Executives
Fuad El-Hibri – Executive Chairman
Jay G. Reilly – General Counsel
Daniel J. Abdun-Nabi – President and Chief Executive Officer
Emergent BioSolutions Inc. (EBS) Annual Shareholder Meeting Conference Call May 17, 2012 9:00 AM ET
Fuad El-Hibri
Good morning ladies and gentlemen, the 2012 Annual Meeting of Stockholders of Emergent BioSolutions is hereby called to order. I’m Fuad El-Hibri, Executive Chairman of the Board of Emergent BioSolutions. I’m pleased to welcome you to our 2012 Annual Meeting of Stockholders. Following the conclusion of this meeting Dan Abdun-Nabi, our Chief Executive Officer, will provide you with a brief update on the current status of the company.
When you sign in this morning, you should have received a registration packet that includes an agenda and rules of conduct. We’ll conduct this annual meeting in accordance with that agenda and those rules. If you wish to ask a question or speak about a matter of being voted on today, I’ll call for questions on those matters at an appropriate point in the meeting. If you wish to speak about a matter not being voted on today, please wait until I call for questions and comments after the formal meeting.
In attendance today are members of our Board of Directors, as I call your name please stand up, Dan Abdun-Nabi, who is also our President and Chief Executive Officer, Dr. Lu Sullivan, Chair of our Compensation Committee, Dr. Zsolt Harsanyi, Dr. Sue Bailey, Chair of our Scientific Review Committee, Marvin White, Chair of our Audit Committee, Dr. John Niederhuber, and Ron Richard, Chair of our Nominating and Corporate Governance Committee and our Lead Independent Director. The Inspector of election has taken the oath of office, which will be filed with the minutes of this meeting.
As indicated in the notice of meeting and the accompanying documents that were mailed to all stockholders the meeting has been apologies in addition we have several officers of the company in attendance. They include Don Elsey, our Chief Financial Officer, and Jay Reilly, our General Counsel and Corporate Secretary. Mr. Reilly will serve the secretary of this meeting.
Finally, I would like to introduce Mr. Dan Clark, who is the representative of Ernst & Young, our independent registered public accounting firm. He will be available to answer questions or response to comments, thank you.
The company has appointed Mr. Michael Nespoli from American Stock Transfer & Trust Company, thank you. The company’s stock transfer agent and registrar, as Inspector of Election for this annual meeting for the purpose of determining the number of votes represented in person or by proxy the authenticity and validity of the proxies. The existence of a quorum and the number of votes casts on all matters. Inspector of Election has taken the oath of office, which will be filed with the minutes of this meeting.
As indicated in the notice of meeting and the accompanying documents that were mailed to all stockholders, the meeting is been held for the following purposes; to elect Daniel Abdun-Nabi, Dr. Sue Bailey, and Dr. John Niederhuber as Class III Directors for a three years time; to ratify this election by the audit committee of Ernst & Young as our independent registered public accounting firm for the fiscal year ending December 31, 2012; to cast an advisory board to approve the compensation of our named executive officers; to approve our second amended and restated 2006 Stock Incentive Plan; to approve our 2012 Employee Stock Purchase Plan; and to transact such other business as may properly come before this meeting. The polls for each matter will open when such a matter is called to a vote and will remain open until I announce that the polls are closed. No ballots or proxies, revocations of or changes to ballots or proxies will be accepted after the polls are closed.
Each stockholder of record at the close of business on March 19, 2012; the voting record date has the right to vote his or her shares on all matters today. For ease of administration, we urged stockholders who have already voted by proxy to allow their proxies to stand. We have ballots available for those of you who have not voted or who wish to change via proxy. If there is any one present who would like a ballot, please raise your hand now.
Before considering the business to come before the meeting, I’d like to say – to ask Jay Reilly to announce the notice of mailing and present the report of the Inspector of Election. Mr. Riley.
Jay G. Reilly
Thank you, Mr. Chairman. I’ve received an affidavit from American Stock Transfer, certifying that the notice of the annual meeting and the proxy statement were sent on or about April 07, 2012 to all stockholders of record as of March 19, 2012. This affidavit is available for inspection by any stockholders and will be annexed to the minutes of this meeting. I’ve been advised by American Stock Transfer that as of the record date there was 36,150,225 shares of common stock of the company outstanding and entitled to vote at the meeting. The holders of more than 34,622,141 shares of the company’s common stock are represented in person or by a proxy. This represents more than a majority of the votes entitled to be cast at this meeting and based up on this count our quorum is present and this annual meeting is lawfully convened and may proceed to transact business.
Fuad El-Hibri
Thank you, the first order of business for this meeting is to considering both upon the election of three Class III Directors as stated in the proxy. The Board of Directors nominees are Dan Abdun-Nabi, Dr. Sue Bailey and Dr. John Niederhuber. I will now entertain a motion that the Board of Directors proposed nominees be elected until the 2015 Annual Meeting and until their successors are duly elected and qualified or until their prior death, resignation or removal.
Unidentified Company Representative
I so move.
Unidentified Company Representative
I second motion.
Fuad El-Hibri
You’ve heard the motion to elect the board of directors nominees are there any questions or comments concerning this matter? Voting will now take place on this matter the polls for this matter are now open. The next item of business is the ratification of the selection by the audit committee of Ernst & Young as our independent registered public accounting firm for the fiscal year ending December 31, 2012. I now ask for a motion on this matter.
Unidentified Company Representative
I so move.
Unidentified Company Representative
I second the motion.
Fuad El-Hibri
You’ve heard the motion, are there any questions or comments concerning this matter? Voting will now take place on this matter the polls to this matter are now open. The next item of business is an advisory vote to approve the compensation paid to our named executive officers. I now ask for a motion to approve this matter?
Unidentified Company Representative
I so move.
Unidentified Company Representative
I second the motion.
Fuad El-Hibri
You’ve heard the motion, are there any questions or comments concerning this matter? Voting will now take place on this matter the polls for this matter are now open. The next item of business is the approval of our second amended and restated 2006 stock incentive plan. I now ask for a motion to approve this matter.
Unidentified Company Representative
I so move.
Unidentified Company Representative
I second the motion.
Fuad El-Hibri
You’ve heard the motion, are there any questions or comments concerning this matter? Voting will now take place on this matter; the polls for this matter are now opened. The next and final item of business is the approval of our 2012 Employee Stock Purchase Plan, I now ask for a motion to approve this matter.
Unidentified Company Representative
I so move.
Unidentified Company Representative
I second the motion.
Fuad El-Hibri
You’ve heard the motion, are there any questions or comments concerning this matter? Voting will now take place on this matter the polls for this matter, are now open. In accordance with our dialogs, these are the only matters of business, which will be conducted at this meeting. I now declare the polls closed. If you voted in person at today’s meeting, please fold your ballot and hand it to the Inspector of Election. I will now ask the Inspector of Election to proceed with the canvassing of the votes. Mr. Reilly, please prevent to us the preliminary report of the Inspector of Election on today’s voting.
Jay G. Reilly
Michael Nespoli as the Inspector of Election has notified me of the following: on the election of Dan Abdun-Nabi, Dr. Sue Bailey and Dr. John Niederhuber as Class III Directors, each nominee has received a plurality of the votes and therefore has been elected as the Director of the Emergent, in accordance with the proposal.
As to the second item of business, the proposal to ratify this election by the audit committee of Ernst & Young as our independent registered public accounting firm for the year ending December 31, 2012. that proposal has received the affirmative vote of the holders of more than a majority of the shares of common stock of the company present in person or by proxy and voting on this matter, and therefore has been passed.
As the third item of business, the advisory board to approve the compensation of our named executive officers. this proposal has received the majority of the votes and therefore has been passed.
As to the fourth item of business, a majority of stockholders have voted to approve the second amended and restated 2006 Stock Incentive Plan and therefore this proposal have passed.
As to the fifth item of business, a majority of stockholders have voted to approve the 2012 Employee Stock Purchase Plan and this measure have been passed. Mr. Nespoli please file your final voting report with Mr. Reilly to be annexed to the minute of this meeting. Thank you.
This completes the business to come before this annual meeting I will now entertain a motion to adjourn. may I have a motion from the floor?
Unidentified Company Representative
I shall move.
Unidentified Company Representative
I second the motion.
Jay G. Reilly
Thank you. This Annual Meeting of Stockholders is now adjourned. At this time, I’d like to have Dan Abdun-Nabi, give the presentation on the current status of the company’s business. Following this presentation, we will then entertain questions from those present in the audience today.
Daniel J. Abdun-Nabi
Well, good morning everyone and thank you for attending this Annual Meeting of Stockholders for 2012. I would like to highlight the business of Emergent just going through that very quickly talk about some of the accomplishments for last year and then move on to some of the milestones that we expect to achieve this year.
This presentation will include some forward-looking statements and there are risks and uncertainties with respect to the achievement of those forward-looking statements. So I just, I ask you to review our SEC filings for a more complete description of the risks and uncertainties.
After I go through this presentation, I think you will agree that Emergent represents a unique value proposition. We are a proving cash generator, operating in two value-creating businesses, with a focus on high growth disease areas, along with a rich history of strategic transactions that has allowed us to establish an exciting advanced clinical stage product pipeline. Let me review each of these in a little bit greater detail for you.
As I noted, Emergent is a proven cash generator. Specifically our marketed product BioThrax, which is the only vaccine approved by the FDA for the prevention of Anthrax disease has a 10-year history of generating revenues. Our principle customer has been the United States government and that includes the partner of defense HHS and CDC. As you can see from this slide units sold or under contract to sell approaching 100 million doses of BioThrax to the United States government with a contract value in excess of $2.5 billion and that’s since 2004.
Our most recent contract award extends deliveries of BioThrax through Q3 2016 and provides nearly five years of revenue visibility for the company. BioThrax plus is a significant asset that generates substantial EBITDA that supports our growth strategy and the business of growing the company.
To further support our growth strategy we are now operating in two value-creating businesses each with a unique business model. We have a BioDefense division and a Biosciences division. The BioDefense division has a distinctive approach to address the United States government’s requirement for medical countermeasures adjusting biological threats. In doing so, the division really needs to focus on a unique customer that is developed in specialized products that are tailored to their needs and that deploys a specialized procurement process in the way in which they do their business. And we are challenged with ever changing priorities and requirements.
So in addition to having manufacturing process and analytical capabilities, clinical, and non-clinical regulatory quality, we also had to develop unique capabilities in the field of government procurement, government budgeting, government processes, all of which have enabled us to be successful in the BioDefense Division.
Our Biosciences Division, has a slightly different approach and that is really to develop the unique vaccines and therapeutics that address unmet medical needs or underserved markets globally for the public heath. With these two divisions, we are now focused in three key disease areas of infectious disease, oncology and autoimmune. And these disease areas were selected using unique processes that are proprietary to Emergent that focused on our core strategies and leverage our core capabilities.
And with that we’ve now been able to assemble an attractive advanced clinical stage pipeline and acquisitions have played a key role in our overall growth trajectory. As you can see from this slide, since 2006 we have undertaken a number of acquisitions, which have done a number of things for the company. First, they’ve brought in some high value advanced stage clinical candidates into the portfolio and has also allowed us to diversify our manufacturing capabilities and our infrastructure. Strategic transactions continues to represent a core strategy for the company as we evolve and grow.
Looking forward the strategic focus will be on acquiring revenue generating products, the pipeline we believe is robust and our focus also move to establishing enhanced revenue generators to support for the growth. Looking at our current pipeline, we have eight candidates that are in clinical development and as you can see from this slide, we have very good balance between Biosciences and BioDefense. We also have solid balance between vaccines and therapeutics, which we believe is a good risk mitigator in terms of the way in which we developed and in terms of advancing both divisions.
A significant note, five of the eight candidates are receiving either full or substantial funding from third party non-dilutive sources, and this again is a strategy of ours, which is develop products and leverage our capabilities, of generating contracts, granting contracts to support clinical development of the candidates in the pipeline.
Importantly, this pipeline is expected to generate some clinical milestones over the course of the next 12 to 18 months that I believe will move the needle in terms of valuation and trajectory of firm. So with that brief overview I would like to talk about the 2011 accomplishments for the organization and I would like to start with the BioDefense division.
We continue to deliver product into the SNS, which supported our revenue, our reports for the last year, and we’ve made significant progress in advancing Building 55, which is our large-scale manufacturing facility that we are moving towards licensure for large-scale manufacturing of BioThrax. We advance our clinical programs under our existing development funding and accordingly we received an award for the supply of 44.75 million doses of BioThrax into the SNS, from our existing manufacturing facility, not from Building 55, the large-scale facility, which we expect could come online during that period. So with this award, we now have revenue visibility just for BioThrax of $1.25 billion through 2016.
Looking at the accomplishments in our Biosciences Division for 2011 some significant highlights we completed dosing of our Tuberculosis Vaccines MVA85A and a Phase IIb efficacy study involving 2,800 infants in South Africa. We also initiated dosing on our TB vaccine. It’s a Phase IIb efficacy study also in South Africa and Senegal, involving 1,400 HIV-infected adults that’s been done in a coordination with Aeras in fact both trials are being done in coordination with Aeras.
We initiated dosing on a Phase II and Phase Ib studies for our oncology candidates and we also completed modification of our Baltimore manufacturing facility. This is a facility that we acquired a couple of year ago to put this to enhance our manufacturing infrastructure to support clinical as well as commercial manufacturing for product within the pipeline.
Moving forward to 2012, I think it’s going to be an exciting year in both division, and let’s talk about the BioDefense Division first. One of the top priorities is to continue to timely deliver products to the SNS under our current contract with CDC. But we are also looking to achieve improvements with respect to BioThrax most notably obtain FDA approval for reduced dosing schedule for our (inaudible) indication for BioThrax. We are targeting a two dose primary series, with boosters thereafter.
We’re also looking to achieve consistency lot manufacturing and large-scale for BioThrax in Building 55, which is a critical milestone towards FDA approval for licenser of BioThrax in 55. We’re also looking to complete ongoing clinical studies for NuThrax and Thravixa both products are receiving substantial support from the U.S. government, and finally to secure follow-on funding for several of the products in the pipeline throughout the course of the year.
For the Biosciences Division, it’s going to be an extremely exciting year. We have our TB Candidate MVA85A. We are now in the follow-up dates with infants in South Africa. We expect to see clinical data towards the end of the year. Should this data be promising, our expectation as we begin discussions with regulatory authorities regarding the process to secure accelerated or conditional licensure of the MVA85A, TB vaccine and it’s really to address a growing public health lab associated with the tuberculosis infections globally.
For TRU-016 we are developing that candidate for two indications, CLL and NHL. In CLL, we expect to complete the dosing enrollment of individuals within that study and we hope to see some clinical data mid next year with that data that will enable us to determine best path forward for that indication in that product in 2013.
For NHL, timing is a little earlier. we expect to see clinical data from the ongoing Phase Ib comparative study later on this year. and with that data, we expect to be able to make some decisions on the forward progress for that candidate. So as you can see, we’ve got a number of key milestones coming up this year, that are value drivers, and I look forward to providing you with an update on each of them as the year progresses.
I’d like to move forward to the financial performance of the organization. as I say it at the outset, we have been successful on establishing strong revenues with substantial cash flow, as you can see in this slide since 2006; we have achieved a revenue CAGR in excess of 10%. for 2011, we had total revenues and we reported of $273 million and associated net income of $23 million.
2012, we have provided a forecast and guidance of total revenues between $280 million and $300 million. We also forecast net income for the year, between $15 million and $25 million. and this is entirely consistent with our approach to maintaining profitability and a target in between the $15 million and $25 million. and our revenue is historic, and perspective are really associated with product sales from BioThrax as well as growing, grants and contract revenues coming from both the BioSciences as well as the BioDefense divisions.
Quick review of the first quarter results. as you can see, our first quarter performance was solid and in line with our expectations. we achieved the first quarter revenues of $15 million, which was really at the very upper hand of the guidance range that we have provided to the investment community.
In addition, we realized a net loss of $6.8 million or $0.19 per share. The loss includes a one-time non-cash charge of $9.6 million relating to Pfizer’s decision to see further development of SBI-087. SBI-087 was a product that was outlicensed to Pfizer and they were solely responsible for the development plan associated with that product. Without this one-time non-cash charge, the Q1 net loss would have been approximately $700,000 or $0.02 per share.
Looking at the balance sheet. we ended the quarter with combined cash, cash equivalents and accounts receivable of over $190 million. and finally, during the quarterly investor call that we conducted a couple of weeks ago, we provided a forecast for Q2 total revenues of between $80 million to $90 million.
So in summary, I trust this high level presentation about the business about our achievements in 2011 and our milestones anticipated for 2012 allows you to appreciate why we believe Emergent represents a unique value proposition. We are a proven cash generator operating in two value creating businesses with a clear focus on high growth disease areas, together with a rich history of strategic transactions, all of which have enabled us to establish an attractive advanced clinical stage pipeline together moving us closer to our mission to protect life.
That concludes my prepared remarks this morning and again I want to thank you for attending this year’s annual meeting of stockholders. Mr. Chairman.
Fuad El-Hibri
Thank you, Dan. I now welcome the questions please raise your hand and I will recognize you. Kindly stand, give your name and state your question as briefly as possible. Ladies and gentlemen that is all the time we have today, thank you for participating in the 2012 Annual Meeting of Stockholders of Emergent Biosolutions. Thank you.
Question-and-Answer Session
[No Q&A session for this event]
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!