Emergent BioSolutions (EBS) 10-Q 5 May 17 2017 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2017	Apr. 28, 2017
Document and Entity Information [Abstract]
Entity Registrant Name	Emergent BioSolutions Inc.
Entity Central Index Key	1,367,644
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		40,974,436
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q1
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2017

Consolidated Balance Sheets (Un

Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 270,170	$ 271,513
Accounts receivable, net	128,082	138,478
Inventories	70,732	74,002
Income tax receivable, net	6,771	9,996
Prepaid expenses and other current assets	13,411	16,229
Total current assets	489,166	510,218
Property, plant and equipment, net	381,102	376,448
Intangible assets, net	32,311	33,865
Goodwill	41,001	41,001
Deferred tax assets, net	5,022	6,096
Other assets	3,037	2,483
Total assets	951,639	970,111
Current liabilities:
Accounts payable	27,179	34,649
Accrued expenses and other current liabilities	4,346	6,368
Accrued compensation	23,318	34,537
Notes payable	0	20,000
Contingent consideration, current portion	2,216	3,266
Deferred revenue, current portion	10,647	7,036
Total current liabilities	67,706	105,856
Contingent consideration, net of current portion	9,601	9,919
Long-term indebtedness	248,394	248,094
Deferred revenue, net of current portion	13,887	8,433
Other liabilities	1,632	1,604
Total liabilities	341,220	373,906
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value; 15,000,000 shares authorized, 0 shares issued and outstanding at both March 31, 2017 and December 31, 2016	0	0
Common stock, $0.001 par value; 200,000,000 shares authorized, 41,380,108 shares issued and 40,954,615 shares outstanding at March 31, 2017; 40,996,890 shares issued and 40,574,060 shares outstanding at December 31, 2016	41	41
Treasury stock, at cost, 425,493 and 422,830 common shares at March 31, 2017 and December 31, 2016, respectively	(6,501)	(6,420)
Additional paid-in capital	355,661	352,435
Accumulated other comprehensive loss	(3,747)	(4,331)
Retained earnings	264,965	254,480
Total stockholders' equity	610,419	596,205
Total liabilities and stockholders' equity	$ 951,639	$ 970,111

Consolidated Balance Sheets (U3

Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2017	Dec. 31, 2016
Stockholders' equity:
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	15,000,000	15,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	200,000,000	200,000,000
Common stock, shares issued (in shares)	41,380,108	40,996,890
Common stock, shares outstanding (in shares)	40,954,615	40,574,060
Treasury stock ( in shares)	425,493	422,830

Consolidated Statements of Oper

Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
Revenues:
Product sales		$ 81,969	$ 63,753
Contract manufacturing		17,628	7,587
Contracts and grants		17,261	31,624
Total revenues		116,858	102,964
Operating expenses:
Cost of product sales and contract manufacturing		46,322	24,001
Research and development		20,476	26,093
Selling, general and administrative		35,150	31,713
Income from operations		14,910	21,157
Other income (expense):
Interest income		373	186
Interest expense		(1,938)	(1,524)
Other income (expense), net		300	35
Total other expense, net		(1,265)	(1,303)
Income from continuing operations before provision for income taxes		13,645	19,854
Provision for income taxes		3,160	7,965
Net Income from continuing operations		10,485	11,889
Loss from discontinued operations (net of tax)		0	(7,898)
Net income		$ 10,485	$ 3,991
Net income per share - basic:
Net income from continuing operations-basic		$ 0.26	$ 0.30
Net loss from discontinued operations-basic		0	(0.20)
Net income per share - basic (in dollars per share)		0.26	0.10
Net income per share - diluted:
Income from continuing operations (in dollars per share)	[1]	0.23	0.27
Net loss per share from discontinued operations-diluted (in dollars per share)		0	(0.17)
Net income per share - diluted (in dollars per share)	[1]	$ 0.23	$ 0.10
Weighted-average number of shares - basic (in shares)		40,727,755	39,542,656
Weighted-average number of shares - diluted (in shares)		49,718,426	48,359,892
[1]	See Note 8 "Earnings per share" for details on calculation.

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Consolidated Statements of Comprehensive Income [Abstract]
Net income	$ 10,485	$ 3,991
Foreign currency translations, net of tax	584	(1,439)
Comprehensive income	$ 11,069	$ 2,552

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash flows from operating activities:
Net income (loss)	$ 10,485	$ 3,991
Adjustments to reconcile to net cash provided by (used in) operating activities:
Stock-based compensation expense	4,284	5,197
Depreciation and amortization	10,166	8,840
Deferred income taxes	4,299	2,964
Change in fair value of contingent obligations	200	847
Excess tax benefits from stock-based compensation	0	(5,786)
Other	87	71
Changes in operating assets and liabilities:
Accounts receivable	10,561	51,207
Inventories	3,270	(11,264)
Prepaid expenses and other assets	2,338	(5,555)
Accounts payable	81	385
Accrued expenses and other liabilities	(1,962)	(2,045)
Accrued compensation	(11,203)	(8,277)
Provision for chargebacks	0	(278)
Deferred revenue	9,065	1,874
Net cash provided by operating activities	41,671	42,171
Cash flows from investing activities:
Purchases of property, plant and equipment	(20,304)	(18,214)
Net cash used in investing activities	(20,304)	(18,214)
Cash flows from financing activities:
Issuance of common stock upon exercise of stock options	2,957	3,595
Excess tax benefits from stock-based compensation	0	5,786
Taxes paid on behalf of employees for equity activity	(4,015)	(4,377)
Payments of notes payable	(20,000)	0
Contingent obligation payments	(1,568)	(752)
Purchase of treasury stock	(81)	0
Net cash (used in) provided by financing activities	(22,707)	4,252
Effect of exchange rate changes on cash and cash equivalents	(3)	11
Net (decrease) increase in cash and cash equivalents	(1,343)	28,220
Cash and cash equivalents at beginning of period	271,513	312,795
Cash and cash equivalents at end of period	$ 270,170	$ 341,015

Summary of significant accounti

Summary of significant accounting policies	3 Months Ended
	Mar. 31, 2017
Summary of significant accounting policies [Abstract]
Summary of significant accounting policies	1. Summary of significant accounting policies Basis of presentation and consolidation The accompanying unaudited consolidated financial statements include the accounts of Emergent BioSolutions Inc. ("Emergent" or the "Company") and its wholly owned and majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The unaudited consolidated financial statements included herein have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X issued by the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC. During the three months ended March 31, 2017, there have been no significant changes to the Company's summary of significant accounting policies contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC, except for revenue recognition associated with the new Biomedical Advanced Research and Development Authority ("BARDA") contract for BioThrax. On March 16, 2017, the Company entered into a contract with BARDA, valued at $100 million for the delivery of BioThrax to the Strategic National Stockpile over a two-year period of performance (the "BARDA BioThrax Contract"). In conjunction with the signing of this contract, the Company entered into a modification to its multi-year contract with BARDA for the advanced development and delivery of NuThrax (the "BARDA NuThrax Contract"). The modification to the BARDA NuThrax Contract increases the number of doses of NuThrax to be delivered under the base period from two million to three million doses with a commensurate reduction in dose price for the initial deliveries. The modification also provides for a discount on the purchase price for doses to be procured during the option period by up to $100 million thereby reducing the total contract value up to $1.5 billion. Due to this modification of the BARDA NuThrax Contract, the Company has determined that these modifications are treated as discounts, and that a portion of the $100 million consideration to be received under the BARDA BioThrax Contract must be allocated to the future deliveries under the BARDA NuThrax Contract. This discount will result in a partial deferral of revenue recognized upon the delivery of BioThrax doses under the BARDA BioThrax Contract. This deferred revenue will then be recognized upon the delivery of NuThrax doses under the BARDA NuThrax Contract, or upon the future extinguishment of the Company's obligation to deliver NuThrax doses to which the discount applies. As of March 31, 2017, the Company has not delivered BioThrax under the BARDA BioThrax Contract. The Company has classified the results of operations of Aptevo Therapeutics Inc. ("Aptevo") as discontinued operations for the three months ended March 31, 2016. The historical financial statements and footnotes have been revised accordingly. See Note 2. "Discontinued operations" for further details regarding the spin-off. For periods following the spin-off, the Company reports financial results under one business segment. In the opinion of the Company's management, any adjustments contained in the accompanying unaudited consolidated financial statements are of a normal recurring nature and are necessary to present fairly the financial position of the Company as of March 31, 2017. Interim results are not necessarily indicative of results that may be expected for any other interim period or for an entire year. Recently issued accounting standards In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) (" In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718) " In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (" ASU No. 2017-01") . ASU No. 2017-01 provides clarification for the definition of a business with the objective of adding guidance and providing a more robust framework to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new standard will be effective for all annual periods beginning after December 15, 2017. Early adoption is permitted. The Company will assess the impact of this standard when a business combination arises. In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 250): Simplifying the Test for Goodwill Impairment (" ASU No. 2017-04") . The standard eliminates the second step in the goodwill impairment test, which requires an entity to determine the implied fair value of the reporting unit's goodwill. Instead, an entity should recognize an impairment loss if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed the amount of goodwill allocated to the reporting unit. The standard is effective for annual and interim goodwill impairment tests conducted in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company does not believe that the new standard will have a material impact on its financial statements. There are no other recently issued accounting pronouncements that are expected to have a material impact on the Company's financial position, results of operations or cash flows.

Discontinued Operations

Discontinued Operations	3 Months Ended
	Mar. 31, 2017
Discontinued Operations [Abstract]
Discontinued operations	2. Discontinued operations On August 1, 2016, the Company completed the spin-off of Aptevo through The historical statements of operations of Aptevo have been presented as discontinued operations in the consolidated financial statements and the prior period has been restated. Discontinued operations include results of Aptevo's business except for certain allocated corporate overhead costs and certain costs associated with transition services provided by the Company to Aptevo. These allocated costs remain part of continuing operations. Due to differences between the basis of presentation for discontinued operations and the basis of presentation as a stand-alone company, the financial results of Aptevo included within discontinued operations for the Company may not be indicative of actual financial results of Aptevo. In conjunction with the spin-off, the Company entered into a manufacturing services agreement, transition services agreement, a tax matters agreement and an employee matters agreement with Aptevo.Under the terms of the manufacturing services agreement, the Company agreed to provide contract manufacturing services for certain of Aptevo's products commencing on the date of the Distribution and continues for 10 years. Under the terms of the transition services agreement, the Company agreed to provide on an interim, transitional basis, various services, including, but not limited to, accounts payable administration, information technology services, regulatory and clinical support, general administrative services and other support services commencing on the date of the Distribution and terminating up to two years following the date of the Distribution. The following table summarizes results from discontinued operations of Aptevo included in the consolidated statements of operations: Three Months Ended March 31, (in thousands) 2016 Revenues: Product sales $ 7,952 Collaborations 85 Total revenues 8,037 Operating expense: Cost of product sales 4,502 Research and development 8,061 Selling, general and administrative 8,070 Loss from operations (12,596 ) Other income (expense), net: 81 Loss from discontinued operations before benefit from income taxes (12,515 ) Benefit from income taxes (4,617 ) Net loss from discontinued operations $ (7,898 ) The following table summarizes the cash flows of Aptevo included in the March 31, 2016 consolidated statements of cash flows: Three Months Ended March 31, (in thousands) 2016 Net cash used in operating activities $ (6,021 ) Net cash used in investing activities (1,087 ) Net cash provided by financing activities 5,689 Net decrease in cash and cash equivalents $ (1,419 )

Fair value measurements

Fair value measurements	3 Months Ended
	Mar. 31, 2017
Fair value measurements [Abstract]
Fair value measurements	3. Fair value measurements Contingent consideration are liabilities measured at fair value on a recurring basis. As of March 31, 2017 and December 31, 2016, the fair value of contingent consideration was $11.8 million and $13.2 million, respectively. On January 29, 2014, the Company issued $250.0 million aggregate principal amount of 2.875% Convertible Senior Notes due 2021 (the "Notes"). The Notes mature on January 15, 2021, unless earlier purchased by the Company or converted. The Notes are subject to the fair value disclosure requirements and are classified as a Level 2 instrument. The estimated fair value of the Notes at March 31, 2017 was $299.6 million. For the three months ended March 31, 2017, the contingent consideration obligation associated with the EV-035 series of molecules and the broad spectrum antiviral platform program decreased by $0.2 million. For the three months ended March 31, 2016, the contingent consideration obligation associated with the EV-035 series of molecules and the broad spectrum antiviral platform program increased by a nominal amount. The changes are primarily due to the estimated timing and probability of success for certain development and regulatory milestones of the EV-035 series of molecules and the broad spectrum antiviral platform program, which are inputs that have no observable market (Level 3). The decreases and increases in the contingent consideration are classified in the Company's statement of operations as both selling, general and administrative expense and research and development expense. For the three months ended March 31, 2017 and 2016, the contingent purchase consideration obligations associated with RSDL increased by $0.4 million and $0.8 million, respectively. The fair value of the RSDL contingent consideration obligations increased primarily due to the expected timing of future net sales, which are inputs that have no observable market (Level 3). These changes are classified in the Company's statement of operations as cost of product sales and contract manufacturing. The following table is a reconciliation of the beginning and ending balance of the liabilities, consisting only of contingent consideration, measured at fair value using significant unobservable inputs (Level 3) during the three months ended March 31, 2017. (in thousands) Balance at December 31, 2016 $ 13,185 Expense included in earnings 200 Settlements (1,568 ) Purchases, sales and issuances - Transfers in/(out) of Level 3 - Balance at March 31, 2017 $ 11,817 Separate disclosure is required for assets and liabilities measured at fair value on a recurring basis from those measured at fair value on a non-recurring basis. As of March 31, 2017 and 2016, the Company had no assets or liabilities that were measured at fair value on a non-recurring basis.

Inventories

Inventories	3 Months Ended
	Mar. 31, 2017
Inventories [Abstract]
Inventories	4. Inventories Inventories consisted of the following: March 31, December 31, (in thousands) 2017 2016 Raw materials and supplies $ 33,264 $ 30,687 Work-in-process 27,326 19,821 Finished goods 10,142 23,494 Total inventories $ 70,732 $ 74,002

Property, plant and equipment

Property, plant and equipment	3 Months Ended
	Mar. 31, 2017
Property, plant and equipment [Abstract]
Property, plant and equipment	5. Property, plant and equipment Property, plant and equipment consisted of the following: March 31, December 31, (in thousands) 2017 2016 Land and improvements $ 20,376 $ 20,340 Buildings, building improvements and leasehold improvements 147,481 147,130 Furniture and equipment 192,828 190,157 Software 53,059 52,564 Construction-in-progress 87,330 77,813 Property, plant and equipment, gross 501,074 488,004 Less: Accumulated depreciation and amortization (119,972 ) (111,556 ) Total property, plant and equipment, net $ 381,102 $ 376,448 As of March 31, 2017 and December 31, 2016, construction-in-progress primarily includes costs related to the build out of the Company's Center for Innovation in Advanced Development and Manufacturing ("CIADM") facility.

Intangible assets, in-process r

Intangible assets, in-process research and development	3 Months Ended
	Mar. 31, 2017
Intangible assets and in-process research and development [Abstract]
Intangible assets, in-process research and development	6. Intangible assets and in-process research and development Intangible assets consisted of the following: (in thousands) Cost basis Balance at December 31, 2016 $ 57,099 Additions - Balance at March 31, 2017 $ 57,099 Accumulated amortization Balance at December 31, 2016 $ (23,234 ) Amortization (1,554 ) Balance at March 31, 2017 $ (24,788 ) Net balance at March 31, 2017 $ 32,311 For the three months ended March 31, 2017 and 2016, the Company recorded amortization expense of $1.6 million and $1.8 million, respectively, for intangible assets, which has been recorded in operating expenses, specifically selling, general and administrative and cost of product sales and contract manufacturing. As of March 31, 2017, the weighted average amortization period remaining for intangible assets is 73 months.

Equity awards

Equity awards	3 Months Ended
	Mar. 31, 2017
Equity awards [Abstract]
Equity awards	7. Equity As of March 31, 2017, the Company had one equity awards plan, the Fourth Amended and Restated Emergent BioSolutions Inc. 2006 Stock Incentive Plan (the "2006 Plan"), which includes both stock options and restricted stock units. The following is a summary of stock option award activity under the 2006 Plan: 2006 Plan Number of Shares Weighted-Average Exercise Price Aggregate Intrinsic Value Outstanding at December 31, 2016 2,559,331 $ 22.94 $ 25,348,245 Granted 376,798 30.63 Exercised (162,642 ) 18.00 Forfeited (10,225 ) 27.38 Outstanding at March 31, 2017 2,763,262 $ 24.17 $ 14,763,038 The following is a summary of restricted stock unit award activity under the 2006 Plan: Number of Shares Weighted-Average Grant Price Aggregate Intrinsic Value Outstanding at December 31, 2016 875,584 $ 28.94 $ 28,754,179 Granted 353,681 30.63 Vested (350,617 ) 30.39 Forfeited (13,989 ) 28.09 Outstanding at March 31, 2017 864,659 $ 30.13 $ 25,109,698

Income taxes

Income taxes	3 Months Ended
	Mar. 31, 2017
Income taxes [Abstract]
Income taxes	8. Income taxes The estimated effective annual tax rate for continued operations, which excludes discrete adjustments, was 31% and 34% for the three months ended March 31, 2017 and 2016, respectively. The increase in the estimated effective annual tax rate on continuing operations was primarily due to a change in the distribution of taxable income between U.S. and foreign jurisdictions.

Earnings per share

Earnings per share	3 Months Ended
	Mar. 31, 2017
Earnings per share [Abstract]
Earnings per share	9. Earnings per share The following table presents the calculation of basic and diluted net income per share: Three Months Ended March 31, (in thousands, except share and per share data) 2017 2016 Numerator: Net income from continuing operations $ 10,485 $ 11,889 Interest expense, net of tax 907 716 Amortization of debt issuance costs, net of tax 195 215 Net income, adjusted from continuing operations 11,587 12,820 Income (loss) from discontinued operations - (7,898 ) Net income, adjusted $ 11,587 $ 4,922 Denominator: Weighted-average number of shares—basic 40,727,755 39,542,656 Dilutive securities—equity awards 894,171 1,096,711 Dilutive securities—convertible debt 8,096,500 7,720,525 Weighted-average number of shares—diluted 49,718,426 48,359,892 Net income per share-basic from continuing operations $ 0.26 $ 0.30 Income (loss) per share-basic from discontinued operations - (0.20 ) Net income per share-basic 0.26 0.10 Net income per share-diluted from continuing operations $ 0.23 $ 0.27 Income (loss) per share-diluted from discontinued operations - (0.17 ) Net income per share-diluted 0.23 0.10 For the three months ended March 31, 2017 and 2016, basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. For the three months ended March 31, 2017 and 2016, diluted earnings per share is computed using the "if-converted" method by dividing the net income adjusted for interest expense and amortization of debt issuance cost, both net of tax, associated with the Notes by the weighted average number of shares of common stock outstanding during the period. The weighted average number of shares is adjusted for the potential dilutive effect of the exercise of stock options and the vesting of restricted stock units along with the assumption of the conversion of the Notes, at the beginning of the period. For the three months ended March 31, 2017, approximately 0.8 million stock options were excluded from the calculation of diluted earnings per share due to the fact that the exercise prices were in excess of the average per share closing price during the period. For the three months ended March 31, 2016, all of the outstanding stock options to purchase shares of common stock were included in the calculation of diluted earnings per share.

Restructuring

Restructuring	3 Months Ended
	Mar. 31, 2017
Abandonment of equipment
Restructuring	10. Restructuring In August 2016, the Company adopted a plan to restructure and reprioritize the operations of one of its facilities at the Emergent BioDefense Operations Lansing LLC ("EBOL") site due to the Company's large-scale manufacturing facility at the EBOL site commencing manufacturing operations. Severance and other related costs and asset-related charges are reflected within the Company's consolidated statement of income as a component of selling, general and administrative expense. The Company has substantially completed the EBOL restructuring. The costs of the restructuring as of March 31, 2017 are detailed below: Incurred in Inception to Date Total Expected (in thousands) 2017 Costs Incurred to be Incurred Termination benefits $ 20 $ 5,266 $ 5,286 Abandonment of equipment - 3,749 3,749 Other costs - 691 691 Total $ 20 $ 9,706 $ 9,726 During the year ended December 31, 2016, the Company abandoned certain equipment and associated assets The following is a summary of the activity for the liabilities related to the restructuring: Termination (in thousands) Benefits Balance at December 31, 2016 $ 4,357 Expenses incurred 20 Amount paid (2,122 ) Other adjustments - Balance at March 31, 2017 $ 2,255

Segment information

Segment information	3 Months Ended
	Mar. 31, 2017
Segment information [Abstract]
Segment information	11. Segment information For financial reporting purposes, in the periods following the spin-off of Aptevo, the Company reports financial information as one business segment.

Litigation

Litigation	3 Months Ended
	Mar. 31, 2017
Litigation [Abstract]
Litigation	12. Litigation On July 19, 2016, Plaintiff William Sponn, or Sponn, filed a putative class action complaint in the United States District Court for the District of Maryland on behalf of purchasers of the Company's common stock between January 11, 2016 and June 21, 2016, inclusive, or the Class Period, seeking to pursue remedies under the Securities Exchange Act of 1934 against the Company and certain of its senior officers and directors, collectively, the Defendants. The complaint alleges, among other things, that the Company made materially false and misleading statements about the government's demand for BioThrax and expectations that the Company's five-year exclusive procurement contract with the U.S. Department of Health and Human Services would be renewed and omitted certain material facts. Sponn is seeking unspecified damages, including legal costs. On October 25, 2016 the Court added City of Cape Coral Municipal Firefighters' Retirement Plan and City of Sunrise Police Officers' Retirement Plan as plaintiffs and appointed them Lead Plaintiffs and Robins Geller Rudman & Dowd LLP as Lead Counsel. On December 27, 2016 the plaintiffs filed an amended complaint that cites the same class period, names the same defendants and makes similar allegations to the original complaint. The Company filed a Motion to Dismiss on February 27, 2017. The Plaintiffs filed an opposition brief on April 28, 2017. The Defendants believe that the allegations in the complaint are without merit and intend to defend themselves vigorously against those claims. As of the date of this filing, the range of potential loss cannot be determined or estimated.

Summary of significant accoun19

Summary of significant accounting policies (Policies)	3 Months Ended
	Mar. 31, 2017
Summary of significant accounting policies [Abstract]
Basis of presentation and consolidation	Basis of presentation and consolidation The accompanying unaudited consolidated financial statements include the accounts of Emergent BioSolutions Inc. ("Emergent" or the "Company") and its wholly owned and majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The unaudited consolidated financial statements included herein have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X issued by the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC. During the three months ended March 31, 2017, there have been no significant changes to the Company's summary of significant accounting policies contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC, except for revenue recognition associated with the new Biomedical Advanced Research and Development Authority ("BARDA") contract for BioThrax. On March 16, 2017, the Company entered into a contract with BARDA, valued at $100 million for the delivery of BioThrax to the Strategic National Stockpile over a two-year period of performance (the "BARDA BioThrax Contract"). In conjunction with the signing of this contract, the Company entered into a modification to its multi-year contract with BARDA for the advanced development and delivery of NuThrax (the "BARDA NuThrax Contract"). The modification to the BARDA NuThrax Contract increases the number of doses of NuThrax to be delivered under the base period from two million to three million doses with a commensurate reduction in dose price for the initial deliveries. The modification also provides for a discount on the purchase price for doses to be procured during the option period by up to $100 million thereby reducing the total contract value up to $1.5 billion. Due to this modification of the BARDA NuThrax Contract, the Company has determined that these modifications are treated as discounts, and that a portion of the $100 million consideration to be received under the BARDA BioThrax Contract must be allocated to the future deliveries under the BARDA NuThrax Contract. This discount will result in a partial deferral of revenue recognized upon the delivery of BioThrax doses under the BARDA BioThrax Contract. This deferred revenue will then be recognized upon the delivery of NuThrax doses under the BARDA NuThrax Contract, or upon the future extinguishment of the Company's obligation to deliver NuThrax doses to which the discount applies. As of March 31, 2017, the Company has not delivered BioThrax under the BARDA BioThrax Contract. The Company has classified the results of operations of Aptevo Therapeutics Inc. ("Aptevo") as discontinued operations for the three months ended March 31, 2016. The historical financial statements and footnotes have been revised accordingly. See Note 2. "Discontinued operations" for further details regarding the spin-off. For periods following the spin-off, the Company reports financial results under one business segment. In the opinion of the Company's management, any adjustments contained in the accompanying unaudited consolidated financial statements are of a normal recurring nature and are necessary to present fairly the financial position of the Company as of March 31, 2017. Interim results are not necessarily indicative of results that may be expected for any other interim period or for an entire year. Recently issued accounting standards In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) (" In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718) " In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (" ASU No. 2017-01") . ASU No. 2017-01 provides clarification for the definition of a business with the objective of adding guidance and providing a more robust framework to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new standard will be effective for all annual periods beginning after December 15, 2017. Early adoption is permitted. The Company will assess the impact of this standard when a business combination arises. In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 250): Simplifying the Test for Goodwill Impairment (" ASU No. 2017-04") . The standard eliminates the second step in the goodwill impairment test, which requires an entity to determine the implied fair value of the reporting unit's goodwill. Instead, an entity should recognize an impairment loss if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed the amount of goodwill allocated to the reporting unit. The standard is effective for annual and interim goodwill impairment tests conducted in fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company does not believe that the new standard will have a material impact on its financial statements. There are no other recently issued accounting pronouncements that are expected to have a material impact on the Company's financial position, results of operations or cash flows.

Discontinued Operations (Tables

Discontinued Operations (Tables)	3 Months Ended
	Mar. 31, 2017
Discontinued Operations [Abstract]
Summarized results of discontinued operations included in consolidated statements of income	The following table summarizes results from discontinued operations of Aptevo included in the consolidated statements of operations: Three Months Ended March 31, (in thousands) 2016 Revenues: Product sales $ 7,952 Collaborations 85 Total revenues 8,037 Operating expense: Cost of product sales 4,502 Research and development 8,061 Selling, general and administrative 8,070 Loss from operations (12,596 ) Other income (expense), net: 81 Loss from discontinued operations before benefit from income taxes (12,515 ) Benefit from income taxes (4,617 ) Net loss from discontinued operations $ (7,898 )
Summary of disposal groups including discontinued operations cash flows	The following table summarizes the cash flows of Aptevo included in the March 31, 2016 consolidated statements of cash flows: Three Months Ended March 31, (in thousands) 2016 Net cash used in operating activities $ (6,021 ) Net cash used in investing activities (1,087 ) Net cash provided by financing activities 5,689 Net decrease in cash and cash equivalents $ (1,419 )

Fair value measurements (Tables

Fair value measurements (Tables)	3 Months Ended
	Mar. 31, 2017
Fair value measurements [Abstract]
Reconciliation of Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)	The following table is a reconciliation of the beginning and ending balance of the liabilities, consisting only of contingent consideration, measured at fair value using significant unobservable inputs (Level 3) during the three months ended March 31, 2017. (in thousands) Balance at December 31, 2016 $ 13,185 Expense included in earnings 200 Settlements (1,568 ) Purchases, sales and issuances - Transfers in/(out) of Level 3 - Balance at March 31, 2017 $ 11,817

Inventories (Tables)

Inventories (Tables)	3 Months Ended
	Mar. 31, 2017
Inventories [Abstract]
Inventories	Inventories consisted of the following: March 31, December 31, (in thousands) 2017 2016 Raw materials and supplies $ 33,264 $ 30,687 Work-in-process 27,326 19,821 Finished goods 10,142 23,494 Total inventories $ 70,732 $ 74,002

Property, plant and equipment (

Property, plant and equipment (Tables)	3 Months Ended
	Mar. 31, 2017
Property, plant and equipment [Abstract]
Property, plant and equipment	Property, plant and equipment consisted of the following: March 31, December 31, (in thousands) 2017 2016 Land and improvements $ 20,376 $ 20,340 Buildings, building improvements and leasehold improvements 147,481 147,130 Furniture and equipment 192,828 190,157 Software 53,059 52,564 Construction-in-progress 87,330 77,813 Property, plant and equipment, gross 501,074 488,004 Less: Accumulated depreciation and amortization (119,972 ) (111,556 ) Total property, plant and equipment, net $ 381,102 $ 376,448 As of March 31, 2017 and December 31, 2016, construction-in-progress primarily includes costs related to the build out of the Company's Center for Innovation in Advanced Development and Manufacturing ("CIADM") facility.

Intangible assets, in-process24

Intangible assets, in-process research and development (Tables)	3 Months Ended
	Mar. 31, 2017
Intangible assets and in-process research and development [Abstract]
Intangible Assets	Intangible assets consisted of the following: (in thousands) Cost basis Balance at December 31, 2016 $ 57,099 Additions - Balance at March 31, 2017 $ 57,099 Accumulated amortization Balance at December 31, 2016 $ (23,234 ) Amortization (1,554 ) Balance at March 31, 2017 $ (24,788 ) Net balance at March 31, 2017 $ 32,311

Equity awards (Tables)

Equity awards (Tables)	3 Months Ended
	Mar. 31, 2017
Equity awards [Abstract]
Option Award Activity	The following is a summary of stock option award activity under the 2006 Plan: 2006 Plan Number of Shares Weighted-Average Exercise Price Aggregate Intrinsic Value Outstanding at December 31, 2016 2,559,331 $ 22.94 $ 25,348,245 Granted 376,798 30.63 Exercised (162,642 ) 18.00 Forfeited (10,225 ) 27.38 Outstanding at March 31, 2017 2,763,262 $ 24.17 $ 14,763,038
Restricted Stock Units Activity	The following is a summary of restricted stock unit award activity under the 2006 Plan: Number of Shares Weighted-Average Grant Price Aggregate Intrinsic Value Outstanding at December 31, 2016 875,584 $ 28.94 $ 28,754,179 Granted 353,681 30.63 Vested (350,617 ) 30.39 Forfeited (13,989 ) 28.09 Outstanding at March 31, 2017 864,659 $ 30.13 $ 25,109,698

Earnings per share (Tables)

Earnings per share (Tables)	3 Months Ended
	Mar. 31, 2017
Earnings per share [Abstract]
Summary of Basic and Diluted Net Income (Loss) per Share	The following table presents the calculation of basic and diluted net income per share: Three Months Ended March 31, (in thousands, except share and per share data) 2017 2016 Numerator: Net income from continuing operations $ 10,485 $ 11,889 Interest expense, net of tax 907 716 Amortization of debt issuance costs, net of tax 195 215 Net income, adjusted from continuing operations 11,587 12,820 Income (loss) from discontinued operations - (7,898 ) Net income, adjusted $ 11,587 $ 4,922 Denominator: Weighted-average number of shares—basic 40,727,755 39,542,656 Dilutive securities—equity awards 894,171 1,096,711 Dilutive securities—convertible debt 8,096,500 7,720,525 Weighted-average number of shares—diluted 49,718,426 48,359,892 Net income per share-basic from continuing operations $ 0.26 $ 0.30 Income (loss) per share-basic from discontinued operations - (0.20 ) Net income per share-basic 0.26 0.10 Net income per share-diluted from continuing operations $ 0.23 $ 0.27 Income (loss) per share-diluted from discontinued operations - (0.17 ) Net income per share-diluted 0.23 0.10

Restructuring (Tables)

Restructuring (Tables)	3 Months Ended
	Mar. 31, 2017
Abandonment of equipment
Costs of the restructuring	The Company has substantially completed the EBOL restructuring. The costs of the restructuring as of March 31, 2017 are detailed below: Incurred in Inception to Date Total Expected (in thousands) 2017 Costs Incurred to be Incurred Termination benefits $ 20 $ 5,266 $ 5,286 Abandonment of equipment - 3,749 3,749 Other costs - 691 691 Total $ 20 $ 9,706 $ 9,726
Summary of the activity for liabilities related to EPDU restructuring	The following is a summary of the activity for the liabilities related to the restructuring: Termination (in thousands) Benefits Balance at December 31, 2016 $ 4,357 Expenses incurred 20 Amount paid (2,122 ) Other adjustments - Balance at March 31, 2017 $ 2,255

Summary of significant accoun28

Summary of significant accounting policies (Details) Dose in Millions, $ in Millions	Mar. 16, 2017USD ($)Dose	Mar. 31, 2017USD ($)Segment
Summary of significant accounting policies [Abstract]
Number of business segments | Segment		1
BioThrax [Member] | BARDA [Member]
Product Information [Line Items]
Amount of contract	$ 100
Period of performance	2 years
NuThrax [Member] | BARDA [Member]
Product Information [Line Items]
Total contract value	$ 1,500
NuThrax [Member] | BARDA [Member] | Minimum [Member]
Product Information [Line Items]
Number of doses to be delivered | Dose	2
NuThrax [Member] | BARDA [Member] | Maximum [Member]
Product Information [Line Items]
Number of doses to be delivered | Dose	3
Discount on purchase price for doses to be procured	$ 100
Accounting Standards Update 2016-09 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Tax benefit associated with stock option activity		$ 2.3

Discontinued Operations (Detail

Discontinued Operations (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Aug. 01, 2016
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Percentage of outstanding shares distributed			100.00%
Record date for distribution	Jul. 22, 2016
Number of common stock distributed (in shares)			20,230,000
Aptevo [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Unsecured debt			$ 20,000
Term of manufacturing services contract	10 years
Term of transition services agreement	2 years
Revenues [Abstract]
Product sales		$ 7,952
Contracts, grants and collaborations		85
Total revenues		8,037
Operating expense [Abstract]
Cost of product sales		4,502
Research and development		8,061
Selling, general and administrative		8,070
Income (loss) from operations		(12,596)
Other income (expense), net [Abstract]
Other income (expense), net		81
Income (loss) from discontinued operations before provision for (benefit from) income taxes		(12,515)
Provision for (benefit from) income taxes		(4,617)
Net Income (loss) from discontinued operations		(7,898)
Net Cash Provided by (Used in) Discontinued Operations [Abstract]
Net cash used in operating activities		(6,021)
Net cash provided by investing activities		(1,087)
Net cash provided by financing activities		5,689
Net increase in cash and cash equivalents		$ (1,419)

Fair value measurements (Detail

Fair value measurements (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended
	Jan. 29, 2014	Mar. 31, 2017	Mar. 31, 2016
Unobservable Input Reconciliation [Roll Forward]
Balance, beginning of period		$ 13,185
Expense included in earnings		200
Settlements		(1,568)
Purchases, sales and issuances		0
Transfers in/(out) of Level 3		0
Balance, end of period		11,817
Convertible Senior Notes Due 2021 [Member]
Unobservable Input Reconciliation [Roll Forward]
Face amount of debt instrument	$ 250,000
Interest rate, stated percentage	2.875%
Maturity date	Jan. 15, 2021
Fair value of the notes		299,600
Evolva Holding SA 035 & Broad Spectrum Antiviral Platform [Member]
Unobservable Input Reconciliation [Roll Forward]
Change in fair value of contingent obligations		(200)
RSDL [Member]
Unobservable Input Reconciliation [Roll Forward]
Change in fair value of contingent obligations		$ 400	$ 800

Inventories (Details)

Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Inventories [Abstract]
Raw materials and supplies	$ 33,264	$ 30,687
Work-in-process	27,326	19,821
Finished goods	10,142	23,494
Total inventories	$ 70,732	$ 74,002

Property, plant and equipment32

Property, plant and equipment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Property, Plant and Equipment [Line Items]
Property, plant and equipment	$ 501,074		$ 488,004
Less: Accumulated depreciation and amortization	(119,972)		(111,556)
Total Property, plant and equipment, net	381,102		376,448
Depreciation and amortization	10,166	$ 8,840
Land and Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment	20,376		20,340
Buildings, Building Improvements and Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment	147,481		147,130
Furniture and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment	192,828		190,157
Software [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment	53,059		52,564
Construction-in-progress [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment	$ 87,330		$ 77,813

Intangible assets, in-process33

Intangible assets, in-process research and development (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cost Basis [Abstract]
Intangible Assets, Beginning Balance	$ 57,099,000
Additions	0
Intangible Assets, Ending Balance	57,099,000
Accumulated Amortization [Abstract]
Accumulated Amortization, Beginning Balance	(23,234,000)
Amortization	1,554,000	$ 1,843,000
Accumulated Amortization, Ending Balance	(24,788,000)
Net book value of intangible assets	$ 32,311,000
Intangible assets, weighted average useful life	73 months

Equity awards (Details)

Equity awards (Details)	3 Months Ended
	Mar. 31, 2017USD ($)Plan$ / sharesshares
Equity awards [Abstract]
Number of stock-based employee compensation plans | Plan	1
Stock Options Member [Member]
Aggregate Intrinsic Value [Abstract]
Outstanding, beginning of period | $	$ 25,348,245
Outstanding, end of period | $	14,763,038
Exercisable, end of period | $	$ 13,761,382
2006 Plan [Member] | Restricted Stock Units (RSUs) [Member]
Restricted stock unit award activity [Roll Forward]
Outstanding, beginning of period (in shares)	875,584
Granted (in shares)	353,681
Vested (in shares)	(350,617)
Forfeited (in shares)	(13,989)
Outstanding, end of period (in shares)	864,659
Weighted-Average Grant Price [Roll Forward]
Outstanding, beginning of period (in dollars per share) | $ / shares	$ 28.94
Granted (in dollars per share) | $ / shares	30.63
Vested (in dollars per share) | $ / shares	30.39
Forfeited (in dollars per share) | $ / shares	28.09
Outstanding, end of period (in dollars per share) | $ / shares	$ 30.13
Aggregate intrinsic value [Abstract]
Outstanding, beginning of period | $	$ 28,754,179
Outstanding, end of period | $	$ 25,109,698
2006 Plan [Member] | Stock Options Member [Member]
Options outstanding [Roll Forward]
Outstanding, beginning of period (in shares)	2,559,331
Granted (in shares)	376,798
Exercised (in shares)	(162,642)
Forfeited (in shares)	(10,225)
Outstanding, end of period (in shares)	2,763,262
Weighted-Average Exercise Price [Roll Forward]
Outstanding, beginning of period (in dollars per share) | $ / shares	$ 22.94
Granted (in dollars per share) | $ / shares	30.63
Exercised (in dollars per share) | $ / shares	18
Forfeited (in dollars per share) | $ / shares	27.38
Outstanding, end of period (in dollars per share) | $ / shares	$ 24.17
Aggregate intrinsic value [Abstract]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized	3,800,000

Income taxes (Details)

Income taxes (Details)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Income taxes [Abstract]
Effective annual tax rate	31.00%	34.00%

Earnings per share (Details)

Earnings per share (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
Numerator [Abstract]
Net Income from continuing operations		$ 10,485	$ 11,889
Interest expense, net of tax		907	716
Amortization of debt issuance costs, net of tax		195	215
Net income, adjusted from continuing operations		11,587	12,820
Income (loss) from discontinued operations		0	(7,898)
Net income (loss), adjusted		$ 11,587	$ 4,922
Denominator [Abstract]
Weighted-average number of shares-basic (in shares)		40,727,755	39,542,656
Dilutive securities-equity awards (in shares)		894,171	1,096,711
Dilutive securities-convertible debt		8,096,500	7,720,525
Weighted-average number of shares-diluted (in shares)		49,718,426	48,359,892
Net income per share - basic from continuing operations (in dollars per share)		$ 0.26	$ 0.30
Net loss from discontinued operations-basic		0	(0.20)
Net income per share - basic (in dollars per share)		0.26	0.10
Net income per share from continuing operations-diluted	[1]	0.23	0.27
Net loss per share from discontinued operations-diluted		0	(0.17)
Net income per share - diluted (in dollars per share)	[1]	$ 0.23	$ 0.10
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive shares excluded from calculation (in shares)		800,000
[1]	See Note 8 "Earnings per share" for details on calculation.

Restructuring (Details)

Restructuring (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2017USD ($)
Selling, General and Administrative Expenses [Member]
Summary of activity for liabilities [Roll Forward]
Abandonment of equipment charge	$ 3,700
EBOL Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Incurred in 2017	20
Inception to Date Costs Incurred	9,706
Total Expected to be Incurred	9,726
Termination Benefits [Member] | EBOL Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Incurred in 2017	20
Inception to Date Costs Incurred	5,266
Total Expected to be Incurred	5,286
Summary of activity for liabilities [Roll Forward]
Balance, beginning of period	4,357
Expenses incurred	20
Amount paid	(2,122)
Other adjustments	0
Balance, end of period	2,255
Other Costs [Member] | EBOL Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Incurred in 2017	0
Inception to Date Costs Incurred	691
Total Expected to be Incurred	691
Abandonment of Equipment [Member] | EBOL Restructuring Plan [Member]
Restructuring Cost and Reserve [Line Items]
Incurred in 2017	0
Inception to Date Costs Incurred	3,749
Total Expected to be Incurred	$ 3,749

Segment information (Details)

Segment information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2017USD ($)SegmentBusinessUnit	Mar. 31, 2016USD ($)	Dec. 31, 2016USD ($)
Segment Reporting Information [Line Items]
Number of business segments | Segment	1
Net income	$ 10,485	$ 3,991
Total assets	$ 951,639		$ 970,111
Aptevo [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Number of business units | BusinessUnit	1