One knock on Emergent Biosolutions (NYSE:EBS) has always been its dependence on anthrax vaccine BioThrax, but management made good on its promise to diversify, moving toward its goal of having $1 billion in revenue by 2020.
Emergent Biosolutions results: The raw numbers
|Revenue||$100.8 million||$91.2 million||10%|
|Income from operations||$8.5 million||($2 million)||N/A|
|Earnings per share||$0.11||($0.27)||N/A|
DATA SOURCE: EMERGENT BIOSOLUTIONS.
What happened with Emergent Biosolutions this quarter?
- Product sales came in at $64 million, a 32% increase over the year-ago quarter, although that mostly has to do with timing of the deliveries of BioThrax to the strategic national stockpile.
- Contract manufacturing revenue increased 59% year over year. Like last quarter, the increase is mostly because Emergent is now charging its spinout, Aptevo Therapeutics to make its drugs.
- The only downside to the quarter was in revenue from contracts and grants, which fell 36%, but since that category typically covers research and development costs, it doesn't really hurt the earnings line.
- Emergent signed three licensing or acquisition agreements over the last few months to increase its product offerings: a smallpox vaccine, ACAM2000, from Sanofi, raxibacumab, an anthrax monoclonal antibody from GlaxoSmithKline, and ZIKV-VLA1601, a Zika vaccine from Valneva.
- The Department of Defense is giving Emergent $23 million to develop a multi-drug auto-injector to deliver nerve agent antidote.
IMAGE SOURCE: GETTY IMAGES.
What management had to say
Emergent's president and CEO Daniel Abdun-Nabi pointed out that two of the three recently acquired products are already FDA approved and therefore will be accretive -- start contributing earnings -- relatively quickly:
"Raxibacumab is expected to be accretive upon first product delivery under the current contract, anticipated within 3 to 6 months of closing. For ACAM2000, the transaction is expected to be accretive beginning with anticipated product deliveries in 2018, following FDA licensure of the U.S. based manufacturing facility."
Emergent is inheriting the government contracts for raxibacumab and ACAM2000 that will end in the next few years, but CFO Robert Kramer sounds confident that the contracts will be renewed since anthrax and smallpox are Category A bioterrorism agents that the government likes to have covered by treatments in the strategic national stockpile:
"So while we may be coming toward the tail end of both contracts, we feel ... pretty strongly that these are countermeasures that are important and that will continue to be procured. The timing about of that and what the contract size look like -- too early to tell and so ... I don't want to comment on that, but just principally, I think the policy of the government -- U.S. government -- and the positioning of the government is to ensure that medical countermeasures for those Category A threats as well as some other threats are critically important and that continued supply and having the capabilities and capacity in the country is something of high priority."
Management reaffirmed its 2017 guidance with revenue expected to come in between $500 million and $530 million and adjusted net income to fall in the $70 million to $80 million range. Those numbers don't include the recently announced acquisitions, which won't be added to guidance until the deals close.
Looking into next year, Emergent plans to start a phase 3 trial for NuThrax, its next generation anthrax vaccine, which will hopefully lead to an Emergency Use Authorization from the FDA that would allow Emergent to start selling the drug to the government under its development and procurement contract.
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