Emergent BioSolutions Inc.
05/01/2026 | Press release | Distributed by Public on 05/01/2026 07:34
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Form 10-K"). For a similar discussion and analysis of our results for the quarter ended March 31, 2025 compared to our results for the quarter ended March 31, 2024, refer to Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Quarterly Report for the quarter ended March 31, 2025, filed with the United States ("U.S.") Securities and Exchange Commission ("SEC") on May 8, 2025. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q includes information with respect to our plans and strategy for our business and financing, as well as forward-looking statements that involve risks and uncertainties. You should carefully review the sections entitled "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
BUSINESS OVERVIEW
Emergent BioSolutions Inc. ("Emergent," the "Company," "we," "us," and "our") is a global life sciences company focused on providing innovative preparedness and response solutions addressing accidental, deliberate, and naturally occurring Public Health Threats ("PHTs"). The Company's solutions include a product portfolio, a product development portfolio, and a contract development and manufacturing services ("CDMO") portfolio.
We have a portfolio of 11 products, 10 of which are owned by the Company, that contribute a substantial portion of our revenue and are sold to government and commercial customers. Additionally, we have a development pipeline consisting of a diversified mix of both pre-clinical and clinical stage product candidates. Finally, we have a fully integrated portfolio of CDMO services which cover development services, drug substance manufacturing and drug product manufacturing and packaging.
The Company structures the business with a focus on markets and customers. As such, the key components of the business structure include the following four product and service categories: Anthrax - Medical Countermeasures ("MCM") products, Naloxone commercial products, Smallpox - MCM products and Emergent Bioservices (CDMO) ("Bioservices").
The Company manages the business with a focus on three operating segments: (1) a Commercial Products segment consisting of NARCAN® Nasal Spray 4 mg and KLOXXADO® Nasal Spray 8 mg, (2) a MCM Products segment consisting of Anthrax - MCM, Smallpox - MCM and Other Products and (3) a Services segment consisting of our Bioservices offerings. Commercial Products and MCM Products are our two reportable segments (see Note 15, "Segment information" in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1, of this Form 10-Q for more information on our reportable segments).
Commercial Products Segment:
The majority of our Commercial product revenue comes from the following products:
Naloxone Products
•NARCAN® (naloxone HCl) Nasal Spray 4 mg is an intranasal formulation of naloxone approved as an over-the-counter ("OTC") medicine by the United States Food and Drug Administration ("FDA") and Health Canada for the emergency treatment of known or suspected opioid overdose as manifested by respiratory and/or central nervous system depression; and
•KLOXXADO® (naloxone HCl) Nasal Spray 8 mg is a prescription medicine. In January 2025, the Company announced an agreement with Hikma Pharmaceuticals Inc. ("Hikma") in which the Company obtained exclusive commercial rights for product sales and marketing in the United States and Canada of Hikma's KLOXXADO® (naloxone HCl) Nasal Spray, an 8 mg naloxone agent.
MCM Products Segment:
The majority of our MCM product revenue comes from the following products and procured product candidates:
Anthrax - MCM Products
•ANTHRASIL® (Anthrax Immune Globulin Intravenous (human)), the only polyclonal antibody therapeutic licensed by the FDA and Health Canada for the treatment of inhalational anthrax in combination with appropriate antibacterial drugs;
•BioThrax® (Anthrax Vaccine Adsorbed), the only vaccine licensed by the for the general use prophylaxis and post-exposure prophylaxis of anthrax disease;
•CYFENDUS® (Anthrax vaccine adsorbed (AVA), adjuvanted), previously known as AV7909, which was recently approved by the FDA for post-exposure prophylaxis of disease following suspected or confirmed exposure to Bacillus anthracis in persons 18 through 65 years of age when administered in conjunction with recommended antibacterial drugs. CYFENDUS® is procured by certain authorized government buyers for their use; and
•Raxibacumab injection, the first fully human monoclonal antibody therapeutic licensed by the FDA for the treatment and prophylaxis of inhalational anthrax.
Smallpox - MCM Products
•ACAM2000®, (Smallpox (Vaccinia) Vaccine, Live), the only single-dose smallpox vaccine licensed by the FDA for active immunization against smallpox disease for persons determined to be at high risk for smallpox infection;
•CNJ-016® (Vaccinia Immune Globulin Intravenous (Human) (VIGIV)), the only polyclonal antibody therapeutic licensed by the FDA and Health Canada to address certain complications from smallpox vaccination; and
•TEMBEXA®, an oral antiviral formulated as 100 mg tablets and 10 mg/mL oral suspension dosed once weekly for two weeks which has been approved by the FDA for the treatment of smallpox disease caused by variola virus in adult and pediatric patients, including neonates.
Other Products
•BAT® (Botulism Antitoxin Heptavalent (A,B,C,D,E,F,G)-(Equine)), the only heptavalent antitoxin licensed by the FDA and Health Canada for the treatment of symptomatic botulism; and
•Ebanga™ (ansuvimab-zykl), a monoclonal antibody with antiviral activity provided through a single IV infusion for the treatment of Ebola. Under the terms of a collaboration with Ridgeback Biotherapeutics ("Ridgeback"), Emergent will be responsible for the manufacturing, sale, and distribution of Ebanga™ in the U.S. and Canada, and Ridgeback will serve as the global access partner for Ebanga™.
Services Segment:
As of the first quarter of 2025, the Company's Services operating segment no longer met the quantitative threshold of a reportable segment and did not meet the aggregation criteria set forth in Accounting Standards Codification ("ASC") 280, Segment Reporting, and as such is categorized within "All other revenues" along with "Contracts and Grants". See Note 15, "Segment information" in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for more information about the Company's reportable segments.
Other Strategic Activities
Share Repurchase Program
In March 2025, the Company announced that its Board of Directors had authorized the repurchase of up to $50.0 million of the Company's common stock (the "2025 Share Repurchase Program") on or before March 27, 2026. In February 2026, the Company reauthorized the 2025 Share Repurchase Program for the repurchase of up to $50.0 million of the Company's common stock (the "Reauthorized Share Repurchase Program") through March 31, 2027. During the three months ended March 31, 2026, the Company utilized $9.1 million to repurchase 0.9 million shares at an average price of $10.21 per share, excluding commissions and excise taxes. As of March 31, 2026, the Company had $46.5 million available to repurchase shares under the Reauthorized Share Repurchase Program.
Senior Unsecured Note Repurchases
In May 2025, the Board authorized the Company to use up to $30.0 million to repurchase Senior Unsecured Notes in open market purchases, privately negotiated transactions or otherwise. During the year ended December 31, 2025, there were $10.3 million in principal repurchases of the Company's Senior Unsecured Notes for $8.7 million in cash, including fees, and the Company recognized a gain on extinguishment of approximately $1.6 million. The Company did not have any principal repurchases during the three months ended March 31, 2026 and 2025. As of March 31, 2026, the Company had $19.7 million available to repurchase additional Senior Unsecured Notes.
Term Loan Agreement and ABL Amendment
On April 16, 2026, subsequent to the three months ended March 31, 2026, the Company entered into a new term loan credit agreement (the "Term Loan Agreement") by and among the Company, the lenders from time to time party thereto, and OrbiMed Royalty & Credit Opportunities V, LP, as administrative agent. The Term Loan Agreement provides for a term loan of $150.0 million that matures in April 2031, subject to certain earlier maturity provisions. The agreement also provides for up to $75.0 million of additional delayed draw availability, subject to the satisfaction of specified conditions. The Company used the net proceeds from the initial term loan, together with cash on hand, to repay and terminate its Term Loan Agreement with OHA Agency LLC, as administrative agent, and the lenders from time to time party thereto (the "Prior Term Loan Agreement"), including accrued interest and fees.
Also on April 16, 2026, the Company amended its existing Revolving Credit Agreement (the "ABL Amendment"). The ABL Amendment, among other things, reduced the total revolving loan commitment to $50.0 million and extended the maturity date to April 2031, subject to customary conditions.
FINANCIAL OPERATIONS OVERVIEW
Revenues
We generate Commercial Product revenues through the sale of Naloxone products, primarily NARCAN® Nasal Spray, which is sold commercially over-the-counter at retail pharmacies and digital commerce websites as well as through physician-directed or standing order prescriptions at retail pharmacies, health departments, local law enforcement agencies, community-based organizations, substance abuse centers and other federal agencies, as well as KLOXXADO® Nasal Spray, which is currently being integrated into our distribution network, NARCANDirect®. We generate MCM Product revenues from the sale of our marketed products and procured product candidates. The U.S. government ("USG") is the largest purchaser of our Government - MCM products and primarily purchases our products for the Strategic National Stockpile, a national repository of medical countermeasures including critical antibiotics, vaccines, chemical antidotes, antitoxins, and other critical medical supplies. The USG primarily purchases our products under long-term, firm fixed-price procurement contracts, generally with annual options.
We also generate revenue from our Services segment through our Bioservices portfolio, which is based on our established development and manufacturing infrastructure, technology platforms and expertise. Our services include a fully integrated molecule-to-market Bioservices business offering across development services, drug substance and drug product for small to large pharmaceutical and biotechnology industry and government agencies/non-governmental organizations. From time to time, clients require suite reservations at our various manufacturing sites, which may be considered leases depending on the facts and circumstances.
We have received contracts and grant funding from the USG and other non-governmental organizations to perform R&D activities, particularly related to programs addressing certain CBRNE threats and EIDs.
Our revenue, operating results and profitability vary quarterly based on the timing of production and deliveries, the timing of manufacturing services performed and the nature of our business, which involves providing large scale bundles of products and services as needs arise. We expect continued variability in our quarterly financial results.
Cost of Product Sales and Services
Commercial and MCM Products - The primary expenses that we incur to deliver our Naloxone and MCM products consist of fixed and variable costs. We determine the cost of product sales for products sold during a reporting period based on the average manufacturing cost per unit in the period those units were manufactured. Fixed manufacturing costs include facilities, utilities and amortization of intangible assets. Variable manufacturing costs primarily consist of costs for materials and personnel-related expenses for direct and indirect manufacturing support staff, contract manufacturing operations, sales-based royalties, shipping and logistics. In addition to the fixed and variable manufacturing costs described above, the cost of product sales depends on utilization of available manufacturing capacity. For our commercial sales, other associated expenses include sales-based royalties, shipping, and logistics.
Services - The primary expenses that we incur to deliver our Bioservices offerings consist of fixed and variable costs, including personnel, equipment, and facilities costs. Our manufacturing process includes the production of bulk material and performing drug product work for containment and distribution of biological products. For drug product customers, we receive work in process inventory to be prepared for distribution.
Research and Development ("R&D") Expenses
We expense R&D costs as incurred. Our R&D expenses consist primarily of:
▪personnel-related expenses;
▪fees to professional service providers for, among other things, analytical testing, independent monitoring or other administration of our clinical trials and obtaining and evaluating data from our clinical trials and non-clinical studies;
▪costs associated with technology transfer and scale up activities throughout the development stage, including internally and through third-party contract manufacturers;
▪costs of Bioservices for our clinical trial material; and
▪costs of materials intended for use and used in clinical trials and R&D.
In many cases, we seek funding for development activities from external sources and third parties, such as governments and non-governmental organizations, or through collaborative partnerships. We expect our R&D spending will be dependent upon such factors as the results from our clinical trials, the availability of reimbursement of R&D spending, the number of product candidates under development, the size, structure and duration of any clinical programs that we may initiate, the costs associated with manufacturing and development of our product candidates on a large-scale basis for later stage clinical trials, and our ability to use or rely on data generated by government agencies.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses consist primarily of personnel-related costs and professional fees in support of our executives, sales and marketing, business development, government affairs, finance, accounting, information technology, legal, human resource functions and other corporate functions. Other costs include facility costs not otherwise included in cost of product sales and Bioservices or R&D expense.
Income taxes
Uncertainty in income taxes is accounted for using a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We recognize in our financial statements the impact of a tax position if that position is more likely than not of being sustained on audit, based on the technical merits of the position.
Changes in tax laws, rulings, policies, or related legal and regulatory interpretations occur frequently and may have significant favorable or adverse impacts on our effective tax rate. In 2021, the Organization for Economic Cooperation and Development released model rules for a 15% global minimum tax applied to cross-border profits of certain large multinational corporations, known as Pillar Two. Pillar Two has now been enacted by approximately 36 countries, including Ireland. This minimum tax is treated as a period cost beginning in 2024 and its impact is included on the Company's financial results of operations for the current period. The Company is monitoring legislative developments, as well as additional guidance from countries that have enacted legislation.
In July 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law in the United States. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. These impacts did not have a material effect on our tax rate for the three months ended March 31, 2026.
Management believes that the assumptions and estimates related to the provision for income taxes are material to the Company's results of operations.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, judgments and methodologies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenues and expenses. Actual results may differ from these estimates. There have been no significant changes to our critical accounting policies and estimates contained in "Critical Accounting Policies and Estimates" in Management's Discussion and Analysis of Financial Condition and Results of Operations, in Part II, Item 7, of the 2025 Form 10-K, as filed with the SEC.
New accounting standards
For a discussion of new accounting standards please see Note 2, "Summary of significant accounting policies", in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1, of this Quarterly Report on Form 10-Q.
RESULTS OF OPERATIONS
Operating Results:
| Three Months Ended March 31, | |||||||||||||||||||||||
| (in millions, except %) | 2026 | 2025 | $ Change | % Change | |||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Commercial Product sales, net: | |||||||||||||||||||||||
|
Naloxone
|
$ | 42.9 | $ | 45.3 | $ | (2.4) | (5) | % | |||||||||||||||
| Total Commercial Product sales, net | 42.9 | 45.3 | (2.4) | (5) | % | ||||||||||||||||||
| MCM Product sales, net: | |||||||||||||||||||||||
| Anthrax MCM | 21.6 | 47.9 | (26.3) | (55) | % | ||||||||||||||||||
| Smallpox MCM | 64.2 | 106.4 | (42.2) | (40) | % | ||||||||||||||||||
| Other Products | 16.0 | 2.3 | 13.7 | NM | |||||||||||||||||||
| Total MCM Product sales, net | 101.8 | 156.6 | (54.8) | (35) | % | ||||||||||||||||||
|
All other revenues (1)
|
11.4 | 20.3 | (8.9) | (44) | % | ||||||||||||||||||
| Total revenues | $ | 156.1 | $ | 222.2 | $ | (66.1) | (30) | % | |||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
|
Cost of product and services sales, net (2)
|
72.0 | 88.5 | (16.5) | (19) | % | ||||||||||||||||||
| Research and development | 10.5 | 15.1 | (4.6) | (30) | % | ||||||||||||||||||
| Selling, general and administrative | 46.6 | 52.4 | (5.8) | (11) | % | ||||||||||||||||||
| Amortization of intangible assets | 16.5 | 16.3 | 0.2 | 1 | % | ||||||||||||||||||
| Total operating expenses | 145.6 | 172.3 | (26.7) | (15) | % | ||||||||||||||||||
| Income from operations | 10.5 | 49.9 | (39.4) | (79) | % | ||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest expense | (11.0) | (14.7) | (3.7) | (25) | % | ||||||||||||||||||
| Loss on assets held for sale | - | (12.2) | (12.2) | (100) | % | ||||||||||||||||||
| Other, net | 13.9 | 69.7 | (55.8) | (80) | % | ||||||||||||||||||
| Total other income, net | 2.9 | 42.8 | (39.9) | (93) | % | ||||||||||||||||||
| Income before income taxes | 13.4 | 92.7 | (79.3) | (86) | % | ||||||||||||||||||
| Income tax provision | 6.6 | 24.7 | (18.1) | (73) | % | ||||||||||||||||||
| Net income | $ | 6.8 | $ | 68.0 | $ | (61.2) | (90) | % | |||||||||||||||
|
(1) "All other revenues" includes Services and Contracts and grants revenue
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(2) Exclusive of intangible asset amortization
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| NM - Not meaningful | |||||||||||||||||||||||
Three Months Ended March 31, 2026 Compared with Three Months Ended March 31, 2025
Revenues and gross margin
| Three Months Ended March 31, | |||||||||||||||||
| (dollars in millions) | 2026 | 2025 | % Change | ||||||||||||||
| Total revenues | $ | 156.1 | $ | 222.2 | (30) | % | |||||||||||
|
Contracts and grants
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6.4 | 13.1 | (51) | % | |||||||||||||
|
Product and services sales, net
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$ | 149.7 | $ | 209.1 | (28) | % | |||||||||||
|
Cost of product and services sales, net
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$ | 72.0 | $ | 88.5 | (19) | % | |||||||||||
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Intangible asset amortization
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16.5 | 16.3 | 1 | % | |||||||||||||
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Gross margin (1)
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$ | 61.2 | $ | 104.3 | (41) | % | |||||||||||
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Gross margin % (1)
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41 | % | 50 | % | |||||||||||||
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(1) Gross margin is calculated as product and services sales, net less cost of product and services sales, net and intangible asset amortization. Gross margin percentage is calculated as gross margin divided by products and services sales, net.
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Total revenues decreased $66.1 million, or 30%, to $156.1 million for the three months ended March 31, 2026. The decrease was due to lower MCM Products revenue of $54.8 million, Contracts and grants revenue of $6.7 million, Commercial Products revenue of $2.4 million and Services revenue of $2.2 million.
Intangible asset amortization increased $0.2 million, or 1%, to $16.5 million for the three months ended March 31, 2026. The increase was primarily due to the added amortization following the increase in basis of the acquired intangible asset related to EbangaTM.
Gross margin decreased $43.1 million, or 41%, to $61.2 million for the three months ended March 31, 2026. Gross margin percentage decreased 9 percentage points to 41% for the three months ended March 31, 2026. The decrease in gross margin was due to a decline in MCM Products and Commercial Products gross margin of $41.7 million and $4.6 million, respectively, partially offset by an increase in Services gross margin of $3.2 million. Gross margin and gross margin percentage exclude Contracts and grants revenues because the related costs are R&D expenses.
See "Reportable Segment Results" for an expanded discussion of revenues and gross margin.
Unallocated corporate operating expenses
R&D Expenses
R&D expenses decreased $4.6 million, or 30%, to $10.5 million for the three months ended March 31, 2026. The decrease was primarily due to lower project spend on EbangaTM related development work, partially offset by increases in development overhead spend.
SG&A Expenses
SG&A expenses decreased $5.8 million, or 11%, to $46.6 million for the three months ended March 31, 2026. The decrease was primarily due to lower professional services, marketing, and administrative support expenses, primarily attributable to cost-saving initiatives implemented as part of the Company's ongoing turnaround and transformation efforts. SG&A expenses as a percentage of total revenues increased 6 percentage points to 30% for the three months ended March 31, 2026.
Interest expense
Interest expense decreased $3.7 million, or 25%, to $11.0 million for the three months ended March 31, 2026. The decrease was primarily due to lower average outstanding debt balances, resulting in reduced interest expense following the $100.0 million principal prepayment of the Prior Term Loan and repurchases of the Company's Senior Unsecured Notes in the prior year. Interest expense was further reduced by lower amortization of debt issuance costs, partially offset by higher non-debt interest expense, primarily related to tax and state interest.
Loss on assets held for sale
Loss on assets held for sale decreased $12.2 million, or 100%, due to no loss on assets held for sale recognized during the three months ended March 31, 2026. The $12.2 million loss on assets held for sale in the first quarter of 2025 was related to warehouse space in Maryland.
Other, net
Other, net decreased from $69.7 million in income to $13.9 million in income for the three months ended March 31, 2026. The change of $55.8 million, or 80%, primarily reflects the absence of one-time income items recognized in the prior-year period from the $50.0 million in CHIK VLP development milestones and the Bayview facility sale gain, partially offset by TEMBEXA® milestone revenue earned in the current period.
Income tax provision
Income tax provision decreased $18.1 million, or 73%, to $6.6 million for the three months ended March 31, 2026. The decrease was primarily due to a change in jurisdictional mix of income and losses, and a decrease of profitability in the first quarter of 2026 relative to 2025.
REPORTABLE SEGMENT RESULTS
COMMERCIAL PRODUCTS SEGMENT
| Three Months Ended March 31, | |||||||||||||||||
| (dollars in millions) | 2026 | 2025 | % Change | ||||||||||||||
| Revenues | $ | 42.9 | $ | 45.3 | (5) | % | |||||||||||
| Cost of sales | 26.8 | 24.5 | 9 | % | |||||||||||||
| Intangible asset amortization | 9.4 | 9.5 | (1) | % | |||||||||||||
|
Gross margin (1)
|
$ | 6.7 | $ | 11.3 | (41) | % | |||||||||||
|
Gross margin % (1)
|
16 | % | 25 | % | |||||||||||||
| Add back: | |||||||||||||||||
| Intangible asset amortization | $ | 9.4 | $ | 9.5 | (1) | % | |||||||||||
|
Segment adjusted gross margin(2)
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$ | 16.1 | $ | 20.8 | (23) | % | |||||||||||
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Segment adjusted gross margin %(2)
|
38 | % | 46 | % | |||||||||||||
|
(1) Gross margin is calculated as revenues less cost of sales and intangible asset amortization. Gross margin percentage is calculated as gross margin divided by revenues.
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(2) Segment adjusted gross margin, which is a non-GAAP financial measure, for our Commercial Products segment is calculated as gross margin plus intangible asset amortization. Segment adjusted gross margin percentage, which is a non-GAAP financial measure, is calculated as segment adjusted gross margin divided by revenues. The Company's management utilizes segment adjusted gross margin and segment adjusted gross margin percentage for purposes of evaluating our ongoing operations and for internal planning and forecasting purposes. We believe that these non-GAAP operating measures, when reviewed collectively with our GAAP financial information, provide useful supplemental information to investors in assessing our operating performance.
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| NM - Not meaningful | |||||||||||||||||
Three Months Ended March 31, 2026 Compared with Three Months Ended March 31, 2025
Naloxone
Naloxone sales decreased $2.4 million, or 5%, to $42.9 million for the three months ended March 31, 2026. The decrease was primarily attributable to lower sales of OTC NARCAN®, driven primarily by an unfavorable price-volume mix in U.S. sales, partially offset by increases in Canadian sales of branded NARCAN® and the timing of the integration of KLOXXADO® sales into the Company's product portfolio.
Cost of Product Sales and Gross Margin
Cost of Commercial Products sales increased $2.3 million, or 9%, to $26.8 million for the three months ended March 31, 2026. The increase was primarily due to higher KLOXXADO® sales due to timing of its integration into the Company's product portfolio, and Canadian branded NARCAN® sales.
Commercial Products gross margin decreased $4.6 million, or 41%, to $6.7 million for the three months ended March 31, 2026. Commercial Products gross margin percentage decreased 9 percentage points to 16% for the three months ended March 31, 2026. The decrease was largely due to an unfavorable price and volume mix of OTC NARCAN® as well as Canadian branded NARCAN®. Commercial Products segment adjusted gross margin in the current year period excludes the impact of intangible asset amortization of $9.4 million.
MCM PRODUCTS SEGMENT
| Three Months Ended March 31, | |||||||||||||||||
| (dollars in millions) | 2026 | 2025 | % Change | ||||||||||||||
| Revenues | $ | 101.8 | $ | 156.6 | (35) | % | |||||||||||
| Cost of sales | 36.8 | 50.2 | (27) | % | |||||||||||||
| Intangible asset amortization | 7.1 | 6.8 | 4 | % | |||||||||||||
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Gross margin(1)
|
$ | 57.9 | $ | 99.6 | (42) | % | |||||||||||
|
Gross margin %(1)
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57 | % | 64 | % | |||||||||||||
| Add back: | |||||||||||||||||
| Intangible asset amortization | $ | 7.1 | $ | 6.8 | 4 | % | |||||||||||
|
Severance and restructuring benefits
|
- | (0.8) | 100 | % | |||||||||||||
| Inventory step-up provision | 0.1 | 1.8 | (94) | % | |||||||||||||
| Stock-based compensation expense | 0.5 | 0.3 | 67 | % | |||||||||||||
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Segment adjusted gross margin(2)
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$ | 65.6 | $ | 107.7 | (39) | % | |||||||||||
|
Segment adjusted gross margin %(2)
|
64 | % | 69 | % | |||||||||||||
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(1) Gross margin is calculated as revenues less cost of sales and intangible asset amortization. Gross margin percentage is calculated as gross margin divided by revenues.
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(2) Segment adjusted gross margin, which is a non-GAAP financial measure, for our MCM Products segment is calculated as gross margin plus intangible asset amortization, inventory step-up provision, severance and restructuring benefits and the portion of stock-based compensation expense that is recorded as cost of sales. Segment adjusted gross margin percentage, which is a non-GAAP financial measure, is calculated as segment adjusted gross margin divided by revenues. The Company's management utilizes segment adjusted gross margin and segment adjusted gross margin percentage for purposes of evaluating our ongoing operations and for internal planning and forecasting purposes. In calculating these measures, we began excluding stock-based compensation that is recorded as cost of sales in the first quarter of 2026, as this reflects a non-cash expenditure that is not related to segment operating performance. As reflected in the table above, we have recast our 2025 results to also reflect this adjustment. We believe that these non-GAAP operating measures, when reviewed collectively with our GAAP financial information, provide useful supplemental information to investors in assessing our operating performance.
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Three Months Ended March 31, 2026 Compared with Three Months Ended March 31, 2025
Anthrax MCM
Anthrax MCM sales decreased $26.3 million, or 55%, to $21.6 million for the three months ended March 31, 2026. The decrease was primarily due to lower international sales of ANTHRASIL®, mainly to the Canadian government, coupled with lower volumes of CYFENDUS® sales to the USG, primarily due to the impact of timing. These decreases were partially offset by an increase in USG BioThrax® sales due to timing of exercised purchase options. Anthrax vaccine product sales are primarily made under annual purchase options exercised by the USG. Fluctuations in revenues result from the timing of the exercise of annual purchase options, the timing of USG purchases, the availability of governmental funding and the Company's delivery of orders that follow.
Smallpox MCM
Smallpox MCM sales decreased $42.2 million, or 40%, to $64.2 million for the three months ended March 31, 2026. The decrease was primarily driven by lower ACAM2000® sales, largely due to reduced international volumes and an overall decline in TEMBEXA® sales driven by lower USG sales volume due to timing partially offset by higher international sales. These decreases were partially offset by an increase in CNJ-016® (VIGIV) USG sales due to timing. Fluctuations in revenues from Smallpox MCM result from the timing of the exercise of annual purchase options in the existing procurement contracts, the timing of USG purchases, the availability of governmental funding and the Company's delivery of orders that follow.
Other Products
Other Products sales increased $13.7 million, or 596%, to $16.0 million for the three months ended March 31, 2026. The increase was primarily due to higher Canadian and other international BAT® sales.
Cost of Sales and Gross Margin
Cost of MCM product sales decreased $13.4 million, or 27%, to $36.8 million for the three months ended March 31, 2026. The decrease was primarily due to lower cost of sales for ANTHRASIL®, ACAM2000®, CYFENDUS® and TEMBEXA® reflecting reduced sales volumes and the absence of significant prior-year non-recurring manufacturing related costs, including shutdown and severance expenses. These decreases were partially offset by an increase in cost of sales for CNJ-016® (VIGIV), BAT® and BioThrax® driven by greater sales volumes and increased overhead costs at the Winnipeg facility.
MCM Products gross margin decreased $41.7 million, or 42%, to $57.9 million for the three months ended March 31, 2026. MCM Product gross margin percentage decreased 7 percentage points to 57% for the three months ended March 31, 2026. The decrease in gross margin percentage was primarily due to an unfavorable sales mix weighted more heavily toward lower margin products as well as product absorption-related variances. These impacts were partially offset by a decrease in shutdown and severance related costs compared with the prior year. MCM Product segment adjusted gross margin in the current year period excludes the impacts of intangible asset amortization of $7.1 million, the portion of stock-based compensation expense recorded as cost of sales of $0.5 million, and inventory step-up provision of $0.1 million.
ALL OTHER REVENUE
Three Months Ended March 31, 2026 Compared with Three Months Ended March 31, 2025
Services Revenues
Services revenues decreased $2.2 million, or 31%, to $5.0 million for the three months ended March 31, 2026. The decrease was primarily attributable to a decline in production at the Company's Winnipeg facility.
Contracts and Grants
Contracts and grants revenue decreased $6.7 million, or 51%, to $6.4 million for the three months ended March 31, 2026. The decrease was primarily due to lower project spend on EbangaTM related development work.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Our financial condition is summarized as follows:
| March 31, | December 31, | ||||||||||||||||
| (dollars in millions) | 2026 | 2025 | Change % | ||||||||||||||
| Financial assets: | |||||||||||||||||
| Cash and cash equivalents | $ | 160.3 | $ | 205.4 | (22) | % | |||||||||||
| Restricted cash | 1.2 | 3.7 | (68) | % | |||||||||||||
|
Total cash, cash equivalents and restricted cash
|
$ | 161.5 | $ | 209.1 | (23) | % | |||||||||||
| Borrowings: | |||||||||||||||||
| Debt, net of unamortized debt issuance costs | 573.6 | 572.1 | - | % | |||||||||||||
| Total borrowings | $ | 573.6 | $ | 572.1 | - | % | |||||||||||
| Working capital: | |||||||||||||||||
| Current assets | $ | 637.6 | $ | 662.5 | (4) | % | |||||||||||
| Current liabilities | 148.7 | 132.2 | 12 | % | |||||||||||||
| Total working capital | $ | 488.9 | $ | 530.3 | (8) | % | |||||||||||
Principal Sources of Capital Resources
As of March 31, 2026, our capital resources included $160.3 million of cash and cash equivalents and an available borrowing capacity of up to $100.0 million under the Revolving Credit Agreement. We have historically financed our operating and capital expenditures through existing cash and cash equivalents, cash from operations, development contracts and grant funding and borrowings under various credit agreements, including the Term Loan Agreement, the Prior Term Loan Agreement and other lines of credit we have established from time to time. We also occasionally obtain financing from the sale of our common stock upon exercise of stock options. As of March 31, 2026, the Company believes that its sources of liquidity, including debt and cash flows from operating activities, are adequate to fund its operations for at least the next twelve months from the issuance of these condensed consolidated financial statements.
Unused Credit Capacity
Available room under the commitments with respect to the Revolving Credit Agreement (the "Revolving Loans") as of March 31, 2026 and December 31, 2025 was:
| (in millions) | March 31, 2026 | December 31, 2025 | |||||||||
| Total Capacity | $ | 100.0 | $ | 100.0 | |||||||
| Unused Capacity | $ | 100.0 | $ | 100.0 | |||||||
Principal Uses of Capital Resources
Future Uses of Capital Resources
We anticipate that our future capital requirements will principally consist of funds required for:
•operating and general corporate expenses;
•capital expenditures;
•debt service requirements, including interest payments;
•compensation to designated executive management under our various long-term incentive compensation programs;
•discretionary funding of the Reauthorized Share Repurchase Program and repurchases of Senior Unsecured Notes;
•contingent obligations related to our acquisitions;
•potential acquisitions of businesses; and
•other known future contractual obligations.
Share Repurchase Program
In March 2025, the Company announced that its Board of Directors had authorized the repurchase of up to $50.0 million of the Company's common stock on or before March 27, 2026. In February 2026, the Company reauthorized the 2025 Share Repurchase Program for the repurchase of up to $50.0 million of the Company's common stock through March 31, 2027. Repurchases under the Reauthorized Share Repurchase Program may be made from time to time on the open market or in privately negotiated transactions. The timing and amount of any shares repurchased will be determined by the Company's management based on its evaluation of market conditions and other factors, including the market price of the Company's common shares, macroeconomic environment and other investment opportunities, consistent with applicable law. The Reauthorized Share Repurchase Program may be suspended or discontinued at any time. The Inflation Reduction Act of 2022, which was enacted on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. Excise tax accrued during the three months ended March 31, 2026 was $0.1 million.
During the three months ended March 31, 2026, the Company utilized $9.1 million to repurchase 0.9 million shares at an average price of $10.21 per share, excluding commissions and excise taxes, respectively. As of March 31, 2026, the Company had $46.5 million available to repurchase shares under the Reauthorized Share Repurchase Program.
Senior Unsecured Note Repurchase
In May 2025, the Board of Directors authorized the Company to repurchase up to $30.0 million aggregate principal amount of the Company's Senior Unsecured Notes. The Company may seek to opportunistically use this authority to repurchase its Senior Unsecured Notes in open market purchases, privately negotiated transactions or otherwise. Any such repurchases will depend upon prevailing market conditions, our liquidity requirements, contractual restrictions, applicable securities law and other factors. The Company did not have any principal repurchases of its Senior Unsecured Notes during the three months ended March 31, 2026. As of March 31, 2026, we had $19.7 million available to repurchase additional Senior Unsecured Notes.
Future Contractual Obligations
Our future contractual obligations as of March 31, 2026 primarily included long-term obligations related to our outstanding borrowings under our Prior Term Loan Agreement, which was repaid in April 2026 with proceeds from the Term Loan Agreement, and the Senior Unsecured Notes, as well as lease arrangements and purchase commitments. As of March 31, 2026, the Company had $589.7 million of fixed and variable rate debt with varying maturities. See Note 8, "Debt" in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1, of this Form 10-Q for further discussion.
These amounts reflect future unconditional payments and are based on the terms of the relevant agreements, appropriate classification of items under GAAP currently in effect and certain assumptions such as interest rates. Future events could cause actual payments to differ from these amounts.
Cash Flows
The following table provides information regarding our cash flows for the three months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | |||||||||||
| (in millions) | 2026 | 2025 | |||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | $ | (33.8) | $ | (11.2) | |||||||
| Investing activities | (2.4) | 59.5 | |||||||||
| Financing activities | (11.4) | (0.4) | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | - | (0.7) | |||||||||
| Net change in cash, cash equivalents and restricted cash | $ | (47.6) | $ | 47.2 | |||||||
Operating Activities:
Net cash used in operating activities for the three months ended March 31, 2026 increased $22.6 million as compared with the three months ended March 31, 2025. The increase was primarily driven by lower net income and a prior year non-cash impairment charge of $12.2 million related to the prior year held-for-sale write-down on certain Bioservices long-lived assets, partially offset by a decrease in cash used for accounts receivable.
Investing Activities:
Net cash used in investing activities for the three months ended March 31, 2026 decreased $61.9 million from net cash provided activities for three months ended March 31, 2025. The decrease was primarily attributable to prior year proceeds from the sale of property, plant and equipment, including proceeds from the sale of our Baltimore-Bayview facility to Syngene and milestone payments received related to the sale of our travel health business to Bavarian Nordic, partially offset by the purchase of a note receivable in the prior year.
Financing Activities:
Net cash used in financing activities for the three months ended March 31, 2026 increased $11.0 million as compared with the three months ended March 31, 2025. The increase was primarily driven by increases in the purchases of treasury stock and taxes paid for stock-based compensation activity.
Uncertainties and Trends Affecting Funding Requirements
We expect to continue to fund our short-term and long-term anticipated operating expenses, capital expenditures and debt service requirements, any future debt repurchases and any future repurchases of our common stock from the following sources:
•existing cash and cash equivalents;
•net proceeds from the sale of our products and Bioservices;
•development contracts and grant funding;
•proceeds from potential asset sales; and
•our Term Loan Agreement and Revolving Loans.
There are numerous risks and uncertainties associated with product sales and with the development and commercialization of our product candidates. We may seek additional external financing to provide additional financial flexibility. Our future capital requirements will depend on many factors, including (but not limited to):
•the level, timing and cost of product sales and services sales;
•the extent to which we acquire or invest in and integrate companies, businesses, products or technologies;
•the acquisition of new facilities and capital improvements to new or existing facilities;
•the payment obligations under our indebtedness;
•the scope, progress, results and costs of our development activities;
•our ability to obtain funding from collaborative partners, government entities and non-governmental organizations for our development programs; and
•the costs of commercialization activities, including product marketing, sales and distribution.
If our capital resources are insufficient to meet our future capital requirements, we will need to finance our cash needs through public or private equity or debt offerings, bank loans, collaboration and licensing arrangements, cost reductions, assets sales or a combination of these options.
If we raise funds by issuing equity securities, our stockholders may experience dilution. Public or bank debt financing, if available, may involve agreements that include covenants, like those contained in our Senior Unsecured Notes, our Term Loan Agreement and our Revolving Credit Agreement, which could limit or restrict our ability to take specific actions, such as incurring additional debt, making capital expenditures, pursuing acquisition opportunities, buying back shares or declaring dividends. If we raise funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies or product candidates or grant licenses on terms that may not be favorable to us.
Economic conditions, including market volatility and adverse impacts on financial markets, may make it more difficult to obtain financing on attractive terms, or at all. Any new debt funding, if available, may be on terms less favorable to us than our Senior Unsecured Notes, our Credit Agreement or our Revolving Credit Agreement. If financing is unavailable or lost, our business, operating results, financial condition and cash flows would be adversely affected, and we could be forced to delay, reduce the scope of or eliminate many of our planned activities.
Emergent BioSolutions Inc. published this content on May 01, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 01, 2026 at 13:35 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]