Emergent BioSolutions Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• The company had a great quarter and is on track to exceed initial 2025 revenue and adjusted EBITDA guidance. Year-to-date, it secured 11 contract modifications and product orders for the biodefense business and maintained market leadership in the nasal naloxone category.
• Third quarter revenues were $231 million, $21 million above the high end of the Q3 guidance range of $180 million to $210 million. Profitability improved, with year-to-date adjusted EBITDA reaching the high end of the full year guidance.
• Adjusted EBITDA guidance range was increased to $195 million to $210 million from $175 million to $200 million. Liquidity remained very strong with $346 million in financial capacity, and net leverage improved to approximately 2x net debt to adjusted EBITDA.
• Progress in the MCM segment with 4 new contract modifications in the third quarter, and international customers representing 34% of MCM sales year-to-date. The naloxone business remains strong, with NARCAN unit volume growing 13% and revenue 9% quarter-over-quarter, expecting continued market growth.

Segment Performance

• Naloxone nasal spray: Revenue totaled $188 million, reflecting improved sequential momentum from the second and third quarters.
• Anthrax medical countermeasure: Revenue was $61 million based on the timing of government procurement orders.
• Smallpox: Revenue was $231 million, an increase of $30 million or 15%, reflecting deliveries under multiyear contracts and increased international orders.
• Other revenues: $49 million. Normalizing for prior year items (e.g., Janssen settlement and Camden facility revenue), other revenues grew $25 million year-over-year due to increased services demand in the Winnipeg facility and C&G revenue related to the Ebanga development program.
• Segment revenue guidance:
  • MCM product sales: $450 million to $475 million (international sales represent 34% of MCM sales year-to-date, up from mid- to high teens in past years).
  • Commercial products, including KLOXXADO: $265 million to $300 million (year-to-date commercial product sales were $188 million with stable pricing across the U.S. public interest channel).

Guidance

• Raised total revenue guidance to a range of $775 million to $835 million, a $5 million improvement at the midpoint.
• Increased adjusted EBITDA guidance to a range of $195 million to $210 million, a $15 million increase at the midpoint compared to prior forecast.
• Raised the midpoint of the medical countermeasures products revenue guidance while maintaining the prior guidance range for commercial products. MCM product sales guidance: $450 million to $475 million; Commercial products guidance: $265 million to $300 million.

Risks

• No specific operational failures discussed, but investors are reminded to consider the cautionary statement and risk factors identified in Emergent's periodic reports filed with the SEC when evaluating forward-looking statements.

Question and Answer

• Q: What drove the strong year-over-year growth in other products specifically?

A: A lot of it is driven by contracts and grants with the Ebanga program having significant activity this year.

• Q: With international driving 34% of MCM orders year-to-date, can we think of these orders as recurring? Are they part of multiyear contracts? Or are they one-off orders? And can you remind me how the gross margin on international MCM orders compares to the gross margin associated with U.S. MCM sales?

A: Viewed as part of a concentrated program and activity; any given contract is for a set amount of product in a set amount of time, but international opportunity is seen as a growth opportunity; international gross margins are higher with the U.S. government getting most favored nation pricing.

• Q: For NARCAN, you mentioned OTC sales and Canadian sales fell year-over-year. What are you seeing in each of those segments of the business? And should we consider any impact from the government shutdown to the NARCAN business this quarter? And what about the MCM business?

A: Making good progress with Canadian provinces with variable sales timing; U.S. government employees working on biodefense initiatives continue despite the shutdown, and MCM business is supported.

• Q: Anticipate any meaningful catalysts over the next 12 months for the Rocketvax collaboration?

A: Rocketvax is making good progress, has funding for Phase I research, obtaining initial clinical trial material to start trial in early 2026; Rocketvax technology uses live attenuated virus technology, and trial expected to start early 2026.

• Q: Which of the products do you think is going to be the principal driver of U.S. government contract-based revenue going forward?

A: The company's diversified product portfolio, including products for smallpox, anthrax, botulism, mpox, and Ebola-related products, are important drivers as the biodefense category is important and the company has a diverse range to address potential threats.