Emergent BioSolutions Inc.

Good day and thank you for standing by. Welcome to the Emergent BioSolutions fourth quarter and full year 2022 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 this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bob Burrows, Vice President of Investor Relations. Please go ahead.

Thank you, Michelle, and good afternoon, everyone. Thank you for joining us today as we discuss the operational and financial results for fourth quarter 2022 as well as full year 2022. As is customary, today's call is open to all participants, and the call is being recorded and is copyrighted by Emergent File Solutions. In addition to today's press release, there's 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 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 emergency operating performance. Please refer to the tables found in today's press release regarding our use of adjusted income loss, net income loss, 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 Q4 2022 and FY 2022. which will also discuss our forecast for FY23, including Q123 revenue 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 February 27, 2023. 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. Bob?

Thank you, Bob, and good afternoon, and thank you for joining the call this afternoon. A summary of my remarks begins on page six. As you've read in our press release, our fourth quarter and fiscal year 2022 results are largely in line with the guidance that we provided at the end of last year and then reaffirmed again in our January 9th press release. Our 2022 results and the 2023 guidance we will share with you today should serve as a more realistic baseline from which we will grow at a rate more consistent with pre-COVID trends. And Rich will walk through those numbers with you in a minute. Today, I'd like to provide some context with respect to sharpening our focus on our core businesses and maximizing outcomes for all stakeholders, patients, customers, employees, equity investors, and debt capital providers. We last gave our long-term view of the business at our investor day in November of 2019. Much has changed since then, and I think it's safe to say that that view no longer matches this post-pandemic environment. By the end of this year, we'll share an updated view informed by the outcomes of several strategic initiatives already underway. First, we've prioritized our foundational products business which includes our portfolio of medical countermeasures such as treatments and vaccines for anthrax and smallpox, a business that has contributed on average $620 million of revenue in each of the last three years. This focus also includes making life-saving treatments like Narcan nasal spray more accessible to patients who need them. Let me give you three clear examples of this prioritization in practice. In January, we announced a new contract to supply RSDL kits to the U.S. Department of Defense, underscoring our continued partnership with the government to address threats they have identified. Also earlier this month, we announced an agreement to sell our travel health business to Bavaria Nordic, which accomplishes two goals. It will help ensure that Vaxcora and VivoTeeth remain available to international travelers and other patients who need them. And upon close, it will generate approximately $270 million in cash and includes the potential for another $110 million in sales-based and development-based milestones. Also, on February 15th, we successfully presented our rationale for making Narcan available over the counter to an FDA joint advisory committee. I'll touch upon that more in a minute. The second strategic initiative is aimed at strengthening our culture of quality and compliance and enhancing our manufacturing capabilities to support both our internal products as well as services to our long-term partners. Third, we're making capital structure and expenditure decisions to build enterprise value for the benefit of both stakeholders and creditors. For example, in January, we announced organizational changes and other cost reduction initiatives expected to result in annualized savings of over $60 million when fully implemented. And finally, as Rich will discuss, we're managing our balance sheet to restructure and extend our debt obligations. To be clear, these decisions are not taking lightly and they have real consequences and impact on many of our emergent colleagues. To those affected by these decisions, I want to again express my gratitude for your commitment to our patients and customers and to our mission to protect and enhance life. Turning to our core businesses, we see continued strength in the medical countermeasure products. We successfully delivered the second shipment of Timbexa under the barter procurement contract at the end of 2022 and are planning for an additional contract modification to be exercised in late 2023. As mentioned previously, we announced a $380 million procurement contract to supply RSDL kits for use by all branches of the U.S. military. We expect deliveries to be consistent with previous years, but this new contract does account for surge capacity should the Department of Defense require additional supplies. With respect to ACAM2000, our smallpox vaccine, we continue to work with the US government on terms for the next delivery into the Strategic National Stockpile. We have previously disclosed that these options are not always exercised on a consistent, predictable timeline, yet we remain confident that we will reach agreement with the US government emboldened by comments from the Assistant Secretary of Preparedness and Response before the Senate Health Committee last September, stating that ACAN 2000 remains, and I quote, the first line of defense to vaccinate Americans in the event of an accidental or intentional release of smallpox, end quote. We're also pleased with the progress toward making Narcan nasal spray available over the counter. Since announcing the FDA's priority review of our application last December, we continue working closely with the agency leading up to the expected approval by March 29th of this year. We're encouraged by the unanimous vote of the FDA Advisory Committee on February 15th in support of over-the-counter Narcan. And assuming the timeline remains the same, we anticipate Narcan appearing on shelves by the end of the summer. we're engaging with stakeholders, including retail pharmacy chains, the Centers for Medicare and Medicaid Services, and congressional offices to ensure the switch to over-the-counter Narcan continues to expand access to this potentially lifesaving medicine. Notably, we also expect consistent public interest demand for Narcan regardless of the outcome of the FDA review. We have invested in relationships across this market and have a sophisticated and mature system in place that enables us to deliver product to these customers in a timely and affordable manner. Turning to CDMO, with respect to this piece of the business, we're currently making investments on our existing network to both deliver our internal products and service external customers, including strengthening operational quality and compliance systems across the enterprise to provide reliable delivery of products and services, as well as bringing online new assets across the manufacturing sites like the high-speed fill-finish drug product line in Rockville that will differentiate us in this growing market, specifically in the mammalian sector. As we've said before, executing on these strategic investments will take time to complete, and we're committed to getting it right. As these investments come to fruition, we will continue to engage potential new customers and evaluate how best to deploy these assets across our network in order to deliver the fastest returns. Turning now to our financial guidance, our sharpened focus on core areas of sustainable growth and other related actions we're taking will have an impact on our business performance. And Rich will go into more detail our 2023 guidance. But our range of total revenues of 1.1 to 1.2 billion and our adjusted EBITDA range of between 75 and 125 million and our adjusted gross margin performance of between 41 and 44 percent reflects the impacts of these actions in the short term. As we look ahead to the rest of 2023, the management team and I are executing against the following priorities. First, improving overall profitability by focusing on both our core products and existing services businesses. Secondly, successfully closing on the sale of the tribal health business that we announced earlier this year. Next, completing the transition of AB 7909 from development to procurement in close partnership with the US government. Fourth, gaining FDA approval for over-the-counter Narcan and launching that product later this year. Next, further delivering and strengthening on our quality and compliance culture and systems. And finally, working with our creditors to restructure and extend our debt obligations. The full benefit of these actions we're taking will not be realized overnight, And our actions demonstrate our belief in the importance and necessity of the work Emergent does to help protect against ongoing and future threats to public health, as well as economic and national security. Again, thank you for attending and participating in the call today. And I'll now turn it over to Rich.