Emergent BioSolutions Inc.
Q4 2009 Earnings Call Transcript

Published: 5 Mar 2010

[Operator:]

Good day, ladies and gentlemen, and welcome to the full-year 2009 Emergent BioSolutions Inc. earnings conference call. My name is Jasmine and I’ll 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, Mr. Robert Burrows. Please proceed.

[Robert Burrows:]

Thank you, Jasmine. Good afternoon, ladies and gentlemen. My name is Robert Burrows. I’m Vice President of Investor Relations for Emergent. Thank you for joining us today as we discuss the Emergent BioSolutions financial results for the fourth quarter and full 12 months of 2009. As discussed in 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, Our Chairman and Chief Executive Officer and Don Elsey, our 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’m 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 for 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 you may be listening to the replay, this call is held and recorded on March 4, 2010. Since then Emergent may have made announcements relating to topics discussed during today’s call, 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 Web site at www.emergentbiosolutions.com under Investor/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?

[Fuad El-Hibri:]

Thank you, Bob. Good afternoon, everyone, and thank you for joining us on today’s conference call. For my prepared comments I will review our financial performance for 2009 and forecast for 2010, discuss selected key accomplishments achieved during 2009 and highlight key milestones for 2010. To begin, let me review our financial results for 2009. Our revenues of $235 million and net income of over $31 million reflect the continued strength of our core BioThrax business. I am very pleased with our reported results. Also today, we reaffirmed our 2010 forecast for total revenues of $235 million to $255 million and net income of $20 million to $30 million. In 2009, Emergent BioSolutions made progress on a number of key initiatives. To begin, let me address our accomplishments related to the sales of our license product BioThrax. Domestically, we continued to manufacture and deliver doses of BioThrax to the strategic national stockpile on schedule. During the year we completed deliveries under an existing procurement contract with DHS. And in the third quarter, we began to deliver doses under our follow on contract for 14.5 million doses valued at approximately $400 million. Our current contract runs through third quarter 2011. In addition, we have started preliminary discussions with the U.S. government regarding another follow on contract. We remain confident that the U.S. government will continue to procure BioThrax for the SNS over the long run. Internationally, we continued to take steps to expand sales of BioThrax. During 2009, we received market authorization in India and filed for licensure in other foreign jurisdictions. We are pleased with the increased level of interest in BioThrax worldwide and look forward to continuing to address this opportunity in the future. Let me now discuss key accomplishments related to the further development of BioThrax. First, we received four-year dating which resulted in the government paying us a premium of $34 million as well as and perhaps more importantly, an increase price per dose for future delivers. BioThrax is the only FDA licensed vaccine with four year dating. The U.S. government plays a significant value on extended dating of BioThrax and other countermeasures in an effort to increase the utility of the SNS. Second, we obtained approval from FDA for an intramuscular route of administration and a reduction to a five dose scheduled over 18 months. Third, the CDC completed a seven-year study which was conducted and funded by the U.S. government on over 1500 subjects, designed to optimize the dosing schedule of BioThrax. We believe that the final data strongly supports the pre-exposure dosing schedule of three doses over six months followed by a booster every three years. We recently filed a supplement with FDA to achieve this dosing regimen. Fourth, we continue to pursue an expansion of the BioThrax label to include a post exposure indication. Multi-year initiative that is funded in part by BARDA. As you can see we continue to enhance our flagship product with multiple initiatives designed to meet growing government needs and at the same time increase the value of BioThrax in the marketplace. Next, I would like to highlight key accomplishments related to our R&D pipeline beginning with our Anthrax franchise program. First, rPA. As you know, the RFP for the development and procurement of rPA was withdrawn in December last year. Subsequently, BARDA invited us to submit a proposal for the further development of our rPA candidate. Second, let me address AIG, one of our two anthrax therapeutic program. In 2009, we initiated a clinical trial which we expect will be the only human study required for licensure. We also completed non-clinical studies and additional assay development necessary to license this product. These activities were conducted under an existing development contract with the U.S. government. And AIG received both Fast Track designation and Orphan Drug status from FDA and in addition orphan drug status from Europe, EMEA. Third, let me address the anthrax mAb, our other anthrax therapeutic program. In 2009, we successfully completed pre-clinical study which we believe will support clinical development of the monoclonal antibody candidates. These activities were also conducted on an existing development contract with the U.S. government. Now, let me turn to our other R&D pipeline programs, specifically, TB and typhoid, both of which are in advanced clinical development. During 2009, we initiated a Phase IIb field efficacy trial of our TB vaccine in South Africa. This candidate is being developed jointly with the University of Oxford and in support of and funded by Wellcome Trust and Aeras Global TB Vaccine Foundation. In addition, the program received funding for a supplemental clinical study in HIV-infected results in adolescents. We also made progress in developing a commercial scale cell base manufacturing process. With respect to our pipeline vaccine candidate, Typhella, we completed a Phase IIb clinical trial, which demonstrated additional safety and immunogenicity in healthy subjects in the U.S. In addition, we began to make preparations for human challenge studies (inaudible) in the UK. We also made progress in identifying a local manufacturing partner for Typhella in Southeast Asia. Finally, we continued to make progress with our two pre-clinical candidates. These are our FDA based flu vaccine and our Chlamydia vaccine Moving on, I would like to discuss accomplishments achieved with respect to our manufacturing infrastructure. Let me first focus on our state-of-the-art large scale Lansing facility Building 55 where we realized three important achievements during the year. First, we accomplished a pioneer industry event. We successfully performed a facility change over that allowed us to campaign Building 55 and the manufacture of vaccine, produce for both performing and nonperforming organism. This capability provides us with the maximum flexibility to manufacture multiple products in the future. Second, in response to a request from BARDA, we submitted a proposal to fund the scale up of BioThrax and Building 55. We believe we made significant progress in negotiating with BARDA to further our plan scales of activity. With respect to the scale of activity it will take approximately three years. Third, in light of BARDA interest and an advance of a development contract, we dedicated the facility and resumed BioThrax scale of activity in Building 55. As a reminder, Building 55 has been designed to manufacture up to 30 million doses of BioThrax per year as currently completed and is expandable to 60 million doses per year based on demand. Let me now comment on our renewal Baltimore facility. As you know, during 2009, we acquired a multi-product manufacturing site which was previously used to manufacture FDA and EMEA license products. This 56,000 square foot facility houses five independent manufacturing sites, flexibly designed to support the production of both clinical and commercial materials for our growing product pipeline. Going to acquisition late last year, we initiated design assessment of the facility and began assembling an experienced team to lead the build out of the second manufacturing site. Finally, I would like to highlight a few key milestones for 2010. First, in terms of additional U.S. government contract milestones. For BioThrax, we expect to secure multi-year follow on procurement contract also for BioThrax, we expect to secure multi-year development contract for the remaining scale of activity to BioThrax and Building 55, and for rPA we expect to secure multiyear development contract to support its advanced development. Second, in terms of pipeline development module. For AIG, we anticipate completing the clinical trial. For rPA we anticipate continued process optimization in asset development. For our Anthrax mAb, we anticipate initiating a Phase I study. For our TB vaccine we expect to initiate an additional Phase II study in HIV-infected adolescent of (inaudible). And for Typhella, we anticipate completing a human challenge study in the UK. Third, in terms of manufacturing infrastructure milestones. For our new Baltimore facility, we plan to complete the facility design for bacterial, viral and nonviral manufacturing. And for our Atlantic facility we plan to expand our process development and validation. And fourth, we will continue to actively pursue acquisition and licensing initiatives that have potentials to broaden our pipeline as well as expand our sources of revenue. In conclusion, 2009 was another year of success and consistent execution. We grew revenues from both product sales and development contract and grant. We also continued to invest in our R&D pipeline while maintaining profitability. And we expanded our manufacturing infrastructure which we consider as core competence as well as a competitive advantage. Looking ahead, we anticipate 2010 to be another year of growth and expansion opportunity. That concludes my prepared comments and I will now turn it over to Don, who will take you through the numbers in greater detail. Don?

[Don Elsey:]

Thank you, Fuad. Good afternoon, everyone. As Fuad mentioned following the close of the markets today, we released our financial results for the fourth quarter and the full 12 months of 2009. I encourage everyone to take a look at the press release, which is currently available on our Web site. We plan to file our annual report on Form 10-K with the SEC by the close of business tomorrow, Friday, March, the 5th. The 10-K when filed will also be available on our Web site. Now, let me briefly discuss the financial results. For the full year 2009, total revenues were $234.8 million, a record for the company. Net income was $31.1 million or $1.02 per share. During 2009, we were able to leverage various opportunities to manage spending allowing us to record net income exceeding our earlier guidance. The performance for the year was primarily driven by sales of BioThrax and illustrates the continued strength of our core BioThrax business. For the fourth quarter of 2009, total revenues were $53.8 million as compared to $35.8 million in 2008. And net income was $4.2 million or $0.14 per share as compared to net income of $1.5 million or $0.05 per share in 2008. Now let me talk in more detail starting with product sales. Our full year 2009 product sales came in at $217.2 million which was an increase of 28% from full year 2008. The increase in year-over-year product sales resulted primarily from payments from HHS of approximately $34 million related to the approval of four- year expiry dating for BioThrax, obtained in June 2009, coupled with an 8% increase in the number of doses sold in 2009. As a reminder, our shipments to the government each quarter can vary significantly based on certain factors including manufacturing yield, product release and strategic national stockpile logistics. We expect that this variability will continue on a quarterly basis, but will be relatively predictable on an annual basis. Moving to contracts and grants revenues, for 2009, we had significantly higher levels of contracts and grants revenues. Specifically, our full year 2009 contracts and grants revenues increased by 8.2 million to 17.6 million, a jump of 87% from full year 2008. The increase in year-over-year contracts and grants revenues resulted primarily from development contracts we have in place from NIAID and BARDA to fund the advance development of various vaccine and antibody-based therapeutic programs within our growing Anthrax franchise. With that said let me move to gross profit. For 2009 we continued to experience strong gross profit on our product sales. The increase in cost of product sales on an absolute basis was driven by the 8% increase in the number of BioThrax doses sold and the increase in the average cost per dose sold associated with reduced production yield in the period which the doses sold were produced. As we have discussed before, biological manufacturing presents specific challenges in terms of actual production yields, and as a result, our gross profit is subject to variability due to normal fluctuations in our yields. Turning now to spending, first, let me take a look at product development. During 2009, we continued to advance the development of our product pipeline, which includes programs that will enhance the usability of BioThrax and various trials to advance our clinical stage candidate and our pre-clinical programs focused on anthrax, tuberculosis, typhoid, flu and chlamydia. As a result for the year, R&D spending was 74.6 million, an increase of 15.1 million or 25% over the full year 2008. With respect to G&A spending for the full year 2009, SG&A spending was 73.8 million, an increase of 18.7 million or 34% over the full year 2008. The spending for the full year 2009 includes litigation services and other professional services expenses of approximately $5 million as well as non-cash charges of 7.3 million for the write-down of our Frederick facilities and 1.4 million associated with acquisitions that were in progress but not completed as of December 31, 2008. In aggregate, these three items represent the majority of the year-over-year increase over 2008. We remain focused on controlling the growth in our general and administrative expenses. Next, the last item on our income statement, our bottom-line net income. For the full year 2009 net income was 31.1 million or $1.02 per basic share, a 51% increase over net income for the full-year 2008 and above Street consensus. Turning now to the balance sheet, for 2009, we continued to be cash flow positive and ended the year with cash and cash equivalents of 102.9 million and an accounts receivable balance of 54.9 million. Our outstanding long-term debt increased during 2009 to 50.7 million as we continued to support our investments in the expansion of our manufacturing facility in Lansing as well as the acquisition of two additional facilities, the product development facility in Gaithersburg and the manufacturing facility in Baltimore. Finally, let me address our 2010 financial forecast, which is, Fuad noted earlier, we have reaffirming. Our financial forecast for 2010 projects total revenues of 235 million to 255 million and net income after-tax of 20 million to 30 million. With that said, let me take a moment and remind everyone there’s still many factors not entirely within our control that can cause significant variability in our actual final results. This includes on the revenue side the timing and magnitude of SNS deliveries and on the expense side, the spending patterns within R&D and the technical requirement and regulatory filings driving such spending. In conclusion, we continue to deliver on our government contracts progress the development of our product candidate and resume qualification and validation of our large scale facility in Lansing. For 2010, we look forward to building on the success of 2009. Our business remains strong and we are confident of our prospects for 2010, both in terms of financial performance and contractual success, progress and product development and continued focus on acquisition and in-licensing opportunities. That concludes my comments. I will now turn the call over to the operator so that we can begin the question-and-answer portion of the call. Operator, please proceed.

[Operator:]

(Operator instructions) Your first question comes from the line of Eric Schmidt with Cowen & Company. Please proceed.

[Eric Schmidt:]

Good afternoon. Thanks for taking my question. Don, in terms of the revenue guidance for 2010, can you provide us with any sort of the rough split between BioThrax and contract and grant revenue or maybe how contract and grant revenue is going to trend year-on-year?

[Don Elsey:]

Yes. As a matter of fact in our presentation at the JP Morgan conference in January, we had a break out of that. Fuad, do you happen to have that chart in handy? Eric, if we can let me get back to you on that question in just a moment.

[Eric Schmidt:]

I think you were guiding to quite a bit of an uptick in contract and grant revenue maybe to the 40 million range?

[Don Elsey:]

That is correct, and the variability in contracts and grants revenues accounts for the greatest variability in the range of our revenue projection. As you know most of these contracts are cost plus contracts. We recognize revenue as we incur expenses on the programs. Therefore, if any of the programs either move ahead, faster or slower than earlier projected, that would cause a direct variation in the revenue that we can recognize.

[Eric Schmidt:]

And Don does the targeted figure of 40 million for the year, would that include a new contract for rPA or for building out the 55 facility?

[Don Elsey:]

That would not include any appreciable contract for rPA or for Building 55.

[Eric Schmidt:]

Okay. And then in terms of the FDA filings for the three dose regimen BioThrax, the three dose application, is there a timeline associated with that filing?

[Fuad El-Hibri:]

That supplemental BLA has been filed. As you well know the FDA doesn’t make any commitments as to when they will get back to you. I think it would be reasonable to assume it will be the latter part of the year before we hear back from them. I would expect give and take and questions, but I would be surprised if they come back with a final ruling on that before late 2010.

[Eric Schmidt:]

Okay. And then while we’re on FDA timelines, would you be able to get a BLA filing in for AIG by year-end or is that going to be an early 2011 event?

[Fuad El-Hibri:]

Let me ask Dr. Jim Jackson to opine on that.

[Jim Jackson:]

Where we are with our AIG program is we plan to complete our clinical study, as Fuad indicated in his remarks. We also plan to complete what we think are going to be with pivotal animal study. So by year-end we could very well be in a position to have all the documents and data in place for a filing. But that’s cutting it pretty close.

[Eric Schmidt:]

Okay. And then maybe another question for Jim or possibly Fuad. In terms of the Building 55 timeline that you laid out is producing BioThrax in that facility about three years from now. Are you waiting around for government funding and is that why potentially the timelines are a little bit extended or does it just take that long to refit the facility for BioThrax?

[Fuad El-Hibri:]

Hi Eric, this is Fuad. We’re not sitting around. We actually have rededicated the facility to the scale of activity of BioThrax. We expect that within government fiscal 2010, that means, by September this year, so within the next three months to six months that’s we would have finalized negotiations on this contract. And we hope that there will be an element of covering the expenses that we’re incurring right now. No, there’s no time that we’re wasting. You see, it’s difficult to project and a lot of interested parties ask us how long do you expect this to take. If we don’t have to do a clinical trial, it’s probably going to be sooner than the three-year period. If there is a clinical trial that’s the bridging study that is required, then it might take about three years. So even though we feel that the regulatory path can be easily navigated through there no big challenges, we still are negotiating with FDA as to exactly what will be required to demonstrate comparability of BioThrax from the 100 liter scale to the (inaudible).

[Eric Schmidt:]

Okay. So you still don’t know whether you need the bridging study?

[Fuad El-Hibri:]

Sorry Eric, you broke up there, could you repeat?

[Eric Schmidt:]

You still are not sure whether or not you’ll need the bridging study?

[Fuad El-Hibri:]

Well, we don’t know. We feel that there’s a very good chance the FDA will require it, but we’re still in discussions with them.

[Eric Schmidt:]

Okay, thanks for taking my questions.

[Fuad El-Hibri:]

Thank you, Eric.

[Operator:]

Your next question comes from the line of David Moskowitz with Madison Williams. Please proceed.

[David Moskowitz:]

Yes, thanks for taking my questions. Just reading to the press release, I see that you guys have talked about rPA work being performed in 2010. Fuad, typically, you don’t do work on projects unless there’s other funding involved. So what should we take away from this with regard to potential funding on rPA government this year?

[Fuad El-Hibri:]

Hi, David. That’s a very good question and yes, you are right. We typically do not do significant work on biodefense programs without the support or without having a contract. That may demonstrate the confidence we have that goes on Building 55 and rPA we would be receiving a contract.

[David Moskowitz:]

Okay. So, are you saying that you are more confident that there could be something, let’s say, under the BAA later this year?

[Fuad El-Hibri:]

I’m confident of both programs. I believe that the government is genuinely interested and dedicating Building 55 to BioThrax and (inaudible) increase the manufacturing of BioThrax. At the same time, as part of their multiple supplier, multiple product strategy, see a second anthrax, which our rPA candidate has been identified as a strong candidate. So we are confident that we will receive the government contract from the government.

[David Moskowitz:]

Would you think that that could happen this year?

[Fuad El-Hibri:]

I also think that it’s going to be fiscal 2010. At least that’s what the government told us, so, in business peak, it’s by September. So I would say, in the next three months to six months, both programs, in my view, are likely to be coming.

[David Moskowitz:]

Okay, thanks, Fuad. And also in the press release you guys talked about supplying more BioThrax to foreign governments. I remember, historically, I believe it was about 5% of sales going to foreign governments and other institutions. Can you talk about what increases and how you are able to do that given the capacity constraints?

[Fuad El-Hibri:]

Yes. So that is another reason why we are so interested in resuming the contracts because as demand increases internationally, we want to be able to supply. And there’s no question that the U.S. government has first priority, and we opportunistically sell BioThrax to foreign countries. So it’s a multifarious equation, if you will. Number one, do we have supply of additional doses? Two, and where do we stand with respect to regulatory licensure? Number three, how far developed are there that foreign countries, policies regarding stockpiling or even active immunization of their military personnel. So a lot of variables go in. We have been broadening our reach internationally. We have touched and sold to more countries, (inaudible) as they ramp-up and then we ramp-up in terms of demand and supply. So historically we were able to disclose a few countries because they allowed us to disclose and there are several countries that we are not allowed to disclose but our reach is expanding.

[David Moskowitz:]

Okay, I appreciate that. And just last question. So CapEx was higher than I expected this year. We were talking about 33 million and maybe I modeled it wrong, but are you guys expecting to spend that level going forward next year? And I guess that sort of dovetails into the question of how much funding could you get from the government for the Building 55 build out as you go forward? Thanks.

[Fuad El-Hibri:]

The physical stock, brick and mortar stock has already been built in Building 55. So really what we would otherwise capitalize is all the process development and process validation work and of course, getting it ready for licensure. So we would capitalize that but it’s mostly very labor-intensive and capitalize labor cost. Plus in Lansing, we do have a policy of reinvesting modest amounts in upgrading the facility, staying ahead of the regulatory. As far as Baltimore is concerned, we put some money aside for the build out and the configuration that we desire and support our products pipeline. We can’t speak to it right now in great detail because we are still finalizing the design of this. I don’t want to call it renovation, because it’s reasonably no facility, but in terms of reconfiguration on this facility.

[Jim Johnson:]

David, are you still there?

[David Moskowitz:]

That’s great, I heard you and I appreciate that. Thanks very much.

[Don Elsey:]

Let me make one last comment. If you were referencing 2009 on CapEx remembering that we had the purchase of both Baltimore and Gaithersburg in there. Maybe making that number higher than you expected.

[David Moskowitz:]

Makes sense. Okay, thanks, Don, appreciate it.

[Don Elsey:]

You bet.

[Operator:]

Your next question comes from the line of Cory Kasimov. Please proceed.

[Mona:]

This is Mona [ph] for Cory. I have a couple of questions. One is on the rPA development contract. I was just wondering if you would be willing to set expectations on the size of that contract that may come late this year.

[Fuad El-Hibri:]

I might be able to give you some color on this. As we have mentioned earlier in connection with the rPA that was outstanding. That the contract size we expected for the development and the delivery of the 25 million doses would be approximately 500 million to 600 million. And if you were to take 600 million and divide that almost evenly between development and procurement, you would end up approximately at a $300 million value of the development work. Now, the development work, again, I think we guided last year that it would take between five years, six years, and seven years and if they took an average of six years and divide that with 300 million roughly into that, we are talking about $50 million to $60 million annual development contract. And as Don mentioned earlier, sometimes you accelerate things, sometimes it goes a little slower. So there’s availability but we expect that the same amount of development work would be funded by the government only under a different contract vehicle.

[Mona:]

Okay, that’s very helpful. And then on BioThrax, on the potential for a follow on contract I was just wondering at what point do you begin to have discussions with the agency on this?

[Fuad El-Hibri:]

We already started discussions with the agency. Actually with CDC because CDC is now the new procurement agent for the government of our vaccine. So we started discussion. We’ve had positive feedback, like to discuss and potentially finalize another follow on contract this year. We are hopeful. That’s why in my prepared comments I mentioned that we are working hard towards getting a follow on contract already signed this year, but again, working with the government. They have their own time schedules and tables and we do have deliveries through September 2011. And not much would be lost if actually happened first quarter of 2011. But our goal is to try to finalize an agreement by 2010 this year.

[Mona:]

Okay, great. And then I guess one final question. Can you provide an update on the litigation with Protein scientists?

[Fuad El-Hibri:]

Yes. We are currently pursuing a proposed action in Connecticut and it’s in front of the judge and we anticipate that we will hear shortly.

[Mona:]

Okay, well, thanks very much for taking my questions.

[Fuad El-Hibri:]

Thank you. We remain confident that we either will be repaid the amount due to us or end up with access sufficient to cover the loans that were given. Thank you, Mona.

[Operator:]

(Operator instructions) Your next question comes from the line of Brian Jeep with Sidoti & Company. Please proceed.

[Brian Jeep:]

Good evening, gentlemen.

[Fuad El-Hibri:]

Hi, Brian.

[Brian Jeep:]

Start up with an easy one. The building for sale, do you have any idea of timing on? Are you talking to people now? Have some idea there?

[Don Elsey:]

Hi, Brian; this is Don Elsey. Yes, we are in active discussions. Real estate is always a tough one to call precisely, but we would certainly hope that we could complete the transaction or certainly sign the contract in the first half of this year.

[Brian Jeep:]

Okay. And then looking at the, I guess, in previous filings I read that the Phase III trials the TB candidate would be solely funded by Emergent. I wonder if you can give us a couple of things on that. One, possibly expected timing and then maybe discuss how that funding would work. Would you be seeking another partner possibly or what might that look like?

[Fuad El-Hibri:]

I don’t know that we spoke to Phase III, because, quite frankly, we are hoping to continue to get funding from our Wellcome Trust and Aeras with respect to this program, they are excited about this program. And also Phase IIb, the program received funding from Wellcome Trust and Aeras. I don’t know where you read that, we don’t expect any funding for Phase III.

[Don Elsey:]

I think, Fuad if I may, because most of the contractual documents were exhibits. The way it’s technically structured in the contract is at the end of Phase IIb, there’s no pre-established obligation on the part of the partners to OETC to fund. As Fuad says, we certainly are optimistic that they will, but there’s no obligation on their part. And the primary lead at that point will be Emergent. We are still 18 months, 20 months away from that. And as Fuad said we are still optimistic and working toward continuing funding from the partners that are currently working with us.

[Brian Jeep:]

Okay, that clears it up. My mistake. Sorry about that. And final question. The three dose filing, would you expect any kind of back payment if the doses already shipped in the same way that the four year expiry dating worked?

[Fuad El-Hibri:]

You broke off.

[Don Elsey:]

If I can state it, Fuad, he was asking we got a look back premium for a four-year expire, would we get the same sort of treatment on three doses?

[Brian Jeep:]

Great. That was my question.

[Fuad El-Hibri:]

Okay. We would certainly be working towards that. There’s nothing prenegotiated. Remember that right now HHS or CDC buys our anthrax vaccine on a post-exposure basis, not that we’re licensed for post-exposure, but their use would be under EUA, post-exposure, so they are already thinking in terms of three dose regimen. Because right now CDC has come out with a recommendation on post-exposure under EUA you would use antibiotic and three doses of (inaudible). So I don’t know that they would have signed a premium. We’ll try to negotiate, but a premium for at least their use. Now, the military use is a different story because they use our vaccine as license (inaudible). So they don’t use, now, immunizing with five doses, immunizing with three doses would be a major advantage to the military and there we may be able to negotiate a premium.

[Brian Jeep:]

Okay, thank you.

[Fuad El-Hibri:]

Thank you, Brian.

[Operator:]

At this time, there are no further questions. I would now turn the call back over to Mr. Robert Burrows. Please proceed.

[Robert Burrows:]

Thank you, Jasmine. Ladies and gentlemen, that concludes today’s call and thank you all for your participation. Please note that today’s call has been recorded and a replay will be available beginning later today through March 18th. Alternatively, there is available a webcast of today’s call and an archive version which will be available later today accessible through the company’s Web site 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. Good bye.

[Operator:]

Ladies and gentlemen, that concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.