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Emergent (EBS) Beats on Q1 Earnings, Cuts Contract Revenue View

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Emergent BioSolutions Inc. EBS reported first-quarter 2021 earnings of $1.53 per share, which comprehensively beat the Zacks Consensus Estimate of 97 cents and also improved from the year-ago quarter’s earnings of 1 cent.

Revenues in the reported quarter were $343 million, up 78% from the prior-year period, primarily owing to an increase in contract development and manufacturing (“CDMO”) services revenues. However, the top line missed the Zacks Consensus Estimate of $368.62 million.

Meanwhile, the company reduced its revenue guidance for 2021, solely due to lower anticipated CDMO services revenues owing to suspension of production at its Bayview facility. Please note that the company halted production at the facility on FDA’s request in mid-April as the regulatory authority began inspection to investigate the error that led to manufacturing of faulty doses of J&J’s JNJ COVID-19 vaccine in March. Reportedly, Emergent had mixed up doses of AstraZeneca’s AZN COVID-19 vaccine with J&J’s vaccine. The FDA is yet give a go ahead to re-start production at the facility, per a Bloomberg article.

Shares of Emergent declined 5% during after-hours trading on Apr 29 due to lowering of CDMO services revenue guidance for 2021. In fact, the company’s shares have declined 29.8% so far this year compared with the industry’s decrease of 0.6%.

Quarter in Detail

Total product sales decreased 7% to $137.9 million from the year-earlier quarter. The company did not report any sales for its smallpox vaccine, ACAM2000.

Narcan (naloxone HCl) nasal spray added $74.2 million to product sales, reflecting an increase of 3% year over year. Notably, sales of anthrax vaccines (BioThrax and AV7909) were $55 million in the reported quarter, increasing 6% year over year.

However, other product sales plunged 64% on a year-over-year basis to $8.7 million due to lower sales of botulism drug and travel health vaccines, especially Vivotif. Sales of botulism drug was hurt due to timing of deliveries to the U.S. government while lower level of global travel amid COVID-19 pandemic hit travel health vaccines.

Revenues from contracts and grants decreased 6% year over year to $21.3 million.

CDMO services revenues jumped to $183.8 million, compared with $21.7 million reported in the year-ago period. The increase was on the back of contributions for services provided to partners engaged in developing COVID-19 vaccines or therapy, especially the Biomedical Advanced Research and Development Authority (BARDA).

The company recorded adjusted EBITDA of $123.5 million in the reported quarter compared with $15.3 million in the year-ago period, mainly due to significant increase in revenues from prior-year quarter.

2021 Guidance Updated

Emergent lowered its revenue guidance for 2021 from the range of $1.95-$2.05 billion to $1.7-$1.9 billion, anticipating lower anticipated CDMO services revenues. The Zacks Consensus Estimate for the total revenues for 2021 stands at $2.02 billion for the period.

The company stated that even if the FDA gave authorization to re-start production at the Bayview facility or release manufactured lots of J&J’s COVID-19 vaccine soon, expected revenues for the services will be delayed. The company now expects CDMO services revenues to be between $765 million and $875 million, reduced from the previous guidance of $925 million to $965 million Moreover, the company also expects lower revenues from one of its anthrax treatments, raxibacumab in anticipation of a delay in new contract. However, the company maintained its previous guidance for NARCAN nasal spray, Anthrax vaccines and ACAM2000.

Emergent anticipates adjusted net income within $395-$470 million compared with the previous guidance of $475-$525 million. Adjusted EBITDA is anticipated in the range of $620-$720 million, down from $750-$810 million.

For the second quarter of 2021, the company expects total revenues of $370-$430 million.

Coronavirus Related Updates

In January 2021, Emergent entered into a CDMO services agreement with Humanigen HGEN for manufacturing the latter’s COVID-19 therapeutic candidate, lenzilumab. Emergent also signed a similar CDMO services agreement in February with Providence Therapeutics to provide drug product manufacturing services to their mRNA PTX-COVID19-B vaccine candidate.

In March, Emergent announced that the NIAID-sponsored phase III ITAC study (INSIGHT-013) evaluating four immunoglobulin candidates for the treatment of hospitalized patients with COVID-19 failed to meet its endpoint. However, the company continues to develop the candidates for outpatients at high risk of progression to severe COVID-19 disease.

Emergent Biosolutions Inc. Price, Consensus and EPS Surprise

Emergent Biosolutions Inc. Price, Consensus and EPS Surprise
Emergent Biosolutions Inc. Price, Consensus and EPS Surprise

Emergent Biosolutions Inc. price-consensus-eps-surprise-chart | Emergent Biosolutions Inc. Quote

Zacks Rank

Emergent currently has a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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