Emergent BioSolutions(EBS) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for Q2 2021 were $398 million, an increase of $3 million compared to the prior year, consistent with guidance [29] - Adjusted EBITDA was $50 million and adjusted net income was $18 million, both showing decreases from the prior year due to various one-time expenses [29] - Cost of goods sold increased by $98 million to $228 million, reflecting higher costs associated with increased CDMO services revenues and $42 million in inventory write-offs [31] Business Line Data and Key Metrics Changes - Anthrax vaccine sales were $52 million lower than the prior year due to timing of deliveries [30] - NARCAN nasal spray sales reached $106 million, an increase driven by strong demand for opioid overdose reversal products [30] - CDMO services revenue was $191 million, reflecting contributions from all service pillars, primarily due to COVID-19 pandemic responses [30] Market Data and Key Metrics Changes - The backlog for CDMO services stood at $1.1 billion as of June 30, with an opportunity funnel of $672 million, down from $807 million at the end of Q1 [34] - The U.S. government exercised the next ACAM2000 contract option valued at approximately $182 million, with deliveries expected by the end of 2021 [31] Company Strategy and Development Direction - The company is in the second year of its 2020-2024 strategic plan, focusing on public health threats while diversifying its customer base beyond the U.S. government [13][20] - Continued collaboration with AstraZeneca and Johnson & Johnson to enhance drug substance production and address public health needs [12][21] - The company is advancing its pipeline of medical countermeasures, including a COVID-HIG candidate and a Trobigard auto-injector [15][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience and ability to meet public health challenges, emphasizing the importance of quality improvements at the Bayview facility [10][26] - The FDA's approval to resume production at Bayview is seen as a significant milestone for future operations [10][39] - The company reaffirmed its 2021 outlook, anticipating total revenue guidance of $400 million to $500 million for Q3 [39] Other Important Information - The company has a strong liquidity position with $448 million in cash and $262 million in accounts receivable, totaling nearly $710 million in current liquid assets [37] - A reorganization of the management team was announced to better position the company for long-term success [23][25] Q&A Session Summary Question: Can you provide color on the $108 million negative contract modification in the CDMO backlog? - Management indicated that the majority of the negative contract modifications were related to the wind down of work at Bayview with AstraZeneca, along with other ordinary course changes [44] Question: Will there be an update on long-term guidance for 2021? - Management is undergoing a strategy refresh and plans to provide updates either later this year or early next year [47] Question: What are the assumptions behind the NARCAN revenue guidance? - Management expects some tailwinds and headwinds impacting NARCAN revenue, setting guidance at $305 million to $325 million for 2021 [52] Question: Is there potential for M&A activity in the second half of the year? - Management is actively looking for strategic M&A opportunities while maintaining a strong liquidity position [59]