Emergent BioSolutions Reports Financial Results for Fourth Quarter and Full Year 2012

  Emergent BioSolutions Reports Financial Results for Fourth Quarter and Full
  Year 2012

Business Wire

ROCKVILLE, Md. -- March 7, 2013

Emergent BioSolutions Inc. (NYSE: EBS) announced today its financial results
for the fourth quarter and full year ended December 31, 2012.

Total revenues for 2012 were $281.9 million as compared to $273.4 million in
2011, and net income for 2012 was $23.5 million, or $0.65 per basic share, as
compared to $23.0 million, or $0.65 per basic share, in 2011.

For the fourth quarter 2012, total revenues were $94.6 million as compared to
$107.9 million in 2011, and net income was $16.1 million, or $0.45 per basic
share, as compared to $28.7 million, or $0.80 per basic share, in 2011.

Robert Kramer, executive vice president and chief financial officer of
Emergent BioSolutions, commented, “Our operational achievements in 2012 marked
another solid year of performance for the company, highlighted by our ongoing
deliveries of BioThrax to the SNS, continued advancement of our many
biodefense development contracts, progress toward licensure of Building 55,
and securing designation of our Baltimore facility by BARDA as one of three
Centers for Innovation in Advanced Development and Manufacturing in the
nation. We look to build upon these successes in 2013 as we take definitive
steps toward achieving the financial and operational goals we set out in our
growth plan.”

2012 Key Operational Accomplishments

  *Received FDA approval for BioThrax^® (Anthrax Vaccine Adsorbed)
    administered in a three-dose primary series with booster doses at 12 and
    18 months and annually thereafter;
  *Advanced toward a post-exposure prophylaxis indication for BioThrax by
    initiating a pivotal antibiotic non-interference study;
  *Progressed toward licensure of Building 55 by initiating manufacture of
    consistency lots;
  *Secured a contract option from BARDA for development of PreviThrax™
    (Recombinant Protective Antigen Anthrax Vaccine, Purified);
  *Partnered with BARDA to establish a Center for Innovation in Advanced
    Development and Manufacturing;
  *Initiated a Phase 2 study of TRU-016 in combination with bendamustine in
    patients with relapsed refractory Chronic Lymphocytic Leukemia (CLL);
  *Initiated a Phase 1b study of TRU-016 in combination with rituximab in
    patients with previously untreated CLL; and
  *Announced a three-year plan for growth and established key financial and
    operational goals to be achieved by year-end 2015.

2012 Key Financial Results

Product Sales

For the full twelve months of 2012, product sales were $215.9 million, an
increase of $13.5 million, or 7 percent, from $202.4 million in 2011,
primarily due to a 15 percent increase in the number of doses of BioThrax
delivered.

For 4Q 2012, product sales were $74.4 million, a decrease of $7.3 million, or
9 percent, from $81.7 million in 4Q 2011, primarily due to a 4 percent
decrease in the number of BioThrax doses delivered and a decrease in the
average sales price per dose.

Contracts and Grants Revenues

For the full twelve months of 2012, contracts and grants revenue was $66.0
million, a decrease of $5.0 million, or 7 percent, from $71.0 million in 2011.
The decrease in contracts and grants revenue was primarily due to decreased
revenues from our agreements with Abbott and Pfizer.

For 4Q 2012, contracts and grants revenue was $20.3 million, a decrease of
$6.0 million, or 23 percent, from $26.3 million in 4Q 2011. The decrease in
contracts and grants revenue was primarily due to decreased revenues from our
agreement with Abbott.

Cost of Product Sales

For the full twelve months of 2012, cost of product sales was $46.1 million,
an increase of $3.9 million, or 9 percent, from $42.2 million in 2011. The
increase in 2012 was primarily attributable to the 15 percent increase in the
number of BioThrax doses delivered.

For 4Q 2012, cost of product sales was $15.1 million, an increase of $0.8
million, or 6 percent, from $14.3 million in 4Q 2011. The increase was
primarily attributable to a 4 percent decrease in the number of BioThrax doses
delivered.

Research and Development

For the full twelve months of 2012, gross research and development expenses
were $120.2 million, a decrease of $4.6 million, or 4 percent, from $124.8
million in 2011. This decrease primarily reflects lower contract service
costs.

For 4Q 2012, gross research and development expenses were $35.9 million, an
increase of $6.6 million, or 22 percent, from $29.4 million in 4Q 2011. This
increase primarily reflects higher contract service costs and an upfront
payment for an exclusive license to certain rights to pandemic influenza
products.

Net R&D expense is calculated as research and development expenses less
development contract and grant reimbursements and the net loss attributable to
non-controlling interests. For the full twelve months of 2012 and 2011, net
R&D expenses were $48.8 million and $47.0 million, respectively. For 4Q 2012
and 2011, net R&D expenses were $14.6 million and $1.3 million, respectively.

Selling, General and Administrative

For the full twelve months of 2012, general and administrative expenses were
$76.0 million, an increase of $1.7 million, or 2 percent, from $74.3 million
in 2011.

For 4Q 2012, selling, general and administrative expenses were $19.5 million,
an increase of $1.2 million, or 7 percent, from $18.3 million in 4Q 2011. The
twelve month and 4Q increases were primarily due to increased spending related
to professional and personnel costs.

Financial Condition and Liquidity

Cash and cash equivalents combined with investments at December 31, 2012 was
$141.7 million compared to $145.9 million at December 31, 2011. Additionally,
at December 31, 2012, the accounts receivable balance was $96.0 million, as
compared to $74.2 million at December 31, 2011. The accounts receivable
balance for both periods is comprised primarily of unpaid amounts due related
to shipments of BioThrax accepted by the US government.

2013 Forecast

For 2013, the company is reaffirming its financial forecast of total revenue
of $290 to $310 million, split between product sales of $230 to $240 million
and contracts and grants revenue of $60 to $70 million. The company also
forecasts 2013 net income of $20 to $30 million.

For the first quarter of 2013, the company anticipates total revenues of $40
to $50 million.

Conference Call and Webcast

Company management will host a conference call at 5:00 pm Eastern on March 7,
2013 to discuss these financial results. The conference call will be
accessible by dialing 888/679-8038 or 617/213-4850 (international) and
providing passcode 76232628. A webcast of the conference call will be
accessible from the company’s website at www.emergentbiosolutions.com, under
“Investors”. A replay of the conference call will be accessible, approximately
two hours following the conclusion of the call, by dialing 888/286-8010 or
617/801-6888 and using the passcode 28122043. The replay will be available
through March 21, 2013. The webcast will be archived on the company’s website,
www.emergentbiosolutions.com, under “Investors”.

About Emergent BioSolutions Inc.

Emergent BioSolutions is a specialty pharmaceutical company seeking to protect
and enhance life by offering specialized products to healthcare providers and
governments to address medical needs and emerging health threats. Additional
information about the company may be found at www.emergentbiosolutions.com.

Follow us on twitter: @emergentbiosolu

Safe Harbor Statement

This press release includes forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Any statements, other
than statements of historical fact, including statements regarding our
strategy, future operations, future financial position, future revenues,
projected costs, prospects, plans and objectives of management, including our
expected revenue growth and net income, and any other statements containing
the words “believes”, “expects”, “anticipates”, “intends”, “plans”,
“estimates” and similar expressions, are forward-looking statements. These
forward-looking statements are based on our current intentions, beliefs and
expectations regarding future events. We cannot guarantee that any
forward-looking statement will be accurate. Investors should realize that if
underlying assumptions prove inaccurate or unknown risks or uncertainties
materialize, actual results could differ materially from our expectations.
Investors are, therefore, cautioned not to place undue reliance on any
forward-looking statement. Any forward-looking statement speaks only as of the
date of this press release, and, except as required by law, we do not
undertake to update any forward-looking statement to reflect new information,
events or circumstances.

There are a number of important factors that could cause the company’s actual
results to differ materially from those indicated by such forward-looking
statements, including appropriations for BioThrax^® procurement; our ability
to obtain new BioThrax^® sales contracts; our plans to pursue label expansions
and improvements for BioThrax^®; availability of funding for our US government
grants and contracts; our ability to identify and acquire or in license
products and product candidates that satisfy our selection criteria; the
potential benefits of our existing collaboration agreements and our ability to
enter into selective additional collaboration arrangements; our ability to
expand our manufacturing facilities and capabilities; the rate and degree of
market acceptance and clinical utility of our products; the success of our
ongoing and planned development programs; the timing of and our ability to
obtain and maintain regulatory approvals for our product candidates; and our
commercialization, marketing and manufacturing capabilities and strategy. The
foregoing sets forth many, but not all, of the factors that could cause actual
results to differ from our expectations in any forward-looking statement.
Investors should consider this cautionary statement, as well as the risk
factors identified in our periodic reports filed with the SEC, when evaluating
our forward-looking statements.

Financial Statements Follow


Emergent BioSolutions Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share data)
                                                                
                                                     December 31,
                                                     2012          2011
ASSETS
Current assets:
Cash and cash equivalents                            $ 141,666     $ 143,901
Investments                                            -             1,966
Accounts receivable                                    96,043        74,153
Inventories                                            15,161        14,661
Deferred tax assets, net                               1,264         1,735
Income tax receivable, net                             -             9,506
Restricted cash                                        -             220
Prepaid expenses and other current assets             9,213      8,276   
Total current assets                                  263,347    254,418 
                                                                     
Property, plant and equipment, net                     241,764       208,973
In-process research and development                    41,800        51,400
Goodwill                                               5,502         5,502
Assets held for sale                                   -             11,765
Deferred tax assets, net                               11,087        13,999
Other assets                                          730        807     
                                                                     
Total assets                                         $ 564,230   $ 546,864 
                                                                     
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                                     $ 31,297      $ 40,530
Accrued expenses and other current liabilities         1,488         1,170
Accrued compensation                                   22,726        20,884
Contingent value rights, current portion               -             1,748
Income tax payable, net                                115           -
Long-term indebtedness, current portion                4,470         5,360
Deferred revenue                                      1,811      1,362   
Total current liabilities                              61,907        71,054
                                                                     
Contingent value rights, net of current portion        -             3,005
Long-term indebtedness, net of current portion         58,304        54,094
Other liabilities                                     1,891      1,984   
Total liabilities                                      122,102       130,137
                                                                     
Commitments and contingencies
                                                                     
Stockholders’ equity:
Preferred stock, $0.001 par value; 15,000,000
shares authorized, 0 shares issued and outstanding     -             -
at December 31, 2012 and December 31, 2011,
respectively
Common stock, $0.001 par value; 100,000,000 shares
authorized, 36,272,550 shares issued and
35,869,392 shares outstanding at December 31,          36            36
2012; 36,002,698 shares issued and outstanding at
December 31, 2011
Treasury stock, at cost, 403,158 and 0 common          (5,906  )     -
shares at December 31, 2012 and 2011, respectively
Additional paid-in capital                             230,964       220,654
Accumulated other comprehensive loss                   (4,129  )     (3,313  )
Retained earnings                                     220,393    196,869 
Total Emergent BioSolutions Inc. stockholders'        441,358    414,246 
equity
Noncontrolling interest in subsidiaries               770        2,481   
Total stockholders’ equity                            442,128    416,727 
Total liabilities and stockholders’ equity           $ 564,230   $ 546,864 
                                                                             


Emergent BioSolutions Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except share and per share data)
                                                             
                                               Year Ended December 31,
                                               2012             2011
Revenues:
Product sales                                  $ 215,879        $ 202,409
Contracts and grants                            66,009        70,975     
Total revenues                                   281,888          273,384
                                                                  
Operating expense:
Cost of product sales                            46,077           42,171
Research and development                         120,226          124,832
Selling, general and administrative              76,018           74,282
Impairment of in-process research and           9,600         -          
development
Income from operations                           29,967           32,099
                                                                  
Other income (expense):
Interest income                                  134              105
Interest expense                                 (6         )     -
Other income (expense), net                     1,970         (261       )
Total other income (expense)                     2,098            (156       )
                                                                  
Income before provision for income taxes         32,065           31,943
Provision for income taxes                      13,922        15,830     
Net income                                      18,143        16,113     
Net loss attributable to noncontrolling         5,381         6,906      
interest
Net income attributable to Emergent            $ 23,524       $ 23,019     
BioSolutions Inc.
                                                                  
Earnings per share - basic                     $ 0.65           $ 0.65
Earnings per share - diluted                   $ 0.65           $ 0.64
                                                                  
Weighted-average number of shares - basic        36,080,495       35,658,907
Weighted-average number of shares - diluted      36,420,662       36,206,052
                                                                             


Emergent BioSolutions Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except share and per share data)
                                                             
                                               Three Months Ended December 31,
                                               2012            2011
                                               (Unaudited)
Revenues:
Product sales                                  $ 74,350         $ 81,670
Contracts and grants                            20,256        26,278     
Total revenues                                   94,606           107,948
                                                                  
Operating expense:
Cost of product sales                            15,150           14,328
Research and development                         35,945           29,376
Selling, general and administrative             19,476        18,254     
Income from operations                           24,035           45,990
                                                                  
Other income (expense):
Interest income                                  31               24
Interest expense                                 (6         )     -
Other income (expense), net                     222           (252       )
Total other income (expense)                     247              (228       )
                                                                  
Income before provision for income taxes         24,282           45,762
Provision for income taxes                      9,283         18,862     
Net income                                      14,999        26,900     
Net loss attributable to noncontrolling         1,105         1,757      
interest
Net income attributable to Emergent            $ 16,104       $ 28,657     
BioSolutions Inc.
                                                                  
                                                                  
Earnings per share - basic                     $ 0.45           $ 0.80
Earnings per share - diluted                   $ 0.44           $ 0.78
                                                                  
                                                                  
Weighted-average number of shares - basic        35,890,640       35,972,320
Weighted-average number of shares - diluted      36,410,143       36,520,245
                                                                  


Emergent BioSolutions Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
                                                              
                                     Year Ended December 31,
                                     2012          2011        2010
Cash flows from operating
activities:
Net income                           $ 18,143      $ 16,113        $ 47,184
Adjustments to reconcile to net
cash provided by operating
activities:
Stock-based compensation expense       11,115        10,739          7,063
Depreciation and amortization          11,197        9,355           5,990
Deferred income taxes                  3,383         20,188          9,229
Non-cash development expenses from     3,670         5,290           5,995
joint venture
Change in fair value of contingent     (3,005  )     221             -
value rights
Impairment of in-process research      9,600         -               -
and development
Impairment of long-lived assets        -             976             1,218
Provision for impairment of
accrued interest on note               -             -               1,032
receivable
Excess tax benefits from               (1,588  )     (4,608  )       (2,609  )
stock-based compensation
Other                                  (40     )     392             (38     )
Changes in operating assets and
liabilities:
Accounts receivable                    (21,890 )     (34,873 )       19,094
Inventories                            (500    )     (1,939  )       799
Income taxes                           8,055         1,422           (4,454  )
Prepaid expenses and other assets      (1,038  )     660             (764    )
Accounts payable                       274           2,510           3,392
Accrued expenses and other             169           (95     )       (447    )
liabilities
Accrued compensation                   1,649         (3,303  )       6,175
Deferred revenue                      449        (10,863 )    (838    )
Net cash provided by operating        39,643     12,185      98,021  
activities
Cash flows from investing
activities:
Purchases of property, plant and       (53,845 )     (54,026 )       (22,101 )
equipment
Proceeds from sale of assets           11,765        -               -
Proceeds from maturity of              1,966         4,250           6,518
investments
Purchase of investments                -             (4,187  )       -
Acquisition of Trubion
Pharmaceuticals, Inc., net of cash     -             -               (17,873 )
acquired
Repayment of note receivable          -          -           10,000  
Net cash used in investing            (40,114 )   (53,963 )    (23,456 )
activities
Cash flows from financing
activities:
Proceeds from borrowings on            13,547        27,522          15,000
long-term indebtedness
Issuance of common stock subject       761           10,026          7,235
to exercise of stock options
Excess tax benefits from               1,588         4,608           2,609
stock-based compensation
Principal payments on long-term        (10,227 )     (15,494 )       (33,291 )
indebtedness and line of credit
Contingent value right payment         (1,748  )     (10,000 )       -
Purchase of treasury stock             (5,906  )     -               -
Restricted cash deposit               220        (3      )    (2      )
Net cash provided by (used in)        (1,765  )   16,659      (8,449  )
financing activities
                                                             
Effect of exchange rate changes on    1          1           (21     )
cash and cash equivalents
                                                                     
Net increase (decrease) in cash        (2,235  )     (25,118 )       66,095
and cash equivalents
Cash and cash equivalents at          143,901    169,019     102,924 
beginning of year
Cash and cash equivalents at end     $ 141,666   $ 143,901    $ 169,019 
of year

Contact:

Emergent BioSolutions Inc.
Investor Contact
Robert G. Burrows
Vice President, Investor Relations
301-795-1877
BurrowsR@ebsi.com
or
Media Contact:
Tracey Schmitt
Vice President, Corporate Communications
301-795-1800
SchmittT@ebsi.com
 
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