BioWorld International Correspondent

MUNICH, Germany - Evotec OAI AG licensed its patented technology for analysis of certain gene fragments in polymerase chain reactions to Roche Diagnostics GmbH, the German affiliate of Roche Diagnostics. The technology analyzes the melting curve reactions of the gene fragments in PCR reactions, allowing diagnostics based on minute amounts of DNA or RNA, thus contributing to the accuracy of data produced by diagnostic kits.

The analyses are designed to detect and quantify target genes in diseased tissues, to identify infectious agents, or to help design a therapeutic regimen based on patient-specific single nucleotide polymorphism (SNP) patterns.

"The license to Roche is a confirmation of our strong technology and intellectual property base," Dirk Ehlers, chief financial officer at Hamburg-based Evotec, told BioWorld International. "Roche is the ideal partner for maximizing the value from this patent," he added.

While the company expects a proper financial return from the license, Ehlers said, it is an additional benefit, rather than a key part of Evotec's strategy. Precise financial details of the license were not disclosed. An analyst report from Consors Capital, based in Frankfurt, said the Roche license could produce revenue for Evotec over 10 to 12 years.

Ehlers said that the company's results for the first six months of 2002 gave further validation of its business strategy for coping with difficult market conditions, with biotech customers and in the sector as a whole.

"The results allow us to reiterate that we are happy with the organic growth that we have achieved in the first half," he said. "They confirm the solid track that we are on."

In the second quarter, according to company filings, Evotec increased its sales by 26 percent to €33.2 million and reduced its net loss by 82 percent to €13.7 million. The company also reported that orders already placed cover 73 percent of the expected revenue for 2002. Lower capital expenses also allowed the company to reduce its burn rate, and it ended the quarter with cash and marketable securities amounting to €18.3 million. Evotec expects to improve its cash position over the course of the year through expanding revenue.

While other German biotech companies have had to issue profit warnings or reduce guidance, Ehlers said that Evotec was confident that growth would continue within the 20 percent to 30 percent guidance. "Reduced predictability in the current environment makes us more cautious," he said. "However, as we mentioned in our conference call [in late August], we see continued growth also for 2003."

Over the short term, the company has benefited from having entered into many long-term contracts and collaborations. For example, beginning in 2002, the company expanded collaborations with Roche, Amgen Inc. and Vertex Pharmaceuticals Inc. In December 2001 it signed a contract with Merck & Co. "This approach gives Evotec more stability in bridging short-term downturns," Ehlers said.

He added, "We can see the benefits of our strategic position as one of the few integrated outsourcing partners for the pharmaceutical and biotech industries with both a critical mass and a proven track record."

As for a general slowdown in the market, Ehlers noted that the company had seen some cutbacks in development chemistry, the preparations companies make just prior to clinical trials. "Some biotechs are postponing their clinical trials," he said.

Despite the slowdown, Ehlers said, "We haven't lost a customer."