On April 28, 2022 Emergent BioSolutions Inc. (NYSE: EBS) reported financial results for the first quarter ended March 31, 2022 (Press release, Emergent BioSolutions, APR 28, 2022, View Source [SID1234613139]).
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"Emergent remains focused on our strategic plan to grow within public health threat markets where we can positively impact patients and customers," said Robert G. Kramer, president and CEO of Emergent BioSolutions. "Our diversified business model, disciplined operating approach, and financial strength enable us to continue pursuing our vision of protecting and enhancing one billion lives by 2030."
FINANCIAL HIGHLIGHTS (1)
SELECT Q1 2022 AND OTHER RECENT BUSINESS UPDATES
Completed the rolling submission to the U.S. Food and Drug Administration (FDA) of the Biologics License Application (BLA) for AV7909 (Anthrax Vaccine Adsorbed, Adjuvanted), the Company’s new anthrax vaccine candidate.
Announced updates to the Company’s corporate governance:
Appointed Zsolt Harsanyi, Ph.D., as Chairman of the Board of Directors; and
Appointed Keith Katkin to the Board of Directors.
Strengthened the Company’s senior leadership with three key hires:
Coleen Glessner joined as EVP, Global Quality and Ethics and Compliance, reporting to the CEO;
Bill Hartzel joined as SVP and Head of the CDMO Services business, reporting to the COO; and
Joseph Philipose joined as SVP and Chief Ethics and Compliance Officer, reporting to the EVP, Global Quality and Ethics and Compliance.
Initiated a Phase 1 study evaluating the safety, tolerability, pharmacokinetics and pharmacodynamics of stabilized isoamyl nitrite (SIAN), a treatment being developed for known or suspected acute cyanide poisoning, with funding from the Biomedical Advanced Research and Development Authority (BARDA) and in collaboration with Southwest Research Institute.
Continued to repurchase the Company’s common stock under an existing authorization by the Board of Directors to management to repurchase up to $250 million through November 11, 2022; during the quarter ended March 31, 2022, the Company purchased an additional 1.1 million shares for $52.2 million, resulting in an aggregate of approximately 3.8 million shares for $164.7 million since initiating repurchases in Q4 2021.
Q1 2022 FINANCIAL PERFORMANCE (1)
For Q1 2022, revenues from Anthrax vaccines increased $48.6 million as compared to Q1 2021. The increase is largely driven by timing of deliveries to the U.S. government (USG), specifically the Strategic National Stockpile (SNS). The Company received an AV7909 (Anthrax Vaccine Adsorbed, Adjuvanted) contract modification in September 2021 valued at approximately $399 million to deliver additional AV7909 doses through March 2023.
Nasal naloxone products
For Q1 2022, revenues from nasal naloxone products increased $18.9 million as compared to Q1 2021. The increase is driven by strong growth in sales of NARCAN (naloxone HCl) Nasal Spray to U.S. public interest and Canadian customers, as well as solid contributions from sales of the authorized generic product licensed to Sandoz which launched in December 2021. These increases are offset by a decrease in sales of NARCAN Nasal Spray to the U.S. commercial retail market.
ACAM2000
For Q1 2022, revenues from ACAM2000 (Smallpox (Vaccinia) Vaccine, Live) increased $14.4 million as compared to Q1 2021. The increase is driven by international sales.
Other (4)
For Q1 2022, revenues from other product sales increased $17.3 million as compared to Q1 2021. The increase is largely a result of sales of VIGIV [Vaccinia Immune Globulin Intravenous (Human)] driven by timing of deliveries to the USG and of sales of Anthrasil (Anthrax Immune Globulin Intravenous (Human)) driven by timing of deliveries to international customers.
Contract Development and Manufacturing (CDMO)
CDMO Services
For Q1 2022, revenue from contract development and manufacturing services decreased $15.8 million as compared to Q1 2021. This decrease is largely due to the impact of the Company’s decision to initiate maintenance and other modification-related work at the Bayview facility which reduced manufacturing activities during the quarter. The decline in revenues at Bayview was offset by an increase in manufacturing activities at the Company’s Camden and Winnipeg sites in support of drug substance and drug product manufacturing services related to products and product candidates of the Company’s commercial customers.
CDMO Leases
For Q1 2022, revenue from contract development and manufacturing leases decreased $107.2 million as compared to Q1 2021. The decrease was primarily due to the completion of the Company’s public-private partnership with BARDA in November 2021.
Contracts and Grants
For Q1 2022, revenues from contracts and grants decreased $11.7 million as compared to Q1 2021. The decrease is primarily due to lower revenue from BARDA as a result of the termination of the Center for Innovation and Advanced Development and Manufacturing (CIADM) agreement in November 2021 as well as decreases in development activities associated with various other externally funded R&D projects.
Operating Expenses
For Q1 2022, cost of product sales increased $27.7 million as compared to Q1 2021. The increase is primarily due to the higher volume of product sales.
Cost of CDMO
For Q1 2022, cost of CDMO increased $28.9 million as compared to Q1 2021. The increase is driven by professional services in support of quality functions at the Bayview site and at the Camden and Winnipeg sites due to an increase in manufacturing activities in Q1 2022 compared to Q1 2021.
Research and Development
For Q1 2022, research and development expenses decreased $6.1 million as compared to Q1 2021. The decrease is primarily due to a decline in costs associated with the development of the Company’s COVID-19 therapeutic product candidates offset by an increase in costs associated with the Phase 3 study of the Company’s chikungunya virus (CHIKV) virus-like particle (VLP) vaccine candidate.
Selling, General and Administrative
For Q1 2022, selling, general and administrative expenses increased $3.9 million due to an increase in professional services and marketing costs in support of the expansion of the Company’s business operations and defending and supporting the Company’s corporate reputation.
Additional Financial Information
Segment Information
During Q1 2022, the Company began assessing its operating performance by focusing on two reportable segments: 1) a products segment (Product) consisting of the Government/Medical Countermeasure (MCM) and Commercial products business lines; and 2) a services segment (Services) consisting of the CDMO services business line. The Company evaluates the performance of these reportable segments based on revenue and adjusted gross margin. Segment revenue includes external customer sales but does not include inter-segment services. The Company does not allocate Contracts and grants, R&D, SG&A, amortization of intangible assets, interest and other income (expense) or taxes to its evaluation of the performance of these segments.
** Gross margin is calculated as Revenue less cost of sales. Gross margin % is calculated as gross margin divided by Revenue.
*** Adjusted gross margin is calculated as Revenue less Adjusted cost of sales. Adjusted gross margin % is calculated as Adjusted gross margin divided by Revenue.
For Q1 2022, Product margin increased $71.5 million as compared to Q1 2021. Product adjusted gross margin increased $70.9 million as compared to Q1 2021. The increase in Product gross margin and Product adjusted gross margin is primarily due to increased volumes.
For Q1 2022, Services gross margin and adjusted gross margin decreased $151.9 million as compared to Q1 2021. The decrease in Services gross and adjusted gross margin is primarily due to the decline in revenue at the Bayview facility as a result of the completion of the Company’s arrangement with BARDA, the pause in manufacturing activities for improvement and modifications, as well as an increase in professional services costs.
For Q1 2022, the Company is temporarily suspending disclosing CDMO Backlog as of March 31, 2022, pending further clarity on Johnson & Johnson (J&J) COVID-19 vaccine requirements, influenced by the fact this metric includes value from the J&J contract. The Company will resume providing this metric at the appropriate time.
For Q1 2022, capital expenditures decreased largely due to less spending associated with the expansion project at the Company’s Rockville facility which is nearing completion.
2022 FINANCIAL FORECAST
The Company provides the following update to its full year 2022 forecast.
Reaffirmed Guidance
The following revenue guidance is reaffirmed for full year 2022 ($ in millions):
• Anthrax Vaccines $280-$300
• ACAM2000 $190-$210
• Nasal Naloxone Products $240-$310
• Other Products + Contracts and Grants $200-$260
Temporarily Suspended Guidance
Following the recent decision by Johnson & Johnson (J&J) to suspend projecting COVID-19 vaccine sales for 2022 due to global supply surplus and vaccine hesitancy in the developing world, the Company’s 2022 revenues related to its commercial supply arrangement with J&J are uncertain. Accordingly, the following metrics are temporarily suspended for full year 2022 pending further clarity on J&J COVID-19 vaccine requirements:
CDMO Revenues
Total Revenues
Adjusted Net Income
Adjusted EBITDA
Gross Margin
At the appropriate time, the Company will communicate additional information and update the overall forecast.
Assumptions
The Company’s 2022 financial forecast also takes into consideration the following assumptions.
2022 Product and Contract and Grant Revenues
Anthrax vaccines revenues are expected to continue at similar levels to 2021 under the terms of the Company’s existing contract with BARDA.
ACAM2000 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 products revenues reflect the formation of a generic market and comprise revenues from a combination of NARCAN Nasal Spray and the authorized generic of NARCAN Nasal Spray, a product licensed to Sandoz and launched in late 2021 and one in which the Company retains a financial interest.
Other Products + Contracts and Grants revenues: 1) other products revenues reflect continued procurement of other products not highlighted on a standalone basis from various government customers under existing multi- year contracts; 2) contracts and grants revenues reflect continued funding of select development programs from various government and other non-dilutive sources.
Other
Pipeline progress is expected across the R&D portfolio with the ongoing advancement of the CHIKV VLP Phase 3 clinical trial, the completion of the BLA filing for AV7909, and anticipated advancements of a number of early- stage programs.
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, and aligned with the average over the previous five-year period.
FOOTNOTES
(1) All financial information incorporated within this release is unaudited.
(2) See "Reconciliation of Net Income to Adjusted Net Income," "Reconciliation of Net Income to Adjusted EBITDA," and "Adjusted Revenues" for a definition of terms and the reconciliation tables.
(3) Product sales, net are reported net of variable consideration including returns, rebates, wholesaler fees and prompt pay discounts in accordance with U.S. generally accepted accounting principles.
(4) Other can include a combination of sales of any of the following products: BAT, VIGIV, Anthrasil, raxibacumab, RSDL, Trobigard, Vivotif, and Vaxchora.
(5) CDMO Customer is defined as a client (commercial, government, NGO) for whom the Company has performed CDMO services where there is evidence of meeting all of the following criteria: i) completion of any billable project milestones in the preceding 24-month period, indicating ongoing work; ii) secured project work planned in the future, which has not yet been invoiced, capturing future work not yet indicated in the invoice record; and, iii) neither the Company nor the client having yet to formally terminate the last remaining project, thereby removing any client for whom work has fully concluded.
(6) CDMO New Business Secured is defined as initial value of contracts secured as well as incremental value of existing contracts modified within the indicated period.
CONFERENCE CALL, PRESENTATION SUPPLEMENT AND WEBCAST INFORMATION
Company management will host a conference call at 5:00 pm (Eastern Time) today, April 28, 2022, to discuss these financial results. The conference call and presentation supplement can be accessed from the Company’s website or through the following:
A replay of the call can be accessed from the Company website.