Emergent BioSolutions (EBS) Q4 2021 Earnings Call Transcript

Emergent BioSolutions (EBS 9.68%)
Q4 2021 Earnings Call
Feb 24, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the Q4 2021 Emergent BioSolutions Incorporated earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session.

Please be advised that today's conference is being recorded. [Operator instructions] I would now like to hand the conference over to your speaker today, Bob Burrows, vice president of investor relations. I will now turn the call over to the company. Please proceed.

Bob Burrows -- Vice President of Investor Relations

Thank you, Deedee, and good afternoon, everyone. Thank you for joining us today as we discuss the operational and financial results for fourth quarter 2021, as well as full year 2021. As is customary, today's call is open to all participants and the call is being recorded and is copyrighted by Emergent BioSolutions. In addition to today's press release, there is a series of slides accompanying this webcast available to all webcast participants.

Turning to Slides 3 and 4. During today's call, we may make projections and other forward-looking statements related to our business, future events, our prospects, or future performance. These forward-looking statements are based on our current intentions, beliefs, and expectations regarding future events. Any forward-looking statement speaks only as of the date of this conference call and except as required by law, we do not undertake to update any forward-looking statement to reflect new information, events, or circumstances.

Investors should consider this cautionary statement, as well as the risk factors identified in our periodic reports filed with the SEC when evaluating our forward-looking statements. During today's call, 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 the tables found in today's press release regarding our use of adjusted net income, adjusted EBITDA and adjusted gross margin, and the reconciliations between our GAAP financial measures and these non-GAAP financial measures. Turning to Slide 5.

The agenda for today's call will include Bob Kramer, president and chief executive officer, who will comment on the current state of the company; and Rich Lindahl, chief financial officer, who will speak to the financials for 4Q '21 and FY '21, which will also discuss in detail the '22 forecast, including 1Q '22 revenue guidance. This will be followed by a Q&A session where additional members of the executive leadership team are present and available as needed. Finally, for the benefit of those who may be listening to the replay of the webcast, this call was held and recorded on February 24, 2022. Since then, Emergent may have made announcements related to topics discussed during today's call.

And with that introduction, I would now like to turn the call over to my colleague, Bob Kramer. Bob, please proceed.

Bob Kramer -- President and Chief Executive Officer

Thank you, Bob, and good afternoon, everyone. Thank you for joining the call this afternoon. Today, I'd like to provide a brief recap of 2021, share some important highlights from each of our business lines, as well as our R&D pipeline and then turn our attention to 2022 and beyond. My comments are summarized across Slides 6 through 8 in the deck that's accompanying this call.

Before I go any further, I want to thank our entire emergent team now more than 2,500 strong for their continued focus and commitment to our mission of protecting and enhancing laws. Today's results demonstrate our team's resilience, and I couldn't be more grateful for their work delivering meaningful outcomes for patients while continuing to fight the COVID-19 pandemic. I'd also like to acknowledge Emergent's founder and executive chairman, Fuad El-Hibri, who has announced his retirement effective April 1 of this year. On behalf of everyone at Emergent, both past and present, I want to thank Fuad for his vision, his dedication and building Emergent into the company that it is today.

Turning to our results. I first want to underscore a few key accomplishments for the year. First, we achieved record revenues in 2021 of $1.8 billion with more than $500 million in adjusted EBITDA and positive cash flow. 2021 continued to trend toward achieving our 2024 financial goals.

Second, with the latest announcement regarding AstraZeneca vaccine drug substance, we've supplied more than 130 million dose equivalents of COVID-19 vaccine for use around the world. Next, we realized more than $600 million in government contract options being exercised in the second half of 2021 alone, including for our smallpox vaccine, ACAM2000, and our next-generation anthrax vaccine AV7909. Fourth, we initiated the rolling BLA submission for AV7909 and the pivotal phase 3 clinical trial for our single-dose chikungunya virus VLP vaccine candidate. Fifth, we secured more than $400 million of new business for our CDMO services business.

And finally, Emergent delivered more than 5 million units of Narcan, the equivalent of more than 10 million doses, while continuing our support of work for those at risk of an opioid overdose, including increased advocacy to expand access to naloxone. In addition, in 2021, we reorganized our operating structure to focus on customers and markets, resulting in three distinct business lines: first, the medical countermeasure business; second, commercial; and finally, CDMO services. We also aligned our research and development function to enhance the delivery of pipeline, which includes both clinical and preclinical-stage programs. Now, let's turn to our performance in the year ahead.

As mentioned, our medical countermeasure business secured more than $600 million in government contract options in the second half of last year. While COVID-19 has captured the headlines, impacts from lesser-known but potentially more significant public health threats remain a risk. We continue to supply the U.S. government and allied governments around the globe with medical countermeasures for anthrax, smallpox, botulism, and chemical agents.

And we continue to work with the U.S. government agencies like BARDA, NIH, NIAID, and the U.S. Department of Defense to advance solutions in areas where there is a great unmet need. In our CDMO business, it remains durable and sustainable with strong and stable base of clients across development services, drug substance manufacturing, and drug product manufacturing and packaging.

In 2021, the value of secured CDMO contracts exceeded $400 million and spanned a variety of therapeutic areas in addition to the ongoing COVID-19 pandemic response. We also enhanced our drug product service capability by bringing online a new high-speed fill-finish line at our Camden facility and installing a high-speed viral fill-finish line at our Rockville facility, the latter of which we anticipate validating by Q1 of 2023. As for our COVID-19 vaccine work, our most recent discussions with J&J have indicated that they are evaluating their global supply chain as they assess the demand for their COVID-19 vaccine. Based on this information and in coordination with J&J, we're taking the opportunity to begin our normally scheduled maintenance period for our Bayview facility earlier than anticipated and also to extend it in order to make improvements in modifications.

These enhancements will enable us to meet the needs of J&J while planning for Bayview's future return to nonpandemic work as part of our CDMO network, a key step in enhancing and advancing the growth of our CDMO business. As a result, we're updating our revenue guidance for 2022 to fall between $1.3 billion and $1.4 billion in revenue. Importantly, our contract with J&J remains unchanged, and Rich will provide more details on the guidance in a few minutes. Turning now to our Commercial Products business.

As opioid overdoses and deaths rose to record levels in 2021, we maintained our commitment to focus on expanding awareness, maintaining affordability, and increasing accessibility to Narcan by working with federal and state governments, healthcare providers, first responders, pharmacists, and insurers in the U.S. and Canada. Our team continues to make meaningful contributions to combat the opioid crisis by helping millions prepare for an opioid overdose emergency. Late last year, our team adapted as a generic intranasal naloxone entered the market.

Concurrently, we entered into a supply agreement with Sandoz, a global leader in generic and biosimilar medicines to allow them to distribute an authorized generic of Narcan. Given the tremendous impact of the opioid epidemic, we remain committed to servicing distribution channels across North America to ensure Narcan is readily available for those in need. With regard to travel health, we made the right decision to pause the business during the pandemic, while maintaining our commercial capability. As we look forward to international travel beginning to resume, we plan to restart the business with the relaunch of Vivotif and Vaxchora in key markets later in 2022.

Staying within the product side of the business, let's now turn to our research and development efforts. Emergent's R&D pipeline saw strong progress in 2021 with the initiation of the phase 3 pivotal trial for our single-dose chikungunya virus VLP vaccine candidate, the phase 1 trial for our universal flu vaccine candidate, and the rolling BLA submission for AV7909 in 2022. In 2022, we expect to share updates regarding the progress of these trials and other pipeline candidates, including additional clinical trials across our focus areas of infectious diseases, substance use disorder, and nerve agent antidotes. We also expect to share news related to the advancement of our auto-injector platforms, which we anticipate becoming part of our medical countermeasure business following appropriate regulatory approvals.

We continue our ongoing efforts as well to evaluate M&A opportunities that would strengthen our leadership positions in targeted areas of public health and contribute to diversified, sustainable revenue growth for the business. I'd like to take this opportunity to congratulate a few members of the management team for their new and expanded roles as announced earlier this week on Tuesday and taking effect on March 1. First, Atul Saran, who currently serves as executive vice president and general counsel, will assume the role of executive vice president and chief strategy and development officer, global research, product development activities, and M&A will now be consolidated under Atul's leadership. Secondly, Dr.

Chris Cabell will be appointed as chief medical officer for Emergent, a role he held in an acting capacity for part of 2021 in addition to his concurrent role as senior vice president, clinical development. In this role, Chris will be reporting to Atul. And finally, I'm pleased to announce the promotion of Jennifer Fox to the position of executive vice president of external affairs, general counsel, and corporate secretary. In this role, Jennifer will be joining her colleagues on my executive management team.

In addition to the legal team, Jennifer will now lead the global communications and public affairs, as well as the global government affairs teams. Many of you know Atul, I'm sure you'll get to know both Jennifer and Chris on future calls. Before I conclude, I want to again thank our team for their hard work and dedication. Emergent's performance and resilience during the past year is a testament to our strategic focus and highly capable team.

Looking forward, I'm encouraged by the stability and durability across our diversified portfolio supported by our improved operating structure that better aligns us with patients and customers and more effectively positions us for success. So, thanks again for joining the call. I look forward to your questions, and I'll now turn to Rich to review the financial results. Rich?

Rich Lindahl -- Chief Financial Officer

Thank you, Bob. Good afternoon, everyone, and thank you for joining the call today. I'll start on Slide 10 and open my remarks with some summary thoughts to put today's earnings report into context. Our fourth quarter execution was solid and continues to illustrate the strength and durability of our diversified business model.

Our medical countermeasures platform remain the foundational element of our business with strong predictable contributions from anthrax vaccines, ACAM2000, and our other medical countermeasure products. Our nasal naloxone product showed another strong period of performance across both the public interest and retail channels. As Bob commented earlier, we responded to the formation of a generic nasal naloxone market by activating our supply agreement with Sandoz for their distribution of an authorized generic. We also continue to make steady progress in stabilizing and incrementally improving the performance of the CDMO services business across our core manufacturing sites at Bayview, Camden, and Winnipeg.

And finally, we further advanced our R&D programs, most notably with the initiation of the AV7909 BLA rolling submission and the launch of the chikungunya vaccine phase 3 trial. With that, let's turn to the numbers, which were especially strong in the fourth quarter, demonstrating the operating leverage and earnings potential inherent in our business model. As indicated on Slide 11, highlights include total revenues of $723 million, an increase over the prior-year period and in line with our guidance, principally due to increased sales of anthrax vaccines and nasal naloxone products. Our key profitability measures also increased compared to the prior-year period, including adjusted EBITDA of $348 million and adjusted net income of $243 million.

Other notable items in the quarter include anthrax vaccine sales of $138 million higher than the prior year due to timing of deliveries of AV7909 to the U.S. Government's Strategic National Stockpile. ACAM2000 sales of $126 million, slightly lower than the prior year, but reflecting ongoing deliveries to the U.S. government under the existing 10-year procurement contract.

Nasal naloxone product sales of $121 million higher than the prior year, driven by strong unit sales of branded Narcan to the U.S. public interest in commercial retail markets, as well as customer channels in Canada. This line also includes revenues related to sales under our arrangement with Sandoz for their authorized generic naloxone nasal spray, which began late in the year. Other product sales were $50 million, significantly higher than the prior year, driven by deliveries to the U.S.

government of VIGIV and other medical countermeasure products. and combined CDMO service and lease revenues of $218 million, which was higher than the prior year due primarily to final cash collections associated with the mutually agreed termination of the CIADM public-private partnership with BARDA, which we announced in early November. Turning to operating expenses. As a reminder, we are now breaking out cost of product sales and cost of CDMO separately.

Product cost of goods sold in the quarter were $145 million, higher than the prior year, largely due to higher product sales. Cost of CDMO were $68 million, slightly higher than the prior year due to additional spending at our Bayview facility to further support enhancements to quality systems and capabilities at the site. R&D expense of $83 million higher than the prior year, primarily reflecting a nonrecurring write-off of a $38 million contract asset that resulted from the CIADM termination. SG&A spend of $94 million higher than the prior year, reflecting growth in headcount and professional services in support of our expanding operations.

And importantly, pursuant to our customary annual impairment testing, we recognized a $42 million noncash goodwill impairment charge related to the commercial business, driven primarily by the near- to medium-term impact of the ongoing pandemic on our travel health business. Turning to Slide 12. Let's look at the latest trends for our CDMO business line performance metrics. In the fourth quarter, we secured new business of $54 million on continuing steady demand for our services.

As of December 31, the CDMO backlog was $837 million, lower than the level as of September 30, reflecting the impact of the $218 million of CDMO revenues recognized in the quarter, offset by the new business secured of $54 million. And for the first time, we are introducing a new metric, number of customers in place of opportunity funnel, as we believe customer count provides more valuable context on the performance of the business. As of December 31, our customer count stood at 70. Importantly, we have retained more than 95% of our existing clients since 2019, reflecting the stability of our diversified customer base.

Next, let me touch briefly on key results related to the full-year period, which are shown on Slides 13 and 14. Total revenues were $1.8 billion, higher than the prior year and in line with our previous guidance. While revenues in the CDMO business did not meet our original expectations for 2021, we had positive outcomes in medical countermeasures and in the commercial business, where nasal naloxone product revenue significantly exceeded our initial guidance. As to profitability, due to operating expenses coming in higher for 2021, primarily as a result of higher cost of CDMO, coupled with increased SG&A expense, we reported adjusted EBITDA of $518 million and adjusted net income of $326 million, both lower than the prior year.

Lastly, gross margin was 54% and adjusted gross margin was 55%, both lower year over year, again, reflecting the higher operating costs in 2021. Moving on to Slide 15. I'll touch on select balance sheet and cash flow highlights. We ended the fourth quarter in a strong liquidity position with $576 million in cash and just under $600 million of available revolver capacity.

Our net debt position was $274 million, and our ratio of net debt to trailing 12-month adjusted EBITDA was less than one time. Our solid balance sheet was supported by strong operating cash flow in 2021 of $321 million. This result enabled continued investments in opportunistic buyback activities as follows: full-year capital expenditures of $225 million, reflecting our continuing commitment to investment in expanded capabilities and capacities to support our diversified product and services business. Net of reimbursements, capital expenditures for the year were $140 million or 8% of total revenues.

And in the fourth quarter, we used approximately $113 million to repurchase approximately 2.6 million shares pursuant to the $250 million repurchase authorization approved by our board of directors in November. The timing of any additional repurchases will be determined by management based on its evaluation of market conditions and other factors, and we will report such activity on a quarterly basis going forward. Please turn to Slide 16 for a review of our 2022 forecast. As outlined in today's press release, we are updating our 2022 outlook, principally the expectations for CDMO revenues.

As Bob said earlier, our most recent discussions with Johnson & Johnson have indicated that they are evaluating their global supply chain as they assess the demand for their COVID-19 vaccine. Based on this information and in coordination with J&J, we are taking the opportunity to initiate a maintenance period that we would normally plan for our Bayview facility earlier than anticipated and also extended in order to make additional improvements and modifications that will better position Bayview for future nonpandemic work. Accordingly, we are adjusting our 2022 CDMO and total revenue guidance downward by $100 million to reflect the expected impact of these activities, which also affects certain profitability metrics. However, it is important to note that our contract with J&J has not been changed.

Our updated guidance ranges are now as follows: for total revenue, we now anticipate a range of $1.3 billion to $1.4 billion. For CDMO revenues, we anticipate a range of $330 million to $380 million. For adjusted EBITDA, we expect a range of $240 million to $300 million. And for adjusted net income, we now anticipate a range of $95 million to $140 million.

All of our other 2022 forecast metrics are unaffected by the update and, therefore, reaffirmed. Finally, we are also providing our forecast for first quarter 2022 total revenues of $280 million to $310 million. As we stated in January, we view 2022 as a year to rebaseline the business. Importantly, our 2022 outlook takes into account a number of key considerations, including: first, continued stability in the government medical countermeasures products business line, driven by the high visibility of our long-term contracts.

Second, stable performance of our key commercial products business line, specifically nasal naloxone products, and our expectations of a full year's impact of the shift to a generic market. Third, despite the updated outlook for revenue specific to the J&J agreement, we expect continued consistent performance for the rest of the CDMO services business line as we pursue opportunities to serve existing and new customers at our other revenue-generating sites. And fourth, continued investments in the business, specifically R&D and capex, as we pursue opportunities to drive growth, improve operating efficiency and optimize capacity utilization across our manufacturing network. To conclude, please turn to Slide 17 for some summary comments.

In the fourth quarter 2021, we delivered solid performance in our core medical countermeasures business and nasal naloxone products, while also generating new business wins in CDMO services. We also continue to make progress at stabilizing the Bayview site in support of J&J and we realized important pipeline milestones with the initiation of the rolling BLA submission for AV7909 and the launch of the CHIKV vaccine phase 3 trial. Looking forward in 2022, we anticipate continued solid contributions from our government medical countermeasure and commercial products businesses, more normalized performance from our CDMO services business, and achievement of important milestones in our R&D portfolio. We look forward to keeping you informed as we execute on these plans and deliver further proof points that demonstrate the long-term growth potential of our strong diversified business.

That completes my prepared remarks, and I'll now turn the call over to the operator so that we can start the question-and-answer session. Operator?

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from Brandon Folkes of Cantor Fitzgerald. Please proceed.

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Hi. Thanks for taking my questions, and congratulations on the results. Maybe just digging into the guidance revision. On the CDMO business, it wasn't too long ago that you issued guidance.

So, I guess, just given what we saw with the other contract last year, is there any way to characterize whether you -- that contract is actually in dispute with J&J? I heard -- I did hear you talk about that the contract hasn't changed and the decision to undertake maintenance was through a discussion. But is there any way you can characterize what the J&J is still paying you? Does that $100 million -- is that just pushed to 2023? How do we sort of look at that contract and characterize that relationship currently? And then maybe secondly, coming back to your base business, A couple of years ago, I think you had set the goal of 10% of the business being international. Obviously, we've had a very different road for a while there. But how do you look at that international opportunity going forward, maybe especially in light of recent international events? Thank you.

Bob Kramer -- President and Chief Executive Officer

Yeah, Brandon. So, a couple of comments about our decision in Bayview. As both Rich and I commented, we're taking this opportunity to make some facility improvements in Bayview to both improve and strengthen the supply chain for J&J. It's critically important to us and the No.

1 commitment that we've made. But also looking forward to eventually having additional nonpandemic work being done in Bayview down the road. I want to make sure that it's best positioned to be able to capitalize on those opportunities and have a bit of an optionality to how we use Bayview longer term. So, that's really what's behind, as we both have said, the contract is in place.

There's nothing in dispute, just to be clear. And we're taking this opportunity to lean forward, look forward a bit and make those modifications that we've long wanted to make. In terms of your second question on the international markets, I think that is one growth opportunity that we've commented on over the last couple of years in the MCM business. Those markets continue to develop.

They are a little longer in terms of how long it takes to create an opportunity. But we think there's some growth opportunity there. Historically, international revenues have been kind of in the neighborhood of 10% of our product revenue and we expect that to continue going forward. So, we see pockets of opportunity.

Clearly, given the macro environment that we're in today, the world is not as stable as it was a year or two ago. So, those are opportunities that we'll continue to pursue.

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Thank you. I appreciate all the color.

Operator

Thank you. Our next question comes from Jessica Fye of J.P. Morgan. Please proceed.

Jessica Fye -- J.P. Morgan -- Analyst

Hey, guys, thanks for taking my questions. I got a few. Following up on Brandon's question, can you just maybe like elaborate on that J&J communication you alluded to about evaluating their COVID vaccine supply chain? Like what does that mean? I know your contract is in place, but what's the implication there?

Bob Kramer -- President and Chief Executive Officer

Yeah, Jess. I think it's as simple as we described, which is we were recently made aware that they are looking at their -- and evaluating their global demand for their vaccine in the supply chain that is supporting it. I'm not sure when we will hear the results of that, I expect probably in the second quarter, but it's as simple as that. We're just made aware recently that they're doing this evaluation and assessment.

And as a result, Emergent in coordination with J&J has decided to go ahead and make these facility improvements and modifications that we talked about.

Jessica Fye -- J.P. Morgan -- Analyst

OK. Got it. Maybe on a couple of other topics. Do you need to validate the Camden fill-finish line as well or just Rockville? And then in the nasal naloxone public interest market, what are you seeing in terms of uptake for Hikma's Kloxxado? And what about the generics? Are you seeing any uptake in the public interest segment there? And is Sandoz trying to get uptake there or just Teva?

Bob Kramer -- President and Chief Executive Officer

Yep. Great questions. So, I'll try to take them in order. So, for Camden, that was an investment in a new high-speed line that we executed and installed a couple of years ago and brought online last year I believe.

So, that work is essentially complete. It's more about fully utilizing that line. So, it's different just in the Rockville scenario where we installed the new viral fill-finish line in Rockville in 2021 and we look to qualify and validate that in 2022 and then kind of bringing online and operationalize it early next year. In terms of the naloxone, the nasal naloxone market, I think the -- first of all, in the public interest market, we see some penetration of that market by the generic product.

As we talked about on the prior call, we expected in the retail side of the market, which historically accounts for about 30% to 35% of the Narcan nasal spray revenues that you will see that typical branded versus generic competition and the generics will claim 80% to 90% of the market and that's every indication that we see two months into this. That's what's happening. On the public interest market side, however, it is a little more fragmented and harder to penetrate plus as we've talked about, the economics are a little different where they already discounted Narcan nasal spray product at 40% of the retail space. So, we do see some generic competition there.

To be clear, the Sandoz authorized generic product is not competing in the public interest market. It's just the other generic product that's in there versus the branded product, Narcan. I don't have much to say about the Kloxxado product. It's I think a little too early to tell what that market impact might be.

Rich Lindahl -- Chief Financial Officer

And, Bob, I might just jump in there. And just, Jess, I think one thing we are seeing is that while it's very early in the game, things are playing out as we would have anticipated at this stage. So, we're not surprised by the way things are developing in the markets, either on the retail side or on the public interest side.

Jessica Fye -- J.P. Morgan -- Analyst

OK. So, the public interest side is kind of playing out as you expected?

Bob Kramer -- President and Chief Executive Officer

At this point. Although, again, it's early in the game.

Rich Lindahl -- Chief Financial Officer

We're two months into it, Jess. So, again, I think we're overall not surprised by what we see on either the retail side or the public interest market side. So, you know, it's behaving as we expected.

Jessica Fye -- J.P. Morgan -- Analyst

Great. Thanks. 

Bob Kramer -- President and Chief Executive Officer

Sure.

Operator

Thank you. Our next question comes from Jacob Hughes of Wells Fargo. Please proceed.

Jacob Hughes -- Wells Fargo Securities -- Analyst

You guys, good afternoon. With respect to CDMO and Bayview, just provide an update on EUA approval. And does your comments here imply that this could potentially be opened up to beyond J&J sooner?

Bob Kramer -- President and Chief Executive Officer

Yeah, Jake, thanks for the questions. Thanks for joining the call. So, really, the regulatory status is really something that is best directed to J&J. I mean, they control the regulatory filing, whether it's, you know, EUA or eventually the BLA filing, that's really up to them.

In terms of the future use of Bayview, I think all we're saying, Jake, is that we know that there are some facility improvements and modifications that would both benefit short term, our ability to stabilize and strengthen the J&J supply chain, as well serve Emergent's use longer term in terms of doing that nonpandemic work that we accounted on several years ago. So, we get the benefit of both stakeholders with that investment.

Jacob Hughes -- Wells Fargo Securities -- Analyst

Got it. OK. And then maybe just with respect to your capital allocation, you generated about $100 million free cash flow this year and you're using it to buy back your stock. You also have this $2 billion revenue target that you reaffirmed in January.

So, the question is, what are the buckets you think you need to have to hit the $2 billion? And given where valuation is today, you know, is M&A going to be a bigger part of that goal? And how do you balance that with maybe, you know, using your cash to buy back your own stock?

Bob Kramer -- President and Chief Executive Officer

Yep. Great question. So, a couple of things, and I'll ask Rich to weigh in as well. M&A has always been an important priority for Emergent, particularly when we look to build our various areas of the business and get them to scale quickly, as well as build and establish leadership positions in segments of the public health threat market where we think we can compete most effectively.

So, M&As continue to be important. Exactly how much M&A adds to getting to that $2 billion in revenue by 2024, Jake, is hard to say. I think what we said two years ago was with the organic business, we saw a high single-digit growth rate in the organic business, which will get us about half of the way there and we were at $1.1 billion back in 2019 and M&A would most likely make up the balance. And I don't think we see it too differently kind of two years into this other than there are a lots of different paths to get into that $2 billion number by 2024.

It could be substantially organic with the growth opportunities that we see in the MCM business, as well as the CDMO business and commercial. So, we'll have to wait and see. In terms of your comment about valuation, obviously, we are hypersensitive to finding good assets to add that are strategically aligned with what we're trying to do, but also offer good value going forward. So, we're not going to overpay for assets.

Maybe with that, Rich, you can talk a little bit about capital allocation and how we look at potential uses of the capital to support programs like the buyback program that we're in the middle of now, as well as M&A.

Rich Lindahl -- Chief Financial Officer

Yeah. Thanks, Bob, and thanks, Jake. So, you know, our capital allocation priorities still remain as they have been, which is we're very focused on investing in the business to drive growth, whether that be through organic growth opportunities in R&D or in capital expenditures to expand the capabilities and capacity of the network or to pursue M&A that fits with our strategy and that's going to be accretive to our value over time. At the same time, as we've articulated, we believe that we can judiciously use some of our capital to buy back stock at times when we feel that it's at an attractive level and also to use some of that capital to manage dilution from employee equity compensation.

I think our balance sheet is at a place. You heard me talk about both the liquidity position, as well as the net leverage position are both very favorable. And with the continued cash flow generation potential of the business, we can continue to manage our balance sheet to a place where we can incur additional leverage as necessary and when necessary to pursue additional acquisition opportunities if needed. We're very comfortable operating in a net leverage ratio of two to three times, which compares to the well under one times place we are today.

And so, I think that we have flexibility to balance these priorities and again make decisions and allocate capital in productive ways to create value for the company.

Jacob Hughes -- Wells Fargo Securities -- Analyst

That's helpful. Maybe just last one for me is, you know, the CDC panel is about to adopt their recommendation for collar vaccination in children and adolescents. I think prior it was over 18 years old or related to Vaxchora. I was just wondering, is that a tailwind we should be thinking about for you guys? Or how are you thinking about that? Thanks.

Bob Kramer -- President and Chief Executive Officer

Yes. Maybe -- Jake, thanks for the question. Maybe I'll ask Adam to weigh in here in terms of that CDC recommendation and whether we think that will have a meaningful impact on our plans for Travel Health or Vaxchora, Adam?

Adam Havey -- Executive Vice President and Chief Operating Officer

Sure. Thanks for the question. I mean, I think at a macro level, we've been evaluating when the right time to relaunch Travel Health is, and that's really been the focus. I think the ACIP recommendation is, I think, more, I'll say, some positive momentum that that's going to return, and those products are going to be needed.

And so, it just came through and was just announced. I don't think we've had a kind of a new take on the market sizing, especially in the U.S. traveler. But I think the take-home message right now is we're excited to relaunch that Travel Health business once we get past this pandemic.

Jacob Hughes -- Wells Fargo Securities -- Analyst

Thanks.

Bob Kramer -- President and Chief Executive Officer

Sure.

Operator

Thank you. Our next question comes from Keay Nakae of Chardan. Please proceed.

Keay Nakae -- Chardan Capital Markets -- Analyst

Yes, thank you. Bob, just back to the guidance on CDMO revenue. When are you taking the downtime to do the maintenance and upgrades? In which quarters out of the year, do we take the $100 million of CDMO revenue out of?

Bob Kramer -- President and Chief Executive Officer

Yeah. Good afternoon, Keay. Thanks for joining. So, I'm not going to tell you which quarter to adjust your model.

What I will say is we're already beginning to transition to be able to make the facility enhancements and modifications that I've talked about. We expect that we will be back into production in late Q2. There may be some additional enhancements that we want to make later in the year, but that's our current thinking, Keay, on timing.

Keay Nakae -- Chardan Capital Markets -- Analyst

OK. And at what point during the year would you expect J&J to come back to you with the decision on exercising options for '23 and beyond?

Bob Kramer -- President and Chief Executive Officer

Yeah. I think, Keay, you know, that based on what they shared with us, they're going through their assessment right now. It may be another 30 to 45 days before they have that complete and give us some feedback. So, sometime in Q2, I think we'll have a better idea of what the overall long-term demand for that product is and how our Bayview facility kind of plays into their global supply chain solution going forward.

We'll have some updates probably in the future.

Keay Nakae -- Chardan Capital Markets -- Analyst

OK. And then just for the CHIKV clinical trial, can you give us any guidelines for either completing enrollment or when you think you might have top-line data?

Bob Kramer -- President and Chief Executive Officer

Sure. Adam, do you want to take that one?

Adam Havey -- Executive Vice President and Chief Operating Officer

Yes, sure. So, I think, Keay, as -- we've said this, I think, previously, but I think the trial, the way it's enrolling, I think we expect to complete that here in the first half of the year. And then there's some follow-up periods. So, I don't think we'll see any top-line data until maybe the middle of '23.

So, this year is mostly about executing the trial, and next year, it'll be kind of analyzing the data and sharing some top-line recommendations.

Keay Nakae -- Chardan Capital Markets -- Analyst

OK. Very good. Thanks.

Operator

Thank you. [Operator instructions] Our next question comes from Lisa Springer of Singular Research. Please proceed.

Lisa Springer -- Singular Research -- Analyst

I was just wondering if you have any updates you can share with us regarding negotiating the new contract for roxidecumet?

Bob Kramer -- President and Chief Executive Officer

Yeah. Lisa, thanks for joining. Thanks for the question. So, I think we're waiting, Lisa, to see when the request for proposal may come out from the government.

That's really the first step in terms of following through. So, we're not actively involved, to be clear, in any negotiations with them right now. We're waiting for that RFP to come out and then we will respond accordingly.

Lisa Springer -- Singular Research -- Analyst

OK. Thank you.

Bob Kramer -- President and Chief Executive Officer

Sure.

Operator

Thank you. I would now like to turn the conference back to Bob Burrows for final remarks.

Bob Burrows -- Vice President of Investor Relations

Thank you, Deedee. And with that, ladies and gentlemen, we now conclude the call. Thank you for your participation. Please note an archived version of today's webcast, as well as a PDF version of the slides used during today's call, will be available later today and accessible through the Investors landing page on the company's website.

Thank you again, and we look forward to speaking with all of you in the future. Goodbye.

Operator

[Operator signoff]

Duration: 46 minutes

Call participants:

Bob Burrows -- Vice President of Investor Relations

Bob Kramer -- President and Chief Executive Officer

Rich Lindahl -- Chief Financial Officer

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Jessica Fye -- J.P. Morgan -- Analyst

Jacob Hughes -- Wells Fargo Securities -- Analyst

Adam Havey -- Executive Vice President and Chief Operating Officer

Keay Nakae -- Chardan Capital Markets -- Analyst

Lisa Springer -- Singular Research -- Analyst

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