The first-quarter numbers for Emergent BioSolutions (NYSE:EBS) didn't look too great. In fact, they were arguably ugly.

Fortunately, the issues just had to do with timing of shipments of its products to the strategic national stockpile (SNS), which determines when it books the revenue. With shipments delayed but still scheduled this year, the company is sticking with its 2018 financial forecast and looking for a substantially stronger second quarter with the inclusion of the delayed shipments.

Emergent BioSolutions results: The raw numbers


Q1 2018

Q1 2017

Year-Over-Year Change


$117.8 million

$116.9 million


Income from operations

($9.5 million)

$14.9 million


Earnings per share




Data source: Emergent BioSolutions.

What happened with Emergent BioSolutions this quarter?

  • Revenue from its anthrax vaccine BioThrax was down 54% year over year, due to the aforementioned timing of deliveries to the SNS.
  • The "other" category made up most of that decline, thanks to smallpox vaccine ACAM2000 and anthrax treatment raxibacumab, which were acquired last year, although there was one shipment of ACAM2000 that also was pushed into the second quarter.
  • Revenue from contract manufacturing was up 48%, but it appears that may be a one-time benefit from milestone payments related to expansion of specific contract manufacturing capabilities at one of its manufacturing sites.
  • In line with the trend in previous quarters, revenue from contracts and grants was down 8% year over year, due to completion of multiple U.S. government development contracts. Fortunately, the completion also means there are no expenses associated with those projects, so it doesn't affect the earnings line as much as the revenue decline would suggest.
Hand in a blue glove holding a vial of blood marked positive for anthrax with vials in the background

Image source: Getty Images.

What management had to say

The ACAM2000 contract that Emerget acquired from Sanofi is near completion, but CEO Daniel Abdun-Nabi sounds confident that it'll be renewed. He said:

We are expecting to negotiate a follow-on contract with U.S. government for continued supply. We expect there will be a multi-year contract, and we expect that to have -- to be in place by year-end.

Investors should also keep an eye on NuTharax, the follow-on to BioThrax that's under contract with the ​​Biomedical Advanced Research and Development Authority (BARDA), which is progressing as outlined by Robert Kramer, Emergent's president and chief operating officer:

For our next-generation anthrax vaccine program NuThrax, we continue to progress toward [Emergency Use Authorization] submission by the end of this year. If successful, this will enable BARDA to procure NuThrax for delivery to the SNS in 2019 under our existing development and procurement contract valued at up to $1.5 billion.

Looking forward

Management is sticking with its guidance for revenue of $715 million to $755 million, resulting in net income of $95 million to $110 million. The second-quarter forecast is for revenue of $205 million to $230 million, a substantial quarter-over-quarter increase due to the shipment timing issues. If you add the two together, however, it's close to half of the annual goal. Barring any more delays, which are often out of the company's hands when the government isn't ready to accept shipments, Emergent should be able to hit its 2018 goals. And if not, there's always next year to make up the difference.

With contracts in place, new products are the key to Emergent's long-term growth. The company still has a goal of acquiring at least one new product this year, and it should get some clinical trial data for pipeline candidates in the coming year, including a vaccine against Zika virus, which could produce revenue from both government contracts for stockpiling and directly from the public for people living in or visiting the affected areas.

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