Emergent Biosolutions, Inc. (EBS)

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Emergent BioSolutions Inc. (EBS)

Q2 2011 Earnings Call

August 4, 2011 5:00 PM ET


Robert Burrows – VP, IR

Fuad El-Hibri – Chairman and CEO

Don Elsey – CFO


Nicolas Bishop

Cory Kasimov – J.P. Morgan



Good day, ladies and gentlemen, and welcome to the Quarter Two 2011 Emergent BioSolutions Earnings Conference Call. I will be your event manager today. Throughout the conference you remain on listen-only. (Operator Instructions). And now I’d like to hand the presentation over to your host for today’s call Mr. Robert Burrows, Vice President of Investor Relations. Please proceed, sir.

Robert Burrows

Thank you. Good afternoon ladies and gentlemen again my name is Robert Burrows I’m Vice President of Investor Relations for Emergent. And thank you all for joining us today as we discuss Emergent BioSolutions financial results for the second quarter of 2011. As is customary our call today is open to all participants. And 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 to 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 August 4, 2011. 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.

And 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 on our call today. In my prepared comments, I will review our financial performance for the second quarter discussed or revised full year 2011 guidance. Provide guidance on third quarter revenue and highlight milestones related to our advanced stage development programs.

I’d like to start with the summary of our second quarter financial results. We achieved total revenues of $88.1 million, which is within the $80 million to $90 million guidance we provided in our previous earnings call. We also realized net income of $14.2 million. As anticipated in our last earnings call, during the second quarter, we completed qualification of the replacement reference matter, which enabled us through deployed our potency testing capacity to routine product testing and release.

As of today, we have completed deliveries under the original 14.5 million dose contract. We have also now begin to make deliveries of the 3.5 million doses under the recently awarded on contract modification. We expect to complete deliveries of all 17.9 million doses under this modified contract by the end of this year.

Selling competition of deliveries under our current contract we anticipate and continuing to deliver BioThrax to the SNS under a new five year contract currently in negotiation. We expect that contract will be signed in the third quarter and will provide for the delivery of 44.8 million doses over the next five years. Depending on the completion of deliveries under the current modified contract deliveries under the new contract are expected to commence in late 2011 or early 2012. This multi-year procurement contract will commit substantially all of our current annual capacity over that period.

Moving on to guidance, for the full-year 2011, we now anticipate total revenues of $270 million to $290 million and net income of $15 million to $25 million. This revised guidance is primarily based on expected deliveries of BioThrax for 2011 of around 7 million doses.

As you all know, our expected annual output can vary from between 7 million to 9 million doses based on a number of factors, including fermentation yields, formulation of both product, filling, potency and release testing and the timing of delivery and acceptance of final product. When we initially prepared our guidance for 2011, we had been experiencing a three year upward trend in fermentation yields as a result of multiyear process optimization activities.

We had anticipated this upward trend would continue in 2011 and therefore anticipated upward – would be closer to the upper end of the 7 million to 9 million dose range. However, year-to-date, the actual fermentation yields has been lower than what we had initially projected due to the variability inherent in biologic manufacturing.

The lower than expected yields are associated with the variability and the growth characteristics of our fermentation process. Our manufacturing process requires operation within tight specification for both production and testing. Our process variability sometimes falls outside of these requirements thus affecting production yields and the overall number of doses available for delivery to the SNS. We now project that the yield will be closer to 7 million doses this year.

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