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Emergent Biosolutions (EBS) Down 28.1% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Emergent Biosolutions (EBS). Shares have lost about 28.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Emergent Biosolutions due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Emergent's Q4 Earnings Miss Estimates, Revenues Beat

Emergent BioSolutions reported an adjusted loss of 31 cents per share in fourth-quarter 2022, missing the Zacks Consensus Estimate of earnings of 32 cents.The bottom line also missed our model estimates of 18 cents. In the year-ago quarter, EBS reported earnings of $4.50 per share.

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Revenues in the reported quarter were $330.7 million, down 54% from the prior-year quarter’s level. This decline was caused by a reduction in COVID-related contract development and manufacturing (CDMO) revenues. The top line beat both the Zacks Consensus Estimate and our model estimates of $311.4 million.

Quarter in Detail

Total product sales were $305.7 million, down 30.0% from the year-ago quarter’s level. This was due to year-over-year decreased sales of the Anthrax vaccine, Narcan nasal spray, ACAM2000 and other products. The underperformance was partially offset as the company started recording Tembexa product sales in fourth-quarter 2022.

Sales of anthrax vaccines (BioThrax and AV7909) were $50.9 million in the reported quarter, down 63.0% year over year. This decline can be attributed to a decrease in deliveries of AV7909 to the U.S. government’s Strategic National Stockpile (SNS).

Narcan (naloxone HCl) nasal spray added $91.1 million to product sales, down 24.0% year over year. The decline was likely due to erosion in sales, following the launch of a generic in December 2021. The downside was slightly offset by higher volumes of Narcan sprays sold to public interest customers in Canada and the United States.

Following the acquisition of worldwide rights to Tembexa in September 2022, the company added product sales of $117.6 million during the quarter.Emergent did not report any product sales from its smallpox vaccine, ACAM2000, in the fourth quarter. In the year-ago period, the company had recorded sales of $125.8 million from ACAM2000. The decline was caused by the timing of deliveries to the U.S. government.

Other product sales were $46.1 million, down 8% year over year. Revenues from contracts and grants plunged 90% year over year to $7.1 million.

Total CDMO revenues were $17.9 million compared with the year-ago quarter’s $218.3 million. While CDMO services revenues declined 65.0% year over year to $17.7 million, CDMO lease revenues were $0.2 million, a substantial fall from the year-ago quarter’s $167.1 million.

This significant decline in CDMO services revenues was due to no combined revenues of COVID-19 vaccine from AstraZeneca and Janssen, a Johnson & Johnson subsidiary, during the quarter.

Emergent reported an adjusted EBITDA of $34.2 million for the fourth quarter, down 82% year over year.

Full-Year 2022 Results

Emergent reported revenues of $1.12 billion, down 37.0% year over year.

It reported an adjusted loss of $2.23 per share against earnings of $6.02 in the previous year.

Its cash, cash equivalents and marketable securities were $642.6 million as of Dec 31, 2022, compared with $241 million as of Sep 30, 2022.

2023 Guidance

Emergent has issued fresh guidance for total revenues, adjusted EBITDA and CDMO services.

The company expects full-year 2023 revenues in the $1.10-$1.20 billion range. For the first quarter, it expects total revenues between $130 million and $150 million.

Management expects Anthrax Medical Countermeasures (Anthrax MCM) sales — including AV7909, BioThrax, Anthrasil and raxibacumab — in the range of $260-$280 million. Revenues from the Narcan nasal spray are expected in the $290-$310 million range. Product sales from Smallpox MCM (comprising ACAM2000, Vigiv and Tembexa) are expected between $235 million and $255 million. Other product sales are expected between $165 million and $185 million. CDMO revenues are expected in the range of $115-$135 million.

Emergent also anticipates adjusted net income (loss) between $(80) million and $(30) million. Adjusted EBITDA is expected in the $75-$125 million range.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -199.63% due to these changes.

VGM Scores

At this time, Emergent Biosolutions has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Emergent Biosolutions has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Emergent Biosolutions is part of the Zacks Medical - Biomedical and Genetics industry. Over the past month, Exact Sciences (EXAS), a stock from the same industry, has gained 6.4%. The company reported its results for the quarter ended December 2022 more than a month ago.

Exact Sciences reported revenues of $553 million in the last reported quarter, representing a year-over-year change of +16.7%. EPS of -$0.72 for the same period compares with -$1.28 a year ago.

Exact Sciences is expected to post a loss of $0.79 per share for the current quarter, representing a year-over-year change of +24%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.7%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Exact Sciences. Also, the stock has a VGM Score of C.

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