Emergent BioSolutions Inc (EBS) 2012 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2012 Emergent BioSolutions Incorporated earnings conference call. My name is Jeff and I'll be your coordinator for today. At this time, all participants are in a listen-only mode. Later, we will facilitate 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. Bob Burrows, Vice President, Investor Relations. You have the floor, sir.

Thank you, Jeff. Good afternoon, ladies and gentlemen. Thank you for joining us today as we discuss Emergent BioSolutions first quarter 2012 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.

Joining me on the call this afternoon with prepared comments will be Dan Abdun-Nabi, our President 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 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 replay, this call was held and recorded on May 3, 2012. Since then, Emergent may have made announcements relating to topics discussed during today's call. So again, please reference to our most recent press releases and SEC filings. Emergent BioSolutions assumes no obligation to update the information in today's press release or as presented on this call, except as may be required by applicable laws or regulations. Today's press release may be found on our website at www.emergentbiosolutions.com under Investors/Press Releases.

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. From my prepared comments, I will review our financial performance for the first quarter of 2012; then, I will address our 2012 forecasts, including revenue expectations for the second quarter. And finally, I will provide a brief business update.

So to begin, let me review our financial results for Q1 2012. Total revenues were approximately $50 million, which is within the $40 million to $50 million range that we provided during our March conference call. In addition, for the quarter, we realized a net loss of $6.8 million or $0.19 per share. This loss includes a one-time non-cash charge of $9.6 million related to Pfizer's decision to cease further development of SBI-087. Without this non-cash charge, the Q1 net loss would have been approximately $700,000 or $0.02 per share.

Just a quick note on Pfizer. Pfizer recently notified us of its intent to terminate its development programs with respect to SBI-087. While Pfizer informed us that the product met the primary endpoint for efficacy and was generally well tolerated in a recently completed Phase II study in RA, Pfizer also indicated that the product did not meet other criterias set by Pfizer to advance the candidate.

On termination of the license agreement, which we anticipate shortly, the license technology would revert to us and Pfizer would have a continuing obligation to pay us low single-digit royalties on net sales of any biosimilar product they may develop directed to CD20. At this time, following the return of the technology to us, we do not plan to pursue further development of SBI-087.

Moving on, we finished the quarter with a combined cash and accounts receivable of $194 million. In terms of guidance, we've reaffirmed our full-year 2012 guidance of total revenues of $280 million to $300 million, and net income of $15 million to $25 million. Finally, for the second quarter, we anticipate total revenues of $70 million to $80 million.

Turning now to an update on the business, let me first discuss our BioDefense Division. As a result of our Q1 financial results, we continue to manufacture and deliver doses of BioThrax to the SNS under our current $1.25 billion contract. Importantly, we also continue to make progress towards licensure of our large-scale facility Building 55 for the production of BioThrax. This new facility is designed to manufacture up to 25 million doses of BioThrax per year on a single production line. If needed, this facility could with the addition of a second production line produce up to 50 million doses per year.

In our meeting last year with FDA, we received overall support for our plan for regulatory approval without the need for conducting clinical trials based on achieving specified endpoints in our proposed comparability and non-clinical studies. We plan to initiate consistency lot manufacturing in Q2, with completion anticipated in Q4. Based on this plan, we remain confident that licensure could occur as early as late 2014.

Separately, we have several initiatives underway to further enhance the value of BioThrax as one of the leading BioDefense countermeasures. These include obtaining a post-exposure indication, optimizing the dosing schedule, and extending the product shelf life to five years. We're also developing BioThrax in combination with a novel adjuvant in pursuit of a two-dose vaccination schedule administered over a two-week period.

Finally, we continue to advance our other anthrax-directed programs, including our rPA vaccine candidate and our two therapeutic candidates. Principally, we are focused on completing our ongoing studies and securing follow-on development funding from BARDA. We anticipate news on all of these initiatives over the next 9 to 12 months.

Now, let me turn to our BioSciences Division. Our lead program in this division is our TB booster vaccine candidate, MVA85A. This is the most advanced clinical-stage TB vaccine candidate under development today. We are developing this candidate with substantial support and funding commitments from renowned global NGOs, given its potential to significantly reduce the TB disease burden worldwide.

As you know, approximately 2 billion people or one-third of the world's population are estimated to be infected with the bacterium and are at risk of developing tuberculosis. According to the WHO, approximately 1.5 million people die from TB every year. It is the second leading cause of death from infectious disease worldwide. The only available licensed TB vaccine, known as BCG, has limited efficacy against pulmonary TB. The public health challenge has been intensified by the rise of multi-drug and extensively-drug-resistant strains of TB. In addition, there have been reports in Italy, Iran, and India of cases of totally drug-resistant strains of TB with mortality rates approaching 100%.

On World TB Day, which was on March 24, a report entitled Tuberculosis Vaccines, a Strategic Blueprint for the Next Decade was published. This report emphasized the need for a global effort to achieve effective TB vaccines. Clearly, TB represents a substantial global unmet medical need and there is growing support to the rapid development and licensure of new vaccines against this disease. Our TB candidate, MVA85A, is being developed with support from our partners, Oxford University, the Wellcome Trust and Aeras. We are also receiving funding support from EDCTP, which is a European development agency, as well as the NIH.

As you know, we are in the process of completing a randomized, double-blind, Phase IIb efficacy study in South Africa, involving 2,800 infants. The vaccination phase of the trial has been completed and these infants are now being observed. We continue to anticipate receiving efficacy data from this study at the end of this year. If these data are promising, given the heavy disease burden worldwide and the recognized need for new TB vaccines, we anticipate pursuing accelerated or conditional approval for MVA85A in selective countries.

Our TB vaccine candidate is also in a second randomized, double-blind, Phase IIb efficacy study involving approximately 1,400 HIV-infected adults in South Africa and Senegal. If successful, MVA85A would be the first vaccine licensed for TB since the introduction of BCG more than 80 years ago.

Our other key BioSciences program is our protein therapeutic candidate, TRU-016, targeting B-cell malignancies, including CLL and NHL. We are in the middle of a Phase II combination study that is examining the safety and efficacy of TRU-016 with bendamustine versus bendamustine alone in patients with relapsed CLL.

The Phase II trial is an open-label, multi-center, active-control study enrolling up to 100 randomized bendamustine-naive patients who have both a confirmed diagnosis of relapsed CLL and a history of having failed up to three previous treatment regimens. The primary endpoints for the study is overall response rate; secondary endpoints include PFS, DOR, and improvement in quality of life and disease symptoms. We expect to complete enrollment this year with data anticipated in 2013.

For TRU-016 and NHL, we have completed enrollment in a Phase Ib combination study, involving both rituximab and bendamustine. We anticipate that data from this study will be available in Q3. We expect to make a decision on further development of this candidate in NHL following a review of the Phase Ib study results.

So in summary, we remain on track, our business remains strong, and I'm confident regarding our prospects for the remainder of the year.

That concludes my prepared remarks and I would now turn it over to Don who will take you through the numbers in greater detail. Don?

Thank you, Dan. Good afternoon, everyone. Following the close of the markets today, we released our financial results for the first 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, May, the 4th. The 10-Q will also be available on our website.

Let me now briefly discuss the numbers. First quarter 2012 total revenues were $50.3 million versus $18.5 million in the first quarter 2011. First quarter revenues were comprised of $34.4 million of product sales, which is an increase of $28.8 million from Q1 2011 and $16 million of contracts and grants revenue, an increase of $3 million from Q1 2011. The increase in product sales was primarily due to an increase in the number of doses of BioThrax delivered.

Turning to gross margins, our gross margin in Q1 2012 was approximately 78%, which remains within our typical range of between 70% and 80%.

Turning to the bottom line, in Q1 2012, we recorded a net loss of $6.8 million or $0.19 per basic share, as compared to a net loss of $21.4 million or $0.61 per basic share in Q1 2011. The Q1 2012 net loss included a one-time non-cash charge of $9.6 million related to impairment of in-process research and development. Without this non-cash impairment, Q1 2012 net loss would have been approximately $700,000 or $0.02 per share.

Turning now to spending, our R&D expense for Q1 2012 was $26.2 million, 24% decrease from Q1 2011. Recall the contracts and grants revenues and costs associated with non-controlling interest offset a portion of our R&D expenses. Taking into account these adjustments, our net R&D for Q1 2012 was $9.1 million.

With respect to SG&A spending, first quarter 2012 SG&A expenses were $19.5 million, an increase of 7% over the same period in 2011. As always, we remain focused on managing growth in our general and administrative expenses. We continue to closely manage SG&A and do not expect the rate of growth seen in Q1 to continue for the balance of the year.

Turning now to the balance sheet, we ended the first quarter 2012 with cash and cash equivalents of $150.4 million and an accounts receivable balance of $43.7 million.

Finally, let me address our 2012 financial forecast. As Dan noted earlier, we are reaffirming our 2012 forecast of total revenues of $280 million to $300 million, put between product sales of $220 million to $230 million and contracts and grants revenue of $60 million to $70 million. We are also reaffirming our 2012 forecast for net income after tax of between $15 million and $25 million. In addition, for the second quarter of 2012, we are anticipating total revenues of between $70 million and $80 million.

And finally, you may have noted today, we filed a new Universal Shelf Registration Statement that would support a primary offering for the Company of up to $180 million and for selling stockholders who have registration rights of up to 3 million shares. As you know, it is fairly customary to have a standing shelf in place and this replaces the Shelf Registration Statement we filed in 2008 that expired unused last November.

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.

Thank you very much. (Operator Instructions) Our first question comes from the line of Mario Corso with Caris & Company. Please proceed.

Hi. Yes. Thanks for taking my questions. With respect to Pfizer, are there anymore payments coming upon the termination of that collaboration and there is -- is there any CVR avoidance that you would like to point out there? And on BioThrax, can you talk a little bit about how yields are going and how many doses may have been shipped in the quarter? Thanks very much.

Thanks, Mario. I appreciate you joining the call today and appreciate the questions. So first, with respect to Pfizer payments, no further payments are going to be forthcoming under the collaboration around SBI-087. However, as I indicated, there is an ongoing low-single-digit royalty obligation for any biosimilar they may develop and commercialize targeting CD20. So that would be the only remaining financial obligation.

With respect to CVR avoidance, there was indeed an avoidance of CVR and the number is $3 million, that was avoided as a result of the early termination of the license arrangement.

And your last question related to production of BioThrax in terms of output in the facility, as you know, we've -- every year, we establish a plan and we have a delivery schedule to the CDC for stockpiling in the SNS. And as you can see by the reaffirmation of our guidance, we believe we're going to be on plan, we're going to be on track. So production is supporting the financial results that we've -- we reported Q1 and for the forecast for the remainder of the year. So, so far, so good, we're on track.

Just a quick follow-up on Pfizer piece. So in terms of your revenue guidance, was there a Pfizer revenue assumption in there and now, it just puts you in a different spot of that range than previously?

No, there was not. This is Don. There was not. There were some minor revenues out in the latter part of the year, but nothing appreciable. So it really didn't have impact there.

Great. Thanks.

Our next question comes from the line of Cory Kasimov with JPMorgan. Please proceed.

Hey, good afternoon, guys. Thanks for taking the question. A couple of them for you. First of all, can you give us, Don, the relative breakdown between BioDefense and BioScience R&D spending this quarter?

Yes, Cory, if you give me just a minute, let me get my hands on that.

All right. I can go to the second question and come back to it.

I've got it, Cory.

Okay.

So basically, as you break it down, this is the gross development, not the netting that we talked about in the comments. There was approximately $15 million in BioDefense; there was approximately $9 million in BioSciences and $2 million in other.

Okay, perfect. That's helpful. And then, I was wondering if you guys can talk a little bit about any supportive data you have for your TB vaccine that gives you confidence that the Phase IIb study could work?

Yes, let me start and then I'm going to ask Jim Jackson, our Chief Scientific Officer, to add to my comments. So as you know, the product is an MVA-based vector delivering of an antigen. So we have seen this product in clinical trials, quite a number of early clinical trials, whereby the vector is effectively delivering the antigen and we are seeing some robust immune responses. Of course, the challenge here is, are those immune responses generating antibodies that are protective and that is the hopeful answer that we expect or anticipate deriving from the ongoing study.

So in terms of the ability of the candidate to generate immune responses, we've seen that consistently through use of the candidate MVA vector in earlier studies, but in terms of answering the final question about whether those antibodies are actually protective, that is what we're hoping the Phase IIb efficacy study will provide us. Jim, anything to add to that?

Yes. Cory, if you remember, MVA85A has been through a series -- rather exhaustive series of preclinical animal efficacy evaluations. I think there were four different animal models that this vaccine had been tested in for its ability to augment or promote further cell-mediated immunity to that initially primed by BCG.

In addition to the reproducible animal efficacy results, the immunogenicity results that we've seen, 85A I think has now been in like 12 different clinical studies where we have demonstrated safety and strong, solid immunogenicity on the cell-mediated side, not only in adults, but adolescents and now in infants as well.

So all that taken together, Cory, it's a very -- pretty compelling story for all of us. And unlike some of the other prototype booster vaccines that are out there, that have now started to progress their clinical development, our vaccines really [elicit] very strong CD4-type cell-mediated immune responses, which we think and a number of the leaders in the TB field think are going to be paramount, leading to a very efficacious vaccine.

All right, that's helpful. Thank you.

(multiple speakers).

Our next question comes from the line of Jason Kantor with RBC Capital Markets. Please proceed.

Hi. This is Adnan on Jason's behalf. First, what would constitute a good result for the TB study? And secondly, what would be the regulatory path or the market strategy?

Well, I didn't catch your first question, I'm sorry. But the second question which is the regulatory path, if I understood it correctly for the TB vaccine.

Yes, that's right.

Okay, on -- and maybe you could repeat the first part of your question and we can get to that in just a moment. So, Adnan, thanks for joining the call. The regulatory path is really something we're going to have to discuss in more detail once we see the data with the regulatory authorities. Our belief and there seems to be a growing sentiment out there is that with a compelling data, there will be some support and it could be quite broad-based for devising an accelerated path that would allow early licensure. Perhaps, there would be conditions that -- we would expect there would be conditions; perhaps, it could be followed up with a large-scale efficacy confirmatory study and the like. But that's speculation at this point.

So it's very difficult to read the minds of the regulators. We haven't had that robust discussion yet, but there are key opinion leader discussions out there that are ongoing about what the level of success ought to be to move for either accelerated or conditional approval and the landscape continues to shift. So I think, as the year unfolds, we'll learn quite a bit more about regulatory appetite for conditional or accelerated approval and what that might look like. And then, once we see the data, I think we would be in a better position to approach the agencies and discuss a more definitive path forward.

In terms of some of the [-- and let me note] that your first question is, what would constitute success in the Phase Ib, and that -- in the Phase IIb, I'm sorry. And that too is an excellent question though there has been a great deal of conversation in the community around what the key end points should be in terms of measuring success for this and I'll ask Jim to follow up on that.

We look to the recent experience in malaria as a possible benchmark. There was, in the malaria trials, a 35% VE, which was deemed by the public health authorities to be quite compelling and supportive of a licensure with the understanding that next-generation malaria vaccines should continue to be developed, moving that VE rate beyond 35% towards 50% and upwards even towards 70% or 80%. But Jim, maybe you can provide a little bit more -- shed a little bit more light on what the current thinking out there is in the KOL community?

Yes, sure. Thanks, Jason. Basically, what the primary endpoint for the study is going to be, is going to be a reduction in the number of confirmed cases of TB among the infants that receive not only BCG as a prime, but our MVA85A as a boost, compared to infants receiving BCG alone. And based on some ongoing dialog we've had with not only key opinion leaders, but some of the more Indian public health organizations, US, globally as well is, we are probably looking for an increase in vaccine efficacy of somewhere around 30%, maybe greater than what's achieved with BCG alone. And that's kind of what we're targeting and I think there are some statistical epidemiological basis for that level of vaccine efficacy as really being a game changer for the TB deal.

Okay. Thank you.

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

Hi, good evening. I wanted to follow up a little bit on the TB vaccine and I wonder if you can help us think about as you look at the countries where you think you might have kind of a near-term possibility of approval, what sort of an addressable market would you imagine is available there and what are the potential margins to EBS and can you remind us of what EBS' obligations to the Wellcome Trust and so on are? Thanks.

Yes. Thank you, Nick. Appreciate the question. As you may recall, and I think we've discussed in prior conference calls and presented at prior conferences, we have full commercial rights to a certain category of countries. They are designated as high-income and middle-income countries. And that includes -- it's about 55 countries, it includes those in the EU, Brazil, Russia, and also the private markets in India and China.

The addressable market, we believe, in terms of our space, generates about 75 million doses annually for those where BCG is actively administered right now as part of an extended program of immunization. So, in terms of the current market, based on BCG immunizations and we're looking at infant immunizations on an annual basis, it's about 75 million doses annually. Of course, we would expect that number to move north, as vaccine efficacy improves and as the experience with a combination, if you will, the prime and the boost materializes and increases, we would expect to see immunization rates, not only in those jurisdictions increase but other territories potentially expanding their immunization policies to include BCG with boost as part of their infant program. So, the immediate is in that 75 million as I've expressed. So even with a modest price per dose, you could easily envision a total market size north of $800 million, even north of $1 billion.

Now, in terms of what is immediately addressable and how that would play out, again, I think that will depend significantly on the conversations that we have with the regulatory authorities. Clearly, right now, one of the most serious outbreak on the countries is South Africa, that was one of the rationales for conducting the studies there.

We have high incidence with high morbidity and mortality in that jurisdiction. So that would be a logical first place to start, not necessarily stop. We do have to be mindful that we are not yet set up for large-scale commercial production, that's something that will take place over the course of the next several years. So we're now talking about large introductory launches, we're talking about pilot launches that will enable public health facilities to begin to address the TB threat that they're experiencing in their population. And I'll ask Jim also to expand on those comments. Jim?

Yes, I think it's really going to be a strong vaccine for companies -- countries where there are mandatory immunization programs, particularly in the Mideast, the Mediterranean region, even some parts of Eastern Europe where there are addressable populations that have some level of disposable income that can drive a reasonable vaccine price. Now, remember, this is a booster vaccine, so it will go hand in hand with countries and in healthcare systems where ECG is already being used.

Okay. Thanks. That's helpful. And I have just a couple of quick follow-ups for Don on the finances. So three questions there, I guess. And one is on the revenue, I guess, you are just slightly above the top end of guidance and I'm wondering if there is one of the two elements of revenue that wasn't near the talk of what you'd expected or what was sort of driving that.

Second question is, if I'm not mistaken, the share count decreased a little bit quarter-over-quarter. I'm just wondering what was behind that. And finally, the R&D run rate was a little less than we had -- I mean, sorry, the quarterly R&D is a little less than we expected, I wondered if you could help us think about what would that look like going forward.

Sure. With regards to -- would take your questions in the order that you gave them. With regards to the revenue, there was not one particular event that was driving that, the achievement at the top end of the range. To go back with regards to product sales, as you recall, we deliver in lots to the government 180,000 doses at a time, $5 million essentially in revenue per lot. So product sales can go up or down very, very quickly with just one or two extra lots being able to be shipped.

On the contracts and grants, it's going to ebb and flow with regards to where the various contracts and grants are at, at any point in time. And so, it's always a little bit of an art in estimating exactly how all the activities are going to go and when they're going to pass through the various checkpoints that the government has with regards to some of these contracts. So there was not one particular event that drove it to the top end.

With regards to the share count, yes, we don't see a decrease. As a matter of fact, we're seeing increase. So we could take that offline, if you'd like, but we don't see a decrease in share count.

With regards to R&D, as we've said in the past, R&D is really going to be a linear activity throughout the year. It depends upon what pace of development the various candidates are in. So I don't think you should take first quarter as first quarter times four and that's the annual spend on this because it's going to again increase or decrease depending upon where the various candidates are in their development cycle.

Okay. Thanks a lot.

Our next question comes from the line of Jim Molloy with ThinkEquity. Please proceed.

Hey, guys. Thanks for taking my question. I was wondering if you could walk through -- in looking back on the Trubion acquisition and some of the events that have happened now with Abbott and Pfizer, the thinking of the -- what's going to happen here in the uptake with these types of things going forward?

Well, in terms of -- when you say the appetite for these things going forward, are you talking about really the M&A arena or are you talking about the development arena? I'm not -- can you help me understand?

Yes, I recall that when you guys acquired the asset, it seemed a little bit outside of really your sweet spot and there are some questions from some non-forward-thinking investors perhaps on whether that was the correct place to be focusing energies. I know it was a fairly cheap acquisition. But here we've Pfizer now -- Abbott now, Pfizer kind of walking away from these programs. This -- looking back on it, are you still as confident in the ability to get [this integration to] finish line at some point?

Yes. And it's a fair question and it's an interesting question, Jim. So thanks for putting that on the table. So the way we look at this is the technology I think is separate and distinct from the collaborations that the acquisition brought to Emergent. We did value the acquisitions. It was clear one of the benefits of the acquisition was the fact that we had a partner in Abbott and Pfizer without any cost to us, was progressing a candidate on its own which had some upside. So that's clear.

The way we look at the events as they've unfolded, as you might recall, neither Abbott nor Pfizer really signed up with Trubion for those relationships and for those programs. Both companies inherited them through acquisitions, Abbott through the acquisition of Facet and Pfizer through the acquisition of Wyeth.

So they weren't home-grown to begin with. I guess the -- and the reasons for the departure of the two partners, if you will, are varied. Abbott, they made it clear that they had a privatization process they went through. The product had successfully met the endpoints that were specified. And similarly with Pfizer, we see a product meeting efficacy endpoint and generally well tolerated. So we don't see this as an indictment of the technology or the platform. It does present a challenge for us in terms of now what we do, in terms of R&D spend going forward to advance the candidate. And that's why we are taking a very measured approach with respect to TRU-016, while we have some data that's coming out this year and into next year.

And I think it would be prudent for us to evaluate data before we make a decision on how best to proceed. Whether it's something that we undertake on our own or something that we should partner, and if so, when do we partner, those are the things that we have to decide internally. For products like this, typically, Emergent would partner them. The question might be, when is it appropriate to partner and what are the circumstances under which those partnerships ought to be developed and signed up for?

And with respect to SBI-087, as we indicated, we really don't anticipate taking that on right now. We have enough on our plate, we don't need to enter into the RA failed, which is highly competitive, a lot of products, it's moving into biosimilars, it's not really in a space that we find core to our strategy and when we think we would be successful. If there were a partnering opportunity or an outlicense opportunity for that, possibly, but again, it's really not something we will focus a lot of effort on. Now, Jim Jackson, as you know, our CSO, is also the leader in the Seattle operation that can give you a little bit more insight into some of the other products that are in the portfolio there and that we think have exciting opportunities for us.

No, I think you summarized it quite well, it's -- Abbott left the CD37 collaboration due to an internal portfolio management process. They were quite supportive of the product from a technical perspective. However, it just wasn't as attractive as some other candidates in their portfolio from a commercial point of view.

With respect to the overall technology is seeing Abbott leave the co-development relationship and now Pfizer deciding not to pursue further development of SBI-087 really doesn't in my opinion impair the overall technology. As you know, we've got three of these recombinant small modular immunopharmaceuticals, the SMIPs, that have now been in the clinic. The two anti-CD20s first, TRU-015 that Wyeth and Pfizer worked on for several years into the second-generation SBI-087 and now we're progressing TRU-016, which is the anti-CD37, we're looking for efficacy in the B-cell malignancies area.

And all three of these molecular candidates have proven to be safe, generally well tolerated and demonstrating some level of clinical efficacy, whereas in the autoimmune disease area or whether it's in oncology. And, we intend to continue to leverage the technology that we have in Seattle and we acquired through the Trubion acquisition, particularly on the bio-specific deal. We've got a couple of candidates we would have moved into the clinic hopefully by the end of this year. It will really start to leverage that multi-specific value that we originally saw through that acquisition.

I guess one final observation I would make for you, Jim, is that, in terms of our future M&A activity, our focus right now, as we said repeatedly, is really to look at revenue generators or something that are very close to approval about to be launched. So, going forward, on the M&A side at least, we're not targeting development programs or earlier-stage clinical products that is similar to what Trubion represented in terms of an M&A profile for the Company.

Great. Thank you very much for that answer. Just a quick follow-up, the -- did I hear -- I have on mind the Phase II data, we're looking for that for SBI-087, end of 2012. Does that come out and look good? Is that what you said?

The Phase IIb data is for MVA85A, that's the TB candidate and we are expecting data at the end of this year.

And also, were you looking for Phase II for the SBI-O87 where lastly it was in Phase II? Does that report out and look good and Pfizer said, alright, we're moving on?

Actually, some of that data will be coming out in the upcoming [ULA] meeting. And as Dan said earlier is -- while this has been a candidate that Pfizer has been developing, we don't have full visibility into the development program. Based on what we do know and what we can communicate to you is that in that Phase II RA study, the efficacy of a [monocule], it did meet its primary end point. It was safe; more information, as I said, will be coming out on those clinical outcomes in ULA and I think the abstracts are going to be available in the next couple of weeks.

Okay. Great. Thanks. So I guess this is the end of the day. Unless you find a partner for that, that product is going nowhere further with you guys?

Yes, we are not prepared to make an investment in that program at this stage.

Okay. Very good. And the final question, you said the Building 55 at this juncture, you're feeling fairly confident that assuming all goes well, end of fourth quarter, end of '14, you could get a license to start producing there starting the first quarter '15?

Yes, our current plan brings us to the end of 2014 for licensure and it's based on the feedback we got from FDA, as I indicated. We do have programs underway to fulfill the plan, both in terms of compatibility study and nonclinical studies to demonstrate that the product manufactured in 55 is indeed comparable to what is currently licensed in Building 12.

Great. Thanks for taking my questions and congratulations to Fuad on Executive of the Year, Maryland.

Yes. Thank you, Jim. We will pass it along.

(Operator Instructions) Our next question comes from the line of Ian Somaiya with Piper Jaffray. Please proceed.

Thanks. Maybe if I can just follow-up on several of the questions that have been asked. On the corporate development side, should we assume that future deals will be focused more on areas of expertise that you already have, maybe potentially anti-infectives as opposed to moving into oncology or autoimmune? And as we think about late-stage assets, can you give us a sense of what the competitor dynamics are in obtaining such an asset and how do you see yourself positioned to get them?

Yes. Ian, thanks for the question and thanks for participating today. So in terms of our core strategy, we are focused on infectious disease, oncology and autoimmune. We believe that they represent that potential for a niche market opportunity for us. And I think the targets for Emergent in terms of near-term acquisitions would be marketed products or near-marketed products in that space. So I think we will continue to focus on what we've historically shown as part of our core competency and try to define acquisitions where we can leverage capabilities here, whether it's our manufacturing capabilities, whether it's the government side of our relationships in terms of sales, and deliveries and contracts. So there could be various aspects.

And the acquisitions need not be just in the BioSciences space, they also could be targeted to BioDefense. So it's a slightly broader universe than the oncology and autoimmune that you described. So the competition is clearly -- it's clearly stiff. There are limited number of such opportunities. And when they are there, there tends to be some interest in an acquisition. We do believe -- through some of the processes that we've developed internally and our selection criteria, we do believe we've identified some very interesting candidates and products that are available and could be transacted. It's always uncertain as to whether you will be able to complete any such transaction. And of course, we'll announce a transaction at the appropriate time. But we believe that there are selective targets out there that are transactable and that we could succeed in our overall plan in terms of growth through M&A.

Okay. And just wanted to follow up on the TB vaccine program and you've provided some qualitative feedback. But if you were to quantify what type of response is needed for an early filing or early approval based on the Phase IIb trial, is there sort of a benchmark that you and the regulatory agency have agreed to or your clinical consultants have pointed to?

That's a great question. The answer is, no, upfront. But we will continue, as public health authorities convene conferences, as regulatory authorities are really focused on the question of tuberculosis and how to get products quickly approved, I think the report that I mentioned in my prepared text is another example of just how important it is globally to address this TB threat. And our candidate being the lead at this point in terms of clinical development, I think we have a unique opportunity to work with authorities to come up with a paradigm that would allow for early conditional licensure and start to address the disease more globally. But right now, there is no agreement with regulatory authorities and I don't anticipate that happening until really post-licensure. Jim, do have anything to answer to that -- add to that?

Yes, just one comment is, over the last year or so, we have really engaged in several active dialogs with world or regional public health agencies, regulatory agencies and that dialog will actually serve as the guidance on how we plan to commercialize the vaccine, both in the developing world as well as the more developed world.

So I guess in conclusion, Ian, really there is a strong desire to address this. And assuming that we get positive results, and it's hard to really describe exactly what that is. I think Jim gave an idea of what that might look like, but it's not definitive. And assuming that they are positive in the eyes of the regulatory agencies and public health authorities, coupled with a desire, I think we'll be able to map out some path towards accelerated or conditional approval.

Okay. Thank you very much.

Ladies and gentlemen, that does conclude the Q&A portion of our event. I'd now like to turn the presentation over to Mr. Bob Burrows for closing remarks.

Thank you, Jeff. Ladies and gentlemen, that concludes today's call. 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, 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. We look forward to speaking to all of you in the future. Goodbye.

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