Emergent BioSolutions Reports Financial Results for First Quarter 2013

  Emergent BioSolutions Reports Financial Results for First Quarter 2013

Business Wire

ROCKVILLE, Md. -- May 02, 2013

Emergent BioSolutions Inc. (NYSE: EBS) announced today its financial results
for the first quarter ended March 31, 2013.

Total revenues for Q1 2013 were $43.1 million as compared to $50.3 million in
2012. In addition, for Q1 2013 the company recorded a net loss of $8.1
million, or $0.22 per share, as compared to a net loss of $6.8 million, or
$0.19 per share, in 2012.

For full year 2013, the company is reaffirming its forecast of total revenues
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 is also
reaffirming its full year 2013 net income forecast of $20 to $30 million. For
the second quarter of 2013, the company anticipates total revenues of $70 to
$80 million.

Daniel J. Abdun-Nabi, president and chief executive officer of Emergent
BioSolutions, stated, “Our first quarter financial performance was in line
with expectations. Moreover, year-to-date we have achieved significant
progress in our business including making strides toward approval of BioThrax
manufacturing in Building 55, as well as signing an agreement to acquire HPPD,
a profitable business with a revenue-generating, FDA-cleared product in a
growing and attractive market.”

Year-To-Date Accomplishments

  *M&A

       *Announced asset purchase agreement for Healthcare Protective Products
         Division (HPPD) of Bracco Diagnostics Inc.:

            *Adds product sales from Reactive Skin Decontamination Lotion
              (RSDL);
            *2010-2012 total revenues averaged approximately $20 million
              annually;
            *5-year (2012-2017) IDIQ procurement contract with the Department
              of Defense valued at up to $240 million in place; and
            *Expected to contribute to revenue and net income, exclusive of
              transaction costs, beginning in 2013, with further growth
              anticipated as business is expanded.

  *Biodefense

       *BioThrax^® (Anthrax Vaccine Adsorbed):

            *Initiated Post-Exposure Prophylaxis (PEP) antibiotic
              non-interference clinical trial;

            *Completed pilot non-clinical studies for BioThrax produced in
              Building 55; and
            *Received written confirmation from FDA on the acceptability of
              the design and endpoints for the pivotal non-clinical study for
              Building 55 licensure.

       *Initiated Phase 2 clinical study to evaluate safety and
         immunogenicity of NuThrax™ (BioThrax with CPG 7909 Adjuvant) for a
         PEP indication.

  *Biosciences

       *TRU-016, an ADAPTIR™ (Modular Protein Technology) therapeutic:

            *Received orphan medicinal product designation from the European
              Commission;
            *Completed enrollment in Phase 2 combination study (Study 16201)
              in relapsed/refractory CLL; and
            *Announced intention to expand Phase 1 combination study (Study
              16009) in front line CLL:

  *One cohort will examine a lower dose of TRU-016 with rituximab in front
    line CLL; and
  *One cohort will evaluate the combination in relapsed/refractory CLL
    patients.

  *Presented data at industry conferences on two preclinical programs based
    on the ADAPTIR platform - one for castration-resistant prostate cancer,
    and the second to address autoimmune disorders.

Q1 2013 Key Financial Results

Product Sales

For Q1 2013, product sales were $30.4 million, a decrease of $4.0 million from
$34.4 million for Q1 2012. This decrease was primarily due to a 14 percent
decrease in the number of BioThrax doses delivered.

Contracts and Grants Revenues

For Q1 2013, contracts and grants revenues were $12.7 million, a decrease of
$3.2 million from $16.0 million for Q1 2012. The decrease was primarily due to
decreased revenues from the company’s agreements with Abbott and Pfizer, which
were terminated in 2012, and, to a lesser extent, decreased activity and
associated revenue from the company’s development contracts with BARDA and
NIAID.

Cost of Product Sales

For Q1 2013, cost of product sales was $5.7 million, a decrease of $1.8
million from $7.5 million for Q1 2012. This decrease was substantially
attributable to the decrease in the number of BioThrax doses delivered and the
decrease in the average cost per dose.

Research and Development

For Q1 2013, research and development expenses were $30.7 million, an increase
of $4.5 million from $26.2 million for Q1 2012. This increase primarily
reflects higher contract service costs for product candidates and technology
platform development activities within the Biosciences segment. Net of
development contracts and grants revenue along with the net loss attributable
to noncontrolling interests, research and development expenses were $17.2
million for Q1 2013.

Selling, General and Administrative

For Q1 2013, selling, general and administrative expenses were $20.0 million,
relatively flat from $19.5 million for Q1 2012. This increase is primarily due
to costs related to the elimination of the company’s UK research and
development operations, substantially offset by decreased spending related to
professional services.

Financial Condition and Liquidity

Cash and cash equivalents at March 31, 2013 was $130.2 million compared to
$141.7 million at December 31, 2012. Additionally, at March 31, 2013, the
accounts receivable balance was $63.0 million and consisted primarily of
unpaid amounts due from the US government under our procurement and
development contracts.

Conference Call and Webcast

Company management will host a conference call at 5:00 pm Eastern on Thursday,
May 2, 2013 to discuss these financial results. The conference call will be
accessible by dialing 888.713.4217 or 617.213.4869 (international) and
providing passcode 31736146. 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 passcode 69284774. The replay will be available through
May 17, 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 the
expected closing of the HPPD transaction, the potential opportunities and
financial impact of the HPPD transaction, and our financial guidance, 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 uncertainties as to the satisfaction of closing
conditions with respect to the HPPD transaction, including the timing and
receipt of third party and regulatory approvals; our ability to successfully
integrate the business and realize the benefits of the HPPD transaction;
appropriations for BioThrax^® procurement; our ability to obtain new BioThrax
sales contracts or modifications to existing contracts; our plans to pursue
label expansions and improvements for BioThrax; availability of funding for
our U.S. government grants and contracts; our ability to identify and acquire
or in-license products or late-stage product candidates that satisfy our
selection criteria; whether anticipated synergies and benefits from an
acquisition or in-license are realized within expected time periods or at all;
our ability to enter into selective 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)
                                                               
                                                  March 31,       December 31,
                                                  2013           2012
ASSETS                                              (Unaudited)
Current assets:
Cash and cash equivalents                         $ 130,238       $  141,666
Accounts receivable                                 62,964           96,043
Inventories                                         22,148           15,161
Deferred tax assets, net                            1,264            1,264
Income tax receivable, net                          10,762           -
Prepaid expenses and other current assets          9,703         9,213   
Total current assets                               237,079       263,347 
                                                                     
Property, plant and equipment, net                  242,344          241,764
In-process research and development                 41,800           41,800
Goodwill                                            5,502            5,502
Deferred tax assets, net                            11,087           11,087
Other assets                                       573           730     
                                                                     
Total assets                                      $ 538,385     $  564,230 
                                                                     
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                                  $ 23,871        $  31,297
Accrued expenses and other current liabilities      1,517            1,603
Accrued compensation                                11,675           22,726
Long-term indebtedness, current portion             4,470            4,470
Deferred revenue                                   2,008         1,811   
Total current liabilities                           43,541           61,907
                                                                     
Long-term indebtedness, net of current portion      57,187           58,304
Other liabilities                                  1,852         1,891   
Total liabilities                                   102,580          122,102
                                                                     
Commitments and contingencies
                                                                     
Stockholders’ equity:
Preferred stock, $0.001 par value; 15,000,000
shares authorized, 0 shares issued and              -                -
outstanding at March 31, 2013 and December 31,
2012, respectively
Common stock, $0.001 par value; 100,000,000
shares authorized, 36,521,011 shares issued and
36,117,853 shares outstanding at March 31,          36               36
2013; 36,272,550 shares issued and 35,869,392
shares outstanding at December 31, 2012
Treasury stock, at cost, 403,158 common shares      (5,906   )       (5,906  )
at March 31, 2013 and December 31, 2012
Additional paid-in capital                          232,887          230,964
Accumulated other comprehensive loss                (3,759   )       (4,129  )
Retained earnings                                  212,330       220,393 
Total Emergent BioSolutions Inc. stockholders'     435,588       441,358 
equity
Noncontrolling interest in subsidiaries            217           770     
Total stockholders’ equity                         435,805       442,128 
Total liabilities and stockholders’ equity        $ 538,385     $  564,230 


Emergent BioSolutions Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except share and per share data)
                                             
                                               Three Months Ended March 31,
                                               2013              2012       
                                               (Unaudited)
Revenues:
Product sales                                  $ 30,359         $ 34,357
Contracts and grants                            12,741        15,954     
Total revenues                                   43,100           50,311
                                                                  
Operating expense:
Cost of product sales                            5,698            7,511
Research and development                         30,724           26,246
Selling, general and administrative              20,028           19,492
Impairment of in-process research and           -             9,600      
development
Loss from operations                             (13,350    )     (12,538    )
                                                                  
Other income (expense):
Interest income                                  23               25
Interest expense                                 (11        )     (3         )
Other income (expense), net                     17            854        
Total other income (expense)                     29               876
                                                                  
Loss before benefit from income taxes            (13,321    )     (11,662    )
Benefit from income taxes                       (4,516     )   (3,640     )
Net loss                                        (8,805     )   (8,022     )
Net loss attributable to noncontrolling         743           1,193      
interest
Net loss attributable to Emergent              $ (8,062     )  $ (6,829     )
BioSolutions Inc.
                                                                  
Loss per share - basic                         $ (0.22      )   $ (0.19      )
Loss per share - diluted                       $ (0.22      )   $ (0.19      )
                                                                  
Weighted-average number of shares - basic        35,968,064       36,045,839
Weighted-average number of shares - diluted      35,968,064       36,045,839
                                                                  


Emergent BioSolutions Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
                                                
                                                  Three Months Ended March 31,
                                                  2013              2012    
Cash flows from operating activities:             (Unaudited)
                                                                     
Net loss                                          $  (8,805   )    $ (8,022  )
Adjustments to reconcile to net cash provided
by (used in) operating activities:
Stock-based compensation expense                     2,976           2,712
Depreciation and amortization                        4,163           2,373
Deferred income taxes                                (4,516   )      6,944
Non-cash development expenses from joint             190             1,212
venture
Change in fair value of contingent value rights      -               (3,005  )
Impairment of in-process research and                -               9,600
development
Excess tax benefits from stock-based                 (1,608   )      (1,118  )
compensation
Other                                                6               (19     )
Changes in operating assets and liabilities:
Accounts receivable                                  33,079          30,501
Inventories                                          (6,987   )      (2,658  )
Income taxes                                         (7,918   )      (11,154 )
Prepaid expenses and other assets                    (246     )      443
Accounts payable                                     (4,196   )      (1,988  )
Accrued expenses and other liabilities               21              (11     )
Accrued compensation                                 (10,982  )      (10,895 )
Deferred revenue                                    197          (1,075  )
Net cash provided by (used in) operating            (4,626   )    13,840  
activities
Cash flows from investing activities:
Purchases of property, plant and equipment           (7,679   )      (22,329 )
Proceeds from sale of assets                         -               11,765
Proceeds from maturity of investments               -            1,966   
Net cash used in investing activities               (7,679   )    (8,598  )
Cash flows from financing activities:
Proceeds from borrowings on long-term                -               9,621
indebtedness
Issuance of common stock subject to exercise of      504             242
stock options
Excess tax benefits from stock-based                 1,608           1,118
compensation
Principal payments on long-term indebtedness         (1,117   )      (8,203  )
Contingent value right payment                       -               (1,748  )
Restricted cash                                     -            220     
Net cash provided by financing activities           995          1,250   
                                                                 
Effect of exchange rate changes on cash and         (118     )    32      
cash equivalents
                                                                     
Net increase (decrease) in cash and cash             (11,428  )      6,524
equivalents
Cash and cash equivalents at beginning of           141,666      143,901 
period
Cash and cash equivalents at end of period        $  130,238     $ 150,425 
                                                                     

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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