On April 29, 2021 Emergent BioSolutions Inc. (NYSE: EBS) reported financial results for the quarter ended March 31, 2021 (Press release, Emergent BioSolutions, APR 29, 2021, View Source [SID1234578760]).
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FINANCIAL HIGHLIGHTS (1) (in millions)
Q1 2021
Q1 2020
% Change
Total revenues
$343.0
$192.5
78%
Net income (loss)
$69.7
($12.5)
*
Net income (loss) per diluted share
$1.28
($0.24)
*
Adjusted net income (2)
$83.6
$0.3
*
Adjusted net income (2) per diluted share
$1.53
$0.01
*
Adjusted EBITDA (2)
$123.5
$15.3
*
* % change is greater than 100%
2021 FINANCIAL PERFORMANCE (1)
(I) Quarter Ended March 31, 2021 (Q1)
Revenues
(in millions)
Q1 2021
Q1 2020
% Change
Product sales, net (5):
• NARCAN Nasal Spray
$74.2
$72.2
3%
• Anthrax vaccines
$55.0
$51.9
6%
• Other
$8.7
$24.1
(64)%
Total product sales, net
$137.9
$148.2
(7)%
Contract development and manufacturing (CDMO) services
$183.8
$21.7
*
Contracts and grants
$21.3
$22.6
(6)%
Total revenues
$343.0
$192.5
78%
(5) Product sales, net are reported net of variable consideration including returns, rebates, wholesaler fees and prompt pay discounts.
* % change is greater than 100%
Product Sales, net
For Q1 2021, revenues from NARCAN Nasal Spray and Anthrax vaccines were consistent as compared to Q1 2020.
For Q1 2021, revenues from other product sales decreased $15.4 million as compared to Q1 2020. The decrease is primarily due to lower sales of BAT[Botulism Antitoxin Heptavalent (A, B, C, D, E, F, G) – (Equine)], due to timing of deliveries to the U.S. government (USG) and the Strategic National Stockpile, and lower sales of the Company’s travel health vaccines, largely Vivotif (Typhoid Vaccine Live Oral Ty21a), due to the currently low level of global travel.
Contract Development and Manufacturing (CDMO) Services
For Q1 2021, revenue from contract development and manufacturing services was $183.8 million, an increase of
$162.1 million, as compared to Q1 2020. The increase is largely due to the public-private partnership with the Biomedical Advanced Research and Development Authority (BARDA) to support the USG’s efforts to address the COVID-19 pandemic and CDMO services in support of commercial innovators.
Contracts and Grants
For Q1 2021, revenues from contracts and grants were consistent as compared to Q1 2020.
Operating Expenses
(in millions)
Q1 2021
Q1 2020
% Change
Cost of product sales and CDMO services
$99.3
$76.9
29%
Research and development
$52.5
$42.7
23%
Selling, general and administrative
$80.9
$69.7
16%
Amortization of intangible assets
$14.9
$14.8
1%
Cost of Product Sales and CDMO Services
For Q1 2021, cost of product sales and contract development and manufacturing services increased $22.4 million as compared to Q1 2020. The increase is primarily due to a higher volume of CDMO services, largely the Company’s arrangements to address the COVID-19 pandemic, partially offset by a decline in costs associated with product sales due to the lower total product sales, net.
Research and Development
For Q1 2021, research and development expenses increased $9.8 million as compared to Q1 2020. The increase is primarily due to higher costs associated with the development of the COVID-HIG therapeutic product candidate, offset by a decline in costs associated with the development of the AV7909 (Anthrax Vaccine Adsorbed, Adjuvanted) product candidate as this program is nearing completion. Net of contracts and grants revenue, which consists primarily of reimbursements against development investments, research and development expenses were $31.2 million for Q1 2021.
Selling, General and Administrative
For Q1 2021, selling, general and administrative expenses increased $11.2 million as compared to Q1 2020. The increase is primarily due to higher staffing and professional service costs to support the Company’s growth.
Additional Financial Information
Gross Margin (2)
(in millions)
Q1 2021
Q1 2020
% Change
Gross margin
$222.4
$93.0
139%
Gross margin % (gross margin divided by adjusted revenues (2))
69%
55%
14%
Adjusted gross margin
$223.5
$93.6
139%
Adjusted gross margin % (adjusted gross margin divided by adjusted revenues (2))
69%
55%
14%
CDMO Metrics
CDMO Backlog Rollforward
(in millions)
Beginning backlog (12/31/2020)
$1,340.0
Revenue recognized during Q1 2021
($183.8)
New business (net new contracted value included in backlog)
$186.6
Ending backlog (3/31/2021)
$1,342.8
(in millions)
March 31, 2021
December 31, 2020
% Change
CDMO services backlog (3)
$1,342.8
$1,340.0
—%
CDMO services opportunity funnel (4)
$807.1
$689.0
17%
Capital Expenditures
(in millions)
Q1 2021
Q1 2020
% Change
Gross capital expenditures
$56.1
$24.2
132%
– Capital expenditures reimbursed
($7.2)
$—
—%
Net capital expenditures
$48.9
$24.2
102%
Gross capital expenditures as a % of total revenues
16%
13%
3%
2021 FINANCIAL FORECAST
For full year 2021, the Company’s revised and previous forecast of the following financial metrics is as follows:
(in millions)
Revised 2021 Forecast
Previous 2021 Forecast
Total revenues
$1,700 – $1,900
$1,950 – $2,050
• NARCAN nasal spray
$305 – $325
$305 – $325
• Anthrax vaccines
$280 – $310
$280 – $310
• ACAM2000
$185 – $205
$185 – $205
• CDMO services
$765 – $875
$925 – $965
Adjusted EBITDA (2)
$620 – $720
$750 – $810
Adjusted net income (2)
$395 – $470
$475 – $525
Gross margin (2)
63% – 65%
65%
The Company’s revised financial forecast for 2021 includes the following additional considerations:
Revised considerations
CDMO services revenues have been reduced primarily due to the hold of certain COVID-19 vaccine bulk drug substance lots and commitment not to initiate new manufacturing at Bayview pending further review by the U.S. Food and Drug Administration (FDA). Even assuming FDA concurrence to re-initiate new manufacturing and/or release of lots, the Company expects a delay in the timing of expected revenue.
Total revenues, specifically other product sales, are expected to be impacted due to the Company’s assumption that a new raxibacumab contract will be awarded later than previously planned.
Unchanged considerations
Anthrax vaccines revenues are expected to continue to primarily reflect procurement of AV7909 under the terms of the Company’s existing contract with BARDA at a more normalized annual level.
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 2020 deliveries.
Narcan (naloxone HCl) Nasal Spray revenues assume the naloxone market remains competitive, that at least one new entrant will enter the market by year end, and that no generic entrant will enter the market prior to the anticipated appellate decision related to the pending patent litigation, which is expected in the second half of 2021.
Pipeline progress is expected across the vaccines, therapeutics, and devices portfolios, anticipating at least one Phase 3 launch and one Biologics License Application (BLA)/Emergency Use Authorization (EUA) filing.
Capital expenditures, net of reimbursement, are expected to be in a range of 8% to 9% of total revenues, reflecting ongoing investments in capacity and capability expansions in support of the Company’s CDMO services business and product portfolio.
Q2 2021 REVENUE FORECAST
For Q2 2021, the Company expects total revenues of $370 million to $430 million.
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," "Reconciliation of Gross Margin and Adjusted Gross Margin" and "Reconciliation of Net Research and Development Expenses" for a definition of terms and the reconciliation tables.
(3) CDMO backlog is defined as estimated remaining contract value as of the indicated period pursuant to signed contracts, the majority of which is expected to be recognized over the next 24 months.
(4) CDMO opportunity funnel is defined as proposal values from new work with new customers, new work with existing customers and extensions/expansions of existing contracts with existing customers, that if converted to new business the majority of which is expected to be realized over the next 24 months. This excludes any value associated with an extension of the commercial supply agreements (CSA) with Johnson & Johnson and AstraZeneca.
(5) Product sales, net are reported net of variable consideration including returns, rebates, wholesaler fees and prompt pay discounts.
CONFERENCE CALL, PRESENTATION SUPPLEMENT, AND WEBCAST INFORMATION
Company management will host a conference call at 5:00 pm (Eastern Time) today, April 29, 2021, 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: 9153099
Live Webcast Information:
Visit View Source for the webcast.
A replay of the call can be accessed from the Emergent website.