UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

____________________

 

FORM 8-K

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported):  August 4, 2016

 

EMERGENT BIOSOLUTIONS INC.
(Exact Name of Registrant as Specified in Charter)

 

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))

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Date:  August 4, 2016	EMERGENT BIOSOLUTIONS INC.
	By:	/s/ ROBERT G. KRAMER                                                             Robert G. Kramer Executive Vice President and Chief Financial Officer

 

 

EMERGENT BIOSOLUTIONS REPORTS SECOND QUARTER AND SIX MONTHS 2016 FINANCIAL RESULTS

GAITHERSBURG, MD, August 4, 2016—Emergent BioSolutions Inc. (NYSE: EBS) reported financial results for the quarter and six months ended June 30, 2016.

FINANCIAL HIGHLIGHTS

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Total revenues: Q2 2016 of $101.5 million; six months 2016 of $212.5 million

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GAAP net loss: Q2 2016 of $(10.9) million, or $(0.27) per diluted share; six months 2016 of $(7.0) million, or $(0.17) per diluted share

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Adjusted net income/loss: Q2 2016 net loss of $(7.1) million, or $(0.18) per diluted share; six months 2016 net income of $0.3 million, or $0.01 per diluted share

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EBITDA: Q2 2016 of $(4.8) million, or $(0.12) per diluted share; six months of $12.4 million, or $0.31 per diluted share

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Adjusted EBITDA: Q2 2016 of $(2.2) million, or $(0.05) per diluted share; six months 2016 of $17.3 million, or $0.43 per diluted share

Q2 2016 & RECENT BUSINESS ACCOMPLISHMENTS

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Spin-off of Aptevo Therapeutics completed

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Repurchase program for up to $50 million of the Company's common stock authorized

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Building 55 milestones achieved towards Food and Drug Administration (FDA) licensure

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Supplemental Biologics License Application accepted

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Pre-approval inspection completed

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PDUFA date of August 15, 2016 established

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BioThrax® (Anthrax Vaccine Adsorbed) granted Orphan Drug status by the FDA for post-exposure prophylaxis (PEP) of anthrax disease

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Centers for Disease Control and Prevention (CDC) confirmed intent to award a follow-on procurement contract for BioThrax® (Anthrax Vaccine Adsorbed) by September 23, 2016

·

U.S. Department of Health and Human Services (HHS) issued a request for proposal seeking a next generation anthrax vaccine; today the company submitted a response proposing its product candidate NuThrax™ (Anthrax Vaccine Adsorbed with CPG 7909 Adjuvant)

·

Task order for up to $21.9 million to develop and manufacture three cGMP lots of a Zika vaccine received from the Biomedical Advanced Research and Development Authority

2016 OUTLOOK

The Company will continue to temporarily postpone its financial guidance for 2016 until further clarity is reached on the following U.S. government contracts and solicitations:

·

Current BioThrax procurement contract: By letter dated April 26, 2016 the CDC indicated that it anticipated procuring less than the total remaining doses of BioThrax under the existing procurement contract and did not quantify the number of doses anticipated to be procured.

·

Follow-on BioThrax procurement contract: On June 21, 2016, HHS issued a Sole Source Notification indicating its intention by September 23, 2016 to award to the Company a follow-on contract to procure 29.4 million doses of BioThrax with a period of performance of five years. The terms of the contract, including the price per dose and the timing of deliveries, remain subject to contract negotiation.

·

Notice of Solicitation for Next Generation Anthrax Vaccine: On June 21, 2016, HHS issued a request for proposal seeking a next generation anthrax vaccine for post-exposure prophylaxis of anthrax disease with the ability to confer protection in one or two doses and meeting additional specific criteria relating to safety, efficacy and manufacturing.

2016 FINANCIAL PERFORMANCE

(I) Quarter Ended June 30, 2016 (unaudited)

Product Sales

For Q2 2016, product sales were $58.5 million, a decrease of 29% as compared to 2015. The decrease in BioThrax sales was primarily due to a reduction in shipments to the CDC consistent with the April 26, 2016 letter from CDC that indicated that it anticipated procuring less than the total remaining doses of BioThrax under the existing procurement contract. The increase in Other Biodefense sales was primarily due to VIGIV sales to the Strategic National Stockpile (SNS). The increase in Aptevo sales was mainly due to increased sales of IXINITY (received FDA licensure and launched in Q2 2015).

Contract Manufacturing

For Q2 2016, revenue from the Company's contract manufacturing operations was $10.2 million, an increase of 15% as compared to 2015. The increase is due primarily to services related to plasma collection and related testing activities.

Contracts, Grants and Collaborations

For Q2 2016, contracts, grants and collaborations revenue was $32.8 million, a decrease of 7% as compared to 2015.

Cost of Product Sales and Contract Manufacturing

For Q2 2016, cost of product sales and contract manufacturing was $35.6 million, an increase of 31% as compared to 2015, attributable to an increase in rejected BioThrax work-in-process material, as well as increased Other Biodefense and Aptevo product sales.

Research and Development

For Q2 2016, gross research and development (R&D) expenses were $35.3 million, a decrease of 14% as compared to 2015. The decrease primarily reflects lower contract service costs.

For Q2 2016, net R&D expenses were $2.5 million, a decrease of 55% as compared to 2015. Net R&D expenses, which are more representative of the Company's actual out-of-pocket investment in product development, are calculated as gross research and development expenses less contracts, grants and collaboration revenues.

Selling, General and Administrative

For Q2 2016, selling, general and administrative expenses were $44.1 million, an increase of 21% as compared to 2015. This increase includes costs associated with the Aptevo spin-off along with increased professional services to support our strategic growth initiatives, higher IXINITY selling costs, and information technology investments.

Net Income/(Loss)

For Q2 2016, GAAP net loss was $(10.9) million, or $(0.27) per diluted share, versus GAAP net income of $14.1 million, or $0.32 per diluted share, in 2015.

(II) Six Months Ended June 30, 2016 (unaudited)

Product Sales

For the six months of 2016, product sales were $130.3 million, an increase of 30% as compared to 2015. The increase in BioThrax sales was primarily due to the suspension of shipments to the CDC in Q1 2015 following the discovery of foreign particles in a limited number of vials in two manufactured lots of BioThrax, resulting in reduced sales volume in the first half of 2015. The decrease in Other Biodefense sales was primarily due to lower RSDL shipments. The increase in Aptevo sales was mainly due to increased sales of IXINITY.

Contract Manufacturing

For the six months of 2016, revenue from the Company's contract manufacturing operations was $17.7 million, a decrease of 16% as compared to 2015. The change is primarily due to a decrease of $3.8 million from services related to the production of an MVA Ebola vaccine in 2015.

Contracts, Grants and Collaborations

For the six months of 2016, contracts, grants and collaborations revenue was $64.5 million, a decrease of 6% as compared to 2015.

Cost of Product Sales and Contract Manufacturing

For the six months of 2016, cost of product sales and contract manufacturing was $64.1 million, an increase of 39% as compared to 2015, primarily attributable to the 37% increase in BioThrax product sales.

Research and Development

For the six months of 2016, gross research and development (R&D) expenses were $69.5 million, a decrease of 13% as compared to 2015. The decrease primarily reflects lower contract service costs.

For the six months of 2016, net R&D expenses were $5.0 million, a decrease of 56% as compared to 2015.

Selling, General and Administrative

For the six months of 2016, selling, general and administrative expenses were $83.9 million, an increase of 18% as compared to 2015. This increase includes costs associated with the Aptevo spin-off along with increased professional services to support our strategic growth initiatives, additional selling effort for IXINITY, and information technology investments.

Net Loss

For the six months of 2016, GAAP net loss was $(7.0) million, or $(0.17) per diluted share, versus GAAP net loss of $(7.4) million, or $(0.19) per diluted share, in 2015.

(III) RECONCILIATION OF GAAP NET INCOME/(LOSS) TO ADJUSTED NET INCOME/(LOSS), EBITDA AND ADJUSTED EBITDA

This press release contains three financial measures (Adjusted Net Income/(Loss), EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), and adjusted EBITDA) 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/(Loss) 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. Adjusted EBITDA also excludes specified items that can be highly variable and the non-cash impact of certain purchase accounting adjustments. 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/(Loss) to Adjusted Net Income/(Loss)

The following table provides a reconciliation of GAAP Net Income/(Loss) to Adjusted Net Income/(Loss) for the three month periods as indicated.

The following table provides a reconciliation of GAAP Net Loss to Adjusted Net Income/(Loss) for the six month periods as indicated.

Reconciliation of GAAP Net Income/(Loss) to EBITDA and Adjusted EBITDA

The following table provides a reconciliation of GAAP Net Income/(Loss) to EBITDA and Adjusted EBITDA for the three month periods as indicated.

The following table provides a reconciliation of GAAP Net Loss to EBITDA and Adjusted EBITDA for the six month periods as indicated.

CONFERENCE CALL AND WEBCAST INFORMATION

Company management will host a conference call at 5:00 pm (Eastern Time) today, August 4, 2016, to discuss these financial results. This conference call can be accessed live by telephone or through Emergent's website:

Live Teleconference Information:

Dial in number: (855) 766-6521

International dial in: (262) 912-6157

Passcode: 29444249

Webcast Information:

Live webcast feed can be accessed using this link: http://edge.media-server.com/m/p/7wsyx2ie/lan/en.

A replay of the call can be accessed on Emergent's website www.emergentbiosolutions.com under "Investors."

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. 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 @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, , any statements containing the words "believes", "expects", "anticipates", "intends", "plans", "forecasts", "estimates" and similar expressions in conjunction with, among other things, discussions of the Company's outlook, financial performance or financial condition, growth strategy, product sales, potential government procurement contracts or awards, 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 the ability to obtain a new procurement contract for BioThrax; the ability to obtain a development and procurement contract under the request for proposal for a next generation anthrax vaccine; appropriations for procurement of BioThrax and a next generation anthrax vaccine; our plans to pursue label expansions and improvements for BioThrax; availability of funding for our US government grants and contracts; whether the operational, marketing and strategic benefits of the spin-off of our biosciences business can be achieved and the timing of any such benefits; 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 achieve FDA licensure of Building 55; 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; the outcome of the purported class action lawsuit recently filed against us and possible other future material legal proceedings; 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.

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FINANCIAL STATEMENTS FOLLOW