On January 13, 2020 Emergent BioSolutions Inc. (NYSE: EBS) reported selected preliminary unaudited 2019 financial results and its financial forecast for 2020 (Press release, Emergent BioSolutions, JAN 13, 2020, View Source [SID1234553059]).
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
Robert G. Kramer Sr., president and chief executive officer of Emergent BioSolutions Inc. stated, "Our preliminary results for 2019 reflect another strong year of execution on the part of the entire Emergent team. With total revenue of $1.1 billion, anticipated gross margin of 56% to 58%, which is a 200 to 400 basis point improvement over prior year, and margins on adjusted net income and adjusted EBITDA of 14% (1) and 26% (2), respectively, our financial performance reflects the consistency and durability of our business model and its focus on public health threat solutions. Moreover, we achieved our key operational goals for the year, which included securing over $3 billion of renewed contract value, expanding markets for our existing products and services portfolio, and continuing investments to advance our product pipeline and enhance our manufacturing infrastructure."
Continuing, Kramer stated, "As we enter 2020, we are planning for continued expansion of our business and a financial forecast that at the midpoint anticipates 11% year-over-year growth in total revenue along with strong absolute and relative gains in adjusted net income and adjusted EBITDA. We intend to achieve these outcomes while simultaneously expanding our portfolio of advanced stage product candidates that address serious global public health threats. As a result, we are confident in the strength of our business model as we pursue the sustained growth and value creation to be realized in the 2020-2024 growth strategy we announced at the Analyst & Investor Day we held in November, which contemplates annual revenue in excess of $2 billion by 2024."
PRELIMINARY 2019 FINANCIAL RESULTS (Unaudited)
The company is providing the following preliminary, unaudited financial results for full year 2019.
Total Revenue
For the full year 2019, the company anticipates total revenue of $1,100 to $1,105 million, the midpoint of which represents a $320 million or 41% increase from 2018, the second year in a row of approximately 40% year-over-year growth in total revenue. This annual increase is due primarily to the contribution of sales of NARCAN (naloxone HCl) Nasal Spray and ACAM2000 (Smallpox (Vaccinia) Vaccine, Live) in 2019 as well as higher contracts and grants revenue, offset by lower anthrax vaccine revenue (now a combination of BioThrax (Anthrax Vaccine Adsorbed) and AV7909 (Anthrax Vaccine Adsorbed, Adjuvanted) (4)).
Net Income (GAAP and Adjusted)
For the full year 2019, the company anticipates net income of $53 to $63 million, which reflects the impact of two significant items, contingent consideration related to the Adapt acquisition and a non-cash impairment. The company also anticipates adjusted net income of $150 to $160 million, the midpoint of which represents a $33 million or 27% increase from 2018, reflecting the impact of both increased product sales as well as higher average margins on the products contributing to product sales in 2019. (See "Reconciliation of Net Income to Adjusted Net Income, EBITDA and Adjusted EBITDA" for a definition of terms and reconciliation tables.)
Note:
The preliminary 2019 financial results are subject to revision and will be finalized upon completion of the company’s external audit, which is anticipated by late February 2020. The company’s final audited financial results could differ materially from these selected preliminary results.
2020 FINANCIAL FORECAST
For the full year of 2020, the company’s financial forecast includes the impact of the following items:
continued growth in sales of NARCAN Nasal Spray to a range of $285 — $315 million;
combined deliveries of AV7909 (4) and BioThrax to the Strategic National Stockpile (SNS) in a range of $270 — $300 million;
deliveries of ACAM2000 in a range of $180 — $200 million under procurement contracts with the U.S. government and other foreign governments;
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 that comprise Other Product sales;
continued expansion of CMO services revenue;
continued improvement of gross margin in a range of 200 — 400 basis points, driven by improved product mix; and
continued investment in discretionary development projects funded by the company, most notably the anticipated Phase 3 studies for both the Chikungunya and FLU-IGIV product candidates, among other R&D projects.
The outlook for 2020 does not include estimates for potential new corporate development or other M&A transactions.
PRESENTATION WEBCAST
The company will provide an update on the current business and discuss preliminary 2019 financial results, the forecast and corporate goals for 2020, and long-term goals for the five-year period 2020-2024 during its presentation at the 38th Annual J.P. Morgan Healthcare Conference on January 14, 2020 at 10:30 AM Pacific time.
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.
FOOTNOTES
Adjusted Net Income margin is defined as Adjusted Net Income divided by total revenues. For the 2019 Preliminary Results, we reference this metric using the midpoints of the relevant factors. Specifically: $155/$1,103 = 14%.
Adjusted EBITDA margin is defined as Adjusted EBITDA divided by total revenues. For the 2019 Preliminary Results, we reference this metric using the midpoints of the relevant factors. Specifically: $285/$1,103 = 26%.
See "Reconciliation of Net Income to Adjusted Net Income, EBITDA and Adjusted EBITDA" for a definition of terms and a reconciliation tables.
AV7909 is a product candidate not yet approved by the FDA or any other health regulatory agency but procured by the U.S. government under special circumstances.
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME, EBITDA AND ADJUSTED EBITDA
This press release contains five financial measures (Adjusted Net Income, Adjusted Net Income margin, EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), Adjusted EBITDA and Adjusted EBITDA margin) 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. All adjustments are tax effected utilizing the federal statutory tax rate for the US, except for changes in the fair value of contingent consideration as the vast majority is non-deductible for tax purposes. Adjusted Net Income margin is defined as Adjusted Net Income divided by total revenues. 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. Adjusted EBITDA margin is defined as Adjusted EBITDA divided by total revenues. 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.