Emergent BioSolutions Inc. (NYSE:EBS) Q3 2023 Earnings Call Transcript

Emergent BioSolutions Inc. (NYSE:EBS) Q3 2023 Earnings Call Transcript November 8, 2023

Operator: Good afternoon, everyone. I am the operator for today’s call. Thank you for joining today as Emergent discusses the Operational and Financial Results for the Third Quarter of 2023. As is customary, today’s call is open to all participants and the call is being recorded and is copyrighted by Emergent BioSolutions. In addition to today’s press release, there is a series of slides accompanying the webcast available to all webcast participants. Turning to slides three and four. During today’s call, Emergent may make projections and other forward-looking statements related to their business, future events, the prospects or future performance. These forward-looking statements are based on their current intentions, beliefs and expectations regarding future events.

Any forward-looking statement speaks only as of the date of this conference call, and except as required by law, Emergent does 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 Emergent’s periodic reports filed with the SEC when evaluating their forward-looking statements. During today’s call, Emergent may also discuss certain non-GAAP financial measures that involve adjustments to GAAP figures in order to provide greater transparency regarding Emergent’s operating performance. Please refer to the tables found in today’s press release and in its slides regarding their use of adjusted net income and loss, adjusted EBITDA and adjusted gross margin and a reconciliation between Emergent’s GAAP financial measures and these non-GAAP financial measures.

Turning to slide five. The agenda for today’s call will include Haywood Miller, Interim Chief Executive Officer; who will comment on the current state of the company; Paul Williams, SVP and Head of the Product Business, will provide brief remarks on NARCAN Nasal Spray; and finally, Rich Lindahl, EVP and Chief Financial Officer, who will speak to the financials for Q3 2023 and then pivot to Emergent’s revised forecast for full year 2023, as well as Q4 2023 total revenues. This will be followed by a Q&A session where additional members of the executive leadership team are present and available as needed. Finally, and for the benefit of those who may be listening to the replay of this webcast, this call was held and recorded on November 8, 2023.

Since then, Emergent may have made announcements related to topics discussed during today’s call. And with that, I would now like to turn the call over to Haywood Miller. Haywood?

Haywood Miller: Good afternoon to everybody and thank you for joining us today. My comments this afternoon begin on slide seven. After my remarks, Rich will detail our third quarter performance and provide updated guidance for 2023. I have also asked Paul Williams, Senior Vice President and Head of our Products business, to join us to provide additional detail on the broad availability of NARCAN Nasal Spray as we continue to battle the ongoing opioid crisis. With a full quarter at Emergent now under my belt, I remain encouraged by the progress we are making to improve performance. We are strengthening our fundamentals and we are continuing to advance our core products business. We are focused on delivering value through our life-saving products and shaping Emergent to return to growth as we continue to further advance public health and preparedness.

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Q&A Session

Over the past few months, we have made strategic and operational adjustments to strengthen Emergent’s financial position and right-size our business. We are prioritizing our core products and have aligned our operations with our medical countermeasures customers, namely the U.S. Government. We continue to achieve important milestones across our businesses, including key contract awards that reinforce the value of our products as an essential part of the government’s preparedness planning. Let me walk through some of the progress we are making across our core products and additional achievements throughout the quarter. First, a brief update on NARCAN Nasal Spray. At the end of August, we officially launched NARCAN Nasal Spray as an over-the-counter opioid overdose reversal treatment.

This is an important milestone for our company that expands access to naloxone, as we seek to help save more lives and fight against the devastating opioid crisis in America. Political support and expansion of funding avenues remain strong to address the public health crisis. We continue to maintain a market leading position and have expanded our addressable market through the introduction of over-the-counter availabilities. As a result, we expect NARCAN Nasal Spray to remain a strong contributor to revenue in the near- to medium-term. Paul will speak more about this in a moment. Now I will turn to our medical countermeasures business. In response to changes in the volume of U.S. Government procurements of medical countermeasures, we are delivering on our commitments across our smallpox franchise, Anthrax and other products.

As demonstrated by our deliveries of the ACAM2000 this year, our partnership with the U.S. Government remains strong. Also, just yesterday, we announced the submission of our supplemental biologics license application to the U.S. Food and Drug Administration, seeking approval for the expansion of the indication for ACAM2000 to include immunization against mpox virus. This milestone is an example of how to evolve our existing product pipeline to address current public health threats. We continue to operate under our current contract for the advanced development and delivery of CYFENDUS, our Anthrax vaccine, while we work on to transition future procurement to seek SNS. We expect this year’s remaining procurement to occur by year-end. However, it’s possible delivery may shift into next year.

Rich will cover the impact on our guidance. As we look ahead, we will continue to service our long-term USG contracts and meet the needs of our international customers. We have also made significant progress on our sustained efforts to strengthen our quality and compliance across our manufacturing network and our enterprise. At this point, we are moving forward with our efforts from remediation to sustaining our high standard of compliance as we focus on delivering for the needs of our customers. We have had successful inspections at multiple sites by regulators. In addition, with respect to our Camden facility in Baltimore, following a re-inspection in July, August of 2023, we received notification from the FDA that we have addressed the matters contained in their August 22 warning letter.

The FDA has also communicated that both the inspections that began in February 2022 and July, August of 2023 are considered closed. As we have shared on prior calls, significant investments were made to upgrade our physical capabilities and further strengthen our culture of quality and compliance across the manufacturing network and enterprise, allowing us to close this action expeditiously. Finally, we are taking steps to streamline our cost structure and deemphasize the growth of our CDMO business, which we expect will strengthen our financial position in the coming quarters. As we discussed last quarter, the strategic actions and cost reduction initiatives already underway, are expected to result in annualized savings of over $100 million when fully implemented next year.

Before I turn the call over to Paul, I’d like to mention that we have enhanced our Board with two new independent directors, Neal Fowler and Don Degolyer. They bring several decades of combined biopharmaceutical industry experience and have held multiple C-suite positions, including as CEO throughout their careers. We look forward to benefiting from their unique and extensive industry expertise. With that, I will now turn the call over to Paul.

Paul Williams: Hey. Thanks, Haywood, and hello, everybody. Haywood noted in his remarks, the opioid epidemic continues to worsen and the need for NARCAN is growing. As a result, we are seeing increased demand for NARCAN Nasal Spray in both our U.S. public interest channel and Canada. With our official launch of NARCAN Nasal Spray as an over-the-counter treatment in September, we have delivered on our commitment to broaden access and make it available both online and on retail shelves. We are now able to offer NARCAN on all fronts, from the most vulnerable populations via the U.S. public interest channel and via the retail channel as an over-the-counter treatment that anyone can access without a prescription to help give someone another chance during an opioid overdose emergency.