Ladies and gentlemen, welcome to the Evotec SE third quarter and nine months 2026 results conference call. I am Sandra, the Chorus Call operator. I would like to remind you that all participants have been made anonymous and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Sarah Fakih, Head of Corporate Communications and IR. Please go ahead.
Thank you, Sandra. Good morning, good afternoon, and welcome to today's webcast and conference call. My name is Sarah Fakih, and I am the Head of Corporate Communications and Investor Relations at Evotec. Please allow me to introduce today's speakers. Joining me on the call are Christian Wojczewski, Chief Executive Officer of Evotec, and Claire Hinshelwood, our Chief Financial Officer. Please note that this call is being webcast live and will be archived in the event calendar on our website. Before we begin, a few forward-looking statements. The discussion and responses to your questions on this call reflect management's view as of today, Thursday, November 5th, 2026. During this call, we will make statements and provide responses that state our intentions, beliefs, expectations, or projections regarding the future. These statements constitute forward-looking statements within the meaning of applicable securities laws.
They are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied. Evotec disclaims any intention or obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. For further information regarding these risks and uncertainties, please refer to our public filings and disclosures. With this, let me hand over the call to Christian.
Thank you, Sarah. Good morning and good afternoon to everyone. Thank you for joining today's call. The third quarter of 2026 showed encouraging progress after a challenging first half. We are beginning to see the different pieces of our transformation come together and translate into improved business performance. Group revenues in Q3 were above both Q1 and Q2, mainly driven by stronger commercial execution in the D&PD base business. At the same time, lower costs brought adjusted group EBITDA close to break-even. The nine-month results still reflect the weaker first half, including slower sales to revenue conversion in D&PD and the Sandoz license contribution in JEB in the first quarter of 2025. Our commercial ramp-up in D&PD is gaining traction. Net sales in the base business were up 24% for the first nine months year-over-year.
In this shorter cycle business, we are now beginning to see stronger commercial activity convert into revenue growth. In Just – Evotec Biologics, we are excited to confirm that Vertex Pharmaceuticals has selected us for the commercial manufacturing of povetacicept at our J.POD Redmond facility. This is an important step for JEB as we advance our continuous manufacturing platform toward commercial scale readiness. Alongside this progress, Horizon execution is well on track. Our target is to deliver approximately EUR 75 million in annual run rate savings by the end of 2027. For this year, we plan to deliver 20%-30% of this target. By the end of September, we had already delivered more than 20% of the target, putting us ahead of plan. Footprint consolidation and workforce measures are starting to deliver tangible savings, while our focus on utilization and operational efficiency is supporting improved profitability.
These developments give us greater confidence in the direction of the business. We reaffirm our full year 2026 guidance and, based on our current visibility, expect revenue and adjusted EBITDA to land toward the upper end of their respective ranges. Later in the call, we will provide greater detail on our mid-range framework through 2030. This will give you better visibility into the business and a clearer view of the path forward, including how we expect the business mix to evolve and support a structurally stronger earnings profile. But before we move into the detailed review of the third quarter and first nine months, I would like to highlight an important transition in our scientific leadership. Science is at the core of Evotec, and I am therefore very pleased to introduce Dr. Joanna Holbrook. Joanna joined Evotec as Chief Scientific Officer and member of the management board on November 1st.
She succeeded Cord Dohrmann, who left Evotec at the end of September. I would like to take the opportunity to thank Cord for his many contributions over more than 16 years. He played an important role in building the scientific capabilities and innovation culture Evotec is known for. We are excited to have attracted a scientific leader of Joanna's caliber to Evotec. Joanna brings more than 25 years of international experience across pharma, biotech, and academia. Most recently, she held senior scientific leadership roles at Novo Nordisk. Previously, she served as Chief Scientific Officer at biomodal. Joanna combines deep scientific expertise with a strong track record in applying new technologies and data-driven approaches to drug discovery and development. Her experience across different scientific environments, organizational structures, and cultures adds a broad perspective that will be particularly valuable as we continue to evolve Evotec.
As Chief Scientific Officer, Joanna's focus will be clear: to strengthen our scientific profile and translate advances in data science, AI, and novel technologies into greater value for our customers and partners. On slide six, let me continue with an overview of recent progress across selected partnerships. The most important development is in Just – Evotec Biologics, where we confirm that Vertex Pharmaceuticals has selected JEB for the commercial manufacturing of povetacicept, Vertex's investigational biologic candidate for a serious kidney disease. Alongside this exciting progress, we are adding a third manufacturing train at our JEB Redmond facility next year, expanding manufacturing capacity for the next phase of JEB's growth. The additional capacity also positions us well to meet our manufacturing and supply commitments to Vertex.
Furthermore, in our collaboration with the Department of War, JEB advanced the orthopoxvirus antibody program into a phase I clinical trial, having progressed the program from sequence to clinical supply. In D&PD, we continue to broaden our partnered innovation activities. The first candidate from our sleep disorder discovery collaboration with Jazz Pharmaceuticals has advanced into a phase I clinical trial. Further, new and recent collaborations span next-generation therapeutic oncology approaches with Plectonic and AI-enabled drug discovery with Odyssey Therapeutics. Let me now hand the call over to Claire for a review of the Q3 and first nine months 2026 financials.
Thank you, Christian, and good morning and good afternoon to everyone. Looking at our income statement on slide seven, group revenues for the third quarter of 2026 amounted to EUR 164.9 million, broadly stable compared with EUR 163.9 million in the prior year period. At constant exchange rates, Q3 group revenues amounted to EUR 164.2 million compared to EUR 163.9 million in Q3 2025. The quarter benefited from stronger performance in the D&PD base business, with the improvement particularly visible in discovery and Cyprotex. This helped offset continued timing and conversion effects in other segments. For the first nine months, group revenues totaled EUR 465 million, reflecting a 13.1% decrease year-on-year from EUR 535.1 million. At constant exchange rates, group revenues declined by 10.8% to EUR 477.4 million compared with EUR 535.1 million in 2025. The nine-month comparison reflects a weaker first half of the year.
D&PD remained affected by the slower sales-to-revenue conversion, while JEB was impacted by delayed program activities and the $25 million Sandoz license sale recognized in Q1 2025. Looking at the segments, D&PD revenues in Q3 were EUR 120.1 million, down only 2.3% or EUR 2.8 million from EUR 122.9 million in the prior year quarter. At constant currencies, D&PD revenues totaled EUR 119.6 million. For the first nine months, D&PD generated EUR 348 million, representing an 11.2% decrease from EUR 391.9 million in the prior year period. At constant exchange rates, D&PD revenues amounted to EUR 355.5 million. Just – Evotec Biologics delivered Q3 revenues of EUR 44.8 million, an increase of 9.4% from EUR 41 million in the prior year quarter. At constant exchange rates, revenues amounted to EUR 44.6 million. For the first nine months, JEB
revenue totaled EUR 117.1 million, representing an 18.2% decrease from EUR 143.2 million in 2025. The year-on-year decrease was primarily driven by the non-recurring Sandoz license sale last year and delayed program activities. At constant exchange rates, revenues amounted to EUR 121.9 million. R&D expenses decreased to EUR 29.7 million in the first nine months, or 6.4% of group revenue, compared with EUR 42.3 million, or 7.9%, in the prior year period. Turning to profitability, adjusted group EBITDA improved significantly in Q3 to EUR -1.6 million from EUR -15 million in the prior year quarter, bringing the group close to break-even. The improvement was broad-based, with significantly better Q3 adjusted EBITDA performance in both D&PD and JEB, supported by improved revenue contribution and a lower cost base. At constant exchange rates, adjusted EBITDA was EUR -1.7 million.
For the first nine months, adjusted group EBITDA decreased to minus EUR 44.3 million from minus EUR 16.9 million in 2025. The result primarily reflects the lower nine months revenue base, partially offset by lower cost of revenues. At constant exchange rates, adjusted EBITDA was minus EUR 39.1 million. At segment level, D&PD adjusted EBITDA improved to minus EUR 1 million in Q3 from minus EUR 9.5 million in the prior year quarter. At constant exchange rates, adjusted EBITDA amounted to minus EUR 1.4 million. D&PD adjusted EBITDA for the first nine months decreased to minus EUR 25.5 million compared with minus EUR 18.8 million in the first nine months of 2025. JEB adjusted EBITDA also improved significantly in the third quarter to minus EUR 0.6 million from minus EUR 5.5 million in Q3 2025. At constant exchange rates, adjusted EBITDA totals minus EUR 0.3 million.
For the first nine months, adjusted EBITDA was minus EUR 18.8 million in 2026, compared with plus EUR 1.9 million in the prior year period, which included the Sandoz license sale. At constant exchange rates, nine-month adjusted EBITDA totals EUR 19.3 million. Turning to liquidity under balance sheet on slide eight, total liquidity as of September 30, 2026, stood at EUR 401 million, representing a quarterly decrease of EUR 65 million compared with EUR 466 million at the end of the second quarter of 2026. We continue to operate from a solid balance sheet. Looking ahead, rigorous cash flow management remains a key priority, with a continued focus on optimizing working capital and preserving the optionality in our liquidity structure. Our capital discipline is reflected in the substantial reduction in CapEx from the elevated levels of recent years, which we reduced to our goal of under 10% of revenue.
This demonstrates our selective investment approach, focusing on areas where we see the strongest strategic relevance and value creation potential, while continuing the shift towards the more capital-efficient operating model established under Horizon. One area of selective high-value investment in 2027 will be Just – Evotec Biologics. As already mentioned, we are investing in a third manufacturing train as part of the next phase of growth at our J.POD Redmond facility. Initial CapEx has already been incurred in 2026, with the remainder of the investment expected in 2027. That said, we expect CapEx for 2027 to remain broadly in line with 2026. Within that envelope, the third train will represent our largest individual investment next year. The investment will expand our manufacturing capacity while benefiting from the lower capital intensity of our continuous manufacturing technology. The installation will require a planned temporary pause in manufacturing activity at Redmond.
The associated near-term impact on 2027 manufacturing revenues is already reflected within our mid-range plan, which Christian will discuss later in this presentation. With that, let me hand the call back to Christian.
Thank you, Claire. Turning to commercial execution, over the past several quarters, we have shared leading commercial indicators to provide greater visibility into the development of our D&PD business. As shown on slide nine, these indicators continued to strengthen through the first nine months of 2026. In the D&PD base business, comprising standalone and integrated programs, net sales increased by 24% year-on-year, exceeding the respective prior year period in each of the first three quarters of 2026. The number of inbound leads increased by more than 45%, while proposal activity remained well above prior year levels, and proposal turnaround time improved by approximately 20%. Our D&PD customer base also increased by approximately 10% compared with the first nine months of 2025. Importantly, we are now beginning to see stronger commercial activity translate into revenue in the shorter cycle base business.
Net sales generated during the first half are beginning to convert, with a Q3 revenue improvement particularly visible in Discovery and Cyprotex. We are also seeing a healthy pipeline of new strategic partnership opportunities. Around 20 opportunities currently represent approximately EUR 1 billion in total potential deal value. Our priority now is clear, maintain this momentum and translate it into sustainable growth. Turning to Horizon on slide 10, the transformation is making strong progress and remains ahead of plan. Its structural measures are increasingly translating into tangible financial and operational results. Let me start with the financial impact. Our target is approximately EUR 75 million in run rate savings by the end of 2027. For 2026, we plan to deliver 20%-30% of that target. By the end of September, Horizon had already delivered more than 20%, putting us ahead of plan.
These savings are visible across our cost base, including COGS and SG&A. Approximately half of the announced workforce reductions have been implemented, representing around 400 of the planned 800 positions. At the same time, footprint consolidation is on track. We expect three of the four planned site closures to be completed by year-end, with a fourth to follow in the first quarter of 2027. Alongside these efficiency measures, we continue to reshape our scientific footprint around fewer, more focused areas of scientific excellence. The consolidation and transfer of capabilities across omics, infectious diseases, and protein science are well underway. Horizon is moving from implementation into tangible delivery, and we remain on track to deliver the full structural benefit of the program by the end of 2027. Moving from our Q3 and first nine months 2026 perspective to our full year outlook.
On slide 11, we are reaffirming the guidance we provided on July 13, 2026. We expect group revenues in the range of EUR 570 million-EUR 610 million on a reported basis, and EUR 595 million-EUR 635 million at constant exchange rates. Adjusted group EBITDA is expected to land between minus EUR 105 million and minus EUR 70 million, or between minus EUR 90 million and minus EUR 60 million at constant exchange rates. Based on our performance through the first nine months and our current visibility for the remainder of the year, we expect both revenue and adjusted EBITDA to finish toward the upper end of their respective guidance ranges. This reflects the improved performance we saw in the third quarter, while the assumptions underlying our July guidance update remain unchanged.
Let me now zoom out one step further and, on slide 12, turn to our mid-range framework through 2030, which we first announced in March this year. Our ambition is to generate around EUR 1 billion in group revenues by 2030, with potential for additional upside. We further expect to achieve an adjusted EBITDA margin of 20% by the end of 2028, rising above 20% by the end of 2030. As announced in our webcast on July 14, going forward, we intend to provide greater transparency on how we expect to reach this ambition. In particular, we would like to provide a clearer view of our principal revenue streams and their underlying economics. The logic is similar across D&PD and JEB. Both segments have a base business, providing a growing and increasingly productive foundation.
Additionally, both segments have revenue streams and profit pools on top of their base businesses, derived from differentiated technology platforms and scientific innovation. In D&PD, the base business comprises our CRO services, including standalone and integrated programs. Here, we are serving end-to-end workflows across the full spectrum, from target identification to IND. We expect this base business to contribute around 40% of revenue by 2030. Horizon and further productivity measures are expected to drive gross margin above 20%. On top of the base business, we will be extending our D&PD strategic partnership business. Those partnerships leverage our proprietary technology platforms and deep scientific expertise. They are expected to contribute another 20% of revenue by 2030 and offer attractive margin upside in excess of 15 percentage points versus the base business through milestone payments and royalty contributions.
Given the more volatile nature of this business, we have taken a risk-adjusted approach in our outlook, which also does not include future royalty income until 2030. Successful scientific execution of our existing long-term partnership commitments or new partnerships can provide milestones and royalty income beyond these assumptions. We intend to provide more granular insight into how the two components of the D&PD business develop, starting in 2027. In JEB, the base business is our CDMO offering, which is an engine for early and late-stage biologics. We have already demonstrated our ability to grow through our development and clinical manufacturing capabilities. Extension of our third train in Redmond and entering commercial manufacturing is expected to provide the basis for further growth. On top, licensing of our continuous manufacturing technology, including offerings such as J.TRAIN, as scalable growth and higher margin income alongside partnership royalties.
Overall, we expect the JEB business to contribute approximately 40% of revenue by 2030. The move into commercial manufacturing, together with the expansion of our licensing business, is expected to drive substantial margin expansion over time, with gross margin rising above 30%. Our 2030 ambition is about building a more balanced business with a structurally stronger earnings profile and a more transparent path to sustainable profitability. On slide 13, let me provide an overview of the drivers behind the 40/20/40 revenue mix in our 2030 mid-range framework. Starting with the D&PD-based business, we expect revenues to reach approximately EUR 400 million by 2030, representing a CAGR of around 10%. Growth should be driven by the continued normalization and recovery of the early drug discovery market, stronger commercial execution, and our differentiated scientific and technology capabilities, including increased contribution of AI to drug discovery and development.
Strategic partnerships and innovation sit on top of this base, but follow a different trajectory. The blue line shown here reflects our risk-adjusted planning assumptions and reaches approximately EUR 200 million by 2030, representing a CAGR of around 5%. Given the volatile nature of this business, actual revenue development will not develop in a straight line. The timing and the progression of individual programs can result in periods above or below that trajectory, as illustrated by the wavy blue area around the risk-adjusted line. As discussed, the risk-adjusted trajectory deliberately takes a more balanced view. Full scientific achievement or expansion of existing programs, together with new strategic opportunities, can provide additional upside. Just – Evotec Biologics has a different growth profile. Greater visibility on future demand, including our commercial manufacturing commitment with Vertex, has guided our decision to add a third manufacturing train at Redmond and expand capacity.
As Claire discussed earlier, the installation will require a planned temporary pause in manufacturing activities in 2027, with the resulting near-term revenue impact already reflected in our plan. Once the additional capacity comes online, we expect growth to accelerate meaningfully. Higher utilization and increasing contributions from higher-margin licensing income and future royalties are expected to drive revenue to approximately EUR 400 million by 2030, representing a CAGR of around 20%. Taken together, these differentiated contributions provide a clear path towards the more balanced, scalable, and profitable business we're targeting for 2030. Before we move on to the Q&A session, I would like to briefly summarize today's key takeaways on slide 14. The third quarter gives us encouraging evidence that the business is moving in the right direction. Commercial execution is strengthening, and in the D&PD-based business, we're beginning to see stronger net sales translate into revenue.
At the same time, improved profitability shows the impact of a lower cost base and better execution. Horizon is ahead of plan. Savings are increasingly visible. Structural measures are well advanced, and we expect to deliver the full program on time. In Just – Evotec Biologics, the Vertex agreement marks an important step toward commercial manufacturing. Together with our planned capacity expansion, this provides a stronger foundation for the next phase of JEB's growth. We confirm our 2026 guidance and expect revenue and adjusted EBITDA toward the upper end of their respective ranges. Looking beyond 2026, we have also given you greater transparency into the structure and economics of our business. The clear distinction between the D&PD-based business, strategic partnerships, and JEB shows how different growth and margin profiles are expected to combine into a more balanced business and a structurally stronger earnings profile.
To further improve understanding of our business, we plan to complement our regular reporting with selected virtual deep dives into key areas of the business over the coming months, providing greater insight into the capabilities, growth drivers, and value potential. There's still work ahead, but the direction is clear: stronger commercial execution, a more efficient cost base, and a more attractive business mix. With this, I would like to close the call and welcome your questions. Thank you.
We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to disable the loudspeaker mode while asking a question. Anyone who has a question may press star and one at this time. Our first question comes from Charles Weston from RBC. Please go ahead.
Hello. Thank you for taking the questions. Three, if I can. A near-term question first. Could you disclose what strategic milestones you received in Q3 and what expectations might be for Q4? My longer-term question is around the JEB business. Specifically, what gives you the confidence that that business can more than double over the next, well, up to 2030, particularly in light of the Sandoz development revenues that will presumably have become quite small by then? My last one is more of a conceptual one. The current environment has got everyone very excited about AI. You have obviously been invested in AI and datasets for a number of years. Could you just give us some color on whether this positioning has led to any meaningful tangible leads? Thank you.
Thank you, Charles, and hello. I will start and see if Claire wants to chip in as well on the milestones. I understand you were talking about Q3 and Q4 this year, if I am correct.
That is right.
Yeah. Not in a meaningful amount, but Claire will further allude to that. On the JEB topic, confidence about 2030 in light of Sandoz. I think we try to explain that when you look at the Sandoz profile, there were short, mid-term, and long-term economic benefits of the deal. We are now in the mid-term phase, 2026-2028, where we are doing the joint development work. Thereafter, basically, the 10 molecules coming to market, we are eligible to royalty payments. That is obviously something that is going to contribute as of 2029, 2030, to a certain amount. Not peak values, but to a certain amount. But I think we also just alluded to the fact that we have lined up new customers, and we are also quite confident with regard to the being ready for Vertex, which will obviously play an important role in our mid-range plan.
On the AI positioning, absolutely, Charles. It is also a contributor to revenue growth that we have seen in parts of our Cyprotex and Discovery business. We are actually doing business and generating work and revenues with quite a few of the drug discovery companies that have focused on AI. We expect this to further continue, if not even accelerate. Claire, any further flavor on the milestone topic?
Yeah. On the milestones in the third quarter, Charles, there was round about EUR 30 million included, and we would expect that to be quite a bit less in the fourth quarter. That is one of the drivers if you look at the year-to-date performance versus our guidance that we have given for the full year. That is why the third quarter was a bit stronger than what you would if you were to extrapolate that out for the full year. That is where we sit with the milestone impact and revenues.
Thank you. If I could just clarify one point. When you talk about that strategic milestone, that is the payments from the strategic partners, right? But what about the milestones from clinical development milestones where you do not have any associated work? Sorry, I was not clear, but that is what I was referring to.
Oh, that was what you were referring to. There was none. What I refer to was ongoing work that we're working on at the moment.
None in Q3 and likely to be none in Q4?
Yes, that's correct.
Thanks very much.
The next question comes from Ramakanth Swayampakula from HCW. Please go ahead.
Thank you. Good afternoon, Christian and Claire. One quick question. You delivered Q3 adjusted EBITDA of negative EUR 1.6 million, yet the unchanged annual range implies a Q4 loss of roughly EUR 26 million-EUR 61 million. What specifically bridges that deterioration? Is it lower partnership or milestone contribution, utilization, manufacturing failures? What is impacting that? Which of these elements are actually temporary, and we should not expect them to be seen in 2027?
Thank you for the question. Maybe a general statement. Our profile quarter by quarter is not even. It is not a straight line, and that is something to keep in mind. We have seen Q3 being strong in terms of revenues, both in D&PD and in JEB. With regard to Q4, we have a clear view on cost out. We have a robust sales development perspective on D&PD. There is still quite some dynamic in JEB when you think about the phasing of the work, revenue recognition for Sandoz, and also Vertex, that can impact the phasing, and that is why we stay confident to stay in the guidance and the upper range. Claire, anything to add?
Yeah, I mean, it is really the same answer that I just gave to Charles a second ago. When you look at the Q3 proportion of milestones impact, both in revenue and in terms of profitability, and with that not repeating to the same magnitude in Q4, then that has an impact when you look at the quarter-by-quarter movement. That is always, as Christian said, why we have such variability across the quarters and tend not to guide in that way. That has been considered as part of when we have looked at the full-year outlook and where we expect to land, that is clearly the consideration that we have taken to place there.
Thank you for that. One additional question. This is on the Vertex relationship. For the tasks at Redmond, what manufacturing validation or inspection or customer release steps are yet to be done? When do you think the commercial supply would actually start contributing to your top line? Do you need to do any additional investments just to be ready? I think you did state something about expanding the facility there.
Thanks for the question. First of all, let me once more say that we're really excited about this opportunity. I think it's reasonable to assume that as part of the preparation for the PDUFA date, and Vertex commented that they're planning to do this on the 13th of November. So we've got, what is it, 25 working days that at this point in time, inspections will have taken place, and we are going the normal course of development here, and we're very confident in our ability to support Vertex and our partner to enter commercial manufacturing. So, it's not a lot of time left until the PDUFA date, and that's why you should not expect that there is a lot of stuff still to be done.
One last question from me. Sorry.
The investment into the third train, obviously, it's not just related to Vertex, also lined up other customers, but it's really good to have here a strong anchor customer that will pick up that capacity going forward. Sorry, you had another question.
Yeah, a quick one. I know having Rui on board, Evotec is expanding the use of AI in all aspects of operations. At what point can you start publicly stating how much of operational excellence you are achieving because of the utility of AI tools? In case you are looking at it internally, what metrics are you applying just to make sure that what you are doing with AI is actually benefiting your operations?
Yeah. Thanks for the question. To be honest, our main focus when it comes to AI is to use it to accelerate drug discovery. Of course, there is also the component of using it for internal processes and productivity here, but the biggest lever is to accelerate drug discovery, and we have started to be more vocal around this. You have seen some announcements more recently where you see the impact of that, the Jazz announcement. We are entering into phase I that has been supported by virtual screening and drug design, molecular dynamics. You have also seen it with the Odyssey announcement in Autoimmune that has been a combination of high-throughput wet lab, plus machine learning analytics, and a couple of others. This is real. This is being applied at Evotec in order to do new partnerships, accelerate the drug discovery.
The other side is actually to partner up with AI companies to improve the models. That is our main focus at this point in time.
Thank you, Christian. Thanks for taking all my questions.
The next question comes from Fynn Scherzler from Deutsche Bank. Please go ahead.
Yes. Hi, and thanks for taking my questions. I also have three. First, if we can maybe go back to the ongoing contract negotiations that caused you to reduce your guidance in July. Back then, you provided this rough split, 40%, 45%, 15%, with the reasons behind that. I was wondering, has your confidence or visibility of these volumes returning in 2027 changed by now? Asking for, are you more confident, less confident in either of these parts? Then, the second question on JEB as well. I mean, with the last J.POD sale to Sandoz, you were talking a lot about becoming more asset-light now and moving more towards licensing, et cetera. Is this now a pivot back in strategy towards a more, yeah, asset-heavy business model?
Aside from the J.TRAIN that you are building now, will there be any other investments necessary to get to your midterm targets, or is this pretty much the only larger one? Then finally, we've been waiting for the D&PD inflection, so to say, for a while now, and with the base business now performing more strongly, would you say this inflection is now here, or are we still in the early innings? Would you say it's back to full steam? How would you describe that? Thank you.
Thanks for the questions, Fynn. Claire, do you want to start with the first one maybe?
Yeah. Thank you, Fynn, for the questions. If you remember, back when we adjusted the guidance, there were three elements to the adjustment that we made to the guidance. Part of that was related to our ability to, or speed with which we were converting sales to revenue, and that was where we said we would have some delayed impact that we would see moving into 2027. Because we are now coming with our guidance at the top end of the range, then some of that is partly what's contributing to us being able to meet the higher end of the guidance this year, and the remainder of it, then we see that flowing through into 2027.
On the strategic deals, which was another significant part of the guidance adjustment, you saw in one of the slides that we shared that the deal pipeline that we've got there is around about EUR 1 billion in terms of value, with several of those deals reaching late maturity. Again, we remain extremely confident in the composition of the pipeline that we've got, the robustness of it, and we're starting to see those deals maturing. Just as a reminder, though, when we did talk about the strategic deals, we didn't say that that would all move into 2027, but it would move into the outer years depending on the timing and the phasing of those deals, and depending on the structure and the way in which those deals ramped up.
Just to manage expectations, or just to remind that that was not a straight shift from one year into the next. The last part that was part of the guidance adjustment was linked to an ambition that we had set ourselves around revenue conversion. That wasn't about lost sales or lost revenue or moving revenue. That was really an ambition we had set ourselves, which we were not able to, at that point, fully commit to and make. Yes, in very long answer to say, a bit of it is helping us meet the top end of guidance this year. Yes, we will see that moving into 2027, but not to assume that all of the strategic deals will land in 2027, but over the period of the outer years, but still confident in our ability to land those.
Fynn, on the JEB question and whether the investment into the third train is an indication of a pivot back to the old strategy, clear answer, no. That's not the case. We stick to our strategy. You should also not think about an investment here in the order of magnitude of what you have seen in previous years in Toulouse or in Redmond. It's a small fraction of an investment. At this point in time, we're not contemplating for this planning period until 2030 any further extension. This is the expansion that is required in order to fulfill the growth plans here from a manufacturing perspective, and we feel totally comfortable with that. There is no change in strategy. You will also have us heard speaking about the fact that the licensing play continues. We're actively marketing J.TRAIN, J.CHO, J.Media.
All of that is still in full swing. On the inflection point, let me describe a little bit the connectivity between sales order book, and then revenues or the commercial activities and how that converts into P&L impact. We always said 2026 is a transition year. It is fair to say from a sales and sales order dynamic perspective, probably 2025 to early 2026 was the trough. We see positive dynamic here, but there is always a delay effect between order book and then revenues. When you think about the 2025 revenue profile, that was basically built on the order book generated between 2023 and 2024. 2026 was then built between 2024 and 2025. 2027 revenues will be built between 2025 and 2026 order book, roughly.
Obviously, the devil is in the detail because it very much depends on how long these projects then actually last, whether it is high velocity, short cycled business, or longer projects. But roughly, when you think about this concept, then you probably will appreciate 2025 being the trough. This certainly has impacted 2026 revenues, and will be washed out over time. Clearly, that then indicates that it is reasonable to expect a rebound in the next couple of quarters, also from a revenue perspective. When it comes to the BMS dynamic, we also explained that there was a substantial revenue decline between 2023 to 2026. The work orders have stabilized. We are expecting BMS contribution to grow the next 12 to 24 months.
The 2027 guidance, which we are then going to issue beginning of next year, will then reflect the latest view on phasing of revenues, milestones, and so forth. But it is fair to say that at this point in time, we see 2025 as a trough with regard to net sales, and 2026 actually the trough when it comes to revenues. Hope that helps.
Yeah, very helpful. Thank you very much.
As a reminder, if you wish to register for a question, please press star followed by one. Our next question comes from Brendan Smith from TD Cowen. Please go ahead.
Hi, this is Jacqueline on for Brendan. I appreciate you taking the questions. Maybe just one from me on the AI side of the conversation. Have you seen any customer inquiries specifically around data generation, given your numerous touchpoints across the discovery process? Are there any areas of white space you're thinking of expanding into with regards to your modeling development that could potentially further bolster those D&PD sales?
Thanks for the question. Not just have we seen customer inquiries, but we are actually actively doing work with customers on this topic. Data generation is a big topic. As I mentioned, can be related to chemical compound generation, can be related to DMPK, tox safety profiling. So, many, many areas. This is an important driver right now also for the positive sales dynamic that we're seeing. There's quite a bit that we have in-house already when it comes to data. Let me remind you, our Molecular Patient Database as such of high, high value and interest in the market, because that's something that you cannot quickly generate and has been built over a decade at Evotec. So, this is a super strong asset in our minds, and it's attracting a lot of interest also from partners.
The other part, obviously, when it comes to data generation, still a lot of demand is related to tox studies and helping to train models here. This is not something far out. This is real business meanwhile.
Great. Thank you.
We have a follow-up question from Charles Weston from RBC. Please go ahead.
Hi. Thanks for taking the follow-up. You have mentioned the word strategy a lot of times on this call, Christian, and you have been quite clear with strategic goals 2030, mid-term strategy, but you are undergoing a strategic review as well. I am just wondering what aspects of the strategy are still left to be determined? Thank you.
You are asking me to give my holding statement. The review is ongoing, Charles.
It's worth a go. Thank you.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Sarah Fakih for any closing remarks.
Thank you. With this, we would like to conclude today's conference call. Thank you for your participation, and please feel free to reach out to the investor relations team should you have any further questions. Thank you and goodbye.
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating.