Additionally, our government-funded development contracts typically give the USG the right, exercisable in its sole discretion, to extend these contracts for successive option periods following a base period of performance. The value of the services to be performed during these option periods may constitute the majority of the total value of the underlying contract. For example, the September 2016 contract award from BARDA for the development and delivery to the SNS of AV7909 for post-exposure prophylaxis of anthrax disease consists of a five-year base period of performance valued at approximately $200 million. The contract award also includes options for the delivery of additional doses of AV7909 to the SNS and options for an additional clinical

study and post-marketing commitments which if both were to be exercised in full, would increase the total contract value to up to $1.5 billion. If levels of government expenditures and authorizations for public health countermeasure preparedness decrease or shift to programs in areas where we do not offer products or are not developing product candidates, or if the USG otherwise declines to exercise its options under our existing contracts, our revenues would suffer, as well as our business, financial condition, operating results and cash flows.

There can be no assurance that we will be able to secure follow-on procurement contracts with the USG upon the expiration of any of our current product procurement contracts.

The majority of our revenue is substantially dependent upon product procurement contracts with the USG and foreign governments for our PHT products. Upon the expiration of a procurement contract, we may not be able to negotiate a follow-on procurement contract for the particular product for a similar product volume, period of performance, pricing or other terms, or at all. The inability to secure a similar or increased procurement contract could materially affect our revenues and our business, financial condition, operating results and cash flows could be harmed. For example, the ~~CDC procurement contract for ACAM2000 that we acquired in our acquisition of the ACAM2000 business from Sanofi expired on March 31, 2018. The~~ BARDA procurement contract for raxibacumab that we acquired in our acquisition of raxibacumab from Human Genome Sciences, Inc. and GlaxoSmithKline LLC ~~collectively~~(collectively referred to as ~~GSK,~~GSK) will expire in November 2019. Our CDC procurement contract for BioThrax expires in 2021. We intend to negotiate follow-on procurement contracts for each of our PHT products upon the expiration of a related procurement contract, including our procurement contract for ~~ACAM2000,~~raxibacumab, but there can be no assurance that we will be successful obtaining any follow-on contracts. Even if we are successful in negotiating a follow-on procurement contract, it may be for a lower product volume, over a shorter period of performance or be on less favorable pricing or other terms. An inability to secure follow-on procurement contracts for our products could

materially and adversely affect our revenues, and our business, financial condition, operating results and cash flows could be harmed.

The government contracting process is typically a competitive bidding process and involves unique risks and requirements.

Our business involves government contracts and grants, which may be awarded through competitive bidding. Competitive bidding for government contracts presents many risks and requirements, including:

the possibility that we may be ineligible to respond to a request for proposal issued by the government;

the commitment of substantial time and attention of management and key employees to the preparation of bids and proposals for contracts that may not be awarded to us;

the need to accurately estimate the resources and cost structure that will be required to perform any contract that we might be awarded;

the submission by third parties of protests to our responses to requests for proposal that could result in delays or withdrawals of those requests for proposal; and

in the event our competitors protest or challenge contract or grant awards made to us pursuant to competitive bidding, the potential that we may incur expenses or delays, and that any such protest or challenge could result in the resubmission of bids based on modified specifications, or in the termination, reduction or modification of the awarded contract.

The USG may choose not to award us future contracts for either the development of our new product candidates or for the procurement of our existing products addressing PHTs and may instead award such contracts to our competitors. If we are unable to secure particular contracts, we may not be able to operate in the market for products that are provided under those contracts. Additionally, if we are unable to consistently win new contract awards over an extended period, or if we fail to anticipate all of the costs or resources that we will be required to secure and, if applicable, perform under such contract awards, our growth strategy and our business, financial condition and operating results and cash flows could be materially and adversely affected.

~~Laws~~There are a number of laws and regulations ~~affecting~~that pertain to government contracts ~~make it costlier~~ and ~~more difficult for us to successfully conduct our business. Failure to comply~~compliance with ~~these~~those laws ~~could result in~~and regulations require significant ~~civil~~time and ~~criminal penalties and materially damage our reputation and relationship with the USG,~~

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cost, which could have a material adverse effect on our business, financial condition, operating results and cash flows.

As a manufacturer and supplier of MCMs to the USG addressing PHTs, we must comply with numerous laws and regulations relating to the procurement, formation, administration and performance of government contracts. These laws and regulations govern how we transact business with our government clients and, in some instances, impose additional costs and related obligations on our business operations. Among the most significant government contracting regulations that

affect our business are:

the Federal Acquisition Regulation (FAR), and agency-specific regulations supplemental to FAR, which comprehensively regulate the award, formation, administration and performance of government contracts;

the Defense Federal Acquisition Regulations (DFARs), and agency-specific regulations supplemental to DFARs, which comprehensively regulate the award, formation, administration and performance of U.S. Department of Defense (DoD) government contracts;

the Department of State Acquisition Regulation (DOSAR), which regulates the relationship between a Department of State organization and a contractor or potential contractor;

business ethics and public integrity obligations, which govern conflicts of interest and the hiring of former government employees, restrict the granting of gratuities and funding of lobbying activities and incorporate other requirements such as the Anti-Kickback Act, the Procurement Integrity Act, the False Claims Act and the Foreign Corrupt Practices Act;

export and import control laws and regulations, including but not limited to International Traffic in Arms Regulations; and

laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.

We may be subject to government investigations of business practices and compliance with government acquisition regulations. USG agencies routinely audit and investigate government contractors for compliance with applicable laws and

standards. Even though we take significant precautions to identify, prevent and deter fraud, misconduct and non-compliance, we face the risk that our personnel or outside partners may engage in misconduct, fraud or improper activities. If we are audited or investigated and such audit or investigation were to uncover improper or illegal activities, we could be subject to civil and criminal fines and penalties, administrative sanctions, including suspension or debarment from government contracting, and suffer significant reputational harm. The loss of our status as an eligible government contractor or significant fines or penalties associated with contract non-compliance or resulting from investigations could have a material adverse effect on our business.

The amount we are paid under our fixed price government procurement contracts is based on estimates

we have made of thetime, resources and expenses required for us to perform under those contracts. If our actual costs exceed our estimates, we may not be able to earn an adequate return or may incur a lossunder these contracts, which could harm our operating results and materially reduce our net income.

Our current procurement contracts with HHS and the DoD are fixed price contracts. We expect that future procurement contracts we successfully secure with the USG would also be fixed price contracts. Under a fixed price contract, we are required to deliver our products at a fixed price regardless of the actual costs we incur. Estimating costs that are related to performance in accordance with contract specifications is difficult, particularly where the period of performance is over several years. Our failure to anticipate technical problems, estimate costs accurately or control costs during performance of a fixed price contract could reduce the profitability of such a contract or cause a loss, which could harm our operating results and materially reduce our net income.

Unfavorable provisions in government contracts, some of which may be customary, maysubject our business to material limitations, restrictions and uncertainties and may have a material adverse impact on our business, financial condition, operating results and cash flows.

Government contracts customarily contain provisions that give the USG substantial rights and remedies, many of which are not typically found in commercial contracts, including provisions that allow the USG to:

terminate existing contracts, in whole or in part, for any reason or no reason;

unilaterally reduce or modify contracts or subcontracts, including by imposing equitable price adjustments;

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cancel multi-year contracts and related orders, if funds for contract performance for any subsequent year become unavailable;

decline, in whole or in part, to exercise an option to purchase product under a procurement contract or to fund additional development under a development contract;

decline to renew a procurement contract;

claim rights to facilities or to products, including intellectual property, developed under the contract;

require repayment of contract funds spent on construction of facilities in the event of contract default;

take actions that result in a longer development timeline than expected;

direct the course of a development program in a manner not chosen by the government contractor;

suspend or debar the contractor from doing business with the government or a specific government agency;

pursue civil or criminal remedies under acts such as the False Claims Act and False Statements Act; and

control or prohibit the export of products.

Generally, government contracts contain provisions permitting unilateral termination or modification, in whole or in part, at the USG’s convenience. Under general principles of government contracting law, if the USG terminates a contract for convenience, the government contractor may recover only its incurred or committed costs, settlement expenses and profit on work completed prior to the termination. If the USG terminates a contract for default, the government contractor is entitled to recover costs incurred and associated profits on accepted items only and may be liable for excess costs incurred by the government in procuring undelivered items from another source. All of our contracts, both development and procurement, with the USG, are terminable at the USG’s convenience with these potential consequences.

In addition, our USG contracts grant the USG the right to use technologies developed by us under the government contract or the right to share data related to our technologies, for or on behalf of the USG. Under our USG contracts, we might not be able to prohibit third parties, including our competitors, from accessing such technology or data, including

intellectual property, in providing products and services to the USG.

The loss of any of our non-exclusive, sole-source or single source suppliers or an increase in the price of inventory supplied to us could have an adverse effect on our business, financial condition and results of operations.

sole-source supplier due to, among other things, the acquisition of such a supplier by a competitor (which may cause the supplier to stop selling its products to us) or the bankruptcy of such a supplier, which may cause the supplier to cease operations. Any reduction or interruption by a sole-source supplier of the supply of materials or key components used in the manufacturing of our products or an increase in the price of those materials or components could adversely affect our business, financial condition and results of operations.

Additionally, any failure by us to forecast demand for, or our suppliers to maintain an adequate supply of, the raw material and finished product for producing NARCAN® Nasal Spray could result in an interruption in the supply of NARCAN® Nasal Spray and a decline in sales of the product.

REGULATORY AND COMPLIANCE RISKS

Our long-term success depends, in part, upon our ability to develop, receive regulatory approval for and commercialize product candidates we develop or acquire and, if we are not successful, our business, financial condition, operating results and cash flows may suffer.

Our product candidates and the activities associated with their development, including testing, manufacture, recordkeeping, storage and approval, are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by comparable authorities in other countries. Except under limited circumstances related to certain government sales, failure to obtain regulatory approval for a product candidate will prevent us from commercializing the product candidate.

In the United States, to obtain approval from the FDA to market any of our future biologic products, we will be required to submit a biologics license application (BLA) to the FDA. Ordinarily, the FDA requires a company to support a BLA with substantial evidence of the product candidate’s safety, purity and ~~efficacy~~potency in treating the targeted indication based on data derived from adequate and well-controlled clinical trials, including Phase 3 ~~safety and efficacy~~ trials conducted in patients with the disease or condition being targeted.

However, ~~AV7909 and~~ many of our MCM product candidates, for example, may take advantage of a different regulatory approval pathway under the FDA’s “Animal Rule.” The Animal Rule provides a regulatory pathway for drug and biologic products targeting indications for which human efficacy studies are not feasible or would be unethical. Instead, efficacy must be demonstrated, in part, by utilizing animal models rather than testing in humans. We cannot guarantee that the FDA will permit us to proceed with licensure of ~~AV7909 or~~ any of our PHT MCM candidates under the Animal Rule. Even if we are able to proceed pursuant to the

Animal Rule, the FDA may decide that our data are insufficient to support approval and require additional preclinical, clinical or other studies, refuse to approve our products, or place restrictions on our ability to commercialize those products. Furthermore, products approved under the Animal Rule are subject to certain additional post-marketing requirements. For example, to the extent feasible and ethical, manufacturers of products approved pursuant to the Animal Rule must conduct post-marketing studies, such as field studies, to verify and describe the product candidate's clinical benefit and to assess its safety when used as indicated. We cannot guarantee that we will be able to meet this regulatory requirement even if one or more

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of our product candidates are approved under the Animal Rule.

The process of obtaining these regulatory approvals is expensive, often takes many years if approval is obtained at all, and can vary substantially based upon the type, complexity and novelty of the product candidate involved. Changes in the regulatory approval process during the development period, changes in or the enactment of additional statutes or regulations, or changes in the regulatory review process generally may cause delays in the approval or rejection of an application.

The FDA has substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient to support approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent regulatory approval of a product candidate.

~~Healthcare legislature reform measures~~Unapproved and investigational products are also subject to FDA's laws and regulations governing advertising and promotion, which prohibit the promotion of both unapproved products and unapproved uses of approved products. There is some risk that the FDA could conclude that our discussions with third parties related to unapproved products or unapproved uses of approved products constitute the promotion of an unapproved product or product use in violation of FDA laws and regulations. There is also a risk that a regulatory authority in another country could take a similar position under that country's laws and regulations and conclude that we have violated the laws and regulations related to product development, approval, or promotion in that country. Therefore, there is a risk that we could be subject to enforcement actions if found to be in violation of such laws or regulations.

Even if we or our collaborators obtain marketing approvals for our product candidates, the terms of approvals and ongoing regulation of our products may limit how we manufacture and market our products, which could materially impair our ability to generate revenue.

Once marketing approval has been granted, an approved product and its manufacturer and marketer are subject to ongoing review and extensive regulation. We and our collaborators must therefore comply with requirements concerning advertising and promotion for any of our product candidates for which we obtain marketing approval. Promotional communications with respect to FDA-regulated products are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved labeling. Thus,

we will not be able to promote any products we develop for indications or uses for which they are not approved.

In addition, manufacturers of approved products and those manufacturers’ facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to cGMPs, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation and reporting requirements. We and our collaborators and our contract manufacturers could be subject to periodic unannounced inspections by the FDA to monitor and ensure compliance with cGMPs.

Accordingly, were we to receive marketing approval for one or more of our product candidates, we would continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance and quality control.

If we and our collaborators are not able to comply with post-approval regulatory requirements, we could have the marketing approvals for our products withdrawn by regulatory authorities and our ability to market any products could be limited, which could adversely affect our ability to achieve or sustain profitability. Further, the cost of compliance with post-approval regulations may have a ~~material adverse~~negative effect on our ~~business~~operating results and financial condition.

Any product candidate for which we or our collaborators obtain marketing approval could be subject to restrictions or withdrawal from the market and we may be subject to substantial penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our product candidates, when and if any of them are approved.

Any product candidate for which we or our collaborators obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to quality control and manufacturing, quality assurance and corresponding maintenance of records and documents, and requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of

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the medicine, including the requirement to implement a risk evaluation and mitigation strategy.

The FDA and other agencies, including the Department of Justice (DOJ), closely regulate and monitor the post-approval marketing and promotion of products to ensure that they are marketed and distributed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA and DOJ impose stringent restrictions on manufacturers’ communications regarding off-label use and if we do not market our products for their approved indications, we may be subject to enforcement action for off-label marketing. Violations of the Federal Food, Drug, and Cosmetic Act and other statutes, including the False Claims Act, relating to the promotion and advertising of prescription products may lead to investigations and enforcement actions alleging violations of federal and state health care fraud and abuse laws, as well as state consumer protection laws.

In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:

restrictions on such products, manufacturers or manufacturing processes;

restrictions on the labeling or marketing of ~~operations.~~a product;

restrictions on distribution or use of a product;

requirements to conduct post-marketing studies or clinical trials;

warning letters or untitled letters;

withdrawal of the products from the market;

refusal to approve pending applications or supplements to approved applications that we submit;

recall of products;

damage to relationships with collaborators;

unfavorable press coverage and damage to our reputation;

fines, restitution or disgorgement of profits or revenues;

suspension or withdrawal of marketing approvals;

refusal to permit the import or export of our

products;

product seizure;

injunctions or the imposition of civil or criminal penalties; and

litigation involving patients using our products.

Non-compliance with EU requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population, can also result in significant financial penalties. Similarly, failure to comply with the EU’s requirements regarding the protection of personal information can also lead to significant penalties and sanctions.

Current and future legislation may increase the difficulty and cost for us and any collaborators to obtain marketing approval of and commercialize our product candidates and affect the prices we, or they, may obtain.

In the United States and foreign jurisdictions, there have been ~~and continue to be~~ a number of legislative ~~initiatives~~and regulatory changes and proposed changes regarding the health care system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to ~~contain healthcare costs. For example,~~profitably sell any product candidates for which we obtain marketing approval. We expect that current laws, as well as other health care reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we, or any collaborators, may receive for any approved products.

In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, ~~(ACA) was enacted, which substantially changed~~as amended by the ~~way health care is financed by both governmental~~Health Care and ~~private insurers, and significantly impacted~~Education Affordability Reconciliation Act (collectively, the ~~U.S. pharmaceutical industry. However, some~~ACA). Among the provisions of the ACA ~~have yet~~of potential importance to our business and our product candidates are the following:

an annual, non-deductible fee on any entity that manufactures or imports specified branded prescription products and biologic agents;

an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;


•	a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for products that are inhaled, infused, instilled, implanted or injected;


•	expansion of health care fraud and abuse laws, including the civil False Claims Act and the federal Anti-Kickback Statute, new

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government investigative powers and enhanced penalties for noncompliance;

a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand products to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient products to be ~~fully implemented~~covered under Medicare Part D;

extension of manufacturers’ Medicaid rebate liability to individuals enrolled in Medicaid managed care organizations;

expansion of eligibility criteria for Medicaid programs;

expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;

new requirements to report certain financial arrangements with physicians and teaching hospitals;

a new requirement to annually report product samples that manufacturers and distributors provide to physicians;

a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;

a new Independent Payment Advisory Board (IPAB), which has authority to recommend certain ~~provisions have been subject~~changes to ~~legal and political challenges, as well as efforts~~the Medicare program to reduce expenditures by the ~~Trump Administration~~program that could result in reduced payments for prescription products; and

established the Center for Medicare and Medicaid Innovation within the Centers for Medicare & Medicaid Services (CMS) to ~~repeal or replace certain aspects of the ACA. For example, since January 2017, President Trump has signed two executive orders~~test innovative payment and other directives designed to delay, circumvent, or loosen certain requirements mandated by the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the ACA, such as removing penalties as of

January 1, 2019 for not complying with the ACA’s individual mandate to carry health insurance, delaying the implementation of certain ACA-mandated fees, and increasing the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D. We continue to evaluate how the ACA and recent efforts to repeal and replace or limit the implementation of the ACA will impact our business.

service delivery models.

In addition, other legislative changes have been proposed and adopted ~~in the United States~~ since the ACA was enacted. OnIn August 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. ~~This includes~~

These changes included aggregate reductions ofto Medicare payments to providers of ~~2 percent~~up to 2% per fiscal ~~year. These reductions~~year, which went into effect onin April 1, 2013 and ~~due to subsequent legislative amendments to the statute,~~ will remain in effect through ~~2027~~2024 unless additional Congressional action is taken. The American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other health care funding and otherwise affect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.

~~Additionally, there has been heightened governmental scrutiny recently over~~Since enactment of the ~~manner in which manufacturers set prices for their marketed products. For example,~~ACA, there have been ~~several recent~~numerous legal challenges and Congressional ~~inquiries~~actions to repeal and ~~proposed~~replace provisions of the law. For example, with enactment of the Tax Cuts and Jobs Act of 2017, which was signed by the President on December 22, 2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, became effective on January 1, 2019. In addition, Congress will likely consider other legislation to replace elements of the ACA, during the next Congressional session. It is possible that such initiatives, if enacted ~~federal~~into law, could ultimately result in fewer individuals having health insurance coverage or in individuals having insurance coverage with less generous benefits. We will continue to evaluate the effect that the ACA and ~~state legislation~~its possible repeal and replacement could have on our business.

The Trump Administration has also taken executive actions to challenge or delay implementation of the ACA. Since January 2017, President Trump has signed two Executive Orders designed to ~~among other things, bring more transparency~~delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. One Executive Order directs federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, health care providers, health insurers, or manufacturers of pharmaceuticals or medical devices. The second Executive Order terminates the cost-sharing subsidies that reimburse insurers under the ACA. In addition, the CMS has proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces. On November 30, 2018, CMS announced a proposed rule that would amend the Medicare Advantage and Medicare Part D prescription

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drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. For example, the Trump administration released a “Blueprint,” or plan,benefit regulations to ~~lower drug prices and~~ reduce out of pocket costs for plan enrollees and allow Medicare plans to negotiate lower rates for certain drugs. Among other things, the proposed rule changes would allow Medicare Advantage plans to use pre authorization (PA) and step therapy (ST) for six protected classes of drugs, ~~that contains additional proposals~~with certain exceptions, permit plans to ~~increase drug manufacturer competition, increase~~implement PA and ST in Medicare Part B drugs; and change the ~~negotiating power~~definition of ~~certain federal healthcare programs, incentivize manufacturers~~“negotiated prices,” while providing a definition of “price concession” in the regulations. It is unclear whether these proposed changes will be accepted, and if so, what effect such changes will have on our business. Litigation and legislation over the ACA are likely to ~~lower the list price of their products,~~continue, with unpredictable and ~~reduce the out of pocket~~uncertain results.

The costs of ~~drug products paid by consumers. Individual states~~prescription pharmaceuticals have also been the subject of considerable discussion in the United States, and members of Congress and the Trump Administration have ~~also~~stated that they will address such costs through new legislative and administrative measures. While any proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures are increasingly ~~active in~~ passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. ~~These~~

Specifically, there have been several recent U.S. congressional inquiries and proposed federal and proposed and enacted state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products. At the federal level, Congress and the Trump administration have each indicated that it will continue to seek new ~~laws~~legislative and/or administrative measures to control drug costs. For example, on May 11, 2018, the Administration issued a plan to lower drug prices. Under this blueprint for action, the Administration indicated that HHS will: take steps to end the gaming of regulatory and ~~initiatives may result~~patent processes by drug makers to unfairly protect monopolies; advance biosimilars and generics to boost price competition; evaluate the inclusion of prices in ~~additional reductions~~drug makers’ ads to enhance price competition; speed access to and lower the cost of new drugs by clarifying policies for sharing information between insurers and drug makers; avoid excessive pricing by relying more on

value-based pricing by expanding outcome-based payments in Medicare and Medicaid; work to give Part D plan sponsors more negotiation power with drug makers; examine which Medicare Part B drugs could be negotiated for a lower price by Part D plans, and improving the design of the Part B Competitive Acquisition Program; update Medicare’s drug-pricing dashboard to increase transparency; prohibit Part D contracts that include “gag rules” that prevent pharmacists from informing patients when they could pay less out-of-pocket by not using insurance; and require that Part D plan members be provided with an annual statement of plan payments, out-of-pocket spending, and drug price increases. More recently, on January 31, 2019, the HHS Office of Inspector General proposed modifications to the federal Anti-Kickback Statute discount safe harbor for the purpose of reducing the cost of drug products to consumers which, among other ~~healthcare funding,~~things, if finalized, will affect discounts paid by manufacturers to Medicare Part D plans, Medicaid managed care organizations and pharmacy benefit managers working with these organizations.

At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs. These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing. We expect that additional state and federal health care reform measures will be adopted in the future, any of which could ~~have a material adverse effect on~~limit the amounts that federal and state governments will pay for health care products and services, which could result in reduced demand for our ~~future customers and accordingly, our financial operations.~~product candidates or additional pricing pressures.

If we fail to comply with foreign, federal, state and local ~~healthcare~~health care laws, including fraud and abuse and health information privacy and security laws, and antitrust laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.

In the United States, certain of our products are reimbursed under federal and state health care programs such as Medicaid, Medicare, TriCare, and or state pharmaceutical assistance programs. Many foreign countries have similar laws. Federal and state laws designed to prevent fraud and abuse under these

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programs prohibit pharmaceutical companies from offering valuable items or services to customers or potential customers to induce them to buy, prescribe, or recommend our product (the so-called “antikickback” laws). Exceptions are provided for discounts and certain other arrangements if specified requirements are met. Other federal and state laws, and similar foreign laws, not only prohibit us from submitting any false information to government reimbursement programs but also prohibit us and our employees from doing anything to cause, assist, or encourage our customers to submit false claims for payment to these programs. We are also subject to various federal, state and foreign antitrust and competition laws that prohibit certain activities that may have an impact against potential competitors. Violations of the various fraud and abuse and antitrust laws may result in severe penalties against the responsible employees and us, including jail sentences, large fines, and the exclusion of our products from reimbursement under federal and state programs. Some of the laws that may affect our ability to operate include:

the federal Anti-Kickback Statute makes it illegal for any person or entity, including a prescription drug manufacturer (or a party acting on its behalf) to knowingly and willfully solicit, receive, offer or pay remuneration, directly or indirectly, overtly or covertly, to induce, or in return for, either the referral of an individual, or the purchase, lease, prescribing or recommendation of an item, good, facility or service reimbursable by a federally funded ~~healthcare~~health care program, such as the Medicare or Medicaid program. The term “remuneration” has been interpreted broadly and may constrain our marketing practices, educational programs, pricing policies and relationships with ~~healthcare~~health care providers or other entities, among other activities;

~~federal civil and criminal false claims, including~~ the federal False Claims Act ~~and false statement laws and civil monetary penalty laws, which impose~~imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, onagainst individuals or entities for, among other things,

knowingly presenting, or causing to be presented, false or fraudulent claims for payment ~~or approval from Medicare, Medicaid or other~~by a federal health care ~~programs that are false~~program or ~~fraudulent or knowingly~~ making ~~any materially~~a false statement ~~in connection~~or record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government, with ~~the delivery or payment for healthcare benefits, items or services;~~

potential liability including mandatory treble damages and significant per-claim penalties, currently set at $10,781 to $21,563 per false claim;

the U.S. federal Health Insurance Portability

and Accountability Act of 1996 (HIPAA), which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any ~~healthcare~~health care benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any ~~healthcare~~health care benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statement, in connection with the delivery of, or payment for, ~~healthcare~~health care benefits, items or services. Similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health (HITECH), and their respective implementing regulations mandates, among other things, the adoption of uniform standards for the electronic exchange of information in common ~~healthcare~~health care transactions, as well as standards relating to the privacy, security and transmission of individually identifiable health information, which require the adoption of administrative, physical and technical safeguards to protect such information. Among other things, HITECH makes HIPAA's security standards directly applicable to “business associates,” or independent contractors or agents of covered entities that create, receive or obtain protected health information in connection with providing a service for or on behalf of a covered entity;

the Physician Payments Sunshine Act and its implementing regulations, which requires certain manufacturers of drugs, biologics, medical devices and medical supplies for which payment is available under Medicare, Medicaid or the Centers for Medicare & Medicaid Services (CMS), certain payments and transfers of value made to physicians and teaching hospitals, and

ownership or investment interests held by physicians and their immediate family members. Beginning in 2022, applicable manufacturers will also be required to report information regarding payments and transfers of value provided to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse-midwives; and

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state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, which may apply to items or services reimbursed by any third-party payor, including commercial insurers; state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts; state, local and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, obtain pharmaceutical agent licensure, and/or otherwise restrict payments that may be made to ~~healthcare~~health care providers and entities; and state, local and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to ~~healthcare~~health care providers or entities, or marketing expenditures.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under the U.S. federal Anti-Kickback Statute, it is possible that some of our business activities could be subject to challenge under one or more of such laws. Moreover, recent health care reform legislation has strengthened these laws. For example, the ACA, among other things, amends the intent requirement of the federal Anti-Kickback Statute and criminal health care fraud statutes, so that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it. In addition, the ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.

If our operations are found to be in violation of any of the laws described above or any governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, individual imprisonment, integrity obligations, exclusion from funded health care programs and the curtailment or restructuring of our operations. Any such penalties could adversely affect our financial results. We are developing and implementing a corporate compliance program designed to ensure that we will market and sell any future products that we successfully develop from our product candidates in compliance with all applicable laws and regulations, but we cannot guarantee that this program will protect us from governmental

investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

Efforts to ensure that our business arrangements with third parties will comply with applicable health care laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other health care laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, individual imprisonment, integrity obligations, exclusion from government funded health care programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other health care providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusion from government funded health care programs.

We are committed to conducting the sales and marketing of our applicable products and all our activities in compliance with the ~~healthcare~~health care fraud and abuse and antitrust laws, but certain applicable laws may impose liability even in the absence of specific intent to defraud. Furthermore, should there be ambiguity, a governmental authority may take a position contrary to a position we have taken, or should an employee violate these laws without our knowledge, a governmental authority may impose civil and/or criminal sanctions.

The United States government, state governments and private payors regularly investigate the pricing and competitive practices of pharmaceutical companies and biotechnology companies, and many file actions alleging that inaccurate reporting of prices has improperly inflated reimbursement rates. We may also be subject to investigations related to our pricing practices. Regardless of merit or eventual outcome, these types of investigations and related litigation can result in:

Diversion of management time and attention;

Expenditure of large amounts of cash on legal fees, costs and payment of damages or penalties;

Limitations on our ability to continue some of our operations;

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Decreased demand for our products; and

Injury to our reputation.

Moreover, an adverse outcome, or the imposition of penalties or sanctions for failing to comply with the fraud and abuse and antitrust laws, could adversely affect us and may have a material adverse effect on our business, results of operations, financial condition and cash flows.

If we fail to comply with our obligations under U.S. governmental pricing programs, we could be required to reimburse government programs for underpayments and could pay penalties, sanctions and fines.

The issuance of regulations and coverage expansion by various governmental agencies relating to the Medicaid rebate program will continue to increase our costs and the complexity of compliance and will be time-consuming. Changes to the definition of “average manufacturer price” (AMP), and the Medicaid rebate amount under the ACA and CMS and the issuance of final regulations implementing those changes has affected and could further affect our 340B “ceiling price” calculations. Because we participate in the Medicaid rebate program, we are required to report “average sales price” (ASP), information to CMS for certain categories of drugs that are paid for under Part B of the Medicare program. Future statutory or regulatory changes or CMS binding guidance could affect the ASP calculations for our products and the resulting Medicare payment rate, and could negatively impact our results of operations.

Pricing and rebate calculations vary among products and programs, involve complex calculations and are often subject to interpretation by us, governmental or regulatory agencies and the courts. The Medicaid rebate amount is computed each quarter based on our

submission to CMS of our current AMP and “best price” for the quarter. If we become aware that our reporting for a prior quarter was incorrect, or has changed as a result of recalculation of the pricing data, we are obligated to resubmit the corrected data for a period not to exceed twelve quarters from the quarter in which the data originally were due. Any such revisions could have the impact of increasing or decreasing our rebate liability for prior quarters, depending on the direction of the revision. Such restatements and recalculations increase our costs for complying with the laws and regulations governing the Medicaid rebate program. Price recalculations also may affect the “ceiling price” at which we are required to offer our products to certain covered entities, such as safety-net providers, under the 340B/PHS drug pricing program.

In addition to retroactive rebate liability and the potential for 340B program refunds, if we are found

to have made a misrepresentation in the reporting of ASP, we are subject to civil monetary penalties for each such price misrepresentation and for each day in which such price misrepresentation was applied. If we are found to have knowingly submitted false AMP or “best price” information to the government, we may be liable for civil monetary penalties per item of false information. Any refusal of a request for information or knowing provision of false information in connection with an AMP survey verification also would subject us to civil monetary penalties. In addition, our failure to submit monthly/quarterly AMP or “best price” information on a timely basis could result in a civil monetary penalty per day for each day the information is late beyond the due date. Such failure also could be grounds for CMS to terminate our Medicaid drug rebate agreement, pursuant to which we participate in the Medicaid program. In the event that CMS terminates our rebate agreement, no federal payments would be available under Medicaid or Medicare Part B for our covered outpatient drugs. Governmental agencies may also make changes in program interpretations, requirements or conditions of participation, some of which may have implications for amounts previously estimated or paid. We cannot assure you that our submissions will not be found by CMS to be incomplete or incorrect.

In order for our products to be reimbursed by the primary federal governmental programs, we report certain pricing data to the USG. Compliance with reporting and other requirements of these federal programs is a pre-condition to: (i) the availability of federal funds to pay for our products under Medicaid and Medicare Part B; and (ii) procurement of our products by the Department of Veterans Affairs (DVA), and by covered entities under the 340B/PHS program. The pricing data reported are used as the basis for establishing Federal Supply Schedule (FSS), and 340B/PHS program contract pricing and payment and rebate rates under the Medicare Part B and Medicaid programs, respectively.

Pharmaceutical companies have been prosecuted under federal and state false claims laws for submitting inaccurate and/or incomplete pricing information to the government that resulted in increased payments made by these programs. The rules governing the calculation of certain reported prices are highly complex. Although we maintain and follow strict procedures to ensure the maximum possible integrity for our federal pricing calculations, the process for making the required calculations involves some subjective judgments and the risk of errors always exists, which creates the potential for exposure under the false claims laws. If we become subject to investigations or other inquiries concerning our compliance with price reporting laws and regulations, and our methodologies for calculating federal prices are found to include flaws or to have been incorrectly applied, we could be required to pay or be subject to additional reimbursements, penalties,

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sanctions or fines, which could have a material adverse effect on our business, financial condition and results of operations.

To be eligible to have our products paid for with federal funds under the Medicaid and Medicare Part B programs as well as to be purchased by certain federal agencies and certain federal grantees, we also must participate in the DVA FSS pricing program. To participate, we are required to enter into an FSS contract with the DVA, under which we must make our innovator “covered drugs” available to the “Big Four” federal agencies-the DVA, the DoD, the Public Health Service (including the Indian Health Service), and the Coast Guard-at pricing that is capped pursuant to a statutory federal ceiling price (FCP), formula set forth in Section 603 of the Veterans Health Care Act of 1992 (VHCA). The FCP is based on a weighted average wholesale price known as the Non-Federal Average Manufacturer Price (Non-FAMP), which manufacturers are required to report on a quarterly and annual basis to the DVA. Pursuant to the VHCA, knowing provision of false information in connection with a Non-FAMP filing can subject us to significant penalties for each item of false information. If we overcharge the government in connection with our FSS contract or Section 703 Agreement, whether due to a misstated FCP or otherwise, we are required to disclose the error and refund the difference to the government. The failure to make necessary disclosures and/or to identify contract overcharges can result in allegations against us under the False Claims Act and other laws and regulations. Unexpected refunds to the government, and responding to a government investigation or enforcement action, ~~would~~can be expensive and time-consuming, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

~~We intend to transfer the manufacturing of raxibacumab, which we acquired from GSK, to our bulk and fill finish facilities in Baltimore, Maryland, and this~~

~~transfer of manufacturing operations requires FDA approval.~~

Under our arrangements with GSK for our acquisition of the raxibacumab product, we will continue to purchase product from GSK to satisfy deliveries to the SNS under the current BARDA contract, which expires in November 2019. We intend to seek FDA approval to transfer the manufacturing of raxibacumab to our Baltimore, Maryland bulk and fill finish manufacturing facilities and currently anticipate FDA approval of this technology transfer in 2020. Approval of this technology transfer may involve complications or may not be secured on a timely basis or at all. Any delay in the approval of this anticipated technology transfer would delay our expected benefits and synergies from this product acquisition and could materially harm our revenues and our business, financial condition, operating results and cash flows could be harmed. Until approval of this technology transfer, we must rely on GSK to supply product to us to satisfy deliveries to the SNS under the BARDA contract, and GSK may fail to meet delivery obligations, which could result in our inability to satisfy requirements under the BARDA contract.

Even after regulatory approval is received, if we fail to comply with regulatory requirements, or if we experience unanticipated problems with our approved products, they could be subject to restrictions, penalties or withdrawal from the market.

Any vaccine, therapeutic product or medical device for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and other regulatory bodies. Our approved products are subject to these requirements and ongoing review. These requirements include submissions of safety and other post-marketing information and reports, plasma donor testing, registration requirements, cGMP, requirements relating to potency and stability, quality control, quality assurance, restrictions on advertising and promotion, import and export restrictions and

recordkeeping requirements. In addition, various state laws require that companies that manufacture and/or distribute drug products within the state obtain and maintain a manufacturer or distributor license, as appropriate. Because of the breadth of these laws, it is possible that some of our business activities could be subject to challenge under one or more of such laws.

Our regulators enforce cGMP and other requirements through periodic unannounced inspections of manufacturing facilities. The FDA is authorized to inspect domestic manufacturing facilities without prior notice at reasonable times and in a reasonable manner. Health Canada may conduct similar inspections of our facilities where Canadian marketed products are produced, or related formulation and filling operations are conducted.

The FDA, Health Canada, and other foreign regulatory agencies conduct periodic inspections of our facilities. Following several of these inspections, regulatory authorities have issued inspectional observations, some of which were significant, but all of which are being, or have been, addressed through corrective actions. If, in connection with any future inspection, regulatory authorities find that we are not in substantial compliance with all applicable requirements, or if they are not satisfied with the corrective actions we take, our regulators may undertake enforcement action against us, which may include:

warning letters and other communications;

product seizure or withdrawal of the product from the market;

restrictions on the marketing or manufacturing of a product;

suspension or withdrawal of regulatory approvals or refusal to approve pending applications or supplements to approved applications;

fines or disgorgement of profits or revenue; and

injunctions or the imposition of civil or criminal penalties.

Similar action may be taken against us should we fail to comply with regulatory requirements, or later discover previously unknown problems with our products or manufacturing processes. For instance, our products are tested regularly to determine if they satisfy potency and stability requirements for their required shelf lives. Even if regulatory approval of a product is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval. Regulatory approval may also contain requirements for costly post-marketing testing and surveillance to

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monitor the safety or efficacy of the product. If we experience any of these post-approval events, our business, financial condition, operating results and cash flows could be materially and adversely affected.

Additionally, companies may not promote drugs for “off-label” uses (~~i.e.~~(i.e., uses that are not described in the product’s labeling and that differ from those approved by the applicable regulatory agencies). A company that is found to have improperly promoted off-label uses may be subject to significant liability, including civil and administrative remedies (such as entering into corporate integrity agreements with the USG), as well as criminal sanctions. If our employees or agents engage in “off-label” marketing of any of our products, we could be subject to civil or criminal investigations and monetary and injunctive penalties, which could adversely impact our ability to conduct business in certain markets,

negatively affect our business, financial condition, operating results and cash flows, and damage our reputation.

~~One or more of our products could be subject to early generic competition.~~

One or more of our products is approved under the provisions of the U.S. Food, Drug and Cosmetic Act (FDCA), which renders it susceptible to potential competition from generic manufacturers via the Hatch-Waxman Act and ANDA process. Generic manufacturers pursuing ANDA approval are not required to conduct costly and time-consuming clinical trials to establish the safety and efficacy of their products; rather, they are permitted to rely on the innovator’s data regarding safety and efficacy. Additionally, generic drug companies generally do not expend significant sums on sales and marketing activities, instead relying on physicians or payers to substitute the generic form of a drug for the branded form. Thus, generic manufacturers can sell their products at prices much lower than those charged by the innovative pharmaceutical or biotechnology companies who have incurred substantial expenses associated with the research and development of the drug product and who must spend significant sums marketing a new drug.

The ANDA procedure includes provisions allowing generic manufacturers to challenge the innovator’s patent protection by submitting “Paragraph IV” certifications to the FDA in which the generic manufacturer claims that the innovator’s patents are invalid, unenforceable, and/or will not be infringed by the manufacture, use, or sale of the generic product. A patent owner who receives a Paragraph IV certification may choose to sue the generic applicant for patent infringement. If the patent owner files suit within 45 days of receiving notice from an ANDA filer, the patent owner is entitled to receive a 30 month stay on the FDA’s ability to give final approval for the generic product that is the subject of the ANDA.

In recent years, generic manufacturers have used Paragraph IV certifications extensively to challenge the applicability of patents listed in the FDA’s Approved Drug Products List with Therapeutic Equivalence Evaluations, commonly referred to as the Orange Book, on a wide array of innovative therapeutic products. We expect this trend to continue and to affect drug products with even relatively modest revenues.

Although we intend to vigorously enforce our intellectual property rights, there can be no assurance that we will prevail in our enforcement or defense of our patent rights. Our existing patents could be invalidated, found unenforceable, or found not to cover a generic form of our product.

Failure to obtain or maintain regulatory approval in international jurisdictions could prevent usfrom

marketing our products abroad and could limit the growth of our business.

We intend to sell certain of our products, outside the United States and received market authorization under the mutual recognition procedure to sell BioThrax, in France, Italy, the Netherlands, Poland, and the U.K. To market our products in foreign jurisdictions under normal circumstances, we may need to obtain separate regulatory approvals and comply with numerous and varying requirements or use alternative “emergency use” or other exemptions from general approval and import requirements. Approval by the FDA in the United States or the mutual recognition procedure in the European member states does not ensure approval by all foreign regulatory authorities. The approval procedures in foreign jurisdictions can vary widely and can involve additional clinical trials and data review beyond that required by the FDA or under the mutual recognition procedure. We and our collaborators may not be able to obtain foreign regulatory approvals on a timely basis, if at all, and we may be unable to successfully commercialize our products internationally if no alternate procurement pathway is identified for authorized government customers in a particular jurisdiction. We have limited experience in preparing, filing and prosecuting the applications necessary to gain foreign regulatory approvals and expect to rely on third-party contract research organizations and consultants to assist us in this ~~process.~~process..

Additionally, on June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the European Union, commonly referred to as Brexit. On March 29, 2017, the United Kingdom formally notified the European Union of its intention to withdraw

~~Our~~pursuant to Article 50 of the Lisbon Treaty. Since a significant proportion of the regulatory framework in the United Kingdom is derived from European Union directives and regulations, Brexit could materially impact the regulatory regime with respect to the approval of our products or product candidates in the United Kingdom or the European Union. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, would prevent us from commercializing product candidates in the United Kingdom and/or the European Union and could restrict our ability to generate revenue and achieve and sustain profitability. There is also a risk that a regulatory authority in another country could conclude that we have violated the rules and regulations related to product development, approval, or promotion in that country. Therefore, there is a risk that we could be subject to an enforcement action if found to be in violation of such laws or regulations.

Laws and regulations governing international operations ~~increase our risk~~may preclude us from developing, manufacturing and selling certain products outside of ~~exposure~~the United States and require us to ~~potential claims of bribery~~develop and ~~corruption.~~implement costly compliance programs.

As we continue to expand our commercialization activities outside of the United States, we are subject to an increased risk of, and must dedicate additional resources towards avoiding, inadvertently conducting activities in a manner that violates the U.S. Foreign Corrupt Practices Act ~~(the FCPA)~~(FCPA), the U.K. Bribery Act, Canada's Corruption of Foreign Public Officials Act, orand other similar foreign laws, which prohibit corporations and individuals from paying, offering to pay, or authorizing the payment of anything of value to any foreign government official, government staff member, political party, or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the ~~course of establishing~~FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and ~~expanding our commercial operations~~doctors and ~~seeking regulatory approvals~~other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

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Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If we expand our presence outside of the United States, it will ~~need~~require us to ~~establish~~dedicate additional resources to comply with these laws, and ~~expand business relationships~~these laws may preclude us from developing, manufacturing, or selling certain products and product candidates outside of the United States, which could limit our growth potential and increase our development costs.

The failure to comply with various third parties and will interact more frequently with foreign officials, including regulatory authorities and physicians employed by state-run healthcare institutions who may be deemed to be foreign officials under the FCPA or similar foreign laws. If ourlaws governing international business practices ~~are found to be~~may result in ~~violation of the FCPA or similar foreign laws despite our training and compliance efforts, we and our senior management may be subject to significant~~substantial civil and criminal penalties ~~potential~~and suspension or debarment from ~~public procurement and reputational damage, which could have a material adverse effect~~government contracting. The SEC also may suspend or bar issuers from trading securities on ~~our business, financial condition, operating results, cash flows and growth prospects.~~

~~The expansion~~U.S. exchanges for violations of ~~our international operations increases our risk of exposure to credit losses.~~

As we continue to expand our business activities with foreign governments in certain countries that have experienced deterioration in credit and economic conditions or otherwise, our exposure to uncollectible accounts will rise. Global economic conditions and liquidity issues in certain countries have resulted and may continue to result in delays in the collection of accounts receivables and may result in credit losses. Future governmental actions and customer specific actions may require us to re-evaluate the collectability of our accounts receivable and we may potentially incur credit losses that may materially impact our operating results.FCPA’s accounting provisions.

MANUFACTURING RISKS

Disruption at, damage to or destruction of our manufacturing facilities could impede our ability to manufacture BioThrax, AV7909, ACAM2000, NARCAN Nasal Spray or our other products, as well as deliver our contract development and manufacturing services, which would harm our business, financial condition, operating results and cash flows.

An interruption in our manufacturing operations could result in our inability to produce our PHT countermeasures for delivery to satisfy the product demands of our customers in a timely manner, which would reduce our revenues and materially harm our business, financial condition, operating results and cash flows. A number of factors could cause interruptions, including:

equipment malfunctions or failures;

technology malfunctions;

cyber-attacks;

work stoppages or slow-downs;

protests, including by animal rights activists;

injunctions;

damage to or destruction of the facility; and

product contamination or tampering.

Providers of PHT countermeasures could be subject to an increased risk of terrorist activities. The USG has designated both our Lansing, Michigan and our Bayview bulk manufacturing facility in Baltimore, Maryland as facilities requiring additional security.

Although we continually evaluate and update security measures, there can be no assurance that any additional security measures would protect these facilities from terrorist efforts determined to disrupt our manufacturing activities.

The factors listed above could also cause disruptions at our other facilities, including our manufacturing facilities in Winnipeg, Manitoba, Canada; other Baltimore, Maryland facilities in Camden; facilities in Canton, Massachusetts; Rockville, ~~Maryland;~~Maryland, Bern, Switzerland; and Hattiesburg, Mississippi. We do not have any redundant manufacturing facilities for any of our marketed products. Accordingly, any disruption, damage, or destruction of these facilities could impede our ability to manufacture our marketed products, our product candidates and our ability to produce products for external customers, result in losses and delays, including delay in the performance of our contractual obligations or delay in our clinical trials, any of which could be costly to us and materially harm our business, financial condition, operating results and cash flows.

We may not be able to utilize the full manufacturing capacity of our manufacturing facilities, which could impact our future revenues and materially harm our business, financial condition, operating results and cash flows.

Despite our ongoing efforts to optimize the utilization of our manufacturing infrastructure (including bulk, fill/finish, support, aseptic filling, lyophilization, final packaging), we may not be able to realize full utilization, which could adversely affect our future revenues, financial condition, operating results and cash flows.

Problems may arise during the production of our marketed products and product candidates due to the complexity of the processes involved in their manufacturing and shipment. Significant delays in product manufacturing or development could cause delays in revenues, which would harm our business, financial condition, operating results and cash flows.

BioThrax, raxibacumab, ACAM2000, Anthrasil, BAT, VIGIV, Vivotif, Vaxchora, and many of our current product candidates, including AV7909, are biologics. Manufacturing biologic products, especially in large quantities, is complex. The products must be made consistently and in compliance with a clearly defined manufacturing process. Problems during manufacturing may arise for a variety of reasons, including problems with raw materials, equipment malfunction and failure to follow specific protocols and procedures. In addition, slight deviations anywhere in the manufacturing process, including obtaining materials, maintaining master seed or cell banks and preventing genetic drift, seed or cell growth,

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fermentation, contamination including from particulates among other things, filtration, filling, labeling, packaging, storage and shipping, potency and stability issues and other quality control testing, may result in lot failures or manufacturing shut-downs, delays in the release of lots, product recalls, spoilage or regulatory action. Such deviations may require us to revise manufacturing processes or change manufacturers. Additionally, as our equipment ages, it will need to be replaced. Replacement of equipment has the potential to introduce variations in the manufacturing process that may result in lot failures or manufacturing shut-downs, delay in the release of lots, product recalls, spoilage or regulatory action. Success rates can also vary dramatically at different stages of the manufacturing process, which can reduce yields and increase costs. From time to time, we may experience deviations in the manufacturing process that may take significant time and resources to resolve and, if unresolved, may affect manufacturing output and could cause us to fail to satisfy customer orders or contractual commitments, lead to a termination of one or more of our contracts, lead to delays in our clinical trials, result in litigation or regulatory action against us, including warning letters and other restrictions on the marketing or manufacturing of a

product, or cause the FDA to cease releasing product until the deviations are explained and corrected, any of which could be costly to us, damage our reputation and negatively impact our business.

We are contractually required to ship our biologic products at a prescribed temperature range and variations from that temperature range could result in loss of product and could significantly and adversely impact our revenues, which would harm our business, financial condition, operating results and cash flows.

Manufacturing delays, lot failures, shipping deviations, spoilage or other loss during shipping could cause us to fail to satisfy customer orders or contractual commitments, lead to a termination of one or more of our contracts, lead to delays in potential clinical trials or result in litigation or regulatory action against us, any of which could be costly to us and otherwise harm our business.

We are required to obtain FDA approval prior to the release of each lot of ~~BioThrax~~raxibacumab and ~~ACAM2000,~~certain other products, which may not be obtained on a timely basis or at all.

FDA approval is required for the release of each lot of ~~BioThrax and ACAM2000.~~raxibacumab. We are not able to sell any lots that fail to satisfy the FDA release testing specifications. For example, we must provide the FDA with the results of certain tests, including potency tests, before lots are released for sale. Potency testing of each lot of ~~BioThrax and each lot of ACAM2000~~raxibacumab is performed against qualified control lots that we maintain. We continually

monitor the status of our reference lots for FDA compliance and periodically produce and qualify a new reference lot to replace the existing reference lot. If we are not able to produce and qualify a new reference lot or otherwise satisfy the ~~FDA's~~FDA’s requirements for release of ~~BioThrax or ACAM2000,~~raxibacumab, our ability to sell ~~BioThrax or ACAM2000~~raxibacumab would be impaired until such time as we become able to meet the ~~FDA's~~FDA’s requirements, which ~~would~~could materially harm our future business, financial condition, operating results and cash flows.

~~If we are unable to obtain supplies for the manufacture of our products and product candidates in sufficientquantities, at an acceptable cost and in acceptable quality, our ability to manufacture or to develop and commercialize our products and product candidatescould be impaired, which could materially harm our revenues, lead to a termination of one or more of our contracts, lead to delays in clinical trials or otherwise materially harm our business.~~

and AV7909, and currently rely on a single-source supplier to manufacture raxibacumab. We also rely on single-source suppliers for the sponge applicator device and the active ingredient used to make RSDL as well as the specialty plasma in our hyperimmune specialty plasma products and certain ingredients for ACAM2000. A disruption in the availability of such materials or services from these suppliers or in the quality of the material provided by such suppliers could require us to qualify and validate alternative suppliers. If we are unable to locate or establish alternative suppliers, our ability to manufacture our products and product candidates could be adversely affected and could harm our revenues, cause us to fail to satisfy contractual commitments, lead to a termination of one or more of our contracts or lead to delays in our clinical trials, any of which could be costly to us and otherwise materially harm our business, financial condition, operating results and cash flows.

Our operations, including our use of hazardous materials, chemicals, bacteria and viruses, require us to complywith regulatory requirements and expose us to significant potential liabilities.

Our operations involve the use of hazardous materials, including chemicals, bacteria and viruses, and may produce dangerous waste products. Accordingly, we, along with the third parties that conduct clinical trials and manufacture our products and product candidates on our behalf, are subject to federal, state, local and foreign laws and regulations that govern the use, manufacture, distribution, storage, handling, exposure, disposal and recordkeeping with respect to these materials. Under the Federal Select Agent Program, pursuant to the Public Health Security and Bioterrorism Preparedness and Response Act, we are required to register with and be inspected by the CDC and the Animal and Plant Health Inspection Service if we have in our possession, or if we use or transfer, select biological agents or toxins that could pose a threat to public health and safety, to animal or plant health or to animal or plant products. This legislation requires stringent safeguards and security measures for these select agents and toxins, including controlled access and the screening of entities and personnel and establishes a comprehensive national database of registered entities. We are also subject to a variety of environmental and occupational health and safety laws. Compliance with current or future laws and regulations can require significant costs and we could be subject to substantial fines and penalties in the event of noncompliance. In addition, the risk of contamination or injury from these materials cannot be completely eliminated. In such event, we could be held liable for substantial civil damages or costs associated with the cleanup of hazardous materials. From time to time, we have been involved in remediation activities and may be so involved in the future. Any related cost or liability might not be fully covered by insurance, could exceed our resources and could have a material adverse

effect on our business, financial condition, operating results and cash flows. In addition to complying with environmental and occupational health and safety laws, we must comply with special regulations relating to biosafety administered by the CDC, HHS, U.S. Department of

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Agriculture and the DoD, as well as regulatory authorities in Canada.

RELIANCE ON THIRD PARTIES

We purchase certain supplies used in our manufacturing processes from non-exclusive, or single sources due to quality considerations, costs or constraints resulting from regulatory requirements, including key components for NARCAN® Nasal Spray (Naloxone API, along with the vial, stopper and device). Where a particular single-source supply relationship is terminated, we may not be able to establish additional or replacement suppliers for certain components or materials quickly. This is largely due to the FDA approval system, which mandates validation of materials prior to use in our products, and the complex nature of manufacturing processes. In addition, we may lose a sole-source supplier due to, among other things, the acquisition of such a supplier by a competitor (which may cause the supplier to stop selling its products to us) or the bankruptcy of such a supplier, which may cause the supplier to cease operations. Any reduction or interruption by a sole-source supplier of the supply of materials or key components used in the manufacturing of our products or an increase in the price of those materials or components could adversely affect our business, financial condition and results of operations.

If we are unable to obtain supplies for the manufacture of our products and product candidates in sufficient quantities, at an acceptable cost and in acceptable quality, our ability to manufacture or to develop and commercialize our products and product candidates could be impaired, which could materially harm our revenues, lead to a termination of one or more of our contracts, lead to delays in clinical trials or otherwise materially harm our business.

We depend on certain single-source suppliers for key materials and services necessary for the manufacture of BioThrax and our other products and product candidates. For example, we rely on a single-source supplier to provide us with Alhydrogel in sufficient quantities to meet our needs to manufacture BioThrax and AV7909, and currently rely on a single-source supplier to manufacture raxibacumab. We also rely on single-source suppliers for the sponge

applicator device and the active ingredient used to make RSDL as well as the specialty plasma in our hyperimmune specialty plasma products, toxins to manufacture BAT and certain ingredients for ACAM2000. A disruption in the availability of such materials or services from these suppliers or in the quality of the material provided by such suppliers could require us to qualify and validate alternative suppliers. If we are unable to locate or establish alternative suppliers, our ability to manufacture our products and product candidates could be adversely affected and could harm our revenues, cause us to fail to satisfy contractual commitments, lead to a termination of one or more of our contracts or lead to delays in our clinical trials, any of which could be costly to us and otherwise materially harm our business, financial condition, operating results and cash flows.

We depend on third parties to conduct our clinical and non-clinical trials. If these third parties do not perform as contractually required or as we expect, we may not be able to obtain regulatory approval for or commercialize our product candidates and, as a result, our business, financial condition, operating results and cash flows may suffer.

We do not have the ability to independently conduct the clinical and non-clinical trials required to obtain regulatory approval for our product candidates. We depend on third parties, such as independent clinical investigators, contract research organizations and other third-party service providers to conduct the clinical and non-clinical trials of our product candidates and expect to continue to do so. We rely heavily on these third parties for successful execution of our clinical and non-clinical trials, but do not exercise day-to-day control over their activities. Our reliance on these service providers does not relieve us of our regulatory responsibilities, including ensuring that our trials are conducted in accordance with good clinical practice regulations and the plan and protocols contained in the relevant regulatory application. In addition, these organizations may not complete these activities on our anticipated or desired timeframe. We also may experience unexpected cost increases that are beyond our control. Problems with the timeliness or quality of the work of a contract research organization may lead us to seek to terminate the relationship and use an alternative service provider, which may prove difficult, costly and result in a delay of our trials. Any delay in or inability to complete our trials could delay or prevent the development, approval and commercialization of our product candidates.

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and non-government organizations have no obligation or commitment to us to conduct or complete any of these studies or clinical trials and may choose to discontinue these development efforts at any time. Furthermore, government entities depend on annual Congressional appropriations to fund their development efforts, which may not be approved.

If we are unable to obtain any necessary third-party services on acceptable terms or if these service providers do not successfully carry out their contractual duties or meet expected deadlines, our efforts to obtain regulatory approvals for our product candidates may be delayed or prevented.

RISKS RELATED TO STRATEGIC ACQUISITIONS AND COLLABORATIONS

Our strategy of generating growth through acquisitions may not be successful.

Our business strategy includes growing our business through acquisition and in-licensing transactions. We may not be successful in identifying, effectively evaluating, structuring, acquiring or in-licensing, and developing and commercializing additional products on favorable terms, or at all. Competition for attractive product opportunities is intense and may require us to devote substantial resources, both managerial and financial, to an acquisition opportunity. A number of more established companies are also pursuing strategies to acquire or in-license products in the biopharmaceutical field. These companies may have a competitive advantage over us due to their size, cash resources, cost of capital, effective tax rate and greater clinical development and commercialization capabilities.

Acquisition efforts can consume significant management attention and require substantial expenditures, which could detract from our other programs. In addition, we may devote significant resources to potential acquisitions that are never completed. Even if we are successful in acquiring a company or product, it may not result in a successfully developed or commercialized product or, even if an acquired product is commercialized, competing products or technologies could render a product noncompetitive, uneconomical or obsolete. Moreover, the cost of acquiring other companies or in-licensing products could be substantial, and in order to acquire companies or new products, we may need to incur substantial debt or issue dilutive securities.

If we are unsuccessful in our efforts to acquire other companies or in-license and develop additional products, or if we acquire or in-license unproductive assets, it could have a material adverse effect on the growth of our business, and we could be compelled to record significant impairment charges to write-down the carrying value of our acquired intangible assets, which could materially harm our, business, financial condition, operating results and cash flows.

Our failure to successfully integrate acquired businesses and/or assets into our operations could

adversely affect our ability to realize the benefits of such acquisitions and, therefore, to grow our business.

We may not be able to integrate any acquired business successfully or operate any acquired business profitably, including our acquisitions of Adapt and PaxVax. In addition, cost synergies, if achieved at all, may be less than we expect, or may take greater time to achieve than we anticipate.

Issues that could delay or prevent successful integration or cost synergies of an acquired business or products include, among others:

retaining existing customers and attracting new customers;

retaining key employees;

diversion of management attention and resources;

conforming internal controls, policies and procedures, business cultures and compensation programs;

consolidating corporate and administrative infrastructures;

successfully executing technology transfers and obtaining required regulatory approvals;

consolidating sales and marketing operations;

identifying and eliminating redundant and underperforming operations and assets;

assumption of known and unknown liabilities;

coordinating geographically dispersed organizations; and

managing tax costs or inefficiencies associated with integrating operations.

If we are unable to successfully integrate pending and future acquisitions with our existing businesses, or operate any acquired business profitably, we may not obtain the advantages that the acquisitions were intended to create, which may materially adversely affect the growth of our business, financial condition, operating results and cash flows.

COMPETITIVE AND POLITICAL RISKS

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We face substantial competition, which may result in others developing orcommercializing products before or more successfully than we do.

The development and commercialization of new biopharmaceutical and medical technology products is highly competitive and subject to rapid technological advances. We may face future competition from other companies and governments, universities and other non-profit research organizations in respect to our products, any products that we acquire, our current product candidates and any products we may seek to develop or commercialize in the future. Our competitors may develop products that are safer, more effective, more

convenient or less costly than any products that we may develop or market. Our competitors may have greater resources to devote to marketing or selling their products, adapt more quickly to new technologies, scientific advances or patient preferences and needs, initiate or withstand substantial price competition more successfully than we can, or more effectively negotiate third-party licensing and collaborative arrangements.

There are a number of companies with products or product candidates addressing PHT preparedness that are competing with us for both USG procurement and development resources. Many of our competitors have greater financial, technical and marketing resources than we do. Our competitors may receive patent protection that dominates, blocks or adversely affects our products or product candidates.

Any reduction in demand for our products or reduction or loss of development funding for our products or product candidates in favor of a competing product could lead to a loss of market share for our products and cause reduced revenues, margins and levels of profitability for us, which could adversely affect our business, financial condition, operating results and cash flows.

Our Biologic Products may face risks of competition from biosimilar manufacturers.

Competition for BioThrax, raxibacumab, ACAM2000, Anthrasil, BAT, VIGIV, Vivotif and Vaxchora otherwise referred to as our “Biologic Products,” may be affected by follow-on biologics, or “biosimilars,” in the United States and other jurisdictions. Regulatory and legislative activity in the United States and other countries may make it easier for generic drug manufacturers to manufacture and sell biological drugs similar or identical to our Biologic Products,

which might affect the profitability or commercial viability of our Biologic Products. Under the Biologics Price Competition and Innovation Act of 2010, the FDA cannot approve a biosimilar application until the 12-year exclusivity period for the innovator biologic has expired. Regulators in the European Union and in other foreign jurisdictions have already approved biosimilars. The specific regulatory framework for this biosimilar approval path and the extent to which an approved biosimilar would be substituted for the innovator biologic are not yet clear and will depend on many factors. If a biosimilar version of one of our Biologic Products were approved, it could have a material adverse effect on the sales and gross profits of the affected Biologic Product and could adversely affect our business, financial condition, operating results and cash flows.

We expect our NARCAN® Nasal Spray marketed product to face future competition from other treatments.

Our marketed product NARCAN® Nasal Spray faces potentially substantial competition from other treatments, including injectable naloxone, auto-injectors, ~~and~~nasal sprays or improvised ~~or other~~ nasal spray kits. In addition, other entrants may seek approval to market generic versions of NARCAN® Nasal Spray before the underlying patents expire. For example, in 2016 Teva filed, and in 2018 Perrigo filed, ANDAs which seek regulatory approval to market generic versions of NARCAN® Nasal Spray before the expiration of certain underlying patents and in April 2019, Teva received FDA approval to market its generic version of NARCAN® Nasal ~~Spray and~~Spray. Teva may decide to launch its approved generic ~~version~~product although the launch would be at risk ~~even if~~since the ~~ongoing~~ litigation we instituted against Teva is still ~~proceeding.~~

ongoing.

Additionally, in January 2019, the FDA released new proposed template Drug Facts Labels to assist sponsors of ~~investigation~~investigational naloxone nasal sprays and auto-injectors seeking approval from the FDA for over-the-counter naloxone products. Any reduction in demand for NARCAN® Nasal Spray in favor of a competing product, or unsuccessful efforts to defend underlying patents from infringement by generic entrants, could lead to a loss of market share and cause reduced revenues, margins and levels of profitability for us, which could adversely affect our business, financial condition, operating results and cash flows.

Political or social factors may delay or impair our ability to market our products and may require us to spend significant management time and financial resources to address these issues.

Products developed to counter the potential impact of PHTs, whether CBRNE or EID, are subject to changing political and social environments. The political responses and social awareness of the risks of these threats on military personnel or civilians may vary over time. If the threat of terrorism were to decline, then the public perception of the risk on public health and safety may be reduced. This perception, as well as political or social pressures, could delay or cause resistance to bringing our products in development to

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market or limit pricing or purchases of our products, any of which could negatively affect our revenues and our business, financial condition, operating results and cash flows.

In addition, substantial delays or cancellations of purchases could result from protests or challenges from third parties. Lawsuits brought against us by third parties or activists, even if not successful, could require us to spend significant management time and financial resources defending the related litigation and could potentially damage the public's perception of us and our products. Any publicity campaigns or other negative publicity may adversely affect the degree of market acceptance of our PHT countermeasures and thereby limit the demand for our products, which would adversely

affect our business, financial condition, operating results and cash flows.

PRODUCT DEVELOPMENT AND COMMERCIALIZATION RISKS

Our growth depends on our success in developing and commercializing our product candidates. If we are unable tocommercialize these product candidates, or experience significant delays or unanticipated costs indoing so, our business would be materially and adversely affected.

We have invested significant effort and financial resources in the development of our vaccines, therapeutics and medical device product candidates and the acquisition of additional product candidates. In addition to our product sales, our ability to generate revenue is dependent on a number of factors, including the success of our development programs, the USG's interest in providing development funding for or procuring certain of our product candidates, and the commercial viability of our acquired or developed product candidates. The commercial success of our product candidates will depend on many factors, including accomplishing the following in an economical manner:

successful development, formulation and cGMP scale-up of manufacturing that meets FDA or other foreign regulatory requirements;

successful program partnering;

successful completion of clinical or non-clinical development, including toxicology studies and studies in approved animal models;

receipt of marketing approvals from the FDA and equivalent foreign regulatory authorities;

establishment of commercial manufacturing processes and product supply arrangements;

training of a commercial sales force for the product, whether alone or in collaboration with others;

successful registration and maintenance of relevant patent and/or other proprietary protection; and

acceptance of the product by potential government and other customers.

Under certain circumstances, we might sell unapproved MCMs to government entities. While this is permissible in some cases, the extent to which we may be able to lawfully market and sell unapproved products in many jurisdictions may be unclear or ambiguous. Such sales could subject us to regulatory enforcement action, product liability and reputational risk.

Under certain circumstances, MCMs may be procured by government entities prior to approval by the FDA or other regulatory authorities. In the United States, the Project BioShield Act of 2004 (Project BioShield) permits the Secretary of HHS to contract to purchase

MCMs for the SNS prior to FDA approval of the countermeasure in specified circumstances. Project BioShield and the Pandemic and All-Hazards Preparedness Reauthorization Act of 2013 also allow the FDA Commissioner to authorize the emergency use of medical products that have not yet been approved by the FDA under an EUA. Absent an applicable exception, our MCM product candidates generally will have to be approved by the FDA or other regulatory authorities through traditional pathways before we can sell those products to governments. Additionally, the laws in certain jurisdictions regarding the ability of government entities to purchase unapproved product candidates are ambiguous, and the permissibility of exporting unapproved products from the United States and importing them to foreign countries may be unclear. Nevertheless, government bodies, such as U.S. federal entities other than HHS, state and local governments within the United States, and foreign governments, may seek to procure our MCM product candidates that are not yet approved. If so, we would expect to assess the permissibility and liability implications of marketing our product candidates to such entities on a case-by-case basis, which presents certain challenges, both in the case of U.S. and foreign governments, and particularly under emergency conditions. In addition, agencies or branches of one country’s government may take different positions regarding the permissibility of such sales than another country’s government or even other agencies or branches of the same government. If we determine that we believe such activities are permissible, local enforcement authorities could disagree with our conclusion and take enforcement action against us.

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In addition, the sale of unapproved products also could give rise to product liability claims for which we may not be able to obtain indemnification or insurance coverage. For example, liability protections applicable to claims arising under U.S. law and resulting from the use of certain unlicensed products, such as a declaration issued under the Public Readiness and Emergency Preparedness Act (the PREP Act) may not cover claims arising under non-U.S. law.

Regardless of the permissibility and liability risks, in the event a user of one or more of our products suffers an adverse event, we may be subject to additional reputational risk if the product has not been approved by the FDA or the corresponding regulatory authority of another country particularly because we will not have approved labeling regarding the safety or efficacy of those products. In addition, legislatures and other governmental bodies that have oversight responsibility for procuring agencies may raise concerns after the fact even if procurement was permissible at the time, which could result in negative publicity, reputational risk and harm to our business prospects.

Clinical trials of product candidates are expensive and time-consuming, and their outcome is uncertain. We must invest substantial amounts of time and financial resources in these trials, which may not yield viable products. Failure to obtain regulatory approval for product candidates, particularly in the United States, could materially and adversely affect our financial resources, which would adversely affect our business, financial condition, operating results and cash flows.

Before obtaining regulatory approval for the marketing of our product candidates, we and our collaborative partners, where applicable, must conduct preclinical studies and clinical trials to establish proof of concept and demonstrate the safety and efficacy of our product candidates. Preclinical and clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. Success in preclinical testing and early clinical trials does not ensure that later clinical trials or animal efficacy studies will be successful, and interim results of a clinical trial or animal efficacy study do not necessarily predict final results. An unexpected result in one or more of our clinical trials can occur at any stage of testing.

For certain of our product candidates addressing CBRNE threats, we expect to rely on the Animal Rule to obtain regulatory approval. The Animal Rule

permits, in certain limited circumstances, the use of animal efficacy studies, together with human clinical safety and immunogenicity trials, to support an application for marketing approval. For a product approved under the Animal Rule, certain additional post-marketing requirements apply. For example, to the extent feasible and ethical, applicants must conduct post-marketing studies, such as field studies, to verify and describe the drug's clinical benefit and to assess its safety when used as indicated. We have limited experience in the application of these rules to the product candidates that we are developing. It is possible that results from these animal efficacy studies may not be predictive of the actual efficacy of our product candidates in humans.

Under Project BioShield, the Secretary of HHS can contract to purchase MCMs for the SNS prior to FDA approval of the countermeasure in specified circumstances. Project BioShield also allows the FDA commissioner to authorize the emergency use of medical products that have not yet been approved by the FDA under an EUA. If our product candidates are not selected under this Project BioShield authority, they generally will have to be approved by the FDA through traditional regulatory mechanisms for distribution in the United States.

We may experience unforeseen events or issues during, or as a result of, preclinical testing, clinical trials or animal efficacy studies. These issues and events, which could delay or prevent our ability to receive

regulatory approval for a product candidate, include, among others:

our inability to manufacture sufficient quantities of materials for use in trials;

the unavailability or variability in the number and types of subjects for each study;

safety issues or inconclusive or incomplete testing, trial or study results;

drug immunogenicity;

lack of efficacy of product candidates during the trials;

government or regulatory restrictions or delays; and

greater than anticipated costs of trials.

~~We depend on third parties to conduct our clinical and non-clinical trials. If these third parties do not perform as contractuallyrequired or as we expect, we may not be able to obtain regulatory approval for orcommercialize our product candidates and, as a result, our business, financial condition, operating results and cash flows may suffer.~~

In certain cases, government entities and non-government organizations conduct studies of our product candidates, and we may seek to rely on these studies in applying for marketing approval for certain of our product candidates. These government entities and non-government organizations have no obligation or commitment to us to conduct or complete any of these studies or clinical trials and may choose to discontinue

~~these development efforts at any time. Furthermore, government entities depend on annual Congressional appropriations to fund their development efforts, which may not be approved.~~

We may fail to select or capitalize on the most scientifically, clinically or commercially promising or profitable product candidates.

We continue to evaluate our product development strategy and, as a result, may modify our strategy in the future. In this regard, we may, from time to time, focus our product development efforts on different product candidates or may delay or halt the development of various product candidates. We may change or refocus our existing product development, commercialization and manufacturing activities based on government funding decisions. This could require changes in our facilities and our personnel. Any product development changes that we implement may not be successful. In particular, we may fail to select

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or capitalize on the most scientifically, clinically or commercially promising or profitable product candidates or choose candidates for which government development funds are not available. Our decisions to allocate our research and development, management and financial resources toward particular product candidates or therapeutic areas may not lead to the development of viable commercial products and may divert resources from better business opportunities. Similarly, our decisions to delay or terminate product development programs may also prove to be incorrect and could cause us to miss valuable opportunities.

INTELLECTUAL PROPERTY RISKS

If we are unable to protect our proprietary rights, our business, financial condition, operating results, and cash flows could be materially harmed.

Our success will depend, in large part, on our ability to obtain and maintain protection in the United States and other countries for the intellectual property incorporated into or covering our technology, products, and product candidates. Obtaining and maintaining protection of our intellectual property is very costly. The patentability of technology in the biopharmaceutical field generally is highly uncertain and involves complex legal and scientific questions.

We may not be able to obtain additional issued patents relating to our technology or products. Even if issued, patents may inadvertently lapse or be

challenged, narrowed, invalidated, or circumvented, and such happenings could limit our ability to stop competitors from marketing similar products or limit the duration of patent protection we may have for our products. In the past, we have abandoned the prosecution and/or maintenance of patent applications related to patent families in the ordinary course of business. In the future we may choose to abandon such prosecution and/or maintenance in a similar fashion. If these patent rights are later determined to be valuable or necessary to our business, our competitive position may be adversely affected. Changes in patent laws or administrative patent office rules or changes in interpretations of patent laws in the United States and in other countries may diminish the value of our intellectual property, narrow the scope of our patent protection, or result in costly defensive measures. In addition, some countries do not grant patent claims directed to methods of treating humans and, in these countries,

patent protection may not be available at all to protect our products or product candidates.

Changes to the U.S. patent system under the Leahy-Smith America Invents Act (the America Invents Act), affected the way patent applications are filed, prosecuted and litigated. For example, the America Invents Act enacted proceedings involving post-issuance patent review procedures, such as inter partes review (IPR) post-grant review (PGR) and covered business methods review (CBM). These proceedings are conducted before the Patent Trial and Appeal Board (the PTAB) of the U.S. Patent and Trademark Office. Each proceeding has different eligibility criteria and different patentability challenges that can be raised. In this regard, the IPR process permits any person (except a party who has been litigating the patent for more than a year) to challenge the validity of some patents on the grounds that it was anticipated or made obvious by prior art. As a result, non-practicing entities associated with hedge funds, pharmaceutical companies who may be our competitors and others have challenged certain valuable pharmaceutical U.S. patents based on prior art through the IPR process. A decision in such a proceeding adverse to our interests could result in the loss of valuable patent rights which would have a material adverse effect on our business, financial condition, results of operations and growth prospects. The America Invents Act and any other potential future changes to the U.S. patent system could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

The cost of litigation to uphold the validity of patents to prevent or stop infringement or to otherwise protect or enforce our proprietary rights could be substantial and, from time to time, our patents may be subjected to opposition proceedings or validity challenges. Some of our competitors may choose to or be better able to sustain the costs of complex patent litigation. Intellectual property lawsuits are expensive and unpredictable and consume management's time and attention and other resources, even if the outcome is successful. In addition, there is a risk that a court could decide that our patents are not valid, are unenforceable, or are not infringed by a competitor product. There is also a risk that, even if the validity of a patent is upheld, a court could refuse to stop the other party from using the invention(s), including on the grounds that its activities do not infringe the patent. If any of these events occur, our business, financial condition, operating results and cash flows could be materially and adversely affected.

Our collaborators and licensors may not adequately protect our intellectual property rights. These third parties may have the first right to maintain or defend intellectual property rights ~~that~~in which we have an interest and, although we may have the right to assume the maintenance and defense of such intellectual property rights if these third parties do not do so, our ability to maintain and defend such

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intellectual property rights may be compromised by the acts or omissions of these third parties. For example, we license ~~from:~~

~~Pfizer, Inc. an oligonucleotide adjuvant, CPG 7909, for use in our AV7909 (anthrax vaccine adsorbed with CPG 7909 adjuvant) anthrax vaccine product candidate.~~

from Opiant Pharmaceuticals, Inc. formulations of naloxone, for use in our NARCAN® Nasal Spray.

Pharma Consult GmbH autoinjectors, including the autoinjector used for our Trobigard® (atropine sulfate, obidoxime chloride) autoinjector.*

*Trobigard® is not currently approved or cleared by the FDA or any similar regulatory body and is only distributed to authorized government buyers for use outside the US. This product is not distributed in the US.

We also will rely on current and future trademarks to establish and maintain recognized brands. If we fail to acquire and protect such trademarks, our ability to market and sell our products, and therefore our business, financial condition, operating results, and cash flows could be materially and adversely affected.

Third parties may choose to file patent infringement claims against us; defending ourselves from such allegations could be costly, time-consuming, distracting to management, and could materially and adversely affect our business, financial condition, operating results, and cash flows.

Our development and commercialization activities, as well as any product candidates or products resulting from these activities, may infringe or be claimed to infringe patents and other intellectual property rights of third parties for which we do not hold sufficient licenses or other rights. Additionally, third parties may be successful in obtaining patent protection for technologies that cover development and commercialization activities in which we are already engaged. Third parties may own or control these patents and intellectual property rights in the United States and abroad. These third parties could bring claims against us that could cause us to incur substantial expenses to defend against these claims and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement or other similar suit is brought against us, we could be forced to stop or delay development, manufacturing, or sales of the product or product candidate that is the subject of the suit. Intellectual property litigation in the biopharmaceutical industry is common, and we expect this trend to continue.

As a result of patent infringement or other similar claims, or to avoid potential claims, we may choose or be required to seek a license from a third party and be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we are able to obtain a license, the rights may be non-exclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented

from commercializing a product, or be forced to cease some

aspect of our business operations. If, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms, if at all, or if an injunction is granted against us, these could materially harm our business, financial condition, operating results, and cash flows.

If we fail to comply with our obligations in our intellectual property licenses with third parties, we could lose license rights that are important to our business.

We are a party to a number of license agreements and expect to enter into additional license agreements in the future. Our existing licenses impose, and we expect future licenses will impose, various diligence, milestone payment, royalty, insurance, and other obligations on us. If we fail to comply with these obligations, the licensor may have the right to terminate the license and/or sue us for breach, which could cause us to not be able to market any product that is covered by the license and subject us to damages, which may be material.

If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products could be adversely affected.

We also rely upon unpatented proprietary technology, processes, and know-how, particularly as to our proprietary manufacturing processes. Because we do not have patent protection for all of our current products, our only other intellectual property protection for products, other than trademarks, is confidentiality regarding our manufacturing capability and specialty know-how, such as techniques, processes, and unique starting materials. However, these types of confidential information and trade secrets can be difficult to protect. We seek to protect this confidential information, in part, through agreements with our employees, consultants, and third parties, as well as confidentiality policies and audits, although these may not be successful in protecting our trade secrets and confidential information.

These agreements may be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known, including through a potential cyber security breach, or may be independently developed by competitors. If we are unable to protect the confidentiality of our proprietary information and know-how, or if others independently develop our proprietary information or processes, competitors may be able to use this information to develop products that compete with our products, which could materially and adversely impact our business.

One or more of our products could be subject to early competition from generic drugs and biosimilars.

One or more of our products is approved as a drug product under the provisions of the U.S. Food, Drug and Cosmetic Act (FDCA), which renders it susceptible to potential competition from generic manufacturers via the Hatch-Waxman Act and ANDA process. Generic manufacturers pursuing ANDA approval are not required to conduct costly and time-consuming clinical

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trials to establish the safety and efficacy of their products; rather, they are permitted to rely on the innovator’s data regarding safety and efficacy. Additionally, generic drug companies generally do not expend significant sums on sales and marketing activities, instead relying on pharmacists or payers to substitute the generic form of a drug for the branded form. Thus, generic manufacturers can sell their products at prices much lower than those charged by the innovative pharmaceutical or biotechnology companies who have incurred substantial expenses associated with the research and development of the drug product and who must spend significant sums marketing a new drug.

In recent years, generic manufacturers have used Paragraph IV certifications extensively to challenge the validity of patents listed in the FDA’s Approved Drug Products List with Therapeutic Equivalence Evaluations, commonly referred to as the Orange Book, on a wide array of innovative therapeutic products. We expect this trend to continue and to affect drug products with even relatively modest revenues.

Further, the 2010 Patient Protection and Affordable Care Act, which was signed into law on March 23, 2010, included a subtitle called the Biologics Price Competition and Innovation Act of 2009 (BPCIA). That Act established a regulatory scheme authorizing the FDA to approve biosimilars

and interchangeable biosimilars. As of January 1, 2018, the FDA has approved nine biosimilar products for use in the United States. No interchangeable biosimilars, have been approved. The FDA has issued several guidance documents outlining an approach to review and approval of biosimilars. Additional guidance is expected to be finalized by FDA in the near term.

Under the Act, a manufacturer may submit an application for licensure of a biologic product that is “biosimilar to” or “interchangeable with” a previously approved biological product or “reference product.” In order for the FDA to approve a biosimilar product, it must find that there are no clinically meaningful differences between the reference product and proposed biosimilar product in terms of safety, purity and potency. For the FDA to approve a biosimilar product as interchangeable with a reference product, the agency must find that the biosimilar product can be expected to produce the same clinical results as the reference product, and (for products administered multiple times) that the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.

Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date of approval of the reference product. The FDA may not approve a biosimilar product until 12 years from the date on which the reference product was approved. Even if a product is considered to be a reference product eligible for exclusivity, another company could market a competing version of that product if the FDA approves a full BLA for such product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of their product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law.

FINANCIAL RISKS

~~Servicing~~We have incurred significant indebtedness in connection with our acquisitions and servicing our debt requires a significant amount of ~~cash, and we~~cash. We may not have sufficient cash flow from our operations to pay our substantial debt.

Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. We may also seek additional debt financing to support our ongoing activities or to provide additional financial flexibility. Debt financing could have significant adverse consequences for our business, including:

requiring us to dedicate a substantial portion of any cash flow from operations to payment on our debt, which would reduce the amounts available to fund other corporate initiatives;

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increasing the amount of interest that we have to pay on debt with variable interest rates, if market rates of interest increase;

subjecting us, as under our senior secured credit facilities, to restrictive covenants that may reduce our ability to take certain corporate actions, acquire companies, products or technology, or obtain further debt financing;

requiring us to pledge our assets as collateral, which could limit our ability to obtain additional debt financing;

limiting our flexibility in planning for, or reacting to, general adverse economic and industry conditions; and

placing us at a competitive disadvantage compared to our competitors that have less debt, better debt servicing options or stronger debt servicing capacity.

We may not have sufficient funds or be able to obtain additional financing to pay the amounts due under our indebtedness. In addition, failure to comply with the covenants under our senior secured credit facilities and other debt ~~instruments~~agreements could result in an event of default under those ~~instruments.~~agreements. An event of default could result in the acceleration of amounts due under a particular debt ~~instrument~~agreement and a cross default and acceleration under other debt ~~instruments,~~agreements, and we may not have sufficient funds to pay or be able to obtain additional financing to make any accelerated payments. Under these circumstances, our lenders could seek to enforce security interests in our assets securing our indebtedness.

Our current indebtedness and any additional debt financing may restrict the operation of our business and limit the cash available for investment in ourbusiness operations.

In connection with the acquisition of Adapt, we entered into an amendment and restatement of our 2017 credit agreement to provide for new five-year syndicated

senior secured credit facilities that replaced our existing facility. The senior secured credit facilities include a $450 million Term Loan and the ability to borrow up to a $600 million revolver, of which we had outstanding borrowings of ~~$444~~$439 million and ~~$298~~

$383 million, respectively, as of ~~March 31,~~September 30, 2019. We may also seek additional debt financing to support our ongoing activities or to provide additional financial flexibility. Debt financing could have significant adverse consequences for our business, including:

the level, timing and cost of product sales and contract manufacturing services;

the extent to which we acquire or invest in and integrate companies, businesses, products or technologies;

the acquisition of new facilities and capital improvements to new or existing facilities;

the payment obligations under our indebtedness;

the scope, progress, results and costs of our development activities;

our ability to obtain funding from collaborative partners, government entities and non-governmental organizations for our development programs;

the extent to which we repurchase additional common stock under our authorized share repurchase program; and

the costs of commercialization activities, including product marketing, sales and distribution.

We may not have sufficient funds or be able to obtain additional financing to pay the amounts due under our indebtedness. In addition, failure to comply with the covenants under our debt ~~instruments~~agreements could result in an event of default under those instruments. An event of default could result in the acceleration of amounts due under a particular debt ~~instrument~~agreement and a cross default and acceleration under other debt ~~instruments,~~agreements, and we may not have sufficient funds or be able to obtain additional financing to make any accelerated payments. Under these circumstances, our lenders could seek to enforce security interests in our assets securing our indebtedness.

Our hedging program is subject to counterparty default risk.

We manage our interest rate risk in part by entering into interest rate swaps with a number of counterparties to swap a portion of our indebtedness that is based on variable interest rates to a fixed rate. As a result, we are subject to the risk that the counterparty to one or more of these contracts defaults on its performance under the contract. During an economic downturn, the counterparty's financial condition may deteriorate rapidly and with little notice and we may be unable to take action to protect our exposure. In the event of a counterparty default, we could incur losses, which may harm our business and financial condition. In the event that one or more of our counterparties becomes insolvent or files for bankruptcy, our ability to eventually recover any losses

EMERGENT BIOSOLUTIONS INC.

suffered as a result of that counterparty's default may be limited by the liquidity of the counterparty.

We may require significant additional funding and may be unable to raise capital when needed or on acceptable terms, which would harm our ability to grow our business, and our results of operations and financial condition.

If our capital resources are insufficient to meet our future capital requirements, we will need to finance our cash needs through public or private equity or debt offerings, bank loans or collaboration and licensing arrangements. In August 2018, we filed an automatic shelf registration statement, which immediately became effective under SEC rules. For so long as we continue to

satisfy the requirements to be deemed a “well-known seasoned issuer” under SEC rules (which include, among other things, the timely filing of our reports under the Exchange Act and maintenance of at least $700 million of public float or issuing an aggregate amount of $1 billion of non-convertible securities, other than common stock, in registered offerings for cash during the past three years), this shelf registration statement, effective until August 8, 2021, allows us to issue an unrestricted amount of equity, debt and certain other types of securities through one or more future primary or secondary offerings. If we do not file a new shelf registration statement prior to August 8, 2021, the existing shelf registration statement will expire, and we will not be able to publicly raise capital or issue debt until a new registration statement is filed and becomes effective. There can be no assurance that we will be eligible to file an automatically effective shelf registration statement at a future date when we may need to raise funds publicly.

If we raise funds by issuing equity securities, our stockholders may experience dilution. Public or bank debt financing, if available, may involve agreements that include covenants, like those contained in our senior secured credit facilities, limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, pursuing acquisition opportunities or declaring dividends. If we raise funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies or product candidates or grant licenses on terms that may not be favorable to us. We are not restricted under the terms of the indenture governing our 2.875% Convertible Senior Notes due 2021 (Senior

Convertible Notes) from incurring additional debt, securing existing or future debt, recapitalizing our debt or taking a number of other actions that could have the effect of diminishing our ability to make payments on our indebtedness. However, our senior secured credit facilities restrict our ability to incur additional indebtedness, including secured indebtedness.

Economic conditions may make it difficult to obtain financing on attractive terms, or at all. If financing is unavailable or lost, our business, operating results, financial condition and cash flows would be adversely affected, and we could be forced to delay, reduce the scope of or eliminate many of our planned activities.

We may not maintain profitability in future periods or on a consistent basis.

Although we have been profitable for each of the last five fiscal years, we have not been profitable for every quarter during that time. ~~For example, we incurred a net loss in the second quarter of 2016 and in each of the first quarters of 2019, 2018, 2015, 2014 and 2013.~~

Our profitability has been substantially dependent on ~~BioThrax~~ product sales, which historically have fluctuated significantly from quarter to quarter, and we expect that they will continue to fluctuate significantly based primarily on the timing of our fulfillment of orders from the USG. We may not be able to achieve consistent profitability on a quarterly basis or sustain or increase profitability on an annual basis.

The expansion of our international operations increases our risk of exposure to credit losses.

~~THE SPIN-OFF OF OUR BIOSCIENCES BUSINESS~~

IfAs we continue to expand our business activities with foreign governments in certain countries that have experienced deterioration in credit and economic conditions or otherwise, our exposure to uncollectible accounts will rise. Global economic conditions and liquidity issues in certain countries have resulted and may continue to result in delays in the ~~spin-off distribution on August 1, 2016~~collection of ~~all of the outstanding shares of Aptevo Therapeutics Inc. common stock to our stockholders does not qualify as a tax-free transaction for U.S. federal income tax purposes, we~~accounts receivables and ~~our stockholders could be subject to significant tax liabilities.~~

It was our intention that our distribution on August 1, 2016 of all of the outstanding shares of Aptevo common stock to our stockholders (the Distribution), together with certain related transactions, qualify as a tax-free transaction described under Sections 355may result in credit losses. Future governmental actions and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the Code). In anticipation of the Distribution, we received a favorable private letter ruling from the Internal Revenue Service (the IRS), regarding certain U.S. federal income tax matters relating to the Distribution and certain related transactions and an opinion of counsel substantially to the effect that, for U.S. federal income tax purposes, the Distribution, together with certain related transactions, will qualify as a transaction described under Sections 355 and 368(a)(1)(D) of the Code. A “private letter ruling,” is a written statement issued to a taxpayer by an Associate Chief Counsel Office of the Office of Chief Counsel that interprets and applies the tax laws to acustomer specific ~~set of facts. Our private letter ruling is based on certain facts and representations submitted by~~actions may require us to re-evaluate the IRS and the opinion of counsel was based upon and relied on, among other things, the IRS private letter ruling and certain facts and assumptions, as well as certain representations and covenants of us and Aptevo contained in a tax matters agreement and certain representations contained in representation letters provided by us, Aptevo and certain stockholders to such counsel, including representations and covenants relating to the past and future conduct of us, Aptevo and such stockholders. If any of these facts, assumptions, representations, or covenants are, or become, inaccurate or incomplete, the IRS private letter ruling and/or the opinion of counsel may be invalid and the conclusions reached therein could be jeopardized and, as a result, the Distribution, together with certain related transactions, could fail to qualify as a tax-free transaction described under Sections 355 and 368(a)(1)(D) of the Code for U.S. federal income tax purposes.

~~In addition, the IRS private letter ruling only addresses certain limited matters relevant to~~

determining whether the Distribution, together with certain related transactions, qualifies as a transaction described under Sections 355 and 368(a)(1)(D) of the Code, and the opinion of counsel only represents the judgment of such counsel, which is not binding on the IRS or any court. Accordingly, notwithstanding the IRS private letter ruling and the opinion of counsel, there can be no assurance that the IRS will not assert that the Distribution, together with certain related transactions, should be treated as a taxable transaction for U.S. federal income tax purposes or that a court would not sustain such a challenge.

If the Distribution, together with certain related transactions, fails to qualify as a tax-free transaction described under Sections 355 and 368(a)(1)(D) of the Code, for U.S. federal income tax purposes, in general, (i) we would recognize taxable gain on the Distribution equal to the amount by which the fair market value of the Aptevo shares distributed to our stockholders exceeded our tax basis in the Aptevo shares and (ii) eachcollectability of our ~~stockholders who received Aptevo shares in the Distribution would be treated as receiving a taxable distribution equal to the fair market value of the Aptevo shares received by such stockholder.~~

Under the tax matters agreement that we entered into with Aptevo in connection with the spin-off, Aptevo may be required to indemnify us against any tax liabilities and related expenses resulting from the failure of the Distribution, together with certain related transactions, to qualify as a transaction described under Sections 355 and 368(a)(1)(D) of the Code to the extent that the failure to so qualify is attributable to actions, events or transactions relating to Aptevo’s stock, assets or business, or a breach of the relevant representations or covenants made by Aptevo in the tax matters agreement or the IRS private letter ruling or in the representation letters provided to our counsel for purposes of their opinion. Any such indemnity obligations could be material, and there can be no assurance that Aptevo will be able to pay any such indemnification.

To preserve the tax-free treatment of the Distribution, together with certain related transactions, and in addition to Aptevo's indemnity obligation, the tax matters agreement, which expired on August 2, 2018, restricted Aptevo from taking any action that prevents such transactions from being tax-free for U.S. federal income tax purposes. In particular, for the two-year period following the Distribution, Aptevo was restricted from taking certain actions (including restrictions on share issuances, business combinations, sales of assets, amendments to organizational documents and similar transactions) that could cause the Distribution, together with certain related transactions, to fail to qualify as a tax-free transaction for U.S. federal income tax purposes. There can be no assurance that Aptevo adequately complied with these restrictions. If a finding is made by

~~the IRS through a tax audit that Aptevo failed to satisfy its obligations, this could have a substantial impact on our tax obligations, consolidated financial condition and cash flows.~~

In connection with Aptevo’s separation from us, Aptevo agreed to indemnify us for certain matters. This indemnity may not be sufficient to hold us harmless from the full amount of losses that we may incur in connection with these matters, and Aptevo may not be able to satisfy its indemnification obligations to us.

Pursuant to the agreements that we entered into with Aptevo at the time of Aptevo’s separation from us, Aptevo agreed to indemnify us for certain matters, including liabilities related to Aptevo’s business or for which Aptevo otherwise agreed to be responsible in the separation. This indemnity from Aptevo may not be sufficient to protect us against the full amount of losses that we may incur in connection with these matters, including if third parties assert claims against us for liabilities that were allocated to Aptevo in the separation. Moreover, Aptevo may dispute its indemnification obligation to us or have insufficient resources to satisfy its indemnification obligations to us. Even if we ultimately succeed in recovering from Aptevo the amount of any losses that we incur in connection with these matters, the recovery could take a substantial amount of timeaccounts receivable and we may ~~be required to bear these~~potentially incur credit losses ~~ourselves while we seek recovery. Each of these risks could negatively affect~~that may materially impact our ~~business,~~ operating ~~results, financial condition and cash flows.~~

results.

OTHER BUSINESS RISKS

We face product liability exposure, which could cause us to incur substantial liabilities andnegatively affect our business, financial condition and results of operations.

We face an inherent risk of product liability exposure related to the sale of our products, any other products that we successfully acquire or develop and the testing of our product candidates in clinical trials.

One measure of protection against such lawsuits is coverage under the PREP Act, which was signed into law in December 2005. The PREP Act creates liability protection for manufacturers of biodefense countermeasures when the Secretary of HHS issues a declaration for their manufacture, administration or use. A PREP Act declaration is meant to provide liability protection from all claims under federal or state law for loss arising out of the administration or use of a covered countermeasure under a government contract. The Secretary of HHS has issued PREP Act

EMERGENT BIOSOLUTIONS INC.

declarations identifying certain of our products, namely BioThrax, ACAM2000, raxibacumab, Anthrasil, BAT and VIGIV, as covered countermeasures. These declarations expire in 2022. Manufacturers are not entitled to protection under

the PREP Act in cases of willful misconduct. We cannot predict whether the Secretary of HHS will renew the declarations when they expire, whether Congress will fund the relevant PREP Act compensation programs, or whether the necessary prerequisites for immunity would be triggered with respect to our products or product candidates.

Additionally, certain of our products, namely BioThrax and RSDL, are certified anti-terrorism products covered under the protections of the Support Anti-Terrorism by Fostering Effective Technology Act of 2002 (the SAFETY Act). The SAFETY Act creates product liability limitations for qualifying anti-terrorism technologies for claims arising from or related to an act of terrorism. Although we are entitled to the benefits of the SAFETY Act for BioThrax and RSDL, the SAFETY Act may not provide adequate protection from claims made against us.

If we cannot successfully defend ourselves against future claims that our products or product candidates caused injuries and if we are not entitled to indemnity by the USG, or the USG does not honor its obligations to us under the PREP Act or SAFETY Act, or if the indemnification under the PREP Act and SAFETY Act is not adequate to cover all claims, we may incur substantial liabilities. Regardless of merit or eventual outcome, product liability claims may result in:

decreased demand or withdrawal of a product;

injury to our reputation;

withdrawal of clinical trial participants;

costs to defend the related litigation;

substantial monetary awards to trial participants or patients;

loss of revenue; and

an inability to commercialize products that we may develop.

The amount of insurance that we currently hold

may not be adequate to cover all liabilities that we may incur. Further product liability insurance may be difficult and expensive to obtain. We may not be able to maintain insurance coverage at a reasonable cost and we may not be able to obtain insurance coverage that will be adequate to satisfy all potential liabilities. For example, we may not have sufficient insurance against potential liabilities associated with a possible large-scale deployment of BioThrax as a countermeasure to a bioterrorism threat. We rely on PREP Act protection for BioThrax, raxibacumab, ACAM2000, Anthrasil, BAT and VIGIV, and SAFETY Act protection for BioThrax and RSDL in addition to our insurance coverage to help mitigate our product liability exposure for these products. Additionally, potential product liability claims related to our commercial products, including NARCAN® Nasal Spray, Vivotif and Vaxchora, may be made by patients, health care providers or others who sell or consume these products. Such claims may be made even with

respect to those products that possess regulatory approval for commercial sale. Claims or losses in excess of our product liability insurance coverage could have a material adverse effect on our business, financial condition, operating results and cash flows.

The accuracy of our financial reporting depends on the effectiveness of our internal control over financial reporting. A material weakness in our internal control over financial reporting could have an adverse effect on our business and financial results and our ability to meet our reporting obligations could be negatively affected, each of which could negatively affect the trading price of our common stock.

Internal control over financial reporting can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements and may not prevent or detect misstatements. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Failure to maintain effective internal control over financial reporting, or lapses in disclosure controls and procedures, could impact our financial information and disclosures, require significant resources to remediate, and expose us to legal or regulatory proceedings.

We regularly review and update our internal controls and disclosure controls and procedures. In addition, we are required under the Sarbanes-Oxley Act of 2002 to report annually on our internal control over financial reporting. Our system of internal controls, however well-designed, can provide only reasonable, not absolute, assurances that the objectives of the system are met. If we, or our independent registered public accounting firm, determine that our internal controls over financial reporting, or the internal controls of other companies we may acquire, are not effective, or we discover areas that need improvement in the future, these shortcomings could have an adverse effect on our

EMERGENT BIOSOLUTIONS INC.

business and financial reporting, and the trading price of our common stock could be negatively affected.

We rely significantly on information technology systems and any failure, inadequacy, interruption or security lapse of that technology, including any cyber security incidents, could harm our ability to operate our business effectively or result in data leakage of proprietary and confidential business and employee information.

Our business is increasingly dependent on critical, complex and interdependent information technology systems, including Internet-based systems, to support business processes as well as internal and external communications. The size and complexity of our computer systems make them potentially vulnerable to

interruption, invasion, computer viruses, destruction, malicious intrusion and additional related disruptions, which may result in the impairment of production and key business processes.

In addition, our systems are potentially vulnerable to data security breaches-whether by employee error, malfeasance or other disruption-which may expose sensitive data to unauthorized persons. Such data security breaches could lead to the loss of trade secrets or other intellectual property or could lead to the public exposure of personal information, including sensitive personal information, of our employees, clinical trial patients, customers and others.

A significant business disruption or a breach in security resulting in misappropriation, theft or sabotage with respect to our proprietary and confidential business and employee information could result in financial, legal, business or reputational harm to us, any of which could materially and adversely affect our business, financial condition and operating results.

Our success is dependent on our continued ability to attract, motivate and retain key personnel, and any failure to attract or retain key personnel maynegatively affect our business.

Because of the specialized scientific nature of our business, our ability to develop products and to compete with our current and future competitors largely depends upon our ability to attract, retain and motivate highly qualified managerial and key scientific and technical personnel. If we are unable to retain the services of one or more of the principal members of senior management or other key employees, our ability to implement our business strategy could be

materially harmed. We face intense competition for qualified employees from biopharmaceutical companies, research organizations and academic institutions. Attracting, retaining or replacing these personnel on acceptable terms may be difficult and time-consuming given the high demand in our industry for similar personnel. We believe part of being able to attract, motivate and retain personnel is our ability to offer a competitive compensation package, including equity incentive awards. If we cannot offer a competitive compensation package to attract and retain the qualified personnel necessary for the continued development of our business, we may not be able to maintain our operations or grow our business.

RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK

Fuad El-Hibri, executive chairman of our Board of Directors, hassignificant influence over us through his substantial beneficial ownership of our common stock, including an ability to influence the election ofthe

members of our Board of Directors, or delay or prevent a change ofcontrol of us.

Mr. El-Hibri has the ability to significantly influence the election of the members of our Board of Directors due to his substantial beneficial ownership of our common stock. As of ~~April 26,~~October 25, 2019, Mr. El-Hibri was the beneficial owner of approximately 11% of our outstanding common stock. As a result, Mr. El-Hibri could exercise substantial influence over all corporate actions requiring board or stockholder approval, including a change of control, or any amendment of our certificate of incorporation or by-laws. The control by Mr. El-Hibri may prevent other stockholders from influencing significant corporate decisions. In addition, Mr. El-Hibri's significant beneficial ownership of our shares could present the potential for a conflict of interest.

Provisions in our certificate of incorporation and by-laws and under Delaware law may discourage acquisition proposals, delay a change in control or prevent transactions that stockholders may consider favorable.

Provisions in our certificate of incorporation and by-laws may discourage, delay or prevent a merger, acquisition or other changes in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management.

These provisions include:

the classification of our directors;

limitations on changing the number of directors then in office;

limitations on the removal of directors;

limitations on filling vacancies on the board;

advance notice requirements for stockholder nominations of candidates for election to the Board of Directors and other proposals;

EMERGENT BIOSOLUTIONS INC.

the inability of stockholders to act by written consent;

the inability of stockholders to call special meetings; and

the ability of our Board of Directors to designate the terms of and issue a new series of preferred stock without stockholder approval.

The affirmative vote of holders of our capital stock representing at least 75% of the voting power of all outstanding stock entitled to vote is required to amend or repeal the above provisions of our certificate of incorporation. The affirmative vote of either a majority of the directors present at a meeting of our Board of Directors or holders of our capital stock representing at least 75% of the voting power of all outstanding stock

entitled to vote is required to amend or repeal our by-laws.

In addition, we are subject to Section 203 of the Delaware General Corporation Law (Section 203). In general and subject to certain exceptions, Section 203 prohibits a publicly-held corporation from engaging in a business combination with an interested stockholder, generally a person which, together with its affiliates, owns or within the last three years has owned 15% or more of the corporation's voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. Accordingly, Section 203 may discourage, delay or prevent a change in control of us.

Our Board of Directors may implement a new stockholder rights plan without stockholder approval, which could prevent a change in control of us in instances inwhich some stockholders may believe a change in control is in their best interests.

Our Board of Directors may implement a stockholder rights plan without stockholder approval. We previously implemented a stockholder rights plan, which expired on November 14, 2016. Under our prior stockholder rights plan, we issued to each of our stockholders one preferred stock purchase right for each outstanding share of our common stock. Each right, when exercisable, would have entitled its holder to purchase from us a unit consisting of one ~~one-thousandth~~one-

thousandth of a share of series A junior participating preferred stock at a purchase price of $150 in cash, subject to adjustments. Our stockholder rights plan was intended to protect stockholders in the event of an unfair or coercive offer to acquire us and to provide our Board of Directors with adequate time to evaluate unsolicited offers.

Our Board of Directors may implement a new stockholder rights plan, which may have anti-takeover effects, potentially preventing a change in control of us in instances in which some stockholders may believe a change in control is in their best interests. This could cause substantial dilution to a person or group that attempts to acquire us on terms that our Board of Directors does not believe are in our best interests or those of our stockholders and may discourage, delay or prevent a merger or acquisition that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares.

Our stock price is volatile and purchasers of our common stock could incursubstantial losses.

Our stock price has been, and is likely to continue to be, volatile. The market price of our common stock could fluctuate significantly for many reasons, including

in response to the risks described in this “Risk Factors” section, or for reasons unrelated to our operations, such as reports by industry analysts, investor perceptions or negative announcements by our customers, competitors or suppliers regarding their own performance, as well as industry conditions and general financial, economic and political instability. From November 15, 2006, when our common stock first began trading on the New York Stock Exchange, through ~~April 26,~~October 25, 2019, our common stock has traded as high as $73.89 per share and as low as ~~$4.40~~$4.20 per share. The stock market in general as well as the market for biopharmaceutical companies in particular has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. The market price of our common stock may be influenced by many factors, including, among others:

contracts, decisions and procurement policies by the USG affecting BioThrax and our other products and product candidates;

the success of competitive products or technologies;

results of clinical and non-clinical trials of our product candidates;

announcements of acquisitions, financings or other transactions by us;

litigation or legal proceedings;

public concern as to the safety of our products;

termination or delay of a development program;

EMERGENT BIOSOLUTIONS INC.

the recruitment or departure of key personnel;

variations in our product revenue and profitability; and

the other factors described in this “Risk Factors” section.

Because we currently do not pay dividends, investors will benefit from an investment in our common stock only if it appreciates in value.

We currently do not pay dividends on our common stock. Our senior secured credit facilities limit and any future debt agreements that we enter into may limit our ability to pay dividends. As a result, capital appreciation, if any, of our common stock will be the sole source of gain for our stockholders for the foreseeable future.

A significant portion of our shares may be sold into the market at any time. This could cause the market price of our common stock to dropsignificantly.

Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales or the perception in the market that the holders of a large number of shares intend to sell shares could reduce the market price of our common stock. Moreover, holders of an aggregate of approximately 6 million shares of our common stock outstanding as of ~~April 26,~~September 30, 2019, have the right to require

us to register these shares of common stock under specified circumstances.

EMERGENT BIOSOLUTIONS INC.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Securities

Not applicable.

Use of Proceeds

Not applicable.

Purchases of Equity Securities

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

The exhibits required to be filed by Item 601 of Regulation S-K are listed in the Exhibit Index immediately preceding the exhibits hereto.

EMERGENT BIOSOLUTIONS INC.

EXHIBIT INDEX



Exhibit Number	Description
10.1^#†	~~Amendment No. 2 to License Agreement, dated as of December 15, 2014, by and between Opiant Pharmaceuticals, Inc. (formerly known as Lightlake Therapeutics Inc.) and Adapt Pharma Operations Limited,~~Modification #3, effective ~~March 18, 2019.~~
~~10.2~~	~~Form of 2019-2021 Performance-Based Stock Unit Award Agreement (incorporated by reference to Exhibit 10~~July 30, 2019, to the ~~Company's Current Report on Form 8-K, filed on February 12, 2019).~~Award/Contract, effective September 30, 2016, from the BioMedical Advanced Research and Development Authority to Emergent Product Development Gaithersburg Inc.
~~31.1~~ 10.2^#†	Notice of Award Letter, dated August 30, 2019, from the Department of Health and Human Services to Emergent Product Development Gaithersburg, Inc. awarding Contract 75A50119C00052 (Requisition: OS245611) for Acquiring Doses of ACAM2000.
31.1 ^#	Certification of the Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a).
31.2 ^#	Certification of the Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a).
32.1 ^#	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 ^#	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101. INS	XBRL Instance ~~Document.~~Document the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document.
101.CAL	Inline XBRL Taxonomy Calculation Linksbase Document.
101.DEF	Inline XBRL Taxonomy Definition Linksbase Document.
101.LAB	Inline XBRL Taxonomy Label Linksbase Document.
101.PRE	Inline XBRL Taxonomy Presentation Linksbase Document.

Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language):


(i)	Condensed Consolidated Statements of Operations for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018;


(ii)	Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018;


(iii)	Condensed Consolidated Balance Sheets at ~~March 31,~~as of September 30, 2019 and December 31, 2018;


(iv)	Condensed Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~March 31,~~September 30, 2019 and 2018; and


(v)	Condensed Consolidated Statement of Changes in Stockholders' Equity for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018; and


(vi)	Notes to Condensed Consolidated Financial Statements.


#	Filed herewith.

† Certain confidential portions of this exhibit were omitted by means of marking such portions with asterisks because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed.

EMERGENT BIOSOLUTIONS INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

EMERGENT BIOSOLUTIONS INC.

By: /s/ROBERT G. KRAMER, SR.

Robert G. Kramer, Sr.

President and Chief Executive Officer

(Principal Executive Officer)

Date: ~~May 8,~~November 6, 2019

By: /s/RICHARD S. LINDAHL

Richard S. Lindahl

Executive Vice President, Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

Date: ~~May 8,~~November 6, 2019

6068



(Mark One)
x☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended ~~March 31,~~	September 30, 2019

OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to



Delaware		14-1902018
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

400 Professional Drive Suite 400
Gaithersburg,	Maryland	20879
(Address and zip code of Principal Executive Offices)			~~(Zip Code)~~



Securities registered pursuant to Section 12(b) of the Act
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.001 per share	EBS	New York Stock Exchange



Large accelerated filerx	☒	Accelerated filer	☐
Non-accelerated filer ☐	☐	Smaller reporting company	☐
		Emerging growth company ☐		☐



Part I. Financial Information		Page No.
Item 1.	~~Condensed Consolidated~~ Financial Statements ~~(Unaudited)~~	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Comprehensive ~~Loss~~Income	7
	Condensed Consolidated Statements of Cash Flows	8
	Condensed Consolidated Statements of Changes in Stockholders' Equity	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

Part II. Other Information
Item 1.	Legal Proceedings	36
Item 1.1A.	~~Legal Proceedings~~Risk Factors	36
Item ~~1A.~~2.	~~Risk Factors~~
~~Item 2.~~	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3.	Defaults Upon Senior Securities	66
Item 4.	Mine Safety Disclosures	66
Item 5.	Other Information	66
Item 6.	Exhibits	66

	Signatures	68


•	our ability to perform under our contracts with the U.S. government (USG) related to BioThrax, our AV7909 product candidate, and our other public health threat products, including the timing of and specifications relating to deliveries;


•	our ability to secure EUA and eventual licensure of AV7909 from the FDA within the anticipated timeframe, if at all;


•	our ability and the ability of our collaborators to defend underlying patents related to NARCAN Nasal Spray from infringement by generic entrants;


	March 31, 2019			December 31, 2018			September 30, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	137.2		$	112.2		$	139.2		$	112.2
Restricted cash	0.2			0.2			0.2			0.2
Accounts receivable, net	121.5			262.5			281.2			262.5
Inventories	211.0			205.8			230.2			205.8
Prepaid expenses and other current assets	58.6			40.1			49.2			40.1
Total current assets	528.5			620.8			700.0			620.8

Property, plant and equipment, net	513.4			510.2			529.1			510.2
Intangible assets, net	757.1			761.6			727.7			761.6
In-process research and development	41.0			50.0			41.0			50.0
Goodwill	267.7			259.7			268.6			259.7
Other assets	46.0			27.1			67.4			27.1
Total assets	$	2,153.7		$	2,229.4		$	2,333.8		$	2,229.4

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	78.6		$	80.7		$	91.3		$	80.7
Accrued expenses	49.6			30.7			51.8			30.7
Contingent consideration, current portion	62.7			5.6			55.7			5.6
Accrued compensation	36.9			58.2			55.8			58.2
Long-term indebtedness, current portion	10.1			10.1
Debt, current portion							10.1			10.1
Other current liabilities	10.5			15.1			10.6			15.1
Total current liabilities	248.4			200.4			275.3			200.4
Contingent consideration	10.0			54.4			14.5			54.4
Long-term indebtedness	732.4			784.5
Debt							813.3			784.5
Deferred tax liability	66.4			67.5			61.1			67.5
Deferred revenue, net of current portion	64.7			62.5
Contract liabilities							81.6			62.5
Other liabilities	44.3			49.2			53.0			49.2
Total liabilities	$	1,166.2		$	1,218.5		$	1,298.8		$	1,218.5
Commitments and contingencies (Notes 8 & 14)
Commitments and contingencies (Notes 8 & 16)
Stockholders' equity:
Preferred stock, $0.001 par value; 15.0 shares authorized, no shares issued or outstanding at both 2019 and 2018	—			—			—			—
Common stock, $0.001 par value; 200.0 shares authorized, 52.6 shares issued and 51.4 shares outstanding at 2019; 52.4 shares issued and 51.2 shares outstanding at 2018	0.1			0.1
Common stock, $0.001 par value; 200.0 shares authorized, 52.8 shares issued and 51.6 shares outstanding at 2019; 52.4 shares issued and 51.2 shares outstanding at 2018							0.1			0.1
Treasury stock, at cost, 1.2 common shares at both 2019 and 2018	(39.6		)	(39.6		)	(39.7		)	(39.6		)
Additional paid-in capital	690.2			688.6			708.8			688.6
Accumulated other comprehensive loss	(4.5		)	(5.5		)	(9.1		)	(5.5		)
Retained earnings	341.3			367.3			374.9			367.3
Total stockholders' equity	987.5			1,010.9			1,035.0			1,010.9
Total liabilities and stockholders' equity	$	2,153.7		$	2,229.4		$	2,333.8		$	2,229.4


	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018			2019			2018
Revenues:
Product sales, net	$	153.0		$	75.8		$	256.2		$	133.3		$	592.7		$	389.1
Contract manufacturing	15.9			26.1			20.0			22.1			54.6			72.0
Contracts and grants	21.7			15.9			35.6			18.2			98.4			50.6
Total revenues	190.6			117.8			311.8			173.6			745.7			511.7

Operating expenses:
Cost of product sales and contract manufacturing	91.8			54.3			108.0			69.3			300.7			208.8
Research and development	46.1			29.1			53.4			37.0			163.4			90.8
Selling, general and administrative	65.4			40.0			65.0			42.1			201.3			121.8
Amortization of intangible assets	14.5			3.9			14.7			3.9			43.9			11.7
Total operating expenses	217.8			127.3			241.1			152.3			709.3			433.1

Loss from operations	(27.2		)	(9.5		)
Income from operations							70.7			21.3			36.4			78.6

Other income (expense):
Interest expense	(9.6		)	(0.2		)	(10.3		)	(0.6		)	(29.3		)	(1.8		)
Other income (expense), net	(1.0		)	0.3
Other (expense) income, net							(1.5		)	0.8			(1.2		)	1.2
Total other income (expense), net	(10.6		)	0.1			(11.8		)	0.2			(30.5		)	(0.6		)

Loss before benefit from income taxes	(37.8		)	(9.4		)
Income tax benefit	(11.8		)	(4.5		)
Net loss	$	(26.0	)	$	(4.9	)
Income before income taxes							58.9			21.5			5.9			78.0
Income tax expense (benefit)							15.7			0.6			(1.7		)	11.8
Net income							$	43.2		$	20.9		$	7.6		$	66.2

Net loss per common share
Net income per common share
Basic	$	(0.51	)	$	(0.10	)	$	0.84		$	0.42		$	0.15		$	1.33
Diluted	$	(0.51	)	$	(0.10	)	$	0.83		$	0.41		$	0.15		$	1.29
Shares used in computing loss per share
Shares used in computing income per share
Basic	51.2			49.6			51.6			50.1			51.4			49.9
Diluted	51.2			49.6			52.3			51.5			52.3			51.2


	$0.001 Par Value Common Stock			Additional Paid-In Capital			Treasury Stock						Accumulated Other Comprehensive Loss			Retained Earnings				Total Stockholders' Equity			$0.001 Par Value Common Stock					Additional Paid-In Capital			Treasury Stock							Accumulated Other Comprehensive Loss				Retained Earnings			Total Stockholders' Equity
	Shares	Amount				Shares			Amount							Retained Earnings			Shares				Amount				Shares	Additional Paid-In Capital			Amount							Accumulated Other Comprehensive Loss				Retained Earnings			Total Stockholders' Equity
Three Months Ended March 31, 2019				Additional Paid-In Capital									Accumulated Other Comprehensive Loss

Balance at December 31, 2018	52.4	$	0.1	$	688.6		(1.2	)		$	(39.6	)	$	(5.5	)	$	367.3			Total Stockholders' Equity	$	1,010.9		52.4		$	0.1		$	688.6		(1.2	)		$	(39.6	)		$	(5.5	)		$	367.3		$	1,010.9
Employee equity plans activity	0.2	—		1.6			—			—			—			—				1.6			0.4		—			20.2			—			(0.1		)		—				—			20.1
Net loss	—	—		—			—			—			—			(26.0		)		(26.0		)
Net income																							—		—			—			—			—				—				7.6			7.6
Other comprehensive income	—	—		—			—			—			1.0			—				1.0			—		—			—			—			—				(3.6		)		—			(3.6		)
Balance at March 31, 2019	52.6	$	0.1	$	690.2		(1.2	)		$	(39.6	)	$	(4.5	)	$	341.3			$	987.5
Balance at September 30, 2019																							52.8		$	0.1		$	708.8		(1.2	)		$	(39.7	)		$	(9.1	)		$	374.9		$	1,035.0

Balance at June 30, 2019																							52.7		$	0.1		$	701.8		(1.2	)		$	(39.7	)		$	(5.0	)		$	331.7		$	988.9
Employee equity plans activity																							0.1		—			7.0			—			—				—							7.0
Net income																							—		—			—			—			—				—				43.2			43.2
Other comprehensive loss																							—		—			—			—			—				(4.1		)		—			(4.1		)
Balance at September 30, 2019																							52.8		$	0.1		$	708.8		(1.2	)		$	(39.7	)		$	(9.1	)		$	374.9		$	1,035.0

Three Months Ended March 31, 2018
Balance at December 31, 2017	50.6	$	0.1	$	618.3		(1.2	)		$	(39.5	)	$	(3.7	)	$	337.1			$	912.3		50.6		$	0.1		$	618.3		(1.2	)		$	(39.5	)		$	(3.8	)		$	337.1		$	912.2
Adoption of new revenue accounting standard (ASC 606), net of tax	—	—		—			—			—			—			(32.5		)		(32.5		)	—		—			—			—			—				—				(32.5		)	(32.5		)
Balance at January 1, 2018	50.6	0.1		618.3			(1.2	)		(39.5		)	(3.7		)	304.6				879.8			50.6		0.1			618.3			(1.2	)		(39.5		)		(3.8		)		304.6			879.7
Employee equity plans activity	0.4	—		6.1			—			—			—			—				6.1			0.8		—			21.8			—			(0.1		)		—				—			21.7
Treasury stock	—	—		—			—			(0.1		)	—			—				(0.1		)
Net loss	—	—		—			—			—			—			(4.9		)		(4.9		)
Other comprehensive income	—	—		—			—			—			0.4			—				0.4
Net income																							—		—			—			—			—				—				66.2			66.2
Other comprehensive loss																							—		—			—			—			—				(1.0		)		—			(1.0		)
Balance at September 30, 2018																							51.4		$	0.1		$	640.1		(1.2	)		$	(39.6	)		$	(4.8	)		$	370.8		$	966.6

Balance at March 31, 2018	51.0	$	0.1	$	624.4		(1.2	)		$	(39.6	)	$	(3.3	)	$	299.7			$	881.3
Balance at June 30, 2018																							51.2		$	0.1		$	632.6		(1.2	)		$	(39.6	)		$	(4.6	)		$	349.9		$	938.4
Employee equity plans activity																							0.2		—			7.5			—			—				—				—			7.5
Net income																							—		—			—			—			—				—				20.9			20.9
Other comprehensive loss																							—		—			—			—			—				(0.2		)		—			(0.2		)
Balance at September 30, 2018																							51.4		$	0.1		$	640.1		(1.2	)		$	(39.6	)		$	(4.8	)		$	370.8		$	966.6


•	Vaccines - AV7909® (Anthrax Vaccine Absorbed with Adjuvant), BioThrax® (Anthrax Vaccine Adsorbed), ACAM2000® (Smallpox (Vaccinia) Vaccine, Live), Vaxchora® (Cholera Vaccine, Live, Oral), and Vivotif® (Typhoid Vaccine, Live, Oral Ty21a).


•	Devices - NARCAN® (naloxone HCl) Nasal Spray for opioid overdose, and RSDL® (Reactive Skin Decontamination Lotion Kit).


•	Therapeutics - raxibacumab (Anthrax Monoclonal antibody therapeutic for anthrax),Anthrasil®( Anthrax Immune Globulin Intravenous (Human)), BAT®(Botulism Antitoxin Heptavalent), and VIGIV (Vaccinia Immune Globulin Intravenous (Human) therapeutic) for complications from smallpox vaccinations.



	October 15, 2018
Cash	$	581.5
Equity	37.7
Fair value of contingent purchase consideration	48.0
Preliminary purchase consideration	667.2
Adjustments	1.5
Updated purchase consideration	$	668.7



(In millions, except lease term and discount rate)	March 31, 2019
Operating lease right-of-use assets	$	12.9

Other current liabilities	2.0
Operating lease liabilities	11.6
Total operating lease liabilities	$	13.6

Operating leases:
Weighted Average Remaining Lease Term	9.3
Weighted Average Discount Rate	4.27		%



	Number of Instruments	Notional
Interest Rate Swaps	7	$	350.0



	October 15, 2018			Measurement Period Adjustments			Updated October 15, 2018
Estimated fair value of tangible assets acquired and liabilities assumed:
Cash	$	17.7		$	—		$	17.7
Accounts receivable	21.3			—			21.3
Inventory	41.4			—			41.4
Prepaid expenses and other assets	7.8			3.0			10.8
Accounts payable	(32.2		)	—			(32.2		)
Accrued expenses and other liabilities	(50.4		)	—			(50.4		)
Deferred tax liability, net	(62.4		)	(0.5		)	(62.9		)
Total estimated fair value of tangible assets acquired and liabilities assumed	(56.8		)	2.5			(54.3		)

Acquired in-process research and development	41.0			—			41.0
Acquired intangible assets	534.0			—			534.0
Goodwill	149.0			(1.0		)	148.0
Total purchase price	$	667.2		$	1.5		$	668.7



	October 4, 2018			Measurement Period Adjustments			Updated October 4, 2018
Estimated fair value of tangible assets acquired and liabilities assumed:
Cash	$	9.0		$	—		$	9.0
Accounts receivable	4.1			—			4.1
Inventory	19.7			—			19.7
Prepaid expenses and other assets	12.2			(0.3		)	11.9
Property, plant and equipment	57.8			—			57.8
Deferred tax assets	3.8			(0.2		)	3.6
Accounts payable	(3.5		)	—			(3.5		)
Accrued expenses and other liabilities	(33.6		)	(0.4		)	(34.0		)
Total estimated fair value of tangible assets acquired and liabilities assumed	69.5			(0.9		)	68.6

Acquired in-process research and development	9.0			(9.0		)	—
Acquired intangible assets	133.0			—			133.0
Goodwill	61.6			9.9			71.5
Total purchase price	$	273.1		$	—		$	273.1



	September 30, 2019		December 31, 2018
Raw materials and supplies	$	69.0	$	51.8
Work-in-process	106.6		103.2
Finished goods	54.6		50.8
Total inventories	$	230.2	$	205.8



	September 30, 2019			December 31, 2018
Land and improvements	$	46.3		$	44.6
Buildings, building improvements and leasehold improvements	234.6			216.2
Furniture and equipment	310.8			293.9
Software	54.0			55.2
Construction-in-progress	83.4			71.8
Property, plant and equipment, gross	729.1			681.7
Accumulated depreciation	(200.0		)	(171.5		)
Total property, plant and equipment, net	$	529.1		$	510.2



	March 31, 2019
Operating lease cost:
Amortization of right-of-use assets	$	0.6
Interest on lease liabilities	0.1
Total operating lease cost	$	0.7



(In millions, except lease term and discount rate)	Balance Sheet Location	September 30, 2019
Operating lease right-of-use assets	Other assets	$	19.4

Operating lease liabilities, current portion	Other current liabilities	2.5
Operating lease liabilities	Other liabilities	17.4
Total operating lease liabilities		$	19.9

Operating leases:
Weighted Average Remaining Lease Term (years)		9.3
Weighted Average Discount Rate		4.2		%


	March 31, 2019														September 30, 2019
	Estimated Life (years)	Cost		Measurement Period Adjustment		Additions		Gross Total		Accumulated Amortization			Net		Estimated Life (years)	Cost		Measurement Period Adjustment			Additions		Gross Total		Accumulated Amortization			Net
Intangible assets, net	5-22	$	818.4	—		$	10.0	$	828.4	$	(71.3	)	$	757.1	5-22	$	818.4	$	—		$	10.0	$	828.4	$	(100.7	)	$	727.7
IPR&D	indefinite	50.0		(9.0	)	—		41.0		—			41.0		indefinite	50.0		(9.0		)	—		41.0		—			41.0
Goodwill	indefinite	259.7		8.0		—		267.7		—			267.7		indefinite	259.7		8.9			—		268.6		—			268.6




Balance at December 31, 2018	$	60.0
Milestone achievement - asset acquisition	10.0
Measurement period adjustment	1.5
Change in fair value	12.4
Settlements	(13.7		)
Balance at September 30, 2019	$	70.2



Hedging derivatives	Amount of Gain/(Loss) Recognized in OCI on Derivative				Location of Gain or (Loss) Reclassified from Accumulated OCI into Income	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income
	September 30, 2019			September 30, 2018		September 30, 2019		September 30, 2018
Interest Rate Swaps	$	(4.2	)	—	Interest expense	$	0.5	$	—



	September 30, 2019			December 31, 2018
Senior secured credit agreement - Term loan due 2023	$	438.8		$	447.2
Senior secured credit agreement - Revolver loan due 2023	383.0			348.0
2.875% Convertible Senior Notes due 2021	10.6			10.6
Other	3.0			3.0
Total debt	835.4			808.8
Current portion of long-term debt, net of debt issuance costs	(10.1		)	(10.1		)
Unamortized debt issuance costs	(12.0		)	(14.2		)
Non-current portion of debt	$	813.3		$	784.5


	Three Months Ended March 31, 2019						Three Months Ended March 31, 2018						Three Months Ended September 30, 2019						Three Months Ended September 30, 2018
	U.S Government		Non-U.S. Government		Total		U.S Government		Non-U.S. Government		Total		U.S. Government		Non-U.S. Government		Total		U.S. Government		Non-U.S. Government		Total
Product sales	$	73.3	$	79.7	$	153.0	$	66.0	$	9.8	$	75.8	$	170.2	$	86.0	$	256.2	$	127.3	$	6.0	$	133.3
Contract manufacturing	—		15.9		15.9		—		26.1		26.1		—		20.0		20.0		—		22.1		22.1
Contracts and grants	20.4		1.3		21.7		14.8		1.1		15.9		35.6		—		35.6		16.7		1.5		18.2
Total revenues	$	93.7	$	96.9	$	190.6	$	80.8	$	37.0	$	117.8	$	205.8	$	106.0	$	311.8	$	144.0	$	29.6	$	173.6



	Nine Months Ended September 30, 2019						Nine Months Ended September 30, 2018
	U.S. Government		Non-U.S. Government		Total		U.S. Government		Non-U.S. Government		Total
Product sales	$	338.1	$	254.6	$	592.7	$	363.2	$	25.9	$	389.1
Contract manufacturing	—		54.6		54.6		—		72.0		72.0
Contracts and grants	94.3		4.1		98.4		46.7		3.9		50.6
Total revenues	$	432.4	$	313.3	$	745.7	$	409.9	$	101.8	$	511.7




December 31, 2018	$	73.1
Prepayments	34.6
Revenue recognized	(18.1		)
September 30, 2019	$	89.6




December 31, 2018	$	73.1
Deferral of revenue	4.9
Revenue recognized	(2.8		)
March 31, 2019	$	75.2



	September 30, 2019		December 31, 2018
Billed, net	$	251.4	$	234.0
Unbilled	29.8		28.5
Total, net	$	281.2	$	262.5



(in millions, except share and per share data)	Three Months Ended March 31,
(in millions, except share and per share data)	2019			2018
Numerator:
Net loss	$	(26.0	)	$	(4.9	)

Denominator:
Weighted-average number of shares—basic	51.2			49.6
Dilutive securities—equity awards	—			—
Weighted-average number of shares—diluted	51.2			49.6

Net loss per share - basic	$	(0.51	)	$	(0.10	)
Net loss per share - diluted	$	(0.51	)	$	(0.10	)



	Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
Net service cost	$	0.3		$	1.0
Expected return on plan assets, net of expenses	(0.1		)	(0.4		)
Total pension expense	$	0.2		$	0.6



	NARCAN Nasal Spray		Other Product Sales
	ACAM2000		Contract Manufacturing
	~~BioThrax~~Anthrax vaccines		Contracts and Grants



	Cost of Product Sales and Contract Manufacturing
l	~~Cost of Sales as a Percentage of Product Sales~~Gross profit margin for product sales and ~~Contract Manufacturing Revenue~~contract manufacturing



	Research and Development expense
l	Research and Development expense, net of contracts and grants revenue