Shares Continue to fall on Emergent BioSolutions' Wider Loss

Zacks

Shares of  Emergent BioSolutions (EBS) have been on the way down since it reported wider first quarter 2014 loss on May 8. The company’s first quarter loss (on an adjusted basis) of 40 cents per share was wider than the Zacks Consensus Estimate of a loss of 34 cents. Furthermore, first quarter 2014 loss was wider than the year-ago loss of 22 cents. Higher costs were responsible for the wider loss incurred by the company in the first quarter of 2014.

Revenues climbed 25% year over year to $53.9 million in the first quarter of 2014. An 18% increase in product sales to $35.8 million boosted revenues in the reported quarter. Revenues were short of the Zacks Consensus Estimate of $57 million. BioThrax sales declined 20% to $24.5 million in the quarter due to the timing of deliveries to the Strategic National Stockpile.

We note that BioThrax is the sole vaccine to be cleared by the U.S. Food and Drug Administration (:FDA) for the pre-exposure prophylaxis of anthrax disease. Emergent BioSolutions is looking to get BioThrax approved for the post-exposure prophylaxis (PEP) of anthrax resulting from exposure (suspected or confirmed) to bacillus anthracis in combination with antibiotics for treating patients with suspected or confirmed exposure to anthrax spores.

Last month, the FDA awarded orphan drug status to the vaccine for the PEP indication. The status makes the drug eligible for seven years of marketing exclusivity in the U.S. following approval for the orphan indication. Emergent BioSolutions will not be required to pay the fees associated with the filing of the supplemental biologics license application (sBLA) as a result of orphan status granted by the U.S. regulatory body. We expect investor focus to remain on updates regarding Emergent BioSolutions’ efforts to expand BioThrax’s label.

Outlook for 2014 Backed

The company still expects 2014 total revenues in the range of $415 million–$445 million. The Zacks Consensus Estimate (pre earnings) of $439 million is within the company's guidance range. The company expects total revenues in the range of $95-$110 million in the second quarter of 2014. The Zacks Consensus Estimate (pre earnings) of $120 million is above the company's guidance range.

Emergent BioSolutions carries a Zacks Rank #3 (Hold).  Better-ranked stocks in the medical sector include Gilead Sciences (GILD), Spectrum Pharmaceuticals, Inc. (SPPI) and Alexion Pharmaceuticals (ALXN). While Gilead and Spectrum Pharma carry a Zacks Rank #1 (Strong Buy), Alexion is a Zacks Rank #2 (Buy) stock. 

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