Ladies and gentlemen, thank you for standing by and welcome to the Emergent BioSolutions Inc. 3Q 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode.

After the speaker's presentation, there will be a question-and-answer session [Operator Instructions] I would now like to hand the conference over to your speaker, Bob Burrows, Vice President of Investor Relations. Please go ahead..

Thank you, Amanda, and good afternoon, everyone. Thanks for joining us today, as we discuss the operational and financial results for the third quarter and nine months ended September 30, 2020. 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 the webcast there is a series of slides accompanying the webcast that we are pushing out to all webcast participants. During today's call, we may make projections and other forward-looking statements related to our business, future events or prospects for future performance.

These forward-looking statements are based on our current intentions, beliefs and expectations regarding future events. Any forward-looking statements 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.

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; Rich Lindahl, Chief Financial Officer, who will speak to the financials for 3Q and year-to-date 2020, as well as our updated guidance for full year 2020.

And given the acceleration in the growth of our Contract Development and Manufacturing Services business my colleague Syed Husain, SVP and Head of the CDMO Business will provide a combination refresher, as well as progress report on the status of this key BU.

This will all be followed by a Q&A session where additional members of the senior team will be present and available as needed. Finally, for the benefit of those who may be listening to the replay of this webcast, this call was held and recorded on November 5 2020.

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 our President and CEO Bob Kramer.

Bob?.

first development services; second drug substance manufacturing; and third drug product manufacturing.

We signed approximately $1.5 billion worth of CDMO contracts since March in response to COVID-19 and continue to build upon that by securing approximately $60 million in new collaborations and existing product extensions -- project extensions during the quarter, which has led to continued revenue growth for the business during these last two quarters.

We will continue to invest in this business unit and our facilities to increase our capabilities to meet the long-term expected demand and growth in this area. The CDMO business is well positioned for significant long-term growth, and you'll hear much more about this from Syed in a moment.

Turning to the devices business unit, there have been several recent events that provide additional confidence in the long-term prospects and value-creating potential for NARCAN Nasal Spray. Recently, we completed two important product life cycle improvements that we expect will provide meaningful value for our customers.

First, we launched the Generation II NARCAN Nasal Spray device, which is identified by a red plunger. It also has a claim for enhanced temperature excursions and storage below 25 degrees centigrade. Secondly, we gained FDA approval for an extension of the shelf life of NARCAN Nasal Spray from 24 months to 36 months.

We expect these product enhancements to be meaningful factors in the product's long-term durability and continued growth. In addition to our internal progress, there have also been notable changes in the general naloxone landscape that we believe will be positive for the NARCAN Nasal Spray franchise.

First, the recent FDA announcement requiring all labels for opioid pain medication as well as medicine to treat opioid use disorder to be updated to include information about naloxone is an important incremental step at the federal level in pursuit of addressing this significant public health threat.

Also, new Canadian national consensus guidelines for proactive naloxone prescribing by pharmacists, the first ever guidelines of this kind of note, were announced.

These guidelines released by a steering committee of pharmacists and recently published in the Canadian Pharmacist Journal recommended all Canadian patients dispensed in opioid, should also be given a naloxone kit and consoled by a pharmacist.

These guidelines were issued in response to a disturbingly high number of opioid-related deaths across Canada coupled with the difficulty for pharmacists in assessing the potential risk for opioid overdose. Unfortunately, the number of opioid overdose deaths continue to rise, due likely in part to the impact of the COVID-19 pandemic.

We believe continued efforts to increase awareness, expand availability and maintain affordability of naloxone products like NARCAN Nasal Spray are more important than ever and we remain steadfast in our commitment to having an impact in the fight against the threat of opioids.

On the therapeutics front, we're committed to using our experience and platforms to rapidly advance treatments for COVID-19 that are intended to augment the natural antibody response to SARS-CoV-2. Our dedicated teams have made significant progress in advancing our COVID-HIG product candidate, using our validated human hyperimmune platform.

As announced earlier, we secured $15 million of funding from BARDA to develop COVID-HIG for a treatment indication and we were incredibly pleased to announce initiation of the Phase 3 clinical trial in partnership with NIAID.

This pivotal clinical trial will evaluate the safety, tolerability and efficacy of hyperimmune product candidates as a potential treatment in adult patients hospitalized with COVID-19. Results from this study are expected in early 2021, depending on the recruitment of approximately 500 patients across multiple sites.

Our partnership with BARDA and NAIAD will evaluate this potential treatment in patients at risk of progressing to severe disease in a second planned trial. This COVID treatment will also be used to evaluate for a second indication to prevent infections in individuals at high-risk of exposure, such as healthcare workers, military personnel and others.

As previously announced, we have partnered with Mount Sinai Health System ImmunoTek Bio Centers and the U.S. Department of Defense, which is providing approximately $35 million funding to rapidly advance this clinical program.

The initial clinical evaluation of a dose in a PK/PD study is planned to initiate soon to be followed by a Phase 2 study to evaluate safety and efficacy of COVID-HIG in individuals at risk of exposure soon thereafter.

Emergent has committed significant resources and expertise to quickly advance these treatment options for both indications and build a robust data set to support an application for Emergency Use Authorization.

In parallel to our efforts with COVID-HIG, we continue to advance our FLU-IGIV program as a potential treatment for patients hospitalized with severe influenza A. We completed the Phase 2 clinical trial earlier this year and the data has been analyzed and reviewed with an external advisory board to inform potential next steps.

The outcomes of the trial were generally favorable and supportive of progressing our discussions with regulators for plans for the next phase of development.

As we advance both late-stage clinical candidates on the same platform, there are many insights that can be applied across both programs and we're assessing the impact of the ongoing COVID-19 pandemic on the ability to execute on a trial for influenza. Turning next to the Vaccines business unit.

We've continued to make deliveries of our anthrax vaccine candidate AV7909 to the strategic national stockpile. In July this year, the U.S. government exercised an option to secure additional doses over the next 12 months. In parallel with delivering doses of this candidate into the stockpile, the clinical path continues on schedule.

During the quarter we completed the year one follow-up for the Phase 3 study and remain on track for submitting the BLA in 2021. With respect to our smallpox vaccine ACAM2000. In May, the U.S. government exercised the second procurement commitment under last year's 10-year contract to secure additional doses for the strategic national stockpile.

We expect all deliveries related to this action to be delivered in 2021. As to our travel health business, while is a small contributor to our overall total revenue, it continues to be affected by the halt in global travel for the foreseeable future. Given this, we've taken steps to adjust this business accordingly.

Specifically, we have restructured commercial components of this business, which has led to cost reductions and some related one-time charges in the third quarter that Rich will discuss in more detail.

Longer term, our conviction in the durability and strategic opportunity of travel health remains intact, as we believe that COVID-19 will lead to an increased awareness for the importance of vaccinations for travel-related diseases.

The business unit has a strong pipeline of products and we expect to be well positioned for significant growth when conditions improve.

As part of that effort our lead travel health vaccines product candidate CHIKV VLP is progressing and remains on track for initiation of the Phase 3 clinical trial for this single dose vaccine for chikungunya in 2021. In summary, our diverse and balanced business model is showing its strength, as well as its durability.

Our operational and financial performance this year are the strongest in our company's history and I couldn't be more encouraged by the prospects for continued growth and expansion, as we continue on our path to protect and enhance the lives of 1 billion persons by 2030. I'll stop here and now turn the call over to Rich.

Rich?.

adjusted net income of $375 million to $405 million an increase of $25 million at the midpoint versus the midpoint of the prior range; and adjusted EBITDA of $575 million to $615 million, an increase of $28 million at the midpoint and a further clear indication of the earnings potential of our overall diversified operations.

Importantly, our revised 2020 guidance takes into account the following operational considerations, which have not changed since July when we last spoke to guidance.

Improvement of full year gross margin by 400 basis points to 600 basis points driven by product mix and increased contribution from our CDMO business; the previously announced delay into 2021 of the launch of the Phase 3 clinical study for the CHIKV VLP program due to the timing of certain operational factors; the continued deferral into 2021 of a follow-on procurement contract with the U.S.

government for raxibacumab due to the impact of the prioritization of the operation work speed program on our efforts to tech transfer the raxi process to the BayView Baltimore site; continued significant disruption of global travel for the entirety of 2020 which greatly reduces Vaxchora and Vivotif revenues; and finally an assumption of no generic competition in 2020 for NARCAN Nasal Spray.

In conclusion, we at Emergent are committed to building a strong and resilient business with the capabilities, capacities and financial strength needed to deliver preparedness and response solutions to public health threats.

Our current outlook and recent accomplishments for tangible evidence of the durability and viability of our unique business model and the role that we play in protecting and enhancing lives across the globe.

We are executing on our mission and sustaining solid operating and financial performance as we approach the end of 2020 and move confidently into 2021. That completes my prepared remarks.

And I'll now turn the call over to my colleague Syed Husain, who will take us through an overview and update on the CDMO business, including for the first time certain key metrics regarding the health of this business unit.

Syed?.

Viral vector and gene therapy drug substance manufacturing at our Canton Massachusetts facility; non-viral drug product manufacturing at our Baltimore Maryland Camden facility; and viral drug product manufacturing at our Rockville Maryland facility.

This will allow us to increase our capacity to deliver on future business opportunities in the coming years. As a reminder, presently we are only in – only one year into the relaunching of this business to realize the full potential of our broad network of sites, as well as growing capabilities and capacities.

At the Analyst and Investor Day, I laid out a series of key initiatives that we believe will drive market penetration and lead to future growth. I'm going to quickly reiterate those now. Continued expansion of our sales and business development team is a key initiative.

We now have many experienced professionals in place and we are already seeing their impact on our funnel of future agreements. We will continue to enhance our molecule-to-market offerings, which is vital and will provide additional opportunities for our sales and business development team to interact with both existing and potential customers.

Growth with existing clients through cross-selling is at the heart of our strategy and a scalable business. Not many CDMO organizations can match the breadth of Emergent's technologies.

To support our sales and business development teams we are focused on increasing brand awareness and expansion within the United States and internationally through innovative marketing including the virtualization of the sales and marketing process.

We are expanding the appropriate levels of the organization to increase our targeting of small and midsized pharma and biotech as these companies are at the heart of innovation and key in our concept to market strategy.

We will continue to invest as appropriate to both meet the evolving market needs and increase capacity in order to meet expected longer term demand. In conjunction, we will also explore partnership opportunities to further enhance our offerings.

Remaining innovative is key, so we will be actively pursuing efforts in gaining access to novel technologies and extend our offerings. Finally, we will maintain a balance between clinical and commercial projects.

While commercial projects provide more stable revenues, earlier-stage programs provide substantial opportunities for more client interaction and cross-selling and will drive the long-term growth of the unit via a diversified portfolio. Our next slide shows our strong current portfolio through the efforts of executing our commercial strategy.

By portfolio, we mean secured business with guaranteed minimums and forecasted business. As a snapshot through Q3 2020, with approximately 57 customers, 71 molecules and 83 projects, the CDMO business is diversified and not overly reliant on a particular offering.

The total value of the CDMO portfolio at present is approximately $1.8 billion, including approximately $60 million in new molecule collaborations and existing project extensions secured within the quarter.

We have already recognized approximately $250 million of these revenues this year and expect to realize the remainder from these projects both this year and into the years ahead. We are providing this data as we believe it is important for investors to judge our progress in the business.

Importantly, we are evaluating how often to update on these metrics in the future. We are also providing our current funnel of opportunities to give insight into the considerable number of potential programs currently in negotiation that we believe have a reasonable probability to enter the portfolio in the near term.

As a reminder, the team works to continuously increase our opportunity funnel through prospecting efforts across the pharma and biotech and government/nongovernment agencies customer segments with all of our offerings and network of development and manufacturing facilities.

I want to highlight that as with our current portfolio, there is a nice mix in terms of customers, molecules and projects including active discussions for our capabilities and capacities in facilities not routinely referenced such as Lansing Michigan and Winnipeg Canada, as well as our active investments in Rockville, Maryland and Canton Massachusetts.

As a snapshot through Q3 2020, the total potential value of the funnel at present is approximately $500 million. I'd like to stress that our current portfolio and opportunity funnel do not tell the full story.

Two key items to highlight, first the previous values I discussed do not include existing project extensions from our current portfolio of customers like Johnson & Johnson or AstraZeneca, which could be sizable.

Also, there is a substantial amount of prospecting discussions ongoing we could also – which could also enter the opportunity funnel or portfolio shortly.

We are enthusiastic in this regard as we are experiencing a steady increase in inquiries and interest for our CDMO services, especially our mammalian and viral technology platforms in development services, drug substance and drug products. Finally, as shown on this slide, I'd like to highlight the key takeaways.

We are very pleased with the progress made in the CDMO business in less than a year and we remain incredibly confident in our ability to execute in delivering on our growth initiatives. Our current portfolio of approximately $1.8 billion provides a solid base over the upcoming years.

Our current funnel of opportunities is approximately $500 million, not including potential existing project extensions. Also, we are committed to further investment in the business of greater than $200 million to provide expansion of capacity and capabilities.

The ongoing expansion of our sales and business development efforts should increase our opportunity funnel further and secure additional business. We believe this will lead to both market share penetration and long-term growth. We look forward to updating all of you on future progress in the coming quarters.

With that, I will turn the call over to the operator to begin the question-and-answer session.

Operator?.

Amanda, are you there please? Operator?.

I do apologize, I was on mute. [Operator Instructions] And your first question comes from Jacob Hughes with Wells Fargo Securities..

Hey, good afternoon. Maybe if we could just have two questions. One is on NARCAN. If we take the mid to high point of your guidance it implies some softening in the fourth quarter from the third quarter.

Maybe if you could just talk about the key drivers of that? And then on, on the CDMO business maybe you could provide some additional detail on the cost that you're currently incurring related to your COVID-19 contracts? And then, longer-term, if a vaccine is successful, how should we think about the economics on a per dose basis for those contracts? Thanks..

Yeah. This is Bob. Thanks Jacob for the questions. Thanks for joining the call. So on the first one the Q3 versus implied Q4 NARCAN. I mean, first of all, the Q3 revenues for NARCAN were at an all-time high of roughly $89 million, roughly 10% above Q2.

As we talked about throughout the year our annual view and guidance on NARCAN was predicated on a couple of things. First of all, that there would be no generic entrant or competitor to NARCAN Nasal Spray during 2020.

Second, that there would be a couple more states that would adopt co-prescription either policy or legislation, which could potentially give a bit of a lift to the overall revenues. So we continue to be quite bullish and optimistic for that franchise in that product.

I think what you might be implying in our Q4 number that you backed into it, it is maybe a little lower than $89 million. But again, we'll continue to monitor.

What I will say is in Q3 both the retail component of NARCAN Nasal Spray revenues as well as the public interest market were higher in part on the PIP market driven by some of the state programs in California, New Jersey, Michigan and Georgia. So, again, we're quite optimistic. On COVID-19 and the contracts.

In terms of the economics, I guess, I would say that we continue to evaluate the economics and what that additional revenue brings to the business.

Our sole focus right now during the first really eight months of these contracts has been to make sure that we are honoring our commitments and obligations to stand up a many -- a robust manufacturing process and supply chain here in the United States for a number of our collaborators, including J&J and AZ.

We'll evaluate longer-term the economics of what those contracts might look like under the commercial supply agreement. But as we have commented on right now those contracts in addition to the contract with BARDA and OWS are meaningfully contributing to both revenue and profitability during 2020 and we expect the same for 2021..

Thanks a lot, Bob..

Sure..

And your next question comes from Jessica Fye with JPMorgan..

Hey, guys. Good evening. Thanks for taking my question. I appreciate you providing that additional detail on the CDMO business. I'm trying to better understand the potential for near-term upside from that business. I think you said you're investing in building on sites in Maryland and Massachusetts.

So how much of your capacity is spoken for at this point? And how much do you think you could still contract out over the next kind of year or two?.

Sure. Thanks Jess for the question and good to hear your voice again welcome back. I guess, on the capacity issue, it suggests that you will look at it in a couple of different ways. First of all, as Syed has articulated we have a fairly broad and diverse network of nine different CDMO development and manufacturing sites.

And as you know just from following us for quite some time, all of those manufacturing sites are a bit different. If you talk about capacity for COVID-19 vaccine development manufacturing in BayView, which is where the majority of that work is being done.

I think we've said out loud that we're pretty much capacity maxed out right now with the work that we're doing with J&J, with AZ, with Novavax, and as well as with Vaxart. How that looks going forward will be somewhat dependent upon what the eventual yield is for many of those products. But I'll turn it over to Syed.

He can comment more -- in more detail about the other kind of non COVID-19 sites including what we're doing in Canton to build that site out for future development..

Thank you, Bob, and thank you for the question. Just -- so the perspective that I would add on top of Bob's comment is to really reiterate the network effect from a utilization standpoint. So, if you go back to my prepared comments with respect to first off the offerings.

So we have three distinct offerings between development services, drug substance and drug product. The ability to offer those individually and in an integrated fashion across all the technologies, allows us to still continue to onboard new business across the network that we have.

That $500 million funnel is spread across opportunities that could go across our network. And that even takes into account, as I mentioned, facilities that we don't routinely reference such as the one in Lansing, Michigan as well as Winnipeg, Canada.

And it also takes into account facilities that are coming on stream based on our committed capital investments. So for example the expansion in Rockville Maryland is coming on stream at the end of 2021. The investment in Canton, Massachusetts, which really puts us into advanced therapies from a gene therapy standpoint, comes online in 2023.

So this network as well as our ability to partner with customers across each of these offerings as well as the $500 million funnel, will allow us the opportunity to over the years, including this year and next year continue to leverage available capacity that we have, and be set up to utilize capacity that's coming on stream with the committed investments..

Okay. Got it. Just two kind of follow-up to that.

How flexible are the suites you're building out for the COVID vaccines? And to the extent that those partners ended up not meeting your capacity, can you help us understand how simple or complicated it would be to switch over that capacity to other products for a different client? And then the last question is just, what's the current operating margin for the CDMO business? And what do you think of it as on a normalized basis?.

Absolutely. So, I'll answer the first question, and then pass it over to my colleague Rich for the second one. With respect to the first question, all of our development and manufacturing facilities are predicated on being multi-purpose. So they are designed to handle multiple products.

They have foundational technology platforms that then allow them to be customized for the specific product and process that we're working on, and specifically, when we talk about the drug substance facility in Baltimore which is known as our BayView facility. So, right now that is predicated on multiple products being in there.

If for any reason, those products are not successful, certainly with our deal structures that we've provided information on previously, we're protected from a financial standpoint.

But then also, given the fact that they're multi-purpose facilities we can pretty readily transition to other opportunities either through those same innovators or opportunities that are in our funnel.

And in parallel to that, while we focus our efforts on our drug substance facility, we're able to onboard new relationships and development services and in drug product as we've done over the past quarter..

And in terms of the profitability of CDMO, so on a normalized basis longer term, we would expect the margins to be in the 45% area somewhere in the mid-40s with an opportunity to improve from there.

As we look at this year and next year, we're experiencing better margins than that just driven by a number of factors including the fact that because the facilities are so highly utilized right now, there's a much higher degree of absorption of the overhead in those facilities as well as some benefits we're receiving on some of the capacity reservation fees.

So, several clicks higher this year and next year, major contributor to that 400 to 600 basis point blended gross margin improvement. And that's -- but on a longer-range basis, more normalized than kind of the 45% maybe higher-margin area..

Great, Thanks..

And your next question comes from Brandon Folkes with Cantor Fitzgerald. .

Hi, thanks for taking our question. Congratulations on the quarter. I'll change pace a little bit here. You talked about the headwinds in the travel vaccines business and that's completely understandable just given the environment.

Does that change how you're thinking about the development time line for your chikungunya products? Is this something you may look to push out just given what is going on with the travel world? Any color there just in terms of what we should expect would be great. thank you..

Yes. Thanks Brandon for the question and thanks for joining the call. And we continue obviously to evaluate our ability to execute the development plan for the chikungunya candidate. Our best information tells us that we should be able to start that clinical trial in 2021.

And clearly I think you're right in identifying that there may be some risk to starting that because of the macro issues around COVID-19. But I mean again as we stand here today, we plan on initiating in 2021. .

Great. Thanks very much..

Sure..

And your next question comes from Keay Nakae with Chardan..

Hi guys, thanks. I just want to talk about some of the guidance for some of the product revenue. Bob your anthrax vaccine travel guidance much higher. What does this imply for next year? Generally speaking we do see these numbers on a year-over-year basis fairly steady. This is going to be an upsized year.

How do we think about 2021?.

Yes, Keay, thanks for joining the call. So, let's take one year at a time. I mean 2020 as you note we were able to increase the range from last quarter from -- it was $320 million to $350 million now it's $350 million to $370 million. So, again, I will readily acknowledge that.

But I will also acknowledge that on ACAM2000 we had to take a little bit of a haircut on the bottom side of the range. And this is all due to our best view of our ability to meet delivery schedules and to supply the appropriate number of doses for, in this case, both anthrax vaccines as well as ACAM2000.

And you know from our many years of conversations the risks associated with the supply chain around biologic products whether it's the production cycle or the testing cycle or regulatory and review cycles, it ebbs and flows a bit. So there's a little bit of variability around that.

And we've been able to manage that effectively when it comes to anthrax vaccines in 2020 to the point where we were able to up the guidance a bit. And as Rich indicated with ACAM2000 the smallpox vaccine, we've provided essentially a little bit of a different range just in recognition of some of the supply chain challenges that go with biologics.

So, we will give some guidance as we always do for 2021 probably in early January of next year. As we've talked about in the past we expect there to be -- the run rate for anthrax vaccines which have historically been in that $250 million to $300 million range we expect that going forward.

I think what we're experiencing in 2020 is a little bit of maturity quite frankly in the transition of the strategic national stockpile from BioThrax only to a BioThrax and AV7909 stockpile. So, it's just part of the evolution the maturity of that transition, Keay. .

Okay.

So, we shouldn't necessarily think that the upsized 2020 number is eating too much into what we would normally think on an average basis for 2021?.

Yes. We'll talk about 2021 in a couple of months..

Okay.

Switching to raxi, you mentioned with the focus on, COVID-19 and the impact on getting the follow-on contract, how far out should we think about that follow-on contract now being -- in terms of being able to secure that?.

Yeah. I would hope that sometime during 2021, we'll get clear line of sight, in terms of the overall procurement and contracting process. I think it -- in part, it's impacted by the more macro issues around COVID-19. So we'll hope to flatten that out, in the first half of 2021..

Do you need to have advance, the U.S.-based manufacturing to a certain point, before you're able to successfully complete that contract?.

You're back on raxi now, Keay?.

Yeah. Yes. Sorry Bob. Yes..

Yeah, we will. As we've talked about in the past, our plans were to do a tech transfer from GSK to our Bayview facility. And right now the Bayview facility as Syed articulated is essentially full up and fully committed to COVID-19. So we'll work through the issues.

I think we'll have again, clear line of sight in the first half of 2021 what the long-term implications if any for raxi will be..

Okay. Great. Thanks..

Sure..

[Operator Instructions] Your next question comes from Dana Flanders with Guggenheim Partners..

Hi. This is Devin on for Dana. Thanks for taking my questions. Just a few for me today, first the midpoints of your guidance imply, I believe, if my math is correct sequential decline in 4Q EBITDA margins.

Could you provide some color on, what's driving that step down sequentially? And is this just a function of mix? And lower relative contributions of CDMO, in terms of percent of overall revenues or something else?.

Yeah, Devin thanks for joining the call. Thanks for the question. Yeah. I'll make a couple of comments. And then, I'll ask Rich to weigh in as well.

I think it's important to note, that in fact we have guided up, the adjusted EBITDA number for 2020, even from quarter two or earlier this year, which was significantly higher than, what we guided initially, in the beginning of 2020.

So I think what you're probably referring to is, when you start doing the math and backing in, to what a Q4 number looks like, given the large revenue contribution. Again as a result of backing into the number, maybe the margin looks a little out of line, particularly if you look at it compared to Q3. I wouldn't read anything into that.

It will be the result of mix of contributions, but I wouldn't read much into that Devin..

Yeah. I mean I -- we can go through that with you off-line but we are not expecting a decline -- a sequential decline, in the adjusted EBITDA margin in the fourth quarter..

Okay. Thank you. And then I guess just one follow-up. So on the CDMO business, I know you guys mentioned -- I didn't have the slides up but the -- you mentioned $1.8 billion in current portfolio $60 million in new business and existing projects and a funnel of approximately $500 million. I'm assuming that the $1.8 billion includes the COVID contracts.

But is there any other COVID-related business, that rolled up into those other I guess, into the funnel or into the new contracts you signed this quarter? Thank you..

Yeah. So at a high level, you are correct. The $1.5 billion in COVID-19 contracts that we've announced and press released, during the first or nine months of this year are included in the $1.8 billion.

Syed, I don't know if you have additional color or detail you want to comment about the remaining $300 million in terms of what's COVID versus what's non-COVID?.

Yes absolutely. Thank you, Bob. So a couple of things. With respect to that 1.8 -- approximately $1.8 billion of that $300 million that's separate from the COVID response that is predominantly non-COVID.

The other aspect is that $1.8 billion approximately $1.8 billion does not include existing project extensions from our current portfolio of customers like Johnson & Johnson or AstraZeneca which could be sizable. From an opportunity funnel standpoint that we had talked about which is as a snapshot right now approximately $500 million.

We see a very diverse set of discussions within that $500 million. That does include some additional COVID opportunities as well as a very healthy mix of non-COVID opportunities as well. .

Okay. Thank you..

And there are no further questions. I would now like to turn the conference back over to Bob. .

Thank you, Amanda. 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 the 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 website.

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

That does conclude today's call. You may now disconnect..