Emergent BioSolutions Inc 10-Q for FY2020 Q2

Emergent BioSolutions Inc. (EBS)

10-Q 2020-07-31 For: 2020-06-30

Added on April 01, 2026

About this 10-Q

Emergent BioSolutions Inc filed this 10-Q on July 31, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $394.7M; up 62.3% from $243.2M a year earlier
Net income: $92.7M; compared with a net loss of $9.5M a year earlier
Diluted EPS: $1.73; compared with -$0.18 a year earlier

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

	For the quarterly period ended	June 30, 2020

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 and zip code of Principal Executive Offices)



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	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐



Part I. Financial Information		Page No.
Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Comprehensive Income	7
	Condensed Consolidated Statements of Cash Flows	8
	Condensed Consolidated Statements of Changes in Stockholders' Equity	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32

Part II. Other Information
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65
Item 3.	Defaults Upon Senior Securities	65
Item 4.	Mine Safety Disclosures	65
Item 5.	Other Information	65
Item 6.	Exhibits	65

	Signatures	67


▪	the impact of global economic conditions and public health crises and epidemics, such as the novel strain of coronavirus (SARS-CoV-2) causing COVID-19 disease, on our markets, operations and employees as well as those of our customers and suppliers;


▪	the availability of U.S. government (USG) funding for procurement of our products;


▪	our ability to perform under our contracts with the USG including the timing of and specifications relating to deliveries;


▪	our ability to provide contract development and manufacturing services for the development and/or manufacture of product candidates of our customers at required levels;


▪	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;


▪	the continued exercise of discretion by the Biomedical Advanced Research and Development Authority (BARDA) to procure additional doses of AV7909 (anthrax vaccine adsorbed with adjuvant) prior to approval by the U.S. Food and Drug Administration (FDA);


▪	the exercise of all remaining options under our recently executed contract for the procurement of ACAM2000® (Smallpox (Vaccinia) Vaccine, Live);


▪	our ability to secure licensure of AV7909 from the FDA within the anticipated timeframe, if at all;


▪	our ability to secure follow-on procurement contracts for our public health threat (PHT) products that are under procurement contracts that have expired or will be expiring;


▪	our ability to successfully appeal the recent patent litigation decision related to NARCAN® (naloxone hydrochloride) Nasal Spray 4mg/spray;


▪	our ability and the ability of our collaborators to enforce patents related to NARCAN Nasal Spray against potential generic entrants;


▪	the accuracy of our estimates regarding future revenues, expenses, capital requirements and needs for additional financing.



	June 30, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	268.8	$	167.8
Restricted cash	0.2		0.2
Accounts receivable, net	258.6		270.7
Inventories	236.2		222.5
Prepaid expenses and other current assets	32.1		25.0
Total current assets	795.9		686.2

Property, plant and equipment, net	580.1		542.3
Intangible assets, net	693.2		712.9
In-process research and development	29.0		29.0
Goodwill	266.3		266.6
Other assets	101.6		90.3
Total assets	$	2,466.1	$	2,327.3

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	84.8	$	94.8
Accrued expenses	33.8		39.5
Accrued compensation	59.0		62.4
Debt, current portion	29.1		12.9
Contract liabilities, current portion	32.7		3.3
Contingent consideration, current portion	22.3		3.2
Other current liabilities	32.0		0.2
Total current liabilities	293.7		216.3

Contingent consideration, net of current portion	6.9		26.0
Debt, net of current portion	758.1		798.4
Deferred tax liability	63.9		63.9
Contract liabilities, net of current portion	85.3		85.6
Other liabilities	59.4		48.6
Total liabilities	1,267.3		1,238.8

Stockholders' equity:
Preferred stock, $0.001 par value; 15.0 shares authorized, no shares issued or outstanding	—		—
Common stock, $0.001 par value; 200.0 shares authorized, 54.1 and 53.0 shares issued; 52.9 and 51.7 shares outstanding, respectively	0.1		0.1


▪	our ability to develop safe and effective treatments for COVID-19 and obtain FDA approval or authorization for emergency or broader patient use of such treatments;


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


▪	our ability to comply with the operating and financial covenants required by 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 impact on our revenues from declines in sales of our vaccine products that target travelers due to the reduction of international travel caused by the COVID-19 pandemic;


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



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Revenues:
Product sales, net	$	298.5		$	183.5		$	446.7		$	336.5
Contract development and manufacturing services	72.6			18.7			94.3			34.6
Contracts and grants	23.6			41.0			46.2			62.8
Total revenues	394.7			243.2			587.2			433.9

Operating expenses:
Cost of product sales and contract development and manufacturing services	129.8			100.8			206.7			192.7
Research and development	47.9			63.9			90.6			110.0
Selling, general and administrative	76.0			70.8			145.7			136.4
Amortization of intangible assets	15.0			14.7			29.8			29.2
Total operating expenses	268.7			250.2			472.8			468.3

Income (loss) from operations	126.0			(7.0		)	114.4			(34.4		)

Other income (expense):
Interest expense	(6.4		)	(9.5		)	(15.0		)	(19.0		)
Other, net	1.1			1.4			—			0.4
Total other income (expense), net	(5.3		)	(8.1		)	(15.0		)	(18.6		)

Income (loss) before provision for income taxes	120.7			(15.1		)	99.4			(53.0		)
Income tax provision (benefit)	28.0			(5.6		)	19.2			(17.4		)
Net income (loss)	$	92.7		$	(9.5	)	$	80.2		$	(35.6	)

Net income (loss) per common share
Basic	$	1.76		$	(0.18	)	$	1.53		$	(0.69	)
Diluted	$	1.73		$	(0.18	)	$	1.51		$	(0.69	)

Shares used in computing income (loss) per share
Basic	52.6			51.5			52.3			51.3
Diluted	53.5			51.5			53.2			51.3



	$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

Balance at December 31, 2019	53.0	$	0.1	$	716.1	(1.2	)	$	(39.6	)	$	(9.9	)	$	421.8		$	1,088.5
Employee equity plans activity	1.1	—		42.4		—		—			—			—			42.4
Net income (loss)	—	—		—		—		—			—			80.2			80.2
Other comprehensive income	—	—		—		—		—			(12.3		)	—			(12.3		)
Balance at June 30, 2020	54.1	$	0.1	$	758.5	(1.2	)	$	(39.6	)	$	(22.2	)	$	502.0		$	1,198.8


Balance at March 31, 2020	53.5	$	0.1	$	726.2	(1.2	)	$	(39.6	)	$	(21.2	)	$	409.3		$	1,074.8
Employee equity plans activity	0.6	—		32.3		—		—			—			—			32.3
Net income (loss)	—	—		—		—		—			—			92.7			92.7
Other comprehensive income	—			—		—		—			(1.0		)	—			(1.0		)
Balance at June 30, 2020	54.1	$	0.1	$	758.5	(1.2	)	$	(39.6	)	$	(22.2	)	$	502.0		$	1,198.8

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	0.3	—		13.2		—		(0.1		)	—			—			13.1
Net income (loss)	—	—		—		—		—			—			(35.6		)	(35.6		)
Other comprehensive income	—	—		—		—		—			0.5			—			0.5
Balance at June 30, 2019	52.7	$	0.1	$	701.8	(1.2	)	$	(39.7	)	$	(5.0	)	$	331.7		$	988.9


Balance at March 31, 2019	52.6	$	0.1	$	690.1	(1.2	)	$	(39.6	)	$	(4.5	)	$	341.2		$	987.3
Employee equity plans activity	0.1	—		11.7		—		(0.1		)	—			—			11.6
Net income (loss)	—	—		—		—		—			—			(9.5		)	(9.5		)
Other comprehensive income	—	—		—		—		—			(0.5		)	—			(0.5		)
Balance at June 30, 2019	52.7	$	0.1	$	701.8	(1.2	)	$	(39.7	)	$	(5.0	)	$	331.7		$	988.9


▪	ACAM2000^® (Smallpox (Vaccinia) Vaccine, Live), the only single-dose smallpox vaccine licensed by the FDA for active immunization against smallpox disease for persons determined to be at high risk for smallpox infection;


▪	BioThrax^® (Anthrax Vaccine Adsorbed), the only vaccine licensed by the FDA, for the general use prophylaxis and post-exposure prophylaxis of anthrax disease;


▪	Vaxchora® (Cholera Vaccine, Live, Oral), the only vaccine licensed by the FDA and the European Medicines Agency (EUA) for the prevention of cholera; and


▪	Vivotif® (Typhoid Vaccine Live Oral Ty21a), the only oral vaccine licensed by the FDA for the prevention of typhoid fever.


▪	NARCAN® (naloxone HCl) Nasal Spray, the first needle-free formulation of naloxone approved by the FDA and Health Canada, for the emergency treatment of known or suspected opioid overdose as manifested by respiratory and/or central nervous system depression; and


▪	RSDL^® (Reactive Skin Decontamination Lotion Kit), the only medical device cleared by the FDA to remove or neutralize the following chemical warfare agents from the skin: tabun, sarin, soman, cyclohexyl sarin, VR, VX, mustard gas and T-2 toxin.


▪	raxibacumab (Anthrax Monoclonal), a fully human monoclonal antibody therapeutic licensed by the FDA for the treatment and prophylaxis of inhalational anthrax;


▪	Anthrasil^® (Anthrax Immune Globulin Intravenous (Human)), the only polyclonal antibody therapeutic licensed by the FDA and Health Canada for the treatment of inhalational anthrax;


▪	BAT® (Botulism Antitoxin Heptavalent (A,B,C,D,E,F,G)-(Equine)), the only heptavalent antibody therapeutic licensed by the FDA and Health Canada for the treatment of botulism; and


▪	VIGIV (Vaccinia Immune Globulin Intravenous (Human)), the only polyclonal antibody therapeutic licensed by the FDA and Health Canada to address certain complications from smallpox vaccination.


•	Trobigard® is a combination drug-device auto-injector procured product candidate that contains atropine sulfate and obidoxime chloride. It has not been approved by the FDA or any similar health regulatory body, but it is



	June 30, 2020		December 31, 2019
Raw materials and supplies	$	81.7	$	70.5
Work-in-process	117.1		89.7
Finished goods	37.4		62.3
Total inventories	$	236.2	$	222.5