Emergent BioSolutions Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Emergent BioSolutions 3rd Quarter 2021 Financial Results Conference Call. At this time, all participants 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 1 on your telephone keypad. If you require any further assistance, please press star 0. I would now like to hand the conference over to the company. Please proceed.

Thank you, Cherry, and good afternoon, everyone. This is Bob Burrows, Investor Relations Officer for the company. Thank you for joining us today as we discuss the operational and financial results for the third quarter 2021. As is customary, today's call is open to all participants, and the call is being recorded and is copyrighted by Merchant File Solutions. In addition to today's press release, there is a series of slides accompanying this webcast available to all webcast participants. Turning to the slides three and four, during today's call, we may make projections and other forward-looking statements related to our business, future events, or 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 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 followed 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, adjusted EBITDA, and adjusted gross margin, 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 Cramer, 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 3Q21, as well as the forecast for full year 21. 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 November 4, 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 the call. Today I'll provide an update on the progress that we've made at our Bayview site and then talk a little bit about our recent accomplishments and milestones and further talk about the business enhancements we've implemented to better focus on our customers. I'll also discuss our revised full-year guidance and our decision to end our involvement in the Centers for Innovation and in Advanced Development and Manufacturing, or CIADM, program with the U.S. government. My comments are summarized across slides seven and eight in the deck accompanying the call. So let's get started. As you've seen this year, our emergent team in our business has shown their strength and resilience as we've made substantial progress in the quarter. Some of the recent highlights include the following. First, we've made significant progress in Bayview, resuming operations and production for Johnson & Johnson at the end of July, and more recently, completing all remaining work on behalf of AstraZeneca. As of the end of the quarter, we've contributed over 100 million dose equivalents of COVID-19 vaccine for global distribution. Importantly, we look forward to continuing to support J&J's ongoing vaccine production in the months ahead while continuing to support their regulatory path for their vaccine. Next, we secured key ongoing commitments from the U.S. government on two core medical countermeasure products. First, we received a contract modification exercising and funding the second of nine annual options to supply ACAM-2000 to the strategic national stockpile valued at approximately $182 million. Secondly, we received the contract modification, exercising and funding the procurement of additional doses of AB 799 for the SNS valued at approximately 399 million over the next 18 months. Also, our Narcan nasal spray team continues to perform well above expectations in the midst of a worsening opioid crisis, helping ensure this critical product gets in the hands of the patients and caregivers who need it. We also launched our pivotal phase three trial for our chikungunya vaccine, CHIKVVLP, a key milestone for us because it's the first phase three drug development program that Emergent has funded on its own. More importantly, it underscores our commitment to progressing our pipeline programs in pursuit of critical public health threats and expanding our tribal health vaccines franchise. And finally, we continue to grow our CDMO operations, securing a new multi-year contract to produce Providence Therapeutics mRNA COVID-19 vaccine candidate at our site in Winnipeg. As these highlights demonstrate, our core strategy and diversified business model remains strong. In addition, today we're announcing that the Department of Health and Human Services and Emergent have mutually agreed to end our partnership in the CIADM program. The agreement will close out all open obligations and task orders issued under CIADM base contract, including the task order related to COVID-19 response. We're proud of the work all of our employees have done over the last nine years to honor our CIADM commitments. And you will recall that the program was initiated in 2012 in recognition of the shortage of domestic manufacturing capability needed to respond to an unforeseen widespread public health threat following the H1N1 influenza pandemic. While an innovative idea, execution of the CIADM program and the necessary operational investments by all administrations fell short of what was needed to maintain capability in case of an emergency. In fact, when the COVID pandemic struck, Emergent was just one of two original partners remaining in the program. Despite the issues, we responded swiftly, engaging several of our facilities to meet the government's needs and made incredible progress in a timeframe never before attempted under very challenging conditions. Our COVID-19 work with BARDA under the CIADM program included a number of activities. These included a reservation of capacity at our Bayview, Camden, and Rockville sites, a direct capital investment by the government and additional fill finish capacity at our Camden and Rockville sites, bulk drug substance manufacturing for AstraZeneca in the reserve space at Bayview. And finally, drug product manufacturing for various COVID-19 therapeutic candidates in the reserve space in Camden. As a reminder, the COVID-19 work under the CIADM program was always expected to end this year. And importantly, our decision does not affect our work with Johnson and Johnson, as it was never part of our CIADM contracting. We will continue to produce their COVID-19 vaccine drug substance at our Bayview facility. And as I mentioned at the top of the call, we're extremely proud that our collaboration with J&J, and in addition to AstraZeneca, has contributed over 100 million dose equivalents of COVID-19 vaccine for global distribution. So while we conclude our involvement in the CIADM program and bring to closure this important chapter in our business, it needs to be said that the work we accomplished under the program and related task order contracts with the U.S. government served a critically important purpose, one that our entire organization is immensely proud of. Despite the setbacks we had earlier in the year, the team has been committed to our mission of protecting and enhancing life, and steadfast in learning from our past to be even better. I'm proud of the team's resilience and the positive impact on millions of lives across the globe and importantly, we're not done yet. As we look forward, we're encouraged and optimistic about the opportunities we see ahead across our entire business. Let me now pivot to recent business changes we've implemented in support of our strategy. During the quarter, we've shifted our operating structure to now have three business lines, each focused on distinct customer or market types. They are the newly created government or medical countermeasure business, the commercial business, as well as the services or CDMO business. which remains essentially unchanged. To be clear, all three of these report to our Chief Operating Officer, Adam Havey. The government or MCM business will be led by Paul Williams, who was previously running the vaccines business unit. This new structure will better serve our customers by sharing their breadth and depth of experience as one team and reduces the complexity with multiple touch points going into the government on different business units. The commercial business will be led by Doug White, who previously ran the devices business unit. He will not drive our core commercial capabilities and seek new investment opportunities. Doug's portfolio includes Narcan nasal spray, travel vaccines, and other similar customer-facing products. This organizational change provides an opportunity to put the strategic and operational pieces of this business under one umbrella that were previously across multiple business units, positioning us to expand into new markets and efficiently integrate newly acquired products in the future. The services or CDMO business, the head of which we're continuing to actively recruit for, will continue to service our pharma and biotech innovator customers, providing development, drug substance, and drug product manufacturing services that capitalize on our core skills and capabilities. As for our R&D programs, we established a centralized and cross-functional product development committee that will govern the R&D portfolio. We're also creating a science and innovation team led by Dr. Laura Sayward, who previously ran the therapeutics business unit. Overall, this new structure positions us to execute effectively on our strategic plan and deliver long-term success, strengthening our foundation and providing new opportunities for growth. So getting back to the operational highlights, as I mentioned, we resumed production of J&J's COVID-19 vaccine at our baby facility in late July, following the implementation of rigorous and comprehensive quality enhancements and the FDA's permission to restart. Over the last five months, we've invested millions of dollars to overhaul cleaning procedures upgrade our facilities, implement additional quality control and oversight practices, and make significant improvements to the processes for batch record keeping, personnel training, data integrity, and lab testing. Emergent teams, along with support from our J&J colleagues, oversee all operations and materials transfer. We took the added step to bring in a recognized independent consultancy who is expert in quality control and who are now reviewing and performing certifications prior to release of any batches. We continue to work closely with the FDA and J&J toward increasing our production level consistent with these new procedures. Finally, I want to commend our team who's around the work efforts over the last 18 months have accelerated the transformation of our Bayview facility from a clinical stage facility to one that is poised to support much larger scale production. Now moving to our core government or medical countermeasures business. Our work helping the US government protect Americans against smallpox, anthrax, and other category A biologic agents remains a top priority for the company. Recall that we previously announced the U.S. government exercised and funded the next term extension for ACAM 2000 under our 10-year contract, and we also secured the next option exercise for our smallpox therapeutic VIG-IV. We recently filed that up with the U.S. government exercising the final option under the existing contract to supply doses of our next generation anthrax vaccine candidate, AB799, to the Strategic National Stockpile valued at approximately $399 million over the next 18 months. As a reminder, the current contract for AB799 facilitates procurement by the SNS while we seek full FDA approval. And to that end, I'm pleased to announce two important updates today on the ongoing regulatory path for AB 7909. First, the FDA has agreed to our request for a rolling review of the AB 7909 BLA The rolling review allows us to submit sections of the application to the FDA as they're completed, rather than waiting until the entire BLA package is compiled. We anticipate initiating the BLA submission in mid-December. Based on this timing, we anticipate BLA approval by the FDA in late 2022 or early 2023. Second, the FDA has granted orphan drug designation for AB 7909. This designation provides development incentives, including a waiver of the DOA filing fee, as well as potential seven year marketing exclusivity upon regulatory approval. On the R&D front, we recently initiated our pivotal phase three safety and immunogenicity study for our single dose chikungunya vaccine candidate. Check the DLP is the only virus like particle based vaccine candidate currently in development for active immunization against chicken guinea disease. The study expects to enroll 3150 participants in 50 US sites in the coming months. I'd like to congratulate the teams across our organization who made this significant milestone possible and who are advancing the development pipeline that will help fuel the long-term growth of the company. We look forward to updating you on this program as we make progress. Finally, with the potential launch of a few other phase one studies anticipated over the next year, as well as continued progress across our autoinjector platform programs focused on chemical threats, I remain encouraged by the contribution of our R&D programs and the effect they could have on our growth in the coming years. Moving next to our CDMO business, I want to highlight that we continue to see growth in this area, both related to the pandemic and beyond. We continue to receive interest from both existing clients and new prospects from small, mid, and large-sized companies, as well as governments and other organizations. Importantly, we're winning new business across all three service pillars, of development services, drug substance, and drug product, including drug packaging. For example, during the quarter, we signed a new five-year agreement with Providence Therapeutics to support its mRNA vaccine development out of our Gaithersburg and Winnipeg facilities. Building off an existing agreement, this new baseline agreement is valued at $90 million and uses portions of all three of our integrated service capabilities demonstrating the value of our integrated molecule to market model for customers. We will continue to cultivate growth, expansion, and maturation of this core business. With respect to Narcan nasal spray, our focus on the public health threat posed by the opioid epidemic is as strong as ever. Our Narcan team has worked tirelessly to ensure that Narcan nasal spray is available and affordable as overdoses continue to devastate families and communities nationwide. We remain committed to combating this crisis, not only through our work on Narcan, but also through outreach efforts and public campaigns to elevate awareness of the dangers of opioids. On the ongoing patent infringement litigation front, recall that the U.S. Circuit Court of Appeals held final oral arguments on August the 2nd of this year. While timing is up to the appellate court, we continue to believe a decision could come by the end of this year. Importantly, in the event of a generic entry, we're prepared to launch an authorized generic product in partnership with a large generics company and are confident in our ability to maintain significant market share. Longer term, we see Narcan and more broadly, our opioid related portfolio, a core component of our portfolio solutions impacting public health. Finally, let me update two important corporate updates. First, I'm pleased to announce that we intend to publish our inaugural ESG or sustainability report later this month. The report will provide insight into our environmental, social, and governance practices. These include product quality and patient safety standards, our human capital and employee-focused programs, our existing charitable and volunteer programs, our work to safeguard the environment and health of our communities and employees, as well as our corporate governance and business ethics principles and practices. I also wanted to note that on a personnel front, Mary Oates, previously our head of global quality, has decided to pursue a new career opportunity and has left Emergent. We're conducting an external search for a new head of global quality. In the meantime, I'm confident that our team of talented, dedicated professionals will continue the important quality advancements made in the last several months. To conclude, our third quarter operational results demonstrate that our business remains resilient and poised for growth in line with our strategy. We continue on our path of both organic opportunities and potential M&A informed by prudent capital deployment, all aimed at generating enhanced shareholder value. With that, I'll turn the call over to Rich, who'll take us through the detailed results for the quarter.