UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
WASHINGTON, D.C. 20549
____________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): January 11, 2016
EMERGENT BIOSOLUTIONS INC.
(Exact Name of Registrant as Specified in Charter)
(Exact Name of Registrant as Specified in Charter)
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Delaware
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001-33137
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14-1902018
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(State or Other Jurisdiction
of Incorporation)
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(Commission
File Number) |
(IRS Employer
Identification No.) |
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400 Professional Drive, Suite 400,
Gaithersburg, Maryland
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20879
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrant's telephone number, including area code: (240) 631-3200
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On January 11, 2016, Emergent BioSolutions Inc. announced preliminary unaudited financial results for 2015 and guidance for 2016 and provided financial and operational goals for 2020. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K. In addition, the section entitled "2015 Year-in-Review & 2012-2015 Growth Plan Performance" of the corporate slide deck attached as Exhibit 99.2 is incorporated herein by reference.
Item 7.01. Regulation FD Disclosure.
During the week of January 11, 2016, representatives of the company will be attending meetings with investors, analysts and others at the JP Morgan Healthcare Conference in San Francisco, California and these company representatives will present the slides attached as Exhibit 99.2 to this Current Report on Form 8-K.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
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Number
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Exhibit
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99.1
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Press release, issued January 11, 2016.
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99.2
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Corporate slide deck, dated January 11, 2016.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Date: January 11, 2016
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EMERGENT BIOSOLUTIONS INC.
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By:
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/s/ A.B. Cruz III
A.B. Cruz III
Executive Vice President, General Counsel and Corporate Secretary
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EXHIBIT 99.1
EMERGENT BIOSOLUTIONS ANNOUNCES PRELIMINARY 2015 FINANCIAL RESULTS, PROVIDES 2016 FINANCIAL OUTLOOK, AND OUTLINES NEW FIVE-YEAR (2016-2020) STRATEGIC GROWTH PLAN
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·
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2015 Preliminary Estimates:
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o
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Total revenues of $520 to $525 million, a 16% increase over 2014 (at midpoint)
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o
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GAAP net income of $60 to $64 million, a 69% increase over 2014 (at midpoint)
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o
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Adjusted net income of $73 to $77 million, a 38% increase over 2014 (at midpoint)
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o
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EBITDA of $130 to $134 million, a 43% increase over 2014 (at midpoint)
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o
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Year-end cash of approximately $310 million
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·
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2016 Forecast:
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o
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Total revenues of $600 to $630 million
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o
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GAAP net income of $75 to $85 million
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o
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Adjusted net income of $90 to $100 million
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o
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EBITDA of $150 to $160 million
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·
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2020 Key Financial and Operational Goals:
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o
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Annual revenue of $1B
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o
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>10% of revenue from ex-US markets
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o
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Net income CAGR of >20%
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o
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Six products in clinical or advanced development, with at least three being dual use, prioritizing those with third party funding
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GAITHERSBURG, MD, January 11, 2016— Emergent BioSolutions Inc. (NYSE: EBS) today announced preliminary unaudited 2015 financial results and provided guidance for 2016. The company also provided an overview of the key financial and operational goals to be achieved by year end 2020 through its next five-year strategic growth plan.
Daniel J. Abdun-Nabi, president and CEO of Emergent BioSolutions, said, "Having successfully implemented our 2012-2015 growth plan and delivered financial results in excess of our expectations, we are well-positioned for continued success and growth. Looking ahead we will remain focused on addressing the growing public health threats market and will build on our momentum to achieve our newly established 2020 goals of $1B in revenue, generating more than 10% of our revenue from ex-US markets, six products in clinical or advanced development with a focus on products supported by third party funding, and a five-year net income CAGR of >20%. We continue to strive toward our vision of protecting and enhancing 50 million lives by 2025."
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(I)
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Preliminary Full Year 2015 Results (unaudited)
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Revenue
For full year 2015, the company anticipates total revenues of $520 to $525 million, the midpoint of which represents a 16% increase over 2014. This growth is driven by continued robust BioThrax sales, accounting for approximately $294 million.
Net Income (GAAP and Non-GAAP)
For full year 2015, the company anticipates GAAP net income of $60 to $64 million, or $1.27 to $1.35 per diluted share, the midpoint of which represents a 69% increase over 2014. On a non-GAAP basis, the company anticipates full year 2015 adjusted net income of $73 to $77 million, or $1.54 to $1.63 per diluted share, the midpoint of which represents a 38% increase over 2014 (see "Reconciliation of GAAP Net Income to Adjusted Net Income and EBITDA" for a definition of terms and a reconciliation table). This growth reflects the continued strength and contribution from BioThrax sales as well as ongoing initiatives to control spending and increase operating efficiencies across the Biodefense and Biosciences divisions.
Cash and Cash Equivalents
For the full year 2015, the company anticipates cash and cash equivalents at year end of approximately $310 million.
Note
The preliminary 2015 financial results are subject to revision and will be finalized upon the completion of the company's external audit, which is anticipated in late February 2016. Once the external audit is completed, the company may report financial results that could differ, and the differences could be material.
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(II)
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2016 Financial Outlook
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Full Year 2016
For the full year of 2016, the company forecasts total revenues of $600 to $630 million, driven by growth in BioThrax sales which are anticipated to be between $305 to $320 million, continued domestic and international sales of the other Biodefense division products, and continued robust development funding through contracts and grants revenues. The company also forecasts full year 2016 GAAP net income of $75 to $85 million, non-GAAP adjusted net income of $90 to $100 million, and EBITDA of $150 to $160 million (see "Reconciliation of GAAP Net Income to Adjusted Net Income and EBITDA" for a definition of terms and a reconciliation table).
The company's outlook for 2016 includes the impact of a successful spin-off of Aptevo Therapeutics in mid-2016 and continuous delivery of BioThrax to the CDC under an anticipated follow-on, multi-year procurement contract, but does not include any estimates for BioThrax deliveries from Building 55, the company's large scale BioThrax manufacturing facility, or any estimates for potential new corporate development or other M&A transactions.
Q1 2016
For the first quarter of 2016, the company anticipates total revenues of $105 to $120 million.
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(III)
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2016-2020 Strategic Growth Plan
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The company announced today a growth plan that is intended to advance its mission by expanding and diversifying its business as measured by achieving the following goals by December 31, 2020:
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Annual revenue of $1B
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>10% of revenue from ex-US markets
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Net income CAGR (2016-2020) of >20%
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Six products in clinical or advanced development, with at least three being dual use and prioritizing those with third party funding.
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To achieve the goals of the growth plan, the company intends to leverage its core competencies in government relations, medical countermeasure development, quality manufacturing, strategic acquisitions, and financial discipline to execute on the following key strategies:
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Expanding its leadership positions in the public health threats market
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Developing innovative products in partnership with governments and NGOs
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Growing through revenue generating and accretive business and product acquisitions
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Delivering attractive net income growth
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Enhancing culture to create a sustainable competitive advantage
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(IV)
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Reconciliation of GAAP Net Income to Adjusted Net Income and EBITDA
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This press release contains two financial measures (Adjusted Net Income and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)) that are considered "non-GAAP" financial measures under applicable Securities & 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 GAAP Net Income to Adjusted Net Income
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Twelve Months Ended
December 31, |
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($ in millions)
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2016
(Forecast) |
2015
(Estimated) |
2014
(Actual) |
Source
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GAAP Net Income
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$
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75.0 to $85.0
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$
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60.0 to $64.0
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$
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36.7
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NA
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Adjustments:
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Acquisition-related costs
(transaction & integration) |
9.0
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6.0
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8.1
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SG&A
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Non-cash amortization charges
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10.0
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11.0
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9.5
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COGS, SG&A, Other Income
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Write-off of syndicated loans
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--
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--
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1.8
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Other Income
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Impact of purchase accounting on inventory step-up
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2.0
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1.0
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3.0
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COGS
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Restructuring and other
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--
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1.0
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2.6
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SG&A
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Tax effect
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(6.0
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)
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(6.0
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)
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(7.5
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)
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NA
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Total Adjustments
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15.0
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13.0
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17.5
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NA
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Adjusted Net Income
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$
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90.0 to $100.0
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$
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73.0 to $77.0
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$
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54.2
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NA
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Reconciliation of GAAP Net Income to EBITDA
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Twelve Months Ended
December 31, |
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($ in millions)
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2016
(Forecast) |
2015
(Estimated) |
2014
(Actual) |
Source
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GAAP Net Income
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$
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75.0 to $85.0
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$
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60.0 to $64.0
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$
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36.7
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NA
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Adjustments:
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+ Depreciation & Amortization
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37.0
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36.0
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31.0
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COGS, SG&A, R&D
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+ Provision For Income Taxes
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32.0
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27.0
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16.3
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Income Taxes
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+ Total Interest Expense
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6.0
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7.0
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8.2
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Other Income
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Total Adjustments
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75.0
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70.0
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55.5
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NA
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EBITDA
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$
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150.0 to $160.0
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$
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130.0 to $134.0
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$
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92.2
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NA
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PRESENTATION WEBCAST
The company will outline the 2016-2020 strategic growth plan in detail during their presentation at the 34th Annual J.P. Morgan Healthcare Conference on January 11, 2016. Additionally, the company will discuss preliminary 2015 financial results, recap the accomplishments from its previous three-year growth plan, and provide a 2016 financial outlook.
A live webcast of the presentation can be accessed through Emergent's website. Visit www.emergentbiosolutions.com and select the "Investors" section. An on-demand replay of the webcast can also be accessed in the investors section after the presentation has concluded.
ABOUT EMERGENT BIOSOLUTIONS INC.
Emergent BioSolutions is a global specialty biopharmaceutical company dedicated to one simple mission—to protect and enhance life. We develop, manufacture, and deliver a portfolio of medical countermeasures for biological and chemical threats as well as emerging infectious diseases. We also develop and commercialize therapeutics and other specialty products for hospitals and clinics in the areas of hematology/oncology, transplantation, infectious diseases and autoimmune disorders. 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.
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 "believes", "expects", "anticipates", "intends", "plans", "forecasts", "estimates" and similar expressions in conjunction with, among other things, the planned spin-off of our biosciences business, discussions of financial performance or financial condition, growth strategy, product sales, manufacturing capabilities, product development, 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 whether the planned spin-off of the biosciences business is completed, as expected or at all, and the timing of any such spin-off; whether the conditions to the spin-off can be satisfied; whether the operational, marketing and strategic benefits of the spin-off can be achieved; whether the costs and expenses of the spin-off can be controlled within expectations; appropriations for BioThrax procurement; our ability to obtain new BioThrax sales contracts or modifications to existing contracts; our plans to pursue label expansions and improvements for BioThrax; availability of funding for our US government grants and contracts; our ability to identify and acquire or in-license products or late-stage product candidates that satisfy our selection criteria; whether anticipated synergies and benefits from an acquisition or in-license are realized within expected time periods or at all; our ability to enter into and maintain selective collaboration arrangements; the timing of and our ability to achieve milestones in out-license and collaboration contracts; our ability to expand our manufacturing facilities and capabilities; our ability and the ability of our contractors and suppliers to maintain compliance with cGMP and other regulatory obligations; the results of regulatory inspections; our ability to meet operating and financial restrictions placed on us and our subsidiaries that are contained in our senior credit facility; the rate and degree of market acceptance and clinical utility of our products; the success of our ongoing and planned development programs; 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 SEC, when evaluating our forward-looking statements.
###
EXHIBIT 99.2
Corporate Update & Strategic Plan Daniel J. Abdun-NabiPresident and CEO J.P. Morgan Healthcare ConferenceJanuary 11, 2016
Forward-Looking Statements / Non-GAAP Financial Measures Forward-Looking Statements This presentation 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 "believes", "expects", "anticipates", "intends", "plans", "forecasts", "estimates" and similar expressions in conjunction with, among other things, the planned spin-off of our biosciences business, discussions of financial performance or financial condition, growth strategy, product sales, manufacturing capabilities, product development, 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 presentation, 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 whether the planned spin-off of the biosciences business is completed, as expected or at all, and the timing of any such spin-off; whether the conditions to the spin-off can be satisfied; whether the operational, marketing and strategic benefits of the spin-off can be achieved; whether the costs and expenses of the spin-off can be controlled within expectations; appropriations for BioThrax procurement; our ability to obtain new BioThrax sales contracts or modifications to existing contracts; our plans to pursue label expansions and improvements for BioThrax; availability of funding for our US government grants and contracts; our ability to identify and acquire or in-license products or late-stage product candidates that satisfy our selection criteria; whether anticipated synergies and benefits from an acquisition or in-license are realized within expected time periods or at all; our ability to enter into and maintain selective collaboration arrangements; the timing of and our ability to achieve milestones in out-license and collaboration contracts; our ability to expand our manufacturing facilities and capabilities; our ability and the ability of our contractors and suppliers to maintain compliance with cGMP and other regulatory obligations; the results of regulatory inspections; our ability to meet operating and financial restrictions placed on us and our subsidiaries that are contained in our senior credit facility; the rate and degree of market acceptance and clinical utility of our products; the success of our ongoing and planned development programs; 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 SEC, when evaluating our forward-looking statements.Non-GAAP Financial Measures This presentation contains two financial measures (Adjusted Net Income and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) that are considered “non-GAAP” financial measures under applicable Securities & 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. Please view the appendix at the end of this presentation for non-GAAP reconciliation tables.
Agenda Growth 2015 Goals & Accomplishments2012-2015Growth Plan Pure Play BiosciencesSpin-off Enables Refocus onPublic HealthThreats Markets Public HealthThreats MarketPotential Next 5 2016-2020GrowthPlan
Growth 2015 Year-in-Review & 2012-2015 Growth Plan PerformanceGoals and Accomplishments
2015 Goal Recap FinancialTotal revenue: $520 to $525M Guidance was $520 to $540MNet income: $60 to $64M (GAAP) Guidance was $50 to $60M $73 to $77M (Adjusted) Guidance was $60 to $70MOperationalSecure BioThrax® PEP approvalSecure Anthrasil™ approvalInitiate Phase 1 trial of MOR209/ES414Launch IXINITY™Finalize sBLA submission for Building 55M&AComplete additional strategic acquisition(s) that align with our core competencies and support our growth plan Key 2015 AccomplishmentsLaunched 2 new products(IXINITY, Emergard™) Achieved 3 FDA approvals (IXINITY, Anthrasil, BioThrax PEP) Secured $96M in new multi-year C&G Funding (VIGIV, Anthrasil, Ebola) Announced plan to spin-off Biosciences business in 2016EBITDA of $130 to $134M Growth Disclaimer: The guidance in this presentation is only effective as of the date it was originally provided, January 11, 2016. Please see the appendix for non-GAAP reconciliation tables.
2012-2015 Growth Plan: Roadmap Recap Growth Products & Services Revenue of >$500M3 Marketed Products3 Year NI CAGR >15% 2012 2015 STRATEGY GOALS Biodefense market expansionSpecialty market diversification COMPETENCIES Leadership in biodefenseTrack record of value-added acquisitionsExpertise in biologicsGovernment and NGO partnering experience OBJECTIVES Drive organic revenue growthAcquire revenue generating assetsFocus R&D on externally funded programsBuild Biosciences Division into profitable business SteadyGrowth
2012-2015 Growth Plan: Goals & Accomplishments Goal 1 FY15 Product & ServiceRevenue of >$500M Goal 2 Minimum of 3 RevenueGenerating Products Goal 3 ($ Millions) ProductsServices/CMO Contract &Grant ($ Millions) CAGRvs 2012 38% Goal Goal Goal 1 Assumes mid-point of range of estimated CY2015 financial results. Disclaimer: The guidance in this presentation is only effective as of the date it was originally provided, January 11, 2016. 1 Growth 3-Year Net Income CAGR >15% 1
Growth 2012-2015 Financial Growth EBITDA ($ Millions) 1 Assumes mid-point of range of estimated CY2015 financial results. 1 ($ Millions) 1 Cash CAGR vs 2012: 40% Disclaimer: The guidance in this presentation is only effective as of the date it was originally provided, January 11, 2016. Please see the appendix for non-GAAP reconciliation tables.
Biosciences Business Spin-offEmergent’s Renewed Focus on Public Health Threats Pure Play
Biosciences Business Spin-off Announced in August 2015Pursuing a tax-free spin-off of the company’s Biosciences business into a separate, stand-alone publicly-traded company, “Aptevo Therapeutics” Spin designed to create opportunities in distinct markets and generate long-term value for shareholdersTimeline: Aug 2015 announced plan to spin off Biosciences business Dec 2015 announced Aptevo Therapeutics’ Board of Directors Jan 2016 Received favorable Private Letter Ruling from the IRS1Q 2016 Selection of Aptevo Therapeutics' Senior Mgt Team1Q 2016 Filing of registration statement with the SECMid-2016 Final Approval by Emergent’s Board of DirectorsMid-2016 Distribution of Aptevo Shares to Emergent Stockholders Pure Play
Renewed Focus onour Core Business Expand in Public Health Threat MarketsTarget Specific OpportunitiesAccelerate Financial Growth Emergent as a Pure Play Company We are a global specialty life sciences company focused on providing specialty products for civilian and military populations that address public health threats C B R N E CHEMICAL: Nerve agents, cyanide, chlorine, toxic industrial chemicalsBIOLOGICAL: Anthrax, smallpox, botulism, and other category A threats RADIOLOGICAL/NUCLEAR: Nuclear and radiological agentsEXPLOSIVE: Trauma, burn and wound care health threats E I D (Emerging Infectious Diseases) Pandemic influenza, Ebola, Dengue, gram negative organisms, multi-drug resistant pathogens Pure Play 11
Company Profiles Post Spin-off Products: 4 Marketed Products Services: None Pipeline: 2 Clinical, Multiple Pre-clin Platforms & Technologies: 1: ADAPTIR™ Employees: ~130 Sites: 2 Domestic Focus: Immuno-Oncology 6 Marketed Products CMO: Bulk, Fill, Finish 4 Clinical Candidates, Multiple Pre-clinical Candidates 4: Hyperimmunes | Emergard™ | Anti-bacterials | Anti-virals ~1200 11 Worldwide Public Health Threats (CBRNE & Emerging Infectious Diseases) Pure Play
Product Portfolio and Manufacturing Capabilities MARKETED PRODUCTS Manufacturing Capabilities Center for Innovation in Advanced Development and Manufacturing (CIADM)“Surge Capacity” for biologics-based MCMs supporting rapid scale-upContract manufacturing servicesBulk, Fill, Finish Clinical Pipeline NuThrax™ VAX161C (Anthrax Vaccine Adsorbed with CPG 7909 Adjuvant) PreviThrax™ (Recombinant Protective Antigen Anthrax Vaccine, Purified) (Pandemic influenza vaccine licensed from VaxInnate) UV-4B (Anti-viral compoundfor Dengue Fever) Pure Play Lansing Bayview Winnipeg Camden Hattiesburg 5 North American Sites: PHASE 2 PHASE 2 PHASE 1 PHASE 1 1 Emergard is not FDA approved or marketed in the U.S. 1
Assessing the Public Health Threats MarketNatural, Accidental & Intentional Market
U.S. Government Biodefense Market U.S. Government’s average annual funding for biodefense (2010-2014)1 Market $5.9B Funding targeted to improve biodefense preparedness in:Medical countermeasuresEnvironmental detectionSurface decontaminationDiagnostics 1 “Federal Agency Biodefense Funding, FY2013-FY2014” Sell and Watson, Biosecurity and Bioterrorism Vol 11, Num 3, 2013 U.S. Government Agencies involved:
Opportunities for Expanding Growth International MarketsPromote and expand sales outside of the United StatesTarget customers & partnersAllied foreign governments (Ministries of Health and Defense)NATO, WHO and other alliancesGates Foundation, Wellcome Trust and other global health organizationsDual Use Products: Government and Commercial MarketsEmerging infectious diseasesBroad spectrum anti-infectives (antibiotics and antivirals)Trauma, burn and wound carePlatforms & TechnologiesHyperimmune polyclonal therapiesEmergardAnti-infectives Market
2016-2020 Corporate Growth PlanRoadmap & Goals Next 5
2016-2020 Growth Plan: Roadmap Next 5 STRATEGY Expand Leadership PositionsDevelop Innovative ProductsGrow Through AcquisitionsDeliver Attractive Net Income Growth COMPETENCIES Government Relations & ContractingMedical Countermeasure DevelopmentQuality ManufacturingBusiness & Product AcquisitionsFinancial Discipline 2020GOALS
2020 Strategic Goals Next 5 REVENUE $1B Annual; >10% ex-US Drivers of Revenue Growth Existing products / servicesNew product launchesProduct and business acquisitions Position for Future Growth Advance existing portfolioLeverage platforms and technologiesFocus on externally funded programs Exercise Financial Discipline Net R&D spend < 15% of revenue SG&A spend < 25% of revenueEBITDA in excess of $350M TARGETED DEVELOPMENT 6 Products in Clinical or Advanced Development; 3 dual use >20% NET INCOME CAGR (2016-2020) Disclaimer: The guidance in this presentation is only effective as of the date it was originally provided, January 11, 2016. Please see the appendix for non-GAAP reconciliation tables.
2016 Goals FinancialTotal revenue: $600 to $630M (Including $305 to $320M of BioThrax product sales)Net income: $75 to $85M (GAAP) $90 to $100M (Adjusted)EBITDA: $150 to $160MOperationalComplete spin-off of Aptevo TherapeuticsObtain FDA licensure of Building 55Secure multi-year, follow-on BioThrax contract with CDC Complete additional strategic acquisition(s) that align with our core competencies and support our growth plan Disclaimer: The guidance in this presentation is only effective as of the date it was originally provided, January 11, 2016. Please see the appendix for non-GAAP reconciliation tables.
Our Vision
APPENDIX Non-GAAP Reconciliations
Non-GAAP Reconciliation This presentation contains two financial measures (Adjusted Net Income and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) that are considered “non-GAAP” financial measures under applicable Securities & 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 GAAP Net Income to Adjusted Net Income Disclaimer: The guidance in this presentation is only effective as of the date it was originally provided, January 11, 2016. (in millions) Financial Results for the Years Ended December 31, 2016 (Forecast) 2015(Estimated) 2014 2013 2012 Source GAAP Net Income $75.0 to$85.0 $60.0 to$64.0 $36.7 $31.1 $23.5 NA Adjustments: Acquisition-related costs (transaction & integration) 9.0 6.0 8.1 4.6 0.7 SG&A Non-cash amortization charges 10.0 11.0 9.5 2.0 -- COGS, SG&A, Other Income Write-off of syndicated loans -- -- 1.8 -- -- Other Income Impact of purchase accounting on inventory step-up 2.0 1.0 3.0 -- -- COGS Restructuring and other -- 1.0 2.6 2.8 -- SG&A Non-cash impairment charge -- -- -- -- 9.6 IPR&D Tax effect (6.0) (6.0) (7.5) (2.8) (3.6) NA Total Adjustments 15.0 13.0 17.5 6.6 6.7 NA Adjusted Net Income $90.0 to$100.0 $73.0 to$77.0 $54.2 $37.7 $30.2 NA
Reconciliation of GAAP Net Income to EBITDA Disclaimer: The guidance in this presentation is only effective as of the date it was originally provided, January 11, 2016. (in millions) Financial Results for the Years Ended December 31, 2016 (Forecast) 2015(Estimated) 2014 2013 2012 Source GAAP Net Income $75.0 to$85.0 $60.0 to$64.0 $36.7 $31.1 $23.5 NA Adjustments: + Depreciation & Amortization 37.0 36.0 31.0 19.0 11.2 COGS, SG&A, R&D + Provision For Income Taxes 32.0 27.0 16.3 13.1 13.9 Income Taxes + Total Interest Expense 6.0 7.0 8.2 -- -- Other Income Total Adjustments 75.0 70.0 55.5 32.1 25.1 NA EBITDA $150.0 to$160.0 $130.0 to$134.0 $92.2 $63.2 $48.6 NA