Emergent BioSolutions' (NYSE:EBS) first-quarter earnings report was a bit anticlimactic, because the company released preliminary revenue and earnings for the quarter a few weeks ago when Emergent announced that it wrapped up its investigation of its manufacturing problems. The biotech estimated first-quarter revenue would fall between $62 million and $64 million, and the company would record a net loss between $21 million and $23 million. It actually had $63.6 million in revenue and a loss of $21.5.
Emergent's revenue was up 18% year over year, but most of that is due to a 115% increase in revenue from contracts, grants, and collaborations, some of which were milestone payments. Contract manufacturing also spiked, adding an additional $9.5 million to the coffers compared to last year.
The company had a full quarter of contract-manufacturing activities compared to a partial quarter a year ago, because they were acquired in the first quarter of last year. The addition of revenue for the Ebola vaccine candidate it's making for GlaxoSmithKline (NYSE:GSK) and GSK's collaborators also helped with the increase in manufacturing.
Product revenue dropped 49%, but investors needn't fret: that was entirely due to the lack of BioThrax sales in the first quarter because of the manufacturing issues. Now that that the issue has been solved -- Emergent identified a supplier component as the most probable cause of the foreign particles -- the company has begun shipping product again.
Because the drug is destined for the stockpile, and the U.S. government will take as much as Emergent can manufacture at this point, the company believes it can catch up on deliveries by the third quarter and meet the 2015 goal of BioThrax sales between $270 million and $285 million. This was set before the manufacturing problem was discovered. No harm, no foul.
Beyond 2015, Emergent looks to be in a good position to ramp manufacturing of BioThrax. In February, the biotech said that the BioThrax produced in its new Building 55 is comparable to the drug made in its current manufacturing facility. The company just needs the FDA to sign off on the change in manufacturing locations, which should occur later this year or early next year.
Once Emergent starts manufacturing out of Building 55, it will have enough capacity to meet the needs of the U.S., with some left over for other governments. Last year, most EU countries signed a joint-procurement agreement to create a stockpile of medical countermeasures, which should help Emergent sell BioThrax and its other biodefense products.
BioThrax remains Emergent's bread and butter, making up more than half of the company's expected revenue in 2015, but the acquisition of Cangene to create the biosciences division is helping Emergent become less reliant on BioThrax. The first drug out of Cangene's pipeline, Ixinity to treat hemophelia B, was approved by the FDA last week.
Management hinted that there would be more acquisitions in the near future because the company has $216 million on the books that it doesn't really need as it expects to be profitable for the full year. Further diversification should be welcome by investors. The only real question is whether the acquisition will come on the biosciences side or the biodefense side.