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Emergent BioSolutions Inc. (NYSE:EBS)

JPMorgan SMid Cap Conference

November 30, 2011 8:45 a.m. ET

Executives

R. Don Elsey - CFO

W. James Jackson - SVP and Chief Scientific Officer

Analysts

Cory Kasimov - JPMorgan

Presentation

Cory Kasimov

Hi. Good morning, everybody. My name's Cory Kasimov. I'm the Senior Biotechnology analyst at JPMorgan. It's my pleasure to welcome you to our annual SMid Cap Conference. And furthermore, it's my pleasure to introduce our first company to present today, which is Emergent BioSolutions. Giving the presentation will be their company's Chief Financial Officer, Don Elsey. We also have Jim Jackson and Bob Burrows from the company sitting up here as well.

And following Don's presentation, we will have a Q&A session right here in this room. So, with that I will turn it over to Don.

R. Don Elsey

Thank you, Cory. I would welcome, everybody, to the first presentation of the day. We got you up early. And I do want to say Emergent is the most successful biotechnology that is at this SMid Conference this week. Of course, we're the only biotech company. So – and we do have a lot of competition in that I understand Tupperware is presenting a couple of doors down and so they put a lid on it. I just couldn't resist. I'm sorry.

All right. So now that we got that out of the way, as Cory is like going, why did I invite these guys. We'll start with the obligatory forward-looking. We're going to make some forward-looking comments and actual results may differ. Let's move on.

To give everybody and I see some familiar faces here, so I apologize if I go over old news but for those of you who don't know Emergent, we have the only FDA licensed anthrax vaccine, which is BioThrax. We're organized into two divisions, BioDefense, which primarily is focused on the anthrax infectious disease. As well as BioSciences, and that's oncology and autoimmune. And you see those are the three disease areas that we're focused on.

We have eight clinical-stage candidates at this point in time. And we've had nine years of profitability and look forward to completing this year as a profitable biotech as well.

This gives you a very quick overview of the clinical candidates that we have today and it's a mixture of BioD and BioDefense. I'm not going to go through each and every one. That could take up to 20 minutes by itself. I will highlight a couple of them a little bit further into the presentation. You can see we've got a couple in Phase 3, couple in Phase 2, couple in Phase 1. We've also got a number of pre-clinical candidates, which we will not be talking about.

So, to get into the BioDefense division and give you a little bit of background on BioThrax. As I said, it's the only FDA-licensed anthrax vaccine. It's been in over 2.5 million individuals to date. It's got a safety profile, which is well established and quite enviable in the vaccine field. We now have four-year dating on this product and one might say, why is that so special.

Number one, BioThrax is primarily purchased by the government today for stockpiling purposes. So the longer the shelf life, the better. And at four-year dating, we have the longest shelf life of any vaccine that's licensed today.

Today's regimen is five doses over 18 months with an annual boost. We're working on improving that and I'll talk to that in just a moment. We manufacture this at a single manufacturing location. Our current capacity is about 7 million to 9 million doses per year. We're increasing that manufacturing capacity. We've got a new building and I'll take you through some of the details of that in just a moment.

Moving on with the enhancements. So, today BioThrax is labeled for a pre-exposure. The government is buying it in the stockpile for a post-exposure application. So, if you're exposed to anthrax, the regimen is to go on broad-spectrum antibiotics for the initial toxins that are released and to go on BioThrax at the same time. Anthrax spores can exist in your lungs up to nine months and during that time, can release toxins and kill you. So the thought is you come off the antibiotics, you've been on the vaccine, and you're now protected.

We have filed a supplemental BLA with the FDA. That would take the five doses over 18 months down to three doses over six months with a triennial boost. We're hoping to hear back from the FDA on that in early 2012. Again, this is – this would facilitate the government procurement. They are buying assuming a three-dose regimen. So when one talks about the stockpile of 75 million doses, they're assuming three doses per person.

We've also filed for five-year dating. As I said, four-year dating is the longest dated vaccine. What the probability is of getting five-year dating from the FDA is a question. In order to get the four-year dating, we've got samples of 6, 7, 8, 9 and 10 years showing stability over that point in time. But you're going to need lots of data points for the FDA to be convinced.

And then the ambient temperature stability is the next key component for a stockpile asset and that's trying to break the cold chain. Our studies have shown that BioThrax can be stable for up to six months at room temperature.

Last but not least, we've got a government-funded program called NuThrax, which takes BioThrax, which uses alum as a current adjuvant and adds CPG 7909, the old coli product now belonging to Pfizer and early studies on this have shown that you can reach the tighter levels that are required potentially with two doses in 17 days.

This is a history of HHS procurement of BioThrax. And again, back in 2004, we have sold to DOD since 1998 in the first Gulf War. And DOD was procuring about 1.5 million to 2 million doses per year. In 2004, under HHS, they established this strategic national stockpile in which they've got broad-spectrum antibiotics. They've got small pox vaccine. Now they've got anthrax vaccine and they began to procure 5 million doses at a time, one year's production.

And I say one year's production because back then it was 5 million doses for HHS, 2 million doses for DOD. That was our capacity. So they began to buy in one-year tranches and then beginning in 2007, we got our first multiyear contract. You can see from this chart we're just about to finish the contract for October 2008, which had been expanded to 17.9 million. We'll complete delivery under that contract next month and begin delivery under the new award, which is 44.75 million over five years. So essentially HHS has spoken for our capacity from now until 2016.

Talked about the stockpile for a moment. I mentioned 75 million doses. This goes back to 2004, rough calculus, it was three cities, 8 million people per city, three doses per person. Now if one takes a look at an attack scenario and says, okay, maybe only one city is attacked. You still have to wonder whether the rest of the country says, it's okay, as long as Chicago, LA and New York are protected, I’m fine. I'm not worried.

You really have to question whether 75 million doses is the appropriate amount. With small pox vaccine, the stockpile has 350 million doses of small pox vaccine already in the stockpile. So not being a communicable disease, you would think, okay, an anthrax, you probably would never stockpile 350 million. But a 75 million, right, 100 million, 125 million – only time will tell.

When this was first calculated, no one had the capacity to fill 75 million doses. And even today, at 7 million to 9 million doses per year for us, with a four-year shelf life, you'll never get to 75 million doses. Our estimate of where the stockpile is today is the low 20s. And I say it's an estimate because DOD now draws from the stockpile. And we don't know exactly how much they draw. We believe it's still about a 1.5 million doses per year.

Doesn't really matter whether there's active conflict. This is a readiness profile for the troops so whether they're in Germany, or they're in Kuwait or they're in Korea, the troops are going to be inoculated and there's high turnover in the Armed Forces overall. So, we imagine that they'll continue to buy 1.5 million doses a year out of the stockpile, almost regardless of the level of hostilities at any point in time.

I mentioned before we had expanded our capacity. We have from a physical infrastructure. The building is completed. The equipment is in there. We're running engineering lots and we're in the process of qualification and validation of what we affectionately call, Building 55. Last year the government gave us a contract for $107 million to finish the qualification and validation of this facility.

So, it clearly demonstrates their interest in bringing this enhanced capacity on board. Now, this $107 million assumes a human bridging trial of 12 to 24 months. Now, recent discussions with the FDA have indicated that the FDA may be satisfied with comparability studies and not require a human bridging trial. So, in our Q3 earnings call, we referenced that for the first time. That as opposed to Building 55 being licensed in 2015 some time, we're bringing that back and saying it's probably in 2014. Could it be earlier? Possibly.

People often ask if there was an attack today, could you produce out of Building 55? You absolutely could. Product is being manufactured in that building as we speak to generate and support these comparability studies and so we could absolutely do that. The capacity is 25 million doses on a single train of equipment in the building. We've got a footprint in the building that would accommodate a second train and double the capacity. So you could be looking at 50 million to 60 million doses per year.

People also often ask me, do you think that the government will buy the capacity of 25 million doses. Again, I'll go back to the fact that we got an award for $107 million just to qualify and validate the building. I believe the government absolutely will buy in that area. Would they buy 50 million doses? I don't think they would buy 50 million doses unless there was an attack or some indication of an imminent attack but 20 million, 25 million doses I believe the government will take that capacity and fill up the stockpile and continue to rotate out the dated material.

The other thing that this capacity allows us to do, which we really haven't been able to do in years gone past is to approach the ex-US market as well as what I'll call the retail market. And ex-US we have gotten market authorization in India. We're pursuing the equivalent in Germany and we hope to have that in 2012. But we've really tilled that soil very cautiously because if a customer came to us today, and said, give me a million doses, we would be unable to do that.

So, this building gives us a lot of options in that sense as well as when I say the retail market. The first part of the retail market would be first responders. And I say it because state and local doesn't have money. They really don't have the funds to inoculate their first responders. And yet, many first responders have said that they would pay for it themselves if it was available. And so that's a market that we would go after as well with this increased capacity.

I'm not going to read through the milestones. We've taken a report card approach to measuring ourselves. We lay out at the beginning of the year what are all the things we hope to accomplish in each division. Within the given year, you can see the checkmarks and what we've accomplished. Certainly, the follow-on procurement contract was key amongst those. We've got a couple left for the balance of this year. Quite honestly, the consistency lots in Building 55 won't be done until 2012. We're going to delay those given some of the discussions with FDA. We think they're going to require another animal test in lieu of the human bridging trial.

Moving on to BioSciences quickly. So in 2010, we acquired Trubion Pharmaceuticals out of Seattle and that brought with it a portfolio of oncology and autoimmune candidates. Real quickly, TRU-016, an anti-CD37 oncology candidate. This is partnered with Abbott in a 50/50 deal. And so the economics of this are split down the middle.

Today, we are conducting the CLL trials. Abbott is conducting the NHL trial. As this goes forward and assuming a successful drug comes to market, we'll split the economics and the profits as we go forward on that. You can see the study statuses. There will be posters presented at ASH in December as well as we would expect to release additional data on this product at both ASH and ASCO in 2012.

Moving on to SBI-087 indicated for rheumatoid arthritis and lupus. This is basically an out-licensed to Pfizer. Pfizer has got the responsibility for the conduct of the trials 100%. So this would be a milestone and royalty opportunity for us. Again, we expect data coming out of the Pfizer trials on rheumatoid arthritis in 2012. Jim, is any lupus data coming out in 2012?

W. James Jackson

Perhaps toward the end of the year.

R. Don Elsey

Okay. So, 2012 is going to be very key from the BioSciences division with the first clinical data released from ourselves versus Trubion. MVA-85A, it's the most advanced tuberculosis vaccine under development today. It is a booster to BCG, which is the standard but is marginally efficacious. This is partnered up with Oxford University as well as Wellcome Trust and AERAS, which is the Bill and the Linda Gates foundation for tuberculosis.

This is in a Phase 2b infant efficacy study in South Africa, which is – has completed dosing. We should see a complete study report by the end of 2012. Again, it's the common theme, a lot of clinical data to come out in 2012 and we'll see where this stands. We believe this represents a very robust opportunity for us assuming that we get the clinical data that we're hoping for in 2012.

The economics of this are such that Wellcome Trust and AERAS go after the countries and the areas of the world unable to afford the TB vaccine. We would take the rest of the world, Western Europe and Southeast Asia and other economies that can afford it and we look at this at a potential of $700 million a year if this product is successful.

Last but not least, we had acquired another manufacturing in Baltimore. We have a development contract with the government for a recombinant protective antigen anthrax vaccine. And we purchased this facility primarily for that but as you can see from this slide, the facility will have two suites and is capable of manufacturing a number of the different candidates that we have.

So, we'll see where RPA goes over time. But if RPA was not something that the government chose to pursue in the future, we could bring other candidates in-house. Again, a quick report card and I'm not going to take you through all these. A lot of initiation of dosing, initiation of trials, completion of dosing, et cetera. I think the thing to focus on is 2012 and the clinical data that will come out.

From a financial perspective, you can see we've had revenue growth year-over-year-over-year. We've got $165 million. You see the red bar, which is product sales. The blue bar, which is government contracts and grants as well as the collaboration with Abbott and Pfizer. $165 million year-to-date. In our Q3 call, we gave annual guidance of $270 million to $290 million. And then for 2012 when we attend the JPMorgan Healthcare Conference, we'll give 2012 guidance at that point in time. Just a cheap plug for JPMorgan.

So, it has been our strategy since going public to live within our means. You can see that we've increased R&D so we continue to invest in the pipeline. $95 million of year-to-date spending on R&D through September is a little misleading. You really need to take the $95 million, take some of the contracts and grants, which are funding the government development efforts, and you've got about $50 million of net R&D that we've spent through Q3.

And you can see that we've been profitable every year through Q3. We actually had a $6 million loss. That's not totally unusual for us. We tend to be a little Q4 heavy weighted. Not that the government buys at Christmas time, but it just seems that every year we ship quite the slug to the government. So in Q3 we forecasted $15 million to $25 million in net income after tax.

So that is a very quick tour of Emergent and concludes my presentation. So we'll open it up to Q&A.

Question-and-Answer Session

Cory Kasimov

There's a microphone around in the back. So if you have a question in the audience.

Unidentified Participant

(Question inaudible)

R. Don Elsey

Balance sheet is pretty strong. At the end of Q3 with cash and AR, we had about $173 million. We have little debt except for mortgage debt. So we've got a mortgage on the new building in Lansing. We've got a mortgage on the Baltimore facility. We've got a mortgage on our development facility in Gaithersburg. But other than that, there's no debt. Yes, sir?

Unidentified Participant

When your price your product (inaudible).

R. Don Elsey

Very good question. How do we price our product. The way that the product has been priced so far goes back to basically the early 2000s. And at that point in time, it was very iterative with Department of Defense. If you take a look at typical margins in the vaccine field and what we would sell for retail and what we do sell when we sell retail, it's $75 to $90 a dose. And that's got an 85% gross profit margin attached to it.

As you probably know in government procurement, they have to have the best price offered to anybody. The price under the current contract is essentially $28 and change per dose. As we negotiated the follow-on contract, quite honestly it was an arm wrestle back and forth. All the agencies of the government are under tremendous pressure to do cost reduction. In Q3 we talked about the follow-on procurement contract had a price reduction from where we were in the current contract. We haven't disclosed that yet but it was more of an arm wrestle.

Now, quite frankly, as we go to Building 55, if we turn that page to the future and they come and they say, here's a contract for 25 million doses a year. I expect that they will go through the iterative process again. I'm not sure of the number but it we're at $28, if they were to come and say, $20, $19 that would not be out of the realm of reasonable from what I would expect.

So it'll be a back and forth. But it basically is tied to retail price, gross profit margin, affordability, commitment on the government's part. It all comes together.

Unidentified Participant

So that $25 million – 25 million-dose capacity is thought of as roughly a $500 million revenue capacity.

R. Don Elsey

I think that's a reasonable calculus.

Unidentified Participant

Given the government's investment (inaudible) are there restrictions in your contract as to how much you can sell overseas (inaudible)?

R. Don Elsey

We don't have to. It's unwise not to ask the government first before you sell overseas. We're certainly not going to offend our best customer. We have sold overseas, modest quantities. We've got the same restrictions as anyone else with regards to there are certain countries that are absolutely off limits as one might expect. But we inform them of every ex-US bid that we have received. And there's no written concurrence but we get verbal concurrence to go ahead with that.

Again, once we get to Building 55, if we're looking at millions of doses overseas, that could change considerably. But we'll probably always pro-actively inform them. Does that answer your question?

Unidentified Participant

Yes.

R. Don Elsey

Okay.

W. James Jackson

And the government's well aware of the fact that we've pursued these as Don said, licensor of BioThrax in India, this (pan-u) approach, they're supportive of that. But at the end of the day to you question, yes, the US government is our primarily customer. And will be probably forever.

Cory Kasimov

Don, when you look at this new contract you just got, 7 million to 9 million doses per year into 2016 and you think about Building 55 coming online perhaps sometime in the middle of this contract, what's the process, what happens? Do you rewrite the contract? Do you start a new contract? When do those talks begin in terms of how much of the 25 million doses the government starts to purchase whenever 55 comes online?

R. Don Elsey

Okay. Everybody heard that question? Okay. There is no set process for it. I would expect that we would cancel the current procurement contract and write a new one. I think that volume commitments, shipping, et cetera, et cetera, there'd be enough new turf here that we would just rewrite the entire contract is how I would see that unfold.

Cory Kasimov

Okay. And then you talk a lot about the 25 million doses and that you have another train that you could put in for another 25 million. Obviously you also have this pilot facility with the 7 million to 9 million doses per year. What would you expect to happen to those doses, or to that facility in general. Is that –

R. Don Elsey

I would expect those 7 million to 9 million doses we would take out of commission. So today, just – we've got 4-100 liter fermentation trains running that produce the 7 million to 9 million doses. In Building 55, we switched to 13-20 liter fermenters. The 100-liter fermentation trains are getting a little long in the tooth. The spare parts, et cetera, et cetera, and it's not an efficient and optimized process to today's latest and greatest.

It would be less expensive to get rid of that. Put in the second train and run it. To give everybody an idea, for the 4-100 liter fermenters, to get out 7 million to 9 million doses, we have approximately 80 manufacturing direct workers. To get out 25 million doses per year will take about 14 direct manufacturing workers. So the state of the art in Building 55 is tremendously advanced versus Building 12 where we do our current manufacturing.

So as soon as we get that Building 55 licensed, I would imagine decommissioning the trains in Building 12.

Cory Kasimov

So with that, with the reduction in workforce and the more sophisticated technology and everything else, do you have any kind of rough estimate of where margin would head, where gross margins would head?

R. Don Elsey

Gross margins I anticipate will keep in the 75% to 80% range once Building 55 comes on. I don't see a big change there. Yes, sir?

Unidentified Participant

Hi, Don. How are you? So along the lines of the new capacity versus the old capacity, how – what kind of an operating rate do you have to get to, to reach those margins? Because I assume there's going to be a start-up period of maybe a year or two before you can reach ideal margins.

R. Don Elsey

You know, it's not something that we've disclosed essentially the break-even point in Building 55. The biggest challenge with Building 55, we could operate Building 55 at 10 million doses per year. And we'll have the same operating margins as we do in Building 12. The issue would be that would make it so strange, you do the 10 million doses in half a year and then you've got a half a year that you basically shut the facility down.

Well as you probably all know, starting and stopping a biological manufacturing process is not the best idea in the world. So if the government were not to come and buy 25 million, certainly we would look to aggressively pursue ex-US and retail and the United States. And then I expanded even beyond first responders. I mean, if you take a look at certainly not all 350 million Americans are going to say, okay, I'd like to be inoculated for anthrax.

But I would put forth that there are a number of million of Americans who would pro-actively say, particularly with the three-dose regimen, go ahead and inoculate me for anthrax. I don't really want to wait until there's an attack. And hope that I get in line to receive something out of the strategic national stockpile. And, Cory's going to laugh because I go back to my disaster scenario, which is as they plan these things and of course New York is where they do so much modeling, if there is an anthrax attack in the subways, the studies have shown it's in every borough in 24 hours.

The estimated exposed individuals is over 400,000. As you're probably aware the mortality of anthrax is pretty significant, particularly after 72 hours. So out of the 400,000 there's an estimated 275,000 to 300,000 people that could potentially die. Now, if you take those numbers and you think, okay, that's just way over the edge. But you say, 3,000 people die. The reaction in the rest of the country and in New York City, I think would be overwhelming to the stockpile.

So I certainly would be a proponent of if the government didn't sign up for the 25 million, I'm happy to go off and sell 5 million doses retail at $75 a piece.

Unidentified Participant

To the uninformed, anthrax seems like it's yesterday's battle. Can you maybe tell us whether there are – update us –?

R. Don Elsey

What's the probability, the possibility?

Unidentified Participant

What's the threat and what evidence is there that there's a real threat that could actually give us the scenario that you just outlined?

R. Don Elsey

So, weaponizing anthrax is not that difficult. Now, the letter attacks were particularly sophisticated form of anthrax spores. And particularly lethal. But not that hard to weaponize. When the 911 Commission wrapped up its work about 18 months ago, there were a couple of findings.

Number one, the 911 Commission said, there will be an attack on US soil by 2013. It will likely be bio terror and it will likely be anthrax. So from the 911 Commission, they absolutely feel that this is front and center. It – now admittedly right behind it is probably a dirty bomb of some sort. The government has a tougher time with a dirty bomb, because as you probably know, (radiologically) and nuclear, they've got few if any therapies.

But they can do something about anthrax, which is why they are. One of the chief technical advisors to the 911 Commission actually advocated the proactive immunization of every man, woman and child in the United States to take the threat off the table. The problem is, and you get Al Qaida spokesmen and others who say, we're not going to attack with airplanes the next time. It's too complicated. We're going to take four pounds of anthrax in a backpack across the Mexican border and we'll kill 300,000 Americans.

And those numbers are the right numbers. Four pounds, 300,000. That can be done. This is a bit of an insurance policy but if you take a look at it and you think about other things. You can take a small container of anthrax spores to an air intake of a building, it goes throughout the building, contaminates everybody in the building but the spores also last for up to 20 years in the building. So you now have to immunize every FedEx person, every cleaning person, every person who's ever going to enter that building. Or you demolish the building.

The scenarios are really quite draconian. But I will tell you if you talk to the head of the House Intelligence Committee, which I've had the privilege to do, and you say, what are you most worried about? He'll say, let me see. Number one, anthrax. Number two, anthrax. Number three, anthrax. And again, it doesn't take four pounds. You don't have to go after 300,000. If you went to Mall of America and did this, no one would feel safe in a mall.

And you kill retail. You can come up with a lot of different scenarios. So I would say it's absolutely on their mind.

Unidentified Participant

Yours works on all the strains? Different strains of anthrax.

W. James Jackson

Correct. All anthrax strains. Even drug resistant strains.

Cory Kasimov

Don, can you talk a little bit about the potential or your view on the longevity of this asset? I know a lot of investors in the past kind of go, look at Emergent on a contract-by-contract basis. But given the commitment the government just made with this five-year deal, giving you more than $100 million to scale up a facility. That gives you three times the annual capacity. How should – and the threat of anthrax and this is not like small pox where you're going to be able to lock it up in a couple of evolves in US or Russia, what – the relative risk that is out there and could stay out there. Can you talk about the longevity of I guess BioThrax in particular but then also the sort of the next generation products you have behind it?

R. Don Elsey

I think the longevity is as far as one can look out. The real question is in my mind is number one, it's our intent to continue to improve the product. It would be our intent to make BioThrax the countermeasure for anthrax, bar none. Ideally, we would make it such that any competitor would just say, no, we're not going to bother. That market is wrapped up.

And to a certain extent that's a little bit like the small pox market but a little bit – with fewer permutations than I guess the small pox market has. So I think its longevity is as far as the eye can see. I think the government's committed to it. I think over time it becomes just a stockpile thing. I think the challenge for this program over the longer haul as it is with so many things that the government is doing is, where does individual responsibility come in.

And if in fact this was made available retail, and there was appropriate education and people who felt that they may be exposed to this, particularly first responders and people in the medical community who might be exposed to it with a patient coming in started to become in inoculated themselves and the strategic national stockpile is not dependent on solely as the provider of this. I think then the government's role might be less and retail might pick up.

Overseas, I think they're still formulating their strategies. A number of countries would prefer to go a therapeutic route rather than a prophylactic route. I don't quite understand that. But today, quite honestly, it’s the economics. Nobody's got any money over there to spend on anything. We've met with NATO a few times. Had 15, 20-member nations come over. They all say, well, we're planning for this. We're trying to put our strategies together but quite honestly, we have no money to spend on this.

And so that's preventing it as well. But you take all those different pieces of the demand equation and I think as far as the eye can see. Other questions? Yes, sir?

Unidentified Participant

How big is the (inaudible)?

R. Don Elsey

Well you know, it's interesting on the vaccine side, there are none. There are two development programs underway. One at PharmAthene, one with us on this RPA. Quite honestly, there's nothing in any animal studies that has shown RPA is as efficacious, let alone more efficacious. If this product ever gets developed and probably the soonest it could be licensed is eight years from now. And after hundreds of millions of dollars has been expended, I would hope by that point in time we're looking at NuThrax with BioThrax. You've got a two-dose regimen with four-year dating. Why go after RPA? So there is no current competition from a vaccine perspective. There are some therapies. There are some polyclonal therapies. We've got a polyclonal therapy, not been licensed, but it's very typical IG polyclonal as does Cangene up in Canada.

From a monoclonal perspective, only human genome has a product that the government is procured. It's efficaciousness and safety is – got some question marks next to it.

Unidentified Participant

But those are all rescue therapies.

R. Don Elsey

Yes. Yes. When we talk about therapies, this is really last course. And it's funny because we talk about doses, but they will just keep administering this to you until you either survive or die.

Unidentified Participant

How does your BioSciences division fit into sort of your long-term strategic goals and sort of – what's the rationale? Are there some type of synergies there? Because they don't seem to be overlapping.

R. Don Elsey

Right. Thank you for that question. Ever since we went public back in 2006, we've talked about growing and solidifying the government business. At the same point in time, we look at the government business, we look at anthrax, bio terror as current course and speed, very healthy business. Moderate growth business.

Looking to grow more aggressively as a company as a whole, we looked to go into different retail-type areas if you will. Even back in 2005. And at that point in time we had acquired a company called Microsciences in the UK, which had infectious disease vaccines. Now as we were working through some of those, it was too far out in time, et cetera, et cetera. The common denominator of oncology really was the work that we had done on the BioDefense side on monoclonal antibodies.

And it was leveraging the expertise on monoclonal antibodies both from a process development perspective, a manufacturing perspective, et cetera, that led us to go out and take a look at what companies were out there that we might be able to expand into in the retail area and get our feet wet. Learn the territory and yet leverage our process development and manufacturing. We met up with Trubion. They're corporate partnerships from a risk mitigation perspective were very attractive to us.

And so that's it. Over the long haul is to grow that monoclonal antibody type of synergy in oncology and autoimmune. Sort of sticking to those areas and grow BioDefense at the same time.

Well thank you very much. I think the big hook is here. So I hope you all have a great day. Thank you for coming.

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