Good day, ladies and gentlemen, and welcome to the second quarter 2010 Emergent BioSolutions earnings conference call. My name is Saab, and I will be your operator for today. (Operator instructions) I would now like to turn the conference over to Mr. Robert Burrows. Please proceed.

Thank you, Saab. 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 Emergent BioSolutions’ financial results for the second quarter and first six months of 2010. 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 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 was held and recorded on August 5, 2010. Since then Emergent may have made announcements relating to topics discussed during today’s call, so 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 website at www.emergentbiosolutions.com under Investors/Press Releases. With that introduction, I would now like to turn the call over to Fuad El-Hibri, Emergent BioSolutions' Chairman and CEO. Fuad?

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 the second quarter of 2010, provide a reaffirmation of our financial forecast, discuss updates regarding our business, and highlight key upcoming milestones. To begin, let me review our financial results for the second quarter of 2010. Our revenues of approximately $62 million and net income of $10 million include the scheduled deliveries of BioThrax to the SNS, as well as progress payments under existing development contracts. These financial results are in line with our projections for the year. We remain on track to achieve our guidance for the year, which was revised upwards on July 20. With respect to our guidance, today we reaffirm our 2010 forecast for total revenues of $275 million to $300 million, and net income of $40 million to $50 million. This upward revision is supported by the recent modification to our current BioThrax contract with CDC, which increased the number of doses we can deliver into the SNS during 2010. This is also supported by an increased volume of available doses due to consistently high production yields projected throughout 2010. We believe our multi-year drive to optimize the manufacturing process at our current facility has contributed to the projected higher yields. As a result, we expect to generate higher revenues and profitability in the second half of the year as reflected by this revised forecast. Let me now provide an update on our business. In mid-July, BARDA awarded us a contract valued at up to $107 million to complete development and obtain FDA licensure for large-scale manufacturing of BioThrax at our new state-of-the-art facility in Lansing. This cost plus fixed fee development contract consists of a two-year base…

Thank you, Fuad. Good afternoon everyone. As Fuad mentioned, following the close of the markets today, we released our financial results for the second quarter of 2010. 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 by the close of business tomorrow, Friday, August the 6th. The 10-Q will also be available on our website. Let me briefly discuss the financial results. For the second quarter of 2010, total revenues were $62.1 million, comprised of 55.9 million of product sales, and 6.3 million of grants and contracts revenue. Product sales revenue compares to revenue of 69.3 million in the second quarter 2009. Product revenues were 19% less than 2009 due to the $30 million lump sum payment in the second quarter of 2009 from HHS related to approval of 4 year expiry dating for BioThrax. In actuality, we delivered 23% more doses into the SNS during the second quarter of 2010 than was delivered in the prior year period. Grants and contracts revenue compared to revenue in the second quarter of 2009 of $3.9 million, for an increase of 62%. For the second quarter of 2010, net income was $9.8 million or $0.32 per share. This compares to net income of $14.8 million for the second quarter of 2009. The decline in net income was a direct consequence of the lump sum payment in 2009. As Fuad mentioned, the quarterly results are in line with our internal expectations. They support the annual guidance we are reaffirming and again they provide an example of the limited value of looking at our quarterly results as an indicator of our annual performance. Now with respect to gross profit and gross profit…

(Operator instructions) And your first question will come from the line of Eric Schmidt from Cowen & Company. Please proceed. Eric Schmidt – Cowen & Company: Thanks for taking my questions, and congrats on all the terrific progress over the last 30 or so days here. Fuad, in terms of the increased production yields that you are able to obtain that drove this boost in 2010 guidance, it sounds to me like there is some sustainability to that process, is that accurate?

Thank you Eric for joining us today, and I appreciate your question. Let me explain that really there are several factors that drive the manufacturing yields that we see every year. You know, one for example, it is the timing of the annual shutdown we do for maintenance, the length of such shutdowns, the FDA release review time, you know, sometimes it is shorter, sometimes it is longer, timing of deliveries, and our continued process optimization. So we are making progress there. We feel that as every year goes by the process is further optimized but there are other factors that influence the yield. This year, you know, it seems that most of the factors that I just mentioned drove it to kind of the high end of the range that we usually get, which is between 7 million to 9 million doses of annual output. Eric Schmidt – Cowen & Company: Okay. And I guess, and thanks for that, that is all very helpful Fuad. Looking forward then to your next contract, which you call the follow-on contract with the CDC, you indicated that would also be at least three years and for essentially all of the capacity that you have. Should we assume that versus prior contracts that the kind of contracted 7 million to 8 million doses a year, this new one might be on the higher end too reflecting the process optimization improvements you made?

Yes. I believe that given this year’s performance and looking at one or two more quarter's achievement, I think it would be safe to look at the higher end of the 7 million to 9 million range. This is something that we would attempt to negotiate with the government in the next contract, but also allow for there are some – you know, our actual production is below what we anticipate that we wouldn’t be in default. And we have done that with the government in the past to allow for ranges of deliveries. Eric Schmidt – Cowen & Company: Okay. And then you also spoke about hopefully seeing a price increase associated with that contract. How confident are you in the ability to negotiate that?

Well, so far if I look back several years, maybe six, seven, eight years the government has always allowed for a price escalation every year, an annual escalation, and that has been typically around 3%. So, there is nothing that would indicate they wouldn’t continue to do that in the new contract. And actually, there may be a potential increase, a one-time further increase of the price associated with five-year dating. As we have shared with you in the past that our current contract has provided for a commitment to attempt to obtain four-year dating, which we achieved, and to continue going towards five-year dating, and we hope to submit that to the FDA sometime at the end of this year. So with that, if the FDA would approve that, we anticipate that we would negotiate the cost in the follow on contract that would give us a price bump based on achieving five-year dating, because it is a win-win situation for the government as it is for us. Eric Schmidt – Cowen & Company: Okay. This sounds like this could be your biggest yet contract for BioThrax?

It could possibly be yes. Eric Schmidt – Cowen & Company: And one accounting question, a bookkeeping question for Don, in the past, prior to you giving the new guidance, we talked about 40 or so million in revenue coming from collaborative ventures and the rest from BioThrax, with the Building 55 contract being 10 million incremental to 2010, should we think that in your revised guidance of 275 million to 300 million for the year may be 50 or so million is collaborative?

Well, as you know in the revised guidance Eric, we didn’t bring that out one category versus another, but that is fair. As you know with government contracts, they look at the total contract performance and the total contract value, and a 12-31 date isn’t necessarily meaningful to them. So, there can be pauses within the development timeline that would cause us to recognize a little bit less revenue than we might have expected on particular programs. So it is always a little hard to project these with precision, but yes, I think that generally speaking you could take that up with the Building 55 estimate. Eric Schmidt – Cowen & Company: Okay, great. Thanks for all the color.

Take care, Eric.

Your next question will come from the line of David Moskowitz from Madison Williams. David Moskowitz – Madison Williams & Company: Hi, good afternoon everyone.

Hi, David. Thanks for joining. David Moskowitz – Madison Williams & Company: Excellent. Thanks for taking my questions. So, I have a question on the gross margin to start, so 70% to 80% [ph] significantly good and you are getting into that period where you are going to have an accelerated procurement from the government. Is there some sort of discounting that could affect those margins as we rolled into the back half of the year?

No, the pricing of the contract that we are currently operating under is specified within that contract, and that is fixed. So it will remain in the pricing of the contract, and throughout this contract the ebb and flow of gross profit is on our back. Just as easily we could have had some setbacks and seen a lower gross profit and we would have had to absorb that. So there is not a discounting exposure that is out there. David Moskowitz – Madison Williams & Company: So, if I average out the first two quarters, you had a really nice gross margin in Q1, 84 there, 82 here, so that is somewhere in the 83 range. Do you expect to end the year at that level?

Again, we don’t give guidance. We give the range on gross profits, but as we mentioned here, we expect that the improved yields that we saw in the first part of the year, we expect those to continue through the balance of the year. So one could extrapolate a higher gross profit margin than where we have been historically. David Moskowitz – Madison Williams & Company: Very good. And also on the potential rPA award that you guys were expecting, you guys expressed some pretty significant conference there in the end of September, so I will give you a chance to either reaffirm that or say you never know kind of thing before we all run-off and say that is going to happen at that time. But I would also like to know you also said 200 million, is that revised, I thought we were talking 250 million, and also what period of time do you think that 200 million (inaudible)? Thanks.

Yes, that is a very good question David. First let me say the following that we are in negotiations with the government on this, and we feel that we are nearing completion. So we’re seeing a lot of progress. We have heard that the government wanted to complete this by the end of this fiscal year, so the stars seem to be aligned and that is the more objective view based on what I have experienced with the government. But then there is also the experienced part of me, which says that you know, you can’t say with any certainty what the government is going to do at any given time. They remain committed to rPA. They remain committed to doing it by the end of this fiscal year. We are hopeful that it is going to happen. And now to the question of $200 million versus and we have said previously $250 million, again that was a different situation that the initial contract discussions were around. The procurement contract, the development and procurement contract of $500 million to $600 million that included 25 million doses, and a development component. Here, we’re talking only about the development, no procurement element. So the development contract we expect to be at around five years, and you know, we expect it to be somewhere up to $200 million. David Moskowitz – Madison Williams & Company: Okay, that is very helpful. I think that is all I have. Thank you.

Okay, thank you David.

Your next question will come from the line of Jeremiah Shepard from Wedbush. Jeremiah Shepard – Wedbush: Okay, good afternoon. Congratulations on your progress this quarter. In regard to the technical permits the you guys spoke to on the call, are these technical changes transferable to Building 55, and if so, maybe would you revise your upper end of manufacturing capacity?

Sorry, can you repeat the question? It didn’t come through very well. Jeremiah Shepard – Wedbush: Yes, in regards to the technical permits that you mentioned, are those improvements transferable to Building 55, and if it is so, would you be able to revise your upper end of manufacturing capacity there?

Yes, any of the process optimization improvements, if I understand you correctly are transferable, because the process is pretty much the same only at a larger scale. So, the answer is yes. Jeremiah Shepard – Wedbush: So, previously was my understanding right that you were guiding to roughly 25 million doses is possibly Building 55. So, would that suggest that maybe like 26, 27, 28?

Yes, I mean the contract actually provides for 26 million dose capacity, the one we signed with BARDA, and this was after they have looked at our technical plant, and they looked at their requirements. We agreed that 26 million doses was a reasonable output number given the current design of the facility. Again, let me remind you, this is just using one train [ph], one fermentor. We could double that capacity twice rapidly and there was only a marginal cost, if necessary and if desired by BARDA, but at this point our contract with them stipulates 26 million doses of capacity from. Jeremiah Shepard – Wedbush: All right. And also in regard to the deliveries expected in Q3 and Q4, is there any lumpiness and to be even between the two quarters?

You know, it is a fair question. But it is hard to answer because in fact, as I mentioned a bit earlier that a lot of when we recognize revenues depends on the timing of deliveries. So even though we might schedule a delivery end of September, it may slip into the beginning of October because of many factors that can influence the actual delivery time. So we intentionally do not give quarterly guidance because it would be not very meaningful to try to predict quarter by quarter. Jeremiah Shepard – Wedbush: And just last question in regards to the five-year dating decision from the FDA, can you give me your guidance in terms of when you might expect that decision?

Well, again FDA has a clock that goes on that could be anywhere from 6 to 12 months and if they have questions, they would send us a list of questions, which we would respond to it. It is very difficult to predict how long it would take, but reasonably, in the industry one would say about a year after submission, and you know, as I said earlier, we are planning to submit by the end of this year. So, when the FDA would grant approval or if they grant approval is something that is really up to them.

And one thing you might want to keep in mind is four-year dated vaccine is the longest dated vaccine yet. So that was a big move for the FDA.

So, five-year dating, although we feel we have very good stability here, would be again exploring…

Exploring the boundaries…

We are pushing the boundaries quite a bit. Jeremiah Shepard – Wedbush: Okay. Thank you for taking my questions.

My pleasure. Thank you, Jeremiah.

Your next question will come from the line of Jim Molloy from Caris & Company. Jim Molloy – Caris & Company: Thanks for taking my question. My phone kind of cut out here, when you guys were talking about gross margin for fiscal ’10, what was the gross margin range you are expecting to hit in ’10?

Well, we didn’t give an exact number Jim. No, we talked about our historical range of 70% to 80%. The question was posed in the first-half you have been in excess of 80%, could one realistically expect that for the second half and 2010, and bottom line the answer was yes. Jim Molloy – Caris & Company: Okay, thank you very much. And then, today we could talk through on the 2010 guidance, obviously the production yields are putting a lot of next year’s production into this year, and one of the comments talking with people about it is almost stealing with Peter to pay Paul, pulling from next year into this year, can you walk through what your thoughts on next year might look? Will there be a drop in production if the next contract doesn’t come through, or sort of how will that – how will sort of production stay level in your thinking given the uncertainty of whether or not you will get a contract for next year?

I mean, you are right; we have projected that deliveries would be concluded by September third quarter next year. So by accelerating deliveries we are bringing that in a bit. It is absolutely correct. Let me just say that we remain and always have been very confident that the government is committed to procuring 75 million doses of anthrax vaccine into the strategic national stockpile, they are nowhere closer to 75 million doses. They remain committed to buy anthrax as a product, they remain committed to anthrax vaccine as a counter measure, and you know, so for we have always had anthrax for basically ever since Emergent started 12 years ago without interruption. So, we feel that timelines are thin [ph] a little bit in terms of completing our deliveries that we would have a contract before those deliveries are finalized. And that is why I mentioned that we are working towards and are confident that we will have a contract finalized with CDC by the fourth quarter this year or first-quarter next year. Jim Molloy – Caris & Company: Great. Thank you very much for that. And maybe I thought, one of your more recent presentations talking about having Building 55 up and running by 2013, and my understanding is that is assuming you don’t need to do a bridging study, can you walk through the bridging study thoughts as they are now, and if you have to do one, when you will find out you have to do it, and then when you have to start it, when it will be completed, and when Building 55 in a worst case if you have to bridge it, when would…

Yes, so that is a very good question because a 12 fold increase or scale up isn’t usually seen as a major regulatory issue. So we are hopeful that comparability data between Building 12 and Building 55 would suffice, and again we have got some indication that the FDA is flexible and looking at the data and then determining whether it does indeed suffice. It is hard and usually FDA doesn’t commit in advance, but we feel that there is a chance that the comparability data that we submit will be sufficient in that case, and that is usually done after consistency lots are manufactured, and that we anticipate to complete by the end of 2011. So sometime beginning 2012, we would know whether a bridging study, human trial would be required. And so, it is something that is hard to predict. Obviously, if this bridging study is not required, we expect to get to licensure quicker. Jim Molloy – Caris & Company: Excellent, fair enough. Who knows how it will turn out, but I guess, 2012 would be when we will find out.

Yes, and you know we will give you updates as they occur, and if it looks more and more hopeful, we will share that with you, if it becomes less hopeful, we will share that with you too. Jim Molloy – Caris & Company: Okay, the last question, on the roughly sort of 80 million you are trying to spend in 2010, of the many programs you are running, where does the bulk of that spend go, and is that R&D, is there any chance that R&D could come down or go up, or is that a pretty solid number?

Well, you can see to the extent we break down our R&D expense in the first and second quarter, you can see and extrapolate from that there is nothing significant that would have a huge redirect on that trend, or on that spend level.

Yes, I would just add, clearly in the Q, you have got tables in there that will show you the primary products. I would probably make sure you focus on the fact that on the bio defense [ph] side the contracting revenue is directly related to that expense. So, as we take a look at an annual projection of 40 million or so in grants and contracts, you can view that as a direct offset to the gross R&D that is reported on that line. In addition to that, I would have you focused on TB, and the offset at the bottom of the income statement, where you have got the add-back for the minority share.

So, this is a very good point. I would like to just re-emphasize just that really given that our programs on the bio defense side are largely funded by the government, the net spend is very small. On the commercial side, the net spend is also not quite as large as it may seem because we get funding from NGOs and governments on that. So, we try to secure funding as much as we can for not only our bio defense programs, but also our commercial programs.

So, the net R&D is significantly less than the total number you are seeing. Jim Molloy – Caris & Company: That makes sense. Thank you, guys, for taking my questions.

Thank you.

(Operator instructions) And your next question will come from the line of Stephen Brozak from WBB Securities. Stephen Brozak – WBB Securities: Hi, good afternoon gentlemen, and congrats on how should I put it, the confidence in the contracting system. I applaud it. We are modeling for numbers going forward that are very, very strong, and one of the things that you have mentioned in the past, one of the things that I hate the word granularity, but I would like some more of it, would be the diversification of your business, i.e., going outside of the government and the NGO world, what would be, let us say for instance, an optimal acquisition target because you do have the cash for it, you do have a stock that is trading well. What would you look for in terms of a potential acquisition into the future, either a product or a whole company, what would be the optimal type of company that you will be looking for, and I have follow up after that?

Thank you, Steve. That is a very good question. So let me start by saying that obviously there has to be a strategic fit, and it has to be a good complement to our business. We want to stay true to our rating, we are in biologics and vaccines and therapeutics, so we would prefer a company that actually is in either monoclonal antibodies or vaccines or something that is a biologic. It could be of course in bio defense, but it could also be on the commercial side and given that we have several programs, we’re slightly more weighted right now on the bio defense side. We would prefer a commercial pipeline or in licensing of a product that we would do. And in terms of disease areas, we are very much focused right now on infectious diseases, but we are looking at and have been hiring resources and spending time really understanding the fields of oncology and autoimmune diseases. So that would be kind of an additional disease area that we would bring to complement our ID space. You know, size is something that it really depends. I mean is the company a strategic fit for us. We are not worried about size necessarily as long as it is accretive to the shareholders. It makes sense and has strategic value. Stephen Brozak – WBB Securities: Okay. The last one is just a housekeeping question, obviously with extension of vaccine in terms of shelf life, you get additional remuneration, what is the current cooked [ph] life that you have got for the vaccine, and how much have you exceeded that so far, or what are your expectations there in terms of your cooked vaccine versus the actual physical’s shelf life?

I can really only address the shelf life and you know, we did get four-year dating from three, and we have stability data that we feel are supportive of five-year dating, whereas we wouldn’t have really submitted – we are in the process of preparing a submission for five-year dating. So, we feel confident. We have strong stability data in support of five years. Stephen Brozak – WBB Securities: Okay. So, basically you wouldn’t have submitted five-year if you didn’t feel like you had it?

Yes, absolutely. Stephen Brozak – WBB Securities: Great. Let me jump back in the queue. Thank you, gentlemen.

Thank you, Steve.

There are no further questions at this time. I would now like to turn the call back over to Robert Burrows for closing comments.

Thank you very much. Ladies and gentlemen, that concludes today’s call. We appreciate your participation. Please note that today’s call is being recorded and a replay will be available beginning later today through August 19. Alternatively, there is available a web cast of today’s call, and archived version of which will be available later today, accessible through the company’s website, again at www.emergentbiosolutions.com and clicking on the investors tab. Thank you again, and we look forward to speaking to all of you in the future. Goodbye.

Thank you all for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a great day.