Emergent BioSolutions (NYSE:EBS) held its first-quarter earnings conference call on Thursday. Below is the complete transcript from the call.

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The full earnings call is available at https://edge.media-server.com/mmc/p/qw3ajghx/

Summary

Emergent BioSolutions reported Q1 2026 revenue of $156 million, exceeding guidance, with an adjusted EBITDA of $36 million.

The company has reduced its net debt by approximately 22% in 2025 and aims for further improvement.

Strategic initiatives include expanding the MCM business internationally and pursuing accretive external opportunities.

Emergent BioSolutions has secured a $140 million multi-product agreement with the Government of Canada and a $54 million contract with ASPR.

The company announced a strategic manufacturing partnership with SAB Biotherapeutics to advance a type 1 diabetes autoimmune candidate.

Full Transcript

OPERATOR

Good day and thank you for standing by. Welcome to the Q1 2026 Emergent BioSolutions earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You'll then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Frank Vargo, Vice President Treasurer. Please go ahead

Frank Vargo (Vice President Treasurer)

Good afternoon everyone and thank you for joining us at Emergent discusses its operational and financial results for the first quarter of 2026. As is customary, today's call is open to all participants. It's being recorded and is copyrighted by Emergent BioSolutions. In addition to today's press release, a slide presentation accompanying this webcast is available to all webcast participants. Turning to Slide 2 during today's call, Emergent may make projections and other forward-looking statements related to its business, future events, prospects or future performance. These forward-looking statements are based on our current intentions, beliefs and expectations regarding future events. Any forward-looking statements speak only as of the date of this conference call and except as required by law, Emergent BioSolutions does not undertake to update any forward looking statement to reflect new information, events or circumstances. Investors should consider this cautionary statement as well as the risk factors identified in Emergent's periodic reports filed with the SEC when evaluating these forward looking statements. During today's call, Emergent may also discuss certain non GAAP financial measures that include adjustments to GAAP figures to provide additional transparency regarding the company's operating performance. Please refer to the tables included in today's press release. Turning to slide 3, the agenda for today's call includes remarks from Joe Bapa, President and Chief Executive Officer, who will provide an update on the Company's leadership in public health, preparedness, business performance and key highlights. Rich Lindahl, EVP and chief financial officer, will then review the first quarter 2026 financial results and provide an update on the full year 2026 guidance. Joe will conclude with a discussion of the Company's key catalysts for growth, followed by a question and answer session. Finally, for the benefit of those who may be listening to the replay of this webcast, this call was held and recorded on April 30, 2026. Since that time, Emergent may have made announcements related to topics discussed during today's call. With that, I would now like to turn the call over to Joe Poppin

Joe Poppin

Thank you, Frank and good afternoon everyone. Welcome to our first quarter 2026 earnings call. This is Joe Papa. I'm joined today by Rich Lindell, our Chief Financial Officer. Let's turn to Slide five. Our aspiration at Emergent is to be the leader in solving public health threats around the world. Over the last 25 years we have built what we believe is the most diverse biodefense product portfolio in the world. Our medical countermeasures address anthrax, smallpox, mpox, Ebola, botulism and complications from smallpox vaccination alongside the leading branded Naloxone franchise with our Narcan nasal spray which has a decade of trusted brand leadership. We believe in our unique position within the industry demonstrate just how public private partnerships are critical for national security. Turning to Slide 6 Since implementing our multi year transformation plan in 2024, we have stabilized and rightsized the company in order to provide Emergent with a strong foundation for future growth. 2026 marks a pivotal year of our transformation as we invest in high growth opportunities. I'm pleased to note that this process is now well underway. We are focusing on segment revenue growth and improved operating performance. We are generating strong cash flow for continued investment in internal R and D and quality capabilities. We have identified product acquisition opportunities that address unmet medical needs and have the potential for sustainable long term revenue growth. Debt reduction will remain a priority for us. In 2025, we reduced our net debt levels by approximately 22% and we have planned for further improvement on our balance sheet and credit ratings. Collectively, these activities are about putting in place the foundations for creating sustainable long term value creation. To move to Slide 8, we'll take a look at our first quarter highlights. Thanks to the great efforts of our emerging team, our first quarter results are evident in both our top and bottom line performance. We reported first quarter revenue of $156 million which exceeded the high end of our guidance range and was ahead of internal expectations. Adjusted EBITDA came at $36 million, also above our internal expectations representing a 23% margin is driven by continued efforts to deliver a lean and operationally efficient customer centric business model. For example, net working capital improved by over $100 million since Q1 2025. We improved our cash balance by $11 million versus the prior year to $160 million and our total liquidity increased to $260 million. Our strong cash position enabled the repayment of $110 million in debt last year on the capital allocation side, we continue to create value In April we announced the refinancing of our prior term loan which enabled us to secure a more favorable interest rate. We also amended our revolver to $50 million and established a new delayed draw term loan facility for 75 million. We also continued our share repurchase program, buying back $9 million in shares in the first quarter. Since the start of the share repurchase program in 2025, Emergent has repurchased approximately $34 million of shares. Turning to our business performance overall, MCM performed very well reflecting increased global demand and strategic diversification in our international market which now represent 37% of our total MCM revenue. We received four contracted product orders in the quarter. With respect to the NALAXO business, we continue maintaining the shared leadership. We command a competitive pricing strategy and recently launched our newest product offering the Narcia Naval Spray Carrying Case and a multi pack configuration, both of which are already performing very well in the first month of launch. We believe on slide 9 the world is an increasingly dangerous place and public health preparedness in the face of potential threats is critical. We are proud of our long standing partnership with the Government of Canada and in Q1 we announced a $140 million multi product agreement. We also executed $54 million big award with ASPR and approximately 21.5 million delivery order to supply Biothrax to the Department of War. Our MCM business represents an important driver of our future growth and with the added flexibility from our recent financing we see multiple opportunities to acquire high growth and complementary products to our MCM portfolio. Our mission on Slide 10 to protect the stabilize is answered every day with the work we do to drive, access, awareness and availability of life saving Nalaniso. We are in lockstep with US public interest customers, Canadian health officials, retail customers and all the communities in need. We're keeping pulse on the staggering overdose death rates, ensuring our best efforts to help combat the thousands of lives lost each month. We believe over the counter access to Narcan should be more publicly accepted and normalized just as other life saving emergency tools are like defibrillators or fire extinguishers for that matter. Just in the news this week if national attention on the opioid settlement funds of over $50 billion which support state, local municipalities, tribes and other entities help turn the tide in the detrimental effects of the opioid crisis. The Purdue settlement alone released over $5 billion for the state for education and Naloxone purchase. There's a tremendous amount of work left to be done to expand access and awareness to nalaxone and to ultimately bring the number of overdose deaths down to zero. Federal state programs also continue to support naloxone funding and services through the SOAR and Substance Use Block Grants. We just announced a new awareness effort with Nalaxone Narcan for pro baseball player Davis Schneider. David Schneider shares his personal story in his late brother's honor. Our goal is to raise awareness of Narcan to help save lives from opioid poisoning so no more families feel the same heartbreak. Additionally, we recently announced a partnership with British Columbia to supply Narcane nasal spray for the province's KCON Nalaxone broken this order filed an additional investment of $18 million Canadian by the government of British Columbia in the US US Public Interest Channel performed in line with our expectations for the quarter U.S. fDA approved our Narcan nasal spray pairing Case in Multipath actions delivering on a promise to offer new line extensions to patients and customers. We will continue to engage to the public across the country, especially in college campuses, with our Ready to Rescue campaign to help drive adoption where young adults may be at risk. Since 2016, Emergent has delivered more than 100 million doses of Narcan nasal spray to people, communities, businesses across the US And Canada to help save lives from opioid poisonings. On slide 11, we are pleased to share that part of our durable and sustainable footprint. We are now expanding our Canton manufacturing site in Massachusetts. Our new strategic partnership with Subsidy Farm Biologics enables to restart the manufacturing of the Canton facility to support the Japanese Encephalitis vaccine. Emergent entered into a US Distribution agreement with Substitute Farm to support the product opportunity with the US Government following US FDA approval. This opportunity establishes our new approach to external manufacturing partnerships beyond a fee for service CDMO approach to one that allows us to share in the product's potential success. In addition, just yesterday we announced the second strategic manufacturing partnership with SAB Biotherapeutics to advance their type 1 diabetes autoimmune candidate. This work will be led by our WITIFACT team. We are excited for the ability to partner with such a dynamic company. Let's hear from Rich who will run through our financial results. Rich thank you Joe and good afternoon everyone.

Rich Lindell (Chief Financial Officer)

Thank you for joining our call today. We started fiscal year 2026 with a strong first quarter with revenue exceeding the top end of our guidance. We also advanced key strategic priorities and improved our cash and liquidity position versus the prior year Execution of our 2026 turnaround plan is well underway as we work toward our near term financial and operational goals building on the stabilization and rightsizing actions completed over the last two years. We also expect the refinancing announced two weeks ago to provide strategically important balance sheet flexibility, lowering interest costs, extending maturities and adding access to incremental capital to support both operational execution and our longer term growth initiatives. Turning to Slide 13, our first quarter results were in line with our expectations and reflect continued progress on execution. Execution Total revenue for the first quarter of 2026 was $156 million, which came in above the high end of our prior Q1 revenue guidance of $135 to $155 million. As a reminder on our last earnings call, we pointed out that our 2025 results benefited from a large international order that we do not currently expect to repeat in 2026. That order contributed approximately $60 million dollars of revenue and $50 million of adjusted EBITDA to our first quarter 2025 results and significantly influences the year over year comparisons of these metrics. Beginning in 2026, we are adding back non cash stock compensation to our adjusted ebitda. This is consistent with our peers and provides a more comparable view of profitability on a cash basis. It also aligns with the covenant calculations under our new debt agreement. In the first quarter, adjusted EBITDA and adjusted EBITDA margin were $36 million and 23% respectively, reflecting the quarterly revenue profile. Adjusted gross margin was 52%, reflecting the high fixed cost nature of our operations. We also maintained strong cost discipline. Operating expenses were $57 million in the first quarter of 2026, down $10 million year over year, and R and D spend declined by about a third compared to the first quarter of 2025. Total revenue was $156 million, supported by a solid contribution from Naloxone. As we continue to maintain a market leadership position, the NCM portfolio performed above our expectations, driven by US government order timing and shipments. International NCM revenue was 37% of total NCM revenues in the quarter, representing continued strong demand and diversification beyond the US government. On slide 15, we highlight the sustained improvements across our quarterly financial metrics. Liquidity and cash both improved by $11 million year over year and we reduced net debt by $122 million or approximately 22% versus the first quarter of 2025. As a result, we continue to see improvement in our net leverage ratio which was 2.4x adjusted EBITDA at 1Q26 versus 2.7x at 1Q25. This level gives us meaningful financial flexibility as we evaluate capital allocation priorities to further strengthen our long term growth profile. This observation provides a good segue to our April 2026 debt refinancing transaction which is highlighted on slide 16. Also noted there we decreased our total term loan debt by $100 million versus the first quarter of 2025 and we increased finance capacity with the addition of a new fully committed delayed draw term loan of $75 million. As Joe noted earlier, the April 2026 debt refinancing was an important milestone for emergent first, it strengthens our ability to preserve liquidity to support ongoing operations and advance long term strategic initiatives. Second, it lowers our interest expense freeing cash flow that can be redeployed into value creating investments that support growth. Finally, it meaningfully extends our maturity profile and improves covenant terms. Taken together, these actions help establish a stronger financial foundation to support durable long term growth. Turning to capital allocation, we have several strategic growth priorities in place for 2026 growing international MCM, internal R& D investments and business development. Continued debt management will remain an important part of our turnaround in 2026. As noted, the April 2026 refinancing provides us with meaningfully greater financial flexibility and supports our long term strategic growth planning. As a reminder, we have a $50 million share repurchase program through March 31, 2027 and we continue to utilize it, repurchasing 900,000 shares for $9 million during the first quarter of 2026. As of the end of the first quarter, $46.5 million of authorized repurchase capacity remains available under this program at current valuation levels. We believe disciplined repurchases can be an attractive way to create shareholder value and they reflect our confidence to emergence long term prospects. One final Note on our March 31 balance sheet, we previously disclosed that $50.4 million of contingent consideration could be owed to Ridgeback Bio in the second quarter of this year assuming continued progress under our contract at Barda. As we now expect, those conditions will be met. We have recorded that amount as an accrued acquisition obligation under current liabilities. On slide 19 we highlight our revenue and profitability guidance. We are maintaining our full year total revenue guidance of $720 million to $760 million. Commercial revenues are expected to be flat to slightly up with volume offsetting anticipated price adjustments and we expect Narcan to maintain its leading market share. MCM revenues are consistent with prior guidance of flat to slightly down with a significant contribution from international sales. Adjusted gross margin is expected to be between 45% and 47% reflecting product mix and expected pricing dynamics. We are updating our adjusted EBITDA guidance to account for the non cash stock compensation add back and we therefore expect full year adjusted EBITDA to be in a range of 155 to 175 million dollars and for the second quarter we expect total revenue to be between 170 million and 185 million dollars. In summary, we have fully commenced the turnaround phase of our multiyear plan and we are executing with focus and urgency. We delivered solid revenue and profitability in the first quarter in line with our internal expectations. Our term loan refinancing extended maturities out to 2031 and enhanced our financial and operational flexibility. We also returned capital to shareholders through share repurchases during the quarter and $46.5 million of authorized repurchase capacity remains available through March 2027. With that, I'd like to turn the call back over to Joe for a 2026 business outlook update and closing remarks before we go into Q and A.

Joe Papa (President and Chief Executive Officer)

Joe thanks rich moving to slide 21 let me now walk through what we see as the key growth drivers ahead, both near term and strategic. We entered 2026 with a stronger cash and liquidity position, further reinforced by the April refinancing. We are well positioned to invest in sustainable long term growth via 4 levers organic growth through internal R and D investments in Tembexa, Ibanga and rexibacuumab number two line extensions for Narcan number three growing the MCM business internationally and number four accelerating business development opportunities like projects such as Colectsado like the now we just announced the Japanese Encephalitis vaccine and more for the future. Moving to our pipeline of assets on Slide 22, Tembexa, Ebanga and Raxibacumab all approved with incremental development programs underway. As I previously mentioned, look forward to serving as the distributor of the substance Farm Biologics Japanese Encephalitis Vaccine for the US Government opportunity following FDA regulatory approval finally, we're pleased to share that just this week ATN-2000 received Singapore Health Sciences Authority expanded approval to include mpox on slide 23 to close Q1. 2026 has been a steady and successful continuation of the turnaround efforts in these past two years. We believe we have made significant headway and now have the opportunity to produce growth both organically and inorganically. We have successfully stabilized the business. We have divested non core assets. We have dramatically reduced our debt while returning capital to shareholders. Today we are investing for segment revenue growth, investing in promising internal R and D pipeline, expanding our international MCM footprint and pursuing accretive external opportunities, all from a position to improve financial strength. All the while, we are committed to patient safety, quality and compliance across the operations with that operator. Please open the line for questions.

OPERATOR

Thank you. As mentioned at this time we'll conduct the question and answer session as a reminder to ask a question, you'll need to press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile our Q and A roster. Your first question comes from the line of Jessica FY with JP Morgan. Your line is now open. Hey guys, good afternoon. Thanks for taking my question. I had a question on your longer term perspective on the Naloxone franchise. I know you talked about that business being flat to slightly up for 2026. How should we think about it taking like maybe like a several year time horizon?

Jessica FY (Equity Analyst)

Sure. Thanks for the question. The way we're looking at Narcan is a couple things are happening. Number one, we're excited about our ability to launch new innovations with Narcan. We do have just the launch opportunity we have with the carrying case. We think that's perfect for college campuses. We also looked at the Multi pack. We think the Multi pack be a more efficient way to deliver the nalaxone Narcan for especially high volume users. We do think there's still some significant upside internationally, especially in Canada. And we're also looking at the Q2 Q3 as being an upside from where we are in Q1 simply because the seasonality of our business. We know that like for example Q2 is the fiscal year end for about 70% of the states. So we think there is some some upside there in the in the near term and so there's always going to be a little bit of seasonality. Beyond that though, clearly getting to the longer term part of your question, we do think the market's going to continue to grow because unfortunately there's still so many deaths that are occurring because of opioid overdoses. So we do expect to see continued dollars spent there by the federal government. We saw that in 2026 budget for the US government, the SOAR grants and the other grants that are coming from the federal grants. Federal government have either increased or at least stay stable. So there's continued bipartisan support for this area of overcoming opioid overdoses so we do expect that. And then on top of that, the other reason we expect the volume to go up is just simply the class action settlements by large pharma companies are about $50 billion. All that we think, especially now that Purdue just settled this week, I guess it was, with about $5 billion of their settlement funds coming in. Those funds are to be directed towards things like educational programs of states and local municipalities and, or the use or purchase of procurement of naloxone. So we think for those reason the market will grow. We expect to hold on to the leading market position. We're going to stay competitive on pricing. So we can't exactly say where pricing is going to go, but that's the reason why we said, you know, for the full year flat to ups slightly and that's how we're looking at the future volume growth, will continue to be market leader and then obviously we'll have to be competitive on price. And that's really how we talked about the future volume growth. Hold on market share and expect to be competitively priced. And that's what we're thinking. Thanks for the question. Yeah. And then maybe switching to the MCM business as you kind of drive the international side there, can you just remind us how to think about the margin you keep on international MCM sales and kind of how that compares to the US Legacy MCM business?

Rich Lindell (Chief Financial Officer)

Yeah, I think logically, yes, the fact that we're offering the US Most favored nation pricing and therefore we have higher prices on the international MCM business, that drives higher margins. And so you should assume that the international sales are above the average for the MCM segment in total.

Raghuram Salvaradju (Equity Analyst)

Thank you. Operator, next question. Operator, any more questions? Oh, excuse me. Your Next question comes from Raghuram Salvaradju with HC Wainwright. Your line is now open.

OPERATOR

Okay, thank you. Yes, we do. Your next question comes online with JPMorgan. Your line is now open. Yeah, thank you. Your next question comes to the line of Alex Kelsey with Wells Fargo. Your line is now open.

Rich Lindell (Chief Financial Officer)

Hey, Joel, Rich, Frank. Good to hear from you guys. Rich, I think I missed it when you were talking about the accrued acquisition obligation. Can you just mention again what exactly that's related to? And then maybe more importantly, is that a cash outflow that we should expect in 2026? Yeah, thanks for the question, Alex. That relates to the Ibonga program. And so this is under our acquisition of the rights to Ibonga from Ridgeback Bio. Once we were awarded the BARDA contract back in 2023, we disclosed that part of that arrangement was ultimately a payment to Ridback Bio, assuming that we continue to make progress under the contract. And that's going to be a cash outflow in the second quarter.

OPERATOR

Thank you for the question, Operator. Any additional questions? At this time. I'm showing no further questions and would now like to turn it back to Joe Papa for closing remarks.

Joe Papa (President and Chief Executive Officer)

Thank you, operator. Thank you everyone for joining us on the call today. I'd like to thank all of our investors, customers, employees for your strong and continued support of our company and look forward to providing further updates throughout the year. Thank you and have a great day, everyone. Thanks for joining us. Have a great day.

OPERATOR

Yes, thank you for your participation in today's conference. This does conclude the program and you may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.