Emergent BioSolutions Inc

Previous wording

•NARCAN® (naloxone HCl) Nasal Spray, an intranasal formulation of naloxone approved by the FDA (including in over-the-counter form) and Health Canada for the emergency treatment of known or suspected opioid overdose as manifested by respiratory and/or central nervous system depression.

Current wording

•NARCAN® (naloxone HCl) Nasal Spray, an intranasal formulation of naloxone approved by the United States Food and Drug Administration (“FDA”) (including in over-the-counter form) and Health Canada for the emergency treatment of known or suspected opioid overdose as manifested by respiratory and/or central nervous system depression.

Previous wording

•BioThrax® (Anthrax Vaccine Adsorbed), the only vaccine licensed by the United States Food and Drug Administration (“FDA”) for the general use prophylaxis and post-exposure prophylaxis of anthrax disease;

Current wording

•BioThrax® (Anthrax Vaccine Adsorbed), the only vaccine licensed by the for the general use prophylaxis and post-exposure prophylaxis of anthrax disease;

Previous wording

•Ebanga™ (ansuvimab-zykl), a monoclonal antibody with antiviral activity provided through a single IV infusion for the treatment of Ebola. Under the terms of a collaboration with Ridgeback Biotherapeutics ("Ridgeback"), Emergent will be responsible for the manufacturing, sale, and distribution of Ebanga™ in the U.S. and Canada, and Ridgeback will serve as the global access partner for Ebanga™;

Current wording

•Ebanga™ (ansuvimab-zykl), a monoclonal antibody with antiviral activity provided through a single IV infusion for the treatment of Ebola. Under the terms of a collaboration with Ridgeback Biotherapeutics ("Ridgeback"), Emergent will be responsible for the manufacturing, sale, and distribution of Ebanga™ in the U.S. and Canada, and Ridgeback will serve as the global access partner for Ebanga™; and

Previous wording

•RSDL® (Reactive Skin Decontamination Lotion Kit), the only medical device cleared by the FDA that is intended to remove or neutralize chemical warfare agents from the skin, including: tabun, sarin, soman, cyclohexyl sarin, VR, VX, mustard gas and T-2 toxin. On July 31, 2024, the Company entered into the Stock and Asset Purchase Agreement (“RSDL® Agreement”) with SERB Pharmaceuticals, through its wholly owned subsidiary BTG International Inc. (collectively, “SERB”), pursuant to which, among other things, the Company sold its worldwide rights to RSDL®, to SERB (the “RSDL® Transaction”). See Note 18, Subsequent events for more information about the RSDL® Transaction; and

Current wording

On July 31, 2024, the Company entered into the Stock and Asset Purchase Agreement (the “RSDL® Agreement”) with SERB Pharmaceuticals, through its wholly owned subsidiary BTG International Inc. (collectively, “SERB”), pursuant to which, among other things, the Company sold its worldwide rights to RSDL®, to SERB (the “RSDL® Transaction”). See Note 3, “Divestitures” in Part I, Item 1, of this Quarterly Report on Form 10-Q for more information on the sale of RSDL®.

Previous wording

Our services revenue consists of distinct but interrelated Bioservices: drug substance manufacturing; drug product manufacturing (also referred to as “fill/finish” services) and packaging; development services including technology transfer, process and analytical development services; and, when necessary, suite reservation obligations. These services, which we refer to as “molecule-to-market” offerings, employ diverse technology platforms (mammalian, microbial, viral and plasma) across a network of seven geographically distinct development and manufacturing sites operated by us for our internal products and pipeline candidates and third-party Bioservices. We service both clinical-stage and commercial-stage projects for a variety of third-party customers, including government agencies, innovative pharmaceutical companies, and non-government organizations. In August 2023, we initiated an organizational restructuring plan (the “August 2023 Plan”) which included actions to reduce investment in and de-emphasize focus on our Bioservices business. In May 2024, the Company initiated an organizational restructuring plan (the “May 2024 Plan”) announcing the closure of the Company’s Baltimore-Bayview Drug Substance manufacturing facility and Rockville, Maryland Drug Product facility. Additionally, on June 20, 2024 the Company announced entry into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Bora Pharmaceuticals Injectibles Inc., a subsidiary of Bora Pharmaceuticals Co., Ltd. (“Bora”), under which the Company will sell its drug product facility in Baltimore-Camden (the “Camden Transaction”).

Current wording

Our services revenue consists of distinct but interrelated Bioservices: drug substance manufacturing; drug product manufacturing (also referred to as “fill/finish” services) and packaging; development services including technology transfer, process and analytical development services; and, when necessary, suite reservation obligations. These services, which we refer to as “molecule-to-market” offerings, employ diverse technology platforms (mammalian, microbial, viral and plasma) across a network of distinct development and manufacturing sites operated by us for our internal products and pipeline candidates and third-party Bioservices. We service both clinical-stage and commercial-stage projects for a variety of third-party customers, including government agencies, innovative pharmaceutical companies, and non-government organizations. In August 2023, we initiated an organizational restructuring plan (the “August 2023 Plan”) which included actions to reduce investment in and de-emphasize focus on our Bioservices business. In May 2024, the Company initiated an organizational restructuring plan (the “May 2024 Plan”) announcing the closure of the Company’s Baltimore-Bayview Drug Substance manufacturing facility and Rockville, Maryland Drug Product facility. Additionally, on August 20, 2024, pursuant to the previously announced Asset Purchase Agreement (the “Asset Purchase Agreement”), the Company completed the sale of its Drug Product facility in Baltimore-Camden (the “Camden Transaction”) to Bora Pharmaceuticals Injectables Inc., a subsidiary of Bora Pharmaceuticals Co., Ltd. (“Bora”).

Previous wording

In May 2024, the Company initiated the May 2024 Plan. These strategic actions will lead to a reduction of the Company’s current workforce by approximately 300 employees across all areas of the Company and the elimination of approximately 85 positions that are currently vacant, as well as the closure of the Company’s Baltimore-Bayview Drug Substance manufacturing facility and Rockville, Maryland Drug Product facility. Decisions regarding the elimination of positions and the closure of manufacturing facilities are subject to local law and consultation requirements in certain countries, as well as the Company’s business needs. The cumulative amount of restructuring charge related to the May 2024 Plan since inception is $17.2 million. All activities related to the May 2024 Plan were substantially completed during the second quarter of 2024. Restructuring costs are recognized as an operating expense within the Condensed Consolidated Statement of Operations and are classified based on the Company's classification policy for each category of operating expense.

Current wording

In May 2024, the Company initiated the May 2024 Plan. These strategic actions led to a reduction of the Company’s workforce by approximately 300 employees across all areas of the Company and the elimination of approximately 85 positions that were vacant, as well as the closure of the Company’s Baltimore-Bayview Drug Substance manufacturing facility and Rockville, Maryland Drug Product facility. Decisions regarding the elimination of positions and the closure of manufacturing facilities were subject to local law and consultation requirements in certain countries, as well as the Company’s business needs. The cumulative amount of restructuring charge related to the May 2024 Plan since inception is $20.0 million. All activities related to the May 2024 Plan were substantially completed during the third quarter of 2024. Restructuring costs are recognized as an operating expense within the Condensed Consolidated Statement of Operations and are classified based on the Company's classification policy for each category of operating expense.

Previous wording

Pursuant to the terms of the Settlement Agreement, Janssen paid the Company $50.0 million on July 31, 2024. In addition, the Settlement Agreement contains broad releases of the parties, their affiliates and subsidiaries, representatives, officers, directors and shareholders, including releases of all claims related to the manufacture of the Product by EMOB, the Janssen Agreement, or any agreement or understanding between the parties concerning the Product, and the matters at issue in the arbitration. The Company concluded this is a recognized subsequent event.

Current wording

Pursuant to the terms of the Settlement Agreement, Janssen paid the Company $50.0 million on July 31, 2024. In addition, the Settlement Agreement contains broad releases of the parties, their affiliates and subsidiaries, representatives, officers, directors and shareholders, including releases of all claims related to the manufacture of the Product by EMOB, the Janssen Agreement, or any agreement or understanding between the parties concerning the Product, and the matters at issue in the arbitration.

Previous wording

On July 18, 2024, Bavarian Nordic announced that the European Medicines Agency has validated the marketing authorization application for CHIKV VLP, which was submitted in June 2024. This approval triggered a milestone payment under the Purchase and Sale Agreement to the Company in the amount of $10.0 million, which is expected to be received in the third quarter of 2024.

Current wording

On July 18, 2024, Bavarian Nordic announced that the European Medicines Agency had validated the marketing authorization application for CHIKV VLP, which was submitted in June 2024. This approval triggered a milestone payment receivable under the Purchase and Sale Agreement to the Company in the amount of $10.0 million.

Previous wording

On July 31, 2024, the Company entered into the RSDL® Agreement with SERB, pursuant to which, among other things, the Company sold its worldwide rights to RSDL®to SERB. The RSDL® Transaction also included the sale of all the outstanding capital stock of Emergent Protective Products USA Inc. (“EPPU”), a wholly owned subsidiary of the Company, which leases a manufacturing facility in Hattiesburg, Mississippi, as well as certain assets related to RSDL®, including intellectual property rights, contract rights, inventory and marketing authorizations. In addition, the employees of EPPU are expected to join SERB in connection with the RSDL®Transaction.

Current wording

On July 31, 2024, the Company, through its wholly owned subsidiary Emergent BioSolutions Canada Inc., entered into the RSDL®Agreement with SERB pursuant to which, among other things, the Company sold its worldwide rights to RSDL® to SERB. The RSDL® Transaction also included the sale to SERB of all the outstanding capital stock of Emergent Protective Products USA Inc. (“EPPU”), a wholly owned subsidiary of the Company, which leases a manufacturing facility in Hattiesburg, Mississippi, as well as certain assets related to RSDL®, including intellectual property rights, contract rights, inventory and marketing authorizations. In addition, the employees of EPPU joined SERB in connection with the RSDL®Transaction.

Previous wording

Pursuant to the RSDL®Transaction, SERB will assume certain government contracts related to RSDL® decontamination lotion, including the Company’s existing contract to supply RSDL® to the U.S. Department of Defense, through a new contract award to the Canadian Commercial Corporation.

Current wording

Pursuant to the RSDL®Transaction, SERB assumed certain government contracts related to RSDL® decontamination lotion, including the Company’s existing contract to supply RSDL® to the U.S. Department of Defense, through a new contract award to the Canadian Commercial Corporation.

Previous wording

The RSDL® Agreement provided for a cash purchase price of $75.0 million at the closing of the RSDL® Transaction, which is subject to customary adjustments based on inventory value at closing. In addition, SERB will pay the Company a $5.0 million payment upon achievement of a milestone relating to sourcing of a certain component of RSDL® decontamination lotion. The RSDL® Transaction closed on July 31, 2024. The Company and SERB made customary representations, warranties, and covenants in the RSDL® Agreement. In addition, the Company agreed, for a period of three years following the closing of the RSDL® Transaction, not to make, import, export, use, sell or otherwise dispose of, any product that is intended to remove or neutralize chemical warfare agents from the skin, including any product that contains the same chemical components as RSDL®, or to engage in a similar competing business.

Current wording

At the closing, SERB paid a cash purchase price of $75.0 million, exclusive of customary closing adjustments related to inventory. In addition, SERB will owe the Company a $5.0 million payment upon achievement of a milestone relating to sourcing of a certain component of RSDL® decontamination lotion. The Company recognized a gain on sale of business of $60.8 million, net of transaction costs of $4.1 million.

Previous wording

At the closing of the RSDL® Transaction, the Company and SERB also entered into a transition services agreement to ensure the orderly transition of RSDL® decontamination lotion and the related assets to SERB, and a supply agreement pursuant to which the Company’s Winnipeg facility will continue to manufacture and supply bulk lotion to SERB under a long-term supply agreement. The Company and SERB will also enter into a reverse supply agreement shortly after the closing of the RSDL® Transaction pursuant to which SERB will supply to the Company finished RSDL® for the purposes of the Company performing certain transitional distribution services.

Current wording

The Company and SERB entered into a transition services agreement (the “SERB TSA”) to ensure the orderly transition of RSDL® decontamination lotion and the related assets to SERB, and a supply agreement (the “SERB Supply Agreement”) pursuant to which they have a suite reservation at the Company’s Winnipeg facility where the Company will perform Bioservices activities to manufacture and supply bulk lotion to SERB. The Company and SERB also entered into a reverse supply agreement (together with the SERB TSA and the SERB Supply Agreement, the “SERB Agreements”) pursuant to which SERB will supply to the Company finished RSDL® for the purposes of the Company’s performance of certain transitional distribution services under customer contracts that have not yet transferred to SERB. Under the SERB Agreements, the Company will retain a portion of net sales received upon delivery of RSDL® to the delayed transfer customers.

Previous wording

During the preparation of our financial statements for the three months ended June 30, 2024, due to the decision to close the Company’s Baltimore-Bayview Drug Substance manufacturing facility and Rockville, Maryland Drug Product facility, the Company determined there were sufficient indicators of impairment for the Bayview and Rockville asset groups within the Bioservices reporting unit. As a result, the Company performed recoverability tests on those asset groups and concluded that the Bayview and Rockville asset groups were not recoverable as the undiscounted expected cash flows did not exceed their carrying values.

Current wording

During the preparation of our financial statements for the quarter ended June 30, 2024, due to the decision to close the Company’s Baltimore-Bayview Drug Substance manufacturing facility and Rockville, Maryland Drug Product facility, the Company determined there were sufficient indicators of impairment for the Bayview and Rockville asset groups within the Bioservices reporting unit. As a result, the Company performed recoverability tests on those asset groups and concluded that the Bayview and Rockville asset groups were not recoverable as the undiscounted expected cash flows did not exceed their carrying values.

Previous wording

Asset groups are written down only to the extent that their carrying value is higher than their respective fair value. The Company, with the assistance of a third-party valuation firm, applied valuation methods to estimate the fair values for each of the assets within the different asset classes. An orderly liquidation value was applied to estimate the fair value of the personal property assets and market and cost based approaches were applied to estimate the fair value of the real property assets, each representing Level 3 non-recurring fair value measurements. Based on these analyses, the Company allocated and recognized a non-cash impairment charge of $27.2 million during the three months ended June 30, 2024.

Current wording

Asset groups are written down only to the extent that their carrying value is higher than their respective fair value. The Company, with the assistance of a third-party valuation firm, applied valuation methods to estimate the fair values for each of the assets within the different asset classes. An orderly liquidation value was applied to estimate the fair value of the personal property assets and market and cost based approaches were applied to estimate the fair value of the real property assets, each representing Level 3 non-recurring fair value measurements. Based on these analyses, the Company allocated and recognized a non-cash impairment charge of $27.2 million during the second quarter of 2024.

Previous wording

Commercial and MCM Products - The primary expenses that we incur to deliver our NARCAN® and MCM and other commercial products consist of fixed and variable costs. We determine the cost of product sales for products sold during a reporting period based on the average manufacturing cost per unit in the period those units were manufactured. Fixed manufacturing costs include facilities, utilities and amortization of intangible assets. Variable manufacturing costs primarily consist of costs for materials and personnel-related expenses for direct and indirect manufacturing support staff, contract manufacturing operations, sales-based royalties, shipping and logistics. In addition to the fixed and variable manufacturing costs described above, the cost of product sales depends on utilization of available manufacturing capacity. For our commercial sales, other associated expenses include sales-based royalties, shipping, and logistics.

Current wording

Commercial and MCM Products - The primary expenses that we incur to deliver our NARCAN® and MCM products consist of fixed and variable costs. We determine the cost of product sales for products sold during a reporting period based on the average manufacturing cost per unit in the period those units were manufactured. Fixed manufacturing costs include facilities, utilities and amortization of intangible assets. Variable manufacturing costs primarily consist of costs for materials and personnel-related expenses for direct and indirect manufacturing support staff, contract manufacturing operations, sales-based royalties, shipping and logistics. In addition to the fixed and variable manufacturing costs described above, the cost of product sales depends on utilization of available manufacturing capacity. For our commercial sales, other associated expenses include sales-based royalties, shipping, and logistics.

Previous wording

The preparation of our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S., requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, judgments and methodologies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenues and expenses. Actual results may differ from these estimates. There have been no significant changes to our critical accounting policies and estimates contained in "Critical Accounting Policies and Estimates" in the Management's Discussion and Analysis, in Part II, Item 7, of the 2023 Form 10-K, as filed with the SEC.

Current wording

The preparation of our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S., requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, judgments and methodologies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenues and expenses. Actual results may differ from these estimates. There have been no significant changes to our critical accounting policies and estimates contained in “Critical Accounting Policies and Estimates” in Management’s Discussion and Analysis of Financial Condition and Results of Operations, in Part II, Item 7, of the 2023 Form 10-K, as filed with the SEC.

Previous wording

Total revenues increased $52.9 million, or 11%, to $555.1 million for the six months ended June 30, 2024. The increase was due to increases in Services revenue of $39.7 million, MCM Products revenue of $17.3 million and Contracts and grants revenue of $1.5 million, partially offset by a decrease in Commercial Products revenue of $5.6 million.

Current wording

Total revenues increased $23.3 million, or 9%, to $293.8 million for the three months ended September 30, 2024. The increase was due to increases in MCM Products revenue of $66.5 million, Contracts and grants revenue of $3.5 million and Services revenue of $0.1 million, partially offset by a decrease in Commercial Products revenue of $46.8 million.

Previous wording

Total segment gross margin decreased $45.8 million, or 31%, to $99.8 million for the six months ended June 30, 2024. Total segment gross margin percentage decreased 11 percentage points to 18% for the six months ended June 30, 2024. The decrease in total segment gross margin was due to decreases in Services gross margin of $94.8 million and Commercial Products gross margin of $10.9 million, partially offset by an increase in MCM Products gross margin of $59.9 million. Total segment gross margin and Total segment gross margin percentage exclude Contracts and grants revenues because the related costs are R&D expenses.

Current wording

Total segment gross margin increased $74.0 million, or 85%, to $161.2 million for the three months ended September 30, 2024. Total segment gross margin percentage increased 24 percentage points to 57% for the three months ended September 30, 2024. The increase in total segment gross margin was due to increases in MCM Products gross margin of $85.0 million and Services gross margin of $23.0 million, partially offset by a decrease in Commercial Products gross margin of $34.0 million. Total segment gross margin and total segment gross margin percentage exclude Contracts and grants revenues because the related costs are R&D expenses.

Previous wording

SG&A expenses decreased $5.5 million, or 6%, to $85.9 million for the three months ended June 30, 2024. The decrease was primarily due to lower employee related expenses and compensation as a result of restructuring initiatives during 2023, coupled with a decrease in marketing expense. The decrease was partially offset by higher legal services fees for disputes and other corporate initiatives, as well as higher restructuring costs. SG&A expenses as a percentage of total revenue increased 7 percentage points to 34% for the three months ended June 30, 2024.

Current wording

SG&A expenses decreased $9.4 million, or 11%, to $76.6 million for the three months ended September 30, 2024. The decrease was primarily due to lower employee related expenses and compensation as a result of restructuring initiatives during 2023 and 2024, coupled with a decrease in legal services fees for disputes and other corporate initiatives. This decrease was partially offset by the settlement charge related to the stockholder litigation matter, net of expected insurance proceeds. SG&A expenses as a percentage of total revenue decreased 6 percentage points to 26% for the three months ended September 30, 2024.

Previous wording

Interest expense decreased $5.0 million, or 17%, to $23.6 million for the three months ended June 30, 2024. The decrease was primarily due to lower interest costs related to our syndicated borrowings and debt service costs attributable to the negotiation of the Fourth Amendment to Amended and Restated Credit Agreement, Waiver and First Amendment to Amended and Restated Collateral Agreement (the “Credit Agreement Amendment") in the second quarter of 2023, partially offset by higher interest expense related to the termination of our interest rate swap hedging agreements.

Current wording

Interest expense decreased $11.4 million, or 58%, to $8.3 million for the three months ended September 30, 2024. The decrease was primarily due to lower amortization of debt service costs coupled with lower interest costs related to our syndicated borrowings, partially offset by higher interest expense related to the termination of our interest rate swap hedging agreements and interest related to our Term Loan Agreement.

Previous wording

As a result of the Asset Purchase Agreement, the assets and liabilities of our Baltimore-Camden facility are classified as held for sale. The Company has recognized a pre-tax loss of $40.0 million during the quarter, including transaction costs of $3.9 million, in “Gain (loss) on sale of business and assets held for sale” within non-operating activities.

Current wording

Gain (loss) on sale of business

Previous wording

Gain (loss) on sale of business and assets held for sale was a loss of $40.0 million for the six months ended June 30, 2024 compared to a gain of $74.9 million for the six months ended June 30, 2023. The loss on sale of business and assets held for sale is related to the held for sale treatment of the Company’s drug product facility in Baltimore-Camden, which the Company agreed to sell to Bora. The gain on sale of business and assets held for sale in the prior year is attributable to the sale of our travel health business to Bavarian Nordic during the second quarter of 2023.

Current wording

Gain (loss) on sale of business was a gain of $64.3 million for the three months ended September 30, 2024 compared with a loss of $0.7 million for the three months ended September 30, 2023. The gain on sale of business in the current year is related to the sale of RSDL® to SERB coupled with a reduction to the loss on the sale of the Company’s drug product facility in Baltimore-Camden to Bora, which is attributable to a net working capital adjustment payable to the Company. The loss on sale of business in the prior year is attributable to a net working capital adjustment, payable to Bavarian Nordic, related to the sale of our travel health business to Bavarian Nordic during the second quarter of 2023.

Previous wording

Income tax provision increased $2.1 million, or 19%, to $13.3 million for the three months ended June 30, 2024. The increase was primarily due to an increase in taxable income in the Company’s profitable jurisdictions.

Current wording

Income tax provision increased $30.1 million to $27.6 million for the three months ended September 30, 2024. The increase was primarily due to an increase in taxable income in the Company’s profitable jurisdictions.

Previous wording

Total revenues decreased $83.2 million, or 25%, to $254.7 million for the three months ended June 30, 2024. The decrease was due to decreases in MCM Products revenue of $100.9 million and Commercial Products revenue of $17.9 million, partially offset by an increase in Services revenue of $35.6 million.

Current wording

Total revenues increased $76.2 million, or 10%, to $848.9 million for the nine months ended September 30, 2024. The increase was due to increases in MCM Products revenue of $83.8 million, Services revenue of $39.8 million, and Contracts and grants revenue of $5.0 million, partially offset by a decrease in Commercial Products revenue of $52.4 million.

Previous wording

Total segment gross margin decreased $188.7 million, or 134%, to $(48.0) million for the three months ended June 30, 2024. Total segment gross margin percentage decreased 61 percentage points to (19)% for the three months ended June 30, 2024. The decrease in total segment gross margin was due to decreases in Services gross margin of $120.3 million, MCM Products gross margin of $51.5 million and Commercial Products gross margin of $16.9 million. Total segment gross margin and total segment gross margin percentage exclude Contracts and grants revenues because the related costs are R&D expenses.

Current wording

Total segment gross margin increased $28.2 million, or 12%, to $261.0 million for the nine months ended September 30, 2024. Total segment gross margin percentage was relatively consistent at 32% for the nine months ended September 30, 2024. The increase in total segment gross margin was due to an increase in MCM Products gross margin of $144.9 million, partially offset by decreases in Services gross margin of $71.8 million and Commercial Products gross margin of $44.9 million. Total segment gross margin and Total segment gross margin percentage exclude Contracts and grants revenues because the related costs are R&D expenses.

Previous wording

R&D expenses decreased $18.9 million, or 28%, to $47.8 million for the six months ended June 30, 2024. The decrease was primarily due to the sale of our development program for CHIKV VLP to Bavarian Nordic in the second quarter of 2023 and reduction in related overhead costs driven by the headcount reductions. The decrease was also driven by a reduction in spend for certain funded projects, excluding Ebanga TM. The decrease was partially offset by write-offs related to program terminations during the period, an increase in the allocation of R&D overhead costs, an increase in severance costs and an increase in funded R&D related to Ebanga TM.

Current wording

R&D expenses decreased $20.4 million, or 25%, to $61.6 million for the nine months ended September 30, 2024. The decrease was primarily due to the sale of our development program for CHIKV VLP to Bavarian Nordic in the second quarter of 2023 and lower overhead costs driven by headcount reductions. The decrease was also driven by the wind-down of funded projects, excluding Ebanga TM. The decrease was partially offset by write-offs related to program terminations during the period and increases in the allocation of R&D overhead costs and funded R&D related to Ebanga TM.

Previous wording

SG&A expenses decreased $22.1 million, or 11%, to $170.6 million for the six months ended June 30, 2024. The decrease was primarily due to lower employee related expenses and compensation as a result of restructuring initiatives during 2023 and lower professional services fees related to corporate initiatives, including organizational transformation consulting fees. These decreases were partially offset by higher legal services fees for disputes and strategic corporate initiatives, as well as higher restructuring costs. SG&A expenses as a percentage of total revenue decreased 7 percentage points to 31% for the six months ended June 30, 2024.

Current wording

SG&A expenses decreased $31.5 million, or 11%, to $247.2 million for the nine months ended September 30, 2024. The decrease was primarily due to lower employee related expenses and compensation as a result of restructuring initiatives during 2023 and 2024, lower professional services fees related to corporate initiatives, including organizational transformation consulting fees, and lower legal fees due to the wind-down of various legal matters. This decrease was partially offset by the settlement charge related to the stockholder litigation matter, net of expected insurance proceeds. SG&A expenses as a percentage of total revenue decreased 7 percentage points to 29% for the nine months ended September 30, 2024.

Previous wording

Amortization of intangible assets decreased $0.6 million, or 2%, to $32.5 million for the six months ended June 30, 2024. The decrease was primarily due to a decrease in amortization expense resulting from the intangibles sold with our travel health business to Bavarian Nordic, partially offset by an increase in amortization expense for the intangible asset related to Ebanga TM, which was the result of the contingent consideration payment made to Ridgeback in the third quarter of 2023.

Current wording

Amortization of intangible assets decreased $0.6 million, or 1%, to $48.8 million for the nine months ended September 30, 2024. The decrease was primarily due to a decrease in amortization expense resulting from the intangibles sold with our travel health business to Bavarian Nordic, partially offset by an increase in amortization expense for the intangible asset related to Ebanga TM, which was the result of the contingent consideration payment made to Ridgeback in the third quarter of 2023.

Previous wording

Impairment of long-lived assets decreased $279.5 million, or 91%, to $27.2 million for the three months ended June 30, 2024. The decrease was due to a $27.2 million non-cash impairment charge in the second quarter of 2024 related to our Bayview and Rockville asset groups within the Bioservices reporting unit, compared to a $306.7 million non-cash impairment charge recorded in the second quarter of 2023 related to our Camden, Bayview and Rockville asset groups within the Bioservices reporting unit.

Current wording

Impairment of long-lived assets decreased $279.5 million, or 91%, to $27.2 million for the nine months ended September 30, 2024. The decrease was due to a $27.2 million non-cash impairment charge in the second quarter of 2024 related to our Bayview and Rockville asset groups within the Bioservices reporting unit, compared with a $306.7 million non-cash impairment charge recorded in the second quarter of 2023 related to our Camden, Bayview and Rockville asset groups within the Bioservices reporting unit.

Previous wording

Interest expense increased $1.4 million, or 3%, to $47.9 million for the six months ended June 30, 2024. The increase was primarily due to interest expense related to the termination of our interest rate swap hedging agreements and one-time debt service costs attributable to the negotiation of the Forbearance Agreement and Sixth Amendment (the “Forbearance Agreement and Amendment”) and the Seventh Amendment to the Amended and Restated Credit Agreement, partially offset by lower interest costs related to our syndicated borrowings.

Current wording

Interest expense decreased $10.0 million, or 15%, to $56.2 million for the nine months ended September 30, 2024. The decrease was primarily due to a decrease in interest expense related to our syndicated borrowings and a decrease in amortization of debt service costs, partially offset by higher interest expense related to the termination of our interest rate swap hedging agreements and interest related to our Term Loan Agreement.

Previous wording

Gain (loss) on sale of business and assets held for sale was a loss of $40.0 million for the three months ended June 30, 2024 compared to a gain of $74.9 million for the three months ended June 30, 2023. The loss on sale of business and assets held for sale is related to the held for sale treatment of the Company’s drug product facility in Baltimore-Camden, which the Company agreed to sell to Bora. The gain on sale of business and assets held for sale in the prior year is attributable to the sale of our travel health business to Bavarian Nordic during the second quarter of 2023.

Current wording

Gain on sale of business decreased $49.9 million, or 67%, to $24.3 million for the nine months ended September 30, 2024. The gain on sale of business in the current year is related to the sale of RSDL® to SERB, partially offset by a loss the sale of the Company’s drug product facility in Baltimore-Camden to Bora. The gain on sale of business in the prior year is attributable to the sale of our travel health business to Bavarian Nordic during the second quarter of 2023.

Previous wording

Other, net went from $1.3 million in income to $6.1 million in expense for the six months ended June 30, 2024. The change of $7.4 million was primarily attributable to lower interest income, due to lower balances in our money market accounts and a write-off of an equity method investment.

Current wording

Other, net was $15.8 million in income for the nine months ended September 30, 2024 compared to $2.1 million in expense for the nine months ended September 30, 2023. The change of $17.9 million was primarily due to income associated with development milestone achievements related to CHIK VLP, partially offset by a loss on the sale of a building at our Canton facility, lower interest income, due to lower balances in our money market accounts, and a write-off of an equity method investment.

Previous wording

Income tax provision decreased $20.4 million, or 55%, to $16.4 million for the six months ended June 30, 2024. The decrease was largely due to the jurisdictional mix of income and losses. The effective tax rate was (6)% for the six months ended June 30, 2024 as compared with (9)% in 2023. The effective annual tax rate increased largely due the jurisdictional mix of income and losses.

Current wording

Income tax provision increased $9.7 million, or 28%, to $44.0 million for the nine months ended September 30, 2024. The increase was largely due to the jurisdictional mix of income and losses. The effective tax rate was (38)% for the nine months ended September 30, 2024 as compared with (5)% in 2023. The effective annual tax rate increased largely due the jurisdictional mix of income and losses and the prior year impairment loss.

Previous wording

NARCAN® sales decreased $13.9 million, or 10%, to $120.0 million for the three months ended June 30, 2024. The decrease was primarily driven by an unfavorable price and volume mix in 2024 to U.S. public interest channels and lower Canadian market sales, partially offset by higher sales of over-the-counter (“OTC”) NARCAN®through wholesaler channels, which launched in the third quarter of 2023.

Current wording

NARCAN® sales decreased $46.8 million, or 33%, to $95.3 million for the three months ended September 30, 2024. The decrease was primarily driven by the discontinuation of prescription NARCAN® due to the launch of over-the-counter (“OTC”) NARCAN® in the third quarter of 2023 and lower Canadian retail sales, partially offset by higher sales of OTC NARCAN®.

Previous wording

Commercial Products gross margin decreased $10.9 million, or 8%, to $133.0 million for the six months ended June 30, 2024. Commercial Products gross margin percentage decreased 3 percentage points to 56% for the six months ended June 30, 2024. The decrease was largely due to an unfavorable price and volume mix in 2024 for NARCAN® products, partially offset by the sale of the products associated with our travel health business to Bavarian Nordic. Commercial Products segment adjusted gross margin is consistent with gross margin.

Current wording

Commercial Products gross margin decreased $34.0 million, or 41%, to $48.1 million for the three months ended September 30, 2024. Commercial Products gross margin percentage decreased 8 percentage points to 50% for the three months ended September 30, 2024. The decrease was largely due to an unfavorable price and volume mix in 2024 for NARCAN® products. Commercial Products segment adjusted gross margin is consistent with gross margin.

Previous wording

NARCAN® sales increased $4.2 million, or 2%, to $238.5 million for the six months ended June 30, 2024. The increase was primarily driven by higher NARCAN®sales to U.S. public interest channels and higher sales of OTC NARCAN®, partially offset by lower Canadian retail sales.

Current wording

NARCAN® sales decreased $42.6 million, or 11%, to $333.8 million for the nine months ended September 30, 2024. The decrease was primarily driven by the discontinuation of prescription NARCAN®due to the launch of OTC NARCAN®in the third quarter of 2023 and lower Canadian retail sales, partially offset by higher sales of OTC NARCAN®.

Previous wording

Other Commercial Products sales decreased $9.8 million, or 100%, to no sales for the six months ended June 30, 2024. During the second quarter of 2023, we sold Vivotif® and Vaxchora® to Bavarian Nordic as part of our travel health business.

Current wording

Other Commercial Products sales decreased $9.8 million, or 100%, to no sales for the nine months ended September 30, 2024. During the second quarter of 2023, we sold Vivotif® and Vaxchora® to Bavarian Nordic as part of our travel health business.

Previous wording

Cost of Commercial Product sales decreased $1.0 million, or 2%, to $53.4 million for the three months ended June 30, 2024. The decrease was primarily due to no current period costs related to Vivotif® and Vaxchora®, which were sold to Bavarian Nordic as part of our travel health business, partially offset by higher NARCAN®expense as a result of increased unit volume.

Current wording

Cost of Commercial Product sales decreased $7.5 million, or 5%, to $152.7 million for the nine months ended September 30, 2024. The decrease was primarily due to no current period costs related to Vivotif® and Vaxchora®, which were sold to Bavarian Nordic as part of our travel health business, and lower prescription NARCAN®unit volume, partially offset by the higher OTC NARCAN®unit volume.

Previous wording

Commercial Products gross margin decreased $16.9 million, or 20%, to $66.6 million for the three months ended June 30, 2024. Commercial Products gross margin percentage decreased 5 percentage points to 56% for the three months ended June 30, 2024. The decrease was largely due to an unfavorable price and volume mix in 2024 for NARCAN® products, partially offset by the sale of the products associated with our travel health business to Bavarian Nordic. Commercial Products segment adjusted gross margin is consistent with gross margin.

Current wording

Commercial Products gross margin decreased $44.9 million, or 20%, to $181.1 million for the nine months ended September 30, 2024. Commercial Products gross margin percentage decreased 5 percentage points to 54% for the nine months ended September 30, 2024. The decrease was largely due to an unfavorable price and volume mix in 2024 for NARCAN® products, partially offset by the sale of the products associated with our travel health business to Bavarian Nordic. Commercial Products segment adjusted gross margin is consistent with gross margin.

Previous wording

Anthrax MCM sales increased $17.6 million, or 83%, to $38.7 million for the three months ended June 30, 2024. The increase reflects the impact of timing of sales related to CYFENDUS®and BioThrax®, partially offset by a decrease in Anthrasil® sales, due to timing. Anthrax vaccine product sales are primarily made under annual purchase options exercised by the USG. Fluctuations in revenues result from the timing of the exercise of annual purchase options, the timing of USG purchases, the availability of governmental funding and the Company’s delivery of orders that follow.

Current wording

Anthrax MCM sales decreased $21.5 million, or 65%, to $11.4 million for the three months ended September 30, 2024. The decrease reflects the impact of timing of sales related to CYFENDUS®and Anthrasil®, partially offset by an increase in BioThrax®sales, due to timing. Anthrax vaccine product sales are primarily made under annual purchase options exercised by the USG. Fluctuations in revenues result from the timing of the exercise of annual purchase options, the timing of USG purchases, the availability of governmental funding and the Company’s delivery of orders that follow.