Emergent BioSolutions(EBS) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for the full year 2022 were $1.1 billion, lower than the prior year but in line with previous guidance [84] - Adjusted gross margin was negative $156 million, a substantial decrease versus the prior year due to declining revenues related to COVID-19 response and incremental costs associated with facility remediation efforts [86] - The company ended the fourth quarter with $643 million in cash, with a net debt position of $771 million as of December 31, 2022 [87] Business Line Data and Key Metrics Changes - Anthrax vaccine sales were $51 million, lower than the prior year due to timing of deliveries to the U.S. Government's Strategic National Stockpile [66] - NARCAN nasal spray product sales were $91 million, lower than the prior year but demonstrating its role in addressing the opioid epidemic [82] - CDMO service and lease revenues were $18 million, significantly lower than the prior year as the company continues to support existing customers [83] Market Data and Key Metrics Changes - The public interest market is expected to remain the majority of sales, with strong demand for NARCAN regardless of FDA review outcomes [12][59] - The company anticipates a revenue outlook for the first quarter of $130 million to $150 million, with expectations for revenues and profits in 2023 to be more heavily weighted towards the second half of the year [91] Company Strategy and Development Direction - The company is focusing on core businesses, including medical countermeasures and improving profitability margins [25][54] - Strategic initiatives include enhancing manufacturing capabilities, strengthening quality and compliance, and managing the balance sheet to restructure debt obligations [56][78] - The company plans to launch NARCAN over-the-counter by the end of summer 2023, which is expected to expand access to the product [58][76] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing demand for NARCAN and the potential for growth in the retail space following its OTC approval [12][17] - The company is actively engaged in discussions with the U.S. Government regarding procurement contracts for ACAM2000 and other products [42][123] - Management acknowledged the challenges faced in the CDMO segment but expects improvements as operational quality and compliance systems are strengthened [60][96] Other Important Information - The company announced a $380 million procurement contract to supply RSDL kits to the U.S. Military, with expected deliveries consistent with previous years [74] - The sale of the travel health business to Bavarian Nordic is expected to generate approximately $270 million in cash, with potential for additional milestone payments [72] Q&A Session Summary Question: Can you elaborate on the expected sales from the public interest market? - Management expects the public interest market to remain the majority of sales, with strong demand for NARCAN [5][12] Question: What is the timeline for FDA approval of NARCAN? - The company anticipates FDA approval for over-the-counter NARCAN by March 29, 2023, with a launch planned for summer [16][76] Question: How will the transition to OTC NARCAN affect market dynamics? - Management believes that OTC approval will allow the company to regain competitive advantage in the retail space while maintaining a strong position in the public interest market [17][132] Question: What are the expectations for the ACAM2000 procurement contract? - The company is in active dialogue with HHS regarding the next procurement of ACAM2000, but no specific timeline for contract finalization was provided [141] Question: How does the company plan to address its debt maturity? - Management is engaged in discussions with lenders to extend the maturity of the credit facility and is working towards a timeline to resolve these concerns [140][151]