Shares in Evotec jumped 8% following Berenberg's initiation of coverage with a "buy" rating. The brokerage believes the market undervalues the German biotech firm's long-term partnerships and core research platform. Berenberg set a price target of €10, significantly above its closing price of €5.90. This positive outlook signals confidence in Evotec's future despite recent challenges.

Berenberg attributes Evotec's recent share price decline to cyclical pressures in biotech funding, rather than issues with its core business. They anticipate a stabilization of funding levels. Evotec provides drug discovery and development services to pharma and biotech companies. The firm reported €781 million in revenue in 2023, but also a negative EBITDA of €41 million.

One key element of the investment thesis is Evotec’s partnership with Sandoz for biosimilar development. The brokerage estimates Evotec will receive royalties on net sales once products reach the market. Berenberg expects Evotec's EBITDA margin to turn positive in 2025 and reach 10.3% in 2026. This positive outlook suggests confidence in Evotec's strategy.

Looking ahead, Berenberg anticipates improved earnings quality supported by a client base including Bristol Myers Squibb and Janssen. The brokerage believes the market has not fully appreciated Evotec’s biologics capabilities and partnerships. A normalization of demand and clearer earnings visibility could lead to a re-rating of the stock. Investors should watch for further developments in Evotec's partnerships.