Emergent BioSolutions Reports Financial Results for First Quarter 2020
- Reaffirms full year 2020 financial forecast
- Executes multi-faceted response to COVID-19 drawing upon longstanding investments in capabilities to address public health threats, as well as expertise in vaccines, therapeutics, and contract development and manufacturing
"Emergent is uniquely positioned to respond to the unprecedented challenges of the COVID-19 pandemic," said
FINANCIAL HIGHLIGHTS (unaudited)
| (in millions) | Q1 2020 | Q1 2019 | $ Change | % Change | |||
| Total Revenues | 1.0% | ||||||
| Net Loss | 51.9% | ||||||
| Adjusted Net Income (Loss) (1) | 105.8% | ||||||
| Adjusted EBITDA (1) | 82.1% | ||||||
EMERGENT'S RESPONSE TO COVID-19
- Signed a contract development and manufacturing (CDMO) agreement, valued at
$135 million , to beU.S. manufacturing partner of Johnson & Johnson's lead vaccine candidate for COVID-19. Negotiations continue on a long-term commercial supply agreement for large-scale drug substance manufacturing, anticipated to begin in 2021.
- Initiated development of two investigational plasma-derived therapies. COVID-Human Immune Globulin (COVID- HIG), a human plasma-derived product candidate, for which the Company subsequently received
$14.5 million inHealth and Human Services (HHS) funding, is being developed as a potential treatment for COVID-19 in severe hospitalized and high-risk patients and will be included in at least one of the studies of theNational Institute of Allergy and Infectious Diseases (NIAID), part of theNational Institutes of Health , evaluating potential treatments for COVID-19. COVID-Equine Immune Globulin (COVID-EIG) is also being developed as an equine plasma-derived therapy candidate for potential treatment of severe disease in humans.
- Signed a CDMO agreement with Novavax, Inc. to provide development services, drug substance and drug product manufacturing for its experimental vaccine candidate for COVID-19, NVX-CoV2373.
- Signed a CDMO agreement with Vaxart, Inc. to provide development services and drug substance manufacturing to produce its experimental oral vaccine candidate for COVID-19.
Q1 2020 AND OTHER RECENT BUSINESS ACCOMPLISHMENTS
- Received agreement from the
European Medicines Agency (EMA) and theU.S. Food and Drug Administration (FDA) on the company’s proposed development plan to use Serum Neutralizing Antibodies (SNA) as surrogate endpoint to predict likely clinical benefit of CHIKV VLP, the company’s chikungunya virus virus-like particle (VLP) vaccine candidate, in a Phase 3 safety and immunogenicity study anticipated in late 2020.
- Received positive opinion and subsequent approval from EMA of Vaxchora® Cholera Vaccine (recombinant, Live, Oral), making it the only single-dose oral cholera vaccine approved across all
European Union member states, theUK , and the European Economic Area countries, indicated for active immunization against disease caused by Vibrio cholerae serogroup 01 in adults and children from 6 years of age. Commercial launch is being planned for late 2020.
- Signed a CDMO agreement with Novavax, Inc. to provide drug substance manufacturing of NanoFluTM, its seasonal influenza vaccine candidate.
- Announced the appointment of Dr.
Karen Smith as chief medical officer with responsibility for leading and further establishing Emergent’s global integrated capability in clinical development, medical affairs, and regulatory affairs.
- Submitted a data package to the FDA in support of extending the shelf life of NARCAN®(naloxone HCl) Nasal Spray from 24 to 36 months, with an expected review by FDA to take approximately six months.
2020 FINANCIAL PERFORMANCE (unaudited)
(I) Quarter Ended
Revenues
Total Revenues
For Q1 2020, total revenues were
Product Sales
For Q1 2020, product sales were
(in millions) |
Three Months Ended |
||
| 2020 | 2019 | % Change | |
| Product Sales | |||
| NARCAN Nasal Spray | 10% | ||
| ACAM2000 | $— | (100)% | |
| Anthrax vaccines | NM | ||
| Other | (20)% | ||
| Total Product Sales | (3)% | ||
For Q1 2020, revenue from the Company’s contract development and manufacturing operations was
Contracts and Grants
For Q1 2020, revenue from the Company’s development-based contracts and grants was
Operating Expenses
Cost of Product Sales and
For Q1 2020, cost of product sales and contract manufacturing was
Research and Development (Gross and Net)
For Q1 2020, gross R&D expenses were
For Q1 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, was 20.1 million, a decrease of
(in millions) |
Three Months Ended |
||
| 2020 | 2019 | % Change | |
| Research and Development Expenses | (7)% | ||
| Adjustments: | |||
| Less Contracts and Grants Revenue | 4% | ||
| (18)% | |||
| Adjusted Revenue (Total Revenue less Contracts and Grants Revenue) |
1% | ||
| Net R&D as % of Adjusted Revenue (Net R&D Margin) | 12% | 14% | NA |
Selling, General and Administrative
For Q1 2020, selling, general and administrative expenses were
Amortization of Intangible Assets
For Q1 2020, amortization of intangible assets was
Income Taxes
For Q1 2020, the income tax benefit in the amount of
Net Loss & Adjusted Net Income (Loss)
For Q1 2020, the Company recorded net loss of
For Q1 2020, the Company recorded adjusted net income of
Adjusted EBITDA
For Q1 2020, the Company recorded adjusted EBITDA of
2020 FINANCIAL FORECAST
For full year 2020, the Company reaffirms its expectation of the following forecasted financial metrics previously provided on
(in millions) |
FULL YEAR 2020 (As of 4/30/2020) |
| Total Revenues | |
| Adjusted Net Income (1) | |
| Adjusted EBITDA (1) |
The Company’s financial forecast for 2020 includes the anticipated impact of the following items:
- A full year of product sales, including the following ranges for key components of the product portfolio:
- NARCAN Nasal Spray:$285 million -$315 million ;
- Anthrax Vaccines:$270 million -$300 million ;
- ACAM2000:$180 million -$200 million ; - Contract development and manufacturing revenue of
$125 million -$145 million ; - Deliveries of raxibacumab to the Strategic National Stockpile (SNS) under the anticipated follow-on procurement contract with HHS;
- Domestic and international sales of the other medical countermeasures that comprise Other Product sales;
- Continued improvement of gross margin (a combination of product sales and CDMO services) in a range of 200 - 400 basis points annually, driven by improved product mix;
- Continued investment in internally funded development projects most notably the anticipated Phase 3 studies for the CHIKV VLP and FLU-IGIV product candidates as well as the Phase 1/2 study for COVID-EIG, among other R&D projects.
Emergent 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 company’s business, the management team 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.
Q2 2020 REVENUE FORECAST
For Q2 2020, the Company forecast for total revenues is
FOOTNOTES
(1) See "Reconciliation of Net Loss to Adjusted Net Loss and Adjusted EBITDA" for a definition of terms and the reconciliation tables.
CONFERENCE CALL, PRESENTATION SUPPLEMENT, AND WEBCAST INFORMATION
Company management will host a conference call at
Live Teleconference Information:
Dial in: [US] (855) 766-6521; [International] (262) 912-6157
Conference ID: 3784302
Live Webcast Information:
Visit https://edge.media-server.com/mmc/p/juw3z8b3 for the live webcast feed.
A replay of the call can be accessed at www.emergentbiosolutions.com under “Investors.”
ABOUT
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; the ability to advance potential solutions to combat the novel strain of coronavirus (SARS-CoV-2) causing COVID-19 disease; statements regarding total contract value; continued product sales of key components of the product portfolio at specified levels; deliveries of raxibacumab to the SNS under the anticipated follow-on procurement contract with the ASPR; domestic and international sales of the other medical countermeasures at specified levels; contract development and manufacturing revenues at specified levels; extending the shelf life of NARCAN® Nasal Spray; the results of clinical trials; continued improvement of gross margin (a combination of product sales and CDMO services); as well as continued investment in internally funded development projects 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 the novel strain of coronavirus (SARS-CoV-2) causing COVID-19 disease that recently originated and quickly spread globally, on the markets, our operations, and employees as well as those of our customers and suppliers; availability of
Investor Contact
Vice President, Investor Relations
(o) 240/631-3280; (m) 240/413-1917
burrowsr@ebsi.com
Media Contact
Senior Director, Corporate Communications
(o) 240/631-3392
NeriM@ebsi.com
Consolidated Balance Sheets
(unaudited, in millions, except per share data)
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | $ | 181.5 | 167.8 | ||
| Restricted cash | 0.2 | 0.2 | |||
| Accounts receivable, net | 162.5 | 270.7 | |||
| Inventories | 248.1 | 222.5 | |||
| Income tax receivable, net | 10.2 | 4.6 | |||
| Prepaid expenses and other current assets | 24.1 | 20.4 | |||
| Total current assets | 626.6 | 686.2 | |||
| Property, plant and equipment, net | 549.2 | 542.3 | |||
| Intangible assets, net | 708.1 | 712.9 | |||
| In-process research and development | 29.0 | 29.0 | |||
| 266.4 | 266.6 | ||||
| Deferred tax assets, net | 17.6 | 13.4 | |||
| Other assets | 81.8 | 76.9 | |||
| Total assets | $ | 2,278.7 | $ | 2,327.3 | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||
| Current liabilities: | |||||
| Accounts payable | $ | 84.2 | 94.8 | ||
| Accrued expenses | 41.5 | 39.5 | |||
| Accrued compensation | 47.5 | 62.4 | |||
| Debt, current portion | 26.3 | 12.9 | |||
| Other current liabilities | 7.6 | 6.7 | |||
| Total current liabilities | 207.1 | 216.3 | |||
| Contingent consideration, net of current portion | 26.1 | 26.0 | |||
| Debt, net of current portion | 762.9 | 798.4 | |||
| Deferred tax liability | 63.9 | 63.9 | |||
| Contract liabilities, net of current portion | 85.0 | 85.6 | |||
| Other liabilities | 58.9 | 48.6 | |||
| Total liabilities | 1,203.9 | 1,238.8 | |||
| Stockholders' equity: | |||||
| Preferred stock, |
— | — | |||
| Common stock, |
0.1 | 0.1 | |||
| (39.6) | (39.6) | ||||
| Additional paid-in capital | 726.2 | 716.1 | |||
| Accumulated other comprehensive loss, net | (21.2) | (9.9) | |||
| Retained earnings | 409.3 | 421.8 | |||
| Total stockholders' equity | 1,074.8 | 1,088.5 | |||
| Total liabilities and stockholders' equity | $ | 2,278.7 | 2,327.3 |
Consolidated Statements of Operations
(unaudited, in millions, except per share data)
| Three Months Ended |
||||||
| 2020 | 2019 | |||||
| Revenues: |
||||||
| Product sales, net | $ | 148.2 | 153.0 | |||
| Contract development and manufacturing services | 21.7 | 15.9 | ||||
| Contracts and grants | 22.6 | 21.7 | ||||
| Total revenues | 192.5 | 190.6 | ||||
| Operating expenses: | ||||||
| Cost of product sales and contract development and manufacturing services | 76.9 | 91.8 | ||||
| Research and development | 42.7 | 46.1 | ||||
| Selling, general and administrative | 69.7 | 65.4 | ||||
| Amortization of intangible assets | 14.8 | 14.5 | ||||
| Total operating expenses | 204.1 | 217.8 | ||||
| Loss from operations | (11.6) | (27.2) | ||||
| Other (expense) income: | ||||||
| Interest expense | (8.6) | (9.6) | ||||
| Other expense, net | (1.1) | (1.0) | ||||
| Total other expense, net | (9.7) | (10.6) | ||||
| Loss before provision for income taxes | (21.3) | (37.8) | ||||
| Income tax benefit | 8.8 | 11.8 | ||||
| Net loss | $ | (12.5) | $ | (26.0) | ||
| Net loss per common share | ||||||
| Basic | $ | (0.24) | $ | (0.51) | ||
| Diluted | $ | (0.24) | $ | (0.51) | ||
| Shares used in computing loss per share | ||||||
| Basic | 52.0 | 51.2 | ||||
| Diluted | 52.0 | 51.2 | ||||
Condensed Consolidated Statements of Cash Flows
(unaudited, in millions)
| Three Months Ended |
||||||
| 2020 | 2019 | |||||
| Cash flows provided by operating activities: | ||||||
| Net loss | $ | (12.5 | ) | $ | (26.0 | ) |
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||
| Share-based compensation expense | 6.6 | 6.8 | ||||
| Depreciation and amortization | 28.2 | 26.6 | ||||
| Amortization of deferred financing costs | 0.7 | 0.7 | ||||
| Deferred income taxes | (4.2 | ) | (11.4 | ) | ||
| Change in fair value of contingent consideration, net | 0.6 | 1.7 | ||||
| Other | — | (0.1 | ) | |||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable | 108.2 | 141.6 | ||||
| Inventories | (25.6 | ) | (5.2 | ) | ||
| Prepaid expenses and other assets | (15.3 | ) | (16.6 | ) | ||
| Accounts payable | (15.6 | ) | 4.2 | |||
| Accrued expenses | 1.1 | 1.7 | ||||
| Accrued compensation | (14.9 | ) | (21.3 | ) | ||
| Contract liabilities | 0.5 | 2.1 | ||||
| Net cash provided by operating activities: | 57.8 | 104.8 | ||||
| Cash flows used in investing activities: | ||||||
| Purchases of property, plant and equipment and other | (24.2 | ) | (21.4 | ) | ||
| Net cash used in investing activities: | (24.2 | ) | (21.4 | ) | ||
| Cash flows used in financing activities: Proceeds from revolving credit facility |
— |
30.0 |
||||
| Principal payments on revolving credit facility | (20.0 | ) | (80.0 | ) | ||
| Principal payments on term loan facility | (2.8 | ) | (2.8 | ) | ||
| Proceeds from issuance of common stock upon exercise of stock options | 9.1 | 0.9 | ||||
| Taxes paid on behalf of employees for equity activity | (5.6 | ) | (6.0 | ) | ||
| Contingent consideration payments | (0.7 | ) | (0.5 | ) | ||
| Net cash used in financing activities: | (20.0 | ) | (58.4 | ) | ||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 0.1 | — | ||||
| Net increase in cash, cash equivalents and restricted cash | 13.7 | 25.0 | ||||
| Cash, cash equivalents and restricted cash at beginning of period | 168.0 | 112.4 | ||||
| Cash, cash equivalents and restricted cash at end of period | $ | 181.7 | $ | 137.4 | ||
RECONCILIATION OF NET LOSS TO ADJUSTED NET LOSS AND ADJUSTED EBITDA (unaudited)
This press release contains two financial measures (Adjusted Net Loss and Adjusted EBITDA (Earnings Before Depreciation and Amortization, Interest and Taxes)) that are considered “non-GAAP” financial measures under applicable
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 Loss to Adjusted Net Loss (Unaudited)
| (in millions, except per share value) | Three Months Ended |
|||||
| 2020 | 2019 | Source | ||||
| Net loss | ( |
( |
||||
| Adjustments: | ||||||
| + Acquisition-related costs (transaction & integration) | — | 4.0 | SG&A | |||
| + Non-cash amortization charges | 15.5 | 15.3 | SG&A, Other Income | |||
| + Changes in fair value of contingent consideration | 0.6 | 1.6 | SG&A | |||
| + Impact of purchase accounting on inventory step-up | — | 5.0 | COGS | |||
| Tax effect | (3.3) | (5.1) | ||||
| Total adjustments: | 12.8 | 20.8 | ||||
| Adjusted net income (loss) | ( |
|||||
| Adjusted net income (loss) per diluted share | ( |
|||||
| (in millions) |
Full Year Forecast |
|
| 2020F | Source | |
| Net income | ||
| Adjustments: | ||
| + Acquisition-related costs (transaction & integration) | 4 | SG&A |
| + Non-cash amortization charges | 64 | Intangible Asset Amortization, Other |
| + Change in fair value of contingent consideration | 1 | COGS |
| Tax effect | (14) | |
| Total adjustments: | 55 | |
| Adjusted net income | ||
Reconciliation of Net Loss to Adjusted EBITDA (Unaudited)
| (in millions, except per share value) |
Three Months Ended |
|
| 2020 | 2019 | |
| Net loss | ( |
( |
| Adjustments: | ||
| + Depreciation & amortization | 28.2 | 26.6 |
| + Provision for income taxes | (8.8) | (11.8) |
| + Total interest expense, net* | 7.8 | 9.0 |
| + Changes in fair value of contingent consideration | 0.6 | 1.6 |
| + Acquisition-related costs (transaction & integration) | — | 4.0 |
| + Impact of purchase accounting on inventory step-up | — | 5.0 |
| Total additional adjustments | 27.8 | 34.4 |
| Adjusted EBITDA | ||
| * Includes interest income of |
||
| (in millions) |
Full Year Forecast |
| 2020F | |
| Net income | |
| Adjustments: | |
| + Depreciation & amortization | 111 to 121 |
| + Provision for income taxes | 48 |
| + Total interest expense | 31 |
| + Acquisition-related costs (transaction & integration) | 4 |
| + Change in fair value of contingent consideration | 1 |
| Total additional adjustments | 195 to 205 |
| Adjusted EBITDA | |
Source: Emergent BioSolutions