Q3 2021 Emergent BioSolutions Inc Earnings Call

November 4, 2021

Ladies and gentlemen, thank you for standing by and welcome to the emergent <unk> solutions third quarter 2000.

<unk> financial results conference call at this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone keypad. If you require any further assistance. Please press star zero I would now like to.

Adjusted EBITDA and adjusted gross margin and the reconciliations between our GAAP financial measures and these non-GAAP financial measures.

Turning to slide five the agenda for today's call will include Bob Kramer, President and Chief Executive Officer, who will comment on the current state of the company and Rich Lindahl, Chief Financial Officer, who will speak to the financials for <unk> 'twenty, one as well as the forecast for full year 'twenty one this.

This will be followed by a Q&A session, where additional members of the executive leadership team are present and available as needed finally for the vintage of those who may be listening to the replay of the webcast. This call was held and recorded on November four 2021. Since then emergent may have made announcements related to topics discussed during today's call and with that introduction I would now like to turn the call over to Bob Who's comments began.

With slide six Bob.

Thank you Bob and good afternoon, everyone. Thanks for joining the call today I'll provide an update on the progress that we've made in our babies site.

And then talk a little bit about our recent accomplishments and milestones.

And further talk about the business enhancements, we have implemented to better focus on our customers.

I'll also discuss our revised full year guidance and our decision to end our involvement in the centers for innovation in advanced development and manufacturing or CIA ADM program with the U S government.

My comments are summarized across slides seven and eight in the deck accompanying the call.

So let's get started as you have seen this year are emergent team and our business has shown their strength and resilience as we've made substantial progress in the quarter.

Some of the recent highlights include the following first we made significant progress in Bayview resuming operations and production for Johnson <unk> Johnson at the end of July and more recently completing all remaining work on behalf of Astrazeneca.

And influenza pandemic, while an innovative idea execution of the CIA ADN program and the necessary operational investments by all administrations fell short of what was needed to maintain capability in case of an emergency.

In fact, when the Covid pandemic struck emergent was just one of two original partners remaining in the program. Despite the issues. We responded swiftly engaging several of our facilities to meet the government's needs and made incredible progress in a timeframe never before attempted under very challenging <unk>.

<unk>.

Our COVID-19 work with BARDA under the CIA ADN program included a number of activities. These included a reservation of capacity at our Bayview Camden and Rockville sites.

Direct capital investment by the government and additional fill finish capacity at our Camden and Rockville sites.

Bulk drug substance manufacturing for Astrazeneca in the reserved space at Bayview.

And finally drug product manufacturing for various COVID-19 therapeutic candidates in the reserve space and Camden.

As a reminder, the COVID-19 work under the CIA ADM program was always expected it to end this year and importantly, our decision does not affect our work with Johnson <unk> Johnson as it was never part of our CIA ADM contracting we will continue to produce their COVID-19 vaccine drug substance at our Bayview facility.

And as I mentioned, the top of the call. We're extremely proud that our collaboration with J&J and in addition to Astrazeneca has contributed over $100 million dose equivalents of COVID-19 vaccine for global distribution.

So while we conclude our involvement in the CIA VM program and bring to closure of this important chapter in our business it needs to be said that the work we accomplished under the program and related task order contracts with the U S. Government served a critically important purpose one that our entire organization is immensely proud of.

Despite the setbacks, we had earlier in the year. The team has been committed to our mission of protecting and enhancing life and steadfast and learning from our past to be even better.

The team's resilience and the positive impact on millions of lives across the globe and importantly, we're not done yet as we look forward. We are encouraged and optimistic about the opportunities. We see ahead across our entire business.

Let me now pivot to recent business changes we've implemented in support of our strategy during the quarter, we shifted our operating structure to now have three business lines each focused on distinct customer or market types. They are the newly created government or medical countermeasure business.

The commercial business as well as the services or <unk> business, which remains essentially unchanged to be clear all three of these report to our Chief operating officer, Adam Havey.

The government or MCM business will be led by Paul Williams, who was previously running the vaccines business unit.

New structure will better serve our customers by sharing their breadth and depth of experience as one team and reduces the complexity with multiple touch points going into the government on different business units.

And the FDA has permission to restart over the last five months, we've invested millions of dollars to overhaul cleaning procedures upgrade our facilities and implement additional quality control and oversight practices and make significant improvements to the processes for batch record keeping personnel training.

Data integrity and lab testing and merchant teams along with support from our J&J colleagues oversee all operations and materials transfer we.

We took the added step to bring in a recognized independent consultancy, who is expert in quality control and who are now reviewing and performing certifications prior to release of any batches.

We continue to work closely with the FDA and J&J toward increasing our production level consistent with these new procedures.

Finally, I want to commend our team who is around the work efforts over the last 18 months and accelerated the transformation of our Bayview facility from a clinical stage facility to one that is poised to support much larger scale production.

December.

Based on this timing, we anticipate DLA approval by the FDA in late 2022 or early 2023.

The FDA is granted orphan drug designation 479 O. Nine this designation provides development incentives, including a waiver of the BLA filing fee as well as potential seven year marketing exclusivity upon regulatory approval.

On the R&D front, we originally initiated are pivotal phase III safety and Immunogenicity study for a single dose chikungunya vaccine candidate check the DLP is the only virus like particle based vaccine candidate currently in development for active immunization against chicken <unk>.

Disease. The study expects to enroll 3150 participants and 50 U S sites in the coming months I'd like to congratulate the teens across our organization, who made this significant milestone possible and who are advancing the development pipeline that will help fuel the long term growth.

The company, we look forward to update you on this program as we make progress.

Finally with the launch.

The potential launch of a few other phase one studies anticipated over the next year as well as continued progress across our auto injector platform programs focused on chemical threats I remained encouraged by the contribution of our R&D programs and the effect they could have on our growth in the coming years.

Moving next to our CD Mo business I want to highlight do we continue to see growth in this area both related to the pandemic and beyond we continue to receive interest from both existing clients and new prospects from small mid and large sized companies as well as governments and other organizations importantly.

We're winning new business across all three service pillows of development services drug substance and drug product, including drug packaging. For example, during the quarter, we signed a new five year agreement with province Therapeutics to support its mrna vaccine development of our Gaithersburg in Winnipeg fulfill.

And health of our communities and employees as well as our corporate governance and business ethics principles and practices.

I also wanted to note that on a personnel front Mary oats previously our head of global quality has decided to pursue a new career opportunity and his left emergent we're conducting an external search for a new head of global quality in the meantime, I'm confident that our team of talented dedicated.

Professionals will continue to be important quality advancements made in the last several months.

To conclude our third quarter operational results demonstrate that our business remains resilient and poised for growth in line with our strategy. We continue on our path of both organic opportunities and potential M&A informed by prudent capital deployment, all aimed at generating enhanced shareholder.

Our value.

With that I'll turn the call over to rich, who will take us through the detailed results for the quarter rich. Thank.

Thank you Bob Good afternoon, everyone and thank you for joining the call.

I'll start on slide 10, and open my remarks, with some summary thoughts to put today's earnings report into context.

As you just heard from Bob solid execution in the third quarter continues to illustrate the strength and durability of our differentiated business.

Our medical countermeasures platform was further reinforced by the AGM 2000 option exercise in July and the <unk> 79, or nine contract modification on September 30.

We have restarted operations update you and are helping J&J deliver on commitments related to their COVID-19 vaccine candidate.

The narcan nasal spray franchises, gaining momentum as we support the battle against the continuing public health crisis and opioids.

We are making steady progress building, our CMO business as evidenced by recent contract awards.

And we are advancing our R&D programs, most notably with the recent launch of the Chikungunya phase III trial.

Having said that there are clearly several topics that merit further explanation starting with the primary drivers of our revised 2021 financial guidance as laid out on slide 11.

The biggest influence relates to our mutual agreement with the U S government to terminate the CIA ADM contract and associated task orders.

As we disclosed in an 8-K filed this afternoon as part of this agreement to close out the arrangement the value of the BARDA task order was reduced by $180 million.

This change will be partially offset by the recognition of $60 million and deferred revenue and other final payments related to the CIA ADM based agreement.

You'll also note that given the continued strong momentum in narcan nasal spray, we increased the full year forecast range of that product by $95 million.

After taking into account various other puts and takes we have tightened the range of our total revenues, which lowered the midpoint by $50 million.

We also disclosed in today's press release, but as of September 30, we reversed $86 million of revenue and removed accounts receivable balances related to uncollected amounts under the BARDA task order.

During the third quarter. Following a review of our revenue recognition policy, we determined that it was appropriate to reclassify certain sweet reservation fees from stand ready obligations to leases and therefore to apply and lease accounting guidance.

You will note that our income statement now has separate line items for <unk> services and <unk> leases.

This change should also allow you to better understand the underlying fundamentals of our CD amongst service related revenue.

Under the lease accounting guidance based on uncertainty regarding collectability of the full contracted amount we converted to a cash basis of accounting for the BARDA task order accordingly in the third quarter, we adjusted our revenue to align with the $315 million of cumulative cash collected under the BARDA task order from May 2012.

Through September 2021.

Looking ahead to the fourth quarter pursuant to the termination of the CIA ATM agreement, we expect to recognize $215 million of revenue.

On the CD amongst services side. However, we are currently seeing several trends, which we're applying pressure to margins.

These include lower capacity utilization for drug substance production a debut while it is solely dedicated to J&J as COVID-19 vaccine candidate.

The additional investments we are making up a view in support of our quality enhancement plan and higher raw material costs than originally anticipated.

While these factors are currently producing <unk> gross margins below our expectations over time, we anticipate that CMO profitability will improve as we continue to grow our CMO revenue base increase network utilization drive a higher mix of drug substance manufacturing realize scale efficiencies and improved productivity.

To facilitate investors' understanding of these trends. Please note that today's press release includes separate calculations, a product gross margin and <unk> gross margin.

With that let's turn to the third quarter numbers.

As indicated on slide 12 highlights include total revenues of $329 million below the prior year period, and our guidance principally due to the $86 million reversal of revenue for the BARDA task order I mentioned earlier.

Looking beyond revenue, we are now breaking out cost of goods sold between product and CD most services.

Product cost of goods sold in the quarter over $103 million, a $17 million decrease from the prior year largely due to one time charges in the prior year offset by increases in the current year due to higher product sales.

CDMA cost of goods sold were $114 million and $86 million increase over the prior year, reflecting the impact of out of period adjustments or $37 million as well as incremental costs at our baby facility as mentioned previously.

Gross R&D expense of $50 million lower than the prior year, primarily reflecting a nonrecurring $29 million impairment charge in the prior year.

Net R&D expense of $33 million or 10% of adjusted revenue in line with the prior year.

SG&A spend of $82 million or 25% of total revenues and increase over the prior year, reflecting growth and head count and professional services and gross margin was 30% in the quarter.

As I mentioned earlier, we are now providing two additional gross margin metrics.

Just did product gross margin was 62% of product sales consistent with the prior period.

And adjusted CD, Most services gross margin was 10% lower than the prior period, primarily reflecting the impact of increased operating costs at our baby facility and the implementation of our quality enhancement plan.

Turning to slide 13, we will now review our key CD Mo metrics.

In the third quarter, we secured new business of $180 million, reflecting robust demand for our services.

As of September 30th for Rolling backlog was just over $1 billion, a 9% decline from the second quarter, reflecting the impact of the broader task order termination.

You will find a detailed roll forward table related to backlog on page five of today's earnings press release.

And lastly, as of September 30th the opportunity funnel was $284 million down from $672 million at 230.

As I said before primarily reflecting a significant new business went in the current quarter as well as the loss of two large opportunities.

In the fourth quarter.

On a different note given the changes we've seen in our business during the pandemic. We've received a number of questions about what to expect from the business going forward as.

As you know our custom has been to provide our first look at annual guidance at the beginning of each calendar year. Once our budgeting process is complete we expect.

To maintain that practice for 2022, but I would like to offer a few thoughts on directional trends. So you can better understand the shape of the underlying business.

In terms of topline revenue we.

We haven't finished our budgeting process for 2022, but the current analyst consensus for total 2022 revenue Directionally seems to be in line with our thinking.

More specifically, we anticipate that our medical countermeasures business will remain steady with high visibility provided by the long term contracts. We currently have in place.

The opioid crisis has been worse than we anticipated when we acquired the program and as a result, narcan nasal spray revenue has continued to exceed expectations.

Of course the question on everyone's mind is what will happen if a generic competitor enters the market.

More than half of our market is in the public interest space and some not necessarily subject to the usual automatic switch for AB rated products.

And for the remaining product markets as Bob said, we are prepared to launch an authorized generic in partnership with a large generics company. All in all we are confident that it will continue to be a meaningful contributor to both our top and bottom line going forward.

On the travel health front, we are monitoring and calibrating our expenses to international travel conditions and do not anticipate meaningful revenue from our travel vaccines next year, although we are expecting upticks in travel following that.

For <unk>, we expect we will continue to support J&J out of our Bayview site and build on the opportunities we see to serve customers from several of our other revenue generating sites.

Any site in support of J&J.

And we realized an important pipeline milestone with the Chick vaccine phase III trial launch last month.

While our guidance for this year has been revised a bit to reflect the termination of the CIA ATM agreement as well as current profitability trends in our <unk> business, bringing the CIA ATM agreement to conclusion was a clarifying step forward for the company.

Finally, our conviction in the long term growth potential of our business is as strong as it has ever been.

That completes my prepared remarks, and I'll now turn the call over to the operator, so that we can start the question and answer session operator.

Ladies and gentlemen, if you have a question at this time. Please press Star then the number one <unk> Bob and then everyone. If you have questions. Please press star one on your telephone keypad.

Your first question comes from the line Brandon Folkes from Cantor Fitzgerald. Your line is now open.

Hi, Thanks for taking my questions.

First can you just run the CIA DM contract pad.

Can you maybe just elaborate in terms of your relationship with HHS.

And maybe the individuals responsible for that contract versus any impact on your relationship with the strategic national stockpile.

And just any clarification on the statement that pad.

Yes.

So of the revenue base to the lack of cash collection did they stop paying you before the mutual termination of that agreement.

And then secondly, maybe just on Narcan.

Do you expect the generic entry on AG to expand the market at a faster rate than it is currently expanding.

Is price not Randy a limitation in that.

Market at this stage. Thank you.

Thanks, Brandon So I'll take the first part of the first question.

Think we all recognize that the CIA ADM as it was contemplated back in 2012 was a good idea at the time, but unfortunately, it didn't work out as it was anticipated.

I think secondly, likewise the task order for COVID-19 work that we've been doing was also a good idea and to declare that government and the public in general has benefited significantly from the activities that were conducted under that cash quarter.

I think the government's decision to remove the astrazeneca product from Bayview.

Those amounts.

As we came to September 30th based on where we were at that point in time, we determined that it was no longer probable that we were going to collect 100% of the contracted amount.

And as a result that triggered a need for us to to convert to cash basis of accounting for that under the lease accounting guidance and so that is why when we compared the amount of revenue that we had accrued up to that point with the amount of cash that we'd actually collected there was a difference of $86 million, which we reversed in the third quarter.

Thanks, Brian or address your second question, which is.

<unk> may come back but.

No assurance that it will just.

Sure.

I'd be guessing quite frankly at the the duration of how long things sit in the funnel I think we have pretty good clarity that once there is a request for proposal that is.

Given to us and they will respond to I would think within probably three to six months, we know or have a pretty good idea of whether it's going to be acted upon or actionable or not so that would be my my estimate just.

Okay, Great and maybe just two more one following up on the last question on Narcan.

Maybe bigger picture when you talk about that representing a core part of their long term portfolio can you elaborate on what that looks like.

How you envision it.

We for US, it's still a sizable asset going forward.

And that is notwithstanding the fact that we continue to look for additional assets and additional lifecycle management opportunities for narcan nasal spray, including the <unk>.

Work that we've done to date regarding dating and the temperature range for the product as well as the by dose product. So we think it's an attractive area and importantly, it really is on point with our strategy of protecting and enhancing life.

Thank you.

Thanks, Jeff.

Your next question comes from the line of Kian <unk> from Chardan. Your line is now open.

Yes. Thank you.

Couple of questions just follow up on the on the last one with respect to.

Having an authorized generic how much price pressure do you think that introduces.

In the retail market.

Yes, I think K. Thanks.

Joining the call and thanks for the question I think as with any branded.

Versus generic competition is going to be much like it is anywhere else, so theres going to be significant pressure on price.

When a generic comes in we're clearly going to lose some market share will gain some back with our authorized generic.

Not really K, we've kind of put that on the back burner in order to prioritize.

Our effort on the Covid HIV side.

And it's.

Potentially at a stage, where we could reinvigorate, but right now the focus is on Covid AIG with not yet.

Okay. Thanks.

Your next question comes from the line of Lisa Springer from singular Research. Your line is now open.

Okay.

Hi, Robert Maltbie in for Lisa.

Thank you for taking my questions.

Regarding the.

The contract.

GM contract and the amount the government.

How common is it for and your experience for the government to.

Get behind and.

What's the rationale and not collecting the balance owed.

Yes, Robert Thanks, it's been awhile since <unk> talked thanks for joining the call.

I'm going to let rich respond to the collectability or the responsiveness of payment by the government but.

As you followed us for many many years you know that the government has always paid within a very short period of time I think this clearly is unusual circumstance.

That was partly impacted by the complexity of the task order that we've put in place which.

And just remember that that task order included reservation fee for a number of facilities, including capital expenditure investment by the government and a number of our facilities and includes us doing a lot of work for fill finish and drug product. So I think the complexity of the task order.

In large part.

Impacted the timing and at the end of the day I think the government decided that they really didn't need that reservation. It took them a while to figure that out and once they figure that we had a productive conversation and mutually agreed to end the task order and then the ATM contract.

Okay.

One follow up.

Oh, sorry, sorry go ahead.

We're just to reinforce and I think Bob mentioned this earlier, but we did believe that we were legally entitled to the full payment, but we did make a business decision in this circumstance after having discussions with the government that the most appropriate way to resolve the task order and the CIA relationship more broadly whats to come to this arrangement.

And final follow up.

Related to the <unk>.

Chicken lagoon.

<unk> senior vaccine could you comment on the potential value of the market.

The vaccine and who would be the customers. Thank you.

Yes, Robert Thanks, again, I'm going to let my colleague Adam Havey talked about that Adam again, as our Chief operating officer runs now oversees all three of our business units.

Adam I think you are on the call as he can respond to that for Robert.

Sure. Thanks, Bob Thanks, Robert for the question. So just just as a reminder, the.

During the virus is carried by mosquitoes like malaria Zika.

The disease. It causes can have both acute consequences and chronic ones somewhat like Lyme disease.

And that's why vaccination is really really critical there is a significant.

Met medical need here.

We're looking at travelers from the U S alone kind of pre pandemic, where there are approximately $35 million unique travelers per year going to check endemic regions and that's about it.

Three times, the number for typhoid and.

Much almost a law greater than in diseases like Colorado. So we.

We think it's a significant opportunity we are developing our candidate.

Based on that DLP technology that we've talked about we believe it can deliver a really robust immunological response, good safety profile and be very competitive in this in this market space. So we're excited about it and looking forward to getting the data and moving the product forward.

Hello.

Thank you.

Thanks, Adam Thanks, Robert.

And then everyone. If you have questions. Please press star one on your telephone keypad.

I am showing no further questions at this time I would now like to turn the conference back to Mr. Robert Burrows.

Thank you Terry with that ladies and gentlemen, we now conclude the call. Thank you for your participation. Please note an archived version of today's webcast as well as a PDF version of the slides used during todays call will be available later today and accessible through the investors landing page on the company website.

Thanks, everyone again for participating and we look forward to speaking with all of you in the future.

This concludes today's conference call. Thank you all for your participation you may now disconnect.

[music].

Yes.

[music].

Ladies and gentlemen, thank you for standing by and welcome to the emergent bio solutions third quarter 2021 financial results conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

I'll ask a question during the session you will need to press star one on your telephone keypad.

You require any further assistance. Please press star zero I would now like to hand, the conference over to the company. Please proceed.

Thank you Jeremy and good afternoon, everyone. This is Bob Burrows Investor Relations Officer for the company. Thank you for joining US today as we discuss the operational and financial results for the third quarter 2021.

As is customary today's call is open to all participants on the call is being recorded and is copyrighted by emergent bio solutions.

In addition to today's press release, there is a series of slides accompanying this webcast available to all webcast participants.

Turning to slides three and four during today's call, we may make projections and other forward looking statements related to our business future events, our prospects or future performance. These forward looking statements are based on our current intentions beliefs and expectations regarding future events.

The forward looking statement speaks only as 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 as well as the risk factors identified in our periodic reports filed with the SEC when evaluating our forward looking statements.

During today's call. 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 tables found in today's press release regarding our use of adjusted net income adjusted EBITDA and adjusted gross margin and a reconciliation between our GAAP financial measures and these non-GAAP financial measures.

Turning to slide five of the agenda for today's call will include Bob Kramer, President and Chief Executive Officer, who will comment on the current state of the company and Rich Lindahl, Chief Financial Officer, who will speak to the financials from <unk> to 'twenty, one as well as the forecast for full year 'twenty one this.

This will be followed by a Q&A session, where additional members of the executive leadership team are present and available as needed finally for the benefit of those who may be listening to the replay of the webcast. This call is held and recorded on November four 2021. Since then emergent may have made announcements related to topics discussed during today's call and with that introduction I would now like to turn the call over to Bob for his comments begin.

With slide six.

Thank you Bob and good afternoon, everyone and thanks for joining the call today I'll provide an update on the progress that we've made in our babies site.

And then talk a little bit about our recent accomplishments and milestones.

And further talk about the business enhancements, we have implemented to better focus on our customers.

I'll also discuss our revised full year guidance and our decision to end our involvement in the centers for our innovation in advanced development and manufacturing or CIA ADM program with the U S government.

My comments are summarized across slides seven and eight in the deck accompanying the call.

So let's get started as you've seen this year are emergent team and our business has shown their strength and resilience as we made substantial progress in the quarter.

As of the end of the quarter. We've contributed over 100 million dose equivalents of COVID-19 vaccine for global distribution importantly, we look forward to continuing to support J&J is ongoing vaccine production in the months ahead, while continuing to support the regulatory path for their vaccines.

Next we took care of key ongoing commitments from the U S government on two core medical countermeasure products first we received a contract modification exercising and funding the second of nine annual options to supply <unk> to the strategic.

Dziedzic National stockpile valued at approximately $182 million secondly, we received a contract modification exercising and funding the procurement of additional doses of AB 799 for the SNS. They had approximately $399 million over the next 18 months.

Also our narcan nasal spray team continues to perform well above expectations in the midst midst of a worsening opioid crisis, helping ensure this critical product it's in the hands of the patients and caregivers who need it.

We also launched our pivotal phase III trial for our chikungunya vaccine check the DLP a key milestone for us because it's the first phase III drug development program that emergent has funded on its own.

More importantly, it underscores our commitment to progressing our pipeline programs and pursuit of critical public health threats and expanding our travel health vaccines franchise.

And finally, we continue to grow our CMO operations, securing a new multiyear contract to produce province Therapeutics mrna COVID-19 vaccine candidate at our site in Winnipeg.

As these highlights demonstrate our core strategy and diversified business model remains strong.

In addition, today, we're announcing that the department of health and human services and immersion have mutually agreed to end our partnership and the CIA ADN program. The agreement will close out all open obligations and task orders issued under our Cie ADM based contract, including the cask.

Quarter related to COVID-19 response.

We're proud of the work all of our employees have done over the last nine years to honor our ADM.

And commitments and Youll recall when the program was initiated in 2012 and a recognition of the shortage of domestic manufacturing capability needed to respond to an unforeseen widespread public health threat. Following the H one N one influenza pandemic.

While an innovative idea execution of the CIA ADN program and the necessary operational investments by all administrations fell short of what was needed to maintain capability in case of an emergency.

In fact, when the Covid pandemic struck and merchant was just one of two original partners remaining in the program. Despite the issues. We responded swiftly engaging several of our facilities to meet the government's needs and made incredible progress in a timeframe never before attempted under very challenging.

Conditions.

Our COVID-19 work with BARDA under the CIA ADN program included a number of activities. These included a reservation of capacity at our Bayview Camden and Rockville sites.

Direct capital investment by the government and additional fill finish capacity at our Camden in Rockville site bulk.

Bulk drug substance manufacturing for Astrazeneca and the reserve space at Bayview.

And finally drug product manufacturing for various COVID-19 therapeutic candidates in the reserve space and Camden.

As a reminder of the COVID-19 work under the CIA ATM program was always expected to end this year and importantly, our decision does not affect our work with Johnson and Johnson and there was never part of our CIA EDM contracting we will continue to produce their COVID-19 vaccine drug substance at our Beijing facility.

And as I mentioned, the top of the call. We're extremely proud that our collaboration with J&J and in addition to Astrazeneca has contributed over 100 million dose equivalents of COVID-19 vaccine for global distribution.

So while we conclude our involvement in the CIA ADM program and bring to closure of this important chapter in our business it needs to be said that the work we accomplished under the program and related task order contracts with the U S. Government served a critically important purpose one that our entire organization is immensely proud of.

Despite the setbacks, we had earlier in the year. The team has been committed to our mission of protecting and enhancing life and steadfast and learning from our past to be even better I am proud of the team's resilience and the positive impact on millions of lives across the globe and importantly, we're not done yet as we look forward.

We are encouraged and optimistic about the opportunities we see ahead across our entire business.

Let me now pivot to recent business changes, we've implemented in support of our strategy.

During the quarter, we shifted our operating structure to now have three business lines, each focused on distinct customer or market types. They are the newly created government or medical countermeasure business, the commercial business as well as the services or CMO business, which.

<unk> remains essentially unchanged to be clear all three of these report to our Chief operating officer, Adam Havey.

The government or MCM business will be led by Paul Williams, who was previously running the vaccines business unit. This new structure will better serve our customers by sharing their breadth and depth of experience as one team and reduces the complexity with multiple touch points going into the government on different business.

Units the.

The commercial business will be led by Doug White, who previously ran the devices business unit. He will not drive our core commercial capabilities and seek new investment opportunities Doug's portfolio includes narcan nasal spray travel vaccines and other similar customer facing products.

This organizational change provides an opportunity to put the strategic and operational pieces of this business under one umbrella that were previously across multiple business units.

<unk> us to expand into new markets and efficiently integrate newly acquired products in the future.

The services or <unk> business, the head of which we're continuing to actively recruit for we'll continue to service, our pharma and biotech innovator customers, providing development drug substance and drug product manufacturing services that capitalize on our core skills and capabilities.

As for R&D programs, we established a centralized and cross functional product development Committee that will govern the R&D portfolio. We're also creating a science and innovation team led by Dr. Laura <unk>, who previously ran the therapeutics business unit.

Overall, this new structure positions us to execute effectively on our strategic plan and deliver long term success, strengthening our foundation and providing new opportunities for growth.

So getting back to the operational highlights as I mentioned, we resumed production of J&J <unk> COVID-19 vaccine and our baby facility in late July following the implementation of a rigorous and comprehensive quality enhancements and the FDA has permission to restart over the last five months, we've invested millions.

$1 to overhaul cleaning procedures upgrade our facilities implement additional quality control and oversight practices and make significant improvements to the processes for batch record keeping personnel training data integrity and lab testing and merchant teams along with support from our <unk>.

JJ colleagues overseeing all operations and materials transfer.

We took the added step to bring in a recognized independent consultancy, who is expert in quality control and who are now reviewing and performing certifications prior to release of any boxes. We continue to work closely with the FDA and J&J towards increasing our production level consistent with these.

New procedures finally, I want to commend our team who are.

Around the work efforts over the last 18 months and accelerated the transformation of our Bayview facility from a clinical stage facility to one that is poised to support much larger scale production.

Now moving to our core government or medical countermeasures business.

Our work, helping the U S government protect Americans against smallpox anthrax and other category a biologic agents remains a top priority for the company.

All that we previously announced the U S government exercised and funded the next term extension for <unk> 2000 under our 10 year contract and we also secured the next option exercise for our smallpox therapeutic DRG IV.

We recently filed that up with the U S government exercising the final option under the existing contract to supply doses of our next generation Anthrax vaccine candidate <unk> 799 to the strategic national stockpile that approximately $399 million over the next 18 months as a reminder, the.

Current contract for AB seven nano nine facilitates procurement by the SNS, while we seek full FDA approval and to that end I am pleased to announce two important updates today on the ongoing regulatory path for AVP 799, first the FDA has agreed to our request.

For a rolling review of the <unk> BLA. The Rolling review allows us to submit sections of the application to the FDA as they are completed rather than waiting until the entire BLA package is compiled we anticipate initiating the BLA submission in mid December.

Based on this timing, we anticipate DLA approval by the FDA in late 2022 or early 2023.

Second the FDA has granted orphan drug designation for AB 799. This designation provides development incentives, including a waiver of the BLA filing fee as well as potential seven year marketing exclusivity upon regulatory approvals.

On the R&D front, we recently initiated our pivotal phase III safety and Immunogenicity study for a single dose chikungunya vaccine candidate.

Check the DLP is the only virus like particle based vaccine candidates currently in development for active immunization against Chikungunya disease. The study expected to enroll 3150 participants and 50 U S sites in the coming months.

Like to congratulate the teams across our organization, who made this significant milestone possible and who are advancing the development pipeline that will help fuel the long term growth for our company. We look forward to updating you on this program as we make progress.

Finally with the launch.

The potential launch of a few other phase one studies anticipated over the next year as well as continued progress across our auto injector platform programs focused on chemical threats I remain encouraged by the contribution of our R&D programs and the effect that could have on our growth in the coming years.

Moving next to our <unk> business I want to highlight that we continue to see growth in this area both related to the pandemic and beyond we continue to receive interest from both existing clients and new prospects from small mid and large sized companies as well as governments and other organizations importantly, we're win.

New business across all three service pillars of development services drug substance and drug product, including drug packaging. For example, during the quarter, we signed a new five year agreement with Providence Therapeutics to support its mrna vaccine development out of our Gaithersburg in Winnipeg facility.

Building off an existing agreement this new baseline agreement is valued at $90 million and uses portions of all three of our integrated service capabilities demonstrating the value of our integrated molecule to market models for customers. We will continue to cultivate growth expansion and maturation of this core.

Business.

With respect to Narcan nasal spray our focus on the public health threat posed by the opioid epidemic is as strong as ever our Narcan team has worked tirelessly to ensure that narcan nasal spray is available and affordable as overdoses continue to devastate families and communities nationwide we.

We remain committed to combating this crisis not only through our work on Narcan, but also through outreach efforts and public campaigns to elevate awareness of the dangers of opioids.

On the ongoing patent infringement litigation front recall that the U S Circuit Court of Appeals held final oral arguments on August the second of this year, while timing is up to the appellate court. We continue to believe a decision could come by the end of this year importantly in the event of a generic entry.

We are prepared to launch an authorized generic product in partnership with a large generic company and are confident our ability to maintain significant market share longer term, we see narcan and more broadly our opioid related portfolio, a core component of our portfolio of solutions impacting public.

<unk>.

Finally, let me update two important corporate updates first I'm pleased to announce that we intend to publish our inaugural ESG or sustainability report later this month to report will provide insight into our environmental social and governance practices. These include product.

<unk> and patient safety standards, our human capital and employee focused programs.

Our existing charitable and volunteer programs, our work to safeguard the environment and health of our communities and employees as well as our corporate governance and business ethics principles and practices.

I also wanted to note that on a personnel front Mary oats previously our head of global quality has decided to pursue a new career opportunity and has left emergent.

We're conducting an external search for a new head of global quality in the meantime, I'm confident that our team of talented dedicated professionals will continue to be important quality advancements made in the last several months.

Value.

With that I'll turn the call over to rich, who will take us through the detailed results for the quarter rich. Thank.

Thank you Bob Good afternoon, everyone and thank you for joining the call.

I'll start on slide 10, and open my remarks, with some summary thoughts to put today's earnings report into context.

You just heard from Bob solid execution in the third quarter continues to illustrate the strength and durability of our differentiated business.

Our medical countermeasures platform was further reinforced by the AGM 2000 option exercise in July and the 87 909 contract modification on September 30.

We have restarted operations update you and are helping J&J deliver on commitments related to their COVID-19 vaccine candidate.

Narcan nasal spray franchise is gaining momentum as we support the battle against the continuing public health crisis and opioids.

We are making steady progress building, our CMO business as evidenced by recent contract awards.

And we are advancing our R&D programs, most notably with the recent launch of the chicken <unk> phase III trial.

Having said that there are clearly several topics that merit further explanation starting with the primary drivers of our revised 2021 financial guidance as laid out on slide 11.

The biggest influence relates to a mutual agreement with the U S government to terminate the CIA ATM contract and associated task orders as.

As we disclosed in an 8-K filed this afternoon as part of this agreement to close out the arrangement the value of our BARDA task order was reduced by $180 million.

This change will be partially offset by the recognition of $60 million and deferred revenue and other final payments related to the CIA ADM based agreement.

You'll also note that given continued strong momentum in narcan nasal spray, we increased the full year forecast range of that product by $95 million.

After taking into account various other puts and takes we have tightened the range of our total revenues, which lowered the midpoint by $50 million.

You will note that our income statement now had separate line items for <unk> services and CMO leases.

This change should also allow you to better understand the underlying fundamentals of our CD most service related revenue.

Through September 2021.

Looking ahead to the fourth quarter pursuant to the termination of the CIA AVM agreement, we expect to recognize $215 million of revenue comprised of $155 million of task order closeout payments and the $60 million of deferred revenue and other I just discussed.

Termination of the CIA ATM agreement also results in asset write downs of approximately $38 million. So we.

The net addition to pretax income in the fourth quarter related to this event to be approximately $177 million.

Second CDM on metrics.

During the quarter, our new business wins were $118 million and very strong.

<unk> performance for the organization, primarily reflecting the impact of the Providence therapeutics contracts for Covid related work.

As for backlog the sequential change reflects the impact of the termination of our BARDA task order.

Regarding the opportunity funnel the period to period decrease reflects both the conversion of opportunities into secured business as well as two large contract opportunities that we did not win one is a company that decided to take the work in house and the other is one that decided to defer the work to a future time.

That said, we continue to identify new leads and secure new business in this period to period fluctuation is not surprising as we pursue opportunities.

Lastly, gross margins and profitability.

As we have previously discussed our gross margins are primarily driven by revenue mix across several dimensions.

<unk> sales proportionate products versus services and the types of services delivered.

The adjusted gross margins on our products continued to remain stable and consistent with historical patterns.

On the CD amongst services side. However, we are currently seeing several trends, which are applying pressure to margins.

These include lower capacity utilization for drug substance production a debut while it is solely dedicated to J&J as COVID-19 vaccine candidate.

The additional investments we are making in support of our quality enhancement plan and higher raw material costs than originally anticipated.

The higher mix of drug substance manufacturing.

Scale efficiencies and improved productivity.

To facilitate investors' understanding of these trends. Please note that today's press release includes separate calculations, a product gross margin and <unk> gross margin.

With that let's turn to the third quarter numbers.

And adjusted negative adjusted EBITDA of negative $3 million and adjusted net loss of $19 million, both significantly below the prior year period and due to a variety of factors, which we will discuss in a moment.

Other key items in the quarter include.

Narcan nasal spray sales were $133 million, an increase over the prior year, reflecting a clear continuation of this franchise is robust performance and driven by continued strong demand for this critical drug device combination product for opioid overdose reversal across both the retail and public interest channels in the United States as.

Well as increased Canadian sales.

Hey, Cam 2000 sales were $81 million higher than the prior year due to timing of deliveries. Following our announcement in July of the U S government's exercise of the second option under the existing 10 year procurement contract.

As we've stated previously we expect to complete all related deliveries under this option exercised by the end of 2021.

Anthrax vaccines sales were $16 million lower than the prior year due to timing of deliveries as the modification to the BARDA contract for 87 909 was not made until the last day of the quarter.

Other product sales were $41 million consistent with the prior year and CMO revenues came in at $42 million lower than the prior prior year period, due primarily to our move to cash basis revenue accounting for the BARDA task order and partially offset by $38 million in out of period adjustments related to our change in <unk>.

Services revenue recognition policy, which will be detailed in our 10-Q filing.

Looking beyond revenue, we are now breaking out cost of goods sold between product and CMO services Prada.

Product cost of goods sold in the quarter were $103 million, a $17 million decrease from the prior year largely due to onetime charges in the prior year offset by increases in the current year due to higher product sales.

<unk> cost of goods sold were $114 million and $86 million increase over the prior year, reflecting the impact of out of period adjustments of $37 million as well as incremental costs at our Bayview facility as mentioned previously.

Gross R&D expense of $50 million lower than the prior year, primarily reflecting a nonrecurring $29 million impairment charge in the prior year.

Net R&D expense of $33 million or 10% of adjusted revenue in line with the prior year.

SG&A spend of $82 million or 25% of total revenues an increase over the prior year, reflecting growth in head count and professional services gross margin was 30% in the quarter.

As I mentioned earlier, we are now providing two additional gross margin metrics.

Adjusted product gross margin was 62% of product sales consistent with the prior period.

And adjusted CD amongst services gross margin was 10% lower than the prior period, primarily reflecting the impact of increased operating costs at our bayview facility and the implementation of our quality enhancement plan.

Turning to slide 13, we will now review our key CD Mohmet tricks in the third quarter, we secured new business of $180 million, reflecting robust demand for our services as.

As of September 30 for Rolling backlog was just over $1 billion.

A 9% decline from the second quarter, reflecting the impact of the broader task order termination.

You will find a detailed roll forward table related to backlog on page five of today's earnings press release.

And lastly, as of September 30, the opportunity funnel was $284 million down from $672 million at June 30.

As I said before primarily reflecting a significant new business win in the current quarter as well as the loss of two large opportunities.

On Slide 14, you can see the sequential trends in these metrics over the last five reporting periods. We look forward to making further progress in this important part of our business as we move forward from here.

Moving on to slide 15, I will touch on select balance sheet and cash flow highlights. We ended the third quarter in a strong liquidity position with $404 million in cash and Undrawn revolver capacity of just under $600 million.

Our net debt position was $454 million and our ratio of net debt to trailing 12 month adjusted EBITDA was one times.

Our year to date operating cash flow was negative $8 million, primarily reflect the timing of cash collections and increases in inventory balances. Additionally, we reported cumulative year to date capital expenditures of $178 million.

Please turn to slide 16, and 17 for a review of our 2021 forecast and associated key consideration.

As detailed in today's press release, we are revising our 2021 outlook and our new ranges are as follows total revenue of $1 7 billion to $1 8 billion.

Narcan nasal spray sales of $400 million to $420 million.

Anthrax vaccines sales of $250 million to $260 million.

ATM 2000 sales of $200 million to $220 million and for the <unk> business. We now anticipate a range of 600 million to $650 million.

Our profitability guidance includes adjusted EBITDA of $500 to $550 million and adjusted net income of 315 million to $350 million.

Importantly, our 2021 revised outlook takes into account a number of key considerations, which are listed in our earnings press release, and many of which are unchanged from our last update in July.

These include no actually vacuum AD revenue this year, the naloxone market remains competitive with at least one new entrant this year, which we actually saw with a branded competitor coming on marketing in Q3.

No generic entrant prior to the resolution of our patent litigation case.

Continued manufacturing of J&J as COVID-19 vaccines bayview.

The considerations that had been revised are as follows we have incorporated the financial implications of our mutual agreement to terminate the CIA ATM agreement and related task orders, including the expected payment in Q4 of the rebel of the relevant agreed upon amounts.

The expected range of adjusted gross margin is now 54% to 56% taking into account both year to date performance and anticipated performance in the fourth quarter.

And then on a different note given the changes we've seen in our business. During the pandemic. We've received a number of questions about what to expect from the business going forward.

As you know our custom has been to provide our first look at annual guidance at the beginning of each calendar year once our budgeting process is complete.

We expect to maintain that practice for 2022, but I would like to offer a few thoughts on directional trends. So you can better understand the shape of the underlying business.

In terms of top line revenue.

We haven't finished our budgeting process for 2022, but the current analyst consensus for total 2022 revenue Directionally seems to be in line with our thinking.

More specifically, we anticipate that our medical countermeasures business will remain steady with high visibility provided by the long term contracts. We currently have in place.

The opioid crisis has been worse than we anticipated when we acquired the program and as a result, narcan nasal spray revenue has continued to exceed expectations.

Of course the question on everyone's mind is what will happen if a generic competitor enters the market.

More than half of our market is in the public interest space and some not necessarily subject to usual automatic switch for AB rated products.

And for the remaining part market as Bob said, we are prepared to launch an authorized generic in partnership with a large generics company all.

All in all we are confident that it will continue to be a meaningful contributor to both our top and bottom line going forward.

For <unk>, we expect we will continue to support J&J out of our Bayview site and build on the opportunities we see to serve customers from several of our other revenue generating sites.

In terms of profitability, we are making investments in our manufacturing and quality systems that are putting pressure on our CMO gross margins, but we expect these will continue to gradually improve over time.

And we are taking a disciplined approach to managing our SG&A expenses as we prepare for a return to stronger top line growth in 2023 and 2024.

With respect to R&D, we continue to invest in long term value drivers as well as programs with non dilutive funding, but we're balancing those investments with some anticipated portfolio rationalization.

As a result, we currently anticipate that these trends may constrained adjusted EBITDA margins to a level that is at or below the range as we saw in 2018 to 2019.

We will refine these views and expect to provide more definitive information early in the new year.

Conclude please turn to slide 18 for some summary comments.

In the third quarter 2021, we continue to deliver solid performance in certain key aspects of our business anthrax vaccines, <unk> 2000, and the rest of the core medical countermeasure products, the narcan nasal spray franchise as well as the new business wins and CMO services.

We also experienced continued forward progress in scaling up the production capabilities at the <unk> site in support of J&J.

And we realized an important pipeline milestone with the Chick vaccine phase III trial launched last month.

While our guidance for this year has been revised a bit to reflect the termination of the CIA AVM agreement as well as current profitability trends in our <unk> business.

The CIA ATM agreement to a conclusion with a clarifying step forward for the company.

Finally, our conviction in the long term growth potential of our business is as strong as it has ever been.

That completes my prepared remarks, and I'll now turn the call over to the operator, so that we can start the question and answer session operator.

Ladies and gentlemen, if you have a question at this time. Please press Star then the number one on your telephone keypad and then everyone. If you have questions. Please press star one on your telephone keypad.

Your first question comes from the line Brandon Folkes from Cantor Fitzgerald. Your line is now open.

Hi, Thanks for taking my questions.

Let me first can you just run the CIA DM contract pad.

Can you maybe just elaborate in terms of your relationship with HHS.

And maybe the individuals responsible for that contract question any impact on your relationship with the strategic National stockpile.

And just any clarification on the statement that pad.

Yes.

Is there still the revenue base to the lack of cash collection did they stop paying you before the mutual termination of that agreement.

And then secondly, maybe just on Narcan.

Do you expect the generic entry on AG to expand the market at a faster rate than it is currently expanding.

Is price not Randy limitation.

Market at this stage. Thank you.

Thanks, Brandon So I'll take the first part of the first question.

Think we all recognize that the CIA ADM as it was contemplated back in 2012 was a good idea at the time, but unfortunately, it didn't work out as it was anticipated.

I think the.

Governments decision to remove the astrazeneca product from Bayview.

And to not direct additional work to Bay view to take its place made it pretty clear that they no longer needed that reserve space.

And while we were.

Legally entitled to receive the full payment under the task order in the contractual obligations, we made the business decision.

After a discussion discussions with the government to the best way forward was to end.

And the task order in the CIA ADM relationship.

Part of your question was really related to the relationships between kind of the CIA and the SNS and to be clear a CIA ADM is government overseen by BARDA.

Under HHS.

The strategic National stockpile is really under the.

The asper the assistant Secretary for preparedness and response, so it's a sister organization, but not directly under our BARDA.

Maybe I'll turn it to rich in terms of the accounting and the cash question Brendan.

Yes, so Brandon to answer your question yesterday.

The government had been behind on payments.

Related to the task order.

As you can appreciate every quarter, we do an assessment of our accounts receivable and based on our assessment at the end of the second quarter. We had believed that it was probable that we were going to collect those amounts.

As we came at September 30th based on where we were at that point in time, we determined that it was no longer probable that we were going to collect 100% of the contracted amount.

And as a result that triggered a need for us to to convert to cash basis of accounting for that under the lease accounting guidance and so that is why when we compared the amount of revenue that we had accrued up to that point with the amount of cash that we had actually collected there was a difference of $86 million, which we've reversed in the third quarter.

<unk>.

Thanks, Brian ill address your second question, which is I think if I understand it correctly, you are asking whether or not.

A generic entrants and authorized generic entrants into the kind of the locks on space would have any material impact on the overall market size.

I think it's a little too early to guess what that impact would look like.

To be clear I think that the.

<unk> delivered naloxone market.

As you can probably attest to is still developing.

Our focus since acquiring the asset three years ago has been really to increase awareness to educate and to make sure that product is available to the millions of patients.

And customers, who need ready access to it so.

I don't anticipate much of an impact, but we'll have to wait and see.

Great. Thank you to you Brian I appreciate the.

Additional color. Thank you.

Thanks, Brian.

Yes.

Your next question comes from the line of Jessica Fye from Jpmorgan. Your line is now open.

Hey, guys. Good evening, thanks for taking my questions.

So I appreciate you kind of bridging us.

From the.

Kind of curious <expletive>.

The decline in the opportunity funnel.

And I'm curious.

How many potential clients are represented in the current opportunity funnel now and what's the average kind of contract size in there and sell.

Over what timeframe do you typically get clarity on whether a contract is.

Moving forward or not so I guess, how long does pitch business kind of fitting the final before you get.

Okay clarity.

Yes, Jeff Thanks to great great questions. So we haven't broken out the number or the average potential deal size and the opportunity funnel.

I think as rich indicated the two opportunities that.

He called out one.

It was kind of taken off the table because the the party decided to take it internal versus putting it out for bid and going to an external CMO relationship.

And I guess the other.

<unk> was deferred so that may come back but.

No assurance that it will adjust.

Sure.

I'd be guessing quite frankly at the duration of how long things sit in the funnel I think we have pretty good clarity that once there is a request for proposal that is.

Given to us and that we respond to I would think within probably three to six months, we know or have a pretty good idea of whether it's going to be acted upon or actionable or not so that would be my my estimate just.

Okay, Great and maybe just two more one following up on the last question on Narcan.

Maybe bigger picture when you talk about that representing a core part of their long term portfolio can you elaborate on what that looks like.

How you envision it.

Yeah.

Remaining a core part longer term and then lastly, and I.

Thank you kind of addressed this but I was curious if there is any positive CDMA lease revenue in the third quarter, that's being offset by the Florida negative revenue item.

Based on the 86, you just cited before maybe it's like that.

Alright.

Yes, just to knock that one off quickly yet there was $15 million of positive lease revenue that was offset by the negative 86 related to BARDA.

Okay and just on your on your first question regarding Narcan.

I guess, our view that its core.

A couple of things made clearly it's outperforming.

Our expectations today, and clearly the expectations that we had when we bought the asset a number of years ago, as rich articulated and a $400 million in revenue.

For projected for this year the range of 400 to 420 <unk>.

Clearly a positive impact.

Impact.

Even in a generic setting.

There is a generic entrants and our authorized generic product competing for space just to be clear.

As we've talked about on prior calls, we see that kind of competitive dynamic looking different in the retail market.

Then in the public interest market for a couple of important reasons, most notably in the public interest market. As you know the product is already discounted at a 40% discount. So the attractiveness economics is not the typical kind of branded versus generic fight it out for market share in that retail space, So even though.

With a authorized generic and generic competing in the retail space.

And some pressure in some competition in the public interest market for us, it's still a sizable asset going forward.

That is notwithstanding the fact that we continue to look for additional assets and additional lifecycle management opportunities for narcan nasal spray, including the work that we've done to date regarding dating and the temperature range for the product as well as the <unk> product. So we think it's an attractive.

Area and importantly, it really is on point with our strategy of protecting and enhancing life.

Thank you.

Thanks Jess.

Your next question comes from the line of Keith <unk> from Chardan. Your line is now open.

Yes. Thank you.

Couple of questions just follow up on the last one with respect to.

Having an authorized generic how much price pressure do you think that introduces.

In the retail market.

Yes, I think Kate thanks for joining the call and thanks for the question I think as with any branded <unk>.

Versus generic competition, it's going to be much like it is anywhere else, so theres going to be significant pressure on price.

When a generic comes in we're clearly going to lose some market share we will gain some back with our authorized generic.

That dynamic again is.

B, we think different and the public interest market for the reasons they articulated.

Not that it's going to be.

Not be able to be penetrated by a generic but we think that competitive dynamic is much different in the public interest market versus the retail market.

Okay, and just going back also to an earlier question about your relationships.

<unk>.

How would you characterize the strength of your relationship.

With people over at Ashford.

Yes, <unk> I think it's.

It's very strong.

You can look to a number of proof points, including the two significant.

Procurement contracts that were exercised and funded recently.

Along with the <unk> contract so.

As we talked about earlier this year, we had a couple of very important contract modifications and extensions to kind of get across the finish line and I think the team and I are.

Very proud of the fact that we've got to work through this I know that a lot of folks on the outside looking at US. We're concerned that the challenges that we've had with COVID-19 response, we're going to somehow impact that core of the business. That's clearly not the case and we move forward.

Okay final question.

For your high Permian for Covid, I know Cobra HRA G.

Recently went into phase three are you still doing development work for Covid.

<unk>.

Not really we've kind of put that on the back burner in order to prioritize.

Our effort on the Covid HIV side.

Hi.

<unk>.

It's potentially at a stage, where we could reinvigorate, but right now the focus is on Covid AIG with not yet.

Okay. Thanks.

Your next question comes from the line.

From singular research your line is now open.

Hi, Robert <unk> in for Lisa.

Thank you for taking my questions.

Regarding the.

The contract.

DM contract and the amount the government.

How common is it for and you expressed to the government too.

Get behind and.

What's the rationale of not collecting the balance owed.

Yes, Robert Thanks, it's been awhile since really talked thanks for joining the call.

I'm going to let rich respond to the collectability or the responsiveness of payment by the government but.

As you followed us for many many years you know that the government has always paid within a very short period of time, but I think this clearly is unusual circumstance.

That was partly impacted by the complexity of the task order that we've put in place which.

And just remember that that task order included reservation fee for a number of facilities, including capital expenditure investment by the government and a number of our facilities. It includes us doing a lot of work for fill finish and drug product. So I think the complexity of the task order.

In large part.

Impacted the timing and at the end of the day I think the government decided that they really didn't need that reservation. It took them a while to figure that out and once they figured it out we had a productive conversation and mutually agreed to end the task order and then the ADM contract.

Okay.

And one follow up.

Oh, sorry, sorry go ahead.

Okay.

And.

Follow up.

Related to the.

Chicken.

<unk> senior vaccine could you comment on the potential value of the market for the vaccine at who would be the customers. Thank you.

Yes, Robert Thanks, again, I'm going to let my colleague Adam Havey talked about that Adam again, as our Chief operating officer runs now oversees all three of our business units.

So Adam I think youre on the call as he can respond to that for Robert.

Sure. Thanks, Bob Thanks, Robert for the question. So just just as a reminder, the.

The chikungunya virus as carried by mosquitoes like malaria Zika.

The disease. It causes can have both acute consequences in chronic ones somewhat like Lyme disease.

And that's why vaccination is really really critical there's a significant unmet medical need here.

We're looking at travelers from the U S alone kind of pre pandemic, where there are approximately $35 million unique travelers per year going to chick endemic regions.

It's about.

Three times, the number for typhoid and.

It's almost a law greater than in diseases like Colorado. So.

We think it's a significant opportunity we are developing our candidate.

Based on that DLP technology that we've talked about we believe it can deliver a really robust immunological response.

Safety profile and be very competitive in this market space. So we're excited about it and looking forward to getting the data and moving the product forward.

Okay.

Thank you.

Thanks, Adam.

Robert.

And then everyone. If you have a question. Please press star one on your telephone keypad.

I am showing no further questions at this time I would now like to turn the conference back to Mr. Robert <unk>.

Thanks, everyone again for participating we look forward to speaking with all of you in the future.

Right.

This concludes today's conference call. Thank you all for your participation you may now disconnect.

Q3 2021 Emergent BioSolutions Inc Earnings Call

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