Emergent BioSolutions Inc., Q2 2009 Earnings Call Transcript

Emergent BioSolutions Inc., (EBS)

Q2 2009 Earnings Call

August 6, 2009 5:00 pm ET

Executives

Robert G. Burrows - Vice President, Investor Relations

Fuad El-Hibri - Chairman of the Board, Chief Executive Officer

R. Don Elsey - Chief Financial Officer

Daniel J. Abdun-Nabi - President, Chief Operating Officer

W. James Jackson, Ph.D. - Senior Vice President and Chief Scientific Officer

Analysts

Eric Schmidt - Cowen & Company

David Moskowitz - Caris & Company

Mona Ashiya - J.P. Morgan

Sean Long – Kennedy Capital Management

Presentation

Operator

Welcome to the Emergent BioSolutions Incorporated second quarter 2009 financial results conference call. (Operator Instructions) I would now like to turn the call over to Mr. Robert Burrows.

Robert Burrows

Good afternoon ladies and gentlemen. My name is Robert Burrows, Vice President of Investor Relations for Emergent. Thank you for joining us today as we discuss Emergent BioSolutions financial results for the second quarter and first six months of 2009. 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 will be Fuad El-Hibri, Chairman and Chief Executive Officer, and Don Elsey, Chief Financial Officer. Additional members of our senior management team will be present on the call for purposes of the Q&A session.

Before we begin, however, I am compelled to remind everyone that during the all 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 substantial 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.

Emergent BioSolutions Inc. (EBS) CEO & Chairman, 10% Owner Fuad El-hibri sells 15,000 Shares

CEO & Chairman, 10% Owner of Emergent BioSolutions Inc. (EBS) Fuad El-hibri sells 15,000 shares of EBS on 08/11/2009 at an average price of $16.78 a share.

EMERGENT BIOSULUTIONS INC. is a leading biopharmaceutical company dedicated to one simple mission - to protect life. EBS develops manufactures and commercializes vaccines and therapeutics that assist the body\'s immune system to prevent or treat disease. Their products target infectious diseases and other medical conditions that have resulted in significant unmet or underserved public health needs. Their marketed product BioThrax? (Anthrax Vaccine Adsorbed) is the only vaccine approved by the U.S. Food and Drug Administration for the prevention of anthrax infection. Emergent BioSolutions Inc. has a market cap of $511.8 million; its shares were traded at around $16.91 with a P/E ratio of 13.1 and P/S ratio of 2.8.

Emergent Biosolutions Acquires Monoclonal Anthrax Product Candidate

Acquisition represents important addition to company’s portfolio of anthrax countermeasures

ROCKVILLE, MD., March 6, 2008—Emergent BioSolutions Inc. (NYSE: EBS) announced that today it completed the acquisition of a group of anthrax monoclonal antibodies from AVANIR Pharmaceuticals (NASDAQ:AVNR), including Avanir’s lead product candidate, AVP-21D9.

AVP-21D9 is a human monoclonal antibody product candidate that is being developed as an intravenous treatment for patients who present with symptoms of anthrax disease following exposure to Bacillus anthracis. In non-clinical studies, this candidate demonstrated an ability to protect animals challenged with a lethal dose of inhaled anthrax spores. AVP-21D9 is being developed with funding support from the National Institute of Allergy and Infectious Diseases of the National Institutes of Health (NIAID), including a grant to establish a cGMP manufacturing process and to test efficacy in additional inhalation studies.

“The acquisition of Avanir’s monoclonal anthrax antibodies rounds out our anthrax countermeasure program nicely. In addition to our FDA-approved product, BioThrax? (Anthrax Vaccine Adsorbed), which is indicated for pre-exposure prevention of anthrax in individuals at high risk of exposure to anthrax spores, we are developing a polyclonal anthrax immune globulin therapeutic, which is a human plasma-derived product candidate. Now, as a result of this acquisition, we have another anthrax therapeutic in our product portfolio – a new monoclonal anthrax antibody product candidate that has performed well in proof-of-concept studies,” said Fuad El-Hibri, chairman and chief executive officer of Emergent BioSolutions. “This transaction reflects our ongoing commitment to develop a full portfolio of countermeasures to strengthen our country’s preparedness in the event of future anthrax attacks.”

Fuad El-Hibri on Brightkite

Name: Fuad El-Hibri

---

About: Just another Brightkite user

---

Website: http://www.emergentbiosolutions....

---

Sex: Male

---

Age: 51

---

Tags: academia, acquisitions, banking, family, health, management, mergers, music, polo, science, technology, telecom, telecommunications

Maker of anthrax vaccine discusses challenges of marketing overseas

By Courtney Potts '06

BioPort is the only FDA-licensed producer of the anthrax vaccine.

Fuad El-Hibri, chairman and CEO of Emergent BioSolutions Inc., speaks March 9 in Sage Hall. Kevin Stearns/University Photography

On March 9, MBA students taking International Political Risk Management, a course taught by Elena Iankova, a lecturer at the S.C. Johnson Graduate School of Management, heard Fuad El-Hibri, chairman and CEO of Bioport's parent company, Emergent BioSolutions Inc., discuss the hurdles his firm faces in making and marketing its products abroad.

His guest lecture was titled "Managing International Risk in the Bio-Defense and Telecommunications Industries."

Using his own company as an example, El-Hibri outlined six areas of risk in international business, among them export/import regulations, politics at home and abroad and financial issues. Much of his talk focused on political issues ranging from export regulations to how to deal with foreign governments.

One hurdle: when BioPort sought to export its anthrax vaccine, BioThrax, the U.S. Department of Defense claimed the vaccine was primarily of military importance and should therefore fall under International Traffic in Arms Regulations (ITAR). Under ITAR, export of the vaccine is controlled by the Department of State and a license is required for each sale. BioPort succeeded in arguing that its product was non-military in nature and therefore belonged under Export Administration Regulations (EAR). Exportation under EAR is controlled by the Department of Commerce and has far fewer restrictions.

El-Hibri seemed to take such challenges in stride. "Obviously," he said, "the U.S. government is interested in vaccines, especially bio-defense vaccines." It controls which countries vaccines can be exported to and may use them as a bargaining chip in its own deals with foreign ministries of defense, he commented. "They like to throw our vaccine into the mix and say, 'Listen, if you buy one more tank or one more fighter jet ... we'll throw in 10,000 doses of anthrax vaccine,'" he said. But such giveaways create problems for companies like BioPort by reducing demand for its products in foreign countries.

Some uncontrollable variables that affect the demand for vaccines are: Politics within the foreign country, the country's relationship with the United States, its finances, its fears about external threats and regional geopolitics, noted El-Hibri.

He also repeatedly mentioned the importance of having local connections. "It is critical that you appoint or partner up with a local distributor," he stressed. A local partner can help businesses stay abreast of the political situation and provide valuable insight into local culture and customs, he said, noting that acceptable business practices often vary widely between countries.

For example, in many countries it is common practice for businesses to offer bribes or gifts to government officials in return for their assistance, he commented. But under U.S. law, it is illegal for American companies to do so, with stiff penalties for violations. While the restriction can be circumvented by giving small gifts, under $25 in value, a better policy is to avoid gifts altogether, said El-Hibri, and instead get close to decision makers by developing relationships with them, helping them solve some of their problems.

R. Scott Kennedy Awarded the 2008 El-Hibri Peace Education Prize

At a glittering event at the El-Hibri Charitable Foundation on October 4th, a few blocks north of the White House, the Honorable R. Scott Kennedy received the 2008 El-Hibri Peace Education Prize. This prize, a joint effort between Nonviolence International, American University, and the El-Hibri family, was held in front of a large crowd in the renovated historic mansion that now serves as the headquarters of the El-Hibri Charitable Foundation.

Ms. Nancy El-Hibri, co-creator of the Prize, presented Mr. Kennedy a check for $10,000 which honored his service as a “peace educator and activist of extraordinary impact.” The award presentation ceremony highlighted his central role in “helping establish and promote the now widespread practice of educational delegations for peace particularly to Central America and the Middle East.”

The Honorable Sam Farr of California entered a congratulatory statement in the Congressional Record which paid tribute to Mr. Kennedy and compared his work to that of Mohandas Gandhi, Martin Luther King, Jr. and Nelson Mandela as a “…true man of peace…”

“His devotion to adult education has changed the lives of thousands of Americans,” said Dr. Mubarak Awad, Chairperson of the Prize Organizing Committee.

The first recipient of the prize in 2007, Professor Abdul Aziz Said of American University, shared his appreciation for peace educators who are doing so much to, “expand the moral imagination of our society.”

“Peace education in the classroom is valuable, yet needs to be complemented with pragmatic hands-on efforts in our communities to make peace and justice a living reality,” said Kennedy at the award ceremony. He expressed deep appreciation for the many colleagues at the Resource Center for Nonviolence as well as the citizens of Santa Cruz for their tremendous support and inspiration over 30 years.

Mr. Fuad El-Hibri, who established the El-Hibri Peace Education Prize, noted that he and the El-Hibri Charitable Foundation will continue to support the prize and its growth each year in an effort to highlight the importance of peace education and to support people who are working for a just, peaceful and healthy planet.

Mr. R. Scott Kennedy is a co-founder of Witness for Peace, the Resource Center for Nonviolence and Interfaith Peacebuilders, which have sent educational delegations to countries around the world to those countries whose people suffer from conflict, lack of educational opportunities, and social injustice.

It sure is wonderful when adult peace education is so strongly honored, and that peace educators have incorporated nonviolent action as a central theme in their work.

Fuad El-Hibri on Peoplepond

Mr. Fuad El-Hibri is the Chairman and Chief Executive Officer of Emergent BioSolutions Inc. (Emergent).

family, health, polo, music, telecommunications, telecom, science, technology, banking, mergers, acquisitions, management, academia

Emergent looks to buy Maryland lab

Emergent BioSolutions Inc. hopes to ramp up production of its anthrax vaccine in Lansing.

The Rockville, Md.-based company said Thursday it plans to sell two unused buildings and purchase a manufacturing facility and laboratory in Maryland.

The pending moves could free up space in Lansing for additional production of BioThrax, the only federally approved anthrax vaccine.

"From a strategic perspective, the new Maryland manufacturing facility broadens our options," CEO Fuad El-Hibri said. Terms of the deals were not disclosed.

Nearly 400 employees work for Emergent in Lansing. About 30 have been hired since the company announced plans to add up to 93 new hires as part of an expansion announced in March that included state tax incentives.

Emergent hopes to ramp up the nation's stockpile of doses for use in case of a biological terrorist attack.

"The government has previously stated they want a stockpile of at least 75 million doses. Our calculations would show the stockpile is way short of that," Chief Financial Officer Don Elsey said.

He wouldn't provide details on the stockpile's shortfall, but said the Department of Defense also draws from the supply.

Emergent currently makes the anthrax vaccine in a Lansing facility with a capacity for roughly 7 million doses a year, Elsey said.

In September, the company will start producing 14.5 million doses as part of a $405 million government contract for the national drug stockpile. It will take two years to complete the contract.

A new $75 million large-scale manufacturing plant in Lansing could handle an additional 30 million doses a year.

The building, completed last year, originally was slated to produce the next-generation anthrax vaccine once it received government approval. But Emergent now is proposing production of the new vaccine be moved to the new Maryland facility, allowing Lansing to make more BioThrax - something that also needs a government OK.

"We have shared with the government our thoughts on this and the new capabilities that this will bring and they are considering it," Elsey said. "It's definitely not something that's firm yet."

Fuad El-Hibri on BackType

Name

Fuad El-Hibri

Web

www.emergentbiosolutions.com

About Me

Mr. Fuad El-Hibri is the Chairman and Chief Executive Officer of Emergent BioSolutions Inc. (Emergent).

Fuad El-Hibri on Yotify

• Name: Fuad El-Hibri
• Username: fuadelhibri

• Yotify since: 06/18/2009

EMERGENT BIOSOLUTIONS ANTICIPATES 2ND QUARTER BIOTHRAX REVENUES OF APPROXIMATELY $20 MILLION BASED ON ACCELERATED DELIVERY TO DEPARTMENT OF DEFENSE

ROCKVILLE, MD, June 27, 2007—Emergent BioSolutions Inc. (NYSE: EBS), a biopharmaceutical company, announced today that, pursuant to the terms of an amended contract with the U.S. Department of Defense (DoD), it anticipates completing delivery of 900,000 doses of BioThrax® (Anthrax Vaccine Adsorbed) during the quarter ending June 30, 2007 or shortly thereafter. The company anticipates that, with these deliveries, second quarter revenues would be approximately $20 million. The terms of the amended contract with the DoD authorize delivery of BioThrax ahead of schedule.

The company is also preparing its response to a May 7, 2007 request for proposal from the DoD for a follow-on contract for the supply of up to 14 million doses of BioThrax to the military for its active immunization program. The request for proposal contemplates a contract term of one base year and three option years.

“Emergent BioSolutions and the DoD have a longstanding relationship and we are pleased to continue to provide doses of BioThrax for the military’s ongoing active immunization program,” said Fuad El-Hibri, chairman and chief executive officer of Emergent BioSolutions. “By repeatedly fulfilling our commitments to the U.S. Government, we continue to strengthen our reputation for reliability—an essential element of a successful partnership with the government. I am proud of our role in helping to protect our nation’s troops against biological threats.”

About Emergent BioSolutions Inc.

Emergent BioSolutions Inc. is a biopharmaceutical company dedicated to one simple mission—to protect life. We develop, manufacture and commercialize immunobiotics, consisting of vaccines and therapeutics that assist the body’s immune system to prevent or treat disease. Our biodefense business focuses on immunobiotics for use against biological agents that are potential weapons of bioterrorism and biowarfare. Our marketed product, BioThrax® (Anthrax Vaccine Adsorbed), is the only vaccine approved by the U.S. Food and Drug Administration for the prevention of anthrax infection. Our commercial business focuses on immunobiotics for use against infectious diseases and other medical conditions that have resulted in significant unmet or underserved public health needs. More information on the company is available at www.emergentbiosolutions.com.

Safe Harbor Statement

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements, other than statements of historical fact, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, including our expected revenue for the second quarter of 2007, and any other statements containing the words “believes”, “expects”, “anticipates”, “plans”, “estimates” and similar expressions, are forward-looking statements. There are a number of important factors that could cause the company’s actual results to differ materially from those indicated by such forward-looking statements, including our performance under BioThrax sales contract with the U.S. Department of Defense, including the timing of deliveries under that contract; our ability to obtain new BioThrax sales contracts with the U.S. government; our plans for future sales of BioThrax; our plans to pursue label expansions and improvements for BioThrax; our plans to expand our manufacturing facilities and capabilities; the rate and degree of market acceptance and clinical utility of our products; our estimates regarding expenses, future revenue, capital requirements and needs for additional financing; and other factors identified in the company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 and subsequent reports filed with the SEC. The company disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this press release.

EMERGENT BIOSOLUTIONS ANNOUNCES MANAGEMENT CHANGES

ROCKVILLE, MD, May 16, 2007—Emergent BioSolutions Inc. (NYSE: EBS) announced today the consolidation of the president and chief operating officer position. With this change, Daniel J. Abdun-Nabi, the company’s president, will also take on the role of chief operating officer. In this combined role, Mr. Abdun-Nabi will oversee all of the company’s product development, manufacturing and corporate affairs activities. Mr. Abdun-Nabi will continue to report to Fuad El-Hibri, chairman and chief executive officer of the company.

Specifics of other management changes, which are also effective immediately, include:

* R. Don Elsey is being promoted to the position of senior vice president finance and administration. Mr. Elsey was formerly vice president finance and administration. Mr. Elsey will continue to retain his responsibilities as chief financial officer for the company and will now assume additional responsibility for investor relations and human resource activities. Mr. Elsey will continue to report to Mr. El-Hibri, chairman and chief executive officer.
* Kyle W. Keese is being appointed to the position of senior vice president corporate affairs with responsibility for public affairs, marketing and sales and corporate development. Mr. Keese was formerly senior vice president marketing and communications.
* Thomas K. Zink, M.D. is assuming the responsibility for clinical development in addition to medical affairs. Dr. Zink, formerly senior vice president medical affairs, is now senior vice president medical and clinical development. Dr. Zink will continue to retain his responsibilities as chief medical officer for the company and, in that capacity, will continue to report to Mr. El-Hibri, chairman and chief executive officer.
* Edward J. Arcuri, Ph.D., is resigning his position as chief operating officer. The resignation is effective immediately.

“Today’s senior management consolidation and associated changes within our corporate organization are designed to strengthen the integration of our development and manufacturing organizations and to enhance the company’s positioning and capabilities in both the biodefense and commercial immunobiotic markets,” said Fuad El-Hibri, chairman and chief executive officer of Emergent BioSolutions Inc.

About Emergent BioSolutions Inc.

Emergent BioSolutions Inc. is a biopharmaceutical company dedicated to one simple mission–to protect life. We develop, manufacture and commercialize immunobiotics, consisting of vaccines and therapeutics that assist the body’s immune system to prevent or treat disease. Our biodefense business focuses on immunobiotics for use against biological agents that are potential weapons of bioterrorism or biowarfare. Our marketed product, BioThrax® (Anthrax Vaccine Adsorbed), is the only vaccine approved by the U.S. Food and Drug Administration for the prevention of anthrax infection. Our commercial business focuses on immunobiotics for use against infectious diseases and other medical conditions that have resulted in significant unmet or underserved public health needs. More information on the company is available at www.emergentbiosolutions.com.

Safe Harbor Statement

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements, other than statements of historical fact, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, including our expected revenue growth and net earnings for 2007, and any other statements containing the words “believes”, “expects”, “anticipates”, “plans”, “estimates” and similar expressions, are forward-looking statements. There are a number of important factors that could cause the company’s actual results to differ materially from those indicated by such forward-looking statements, including our performance under BioThrax® sales contracts with the U.S. government, including the timing of deliveries under these contracts; our ability to obtain new BioThrax sales contracts with the U.S. government; our plans for future sales of BioThrax; our plans to pursue label expansions and improvements for BioThrax; our plans to expand our manufacturing facilities and capabilities; the rate and degree of market acceptance and clinical utility of our products; our ongoing and planned development programs, preclinical studies and clinical trials; our ability to identify and acquire or in license products and product candidates that satisfy our selection criteria; the potential benefits of our existing collaboration agreements and our ability to enter into selective additional collaboration arrangements; the timing of and our ability to obtain and maintain regulatory approvals for our product candidates; our commercialization, marketing and manufacturing capabilities and strategy; our intellectual property portfolio; our estimates regarding expenses, future revenue, capital requirements and needs for additional financing; and other factors identified in the company’s Annual Report on Form 10-K for the year ended December 31, 2006 and subsequent reports filed with the SEC. The company disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this press release.

Maker of anthrax vaccine discusses challenges of marketing overseas

BioPort is the only FDA-licensed producer of the anthrax vaccine.

Fuad El-Hibri, chairman and CEO of Emergent BioSolutions Inc., speaks March 9 in SAGE HALL. Kevin Stearns/University Photography

On March 9, MBA students taking International Political Risk Management, a course taught by Elena Iankova, a lecturer at the S.C. Johnson Graduate School of Management, heard Fuad El-Hibri, chairman and CEO of Bioport’s parent company, Emergent BioSolutions Inc., discuss the hurdles his firm faces in making and marketing its products abroad.

His guest lecture was titled “Managing International Risk in the Bio-Defense and Telecommunications Industries.”

Using his own company as an example, El-Hibri outlined six areas of risk in international business, among them export/import regulations, politics at home and abroad and financial issues. Much of his talk focused on political issues ranging from export regulations to how to deal with foreign governments.

Fuad El-Hibri on Corridor Inc.

Fuad El-Hibri, chairman and chief executive officer at Emergent BioSolutions Inc., is a finalist for the Ernst & Young Entrepreneur of the Year® 2009 Award in the Greater Washington region. The awards program recognizes extraordinary innovation, financial performance and personal commitment to a businesses and its community. Emergent BioSolutions, based in Rockville, is a biopharmaceutical company focused on the development, manufacture and commercialization of immunobiotics....

Fuad El-Hibri On Lead411

Description: Fuad El-Hibri is Emergent BioSolutions's CEO/Chairman. With a Lead411 subscription you are able to view the email addresses ( @emergentbiosolutions.com ) of the executives. Besides e-mail, other employee info could include phone, biography, education, and extension. Management titles include VP, Chief, Vice President, managers, & more. Similar last names to El-Hibri can be found at Executive Directory - El-Hibri.

BIOGRAPHY:
Mr. Fuad El-Hibri is the Chairman and Chief Executive Officer of Emergent BioSolutions Inc. (Emergent), a publicly traded biopharmaceutical company focused on developing, manufacturing and commercializing vaccines and therapeutics to prevent and treat life-threatening diseases. The company’s current marketed product, BioThrax® (Anthrax Vaccine Adsorbed), is the only FDA-licensed vaccine for pre-exposure prophylaxis of anthrax disease. The company is also investing heavily in the development of a broad pipeline of products that address specific global unmet medical needs, including Typhoid, Tuberculosis, Hepatitis B and Chlamydia.

Mr. El-Hibri has extensive experience in the biopharmaceutical industry beginning with Porton Products, Ltd. (Porton), a mid-sized biotechnology company in the United Kingdom. Subsequent to the successful marketing and distribution of Porton’s biodefense vaccines to foreign governments in the early 1990’s, Mr. El-Hibri organized a management buyout of Porton in 1994, forming Speywood Holdings, Ltd. He was appointed to the Board of Directors of Speywood Holdings, Ltd. and acted as an advisor to the senior management team in the operations of the company until 1996.

Fuad El-Hibri on Businessweek

Fuad El-Hibri has been Chairman and Chief Executive Officer of Emergent Biodefense Operations Lansing Inc., a subsidiary of Emergent Biosolutions Inc. since June 2004. Mr. El-Hibri founded Emergent Biosolutions Inc. in 2004 and has been its Chairman and Chief Executive Officer since June 2004. He served as President of Emergent BioSolutions, Inc. from March 2006 to April 2007. He is a successful business entrepreneur with extensive experience in telecommunications and ...

Emergent BioSolutions hands out bonuses

Emergent BioSolutions hands out bonuses

Bonus may be a bad word right now — but not for a biotech that is actually making money.

Alongside minimal pay raises, execs received bonuses in 2008 that increased anywhere from 5 percent to 43 percent from their 2007 bonuses. Fuad El-Hibri got the lowest increase, but the highest bonus at $323,250. The highest increase was doled out to Kyle Keese, who took home a $96,460 bonus for 2008.

Though, at least one manager’s perk wasn’t quite so perky last year. Robert Kramer, who stepped down in January as head of Emergent’s manufacturing subsidiary and instead will manage a contract that the company hopes to nail with the federal Government year, got a 48 percent decrease in his bonus from 2007, bringing his 2008 figure to $78,815…