Emergent BioSolutions fourth quarter total revenues increase to $107.9M

Mar 9 2012

Emergent BioSolutions Inc. (NYSE: EBS) announced today its financial results for the fourth quarter and full year ended December 31, 2011.

Total revenues for 2011 were $273.4 million as compared to $286.2 million in 2010, and net income for 2011 was $23.0 million, or $0.65 per basic share, as compared to $51.7 million, or $1.63 per basic share, in 2010.

For the fourth quarter 2011, total revenues were $107.9 million as compared to $103.2 million in 2010, and net income was $28.7 million, or $0.80 per basic share, as compared to $26.2 million, or $0.78 per basic share, in 2010.

R. Don Elsey, chief financial officer of Emergent BioSolutions, commented, "Throughout 2011, we continued to execute on our operating plan. We manufactured and delivered doses of BioThrax into the SNS, we made progress on Building 55 scale up, we secured a multi-year contract to supply BioThrax to the SNS through September 2016 valued at up to $1.25 billion, and we advanced the development of our clinical stage programs targeting infectious disease, autoimmune and inflammatory disorders and oncology. We look to build on this performance throughout 2012."

2011 Key Operational Accomplishments

• Secured a new CDC procurement contract, valued at up to $1.25 billion, to supply 44.75 million doses of BioThrax^® (Anthrax Vaccine Adsorbed) to the SNS through September 2016;
• Completed multiple engineering runs in Building 55 under a multi-year BARDA development contract, valued at up to $107.0 million, to fund qualification, validation and licensure of the manufacture of BioThrax in Building 55 at large-scale;
• Completed dosing in a Phase 1 safety study for NuThrax^TM (Anthrax Vaccine Adsorbed with CPG 7909 Adjuvant) and a Phase 1 safety study for Thravixa^TM (Fully Human Anthrax Monoclonal Antibody);
• Completed dosing in a Phase 2b infant efficacy study for MVA85A (Recombinant Tuberculosis Vaccine);
• Initiated enrollment in a Phase 2b efficacy study for MVA85A in HIV-infected adults;
• Completed enrollment in a Phase 1b combination study for TRU-016 in relapsed CLL;
• Initiated dosing in the Phase 2 portion of the combination study for TRU-016 in relapsed CLL;
• Completed enrollment in a Phase 1b combination study of TRU-016 in NHL;
• Completed enrollment in a Phase 2 dose finding study of SBI-087 in RA (by Pfizer); and
• Completed dosing in a Phase 1 safety and PK study of SBI-087 in SLE (by Pfizer).

2011 Key Financial Results

Product Sales

For the full twelve months of 2011, product sales were $202.4 million, a decrease of $49.0 million, or 19 percent, from $251.4 million in the comparable period of 2010, primarily due to a 21 percent decrease in the number of doses of BioThrax delivered due to the redeployment of potency testing capacity from BioThrax release testing to qualification of replacement reference standards and other development testing during the first quarter of 2011, coupled with decreased production yield in the period in which the doses were produced.

For 4Q 2011, product sales were $81.7 million, a decrease of $7.7 million, or 9 percent, from $89.4 million in 4Q 2010, due to a 6 percent decrease in the number of doses of BioThrax delivered due primarily to decreased production yield in the period in which the doses were produced.

Contracts and Grants Revenues

For the full twelve months of 2011, contracts and grants revenue was $71.0 million, an increase of $36.2 million, or 104 percent, from $34.8 million in the comparable period of 2010. For 4Q 2011, contracts and grants revenue was $26.3 million, an increase of $12.4 million, or 90 percent, from $13.9 million in 4Q 2010. The increase in contracts and grants revenue was primarily due to revenues from our contract with BARDA for large-scale manufacturing for BioThrax and our collaborations with Abbott and Pfizer, along with increased activity and associated revenue from our development contracts with NIAID and BARDA for NuThrax and PreviThrax^TM.

Cost of Product Sales

For the full twelve months of 2011, cost of product sales was $42.2 million, a decrease of $4.9 million, or 10 percent, from $47.1 million in the comparable period of 2010. The decrease in 2011 was attributable to the reduced number of doses of BioThrax delivered, partially offset by an increase in the cost per dose sold associated with decreased production yield in the period in which the doses were produced.

For 4Q 2011, cost of product sales was $14.3 million, a decrease of $2.7 million, or 16 percent, from $17.0 million in 4Q 2010. The decrease was attributable to the reduced number of doses of BioThrax delivered, coupled with cost savings associated with a shorter manufacturing shut down in 2011 as compared to 2010.

Research and Development

For the full twelve months of 2011, research and development expenses were $124.8 million, an increase of $35.5 million, or 40 percent, from $89.3 million in the comparable period of 2010. This increase primarily reflects higher contract service and personnel-related costs, and includes increased expenses of $30.0 million for product candidates and technology platform development activities that are categorized in the biosciences segment, increased expenses of $4.0 million categorized in the biodefense segment, and increased expenses of $1.6 million in other research and development. For 2011 and 2010, net R&D expenses were $47.0 million and $50.0 million, respectively. Net R&D expense is calculated as research and development expenses less development contract and grant reimbursements and the net loss attributable to noncontrolling interests.

For 4Q 2011, research and development expenses were $29.4 million, a decrease of $0.2 million, or 1 percent, from $29.6 million in 4Q 2010. For 4Q 2011 and 2010, net R&D expenses were $1.3 million and $13.4 million, respectively.

Selling, General and Administrative

For the full twelve months of 2011, general and administrative expenses were $74.3 million, a decrease of $1.9 million, or 3 percent, from $76.2 million in the comparable period of 2010. This decrease is primarily due to decreased spending related to professional services partially offset by increased personnel costs.

For 4Q 2011, selling, general and administrative expenses were $18.3 million, a decrease of $3.4 million, or 16 percent, from $21.7 million in 4Q 2010. This decrease is primarily due to costs incurred in the restructuring of the Company's UK operations in 4Q 2010.

Financial Condition and Liquidity

Cash and cash equivalents combined with investments at December 31, 2011 was $145.9 million compared to $171.0 million at December 31, 2010. Additionally, at December 31, 2011, the accounts receivable balance was $74.2 million, as compared to $39.3 million at December 31, 2010. The accounts receivable balance for both periods is comprised primarily of unpaid amounts due related to shipments of BioThrax accepted by the US government.

2012 Forecast

For 2012, the Company is reaffirming its financial forecast of total revenue of $280 to $300 million, split between product sales of $220 to $230 million and contracts and grants revenue of $60 to $70 million. The Company also forecasts net income of $15 to $25 million.

2012 total revenue is expected to be driven by, among other things:

• Increased dose deliveries of BioThrax under the current multi-year procurement contract with CDC; and,
• Contracts and grants revenue based on continuing work under existing, multi-year development contracts associated primarily with the Company's BioDefense Division programs.

For the first quarter of 2012, the company anticipates total revenues of $40 to $50 million.