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What changed in Emergent BioSolutions Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Emergent BioSolutions Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+692 added−574 removedSource: 10-K (2024-03-08) vs 10-K (2023-03-01)

Top changes in Emergent BioSolutions Inc.'s 2023 10-K

692 paragraphs added · 574 removed · 424 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

145 edited+62 added−54 removed115 unchanged
Biggest changeOur board will provide oversight and governance over the implementation and disclosures relating to our ESG strategy: • Access to Medicine • Community Engagement • Compliance • Corporate Governance • Diversity, Equity and Inclusion • Employee Engagement • Environmental, Health and Employee Safety • Governmental Relationships • Innovation • Manufacturing and Product Quality • Patient and Drug Safety • Scientific Integrity • Supply Chain Management Sustainability and Environmental Management We recognize that our operations have an impact on our local and global communities from the waste we generate, the energy we source, and the water we discharge.
Biggest changeOur updated priority issues are: • Top Priorities ◦ Talent Attraction, Engagement & Development ◦ Ethics & Compliance ◦ Product Quality & Patient Safety ◦ Sustainable Innovation ◦ Product Affordability & Accessibility ◦ Responsible Supply Chain 24 • Relative Priorities ◦ Carbon Emissions ◦ Climate Policy and Risk Management ◦ Clinical Trial Practices ◦ Diversity, Equity and Inclusion ◦ Employee Health and Safety ◦ Energy Use and Efficiency ◦ Environmental Policy and Management ◦ ESG Oversight ◦ Supplier Product Quality, Reliability and Compliance ◦ Waste Management Sustainability and Environmental Management We recognize that our operations have an impact on our local and global communities from the waste we generate, the energy we source, and the water we discharge.
First, we launched the Generation II NARCAN device, which has a claim for enhanced temperature excursions and storage below 25°C. Second, we gained FDA approval for an extension of the shelf life of NARCAN Nasal Spray from 24 months to 36 months.
First, we launched the Generation II NARCAN ® Nasal Spray device, which has a claim for enhanced temperature excursions and storage below 25°C. Second, we gained FDA approval for an extension of the shelf life of NARCAN ® Nasal Spray from 24 months to 36 months.
SIAN. We are developing SIAN (stabilized Isoamyl nitrate) as an antidote for initial treatment of acute poisoning of cyanide that is judged to be serious or life threatening. The USG consistently identifies cyanide ("CN") as a high-priority threat, most recently in the Public Health Emergency medical Countermeasure Enterprise 2022 Strategy and Implementation Plan.
We are developing SIAN (stabilized Isoamyl nitrate) as an antidote for initial treatment of acute poisoning of cyanide that is judged to be serious or life threatening. The USG consistently identifies cyanide ("CN") as a high-priority threat, most recently in the Public Health Emergency Medical Countermeasure Enterprise 2022 Strategy and Implementation Plan.
Teva launched its generic naloxone nasal spray in the U.S. In 2021 Padagis Pharmaceuticals also has a generic version of an intranasal naloxone spray based on NARCAN approved by the FDA. Padagis launched its generic naloxone nasal spray.
Teva launched its generic naloxone nasal spray in the U.S. In 2021, Padagis Pharmaceuticals also has a generic version of an intranasal naloxone spray based on NARCAN ® Nasal Spray approved by the FDA. Padagis launched its generic naloxone nasal spray.
Before clinical testing may begin, the results of pre-clinical testing and other available clinical data and manufacturing information must be submitted to the FDA as part of an Investigational New Drug ("IND") application. The data must provide an adequate basis for evaluating both the safety and the scientific rationale for the initial clinical studies.
Before clinical testing may begin, the results of pre-clinical testing and other available clinical data and manufacturing information must be submitted to the FDA as part of an Investigational New Drug application ("IND"). The data must provide an adequate basis for evaluating both the safety and the scientific rationale for the initial clinical studies.
For small molecule drugs, this information is submitted in a NDA filing. The submission of an application, either a BLA or an NDA, is not a guarantee that the FDA will find the application complete and accept it for filing.
For small molecule drugs, this information is submitted in an NDA filing. The submission of an application, either a BLA or an NDA, is not a guarantee that the FDA will find the application complete and accept it for filing.
In reviewing a BLA or NDA, the FDA may grant approval, request more information or data, or decline to approve the application if, if among other potential deficiencies, the FDA determines that the application does not provide substantial evidence of effectiveness, the drug is not safe for use under the conditions of use in the proposed labeling, or there are deficiencies in manufacturing quality.
In reviewing a BLA or NDA, the FDA may grant approval, request more information or data, or decline to approve the application if, among other potential deficiencies, the FDA determines that the application does not provide substantial evidence of effectiveness, the drug is not safe for use under the conditions of use in the proposed labeling, or there are deficiencies in manufacturing quality.
Any subsequent applicant who files an ANDA or a 505(b)(2) NDA must make one of the following certifications to the FDA concerning each patent for which the RLD sponsor was required to submit information in connection with the RLD: (1) the patent information has not been submitted to the FDA; (2) has expired; (3) the date on which the patent will expire; or (4) the patent is invalid, unenforceable, or will not be infringed by the manufacture, use or sale of the drug product for which the application is submitted.
Any subsequent applicant who files an ANDA or a 505(b)(2) NDA must make one of the following certifications to the FDA concerning each patent for which the RLD sponsor was required to submit information in connection with the RLD: (1) the patent information has not been submitted to the FDA; (2) the patent has expired; (3) the date on which the patent will expire; or (4) the patent is invalid, unenforceable, or will not be infringed by the manufacture, use or sale of the drug product for which the application is submitted.
The Biologics Price Competition and Innovation Act of 2009 (the "BPCIA") added Section 351(k) of the PHSA, which provides an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product.
The Biologics Price Competition and Innovation Act of 2009 (the "BPCIA") added Section 351(k) of the PHSA, which provides an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference product.
Like their constituent parts—e.g., drugs and devices—combination products are highly regulated and subject to a broad range of pre- and post-market requirements including premarket review, cGMPs, or QSRs, adverse event reporting, periodic reports, labeling and advertising and promotion requirements and restrictions, market withdrawal and recall.
Like their constituent parts—e.g., drugs and devices—combination products are highly regulated and subject to a broad range of pre- and post-market requirements including premarket review, CGMPs and/or QSRs, adverse event reporting, periodic reports, labeling and advertising and promotion requirements and restrictions, market withdrawal and recall.
Government Contracting Our status as a USG contractor means that we are subject to various statutes and regulations, including: • the Federal Acquisition Regulation ("FAR") and agency-specific regulations supplemental to FAR, which comprehensively regulate the award, formation, administration and performance of government contracts; • the Defense Federal Acquisition Regulations ("DFARs") and agency-specific regulations supplemental to DFARs, which comprehensively regulate the award, formation, administration and performance of DoD government contracts; • the Department of State Acquisition Regulation which regulates the relationship between a Department of State organization and a contractor or potential contractor; • business ethics and public integrity obligations, which govern conflicts of interest and the hiring of former government employees, restrict the granting of gratuities and funding of lobbying activities and incorporate other requirements such as the Anti-Kickback Act, the Procurement Integrity Act, the False Claims Act and the Foreign Corrupt Practices Act; • export and import control laws and regulations, including but not limited to the Export Administration Regulations and International Traffic in Arms Regulations; and 14 • laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.
Government Contracting Our status as a USG contractor means that we are subject to various statutes and regulations, including: • the Federal Acquisition Regulation ("FAR") and agency-specific regulations supplemental to FAR, which comprehensively regulate the award, formation, administration and performance of government contracts; • the Defense Federal Acquisition Regulations ("DFARs") and agency-specific regulations supplemental to DFARs, which comprehensively regulate the award, formation, administration and performance of DoD government contracts; • the Department of State Acquisition Regulation which regulates the relationship between a Department of State organization and a contractor or potential contractor; • business ethics and public integrity obligations, which govern conflicts of interest and the hiring of former government employees, restrict the granting of gratuities and funding of lobbying activities and incorporate other requirements such as the Anti-Kickback Act, the Procurement Integrity Act, the False Claims Act and the Foreign Corrupt Practices Act; 15 • export and import control laws and regulations, including but not limited to the Export Administration Regulations and International Traffic in Arms Regulations; and • laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.
Potential Sanctions For all FDA-regulated products, if the FDA finds that a manufacturer has failed to comply with applicable laws and regulations, or that a product is ineffective or poses an unreasonable health risk, it can institute or seek a wide variety of enforcement actions and remedies, including but not limited to: • restrictions on products, manufacturers or manufacturing processes; 20 • restrictions on the labeling or marketing of a product; • restrictions on distribution or use of a product; • requirements to conduct post-marketing studies or clinical trials; • warning letters or untitled letters; • withdrawal of the products from the market; • refusal to approve pending applications or supplements to approved applications that are submitted; • recall of products; • fines, restitution or disgorgement of profits or revenues; • suspension or withdrawal of marketing approvals; • refusal to permit the import or export of our products; • product seizure; and • injunctions or the imposition of civil or criminal penalties.
Potential Sanctions For all FDA-regulated products, if the FDA finds that a manufacturer has failed to comply with applicable laws and regulations, or that a product is ineffective or poses an unreasonable health risk, it can institute or seek a wide variety of enforcement actions and remedies, including but not limited to: • restrictions on products, manufacturers or manufacturing processes; • restrictions on the labeling or marketing of a product; • restrictions on distribution or use of a product; • requirements to conduct post-marketing studies or clinical trials; • warning letters or untitled letters; • withdrawal of the products from the market; 21 • refusal to approve pending applications or supplements to approved applications that are submitted; • recall of products; • fines, restitution or disgorgement of profits or revenues; • suspension or withdrawal of marketing approvals; • refusal to permit the import or export of our products; • product seizure; and • injunctions or the imposition of civil or criminal penalties.
Products designated as orphan drugs may be eligible for special grant funding for R&D, FDA assistance with the review of clinical trial protocols, potential tax credits for research, 18 an exemption from the application fee for marketing applications and a seven-year period of orphan drug exclusivity after marketing approval.
Products designated as orphan drugs may be eligible for special grant funding for R&D, FDA assistance with the review of clinical trial protocols, potential tax credits for research, an exemption from the application fee for marketing applications and a seven-year period of orphan drug exclusivity after marketing approval.
Anthrax is a potentially fatal disease caused by the spore-forming bacterium, Bacillus anthracis . Inhalational anthrax is the most lethal form of anthrax. In the U.S., BioThrax vaccine is administered in a pre-exposure prophylaxis setting by intramuscular injection as a three-dose primary series over a six-month period.
Anthrax is a potentially fatal disease caused by the spore-forming bacterium, Bacillus anthracis . Inhalational anthrax is the most lethal form of anthrax. In the U.S., BioThrax ® vaccine is administered in a pre-exposure prophylaxis setting by intramuscular 6 injection as a three-dose primary series over a six-month period.
The USG has funded the development of a number of nerve agent antidote auto-injectors including development programs at Aktiv Pharma Group, Kaleo and others. Outside of the U.S. there are a number of suppliers of these devices though few with approvals from national or regional regulatory authorities. • Vaxchora ® .
The USG has funded the development of a number of nerve agent antidote auto-injectors including development programs at Aktiv Pharma Group, Kaleo and others. Outside of the U.S. there are a number of suppliers of these devices though few with approvals from national or regional regulatory authorities.
In the EU, TPOXX is indicated for the treatment of smallpox, mpox and cowpox, as well as the treatment of complications following vaccination against smallpox. • Trobigard® atropine sulfate, obidoxime chloride auto-injector. In the U.S., Meridian Medical Technologies has been the primary supplier of nerve-agent antidote auto-injectors.
In the EU, TPOXX ® is indicated for the treatment of smallpox, mpox and cowpox, as well as the treatment of complications following vaccination against smallpox. 13 • Trobigard ® atropine sulfate, obidoxime chloride auto-injector. In the U.S., Meridian Medical Technologies has been the primary supplier of nerve-agent antidote auto-injectors.
Combination products are typically reviewed through a marketing submission that corresponds to the constituent part which provides the primary mode of action (“PMOA”) for the combination product. For 19 example, if the PMOA of a device-biologic combination product is attributable to the biologic, the agency center that reviews biologics would have the primary jurisdiction for the review.
Combination products are typically reviewed through a marketing submission that corresponds to the constituent part which provides the primary mode of action (“PMOA”) for the combination product. For example, if the PMOA of a device-biologic combination product is attributable to the biologic, the agency center that reviews biologics would have the primary jurisdiction for the review.
Ebanga™ (Ansuvimab-zykl) is a monoclonal antibody with antiviral activity provided through a single IV infusion (over 60 minutes) for the treatment of Zaire ebolavirus in adult and pediatric patients, including neonates born to a mother who is RT-PCR positive for Zaire ebolavirus.
Ebanga TM (ansuvimab-zykl) is a monoclonal antibody with antiviral activity provided through a single IV infusion (over 60 minutes) for the treatment of Zaire ebolavirus in adult and pediatric patients, including neonates born to a mother who is RT-PCR positive for Zaire ebolavirus.
Materials for production of NARCAN Nasal Spray, such as the naloxone active pharmaceutical ingredient and other excipients, along with the vial, stopper and device are produced around the world by other third parties and delivered to the primary manufacturer and released to manufacturing following appropriate testing.
For example, materials for production of NARCAN ® Nasal Spray, such as the naloxone active pharmaceutical ingredient and other excipients, along with the vial, stopper and device are produced around the world by other third parties and delivered to the primary manufacturer and released to manufacturing following appropriate testing.
Manufacturers and other entities involved in the manufacture and distribution of cleared, approved, or otherwise authorized products are required to register their establishments with the FDA, and in some instances state agencies, and they are subject to periodic unannounced inspections by the FDA for compliance with cGMPs and other requirements.
Manufacturers and other entities involved in the manufacture and distribution of cleared, approved, or otherwise authorized products are required to register their establishments with the FDA, and in some instances state agencies, and they are subject to periodic unannounced inspections by the FDA for compliance with CGMPs and/or QSRs and other requirements.
A grant of an orphan designation is not a guarantee that a product will be approved. Orphan drug exclusivity (afforded to the first applicant to receive approval for an orphan designated drug for a particular rare disease or condition) generally prevents FDA approval of another sponsor’s application for the same drug or for the same rare disease or condition.
A grant of an orphan designation is not a guarantee that a product will be approved. Orphan drug exclusivity (afforded to the first applicant to receive approval for an orphan designated drug for a particular rare disease or condition) generally prevents FDA approval of another sponsor’s application for the same drug for the same indication.
We also partner with foreign governments and international NGOs to support procurement of MCM products and procured product candidates internationally. Our specialized team has expertise and experience in the public and private sector, dealing with counter terrorism, CBRNE preparedness and public health. Commercial Products.
We also partner with foreign governments and international NGOs to support procurement of MCM products and procured product candidates internationally. Our specialized team has expertise and experience in the public and private sector, dealing with counter terrorism, CBRNE preparedness and public health.
When a biological product is licensed for marketing by FDA through the approval of a BLA under section 351(a) of the PHSA, the product may be entitled to exclusivity barring FDA from accepting or approving an application under section 351(k) of the PHSA for a competing products for certain periods of time.
When a biological product is licensed for marketing by FDA through the approval of a BLA under section 351(a) of the PHSA, the product may be entitled to exclusivity barring FDA from accepting or approving an application under section 351(k) of the PHSA for a competing product for certain periods of time.
BioThrax vaccine is the only vaccine licensed by the FDA for pre-exposure prophylaxis of anthrax disease in persons at high risk of exposure. BioThrax vaccine is also approved by the FDA for post-exposure prophylaxis administration in combination with antimicrobial therapy in the event of suspected or confirmed exposure to Bacillus anthracis .
BioThrax ® (Anthrax Vaccine Adsorbed). BioThrax ® vaccine is the only vaccine licensed by the FDA for pre-exposure prophylaxis of anthrax disease in persons at high risk of exposure. BioThrax ® vaccine is also approved by the FDA for post-exposure prophylaxis administration in combination with antimicrobial therapy in the event of suspected or confirmed exposure to Bacillus anthracis .
ACAM2000 vaccine faces competition from JYNNEOS TM vaccine, which is licensed by the FDA for the prevention of smallpox and mpox disease in adults 18 years of age and older determined to be at high risk for smallpox or mpox infection.
ACAM2000 ® vaccine faces competition from JYNNEOS TM vaccine, which is licensed by the FDA for the prevention of smallpox and mpox disease in adults 18 years of 12 age and older determined to be at high risk for smallpox or mpox infection.
RSDL kit is 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.
RSDL ® kit is cleared by the FDA and 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.
Environmental sustainability is a central consideration when improving and innovating our operational infrastructure across our enterprise and we must do out part to reverse the impacts of climate change which threaten environmental and human health.
Environmental sustainability is a central consideration when improving and innovating our operational infrastructure across our enterprise and we must do our part to reverse the impacts of climate change which threaten environmental and human health.
United States Trobigard ® Auto-injector atropine sulfate, obidoxime chloride auto-injector Indicated for the emergency treatment of known or suspected exposure to nerve agents or toxic organophosphates in adults > 18 years of age.
United States, Canada Trobigard ® Auto-injector atropine sulfate, obidoxime chloride auto-injector Indicated for the emergency treatment of known or suspected exposure to nerve agents or toxic organophosphates in adults > 18 years of age.
Anthrasil [Anthrax Immune Globulin Intravenous (Human)] ("Anthrasil Anthrax IGIV") is the only polyclonal antibody therapeutic licensed by the FDA for the treatment of inhalational anthrax in adult and pediatric patients in combination with appropriate antibacterial drugs.
ANTHRASIL ® (Anthrax Immune Globulin Intravenous (human)) is the only polyclonal antibody therapeutic licensed by the FDA for the treatment of inhalational anthrax in adult and pediatric patients in combination with appropriate antibacterial drugs.
Based on one of these determinations, the Secretary of HHS may make a declaration that circumstances exist justifying EUAs for MCMs to respond to the threat or emergency at issue.
Based on one of these determinations, the Secretary of HHS may make a declaration (the EUA Declaration) that circumstances exist justifying EUAs for MCMs to respond to the threat or emergency at issue.
United States, Australia, Singapore Anthrasil ® [Anthrax Immune Globulin Intravenous (Human)] Treatment of inhalational anthrax in adult and pediatric patients in combination with appropriate antibacterial drugs.
United States, Australia, Singapore, Canada ANTHRASIL ® [Anthrax Immune Globulin Intravenous (human)] Treatment of inhalational anthrax in adult and pediatric patients in combination with appropriate antibacterial drugs.
The FDA may then approve the new product candidate for certain label indications for which the referenced product has been approved, as well as for any new indication sought by the applicant.
The FDA may then approve the new product candidate for certain indications for which the referenced product has been approved, as well as for any new indication sought by the applicant.
Food and Drug Administration (FDA) Nonprescription Drugs Advisory Committee and the Anesthetic and Analgesic Drug Products Advisory Committee unanimously voted in favor (a total of 19 votes) that the benefit-risk profile of NARCAN® (naloxone HCl) Nasal Spray was supportive of its use as a nonprescription opioid overdose reversal agent.
Food and Drug Administration (FDA) Nonprescription Drugs Advisory Committee and the Anesthetic and Analgesic Drug Products Advisory Committee unanimously voted in favor (a total of 19 votes) that the benefit-risk profile of NARCAN ® Nasal Spray was supportive of its use as a nonprescription opioid overdose reversal agent.
Our CDMO Services are based on our established development and manufacturing infrastructure, technology platforms and expertise, as well as continuing capital expenditure projects to expand our capabilities and increase capacity. Our CDMO Services consist of development services, bulk drug substance manufacturing, fill, finish, and packaging of final drug product.
Our Bioservices are based on our established development and manufacturing infrastructure, technology platforms and expertise, as well as continuing capital expenditure projects to expand our capabilities and increase capacity. Our Bioservices consist of development services, bulk drug substance manufacturing, fill, finish, and packaging of final drug product.
The FDA may impose a temporary or permanent clinical hold, or other sanctions, if it believes that a clinical trial is not being conducted in accordance with the FDA requirements or presents an unacceptable risk to the clinical trial subjects. 16 Good Clinical Practice.
The FDA may impose a temporary or permanent clinical hold, or other sanctions, if it believes that a clinical trial is not being conducted in accordance with the FDA requirements or presents an unacceptable risk to the clinical trial subjects. 17 Good Clinical Practice.
Our current contract with the DoD awarded in December 2022 is a five-year contract including a base year period and four single year option periods, valued at up to $379.6 million to supply RSDL kits for use by all branches of the U.S. military. We also sold RSDL kits to nine foreign countries outside the U.S. in 2022.
Our current contract with the DoD awarded in December 2022 is a five-year contract including a base year period and four single year option periods, valued at up to $379.6 million to supply RSDL ® kits for use by all branches of the U.S. military. We also sold RSDL ® kits to ten foreign countries outside the U.S. in 2023.
United States RSDL ® (Reactive Skin Decontamination Lotion Kit) Intended to remove or neutralize chemical warfare agents and T-2 Toxin from the skin. United States (510k), Australia, Canada, European Union and Israel TEMBEXA ® (brincidofovir), oral antiviral Treatment of human smallpox disease caused by variola virus in adult and pediatric patients, including neonates.
United States RSDL ® (Reactive Skin Decontamination Lotion Kit) Intended to remove or neutralize chemical warfare agents and T-2 Toxin from the skin. United States (510k), Australia, Canada, European Union and Israel TEMBEXA ® (brincidofovir), (tablet and oral suspension) Treatment of human smallpox disease caused by variola virus in adult and pediatric patients, including neonates.
The FDA may issue a refuse to file, or RTF, letter to the applicant and request additional information, in which case the application must be resubmitted. Most applications are subject to a substantial application fee and, if approved, will be assessed an annual fee. Under the FDCA, the FDA has the authority to grant waivers of certain user fees.
The FDA may issue a refuse to file, or RTF, letter to the applicant and request additional information, in which case the application must be resubmitted. Most applications are subject to a substantial application fee and each approved product will be assessed an annual fee. Under the FDCA, the FDA has the authority to grant waivers of certain user fees.
JYNNEOS vaccine is also approved in Canada and in the EU under the trade names IMVAMUNE ® and IMVANEX ® , respectively. • AV7909 and BioThrax . AV7909 and BioThrax vaccines are currently procured, primarily by the USG, for prevention of anthrax disease.
JYNNEOS ® vaccine is also approved in Canada and in the EU under the trade names IMVAMUNE ® and IMVANEX ® , respectively. • CYFENDUS ® and BioThrax ® . CYFENDUS ® and BioThrax ® vaccines are currently procured, primarily by the USG, for prevention of anthrax disease.
AV7909 is designed to provide protection with a two-dose regimen (versus the BioThrax three-dose regimen) for post-exposure prophylaxis of anthrax disease, when administered in combination with the recommended antibacterial drugs.
CYFENDUS ® is designed to provide protection with a two-dose regimen (versus the BioThrax ® three-dose regimen) for post-exposure prophylaxis of anthrax disease, when administered in combination with the recommended antibacterial drugs.
However, a generic manufacturer is required to demonstrate that its product contains the same active ingredient as, and is bioequivalent to, the innovator product, among other requirements. For a systemically absorbed drug, bioequivalence generally is established when there is an absence of a significant difference in the rate and extent of absorption of the generic product and the listed drug.
However, a generic manufacturer is required to demonstrate that its product contains the same active ingredient as, and is bioequivalent to, the RLD, among other requirements. For a systemically absorbed drug, bioequivalence generally is established when there is an absence of a significant difference in the rate and extent of absorption of the generic product and the RLD.
Collectively, this portfolio of services provides “molecule-to-market” solutions to clients engaged in all stages of drug development and commercialization. These services are provided to innovator biopharmaceutical companies and non-governmental organizations ("NGOs"). We currently have 10 development and manufacturing sites located in the U.S., Canada and Switzerland.
Collectively, this portfolio of services provides “molecule-to-market” solutions to clients engaged in all stages of drug development and commercialization. These services are provided to innovator biopharmaceutical companies and non-governmental organizations ("NGOs"). We currently have 8 development and manufacturing sites located in the U.S. and Canada.
BARDA is currently procuring AV7909, a product candidate that has not been approved or authorized by FDA under these authorities. 15 Public Readiness and Emergency Preparedness Act.
BARDA is currently procuring AV7909, a product candidate that has not been approved or authorized by the FDA under these authorities. Public Readiness and Emergency Preparedness Act.
Raxibacumab injection, a fully human monoclonal antibody. Our raxibacumab product is the first fully human monoclonal antibody therapeutic licensed by the FDA for the treatment and prophylaxis of inhalational anthrax due to Bacillus anthracis .
Our raxibacumab product is the first fully human monoclonal antibody therapeutic licensed by the FDA for the treatment and prophylaxis of inhalational anthrax due to Bacillus anthracis .
Our revenues are derived from a combination of the sale and procurement of our product/product candidate portfolio (described below), the provision of our CDMO services to external customers, and non-dilutive contract and grant funding for research and development ("R&D") projects from various third-party sources.
Our revenues are derived from a combination of the sale and procurement of our product/product candidate portfolio (described below), the provision of our bioservices to external customers, and non-dilutive contract and grant funding for research and development ("R&D") projects from various third-party sources.
The Pandemic and All Hazards Preparedness Act of 2006 and Reauthorization Acts. The Pandemic and All Hazards Preparedness Act of 2006 established the role of Assistant Secretary for Preparedness and Response ("ASPR") within HHS and provided statutory authorities for a number of programs, including the creation of BARDA to support the development and procurement of MCMs to respond to CBRNE.
The Pandemic and All Hazards Preparedness Act of 2006 and Reauthorization Acts. The Pandemic and All Hazards Preparedness Act of 2006 established the role of ASPR within HHS and provided statutory authorities for a number of programs, including the creation of BARDA to support the development and procurement of MCMs to respond to CBRNE.
For example, the Inflation Reduction Act of 2022 (the “IRA”), was signed into law on August 16, 2022. As written, the IRA will, among other provisions, give HHS the ability and authority to directly negotiate with manufacturers the price that Medicare will pay for certain single-source drugs that account for the highest total Medicare spending.
For example, the Inflation Reduction Act of 2022 (the “IRA”), was signed into law on August 16, 2022. As written, the IRA will, among other provisions, give HHS the ability and authority to directly negotiate with manufacturers the price that Medicare will pay for certain single-source drugs that account for 22 high Medicare spending.
Vaccine and Therapeutic Product Lot Protocol. Because the manufacturing process for biological products is complex, the FDA requires for many biologics, including most vaccines and immune globulin products, that each product lot undergo thorough testing for purity, potency, identity and sterility.
Because the manufacturing process for biological products is complex, the FDA requires for many biologics, including most vaccines and immune globulin products, that each product lot undergo thorough testing for purity, potency, identity and sterility.
Following this submission, BARDA began procuring AV7909, exercising its first contract option in July 2019 (valued at approximately $261.0 million) to procure doses to be delivered to the SNS through June of 2020, its second contract option in June 2020 (valued at $258.0 million) to procure additional doses of AV7909 for delivery into the SNS over 12 months and, most recently, in September 2021 funding another contract option (valued at approximately $399.0 million) to deliver doses of AV7909 to the SNS over 18 months.
Following this submission, BARDA began procuring CYFENDUS ® , exercising its first contract option in July 2019 (valued at approximately $261.0 million) to procure doses to be delivered to the SNS through June of 2020, its second contract option in July 2020 (valued at $258.0 million) to procure additional doses of CYFENDUS ® for delivery into the SNS over 12 months, in September 2021 funding another contract option (valued at approximately $399.0 million) to deliver doses of CYFENDUS ® to the SNS over 18 months.
The second deliverable, valued at up to approximately $366.0 million, is for the production of additional doses of bulk drug substance over 10 years to maintain the plasma collection and production capability for botulism response planning. In addition to domestic government sales, BAT antitoxin continues to be sold internationally, with deliveries to over 17 foreign governments in 2022. BioThrax®.
The second deliverable, valued at up to approximately $366.0 million, is for the production of additional doses of bulk drug substance over 10 years to maintain the plasma collection and production capability for botulism response planning. In addition to domestic government sales, BAT ® antitoxin continues to be sold internationally, with deliveries to 15 foreign governments in 2023.
Any drug, biologic or medical device product for which we receive FDA approval will be subject to continuing regulation by the FDA, including, among other things, record keeping requirements, reporting of adverse events, providing FDA with updated safety and efficacy information, product sampling and distribution requirements, restrictions on advertising and promotion, and FDA inspections.
Any drug, biologic or medical device product for which we receive FDA marketing authorization will be subject to continuing regulation by the FDA, including, among other things, record keeping requirements, reporting of adverse events, providing FDA with updated safety and efficacy information, product sampling and distribution requirements (for drugs and biologics), restrictions on advertising and promotion, and FDA inspections.
We also provided CDMO services to the USG, which ended in 2021. Our CDMO services are supported by a dedicated group of professionals qualified to represent the full breadth of our service offerings.
We also provided bioservices to the USG, which ended in 2021. Our bioservices are supported by a dedicated group of professionals qualified to represent the full breadth of our service offerings.
On September 29, 2021, we were granted a no-cost contract extension, which extended the date through which the USG procured BioThrax vaccine to March 31, 2022. On June 16, 2022, the contract's period of performance was extended to June 30, 2022. All deliveries under this contract were completed in August 2022. Ebanga™ (Ansuvimab-zykl), a monoclonal antibody.
On September 29, 2021, we were granted a no-cost contract extension, which extended the date through which the USG procured BioThrax ® vaccine to March 31, 2022. On June 16, 2022, the contract's period of performance was extended to June 30, 2022. All deliveries under this contract were completed in August 2022.
Regulations Governing Reimbursement The marketing practices of U.S. pharmaceutical manufacturers are also subject to federal and state healthcare laws related to government funded healthcare programs. In the U.S., certain of our products are reimbursed under federal and state health care programs such as Medicaid, Medicare, TriCare, and or state pharmaceutical assistance programs.
Regulations Governing Reimbursement The marketing practices of U.S. pharmaceutical manufacturers are also subject to federal and state healthcare laws related to government funded healthcare programs. In the U.S., certain of our products are reimbursed under federal and state health care programs such as Medicaid, Medicare, Tricare, and or state pharmaceutical assistance programs. Many foreign countries have similar laws.
Once the relevant determination and declaration are issued, FDA has the authority to issue EUAs for the use of specific medical products based on criteria established by statute, including that the product at issue may be effective in diagnosing, treating, or preventing serious or life-threatening diseases or conditions related to the threat or emergency and that there are no adequate, approved, and available alternatives to the issuance of an EUA.
Once the relevant determination and EUA declaration are issued, FDA has the authority to issue EUAs for the use of specific medical products based on criteria established by statute, including that the product at issue may be effective in diagnosing, treating, or preventing a serious or life-threatening disease or condition related to the threat or emergency and that there are no adequate, approved, and available alternatives to the product for diagnosing, preventing, or treating the disease or condition.
In September 2016, we signed a combination development and procurement contract with BARDA, which included a five-year base period of performance to develop AV7909 for post-exposure prophylaxis of anthrax disease and to deliver to the SNS an initial two million doses, subsequently modified to three million doses in March 2017.
In September 2016, we signed a combination development and procurement contract with Biomedical Advanced Research and Development Authority ("BARDA"), which included a five-year base period of performance to develop CYFENDUS ® for post-exposure prophylaxis of anthrax disease and to deliver to the SNS an initial two million doses, subsequently modified to three million doses in March 2017.
Funding for BARDA is provided by annual appropriations by Congress. Congress appropriates annual funding for procurement of MCMs for the SNS (currently managed by ASPR) and for the NIAID to conduct biodefense research. This appropriation funding supplements amounts available under Project BioShield.
Congress appropriates annual funding for procurement of MCMs for the SNS (currently managed by ASPR) and for the NIAID to conduct biodefense research. This appropriation funding supplements amounts available under Project BioShield.
ITEM 1. BUSINESS OVERVIEW We are a global life sciences company focused on providing innovative preparedness and response solutions addressing accidental, deliberate and naturally occurring public health threats ("PHTs"). Our solutions include a product portfolio, a product development portfolio, and a contract development and manufacturing ("CDMO") services portfolio.
ITEM 1. BUSINESS OVERVIEW We are a global life sciences company focused on providing innovative preparedness and response solutions addressing accidental, deliberate and naturally occurring public health threats ("PHTs"). Our solutions include a product portfolio, a product development portfolio, and a Bioservices portfolio.
We are a party to various license agreements, including those under which we license patents, patent applications, trademarks, materials and other intellectual property rights. It is our policy to ethically consider the enforcement and defense of our intellectual property rights, and to respect the intellectual property rights of others.
We are a party to various license agreements, including those under which we license patents, patent applications, trademarks, know-how, and other intellectual property rights. It is our policy to ethically consider the enforcement and defense of our intellectual property rights, and to respect the valid and enforceable intellectual property rights of others.
Doing so will enable Emergent to establish an energy baseline and prioritize future footprint reductions. This will also allow us to make informed decisions on setting targets and creating an accompanying strategy and road map for meeting our goals.
Doing so will enable Emergent to establish an energy baseline and prioritize future footprint reductions. We expect these efforts will also allow us to make informed decisions on setting targets and creating an accompanying strategy and road map for meeting our goals.
United States Raxibacumab injection, a fully human monoclonal antibody Treatment of adult and pediatric patients with inhalational anthrax due to Bacillus anthracis in combination with appropriate antibacterial drugs and for prophylaxis of inhalational anthrax when alternative therapies are not available or are not appropriate.
United States Raxibacumab injection Treatment of adult and pediatric patients with inhalational anthrax due to Bacillus anthracis in combination with appropriate antibacterial drugs and for prophylaxis of inhalational anthrax when alternative therapies are not available or are not appropriate.
Our raxibacumab product is indicated for the treatment of adult and pediatric patients with inhalational anthrax in combination with appropriate antibacterial drugs and for prophylaxis of inhalational anthrax when alternative therapies are not available or appropriate. RSDL® .
Our raxibacumab product is indicated for the treatment of adult and pediatric patients with inhalational anthrax in combination with appropriate antibacterial drugs and for prophylaxis of inhalational anthrax when alternative therapies are not available or appropriate. RSDL ® (Reactive Skin Decontamination Lotion Kit) .
Inmazeb is currently procured by the USG for the SNS . • NARCAN ® . NARCAN Nasal Spray is the first FDA-approved intranasal naloxone spray for the emergency reversal of opioid overdoses. Teva Pharmaceuticals Industries Ltd. and its Canadian affiliate (collectively, Teva) have generic versions of an intranasal naloxone spray based on NARCAN approved by the FDA and Health Canada.
NARCAN ® (naloxone HCl) Nasal Spray is the first FDA-approved intranasal naloxone spray for the emergency reversal of opioid overdoses. Teva Pharmaceuticals Industries Ltd. and its Canadian affiliate (collectively, "Teva") have generic versions of an intranasal naloxone spray based on NARCAN ® Nasal Spray approved by the FDA and Health Canada.
This can be (1) a determination by the Secretary of HHS that there is a public health emergency, or a significant potential for a public health emergency, that affects, or has a significant potential to affect, national security or the health and security of United States citizens living abroad, and that involves CBRN agents; (2) a determination by the Secretary of Homeland Security (“DHS”) that there is a domestic emergency, or a significant potential for a domestic emergency, involving a heightened risk of attack with a CBRN agent; (3) a determination by the Secretary of Defense that there is a military emergency, or a significant potential for a military emergency, involving a heightened risk to United States military forces from a CBRN agent; or (4) the identification of a material threat pursuant to section 319F–2 of the Public Health Service Act (“PHSA”) sufficient to affect national security or the health and security of United States citizens living abroad.
This can be (1) a determination by the Secretary of HHS that there is a public health emergency, or a significant potential for a public health emergency, that affects, or has a significant potential to affect, national security or the health and security of United States citizens living abroad, and that involves CBRN agents, or a disease or condition that may be attributable to CBRN agents; (2) a determination by the Secretary of Homeland Security (“DHS”) that there is a domestic emergency, or a significant potential for a domestic emergency, involving a heightened risk of attack with a CBRN agent; (3) a determination by the Secretary of Defense that there is a military emergency, or a significant potential for a military emergency, involving a heightened risk to United States military forces from an attack with a CBRN agent or an agent that may cause, or is otherwise associated with, an imminently life-threatening and specific risk to United States military forces; or (4) the identification of a material threat pursuant to section 319F–2 of the Public Health Service Act (“PHSA”) sufficient to affect national security or the health and security of United States citizens living abroad.
In November 2022, a specific batch of our RSDL kits was recalled due to leakage, which could cause the product not to perform as effectively as intended. There have been no reports of injuries or death related to this recall of which we are aware. TEMBEXA® (brincidofovir).
In November 2022, three lots of our RSDL ® kits was recalled due to leakage, which could cause the product not to perform as effectively as intended. There have been no reports of injuries or death related to this recall of which we are aware.
Orphan drug exclusivity will not bar approval of the same product marketed by a different manufacturer under certain circumstances, including if the company with orphan drug exclusivity is not able to meet market demand or the subsequent product is shown to be clinically superior to the approved product on the basis of greater efficacy or safety, or providing a major contribution to patient care.
Orphan drug exclusivity will not bar approval of the same drug marketed by a different manufacturer under certain circumstances, including if the company with orphan drug exclusivity is not able to meet market demand, grants consent to the FDA’s approval of the subsequent product or the subsequent product is shown to be clinically superior to the approved product on the basis of greater efficacy or safety, or providing a major contribution to patient care. 19 In September 2021, the U.S.
We currently have over 50 active CDMO customers. Marketing and Sales We have dedicated sales channels for each of our products and service offerings. Government - MCM Products. We partner with stakeholders in the USG and domestic NGOs to support procurement of our MCM products and procured product candidates.
Marketing and Sales We have dedicated sales channels for each of our products and service offerings. Government - MCM Products. We partner with stakeholders in the USG and domestic NGOs to support procurement of our MCM products and procured product candidates.
ACAM2000 vaccine remains the primary smallpox vaccine stockpiled by the USG and offers key features for public health mass vaccination programs that are critical, including a single dose vaccination schedule and multi-dose vial presentation.
ACAM2000 ® vaccine, which is licensed by the FDA and recently licensed by Health Canada, remains the primary smallpox vaccine stockpiled by the USG and offers key features for public health mass vaccination programs that are critical, including a single dose vaccination schedule and multi-dose vial presentation.
Many foreign countries have similar laws. 21 Various U.S. federal health care laws apply when we or customers submit claims for items or services that are reimbursed under federally funded health care programs, including federal and state anti-kickback laws, false claims laws, and anti-self-referral laws, which may apply to federal and state-funded Medicaid and other health care programs and private third-party payers.
Various U.S. federal health care laws apply when we or customers submit claims for items or services that are reimbursed under federally funded health care programs, including federal and state anti-kickback laws, false claims laws, and anti-self-referral laws, which may apply to federal and state-funded health care programs and private third-party payers.
Each foreign country has its own regulatory requirements to medical devices. Before a medical device can be placed on the market in the EU compliance with the requirements of the Medical Devices Regulation (EU) 2017/745 must be demonstrated in order to affix the CE Mark to the product.
Before a medical device can be placed on the market in the EU compliance with the requirements of the Medical Devices Regulation (EU) 2017/745 must be demonstrated in order to affix the CE Mark to the product.
Emergency Use Authorization Section 564 of the Federal Food, Drug, and Cosmetics Act ("FDCA") authorizes FDA to issue EUAs to permit the introduction into interstate commerce of unapproved MCMs, or approved MCMs for unapproved uses, in the context of certain potential or actual public health emergencies. Several actions are required to trigger FDA’s authority to issue EUAs.
Emergency Use Authorization Section 564 of the Federal Food, Drug, and Cosmetics Act ("FDCA") authorizes FDA to issue an Emergency Use Authorization ("EUA") to permit the introduction into interstate commerce of unapproved MCMs, or approved MCMs for unapproved uses, in the context of certain potential or actual public health emergencies.
Food and Drug Administration (FDA) Nonprescription Drugs Advisory Committee and the Anesthetic and Analgesic Drug Products Advisory Committee unanimously voted in favor (a total of 19 votes) that the benefit-risk profile of NARCAN® (naloxone HCl) Nasal Spray was supportive of its use as a nonprescription opioid overdose reversal agent.
Food and Drug Administration (FDA) Nonprescription Drugs Advisory Committee and the Anesthetic and Analgesic Drug Products Advisory Committee unanimously voted in favor (a total of 19 votes) that the benefit-risk profile of NARCAN ® Nasal Spray was supportive of its use as a nonprescription opioid overdose reversal agent. 8 NARCAN ® Nasal Spray was approved as an OTC medication on March 29, 2023.
Data Privacy Laws A number of states in the U.S. have passed or introduced bills, which, if passed, impose operational requirements on U.S. companies similar to the requirements reflected in the General Data Protection Regulation ("GDPR") in the EU.
Data Privacy Laws A number of states in the U.S. have passed or introduced bills, which, if passed, impose operational privacy requirements on U.S. companies similar to the requirements reflected in the General Data Protection Regulation ("GDPR") in the EU ("State Consumer Privacy Laws"). As of December 31, 2023, State Consumer Privacy Laws were effective in five U.S. states.
In 2022, we submitted a supplemental New Drug Application (sNDA) requesting that FDA switch Narcan (4mg) from a prescription drug to an over-the-counter medicine. The PDUFA goal date for that application is March 29, 2023. On February, 15, 2023, the U.S.
In 2022, we submitted a supplemental New Drug Application (sNDA) requesting that FDA switch NARCAN ® Nasal Spray (4mg) from a prescription drug to an over-the-counter medicine. On February 15, 2023, the U.S.
United States, Canada * TROBIGARD ® is not approved by the U.S. Food and Drug Administration ("FDA") . It is only approved by the Belgian Health Authority but has been procured by various government entities for emergency preparedness purposes. 5 Description of MCM Products ACAM2000® .
United States, Canada *TROBIGARD ® is not approved by the FDA. It is only approved by the Belgian Health Authority but has been procured by various government entities for emergency preparedness purposes. 5 Description of MCM Products ACAM2000 ® (Smallpox (Vaccinia) Vaccine, Live).
It is also licensed in Canada pursuant to Health Canada’s Extraordinary Use New Drugs regulations. BAT antitoxin is the only heptavalent botulism antitoxin available in the U.S. and Canada for treating naturally occurring botulism in adults or pediatric patients. Botulinum toxin is a nerve toxin produced by the bacterium Clostridium botulinum that causes botulism, a serious paralytic illness.
BAT ® antitoxin is the only heptavalent botulism antitoxin available in the U.S. and Canada for treating naturally occurring botulism in adults or pediatric patients. Botulinum toxin is a nerve toxin produced by the bacterium Clostridium botulinum that causes botulism, a serious paralytic illness.
In the fourth quarter of 2022, we filed our supplemental New Drug Application (“sNDA”) for NARCAN® (naloxone HCI) Nasal Spray, as an over-the-counter ("OTC") emergency treatment for known or suspected opioid overdose. The FDA accepted the application and also granted Priority Review. If approved, it would be the first 4 mg naloxone nasal spray available OTC in the U.S.
In the fourth quarter of 2022, we filed our supplemental New Drug Application (“sNDA”) for NARCAN ® Nasal Spray, as an over-the-counter ("OTC") emergency treatment for known or suspected opioid overdose. The FDA accepted the application and also granted Priority Review. On February 15, 2023, the U.S.
BAT antitoxin is the only equine plasma antitoxin licensed by the FDA and Health Canada for the treatment of all seven botulinum neurotoxin serotypes. BAT antitoxin is licensed by the FDA for the treatment of symptomatic botulism following suspected or documented exposure to botulinum neurotoxin serotypes A, B, C, D, E, F or G in adults and pediatric patients.
BAT ® antitoxin is licensed by the FDA for the treatment of symptomatic botulism following suspected or documented exposure to botulinum neurotoxin serotypes A, B, C, D, E, F or G in adults and pediatric patients. It is also licensed in Canada pursuant to Health Canada’s Extraordinary Use New Drugs regulations.
Products Segment Government - MCM Products Our Government - MCM business focuses primarily on procurement of MCM products and procured product candidates by domestic and international government customers, with an emphasis on the United States ("U.S.") Government ("USG"), which is our largest customer.
Services pursuant to the TSA remain ongoing. For additional information, refer to Note 3, "Divestiture." MCM Products Segment Our Government - MCM business focuses primarily on procurement of MCM products and procured product candidates by domestic and international government customers, with an emphasis on the United States ("U.S.") Government ("USG"), which is our largest customer.
We continue to provide employees access to country-specific salary range information so that they may have greater visibility to their current compensation levels and more context as they explore developing their careers through new roles within our company.
We continue to provide employees access to country-specific salary range information so that they may have greater visibility to their current compensation levels and more context as they explore developing their careers within our company. Diversity, Equity and Inclusion Commitment Diversity, equity and inclusion ("DEI") is integral to how we operate and our success.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThere are a number of risks related to our strategic acquisitions, divestitures and collaborations that could impact our business, financial condition, operating results and cash flows, including: • Our failure to successfully integrate acquired businesses and/or assets into our operations and our ability to realize the benefits of such acquisitions. • Our failure to consummate the sale of our travel health business to Bavarian Nordic and to realize the anticipated benefits of the transaction.
Biggest changeThere are a number of risks related to our strategic acquisitions, divestitures and collaborations that could impact our business, financial condition, operating results and cash flows, including: • We may not be successful in identifying, structuring or acquiring businesses and products to drive our growth. • Our failure to successfully integrate acquired businesses and/or assets into our operations and our ability to realize the benefits of such acquisitions. • Our failure to realize the full benefits from the sale of our travel health business to Bavarian Nordic. 27 There are a number of risks associated with our common stock, including, but not limited to: • Our business or our share price could be negatively affected as a result of the actions of stockholders. • The price of our common stock has been and remains subject to extreme volatility.
Government contracts customarily contain provisions that give the USG substantial rights and remedies, many of which are not typically found in commercial contracts, including provisions that allow the USG to: • terminate existing contracts, in whole or in part, for any reason; 29 • unilaterally reduce or modify contracts or subcontracts; • decline, in whole or in part, to exercise an option to purchase product under a procurement contract or to fund additional development under a development contract; • decline to renew a procurement contract; • claim certain rights to facilities or to products, including intellectual property, developed under the contract; • require repayment of contract funds spent on construction of facilities in the event of contract default; • take actions that result in a longer development timeline than expected; • direct the course of a development program in a manner not chosen by the government contractor; • suspend or debar the contractor from doing business with the government or a specific government agency; • pursue civil or criminal remedies under acts such as the False Claims Act and False Statements Act; and • control or prohibit the export of products.
Government contracts customarily contain provisions that give the USG substantial rights and remedies, many of which are not typically found in commercial contracts, including provisions that allow the USG to: • terminate existing contracts, in whole or in part, for any reason; • unilaterally reduce or modify contracts or subcontracts; • decline, in whole or in part, to exercise an option to purchase product under a procurement contract or to fund additional development under a development contract; 29 • decline to renew a procurement contract; • claim certain rights to facilities or to products, including intellectual property, developed under the contract; • require repayment of contract funds spent on construction of facilities in the event of contract default; • take actions that result in a longer development timeline than expected; • direct the course of a development program in a manner not chosen by the government contractor; • suspend or debar the contractor from doing business with the government or a specific government agency; • pursue civil or criminal remedies under acts such as the False Claims Act and False Statements Act; and • control or prohibit the export of products.
These issues and events, which could delay or prevent our ability to receive regulatory approval for a product candidate, include, among others: • our inability to manufacture sufficient quantities for use in trials; • the unavailability or variability in the number and types of subjects for each study; • safety issues or inconclusive or incomplete testing, trial or study results; • drug immunogenicity; • lack of efficacy of product candidates during the trials; • government or regulatory restrictions or delays; and • greater than anticipated costs of trials .
These issues and events, which could delay or prevent our ability to receive regulatory approval for a product candidate, include, among others: • our inability to manufacture sufficient quantities for use in trials; • the unavailability or variability in the number and types of subjects for each study; • safety issues or inconclusive or incomplete testing, trial or study results; • drug immunogenicity; • lack of efficacy of product candidates during trials; • government or regulatory restrictions or delays; and • greater than anticipated costs of trials .
Under the FDCA, the PHSA, and FDA’s implementation of those statutes, a company must support an NDA or BLA with substantial evidence that the product candidate is effective and evidence that the product is safe.
Under the FDCA, the PHSA, and the FDA’s implementation of those statutes, a company must support an NDA or BLA with substantial evidence that the product candidate is effective and evidence that the product is safe.
Ordinarily, FDA requires data from adequate and well-controlled clinical trials, including Phase 3 trials conducted in patients with the disease or condition being targeted, to demonstrate that a drug meets the statutory standards for approval.
Ordinarily, the FDA requires data from adequate and well-controlled clinical trials, including Phase 3 trials conducted in patients with the disease or condition being targeted, to demonstrate that a drug meets the statutory standards for approval.
These marketing submissions must also be supported by appropriate data, including in many cases clinical data. Likewise, changes to our combination products, including changes to the device constituent part, may also require a new submission to, and approval from, FDA.
These marketing submissions must also be supported by appropriate data, including in many cases clinical data. Likewise, changes to our combination products, including changes to the device constituent part, may also require a new submission to, and approval from, the FDA.
If the FDA or any foreign regulatory authority determines that any of our communications constitute pre-approval promotion or promotion of an off-label use, FDA could request that we modify our promotional materials, issue an untitled letter or warning letter, or subject us to regulatory or enforcement actions, including injunction, seizure, civil fine or criminal penalties.
If the FDA or any foreign regulatory authority determines that any of our communications constitute pre-approval promotion or promotion of an off-label use, the FDA could request that we modify our promotional materials, issue an untitled letter or warning letter, or subject us to regulatory or enforcement actions, including injunction, seizure, civil fine or criminal penalties.
Once marketing authorization has been granted, we and our business partners will remain subject to ongoing regulatory oversight of our medical products, including with respect to labeling; safety surveillance and reporting; registration and listing requirements; cGMP and QSR requirements relating to manufacturing, quality control, quality assurance, and corresponding maintenance of records and documents; advertising and promotional activities; requirements regarding the distribution of samples to physicians and related recordkeeping; medical device design, development and manufacturing.
Once marketing authorization has been granted, we and our business partners will remain subject to ongoing regulatory oversight of our medical products, including with respect to labeling; safety surveillance and reporting; registration and listing requirements; CGMP and QSR requirements relating to manufacturing, quality control, quality assurance, and corresponding maintenance of records and documents; advertising and promotional activities; requirements regarding the distribution of samples to physicians and related recordkeeping; and medical device design, development and manufacturing.
For example, there have been several recent Congressional inquiries and has been proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and 36 reform government program reimbursement methodologies for drug products.
For example, there have been several recent Congressional inquiries and has been proposed and enacted 36 federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.
At least six states (Vermont, Colorado, Florida, Maine, New Mexico, and New Hampshire) have passed laws allowing for the importation of drugs from Canada, and at least three states (Colorado, Florida, and New Mexico) have submitted SIPs to FDA for review and approval.
At least six states (Vermont, Colorado, Florida, Maine, New Mexico, and New Hampshire) have passed laws allowing for the importation of drugs from Canada, and at least three states (Colorado, Florida, and New Mexico) have submitted SIPs to the FDA for review and approval.
If we fail to comply with foreign, federal, state and local health care laws, including fraud and abuse and health information privacy and security laws, and antitrust laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.
If we fail to comply with foreign, federal, state and local health care laws, including fraud and abuse laws, health information privacy and security laws, and antitrust laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.
The term “remuneration” has been interpreted broadly and may constrain our marketing practices, educational programs, pricing policies and relationships with health care providers or other entities, among other activities; 37 • the federal False Claims Act imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, false or fraudulent claims for payment by a federal health care program or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government, with potential liability, including mandatory treble damages and significant per-claim penalties. • the U.S. federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any health care benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statement, in connection with the delivery of, or payment for, health care benefits, items or services.
The term “remuneration” has been interpreted broadly and may constrain our marketing practices, educational programs, pricing policies and relationships with health care providers or other entities, among other activities; • the federal False Claims Act imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, false or fraudulent 37 claims for payment by a federal health care program or making a false statement or record material to payment of a false claim or avoiding, decreasing or concealing an obligation to pay money to the federal government, with potential liability, including mandatory treble damages and significant per-claim penalties. • the U.S. federal Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any health care benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statement, in connection with the delivery of, or payment for, health care benefits, items or services.
In the United States, the Secretary of HHS has the authority to contract to purchase MCMs for the SNS prior to FDA approval of the relevant MCM in specified circumstances. FDA also has the authority to permit the emergency use of medical products that have not yet been approved by the FDA under an EUA.
In the United States, the Secretary of HHS has the authority to contract to purchase MCMs for the SNS prior to FDA approval of the relevant MCM in specified circumstances. The FDA also has the authority to permit the emergency use of medical products that have not yet been approved by the FDA under an EUA.
Alternatively, FDA may determine that there is no reasonable expectation that the costs of research and development of the drug can be recovered from sales of the drug in the United States. The FDA may conclude that the condition or disease for which we seek orphan drug designation does not meet this standard.
Alternatively, the FDA may determine that there is no reasonable expectation that the costs of research and development of the drug can be recovered from sales of the drug in the United States. The FDA may conclude that the condition or disease for which we seek orphan drug designation does not meet this standard.
Debt financing can have significant adverse consequences for our business, including: • requiring us to dedicate a substantial portion of cash flows from operations to payment on our debt, which would reduce available funds for other corporate initiatives; • increasing the amount of interest that we have to pay on debt with variable interest rates, if market rates of interest increase, to the extent we are unable to offset such risk through our hedging instruments; • subjecting us, as under our Senior Secured Credit Facilities and the indenture governing the Senior Unsecured Notes, to restrictive covenants that reduce our ability to take certain corporate actions, acquire companies, products or technology, or obtain further debt financing; • requiring us to pledge our assets as collateral, which could limit our ability to obtain additional debt financing; • limiting our flexibility in planning for, or reacting to, general adverse economic and industry conditions; and • placing us at a competitive disadvantage compared to our competitors that have less debt, better debt servicing options or stronger debt servicing capacity.
Debt financing can have significant adverse consequences for our business, including: 48 • requiring us to dedicate a substantial portion of cash flows from operations to payment on our debt, which would reduce available funds for other corporate initiatives; • increasing the amount of interest that we have to pay on debt with variable interest rates, if market rates of interest increase, to the extent we are unable to offset such risk through our hedging instruments; • subjecting us, as under our Senior Secured Credit Facilities and the indenture governing the Senior Unsecured Notes, to restrictive covenants that reduce our ability to take certain corporate actions, acquire companies, products or technology, or obtain further debt financing; • requiring us to pledge our assets as collateral, which could limit our ability to obtain additional debt financing; • limiting our flexibility in planning for, or reacting to, general adverse economic and industry conditions; and • placing us at a competitive disadvantage compared to our competitors that have less debt, better debt servicing options or stronger debt servicing capacity.
For all FDA-regulated products, if the FDA finds that a manufacturer has failed to comply with applicable laws and regulations, or that a product is ineffective or poses an unreasonable health risk, it can institute or seek a wide variety of enforcement actions and other remedies, including but not limited to: • restrictions on such products, manufacturers or manufacturing processes; • restrictions on the labeling or marketing of a product; • restrictions on distribution or use of a product; 35 • requirements to conduct post-marketing studies or clinical trials; • warning letters or untitled letters; • refusal to approve pending applications or supplements to approved applications that are submitted; • delay in or refusal to approve/clear/authorize pending PMA applications, 510(k) premarket submissions, or de novo authorization requests; • fines, restitution or disgorgement of profits or revenues; • suspension or withdrawal of marketing approvals; • refusal to permit the import or export of our products; • product seizure; and • injunctions or the imposition of civil or criminal penalties.
For all FDA-regulated products, if the FDA finds that a manufacturer has failed to comply with applicable laws and regulations, or that a product is ineffective or poses an unreasonable health risk, it can institute or seek a wide variety of enforcement actions and other remedies, including but not limited to: • restrictions on such products, manufacturers or manufacturing processes; • restrictions on the labeling or marketing of a product; • restrictions on distribution or use of a product; • requirements to conduct post-marketing studies or clinical trials; • warning letters or untitled letters; • refusal to approve pending applications or supplements to approved applications that are submitted; • delay in or refusal to approve, clear or authorize pending PMA applications, 510(k) premarket submissions, or de novo authorization requests; • fines, restitution or disgorgement of profits or revenues; • suspension or withdrawal of marketing approvals; • refusal to permit the import or export of our products; • product seizure; and • injunctions or the imposition of civil or criminal penalties.
If, in connection with any future inspection, regulatory authorities find that we are not in substantial compliance with all applicable requirements, or if they are not satisfied with the corrective actions we take, our regulators may undertake enforcement action against us, which may include: • warning letters, untitled letters, and other communications; • product seizure or withdrawal of the product from the market; • restrictions on the marketing or manufacturing of a product; • suspension or withdrawal of regulatory approvals or refusal to approve pending applications or other marketing submissions, or supplements to approved applications; 41 • fines or disgorgement of profits or revenue; and • injunctions or the imposition of civil or criminal penalties.
If, in connection with any future inspection, regulatory authorities find that we are not in substantial compliance with all applicable requirements, or if they are not satisfied with the corrective actions we take, our regulators may undertake enforcement action against us, which may include: • warning letters, untitled letters, and other communications; • product seizure or withdrawal of the product from the market; • restrictions on the marketing or manufacturing of a product; • suspension or withdrawal of regulatory approvals or refusal to approve pending applications or other marketing submissions, or supplements to approved applications; • fines or disgorgement of profits or revenue; and • injunctions or the imposition of civil or criminal penalties.
In addition, even after a product receives orphan drug exclusivity, the FDA can subsequently approve the same product for the same condition if the FDA or such authorities conclude that the later product is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care; if the FDA determines that the holder of orphan drug exclusivity cannot ensure the availability of sufficient quantities of the product to meet the needs of patients with the rare disease or condition; or if the holder of orphan drug exclusivity consents to the approval of such subsequent product.
In addition, even after a product receives orphan drug exclusivity, the FDA can subsequently approve the same product for the same indication if the FDA or such authorities conclude that the later product is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care; if the FDA determines that the holder of orphan drug exclusivity cannot ensure the availability of sufficient quantities of the product to meet the needs of patients with the rare disease or condition; or if the holder of orphan drug exclusivity consents to the approval of such subsequent product.
If our employees or agents engage in marketing of an unapproved/uncleared product or the unapproved/uncleared use of an approved/cleared product, we could be subject to civil or criminal investigations and monetary and injunctive penalties, which could adversely impact our ability to conduct business in certain markets, negatively affect our business, financial condition, operating results and cash flows, and damage our reputation.
If our employees or agents engage in marketing of an unapproved/uncleared product or the unapproved/uncleared use of an approved/cleared product, we could be subject 41 to civil or criminal investigations and monetary and injunctive penalties, which could adversely impact our ability to conduct business in certain markets, negatively affect our business, financial condition, operating results and cash flows, and damage our reputation.
Even if we are able to proceed under the Animal Rule, product development can take a considerable amount of time, and the FDA may decide that our data are insufficient to 34 support approval and require additional pre-clinical, clinical or other studies, refuse to approve our products, or place restrictions on our ability to commercialize those products.
Even if we are able to proceed under the Animal Rule, product development can take a considerable amount of time, and the FDA may decide that our data are insufficient to support approval and require additional pre-clinical, clinical or other studies, refuse to approve our products, or place restrictions on our ability to commercialize those products.
If we are unable to satisfy USG 31 requirements for the release of our products or product candidates, our ability to supply such products and product candidates to authorized buyers would be impaired until such time as we become able to meet such requirements, which could materially harm our future business, financial condition, operating results and cash flows.
If we are unable to satisfy USG requirements for the release of our products or product candidates, our ability to supply such products and product candidates to authorized buyers would be impaired until such time as we become able to meet such requirements, which could materially harm our future business, financial condition, operating results and cash flows.
For example, despite liability protections applicable to claims arising under U.S. law and resulting from the use of certain unlicensed or unauthorized MCMs, such as a declaration issued under the PREP Act, plaintiffs still may bring lawsuits, among other things, that their claims are not barred under the PREP Act.
For example, despite liability protections applicable to claims arising under U.S. law and resulting from the use of certain unlicensed or unauthorized MCMs, such as a declaration issued under the PREP Act, plaintiffs still may bring lawsuits alleging, among other things, that their claims are not barred under the PREP Act.
If our operations are found to be in violation of any of these laws, we may be subject to significant civil, criminal and administrative penalties, damages, fines, individual imprisonment, integrity obligations, exclusion from government funded health care programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations.
If our operations are found to be in violation of any of these laws, we may be subject to significant civil, criminal and administrative penalties, damages, fines, individual imprisonment, integrity obligations, exclusion from government funded health care programs, such as Medicare and 38 Medicaid, and the curtailment or restructuring of our operations.
If we are found to have knowingly submitted false AMP or “best price” information to the government, we may be liable for civil monetary penalties per item of false information. Any refusal of a request for information or knowing provision of false 39 information in connection with an AMP survey verification would also subject us to civil monetary penalties.
If we are found to have knowingly submitted false AMP or “best price” information to the government, we may be liable for civil monetary penalties per item of false information. Any refusal of a request for information or knowing provision of false information in connection with an AMP survey verification would also subject us to civil monetary penalties.
Our reliance on these service providers 46 does not relieve us of our regulatory responsibilities, including ensuring that our trials are conducted in accordance with good clinical practice regulations and the plan and protocols contained in the relevant regulatory application. In addition, these organizations may not complete these activities on our anticipated or desired timeframe.
Our reliance on these service providers does not relieve us of our regulatory responsibilities, including ensuring that our trials are conducted in accordance with good clinical practice regulations and the plan and protocols contained in the relevant regulatory application. In addition, these organizations may not complete these activities on our anticipated or desired timeframe.
We are unable to sell any products and product candidates that fail to satisfy such testing specifications. For example, we must provide the FDA with the results of certain tests, including potency tests, before certain lots are released for sale. Potency testing of each applicable lot is performed against qualified control lots that we maintain.
We are unable to sell any products and product candidates that fail to satisfy certain testing specifications. For example, we must provide the FDA with the results of certain tests, including potency tests, before certain lots are released for sale. Potency testing of each applicable lot is performed against qualified control lots that we maintain.
Our decisions to allocate our R&D, management and financial resources toward particular product candidates or therapeutic areas may not lead to the development of viable commercial products and may divert resources from better business opportunities. Similarly, our decisions to 33 delay or terminate product development programs could also cause us to miss valuable opportunities.
Our decisions to allocate our R&D, management and financial resources toward particular product candidates or therapeutic areas may not lead to the development of viable commercial products and may divert resources from better business opportunities. Similarly, our decisions to delay or terminate product development programs could also cause us to miss valuable opportunities.
There is also a risk that our communications with governments about our unapproved/uncleared products, such as in the procurement context, could be considered promotion of an unapproved/uncleared product or unapproved/uncleared use of an approved product. Therefore, there is a risk that we could be subject to enforcement actions if found to be in violation of such laws or regulations.
There is also a risk that our communications with governments about our unapproved/uncleared products, such as in the procurement context, could be considered promotion of an unapproved/uncleared product or unapproved/uncleared use of an approved 40 product. Therefore, there is a risk that we could be subject to enforcement actions if found to be in violation of such laws or regulations.
Although we maintain and follow strict procedures to ensure the maximum possible integrity for our federal pricing calculations, the process for making the required calculations is complex, involves some subjective judgments and the risk of errors always exists, which creates the potential for exposure under the false claims laws.
Although we maintain and follow strict procedures to ensure the maximum possible integrity for our federal pricing calculations, the process for making the required calculations is complex, involves some subjective judgments and the risk of 39 errors always exists, which creates the potential for exposure under the false claims laws.
Any reduction in demand for our products or reduction or loss of development funding for our products or product candidates in favor of a competing product could lead to a loss of market share for our products and cause reduced revenues, margins and levels of profitability for us, which 43 could adversely affect our business, financial condition, operating results and cash flows.
Any reduction in demand for our products or reduction or loss of development funding for our products or product candidates in favor of a competing product could lead to a loss of market share for our products and cause reduced revenues, margins and levels of profitability for us, which could adversely affect our business, financial condition, operating results and cash flows.
Moreover, an adverse outcome, or the imposition of penalties or sanctions for failing to comply with the fraud and abuse and antitrust laws, could adversely affect us and may have a material adverse effect on our business, results of operations, financial condition and cash flows.
Moreover, an adverse outcome, or the imposition of penalties or sanctions for failing to comply with applicable fraud and abuse and antitrust laws, could adversely affect us and may have a material adverse effect on our business, results of operations, financial condition and cash flows.
Claims or losses in excess of our product liability insurance coverage could have a material adverse effect on our business, financial condition, operating results and cash flows. 48 FINANCIAL RISKS We have incurred significant indebtedness in connection with our acquisitions and servicing our debt requires a significant amount of cash.
Claims or losses in excess of our product liability insurance coverage could have a material adverse effect on our business, financial condition, operating results and cash flows. FINANCIAL RISKS We have incurred significant indebtedness in connection with our acquisitions and servicing our debt requires a significant amount of cash.
Nevertheless, government bodies, such 40 as U.S. federal entities other than HHS, state and local governments within the United States, and foreign governments have sought and may further seek to procure our MCM product candidates that are not yet approved.
Nevertheless, government bodies, such as U.S. federal entities other than HHS, state and local governments within the United States, and foreign governments have sought and may further seek to procure our MCM product candidates that are not yet approved.
Many countries, including the United States, restrict the export or import of products to or from certain countries through, for example, bans, sanction programs, and boycotts. Such restrictions may preclude us from supplying products in certain countries, which could limit our growth potential.
Many countries, including the United States, restrict the export or import of products to or from certain countries through, for example, bans, sanction programs, and boycotts. Such restrictions may preclude us from supplying products in certain countries, 42 which could limit our growth potential.
In addition to our product sales, our ability to generate revenue is dependent on a number of factors, including the success of our development programs, the USG's interest in providing development funding for or procuring certain of our product candidates, and the commercial viability of our acquired or developed product candidates.
In addition to our product sales, our ability to generate revenue is dependent on a number of factors, including the success of our development programs, the USG's interest in providing development funding for or procuring certain of our product candidates, and the commercial viability of our acquired or developed 32 product candidates.
Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed, or to conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product.
Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed, or to conditions of approval, or contain 34 requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product.
Violations of the FDCA and other statutes, including the False Claims Act, relating to the promotion and advertising of prescription products may lead to investigations and enforcement actions alleging violations of federal and state health care fraud and abuse laws, as well as state consumer protection laws.
Violations of the FDCA and other statutes, including the False Claims 35 Act, relating to the promotion and advertising of prescription products may lead to investigations and enforcement actions alleging violations of federal and state health care fraud and abuse laws, as well as state consumer protection laws.
Laws and regulations governing international operations may preclude us from developing, manufacturing and selling certain products outside of the United States, require us to develop and implement costly 42 compliance programs, and if violated, can lead to financial and other impacts.
Laws and regulations governing international operations may preclude us from developing, manufacturing and selling certain products outside of the United States, require us to develop and implement costly compliance programs, and if violated, can lead to financial and other impacts.
Additionally, the FDA may revoke orphan drug designation if the FDA determines that the request for designation contained an untrue statement of material fact, omitted material information, or the FDA subsequently finds that the drug in fact had not been eligible for orphan drug designation at the time of submission of the request for designation.
Additionally, the FDA may revoke orphan drug designation if the FDA determines that the request for designation contained an untrue statement of material fact, omitted 44 material information, or the FDA subsequently finds that the drug in fact had not been eligible for orphan drug designation at the time of submission of the request for designation.
An EUA terminates when the EUA is revoked or the emergency declaration underlying the EUA terminates. An EUA is not a long-term alternative to obtaining FDA approval, licensure, clearance, or other marketing authorization for a product. An EUA has not been granted for TROBIGARD or AV7909.
An EUA terminates when the EUA is revoked or the emergency declaration underlying the EUA terminates. An EUA is not a long-term alternative to obtaining FDA approval, licensure, clearance, or other marketing authorization for a product. An EUA has not been granted for TROBIGARD ® .
Any publicity campaigns or other negative publicity may adversely affect the degree of market 44 acceptance of our MCMs and thereby limit the demand for our products, which would adversely affect our business, financial condition, operating results and cash flows.
Any publicity campaigns or other negative publicity may adversely affect the degree of market acceptance of our MCMs and thereby limit the demand for our products, which would adversely affect our business, financial condition, operating results and cash flows.
There are a number of competitive and political risks that could impact our business, financial condition, operating results and cash flows, including: • Development and commercialization of pharmaceutical products are subject to evolving private and public sector competition. • NARCAN Nasal Spray is currently subject to branded and generic competition in the U.S. and may be subject to branded and generic competition in Canada.
There are a number of competitive and political risks that could impact our business, financial condition, operating results and cash flows, including: • Development and commercialization of pharmaceutical products are subject to evolving private and public sector competition. • NARCAN ® (naloxone HCl) Nasal Spray is currently subject to generic and branded competition in the U.S. and may be subject to branded and generic competition in Canada.
The number of claims, legal proceedings and government investigations involving us, and the alleged magnitude of such claims, proceedings and government investigations, has generally increased over time and may continue to increase.
The number of claims, legal proceedings and government investigations involving us, and the alleged magnitude of such claims, proceedings and government investigations, has generally increased over time and may continue to 46 increase.
Because we currently do not pay dividends, investors will benefit from an investment in our common stock only if it appreciates in value. We currently do not pay dividends on our common stock.
Because we currently do not pay dividends, investors will benefit from an investment in our common stock only if it appreciates in value. 54 We currently do not pay dividends on our common stock.
In recent years, some shareholders have placed increasing pressure on publicly traded companies in our industry and others to effect changes to corporate governance practices, executive compensation practices, social and environmental practices and to undertake certain corporate actions. This may be true even if they only hold a minority of shares.
In recent years, some stockholders have placed increasing pressure on publicly traded companies in our industry and others to effect changes to corporate governance practices, executive compensation practices, social and environmental practices and to undertake certain corporate actions. This may be true even if they only hold a minority of shares.
Biologic Products in our current pipeline include AV7909, BioThrax, and ACAM2000. If a biosimilar version of one of our Biologic Products were approved, it could have a material adverse effect on the sales and gross profits of the affected Biologic Product and could adversely affect our business, financial condition, operating results and cash flows.
Biologic Products in our current pipeline include CYFENDUS ® , BioThrax ® , and ACAM2000 ® . If a biosimilar version of one of our Biologic Products were approved, it could have a material adverse effect on the sales and gross profits of the affected Biologic Product and could adversely affect our business, financial condition, operating results and cash flows.
If priorities for the Strategic National Stockpile ("SNS") change generally, or as a result of the conclusion of the USG’s audit of the SNS, or with respect to the level of procurement of our anthrax vaccines, funding to procure future doses of AV7909 or BioThrax vaccines may be delayed, limited or not available, BARDA may never complete the anticipated full transition to stockpiling AV7909 in support of anthrax preparedness, and our future business, financial condition, operating results and cash flows could be materially harmed.
If priorities for the Strategic National Stockpile (“SNS”) change generally, or as a result of the conclusion of the USG’s audit of the SNS, or with respect to the level of procurement of our anthrax vaccines, funding to procure future doses of CYFENDUS ® or BioThrax ® vaccines may be delayed, limited or not available, BARDA may never complete the anticipated full transition to stockpiling CYFENDUS ® in support of anthrax preparedness, and our future business, financial condition, operating results and cash flows could be materially harmed.
There are a number of manufacturing risks that could impact our business, financial condition, operating results and cash flows, including: • Our inability to maintain quality and manufacturing compliance at our manufacturing facilities for our products and for product candidates for our CDMO customers. • Disruption at, damage to or destruction of our development and/or manufacturing facilities may impede our ability to manufacture our products, as well as deliver our CDMO services. • Our operations, including our use of hazardous materials, chemicals, bacteria and viruses expose us to significant potential liabilities.
There are a number of manufacturing risks that could impact our business, financial condition, operating results and cash flows, including: • Our inability to maintain quality and manufacturing compliance at our manufacturing facilities for our products and for product candidates for our Bioservices customers. • Disruption at, damage to or destruction of our development and/or manufacturing facilities may impede our ability to manufacture our products, as well as deliver our bioservices. • Our operations, including our use of hazardous materials, chemicals, bacteria and viruses expose us to significant potential liabilities.
For drugs products, we must promote the product in a manner consistent with the full prescribing information or, for 510(k) cleared devices, consistent with the cleared indication. The FDA, DOJ, and OIG impose stringent restrictions on manufacturers’ communications regarding unapproved/uncleared products and unapproved/uncleared uses of approved/cleared products.
For drug products, we must promote the product in a manner consistent with the full prescribing information or, for 510(k) cleared devices, consistent with the cleared indication. The FDA, DOJ, and OIG impose stringent restrictions on manufacturers’ communications regarding unapproved/uncleared products and unapproved/uncleared uses of approved/cleared products.
The commercial success of our product candidates can depend on many factors, including accomplishing the following in an economical manner: • successful development, formulation and cGMP or QSR scale-up of manufacturing that meets FDA and/or foreign regulatory requirements; 32 • successful program partnering; • successful completion of clinical or non-clinical development; • receipt of marketing approvals, clearances, or other authorizations from the FDA and equivalent foreign regulatory authorities; • establishment of commercial manufacturing processes and product supply arrangements; • training of a commercial sales force for the product; • successful registration and maintenance of relevant patent and/or other proprietary protection; • competitive pricing and market access; and • acceptance of the product by potential government and other customers.
The commercial success of our product candidates can depend on many factors, including accomplishing the following in an economical manner: • successful development, formulation and CGMP or Quality System Regulation ("QSR") scale-up of manufacturing that meets FDA and/or foreign regulatory requirements; • successful program partnering; • successful completion of clinical or non-clinical development; • receipt of marketing approvals, clearances, or other authorizations from the FDA and equivalent foreign regulatory authorities; • establishment of commercial manufacturing processes and product supply arrangements; • training of a commercial sales force for the product; • successful registration and maintenance of relevant patent and/or other proprietary protection; • competitive pricing and market access; and • acceptance of the product by potential government and other customers.
Additionally, in October 2020, HHS and the FDA published a final rule allowing states and other entities to develop a Section 804 Importation Program ("SIP"), to import certain prescription drugs from Canada into the United States. The final rule is currently the subject of ongoing litigation.
Additionally, in October 2020, HHS and the FDA published a final rule allowing states and other entities to develop a Section 804 Importation Program (“SIP”), to import certain prescription drugs from Canada into the United States. The final rule is currently the subject of ongoing litigation.
Among other things, HITECH makes HIPAA's security standards directly applicable to “business associates,” or independent contractors or agents of covered entities that create, receive or obtain protected health information in connection with providing a service for or on behalf of a covered entity; • the Physician Payments Sunshine Act and its implementing regulations require certain manufacturers of drugs, biologics, medical devices and medical supplies for which payment is available under Medicare, Medicaid or the Centers for Medicare & Medicaid Services (CMS) to report certain payments and transfers of value made to U.S. physicians, other healthcare providers and teaching hospitals, and ownership or investment interests held by physicians, other healthcare providers and their immediate family members; and • state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, which may apply to items or services reimbursed by any third-party payor, including commercial insurers; state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts; state, local and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, obtain pharmaceutical agent licensure, and/or otherwise restrict payments that may be made to health care providers and entities; and state, local and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to health care providers or entities, or marketing expenditures.
Among other things, HITECH makes HIPAA's security standards directly applicable to “business associates,” or independent contractors or agents of covered entities that create, receive or obtain protected health information in connection with providing a service for or on behalf of a covered entity; • the Physician Payments Sunshine Act and its implementing regulations require certain manufacturers of drugs, biologics, medical devices and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report certain payments and transfers of value made to U.S. physicians, prescribers and teaching hospitals, as well as ownership or investment interests held by physicians, and their immediate family members; and • state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, which may apply to items or services reimbursed by any third-party payor, including commercial insurers; state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts; state, local and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, obtain pharmaceutical agent licensure, and/or otherwise restrict payments that may be made to health care providers and entities; and state, local and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to health care providers or entities, or marketing expenditures.
Debt financing can have significant adverse consequences for our business, including: • the level, timing and cost of product sales and CDMO services; • the extent to which we acquire or invest in and integrate companies, businesses, products or technologies; • the acquisition of new facilities and capital improvements to new or existing facilities; • the payment obligations under our indebtedness; • the scope, progress, results and costs of our development activities; • our ability to obtain funding from collaborative partners, government entities and non- 49 governmental organizations for our development programs; • the extent to which we repurchase common stock under any future share repurchase program; and • the costs of commercialization activities, including product marketing, sales and distribution.
Debt financing can have significant adverse consequences for our business, including: • the level, timing and cost of product sales and bioservices; • the extent to which we acquire or invest in and integrate companies, businesses, products or technologies; • the acquisition of new facilities and capital improvements to new or existing facilities; • the payment obligations under our indebtedness; • the scope, progress, results and costs of our development activities; • our ability to obtain funding from collaborative partners, government entities and non-governmental organizations for our development programs; • the extent to which we repurchase common stock under any future share repurchase program; and • the costs of commercialization activities, including product marketing, sales and distribution.
To be eligible to have our products paid for with federal funds under the Medicaid and Medicare Part B programs and purchased by certain federal agencies and grantees, we also must participate in the DVA FSS pricing program.
To be eligible to have our products paid for or reimbursed with federal funds under the Medicaid and Medicare Part B programs and purchased by certain federal agencies and grantees, we also must participate in the DVA FSS pricing program.
For example, we rely on a single-source supplier to provide us with Alhydrogel in sufficient quantities to meet our needs to manufacture AV7909 and BioThrax vaccines and the specialty plasma in our hyperimmune specialty plasma products and certain ingredients for the ACAM2000 vaccine.
For example, we rely on a single-source supplier to provide us with Alhydrogel ® in sufficient quantities to meet our needs to manufacture CYFENDUS ® and BioThrax ® vaccines and the specialty plasma in our hyperimmune specialty plasma products and certain ingredients for the ACAM2000 ® vaccine.
Accordingly, Section 203 may discourage, delay or prevent a change in control of us. Our Board of Directors may implement a new stockholder rights plan without stockholder approval, which could prevent a change in control of us in instances in which some stockholders may believe a change in control is in their best interests.
Accordingly, Section 203 may discourage, delay or prevent a change in control of us. Our board of directors may adopt a new stockholder rights plan without stockholder approval, which could prevent a change in control of us in instances in which some stockholders may believe a change in control is in their best interests.
Problems may arise during the production of our products and product candidates, as well as those we produce for our CDMO customers, due to the complexity of the processes involved in their development, manufacturing and shipment or other factors.
Problems may arise during the production of our products and product candidates, as well as those we produce for our Bioservices customers, due to the complexity of the processes involved in their development, manufacturing and shipment or other factors.
We actively seek to protect intellectual property rights related to our Company's assets, including patent rights, trademark rights, trade secrets and proprietary confidential information, through defense and enforcement of existing rights and pursuit of protection on new and arising innovations.
We actively seek to protect intellectual property rights related to our Company's assets, including patent rights, trademark rights, trade secrets, know-how and proprietary confidential information, through defense and enforcement of existing rights and pursuit of protection on new and arising innovations.
We also rely on single-source suppliers for the materials necessary to produce NARCAN, such as the naloxone active pharmaceutical ingredient and other excipients, along with the vial, stopper and device. Where a particular single-source supply relationship is terminated, we may not be able to establish additional or replacement suppliers for certain components or materials quickly.
We also rely on single-source suppliers for the materials necessary to produce NARCAN ® (naloxone HCl) Nasal Spray, such as the naloxone active pharmaceutical ingredient and other excipients, along with the vial, stopper and device. Where a particular single-source supply relationship is terminated, we may not be able to establish additional or replacement suppliers for certain components or materials quickly.
Over its lifetime, a USG procurement or development program, such as for AV7909 under our development and procurement contract with BARDA, may be implemented through the award of many different individual contracts and subcontracts.
Over its lifetime, a USG procurement or development program, such as for CYFENDUS ® under our development and procurement contract with BARDA, may be implemented through the award of many different individual contracts and subcontracts.
Our Board of Directors may implement a stockholder rights plan without stockholder approval, which may have anti-takeover effects, potentially preventing a change in control of us in instances in which some stockholders may believe a change in control is in their best interests.
Our board of directors may adopt a stockholder rights plan without stockholder approval, which may have anti-takeover effects, potentially preventing a change in control of us in instances in which some stockholders may believe a change in control is in their best interests.
If our capital resources are insufficient to meet our future capital requirements, we will need to finance our cash needs through public or private equity or debt offerings, bank loans or collaboration and licensing arrangements. In August 2021, we filed an automatic shelf registration statement, which immediately became effective under SEC rules.
If our capital resources are insufficient to meet our future capital requirements, we will need to finance our cash needs through public or private equity or debt offerings, bank loans or collaboration and licensing arrangements. In August 2021, we filed a shelf registration statement, which immediately became effective under SEC rules.
We manage our interest rate risk in part by entering into interest rate swaps with a number of counterparties to swap a portion of our indebtedness that is based on variable interest rates to a fixed rate.
From time to time, we manage our interest rate risk in part by entering into interest rate swaps with a number of counterparties to swap a portion of our indebtedness that is based on variable interest rates to a fixed rate.
Department of Agriculture and the DoD, as well as regulatory authorities in Canada and Switzerland. PRODUCT DEVELOPMENT AND COMMERCIALIZATION RISKS The product candidates that we work on for our CDMO customers may not be safe or effective and even if they are, we may be unable to manufacture sufficient quantities to meet demand.
Department of Agriculture and the DoD, as well as regulatory authorities in Canada. PRODUCT DEVELOPMENT AND COMMERCIALIZATION RISKS The product candidates that we work on for our Bioservices customers may not be safe or effective and even if they are, we may be unable to manufacture sufficient quantities to meet demand.
The USG may choose not to award us future contracts for either the development of our new product candidates or for the procurement of our existing MCM products and may instead award such contracts to our competitors.
The USG may choose not to award us future contracts for either the development of our new product candidates or for the procurement of our existing MCM and other commercialized products and may instead award such contracts to our competitors.
If levels of government expenditures and authorizations for public health countermeasure preparedness decrease or shift to programs in areas where we do not offer products or are not developing product candidates, or if the USG otherwise declines to exercise its options under our existing contracts, our revenues would suffer, as well as 28 our business, financial condition, operating results and cash flows.
If levels of government expenditures and authorizations for public health countermeasure preparedness decrease or shift to programs in areas where we do not offer products or are not developing product candidates, or if the USG otherwise declines to exercise its options under this contract or our other existing contracts, our revenues would suffer, as well as our business, financial condition, operating results and cash flows.
As of January 1, 2021, the Medicines and Healthcare products Regulatory Agency (the "MHRA"), became responsible for supervising medicines and medical devices in Great Britain, comprising England, Scotland and Wales under domestic law, whereas Northern Ireland will continue to be subject to European Union rules under the Northern Ireland Protocol.
As of January 1, 2021, the Medicines and Healthcare products Regulatory Agency (the "MHRA"), became responsible for supervising medicines and medical devices in Great Britain, comprising England, Scotland and Wales under domestic law, whereas Northern Ireland continues to be subject to European Union rules under the Northern Ireland Protocol.
Disruption at, damage to or destruction of our manufacturing facilities could impede our ability to manufacture anthrax vaccines, our ACAM2000 vaccine or our other products or product candidates, as well as impact the delivery of CDMO services, which would harm our business, financial condition, operating results and cash flows.
Disruption at, damage to or destruction of, our manufacturing facilities could impede our ability to manufacture anthrax vaccines, our ACAM2000 ® vaccine or our other products or product candidates, as well as impact the delivery of bioservices, which would harm our business, financial condition, operating results and cash flows.
There is a high rate of failure inherent in the medical product development process, and potential products that appear promising at early stages of development may fail for a number of reasons, and positive results from pre-clinical studies may not be predictive of similar results in human clinical trials.
There is a high rate of failure inherent in the medical product development process, and product candidates that appear promising at early stages of development may fail for a number of reasons, and positive results from pre-clinical studies may not be predictive of similar results in human clinical trials.
Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different products can be approved for the same condition.
Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different products can be approved for the same indication.
The MHRA will rely on the Human Medicines Regulations 2012 (SI 2012/1916) (as amended) (the "HMR"), as the basis for regulating medicines. The HMR has incorporated into the domestic law of the body of European Union law instruments governing medicinal products that pre-existed prior to the United Kingdom's withdrawal from the European Union.
The MHRA relies on the Human Medicines Regulations 2012 (SI 2012/1916) (as amended) (the "HMR"), as the basis for regulating medicines. The HMR has incorporated into the domestic law of the body of European Union law instruments governing medicinal products that pre-existed prior to the United Kingdom's withdrawal from the European Union.
These provisions include: • the classification of our directors; • limitations on changing the size of our Board of Directors; • limitations on the removal of directors; • limitations on filling vacancies on the Board of Directors; • advance notice requirements for stockholder nominations of candidates for election to the Board of Directors and other proposals; • the inability of stockholders to act by written consent; • the inability of stockholders to call special meetings; and • the ability of our Board of Directors to designate the terms of and issue a new series of preferred stock without stockholder approval.
These provisions include: • the classification of our directors; • limitations on changing the size of our board of directors; • limitations on the removal of directors; • limitations on filling vacancies on the board of directors; 53 • advance notice requirements for stockholder nominations of candidates for election to the board of directors and other proposals to be voted on at meetings of stockholders; • the inability of stockholders to act by written consent; • the inability of stockholders to call special meetings; and • the ability of our board of directors to designate the terms of and issue a new series of preferred stock without stockholder approval.
As part of recent state settlements, including in Florida, Texas, Rhode Island, and West Virginia, Teva has agreed to supply Medication- Assisted Treatment (MAT) and generic opioid overdose reversal agents, like naloxone, to states at no cost in lieu of additional monetary compensation. The terms of these product donation agreements stretch 10 to 15 years.
As part of state settlements, including in Florida, Texas, Rhode Island, and West Virginia, Teva has agreed to supply Medication- Assisted Treatment 43 (“MAT”) and generic opioid overdose reversal agents, like naloxone, to states at no cost in lieu of additional monetary compensation. The terms of these product donation agreements stretch 10 to 15 years.
Any delay in or inability to complete our trials could delay or prevent the development, approval and commercialization of our product candidates. In certain cases, government entities and NGOs conduct studies of our product candidates, and we may seek to rely on these studies in applying for marketing approval for certain of our product candidates.
Any delay in or inability to complete our trials could delay or prevent the development, approval and commercialization of our product candidates. In certain cases, government entities and non-governmental organizations ("NGOs") conduct studies of our product candidates, and we may seek to rely on these studies in applying for marketing approval for certain of our product candidates.
Regulatory action, including the issuance of Forms FDA 483 and warning letters can also have an impact. Additionally, if changes are made to the manufacturing process, we may be required to provide the FDA with pre-clinical and clinical data showing the comparable identity, strength, quality, purity or potency of any impacted products before and after the changes.
Regulatory action, including the issuance of Form FDA 483s and warning letters can also have an impact. Additionally, if changes are made to the manufacturing process, we may be required to provide the FDA with pre-clinical and clinical data showing the comparable identity, strength, quality, purity or potency of any impacted products before and after the changes.
Under certain and narrow circumstances, MCMs may be procured by government entities prior to approval by the FDA or other regulatory authorities, a practice which we follow in connection with certain MCMs, including AV7909 and TROBIGARD in the United States.
Under certain and narrow circumstances, MCMs may be procured by government entities prior to approval by the FDA or other regulatory authorities, a practice which we follow in connection with certain MCMs, including TROBIGARD ® (and CYFENDUS ® , prior to its approval by the FDA) in the United States.
Obtaining, maintaining and defending our intellectual property rights in the United States and other countries remains a critical component of the development and commercialization of our Company's assets.
Obtaining, maintaining and enforcing our intellectual property rights in the United States and other countries remains a critical component of the development and commercialization of our Company's assets.
Certain payments to hospital employees and other health care professionals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions. Many countries, including the U.S., also have various lobbying laws and regulations governing the conduct of individuals and companies who interact with government officials.
Certain payments to hospital employees and other health care professionals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions. Many countries, including the United States, also have various lobbying laws and regulations governing the conduct of individuals and companies who interact with government officials.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK Our business or our share price could be negatively affected as a result of the actions of shareholders.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK Our business or our share price could be negatively affected as a result of the actions of stockholders.
Responding to challenges from shareholders, such as proxy contests, media campaigns or other public or private means, could be costly and time consuming and could have an adverse effect on our reputation and divert the attention and resources of management and our board, which could have an adverse effect on our 53 business and operational results.
Responding to challenges from stockholders, such as proxy contests, media campaigns or other public or private means, could be costly and time consuming and could have an adverse effect on our reputation and divert the attention and resources of management and our board of directors, which could have an adverse effect on our business and operational results.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePrincipal locations include: Location Use Approximate square feet Owned/leased Operating Segment Lansing, Michigan Manufacturing operations, office and laboratory space. 336,000 Owned Products & Services Winnipeg, Manitoba, Canada Manufacturing operations, office and laboratory space. 315,000 (Owned); 15,800 (Leased) Owned/Leased Products & Services Gaithersburg, Maryland Laboratory space, office space and rental real estate. 173,000 Owned Products & Services Canton, Massachusetts Manufacturing operations and warehouse space. 122,508 (Owned); 27,000 (Leased) Owned/Leased Products & Services Baltimore, Maryland (Bayview) Manufacturing facilities, office and laboratory space. 112,000 Owned Products & Services Elkridge, Maryland Warehouse space. 103,182 Leased Products & Services Baltimore, Maryland (Camden) Manufacturing facilities, office and laboratory space. 86,900 (Owned); 41,000 (Leased) Owned/Leased Products & Services Rockville, Maryland Manufacturing facilities, office and warehouse space. 84,295 Owned Products & Services Bern, Switzerland Manufacturing operations, office and laboratory space. 81,000 Owned Products San Diego, California Manufacturing facilities and office space. 66,012 Leased Products Each property is considered to be in good condition, adequate for its purpose, and suitably utilized according to the individual nature and requirements of the relevant operations.
Biggest changePrincipal locations include: Location Use Approximate square feet Owned/leased Operating Segment Lansing, Michigan Manufacturing operations, office and laboratory space. 336,000 Owned Products & Services Winnipeg, Manitoba, Canada Manufacturing operations, office and laboratory space. 160,000 (Owned); 15,800 (Leased) Owned/Leased Products & Services Gaithersburg, Maryland Laboratory space, office space and rental real estate. 173,000 (Owned); 11,547 (Leased) Owned/Leased Products & Services Canton, Massachusetts Manufacturing operations and warehouse space. 122,508 (Owned); 27,000 (Leased) Owned/Leased Products & Services Baltimore, Maryland (Bayview) Manufacturing facilities, office and laboratory space. 112,000 Owned Products & Services Elkridge, Maryland Warehouse space. 103,182 Leased Products & Services Baltimore, Maryland (Camden) Manufacturing facilities, office and laboratory space. 86,900 (Owned); 41,000 (Leased) Owned/Leased Products & Services Rockville, Maryland Manufacturing facilities, office and warehouse space. 84,295 Owned Products & Services San Diego, California Office space. 18,012 Leased Products Each property is considered to be in good condition, adequate for its purpose, and suitably utilized according to the individual nature and requirements of the relevant operations.
Our policy is to improve and replace property as considered appropriate to meet the needs of the individual operations. ITEM 3. LEGAL PROCEEDINGS See Item 8 of Part II, “Financial Statements and Supplemental Data — Notes to consolidated financial statements" — Note 17 ”Litigation." ITEM 4. MINE SAFETY DISCLOSURES Not applicable PART II
Our policy is to improve and replace property as considered appropriate to meet the needs of the individual operations. ITEM 3. LEGAL PROCEEDINGS See Item 8 of Part II, “Financial Statements and Supplemental Data — Notes to Consolidated Financial Statements" — Note 19, "Litigation." ITEM 4. MINE SAFETY DISCLOSURES Not applicable PART II 58
ITEM 2. PROPERTIES We own and lease approximately 1.6 million square feet of building space for development and manufacturing, laboratories, fill/finish facility services, offices and warehouse space for the conduct of our businesses at 25 locations in North America and Europe. Properties that have been leased expire on various dates between 2023 and 2034.
ITEM 2. PROPERTIES We own and lease approximately 1.4 million square feet of building space for development and manufacturing, laboratories, fill/finish facility services, offices and warehouse space for the conduct of our businesses at 16 locations in North America and Europe. Properties that have been leased expire on various dates between 2024 and 2034.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMarket Performance Company / Index 2017 2018 2019 2020 2021 2022 Emergent BioSolutions Inc. $ 100.00 $ 127.57 $ 116.10 $ 192.81 $ 93.54 $ 25.41 S&P 500 $ 100.00 $ 95.62 $ 125.72 $ 148.85 $ 191.58 $ 156.89 Russell 2000 $ 100.00 $ 88.99 $ 111.70 $ 134.00 $ 153.85 $ 122.41 S&P SmallCap 600 $ 100.00 $ 91.52 $ 112.37 $ 125.05 $ 158.59 $ 133.06 S&P Pharmaceuticals $ 100.00 $ 108.09 $ 124.40 $ 133.76 $ 168.21 $ 182.43 S&P Biotechnology $ 100.00 $ 94.50 $ 110.67 $ 120.22 $ 134.80 $ 155.89 ITEM 6. [RESERVED] 57
Biggest changeMarket Performance Company / Index 2018 2019 2020 2021 2022 2023 Emergent BioSolutions Inc. $ 100.00 $ 91.01 $ 151.15 $ 73.33 $ 19.92 $ 4.05 S&P 500 $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 Russell 2000 $ 100.00 $ 125.52 $ 150.58 $ 172.90 $ 137.56 $ 160.85 S&P SmallCap 600 $ 100.00 $ 122.78 $ 136.64 $ 173.29 $ 145.39 $ 168.73 S&P Pharmaceuticals $ 100.00 $ 115.09 $ 123.75 $ 155.62 $ 168.77 $ 169.33 S&P Biotechnology $ 100.00 $ 117.11 $ 127.21 $ 142.64 $ 164.95 $ 171.29 ITEM 6. [RESERVED] 59
The annual changes for the five-year period shown on the graph are based on the assumptions that $100 had been invested in Emergent BioSolutions Inc.'s common stock and each index on December 31, 2017, all fiscal years end December 31 st and all dividends were reinvested.
The annual changes for the five-year period shown on the graph are based on the assumptions that $100 had been invested in Emergent BioSolutions Inc.'s common stock and each index on December 31, 2018, all fiscal years end December 31 st and all dividends were reinvested.
The remaining information required by Item 5 is hereby incorporated by reference from our Definitive Proxy Statement relating to our 2023 Annual Meeting of the Stockholders, to be filed with the SEC within 120 days following the end of our fiscal year.
The remaining information required by Item 5 is hereby incorporated by reference from our Definitive Proxy Statement relating to our 2024 Annual Meeting of the Stockholders, to be filed with the SEC within 120 days following the end of our fiscal year.
T his number does not include beneficial owners whose shares are held by nominees in street name. 56 Dividend Policy We have not declared or paid any cash dividends on our common stock since becoming a publicly traded company in November 2006. We currently have no plans to pay dividends.
Dividend Policy We have not declared or paid any cash dividends on our common stock since becoming a publicly traded company in November 2006. We currently have no plans to pay dividends.
As of February 22, 2023, the closing price per share of our common stock on the New York Stock Exchange was $13.98 and we had 18 holders of record of our common stock.
As of February 28, 2024, the closing price per share of our common stock on the New York Stock Exchange was $3.20 and we had 19 holders of record of our common stock. This number does not include beneficial owners whose shares are held by nominees in street name.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFor additional information on our uncertain tax positions and income tax expense, please see Note 13, "Income taxes" to our consolidated financial statements included in this report. 61 RESULTS OF OPERATIONS Consolidated and Segment Operating Results: Year ended December 31, (in millions) 2022 2021 $ Change % Change Revenues: Product sales, net: Nasal Naloxone Products $ 373.7 $ 434.3 $ (60.6) (14) % Anthrax Vaccines 274.3 259.8 14.5 6 % ACAM2000 63.4 206.5 (143.1) (69) % TEMBEXA 117.6 — — NM Other product sales 137.2 123.3 13.9 11 % Total product sales, net 966.2 1,023.9 (57.7) (6) % Services: CDMO - Services 108.4 334.9 (226.5) (68) % CDMO - Leases 4.9 299.7 (294.8) (98) % Total services revenues 113.3 634.6 (521.3) (82) % Contracts and grants 41.4 134.2 (92.8) (69) % Total revenues 1,120.9 1,792.7 (671.8) (37) % Operating expenses: Cost of product sales 424.1 382.0 42.1 11 % Cost of services 269.6 375.5 (105.9) (28) % Research and development 193.0 234.0 (41.0) (18) % Selling, general and administrative 340.3 348.4 (8.1) (2) % Goodwill impairment 6.7 41.7 (35.0) (84) % Amortization of intangible assets 59.9 58.5 1.4 2 % Total operating expenses 1,293.6 1,440.1 (146.5) (10) % Income (loss) from operations (172.7) 352.6 (525.3) NM Other income (expense): Interest expense (37.3) (34.5) (2.8) 8 % Other, net (11.7) (3.7) (8.0) NM Total other income (expense), net (49.0) (38.2) (10.8) 28 % Income (loss) before income taxes (221.7) 314.4 (536.1) NM Income tax provision 2.1 83.5 (81.4) (97) % Net income (loss) $ (223.8) $ 230.9 $ (454.7) NM NM - Not meaningful 62 Year Ended December 31, 2022 Compared with Year Ended December 31, 2021 Revenues and gross margin Total revenues decreased $671.8 million to $1.1 billion in 2022.
Biggest changeThese decreases were partially offset by increases in revenue on the BARDA contract for the procurement of Ebanga TM , which was awarded in the current period, and TEMBEXA ® . 72 Year Ended December 31, 2022 Compared with Year Ended December 31, 2021 RESULTS OF OPERATIONS Consolidated and Segment Operating Results: Year Ended December 31, (in millions, except %) 2022 2021 $ Change % Change Revenues: Commercial Product sales, net: NARCAN ® $ 373.7 $ 434.4 $ (60.7) (14) % Other Commercial Products 12.9 3.6 9.3 NM Total Commercial Product sales, net 386.6 438.0 (51.4) (12) % MCM Product sales, net: Anthrax MCM $ 290.1 $ 262.6 $ 27.5 10 % Smallpox MCM 234.4 266.7 (32.3) (12) % Other Products 55.1 56.6 (1.5) (3) % Total MCM product sales, net 579.6 585.9 (6.3) (1) % Services: Bioservices - Services 105.0 310.3 (205.3) (66) % Bioservices - Leases 4.9 305.2 (300.3) (98) % Total Services revenues 109.9 615.5 (505.6) (82) % Contracts and grants 41.4 134.2 (92.8) (69) % Total revenues $ 1,117.5 $ 1,773.6 $ (656.1) (37) % Operating expenses: Cost of Commercial product sales 160.3 187.2 (26.9) (14) % Cost of MCM product sales 264.3 195.4 68.9 35 % Cost of Bioservices 268.5 365.5 (97.0) (27) % Research and development 188.3 235.2 (46.9) (20) % Selling, general and administrative 339.5 348.7 (9.2) (3) % Goodwill impairment 6.7 41.7 (35.0) (84) % Amortization of intangible assets 59.9 58.5 1.4 2 % Total operating expenses 1,287.5 1,432.2 (144.7) (10) % Income (loss) from operations (170.0) 341.4 (511.4) NM Other income (expense): Interest expense (37.3) (34.5) (2.8) 8 % Other, net (11.7) (3.7) (8.0) NM Total other income (expense), net (49.0) (38.2) (10.8) 28 % Income (loss) before income taxes (219.0) 303.2 (522.2) NM Income tax provision (benefit) (7.4) 83.7 (91.1) NM Net income (loss) $ (211.6) $ 219.5 $ (431.1) NM NM - Not meaningful 73 Year Ended December 31, 2022 Compared with Year Ended December 31, 2021 Revenues and gross margin Year Ended December 31, (dollars in millions) 2022 2021 % Change Total revenues $ 1,117.5 $ 1,773.6 (37) % Contracts and grants 41.4 134.2 (69) % Total segment revenues (1) $ 1,076.1 $ 1,639.4 (34) % Cost of Commercial Product sales 160.3 187.2 (14) % Cost of MCM Product sales 264.3 195.4 35 % Cost of Bioservices 268.5 365.5 (27) % Total cost of sales or services 693.1 748.1 (7) % Total segment gross margin (1) $ 383.0 $ 891.3 (57) % Total segment gross margin % (1) 36 % 54 % (1) We define total segment revenues, which is a non-GAAP financial measure, as our total revenues, less contracts and grants revenue, which is also equal to the sum of the revenues of our operating segments.
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K.
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K (the "Annual Report").
Actual results may differ from these estimates under different assumptions or conditions. Management believes the Company’s critical accounting policies and estimates are those related to revenue recognition, contingent consideration, and income taxes. Revenue Recognition The Company's product sales are recognized at a point-in-time generally upon delivery to the customer, depending on the performance obligation which the Company is delivering.
Actual results may differ from these estimates under different assumptions or conditions. 83 Management believes the Company’s critical accounting policies and estimates are those related to revenue recognition, contingent consideration, and income taxes. Revenue Recognition The Company's product sales are recognized at a point-in-time generally upon delivery to the customer, depending on the performance obligation which the Company is delivering.
Revenues from sales of products is recognized to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with such variable consideration is subsequently resolved. Provisions for variable consideration revenues from sales of products are recorded at the net sales price.
Revenues from sales of MCM products is recognized to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with such variable consideration is subsequently resolved. Provisions for variable consideration revenues from sales of products are recorded at the net sales price.
Public or bank debt financing, if available, may involve agreements that include covenants, like those contained in our 3.875% Senior Unsecured Notes due 2028 (the "Senior Unsecured Notes") and the Senior Secured Credit Facilities, which could limit or restrict our ability to take specific actions, such as incurring additional debt, making capital expenditures, pursuing acquisition opportunities, buying back shares or declaring dividends.
Public or bank debt financing, if available, may involve agreements that include covenants, like those contained in our 3.875% Senior Unsecured Notes due 2028 (the “Senior Unsecured Notes”) and the Senior Secured Credit Facilities, which could limit or restrict our ability to take specific actions, such as incurring additional debt, making capital expenditures, pursuing acquisition opportunities, buying back shares or declaring dividends.
(“Emergent,” the “Company,” “we,” “us,” and “our”) is a global life sciences company focused on providing innovative preparedness and response solutions addressing accidental, deliberate, and naturally occurring Public Health Threats ("PHTs"). The Company's solutions include a product portfolio, a product development portfolio, and a contract development and manufacturing ("CDMO") services portfolio.
(“Emergent,” the “Company,” “we,” “us,” and “our”) is a global life sciences company focused on providing innovative preparedness and response solutions addressing accidental, deliberate, and naturally occurring Public Health Threats (“PHTs”). The Company's solutions include a product portfolio, a product development portfolio, and a contract development and manufacturing services ("CDMO") portfolio.
The decrease was primarily due to BARDA's completion of the CIADM agreement in November 2021 as well as decreases in development activities associated with various other externally funded research and development projects, most notably the Company's COVID-HIG therapeutic product candidate, as well as decreases in development activities for AV7909.
The decrease was primarily due to BARDA's completion of the CIADM agreement in November 2021 as well as decreases in development activities associated with various other externally funded research and development projects, most notably the Company's COVID-HIG therapeutic product candidate, as well as decreases in development activities for CYFENDUS ® .
Revenues are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with customers. The Company makes estimates of the transaction price, including variable consideration that is subject to a constraint.
MCM product revenues are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with customers. The Company makes estimates of the transaction price, including variable consideration that is subject to a constraint.
The increase in anthrax vaccine sales was primarily due to an increase in the number of doses sold as a result of the timing of deliveries to the USG in 2022 as compared with 2021, as well as an increase in sales to non-USG customers at a higher price per unit in 2022.
The increase was primarily due to an increase in the number of doses sold as a result of the timing of deliveries to the USG in 2022 as compared with 2021, as well as an increase in sales to non-USG customers at a higher price per unit in 2022.
For additional information on the Company's contingent consideration, refer to Note 6, "Fair value measurements" in the Notes to Consolidated Financial Statements in Part II, Item 8. of this Form 10-K.
For additional information on the Company's contingent 84 consideration, refer to Note 8, "Fair value measurements" in the Notes to Consolidated Financial Statements in Part II, Item 8. of this Form 10-K.
Our R&D expenses consist primarily of: ▪ personnel-related expenses; ▪ fees to professional service providers for, among other things, analytical testing, independent monitoring or other administration of our clinical trials and obtaining and evaluating data from our clinical trials and non-clinical studies; ▪ costs of CDMO services for our clinical trial material; and ▪ costs of materials intended for use and used in clinical trials and R&D.
Our R&D expenses consist primarily of: ▪ personnel-related expenses; ▪ fees to professional service providers for, among other things, analytical testing, independent monitoring or other administration of our clinical trials and obtaining and evaluating data from our clinical trials and non-clinical studies; ▪ costs of Bioservices for our clinical trial material; and ▪ costs of materials intended for use and used in clinical trials and R&D.
Other costs include facility costs not otherwise included in cost of product sales and CDMO services or R&D expense. Income Taxes Uncertainty in income taxes is accounted for using a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
Other costs include facility costs not otherwise included in cost of product sales and Bioservices or R&D expense. Income Taxes Uncertainty in income taxes is accounted for using a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
The decrease was largely due to the non-cash write-off in 2021 of $38.0 million of the contract asset associated with the completion of the BARDA COVID-19 Development Public Private Partnership, coupled with a decrease in spending for the Company's COVID-19 therapeutic product candidates along with a number of other developmental activities, partially offset by an increase in costs associated with the Company's Phase 3 study of our chikungunya virus-like particle vaccine candidate and pre-launch inventory related to CGRD-001.
The decrease was primarily due to the non-cash write-off in 2021 of $38.0 million of the contract asset associated with the completion of the BARDA COVID-19 Development Public Private Partnership (as defined below), coupled with a decrease in spending for the Company's COVID-19 therapeutic product candidates along with a number of other developmental activities, partially offset by an increase in costs associated with the Company's Phase 3 study of our chikungunya virus-like particle vaccine candidate and pre-launch inventory related to CGRD-001.
The Company's estimates and assumptions may differ from tax benefits ultimately realized. For additional information on the Company's income taxes, refer to Note 13, "Income taxes" in the Notes to Consolidated Financial Statements in Part II, Item 8. of this Form 10-K. 71
The Company's estimates and assumptions may differ from tax benefits ultimately realized. For additional information on the Company's income taxes, refer to Note 15, "Income taxes" in the Notes to Consolidated Financial Statements in Part II, Item 8. of this Form 10-K.
You should carefully review the "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" sections of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. BUSINESS OVERVIEW Emergent BioSolutions Inc.
You should carefully review the "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" sections of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. BUSINESS OVERVIEW Emergent BioSolutions Inc.
These actions, in combination with other cost reduction initiatives, are expected to result in annualized savings of over $60 million when fully implemented.
These actions, in combination with other cost reduction initiatives, are expected to result in annualized savings of over $160 million when fully implemented.
Additionally, we have a development pipeline consisting of a diversified mix of both pre-clinical and clinical stage product candidates. Finally, we have a fully integrated portfolio of CDMO services. Our CDMO service offerings cover development services, drug substance manufacturing and drug product manufacturing and packaging. The Company structures the business with a focus on markets and customers.
Additionally, we have a development pipeline consisting of a diversified mix of both pre-clinical and clinical stage product candidates. Finally, we have a fully integrated portfolio of CDMO services which cover development services, drug substance manufacturing and drug product manufacturing and packaging. The Company structures the business with a focus on markets and customers.
The decrease was primarily due to $201.4 million less of combined revenue related to reduced production activities at the Company's Bayview facility as a result of a halt in manufacturing under the Janssen contract in first quarter of 2022 and the cessation of manufacturing activities under the AstraZeneca contract which occurred in 2021.
The decrease was primarily due to $170.9 million less of combined revenue related to reduced production activities at the Company's Bayview facility as a result of a halt in manufacturing under the Janssen contract in first quarter of 2022 and the cessation of manufacturing activities under the AstraZeneca contract which occurred in 2021.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and financing, includes forward-looking statements that involve risks and uncertainties.
Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and financing, includes forward-looking statements that involve risks and uncertainties.
Management may evaluate the mitigating effect of its plans to determine if it is probable that (1) the plans will be effectively implemented within one year after the date the financial statements are issued, and (2) when implemented, the plans will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.
Management has evaluated the mitigating effects of its plans to determine if it is probable that (1) the plans will be effectively implemented within one year after the date the financial statements are issued, and (2) when implemented, the plans will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.
We also generate revenue from our CDMO services, which is based on our established development and manufacturing infrastructure, technology platforms and expertise. Our services include a fully integrated molecule-to-market CDMO services business offering across development services, drug substance and drug product for small to large pharmaceutical and biotechnology industry and government agencies/non-governmental organizations.
We also generate revenue for our Services segment through our Bioservices portfolio, which is based on our established development and manufacturing infrastructure, technology platforms and expertise. Our services include a fully integrated molecule-to-market bioservices business offering across development services, drug substance and drug product for small to large pharmaceutical and biotechnology industry and government agencies/non-governmental organizations.
Selling, general and administrative costs as a percentage of total revenue increased 10.9% to 30.4% for the year ended December 31, 2022. The increase was due to a decrease in revenues during the period, partially offset by a decrease in selling, general and administrative expenses during the period.
Selling, general and administrative costs as a percentage of total revenue increased 11 percentage points to 30% for the year ended December 31, 2022. The increase was due to a decrease in revenues during the period, partially offset by a decrease in selling, general and administrative expenses during the period.
Economic conditions, including market volatility and adverse impacts on financial markets as a result of the COVID-19 pandemic, may make it more difficult to obtain financing on attractive terms, or at all. Any new debt funding, if available, may be on terms less favorable to us than our Senior Secured Credit Facilities or the Senior Unsecured Notes.
Economic conditions, including market volatility and adverse impacts on financial markets, may make it more difficult to obtain financing on attractive terms, or at all. Any new debt funding, if available, may be on terms less favorable to us than our Senior Secured Credit Facilities or the Senior Unsecured Notes.
Unused Credit Capacity Available room under the Revolving Credit Facility as of December 31, 2022 and December 31, 2021 was: December 31, (in millions) 2022 2021 Total Capacity $ 600.0 $ 600.0 Less: Outstanding Letters of Credit 1.3 2.3 Outstanding Indebtedness 598.0 — Unused Capacity $ 0.7 $ 597.7 Contractual Obligations As of December 31, 2022, the Company has contractual obligations related to lease arrangements and purchase commitments.
Unused Credit Capacity Available room under the Revolving Credit Facility as of December 31, 2023 and December 31, 2022 was: December 31, (in millions) 2023 2022 Total Capacity $ 300.0 $ 600.0 Less: Outstanding Letters of Credit 0.5 1.3 Outstanding Indebtedness 219.2 598.0 Unused Capacity $ 80.3 $ 0.7 Contractual Obligations As of December 31, 2023, the Company has contractual obligations related to lease arrangements and purchase commitments.
The effective annual tax rate decreased largely due to an increase in nondeductible expenses, specifically the impact of a valuation allowance charge in the U.S., state and foreign jurisdictions, a charge due the Company’s indefinite reinvestment assertion, GILTI, and other permanent items.
The effective annual tax rate decreased largely due to an increase in nondeductible expenses, specifically the impact of a valuation allowance charge in the U.S., state and foreign jurisdictions, goodwill impairment charge, GILTI, and other permanent items.
The decrease was primarily due to reduced production activities across our CDMO network, as well as a $41.5 million inventory write-off related to the Bayview facility in the second quarter of 2021, partially offset by increased costs at our Camden facility for additional investments in quality enhancement and improvement initiatives. Services gross margin percentage decreased to (138)% in 2022.
The decrease was primarily due to reduced production activities across our Bioservices network, as well as a $41.5 million inventory write-off related to the Bayview facility in the second quarter of 2021, partially offset by increased costs at our Camden facility for additional investments in quality enhancement and improvement initiatives.
These services, which we refer to as "molecule-to-market" offerings, employ diverse technology platforms (mammalian, microbial, viral and plasma) across a network of nine geographically distinct development and manufacturing sites operated by us for our internal products and pipeline candidates and third-party CDMO services.
These services, which we refer to as “molecule-to-market” offerings, employ diverse technology platforms (mammalian, microbial, viral and plasma) across a network of eight geographically distinct development and manufacturing sites operated by us for our internal products and pipeline candidates and third-party Bioservices.
Debt As of December 31, 2022, the Company has $1.4 billion of fixed and variable rate debt with varying maturities, with $957.3 million payable within 12 months (see Note 8, "Debt" in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K).
Debt As of December 31, 2023, the Company has $868.4 million of fixed and variable rate debt with varying maturities, with $418.4 million payable within 12 months (see Note 10, "Debt" in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K).
For the year ended December 31, 2022, income tax expense totaled $2.1 million. For every 1% change in the 2022 effective rate, income tax expense would have changed by approximately $2.2 million.
For the year ended December 31, 2023, income tax expense totaled $29.3 million. For every 1% change in the 2023 effective rate, income tax expense would have changed by approximately $7.3 million.
Adjusted gross margin percentage decreased 1% to 62% in 2022. Adjusted gross margin excludes the impact of non-cash items related to the changes in the fair value of contingent consideration of $2.6 million and the inventory step-up provision TEMBEXA inventory of $51.4 million.
The 2022 MCM Product Segment Adjusted Gross Margin excludes the impact of non-cash items related to the changes in the fair value of contingent consideration of $2.6 million and the inventory step-up provision of $51.4 million.
Selling, General and Administrative Expenses Selling, general and administrative expenses decreased $8.1 million to $340.3 million in 2022. The decrease was due to lower professional services and marketing expenses partially offset by increased employee costs, primarily due to increased travel costs.
Selling, General and Administrative Expenses Selling, general and administrative expenses decreased $9.2 million, or 3%, to $339.5 million in 2022. The decrease was primarily due to lower professional services and marketing expenses partially offset by increased employee costs, primarily due to increased travel costs.
Additionally, the decrease also reflects reduced production at the Camden facility. The decreases were slightly offset by an increase in manufacturing activities at the Company's Winnipeg facility. 65 CDMO lease revenue decreased $294.8 million to $4.9 million in 2022.
Additionally, the decrease also reflects reduced production at the Camden facility. The decreases were slightly offset by an increase in manufacturing activities at the Company's Winnipeg facility. Bioservices lease revenue decreased $300.3 million, or 98%, to $4.9 million in 2022.
The decrease was primarily due to a reduction of $237.6 million associated with the completion of our COVID-19 development public-private partnership with BARDA in November 2021 and reduced lease revenues under the Janssen contract of $58.1 million. Cost of Services and Gross Margin Cost of Services decreased $105.9 million, or 28%, to $269.6 million in 2022.
The decrease was primarily due to a reduction of $243.1 million associated with the completion of our COVID-19 development public-private partnership with BARDA in November 2021 and reduced lease revenues under the Janssen contract of $58.1 million. Cost of Services and Gross Margin Cost of services decreased $97.0 million, or 27%, to $268.5 million in 2022.
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 and the USG purchases and Company delivery of orders that follow. 64 ACAM2000 ACAM2000 sales decreased $143.1 million to $63.4 million in 2022.
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 and the USG purchases and Company delivery of orders that follow. Smallpox MCM Smallpox MCM sales decreased $32.3 million, or 12%, to $234.4 million in 2022.
In addition, we may receive milestone payments of up to $80.0 million related to the development of CHIKV VLP and receipt of marketing approval and authorization in the U.S. and Europe, and sales-based milestones payments of up to $30.0 million based on aggregate net sales of Vaxchora and Vivotif in calendar year 2026.
Bavarian Nordic may also be required to pay milestone payments of up to $80.0 million related to the development of CHIKV VLP and receipt of marketing approval and authorization in the U.S. and Europe, and earn-out payments of up to $30.0 million based on aggregate net sales of Vaxchora and Vivotif in calendar year 2026.
There is the risk of future impairments in our reporting units as any further deterioration in their performance compared to forecast, changes in order volumes or delivery schedules for major customers, as well as any changes in economic forecasts and expected recovery in the biopharmaceutical industry, may require the Company to complete additional impairment tests in future quarters and could result in the reporting unit’s fair value falling below carrying value in subsequent quarters.
In 2022, as part of its annual goodwill impairment testing, the Company recognized a $6.7 million impairment charge to goodwill in the Bioservices reporting unit, reducing the goodwill balance to zero as of December 31, 2022. 74 There is the risk of future impairments in our reporting units as any further deterioration in their performance compared to forecast, changes in order volumes or delivery schedules for major customers, as well as any changes in economic forecasts and expected recovery in the biopharmaceutical industry, may require the Company to complete additional impairment tests in future quarters and could result in the reporting unit’s fair value falling below carrying value in subsequent quarters.
Services - The primary expenses that we incur to deliver our CDMO services consist of fixed and variable costs, including personnel, equipment, and facilities costs. Our manufacturing process includes the production of bulk material 60 and performing drug product work for containment and distribution of biological products.
For our commercial sales, other associated expenses include sales-based royalties, shipping, and logistics. Services - The primary expenses that we incur to deliver our Bioservices offerings consist of fixed and variable costs, including personnel, equipment, and facilities costs. Our manufacturing process includes the production of bulk material and performing drug product work for containment and distribution of biological products.
If we raise funds by issuing equity securities, our stockholders may experience dilution.
If we raise funds by issuing equity securities, including through the ATM Program, our stockholders may experience dilution.
Our future capital requirements will depend on many factors, including (but not limited to): • the level, timing and cost of product sales and CDMO services; • the extent to which we acquire or invest in and integrate companies, businesses, products or technologies; • the acquisition of new facilities and capital improvements to new or existing facilities; • the payment obligations under our indebtedness; • the scope, progress, results and costs of our development activities; • our ability to obtain funding from collaborative partners, government entities and non-governmental organizations for our development programs; and • the costs of commercialization activities, including product marketing, sales and distribution. 69 If our capital resources are insufficient to meet our future capital requirements, we will need to finance our cash needs through public or private equity or debt offerings, bank loans, collaboration and licensing arrangements, cost reductions, assets sales or a combination of these options.
Our future capital requirements will depend on many factors, including (but not limited to): • the level, timing and cost of product sales and bioservices; • the extent to which we acquire or invest in and integrate companies, businesses, products or technologies; 82 • the acquisition of new facilities and capital improvements to new or existing facilities; • the payment obligations under our indebtedness; • the scope, progress, results and costs of our development activities; • our ability to obtain funding from collaborative partners, government entities and non-governmental organizations for our development programs; and • the costs of commercialization activities, including product marketing, sales and distribution.
We expect our R&D spending will be dependent upon such factors as the results from our clinical trials, the availability of reimbursement of R&D spending, the number of product candidates under development, the size, structure and duration of any clinical programs that we may initiate, the costs associated with manufacturing and development of our product candidates on a large-scale basis for later stage clinical trials, and our ability to use or rely on data generated by government agencies.
We expect our R&D spending will be dependent upon such factors as the results from our clinical trials, the availability of reimbursement of R&D spending, the number of product candidates under development, the size, structure and duration of any clinical programs that we may initiate, the costs associated with manufacturing and development of our product candidates on a large-scale basis for later stage clinical trials, and our ability to use or rely on data generated by government agencies. 64 Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of personnel-related costs and professional fees in support of our executives, sales and marketing, business development, government affairs, finance, accounting, information technology, legal, human resource functions and other corporate functions.
The lease arrangements are for certain equipment and facilities. As of December 31, 2022, the Company had fixed lease payment obligations of $23.5 million, with $6.5 million due within 12 months. The Company has non-cancelable purchase commitments of $132.8 million, with an estimated $125.7 million being due within 12 months.
The lease arrangements are for certain equipment and facilities. As of December 31, 2023, the Company had fixed lease payment obligations of $20.4 million, with $4.3 million due within 12 months. The Company has non-cancelable purchase commitments of $526.9 million, with an estimated $117.0 million being due within 12 months.
The decrease was primarily due to reduced production activities across our CDMO network including the completion of the Company's arrangement with BARDA in November 2021, the halt in manufacturing under the Janssen and AstraZeneca contracts and the decrease in margins at the Company's Camden facility due to additional investments in quality enhancement and improvement initiatives, including an increase in professional services costs.
The decrease was primarily driven by reduced production activities across our Bioservices network including the completion of the Company's arrangement with BARDA in November 2021, the halt in manufacturing under the Janssen and AstraZeneca contracts and the decrease in margins at the Company's Camden facility due to additional investments in quality enhancement and improvement initiatives, including an increase in professional services costs. 78 OTHER REVENUE Year Ended December 31, 2022 Compared with Year Ended December 31, 2021 Contracts and Grants Contract and grants revenue decreased $92.8 million, or 69%, to $41.4 million in 2022.
For additional information on our revenues, refer to Note 11, "Revenue recognition" in the Notes to Consolidated Financial Statements in Part II, Item 8. of this Form 10-K.
Because returned product cannot be resold, there is no corresponding asset for product returns. For additional information on our revenues, refer to Note 13, "Revenue recognition" in the Notes to Consolidated Financial Statements in Part II, Item 8. of this Form 10-K.
Cost of Product Sales and Services Products - The primary expenses that we incur to deliver our 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.
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.
On January 9, 2023, the Company announced the 2023 organizational restructuring Plan (the “Plan”) intended to reduce operating costs, improve operating margins, and continue advancing the Company’s ongoing commitment to profitable growth. The Plan includes a reduction of the Company’s current workforce by approximately five percent.
The Company had $111.7 million of cash on hand at December 31, 2023. On January 9, 2023, the Company announced the January 2023 Plan, intended to reduce operating costs, improve operating margins, and continue advancing the Company’s ongoing commitment to profitable growth. The January 2023 Plan included a reduction of the Company’s current workforce by approximately 125 employees.
Further, if the composition of the Company’s reporting unit’s assets and liabilities were to change and result in an increase in the reporting unit’s carrying value, it could lead to additional impairment testing and further impairment losses. Total other income (expense), net Total other income (expense), net decreased $10.8 million to an expense of $49.0 million in 2022.
Further, if the composition of the Company’s reporting unit’s assets and liabilities were to change and result in an increase in the reporting unit’s carrying value, it could lead to additional impairment testing and further impairment losses. Amortization of Intangible Assets Amortization of intangible assets increased $1.4 million, or 2%, to $59.9 million in 2022.
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™; • Raxibacumab injection, the first fully human monoclonal antibody therapeutic licensed by the FDA for the treatment and prophylaxis of inhalational anthrax; • 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; • TEMBEXA®, an oral antiviral formulated as 100 mg tablets and 10 mg/mL oral suspension dosed once weekly for two weeks which has been approved by the FDA for the treatment of smallpox disease caused by variola virus in adult and pediatric patients, including neonates; and • Trobigard® atropine sulfate, obidoxime chloride auto-injector, a combination drug-device auto-injector procured product candidate that contains atropine sulfate and obidoxime chloride.
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™; • 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; and • Trobigard ® atropine sulfate, obidoxime chloride auto-injector, a combination drug-device auto-injector procured product candidate that contains atropine sulfate and obidoxime chloride.
Amortization of Intangible Assets Amortization of intangible assets increased $1.4 million to $59.9 million in 2022. Apart from the addition of the intangibles related to the Company's acquisition of the worldwide rights to TEMBEXA in 2022, the composition of intangible assets amortized was largely consistent with 2021. Goodwill Impairment Goodwill impairment decreased $35.0 million to $6.7 million in 2022.
Apart from the addition of the intangibles related to the Company's acquisition of the worldwide rights to TEMBEXA ® in 2022, the composition of intangible assets amortized was largely consistent with 2021. Interest expense Interest expense increased $2.8 million, or 8%, to $37.3 million in 2022.
Uncertainties and Trends Affecting Funding Requirements We expect to continue to fund our anticipated operating expenses, capital expenditures and debt service requirements from the following sources: • existing cash and cash equivalents; • net proceeds from the sale of our products and CDMO services; • development contracts and grant funding; • proceeds from the sale of our travel health business to Bavarian Nordic (see Note 18, "Subsequent events" in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K); and • our Senior Secured Credit Facilities and any replacement or other lines of credit we may establish from time to time.
Uncertainties and Trends Affecting Funding Requirements We expect to continue to fund our short-term and long-term anticipated operating expenses, capital expenditures and debt service requirements from the following sources: • existing cash and cash equivalents; • net proceeds from the sale of our products and bioservices; • development contracts and grant funding; • proceeds from the sale of our common stock through the ATM Program; and • our Senior Secured Credit Facilities and any replacement or other lines of credit we may establish from time to time.
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.
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.
Year Ended December 31, 2021 Compared with Year Ended December 31, 2020 Discussion and analysis of the year ended December 31, 2021 compared with the year ended December 31, 2020 is included under the heading "Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on February 25, 2022. 66 Financial Condition, Liquidity and Capital Resources Our financial condition is summarized as follows: December 31, (in millions, except percentages) 2022 2021 Change % Financial assets: Cash and cash equivalents $ 642.6 $ 576.1 12 % Borrowings: Debt, current portion $ 957.3 $ 31.6 NM Debt, net of current portion 448.5 809.4 (45) % Total borrowings $ 1,405.8 $ 841.0 67 % Working capital: Current assets $ 1,210.7 $ 1,272.1 (5) % Current liabilities 1,229.9 373.8 229 % Total working capital $ (19.2) $ 898.3 (102) % NM - Not Meaningful Principal Sources of Capital Resources We have historically financed our operating and capital expenditures through existing cash and cash equivalents, cash from operations, development contracts and grant funding and borrowings under our senior revolving credit facility (the "Revolving Credit Facility") and senior term loan facility (the "Term Loan Facility", and together with the Revolving Credit Facility, the "Senior Secured Credit Facilities") and other lines of credit we have established from time to time.
Decreases were partially offset by revenue increases relating to indirect rate adjustments during the period. 79 Financial Condition, Liquidity and Capital Resources Our financial condition is summarized as follows: December 31, (in millions, except percentages) 2023 2022 Change % Financial assets: Cash and cash equivalents $ 111.7 $ 642.6 (83) % Borrowings: Debt, current portion $ 413.7 $ 957.3 (57) % Debt, net of current portion 446.5 448.5 — % Total borrowings $ 860.2 $ 1,405.8 (39) % Working capital: Current assets $ 679.5 $ 1,210.4 (44) % Current liabilities 651.3 1,228.9 (47) % Total working capital $ 28.2 $ (18.5) 252 % NM - Not Meaningful Principal Sources of Capital Resources We have historically financed our operating and capital expenditures through existing cash and cash equivalents, cash from operations, development contracts and grant funding and borrowings under our senior revolving credit facility ("Revolving Credit Facility"),our senior term loan facility ("Term Loan Facility" and together with the Revolving Credit Facility, the "Senior Secured Credit Facilities"), and other lines of credit we have established from time to time.
Financial Operations Overview Revenues We generate product revenues from the sale of our marketed products and procured product candidates. The USG is the largest purchaser of our Government - MCM products and primarily purchases our products for the SNS, a national repository of medical countermeasures including critical antibiotics, vaccines, chemical antidotes, antitoxins, and other critical medical supplies.
The USG is the largest purchaser of our Government - MCM products and primarily purchases our products for the SNS, a national repository of medical countermeasures including critical antibiotics, vaccines, chemical antidotes, antitoxins, and other critical medical supplies. The USG primarily purchases our products under long-term, firm fixed-price procurement contracts, generally with annual options.
Revenues are recognized as a percentage of the work completed during the period in an amount that reflects the percentage of the consideration which the Company expects to receive in exchange for the product or services. 70 For contracts with multiple performance obligations, the Company allocates the contract price to each performance obligation on a relative standalone selling price basis using the Company’s best estimate of the standalone selling price of each distinct product or service in the contract.
The Company's Bioservices arrangements are generally recognized on a percentage of completion basis utilizing a cost-to-cost method. Revenues are recognized as a percentage of the work completed during the period in an amount that reflects the percentage of the consideration which the Company expects to receive in exchange for the product or services.
SERVICES SEGMENT Services Segment Year Ended December 31, (in millions) 2022 2021 % Change Revenues $ 113.3 $ 634.6 (82) % Cost of sales $ 269.6 $ 375.5 (28) % Gross margin (1) $ (156.3) $ 259.1 NM Gross margin % (1) (138) % 41 % NM (1) Gross margin is calculated as revenues less cost of sales.
SERVICES Services Year Ended December 31, (in millions) 2022 2021 % Change Revenues $ 109.9 $ 615.5 (82) % Cost of services 268.5 365.5 (27) % Gross margin (1) $ (158.6) $ 250.0 NM Gross margin % (1) (144) % 41 % Segment adjusted gross margin (2) $ (158.6) $ 250.0 NM Segment adjusted gross margin % (2) (144) % 41 % (1) Gross margin is calculated as revenues less cost of services.
The decrease was due to a write-off of a tax indemnity receivable, which is offset in income tax provision, and unrealized foreign currency losses recorded related to the remeasurement of certain intercompany balances. Interest expense was largely consistent between periods. 63 Income tax provision Income tax provision decreased $81.4 million to $2.1 million for the year ended December 31, 2022.
The increase was primarily due to a write-off of a tax indemnity receivable, which was offset in income tax provision, and unrealized foreign currency losses recorded related to the remeasurement of certain intercompany balances.
The decrease was due to a smaller non-cash impairment charge taken in 2022 as compared with 2021. In 2022, as part of its annual goodwill impairment testing, the Company recognized a $6.7 million impairment charge to goodwill in the CDMO- Services reporting unit, reducing the goodwill balance to zero as of December 31, 2022.
Goodwill Impairment Goodwill impairment decreased $35.0 million to $6.7 million in 2022. The decrease was due to a smaller non-cash impairment charge taken in 2022 as compared with 2021.
AV7909 has not been approved by the FDA, but is procured by certain authorized government buyers for their use; • BAT® (Botulism Antitoxin Heptavalent (A,B,C,D,E,F,G)-(Equine)), the only heptavalent antitoxin licensed by the FDA and Health Canada for the treatment of symptomatic botulism; • CNJ-016® (Vaccinia Immune Globulin Intravenous (Human) (VIGIV)), the only polyclonal antibody therapeutic licensed by the FDA and Health Canada to address certain complications from smallpox vaccination; 58 • Ebanga™ (ansuvimab-zykl) is a monoclonal antibody with antiviral activity provided through a single IV infusion for the treatment of Ebola.
Other Products • BAT ® (Botulism Antitoxin Heptavalent (A,B,C,D,E,F,G)-(Equine)), the only heptavalent antitoxin licensed by the FDA and Health Canada for the treatment of symptomatic botulism; • Ebanga™ (ansuvimab-zykl), a monoclonal antibody with antiviral activity provided through a single IV infusion for the treatment of Ebola.
We currently expect the transaction to close in the second quarter of 2023, but we can provide no assurance that the transaction will close prior to the October 2023 maturity of the Term Loan Facility, or at all. 67 Pursuant to the Third Credit Agreement Amendment the requisite lenders have agreed to a limited waiver of any defaults or events of default that result from (a) any violation of the financial covenants set forth in the Senior Secured Credit Facilities with respect to the fiscal quarters ending December 31, 2022 and March 31, 2023 and (b) the going concern qualification or exception contained in the audited financial statements for the fiscal year ending December 31, 2022.
On February 29, 2024, the requisite lenders agreed to enter into the Forbearance Agreement, which includes a limited waiver of any defaults or events of default that result from (a) any violation of the financial covenants set forth in the Senior Secured Credit Facilities with respect to the fiscal quarter ending December 31, 2023 and the fiscal quarter ending March 31, 2024 and (b) the going concern explanatory paragraph contained in the audited financial statements for the fiscal year ended December 31, 2023.
The decrease was primarily due to decreases in the Services segment and Products segment gross margins of $415.4 million and $99.8 million, respectively. Consolidated gross margin percentage excludes contracts and grants revenues because the related costs are R&D expenses. See "Segment Results" for an expanded discussion of revenues and gross profit.
Total segment gross margin and gross margin percentage excludes contracts and grants revenues because the related costs are R&D expenses. See "Segment Results" for an expanded discussion of revenues and gross profit. Unallocated corporate operating expenses Goodwill Impairment Goodwill impairment increased $211.5 million to $218.2 million in 2023.
Excluding the acquisition related product costs, cost of product sales decreased $18.1 million, primarily due decreases in royalties paid for NARCAN sales and ACAM2000 product sales which were due to a reduced number of units sold to the USG and decreased expenses at our Bern facility due to higher facility utilization versus prior year.
These increases were partially offset by decreases in ACAM2000 ® product sales which were due to a reduced number of units sold to the USG and decreased expenses at our Bern facility due to higher facility utilization versus prior year. MCM Products gross margin decreased $75.2 million, or 19%, to $315.3 million in 2022.
Services Segment: Services - Contract Development and Manufacturing Our services revenue consists of distinct but interrelated CDMO services : 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.
Trobigard ® is procured by certain authorized government buyers under special circumstances for potential use as a nerve agent countermeasure outside of the U.S. 61 Services Segment: Bioservices - contract development and manufacturing 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.
TEMBEXA is a medical countermeasure for smallpox approved by the FDA in June 2021. Other Strategic Activities 2023 Organizational Restructuring Plan On January 9, 2023, the Company announced an organizational restructuring plan (the “Plan”) intended to reduce operating costs, improve operating margins, and continue advancing the Company’s ongoing commitment to profitable growth.
Other Strategic Activities January 2023 Organizational Restructuring Plan In January 2023, the Company initiated an organizational restructuring plan (the “January 2023 Plan”) intended to reduce operating costs, improve operating margins, and continue advancing the Company’s ongoing commitment to profitable growth. As part of the January 2023 Plan, the Company reduced its workforce by approximately 125 employees.
(2) Gross margin is calculated as revenues less cost of sales. Gross margin % is calculated as gross margin divided by revenues. (3) Adjusted gross margin, which is a non-GAAP financial measure, is calculated as revenues less Adjusted cost of sales. Adjusted gross margin %, which is a non-GAAP financial measure, is calculated as Adjusted gross margin divided by revenues.
We define total segment gross margin, which is a non-GAAP financial measure, as total segment revenues less our aggregate cost of sales or services. We define total segment gross margin %, which is a non-GAAP financial measure, as total segment gross margin as a percentage of total segment revenues.
Other Product Sales Other product sales increased $13.9 million to $137.2 million in 2022. The increase was primarily due to increased sales of Anthrasil, Vivotif and RSDL products partially offset by decreased sales of VIGIV and BAT products. Cost of Sales and Gross Margin Cost of product sales increased $42.1 million, or 11%, to $424.1 million in 2022.
Other Commercial Products Other Commercial Products sales increased $9.3 million to $12.9 million in 2022. The increase was primarily driven by higher sales of Vivotif ® and Vaxchora ® in 2022. Cost of Sales and Gross Margin Cost of Commercial product sales decreased $26.9 million, or 14%, to $160.3 million in 2022.
We also obtain financing from the sale of our common stock upon exercise of stock options. As of December 31, 2022, we had unrestricted cash and cash equivalents of $642.6 million and remaining capacity under our Revolving Credit Facility of $0.7 million.
As of December 31, 2023, we had unrestricted cash and cash equivalents of $111.7 million and remaining capacity under our Revolving Credit Facility of $80.3 million.
As of December 31, 2022, there is $598.0 million outstanding on the our Revolving Credit Facility and $362.8 million on our Term Loan Facility that mature in October 2023, which is within one year of the date that the consolidated financial statements for the year ended December 31, 2022 are issued.
As of December 31, 2023, there was $219.2 million outstanding on our Revolving Credit Facility and $198.2 million on our Term Loan Facility that mature in May 2025. The Company determined that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.
The Company does not expect to be in compliance with debt covenants in future periods without additional sources of liquidity or future amendments to the Credit Agreement.
This forbearance period will expire on the earlier to occur of (i) any other event of default and (ii) April 30, 2024. The Company does not expect to be in compliance with debt covenants in future periods without additional sources of liquidity or future amendments to the Senior Secured Credit Facilities.
Commercial Products • NARCAN ® (naloxone HCl) Nasal Spray, an intranasal formulation of naloxone approved by the FDA and Health Canada for the emergency treatment of known or suspected opioid overdose as manifested by respiratory and/or central nervous system depression; • Vaxchora ® (Cholera Vaccine, Live, Oral), the first vaccine approved by the FDA for the prevention of cholera, which we have agreed to sell as part of our travel health business; and • Vivotif ® (Typhoid Vaccine Live Oral Ty21a), a live attenuated vaccine for oral administration for the prevention of typhoid fever, which we have agreed to sell as part of our travel health business.
Commercial Products Segment: The majority of our Commercial product revenue comes from the following products: NARCAN ® • 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.
We are currently focused on the following five PHT categories: chemical, biological, radiological, nuclear and explosives ("CBRNE"); emerging infectious diseases ("EID"); travel health, which we have agreed to sell to Barvarian Nordic; public health crises; and acute, emergency and community care.
We are currently focused on the following four PHT categories: chemical, biological, radiological, nuclear and explosives (“CBRNE”); emerging infectious diseases (“EID”); public health crises; and acute, emergency and community care. We have a product portfolio of 12 products that contribute a substantial portion of our revenue and are sold to government and commercial customers.
OTHER REVENUE Year Ended December 31, 2022 Compared with Year Ended December 31, 2021 Contracts and Grants Contract and grants revenue decreased $92.8 million, or 69%, to $41.4 million in 2022.
The 2023 Services Segment Adjusted Gross Margin excludes the impact of restructuring costs of $8.4 million. OTHER REVENUE Year Ended December 31, 2023 Compared with Year Ended December 31, 2022 Contracts and Grants Contract and grants revenue decreased $15.1 million, or 36%, to $26.3 million in 2023.
The Company estimates that it will incur approximately $9.0 million to $11.0 million of charges in connection with the Plan, which it expects to incur in the first quarter of fiscal 2023. These charges consist primarily of charges related to 59 employee transition, severance payments, employee benefits, and share-based compensation.
The Company incurred approximately $9.3 million in charges in connection with the January 2023 Plan during the year ended December 31, 2023. These charges consist primarily of charges related to employee transition, severance payments and employee benefits. All activities related to the January 2023 Plan were substantially completed during the first quarter of 2023.
The decrease was primarily due to a decrease in Services revenue of $521.3 million, coupled with decreases in Contracts and Grants revenue of $92.8 million and Products revenue of $57.7 million. Consolidated gross margin percentage decreased 19% to 36%.
Total revenues decreased $656.1 million, or 37%, to $1.1 billion in 2022. The decrease was primarily due to a decrease in Bioservices revenue of $505.6 million, coupled with decreases in Contracts and grants revenue of $92.8 million, Commercial Products revenue of $51.4 million and MCM Products revenue of $6.3 million.
Agreement to Sell Travel Business On February 15, 2023, we entered into the Sale Agreement with Bavarian Nordic, under which we agreed to sell our travel health business, including rights to Vaxchora and Vivotif, as well as our development-stage chikungunya vaccine candidate CHIKV VLP, our manufacturing site in Bern, Switzerland and certain of our development facilities in San Diego, California for a cash purchase price of $270.0 million, subject to certain customary adjustments.
Sale of Travel Health Business to Bavarian Nordic On May 15, 2023, pursuant to the Purchase and Sale Agreement (the "Purchase and Sale Agreement"), by and between the Company, through its wholly owned subsidiaries Emergent International Inc. and Emergent Travel Health Inc., and Bavarian Nordic, the Company completed the previously announced sale of the Company's travel health business, including rights to Vivotif ® , the licensed typhoid vaccine; Vaxchora ® , the licensed cholera vaccine; the development-stage chikungunya vaccine candidate CHIKV VLP; the Company’s manufacturing site in Bern, Switzerland; and certain of its development facilities in San Diego, California.
These were partially offset by inventory write-offs, primarily related to AV7909 and ACAM2000 and higher costs due to under-utilized capacity at our facilities. Product gross margin percentage decreased 7% to 56% in 2022. The decrease was largely due to decreased sales volumes and inventory write-offs combined with a less favorable mix weighted more heavily to lower margin products.
MCM Products gross margin percentage decreased 13 percentage points to 54% in 2022. The decrease was largely due to lower sales volumes and higher shutdown related costs and inventory write-offs, coupled with an unfavorable product revenue mix which was weighted more heavily to lower 77 margin products compared with the prior year.
The decrease was largely due to the decline in income before income taxes. The effective tax rate was (1)% for the year ended December 31, 2022 as compared to 27% in 2021.
Income taxes Income tax benefit of $7.4 million for the year ended December 31, 2022 decreased $36.7 million to a provision of $29.3 million for the year ended December 31, 2023. The effective tax rate was (4)% for the year ended December 31, 2023 as compared to 3% in 2022.
Year Ended December 31, (in millions) 2022 2021 Net cash provided by (used in): Operating activities $ (34.1) $ 321.1 Investing activities (381.3) (225.0) Financing activities 481.2 (141.0) Effect of exchange rate changes on cash, cash equivalents and restricted cash 0.5 (0.3) Net change in cash, cash equivalents and restricted cash $ 66.3 $ (45.2) Operating Activities: Net cash used in operating activities of $34.1 million in 2022 was due to net income excluding non-cash items of $34.6 million offset by positive working capital changes of $0.5 million primarily due an increase in payments for our contingent consideration and other accrued expenses, an increase in prepaid expenses and an accumulation of inventory, partially offset by collections on receivables.
Year Ended December 31, (in millions) 2023 2022 Net cash provided by (used in): Operating activities $ (206.3) $ (34.1) Investing activities 212.3 (381.3) Financing activities (535.7) 481.2 Effect of exchange rate changes on cash, cash equivalents and restricted cash (1.2) 0.5 Net change in cash, cash equivalents and restricted cash $ (530.9) $ 66.3 Operating Activities: Net cash used in operating activities increased $172.2 million in 2023.
Products Segment: The majority of our product revenue comes from the following products and procured product candidates: Government - MCM Products • ACAM2000®, (Smallpox (Vaccinia) Vaccine, Live), the only single-dose smallpox vaccine licensed by the FDA for active immunization against smallpox disease for persons determined to be at high risk for smallpox infection; • Anthrasil® (Anthrax Immune Globulin Intravenous (human)), the only polyclonal antibody therapeutic licensed by the FDA and Health Canada for the treatment of inhalational anthrax in combination with appropriate antibacterial drugs; • Anthrax vaccines, including our AV7909 (Anthrax vaccine adsorbed (AVA), adjuvanted) procured product candidate being developed as a next-generation anthrax vaccine for post-exposure prophylaxis and BioThrax® (Anthrax Vaccine Adsorbed), the only vaccine licensed by the FDA for the general use prophylaxis and post-exposure prophylaxis of anthrax disease.
Other Commercial Products (Sold to Bavarian Nordic as part of our travel health business in Mar 2023) • Vaxchora ® (Cholera Vaccine, Live, Oral), the first vaccine approved by the FDA for the prevention of cholera, which we sold to Bavarian Nordic as part of our travel health business; and • Vivotif ® (Typhoid Vaccine Live Oral Ty21a), a live attenuated vaccine for oral administration for the prevention of typhoid fever, which we sold to Bavarian Nordic as part of our travel health business. 60 MCM Products Segment: The majority of our MCM product revenue comes from the following products and procured product candidates: Anthrax - MCM Products • Anthrasil ® (Anthrax Immune Globulin Intravenous (human)), the only polyclonal antibody therapeutic licensed by the FDA and Health Canada for the treatment of inhalational anthrax in combination with appropriate antibacterial drugs; • 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; • CYFENDUS ® (Anthrax vaccine adsorbed (AVA), adjuvanted), previously known as AV7909, which was recently approved by the FDA for post-exposure prophylaxis of disease following suspected or confirmed exposure to Bacillus anthracis in persons 18 through 65 years of age when administered in conjunction with recommended antibacterial drugs.
Financing Activities: Net cash provided by financing activities of $481.2 million in 2022 was largely from the $598.0 million of proceeds from our Revolving Credit Facility partially offset by repurchases of stock of $82.1 million and payments on our term loan of $33.8 million.
The increase in cash used in financing activities was primarily due to increased principal payments on our Revolving Credit Facility and Term Loan Facility of $398.8 million and $130.8 million, respectively, coupled with a reduction in proceeds of $578.0 million under our Revolving Credit Facility, partially offset by a decrease in purchases of treasury stock of $82.1 million in the current year and an increase of $8.4 million in proceeds from the sale of stock under our ATM program.
SEGMENT RESULTS PRODUCTS SEGMENT Products Segment Year Ended December 31, (in millions) 2022 2021 % Change Revenues $ 966.2 $ 1,023.9 (6) % Cost of sales $ 424.1 $ 382.0 11 % Less: Changes in fair value of contingent consideration 2.6 2.9 (10) % Less: Inventory step-up provision 51.4 — NM Adjusted cost of sales (1) $ 370.1 $ 379.1 (2) % Gross margin (2) $ 542.1 $ 641.9 (16) % Gross margin % (2) 56 % 63 % (11) % Adjusted gross margin (3) $ 596.1 $ 644.8 (8) % Adjusted gross margin % (3) 62 % 63 % (2) % (1) Adjusted cost of sales, which is a non-GAAP financial measure, is calculated as cost of sales less changes in fair value of contingent consideration and inventory step-up provision, both of which are non-cash items.
MCM PRODUCTS MCM Products Year Ended December 31, (dollars in millions) 2023 2022 % Change Revenues $ 447.2 $ 579.6 (23) % Cost of sales 305.6 264.3 16 % Gross margin (1) $ 141.6 $ 315.3 (55) % Gross margin % (1) 32 % 54 % Add back: Changes in fair value of contingent consideration 0.2 2.6 (92) % Restructuring costs 5.6 — NM Inventory step-up provision 3.9 51.4 (92) % Segment adjusted gross margin (2) $ 151.3 $ 369.3 (59) % Segment adjusted gross margin % (2) 34 % 64 % (1) Gross margin is calculated as revenues less cost of sales.
As such, the key components of the business structure include the following three product and service categories: Government - Medical Countermeasures ("MCM") Products, Commercial Products, and CDMO Services. The Company operates as two operating segments: (1) a products segment ("Products") consisting of the Government - MCM and Commercial products and (2) a services segment ("Services") consisting of our CDMO services.
As such, the key components of the business structure include the following four product and service categories: Anthrax - Medical Countermeasures (“MCM”) Products, NARCAN ® , Smallpox - MCM products and Emergent Bioservices (CDMO) services ("Bioservices"). In the fourth quarter of 2023, we realigned our reportable operating segments to reflect recent changes in our internal operating and reporting process.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeFloating rate debt carries interest based generally on the eurocurrency rate, as defined in our Credit Agreement, plus an applicable margin. We manage the impact of interest rate changes on our variable debt through derivative instruments such as interest rate swap arrangements.
Biggest changeWe terminated our interest rate swaps in June 2023, and we are satisfied with the current fix-float mix of the Company's debt portfolio. Floating rate debt carries interest based generally on the eurocurrency rate, as defined in our senior secured credit agreement, as amended by the Credit Agreement Amendment, plus an applicable margin.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For a discussion of additional risks arising from our operations, see “Item 1A—Business—Risk Factors” in this 2022 Annual Report. Market Risks We have interest rate and foreign currency market risk.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For a discussion of additional risks arising from our operations, see “Item 1A—Business—Risk Factors” in this 2023 Annual Report. Market Risks We have interest rate and foreign currency market risk.
We currently do not hedge all of our foreign currency exchange exposure and the movement of foreign currency exchange rates could have an adverse or positive impact on our results of operations. 72
We currently do not hedge all of our foreign currency exchange exposure and the movement of foreign currency exchange rates could have an adverse or positive impact on our results of operations. 87
We have assessed our exposure to changes in interest rates by analyzing the sensitivity to our operating results assuming various changes in market interest rates. A hypothetical increase of one percentage point in the eurocurrency rate as of December 31, 2022 would increase our interest expense by approximately $6.1 million annually.
We have assessed our exposure to changes in interest rates by analyzing the sensitivity to our operating results assuming various changes in market interest rates. A hypothetical increase of one percentage point in the eurocurrency rate as of December 31, 2023 would increase our interest expense by approximately $4.2 million annually.
For debt that we have not hedged through our interest rate swap arrangements increases in interest rates could therefore increase the associated interest payments that we are required to make on this debt. See Note 8, "Debt," in the Notes to Consolidated Financial Statements in Part II, Item 8. of this Form 10-K.
Increases in interest rates could result in an increase in interest payments for our floating rate debt. See Note 10, "Debt" in the Notes to Consolidated Financial Statements in Part II, Item 8. of this Form 10-K. From time to time, we may use derivative instruments to manage our interest rate risk and market risk exposure.

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