Shares of Emergent BioSolutions (EBS) have declined marginally following the company’s mixed performance in the second quarter of 2014. While revenues came in above expectations, earnings fell short of the Zacks Consensus Estimate.
The company’s second quarter earnings (on an adjusted basis) of 24 cents per share fell short of the Zacks Consensus Estimate by 2 cents. Furthermore, second quarter 2014 earnings were below the year-ago figure by 17.2%. The year-over-year decline was primarily due to higher costs incurred by the company in the reported quarter.
Revenues climbed 33.8% year over year to $110.3 million in the second quarter of 2014. A 19% increase in product sales to $78.3 million boosted revenues in the reported quarter. Revenues beat the Zacks Consensus Estimate of $108 million. BioThrax sales grew 2.9% to $67.5 million in the quarter due to the timing of deliveries to the Strategic National Stockpile (SNS).
We note that BioThrax is the sole vaccine to be cleared by the FDA for the pre-exposure prophylaxis of anthrax disease. Emergent BioSolutions is looking to get BioThrax approved for the post-exposure prophylaxis of anthrax resulting from exposure (suspected or confirmed) to bacillus anthracis in combination with antibiotics for treating patients with suspected or confirmed exposure to anthrax spores.
Emergent BioSolutions’ acquisition of Cangene in Feb 2014 has broadened the company’s product portfolio and pipeline substantially. Prior to the Cangene acquisition, the Biodefense segment at Emergent BioSolutions had only two marketed products — BioThrax and Reactive Skin Decontamination Lotion (RSDL). The Cangene acquisition took the number of revenue generating products at the segment to five. The new additions are Bat (botulism antitoxin heptavalent (A, B, C, D, E, F, G)-equine), Vigiv (vaccinia immune globulin intravenous (human)) and Aigiv (anthrax immune globulin intravenous (human)).
Aigiv, though not yet approved by any regulatory agency, is purchased by the U.S. Health & Human Services for delivery into the SNS to combat a crisis under an emergency use authorization. Aigiv is being developed under a contract (worth $160 million) with the Biomedical Advanced Research and Development Authority for treating inhalation anthrax. Apart from announcing earnings results, Emergent BioSolutions announced the submission of a Biologics License Application for Aigiv to the FDA for the above indication.
Besides this Emergent BioSolutions announced that the U.S. government has exercised contract options worth $18.9 million for the supply of Vigiv into the SNS over a three-year period. Vigiv is approved for treating complications arising from small pox vaccination. The contract is now worth $36.6 million following the modification.
The acquisition of Cangene also added a contract manufacturing services business (contract services to third parties) which operates under the Biosciences division. Contract manufacturing revenues were $9.2 million in the second quarter of 2014.
Revenue Guidance
The company now expects 2014 revenues in the range of $425 million to $450 million (old guidance: $415 million to $445 million). The addition of Cangene’s products to its portfolio and expectations of continued strong performance of BioThrax led to the improved guidance. The Zacks Consensus Estimate of $428 million is on the lower end of the company’s guidance. The company also increased its third quarter revenue guidance to the band of $110 million to $125 million from $95 million to $110 million. The Zacks Consensus Estimate of $121 million is on the higher end of the guidance range.
Emergent BioSolutions carries a Zacks Rank #3 (Hold). Better-ranked stocks in the health care sector include Gilead Sciences (GILD), Actelion (ALIOF) and Curis (CRIS). All three stocks sport a Zacks Rank #1 (Strong Buy).
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