Emergent BioSolutions Inc.

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.

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.

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.