Emergent Biosolutions reports decreased revenue in 2010 first quarter

Emergent BioSolutions Inc. (NYSE: EBS) announced today its financial results for the first quarter ended March 31, 2010.

For the first quarter 2010, total revenues were $46.8 million as compared to $64.5 million in 2009, and net income was $2.5 million, or $0.08 per share, as compared to $11.1 million, or $0.37 per share, in 2009. The 2010 performance was primarily driven by sales of BioThrax^® (Anthrax Vaccine Adsorbed) based on scheduled deliveries to the Strategic National Stockpile.

R. Don Elsey, chief financial officer of Emergent BioSolutions, stated, "Our 1Q 2010 financial results were in line with our internal expectations and we remain on track to achieve our guidance for the year. For the remainder of 2010, we anticipate strong financial performance as evidenced by our reaffirmed forecast of total revenues of $235 to $255 million and net income of $20 to $30 million. This forecast does not reflect the revenue impact for 2010 associated with the anticipated awards of a multi-year development contract for BioThrax scale-up with potential funding in excess of $100 million and a multi-year development contract for our rPA vaccine candidate with potential funding in excess of $250 million."

1Q 2010 Key Financial Results

Product Sales

For 1Q 2010, product sales were $38.9 million, a decrease of $22.8 million, or 37 percent, from $61.7 million in 1Q 2009, primarily due to a 47 percent decrease in the number of doses of BioThrax^® delivered related to the timing of scheduled deliveries under our contract with HHS, partially offset by an 18 percent increase in the sales price per dose. Product sales revenues in 1Q 2010 consisted of BioThrax^® sales to HHS of $38.8 million and aggregate international and other sales of $37,000.

Contracts and Grants Revenues

For 1Q 2010, contracts and grants revenue was $7.9 million, an increase of $5.1 million, or 180 percent, from $2.8 million in 1Q 2009. Contracts and grants revenue for 2010 primarily consisted of development contract revenue from NIAID and BARDA.

Cost of Product Sales

For 1Q 2010, cost of product sales was $7.5 million, a decrease of $7.9 million, or 51 percent, from $15.4 million in 1Q 2009. This decrease was attributable to the 47 percent decrease in BioThrax^® doses sold.

Research and Development

For 1Q 2010, research and development expenses were $19.9 million, an increase of $4.0 million, or 25 percent, from $15.9 million in 1Q 2009. This increase reflects higher contract service costs, and includes increased expenses of $5.3 million on product candidates in our biodefense programs, primarily product candidates within our anthrax franchise, decreased expenses of $2.3 million related to our commercial product candidates, and increased expenses of $1.0 million in other research and development, which are in support of technology platforms and central R&D activities.

Selling, General and Administrative

For 1Q 2010, selling, general and administrative expenses were $16.2 million, an increase of $0.2 million, or 1 percent, from $16.0 million in 1Q 2009. This increase includes a $0.5 million non-cash charge associated with our Frederick, Maryland facilities and increased personnel costs related to the growth of the Company, partially offset by a $1.4 million non-cash charge during 1Q 2009 associated with acquisitions that were in progress but not completed as of December 31, 2008.

Financial Condition and Liquidity

Cash and cash equivalents at March 31, 2010 was $116.4 million compared to $102.9 million at December 31, 2009. Additionally, at March 31, 2010, the accounts receivable balance was $33.4 million, which is comprised primarily of unpaid amounts due related to shipments of BioThrax^® received and accepted by the US government in the first quarter of 2010.

2010 Forecast

For 2010, the Company is reaffirming its financial forecast of total revenues of $235 to $255 million and net income of $20 to $30 million.

Total revenue for 2010 is expected to be driven by, among other things:

• the continuation of deliveries of BioThrax^® under the current multi-year procurement contract with CDC;
• additional sales of BioThrax^® to allied foreign governments; and
• an increase in the performance of work under contracts with the U.S. government with respect to the Company's BioThrax^® related programs, anthrax immune globulin therapeutic candidate, and anthrax monoclonal antibody candidate.