Good day, ladies and gentlemen, and welcome to the third quarter 2009 Emergent BioSolutions Inc. earnings conference call. My name is Chanel, and I will be your operator for today. At this time, all participants are in listen only mode. Later we will conduct a question and answer session. (Operator instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today's call, Mr. Robert Burrows. Please proceed.

Thank you, Chanel. 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 third quarter and first nine 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 with prepared comments 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, I am compelled to remind everyone that during the call, 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 was held and recorded on November 5, 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 may be required by applicable laws or regulations. Today’s press release may be found on our website at www.emergentbiosolutions.com under Investors/Press Release. And with that introduction, I would now like to turn the call over to Fuad El-Hibri, Emergent BioSolutions' Chairman and CEO. Fuad?

Thank you, Bob. Good afternoon, ladies and gentlemen. We appreciate your participation on this call. Today, we reported financial results for the third quarter and first nine months of 2009. I am very pleased with Emergent's overall performance year-to-date. We delivered strong sales and earnings results while continuing to invest in our product pipeline. Based upon our year-to-date performance, we are reaffirming our forecast for total revenues of approximately $225 million to $240 million and net income in excess of $20 million. Let me remind you, as I have done previously, that this forecast does not affect any financial impact from an rPA award or M&A activity. Let me now provide you a brief update on key aspects of our business. Let me begin with our biodefense program starting with our core BioThrax business. As you know, BioThrax is the only FDA licensed vaccine for the prevention of anthrax disease. We continue to manufacture and deliver doses of BioThrax to the strategic national stockpile on schedule. We recently completed delivery under a multiyear contract for 18.75 million doses valued at $448 million. We have now been without interruption to manufacture and deliver product under our follow on contract for 14.5 million doses over two years valued at approximately $400 million. Beyond this follow-on contract, we expect that the US government will continue to procure BioThrax for the strategic national stockpile. Further on the domestic front, we are pleased with the progress made at the Department of Homeland Security; specifically DHS has recently prepared draft guidance that includes BioThrax as an important piece of our nation's preparedness, and has proposed appropriate uses of the vaccine for the protection of first responders. On the international front, we are continuing to expand sales of BioThrax worldwide. In addition to receiving market authorization in…

Thank you, Fuad, good afternoon everyone. As Fuad mentioned, following the close of the markets today, we released our financial results for the third 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 10-Q with the SEC by the close of business tomorrow, Friday, November 6. The 10-Q we file will also be available on our website. I would like to say right up front that our financial performance for the third quarter is consistent with what we expected and was the basis when we reaffirmed our full-year guidance in early August as well as our continued re-affirmation of 2009 guidance today. With that said, let me walk you though the income statement. Product sales for the quarter came in at $39 million which was a decrease of 30% versus Q3 2008. The decrease in product sales was attributable to a 31% fewer doses shipped in the quarter than in the third quarter 2008. This is an example of the point I made previously which is that we have fairly good visibility into full year shipments or less visibility into quarterly shipments. Product sales for the first nine months of 2009 were 170 million, which is a 22% increase over the first nine months of 2008, and includes the payment of $34 million as a result of receiving four year dating for BioThrax. Contracts and grants revenue for the quarter were $4.3 million versus 1.1 million in Q3 2008 and for the first nine months of 2009 was $11 million compared to 3.5 million in the first nine months of 2008. The growth in contracts and grants revenue is a reflection of the impact of contracts we received from…

Yes, thank you, sir. (Operator instructions). We possible moment to compile the list. Your first question comes from the line of Eric Schmidt with Cowen & Company. Eric Schmidt – Cowen & Company: Good afternoon. Don, within the $39 million BioThrax sales this quarter, was there about $4 million residual payment for the higher shelf life?

Yes. The balance four year dating that was not reflected in the first half was indeed picked up to higher dose prices in the third quarter. However, that was $2 million, Eric. Eric Schmidt – Cowen & Company: 2 million, okay. And with the end of year approaching, do you have visibility in terms of your production yields and success rates out of Building 2, looks like you have great confidence in doing 7 million in total doses or might you be able to do a little bit more than that, where are you kind of tracking?

With respect to yields on that, Eric, for the most part, all of the doses that will be eligible for shipment to the SNS in the fourth quarter have already gone to the manufacturing process and are now going through the testing process and FDA release process. So manufacturing variability is not so much a question. But if you recall back to fourth quarter of last year, we had issues with exactly how many and where the SNS was going to accept, and we had a couple of lots slip into the first quarter. That is not out of the question for this year. As you know, we always come down the home stretch and are trying to get everything squared away with SNS, but the manufacturing yield does not have impact at this point with the doses that we have eligible for shipment in Q4.

If I may add the two drivers really in terms of how many doses we can ship in the fourth quarter is the FDA release turnaround time which varies sometimes from as little as two weeks to six weeks. And then of course the timing of the shipment and the flexibility and availability of the government to receive shipments at the SNS. So those are the two key drivers which may have an impact on one or two lots which as you know can have ultimate impact on profitability and the sales figure. Eric Schmidt – Cowen & Company: And I guess what I was also getting at a little bit is whether you might have any excess coming out of Building 12 that you could ship ex US in the fourth quarter?

I don't know that I would term it excess, Eric. Clearly as we take a look at the doses eligible for shipment, if we are able to close on a foreign order, that has the possibility of shipping in Q4, we are certainly going to take a look at that and take advantage of it as we can.

And there is upside in terms of if everything goes well in terms of the FDA release turnaround time on each of the lots and the shipment dates works out fine, there certainly is upside. Eric Schmidt – Cowen & Company: And then last question on Building 55, it sounds like you've internally made the decision you would like to go ahead and dedicate that to BioThrax at leas for the time being but that you need to run that by the government. What are the timelines here for making a firm decision and then assuming you get buy-in from the powers that be, when might we see product starting to come out of Building 55?

Eric, you know that be exciting part of this new development is that it really didn't come from within. It was a request for proposal that came from BARDA. So BARDA expressed an interest for us to submit a proposal for the scale up of BioThrax in the new facility and which we responded. So it is very fragmented [ph] and we feel that that doesn't really impact our rPA prospect of the rPA award. So if everything works out well, we may have to scale up contract, which again is where we expect to be funded for the scale up of BioThrax, additional revenue there, as well as potentially rPA [inaudible]. So now to your question as to timing, you know I believe I have answered that in the past, that depends of course on when the contract is awarded, but from award time, I would expect depending on whether a clinical comparability study is required, anywhere from two years to three years. Eric Schmidt – Cowen & Company:

What they would be – yes, thank you Eric for the question. What they would be funding is the further – remember that when the rPA RFP came out, we decided to dedicate Building 55 for rPA and we were in the middle of the process validation exercise, we have halted that. Now we would be resuming the process validation, and that takes six months to twelve months [inaudible] and running process. Then there may be a clinical trial that will be funded, there may be some non-clinical trial studies that may be funded, and of course the BLA preparation and filing processes associated with that. We are not prepared yet to comment on the size of that contract but it would be reasonably sizable. I mean it would hopefully fund the entire cost that was at least intention of us getting BioThrax to a stage where it can be manufactured at large-scale, at least 25 million, 30 million doses a year, and if the government so desires, we would install which is an option in our proposal, to install the second line, to go up to about 50 million to 60 million doses a year. Very exciting. And what is exciting too is that everything is really falling into place with BioThrax. We now have data after seven year study that shows that we may get a three dose regimen with a three year booster. I'm this is phenomenal data. The other thing is of course our four year dating which is highly attractive for SNS. The IM route of administration has reduced some of the local reactogenicity, so that is also very positive. Really and we are conducting some internal stability studies at room temperature, we are not ready to comment on that yet, but we are certainly very excited about how BioThrax is progressing and we believe what is going to even within rPA contract and rPA approval maintain its competitiveness in the marketplace. Eric Schmidt – Cowen & Company: Okay. And would there be a procurement portion to the RFP?

At this time, it is not contemplated, but certainly our expectation is that after the government were to get that contract development shortly thereafter, it would be procured. And let me explain why they might have decided to bifurcate it, it's because right now our client is CDC. CDC is buying from us BioThrax doses whereas BARDA is doing the development work. So getting our facility up and running and to scale up BioThrax – scale up BioThrax BARDA [inaudible] the product that might – the licensed product that would come out of that would be a CDC [inaudible]. Eric Schmidt – Cowen & Company: Okay, got it. Thanks a lot.

Thank you, Eric.

Your next question comes from the line of David Moskowitz of Caris & Company. David Moskowitz – Caris & Company: Yes, thanks and good afternoon. First of all, can you – the declines that we saw in the volumes of BioThrax, are you able to quantify that in the quarter? You talked about the 31% decline year-over-year, and also I would say that the reiteration of your guidance range implies that there is going to be a meaningful up tick in the fourth quarter of those volumes. Is that fair?

Some aspects – good afternoon, David. This is Don. With regards to the volumes, as we take a look and we project the 225 to 240, it is of course made up of two components, product sales and contracts and grants. Clearly, the shipment projection that can be derived for the fourth quarter is going to be greater there [ph] but it really is comprised of both those components, and so you've got to take a look at both those items. With regards to where we're going to end up for the full year and in re-affirming our guidance of 20 million in net income, as I said in my comments, we have a number of moving pieces that are still in front of us for the fourth quarter, not the least of which is the SNS shipment. And so we are seeing with that number, at the same time if we see opportunities to improve and optimize our net income for the year, we certainly will. But there are just too many moving pieces and too many of those pieces that are not within our direct control for us to take a look at something other than the guidance we have provided. David Moskowitz – Caris & Company: Okay. And just I guess along with that, the margins of 80%, I would imagine that they're going to improve a bit quarter to quarter given that the kind of move past the production yields bottlenecks?

Well I would say historically what – and I mentioned this in my comments as well, historically we have been between 75% and 80%. As you know with biologics, at any point in time, they can go up, down or sideways, you can lose things not only in the fermentation process but in the shipping process and have additional costs pop up in many different areas. So I'm very comfortable within that that range. Is it 80, I can't say that precisely. David Moskowitz – Caris & Company: Okay. Level of contracts and grants, looks like it is running roughly 4 million a quarter, the past two quarters, is that fair to believe that will remain somewhat consistent or should we see an up tick?

Again, that is highly dependent upon the technical milestones within those. Most of those contracts are of a cost plus nature, and as we go through it, there'll be various checkpoints with the government where they need to approve moving onto the next stage. So we can have a plan internally with regards to how fast and far we move on a particular program and we can knocked off track temporarily by a delete approval to move on to the next step. And we record revenues as we incur invoices in these contracts.

And if I might add in order to make sure it is correctly understood, approval to proceed is not in terms of meeting major milestones. But when dealing with those grants and development contracts, often the government wants to review every subcontract we have, or review other contracts that we may enter into as part of that grant. There is sometimes unfortunately the matter of delays in getting approvals with respect to the routine progress that we make with respect to a particular grant or development. David Moskowitz – Caris & Company: Okay. And in terms of the Protein Sciences litigation cost, 4.5 million we saw in the third quarter, do you expect any more litigation cost or is that pretty much everything you need to get the job done?

I have Denise Esposito with us. She is a general counsel, and why don't you please address this question, Denise?

Sure, I would be happy to. Certainly there will be some ongoing litigation costs involved in the PSC matter until we are repaid. The spike that we saw in the third quarter was due to an expedited discovery and trial schedule in the bankruptcy action. So we expect them to level off and be somewhat more consistent with what we have seen in prior quarters in terms of standard litigation to recovered loan proceeds.

David, let me just add to what Denise has said, we believe that even with the outstanding loan amount, the accrued interest, and the litigation expenses that the collateral that we have is adequate to protect that amount. So either we will get paid back or we will get the value out of the collateral. David Moskowitz – Caris & Company: Very good. Okay, I'll jump back in the queue.

Your next question comes from the line of Matt Hussey [ph] of ADR Research [ph]. Matt Hussey – ADR Research: Hi. Thanks for taking my question. Just as you look over at the experience that Abdax [ph] had at the Advisory Committee, is there anything that you will sort of change your approach or perspective to your IG or monoclonal anthrax program?

Yes. I'm going to ask Dr. Jim Jackson, who has been keeping a very close eye on that to respond to this question.

As you know, the Anti-Infective Drug Product Advisory Committee met early last week to review some of the components of HDS' anthrax BLA. And based on the information and the guidance that came out of that meeting, it is very consistent with what we are planning with our development program. And in fact in some of the enlightening information that did come out, we plan to use to expedite development of our monoclonal antibody program. So no, it is not a big change, it is quite expected and consistent with what we're planning in our program. Matt Hussey – ADR Research: Okay, very good. Thanks. And one other follow-up question on the – I think you had implied – your guidance implies about 65 million in fourth quarter revenue, is there any money in thee from the rPA award?

No, there is not. Matt Hussey – ADR Research: Okay. And just a bigger, a little bit bigger picture may be, Fuad, how important longer-term is the question of whether rPA is actually awarded or you stick with anthrax longer-term?

You know I look at every product as an incremental opportunity. Certainly if rPA was awarded, that is additional work over the work that we are doing with BioThrax. But can BioThrax on its own generate the sales and the added volume with the scaled up facility? Absolutely. So, would we like to have a second anthrax vaccine? Sure. So we are flexible. I think we are in a place where we're happy with any opportunity that the government gives us to develop products for the strategic national stockpile and for the protection of American civilians. With respect to the monoclonal antibody, the therapeutic, as opposed to the vaccine, and there we believe that the recent developments have helped us understand the situation better and we will incorporate some lessons learned and actually I believe puts us in an even stronger competitive position. Matt Hussey – ADR Research: Okay, very good. Thank you.

Thank you.

Your next question comes from the line of Daniel Mallin of WBB Securities.

Hi, Dan. Daniel Mallin – WBB Securities: Hi. Thanks for taking my question and congratulations on the quarter. I guess the fact that the sales of BioThrax during any particular period, certainly quarter or half are a little bit lumpy, certainly shouldn't be surprising. I guess I'm curious if you look at little further out, you certainly have this government contract which obligates the government to buy a certain amount of product over a set period of time. Can you just refresh my memory please as to the current terms on the contract, when the contract is up for renewal, and when we might begin to see some indication regarding any new contract negotiations for continuing procurement for BioThrax?

Absolutely. So right now, we are projecting that we will complete deliveries under the current follow-on contract by September of 2011, and so roughly about you know two years from now. And we do expect – I mean we had gotten repeated signals that the government continues to be interested in buying BioThrax for the strategic national stockpile. And let me remind you, I mean the standing requirement that has been reaffirmed on several occasions by the government of 75 million doses; we are nowhere close to that. The doses we have been delivering, and you can look back at our filings and calculate roughly how many we have, some of which have already expired, and we are well below half – having reached half of the strategic national stockpile, which is closer to one third of it right now. So there is plenty of opportunity. There is a need; there is an urgent to keep buying our capacity for indefinite period, certainly for years to come. Now, with respect to CDC, we have had preliminary discussions. They certainly are interested in starting the negotiations for a follow-on contract beyond September 2011, so that process has started. And hopefully you know if things go well and we get approval in the next three years or so with the scaled up product, we then can ship significantly more than the 7 million doses a year that we have right now. So we're quite excited about A, the government's interest in scaling up, and B, CDC's interest in already starting the discussions on the next follow-on contract. Daniel Mallin – WBB Securities: Forgive me for asking a question that is difficult to answer, but would you say that in the time frame of the next cycle of contract for renewals for BioThrax, that it is highly unlikely that there'll be any significant developments with respect to making rPA procurement a significant factor in the next BioThrax negotiation? I know that is a little bit convoluted way of asking but what I'm suggesting is that the next milestone in a BioThrax contract really predates any potential procurement oriented developments within rPA which is at least five or six year time frame if I recall?

Yes. So, let we just reiterate a couple of I guess facts that are out there. One is that I think both companies have said that both rPA contenders have said that it would take somewhere between five years to eight years to develop an rPA contract. And you know like we said, we are already in November, so if it is end of 2009 that an award comes out, you can add five to eight years until rPA may be licensed. There are still risks whether it is ours or our competitors' product, whether licensure can be achieved, whether it can be achieved with that time frame, and you know exactly how that product is going to be licensed. Is it going to be licensed as one, two year product with shelf life, is it going to be three doses, we hope it is going to be three does, will it be four doses, will it be five doses? So we just don't know right now. The other thing is that the government has been very clear that they would like multiple suppliers, multiple technologies, multiple products, so I am trying to disabuse people of thinking that BioThrax is going to end when rPA start being purchased. That is really not the case. That is not how we understand it, and everything we have heard from the government was contrary to that. They would like to maintain BioThrax. BioThrax, like I said again, could be you know showed [ph] once FDA reviews the data and safely approve it; it will be a three dose regimen with a three year booster. Even after the five to eight years of development to licensure rPA, another seven for rPA to have that kind of dose regimen. So it is way out there…

Thank you, Dan.

(Operator instructions). Your next question comes from the line of Cory Kasimov, JP Morgan. Cory Kasimov – JP Morgan: Hi, good afternoon. Thanks for taking the question. Actually I have two product related questions for you and then one big picture one. On the product related question first and I apologize if this has been addressed but I jumped on a couple of minutes late. To the extent that you can comment on rPA, what are the gating factors to getting this done this year? I know based on your dialogue, you think it can happen this year, but is there anything in particular you have to work through to make that happen?

Thanks for the question, Cory, and it is a very good question. You know we are nearing the end of this process. So that is why I continue to be optimistic based on what the government has told us that we are very close to an award. The remaining steps are more internal steps to the government and you know there I don't have more visibility than to say that I hope they can do this in the next couple of months. Cory Kasimov – JP Morgan: Okay, fair enough. And then the other product related question is on AIG, anything, any further expectations or more specific expectations for an RFP for this product in 2010?

You know that is a very good question, Cory, because we haven't really seen any RPD come out yet. I believe that especially with – you know AIG is in kind of in the same competitive landscape with monoclonal antibodies. So now with some further understanding of what is required in terms of the animal models, we believe that both of our products, our monoclonal antibodies as well as our AIG products are competitively now even better positioned. So we hope that the government will come out with an RFP next year, but we can't tell you with any certainty and usually the government doesn't give any hint prior to an RFP. We are usually surprised by the issuance of those RFPs. So we still expect it, but we can't be sure. Cory Kasimov – JP Morgan: Okay. And then finally, a big picture question here, a couple of weeks ago there was a front-page article in the USA Today about a report that they get their hands on where in a Congressional Commission was accusing the White House of neglecting bioterrorism in general and anthrax in particular. And they basically were calling for a change to that. And I'm wondering if you had any comments on that, if you in your interactions with BARDA and HHS have had any discussions regarding this topic in this particular commission?

Well, I will ask Dan to comment. He has been working on that for a long time.

Yes. Thanks for the question Cory. That did get a lot of press. It was an interesting observation by the Commission about the importance of addressing the bioterrorist threat. We have had not specific discussions about that with HHS or BARDA regarding either their perspective on it or whether they are taking any specific actions in connection with it. But having said that, I think the – what we see from BARDA is continuing commitment to this space, continuing desire to develop these countermeasures, so we are really not seeing on the operational level anything to suggest either a ratchet down given the new administration or starting to ratchet up. I think they're proceeding at pace with evaluating and trying to stockpile on all the countermeasures that they targeted. Is that helpful? Cory Kasimov – JP Morgan: Okay, that is helpful. Thanks for taking the questions.

And Dan when you say ratcheting up beyond the 75 million doses, they are still committed to the 75 million?

And I was actually going broadly in terms of overall bio terror that they have a portfolio approach, they're looking at assembling a portfolio of products and they're staying that course. They believe that they have got a right strategy which has been published and people have evaluated and they appear to be marching towards completion of that strategy, which started as you know in the prior administration. Cory Kasimov – JP Morgan: Absolutely. Thank you, Dan.

There are no further questions. I'll now turn the call back over to your host Mr. Robert Burrows.

Thank you, Chanel. Ladies and gentleman, that concludes today's call, and thank you for your participation. Please note that today's call is being recorded and a replay will be available beginning later today through November 19. Alternatively there is available a webcast of today's call, an archived version of which will be available later today accessible through the company website at www.emergentbiosolutions.com and clicking on the Investors tab. Thank you again and we look forward to speaking to all of you in the future. Goodbye.

Ladies and gentlemen, that concludes the presentation. Thank you for your participation. You may now disconnect. Have a great day.