Emergent Biosolutions, Inc. (EBS)

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Emergent BioSolutions, Inc. (EBS)

Q3 2010 Earnings Call Transcript

November 4, 2010 5:00 pm ET


Bob Burrows – VP, IR

Fuad El-Hibri – Chairman and CEO

Don Elsey – CFO, SVP of Finance & Administration, Treasurer


Eric Schmidt – Cowen & Company

David Moskowitz – Madison Williams

Steve Brozak – WBB Securities

Jim Molloy – Caris & Company

Greg Wade – Wedbush



Good day, ladies and gentlemen, and welcome to the Emergent BioSolutions third quarter 2010 financial results conference call. My name is Jennifer and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.

I would now like to hand the call over to Mr. Bob Burrows. Please proceed.

Bob Burrows

Thank you, Jennifer. Good afternoon, ladies and gentlemen. My name is Bob Burrows. I'm Vice President of Investor Relations for Emergent. Thank you for joining us today as we discuss Emergent BioSolutions' financial results for the third quarter of 2010. 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 Fuad El-Hibri, Our Chairman and Chief Executive Officer and Don Elsey, our 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, I'm 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 for 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.

For the benefit of those you may be listening to the replay, this call was held and recorded on November 4, 2010. Since then, Emergent may have made announcements relating to topics discussed during today's call. So again please reference our most recent press releases and SEC filings.

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.

With that introduction, I would now like to turn the call over to Fuad El-Hibri, Emergent BioSolutions' Chairman and CEO. Fuad?

Fuad El-Hibri

Thank you, Bob. Good afternoon, everyone and thank you for joining us today on our conference call. For my prepared comments, I will review our financial performance for the third quarter, reaffirm our 2010 financial forecast, discuss updates regarding our product sales activities and development programs and highlight our recent acquisition of Trubion Pharmaceuticals.

To begin, let me review our financial results for the third quarter of 2010. Our revenues of approximately $74 million and net income of $13 million include the scheduled deliveries of BioThrax to the SNS, as well as progress payments under existing development contracts.

With respect to our guidance, we reaffirm our 2010 forecast for total revenues of $275 million to $300 million, a net income of $40 million to $50 million including the recently acquired Seattle operations. As we stated last quarter, this forecast was supported by the modification to our current BioThrax contract with CDC, which increased the number of doses we can deliver into the SNS during 2010.

Furthermore, our forecast is also supported by an increased volume available – of available doses due to high production yields which we have experienced throughout 2010.

Let me now provide an update on our product sales activities specifically BioThrax. We continued to deliver doses into the SNS under a multi-year procurement contract. As I stated, we are experiencing high production yields which are principally due to our multi-year drive to optimize the manufacturing process at our current facility dosing trough.

These improved yields will enable us to deliver at least 8.5 million doses to the SNS this year. As a result, we are projecting that deliveries of BioThrax under the current contract will be completed by the end of the second quarter, next year.

In terms of a follow-on procurement contract, we are currently in discussions with CDC representatives. We anticipate this contract will cover a multi-year period and will be structured to secure substantially all of our projected capacity. We expect to finalize this follow-on contract in the first quarter of 2010 – 2011, apologies.

Let me now provide an update on our product development activities beginning with our BioThrax expansions. First, contract scale, as you know in mid-July BARDA awarded us a contract, valued at up to a $107 million. This contract funds activities through FDA licensor for large scale manufacturing of BioThrax and our state-of-the-art facility in Lansing.

This development contract consists of a two-year base period of performance valued at $55 million and three auctioneers that effects to side by BARDA with increased contract value to $107 million. A majority of this value can be realized in the first three years of performance from mid 2010 to mid 2013.

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