Welcome to the Emergent BioSolutions Incorporated second quarter 2009 financial results conference call. (Operator Instructions) I would now like to turn the call over to Mr. Robert Burrows.

Good afternoon ladies and gentlemen. My name is Robert Burrows, Vice President of Investor Relations for Emergent. Thank you for joining us today as we discuss Emergent BioSolutions financial results for the second quarter and first six months of 2009. As is customary, our call today is open to all participants. In addition, the call is being recorded and is copyrighted by Emergent BioSolutions. Joining me on the call this afternoon will be Fuad El-Hibri, Chairman and Chief Executive Officer, and Don Elsey, Chief Financial Officer. Additional members of our senior management team will be present on the call for purposes of the Q&A session. Before we begin, however, I am compelled to remind everyone that during the all management may make projections and other forward-looking statements regarding future events and the company’s prospects or future performance. These forward-looking statements reflect Emergent’s current perspective on existing trends and information. Any such forward-looking statements are not guarantees of future performance and involve substantial risks and uncertainties. Actual results may differ materially from those projected in any forward-looking statements. You are encouraged to review Emergent’s filings with the SEC on Forms 10-K, 10-Q, and 8-K for more information on the risks and uncertainties that could cause actual results to differ. For the benefit of those who may be listening to the replay, this call is held and recorded on August 6, 2009. Since then Emergent may have made announcements relating to topics discussed during today’s call, so again, please reference our most recent press releases and SEC filings. Emergent BioSolutions assumes no obligation to update the information in today’s press release or as presented on this call except as maybe required by applicable laws or regulations. Today’s press release may be found on our website at www.emergentbiosolutions.com under Investors/Press Release. With that brief introduction, I would now like to turn the call over to Fuad El-Hibri, Emergent’s Chairman and CEO.

Good afternoon ladies and gentlemen. We appreciate your participation on this call. Today, we announced two important items. First, we reported financial results for the second quarter and first 6 months of 2009. Let me tell you that I’m very pleased with Emergent’s overall performance year to date. We have delivered strong sales and earnings results while we continue to invest in our product pipeline. We remain on the path to achieving our financial and product development goals for the year. Second, we announced a series of real estate transactions that expand our manufacturing and development infrastructure. In addition the strategic implication, these transactions should reduce our total debt and annual interest and operating expenses. In addition, I would like to provide a brief update on selected aspects of our business. To begin, let me update you on our biodefense franchise. Specifically, I’d like to address our ongoing core BioThrax business and our combinant anthrax vaccine opportunity. First, BioThrax. As you know, BioThrax is the only FDA license vaccine for the prevention of anthrax disease. We’re currently manufacturing and delivering doses of BioThrax to the strategic national stockpile. In fact, we recently completed deliveries under a multi-year contract for 18.75 million doses valued at $448 million. As a result and without interruption, we have begun to manufacture product under our existing follow-on contract. As a reminder, this contract calls for the delivery of an additional 14.5 million doses of BioThrax valued at $405 million over the next two years. Beyond the follow-on contract, we expect that the US government will continue to procure BioThrax for the strategic national stockpile. In addition to domestic sales, we’re addressing continuing demand for BioThrax worldwide. Earlier this year, we announced that BioThrax received market authorization in India. Since then, we’ve been marketing BioThrax to…

As Fuad mentioned, following the close of the markets today, we released our financial results for the second quarter of 2009. I encourage everyone to take a look at the press release which is currently available on our website. We plan to file our quarterly report on Form Q with the SEC by the close of business tomorrow, Friday, August 7, 2009. The 10-Q filed will also be available on our website. Now let me discuss the financial results. The second quarter was a very strong quarter for our company. Our product sales came in at $69.3 million, which is an increase of 64% over Q2 2008. The growth in sales quarter over quarter was driven by the achievement of 4-year dating for BioThrax which as Fuad mentioned triggered a lump sum payment from HHS. Product sales for the first half of 2009 were $131 million which is an increase of 56% over the first half of 2008. Contracts and grants revenues were $3.9 million versus $1.2 million in Q2 2008, and for the first half of 2009, it was $6.7 million compared to $2.4 million in the first half of 2008. The growth in contracts and grants revenues is a reflection of the impact of contracts we received from BARDA and NIAID in September 2008 as well as the continuation of work under earlier government contracts and grants. Our gross profit on product sales was 85% for Q2 2009 and 80% for the first half of 2009. Our gross profit margins for the second quarter and first half were positively impacted by the payment for 4-year dating. If that impact is removed, the margins for these two periods are generally consistent with historic trends. With respect to R&D spending, we continue to advance the development of our product pipeline…

(Operator Instructions) The first question comes from the line of Mona Ashiya - J.P. Morgan.

On the new manufacturing infrastructure, I’m wondering what kind of time frame you are looking at to get the Maryland facility up and running if you use this for RPA and also what sort of capacity this facility has and also what level of investment it would take beyond the actual purchase to get it ready for manufacturing.

There are several questions you’ve just posed. Now let me try to answer them one by one. First, we do believe that the new facility in Maryland is suitable for RPA manufacturing and as I mentioned earlier, this facility did produce licensed products before. We are in the process of evaluating each of the suites and their suitability for the RPA manufacturing requirement. We’re not at a stage right now where we can share with you or anyone else the scope of the costs to make that suite 100% compatible for the manufacturing process.

Can you say what kind of capacity?

It can generate the same type of capacity as Building 55 would.

Actually that fits nicely into my next question which is on the status of Building 55. My impression was that the qualification and validation that was needed to use this facility for BioThrax was suspended when you thought the facility could be used for RPA so I was wondering if you wanted to use this facility now for BioThrax, what kind of time frame are you looking at get it set up again to use for BioThrax manufacturing again?

Yes, that’s a very good question Mona because one of the reasons why we looked at another facility was exactly that we wanted to have an opportunity not only to produce RPA but also continue the scale-up of BioThrax. So with this new facility, assuming the government agrees with our plan we may be able to achieve both. The question as to timing will depend on the plan that we agree with the government and the timing of the award, but one thing I can tell you is that the moment the government has agreed that we can use this alternative facility for RPA manufacturing we would resume the scale-up activities of BioThrax.

In your press release, it looks like there’s a higher cost per dose because of a lower production yield for the quarter for BioThrax and I was just wondering if this was a one-off issue for the quarter or is this something that you see persisting for the rest of the year?

We’re really looking at this as a one time event. As you’re well familiar the biological yields can certainly fluctuate and, as you probably know, doses we’re delivering in Q2 began their manufacturing in 2008, so that was really the function of some of the manufacturing back in 2008 manifesting itself in Q2. So we don’t expect that to continue on.

Your next question comes from the line of Eric Schmidt - Cowen & Company. Eric Schmidt - Cowen & Company : Fuad, did I hear you right that you are now expecting to receive the RPA contract this year?

Yes Eric Schmidt - Cowen & Company : I think that’s a change in tone if not absolute content from your previous guidance of maybe late this year or early next. Could you tell us about what has changed in your discussions?

With the change in administration earlier this year when we saw that there were some delays in the process, we wanted to hedge and we really didn’t know whether this was a short-term delay or on that brings us into next year. What we’ve seen in the last three to six months is continued step by step engagement by the government, and we’ve gone through the FDA meeting process, we’ve had several discussions with BARDA. It really does seem that they remain committed and that they want to move this forward as quickly as possible. Now I always hedge this because the government sometimes has priorities that may shift so it could still be that this thing might take a little longer, but the signals we’ve received so far and they’ve been reaffirming themselves from month to month are very positive that they’re committed to the process, committed to letting out two awards for RPA, and right now from what I can see, I’m quite optimistic. Eric Schmidt - Cowen & Company : And if that happens this year would that be toward the very end of the year or could it be soon?

Now we’re becoming real granular, and I’ve already kind of put my neck out there deciding whether it’s this year or next and I feel that there’s a good chance it’s going to happen this year, but to the month I can’t tell you. The good news is that there are only 4-5 more months left this year, and so it’s going to be reasonably short in term. Eric Schmidt - Cowen & Company : I guess your waiting on this contract in terms of determining what you might be doing with Building 55 versus what you might be doing with your newly acquired facilities in Maryland. What’s actually going on in Building 55 right now? Is it just kind of sitting without any progress or are you behind the scenes getting prepared to potentially make either a validated process for BioThrax or RPA in Building 55?

I’m glad you asked that Eric because I want to clarify that. As we previously announced, we had ceased the continued scale-up exercise with BioThrax in favor of the pre-award activities of RPA because we did position as we previously announced building 55 which is one of our great assets as an integral part of our bid for this award, but with this new acquisition in Maryland, we are engaged in discussions with the government to see if we could use that new facility to free up building 55 so that we could continue our BioThrax scale-up, and that has always been a point where people have asked me and said could you do both in building 55, and the answer was no. It’s a campaignable facility which means we could do several products, but not simultaneously. We can do that sequentially with the proper changeover protocols. Now, with this new manufacturing facility, we may be in a position to commit to the government that we could do both—RPA as well as continue our scale-up activities in building 55. Eric Schmidt - Cowen & Company : But as of today, Fuad, there has been no switch back to BioThrax?

No. As of today, we continue to conduct RPA work as far as pre-award activities are concerned. Eric Schmidt - Cowen & Company: For Don, the $30 million you received in lumpsum, I guess you have $4 million left. Was that in receivables at the end of the quarter, or where is that?

Basically we got a $30 million lumpsum payment for doses that had been delivered up until the second quarter of 2009. There was some additional premium price booked as revenue on doses that shipped within Q2 2009, but after the award of 4-year dating, and then the balance of the premium, if you will, associated in the current contract will be experienced in Q3. Eric Schmidt - Cowen & Company: On the manufacturing facility sale and purchase of the new facilities, are all the prices negotiated?

We had entered into commitment agreements on the sale of the Frederick facility and on the manufacturing facility. I’m not at liberty at this point in time to disclose the dollar arrangements or any of the other details. Eric Schmidt - Cowen & Company: What’s the update on the Protein Sciences situation?

As you know, the Protein Sciences matter is still in litigation, and we’re not in a position to give you much more detail than that. I will remind you that we did lend PSC $10 million last year in connection with a planned purchase of the PSC assets which fell through, and after a long period of an effort to collect under this loan in late June, we and several other PSC creditors filed a bankruptcy petition against PSC in federal court in Delaware, and the trial is currently scheduled for August 28th, and all I can tell you is that we remain confident that through the bankruptcy process we will either be repaid or we’ll recover fair value for our loan.

Your next question comes from the line of David Moskowitz - Caris & Company. David Moskowitz - Caris & Company : You guys have put up $24 million of net income in the first half of the year, and yet your guidance is unchanged at more than $20 million, so I have to believe that there are investors out there that are going to be frustrated with that. It almost implies that there is a loss coming in the back half of the year. I know you guys talked about the seasonality. Are you guys expecting to lose money in the quarters going forward?

As you know, we don’t give guidance on a quarterly basis. We give guidance on an annual basis, and we’re going to stick with that. Regarding seasonality, I’d prefer to just say the variability with regards to how income flows from government shipments, what we normally is as we plan our R&D and SG&A spending which is going to be in line with programs that we support, quite often that is occurring ratably through the year, when in fact the revenue streams from the government can be extremely skewed to one end or the other, and so we will focus on the management of the financials for the annual and not so much on a quarter by quarter basis. With respect to taking a look at models and mathematically determining what might occur in the second half of the year, I think you can extrapolate out to your models through the guidance that we’ve given for the annual basis. David Moskowitz - Caris & Company : Let me try to ask it in a different way. Is there anything in the back half of the year that we should expect may not run at normal levels? I recognize you mentioned the volatility in the quarters. It looks like you had a pretty low level of BioThrax sales this quarter because of the plant shutdown in Q2. $30 million if you take out the HHS payment, so my estimation based on taking 7.5 million doses and multiplying it by the current price is somewhere in that high $30 to mid $40 level for the quarter, so that’s sort of the product revenue side, and then SG&A and R&D you mentioned had some one-time non-cash charges in those, so let me wrap this all together and say is there something that we really should be expecting in the back half of the year whereby you’re not going to see roughly $80 to $85 million of BioThrax sales and/or you’re going to see some anomaly in the operating expense line to really throw numbers off?

I don’t think there is anything that we haven’t previously discussed and given the guidance on $225 to $240 on the top line and $131 million delivered to date. Certainly, mathematically you can derive what’s going to be experienced over the next couple of quarters. As in years past, as we take a look at how we spend the SG&A and R&D, it’s usually fairly ratable over the year, and there’s nothing extraordinary that’s going to be coming in from that perspective, remembering that the $225 to $240 is made up of both the product sales revenues and the contracts and grants revenue and the $34 million lump sum premium. David Moskowitz - Caris & Company : I’m following all that, and that actually meets the criteria of the model that I’m looking at, so it doesn’t look like there anything unusual. If you hit the low end, then I understand, so just hitting the cost side, to try and wrap this up, in the first quarter you were running about $16 million in SG&A, you had $3 and change in the second quarter. Do you go back down to that level?

Again, we don’t give guidance on each individual line item, David, but again we spend fairly ratably through the year, and the only thing that I would toss out there is what is all unusual is we had a couple of non-cash charges in the first part of the year. We’ve got a litigation with PSC which is certainly going to drive some spending—exactly how much remains to be seen, but above and beyond that I think that’s as far as I can go with the guidance on the individual line items.

Just to add to what Don said, even though our G&A spend is more or less ratably during the year as certain clinical trials start and others end, so there is a little bit more of a variation from quarter to quarter. We’re not just a biodefense BioThrax sales company. We’re developing a pipeline both in biodefense and commercial segment that we are reinvesting to advance and reap the benefits sometime in the future. David Moskowitz - Caris & Company : If I can quickly dig down to that PSC litigation, I know you don’t want to give straight numbers but are we talking in the $1 to $2 million level or it could be just be multiple millions of dollars?

Really can’t say at this point. We are number one not ready to or prepared to publicly disclose the amount, but it won’t break the bank, and certainly depends on the length of the proceeding. If this was quickly resolved, it’s one number, and if it goes on for a protracted amount of time, it’s certainly a different number. David Moskowitz - Caris & Company : On the Building 55, you guys talk about if there is that scenario where you able to shift to the Maryland building after the RPA contract, how long would it take before you actually had salable BioThrax product coming out of Building 55?

Well, we previously discussed this. We need to complete our process validation of the scale-up product, then we may or may not need to do a bridging study clinically, so we didn’t give any timeframe, but it’s going to take several years.

The next question comes from the line of Sean Long – Kennedy Capital Management. Sean Long – Kennedy Capital Management : I was wondering if you had a BioThrax cost per dose on hand for this quarter.

We have not traditionally published or shared publicly the cost per dose for BioThrax. We have within the context of the contracts that we’ve been awarded, certainly we talk about the total number of doses and the total value of the contracts, and you can derive a price per dose. Within the context of the publicly published financial statements, you can determine the gross profit over a certain amount of time and back into a cost per dose but that’s not something that we share publicly.

Your next question comes from the line of David Moskowitz - Caris & Company David Moskowitz - Caris & Company : Could you talk about the US BioThrax sales that we might expect this year? I remember writing the report we talked about 5% of your sales coming from OUS. Is there a potential for you to be better than that this year?

If I have difficulty predicting the timeframe with the US government, I can tell you I have much larger challenges in predicting other governments. All I can tell you is that there is continuing demand. Of course, the regulatory questions in some countries like in India, we had to achieve regulatory approval before the government would be seriously considering a purchase. We’re happy to have announced that we’ve achieved it there. We have several other regulatory submissions we’re pursuing and making progress there. The international markets take a little longer and are very hard to predict in terms of annual sales, but if you look along a 3- to 5-year horizon, I feel quite confident that we will have growing international sales. David Moskowitz - Caris & Company : If I could get a little bit of a handle on the cash differential that you might expect, the debt repayment that you might be able to engage in by swapping the facilities and perhaps the interest expense saved. Any color you can put around that?

What I can tell you is what I anticipate is a modest reduction. Clearly, we haven’t finalized the financing for all the locations and taken a look at what that all nets out to be because it’s going to, as we’ve said before, it takes 60 to 90 days to close these transactions, but I would expect with regards to the real estate debt that it would be a modest reduction. It’s not a 50% reduction.

This concludes the question and answer session for today’s call. I would now like to turn the call back over to Mr. Robert Burrows for closing remarks.

That concludes today’s call.