Emergent BioSolutions Inc. (NYSE: EBS) today reported financial
results for the third quarter ended September 30, 2021.
"Emergent's core products and service businesses
remain strong as evidenced by our accomplishments this quarter,"
said Robert G. Kramer, president and CEO of Emergent BioSolutions.
"We have secured renewals of multiple medical countermeasure supply
contracts, made pipeline advancements, implemented organizational
enhancements that better serve our customers, and are pursuing new
business prospects. We are confident in our 2024 growth plan and
remain focused on our mission - to protect and enhance life."
FINANCIAL HIGHLIGHTS (1)
($ in millions, except per share amounts) |
Q3 2021 |
Q3 2020 |
% Change |
Total revenues |
$329.0 |
$385.2 |
(15)% |
Net (loss) income |
($32.7) |
$39.5 |
* |
Net (loss) income per diluted share |
($0.61) |
$0.73 |
* |
Adjusted net (loss) income (2) |
($19.3) |
$119.0 |
* |
Adjusted net (loss) income (2) per diluted share |
($0.36) |
$2.19 |
* |
Adjusted EBITDA (2) |
($3.3) |
$168.1 |
* |
($ in millions, except per share amounts) |
YTD 2021 |
YTD 2020 |
% Change |
Total revenues |
$1,069.5 |
$972.4 |
10% |
Net income |
$41.6 |
$119.7 |
(65)% |
Net income per diluted share |
$0.77 |
$2.23 |
(65)% |
Adjusted net income (2) |
$82.3 |
$225.1 |
(63)% |
Adjusted net income (2) per diluted share |
$1.52 |
$4.20 |
(64)% |
Adjusted EBITDA (2) |
$169.7 |
$339.5 |
(50)% |
* % change is greater than 100% |
Q3 2021 AND OTHER RECENT
BUSINESS
- Announced a mutual
agreement with the U.S. Department of Health and Human Services
(HHS) to terminate the Company's 2012 Center for Innovation in
Advanced Development and Manufacturing (CIADM) contract to
establish a public-private partnership for pandemic preparedness,
along with all associated task orders, including the 2020 task
order to reserve capacity and expand manufacturing for third-party
COVID-19 vaccine and therapeutic candidates
- Initiated a pivotal Phase 3 safety and
immunogenicity study to evaluate CHIKV VLP, the company's
single-dose chikungunya virus virus-like particle vaccine
candidate
- Secured a
multi-year development and manufacturing agreement with Providence
Therapeutics, valued at approximately $90 million, for its mRNA
COVID-19 vaccine candidate
- Received a contract
modification to the 2016 AV7909 (Anthrax Vaccine Adsorbed with
Adjuvant) development and procurement contract with the U.S.
government, valued at approximately $399 million, to deliver doses
of AV7909 to the Strategic National Stockpile (SNS) over 18
months
- Received Orphan
Drug designation from the U.S. Food and Drug Administration (FDA)
for AV7909
- Announced inclusion of the company's
SARS-CoV-2 Immune Globulin Intravenous (Human) (COVID-HIG)
plasma-derived therapy in a Phase 3 safety and efficacy study,
INSIGHT-012, sponsored by the National Institute of Allergy and
Infectious Diseases of the National Institutes of Health,
evaluating hyperimmune intravenous immunoglobulin for outpatient
COVID-19 treatment
Q3 2021 FINANCIAL PERFORMANCE
(1)
(I) Quarter Ended September 30, 2021
(Q3)
Revenues
($ in millions) |
Q3 2021 |
Q3 2020 |
% Change |
Product sales, net (3): |
|
$133.3 |
$88.8 |
50% |
|
$80.7 |
$1.0 |
* |
|
$15.6 |
$73.9 |
(79)% |
|
$40.9 |
$38.5 |
6% |
Total product sales, net |
$270.5 |
$202.2 |
34% |
Contract development and manufacturing (CDMO): |
|
$112.6 |
$53.1 |
* |
|
($71.0) |
$104.0 |
* |
Total CDMO |
$41.6 |
$157.1 |
(74)% |
Contracts and grants |
$16.9 |
$25.9 |
(35)% |
Total revenues |
$329.0 |
$385.2 |
(15)% |
* % change is greater than 100% |
Product Sales, net NARCAN Nasal
SprayFor Q3 2021, revenues from NARCAN® (naloxone HCI) Nasal Spray
increased $44.5 million as compared to Q3 2020. The increase is
driven by continued growth in unit sales to the U.S. public
interest and commercial retail markets as well as customer channels
in Canada.
ACAM2000For Q3 2021, revenues from ACAM2000®
(Smallpox (Vaccinia) Vaccine, Live) increased $79.7 million as
compared to Q3 2020. The increase is largely driven by the timing
of deliveries to the U.S. government (USG), specifically the
Strategic National Stockpile (SNS). The revenues recognized in Q3
2021 are a result of a recent option exercise in July 2021 by the
USG valued at approximately $182 million. The Company expects to
deliver the remaining units under this option exercise during the
fourth quarter of 2021.
Anthrax vaccinesFor Q3 2021, revenues from Anthrax
vaccines decreased $58.3 million as compared to Q3 2020. The
decrease is largely driven by timing of deliveries to the USG,
specifically the SNS. The Company received an AV7909 contract
modification in September 2021 wherein the Company expects to
deliver additional doses of AV7909 over 18 months from the date of
execution of the contract modification valued at approximately $399
million.
Other (4)For Q3 2021, revenues from other product
sales were consistent as compared to Q3 2020. During the quarter,
an increase in sales of VIGIV [Vaccinia Immune Globulin Intravenous
(Human)] was offset by a decline in sales of BAT® [Botulism
Antitoxin Heptavalent (A, B, C, D, E, F, G) - (Equine)], largely
driven by timing of deliveries to the USG, specifically the
SNS.
CDMO Services For Q3 2021, revenue
from contract development and manufacturing services increased
$59.5 million as compared to Q3 2020. This increase is largely due
to arrangements with innovator manufacturers to address the
COVID-19 pandemic, specifically Johnson & Johnson, as well as
out-of-period adjustments (see discussion below entitled
"Out-of-Period Adjustments").
CDMO LeasesDuring Q3 2021, the
Company determined that it was necessary to classify the
public-private partnership with the Biomedical Advanced Research
and Development Authority (BARDA) as a lease rather than a
stand-ready arrangement. This change has been considered as part of
the immaterial out-of-period adjustment (see discussion below
entitled "Out-of-Period Adjustments"). As such, the Company is now
separately disclosing lease revenues on the statement of
operations. For Q3 2021, revenue from contract development and
manufacturing leases decreased $175.0 million largely due to a
reduction in lease revenues associated with the public-private
partnership with BARDA as the Company recognized revenue of $85.9
million in Q3 2020 and recorded a reversal of revenue of $86.0
million during Q3 2021 based on the lack of cash collections under
the arrangement in recent months. In November 2021, the Company and
BARDA mutually terminated this arrangement ending the
public-private partnership with BARDA. As a result of the
termination, the Company expects to record CDMO lease revenue in
the fourth quarter 2021 to reflect the remaining unrecognized
contract value and associated payments of approximately
$155.7 million.
Contracts and GrantsFor Q3 2021,
revenues from contracts and grants decreased $9.0 million as
compared to Q3 2020. The decrease is primarily due to a decrease in
activities associated with the COVID-HIG therapeutic product
candidate. As a result of the CIADM base contract termination, the
Company expects to record approximately $60.0 million of contracts
and grants revenue during the fourth quarter 2021.
Operating Expenses
($ in millions) |
Q3 2021 |
Q3 2020 |
% Change |
Cost of product sales |
$103.2 |
$120.2 |
(14)% |
Cost of CDMO |
$114.3 |
$28.8 |
* |
Research and development |
$49.6 |
$84.4 |
(41)% |
Selling, general and administrative |
$82.1 |
$75.5 |
9% |
Amortization of intangible assets |
$14.5 |
$15.0 |
(3)% |
Cost of Product SalesFor Q3 2021,
cost of product sales decreased $17.0 million as compared to Q3
2020. The decrease in cost is primarily due to significant items in
the prior year that did not recur in the current period offset by
higher volume of product sales, specifically NARCAN® Nasal Spray
and ACAM2000. During Q3 2020, the Company incurred charges of $30.2
million related to the Company's contingent consideration
liabilities and $13.8 million related to a write-down of inventory
balances related to the Company's travel health vaccines.
Cost of CDMO For Q3 2021, cost of
CDMO increased $85.5 million as compared to Q3 2020. The increase
in cost is primarily due to increases in CDMO services and
additional investments in manufacturing and quality systems and
capabilities, largely from the Company's arrangements to address
the COVID-19 pandemic and out-of-period adjustments (see discussion
below entitled "Out-of-Period Adjustments").
Research and Development For Q3
2021, research and development expenses decreased $34.8 million as
compared to Q3 2020. The decrease is primarily due to a decline in
costs associated with the Company's COVID-HIG therapeutic product
candidate and a non-recurring charge for an impairment of the
Company's in-process research and development (IPR&D)
intangible asset of $29.0 million during Q3 2020.
Selling, General and
AdministrativeFor Q3 2021, selling, general and
administrative expenses increased $6.6 million due to
organizational growth in headcount and professional services in
support of the expansion of the Company's business operations.
Out-of-Period AdjustmentsDuring
the three months ended September 30, 2021, the Company made
immaterial out-of-period adjustments related to its revenue
recognition policy for contract development and manufacturing
(CDMO) services and classification of the BARDA public-private
partnership as a lease. These adjustments resulted in out-of-period
increases of $38.3 million in CDMO service revenue, $36.9
million of costs of product sales and CDMO services for the three
months ended September 30, 2021 with a net impact to income
before income taxes of $1.4 million.
Additional Financial
InformationProduct Margin and Adjusted Product
Margin (2)
($ in millions) |
Q3 2021 |
Q3 2020 |
% Change |
Product margin |
$167.3 |
$82.0 |
* |
Product margin % (product margin divided by product revenues
(2)) |
62% |
41% |
21% |
Adjusted product margin |
$168.2 |
$126.0 |
33% |
Adjusted product margin % (adjusted product margin divided by
product revenues (2)) |
62% |
62% |
—% |
For Q3 2021, product margin increased
$85.3 million as compared to Q3 2020. Adjusted product margin
increased $42.2 million as compared to Q3 2020. The increase
in gross margin is primarily due to the $44.0 million of charges
related to inventory write-offs of the travel health vaccines and
the Company's contingent consideration liabilities which were not
recurring in Q3 2021. Adjusted product margin percent is consistent
from Q3 2021 as compared to Q3 2020.
CDMO Margin and Adjusted CDMO Margin
(2)
($ in millions) |
Q3 2021 |
Q3 2020 |
% Change |
CDMO margin |
($1.7) |
$24.3 |
* |
CDMO margin % (CDMO margin divided by CDMO service revenues
(2)) |
(2)% |
46% |
(48)% |
Adjusted CDMO margin |
$13.3 |
$42.4 |
(69)% |
Adjusted CDMO margin % (adjusted CDMO margin divided by adjusted
CDMO revenues (2)) |
10% |
60% |
(50)% |
For Q3 2021, CDMO margin decreased
$26.0 million as compared to Q3 2020. Adjusted CDMO margin
decreased $29.1 million as compared to Q3 2020. The decline in
CDMO margin and adjusted CDMO margin is primarily due to an
increase in CDMO service activities, increase in costs due to
out-of-period adjustments (see discussion below entitled
"Out-of-Period Adjustments") and additional costs to support
remediation efforts for our COVID-19 manufacturing activities.
CDMO Metrics
CDMO Backlog Rollforward |
($ in millions) |
Beginning backlog (6/30/2021) (5) |
$1,097.0 |
Contract development and manufacturing (revenue recognized in Q3
2021): |
|
CDMO services |
($112.6) |
CDMO leases |
$71.0 |
CDMO revenues recognized in Q3 2021 |
($41.6) |
New Business - Initial value of contracts secured (6) |
$117.7 |
Impact of CIADM termination and other modifications |
($171.1) |
Ending backlog (9/30/2021) (5) |
$1,002.0 |
($ in millions) |
As of Q3 2021 |
As of Q2 2021 |
% Change |
CDMO backlog (5) |
$1,002.0 |
$1,097.0 |
(9)% |
CDMO opportunity funnel (7) |
$283.7 |
$672.0 |
(58)% |
Capital Expenditures
($ in millions) |
Q3 2021 |
Q3 2020 |
% Change |
Gross capital expenditures |
$55.2 |
$45.7 |
21% |
- Capital expenditures reimbursed |
$5.7 |
$25.1 |
(77)% |
Net capital expenditures |
$49.5 |
$20.6 |
* |
Gross capital expenditures as a % of total revenues |
17% |
12% |
5% |
Net capital expenditures as a % of total revenues |
15% |
5% |
10% |
For Q3 2021, capital expenditures increased largely
due to the Company's continued investments associated with
increased capacity and capabilities at the Company's Rockville
facility. The increase in gross capital expenditures was offset by
reimbursements of $5.7 million related to arrangements funded by
the USG.
2021 FINANCIAL FORECAST
For full year 2021, the Company's updated forecast
includes the following financial metrics:
($ in millions) |
Updated 2021 Forecast |
Previous 2021 Forecast (As of July 29,
2021) |
Total revenues |
$1,700 - $1,800 |
$1,700 - $1,900 |
|
$400 - $420 |
$305 - $325 |
|
$250 - $260 |
$280 - $310 |
|
$200 - $220 |
$185 - $205 |
|
$600 - $650 |
$765 - $875 |
Adjusted EBITDA (2) |
$500 - $550 |
$620 - $720 |
Adjusted net income (2) |
$315 - $350 |
$395 - $470 |
Gross margin (2) |
54% - 56% |
61% - 63% |
The Company's financial forecast for 2021 includes
the following additional considerations:
Revised Considerations
- Gross margin reflects the impact of
the Q3 2021 performance as well as expectations for the remainder
of the year.
- CDMO services revenue reflects the
impact of the mutual agreement with HHS to end the Company's
involvement in the CIADM program and to close out remaining
obligations under the CIADM base contract and related task orders.
This agreement reduces the total contract value to be realized
under the 2020 task order to $470.9 million from $650.8
million.
Unchanged Considerations
- Narcan® Nasal Spray revenues assume
the naloxone market remains competitive and incorporates the impact
of at least one new branded entrant into the market (one branded
competitor entered the market during the third quarter of 2021), as
well as no generic entrant into the market prior to the anticipated
appellate decision related to the pending patent litigation, which
is expected by the end of 2021.
- Anthrax vaccines revenue is expected
to continue to primarily reflect procurement of AV7909 under the
terms of the Company's existing contract with BARDA at a more
normalized annual level.
- ACAM2000®vaccine revenues incorporate
the expected full delivery of product under the $182 million option
exercise received in July 2021 as well as other international
sales.
- CDMO services revenue reflects the
continued manufacturing of Johnson & Johnson's COVID-19 vaccine
bulk drug substance. On July 29th, the Company announced that it
was informed by the FDA that it can resume production at its
Bayview manufacturing facility.
- Total revenues, specifically other
product sales, are expected to be impacted due to the Company's
assumption that a new raxibacumab contract will be awarded later
than previously planned.
- R&D expenses are expected to
reflect continued pipeline progress across the portfolio, including
the assumption of at least one Phase 3 launch and one Biologics
License Application (BLA)/Emergency Use Authorization (EUA)
filing.
- Capital expenditures, net of
reimbursement, are expected to be in a range of 8% to 9% of total
revenues, reflecting ongoing investments in capacity and capability
expansions in support of the Company's CDMO services business and
product portfolio.
FOOTNOTES
(1) All financial information incorporated within
this release is unaudited. (2) See "Reconciliation of Net Income to
Adjusted Net Income," "Reconciliation of Net Income to Adjusted
EBITDA," "Reconciliation of Product Margin and Adjusted Product
Margin," "Reconciliation of CDMO Margin and Adjusted CDMO Margin"
and "Reconciliation of Net Research and Development Expenses" for a
definition of terms and the reconciliation tables.(3) Product
sales, net are reported net of variable consideration including
returns, rebates, wholesaler fees and prompt pay discounts. (4)
Other can include a combination of sales of any of the following
products: BAT, VIGIV, Anthrasil, raxibacumab, RSDL, Trobigard,
Vivotif, and Vaxchora.(5) CDMO backlog is defined as estimated
remaining contract value as of the indicated period pursuant to
signed contracts, the majority of which is expected to be
recognized over the next 24 months.(6) CDMO new business is defined
as initial value of contracts secured as well as incremental value
of existing contracts modified within the indicated period and is
incorporated into Backlog.(7) CDMO opportunity funnel is defined as
proposal values from new work with new customers, new work with
existing customers and extensions/expansions of existing contracts
with existing customers that, if converted to new business, the
majority of which is expected to be realized over the next 24
months. This excludes any value associated with an extension of the
commercial supply agreement (CSA) with Johnson & Johnson.
CONFERENCE CALL, PRESENTATION SUPPLEMENT
AND WEBCAST INFORMATION
Company management will host a conference call at
5:00 pm (Eastern Time) today, November 4, 2021, 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) 912-6157Conference ID: 2937668 |
|
Live Webcast Information:Visit
https://edge.media-server.com/mmc/p/nitqgk48 for the
webcast. |
|
A replay of the call can be accessed from the
Emergent website.
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 our website and follow us on LinkedIn, Twitter,
and Instagram.
RECONCILIATION OF NON-GAAP
MEASURES
This press release contains financial measures
(Adjusted Net Income, Adjusted EBITDA (Earnings Before
Interest, Taxes, Depreciation and Amortization), Adjusted Gross
Margin, Adjusted Product Gross Margin, Adjusted CDMO 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 to Adjusted Net
Income," "Reconciliation of Net Income to Adjusted EBITDA,"
"Reconciliation of Product Margin and Adjusted Product Margin,"
"Reconciliation of CDMO Margin and Adjusted CDMO Margin,"
"Reconciliation of 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. 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 the strength of our 2024 growth plan;
annual expectations underlying gross margin; the timing of
deliveries of AV7909; the full delivery in 2021 of vaccines
procured under the July 2021 ACAM2000® option exercise; the
strength of the naloxone market and the number of generic and new
branded naloxone entrants expected to enter into the market this
year; new business prospects; enhanced customer service; capacity
expansion in our pipeline portfolio; our CDMO backlog and
opportunity funnel; total contract value; the timing and level of
future revenues; the continued manufacturing of bulk drug substance
for Johnson & Johnson's COVID-19 vaccine; the expectation of at
least one new Phase 3 launch and one BLA/EUA by year end and the
level of capital expenditures; 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, product sales, government
development or procurement contracts or awards, government
appropriations, manufacturing capabilities, and the timing of
certain clinical trials and regulatory approvals 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.
The reader should realize that if underlying
assumptions prove inaccurate or unknown risks or uncertainties
materialize, actual results could differ materially from our
expectations. Readers 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 availability of
U.S. government funding for procurement of AV7909 and/or BioThrax
or ACAM2000 and our other U.S. government procurement and
development contracts; the timing of our submission of an
application for and our ability to secure licensure of AV7909 from
the FDA within the anticipated timeframe, if at all; our ability to
perform under our contracts with the U.S. government, including the
timing of and specifications relating to deliveries; whether we
will realize the full benefit of our investments in additional
manufacturing and quality control systems; our ability to meet our
commitments to continued quality and manufacturing compliance at
our manufacturing facilities and the potential impact on our
ability to continue production of bulk drug substance for Johnson
& Johnson's COVID-19 vaccine; our ability to provide CDMO
services for the development and/or manufacture of product
candidates of our customers at required levels and on required
timelines; 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 obtain
and maintain regulatory approvals for our product candidates and
the timing of any such approvals; changes to U.S. government
priorities for the SNS; our ability to negotiate additional U.S.
government procurement or follow-on contracts for our public health
threat products that have expired or will be expiring; 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 develop a
safe and effective treatment for COVID-19 and obtain EUA or
approval of such treatment from the FDA; 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 U.S. government entities under
regulatory exemptions prior to approval by the FDA 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
full impact of COVID-19 disease 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; the success of our
commercialization, marketing and manufacturing capabilities and
strategy; 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. The reader 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 ContactRobert BurrowsVice President,
Investor Relationsburrowsr@ebsi.com(240) 413-1917 |
Media ContactMatt HartwigSenior Director, Media
Relationshartwigm@ebsi.com (240) 760-0551 |
Emergent BioSolutions Inc. |
Condensed Consolidated Balance Sheets |
(unaudited, in millions, except per share
data) |
|
|
|
|
|
September 30, 2021 |
|
December 31, 2020 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
403.8 |
|
|
$ |
621.3 |
|
Restricted cash |
0.2 |
|
|
0.2 |
|
Accounts receivable, net |
254.6 |
|
|
230.9 |
|
Inventories, net |
364.6 |
|
|
307.0 |
|
Prepaid expenses and other current assets |
88.3 |
|
|
36.5 |
|
Total current assets |
1,111.5 |
|
|
1,195.9 |
|
|
|
|
|
Property, plant and equipment, net |
768.7 |
|
|
644.1 |
|
Intangible assets, net |
618.6 |
|
|
663.1 |
|
Goodwill |
266.5 |
|
|
266.7 |
|
Other assets |
102.2 |
|
|
113.4 |
|
Total assets |
$ |
2,867.5 |
|
|
$ |
2,883.2 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
135.2 |
|
|
$ |
136.1 |
|
Accrued expenses |
42.9 |
|
|
46.9 |
|
Accrued compensation |
73.4 |
|
|
84.6 |
|
Debt, current portion |
31.6 |
|
|
33.8 |
|
Other current liabilities |
82.3 |
|
|
83.1 |
|
Total current liabilities |
365.4 |
|
|
384.5 |
|
|
|
|
|
Contingent consideration, net of current portion |
5.1 |
|
|
34.2 |
|
Debt, net of current portion |
817.3 |
|
|
841.0 |
|
Deferred tax liability |
53.0 |
|
|
53.2 |
|
Contract liabilities, net of current portion |
45.3 |
|
|
55.5 |
|
Other liabilities |
58.7 |
|
|
67.8 |
|
Total liabilities |
$ |
1,344.8 |
|
|
$ |
1,436.2 |
|
|
|
|
|
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, 54.9 and
54.2 shares issued; 53.7 and 53.0 shares outstanding,
respectively |
0.1 |
|
|
0.1 |
|
Additional paid-in capital |
816.8 |
|
|
784.9 |
|
Treasury stock, at cost, 1.2 common shares |
(39.6 |
) |
|
(39.6 |
) |
Accumulated other comprehensive loss, net |
(23.1 |
) |
|
(25.3 |
) |
Retained earnings |
768.5 |
|
|
726.9 |
|
Total stockholders' equity |
1,522.7 |
|
|
1,447.0 |
|
Total liabilities and stockholders' equity |
$ |
2,867.5 |
|
|
$ |
2,883.2 |
|
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, |
|
2021 |
2020 |
|
2021 |
2020 |
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
Product sales, net |
$ |
270.5 |
|
$ |
202.2 |
|
$ |
589.6 |
|
$ |
648.9 |
|
Contract development and manufacturing: |
|
|
|
|
|
|
|
|
Services |
|
112.6 |
|
|
53.1 |
|
|
283.7 |
|
|
102.7 |
|
Leases |
|
(71.0 |
) |
|
104.0 |
|
|
132.6 |
|
|
148.7 |
|
Total contract development and manufacturing |
|
41.6 |
|
|
157.1 |
|
|
416.3 |
|
|
251.4 |
|
Contracts and grants |
|
16.9 |
|
|
25.9 |
|
|
63.6 |
|
|
72.1 |
|
Total revenues |
|
329.0 |
|
|
385.2 |
|
|
1,069.5 |
|
|
972.4 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Cost of product sales |
|
103.2 |
|
|
120.2 |
|
|
237.0 |
|
|
287.6 |
|
Cost of contract development and manufacturing |
|
114.3 |
|
|
28.8 |
|
|
307.6 |
|
|
68.1 |
|
Research and development |
|
49.6 |
|
|
84.4 |
|
|
151.0 |
|
|
175.0 |
|
Selling, general and administrative |
|
82.1 |
|
|
75.5 |
|
|
254.2 |
|
|
221.2 |
|
Amortization of intangible assets |
|
14.5 |
|
|
15.0 |
|
|
44.5 |
|
|
44.8 |
|
Total operating expenses |
|
363.7 |
|
|
323.9 |
|
|
994.3 |
|
|
796.7 |
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
(34.7 |
) |
|
61.3 |
|
|
75.2 |
|
|
175.7 |
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
Interest expense |
|
(8.4 |
) |
|
(7.6 |
) |
|
(25.5 |
) |
|
(22.6 |
) |
Other, net |
|
(2.4 |
) |
|
1.3 |
|
|
(2.8 |
) |
|
1.3 |
|
Total other income (expense), net |
|
(10.8 |
) |
|
(6.3 |
) |
|
(28.3 |
) |
|
(21.3 |
) |
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
(45.5 |
) |
|
55.0 |
|
|
46.9 |
|
|
154.4 |
|
Income taxes |
|
12.8 |
|
|
(15.5 |
) |
|
(5.3 |
) |
|
(34.7 |
) |
Net income (loss) |
$ |
(32.7 |
) |
$ |
39.5 |
|
$ |
41.6 |
|
$ |
119.7 |
|
|
|
|
|
|
|
|
|
|
Net (loss) income per common share* |
|
|
|
|
|
|
|
|
Basic |
$ |
(0.61 |
) |
$ |
0.75 |
|
$ |
0.78 |
|
$ |
2.28 |
|
Diluted |
$ |
(0.61 |
) |
$ |
0.73 |
|
$ |
0.77 |
|
$ |
2.23 |
|
|
|
|
|
|
|
|
|
|
Shares used in computing income (loss) per share |
|
|
|
|
|
|
|
|
Basic |
|
53.7 |
|
|
53.0 |
|
|
53.6 |
|
|
52.5 |
|
Diluted |
|
53.7 |
|
|
54.3 |
|
|
54.3 |
|
|
53.6 |
|
|
|
|
|
|
|
|
|
|
* Any differences in the calculation of net income per common share
is due to rounding. |
Emergent BioSolutions Inc. |
Condensed Consolidated Statements of Cash
Flows |
(unaudited, in millions) |
|
|
Nine Months Ended September 30, |
|
2021 |
|
2020 |
Cash flows (used in) provided by operating activities: |
|
|
|
Net income |
$ |
41.6 |
|
|
$ |
119.7 |
|
Adjustments to reconcile net income to net cash (used in) provided
by operating activities: |
|
|
|
Share-based compensation expense |
32.3 |
|
|
41.0 |
|
Depreciation and amortization |
94.6 |
|
|
85.6 |
|
Adjustment for prior period lease receivables (Note 10) |
86.1 |
|
|
— |
|
Change in fair value of contingent consideration, net |
2.6 |
|
|
31.3 |
|
Amortization of deferred financing costs |
3.1 |
|
|
2.4 |
|
Deferred income taxes |
0.6 |
|
|
(4.4 |
) |
Impairment of IPR&D |
— |
|
|
29.0 |
|
Other |
5.1 |
|
|
0.6 |
|
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable |
(114.7 |
) |
|
74.6 |
|
Inventories |
(58.0 |
) |
|
(47.6 |
) |
Prepaid expenses and other assets |
(54.8 |
) |
|
(61.8 |
) |
Accounts payable |
3.5 |
|
|
10.6 |
|
Accrued expenses and other liabilities |
(19.3 |
) |
|
4.4 |
|
Accrued compensation |
(11.1 |
) |
|
14.5 |
|
Contract liabilities |
(19.5 |
) |
|
(9.0 |
) |
Net cash (used in) provided by operating activities: |
(7.9 |
) |
|
290.9 |
|
Cash flows used in investing activities: |
|
|
|
Purchases of property, plant and equipment |
(178.3 |
) |
|
(105.0 |
) |
Milestone payment from prior asset acquisition |
— |
|
|
(10.0 |
) |
Net cash used in investing activities: |
(178.3 |
) |
|
(115.0 |
) |
Cash flows (used in) provided by financing activities: |
|
|
|
Principal payments on revolving credit facility |
— |
|
|
(373.0 |
) |
Principal payments on term loan facility |
(16.9 |
) |
|
(8.4 |
) |
Principal payments on convertible senior notes |
(10.6 |
) |
|
— |
|
Proceeds from senior unsecured notes |
— |
|
|
450.0 |
|
Proceeds from share-based compensation activity |
12.5 |
|
|
26.6 |
|
Debt issuance costs |
— |
|
|
(8.4 |
) |
Taxes paid for share-based compensation activity |
(13.5 |
) |
|
(12.8 |
) |
Contingent consideration payments |
(2.5 |
) |
|
(2.2 |
) |
Net cash (used in) provided by financing activities: |
(31.0 |
) |
|
71.8 |
|
Effect of exchange rate changes on cash, cash equivalents and
restricted cash |
(0.3 |
) |
|
(0.5 |
) |
Net change in cash, cash equivalents and restricted cash |
(217.5 |
) |
|
247.2 |
|
Cash, cash equivalents and restricted cash at beginning of
period |
621.5 |
|
|
168.0 |
|
Cash, cash equivalents and restricted cash at end of period |
$ |
404.0 |
|
|
$ |
415.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income to Adjusted
Net Income (1)
|
Three Months Ended September 30, |
($ in millions, except per share value) |
2021 |
2020 |
Source |
Net income (loss) |
($32.7) |
$39.5 |
|
Adjustments: |
+ Non-cash amortization charges |
15.4 |
15.9 |
Intangible Asset(IA) Amortization,Other Income |
+ Changes in fair value of contingent consideration |
0.9 |
30.2 |
Product 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) |
0.4 |
0.5 |
SG&A |
Tax effect |
(3.3) |
(13.2) |
|
Total adjustments: |
$13.4 |
$79.5 |
|
Adjusted net income (loss) |
($19.3) |
$119.0 |
|
Adjusted net income (loss) per diluted share |
($0.36) |
$2.19 |
|
|
Nine Months Ended September 30, |
($ in millions, except per share value) |
2021 |
2020 |
Source |
Net income (loss) |
$41.6 |
$119.7 |
|
Adjustments: |
+ Non-cash amortization charges |
47.5 |
47.2 |
Intangible Asset(IA) Amortization,Other Income |
+ Changes in fair value of contingent consideration |
2.6 |
31.3 |
Product 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) |
0.7 |
0.5 |
SG&A |
Tax effect |
(10.1) |
(19.7) |
|
Total adjustments: |
$40.7 |
$105.4 |
|
Adjusted net income |
$82.3 |
$225.1 |
|
Adjusted net income per diluted share |
$1.52 |
$4.20 |
|
($ in millions) |
2021 Full Year Forecast |
Source |
Net income |
$260 - $295 |
|
Adjustments: |
+ Non-cash amortization charges |
64 |
IA Amortization,Other Income |
+ Changes in fair value of contingent consideration |
3 |
COGS |
+ Acquisition-related costs (transaction & integration) |
1 |
SG&A |
Tax effect |
(13) |
|
Total adjustments: |
$55 |
|
Adjusted net income |
$315 - $350 |
|
Reconciliation of Net Income to Adjusted
EBITDA (1)
|
Three Months Ended September 30, |
($ in millions) |
2021 |
2020 |
Net income (loss) |
($32.7) |
$39.5 |
Adjustments: |
+ Depreciation & amortization |
32.6 |
28.8 |
+ Income taxes |
(12.8) |
15.5 |
+ Total interest expense, net |
8.3 |
7.5 |
+ Changes in fair value of contingent consideration |
0.9 |
30.2 |
+ Impairment of IPR&D intangible asset |
— |
29.0 |
+ Exit and disposal costs |
— |
17.1 |
+ Acquisition-related costs (transaction & integration) |
0.4 |
0.5 |
Total adjustments |
$29.4 |
$128.6 |
Adjusted EBITDA |
($3.3) |
$168.1 |
|
Nine Months Ended September 30, |
($ in millions) |
2021 |
2020 |
Net income (loss) |
$41.6 |
$119.7 |
Adjustments: |
+ Depreciation & amortization |
94.5 |
85.6 |
+ Income taxes |
5.3 |
34.7 |
+ Total interest expense, net |
25.0 |
21.6 |
+ Changes in fair value of contingent consideration |
2.6 |
31.3 |
+ Impairment of IPR&D intangible asset |
— |
29.0 |
+ Exit and disposal costs |
— |
17.1 |
+ Acquisition-related costs (transaction & integration) |
0.7 |
0.5 |
Total adjustments |
$128.1 |
$219.8 |
Adjusted EBITDA |
$169.7 |
$339.5 |
($ in millions) |
2021 Full Year Forecast |
Net income |
$260 - $295 |
Adjustments: |
+ Depreciation & amortization |
127 |
+ Provision for income taxes |
76 - 91 |
+ Total interest expense, net |
33 |
+ Changes in fair value of contingent consideration |
3 |
+ Acquisition-related costs (transaction & integration) |
1 |
Total adjustments |
240 - 255 |
Adjusted EBITDA |
$500 - $550 |
Reconciliation of Gross Margin and Adjusted
Gross Margin (1)
|
Three Months Ended September 30, |
($ in millions) |
2021 |
2020 |
Total revenues |
$329.0 |
$385.2 |
- Contract and grants revenues |
(16.9) |
(25.9) |
Adjusted revenues |
$312.1 |
$359.3 |
|
|
|
Cost of product sales |
$103.2 |
$120.2 |
Cost of contract development and manufacturing |
$114.3 |
$28.8 |
Cost of product sales and cost of contract development and
manufacturing services ("COGS") |
$217.5 |
$149.0 |
- Changes in fair value of contingent consideration |
(0.9) |
(30.2) |
- Inventory reserves related to Travel Health vaccines |
— |
(13.8) |
Adjusted COGS |
$216.6 |
$105.0 |
|
|
|
Gross margin (adjusted revenues minus COGS) |
$94.6 |
$210.3 |
Gross margin % (gross margin divided by adjusted revenues) |
30% |
59% |
|
|
|
Adjusted gross margin (adjusted revenues minus adjusted COGS) |
$95.5 |
$254.3 |
Adjusted gross margin % (adjusted gross margin divided by adjusted
revenues) |
31% |
71% |
|
Nine Months Ended September 30, |
($ in millions) |
2021 |
2020 |
Total revenues |
$1,069.5 |
$972.4 |
- Contract and grants revenues |
(63.6) |
(72.1) |
Adjusted revenues |
$1,005.9 |
$900.3 |
|
|
|
Cost of product sales |
$237.0 |
$287.6 |
Cost of contract development and manufacturing |
$307.6 |
$68.1 |
Cost of product sales and cost of contract development and
manufacturing services ("COGS") |
$544.6 |
$355.7 |
- Changes in fair value of contingent consideration |
($2.6) |
($31.3) |
- Inventory reserves related to Travel Health vaccines |
$— |
($13.8) |
Adjusted COGS |
$542.0 |
$310.6 |
|
|
|
Gross margin (adjusted revenues minus COGS) |
$461.3 |
$544.6 |
Gross margin % (gross margin divided by adjusted revenues) |
46% |
60% |
|
|
|
Adjusted gross margin (adjusted revenues minus adjusted COGS) |
$463.9 |
$589.7 |
Adjusted gross margin % (adjusted gross margin divided by adjusted
revenues) |
46% |
66% |
Reconciliation of Product Margin and
Adjusted Product Margin (1)
|
Three Months Ended September 30, |
($ in millions) |
2021 |
2020 |
Product revenues |
$270.5 |
$202.2 |
|
|
|
Cost of product sales (COPS) |
$103.2 |
$120.2 |
- Changes in fair value of contingent consideration |
(0.9) |
(30.2) |
- Inventory reserves related to Travel Health vaccines |
— |
(13.8) |
Adjusted cost of product sales |
$102.3 |
$76.2 |
|
|
|
Product margin (product revenues minus COPS) |
$167.3 |
$82.0 |
Product margin % (product margin divided by product revenues) |
62% |
41% |
|
|
|
Adjusted gross margin (product revenues minus adjusted COPS) |
$168.2 |
$126.0 |
Adjusted gross margin % (adjusted product margin divided by product
revenues) |
62% |
62% |
|
Nine Months Ended September 30, |
($ in millions) |
2021 |
2020 |
Product revenues |
$589.6 |
$648.9 |
|
|
|
Cost of product sales |
$237.0 |
$287.6 |
- Changes in fair value of contingent consideration |
(2.6) |
(31.3) |
- Inventory reserves related to Travel Health vaccines |
— |
(13.8) |
Adjusted COPS |
$234.4 |
$242.5 |
|
|
|
Gross margin (product revenues minus COPS) |
$352.6 |
$361.3 |
Gross margin % (product margin divided by product revenues) |
60% |
56% |
|
|
|
Adjusted product margin (product revenues minus adjusted COPS) |
$355.2 |
$406.4 |
Adjusted product margin % (adjusted product margin divided by
product revenues) |
60% |
63% |
Reconciliation of CDMO Margin and Adjusted
CDMO Margin (1)
|
Three Months Ended September 30, |
($ in millions) |
2021 |
2020 |
CDMO services revenues |
$112.6 |
$53.1 |
+ Non-USG lease revenue |
15.0 |
18.1 |
Adjusted CDMO service revenues |
$127.6 |
$71.2 |
|
|
|
Cost of CDMO services |
$114.3 |
$28.8 |
|
|
|
CDMO margin (CDMO service revenues minus Cost of CDMO
services) |
$(1.7) |
$24.3 |
CDMO margin % (CDMO margin divided by CDMO services revenues) |
(2)% |
46% |
|
|
|
Adjusted CDMO margin (adjusted CDMO services revenues minus Cost of
CDMO services) |
$13.3 |
$42.4 |
Adjusted CDMO margin % (adjusted CDMO margin divided by adjusted
CDMO services revenues) |
10% |
60% |
|
Nine Months Ended September 30, |
($ in millions) |
2021 |
2020 |
CDMO services revenues |
$283.7 |
$102.7 |
+ Non-USG lease revenue |
50.7 |
18.2 |
Adjusted CDMO service revenues |
$334.4 |
$120.9 |
|
|
|
Cost of CDMO services |
$307.6 |
$68.1 |
|
|
|
CDMO margin (CDMO service revenues minus Cost of CDMO
services) |
$(23.9) |
$34.6 |
CDMO margin % (CDMO margin divided by CDMO services revenues) |
(8)% |
34% |
|
|
|
Adjusted CDMO margin (adjusted CDMO services revenues minus Cost of
CDMO services) |
$26.8 |
$52.8 |
Adjusted CDMO margin % (adjusted CDMO margin divided by adjusted
CDMO services revenues) |
8% |
44% |
Reconciliation of Net Research and
Development Expenses (1)
|
Three Months Ended September 30, |
($ in millions) |
2021 |
2020 |
Research and Development Expenses |
$49.6 |
$84.4 |
Adjustments: |
- Contracts and Grants Revenue |
(16.9) |
($25.9) |
- Impairment of IPR&D intangible asset |
— |
(29.0) |
Net Research and Development Expenses |
32.7 |
29.5 |
Adjusted Revenue (Total Revenue less Contracts and Grants
Revenue) |
312.1 |
$359.3 |
Net R&D as % of Adjusted Revenue (Net R&D Margin) |
10% |
8% |
|
Nine Months Ended September 30, |
($ in millions) |
2021 |
2020 |
Research and Development Expenses |
$151.0 |
$175.0 |
Adjustments: |
- Contracts and Grants Revenue |
(63.6) |
($72.1) |
- Impairment of IPR&D intangible asset |
— |
(29.0) |
Net Research and Development Expenses |
87.4 |
73.9 |
Adjusted Revenue (Total Revenue less Contracts and Grants
Revenue) |
1,005.9 |
$900.3 |
Net R&D as % of Adjusted Revenue (Net R&D Margin) |
9% |
8% |
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