Good day, ladies and gentlemen, and welcome to the Emergent BioSolutions First Quarter 2013 financial results conference call. My name is Karris, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this call is being recorded for replay purposes. I would now like to hand the call over to your host for today, Mr. Bob Burrows. Please proceed.

Thank you, Karris. Good afternoon, ladies and gentlemen. Again, my name is Bob Burrows, I am Vice President of Investor Relations for Emergent and thank you for joining us today as we discuss Emergent BioSolutions' first quarter 2013 financial results. 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 Dan Abdun-Nabi, our President and CEO; and Bob Kramer, our Chief Financial Officer. Following the prepared comments, we will conduct a 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 is held and recorded on May 2, 2013. 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. And with that introduction, I would now like to turn the call over to Dan Abdun-Nabi, Emergent Biosolutions' President and CEO. Dan?

Thank you, Bob. Good afternoon everyone and thank you for joining our call today. In my prepared comments, I will briefly touch on our financial performance for the quarter and our guidance for the full year and the second quarter. I'll then discuss our year to date operational performance and highlight the key milestones for the remainder of 2013. To begin, total revenue for the first quarter was $43.1 million, this is within the $40 million to $50 million range that we reaffirmed last week. During the first quarter, we realized a net loss of $8.1 million or $0.22 per share. In terms of guidance, for the full year 2013, we reaffirm our forecast of total revenue of $290 million to $310 million and net income of between $20 million to $30 million. For the second quarter 2013, we forecast total revenues of between $70 million to $80 million. Bob Kramer will provide more detail on both our financial performance and our guidance in a moment. Let me now turn to the operational performance of each of our business uni5ts during the first quarter. Beginning with the BioDefense Division, we continue to manufacture and deliver doses of BioThrax through the SNS under our current $1.25 billion contract. We also continue to advance the program for large-scale manufacturing of BioThrax in Building 55. Specifically after having successfully completed the pilot non-clinical studies this quarter, we received written confirmation from the FDA that the design of our pivotal non-clinical studies is acceptable. This is a very important step towards licensure of Building 55 and we remain on track to submit our sBLA filing to the FDA in 2014 with regulatory approval possibly in May 2014 or in 2015. Timing of both the filing and approval of course is dependent on the interactions…

Thank you, Dan. Good afternoon everyone. I'd like to make some general comments about our guidance for the full year and the second quarter, and then turn to both our consolidated performance for the quarter compared to prior year and then detail the performance of our two operating divisions during the first quarter. To start with, we are reaffirming our full-year forecast of between $290 million and $310 million in total revenue split between $230 million to $240 million in product sales and $60 million to $70 million of grant and contract revenue. We're also reaffirming our full-year net income forecast of between $20 million and $30 million. In addition, in the second quarter of 2013, we anticipate total revenues of between $70 million to $80 million. As Dan referenced earlier, we've made the decision to expand Study 16009, the open label study combining TRU and rituximab in front line CLL. We've also made a decision to further support the ADAPTIR platform by strategically investing in several preclinical candidates using this technology. Both efforts, the extension of Study 16009 and investment in preclinical candidates, are being done in support of our partnering strategy for these assets. While the R&D cost for these efforts will be higher than our original plan, it will not affect our net income guidance for 2013. Turning to our consolidated financial performance, total revenues for the quarter were $43.1 million, which included $30.4 million in product sales and $12.7 million in grants and contract revenue. This compares to total revenue of $50.3 million for the prior year. The year-over-year reduction was primarily a result of two factors; first, fewer BioThrax doses delivered during the period, the difference is essentially the closing of one BioThrax lot; and secondly, lower grants and contracts revenues due to payments we…

(Operator Instructions) Your first question comes from the line of Cory Kasimov with JPMorgan. Please proceed.

This is Whitney on for Cory. Two quick questions. First on Building 55, just wondering if you guys have had any discussions with the government or have any updated thoughts on the logistics of supply if Building 55 comes online before your contract is up, and then secondly, if you have any updated thoughts around your BD strategy post HPPD acquisition?

With respect to 55, we continue to believe that there would be a feathering in of doses from 55 to supplement Building 12 deliveries. The actual mechanics and the timing and the quantities are yet to be worked out. That's something that we're going to have to have discussions with CDC. Probably sometime next year we would begin those discussions to look at the mechanics to announce the timing, et cetera. We would expect that many of those deliveries would be pursuant to a new contract, but again the mechanics are yet to be discussed with the government. In terms of future BD activities, as we said, our growth plan really targets acquisitions and revenue generators and products or businesses that immediately contribute to the bottom line as well. So, I think the RSDL acquisition is a good example just holistically of the types of things that we are looking for, not necessarily in terms of size but in terms of the way it contributes to our overall growth. So we believe there are a number of other opportunities out there and we continue to focus on bringing one or more of those across the goal line over the course of the rest of the year. So, hopefully we will be successful and be able to report out to you as those mature and occur.

Your next question comes from the line of Jim Molloy with Janney. Please proceed.

Thanks for taking my question. Just a quick, the $230 million to $240 million product guidance, is that inclusive or exclusive of contribution from RSDL? And then second, the R&D numbers total seems persistently kind of high, I know you guys are showing a number of R&D projects, I mean at what point could we expect to see a meaningful decrease in the R&D number going forward?

So first Jim, this is Bob, on your revenue question, those guidance numbers exclude any impact of RSDL. Those are the guidance numbers that we communicated earlier. So just to be clear, they did not include any RSDL sales. And I guess on the second question, the R&D spend, as we have communicated in the past, 2013 will be a bit of a transition year for us as we fully implement the growth plan and the objectives around that that we announced last fall. We clearly have some projects and products that we continue to be excited about and we think hold a lot of value for the Company, and for us it's a matter of making the right decisions in 2013 as we again transition from where we started with that portfolio to the end of the year.

Just to add to that, Jim, with respect to the guidance numbers that I think Bob indicated, it's not clear exactly when this is going to cause, we anticipate sometime in Q3, so we'll have much better visibility once the (indiscernible) as to what the contributions might be for the financial performance, both from a top line and bottom line.

Maybe a couple of quick follow-ups if I may, the gross margin is still excellent, in line with where it's been, can you give your thoughts on where that could go to in 2014 should the HPPD close, obviously a lower margin business there? And then on the capital structure, you guys delivered a debt certainly given the consistency of your earnings, do you see some room to take on debt if you'd like to, if you wanted to, what's the thought on the capital structure if you're looking to make an acquisition that perhaps you have to go to the market or you can't do from cash on hand?

On the gross margin question, clearly the 81% as I indicated earlier is at the upper end of our historical range if you look at where we've been over the last 10 years. I mean I would just return you to the historical range which has been at 75% to 80% range, and it is too early to predict with certainty what the impact of the RSDL sales would have on that margin. I don't think we expect them to be that high but we won't know for sure until we get them, integrated them in part of Emergent going forward. And on the capital structure side, we continue to look at the most efficient ways to use our balance sheet and our cash in furtherance of our growth plan. So, I don't want to get real specific but we clearly have the ability and flexibility to do a number of things as we look at these transactions. So, I think that's all we are willing to say for now.

Your next question comes from the line of Nicholas Bishop with Cowen and Company. Please proceed.

Just a couple of questions, first on HPPD, just with modelling, are you willing to tell us what the pre-tax operating margin of HPPD was at the time of the acquisition?

I'm not sure we are understanding the question. You are looking for the pre-tax operating margin in the hands of the seller?

That's right.

So the EBITDA?

That would work too, yes.

So I think what we said historically, given the range of the revenue, which is sort of in the $20 million run rate, and given some estimates on the gross margin which we expect to be around the 50% range, we haven't given I'll call it sort of the below, further below the income statement guidance, and it's really difficult for us to do that at this juncture. I think again, the best course is to wait for further information. Once we get this integrated, then we'll have a much better figures to give the investment community in terms of where this is headed. But again, at the bottom line, we are anticipating that will be accretive beginning this year after backing out the transaction cost, and then growing the business into 2014 and beyond, we believe the contributions will further increase.

Okay. Just going back and reviewing the SEC filings of the predecessor, to Bracco there, (indiscernible) entity, that was a more diversified business but it had pre-tax operating margins in the range of about 8% to 10%. Obviously this is before you grow the revenues but is that an absurd range to be thinking about or can you give me any help there?

Again, I think if you look at the composition of the Bracco Diagnostics businesses, they were quite diverse. They included contract manufacturing operations as well as device. So it's very difficult, to Dan's point, very difficult for us right now, I mean pre-closing on this, to say with certainty. It would be inappropriate for us to do that. I think we've given sufficient guidance now that where we think the revenue will be, where we think the gross margin will be, there will be some SG&A and some R&D, and again, we think it has been a – we feel very confident it's going to contribute positively to our bottom line and we will be in a better position to clarify that after closing.

Okay, that's great. And I don't know if you said it before but the mix of revenues that HPPD was receiving on RSDL, was that primarily sales to the DoD on was it more split between the DoD and others?

It was primarily DoD against that contract and they had some non-DoD sales including sales to foreign governments, but it was predominantly DoD revenue.

And I mean the customer base is attracted to us because it's across the globe, we have got approximately 30 government agencies and ministries purchasing the product. So from that perspective, it's a nice base to build upon and we're actually seeing, we are also seeing purchases within the first responder community, again something that we think we can leverage and build upon, and there are growth potential markets that we look at for expanding RSDL sales that we talked about previously. So, it's a wonderful launching pad for us to expand upon. So, I don't look at the current book of business as really being the future book of business and I think we'll come back and share with you some thoughts as to how we believe and the timing for growing the business over the next several years.

Okay, that's great. And if I could ask one more and then I'll get back in the queue. Could you just talk a little bit about the composition of RSDL products and kind of what the barriers to competition are with that particular product?

Sure, I'll start and then I'd ask Adam to contribute a bit. So, this product was initially developed via the Canadian government, and then U.S. probably with the DoD in particular also contributed in its development and licensure in accordance by FDA. So, its historical roots go back to government demand and need. The way the product works, I won't get into the specific composition, I'll ask Adam to address that, but the final device is packaged in a sealed foil wrapper, if you will, and it is a sponge that has been impregnated with the proprietary lotion that comes with the business, and once an individual has been exposed to a chemical agent or compound, they simply lift open the seal, pull the packet, pull out the sponge and wipe down the exposed area, and the product is really designed to clear and decontaminate the skin from the exposure. Adam, maybe you can get into a little bit greater detail about the lotion and its composition and the protections that we have with respect to competition?

Sure. So yes, as Dan mentioned, I mean it's basically a small molecule that's formulated into a lotion and impregnated, as Dan mentioned, into a sponge, and then as Dan mentioned, there was an original patent that was associated with that chemical and sponge, but it's basically leveraging kind of typical or traditional neutralization chemistry when it comes to organophosphates or other nerve agents or toxins. So it's basically breaking bonds and neutralizing those agents.

So in terms of the competitive flood and the way in which we think we can maintain our position, there is a tremendous know-how in terms of the way the formulation works and the way the sponge has been developed and the application of the lotion to the sponge, that is proprietary. There are some exclusivity arrangements that we have gotten in place for some of the key components that are necessary in order to manufacture this product. So there is manufacturing know-how, there is proprietary formulation, if you will, we also have finished information that is trade secret protected and there is exclusivity around key components and ingredients that go into the product, around the sponge itself which is proprietary and unique to the RSDL platform.

Okay, that's very helpful. Thank you.

(Operator Instructions) At this time, there are no further questions in queue, and I would now like to hand the call back over to Mr. Rob Burrows for closing remarks.

Thank you, Karris, and ladies and gentlemen, that's all the time we have today. Thank you for your participation. Please note that today's call has been recorded and a replay will be available beginning later today through May 17. Alternatively available is a webcast for 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 does conclude today's conference. Thank you for your participation. You may now disconnect. Have a wonderful day.