Evotec has entered into exclusive negotiations with Sanofi on a major multi-component strategic alliance over the next five years. The collaboration will comprise three major strategic initiatives all focused on improving innovation effectiveness in the drug discovery and preclinical development space.

The collaboration will result in a minimum guaranteed commitment from Sanofi to Evotec of $308.3 million over the next five years, including a sizeable upfront cash payment. It will include a co-development agreement with associated upfront, development, regulatory and sales milestones, as well as royalties benefiting both parties. This multi-component transaction is expected to be signed in the first half of 2015, subject to finalization of definitive agreements and completion of the appropriate social process.

The alliance, upon completion, will cover three major strategic initiatives:

1. Collaboration on selected preclinical development projects with a focus on oncology and potential Cure X/Target X initiatives. Evotec will accelerate drug discovery projects to the point of preclinical development candidates (PDC), from which point Sanofi may take over development and commercialization. Evotec will license from Sanofi a portfolio of projects including five well-advanced preclinical projects in oncology that will be progressed to IND (Investigational New Drug) jointly before potential partnering.

2. Evotec will expand its capabilities in integrated drug discovery of approximately 650 scientists by integrating a state-of-the-art scientific and technological facility, which has more than 200 scientists from the Sanofi research site in Toulouse, France. Evotec will integrate the capacities of the highly productive small molecule discovery site into its global drug discovery platform. The expanded capabilities will cover the early-stage discovery and preclinical process from screening to medicinal chemistry.

3. Sanofi and Evotec plan to combine their libraries to make them available for screening to Evotec's partners. The Sanofi library, established on its Toulouse site with over one million compounds, will expand Evotec's own corporate library of more than 400,000 compounds, creating a large and valuable source of starting points for drug discovery. Evotec will screen the libraries against collaborators' and partners' targets under pre-agreed terms from which Sanofi will receive a contribution if a product is developed.