To RBC Capital Markets' 2025 Global Healthcare Conference in New York City at the InterContinental. I'm Jose Ricardo Moreno on the Life Science Tools and Diagnostics teams for RBC. It's my pleasure to introduce our next company, Emergent BioSolutions. On the stage with me is CEO Joe Papa and CFO Richard Lindahl. Welcome, and thank you for being here. Let's get started. You're welcome. We have a lot of investors that may be new to the Emergent BioSolutions story. So can you give us a brief breakdown of where you sit in the healthcare paradigm?
Sure. Happy. Thank you again for the invitation. Happy to be here, everyone. Emergent is a biopharma company that's been in existence for 25 years. We started initially focusing in the area of biodefense or medical countermeasures, where we make products for the U.S. government initially and then governments around the world that are looking at protecting from whether it be smallpox, anthrax, products that we hope never to need, but reality we want to be prepared. We have been making those products for countries around the world for, as I said, over 25 years. We have products that have a significant moat around them because they're very difficult to make. You can't imagine the difficulty of making a live attenuated virus vaccine for smallpox.
First of all, you can't even get access to the smallpox, so people don't want you to have access to smallpox for protection and making sure you can contain it. Beyond that, you obviously have to protect all your employees and everybody involved in the process. A very significant moat around our smallpox products, our anthrax products, our botulism antitoxin products, our products. We have Ebanga for Ebola, we have raxibacumab for a therapeutic for anthrax. Very difficult products to make with a significant moat around them. We think that's important that we can help people prepare and be prepared in case we live, as you know, in an increasingly dangerous world. We want to make sure everyone's prepared. We do that. We also make Narcan. Narcan is one of the other public health threats.
A threat, obviously, has resulted in approximately 100,000 people dying in the U.S. alone in 2023. Good news is we've been able to reduce that now down to about 80,000 deaths per year in 2024, but it's still 80,000 deaths per year. Narcan can save lives. That's another area we're really excited to help in dealing with public health threats. That's the Emergent company. I only joined about a year ago, 15 months ago now, and we've been focused on first stabilizing our company and now turning it around. We're excited to be here and have a chance to talk more about Emergent.
Fantastic. Thank you. Joe, you're a very experienced leader in the healthcare space, including at much larger organizations like Parago, Bausch & Lomb, and Cardinal Health. What is it that attracted you to Emergent, and what are the challenges and opportunities that you see at a smaller organization like Emergent?
Sure. First and foremost, I love healthcare. As I looked at the mission of what Emergent was all about in terms of protecting and saving lives, it clearly was one that appealed to me and what I was looking at doing. Number two, I found with Emergent the moat I mentioned to you before in terms of products that are just excellent products that we could work on and continue to make a real difference in people's lives around the world. Number three, I looked at some of the challenges that Emergent faced, and they were very similar challenges to things I faced in the past in terms of turning around companies. We had a debt issue that we had to deal with. Rich, who's with me today, our CFO, did a fabulous job. We had to work on the debt.
We had to extend the maturities, reduce the debt. We had to improve operating performances, all things they had experience with in the past and felt that as I looked at what was going on with Emergent, things that I can help to turn around for the company. I joined Emergent with the concept of being able to turn it around into a company that could truly continue to make a difference, continue to make these very important products that had the moat around them.
Great. For Emergent, I know you've just described a little bit about the transformation over the past few years, and you've shared about your strategic plan in turning around the company. Where are we at right now, and what does the future look like in that strategic plan?
Sure. Great question. As we were thinking about what you need to do in turning around a company, we felt there were three phases, and this is something I had familiarity with in my previous companies. First phase to stabilize the company. By stabilizing, it was really dealing with many of the issues I talked about. We had too much debt. We had to reduce the debt. We had to extend the maturity of the debt. We had some legacy litigation that we had to resolve. We had a litigation with J&J over some of the issues that we had where we were suing J&J. J&J was suing us. We did end up settling with J&J, and J&J actually paid us $50 million to resolve that. We had to solve that. These are all things that were part of this initial stabilization phase as a company.
We had to absolutely improve our operating performance. Unfortunately, our operating performance in 2023, our adjusted EBITDA was negative in 2023. The good news is we were able to turn that around. In 2024, our adjusted EBITDA was at $183 million. We made a nice transition as we went through the stabilization phase. Having said that, the next phase for us is turnaround, and then the final stage being transformation. Let me just comment a little bit on our turnaround phase that we're in right now. We see that turnaround phase is the next logical phase where we are looking at what areas of the company we can invest in. Investment will be both in terms of dollars, resources, and just projects that we can invest in that will initiate growth for our company.
That growth is something that we expect to do both organically through this internal R&D projects that we have, but also externally through business development activities where we can bolt on product A, B, and C with the belief that it can go after the two main areas of our company. We sell products to the U.S. government, as I mentioned. How do I sell one more product to the U.S. government and/or other allied countries? Let's do that. That is one area that we do business. The other business area for us is Narcan, and we sell those to first responders. How do I find one more product that we can sell to the first responders, whether it be the local, municipal, or statewide first responders? Through that first responders channel.
Those are the things that we're working on today from our own organic R&D, but also the future business development projects. We're looking for those things. That's the turnaround phase. Where do we invest? Ultimately, we expect to get to transformation, which is 2026 and beyond. How can we get to a transformation of our company where we have a long-term growing, sustainable growth company that's profitable for the future? That's what I would call our ultimate phase of transformation. Once again, multi-year process. We've completed stabilization. We're in the turnaround phase, the investment phase, and ultimately hope to get to transformation in the near future.
As we've entered into the investment phase, I wanted to ask, how should we think about the current portfolio of products and services currently offered by Emergent?
Sure. Good question. Emergent has a number of products, all told about 10 products, a little more than 10 products that are predominantly focused on what we can do in terms of this whole area of medical countermeasures, biodefense. The good news about those products is that there's not a lot of things that the U.S. government can get bipartisan support behind. Good news, there is strong bipartisan support for biodefense. We have both congressional Republicans, congressional Democrats that support this area of medical countermeasures in terms of biodefense. That's where most of our product revenue is coming from today. Once again, the leading product for treatment of smallpox vaccine, therapeutic for smallpox, that's called Tembexa. We've got the area of anthrax. We've got a vaccine for anthrax called CYFENDUS. We've got BioThrax that we treat all of our forward deployed troops in the U.S.
and other allied nations treat their forward deployed troops to bacteria protect them from that. We have a therapeutic for anthrax called Raxibacumab. We've got a product, Ebanga for Ebola, a botulism anti-toxin, a very potent toxin. We have a product for that. All of our products are really geared towards making sure that we are prepared for the future for our country and all of our allied countries that we work with every day. We sell them to those countries around the world. It's a great business model. We work closely with the U.S. government. We get the products through the R&D process, get it approved by the FDA, sell them to the U.S. government. The U.S. government allows us to also sell those products to other countries around the world to help protect them. Good news, as long as we give the U.S.
government the most favored nation pricing, which we already do, then we are allowed to sell it to other countries around the world. A great return on investment for all of our shareholders.
Fantastic. What is the kind of moat that's around those kinds of products?
The moat is very significant because I can guarantee you that somebody's not going to go to their garage tonight and say, "I'm going to create a smallpox vaccine." First of all, you're not going to get access to smallpox because it's obviously something that people want to keep very controlled. Beyond that, a live virus vaccine and the difficulty in making that is a very difficult process. Fortunately, we have that capability within Emergent today. Same comment I could make for anthrax. Those are things that is a controlled process that the government wants to keep in a very tight process so that the product doesn't get into the hands of some bad actors. As we know, we live in an increasingly dangerous world. We need the products.
That gives us a moat, though, because of our capabilities in manufacturing, our capabilities in working with the U.S. government, everything from BARDA, Strategic National Stockpile, Department of Defense. Those are relationships that have been built over 25 years that we think allows us to truly differentiate our product offering from others. As I said, unlikely someone's trying to build another smallpox vaccine in their garage tonight. I don't think that's going to happen.
It'd be pretty hard to contain.
It'd be pretty hard to contain, and I would not want to be their neighbor.
Since acquiring Narcan in 2018, Narcan has played an outsized part in Emergent's growth story. Just wanted to ask, where are we in that growth trajectory for Emergent?
Yeah. Narcan, a very important product, our largest product, actually, is a product that saves lives. It is core to our mission of protecting and saving lives. As I think about where we are today, we are in a very unfortunate place for the world that there are still in the United States 80,000 people dying every year from opioid overdoses. We know if Narcan is available at that time, it can reverse the opioid overdose and help people to start breathing again and save lives. We know that the product will work. We know that we need to make it more accessible. What has Emergent done? Emergent obviously took this product in as a prescription item. We then sought to make the product over-the-counter, which means you can get it without a prescription.
As an over-the-counter product, the concept would be that we'd make it much more accessible so that everybody can have it. Hopefully, you'll never need it, but like that fire extinguisher sitting in the corner of a house, just in case you ever need it, it'll save the house. We believe the same thing. It's very cost-effective to have a Narcan product available just in case somebody overdoses on an opioid, a prescription product, or in case somebody shouldn't do it, but if they're experimenting, if a college student experiments with a product and it turns out to be laced with fentanyl, it could kill them. We can save those lives. We want to make sure that Narcan is widely distributed across every access point we possibly can make it. We are working with, for example, restaurants to put kits on the wall right next to the defibrillator.
Narcan should be there because actually Narcan's probably more cost-effective in terms of the number of lives that can be saved with a $40 Narcan on the wall versus a defibrillator, which is $1,500. I hope both are there to be clear, but we think Narcan could be even much more cost-effective there. Beyond that, we're working with large retailers to make sure it's available in their location. We just announced we have a deal with a large e-commerce company that's also going to make it available in their facilities. We're obviously selling it on the retail side through all the large retailers, the Walgreens, the CVS, the Rite Aid, etc. We sell it through all of them. Those are things that we want to make it even more and more.
If you ask my personal aspiration, I would love to see that Narcan is included in every first-aid kit sold in the United States because it will save lives. Unfortunately, 80,000 people dying every year still is a disaster we got to fix. We're fortunate. There is bipartisan support for saving lives from opioid overdoses as well. People think about the fentanyl problem. That's certainly part of it. Everyday opioids that people use for prescriptions could also be overdosed, and we can save people's lives for that as well. We're on a mission to make Narcan more accessible. As we do that, we will save more lives each and every day.
Yep. What is the current market share of Narcan, and where do you see the biggest possibilities for growth? U.S., OUS?
Sure. The current market share we have, we are the market leader of the naloxone Narcan products. Narcan is the standard of care, 4 mg of standard of care. We have that product. Ballpark, we have a 70-75% market share of that product. There are two generic players out there as well. There are other players out there. We still, as the market leader, maintain that market-lead position. We think it's from a couple of reasons. Number one, first and foremost, we have the brand name Narcan, the very widely known brand name. Number two, we have the manufacturing capacity. We work with a third party, but we make over 12 million-13 million doses a year. We have that large capacity to make the product, and it's all automated, so it gives us a low cost of goods. Number three, we have distribution capabilities.
We have a Narcan direct capability where we can ship it to about 18,000 different customers' locations over the course of any given year. That distribution capability comes with it to make it very easy to do business with the Narcan direct program. The team is very knowledgeable on where one can get funding to help pay for the Narcan. We obviously try to help all of our customers to get the product, get it there in a timely fashion, but also help them think about the ways they can get funding for this. The good news is that there is a lot of funding available for it, either through the federal government and the current administration has been very supportive of Narcan. There is also funding from many of the large pharma companies that made opioids and have entered into settlements for their opioid sales.
There is ballpark $50 billion coming to the states over the next five-10 years that is going to be dedicated to reducing the deaths to opioid overdoses. That funding is also available. Our team helps the local, state, municipalities try to find funding. That is what we think is going to be the biggest opportunity for additional distribution. We expect the volume growth, the unit volume growth for naloxone and Narcan products to be somewhere in that mid-single-digit growth rate. We want to continue to be the market leader, and we are going to do everything we can to have those kits on the walls I described. We just recently licensed from ICMA a product called Kloxxado, which is an 8 mg form of naloxone. We Emergent now have the 4 mg Narcan brand, but we also have the 8 milligram Kloxxado brand.
We're working to try to continue to get more distribution of Kloxxado through our Narcan direct program. We are excited about what that means for, as a leader, what we can do to continue to help save lives for patients that are potentially overdosing with Narcan, I'm sorry, overdosing on opioids, and Narcan or the Kloxxado can be a solution for them. As I said, we know that about half the time or more than half the time when someone overdoses, there is somebody in the room with them. If that is the case, we can save that person's life if Narcan is available.
Look to us to have more to say about continuing to make distribution available, everything we can do with kits, clip it on a backpack for college students to make sure that if one of their friends runs into a problem, they can save their friend's life.
Fantastic. In quarter one, 2025, Emergent reaffirmed revenue guide of $750 million-$850 million and adjusted EBITDA of $150 million-$200 million. What is contemplated currently in the guide? What gives you confidence that you remain on track as Fiscal 2025 progresses?
Sure. I'm going to start, but I'm going to also ask Richard if you want to make some comments on this. First and foremost, what gives us most confidence, as we thought through the issue, is number one, we entered in 2025 with very strong momentum, especially on our adjusted EBITDA. As I mentioned, we had a very good turnaround stabilization phase that happened in 2024 to the beginning parts of our turnaround program. We're going to continue to build on that momentum. Also, through the work of Rich and his team, we've done a lot to reduce some of our operating expenses. I'll let Rich kind of add on to that, but I think that a good part of what gives us confidence about the future.
Yeah, I think that's right. I think when you look at the revenue, I think Joe talked about the different elements of it. We have good visibility in terms of what we expect on the medical countermeasure side based on our ongoing dialogue with the U.S. government as well as with some of the international opportunities. On the commercial side, which is principally our Narcan revenue and now Kloxxado as well, we have, based on the trends we're seeing as we come through this part of the year, we feel like we're on the right trajectory to achieve that guidance on the revenue side. On the cost side, you see a significant reduction year over year in both our R&D and SG&A expenses.
The run rates that you saw in the first quarter are very indicative of what we would expect for the rest of the year. When you combine that with the gross margin guidance we put out there, it gives us a lot of confidence to be able to deliver the EBITDA range of $150 million-$200 million as well.
I know this has changed frequently with the volatility of government policies, but what are the impacts of tariffs to Emergent?
Yeah, one of the good news stories about Emergent as we think about what's happening is that Emergent makes all of our products in the U.S. or in Canada, but in a USMCA compliant facility. The good news is that the current administration clearly is trying to move products back to the U.S., which we support, obviously, but we never moved. We've always been in the U.S. in terms of our facility manufacturing and/or in Canada, which is a USMCA compliant facility. Tariffs, we don't expect to have a significant impact on us. To be clear, we do source one of the actual devices for our Narcan. It comes from overseas, comes from Europe, but that's just one component of our Narcan product. Our final bill of fare is here in the U.S. Our product portfolio is predominantly U.S.
manufactured portfolio or manufactured in Canada through a USMCA compliant facility. We do not expect big issues from tariffs based on our U.S. manufacturing decisions in the past.
Definitely. As pharma companies have brought back conversations about reshoring their own capabilities, could you provide an update about how Emergent has leveraged its CDMO capabilities and what it sees the future with those?
Emergent has CDMO capabilities. It is an area that we have always had that capability. It's not an area of focus for us. Having said that, though, we are absolutely aware of many of the pharma companies that are seeking to bring back drug substance manufacturing to the U.S. and/or fill finish for some of the injectable products into the U.S. The good news is that we have capabilities and sites that can do this. We have a, in our Canton, Massachusetts facility, we have a drug substance capability. Currently, it's making our products for our ACAM product, which is a live virus smallpox product. It has that capability, but it has a lot of extra capacity today. That is something we could make available to pharma companies if there was an opportunity for a need to bring back product and manufacture here in the U.S.
Our facility in Canton is just a, I was up there just recently. It's a world-class facility. I've had a chance to see over 100 different pharma facilities in my life, and this is absolutely one of the world-class facilities. We also have a fill finish facility in our Rockville, Maryland site that is available for fill finish of sterile products. Once again, that's a capacity that's available if companies are looking for it. We've got a team in place working with pharma companies to talk about that. We also have capacity in our Winnipeg site in our facility that we have in Winnipeg, Canada. Our Lansing, Michigan has a capability for a BSL-3, which is a very difficult lab capability that we have available. We've got a lot of capabilities. If pharma companies are looking for it, we'll be ready to help them.
Maybe just last, if you could look back five years from now after this transformation that you've done at Emergent, what would you be most proud of to have accomplished in that time?
Hopefully, there's a lot of good things I'll be able to say here, but I think first and foremost to build a world-class team of pharma people that are focused on all the right things of protecting and saving lives. We will have accomplished our mission of protecting and saving lives. My hope is, as an example of that, is that we will have done more to reduce the number of deaths for opioid overdoses from the current level of 80,000 to something significantly below that. I'd love to say we got to zero. I think that that might be a real stretch objective to be clear, but my hope would be we've dramatically improved the opioid overdose deaths that have occurred and that we are continuing to be a supplier of many new products to the U.S.
government and governments around the world around what we do for our medical countermeasures. Finally, that we will have expanded our international capabilities and grown. That's one of the things we, in the latest first quarter, we did over $90 million of revenue outside of the U.S. My hope is that we'll continue to expand our geographic footprint, that we can provide some of the important life-saving products to countries all over the world. We'll be really proud of that ability for us to ensure that unless world peace breaks out, we'll have the availability to help countries be prepared.
Thank you, Joe. Thank you, Rich.
Thank you.
Thank you.