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Emergent (EBS) Q3 Earnings Beat Estimates, Guidance Raised

Emergent BioSolutions Inc. EBS reported earnings of 73 cents per share in the third quarter of 2017, which beat the Zacks Consensus Estimate of 40 cents. The bottom line also increased from the year-ago figure of 56 cents.

Shares of Emergent have outperformed the industry so far this year. The stock has rallied 22% compared with the industry’s increase of 2.4%.

Revenues in the reported quarter increased 5% from the year-ago period to $149.4 million, primarily on the back of higher product sales and increase in contract manufacturing revenues. This was however, partially offset by lower contracts and grants revenues. The top line also beat the Zacks Consensus Estimate of $127.5 million.

Quarter in Detail

Total product sales grew 18% to $114.3 million from the year-ago period, mainly owing to other product sales, associated with the favorable timing of botulism antitoxin heptavalent (“BAT”) deliveries to the strategic national stockpile (“SNS”) and reactive skin decontamination lotion kit (“RSDL”) shipments to the department of defense (“DOD”). This also includes higher international sales of vaccinia immune globulin intravenous (VIGIV) and Trobigard (atropine sulfate, obidoxime chloride). This upside was however offset by lower BioThrax sales due to the unfavorable timing of BioThrax deliveries to the SNS.

Notably, earlier this year, Emergent signed a two-year contract with the Biomedical Advanced Research and Development Authority (“BARDA”) for the delivery of BioThrax to the SNS.

Contracts, grants and collaboration revenues plunged 48% year over year to $16.2 million, primarily due to decrease in revenues related to the completion of multiple contracts with the U.S. government as well as reduction in the R&D activities related to certain ongoing funded development programs.

On the other hand, Contract manufacturing revenues were $16.2 million, which surged significantly by 29% compared with the year-ago figure. This increase was primarily driven by the favorable timing of fill/finish services as well as certain bulk manufacturing services.

Notably, in August last year, Emergent completed the spin-off of certain assets and liabilities of its Biosciences business into a separate publicly traded company, Aptevo Therapeutics Inc. APVO.

Research and development expenses were $22.7 million, down 17% from the year-ago quarter. This is attributable to cost reduction related to development services performed during the period.

Selling, general and administrative expenses decreased 15% to $34.5 million owing to lower restructuring costs.

Other Updates

Last month, Emergent announced that it has completed the acquisition of Sanofi’s SNY ACAM2000 {Smallpox (Vaccinia) Vaccine, Live} business. The company plans to assume responsibility of supplying the product to the U.S. Strategic National Stockpile (SNS) under a 10-year contract with the Centers for Disease Control and Prevention (“CDC”).

During the same month, the company completed another contract with GlaxoSmithKline plc GSK to acquire raxibacumab, a fully human monoclonal antibody approved by the FDA for treatment and prophylaxis of inhalational anthrax.

2017 Outlook

Taking into consideration the recent acquisitions and a strong performance so far this year, Emergent raised its revenue guidance for 2017. The company now expects total revenues in the range of $540-$560 million compared with $500-$530 million, expected previously. This includes BioThrax sales expectation to range from $280 million to $290 million compared with the earlier projection of $265-$280 million. The Zacks Consensus Estimate for revenues in 2017 is $507.54 million.

Emergent Biosolutions, Inc. Price, Consensus and EPS Surprise

Emergent Biosolutions, Inc. Price, Consensus and EPS Surprise | Emergent Biosolutions, Inc. Quote

Zacks Rank

Emergent carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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