Emergent BioSolutions Inc. (Emergent BioSolutions), a in vitro diagnostics company, has reported total revenues of $178.6 million for the full year of 2008, compared with the total revenues of $182.9 million in the previous year-end. It has reported a net income of $20.7 million, or $0.68 per diluted share, for the full year of 2008, compared with the net income of $22.9 million, or $0.77 per share diluted share, in the previous year-end.
The 2008 performance was primarily driven by sales of BioThrax (Anthrax Vaccine Adsorbed), the company’s FDA licensed vaccine for the prevention of anthrax, offset somewhat by a lower level of contracts and grants revenue.
For the fourth quarter 2008, total revenues were $35.8 million as against $89.6 million in 2007, and net income was $1.5 million, or $0.05 per share, as against net income of $27.7 million, or $0.93 per share in 2007.
R. Don Elsey, chief financial officer of Emergent BioSolutions, stated, “Our net income for 2008 exceeded the $18 to $20 million we projected on January 9, 2009. Importantly, our total revenues for 2008 were impacted by the three BioThrax® lots, representing over $12 million of additional product sales, whose delivery to HHS was delayed from the fourth quarter. Such an event is further evidence that our revenues fluctuate quarter to quarter based on the timing of deliveries of BioThrax® to HHS. Looking ahead, our business remains strong and we are confident about the prospects for growth in 2009. We currently anticipate 2009 total revenues of $225 to $240 million and continued profitability. Additionally, we are optimistic about a substantial rPA development and procurement contract award, expected to exceed $500 million, after which we would update our 2009 guidance. Finally, and consistent with our strategy for growth, we are actively pursuing acquisition opportunities that would complement our product pipeline.”
2008 Key Operational Accomplishments
Signed a multi-year follow on contract with HHS for 14.5 million additional doses of BioThrax valued at up to $405 million, providing revenue visibility through 3Q 2011;
Received FDA approval for a BioThrax® license change providing for an IM route of administration and a reduction to a five-dose schedule over 18 months;
Acquired an advanced recombinant protective antigen (rPA) anthrax vaccine candidate;
Submitted a proposal in response to the HHS RFP to procure up to 25 million doses of an rPA vaccine for the SNS, for which we are in current negotiations for a contract and are optimistic about an award shortly;
Acquired an anthrax monoclonal antibody therapeutic candidate;
Secured up to $58.5 million of government development contracts and grants to fund future work on selected anthrax and botulism product
Formed a joint venture with the University of Oxford to develop an advanced tuberculosis vaccine, with a clinical trial financed primarily by Wellcome Trust and Aeras Global TB Vaccine Foundation;
Completed a Phase IIa clinical study of TyphellaTM, the company’s single dose, oral typhoid vaccine candidate, in Vietnam, and reported it was both highly immunogenic and well-tolerated; and
Initiated a Phase IIb clinical trial of TyphellaTM in healthy patients in the U.S., which is nearing completion.
2008 Key Financial Results
For 2008, product sales were $169.1 million, a decrease of $675,000, or less than one%, as against $169.8 million in 2007. The decrease was primarily due to a 16% decline in the number of doses of BioThrax delivered, offset by an 18% increase in the average sales price per dose. Product sales in 2008 consisted of BioThrax sales to HHS of $167.6 million and aggregate international and other sales of $1.5 million. Product sales in 2007 consisted of BioThrax sales to HHS of $141.6 million, sales to the DoD of $26.2 million and aggregate international and other sales of $2.0 million.
Contracts and Grants Revenues
For 2008, contracts and grant revenue was $9.4 million, down $3.7 million, or 28%, from $13.1 million in 2007. Contracts and grants revenue for 2008 consisted of $4.4 million from our meningitis B collaboration with Sanofi Pasteur, a majority of which represents an acceleration of recognition of deferred revenue upon the conclusion of the collaboration, $3.2 million from NIAID and other governmental agencies, and $1.8 million from the sale of Pertussis-related technology and materials.
Cost of Product Sales
For 2008, cost of product sales was $34.1 million, down $6.2 million, or 15%, from $40.3 million for 2007. The decrease was attributable to the decline in the number of doses of BioThrax® delivered.
Research and Development
For 2008, research and development expenses were $59.5 million, up $5.5 million, or 10%, from $54.0 million in 2007. The increase reflects additional personnel and contract service costs, and includes increased expenses of $1.6 million on product candidates that are categorized in the biodefense segment, $3.5 million on product candidates categorized in the commercial segment, and $436,000 in other research and development expenses, which are in support of technology platforms and central research and development activities.
Selling, General and Administrative
For 2008, selling, general and administrative expenses were $55.1 million, down $479,000, or 1%, from $55.6 million in 2007. The decrease was driven by $2.1 million representing reimbursement from the company’s insurance company and an invoice to the US Department of Defense for legal fees associated with now completed product liability litigation, partially offset by an increase of about $1.8 million in our headquarters and staff organization to support the overall growth of our business.
Financial Condition and Liquidity
Cash and cash equivalents at December 31, 2008 was $91.5 million against $105.7 million at December 31, 2007. The net decrease of $14.2 million in cash and cash equivalents resulted primarily from net cash provided by operating activities of $7.6 million and financing activities of $9.0 million, offset by net cash used in investing activities of $30.8 million.
2009 Financial Outlook
For 2009, the company is forecasting 25% to 35% growth in total revenue to about $225 to $240 million. The company also anticipates 2009 net income in excess of $20 million. Forecasts for both revenue and net income exclude the potential contribution of the pending contract award from HHS related to the development and procurement of an rPA vaccine. The company is optimistic about an award for rPA shortly, upon which the company would update its 2009 guidance.
Current 2009 revenue guidance is expected to be driven by the following:
the completion of deliveries of BioThrax under the company’s 2007 contract with HHS, valued at up to $448 million, to deliver 18.75 million doses through 3Q 2009;
the initiation of deliveries of BioThrax under a follow-on, multi-year contract with HHS, valued at up to $405 million, to deliver 14.5 million doses through 3Q 2011;
a price premium for BioThrax in the event of FDA approval of the company’s pending application for 4-year expiry dating;
the performance of work in 2009 under existing development contracts with the U.S. government; these multi-year contracts, with an aggregate value of up to $72 million, support the development of the company’s anthrax immune globulin therapeutic, advanced BioThrax vaccine, anthrax monoclonal antibody therapeutic and recombinant botulinum vaccine; and
additional sales of BioThrax to allied foreign governments.