Emergent BioSolutions Inc 10-Q for FY2021 Q1

Emergent BioSolutions Inc. (EBS)

10-Q 2021-04-30 For: 2021-03-31

Added on April 01, 2026

About this 10-Q

Emergent BioSolutions Inc filed this 10-Q on April 30, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).

Headline figures

Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $343M; up 78.2% from $192.5M a year earlier
Net income: $69.7M; compared with a net loss of $12.5M a year earlier
Diluted EPS: $1.28; compared with -$0.24 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	March 31, 2021

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	33
Item 4.	Controls and Procedures	33

Part II. Other Information
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 3.	Defaults Upon Senior Securities	63
Item 4.	Mine Safety Disclosures	63
Item 5.	Other Information	63
Item 6.	Exhibits	63

	Signatures	65


	March 31, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	547.8	$	621.3
Restricted cash	0.2		0.2
Accounts receivable, net	184.4		230.9
Inventories, net	406.5		307.0
Prepaid expenses and other current assets	42.2		36.5
Total current assets	1,181.1		1,195.9

Property, plant and equipment, net	692.9		644.1
Intangible assets, net	648.2		663.1
Goodwill	266.5		266.7
Other assets	111.4		113.4
Total assets	$	2,900.1	$	2,883.2

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	142.2	$	136.1
Accrued expenses	25.0		46.9
Accrued compensation	55.0		84.6
Debt, current portion	26.0		33.8
Other current liabilities	122.0		83.1
Total current liabilities	370.2		384.5

Contingent consideration, net of current portion	5.3		34.2
Debt, net of current portion	833.1		841.0
Deferred tax liability	53.3		53.2
Contract liabilities, net of current portion	52.5		55.5
Other liabilities	62.9		67.8
Total liabilities	1,377.3		1,436.2

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, 54.8 and 54.3 shares issued; 53.6 and 53.1 shares outstanding, respectively	0.1		0.1
Additional paid-in capital	790.1		784.9
Treasury stock, at cost, 1.2 common shares	(39.6)		(39.6)
Accumulated other comprehensive loss, net	(24.4)		(25.3)
Retained earnings	796.6		726.9
Total stockholders' equity	1,522.8		1,447.0
Total liabilities and stockholders' equity	$	2,900.1	$	2,883.2


	Three Months Ended March 31,
	2021		2020
Revenues:
Product sales, net	$	137.9	$	148.2
Contract development and manufacturing services	183.8		21.7
Contracts and grants	21.3		22.6
Total revenues	343.0		192.5

Operating expenses:
Cost of product sales and contract development and manufacturing services	99.3		76.9
Research and development	52.5		42.7
Selling, general and administrative	80.9		69.7
Amortization of intangible assets	14.9		14.8
Total operating expenses	247.6		204.1

Income (loss) from operations	95.4		(11.6)

Other income (expense):
Interest expense	(8.5)		(8.6)
Other, net	(1.7)		(1.1)
Total other income (expense), net	(10.2)		(9.7)

Income (loss) before income taxes	85.2		(21.3)
Income taxes	(15.5)		8.8
Net income (loss)	$	69.7	$	(12.5)

Net income (loss) per common share
Basic	$	1.31	$	(0.24)
Diluted	$	1.28	$	(0.24)

Shares used in computing income (loss) per share
Basic	53.3		52.0
Diluted	54.5		52.0


	$0.001 Par Value Common Stock			Additional Paid-In Capital		Treasury Stock			Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders' Equity
	Shares	Amount				Shares	Amount

Balance at December 31, 2020	54.3	$	0.1	$	784.9	(1.2)	$	(39.6)	$	(25.3)	$	726.9	$	1,447.0
Share-based compensation activity	0.5	—		5.2		—	—		—		—		5.2
Net income (loss)	—	—		—		—	—		—		69.7		69.7
Other comprehensive income (loss)	—	—		—		—	—		0.9		—		0.9
Balance at March 31, 2021	54.8	$	0.1	$	790.1	(1.2)	$	(39.6)	$	(24.4)	$	796.6	$	1,522.8


Balance at December 31, 2019	53.0	$	0.1	$	716.1	(1.2)	$	(39.6)	$	(9.9)	$	421.8	$	1,088.5
Share-based compensation activity	0.5	—		10.1		—	—		—		—		10.1
Net income (loss)	—	—		—		—	—		—		(12.5)		(12.5)
Other comprehensive income (loss)	—	—		—		—	—		(11.3)		—		(11.3)
Balance at March 31, 2020	53.5	$	0.1	$	726.2	(1.2)	$	(39.6)	$	(21.2)	$	409.3	$	1,074.8


	March 31, 2021		December 31, 2020
Raw materials and supplies	$	194.3	$	160.6
Work-in-process	163.1		102.5
Finished goods	49.1		43.9
Total inventories, net	$	406.5	$	307.0


	March 31, 2021		December 31, 2020
Land and improvements	$	51.1	$	52.7
Buildings, building improvements and leasehold improvements	286.6		246.3
Furniture and equipment	414.8		362.1
Software	59.9		58.7
Construction-in-progress	152.0		183.4
Property, plant and equipment, gross	964.4		903.2
Accumulated depreciation	(271.5)		(259.1)
Total property, plant and equipment, net	$	692.9	$	644.1


(In millions, except lease term and discount rate)	Balance Sheet location	March 31, 2021			December 31, 2020
Operating lease right-of-use assets	Other assets	$	29.7		$	31.0

Operating lease liabilities, current portion	Other current liabilities	5.3			5.4
Operating lease liabilities	Other liabilities	26.3			27.8
Total operating lease liabilities		$	31.6		$	33.2

Operating leases:
Weighted average remaining lease term (years)		7.6			7.7
Weighted average discount rate		4.1		%	4.1		%


		March 31, 2021						December 31, 2020
Asset Type	Estimated Life	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Products	9-22 years	$	798.0	$	151.6	$	646.4	$	798.0	$	137.8	$	660.2
Customer relationships	8 years	28.6		27.4		1.2		28.6		26.5		2.1
CDMO	8 years	5.5		4.9		0.6		5.5		4.7		0.8
Total intangible assets		$	832.1	$	183.9	$	648.2	$	832.1	$	169.0	$	663.1



Goodwill, December 31, 2020	$	266.7
Foreign currency translation	(0.2)
Goodwill, March 31, 2021	$	266.5


	March 31, 2021				December 31, 2020
	Total	Level1	Level 2	Level 3	Total	Level1	Level 2	Level 3
Assets:
Money market accounts	135.1	135.1	—	—	352.2	352.2	—	—
Time deposits	315.0	—	315.0	—	—	—	—	—
Total	450.1	135.1	315.0	—	352.2	352.2	—	—
Liabilities:
Contingent consideration	38.0	—	—	38.0	58.1	—	—	58.1
Derivative instruments	12.6	—	12.6	—	15.0	—	15.0	—
Total	50.6	—	12.6	38.0	73.1	—	15.0	58.1



Balance at December 31, 2020	$	58.1
Change in fair value	1.1
Settlements	(21.2)
Balance at March 31, 2021	$	38.0


	Number of Instruments	Notional
Interest rate swaps	7	$	350.0


	March 31, 2021		December 31, 2020
Senior secured credit agreement - Term loan due 2023	$	416.2	$	421.9

3.875% Senior Unsecured Notes due 2028	450.0		450.0
2.875% Convertible Senior Notes due 2021	—		10.6
Other	3.0		3.0
Total debt	869.2		885.5

Current portion of long-term debt, net of debt issuance costs	(26.0)		(33.8)
Unamortized debt issuance costs	(10.1)		(10.7)
Non-current portion of debt	$	833.1	$	841.0



December 31, 2020	$	100.1
Deferral of revenue	131.6
Revenue recognized	(118.9)
March 31, 2021	$	112.8


	Year ended December 31,
2021 (1)	$	56.1
2022	74.8
2023	15.7
	$	146.6

(1) As of March 31, 2021, amount represents the nine months ending December 31, 2021.


	Asset Derivatives						Liability Derivatives
	March 31, 2021			December 31, 2020			March 31, 2021			December 31, 2020
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Interest Rate Swaps	Other Current Assets	$	—	Other Current Assets	$	—	Other Current Liabilities	$	5.7	Other Current Liabilities	$	5.7
	Other Assets	$	—	Other Assets	$	—	Other Liabilities	$	6.9	Other Liabilities	$	9.3


Hedging derivatives	Cumulative Amount of Gain/(Loss) Recognized in OCI on Derivative				Location of Gain or (Loss) Reclassified from Accumulated OCI into Income	Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income
	March 31,		December 31,			Three Months Ended March 31,
	2021		2020			2021		2020
Interest Rate Swaps	$	(12.6)	$	(15.0)	Interest expense	$	1.4	$	—


	Three Months Ended March 31, 2021						Three Months Ended March 31, 2020
	U.S. Government		Non-U.S. Government		Total		U.S. Government		Non-U.S. Government		Total
Product sales, net	$	56.4	$	81.5	$	137.9	$	63.9	$	84.3	$	148.2
CDMO services	97.5		86.3		183.8		—		21.7		21.7
Contracts and grants	20.0		1.3		21.3		22.0		0.6		22.6
Total revenues	$	173.9	$	169.1	$	343.0	$	85.9	$	106.6	$	192.5


	March 31, 2021		December 31, 2020
Billed, net	$	134.0	$	172.7
Unbilled	50.4		58.2
Total, net	$	184.4	$	230.9


	Defined Benefit Pension Plan		Derivative Instruments		Foreign Currency Translation Losses		Total
(in millions)
Balance, December 31, 2020	(7.7)		(11.0)		(6.6)		(25.3)
Other comprehensive (loss) income before reclassifications	—		1.7		(2.2)		(0.5)
Amounts reclassified from accumulated other comprehensive income	—		1.4		—		1.4
Balance, March 31, 2021	$	(7.7)	$	(7.9)	$	(8.8)	$	(24.4)

Balance, December 31, 2019	(3.4)		(1.6)		(4.9)		(9.9)
Other comprehensive (loss) income before reclassifications	—		(11.2)		(0.1)		(11.3)

Balance, March 31, 2020	$	(3.4)	$	(12.8)	$	(5.0)	$	(21.2)


Legend
	NARCAN nasal spray	Contract development and manufacturing services
	Anthrax vaccines	Contracts and Grants
	Other product sales


			Cost of Product Sales and Contract Development and Manufacturing Services
l			Gross profit margin for product sales and contract development and manufacturing services


			Research and Development expense
l			Research and Development expense, net of contracts and grants revenue


			Selling, General and Administrative
l			SG&A as a percentage of total revenue


(in millions, except percentages)	March 31, 2021		December 31, 2020		Change %
Financial assets:
Cash and cash equivalents	$	547.8	$	621.3	(12)	%

Borrowings:
Debt, current portion	26.0		33.8		(23)	%
Debt, net of current portion	833.1		841.0		(1)	%
Total borrowings	859.1		874.8		(2)	%

Working capital:
Current assets	1,181.1		1,195.9		(1)	%
Current liabilities	370.2		384.5		(4)	%
Total working capital	810.9		$	811.4	—	%


(in millions)
Total Capacity	Outstanding Letters of Credit	Outstanding Indebtedness on Revolving Credit Facility	Unused Capacity
	March 31, 2021
$600.0	2.9	—	$597.1
	December 31, 2020
$600.0	2.8	—	$597.2


Exhibit Number			Description
10.1#†			Modification No. 4, effective January 29, 2021, to Order for Supplies and Services Between Emergent Manufacturing Operations Baltimore LLC and the BioMedical Advance Research and Development Authority, dated May 24, 2020 (Task Order 75A50120F33007), under the Award/Contract, effective August 30, 2019 (BARDA ADM Conract), from the Assistant Secretary, U.S. Department of Health and Human Services (ASPR/OPM) to Emergent Product Development Gaithersburg Inc.
10.2#†			Modification No. 5, effective February 22, 2021, to Task Order 75A50120F33007.
10.3#†			Modification No. 6, effective March 24, 2021, to Task Order 75A50120F33007.
10.4#†			Amendment No. 1, effective February 25, 2021, to Manufacturing Services Agreement, dated July 1 , 2020, by and between Emergent Manufacturing Operations Baltimore, LLC and Janssen Pharmaceuticals, Inc., one of the Janssen Pharmaceutical Companies of Johnson & Johnson.
10.5#†			Amendment No. 2 , effective October 30, 2020, to Manufacturing Services Agreement, dated July 24, 2020, by and between Emergent Manufacturing Operations Baltimore, LLC and AstraZeneca Pharmaceuticals LP (AZ MSA).
10.6#†			Amendment No. 3, effective November 25, 2020, to AZ MSA.
10.7#†			Amendment No. 4, effective January 21, 2021, to AZ MSA.
31.1 #			Certification of the Chief Executive Officer, pursuant to Exchange Act Rule 13a-14(a).
31.2 #			Certification of the Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a).
32.1 #			Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 #			Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 #			The following financial information related to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statement of Changes in Stockholders' Equity; and (vi) the related Notes to the Condensed Consolidated Financial Statements.
104 #			Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101.


EMERGENT BIOSOLUTIONS INC.

By: /s/ROBERT G. KRAMER Robert G. Kramer President, Chief Executive Officer and Director (Principal Executive Officer)

Date: April 29, 2021

By: /s/RICHARD S. LINDAHL Richard S. Lindahl Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

Date: April 29, 2021