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Emergent BioSolutions Reports Financial Results For First Quarter 2023
- Reports Q1 2023 total revenues of $165M, above the prior guidance range, net loss of $183M and adjusted EBITDA of negative $101M
- Updates FY 2023 guidance and provides initial Q2 2023 guidance
GAITHERSBURG, Md., May 09, 2023 (GLOBE NEWSWIRE) -- Emergent BioSolutions Inc. (NYSE: EBS) today reported financial results for the first quarter ended March 31, 2023. Among the highlights, Emergent has received from the U.S. government Notices of Intent to Purchase medical countermeasures to combat smallpox and botulism. Further, the Company expects to reach a deal with its lenders to amend and extend the terms of its debt obligations.
"Since the beginning of the year, we have taken strategic actions to stabilize and strengthen our core businesses to create sustainable, long-term value for all our stakeholders," said Robert G. Kramer, president and CEO of Emergent BioSolutions. “The impending sale of our travel health business, notices of intent from the U.S. government to procure medical countermeasures, productive conversations with our lenders, and the anticipated launch of over-the-counter Narcan® Nasal Spray later this summer all help build momentum for the rest of 2023 and beyond.”
FINANCIAL HIGHLIGHTS (1)
Q1 2023 vs. Q1 2022
| ($ in millions, except per share amounts) | Q1 2023 | Q1 2022 | % Change |
| Total Revenues | $165.1 | $307.5 | (46)% |
| Net Loss | $(183.0) | $(3.7) | * |
| Net Loss per Diluted Share | $(3.65) | $(0.07) | * |
| Adjusted Net Income (Loss) (2) | $(158.8) | $9.1 | * |
| Adjusted Net Income (Loss) (2) per Diluted Share | $(3.17) | $0.18 | * |
| Adjusted EBITDA (2) | $(100.8) | $36.0 | * |
| Gross Margin % | 2% | 48% | NM |
| Adjusted Gross Margin % (2) | 4% | 48% | NM |
| * % change is greater than +/- 100% | |||
| NM - Not Meaningful | |||
SELECT Q1 2023 AND OTHER RECENT BUSINESS UPDATES
- Received from the U.S. government Notices of Intent to Procure ACAM2000®, (Smallpox (Vaccinia) Vaccine, Live), VIGIV [Vaccinia Immune Globulin Intravenous (Human)], and BAT® [Botulism Antitoxin Heptavalent (A, B, C, D, E, F, G) - (Equine)], medical countermeasures that help address the threat of smallpox and botulism, for inclusion in the Strategic National Stockpile
- Announced U.S. Food and Drug Administration ("FDA") approval of NARCAN® (naloxone HCl) Nasal Spray 4 mg as an over-the-counter ("OTC") emergency treatment for known or suspected opioid overdose
- Announced an agreement to sell the travel health business to Bavarian Nordic for up to $380 million, including $270 million upfront
Q1 2023 FINANCIAL PERFORMANCE (1)
Revenues
Beginning in 2023, the Company is revising the categories used in discussing product/service level revenues. The new categories are:
- Anthrax MCM — comprises potential contributions from AV7909, BioThrax, Anthrasil and raxibacumab
- NARCAN — comprises contributions from NARCAN Nasal Spray
- Smallpox MCM — comprises potential contributions from ACAM2000, VIGIV and Tembexa
- Other Products — includes potential contributions from BAT, RSDL, Trobigard, Vaxchora and Vivotif
- CDMO — comprises service and lease revenues from the contract development and manufacturing business
| ($ in millions) | Q1 2023 | Q1 2022 | % Change | ||
| Product sales, net (3): | |||||
| $21.9 | $109.4 | (80)% | ||
| $100.4 | $93.1 | 8% | ||
| $7.2 | $23.3 | (69)% | ||
| $13.9 | $11.3 | 23% | ||
| Total product sales, net | $143.4 | $237.1 | (40)% | ||
| Contract development and manufacturing ("CDMO"): | |||||
| $13.4 | $51.8 | (74)% | ||
| $1.8 | $9.0 | (80)% | ||
| Total CDMO | $15.2 | $60.8 | (75)% | ||
| Contracts and grants | $6.5 | $9.6 | (32)% | ||
| Total revenues | $165.1 | $307.5 | (46)% | ||
Product Sales, net
Anthrax MCM
For Q1 2023, revenues from Anthrax MCM decreased $87.5 million as compared with Q1 2022. The decrease was primarily due to timing of sales related to AV7909 (Anthrax Vaccine Adsorbed, Adjuvanted) and BioThrax® (Anthrax Vaccine Adsorbed) during Q1 2022, partially offset by an increase in Anthrasil® [Anthrax Immune Globulin Intravenous (human)] sales.
NARCAN
For Q1 2023, revenues from NARCAN increased $7.3 million as compared with Q1 2022. The increase was primarily driven by an increase in branded NARCAN sales as well as an increase in Canadian public sales, partially offset by a reduction in commercial retail sales in the U.S.
Smallpox MCM
For Q1 2023, revenues from Smallpox MCM decreased $16.1 million as compared with Q1 2022. The decrease was primarily due to the timing of ACAM2000 international sales during Q1 2022.
Other Products
For Q1 2023, revenues from other product sales increased $2.6 million as compared with Q1 2022. The increase was primarily due to higher Vivotif® (Typhoid Vaccine Live Oral Ty21a) and Vaxchora® (Cholera Vaccine, Live, Oral) product sales, partially offset by decreases in RSDL® (Reactive Skin Decontamination Lotion Kit) and BAT product sales.
CDMO
CDMO Services
For Q1 2023, revenues from contract development and manufacturing services decreased $38.4 million as compared with Q1 2022. The decrease was primarily due to $19.2 million less of revenue related to reduced production activities at the Company's Bayview facility as a result of a halt in manufacturing under the Janssen contract in 2022. Additionally, the decrease also reflects reduced production at the Company's Camden facility. The decreases were slightly offset by an increase in production at the Company's Canton facility.
CDMO Leases
For Q1 2023, revenues from contract development and manufacturing leases decreased $7.2 million as compared with Q1 2022. The decrease was primarily due to a reduction of lease revenues related to the Janssen contract termination.
Contracts and Grants
For Q1 2023, revenues from contracts and grants decreased $3.1 million as compared with Q1 2022. The decrease was primarily due to the conclusion of COVID-19 related studies in Q4 2022.
Operating Expenses
| ($ in millions) | Q1 2023 | Q1 2022 | % Change | ||
| Cost of product sales | $102.9 | $80.3 | 28% | ||
| Cost of CDMO | $52.2 | $75.6 | (31)% | ||
| Research and development ("R&D") | $40.6 | $46.4 | (13)% | ||
| Selling, general and administrative | $100.5 | $84.8 | 19% | ||
| Amortization of intangible assets | $17.0 | $14.0 | 21% | ||
| Total operating expenses | $313.2 | $301.1 | 4% | ||
Cost of Product Sales
For Q1 2023, cost of product sales increased $22.6 million as compared with Q1 2022. The increase was primarily due to lower overhead absorption coupled with higher allocations of product COGS at the Bayview facility, partially offset by lower period costs at our Bern facility and lower NARCAN royalty fees.
Cost of CDMO
For Q1 2023, cost of CDMO decreased $23.4 million as compared with Q1 2022. The decrease was primarily due to reduced production activities across the CDMO network of manufacturing sites in Q1 2023 compared to Q1 2022 resulting in decreased raw materials consumption, partially offset by increased costs at our Camden facility for additional investments in quality enhancement and improvement initiatives and increased costs associated with production activities at the Company's Canton Facility.
Research and Development (2)
For Q1 2023, R&D expenses decreased $5.8 million as compared with Q1 2022. The decrease was primarily due to a reduction in R&D spend related to the next phase of the development program for the chikungunya vaccine candidate CHIKV VLP; this development program will be included in the sale of the Travel Health business to Bavarian Nordic, first announced in February 2023. Net of contracts and grants revenue, which consists primarily of reimbursements against development investments, adjusted research and development expenses were $34.1 million for Q1 2023.
Selling, General and Administrative
For Q1 2023, selling, general and administrative expenses increased $15.7 million as compared with Q1 2022. The increase was primarily due to higher professional services fees and severance costs related to our 2023 Restructuring Plan discussed further below.
Restructuring Expense
During Q1 2023, the Company incurred restructuring expense in connection with an organizational restructuring plan (the “2023 Plan”) announced on January 9, 2023. The Company incurred approximately $9.7 million in charges in connection with the 2023 Plan during Q1 2023. These charges consist primarily of charges related to employee transition, severance payments and employee benefits. All activities related to the 2023 Plan were substantially completed during the first quarter of 2023.
Capital Expenditures
| ($ in millions) | Q1 2023 | Q1 2022 | % Change |
| Capital expenditures | $15.1 | $32.2 | (53)% |
| Capital expenditures as a % of total revenues | 9% | 10% | (100) bps |
For Q1 2023, gross capital expenditures decreased largely due to lower product development activities, including our chikungunya facility redesign project.
Segment Information
The Company manages the business with a focus on two reportable segments. Our Products segment, which includes the Anthrax MCM products, NARCAN products, Smallpox MCM products and Other products, and our Services segment consisting of our CDMO services. The Company evaluates the performance of these reportable segments based on revenue and Adjusted Gross Margin, which is a non-GAAP financial measure. Segment revenue includes external customer sales, but does not include inter-segment services. The Company does not allocate contracts and grants, R&D, SG&A, amortization of intangible assets, interest and other income (expense) or taxes to its evaluation of the performance of these segments.
| ($ in millions) | Products | Services | ||||
| Three Months Ended March 31, | Three Months Ended March 31, | |||||
| 2023 | 2022 | % Change | 2023 | 2022 | % Change | |
| Revenues | $143.4 | $237.1 | (40)% | $15.2 | $60.8 | (75)% |
| Cost of sales | $102.9 | $80.3 | 28% | $52.2 | $75.6 | (31)% |
| Less: Changes in fair value of contingent consideration | $1.5 | $0.5 | * | $— | $— | NM |
| Less: Restructuring costs | $2.0 | $— | NM | $— | $— | NM |
| Adjusted cost of sales ** | $99.4 | $79.8 | 25% | $52.2 | $75.6 | (31)% |
| Gross margin *** | $40.5 | $156.8 | (74)% | $(37.0) | $(14.8) | * |
| Gross margin % *** | 28% | 66% | NM | (243)% | (24)% | NM |
| Adjusted gross margin **** | $44.0 | $157.3 | (72)% | $(37.0) | $(14.8) | * |
| Adjusted gross margin % **** | 31% | 66% | NM | (243)% | (24)% | NM |
| * % change is greater than +/- 100% | ||||||
| ** Adjusted cost of sales, which is a non-GAAP financial measure, is calculated as cost of sales less restructuring costs, and other special items and non-cash items related to changes in fair value of contingent consideration. See “Reconciliation of Non-GAAP Measures” for the reconciliation of this non-GAAP measure to the most closely related GAAP financial measure. | ||||||
| *** Gross margin is calculated as revenues less cost of sales. Gross margin % is calculated as gross margin divided by revenues. | ||||||
| **** Adjusted gross margin, which is a non-GAAP financial measure, is calculated as revenues less Adjusted cost of sales. Adjusted gross margin %, which is a non-GAAP financial measure, is calculated as Adjusted gross margin divided by revenues. See “Reconciliation of Non-GAAP Measures” for the reconciliation of this non-GAAP measure to the most closely related GAAP financial measure. | ||||||
| NM - Not Meaningful | ||||||
For Q1 2023, Product gross margin and Product adjusted gross margin decreased $116.3 million and $113.3 million, respectively, as compared with Q1 2022. The decrease in Product gross margin and Product adjusted gross margin was primarily due to decreased sales volumes and increases in costs related to lower overhead absorption combined with a less favorable sales mix weighted more heavily towards lower margin products.
For Q1 2023, Services gross margin and Services adjusted gross margin decreased $22.2 million and $22.2 million, respectively, as compared with Q1 2022. The decreases are primarily due to reduced production activities across our CDMO network including the halt in manufacturing under the Janssen contract and the decrease in margins at the Company's Camden facility due to additional investments in quality enhancement and improvement initiatives.
2023 FINANCIAL FORECAST
The Company provides the following updated financial forecast for the full year 2023 and Q2 2023, in both instances reflecting management's expectations based on the most current information available, and taking into account the actual performance in Q1 2023.
Full Year 2023
| METRIC ($ in millions) | Updated Range (as of 05/09/23) | Action | Previous Range (as of 02/27/23) |
| Total Revenues | $1,100 - $1,200 | UNCHANGED | $1,100 - $1,200 |
| Net Loss | $(185) - $(135) | REVISED | $(180) - $(130) |
| Adjusted Net Loss (2) | $(85) - $(35) | REVISED | $(80) - $(30) |
| Adjusted EBITDA (2) | $100 - $150 | REVISED | $75 - $125 |
| Adjusted Gross Margin % (2) | 39% - 42% | REVISED | 41% - 44% |
By: GlobeNewswire
- 09 May 2023
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