Emergent BioSolutions Spinning Off Biosciences

Emergent BioSolutions (EBSannounced that it will spin off its Biosciences business into a standalone entity. So what do they mean by ‘biosciences’? The new company will ‘focus on providing novel oncology and hematology therapeutics to meaningfully improve patients’ lives. The core technology of the Biosciences company will be its ADAPTIR platform applied to immuno-oncology’. More specifically, the new company will consist of the following assets:

  • the ADAPTIR™ (modular protein technology) platform including bi-specific therapeutics based on Redirected T-cell Cytotoxicity (RTCC), a promising approach within immuno-oncology,
  • MOR209/ES414, a bi-specific therapeutic for metastatic castration resistant prostate cancer currently in Phase 1 clinical development in partnership with MorphoSys AG, and
  • a commercial product portfolio consisting of IXINITY, WinRho, HepaGam B, and VARIZIG

That helped. The new company will be launched with a cash balance of $50-70m, but is expected to be able to raise additional cash via sales and partnerships. Without seeing any financial filings, it’s unclear how long that cash will last, but in 2014, the biosciences business lost over $50m on just $79m in sales. The first two quarters of 2015 witnessed a similar trend. The new company will be led by current board member Marvin White, who will take on both the President and CEO titles. He will have to develop these businesses and make sure there is enough funding in the tank.

The parent company will continue providing biosolutions and ‘operate as a global specialty biopharmaceutical company whose core business is focused on providing specialty products for civilian and military populations that address intentional and naturally emerging public health threats.’ It’s the biodefense segment which has decent margins. By eliminating the hefty cash drain from biosciences’ R&D and sales, the parent company’s financial metrics and margins should look much better. That, instead of the typical spinoff rationale boilerplate, is likely the real reason for the spin.

Investors liked the news of the spinoff as the stock jumped on the announcement. The initial Form 10 is expected to be filed during the first quarter of 2016, with the spinoff being completed in ‘mid-2016’.

Disclosure: Author holds no position in any stock mentioned.