News Release Details

• Reaffirms full year 2018 financial forecast and operational goals
• Provides Q2 2018 revenue forecast of $205M-$230M

GAITHERSBURG, Md., May 03, 2018 (GLOBE NEWSWIRE) -- Emergent BioSolutions Inc. (NYSE:EBS) reported financial results for the quarter and three months ended March 31, 2018.

FINANCIAL HIGHLIGHTS

Q1 2018 AND RECENT BUSINESS ACCOMPLISHMENTS

Procurement Contract

• Awarded a contract valued at up to $26 million over 12 months by the Centers for Disease Control and Prevention for the continued supply of VIGIV [Vaccinia Immune Globulin Intravenous (Human)] into the U.S. Strategic National Stockpile. VIGIV is the only therapeutic licensed by the U.S. Food and Drug Administration for the treatment of complications due to smallpox vaccination.

Product Development

• Completed Mutual Recognition Procedure for market authorization of BioThrax^® (Anthrax Vaccine Adsorbed) in five Concerned Member States within the European Union – Italy, the Netherlands, Poland, the U.K. and France.
• Initiated, together with Valneva, a Phase 1 clinical trial in the U.S. to evaluate the safety and immunogenicity of VLA1601, our vaccine candidate against Zika virus, using Valneva’s validated expression platform. Initial data from this trial is expected in late 2018 or early 2019.
• Initiated a Phase 2 dose-ranging study to evaluate the safety, pharmacokinetics, and clinical benefit of FLU-IGIV, an anti-influenza immune globulin being developed as an intravenous treatment for serious illness caused by influenza A infection in hospitalized patients, and developed on the Company’s hyperimmune platform, on which several marketed antibody therapeutics have been licensed, including Anthrasil^® [Anthrax Immune Globulin Intravenous (human)] and VIGIV. The clinical study will continue to enroll patients through the next influenza season and is expected to be completed in 2019.

2018 FINANCIAL PERFORMANCE

(I) Quarter Ended March 31, 2018 (Unaudited)

Revenues

Total Revenues

For Q1 2018, total revenues were $117.8 million, a slight increase over 2017. Total revenues reflect a delay in the timing of BioThrax deliveries as previously disclosed by the Company on February 22, 2018. In addition, Q1 2018 total revenues were impacted by the delay in the delivery of some ACAM2000^®, (Smallpox (Vaccinia) Vaccine Live) shipments during the quarter. The Company has commenced delivery and expects to complete all delayed Q1 deliveries by the end of the second quarter.

Product Sales

For Q1 2018, product sales were $75.8 million, a decrease of 8% as compared to 2017. The decrease is principally attributable to lower BAT^® [Botulism Antitoxin Heptavalent (A, B, C, D, E, F, G) - (Equine)] and BioThrax^® sales, partially offset by an increase in other product sales, principally attributable to sales of ACAM2000^® and Raxibacumab (Anthrax Monoclonal Antibody), both of which were acquired in Q4 2017.

Contract Manufacturing

For Q1 2018, revenue from the Company’s contract manufacturing operations was $26.1 million, an increase of 48% as compared to 2017. The increase primarily reflects the completion of a milestone related to the expansion of certain contract manufacturing capabilities at the Company’s Lansing site.

Contracts and Grants

For Q1 2018, contracts and grants revenue was $15.9 million, a decrease of 8% as compared to 2017. The decrease primarily reflects a reduction in revenue associated with the successful completion of multiple U.S. government development contracts as well as reduced R&D activities related to certain ongoing funded development programs.

Operating Expenses

Cost of Product Sales and Contract Manufacturing

For Q1 2018, cost of product sales and contract manufacturing was $58.0 million, an increase of 25% as compared to 2017. The increase is primarily attributable to sales of ACAM2000 and Raxibacumab, both of which were acquired in Q4 2017, partially offset by lower sales of BAT and BioThrax.

Research and Development (Gross and Net)

For Q1 2018, gross R&D expenses were $29.1 million, an increase of 42% as compared to 2017. The increase primarily reflects increased contract development services performed for NuThrax^TM (anthrax vaccine adsorbed with CPG 7909 adjuvant) and the introduction of costs associated with development work related to the technology transfer of the Raxibacumab manufacturing process to the Company’s Bayview manufacturing site in Baltimore.

For Q1 2018, net R&D expense (calculated as gross research and development expenses minus contracts and grants revenue) was $13.2 million, an increase of $10 million as compared to 2017, reflecting increased investment in countermeasure development programs not currently funded in whole or in part by third-party partners, notably costs associated with the Raxibacumab technology transfer, the FLU-IGIV flu therapeutic Phase 2 trial, the ZIKV-IG Zika therapeutic Phase 1 trial preparations, and the UNI-FLU universal flu vaccine preclinical effort, among others.

Selling, General and Administrative

For Q1 2018, selling, general and administrative expenses were $40.2 million, an increase of $5 million as compared to 2017, attributable primarily to increased stock compensation and professional services costs.

Income Taxes

For Q1 2018, the tax benefit in the amount of $4.5 million includes a discrete benefit of $2.3 million related to stock compensation activity resulting in an effective tax rate of 48%. Excluding the discrete benefit, the Q1 2018 effective tax rate was 24%.

Net Income (Loss) & Adjusted Net Income (Loss)

For Q1 2018, the Company recorded a net loss of $4.9 million, or $0.10 per diluted share, versus net income of $10.5 million, or $0.23 per diluted share, in 2017. (1)

For Q1 2018, the Company recorded an adjusted net loss of $1.6 million, or $0.03 per diluted share, versus net income of $14.3 million, or $0.29 per diluted share, in 2017. (1) (2)

2018 FINANCIAL FORECAST & OPERATIONAL GOALS

The Company is reaffirming its full year 2018 financial performance forecast:

The Company is also reaffirming its full year 2018 operational goals:

• Advance NuThrax development to enable Emergency Use Authorization filing with the FDA in 2018
• Complete ACAM2000 deliveries; establish a multi-year follow-on contract with the U.S. government
• Deliver Raxibacumab doses under current contract; advance technology transfer to the Company’s Bayview facility in Baltimore, Maryland
• Progress pipeline to have at least four product candidates in advanced development
• Complete an acquisition that generates revenue within 12 months of closing

Q2 2018 FINANCIAL FORECAST

The Company forecast for Q2 2018 total revenue is $205 million to $230 million. This forecast reflects the deliveries of BioThrax and ACAM2000 previously expected in the first quarter as well as continued deliveries of both products in the second quarter.

FOOTNOTES

(1)  See “Calculation of Diluted Earnings Per Share.”
(2)  See “Reconciliation of Net Income to Adjusted Net Income and EBITDA” for a definition of terms and a reconciliation table.
(3)  Reflects an estimated tax rate that includes the expected effects of the United States Tax Cuts and Jobs Act of 2017 on the Company’s 2018 income tax provision.
(4) “Net revenue” is computed as Total Revenue minus Contracts & Grants Revenue.

CONFERENCE CALL AND WEBCAST INFORMATION

Company management will host a conference call at 5:00 pm (Eastern Time) today, May 3, 2018, to discuss these financial results. This conference call can be accessed live by telephone or through Emergent’s website:

A replay of the call can be accessed at www.emergentbiosolutions.com under “Investors.”

ABOUT EMERGENT BIOSOLUTIONS INC.

Emergent BioSolutions Inc. is a global life sciences company seeking to protect and enhance life by focusing on providing specialty products for civilian and military populations that address accidental, intentional, and naturally occurring public health threats. Through our work, we envision protecting and enhancing 50 million lives with our products by 2025. Additional information about the company may be found at www.emergentbiosolutions.com. 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 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, acquisition strategy, product sales, government development or procurement contracts or awards, government appropriations, manufacturing capabilities, product development and delivery timeline, and Emergency Use Authorization (EUA) and the timing of other 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 statement speaks 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 the Company's actual results to differ materially from those indicated by such forward-looking statements, including the availability of funding and the exercise of options under our BioThrax and NuThrax contracts; appropriations for the procurement of our products; our ability to secure EUA pre-authorization approval and licensure of NuThrax from the FDA within the anticipated timeframe, if at all; availability of funding for our U.S. government grants and contracts; our ability to complete expected deliveries of BioThrax and ACAM2000 by the end of the second quarter; our ability to identify and acquire or in-license products or product candidates that satisfy our selection criteria; our ability to successfully integrate and develop the products or product candidates, programs, operations and personnel of any entities, businesses or products that we acquire, including our acquisitions of the ACAM2000 business from Sanofi Pasteur Biologics, LLC and Raxibacumab from GlaxoSmithKline LLC and the timing and receipt of required FDA approvals for remaining actions contemplated in connection with our integration of these acquisitions; whether anticipated synergies and benefits from an acquisition or in-license are realized within expected time periods, if at all; our ability to utilize our manufacturing facilities and expand our capabilities; our ability and the ability of our contractors and suppliers to maintain compliance with Current Good Manufacturing Practices and other regulatory obligations; the results of regulatory inspections; the outcome of the purported class action lawsuit filed against us and possible other future material legal proceedings; the success of our ongoing and planned development programs; the timing and results of clinical trials; the timing of and our ability to obtain and maintain regulatory approvals for our product candidates; and our commercialization, marketing and manufacturing capabilities and strategy. 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.

FINANCIAL STATEMENTS FOLLOW

(1)  The change in deferred revenue from December 31, 2017 to March 31, 2018 includes the impact of a $42.4 million increase related to the adoption of a new revenue recognition accounting standard effective January 1, 2018.

(2)  The change in retained earnings from December 31, 2017 to March 31, 2018 includes the impact of a $32.5 million, net of tax, reduction related to the adoption of a new revenue recognition accounting standard effective January 1, 2018.
 

CALCULATION OF DILUTED EARNINGS PER SHARE

Net income (loss) per diluted share is computed using the “if-converted” method for the three months ended March 31, 2017. Such a method only applies to results prior to November 14, 2017, the date the Company terminated conversion rights associated with the 2.875% Convertible Senior Notes due 2021 (the Notes). This method requires net income to be adjusted to add back interest expense and amortization of debt issuance cost, both net of tax, associated with the Notes. For the three months ended March 31, 2018, Net income (loss) per diluted share was calculated using the “treasury method.”  The following table details the adjustments made in this calculation.

RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME AND EBITDA

This press release contains two financial measures (Adjusted Net Income (Loss) and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)) 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 resulting from purchase accounting. EBITDA reflects net income excluding the impact of depreciation, amortization, interest expense and provision for income taxes. 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 (Loss) to Adjusted Net Income (Loss) (Unaudited)

Reconciliation of Net Income (Loss) to EBITDA (Unaudited)

Source: Emergent BioSolutions