On April 30, 2020 Emergent BioSolutions Inc. (NYSE: EBS) reported financial results for the three months ended March 31, 2020 (Press release, Emergent BioSolutions, APR 30, 2020, View Source [SID1234556845]).
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"Emergent is uniquely positioned to respond to the unprecedented challenges of the COVID-19 pandemic," said Robert G. Kramer Sr., president and chief executive officer of Emergent BioSolutions. "We are deploying our decades of experience in vaccines and therapeutics development and manufacturing, our well-established platform technologies, and our significant development and manufacturing capabilities. Our goal is to create multiple innovative solutions to deliver on our commitments to our customers and patients, while continuing to safeguard our employees."
Signed a contract development and manufacturing (CDMO) agreement, valued at $135 million, to be U.S. manufacturing partner of Johnson & Johnson’s lead vaccine candidate for COVID-19. Negotiations continue on a long-term commercial supply agreement for large-scale drug substance manufacturing, anticipated to begin in 2021.
Initiated development of two investigational plasma-derived therapies. COVID-Human Immune Globulin (COVID-HIG), a human plasma-derived product candidate, for which the Company subsequently received $14.5 million in Health and Human Services (HHS) funding, is being developed as a potential treatment for COVID-19 in severe hospitalized and high-risk patients and will be included in at least one of the studies of the National Institute of Allergy and Infectious Diseases (NIAID), part of the National Institutes of Health, evaluating potential treatments for COVID-19. COVID-Equine Immune Globulin (COVID-EIG) is also being developed as an equine plasma-derived therapy candidate for potential treatment of severe disease in humans.
Signed a CDMO agreement with Novavax, Inc. to provide development services, drug substance and drug product manufacturing for its experimental vaccine candidate for COVID-19, NVX-CoV2373.
Signed a CDMO agreement with Vaxart, Inc. to provide development services and drug substance manufacturing to produce its experimental oral vaccine candidate for COVID-19.
Q1 2020 AND OTHER RECENT BUSINESS ACCOMPLISHMENTS
Received agreement from the European Medicines Agency (EMA) and the U.S. Food and Drug Administration (FDA) on the company’s proposed development plan to use Serum Neutralizing Antibodies (SNA) as surrogate endpoint to predict likely clinical benefit of CHIKV VLP, the company’s chikungunya virus virus-like particle (VLP) vaccine candidate, in a Phase 3 safety and immunogenicity study anticipated in late 2020.
Received positive opinion and subsequent approval from EMA of Vaxchora Cholera Vaccine (recombinant, Live, Oral), making it the only single-dose oral cholera vaccine approved across all European Union member states, the UK, and the European Economic Area countries, indicated for active immunization against disease caused by Vibrio cholerae serogroup 01 in adults and children from 6 years of age. Commercial launch is being planned for late 2020.
Signed a CDMO agreement with Novavax, Inc. to provide drug substance manufacturing of NanoFluTM, its seasonal influenza vaccine candidate.
Announced the appointment of Dr. Karen Smith as chief medical officer with responsibility for leading and further establishing Emergent’s global integrated capability in clinical development, medical affairs, and regulatory affairs.
Submitted a data package to the FDA in support of extending the shelf life of NARCAN (naloxone HCl) Nasal Spray from 24 to 36 months, with an expected review by FDA to take approximately six months.
2020 FINANCIAL PERFORMANCE (unaudited)
(I) Quarter Ended March 31, 2020 (Q1)
Revenues
Total Revenues
For Q1 2020, total revenues were $192.5 million, a slight increase over 2019. Total revenues reflect a decline in product sales revenues partially offset by an increase in CDMO and contracts and grants revenues.
Product Sales
For Q1 2020, product sales were $148.2 million, a decrease of $4.8 million or 3% as compared to 2019. The change primarily reflects increases in sales of Anthrax Vaccines and NARCAN Nasal Spray offset by a decrease in ACAM2000, as previously anticipated.
Contract Development and Manufacturing
For Q1 2020, revenue from the Company’s contract development and manufacturing operations was $21.7 million, an increase of $5.8 million or 36% as compared to 2019. The increase primarily reflects increased demand across development services, drug substance and drug product offerings.
Contracts and Grants
For Q1 2020, revenue from the Company’s development-based contracts and grants was $22.6 million, an increase of $0.9 million as compared to 2019. The increase primarily reflects revenues associated with a grant received related to our PC2A (diazepam) auto-injector drug-device product candidate.
Operating Expenses
Cost of Product Sales and Contract Development and Manufacturing
For Q1 2020, cost of product sales and contract manufacturing was $76.9 million, a decrease of $14.9 million or 16% as compared to 2019. The decrease primarily reflects a decrease in sales of ACAM2000 and raxibacumab.
Research and Development (Gross and Net)
For Q1 2020, gross R&D expenses were $42.7 million, a decrease of $3.4 million or 7% as compared to 2019. The decrease primarily reflects a decline of costs associated with the Company’s FLU-IGIV product candidate. During 2019, the Company was incurring costs associated with phase 2 clinical trials for FLU-IGIV.
For Q1 2020, net R&D expense, which reflects investments made in development programs that are not currently funded in whole or in part by third-party partners and is calculated as gross research and development expenses minus contracts and grants revenue, was 20.1 million, a decrease of $4.3 million or 18% as compared to 2019. The decrease is also attributable to a decline of costs associated with the Company’s FLU-IGIV product candidate. The Q1
2020 and Q1 2019 net R&D expense was 12% of adjusted revenue (total revenue less contracts & grants).
Selling, General and Administrative
For Q1 2020, selling, general and administrative expenses were $69.7 million, an increase of $4.3 million or 7% as compared to 2019. The increase primarily reflects additional expenses related to staffing to support the Company’s growth.
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Amortization of Intangible Assets
For Q1 2020, amortization of intangible assets was $14.8 million was consistent with amortization of intangible assets of $14.5 million in Q1 2019.
Income Taxes
For Q1 2020, the income tax benefit in the amount of $8.8 million was consistent with the benefit during the Q1 2019 as a percentage of net loss during the periods.
Net Loss & Adjusted Net Income (Loss)
For Q1 2020, the Company recorded net loss of $12.5 million, or $0.24 per diluted share, versus net loss of $26.0 million, or $0.51 per diluted share, in 2019.
For Q1 2020, the Company recorded adjusted net income of $0.3 million, or $.01 per diluted share, versus adjusted net loss of $5.2 million, or $.10 per diluted share, in 2019. (1)
Adjusted EBITDA
For Q1 2020, the Company recorded adjusted EBITDA of $15.3 million versus $8.4 million in 2019. (1)
2020 FINANCIAL FORECAST
The Company’s financial forecast for 2020 includes the anticipated impact of the following items:
A full year of product sales, including the following ranges for key components of the product portfolio:
NARCAN Nasal Spray: $285 million – $315 million;
Anthrax Vaccines: $270 million – $300 million;
ACAM2000: $180 million – $200 million;
Contract development and manufacturing revenue of $125 million – $145 million;
Deliveries of raxibacumab to the Strategic National Stockpile (SNS) under the anticipated follow-on procurement contract with HHS;
Domestic and international sales of the other medical countermeasures that comprise Other Product sales;
Continued improvement of gross margin (a combination of product sales and CDMO services) in a range of 200 – 400 basis points annually, driven by improved product mix;
Continued investment in internally funded development projects most notably the anticipated Phase 3 studies for the CHIKV VLP and FLU-IGIV product candidates as well as the Phase 1/2 study for COVID-EIG, among other R&D projects.
Emergent has assessed the risks to its business associated with the COVID-19 pandemic and has adopted measures to mitigate those risks as they are understood today, and accordingly is providing this outlook for 2020. Despite the lack of expected material disruption to the company’s business, the management team continues to assess the business and operational implications associated with the pandemic and market conditions on its employees, patients and customers.
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The outlook for 2020 does not include estimates for potential new corporate development or other M&A transactions.
Q2 2020 REVENUE FORECAST
For Q2 2020, the Company forecast for total revenues is $270 million – $300 million.
FOOTNOTES
(1) See "Reconciliation of Net Loss to Adjusted Net Loss and Adjusted EBITDA" for a definition of terms and the reconciliation tables.
CONFERENCE CALL, PRESENTATION SUPPLEMENT, AND WEBCAST INFORMATION
Company management will host a conference call at 5:00 pm (Eastern Time) today, April 30, 2020, to discuss these financial results. The conference call and presentation supplement can be accessed from the Company’s website or through the following:
Live Teleconference Information:
Dial in: [US] (855) 766-6521; [International] (262) 912-6157
Conference ID: 3784302
Live Webcast Information:
Visit View Source for the live webcast feed.
A replay of the call can be accessed at www.emergentbiosolutions.com under "Investors."