Why Is Emergent Biosolutions (EBS) Down 21.4% Since Last Earnings Report?
A month has gone by since the last earnings report for Emergent Biosolutions (EBS). Shares have lost about 21.4% 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 its most recent earnings report in order to get a better handle on the important drivers.
Emergent Q1 Earnings Miss Estimates, Revenues Beat
Emergent reported a first-quarter 2023 adjusted loss of $3.17 per share, wider than the Zacks Consensus Estimate of a loss of $1.67. The figure also missed our model estimates of a loss of $1.62 per share. In the year-ago quarter, the company reported earnings of 18 cents per share.
Revenues in the reported quarter totaled $165.1 million, down 46% from the prior-year period’s level. This decline was caused by a reduction in COVID-related contract development and manufacturing (CDMO) revenues. The top line beat the Zacks Consensus Estimate and our model estimates of $143 million and $143.8 million, respectively.
Quarter in Detail
Total product sales decreased 40.0% to $143.4 million from the year-ago quarter’s level. This was due to the year-over-year deterioration in sales of the Anthrax vaccine and ACAM2000.
Sales of anthrax vaccines (BioThrax and AV7909) totaled $21.9 million in the reported quarter, down 80% year over year.This decline can be attributed to a decrease in deliveries of AV7909 and BioThrax to the U.S. government’s strategic national stockpile.
Narcan (naloxone HCl) nasal spray added $100 million to product sales, up 8% year over year. This rise was likely due to higher volumes of Narcan sprays sold to public customers in Canada.
Sales of smallpox vaccine totaled $7.2 million, down 69% from the year-ago-quarter’s level, due to the unfavourable timing of ACAM2000 international sales.
Other product sales amounted to $13.9 million, up 23% year over year. The increase was primarily driven by higher Vivotif and Vaxchora product sales.
Revenues from contracts and grants plunged 32% year over year to $6.5 million.
Total CDMO revenues came in at $15.2 million compared with $60.8 million in the prior-year period. CDMO services revenues declined 74% year over year to $13.4 million. CDMO lease revenues totaled $1.8 million, indicating a substantial decline from the year-ago quarter’s level of $9 million.
The deterioration was largely due to a reduction in lease revenues related to the Janssen contract termination.
Q2 2023 Guidance
Emergent expects total revenues in the band of $210-$230 million for second-quarter 2023.
2023 Guidance
Emergent updated its guidance for adjusted EBITDA, adjusted net loss and net loss. The company also revised the categories used in discussing product/service level revenues.
Projection for total revenues remains unchanged at $1.1-$1.2 billion range.
EBS anticipates a net loss of $185-$135 million for 2023 compared with the previous guidance of a loss of $180-$130 million. It also expects an adjusted net loss of $85-$35 million compared with the previous projection of a loss of $80-$30 million.
Adjusted gross margin is anticipated between 39-42% (earlier estimate: 41-44%).
Management expects Anthrax Medical Counter measures (Anthrax MCM) sales — including AV7909, BioThrax, Anthrasil and raxibacumab — in the range of $260-$280 million. Revenues from the Narcan nasal spray are now expected in the band of $360-$380 million (previously $290-$310 million).
Product sales from Smallpox MCM (including ACAM2000, Vigiv and Tembexa) are expected to add $235-$255 million to the company’s total revenues. EBS expects revenues of $120-$140 million (previously $165-$185 million) from other products.
It projects CDMO revenues of $90-$110 million compared with the prior guidance of $115-$135 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted -8.89% due to these changes.
VGM Scores
Currently, Emergent Biosolutions has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Emergent Biosolutions has a Zacks Rank #5 (Strong Sell). We expect a below average 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, Editas Medicine (EDIT), a stock from the same industry, has gained 5.3%. The company reported its results for the quarter ended March 2023 more than a month ago.
Editas reported revenues of $9.85 million in the last reported quarter, representing a year-over-year change of +45.5%. EPS of -$0.71 for the same period compares with -$0.74 a year ago.
Editas is expected to post a loss of $0.77 per share for the current quarter, representing a year-over-year change of +1.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.2%.
Editas 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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