Emergent BioSolutions Reports Financial Results for Second Quarter 2023

• Reports Q2 2023 total revenues of $338M, above the prior guidance range, net loss of $261M and adjusted EBITDA of $56M
• Updates FY 2023 guidance and provides initial Q3 2023 forecast for total revenues

GAITHERSBURG, Md., Aug. 08, 2023 (GLOBE NEWSWIRE) -- Emergent BioSolutions Inc. (: EBS) today reported financial results for the second quarter ended June 30, 2023. It also announced strategic steps to reduce investment in and de-emphasize focus on growth in its CDMO business.

“Emergent has achieved a number of strategic milestones in 2023 that will help America be better prepared to face future public health threats and help to strengthen Emergent’s financial position,” said interim Chief Executive Officer Haywood Miller. “These achievements together with actions we announced earlier today will help ensure the sustainability of Emergent and its future growth.”

FINANCIAL HIGHLIGHTS ⁽¹⁾

Q2 2023 vs. Q2 2022

Year to Date ("YTD") 2023 vs. YTD 2022

SELECT Q2 2023 AND OTHER RECENT BUSINESS UPDATES

• Announced CEO transition with the appointment of Haywood Miller as Interim CEO following the retirement of Robert G. Kramer
• Announced U.S. Food and Drug Administration (FDA) approval of CYFENDUS^TM (Anthrax Vaccine Adsorbed, Adjuvanted), previously known as AV7909, a two-dose anthrax vaccine for post-exposure prophylaxis use
• Finalized the sale of the travel health business to Bavarian Nordic for total consideration of up to $380 million, including receipt of $270 million upfront; currently engaged in facilitating the transfer of assets, people and programs to Bavarian Nordic under a minimum six-month Transition Services Agreement
• Completed amendment and maturity extension of the Company's existing senior secured credit facilities
• Awarded a 10-year contract by the Biomedical Advanced Research and Development Authority for advanced development, manufacturing scale-up, and procurement of Ebanga^TM (ansuvimab-zykl) product, a treatment for Ebola

Q2 2023 FINANCIAL PERFORMANCE ⁽¹⁾

Revenues

Beginning in 2023, the Company is revising the categories used in discussing product/service level revenues. The new categories are:

• Anthrax MCM — comprises potential contributions from CYFENDUS^TM , previously known as AV7909, BioThrax, Anthrasil and raxibacumab
• NARCAN — comprises contributions from NARCAN Nasal Spray
• Smallpox MCM — comprises potential contributions from ACAM2000, VIGIV and Tembexa
• Other Products — comprises potential contributions from BAT, RSDL, Trobigard, Vaxchora and Vivotif
• CDMO — comprises service and lease revenues from the contract development and manufacturing business

Product Sales, net

Anthrax MCM

For Q2 2023, revenues from Anthrax MCM decreased $74.6 million as compared with Q2 2022. The decrease reflects the impact of timing of sales related to CYFENDUS (Anthrax Vaccine Adsorbed, Adjuvanted), previously known as AV7909, and BioThrax® (Anthrax Vaccine Adsorbed), partially offset by an increase in sales of Anthrasil® [Anthrax Immune Globulin Intravenous (human)].

NARCAN

For Q2 2023, revenues from NARCAN® (naloxone HCl) Nasal Spray increased $32.3 million as compared with Q2 2022. The increase was primarily driven by higher branded NARCAN sales to U.S. public interest channels and Canadian retail sales, partially offset by lower commercial retail sales in the U.S. following the termination of the Company's relationship with Sandoz related to the authorized generic NARCAN product.

Smallpox MCM

For Q2 2023, revenues from Smallpox MCM increased $107.9 million as compared with Q2 2022. The increase was primarily due to the exercise and full delivery during the quarter of a $120 million option by the U.S. government (USG) to purchase ACAM2000, partially offset by lower VIG sales due to timing.

Other Products

For Q2 2023, revenues from other product sales decreased $0.6 million as compared with Q2 2022. The decrease was primarily due to lower BAT sales, partially offset by higher RSDL sales.

CDMO

CDMO Services

For Q2 2023, revenues from contract development and manufacturing services increased $23.7 million as compared with Q2 2022. The increase was primarily driven by work at the Company's Canton facility for a CDMO customer and resolution of a customer's outstanding obligation. In the prior year quarter, there was a reversal of revenue related to the halt in manufacturing under the Janssen Agreement.

CDMO Leases

For Q2 2023, revenues from contract development and manufacturing leases increased $7.2 million as compared with Q2 2022. The lease revenue in the current year quarter is related to the Company's Canton facility. In the prior year quarter, there was a reversal of revenue recognized related to the Janssen Agreement termination.

Contracts and Grants

For Q2 2023, revenues from contracts and grants decreased $0.7 million as compared with Q2 2022. The decrease was due to changes in the mix and timing of various development initiatives.

Operating Expenses

Cost of Product Sales

For Q2 2023, cost of product sales increased $43.9 million as compared with Q2 2022. The increase was primarily due to higher sales of ACAM2000 and NARCAN, partially offset by lower sales of CYFENDUS, coupled with higher allocations to product COGS at the Company's Bayview facility and an increase in Trobigard inventory related costs.

Cost of CDMO

For Q2 2023, cost of CDMO decreased $23.1 million as compared with Q2 2022. The decrease was primarily due to reduced production activities at the Company's Bayview facility related to the halt in manufacturing under the Janssen Agreement, partially offset by higher costs at its Camden facility related to additional investments in quality enhancements and improvement initiatives as well as increased production at the Company's Canton facility related to work for a CDMO customer.

Long-Lived Asset Impairment Charge

For Q2 2023, the Company recorded a non-cash impairment charge of $306.7 million related to certain asset groups within our CDMO reporting unit. The asset groups were written down only to the extent their carrying value was higher than their respective fair values. The Company, with the assistance of a third-party valuation firm, applied valuation methods to estimate the fair values for each of the assets within the different asset classes to determine the amount of the impairment.

Prior to recording the impairment charge, the Company performed recoverability tests on the impacted asset groups within the CDMO reporting unit and concluded that the asset groups were not recoverable as the undiscounted expected cash flows did not exceed their carrying values. The indicators for the impairment were related to the deterioration in performance and resulting downward revisions to our internal CDMO forecasts, including future expected cash flows, that took place during the preparation of our financial statements for the quarter ended June 30, 2023.

Research and Development ⁽²⁾

For Q2 2023, R&D expenses decreased $23.8 million as compared with Q2 2022. The decrease was primarily due to the sale of the Company's development program for CHIKV VLP to Bavarian Nordic, which was a significant contributor to prior period R&D expense.

Selling, General and Administrative

For Q2 2023, selling, general and administrative expenses increased $10.3 million as compared with Q2 2022. The increase was primarily due to higher professional services fees related to general corporate initiatives, including ongoing organizational transformation consulting and legal remediation efforts.

ADDITIONAL FINANCIAL INFORMATION

Capital Expenditures

For Q2 2023, gross capital expenditures decreased largely due to lower product development activities across the Company's facilities.

At-The-Market Equity Offering Program (ATM Program)

In Q2 2023, the Company initiated its "at-the-market" equity offering program (ATM Program). During the quarter ended June 30, 2023, the Company sold 1.1 million shares of its common stock under the ATM Program for gross proceeds of $9.1 million, representing an average price of $8.22 per share.

Segment Information

The Company manages the business with a focus on two reportable segments: the Products segment, which includes the Anthrax MCM products, NARCAN products, Smallpox MCM products and Other products; and, the Services segment, which consists of CDMO services. The Company evaluates the performance of these reportable segments based on revenue and 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.

For the three months ended June 30, 2023, Product gross margin and Product adjusted gross margin increased $21.1 million and $22.1 million, respectively, as compared to the three months ended June 30, 2022. Product gross margin percentage decreased 7 percentage points to 55% for the three months ended June 30, 2023. The decrease in gross margin percentage was largely due to increases in shutdown related costs and inventory write-offs.

For the three months ended June 30, 2023, Services gross margin increased $54.0 million, as compared to the three months ended June 30, 2022. Services gross margin percentage improved to (91)% for the three months ended June 30, 2023. The improvement in gross margin percentage was primarily due to one-time costs and reserves related to the Janssen Agreement in the prior year quarter, partially offset by additional investments in quality enhancement and improvement initiatives at the Company's Camden facility in the current year.