Emergent BioSolutions Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Phase Completion: Completed the stabilization phase of the multi-year plan ahead of expectations, moving into the turnaround phase.
• Financial Strength: Strong Q3 financials, finished in the strongest financial position since 2021. Raised 2024 revenue and adjusted EBITDA guidance. Reduced net debt by over $200 million, refinanced debt, and improved working capital.
• Operational Progress: NARCAN volume up year-to-date, secured medical countermeasures contracts, appointed new Head of R&D and General Counsel, resolved Janssen settlement, and streamlined the site network with asset sales.

Segment Performance

• Commercial Products: In 2024 guidance, commercial product sales are $420 million to $430 million. In Q3, NARCAN sales were $95 million, with year-to-date volume up 7% but impacted by price decreases from the OTC launch. Gross margin for commercial products was 50% in Q3.
• Medical Countermeasures (MCM) Products: 2024 guidance for MCM product sales is $510 million to $550 million. In Q3, Smallpox MCM sales were $133 million (including ACAM2000 deliveries), Anthrax MCM sales were $11 million. Gross margin for MCM products was 73% in Q3. Gained FDA approval for ACAM2000 to include mpox expanded indication.
• Services Segment: 2024 guidance for services segment revenue is $105 million to $110 million, down from prior due to the sale of the Canton facility. In Q3, services segment had a negative $7 million gross profit, but approaching breakeven on a cash basis.

Guidance

• 2024 Full Year: Total revenues expected to be $1.065 billion to $1.125 billion. Commercial products sales $420 million to $430 million, MCM products sales $510 million to $550 million, services segment revenue $105 million to $110 million. Adjusted EBITDA forecasted to be $180 million to $200 million. Total segment adjusted gross margin forecasted to be 43% to 45%.

Risks

• Competitive Pricing: NARCAN facing competitive pricing pressures, needing to remain competitive while maintaining volume.
• Business Development Uncertainty: Uncertainty around success of internal growth initiatives and business development deals.
• Asset Sale Execution: Uncertainty in executing asset sales for remaining properties and sites.

Question and Answer

Q: Talk about NARCAN gross margin longer term A: Rich Lindahl said gross margin has stabilized around current levels, responding to price reductions, with ongoing efforts to improve cost of goods sold.

Q: New opportunities aligned to internal capabilities A: Joe Papa discussed internal opportunities like Ebanga, TEMBEXA, NARCAN expansions, and potential business development deals.

Q: NARCAN guidance factors, mix, evolution A: Joe Papa mentioned volume growth, competitive pricing, and factors like OTC launch, Canada sales, and opioid settlement funding influencing NARCAN guidance.

Q: Asset sales progress A: Joe Papa said they are managing sites, looking at business development opportunities, but no specific timelines for individual assets.

Q: Long-term earnings power A: Joe Papa noted significant operating expense reductions and maintained manufacturing capabilities, but no specific 2025 guidance provided