I am neutral on Emergent BioSolutions Inc. (EBS), as its cheap valuation is largely offset by weak performance in its business, and lack of catalysts for the foreseeable future.

Emergent BioSolutions Inc. is an American multinational company in life sciences with headquarters located in Gaithersburg Maryland.

It offers biopharmaceutical products such as vaccines, antibody therapeutics, and bio-defensive devices. (See Emergent stock charts on TipRanks)

Strengths

Emergent BioSolutions showed strong second-quarter results, and the company announced it would continue to play an important role in public health safety through investment and innovation.

The company has recently entered into a five-year contract with Providence Therapeutics to support Providence’s COVID-19 messenger RNA vaccine development.

Emergent intends to produce tens or millions of PTX-19-B products in the future. The company will also create batches of its formulated bulk drugs substance which could yield many millions more for pandemic relief.

Recent Results

Emergent BioSolutions announced total revenue of $397.5 million in the second quarter of 2021, missing Zack’s consensus estimate of $415.73 million.

The company’s NARCAN Nasal Spray net sales increased by $33.4 million over the previous year, bringing it to $106.2million. This is due in large part to increased sales in U.S. commercial and public retail markets and growth in Canadian sales channels.

Anthrax vaccines saw a drop of $80.8million, which resulted in $51.5 million revenue. ACAM2000, smallpox vaccine, saw a decline of $70 millions. Both of these were due to delays in delivering the product to the U.S. government.

The revenue from Contract Development and Manufacturing Services, however, increased by $118.3 millions year-over-year. Comparable to the preceding quarter, the revenue for Contracts and Grants was stable. In addition, the company’s gross margin decreased $97 million as compared with the previous year’s quarter.

Aside from these financial results, Emergent BioSolutions is also supporting the U.S. government’s smallpox preparedness efforts under contract options of $182 million for ACAM2000 and $56 million for VIGIV (for the treatment of complications from smallpox vaccine).

Anthrasil will be delivered to Canada by the company as part of its support for Canada’s anthrax preparation efforts. The company has also been allowed by the FDA to resume its Johnson & Johnson (NYSE:) COVID-19 vaccine production activities.

Emergent BioSolutions has maintained its full year revenue guidance of between $1.7 billion and $1.9 billion. The company anticipates that its CDMO revenues will be $765 million to $875 million. It expects to generate between $400 million and $500 millions in total revenue for the next quarter.

Valuation Metrics

Emergent BioSolutions stock looks reasonably attractive here, as its enterprise value to forward EBITDA is just 6.2x, and its price to forward normalized earnings is a mere 6.4x.

Wall Street’s Take

From Wall Street analysts, Emergent BioSolutions earns a Moderate Buy analyst consensus, based on one Buy rating assigned in the past three months.

The upside potential for Emergent Biosolutions (NYSE 🙂 is 81.1%, based on the $92 average price target.

Summary and Conclusion

Emergent BioSolutions looks like an interesting opportunity as a value investment in the pharmaceutical space.

The stock’s multiples of valuation are low. If the company is able to sustain its earnings power over the long term, it should be able to generate attractive long-term returns.

It does have some headwinds, as certain of its products face declining demand. Only one Wall Street analyst is covering the stock right now, which indicates that it’s not drawing a lot attention from big-name investors.

Disclosure: Samuel Smith had no position at the time this article was published.

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