Emergent BioSolutions Inc. (NYSE:EBS)
Lazard Capital Markets Healthcare Conference 2011
November 16, 2012 10:00 AM ET
Don Elsey – Senior Vice President Finance & Administration and Chief Financial Officer
Hi, good morning, and today we are here to hear more about Emergent BioSolutions, and speaking to you is Don Elsey.
Good morning. Thank you for joining us this morning. I am told I have 25 minutes, and it is a hard stop. So that should not be a problem. So forward-looking statements, our normal disclaimer. We may say things here that the actual results differ from, and if you haven’t heard that 500 times, you haven’t been in any of these.
So let me tell you about EBS for those of you who don’t know us, EBS at a glance. So we have got one licensed product, which is the only FDA approved anthrax vaccine, and that we sell on a regular basis to the US government for stockpiling purposes. We will get into that more later on. We are organized into two divisions, biodefense and biosciences, focused on three disease areas, infectious diseases, oncology and autoimmune. We will get into the components of each of those as we go through the presentation, and we have got eight clinical stage product candidates currently, and a nine-year track record of profitability, and hopefully making that a 10-year track record of profitability.
So let us go and take a look at the eight clinical candidates, and we will come back to BioThrax, our licensed anthrax vaccine in a moment. So starting at the top and what you see here is mixture of bio defense and bioscience candidates. So Anthrivig, which is a polyclonal anthrax therapeutic, basically in a phase 3. This is of course all animal studies. This is underwritten by the government as it currently stands, whether it gets to a procurement stage, we will have to see.
As the government’s appetite for therapeutics at this point in time in the anthrax market is one that I think has been examined along with all of the areas of funding that they are pursuing and the current budgetary constraints. Zemab is a product that we inlicensed earlier in 2011 targeted for PTCL and CTCL. This particular product was in the middle of
a Phase 3 clinical trial, when the company that had its rights, Tenax, entered bankruptcy, and we invested in this product to see if we could resuscitate the phase 3.
That investigation and evaluation of the data is ongoing as we speak. I would expect in the beginning of 2012 we will have ascertained with FDA what exactly can be done with that phase 3. I believe that if it is a product that we can resuscitate the Phase 3 it is one we will certainly pursue and pursue aggressively. If on the other hand, the phase 3 work that had been done previously has to be restarted, then there is whole another evaluation to be done because it is a fairly small market. It is one that is moving rapidly with new developments everyday. So we will have to take a look at that.
MVA85A, this is our tuberculosis booster vaccine. This is in a phase IIb infant efficacy study in South Africa as we speak. This trial will conclude in 2012, and we will have the clinical results that we anticipate publishing by the end of 2012. In addition to the phase IIb infant efficacy study, a study has also been undertaken to examine MVA85A in HIV compromised individuals. That is being run by a European consortium. So we are going to benefit from that trial, but we are not directly involved in that trial.
PreviThrax is a Recombinant Protective Antigen for anthrax. This is an alternate vaccine that the government is investigating. For those of you that may have followed us, this has been a program that has waxed and waned with the government for quite some time. But we received a $187 million contract to develop this alternate vaccine. It is a two-year base contract with three option years associated with it.
This product, as well as, (inaudible) which is a parallel sort of a program, we believe is a number of years away from licensure if it ever gets licensed, probably looking 5 to 8 years from now before this product could be licensed.
Switching over to two candidates on the bioscience side that came to us from the acquisition of Trubion in 2010. SBI-087, you can see that is a phase 2 for rheumatoid arthritis. It is also indicated for lupus. This is a candidate that has been 100% outsourced to Pfizer. So it is totally in their hands. We will benefit over the long run from milestones and double-digit royalty arrangement, but from a purely development perspective that is being driven by Pfizer. We anticipate that phase 2 results will be seen sometime in the first half of 2012.
TRU-016, which is indicated for CLL and NHL, we have a 50-50 partnership with Abbot on this particular candidate. We are doing the work on CLL. Abbot is doing the work on NHL, and here again we expect that we will see some clinical data in the first half of 2012. So 2012 seems to be the convergence of all things clinical for us. So it is going to be a big year from a data disclosure perspective.
NuThrax, which is an improvement on BioThrax, and we will talk about some of the other improvements, but this is rather key. BioThrax as it is labeled today is labeled as five doses over 18 months with an annual booster. We have submitted an sBLA to the FDA to reduce that to over three doses over six months with a triennial booster. This is how the government currently procures it. They procure BioThrax for the strategic national stockpile based on an assumption of three doses of a three dose regimen.
This happens to combine the CPG 7909 Adjuvant with BioThrax, and early studies have shown that the desired titer levels maybe accomplished within 17 days within two doses. We get a lot of questions of why would you pursue this, with less doses, it is going to cut into your revenue. When one really takes a look at trying to position BioThrax as the countermeasure to anthrax, we want to make it the best stockpile candidate that there is.
And so from our perspective for a stockpile purpose, two doses over 17 days, makes it ideal. So this is underwritten as our pretty much all of the development programs on bio defense by government funded, and we are quite excited about that program.
Thravixa, a parallel to the Anthrivig on top is a monoclonal antibody for anthrax therapy. It is fairly early stage, parallel program if you will of human genome. Again I believe that the government’s path forward on the therapies for anthrax is still evolving and hopefully we will get a better direction from the government as we go through 2012.
So let me shift to a little bit of the detail on BioThrax, for those of you who don’t know. It has been an over 2.5 million ready. BioThrax is used for active immunization of our troops before they go into feeders of high threat. We believe DoD uses approximately 1 million to 1.5 million doses per year. It is really fairly independent of what level of hostilities are going on at any particular point in time, because this is a readiness vaccine. So troops that might be positioned in Korea, in Kuwait, what have you to go into feeders will all be immunized, and the turnover of troops I think drives a rather steady state of immunized.
We have got a four year shelf life, which is the longest shelf life of any vaccine at this point in time, and we file for a 5 year. It took the FDA quite a while to get comfortable with 4 year dating. It is hard to tell how quickly they will get their arms around a 5 year dating. As I said five doses over 18 months is the current label. It is manufactured in a facility we have had for quite some time in Michigan, where our capacity is approximately 7 million to 9 million doses a year.
We have finished the construction, and installation of equipment on an expanded capacity in Michigan. That is currently undergoing qualification and validation, and the government last year gave us $107 million contract to pay for the qualification and validation. During our Q3 earnings call, we discussed that we have been in conversations with FDA as to the licensure path forward, and we believe that a human bridging trial may not be required, which will allow this facility to hopefully become licensed by sometime in 2014.
So that would change our capacity to 25 million doses per year on a single manufacturing train, and the facility has the capacity for a second train. So you could be looking at 50 million doses per year. Enhancements, I have already touched on a number of these dose reduction five year dating. We are also doing a number of studies to show its stability at ambient temperature. Again from a stockpile perspective, from an emergency response perspective, a 2 to 8 storage is something that is problematic. So we have got studies that have shown it is stable at room temperature for up to 6 months. So hope to get that as part of the label as well. And then you can see a note here on NuThrax, which we talked about already.
This is the procurement history that we have had with HHS, dating back to 2004, when they started to buy 5 million doses at a time. Just recently we announced an award with HHS for basically our capacity, from now until 2016 valued at $1.25 billion. So, this was a very key milestone for us to get over this year. This is the longest procurement contract that we have had with the government at this point in time. So this gives us a lot of visibility as we go through the next five years.
If in fact building 55 were to come on during that point in time, I would expect that we would probably take this contract, put it aside, and put a new contract in place that would provide for procurement in the range of 20 million to 25 million doses per year. The stockpile itself, the stated requirements from HHS is 75 million doses. We estimate that the stockpile has got about 20 million to 22 million doses at this point in time, I say estimate because again we are not certain exactly how much is being used for active immunization of the troops.
But we know what we are putting in there, we know the shelf life of the products that we put in there, and then estimating what is used for the troops, we think it is about 22 million. Our current capacity in building 12, you will never get to 75 million. It is just not mathematically possible. When building 55 comes on board, then it is possible to fill that stockpile.
People will often ask, where does the 75 million come from. It dates back to 2004, and it is some very rough calculation. It is 3 cities of 8 million people per city and three doses per person. And that is the response that was assessed appropriate back in 2004. It comes up to 75 million. The stockpile has over 350 million doses of Cipro, and over 350 million doses of small pox. One can say 75 million is the right number. The government has never really had to alter that because the capacity doesn’t support it as it stands currently.
Once it does, will that number migrate north, we will have to see at that point in time what the Government’s appetite is potentially to increase that. But I think when I talk to disaster planning experts, and you think about a significant attack on any metropolitan area, to say, well we have got the cities covered, and the rest of the United States don’t worry about it, I don’t think is something that will be acceptable to people.
So this is the building of expanded capacity in Lansing, affectionately called the building 55. We have put in over $85 million of our own money to build and equip this particular facility, and as I said we have now got a 100 million award to finish this off, and get the product licensed in building 55. So right now we have run a number of engineering lots. We are preparing to run the consistency lots. I would expect that we will finish that in 2012, and submit all that data to the FDA, and hopefully have a package that could potentially be approved in 2013. We are conservatively estimating that 2014 because I think we will trade off some animal studies for the human bridging study, which would have taken two years to complete.
2011 milestones, ever since we went public, we sort of take a report card view of each year, and we layout a number of key milestones that we hope to complete within that year. I’m certainly not going to go through all these. But you can see the number of things that we have accomplished, and the remaining three, I believe, we will complete the next two, the consistency lots will be deferred however, with the latest discussions with the FDA and the human bridging study.
Moving on to biosciences, as I said in October of 2010, when we acquired Trubion Pharmaceuticals, and they brought with it TRU-016 and SBI-087. TRU-016 being an anti CD-37, and Dr. Scott Stromatt, our Chief Medical Officer, is here with me. So when we get to the Q&A portion, if you have got detailed questions on TRU-016, SBI-087 I will absolutely refer you to Dr. Stromatt. So as I said before, we expect some clinical data on this product in early 2012, and as I outlined it is a 50-50 partnership with Abbot.
SBI-087, an anti-CD 20, again indicated for rheumatoid arthritis, and lupus and partnered up with Pfizer, and the same theme, clinical data in 2012. So we’re pretty excited about both of these products and expanding them. Both of these products, Trubion has two platforms, SMIP and SCORPION, and both of them generate a number of interesting candidates in the pre-clinical sense. One of the challenges that we will have in 2012 is to evaluate and to prioritize which of those preclinical candidates represent the best potential to partner up with others.
Partners is a theme, if you haven’t already discerned that we are not really of the size and the breath to take these products all the way through, and commercialize them ourselves. So whether it be TB, be it SBI-087, TRU-016, partnering is absolutely our tactic. For MVA85A, and as I said before, that is partnered up with AERAS. It is Wellcome Trust and it is Oxford University. The phase IIb trial in South Africa, 2800 infants, and again looking for clinical data in 2012. If it turns out to be the compelling data that we are hoping for, I would expect that we will actually bring a number of other partners to the table because to distribute this throughout the world is an astronomical fact.
We have also picked up a facility in Baltimore, and currently that facility is a two suite facility. We are completing the equipping of that facility as we speak, and we will be tech transferring the TB vaccine into this facility next month. As you can see here 56,000 square feet, two suites. One of the suites is currently earmarked for RPA, and the other one for TB is as we currently sit here today.
Same sort of a milestone and report card approach for biosciences. Again, not going to read through all of these, but you can see that we have accomplished a lot with regards to the various dosing milestones, whether it be MVA85A or TRU-016. So from a financial perspective, we had some manufacturing issues a little bit earlier in the year. And we initially got it to the street that we would be looking at 320 to 340 as top line, and we reduced that to 270 to 290. We had 165 million year-to-date, and we reaffirmed our guidance in Q3 that we would expect to be 270 to 290 from a revenue perspective.
From a net income perspective we guided that we would be between 15 million and 25 million net income after-tax. So that basically wraps it up, and we will turn to Q&A.
No questions. This is an easy audience.
Absolutely. So the question was whether we sell BioThrax outside the United States. We have to date sold modest quantities outside the United States. The biggest problem has been, number one, the rest of the government is figuring out exactly what they want to do in this area. But secondarily our capacity is purchased by the US government. So we don’t have restrictions per se, other than the ones that would apply to any exporter with regards to their certain countries that are absolutely off-limit.
If a country came to us and asked for a million doses a year, we of course would consult with the state department. I think the government would have a hard time relinquishing a million doses a year out of the stock pile to supply elsewhere. 50,000 doses, 75,000 doses we have supplied that in the past. When building 55 comes on board we will pursue that more aggressively. We are pursuing licensure in Germany. We have got market authorization in India, which will make that transition easier when we get to that point.
Other questions? My job is easy. No other questions, then I would just say thank you very much. Have a good conference.