Why Is Emergent Biosolutions (EBS) Down 22.6% Since Last Earnings Report?
A month has gone by since the last earnings report for Emergent Biosolutions (EBS). Shares have lost about 22.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Emergent Biosolutions due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Emergent Q2 Earnings Miss Estimates, Revenues Beat
Emergent reported a second-quarter 2023 adjusted loss of $1.06 per share, wider than the Zacks Consensus Estimate of a loss of 98 cents. In the year-ago quarter, the company reported a loss of 86 cents per share.
Revenues in the quarter totaled $337.9 million, up 39.2% from the prior-year period’s level. The top line beat the company’s guided range of $210-$230 million. It also outpaced the Zacks Consensus Estimate of $212 million.
Quarter in Detail
Total product sales rose 27% from the year-ago quarter’s level to $302.2 million. The figure beat our model estimate of $181.8 million.
Sales of Anthrax Medical Counter measures (Anthrax MCM) totaled $21.2 million in the reported quarter, down 78% year over year.This decline can be attributed to unfavorable timing of deliveries related to Cyfendus and BioThrax, partially offset by higher demand for Anthrasil.
Revenues from Anthrax MCM segment missed our model estimate of $36.4 million.
Narcan nasal spray added $133.9 million to product sales, up 32% year over year. This rise was due to higher volumes of branded Narcan sprays sold to public customers in Canada and public interest channels in the United States. Narcan revenues beat our model estimate of $72.7 million.
Sales of smallpox vaccine totaled $123.9 million compared with $16 million in the year-ago quarter due to favorable timing of a government order. In the quarter, Emergent fully delivered the $120-million option exercised by the U.S. government to procure ACAM2000. Revenues from smallpox vaccine beat our model estimate of $36.4 million.
Other product sales amounted to $23.2 million, down 3% year over year. The decrease was primarily due to lower Botulism Antitoxin Heptavalent (BAT) sales, partially offset by higher Reactive Skin Decontamination Lotion Kit (RSDL) sales.
Revenues from contracts and grants plunged 10% year over year to $6.6 million.
CDMO service revenues totaled $26.4 million in the second quarter compared with $2.7 million in the year-ago period.
Updated 2023 Guidance
Emergent has updated its previously issued guidance for 2023, reflecting continued strength in Narcan, offset by reduced expectations across other products and services.
The company expects total revenues in the range of $1-$1.1 billion for 2023 compared with the previous guidance of $1.1-$1.2 billion. Emergent expects total revenues in the band of $210-$250 million for third-quarter 2023.
EBS anticipates a net loss of $465-$415 million for 2023 compared with the previous guidance of a loss of $185-$135 million. It also projects an adjusted net loss of $195-$145 million compared with the previous guidance of a loss of $85-$35 million.
Adjusted gross margin is expected in the range of 36-39% (earlier estimate: 39-42%).
Management expects Anthrax MCM sales in the band of $200-$220 million compared with the previous guided range of $260-$280 million. Revenues from the Narcan nasal spray are expected in the band of $425-$445 million compared with the previously estimated range of $360-$380 million.
Product sales from Smallpox MCM (comprising ACAM2000, Vigiv and Tembexa) are expected in the band of $180-$200 million compared with the formerly projected range of $235-$255 million. EBS expects revenues of $100-$120 million, down from the previously projected band of $120-$140 million from other products.
It projects CDMO revenues in the range of $60-$80 million compared with the formerly estimated band of $90-$110 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -91.8% due to these changes.
VGM Scores
At this time, Emergent Biosolutions has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Emergent Biosolutions has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Emergent Biosolutions is part of the Zacks Medical - Biomedical and Genetics industry. Over the past month, Axsome Therapeutics (AXSM), a stock from the same industry, has gained 16.4%. The company reported its results for the quarter ended June 2023 more than a month ago.
Axsome reported revenues of $46.7 million in the last reported quarter, representing a year-over-year change of +429.5%. EPS of -$1 for the same period compares with -$1.06 a year ago.
Axsome is expected to post a loss of $1.24 per share for the current quarter, representing a year-over-year change of -20.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -3.3%.
Axsome has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.
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