Emergent BioSolutions Inc.

Good day, and thank you for standing by. Welcome to the Emergent BioSolutions third quarter 2022 earnings 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 need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would like to hand the conference over to the company.

Thank you, Victor, and good afternoon, everyone. My name is Bob Burroughs, VP and IRO for the company. Thank you for joining us today as we discuss the operational and financial results for third quarter 2022. As is customary, today's call is open to all participants and the call is being recorded and is copyrighted by Immersion 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 accepted 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 emergency 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 3Q2022. Rich will also discuss the updated 2022 guidance. This will be followed by a Q&A session where additional members of the 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 8, 2022. Since then, a merchant 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 7. Bob?

Thank you, Bob, and good afternoon, and thank you all for joining the call. Today, we'll provide an update on our business, including significant recent developments, as well as thoughts on the road ahead for Emergent. Let me first begin with our medical countermeasures business, which, as you all know, is a cornerstone of our strategy. We continue to work closely with the U.S. government to deliver medical countermeasures focused on dangerous public health threats in line with our country's biodefense priorities. Case in point, last month we shipped the first doses of Tembexa to the US government under the BARDA procurement contract. Our second delivery is scheduled to occur in the next few weeks. This product continues to expand our smallpox franchise and further diversifies our medical countermeasure portfolio. I'm incredibly proud of the team for the seamless integration and management of the Timbexa acquisition. The collaborative work that's been accomplished in support of integrating this product into our portfolio, including being able to ship product to our customer in short order following the closing of the acquisition has been remarkable. We also continue to work with the FDA on the BLA filing for AB 7909. We've responded to additional information requests, and as a result, we now anticipate a PDUFA date of July of 2023. Meanwhile, we're continuing to deliver AB-709 to the Strategic National Stockpile under the existing 18-month procurement contract, thereby ensuring product availability while the FDA reviews our BLA submission. Next, let me talk about our smallpox vaccine program. in the status of the government's contract option for ACAM 2000. We're currently in discussions with the Department of Health and Human Services and specifically the Administration for Strategic Preparedness and Response regarding the fiscal year 2022 procurement option. In prior years, the government has exercised its procurement option in Q2 or Q3, and we expected the same timing for this year. Reflecting the government's failure to exercise the option to date, we're adjusting our 2022 forecast for ACAM, which Rich will discuss in his remarks shortly. The delayed exercise of the 2022 procurement option for ACAM is disappointing, but let's keep the following in mind. Since 2017, immersion has worked closely with the U.S. government to help execute its strategy to protect all Americans from smallpox. Today, that would suggest that more than 330 million doses of vaccine would be needed. By the government's own admission, we're not there yet. In support of the government's strategy, we entered into a 10-year contract in 2019 to provide the government with a vaccine that will be domestically produced, consistent with the hundreds of millions of dollars invested in onshoring the manufacturing process. Also a vaccine that was administered in a single dose and has a 16-year shelf life. And importantly, a vaccine that can be cost-effectively stockpiled and deployed in the volumes necessary and also addresses the threat posed by an accidental or intentional smallpox event. Based on public statements from across the administration, including testimony by the Assistant Secretary of Preparedness and Response, before the Senate Health Committee in September, we believe the government remains committed to its preparedness strategy. We also believe it doesn't wish to lose access to domestic manufacturing capability and supply of a key countermeasure in the nation's biodefense strategy. And importantly, we stand ready to deliver doses immediately upon the government's exercising of the option. Next, let me speak about our commercial products business. The continued need for greater access to naloxone, including Narcan nasal spray, has grown as the opioid epidemic continues to worsen. Our years-long commitment to increasing awareness, improving affordability, and driving access to naloxone continues to benefit millions of patients. We continue to see significant demand for naloxone from the public interest market, with a demand for Narcan nasal spray specifically being more durable than we originally expected. Based on the feedback we've received, the infrastructure we've established for Narcan with state and local governments has been an important element in their efforts to address the opioid crisis more broadly. Conversely, in the retail pharmacy market, where most states have automatic generic substitution, unsurprisingly, we're seeing lower demand for branded Narcan nasal spray and expect that to continue in 2023. Given the ongoing devastation caused by the opioid crisis and consistent with our mission to protect and enhance life, our principal aim here is to continue putting resources toward expanding awareness of and access to naloxone consistent with the market demand. Also within commercial products business, the steady return of global travel has resulted in a stronger than anticipated demand for our typhoid vaccine, Divotif. We're also in the process of ramping up the supply chain for our cholera vaccine, Vaxcora, for the U.S. market and introducing it into select European markets. We're targeting early Q1 of 2023 to make supply available. Let's now turn to our CDMO business. We continue to be focused on stabilizing and enhancing our CDMO capabilities across the entire network of manufacturing sites. This includes operationalizing investments made during the last few years. As an example, at our Rockville Drug Product Manufacturing Facility, we're preparing to open our newly expanded site later this year with a new state-of-the-art Groninger Integra fill finish line. These state-of-the-art investments along with our investments in quality controls, help strengthen our aseptic manufacturing capabilities, a growing area of focus and demand within the CDMO market. Our efforts to stabilize operations and bring new capacity online will be a multi-year process, to be clear, and one that holds meaningful long-term strategic values to our business. On the product development front, in addition to progress toward licensure of AB7909, we're pleased to have fully enrolled our primary Phase III trial for our Chikungunya vaccine candidate and expect to have top-line data in the first half of next year. Additionally, our team presented data at the American Society of Tropical Medicine and Hygiene Conference last week from a study evaluating the safety of our ACAM2000 smallpox vaccine in previously vaccinated healthy volunteers. With more than 3,000 vaccinations administered, the study demonstrated that serious adverse events were uncommon and no cases of pericarditis or myocarditis were reported. And lastly, we're pleased to have announced the initiation of our phase one study for our Lassa fever vaccine candidate, which is co-funded by CEPI, the Coalition for Epidemic Preparedness Innovations. Finally, I want to update you on our commitment to further strengthen our culture of quality and compliance, improve the effectiveness of our quality management system, and further embed controls into our processes. Through our recently realigned quality and compliance organizations, we've moved swiftly to address observations made by the FDA in the warning letter issued in August related to our Camden facility. We've begun regularly updating the FDA on our progress and continue to operate the facility at a reduced capacity as we make necessary improvements. We understand that confidence in our ability to meet our regulatory commitments as we continue to ensure the safety and efficacy of our products is paramount to an urgent success. We're committed to building upon, in some cases, rebuilding that confidence one dose at a time. These activities will take time to implement but are critical to the important work we do every day to protect and enhance life. Our employees embrace and take pride in maintaining high standards of product quality and product safety. That's everyone's number one priority at Emergent. In closing, as we look ahead, we remain focused on the following priorities. First, we want to continue to be a dependable partner to our clients, including the U.S. and deliver on their strategic objectives and the commitments we've agreed upon. Second, we're investing in our people, our facilities, quality systems, and culture, so we have the necessary skills and tools to compete long term. Third, we're actively evaluating opportunities for growth through strategic partnerships and acquisitions, as evidenced by our deals on Tembexa and Abango, and advancing our internal development pipeline to address diseases like chikungunya and loss of fever. Fourth, we're sharing our experience for more than 20 years helping governments prepare for public health threats and advocating for proper funding and improved planning and response so the public doesn't end up paying for the cost of complacency down the road. And finally, we continue to be guided by financial discipline as we execute our strategy of building leadership positions in select segments of the growing public health threat market. This includes carefully managing our OpEx and CapEx investments while we seek to create value for our shareholders. I remain confident in eMERGE's ability to deliver results for our patients, customers, and shareholders by focusing on these critical priorities. The important role we play in niche public health markets is more critical than ever given the ongoing emergencies we face such as COVID-19, monkeypox, Ebola, and the biologic weapons threat posed by Russians' aggression in Ukraine, and the need to be better prepared for future threats. With that, I'll turn it over to Rich to review our financial performance for the quarter, and I look forward to answering your questions. Rich?