Bad News Clouds Two Bio Defense Stocks

Written by Staff and Wire Reports
Tuesday, 08 December 2009 01:28

Key news developments will affect shares of these two companies who help meet the critical needs of the United States and its allies by developing and commercializing medical countermeasures against biological and chemical weapons.

The two companies which waited until late after hours on Monday to announce that the Biomedical Research and Development Authority had informed them of some negative news.

After hours on Monday, PharmAthene, Inc. (NYSE Amex: PIP) a biodefense company specializing in the development and commercialization of medical countermeasures against chemical and biological threats, announced that the Department of Health and Human Services Biomedical Research and Development Authority (BARDA) has canceled its request for proposal (RFP) for Recombinant Protective Antigen Anthrax Vaccine for the Strategic National Stockpile (RFP BARDA 08-15).

PharmAthene was informed of BARDA’s decision during a meeting late Monday afternoon with BARDA representatives.  BARDA issued a press release after the close of the securities markets announcing that it will cancel RFP BARDA 08-15 because it did not believe vaccine developers submitting proposals in response to the request for proposal (RFP) could have product ready for FDA licensure within 8 years.

In similar news…

Emergent BioSolutions Inc. (NYSE:EBS) announced today that it has been advised by the Office of the Biomedical Advanced Research and Development Authority (BARDA) that the Request for Proposal (RFP) for the procurement of rPA vaccines has been cancelled in favor of a Broad Agency Announcement (BAA) for rPA vaccine development. According to BARDA officials, BARDA took this action after a technical evaluation panel determined that none of the vaccine developers submitting proposals could meet the Project BioShield statutory requirement of having a product ready for licensure within 8 years.

Simultaneously, BARDA issued an amendment to BAA 09-34 to enable companies to submit proposals to obtain development funding for rPA vaccine candidates. The due date for all proposals is February 1, 2010. During a meeting with company officials today, BARDA strongly encouraged Emergent to submit a proposal to this BAA. Emergent intends to submit its proposal by the end of this year.

While the decision by BARDA has no impact on the company’s $400 million procurement contract with the Centers for Disease Control and Prevention (CDC) for the manufacture and delivery of 14.5 million doses of BioThrax® into the Strategic National Stockpile (SNS). Investors are still likely to react negatively to the news.

After selling dies down, there may be a bounce trade opportunity for EBS followers since the company feels that “BioThrax remains a critical and long-term countermeasure for the US government,” said Fuad El-Hibri, chairman and chief executive officer of Emergent BioSolutions. “In addition, based upon encouragement by the USG, we believe our rPA vaccine is well-positioned to obtain a development contract under this BAA. Our anthrax franchise solidifies Emergent as a leader in the development and supply of anthrax medical countermeasures.”

Source :: http://biomedreports.com/articles/most-popular/20870-bad-news-clouds-move-in-on-these-stocks.html

Emergent BioSolutions Inc., Q2 2009 Earnings Call Transcript

Emergent BioSolutions Inc., (EBS)

Q2 2009 Earnings Call

August 6, 2009 5:00 pm ET

Executives

Robert G. Burrows – Vice President, Investor Relations

Fuad El-Hibri – Chairman of the Board, Chief Executive Officer

R. Don Elsey – Chief Financial Officer

Daniel J. Abdun-Nabi – President, Chief Operating Officer

W. James Jackson, Ph.D. – Senior Vice President and Chief Scientific Officer

Analysts

Eric Schmidt – Cowen & Company

David Moskowitz – Caris & Company

Mona Ashiya – J.P. Morgan

Sean Long – Kennedy Capital Management

Presentation

Operator

Welcome to the Emergent BioSolutions Incorporated second quarter 2009 financial results conference call. (Operator Instructions) I would now like to turn the call over to Mr. Robert Burrows.

Robert Burrows

Good afternoon ladies and gentlemen. My name is Robert Burrows, 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 2009. As is customary, our call today is open to all participants. In addition, the call is being recorded and is copyrighted by Emergent BioSolutions….

Emergent BioSolutions Inc. (EBS) CEO & Chairman, 10% Owner Fuad El-hibri sells 15,000 Shares

CEO & Chairman, 10% Owner of Emergent BioSolutions Inc. (EBS) Fuad El-hibri sells 15,000 shares of EBS on 08/11/2009 at an average price of $16.78 a share.

EMERGENT BIOSULUTIONS INC. is a leading biopharmaceutical company dedicated to one simple mission – to protect life. EBS develops manufactures and commercializes vaccines and therapeutics that assist the body\’s immune system to prevent or treat disease. Their products target infectious diseases and other medical conditions that have resulted in significant unmet or underserved public health needs. Their marketed product BioThrax? (Anthrax Vaccine Adsorbed) is the only vaccine approved by the U.S. Food and Drug Administration for the prevention of anthrax infection. Emergent BioSolutions Inc. has a market cap of $511.8 million; its shares were traded at around $16.91 with a P/E ratio of 13.1 and P/S ratio of 2.8…..

Maker of anthrax vaccine discusses challenges of marketing overseas

On March 9, MBA students taking International Political Risk Management, a course taught by Elena Iankova, a lecturer at the S.C. Johnson Graduate School of Management, heard Fuad El-Hibri, chairman and CEO of Bioport’s parent company, Emergent BioSolutions Inc., discuss the hurdles his firm faces in making and marketing its products abroad.

His guest lecture was titled “Managing International Risk in the Bio-Defense and Telecommunications Industries.”

Using his own company as an example, El-Hibri outlined six areas of risk in international business, among them export/import regulations, politics at home and abroad and financial issues. Much of his talk focused on political issues ranging from export regulations to how to deal with foreign governments.

Muslim CEO Fuad El-Hibri of U.S. firms fight terrorism, ’stop evil’

ROCKVILLE, Md. — Those who go to sleep at night with the threat of terrorism on their minds might be surprised to learn that Muslim CEOs are running companies that watch over our safety.

• Fuad El-Hibri is CEO of BioPort, the only U.S. maker of anthrax vaccine.

• Houssam Salloum is CEO of Axiolog, a Detroit firm developing a high-tech system for tracking international cargo into vulnerable U.S. ports.

• Nafa Khalaf is CEO of Detroit Contracting, which after the Sept. 11 attacks in 2001 secured the five major treatment plants that supply water to 4.5 million residents of the Detroit area. Khalaf, 50, emigrated from Iraq in 1986, and his company is now working to protect water plants in Iraq.

• Ahmad Mesdaq, owner of businesses in San Diego including a coffee lounge and cigar factory, this summer will launch an auto registration system in his native Afghanistan that will help authorities stop widespread shipments of explosives and drugs by warlords. Getting Afghanistan back on its feet brings security to the USA, he says.

The past three years have shown the war on terror is complicated. Just as sides can’t be drawn up by national boundaries, neither can the good guys and bad guys be identified based on their religion or national origin.

Throughout history corporate executives have played important roles in winning wars. President Franklin Roosevelt made Robert Wood Johnson, the late CEO of Johnson & Johnson, an Army general in World War II and put him in charge of bringing small business into the war effort. Executives will likely play a critical role in the war on terrorism as well. But they won’t all have names like Johnson. Some may have names like El-Hibri or Mesdaq.

“American Muslims are making endless efforts to stop evil,” Mesdaq says.

These executives are the antithesis of the celebrity CEO so common now in Corporate America. After all, these are times when Muslims running companies in homeland security could attract the attention of both Islamophobes and terrorists. It took months of searching trade associations, chambers of commerce and homeland security experts for USA TODAY to find a cadre of companies that contribute to the security of the U.S. and have a Muslim at the helm. When found, some said they were under contractual obligations not to talk to the media. Some, like Salloum, declined to be interviewed so as not to attract attention. Others were like El-Hibri, who agreed to an interview with reservation.

“Some successful business people in the Muslim community are worried that there are forces working against them,” he says, sitting in his office tucked away in a building with no exterior signage in this Washington, D.C., suburb.

“I’m trusting, not paranoid,” says El-Hibri, 46, who became a U.S. citizen in 1999. He was born in Germany and spent his childhood equally in Europe and the Middle East before coming to the USA to get an economics degree from Stanford and an MBA from Yale. “But there is a group who don’t think the anthrax vaccine should be in the hands of someone with an Arab or Muslim background.”

Scrutiny surrounds anthrax vaccine

Conspiracy-theory Internet sites have taken a special interest in El-Hibri’s formative years in Lebanon and Sudan, and a more recent three-year assignment in Saudi Arabia with Citibank. The sites imply crimes ranging from ties to Osama Bin Laden to being the mastermind behind the mailing of anthrax spores that killed five people in 2001. El-Hibri calls the Web sites annoying and jokes that he’s lucky to be in the vaccination business so that he can inoculate himself from the pain of accusers who can’t be confronted.

Even some members of Congress have objected to BioPort’s anthrax role. That criticism reflects ignorance, says retired admiral William Crowe, who served as chairman of the Joint Chiefs of Staff in the Reagan administration and the first George Bush administration and now is on BioPort’s board of directors. BioPort recruited Crowe, a friend of El-Hibri’s father. Crowe received 8% of BioPort’s stock to serve on its board, largely because of his expertise about the key customer, the Defense Department. But Crowe’s presence also mitigates the attention on El-Hibri.

BioPort keeps a small supply of anthrax spores under five layers of security to verify the potency of the vaccine, a requirement of the Food and Drug Administration. That makes El-Hibri a suspect of conspiracy theorists, who say the unsolved anthrax mail crime of 2001 increased demand for BioPort’s product while El-Hibri and his family were safely inoculated from the fatal bio-threat.

“That’s a terrible stretch,” says Crowe, who says El-Hibri is straightforward and honest and is one who has “never entertained even the slightest idea of fooling the government” and “bends over backward to make sure the Defense Department is aware.”

Muslim executives were careful and measured when responding to most questions but became noticeably uneasy when asked how devout they were to Islam. A typical response: “I attend mosque when I have time,” Khalafsaid. “My philosophy is to be good, to live with others and to be equal with others.”

“I don’t drink alcohol or gamble,” said Mesdaq, 32. “I go to mosque,” but he emphasized: “I’m not a political Muslim. I’m a normal American. I like to drive nice cars, go out and have fun and dance. I’m very blessed.”

El-Hibri says he attends mosque once a year. His mother is German and Catholic. He adopted the faith of his Lebanese father. Islam, Christianity and Judaism are essentially the same, El-Hibri says, with a “belief in one God, what’s right and what’s wrong. Do the best things in the eyes of God, that’s most important.”

That there are Muslims fighting terrorism comes as no surprise to Daniel Lubetzky, the Jewish CEO of Peaceworks, a New York company that fosters joint ventures in regions of conflict. For example, Peaceworks markets Meditalia food products made in cooperation among Israelis, Palestinians, Egyptians and Turks; and Bali Spices made by Muslims, Buddhists and Christians working as partners in Indonesia.

Lubetzky finds that business leaders are usually moderates who see extremism as the enemy to solving poverty. The majority of Muslims have the most to lose from terrorism, because the moderates always pay for the backlash against the extremists, Lubetzky says. “Terrorists hurt their own people the most.”

Making Afghanistan safer helps the USA

Mesdaq is the son of a brigadier general in the Afghani air force who immigrated to the USA as a 9-year-old after the Soviet Union invaded Afghanistan. After the Sept. 11 attacks and the subsequent U.S. war in Afghanistan, he returned a year ago to his native country to visit family. He found a country with more than 500,000 vehicles and no efficient system of registration and licensing. SUVs with tinted windows and diplomatic plates from Iran, Pakistan and the former Soviet republics are everywhere,loaded with explosives or drugs and driven by warlords, he says.

Mesdaq had an idea for a registration system using license plates with holograms. The U.S. State Department approved his plan last month, and he says it will be launched this summer. A one-time registration fee of $100 a car will generate $50 million for the country.

Mesdaq says it’s important that Afghanistan not become dependent on aid from the U.S. “They need to lift themselves if they love their country,” he said.

Salloum is a former captain for the Italian merchant marine who left Lebanon at 17. He has lived in the USA since 1998 and is developing a tracking system that uses satellites to monitor U.S.-bound cargo.

Under the present system, if authorities become suspicious about U.S.-bound cargo, the U.S. Coast Guard boards the arriving ship six miles out at sea, checks the paperwork and, if necessary, examines individual crates. The Axiolog system aims to let enforcement agents worldwide use intelligence more efficiently to flag questionable shipments.

For example, a shipment of books might be inspected if Axiolog finds no record of that company ever receiving paper to publish books. Axiolog would allow such anomalies to be examined by computer while the cargo is en route, cutting down on expensive delays to legitimate shipments.

Such a system could prove invaluable. Even the threat of a dirty bomb could close the port of Los Angeles for a week. It would then take nearly two months to clear the backlog of incoming ships, economic terrorism that could cost billions of dollars.

El-Hibri says it’s a myth that a belief in Islam interferes with being good in business. A study last year by Marcus Noland at the Institute for International Economics supports El-Hibri’s position. Noland found no evidence that Islam was a drag on economic development in countries with large Muslim populations — outside of oil-rich regions where extremist views often interfere with education.

“The Islamic religion promotes hard work and the idea that there’s nothing wrong with being a financial success as long as you do it in an ethical and moral way,” says El-Hibri, an avid polo player whose father’s company built telecommunication networks in Saudi Arabia, Russia, Poland, Venezuela and El Salvador.

Khalaf, who took just 18 months to get a civil engineering degree from Wayne State University when he came to the USA in 1986, then earned an MBA from George Washington University, agrees that Muslim executives have their priorities straight.

“When you become an American citizen your priority is to protect Americans,” he says.

Fuad El-Hibri discusses challenges of marketing overseas

BioPort is the only FDA-licensed producer of the anthrax vaccine.

Fuad El-Hibri, chairman and CEO of Emergent BioSolutions Inc., speaks March 9 in Sage Hall. Kevin Stearns/University Photography

On March 9, MBA students taking International Political Risk Management, a course taught by Elena Iankova, a lecturer at the S.C. Johnson Graduate School of Management, heard Fuad El-Hibri, chairman and CEO of Bioport’s parent company, Emergent BioSolutions Inc., discuss the hurdles his firm faces in making and marketing its products abroad.

His guest lecture was titled “Managing International Risk in the Bio-Defense and Telecommunications Industries.”

Using his own company as an example, El-Hibri outlined six areas of risk in international business, among them export/import regulations, politics at home and abroad and financial issues. Much of his talk focused on political issues ranging from export regulations to how to deal with foreign governments.

One hurdle: when BioPort sought to export its anthrax vaccine, BioThrax, the U.S. Department of Defense claimed the vaccine was primarily of military importance and should therefore fall under International Traffic in Arms Regulations (ITAR). Under ITAR, export of the vaccine is controlled by the Department of State and a license is required for each sale. BioPort succeeded in arguing that its product was non-military in nature and therefore belonged under Export Administration Regulations (EAR). Exportation under EAR is controlled by the Department of Commerce and has far fewer restrictions.

El-Hibri seemed to take such challenges in stride. “Obviously,” he said, “the U.S. government is interested in vaccines, especially bio-defense vaccines.” It controls which countries vaccines can be exported to and may use them as a bargaining chip in its own deals with foreign ministries of defense, he commented. “They like to throw our vaccine into the mix and say, ‘Listen, if you buy one more tank or one more fighter jet … we’ll throw in 10,000 doses of anthrax vaccine,’” he said. But such giveaways create problems for companies like BioPort by reducing demand for its products in foreign countries.

Some uncontrollable variables that affect the demand for vaccines are: Politics within the foreign country, the country’s relationship with the United States, its finances, its fears about external threats and regional geopolitics, noted El-Hibri.

He also repeatedly mentioned the importance of having local connections. “It is critical that you appoint or partner up with a local distributor,” he stressed. A local partner can help businesses stay abreast of the political situation and provide valuable insight into local culture and customs, he said, noting that acceptable business practices often vary widely between countries.

For example, in many countries it is common practice for businesses to offer bribes or gifts to government officials in return for their assistance, he commented. But under U.S. law, it is illegal for American companies to do so, with stiff penalties for violations. While the restriction can be circumvented by giving small gifts, under $25 in value, a better policy is to avoid gifts altogether, said El-Hibri, and instead get close to decision makers by developing relationships with them, helping them solve some of their problems.

He also stressed that the media can be either an important ally or a formidable enemy. “Many of our competitors aren’t as media savvy as we are and that gives us an edge.”

Iankova later said of El-Hibri’s talk: “I was impressed because he’s put a lot of effort into addressing exactly the issues we addressed in class. [It was] very helpful for my students.”

Gligor Tashkovich ‘87, MBA ‘91, who worked with El-Hibri in the telecommunications industry and helped to organize his visit to campus, called him “a brilliant businessman and entrepreneur.”

And Herb Lara, MBA ‘06, president of the Health Care and Biotechnology Club, a student group at the Johnson School, enjoyed having the opportunity to hear El-Hibri speak. “Bio-defense is something that’s not a widely available topic for discussion, so it was definitely a big deal to have someone of his stature come here to talk to us,” he said.

Before entering the biopharmaceutical industry 15 years ago, El-Hibri worked at Citicorp and Booz Allen & Hamilton.

Courtney Potts is an intern with the Cornell News Office.

Fuad El-Hibri Chief Executive Officer and Chairman of the Board of Directors

Mr. Fuad El-Hibri has served as chief executive officer and chairman of the board of directors since June 2004 and as president from March 2006 to April 2007. Mr. El-Hibri served as chief executive officer and chairman of the board of directors of BioPort Corporation from May 1998 until June 2004, when, as a result of our corporate reorganization, BioPort became a wholly owned subsidiary of Emergent. We subsequently renamed BioPort as Emergent BioDefense Operations Lansing Inc. Mr. El-Hibri served as chairman of Digicel Holdings, Ltd., a privately held telecommunications firm, from August 2000 to October 2006. He served as president of Digicel from August 2000 to February 2005. Mr. El-Hibri has served as chairman of East West Resources Corporation, a venture capital and financial consulting firm, since June 1990. He served as president of East West Resources from September 1990 to January 2004. Mr. El-Hibri is a member of the board of trustees of American University and a member of the board of directors of the International Biomedical Research Alliance, an academic joint venture among the NIH, Oxford University and Cambridge University. He also serves as chairman and treasurer of El-Hibri Charitable Foundation. Mr. El-Hibri received a master’s degree in public and private management from Yale University and a B.A. in economics from Stanford University.