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Shares of Emergent BioSolutions (EBS - Analyst Report) have gained more than 8% following the company’s impressive performance in the final quarter of 2013 with both revenues and earnings coming above expectations.

The company exited 2013 on a strong note with fourth quarter earnings per share coming in 17% above the Zacks Consensus Estimate of 35 cents. Earnings were however 6.8% below the year-ago figure. Revenues increased 3.7% year over year to $98.1 million, beating the Zacks Consensus Estimate of $94 million. Top-line growth came on the back of strong product sales.

Emergent operates through two segments – Biodefense and Biosciences. The Biodefense segment focuses on government-sponsored development and supply of measures to counter bioterrorism threats. The unit includes both the marketed products at Emergent BioSolutions – BioThrax and Reactive Skin Decontamination Lotion (RSDL). While BioThrax is marketed for anthrax prevention, RSDL is available for removing or neutralizing the effects of chemical warfare agents from the skin, including nerve agents, mustard gas and toxins. BioThrax is the sole vaccine to be approved in the U.S. for anthrax prevention.

Product sales climbed 15.2% to $85.7 million primarily due to an increase in the number of doses of BioThrax delivered. Revenues from contracts and grants declined 39% to $12.4 million in the final quarter of 2013.

Full year 2013 revenues increased 11% to $312.7 million, topping the Zacks Consensus Estimate of $309 million. Product sales climbed 19% to $257.9 million. Adjusted earnings increased 18.1% to 98 cents per share, above the Zacks Consensus Estimate of 80 cents per share.

Outlook

The company still expects 2014 total revenues in the range of $415–$445 million, reflecting a 33%–42% year over year growth. The Zacks Consensus Estimate of $431 million is within the company’s guidance range. The company expects total revenues in the range of $45–$55 million in the first quarter of 2014. The Zacks Consensus Estimate of $48 million is within the company’s guidance range.

Cangene Deal

We are positive on Emergent’s recent acquisition of Cangene. The addition of the erstwhile Cangene’s products has boosted Emergent BioSolutions’ top line. With the acquisition of Cangene, Emergent BioSolutions has acquired biodefense products like Bat (botulinum neurotoxin serotypes A, B, C, D, E, F or G), Vigiv (complications due to smallpox vaccination including eczema vaccinatum, progressive vaccinia, severe generalized vaccinia, vaccinia infections), episil (pain) and Aigiv (toxemia associated with symptomatic inhalational anthrax). Emergent has also got access to commercial products such as WinRho SDF (hemolytic disease of the newborn), HepaGam B (Hepatitis B recurrence following liver transplant in HBsAg-positive liver transplant patients and post-exposure prophylaxis) and Varizig (chickenpox infections). Moreover, a medical device by the name of Episil has also been added to Emergent’s portfolio following the acquisition.

Emergent presently carries a Zacks Rank #3 (Hold). Better-ranked stocks include Alexion Pharmaceuticals (ALXN - Analyst Report), Biogen Idec (BIIB - Analyst Report) and Alkermes (ALKS - Analyst Report). All these stocks hold a Zacks Rank #1 (Strong Buy).

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