On January 9, 2022 Emergent BioSolutions Inc. (NYSE:EBS) reported its financial guidance for 2022 and selected preliminary unaudited financial results for 2021 (Press release, Emergent BioSolutions, JAN 9, 2022, View Source [SID1234598439]).
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"This past year we celebrated wins across the business and overcame our share of challenges, which have made our organization stronger," said Robert G. Kramer, president and CEO of Emergent BioSolutions. "We remain focused on our growth goals and dedicated to our vision of protecting and enhancing the lives of 1 billion people by 2030. We are confident in our core business and our growth potential, driven by quality manufacturing, a broad R&D portfolio, diverse M&A opportunities, and most importantly, our talented workforce."
"Our 2021 financial performance reflects steady growth in our core products combined with strong CDMO services revenues stemming from our participation in the global COVID-19 response," said Richard S. Lindahl, executive vice president and CFO. "In 2022 we anticipate continued solid contributions from our Government/Medical Countermeasure and Commercial products businesses, more normalized performance from our CDMO services business, and achievement of important milestones in our R&D portfolio."
PRELIMINARY 2021 FINANCIAL RESULTS (Unaudited)
The Company is providing the following preliminary, unaudited financial results for full year 2021.
Revenue Metrics
Total revenues for 2021 are expected to be in the range of $1,770 million to $1,790 million, an increase at the midpoint of $225 million or 14% as compared to 2020. This growth primarily reflects increased sales of contract development and manufacturing (CDMO) services to pharmaceutical and biotechnology innovators and government/non-government organization (NGO) customers, and to a lesser extent higher product sales, primarily from NARCAN (naloxone HCl) Nasal Spray.
Profitability Metrics
The Company anticipates Adjusted EBITDA of $500 million to $525 million, a decrease at the midpoint of $118 million or 19% as compared to 2020. The Company anticipates Adjusted Net Income of $315 million to $335 million, a decrease at the midpoint of $99 million or 23% as compared to 2020. This decrease primarily reflects the impact of the incremental costs at the Company’s Bayview facility. (See "Reconciliation of Non-GAAP Measures" for a definition of the terms and reconciliation tables.)
Note:
The preliminary 2021 financial results are unaudited, subject to revision, and anticipated to be finalized by late February 2022. The Company is in the process of finalizing its goodwill and long-lived asset impairment assessments for 2021. Any potential impairment has not been incorporated in these preliminary 2021 financial results. The Company’s final audited financial results could differ materially from these selected preliminary results.
2022 FINANCIAL GUIDANCE
The Company is providing the following guidance of selected financial metrics for full year 2022.
* Includes revenues from the Company’s branded NARCAN Nasal Spray and revenues related to the authorized generic of NARCAN Nasal Spray, a product licensed to Sandoz AG and launched in late 2021.
Total Revenues
The 2022 guidance for total revenue indicates a re-baseline of the Company’s operational performance and primarily reflects the impact to the CDMO services business following the conclusion of the Center for Innovation in Advanced Development and Manufacturing (CIADM) task order with the Biomedical Advanced Research and Development Authority (BARDA) and to the commercial products business following the formation of a generic market for NARCAN Nasal Spray.
Adjusted EBITDA and Adjusted Net Income (1)
The 2022 guidance reflects an anticipated mix of product and services gross margin, continued investment in research and development, and scale efficiencies in selling, general & administration expenses.
2022 Product/Service Level Revenues – Select Assumptions
Anthrax vaccines revenues are expected to continue at similar levels to 2021 under the terms of the Company’s existing contract with BARDA.
ACAM2000 (Smallpox (Vaccinia) Vaccine, Live) vaccine deliveries are expected to continue under the terms of the Company’s existing contract with the U.S. Department of Health and Human Services (HHS) at unit volume levels consistent with 2021 deliveries.
Nasal naloxone product revenues reflect the formation of a generic market and comprise revenues from NARCAN (naloxone HCl) Nasal Spray and revenues related to the authorized generic of NARCAN Nasal Spray, a product licensed to Sandoz AG and launched in late 2021.
CDMO revenues include, among others, continued production of COVID-19 drug substance for Johnson & Johnson.
Other 2022 Assumptions
Gross margin is expected to be approximately 47%-51% on a GAAP basis, influenced by the mix of product and services revenues.
Pipeline progress is expected across the R&D portfolio with anticipated advancements of a number of early-stage programs, the ongoing progress of the CHIKV VLP Phase 3 clinical trial, and completion of the Biologics License Application filing for AV7909, the Company’s next generation anthrax vaccine candidate.
Capital expenditures, net of reimbursement, are expected to be approximately 10% of total revenues at the midpoint, reflecting ongoing investments in capacity and capability expansions related to the CDMO business and the Company’s R&D programs.
FOOTNOTES
(1) See "Reconciliation of Non-GAAP Measures" for a definition of terms and applicable reconciliation tables.
PRESENTATION WEBCAST
The Company will provide an update on the current business and discuss preliminary 2021 unaudited financial results, the financial guidance for 2022, and long-term goals during its presentation at the 40th Annual J.P. Morgan Healthcare Conference on January 10, 2022 at 8:15 AM Eastern time.
A live webcast of the presentation can be accessed through Emergent’s website. An on-demand replay of the webcast can also be accessed in the investors section after the presentation has concluded.
RECONCILIATION OF NON-GAAP MEASURES (unaudited)
This press release contains financial measures (Adjusted Net Income, Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization 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. 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 EBITDA reflects net income excluding the impact of depreciation, amortization, interest expense and income taxes, excluding specified items that can be highly variable and the non-cash impact of certain 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.
This press release references changes in Revenues, Adjusted EBITDA, and Adjusted Net Income from the Company’s full year 2020 performance to the mid-point of the estimated full year 2021 performance. The Company believes these metrics are an important part of assessing performance on a year over year basis. These changes are expressed in dollars as well as percentages. A reconciliation of the calculation of these changes is included below.
Reconciliation of Net Income to Adjusted Net Income (Unaudited)
Reconciliation of the 2021 Estimated Midpoint of Revenues, Adjusted EBITDA and Adjusted Net Income and the Dollar and Percentage Changes as compared to 2020 Actual (Unaudited)