Earnings Call Transcript - EBS Q2 2017

Operator, Operator

Good day, ladies and gentlemen, and welcome to the Emergent BioSolutions Second Quarter 2017 Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to the company for opening remarks.

Robert Burrows, VP of IR

Thank you, Latoya, and good afternoon, everyone. My name is Bob Burrows, Vice President of Investor Relations for Emergent BioSolutions. Thank you for joining us today, as we discuss our second quarter and first six months of 2017 financial and operational results. As is customary, today's call is open to all participants and, in addition, the call has been recorded and is copyrighted by Emergent BioSolutions. Participating on a call with prepared comments will be Dan Abdun-Nabi, President and Chief Executive Officer; and Bob Kramer, Executive Vice President and Chief Financial Officer. A Q&A session will follow at the conclusion of our prepared comments, and other members of our senior management will be available to participate if needed. Before we get started, I need to remind everyone that during today's call, either in our prepared comments or the Q&A session, management may make projections and other forward-looking statements related to our business, future events, our prospects or future performance. These forward-looking statements 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. Please review our filings with the SEC on forms 10-K, 10-Q and 8-K for more information on the risks and the uncertainties that could cause actual results to differ. During our prepared comments as well as during the Q&A session, we may also refer to certain non-GAAP financial measures that involve adjustments to GAAP figures in order to provide greater transparency regarding Emergent's operating performance. Please refer to tables found in today's press release regarding our use of adjusted net income and EBITDA and the reconciliations between our GAAP financial measures and these non-GAAP financial measures. For the benefit of those who may be listening to the replay of the webcast, this call is held and recorded on August 3, 2017; since then, Emergent may have made announcements related to topics discussed during today's call. Emergent BioSolutions assumes no obligations to update information in today's press release or as presented on this call except as may be required by applicable laws and regulations. You're once again encouraged to refer to our most recent press releases and SEC filings, all of which can be found on the Investors homepage of our website. With that introduction, I would now like to turn the call over to Dan Abdun-Nabi, Emergent BioSolutions' President and CEO. Dan?

Daniel Abdun-Nabi, CEO, President

Thank you, Bob, and good afternoon, everyone, and thank you for joining us. Today, I will touch on our financial results and then highlight some of our recent business accomplishments. And I'll then turn the call over to Bob Kramer, who will review our financial performance and guidance in greater detail. So as we pass the halfway point for the year, we have made significant progress in growing and diversifying our business, expanding our portfolio, addressing our pipeline and driving towards the achievement of our 2017 goals. As announced in today's press release, reported financial performance is strong. In the second quarter, we generated total revenue of $101 million, up 10% from the same period last year. Product sales were $64 million, up 32% from last year. And EBITDA was $18 million, three times the amount generated last year in the second quarter. Now let's review some of the accomplishments this year that highlight our operational progress. First, we continue to demonstrate our ability to build our business based on our core competency in government contracting. Earlier this year, we signed a 2-year contract with BARDA to deliver $100 million of BioThrax to the SNS. This contract is separate and distinct from our $911 million contract with the CDC for BioThrax procurement. We anticipate all the deliveries under the BARDA contract will be completed in 2017. We also signed a contract modification with BARDA to manufacture and store all drug substance for that, with a value of up to $53 million. We anticipate that a significant portion of this revenue will be realized in 2018. To address emerging infectious diseases, we were awarded a task order from BARDA to develop therapeutics for viral hemorrhagic fever. This represents our fourth task order awarded to us under our CIADM program and provides revenue of up to $30 million. Revenue is expected to begin to be recognized in 2017, with a significant portion of the work and revenue expected in 2018. And most recently, building upon our auto-injector capabilities and expertise, we signed a 5-year agreement to develop a novel, multi-drug auto-injector for the delivery of nerve agent antidotes for the Department of Defense. The objectives of this agreement is to support the DoD's requirements for a novel auto-injector platform that is easy to use and capable of rapid delivery. This agreement has a total value of up to $23 million with revenue beginning to be realized this year. So during the course of this year, we continue to advance our diversification goals through meaningful progress in our clinical development pipeline. We continue to advance our NuThrax development program and are currently in the process of manufacturing engineering launch of Building 55 to support our plans to initiate a Phase III study in 2018. This could then lead to an Emergency Use Authorization designation from NuThrax followed by procurement by BARDA under our NuThrax development and procurement contract that is up to $1.5 billion. In February, we initiated a Phase I trial for UB4D, a therapeutic built on our proprietary broad-spectrum antiviral platform, and along with that, we continue to target initiating 2 additional clinical studies in 2017 for emerging infectious disease therapeutics based on our hybrid new platform. The first is a Phase II trial targeting seasonal influenza, and the second is a Phase I trial to address Zika. And most recently, we signed a license agreement with Valneva for global exclusive rights to their Zika vaccine technology. This vaccine will add an additional product to our clinical pipeline with dual market potential and be synergistic with our Zika high-premiums as I previously mentioned. Under the agreement, we plan to co-develop the vaccine with Valneva, and we're targeting a Phase I clinical trial to commence in late 2017 or early 2018. Importantly going forward, we expect to manufacture this vaccine in our recently expanded Bayview facility. We have also seen promising developments during 2017 in other aspects of our operations. Earlier this year, we received German regulatory approval to market BioThrax produced in Building 55. This approval was for both GUP and PEP indications and positions us to pursue BioThrax licensure in additional countries within the European Union based on the mutual recognition process. We are targeting the first half of 2018 for the first of these approvals. We continue to see elevated international interest across our product portfolio, which is translating into higher ex-U.S. sales of our products this year. As we have noted in the past, in addition to our vaccine and therapeutic products, SilverGuard, a nerve agent antidote auto-injector, has been a meaningful contributor to this growth, with international orders and interest exceeding our initial 2017 supply capacity. To address this, we are working with Amaya, a recognized world leader in the design, development, and manufacturing of drug delivery devices, to double manufacturing capacity by the end of this year, with further expansion in 2018. I'm also pleased with the growth that we have been experiencing in our CMO business, driven by our expanding capacity and increased demand for both bulk manufacturing and fill finish work. We continue to see the CMO business as an important contributor to our growth plans. In that regard, in May, we announced the completed expansion of our Bayview CIADM facility in Baltimore, Maryland. This facility now totals 112,000 square feet and is designed to enable cGMP production of a broad portfolio of biological products as well as support surge manufacturing of medical countermeasures to address urgent public health threats. As previously announced, we plan to produce both raxibacumab, which we are acquiring from GSK, and the Zika vaccine that we'll license out from Valneva in this facility. Finally, we are taking steps to further expand our portfolio through acquisitions. Last month, we entered into an agreement with Sanofi to acquire their ACAM2000 smallpox business. In this transaction, we will be acquiring the only FDA-licensed smallpox vaccine and existing CDC procurement contract with the remaining value of approximately $160 million, live viral manufacturing facilities, and approximately 100 employees. Also last month, we entered into an agreement with GSK to acquire raxibacumab, an FDA-approved anthrax monoclonal antibody, and plan to assume responsibility for an existing BARDA contract with a remaining value of approximately $130 million. As I noted earlier, we are planning to move manufacturing of this product from GSK to our Bayview facility in Baltimore. The acquisitions of the ACAM2000 smallpox business and raxibacumab are both expected to close by the end of the year. As we previously announced, we anticipate both acquisitions will be accretive to earnings. Specifically, raxibacumab is expected to be accretive upon first product delivery under the current contract, anticipated within 3 to 6 months of closing. For ACAM2000, the transaction is expected to be accretive beginning with anticipated product deliveries in 2018 following FDA licensure of the U.S.-based manufacturing facility. We continue to evaluate additional M&A opportunities to drive our growth plans. These include revenue-generating businesses and products in the vaccines, therapeutics, and device spaces, as well as pipeline candidates that can be acquired with grant and contract funding that will leverage our core competencies and contribute to our financial goals. In summary, I'm very pleased with the progress we have made so far this year towards achieving our 2017 goals. Moreover, we see these developments as positioning the company for significant growth in 2018 as we march towards achieving our 2020 goals. That concludes my prepared remarks and I will now turn the call over to Bob Kramer, for details on our financial performance and guidance. Bob?

Robert Kramer, CFO, EVP of Administration and Treasurer

Thank you, Dan, and good afternoon to everyone, and thank you again for joining the call. Today, I will comment on our financial results for the second quarter and first six months of 2017 compared to last year, walking through the P&L, as well as select elements of our balance sheet. I will then discuss our 2017 guidance, both for the full year and for Q3. As a reminder, we continue to present our comparative 2016 financials on the basis of continuing operations, which excludes the Aptevo operations following the spin-off last year of our Biosciences business into a separate publicly traded company, Aptevo Therapeutics. Now to the numbers. Overall, the second quarter was another period of solid performance by the company. Total revenues were $101 million, $10 million above the same period last year. Of that total, product sales were $64 million, which is 32% above the second quarter of 2016. BioThrax sales accounted for $52 million of the $64 million in product sales, this was up approximately $12 million from last year. The increase in BioThrax revenue is strictly timing related as determined by the delivery schedule of our contracts. Moving to CMO services. Our contract manufacturing revenues were just over $16 million or $6 million higher than 2016. This performance was driven primarily by the timing of fill/finish services, as well as CMO work we are performing for Aptevo on an ongoing basis, which was not occurring in Q2 of last year. We look to continue this year-over-year trend of higher CMO revenue as we remain committed to aggressively seeking opportunities to grow this business and more fully utilize our available manufacturing capacity. Completing the revenue discussion, contracts and grant revenue was $20 million for the quarter, which was significantly lower than 2016, but as expected due to the timing of R&D activities related to certain funded development programs that are either ongoing, winding down or complete. We anticipate that this year-over-year trend will persist throughout the remaining reporting periods of 2017. Second quarter 2017 gross margin came in at 57%, which is slightly below the margin range of 60% to 70%. This gross margin for the period reflects the impact of revenue mix during the second quarter. Looking ahead, based on the revenue mix projected for the remainder of the year, we expect that performance for the full year will be in the 60% to 70% range. Turning to expenses. Our growth R&D spend was $26 million for the second quarter, $2 million below that for 2016. On a net basis, after adjusting for grant and contract revenue, our R&D expense for the second quarter was slightly under $5 million or 6% of net revenue. As we stated in the past, we will continue to regard investment in the development of new medical countermeasures, both funded and unfunded as an important component of our strategy to grow and diversify our business. SG&A expenses for the quarter were $32 million or $4 million lower than last year, as a percent of total revenue, second quarter SG&A was 32% versus 39% in the prior year, reflecting our commitment to carefully manage our operating expenses. During the quarter, the business generated $18 million of EBITDA or 18% of total revenue, significantly higher than the prior year period and reflecting the continued strength of the core business. And finally, our GAAP net income for the quarter was $5 million, an improvement over the $2 million loss in the second quarter of 2016. Turning now to the performance, year-to-date. Through the first six months of 2017, our business is performing well as evidenced by the following: Total product sales of $146 million, an increase of $33 million or 30% versus the prior year. CMO services revenue up $63 million or 90% versus the same period last year. Next, our gross R&D spend was $8 million below the prior year, reflecting the successful completion of certain funded development programs and the continued controlled investments in our pipeline. Our SG&A spend of $64 million is flat with last year, as a percent of total SG&A expenses of 31% of revenue in 2017 versus 35% in the prior year period. And finally, our net income of $15.1 million versus $9.8 million last year, while generating $43 million in EBITDA compared to $35 million last year. On the balance sheet, our midyear cash balance was $316 million, and when combined with our receivables balance of $102 million, we continue to reflect a strong liquidity position to support our operations and strategic M&A initiatives. Finally, looking at cash flow, through midyear we generated over $95 million in net operating cash. We anticipate continued strong operating cash flow generation for the business, which will be used to support capital needs, principally working capital, CapEx, and M&A. With our recent news regarding our plans to acquire the licensed smallpox vaccine ACAM2000 and its related business from Sanofi and the licensed anthrax monoclonal therapeutic raxibacumab from GSK, we will be using approximately $174 million of our cash, or roughly half the current balance, to fund the upfront portions of these transactions. The remaining cash is sufficient to cover normal working capital needs of the business. As for 2017 full year forecasts, we are reaffirming our guidance, namely, total revenues are between $500 million and $530 million, including $265 million to $280 million of BioThrax sales under our contractual arrangements with both CDC and BARDA. We are reaffirming net income guidance of between $60 million and $70 million for the year, adjusted net income of between $70 million and $80 million for the year, and finally, EBITDA of between $135 million and $145 million. Please keep in mind that we do not include any M&A activity in our annual guidance, except for the provision of specific diligence-related expenses required to support our ongoing M&A efforts. Regarding recently announced deals, we will defer updating our forecast for 2017 until we close on each transaction. Additionally, through the third quarter of 2017, we estimate total revenues of between $115 million and $130 million. That concludes my prepared remarks. And I'll now turn the call over to the operator to begin the question-and-answer session.

Operator, Operator

Thank you. The first question is from Keay Nakae of Chardan. Your line is open.

Keay Nakae, Analyst

Yes, thank you. Just in terms of the reaffirmation of the guidance. We're understanding that the business is lumpy. Can you help us understand your confidence in your delivery schedule, maybe particularly for BioThrax, and your confidence in hitting the guidance for the full year?

Robert Kramer, CFO, EVP of Administration and Treasurer

Sure, Keay, this is Bob. Thanks for the question and thanks for joining the call. As we've discussed in the past, the BioThrax shipments are for our delivery schedule under the contracts we have with the U.S. government. I think to your specific question, if you look at the shipments to date of BioThrax, they account for about 35% of our indicated range of between $265 million and $280 million for the year. It's similar to what we have experienced in prior years. In 2016, the number was closer to 42%. So this is not an unusual pattern for us. Importantly, we have the contracts existing to support those deliveries and again, reaffirmed that number for 2017 for the full year. So we're quite confident in our ability to meet those numbers.

Keay Nakae, Analyst

Okay, and then just thinking about the timing and ability to close the two acquisitions. What would be the major hurdles to completing each of those before the end of the year, as you're looking at them now?

Daniel Abdun-Nabi, CEO, President

Thanks for the question, Keay, and again, thank you for joining the call. I don't think there's anything extraordinary in the process for completing the transactions, as the typical notifications that need to be made with the U.S. government under Hart-Scott-Rodino and some transition work that is underway, but nothing in particular to call out as unusual or extraordinary.

Keay Nakae, Analyst

All right. And one final question, if I can. With respect to the auto injector contract, you just signed, can you give us any color on the types of deliverables under that 5-year contract?

Daniel Abdun-Nabi, CEO, President

Yes, thanks for that. It's a pretty exciting opportunity for the company, and that it expands the types of devices that we will be working on and establishes a collaboration with the DoD, which for us I think is a real significant step forward, if we look to strengthen that relationship. But under the contract, we are expected to develop the device, and we need to conduct the tests to demonstrate that there's consistency in manufacturing. We also have to demonstrate the functionality according to the specs and overall usability of that device. And then final steps along those continue with the regulatory approval and all the filings and submissions necessary to secure FDA licensure of the device. So as mentioned in the release for that announcement, it's a 5-year contract, and its total funding is approximately $23 million.

Keay Nakae, Analyst

And does it specify needing to get approval for any specific antidote?

Daniel Abdun-Nabi, CEO, President

It doesn't specify approval for any specific. I didn't catch the last word.

Keay Nakae, Analyst

Specific antidote, do you need to get FDA approval for just the device itself?

Daniel Abdun-Nabi, CEO, President

Maybe I'll ask Adam to comment on that.

Adam Havey, EVP of Business Operations

Yes, so the device will not just only be the approval won't be just for the devices, it will be for the device with the acting ingredients.

Keay Nakae, Analyst

Okay. Thank you.

Operator, Operator

Thank you. The next question is from Jessica Fye of JPMorgan. Your line is open.

Unidentified Analyst, Analyst

Hey, guys. This is Ryan on for Jess. Thanks for taking our questions. Kind of wanted to touch about the dynamic with BioThrax and I know NuThrax is coming up, it's progressing in the pipeline. So bigger picture, what color can you give us on sort of how this is thinking about, if the stockpile was like with dual BioThrax, NuThrax combo there. Is there sort of a preference that ultimately goes all NuThrax or would they stock both?

Daniel Abdun-Nabi, CEO, President

Thank you, Ryan, for your question and for being part of this discussion. The government is transitioning from BioThrax for post-exposure use to NuThrax, primarily because NuThrax offers faster immunogenicity and protection. In post-exposure scenarios, NuThrax clearly outperforms BioThrax, which requires three doses and takes longer to provide protection. However, BioThrax will still be used for military personnel under a general use access profile. I don't anticipate that BioThrax will be completely replaced in the current framework. Therefore, it will continue to be utilized in the General Use Profile Access Setting. I don't have specific numbers or timelines about the government's plans, but they are preparing for large-scale procurement of NuThrax under our development contract, which aims to provide sufficient supplies for protecting up to 25 million people.

Unidentified Analyst, Analyst

Okay, are you developing the auto injector for the nerve antidote, or is this something that the government already possesses and is just incorporating into your device?

Daniel Abdun-Nabi, CEO, President

So if I could ask for clarification, you're talking about a new DoD contract that has been awarded?

Unidentified Analyst, Analyst

Yes, yes.

Daniel Abdun-Nabi, CEO, President

Yes, again, I'll ask Adam Havey to comment on that.

Adam Havey, EVP of Business Operations

Yes, so this is something that DoD already has and will be meeting their requirements and putting in place. So we are not developing a novel API for those auto injectors.

Unidentified Analyst, Analyst

Okay. And then would there be drug, drug or say drug device combos for each potential sort of application going forward? Or is that still sort of to be determined?

Daniel Abdun-Nabi, CEO, President

So right now I think, as we have identified their API of choice and the regulatory path for that. If you're asking about additional APIs that might be deployed in that device, I think that's a question that's TBD.

Unidentified Analyst, Analyst

Okay, got it. Thanks for taking the questions.

Operator, Operator

Thank you. The next question comes from David Maris of Wells Fargo. Your line is open.

David Maris, Analyst

Hi. I am sorry if I missed it. But can you remind us when you think that the facility and the first product will be delivered under the ACAM deal? You had mentioned that it would be the deal that you'd expected to be accretive at that point, but I just don't know if we have a date that you expected to close?

Daniel Abdun-Nabi, CEO, President

Yes, thanks, Dave for joining the call and for asking the question. So there is a process that we need to go through. The first thing that we need to do - or really Sanofi needs to do at this point since we don't get on the business, is to submit to the FDA an sBLA for licensure of the facility, and the target for that is in the second half of this year. We understand it's approximately a 6-month PDUFA timeline associated with that. So we do expect that there would be facility approval in '18. In normal course of that, there is some back and forth with the FDA, any questions that they have got would need to be answered. But obviously, there would be a prior approval inspection that would be required and ultimately licensure. So with that higher level, we would expect current course and speed to at least anticipate that regulatory approval in '18 and then to commence shortly thereafter.

Operator, Operator

Thank you. The next question is from Eric Schmidt of Cowen and Company. Your line is open.

Eric Schmidt, Analyst

Maybe a couple for Bob. It looks like you came at the lower end of your Q2 revenue guidance. I have to say that's a bit out of character for you. So just wondering if anything didn't materialize, which you'd counted on, or if anything slipped into Q3?

Robert Kramer, CFO, EVP of Administration and Treasurer

Not really, and thanks for the question. As we stated year-over-year, that BioThrax business component is pretty predictable. As I explained earlier, we feel very comfortable in our ability to meet that indicated range of $265 million to $280 million for the year, and the pattern quarter-by-quarter for 2017 is similar to what we experienced in '15 and what we experienced in '16. So I wouldn't read anything into us being at the lower end of the range.

Eric Schmidt, Analyst

Okay, and then I understand the policy of not updating the guidance for the acquisitions until the acquisitions close later this year. But just to get a sneak preview of things, what income lines are going to change? It doesn't sound like we will be getting material revenue, so we're just expecting a little bit of R&D to be added to the expense budget, or might we see something else?

Robert Kramer, CFO, EVP of Administration and Treasurer

So I think what you should expect is that and we have talked about a couple of different categories of financial impact. Clearly, when each of these assets is in our hands, there will be some transition costs and integration costs that begin to occur day one of it being in our hands that will be added as to the various operating expense lines. There could also be some revenue addition as well. So again, until we finish the closing process and have a clear indication of the impact in '17, we're going to be very careful about saying anything, and we'll update you as soon as we close them.

Operator, Operator

Thank you. The next question is from François Brisebois at Laidlaw. Your line is open.

François Brisebois, Analyst

Thank you for taking my question. Is there any possibility that the process with ACAM is not finalized before the sBLA submission, or are we currently waiting on Sanofi?

Robert Kramer, CFO, EVP of Administration and Treasurer

Yes, so the closing on the transaction and the acquisition is completely separate and distinct from the submission of the sBLA. So those are two parallel paths, and so don't think of them as linked at all in your mind.

François Brisebois, Analyst

Okay, great. That's good to know. And then how comfortable are you in your ability to just not have any interruption between basically the ACAM and raxibacumab end of the existing contract and the start of revenues kicking in for the follow-on? Is this something that you start negotiating while the existing contract is going on? Or how do we ensure that there is no interruption?

Robert Kramer, CFO, EVP of Administration and Treasurer

Yes, it's a good question, and thanks for asking. As you know, both smallpox and anthrax are considered Category A bioterrorism agents, considered turning agents by the CDC, and these have been fairly long-standing contracts with the U.S. government to ensure a supply of these critically required countermeasures to the SNS to protect the nation. So while we may be coming towards the tail end of both contracts, we feel pretty strongly that these are countermeasures that are important and that will continue to be procured. The timing of that and what the contract size may look like is too early to tell, and so I don't want to comment on that. But just principally, I think the policy of the government and the positioning of the U.S. government is to ensure that medical countermeasures for those Category A threats, as well as some other threats are critically important and that continued supply and having the capabilities and capacity in the country is something of high priority. So we have a high degree of confidence that we will see those follow-on contracts executed.

François Brisebois, Analyst

Okay, great. I have a couple of last quick questions. Regarding the $300 million for raxibacumab that spans over 8 years, I understand it's a complex situation and not straightforward. Can you provide any details on how that $300 million amount is structured?

Daniel Abdun-Nabi, CEO, President

Yes, I don't think I can really provide color. That contract was back, as you know, a number of years and has been amended by GSK and the U.S. government over that period of time. So I'm not really in a position to share the details of that. But what I would say is that we're talking about in terms of the remaining value under the contract that we're assuming is that figure. So up to $130 million of the remaining value to be delivered, and that's a piece that remains under the contract before expiration.

François Brisebois, Analyst

Okay, and lastly, you mentioned the upfront amount of $174 million, which is about half of what you had. As you work towards your 2020 goal, are you still considering acquisitions? How should we view your cash situation regarding this goal?

Daniel Abdun-Nabi, CEO, President

So as I said, I think we continue to target M&A and we are looking at products, we're looking at businesses. All would be geared towards revenue generators and products and businesses that can be accretive. We are targeting vaccines and therapeutics and devices and all in areas where we can exercise our core competencies and create real value towards achieving our goal target. So that remains unchanged from where we were before. And in terms of the second part of your question, maybe, Bob, you could pick up on that.

Robert Kramer, CFO, EVP of Administration and Treasurer

Sure Dan, thanks, and thanks for asking the question. So just to be clear, these transactions will be cash flow positive and accretive. So they will contribute to the existing base core business that we have today, which is strong and continuing to generate cash. Having said that, the upfront that we have now committed is going to take a good chunk of our cash and leave us with a balance that's sufficient to cover the working capital needs of what we have today. We continue to evaluate potentially increasing our revolver, which right now stands at $100 million, could go as high as $200 million to provide us some additional near-term working capital. As Dan and others have indicated, we continue to be very committed to additional M&A activities, complementary to our strategy and depending on the deal terms and the size, we will look at cash, debt, and potentially equity as funding mechanisms for those transactions, in that order.

François Brisebois, Analyst

All right. Thank you very much. That's it from me.

Operator, Operator

Thank you. The next question is from Lisa Springer of Singular Research. Your line is open.

Lisa Springer, Analyst

Good afternoon. My question concerns the manufacturing operations that come with the ACAM2000 acquisition. Assuming the contract continues at the current run rate, is the manufacturing facility going to be totally devoted to that one product, or would it be possible that you'd be able to move other products to it?

Robert Kramer, CFO, EVP of Administration and Treasurer

Thank you for the question. Currently, the facility is dedicated to the production of a single product. However, there is another product produced by Sanofi at that facility, which we are not acquiring. We have agreed to manufacture that product on a contract basis as needed to support them. The facility does have flexible manufacturing capabilities and is designed for live viral production. We expect to introduce additional products in the future that align with the building's configuration, so it has the ability to support multiple products.

Lisa Springer, Analyst

Okay, great. Thank you.

Operator, Operator

Thank you. Okay, no further questions at this time. I'll turn the call back over to Bob Burrows for closing remarks.

Robert Burrows, VP of IR

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

Operator, Operator

Thank you, ladies and gentlemen. This concludes today's conference. You may now disconnect. Good day.