Company Reports Strong Financial Progress and Future Growth Plans

In extending our debt maturity to 2029, we have enhanced profitability and operating cash flow. Additionally, we have strategically divested assets and streamlined our site network while successfully meeting internal delivery commitments for our customers, resulting in significant improvements in operating margins.

Operating expenditures decreased by $130 million while we remained committed to delivering our core products. Our focus has shifted to medical countermeasures, particularly the NARCAN nasal spray. Notably, in 2024, we distributed 11 million two-dose cartons, equating to 22 million doses across the U.S. and Canada. We continue to lead in the growing naloxone nasal spray market and have supported public health preparedness alongside the U.S. and allied government customers by addressing critical threats such as anthrax, smallpox, mpox, and botulism, culminating in $550 million in MCM contract awards.

Moreover, we resolved legacy legal and quality issues and enhanced our company-wide quality and compliance systems. We prioritize critical stabilization, ensuring the highest standards of patient safety and regulatory compliance. Moving to Slide 8, our achievements in 2024 enable us to concentrate on five key areas for our 2025 plan: generating strong profits from 2024, focusing on higher net income and an increased gross margin percentage, improving adjusted EBITDA margin percentage, driving growth in operating cash flow compared to 2024, and achieving strong positive free cash flow.

Our Chief Medical Officer and head of R&D, Dr. Simon Lowry, will lead our efforts in rebuilding the product pipeline. We also aim to further optimize manufacturing operations and establish partnerships, potentially taking steps to streamline our footprint. Lastly, we will focus on strategic capital investments for growth through business development opportunities.

These targeted investments will aim to create value, leveraging our expertise and capabilities—similar to our KLOXXADO business development transaction. Before I turn it over to Rich for detailed financial insights, I want to outline our more conservative 2025 guidance approach, which we view as a commitment to stakeholders. With the onboarding of the new administration, we anticipate shifts in product delivery timing or potential uncertainties due to staff transitions. Having served government customers for over 25 years, we are accustomed to navigating these shifts. Our products are mission-critical, a sentiment supported by bipartisan appreciation for the importance of biodefense and the urgent need to reduce opioid overdose deaths. Despite our cautious overall guidance, we expect a strong first quarter.

As a standard practice, we plan to update our guidance quarterly, continuing our tradition from previous years. After Rich shares his insights, I’ll expand on these topics. Now, I’ll hand the call over to Rich.

Richard S. Lindahl — Executive Vice President, Chief Financial Officer, and Treasurer

Thank you, Joe. Good afternoon to all. We appreciate your participation today. In 2024, we made notable strides in stabilizing the financial foundation of our business and have entered the turnaround phase of our multiyear transformational plan.

Our array of medical countermeasures and opioid overdose reversal products offers lifesaving capabilities globally while driving sustainable revenue and receiving bipartisan support. The actions taken over the past two years have positioned us at an inflection point regarding profitability and cash flow, enabling us to identify and pursue value-creating growth opportunities moving forward.

Our fourth quarter results largely adhered to the guidance provided during our previous call, as summarized on Slide 10: total revenues reached $195 million, reflecting a decline from the previous year primarily due to lower NARCAN sales and the timing of anthrax sales, which was somewhat offset by higher smallpox sales. Our adjusted EBITDA stood at $21 million, an increase of $18 million compared to last year. The total segment adjusted gross margin rose to 40%, marking an 800 basis point improvement year-over-year due to product mix and enhanced cost structure resulting from our restructuring efforts. Notably, we achieved a $49 million reduction in operating expenses, which translates to a 41% decrease across R&D and SG&A compared to the previous year, reflecting the full impact of our cost-saving measures.

On Slide 11, we highlight our strong results for the year: total revenues were $1.04 billion, remaining roughly flat against the prior year; total adjusted EBITDA hit $183 million, reflecting a turnaround from a negative $22 million in 2023; adjusted gross margin reached $457 million, representing a $121 million annual improvement, or 1,200 basis points as a percentage of revenue. Our full-year operating expenses totaled $379 million, a reduction of $101 million or 21% year-over-year, which includes cuts across both R&D and SG&A following our cost actions in the latter half of 2024.

Turning to Slide 12, we note highlights from our total product sales, which were $909 million—a slight drop compared to last year. Increased smallpox revenue from U.S. and international customers offset lower NARCAN sales and the timing of anthrax sales. Within the NARCAN sector, we maintained competitive pricing and emphasized our strengths, including brand recognition, leading distribution capabilities, and superior customer service. Sales volumes remained consistent with 2023 levels.

Although prices compared to 2023 were lower, they stabilized in the latter half of 2024. Total bioservices revenue reached $105 million, improving by $26 million year-over-year, largely due to a $50 million one-time settlement with Janssen. Contracting and grant revenue totaled $30 million in 2024, mainly from ongoing U.S. government funding for the Ebanga program designed for treating Ebola.

On Slide 13, we summarize material achievements ahead of expectations in 2024: we completed $117 million in asset sales and secured a $50 million payment from Janssen due to the confidential settlement agreement. Overall cost structure improvements delivered $130 million in annualized savings for 2024, contributing to a total of $250 million in operating expense savings over the past two years while keeping our core product capabilities intact.

We also received $30 million in development milestone payments from Bavarian Nordic. These liquidity enhancements facilitated refinancing of our previous secured credit facility as we entered a new $250 million term loan from Oak Hill Advisors, extending our debt maturity to August 2029. Additionally, we established a $100 million asset-backed revolving credit facility led by Wells Fargo, also maturing in 2029. On Slide 14, we illustrate the significant improvements in our financial metrics. At the close of 2024, we reported total liquidity of $200 million, which includes $100 million in cash and $100 million from undrawn revolving credit.

Emergent’s Financial Recovery and Strategic Plans for 2025

Emergent’s financial position has significantly improved, aided by generating $59 million of operating cash flow—an increase of $265 million year over year. Through successful debt refinancing, our net debt at year-end stood at $601 million, a reduction of $156 million, or 21%, since the beginning of 2024. This financial rebound, coupled with strong business performance, lowered our net leverage to 3.3 times adjusted EBITDA.

Credit rating agencies have acknowledged our improved financial standing. Moody’s upgraded our corporate family credit rating to B3, while S&P rated it B minus, both with stable outlooks. Notably, the prior going concern qualification has been removed from the audit opinion, reflecting our stronger financial disclosures that will be included in our forthcoming 10-K filing.

Looking at our revenue, the total for 2024 was $1.04 billion, which includes approximately $115 million not carried into our 2025 base. The Janssen settlement agreement contributed $50 million in revenue within our bioservices division. Additionally, RSDL and Camden generated about $65 million before their divestiture in the third quarter of 2024. Thus, the normalized revenue starting point for 2025 is approximately $930 million.

2025 Revenue and Profitability Guidance

For 2025, we project total revenue between $750 million and $850 million. Our conservative outlook, as previously mentioned by Joe, accounts for anticipated transitions under the new administration. We expect adjusted EBITDA for 2025 to be between $150 million and $200 million, maintaining consistency with the 2024 full-year results despite the lower revenue guidance.

This cautious revenue estimate underscores our strategic efforts to enhance our cost structure and profitability prospects. We believe that 2024 may represent a low point in adjusted EBITDA, with expectations for future growth in profitability. We anticipate a net income ranging from $16 million to $66 million and an adjusted net income between $20 million and $70 million.

For 2025, we forecast a total adjusted gross margin of 48% to 51%, marking a 500 basis point expansion at the midpoint compared to 2024. Segment-level revenue guidance indicates MCM product sales between $435 million and $485 million, comprising U.S. government and international orders. Our commercial products, which include NARCAN and KLOXXADO, are expected to generate revenue between $265 million and $315 million.

We anticipate NARCAN will maintain its leading position in the burgeoning naloxone nasal spray market. For the first quarter of 2025, we project total revenue between $200 million and $240 million, indicating a healthy start to the year. In conclusion, as illustrated on Slide 17, we have entered a turnaround phase ahead of schedule, with strong profit potential in 2024 despite lower overall revenues.

This guidance signals robust margin improvement prospects. Combined with our anticipated positive operating cash flow and expected milestone payments from Bavarian Nordic in 2025, we are well-positioned to harness growth opportunities as we advance. Now, I will pass the discussion back to Joe.

Joe Papa — President and Chief Executive Officer

Thank you, Rich. Moving to Slide 19, let’s contextualize our financial outlook for 2025. Our mission to combat opioid overdoses is central to our work, as we strive to expand access to over-the-counter NARCAN. NARCAN currently leads the market for intranasal naloxone products, holding approximately 75% of the market share.

Through ongoing efforts to increase OTC NARCAN access, we contribute to the decreasing national rates of opioid overdose deaths reported by the CDC. While this preliminary data indicates a significant decline in opioid-related fatalities, challenges remain, particularly in Canada, where overdose rates are concerningly high among certain provinces and indigenous communities. In the U.S., over $50 billion from opioid settlement funds is set to flow through channels supporting naloxone access over the next decade, along with an additional $3.5 billion in federal grants anticipated in 2025.

This funding is critical, given the ongoing opioid crisis intensified by fentanyl. Our NARCAN franchise relies on several key elements to continue making a difference in overdose prevention through 2025. We expect our competitive pricing strategy to sustain NARCAN’s market share, projecting unit volume growth in the total naloxone market at mid to high single-digit rates.

Another vital aspect of our strategy involves engagement with the National Safety Council, as we partner with major corporations focusing on first-aid safety kits that include OTC NARCAN. We aspire to see NARCAN nasal spray in every first-aid kit across the U.S. and Canada.

Our NARCANDirect national logistics program serves 18,000 endpoints, ensuring public interest customers have timely access to necessary product volumes. We believe that no other company matches our capacity to produce NARCAN nasal spray. Recently, we secured commercial rights for the KLOXXADO nasal spray from Hikma, further expanding our distribution capabilities for lifesaving treatments.

In conclusion, we view NARCAN as an essential standard of care in reducing opioid overdose deaths. Given Emergent’s reliable history of supplying NARCAN to diverse groups—states, first responders, and law enforcement—adding KLOXXADO nasal spray enhances our offerings to meet varied patient needs.

Now, transitioning to Slide 20, our MCM business continues to address critical biodefense needs in today’s threat-laden environment. This includes preparedness for anthrax, smallpox, ebola, and botulism, aligning with our strategic portfolio. We are well-positioned for future contracts, having received $550 million in biodefense contract modifications throughout 2024.

Emergent BioSolutions Updates Financial Guidance and Growth Strategy

It is essential to highlight that the Department of Defense has a mandatory funding commitment for BioThrax, a vaccine for anthrax used by military personnel. We see opportunities to actively address the ongoing mpox outbreak with ACAM2000. Additionally, we are optimistic about the potential of our other Medical Countermeasures (MCM) products, including TEMBEXA and Ebanga, which may contribute to our future growth. The U.S. government has also committed funding for TEMBEXA through 2027, further confirming the significance of our MCM assets in biodefense.

Referring to Slide 21 regarding upcoming growth catalysts for 2025, we look forward to the World Health Organization’s emergency use listing for ACAM2000 as the mpox public health situation evolves. We remain dedicated to diversifying revenue across our existing businesses and enhancing core capabilities to drive growth. This includes anticipated incremental revenue from KLOXXADO nasal spray.

In conjunction with domestic initiatives, we will also seek international growth opportunities within our product portfolio. Notably, we expect to receive $50 million in milestone payments for the Bavarian Nordic Chikungunya vaccine in the coming 30 days. As we implement our 2025 turnaround plans, our commitment to the highest standards of quality, ethics, and compliance will remain paramount. Ultimately, based on the factors we’ve outlined, we believe Emergent is in a strong position for a significant turnaround and sustained growth.

With that, I welcome your questions. Operator, please open the line for inquiries.

Questions & Answers:

Operator:

[Operator instructions] Our first question is from Jessica Fye with JPMorgan. Your line is now open.

Unknown speaker (Nick):

Hi, this is Nick on behalf of Jess. Thank you for taking our questions. First, can you provide more specifics on your NARCAN guidance, particularly regarding underlying volume and price assumptions? You mentioned expecting growth in the overall naloxone market, so how do you see that share divided between the pit market and other channels? What do you anticipate for your market share in 2025 compared to 2024, and do you foresee any pricing pressures?

Joe Papa — President and Chief Executive Officer:

Sure, Rich will address the first part of your question, and I’ll add to it afterwards.

Richard S. Lindahl — Executive Vice President, Chief Financial Officer:

Thanks, Nick. We discussed in the last call that pricing varied between the first and second halves of the year, with a stabilization observed in the latter half. This trend has continued into the new year. However, we expect that the lower pricing we experienced in the second half will impact our overall results for the coming year. This remains the key driver of our guidance as we progress into 2025.

We have provided a broad range for guidance to encompass a variety of outcomes, leaning towards a conservative stance, and we will update this as the year unfolds. We continue to expect to hold a strong, if not majority, share of the pit market moving forward. That largely answers your question.

Joe Papa:

Yes, I’d like to add that public interest currently constitutes about 75% of our overall business, which was one of your questions. I believe Rich covered the rest adequately.

Unknown speaker:

Thank you. One more question: you’re guiding for adjusted EBITDA in 2025 to be roughly flat year-over-year at the midpoint. While you mentioned that 2025 could represent a trough, can you discuss how you view growth opportunities beyond 2025, particularly regarding the dynamics surrounding NARCAN?

Joe Papa:

Certainly. One of the strengths of our business model lies in its diversification. We possess several assets, notably in medical countermeasures like NARCAN and KLOXXADO. We plan to pursue further business development opportunities in 2025 and beyond. These growth avenues will significantly contribute to our overall performance.

Specifically, we see various organic growth opportunities, including our continued work on TEMBEXA and Ebanga, and the mpox initiative. While mpox isn’t incorporated into our 2025 guidance at this stage, securing that business would represent a potential upside. Additionally, business development avenues like partnerships for biodefense medical countermeasures and first responder products will be vital. These aspects will play crucial roles in driving growth into 2026 and beyond.

Unknown speaker:

Great, thank you.

Joe Papa:

Alright, operator, let’s move on to the next question.

Operator:

Thank you. Our next question is from Brandon Folkes with Rodman and Renshaw. Your line is now open.

Brandon Folkes — Analyst:

Hi, thank you for taking my questions and providing detailed insights. I’d like to return to the 2026 discussion. Could you comment on the overall operational expenses (opex) reflected in your 2025 guidance and how you envision that evolving post-2025?

Richard S. Lindahl:

As I mentioned earlier, in our fourth-quarter results, we are seeing the benefits of the actions we’ve taken. We’ll continue to focus on optimizing our SG&A expenses as we enhance revenue growth. There are opportunities for efficiency improvements in SG&A that we will actively explore.

Joe Papa:

And I think you’re…

Emergent BioSolutions Discusses KLOXXADO Launch and Financial Performance

During a recent earnings call, executives from Emergent BioSolutions discussed the financial strategies and product positioning related to their acquisition of KLOXXADO. The conversation focused on adjusting operating expenses to enhance overall margins for 2023 and 2024, with a projected full realization of benefits in 2025.

Strategic Positioning of KLOXXADO

Brandon Folkes — Analyst

The impact of KLOXXADO was a key point of interest. How does Emergent plan to position KLOXXADO compared to NARCAN, especially with the recent acquisition?

Joe Papa — President and Chief Executive Officer

Upon acquiring KLOXXADO, we identified it as a significant opportunity to utilize our existing distribution framework, particularly through our NARCANDirect program. This setup will simplify access for first responders, facilitating the integration of KLOXXADO with NARCAN within our distribution capabilities. The rising incidence of fentanyl overdoses underscores the need for KLOXXADO, especially given the potency of fentanyl. Our goal is to ensure first responders can easily access either product for effective patient care.

Responding to Overdose Trends

First responders must consider dosage when administering treatment. While we acknowledge that 4 mg represents the standard care, we are aware of the growing necessity for 8 mg options. The acquisition of KLOXXADO helps us address this demand. Our strategy is to enhance distribution and provide our customers with comprehensive solutions.

Integration of KLOXXADO into NARCANDirect

Brandon Folkes — Analyst

Is KLOXXADO currently available through NARCANDirect?

Joe Papa — President and Chief Executive Officer

Yes, we announced our acquisition of KLOXXADO in January and are currently finalizing logistics. Hikma already has the product in the system, and we expect to complete integration within the next 30 to 60 days, aiming to streamline the ordering process for first responders.

Updates on mpox and Future Trials

Unknown speaker — — Analyst

Moving to mpox, is the MOSA trial on track for its first interim analysis at the end of Q1?

Joe Papa — President and Chief Executive Officer

We are collaborating with the World Health Organization to secure an emergency use label for mpox. We expect updates soon as we adapt to ongoing policy changes. While we are currently engaged in clinical trials for related products such as TEMBEXA, further details will be shared at a later date.

Biodefense Contracts and Expectations for 2025

Unknown speaker — — Analyst

Will there be contract adjustments regarding biodefense products in the near term?

Richard S. Lindahl — Executive Vice President, Chief Financial Officer, and Treasurer

Anticipate patterns similar to 2024 for 2025 as we expect ongoing procurement orders from the U.S. government. The timing may shift, but we foresee a consistent commitment to executing contracts.

Joe Papa — President and Chief Executive Officer

A strong start in Q1 is supported by the momentum we built through 2024, which bodes well for the year ahead.

Thank you for your questions.

Conclusion

The conference call concluded with a thank you from Joe Papa, who expressed gratitude to participants for their engagement and noted that archived materials would be available on the company’s website.

Operator

This completes today’s conference call. Thank you for your participation.

Duration: 0 minutes

Call Participants:

Frank Vargo — Assistant Treasurer

Joe Papa — President and Chief Executive Officer

Richard S. Lindahl — Executive Vice President, Chief Financial Officer, and Treasurer

Brandon Folkes — Analyst

This transcript has been prepared for The Motley Fool, aligning with our commitment to accuracy. Readers are encouraged to conduct independent research and review relevant SEC filings.

The Motley Fool recommends Emergent BioSolutions and maintains a disclosure policy.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.