Emergent BioSolutions first quarter total revenues increase to $50.3M

Emergent BioSolutions Inc. (NYSE: EBS) announced today its financial results for the first quarter ended March 31, 2012.

Total revenues for Q1 2012 were $50.3 million as compared to $18.5 million in 2011. In addition, for Q1 2012 the company recorded a net loss of $6.8 million, or $0.19 per share, as compared to a net loss of $21.4 million, or $0.61 per share, in 2011. The Q1 2012 net loss included a one-time, non-cash charge of $9.6 million. This charge is related to impairment of in-process research and development associated with the SBI-087 product candidate, which was being developed by Pfizer. Pfizer recently notified the company of its intent to terminate its current development programs with respect to SBI-087, thus triggering the impairment charge. Without this non-cash charge, the company's non-GAAP adjusted net loss was $0.7 million, or $0.02 per share.

Daniel J. Abdun-Nabi, president and chief executive officer of Emergent BioSolutions, stated, "The performance of our core business during the first quarter was in line with expectations. We continued to manufacture and deliver BioThrax into the SNS while investing in the ongoing development of both our Biosciences and Biodefense product development programs. We look forward to achieving key milestones in 2012, including completion of Building 55 consistency lot manufacture, reviewing preliminary efficacy data from our Phase 2b TB infant trial, completing enrollment in our Phase 2 CLL combination study, and publishing data from our Phase 1b NHL combination study."

Q1 2012 Key Financial Results

Product Sales

For Q1 2012, product sales were $34.4 million, an increase of $28.8 million, from $5.6 million for Q1 2011. This increase was primarily due to a 636 percent increase in the number of doses of BioThrax delivered.

Contracts and Grants Revenues

For Q1 2012, contracts and grants revenues were $16.0 million, an increase of $3.0 million, or 23 percent, from $12.9 million for Q1 2011. The increase was primarily due to increased activity and associated revenue from our development contracts, specifically large-scale manufacturing of BioThrax and development of PreviThrax™, both funded by BARDA.

Cost of Product Sales

For Q1 2012, cost of product sales was $7.5 million, an increase of $6.4 million, from $1.1 million for Q1 2011. This increase was substantially attributable to the 636 percent increase in the number of BioThrax doses sold.

Research and Development

For Q1 2012, research and development expenses were $26.2 million, a decrease of $8.5 million, or 24 percent, from $34.8 million for Q1 2011. This decrease primarily reflects lower contract service expenses, and includes decreased expenses of $9.6 million for product candidates and technology platform development activities within the Biosciences segment, offset by increased expenses of $1.1 million related to development of product candidates within the Biodefense segment and other research and development activities. Net of development contracts and grants revenue along with the net loss attributable to noncontrolling interests, research and development expenses were $9.1 million for Q1 2012.

Selling, General and Administrative

For Q1 2012, selling, general and administrative expenses were $19.5 million, an increase of $1.3 million, or 7 percent, from $18.2 million for Q1 2011. This increase is primarily due to legal and other professional services to support business initiatives. Selling, general and administrative expenses for Q1 2012 consisted of $14.5 million associated with the Biodefense segment and $5.0 million associated with the Biosciences segment.

In-Process Research & Development

During Q1 2012, the company recorded a charge of $9.6 million attributable to impairment of the company's SBI-087 in-process research and development asset.

Financial Condition and Liquidity

Cash and cash equivalents combined with investments at March 31, 2012 was $150.4 million compared to $145.9 million at December 31, 2011. Additionally, at March 31, 2012, the accounts receivable balance was $43.7 million, which is comprised primarily of unpaid amounts due for shipments of BioThrax accepted by the US government.

Forecast: 2Q 2012

For the second quarter of 2012, the company anticipates total revenues of $70 to $80 million.

Forecast: Full Year 2012

For full year 2012, the company is reaffirming its forecast of total revenues 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 reaffirms its forecast of net income of $15 to $25 million.

Reconciliation of GAAP to Non-GAAP Net Loss

During Q1 2012, the company recorded an impairment charge of $9.6 million, which represents the entire carrying value of the company's SBI-087 in-process research and development asset. Without this non-cash charge, after taking into consideration the tax effect, the net loss for the period is reduced from $6.8 million to $0.7 million, a difference of approximately $6.1 million. The company believes that disclosing adjusted earnings figures which exclude the impact of this non-cash impairment charge provides a more meaningful measure of its operating results for comparison to future periods and previously announced guidance.