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Emergent (EBS) Q3 Earnings and Revenues Fall Shy of Estimates

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Emergent BioSolutions Inc. (EBS - Free Report) delivered third-quarter 2018 earnings of 55 cents per share, missing the Zacks Consensus Estimate of 62 cents. Earnings were also lower than the year-ago bottom-line figure of 73 cents.

Revenues in the reported quarter increased 16.3% from the year-earlier period’s level to $173.7 million, primarily backed by high product sales. However, the top line lagged the Zacks Consensus Estimate of $188 million.

Shares of Emergent have surged 37.5% year to date against the industry’s decline of 16.2%.

Quarter in Detail

Total product sales rose 16.7% to $133.3 million from the year-earlier quarter’s tally.

Notably, BioThrax’s sales declined 45% in the reported quarter to $45.9 million. Other product sales improved to $87.4 million from $30.8 million in the comparable quarter last year.

The increase in other product sales is almost entirely courtesy of the incremental contribution of ACAM2000 and raxibacumab, which did not generate sales in the prior-year period. Notably, raxibacumab and ACAM2000 were acquired by Emergent from GlaxoSmithkline (GSK - Free Report) and Sanofi (SNY - Free Report) , respectively, in the fourth quarter of 2017.

Contracts, grants and collaboration revenues increased 12% year over year to $18.2 million, primarily owing to greater R&D activities, associated with certain development funding programs.

Contract manufacturing revenues jumped 17% to $22.2 million compared with the year-ago tally. This upside was primarily on the completion of certain contract manufacturing services at the company’s Camden site.

Research and development (R&D) expenses were $37 million, up 63% from the level in the comparable period a year ago. This downside was caused by higher costs associated with contract development services.

Selling, general and administrative (SG&A) expenses were $42.1 million, up 22% from the level in the comparable quarter last year. This downside was due to higher cost incurred from the acquisition of PaxVax and Adapt Pharma.

2018 Outlook

Emergent raised its previously issued revenue guidance of $715-$755 million to $770-$800 million in 2018. This upped guidance was fueled by a strong organic sales growth performance year to date as well as an expected contribution from the recent buyouts of PaxVax and Adapt Pharma.

However, the company lowered its view of adjusted net income to $105-$115 million from the previous figure of $110-$125 million.

Other Updates

Emergent completed two integrations in October and remains optimistic that the transactions will add more value to the current trends in its business.

The acquisition of Adapt Pharma will add its Narcan nasal spray to Emergent’s portfolio, thereby expanding the company’s presence in the public health threats market. Total purchase consideration was up to $735 million, which included an upfront payment of $635 million in cash and Emergent’s common stock.

Emergent also completed the consolidation of specialty vaccine company, PaxVax, for an all-cash consideration of $270 million with a combination of cash in hand and borrowings under its existing credit facility.

With the PaxVax deal, Emergent acquired two marketed vaccines, namely Vivotif, the only oral vaccine licensed by the FDA for preventing typhoid fever, and Vaxchora, the only FDA-licensed vaccine for the prevention of cholera.

In July, Emergent initiated a phase I study for its pipeline candidate, ZIKV-IG, currently being developed as a therapeutic intervention against Zika virus disease. The company aims to make this complete study data available during the first quarter of 2019.

Emergent Biosolutions Inc. Price, Consensus and EPS Surprise

Emergent Biosolutions Inc. Price, Consensus and EPS Surprise | Emergent Biosolutions Inc. Quote

Zacks Rank & Stock to Consider

Emergent currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the healthcare sector is Gilead Sciences, Inc. (GILD - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Gilead Sciences’ earnings estimates have moved 4.4% north for 2018 and 4.2% for 2019 over the past 60 days.

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