Evotec SE (EVT) Earnings Call Transcript & Summary

Good morning. Good afternoon. Welcome to Evotec's Capital Markets Day in 2022. Welcome to Redmond, to a group who came to our site here today to visit our J.POD. Let me start by also saying welcome to our audience on the webcast. And let me remind you that you can ask questions at every moment in time where you put your thing on the button, then you click to where it says question and you send in the question. Questions will be collected here and we bring down the questions later throughout the day. We will discuss today a paradigm shift in biologics. When we talk about a paradigm shift, we changed something in a radical way in order to create significantly better results. That's the whole spirit, that's the whole mantra that stands behind just Evotec Biologics, which is the paradigm shift in the world of antibodies that we are entering. I'm here together with my team where you see Matthias, who will take over a section about market access; you see Craig, who will bring you into the history and our setup; and most importantly, the Just Evotec Biologics leadership team led by Linda, Randal. And we have a very esteemed external speaker. His name is John Erickson here with us, who is one of the leading experts on the planet when it comes to biotherapeutics and manufacturing processes. Linda will introduce John then later. When we say there is a market of biologics, let me remind you of the opportunity, but also let me remind you of the challenges. The opportunity is enormous. The challenges today are mostly not mastered in the way we are addressing it. So when we think about the world of biologics, we have to come to a world where technology brings us to lower costs, where we improve probabilities of success through technologies and where we come to much more agility at the same or even higher levels of quality to address the challenges of biologics. How do we do this? We have created an end-to-end system where you can start to work with us at every moment in time, but where we ask the question from the beginning where and how do we discover an antibody that is from the start bias for manufacturability. That's what we call J.HAL. When it comes down to how do we design and downselect an antibody that we bring into our manufacturing system, that's what we call J.MD. When we go for process design to come to the highest productivity and to the highest yield, that's where we go for a package that is called J.P3. And ultimately, we want to have continuous manufacturing processes that bring us to highest mass and most efficient cost of goods for antibodies. That's what's happening in so-called J.POD. All four services are available -- all four services create revenues and all four services are something that the group that is in the room with me here has visited and seen and where we will illustrates to you the technologies throughout this presentation. What do we do when we are creating the world of antibodies of tomorrow. We have taken in a very linear fashion, the best-in-class facility design, continuous manufacturing processes, high-end process development and the latest molecular design and discovery processes together. And we leverage this with AI and machine technology and the highest degree of optimization in the industry. With this -- which is not a -- is led with algorithms from the very beginning and is -- the beginning. For us, technology -- for us, technology is what our staff is breathing every moment we enter our facilities. Why are we breathing technology because technology is enabling our access with more drugs to more people in the future because that's the mission. Can we create better access for more drugs in the future. And this is just two examples of our outstanding talent that we have -- see that technology is driving our processes. So what is this paradigm shift. Let me just guide you here through a few principles how we define this paradigm shift because engineering is the science of making things much, much more practical. And what we are doing here in making engineering, the centerpiece of this paradigm shift is basically we are rethinking how technology improves cost of goods. And by shifting the paradigm from more than $150 per gram to below $50 per gram of product, you can imagine what intervention this is in the market and how much market opportunities this is opening. When we go from large infrastructure to very small parts and we go to continuous manufacturing processes, this is a paradigm shift where for more than a decade, people talk about continuous manufacturing, but we are doing it. We are setting here the blueprint of how continuous manufacturing can be put in action, and we are so thankful that we can prove this on many products already today and many more to come. When you think about a world where high CapEx need for facilities is changing the equation of cost of goods at the very beginning to very high numbers and where you're going with facilities that we are building to relatively low CapEx need, it's opening a new space of access that today is really happening here in Redmond as we speak. The paradigm shift of not needing a scale-up process is changing the paradigm when it comes to probabilities of success way to different dimensions than what we have seen before. Flexible capacity allows us to react much faster to, for example, pandemic situations. And when it comes to construction time, what we have proven that even in the pandemic, we were able to build the first J.POD in less than 24 months, which is now fully operational, that shows you what is possible compared to old processes where it took more than five years to set up a facility like this. And the key word that we have to really always remember here is technology-driven, agility and higher quality for our drugs because that's what's in our drugs within this paradigm shift that we are designing everything with AI, machine learning tools and have a highly optimized process from the very beginning compared to the enormously high level of manual labor in old processes, which, of course, leads to many, many problems in the law of failure. So the paradigm shift that we are talking is just at the beginning. And this paradigm shift of biologics also brings me into the overall strategy of Evotec where biologics is an important part of our Action Plan 2025. And let me just give you here a short reminder that within Action Plan 2025, we have given ourselves highly aspirational goals, and biologics is one core element within these highly aspirational goals. There's a revenue goal, there's an EBITDA goal, there's an unpartnered R&D goal, and there are co-owned projects, which is part of our strategy to build a very large royalty pool into the future. All goals are fully confirmed at this stage. When we look at our revenue goal, we are on a good track. I think it's fair to say we are on a very good track because we see very strong growth on our platforms. We see that our shared R&D continuum is picking up momentum despite some funding gaps in the biotech industry at this stage, but you will see that our top line is not suffering from this at all. But what you also should conceptualize all the time is just Evotec Biologics is in start-up mode. So there are many start-up investments at this stage that are behind the numbers that you see when you look at Evotec overall. When it comes to our EBITDA goal, it's the same. We have to create higher operational leverage once these facilities are fully up and at scale, that cannot happen, of course, when you are doing this in start-up mode. You have to go to scale first. When you look at the growth of our pipeline, leading to contributions via milestones and in the future also the royalties, we have to accept that P2X3 was a setback, but P2X3 was only 1 out of 150 molecules into the future. That's why, yes, a setback is there, but the strategy of having contributions for EBITDA from co-owned products in the future is fully in place. And what you also see when it comes to the contribution to our EBITDA is that our precision medicine platforms and, of course, our contribution through Just is just at the beginning when you look at what we are expecting in the years to come. And when we look at the years to come, I think it is more timely than ever before to think about a shared economy platform. And why is this so timely -- because we are talking about an industry where the need for more precision is clearer than ever before. And let me just illustrate here that you see that it can't be true that still many drugs are only benefiting a handful or, for example, 50% of all population that we are addressing. That can't be the future and that can't be the present of modern medicine. When it comes to better disease understanding, we have to start by understanding a disease in order to bring probabilities of success up. And when it comes to wider access, we have to use technology to bring cost of goods down in order to have more access for more people. And that's why the four focus areas of Evotec are so clear for us. It's PanOmics-driven drug discovery and drug development, where we will increase disease understanding dramatically. It's the application of induced pluripotent stem cell therapeutic products where you will go for cures with these products. It's just Evotec Biologics to improve access, and it is a shared end-to-end R&D continuum, where basically on all modalities, all experiments that you can imagine can be done with Evotec. And with this, this is very timely because it becomes obvious that Evotec is the solution to all these biotech companies at this stage who have built too high fixed costs and where they can achieve something on variable costs at higher quality with Evotec. And that's why when we look at what we can do together for medicines that matter, we are bringing game-changing platforms and technologies to our partners. When it comes to more precision, PanOmics will be the answer. When it comes to AI, machine learning automatization technologies, you will see that on Evotec platforms. All these technologies are converging, and you can at every moment in time, access the expertise of more than 4,400 scientists of Evotec who are mastering these disciplines better than anyone else. And with this, you have access to the best talent at the right business model for how you want to play your drug discovery and drug development project into the future. This is why we are not only sure that we know what we want to master together with our partners, but also how we're going to do this within Action Plan 2025. And let me just illustrate here once again why just Evotec Biologics is on such a critical path here. Because when you think about, for example, the first company mastering fully continuous manufacturing processes, we see that this is critical capacity that has to come to availability worldwide. When we think about Action Plan 2025, again, let me also here update you on how we think about the contributions coming together, where our end-to-end shared R&D platform will be more than 40% contribution where PanOmics, which we are rolling out at this stage will be about 25% and more in our contribution where our [ iPSC ] based products are in the making as we speak in their very early stage, but here, you will also see revenue contributions coming in, in the area of more than 5% into 2025. And just Evotec Biologics is starting small but will grow quite significantly, and that will be the focus of today and the illustration in the slides to come. Let me again highlight this paradigm shift by reminding you that a paradigm shift is only taking place and you can only see it if you go very deep in the understanding of biologics, and that's what we will illustrate through this webcast in the next couple of hours. Going deep is so important because when you go deep, you will understand how we are differentiating ourselves in a wide marketplace that is on a journey from technologies that I established where everyone knows this cannot be the technologies of the future. So this journey of this paradigm shift is not going in radical process, it's going in a step-wise process, where Just-Evotec Biologics is basically taking the center stage of continuous hybrid manufacturing and fully continuous manufacturing. It will become clear to you throughout this presentation that fully continuous manufacturing is the technology application to come to lower cost of goods and with this a true intervention, and that's why the term paradigm shift is allowed here and fully justified. Let me also remind you that the blueprint of how a product in biologics evolves is that everything starts small. But once you are working with Evotec or once you're working with Just-Evotec Biologics, the probability that you will ever leave our platform basically is zero. Why? Because you are entering the best-in-class process. As we have shown in all our platforms, there is a more than 93% probability that people who can make the next experiment with us will make the next experiment with us. So that's why the scale up from preclinical optimization for manufacturing of an antibody into commercial scale has a very high probability to happen. And that's what you see here is for us an equation, which we live and breathe. And that's why we can think so long term because we will grow with our partners, and we will grow with our portfolio of partners faster and bigger than many people at this stage can to the outside see that. Why is this important? Because this shows you for the first time how our composition of programs at this stage comes together. And what you should appreciate here is we are not releasing every little transaction that we are making. But we are, of course, very happy that you see here a lot of projects already happening on our technology platform in the preclinic, in early clinical stages, some of them already in later clinical stages and they will translate into manufacturing commercial processes as of '24, '25. And of course, the moment you are changing your paradigm into commercial manufacturing your yields go up, your profitability goes up, your cost of goods go down. That's really what you have to keep in your mind. And let me remind you again, this facility where we are standing today did not exist 18 months ago. Can you imagine that so many people gave us already their trust with their antibodies in such a short period of time and what was the convincing argument to them. It's technology, which is driving this paradigm shift, and that's why you see a huge pickup of partners who are working with us as we speak, and this is best illustrated that we are very confident on these graphs to become reality. This graph shows you here basically on the one bar, our revenues; and on the second bar, our EBITDA. Of course, EBITDA contribution in start-up mode is negative. That's the nature of high fixed cost investments. But what you also see here that we have started only with two trains, for example, in our Redmond facility. We will scale this up to four trains initially and then to 6 trains because that's the full capacity here, which will lead us to 2 metric tons of product that we can make. And if we translate this to potential revenues, in 2025. This is more than EUR 250 million in potential revenues out of one J.POD. What you then see here is that the utilization rate in very fast moving systems like a J.POD is much higher than industry standard. And with this also potential gross margins are at very high levels. What you see drawn in here is that we have already started our second J.POD construction in Toulouse, France, where the capacity of that one will be installed by '24, '25. And this picture has to be seen together with this picture, we are -- through higher utilization, cost of goods through technology will go down. And with this, this paradigm shift becomes a reality in a shared platform where not one company is benefiting, but where everyone is benefiting from that. And that's the huge difference to silo-driven manufacturing capacity of, for example, old setups. This is truly benefiting everyone where cost of goods are coming down, and that's why we are operating together with mission-driven foundations with pharma companies, with biosimilar companies and with biotech companies at the same time because the platform ultimately is benefiting everyone. This is very important to realize because the business model that we are building has always the optionality to, on the one hand side, simply go for a CDMO business model. But never forget tech is the highest drug discovery and drug development powerhouse in the industry when it comes to co-owning and co-creating new drugs. So the business model that we are offering is very often also to say, why don't we become or create antibodies together. And if you look at this picture in the year 2015, Evotec did not co-own any biologics because we didn't have access to a biologic platform. By changing here, our exposure to other modalities and by accepting that biologics will be a key modality also in the future. We are building this portfolio of co-owning this. We're, of course, initially, we take out a bit of revenue contribution. But in contrast to just having gross margin through CDMO business, you will trade this in for milestone-bearing projects and ultimately for royalty-bearing projects. And the numbers that you see here are probably on the lower end of what we can expect because it's highly productive how our platforms are working at this stage. And when you think through that we do not only have small molecule expertise, but all modalities happening and the power of biologics that we can make here, then it becomes obvious that our partners will always stay with us on our platform and use them. This is just also reminding you that many parts of the company are in full swing and performing in an excellent way at this stage. So you will see and you have seen that our gross margins in our base business are better than ever, despite the fact that we have higher energy costs that we have higher cost exposure through inflation and through supply chain issues, and that will not go away in the short run. Having said that, you also then have to see that Just-Evotec Biologics is in startup mode. And that's why if you differentiate this picture, then you see here the negative contribution at this stage in contrast to the very nicely accelerating business if you look at Evotec outside of Just-Evotec Biologics. I just always want to remind you of that, because we are building, of course, Just-Evotec Biologics as part of our portfolio at this stage. And there's a very, very clear logic why it is part of the portfolio because the modality belongs to our platform. And if you then look at the future, it's a fantastic day to be quite optimistic because what we are signing has typically a lead time of a year. And if you look back to our science sales of '21 with about EUR 30 million, if you look at our science sales of now, then you have tripled this even before Just-Evotec Biologics was fully in swing, has the first proof points. And that's why I think it is quite encouraging to see this number going up quite nicely. And don't hear mix up revenue recognized and sales done because these projects take their time, but we are quite happy that we have gone above 90 when it comes to our contracted sales, and this number is a number that will grow quite fast now in the next quarters. That's a number that we will post also in regular time lines now to give you visibility of the momentum of Just because I think that's important for you to follow the paradigm shift that we are creating here. When we are creating a paradigm shift, others have also done that. But they took much longer. And nevertheless, people followed it. And this is just giving you a reminder of the car industry and how they have done it because it took time to adopt to a next-generation technology when you look at Tesla, it took a lot of CapEx to do it. And it took a plan that had to be rolled out globally and not only locally. And yes, we take this analogy and we know that it might come across a bit bold. But if you are shifting paradigms in biologics, you have to be bold because that's the mission to come to higher and better access. And with this, let me round up that imagine a world of $50 per gram of product. What this will do to us, it will allow us to come to underserved indications with multiple treatments and multiple treatment options that we today don't have or don't see. It will allow us to have better access. It will allow us not only for better access in many geographies, but also in many patients and inpatient combinations that we can make. And of course, it will allow us also to think about global health and pandemic preparedness in a totally different way than what we have done. So with this, today, we focus on Just-Evotec Biologics in this Capital Markets Day because together making medicines that matter is just at the beginning. With this, let me thank you initially, and let me hand over to my colleague, Craig.

Thank you, Werner. Let me also just extend my warm welcome to all of you who are here in the room with us. It's wonderful to see you here in Redmond, and also welcome to those who are joining on the webcast, wherever you are in the world. My name is Craig Johnstone, I'm the Chief Operating Officer of Evotec. I've been with Evotec 10 years and what a journey it's been. And so it's really a privilege and a pleasure for me to be able to welcome you into the next part of the presentation and the session where what we're going to do is bring you into some of the science and the technology and the knowledge leadership about transforming biologics that the team here are going to take you through. What I expect you'll gain from this discussion is an understanding of how this paradigm shift, this transformation, this very grand ambition to completely transform the industry through a transformation of cost is an achievable and understandable objective. But before I get to that, I think I probably ought to bring you into a little bit of a historic context. So what we have here on the screen, and also, for those of you in the room, you can also see around the room here, an unbelievably experienced gifted, talented and knowledgeable team who are also visionaries, I believe. The team here and the team on this slide and the team in the room are a team who were established at the beginning a few years ago, about eight years ago, with really a vision, a mission, a dream about transforming access of biologics and important medicines that matter to a much wider population of people who deserve to benefit from these very important medicines. This meeting took place, I think, in Jim Thomas' house or garage, classic start-up, very ambitious, very grand, very big dreams, but gathered up the knowledge and expertise of a number of people who have been in the industry a very long time, and understood feel where they were, where the pitfalls were and where the gremlins and problems emerged from lack of connectivity between discovery, process development, manufacture and commercial launch. And this team really was the team who dialed to dream a big plan, a big vision, and you'll see it on the wall outside as you come into the building where the mission was to transform access through important biologics therapeutics through a transformation of processes and the resulting transformation of cost. This vision which the founding team and the early members of the community really carried and really held in their hearts, has also become a magnet, I think, for attracting other talent here to Redmond and here to Just-Evotec Biologics and it, we are really blessed to have such a fantastic diverse and also very, very broadly gifted and talented team. The beginning of Just Biotherapeutics was conceived in Jim's garage in about 2013, 2014, and what you have here is a timeline of about what I want to paint you as a 10-year journey from 2014 to 2024. Just was founded in 2014 with very strong backers, as you can see on the slide. And it was only a few short years before J.PLANT was conceived and built and established in J.PLANT is basically the prototype technology developments and all the modules of the technology developments that give rise to the capabilities of enabling continuous biomanufacturing. In 2019, Evotec acquired Just and immediately committed to the groundbreaking of the construction of the facility or J.POD 1 in Redmond, where we are today. Why commit so early? Because we knew we all understood that in order to achieve the mission and the vision, manufacturing had to be part of the continuum. The only way to get to our transformational cost and our transformational access is to have a facility like this. And so we started construction in 2019, immediately after the acquisition. And I have to acknowledge the team for an unbelievably tremendous job was done because two years later, during a pandemic, the construction was finished. The facility was validated and the first engineering runs were completed before the end of 2021. Two years during the pandemic. In parallel to that, the first fully continuous biomanufacturing runs were completed by the team. And I remember being here at the time, it was a very, very big day and a very impressive event. And as a result of all of this confidence, success and technology development and also because Evotec Group also has a very strong established presence in France, in Toulouse. We also understood that U.S. presence was not going to be anything like adequate for realizing the mission and the vision. And so with very strong support from the French government at various levels, local, city, regional and national government. We also made the decision to commit to groundbreaking of J.POD 2, which is the first J.POD in Europe in September 2022. And again, our expectation is that, that facility will come online two years later, which is why I wanted to bring you to a 10-year view because we expect J.POD 2 to come online in the second half of 2024, as Werner showed in the capacity buildup. But of course, the ambition and the scale of ambition and mission does not stop at 2 and doesn't stop only in the U.S. and only in Europe. And so you can see that we're very firmly on the path of establishing a really global footprint for transforming access globally for important medicines that matter. . So what are the key features of this technology? Well, Werner already touched on some of them, and you're going to hear a lot more about the underlying analytics and the details about where we make an impact, where we were differentiated and the impact across flexibility and agility, across cost, the essence of continuous connectivity between the technologies to enable continuous manufacturing, which means that a number of days as a multiplier. And then that transforms the whole value offering of cost of goods. Perhaps the thing that this slide doesn't see, but I feel is a very impressive extra element is that in a facility like this, we can envisage that there would be preclinical batches, clinical batches and commercial scale, metric ton production not only out of the same facility, but even out of the same reactor size vessel. Removing scale up, removing risk and thus transforming the performance of the industry. So this paradigm shift is very much here living alive, well and visitable in the U.S., as you've -- as those of you in the room have seen. And our groundbreaking in France also puts a footprint firmly an ambition and a footprint firmly in the EU. But really, if we're going to realize our ambition and our mission, we have to envisage that we are still only at the beginning even with 2 J.PODs and putting cloned technologies to allow easy technology transfer and scalability across the globe, then implies that there will be ambitions for further deployment of this continuous biomanufacturing capabilities to enable access to a really wide population of beneficiaries. This is what's really disruptive. This is what opens new opportunities. This is what opens new markets. This is what even opens up new indications that are currently prevented from access by cost. And each one of those opportunities, access, indications, niche combinations and so on is also a human story. It's somebody's child, it's somebody's partner, it's somebody's mother, and this is what motivates all of us and all of the team here and opens the door to a real paradigm shift in biologics and medicines that matter at a global scale, human scale and a personal scale. And so with that, it's really a delight and a pleasure for me to be able to introduce Linda, and Linda is going to take you through -- with the team, take you into where all the magic happens, which is in the technology and science. Linda?

Thanks, Craig. Okay. So I'm excited to tell you about our technology today. But first, I wanted to illustrate it with a brief story. One of the things that makes Just special is that as you saw from the great introduction that Craig gave us is that we all come from the product development side, right? You saw Amgen, Genentech, BMS. It's really in our DNA that we want to bring medicines to the world. And so when Just started, and we had this great group, we kept reflecting on this common theme, where our research colleagues would bring us in vial and say, "This is an amazing biotherapeutic. It is going to be impactful for patients in oncology, RA, et cetera." And we would, on the development side, say, "Great, we're so excited to develop this and manufacture it and bring it through preclinical. Can you tell us anything about it?" Well, we did notice that when you put it in the fridge, it all falls out the solution. And we did notice that we really couldn't formulate it to have really high concentration, so good luck with that. And what would happen with stories like that is that the ability of those therapeutics to really reach market would be severely limited. And some wouldn't make it at all. And so part of the idea was that if you could start earlier in the value chain, you could start with a molecule that was biased or ready to be manufacturable. If you could take a molecule that already exists and tweak some of the DNA in it to make it more manufacturable, you could help realize our mission, which is to enable global access for biotherapeutics. So with that in mind, when the company was founded, the very first thing that was purchased were computers, not pipettes, not reagents, but computers. Because along the continuum of that story I just told you, what underpins it is that data was also being lost from that transition from research to development. And if we could capture that data and harness it then that would be better not just for that biologic, but of course, for all the biologics that we develop onwards. And so colleagues like Randy and the data science group built an amazing data infrastructure that enables the capture of that data along the way. And it also enables groups like EVO's group when we think about automation and technology. And these are the things that really set us apart. So I will continue on. You've heard and seen this slide, and you'll hear more about the detail today about our J.HAL library. HAL stands for humanoid antibody library. It's human sequences that have been biased for manufacturability. J.MD or J Molecular Design is our in silico tools which allow us to down select and actually tweak antibodies and antibody-like molecules to make them more manufacturable. And then our J.P3 is our platform. And you heard on the tour about our low-cost media, our very high expressing cells, about how we do platform in a plate and how these kinds of platform -- this platform is so highly differentiated from what's in the field. And all of that culminates with the manufacturing process that you saw today in J.POD. And so what we have to support our change in paradigm is a winning formula that creates value, not just for patients, but for the broader society. And when we think about those characteristics of our J.DESIGN platform, we can think about how we impact that formula in terms of quality and agility, cost and risk. And so we're going to break that down for you. And altogether, it will culminate in value not just for patients, but for global access to these important medicines. So I'm going to start by talking about the quality and agility aspects. I'm going to turn it over to Randy Ketchem to talk about risk, and then Randal will follow with cost. And along the way, you'll see how our technology really drives to that. So some of these messages you actually heard today, you don't need to scale up to go from clinical to commercial manufacturer. You don't need to go from small scale all the way to large scale. All we need to do is simply extend cell culture. So we develop that to be commercial processes at our clinical scale. You can build a facility like this in less than 24 months, and you can add capacity in less than 12. Lots of discussions go on in the industry about being able to predict demand, forecast planning for commercial and late-stage projects. And having just been at a biopharma roundtable sponsored by McKinsey, one of the common themes was nobody does that very well from the product side. And this is where we can help and really do it differently. We also can change over between two products in less than two days, and that's a product of our single-use technology. So you've seen a version of this slide before. As we talked about and I introduced in the beginning, traditional facilities have quite large bioreactors. They're very fixed. We use these human scale single-use bioreactor, and so we don't need to scale up to make more mass. There's some information in the literature that talks about the risk that's associated with scaling up as well as the time and cost that, that takes where we can do it all at that simple commercial scale -- clinical scale and then be ready to go into commercial manufacturing. Just to highlight that a little further. We traditionally run a 15-day process for our early-stage clinical trial clients. We make quite a bit of material with that process, 5 to 8 kilograms. You heard some about that on the tour. If we want to make more, we can simply continue to culture the cells out to 25 days. And if we really wanted to do a late-stage, very high mass demand, we can simply add more bioreactors by keeping that same format. And this facility can make about 2 metric tons a year. The time line to set up a facility is very short, traditional stainless steel facilities take about 4 to 5 years -- and you'll see they're quite capital intensive where, as you've heard today, this facility was built in less than 18 months and Valerie Alvarado in the back, who is our VP of Capital Projects is building our Toulouse site, and that will also take 24 months. And if I know Valerie, it will actually be less than that. You can add capacity. This is really impactful in less than 12 months. One of the nice things about why these facilities get built quickly is that you can do the pods and the equipment ordering in parallel with the actual infrastructure build, and that's part of the beauty. Same with expanding capacity. You can be expanding capacity behind a closed wall without interrupting your ongoing processes. So it doesn't take very long to add capacity very quickly, which makes us very agile. And lastly, but very importantly, we can change over very quickly using those single-use materials. So typically, it takes 1 to 2 weeks. Many of you have heard SIP, CIP steam in place or clean in place. All that stainless steel has to be cleaned. It has to be validated that it's ready to go for the next project, where we can simply change over bags and connections that you saw on the tour today. And these are -- well, it was tremendous flexibility in terms of scheduling, bringing clients in and being very agile. So the main take-home is that we don't have to do that large scale up, so that reduces cost and risk. We can build a new facility if we wanted to in less than 24 months, add additional capacity for clients, for our own purposes in less than 12 months, the changeover between products is really very, very short compared to traditional facilities. And that is really how we impact that agility cost of the formula to bring our mission alive. And with that, I'm going to introduce Randy Ketchem, who's going to talk about risk, and he promises me, then he will stay on time.

1.5 hours. Thank you, Linda. Go forward. So I will talk to you about risk. And I think that what you'll take home from all of the presentations that we give you, and hopefully, from the tour is that really most of what we do impacts quality, risk and cost together. It's very tightly integrated. But I'm going to show you some examples of how what we do impacts risk from selecting the very best therapeutic possible, either from [indiscernible] patient from other discovery platforms or from our own discovery platform, being able to optimize a molecule to fit our process so that it lowers the risk of its failure. Increased automation throughout the entire company, not just at the J.POD facility but in everything we do in both data and laboratory automation, resulting in higher-quality products in the way that we treat our product, the way that we hold our product and the way that we build our product from scratch. The lower environmental impact that this facility has as well, increasing the ability to react with lower risk of infrastructure costs. I'll start with an explanation of our discovery platform. It's been alluded to, and this is where I can talk for an hour, but I won't -- we have a system that's generated by an AI. It's an artificial intelligence method called a Generative Adversarial Network. And we wanted to build it based on an AI so that we can build properties into the system from the start that are not only for developability but also for broad efficacy. So the way that a GAN works, this generative adversarial network is with two competing deep layer neural networks. One, a discriminator, its job is only to tell real from take, and that's all that it does. You don't have to teach it anything first principles about a molecule. You just train it with existing sequences that have been structurally aligned and it learns real from fake. At the same time, you have a generator that starts presenting fake sequences to the discriminator. And it starts with just random sequence. Its feedback is the real or fake from the discriminator. So that neural network trains to try to fool the discriminator and that adversarial competition drives the generator to be able to fool the discriminator, at which point you train the discriminator more until the whole system gets better and better at fooling the discriminator until eventually, you have a generator that can fool a discriminator; it can fool our in-house analysis suite, Abacus; and it can fool me. These are representative of human response. And we've trained it on human mature, somatically hyper mature B-cell antibodies. But human antibodies have no selective pressure for developability. They only care about binding. And so we need to care about how that molecule can be made in a manufacturing facility. So we can use this to bias the molecule. Now if all we did was make this library, it would be fantastic. But we go beyond that. We utilize the power of the GAN to be able to transfer them. And the way that transfer learning works is you have an initially trained GAN from big data sets of human response. And if you have a smaller data set like immunogenicity an in silico machine learn method that we have in-house or something like heavy-chain CDR3 length to change the efficacy of the molecule to be able to hit membrane-bound targets or various different hydrophilic surfaces or electro-negative surfaces or changing the PI so that it behaves in serum well. We can take these smaller data sets, feed it into an existing GAN the discriminator starts to shift what it calls real from fake, which forces the generator to start to generate antibody sequences that fit the property that we're training the AI for. So we can use this to build a broad library for discovery. The other thing that we've done is make this library able to be a data generation engine so that we can build machine learning optimizers and machine learning predictors as well so that when I look at a molecule, I'm handing a molecule off to my next colleague that was going to be talking Randal Bass that he can make. And like Linda alluded to, we don't want to just throw something over the wall that fails. This is one of the many ways that we do that. An example of how this library works. You may have seen we've pushed data out before and we've shown it at conferences on SARS-CoV-2 infectious disease pathway, where all we had to do is block and interaction. Now I won't say it's easy, but it's certainly easier to build an antagonist, something that blocks an interaction, than an agonist. And so we wanted to set the bar a little higher and see if we could use this library to generate a discovery of an agonist antibody. And I won't -- I can't tell you what the target is here, but -- the initial work showed that we were able to find binders on cell surface of molecules that could send a signal, an antibody that would bind a receptor and send a signal into that cell. And the binding is one thing, but to be able to see it in a functional activity assay is quite another. And what we found was that in collaboration with our colleagues at Evotec, we were able to show that we were -- this library could produce an agonist antibody. So all of this together reduces the risk of failure in process development. It reduces the risk of a manufacturing failure. It reduces the risk of discovery. And -- but we're able to provide a platform from the beginning to end in everything that we do. You've seen this slide earlier, but I'm going to speak to it a little bit from a standpoint of risk and automation. It's showing fed-batch versus continuous process like a J.POD facility. But the reality is, as Linda mentioned, is we employ automation in both data and laboratory. And we do it from discovery in our research offices in J.PLANT and even in J.POD. This automation of data is a huge impact even outside of machine learning. If you can automate the collection, use meta-analysis and utilization of that data, then you can drive capacity higher, reducing your risk of being able to take on extra projects and to be able to stop -- to be able to take on extra clients. But in the automation of a facility like this, it allows us to run a facility with fewer people. And I tell my colleagues, I'm a little bit of a robot that people introduce errors. And I'd rather have people out of every process possible. you shouldn't be copying data because you're going to copy it wrong. You shouldn't be building your own plots, you're going to do it wrong. You should be using your brain to analyze the data to make the next technological advancement. And so people will cause problems. And in a facility like a fed batch, people are moving the material, they're shaking the material, they're introducing contamination. There are risks. And so a continuous process in a J.POD facility reduces the risk through automation as well. One of those risks is post-translational modifications. And I didn't mention this in the discovery slide, but one of the things that we are trying to do is built in higher stability into the molecule. So it produces higher titer and produces higher yield, and it doesn't aggregate during low PH viral inactivation or virtuous cycle or in serum delivery in the patient. But one of the first things that we can do is also bias that library toward lower post-translational modification sites. But even if we have a -- every molecule is going to have some level of PTMs but if you're in a continuous processing facility like you've seen here, you have a lower risk of introducing PTMs because you're not holding the material in cell product with wholesale protein with proteases, with oxidative agents with PH changes that can force deamidation or isomerization, oxidation, tryptophan degradation, these are all problems for a molecule that can not only lead to failure and process development and manufacturing but can also lead to lowered efficacy in the final product, which can impact dose. So we lower the risk by building this into our molecule from the beginning but also in our continuous process here. Environmental impact is also something that's a huge risk that we have alleviated. And a lot of what you saw today, those -- the ballroom is a clean room, but the PODS themselves are the higher-grade clean room. And by shrinking the POD, we have -- we were required to use less HVAC, less filtration, less risk of contamination in that size of a ballroom and fewer people going into those ballrooms or into the J.POD -- into PODS, lowers the risk of contamination. We also, as Linda just mentioned, don't have to do steam in place or clean in place because it's a disposable system. We use a disposable throughout the continuous process, and that reduces water usage by greater than 50%. The water that we do inject into a bioreactor by reverse osmosis reduces the cost by 90%. So this impact is good not only for the planet, but for the business. There's a lot of different ways that we impact our environmental impact. Recycling is huge. The way that we do our lighting, the right sizing of air changes in the laboratories is all very important. So with that, I'll just summarize to say that we are able to use our machine learned and AI methods to design the best molecule, if it's a panel of antibodies that are coming from a convalescing patient to be able to select the best molecule that not only has efficacy, but will fit our process. And much like Linda said, with those handoffs, you'd hand a vial and you say, "Oh, by the way, it behaves poorly." I was that person that was handing the vial. And when I would hand the vial, my process development colleagues at a previous company would say, "Hey, Randy, if it's all the same to you, can you give us something we can actually make?" And the answer is yes. We increase automation, less human intervention, less contamination and a higher likelihood that we'll be able to use our data continuously to improve our processes and invent new technologies. Reduction of human interaction and hold times increases product quality, and we have a lower environmental impact. With that, I'll introduce my colleague, Randal Bass.

He's learned his lesson from that time before he's never handed me a molecule that we can't make, actually. So that's good. He learns. So like I said, my name is Randal Bass, and I'll -- we're going to switch over and talk about the cost side of the equation and where some of our technology plays in. Four broad places to stop and talk about it, the selection of the best antibody not just for how it's going to work in the body, but actually how it gets us to higher productivity and lowers cost. We're going to spend a little bit of time really diving into the intensification of our processes and how we make those more efficient, really targeting lower COGS. We're also going to stop briefly about the robustness of the platform we've built. It's not just a manufacturing facility, but it's actually the platform that underpins the entirety of the J.DESIGN concept that allows us to have this incredibly fast, robust and cost-effective development. And then finally, I'm going to talk about the facility about how we built this and the design tenants that allow us to substantially lower the cost of building a facility and setting it up. So this is an example using J.MD. And so these are machine learning tools that we can apply to optimizing to the very best sequence. And so this is a down selection of 283 antibodies that came from convalescent patients. So these all came out of humans. What Randy and the team did using the in silico tools is we actually down selected to four molecules that looked in silico that they had good biochemical and biophysical properties, and then we made them in the physical world, and they characterize them with a series of confirmational stability assays, and those are actually in the horizontal axis. And each of the went 1, 2, 3 are on the vertical axis -- sorry other way around. The other is to look at colloidal stability. So we used -- all of these are very, very high throughput tools. I won't go into -- we can actually produce small amounts of material using high-throughput transfection tools. So this is all designed to work together. We can produce these and then interrogate them both for their productivity as well as their properties. And so in each of these cases, we profiled with a variety of different assays and also looked at their overall productivity in a highly stable CHO cell line. So these are actually being produced in CHO cell lines that are also used in the manufacturing process. So we get a really good understanding of how productive they are. In this case, mAb 1 and mAb 2 at the top, they had really good looking profiles, and so they all looked great and all of our interrogation of their physical and chemical properties. They also had really good titer, so they produced at a high level, mAb 3 and mAb 4 didn't. They actually had some liabilities in different aspects of their physical properties and so they were down selected. So this, again, is a machine-learned tool that allows us to get the very best sequence. The important thing about sequences, once those sequences start the development, it's the one thing that you can't change. So you really need to get it right. So these tools get better, and better, and better. And as Randy said, we're collecting all this data. And so how we learn from this data is just an ongoing continuous basically virtuous cycle that as we build these tools, we interrogate more molecules, the machines actually learn and they build better molecules for us. This is an example, that is an actual project that we ran all the way through manufacturing. And that's the selection of the best antibody, again, using these machine-learned tools. And this looks at sequence optimization and the impacts to something around sensitivities around PH-induced aggregation may not seem super interesting, but it turns out low PH viral and activation is a key step of most protein therapeutics. It's a way of mitigating any viral risk that came along with producing them in cells. And so on the left-hand side, one of our antibodies that came in, again, this is a fully human antibody. When we put it through low PH in activation, it aggregated quite a bit. About 40% of the molecule was a loss. And that's a straight yield loss, you're never getting that material back. By improving the sequence, Randy and his team were able to lower that by 91%. So it only had about 3% aggregation, and that's something that we can clean up after the fact. The other molecule that was part of a cocktail actually had even higher levels of aggregation upon low PH. It basically all fell out of solutions. So about 88% of it was gone when we went through it. Randy has optimized molecule, again, dramatically lowered the amount of aggregation by optimizing that sequence. That molecule is undevelopable. You'll never take that forward into the clinic because it would just be extraordinarily expensive if it didn't have other liabilities, which it likely would. So this is a place where we can say by redesigning the molecule from the get-go, we can increase that probability of success much higher. So sequence matters with cost. And again, these are yield hit. So that's a straight off the top cost of goods. Another one, and this is really important, is optimization for productivity. So we know, and we've seen over many, many molecules development, different molecules, in this case, these are antibodies that I'm showing here. Monoclonal antibodies have dramatically different amounts that they just naturally produce. Can we optimize the sequences so that they get higher productivity molecules? And the answer is yes, we can, actually. So Randy and his team, again, using machine-learned tools were in this case, targeting stability violations in a parent molecule. The parent molecules productivity shown overall on the left-hand side had quite modest productivity. But by looking at stability violations, places where the molecule just wasn't going to fold very well and applying these machine-learned tools, we actually found through a high throughput production of 24 different variants, sequence variants of that parental molecule. They were roughly averaging about twofold higher than the parent molecule. Now this is just the start of what we're trying to do to, again, feed more data into these machine-learned tools, into this data infrastructure that Randy and his team created for us so that we can get better predictors of productivity. The key thing about productivity, it is the single biggest driver of cost. If you can take a given cell and a given process and get double or triple or quadruple the amount of productivity, you're going to have a commensurate lowering of cost. So this is an incredibly important tool that we're applying and developing. This is actually stopping to talk a little bit about really the fruits of a highly intensified process. The schematic that's shown in the bottom left is going through the major unit operations that we run either in a continuous hybrid or in a continuous fashion. Starting at the left-hand side, it's our perfusion -- our perfused bioreactor going into a continuous capture chromatography system onto low PH viral inactivation, diafiltration. And then we start our polishing steps. So chromatography steps that are designed to remove impurities. Finally, we go through viral filtration and ultimately in line concentration and diafiltration. What's interesting is a lot of the major pieces of the unit operations that we're running in a continuous mode -- these are all the same processes that fed-batch processes use as well, but we've stitched them together in a clever way that applies a lot of automation and some really good logic around connecting these discontinuous flows together. And that's actually one of the really key things about continuous manufacturing to get it to all work. The benefits of it are in a real-world example that's over here on the right-hand side. This is actual data for GMP runs that we were running simultaneously at the 500-liter scale. A partner of ours was running in a fed batch mode at 500-liter scale, and we were running a continuous hybrid process also at 500-liter scale. And you can see just by moving into this continuous hybrid process, we were able to get a sevenfold increase in the amount of mass out of that same bioreactor. If we take that and we extrapolate it to a 25-day process, and running in an end-to-end way at 1,000 liters, which is what our cell culture pods are set up to do. You can see that it's even a greater increase in mass, roughly fivefold above that, that we'll get out of the 1,000 liter runs. So by running in these highly intensified continuous processes by building this robust process, platform, we actually get tremendous achievements on a per run basis in terms of the total mass out. And again, that's a direct impactor of cost of goods. This is showing you one of the things that we had to do is we actually have to engineer our own cells. So these are comparing in a 20-day run of [ permit ] productivity or the volumetric productivity in grams per liter per day, again, that's the other paradigm shift we want people to recognize. When we talk about productivity, we talk about volumetric productivity, not how much you're going to get out of a tank, but how much you're going to get out of that tank every single day. And that's what's shown on this graph. And the light gray is really what I would consider to be the industry standard commercially available cell line and in the dark blue is Just-Evotec Biologics proprietary cell line. And again, much higher productivity, very high productivity over a long extended range of time. This actually enables us to really achieve lower cost of goods. The exact same DNA sequence was transfected into these cells for this example, by the way. The term that we use for our internal cell line is called CL-72. This is actually -- when we walk through the tour for those of us that were lucky enough to walk on the tour here at just there was lots of questions around how we link the development activities with the GMP manufacturing. And this is just a piece of data showing sharing you some scale-down data from our 3-liter [ mono ] reactors or the little ones that we saw in the lab relative to what they look like at 500 or 1,000 liter productions. And you can see that those cultures are behaving in terms of the amount of cells that they're growing and then a lot of other factors that I can't show you on this slide for brevity. They actually scaled down really well. And that's actually true, not just for the reactors but for all of the unit operations that we have. Again, it's a very robust platform that allows us to drive down costs, do experiments in the lab to really optimize our processes and come up with the lowest possible costs. The other thing is that these highly intensified processes can dramatically lower cost of goods. So in a traditional CDMO, it's not uncommon to hear quotes of per gram cost anywhere between $200 and $500 per gram. We'll use an average of $200 in the U.S. to make the comparison. We believe that as we build these technologies and put them together with certain assumptions in around a fully built facility, 6 by 1,000 liters is the max that we can produce here in Redmond. 4 grams per liter per day. That's the reality of what our volumetric productivity is for ourselves today. This is an aspirational, that's actually real. And then comparing that to roughly $200 per gram that we think we can achieve aspirationally, a 75% reduction in the cost of goods, leading us to a program cost of less than $50 per gram. And that's great, and that's a win-win situation where we know that we can be a highly profitable company, but we can also reach in and afford to be in these emerging markets that we so desperately want to get into to enable access to these biologic therapeutics. One thing we can do with this robust process is we can translate very, very quickly and efficiently from the bench into GMP manufacturing. So essentially for all of our first-in-human programs are very early development programs. We go straight from the 3-liter scale model straight into GMP manufacturing and skip engineering runs. So that actually allows us to save costs and reduce the number of runs by at least 50%. Typically, it's even more than a single engineering run. We don't do any of those because of the confidence that we have in our manufacturing platform. And also, it's backed up by our success rate. Our success rate going and using this approach is extremely high. It's above 90% over the last few years. So we have a lot of ability to move quickly and efficiently for our clients. And then finally, I'll talk a little bit about the costs, this lovely facility that we're in and that Valerie's building as another one. She liked it so much. Traditional facilities, they really are amazing and they look really cool, they're big, they're expensive and they're slow. And so on average, we'd say anywhere between $800 million and $1 billion is going to need to get sunk in the ground before you can actually turn the facilities on. This facility was on the order of $200 million to $250 million. So that's a massive reduction. And both of those facilities are capable of producing metric tons. So apples-to-apples, they're going to have similar outputs, but we can build it much faster in a dramatically lower cost. Also, the other thing is this facility is much more flexible than a traditional facility. We've talked a lot about, look, how many things are on wheels. We just plug new things in. The automation system that has been described as a SCADA or supervisory control allows us to very quickly and nimbly apply the latest and greatest technology, whether we developed it ourselves or we bought it from a vendor. Incredibly, incredibly flexible facilities. So we're going to capture market by introducing this paradigm shift. We're going to select the best antibodies for its molecular properties, but also its productivity. We're going to continue to work on highly intensified processes to yield the lowest possible COGS. We're going to continue to work on our bench scale model so that we have high confidence that we can eliminate the number of engineering runs we need at any stage of development. And then we're going to substantially lower the cost in the range of millions of this facility as opposed to billions in a traditional manufacturing facility because those costs also get added on to the cost of every gram that you make. We want all of those things to be working in concert so that we can access patients and enable markets. And with that, I'll turn it back over to Werner.

Great. Let's take a few initial questions right now. And if there are no questions, then there is other people in the room, lunch. And for those on the webcast, hopefully, also lunch. Any question in the room? Yes, please. James, this is the mic.

James Quigley from Morgan Stanley. So a couple of observations. So in terms of the costs coming down for the biologic products. The set up sort of favors -- the current set of for biologics favors pharma companies in terms of they've got high-priced drugs and reasonable COGS for them. So in terms of the move into emerging markets and broadening access, who is going to drive that? Is it new pharma companies? Is it going to be government? And then how does that then need to benefiting from Evotec's point of view? And then one other observation is that about a year ago, you were talking about a cost for the J.POD of EUR 150 million, then it was EUR 180 million, and now we're talking EUR 200 million, EUR 250 million. So what's driving that sort of step-up in costs?

So on the last one, it's the full thing out with trains is driving that up. And if you go to your first question, if I may, let's pause that because that will be part of Matthias' presentation, and it will be a big part also of our presentation from John coming how this is going to go in there. What you will see in our facility costs in Toulouse, depending on how we put that in there. We see a slight increase already now. because don't forget the last three years, supply chains went up, cost of goods went up, inflationary pressures went up, energy costs went up. So that's something where you have to factor in probably 10% to 15% that Toulouse will go up in its cost compared to where we started here. Any other questions now in the room because yes, please -- sorry.

Just one question. You mentioned that there are many indications currently that may onboard is that can't be manufactured. Can you give us a sense how large is this opportunity?

Yes. So if you think also here, we'll have parts of that in Matthias' presentation but just a short cut to the answer. Think about aging populations, and think about long-term chronic diseases that are currently treated with antibodies and it will be treated in the future with antibodies. You will have many people being on these drugs for a long period of time. And then, of course, with aging populations, you will not have only one disease, you will have multiple disease at the same time. Think about eye diseases and oncology. Think about metabolic diseases and oncology. Think about neuro diseases and oncology. This will all be reality that life extension will not be only one drug that you take, but it will be multiple drugs. So the first thing is, of course, how big are these drugs? How much volume do you bring into your body every day. And that's I think what Randy and Randal have shown quite extensively that bringing down the volume is, of course, a massive benefit that you're generating. The second thing, if you can -- and that will come down to the access question again, think about a health care system, where affordability of one drug where many of these antibodies today are high-cost medicines, multiply them by 2, multiply them by 3, that's where it becomes so absolutely critical to start this now because one thing is sure that aging population is happening. So that's where the combinations are multi, multi, multifold, and not even going down now to there are so many orphan diseases where today, the development doesn't even start because the market is not there because the cost of development and the probabilities of success are too low. So with these technologies, you open the development from many of the orphan diseases, which otherwise would not start.

Peter Verdult from Citi. Just two questions maybe to Werner and the team. This continuous biologic manufacturing is cool stuff, but I can't see thinking it's Just-Evotec that's only down this path. So can you give us a sense on competitive intelligence, who is trying to do something similar to you? Who are the movers and shakers in terms of who's trying to do something similar to Evotec? And then secondly, just can you characterize the sort of customers that you currently have in this J.POD? Is it just large pharma, large biotech? Is it start-up? I realize you probably don't want to give names, but you just characterize the type of people that are here today using the facility?

So maybe on competitive intelligence, Linda, if you can take that over?

Your second question about the clients. We have everything from large pharma to start-up. We have government clients. We've got foundation clients. We really actually have -- and midsize as well. We really actually have a really nice mix across the spectrum. And then who are the movers and shakers in the field who -- so we know, for example, BI, we know WuXi, we know Millipore and Merck as well.

There's this one chart, and we'll, of course, have the presentation available for all of you where I think you really have to differentiate many of the movers and trackers within fed batch have never moved out of fed batch. So you're in your technology box, which has its limitations. And they are, of course, in competition with each other. And what is truly opening are the players that go to hybrid continuous or fully continuous manufacturing processes, which is a different set of players and a different also dynamic of competition. And that's, I think, we are in all fairness and in all humbleness, we are the representation of the paradigm shift. Okay. Then let's do the following. Let's take a short break now. Take lunch. I know that there are many more questions there will be all the time on the planet to answer them. And with this to everyone on the webcast, thank you so much. We'll come back in about 35 to 40 minutes. Oh sorry, we'll come back in 30 minutes. So that will be then -- whatever time zone you're in, 30 minutes from now. [Break]

So welcome back to the followers on the webcast. I hope you had a great lunch. I can assure you that we had a great break here. And let's come back into our topic. And let's come back to our topic with someone who spent a lot of his career in thinking about the world of biotherapeutics. John Erickson, who is a true expert -- in the world of biologics, biotherapeutics manufacturing processes and a very esteemed also of multiple papers was kind enough to give us his time and share with us his time here. And with this, maybe I first hand over to Linda, who will introduce John and his background, and then we hand over to John and his remarks for this topic. With this, Linda, here we go.

A little bio about John. He is the son of a NASA engineer, and he's always had a very natural curiosity and passion for innovation. He received a BA in Biology and Chemistry from Amherst College and an MS in Chemical Engineering and a PhD in Chemical Engineering from MIT. He initially worked in industrial enzymology before joining the biopharmaceutical industry. And at GSK, he had many different roles in process development, project management, and manufacturing, where he worked for over 29 years. Most recently, Dr. Erickson served as Vice President of Biopharmaceutical and Steriles Manufacturing and Technology, where he was responsible for the scientific oversight and support for commercial manufacturing of drug substance as well as fill/finish for small molecules. Dr. Erickson started his own consulting company in 2019 and has been consulting for NIIMBL, which is the National Institute for Innovation and Manufacturing Biopharmaceuticals, which is a private/public partnership. And since 2019, he's been the acting Chief Technology Officer. And we are also a member of NIIMBL at Just-Evotec. At NIIMBL, he applies his perspective and extensive industry experience to help ensure that NIIMBL investments are aligned with current industry needs. He also supports the portfolio management of very impactful projects there and leads technology initiatives that will benefit the biopharmaceutical ecosystem. We are really lucky to have him come on site. It's been a pleasure to talk with him over the past several weeks, and I'm very happy to turn the mic over to Dr. John Erickson. Let's welcome him.

Thank you very much, Linda and Werner, for the kind introduction. I am aware that it's after lunch. And I know a number of you have flown in from other places. I've met some of you on the tours and you probably jet lag. I mean I flew in from Philadelphia last night. And so I think I need to have a little bit more energy than normal. But that's easy for me because this is something that I'm really excited about is biomanufacturing. I also -- let's see, there we go. I wanted to share a shared vision with that. And I appreciate being called an expert. But the real experts are the people on this paper here. And one of my main strengths is being able to put together a room where I'm not the smartest person in the room. And you'll see Lisa is on this paper. I do have to say that the views expressed by the authors on the paper represent themselves and not their companies. But that said, we had a critical mass of people from a number of the major biopharmaceutical companies that are listed there. And I think it was really great that we came up with this shared vision that I want to share with you. First thing though, I want to start out with defining the problem. What is the problem moving to. We've heard a lot about cost of goods. And I think whether or not cost of goods is a problem depends on your point of view. And you see in the cartoon there, that rhinosaurus, who's an artist. And he's painted a lot of landscapes. And you notice that he paints them from his point of view and that there's this corn that's in the middle there. And so I said, well, let's look around a large pharmaceutical company and see what do people think about cost of goods. So yes, the salespeople. And this is based on my personal experience, I know a lot of people, cost of goods, usually, if you talk to the salespeople, it's usually not the biggest issue, they want on time in full delivery. They never want to miss a sale. You miss a sale, that's a big, big, big problem. And if there are high gross margin, they're diminishing returns. We'll come on to that in a little bit. But if you're 90-or-more percent gross margin, you can reduce the cost of goods by a few percent. They're not usually that interested. Plus there's a significant selling cost in the developed markets and the selling cost can be comparable to the cost of goods. And so they just don't launch in low-margin markets, and we've heard some of that today. So not often the biggest issue. Corporate yes, very much so because we want to save money in manufacturing, and we want to spend it on R&D, reduce the cost of goods as well as inventory. And if you look at the innovator cost of goods, this is from a McKinsey report, a couple of years ago. They estimate that the cost of goods for the innovator companies is over $100 billion, which is more than those companies spend on R&D. And then, of course, the other reason that the corporate is interested is access to medicines and market. So cost of goods come down. You can have more you can launch in more markets and you can get your medicines to more people. You talked to manufacturing. I spent some time about 10 years in manufacturing, and they're often conflicted. And the reason for that is that they recover their costs from the sales organization. You agree on a -- this is the standard cost. And then every time I make a batch I get that amount. And my job as a plant manager is to breakeven. So a lot of times, you talk to a plant manager, they would actually have -- they would prefer a predictable process and a good quality process rather than a low cost of goods. And the other thing is that they will often have maybe a 4% year-on-year improvement target. So if you improve the cost of goods by a whole lot one year, they're still going to have another 4% the next year. And it's one of those prefers things about the way that their objectives work. And you go to emerging markets and say, "Yes, okay, yes, we would like that. But we need a dramatic reduction in cost of goods, a couple of percent is not going to do it." So that explains why a lot of times when I would have discussions about cost of goods, particularly in manufacturing organizations, it just was not a very energetic discussion. But every time we talked about capital equipment, boy, there was a lot of enthusiasm there, right? And this is -- it's a good baseball analogy, being from Phillies. I was on the plane last night during game 3 of the World Series, which those of you from Europe, it's an important baseball game. And so my wife was texting me, the play-by-play as we went through. But discussions about capital equipment and just capital in general, are very much more robust. And I was thinking, okay. Well, maybe there's something there. Everybody is interested in reducing capital costs of facilities. We talked about there are some people interested in reducing cost of goods. But capital cost is a problem for everybody. And if you look at the cost of goods, right, the total cost divided by the lifetime, that's your depreciation plus raw materials and labor. And if you say just for the sake of argument, cost of goods $100 a gram, $40 depreciation, $60 raw material and labor. If your price is $1,000 a gram -- it means your depreciation is only 4% of sales. So on a percentage basis, it's not very much. You say who cares about that. But it's still $500 million and that's a lot of money. And people who have $500 million to spend have a lot of choices, and they usually don't want to spend that on a manufacturing facility. And I've got some top reasons here, and I'm going to have some audience participation to keep us awake in a minute, so be ready for it. Okay. We're going to start at the bottom, number six, you have to build years before demand. We heard about some of that earlier. Maybe it's five years before, you need to start with a traditional plant. Before you need the demand, you've got to build. And during the time that you're building, you're building for something that's not even approved yet. That product could go down in flames, it could turn out to be delayed or maybe and it's not what you thought it was going to be. Even if you do get the product approved, you've got decades of depreciation and there's a risk of write-off of the technology change. I remember being in a conversation one time where I was in a group of people thinking about building a new facility and a finance person turns to me and says, and so we're not going to change the technology over the next 20 years, right? So we can depreciate it while would like to be able to improve. If you think about it, you want to improve your manufacturing process. You want to make it better. You want to improve quality. But if you've got some costs like that, the accountants don't really want you to do that. That money, that $500 million is competing -- so remember, this is for a drug company -- with developing more drugs. And that's a lot of Phase III trials that you could do with that. The other thing is you need all at once. You need hundreds of millions of dollars of cash all at one time. And then there's the top reason and here's where the audience participation comes in. How many of you follow pharmaceutical companies? Now the innovator pharmaceutical company. Okay. Okay, good. A lot. How good are their forecasts? Everybody's laughing. Okay. I see some heads shaking. Yes, usually. Usually, I'd say the forecast is always wrong, but I tone it down a little bit because I don't want to offend anybody, but the forecast is usually wrong. And there's data to back that up. This is a great paper, which was in Nature Reviews Drug Discovery. The title of it is "pharmaceutical forecasting: throwing darts?" So what they did is they looked at 260 drugs that were launched between 2002 and 2011 and the comment that they made -- I have to stand back here. I feel like I'm in a cage here. Most forecasts were wrong often substantially. And if you look at -- oh, I think I can -- let's see, if I do pointer. I've been released from microphone jail. Okay. So if you look here, -- these are the -- so on the X-axis, this is the percentage difference of the forecast with the actual peak forecast. And this is the percentage of those 260, right? So you've got a few here that were plus or minus 20%. 60% of a forecast. That's the ones outside of the white here, we're off by more than 40%. And the red bar here, 20% of those forecasts were overly optimistic by more than 160%. And this is really amazing. They were still wrong years after launch. So this graph at the bottom shows at the time relative to launch, we started out two years before launch. Forecast is 75% off. But look at this, even at six years after launch, they're 45% wrong. So what does that mean? Remember, let's go back and imagine that we're running a factory now. So if the actual demand is less than what was forecasted, you've got an underutilized facility because you built for the forecast. And there was -- so you've got now excessive depreciation and that breaks your budget because the accountants still want you to depreciate the facility, but you're not making as much stuff, and you've already agreed with the commercial organization on what the price is. So you're in trouble. It's even worse if the actual is more than expected because now you can't make enough to supply the demand. So you have stock-outs. So now if you assume you're at a 90% gross margin, then the lost sales cost you 10x what the cost of goods is. And if it's a life-saving medicine, then people aren't getting their medicine, people could even die. So this is a really, really bad situation, which, I think, biases people, so when they're thinking about this, they think that if they build a plant that's too big, they'll get in trouble, if they build a plant that's too small, they might get fired. So people tend to build a little bit more than is needed. The second problem is the high CapEx, and we've talked about that a little bit. And in the paper that I mentioned, we look at biopharmaceuticals versus small molecules. And I think that's a really interesting way to look at it. If you look at this line here, this is just based on the literature. For this paper, we went to published articles. So this comes from a paper by Brian Kelly back in 2009. So they're saying there was -- you could build a six-pack. So that's one of the Stone Age facilities, $500 million makes 4 tons a year. If you go with some of the single-use bioreactors, you could get that down a little bit. I'd like to look at the normalized capital in terms of the cost -- capital cost per kg per year of capacity. But if you can look at the small molecule API, that's comparable to the biopharma drug substance. We're talking about EUR 73 million or for a continuous process, EUR 31 million, but they're making 200 tons. So less expensive makes a lot more. And then if you look at this metric, we're talking about a 1,000-fold difference. And so we thought, okay, why is that? Well, if you go and you look at a biopharmaceutical facility, you say they're usually -- the equipment is usually empty, especially if you're running in batch. There's nothing in there. It's waiting for the few hours where the material is going to come through or it's mostly water. And one thing that I wanted to show you is, see these three pallets here? That's 4,000 kilos of salt. It doesn't look like a lot. So if you take the entire year's production of a monoclonal antibody and you drive it all down, you can fit it on to this. It's just not -- it's not a lot. Okay. Here we go. So what happens then is what I call the biotechnology vicious cycle. You've got constrained resources and capital equipment, and you might also have constrained resources to develop improvements to your technology. And so your bias not to believe the forecast because you don't really want to spend that -- all that money. And so delay the capacity expansion and say, "Well, okay, those products probably won't make it. So we won't do anything." But then you get surprised and now the forecast or the actual demand is more than you thought, so you don't have enough capacity. So the plant is running flat out. So if the plant is running flat out, you don't have time to make improvements. So if you think about -- sometimes if you want to make an improvement to a process, you've got to change something in the factory. So you got to shut down and do some work. That's totally out. But even if you don't have to make changes in the factory, if you want to change the process, you're going to stop the registered approved process, use the new process and you can't sell that material right way. You got to put it aside, it's got to get validated, and that has to get approved by the regulators. And then you go back. And then the supply chain people say, "We don't have time. We can't do that." So we can't change. And so then you're stock. So then you think, okay, well, I guess we have to outsource this. If you go to a CMO, but you're kind of under the gun, and so you probably have to get stuck into a long-term contract to outsource the additional production. But then things change. And now you don't have as much demand as you did, but you can't bring in the stuff from the CMO because you got a take-or-pay contract with them. So now there's pressure to bring work in for the pharmaceutical company to contract work in, which they're usually not the most set up to do. And then you got to guarantee the production there. And then the cycle starts all over again. And all this is because the current dinosaur or Stone Age facilities, the six-pack facilities are very inflexible. So what do we do? So I've talked a lot about the problem. Okay. Let's not complain about the forecast. The forecast is just -- that's not going to change. But what we can do is we can mitigate the forecast variability through flexibility and lower the CapEx to reduce the impact of the utilization. So with the flexibility, what we're trying to do here is to make a variety of products in the face of uncertainty with change in demand. So it solves a number of problems. One is the forecast variability problem that I mentioned. But it also solves another problem, which is that every time you have a new molecule coming into a facility, there's a facility fit that you have to look at. And now we're seeing not just mAbs, but what people call [indiscernible] mAbs or you've got mAbs with other things on them, you got bispecifics. And that means that processes can be different -- and then you've got personalized and targeted medicine, which is coming. So that means smaller batches. And so the changeover, eats into the plant time. So what do we want to do? We want to delay capital until just before it's needed and have more fully utilized facilities with reduced capital. So how do we do that? Well, we build what we know we need now. And how do we do that? Well, we have equipment that allows flexibility in the rate of turndown. So in production, you can turn up, you can turn down the type of product, as I mentioned before, and so we need product -- we need equipment that is reconfigurable, so you don't just have to buy something new every time you need something, but you reconfigure it. Portability. So if you're making something in one place, you can make it easily and quickly in another place, interchangeable, fast changeover. And the last thing is this automated qualification. Every time you bring a new piece of equipment into a GMP facility, you've got to qualify it. You have to prove that it's doing what it's supposed to do. And we want to automate that. So ideally, you roll in a piece of equipment, you plug it in and the computer turns for a few minutes and then says, okay, everything is fine, and we're good to go. The other thing that we want to do is reduce the capital and operating costs because that is a real barrier, I think the innovation and change. And what we're looking for is a 100-fold capital reduction -- and this is a 10-year vision, by the way. So that ideally, you never have to build another building again. So this building -- wouldn't it be great if they never have to build another building. But as you -- and you can look over here, the idea is you've got a building and then you've got a number of cells here, which are production lines, and then you expand as you need to, but you don't fill up everything. And then in the meantime, while the production group has been expanding, the process development group has been intensifying the process. So now you got a process here so these little ones here. All right. these little ones here mean it's a productivity of one. But the new process is 3x is productive. So these 4 cells can do what these 12 do. So now you can turn off most of those. Now you might have some markets like China or other markets where you can't change as easily. But then you've freed up a lot of capacity, you expand, you bring in the ninefold improved process and you keep doing that over and over again. And the way to do that, we think, is with intensified, integrated, continuous processing. And the other thing is standardized off-the-shelf equipment. If you can make the process small enough. And if you can make the equipment flexible enough, then we think that we can get manufacturers then to make standard equipment. Right now, most of the equipment that you see out there is built to order customized. But we'd like to have it. So imagine you need to expand your capacity, call up your suppliers and you say, I need 3 of these and 10 of those and whatever, two weeks later, the materials on your loading dock and off you go. Again, that's the 10-year vision. So the overall vision is by the end of the decade to invent, design, build and help commercialize drug substance and product manufacturing that enables flexibility. I talked about that. I didn't talk as much about improved control, robustness and security of supply, faster product development and supply chain velocity, sustainable plastic and energy use and reduced capital and operating costs. So I think that is -- yes, that's the end of my talk, I'd be happy to answer any questions that you might have for a few minutes before we go into the next this. Thank you.

I'm happy to questions from the audience or on the webcast.

I'm trying to get your take on these following production executive order by Biden. Anything that can affect going forward?

Yes. Okay. So what do I want to say about that? There's a lot of interest in the federal government now and helping by manufacturing. And I think what people are doing now is taking the kind of the broad goals and then putting that into practice. So we don't know a lot about what the details are. But I do think that, that will translate into probably funding for things like this to help us to achieve some of the things that we want. So more intensified processes and also help to bring new technologies to the market.

Any other questions for John?

Just picking up on the topic of all the cost savings that you laid out there from a pharma company perspective. And clearly, they're not doing it. So what's the trigger to -- for the pharma companies to start to think about this more intently and sort of realize those savings and to be able to reinvest in R&D because single-use has been around for a long time, and those CapEx arguments have been around for a long time, but they're still moving down the sort of large stainless steel argument. So is there a case of precision medicine is the trigger? Or what do you think is going to be a trigger for that paradigm shift?

Yes. I don't see it as much of a trigger as a gradual evolution and a tipping point. I think we are at a tipping point now with single-use. I think most people are going to single-use. I mean you still do see some large stainless steel with the large biogens of the world. But you're right, it's been around for a while. Our industry is slow to adopt things. But I think single-use has been around long enough now that people are more comfortable with it? And I guess I will say that just the fact that people are going to single use, we are seeing people by pharmaceutical companies wanting to reduce that CapEx. And that's why I really focus on the CapEx because I think that's where you get a lot of passion.

In the back.

John, thanks for the presentation. But the single-use application, you would think is particularly relevant for new products, right? I mean, you would not change an existing process if that -- if you're at risk changing the features and characteristics and maybe FDA consequences and so on.

Yes. So that's a great point. And we talk about that a lot. People actually have changed existing products. Sometimes you have to because you're out of capacity and you put in a second gen process. So it has been done, can be done. But you're right, then there are other people who say, well, there could be a comparability issue what if the FDA doesn't like it, et cetera. So I would say it's mix. It can be done, but some people don't.

We would say that for sure, it can be done, respectfully. So we definitely have clients that are interested in next-generation processes. Our facility and our platforms really lend itself to that. And of course, there's a whole biosimilar industry where you're really focused on manufacturing that lower cost of goods and then matching critical quality attributes or CQAs, which are important for that similarity assessment so...

Yes. And I'm sorry if I meant -- I've done it yet. You can do it.

One more, please. Sorry, we've got one more from the web. Which is -- what are your thoughts on using yeast in the future of mammalian products?

Yes. Okay. So that is -- it was a question about what's going to happen in 5 or 10 years from now. An alternate host is a big discussion. Whether it's yeast or whether it's something else, I don't know what it is right now. I think there are some advantages of yeast. They probably have fewer host proteins, but the titers are for antibodies anyway, aren't rivaling what you can do with CHO. But I think it's something to watch. But I will say, though, at a facility that is flexible, it's going to be able to adapt to newer hosts. Whereas if you have a stainless steel facility that's designed for mammalian, you're not going to be able to grow yeast in there.

Great. Thank you so much again. Thank you.

Let's see if the microphone is on. The microphone is on. Let me welcome you. It's great to see you here in the room. It's great to see you gradually. And believe me, I feel for you, I know quite some are online still from Europe. It's getting late. So hang in there. Hopefully, an interesting session is coming because we want to move a little bit shift gears and talk about market needs and access. Let me first introduce myself. My name is Matthias Evers, I work for Evotec. I act as Chief Business Officer, and I look at partnering technology and strategy. Let me start with a question. So some of you entered J.POD, this building. And what do you note first. So you might note our neighbors Space X, okay? You might note, hopefully, a few things we talked about over the last few hours, which might be where this field is different. It's squeaky clean. There are no people are walking around when the process is running. It's one process, lots of space, high flexibility. But I don't want to get that, you heard all that. I want to put highlight, when you enter the building, you see a sign with a statement, design and apply innovative technologies to drive global access. Because what I want to do in the next 45 minutes or so, highlight a little bit why we do what we do, what fuels as the purpose how this unlocks market potential and new markets through the technology we discussed. And I know there were quite a few questions I have to cover and catch up now. So to link the market opportunity, our purpose-driven approach as a design and technology company and give you a little bit an update why partnering is so important. It's not to make sales. It's actually to fulfill this mission because only together, we can do that. So that's a little bit to round up the frame for this discussion. And now let's go more into detail. Here we are, the Biomet and that was just a question before. I would say access to high-quality affordable biotherapeutics is an issue of our time. So -- and this access definition has actually widened because what you see on the right side that is often in the room, high price, affordability, et cetera. But I would add to what John said before me, through the Biden Act, there is also a notion of access to capacities, to capabilities. It's one of the broadest acts from my perspective, which is supporting R&D and manufacturing and biotechnology. And I'm excited here. We are at the forefront, and this is just a U.S. view. We take a global view. The statement at the door has global access. But these are some U.S. examples why we believe this is really the issue of our time. Let's rewind just a little bit. I know here are lots of experts on the call, and I really don't want to bore you. We know it started in 1975 hybridoma technology. First antibody, anyone, anyone, 1986, first ADC, 2000, and it became a major modality. This plot just shows the number of molecules among the top 10 by value in a number of indications. We see, of course, the obvious ones like immunology, blood disorders, et cetera. But it's just here, those are not only new innovations, I'll come to that, but also essential medicines, and we can then talk about who's getting those. But that's a question I'll try to answer in the coming slides. Next question is perhaps, first of all, will they stay important. Basic answer, yes. This is a little bit to put some facts beyond my statement. What you see here is the pharma industry R&D pipeline, the clinical pipeline, Phase I, II, III, just by number of projects, the plot would look differently if you plot by value. This is just by number of projects. And you see how the part of biologics is growing, but also broadening because we have antibody fragments. We have complex biologics, et cetera. And we are ready to serve all those needs, not only the simple monoclonal antibodies. So we have something that's a mainstay therapy. We have something that is critical in future. And the key question is, do we reach -- do these medicines reach everybody? And I want to spend a decent amount of time to go through them because, I mean, the question is, where are the needs and how can we reach them? So the first one is a picture of a baby. And I will give you a couple of facts on rare diseases. But as you see underserved indications, just -- this doesn't work. So you will see online a number of factories. I will just jump over them. But we have 7,000 underserved indications, particularly many in the rare disease space. How can we unlock those? That's a matter of obviously are the incentives. I'm not talking about that. but it's also a matter of cost of therapy, or flexibility and are you able to invest in CapEx that is able to produce a kilo, not metric tons and makes that unaffordable. They're the comment of speed, and that's how we can address underserved indications. Underserved populations. So this picture, which is, I think, on that screen it, it's a bit polarizing admittedly. This is a person of a homeless person in the U.S. Let me broaden the scope of this picture. Black, let's say, people who follow a general workers job. The percentage of people who suffer from cancer and go bankrupt in year 2 in the U.S. is in the high double digits. So we talk also about blue-collar workers, which are definitely also in a way underserved, not only the homeless. We are also not talking only about the U.S. It's the same situation in Europe. It's just a symbol for the underserved population that we have to -- how do we unlock access to high-quality medicines to them. Underserved regions, something I will rather explain on a detailed slide. I think it's obvious how do we reach Southeast Asia, how do we reach Africa, et cetera. And then, of course, there's a pandemic need. As we all realize, pandemic is always the question is, are we in the interpandemic phase or in the pandemic phase. It's always an argument. And I will make an argument why what we offer here is relevant across the board. Now let's first, before I back this up with facts, take a little bit of view because when I ask this question, what will happen if we make it available at COGS, cost of goods, below $50. Hopefully, I mean, during the day here, you took away, it's possible. We have validation, we have facts that this is possible. Now if it's possible, what does it allow us to do? If I go through underserved indication, it needs everything from cost to agility to risk reduction. Otherwise, we cannot serve these rare diseases. Underserved populations, it's a particular cost argument. You could argue I'm conservative, but because the other arguments are also relevant. And when it comes to life-saving therapies to the regions, I think there's also supply chain agility. How do we serve, let's say, with antibodies, somebody in Africa? And then, of course, we have the pandemic. In that case, I will make further on in the presentation. Why again, it's a combination of cost agility and risk? And you will remember the formula we talked about. Now, let's click a little bit through these 4 opportunity areas and how do we believe we can unlock them, and I'll try to answer the questions along the way. First, rare diseases. Personally, I believe this is more than a trigger point because we have, on the one hand, rare diseases, but I want to add to this slide and talk also about what you could frame as precision medicine, because we do know that the biology dictates that the patient populations are often very small. So I would say 7,000 underserved diseases, disorders, but also how about serving the very specific populations as we understand immunology better, as we understand cancer battery, et cetera. So that is a real trigger point. This 30 million plus 30 million is wide underestimate. This is just the patients suffering from these rare diseases, where often innovation is lacking or it's limited. Now why can we unlock these markets? Here's just a selection of arguments. Argument list is longer, but the high titer cell lines. So I mean, you had Randy, we optimized the molecules for higher yield than the cell lines for optimal yield, and we have a rapid turnaround time. So you can go here 2 days, put in, produce a kilo, go out. I think that's a very different paradigm, again, the paradigm shift, to tackle rare diseases. And again, to add to the slide also the, let's say, the precise patient populations. The second argument I tried to make is to address underserved populations. I keep this short. I mean, I think the pricing issue, I assume, is present for everybody. It's an issue of our time. Here, I'm focusing again a little bit more on the U.S. because we have the situation that the biologics are versus small molecules, higher priced and versus other countries higher priced. In the lower, just to explain the lower part of the data chart, I mean we took the U.S. price average for biologics pre-patent expiry at 100% -- and sorry, the U.S. and compared it with the other countries. So you see that the U.S. is somewhere between 300% to 250% higher priced. Now the arguments here, I think, obvious. And here, I take a little bit more aggressive stand because we spoke with a lot of industry experts and see, I mean, where top quartile facilities are across the pharma industry and the CDMO industry. And we feel even there, we have a cost advantage that we -- of 50%. And let's be clear, we call it our aspiration. It will take a few years, but we have a road map to get there. That's a big -- it's not a pipe dream. We have a technology road map to get there to these levels, and that will what we try to communicate. Proximity to key markets. You see the flex of Europe and the U.S. That's where we are present. We are proud contributors to these regions. What the J.POD model also allows is flexibility in terms of producing quickly. We could easily put in a run for Africa into this building. So I'm not suggesting only to put a J.POD in every region, but that I'm also proposing because we have also the lower caps and can expand the global network of J.PODs. There we are, the Inflation Reduction Act, question before. One of the new federal law, I believe, in summer in August, it came -- it was enacted. There's, of course, a big discussion in the small molecule space. That's for the break or later. I mean, very happy to discuss. I think here I'm discussing a little bit the implication for the biologics, because this can contribute again to the trigger point. Why this paradigm shift is needed? Because in the first, and you see it, I called it in the domino piece, because the first question is, is it the end of any pricing discussion? This is a speculative statement. Likely not. But along with the IRA, the discussion is on negotiating the price of biologics in the later years. and that puts a price under pressure for the innovator. So innovators to one question before, might be more interested, especially for the large critical products to move it to a platform like we are proposing because it gives them economic freedom or flexibility -- economic flexibility is perhaps a better word in the outer years. Now that shows the first downward pressure on the innovator. That alone is one market opportunity. if I take the Just-Evotec Biologics lens. What is even more interesting is this moves the goal post for the biosimilars. It moves the gold post for the biosimilars because they get it under sequential pressure. I'm not discussing what is intended. The point is this is what the most likely outcome is. And so there's another market opportunity. How do you deal with that increased cost pressure is the change of the business case for biosimilars. And the south regions. I think, again, a little bit an argument that is broadly known a little to illustrate the point and again, the market opportunity. What we did here is on this world map. We shaded the areas where we could not find commercial access to PD-1 antibodies as an example. Highly effective therapies, great for humanity, just not available. I will provide the footnote that, of course, in certain countries, there are certain arrangement for higher costs, you can import. But for the basic access, it's not a given. So why can be -- Just-Evotec Biologics paradigm be an answer. It's again the CapEx. We had now a lot from it. But also the time to set up facilities, then I made the point before 18 months ago, this didn't exist. In 12 months, we can set up additional trends. So that's the speed we need to get to. We can discuss if you need to further improve the speed but not to slow down given the needs. I see -- not sure what happened, but maybe it's a signal from somewhere that I should pace up. So I take that as a signal to pace up because the fourth area is the pandemic. So this is a little bit of a wild slide and maybe to digest this a little bit. You see in the middle of the pandemic phase, and my statement is that we are always in a pandemic. So either are we in interpandemic or in pandemic. And we learned a bitter lesson that's true through COVID, of course. Now why -- what is important here when it comes to antibodies? And we have real examples. First is in the pandemic phase, accelerated R&D. And I will speak later about -- and there was an interest who are our customers. You see here the logo of the U.S. Department of Defense as one customer, how we had to select COVID antibodies is that true accelerated R&D given the automated and standardized platform. But there's also the preparedness because if cost now allows to develop antibody and future threats, that's, of course, where it gets really interesting because you can do preparatory R&D, you can even do proprietary stockpiling or prepare cell lines that you can down-select as soon as you hit the signal of a new rapid onset. So hopefully, this gave you a little bit of view how we think there's a very traditional market, a CDMO market that you all know. We know the growth rates, and obviously, this is an attractive value proposition. But this from a debrief on 4 areas, which we feel that we are completely unlocking with this value proposition. Now this is actually the statement that's on the wall when you enter the room. But beyond that, what I want to signal here, we are committed to access. So this is not just statement because that's how we want to unlock market value. And the second element on this slide I want to highlight the work together because now I want to shift in my presentation, how do we think about partnering? I will give you also a little bit an update on the partnering, but actually not to turn it into, we need more sales, but into why is partnering critical to deliver this impact for patients. Now first of all, who are our partners? We believe with this mission, I would not call it, we need everyone, but we need definitely the public side and the private side. First, on the public side. We have actual discovery and development work. Development can also include clinical supply but that's running. That's the run you have been observing not within the POD, but there as a one, discovery and development for governance and foundations. We have not yet active example from consortia and public-private partnerships, but we are ready to play. And the dark bar is a little bit, I mean, we are signaling ready for commercial and market supply 2024, early 2025. So we have already reserved program plans to go there into the commercial phase. The private side. And with some of you I talked already about, we need to segment our customers. We definitely have customers in the biotech area, and I will talk more about how these biotechs are interested in first-in-man, early clinical supply and when and how they start with us. Again, discovery and development. We have, as we speak, large pharma partnerships and Discovery and Development, and I will disclose a little bit more why as a partner is undisclosed, that we also start in biosimilars because it fits our mission. This is perhaps more as a business update. We are also expanding across disease areas. And this is, of course, how our technology focus just connects also with the therapeutic areas that we have across the Evotec group. What you see here is some of the obvious indications because of the large big pharma demand and the biotech demand oncology, autoimmune. You see also infectious disease is quite present. You see cardiovascular, CNS, we also quite interested on the cardiovascular side, how we get more into biologic treatments for these areas. To highlight a few things. I mean, 20 programs, we are playing with a mix of fee-for-service and as we introduced earlier, co-ownership. We will have to play over time. As somebody asked me and I will mention it here, this is not a market where we go all for royalty only, but also not for fee-for-service only. It will be a mix. This will offer affordable -- access to affordable medicines. And I mean, we did the analysis, how does it connect with SDG 3. So more of half of our work contributes also to the sustainability goal. Now it's maybe a little bit gimmicky from partnerships to actual ships. But hey, I mean, these are also now better ships, but we have the yards, let's say. Different sizes, different speeds, different colors. But to give you a little bit one or the other example. So I will talk a little bit more on a slide about the DoD. Why is that, why we are excited, why is this important? How does it fit the mission? I will talk about one example for biotech, but just to be clear, we have various biotech partnership. I would even say that's a base model because the biotechs come in and spares that breadth because I will explain how they come in. And then I won't talk more, but we have an undisclosed partnership discussion ongoing in biosimilars. DoD. DoD is all in the context of pandemic response and pandemic preparedness. I try -- I won't read through every element here, but let me highlight a couple of core messages. One, it's a multiyear effort. So it's not a single deal and we are happy because we work for it. I think we are committed to the aspiration of helping during the pandemic. How this started? We qualified for a selection of COVID antibodies in 2020. It expanded from there in COVID work. And what we are excited that we were selected, and we joined the advanced development manufacturing network of facilities. That status gave us now. On the one hand, the announced deals that all of you are aware of, with a value of up to $49.9 million for developing antibodies against plague. So we can definitely sign up against that mission. But also what is new, a second award, which is already accelerated. Now again, why I'm excited about it? Why are we excited about this? I think, number one, we need public stakeholders to fulfill the broader mission. I don't think we -- I mean, we would be genuine if you say we have this bold mission and follow only with private partners. Secondly, we believe the rigorous process, how technology were compared gives us validation. Because in a tender process, our experiments were compared with others, and it was a matter of less about CapEx already in the ground, but it was a matter of technical qualifications. So we feel very good about this validation event. And I mean, the last point is, obviously, you expect me that to say that this helps us in our competitive position as we get this validation in place. That's the DOD. I take Alpine Immune Sciences as one selected example of all our biotech partnerships. Let me start similarly. This is a multiyear journey, and the arrow will hopefully continue for a long time because what happens here is, we start with these biotechs earlier. We could start super early. Randy was there explaining that we actually drive the discovery. We could start early where the initial sequence, the initial clone is there, but then we come in with our AI to optimize a clone to make out of an early antibody actually a great therapeutic because our value, our positioning is quite unique. How do you utilize the whole data we collect here to make it better developable and better manufacturable. And here, in this case, we had on the early clinical supply, and now we launched the commercial process development. It's an important, another important validation point that we move into the commercial phase. So rapid development. We had to de-risk the clinical development. And I think it's a validation point that we develop commercial processes. A little bit more color. I know Werner the intro showed this already. So we definitely feel good about the demand we are seeing when it comes to close sales. So he mentioned, I mean, we have a lead time of 1 year or a bit more. And that, of course, is not a signal for within year sales, to be clear. But we see an acceleration because of our demand on the biotech side. We have -- you have, of course, seen the public examples and the ongoing discussions. I think the two examples I showed fell into this quarter. We are definitely excited about it. That's the reason why we are showing them. And business development is further ramping up because we feel it's very timely with this presentation. The validation points you have seen, the data you have seen, we are going out there, particularly U.S., Europe, but expanding globally. Now how will this evolve? It's, of course, a metric question. And I'm not answering this by a detailed sales forecast, although there will be indicative line, I believe. But the point is more how can you think about business? As I assume all of you will play now with your models. I mean the point is there is a stable base of first-in-human programs. And I would say that's the best case how you have to conceptualize this because there's somebody who wants to enter to start process development, Randy teams is ready. I mean the value proposition is clear because in a future world of cost pressure. I mean with high agility with derisking. You develop your early asset and go down the line. It obviously takes years. And yes, there's also attrition. So this block grows. Secondly, where we have, I would say, more early discussions, but we see already the beginning, which is a multi-target, multi-molecule opportunity. which Evotec and you might have heard about the IR&D framing, but we have -- I mean, it's one of our most successful products and how we have multiple molecule opportunities that are often also linked to royalty and core and ownership components. We definitely foresee biosimilars is important to our mission. And that's something we say now more clearly as perhaps in the past. And we can now discuss in the midterm, the exact contribution. This will, of course, balance out. And then, of course, you have the commercial part. We did say we are commercial ready 2024, 2025. And I would strongly signal here commercial can come from at least 3 sources, biosimilars, from the biotechs going through the chain but also from next-generation process, I would strongly propose that because with IRA with cost pressure all along, there's an attractive case to move established processes on our platform, given the cost and actually also given the sustainability arguments. With that, I would just close my presentation on we are ready to tackle the global access challenge. So hopefully, out of the last few hours, you took away. This is actually more than [ fickle ]. I mean, it's actually a real commitment to access. This will unlock multiple markets. It hopefully contributes to the trigger point. This is from discovery to manufacturing. Whenever we talk about sales and revenues. We think about Just-Evotec Biologics biologic as a whole. So that's always you have to think about it. And I think we bombarded you with validation points, now I have a picture, that's maybe a small validation point. What is that? It's life of surprises, CPHI was yesterday evening, announced us as a 2022 winner in manufacturing, technology and equipment. The team is super proud about it. It's one of the awards we, I think we can be proud about it. And we thought you should know. With that, thank you, and I believe I hand over for Werner because you have questions to all of us. Thank you.

Thank you so much. So this was a lot of information. But what we wanted to do with you once is to go deep, really deep because once you go really deep, you will look at this totally different from now on. And with this, we are open for all questions. And it can go to everyone who presented, but it can also be an open dialogue that we have now. And of course, we are open to questions from the webcast. Here we go.

We'll start obviously with the question.

Any question in the room? Yes. And I bring you the mic and this is James.

James Quigley from Morgan Stanley. Two or 3 questions from me. So you gave some additional data on the order book or the assigned orders. So can you just give us a sort of sense of what that relates to and how that could potentially be recognized over time? And then sort of related to that, there's 18 to 20 projects I counted on the slide, can you give us a sense of the split of the customers that those projects relate to? And then in terms of the interest you're getting, how does that split change? So the DoD is clearly an important part of the current number of projects. Then based on your incoming inbound inquiries, how does that shift? That's question number one. And then question #2 is, Matthias, you mentioned just now about the potential for established processes to potentially move on to the Evotec platform. But what would you say are the barriers or the key barriers to that happening? And are there, have you identified a number of products or obvious examples or types of products which could potentially make more sense to move on to the Evotec platform. So is it the products that require them so mega volumes that could act like DARZALEX that could potentially come down, more mid-sized volumes, and how you think about that? And then just one final one on ESG. When I speak to your -- some of your suppliers from a single-use perspective, they point to studies that the ESG benefit of single-use versus stainless steel is -- can sometimes be very much dependent on the energy sources that you use. So -- and that's more relevant to -- or seems to be more relevant to batch production. So with the Evotec way, can you sort of highlight where your ESG credentials are more positive.

So we'll do the following thanks so much for the questions. We do the ESG question, Randy. We do the platform, both of you actually, I would say. We can say Randal and Randy just to get that. The process transfer on our platform, I would take the Linda, if that's okay. And the demand question, maybe Craig, you start. And Matthias, you round off that question. So we start with the ESG question.

Sure. So a couple of things that yes, I would agree that having what the energy source is where you're operating is an important contribution to the overall footprint. The hope is that at least for us, the 2 footprints that we have currently in our area, we're fortunate we have really great hydroelectric power. So a lot of our energy consumption. You've heard, we've converted a lot of our utilities to electricity. And in France, it's mostly nuclear. And so we actually also have a low footprint. I would say though, all of the studies that we've looked at, and we've been looking at this for quite some time, the disposable facilities do have a lower carbon footprint regardless. And we've actually kind of -- we've accelerated that a bit by saying, well, we're not just going to do disposables. We're going to do highly intensified small disposables. So the amount of waste that we're generating on a per gram basis is even lower than previous generations of disposable facilities.

Anything to add?

I'd say that even those components that are still problematic in terms of recycling, we can at least down cycle, and we're working on ways to do that.

Great. Let's go to the process transfer our platform, Linda.

So your question, just to clarify, was about how difficult is it to transfer processes onto our platform from outside clients? Was that the question? I would say that what we -- that a lot of the cho cell lines fit very well on our platform. And they -- even some of the older ones are really amenable to the perfusion based from -- as opposed to traditional, so we've had really good success transferring in other client cell lines, et cetera, and adapting them to our process. I don't know if Randal wants to add anything to that.

Yes. I think the take home is that it's not only possible, but it's actually the norm, not the exception that we can bring them in. We've also built quite a bit of diversity into how to support robust growth and getting the best product quality out of the products as well. So there's not just a single process platform or media or process type, we can actually adapt our processes to make sure that it's both cost effective. And that's the big thing is you have to find what are the solutions that make sense to do it. we have to find places where you can pay for the development costs, tech transfer costs, regulatory filing costs and that lag of getting it in place by significantly improving how expensive they are to make the COGS. That's how we pay for it. So we model that ahead of time before we make those changes.

And maybe just very quickly, James, because I believe you said also the hurdle, so what you hear about is it's not necessarily the technical challenge. So I mean that we can overcome. And in a humble way, I want to get back to the case example of Tesla because you know that Tesla is driving, but you're used to the old car. So it's getting enough proof points -- I mean, getting away from the infrastructure you're used to the process you are used to. So I would also focus on that area to convince and then move more and more products on our platform.

And before we go to the demand composition and the portfolio, let me again bring you into the following situation that before, for example, as a biotech company, you're developing only one antibody or 2 at a time. Before you hand over that antibody to your manufacturing partner, or to your process optimization partner or to your process development partner, you typically want to see that they exist. So when we are today showing that after 18 months of existing physically, that people are trusting us that they give us their antibodies, you should see that they did not come to us in the pandemic because they were all virtual. No pharma company sent any team in the pandemic to visit us because either we didn't exist or they were virtual. So we are entering here a new phase of ongoing due diligences and ongoing "let's touch this fully continuous process" which was theoretical to most of them before. So that's what I wanted to really keep in mind here before we give you a bit more color on the composition of who is, who we are working with and how this comes together.

Yes. And maybe I can start and then you can add if there's anything I missed. But I would also reiterate that point when it comes to sales and sales trajectory because I mean, our reflection is selling into a facility that doesn't exist is rather challenging, as you might imagine, James, right? So the fact that we're only 12 months open, and we've got a sales trajectory that's heading in a very, very upward steep path is really a testament, I think, to the quality of the team and the technology and the capabilities that are now possible to visit in the way that you did. The mix of partners that we see here, Just-Evotec Biologics pretty much reflects the same sort of communities that we also see for the rest of the Evotec Group. The DoD, you've heard about and you've heard about the cases. And of course, that also illustrates and [indiscernible] made a point of highlighting that most of our relationships with just Evotec Biologics are multiyear. We see this because partly biologics development times along, but also the commitment to multiple projects, multiple antibodies, multiple paths is also -- that also extends the time line that we can collaborate together. And so I would say from 2021 to 2022, we've seen an increase in the length of contractual framework. We've also seen an increase in the value of each individual contractual framework. And then the business mix that we see is, yes, we absolutely still see a lot of interest from biotech. The government side is very, very interesting, of course, but pharma innovators and as Matthias indicated, now biosimilars becoming part of the portfolio, I think, puts us in a very positive frame about what's coming. But the caveat is that the sales volume we've seen is spread over a multiyear. So it's a high level of confidence, but it builds up.

Let's also be clear, 2022 EBITDA negative, big time. but that's expected, and then that's how it has to be. Could it have been faster? Yes. If we would have compromised on the quality of our partners. That's also a point that I want you to take with you that we are so convinced about what we have that we only want to work with the best quality partners because this will pay off significantly into the future. Okay. Other question in the room? Here we go, Zoe.

Zoe Karamanoli from Royal Bank of Canada. With regards to -- do you have a target with regards to clinical development versus commercial projects that you want to have and just -- and the reason why I ask is because I saw that you -- as part of your portfolio, you mentioned that you'll be ready to take commercial scale in 2025. And I'm just wondering given the contribution in terms of margin will be -- what stopped you from taking projects now?

So if there would be a high-quality partner with a high-quality commercial product that, of course, would have a priority to bring in. Why? Because of margin profile? Why? Because of security. Why? Because of visibility, a lot of that. Having said that, this is an event which is coming. I don't know when it's coming, and it will need several proof points before someone is switching a commercial product on our platform, but it will come. That would be the one that exists already and switches to us. Otherwise, we'll have to build it. And here the fastest way to commercial or commercial ready with a lower probability of success would be biosimilars. Having said that, when you have 20 ongoing projects and our speed, how these are going and when you know that some of the clinical development times of some of the orphan drugs will not be 15 years as in the past, but this can be very short trials. Then it's also absolutely foreseeable that you can have commercial products in orphan drugs in 2 to 3 years on the platform. At this stage, we are exploring all the options because at this stage, we feel that the moment it takes quality, the moment it takes the level of partner that we want to have. The platform is there. And that's why I think it will come, but it's definitely not definitely not in '22, definitely not in '23, and that's why we're indicating '24, '25 and forward.

And if I can squeeze another one. You mentioned that you probably aim to be about 75% lower cost than a traditional CDMO. How that does translate in terms of margin for you in term?

Margin profile, maybe Craig?

Sure. So what we showed was the expected dilution of cost as a result of full utilization. That's really where the data that we showed in the slides, and you can refer back to afterwards, really stretches out that the costs fall. And we share that cost advantage with all the partners that use the facility as the full utilization is reached. It will take some time to get to that point, to get down to $50 a gram of cost. But then, of course, that then clearly gives us the opportunity still to make a very healthy margin while transacting in a price point, which is still very, very dramatically different for partners.

And if you would take competitors' margin now or similar players margin now, then we will definitely be in that range or even higher because the other advantages that we have justified that we are asking for high prices and that's why gross margins will be good, will be very good.

[Technical Difficulty]. I was wondering what is a kind a limit or what's the program there. How many programs [indiscernible] itself, you can say [indiscernible] 1 month, we have one train and [indiscernible]. Don't you just do that in-house and then out-license the product.

Yes. So Linda will take the first question. The second question, I can answer you right away. Because, we feel that Evotec is an amazing platform with a limited level of complexity that we want to have in our business. And going now and adding a level of complexity in front-running biosimilars is simply where we don't feel at this stage that we want to go. But you absolutely get the point we could go there. And having the optionality is just an amazing point again. But we, I think, at this stage deliberately say that's not what we want to do. I'd rather see us in a foreseeable time frame, building a very strong partnership with one of these players, very strong.

So the -- yes, your second question was about capacity. I think, so we can do high double-digit project starts every year. The capacity utilization is an interesting one because it's a complex formula of how long we run a process for, whether it's 12, 15, 25 days, the type of project that's in there in the number of runs and the type of molecule, et cetera. So it's a bit of a Tetris game with regard to that, but we can start quite a few projects each year.

And of course, if I may add to this one, if you think now the world in 5 to 10 years through and you have all of a sudden, a positive portfolio effect coming in through scale, then it becomes really interesting. I mean it is already interesting, but I think becomes even more interesting because then you can play full capacity utilization, optimization over various facilities and various completely cloned platforms. Same media, same everything. And that's again where the world has not gone yet to this level of standardization where this will then no longer be a limitation because you can really play the whole global world then on access.

Can I just add one other important point to your question because as John said in his presentation, predicting demand is I was going to say a mug's game John didn't say that. But predicting demand is very difficult and is almost always wrong. And the whole point of what you've seen here is that we don't need to predict. We can respond to demand, right? So depending on the business mix as it evolves, we are capable of delivering, whether it be 12 products of one train for a full year or one train being committed to one product for 2 years. We don't have to pick.

Yes.

[indiscernible] 2 questions to you and the team. If you get -- if you meet your aspirational targets and we get to the second half of '24 and Toulouse open, how many other sites or warehouse would you like to open a J.POD if you prove your business case? That's question #1. And #2 is, when you hear Lonza talking about wherever a new site, they say they have 75% of the capacity already sort of taken by customers on long-term contracts, I realize your business model is different. But when you open to lose again, second half '24, are you totally at risk? Or do you already have interest from partners where you have some of that capacity utilized from day 1? Or is it completely a risk for Evotec.

So before we go to the location which is of where J.POD 3, 4, 5 are going to be, let me bring you into the demand question. Because one thing, I think, is very clear that near shoring of biotherapeutics is something which we have not even fully conceptualized as an industry. And I think also here that it's great to be in the U.S. In the U.S., we see the first signs. What does a changed world mean in terms of nearshoring not only of manufacturing capacity but of the whole supply chain that is linked to that. And that is something where I think Europe is just starting to realize that this is coming. I think that's where other areas of the planet are much more forward thinking. I think about the Middle East here. I think about some parts of Asia where they have realized that this is a huge topic to come. And in Europe, I think given the fragmentation of many governments that they all think that the other one will take care of it or the EU body will take care of it. No one has really figured out what near-shoring for the EU means or for every single country because many of the single countries will be too small and the aggregation doesn't care about it so far. We are not lobbyists, but we talk to political-influencing people because I think this nearing topic for Europe will be one of the drivers to early on have demand also secured for Toulouse. And that's why, for example, having the government supporting us in building up a facility is a good sign, but not sufficient at this stage. Having said that, again, it comes down to -- it will be globally available exchangeable capacity. So we don't have to today, say to anyone, your J.POD will be the one in Toulouse and yours will be the one in Redmond. In general, you can spread it out globally. But of course, this near-shoring topic will come and also here in all fairness, we have a bit of time for Toulouse because we're not opening before '24. Imagine that you have 1, 2, 3, 4, 5 proof points here in the beginning of '23, with new transactions, no public institutions and, and, and I tell you, there will not be a supply problem. I think it's more the opposite that we will have not enough supply to offer because there are 400 to 500 targets every year that need biologics capacity. If we only have 5% of that market, we are already full. And it can't be true that the technology leader which we will be and are already will not take more than 10% to 15% of the market. Otherwise, we're not doing our job as technology leaders. So I think that's why there's a lot of factors playing into that. And no, we have not signed up a single customer at this stage for the J.POD in Toulouse. That's the answer to that question. On the second part of the question, competitors, how we are dealing with the Lonzas and the like. Anyone wants to comment on that?

Yes. I guess the second part -- I thought the second part of the question was, well, I guess I was still thinking about, we are opening P&PD labs. I guess to add on to the Toulouse if it's okay, Werner. We are opening P&PD process labs so that we can have processes in place for when those first clients come in, and that helps mitigate risk around manufacturing solely in Toulouse. So we're taking active steps for that. And then can you remind me of the competitor question?

That they have -- are you fine?

It was the competitor question. It was about the -- do you have anyone signed up when you opened new sites, and it was the location of J.POD 3, 4, 5.

Yes. location, I think nearshoring is a topic, those who understand near-shoring faster than others will have a preference in us being there ready. Having said that, don't underestimate that there's 2 metric tons coming out of a J.POD here and 2 metric tons coming out of another J.POD. That's this enormous capacity that we can bring to these 4 themes that we have highlighted, but I'm very convinced that there will be a J.POD 3, 4, 5 in the future. But let's not, again, someone gave us, penalized us because we have taken J.POD 3 out of our models. I don't know why because it will come it will come. So I think you then have to triple, put that into the model again. Any other questions?

We have a few questions from the webcast, Werner.

Great. Can you read them or...

Sure. So one question came in. Samir Devani, which with such efficient manufacturing and low COGS, what is the company's strategy regarding the biosimilars opportunity? I think that's a great question. Check that box.

We checked it, Matt. Maybe I can help clustering it. Sorry, This was compiled 2 hours ago. So you answered a lot of questions. There were some biosimilar related questions and also to Toulouse related. I think we covered that one. For Randal and Randy, 2 questions actually going into tech details. What is the normal pH aggregation percentage within the industry using conventional production methods? I guess the question is about the 3.6% that you showed compared to a conventional process.

Sure. It's important to note that low pH hold step is actually pretty universal across our industry for most proteins. So whether you're running continuous or not, most processes actually employ it. I'd say a bad-ish process is -- would be above 10%. So that's a 10% yield loss just on that particular viral and activation step. We typically see things closer and below 5%. So those targets that Randy's help in improving those sequences, we're right in range with what we would expect for the industry.

And I'll just add to that and say that when we lowered that aggregation level under pH stress down to triple single digits, that's about what you see without a pH stress. So we were able to essentially remove pH stress from that molecule by optimizing its stability, completely rescued it in terms of therapeutic. And I think you mentioned this during the slide. Those were derived from humans. Those are completing human patient antibodies. These aren't franken bodies, normal cells don't care about process development.

I point back from the hiding behind my computer because now I have a print out. How widely applicable is your proprietary cell line? How many different antibodies can be sanitized.

So I can answer that. I mean our -- it's an interesting word to question, right? We can put any antibody into our cell line. We can put bispecifics, we use the term Franken body, which is just a very complicated multichain type of product. We can put that in. We can put Fc-containing proteins that are fusion proteins, for example. So it's really kind of an empty vessel for the types of molecules that we want to put in there. Highly versatile.

And a related question on capabilities, would that also be applicable to gene therapies? Or are these less amenable to continuous single-use batch?

Well, there's a lot in that question. So maybe about a gene therapy, I'll turn it over because that's for the broader...

So we have made a very deliberate decision that we use capacity of J.POD 1 and J.POD 2 for antibody manufacturing, a very, very high priority because we have enough complexity. We don't want to go to that complexity. As you have seen, we have recently acquired a site for cell therapy manufacturing that will be the process for driving cell therapies going forward. And before we scale up gene therapy, we want to have successful data points to scale up gene therapy processes into manufacturing. That's really a gate that we have built.

And then there's another question, looking at risk from a bit different angle. I guess that's for you, Randy. Does the interconnectedness of the Evotec process means that when something goes wrong in a number of "precious" are affected, whereas on the conventional manufacturing, each patch is isolated, so issues are limited to just one batch.

Yes. I guess I probably take that one. So it's important to note that there's, again, Yes, the continuous process and, as I said, the Clever Bits around stringing the automation together, connecting things that are running at discontinuous lows. Those are new and novel concepts. A lot of what we're doing is actually fairly traditional. The pods themselves have fairly traditional segregation associated with them. The other thing is, is that it's actually less of a risk from cross contamination. If there anything happens to a batch, essentially, everything that, that batch is contacted is stripped out of the facility, right? So there's -- these are fully or functionally closed systems. You could actually -- we actually ask questions of the regulators. Since these are fully or functionally closed, the risk of cross-contamination between products is actually quite low. Could you actually run them simultaneously. the answer is yes. I see John on his head in the back Yes, you can do that. So I'd say the reality is it's actually quite a bit lower because we're using all of these disposable single-use systems and then we're putting them into segregated spaces.

And then there's one related to the sales order book, how much of the closed sales of EUR 90 million is from the large contracts with the DOD and MSD.

Maybe Matthias?

I can take it. Is the mic on? I mean I can take it. I mean, I mentioned the number for DoD. That's, of course, covered in the closed sales.

That's it for the time being.

Great. I look one more time in the room. I want to up-front thank you so much for being 100% active after the most intense biologic session that ever happened on the planet. But if you compare this to a Netflix series, this would have been now 6 series of a Netflix and you know now more than anyone else in this field. Let me before we close whole heartedly thank everyone who helped to make this action happen, because you don't see it, but it all appears. The mics are here. The food is here, the coffees here, the slides are here. So with this big say to Caroline, big thank you to Debbie, big thank you to Eva, big thank you to Gabby online, [indiscernible] online, big thank you to Volker and the many, many other people who contributed to make a little event like this happen. And with this...

Actually, can I add a couple more thank yous?

Of course.

Rachel Browning, Nancy Sanchez, where you are, please raise your hand. Thank you for that. And I guess I'd like to ask the, Just leadership team to stand up and come forward because yes, maybe just stand up all you.

[indiscernible] that now. Yes. yes.

[indiscernible] Leadership team around here. it's an outstanding group, right? We invest in technology, but much and much of the investment is in people. And without that, we would never be able to realize that. So I just wanted to take a moment and thank our leadership team and echo that through all of the staff both here and as well as at our Seattle site who couldn't join us today. We are very grateful for all the hard work in realizing all of our client projects. So.

Yes. Thank you. Absolutely right, Linda, and we cannot thank you enough because that's what it all makes it happen. And I think let me close by saying we are aware that we have an amazing technology built. We are aware that with this technology, there comes an enormous responsibility, and we are very clear that this will be an enormous business as well. Thank you so much. And here is drinks and everything now for us. And thank you to everyone on the webcast. Good night.