Emergent BioSolutions' Q3 2025: Contradictions Emerge on Gross Margins, MCM Growth, and Naloxone Market Projections

Date of Call: October 29, 2025

Financials Results

• Revenue: $231M, $21M above the high end of guidance ($180M–$210M)
• EPS: $1.89 year-to-date EPS (YTD), exceeded internal expectations
• Gross Margin: Adjusted gross margin 61% in Q3, up 200 bps year-over-year

Guidance:

• Total revenues expected $775M–$835M (midpoint +$5M vs prior guidance)
• Adjusted EBITDA expected $195M–$210M (midpoint +$15M vs prior guidance)
• Adjusted gross margin expected 52%–54% (up ~200 bps at midpoint)
• Segment guidance: MCM product sales $450M–$475M; Commercial products $265M–$300M

Business Commentary:

* Revenue and Profitability Growth: - Emergent BioSolutions reported revenue of $231 million for Q3 2025, exceeding the upper end of their guidance range by $21 million. - The growth was driven by sequential growth in NARCAN and the addition of 4 new contract modifications.

• International Sales Expansion:
• International sales represented 34% of the company's MCM segment's sales year-to-date, a significant increase from previous years.

• This growth was attributed to strategic investments in the international platform and increased demand from European Union and other global entities.

• Restructuring and Cost Efficiency:

• Emergent achieved a 38% adjusted EBITDA margin for Q3 2025, reflecting improved profitability compared to the previous year.

• This efficiency was the result of restructuring actions, divestitures, and a leaner cost structure.

• Naloxone and Opioid Overdose Response:

• NARCAN unit volume grew by 13% quarter-over-quarter, and revenue grew by 9%.
• The growth was supported by stabilized U.S. pricing, over-the-counter availability, and ongoing efforts to expand access.

Sentiment Analysis:

Overall Tone: Positive

• Q3 revenues of $231M beat guidance by $21M; adjusted EBITDA margin 38% in Q3; company raised full-year revenue and adjusted EBITDA guidance; liquidity $346M and net leverage ~2x, with accelerated cash collection and debt/share repurchases.

Q&A:

• Question from Jessica Fye (JPMorgan Chase & Co, Research Division): I have several. First, what drove the strong year-over-year growth in other products specifically? Second, with international driving 34% of MCM orders year-to-date, can we think of these orders as recurring? Are they part of multiyear contracts? Or are they one-off orders? And can you remind me how the gross margin on international MCM orders compares to the gross margin associated with U.S. MCM sales? Then for NARCAN, you mentioned OTC sales and Canadian sales fell year-over-year. What are you seeing in each of those segments of the business? And should we consider any impact from the government shutdown to the NARCAN business this quarter? And what about the MCM business?
  Response: Other revenue was largely driven by Ebanga contracts/grants; international MCM is a deliberate, growing program—orders are for specific quantities/timing but management views the channel as repeatable growth with slightly higher international gross margins; NARCAN Canadian demand is progressing but timing is variable; government shutdown has not disrupted MCM/NARCAN operations.

• Question from Eduardo Martinez-Montes (H.C. Wainwright & Co, LLC, Research Division): I was hoping to get a little update on the Rocketvax collaboration, if you have any — anticipate any meaningful catalysts over the next 12 months?
  Response: Rocketvax: Phase I is funded and expected to start in early 2026; clinical trial material is being prepared and remains a near-term catalyst.

• Question from Eduardo Martinez-Montes (H.C. Wainwright & Co, LLC, Research Division): Could I get — just kind of curious more on the MCM products this time. Which of the products do you think is going to be the principal driver of U.S. government contract-based revenue going forward? And do you have any ideas what — why that might be?
  Response: Management declined to single out one product, emphasizing a diversified MCM portfolio (smallpox, anthrax, Ebola/TEMBEXA, mpox, etc.) as the strategic driver for government contract revenue.

Contradiction Point 1

Gross Margin Expectations

It involves changes in financial forecasts, specifically regarding gross margin expectations, which are critical indicators for investors.

What drove the strong YoY growth in other products? - Jessica Fye (JPMorgan Chase & Co, Research Division)

2025Q3: Growth in other products is driven by contracts and grants with the Ebanga program. International orders are part of specific contracts but viewed as an international growth opportunity. International gross margins are higher due to certain pricing agreements. - Richard Lindahl(CFO)

Will Q2 SG&A expenses be a sustainable run rate for the remainder of 2025? - Jessica Fye (JPMorgan)

2025Q2: Gross margins for Q3 are expected around 75%, with full-year guidance in the mid-70s. - Richard Lindahl(CFO)

Contradiction Point 2

MCM Contract Revenue and Growth Drivers

It highlights differing perspectives on the future growth drivers within the MCM segment, which impact strategic planning and revenue projections.

Which MCM product will be the main driver of U.S. government contract revenue moving forward? Why? - Eduardo Martinez-Montes (H.C. Wainwright & Co, LLC, Research Division)

2025Q3: Emergent's portfolio is diverse, including products for smallpox, anthrax, botulism, and mpox. TEMBEXA and Ebola product developments are important. The diversity and strategic partnerships with U.S. agencies are key factors for future growth and preparedness. - Joseph Papa(CEO)

Will there be further contract changes for MCM in 2H2025? - Eduardo Martinez-Montes (H.C. Wainwright Company)

2025Q2: We believe our MCM portfolio is well positioned to capitalize on the need for a robust medical countermeasure arsenal to protect the nation and its allies. We are seeking to expand the breadth of our product portfolio, strengthen our strategic partnerships with U.S. government agencies. - Joseph Papa(CEO)

Contradiction Point 3

Naloxone Market Growth Expectations

It involves differing expectations for the growth rate of the naloxone market, which impacts revenue projections and investor expectations.

What drove the strong YoY growth in other products? Are international MCM orders recurring and part of multiyear contracts or one-off orders? How does the gross margin on international MCM orders compare to U.S. MCM sales? What caused the YoY decline in OTC and Canadian NARCAN sales? Did the government shutdown impact Q4 NARCAN or MCM business? - Jessica Fye(JPMorgan Chase & Co, Research Division)

2025Q3: we do expect the business-to-business activities as exemplified by some of the things I have mentioned in the call, what we are doing with the NARCAN wall units and making sure we have those available and putting together programs like that, working with a very large e-commerce partner and making NARCAN available at their facilities and also being able to sell these NARCAN wall units to other businesses across the board. All of those, we think are going to drive and make the business-to-business segment a faster-growing segment. - Joseph Papa(CEO)

Has the Naloxone market's unit volume growth rate consistently been in the mid-single-digit range, and will the total NARCAN and Naloxone market continue to grow at this rate? - Jessica Fye(JPMorgan)

2025Q1: Far and away, the largest segment is the public interest. However, as a growth driver, we do expect the business-to-business activities as exemplified by some of the things I have mentioned in the call, what we are doing with the NARCAN wall units and making sure we have those available and putting together programs like that, working with a very large e-commerce partner and making NARCAN available at their facilities and also being able to sell these NARCAN wall units to other businesses across the board. All of those, we think are going to drive and make the business-to-business segment a faster-growing segment. - Joe Papa(CEO)

Contradiction Point 4

Impact of Government Shutdown on Business Operations

It involves differing statements about the impact of the government shutdown on the company's operations, which could affect expectations regarding business continuity and revenue projections.

What drove the strong YoY growth in other products? Are the 34% international MCM orders recurring, multiyear contracts, or one-off? How does their gross margin compare to U.S. MCM sales? What caused the YoY decline in OTC and Canadian NARCAN sales? Could the government shutdown impact Q4 NARCAN and MCM business? - Jessica Fye(JPMorgan Chase & Co, Research Division)

2025Q3: Government shutdown has minimal impact as U.S. government employees continue to work on critical initiatives. - Richard Lindahl(CFO)

Was the 1Q revenue guidance of $200M–$240M already factoring in NARCAN-related factors such as the competitor’s short-dated product sales? - Jessica Fye(JPMorgan)

2025Q1: Had we contemplated some of it, yes. But certainly, we got more clarity on the – and transparency on the magnitude as time went on. - Joe Papa(CEO)