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Emergent BioSolutions Reports Second Quarter 2024 Financial Results
- Second Quarter 2024 Total Revenues of $254.7 million, above the prior guidance range
- Second Quarter 2024 Net Loss of $283.1 million and Adjusted EBITDA of $(10.1) million
- Updates FY 2024 guidance
GAITHERSBURG, Md., Aug. 06, 2024 (GLOBE NEWSWIRE) -- Emergent BioSolutions Inc. (NYSE: EBS) today reported financial results for the second quarter ended June 30, 2024.
"In the first half of the year, we made great progress to stabilize our financial position by strategically divesting assets, resolving several legacy issues, and securing operational cash flow and working capital improvements," said Joe Papa, president and CEO at Emergent. “As a result, we expect to exceed $200 million in debt reduction by the end of the year. With a sharpened focus on our core products, operationalizing a leaner, more flexible footprint with our customers and patients at the center of our efforts, we are well positioned to enhance Emergent’s leadership position in public health preparedness."
FINANCIAL HIGHLIGHTS(1)
Q2 2024 vs. Q2 2023
| ($ in millions, except per share amounts) | Q2 2024 | Q2 2023 | % Change | |||||
| Total Revenues | $ | 254.7 | $ | 337.9 | (25 | )% | ||
| Net Loss | $ | (283.1 | ) | $ | (261.4 | ) | (8 | )% |
| Net Loss per Diluted Share | $ | (5.38 | ) | $ | (5.16 | ) | (4 | )% |
| Adjusted Net Loss(2) | $ | (122.0 | ) | $ | (53.3 | ) | (129 | )% |
| Adjusted Net Loss per Diluted Share(2) | $ | (2.32 | ) | $ | (1.05 | ) | (121 | )% |
| Adjusted EBITDA(2) | $ | (10.1 | ) | $ | 55.9 | (118 | )% | |
| Total Segment Gross Margin %(2) | (19 | )% | 42 | % | ||||
| Total Segment Adjusted Gross Margin %(2) | 26 | % | 43 | % | ||||
Year to Date ("YTD") 2024 vs. YTD 2023
| ($ in millions, except per share amounts) | YTD 2024 | YTD 2023 | % Change | |||||
| Total Revenues | $ | 555.1 | $ | 502.2 | 11 | % | ||
| Net Loss | $ | (274.1 | ) | $ | (447.6 | ) | 39 | % |
| Net Loss per Diluted Share | $ | (5.23 | ) | $ | (8.86 | ) | 41 | % |
| Adjusted Net Loss(2) | $ | (90.9 | ) | $ | (216.8 | ) | 58 | % |
| Adjusted Net Loss per Diluted Share(2) | $ | (1.73 | ) | $ | (4.29 | ) | 60 | % |
| Adjusted EBITDA(2) | $ | 56.8 | $ | (45.6 | ) | * | ||
| Total Segment Gross Margin %(2) | 18 | % | 30 | % | ||||
| Total Segment Adjusted Gross Margin %(2) | 39 | % | 31 | % | ||||
| * % change is greater than +/- 200% | ||||||||
SELECT Q2 2024 AND OTHER RECENT BUSINESS UPDATES
- Secured $250 million in U.S. government contract award modifications for four medical countermeasures
- Announced a $30 million definitive agreement to sell the Baltimore-Camden manufacturing site, which is expected to close in the third quarter of 2024, subject to the satisfaction or waiver of customary closing conditions
- Received $50 million in the third quarter related to the resolution of the contract dispute with Janssen Pharmaceuticals, Inc.
- Received $7 million for sale of an unimproved, empty building in Canton, Massachusetts
- Expected receipt of $10 million development milestone payment in the third quarter of 2024 from Bavarian Nordic as part of the sale of the Travel Health Business
- Received $75 million for the sale of our RSDL® (Reactive Skin Decontamination Lotion) product to SERB Pharmaceuticals, subject to customary adjustments based on inventory value at closing
SECOND QUARTER 2024 FINANCIAL PERFORMANCE(1)
Revenues
The Company uses the following categories in discussing product/service level revenues:
- NARCAN® — comprises contributions from NARCAN® Nasal Spray
- Other Commercial Products - comprised former contributions from Vaxchora® and Vivotif®, which we sold to Bavarian Nordic as part of our travel health business in May 2023
- Anthrax MCM — comprises contributions from CYFENDUS®, previously known as AV7909, BioThrax®, Anthrasil® and Raxibacumab
- Smallpox MCM — comprises contributions from ACAM2000®, VIGIV and TEMBEXA®
- Other Products — comprises contributions from BAT® and RSDL®
- Bioservices — comprises service and lease revenues from the Bioservices business
| ($ in millions) | Q2 2024 | Q2 2023 | % Change | |||||
| Product sales, net:(3) | ||||||||
| NARCAN® | $ | 120.0 | $ | 133.9 | (10 | )% | ||
| Other Commercial Products | — | 4.0 | NM | |||||
| Anthrax MCM | 38.7 | 21.1 | 83 | % | ||||
| Smallpox MCM | 17.9 | 123.8 | (86 | )% | ||||
| Other Products | 6.8 | 19.4 | (65 | )% | ||||
| Total Product sales, net | $ | 183.4 | $ | 302.2 | (39 | )% | ||
| Bioservices: | ||||||||
| Services | $ | 64.5 | $ | 26.4 | 144 | % | ||
| Leases | 0.2 | 2.7 | (93 | )% | ||||
| Total Bioservices revenues | $ | 64.7 | $ | 29.1 | 122 | % | ||
| Contracts and grants | $ | 6.6 | $ | 6.6 | — | % | ||
| Total revenues | $ | 254.7 | $ | 337.9 | (25 | )% | ||
| NM - Not Meaningful | ||||||||
Products Sales, net
NARCAN®
For Q2 2024, revenues from NARCAN® (naloxone HCl) Nasal Spray decreased $13.9 million, or 10%, as compared with Q2 2023. The decrease was primarily driven by an unfavorable price and volume mix in 2024 to U.S. public interest channels and lower Canadian market sales, partially offset by higher sales of over-the-counter (“OTC”) NARCAN® through wholesaler channels, which launched in the third quarter of 2023.
Other Commercial Products
For Q2 2024, we did not receive revenues from Other Commercial Products, representing a decrease of $4.0 million compared with Q2 2023. During the second quarter of 2023, the Company sold Vivotif® and Vaxchora® to Bavarian Nordic as part of our travel health business.
Anthrax MCM
For Q2 2024, revenues from Anthrax MCM increased $17.6 million, or 83%, as compared with Q2 2023. The increase reflects the impact of timing of sales related to CYFENDUS® and BioThrax®, partially offset by a decrease in Anthrasil® sales, due to timing. Anthrax vaccine product sales are primarily made under annual purchase options exercised by the USG. Fluctuations in revenues result from the timing of the exercise of annual purchase options, the timing of USG purchases, the availability of governmental funding and the Company's delivery of orders that follow.
Smallpox MCM
For Q2 2024, revenues from Smallpox MCM decreased $105.9 million, or 86%, as compared with Q2 2023. The decrease was primarily due to timing of USG purchases of ACAM2000® and VIGIV. Fluctuations in revenues from Smallpox MCM result from the timing of the exercise of annual purchase options in the existing procurement contracts, the timing of USG purchases, the availability of governmental funding and the Company's delivery of orders that follow.
Other Products
For Q2 2024, revenues from Other Product sales decreased $12.6 million, or 65%, as compared with Q2 2023. The decrease was due to lower BAT® and RSDL® product sales, due to timing of deliveries.
Bioservices Revenues
Services
For Q2 2024, revenues from Bioservices services increased $38.1 million, or 144%, as compared with Q2 2023. The increase was primarily attributable to the $50.0 million arbitration settlement (the "Settlement Agreement") with Janssen Pharmaceuticals, Inc. (“Janssen”), one of the Janssen Pharmaceutical Companies of Johnson & Johnson, related to the 2022 termination of the manufacturing services agreement with Janssen (the “Janssen Agreement”), coupled with an increase in production at our Camden facility. The increase was partially offset by lower production at the Company's Canton and Winnipeg facilities coupled with the prior year quarter recognition of revenue related to the resolution of a customer’s outstanding obligation.
Leases
For Q2 2024, revenues from Bioservices leases decreased $2.5 million, or 93%, as compared with Q2 2023. The decrease was related to the completion of a lease for a Bioservices customer at our Canton facility.
Contracts and Grants
For Q2 2024, revenues from contracts and grants was consistent with Q2 2023.
Operating Expenses
| ($ in millions) | Q2 2024 | Q2 2023 | % Change | |||||
| Cost of Commercial product sales | $ | 53.4 | $ | 54.4 | (2 | )% | ||
| Cost of MCM product sales | 31.1 | 80.5 | (61 | )% | ||||
| Cost of Bioservices | 211.6 | 55.7 | * | |||||
| Impairment of long-lived assets | 27.2 | 306.7 | (91 | )% | ||||
| Research and development (“R&D”) | 32.7 | 26.0 | 26 | % | ||||
| Selling, general and administrative (“SG&A”) | 85.9 | 91.4 | (6 | )% | ||||
| Amortization of intangible assets | 16.3 | 16.1 | 1 | % | ||||
| Total operating expenses | $ | 458.2 | $ | 630.8 | (27 | )% | ||
| * % change is greater than +/- 200% | ||||||||
Cost of Commercial Product Sales
For Q2 2024, cost of Commercial Product sales decreased $1.0 million, or 2%, as compared with Q2 2023. The decrease was primarily due to no current period costs related to Vivotif® and Vaxchora®, which were sold to Bavarian Nordic as part of our travel health business, partially offset by higher NARCAN® expense as a result of increased unit volume.
Cost of MCM Product Sales
For Q2 2024, cost of MCM Product sales decreased $49.4 million, or 61%, as compared with Q2 2023. The decrease was primarily due to lower sales of ACAM2000®, BAT®, RSDL® and Anthrasil®, lower allocations to Cost of MCM Product sales at our Bayview facility and a reduction in Trobigard® related costs, due to the Belgium Federal Agency for Medicines and Health Products' approval of the Company's request to revoke the Market Authorization for Trobigard® (the "Trobigard® revocation"). This decrease was partially offset by higher shutdown costs, Raxibacumab inventory reserves and overhead allocations at our Winnipeg facility.
Cost of Bioservices
For Q2 2024, cost of Bioservices increased $155.9 million as compared with Q2 2023. The increase was primarily due to the Settlement Agreement with Janssen and resulting write-down of related assets to net realizable value, partially offset by a decrease in production at the Company's Canton facility and a decrease in overhead costs at our Maryland facilities.
Impairment of Long-Lived Assets
For Q2 2024, Impairment of long-lived assets decreased $279.5 million, or 91%, as compared with Q2 2023. The decrease was due to a $27.2 million non-cash impairment charge in the second quarter of 2024 related to our Bayview and Rockville asset groups within the Bioservices reporting unit, compared to a $306.7 million non-cash impairment charge recorded in the second quarter of 2023 related to our Camden, Bayview and Rockville asset groups within the Bioservices reporting unit.
Research and Development Expenses
For Q2 2024, R&D expenses increased $6.7 million, or 26%, as compared with Q2 2023. The increase was primarily due to write-offs related to program terminations during the period and an increase in R&D overhead and severance costs. The increase was partially offset by the sale of our development program for CHIKV VLP to Bavarian Nordic and reduction in related overhead costs driven by the headcount reductions and an overall decrease in spend for funded projects.
Selling, General and Administrative Expenses
For Q2 2024, SG&A expenses decreased $5.5 million, or 6%, as compared with Q2 2023. The decrease was primarily due to lower employee related expenses and compensation as a result of restructuring initiatives during 2023, coupled with a decrease in marketing expense. The decrease was partially offset by higher legal services fees for disputes and other corporate initiatives, as well as higher restructuring costs.
ADDITIONAL FINANCIAL INFORMATION(1)
Capital Expenditures
| ($ in millions) | Q2 2024 | Q2 2023 | % Change | |||||
| Capital expenditures | $ | 4.6 | $ | 12.5 | (63 | )% | ||
| Capital expenditures as a % of total revenues | 2 | % | 4 | % | ||||
For Q2 2024, capital expenditures decreased largely due to lower product development activities across the Company’s facilities.
SEGMENT INFORMATION
In the fourth quarter of 2023, we realigned our reportable operating segments to reflect recent changes in our internal operating and reporting process. The Company now manages the business with a focus on three reportable segments: (1) the Commercial Products segment consisting of our NARCAN® and other commercial products that were sold as part of our travel health business in the second quarter of 2023; (2) the MCM Products segment consisting of the Anthrax - MCM, Smallpox - MCM and Other products and (3) the services segment (“Services”) consisting of our Bioservices. The Company evaluates the performance of these reportable segments based on revenue and segment 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.
SECOND QUARTER 2024 SEGMENT RESULTS
| ($ in millions) | Commercial Products | ||||||||||
| Quarter Ended June 30, | |||||||||||
| 2024 | 2023 | $ Change | % Change | ||||||||
| Revenues | $ | 120.0 | $ | 137.9 | $ | (17.9 | ) | (13 | )% | ||
| Cost of sales | 53.4 | 54.4 | (1.0 | ) | (2 | )% | |||||
| Gross margin** | $ | 66.6 | $ | 83.5 | $ | (16.9 | ) | (20 | )% | ||
| Gross margin %** | 56 | % | 61 | % | |||||||
| Segment adjusted gross margin(2) | $ | 66.6 | <|||||||||
