Emergent BioSolutions - Emerge stronger in 2009

January 10, 2009

Ticker: EBS

Emergent BioSolutions Inc. is a biopharmaceutical company and focuses on the development, manufacture, and commercialization of immunobiotics primarily in the United States. Immunobiotics are pharmaceutical products, such as vaccines and immune globulins that assist the body's immune system to prevent diseases. The company operates in two segments, Biodefense and Commercial.
Its main product is BioThrax, which is a vaccine to treat Anthrax infection. It’s a little bizarre that 127 years after Louis Pasteur and co developed the world's first vaccine - for anthrax – Maryland based EBS makes the only U.S. approved one. It has sold 30 million doses of this vaccine in about a decade.
The company also has various products in development to treat typhoid, hepatitis and botulism. In addition to their existing product line, Emergent BioSolutions is developing a chlamydia vaccine and a meningitis B vaccine, which are in preclinical development. The company serves primarily the U.S. Department of Defense and the U.S. Department of Health and Human Services. It has collaboration agreements with U.K. Health Protection Agency for the development of a human botulinum immune globulin candidate; and with Sanofi Pasteur for the development of meningitis B vaccine candidate. The company, formerly known as BioPort Corporation, was founded in 1998 and is based in Rockville, Maryland. (Reuters)

In the News
Emergent Biosystems put out strong earnings in the third quarter of 2008 and reported that revenues were up 30% to $56.6 million (35 cents per share). The Company increased its full year guidance for 2008 from 70 cents to 83 cents per share. It recently renewed a contract with the Federal Government to supply millions of doses of the vaccine. The stock was up 416% in 2008.
EBS was named recently to Security magazine’s “Security 500: The Biggest and Best Security Organizations.” The publication cites U.S.-based companies in 16 sectors. Emergent BioSolutions was measured in the industrial and manufacturing sector. It is the first year Emergent has been recognized.

Earnings
The earnings date for Q4 2008 March 2, 2009 – which the analysts estimated to be $0.11. My money says EBS will beat that figure hands down. In general though, the earnings have been not been that consistent – here are some recent numbers –

Q3 2008 Actual (USD) 0.35 - Estimates (USD) 0.18 - Surprise 91%
Q2 2008 Actual (USD) 0.06 - Estimates (USD) 0.22 - Surprise -73.33%
Q1 2008 Actual (USD) 0.24 - Estimates (USD) 0.27 - Surprise -11.11%
Q4 2007 Actual (USD) 0.93 - Estimates (USD) 0.87 - Surprise 6.90%

View the full EBS chart at Wikinvest

Fundamentals
The Cash Flow per share (CPS) for Q3 2008 was at $0.65 - the current cash flow seems fairly healthy after strong earnings in Q3 2008.

EBS's P/E Ratio @ 15 is a little higher than other companies in the Biotechnology & Drugs industry (13.32). At the current price, EBS seems a little expensive with a PEG value of 1.5177, above the Biotechnology & Drugs industry median PEG of 0.99.

With that said, EBS's Gross Margin @ 80.75% is more than 83% of other companies in the Biotechnology & Drugs industry, which means it has more cash to spend on business operations as compared to its peers – something very important for a small growing company. EBS’s Operating Margin @ 31.07% indicates that it controls its costs and expenses better than 96% of its peers.

The Return on Equity for EBS @ 27.93% shows that it is able to reinvest its earnings more efficiently than 96% of its competitors in the Biotechnology & Drugs industry. Also, EBS's EPS Growth Rate is greater than 90% of its peers.

Analyst Research
EBS has been rated by Thomson Reuters to “Outperform”
EBS's consensus score is higher than 98.4% of the Jaywalk Universe
EBS's consensus score is higher than 98.9% of the Biotechnology Industry
EBS's consensus score is higher than 97.4% of the Healthcare Sector