Emergent Biosolutions Q3 Earnings Call Highlights

Key Points

• Q3 revenue fell to $110 million from $231 million a year earlier, largely because medical-countermeasure deliveries shifted between quarters. Emergent generated $128 million in year-to-date adjusted EBITDA and $122 million in operating cash flow.
• Cost-cutting measures are expected to deliver approximately $40 million in annualized savings, while debt reduction continued: gross debt declined to $514 million from $693 million a year earlier after the company repurchased $75 million of bonds.
• Emergent updated 2026 guidance to revenue of $600 million-$645 million, adjusted gross margin of 45%-47% and adjusted EBITDA of $110 million-$140 million. CFO Rich Lindahl will retire at year-end, with Frank Vargo becoming interim CFO on Jan. 1, 2027.

Emergent Biosolutions NYSE: EBS reported third-quarter revenue within its guidance range and updated its full-year outlook, while continuing a multiyear transformation focused on cost control, debt reduction, medical countermeasures and naloxone access.

The company recorded third-quarter revenue of $110 million, compared with $231 million in the prior-year period. Chief Financial Officer Rich Lindahl said the year-over-year decline was primarily driven by the timing of medical countermeasure, or MCM, deliveries. Stronger deliveries in the second quarter accelerated revenue that otherwise affected the third-quarter comparison, he said.

Year-to-date revenue totaled $500 million, while adjusted EBITDA was $128 million, representing a 25% margin. The company generated $122 million in operating cash flow through Sept. 30.

Cost Actions and Balance Sheet Progress

Emergent implemented restructuring actions in August intended to improve efficiency and better align resources with strategic priorities. Lindahl said the company expects the measures to produce approximately $40 million in annualized savings, with the initial impact expected in the fourth quarter.

Third-quarter adjusted EBITDA was negative $5 million, while adjusted gross margin was 28%. SG&A and research-and-development expenses were $56 million, including $8 million in restructuring costs. Excluding those costs, operating expenses were lower than in the third quarter of 2025, according to Lindahl.

The company ended the quarter with $176 million in cash and $226 million of total liquidity. During the quarter, Emergent repurchased $75 million in aggregate principal of unsecured bonds for $68 million in cash.

• Gross debt was $514 million at Sept. 30, compared with $693 million a year earlier.
• Net debt was $339 million, compared with $448 million a year earlier.
• Net leverage was 2.4 times trailing 12-month adjusted EBITDA, compared with 1.9 times a year ago.

Lindahl said that since the end of 2023, the company has generated $352 million in cumulative operating cash flow and reduced gross debt by $354 million, or 41%. Net debt declined by $418 million, or 55%, over that period, while net leverage fell from approximately 16 times to approximately 2.4 times.

Emergent also repurchased 2 million shares for $18.1 million year to date and had $37.3 million remaining under its share-repurchase authorization at quarter-end.

MCM Deliveries and International Sales

Emergent's MCM business generated $59 million in third-quarter revenue. The results included a $24 million CYFENDUS contract modification, with product delivered to the U.S. government during the quarter. The company also completed the majority of a TEMBEXA tablet delivery under a U.S. government contract modification awarded in March.

President and Chief Executive Officer Joe Papa said Emergent has now executed all six anticipated U.S. government contract modifications.

Internationally, the company made sales to 13 countries and closed 19 sales in the quarter. International sales and product orders contributed $72 million of revenue, representing 22% of year-to-date MCM revenue.

During the question-and-answer session, Papa said the company maintains ongoing discussions with U.S., Canadian and other government customers regarding stockpile needs. He said some orders can shift between quarters based on specific circumstances, but the company believes it has relatively good visibility into its programs.

Lindahl said the full-year revenue range reflects the possibility that certain international and U.S. government orders could materialize in the fourth quarter or early 2027.

Naloxone Market and Growth Programs

Commercial revenue declined during the quarter as the naloxone market faced competitive pricing and volume pressure. Lindahl said pricing for NARCAN compared with the second quarter was relatively stable, and the company's naloxone performance was consistent with its prior outlook.

Papa said Emergent continues to hold the leading U.S. market position for NARCAN nasal spray. He cited continued need for overdose-reversal medications despite a decline in opioid overdose deaths, and said the company is working to expand access through states, law enforcement, harm-reduction organizations, retailers and workplaces.

The company also continues to offer KLOXXADO, an 8-milligram naloxone nasal spray, as another option for first responders and caregivers. Papa said newly approved naloxone competitors had not made a major market impact so far, though the company continues to monitor the competitive environment.

In Canada, Emergent said NARCAN has continued to grow, and the Canadian government recently executed a standing offer that creates a multiyear pathway for the product.

Looking beyond its existing portfolio, Emergent is advancing a pan-Ebola therapeutic program, evaluating a pan-flu vaccine opportunity and progressing work related to Novavax, Ebanga and Raxibacumab. Papa said the company is also pursuing artificial-intelligence and machine-learning collaborations related to pipeline opportunities and preparedness against bioterrorism risks.

Updated 2026 Outlook and Leadership Transition

Emergent updated its full-year 2026 guidance to revenue of $600 million to $645 million. The company expects MCM revenue to decline from the prior year based on the timing of remaining international deliveries and U.S. government procurement.

For the commercial business, which is primarily driven by NARCAN, the company said it is tracking toward the lower end of its previously stated expectation for a 20% to 25% revenue decline versus 2025.

The company raised its adjusted gross-margin outlook to 45% to 47%, a 300-basis-point increase from its August guidance, citing manufacturing improvements, product mix and stabilization in U.S. public-interest-channel NARCAN pricing. Adjusted EBITDA is now expected to range from $110 million to $140 million.

Emergent also announced that Lindahl will retire as CFO effective Dec. 31. Frank Vargo, the company's vice president and treasurer, will become interim CFO on Jan. 1, 2027. Lindahl will remain a senior executive advisor through March 31, 2027.

About Emergent Biosolutions (NYSE:EBS)

Emergent BioSolutions Inc is a life sciences company that develops, manufactures and supplies medical countermeasures for public health threats. Its portfolio has included products for protection against anthrax and smallpox, as well as treatments and emergency medicines used in overdose response and other acute-care settings.

The company has also provided contract development and manufacturing services for pharmaceutical and biotechnology companies, supporting activities such as drug substance and product manufacturing, packaging and related commercialization services.

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