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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-33137
ebs-20220331_g1.jpg
EMERGENT BIOSOLUTIONS INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware14-1902018
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
 
400 Professional Drive Suite 400
Gaithersburg, Maryland20879
(Address and zip code of Principal Executive Offices)
(240) 631-3200
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, Par Value $0.001 per shareEBSNew York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerAccelerated filer
Non-accelerated filer Smaller reporting company

Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of April 22, 2022 the registrant had 50,243,624 shares of common stock outstanding.
1


Emergent BioSolutions Inc.
Form 10-Q
For the Fiscal Quarter Ended March 31, 2022
TABLE OF CONTENTS
Page
 
 
 
 
 
 
 


2

EMERGENT BIOSOLUTIONS INC.
PART I. FINANCIAL INFORMATION
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q and the documents we incorporate by reference include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, including statements regarding the future earnings and performance of Emergent BioSolutions Inc. or any of our businesses, our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management and the ongoing impact of the COVID-19 pandemic, are forward-looking statements. We generally identify forward-looking statements by using words like "will," "believes," "expects," "anticipates," "intends," "plans," "forecasts," "estimates" and similar expressions in conjunction with, among other things, discussions of financial performance or financial condition, growth strategy, product sales, manufacturing capabilities, product development and regulatory approvals or expenditures. These forward-looking statements are based on our current intentions, beliefs and expectations regarding future events. We cannot guarantee that any forward-looking statement will be accurate. You should realize that if underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could differ materially from our expectations. You are, therefore, cautioned not to place undue reliance on any forward-looking statement. Any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by law, we do not undertake to update any forward-looking statement to reflect new information, events or circumstances.
There are a number of important factors that could cause our actual results to differ materially from those indicated by such forward-looking statements, including, among others:

the availability of U.S. Government (USG) funding for contracts related to procurement of our medical countermeasures, including AV7909 (Anthrax vaccine adsorbed (AVA), adjuvanted), BioThrax® (Anthrax Vaccine Adsorbed) and ACAM2000®, (Smallpox (Vaccinia) Vaccine, Live), among others, as well as contracts related to development of medical countermeasures.
our ability to meet our commitments to quality and manufacturing compliance at our manufacturing facilities, and the potential impact on our ability to continue production of bulk drug substance for Johnson & Johnson’s COVID-19 vaccine;
the impact of the generic marketplace on NARCAN® (naloxone HCI) Nasal Spray and future NARCAN sales;
our ability to perform under our contracts with the USG, including the timing of and specifications relating to deliveries;
our ability to provide contract development and manufacturing (CDMO) services for the development and/or manufacture of product and/or product candidates of our customers at required levels and on required timelines;
our ability to obtain and maintain regulatory approvals for our product candidates and the timing of any such approvals and our ability and the ability of our contractors and suppliers to maintain compliance with current good manufacturing practices and other regulatory obligations;
our ability to negotiate additional USG procurement or follow-on contracts for our Public Health Threat (PHT) products that have expired or will be expiring;
our ability to negotiate new CDMO contracts and the negotiation of further commitments related to the collaboration and deployment of capacity toward future commercial manufacturing under our existing CDMO contracts;
the outcomes associated with pending shareholder litigation and government investigations and their potential impact on our business;
our ability to comply with the operating and financial covenants required by our senior secured credit facilities (Senior Secured Credit Facilities) and our 3.875% Senior Unsecured Notes due 2028;
the procurement of products by USG entities under regulatory exemptions prior to approval by the U.S. Food and Drug Administration (FDA) and corresponding procurement by government entities outside of the United States under regulatory exemptions prior to approval by the corresponding regulatory authorities in the applicable country;
the extent of any ongoing impact of COVID-19 pandemic on our supply chains and potential future impact of any variants thereof on our markets, operations and employees as well as those of our customers and suppliers;
3

EMERGENT BIOSOLUTIONS INC.
the impact on our revenues from and duration of declines in sales of our vaccine products that target travelers due to the reduction of international travel caused by the COVID-19 pandemic;
our ability to identify and acquire companies, businesses, products or product candidates that satisfy our selection criteria;
our ability to commercialize, market and manufacture new product candidates successfully; and
the accuracy of our estimates regarding future revenues, expenses, capital requirements and needs for additional financing.

The foregoing sets forth many, but not all, of the factors that could cause actual results to differ from our expectations in any forward-looking statement. New factors emerge from time to time. and it is not possible for management to predict all such factors, nor can it assess the impact of any such factor on the business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. You should consider this cautionary statement, the risk factors identified in the sections entitled “Risk Factor Summary” and “Risk Factors” in this quarterly report on Form 10-Q and the risk factors identified in our other periodic reports filed with the Securities and Exchange Commission (SEC) when evaluating our forward-looking statements.
NOTE REGARDING COMPANY REFERENCES
References in this report to “Emergent,” the “Company,” “we,” “us,” and “our” refer to Emergent BioSolutions Inc. and its consolidated subsidiaries.
NOTE REGARDING TRADE NAMES
Emergent®, BioThrax®, BaciThrax®, RSDL®, BAT®, Trobigard®, Anthrasil®, CNJ-016®, ACAM2000®, Vivotif®, Vaxchora®, NARCAN® and any and all Emergent BioSolutions Inc. brands, products, services and feature names, logos and slogans are trademarks or registered trademarks of Emergent BioSolutions Inc. or its subsidiaries in the United States or other countries. All other brands, products, services and feature names or trademarks are the property of their respective owners.
4


ITEM 1. FINANCIAL STATEMENTS
Emergent BioSolutions Inc.
Condensed Consolidated Balance Sheets
(unaudited, in millions, except per share amounts)
 March 31, 2022December 31, 2021
ASSETS 
Current assets:  
Cash and cash equivalents$435.8 $576.1 
Restricted cash0.2 0.2 
Accounts receivable, net181.8 274.7 
Inventories, net400.7 350.8 
Prepaid expenses and other current assets81.8 70.3 
Total current assets1,100.3 1,272.1 
Property, plant and equipment, net807.5 800.1 
Intangible assets, net590.6 604.6 
Goodwill224.9 224.9 
Other assets57.1 57.3 
Total assets$2,780.4 $2,959.0 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$107.3 $128.9 
Accrued expenses 29.3 51.7 
Accrued compensation56.4 88.7 
Debt, current portion31.6 31.6 
Other current liabilities24.6 72.9 
Total current liabilities249.2 373.8 
Contingent consideration, net of current portion4.4 4.5 
Debt, net of current portion801.5 809.4 
Deferred tax liability94.8 94.9 
Contract liabilities, net of current portion5.9 4.7 
Other liabilities49.3 52.7 
Total liabilities1,205.1 1,340.0 
Stockholders' equity:
Preferred stock, $0.001 par value; 15.0 shares authorized, no shares issued or outstanding
  
Common stock, $0.001 par value; 200.0 shares authorized, 55.3 and 55.1 shares issued; 50.4 and 51.3 shares outstanding, respectively
0.1 0.1 
Treasury stock, at cost, 4.9 and 3.8 common shares, respectively
(204.4)(152.2)
Additional paid-in capital834.8 829.4 
Accumulated other comprehensive loss, net(9.3)(16.1)
Retained earnings954.1 957.8 
Total stockholders' equity1,575.3 1,619.0 
Total liabilities and stockholders' equity$2,780.4 $2,959.0 

See accompanying notes.
5


Emergent BioSolutions Inc.
Condensed Consolidated Statements of Operations
(unaudited, in millions, except per share amounts)
 
Three Months Ended March 31,
 
20222021
Revenues:  
Product sales, net$237.1 $137.9 
Contract development and manufacturing:
Services51.8 67.6 
Leases9.0 116.2 
Total contract development and manufacturing60.8 183.8 
Contracts and grants9.6 21.3 
Total revenues307.5 343.0 
Operating expenses:
Cost of product sales80.3 52.6 
Cost of contract development and manufacturing75.6 46.7 
Research and development46.4 52.5 
Selling, general and administrative84.8 80.9 
Amortization of intangible assets14.0 14.9 
Total operating expenses301.1 247.6 
Income (loss) from operations6.4 95.4 
Other income (expense):
Interest expense(8.2)(8.5)
Other, net(2.0)(1.7)
Total other income (expense), net(10.2)(10.2)
Income (loss) before income taxes(3.8)85.2 
Income taxes0.1 (15.5)
Net income (loss)$(3.7)$69.7 
Net income (loss) per common share
Basic$(0.07)$1.31 
Diluted$(0.07)$1.28 
Shares used in computing net income (loss) per common share
Basic50.7 53.3 
Diluted50.7 54.5 

See accompanying notes.
6


Emergent BioSolutions Inc.
Condensed Consolidated Statements of Comprehensive Income
(unaudited, in millions)
Three Months Ended March 31,
20222021
Net income (loss)$(3.7)$69.7 
Other comprehensive income (loss), net of tax:
Foreign currency translation0.5 (2.2)
Unrealized gains (losses) on hedging activities6.3 3.1 
Total other comprehensive income (loss), net of tax6.8 0.9 
Comprehensive income (loss), net of tax$3.1 $70.6 
    
See accompanying notes.
7


Emergent BioSolutions Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited, in millions)
 
Three Months Ended March 31,
20222021
Cash flows (used in) provided by operating activities:
Net income (loss)$(3.7)$69.7 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Share-based compensation expense9.9 10.5 
Depreciation and amortization30.9 28.7 
Change in fair value of contingent consideration, net0.5 1.1 
Amortization of deferred financing costs1.0 1.0 
Deferred income taxes1.9 (1.7)
Other0.6 3.5 
Changes in operating assets and liabilities:
Accounts receivable93.7 42.1 
Inventories(50.1)(99.9)
Prepaid expenses and other assets(16.6)(10.0)
Accounts payable(14.7)20.1 
Accrued expenses and other liabilities(56.5)(40.0)
Accrued compensation(32.2)(29.4)
Contract liabilities(2.0)9.4 
Net cash (used in) provided by operating activities:(37.3)5.1 
Cash flows used in investing activities:
Purchases of property, plant and equipment(32.2)(56.1)
Net cash used in investing activities:(32.2)(56.1)
Cash flows used in financing activities:
Purchases of treasury stock(57.5) 
Principal payments on term loan facility(8.5)(5.6)
Principal payments on convertible senior notes (10.6)
Proceeds from share-based compensation activity0.5 6.9 
Taxes paid for share-based compensation activity(5.0)(12.2)
Contingent consideration payments (0.7)
Net cash used in financing activities:(70.5)(22.2)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(0.3)(0.3)
Net change in cash, cash equivalents and restricted cash(140.3)(73.5)
Cash, cash equivalents and restricted cash at beginning of period576.3 621.5 
Cash, cash equivalents and restricted cash at end of period$436.0 $548.0 
Supplemental disclosure of cash flow information:
Cash paid during the period for interest$11.7 $12.4 
Cash paid during the period for income taxes$4.8 $1.5 
Supplemental information on non-cash investing and financing activities:
Purchases of property, plant and equipment unpaid at period end$13.3 $32.5 
Purchases of treasury stock$1.3 $ 
Reconciliation of cash and cash equivalents and restricted cash at March 31, 2022 and December 31, 2021:
Cash and cash equivalents$435.8 $576.1 
Restricted cash0.2 0.2 
Total$436.0 $576.3 

See accompanying notes.
8


Emergent BioSolutions Inc.
Condensed Consolidated Statements of Changes in Stockholders' Equity
(unaudited, in millions)
 
$0.001 Par Value Common Stock
Treasury Stock
Additional Paid-In CapitalAccumulated Other Comprehensive LossRetained EarningsTotal Stockholders' Equity
SharesAmountSharesAmount
Balance at December 31, 202155.1 $0.1 (3.8)$(152.2)$829.4 $(16.1)$957.8 $1,619.0 
Share-based compensation activity0.2 — — — 5.4 — — 5.4 
Net income (loss)— — — — — — (3.7)(3.7)
Repurchases of stock— — (1.1)(52.2)— — — (52.2)
Other comprehensive income (loss), net of tax— — — — — 6.8 — 6.8 
Balance at March 31, 202255.3 $0.1 (4.9)$(204.4)$834.8 $(9.3)$954.1 $1,575.3 
Balance at December 31, 202054.3 $0.1 (1.2)$(39.6)$784.9 $(25.3)$726.9 $1,447.0 
Share-based compensation activity0.5 — — — 5.2 — — 5.2 
Net income (loss)— — — — — — 69.7 69.7 
Other comprehensive income (loss), net of tax— — — — — 0.9 — 0.9 
Balance at March 31, 202154.8 $0.1 (1.2)$(39.6)$790.1 $(24.4)$796.6 $1,522.8 
See accompanying notes.
9

EMERGENT BIOSOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in millions, except share and per share amounts)

1.    Business
Overview
Emergent BioSolutions Inc. (the Company or Emergent) 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 (CDMO) services portfolio.
The Company is focused on the following five distinct PHT categories: chemical, biological, radiological, nuclear and explosives (CBRNE); emerging infectious diseases (EID); travel health; emerging health crises; and acute/emergency care. The Company has a product portfolio of eleven products (vaccines, therapeutics, and drug-device combination products) that contribute a substantial portion of its revenue. The Company has one product candidate that is procured under special circumstances by the U.S. government (USG), although it is not approved by the U.S. Food and Drug Administration (FDA). The Company structures the business with a focus on markets and customers. As such, the key components of the business structure include a Government - Medical Countermeasures (MCM) business line, a Commercial business line and a Services line focused on CDMO.
The Company's products and services include:
Government - MCM Products
AV7909®, is a procured product candidate being developed as a next generation anthrax vaccine for post-exposure prophylaxis of disease resulting from suspected or confirmed Bacillus anthracis exposure. The USG has largely switched from procuring BioThrax to AV7909 for the Strategic National Stockpile (SNS) prior to its approval by the FDA; and
BioThrax®, the only vaccine licensed by the FDA, for the general use prophylaxis and post-exposure prophylaxis of anthrax disease;
ACAM2000®, 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;
BAT®, the only heptavalent antitoxin licensed by the FDA and Health Canada for the treatment of botulism; and;
CNJ-016®, also referred to as VIGIV, the only polyclonal antibody therapeutic licensed by the FDA and Health Canada to address certain complications from smallpox vaccination.
Raxibacumab injection, a fully human monoclonal antibody therapeutic licensed by the FDA for the treatment and prophylaxis of inhalational anthrax;
Anthrasil®, the only polyclonal antibody therapeutic licensed by the FDA and Health Canada for the treatment of inhalational anthrax;
RSDL®, the only medical device cleared by the FDA to remove or neutralize the following chemical warfare agents from the skin: tabun, sarin, soman, cyclohexyl sarin, VR, VX, mustard gas, and T-2 toxin.
Trobigard® atropine sulfate, obidoxime chloride AUTO-INJECTOR, is a combination drug-device auto-injector procured product candidate that contains atropine sulfate and obidoxime chloride. It has not been approved by the FDA, but it is procured by certain authorized government buyers under special circumstances for potential use as a nerve agent countermeasure.
Commercial Products
NARCAN® (naloxone HCl) Nasal Spray, the first needle-free formulation of naloxone approved by the FDA and Health Canada, for the emergency treatment of known or suspected opioid overdose as manifested by respiratory and/or central nervous system depression; Recently, the Company licensed an authorized generic of naloxone nasal spray to Sandoz; and
10

EMERGENT BIOSOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in millions, except share and per share amounts)
Vaxchora® (Cholera Vaccine, Live, Oral), the only single-dose oral vaccine licensed by the FDA and the European Medicines Agency (EMA) for the prevention of cholera; and
Vivotif® (Typhoid Vaccine Live Oral Ty21a), the only oral vaccine licensed by the FDA for the prevention of typhoid fever.
Services - Contract Development and Manufacturing
The Company's services line focused on CDMO offerings cover development services, drug substance manufacturing, drug product manufacturing, and when necessary, suite reservations, which depending on facts and circumstances could be considered a lease. These services are provided across the pharmaceutical and biotechnology industries as well as the USG and non-governmental organizations. The Company's technology platforms include mammalian, microbial, viral, plasma and advanced therapies utilizing the Company's core capabilities for manufacturing to third parties on a clinical and commercial (small and large) scale. Additional services include fill/finish formulation and analytical development services for injectable and other sterile products, inclusive of process design, technical transfer, manufacturing validations, aseptic filling, lyophilization, final packaging and stability studies, as well as manufacturing of vial and pre-filled syringe formats on multiple platforms.
The Company operates as two operating segments: 1) a products segment (Products) consisting of the Government - MCM and Commercial business lines and a services segment (Services) focused on CDMO (Note 14, Segment information).
2.    Basis of presentation and principles of consolidation
Basis of presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Emergent and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements included herein have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X issued by the SEC. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC.
All adjustments contained in the accompanying unaudited condensed consolidated financial statements are of a normal recurring nature and are necessary to present fairly the financial position of the Company as of March 31, 2022. Interim results are not necessarily indicative of results that may be expected for any other interim period or for an entire year.
Significant accounting policies
During the three months ended March 31, 2022, there have been no significant changes to the Company's summary of significant accounting policies contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC that have materially impacted the presentation of the Company's financial statements. During the three months ended March 31, 2022, the Company revised the reporting that the Chief Operating Decision Maker (CODM) reviews in order to assess Company performance. The CODM manages the business with a focus on two reportable segments: 1) a products segment (Products) consisting of the Government - MCM and Commercial business lines and 2) the services segment focused on CDMO (Services). This change is further outlined in Note 14, Segment information.
Fair value measurements
Separate disclosure is required for assets and liabilities measured at fair value on a recurring basis from those measured at fair value on a non-recurring basis. The Company has cash held in money market accounts (level 1) and time deposits (level 2), contingent purchase consideration (level 3) and interest rate swaps arrangements (level 2) that are measured at fair value on a recurring basis (Note 7, Fair value measurements and Note 8, Derivative instruments and hedging activities).
11

EMERGENT BIOSOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in millions, except share and per share amounts)
On a non-recurring basis, the Company measures its long-lived assets as part of impairment evaluations using fair value measurements. Goodwill is allocated to the Company's reporting units, which are one level below its operating segments. The Company evaluates goodwill and other indefinite-lived intangible assets for impairment annually as of October 1 and earlier if an event or other circumstance indicates that the carrying value of the asset may not be recoverable. If the Company believes that as a result of its qualitative assessment it is more likely than not that the fair value of a reporting unit or other indefinite-lived intangible asset is greater than its carrying amount, the quantitative impairment test is not required. If however it is determined that it is not more likely than not that the fair value of a reporting unit or other indefinite-lived intangible asset is greater than its carrying amount, a quantitative test is required. Long-lived assets such as intangible assets and property, plant and equipment are not required to be tested for impairment annually. Instead, long-lived assets are tested for impairment whenever circumstances indicate that the carrying amount of the asset may not be recoverable, such as when there is an adverse change in the market relating to those related assets. The impairment test first requires a comparison of undiscounted future cash flows to the carrying value of the asset. Determining the need for a detailed impairment analysis requires the exercise of judgment about several business factors, including the timing of expected future cash flows and assumptions about the economic environment.
As of March 31, 2022 and December 31, 2021, the Company had no other significant assets or liabilities that were measured at fair value.
Recently issued accounting standards
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) that the Company adopts as of the pronouncement's specified effective date. Unless otherwise discussed below, the Company does not believe that the adoption of recently issued standards have or may have a material impact on the consolidated financial statements or disclosures.
Not Yet Adopted
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting
In March 2020, the FASB issued Topic 848, which was further amended in January 2021. Topic 848 provides relief for impacted areas as it relates to impending reference rate reform. Topic 848 contains optional expedients and exceptions to debt arrangements, contracts, hedging relationships, and other areas or transactions that are impacted by reference rate reform. This guidance is effective upon issuance for all entities and elections of certain optional expedients are required to apply the provisions of the guidance. The Company continues to assess all potential impacts of the standard and will disclose the nature and reason for any elections that the Company makes.
3.    Inventories, net
Inventory, net consisted of the following:
March 31, 2022December 31, 2021
Raw materials and supplies$244.1 $217.5 
Work-in-process106.0 95.8 
Finished goods50.6 37.5 
Total inventories, net$400.7 $350.8 
12

EMERGENT BIOSOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in millions, except share and per share amounts)
4.    Property, plant and equipment, net
Property, plant and equipment, net consisted of the following:
March 31, 2022December 31, 2021
Land and improvements$51.9 $52.1 
Buildings, building improvements and leasehold improvements286.9 269.7 
Furniture and equipment527.9 513.5 
Software62.5 60.7 
Construction-in-progress208.1 223.2 
Property, plant and equipment, gross$1,137.3 $1,119.2 
Less: Accumulated depreciation & amortization(329.8)(319.1)
Total property, plant and equipment, net$807.5 $800.1 
As of March 31, 2022 and December 31, 2021, construction-in-progress primarily includes costs incurred related to construction to advance the Company's CDMO capabilities.
5.    Leases
The Company is the lessee for operating leases for offices, research and development facilities and manufacturing facilities. The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use (ROU) assets and liabilities. For a discussion of lessor activities, see Note 10, Revenue recognition.
The components of lease expense were as follows: 
Three Months Ended March 31,
20222021
Operating lease cost:
Amortization of right-of-use assets$1.4 $1.3 
Interest on lease liabilities0.3 0.4 
Total operating lease cost$1.7 $1.7 
Operating lease costs are reflected as components of cost of product sales, cost of contract development and manufacturing, research and development expense and selling, general and administrative expense.
Supplemental balance sheet information related to lessee activities is as follows:
(In millions, except lease term and discount rate)Balance Sheet locationMarch 31, 2022December 31, 2021
Operating lease right-of-use assetsOther assets$26.9$28.3
Operating lease liabilities, current portionOther current liabilities5.85.8
Operating lease liabilitiesOther liabilities22.624.2
Total operating lease liabilities$28.4$30.0
Operating leases:
Weighted average remaining lease term (years)6.87.0
Weighted average discount rate4.1 %4.1 %
13

EMERGENT BIOSOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in millions, except share and per share amounts)
6.    Intangible assets
The Company's intangible assets consist of products acquired via business combinations or asset acquisitions. The following table summarizes the Company's intangible assets for the periods ended March 31, 2022 and December 31, 2021:
March 31, 2022December 31, 2021
Asset TypeEstimated LifeCostAccumulated AmortizationNetCostAccumulated AmortizationNet
Products
9-22 years
$798.0 $207.4 $590.6 $798.0 $193.5 $604.5 
Customer relationships8 years28.6 28.6  28.6 28.6  
CDMO8 years5.5 5.5  5.5 5.4 0.1 
   Total intangible assets$832.1 $241.5 $590.6 $832.1 $227.5 $604.6 
Amortization expense associated with the Company's intangible assets was recorded as follows:
Three Months Ended March 31,
20222021
Amortization Expense$14.0 $14.9 
As of March 31, 2022, the weighted average amortization period remaining for intangible assets was 11.7 years.
The following table provides a roll forward of changes in our goodwill balance:
Goodwill, December 31, 2021
$224.9 
Foreign currency translation 
Goodwill, March 31, 2022
$224.9 
The carrying amount of goodwill included accumulated impairments of $41.7 million as of March 31, 2022 and December 31, 2021, respectively.
7.    Fair value measurements
The table below presents information about the Company's assets and liabilities that are regularly measured and carried at fair value and indicate the level within the fair value hierarchy of the valuation techniques we utilized to determine fair value:
March 31, 2022
December 31, 2021
TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Assets:
Money market accounts$7.4 7.4  $ $152.4 152.4  $ 
Time deposits250.2  250.2  200.0  200.0  
Derivative instruments2.5  2.5      
Total$260.1 7.4 252.7 $ $352.4 152.4 200.0 $ 
Liabilities:
Contingent consideration$7.6   $7.6 $37.2   $37.2 
Derivative instruments    6.1  6.1  
Total$7.6   $7.6 $43.3  6.1 $37.2 
14

EMERGENT BIOSOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in millions, except share and per share amounts)
Contingent consideration
Contingent consideration liabilities associated with business combinations are measured at fair value. These liabilities represent an obligation of the Company to transfer additional assets to the selling shareholders and owners if future events occur or conditions are met. These liabilities associated with business combinations are measured at fair value at inception and at each subsequent reporting date. The changes in the fair value are primarily due to the expected amount and timing of future net sales, which are inputs that have no observable market. Any changes in fair value for the contingent consideration liabilities related to the Company’s products are classified in the Company's statement of operations as cost of product sales.
The following table is a reconciliation of the beginning and ending balance of contingent considerations.
 
Balance at December 31, 2021$37.2 
Change in fair value0.5 
Settlements(30.1)
Balance at March 31, 2022$7.6 
As of March 31, 2022 and December 31, 2021, the current portion of the contingent consideration liability was $3.2 million and $32.7 million, respectively, and was included in other current liabilities on the condensed consolidated balance sheets.
The recurring Level 3 fair value measurements for the Company's contingent consideration liability include the following significant unobservable inputs:
Contingent Consideration Liability
Fair Value as of March 31, 2022
Valuation TechniqueUnobservable InputRangeWeighted Average
Revenue milestone and royalty based$7.6 millionDiscounted cash flowDiscount rate
8.3%
8.3%
Probability of payment
25% - 50%
37.7%
Projected year of payment2022 - 20282024
Derivative instruments
Refer to Note 8, Derivative instruments and hedging activities, to these condensed consolidated financial statements.
Non-variable rate debt
As of March 31, 2022 and December 31, 2021, the fair value of the Company's 3.875% Senior Unsecured Notes was $403.7 million and $433.3 million. The fair value was determined through market sources, which are level 2 inputs and directly observable. The carrying amounts of the Company’s other long-term variable interest rate debt arrangements approximate their fair values (see Note 9, Debt).
8.    Derivative instruments and hedging activities
Risk management objective of using derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company has entered into interest rate swaps to manage exposures that arise from the Company's senior secured credit agreement's payments of variable interest rate debt.
If current fair values of designated interest rate swaps remained static over the next twelve months, the Company would reclassify $0.2 million of net deferred gains from accumulated other comprehensive income (loss) into the
15

EMERGENT BIOSOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in millions, except share and per share amounts)
condensed consolidated statement of operations over the next twelve month period. All outstanding cash flow hedges mature in October 2023.
As of March 31, 2022, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:
(in millions, except number of instruments)Number of InstrumentsNotional
Interest rate swaps7$350.0 
The table below presents the fair value of the Company’s derivative financial instruments designated as hedges as well as their classification on the balance sheets.
Asset DerivativesLiability Derivatives
 
March 31, 2022December 31, 2021March 31, 2022December 31, 2021
Balance Sheet LocationFair ValueBalance Sheet LocationFair ValueBalance Sheet LocationFair ValueBalance Sheet LocationFair Value
Interest Rate SwapsOther Current Assets$0.2 Other Current Assets$ Other Current Liabilities $ Other Current Liabilities$4.5 
Other Assets$2.3 Other Assets$ Other Liabilities$ Other Liabilities$1.6 
The valuation of the interest rate swaps is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each interest rate swap. This analysis reflects the contractual terms of the interest rate swaps, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash payments (or receipts) and the discounted expected variable cash receipts (or payments). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. We incorporate credit valuation adjustments in the fair value measurements to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk. These credit valuation adjustments were not significant inputs for the fair value calculations for the periods presented. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as the posting of collateral, thresholds, mutual puts and guarantees. The valuation of interest rate swaps fall into Level 2 in the fair value hierarchy.
The table below presents the effect of cash flow hedge accounting on accumulated other comprehensive income.
Cumulative Amount of Gain/(Loss) Recognized in OCI on Derivative
Location of Gain or (Loss) Reclassified from Accumulated OCI into Income
Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income
March 31,December 31,Three Months Ended March 31,
2022202120222021
Interest Rate Swaps$2.5 $(6.1)Interest expense$1.4 $1.4 
16

EMERGENT BIOSOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in millions, except share and per share amounts)
9.    Debt
The components of debt are as follows:
March 31, 2022December 31, 2021
Senior secured credit agreement - Term loan due 2023$388.1 $396.6 
Senior secured credit agreement - Revolver loan due 2023  
3.875% Senior Unsecured Notes due 2028
450.0 450.0 
Other3.0 3.0 
Total debt$841.1 $849.6 
Current portion of long-term debt, net of debt issuance costs(31.6)(31.6)
Unamortized debt issuance costs(8.0)(8.5)
Non-current portion of debt$801.5 $809.4 
   
As of March 31, 2022 and December 31, 2021, debt issuance costs associated with the revolver loan were classified as other current assets and other assets on the Company's consolidated balance sheets because there was no outstanding revolver balance at period end. As of March 31, 2022, the Company had $2.0 million and $1.1 million of debt issuance costs associated with the revolver loan classified as other current assets and other assets, respectively. As of December 31, 2021, the Company had approximately $2.0 million and $1.6 million of debt issuance costs associated with the revolver loan that were classified as other current assets and other assets, respectively.
3.875% Senior Unsecured Notes due 2028
On August 7, 2020, the Company completed its offering of $450 million aggregate principal amount of 3.875% Senior Unsecured Notes due 2028 (the 2028 Notes) of which the majority of the net proceeds were used to pay down the Revolving Credit Facility (as defined below). Interest on the 2028 Notes is payable on February 15th and August 15th of each year until maturity, beginning on February 15, 2021. The 2028 Notes will mature on August 15, 2028.
On or after August 15, 2023, the Company may redeem the 2028 Notes, in whole or in part, at the redemption prices set forth in the related Indenture, plus accrued and unpaid interest. Prior to August 15, 2023 the Company may redeem all or a portion of the 2028 Notes at a redemption price equal to 100% of the principal amount of the 2028 Notes plus a “make-whole” premium and accrued and unpaid interest. Prior to August 15, 2023, the Company may redeem up to 40% of the aggregate principal amount of the 2028 Notes using the net cash proceeds of certain equity offerings at the redemption price set forth in the related Indenture. Upon the occurrence of a change of control, the Company must offer to repurchase the 2028 Notes at a purchase price of 101% of the principal amount of such 2028 Notes plus accrued and unpaid interest.
Negative covenants in the Indenture governing the 2028 Notes, among other things, limit the ability of the Company to incur indebtedness and liens, dispose of assets, make investments, enter into certain merger or consolidation transactions and make restricted payments.
Senior secured credit agreement
Also on August 7, 2020, the Company entered into a Second Amendment (the “Credit Agreement Amendment”) to its senior secured credit agreement, dated October 15, 2018, with multiple lending institutions relating to the Company’s senior secured credit facilities (the “Credit Agreement,” and as amended, the “Amended Credit Agreement”), consisting of a senior revolving credit facility (the “Revolving Credit Facility”) and senior term loan facility (the “Term Loan Facility,” and together with the Revolving Credit Facility, the “Senior Secured Credit Facilities”). The Credit Agreement Amendment amended, among other things, the definition of incremental facilities limit, the consolidated net leverage ratio financial covenant by increasing the maximum level, increased the permissible applicable margins based on the Company’s consolidated net leverage ratio and increased the commitment fee that the Company is required to pay in respect of the average daily unused commitments under the Revolving Credit Facility, depending on the Company’s consolidated net leverage ratio.
17

EMERGENT BIOSOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in millions, except share and per share amounts)
The Amended Credit Agreement includes (i) a Revolving Credit Facility of $600 million and (ii) a Term Loan Facility with a principal amount of $450 million. The Company may request incremental term loan facilities or increases in the Revolving Credit Facility (each an "Incremental Loan") as long as certain requirements involving our net leverage ratio will be maintained on a pro forma basis. Borrowings under the Revolving Credit Facility and the Term Loan Facility bear interest at a rate per annum equal to (a) a eurocurrency rate plus a margin ranging from 1.25% to 2.25% per annum, depending on the Company's consolidated net leverage ratio or (b) a base rate (which is the highest of the prime rate, the federal funds rate plus 0.50%, and a eurocurrency rate for an interest period of one month plus 1% plus a margin ranging from 0.25% to 1.25%, depending on the Company's consolidated net leverage ratio). The Company is required to make quarterly payments on the last business day of each calendar quarter under the Amended Credit Agreement for accrued and unpaid interest on the outstanding principal balance, based on the above interest rates. In addition, the Company is required to pay commitment fees ranging from 0.15% to 0.35% per annum, depending on the Company's consolidated net leverage ratio, for the average daily unused commitments under the Revolving Credit Facility. The Company is to repay the outstanding principal amount of the Term Loan Facility in quarterly installments on the last business day of each calendar quarter based on an annual percentage equal to 2.5% of the original principal amount of the Term Loan Facility during each of the first two years of the Term Loan Facility, 5% of the original principal amount of the Term Loan Facility during the third year of the Term Loan Facility and 7.5% of the original principal amount of the Term Loan Facility during each year of the remainder of the term of the Term Loan Facility until the maturity date of the Term Loan Facility, at which time the entire unpaid principal balance of the Term Loan Facility will be due and payable. The Company has the right to prepay the Term Loan Facility without premium or penalty. The Revolving Credit Facility and the Term Loan Facility mature on October 13, 2023.
The Amended Credit Agreement also requires mandatory prepayments of the Term Loan Facility in the event the Company or its Subsidiaries (a) incur indebtedness not otherwise permitted under the Amended Credit Agreement or (b) receive cash proceeds in excess of $100 million during the term of the Credit Agreement from certain dispositions of property or from casualty events involving their property, subject to certain reinvestment rights. The financial covenants under the Amended Credit Agreement currently require the quarterly presentation of a minimum consolidated 12-month rolling debt service coverage ratio of 2.50 to 1.00, and a maximum consolidated net leverage ratio of 4.50 to 1.00 (subject to an increase to 5.00 to 1.00 for an applicable four quarter period, at the election of the Company, in connection with a permitted acquisition having an aggregate consideration in excess of $75.0 million). Negative covenants in the Amended Credit Agreement, among other things, limit the ability of the Company to incur indebtedness and liens, dispose of assets, make investments, enter into certain merger or consolidation transactions and make restricted payments. As of the date of these financial statements, the Company is in compliance with all affirmative and negative covenants.
10.    Revenue recognition
The Company operates as two operating segments (Note 14, Segment information). The Company's revenues disaggregated by the major sources were as follows:
Three Months Ended March 31, 2022Three Months Ended March 31, 2021
U.S. GovernmentNon-U.S. Government TotalU.S. GovernmentNon-U.S. Government Total
Product sales, net$103.4 $133.7 $237.1 $56.4 $81.5 $137.9 
Contract development and manufacturing:
Services 51.8 51.8  67.6 67.6 
Leases 9.0 9.0 97.5 18.7 116.2 
Total contract development and manufacturing$ $60.8 $60.8 $97.5 $86.3 $183.8 
Contracts and grants9.1 0.5 9.6 20.0 1.3 21.3 
Total revenues$112.5 $195.0 $307.5 $173.9 $169.1 $343.0 
18

EMERGENT BIOSOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in millions, except share and per share amounts)
BARDA COVID-19 Development Public-Private Partnership
In 2020, the Company announced the issuance of a task order under our existing Center for Innovation in Advanced Development and Manufacturing (CIADM) agreement with BARDA for COVID-19 vaccine development and manufacturing (the BARDA COVID-19 Development Public Private Partnership). The BARDA COVID-19 Development Public Private Partnership is considered a lease and is accounted for under ASC 842. The initial task order had a contract value of up to $628.2 million and included the reservation of manufacturing capacity and accelerated expansion of fill/finish capacity valued at $542.7 million and $85.5 million, respectively. Subsequently, the task order was expanded to include incremental capital activities which increased the value to $650.8 million. On November 1, 2021, the Company and BARDA mutually agreed to terminate the Company's CIADM contract and associated task orders, including the BARDA COVID-19 Development Public Private Partnership. The Company did not recognize lease revenues under this arrangement during the three months ended March 31, 2022. During the three months ended March 31, 2021 the Company recognized lease revenues of $97.5 million related to this arrangement.
CDMO operating leases
Certain multi-year CDMO service arrangements with commercial customers include operating leases whereby the customer has the right to direct the use of and obtain substantially all of the economic benefits of specific manufacturing suites operated by the Company. The associated revenue is recognized on a straight-line basis over the term of the lease. The remaining term on the Company's operating lease components approximates 2.1 years. The Company utilizes a cost-plus model to determine the stand-alone selling price of the lease component to allocate contract consideration between the lease and non-lease components. The Company has allocated contract operating lease revenues due under our long-term CDMO services arrangements as follows:
Year ended December 31,
2022 (1)
$24.1 
202336.5 
202432.2 
20258.7 
Thereafter2.7 
$104.2 
(1) As of March 31, 2022, amount represents the nine months ending December 31, 2022.
Transaction price allocated to remaining performance obligations
As of March 31, 2022, the Company has future contract value on unsatisfied performance obligations of approximately $1.1 billion associated with all arrangements entered into by the Company. The Company expects to recognize a majority of the $1.1 billion of unsatisfied performance obligations within the next 24 months. The amount and timing of revenue recognition for unsatisfied performance obligations can change. The future revenues associated with unsatisfied performance obligations exclude the value of unexercised option periods in the Company’s revenue arrangements. Often the timing of manufacturing activities changes based on customer needs and resource availability. Government funding appropriations can impact the timing of product deliveries. The success of the Company's development activities that receive development funding support from the USG under development contracts can also impact the timing of revenue recognition.
Contract assets
The Company considers accounts receivable and deferred costs associated with revenue generating contracts, which are not included in inventory or property, plant and equipment and the Company does not currently have a contractual right to bill, to be contract assets. As of March 31, 2022 and December 31, 2021, the Company had $42.2 million and $21.5 million, respectively, of contract assets recorded within accounts receivable, net on the condensed consolidated balance sheets.
19

EMERGENT BIOSOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in millions, except share and per share amounts)
Contract liabilities
When performance obligations are not transferred to a customer at the end of a reporting period, cash received associated with amounts allocated to those performance obligations is reflected as contract liabilities on the consolidated balance sheets and is deferred until control of these performance obligations is transferred to the customer. The following table presents the roll forward of the contract liability balances:
December 31, 2021$16.4 
Deferral of revenue6.4 
Revenue recognized(6.9)
March 31, 2022$15.9 
As of March 31, 2022 and December 31, 2021, the current portion of contract liabilities was $10.0 million and $11.7 million, respectively, and was included in other current liabilities on the balance sheet.
Accounts receivable
Accounts receivable, including unbilled accounts receivable contract assets, consist of the following:
March 31, 2022December 31, 2021
Billed, net$115.2 $224.9 
Unbilled66.6 49.8 
Total, net$181.8 $274.7 
As of March 31, 2022 and December 31, 2021, the allowances for doubtful accounts was $0.7 million and $3.2 million, respectively.
11.    Income taxes
The estimated effective annual tax rate for the years ended December 31, 2022 and 2021, excluding the impact of discrete adjustments, was 25% and 27%. respectively. For the three months ended March 31, 2022 and 2021, the Company recorded a discrete tax expense (benefits) of $0.4 million and $(6.6) million, respectively. The discrete tax expense in 2022 was primarily due to share-based compensation activity offset by return to provision adjustments. The discrete tax benefits in 2021 were primarily due to share-based compensation activity.
12.    Net (loss) income per share
The following table presents the calculation of basic and diluted net (loss) income per share:
Three Months Ended March 31,
20222021
Numerator: 
Net (loss) income$(3.7)$69.7 
Denominator:
Weighted-average number of shares—basic50.7 53.3 
Dilutive securities—equity awards 1.2 
Weighted-average number of shares—diluted50.7 54.5 
Net (loss) income per share - basic$(0.07)$1.31 
Net (loss) income per share - diluted$(0.07)$1.28 
Basic net (loss) income per share is computed by dividing net (loss) income by the weighted average number of shares of common stock outstanding during the period. Diluted (loss) income per share is computed using the treasury method by dividing net (loss) income by the weighted average number of shares of common stock outstanding during
20

EMERGENT BIOSOLUTIONS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in millions, except share and per share amounts)
the period, adjusted for the potential dilutive effect of other securities if such securities were converted or exercised and are not anti-dilutive. No adjustment for the potential dilutive effect of dilutive securities is reported for the three months ended March 31, 2022 as the effect would have been anti-dilutive due to the Company's net loss.
The following table presents the share-based awards that are not considered in the diluted net (loss) income per share calculation generally because the exercise price of the awards was greater than the average per share closing price during the three months ended March 31, 2022 and 2021. In certain instances, awards may be anti-dilutive even if the average market price exceeds the exercise price when the sum of the assumed proceeds exceeds the difference between the market price and the exercise price.
Three Months Ended March 31,
20222021
Anti-dilutive stock awards1.6 0.1 
13.    Equity
Repurchase programs
On November 11, 2021, the Company announced that its Board of Directors authorized management to repurchase up to an aggregate of $250.0 million of Common Stock under a board-approved Share Repurchase Program, of which $164.7 million has been utilized to purchase 3.8 million shares as of March 31, 2022. During the three months ended March 31, 2022, the Company has utilized $52.2 million to purchase 1.1 million shares. The number of shares repurchased includes trades executed in March and settled in April due to timing. The Share Repurchase Program does not obligate the Company to acquire any specific number of shares. Repurchased shares will be available for use in connection with our stock plans and for other corporate purposes.
Share-based compensation
During the three months ended March 31, 2022, the Company granted stock options to purchase 0.6 million shares of common stock and 1.2 million restricted and performance stock units under the Emergent BioSolutions Inc. Stock Incentive Plan. Typically, the stock option and restricted stock unit grants vest over three equal annual installments beginning on the day prior to the anniversary of the grant date. The performance stock units settle in stock at the end of the three-year performance period based on the Company's results compared to the performance criteria. Share-based compensation expense was recorded in the following financial statement line items:
Three Months Ended March 31,
20222021
Cost of product sales$1.7 $1.5 
Cost of contract development and manufacturing0.4 0.2 
Research and development1.1 1.4 
Selling, general and administrative6.7 7.4 
Total share-based compensation expense$9.9 $