On May 2, 2019 Emergent BioSolutions Inc. (NYSE: EBS) reported financial results for the three months ended March 31, 2019 (Press release, Emergent BioSolutions, MAY 2, 2019, View Source [SID1234535550]).

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!

Q1 2019 AND RECENT BUSINESS ACCOMPLISHMENTS

Procurement Contract

Signed a contract with the U.S. Department of State valued at up to $100 million over 10 years to establish a long-term, reliable supply chain of medical countermeasures for chemical threats, including the supply of RSDL (Reactive Skin Decontamination Lotion Kit) and Trobigard atropine sulfate/obidoxime chloride auto-injector.

Product Development

Initiated a Phase III trial to evaluate the lot consistency, immunogenicity and safety of AV7909 (anthrax vaccine adsorbed with CPG 7909 adjuvant), with funding from the U.S. Biomedical Advanced Research and Development Authority (BARDA) pursuant to a development and procurement contract signed in September 2016; the Company also initiated manufacturing of AV7909 in Q1 2019.

Provided interim analysis of the Phase II clinical study evaluating the safety and immunogenicity of the Company’s chikungunya virus virus-like-particle vaccine candidate, CHIKV-VLP, showing with a single dose administered up to 98% of study participants produced neutralizing antibodies against the chikungunya virus by day 7, with persistent effect out to the six-month visit, including in the single-dose regimen.

2019 FINANCIAL PERFORMANCE

Revenues

Total Revenues
For Q1 2019, total revenues were $190.6 million, an increase of 62% over 2018. Total revenues reflect a significant increase in product sales due to the contribution of recently acquired products.

Product Sales
For Q1 2019, product sales were $153.0 million, an increase of $77.2 million or 102% as compared to 2018. The increase primarily reflects sales of NARCAN (naloxone HCl) Nasal Spray, which was acquired in October 2018, and ACAM2000 (Smallpox (Vaccinia) Vaccine, Live).

Contract Manufacturing
For Q1 2019, revenue from the Company’s contract manufacturing operations was $15.9 million, a decrease of $10.2 million or 39% as compared to 2018. The decrease primarily reflects contracted service work in Q1 2018 that did not recur in Q1 2019.

Contracts and Grants
For Q1 2019, revenue from the Company’s development-based contracts and grants was $21.7 million, an increase of $5.8 million or 36% as compared to 2018. The increase primarily reflects increased R&D activities related to certain ongoing funded development programs, most notably AV7909.

Operating Expenses

Cost of Product Sales and Contract Manufacturing
For Q1 2019, cost of product sales and contract manufacturing was $91.8 million, an increase of $37.5 million or 69% as compared to 2018. The increase primarily reflects the impact of an increase in product sales due to the contribution of recently acquired products NARCAN Nasal Spray, Vivotif(Typhoid Vaccine Live Oral Ty21a), and Vaxchora (Cholera Vaccine, Live, Oral), which were all acquired in October 2018, as well as the contribution of increased ACAM2000 sales.

Research and Development (Gross and Net)
For Q1 2019, gross R&D expenses were $46.1 million, an increase of $17.0 million or 58% as compared to 2018. The increase primarily reflects costs associated with incremental development programs from the recent acquisitions of PaxVax and Adapt Pharma in October 2018, as well as timing of manufacturing development activities related to the AV7909 program.

For Q1 2019, 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 $24.4 million, an increase of $11.2 million or 85% as compared to 2018. The increase primarily reflects investments in the development of the CHIKV-VLP vaccine, FLU-IGIV hyperimmune and various programs related to opioid overdose response, which are part of the development portfolio resulting from the Adapt Pharma acquisition in October 2018. The Q1 2019 net R&D expense was 14% of net revenue (total revenue less contracts & grants) compared to 13% of net revenue in Q1 2018.

Selling, General and Administrative
For Q1 2019, selling, general and administrative expenses were $65.4 million, an increase of $25.4 million or 64% as compared to 2018. The increase primarily reflects the addition of the operations associated with the October 2018 acquisitions of both PaxVax and Adapt Pharma.

Amortization of Intangible Assets
For Q1 2019, amortization of intangible assets was $14.5 million versus $3.9 million as compared to 2018. The increase entirely reflects higher non-cash intangible asset amortization costs associated with the PaxVax and Adapt Pharma acquisitions, which both closed in October 2018.

Income Taxes
For Q1 2019, the benefit from income taxes in the amount of $11.8 million includes the impact of non-deductible acquisition transaction costs and other permanent items. The effective tax rate for Q1 2019 is not meaningful given the lack of any pre-tax income for the quarter.

Net Income (Loss) & Adjusted Net Income (Loss)
For Q1 2019, the Company recorded a net loss of $26.0 million, or $0.51 per diluted share, versus a net loss of $4.9 million, or $0.10 per diluted share, in 2018.

For Q1 2019, the Company recorded an adjusted net loss of $6.8 million, or $0.13 per diluted share, versus an adjusted net loss of $1.6 million, or $0.03 per diluted share, in 2018.

EBITDA & Adjusted EBITDA
For Q1 2019, the Company recorded EBITDA of $(1.6) million versus $3.1 million in 2018.

For Q1 2019, the Company recorded adjusted EBITDA of $7.4 million versus $3.3 million in 2018. (1)

2019 FINANCIAL FORECAST (Reaffirmed)

For full year 2019, the company reaffirms its expectation of the following forecasted financial metrics:

The Company’s financial forecast for 2019 includes the anticipated impact of full year product sales, continued contract manufacturing and contracts & grants revenue as well as continued investment in discretionary funding development projects. The outlook for 2019 does not include estimates for potential new corporate development or other M&A transactions.

Q2 2019 REVENUE FORECAST

For Q2 2019, the Company forecast for total revenues is $200 million to $220 million.

FOOTNOTES

(1) See "Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss), EBITDA and Adjusted EBITDA" for a definition of terms and a reconciliation table.

CONFERENCE CALL AND WEBCAST INFORMATION
Company management will host a conference call at 5:00 pm (Eastern Time) today, May 2, 2019, to discuss these financial results. This conference call can be accessed live by telephone or through Emergent’s website:

Live Teleconference Information:
Dial in: [US] (855) 766-6521; [International] (262) 912-6157
Conference ID: 8099738

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."