Bioport/EBS finances--need to stop more civilian purchases this quarter

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From the company that spent over 2 million on lobbying last year--

ask me for the figures if you haven't seen them--Meryl

Emergent BioSolutions Inc.

August 06, 2007 04:01 PM Eastern Daylight Time

Emergent BioSolutions Reports Financial Results for Second Quarter 2007

* Year over Year Growth in Product Revenues of $14.3 Million to

$22.5 Million

ROCKVILLE, Md.--(BUSINESS WIRE)--Emergent BioSolutions Inc.

(NYSE:EBS), a biopharmaceutical company focused on developing,

manufacturing and commercializing immunobiotics to prevent or treat

disease, announced today its financial results for the second quarter

ended June 30, 2007.

Total revenues for the period grew by $11.7 million to $23.2 million

from $11.4 million in the comparable period in 2006, driven primarily

by a 169 percent increase in the number of doses of BioThrax®

(Anthrax Vaccine Adsorbed) delivered during the quarter to the U.S.

Department of Defense (the DoD) for active immunization of military

personnel. The company also announced that the net loss for the

second quarter of 2007 was $5.0 million, or $0.17 per share, compared

to a net loss of $3.1 million, or $0.14 per share, for the comparable

period in 2006, driven primarily by a $9.9 million increase in

operating expenses during the current quarter.

Commenting on the financial results, R. Don Elsey, senior vice

president and chief financial officer of Emergent BioSolutions Inc.,

said, “Year-to-date, Emergent BioSolutions is generating financial

results that are in line with our internal expectations. Our revenues

have outpaced 2006, and our R & D and G & A expenditures are as expected

and reflect our ongoing commitment to invest in our product pipeline

and manufacturing infrastructure as we continue to progress our

product candidates, as we have previously indicated. As a result, our

year-to-date net loss is currently better than the comparable period

for 2006. We remain confident that both of the contracts for new

supply agreements for BioThrax with our U.S. government customers

will be signed and we expect this will be accomplished before the end

of the third quarter, which should position us well for strong

financial performance in the future.”

2Q 2007 Highlights

The company’s achievements during the second quarter of 2007 included:

* delivery of 900,000 doses of BioThrax to the DoD, thus

completing the company’s current delivery obligation to the DoD;

* receipt of a Presolicitation Notice and a subsequent Request

For Proposal on April 18 and May 7, respectively, from DoD to procure

a minimum of 1.0 million to a maximum of 3.7 million doses of

BioThrax in each of one base period plus three optional ordering

periods for a total of up to 14.7 million doses, for which

negotiations are ongoing;

* receipt of a Presolicitation Notice and a subsequent Request

For Proposal on April 18 and May 3, respectively, from the U.S.

Department of Health and Human Services (HHS) to procure 10.4 million

doses of BioThrax, with an option for an additional 8.35 million

doses, over a three year period, for which negotiations are ongoing;

* signing of a $30 million loan agreement with HSBC to be used

to fund the continued expansion of the company’s manufacturing

facilities in Lansing, Michigan, replacing an existing $15 million

HSBC credit facility; and

* expansion of the board of directors and the subsequent

appointment of Dr. Sue as a Class III director for a two year

term that will expire at the 2009 annual meeting of stockholders.

(former ASD HA)

Product Sales

For the second quarter of 2007, product sales increased by $14.3

million to $22.5 million from $8.2 million in the comparable period

in 2006, primarily due to a 169 percent increase in the number of

doses of BioThrax delivered and a 2 percent increase in the average

sales price per dose. Product sales for the second quarter of 2007

consisted of BioThrax sales to the DoD of $22.5 million.

For the six month period of 2007, product sales increased by $27.6

million to $48.0 million from $20.4 million in the comparable period

in 2006, primarily due to a 143 percent increase in the number of

doses of BioThrax delivered, partially offset by a 3% decrease in the

average sales price per dose. Product sales for the six month period

of 2007 consisted of BioThrax sales to HHS of $21.7 million and sales

to the DoD of $26.2 million.

Contracts and Grant Revenues

For the second quarter of 2007, contracts and grant revenues

decreased by $2.6 million to $668,000 from $3.2 million in the

comparable period in 2006. Contracts and grant revenues for the

second quarter of 2007 consisted of $668,000 from recognition of the

upfront payment received in 2006 and development program revenue from

the Sanofi Pasteur collaboration relating to the company’s meningitis

B vaccine candidate.

For the six month period of 2007, contracts and grant revenues

decreased by $1.6 million to $1.7 million from $3.3 million in the

comparable period in 2006. Contracts and grant revenues for the

second quarter of 2007 consisted of $1.7 million from recognition of

the upfront payment received in 2006 and development program revenue

from the Sanofi Pasteur collaboration.

Cost of Product Sales

For the second quarter of 2007, cost of product sales increased by

$4.3 million to $5.8 million from $1.5 million for the comparable

period in 2006. For the six month period of 2007, cost of product

sales increased by $7.0 million to $11.4 million from $4.4 million

for the comparable period in 2006. The increase for both the second

quarter and six month period of 2007 was primarily attributable to

the increase in the number of BioThrax doses delivered, coupled with

increased costs associated with the company’s annual production shut-

down, the related impact on production yield and the write-off of

waste during the period.

Research and Development

For the second quarter of 2007, research and development expenses

increased by $6.6 million to $13.3 million from $6.7 million for the

comparable period in 2006. This increase primarily reflects increased

expenses of $3.8 million in the biodefense segment, $2.4 million in

the commercial segment and approximately $472,000 in other research

and development expense.

For the six month period of 2007, research and development expenses

increased by $13.2 million to $28.9 million from $15.7 million for

the comparable period in 2006. This increase primarily reflects

increased expenses of $9.1 million in the biodefense segment, $3.3

million in the commercial segment and approximately $791,000 in other

research and development expense.

The increase in biodefense spending was attributable to increased

efforts by the company on all of its biodefense programs as it

completed various studies and began subsequent studies and trials.

The increase in spending for BioThrax enhancements is related to

conducting animal efficacy studies to support applications for

marketing approval of these enhancements, which the company expects

to submit to the FDA in late 2008 or 2009. The increase in spending

for the immune globulin candidate development related primarily to

costs associated with the plasma collection and fractionation program

for the anthrax immune globulin. The increase in spending for the

recombinant botulinum vaccine program, which is in preclinical

development, resulted from advancing this program to the process

development stage. The increase in spending for the next generation

anthrax vaccine program, which has product candidates in preclinical

and Phase I clinical development, resulted from feasibility studies

and formulation development of product candidates.

The increase in commercial spending primarily reflects additional

personnel and contract service costs. The increase spending for the

typhoid vaccine candidate resulted from the ongoing Phase II study in

Vietnam, which commenced in the first quarter 2007. The increase in

spending for the hepatitis B therapeutic vaccine candidate resulted

from conducting the Phase II clinical trial, which commenced in the

first quarter 2007. The increase in spending for the group B

streptococcus vaccine candidate resulted from costs associated with

preparation for Phase I clinical trials for two of the protein

components of the vaccine candidate.

The increase in other research and development expenses was primarily

attributable to spending associated with preclinical programs that

were acquired from ViVacs GmbH in July 2006.

Selling, General and Administrative

For the second quarter of 2007, selling, general and administrative

expenses increased by $3.2 million to $12.7 million from $9.4 million

for the comparable period in 2006. SG & A expenses related to the

biodefense segment increased by $2.4 million, while SG & A expenses

related to the commercial segment increased by $858,000.

For the six month period of 2007, selling, general and administrative

expenses increased by $4.7 million to $23.9 million from $19.2

million for the comparable period in 2006. SG & A expenses related to

the biodefense segment increased by $2.8 million, while SG & A expenses

related to the commercial segment increased by $1.9 million.

The increase for the second quarter and six month period of 2007 in

both segments was primarily attributable to an increase in general

and administrative expenses resulting from the addition of personnel

related to the company’s transition to a publicly traded company and

increased legal and other professional services for the company’s

headquarters organization.

Financial Condition and Liquidity

Cash and cash equivalents at June 30, 2007 was $34.0 million versus

$76.4 million at December 31, 2006. The net decrease in cash and cash

equivalents resulted primarily from capital expenditures and cash

used in operations, including research and development expenses, the

payment of 2006 income taxes and the repayment of an existing

revolving line of credit, offset by collection of accounts receivable

related primarily to amounts due from HHS and the DoD that were

billed in December 2006 and received in January 2007.

On June 29, 2007, the company entered into a loan agreement with HSBC

Realty Credit Corporation under which HSBC provided the company with

a term loan of $30 million. This loan replaced an existing loan

arrangement with HSBC under which HSBC had provided a $10 million

term loan and a $5 million revolving line of credit. On July 3, 2007,

the company received and recorded $14.8 million in net proceeds

related to the new loan agreement.

2007 Financial Expectations

For 2007, the company reaffirms its expectation for full year total

revenue growth of 10 to 15 percent and full year positive net earnings.

Conference Call & Webcast

Company management will host a conference call at 5:00 pm Eastern on

August 6, 2007 to discuss these financial results and to provide an

update on business developments, including the status of the BioThrax

procurement contract negotiations with HHS and DoD. Interested

parties may participate in the live teleconference by dialing

800/299-7928 or 617/614-3926 or via a webcast accessible at

www.emergentbiosolutions.com, under “Investors”. A replay of the

teleconference will be available on the company website or by dialing

888/286-8010 or 617/801-6888 and using the passcode 25894369,

approximately one hour after the teleconference concludes. The replay

will be available through August 20.

About Emergent BioSolutions Inc.

Emergent BioSolutions Inc. is a biopharmaceutical company dedicated

to one simple mission—to protect life. We develop, manufacture and

commercialize immunobiotics, consisting of vaccines and therapeutics

that assist the body’s immune system to prevent or treat disease. Our

biodefense business focuses on immunobiotics for use against

biological agents that are potential weapons of bioterrorism and

biowarfare. Our marketed product, BioThrax® (Anthrax Vaccine

Adsorbed), is the only vaccine approved by the U.S. Food and Drug

Administration for the prevention of anthrax infection. Our

commercial business focuses on immunobiotics for use against

infectious diseases and other medical conditions that have resulted

in significant unmet or underserved public health needs. More

information on the company is available at www.emergentbiosolutions.com.

Safe Harbor Statement

This press release includes forward-looking statements within the

meaning of the Private Securities Litigation Reform Act of 1995. Any

statements, other than statements of historical fact, including

statements regarding our strategy, future operations, future

financial position, future revenues, projected costs, prospects,

plans and objectives of management, including our expected revenue

growth and net earnings for 2007, and any other statements containing

the words " believes " , " expects " , " anticipates " , " plans " , " estimates "

and similar expressions, are forward-looking statements. There are a

number of important factors that could cause the company's actual

results to differ materially from those indicated by such forward-

looking statements, including our ability to obtain new BioThrax®

sales contracts with the U.S. government; our plans for future sales

of BioThrax; our plans to pursue label expansions and improvements

for BioThrax; our plans to expand our manufacturing facilities and

capabilities; the rate and degree of market acceptance and clinical

utility of our products; our ongoing and planned development

programs, preclinical studies and clinical trials; our ability to

identify and acquire or in license products and product candidates

that satisfy our selection criteria; the potential benefits of our

existing collaboration agreements and our ability to enter into

selective additional collaboration arrangements; the timing of and

our ability to obtain and maintain regulatory approvals for our

product candidates; our commercialization, marketing and

manufacturing capabilities and strategy; our intellectual property

portfolio; our estimates regarding expenses, future revenue, capital

requirements and needs for additional financing; and other factors

identified in the company's Quarterly Report on Form 10-Q for the

quarter ended March 31, 2007 and subsequent reports filed with the

SEC. The company disclaims any intention or obligation to update any

forward-looking statements as a result of developments occurring

after the date of this press release.

Financial Statements Follow

Emergent BioSolutions Inc. and Subsidiaries

Consolidated Statements of Operations

(in thousands, except per share data)

Three months ended June 30,

2007 2006

Revenues:

Product sales $ 22,518 $ 8,212

Contracts and grants 668 3,234

Total revenues 23,186 11,446

Operating expense:

Cost of product sales 5,842 1,509

Research and development 13,342 6,701

Selling, general and administrative 12,659 9,430

Loss from operations (8,657 )

(6,194 )

Other income (expense):

Interest income 599 123

Interest expense (21 ) (62 )

Other income (expense), net 1 117

Total other income (expense) 579 178

Loss before benefit from income taxes (8,078 ) (6,016 )

Benefit from income taxes (3,117 ) (2,962 )

Net loss $ (4,961 )

$ (3,054 )

Earnings (loss) per share -- basic $ (0.17 ) $ (0.14 )

Earnings (loss) per share -- diluted $ (0.17 ) $ (0.14 )

Weighted-average number of shares -- basic

28,599 22,372

Weighted-average number of shares -- diluted 28,599 22,372

Emergent BioSolutions Inc. and Subsidiaries

Consolidated Statements of Operations

(in thousands, except per share data)

Six months ended June 30,

2007 2006

Revenues:

Product sales $ 47,964 $ 20,408

Contracts and grants 1,670 3,261

Total revenues 49,634 23,669

Operating expense:

Cost of product sales 11,358 4,370

Research and development 28,912 15,696

Selling, general and administrative 23,851 19,195

Loss from operations (14,487 )

(15,592 )

Other income (expense):

Interest income 1,473 326

Interest expense (47 ) (232 )

Other income (expense), net 178 124

Total other income (expense) 1,604 218

Loss before benefit from income taxes (12,883 ) (15,374 )

Benefit from income taxes (5,233 ) (7,684 )

Net loss $ (7,650 )

$ (7,690 )

Earnings (loss) per share -- basic $ (0.27 ) $ (0.34 )

Earnings (loss) per share -- diluted $ (0.27 ) $ (0.34 )

Weighted-average number of shares -- basic 28,234 22,360

Weighted-average number of shares -- diluted 28,234 22,360

Emergent BioSolutions Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share and per share data)

June 30, December 31,

2007 2006

ASSETS

Current assets:

Cash and cash equivalents $ 33,980 $ 76,418

Accounts receivable 19,397 43,331

Inventories 28,885 24,721

Income taxes receivable 14,787 869

Deferred tax assets - 295

Prepaid expenses and other current assets 2,561 1,703

Total current assets 99,610 147,337

Property, plant and equipment, net 96,576 78,174

Deferred tax assets, net of current 9,378 11,477

Other assets 1,432 1,267

Total assets $ 206,996 $ 238,255

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 17,347 $ 27,366

Accrued expenses and other current liabilities 3,537 3,253

Accrued compensation 7,609 7,190

Indebtedness under lines of credit - 8,930

Long-term indebtedness, current portion 2,597 2,456

Notes payable to employees - 17

Income taxes payable - 13,703

Deferred tax liability 195 -

Deferred revenue, current portion 976 1,432

Total current liabilities 32,261 64,347

Long-term indebtedness, net of current portion 30,020 31,368

Deferred revenue, net of current portion 2,773 2,997

Other liabilities 1,922 1,071

Total liabilities 66,976 99,783

Stockholders' equity:

Preferred Stock $0.001 par value; 15,000,000 authorized, 0 shares

issued and outstanding at June 30, 2007 and December 31, 2006

- -

Common Stock, $0.001 par value; 100,000,000 shares authorized;

29,730,483 and 27,596,249 shares issued and outstanding at June 30,

2007 and December 31, 2006, respectively

30 28

Additional paid-in capital 101,203 90,920

Accumulated other comprehensive loss (954 ) (473 )

Retained earnings 39,741 47,997

Total stockholders' equity 140,020 138,472

Total liabilities and stockholders' equity $ 206,996 $ 238,255

Emergent BioSolutions Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

Six months ended June 30,

2007 2006

Cash flows from operating activities:

Net loss $ (7,650 ) $ (7,690 )

Adjustments to reconcile net loss to net cash provided by (used in)

operating activities:

Stock-based compensation expense 1,160 289

Depreciation and amortization 2,332 2,002

Deferred income taxes 9,297 (835 )

Excess tax benefits from stock-based compensation (6,708 ) -

Loss on disposal of property and equipment - 5

Changes in operating assets and liabilities:

Accounts receivable 23,934 1,099

Inventories (4,164 ) (12,236 )

Income taxes (27,621 ) (8,160 )

Prepaid expenses and other assets (1,023 ) (3,038 )

Accounts payable (3,410 ) (6,464 )

Accrued expenses and other liabilities 526 (223 )

Accrued compensation 420 (927 )

Deferred revenue (680 ) 22,551

Net cash used in operating activities (13,587 ) (13,627 )

Cash flows from investing activities:

Purchases of property, plant and equipment (27,343 )

(14,421 )

Net cash used in investing activities (27,343 ) (14,421 )

Cash flows from financing activities:

Proceeds from borrowings on long term indebtedness and lines of

credit - 8,500

Issuance of common stock subject to exercise of stock options

2,419 43

Redemption of Class B common stock - (201 )

Principal payments on long term indebtedness, notes payable to

employees, and lines of credit (10,154 ) (814 )

Excess tax benefits from stock-based compensation 6,708 -

Net cash provided by (used in) financing activities (1,027 )

7,528

Effect of exchange rate changes on cash and cash equivalents

(481 ) (37 )

Net decrease in cash and cash equivalents (42,438 ) (20,557 )

Cash and cash equivalents at beginning of period 76,418

36,294

Cash and cash equivalents at end of period $ 33,980 $ 15,737

Contacts

Emergent BioSolutions Inc.

Investors Contact:

G. Burrows

Vice President, Investor Relations

301-795-1877

burrowsr@...

Meryl Nass, MD

Mount Desert Island Hospital

Bar Harbor, Maine 04609

207 288-5081 ext. 220

http://anthraxvaccine.blogspot.com

http://www.anthraxvaccine.org