Emergent BioSolutions CEOs Discuss 1Q 2012 Results - Earnings Call Transcript

Emergent BioSolutions, Inc. (CBN)

1Q 2012 Earnings Call

May 3, 2012 17:00 p.m. ET

Executives

Bob Burrows – Vice President IR

Dan Abdun-Nabi – President and CEO

Don Elsey – Senior Vice President Finance and Administration, CFO

W. James Jackson, Ph.D. – Senior Vice President, CSO

Analysts

Adnan Butt – RBC Capital Markets

Corey Kasimov – JP Morgan

Ian Somaiya - Piper Jaffray

Nicholas Bishop - Cowen and Company

Jim Molloy - ThinkEquity

Presentation

Operator

Good day, ladies and gentlemen and welcome to the first quarter 2012 Emergent BioSolutions Incorporated Earnings Conference Call. My name is Jeff and I'll be your coordinator for today. At this time, all participants are in a listen-only mode. Later we will facilitate a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr. Bob Burrows, Vice President of Investor Relations. You have the floor, sir.

Bob Burrows

Thank you, Jeff. Good afternoon, ladies and gentlemen. Thank you for joining us today as we discuss Emergent BioSolutions first quarter 2012 financial results. As is customary, our call today is open to all participants. In addition, the call is being recorded and is copyrighted by Emergent BioSolutions.

Joining me on the call this afternoon with prepared comments will be Dan Abdun-Nabi, our President and Chief Executive Officer and Don Elsey, our Chief Financial Officer. Additional members of our senior management will be present on the call for purposes of the Q&A session.

Before we begin, I am compelled to remind everyone that during the call management may make projections and other forward-looking statements regarding future events and the company's prospects or future performance. These forward-looking statements reflect Emergent's current perspective on existing trends and information.

Any such forward-looking statements are not guarantees of future performance and involve potential risks and uncertainties. Actual results may differ materially from those projected in any forward-looking statements. You are encouraged to review Emergent's filings with the SEC on Forms 10-K, 10-Q, and 8-K for more information on the risks and uncertainties that could cause actual results to differ.

For the benefit of those who may be listening to replay, this call was held and recorded on May 3, 2012. Since then, Emergent may have made announcements related to topics discussed during today's call. So, again, please reference our most recent press releases and SEC files.

Emergent BioSolutions assumes no obligation to update the information in today's press release, or as presented on this call, except as may be required by applicable laws or regulations. Today's press release may be found on our website at www.emergentbiosolutions.com under Investors/Press Releases. And wWith that introduction, I would now like to turn the call over to Dan Abdun-Nabi, Emergent BioSolutions President and CEO. Dan?

Dan Abdun-Nabi

Thank you, Bob. Good afternoon, everyone and thank you for joining our call today. For my prepared comments I will review our financial performance for the first quarter of 2012. Then I will address our 2012 forecast, including revenue expectations for the second quarter and finally, I will provide a brief business update.

To begin, let me review our financial results for Q1 2012. Total revenues were approximately $50 million, which is within the $40 million to $50 million range that we provided during our March conference call. In addition, for the quarter we realized a net loss of $6.8 million, or $0.19 per share. This loss includes a one-time, non-cash charge of $9.6 million related to Pfizer's decision to cease further development of SBI-087.

Without this non-cash charge, the Q1 net loss would have been approximately $700,000 or $0.02 per share.

Just a quick note on Pfizer. Pfizer recently notified us of its intent to terminate its development programs with respect to SBI-087. While Pfizer informed us that the product met the primary endpoint for efficacy and was generally well tolerated in a recently completed Phase II study in RA, Pfizer also indicated that the product did not meet other criteria set by Pfizer to advance the candidate.

On termination of the license agreement, which we anticipate shortly, the license technology would revert to us, and Pfizer would have a continuing obligation to pay us low single-digit royalties on net sales of any biosimilar product they may develop directed to CD20. At this time, following the return of the technology to us, we do not plan to pursue further development of SBI-087.

Moving on, we finished the quarter with a combined cash and accounts receivable of $194 million. In terms of guidance, we reaffirm our full year 2012 guidance of total revenues of $280 million to $300 million and net income of $15 million to $25 million. Finally, for the second quarter we anticipate total revenues of $70 million to $80 million.

Turning now to an update on the business, let me first discuss our biodefense division. As a result of our Q1 financial results, we continue to manufacture and deliver doses of BioThrax to the SNS under our current $1.25 billion contract. Importantly, we also continue to make progress towards licensure of our large-scale facility, Building 55, for the production of BioThrax.

This new facility is designed to manufacture up to 25 million doses of BioThrax per year on a single production line. If needed, this facility could, with the addition of a second production line, produce up to 50 million doses per year. In our meeting last year with FDA, we received overall support for our plan for regulatory approval without the need for conducting clinical trials based on achieving specified endpoints in our proposed comparability and non-clinical studies. We plan to initiate consistency lot manufacturing in Q2, with completion anticipated in Q4. Based on this plan, we remain confident that licensure could occur as early as late 2014.

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