Emergent BioSolutions Inc 10-Q for FY2019 Q1

Emergent BioSolutions Inc. (EBS)

10-Q 2019-05-08 For: 2019-03-31

Added on April 03, 2026

About this 10-Q

Emergent BioSolutions Inc filed this 10-Q on May 8, 2019, covering the quarter ended March 31, 2019 (FY2019 Q1).

Headline figures

Quarter ended March 31, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $190.6M; up 61.8% from $117.8M a year earlier
Net loss: $26M; compared with a net loss of $4.9M a year earlier
Diluted EPS: -$0.51; compared with -$0.10 a year earlier

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(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended March 31, 2019

OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to



Delaware	14-1902018
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

400 Professional Drive, Suite 400
Gaithersburg, Maryland	20879
(Address of Principal Executive Offices)	(Zip Code)



Securities registered pursuant to Section 12(b) of the Act
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.001 per share	EBS	New York Stock Exchange



Large accelerated filer x		Accelerated filer ☐
Non-accelerated filer ☐		Smaller reporting company ☐
Emerging growth company ☐



Part I. Financial Information
Item 1.	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets
	Condensed Consolidated Statements of Operations
	Condensed Consolidated Statements of Comprehensive Loss
	Condensed Consolidated Statements of Cash Flows
	Condensed Consolidated Statements of Changes in Stockholders' Equity
	Notes to Condensed Consolidated Financial Statements
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures

Part II. Other Information
Item 1.	Legal Proceedings
Item 1A.	Risk Factors
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.	Defaults Upon Senior Securities
Item 4.	Mine Safety Disclosures
Item 5.	Other Information
Item 6.	Exhibits

	Signatures


•	appropriations for the procurement of BioThrax® (Anthrax Vaccine Adsorbed) and our other products addressing public health threats (PHTs);


•	our ability to perform under our contracts with the U.S. government (USG) related to BioThrax, our AV7909 product candidate, and our other public health threat products, including the timing of and specifications relating to deliveries;


•	our ability to commence deliveries based on BARDA’s procurement of AV7909 (anthrax vaccine adsorbed with CPG 7909 adjuvant) for the Strategic National Stockpile (SNS), to receive Emergency Use Authorization (EUA) and eventual licensure of AV7909 from the U.S. Food and Drug Administration (FDA);


•	the availability of funding for our U.S. government grants and contracts;


•	our ability to secure follow-on procurement contracts for our PHTs that are under procurement contracts that have expired or will be expiring;


•	our ability and the ability of our collaborators to defend underlying patents from infringement by generic naloxone entrants;


•	our ability to identify and acquire companies, businesses, products or product candidates that satisfy our selection criteria;


•	our ability to successfully integrate and realize the benefits of our acquisitions of PaxVax Holding Company Ltd. (PaxVax) and Adapt Pharma Limited (Adapt), both of which were acquired in October 2018;


•	our ability to successfully identify and respond to new development contracts with the USG, as well as successfully maintain, through achievement of development milestones, current development contracts with the USG;


•	our ability and the ability of our contractors and suppliers to maintain compliance with current good manufacturing practices and other regulatory obligations;


•	the operating and financial restrictions placed on us and our subsidiaries under our senior secured credit facilities;


•	the procurement of products by USG 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 accuracy of our estimates regarding future revenues, expenses, capital requirements and needs for additional financing.



	March 31, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	137.2		$	112.2
Restricted cash	0.2			0.2
Accounts receivable, net	121.5			262.5
Inventories	211.0			205.8
Prepaid expenses and other current assets	58.6			40.1
Total current assets	528.5			620.8

Property, plant and equipment, net	513.4			510.2
Intangible assets, net	757.1			761.6
In-process research and development	41.0			50.0
Goodwill	267.7			259.7
Other assets	46.0			27.1
Total assets	$	2,153.7		$	2,229.4

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	78.6		$	80.7
Accrued expenses	49.6			30.7
Contingent consideration, current portion	62.7			5.6
Accrued compensation	36.9			58.2
Long-term indebtedness, current portion	10.1			10.1
Other current liabilities	10.5			15.1
Total current liabilities	248.4			200.4
Contingent consideration	10.0			54.4
Long-term indebtedness	732.4			784.5
Deferred tax liability	66.4			67.5
Deferred revenue, net of current portion	64.7			62.5
Other liabilities	44.3			49.2
Total liabilities	$	1,166.2		$	1,218.5
Commitments and contingencies (Notes 8 & 14)
Stockholders' equity:
Preferred stock, $0.001 par value; 15.0 shares authorized, no shares issued or outstanding at both 2019 and 2018	—			—
Common stock, $0.001 par value; 200.0 shares authorized, 52.6 shares issued and 51.4 shares outstanding at 2019; 52.4 shares issued and 51.2 shares outstanding at 2018	0.1			0.1
Treasury stock, at cost, 1.2 common shares at both 2019 and 2018	(39.6		)	(39.6		)
Additional paid-in capital	690.2			688.6


•	our ability to obtain and maintain regulatory approvals for our product candidates and the timing of any such approvals;


•	the success of our commercialization, marketing and manufacturing capabilities and strategy; and



	Three Months Ended March 31,
	2019			2018
Revenues:
Product sales, net	$	153.0		$	75.8
Contract manufacturing	15.9			26.1
Contracts and grants	21.7			15.9
Total revenues	190.6			117.8

Operating expenses:
Cost of product sales and contract manufacturing	91.8			54.3
Research and development	46.1			29.1
Selling, general and administrative	65.4			40.0
Amortization of intangible assets	14.5			3.9
Total operating expenses	217.8			127.3

Loss from operations	(27.2		)	(9.5		)

Other income (expense):
Interest expense	(9.6		)	(0.2		)
Other income (expense), net	(1.0		)	0.3
Total other income (expense), net	(10.6		)	0.1

Loss before benefit from income taxes	(37.8		)	(9.4		)
Income tax benefit	(11.8		)	(4.5		)
Net loss	$	(26.0	)	$	(4.9	)

Net loss per common share
Basic	$	(0.51	)	$	(0.10	)
Diluted	$	(0.51	)	$	(0.10	)
Shares used in computing loss per share
Basic	51.2			49.6
Diluted	51.2			49.6



	$0.001 Par Value Common Stock			Additional Paid-In Capital		Treasury Stock					Accumulated Other Comprehensive Loss			Retained Earnings			Total Stockholders' Equity
	Shares	Amount		Additional Paid-In Capital		Shares		Amount			Accumulated Other Comprehensive Loss			Retained Earnings			Total Stockholders' Equity
Three Months Ended March 31, 2019
Balance at December 31, 2018	52.4	$	0.1	$	688.6	(1.2	)	$	(39.6	)	$	(5.5	)	$	367.3		$	1,010.9
Employee equity plans activity	0.2	—		1.6		—		—			—			—			1.6
Net loss	—	—		—		—		—			—			(26.0		)	(26.0		)
Other comprehensive income	—	—		—		—		—			1.0			—			1.0
Balance at March 31, 2019	52.6	$	0.1	$	690.2	(1.2	)	$	(39.6	)	$	(4.5	)	$	341.3		$	987.5


Three Months Ended March 31, 2018
Balance at December 31, 2017	50.6	$	0.1	$	618.3	(1.2	)	$	(39.5	)	$	(3.7	)	$	337.1		$	912.3
Adoption of new revenue accounting standard (ASC 606), net of tax	—	—		—		—		—			—			(32.5		)	(32.5		)
Balance at January 1, 2018	50.6	0.1		618.3		(1.2	)	(39.5		)	(3.7		)	304.6			879.8
Employee equity plans activity	0.4	—		6.1		—		—			—			—			6.1
Treasury stock	—	—		—		—		(0.1		)	—			—			(0.1		)
Net loss	—	—		—		—		—			—			(4.9		)	(4.9		)
Other comprehensive income	—	—		—		—		—			0.4			—			0.4

Balance at March 31, 2018	51.0	$	0.1	$	624.4	(1.2	)	$	(39.6	)	$	(3.3	)	$	299.7		$	881.3


•	Vaccines and Anti-Infectives - BioThrax® (Anthrax Vaccine Adsorbed), ACAM2000® (Smallpox (Vaccinia) Vaccine, Live), Vaxchora® (Cholera Vaccine, Live, Oral), and Vivotif® (Typhoid Vaccine, Live, Oral Ty21a).


•	Devices - NARCAN® (naloxone HCl) Nasal Spray for opioid overdose, RSDL® (Reactive Skin Decontamination Lotion Kit), and the Trobigard® (atropine sulfate, obidoxime chloride a nerve agent countermeasure) auto-injector.


•	Antibody Therapeutics - raxibacumab (Anthrax Monoclonal antibody therapeutic for anthrax), Anthrasil®( Anthrax Immune Globulin Intravenous (Human)), BAT®(Botulism Antitoxin Heptavalent), and VIGIV (Vaccinia Immune Globulin Intravenous (Human) therapeutic) for complications from smallpox vaccinations.



	October 15, 2018
Cash	$	581.5
Equity	37.7
Fair value of contingent purchase consideration	48.0
Preliminary purchase consideration	667.2
Adjustments	1.5
Updated purchase consideration	$	668.7



	October 15, 2018			Measurement Period Adjustments			Updated October 15, 2018
Estimated fair value of tangible assets acquired and liabilities assumed:
Cash	$	17.7		$	—		$	17.7
Accounts receivable	21.3			—			21.3
Inventory	41.4			—			41.4
Prepaid expenses and other assets	7.8			3.0			10.8
Accounts payable	(32.2		)	—			(32.2		)
Accrued expenses and other liabilities	(50.4		)	—			(50.4		)
Deferred tax liability, net	(62.4		)	(0.5		)	(62.9		)
Total estimated fair value of tangible assets acquired and liabilities assumed	(56.8		)	2.5			(54.3		)

Acquired in-process research and development	41.0			—			41.0
Acquired intangible assets	534.0			—			534.0
Goodwill	149.0			(1.0		)	148.0
Total purchase price	$	667.2		$	1.5		$	668.7



	October 4, 2018			Measurement Period Adjustments			Updated October 4, 2018
Estimated fair value of tangible assets acquired and liabilities assumed:
Cash	$	9.0		$	—		$	9.0
Accounts receivable	4.1			—			4.1
Inventory	19.7			—			19.7
Prepaid expenses and other assets	12.2			—			12.2
Property, plant and equipment	57.8			—			57.8
Deferred tax assets	3.8			—			3.8
Accounts payable	(3.5		)	—			(3.5		)
Accrued expenses and other liabilities	(33.6		)	—			(33.6		)
Total estimated fair value of tangible assets acquired and liabilities assumed	69.5			—			69.5

Acquired in-process research and development	9.0			(9.0		)	—
Acquired intangible assets	133.0			—			133.0
Goodwill	61.6			9.0			70.6
Total purchase price	$	273.1		$	—		$	273.1



	March 31, 2019		December 31, 2018
Raw materials and supplies	$	57.3	$	51.8
Work-in-process	112.7		103.2
Finished goods	41.0		50.8
Total inventories	$	211.0	$	205.8



	March 31, 2019			December 31, 2018
Land and improvements	$	44.3		$	44.6
Buildings, building improvements and leasehold improvements	223.4			216.2
Furniture and equipment	316.8			293.9
Software	55.5			55.2
Construction-in-progress	57.2			71.8
Property, plant and equipment, gross	697.2			681.7
Less: Accumulated depreciation and amortization	(183.8		)	(171.5		)
Total property, plant and equipment, net	$	513.4		$	510.2



	March 31, 2019
Operating lease cost:
Amortization of right-of-use assets	$	0.6
Interest on lease liabilities	0.1
Total operating lease cost	$	0.7



(In millions, except lease term and discount rate)	March 31, 2019
Operating lease right-of-use assets	$	12.9

Other current liabilities	2.0
Operating lease liabilities	11.6
Total operating lease liabilities	$	13.6

Operating leases:
Weighted Average Remaining Lease Term	9.3
Weighted Average Discount Rate	4.27		%



	March 31, 2019
	Estimated Life (years)	Cost		Measurement Period Adjustment		Additions		Gross Total		Accumulated Amortization			Net
Intangible assets, net	5-22	$	818.4	—		$	10.0	$	828.4	$	(71.3	)	$	757.1
IPR&D	indefinite	50.0		(9.0	)	—		41.0		—			41.0
Goodwill	indefinite	259.7		8.0		—		267.7		—			267.7




Balance at December 31, 2018	$	60.0
Milestone achievement - asset acquisition	10.0
Measurement period adjustment	1.5
Change in fair value	1.7
Settlements	(0.5		)
Balance at March 31, 2019	$	72.7



	Three Months Ended March 31, 2019						Three Months Ended March 31, 2018
	U.S Government		Non-U.S. Government		Total		U.S Government		Non-U.S. Government		Total
Product sales	$	73.3	$	79.7	$	153.0	$	66.0	$	9.8	$	75.8
Contract manufacturing	—		15.9		15.9		—		26.1		26.1
Contracts and grants	20.4		1.3		21.7		14.8		1.1		15.9
Total revenues	$	93.7	$	96.9	$	190.6	$	80.8	$	37.0	$	117.8




December 31, 2018	$	73.1
Deferral of revenue	4.9
Revenue recognized	(2.8		)
March 31, 2019	$	75.2



	March 31, 2019		December 31, 2018
Billed, net	$	89.6	$	234.0
Unbilled	31.9		28.5
Total, net	$	121.5	$	262.5



(in millions, except share and per share data)	Three Months Ended March 31,
(in millions, except share and per share data)	2019			2018
Numerator:
Net loss	$	(26.0	)	$	(4.9	)

Denominator:
Weighted-average number of shares—basic	51.2			49.6
Dilutive securities—equity awards	—			—
Weighted-average number of shares—diluted	51.2			49.6

Net loss per share - basic	$	(0.51	)	$	(0.10	)
Net loss per share - diluted	$	(0.51	)	$	(0.10	)