Evotec OAI Takes Stake In New Drug Company
The drug development services company Evotec OAI is taking a new approach to participating in the success of its customers: It is investing in one of them.
Evotec is investing in Genovation, a new cardiovascular drug company being spun off from the German biopharmaceutical firm MediGene. Under the agreement, Evotec will be paid cash to cover its costs, while acquiring up to 15% of Genovation over time as it provides services. These will come via an exclusive contract chemistry and biology agreement involving the equivalent of more than 70 full-time Evotec scientists who will carry out chemical screening and drug-lead optimization for the new company.
The investment is part of Evotec's answer to a conundrum facing companies that provide chemistry services to the drug industry. Demand for these services is expanding rapidly--Evotec's discovery division grew by 26% in the first half of 2002--but providers rarely make out big when their customers' drugs succeed. Royalty agreements are another way of participating in customer success, but customers are often hesitant to strike them.
According to Joern Aldag, Evotec OAI's CEO, both parties stand to make out in the new deal. Genovation gets Evotec's assay development, screening, and lead optimization services, and Evotec wins if Genovation's value grows. "We are not a product company, but we like to have upside potential," he says. "One way, if you believe in the quality of the target of a company, is to take equity in it."