Hello, everyone. Thank you for joining us, and welcome to the Emergent BioSolutions Third Quarter 2026 Earnings Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Frank Vargo, VP and Treasurer. Frank, please go ahead.
Good afternoon, everyone, and thank you for joining us as Emergent discusses its operational and financial results for the third quarter of 2026. As is customary, today's call is open to all participants, is being recorded, and is copyrighted by Emergent BioSolutions. In addition to today's press release, a slide presentation accompanying this webcast is available to all webcast participants. Turning to slide two. During today's call, Emergent may make projections and other forward-looking statements related to its business, future events, prospects, or future performance. These forward-looking statements are based on our current intentions, beliefs, and expectations regarding future events. Any forward-looking statements speak only as of the date of this conference call, and except as required by law, Emergent does not undertake to update any forward-looking statement to reflect new information, events, or circumstances.
Investors should consider this cautionary statement, as well as the risk factors identified in Emergent's periodic reports filed with the SEC when evaluating these forward-looking statements. During today's call, Emergent may also discuss certain non-GAAP financial measures that include adjustments to GAAP figures to provide additional transparency regarding the company's operating performance. Please refer to the tables included in today's press release. Turning to slide three. The agenda for today's call include remarks from Joe Papa, President and Chief Executive Officer, who will provide an update on the company's transformation plan, business performance, and key highlights. Rich Lindahl, EVP and Chief Financial Officer, will then review the third quarter 2026 financial results and provide an update on full-year 2026 guidance. Joe Papa will conclude with a discussion of the company's key catalysts for growth, followed by a question-and-answer session.
Finally, for the benefit of those who may be listening to the replay of this webcast, this call was held and recorded on November 2, 2026. Since that time, Emergent may have made announcements related to topics discussed during today's call. With that, I will now turn the call over to Joe Papa. Joe?
Hello, everyone, and thank you for joining us to discuss Emergent's Third Quarter 2026 Financial Results. This is Joe Papa, President and Chief Executive Officer of Emergent, and I'm joined today by Rich Lindahl, our Chief Financial Officer. This afternoon, I will share an update on our multi-year transformation plan, the actions we implemented during the quarter to strengthen the business, and the progress we are making across our diversified medical countermeasures and naloxone portfolios. Rich will then review our third-quarter financial results and our outlook for the remainder of 2026. I will close with the growth catalysts and priorities that will guide us as we finish the year. Then we'll open up the call for Q&A. Before we begin, though, I want to acknowledge an important milestone. This November marks 20 years since Emergent's initial public offering in November 2006.
As we reflect on that anniversary, our mission to protect and save lives remains our foundation. We are focused on building on that legacy as we advance our transformation and position Emergent for the future. I'd also like to take a moment to recognize Rich. After 17 years as a public company CFO, of which approximately nine years were spent at Emergent, Rich has decided to retire effective December 31st, 2026. Frank Vargo, our Vice President and Treasurer, will assume the role of interim CFO on January 1st, 2027. To support a seamless transition, Rich will continue to serve as a Senior Executive Advisor through March 31st, 2027. Rich has been a trusted partner to me, our Board, and our leadership team.
He has helped guide Emergent through periods of significant change, strengthened our financial discipline, and played an important role in the progress we have made to position the company for the future. He's also built a very strong and highly talented finance and IT organization. We are fortunate to have an experienced leader in Frank, who knows our business, understands our priorities, and will provide continuity and disciplined financial stewardship during this transition. On behalf of the Board and our colleagues, I want to thank Rich for his leadership, his commitment to Emergent's mission, and his dedication to our people. I'll now begin the presentation on slide four. For more than 25 years, Emergent has prepared for and responded to complex public health threats. Our mission remains clear: to protect and save lives.
That mission is especially important in a world where biological threats are evolving, geopolitical uncertainty is elevated, and advances in technology, including artificial intelligence, can create both new opportunities and new risks. We continue to believe that Emergent is the leader in biodefense preparedness and naloxone, serving patients, customers, and government partners around the world. Turning to slide six. Against that backdrop, our multi-year transformation plan continues to guide our business and strategic decisions. We are focused on improving operating performance, aligning our cost structure, strengthening the balance sheet, advancing growth opportunities where Emergent has differentiated capabilities, and maintaining a strong commitment to patient safety, quality, and compliance. Let's move to slide eight. After an exceptional, better-than-expected second-quarter performance of $234 million in revenue, our third-quarter results were consistent with expectations, with $110 million in revenue within our guidance range.
This brings our year-to-date revenue to $500 million. Additional highlights from the quarter include our overall profitability and cash generation support investment in growth. Year-to-date adjusted EBITDA reached $128 million, a 25% margin, with $122 million in operating cash flow. Cash stood at $176 million, with $226 million in liquidity. Financial discipline remains a priority for us. We repurchased $75 million in bond principal, and continued cost prioritization is occurring. Our MCM business delivered solid performance. We executed a $24 million contract modification for CYFENDUS, made deliveries to the U.S. government by the close of quarter three. We also completed a TEMBEXA tablet delivery from a contract modification awarded in March of this year.
Internationally, we completed product sales to more than 13 countries in the third quarter, which demonstrates the diversification of our MCM business and the importance of biodefense preparedness internationally around the world. Naloxone remains central to community preparedness. We maintained our U.S. market-leading position while we continue to be competitive in the market to ensure customers have access to both NARCAN nasal spray and KLOXXADO nasal spray when needed. Our growth initiatives are progressing. Importantly, we are taking a disciplined approach when it comes to the evaluation and pursuit of certain business development opportunities. The Canton manufacturing facility restart milestones remain on track, and we are proud to celebrate this restart with the local Commonwealth officials. Finally, we are progressing the pan-Ebola therapeutic program and AI partnership for clinical development work.
We have a handful of other AI and machine learning platforms that we are engaging for pipeline and growth opportunities. We plan to advance this critical work while remaining focused on patient safety, quality, and compliance. Turning to slide 9, I'd like to highlight the recent reports on the rising threat of AI in bioterrorism, national security, and the role Emergent can play in collaboration with other companies on potentially addressing such risks. In August, we issued a call to cross-collaborate with AI leaders, including Anthropic and OpenAI, on key areas like threat detection and to develop a preparedness framework. We expect to continue these efforts and be a potential partner on AI bioterrorism prevention efforts today and into the future. On slide 10, let's take a look at our MCM results.
Through the great efforts of our MCM team, we secured $59 million in revenue in the third quarter, which was driven by an executed $24 million CYFENDUS contract modification. The product was delivered to the U.S. government within the quarter, while the team also completed the majority of a TEMBEXA tablet delivery from a March 2026 contract modification with the U.S. government. To date, we executed all six anticipated U.S. government contract modifications. On the international side, we supplied a diverse mix of MCM to 13 different countries and closed 19 sales during the quarter. International sales and product orders contributed $72 million of revenue, representing 22% of year-to-date MCM revenue. On slide 11, the decline in opiate overdose deaths is encouraging, but powerful synthetic opioids and accidental poisonings continue to make preparedness very important across the U.S. and Canada.
Our focus remains increasing on access to overdose reversal medications, with over-the-counter NARCAN continuing as standard of care, and KLOXXADO 8 mg offering another important option. In the U.S., we continue supporting states, law enforcement, and harm reduction organizations, as well as retail partners and workplaces on increasing access and the availability for vulnerable populations. We continue seeing strong growth in NARCAN across Canada, and the government of Canada recently executed a standing offer which creates a multi-year pathway for NARCAN. To this end, we're complementing access with public awareness through our Ready to Rescue campaign and college educational engagements. These are important efforts to help increase access, awareness, and the availability of NARCAN and KLOXXADO to save lives. Let me now hand the call over to Rich. Following Rich's comments, I'll spend some time elaborating on our business outlook and growth catalysts. Rich?
Thank you, Joe. Good afternoon, everyone, and thank you for joining us today. Our third quarter results reflect continued execution against our transformation priorities. Revenue was within our guidance range. We maintained disciplined control of operating expenses, and we continue to generate strong cash flow while taking decisive actions to align our cost structure with current business realities. In August, we implemented restructuring actions across the organization to improve efficiency and better align resources with our strategic priorities. We continue to expect these actions to generate approximately $40 million of annualized savings, with the initial impact becoming evident in the fourth quarter of 2026. We also continue to strengthen the balance sheet. During the quarter, we repurchased $75 million aggregate principal amount of our unsecured bonds for $68 million of cash.
Together with the April term loan refinancing and strong operating cash generation, this action further reduced gross debt while net leverage remained stable. Turning to slide 13, third quarter revenue was $110 million, within our prior guidance range, compared with $231 million in the third quarter of 2025. The year-over-year comparison was primarily influenced by the timing of MCM deliveries. As a reminder, our strong second quarter 2026 results reflected accelerated deliveries, which now skews the third quarter's comparison to the prior year. At the same time, this factor also drove robust receivable collections and cash flow from operations in the third quarter of 2026. Adjusted EBITDA was - $5 million, and adjusted gross margin was 28%. Our profitability in the quarter was influenced by the timing of revenue, product mix, and the competitive market dynamics in the commercial segment.
SG&A and R&D operating expenses were $56 million, including $8 million of restructuring costs, compared with $52 million in the third quarter of 2025. Excluding those restructuring costs, SG&A and our R&D operating expenses were lower year-over-year, demonstrating effective cost management. Moving to slide 14, MCM revenue declined year-over-year, primarily due to the timing of U.S. government product deliveries. Commercial revenue also declined as the naloxone market is experiencing competitive pricing and volume pressure. The performance of naloxone was consistent with our prior outlook, and pricing compared to Q2 2026 was relatively stable. Bioservices and contracts and grants revenue remained a smaller component of the overall mix. Turning to slide 15, year-to-date revenue was $500 million, in line with our expectations. Adjusted EBITDA was $128 million, representing a 25% margin.
Adjusted gross margin was 49%, reflecting our continued focus on operating efficiency, even in light of product mix. Year-to-date operating expenses were $167 million, including $8 million of restructuring costs, compared with $176 million in the prior-year period. Moving to slide 16, the year-to-date revenue comparison reflects the impact of the large one-time international MCM order in 2025. Commercial revenue trends incorporate reduced naloxone pricing and volume in the U.S. public interest channel, partially offset by strength in our Canadian naloxone business. Overall, portfolio continues to benefit from our strong, ongoing collaborative engagement with U.S. and international government customers, and from our established market-leading position in naloxone. On slide 17, we highlight our rigorous balance sheet management. We ended the quarter with $176 million of cash and $226 million of total liquidity.
Year-to-date operating cash flow was $122 million, as our focus on working capital management produced very strong conversion from year-to-date adjusted EBITDA of $128 million. Following our $75 million bond repurchase, gross debt was $514 million at September 30, 2026, compared with $693 million a year ago. Net debt was $339 million compared with $448 million, and net leverage remained stable at 2.4 x trailing 12-month adjusted EBITDA, compared with 1.9 x a year ago. Transitioning to slide 18, the progress on our balance sheet is even more evident when viewed over the course of the turnaround. Through the third quarter of 2026, we generated $352 million of cumulative operating cash flow.
Gross debt declined by $354 million, or 41%, from year-end 2023, while net debt has declined by $418 million, or 55%, reflecting the net positive impact of our strategic asset divestitures. Over the same period, net leverage decreased from approximately 16 x to approximately 2.4 x. Turning to slide 19, our capital allocation priorities remained balanced. We continue to support international MCM growth initiatives, invest in internal R&D programs, including the approximately $50 million Novavax milestone payment made earlier this year, and maintain focus on business development opportunities. At the same time, we refinanced our term loan, repurchased $75 million of unsecured bond principal, and repurchased 2 million shares year-to-date for $18.1 million. We ended the quarter with $37.3 million remaining under the share repurchase authorization. Turning to slide 20, we are updating our full-year 2026 guidance.
We now expect total revenues of $600 million to $645 million, reflecting our current outlook for both the MCM and commercial segments. In our medical countermeasures business, we now expect full-year revenues to decline versus the prior year based on the timing of remaining international MCM deliveries and U.S. government procurement as we close out 2026. Our ongoing dialogue with the U.S. government and allied nations continues to indicate strong demand. However, the timing of certain deliveries may fall outside the fourth quarter. In our commercial segment, which is primarily driven by NARCAN, we continue to hold the leading market position. Year-to-date performance is in line with our expectations, though we are currently tracking toward the lower end of our 20%-25% range of revenue reduction versus 2025.
At the same time, we're raising our adjusted gross margin guidance to a range of 45%-47%, a 300 basis point improvement versus our August guidance. This reflects our continued focus on operational improvements across our manufacturing network, the impact of product mix, and recent stabilization of NARCAN pricing in the U.S. public interest channel. Finally, we now expect adjusted EBITDA of $110 million-$140 million, with the upper end of the range consistent with the midpoint of our prior guidance. This update primarily reflects our revenue outlook, while we continue to maintain disciplined control of operating expenses as we execute our turnaround. In summary, third quarter revenue was within our guidance range. Year-to-date adjusted EBITDA was $128 million, and we generated $122 million of operating cash flow through September.
We maintained a strong cash position, stayed focused on expense management, and took meaningful restructuring actions to improve our cost structure and prepare the business for the future. We also continue to strengthen the balance sheet through proactive debt management. The repurchase of our unsecured bonds, together with the April refinancing and sustained cash generation, reduced gross debt further while preserving stable net leverage and ample liquidity. We will continue to allocate capital thoughtfully across debt reduction, targeted investments in growth, and shareholder returns, while maintaining our commitment to patient safety, quality, and compliance. With that, I'll turn the call back to Joe to discuss our business outlook and growth catalysts before we move to Q&A. Joe?
Thank you, Rich. Turning to slide 22, I'd like to briefly touch on the key catalysts we believe can enable growth in 2026 and beyond. Our growth organization is focused on programs where Emergent has differentiated expertise, clear mission alignment, and the potential to create sustainable value. This includes advancing our pan-Ebola therapeutic program, evaluating a pan-flu vaccine opportunity, progressing work related to Novavax, Ebanga, and Raxibacumab, and selectively evaluating external opportunities that fit our capabilities and financial criteria. Turning to slide 23, our near-term pipeline and current asset strategy is focused on maximizing value for programs where Emergent has differentiated experience, clear mission alignment, and the potential to support sustainable growth. And moving to our summary and closing slide 24, our third quarter results reflect continued execution across the business and the delivery of our U.S. government partner order.
As we look at the remainder of 2026, our priorities are clear. First, stay focused on our mission to protect and save lives while prioritizing growth, quality, and our people every day. Second, deliver for our government and public health customers by meeting commitments, pursuing additional U.S. and international opportunities, and strengthening domestic preparedness capabilities. Third, effectively compete in the naloxone by protecting our leadership position, responding competitively to pricing and procurement dynamics, and expanding access through different offerings and configurations. And fourth, advance focused growth programs through our integrated growth organization with clear decision points and disciplined capital allocation. We have made meaningful progress, but we also recognize there is much work to do ahead of us.
We're entering the final month of 2026 with a leaner operating model, a more focused growth agenda, stronger financial discipline, and a portfolio that addresses some of the most consequential public health threats facing communities around the world. With that, I look forward to your questions. Operator, if we could please open the line for any questions.
We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Rag Selvaraju with H.C. Wainwright. Your line is now open. Please go ahead.
Thanks very much for taking our questions. I was just wondering if you could provide us with some additional granularity regarding the underlying market dynamics in the NARCAN market segment, particularly as this pertains to the current state of the competitive landscape, as well as drivers of underlying market demand, particularly with respect to, as I think you alluded to during your prepared remarks, the presence of increasingly potent opioid analogs, sort of next- generation beyond fentanyl. I was also wondering if you could comment on current broad- spectrum international demand for smallpox vaccine products, particularly in light of the recent awards that have been announced for MVA-BN, and if you think that this may point to increasing demand overall, both within the U.S. and ex-U.S. for your smallpox vaccine product. Thank you.
Okay. Rag, thank you for the questions. Got quite a bit there, and I'll try to make sure I get all pieces of it, but if I leave any out, please come back to me on it. Basically, the market dynamic on NARCAN, it remains good in the sense that there are still way too many people dying from opioid overdose, so there's still significant demand opportunity for opioid overdose medications. We've got to bring down that death rate. It's come down a lot. But we believe there's still much more we can do, and we want to make sure we continue to increase access for NARCAN because we believe that's what saves lives. When you have somebody who overdoses, if NARCAN's available, you can save that life. So we need to just continue to make NARCAN more available, and we're doing everything we can.
But that's the biggest issue out there. Number two, funding. The area of funding continues to be an important issue. It's, we believe, a bipartisan-supported opportunity that we see both on the Congressional Republicans and Congressional Democrats. There is support for what people believe NARCAN can do to help save lives, making sure the product's available. Beyond that, on the funding side, we also know that there's a number of legal class action settlements by big pharma companies that distributed opioids. Those funds are available and will be available over the next 10 years. We think that's going to help on the funding side to continue to make products like NARCAN, therapeutic products available and funded so that patients can get access when they need it.
And of course, because first and foremost, we made NARCAN over the counter in 2023, we think that's a big part of making it more accessible because it's over the counter. So those are the issues we face. We did see earlier in the year some new competitors get approval in the naloxone space, but at this time, they have not made a major impact on the market. But we continue to monitor that, and we're keeping a close eye on it. And what's important is we sit here today, NARCAN still has the market-leading position, and we think that's an important differentiator for us because patients and their family member caregivers all know the NARCAN brand name and also the way that we distribute it to make it more accessible. So those are the issues that we see in the marketplace on the demand side.
As it relates to stronger drugs, there's no doubt about that. It's true, whether it be the fentanyl, the carfentanil, some of the other products that are out there. We want to make sure that, once again, NARCAN's available. And for us, it's just making sure NARCAN's going to work, but at times, you may need a higher, more potent product, and we have KLOXXADO. We think that's the other avenue that the caregivers, first responders will pursue, is having both the 4 mg naloxone, NARCAN, which is the gold standard, but also have the 8 mg KLOXXADO. So we want to continue to make sure both drugs are available, whatever the first responders need to help patients with. The second question, what was I'm sorry, remind me of smallpox. I know it was What was your question again? About the international side of smallpox?
Yeah, it was related to international demand, especially as when we look at recent orders that have been placed for MVA-BN, what implications this may have for ongoing underlying demand for ACAM2000.
ACAM, we feel, once again, is a gold standard. The predecessor product to ACAM was the product that essentially eradicated smallpox around the world. ACAM still has a very important position. It is a single-dose requirement. It has been used around the world. We think ACAM still is a very important product there. Our expectation is that their countries are going to continue to think about what is needed for their own stockpiles. We have been working very closely with governments around the world, as well as the U.S., of course, about the stockpile. The good news is that ACAM is an important product to help them be prepared for whatever the issues are.
In addition to ACAM, though, we also do and spend a lot of time on TEMBEXA, a therapeutic, that we have the TEMBEXA along with ACAM as a portfolio of products for both for the vaccine side, but also for the therapeutic side, if indeed needed. Personal opinion is that there is a lot of concern that companies will use AI to create new pathogens. The bad actors that may use the AI to create new pathogens, something like smallpox would be probably one of the things they think about because of the simplicity that they could potentially work on, looking at how they could weaponize smallpox and make smallpox even more concerning for people.
We want to make sure we are prepared as we think about what could happen in the future and how we work with AI companies to be prepared for whatever the circumstances that the bad actors could come forward with. Thank you for your question, Rag. Operator, next question.
Thank you.
Your next question comes from the line of Jessica Fye with JPMorgan. Your line is now open. Please go ahead.
Hey, this is Anupam on for Jess. Can you give more specific visibility into when the MCM orders that slipped out of Q3 are expected to land? Is this Q4 catch-up a 2027 pushout, or is it still on schedule? Thank you.
Sure. I am going to start, but Rich, you may want to add to it. I think what you are really asking is our visibility to the fourth quarter and what we are expecting for this year, and then some parts of it obviously extended to 2027. I think that is what you are asking. I think we have, right now, we work very closely with the U.S. government to ensure that we understand their needs. We have regular ongoing meetings with the government to make sure we understand what their needs are, but also, with needs of the Canadian government, other governments around the world, we continue to work very closely with to ensure we understand their needs and expectations.
We have a back-and-forth to make sure that both sides, whether it is us as a supplier or them as customers, will get what they need to make sure that we work on the needs for the stockpile. There is very good back-and-forth and conversations with them. I think we have reasonable good visibility into that. S ometimes orders do slip from quarter to quarter depending on specifics, but for the most part, I think we have got pretty good visibility into the programs.
As we said, what's great about the third quarter results is that we shipped to 13 countries in the third quarter, which is another important part of the diversification that we've been striving for to ensure that we certainly have a very strong position with the U.S. government, but having the additional countries around the world gives us that diversification, which we think is very helpful for us in terms of smoothing out the revenue over time.
Yeah, I think the other thing I'd add is that we provided a range, obviously, of revenue guidance for the full year. That's the things that are driving that range to one end or the other are the potential for some orders internationally as well as with the U.S. government to materialize this year or in the early part of next year. Also, there's a range of variability around the ultimate kind of where the naloxone revenues land in the year. So that's what's implied by the range of revenue.
Operator, our next question, please.
There are no further questions at this time. I will now turn the call back to Joe Papa for closing remarks.
Well, thank you, everyone, for joining today. Very much appreciated the questions as well. We look forward to continuing to work with you and answer your questions, but we appreciate very much your time today. Thank you, everyone. Have a great day.
This concludes today's call. Thank you for attending. You may now disconnect.