Emergent BioSolutions Inc. (NYSE: EBS) today reported financial
results for the fourth quarter and year ended December 31,
2021.
"Emergent’s performance in 2021 is a testament to
our strategic focus and highly capable team," said Robert G.
Kramer, president and CEO of Emergent BioSolutions. "Looking
forward, I am encouraged by the stability and durability of our
diversified business lines and exciting R&D portfolio,
supported by our improved operational structure that better aligns
us with patients and customers, and more effectively positions us
for success."
FINANCIAL HIGHLIGHTS (1)
Q4 2021 vs. Q4 2020
($ in millions, except per share amounts) |
Q4 2021 |
Q4 2020 |
% Change |
Total Revenues |
$723.2 |
$583.0 |
24% |
Net Income |
$189.3 |
$185.4 |
2% |
Net Income per Diluted Share |
$3.50 |
$3.44 |
2% |
Adjusted Net Income (2) |
$243.4 |
$198.8 |
22% |
Adjusted Net Income (2) per Diluted Share |
$4.50 |
$3.67 |
23% |
Adjusted EBITDA (2) |
$347.9 |
$290.9 |
20% |
Gross Margin % (2) |
67% |
69% |
|
Adjusted Gross Margin % (2) |
67% |
69% |
|
Full Year 2021 vs. Full Year
2020
($ in millions, except per share amounts) |
Full Year 2021 |
Full Year 2020 |
% Change |
Total Revenues |
$1,792.7 |
$1,555.4 |
15% |
Net Income |
$230.9 |
$305.1 |
(24)% |
Net Income per Diluted Share |
$4.27 |
$5.67 |
(25)% |
Adjusted Net Income (2) |
$325.7 |
$423.9 |
(23)% |
Adjusted Net Income (2) per Diluted Share |
$6.02 |
$7.88 |
(24)% |
Adjusted EBITDA (2) |
$517.6 |
$630.4 |
(18)% |
Gross Margin % (2) |
54% |
64% |
|
Adjusted Gross Margin % (2) |
55% |
67% |
|
SELECT Q4 2021 AND OTHER RECENT BUSINESS
UPDATES
- Announced a supply agreement with
Sandoz for them to distribute an authorized generic of NARCAN®
(naloxone HCl) Nasal Spray 4 mg, which is available in the U.S. via
retail pharmacies and institutions, including hospitals
- Initiated 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 investigational anthrax vaccine
candidate
- Initiated a pivotal Phase 3 safety and
immunogenicity study to evaluate CHIKV VLP, the Company's
single-dose chikungunya virus virus-like particle (VLP) vaccine
candidate
- Initiated a Phase 1 safety,
tolerability, and immunogenicity study to evaluate UniFlu, the
Company’s universal influenza vaccine candidate comprised of
multiple components intended to induce broad and supra-seasonal
immunity against influenza A viruses
- Announced the Company’s Board of
Directors authorization to management to repurchase up to $250
million of the Company’s common stock through November 11, 2022; as
of December 31, 2021, the Company repurchased approximately 2.6
million shares for $112.6 million, an average price per share of
$42.67
- Announced the retirement of the
Company's founder and executive chairman, Fuad El-Hibri, effective
April 1, 2022
Q4 2021 FINANCIAL PERFORMANCE
(1)
($ in millions) |
Q4 2021 |
Q4 2020 |
% Change |
Product sales, net (3): |
• Anthrax vaccines |
$137.7 |
$115.7 |
19% |
• ACAM2000® |
$125.8 |
$129.3 |
(3)% |
• Nasal naloxone products |
$120.6 |
$77.4 |
56% |
• Other (4) |
$50.2 |
$18.5 |
* |
Total product sales, net |
$434.3 |
$340.9 |
27% |
Contract development and manufacturing (CDMO): |
• Services |
$51.2 |
$64.0 |
(20)% |
• Leases |
$167.1 |
$135.1 |
24% |
Total CDMO |
$218.3 |
$199.1 |
10% |
Contracts and grants |
$70.6 |
$43.0 |
64% |
Total revenues |
$723.2 |
$583.0 |
24% |
* % change is greater than 100% |
Product Sales, net Anthrax
vaccinesFor Q4 2021, revenues from anthrax vaccines increased $22.0
million as compared to Q4 2020. The increase is largely driven by
an increase in deliveries of AV7909 to the U.S. government (USG),
specifically the Strategic National Stockpile (SNS). The Company
received an AV7909 contract modification in September 2021 and
began delivering additional doses of AV7909 under that
modification, which covers a period of 18 months and is valued at
approximately $399 million.
ACAM2000For Q4 2021, revenues from ACAM2000®
(Smallpox (Vaccinia) Vaccine, Live) decreased $3.5 million as
compared to Q4 2020. The decrease is largely driven by the timing
of deliveries to the USG. The revenues recognized in Q4 2021
reflect delivery of doses into the SNS resulting from the July 2021
exercise by the USG of the second of nine annual contract term
extension options pursuant to the Company's 10-year supply
agreement with the USG. This latest option is valued at
approximately $182 million.
Nasal naloxone productsFor Q4 2021, revenues from
nasal naloxone products increased $43.2 million as compared to Q4
2020. The increase is driven by continued demand for NARCAN®
(naloxone HCI) Nasal Spray across customer channels in the U.S. and
Canada. The increase also reflects the impact of revenues related
to the authorized generic of NARCAN® (naloxone HCI) Nasal Spray
4mg, a product licensed to Sandoz and launched in late 2021 and one
in which the Company retains a financial interest.
Other (4)For Q4 2021, revenues from other product
sales increased $31.7 million as compared to Q4 2020. The increase
is largely due to sales of VIGIV [Vaccinia Immune Globulin
Intravenous (Human)], driven by timing of deliveries to the USG and
based on the June 2021 exercise by the USG of the second of nine
annual contract term extension options pursuant to the Company's
10-year supply agreement with the USG. This latest option is valued
at approximately $56 million.
Contract Development and Manufacturing
(CDMO)CDMO Services For Q4 2021, revenue from contract
development and manufacturing services decreased $12.8 million as
compared to Q4 2020. This decrease is largely due to the
discontinuation of manufacturing activities related to the
Company's arrangement with AstraZeneca as was previously announced
in the second quarter of 2021. Additionally, there was less
activity as compared to Q4 2020 due to routine maintenance in the
Company's manufacturing network.
CDMO LeasesFor Q4 2021, revenue from contract
development and manufacturing leases increased $32.0 million as
compared to Q4 2020. This increase is largely due to the timing of
$155.7 million in final cash collections associated with the Center
for Innovation in Advanced Development and Manufacturing (CIADM)
public-private partnership with the Biomedical Advanced Research
and Development Authority (BARDA), an arrangement that was mutually
terminated by both parties in the fourth quarter. The Company
anticipates ongoing CDMO lease revenues in subsequent periods
related primarily to its existing CDMO manufacturing agreement with
Johnson & Johnson, a portion of which is considered a
lease.
Contracts and GrantsFor Q4 2021,
revenues from contracts and grants increased $27.6 million as
compared to Q4 2020. The increase is a result of $59.7 million
being recognized in Q4 2021, primarily deferred revenue, as a
result of the CIADM base contract termination offset by a decrease
in third party development activities.
Operating Expenses
($ in millions) |
Q4 2021 |
Q4 2020 |
% Change |
Cost of product sales |
$145.0 |
$104.4 |
39% |
Cost of CDMO |
$67.9 |
$63.9 |
6% |
Research and development |
$83.0 |
$59.5 |
39% |
Selling, general and administrative |
$94.2 |
$82.1 |
15% |
Goodwill impairment |
$41.7 |
$— |
* |
Amortization of intangible assets |
$14.0 |
$15.0 |
(7)% |
Total operating expenses |
$445.8 |
$324.9 |
37% |
* % change is greater than 100% |
|
|
|
Cost of Product SalesFor Q4 2021,
cost of product sales increased $40.6 million as compared to Q4
2020. The increase is primarily due to a higher volume of product
sales, specifically nasal naloxone products, AV7909 and VIGIV.
Cost of CDMOFor Q4 2021, cost of
CDMO increased $4.0 million as compared to Q4 2020. The increase is
primarily due to additional costs at the Company's Bayview facility
to further support enhancements to quality systems and capabilities
at the site.
Research and Development For Q4
2021, research and development expenses increased $23.5 million as
compared to Q4 2020. The increase is primarily due to the non-cash
write-off of $38.0 million associated with a contract asset balance
resulting from the CIADM contract termination.
Selling, General and
AdministrativeFor Q4 2021, selling, general and
administrative expenses increased $12.1 million as compared to Q4
2020. The increase is primarily due to professional services
costs.
Goodwill ImpairmentDuring Q4 2021,
the Company performed its annual impairment testing reflecting its
revised reporting unit structure. Pursuant to this analysis, the
Company recognized a $41.7 million non-cash impairment of goodwill
in the Commercial reporting unit.
ADDITIONAL FINANCIAL
INFORMATION
Product Gross Margin (2)
($ in millions) |
Q4 2021 |
Q4 2020 |
% Change |
Product gross margin |
$289.3 |
$236.5 |
22% |
Product gross margin % (product gross margin divided by product
revenues) (2) |
67% |
69% |
(2)% |
For Q4 2021, product gross margin increased
$52.8 million as compared to Q4 2020. The increase is
primarily due to the increase in product sales. Product gross
margin percent decreased primarily due to changes in product
mix.
CDMO Gross Margin and Adjusted CDMO
Gross Margin (2)
($ in millions) |
Q4 2021 |
Q4 2020 |
% Change |
CDMO gross margin |
($16.7) |
$0.1 |
* |
CDMO gross margin % (CDMO gross margin divided by CDMO revenues)
(2) |
(33)% |
—% |
* |
Adjusted CDMO gross margin |
($5.3) |
$12.4 |
* |
Adjusted CDMO gross margin % (adjusted CDMO gross margin divided by
adjusted CDMO revenues) (2) |
(8)% |
16% |
* |
* % change is greater than 100% |
For Q4 2021, CDMO gross margin decreased $16.8
million as compared to Q4 2020. Adjusted CDMO gross margin
decreased $17.7 million as compared to Q4 2020. The decline in CDMO
gross margin and adjusted CDMO gross margin is primarily due to
routine maintenance activity that occurred in the Company's
manufacturing network in Q4 2021 that did not occur in Q4 2020 as
well as increased costs to support remediation efforts for the
Company's manufacturing activities at its Bayview facility.
CDMO Metrics (presentation on a sequential
basis)
($ in millions) |
In 4Q21 |
In 3Q21 |
% Change |
CDMO New Business Secured (5) |
$53.5 |
$117.7 |
(55)% |
($ in millions) |
As of 12/31/2021 |
As of 09/30/2021 |
% Change |
CDMO Backlog (6) |
$837.2 |
$1,002.0 |
(16)% |
CDMO Customers (7) |
70 |
71 |
(1)% |
CDMO Backlog Rollforward (6) |
($ in millions) |
Beginning Backlog (As of 9/30/2021) |
$1,002.0 |
Less: CDMO revenue recognized in Q4 2021 |
($218.3) |
Plus: New Business Secured in Q4 2021 (5) |
$53.5 |
Ending Backlog (As of 12/31/2021) |
$837.2 |
For Q4 2021, the Company has revised the metrics it
provides related to specific aspects of the CDMO business. The
Company will continue to provide the CDMO New Business Secured and
Backlog metrics. The Company is introducing CDMO Customers as a new
metric, and is discontinuing reporting of the CDMO Opportunity
Funnel. The Company believes this set of supplemental information
provides more valuable and relevant context on the performance and
stability of the CDMO business.
Capital Expenditures
($ in millions) |
Q4 2021 |
Q4 2020 |
% Change |
Gross capital expenditures |
$46.7 |
$36.0 |
30% |
- Capital expenditures reimbursed |
60.5 |
16.7 |
* |
Net capital expenditures |
($13.8) |
$19.3 |
* |
Gross capital expenditures as a % of total revenues |
6% |
6% |
—% |
Net capital expenditures as a % of total revenues |
(2)% |
3% |
(5)% |
* % change is greater than 100% |
For Q4 2021, capital expenditures increased largely
due to the Company's continued investments in expanded capacity and
capabilities at the Company's Rockville manufacturing facility. The
increase in gross capital expenditures was offset by the timing of
reimbursements of $60.5 million related to arrangements funded by
the USG. The capital expenditures related to this reimbursement
were incurred in a prior period.
SELECT FULL YEAR 2021 FINANCIAL
INFORMATION
Revenues
($ in millions) |
Full Year 2021 |
Full Year 2020 |
% Change |
Product sales, net (3): |
• Nasal naloxone products |
$434.3 |
$311.2 |
40% |
• ACAM2000® |
$206.5 |
$200.3 |
3% |
• Anthrax vaccines** |
$259.8 |
$373.8 |
(30)% |
• Other (4) |
$123.3 |
$104.5 |
18% |
Total product sales, net |
$1,023.9 |
$989.8 |
3% |
Contract development and manufacturing (CDMO): |
• Services |
$334.9 |
$166.7 |
* |
• Leases |
$299.7 |
$283.8 |
6% |
Total CDMO |
$634.6 |
$450.5 |
41% |
Contracts and grants |
$134.2 |
$115.1 |
17% |
Total revenues |
$1,792.7 |
$1,555.4 |
15% |
* % change is greater than 100% |
** Full year 2020 anthrax vaccine sales were larger than average
due to strong sales volumes associated with the transition from
BioThrax alone to a combination of BioThrax and AV7909 in the SNS
which had resulted in delayed deliveries in 2019. |
Operating Expenses
($ in millions) |
Full Year 2021 |
Full Year 2020 |
% Change |
Cost of product sales |
$382.0 |
$392.0 |
(3)% |
Cost of CDMO |
$375.5 |
$132.0 |
* |
Research and development |
$234.0 |
$234.5 |
—% |
Selling, general and administrative |
$348.4 |
$303.3 |
15% |
Goodwill impairment |
$41.7 |
$— |
* |
Amortization of intangible assets |
$58.5 |
$59.8 |
(2)% |
Total operating expenses |
$1,440.1 |
$1,121.6 |
28% |
* % change is greater than 100% |
|
|
|
Other Financial Information
($ in millions) |
Full Year 2021 |
Full Year 2020 |
% Change |
Gross capital expenditures |
$225.0 |
$141.0 |
60% |
Net capital expenditures** |
$140.2 |
$99.2 |
41% |
** Reflects reimbursements of $84.8 and $41.8 in 2021 and 2020,
respectively |
2022 FINANCIAL FORECAST
Full Year 2022
For full year 2022, the Company provides the
following update to its forecast of key financial metrics, which
were originally announced on January 9, 2022.
(in millions) |
Updated 2022 Forecast |
Total Revenues |
$1,300 - $1,400 |
Revised(previous: $1,400 - $1,500) |
Adjusted EBITDA (1) |
$240- $300 |
Revised(previous: $280 - $340) |
Adjusted Net Income (1) |
$95 - $140 |
Revised(previous: $135 - $180) |
Gross Margin % |
47% - 51% |
Reaffirmed |
|
|
|
Product/Service Level Revenue |
|
|
• Anthrax Vaccines |
$280 - $300 |
Reaffirmed |
• ACAM2000® |
$190 - $210 |
Reaffirmed |
• Nasal Naloxone Products |
$240 - $310 |
Reaffirmed |
• CDMO Services |
$330 - $380 |
Revised(previous: $430 - $480) |
• Other Products + Contracts and Grants |
$200 - $260 |
Reaffirmed |
The Company's 2022 financial forecast includes the
following considerations:
Revised Considerations
The revision to total revenues, CDMO services
revenue, Adjusted EBITDA and adjusted net income reflect the impact
of the Company's decision to take the opportunity to initiate a
maintenance period that it would normally plan for the Bayview
facility earlier than anticipated and also extend it in order to
make additional improvements and modifications that will better
position Bayview for future non-pandemic work.
Unchanged Considerations
2022 Product/Service Level Revenues –
Select Assumptions
- Anthrax vaccines revenues are expected
to continue at similar levels to 2021 under the terms of the
Company's existing contract with BARDA.
- 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 2021 deliveries.
- Nasal naloxone products revenues
reflect the formation of a generic market and comprise revenues
from a combination of NARCAN®(naloxone HCl) 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 2022 Assumptions
- Gross margin primarily reflects the
influence of the mix of product and services revenues.
- 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.
Q1 2022
For Q1 2022, the Company expects total revenues of
$280 million to $310 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 Product Gross Margin and Adjusted
Product Gross Margin," "Reconciliation of CDMO Gross Margin and
Adjusted CDMO Gross Margin" 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. (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 New Business Secured is defined as
initial value of contracts secured as well as incremental value of
existing contracts modified within the indicated period and is
incorporated into Backlog.(6) 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. This excludes any value
associated with an extension of the commercial supply agreement
(CSA) with Johnson & Johnson.(7) CDMO Customers 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 invoiceable 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.
CONFERENCE CALL, PRESENTATION SUPPLEMENT
AND WEBCAST INFORMATION
Company management will host a conference call at
5:00 pm (Eastern Time) today, February 24, 2022, 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) 912-6157Conference ID: 7619558 |
|
Live Webcast Information:Visit
https://edge.media-server.com/mmc/p/tfd93ojy for the webcast. |
|
A replay of the call can be accessed from the
Emergent website.
ABOUT EMERGENT BIOSOLUTIONS
INC.
At Emergent, our mission is to protect and enhance
life. We develop, manufacture, and deliver protections against
public health threats through a pipeline of innovative vaccines and
therapeutics. For over 20 years, we’ve been at work defending
people from things we hope will never happen—so that we’re prepared
just in case they ever do. We do what we do because we see the
opportunity to create a better, more secure world. One where
preparedness empowers protection from the threats we face. And
peace of mind prevails. In working together, we envision protecting
or enhancing 1 billion lives by 2030. For more information, visit
our website and follow us on LinkedIn, Twitter, and Instagram.
RECONCILIATION OF NON-GAAP
MEASURES
This press release contains financial measures
(Adjusted Net Income, Adjusted EBITDA (Earnings Before
Interest, Taxes, Depreciation and Amortization), Adjusted Revenues,
Adjusted COGS, Adjusted Gross Margin, Adjusted Cost of Product
Sales, Adjusted Product Margin, Adjusted CDMO Service Revenues and
Adjusted CDMO Service Margin) that are
considered “non-GAAP” financial measures under applicable
Securities and Exchange Commission rules and regulations. These
non-GAAP financial measures should be considered supplemental to
and not a substitute for financial information prepared in
accordance with generally accepted accounting principles. The
Company’s definition of these non-GAAP measures may differ from
similarly titled measures used by others. For its non-GAAP
measures, the Company adjusts for specified items that can be
highly variable or difficult to predict, or reflect the non-cash
impact of charges or accounting changes. As needed, such
adjustments are tax effected utilizing the federal statutory tax
rate for the U.S., except for both changes in the fair value of
contingent consideration, the vast majority of which is
non-deductible for tax purposes, and goodwill impairment, all of
which is non-deductible for tax purposes. The Company views these
non-GAAP financial measures as a means to facilitate management’s
financial and operational decision-making, including evaluation of
the Company’s historical operating results and comparison to
competitors’ operating results. These non-GAAP financial measures
reflect an additional way of viewing aspects of the Company’s
operations that, when viewed with GAAP results and the
reconciliations to the corresponding GAAP financial measure, may
provide a more complete understanding of factors and trends
affecting the Company’s business. For more information on these
non-GAAP financial measures, please see the tables captioned
"Reconciliation of Net Income to Adjusted Net Income,"
"Reconciliation of Net Income to Adjusted EBITDA," "Reconciliation
of Gross Margin and Adjusted Gross Margin," "Reconciliation of
Product Margin and Adjusted Product Margin," and "Reconciliation of
CDMO Services Margin and Adjusted CDMO Services Margin" and
included at the end of this release.
The determination of the amounts that are excluded
from these non-GAAP financial measures are a matter of management
judgment and depend upon, among other factors, the nature of the
underlying expense or income amounts. Because non-GAAP financial
measures exclude the effect of items that will increase or decrease
the Company’s reported results of operations, management strongly
encourages investors to review the Company’s consolidated financial
statements and publicly filed reports in their entirety.
SAFE HARBOR STATEMENT
This press release includes forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Any statements, other than statements of
historical fact, including, without limitation, our financial
guidance and related projections and statements regarding our
ability to meet such projections in the anticipated timeframe, if
at all, statements regarding our future performance and future
revenue levels and the sources of such revenues, capital
expenditures, gross margin, ACAM2000 vaccine deliveries, the impact
of a generic market on NARCAN Nasal Spray, the timing of
advancement of early-stage programs and completion of a Biologics
License Application filing for AV7909, progress of the CHIKV VLP
Phase 3 clinical trial, and any other statements containing the
words “will,” “believes,” “expects,” “anticipates,” “intends,”
“plans,” “targets,” “forecasts,” “estimates” and similar
expressions in conjunction with, among other things, discussions of
the Company’s outlook, financial performance or financial
condition, financial and operation goals, strategic goals, growth
strategy, product sales, government development or procurement
contracts or awards, government appropriations, manufacturing
capabilities, and the timing of certain regulatory approvals or
expenditures are forward-looking statements. These forward-looking
statements are based on our current intentions, beliefs and
expectations regarding future events. We cannot guarantee that any
forward-looking statement will be accurate.
The reader should realize that if underlying
assumptions prove inaccurate or unknown risks or
uncertaintiesmaterialize, actual results could differ materially
from our expectations. Readers are, therefore, cautioned not to
place undue reliance on any forward-looking statement. Any
forward-looking statements speak only as of the date of this press
release, and, except as required by law, we do not undertake to
update any forward-looking statement to reflect new information,
events or circumstances. There are a number of important factors
that could cause our actual results to differ materially from those
indicated by such forward-looking statements, including the
availability of U.S. government funding for procurement of AV7909
and/or BioThrax or ACAM2000 and our other U.S. government
procurement and development contracts, the timing of completion of
our submission of the application for and our ability to secure
licensure of AV7909 from the FDA within the anticipated timeframe,
if at all, our ability to perform under our contracts with the U.S.
government, including the timing of and specifications relating to
deliveries, whether we will realize the full benefit of our
investments in additional manufacturing and quality control
systems, our ability to meet our commitments to continued quality
and manufacturing compliance at our manufacturing facilities and
the potential impact on our ability to continue production of bulk
drug substance for Johnson & Johnson’s COVID-19 vaccine, our
ability to provide CDMO services for the development and/or
manufacture of product candidates of our customers at required
levels and on required timelines, our ability and the ability of
our contractors and suppliers to maintain compliance with Current
Good Manufacturing Practices and other regulatory obligations, our
ability to obtain and maintain regulatory approvals for our product
candidates and the timing of any such approvals, changes to U.S.
government priorities for the strategic national stockpile, our
ability to negotiate additional U.S. government procurement or
follow-on contracts for our public health threat products that have
expired or will be expiring, the negotiation of further commitments
or contracts related to the collaboration and deployment of
capacity toward future commercial manufacturing under our CDMO
contracts, our ability to comply with the operating and financial
covenants required by our senior secured credit facilities and our
3.875% Senior Unsecured Notes due 2028, procurement by U.S.
government entities under regulatory exemptions prior to approval
by the FDA and corresponding procurement by government entities
outside of the United States under regulatory exemptions prior to
approval by the corresponding regulatory authorities in the
applicable country, the full impact of COVID-19 disease on our
markets, operations and employees as well as those of our customers
and suppliers, the impact on our revenues from and duration of
declines in sales of our vaccine products that target travelers due
to the reduction of international travel caused by the COVID-19
pandemic, our ability to identify and acquire companies,
businesses, products or product candidates that satisfy our
selection criteria, the success of our commercialization, marketing
and manufacturing capabilities and strategy, and the accuracy of
our estimates regarding future revenues, expenses and capital
requirements and needs for additional financing. The foregoing sets
forth many, but not all, of the factors that could cause actual
results to differ from our expectations in any forward-looking
statement. The reader should consider this cautionary statement as
well as the risk factors identified in our periodic reports filed
with the Securities and Exchange Commission when evaluating our
forward-looking statements.
|
|
Investor ContactRobert BurrowsVice President,
Investor Relationsburrowsr@ebsi.com(240) 413-1917 |
Media ContactMatt HartwigSenior Director, Media
Relationsmediarelations@ebsi.com |
|
|
|
|
Emergent BioSolutions
Inc. Consolidated Balance
Sheets(unaudited in millions, except per share
data)
|
December 31, |
|
2021 |
|
|
|
2020 |
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
576.1 |
|
|
$ |
621.3 |
|
Restricted cash |
|
0.2 |
|
|
|
0.2 |
|
Accounts receivable, net |
|
274.7 |
|
|
|
230.9 |
|
Inventories, net |
|
350.8 |
|
|
|
307.0 |
|
Prepaid expenses and other current assets |
|
70.3 |
|
|
|
36.5 |
|
Total current assets |
|
1,272.1 |
|
|
|
1,195.9 |
|
|
|
|
|
Property, plant and equipment, net |
|
800.1 |
|
|
|
644.1 |
|
Intangible assets, net |
|
604.6 |
|
|
|
663.1 |
|
Goodwill |
|
224.9 |
|
|
|
266.7 |
|
Other assets |
|
57.3 |
|
|
|
113.4 |
|
Total assets |
$ |
2,959.0 |
|
|
$ |
2,883.2 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
128.9 |
|
|
$ |
136.1 |
|
Accrued expenses |
|
51.7 |
|
|
|
46.9 |
|
Accrued compensation |
|
88.7 |
|
|
|
84.6 |
|
Debt, current portion |
|
31.6 |
|
|
|
33.8 |
|
Other current liabilities |
|
72.9 |
|
|
|
83.1 |
|
Total current liabilities |
|
373.8 |
|
|
|
384.5 |
|
|
|
|
|
Contingent consideration, net of current portion |
|
4.5 |
|
|
|
34.2 |
|
Debt, net of current portion |
|
809.4 |
|
|
|
841.0 |
|
Deferred tax liability |
|
94.9 |
|
|
|
53.2 |
|
Contract liabilities, net of current portion |
|
4.7 |
|
|
|
55.5 |
|
Other liabilities |
|
52.7 |
|
|
|
67.8 |
|
Total liabilities |
$ |
1,340.0 |
|
|
$ |
1,436.2 |
|
|
|
|
|
Stockholders’ equity: |
|
|
|
Preferred stock, $0.001 par value; 15.0 shares authorized, no
shares issued and outstanding |
|
— |
|
|
|
— |
|
Common stock, $0.001 par value; 200.0 shares authorized, 55.1 and
54.3 shares issued; 51.4 and 53.1 shares outstanding,
respectively. |
|
0.1 |
|
|
|
0.1 |
|
Treasury stock, at cost, 3.8 and 1.2 common shares,
respectively |
|
(152.2 |
) |
|
|
(39.6 |
) |
Additional paid-in capital |
|
829.4 |
|
|
|
784.9 |
|
Accumulated other comprehensive loss, net |
|
(16.1 |
) |
|
|
(25.3 |
) |
Retained earnings |
|
957.8 |
|
|
|
726.9 |
|
Total stockholders’ equity |
$ |
1,619.0 |
|
|
$ |
1,447.0 |
|
Total liabilities and stockholders’ equity |
$ |
2,959.0 |
|
|
$ |
2,883.2 |
|
|
|
|
|
|
|
|
|
Emergent BioSolutions
Inc. Consolidated Statements of
Operations(unaudited in millions, except per share
data)
|
Three Months Ended December 31, |
|
2021 |
|
|
|
2020 |
|
|
|
Revenues: |
|
|
|
Product sales, net |
$ |
434.3 |
|
|
$ |
340.9 |
|
CDMO: |
|
|
|
Services |
|
51.2 |
|
|
|
64.0 |
|
Leases |
|
167.1 |
|
|
|
135.1 |
|
Total CDMO |
|
218.3 |
|
|
|
199.1 |
|
Contracts and grants |
|
70.6 |
|
|
|
43.0 |
|
Total revenues |
|
723.2 |
|
|
|
583.0 |
|
|
|
|
|
Operating expenses: |
|
|
|
Cost of product sales |
|
145.0 |
|
|
|
104.4 |
|
Cost of CDMO |
|
67.9 |
|
|
|
63.9 |
|
Research and development |
|
83.0 |
|
|
|
59.5 |
|
Selling, general and
administrative |
|
94.2 |
|
|
|
82.1 |
|
Goodwill impairment |
|
41.7 |
|
|
|
— |
|
Amortization of intangible
assets |
|
14.0 |
|
|
|
15.0 |
|
Total operating expenses |
|
445.8 |
|
|
|
324.9 |
|
|
|
|
|
Income from operations |
|
277.4 |
|
|
|
258.1 |
|
|
|
|
|
Other income (expense): |
|
|
|
Interest expense |
|
(9.0 |
) |
|
|
(8.7 |
) |
Other, net |
|
(0.9 |
) |
|
|
3.4 |
|
Total other income (expense),
net |
|
(9.9 |
) |
|
|
(5.3 |
) |
|
|
|
|
Income before income
taxes |
|
267.5 |
|
|
|
252.8 |
|
Income taxes |
|
78.2 |
|
|
|
67.4 |
|
Net income |
$ |
189.3 |
|
|
$ |
185.4 |
|
|
|
|
|
Net income per common
share |
|
|
|
Basic |
$ |
3.54 |
|
|
$ |
3.51 |
|
Diluted |
$ |
3.50 |
|
|
$ |
3.44 |
|
|
|
|
|
Shares used in computing net
income per share |
|
|
|
Basic |
|
53.5 |
|
|
|
53.1 |
|
Diluted |
|
54.1 |
|
|
|
54.2 |
|
|
|
|
|
|
|
|
|
Emergent BioSolutions
Inc. Consolidated Statements of
Operations(unaudited in millions, except per share
data)
|
Year Ended December 31, |
|
2021 |
|
|
|
2020 |
|
|
|
|
|
Revenues: |
|
|
|
Product sales, net |
$ |
1,023.9 |
|
|
$ |
989.8 |
|
CDMO: |
|
|
|
Services |
|
334.9 |
|
|
|
166.7 |
|
Leases |
|
299.7 |
|
|
|
283.8 |
|
Total CDMO |
|
634.6 |
|
|
|
450.5 |
|
Contracts and grants |
|
134.2 |
|
|
|
115.1 |
|
Total revenues |
|
1,792.7 |
|
|
|
1,555.4 |
|
|
|
|
|
Operating expenses: |
|
|
|
Cost of product sales |
|
382.0 |
|
|
|
392.0 |
|
Cost of CDMO |
|
375.5 |
|
|
|
132.0 |
|
Research and development |
|
234.0 |
|
|
|
234.5 |
|
Selling, general and
administrative |
|
348.4 |
|
|
|
303.3 |
|
Goodwill impairment |
|
41.7 |
|
|
|
— |
|
Amortization of intangible
assets |
|
58.5 |
|
|
|
59.8 |
|
Total operating expenses |
|
1,440.1 |
|
|
|
1,121.6 |
|
|
|
|
|
Income from operations |
|
352.6 |
|
|
|
433.8 |
|
|
|
|
|
Other income (expense): |
|
|
|
Interest expense |
|
(34.5 |
) |
|
|
(31.3 |
) |
Other, net |
|
(3.7 |
) |
|
|
4.7 |
|
Total other income (expense),
net |
|
(38.2 |
) |
|
|
(26.6 |
) |
|
|
|
|
Income before income
taxes |
|
314.4 |
|
|
|
407.2 |
|
Income taxes |
|
83.5 |
|
|
|
102.1 |
|
Net income |
$ |
230.9 |
|
|
$ |
305.1 |
|
|
|
|
|
Net income per common
share |
|
|
|
Basic |
$ |
4.32 |
|
|
$ |
5.79 |
|
Diluted |
$ |
4.27 |
|
|
$ |
5.67 |
|
|
|
|
|
Shares used in computing net
income per share |
|
|
|
Basic |
|
53.5 |
|
|
|
52.7 |
|
Diluted |
|
54.1 |
|
|
|
53.8 |
|
|
|
|
|
|
|
|
|
Emergent BioSolutions
Inc. Consolidated Statements of Cash
Flows(unaudited, in
millions)
|
Year Ended December 31, |
|
2021 |
|
|
|
2020 |
|
Cash flows from operating
activities: |
|
|
|
Net income |
$ |
230.9 |
|
|
$ |
305.1 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Stock-based compensation expense |
|
42.4 |
|
|
|
51.0 |
|
Depreciation and amortization |
|
123.8 |
|
|
|
114.5 |
|
Change in fair value of contingent obligations, net |
|
2.9 |
|
|
|
31.7 |
|
Amortization of deferred financing costs |
|
4.1 |
|
|
|
3.5 |
|
Impairments |
|
41.7 |
|
|
|
29.0 |
|
Deferred income taxes |
|
46.9 |
|
|
|
(2.4 |
) |
Write off of contract asset and liability |
|
(17.2 |
) |
|
|
— |
|
Other |
|
2.0 |
|
|
|
(5.2 |
) |
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable |
|
(48.2 |
) |
|
|
49.0 |
|
Inventories |
|
(44.0 |
) |
|
|
(83.2 |
) |
Prepaid expenses and other assets |
|
(24.7 |
) |
|
|
(29.2 |
) |
Accounts payable |
|
(2.5 |
) |
|
|
19.8 |
|
Accrued expenses and other liabilities |
|
(9.2 |
) |
|
|
19.4 |
|
Accrued compensation |
|
4.0 |
|
|
|
21.8 |
|
Contract liabilities |
|
(31.8 |
) |
|
|
11.2 |
|
Net cash provided by operating activities |
|
321.1 |
|
|
|
536.0 |
|
Cash flows from investing
activities: |
|
|
|
Purchases of property, plant and equipment |
|
(225.0 |
) |
|
|
(141.0 |
) |
Milestone payment from prior asset acquisition |
|
— |
|
|
|
(10.0 |
) |
Net cash used in investing activities |
|
(225.0 |
) |
|
|
(151.0 |
) |
Cash flows (used in) provided
by financing activities: |
|
|
|
Purchases of treasury stock |
|
(106.0 |
) |
|
|
— |
|
Proceeds from revolving credit facility |
|
— |
|
|
|
— |
|
Proceeds from senior unsecured notes |
|
— |
|
|
|
450.0 |
|
Principal payments on convertible senior notes |
|
(10.6 |
) |
|
|
— |
|
Principal payments on revolving credit facility |
|
— |
|
|
|
(373.0 |
) |
Principal payments on term loan facility |
|
(25.3 |
) |
|
|
(14.1 |
) |
Proceeds from stock-based compensation activity |
|
15.9 |
|
|
|
31.6 |
|
Taxes paid for stock-based compensation activity |
|
(13.8 |
) |
|
|
(13.8 |
) |
Debt issuance costs |
|
— |
|
|
|
(8.4 |
) |
Contingent consideration payments |
|
(1.2 |
) |
|
|
(2.8 |
) |
Net cash (used in) provided by financing activities: |
|
(141.0 |
) |
|
|
69.5 |
|
Effect of exchange rate changes on cash, cash equivalents and
restricted cash |
|
(0.3 |
) |
|
|
(1.0 |
) |
Net change in cash, cash equivalents and restricted cash |
|
(45.2 |
) |
|
|
453.5 |
|
Cash, cash equivalents and
restricted cash at beginning of period |
|
621.5 |
|
|
|
168.0 |
|
Cash, cash equivalents and
restricted cash at end of period |
|
576.3 |
|
|
|
621.5 |
|
Supplemental disclosure of
cash flow information: |
|
|
|
Cash paid during the year for interest |
|
30.4 |
|
|
|
21.0 |
|
Cash paid during the year for income taxes |
|
71.6 |
|
|
|
109.3 |
|
Supplemental information on
non-cash investing and financing activities: |
|
|
|
Purchases of property, plant
and equipment unpaid at period end |
|
20.0 |
|
|
|
22.0 |
|
Purchase of Treasury
Stock |
|
6.6 |
|
|
|
— |
|
Reconciliation of cash and
cash equivalents and restricted cash: |
|
|
|
Cash and cash equivalents |
|
576.1 |
|
|
|
621.3 |
|
Restricted cash |
|
0.2 |
|
|
|
0.2 |
|
Total |
$ |
576.3 |
|
|
$ |
621.5 |
|
Reconciliation of Net Income to Adjusted
Net Income (1)
($ in millions, except per share value) |
Three Months Ended December 31, |
2021 |
2020 |
Source |
Net income |
$189.3 |
$185.4 |
|
Adjustments: |
+ Non-cash amortization charges |
15.2 |
16.2 |
Intangible Asset (IA) Amortization, Other Income |
+ Changes in fair value of contingent consideration |
0.3 |
0.4 |
Product COGS |
+ Impairments |
41.7 |
— |
Goodwill impairment |
+ Exit and disposal costs |
— |
0.1 |
COGS, SG&A, Other Income |
+ Acquisition-related costs (transaction & integration) |
0.2 |
0.1 |
SG&A |
Tax effect |
(3.3) |
(3.4) |
|
Total adjustments: |
$54.1 |
$13.4 |
|
Adjusted net income |
$243.4 |
$198.8 |
|
Adjusted net income per diluted share |
$4.50 |
$3.67 |
|
($ in millions, except per share value) |
Twelve Months Ended December 31, |
2021 |
2020 |
Source |
Net income |
$230.9 |
$305.1 |
|
Adjustments: |
+ Non-cash amortization charges |
62.7 |
63.4 |
Intangible Asset (IA) Amortization, Other Income |
+ Changes in fair value of contingent consideration |
2.9 |
31.7 |
Product COGS |
+ Impairments |
41.7 |
29.0 |
Goodwill impairment/R&D |
+ Exit and disposal costs |
— |
17.2 |
COGS, SG&A, Other Income |
+ Acquisition-related costs (transaction & integration) |
0.9 |
0.6 |
SG&A |
Tax effect |
(13.4) |
(23.1) |
|
Total adjustments: |
$94.8 |
$118.8 |
|
Adjusted net income |
$325.7 |
$423.9 |
|
Adjusted net income per diluted share |
$6.02 |
$7.88 |
|
($ in millions) |
Revised 2022 Full Year Forecast |
Source |
Net income |
$45 - $90 |
|
Adjustments: |
+ Non-cash amortization charges |
60 |
IA Amortization, Other Income |
+ Changes in fair value of contingent consideration |
1 |
COGS |
+ Acquisition-related costs (transaction & integration) |
2 |
SG&A |
Tax effect |
(13) |
|
Total adjustments: |
$50 |
|
Adjusted net income |
$95 - $140 |
|
Reconciliation of Net Income to Adjusted
EBITDA (1)
($ in millions) |
Three Months Ended December 31, |
2021 |
2020 |
Net income (loss) |
$189.3 |
$185.4 |
Adjustments: |
+ Income taxes |
78.2 |
67.4 |
+ Depreciation & amortization |
29.3 |
28.9 |
+ Total interest expense, net |
8.9 |
8.6 |
+ Impairments |
41.7 |
— |
+ Changes in fair value of contingent consideration |
0.3 |
0.4 |
+ Acquisition-related costs (transaction & integration) |
0.2 |
0.1 |
+ Exit and disposal costs |
— |
0.1 |
Total adjustments |
$158.6 |
$105.5 |
Adjusted EBITDA |
$347.9 |
$290.9 |
($ in millions) |
Twelve Months Ended December 31, |
2021 |
2020 |
Net income |
$230.9 |
$305.1 |
Adjustments: |
+ Depreciation & amortization |
123.8 |
114.5 |
+ Income taxes |
83.5 |
102.1 |
+ Total interest expense, net |
33.9 |
30.2 |
+ Impairments |
41.7 |
29.0 |
+ Changes in fair value of contingent consideration |
2.9 |
31.7 |
+ Acquisition-related costs (transaction & integration) |
0.9 |
0.6 |
+ Exit and disposal costs |
— |
17.2 |
Total adjustments |
$286.7 |
$325.3 |
Adjusted EBITDA |
$517.6 |
$630.4 |
($ in millions) |
Revised 2022 Full Year Forecast |
Net income |
$45 - $90 |
Adjustments: |
+ Depreciation & amortization |
133 |
+ Provision for income taxes |
26 - 41 |
+ Total interest expense, net |
33 |
+ Changes in fair value of contingent consideration |
1 |
+ Acquisition-related costs (transaction & integration) |
2 |
Total adjustments |
$195 - $210 |
Adjusted EBITDA |
$240 - $300 |
Reconciliation of Gross Margin and Adjusted
Gross Margin (1)
($ in millions) |
Three Months Ended December 31, |
2021 |
2020 |
Total revenues |
$723.2 |
$583.0 |
- Contract and grants revenues |
(70.6) |
(43.0) |
Adjusted revenues |
$652.6 |
$540.0 |
|
|
|
Cost of product sales |
$145.0 |
$104.4 |
Cost of contract development and manufacturing |
$67.9 |
$63.9 |
Cost of product sales and cost of contract development and
manufacturing services ("COGS") |
$212.9 |
$168.3 |
- Changes in fair value of contingent consideration |
(0.3) |
(0.4) |
- Inventory reserves related to Travel Health vaccines |
— |
1.5 |
Adjusted COGS |
$212.6 |
$169.4 |
|
|
|
Gross margin (adjusted revenues minus COGS) |
$439.7 |
$371.7 |
Gross margin % (gross margin divided by adjusted revenues) |
67% |
69% |
|
|
|
Adjusted gross margin (adjusted revenues minus adjusted COGS) |
$440.0 |
$370.6 |
Adjusted gross margin % (adjusted gross margin divided by adjusted
revenues) |
67% |
69% |
($ in millions) |
Twelve Months Ended December 31, |
2021 |
2020 |
Total revenues |
$1,792.7 |
$1,555.4 |
- Contract and grants revenues |
(134.2) |
($115.1) |
Adjusted revenues |
$1,658.5 |
$1,440.3 |
|
|
|
Cost of product sales |
$382.0 |
$392.0 |
Cost of contract development and manufacturing |
$375.5 |
$132.0 |
Cost of product sales and cost of contract development and
manufacturing services ("COGS") |
$757.5 |
$524.0 |
- Changes in fair value of contingent consideration |
($2.9) |
($31.7) |
- Inventory reserves related to Travel Health vaccines |
$— |
($12.6) |
Adjusted COGS |
$754.6 |
$479.7 |
|
|
|
Gross margin (adjusted revenues minus COGS) |
$901.0 |
$916.3 |
Gross margin % (gross margin divided by adjusted revenues) |
54% |
64% |
|
|
|
Adjusted gross margin (adjusted revenues minus adjusted COGS) |
$903.9 |
$960.6 |
Adjusted gross margin % (adjusted gross margin divided by adjusted
revenues) |
55% |
67% |
Reconciliation of Product Margin and
Adjusted Product Margin (1)
($ in millions) |
Three Months Ended December 31, |
2021 |
2020 |
Product revenues |
$434.3 |
$340.9 |
|
|
|
Cost of product sales (COPS) |
$145.0 |
$104.4 |
- Changes in fair value of contingent consideration |
(0.3) |
(0.4) |
- Inventory reserves related to Travel Health vaccines |
— |
1.5 |
Adjusted cost of product sales |
$144.7 |
$105.5 |
|
|
|
Product margin (product revenues minus COPS) |
$289.3 |
$236.5 |
Product margin % (product margin divided by product revenues) |
67% |
69% |
|
|
|
Adjusted product margin (product revenues minus adjusted COPS) |
$289.6 |
$235.4 |
Adjusted product margin % (adjusted product margin divided by
product revenues) |
67% |
69% |
($ in millions) |
Twelve Months Ended December 31, |
2021 |
2020 |
Product revenues |
$1,023.9 |
$989.8 |
|
|
|
Cost of product sales |
$382.0 |
$392.0 |
- Changes in fair value of contingent consideration |
(2.9) |
(31.7) |
- Inventory reserves related to Travel Health vaccines |
— |
(12.6) |
Adjusted COPS |
$379.1 |
$347.7 |
|
|
|
Product margin (product revenues minus COPS) |
$641.9 |
$597.8 |
Product margin % (product margin divided by product revenues) |
63% |
60% |
|
|
|
Adjusted product margin (product revenues minus adjusted COPS) |
$644.8 |
$642.1 |
Adjusted product margin % (adjusted product margin divided by
product revenues) |
63% |
65% |
Reconciliation of CDMO Services Margin and
Adjusted CDMO Services Margin (1)
($ in millions) |
Three Months Ended December 31, |
2021 |
2020 |
CDMO services revenues |
$51.2 |
$64.0 |
+ Non-USG lease revenue |
11.4 |
12.3 |
Adjusted CDMO services revenues |
$62.6 |
$76.3 |
|
|
|
Cost of CDMO services |
$67.9 |
$63.9 |
|
|
|
CDMO services margin (CDMO services revenues minus Cost of CDMO
services) |
$(16.7) |
$0.1 |
CDMO services margin % (CDMO margin divided by CDMO services
revenues) |
(33)% |
—% |
|
|
|
Adjusted CDMO services margin (adjusted CDMO services revenues
minus Cost of CDMO services) |
($5.3) |
$12.4 |
Adjusted CDMO services margin % (adjusted CDMO margin divided by
adjusted CDMO services revenues) |
(8)% |
16% |
($ in millions) |
Twelve Months Ended December 31, |
2021 |
2020 |
CDMO services revenues |
$334.9 |
$166.7 |
+ Non-USG lease revenue |
62.1 |
30.5 |
Adjusted CDMO services revenues |
$397.0 |
$197.2 |
|
|
|
Cost of CDMO services |
$375.5 |
$132.0 |
|
|
|
CDMO services margin (CDMO services revenues minus Cost of CDMO
services) |
$(40.6) |
$34.7 |
CDMO services margin % (CDMO margin divided by CDMO services
revenues) |
(12)% |
21% |
|
|
|
Adjusted CDMO services margin (adjusted CDMO services revenues
minus Cost of CDMO services) |
$21.5 |
$65.2 |
Adjusted CDMO services margin % (adjusted CDMO margin divided by
adjusted CDMO services revenues) |
5% |
33% |
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