Q1 2020 Earnings Call
Actual results could differ materially from our expectations.
Any forward looking statements speaks only as a day.
This conference call and except as required by law, we undertake to update any forward looking statements to reflect new information.
Events or circumstances.
Investors should consider this cautionary statements as well as the risk factors identified in our periodic reports filed with.
Yes, you see when evaluating our forward looking statements.
During our prepared comments as well as during the Q. When a session. We may also refer to certain non-GAAP financial measures that involve adjustments to GAAP figures in order to provide greater transparency regarding emergence operating performance. Please refer to the table sounds todays press release regarding our use of adjusted net income and adjusted EBITDA and reconciliations between our GAAP financial measure.
As in these non-GAAP financial measures.
Some additional housekeeping items.
The decrease on a session because of the fact that we were all in separate locations and practicing the necessary.
It's also distancing per CDC guidelines, we will have a CEO Bob Kramer fielding all questions to begin with and then we'll verbally hand off to other members of the.
The team for additional answers as warranted for.
For the benefit of those who may be listen to the replay of the webcast of this call was held and recorded on April 30 22.
20, since then emerging they have made announcements related topics discussed during today's call. You are once again encouraged to refer to our most recent press.
Leases the message you filings all of which may be found on the industry's home page of our websites without introduction I would like to turn the call in L. over to my colleague Bob Kramer.
Okay.
Thanks, Bob and good afternoon, everyone. Thank you for joining the call today.
Yeah.
You start by sending our thoughts and prayers to everyone impacted by the current Covance 19 pandemic and by expressing a huge thank you.
I've been to all those in the front line of this slight.
The first responders doctors and nurses and medical staff, who are taking care of the thousands of patients battling this disease and especially thanks to our employees, who continue to make sure that we deliver on our commitments to public health during this global emergency.
So before I discuss our views going forward and want to take a moment and share how excited I am about the recent addition, dr. Kevin Smith as our newly appointed Chief Medical Officer, Karen's primary responsibility will lead to alert lead emergence clinical development Medical affairs.
In a regulatory affairs functions and we very much look forward to her contributions.
Now turning to recent developments and our outlook.
When we reported our fourth quarter results in late February we discussed our goal for 2020 and noted the strong momentum we had coming into the year as part of that discussion, we highlighted our expertise and vaccines therapies.
Thanks, and then contract development and manufacturing.
We stated that our strategy includes expanding our leadership position in current and new public health direct markets and continuing to make investments and capabilities innovation and operational excellence.
As we will discuss in more detail in a few minutes our company achieved strong results during the first quarter and that trend continues into Q2.
Our team remains focused on execution and our core business remains strong with a majority of our business units in product lines performing at or above our expectations.
That's it.
Time, the emerging threats of the novel Crown. The virus was just beginning to come into focus and as we all know the world has changed significantly in the last few weeks.
In this unprecedented time pharma and biotech companies are joining together in new ways to address this global.
Well pandemic.
They are accelerating testing and detection.
Advancing health services.
Leading the development of vaccines and treatments and expanding manufacturing capabilities.
Yes, emergent is uniquely positioned in this environment.
We're deploying decades of experience in vaccines in therapeutic development and manufacturing.
We're also activated.
We are well established platform technologies, and our development and manufacturing capabilities to address this new threat.
In many cases, we're doing this in concert with long standing partners.
We're also joining with new collaborators our goal is to create multiple innovative solutions to deliver on our commitments to our customers in our patients.
This includes working with leading innovators in our fields. Our efforts are focused on two of our platforms contract development and manufacturing and therapeutics.
First we are taking our history, a working hand in hand, with the U.S. government to be able to develop and manufacture.
Candidates, which will discuss in more detail later on the call.
Simply put emergent is built for this challenge.
Given the developments over the past several weeks, we're going to depart from more typical earnings call format by having two of our business you that heads site Hussein our CDMO. The you head and Dr. lower same word head of our therapeutics business unit.
Joining and discuss the details of our coded 90.
Initiatives that we've announced today.
Before side and lower join US I'll briefly touch on the impact of the current.
Pandemic on emergent as well as provide an update on our vaccine and devices business units.
As you'd expect emergent has a comprehensive robust business continuity program in place the guide how we operate during any form of crisis.
Priorities of this program are as follows.
First to ensure the health and wellbeing of our employees and that our workplaces are safe for onsite employees to carry out their critical work.
Teams that can work remotely are doing so well.
We are providing those responsible for manufacturing and advancing our therapies with personal protect.
Thanks, and continuity of our supply chain.
We've assessed all elements of the supply chain, including critical raw materials service providers safety stock and contractor performance just to name a few.
We've taken measures to secure and protect the critical components of our supply chain.
And third to deliver on a growing number of commitments. This includes the goals that we shared with all of you at our Investor day six months ago.
The next weekend business.
Full.
Doctors office visits have dropped.
So beloved 19.
Surgeries had been postponed.
Greg will undoubtedly have an impact on our operations in 2020.
Okay prescriptions across the industry are down.
They come to a standstill.
Both.
Okay and demand for travel health medications.
Strong states community organizations and first responders remained focused on the opioid crisis and being prepared for opioid opioid overdose emergencies.
Sure on our travel health business revenue.
Pressures on travel.
Strong sales and growth of the nor can.
Or being offset by increased demand for development and manufacturing.
We're seeing pressure on the retail pharmacies segment of the Narcan business.
Our full guidance for 2020, and rich will elaborate more.
Okay.
Turning to our vaccines business unit.
Dropped.
The number of developments.
Injuries had been postponed.
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And retail pharmacy traffic has slowed.
Measure vaccines, which remain the majority of our vaccine based revenue.
2020 are stable and on track.
Over the.
I mentioned, a few months moments ago.
Maintaining our full guidance for 2020.
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More on our full year outlook in a few minutes.
May serve as a catalyst to raise awareness of the opportunities to protect against vaccine preventable travel related illnesses.
During the first quarter.
Yes, I'd like to note that we anticipate the initiation.
Scenes, which remain the majority of our.
Or chick VLP, our chicken gunia virus like particle vaccine.
20 are stable and on track.
Of course, we continue to assess the potential impact of the pandemic.
Travel health business.
Well as all of our other clinical programs.
Global travel.
Turning to the devices business unit.
The catalyst to raise awareness.
As I discussed a few minutes ago.
Against vaccine preventable travel related illnesses.
To that data package to the FDA and supportive extending the shelf life.
Finally, I'd like to.
Faisal spray.
The paid the initiation.
36 months.
Trial.
This time, we would expect a review of the application to take approximately six months.
Finally, we are aware of several states with upcoming co prescription legislation as well as activities by local medical boards.
Due to assess the potential impact of the pandemic.
Stick that additional states who may.
Cynical programs.
For co prescribing the locks on.
The business unit.
Opioid prescriptions.
As I discussed a few minutes ago.
We remain focused on continued innovation.
Lora and rich when they can keep conclude with a few summary thoughts.
Of Narcan nasal spray.
Uniquely prepared to answer the call.
Yeah.
Medical solutions to the coded pandemic.
The application to take approximately six months.
Place.
Finally, we are aware.
With the U.S. government had built the ability to quickly advanced early stage candidates.
Upcoming co prescription legislation.
As well as activities by local medical boards.
Reported their efforts to develop vaccines.
Guidelines.
Time advancing to potential therapy.
May.
Requirements for co prescribing the locks on.
They are prepared to take on this challenge.
The 2000 person strong emergent team.
There are continued commitment to our patients and customers.
Flora and rich when they can keep conclude with a few summary thoughts.
Is unwavering.
Immersion is uniquely prepared to answer the call.
Income from a position of strength.
Coated pandemic.
20 was strong momentum which continues today.
Thanks.
Each of our business units is executing well.
Against their strategic plans and our diverse model of complementary capabilities.
Commercial scale manufacturing.
Driving us forward.
And with leading innovators.
To achieve both our current.
To develop vaccines.
While the same time advancing to potential therapy.
Forward to keeping you apprised.
In new progress.
With that I'll turn the call over two sides, the same and Dr. lower say word to speak to the significant contributions.
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Their organizations in the fight against.
And our diverse model of complementary capabilities.
Thank you Bob.
Streams.
But also like to thank everyone for joining the call today.
Keeping us on track to achieve both our current.
With respect to our CDMO business.
I'm proud of what we're achieving at.
To the CMO overview slide in our presentation.
Prized of our continued progress.
Today I shared division for the CDMO business to beat a leader in molecule the market biologic services.
Significant contributions.
In the development and manufacturing.
Against.
Namely across development services.
Drug substance manufacturing.
Thank you Bob.
Product manufacturing.
I'd like to thank everyone for joining the call today.
And the our infrastructure.
And Craig Blige to provide an update with respect to our CDMO business.
Turning as well it commercialization of solutions that address public health.
Presentation.
Nation current differentiated CDMO that allows us the ability to work with five technology platforms.
And Investor Day, I shared division for the CDMO business to be the leader in molecule that market biologic services.
Hello innovators to progress there clinical.
Manufacturing can.
Patients, we have been and continued to be built for this.
Through this foundational.
Development services.
Well to rapidly respond and deployed capability.
Okay.
And expertise in response to the coded 19.
Infrastructure.
On the next slide.
Great and expertise in development and manufacturing as well as commercialization of solutions that address public health.
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Provide the foundation current differentiated CDMO.
Through the cross development services drug substance and drug product manufacturing to support their clinical trial.
Correct with five technology platform.
Phase one in May of 2020.
Nine development and manufacturing.
All right.
We leverage the.
To provide development services and drug substance manufacturing.
Great.
Support their clinical trial neat.
We have Dan and continued to be built for.
As one in the second half from 2000.
Additionally.
Lead Johnson and.
People to rapidly responding deployed.
Approximately $135 million to provide drug substance manufacturing services.
Capacity and expertise in response to the Colgate 19.
Start manufacturing in 2020.
Let's review the recent CH CDMO coded 19 partnerships that we have formed.
Our three coated 19 collaboration show the depth and breadth of our customizable CDMO.
Conservative.
And our fundamental understanding of in innovators perspective.
Their clinical trial.
Pillar.
Which they anticipate to commence phase one in may of 2020.
And our ability to serve the needs of.
Thank you painted to start manufacturing and 2021.
As well as.
Long term commercial supply agreement it under negotiation.
Leveraging our unparalleled.
Great 19 collaboration show the gap and breadth of our customizable CDMO offering.
Expansion earlier.
Right and then to understanding of than innovators perspective.
And the salient microbial viral.
Four pillars.
And advance therapy.
Customer centricity and our ability to serve the needs.
Right.
Hey.
Ability and capacity to support the entire drug development lifecycle.
Large pharma and biotech.
Being able to support the clinical timelines that Novavax Ambacs art.
Yeah.
As well as large scale manufacturing readiness with a validated process for Johnson and Johnson.
Our infrastructure.
Operational capacity.
Yeah.
Of up to 300 million doses annually.
Hi, Biologics technology platforms across.
Sure.
Microbial viral.
Patient.
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To seek and systems, resulting in the creation of operating leverage.
Flexible deployment.
Of clinical and commercial.
We need to support the entire drug development lifecycle.
The fight against coated 19 as a viable.
Timelines that novavax in back sorry.
Hi, Peter.
Well as large scale manufacturing readiness.
Oh no business.
Validated process for Johnson and Johnson.
Customers.
By our operational capacity.
For the.
300 million doses annually.
The CDMO business continues to be an integral part of our overall emerging offering.
And.
Our.
Steven.
Secondly, as we progress towards our enterprise the laid out for 2024.
Getting leverage.
Solid start has reiterated our confidence in that business.
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And provides the potential opportunity.
Sure.
Accelerate growth.
Good 19 as a viable.
Suitable penetration of the pharma and biotech market.
We are proud of our differentiated CDMO business.
Capability capacities and expertise.
Our customers and the potential to impact the lies the patient.
Rapid development of.
In business.
It does need and most importantly to go.
To accelerate kids grow.
Used.
Towards are successful penetration of the pharma in biotech market.
The structure for plasma derived hyperimmune.
And then capability capacities and expertise.
That was outlined in our analysts and investors day in November.
Based on for decades of experience and support six existing F.D.A. licensed products.
I will now turn the call over to my colleague Dr. Laura They were.
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It can be isolated from the blood in the plasma.
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Affected by strain variability or the emergence of resistance.
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Covet H.I.G. is being developed as a potential treatment for severe hospitalized patients.
Important work that we've done.
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And prevent progression to severe disease.
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Workers, who have been significantly impacted during this outbreak.
Getting treatment patience as quickly as possible in clinical trials.
It's been highlighted by many.
For patients under emergency use authorization.
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Study of a commercial supply.
Biologics evaluation and research at the F.D.A.
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Very excited to continue our partnership.
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It's been accelerated by using the existing G.M.P.
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Products license on this platform.
Merging is committed to the goal of getting treatment.
Tend to go directly into.
Missile in clinical trials.
With the potential to reach more patients under emergency use authorization.
Influenza.
The ability of a commercial supply.
We've discussed.
But I was announced at the beginning of April.
Noone.
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The two clinical trials and not development.
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And for Cobin 19.
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Treatments honest platform.
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Partner for our program is a national.
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Application to go directly into.
And to accelerate the collection of convalescent plasma from their clinical map.
And then have a treatment persevere hospitalized influenza the flu I.D.I.V. program that we've.
Yeah.
Working closely with several lead institution.
For.
Collect plasma from recovered.
They to clinical trials and not development.
Quickly as possible.
Just the code in 19.
Emerging initiated work any programs as soon as the cozad outbreak was.
To quickly initiate work on the carpet H.I.D. program.
The goal is to manufactured G.N.P.
Government partner for our program is a natural.
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Infectious.
Dissipate, providing treatment to patients in the clinical setting by the end of the summer.
The text to date are covered H.I.D. program.
And recently completed our P.I.M.D.
Celebrate the collection of convalescent plasma from their clinical.
Oh by the available.
Architecture of the Hyperimmune.
A second covered solution is being developed using our echoing hyperimmune platform.
Lead institution.
Yeah.
To collect plasma from recovered.
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And in clinical trials.
She lives in Manny.
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Dissipate, providing treatment to patients in the clinical setting by the end of the summer.
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We are engaged with the F.D.A. and recently completed our P.I.N.D.
Did team that have been working tirelessly two movies programs ahead as quickly as possible.
This outbreak has been.
Solution is being developed using our echoing hyperimmune pot for him.
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Energy and commitment.
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And all of us that emerging bars.
You together to maintain are existing commitments, but also.
Went to take this opportunity just pick.
Global response to the public health.
Working tirelessly two movies programs I had as quickly as possible.
Results from a financial.
Oh and.
Or first quarter performance.
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Overall.
And our team has dedicated their best knowledge.
Commitment.
The largest contributors to revenue.
They deserve our.
They will spray.
So my prepared.
Improve your over your profitability of the gross margin level as well as increased levels of of <unk> and adjusted net.
Thank you for joining the call.
We exited the quarter.
But again.
Solid liquidity.
Express earlier.
Reaffirmed or for your dog.
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Considers a range of.
Pulling together to maintain are existing comment.
As in any year.
Parts of our business are facing challenges.
Global response to the public health.
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But covert.
The covert 19 situation. Unlike any in recent memory, none of us knows exactly where it is crazy.
Yeah.
Went from either do public.
Patients we shared in February.
Nevertheless.
Contributors to revenue.
For older Man for Us solutions remains strong.
Yeah.
Apartment.
We talk improve your over your profitability of the gross margin level as well as increased levels of adjusted even talk and adjusted met.
Well today.
Yeah.
You're feeling.
Quarter.
We confident.
Oh it liquidity.
Momentum in this I'm certain environment.
Purple your dog.
With that.
Considers a range of.
The the numbers.
Twentytwenty prefer.
To the quarter reflect the diversity.
Yeah.
Parts of our business are facing.
Centered on specialty products and services.
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The covert 19 situation to unlike any in recent memory.
Revenues of $193 million.
Versus going from either in public.
Per year.
Normally.
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Overall demand for our solutions remains strong.
Jumped admit income of $300000.
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It's an improvement $5.5 million.
Action, you fact summer.
Breaking down quarterly revenue a bit further.
We're feeling responsibly.
$72 million.
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Consistent performance since we acquired adopt format in the fourth quarter of 2080.
The numbers.
These results also reflect the impact of ongoing community access programs addressing the public.
Business model.
We're demand continues to be robust.
Purposes addressing global.
During this campaign and co prescription.
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And their combined.
$93 million to one per cent increase versus the prior.
The the $52 million.
$15 million.
And and delivery schedule.
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Dziedzic National.
That just admit income $300000.
And improvement $5.5 million.
Prior.
Can you to work on securing an option exercise to deliver additional doses to the s. and.
Sales were $72 million.
Other product sales for $24 million.
We acquired adopt format in the fourth quarter of 2080.
Measure products.
These results also reflect the impact of ongoing community access programs addressing the public interest.
Oh Hell.
Demand continues to be robot.
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As well as the ongoing.
Is revenue of $22 million.
Action.
Increase driven by continue demand for our molecule to market services.
Failed from our anthrax vaccines, a $52 million in line with our manufacturing plant and delivery schedule.
Salt also.
Product and CDMO gross margin.
35%.
Sales or they can 2000 in the quarter as we continue to work on securing an option exercise to deliver additional doses to the s. and.
Contribution from CDMO.
Jailed for $24 million.
R. and D. expense was $20 million.
Sales of countermeasure.
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Addressing a wide range.
Disciplined approach.
Logical.
And every development.
The trouble.
G.N.A. spend a $70 million reflects ongoing investments and capabilities and capacities to support future growth.
Dribble increase driven by continue demand for or molecule to market.
Stupid dollar $50 million and adjust the net income of $300000 both reflect the normal operating outcomes.
Oh also.
We balance product mix.
Operational.
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Then we'd prudent investments.
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Most notably deliveries of anthrax vaccine been nork enable spray.
In terms of the balance.
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The amount of services.
Assertion as evidenced by cache of $182 million.
$10 for 12% of adjusted revenue.
$162 million.
Infrequent approach.
Fine total of $344 million of current liquid assets.
Million dollars reflects ongoing investments and capabilities and capacities to support future growth.
Drunk capacity under our revolving credit.
Bottom line.
Grew enhancing our ability.
$50 million and adjusted net income of $300000.
Even at the pandemic.
Now comes with the first quarter.
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As we balanced product mix.
Increase approximately $23 million versus.
With prudent investments and it.
Dollar pay down.
On profitable growth.
Facility.
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Into consideration to performance for the first quarter.
$62 million.
Group of year across all of our.
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Challenges in some parts of our business will be offset by.
End of the first quarter.
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We also had $245 million of on drunk capacity under a revolving credit.
So the following.
During hampering our ability.
Revenue.
Stain business.
A billion to 1.275 million.
The pandemic.
Calling product specific detail.
Outstanding debt decrease approximately $23 million versus.
$115 million.
20 million dollar pay down.
I've seen sales are between 270 million and 300 million.
Modestly.
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Between 180 million and $200 million.
Taking into consideration to performance for the first quarter.
160 million to $210 million.
Units.
And adjusted to keep it.
And the challenges in some parts of our business will be offset by expansion another.
We are also sharing.
In our forecast.
Oh forecast.
This quarter's report.
The forecast consists of the following.
Aberration agreements are providing solid tailwinds in our CDMO.
The into 1.275 million.
Greater revenue contribution from CDMO than previously thought.
Nor can nasal spray sales are between 285 million and $315 million.
Agreements contains multiple distinct milestones and deliverables to be provided to the.
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Revenue related to these agreements.
So.
To be recognized as these performance obligations are met over him off a year period.
Or profitability guidance includes adjusted net income 160 million to $210 million.
Hundred and 25 million.
$145 million.
Third and $60 million.
Five to 80 per cent growth.
For sharing.
2019.
Demo forecasting.
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In 2020, we continue to make progress.
Operation agreements are providing solid tailwinds in our CDMO.
Expansion of the CDMO services business and its contribution to the overall businesses just.
Thoughts, which mitigate for softness we are seeing in our travel business.
400 basis.
Two of these agreements contains multiple distinct milestones and deliverables to be provided to the customer.
Investment in discretionary development.
Kick nice as these performance obligations are met over him off a year.
Screwdrivers incremental growth.
We currently C. 2020, CDMO full year revenue.
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In a range of 125 million.
$145 million.
As well as execute an attractive emanate opportunity should there.
220 19.
In terms of revenue.
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2020, we forecast a product sales will account for approximately 80% of total.
Putting.
The remainder split between CDMO services.
Contribution to the overall businesses just.
And in terms of occasions of revenue in earnings between the first cap and second.
400.
For continued to anticipate.
As proof product mix.
It will follow me similar patterns that I've seen in 2019, approximately 40% of revenues delivered in the first half of the year.
By the company.
Finally.
What are our pipeline.
On second quarter total revenue of between 270 million and $300 million.
I'm in philosophy.
Cats, reflecting number.
Sufficient capital to both invest in the business.
Shipments a big him 2000.
Tracking emanate opportunity should there right.
Hi, My paycheck.
In terms of revenue.
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2020, we forecast the product sales will account for approximately 80% of total revenue.
Ongoing contributions of our other products addressing governments needs to address.
I can grants.
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And.
If I anticipated lower.
Things between the first cap and second half.
Fourth.
We continue to anticipate.
Ovid related reduction synar can nasal spray revenue.
2019.
And face in both the retail and pick.
Deliver it in the first half of the year.
Anticipating contribution of CDMO services revenue, resulting from recently announced degree.
Hundred and 70 million and 300 million.
The following.
This forecasts reflecting number of.
Get emerging have put in place a strong and resilient.
The big him 2000.
And contingency planning needed to.
Size like H.H.S.
Band, our ability to deliver preparedness.
Anthrax.
Yes in it.
Our businesses not immune to the effects of the pandemic.
For products addressing governments needs to address chemical and biological threats.
Mix and services are critical to addressing public health.
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Our current.
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With what we have announced as far this year.
Reduction synar can't nasal spray revenue.
Ability and.
Retail and Pip channels.
Oh and the role that we play.
Anticipating contribution of CDMO services revenue, resulting from recently announced degree.
Long haul and prepared to meet our.
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All our stakeholder.
Present time, we had emergence have put in place they strong and resilient busy.
For to the.
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Getting the question and answer session.
Bitter.
In some cases.
And our ability to deliver preparedness.
And response.
So when you touch tone telephone.
Because this is not immune to the effects of the pandemic, but the very nature of this crisis.
From brand in both of Kansas. It's early on is.
Critical to addressing public health threats.
Hi, they stay my <unk>.
Bind with what we have announced as far this year.
If tangible evidence.
But the durability and.
You had.
Business.
Role that we play.
Tens of that.
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Right, but on the visibility you have to keep delivery.
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Thank you.
The current situation we're in right now.
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Is it businesses normal Oh, Dear, it's Jim a change.
That's the first question comes from brand in hopes of Kansas. It's early on is open.
With it for this to treat it if it's deliberate.
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Brandon for the question and thanks for joining the call I'll take the second question and then I'm going to ask.
Contends that I.
Okay.
Above the capacity.
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R.C.D.M.O. network.
24.
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The S.N.S. deliveries, we don't see any.
Yeah.
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Or interruption, if you will.
National stockpiled.
Pretty much business as usual.
Oh.
In terms of schedule shipments and or execution against outstanding and current contract that we have for the various medical kind of measures that we have on their contract. So we don't see again any interruption that tense or.
Before the question and thanks for joining the call I'll take the second question and then I'm Gonna ask.
And as well as the the categories of different products.
We have a and R.C.D.M.O. network.
Capacity.
On the on the S.N.S. deliveries, we don't see any.
I cities capabilities and.
Or interruption, if you will.
Sickness offering.
Is predicated on being able to serve abroad and diversified customer and project.
<unk> execution against outstanding and current contract and we have for the various medical kinda measures that we have on their contract. So we don't see again any interruption that tense or.
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As rich described with both the overall.
They have our capacity based on their scope and timing.
The the the categories of different products.
Provide clinical supply material in 2020.
Capacity.
It's 10 neighbor large scale manufacturing.
For the question.
20.
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Capacities capabilities and.
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The part of our C.D.M.L. business offering.
Predicated on being able to serve abroad and diversified customer and project.
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She had our Baltimore.
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Communities across or service offering what's important to know is that the agreements that leave referenced within.
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Novavax and Vaxserve agreements to provide clinical supply material in 2020.
Then just sort of question.
So manufacturing.
Billion dollar value yeah dessert.
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Are you getting there and is there any incremental details you can provide on that as well as the long term commercial agreement and then.
Rapid clinical material and as well as.
Appreciate your balance on.
So manufacturing.
Then.
Additionally, we haven't 50 million dollar capital expansion at our Baltimore.
And that would end up puts and takes your employer guidance.
Mmm Jacobs and so the on the J. and J. agreement the 135.
Oh, Yeah, I think saying summarized.
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The 135 is essentially is in enabling investment for us to get too large scale.
35 million dollar value.
Yeah.
And to have a validated manufacturing process in place.
Term commercial.
Facts your product for them.
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Pick up there so the on the J. and J. agreement the 135.
I think again, just a as a reminder.
So we see a bit of.
The 135 is essentially is in enabling investment for us to get too large scale.
It's such that our expectations again or to continue in that range of 285 to to 315.
To potentially manufacture products for them that second peace as Sally.
To.
Will be.
Okay.
Part of a a separate.
You can put a second quarter, but it won't be.
Because of the overall.
But we do expect that to be made up more than made up by second.
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On the nor can nasal spray I think again, just a as a reminder, even though we see a bit of.
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So side of things, that's being pretty much offset by continuing strength on the public interest market such that our expectations again or to continue in that range of 285 two to 315.
So rapidly but.
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Open 19 pandemic.
And Bob I might just.
Chip in that we do expect.
Pull up preparedness.
Eight sequential decline in our can for the second quarter, but it won't be.
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Material.
You know related perspective.
Got to be made up more than made up by second.
Recently as well if you're seeing any changes on that front. Thank you.
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Challenges and the government response.
For the questions and congressional the progress.
He'd been doing for no over 20 years I think is reinforcing of the fact that.
Preparedness and response is critically important.
I mean, the work that we've done for years and years and years in partnership.
With the government is.
You know stockpiling or supply chain.
Oh that talk about the importance today.
Maybe if you can comment on that.
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The as well if you're seeing any changes on that front.
Again, whether it's in the testing area.
It's a question Dana showing the.
Yeah or P.B. area.
19.
Many companies getting into the vaccine therapeutic development space.
I mean, clearly the work that we've been doing for.
The fact that the U.S. government has been on this for quite some time.
Reinforcing the fact that.
Preparedness and response is critically important.
I mean, the work that we've done for years and years and years in partnership.
Or through the good work displayed in his team or doing on the CDMO fronts.
Talk about the importance today.
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Partnerships.
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And all the good work that industry is doing.
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Getting into the vaccine therapeutic development space.
You do differently, what we can do better.
A testament to the.
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The U.S. government has been on this for quite some time.
Part of this.
We are obviously proud to be in a position of being able to help any way we can whether it's directly with the therapeutic products that Laura went through a or through the good work this site and his team or doing on the CDMO fronts.
Nothing.
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Question about your high premium product.
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But I think it will be all around in support of this.
Or do you want to weigh in on.
And her shifts around preparedness and response.
But.
Sure absolutely so they that clinical trials that are.
Yeah.
Sort of that the protocols days right now in about.
Okay I'm chart in your eyes open.
Nickel trials and certainly the data coming out of those.
Question about your high premium product.
As for emergency use authorization.
In the face to.
Since you're working with Nite.
And.
Can we expect that this would be a.
B treating a hospitalized patients initially.
Do you need to do to make for me.
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<unk> for the question Lord you want to weigh in on.
And some comments on what the clinical trial looks like.
Sure I'll I'll answer that question by the Fat fine.
Well child that are.
Yeah.
That the protocols days right now and about to get.
So initially were very focused on trying to reduce that impact them dead people already infected with <unk> certainly.
At some point the applications for emergency you.
One of the greatness means that is well the people who are early in their cozad infections that haven't yet been hospitalized or early in their hospitalization, but at high risk because the scenario impacted the disease that both of those we feel will really averages. The overall burden on the healthcare system on in parallel though.
And we're in discussions with and number of fat clinical sites on the possibility of also setting up 'cause separate clinical trials to evaluate the ability to use the hyperimmune prophylactically to protect the healthcare workers. So it'll be a separate screen of clinical effort certainly looking at then the numbers of how this outbreak has.
Yeah.
Impacted the healthcare community you know there does seem to be outdoor very high I met unfair.
It can justify the question on this topic.
Once you start to face to how long do you think it'll take to get an answer thinks that's it for me.
Yeah. This time I think our our time lines are really dependent on on getting that product into the clinic quickly and then we'll look at those recruitment timelines in order to give that a better estimate obviously, we're focused on trying to go as fast as possible.
Channel or.
Next question operator.
How do we justify your line is open.
Great. Thanks to my question English following up on then Jane J. agreement can you quantify how much of the hundred and 35 million for the first stage of the deal contributes to 2020 revenues versus 2021 or something thereafter.
Sure adjust thanks for the question. Thanks for joining so I hope you can appreciate we're still sorting through the the revenue recognition potential for the 135, but our best estimate today.
That around 25%.
That 135 million a contract value will be recognized in 2020.
Okay, Great and then.
We think about the potential contribution from the subsequent commercial supply ideal you're negotiating with Jane J. is there any kind of framework you can provide to help us think about.
That revenue contributions going forward, obviously, if the sexiness successful.
Yeah. It is it really depends just.
How much of a commitment.
Our partner wants to make to manufacture doses I think you've heard j. and J. say that they would like the ability to to have the U.S. face manufacturing capacity of up to 300 million doses annually for their products.
So until we get really through the next phase of the agreement discussions with them, it's really inappropriate to speculate on what that might look like.
On on the revenue side, yeah, and just to to talk a little bit about the perhaps the gross margin contribution on that as we said before R.C.D.M., Oh gross margin percentages or less than the product.
Avenue.
Aggregate, we expect the consolidated gross margin to still be at that 60% range I think as we talked about last year and is rich commented on his script today, we expected to to 400 basis point gross margin improvement and 2020 versus 29 10.
And I think even if we significantly expand that CDMO revenue and 2020, we would expect that gross margin range to to fall in that same area.
Right. If I can just sneak one last morning should we anticipate it can deliveries restarting in the second quarter or could that skew.
The backup Dear.
Yeah or or guidance that rich described both for the year as well as Q2 that 270 to 300 assumes that we will resume shipments so they can 2000 and q. too.
Great. Thank you.
Sure it's you.
Oh, that's questions from board <unk> Okay.
Great I have one on the Hyperimmune plasma and the other one or <unk>, maybe we'll start with the Hyperimmune I'm just curious how hard is it to actually get blood plasma from these prying suppose covert patient and how much of it can you actually get in terms of generating or you know quantities for drug product.
Yeah bars, thanks to the question. Thanks for joining the thank you put your finger on the better the the long pool in the tent here and I'll ask Florida way and as well, but that is a key a key issue for us to to resolve and as Laura commented, we're working with our government partners.
As well as with our corporate partners that are experts in the space to get access to plasma sufficient to manufacture an initial clinical trial batch of material. So we can start the the phase two clinical trial in the summer and then obviously, we're working and planning for.
Grader and brought her access to that plasma to support the the potential needs of the program going forward, but Lord you want to weigh in on on additional color.
Sure Yeah, maybe I can just add to your comments I think you highlighted the right part I think the the medical community very quickly organized around getting convalescent plasma collection going and I can't they said that I treatment that can be used in the short term I think the way we've approached the partnerships in this area is really as we.
Sexy transition from those programs to the Hyperimmune the supply of that convalescent plasma will be key to getting on you know further hyperimmune manufacturing going and I think overall the I.D. as bad as you start with the the treatment success in a convalescent husband side, you know the hyperimmune provide a a much more I uniform and license.
The way of coming at treatment for for the right now there's a lot of efforts around some lessons plasma collection certainly our partnership Barden NIAD on put it very well position to partner in these areas and we're going to spend a lot of our our network on the critical side.
I just want to get it sounds like you guys have right now in a plasma to even make enough truck product for the clinical studies or is that going to be a limiting factor in some way.
Yeah. So we're we're accumulating plasma today for us to support that initial manufacture the clinical trial material and don't see any any risking being able to meet the timeline for that clinical trial initiation to lower laid out.
Right and my my last question is <unk>, you mentioned extending shelf life on 24 to 36 months I'm. Just curious just one understand how he's going to benefit you and just trying to understand how much snark n. is actually used how much of it is disposed to to just expiration date and you know just trying to think.
Extending the expiration date, it's of any benefit to you guys.
Sure so as we have.
Slogan Yeah, since we acquired the nor can nasal spray product and in October of 2018, our focus continues to be on increasing the the access to and the availability as well as the affordable.
All the for no oxon products to the patients and and customers who need it. So we see the shelf life extension from 24, 236 months as being entirely consistent with making sure that initial mostly impact retail patients.
And customers bore us not the public interests market, where there is strong and cost and pull through from a procurement perspective. So for US. This is a another value added element to our accessibility availability and affordability seems for the retail <unk>.
<unk>.
But in the public interest market too I'm I'm curious what fraction of <unk> throw out because it expires within two years versus how much they actually end up utilizing.
Yeah, so that our our best guess is that the vast majority of of the public interest market customers are reordering within six months it can be upwards of 90% or grader of those customers or reordering within six months.
I think to some of your earlier questions on prior calls there there isn't much of a stockpiling exercising that public health or public interest market that product is pulled through and use pretty quickly.
Great. Thank you I'm I should take my questions.
Thank you again I haven't done anything like ask questions. Please press star than one when you touch tone telephone.
Our next question constantly for spring marketing research Carolina's open.
Thank you.
My question concerns the plasma derived therapeutics.
The the funding you got the 14.5 million of funding is that only to support the H.I.T. product or a little bit also support the yaggi products.
Yeah, Lisa Thanks for joining the call it the the bar to funding for the the human I.G. product is limited to that products. We have decided on our own to go ahead and invest in parallel on the F. One program again as a way to go.
A couple shots on goal here.
Potentially bring yet another product to the market into the patients who needed quickly.
Okay and are they roughly at the same stage of development right now.
Yeah, I'd say pretty much lower you want to weigh in here.
Yes, I would say, they're attacking pretty much in parallel at this time you know, we're investing stated that the plasma generation as they are humans and <unk> and we are targeting getting into the manufacturing phase in the summer.
Okay and with the <unk> would that give you an advantage in terms of cost of the ability to scale.
<unk> on the benefits.
Everything you know as Bob said, we were sort of focused on taking our platforms and seeing what solutions, we could pull for they obviously have different sort of benefits on each side that as you highlight on the airplane that hyperimmune product. How many advantages buried you've got sort of a rapidly scaled I'd misapply much.
Controllable from a cost perspective that certainly would be the advantages. Let me look at how this could impact that the need for doses.
Hmm, Okay. Thank you very much.
Thank you.
I'm sure no for the question of the time elected trying to call back up to the company for closing remarks.
Oh, Thank you Valerie and without ladies and gentlemen, we now conclude the call. Thank you for your participation.
Hi version of the web cast of today's call will be available later today and accessible through the company website. Thank you again, and we look forward to speaking with all of you in the future Goodbye.
<unk>, Okay Conference give me all disconnect have a great though.
Oh.
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