Emergent BioSolutions Inc. (NYSE: EBS) today reported financial
results for the third quarter ended September 30, 2022.
“For more than 20 years, Emergent has been a dependable partner
to customers, including the U.S. and allied governments, in helping
prepare for public health threats through our products, services,
and development programs,” said Robert G. Kramer, president and
CEO. “As we continue to strengthen our operations, be guided by
financial discipline, and evaluate opportunities for growth, we
remain confident in our ability to deliver results for our
patients, customers, and shareholders.”
FINANCIAL HIGHLIGHTS (1)
($ in millions, except per share amounts) |
Q3 2022 |
Q3 2021 |
% Change |
Total Revenues |
$240.0 |
$329.0 |
(27)% |
Net Loss |
$(75.7) |
$(32.7) |
* |
Net Loss per Diluted Share |
$(1.52) |
$(0.61) |
* |
Adjusted Net Loss (2) |
$(63.2) |
$(19.3) |
* |
Adjusted Net Loss (2) per Diluted Share |
$(1.27) |
$(0.36) |
* |
Adjusted EBITDA (2) |
$(15.2) |
$(3.3) |
* |
Gross Margin % |
33% |
30% |
300 bps |
Adjusted Gross Margin % (2) |
34% |
31% |
300 bps |
* % change is greater than +/- 100% |
($ in millions, except per share amounts) |
YTD 2022 |
YTD 2021 |
% Change |
Total Revenues |
$790.2 |
$1,069.5 |
(26)% |
Net Income (Loss) |
$(135.8) |
$41.6 |
* |
Net Income (Loss) per Diluted Share |
$(2.71) |
$0.77 |
* |
Adjusted Net Income (Loss) (2) |
$(96.9) |
$82.3 |
* |
Adjusted Net Income (Loss) (2) per Diluted Share |
$(1.93) |
$1.52 |
* |
Adjusted EBITDA (2) |
$(8.0) |
$169.7 |
* |
Gross Margin % |
37% |
46% |
(900) bps |
Adjusted Gross Margin % (2) |
38% |
46% |
(800) bps |
* % change is greater than +/- 100% |
SELECT Q3
2022 AND OTHER RECENT BUSINESS
UPDATES
- Completed the acquisition from
Chimerix of its worldwide rights to TEMBEXA(R) (brincidofovir), the
first U.S. Food and Drug Administration (FDA) approved smallpox
oral antiviral for all ages, following the award by the Biomedical
Advanced Research and Development Authority (BARDA) of a 10-year
procurement contract valued at up to $680 million to deliver 1.7
million doses of TEMBEXA to the U.S. government.
- Initiated a Phase 1 study to
evaluate the safety and immunogenicity of EBS-LASV, a recombinant
VSV-vectored Lassa virus vaccine candidate being developed for
prevention of disease caused by Lassa virus infection.
- Completed enrollment of participants
in the pivotal Phase 3 study evaluating safety and immunogenicity
of the Company's single-dose CHIKV VLP vaccine candidate in adults
aged 12 to 64; recruitment continues for the second Phase 3 study
focused on adults 65 and older.
- Announced data from a Phase 2 study
evaluating the CHIKV VLP vaccine candidate in prior recipients of
other investigational alphavirus vaccines. The study demonstrated
that CHIKV VLP was well-tolerated and immunogenic in both
alphavirus vaccine-naïve participants and participants previously
vaccinated against the Venezuelan equine encephalitis virus.
- Published in early October the 2021
ESG Report (available at
https://www.emergentbiosolutions.com/impact/environmental-social-governance/).
Q3 2022 FINANCIAL
PERFORMANCE (1)
Revenues
($ in millions) |
Q3 2022 |
Q3 2021 |
% Change |
Product sales, net (3): |
|
$24.2 |
$15.6 |
55% |
|
87.9 |
133.3 |
(34)% |
|
49.0 |
80.7 |
(39)% |
|
25.1 |
40.9 |
(39)% |
Total product sales, net |
$186.2 |
$270.5 |
(31)% |
Contract development and manufacturing (CDMO): |
|
$36.2 |
$112.6 |
(68)% |
|
0.2 |
(71.0) |
(100)% |
Total CDMO |
36.4 |
41.6 |
(13)% |
Contracts and grants |
17.4 |
16.9 |
3% |
Total revenues |
$240.0 |
$329.0 |
(27)% |
* % change is greater than +/- 100% |
Product Sales, net Anthrax vaccinesFor Q3 2022,
revenues from Anthrax vaccines increased $8.6 million as compared
to Q3 2021. The increase is largely driven by timing of deliveries
to the U.S. government (USG), specifically the Strategic National
Stockpile (SNS). The Company received an AV7909 (Anthrax Vaccine
Adsorbed, Adjuvanted) contract modification in September 2021
valued at approximately $399.0 million to deliver additional AV7909
doses through March 2023.
Nasal naloxone productsFor Q3 2022, revenues from nasal naloxone
products decreased $45.4 million as compared to Q3 2021. The
decrease was driven by a reduction in commercial retail sales
following the launch of a generic in December 2021. This decrease
was partially offset by strong growth in unit sales of branded
NARCAN®(naloxone HCl) Nasal Spray to public interest customers in
the U.S., as well as from sales of the authorized generic product
licensed to Sandoz, which launched in December 2021.
ACAM2000 For Q3 2022, revenues from ACAM2000 decreased $31.7
million as compared to Q3 2021. The decrease was due to a lower
number of doses sold to the USG, partially offset by an increased
number of doses sold to non-U.S. customers at a higher price per
dose.
Other (4)For Q3 2022, revenues from other product sales
decreased $15.8 million as compared to Q3 2021. The decrease
was primarily due to sales of two of the Company's
Government/Medical Countermeasure (MCM) products: i) VIGIV
[Vaccinia Immune Globulin Intravenous (Human)], driven by timing of
deliveries to the SNS; and ii) BAT® [Botulism Antitoxin Heptavalent
(A, B, C, D, E, F, G) - (Equine)], driven by timing of deliveries
to international customers, partially offset by an increase in
sales of Anthrasil® [Anthrax Immune Globulin Intravenous (human)],
RSDL® (Reactive Skin Decontamination Lotion Kit) and Vivotif®
(Typhoid Vaccine Live Oral Ty21a).
Contract Development and Manufacturing
(CDMO)CDMO Services For Q3 2022, revenues from CDMO
services decreased $76.4 million as compared to Q3 2021. This
decrease is largely due to lower combined revenues of $59.1 million
from AstraZeneca and Janssen reflecting the impact of reduced
production activities at the Bayview facility as a result of a
cessation of manufacturing activities under the AstraZeneca
contract which occurred in 2021, and a pause and eventual cessation
of manufacturing activities under the Janssen contract which began
in Q1 2022. The decrease also reflects reduced production at the
Camden facility in the quarter driven by additional investments in
strengthening quality and compliance that restricted the Company’s
ability to optimally utilize the existing capacity at the site.
These declines in revenues were partially offset by an increase in
services revenues earned at the Company's Winnipeg facility.
CDMO LeasesFor Q3 2022, revenues from CDMO leases increased
$71.2 million as compared to Q3 2021. The increase was primarily
due to the reversal of $86.0 million of revenue in Q3 2021
related to the Company's public-private COVID-19 development
partnership with BARDA in November 2021, partially offset by a
$15.1 million decrease in lease revenues related to the Janssen
contract.
Contracts and Grants For Q3 2022, revenues from
contracts and grants were consistent with Q3 2021.
Operating Expenses
($ in millions) |
Q3 2022 |
Q3 2021 |
% Change |
Cost of product sales |
$85.5 |
$103.2 |
(17)% |
Cost of CDMO |
63.1 |
114.3 |
(45)% |
Research and development |
39.2 |
49.6 |
(21)% |
Selling, general and administrative |
80.2 |
82.1 |
(2)% |
Amortization of intangible assets |
14.0 |
14.5 |
(3)% |
Total operating expenses |
$282.0 |
$363.7 |
(22)% |
Cost of Product SalesFor Q3 2022, cost of
product sales decreased $17.7 million as compared to Q3 2021. The
decrease is primarily due to a change in volume of product
sales.
Cost of CDMOFor Q3 2022, cost of CDMO decreased
$51.2 million as compared to Q3 2021. The decrease is primarily due
to reduced production activities across our CDMO network in Q3 2022
compared to Q3 2021 resulting in decreased raw materials
consumption. These decreases were partially offset by increased
costs at the Company's Camden facility due to additional
investments in quality enhancement and improvement initiatives.
Research and DevelopmentFor Q3 2022, research
and development expenses decreased $10.4 million as compared to Q3
2021. The decrease is primarily due to a decline in costs for the
Company's COVID-19 therapeutic and other product candidates.
Selling, General and AdministrativeFor Q3 2022,
selling, general and administrative expenses decreased $1.9 million
due to reduced professional services and marketing costs partially
offset by higher travel costs.
Additional Financial
Information
Segment InformationDuring Q1
2022, the Company began assessing its operating performance by
focusing on two reportable segments: 1) a products segment
(Products) consisting of the MCM and Commercial products business
lines; and 2) a services segment (Services) consisting of the CDMO
business line. The Company evaluates the performance of these
reportable segments based on revenue and adjusted gross margin.
Segment revenue includes external customer sales but does not
include inter-segment services. The Company does not allocate
contracts and grants, R&D, SG&A, amortization of intangible
assets, interest and other income (expense) or taxes to its
evaluation of the performance of these segments.
($ in millions) |
Products |
Services |
Three Months Ended September 30, |
Three Months Ended September 30, |
2022 |
2021 |
% Change |
2022 |
2021 |
% Change |
Revenues |
$186.2 |
$270.5 |
(31)% |
$36.4 |
$41.6 |
(13)% |
|
|
|
|
|
|
|
Cost of sales |
85.5 |
103.2 |
(17)% |
63.1 |
114.3 |
(45)% |
Less: Changes in fair value of contingent consideration |
0.6 |
0.9 |
(33)% |
— |
— |
—% |
Adjusted cost of sales |
$84.9 |
$102.3 |
(17)% |
$63.1 |
$114.3 |
(45)% |
|
Gross margin ** |
$100.7 |
$167.3 |
(40)% |
$(26.7) |
$(72.7) |
63% |
Gross margin % ** |
54% |
62% |
(800) bps |
NM |
NM |
|
|
Adjusted gross margin *** |
$101.3 |
$168.2 |
(40)% |
$(26.7) |
$(72.7) |
63% |
Adjusted gross margin % *** |
54% |
62% |
(800) bps |
NM |
NM |
|
* % change is greater than +/- 100% |
** Gross margin is calculated as Revenues less cost of sales. Gross
margin % is calculated as gross margin divided by Revenues. |
*** Adjusted gross margin is a non-GAAP metric that is calculated
as Revenues less Adjusted cost of sales. Adjusted gross margin % is
is a non-GAAP metric that is calculated as Adjusted gross margin
divided by Revenues. |
NM - Not Meaningful |
|
|
|
|
|
|
($ in millions) |
Products |
Services |
Nine Months Ended September 30, |
Nine Months Ended September 30, |
2022 |
2021 |
% Change |
2022 |
2021 |
% Change |
Revenues |
$660.5 |
$589.6 |
12% |
$95.4 |
$416.3 |
(77)% |
|
|
|
|
|
|
|
Cost of sales |
256.8 |
237.0 |
8% |
217.5 |
307.6 |
(29)% |
Less: Changes in fair value of contingent consideration |
2.4 |
2.6 |
(8)% |
— |
— |
—% |
Adjusted cost of sales |
$254.4 |
$234.4 |
9% |
$217.5 |
$307.6 |
(29)% |
|
Gross margin ** |
$403.7 |
$352.6 |
14% |
$(122.1) |
$108.7 |
* |
Gross margin % ** |
61% |
60% |
100 bps |
NM |
26% |
|
|
Adjusted gross margin *** |
$406.1 |
$355.2 |
14% |
$(122.1) |
$108.7 |
* |
Adjusted gross margin % *** |
61% |
60% |
100 bps |
NM |
26% |
|
* % change is greater than +/- 100% |
** Gross margin is calculated as Revenues less cost of sales. Gross
margin % is calculated as gross margin divided by Revenues. |
*** Adjusted gross margin is is a non-GAAP metric that is
calculated as Revenues less Adjusted cost of sales. Adjusted gross
margin % is is a non-GAAP metric that is calculated as Adjusted
gross margin divided by Revenues. |
NM - Not Meaningful |
|
|
|
|
|
|
For the three months ended September 30, 2022, Product gross
margin and Product adjusted gross margin decreased
$66.6 million and $66.9 million, respectively, as
compared to the three months ended September 30, 2021. The
decreases in Product gross margin and Product adjusted gross margin
are primarily due to decreased volumes and changes in mix.
For the nine months ended September 30, 2022, Product gross
margin and Product adjusted gross margin increased
$51.1 million and $50.9 million, respectively as compared
to the nine months ended September 30, 2021. The increases in
Product gross margin and Product adjusted gross margin are
primarily due to a favorable mix weighted more heavily to higher
margin products.
For the three months ended September 30, 2022, Services gross
margin and Services adjusted gross margin each increased
$46.0 million, as compared to the three months ended September
30, 2021. The increases in Services gross margin and Services
adjusted gross margin are primarily due to the impact of the Q3-21
lease revenue reversal for $86.0 million, as a result of the
completion of the Company's arrangement with BARDA in November
2021, partially offset by the cessation of manufacturing activities
related to the AstraZeneca and Janssen contracts and a decrease in
margins at the Camden facility due to additional investments in
quality enhancement and improvement initiatives.
For the nine months ended September 30, 2022, Services gross
margin and Services adjusted gross margin each decreased
$230.8 million as compared to the nine months ended September
30, 2021. The decreases in 2022 are primarily due to the decline in
revenue at the Bayview facility as a result of the completion of
the Company's arrangement with BARDA, the cessation of
manufacturing activities related to the AstraZeneca and Janssen
contracts, and the decrease in margins at the Camden facility due
to additional investments in quality enhancement and improvement
initiatives, including an increase in professional services
costs.
Capital Expenditures
($ in millions) |
Q3 2022 |
Q3 2021 |
% Change |
Gross capital expenditures |
$27.9 |
$55.2 |
(49)% |
Less: capital expenditures reimbursed |
— |
5.7 |
(100)% |
Net capital expenditures |
$27.9 |
$49.5 |
(44)% |
Gross capital expenditures as a % of total revenues |
12% |
17% |
(500) bps |
Net capital expenditures as a % of total revenues |
12% |
15% |
(300) bps |
* %
change is greater than +/- 100% |
For Q3 2022, capital expenditures decreased largely due to less
spending associated with the expansion project at the Company's
Rockville facility, which has progressed to a less capital
intensive phase. The Company anticipates completing this expansion
project by year end 2022.
2022 FINANCIAL
FORECAST(1)
The Company has updated its full year 2022 financial forecast to
reflect management's expectations based on the most current
information available.
The following key assumptions are incorporated into the revised
forecast.
- Anthrax Vaccines:
Reflects anticipated deliveries of AV7909 and BioThrax® (Anthrax
Vaccine Adsorbed) and the impact of the FDA Warning Letter on
certain batches filled/finished at the Camden site.
- ACAM2000: Reflects
the removal of revenues associated with the next option exercise
under the existing 10-year BARDA procurement contract, as the
timing is now uncertain.
- TEMBEXA: Reflects
the initial revenues related to deliveries under the existing
10-year HHS procurement contract and following the September 2022
acquisition from Chimerix of its worldwide rights to this
product.
- Nasal Naloxone
Products: Primarily reflects continued strong demand in
the public interest (PIP) channel in the U.S. as well as continuing
demand in Canada.
- CDMO: Reflects the
continued rebaselining of the services business overall and,
specifically, the impact of reduced production output from the
Camden facility following the FDA's issuance of a Warning Letter
for this site earlier in 2022.
The updated full year 2022 financial forecast is as follows:
METRIC($ in millions) |
Action |
Updated Range (as of 11/8/22) |
Previous Range (as of 8/1/22) |
Anthrax Vaccines |
REVISED |
$260-$275 |
$280-$300 |
ACAM2000 |
REVISED |
$63-$63 |
$225-$250 |
TEMBEXA |
ADDED |
$110-$115 |
N/A |
Nasal Naloxone Products |
REVISED |
$350-$365 |
$300-$340 |
Other Products(4) + C&G |
REVISED |
$167-$172 |
$235-$240 |
CDMO Revenues |
REVISED |
$100-$110 |
$105-$125 |
Total Revenues |
REVISED |
$1,050-$1,100 |
$1,150-$1,250 |
Adjusted Net Income (Loss)(2) |
REVISED |
$(100)-$(70) |
$(15)-$10 |
Adjusted EBITDA(2) |
REVISED |
$0-$30 |
$80-$120 |
Gross Margin |
REVISED |
33%-34% |
41%-45% |
Adjusted Gross Margin (2),(6) |
ADDED |
39%-41% |
N/A |
N/A - Not Applicable |
FOOTNOTES
(1) All financial information incorporated within this release
is unaudited. (2) See "Reconciliation of Non-GAAP
measures" and the reconciliation tables for reconciliations of
these non-GAAP metrics to the most closely related GAAP metrics.(3)
Product sales, net are reported net of variable consideration
including returns, rebates, wholesaler fees and prompt pay
discounts in accordance with U.S. generally accepted accounting
principles. (4) Other can include a combination of sales of any of
the following products: BAT, VIGIV, Anthrasil, raxibacumab, RSDL,
Trobigard, Vivotif, and Vaxchora.(5) Other income (expense), net
item adjustments to reconcile Net Income (Loss) to Adjusted EBITDA
are related to the expense of the release of an indemnified
uncertain tax position, which was recorded to other income
(expense), net during the three and nine months ended September 30,
2022.(6) Includes the reversal of the impact of a $58 million
inventory step up related to the TEMBEXA asset acquisition which
closed during Q3 2022.
CONFERENCE CALL, PRESENTATION SUPPLEMENT AND WEBCAST
INFORMATION
Company management will host a conference call at 5:00 pm
(Eastern Time) today, November 8, 2022, to discuss these
financial results. The conference call and presentation supplement
can be accessed from the Company's website or through the
following:
Advanced registration is
required to participate by phone.Visit
https://register.vevent.com/register/BIa05213ecbb2b4a4d9e16b9f2ff36a6e2 to
register and receive an email with the dial-in number, passcode and
registrant ID. |
|
Live Webcast Information:Visit
https://edge.media-server.com/mmc/p/guiij5aj for the
webcast. |
|
A replay of the call can be accessed from the Investors page of
the Company's website.
ABOUT EMERGENT BIOSOLUTIONS INC.
At Emergent, our mission is to protect and enhance life. For
over 20 years, we’ve been at work defending people from things we
hope will never happen—so we are prepared just in case they ever
do. We provide solutions for complex and urgent public health
threats through a portfolio of vaccines and therapeutics that we
develop and manufacture for governments and consumers. We also
offer a range of integrated contract development and manufacturing
services for pharmaceutical and biotechnology customers. To learn
more about how we plan to protect or enhance 1 billion lives by
2030, visit our website and follow us on LinkedIn, Twitter, and
Instagram.
RECONCILIATION OF NON-GAAP MEASURES
This press release contains financial measures (Adjusted
Net Income (Loss), Adjusted Net Income (Loss) per Diluted Share,
Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization), Adjusted Gross Margin, Adjusted Gross Margin %,
Adjusted Revenues and Net Research and Development
Expenses) that are considered “non-GAAP” financial
measures under applicable Securities and Exchange Commission rules
and regulations. These non-GAAP financial measures should be
considered supplemental to and not a substitute for financial
information prepared in accordance with generally accepted
accounting principles. The Company’s definition of these non-GAAP
measures may differ from similarly titled measures used by others.
For its non-GAAP measures, the Company adjusts for specified items
that can be highly variable or difficult to predict, or reflect the
non-cash impact of charges or accounting changes. As needed, such
adjustments are tax effected utilizing the federal statutory tax
rate for the U.S., except for changes in the fair value of
contingent consideration as the vast majority is non-deductible for
tax purposes. The Company views these non-GAAP financial measures
as a means to facilitate management’s financial and operational
decision-making, including evaluation of the Company’s historical
operating results and comparison to competitors’ operating results.
These non-GAAP financial measures reflect an additional way of
viewing aspects of the Company’s operations that, when viewed with
GAAP results and the reconciliations to the corresponding GAAP
financial measure, may provide a more complete understanding of
factors and trends affecting the Company’s business. For more
information on these non-GAAP financial measures, please see the
tables captioned "Reconciliation of Net Income (Loss) to Adjusted
Net Income (Loss)," "Reconciliation of Net Income (Loss) to
Adjusted EBITDA," "Reconciliation of Total Revenues and Adjusted
Revenues and Gross Margin and Adjusted Gross Margin" and
"Reconciliation of Net Research and Development Expenses" included
at the end of this release.
The determination of the amounts that are excluded from these
non-GAAP financial measures are a matter of management judgment and
depend upon, among other factors, the nature of the underlying
expense or income amounts. Because non-GAAP financial measures
exclude the effect of items that will increase or decrease the
Company’s reported results of operations, management strongly
encourages investors to review the Company’s consolidated financial
statements and publicly filed reports in their entirety.
SAFE HARBOR STATEMENT
This press release includes forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. All statements, other than statements of historical fact,
including statements regarding the future performance of the
Company or our business strategy, future operations, future
financial position, future revenues and earnings, projected costs,
prospects, plans and objectives of management and the ongoing
impact of the COVID-19 pandemic, are forward-looking statements. We
generally identify forward-looking statements by using words like
“anticipate,” “believe,” “continue,” “estimate,” “expect,”
“forecast,” “intend,” “may,” “plan,” should,” “will,” and similar
expressions or variations thereof, or the negative thereof, but
these terms are not the exclusive means of identifying such
statements. Forward-looking statements are based on our current
intentions, beliefs and expectations regarding future events. We
cannot guarantee that any forward-looking statement will be
accurate. You should realize that if underlying assumptions prove
inaccurate or unknown risks or uncertainties materialize, actual
results could differ materially from our expectations. You are,
therefore, cautioned not to place undue reliance on any
forward-looking statement. Any forward-looking statement speaks
only as of the date on which such statement is made, and, except as
required by law and the rules of the Securities and exchange
Commission (the “SEC”), we do not undertake to update any
forward-looking statement to reflect new information, events or
circumstances.
There are a number of important factors that could cause our
actual results to differ materially from those indicated by such
forward-looking statements, including, among others, the
availability of U.S. Government (“USG”) funding for contracts
related to procurement of our medical countermeasures, including
AV7909 (Anthrax Vaccine Adsorbed (AVA), Adjuvanted), BioThrax®
(Anthrax Vaccine Adsorbed) and ACAM2000®, (Smallpox (Vaccinia)
Vaccine, Live), among others, as well as contracts related to
development of medical countermeasures; our ability to meet our
commitments to quality and compliance in all of our manufacturing
operations; the impact of the generic marketplace on NARCAN®
(naloxone HCI) Nasal Spray and future NARCAN sales; our ability to
perform under our contracts with the USG, including the timing of
and specifications relating to deliveries; our ability to provide
CDMO services for the development and/or manufacture of product
and/or product candidates of our customers at required levels and
on required timelines; our ability to obtain and maintain
regulatory approvals for our product candidates and the timing of
any such approvals; the ability of our contractors and suppliers to
maintain compliance with current good manufacturing practices and
other regulatory obligations; our ability to negotiate additional
USG procurement or follow-on contracts for our Public Health Threat
products that have expired or will be expiring; our ability to
negotiate new CDMO contracts and the negotiation of further
commitments related to the collaboration and deployment of capacity
toward future commercial manufacturing under our existing CDMO
contracts; our ability to collect reimbursement for raw materials
and payment of services fees from Janssen Pharmaceuticals, Inc. or
other CDMO customers; the outcomes associated with pending
shareholder litigation and government investigations; our ability
to comply with the operating and financial covenants required by
our senior secured credit facilities and our 3.875% Senior
Unsecured Notes due 2028; the procurement of products by USG
entities under regulatory exemptions prior to approval by the U.S.
Food and Drug Administration and corresponding procurement by
government entities outside of the United States under regulatory
exemptions prior to approval by the corresponding regulatory
authorities in the applicable country; the extent of any ongoing
impact of the COVID-19 pandemic on our supply chains and potential
future impact thereof on our markets, operations and employees as
well as those of our customers and suppliers; the impact on our
revenues from and duration of declines in sales of our vaccine
products that target travelers due to the reduction of
international travel caused by the COVID-19 pandemic; our ability
to identify and acquire companies, businesses, products or product
candidates that satisfy our selection criteria, contribute to our
overall business strategy, and align with our underlying
assumptions that formed the basis of acquisition; our ability to
commercialize, market and manufacture new product candidates
successfully; and the accuracy of our estimates regarding future
revenues, expenses, capital requirements and needs for additional
financing. The foregoing sets forth many, but not all, of the
factors that could cause actual results to differ from our
expectations in any forward-looking statement. When evaluating our
forward-looking statements, you should consider this cautionary
statement along with the risks identified in our reports filed with
the SEC. New factors emerge from time to time, and it is not
possible for management to predict all such factors, nor can it
assess the impact of any such factor on the business or the extent
to which any factor, or combination of factors, may cause results
to differ materially from those contained in any forward-looking
statement.
Investor ContactRobert BurrowsVice President,
Investor Relationsburrowsr@ebsi.com (240) 413-1917 |
Media ContactMatt HartwigSenior Director, Media
Relationsmediarelations@ebsi.com |
Emergent BioSolutions Inc. |
Condensed Consolidated Balance Sheets |
(unaudited, in millions, except per share
data) |
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September 30, 2022 |
|
December 31, 2021 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
240.9 |
|
|
$ |
576.1 |
|
Restricted cash |
|
0.1 |
|
|
|
0.2 |
|
Accounts receivable, net |
|
191.3 |
|
|
|
274.7 |
|
Inventories, net |
|
546.3 |
|
|
|
350.8 |
|
Prepaid expenses and other current assets |
|
139.9 |
|
|
|
70.3 |
|
Total current assets |
|
1,118.5 |
|
|
|
1,272.1 |
|
|
|
|
|
Property, plant and equipment, net |
|
806.7 |
|
|
|
800.1 |
|
Intangible assets, net |
|
722.7 |
|
|
|
604.6 |
|
Goodwill |
|
224.9 |
|
|
|
224.9 |
|
Other assets |
|
35.7 |
|
|
|
57.3 |
|
Total assets |
$ |
2,908.5 |
|
|
$ |
2,959.0 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
103.8 |
|
|
$ |
128.9 |
|
Accrued expenses |
|
35.9 |
|
|
|
51.7 |
|
Accrued compensation |
|
82.5 |
|
|
|
88.7 |
|
Debt, current portion |
|
21.2 |
|
|
|
31.6 |
|
Other current liabilities |
|
25.0 |
|
|
|
72.9 |
|
Total current liabilities |
|
268.4 |
|
|
|
373.8 |
|
|
|
|
|
Debt, net of current portion |
|
1,032.1 |
|
|
|
809.4 |
|
Deferred tax liability |
|
113.8 |
|
|
|
94.9 |
|
Other liabilities |
|
44.9 |
|
|
|
61.9 |
|
Total liabilities |
$ |
1,459.2 |
|
|
$ |
1,340.0 |
|
|
|
|
|
Stockholders' equity: |
|
|
|
Preferred stock, $0.001 par value; 15.0 shares authorized, no
shares issued or outstanding |
|
— |
|
|
|
— |
|
Common stock, $0.001 par value; 200.0 shares authorized, 55.5 and
55.1 shares issued; 49.9 and 51.3 shares outstanding,
respectively |
|
0.1 |
|
|
|
0.1 |
|
Treasury stock, at cost, 5.6 and 3.8 common shares,
respectively |
|
(227.7 |
) |
|
|
(152.2 |
) |
Additional paid-in capital |
|
860.1 |
|
|
|
829.4 |
|
Accumulated other comprehensive loss, net |
|
(5.2 |
) |
|
|
(16.1 |
) |
Retained earnings |
|
822.0 |
|
|
|
957.8 |
|
Total stockholders' equity |
|
1,449.3 |
|
|
|
1,619.0 |
|
Total liabilities and stockholders' equity |
$ |
2,908.5 |
|
|
$ |
2,959.0 |
|
Emergent BioSolutions Inc. |
Condensed Consolidated Statements of
Operations |
(unaudited, in millions, except per share
data) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
Product sales, net |
|
$ |
186.2 |
|
|
$ |
270.5 |
|
|
$ |
660.5 |
|
|
$ |
589.6 |
|
CDMO: |
|
|
|
|
|
|
|
|
Services |
|
|
36.2 |
|
|
|
112.6 |
|
|
|
90.7 |
|
|
|
283.7 |
|
Leases |
|
|
0.2 |
|
|
|
(71.0 |
) |
|
|
4.7 |
|
|
|
132.6 |
|
Total CDMO |
|
|
36.4 |
|
|
|
41.6 |
|
|
|
95.4 |
|
|
|
416.3 |
|
Contracts and grants |
|
|
17.4 |
|
|
|
16.9 |
|
|
|
34.3 |
|
|
|
63.6 |
|
Total revenues |
|
|
240.0 |
|
|
|
329.0 |
|
|
|
790.2 |
|
|
|
1,069.5 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Cost of product sales |
|
|
85.5 |
|
|
|
103.2 |
|
|
|
256.8 |
|
|
|
237.0 |
|
Cost of CDMO |
|
|
63.1 |
|
|
|
114.3 |
|
|
|
217.5 |
|
|
|
307.6 |
|
Research and development |
|
|
39.2 |
|
|
|
49.6 |
|
|
|
135.4 |
|
|
|
151.0 |
|
Selling, general and
administrative |
|
|
80.2 |
|
|
|
82.1 |
|
|
|
246.1 |
|
|
|
254.2 |
|
Amortization of intangible
assets |
|
|
14.0 |
|
|
|
14.5 |
|
|
|
42.0 |
|
|
|
44.5 |
|
Total operating expenses |
|
|
282.0 |
|
|
|
363.7 |
|
|
|
897.8 |
|
|
|
994.3 |
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations |
|
|
(42.0 |
) |
|
|
(34.7 |
) |
|
|
(107.6 |
) |
|
|
75.2 |
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
Interest expense |
|
|
(8.5 |
) |
|
|
(8.4 |
) |
|
|
(24.5 |
) |
|
|
(25.5 |
) |
Other, net |
|
|
(13.4 |
) |
|
|
(2.4 |
) |
|
|
(18.4 |
) |
|
|
(2.8 |
) |
Total other income (expense),
net |
|
|
(21.9 |
) |
|
|
(10.8 |
) |
|
|
(42.9 |
) |
|
|
(28.3 |
) |
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes |
|
|
(63.9 |
) |
|
|
(45.5 |
) |
|
|
(150.5 |
) |
|
|
46.9 |
|
Income tax benefit
(provision) |
|
|
(11.8 |
) |
|
|
12.8 |
|
|
|
14.7 |
|
|
|
(5.3 |
) |
Net income (loss) |
|
$ |
(75.7 |
) |
|
$ |
(32.7 |
) |
|
$ |
(135.8 |
) |
|
$ |
41.6 |
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common
share* |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(1.52 |
) |
|
$ |
(0.61 |
) |
|
$ |
(2.71 |
) |
|
$ |
0.78 |
|
Diluted |
|
$ |
(1.52 |
) |
|
$ |
(0.61 |
) |
|
$ |
(2.71 |
) |
|
$ |
0.77 |
|
|
|
|
|
|
|
|
|
|
Shares used in computing net
loss per common share |
|
|
|
|
|
|
|
|
Basic |
|
|
49.9 |
|
|
|
53.7 |
|
|
|
50.2 |
|
|
|
53.6 |
|
Diluted |
|
|
49.9 |
|
|
|
53.7 |
|
|
|
50.2 |
|
|
|
54.3 |
|
|
|
|
|
|
|
|
|
|
* Any differences
in the calculation of net income (loss) per common share is due to
rounding. |
Emergent BioSolutions Inc.
Condensed Consolidated Statements of Cash
Flows(unaudited, in millions)
|
Nine Months Ended September 30, |
|
|
2022 |
|
|
|
2021 |
|
Cash flows used in operating
activities: |
|
|
|
Net income (loss) |
$ |
(135.8 |
) |
|
$ |
41.6 |
|
Adjustments to reconcile net income (loss) to net cash used in
operating activities: |
|
|
|
Share-based compensation expense |
|
33.4 |
|
|
|
32.3 |
|
Depreciation and amortization |
|
107.7 |
|
|
|
94.6 |
|
Adjustment for prior period lease receivables |
|
— |
|
|
|
86.1 |
|
Change in fair value of contingent consideration, net |
|
2.4 |
|
|
|
2.6 |
|
Amortization of deferred financing costs |
|
3.1 |
|
|
|
3.1 |
|
Deferred income taxes |
|
23.0 |
|
|
|
0.6 |
|
Other |
|
13.0 |
|
|
|
5.1 |
|
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable |
|
76.2 |
|
|
|
(114.7 |
) |
Inventories |
|
(112.2 |
) |
|
|
(58.0 |
) |
Prepaid expenses and other assets |
|
(29.2 |
) |
|
|
(54.8 |
) |
Accounts payable |
|
(9.0 |
) |
|
|
3.5 |
|
Accrued expenses and other liabilities |
|
(98.0 |
) |
|
|
(19.3 |
) |
Accrued compensation |
|
(5.7 |
) |
|
|
(11.1 |
) |
Contract liabilities |
|
4.2 |
|
|
|
(19.5 |
) |
Net cash used in operating activities: |
|
(126.9 |
) |
|
|
(7.9 |
) |
Cash flows used in investing
activities: |
|
|
|
Purchases of property, plant and equipment |
|
(92.2 |
) |
|
|
(178.3 |
) |
Asset acquisitions |
|
(243.7 |
) |
|
|
— |
|
Net cash used in investing activities: |
|
(335.9 |
) |
|
|
(178.3 |
) |
Cash flows provided by (used
in) financing activities: |
|
|
|
Proceeds from revolving credit facility |
|
238.0 |
|
|
|
— |
|
Purchases of treasury stock |
|
(81.9 |
) |
|
|
— |
|
Principal payments on term loan facility |
|
(25.3 |
) |
|
|
(16.9 |
) |
Principal payments on convertible senior notes |
|
— |
|
|
|
(10.6 |
) |
Proceeds from share-based compensation activity |
|
3.0 |
|
|
|
12.5 |
|
Taxes paid for share-based compensation activity |
|
(5.7 |
) |
|
|
(13.5 |
) |
Contingent consideration payments |
|
— |
|
|
|
(2.5 |
) |
Net cash provided by (used in) financing activities: |
|
128.1 |
|
|
|
(31.0 |
) |
Effect of exchange rate changes on cash, cash equivalents and
restricted cash |
|
(0.6 |
) |
|
|
(0.3 |
) |
Net change in cash, cash equivalents and restricted cash |
|
(335.3 |
) |
|
|
(217.5 |
) |
Cash, cash equivalents and restricted cash at beginning of
period |
|
576.3 |
|
|
|
621.5 |
|
Cash, cash equivalents and restricted cash at end of period |
$ |
241.0 |
|
|
$ |
404.0 |
|
|
|
|
|
Reconciliation of Net Income (Loss) to Adjusted Net
Income (Loss) (1)
($ in millions, except per share value) |
Three Months Ended September 30, |
2022 |
2021 |
Source |
Net loss |
$(75.7) |
$(32.7) |
|
Adjustments: |
Non-cash amortization charges |
15.1 |
15.4 |
Intangible Asset Amortization, Other Income |
Changes in fair value of contingent consideration |
0.6 |
0.9 |
Product COGS |
Acquisition-related costs (transaction & integration) |
(0.1) |
0.4 |
SG&A |
Tax effect |
(3.1) |
(3.3) |
|
Total adjustments: |
$12.5 |
$13.4 |
|
Adjusted net loss |
$(63.2) |
$(19.3) |
|
Adjusted net loss per diluted share |
$(1.27) |
$(0.36) |
|
($ in millions, except per share value) |
Nine Months Ended September 30, |
2022 |
2021 |
Source |
Net income (loss) |
$(135.8) |
$41.6 |
|
Adjustments: |
Non-cash amortization charges |
45.1 |
47.5 |
Intangible Asset Amortization, Other Income |
Changes in fair value of contingent consideration |
2.4 |
2.6 |
Product COGS |
Acquisition-related costs (transaction & integration) |
1.1 |
0.7 |
SG&A |
Tax effect |
(9.7) |
(10.1) |
|
Total adjustments |
$38.9 |
$40.7 |
|
Adjusted net income (loss) |
$(96.9) |
$82.3 |
|
Adjusted net income (loss) per diluted share |
$(1.93) |
$1.52 |
|
($ in millions) |
Revised 2022 Full Year Forecast |
Source |
Net loss |
$(217) - $(189) |
|
Adjustments: |
Non-cash amortization charges |
63 |
Intangible Asset Amortization, Other Income |
Changes in fair value of contingent consideration |
3 |
COGS |
Acquisition-related costs (transaction & integration) |
2 |
SG&A |
Inventory step up |
58 |
COGS |
Tax effect |
(9) - (7) |
|
Total adjustments: |
$117 - $119 |
|
Adjusted net loss |
$(100) - $(70) |
|
Reconciliation of Net Income (Loss) to Adjusted
EBITDA (1)
($ in millions) |
Three Months Ended September 30, |
2022 |
2021 |
Net loss |
$(75.7) |
$(32.7) |
Adjustments: |
Depreciation & amortization |
32.3 |
32.6 |
Income taxes |
11.8 |
(12.8) |
Total interest expense, net |
7.9 |
8.3 |
Changes in fair value of contingent consideration |
0.6 |
0.9 |
Acquisition-related costs (transaction & integration) |
(0.1) |
0.4 |
Other income (expense), net item (5) |
8.0 |
— |
Total adjustments |
$60.5 |
$29.4 |
Adjusted EBITDA |
$(15.2) |
$(3.3) |
($ in millions) |
Nine Months Ended September 30, |
2022 |
2021 |
Net income (loss) |
$(135.8) |
$41.6 |
Adjustments: |
Depreciation & amortization |
107.7 |
94.5 |
Income taxes |
(14.7) |
5.3 |
Total interest expense, net |
23.3 |
25.0 |
Changes in fair value of contingent consideration |
2.4 |
2.6 |
Acquisition-related costs (transaction & integration) |
1.1 |
0.7 |
Other income (expense), net item (5) |
8.0 |
— |
Total adjustments |
$127.8 |
$128.1 |
Adjusted EBITDA |
$(8.0) |
$169.7 |
($ in millions) |
Revised 2022 Full Year Forecast |
Net loss |
$(217) - $(189) |
Adjustments: |
Depreciation & amortization |
143 |
Income taxes |
(29) - (27) |
Total interest expense, net |
32 |
Changes in fair value of contingent consideration |
3 |
Inventory step up |
58 |
Other income (expense), net item (5) |
8 |
Acquisition-related costs (transaction & integration) |
2 |
Total adjustments |
$217 - $219 |
Adjusted EBITDA |
$0 - $(30) |
Reconciliation of Total Revenues to Adjusted Revenues
and Gross Margin and Adjusted Gross Margin
(1)
($ in millions) |
Three Months Ended September 30, |
2022 |
2021 |
Total revenues |
$240.0 |
$329.0 |
Contracts and grants revenues |
(17.4) |
(16.9) |
Adjusted revenues |
$222.6 |
$312.1 |
|
|
|
Cost of product sales |
85.5 |
103.2 |
Cost of CDMO |
63.1 |
114.3 |
Cost of product sales and cost of contract development and
manufacturing services ("COGS") |
148.6 |
217.5 |
Less: Changes in fair value of contingent consideration |
0.6 |
0.9 |
Adjusted COGS |
$148.0 |
$216.6 |
|
|
|
Gross margin (adjusted revenues minus COGS) |
$74.0 |
$94.6 |
Gross margin % (gross margin divided by adjusted revenues) |
33% |
30% |
|
|
|
Adjusted gross margin (adjusted revenues minus adjusted COGS) |
$74.6 |
$95.5 |
Adjusted gross margin % (adjusted gross margin divided by adjusted
revenues) |
34% |
31% |
|
Nine Months Ended September 30, |
($ in millions) |
2022 |
2021 |
Total revenues |
$790.2 |
$1,069.5 |
Contract and grants revenues |
(34.3) |
(63.6) |
Adjusted revenues |
755.9 |
1,005.9 |
|
|
|
Cost of product sales |
256.8 |
237.0 |
Cost of contract development and manufacturing |
217.5 |
307.6 |
Cost of product sales and cost of contract development and
manufacturing services ("COGS") |
474.3 |
544.6 |
Less: Changes in fair value of contingent consideration |
2.4 |
2.6 |
Adjusted COGS |
$471.9 |
$542.0 |
|
|
|
Gross margin (adjusted revenues minus COGS) |
$281.6 |
$461.3 |
Gross margin % (gross margin divided by adjusted revenues) |
37% |
46% |
|
|
|
Adjusted gross margin (adjusted revenues minus adjusted COGS) |
$284.0 |
$463.9 |
Adjusted gross margin % (adjusted gross margin divided by adjusted
revenues) |
38% |
46% |
Reconciliation of Research and Development Expenses and
Net Research and Development Expenses
(1)
($ in millions) |
Three Months Ended September 30, |
2022 |
2021 |
Research and development expenses |
$39.2 |
$49.6 |
Adjustments: |
Contracts and grants revenue |
(17.4) |
(16.9) |
Net research and development expenses |
$21.8 |
$32.7 |
Adjusted revenue (Total revenues less contracts and grants
revenue) |
$222.6 |
$312.1 |
Net R&D as % of adjusted revenue (Net R&D margin) |
10% |
10% |
($ in millions) |
Nine Months Ended September 30, |
2022 |
2021 |
Research and development expenses |
$135.4 |
$151.0 |
Adjustments: |
Contracts and grants revenue |
(34.3) |
(63.6) |
Net research and development expenses |
$101.1 |
$87.4 |
Adjusted revenue (Total revenues less contracts and grants
revenue) |
$755.9 |
$1,005.9 |
Net R&D as % of adjusted revenue (Net R&D margin) |
13% |
9% |
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