Why Is Emergent Biosolutions (EBS) Down 3.7% Since Last Earnings Report?
It has been about a month since the last earnings report for Emergent Biosolutions (EBS). Shares have lost about 3.7% 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 (EBS) Q3 Earnings and Revenues Miss Estimates
Emergent reported an adjusted loss of $1.27 per share in third-quarter 2022, significantly wider than the Zacks Consensus Estimate of a loss of 6 cents. In the year-ago quarter, EBS reported a loss of 36 cents per share.
Revenues in the reported quarter were $240 million, down 27% from the prior-year period’s level. The revenue decline was caused by a reduction in COVID-related contract development and manufacturing (CDMO) revenues. Revenues missed the Zacks Consensus Estimate of $268 million.
Quarter in Detail
Total product sales decreased 31.2% from the year-ago quarter’s level to $186.2 million, owing to the year-over-year decrease in sales of Narcan nasal spray, ACAM2000 and other products. The decline was slightly offset by a solid year-over-year increase in anthrax vaccine sales.
Sales of anthrax vaccines (BioThrax and AV7909) were $24.2 million in the reported quarter, up 55.1% year over year. The increase in sales of anthrax vaccines can be attributed to the timely deliveries of the Anthrax vaccines to the U.S Government (USG), specifically the Strategic National Stockpile (SNS).
Emergent received an AV7909 contract modification in September 2021 valued at approximately $399 million to deliver additional AV7909 doses to the USG through March 2023.
Narcan (naloxone HCl) nasal spray recorded product sales of $87.9 million, down 34.1% year over year. The decline in sales was due to erosion in sales following the launch of a generic in December 2021. The downside was slightly offset by higher volumes of Narcan spray sold to public interest customers in the United States and Canada. The decline in nasal naloxone revenues was also offset by the sales of the aforementioned authorized generic product licensed to Sandoz, the generic arm of Novartis.
Emergent authorized Novartis’ generic arm, Sandoz, to distribute a generic Narcan nasal spray, launched in the United States in December 2021.
Emergent reported $49 million in revenues for its smallpox vaccine ACAM2000 in the third quarter, down 39.3% year over year. The decline was due to fewer doses sold to the U.S. Government. The downfall was partially offset by a rise in the number of doses sold to the non-U. S customers at a higher price per dose.
Other product sales were $25.1 million, down 38.6% year over year.
Revenues from contracts and grants increased 3% year over year to $17.4 million.
Total CDMO revenues reached 36.4 million, compared to the year-ago quarter’s revenues of $41.6 million. While CDMO services revenues declined 67.9% year over year to $36.2 million, the CDMO lease revenues increased $71.2 million from the year-ago quarter, reaching $0.2 million.
The decline in CDMO services revenues was due to lower combined revenues of $82 million from AstraZeneca and Janssen, a Johnson &Johnson subsidiary, which resulted in lower production-related work carried out at one of Emergent’s facilities, which reduced manufacturing activities. Emergent reversed $8.3 million of previously recognized revenues under the Janssen contract.
Emergent reported an adjusted EBITDA loss of $15.2 million for the third quarter, wider than the year-ago quarter’s loss of $3.3 million.
Update on 2022 Guidance
Emergent has issued fresh guidance for total revenues, adjusted EBITDA and CDMO services while providing updated ranges for its other business segments.
The company lowered its previous guidance for full-year 2022 revenues from the range of $1.15-$1.25 billion and now expects it to be between $1.05 billion and $1.10 billion.
Management revised anthrax sales guidance and currently expects sales of $260-$275 million from anthrax vaccines, down from the previous guidance of $280-$300. The company has lowered the revenue guidance for Narcan nasal spray and smallpox vaccine. It now expects revenues from smallpox vaccine to be in the range of $63-$63 million compared with the previously guided range of $225-$250 million. Revenues from the Narcan nasal spray are expected to be between $350-$365 million, up from $300-$340 million expected previously. The projection for revenues from other products and Contracts and Grants was updated in the range of $167-$172 million from its previously expected range of $235-$240 million.
Emergent expects CDMO revenues to be in the range of $100-$110 million, revised from $105 - $110 million.
The company now expects adjusted EBITDA in the range of $0-$30 million, down from $80-$120 million expected previously.
Emergent also anticipates lower adjusted net income(loss) within $(100)-$(70) million, compared to the previous expectation of $(15)-$10 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -48.86% due to these changes.
VGM Scores
At this time, Emergent Biosolutions has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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 this revision indicates a downward shift. It's no surprise Emergent Biosolutions has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Emergent Biosolutions belongs to the Zacks Medical - Biomedical and Genetics industry. Another stock from the same industry, IVERIC bio (ISEE), has gained 7.1% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
IVERIC bio reported revenues of $0 million in the last reported quarter, representing a year-over-year change of
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