Morgan Stanley thinks little-known drug developer Evotec could benefit from artificial intelligence advancements in Europe as well as new collaborations with peer companies. The bank upgraded Evotec to overweight from equal weight. It also hiked its price target on U.S.-listed shares to $16 from $12. Morgan Stanley’s forecast implies nearly 43% upside from Thursday’s close. EVO YTD mountain Evotec SE stock has surged 40% from the start of the year. Evotec is based in Germany and often partners with pharmaceutical companies across the globe to help foster medication — specifically small molecule drugs that can enter cells easily given their minuscule size. “We believe that Evotec can continue to deliver strong growth, and we forecast a c.16% 2024-27 revenue [compounded annual growth rate] and c.41% EBITDA [earnings before interest, taxes, depreciation and amortization] CAGR,” Morgan Stanley analyst James Quigley said. Meanwhile, a security breach in April did little to caution Quigley away from the stock, and the analyst highlighted the company’s potential to better use artificial intelligence to aid in drug development in the future — as well as partnerships with big pharma names. “Evotec has a number of collaborations using its key precision medicine platforms, including collaboration agreements with Merck & Co, Bristol Myers Squibb, Novo Nordisk and Eli Lilly,” Quigley said. “A number of Pharma companies are investing in internal AI/ML efforts,” he added. “Some of the key benefits of the Evotec platform include the ability to develop a drug across different modalities, whereas the internal AI/ML platforms could largely focus on the therapeutic modality that each particular company has a history in.” Evotech shares have been on fire this year, popping more than 40%. On Friday, the stock jumped 3%. — CNBC’s Michael Bloom contributed to this report.
