Last quarter, Emergent BioSolutions' (NYSE:EBS) numbers looked downright ugly due to delayed timing of shipments of its products to the strategic national stockpile. With those shipments made up for in the second quarter, the numbers now look absolutely great, although the year-over-year increases are just as useless as last quarter.

Emergent BioSolutions results: The raw numbers

Metric

Q2 2018

Q2 2017

Year-Over-Year Change

Revenue

$220.2 million

$100.8 million

118%

Income from operations

$66.8 million

$8.5 million

683%

Earnings per share

$0.98

$0.11

990%

Data source: Emergent BioSolutions.

What happened with Emergent BioSolutions this quarter?

  • Combining the two quarters, revenue was up 55% in the first half of the year compared to the same period last year thanks to acquisitions of smallpox vaccine ACAM2000 and anthrax treatment raxibacumab late last year. Year-to-date adjusted earnings per share increased 147%.
  • Second-quarter revenue from contract manufacturing, which wasn't affected by the shipment timing issue, increased 46%, which was mostly due to the manufacturing plant the company got in the ACAM2000 deal with Sanofi (NYSE:SNY). Emergent plans to invest up to $50 million over the next three years in one of its other manufacturing plants to further increase revenue from contract manufacturing.
  • Emergent BioSolutions set up a collaboration with Profectus BioSciences and the Coalition for Epidemic Preparedness Innovations to develop a vaccine against Nipah virus, which Emergent has an option to license.
  • A phase 1 trial for ZIKV-IG as a treatment for the Zika virus started this month.
A paper with the definition of anthrax written on it with a needle and vial sitting on the paper.

Image source: Getty Images.

What management had to say

Emergent's CEO Daniel Abdun-Nabi highlighted the potential expansion of stockpiles for chemical, biological, radiological, nuclear, and explosives (CBRNE) countermeasures in Europe discussed at the June summit of the European Council:

CBRNE threats were a major topic, particularly in light of the recent nerve agent attacks in the United Kingdom. The 28 EU Head of States formally endorsed a strategy for dealing with CBRNE threats in Europe. This was published in the European Commission joint communication, which stressed the need to accelerate full implementation of the EU CBRNE action plan. That plan contemplates that each member state will establish stockpiles of medical countermeasures and take steps to enhance access to, and enable rapid deployment of, those stockpiles.

Given Emergent's product offerings, there's obviously a big opportunity to grow sales in Europe, but Abdun-Nabi pointed out that we're still early in the process. "We don't have a lot of details on how this is going to actually unfold, but as we get into deeper conversation with member states, we will have a much better understanding for the policy and directives that they'll be launching over the course of the next 12 to 24 months," Abdun-Nabi said.

Looking forward

Management is sticking with its previously announced 2018 revenue and earnings guidance and said it expects third-quarter revenue to fall in the $165 million to $190 million range.

To get to its goal of $1 billion in sales in 2020, management is going to have to make another acquisition or two, which is still in the works for this year. The company also needs to negotiate the next contract for ACAM2000, which will hopefully come with a larger volume or price (or both!) than the contract it inherited from Sanofi. And there's potential to start generating revenue from NuThrax, the follow-on to its anthrax vaccine BioThrax, after the FDA approves the Emergency Use Authorization that's scheduled to be filed by the end of this year.

Brian Orelli has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Emergent BioSolutions. The Motley Fool has a disclosure policy.