Q4 2019 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the emergent Biosolutions incorporated fourth quarter 2019 earnings Conference call.
At this time, all participants are not listen only mode.
To the speaker presentation, there will be a question and answer session.
Ask a question during this session you'll need to press star one on your telephone if you acquire any but assistance. Please press star Zero I would now like turn the conference to your company to begin. Please go ahead.
Thank you draw and good afternoon, everyone. My name is Bob Burrows, Vice President Investor Relations for emergency. Thank you for joining US today as we discussed the operational and financial results for the fourth quarter in 12 months of 29 gene.
As is customary today's calls opened all participants are in addition, the call is being recorded and is copyrighted by emergent biosolutions.
Depending on the call with prepared comments will be Bob Kramer, President and Chief Executive Officer, and Rich Lindahl, Chief Financial Officer.
Members of the senior team are present in available during the Q1, a session that will follow our prepared comments.
Before beginning during today's call either on or per our prepared comments for an acute I session management may make projections and other forward looking statements related to our business future events or prospects. Your future performance. These forward looking statements are based on our current intentions beliefs and expectations regarding future events.
Cannot guarantee that any forward looking statement will be accurate.
Mr should realize its underlying assumptions prove inaccurate or unknown risks or uncertainties materialize actual results could differ materially from our expectations any forward looking statements speak only as of the date of this conference call and except as required by law, we do not undertake to update any forward looking statement to reflect new information events or circumstances.
Investors should consider this cautionary statement. This was the risk factors identified in our public reports.
And with the FCC when evaluating our forward looking statements.
During my prepared comments as well during the coming especially in a way may also refer to certain non-GAAP financial measures that involved adjustments to GAAP figures in order to provide greater transparency regarding emerges operating performance. Please refer to the tables found in today's press release regarding our use of adjusted net income EBITDA and adjusted EBITDA and the reconciliations between our GAAP.
Financial measures and these non-GAAP financial measures.
For the benefit or those who maybe listening to the replay. The webcast. This call was held and recorded on February 20, 2020 cents that emerges may have made announcements related topics discussed during today's call. You are once again encouraged you refer to our most recent press releases and S. Yoo filings all of which may be found any investors homepage of our website.
Introduction I'd now like to turn the call over to Bob Kramer emergent Biosolutions, President and CEO Oh.
Thank you Bob and good afternoon, everyone. Thank you for joining the call today in my comments. This afternoon I'll provide a brief recap of what was accomplished during 2019, and then turn to our strategic plans and expectations for 2020 and beyond.
As we look back at the year just completed I think there are three key takeaways first we effectively executed on our strategy of building and strengthening our leadership positions and the public health right Mark as we compete in.
Secondly, we continue to progress strategic R&D investments, which we expect to contribute to longer term revenue growth.
And third we made prudent investments to build scale in key functions to better leverage our core competencies for sustainable competitive advantage may take a few mass and expand on each of these three points.
Starting with strategy execution.
In 2019, we initiated deliveries of our next generation Anthrax vaccine candidate Avi seven I know nine beginning the transition from Biothrax to 87 now nine as the cornerstone of the U.S. government preparedness efforts against the threat of anthrax.
Related to this BARDA exercised its first contract option for 10 million doses of maybe 799 to be delivered over a 12 month period valued at approximately $261 million.
Next we made great strides with our smallpox franchise, we secured a 2 billion dollar tenure procurement contract for the continued supply of eight Cam 2000, the only single dose escalating approved smallpox vaccine and the U.S. government principal response to against the threat smallpox.
We also secured a $535 million tenure contract for the continued supply or the G. I see our ft approved therapeutic for smallpox vaccine complications.
Next we secured a $90 million commitment as part of an anticipated 490 million 10 year commitment from the U.S. government. The continued supply of bad or Sta approved botulism antitoxin.
And finally, we completed the integration of the packs facts and adapt pharma acquisitions and continue to invest and further scale the travel health and our can nasal spray franchises.
So to summarize during 2019, we successfully strengthen our leadership positions across our portfolio of products by securing over 3 billion dollars' worth of long term procurement contracts with the U.S. government.
As a result, we now have three key medical countermeasure franchises, those being anthrax smallpox and opioid overdose reversal each of which are in a position to generate in excess of $250 million an annual revenue a clear follow through on our commitment to profitably grow.
So revenue, while diversifying our product and customer mix.
The second key takeaway relates to R&D. During 2019, we made significant progress in our R&D portfolio advancing a number of product candidates through various stages of development. This included initiating a phase three study for Avi seven I don't I'm completing a phase.
These two study for our flu I G.I.D. seasonal influenza eighth therapeutic.
Completing the interim analysis of assays for pediatric study for our approach cholera vaccine Vacs Cora.
Advancing various auto injector based programs addressing chemical threats and furthering various drug device combination programs addressing the opioid crisis.
We also presented updated results from our phase two study of our chicken Gonya vaccine candidate and more recently received the alignment of both M&A and FDA to pursue our development program for a phase three study involving the use of a surrogate endpoint of efficacy.
We anticipate and initiating this phase three study later this year.
The last takeaway relates to scale. During 2019, we made significant progress and further scaling our business through targeted investments in people capabilities and infrastructure to continue to drive top and bottom line growth over the long term.
At the same time, managing our expense base.
The strong execution against our operating goals translated equally into strong financial results on the top line, we recorded over $1 billion in revenue, which marks the achievement of a corporate goal one year in advance of what we set out to do we first establish the goal in 2016.
Nosebleed revenue grew over 40% as compared to 2018, as we fully integrated the tax effects and the depth acquisitions drove organic growth and executed numerous contracts is I just outlined.
We also generated strong profitability with year over year increases in adjusted EBITDA, and adjusted net income of 40% and 24% respectively.
As we close the chapter on 2019, I like to take the opportunity to thank the leadership team and my 1800 colleagues that emerge and for the extraordinary progress we achieved as a company over the course of the year as result of their hard work and efforts were entering 2020 with momentum and with confidence.
So, let's look forward to that and talk about 2020, as we discussed at our November analyst and Investor Day, we intend to once again double our revenues over the next five years between 2020 and 2024, while remaining disciplined as we manage this growth.
Our strategy includes expanding our leadership positions and current and new public health threat markets, we continue to make investments and capabilities innovation and operational excellence. This strategy centered on five core principles first executing our core business second growth through.
M&A.
Third strengthening our R&D portfolio.
Fourth building scalable capabilities.
And fifth continuing to evolve our culture.
With that as a backdrop for 2020, we've established ambitious financial goals, which rich will further touched on in his prepared remarks.
We've also established a variety of operational goals for the coming year, which will drive the continued growth of the company. This is where I liked to spend the balance of my time in prepared comments.
Beginning with our anthrax vaccines, which are elements of our broader franchise and anthrax, we plan to ship doses of both Biothrax and Avi 7009 over the course of the year, thereby continuing to support the U.S. garments ongoing preparedness against the threat of anthrax, while supporting the ongoing.
And transition in the stockpile from Biothrax to 80 799, the exact mix. So the two products and the timing is dependent upon a number of factors that said, our 2020 revenue guidance contemplates a combined contribution for both vaccines in the range of between 270 $300 million of rough.
A return to historic annual levels.
Turning to our smallpox franchise, which consist both of the it can't 2000 vaccine and the VIP Ivy therapeutic we anticipate strong contributions from both and 2020.
Our 2020 revenue guidance contemplates a camp 2000 revenue of between 180, and 200 million consisting primarily of shipments to U.S. government.
Recall that in 2019, the U.S. government committed to by approximately 18 million doses, where the value of approximately 170 million as part of the base year contract Award.
We complete delivery of all doses and 2019 and expect a similar award in 2020.
The $180 billion to $200 billion range for a camp 2000 also includes anticipated sales to international customers on that note last year, we signed a multiyear procurement contract with a U.S. Allied nation in support of their continue procurement of a Cam 2000.
This latest contract win is a good example, the global nature of the medical countermeasure public health threat preparedness business.
When we consider partnerships with organizations outside the U.S., we look for international entities that have a similarly aligned goals around preparedness and response in order to assist them with their readiness capabilities against the threat of various chemical and biologic threats.
Next we expect continued growth and the sales of the nor can nasal spray business rising to between 285 and $315 million. This range includes an assumption of two additional states adapting co prescription legislation along with branded competition.
Entering the market sometime during 2020.
We will continue to focused on three areas first expanding awareness of the risks of opioids and the importance of having ready access to naloxone as highlighted by the U.S. surgeon General Advisory statement.
Second increasing availability and accessibility through a variety of naloxone distribution programs and third maintaining affordability of nor can we.
With this focus we feel confident that nor can nasal spray, we'll continue to have a meaningful impact on addressing the opioid crisis.
While we're on the topic, let me address the 8-K, we filed earlier this week on February 18th we announced that Weve reached a settlement agreement and our ongoing litigation with Parago related to their anda seeking to market a generic version of nor can nasal spray.
For the agreement paired goes license will be effective as of January 2033, or earlier under certain circumstances, including the outcome of the current type of litigation or litigation against future Anda filers should they come about.
The settlement remains subject to customary final approvals.
Regarding the tell the litigation matter also on February 18th we announced the date for closing arguments has been schedule by the court for next Wednesday February 26.
Next let me say a few words about our CDMO services business.
We continue to build out our growing portfolio of molecule to market contract development and manufacturing services to support both emergence growth as well as the growth of external pharma and biotech customers.
Factoring in our broad technology platform supporting mammalian microbial viral plasma in advance there. The approaches we re oriented the focus of our CDMO business centering on three strategic pillars first commercial which include sales and marketing penetrate.
One domestic and international expansion and pipeline and portfolio management.
Second operational where we're striving to harmonize our processes and systems extend our technological expertise across multiple biologic modalities as well as expand our capacity and capabilities and finally customer centricity with a focus on project management consistent and folks.
Governance of our relationships with customers and the development of a comprehensive molecule to market offering.
As you May remember, we announced our decision in 2018 to invest approximately $50 million and expanded capacity and stayed the art capabilities at our drug product facility in Baltimore, We anticipate completing this project this year and are already actively engaging in discussions.
With customers or access to this sites services, we expect to begin generating a positive return on this investment beginning in 2021.
Speaking more broadly we looked for the CDMO business to continue to be a consistent and growing contributor to the overall operations and financial performance of the company integral component of our broad product and solutions offering.
Before turning the call open a rich let me finish with a couple of brief comments on our key 2020 goals related to R&D.
In our devices business, we will continue to invest in advance our various development pipeline programs for auto injectors, and the medical countermeasures market, specifically addressing chemical threats and in additional naloxone and now with things spray and syringe constructs addressing.
Addressing components of the opioid crisis.
Of our devices based development programs, we anticipate one regulatory filing and one approval in 2020.
No therapeutics business, we will continue to invest in the pipeline to address public health threats with our antibody platforms.
Regarding flu like GE the are influenced a therapeutic for hospitalized patients and leading therapeutic development program. We plan to capitalize on the completion of the phase two and database lock, which occurred last year with data read out in Q2, and then potential phase three initiation later.
For this year.
And our travel health business that score or FDA approved single dose oral vaccine for Colorado.
You should we received a positive opinion from the M&A, which we anticipate leading to market authorization for the product within a couple of months if received it will be valid and all 28 member states of the you as well as in the European economic area countries.
And with respect to our kicking good new program, we continue to work toward launching the phase three trial of check the LP as supported by the compelling phase two data, we presented and reported on late last year.
While we're on the topic of emerging infectious diseases I want to make it take a moment and speak to the ongoing global crisis related to the Corona virus.
As an organization emergent is committed to being part of the solution to support pandemic responses, especially where there was an absence and improved preventative and treatment options. The rise of coded 19, and the push to develop response capabilities against this emerging infectious disease is squarely in our wheelhouse.
We have considerable experience expertise and the infrastructure to bring to bear in helping respond to and so for this increasingly challenging public health threat.
Currently we're working with several organizations, including the U.S. government Envios and commercial parties as to how to best Marshall, our resources and capabilities, whether its toward a vaccine.
Punic diagnostic or utilizing our extensive contract development and manufacturing Tskhinvali, we'll keep you apprised and posted on progress as events unfold.
So to summarize in 2019, who is another solid year for emergent operationally as well as financially 2020 is lining up to be equally successful across all of our business units.
The management team and I are committed to achieving our goals and remain confident in our ability to grow organically, while leveraging opportunities to accelerate organic growth through strategic M&A.
Focus on the innovation and the advancement of our pipeline candidates and continually drive to create shareholder value over the long term.
With that I'll now turn the call over to rich to provide more detail on the 2019 results and our thoughts about 2020 rich. Thank you Bob Good afternoon, everyone and thank you for joining the call.
As you heard from Bob 2019 was a year of significant accomplishment for emerging on multiple fronts as we achieved our operational objectives and set out an ambitious growth strategy for the next five years.
From a financial perspective, we exited the year with positive momentum built upon a solid platform for continued growth.
Specifically, we delivered strong annual topline growth increasing total revenue by approximately 40% for the second consecutive year of which 7% was organic.
Improved our blended product and CDMO gross margin by 160 basis points funded key programs to advance our research and development pipeline.
Generated strong cash flow from operations strengthened our balance sheet by increasing liquidity and lowering our ratio of net debt to adjusted EBITDA and provided a 2020 financial outlook that keeps us solidly on track to achieve our long term strategic growth objectives.
For the rest of my prepared comments today I will provide additional detail on these themes by walk you through our performance for the fourth quarter and full year periods discussing balance sheet highlights and reviewing the elements of our guidance for 2020.
With that let's first look at our fourth quarter performance.
As we discussed throughout the year, our 2019 annual results were backend weighted consistent with historical trends as such our fourth quarter results were particularly strong compared to prior quarters and reflect our ongoing efforts to increase the scale of our operations, while further diversifying our sources of revenue.
These points are evidenced by the following key fourth quarter highlights.
Total revenues of $360 million, a 33% increase versus the prior year largely due to deliveries of it came 2000 under our recently awarded contract and a full quarters worth of sales of nor can nasal spray, which was acquired in the fourth quarter of 2018.
Adjusted EBITDA of $134 million or 37% of total revenue, a 76% increase versus the prior year.
And adjusted net income of $83 million or 23% of total revenue an increase of $43 million versus the prior year.
Digging a little deeper into quarterly revenue, nor can nasal spray sales were $67 million continuing the strong performance witnessed in the three previous quarters of year and reflecting the impact of ongoing community access programs addressing the public interest market as well as higher aggregate demand in the retail channel driven by naloxone co prescription.
In legislation that is now in effect in nine states.
He came 2000 sales were $79 million as we completed the $170 million the deliveries under the base your performance for the new tenure contract announced in September.
Sales of our anthrax vaccines of $93 million, primarily 87 nine on nine was inline with what we previewed last month.
Other product sales were $73 million, reflecting sales of countermeasure products addressing a wide range of chemical biological emerging infectious disease, trebled health and emerging health crisis threats.
And CDMO services revenue of $26 million, which is down slightly over the prior year.
Looking beyond revenue. The quarterly results also include combined product and CDMO gross margin of 61%, reflecting the impact of mix, most notably deliveries of it came 2000 and anthrax vaccines as well as continued robust sales of narcan nasal spray.
Operating expenses, both R&D and SGN, a at levels, reflecting continuing investments in key pipeline programs and capabilities to support future growth.
Turning now to the full year, our financial performance for 2019 was very strong and generally consistent with the range. We previewed in early January.
These results reflect the durability of our expanding business model centered on specialty products and services targeting global public health threat market opportunities.
Key highlights include total revenues of $1.1 billion, an increase of $324 million for 41% as compared to last year again of which 7% was organic growth.
Total product sales of $904 million up $297 million or 49%.
This includes $280 million from Narcan nasal spray $243 million for make him 2000, and other products sales of $208 million, all of which were up meaningfully versus the prior year.
Offsetting these increases were anthrax vaccine sales of $173 million, which were lower by 105 million versus 2018.
As a reminder, 2019 was a transition year for anthrax vaccine portfolio as he has the U.S. government began procuring our next generation vaccine candidate Avi seven nine or nine.
CDMO services revenue was $80 million consistent with our expectations for 2019 and lower than the prior year due to contracted service work in 2018 that did not recur.
Combined product and CDMO gross margin of 56%, reflecting the impact of mix and our efforts to improve blended gross margin to approximately 60% in the near to medium term.
Net R&D expense was $92 million or 9% of adjusted revenue, reflecting our ongoing discretionary investments in select development programs that are internally funded most notably our chicken be VLP vaccine program and our flu.
Therapeutic program among others.
As DNA spend of $274 million or 25% of total revenue reflects the addition of the operations associated with the tax Baxter said that pharma acquisitions.
As a percentage of total revenue 2019, SGN a is directly in line with historical norms for the company.
And in terms of full year profitability, adjusted EBITDA of $280 million or 25% of total revenue and adjusted net income of $152 million or 14% of total revenue both reflect the influence of product mix operational execution and cost management balanced with prudent investments and a sustained focus on profit.
Double growth.
Three other items I want to touch on our first the tax rate.
For 2019, our effective tax rate is 30%, which is higher than expected due primarily to the nondeductibility of contingent consideration expense related to the adapt pharma acquisition.
Excluding the impact of this nondeductible expense, our effective tax rate for 2019 was 23%.
Second customer mix as you will see in the 10-K, which will be filed in the coming days, our customer mix profile continues to become more diversified.
For 2019, the mix between U.S. government sales and non U.S. government sales was 61% and 39% respectively versus 76% and 24% respectively in 2018.
And third geographic mix.
We'll also be disclosed in the 10-K for 2019, our revenue from ex us customers as a percent of total revenue was 10% as compared to 9% in 2018.
This shows yet another means by which we are diversifying and therefore for further strengthening our business.
Throughout things out in terms of the balance sheet. We ended this year in a solid liquidity position as evidenced by cash of $168 million.
And an accounts receivable balance of $271 million.
Total debt increased slightly year over year and at the same time, we meaningfully lowered our leverage ratio of net debt to adjusted EBITDA to about 2.3 times, which is at the low end of our target range of two times to three times.
As a result, we further strengthened our credit profile and our current capital structure continues to position us for sustained growth and expansion.
Let me turn now to guidance.
Taking into consideration the performance from 2019 as well as current facts and circumstances before us we are reaffirming our forecast for full year 2020 that we previously published in early January.
This consists of the following.
Total revenue of 1.175 billion.
To 1.275 billion, which reflects the following product specific details nor can nasal spray sales of between 285 million and 350 million.
Anthrax vaccine sales of between 270 and $300 million and it came 2000 sales of each of between 180 and $200 million.
Returning to our reaffirmed guidance additional metrics include adjusted net income of $160 million to $210 million and adjusted EBITDA of 300 million to $360 million.
In addition across the year 2020, we look we look to achieve a variety of additional objectives, namely the continuation of the following first expansion of the CDMO services business and its contribution to the overall business second improvement of gross margin by 200 to 400 basis points driven by improved product mix.
And operating efficiencies.
Third investment in discretionary development projects funded by the company that further our pipeline of potential future drivers of incremental growth.
And finally adherence to approve prudent capital deployment philosophy focused on maintaining sufficient capital to both invest in the business as well as execute on attractive M&A opportunities should they arrive.
In terms of revenue mix in 2020, we anticipate that product sales will account for 80% to 85% of total revenue with the remainder split between CDMO services and contracts and grants revenue.
And in terms of the cadence of revenue and earnings. We currently anticipate that 2020 will follow a similar pattern to that seem in 2019.
With that in mind, we also are providing guidance on first quarter total revenue of between 190 and $215 million.
This forecast reflects our expert to expectation of no deliveries of eight came 2000 during the first quarter during due to two factors.
First as mentioned earlier in the fourth quarter, we completed delivery of the full 18 million doses under the base year performance of the recently signed 2 billion tenure contracts.
Second as Bob said, we expect the U.S. government will exercise the first one your option for another 18 million doses to be delivered in calendar 2020.
While we anticipate this option exercise will happen in the near term our current guidance assumes deliveries of eight Cam 2000 will resume in the second quarter.
That completes my prepared remarks, I'll now turn the call over to the operator to begin the question and answer session operator.
Thank you.
Ask a question you would need tapas style on your telephone.
A question on key please standby lobby.
Dave aspect.
First question comes from Brandon Folkes with Cantor Fitzgerald. Your line is now open.
Hi, Thanks, taking my question then congratulations on a great quarter in years and Christy can you elaborate on.
On your assumptions around the market dynamics for Ken any acute evidenced market.
When I know that branded competitors that comes to market as you mentioned in your.
Appeared remarks and.
Then maybe not sure if you know incidents, but all I can anyway.
At this stage is it till the sentiment will fit table, who is this still possible on knockin and too. Thank you.
Thanks, Brent I Didnt understand kind of repeat the second question is settlements still possible.
So.
Thoughts on branded competition as we described have talked a couple of times.
We fully expect some competition in the market in 2020.
We're not going to predict our estimate who might be doing that and again our guidance for 2020.
Isn't that to 85 to 315 range.
Two additional couric states coming in a branded competitor so depending on when and if it's really difficult to predict the no impact on the 285 to 315 so I.
I will not guestimate.
Brendan I think on on the Teva question.
I think we've said openly.
The settlement question, Oh has not come up.
We fully we have all the confidence in the world and the strength of the patents that we have in place and.
Our focus remains on those areas that we had been describing for Simmons since we bought the brand which is around awareness accessibility and affordability and doing everything we can to make that product available when it needs to be available to the patients and customers who need it so that.
Remains our core focus.
Great. Thanks, very much and one more if I may have just on the Biothrax work down in Twentytwenty in your guidance.
How should we think about that.
Well, we had a steady state.
Biothrax sales and Twentytwenty looking forward into 2021 and.
Non.
I mean, not is going to try the good or should we continued tomato a we're kind of biothrax 2021 and beyond thank you.
Yes, thanks, Brendan so.
I think with the way that we look at the Anthrax vaccine franchise is.
We expect fully that both biothrax.
And Avi seven now nine will continue to be procured by the government obviously for different reasons.
Biothrax is currently supporting.
Both the HHS requirement for a stockpile of license anthrax vaccine well the department of defense is using it to immunize military personnel, who are going into hides right areas. We fully expect died that dynamic will continue.
As we stated 2019 kind of began the transition period Brandon.
As the the government started to slow down their procurement of Biothrax, while they began to accelerate their procurement of Avi 7009, we expect that transition to continue in 2020.
As we execute against the contracts that are in place.
So that's the the dynamic we're not going to speculate on the the mix of those two vaccines, but in the aggregate reinforce our belief that.
Going forward that that number of to 7300 and total revenue between the two holes.
Great. Thank you very much.
Thank you.
Next question comes from Jessica Fye with JP Morgan Your line is now open.
Hey, guys. Good afternoon. Thanks for taking my question a couple of more on non Ken.
For the sales in the fourth quarter. It looks like revenue was down about 11% sequentially and I notice that the Q via script data that we can see is down 7% sequentially. So recognizing that that data doesn't even fully captured the retail business, let alone the public interest side.
Wondering what led to the sequential revenue decline beyond what would be predicted by the script volume decline.
Where the timing of public interest orders or maybe something else.
Yes, just thanks for joining and thanks to the question.
I think the your read on that is right.
The when folks look at that Q via data, they're getting a partial view of the overall performance of the business. So as we stated we think that there has been a bit of a trend or shift to that public interest market being.
In that 60% of the market area versus the retail in that 40 space.
As we've said this market continues to develop its dynamic it's being influenced by any number of programs.
Where the government both at the local level as well as the state and federal level continue to implement programs and get traction on those programs to make this product more accessible to the patients and customers who need it could be taking the form of programs like nor can.
Nor can days in different states, there or any number of programs that are impacting those quarter over quarter numbers. So I think folks need to just be a little cautious about looking at a quarter by quarter versus on a more macro level.
Okay.
And next one on our Cat is just as the judge in that litigation whatever given any indication of how long it might take to turn around a ruling.
No no they haven't Jess.
Okay.
And.
Maybe switching to wrap fee.
I really do you have revenue from the follow on contract in the guidance is the old contract. There are completed and should we not expect any Iraqi revenue until a new contract is in place or they're still kind of anymore deliveries that could occur in the meantime.
Yes in those deliveries under the contract that was acquired.
Back in Q4 of 17.
We pretty much completed that so.
We expect that the RFP will come out for a rack C.
Near term and we have some revenue in 2020.
Under a new contract.
But we clearly don't break that out separately.
Okay got it.
Any chance that you could.
Quantify the contribution in your it can guidance from the international contract with an ally government that you alluded to.
Well I think if you look at the 180 to 200 range that we provided for ATM.
And you look at what was put under contract and delivered last year, which was that 18 million 170 million dollar number.
And you take into consideration that the next option period will include.
3% to 3.5% price increase per dose as in the contract you can start to triangulate what that might look like from a U.S.G. piece.
And then in that 180 to 200 arranged the delta is going to be ex us.
Okay perfect. Thank you.
Thank you next question comes from Dana Flanders with Guggenheim. Your line is now open.
Hi, Thanks for taking my questions.
My first one that just following up on the Roxy contract.
How should we just think about the complexity of negotiations I know a Tam was it was a complex contract to negotiate and was delayed a little bit should we think of rack see a similar complexity or possibly an easier and more straightforward.
On track to negotiate and then my second question I think I heard that you're assuming two additional states adopt car X legislation this year.
Can you help us understand kind of what goes behind those assumptions do you have good line of sight into that or is that just there are so many states. Considering this you felt it was appropriate to to put into guidance. Thank you.
Thanks, Dan So on the first question Roxy.
Yes.
Remind me what exactly about that telecom common question is it a complex contract.
Yeah. So.
They're they're all unique contract negotiations Dana.
Whether it's related to anthrax vaccine or smallpox.
Again, we've been doing this for 21 years so.
We've we've dealt with all varieties of that we don't expect prolong delay.
But again, we're waiting for the RFP to come out and then when it comes out we'll respond and will enter into the normal contract negotiation process.
On the question about nor can in the two Komarek states.
We obviously are working.
Hand in glove with numerous states.
On their efforts to and interest and potentially putting yen.
Co prescription legislation so they're probably.
Half dozen.
States that are probably more advanced than others.
And we thought it was appropriate to without guessing or predicting which one simply.
I assume that too we'll get it across the finish line in 2020.
Okay. Thank you.
Thank you. Our next question comes from K, Nikkei, Charleston, Atlanta Feldman.
Hi, Thanks.
Maybe shifting gears to.
Since the limit.
You will need to mature Corning 24 aspirationally goals.
You talked about progress integrating.
Your cool most.
Weak luck with absence backpacks and.
So I wouldn't think the argument Walsall stands now will acquire.
Another company.
Product line.
How prepared are.
Great today too quick on across like that to that it's been a couple of integration which has never.
Yeah, Okay. Thanks for the question and for joining the call.
Yes.
As we've talked about pretty openly over the last three to five years.
We have proactively made investments.
In our infrastructure and our capability.
In order to handle additional M&A transactions and as an example that we've referred to in the past we made it pretty substantial investment in 2015 and 2016.
In our S&P enterprise system, such that it is capable to handle multiple acquisitions going forward, which made both the adapt as well as the packs backs acquisitions.
Much smoother than we would have been able to do without that investment so.
We are ready for additional M&A transactions.
Your your.
Correct to point out that.
They all are a bit challenging no no no one is easy.
And we've done single product acquisitions.
It has included staff and manufacturing facilities.
We've done.
Carve outs, such as the Cam 2000, which came out of Sanofi, which was very complex and we've been hand able to handle them seamlessly.
In order to protect the integrity of the revenue base, while doing important things, including making sure that the talent that we acquire is protected.
As well as ensuring a smooth transition.
The things that are important to us around culture as well as facility. So we're.
We're ready inexperienced Stan.
We'd like to do it again soon.
Okay, and just maybe a follow on questions comment about.
Your plans for some discretionary investments this year I assume that with mobile more capital about.
Close to or span Ahmad and mobile.
Little more color on what type of amounts were talking.
So I think in general without giving specific to a a line item or category.
We continue to look opportunistically.
Making investments.
That support our ability to grow and scale the business over the long haul.
And throughout the the example, where we committed to spend $50 million in our Baltimore facility to support the growth of the CDMO business unit.
As we look at M&A opportunities there are clearly opportunities across all four business units.
And as we talked about during the annual Investor day.
R&D continues to be a focus of ours, especially during this 2020 through 2024 period.
We need and.
And want revenue to come through that pipeline.
So they can meaningfully contribute to our revenue growth over at the end of this cycle, but more importantly.
Throughout the next five year period, so we're going to continue to be as Rick indicated.
Prudent about how we use our capital but.
Again, the growth will require investments across the board in a number of areas, but we'll do that in a very careful prudent way.
Okay. Thanks, that's all.
Thank you. Our next question comes from Boys Teekay with Cowen. Your line is now open.
Good evening and this is John Scott on for Boris.
My first question given the recent slowdown and global travel in restrictions are in place have you seen an impact on facts Cora or to motif either in terms of sales on the investments that you've been making those franchises.
Hey, John Thanks for the call. Thanks, a question.
We haven't seen much of a slowdown I mean, our traveler health footprint is as you know it's focused on.
Typhoid and cholera.
While we do opportunistic opportunistically are looking at additional assets the ads that travel health business, we haven't seen much of an impact so.
And I think you know if we weren't to it it will be pretty short term.
In nature.
Okay. Thanks, and then moving on to our Ken with the New co prescribing States can you comment on which Steve those would be or whether there and states you'd want to flag there at an advanced stage with that type or regulation and do you anticipate the regulation would be focus.
On patients getting a high dose of opioid or would it be more expansive along lines, what new Mexico did last year.
Yes, so we're not going to speculate on which states.
Kind of bring this over the finish line entwined 20.
As I commented earlier, there are a handful of states that are more advanced than others.
And we're working with but any number of them well. So again, we're not going to guess both in terms of timing or which individual states, but we expect them to be very consistent with the previously adopted nine states that have in place today.
Okay. Thank you very much for taking my question.
Thank you. Our next question comes from Lisa Springer was thinking that research your line itself.
Hello, This is Robert Maltbie.
Covering for Lisa she couldn't be here today.
So thank you for taking my call.
No if on the last but as you as I like to see sometimes you see the.
The best for last and I want to agree congratulate you for your long term performance you know I believe we launch coverage for years ago.
Much lower levels at $30.
We want to welcome Mark our new newest French covering and the more the better from Barclays Morgan Stanley I think I heard JP Morgan Guggenheim chartered accountant. So congratulations on also gentlemen, garnering that type of broad broad interest and it always comes from.
I believe in executing so congratulations on that long term and we hope the next four or five years can be equally profitable.
My question relates again to that longer term focus.
You mentioned, some some targets out four or five years.
In terms of.
Some pretty pretty good targets, a doubling of all your revenue off.
My first question relates to what is force you can tell what do you expect the revenue mixture between.
Governments and say non government.
Sources to look like during that ramp.
Yep, Robert Thanks for the question and for the kind comments about the team.
It is clearly results of.
Or 1800 employees.
Working in a very diligent committed way that we've had the success that we've had over our 21 year history, but more notably the significant progress we've made over the last three to five years. So appreciate the kind words as we look at and as we announced last year.
In terms of our 2020 through 2024 goal of yet again doubling revenue during that five year period as we did in 2013 14, 15, and again 2016 through 2019, it will be a combination of both organic growth as well.
Strategically aligned M&A transactions. So we again, we we are structured with four very distinct business units, each operating and having developed their own strategy.
But collectively we're committed as an organization to making meaningful difference.
In terms of protecting and enhancing life, that's part of the core strategy.
Operating in this growing attractive public health threat market, which we anticipate or expect.
To be in that 50 billion dollar addressable market range. So there there is ample room for us to leverage our competencies and our historical success in a growing attractive market.
Terrific and.
Hopefully all the employees are participating the way we have we.
Don't do investment banking.
We leverage our IP with proprietary a private funds and we can very happy and so my second question relates to the envy seven I don't know.
And the Biothrax and looking at that.
Crossover.
The initial proof procurement options are the BARDA contract and your enrollment in the phase three studies Oh, how should we speak about the path forward for that product outside the U.S.
And that's all yet.
Sure. So again, thanks for the question and the kind words.
As I commented before we see opportunities for continued procurement of both.
Vaccines Biothrax and the second generation candidate Avi 7009.
Both domestically and internationally.
As we have in recent years gotten traction around our growing the portfolio of medical countermeasure products outside the U.S., we see ample opportunity for both the vaccine the anthrax vaccine candidates to do likewise, so that growth will be so.
Lower and the a bit lumpier.
As we've commented in the past governments outside the U.S. are not in many cases as mature or developed in terms of their strategies, but we see progress being made particularly in the European Union.
Opting procurement strategies and objectives that are more aligned with what the U.S. government is doing so for us that all means more opportunity across the broad portfolio of 10 products than we have today. So.
Again, we have.
We had a goal in the last strategy of having 10% of our revenue being generated from customers and patients outside the U.S.. We hit that goal that early almost a year early and have every expectation of keeping at that level going forward.
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Thank you.
Thank you I'm not showing any further questions at this time I would now like to turn the call back over to Bob fast for closing remarks.
Thank you drill it with flat ladies and gentlemen, we're now conclude the call. Thank you for your participation. Please note an archived version of the webcast of today's call will be available later today and accessible to the company website. Thank you again, we look forward to speaking with all of you in the future Goodbye.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Yes.
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