Good day, ladies and gentlemen, and welcome to the Emergent BioSolutions 1Q 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to the company, Emergent BioSolutions. You may begin.

Thank you, Glenda, and good afternoon, everyone. My name is Bob Burrows, Vice President of Investor Relations for Emergent. Thank you for joining us today, as we discuss the operational and financial results for first quarter 2018. As is customary, today's call is open to all participants, and in addition, the call is being recorded and is copyrighted by Emergent BioSolutions. Participating on the call with prepared comments will be Dan Abdun-Nabi, Chief Executive Officer; Bob Kramer, President and Chief Operating Officer and Rich Lindahl, our newly appointed Chief Financial Officer. Other members of the senior team are present and available during the Q&A that will follow our prepared comments. Before beginning, I'm compelled to remind everyone that during today's call or either on our prepared comments or the Q&A session, management may make projections and other forward-looking statements related to our business, future events; our prospects or future performance. These forward-looking statements are based on our current intentions, beliefs and expectations regarding future events. We cannot guarantee that any forward-looking statement will be accurate. Investors should realize that if underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could differ materially from our expectations. Investors are therefore caution not to place undue reliance on any forward looking statement. Any forward looking statements speaks only as of the date of this press release and except as required by law, we do not undertake to update any forward looking statement to reflect new information, events or circumstances. Investor should consider this cautionary statement as well as risk factors identified in our periodic reports filed with the SEC when evaluating our forward-looking statements. During our prepared comments as well as during the Q&A session, we may also refer to certain non-GAAP financial measures that involve adjustments to GAAP figures, in order to provide greater transparency regarding Emergent's operating performance. Please refer to the tables found in today's press release regarding our use of adjusted net income and EBITDA and the reconciliations between our GAAP financial measures and these non-GAAP financial measures. For the benefit of those who may be listening to a replay of the webcast, this call was held and recorded on May 3, 2018. Since then, Emergent may have made announcements related to topics discussed during today's call. You're once again encouraged to refer to our most recent press releases and SEC filings, all of which may be found on the Investors home page of our website. And with that introduction, I would now like to turn the call over to Dan Abdun-Nabi, Emergent BioSolutions' CEO. Dan?

Well, thank you Bob and good afternoon everyone and thank you for joining our call today. Let me begin by discussing recent executive management changes made to further enhance execution of our growth strategy. I am extremely pleased that Bob Kramer has been promoted to the new created position of President and Chief Operating Officer. Bob has been a strong and dedicated leader of Emergent for many years with extensive knowledge of all aspects of business that make him uniquely qualified to oversee our global operations. I am also delighted to welcome Rich Lindahl to Emergent as our Chief Financial Officer. Rich brings a wealth of financial leadership experience in large growth oriented public companies, including CEB, Spring Nextel Corporation, Nextel Communications and MCI Communications. We’re pleased to have Rich on the team and present on this call, his first earnings call with Emergent. During our call today I'll focus my remarks on our view of recent trends in the public health threat market and our growth strategy to address those threats and serve that market. Bob will discuss our progress in our global operations and finally Rich will provide financial details about our first quarter performance and financial guidance. Now let’s turn to the topic at hand; Global public health threats and Emergent’s strategy to address those threats. Recently we have seen, with horrific consequences the use of chemical weapons and increase in the CBRNE threat posed by both state and non-state actors along with the increased threat posed by emerging infectious diseases. In the face of these experiences, across the globe we are witnessing an enhanced level of concern and focus on the importance of medical countermeasures to address these threats. Domestically we’re seeing U.S. government initiatives that focus on preparedness and the need to develop and stockpile…

Thank you, Dan. And good afternoon to everyone. Thank you for joining the call. For my comments today, I am going to focus on the current state-of-art operations, with an emphasis on our business unit structure that we adopted in April of 2017. Just as a reminder the business unit structure encompasses the following four focus areas. First Vaccines and Anti-Infectives currently run on an interim basis by Adam Havey. Next is our Antibiotic Therapeutic Business unit run by Doctor Laura Saward. Next is the Device Business Unit run by Doug White. And finally our contract development and manufacturing unit or CDMO Services run by Sean Kirk. Importantly these business units are all supported by enterprise wide functions including sales and marketing, human resources, finance, legal, regulatory, quality and others. We continue to make steady progress in aligning our operations across these lines of business and expect to continue to realize the benefits of the structure. With that overview, let me highlight some specific accomplishments, in each business unit, during the first quarter. Let’s start with vaccines and anti-infectives. As a reminder the vaccines and anti-infectives business unit consists of bio threats and ACAM2000 as well as a portfolio of development programs, notably NuThrax, our Zika and flu vaccines and the anti-infective candidates. Last year we completed the acquisition of the ACAM2000 business from Sanofi which brought the license smallpox vaccine as well as live viral manufacturing and fill/finish facilities and a contract with CDC for the delivery of ACAM2000 to the Strategic National Stockpile. Our integration of the acquired operations in Canton Massachusetts and Rock Hill, Maryland is essentially complete and we can now turn our attention to planning for the anticipated new ACAM2000 contract which we expect to have in place by the end of this year to…

Thank you Bob. And good afternoon everyone and thank you for joining the call. I'm thrilled to be joining my first earnings call as Emergent’s new CFO. There is a great deal going on here at Emergent and I look forward to working closely with my new colleagues in pursuit of our business objectives as well as our mission and vision. For my prepared comments today I will walk through our first quarter results, starting with the P&L and shift to the balance sheet and the state of our capital structure and finish up with comments on full year and second quarter guidance. With that let's first look at the performance for the first quarter of 2018. As you can see in our earnings press release our first quarter results reflected the delay in the timing of BioThrax deliveries, as we previously disclosed on February 22, as well as a delay in the timing of one ACAM2000 shipment. Despite otherwise solid execution to start the year this shift of deliveries to the second quarter impacted our revenue and profitability in the first quarter. That said we expect to complete these deliveries by the end of the second quarter, which is clearly reflected in our second quarter revenue guidance and has no impact on our full year guidance. Turning now to the numbers. Total revenues were $180 million, slightly higher than the prior year. Compared to the same period in 2017, the Q1 revenue highlights are as follows. First, product sales. Product sales during the quarter were $76 million, down 8% due principally to lower BAT and BioThrax sales, partially offset by an increase in other product sales, principally attributable to sales of ACAM2000 and Raxibacumab, both of which were acquired in the fourth quarter of last year. Second, contract manufacturing…

Thank you. [Operator Instructions] And our first question comes from the line of Dana Flanders from Goldman Sachs. Your line is now open.

Hi guys. This is Chris Staral on for Dana. Thanks for taking our questions. So in 2016, I think Congress passed an extension, that expanded the mandatory or the priority review program to include medical countermeasures that treat harmful biological chemical radiation or nuclear agents and this seems to be right in your wheelhouse. So maybe can you comment on how we should think about those potentially impacting your ongoing development programs including NuThrax and do you know who makes the determination of what is identified as a material threat? And then I have a follow-up after that.

Yeah. Thank you Chris for joining the call and thank you for sharing that observation. That’s absolutely right. It’s one of the many Congressional initiatives that’s been adopted over the last five to 10 years, really trying to expand the enterprise and create incentives for companies to develop medical countermeasures against some of these serious threats. When you look at our portfolio, we do have a number of products that we have identified that could be eligible for priority review vouchers. I know you mentioned specifically NuThrax. NuThrax, would not be eligible PRV in that there is already an approved vaccine for the prevention of Anthrax disease and that’s BioThrax. So PRV would not be available until those circumstances. But certainly as we think about development programs across the portfolio, whether it’s in the vaccines and any infectives or whether it’s in the antibody therapeutic side, we are as part of our analysis looking at the PRV potential. So we do have several actually in the portfolio today that would be eligible for PRV designation. And they include both the vaccine and the therapeutic for Zika we have a flu the vaccine it would be a broad spectrum flu product, universal flu product as the vaccine could be eligible and then just a few. So it is a driver for us and we see real economic value in migrating to portfolio that includes products are PRV eligible. So hopefully that gives you a sense for potential impact as we look at the pipeline going forward.

That’s very helpful. And then the quick follow-up is, for the delay ACAM2000 shipment can you maybe provide a little more color on what caused the delay and should we just be pushing now ACAM2000 revenues that would have been realized in 1Q after 2Q and is there any flow through for the calling quarters? And then my understand was that the contract renewal was or extension was up in March 2018 so it is fair to assume that we -- that you were granted an extension and how long should we expected revenues to be coming out of the program through the extension?

Yeah. So great question so the ACAM single delivery delayed so we have put that into deliveries in the second quarter, I would expect you could do the same. And now under the contract that recently expired we do have orders that are expected to take through the, rest of this year to complete. And so we are scheduled to make deliveries through the balance of the year. And we are expecting to negotiate a follow-on contract with U.S. government for continued supply. We expect there will be a multi-year contract and we expect that to have to be in place by year-end. So, in terms of extension, really no need for extension because the orders that are in place right now for continued supply during the balance of the year remain effective.

Thanks a lot.

Sure.

Thank you. And our next question comes from the line of Eric Schmidt, Cowen and Company. Your lines are open.

So thanks for taking my question. Maybe just on NuThrax in order to, to get this year-end submission in. Can you talk about the rate limiting steps and what is yet to be accomplished?

Yeah. Thanks Eric, good to hear your voice. Thanks for joining the call. I am going to ask Adam to walk you through the key steps that lead to EUA submission. Adam Havey, as you know, our EVP for Operations and standing in as a Head of the Business Unit for vaccines and anti-infectives. Adam?

Thanks Dan. So Eric really there is two rate limiters. One is we are kind of in the process right now as Bob mentioned, working through some engineering runs and that’s the process validation essentially of the manufacturing process, we need to complete what we would call PPQ loss, basically consecutive loss that just show reproducibility of the manufacturing process. And in parallel with that you need to validate our Popsie test [ph] and really those are the only two things that hold us back from submitting the EUA application.

And Adam I think at one point I think at one point we are talking about maybe up to 10 million doses of NuThrax orders for next year. Is that still a possibility under this approval process?

Yeah. So, I think when we think as we guided around I think Anthrax vaccine delivery we have said we expect approximately 10 million doses of delivery in 2019. I think the EUA really speaks to more the enabling of the claims in the current procurement contract and those claims kind of give a range of possibilities for BARDA and we would expect post EUA that they would start to make the transition from BioThrax to NuThrax.

Okay. So you don’t think you would get a full years order under EUA in other words?

No. I think we would absolutely get a full years order. I think it really just depends on the timing. The great thing building 55 is with we got increased capacity. It can produce up to 20 million to 25 million doses and so even if the EUA comes a little bit later, we'd still have the capability to deliver quite bit of NuThrax in 2019.

Okay. And then coming back to BioThrax we have seen lumpy quarters before, and you have always normalized things on an annual basis. But I guess I was a little bit surprised by the weakness in Q1 given the updated guidance so late in the quarter and in late February. So I think as you are operating off of contracts, does that make it more difficult for you to guess the timing of deliveries or maybe any insight to what happened there?

Yeah. Eric, it's Bob. Thanks for the question. We wanted to offer Rich as the new CFO, a traditional lumpy Q1. And really the addition of ACAM2000 quite frankly is another potential source of variability in the overall delivery schedule. So there is really nothing new other than the fact that ACAM we are ending up pushing a shipment into Q2 as was asked and responded to earlier. So I wouldn't read anything more into it than that.

Okay. Glad Rich is joining a team with lots of friends. Thanks guys.

Yeah. Thank you, Eric.

Thank you. And our next question comes from the line of Keay Nakae from Chardan. Your line is now open.

Thanks. I wanted to ask you about how we should think about the timing for any expanded sales into the EU. First step is to get the actual licenses but how long after that do you think it takes to negotiate supply contract and then also with respect to what you're preparing to do in the facility, how do you stand in terms of having products available?

Yeah So Keay, thanks for joining the call and thanks for the question. It's pretty exciting the regulatory approval for BioThrax in the EU but it's a -- I'll call it a single data point as you know the threat matrix in the EU is fairly significant. It's pretty high across the whole CBRNE, I’ll call it enterprise. And the reality is the European Union is taking it quite seriously and every country is developing their own policy in terms of how to address it and there are at varying stages of their development in terms of allocating funding and developing plans and identifying levels of procurement and stockpiling. So every country is a bit different. So there isn’t a single answer to your question. And various countries prioritize different products differently. For example some countries do prioritize an Anthrax vaccine to protect military personnel and potentially some civilian populations. Others look at smallpox as a higher threat level and keenly interested in starting to rotate stockpiles of smallpox that exist and have existed for a number of years in their stockpiles. Others are really focused on the chemical threat we've seen as you know the attack in the UK. We've seen the attack in Syria. And that's creating a high level of concern. So it's not simply around a single product or a single regulatory approval, it's really around having conversations with customers across the whole threat matrix and what opportunities they see within our portfolio to address the consensus that they have. So these are ongoing discussions and it's not -- it's not digital. It takes a while to have these conversations to the point where the government is now resolved its issues and internal issues in terms of prioritization of the threats they want to address, the amount of money they want to allocate, what countermeasures might be appropriate for their procurement and how they would stockpile and or deploy them. So this is a continuum, and we continue to see 2018 and 2019 as advancing the international sales opportunities for us and we can see, continue to see growth opportunity for international sales. As we said in the past, we do not expect international sales to come to the level of U.S. We're really targeting for a 2020 revenue performance, 10% of revenue coming from international markets. So that's our goal. And we think the landscape is evolving in such a way whereby we can achieve that.

Okay. Thanks, that’s all I have.

Thank you. And our next question comes from the line of Jessica Fye from JPMorgan Your line is now open.

Hey guys. Thanks for taking my questions. I wanted to follow up with the comment in prepared remarks about potential near term business development. Specifically, how do you think about prioritizing commercial versus clinical or even late clinical stage assets and how does your 2020 targets factor into those decisions? Thank you.

Yeah. Thanks. Thanks for joining the call and thanks for the question. So our priority are revenue generators that can be accretive to earnings within 12 months. That’s really what we see as the number one priority, the bull eye so to speak. To put a finer point on it we are looking at opportunities that if we can, have dual market potential whereby it’s not only to a government customer but also to be sold in a more traditional commercial market. Does that mean that completely off the table, a product that’s in advanced development that could be launched within a fairly short period of time but essential to the wheel house, no, I wouldn't say it's completely off the table but it's not priority number one. So as we look at the funnel it's heavily, heavily weighted towards the first priority number one meaning revenue generators have that could be accretive. And there is a possibility that perhaps the business acquisition we get both a product revenue generator or two along with a pipeline of products which could fall within the description that you provided. But in terms of the prioritization it’s really ensuring that when we look at an opportunity it's got near term revenue and can be accretive to the business. Hopefully that answers your question Jessica?

Yeah. That's helpful. And I also just wanted to ask about operating expenses, R&D in particular came in well below our forecast. Is that -- is the first quarter number do you think a run rate to think about for the year or is this going to be an anomaly?

Yeah. So Jess this is Bob. Again, I think we've been pretty clear that our longer term net R&D. goal of having R&D expenses less than 15% of revenue is where we would like to stay under. Historically we've not been anywhere near that level. However as Dan and Rich and Adam and I have all commented on, we see very exciting opportunities for carefully selected candidates to get some investment to get them to the point where they could potentially be funded or pick up some type of collaboration or joint venture. So we will be ramping up our net R&D spend over time and you should expect that to ratchet up. It's not going to jump immediately but it will inch up over the next year or two.

Great. Thank you.

Thank you. And our next question comes from the line of [indiscernible] from Wells Fargo Your line is now open.

Hi. It's David Maris. Couple of questions. So first, on the business development front you had some comments, I may have missed them though. How active or would you say you are and how confident and I don't mean over very active, are you getting multiple opportunities at this point or is it no, one or two you are attracted and you hope to get one done this year. So maybe if you can get any sort of color about the range and level of activity? And then the second is following up on your comment as well, international sales you hope to be large but they won't be as large as the U.S. I think that's self-evident but the question more is, maybe you think that you'll have meaningful U.S. sales, is 2019. 2020, just give us sort of a timeline or any sort of information about that that would be great. Thank you.

Sure. Thanks David, thanks for joining the call. Appreciate your participation. So in terms of the BD we have a very large funnel I would say for a company our size. We have opportunities that are further advanced and there are developments both in terms of diligence and evaluation and negotiation and others that are much further back in the queue. So I don't want to say that we’re very active because you asked me not to tell you that but the reality is it’s just it’s a pretty active team effort and given the size of the company and the size of team and the resources we have there is so many opportunities that we can really focus on. So I'm very pleased with the target opportunities that are elevating, both in terms of what they look like the profile of the opportunities, the valuations associated with them and where they would fit in our overall portfolio of products, both revenue generators and across the business units. So it’s really hard to say, last year we ended up doing two. You ask me say if this is one or two or more. It’s really hard to tell. As you know in the M&A world, opportunities that you think are in your grasp, can suddenly disappear for reasons quite unexpected. We have had experience in years gone by and other where you didn’t expect it to materialize in fact do materialize. So you know this business as well as I do. M&A is tough to anticipate but I am comfortable that we are in a position now, given the level of involvement engagement, the number of opportunities and the types of opportunities. We should be in a position to achieve the goal that we set for the organization. On the international sales, actually last year I thought was a very active year and successful year, I think we were up over $40 million in international sales last year which was double-digit percentage of total revenue. So, our goal as you know, get to that 10% of revenue, based on $1 billion revenue target for 2020 and that’s going to require continued increases year-over-year-over -year ’18, ’19 and ’20. So that's the way we, we are looking at it David so I think last year was significant for perhaps the first time in our history and over time we look to continue to ramp that up as overall revenues continue to ramp.

Okay. Thank you very much.

Thank you. And our next question comes from the line of François Brisebois from Laidlaw. Your line is now open François Brisebois: Hey. Thanks for taking the questions. Just a couple here. What should we be looking at through the original data coming out late ’18 or early ’19 through VLA 1601?

For the Phase 1 data on Zika. Yeah. Let's ask Adam Havey to answer that one.

Sure. Hey Franc, thanks for the questions. Really we're looking at safety. This is a proven -- it's based on a proven platform. So it's really a safe -- I mean we are looking at some immunogenicity markers as well but I think the primary endpoint for this is we are looking at for this pc. And I think our thinking here, our hypothesis ids if we can show it based on this platform we would be in a conversation with BARDA about funding. E plan to make this out of our Bayview facility. So it fits with our strategy, fits with the vaccines, business units, ideas around growth it fits into our market approach. François Brisebois: Okay. Great. That's helpful and then in terms of the ACAM delivery that missed. It’s one delivery out of how many or how should we think of that?

Yeah. It was just one shipment, so Franc to be clear, and again as we said we anticipate that that will get picked up in Q2 and we will leave that contract. François Brisebois: Okay. And that's one shipment out of out of how many shipments that you might expect.?

Yeah. I think it was one out of one. François Brisebois: Oh, got you. Okay. Okay. And then when you answered David, I think I heard -- so the $1 billion 2020 top line is still -- it's still intact?

Yeah. That continues to be our goal. François Brisebois: Okay. Great. All Right that's it for me. Thank You.

Thanks.

Thank You. [Operator Instructions] And our next question comes from the line of Lisa Springer from Singular Research. Your line is now open.

Thank you. With the five additional EU members that you will be able to supply BioThrax to, how much of the European market do you feel that you would have covered and what‘s the opportunity like -- are there other countries you would still like to get approval in?

Yeah. Thank you for joining the call Lisa and thanks for the question. So when we went out with mutual recognition procedure we identified, I think the countries we thought were most important to address from a licensure perspective. So at this point, I think that's the candidate list. And we're pleased that we got approval and we crossed that threshold in all five of those countries. Having said that what I would say that in the past we’ve experienced procurements from countries even where regulatory approval has not been obtained, based on regulatory approval either in the United States or in some countries outside of the U.S. So I don't think it forecloses potential sales in other countries within the EU based a licensure in Germany or the UK or France. But nevertheless we felt that these were the right countries for us to target and we're pleased that we've crossed this milestone.

Okay. And were there any share purchases during the quarter?

No. There weren’t any purchases of stock during the quarter.

Okay. Thank you.

Thank you. And that concludes our question-and-answer session for today. I'd like to turn the call back over to Mr. Burrows for closing remarks.

Thank you Glenda. With that ladies and gentlemen, let me now conclude the call. Thank you for your participation. Please note an archive version of the webcast of today's call be available later today and accessible through the company website Thank you all once again and we look forward to speaking with all of you in the future. Goodbye.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect. Everyone have a great day.