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December 12, 2018
Richard S. Lindahl
Executive Vice President and Chief Financial Officer
Emergent BioSolutions Inc.
400 Professional Drive
Suite 400
Gaithersburg, MD 20879
Re: Emergent BioSolutions Inc.
Form 10-K for the Fiscal Year Ended December 31, 2017
Filed February 23, 2018
Form 10-Q for the Quarterly Period Ended September 30, 2018
Filed November 2, 2018
Form 8-K
Filed November 1, 2018
File No. 001-33137
Dear Mr. Lindahl:
We have limited our review of your filings to the financial statements
and related
disclosures and have the following comments. In some of our comments, we may
ask you to
provide us with information so we may better understand your disclosure.
Please respond to these comments within ten business days by providing
the requested
information or advise us as soon as possible when you will respond. If you do
not believe our
comments apply to your facts and circumstances, please tell us why in your
response.
After reviewing your response to these comments, we may have additional
comments.
Form 10-K for the Fiscal Year Ended December 31, 2107
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Year ended December 31, 2017 Compared to Year Ended December 31, 2016
Revenue
1. Please tell us the following regarding your discussion of the changes in
revenue:
How much of the increase in Bio Thrax product sales relates to volume
versus price.
What is meant by "timing of Bio Thrax deliveries to SNS" and how it
explains the
Richard S. Lindahl
FirstNameBioSolutions Inc. S. Lindahl
Emergent LastNameRichard
Comapany12, 2018
December NameEmergent BioSolutions Inc.
December 12, 2018 Page 2
Page 2
FirstName LastName
increase in Bio Thrax sales.
The amount of other product sales by product for 2017 and 2016.
The amount attributable to each bullet with regard to the increase
in other product
sales.
The amount of expense incurred in 2017 and 2016 related to contracts
and grants and
where they are reflected in your financial statements.
Also address the above bullets, as applicable, to your MD&A revenue
discussion for the
nine months ended September 30, 2018 compared to nine months ended
September 30,
2017 in your Form 10-Q for the quarterly period ended September 30,
2018.
Cost of Product Sales and Contract Manufacturing
2. Please tell us the amount attributable to each bullet with regard to
the increase in cost of
product sales and manufacturing.
Consolidated Financial Statements
Consolidated Statements of Operations
3. Regarding the line item cost of product sales and contract
manufacturing, please provide
us the amounts included for fiscal years December 31, 2016 and 2017
and the nine months
ended September 30, 2018 for cost of product sales versus cost of
contract manufacturing.
Tell us how your current presentation that combines those items into
one line item
complies with rule 5-03(b)2 of Regulation S-X.
Notes to Consolidated Financial Statements
2. Summary of Significant Accounting Policies
Revenue Recognition
4. Please provide us an accounting analysis that describes your
accounting treatment (i.e.
separation, measurement, recognition and classification) for the March
16, 2017 contract
and modification that you entered with BARDA. Provide reference to
authoritative
literature supporting your treatment.
Form 8-K Dated November 1, 2018
Exhibit 99
5. Please refer to Compliance and Disclosure Interpretations: Non-GAAP
Financial
Measures and specifically to the answers to questions 103.02 and
102.05. Tell us how
your presentation of EBITDA and adjusted EBITDA on a per share basis
complies with
those answers.
Richard S. Lindahl
FirstNameBioSolutions Inc. S. Lindahl
Emergent LastNameRichard
Comapany12, 2018
December NameEmergent BioSolutions Inc.
December 12, 2018 Page 3
Page 3
FirstName LastName
Form 10-Q for the Quarterly Period Ended September 30, 2018
Notes to Condensed Consolidated Financial Statements
2. Revenue Recognition
6. Regarding your adoption of ASU 2014-09, please:
Tell us why the adoption of ASC 606 resulted in a $42.4 million
increase in deferred
revenue liability.
Tell us whether you applied the guidance to all contracts at the
date of initial
application or only to contracts that were not completed at the
date of initial
application. Refer to ASC 606-10-65-1.h.
Tell us whether you applied the practical expedient for contract
modifications referred
to in ASC 606-10-65-1f(4) and, if so, whether you applied the
guidance in ASC 606-
10-65-1.g.
Provide us the disclosures required by ASC 606-10-65-1.i. and tell
us why you did not
make these disclosures.
7. Regarding your application of ASC 606, please address the following:
For each type of performance obligation you have, tell us whether it
is recognized over
time or at a point in time and specifically how it is satisfied as
well as the payment
terms. For those recognized over time, tell us the method you use
to recognize
revenue and why it represents a faithful depiction of the transfer
of the goods or
services.
In the third paragraph, you indicate that the Company's variable
consideration
primarily includes consideration transferred under its development
contracts with the
U.S. government as consideration received can vary based on
developmental
progression of the product candidate(s). Please tell us more
specifically about why this
consideration can vary and why you have not constrained it.
In the fourth paragraph you indicate that revenue for long-term
development contracts
is generally recognized based upon the cost-to-cost measure of
progress, provided that
the Company meets the criteria associated with transferring control
of the good or
service over time. Please tell us about any exceptions to your
general recognition
policy.
Regarding your disclosure in the eighth paragraph, tell us why with
reference to
authoritative literature it is appropriate to recognize revenue for
the CIADM contract
with Barda on a straight- line basis .
Regarding your disclosure in the ninth paragraph, provide us an
analysis with
reference to authoritative literature that supports your accounting
for the modification
of the CIADM contract that reduced the optional periods to seven as
a termination and
creation of a new contract to be accounted for prospectively.
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
Richard S. Lindahl
Emergent BioSolutions Inc.
December 12, 2018
Page 4
absence of action by the staff.
You may contact Christine Torney at 202-551-3652 or Jim Rosenberg at
202-551-3679
with any questions.
FirstName LastNameRichard S. Lindahl Sincerely,
Comapany NameEmergent BioSolutions Inc.
Division of Corporation
Finance
December 12, 2018 Page 4 Office of Healthcare &
Insurance
FirstName LastName