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Emergent (EBS) to Start Restructuring Plan, Lays Off 5% Workforce
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Shares of Emergent BioSolutions (EBS - Free Report) were down 3.1% on Jan 9 after management announced its restructuring plans to strengthen its business performance.
As part of its strategic plans, Emergent will create a new Science and Development (S&D) function that unites research, product development and clinical teams. It will also reshuffle several of its leadership roles.
Given the above measures, management will lay off 132 roles in the organization representing nearly 5% of the workforce. This is likely to benefit management in the long term as it expects to result in annualized savings of over $60 million. However, the company will incur around $9-$11 million in first-quarter 2023 associated with the company’s restructuring initiatives.
These restructuring activities undertaken by management are likely to account for the decline in contract development and manufacturing (CDMO) service revenues. This decline was due to the loss of revenues from AstraZeneca (AZN - Free Report) and Janssen, a Johnson &Johnson (JNJ - Free Report) subsidiary, which resulted in lower production-related work carried out at one of Emergent’s facilities, which reduced manufacturing activities.
In July 2020, J&J and Emergent entered into an agreement to provide CDMO services for J&J’s single-shot, adenovirus-based COVID-19 vaccine for five years. In June 2022, the companies announced their decision to terminate the deal, citing contract breaches.
Emergent had received a setback in 2020 when there was a manufacturing mishap at its Bayview facility where COVID-19 vaccine ingredients of J&J and AstraZeneca reportedly got mixed and led to several faulty batches of J&J’s vaccine. Emergent lost its contract for AstraZeneca’s vaccine following the mishap.
Shares of Emergent have declined 74.2% in the past year compared with the industry’s 17.3% fall.
Image Source: Zacks Investment Research
Alongside its restructuring plans, Emergent also revised guidance for total revenues, adjusted EBITDA and adjusted net income/loss.
Management slightly raised its previous guidance for full-year 2022 revenues from the range of $1.05 billion and $1.10 billion and now expects it to be between $1.10 billion and $1.12 billion.
The company now expects adjusted EBITDA in the range of $20-$40 million, up from $0-$30 million expected previously.
Emergent also raised the lower end of the adjusted net loss. It now expects adjusted loss between $(90)-$(70) million, compared to the previous expectation of $(100)-$(70) million range.
In the past 60 days, estimates for Allogene’s 2022 loss per share have narrowed from $2.39 to $2.38. In the same period, the loss per share estimate for 2023 has narrowed from $2.84 to $2.82. Shares of Allogene have declined 54.0% in the past year.
Earnings of Allogene beat estimates in each of the last four quarters, witnessing an earnings surprise of 9.44%, on average. In the last reported quarter, Allogene’s earnings beat estimates by 6.45%.
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Emergent (EBS) to Start Restructuring Plan, Lays Off 5% Workforce
Shares of Emergent BioSolutions (EBS - Free Report) were down 3.1% on Jan 9 after management announced its restructuring plans to strengthen its business performance.
As part of its strategic plans, Emergent will create a new Science and Development (S&D) function that unites research, product development and clinical teams. It will also reshuffle several of its leadership roles.
Given the above measures, management will lay off 132 roles in the organization representing nearly 5% of the workforce. This is likely to benefit management in the long term as it expects to result in annualized savings of over $60 million. However, the company will incur around $9-$11 million in first-quarter 2023 associated with the company’s restructuring initiatives.
These restructuring activities undertaken by management are likely to account for the decline in contract development and manufacturing (CDMO) service revenues. This decline was due to the loss of revenues from AstraZeneca (AZN - Free Report) and Janssen, a Johnson &Johnson (JNJ - Free Report) subsidiary, which resulted in lower production-related work carried out at one of Emergent’s facilities, which reduced manufacturing activities.
In July 2020, J&J and Emergent entered into an agreement to provide CDMO services for J&J’s single-shot, adenovirus-based COVID-19 vaccine for five years. In June 2022, the companies announced their decision to terminate the deal, citing contract breaches.
Emergent had received a setback in 2020 when there was a manufacturing mishap at its Bayview facility where COVID-19 vaccine ingredients of J&J and AstraZeneca reportedly got mixed and led to several faulty batches of J&J’s vaccine. Emergent lost its contract for AstraZeneca’s vaccine following the mishap.
Shares of Emergent have declined 74.2% in the past year compared with the industry’s 17.3% fall.
Image Source: Zacks Investment Research
Alongside its restructuring plans, Emergent also revised guidance for total revenues, adjusted EBITDA and adjusted net income/loss.
Management slightly raised its previous guidance for full-year 2022 revenues from the range of $1.05 billion and $1.10 billion and now expects it to be between $1.10 billion and $1.12 billion.
The company now expects adjusted EBITDA in the range of $20-$40 million, up from $0-$30 million expected previously.
Emergent also raised the lower end of the adjusted net loss. It now expects adjusted loss between $(90)-$(70) million, compared to the previous expectation of $(100)-$(70) million range.
Emergent Biosolutions Inc. Price
Emergent Biosolutions Inc. price | Emergent Biosolutions Inc. Quote
Zacks Rank & Stock to Consider
Emergent currently carries a Zacks Rank #5 (Strong Sell). A better-ranked stock in the overall healthcare sector is Allogene (ALLO - Free Report) , which currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past 60 days, estimates for Allogene’s 2022 loss per share have narrowed from $2.39 to $2.38. In the same period, the loss per share estimate for 2023 has narrowed from $2.84 to $2.82. Shares of Allogene have declined 54.0% in the past year.
Earnings of Allogene beat estimates in each of the last four quarters, witnessing an earnings surprise of 9.44%, on average. In the last reported quarter, Allogene’s earnings beat estimates by 6.45%.