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Emergent's (EBS) Q1 Earnings Miss, Revenues Beat Estimates

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Emergent BioSolutions Inc. (EBS - Free Report) reported first-quarter 2022 adjusted earnings of 18 cents per share, which missed the Zacks Consensus Estimate of 24 cents. In the year-ago quarter, EBS had reported earnings of $1.53 per share.

Revenues in the reported quarter were $307.5 million, down 10% from the prior-year period’s level. Although Emergent reported higher product sales, the same was largely offset by lower contract development and manufacturing (CDMO) revenues in the quarter. Revenues beat the Zacks Consensus Estimate of $292.3 million.

Shares of Emergent BioSolutions have declined 15.8% in the year so far compared with the industry’s 20.6% decrease.

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Quarter in Detail

Total product sales increased 72% from the year-ago quarter’s level to $237.1 million, driven by strong sales of the anthrax vaccine, the Narcan nasal spray and smallpox vaccine.

Sales of anthrax vaccines (BioThrax and AV7909) were $103.6 million in the reported quarter, up 88% year over year. The increase in sales of anthrax vaccines was owing to a rise in deliveries of AV7909 for the strategic national stockpile.

Narcan (naloxone HCl) nasal spray added $93.1 million to product sales, up 25% year over year, driven primarily by growth in the U.S. and Canadian markets.

Emergent reported sales of $14.4 million for its smallpox vaccine ACAM2000, driven by international sales.

Other product sales were $26 million compared with $8.7 million in the year-ago period.

Revenues from contracts and grants declined 55% year over year to $9.6 million. This substantial decline was on account of lower revenues from the Biomedical Advanced Research and Development Authority (BARDA) due to termination of a development and manufacturing agreement last November.

Total CDMO revenues were down 67% year over year to $60.8 million. While CDMO services revenues declined 23% year over year to $51.8 million, the CDMO leases revenues fell 92% to $9 million. The decline in CDMO services revenues was due to maintenance-related work carried out at one of Emergent’s facilities, which reduced manufacturing activities. Revenues from the CDMO leases fell due to completion of a public-private partnership between EBS and BARDA

Emergent reported adjusted EBITDA of $36 million for the first quarter, down 71% from the prior-year quarter’s level.

Recent Updates

Emergent completed the rolling submission of the biologic license application (BLA) for its new anthrax vaccine candidate AV7909 in the last week.

Update on 2022 Guidance

Alongside its first-quarter results, Emergent announced that it is temporarily suspending its CDMO financial guidance. The decision was taken after Johnson & Johnson (JNJ - Free Report) announced the suspension of its previously issued 2022 financial guidance for its COVID-19 vaccine on its first-quarter conference call earlier this month.

J&J took this step in the wake of global surplus supply and demand uncertainty. The manufacturing of J&J’s COVID-19 vaccine is one of Emergent’s key CDMO contracts. Hence, until EBS gets a better understanding of J&J’s COVID-19 vaccine requirements, it is also temporarily suspending guidances on other metrics, including total revenues, adjusted net income, adjusted EBITDA and gross margin.

However, EBS maintained its previous guidance for all other business segments. Management continues to expect sales of $280-$300 million from anthrax vaccines, $190-$210 million from smallpox vaccine and $240-$310 million from the Narcan nasal spray. The projection for revenues from other products, and Contracts and Grants was reaffirmed in the range of $200-$260 million.

Zacks Rank & Stocks to Consider

Currently, Emergent BioSolutions has a Zacks Rank #5 (Strong Sell).

Better-ranked stocks in the same sector include Deciphera Pharmaceuticals (DCPH - Free Report) and Vertex Pharmaceuticals (VRTX - Free Report) , each holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Deciphera Pharmaceuticals’ loss per share estimates for 2022 have narrowed from $2.94 to $2.84 in the past 30 days. The same for 2023 has narrowed from $2.38 to $2.27 in the past 30 days. DCPH has risen 10.9% in the year-to-date period.

Earnings of Deciphera Pharmaceuticals missed estimates in three of the last four quarters and beat the mark once, the average surprise being 2.7%.

Vertex Pharmaceuticals’ earnings per share estimates for 2022 have increased from $14.52 to $14.56 in the past 30 days. The same for 2023 has risen from $15.31 to $15.35 in the past 30 days. VRTX has rallied 22.3% in the year so far.

Earnings of Vertex Pharmaceuticals beat estimates in each of the last four quarters, the average being 10%.