Emergent BioSolutions Inc. (NYSE: EBS) today reported financial
results for the three and nine months ended September 30, 2020 and
updated its full year 2020 guidance.
“Over the last 22 years, Emergent has built a
solid business founded on demonstrable strengths in partnering,
manufacturing, and integrating value-added M&A,” said Robert G.
Kramer, president and chief executive officer of Emergent
BioSolutions. “The strength of our core business and the
accelerated growth of our contract development and manufacturing
unit validate our strategy to pursue leadership positions across
the public health threat market. Our diverse product and service
portfolio gives us continued confidence in executing our strategy,
delivering on our commitments to our partners and customers, and
creating value for our shareholders.”
FINANCIAL HIGHLIGHTS
(unaudited)
(in millions) |
Q3 2020 |
Q3 2019 |
$ Change |
% Change |
Total
Revenues |
$385.2 |
$311.8 |
$73.4 |
24% |
Net
Income |
$39.5 |
$43.2 |
($3.7) |
(9)% |
Adjusted Net
Income (1) |
$119.0 |
$64.8 |
$54.2 |
84% |
Adjusted
EBITDA (1) |
$168.1 |
$106.4 |
$61.7 |
58% |
|
|
|
|
|
(in millions) |
YTD 2020 |
YTD 2019 |
$ Change |
% Change |
Total
Revenues |
$972.4 |
$745.7 |
$226.7 |
30% |
Net
Income |
$119.7 |
$7.6 |
$112.1 |
* |
Adjusted Net
Income (1) |
$225.1 |
$69.6 |
$155.5 |
* |
Adjusted
EBITDA (1) |
$339.5 |
$145.4 |
$194.1 |
* |
|
|
|
|
|
* % change is greater than 100% |
SELECT Q3 2020 BUSINESS
ACCOMPLISHMENTS
- Completed an offering of $450 million in aggregate principal
amount 3.875% Senior Unsecured Notes due in 2028. The Company
utilized the proceeds from the offering to repay $353 million
outstanding under its revolving credit facility with the remainder
to be utilized for general corporate purposes.
- Announced the initiation of a Phase 3 clinical trial sponsored
by the National Institutes of Health to evaluate the safety,
tolerability, and efficacy of hyperimmune globulin products,
including the Company's COVID-19 Human Immune Globulin (COVID-HIG),
as a potential treatment in adult patients hospitalized with
COVID-19.
- Announced U.S. Food and Drug Administration (FDA) approval of
the shelf life extension of NARCAN® (naloxone HCl) Nasal Spray from
24 months to 36 months.
- Secured approximately $60 million in new business and existing
project extensions across development services, drug substance
manufacturing, and drug product manufacturing towards the Company's
contract development and manufacturing (CDMO) portfolio.
2020 FINANCIAL PERFORMANCE
(unaudited)
(I) Quarter Ended September 30, 2020
(Q3)
Revenues
Total Revenues
For Q3 2020, total revenues were $385.2 million,
an increase of $73.4 million as compared to 2019. Total revenues
reflect an increase in contract development and manufacturing
services revenues partially offset by a decrease in product sales
and contracts and grants revenues.
Product Sales
For Q3 2020, product sales were $202.2 million, a
decrease of $54.0 million or 21% as compared to 2019. Other product
sales increased due to increased sales of BAT®[Botulism Antitoxin
Heptavalent (A, B, C, D, E, F, G) - (Equine)] and VIGIV [Vaccinia
Immune Globulin Intravenous (Human)] offset by a decline in sales
of travel health vaccines.
(in millions) |
Three Months Ended September 30, |
2020 |
2019 |
% Change |
Product Sales |
NARCAN® Nasal Spray |
$88.8 |
$75.0 |
18% |
Anthrax vaccines |
$73.9 |
$40.3 |
83% |
ACAM2000 |
$1.0 |
$112.1 |
(99)% |
Other |
$38.5 |
$28.8 |
34% |
Total
Product Sales |
$202.2 |
$256.2 |
(21)% |
Contract Development and Manufacturing
(CDMO) Services
For Q3 2020, revenue from the Company’s contract
development and manufacturing operations was $157.1 million, an
increase of $137.1 million as compared to 2019. The increase is
largely due to the contribution of arrangements across development,
drug substance manufacturing, and drug product manufacturing
services with industry and government customers.
Contracts and Grants
For Q3 2020, revenue from the Company’s
development-based contracts and grants was $25.9 million, a
decrease of $9.7 million as compared to 2019. The decrease
primarily reflects the completion of development activities
associated with the AV7909 product candidate in 2019, partially
offset by recent new development awards related to the Company's
COVID-19 product candidates.
Operating Expenses
Cost of Product Sales and Contract
Development and Manufacturing (CDMO) Services
For Q3 2020, cost of product sales and contract
development and manufacturing services was $149.0 million, an
increase of $41.0 million or 38% as compared to 2019. The increase
is primarily due to a charge of $29.9 million associated with
contingent consideration liabilities due to the increased
expectation that the Company will meet its final sales milestone
for NARCAN® Nasal Spray, a charge of $13.8 million related to a
write-down of inventory balances due to the expected expiration of
a portion of the Company's travel health vaccines, and an increase
in volume in CDMO services offset by a decline in volume of product
sales.
Research and Development (Gross and
Net)
For Q3 2020, gross R&D expenses were $84.4
million, an increase of $31.0 million or 58% as compared to 2019.
The increase primarily reflects the impairment of the Company's
in-process research and development (IPR&D) intangible asset of
$29.0 million. Excluding this item, research and development
expenses were consistent reflecting an increase in costs associated
with the Company's COVID-19 therapeutic product candidates offset
by a decrease in costs due to the completion of development
activities associated with the Company's AV7909 product
candidate.
For Q3 2020, net R&D expense, which reflects
investments made in development programs that are not currently
funded in whole or in part by third-party partners and is
calculated as gross research and development expenses minus
contracts and grants revenue and the impact of the IPR&D
intangible asset impairment, was $29.5 million, an increase of
$11.7 million or 66% as compared to 2019. The increase is
attributable to an increase in costs associated with the Company's
COVID-19 product candidates. The Q3 2020 and Q3 2019 net R&D
expense was 8% and 6%, respectively, of adjusted revenue (total
revenue less contracts & grants).
(in millions) |
Three Months Ended September 30, |
2020 |
2019 |
% Change |
Research and Development Expenses |
$84.4 |
$53.4 |
58% |
Adjustments: |
Less Contracts and Grants Revenue |
$25.9 |
$35.6 |
(27)% |
Less Impairment of IPR&D intangible asset |
$29.0 |
$— |
NA |
Net Research
and Development Expenses |
$29.5 |
$17.8 |
66% |
Adjusted
Revenue (Total Revenue less Contracts and Grants Revenue) |
$359.3 |
$276.2 |
30% |
Net R&D
as % of Adjusted Revenue (Net R&D Margin) |
8% |
6% |
NA |
Selling, General and
Administrative
For Q3 2020, selling, general and administrative
expenses were $75.5 million, an increase of $10.5 million or 16% as
compared to Q3 2019. The increase primarily reflects an increase in
staffing costs to support the Company's growth.
Amortization of Intangible
Assets
For Q3 2020, amortization of intangible assets was
$15.0 million, which was consistent with amortization of intangible
assets of $14.7 million in Q3 2019.
Income Taxes
For Q3 2020, the income tax provision was $15.5
million as compared to $15.7 million in Q3 2019. The decrease is
due to a decrease in income before the provision for income taxes
of $3.9 million, an increase in discrete tax benefits of $3.5
million, offset by the impact of non-deductible contingent
consideration expense. The Company's effective quarterly tax rate,
excluding discrete adjustments, was 34% and 26%, for Q3 2020 and Q3
2019, respectively. The effective quarterly tax rate, excluding the
impact of non-deductible contingent consideration expense was 22%
and 26%, for Q3 2020 and Q3 2019, respectively.
Net Income & Adjusted Net
Income
For Q3 2020, the Company recorded net income of
$39.5 million, or $0.73 per diluted share, versus net income of
$43.2 million, or $0.83 per diluted share, in 2019.
For Q3 2020, the Company recorded adjusted net
income of $119.0 million, or $2.19 per diluted share, versus
adjusted net income of $64.8 million, or $1.24 per diluted share,
in 2019. (1)
Adjusted EBITDA
For Q3 2020, the Company recorded adjusted EBITDA
of $168.1 million versus $106.4 million in 2019. (1)
(II) Nine months ended September 30,
2020 (unaudited)
Revenues
Total Revenues
For the nine months ended September 30, 2020,
total revenues were $972.4 million, an increase of 30% over 2019.
Total revenues reflect an increase in product sales and contract
development and manufacturing services offset by a decrease in
contracts and grants revenues.
Product Sales
For the nine months ended September 30, 2020,
product sales were $648.9 million, an increase of $56.2 million or
9% as compared to 2019. Other product sales decreased due to a
decline in sales of raxibacumab and travel health vaccines slightly
offset by an increase in sales of BAT and VIGIV.
(in millions) |
Nine Months Ended September 30, |
2020 |
2019 |
% Change |
Product Sales |
Anthrax vaccines |
$258.1 |
$79.9 |
NM |
NARCAN® Nasal Spray |
$233.8 |
$213.5 |
10% |
ACAM2000 |
$71.0 |
$164.1 |
(57)% |
Other |
$86.0 |
$135.2 |
(36)% |
Total
Product Sales |
$648.9 |
$592.7 |
9% |
Contract Development and Manufacturing
(CDMO) Services
For the nine months ended September 30, 2020,
revenue from the Company’s contract development and manufacturing
services operations was $251.4 million, an increase of $196.8
million as compared to 2019. The increase is largely due to the
contribution of arrangements across development, drug substance
manufacturing, and drug product manufacturing services with
industry and government customers.
Contracts and Grants
For the nine months ended September 30, 2020,
revenue from the Company’s development-based contracts and grants
was $72.1 million, a decrease of $26.3 million or 27% as compared
to 2019. The decrease primarily reflects the completion of
development activities associated with the AV7909 product candidate
in 2019, offset by recent new development awards related to the
Company's COVID-19 product candidates.
Operating Expenses
Cost of Product Sales and Contract
Development and Manufacturing Services
For the nine months ended September 30, 2020, cost
of product sales and contract development and manufacturing
services was $355.7 million, an increase of $55.0 million or 18% as
compared to 2019. The increase is due primarily to an increase in
volume of product sales and CDMO services, charges of $31.3 million
related to the Company's contingent consideration liabilities, a
charge of $13.8 million related to a write-down of inventory
balances due to the expected expiration of a portion of the
Company's travel health vaccines, and an increase in share-based
compensation expense due to a one-time special broad-based,
immediately vested equity award to employees.
Research and Development (Gross and
Net)
For the nine months ended September 30, 2020,
gross R&D expenses were $175.0 million, an increase of $11.6
million compared to 2019. The increase primarily reflects the
impact of impairment of the Company's IPR&D intangible asset of
$29.0 million. Excluding this item, gross R&D expense decreased
$17.4 million compared to 2019. The decrease primarily reflects a
decrease in costs in 2020 due to the completion of development
activities associated with the Company's AV7909 product candidate
in 2019. The decrease has been partially offset by an increase in
costs associated with the Company's chikungunya and COVID-19
product candidates.
For the nine months ended September 30, 2020, net
R&D expense, which reflects investments made in development
programs that are not currently funded in whole or in part by
third-party partners and is calculated as gross research and
development expenses minus contracts and grants revenue and the
impact of the IPR&D intangible asset impairment, was $73.9
million, an increase of $8.9 million or 14% as compared to 2019.
The increase primarily reflects an increase in costs associated
with the Company's chikungunya and COVID-19 product candidates
offset by a decline in costs associated with the FLU-IGIV product
candidate. The 2020 and 2019 net R&D expense was 8% and 10%,
respectively, of adjusted revenue (total revenue less contracts
& grants).
(in millions) |
Nine Months Ended September 30, |
2020 |
2019 |
% Change |
Research and Development Expenses |
$175.0 |
$163.4 |
7% |
Adjustments: |
Less Contracts and Grants Revenue |
$72.1 |
$98.4 |
(27)% |
Less Impairment of IPR&D intangible asset |
$29.0 |
$— |
NA |
Net Research
and Development Expenses |
$73.9 |
$65.0 |
14% |
Adjusted
Revenue (Total Revenue less Contracts and Grants Revenue) |
$900.3 |
$647.3 |
39% |
Net R&D
as % of Adjusted Revenue (Net R&D Margin) |
8% |
10% |
NA |
Selling, General and
Administrative
For the nine months ended September 30, 2020,
selling, general and administrative expenses were $221.2 million,
an increase of $19.9 million or 10% as compared to 2019. The
increase primarily reflects an increase in staffing costs to
support the Company's growth and share-based compensation due to a
special broad-based, immediately vested equity award to employees
during the second quarter of 2020.
Amortization of Intangible
Assets
For the nine months ended September 30, 2020,
amortization of intangible assets of $44.8 million was consistent
with $43.9 million in 2019.
Income Taxes
For the nine months ended September 30, 2020, the
income tax provision of $34.7 million increased $36.4 million when
compared to 2019. The increase is due to an increase in income
before the provision for income taxes of $148.5 million, offset by
an increase in discrete tax benefits of $7.0 million in 2020. The
Company's effective tax rate, excluding discrete adjustments, was
29% and 27%, for the nine months ended September 30, 2020 and 2019,
respectively. The effective tax rate, excluding the impact of
non-deductible contingent consideration expense was 25% and 24%,
for the nine months ended September 30, 2020 and 2019,
respectively.
Net Income & Adjusted Net
Income
For the nine months ended September 30, 2020, the
Company recorded net income of $119.7 million, or $2.23 per diluted
share, versus net income of $7.6 million, or $0.15 per diluted
share, in 2019.
For the nine months ended September 30, 2020, the
Company recorded adjusted net income of $225.1 million, or $4.20
per diluted share, versus adjusted net income of $69.6 million, or
$1.33 per diluted share, in 2019. (1)
Adjusted EBITDA
For the nine months ended September 30, 2020, the
Company recorded adjusted EBITDA of $339.5 million versus $145.4
million in 2019. (1)
2020 FINANCIAL FORECAST
Based upon the Company's financial performance
year to date as well as expectations for the remainder of the year,
the Company has updated its full year 2020 financial forecast
reflected by the following financial metrics and accompanying
operational considerations:
Financial Metrics
(in millions) |
Updated 2020 FORECAST (As of 11/5/2020) |
Previous 2020 forecast (As of 7/30/2020) |
Total Revenues |
$1,520 - $1,580 |
$1,500 - $1,600 |
• NARCAN® Nasal Spray |
$295 - $315 |
$285 - $315 |
• Anthrax vaccines |
$350 - $370 |
$320 - $350 |
• ACAM2000 |
$160 - $200 |
$180 - $200 |
• CDMO |
$450 - $470 |
$440 - $460 |
Adjusted Net Income (1) |
$375 - $405 |
$340 - $390 |
Adjusted EBITDA (1) |
$575 - $615 |
$535 - $600 |
The following operational considerations are
incorporated in the Company's forecast and remain consistent with
the previous forecast:
- Year over year improvement in gross margin of 400 - 600 basis
points driven by improved product mix and increased contribution
from the Company's CDMO business;
- The previously announced delay into 2021 of the launch of the
Phase 3 clinical study for CHIKV-VLP, the Company's chikungunya
virus virus-like particle vaccine, due to the timing of certain
operational factors;
- The continued deferral into 2021 of a follow-on procurement
contract with the U.S. government for raxibacumab, the Company's
FDA-approved anthrax monoclonal antibody therapeutic, due to the
impact of the prioritization of Operation Warp Speed on the
Company's technology transfer activities for the product;
- Continued challenges through the end of 2020 in the Company's
travel health business and revenues associated with Vaxchora®
(Cholera Vaccine, Live, Oral) and Vivotif® (Typhoid Vaccine Live
Oral Ty21a);
- No generic competition in 2020 for NARCAN® Nasal Spray.
The Company has assessed the risks to its business
associated with the COVID-19 pandemic and has adopted measures to
mitigate those risks as they are understood today and accordingly
is providing this outlook for 2020. Despite the lack of expected
material disruption to the business, the Company's executive
management continues to assess the business and operational
implications associated with the pandemic and market conditions on
its employees, patients, and customers.
The outlook for 2020 does not include estimates
for potential new corporate development or other M&A
transactions.
FOOTNOTES
(1) See "Reconciliation of Net Income to Adjusted
Net Income and Adjusted EBITDA and Gross Margin and Adjusted Gross
Margin" for a definition of terms and the reconciliation
tables.
CONFERENCE CALL, PRESENTATION SUPPLEMENT, AND
WEBCAST INFORMATION
Company management will host a conference call at
5:00 pm (Eastern Time) today, November 5, 2020, to discuss these
financial results. The conference call and presentation supplement
can be accessed from the Company's website or through the
following:
Live Teleconference Information: Dial in: [US]
(855) 766-6521; [International] (262) 912-6157 Conference ID:
3549944
Live Webcast Information: Visit
https://edge.media-server.com/mmc/p/7c8i4shm for the live webcast
feed.
A replay of the call can be accessed at
www.emergentbiosolutions.com under “Investors.”
ABOUT EMERGENT BIOSOLUTIONS INC.
Emergent BioSolutions is a global life sciences
company whose mission is to protect and enhance life. Through our
specialty products and contract development and manufacturing
services, we are dedicated to providing solutions that address
public health threats. Through social responsibility, we aim to
build healthier and safer communities. We aspire to deliver peace
of mind to our patients and customers so they can focus on what’s
most important in their lives. In working together, we envision
protecting or enhancing 1 billion lives by 2030. For more
information visit www.emergentbiosolutions.com. Find us on LinkedIn
and follow us on Twitter @emergentbiosolu and Instagram
@life_at_emergent.
SAFE HARBOR STATEMENT
This press release includes forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Any statements, other than statements of
historical fact, including, without limitation, our financial
guidance and related projections and statements regarding our
ability to meet such projections in the anticipated timeframe, if
at all; statements regarding executing our strategy; delivering on
our commitments to our partners and customers; creating value for
our shareholders; our ability to develop safe and effective
vaccines against the novel strain of coronavirus (SARS-CoV-2)
causing COVID-19 and implement measures to mitigate the risks to
our business posed by COVID-19; total contract and related option
value; annual improvement in gross margin driven by improved
product and services mix; the lack of generic competition for
NARCAN® Nasal Spray for the remainder of 2020; the expectation that
the Company will meet its final sales milestone for NARCAN® Nasal
Spray; the entry into a follow-on procurement contract for
raxibacumab in 2021; the launch of a Phase 3 clinical study for
CHIKV-VLP; the annual impact on our revenues from declines in sales
of our vaccine products that target travelers due to the reduction
of international travel caused by the COVID-19 pandemic and any
other statements containing the words “will,” “believes,”
“expects,” “anticipates,” “intends,” “plans,” “targets,”
“forecasts,” “estimates” and similar expressions in conjunction
with, among other things, discussions of the Company’s outlook,
financial performance or financial condition, financial and
operation goals, strategic goals, growth strategy, product sales,
government development or procurement contracts or awards,
government appropriations, manufacturing capabilities, and the
timing of certain regulatory approvals or expenditures are
forward-looking statements. These 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.
Investors should realize that if underlying
assumptions prove inaccurate or unknown risks or uncertainties
materialize, actual results could differ materially from our
expectations. Investors are, therefore, cautioned not to place
undue reliance on any forward-looking statement. Any
forward-looking statements speak only as of the date of this press
release, and, except as required by law, 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 the impact
of global economic conditions and public health crises and
epidemics, such as the impact from the global pandemic that arose
from COVID-19, on the markets, our operations, and employees as
well as those of our customers and suppliers; our ability to obtain
or maintain FDA approval or authorization for emergency or broader
patient use of our COVID-19 treatments and their actual safety and
effectiveness; availability of U.S. government funding for
procurement for our products and certain product candidates and the
future exercise of options under contracts related to such
procurement; the negotiation of further commitments or contracts
related to the collaboration and deployment of capacity toward
future commercial manufacturing under our CDMO contracts; our
ability to perform under our contracts with the U.S. government and
our CDMO clients, including the timing of and specifications
relating to deliveries; the continued exercise of discretion by
BARDA to procure additional doses of AV7909 (Anthrax Vaccine
Adsorbed, Adjuvanted) prior to approval by the FDA; our ability to
secure licensure of AV7909 from the FDA within the anticipated
timeframe, if at all; our ability to secure follow-on procurement
contracts for our solutions to public health threats that are under
procurement contracts that have expired or will be expiring; our
ability to successfully appeal the patent litigation decision
related to NARCAN® Nasal Spray 4mg/spray; our ability and the
ability of our collaborators to enforce patents related to NARCAN®
Nasal Spray against potential generic entrants; our ability to
identify and acquire companies, businesses, products or product
candidates that satisfy our selection criteria; our ability and the
ability of our contractors and suppliers to maintain compliance
with Current Good Manufacturing Practices and other regulatory
obligations; our ability to comply with the operating and financial
covenants required by our senior secured credit facilities and the
indenture governing our senior unsecured notes due 2028; our
ability to obtain and maintain regulatory approvals for our other
product candidates and the timing of any such approvals; the
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 success of
our commercialization, marketing and manufacturing capabilities and
strategy; and the accuracy of our estimates regarding future
revenues, expenses, and 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. Investors should
consider this cautionary statement as well as the risk factors
identified in our periodic reports filed with the Securities and
Exchange Commission when evaluating our forward-looking
statements.
Investor Contact |
Media Contact |
Robert Burrows |
Miko B. Neri |
Vice President, Investor Relations |
Senior Director, Global Communications & Public Affairs |
(o) 240/631-3280; (m) 240/413-1917 |
(o) 240/631-3392 |
burrowsr@ebsi.com |
nerim@ebsi.com |
Emergent BioSolutions Inc.Condensed Consolidated
Balance Sheets (unaudited, in millions, except per share data)
ASSETS |
|
September 30, 2020 |
|
|
December 31, 2019 |
Current
assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
415.0 |
|
$ |
167.8 |
Restricted cash |
|
0.2 |
|
|
0.2 |
Accounts receivable, net |
|
196.1 |
|
|
270.7 |
Inventories, net |
|
270.1 |
|
|
222.5 |
Prepaid expenses and other current assets |
|
77.4 |
|
|
25.0 |
Total current assets |
|
958.8 |
|
|
686.2 |
Property, plant and equipment, net |
|
606.5 |
|
|
542.3 |
Intangible assets, net |
|
678.1 |
|
|
712.9 |
In-process research and development |
|
— |
|
|
29.0 |
Goodwill |
|
266.5 |
|
|
266.6 |
Other assets |
|
106.4 |
|
|
90.3 |
Total assets |
$ |
2,616.3 |
|
$ |
2,327.3 |
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
Accounts payable |
$ |
102.8 |
|
|
$ |
94.8 |
|
Accrued expenses |
|
34.9 |
|
|
|
39.5 |
|
Accrued compensation |
|
76.9 |
|
|
|
62.4 |
|
Debt, current portion |
|
30.9 |
|
|
|
12.9 |
|
Other current liabilities |
|
53.8 |
|
|
|
6.7 |
|
Total current liabilities |
|
299.3 |
|
|
|
216.3 |
|
|
|
|
|
|
|
|
|
Contingent consideration, net of current portion |
|
35.2 |
|
|
|
26.0 |
|
Debt, net of current portion |
|
848.5 |
|
|
|
798.4 |
|
Deferred tax liability |
|
64.0 |
|
|
|
63.9 |
|
Contract liabilities, net of current portion |
|
60.4 |
|
|
|
85.6 |
|
Other liabilities |
|
57.4 |
|
|
|
48.6 |
|
Total liabilities |
$ |
1,364.8 |
|
|
$ |
1,238.8 |
|
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, 54.2 and
53.0 shares issued; 53.0 and 51.7 shares outstanding,
respectively |
|
0.1 |
|
|
|
0.1 |
|
Treasury stock, at cost, 1.2 common shares |
|
(39.6 |
) |
|
|
(39.6 |
) |
Additional paid-in capital |
|
770.9 |
|
|
|
716.1 |
|
Accumulated other comprehensive loss, net |
|
(21.4 |
) |
|
|
(9.9 |
) |
Retained earnings |
|
541.5 |
|
|
|
421.8 |
|
Total stockholders' equity |
|
1,251.5 |
|
|
|
1,088.5 |
|
Total liabilities and stockholders' equity |
$ |
2,616.3 |
|
|
$ |
2,327.3 |
|
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, |
Revenues: |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Product
sales, net |
$ |
202.2 |
|
$ |
256.2 |
|
$ |
648.9 |
|
$ |
592.7 |
|
Contract
development and manufacturing |
|
|
|
|
|
|
|
|
services |
157.1 |
|
20.0 |
|
251.4 |
|
54.6 |
|
Contracts
and grants |
25.9 |
|
35.6 |
|
72.1 |
|
98.4 |
|
Total
revenues |
385.2 |
|
311.8 |
|
972.4 |
|
745.7 |
|
Operating
expenses: |
|
|
|
|
Cost of
product sales and contract development and manufacturing
services |
149.0 |
|
108.0 |
|
355.7 |
|
300.7 |
|
Research and
development |
84.4 |
|
53.4 |
|
175.0 |
|
163.4 |
|
Selling,
general and administrative |
75.5 |
|
65.0 |
|
221.2 |
|
201.3 |
|
Amortization
of intangible assets |
15.0 |
|
14.7 |
|
44.8 |
|
43.9 |
|
Total
operating expenses |
323.9 |
|
241.1 |
|
796.7 |
|
709.3 |
|
|
|
|
|
|
|
|
|
|
Income from
operations |
61.3 |
|
70.7 |
|
175.7 |
|
36.4 |
|
|
|
|
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
Interest
expense |
(7.6 |
) |
(10.3 |
) |
(22.6 |
) |
(29.3 |
) |
Other,
net |
1.3 |
|
(1.5 |
) |
1.3 |
|
(1.2 |
) |
Total other
income (expense), net |
(6.3 |
) |
(11.8 |
) |
(21.3 |
) |
(30.5 |
) |
Income
before provision (benefit) for income taxes |
|
55.0 |
|
|
58.9 |
|
|
154.4 |
|
|
5.9 |
|
Income tax
provision (benefit) |
|
15.5 |
|
|
15.7 |
|
|
34.7 |
|
|
(1.7 |
) |
Net
income |
$ |
39.5 |
|
$ |
43.2 |
|
$ |
119.7 |
|
$ |
7.6 |
|
|
|
|
|
|
|
|
|
|
Net income
per common share |
|
|
|
|
|
|
|
|
Basic |
$ |
0.75 |
|
$ |
0.84 |
|
$ |
2.28 |
|
$ |
0.15 |
|
Diluted |
$ |
0.73 |
|
$ |
0.83 |
|
$ |
2.23 |
|
$ |
0.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing income per share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
53.0 |
|
|
51.6 |
|
|
52.5 |
|
|
51.4 |
|
Diluted |
|
54.3 |
|
|
52.3 |
|
|
53.6 |
|
|
52.3 |
|
Emergent BioSolutions Inc.Condensed Consolidated
Statements of Cash Flows (unaudited, in millions)
|
Nine Months Ended September 30, |
|
|
2020 |
|
|
2019 |
|
Cash flows provided by operating activities: |
|
|
|
|
|
|
Net income |
$ |
119.7 |
|
$ |
7.6 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
Stock-based compensation expense |
|
41.0 |
|
|
21.0 |
|
Depreciation and amortization |
|
85.6 |
|
|
82.8 |
|
Impairment of IPR&D intangible asset |
|
29.0 |
|
|
— |
|
Change in fair value of contingent consideration, net |
|
31.3 |
|
|
12.4 |
|
Amortization of deferred financing costs |
|
2.4 |
|
|
2.2 |
|
Deferred income taxes |
|
(4.4 |
) |
|
(5.7 |
) |
Other |
|
0.6 |
|
|
0.7 |
|
Changes in operating assets and liabilities: |
|
|
Accounts receivable |
|
74.6 |
|
|
(18.6 |
) |
Inventories |
|
(47.6 |
) |
|
(24.4 |
) |
Prepaid expenses and other assets |
|
(61.8 |
) |
|
(36.5 |
) |
Accounts payable |
|
10.6 |
|
|
2.5 |
|
Accrued expenses |
|
4.4 |
|
|
5.2 |
|
Accrued compensation |
|
14.5 |
|
|
(2.4 |
) |
Contract liabilities |
|
(9.0 |
) |
|
19.1 |
|
Net cash provided by operating activities: |
|
290.9 |
|
|
65.9 |
|
Cash flows
used in investing activities: |
|
|
Purchases of property, plant and equipment and other |
|
(105.0 |
) |
|
(50.8 |
) |
Milestone payment from prior asset acquisition |
|
(10.0 |
) |
|
(10.0 |
) |
Net cash used in investing activities: |
|
(115.0 |
) |
|
(60.8 |
) |
Cash flows
provided by financing activities: |
|
|
|
|
|
|
Proceeds from revolving credit facility |
|
— |
|
|
130.0 |
|
Principal payments on revolving credit facility |
|
(373.0 |
) |
|
(95.0 |
) |
Proceeds from senior unsecured notes |
|
450.0 |
|
|
— |
|
Principal payments on term loan facility |
|
(8.4 |
) |
|
(8.4 |
) |
Debt issuance costs |
|
(8.4 |
) |
|
— |
|
Proceeds from exercise of stock options |
|
26.6 |
|
|
5.7 |
|
Taxes paid for share-based compensation activity |
|
(12.8 |
) |
|
(6.6 |
) |
Contingent consideration payments |
|
(2.2 |
) |
|
(3.7 |
) |
Net cash provided by financing activities: |
|
71.8 |
|
|
22.0 |
|
Effect of exchange rate changes on cash, cash equivalents and
restricted cash |
|
(0.5 |
) |
|
(0.1 |
) |
Net increase in cash, cash equivalents and restricted cash |
|
247.2 |
|
|
27.0 |
|
Cash, cash equivalents and restricted cash at beginning of
period |
|
168.0 |
|
|
112.4 |
|
Cash, cash equivalents and restricted cash at end of period |
$ |
415.2 |
|
$ |
139.4 |
|
RECONCILIATION OF NET INCOME TO ADJUSTED NET
INCOME AND ADJUSTED EBITDA and GROSS MARGIN AND ADJUSTED GROSS
MARGIN (unaudited)
This press release contains four financial
measures (Adjusted Net Income, Adjusted EBITDA (Earnings
Before Depreciation and Amortization, Interest and Taxes, Gross
Margin and Adjusted Gross Margin)) 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. Adjusted net income adjusts for specified items that can be
highly variable or difficult to predict, or reflect the non-cash
impact of charges. All adjustments are tax effected utilizing the
federal statutory tax rate for the US, except for changes in the
fair value of contingent consideration as the vast majority is
non-deductible for tax purposes. Adjusted net income margin is
defined as adjusted net income divided by total revenues. Adjusted
EBITDA reflects net income excluding the impact of depreciation,
amortization, interest expense and income tax provision (benefit),
excluding specified items that can be highly variable and the
non-cash impact of certain accounting adjustments. Adjusted EBITDA
margin is defined as Adjusted EBITDA divided by total revenues.
Gross margin reflects adjusted revenues minus cost of product sales
and contract development and manufacturing services (COGS).
Adjusted revenues is calculated as total revenues minus contracts
and grants revenues. Gross margin percentage is calculated as gross
margin divided by adjusted revenues. Adjusted gross margin adjusts
COGS for specified items that can be highly variable or difficult
to predict, or to reflect the non-cash impacts of charges (Adjusted
COGS). Adjusted gross margin is calculated as adjusted revenues
minus adjusted COGS. Adjusted gross margin percentage is calculated
as adjusted gross margin divided by adjusted revenues. 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.
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.
Reconciliation of Net Income to Adjusted Net
Income (Unaudited)
(in millions, except per share value) |
Three Months Ended September 30, |
|
2020 |
|
|
2019 |
|
Source |
Net
income |
$39.5 |
|
$43.2 |
|
|
Adjustments: |
+ Changes in fair value of contingent consideration |
|
30.2 |
|
|
6.9 |
|
COGS |
+
Impairment of IPR&D intangible asset |
|
29.0 |
|
|
— |
|
R&D |
+
Exit and disposal costs* |
|
17.1 |
|
|
— |
|
COGS,
SG&A, Other Income |
+
Non-cash amortization charges |
|
15.9 |
|
|
15.4 |
|
Intangible
Asset Amortization, Other Income |
+
Acquisition-related costs (transaction & integration) |
|
0.5 |
|
|
3.2 |
|
SG&A |
Tax
effect |
|
(13.2) |
|
|
(3.9) |
|
|
Total
adjustments: |
$79.5 |
|
$21.6 |
|
|
Adjusted net
income |
$119.0 |
|
$64.8 |
|
|
Adjusted net
income per diluted share |
$2.19 |
|
$1.24 |
|
|
* Amount incorporates $13.8 million of inventory reserves
associated with the Company's travel health vaccines
(in millions, except per share value) |
Nine Months Ended September 30, |
|
2020 |
|
|
2019 |
|
Source |
Net
income |
$119.7 |
|
$7.6 |
|
|
Adjustments: |
+ Non-cash amortization charges |
|
47.2 |
|
|
46.1 |
|
Intangible Asset Amortization, Other Income |
+
Changes in fair value of contingent consideration |
|
31.3 |
|
|
12.4 |
|
COGS |
+
Impairment of IPR&D intangible asset |
|
29.0 |
|
|
— |
|
R&D |
+
Exit and disposal costs* |
|
17.1 |
|
|
— |
|
COGS,
SG&A, Other Income |
+
Acquisition-related costs (transaction & integration) |
|
0.5 |
|
|
10.6 |
|
SG&A |
+
Impact of purchase accounting on inventory step-up |
|
— |
|
|
6.1 |
|
COGS |
Tax effect |
|
(19.7) |
|
|
(13.2) |
|
|
Total
adjustments: |
$105.4 |
|
$62.0 |
|
|
Adjusted net
income |
$225.1 |
|
$69.6 |
|
|
Adjusted net
income per diluted share |
$4.20 |
|
$1.33 |
|
|
* Amount incorporates $13.8 million of inventory
reserves associated with the Company's travel health vaccines
(in millions) |
Updated 2020 Full Year Forecast |
2020F |
Source |
Net income |
$255 - $285 |
|
Adjustments: |
+
Non-cash amortization charges |
63 |
Intangible
Asset Amortization, Other Income |
+
Changes in fair value of contingent consideration |
32 |
COGS |
+
Impairment of IPR&D intangible asset |
29 |
R&D |
+
Exit and disposal costs |
17 |
COGS,
SG&A, Other Income |
+
Acquisition-related costs (transaction & integration) |
1 |
SG&A |
Tax
effect |
(22) |
|
Total
adjustments: |
$120 |
|
Adjusted net
income |
$375 - $405 |
|
Reconciliation of Net Income to Adjusted EBITDA
(Unaudited)
(in millions) |
Three Months Ended September 30, |
|
2020 |
|
2019 |
Net
income |
$39.5 |
$43.2 |
Adjustments: |
+ Depreciation & amortization |
|
28.8 |
|
27.7 |
+
Provision for income taxes |
|
15.5 |
|
15.7 |
+
Total interest expense, net* |
|
7.5 |
|
9.7 |
+
Changes in fair value of contingent consideration |
|
30.2 |
|
6.9 |
+
Impairment of IPR&D intangible asset |
|
29.0 |
|
— |
+
Exit and disposal costs** |
|
17.1 |
|
— |
+
Acquisition-related costs (transaction & integration) |
|
0.5 |
|
3.2 |
Total
adjustments |
$128.6 |
$63.2 |
Adjusted EBITDA |
|
$168.1 |
|
$106.4 |
* Includes interest income of $0.1 million in 2020 and $0.6 million
in 2019 ** Amount incorporates $13.8 million of inventory reserves
associated with the Company's travel health vaccines |
(in millions) |
Nine Months Ended September 30, |
|
2020 |
|
2019 |
|
Net
income |
$119.7 |
$7.6 |
|
Adjustments: |
+ Depreciation & amortization |
|
85.6 |
|
82.8 |
|
+
Provision (benefit) for (from) income taxes |
|
34.7 |
|
(1.7) |
|
+
Total interest expense, net* |
|
21.6 |
|
27.6 |
|
+
Changes in fair value of contingent consideration |
|
31.3 |
|
12.4 |
|
+
Impairment of IPR&D intangible asset |
|
29.0 |
|
— |
|
+
Exit and disposal costs** |
|
17.1 |
|
— |
|
+
Acquisition-related costs (transaction & integration) |
|
0.5 |
|
10.6 |
|
+
Impact of purchase accounting on inventory step-up |
|
— |
|
6.1 |
|
Total
adjustments |
$ |
219.8 |
$ |
137.8 |
|
Adjusted
EBITDA |
$339.5 |
$145.4 |
|
* Includes interest income of $1.0 million in 2020 and $1.7 million
in 2019 ** Amount incorporates $13.8 million of inventory reserves
associated with the Company's travel health vaccines |
(in millions) |
Updated 2020 Full Year Forecast |
2020F |
Net
income |
$255 -
$285 |
Adjustments: |
|
+
Depreciation & amortization |
115 |
+
Provision for income taxes |
96 -
106 |
+
Total interest expense |
30 |
+
Change in fair value of contingent consideration |
32 |
+
Impairment of IPR&D intangible asset |
29 |
+
Exit and disposal costs |
17 |
+
Acquisition-related costs (transaction and integration) |
1 |
Total
adjustments |
$320 - $330 |
Adjusted
EBITDA |
$575 - $615 |
Reconciliation of Gross Margin and Adjusted Gross
Margin (Unaudited)
(in millions) |
Three Months Ended September 30, |
Nine Months Ended September 30, |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Total
revenues |
$385.2 |
|
$311.8 |
|
$972.4 |
|
$745.7 |
|
Less: Contract and grants revenues |
|
(25.9) |
|
|
(35.6) |
|
|
(72.1) |
|
|
(98.4) |
|
Adjusted
revenues |
$359.3 |
|
$276.2 |
|
$900.3 |
|
$647.3 |
|
|
|
|
Cost of
product sales and contract development and manufacturing services
("COGS") |
$149.0 |
|
$108.0 |
|
$355.7 |
|
$300.7 |
|
-
Changes in fair value of contingent consideration |
|
(30.2) |
|
|
(6.9) |
|
|
(31.3) |
|
|
(12.4) |
|
-
Inventory reserves related to Travel Health vaccines |
|
(13.8) |
|
|
— |
|
|
(13.8) |
|
|
— |
|
Adjusted
COGS |
$105.0 |
|
$101.1 |
|
$310.6 |
|
$288.3 |
|
|
|
|
Gross margin
(adjusted revenues minus COGS) |
$210.3 |
|
$168.2 |
|
$544.6 |
|
$346.6 |
|
Gross margin
% (gross margin divided by adjusted revenues) |
|
59% |
|
|
61% |
|
|
60% |
|
|
54% |
|
|
Adjusted
gross margin (adjusted revenues minus adjusted COGS) |
$254.3 |
|
$175.1 |
|
$589.7 |
|
$359.0 |
|
Adjusted
gross margin % (adjusted gross margin divided by adjusted
revenues) |
|
71% |
|
|
63% |
|
|
66% |
|
|
55% |
|
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