Q3 2024 Emergent BioSolutions Inc Earnings Call
Chris: Thank you for standing by my name is Chris and I will be your conference up earlier today.
At the same, I would like to welcome everyone to the Q2U 2021 Fall, imagine five solutions to ink earnings conference call.
All lines have in place on YouTube to prevent any background noise.
I have a few speakers who I explore will be a question and answer session. If you would like to ask a question during this time, simply press part.
Chris: followed by the number one on your telephone keypad.
and if you would like to enjoy your question, rest our run again. Thank you. I would love to turn the call over to Frank Vargo, Assistant Fasher. Please go ahead.
Chris: is being recorded and is copyrighted by Emergent Biosolutions. In addition to today's press release, a slide presentation accompanying this webcast is available to all webcast participants.
Frank Vargo: Turning to slide three. During today's call, emergent may make projections and other forward-looking statements related to their business, future events, their 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 call, and except as required by law, Emergent does not undertake
Frank Vargo: to update any forward-looking statements to reflect new information, events, or circumstances.
Investors should consider this cautionary statement as well as the risk factors identified in emergence periodic reports filed with the SEC when evaluating their forward-looking statements.
Frank Vargo: 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 provide an update on the company's multi-year plan progress, key product highlights, and turnaround actions.
Frank Vargo: Rich Lindahl, EVP, Chief Financial Officer and Treasurer, will speak to key achievements in the third quarter, the financial results for Q3 2024, as well as full year guidance.
Frank Vargo: This will be followed by Q&A.
Finally, for the benefit of those who may be listening to the replay of this webcast, this call was held and recorded on November 6, 2024. Since then, Emergent may have made announcements related to topics discussed during today's call.
Frank Vargo: And with that, I'd like to now turn it over to Joe Papa for opening remarks.
Joe Papa: Thank you.
Joe Papa: Hello and thank you for joining us today to discuss our third quarter results in our 2024 Financial Outlook. I'm joined today by Richard Lindahl, our Chief Financial Officer.
Chris: Following my opening remarks, Rich will detail our quarter three performance as well as our full year guidance update. I would close the call with a discussion of our path forward as we continue to make significant progress on our turnaround efforts. Then we'll open up the call for questions and answers.
Chris: Earlier this year we embarked on a multi-year plan to stabilize, turnaround, and ultimately transform the emerging business.
Frank Vargo: Based on the great efforts of the entire emergent team, I am pleased to share that we have now completed our first phase, the stabilization phase, ahead of our expectations.
Chris: Emergent is now embarking on the next phase or turnaround as part of our multi-year plan to transform and strengthen our business.
Frank Vargo: I'd like to recognize all of our emergent team members who have demonstrated their commitment to delivering against our multi-year plan to stabilize, turn around, and transform the business. This stems from our collective passion for the Emergent's mission.
Frank Vargo: to protect, enhance, and save lives against leading public health threats around the world. We plan to continue our operational improvement initiatives and focus on driving profitable growth to create sustainable value for shareholders.
Frank Vargo: Beginning on slide six, I will review several important updates from the third quarter as well as the full year efforts. First...
Frank Vargo: The third quarter was another strong quarter and paired with a great first six months of 2024. We are very pleased with the results year-to-date. I'd like to emphasize that Emergent finished the quarter in its strongest financial position since 2021.
Frank Vargo: Reflecting on our strong third quarter financial performance, we are once again raising the revised midpoint for our 2024 revenue and raising our adjusted EBITDA 2024 full year guidance. Rich will walk us through the details. We have strengthened our balance sheet and will exceed our expectations to reduce our net debt by more than 200 million dollars this year.
Frank Vargo: We successfully refinanced our debt closing a new credit facility agreement with Oak Hill Advisors for a term loan of 250 million dollars and using a portion of that capital to repay all amounts of outstanding under the Senior Bank term loan facility.
Frank Vargo: We continue to improve working capital driven by increases in both revenue and cost savings, and we implemented a leaner, more flexible organization by streamlining our site network, including several asset sales.
Frank Vargo: From an operational standpoint, we also made great strides in the execution of our strategic priorities during the third quarter.
Frank Vargo: Through our relentless commitment to combat the overdose epidemic and help save lives as we expected Narcan nasal spray volumes increase year's day and we continue to meet the increased demand of nasal and lactobum for our customers.
Frank Vargo: We received FDA approval for ACAM2000 to include the MPOX expanded indication in August 2024 as the public health outbreak continues across Africa and other regions.
Frank Vargo: We secured a number of contracts for a medical countermeasures business as a result of increased clarity in the US government as well as international government's plan to procure medical countermeasure products.
Frank Vargo: also
Frank Vargo: We announced on Monday we appointed a new head of R&D and chief medical officer, Dr. Simon Lowry, who brings decades of biotech and pharma experience to redefine eMERGE's scientific platform for growth.
Frank Vargo: I'm also pleased to announce that Jessica Pearl has been promoted to our General Counsel and Corporate Secretary. Both will be critical leaders on the Executive Management Team as we move the company forward.
Frank Vargo: Lastly, we made substantial progress on certain legacy compliance and legal matters including resolving our Jensen settlement for which Emergent received a 50 million dollar payment. Also,
Frank Vargo: Following a successful FDA inspection at the cancer facility, which we have now divested, but importantly, the site received NAI status.
Frank Vargo: As we continue to operate for operative
Frank Vargo: Operations, we expect to remain well positioned to help deliver value for our customers, patients, and shareholders, all while striving to instill the highest standards.
Frank Vargo: patient safety, quality, and compliance in our work every day. Another question of the day is how does the election impact your business?
Frank Vargo: We are confident that what we do at Emergent has broad-based, bipartisan support. We help governments protect from catastrophic public health threats.
Frank Vargo: including opioid overdose death and biodefense.
Frank Vargo: Both of these programs transcend political parties. With that, I'll hand you over to Rich to review our financials in more detail.
Rich Lindahl: Thanks, Joe. Good afternoon, everyone. We appreciate you joining the call. As Joe has just discussed, coming out of the third quarter, our significant progress against our operational and financial priorities is enabling us to transition from the stabilization phase to the turnaround phase.
Rich Lindahl: Our financial foundation has been meaningfully strengthened as a result of the following positive developments which are highlighted on slide 8 in the earnings presentation.
Rich Lindahl: We completed $117 million of asset sales and received a $50 million payment from Janssen Pharmaceuticals as a result of the confidential settlement agreement.
Rich Lindahl: Operating cash flow through September 30th was $139 million, an improvement of approximately $377 million as compared to the same period in the prior year, and net working capital improved $98 million versus the previous quarter and $100 million as compared to the prior year.
Frank Vargo: These liquidity enhancements supported the refinancing of our prior secured credit facility as we entered into a new 250 million dollar term loan from Oak Hill Advisors, extending the maturity of our debt to August 2029.
Frank Vargo: and we closed a 100 million dollar asset-backed revolving credit facility led by Wells Fargo also maturing in 2029
Frank Vargo: These activities resulted in the following major improvements to our credit profile. Net debt was reduced to $551 million, a $206 million reduction since the beginning of 2024.
Frank Vargo: Moody's and S&P both upgraded our corporate family credit rating to B3 and B- respectively with stable outlooks.
Frank Vargo: And based on our improved financial position, when we file our 10-Q, you will note that we have removed the prior going concern qualification. Now, shifting to key business highlights depicted on slide 9.
Frank Vargo: We received total medical countermeasure contract modifications of over 500 million dollars this year for anthrax MCM, smallpox MCM, and BAT, further strengthening our revenue diversification.
Frank Vargo: We also announced a $42 million option exercise for continued development of the Ibonga treatment for Ebola.
Frank Vargo: We are due $30 million from Bavarian Nordic as payment of the first few milestones triggered on acceptance by the EMA and FDA of the Chikungunya vaccine license applications.
Frank Vargo: Narcan volume continues to remain strong, up 7% year-to-date, and its value proposition continues to drive a differentiated price point as compared to generic competition.
Frank Vargo: And finally, we're further raising the midpoints of our revenue and adjusted EBITDA guidance for 2024. Turning to our financial results, we built upon our solid first-half performance with continued strength in the third quarter.
Frank Vargo: As indicated on slide 10, highlights in the third quarter include total revenues of $294 million at the upper end of our guidance range and a 9% improvement year-over-year.
Frank Vargo: Total segment adjusted gross margin at 59%, a significant improvement both sequentially and year-over-year.
Frank Vargo: An adjusted EBITDA of $105 million or 36% of revenues. An improvement of $85 million versus the prior year.
Frank Vargo: Diving deeper into quarterly revenues, important items on slide 11 include Narcan sales of $95 million, which reflects continued strong volume in our U.S. public interest channel.
Frank Vargo: It's important to note that the prior year included the initial stock in volume and revenue associated with the launch of Narcan OTC. Price was lower year-over-year as a result of our previously announced price decrease in September 2023, which was announced with the over-the-counter launch.
Frank Vargo: Anthrax MCM sales of $11 million, a decrease versus the prior year due to the timing of deliveries in 2024. Smallpox MCM sales of $133 million, which included deliveries of the previously announced ACAM2000 and VIG contract options to the U.S. government.
Frank Vargo: Other product sales of $30 million, driven by BAT, our botulism antitoxin product, and total bioservices revenues of $14 million.
Frank Vargo: Note that the 9% year-over-year growth in total revenues came despite the divestitures of Camden and RSDL.
Frank Vargo: This outcome reinforces the value of our revenue diversification. Transitioning to operating expenses on slide 12, our previously announced cost actions were fully implemented by the third quarter, resulting in a significant improvement in our total operating expenses.
Frank Vargo: Total adjusted gross margin was 59% in the quarter, trending to a more normalized level and directionally consistent with performance prior to the pandemic.
Frank Vargo: Adjusted gross margin performance by business segment was as follows. Commercial products was 50%, which highlights key cost reduction initiatives with our suppliers, partially offsetting the lower sales price within the public interest channel.
Frank Vargo: MCM products adjusted gross margin was 73% and was influenced by higher delivery volumes as well as reduced expenses in our manufacturing facilities. And the services segment adjusted gross profit was negative 7 million dollars which on a cash basis excluding depreciation is approaching break-even.
Frank Vargo: Total research and development and SG&A improved 11 million dollars or 11% year over year.
Frank Vargo: This was driven by lower compensation due to the previously announced 2023 and 2024 restructuring initiatives, reduced internal R&D project expenses, and reduced legal fees due to the settlement of key disputes.
Frank Vargo: SG&A also includes a one-time $10 million settlement charge in Q3 related to the shareholder litigation matter.
Frank Vargo: So, on a normalized basis, SG&A improved $19 million versus the prior year, and we expect further run rate reductions as we exit 2024 and realize the full impact of the cost actions taken to date.
Frank Vargo: Additional detail on our operating expenses can be found in the appendix of the earnings deck.
Frank Vargo: I will now take a moment to summarize our 24 year-to-date performance as shown on slide 13.
Frank Vargo: Revenue was 849 million dollars, up 10% versus the prior year, driven by U.S. government and international medical countermeasures.
Frank Vargo: Year-to-date adjusted gross margin was 381 million dollars or 46%, reflecting our prior efforts to reduce costs as well as MCM sales timing. And adjusted EBITDA was 162 million dollars, an improvement of 188 million dollars versus the prior year.
Frank Vargo: Turning to slide 14, we'd like to highlight the significant improvements we've made to our financial metrics.
Frank Vargo: At the end of the third quarter, total cash was $150 million. This was aided by generating $139 million of operating cash flow, which, as I said earlier, was an improvement of $377 million year over year.
Frank Vargo: We also achieved a reduction of $98 million in our net working capital versus the prior quarter.
Frank Vargo: The strong performance in the business coupled with our debt refinancing and reduction efforts has lowered our net leverage to 3.3 times adjusted EBITDA, a material improvement versus the third quarter of 2023.
Frank Vargo: And, with the fully available $100 million undrawn asset-backed revolver, total liquidity at the end of Q3 was $250 million, an increase of approximately $170 million as compared to the second quarter of 2024.
Frank Vargo: Turning to 2024 guidance, please see slide 15.
Frank Vargo: With our continued strong performance year-to-date, we're further raising the midpoint of our revenue and adjusted EBITDA guidance.
Frank Vargo: 2024 full year guidance is as follows and the details are shown on slide 26 in the appendix. Total revenues of 1.065 billion to 1.125 billion dollars. Commercial product sales of 420 to 430 million dollars.
Frank Vargo: We continue to see strong volume demand for Narcan and the revised guidance takes into account a balanced approach in the competitive environment.
Frank Vargo: NCM product sales of 510 to 550 million dollars. This includes all of the previously announced contract modifications and at this point the vast majority of the NCM revenue is committed in 2024.
Frank Vargo: Services segment revenue of 105 to 110 million dollars, a decrease versus the prior guidance due to the sale of our Camden facility on August 20th.
Frank Vargo: Shifting to profitability metrics, we're forecasting adjusted EBITDA of $180 to $200 million. This increase at the midpoint reflects the recently announced awards for our MCM products as well as our continued realization of lower operating expenses.
Frank Vargo: For the full year of 2024, we're forecasting total segment adjusted gross margin of 43 to 45 percent.
Frank Vargo: That's it for the financial update. I'll now turn the call back over to Joe.
Joe Papa: Thank you, Rich. As we look forward, we see meaningful opportunity for emerging in-line products and future growth drivers that have the potential to impact lives around the world. Let me dive deeper on slide 17 with key highlights around Narcan nasal spray.
Frank Vargo: While there is still a tragic number of deaths caused by an opioid, fentanyl, or heroin, recent preliminary data from the CDC points to a meaningful decline in overdose deaths in the U.S. for the first time in decades.
Speaker Change: How are you?
Frank Vargo: Rates of overdose deaths still remain particularly high among various demographics of people and regions across the U.S., so we must remain focused on efforts to continue broadening access, increasing awareness, and helping to maintain affordability of Narcan nasal spray. To this end, demand for Narcan, especially from public interest partners and expanded categories like business-to-business and retail channels, remains on course.
Frank Vargo: We believe the NARC and NASA spray value proposition continues to score a differentiated price point for our public interest customers and we intend to competitively price our NARC end product.
Frank Vargo: We also believe our best-in-class service, NARCAN Direct, is a differentiated capability for our customers. In August, we announced a new distribution center in Nevada to further demonstrate our customer-focused approach and continued investments in NARCAN supply readiness efforts.
Speaker Change: and Paul. Thank you. Thank you.
Frank Vargo: Across Canada we are making significant strides to increase access to British Columbia and Western Canada where take home now accident kids are becoming
Frank Vargo: more readily be able to perfect.
Frank Vargo: pledged to support the White House challenge to save lives from overdose through workplace and public safety measures. Our engagement with the National Safety Council and other partners to educate and reach businesses. We want to specifically acknowledge that Amazon has publicly announced their efforts to keep employees safe in the workplace.
Frank Vargo: Our continued commitment to educate through our Ready to Rescue campaign to expand awareness in Narcan, particularly among young adults in vulnerable communities. And this month we donated 20,000 additional doses of Narcan to organizations in need.
Frank Vargo: As stated, we will remain focused on a multi-pronged strategy and effort to help save lives, while relying upon strong bipartisan support to combat this tragic epidemic.
Frank Vargo: Turning to our medical countermeasures portfolio on slide 18, we are seeing tangible benefits from our product diversification and will continue to follow this approach. This starts with maintaining our unique position to prepare and respond to public health threats through our continued engagement with U.S. government and international customers.
Frank Vargo: During the third quarter, we gained FDA approval for the use of ACM-2000 to treat NPOX infection, which further strengthens and broadens our smallpox portfolio.
Frank Vargo: This expanded indication has enabled us to have a very important seat at the table as international leaders now respond to the NCOX outbreak. Also in August, we proudly donated 50,000 doses of ACAM2000 for potential deployment across countries in Central Africa.
Frank Vargo: As we look forward, we believe we are well-positioned to support the global response by actively engaging with world health leaders, deploying available product inventory based on the need, and the ability to increase supply if needed.
Frank Vargo: One promising medical countermeasure product was the development highlights from this quarter. We announced a 42 million dollar contract option with BARDA to develop and scale Evanga, a licensed treatment for Ebola.
Frank Vargo: Joseph Papa, Brandon Folkes, Richard Lindahl,
Frank Vargo: Earlier today, or just recently, we announced our work to support a clinical trial sponsored by Panther.
Frank Vargo: and led by Africa CDC to evaluate the safety and efficacy of Pembexo or Brincidoflavir in treating mpox infections across Africa.
Frank Vargo: In summary, we are proud.
Frank Vargo: to be a trusted partner to supply medical countermeasures for biodefense and health preparedness around the world. Turn to slide 19, I'd like to touch on several of our turnaround phase focus areas that we will focus on and anticipate can lead to future growth drivers.
Frank Vargo: continuing to be a mission-driven company that strives to be a leader in public health, maintaining a level of revenue diversification across our products.
Frank Vargo: strategically focusing on international expansion efforts and line extensions of our current product and creating long-term and sustainable value for our shareholders.
Frank Vargo: On slide 20, we provide a summary of our products, communications, current market, and our future growth opportunities.
Frank Vargo: On slide 21, we outline a significant progress on the strategic operational changes to stabilize our financial position.
Frank Vargo: and I'm excited about how we are positioned for the future as we enter a new phase of turnaround growth. Our confidence in our financial stability is based on our strong third quarter and year-to-date results, the significant reduction in our total quantum of debt, and importantly, our cash generation.
Frank Vargo: Our commitment to ensuring public health preparedness with Narcan nasal spray and our medical countermeasure products.
Frank Vargo: And as I mentioned, with the addition of the new leadership of Dr. Lowry as our chief medical officer, head of R&D, I believe we have the right team and capabilities to accomplish our turnaround goals over the next 18 to 24 months. We are grateful to the entire Emergent team for all of their work to date and look forward to seeing what else we can accomplish together. I look forward to keeping you updated on our continued progress as we continue to transform and strengthen Emergent and enter this exciting turnaround phase for our company.
Frank Vargo: Thank you, and now I'd like to turn it back to you for question and answer.
Speaker Change: We will now begin the question and answer session. At this time, I would like to remind everyone in order to ask a question, press star, then the number 1 on your telephone keypad. We will pause for just a moment to compile the Q&A roster.
Speaker Change: And your first question comes from the line of Brandon Fox with Brodman and Renshaw. Please go ahead.
Brandon Fox: Thanks for taking my questions and congratulations on all the progress. Maybe just two from me.
Brandon Fox: Can we just talk about the gross margin on NARCAN, sort of longer term, obviously, I think it was at about 50% this quarter, looks very good, just how do we think about that with the moving pieces on NARCAN, and then
Frank Vargo: Maybe, well, I'll stop that and ask my second one afterwards.
Frank Vargo: Hi Brandon, this is Rich. I think certainly the gross margin has responded to the price reductions that we referenced earlier on the call.
Frank Vargo: I think we're starting to see some stabilization in the pricing environment. We're also continuing to look for ways to improve the cost of goods sold there as well. So while I hesitate to give you a specific long-term guide on gross margin there, I think that we're stabilizing the gross margin somewhere in the area of this level.
Speaker Change: Thank you.
Speaker Change: Thanks, Rich. That's very helpful. And then maybe, Joe, obviously, congratulations on all the progress here. Not to get greedy, but...
Frank Vargo: Can you just elaborate on the seeking your opportunities aligned to your internal capabilities? You know, is that something that's high on the priority list? Is that just in the infancy of Exploration at this stage and then how should we think about?
Frank Vargo: You know, bringing in additional assets in 2025 and any preference there on commercial versus development stage given the additions to your team.
Speaker Change: Sure. A lot of great comments there. Let me try to take them one by one. Certainly, we're delighted with the progress. We're delighted to look at the financial results. We're delighted to pay down the debt we've been able to pay down and certainly the net debt coming down by approximately $200 million. We think all that's great. As we think though about the future and the go forward, we're very much focused on growth and what can we do to increase the growth and where we can make the resource allocations to ensure growth for the future. So that's what we're focused on. I think it's going to come both internally and through business development deals. On the internal side, clearly, you've seen some of the comments I made today about what we're doing. Rich talked about Ibonga. Clearly, we have opportunities to put them back.
Speaker Change: and what we're doing there with the with the Panther trial and what we're doing with working with the US government and BARDA. So there's a lot of things we can do internally. Racky Backy Mav is another one that we have for anthrax. A lot of those projects are ones where we think there are clear opportunities that leverage our existing infrastructure on the countermeasure side. On the other side, on the what we're doing with NARCAN, we clearly believe there's opportunities to expand with NARCAN. Everything from kits that go into the business. I mentioned about it last time. We've all seen, if you go into a restaurant, the defibrillator.
Speaker Change: kits that are on the wall. We think that another product
Speaker Change: All clearly could be our NARCAN product to save lives. You know that clearly defibrillators cost somewhere around $1,800. They save 1,700 lives a year. We think we can put together a NARCAN kit that costs about $45 that can save infinitely more lives. So we think that's another simple example what we're trying to do is leverage the existing capabilities we have today as an example. But beyond kits, there's also line extension opportunities we see that can be very beneficial especially as we think about unfortunately
Speaker Change: The thousands of deaths that are occurring with
Speaker Change: College students, high school students, people that we know, we can do a better job of saving those lives if only we have access to the product at the time of need. And we know that at the time of need, so often there are people there with the patient. If we can just have product available, we can save lives. So look to us to spend more time talking about that in terms of Narcan, new formulation, new kits, also geographic expansion, and then of course what I mentioned on medical countermeasures are all part of it. I think on the business development side, I'm not talking about hundreds of millions of dollars business development opportunities, but I do think there's opportunities for us to do some business development. And we're going to look to really...
Speaker Change: Look to those products that fit within what we do with the first responders for the Narcan side of the business. There's other products first responders need. We'll look to develop products for them that they need and use our distribution capabilities to get products to them. And also on the medical countermeasures, what else can we do to help the U.S. government and other governments around the world to help their approach to medical countermeasures. So I think there's a lot of opportunities in front of us and we look forward to having more chance to explain those and elaborate on them in the near future.
Speaker Change: Great, thank you very much and congrats again on all the progress.
Speaker Change: Thank you. Operator, next question.
Speaker Change: And your next question comes from the line of Jessica Fye with J.P. Morgan. Please go ahead.
Speaker Change: Hey, this is Nick on for Jess. Thanks for taking our questions. Two-parter here on NARCAN. Can you talk a little bit more of the factors that went into lowering that NARCAN guidance? Is it driven more by lower expected volumes or is it more on competitive pricing pressures?
Speaker Change: And then also, could you provide an update on what the latest mix of Narcan revs is across the public interest markets, maybe some of those ex-U.S. revs in Canada, and then OTC and how we should expect that to evolve over time?
Speaker Change: awareness and the education that goes into opioid overdose. So we do think there's a lot of opportunity to go around the table. Having said all that I might get to the other part of your question was what are some of the other issues that we face and that clearly as we thought about
Speaker Change: Narcan, we wanted to make sure that we took into account some of the initiatives that we did versus a year ago and looked at, for example, we discontinued the RX Narcan last year. The prescription strength, that was something that caused it one impact in the quarter. We also looking at sales in Canada and what's happening there and also what we are offset by some things we're seeing on the OTC sales. There's a lot of different factors going into it but we, given the diversity of our portfolio, we felt it was prudent at this time to look at that Narcan number, manage that to where we think it could be. It could be upside too but we want to manage it to that.
Speaker Change: I think I got the first part of the question. Is there a second part as well?
Speaker Change: yeah it makes between but I think you kind of touched on it yeah the majority of the business by far is still the tip business somewhere in the 70% range of the totality of the business
Speaker Change: I think that's your question, right?
Speaker Change: And then just to follow up there, in the pip market, can you talk a bit more about some of the competitive dynamics you're seeing there?
Speaker Change: Just thinking about any contract between competitors and states that could be unfolding kind of similar to what we saw with AMA on the state of California
Speaker Change: Sure. Yeah, we have followed that, as you would imagine, very closely and we are doing well. We, you know, clearly there are some, like in the CalRx program, that their competitor did pick up that business, but across all the different states we're doing very well. The one thing I probably should have mentioned, and I don't recall I said exactly, but we're seeing pricing stabilized in the overall Narcan business, at least one of the things we follow, as you would imagine, we follow it on a weekly basis, but from July through October 2024, the pricing has been relatively stable, so we're not seeing anything dramatically change with the pricing environment, and as you can tell by the amount of volume we have, we're growing.
Speaker Change: Recently quoted, the total business volume is slightly below the prior version of nearly 50 compared to last year.
Speaker Change: Maybe if I could just squeak one last one in on smallpox. On the $400 million of orders that you announced back in September, I believe it was, you noted, $210 million. It hit through the end of that period, i.e. through end of 3Q. There is like a remaining $180 million or so more.
Speaker Change: that is expected to hit over the course of, you know, maybe the next couple months or quarters. Can you just kind of talk about how that's weighted across 4Q and say maybe early 2025 and how we should also think about that being broken down between various products?
Speaker Change: Yeah, you want to take it Richard? Sure, yeah I mean I would say that certainly a portion of it is going to hit in fourth quarter. Most of it will hit in 2025 but you know that's it's all baked into our guidance that we that we've updated.
Speaker Change: Great, thank you.
Speaker Change: Thank you for your questions. Operator, next question.
Speaker Change: Again, if you would like to ask a question, press star 1 on your telephone keypad.
Speaker Change: And your next question comes from the line of Alex Falsey with Wells Fargo. Please go ahead.
Alex Falsey: Hey guys, thanks for taking the question here. If I can belabor the Narcan question one more time, of the 30-odd percent decline in Q3, are you able to bucket out how much of that was the year-over-year, call it headwind from the initial ramp of OTC, how much of that is pricing and how much of that it was
Alex Falsey: Organic declines or increase. I know you guys have referenced the year-to-date figure but if there's any figure you can reference for the quarter just to get a sense of how that segment has been performing sequentially I think it'd be very helpful.
Alex Falsey: Yeah.
Speaker Change: I think the stock in revenue from last year was in the, you know, in between 10 to 15 million dollars. It was probably around 12 million dollars or so. The rest of it is really more overall mix and really driven by the pricing impacts.
Speaker Change: Got it. And I know you guys took pricing down back in, I think it was August of last year when the drug went OTC. It sounds like you've taken down pricing since then to be more competitive with generics. Is that a reasonable assumption?
Speaker Change: Yeah, we've been responding, as Joe said, to be competitive. We haven't been matching pricing, but we have remained competitive in the marketplace. That has resulted in us being, as Joe said, we've had some very good success in keeping a lot of the business that we had, even in light of some of the additional competition that's been out there.
Speaker Change: Okay, switching gears, just in terms of asset sales, obviously a great job on the $200 million that you've done so far, but you know, you still have Exeter Warehouse, you still have Canton, you still have Rockville, you still have Fort Warner Professional Drive, you still have Bayview. Any updates on thoughts around those properties, you know, any progress on asset sales there or anything else we should expect, you know, for the next 12 months, whatever it is?
Speaker Change: First, I compliment you on knowing our entire site network, but yeah, appreciate that. That is something we are absolutely looking at that all the time. I don't want to make any specific.
Speaker Change: comments about any individual site, but to be clear, we have reduced significantly the operating expense of our business, as I mentioned, and as Rich mentioned, so we are managing this to make sure that we bring down operating expense to manage it. But we do believe we have a little bit more flexibility now in terms of some of those sites, in terms of what the long-term opportunities can be with them, especially as we're thinking about other...
Speaker Change: business development activities things that we can bring within them to our portfolio for growth so I think we got a little bit more latitude I mean some of them are absolutely you know you know the sites you talked about them some of them when you talk about some of the you know operational centers in terms of manufacturing sites they could be more important to us but we'll manage that others just don't have we don't have a need and we're going to certainly try to divest certain locations like potentially warehouse that we don't need we divested one warehouse in Canton Massachusetts as an example that was an unused warehouse the more we can do those types of things obviously the better return on investment for our shareholders so we're going to be focused on it but I don't want to make any specific prognosis of when and where we'll do that
Speaker Change: Could Bayview be used to manufacture GLP-1s?
Speaker Change: Bayview is an extraordinary site.
Speaker Change: that has been a significant amount has been invested in the site by the merchant and other government agencies and we think there's a lot of opportunities for that site in terms of capabilities in terms of drug substance but I don't want to specifically talk about any individual product but there it's a phenomenal site I've had a chance to be in pharmaceutical business for over 35 years and you know I've been through probably hundreds of different sites it's a very significant opportunity it is everything is state-of-the-art so there is really good capabilities there we just got to find the right place to kick off some significant opportunities there but it is a very unique site got a lot of capability
Speaker Change: Okay, got it. Last one, if I can. If we just look to like 2025 and beyond, and obviously, you know, I understand as well as anybody, the mumpiness of the business, then...
Speaker Change: You know, there's years where big orders come in or don't come in, but if I just start with, call it the midpoint of EBITDA guide 190...
Speaker Change: You know, even like CDMO gross profit year-to-date is still $60 million, and if that's approaching zero, I mean, that's a big uplift right there, you know, not to ask for forward guidance or anything, but, you know, if you had to look to 2025 and beyond, given the big undertaking you guys have taken on the cost side of things and stabilize the business, you know, like,
Speaker Change: You know is EBS kind of like a 225, 250 EBITDA business plus looking forward or you know How do you guys think about kind of the long-term earnings power of this business?
Speaker Change: I think you probably expect my answer that we're not going to make comments specifically about 2025. Having said that I could certainly say that you know one of the things that we did is we took out ballpark 130 million dollars of operating expenses from the business. If you look at
Speaker Change: Just even in the quarter, the operating expense reductions, absentee...
Speaker Change: impairment versus last year was 65 million dollars just in the quarter. So it tells you we're taking the steps to bring down the operating expense, number one. Number two, I've got to say this so that everyone understand, we are continuing to maintain the capabilities to manufacture our products and have the ability to manufacture all of our products and have expectations that over the next several years we have availability to make all the product even
Speaker Change: with the reduction in the number of sites and the streamlining of our site network. So that probably is the best way I can answer the question in terms of we've brought down operating expenses significantly. It's at 65 million dollars in the quarter versus a year ago and then of course we still maintain, although the network is streamlined, we still maintain the capabilities to make all of our products.
Speaker Change: Got it. Thank you and best of luck with the balance of the year.
Speaker Change: Thank you.
Speaker Change: Operator, next question.
Speaker Change: Thank you. Thank you. Thank you.
Speaker Change: And there are no questions at this time. I will now turn the call back over to Frank Bargo for closing remarks.
Speaker Change: Hi, this is Joe Papa. I'll take the closing remarks. So thank you again for everyone for joining us. And we very much appreciate your interest in Emergent. We look forward to having a chance to talk to all of you in the near future. Rich and I will be out talking to more investors in the very near future and look forward to having a chance to catch up with any of you. So thanks again for joining us today. Have a great day, everyone.
Speaker Change: This concludes today's conference call. Thank you all for joining. You may now disconnect.