Emergent BioSolutions (EBS) Q4 2022 Earnings Call Transcript

Emergent BioSolutions (EBS -10.55%)
Q4 2022 Earnings Call
Feb 27, 2023, 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 Emergent Biosolutions fourth quarter and full year 2022 financial results conference call. [Operator instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator instructions] Please be advised, today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Bob Burrows, vice president of investor relations. Please go ahead.

Bob Burrows -- Vice President, Investor Relations

Thank you, Michelle, and good afternoon, everyone. Thank you for joining us today as we discuss the operational and financial results for fourth quarter 2022, as well as full year 2022. 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's 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 income loss -- net income loss, 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 our Q4 2022 and FY 2022. Rich will also discuss our forecast for FY '23, including Q1 '23 revenue guidance. This will be followed by a Q&A session, where additional members of the 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 27, 2023.

Since then, Emergent may have made announcements related to the topics discussed during today's call. With that introduction, I would now like to turn the call over to Bob. Bob.

Bob Kramer -- President and Chief Executive Officer

Thank you, Bob, and good afternoon and thank you for joining the call this afternoon. A summary of my remarks begins on Page 6. As you've read in our press release, our fourth quarter and fiscal year 2022 results are largely in line with the guidance that we provided at the end of last year and then reaffirmed again in our January 9th press release. Our 2022 results and the 2023 guidance we will share with you today should serve as a more realistic baseline from which we will grow at a more -- at a rate more consistent with pre-COVID trends, and Rich will walk through those numbers with you in a minute.

Today, I'd like to provide some context with respect to sharpening our focus on our core businesses and maximizing outcomes for all stakeholders, patients, customers, employees, equity investors, and debt capital providers. We last gave our long-term view of the business at our Investor Day in November of 2019. Much has changed since then, and I think it's safe to say that that view no longer matches this post-pandemic environment. By the end of this year, we'll share an updated view informed by the outcomes of several strategic initiatives already underway.

First, we've prioritized our foundational products business, which includes our portfolio of medical countermeasures such as treatments and vaccines for anthrax and smallpox, a business that has contributed, on average, $620 million of revenue in each of the last three years. This focus also includes making lifesaving treatments like Narcan nasal spray more accessible to patients who need them. Let me give you three clear examples of this prioritization in practice. In January, we announced a new contract to supply RSDL kits to the U.S.

Department of Defense, underscoring our continued partnership with the government to address threats they have identified. Also, earlier this month, we announced an agreement to sell our travel health business to Bavarian Nordic, which accomplishes two goals. It will help ensure that Vaxchora and Vivotif remain available to international travelers and other patients who need them. And upon close, it will generate approximately $270 million in cash and includes the potential for another 110 million in sales-based and development-based milestones.

Also, on February 15th, we successfully presented our rationale for making Narcan available over the counter to an FDA joint advisory committee, and I'll touch upon that more in a minute. The second strategic initiative is aimed at strengthening our culture of quality and compliance and enhancing our manufacturing capabilities to support both our internal products, as well as services to our long-term partners. Third, we're making capital structure and expenditure decisions to build enterprise value for the benefit of both stakeholders and creditors. For example, in January, we announced organizational changes and other cost reduction initiatives expected to result in annualized savings of over $60 million when fully implemented.

And finally, as Rich will discuss, we're managing our balance sheet to restructure and extend our debt obligations. To be clear, these decisions are not taken lightly, and they have real consequences and impact on many of our Emergent colleagues. To those affected by these decisions, I want to again express my gratitude for your commitment to our patients and customers and to our mission to protect and enhance life. Turning to our core businesses, we see continued strength in the medical countermeasure products.

We successfully delivered the second shipment of Tembexa under the BARDA procurement contract at the end of 2022 and are planning for an additional contract modification to be exercised in late 2023. As mentioned previously, we announced a $380 million procurement contract to supply RSDL kits for use by all branches of the U.S. military. We expect deliveries to be consistent with previous years, but this new contract does account for surge capacity should the Department of Defense require additional supplies.

With respect to ACAM2000, our smallpox vaccine, we continue to work with the U.S. government on terms for the next delivery into the Strategic National Stockpile. We have previously disclosed that these options are not always exercised on a consistent, predictable timeline, yet we remain confident that we will reach an agreement with the U.S. government, emboldened by comments from the assistant secretary of preparedness and response before the Senate Health Committee last September, stating that ACAM2000 remains, and I quote, "the first line of defense to vaccinate Americans in the event of an accidental or intentional release of smallpox," end quote.

We're also pleased with the progress toward making Narcan nasal spray available over the counter. Since announcing the FDA's priority review of our application last December, we continued working closely with the agency, leading up to the expected approval by March 29th of this year. We're encouraged by the unanimous vote of the FDA advisory committee on February 15th in support of over-the-counter Narcan. And assuming the timeline remains the same, we anticipate Narcan appearing on shelves by the end of the summer.

We're engaging with stakeholders, including retail pharmacy chains, the Centers for Medicare & Medicaid Services, and congressional offices to ensure the switch to over-the-counter Narcan continues to expand access to this potentially lifesaving medicine. Notably, we also expect consistent public interest demand for Narcan, regardless of the outcome of the FDA review. We have invested in relationships across this market and have a sophisticated and mature system in place that enables us to deliver product to these customers in a timely and affordable manner. Turning to CDMO.

With respect to this piece of the business, we're currently making investments in our existing network to both deliver our internal products and service external customers, including strengthening operational, quality, and compliance systems across the enterprise to provide reliable delivery of products and services, as well as bringing online new assets across the manufacturing sites like the high-speed fill/finish drug product line in Rockville that will differentiate us in this growing market, specifically in the mammalian sector. As we've said before, executing on these strategic investments will take time to complete, and we're committed to getting it right. As these investments come to fruition, we will continue to engage potential new customers and evaluate how best to deploy these assets across our network in order to deliver the fastest returns. Turning now to our financial guidance.

Our sharpened focus on core areas of sustainable growth and other related actions we're taking will have an impact on our business performance. And Rich will go into more detail our 2023 guidance, but our range of total revenues of 1.1 billion to 1.2 billion and our adjusted EBITDA range of between 75 million and 125 million and our adjusted gross margin performance of between 41% and 44% reflects the impacts of these actions in the short term. As we look ahead to the rest of 2023, the management team and I are executing against the following priorities. First, improving overall profitability by focusing on our -- both our core products and existing services businesses.

Secondly, successfully closing on the sale of the travel health business that we announced earlier this year. Next, completing the transition of AV7909 from development to procurement in close partnership with the U.S. government. Fourth, gaining FDA approval for over-the-counter Narcan and launching that product later this year.

Next, further delivering and strengthening on our quality and compliance culture and systems. And finally, working with our creditors to restructure and extend our debt obligations. The full benefit of these actions we're taking will not be realized overnight, and our actions demonstrate our belief in the importance and necessity of the work Emergent does to help protect against ongoing and future threats to public health, as well as economic and national security. Again, thank you for attending and participating in the call today, and I'll now turn it over to Rich.

Rich Lindahl -- Chief Financial Officer

Thank you, Bob, and good afternoon, everyone. We appreciate you joining the call. I'll start on Slide 9 and begin my remarks by reinforcing the financial implications of sharpening our strategic focus and maximizing stakeholder outcomes, as Bob has described for you today. First, we are committed to sustaining revenue growth and improving profitability.

We plan to leverage our capabilities in medical countermeasures and Narcan nasal spray and develop the potential of our CDMO services business, with the combined effect to establish a platform for solid future growth. The position elimination and other actions we announced earlier in the year, in combination with the sale of our travel health business, will better align our cost structure with our revenue trajectory as we continue to strengthen quality and compliance and operationalize the network investments made over the past three years. Our 2023 guidance reflects our expectations for solid progress in a multiyear journey toward these objectives. Second, we are addressing near-term challenges to our credit profile.

Improved profitability, stronger cash flow, and disciplined resource allocation are important short-term objectives that are reflected in our recent actions. The sale of the travel health business will provide enhanced liquidity as we work with our lenders to replace the current credit facility and extend the October 2023 maturity. To that end, our lender group has been constructive in these efforts, as evidenced by their consent to the travel health sale and the limited waiver of covenant compliance described in our 8-K filing on February 15th related to the announced divestiture. We are working diligently with the lender group to extend the debt maturity and resolve these concerns as soon as possible.

With that, let's now turn to a review of financial results, which continue to be mixed in the fourth quarter. On the positive side, total revenues were in line with our guidance as the product segment continued to deliver solid contributions, including Narcan nasal spray, Tembexa, and other products. These outcomes partially offset the disappointing circumstances related to ACAM2000, which did not contribute any revenue in the period. Similarly, the services segment was once again a modest top-line contributor as we continue to make steady progress in stabilizing and incrementally improving the performance of the CDMO services business across our core sites at Winnipeg, Camden, Rockville, and Bayview.

At the same time, our profitability measures reflect underutilization of our CDMO capacity, as well as ongoing incremental costs to address the Camden warning letter and further strengthen our systems, processes, and culture of quality and compliance in our manufacturing plants and across the enterprise. As indicated on Slides 10, 11, and 12, financial highlights include total revenues of $331 million, a decrease over the prior year, driven by lower sales of our key franchise products, substantially reduced CDMO services revenue, and lower contracting grant revenues. And as expected, our key profitability measures declined versus the prior year, with net loss of $88 million, adjusted net loss of $15 million, and adjusted EBITDA of positive $34 million. Notable revenue elements in the quarter include anthrax vaccine sales of $51 million, lower than the prior year due to timing of deliveries of AV7909 to the U.S.

government's Strategic National Stockpile. Nasal naloxone product sales of $91 million, lower than the prior year but demonstrating the continuing role of Narcan in addressing the ongoing opioid epidemic, especially in the U.S. public interest segment. Tembexa, our newest acquired medical countermeasure product, generated its first product sales during the quarter, contributing $118 million under the 10-year contract to supply doses of this smallpox therapeutic to the SNS.

Other product sales were $46 million, slightly lower year over year but demonstrating the impact of our other MCM products. And combined CDMO service and lease revenues were $18 million, significantly lower than the prior year as we continue to support existing customers and rebaseline the business following our COVID-19 response. Turning to operating expenses, cost of product sales in the quarter was $167 million, higher than the prior year, driven by Tembexa, and offset by lower sales of anthrax vaccines, ACAM2000, and nasal naloxone products. Note that cost of product sales includes $51 million of inventory step-up related to the Tembexa acquisition that has been adjusted out of our non-GAAP metrics.

Cost of CDMO was $52 million, significantly lower than the prior year due to reduced production across the CDMO network, partially offset by higher costs at the Camden site, resulting from additional investments in quality enhancement and improvements. R&D expense of $58 million, lower than the prior year, reflecting a noncash write-off in 2021 of a contract asset balance resulting from the termination of the CIADM contract with the U.S. government. This reduction was partially offset by higher costs associated with the CHIKV phase 3 trials.

And SG&A spend of $94 million, in line with the prior year. With that, let's move to Slide 13 and review segment performance during the quarter. In the products segment, revenues were $306 million, a decrease from the prior year as strong performance from the anthrax franchise, Narcan, and Tembexa were offset by lower ACAM2000 sales; and adjusted gross margin was $190 million, or 62%, both decreases over the prior year, reflecting lower sales volume and a less favorable product mix. As for the services segment, revenues were $18 million, a significant decrease from the prior year; and adjusted gross margin was negative $34 million, a decrease versus the prior year, driven primarily by lower lease revenues as compared to 2021.

Next, I will share key results related to the full year period, which are shown in Slides 14 and 15. Total revenues were $1.1 billion, lower than the prior year but in line with our previous guidance. While revenues in the CDMO business were substantially lower than the prior-year period due to all the same issues that impacted fourth quarter performance, anthrax vaccines came in higher than prior year, Tembexa contributed significantly, and other products were slightly higher, offset by slightly lower nasal naloxone sales and significantly reduced ACAM2000 revenues. As to profitability, we reported adjusted net loss of $112 million and adjusted EBITDA of $26 million, both substantially lower than the prior year.

Lastly, gross margin of 36% and adjusted gross margin of 41% were both lower year over year, reflecting the impact of less favorable product mix, combined with negative services gross margins. On Slide 16, we present the segment performance for the full year periods. In the products segment, revenues were $966 million, slightly lower from the prior year; and adjusted gross margin was $596 million, or 62%, both slight decreases over the prior year, reflecting lower sales volume and less favorable product mix. As for the services segment, revenues were $113 million, a significant decrease from the prior year, primarily due to reduced production at Camden and the cessation of operations at Bayview as we continue to reposition the site to initially support select internal products.

And adjusted gross margin was negative $156 million, a substantial decrease versus the prior year due principally to declining revenues related to the COVID-19 response, coupled with incremental costs associated with the Camden facility remediation efforts and investments in quality and compliance across our manufacturing network. Moving on to Slide 17, I'll touch on select balance sheet and cash flow highlights. We ended the fourth quarter with $643 million in cash as we took down the remaining approximately $360 million of available revolver capacity to further strengthen our liquidity position at year-end. As of 12/31/22, our net debt position was $771 million.

Turning to cash flows. For the year, our operating cash flow is negative, primarily influenced by the ACAM2000 order that did not materialize in 2022. In addition, capital expenditures were $116 million, over $100 million lower than the prior year. Please turn to Slides 18 and 19 for a review of our 2023 forecast and associated assumptions.

You will note that we are now guiding to sales by threat area instead of by individual product and, therefore, have introduced two new groupings: Anthrax Medical Countermeasures, or MCM, which comprises AV7909, BioThrax, Anthrasil, and raxibacumab; and Smallpox Medical Countermeasures, which includes ACAM2000, Tembexa, and VIGIV. In the financial forecast section of our press release, for comparison, you will see the 2022 actual revenue for each grouping next to the 2023 forecast. For the full year 2023, we are guiding to the following: total revenues of $1.1 billion to $1.2 billion; anthrax MCM sales of $260 million to $280 million; Narcan nasal spray sales of $290 million to $310 million, taking into account our assumptions regarding impact of over-the-counter Narcan across all customer channels; smallpox MCM sales of $235 million to $255 million; other product sales of $165 million to $185 million; CDMO services revenues of $115 million to $135 million; adjusted net loss of $30 million to $80 million; adjusted EBITDA for $75 million to $125 million; and adjusted gross margin of 41% to 44%. Fiscal year 2023 forecast reflects the following key considerations.

It excludes the potential impact of the sale of our travel health business. We will update our guidance accordingly after the transaction closes, which is anticipated in the second quarter. It assumes the over-the-counter launch of Narcan by the end of the summer, with continued strong demand in the U.S. public interest channel, as well as continuing demand in Canada.

Continued procurement and delivery of anthrax, smallpox, and other medical countermeasure products to the U.S. and allied governments. And continued rebaselining of the CDMO services business overall and the impact of reduced production output from the Camden facility. Note that we expect revenues and profits in 2023 will be more heavily weighted toward the second half of the year.

And as a result, we have provided a revenue outlook for the first quarter of $130 million to $150 million. To conclude, please turn to Slide 20 for some summary comments. Our results in the fourth quarter reflect a mix of strong performance in certain core areas of our products business, offset by ongoing challenges in other aspects of our products business and our services business. We are committed to sustaining revenue growth and improving profitability, and we are addressing near-term challenges to our credit profile.

Finally, as always, we remain confident in the impact we are having on patients and customers, focused on health security and pandemic preparedness. 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] And our first question comes from the line of Jessica Fye with J.P. Morgan. Your line is open.

Please go ahead.

Unknown speaker

Hey, this is Nick on for Jess. Thanks for taking our questions. Two from us. First one is for your 2023 Narcan guidance, can you just help quantify how much of that $290 million to $310 million revenue range is associated with potential OTC use?

Bob Kramer -- President and Chief Executive Officer

Yeah. Nick, I think you mentioned 2022 guidance. I think you probably mentioned --

Unknown speaker

Yeah.

Bob Kramer -- President and Chief Executive Officer

Meant 2023 --

Unknown speaker

2023. Sorry about that.

Bob Kramer -- President and Chief Executive Officer

Yeah, no problem. So, as Rich indicated in his script and prepared remarks, we are assuming that FDA grants approval for OTC treatment of Narcan and that we will be launching this product into the OTC market in the summer. So, it's really difficult to break out, you know, how much of the revenue guidance of 290 to 310 is attributable to OTC market versus continuing in the prescription market. So, again, we can tell you our assumptions, and again, it's kind of based on the timing of when that product will likely be launched.

Rich Lindahl -- Chief Financial Officer

The other thing I might add there, Bob, is I do think it's fair to say that we do expect the public interest market to remain the majority of sales, and that's factored into that piece of the guidance.

Bob Kramer -- President and Chief Executive Officer

Yeah, that's right, Rich. Thanks.

Unknown speaker

Great. Thank you. And just a quick follow-up. For the anthrax and smallpox guide, includes potential contributions, but the same potential quantifier is not there for the other products such as Narcan or CDMO.

Kind of how -- have you heard any -- have you heard commitments from the U.S. government on taking the 2023 option, say, for ACAM2000 or anthrax?

Bob Kramer -- President and Chief Executive Officer

Yeah. So, I'll start with the smallpox threat category and specifically on ACAM. I think as I remarked in my comments, Nick, we continue to be in active dialogue with HHS around the next procurement of ACAM2000. So, we've actually factored that into the guidance that we've given around the smallpox threat category.

And as Rich indicated, we've pivoted to more of a threat-based guidance format as opposed to an individual product. As it relates to anthrax vaccines, clearly, we're in kind of nearing the end of the transition in terms of almost a five-and-a-half-year development/procurement relationship with the U.S. government, BARDA, in particular. We've got the PDUFA date later this year for AV7909.

We've assumed continued procurement of AV7909 into the stockpile as we kind of position that product from a development-stage product to a licensed stage later of this year or early next year. So, those are just some of the assumptions that we put into our guidance for those two threat categories.

Unknown speaker

Great. Thanks so much.

Bob Kramer -- President and Chief Executive Officer

Sure.

Operator

Thank you. And one moment for our next question. Our next question comes from the line of Brandon Folkes with Cantor. Your line is open.

Please go ahead.

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Hi. Thanks for taking my questions. Appreciate all the guidance and congrats on all the work done this year. Maybe just following on from that first question, just high level, can you just elaborate maybe on how you see the Narcan OTC market evolving? Is this something that you think takes time? Do you think it could move quite quickly? And then how would you contemplate the 2023 gross margin guidance for the company going forward or is it sort of steady state from here? You know, I know you haven't announced pricing on Narcan OTC, but, you know, how could the Narcan OTC opportunity affect that gross margin going forward?

Bob Kramer -- President and Chief Executive Officer

Yup. Thanks, Brandon. So, I'll take the first question then ask Rich to comment on the gross margin guidance and potential impact throughout the year as we potentially, you know, pivot to Narcan being distributed OTC. So, I think as it relates to kind of the general market dynamic, Brandon, when -- assuming that the timing sticks with FDA approval at the end of March, there'll be a bit of a transition period so we can complete our supply chain solution, preparation, and prepare for a launch, as we said, in maybe the summer time frame to see product on shelves.

I mean, clearly, it gives us the opportunity to be back into and compete in the retail space, Brandon, which we lost significant market share as a result of the generic products coming in in December of 2021. We've always been able to maintain a good, healthy market share of the public interest market, even with the introduction of the generic products. We expect that to hold in the OTC setting. So, I think OTC for Narcan means that we can perhaps be a little bit more competitive or regain some competitive advantage in the retail space, as well as hold on to the public interest market where we've always had strong attraction and relationships with those customers.

But, Rich, do you want to comment on the gross margin guidance?

Rich Lindahl -- Chief Financial Officer

Sure. So, I guess two parts to the question. One being the overall gross margin guidance is a blend of product gross margin and services gross margins. And we do anticipate that services gross margins, while we would expect some improvement this year, are going to remain lower than where we ultimately expect them to be.

So, I do think, over time, the services gross margins can be a positive influence on the blended gross margins. As it relates to product margins, I think, generally speaking, we expect there to be stability in product gross margins. The Narcan experience will certainly weigh into that. I think at this point, we've made some assumptions about where we expect pricing to be and also other costs related to marketing or other costs associated with that -- with Narcan.

We're not prepared to provide specificity on those assumptions at this point, but it does reflect our current assumptions.

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Thanks very much. And one more, if I may, just very high level. Bob, you talked about the -- sort of the long-term guidance you last put out in 2019. But, you know, a lot going on this year, and you've continued to narrow your focus and, you know, work through a lot.

But how should we think about how different EBS looks in two to three years from now, maybe especially the manufacturing footprint? I know, you know, you don't want to give guidance, but just what are you envisioning in terms of how, you know, narrow to take this focus?

Bob Kramer -- President and Chief Executive Officer

Yeah, Brandon, it's a really good question. I think when you look back at November of 2019, prior to COVID, as we shared during that Investor Day, we expected that the organic portion of our business would kind of be able to grow in that mid to high single-digit growth rate going forward. And we expected to be able to continue to do potential M&A transactions that would continue to contribute on a revenue basis to us, gaining leadership positions in key niche markets of this public health threat space that we continue to operate in. I think for the next couple of years, we're going to continue to focus on the priorities that I mentioned in my prepared remarks, meaning driving and improving profitability margin both at the gross margin level, as Rich described, as well as the adjusted EBITDA level.

We need to complete this sale of the travel health business to Bavarian Nordic, as we said. There are a couple of product initiatives regarding securing the next procurement contract for ACAM, as well as executing on the Narcan nasal spray OTC switch later this year. And then finally, completing this AV7909 transition during 2023. I think all of those will be really important.

In terms of kind of post-2023, once these balls have landed, I think we'll be in a better position, Brandon, to comment with more certainty about what the financial profile of the business looks like post-2023 and kind of going into 2024 and 2025. But I think, you know, the potential profitability and earnings profile of the business is not too dissimilar to what we saw in 2019. It's just that we're pivoting now coming out of the pandemic, and it will be really important, as Rich described, to operationalize these investments that we've made in our manufacturing network and make sure that any underutilized facilities are more fully utilized going forward. That alone will potentially improve gross margin and adjusted EBITDA going forward.

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Great. Thank you very much. Appreciate you taking all my questions.

Bob Kramer -- President and Chief Executive Officer

Sure.

Operator

Thank you. And one moment for our next question. Our next question comes from the line of Boris Peaker with Cowen. Your line is open.

Please go ahead.

Boris Peaker -- Cowen and Company -- Analyst

Great. Thank you very much for taking my questions. A couple of questions here. First on Narcan, you mentioned that you will be competitive in the retail space, assuming approval later this year.

Just curious, why won't the generics pressure you in the OTC space? And also, why haven't we seen significant generic pressure in the public interest market?

Bob Kramer -- President and Chief Executive Officer

Yeah, Boris, thanks for joining the call. So, you know, we'll see what happens and what develops, you know, when and if Narcan is approved to go OTC. Our belief is that the brand awareness and the brand recognition and the brand value of Narcan is very strong. We've had really positive conversations with a number of the nationwide pharmacy retailers.

They're anxious to get the product into their stores. So, we think there's a real opportunity to compete for some of that retail space that we lost when the generics were actively introduced 18 -- or 15 to 18 months ago. With respect to the public interest market, I think there's a strong stickiness factor with Narcan, including and in part due to the fact that, as you probably know, that market had already had a fairly heavily discounted price per carton of about 40%. So, the economics were a bit different already in the public interest market versus the retail space.

I guess secondly, you know, we've had a five- or six-year head start in establishing really strong relationships with a rather fragmented public interest market that allows us to respond and to deliver on service commitments in a very meaningful way that has allowed us to kind of keep that customer base intact. So, I think it's the combination of those two, Boris, that allowed us to be really competitive in that public interest market.

Boris Peaker -- Cowen and Company -- Analyst

Got it. I just have question on -- my last question on 7909. Can you just discuss how this transition may occur? The reason I ask is 7909 is only two doses per patient, while BioThrax was three. So, I mean, do you anticipate either the government to buy more of 7909 than BioThrax or maybe price it at significant premium on a per vial basis versus BioThrax? Just how does this two from three doses impact revenue going forward?

Bob Kramer -- President and Chief Executive Officer

Yeah, it's a really good question. As we've talked about, Boris, the transition that we're -- I'll say in the fourth quarter of the executing in this transition started a number of years ago. The U.S. government has been procuring and placing into the Strategic National Stockpile AV7909 all along the way.

But transition will include, as the product goes from basically a development-stage product to an FDA-licensed product, that requires within the government a shift from BARDA to the Strategic National Stockpile in terms of who manages the overall procurement. In terms of the logistics of it, as we've talked about, the government's strategy all along for many, many years has been to have enough anthrax vaccine in our country's Strategic National Stockpile to protect 25 million lives. With BioThrax, as you correctly say, which is a three dose primary series, that implied an inventory or a stockpile of 75 million doses. For AV7909, given its two-dose nature, that reduces the overall stockpile requirement down to roughly 50 million doses.

As far as we know, the government is not -- has not fully sourced either the 75 million or the 50 million dose level, so what we expect going forward is an annual procurement level to get them to get to and maintain that 25 million lives protected level, which for AV7909 would be roughly 50 million doses.

Boris Peaker -- Cowen and Company -- Analyst

OK. Thanks for taking my questions.

Bob Kramer -- President and Chief Executive Officer

Sure.

Operator

Thank you. [Operator instructions] And our next question comes from the line of Christopher Sakai with Singular Research. Your line is open. Please go ahead.

Unknown speaker

Hi, this is [Inaudible] for Chris. Firstly, I was wondering about Narcan nasal spray to an extent you can share a little bit about pricing strategy and potential cannibalization, considering that you are expecting this to be contributing revenues in the second half of the year.

Bob Kramer -- President and Chief Executive Officer

Yeah. Chris, thanks for joining the call. Thanks for the question. So, as we've talked about, our focus right now kind of coming out of the ad com meeting with the FDA and given the PDUFA date of March 29th is to finalize discussions with the FDA regarding packaging and labeling, number one, as well as prepare our supply chain for launching the product in the summer of this year.

It's a little too early to really say with certainty what the pricing is going to be. Your question about cannibalization is interesting because what we expect is that when FDA approves and when we launch the product in the summer, there'll be a bit of a transition period where you will likely see both the prescription branded product, Narcan, as well as the OTC distributed branded product in the market for a very short period of time. And then when that's over, it will be the OTC version of Narcan in distribution. So, we don't really -- cannibalization may not be the -- what we expect going forward.

Rather, as I said earlier, we expect to be able to kind of reenter or reestablish Narcan in the retail space where it was edged out because of generics while continuing to maintain a pretty healthy competitive position in the public interest market.

Unknown speaker

And in terms of the channels you will be focusing on, that depends on the label you will get or that is a little bit, you know, planned at this point?

Bob Kramer -- President and Chief Executive Officer

So, we're in active discussions with a number of the nationwide pharmacy chains about distributing Narcan in the retail space, as well as continuing to support the public interest market. So, my comment around the label, Chris, is really one of the areas of continued interest by the FDA is on the label and the packaging for Narcan in the OTC setting. We've gotten good feedback coming out of the ad com meeting with regard to that, so we'd like to finalize that soon so we can finalize our supply chain solutions for planning for a launch in the summer.

Unknown speaker

To an extent you can comment based on your discussions, is FDA interested in or would like to have this product entirely over the counter, maybe not immediately, but long term?

Bob Kramer -- President and Chief Executive Officer

I think that's our expectation of what will happen, Chris, but I'm not going to speculate on what actions or preferences the FDA would like. But that's our expectation, is it will be OTC only after some transition period later this year.

Unknown speaker

OK. On the travel health sale, to an extent you can give us some color given that all the financials were not disclosed, what kind of valuation you'll be receiving on that sale or divestment?

Bob Kramer -- President and Chief Executive Officer

So, as we included in our press release when we announced the signing of the transaction, the total consideration that's been agreed with the other party is $380 million of value, Chris, 270 million of which is upfront payment, with another 110 million being potentially in the form of either development-based milestones for the chikungunya product as it goes through its development stages, as well as some milestone payments based on future sales of both the Vaxchora and the Vivotif product. So, 270 million upfront plus another 110 million potentially in development- and sales-based milestones down the road.

Unknown speaker

I'm sorry, I meant any valuation metrics you can provide, you know, in sales or EBITDA or any color.

Bob Kramer -- President and Chief Executive Officer

Yeah. You know, we obviously went through the normal and traditional valuation metrics based on multiples of revenue and EBITDA and looked at kind of competing products in the market, Chris. We think that the -- where we landed with Bavarian Nordic represents fair value. But more importantly, it's -- I think Bavarian Nordic is a great partner to transition these assets to.

They're committed to this space. They have experience in other products in this space and will serve well the very patients and customers who need these products going forward.

Unknown speaker

OK. And finally, to an extent you can provide us a little bit more color on, you know, going from like a 306 million revenues fourth quarter to around 130 million to 150 million, if you can kind of provide a little bit more color, you know, what are the pushes and pulls, that would be helpful.

Bob Kramer -- President and Chief Executive Officer

Yeah, I think historically, Chris, our business has had revenues that are lower in the first quarter and certainly the first half of the year versus the second half of the year. I think if you go back and look quarter by quarter and first half versus second half, historically, roughly 40% of our revenues have occurred in the first half of the year, with 60 -- sometimes 60-plus percent in the second half. So, this is not out of the ordinary for us. And it's really the nature of our deliveries for the medical countermeasure products that we have under contract with the U.S.

government. I don't know, Rich, if you want to add anything to that.

Rich Lindahl -- Chief Financial Officer

No, I think that's right. It's really just there's an inherently lumpy nature to those deliveries. And it's very common that the fourth quarter ends up being our strongest quarter of the year and the first quarter being our -- you know, being sequentially lower. And that's a similar trend we're expecting this year.

Unknown speaker

Perfect. Thank you.

Operator

Thank you. And one moment for our next question. We have a follow-up question from the line of Boris Peaker with Cowen. Your line is open.

Please go ahead.

Boris Peaker -- Cowen and Company -- Analyst

Oh, well, thanks for taking a follow-up. I guess one question that is in the minds of a lot of investors is in terms of your debt maturity. Can you talk about maybe the timeline or what we should be expecting in terms of your strategy or communication with the debtors in terms of this process?

Bob Kramer -- President and Chief Executive Officer

Sure, Boris. Thanks. Rich, do you want to take that one?

Rich Lindahl -- Chief Financial Officer

Sure. Yeah, as I commented in my remarks, we are engaged in an active dialogue with our lender group on extending the maturity of the credit facility, the October maturity. I think I pointed to the consent to the travel health sale and the waiver that they provided is evidence that they're being constructive in those conversations. We're certainly working toward a timeline to get this done as quickly as possible, and we will keep you posted when we have more specific information to provide.

Boris Peaker -- Cowen and Company -- Analyst

Great. Thanks. And then maybe I'll ask another in ACAM2000. Do you have a time frame of when we should hear about a new contract? And also, if a new contract is awarded, should we expect it to just cover '23 and to be kind of a run rate historically as we've seen? Or should we see -- kind of expect the bolus of catch-up for '22 and '23?

Bob Kramer -- President and Chief Executive Officer

Yeah, Boris, great question. You know, our immediate interest is ensuring and finalizing the 2023 procurement decision by the U.S. government. At the same time, we're actively in discussions with them about their longer-term plans for continuing to procure ACAM as part of the Strategic National Stockpile requirement.

So, I think the answer to your question is we're in active dialogue about both of those, both short term and long term, and really can't speculate, Boris, on when we expect those discussions to be finalized or to result in a procurement commitment or contract with the government.

Boris Peaker -- Cowen and Company -- Analyst

Great. Thanks for taking my follow-up questions.

Bob Kramer -- President and Chief Executive Officer

Glad to. Thanks.

Operator

Thank you. [Operator instructions] Showing no further questions, I would like to hand the conference back over to Bob Burrows for any further remarks.

Bob Burrows -- Vice President, Investor Relations

Thank you, Michelle. 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 made 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. Have a good night.

Operator

[Operator signoff]

Bob Kramer -- President and Chief Executive Officer

Thanks, Michelle.

Duration: 0 minutes

Call participants:

Bob Burrows -- Vice President, Investor Relations

Bob Kramer -- President and Chief Executive Officer

Rich Lindahl -- Chief Financial Officer

Unknown speaker

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Boris Peaker -- Cowen and Company -- Analyst

More EBS analysis

All earnings call transcripts