Q1 2024 Emergent BioSolutions Inc Earnings Call
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Operator: Good afternoon, everyone. I'm the operator for today's call. Thank you for joining today as Emergent discusses its operational and financial results for the first quarter of 2024. As is customary, today's call is open to all participants, and the call is being recorded and is copyrighted by Emergent BioSolutions.
Good afternoon, everyone I'm, the operator for today's call.
Speaker Change: As you for joining today as the merger discussions their operational and financial results for the first quarter of 2024.
Speaker Change: As is customary today's call is open to all participants on the call is being recorded and is copyrighted by emergent bio solutions.
Operator: In addition to today's press release, there is a series of slides accompanying this webcast available to all webcast participants. Turning to slide three, during today's call, Emergent may make projections and other forward-looking statements related to its business, future events, its prospects, or future performance. These forward-looking statements are based on their current intentions, beliefs, and expectations regarding future events. Any forward-looking statement speaks only as of the date of this conference call, and, Except as required by law, Emergent does not undertake to update any forward-looking statements to reflect new information, events, or circumstances.
Speaker Change: In addition to today's press release, there was a series of slides accompanying this webcast available to our webcast participants.
Speaker Change: Turning to slide three during today's call emergent may make projections and other forward looking statements related to their business future events.
Speaker Change: Brett or future performance. These forward looking statements are based on their current intentions beliefs and expectations regarding future events.
Speaker Change: Any forward looking statement speaks only as of the date of this conference call and its.
Speaker Change: Except as required by law the merger does not undertake to update any forward looking statements to reflect new information events or circumstances.
Operator: Investors should consider this cautionary statement, as well as the risk factors identified in Emergent's periodic reports filed with the SEC when evaluating its forward-looking statements. During today's call, Emergent may also discuss certain non-GAAP financial measures that involve adjustments to GAAP figures in order to provide greater transparency regarding Emergent's operating performance; please refer to the tables found in today's press release. Turning to slide four, the agenda for today's call will include Joe Papa, President and Chief Executive Officer, who will comment on key business and product updates.
Speaker Change: You should consider this cautionary statement as well as the risk factors identified any Burgess periodic reports filed with the S. E C. When you're evaluating their forward looking statements.
Speaker Change: During today's call emergent may also discuss certain non-GAAP financial measures that involve adjustments to GAAP figures in order to provide greater transparency regarding emergence operating performance.
Speaker Change: Please refer to the tables found in today's press release.
Speaker Change: Turning to slide four.
Speaker Change: Linda for today's call will include Joe Papa President and Chief Executive Officer, who will comment on key business and product updates rich.
Speaker Change: Rich Lindahl executive Vice President and Chief Financial Officer, who will speak to the current state of the company and financials for first quarter fiscal year, 2024, and Q2 2020 for guidance.
Speaker Change: This will be followed by Q&A.
Speaker Change: Finally, and for the benefit of those who may be listening to the replay of this webcast. This call was held and recorded on May one 2020 for Sip fan emergent may have made announcements related to topics discussed during today's call and with that I would now like to turn the call over to Joe Papa Chief Executive Officer for opening remarks.
Operator: Rich Lindahl, Executive Vice President and Chief Financial Officer, who will speak to the current state of the company and financials for first quarter fiscal year 2024 and Q2 2024 guidance. This will be followed by a Q and A. Finally, and for the benefit of those who may be listening to the replay of this webcast, this call was held and recorded on May 1st, 2024. Since then, Emergent may have made announcements related to topics discussed during today's call. And with that, I would now like to turn the call over to Joe Papa, Chief Executive Officer, for opening remarks. Joe?
Speaker Change: Joe.
Joseph C. Papa: Hello, everyone, and thank you for joining us to discuss our first quarter 2024 results. I'm joined today by Rich Lindahl, our Chief Financial Officer.
Joseph C. Papa: Hello, everyone and thank you for joining us to discuss our first quarter of 2024 results I'm joined today by Rich Lindahl, Our Chief Financial Officer. Following my opening comments rich will detail. Our Q1 performance provide an updated guidance for the second quarter as well as our full year outlook for 2024.
Joseph C. Papa: Following my opening comments, Rich will detail our Q1 performance, provide updated guidance for the second quarter as well as our full year outlook for 2024. I'll then talk about future growth drivers and catalysts at Emergent. First, I want to begin by addressing the announcement made earlier today to reduce our enterprise footprint, consolidate operations, and prioritize the capabilities most critical to executing on Emergent's core business. When I stepped into the role of CEO in February, I talked about a multi-year plan to stabilize, turn around, and transform our company.
Joseph C. Papa: Then talk about future growth drivers and catalysts and emerging.
Joseph C. Papa: Also, we identified a near-term challenge surrounding our debt position as a critical component of our stabilization plan. We understood that reducing our total debt would require improving operating performance, reducing working capital, and evaluating product or asset sales. I've seen firsthand that our employees are inspired and driven by the company's mission to protect, enhance, and help save lives. And that is why any type of impact on our workforce is very difficult.
Richard S. Lindahl: First I wanted to begin by addressing the announcement made earlier today to reduce our enterprise footprint consolidated operations and prioritize the capabilities most critical to executing that emerges core business.
Richard S. Lindahl: And it's definitely the royalty you talked about a multiyear plan.
Richard S. Lindahl: Stabilize turnaround and transform our company also we identified a near term challenge surrounding our debt position as a critical component of our stabilization plan.
Richard S. Lindahl: Understood that reducing our total debt would require improving operating performance, reducing working capital and evaluating product or asset sales.
Richard S. Lindahl: I've seen firsthand that our employees are inspired and driven by the company's mission to protect enhance and help save lives and that is why.
Richard S. Lindahl: Any type of impact on our workforce is very difficult. However.
Joseph C. Papa: However, after a careful review by our board and management team, we need to restructure the way we operate, create a customer-focused, leaner, more flexible team, and a streamlined manufacturing footprint that will still allow us to supply all of the products needed by our customers. Beyond the business restructuring on page six, we highlight the plan in Q1 2024 achievements in our first phase or stabilization of our multi-year transformation plan. Going forward, we will focus on key business areas and implement a simplified organization to improve our cost structure and enable key actions, including meeting the opioid crisis demand and exploring opportunities to grow Narcan nasal spray, protecting our medical countermeasures business, and identifying new growth opportunities.
Richard S. Lindahl: After a careful review by our board and management team, we need to restructure the way we operate create a customer focused leaner more flexible teams and extreme line manufacturing footprint that will still allow us to supply all of the products needed by our customers.
Richard S. Lindahl: Beyond the business restructuring on page six we highlight the plan in Q1 2020 for achievements in our first phase of our stabilization of our multiyear transformation plan.
Richard S. Lindahl: Going forward, we will focus on key business areas.
Richard S. Lindahl: Simplify organization to improve our cost structure and enable key actions, including meeting the opioid crisis demand exploring opportunities to grow the narcan nasal spray.
Richard S. Lindahl: Testing, our medical countermeasures business and identifying new growth opportunities.
Joseph C. Papa: Supporting our existing customers in our CDMO services business and always ensuring patient safety and product quality underpins everything we do, an item that will not change the emergent focus on making challenging, difficult products that are needed by our customers.
Richard S. Lindahl: Our existing customers and our <unk> services business and always ensuring patient safety product quality underpins everything we do.
Richard S. Lindahl: An item that will not change emerging focus on making challenging difficult products that are needed by our customers as I mentioned during our last earnings call. We reviewed the moat around our business and we believe <unk> product and capabilities, we offer across a significant public health threats underscores the value we deliver.
Joseph C. Papa: As I mentioned during our last earnings call, we reviewed the moat around our business, and we believe the unique products and capabilities we offer across significant public health threats underscore the value we deliver. We'll continue to focus on executing our multi-year plan to bolster our position as a leader in global public health. During the first quarter, we also achieved significant improvements in a number of business performance metrics, including revenue, which is ahead of internal and consensus expectations, adjusted gross margin, reduced operating expenses, and adjusted EBITDA. Overall, it was a great first quarter and a great start to 2024.
Richard S. Lindahl: Can you focus on executing our multiyear plan to bolster our position as a leader in global public health.
Richard S. Lindahl: The first quarter. We also achieved significant improvement in a number of different performance metrics, including revenue, which is ahead of internal and consensus expectations adjusted gross margin reduced operating expenses and adjusted EBITDA overall.
Richard S. Lindahl: It was a great first quarter.
Richard S. Lindahl: A great start to 2024.
Joseph C. Papa: As you know, last quarter, we entered into a forbearance agreement with our lenders through April 30th. Our conversation with the bank group continued, and just yesterday, we are delighted to announce a new bank amendment. This amendment will extend our runway to execute on a go-forward business plan and stabilize our financial position. We will also strengthen our relationship with key stakeholders during the quarter. Over the last three months, we've held over a dozen collaborative meetings with key stakeholders across U.S. and international government agencies, including BARDA, the Department of Defense, the Strategic National Stockpile, and the White House, to gain clarity on their needs for medical countermeasures products.
Richard S. Lindahl: As you know last quarter, we entered into a forbearance agreement with our lenders through April 30, our conversation with Bank group continue and just yesterday, we are delighted to announce a new Bank amendment.
Richard S. Lindahl: This amendment will extend our runway to execute on our go forward business plan and stabilize our financial position we are.
Richard S. Lindahl: Also strengthen our relationships with key stakeholders during the quarter over the last three months, we've held over a dozen collaborative meetings with key stakeholders across the U S International Government agency, including BARDA Department of Defense strategic National stockpile, and the White house to gain clarity on their needs for medical countermeasures products.
Joseph C. Papa: These meetings have been incredibly productive, and the results are reflected in our improved revenue guidance. These conversations also reflect a renewed willingness to engage with Emergent to improve planning and communication, which are critical to driving long-term success. Consistent with our comments in March, we've also initiated efforts to divest products and or sites. We've already received multiple orders for one of our sites, albeit one of our smaller sites.
Richard S. Lindahl: <unk> have been incredibly productive.
Richard S. Lindahl: All are reflected in our improved revenue guide. These conversations also reflect a renewed willingness to engage with emergency improved planning and communication, which are critical to driving long term success.
Richard S. Lindahl: Consistent with our comments in March we also initiated efforts to divest products and our sites. We have already received multiple orders for one of our sites, albeit one of our smaller sites. We hope to have more to say about this initiative in the near future.
Joseph C. Papa: We hope to have more to say about this initiative in the near future. Our prioritization commitment to instilling a culture of quality compliance across the company was also evident in the first quarter as we announced that our Baltimore Bayview Manufacturing Facility received no action indicator or NAI status classification from the FDA. We are proud of our colleagues who have worked relentlessly to achieve this status and will continue to adhere to the highest standards of quality and compliance across the organization.
Richard S. Lindahl: Our prioritization committed to instilling a culture of quality life Cross. The company is also evident in the first quarter as we announced our Baltimore based <unk> manufacturing facility received no action indicated or Nai status classification from the FDA. We are proud of our colleagues who have worked relentlessly to achieve this data you'll continue to hear the highest.
Richard S. Lindahl: We ended the quality and compliance across the organization I'll now turn it over to rich to review, our Q1 2020 core business.
Joseph C. Papa: I'll now turn it over to Rich to review our Q1 2024 business and our revised 2024 four-year guidance. Thanks, Joe. Good afternoon, everyone. And thank you for joining the call. As Joe has just discussed, we're making significant progress against our near-term priorities of stabilizing the business and strengthening our financial foundation. Our report today reflects several key accomplishments. We delivered strong first quarter results, with all parts of the business delivering year-over-year growth.
Richard S. Lindahl: By 2020 for full year guidance.
Richard S. Lindahl: Thanks, Joe. Good afternoon, everyone, and thank you for joining the call. As Joe has just discussed, we're making significant progress against our near-term priorities of stabilizing the business and strengthening our financial foundation. Our report today reflects several key accomplishments. We delivered strong first-quarter results, with all parts of the business delivering year-over-year growth. We're taking aggressive actions to further improve our operating performance as we seek to reduce our debt. We further amended our credit facility to support our ability to execute against our 2024 priorities.
Richard S. Lindahl: Thanks, Joe Good afternoon, everyone and thank you for joining the call.
Richard S. Lindahl: As Joe just discussed we're making significant progress against our near term priorities are stabilizing the business and strengthening our financial Foundation.
Richard S. Lindahl: Our report today reflects several key accomplishments.
Richard S. Lindahl: We delivered strong first quarter results with all parts of the business delivering year over year growth.
Richard S. Lindahl: We're taking aggressive actions to further improve our operating performance as we seek to reduce our debt.
Richard S. Lindahl: We further amended our credit facility to support our ability to execute against our 2024 priorities and we are significantly raising our profit outlook driven by increased clarity on near term U S government procurement combined with reduced operating expenses.
Richard S. Lindahl: And we are significantly raising our profit outlook, driven by increased clarity on near-term U.S. government procurement, combined with reduced operating expenses. Turning to our results, we had strong revenue in the quarter, which exceeded our first quarter guidance. As indicated on slide 8, highlights in the first quarter include total revenues of $300 million, an increase of 83% versus the prior year driven by NARCAN, Anthrax MCM, Smallpox MCM, and BAS; and total segment adjusted gross margin of 51% versus 5% in the prior year. Adjusted EBITDA in the quarter of $67 million, a material improvement over the negative $102 million reported last year. An adjusted net income of $31 million also materially improved compared to negative $163 million last year.
Richard S. Lindahl: Diving deeper into quarterly revenues, important items on slide 9 include NARCAN sales of $118 million, up 18% year-over-year, demonstrating the continued strength and durability of this product driven by higher branded NARCAN sales to U.S. public interest channels and sales of OTC NARCAN, partially offset by lower Canadian retail sales of branded NARCAN. Anthrax MCM sales were $56 million, an increase of 155% versus the prior year, driven by syphandous deliveries to the U.S. government's strategic national stockpile, including final shipments under the $75 million contract option provided by BARDA that we announced on November 28 of last year. Smallpox MCM sales of $50 million, up $43 million year over year, driven by ACAM2000 and VIGID
Richard S. Lindahl: Turning to our results, we had strong revenue in the quarter, which exceeded our first quarter guidance.
Richard S. Lindahl: Other product sales of $49 million, an increase of $41 million versus the prior year, primarily related to BAT and RSDL, and total bioservices revenues of $18 million, reflecting our continued transition to focus on existing customers. Turning to operating expenses on slide 10, the cost of commercial product sales in the quarter was $52 million, driven by strong sales of Narcan. The cost of MCM product sales in the quarter was $62 million, driven primarily by siphendis sales volume and other medical countermeasure products, partially offset by a decrease in shutdown costs.
Richard S. Lindahl: As indicated on slide eight highlights in the first quarter include total revenues of $300 million, an increase of 83% versus the prior year, driven by Narcan and Frac MCM smallpox MCM and back.
Richard S. Lindahl: Total segment adjusted gross margin of 51% versus 5% in the prior year adjust.
Richard S. Lindahl: Adjusted EBITDA in the quarter of $67 million and material improvement over the negative $102 million reported last year.
Richard S. Lindahl: And adjusted net income of $31 million also materially improved compared to negative $163 million last year.
Richard S. Lindahl: Diving deeper into quarterly revenues important items on slide nine include Narcan sales of $118 million up 18% year over year, demonstrating the continued strength and durability of this product driven by higher branded narcan sales to U S public interest channels and sales of OTC narcan, partially offset by lower Canadian.
Richard S. Lindahl: Sales of branded Narcan.
Richard S. Lindahl: Amtrak MCM sales of $56 million.
Richard S. Lindahl: An increase of 155% versus the prior year, driven by select vendors deliveries to the U S government strategic national stockpile, including final shipments under the $75 million contract option provided by BARDA that we announced on November 28 of last year.
Richard S. Lindahl: Smallpox MCM sales of $50 million up $43 million year over year, driven by <unk> thousand and <unk> IV.
Richard S. Lindahl: Other product sales of $49 million, an increase of $41 million versus the prior year, primarily related to back in <unk>.
Richard S. Lindahl: And total bio services revenues of $18 million, reflecting our continued transition to focus on existing customers.
Richard S. Lindahl: Turning to operating expenses on slide 10 cost of commercial product sales in the quarter was $52 million driven by strong sales of Narcan.
Richard S. Lindahl: Cost of SCM product sales in the quarter was $62 million driven primarily by <unk> sales volume and other medical countermeasure products, partially offset by a decrease in shutdown costs.
Richard S. Lindahl: Cost of bioservices of $30 million, reflecting actions taken to improve profitability, is in the expense of $15 million reflecting the impact of the travel health divestiture to Bavarian Nordic as well as the impact of cost management activities taken in 2023, and SG&A spend of $85 million, including expenses supporting key NARCAN initiatives offset by reduced expenses related to restructuring initiatives. Of note, total operating expenses were down 16% compared to the prior year as we focused on improving profitability and cash flow to manage our debt position.
Richard S. Lindahl: Cost of <unk>, as a $30 million, reflecting actions taken to improve profitability.
Richard S. Lindahl: R&D expense of $15 million, reflecting the impact of the travel health divestiture to primary and Arctic as well as the impact of cost management activities taken in 2023.
Richard S. Lindahl: SG&A spend of $85 million, including expenses supporting key narcan initiatives offset by reduced expenses related to restructuring initiatives.
Richard S. Lindahl: Total operating expenses were down 16% compared to the prior year as we focus on improving profitability and cash flow to manage our debt position.
Richard S. Lindahl: With that, let's move to slide 11 and review segment performance during the quarter. In the commercial segment, revenues were $118 million, comprised entirely of Narcan, and segment adjusted gross margin was $66 million, or 56%. In the MCM segment, revenues were $155 million, driven by anthrax, smallpox, and bats.
Richard S. Lindahl: With that let's move to slide 11, and review segment performance during the quarter.
Richard S. Lindahl: In the commercial segment revenues were $118 million comprised entirely of Narcan and segment adjusted gross margin was $66 million or 56%.
Richard S. Lindahl: In the Mcs segment revenues were $155 million, driven by anthrax smallpox and back.
Richard S. Lindahl: The segment-adjusted gross margin was $94 million, or 60%. As for the services segment, revenues were $18 million, and the segment adjusted gross margin was negative $12 million. I'll now turn to slide 12 and touch on Select Balance Sheet and Cash Flow Highlights. We ended the first quarter with $78 million in cash and liquidity, including availability under our revolving credit facility. The change in cash and liquidity versus the prior quarter was due to sales timing and collection of accounts receivable.
Richard S. Lindahl: The segment adjusted gross margin was $94 million or 60%.
Richard S. Lindahl: As for the services segment revenues were $18 million and segment adjusted gross margin was negative $12 million.
Richard S. Lindahl: I'll now turn to slide 12, and touch on select balance sheet and cash flow highlights. We ended the first quarter was $78 million in cash and liquidity, including availability under our revolving credit facility.
Richard S. Lindahl: The change in cash and liquidity versus the prior quarter was due to sales timing and collection of a R.
Richard S. Lindahl: Operating cash flow was negative $63 million, which improved significantly versus the prior year. Capital expenditures were $11 million in the first quarter, which is a 28% reduction versus the first quarter of 2023. And as of March 31, 2023, our net debt position was $827 million. Earlier today, we announced a set of strategic actions to improve our cost structure, enable turnaround efforts, and support our key priority to reduce our debt. These actions include the difficult decision to reduce our organization's footprint effective July 1, 2024, prioritizing only those capabilities most critical to executing our core MCM and Narcan Naval Spray businesses.
Richard S. Lindahl: Operating cash flow was negative $63 million.
Richard S. Lindahl: Which improved significantly versus the prior year.
Richard S. Lindahl: Capital expenditures were $11 million in the first quarter, which is a 28% reduction versus the first quarter of 2023.
Richard S. Lindahl: As of March 31, 2023, our net debt position was $827 million.
Richard S. Lindahl: Earlier today, we announced a set of strategic actions to improve our cost structure enabled turnaround efforts and support our key priority to reduce our debt.
Richard S. Lindahl: These actions include the difficult decision to reduce our organization footprint effective July one 2020 for prioritizing only those capabilities most critical to executing our core MCM and narcan nasal spray businesses.
Richard S. Lindahl: We estimate that the changes we're making will result in annualized savings of approximately $80 million when fully implemented. The costs associated with these actions are estimated to be approximately $18 to $21 million and are expected to be incurred in the third quarter of 2024. We are confident that these efforts, let me amend that, they're expected to be incurred in the second quarter of 2020. We are confident that these efforts are an important step to achieving greater consistency in operating performance and improving future profitability. We also announced yesterday that we have entered into another amendment to our Senior Secured Credit Facility. This amendment will support our ability to execute against our 2024 priorities by granting certain waivers, providing...
Richard S. Lindahl: We estimate that the changes, we're making will result in annualized savings of approximately $80 million when fully implemented.
Richard S. Lindahl: The cost associated with these actions are estimated to be approximately 18% to $21 million and are expected to be incurred in the third quarter of 2024.
Richard S. Lindahl: We are we are confident that these efforts, let me them and that they are expected to be incurred in the second quarter of 2024.
Richard S. Lindahl: We are confident that these efforts are an important step to achieving greater consistency in operating performance and improving future profitability.
Richard S. Lindahl: We also announced yesterday that we have entered into another amendment to our senior secured credit facilities.
Richard S. Lindahl: This amendment will support our ability to execute against our 2024 priorities by granting certain waivers provide.
Richard S. Lindahl: Hi.
Operator: Ladies and gentlemen, please stand by. Howard, can you hear us? I can hear you, sir. I can hear you now.
Speaker Change: Ladies and gentlemen, please standby.
Richard S. Lindahl: Okay.
Richard S. Lindahl: Okay.
Richard S. Lindahl: Okay.
Richard S. Lindahl: Okay.
Richard S. Lindahl: Howard can you Gareth.
Richard S. Lindahl: Can hear you Sir I gave you know.
Richard S. Lindahl: Okay.
Operator: I'm going to start at the beginning of the guidance section. Unknown Speaker Yes.
Speaker Change: I'm going to start at the beginning of the guidance section, where we drop yes.
Speaker Change: Okay.
Speaker Change:
Richard S. Lindahl: Okay. Returning to the 2024 guidance, please see slide 13. While our efforts to improve operating performance will not happen overnight, we're making significant progress towards those goals, which is giving us the confidence to raise our 2024 outlook at this time. As announced in our press release this evening, we're providing guidance for full year 2024 as follows, total revenues of $1 to $1.1 billion, forecasting commercial product sales of $460 to $500 million, as we expect continued strong demand for NARCAN in the U.S. public interest channel We're forecasting MCM product sales of $440 to $490 million. Since our last report on March 6, we've continued to engage with our U.S. government stakeholders to improve the procurement visibility for syphandus and other medical devices.
Richard S. Lindahl: So turning to 2024 guidance, please water tea, while our efforts to improve operating performance will not happen overnight, we're making significant progress towards those goals, which is giving us the confidence to raise our 2024 outlook at this time.
Richard S. Lindahl: As announced in our press release. This evening, we are providing guidance for full year 2024 as follows.
Richard S. Lindahl: Total revenues of one to $1 1 billion.
Richard S. Lindahl: Forecasting commercial product sales of $460 million to $500 million as we expect continued strong demand for narcan in the U S. Public interest channel in Canada, combined with further growth with OTC narcan in the retail channel.
Richard S. Lindahl: We're forecasting MCM product sales of $440 million to $490 million.
Richard S. Lindahl: Since our last report on March six we've continued to engage with our U S government stakeholders to improve the procurement visibility perfect vendors and other medical countermeasure products.
Richard S. Lindahl: As a result of those conversations, we have a better understanding of the US government's intentions for the near and medium term and are therefore narrowing the range of potential 2024 revenue outcomes in this segment. We're forecasting services segment revenue of $70 to $80 million, reflecting our commitment to serve our existing customers. Shifting to profitability metrics, we're forecasting adjusted EBITDA of $125 to $175 million, reflecting the impact of our 2023 cost reduction. The additional organizational change is announced today.
Richard S. Lindahl: As a result of those conversations we have a better understanding of the U S government's intention for the near and medium term and are therefore narrowing the range of potential 2024 revenue outcomes in this segment.
Richard S. Lindahl: We're forecasting services segment revenue of $70 million to $80 million, reflecting our commitment to serve our existing customers.
Richard S. Lindahl: Shifting to profitability metrics, we're forecasting adjusted EBITDA of $125 million to $175 million, reflecting the impact of our 2023 cost reduction actions the additional organizational changes announced today.
Richard S. Lindahl: Our Capacity Utilization Profile, and the range of revenue expectations across our segment. For the full year of 2024, we're forecasting a total segment adjusted gross margin of 44 to 47 percent, an increase over the 2023 level, primarily reflecting the impact of our profitability improvement. Finally, we're forecasting Q2 revenue in a range of $160 to $210 million. We've also included some additional assumptions around our four-year guidance. Interest expense is forecasted to be $82 million, reflecting terms around our new credit. Total R&D spend as a percentage of revenues is anticipated at approximately, Weighted Average Fully Diluted Shares of $52 million, CapEx spend of approximately $32 million, and $111 million of depreciation and amortization. That is all for the financial update. I'll now turn the call back over to Joe for some further talk.
Richard S. Lindahl: Our capacity utilization profile in the range of revenue expectations across our segments.
Richard S. Lindahl: For the full year of 2024 were forecasting total segment adjusted gross margin of 44% to 47% and.
Richard S. Lindahl: An increase over the 2023 level primarily reflect the impact.
Richard S. Lindahl: Impact of our profitability improvement efforts.
Richard S. Lindahl: Finally, we're forecasting Q2 revenue in a range of 160 $210 million.
Richard S. Lindahl: We've also included some additional assumptions around our full year guidance.
Richard S. Lindahl: Interest expense is forecasted to be $82 million, reflecting terms around our new credit agreements.
Richard S. Lindahl: Total R&D spend as a percentage of revenues is anticipated at approximately 6%.
Richard S. Lindahl: Weighted average fully diluted shares of $52 million.
Richard S. Lindahl: Capex spend of approximately $32 million and $111 million of depreciation and amortization.
Richard S. Lindahl: That is all for the financial update I'll now turn the call back over to Joe for some further thoughts.
Joseph C. Papa: Rich, as I mentioned last quarter, another key element of our turnaround is driving long-term profitable growth. One of the first steps we announced earlier today is the initiation of a search for an emerging chief scientific officer reporting to me. This individual will bring together all of our science innovation efforts, improving our long-term product pipeline. The search will include both internal and external candidates.
Joseph C. Papa: Thank you rich as I mentioned last quarter. Another key element of our turnaround is driving long term profitable growth one of the first steps we announced earlier today is the initiation of a search.
Joseph C. Papa: Emerging Chief Scientific officer reporting to me. This individual brings together all of our science innovation efforts, improving our long term product pipeline.
Joseph C. Papa: Virtual crude both internal and external candidates.
Joseph C. Papa: Let me now provide an update on our core products and future growth drivers, starting with Narcan nasal spray. Turning to slide 15, a vital way Emergent helps save lives through our efforts to combat the opioid crisis by expanding access, awareness, and the availability of Narcan nasal spray. The opioid epidemic continues to have a devastating impact across the world.
Joseph C. Papa: We now provide an update on our core products and future growth drivers, starting with Narcan nasal spray turning to slide 15, a vital way emergent help save lives through our efforts to combat the opioid crisis by expanding access awareness and the availability of narcan nasal spray. The opioid epidemic continues to have a devastating impact.
Joseph C. Papa: As the leader in the opioid reversal space, we remain committed to getting Narcan to everyone who needs it. To be clear, we do expect Narcan's share of the market will be impacted by generic competitors over time. However, we also expect market forces like opioid settlement funds, continuing opioid overdoses, and the need for increased Narcan access will continue to expand total Narcan demand. Here's a Narcan nasal spray is tracking to plan with strong performance driven by the U.S. Public Interest Channel, Canada.
Joseph C. Papa: The World is the leader of opioid reversal space, we remain committed to getting everyone needs. It.
Joseph C. Papa: To be clear, we do expect archaean share market will be impacted by generic competitors over time. However.
Joseph C. Papa: We also expect market forces like opioid settlement funds, continuing opioid overdoses and the need for increased market access will continue to expand total murky and demand.
Joseph C. Papa: Year to date Narcan nasal spray is tracking to plan, but strong performance driven by the U S public interest channel Canada.
Joseph C. Papa: Since the OTC launch, hundreds of thousands of Narcan cartons have been made available to purchase at mass drug, grocery, online retailers, and e-commerce sites, and we continue to be well-prepared to meet anticipated demand from a supply and manufacturing perspective. This quarter, we also expanded access to NARCAN by creating a direct ordering platform called NARCANWorkplace.com. This facilitates getting lifesaving treatment directly into the workplace. We have engaged with new partners like the National Safety Council to educate and reach businesses about the importance of workplace safety. In addition, The Emerson Group has been brought on to support penetration into a broader set of retail.
Joseph C. Papa: Since the OTT launch hundreds of thousands Nokia.
Joseph C. Papa: Or made available to purchase at mass drive grocery online retailer in ecommerce site.
Joseph C. Papa: It continued to be well prepared to meet anticipated demand from a supply and manufacturing perspective.
Joseph C. Papa: This quarter, we also expanded access Nokia and by creating a direct.
Joseph C. Papa: While dark in workplace dotcom facilitate getting the lifesaving treatment directly into the workplaces, we've engaged with new partners like the National Safety Council to educate and reach businesses around the importance of workplace safety. In addition.
Joseph C. Papa: The Emerson group have been brought out to support penetration to a broader set of retailers. Sadly there is still immense need for narcan nasal spray to reduce number of lives lost a data from a recently completed survey that we just released today suggest the number of opioid deaths is unacceptable to Americans and.
Joseph C. Papa: Sadly, there is still an immense need for Narcan nasal spray to reduce the number of lives lost. The data from our recently completed survey that we just released today suggest the number of opioid deaths is unacceptable to Americans, especially when considering the impact on younger adults. We are seeing continued bipartisan support to address the opioid crisis and have ongoing engagement with leaders across government, retail, and advocacy groups to increase access and the availability of knowledge.
Joseph C. Papa: Looking at the impact on younger adults.
Joseph C. Papa: We are seeing continued bipartisan support to address the opioid crisis and have ongoing engagement with needed across government retail and advocacy groups to increase access and availability of naloxone.
Joseph C. Papa: Page 16 highlights several of the catalysts and future drivers of Narcan growth. We continue to prioritize efforts to reduce barriers to access for Narcan. This includes encouraging businesses and school districts to carry Naloxone, supporting policy to ensure health spending accounts and flexible savings accounts are eligible for Naloxone, and working with state Medicaid agencies to provide coverage.
Joseph C. Papa: On page 16, we highlight several of the catalyst and future drivers of Narcan growth.
Joseph C. Papa: We continue to prioritize efforts to reduce barriers to access for Narcan. This includes encouraging businesses in school districts to carry naloxone supporting policy to ensure health spending account and flexible savings account are eligible for not lactose and working with state Medicaid agencies right coverage.
Joseph C. Papa: We've been working closely with Health Canada with a goal to distribute Nalaxone convenience kits containing Narcan. Finally, we're exploring opportunities to expand access internationally beyond the U.S. and Canada, either internally or through partnerships that we believe will increase NARCAN growth. Turning to slide 17, to review our MCM business, we continue to deliver on our commitments to the U.S. and allied governments, maintaining open lines of communication and engaging in discussions about how we can support their plans for long-term, sustainable public health threat preparedness. In the last few months, we also received clarity from the government regarding future purchase orders for Sifendis, our post-exposure anthrax vaccine. For the strategic national stockpile, we are finalizing a modification to our ACAM contract.
Joseph C. Papa: We've been working closely with health, Canada with a goal to distribute naloxone convenient kits.
Speaker Change: Turning to our game.
Joseph C. Papa: Finally, we are exploring opportunities to expand active internationally beyond the U S and Canada.
Joseph C. Papa: Either internally or through partnerships that we believe will increase narcan growth.
Joseph C. Papa: Turning to slide 17 to review our MCM business, we continued to deliver on our commitment to the U S and allied governments, maintaining open lines of communication and engaging in discussions about how we can support their plans for long term sustainable public health threat preparedness.
Joseph C. Papa: During the last few months, we also received clarity from the government regarding future purchase orders for our post exposure anthrax vaccine.
Joseph C. Papa: With a treat for the strategic National stockpile, we are finalizing modification to our ATM contract. In addition, we received notices of intent to procure from the U S government in 'twenty 'twenty four for bat, our botulism antitoxin product and Vic, which is treat used bally complications resulting for smallpox.
Joseph C. Papa: In addition, we have received notices of intent to procure from the US government in 2024 for BAT, our botulism antitoxin product, and VIG, which is a treatment used following complications resulting from smallpox. This level of clarity demonstrates continuous U.S. government support across our portfolio. On page 18, review MCM Catalyst and Growth Drivers.
Joseph C. Papa: This level of Cleary demonstrates continues U S government support across our portfolio.
Joseph C. Papa: On page 18 review M.
Joseph C. Papa: MCM catalyst and growth drivers.
Joseph C. Papa: As referenced on our last call, as a leading biodefense contractor, we're addressing the most pressing threats around the world, including anthrax, smallpox, botulism, Ebola, and chemical threats. We believe that our role in global public health preparedness remains vital. Finally, on slide 19, I'd like to take a few moments to focus on future growth drivers for the organization based on the potential expansion of our inline products. First, we believe international expansion will be an important growth driver across our business.
Joseph C. Papa: As referenced on our last call we added.
Joseph C. Papa: <unk> biodefense contracts, we're addressing the most pressing threats around the world, including Anthrax smallpox botulism, Ebola and chemical threats, we believe that our role a global public health preparedness remains vital.
Joseph C. Papa: Finally on slide 19 like to take a few moments to focus on future growth drivers for the organization based on the potential expansion of our in line products first we believe international expansion will be an important growth driver across our business.
Joseph C. Papa: Global public health and preparedness have never been more vital, and our collaboration with international partners is a key factor in improving global health security. We are seeing an increased focus on public health preparedness and believe we're well-positioned to fulfill the needs of our international partners with our critical products. In the year ahead, we will continue building these partnerships to expand access to our products across the globe. Our product portfolio today has a significant impact to help protect, enhance, and save lives against public health threats around the world.
Joseph C. Papa: Global public health preparedness have never been more vital and our collaboration with international partners. The key factor in improving global Health Security, we're seeing increased focus on public health preparedness and believe we're well positioned to fulfill the needs of our international partners with our critical products in the year ahead.
Joseph C. Papa: We will continue building these partnerships expand access to our products across the globe.
Joseph C. Papa: Our product portfolio today has significant impact to help protect enhance and save lives and public health threats around the world with a refreshed lifecycle management initiatives, we are well positioned to fuel future growth drivers to meet customer and patient needs.
Joseph C. Papa: With a refreshed lifecycle management initiative, we are well-positioned to fuel future growth drivers to meet customer and patient needs. In summary, although it's early in our transformation process, I'm encouraged by the progress we are making to execute our turnaround strategy. Importantly, we have more stability, clarity, and financial flexibility than just a few months ago. This progress is reflected in our first quarter results and our full year 2024 guidance improvement. We believe there will be significant opportunities to partner with domestic and international partners to address the public health crisis with our important and innovative products.
Joseph C. Papa: In summary, although it's early in our transformation profit I'm encouraging by the progress we are making to execute our turnaround strategy importantly, we have more stability clarity and financial flexibility than just a few months ago. This progress is reflected in our first quarter results and our full year 2024 guidance improvement we.
Joseph C. Papa: Believe there will be significant opportunities to partner with domestic and international partners to address the public health crisis with our important and innovative product. We look forward to continue to work with key stakeholders to prepare for and respond to a range of public health threat, while returning emergent to greater operating ability for our shareholders with that well open up the.
Joseph C. Papa: We look forward to continuing to work with key stakeholders to prepare for and respond to a range of public health threats while returning quickly to greater property and ability for our shareholders. With that, we'll open up the call for questions. We also invited Paul Williams, our head of Narcan and medical countermeasures business, to join us for the Q&A. Operator, let's open up the line for questions, please. Yes, sir. Ladies and gentlemen, if you have a question or comment at this point,
Speaker Change: Offered question, we also invited Paul Williams, our head of Nokia and medical countermeasures business to join us for the Q&A operator, let's open up the line for questions. Please.
Operator: Yes, sir. Ladies and gentlemen, if you have a question or comment at this time, please press star 1 1 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press star 11 again. Again, if you have a question or comment, please press star 1 1 on your telephone keypad. Please stand by while we compile the Q&A roster. Our first question or comment comes from the line of Jessica Fye from J.P. Morgan. Ms. Fye, your line is open.
Paul Williams: Yes, Sir ladies and gentlemen, if you have a question or comment at this time. Please press star one one on your telephone keypad.
Speaker Change: If your question has been answered or you wish to remove yourself from the queue simply press star one one again.
Paul Williams: Again, if you have a question or comment please press star one one on your telephone keypad. Please standby, while we compile the Q&A roster.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Our first question or comment comes from the line of Jessica Fye from J P. Morgan Misfire. Your line is open.
Unknown Attendee: Hey, this is Nikon for Jess. Congratulations on the quarter and thanks for taking our questions. First one on Narcan, you guys are showing continued growth from that product year over year, quarter over quarter, but maybe can you provide some additional details on the breakdown of 1Q sales by the PIP channel and OTC Narcan and maybe also provide some color on how you're thinking about any generic competition that could come into either of those two segments throughout the course of this year?
Speaker Change: Hey, this is Nick on for Jeff Congrats on the quarter and thanks for taking our questions first one on Narcan you guys are showing continued growth from that product kind of year over year quarter over quarter, but maybe can you provide some additional details on the breakdown of that one key sales by channel and OTC Narcan and maybe also provide some color on how you're thinking about any gene.
Speaker Change: Eric competition that could come in to either those two segments throughout the course of this year.
Joseph C. Papa: So I'll take, thanks, Nick. I'll take the first one.
Richard S. Lindahl: So I'll take thanks, Nik I'll take the first one this is rich.
Richard S. Lindahl: This is Rich. Yeah, I mean, certainly the majority of the sales remain from the PIP channel. We are still moving forward with our OTC rollout, and it's still gaining traction, but the majority is coming from the PIP channel with some contribution from Canada.
Richard S. Lindahl: Yes, I mean, certainly the majority of the sales remained from the Pip channel. We are still moving forward with our with our OTC rollout and it's still it's gaining traction but the majority is coming from <unk> channel with some contribution from Canada as well.
Joseph C. Papa: And I think the question relative to, you know, generic entrance is one that we've anticipated and expect there'll be additional competitors entering the space this year. I think we continue to believe that our ability to service the channel and the retail OTC channel uniquely with the capabilities that we have, like NARCAN Direct, and through the partnerships that we're building on the retail side, we can support the forecast that we have for the rest of the year.
Nik: Yeah, and I think the question relative to your generic entrants I think we've anticipated and expect there'll be additional competitors that space. This year.
Nik: We continue to believe that our ability to service that channel retail OTC channels equally.
Nik: With the capabilities that we have with indirect.
Nik: The partnerships, we're building retail side support.
Nik: Yes that we have for the rest of the year.
Joseph C. Papa: And finally, just to put a couple of other future comments, I think when we look at NARCAN, we look at a couple of important points. Number one, the importance of the NARCAN brand, and obviously that brand is very important when you're talking about the years of experience with NARCAN. And importantly, you're dealing with life-threatening situations where NARCAN is used.
Speaker Change: And violent just to put a couple of other future looking comments I think what we look at <unk>. We look at couple of important points number one the importance of the Nokia brand and obviously that brand is very important when youre talking about the years of experience with Nokia and importantly, youre dealing with life threatening situations.
Joseph C. Papa: Number two, we have a strong distribution capability, and we believe that's an important part of what Paul and the team have built that allows us to make sure that we get to the thousands of customers around the United States that, in Canada, that order our products. And then, obviously, we've built up the manufacturing capabilities to be automated and able to compete with anybody in the space. So yes, we may see some inroads over time. But more importantly, we think the market growth is still going to be very significant, which allows us to have long-term opportunities with Arden Arcade.
Speaker Change: Situations that <unk> has used number two we have a strong distribution capability.
Richard S. Lindahl: That's an important part of what Paul and the team has built that allows us to make sure that we get to the thousands of customers around around the United States that offer in Canada.
Richard S. Lindahl: Order our products.
Richard S. Lindahl: Then finally, clearly we built up the manufacturing capabilities to be automated enabled us to compete with anybody in that space. So yes, we may see some inroad.
Richard S. Lindahl: Inroads over time more importantly, we think the market growth.
Richard S. Lindahl: It's still going to be very significant that allows that have long term opportunities with Arden our kids business.
Unknown Attendee: Unknown Speaker Great. And then maybe on the guide, and Can you just provide a bit more color on the pushes and pulls that went into raising the MCM product guidance to 440 to 490, I believe, from 340 to 490. Is that just more clarity around anthrax facts? Are there other assumptions baked in there?
Speaker Change: Great and then maybe on the guidance.
Speaker Change: Can you just provide a bit more color on the pushes and pulls there wanted to raising the MCM product guidance to $4 40 to 490 I believe from the $3 40 to $4 90 is that just more clarity around anthrax vaccine are there other are there other assumptions baked in there.
Richard S. Lindahl: That's really the primary driver. As we commented back on our March call, there was less clarity, we had less visibility at the time, so we had a much wider range of potential outcomes there.
Speaker Change: That's really the primary driver as we commented back in on our March call.
Speaker Change: There was less clarity, we had less visibility at the time, so at a much wider range about potential outcomes. There based on the conversations that we've had we have better visibility into where we see <unk> procurement. This year and as a result, we were able to narrow the range by lowering our by raising the low end of the range.
Unknown Attendee: Great, great. Maybe we can just repeat one more.
Speaker Change: Okay, Great and maybe if I could just will be then one more.
Speaker Change: Understanding that this is not an easy decision around the two facilities can you maybe just provide some additional details on why you chose Rockville and bayview as part of that.
Speaker Change: Restructuring announcement and I know you said that there was some interest that you mentioned that you can talk about later, but all of those two facilities can you provide any color on which if any you're seeing maybe strategic interest in today.
Joseph C. Papa: Yeah, let me start with maybe the big picture, and I'll get to your question. But the big picture is, first and foremost, we made the decision to focus our future in the areas of Lansing and Winnipeg. We think that's probably the most important thing. That was our first decision on which sites had the most flexibility, so that we could run a leaner company with streamlined facilities and still make sure we can provide all of our products availability.
Speaker Change: Yes, let me, let me start with maybe the big picture and I'll get to your questions.
Speaker Change: Big picture is first and foremost we made the decision to focus our future in the areas of Lansing and Winnipeg.
Speaker Change: Probably the most important thing that was our first decision on what sites have the most flexibility that we can run a leaner company with.
Speaker Change: Streamline facilities and still make sure we can provide all of our products availability. So I think that would probably the first thing went into our decision. Once we did that we looked at the other sites and just make judgments as to based on where we saw the opportunity what the expenses were.
Joseph C. Papa: So I think that was probably the first thing that went into our decision. Once we did that, we looked at the other sites, and just made judgments as to based on what we saw in terms of the opportunity, what the expenses were, we made decisions to reduce our total operating expenses but make sure that we can still provide access to the products that are so important to the US government, governments around the world, and obviously to treat and be ready to be able to help the opioid crisis.
Speaker Change: We made decisions to reduce our total operating expenses, but make sure that we can still provide access to the products that are so important the U S government and governments around the world and obviously to two.
Speaker Change: Pete.
Joseph C. Papa: And when we went through that, the sites that Bayview and Rockville came out as sites that we would close down, wind down, and close. And that was really the way we went through this process. I will say that we did make mention that we had multiple offers on one site, albeit it was a small site. I wanted to be clear in saying that. I do hope, though, that we will continue this process and potentially have more to say about that in the future. But I'm probably going to restrict my comment to that, going that far in terms of what we've had interest so far. I think I've got all those parts.
Speaker Change: It would be ready to be able to help the opioid crisis and when we went through that.
Speaker Change: The sites that.
Speaker Change: <unk> and in Rockville came out of sight that we would close.
Speaker Change: Closed down.
Speaker Change: Wind down and close the site and that was really the way we went through this process.
Speaker Change: I will say that we did make mention of debt. We had multiple offers on one site, albeit of a small side I wanted to be clear in saying that I.
Speaker Change: I do hope that we will continue this process and potentially have more to say about that in the future, but I would probably restrict my comments to that going that far in terms of.
Speaker Change: What we've had interest so far I think I've got all those parts of your question.
Speaker Change: Yeah. Thanks, so much.
Operator: Thank you. Again, ladies and gentlemen, if you have a question or comment at this time, please press star 11 on your telephone keypad. I'm sure there are no additional questions in the queue at this time. I'd like to turn the conference back over to Mr. Papa for any closing remarks.
Speaker Change: Thank you.
Speaker Change: Thank you again, ladies and gentlemen, if you have a question or comment at this time. Please press star one one on your telephone keypad.
Speaker Change: I'm showing no additional questions in the queue at this time I would like to turn the conference back over to Mr. Parker for any closing remarks.
Joseph C. Papa: Well, thank you very much, everyone, for your interest in Emergent. We look forward to having more to comment on in the future as we make progress on our multi-year turnaround training.
Unknown Attendee: Well. Thank you very much everyone for your interest in emerging we look forward to having mortgage coming in the future as we make progress on our multiyear turnaround transformation.
Parker: Obviously the team has done a great job in this first quarter and look forward to having more to say as we continue down the path for 2024 and beyond but thank you everyone for joining us today have a great day.
Operator: Thank you. Thank you all.
Speaker Change: Thank you. Thank you all and with that ladies and gentlemen, we now conclude the call. Thank you for your participation. Please note in our current 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 Companys website.
Speaker Change: Again, we look forward to speaking with you.
Speaker Change: In the future Goodbye.
Speaker Change: Okay.
Parker: Okay.
Parker: Okay.
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Parker: Okay.
Parker: Okay.
Parker: Okay.
Parker: Okay.
Parker: [music].
Parker: Okay.
Parker: [music].