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spk07: Ladies and gentlemen, thank you for standing by and welcome to the Emergent BioSolutions second quarter 2021 financial results conference call. At this time, all participants lines are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Mr. Bob Burrows, Investor Relations Officer for the company. Please proceed.
spk04: Thank you, Michelle, and good afternoon, everyone. Thank you for joining us today as we discuss the operational and financial results for the second quarter of 2021. As is customary, today's call is open to all participants, and the call is being recorded and is copyrighted by Emergent BioSolutions. In addition to today's press release, there is a series of slides accompanying this webcast available to all webcast participants. Turning to slides three and four, during today's call we may make projections and other forward-looking statements related to our business, future events, our prospects, or future performance. These forward-looking statements are based on our current intentions, beliefs, and expectations regarding future events. Any forward-looking statement speaks only as of the date of this conference call and except as required by law, we do not undertake to update any forward-looking statement to reflect new information, events, or circumstances. Investors should consider this cautionary statement as well as the risk factors identified in our periodic reports filed with the SEC when evaluating our forward-looking statements. During today's call, we may also refer to certain non-GAAP financial measures that involve adjustments to GAAP figures in order to provide greater transparency regarding emergence operating performance. Please refer to the tables found in today's press release regarding our use of adjusted net income and adjusted EBITDA and the reconciliations between our GAAP financial measures and these non-GAAP financial measures. Turning to slide five, the agenda for today's call will include Bob Kramer, President and Chief Executive Officer, who will comment on the current state of the company. And Rich Lindahl, Chief Financial Officer, who will speak to the financials for 2Q21, as well as the forecast for full year 21, including guidance on 3Q21 total revenues. This will be followed by a Q&A session where additional members of the executive leadership team are present and available as needed. Finally, for the benefit of those who may be listening to the replay of the webcast, this call was held and recorded on July 29, 2021. Since then, Emergent may have made announcements related to topics discussed during today's call. And with that introduction, I would now like to turn the call over to Bob, whose comments begin with slide six.
spk01: Bob? Thank you, Bob, and good afternoon, everyone. Thanks for joining us on the call this afternoon. Today, I'd like to spend some time talking about the progress we've made at our Bayview site and then talk more broadly about the health of the overall business and our continuing dedication and focus on public health threats. Our second quarter performance reinforces the strength of our strategy and we are maintaining our overall guidance for 2021. Rich will go over in more detail those numbers in a few minutes. My comments are summarized across slides six and seven in the deck accompanying the call. Turning first to our efforts to produce COVID-19 vaccines, there's been a great deal of attention paid to Emergence History as a public health threats company with a leadership role in working with the US government on biodefense. When the pandemic struck, America turned to emergent because of our history and unique capabilities. While millions of COVID-19 vaccine doses that we manufactured are currently protecting people around the world, we faced serious challenges along the way. We didn't always live up to the expectations, including those that we set for ourselves. However, we have learned some important lessons, which are allowing us to improve our operations and at the same time, strengthening America's public health response for the future. The FDA inspection of Bayview earlier this year identified a number of areas for improvement. Along with Johnson & Johnson, we established a comprehensive, robust quality improvement plan, which includes facility improvements, capability building, and deployment of enhanced tools and controls. We reviewed this plan with the agency and immediately began its implementation. We also made additional investments during the quarter in quality, compliance, and operations. All of this work is in order to satisfy both ourselves as well as J&J and demonstrate to the FDA that we've achieved a level of sustainable compliance that will allow us to resume production. We've made significant progress toward this goal. And as we announced earlier today, we received the green light from the FDA to resume production at the site, which will continue to be the subject of routine inspections by the FDA. The emergency team has shown remarkable resilience and want to thank them for staying focused on delivering on our commitments to patients and customers. They know at the end of the day, that's what matters most. I also want to recognize our strategic partners and particularly the strong collaboration with our J&J colleagues. We continue to work closely with them and the FDA as previously manufactured batches of COVID-19 drug substance are released and added to J&J's emergency use authorization, helping protect tens of millions of lives around the globe. We're awfully proud of both of these accomplishments. The hard work and investments that we've made in Bayview over the last decade, in particular the last few months, are starting to pay off. In addition, we continue to work collaboratively with AstraZeneca to complete all documents related to their drug substance so they and the US government can make decisions regarding the disposition of this material. Moving more broadly to our overall business, We're in year two of our 2020 through 2024 strategic plan and continue to make meaningful progress against that plan. So let's start with our core medical countermeasure business. Our work supporting the US government's priorities to protect the American public against smallpox, anthrax, and other category A biologic agents remains stable. With respect to our smallpox franchise, In the second quarter, the U.S. government has exercised and funded the next term extension for ACAM 2000 under our 10-year contract. This option exercise is valued at approximately $182 million and requires all doses to be delivered by the end of this calendar year. This quarter, we also secured the next option exercise for our smallpox therapeutic DIGIV product that is approximately $56 million. For our next generation anthrax vaccine candidate, AB 7909, we continue to engage with the government regarding exercising the final option under the existing contract to procure additional doses for inclusion into the strategic national stockpile. The current procurement contract for AB 7909 was put in place in 2016 and facilitated procurement by the S&S starting in 2019 while we seek full approval by the FDA. We continue to make good progress toward our target of submitting our AB7909-BLA later this year. In addition, we recently secured a procurement contract to supply doses of anthracil, our polyclonal antibody therapeutic for treating inhalational anthrax to the Canadian government as part of their anthrax preparedness strategy. On the R&D front, in addition to our anticipated BLA filing for 87-909, we advanced a number of our medical countermeasure programs, and I'd like to highlight two of them. Specifically, we continue work on our COVID-19 HIG candidate, which is being developed in collaboration with NIAID, BARDA, and the US Department of Defense as an early treatment option to address at-risk COVID-19 populations. COVID-HIG leverages our polyclonal hyperimmune platform and continues to show neutralizing activity against variants of SARS-CoV-2 virus in in vitro models. We anticipate in the near term the initiation of a phase three study led by NIAID, assessing the effect of hyperimmunes on patient populations that have not yet progressed to severe disease to determine if progression can be impacted. In addition, we recently obtained approval for our Trobogard auto-injector from the Belgian regulatory authority. Several years ago, through interactions with various governments around the world, we identified their need to have auto-injectors available in case of nerve agent attacks, and as a result, we invested in building that capability. Achieving this first approval from our auto injector platform is a key milestone in the maturity of our auto injector platform. Moving next to our contract development and manufacturing business or CDMO, When we first laid out in our last strategic plan, the goal was to leverage further our drug manufacturing network of nine sites to provide development services, drug substance, and drug product services to a diverse customer base. We obviously have seen significant growth related to the pandemic, which was unanticipated at the time. But beyond COVID-19, we continue to see strong interest from current and potential clients and are winning new clients and projects in all three service pillars, those being development services, drug substance, and drug product and drug packaging. Interest is coming from small, mid, and large companies, as well as governments and other organizations. Rich will provide detailed information on new business, the backlog, in our rolling opportunity funnel, but I'd like to emphasize that even though we expect variation quarter to quarter as we grow the business, the growth over the 2019 baseline in our strategic plan is considerable. Overall, the key takeaway is that our CDMO business unit remains strong as the industry's demand for biologics manufacturing services continues to grow while we pursue becoming an increasingly important service provider in support of pharma and biotech innovation. Finally, a third pillar of our 2024 strategy was to continue our focus on public health threats while diversifying our customer base beyond the U.S. government, and I'm pleased to report the continued progress on that front as well. As you know, the opioid crisis has been a public health threat and has claimed far too many lives and made even worse by the pandemic. As announced earlier this week, we're very proud to be working with several nonprofits to help raise awareness of the risk of accidental opioid overdose through a month-long public awareness campaign called Reverse the Silence. In addition, as we have previously discussed, The US Circuit Court of Appeals has scheduled the oral argument for Narcan US appeal for August the second on the ongoing patent infringement litigation. Based on this timing, we believe the decision is likely by the end of the year. Regardless of the outcome of the appellate courts ruling, we continue to focus on the public health threat and our role as a provider of solutions to address the opioid epidemic. Continuing with the diversification theme, while the travel health space has been understandably challenging, we continue to make good progress with building our development stage vaccine candidates. We still expect to initiate a phase three trial for our chikungunya virus VLP vaccine in 2021. In addition, and in support of this important development program, we recently announced positive two-year persistence data from a phase two clinical study that indicated that our vaccine candidate appears to generate a rapid and durable immune response. We intend to publish the results of this study in the near term. We also plan to initiate a phase one study in late 2021 and early 2022 related to a number of vaccine candidates in the pipeline, including our Shigella, Lassa and universal flu vaccine candidates. As you can see, we expect that a remainder of 2021 will be busy for our product development teams, including clinical regulatory and quality as our pipeline continues to mature. That wraps up my comments regarding the business overall. On the personnel front, we recently issued an AK announcing the reorganization of my direct reports. Rich Lindo, our chief financial officer, Karen Smith, our chief medical officer, and Katie Stry, our chief human resources officer, continue to report directly to me. In addition, rounding out my direct reports, Adam Haley's role has been expanded to include overall responsibility for all of our business units, as well as global manufacturing operations. Mary Oates's role has been expanded to include a focus on operational excellence, in addition to current responsibility for global quality. And finally, Atul Saran's role has been expanded to include the management of the global communications and public affairs function as well as the global government affairs team. As part of this reorganization, the role of executive vice president for manufacturing and technical operations that has been held by Sean Kirk has been eliminated and consequently Sean is leaving the company. We have a deep appreciation for Sean's 18 years of service at Emergent and wish him the very best for him and his family going forward. We believe this organization and reorganization of our management team allows us the best position for the long-term success of this strategic plan. To conclude, as you'll hear from Rich, our second quarter results demonstrate that Emergence Business remains durable, resilient, and poised for growth. We're on track with our 2024 strategy and Emergent is well positioned to play a meaningful role in strengthening our national public health threat preparedness. And I continue to be proud of each member of the Emergent team who come into work every day focused on a mission to protect and enhance life. I'll now turn the call over to Rich, who took us take us through the detailed results for the second quarter. Rich.
spk05: Thank you, Bob. Good afternoon, everyone, and thank you for joining the call. I'll start on slide nine. As you can see from today's earnings press release, during the second quarter of 2021, we had solid top line performance, which was consistent with our expectations, while our expenses were clearly impacted by financial ramifications associated with the situation at our Bayview facility, including direct costs associated with remediation efforts and inventory write downs, as well as other costs to support and defend our corporate reputation. Despite recent challenges, we have continued to execute across all aspects of the business, vaccines, therapeutics, devices, and CDMO. Our financial condition remains strong with the liquidity and financial flexibility to fund our operations and pursue opportunistic investments. And we remain steadfast in our unwavering commitment to supporting global preparedness and response to public health threats. Today's announcement that we are clear to resume manufacturing at Bayview is a testament not only to that commitment, but also to the strong teamwork and organizational discipline that have been hallmarks of this company throughout its nearly 23-year history. With that, please turn to slide 10 and let's first look at the details of our second quarter performance. A quick run-through of key highlights include Total revenues of $398 million, an increase of $3 million versus the prior year and in line with our guidance, and adjusted EBITDA of $50 million and adjusted net income of $18 million, both decreases versus the prior year due to a variety of one-time and other expenses, which we will discuss in a moment. Breaking down quarterly revenue into its components, anthrax vaccine sales were $52 million, lower than the prior year due to timing of deliveries. Narcan nasal spray sales were $106 million, an increase over the prior year driven by continued strong demand for this critical drug-device combination product for opioid overdose reversal across both the retail and public interest channels in the U.S., as well as increased Canadian sales. Other product sales were $24 million, consistent with the prior year, and CDMO services revenue came in at $191 million, an increase over the prior year and reflecting contributions from all three service pillars, primarily for our government and innovator partners' response to the COVID-19 pandemic. As Bob noted in his remarks, earlier in July, the U.S. government exercised the next ACAM 2000 contract option that is valued at $182 million. Accordingly, we now expect sales of ACAM 2000 to resume in the third quarter and to complete all related deliveries by the end of 2021. Looking beyond revenue, the quarterly results also include cost of goods sold of $228 million, a $98 million increase over the prior year, and reflecting the increased costs associated with the substantial increase in CDMO services revenues, as well as $42 million of inventory write-offs, which I will return to in a moment. Gross R&D expense of $49 million, consistent with the prior year, reflecting our continued commitment to investing in our pipeline of development programs across our three product-focused business units, net R&D expense of $24 million, or 6% of adjusted revenue, consistent with the prior year, SG&A spend of $91 million, or 23% of total revenues, an increase over the prior year and primarily reflecting the impact of higher costs to support and defend our corporate reputation and combined product and CDMO gross margin of $144 million, or 39 percent of adjusted revenue, a decline of $97 million, and reflecting the impact of $42 million of inventory write-offs due to raw materials and in-process batches at the Bayview facility that the company plans to discard if they were deemed unusable. $43 million associated with the product and service revenue mix, which was weighted more heavily to lower margin products and services, and $12 million associated with costs incurred to remediate and strengthen manufacturing processes at our Bayview facility, many of which are temporary in nature. Turning to slide 11, we will now review our key CDMO metrics. In the second quarter, we continued to obtain incremental contract awards, resulting in secured new business of $53 million. However, this outcome was significantly offset by $108 million of negative contract modifications. As of June 30th, the backlog is $1.1 billion. And lastly, as of June 30th, the opportunity funnel was $672 million, down from $807 million at March 31st. While the CDMO team's ongoing business prospecting and marketing initiatives continue to generate new opportunities, for now we are removing potential opportunities at Bayview, as all manufacturing activities at that facility are currently prioritized to support the J&J COVID-19 vaccine. As a reminder, the opportunity funnel does not include any value associated with an extension of the commercial supply agreement with Johnson & Johnson into years three to five of the existing contract. On slide 12, you can see the sequential trends in these metrics over the last four reporting periods. We remain committed to serving our existing customers and continue to execute on our marketing initiatives with pharma biotech innovators across all three of our service pillars. We look forward to making further progress in this important part of our business as we move forward from here. Moving on to slide 13 for a review of our balance sheet and cash flow, we ended the second quarter in a strong liquidity position with $448 million in cash and $262 million of accounts receivable, resulting in aggregate current liquid assets of nearly $710 million. This compares with approximately $732 million of aggregate current liquid assets as of the end of the first quarter. We also still have undrawn revolver capacity of just under $600 million. Finally, at the end of the second quarter, our net debt position was $416 million, and our ratio of net debt to trailing 12-month adjusted EBITDA remained below one times. Please turn to slides 14 and 15 for a review of our 2021 forecast and associated key considerations. As detailed in today's press release, we are reaffirming our 2021 outlook. Importantly, our 2021 outlook takes into account a number of key considerations which are listed in our earnings press release and remain largely unchanged from our first quarter update. These considerations include no Raxi-Bacumab revenue until 2022, the naloxone market remains competitive with at least one new entrant this year, but no generic entrant prior to the resolution of our patent litigation case, and the successful manufacturing of J&J's COVID-19 vaccine at Bayview. On that last point, the FDA's green light to restart production at the site, which we confirmed earlier today, is a key milestone toward that end. One consideration that has been revised is that our expectation for gross margin for the full year is now approximately 61 to 63 percent on a GAAP basis, a reduction of 200 basis points from the prior range of 63 to 65 percent. This change reflects the impact of the Q2 2021 performance, as well as expectations for the remainder of the year. We anticipate that this lower gross margin will be offset by cost savings related to R&D and SG&A. Lastly, we are providing third quarter total revenue guidance of $400 million to $500 million. To conclude, please turn to slide 16 for some summary comments. In the second quarter 2021, we continue to deliver solid financial results that keep us on track with our full year outlook. On a year-to-date basis, our revenues of $741 million represent approximately 41 percent of our full year 2021 forecasted total revenues at the midpoint, a similar weighting between first half and second half total revenues as has occurred in each of the last four years. We remain confident in the strength of the business, which continues to be robust and resilient with the capabilities, capacity, and financial strength needed to deliver preparedness and response solutions to a wide range of public health threats. That completes my prepared remarks, and I'll now turn the call over to the operator so that we can start the question and answer session. Operator?
spk07: Thank you. At this time, I would like to remind everyone, in order to ask a question, please press star, then the number 1 on your telephone keypad. Again, that's star 1 for any questions. We'll pause for just a moment to compile the Q&A roster. And your first question is from the line of Brandon Folks with Cantor Fitzgerald. Please go ahead.
spk03: Hi, thanks for taking my questions and congratulations on all the progress. Firstly, on the CDMO backlog, would you be able to just give some color around the 108 million negative contract modification, even if it's just a comment whether these are COVID-related or not? And then along those lines, can you comment at all? if there have been any efforts to recover any revenue by J&J or BARDA. And then secondly, congratulations on the announcement this morning. Can you just help us understand the difference between resuming manufacturing at Bayview versus all-out EUA for that facility? Does this have any impact at all on your ability to deliver to J&J, or is it, you know, I don't want to be flippant, but a bit more, procedural and you have no limit. You're now able to completely fulfill the needs of J&J.
spk01: Thank you. Yeah, Brandon, thanks for joining the call. Thanks for the series of questions. So I'll tackle a couple of them and then I'll ask Rich to comment on specifically on your question about the 108 adjustment. So maybe first of all, your question about attempts to recover any money. Let me just hit that one square on. Our assumptions going forward in the guidance numbers that Rich talked about and I talked about assume that we continue to execute against the existing contracts that we have in place and we have every expectation of being successful in doing so. Your question which is a good one around kind of resuming production versus emergency use authorization approval. So I think as you know up to now the FDA has approved the use of certain batches of material from J&J under an exemption or an exception to their emergency use authorization and we expect that will continue as it relates to product that has already been manufactured. Going forward with, I'll say, new campaign production, there are a number of variables that kind of go into that mix, Brandon, but just to be clear, the nature of our contract with J&J is that we get paid when we successfully manufacture drug substance. It really doesn't hinge on FDA approval of doses to be released to the public. So with that, Rich, can I ask you to comment on Brandon's first question regarding the 108 number?
spk05: Yes, thanks, Bob, and thanks, Brandon, for the question. So in terms of what drove the 108 million of contract modifications, the biggest component relates to the wind down of our work at Bayview with AstraZeneca. But I'd note that there were also a number of contract modifications with other clients that came about due to change orders in the ordinary course. So that's, that gives a little more color on the 108.
spk03: Richard, would you, just to confirm, would you be able to say that that 108 did not come through outside of the AstraZeneca portion, I guess, through BARDA or J&J?
spk05: You know, I think we're not going to confirm specifically, but I would say that under the contract, as Bob said, our guidance assumes that we're going to fulfill the obligations that we have under our existing contracts.
spk03: Robert Nussbaum- No, thank you. And I appreciate that I had to ask. Thank you to you both. There's a lot of good . Congratulations. You know, I know there's a lot of work to support it.
spk01: Male Speaker 1 Thanks, Brandon.
spk07: Female Speaker 2 Your next question comes from the line of Jessica Tsai with JPMorgan. Please go ahead.
spk08: Hey guys, good afternoon. Thanks for taking my question. Maybe this first one, I think you previously considered updating your long-term guidance at some point this year. Is that something we should still think about for 2021?
spk01: Yeah, Jess, thanks for joining the call. Thanks for the question. So you're exactly right. We are now kind of going through a process of we call a strategy refresh, if you will, Jess, where we're looking at the principal assumptions that we put together in the fall of 2019 for the five-year period of 2020 through 2024 and making sure that those are still kind of valid assumptions. Obviously, the business has gone through a bit of change over the last 15 to 18 months, and we hope to be able to update and provide some color either later this year or early next year at some type of annual investor day.
spk08: Okay, great. And then another question on COGS. You know, I noted the change in the COGS or gross margin guidance. There was a line in the press release that said something along the lines of, you know, many of the items impacting COGS this quarter are expected to be temporary. I was curious if you could elaborate on, you know, which were, which were not, like the inventory write-off probably is temporary, but what else kind of is and isn't? And should we, I guess I'm mainly just trying to think about, you know, you're changing 2021 COGS guidance, but how should we think about the kind of residual impact to COGS, say, in 22 and beyond?
spk01: Great. Thanks. Rich, you want to take that one?
spk05: Sure. So in terms of things that were temporary, you're right. The inventory write-off is the biggest one. When we look at efforts to execute our quality enhancement plan, there were a number of remediation costs, you know, things like decontamination, some work to update, you know, operating procedures and documentation, training of staff, you know, things of that ilk, which really were more incurred on a one time basis, some may continue for a short for, you know, for a little bit longer, but are not going to be necessarily in the magnitude they were in the second quarter, you know, persistently. Some of the other costs were increased investment in additional staff as well to ensure that we had the ability to really execute our functions and processes at Bayview in a CGMP compliant manner. So that's really what the differentiation is there. You know, in terms of our overall COGS guidance, I mean, I think, you know, somewhere in that kind of low to mid 60s area in terms of gross margin is not a bad assumption. I mean, it's always going to depend on the mix of products and services. And so we'll have to see how that evolves from year to year and over time. But that's but but, you know, overall, fundamentally, the business hasn't changed.
spk08: Okay, great. And maybe just one last one, slightly related to this, any change in the way you're thinking about the company's need for capex investments going forward?
spk01: Yeah, I don't think so. I don't think so, Jess, I think we continue to look, particularly in the CDMO area for opportunities. Again, the demand clearly is there for the full portfolio of service offering that we have in our network. So we continue to look for opportunities there. Other than that, I think it's the normal kind of course of roughly maintenance capex given our nine network facilities and normal investments in things like IT infrastructure and preparing the organization for continued growth.
spk07: Great. Thank you.
spk01: Thank you.
spk07: Your next question comes from the line of Jacob Hughes with Wells Fargo Securities. Please go ahead.
spk06: Hi. Thanks for taking my question. On the NARCAN guidance, based on the first half, I think it's $180 million in revenue, that assumes a deceleration in the back half of the year. Could you provide some color on your assumption there?
spk01: Sure, Jacob. Thanks for joining the call. So as you know and as you have kind of reconciled, we had roughly – You know, 74 or $75 million of revenue for Narcan in Q1, a much stronger quarter in Q2, as Rich commented on. We see some potential kind of tailwinds going into Q3 and Q4. I mean, we see strength overall in that part of the business. And we've set our guidance accordingly at that 305 to 325 range. and think that, again, we expected to land within that range, but there are clearly some headwinds and some tailwinds that could impact that. But being a bit conservative, that's where we've landed the revenue guidance for 2021. Okay.
spk06: And then on the fall on RACSI contract, I mean, has RFP been issued yet? And when do you think that could be awarded? And I know previously you said that's going to probably slip into next year, but could you provide an update on that?
spk01: Yeah, Jacob, that's still our belief is that it will be a 2022 event. So I think as we've commented on in the past, we've taken any RACSI revenue out of the guidance and forecast for 2021 and still expect that to occur next year.
spk06: Okay. Thanks very much.
spk01: Thank you.
spk07: Your next question comes from the line of Key and McKay with Chardon. Please go ahead.
spk02: Yes, thanks. Two questions. The first, in terms of the CDMO pipeline, you know, what kind of pushback were you getting from potential customers given the the issues at Bayview?
spk01: Okay, thanks for joining the call. So as I included in my comments and Richard as well, we still see support and interest in the broad service offering that we have throughout our network. Again, as we've talked about of the nine sites that we have in our network, five of them are generating revenue today. If you look and walk across the development services, the drug substance, as well as the drug product capability that we have, supporting as many as five different platform technologies, that's a pretty unique product and capability offering that we have. So we still see strong demand from small, mid and large clients from clinical and commercial customers, government and strategic partners, so that business remains strong, the interest is strong. Again, admittedly, we need to get through this bit of a firestorm in Bayview, which we're in good place to go quickly, but we, again, see continued strengthen that CDMO business unit long term.
spk02: Okay. And for 87909, under the 2016 contract, there were a number of options as you made the transition to that product. Can you remind us where we are in terms of remaining options? And then at what point do we start thinking about a new supply agreement?
spk01: Yeah, so if you go back to the second half of 2016, that contract was structured in two pieces. There was a development piece worth roughly 250 million, and then there was a 1.2 or 1.3 billion dollar sleeve, if you will, that was earmarked for their procurement of up to 50 million doses over the next five year period. The SNS in BARDA began procuring AV7909 under that second sleeve in 2019. And it's our view that this next tranche or next exercise will help bridge between now and when we get full BLA approval in about a year and a half.
spk02: Okay. And does the agency view an approved product any different than what they're currently buying under the pre-EUA in terms of your possible economics?
spk01: Yeah. Yeah, I think when we put the contract pricing in place in 2016, we negotiated what both the development as well as the procurement terms were going to be. Okay, so that's really already been negotiated, and I'm not anticipating any significant change from what was done five years ago.
spk02: Okay, thanks.
spk07: And once again, if you do have a question, please press stars and the number one on your telephone keypad. Your next question comes from the line of Lisa Springer with Singular Research. Please go ahead.
spk00: Thank you. Good afternoon, and thank you for taking my question. My question concerns the amount of cash on the balance sheet. I was wondering how likely are we to see any M&A activity in the second half of the year, and what is the board's current thinking regarding share purchases?
spk01: Yeah, thanks Lisa for joining the call, and thanks for the question. So I'll let Rich talk a little bit about the cash that we have on the balance sheet, but in terms of its potential use, I'll go back to what we've said for many, many years in terms of our priorities for capital allocation, which is first obviously to support the working capital needs of the business, Next to invest in capital expenditures to support the execution of the strategy. Third is M&A and then to the extent that there is excess cash liquidity we will consider as we have in the past programs like buyback. So in terms of M&A we continue to look for and look at opportunities that are of strategic importance and fit with our overall strategy across all areas of the business, vaccines, therapeutics, devices, and CDMO. So we continue to be, again, active in looking at opportunities. I think that what we've built over the last five years is very scalable and leverageable toward additional assets. But maybe with that, Rich, you can talk a little bit about the cash that's on the balance sheet today.
spk05: Yeah, so we are certainly sitting, as I mentioned in my remarks, in a very strong liquidity position as of June 30th, both in terms of actual cash on the balance sheet, accounts receivable, as well as access to undrawn revolvers. So we certainly have the flexibility to pursue all those options that Bob articulated, and we'll continue to maintain that solid position as we go forward.
spk00: Okay. Well, thank you for the call.
spk01: Thanks, Lisa.
spk07: And I'm sure there are no further questions at this time. I'll turn the call back over to you, Mr. Burroughs.
spk04: Thank you, Michelle. With that, ladies and gentlemen, we now conclude the call. Thank you for your participation. Please note an archived version of today's webcast as well as a PDF version of the slides used during today's call will be available later today and accessible through the investor's landing page on the company website. Thank you all again. We look forward to speaking with all of you in the future. Goodbye.
spk07: And this does conclude today's conference call. You may now disconnect.
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