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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is meant to provide material information relevant to an assessment of the financial condition and results of operations of our company, including an evaluation of the amounts and uncertainties of cash flows from operations and from outside resources, so as to allow investors to better view our company from management’s perspective. 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"). 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. 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. (“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.

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. 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. 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. The revised reporting structure reflects the internal reporting and review process used by our Chief Operating Decision Maker, for making decisions and assessing performance, and is consistent with how we currently manage the business. We now manage our business with a focus on three reportable segments: (1) a Commercial Products segment consisting of our NARCAN® and Other Commercial Products; (2) a MCM Products segment consisting of the Anthrax - MCM, Smallpox - MCM and Other Products and (3) a Services segment consisting of our Bioservices offerings.

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.

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.

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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. CYFENDUS® is procured by certain authorized government buyers for their use; and

•Raxibacumab injection, the first fully human monoclonal antibody therapeutic licensed by the FDA for the treatment and prophylaxis of inhalational anthrax.

Smallpox - 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;

•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; and

•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.

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;

•EbangaTM (ansuvimab-zykl), a monoclonal antibody with antiviral activity provided through a single IV infusion for the treatment of Ebola. Under the terms of a collaboration with Ridgeback Biotherapeutics ("Ridgeback"), Emergent will be responsible for the manufacturing, sale, and distribution of EbangaTM in the U.S. and Canada, and Ridgeback will serve as the global access partner for EbangaTM;

•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. Trobigard® was approved in Belgium in 2021 but has not been approved by the FDA. Trobigard® is procured by certain authorized government buyers under special circumstances for potential use as a nerve agent countermeasure outside of the U.S.

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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. 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. We service both clinical-stage and commercial-stage projects for a variety of third-party customers, including government agencies, innovative pharmaceutical companies, and non-government organizations. In August 2023, we initiated an organizational restructuring plan (the “August 2023 Plan”) which included actions to reduce investment in and de-emphasize focus on our Bioservices business.

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. 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.

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.

At the closing, Bavarian Nordic paid a cash purchase price of $270.2 million, exclusive of customary closing adjustments for cash, indebtedness, working capital and transaction expenses of the business at closing. 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.

As a result of the divestiture, the Company recognized a pre-tax gain of $74.2 million during year ended December 31, 2023, net of transaction costs of $4.0 million, which was recorded within "Gain on sale of business" on the Consolidated Statements of Operations.

FDA Approval of CYFENDUS®

On July 20, 2023, the FDA approved CYFENDUS® 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. In December 2018, CYFENDUS® vaccine was the subject of a pre-emergency use authorization package submitted to the FDA. The following year, the USG began procuring this product for national preparedness efforts.

EbangaTM Procurement Contract

On July 31, 2023, the Company was awarded a 10-year contract by the Biomedical Advanced Research and Development Authority ("BARDA") for advanced development, manufacturing scale-up, and procurement of EbangaTM treatment for Ebola. The contract consists of a base period of performance with two option periods valued at approximately $121.0 million, and five option periods for procurement of EbangaTM over five years valued at up to $583.0 million. If all option periods are exercised, the total contract value will be valued at up to approximately $704.0 million.

Emergent is responsible for the manufacturing, sale, and distribution of EbangaTM in the U.S. and Canada pursuant to a collaboration agreement with Ridgeback, the developer of the treatment.

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Emergent paid Ridgeback $6.3 million in contingent consideration as a result of the award of the BARDA contract in the third quarter of 2023. In addition, the Company could owe up to $50.4 million in contingent consideration to Ridgeback if activities under the awarded contract have not ceased by June 1, 2026.

August 2023 Organizational Restructuring Plan

In August 2023, the Company initiated the August 2023 Plan intended to strengthen its core business and financial position by reducing investment in and de-emphasizing focus on its Bioservices business for future growth. As part of the August 2023 Plan, the Company reduced its workforce by approximately 400 employees. The Company incurred approximately $20.0 million in charges in connection with the August 2023 Plan during the year ended December 31, 2023. These charges consist primarily of charges related to severance payments, transition services, and employee benefits. All activities related to the August 2023 Plan were substantially completed during the third quarter of 2023.

Launch of NARCAN® Naloxone HCl Nasal Spray 4 mg Over-The-Counter ("NARCAN® OTC")

In the third quarter of 2023, the Company launched NARCAN® OTC, which was approved by the FDA as an over-the-counter emergency treatment of opioid overdose, broadening our customer base and sales channels to retail pharmacies and digital commerce websites. The Company's Nasal Naloxone products are now sold commercially over-the-counter at retail pharmacies and digital commerce websites as well as through physician-directed or standing order prescriptions at retail pharmacies, health departments, local law enforcement agencies, community-based organizations, substance abuse centers and other federal agencies.

2023 Triggering Events

Long-Live Asset Impairment Testing

The Company tests its long-lived assets that are held and used for recoverability whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable.

During the second quarter of 2023, due to deterioration in performance and resulting downward revisions to our internal Bioservices forecast made during the second quarter, including future expected cash flows, the Company determined there were sufficient indicators of impairment on certain asset groups within the Bioservices reporting unit to require an impairment analysis. As a result, the Company performed recoverability tests on certain asset groups within the Bioservices reporting unit and concluded that the impacted asset groups were not recoverable as the undiscounted expected cash flows did not exceed their carrying values.

Asset groups are written down only to the extent that their carrying value is higher than their respective fair value. The Company, with the assistance of a third-party valuation firm, applied valuation methods to estimate the fair values for each of the assets within the different asset classes. For the intangible assets, an option pricing model was applied to estimate the assets' fair value. An orderly liquidation value was applied to estimate the fair value of the personal property assets and market and cost based approaches were applied to estimate the fair value of the real property assets, each representing Level 3 non-recurring fair value measurements. Based on this analysis, the Company allocated and recognized a non-cash impairment charge of $306.7 million during the year ended December 31, 2023.

Goodwill Impairment Testing

The Company performs its goodwill impairment evaluation annually, during the fourth quarter, or sooner if triggering events are identified. During the third quarter of 2023, the Company observed continued market volatility including significant declines in its market capitalization and revised its financial outlook during the third quarter, which was identified as a triggering event. As a result of the quantitative assessments performed in connection with the preparation of the financial statements as of and for the quarter ended September 30, 2023, the Company recorded a $218.2 million non-cash goodwill impairment charge for the MCM reporting unit within the Products segment, which is included in "Goodwill impairment" on the Condensed Consolidated Statement of Operations for the year ended December 31, 2023. The MCM reporting unit and Products segment had no remaining goodwill as of December 31, 2023. The goodwill impairment charge resulted from a reduction in the estimated fair value of the MCM reporting unit due to changes in the risk profile of the Company as well as revisions to the long-term operating plan that reflected lower expectations for growth and profitability than previous expectations. The Company used a quantitative assessment, utilizing an income-based (discounted cash flows) approach, Level 3 non-recurring fair value measurement, for our goodwill impairment testing.

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FINANCIAL OPERATIONS OVERVIEW

Revenues

We generate Commercial Product revenues through sale of NARCAN® Nasal Spray, which is sold commercially over-the-counter at retail pharmacies and digital commerce websites as well as through physician-directed or standing order prescriptions at retail pharmacies, health departments, local law enforcement agencies, community-based organizations, substance abuse centers and other federal agencies. In addition we previously generated Commercial product revenues through sale of the Company's travel health products, which we sold to Bavarian Nordic in May 2023.We generate MCM 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 primarily purchases our products under long-term, firm fixed-price procurement contracts, generally with annual options.

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. From time to time, clients require suite reservations at our various manufacturing sites, which may be considered leases depending on the facts and circumstances.

We have received contracts and grant funding from the USG and other non-governmental organizations to perform R&D activities, particularly related to programs addressing certain CBRNE threats and EIDs.

Our revenue, operating results and profitability vary quarterly based on the timing of production and deliveries, the timing of manufacturing services performed and the nature of our business, which involves providing large scale bundles of products and services as needs arise. We expect continued variability in our quarterly financial results.

Cost of Product Sales and Services

Commercial and MCM Products - The primary expenses that we incur to deliver NARCAN® and MCM and other commercial 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. 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. In addition to the fixed and variable manufacturing costs described above, the cost of product sales depends on utilization of available manufacturing capacity. 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. For drug product customers, we receive work in process inventory to be prepared for distribution.

Research and Development Expenses ("R&D")

We expense R&D costs as incurred. 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.

In many cases, we seek funding for development activities from external sources and third parties, such as governments and non-governmental organizations, or through collaborative partnerships. 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.

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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. 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. We recognize in our financial statements the impact of a tax position if that position is more likely than not of being sustained on audit, based on the technical merits of the position.

Management believes that the assumptions and estimates related to the provision for income taxes are critical to the Company’s results of operations. 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.

The OECD ("Organization for Economic Co-operation and Development") has proposed a global minimum tax of 15% of reported profits (Pillar 2) that has been agreed upon in principle by over 140 countries. During 2023, many countries took steps to incorporate Pillar 2 model rule concepts into their domestic laws. On December 18, 2023, Ireland enacted laws related to this minimum tax, effective January 1, 2024.

Under the Pillar Two rules, a company would be required to determine a combined effective tax rate for all entities located in a jurisdiction. If the jurisdictional effective tax rate determined under the Pillar Two is less than 15%; a top-up tax will be due to bring the jurisdictional effective tax rate up to 15%. We continue to evaluate the potential impacts of proposed and enacted legislative changes on our business in future periods in Ireland and elsewhere.

For additional information on our uncertain tax positions and income tax expense, refer to Note 15, "Income taxes" to our consolidated financial statements included in this report.

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RESULTS OF OPERATIONS

Consolidated and Segment Operating Results:

Year Ended December 31,

(in millions, except %) 2023 2022 $ Change % Change

Revenues:

Commercial Product sales, net:

Other Commercial Products 9.8 12.9 (3.1) (24) %

MCM Product sales, net:

Services:

Operating expenses:

Impairment of long-lived assets 306.7 — 306.7 NM

Amortization of intangible assets 65.6 59.9 5.7 10 %

Other income (expense):

Gain on sale of business 74.2 — 74.2 NM

Total other income (expense), net (4.8) (49.0) 44.2 (90) %

Income tax provision (benefit) 29.3 (7.4) 36.7 NM

NM - Not meaningful

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Year Ended December 31, 2023 Compared with Year Ended December 31, 2022

Revenues and gross margin

Year Ended December 31,

Total cost of sales or services 705.4 693.1 2 %

Total segment gross margin % (1) 31 % 36 %

Total revenues decreased $68.2 million, or 6%, to $1.0 billion in 2023. The decrease was due to a decrease in MCM Products revenue of $132.4 million, Bioservices revenue of $31.4 million and Contracts and Grants revenue of $15.1 million, offset by an increase in Commercial Products revenue of $110.7 million.

Total segment gross margin decreased $65.4 million, or 17%, to $317.6 million in 2023. Total segment gross margin percentage decreased 5 percentage points to 31%. The decrease was primarily due to a decrease in the MCM Products segment gross margin of $173.7 million, partially offset by increases in the Commercial Products segment gross margin and Bioservices segment gross margin of $60.7 million and $47.6 million, respectively. 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. During the third quarter of 2023, the Company recognized a $218.2 million impairment charge to goodwill in the MCM reporting unit, reducing the goodwill balance of the reporting unit and segment to zero as of December 31, 2023.

Impairment of long-lived assets

During the year ended December 31, 2023, the Company recorded a non-cash impairment charge of $306.7 million related to certain asset groups within our Bioservices reporting unit. The asset groups were written down only to the extent their carrying value was higher than their respective fair values. The Company, with the assistance of a third-party valuation firm, applied valuation methods to estimate the fair values for each of the assets within the different asset classes to determine the amount of the impairment.

R&D Expenses

R&D expenses decreased $76.9 million, or 41%, to $111.4 million in 2023. The decrease was primarily due to the sale of our development program for CHIKV VLP to Bavarian Nordic and reduction in related overhead costs driven by the headcount reductions, which were significant contributors to prior period R&D expense, partially offset by write-offs related to program terminations during the period.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $28.9 million, or 9%, to $368.4 million in 2023. The increase was primarily due to higher professional services fees related to general corporate initiatives, including organizational transformation consulting fees and legal remediation services fees as well as an increase in marketing expenses related to the launch of NARCAN® OTC. The increase was partially offset by decreases in compensation and other employee costs related to the restructuring initiatives during 2023. Selling, general and administrative costs as a percentage of total revenue increased 5 percentage points to 35% for the year ended December 31, 2023. The increase was due to an increase in selling, general and administrative expenses coupled with a decrease in revenues during the period.

Amortization of Intangible Assets

Amortization of intangible assets increased $5.7 million, or 10%, to $65.6 million in 2023. The increase was primarily due to amortization expense for intangible assets related to TEMBEXA®, NARCAN®, and EbangaTM which were acquired during the second half of 2022. The increase was partially offset by a decrease in amortization expense resulting from the intangibles sold as part of our travel health business to Bavarian Nordic.

Interest expense

Interest expense increased $50.6 million, or 136%, to $87.9 million in 2023. The increase was primarily due to higher interest costs related to our syndicated borrowings and debt service costs attributable to the negotiation of the Fourth Amendment to Amended and Restated Credit Agreement, Waiver and First Amendment to Amended and Restated Collateral Agreement (the “Credit Agreement Amendment"), partially offset by reduced interest expense related to the termination of our interest rate swap hedging agreements.

Gain on sale of business

Gain on sale of business was $74.2 million for the year ended December 31, 2023, which was attributable to the sale of our travel health business to Bavarian Nordic on May 15, 2023.

Other, net

Other, net decreased $20.6 million, or 176%, to an income of $8.9 million in 2023. The decrease in expense was primarily attributable to a write-off of a tax indemnity receivable in the prior period that did not reoccur in the current period, favorable foreign exchange revaluations, higher interest income from rising interest rates during the year, income from the Transition Services Agreement with Bavarian Nordic and a gain on extinguishment of debt.

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. 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. This is partially offset by tax credits and favorable rates in foreign jurisdictions.

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SEGMENT RESULTS

COMMERCIAL PRODUCTS

Commercial Products

Year Ended December 31,

Gross margin % (1) 58 % 59 %

Segment adjusted gross margin % (2) 58 % 59 %

Year Ended December 31, 2023 Compared with Year Ended December 31, 2022

NARCAN®

NARCAN® sales increased $113.8 million, or 30%, to $487.5 million in 2023. The increase was primarily driven by higher sales of NARCAN® OTC and branded NARCAN® to U.S. public interest channels and Canadian retail, partially offset by the cessation of authorized generic NARCAN® sales related to the termination of the Company's relationship with Sandoz and a reduction in commercial retail sales in the U.S.

Other Commercial Products

Other Commercial Products sales decreased $3.1 million, or 24%, to $9.8 million. The decrease was driven by lower sales of Vivotif®, partially offset by higher sales of Vaxchora®. During the second quarter of 2023, we sold Vivotif® and Vaxchora® to Bavarian Nordic as part of our travel health business.

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Cost of Sales and Gross Margin

Cost of Commercial product sales increased $50.0 million, or 31%, to $210.3 million in 2023. The increase was primarily driven by higher sales of NARCAN® OTC and higher branded NARCAN® sales.

Commercial Products gross margin increased $60.7 million, or 27%, to $287.0 million in 2023. Commercial Products gross margin percentage decreased 1 percentage point to 58% in 2023. The decrease was largely due to a decrease in the per unit selling price in response to increased competition for generic NARCAN®, partially offset by a decrease in royalty expense. Commercial Products Segment Adjusted Gross Margin is consistent with gross margin.

MCM PRODUCTS

MCM Products

Year Ended December 31,

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 %

NM - Not meaningful

Year Ended December 31, 2023 Compared with Year Ended December 31, 2022

Anthrax MCM

Anthrax MCM sales decreased $102.5 million, or 35%, to $187.6 million in 2023. The decrease reflects the impact of timing of sales related to CYFENDUS® and BioThrax, partially offset by an increase in Anthrasil® sales. 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, the timing and amount of USG purchases, the availability of governmental funding and timing of Company delivery of orders that follow.

Smallpox MCM

Smallpox MCM sales decreased $67.0 million, or 29%, to $167.4 million in 2023. The decrease was primarily due to lower sales of TEMBEXA®, partially offset by an increase related the exercise and full delivery in the current period of a $120 million option by the USG to purchase ACAM2000®. Fluctuations in revenues result from the timing of the exercise of annual purchase options in existing procurement contracts, the timing of USG purchases, the availability of governmental funding and timing of Company delivery of orders that follow.

Other Product Sales

Other Product sales increased $37.1 million, or 67%, to $92.2 million in 2023. The increase was primarily due to higher BAT® product sales, partially offset by lower RSDL® and Trobigard® product sales due to timing.

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Cost of Sales and Gross Margin

Cost of MCM Product sales increased $41.3 million, or 16%, to $305.6 million in 2023. The increase was primarily due to higher sales of ACAM2000®, BAT® and AIG, partially offset by lower sales of CYFENDUS®, coupled with higher allocations to MCM Product COGS at our Bayview facility, shutdown costs and inventory write-offs.

MCM Products gross margin decreased $173.7 million, or 55%, to $141.6 million in 2023. MCM Products gross margin percentage decreased 22 percentage points to 32% in 2023. 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 margin products compared with the prior year. The 2023 MCM Product Segment Adjusted Gross Margin excludes the impact of restructuring costs of $5.6 million, non-cash items related to the changes in the fair value of contingent consideration of $0.2 million and the inventory step-up provision of $3.9 million.

SERVICES

Services

Year Ended December 31,

Add back:

Restructuring costs $ 8.4 $ — NM

Segment adjusted gross margin (2) $ (102.6) $ (158.6) 35 %

Segment adjusted gross margin % (2) (131) % (144) %

NM - Not meaningful

Year Ended December 31, 2023 Compared with Year Ended December 31, 2022

Services Revenues

Bioservices revenue decreased $32.2 million, or 31%, to $72.8 million in 2023. The decrease was driven by reduced production activities at the Company's Winnipeg and Camden facilities. The decreases were partially offset by an increase in production at our Canton facility for a Bioservices customer.

Bioservices lease revenue increased $0.8 million, or 16%, to $5.7 million in 2023. The increase was related to a Bioservices customer at our Canton facility.

Cost of Services and Gross Margin

Cost of Services decreased $79.0 million, or 29%, to $189.5 million in 2023. The decrease was primarily due to reduced production activities related to the halt in manufacturing under the Janssen Agreement coupled with higher allocations to MCM Product cost of sales at our Bayview facility and lower production activities at our Winnipeg facility, partially offset by increased costs at our Camden facility for additional investments in quality enhancement and improvement initiatives and increased costs associated with production activities at our Canton facility for a Bioservices customer.

Services gross margin increased $47.6 million, or 30%, to $(111.0) million in 2023. Services gross margin percentage increased 3 percentage points to (141)% in 2023. The increase was primarily driven by one-time costs and reserves related to the Janssen

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Agreement in the prior year. 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 decrease was primarily attributable to one-time indirect rate adjustments in the prior period, the conclusion of COVID-19 related studies in the fourth quarter of 2022, and decreases in development activities associated with various externally funded research and development projects. These decreases were partially offset by increases in revenue on the BARDA contract for the procurement of EbangaTM, which was awarded in the current period, and TEMBEXA®.

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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:

Other Commercial Products 12.9 3.6 9.3 NM

MCM Product sales, net:

Services:

Operating expenses:

Selling, general and administrative 339.5 348.7 (9.2) (3) %

Amortization of intangible assets 59.9 58.5 1.4 2 %

Other income (expense):

Total other income (expense), net (49.0) (38.2) (10.8) 28 %

Income tax provision (benefit) (7.4) 83.7 (91.1) NM

NM - Not meaningful

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Year Ended December 31, 2022 Compared with Year Ended December 31, 2021

Revenues and gross margin

Year Ended December 31,

Cost of Commercial Product sales 160.3 187.2 (14) %

Total cost of sales or services 693.1 748.1 (7) %

Total segment gross margin % (1) 36 % 54 %

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.

Total segment gross margin decreased $508.3 million, or 57%, to $383.0 million in 2022. Total segment gross margin percentage decreased 19 percentage points to 36%. The decrease was primarily due to a decrease in the Bioservices segment gross margin of $408.6 million, coupled with decreases in MCM Products segment gross margin and Commercial Products segment gross margin of $75.2 million and $24.5 million, respectively. Total segment 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

R&D Expenses

R&D expenses decreased $46.9 million, or 20%, to $188.3 million in 2022. 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.

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. 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.

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. 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.

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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 the event the Company experiences factors that it believes indicate a decline in fair value, including negative changes to long-term growth rates or if discount rates increase, we may be required to record impairments of goodwill and other identified intangible assets. 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. 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. The increase was primarily due to higher interest costs related to our syndicated borrowings, partially offset by a decrease in interest expense related to our interest rate swap hedging agreements.

Other, net

Other, net increased $8.0 million to an expense of $11.7 million in 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 increases in expense were partially offset by an increase in interest income due to higher interest rates in 2022.

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Income tax provision

Income tax provision decreased $91.1 million to an income tax benefit of $7.4 million for the year ended December 31, 2022. The decrease was largely due to the decline in income before income taxes. The effective tax rate was 3% for the year ended December 31, 2022 as compared to 28% in 2021. The effective annual tax rate decreased largely due to 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. This is partially offset by tax credits, favorable rates in foreign jurisdictions, and the release of an indemnified unrecognized tax benefit.

SEGMENT RESULTS

COMMERCIAL PRODUCTS

Commercial Products

Year Ended December 31,

Gross margin % (1) 59 % 57 %

Segment adjusted gross margin (2) $ 226.3 $ 250.8 (10) %

Segment adjusted gross margin % (2) 59 % 57 %

Year Ended December 31, 2022 Compared with Year Ended December 31, 2021

NARCAN®

NARCAN® sales decreased $60.7 million, or 14%, to $373.7 million in 2022. The decrease was primarily driven by a reduction in commercial retail sales and a decrease in the price per unit following the launch of a generic version of NARCAN® Nasal Spray 4mg in December 2021, partially offset by an increase in U.S. public interest and Canadian sales.

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. The decrease was primarily driven by a decrease in royalties paid for NARCAN® sales due to the royalty settlement in 2022.

Commercial Products gross margin decreased $24.5 million, or 10%, to $226.3 million in 2022. Commercial Products gross margin percentage increased 2 percentage points to 59% in 2022. The increase was largely due to a decrease in royalties paid for NARCAN® sales due to the royalty settlement in 2022.

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MCM PRODUCTS

MCM Products

Year Ended December 31,

Gross margin % (1) 54 % 67 %

Add back:

Changes in fair value of contingent consideration 2.6 2.9 (10) %

Inventory step-up provision 51.4 — NM

Segment adjusted gross margin (2) $ 369.3 $ 393.4 (6) %

Segment adjusted gross margin % (2) 64 % 67 %

NM - Not meaningful

Year Ended December 31, 2022 Compared with Year Ended December 31, 2021

Anthrax MCM

Anthrax MCM sales increased $27.5 million, or 10%, to $290.1 million 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. 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. The decrease was primarily due to lower sales of ACAM2000®, partially offset by TEMBEXA® sales following the 2022 acquisition of worldwide rights for TEMBEXA®. Fluctuations in revenues result from the timing of the exercise of annual purchase options in existing procurement contracts, the timing of USG purchases, the availability of governmental funding and timing of Company delivery of orders that follow.

Other Product Sales

Other Product sales decreased $1.5 million, or 3%, to $55.1 million in 2022. The decrease was primarily due to lower BAT® product sales, partially offset by higher RSDL® and Trobigard® product sales.

Cost of Sales and Gross Margin

Cost of MCM Product sales increased $68.9 million, or 35%, to $264.3 million in 2022. The increase was primarily due to cost of sales for TEMBEXA® following our 2022 acquisition of the worldwide rights for TEMBEXA®. Excluding the acquisition related product costs, cost of MCM product sales increased $8.7 million, primarily due to inventory write-offs, primarily related to CYFENDUS® and ACAM2000® and higher costs due to under-utilized capacity at our facilities. 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. 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

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margin products compared with the prior year. 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.

SERVICES

Services

Year Ended December 31,

Gross margin % (1) (144) % 41 %

Segment adjusted gross margin (2) $ (158.6) $ 250.0 NM

Segment adjusted gross margin % (2) (144) % 41 %

NM - Not meaningful

Year Ended December 31, 2022 Compared with Year Ended December 31, 2021

Services Revenues

Bioservices revenue decreased $205.3 million, or 66%, to $105.0 million in 2022. 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. 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 $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. 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.

Services gross margin decreased $408.6 million to $(158.6) million in 2022. Services gross margin percentage decreased 185 percentage points to (144)% in 2022. 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.

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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 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®. Decreases were partially offset by revenue increases relating to indirect rate adjustments during the period.

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Financial Condition, Liquidity and Capital Resources

Our financial condition is summarized as follows:

December 31,

(in millions, except percentages) 2023 2022 Change %

Financial assets:

Borrowings:

Debt, net of current portion 446.5 448.5 — %

Working capital:

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. We also obtain financing from the sale of our common stock upon exercise of stock options and participation in an at-the market equity offering program that we entered into on May 18, 2023 (the "ATM Program"). 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.

Going Concern

The consolidated financial statements have been prepared on the going concern basis of accounting, which assumes the Company will continue to operate as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

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 evaluation considered the potential mitigating effects of management’s plans that have not been fully implemented. 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. Managements's plans include (A) amending the Senior Secured Credit Facilities, and (B) improving operating performance, reducing working capital and the potential sale of assets to pay down the Senior Secured Credit Facilities before they become due. As neither plan is in the complete control of Management, neither is probable of occurring. In this regard, management may not be able to find a buyer for the assets it is willing to divest and may not be able to close on any asset sales for which management is able to reach an agreement with a buyer, and as a result the Company may be unable to meet its obligations as they become due. In addition, any asset sales that are completed could have potential negative impacts on the Company's future operating cash flows and profitability.

Debt Covenants

The Senior Secured Credit Facilities mature in May 2025 which provide for (1) revolving credit commitments, (2) a term loan, and (3) the issuance of commercial letters of credit. As of December 31, 2023, we had $417.4 million outstanding under the Senior Secured Credit Facilities. Under the Senior Secured Credit Facilities, the Company is subject to a monthly minimum consolidated EBITDA covenant through February 29, 2024, and is also required to raise at least $75.0 million through the issuance of equity and/or unsecured indebtedness by April 30, 2024. Beginning with the quarter ended March 31, 2024, the Company is subject to a minimum

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consolidated debt service coverage ratio and a maximum consolidated leverage ratio covenant. As of December 31, 2023, the Company was not in compliance with the minimum consolidated EBITDA covenant under the Senior Secured Credit Facilities and did not expect to be able to raise the remaining of the $75.0 million through the issuance of equity under the at-the-market equity offering program (the "ATM Program") that we entered into on May 18, 2023, by April 30, 2024, as required by the requisite lenders. In addition, the Company is required to deliver audited annual financial statements without a “going concern” explanatory paragraph with respect to its financial statements for the year ended December 31, 2023, within 90-days of year end, while the financial statements included in this Annual Report contain an explanatory paragraph related to Going Concern. 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. 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. The Senior Secured Credit Facilities and the Company’s other debt facilities are described in more detail in Note 10, “Debt” in the Notes to Consolidated Financial Statements in Part II, Item 8. of this Annual Report.

Further, acceleration of the repayment of the Senior Secured Credit Facilities would result in a cross-default of the Company’s obligations under the 3.875% Senior Unsecured Notes due in 2028. If the Company would be unable to obtain additional waivers or forbearance of such covenants or defaults, to successfully renegotiate the terms of the Senior Secured Credit Facilities, or to cure the potential covenant breach or default, and the lenders enforced one or more of their rights upon default and/or the default resulted in a cross-default under the 3.875% Senior Unsecured Notes due in 2028, the Company would be unable to meet its obligations under those agreements and could be forced into insolvency proceedings.

Based on the facts and circumstances described above, there can be no assurance that the Forbearance Period will continue to remain in place, and that the Company would be able to comply with covenants in the future. As a result, the Company continues to evaluate a number of factors related to its ability to continue as a going concern, including its ability to comply with the terms and operating and financial covenants required by the Senior Secured Credit Facilities, its ability to satisfy the capital raise requirement, other market conditions, economic conditions, particularly in the pharmaceutical and biotechnology industry, and disruptions or volatility caused by factors such as regional conflicts, inflation, and supply chain disruptions. The Company has engaged legal and financial advisors to assist with a comprehensive review of alternatives to enhance its capital structure, which may include taking steps to cure any potential defaults or seeking forbearance, waivers, further cost reductions, asset sales or other alternatives to avoid an event of default.

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. Additionally, on August 8, 2023, the Company announced the August 2023 Plan, intended to strengthen its core business and financial position by reducing investment in and de-emphasizing focus on its Bioservices business for future growth. The August 2023 Plan included a reduction of the Company's current workforce by approximately 400 employees. These actions, in combination with other cost reduction initiatives, are expected to result in annualized savings of over $160 million when fully implemented.

At-the-Market Equity Offering Facility

We may, from time to time, sell up to $150.0 million aggregate gross sales price of shares of our common stock through Evercore Group L.L.C. and RBC Capital Markets, LLC, as sales agents, under the ATM Program that we entered into on May 18, 2023. Between the adoption of the ATM Program and December 31, 2023, we sold 1.1 million shares of our common stock under the ATM Program for gross proceeds of $9.1 million, representing an average price of $8.22 per share. As of December 31, 2023, $140.9 million aggregate gross sales price of shares of our common stock remains available for issuance under the ATM Program. We intend to use proceeds obtained from the sale of shares under the ATM Program for general corporate purposes.

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Cash Flows

The following table provides information regarding our cash flows for the years ended December 31, 2023 and 2022.

Year Ended December 31,

Net cash provided by (used in):

Operating activities $ (206.3) $ (34.1)

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. The increase in net cash used in operating activities was primarily due to negative working capital changes of $68.2 million, driven by lower cash collections on accounts receivable, and an increase in cash payments for accrued compensation and income taxes, partially offset by lower cash payments for inventories, prepaid expenses and other assets, accrued expenses and other liabilities, and accounts payable.

Investing Activities:

Net cash provided by investing activities increased $593.6 million in 2023. The increase in net cash provided by investing activities was primarily due to the proceeds received from the sale of the travel health business during the second quarter of 2023 of $270.2 million, a decrease in payments for the acquisition of businesses of $243.7 million and a decrease of $64.2 million in capital expenditures, partially offset by an increase in milestone payments of $6.3 million for prior asset acquisitions.

Financing Activities:

Net cash used in financing activities increased $1.0 billion in 2023. 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.

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).

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.

There are numerous risks and uncertainties associated with product sales and with the development and commercialization of our product candidates. We may seek additional external financing to provide additional financial flexibility. 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;

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•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.

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.

If we raise funds by issuing equity securities, including through the ATM Program, our stockholders may experience dilution. 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. If we raise funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies or product candidates or grant licenses on terms that may not be favorable to us.

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. If financing is unavailable or lost, our business, operating results, financial condition and cash flows would be adversely affected, and we could be forced to delay, reduce the scope of or eliminate many of our planned activities.

Unused Credit Capacity

Available room under the Revolving Credit Facility as of December 31, 2023 and December 31, 2022 was:

December 31,

Less:

Outstanding Letters of Credit 0.5 1.3

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 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.

Critical Accounting Policies and Estimates

Our consolidated financial statements and related disclosures are prepared in accordance with US GAAP, which requires management to make estimates, judgments and assumptions that affect the amounts reported. Note 2, “Summary of significant accounting policies” of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K describes the accounting policies and methods used in the preparation of the Company’s consolidated financial statements. Management considers an accounting policy to be critical if it is important to reporting our financial condition and results of operations, and if it requires significant judgment and estimates on the part of management in its application. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the reported amounts of revenues and expenses that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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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. 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.

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. Certain contracts may include lease components which are recognized under Accounting Standards Codification ("ASC") 842. The primary method used to estimate standalone selling price is the price observed in standalone sales to customers, however when prices in standalone sales are not available the Company may use third-party pricing for similar products or services or estimate the standalone selling price based on the best available information.

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. Estimates of variable consideration includes allowances for returns, specialty distributor fees, wholesaler fees, prompt payment discounts, government rebates, chargebacks and rebates under managed care plans. 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.

The Company's NARCAN® OTC customer contracts are fixed price contracts. For that majority of the Company's NARCAN® OTC contract, the Company invoices and records revenue when the pharmacies and wholesalers receive product from the third-party logistics warehouse used by the Company, which is the point at which control is transferred to the customer. Revenues for these NARCAN® OTC arrangements are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established. Estimates of variable consideration includes allowance for returns, specialty distributor fees, wholesaler fees and prompt payment discounts. NARCAN® OTC may also be sold on consignment through third-party online retailers where revenues are recognized point in time when sold to the end customer. The Company pays these third-party online retailers selling commissions and fulfillment fees which are recorded as selling general & administrative expenses and cost of commercial product sales, respectively, in the Consolidated Statement of Operations. Revenues from NARCAN® OTC are 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. The Company considers several factors in the estimation process for the allowance for returns of NARCAN® OTC, including inventory levels within the distribution channel and historical return activity, including activity for product sold for which the return period has passed, as well as other relevant factors. 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.

Contingent Consideration

In connection with the Company's acquisitions accounted for as business combinations, the Company records contingent consideration associated with sales-based royalties, sales-based milestones and development and regulatory milestones at fair value, as applicable. The fair value model used to calculate these obligations is based on the income approach (a discounted cash flow model) that has been risk adjusted based on the probability of achievement of net sales and achievement of the milestones. The inputs the Company uses for determining the fair value of the contingent consideration associated with sales-based royalties, sales-based milestones and development and regulatory milestones are Level 3 fair value measurements. The Company re-evaluates the fair value of contingent consideration on a quarterly basis. Changes in the fair value can result from adjustments to the discount rates and updates in the assumed timing of or achievement of net sales and/or the achievement of development and regulatory milestones.

The Company's acquisitions accounted for as asset acquisitions may also include contingent consideration payments to be made for sales-based royalties, sales-based milestones and development and regulatory milestones. We assess whether such contingent consideration meets the definition of a derivative. Contingent consideration payments in an asset acquisition not required to be accounted for as derivatives are recognized when the contingency is resolved, and the consideration is paid or becomes payable. Contingent consideration payments required to be accounted for as derivatives are recorded at fair value on the date of the acquisition and are subsequently remeasured to fair value at each reporting date. For additional information on the Company's contingent

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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.

Income Taxes

The Company recognizes deferred tax assets and liabilities for future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and R&D tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. Valuation allowances are recorded as appropriate to reduce deferred tax assets to the amount considered likely to be realized.

The Company’s income tax expense, deferred tax assets and liabilities and liabilities for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. As tax laws are complex and subject to different interpretations, significant management judgement is required in (1) calculating the Company's income tax expense, deferred tax assets and deferred tax liabilities, (2) determining any valuation allowance recorded against deferred tax assets and (3) evaluating the amount of unrecognized tax benefits, as well as the interest and penalties related to such uncertain tax positions. 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.

Goodwill and long-lived assets

We evaluate our goodwill for impairment annually as of the first day of the fourth quarter and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. We assess our goodwill for impairment at the reporting unit level.

As part of the evaluation of goodwill for potential impairment, we exercise judgment to:

•Perform a qualitative assessment to determine whether it is “more likely than not” that the fair value of a reporting unit is less than it’s carrying value. Factors we consider when making the determination include assessing macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and other relevant reporting unit specific events;

•Decide whether to bypass the qualitative assessment and perform a quantitative assessment. Factors we consider when making this determination include changes in the Company or general economic conditions since the previous quantitative assessment was performed, the amount by which the fair value exceeded the carrying value at that time and the period of time that has passed since such quantitative assessment; and

•Perform a quantitative assessment by comparing the estimated fair value of the reporting unit with the carrying amount of that reporting unit. We estimate fair value using a combination of an income approach (based on discounted cash flows) and market approach, using appropriate weighting factors.

The cash flows employed in the income approach are based on our most recent forecasts, budgets and business plans, as well as various growth rate assumptions for years beyond the current business plan period, discounted using an estimated weighted average cost of capital, which reflects an assessment of the risk inherent in the future revenue streams and cash flows. In the market approach, we utilize market multiples derived from comparable guideline companies and comparable market transactions to the extent available. These valuations are based on estimates and assumptions, including projected future cash flows, determination of appropriate comparable guideline companies and the determination of whether a premium or discount should be applied to such comparable guideline companies.

The process of evaluating the potential impairment of goodwill requires significant judgment and estimates. In 2023, due to triggering events in the respective quarters, we performed interim impairment tests during the second and third quarter for the MCM reporting unit. The results of the test performed during the second quarter, which yielded no impairment of goodwill. The results of the test performed during the third quarter indicated that for our MCM reporting unit, an impairment existed. As a result, the Company recorded a $218.2 million non-cash goodwill impairment charge for the MCM reporting unit within the Products segment, reducing the goodwill balance to zero across all reporting units.

Long-lived assets such as finite lived intangible assets and property, plant and equipment are not required to be tested for impairment annually, instead they are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. These events or changes in circumstances may include a significant deterioration of operating results, changes in business plans or changes in anticipated future cash flows. If an impairment indicator is present, we evaluate recoverability of assets to be held and used by a comparison of the carrying value of the assets with future undiscounted net

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cash flows expected to be generated by the assets. We group assets at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows generated by other asset groups. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset group, we estimate the fair value of the asset group to determine whether an impairment loss should be recognized. Impairment would then be measured as the excess of the asset’s carrying value over its fair value. Fair value is typically determined by discounting the future cash flows associated with that asset. Significant judgments used for long-lived asset impairment assessments include identifying the appropriate asset groupings and primary assets within those groupings, determining whether events or circumstances indicate that the carrying amount of the asset may not be recoverable, determining the future cash flows for the assets involved and assumptions applied in determining fair value, which include, reasonable discount rates, growth rates, market risk premiums and other assumptions about the economic environment.

During the second quarter of 2023, due to deterioration in performance and resulting downward revisions to our internal Bioservices forecast made during the second quarter, including future expected cash flows, the Company determined there were sufficient indicators of impairment on certain asset groups within the Bioservices reporting unit to require an impairment analysis. As a result, the Company performed recoverability tests on certain asset groups within the Bioservices reporting unit and concluded that the impacted asset groups were not recoverable as the undiscounted expected cash flows did not exceed their carrying values. Based on this analysis, the Company recorded a non-cash impairment charge of $306.7 million during 2023.

Significant New Accounting Pronouncements

See Note 2, “Summary of significant accounting policies” in the Notes to Consolidated Financial Statements in Part II, Item 8. of this Form 10-K.

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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. Because of the short-term maturities of our cash and cash equivalents, we believe that an increase in market rates would likely not have a significant impact on the realized value of our investments.

Interest Rate Risk

We have debt with a mix of fixed and variable rates of interest. We 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. 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.

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.

Foreign Currency Exchange Rate Risk

We have exposure to foreign currency exchange rate fluctuations worldwide and primarily with respect to the Euro, Canadian dollar, Swiss franc and British pound. We manage our foreign currency exchange rate risk primarily by either entering into foreign currency hedging transactions or incurring operating expenses in the local currency in the countries in which we operate, to the extent practicable. 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.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Emergent BioSolutions Inc. and Subsidiaries

Index to Consolidated Financial Statements Page

Report of Independent Registered Public Accounting Firm 89

Notes to Consolidated Financial Statements 96

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Emergent BioSolutions Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Emergent BioSolutions Inc. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 8, 2024 expressed an unqualified opinion thereon.

The Company's Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company does not expect to be in compliance with debt covenants in future periods without additional sources of liquidity or future amendments to its Senior Secured Credit Facilities and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

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Revenue recognition - Allowance for product returns

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2004.

Tysons, Virginia

March 8, 2024

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Emergent BioSolutions Inc. and Subsidiaries

Consolidated Balance Sheets

(in millions, except per share data)

December 31,

ASSETS

Current assets:

Cash and cash equivalents $ 111.7 $ 642.6

Prepaid expenses and other current assets 47.9 57.9

Property, plant and equipment, net 382.8 817.6

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Other current liabilities 32.7 45.9

Deferred tax liability 47.2 59.7

Stockholders’ equity:

Treasury stock, at cost, 5.6 and 5.6 common shares, respectively (227.7) (227.7)

Accumulated other comprehensive income (loss), net (5.7) 3.1

Retained earnings (accumulated deficit) (21.8) 738.7

Total liabilities and stockholders’ equity $ 1,823.2 $ 3,166.3

The accompanying notes are an integral part of the consolidated financial statements.

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Emergent BioSolutions Inc. and Subsidiaries

Consolidated Statements of Operations

(in millions, except per share data)

Year Ended December 31,

Revenues:

Bioservices:

Operating expenses:

Impairment of long-lived assets 306.7 — —

Amortization of intangible assets 65.6 59.9 58.5

Other income (expense):

Gain on sale of business 74.2 — —

Total other income (expense), net (4.8) (49.0) (38.2)

Income tax provision (benefit) 29.3 (7.4) 83.7

Net income (loss) per common share

Weighted average shares outstanding

The accompanying notes are an integral part of the consolidated financial statements.

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Emergent BioSolutions Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(in millions)

Year Ended December 31,

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments, net 0.9 1.0 (1.0)

Unrealized gains (losses) on hedging activities 2.7 10.8 12.3

Total other comprehensive income (loss), net of tax (8.8) 19.2 9.2

Comprehensive income (loss), net of tax $ (769.3) $ (192.4) $ 228.7

The accompanying notes are an integral part of the consolidated financial statements.

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Emergent BioSolutions Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in millions)

Year Ended December 31,

Operating Activities

Share-based compensation expense 23.1 45.1 42.4

Change in fair value of contingent obligations, net 0.2 2.6 2.9

Amortization of deferred financing costs 21.3 4.1 4.1

Gain on sale of travel health business (74.2) — —

Impairment of long-lived assets 306.7 — —

Write off of contract asset and liability — — (17.2)

Changes in operating assets and liabilities:

Prepaid expenses and other assets 11.7 (19.9) 7.7

Accrued expenses and other liabilities (55.7) (66.7) (9.2)

Long-term incentive plan accrual 4.8 — —

Accrued compensation (10.4) (0.8) 4.0

Income taxes receivable and payable, net (16.2) 28.7 (31.3)

Net cash provided by (used in) operating activities (206.3) (34.1) 320.2

Investing Activities

Purchases of property, plant and equipment (51.6) (115.8) (224.1)

Royalty settlement payment — (21.8) —

Milestone payment from prior asset acquisition (6.3) — —

Asset acquisitions — (243.7) —

Proceeds from sale of travel health business, net 270.2 — —

Net cash provided by (used in) investing activities 212.3 (381.3) (224.1)

Financing Activities

Purchases of treasury stock — (82.1) (106.0)

Principal payments on convertible senior notes — — (10.6)

Proceeds from revolving credit facility 20.0 598.0 —

Principal payments on revolving credit facility (398.8) — —

Principal payments on term loan facility (164.6) (33.8) (25.3)

Proceeds from stock-based compensation activity 1.8 5.0 15.9

Taxes paid for stock-based compensation activity (2.5) (5.9) (13.8)

Contingent consideration payments — — (1.2)

Net cash provided by (used in) financing activities: (535.7) 481.2 (141.0)

Net change in cash, cash equivalents and restricted cash (530.9) 66.3 (45.2)

Supplemental cash flow disclosures:

Cash paid for income taxes $ 52.8 $ 6.2 $ 71.6

Non-cash investing and financing activities:

Purchases of treasury stock unpaid at period end $ — $ — $ 6.6

Gain on extinguishment of debt $ 2.5 $ — $ —

The accompanying notes are an integral part of the consolidated financial statements.

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Emergent BioSolutions Inc. and Subsidiaries

Consolidated Statement of Changes in Stockholders' Equity

(in millions, except per share data)

Shares Amount Shares Amount

Other comprehensive income, net of tax — — — — — 9.2 — 9.2

Share-based compensation activity 0.8 — 44.5 — — — — 44.5

Repurchases of common stock — — — (2.6) (112.6) — — (112.6)

Other comprehensive income, net of tax — — — — — 19.2 — 19.2

Share-based compensation activity 0.6 — 44.1 — — — — 44.1

Repurchases of common stock — — — (1.8) (75.5) — — (75.5)

Other comprehensive loss, net of tax — — — — — (8.8) — (8.8)

Share-based compensation activity 1.0 — 22.5 — — — — 22.5

The accompanying notes are an integral part of the consolidated financial statements.

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Emergent BioSolutions Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(dollar and share amounts in tables expressed in millions, except per share data)

1. Nature of the business and organization

Organization and business

Emergent BioSolutions Inc. (“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.

The Company is focused on the following four PHT categories: chemical, biological, radiological, nuclear and explosives ("CBRNE"); emerging infectious diseases ("EID"); emerging health crises; and acute, emergency and community care. The Company has a product portfolio of 12 products (vaccines, therapeutics, and drug-device combination products). The revenue generated by the products comprises a substantial portion of the Company's revenue. The Company structures the business with a focus on markets and customers. As such, the key components of the business structure include the following four product and service categories: Anthrax - Medical Countermeasures (“MCM") Products, NARCAN® commercial product, Smallpox - MCM products and Emergent Bioservices (CDMO) ("Bioservices").

Beginning in the fourth quarter of 2023, the Company manages our business with a focus on three operating segments: (1) a Commercial Products segment consisting of NARCAN® Nasal Spray and other commercial products which were sold as part of our travel health business in the second quarter of 2023 (see Note 3, "Divestiture" for more information on the sale of the travel health business); (2) a MCM Products segment consisting of our Anthrax - MCM, Smallpox - MCM and Other Products, described below and (3) a Services segment consisting of our Bioservices offerings (See Note 18, "Segment information" for more information on our reportable segments).

The Company's products and services include:

Commercial Products Segment:

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;

Sale of Travel Health Business

On May 15, 2023, the Company completed the sale of its Commercial Products segment'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. For additional information, refer to Note 3, "Divestiture".

MCM Products Segment

Anthrax - MCM Products

•Anthrasil® (Anthrax Immune Globulin Intravenous (human)), the only polyclonal antibody therapeutic licensed by the United States Food and Drug Administration (“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 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 Bacillusanthracis in persons 18 through 65 years of age when administered in conjunction with recommended antibacterial drugs. CYFENDUS® is procured by certain authorized government buyers for their use; and

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•Raxibacumab injection, the first fully human monoclonal antibody therapeutic licensed by the FDA for the treatment and prophylaxis of inhalational anthrax;

Smallpox - 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;

•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; and

•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.

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;

•EbangaTM (ansuvimab-zykl), a monoclonal antibody with antiviral activity provided through a single IV infusion for the treatment of Ebola. Under the terms of a collaboration with Ridgeback Biotherapeutics ("Ridgeback"), Emergent will be responsible for the manufacturing, sale, and distribution of EbangaTM in the U.S. and Canada, and Ridgeback will serve as the global access partner for EbangaTM;

•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. Trobigard® was approved in Belgium in 2021 but has not been approved by the FDA. Trobigard® is procured by certain authorized government buyers under special circumstances for potential use as a nerve agent countermeasure outside of the U.S.

Services Segment:

Bioservices - CDMO

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. 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 Bioservices. We service both clinical-stage and commercial-stage projects for a variety of third-party customers, including government agencies, innovative pharmaceutical companies, and non-government organizations. In August 2023, the Company initiated an organizational restructuring plan (the “August 2023 Plan”) which included actions to reduce investment in and de-emphasize focus on its Bioservices business.

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2. Summary of significant accounting policies

Basis of presentation and consolidation

Our financial statements are prepared in conformity with U.S. generally accepted accounting principles ("GAAP"). The accompanying consolidated financial statements include the accounts of Emergent and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. Reclassifications of certain prior period amounts have been made to conform to the current period presentation.

Going Concern

The consolidated financial statements have been prepared on the going concern basis of accounting, which assumes the Company will continue to operate as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

As of December 31, 2023, there was $219.2 million outstanding on our senior revolving credit facility ("Revolving Credit Facility") and $198.2 million on our senior term loan facility ("Term Loan Facility" and together with the Revolving Credit Facility, the "Senior Secured Credit Facilities") that mature in May 2025. As of December 31, 2023, the Company had $111.7 million in cash and cash equivalents. 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 evaluation considered the potential mitigating effects of management’s plans that have not been fully implemented. 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. Management's plans include (A) amending the Senior Secured Credit Facilities, and (B) improving operating performance, reducing working capital and the potential of the sale of assets to pay down the Senior Secured Credit Facilities before they become due. As neither plan is in the complete control of Management, neither is probable of occurring. In this regard, management may not be able to find a buyer for the assets it is willing to divest and may not be able to close on any asset sale for which management is able to reach an agreement with a buyer, and as a result the Company may be unable to meet its obligations as they become due. In addition, any asset sales that are completed could have potential negative impacts on the Company's future operating cash flows and profitability.

Debt Covenants

The Senior Secured Credit Facilities mature in May 2025, which provide for (1) revolving credit commitments, (2) a term loan, and (3) the issuance of commercial letters of credit. As of December 31, 2023, we had $417.4 million outstanding under the Senior Secured Credit Facilities. Under the Senior Secured Credit Facilities, the Company is subject to a monthly minimum consolidated EBITDA covenant through February 29, 2024, and is also required to raise at least $75.0 million through the issuance of equity and/or unsecured indebtedness by April 30, 2024. Beginning with the quarter ended March 31, 2024, the Company is subject to a minimum consolidated debt service coverage ratio and a maximum consolidated leverage ratio covenant. As of December 31, 2023, the Company was not in compliance with the minimum consolidated EBITDA covenant under the Senior Secured Credit Facilities and did not expect to be able to raise the remaining of the $75.0 million through the issuance of equity under the at-the-market equity offering program (the "ATM Program") that we entered into on May 18, 2023, by April 30, 2024, as required by the requisite lenders. In addition, the Company is required to deliver audited annual financial statements without a “going concern” explanatory paragraph with respect to its financial statements for the year ended December 31, 2023, within 90-days of year end, while the financial statements included in this Annual Report contain an explanatory paragraph related to Going Concern. On February 29, 2024, the requisite lenders agreed to enter into a Forbearance Agreement and Sixth Amendment to Amended and Restated Credit Agreement (the “Forbearance Agreement and Amendment”), 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. 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. The Senior Secured Credit Facilities and the Company’s other debt facilities are described in more detail below in Note 10, “Debt”.

Further, acceleration of the repayment of the Senior Secured Credit Facilities would result in a cross-default of the Company’s obligations under the 3.875% Senior Unsecured Notes due in 2028. If the Company would be unable to obtain additional waivers or forbearance of such covenants or defaults, to successfully renegotiate the terms of the Senior Secured Credit Facilities, or to cure the potential covenant breach or default, and the lenders enforced one or more of their rights upon default and/or the default resulted in a cross-default under the 3.875% Senior Unsecured Notes due in 2028, the Company would be unable to meet its obligations under those agreements and could be forced into insolvency proceedings.

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Based on the facts and circumstances described above, there can be no assurance that the Forbearance Period will continue to remain in place, and that the Company would be able to comply with covenants in the future. As a result, the Company continues to evaluate a number of factors related to its ability to continue as a going concern, including its ability to comply with the terms and operating and financial covenants required by the Senior Secured Credit Facilities, its ability to satisfy the capital raise requirement, other market conditions, economic conditions, particularly in the pharmaceutical and biotechnology industry, and disruptions or volatility caused by factors such as regional conflicts, inflation, and supply chain disruptions. The Company has engaged legal and financial advisors to assist with a comprehensive review of alternatives to enhance its capital structure, which may include taking steps to cure any potential defaults or seeking forbearance, waivers, further cost reductions, asset sales or other alternatives to avoid an event of default.

Use of estimates

The preparation of financial statements requires management to make estimates, judgments and assumptions that affect reported amounts and disclosures in the consolidated financial statements and accompanying notes. Due to the inherent uncertainty involved in making those estimates, judgements and assumptions, actual results could differ from those estimates. Our most significant estimates relate to revenue recognitions and the assessment of the recoverability of goodwill, definite lived intangible assets and other long-lived assets. Other estimates include allowances for expected credit losses, inventory, depreciation and amortization, business combinations, contingent consideration, share-based compensation, income taxes, and other contingencies. Management continually re-evaluates its estimates, judgments and assumptions and basis its estimates on historical trends, projections, current experience and other assumptions that it believes are reasonable. These estimates are sometimes complex, sensitive to changes in assumptions and require fair value determinations using Level 3 fair value measurements.

Cash and cash equivalents

Cash equivalents are highly liquid investments with a maturity of 90 days or less at the date of purchase and consist of time deposits and investments in money market funds with commercial banks and financial institutions. Also, the Company maintains cash balances with financial institutions in excess of insured limits.

Fair value measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value include:

On a recurring basis, the Company measures and records money market funds (Level 1), interest-rate swap arrangements and time deposits (Level 2) and contingent purchase consideration (Level 3) using fair value measurements in the accompanying financial statements. The carrying amounts of the Company's short-term financial instruments, which include cash and cash equivalents, accounts receivable and accounts payable approximate their fair values due to their short maturities. The carrying amounts of the Company’s long-term variable interest rate debt arrangements (Level 2) approximate their fair values.

Significant customers and accounts receivable

Billed accounts receivable are stated at invoice amounts and consist of amounts due from the USG, commercial and Bioservices customers, as well as amounts due under reimbursement contracts with other government entities and non-government organizations. The Company's branded and generic opioid overdose reversal product, NARCAN® Nasal Spray, is sold commercially over-the-counter at retail pharmacies and digital commerce websites as well as through physician-directed or standing order prescriptions at retail pharmacies, health departments, local law enforcement agencies, community-based organizations, substance abuse centers and other federal agencies.

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We maintain an allowance for expected credit losses, which represents the estimated aggregate amount of credit risk arising from the inability or unwillingness of specific customers to pay our fees or disputes that may affect our ability to fully collect our billed accounts receivable. We estimate the current-period provision for expected credit losses on a specific identification basis and we consider factors such as the age of the receivables balance, knowledge of the specific customers' circumstances and historical collection experience for similar customers. Amounts determined to be uncollectible are charged or written-off against the reserve. Accounts receivable, net of the allowance for expected credit losses, represents the amount we expect to collect. Our actual experience may vary from our estimates. At each reporting date, we adjust the allowance for expected credit losses to reflect our current estimate. Unbilled accounts receivable relates to various service contracts for which work has been performed and the Company has a right to bill but invoicing has not yet occurred. Contract assets include revenues recognized in advance of billings and the Company does not have a right to invoice the customer under the terms of the contract. The Company has receivables from contracts containing lease components. At each reporting period, the Company assesses whether it is probable that the Company will collect all future lease payments. The Company considers payment history and current credit status when assessing collectability. The Company does not adjust our receivables for the effects of a significant financing component at contract inception if we expect to collect the receivables in one year or less from the time of sale.

Concentration Risk

Customers

The Company has long-term contracts with the USG that expire at various times from 2024 through 2036. The Company has derived a significant portion of its revenue from sales of our Government - MCM products under contracts with the USG. The Company's current USG contracts do not necessarily increase the likelihood that it will secure future comparable contracts with the USG. The Company expects that a significant portion of the business will continue to be under government contracts that present a number of risks that are not typically present in the commercial contracting process. USG contracts for ACAM2000® and Anthrax Vaccines and other medical countermeasures products are subject to unilateral termination or modification by the government. The Company may fail to achieve significant sales of its medical countermeasures products, including ACAM2000® and Anthrax Vaccines to customers in addition to the USG, which would harm their growth opportunities. The Company's commercial product sales, largely NARCAN® Nasal Spray, are sold commercially over-the-counter at retail pharmacies and digital commerce websites as well as through physician-directed or standing order prescriptions at retail pharmacies, health departments, local law enforcement agencies, community-based organizations, substance abuse centers and other federal agencies. Refer to Note 13, "Revenue recognition" for more information regarding significant customers.

Although the Company seeks to expand its customer base and to renew its agreements with its customers prior to expiration of a contract, a delay in securing a renewal or a failure to secure a renewal or securing a renewal on less favorable terms may have a material adverse effect on the Company’s financial condition and results of operations.

The Company’s accounts receivable do not represent a significant concentration of credit risk. The USG accounted for approximately 38%, 43% and 51% of total revenues for 2023, 2022 and 2021, respectively. The Company’s accounts receivable as of December 31, 2023 and 2022, consist primarily of amounts due from the USG or other large multi-national highly reputable customers for product sales, Bioservices or from government agencies under government grants.

Financial Institutions

Cash and cash equivalents are maintained with several financial institutions. The Company has deposits held with banks that exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions of reputable credit and, therefore, bear minimal credit risk.

Lender Counterparties

There is lender counterparty risk associated with the Company's revolving credit facility and derivatives instruments. There is risk that the Company’s revolving credit facility investors and derivative counterparties will not be available to fund as obligated. If funding under the revolving credit facility is unavailable, the Company may have to acquire a replacement credit facility from different counterparties at a higher cost or may be unable to find a suitable replacement. The Company seeks to manage risks from its revolving credit facility and derivative instruments by contracting with experienced large financial institutions and monitoring the credit quality of its lenders. As of December 31, 2023, the Company does not anticipate nonperformance by any of its counterparties.

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