Good day, ladies and gentlemen and welcome to the Emergent BioSolutions third quarter 2012 financial results conference call. My name is Grant and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions) As a reminder, this call is also being recorded for replay purposes. I would now like to turn the call over to your Mr. Bob Burrows, Vice President, Investor Relations. Please proceed.

Thank you, Grant. Good afternoon, ladies and gentlemen. Thank you for joining us today as we discuss Emergent BioSolutions' third quarter and year-to-date 2012 financial results and recently announced growth plans through 2015. As is customary, our call today is open to all participants. In addition, the call is being recorded and is copyrighted by Emergent BioSolutions. Participating on the call this afternoon with prepared comments will be our President and Chief Executive Officer, Dan Abdun-Nabi and Chief Financial Officer, Don Elsey. Several other members of senior management team will be available to respond to your questions during 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 filing 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 November 1, 2012. Since then, Emergent may have made announcements relating to topics discussed during today's call. So, again, please do 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/news. With that introduction, I would now like to turn the call over to Dan Abdun-Nabi, Emergent BioSolutions' President and CEO. Dan?

Well, thank you, Bob. Good morning, everyone and thank you for joining on our call today. During my prepared comments, I will review cover two broad topics. First, I will discuss our financial and operational performance for the past quarter and the year-to-date. Then, I will discuss in greater detail the growth plans through 2015 that we announced this morning. To begin, let me review our financials for the period. Our total revenues for the third quarter were approximately $67 million. This is within the guidance that we provided during our August conference call. Year-to-date total revenues were just over $187 million. Net income for the quarter were $6.6 million and net income for the first nine months of the year were $7.4 million. Turning to our achievements during the third quarter. We made significant progress in a number of areas. In our biodefense division we completed the manufacturing of BioThrax consistency lots in Building 55 and final product testing of these lots continues to move forward. Regarding PreviThrax, our Recombinant Anthrax Vaccine candidate, we announced that BARDA exercised a one-year contract option to further advance the development of this program. This option was exercised based upon PreviThrax. Having met all of the key milestones and after BARDA completed interagency process review. In our biosciences division, we initiated a Phase 2 study of TRU-016 in combination with bendamustine for relapsed refractory CLL. Recruiting for this study is on track with data expected next year. Meanwhile we completed the Phase 1b comparative study evaluating TRU-016 in combination with bendamustine and rituximab in relapsed indolent NHL The data from that study indicated that the combination therapy had an acceptable safety profile and there was evidence of clinical activity. Finally during the quarter, we initiated a $35 million share repurchase program. Now, I…

Thank you, Dan, good morning, everyone. Prior to the open of the markets, today, we released our financial results for the third quarter 2012. 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 no later than the close of business tomorrow Friday, November 2. The 10-Q will also be available on our website. Let me now briefly discuss the numbers. Third quarter 2012 total revenues were $66.6 million versus $58.8 million in the third quarter 2011. Total revenues for the first nine months of 2012 were $187.3 million versus $165.4 million for the first nine months of 2011. Diving a little deeper, year-to-date product sales revenues were $141.5 million versus $120.7 million for the first nine months last year. This increase was primarily due to an increase in doses of BioThrax delivered, partially offset by a lower sales price per dose. Year-to-date contracts and grants revenues were $45.8 million versus $44.7 million for the same period last year. This increase was primarily due to increased activity in associated revenue from our partner development contracts. Turning to gross margins. Our gross margin in Q3 2012 was approximately 81% which is modestly higher than our typical range of between 70% and 80%. Gross margin for the first nine months of 2012 was approximately 78%. Turning to the bottom line. Third quarter 2012 net income was $6.6 million or $0.18 per basic share as compared to $1.5 million or $0.04 per basic share in the third quarter of 2011. Net income for the first nine months of 2012 was $7.4 million or $0.21 per share, as compared to a net loss of $5.6 million, or a loss of $0.16 per share…

(Operator Instructions) Our first question comes from the line of Cory Kasimov from J.P. Morgan. Please go ahead.

It is actually Matt Lowe in for Cory today. Just a couple of questions. First one is, when the Phase 2 TB vaccine gets released, just wondering, how much detail will you be able to give us in that release? What might be in it? Secondly, just any more comments on potential ongoing BD efforts contributing to the 2015 growth plan?

Sure, in terms of the release itself, I think we are working out with our partners the actual plan for releasing the data. As you can appreciate, Gates, through the (inaudible) institute is very interested as is Oxford and Wellcome Trust. Then there are also the South African partners that we work with. So the actual details of the communication plan are currently being finalized. So I can't give you specifics yet, in terms of how that is going to work., but certainly in early Q1 next year, you will see the details. I think the team is also anticipating that there would be a publication in a well-recognized journal of the full results of the study. So stay tuned for more on that one. In terms of the BD efforts, we have a number of ongoing activities, with respect to potential targets and they are numerous and I would say, broad and I am pleased with the progress that is being made. They are in various stages of evolution from early stage to later stage, but stay tuned for further announcements on that. I think a priority for us, as I indicated, is that we would like to complete the AVM selection process and make that announcement by year-end. So you can look for that.

Thank you for your question there. Our next question comes from the line of Nicolas Bishop from Cowen and Company. Please go ahead.

I have a couple of questions on the three year growth plan. The first one is, just to clarify of the free marketed specialty products that you talked about. One of those is BioThrax, I assume. Just confirm that’s correct. Then, I wonder if you could provide any more granularity on the $500 million plus revenue guidance. How much of that do you envision being BioThrax versus something else because it seems to me you could get there on BioThrax alone, if building 55 is approved.

Yes, so thank you for joining us this morning. So BioThrax is certainly one of the three. So your observation is correct. In terms of the allocation of the breakdown of the products by revenue. Again, I think we set a target for ourselves. I am not, at this point, prepared to give an assessment of how it works. Remember that our current contract with the CDC runs through 2016 and we still have yet to work out how we are going to introduce building 55 material into the mix. So I am really not in position to give you specifics on that but our evaluation as we look at it is we should be able to achieve the target that we set out there. We are comfortable with that. We have done the analysis. We have look at potential product opportunities for acquisition and on balance, I think we will be able to hit that, the target that we have set out there for you.

Then just two follow-ups on the plan. I guess I will ask the first one and let you respond and that is, can you get to your revenue targets just on the basis of the programs that are extending your pipeline today or do you need to make external acquisitions to get there?

So as we look at our pipeline today, we don't see beyond the BioThrax in building 55 other products coming to market within the planned period by the end of 2015. So we are looking at acquisitions to support expanded BioThrax sales.

Okay and then I guess just one bigger picture sort of strategy kind of question. That is, if you could just explain, I guess that the motivation for providing this guidance today especially taking into account that it assumes acquisitions of the products you don't yet own. Just what's the intent of providing this big picture now as opposed to maybe after you have closed something?

Yes, and I think that’s a good question. We have been evaluating the direction of the company. What are the ways in which we want to build and grow on our history of success? A couple of things. We felt it was very important to be transparent with our shareholders and investors, in terms of where we are taking the company and to lay out there specific milestones that we have set for our ourselves and allow our investors to measure our progress towards those milestones. A couple of other things that make our unique refinements, which is, we have given real financial goals. We have put out there now, a growth target for the bottom line, which historically we have not set. We have put out a top line growth figure. Again, historically, we have not given that kind of granularity and specificity. So I think that is an important element of communication today. Also we have communicated to you on what we think our core competencies are and how we think we can leverage those core competencies. Our competence in the biodefense field as a specialty market, we think that is growth opportunity and we believe that we have competencies which cut across under specialty fields that we can leverage to build the business. I am quite confident that the acquisition strategy that we have laid out here can be implemented successfully, both in the near and midterm. So my view on it is, yes, while there is some risk, and I am glad you recognized there is some risk, I think the risk is manageable and the plan is achievable. So the point here was really to lay out for you how we see the path forward, give you some milestones down the road that we are targeting and we are seeking to achieve, tell you how we are going to get there and allow you then to measure our progress as a management team in achieving those goals.

Okay, that was really helpful. Thanks a lot, and if I can just sneak in one last one. On the fourth quarter, either for Dan or Don. Looking at our model, if we put revenues even near the low end of guidance, the net income seems to come towards the top or even above guidance. Is there a possibility that there could be a spike in one of the expense items in the fourth quarter or could there even be P&L related acquisition expenses, it seems that or could you comment on that?

Thank you for the question. With respect to Q4, with respect to our guidance for the full year, there are no acquisition expenses anticipated in there. I can't comment on your model per se but with the expenses that we project for fourth quarter, which are normal. I anticipated expenses in support of our programs going forward and the revenues that we are projecting we see the guidance as being appropriate.

Thank you for your question there. Our next question comes from the line of Jason Kantor from Credit Suisse. Please go ahead.

Thanks for taking my question. I was just wondering if you could give us some idea of what kind of hurdle you are looking for in your go-no-go decision in CLL? I assume it's an increasingly crowded space with lots of different drugs. What do you need to see to make determine to make that investment and would you make investment yourself or does that require a partner?

Thank you for the question. In terms of the actual target endpoints, maybe Scott Stromatt, our CMO, Chief Medical Officer can take that piece and then I will come back on the partnering question.

Sure. In terms of response rates, we are looking at 30% to 50% response rates. What's interesting is that although it is a crowded field there is no cure to the agent and given the cure, (inaudible) inhibitors they have mice activity, but again, they are the cure. So I think the real promise in a field like combination and that’s what very encouraging with TRU-016. So we when we do common (inaudible) study in animal, the marked effort would be and our goal is to move towards non- chemotherapy combinations, which won't have a mild depression and won't have the secondary malignancy that's current with the combination (inaudible).

In terms of partnering out, as part of my comments on the growth plan, that’s absolutely on the table. We will evaluate the data from the study. Make a determination as the next steps and my expectation is we would look to have some discussions around partnering and make a determination whether it is the right time, it is right deal, whether we should invest on our own to get to the next inflection point, or partner at that point. So stay tuned but in terms of overall strategy, partnering late stage candidates is certainly part of the approach that we are taking and it really depends on the product, the market and the deal.

Thank you for your question there. Our next question comes from the line of Matthew Luchini from Piper Jaffray. Please go ahead.

Just a couple, if I may. The first is, as it relates to the TB vaccine and that the data there. Is the definition of success, in your mind, black or white, are there specific hurdle rate that you are looking for relative to the booster plus vaccine versus vaccine alone? Or is there gray outcome as well? I think in the past you have mentioned maybe 40% to 50% improvement? Is that a hard and fast line? What happens if the data comes a little bit below that? If you could just share your thoughts on that, that will be great. Thank you.

That’s a great question. As you know, as we commented before there are a lot of eyes on this trial and the results of the study. The endpoint is vaccine efficacy of 50% or greater, that’s what we were hoping the trial will provide. However there is widespread acceptance of the fact that even below 50%, this vaccine could have tremendous public health benefits. We have heard numbers as low as 30%. So 30% to 50%, is that the gray zone? Yes, very well could be the gray zone. We would have to then evaluate what the data is telling us, look at the full scope of the data that’s provided by the results of the study, have some discussions with key opinion leaders, public health authorities and the regulatory agencies and then devise a path forward based on that, use your words, the gray zone. But from a public health perspective, even vaccine efficacy in that range could be very, very beneficial. We will just have to see how we develop the product at that point.

Looking at the things you laid out in the growth plan, I was just curious. You have outlined some core competencies, and some other things here. You talk a little bit about hoping to target on bioscience side hospital oriented products. I was just wondering, from your prospective, from a commercial point of view. What do you see is your competitive advantages, in terms of selling into that space? If you could just share some thoughts on that, that would be great. Thanks.

That is a great question. We, as a team, have talked about that at length. Candidly, if we were going to do an acquisition for that space, it will be a product coupled with commercialization capability and expertise because we recognize that we don't have that internally at Emergent now. So first foray into that the market would be product coupled with commercialization capability followed by, our hope would be we would continue to stand on that business by following it up with other acquisitions that could be carried by the commercialization team to address that market.

If I am understanding you, then that would somewhat suggest company acquisition, at least on the early side, as opposed to a license strategy, is that a correct interpretation of your last comment?

It is somewhat correct, because what we are seeing out there is that there are product opportunities that come with a sales force. There are small divisions of companies out there that are available, if you will, for transacting. Of course, you are right, there could also be "company acquisition" which will address that issue. So it's not necessarily a company but certainly the capabilities around commercialization would be part of that initial foray.

Thank you for your question there. Our next question comes from the line of Greg Wade. Please go ahead.

If I could just follow up on Nic's questions regarding the bogie for the delta and revenue. Existing products are quite, trading at three to five times revenue. What type of revenue stream are you trying to pull in through an acquisition? Does your $500 million target, as you expecting fully to be online by the end with the TB vaccine play in to that number and some commentary around how much bigger you think BioThrax gets with building 55 would be helpful. Investors consider how dilution are you willing to undertake in order to achieve your goals. Thanks.

Thank you for the question, Greg, very helpful. Starting with the BioThrax piece, again, I think there is too much uncertainty right now about how 55 is going to get feathered into the deliverables on the CDC. So it's is going to be very difficult until we have start to have more specific conversation giving you specifics around that. In terms of the other product opportunities, the targets that we are looking at are ways in which we can acquire product opportunities where we can actually build on the business and make it more valuable in our hands than in somebody else's hands and that is where, if we look at, for example our expertise in government contracting and delivering to governments, whether its U.S. or foreign, or creating a portfolio of products that address stated requirements whether its health threats or biodefense targets. So what we are trying to do is really leverage what we have got acquire at a value which is below what we think we can build internally, and create value through the acquisition. So my expectation is that the targets that you will see that we announced on may, on first flush, not be as large as we think top line and bottom line contributions can be because that’s, from my perspective, the rationale for doing a transaction. We have got to be able to acquire something that, in our hands, could be more valuable or would be more valuable than it is in the hands of the seller. Second, I don't see this as one large acquisition that answers them all across the board. I think that this very well could be assumed series of acquisitions of smaller in nature, which allows us to grow top line and bottom line and hopefully from a market perspective is small from a valuation perspective as well. So, I think, there are a number ways to model this well to get to the end point. There isn’t one model that answers them all.

Okay, and then with respect to the specifics around whether flu or TB is in that $500 million estimate. You obviously modeled all this, so you know the bogie you are looking for in terms of revenue or else you wouldn’t know what to shop for. Are those included?

I really don’t to comment on the (inaudible) or what the profile looks like in 2015 because undoubtedly whatever I say today, ultimately it is going to be different over the course of the next three years. So all I know is, I think, we have multiple ways to get there and that’s why we have the confidence that we can achieve it. What we will do is continue to deliver on this plan and then you can better assess what that portfolio ultimately looks like.

Okay, then just one last question with respect to building 55. The government had a previously stated goal of 70 million plus doses of anthrax vaccine and you are doing your best to supply them as much as you can out of your existing facility. Have you seen a change in the posture of the government with respect to its plans for that? Do you see less visibility into the potential future demand out of the building 55? Thanks.

Thanks for the question. No, I think the government has been absolutely firm and committed to that number. As you point out, we continue to deliver as much product s we can produce. And they reiterated that figure several times. So we see no wavering on that commitment.

Thank you for your question. We have no further questions at this time. (Operator Instructions)

Grant, are you going to turn it back to me?

We have no questions at this time. So I would now like to turn back to Bob.

Great, thank you very much. Ladies and gentlemen, that’s all the time we have for today and we really appreciate your participation. Please note that today's call has been recorded and a replay will be available beginning later today through November 8. Alternatively, there is available a webcast of today's call, an archived version of which will be available later today accessible through the company's website at www.emergentbiosolutions.com and clicking on the investors tab. Thank you again and we look forward to speaking with all of you in the future. Goodbye.

Thank you for your participation in today's conference. This now concludes the presentation. You may now disconnect. Have a good day.