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United States securities and exchange commission logo
October 29, 2021
Richard Lindahl
Chief Financial Officer
Emergent BioSolutions Inc.
400 Professional Drive Suite 400
Gaithersburg, Maryland
Re: Emergent
BioSolutions Inc.
Form 10-K for the
Fiscal Year Ended December 31, 2020
Form 10-Q for the
Fiscal Quarter Ended June 30, 2021
Response dated
September 30, 2021
File No. 001-33137
Dear Mr. Lindahl:
We have reviewed your September 30, 2021 response to our comment
letter and have the
following comments. In some of our comments, we may ask you to provide
us with information
so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your response to these comments, we may have
additional
comments. Unless we note otherwise, our references to prior comments are
to comments in our
August 18, 2021 letter.
Form 10-K for the Fiscal Year Ended December 31, 2020
Management's Discussion and Analysis of Financial Condition and Results
of Operations Results
of Operations
Contract Development and Manufacturing Services, page 58
1. Refer to your response
to comment 6 and the proposed disclosure in response to comment
4 with respect to the
status of the AZ contract. You state that you are in negotiations with
AZ to settle your
contract and have not included revenue associated with the performance
of any future services
for AZ in the unsatisfied performance obligation disclosure. Please
address the following:
Richard Lindahl
FirstName LastNameRichard
Emergent BioSolutions Inc. Lindahl
Comapany
October 29,NameEmergent
2021 BioSolutions Inc.
October
Page 2 29, 2021 Page 2
FirstName LastName
As previously requested, please clarify in your proposed
disclosure how your results
of operations have been and are expected to be affected in the
future for the
renegotiation of the AstraZeneca contract. In this regard, we
note the increase in
selling, general and administrative expenses in the six months
ended June 30, 2021
compared to the prior period of $15.2 million and the $12 million
spent to remediate
and strengthen the manufacturing process at the Bayview site
referred to in your
earnings call. In addition, it is unclear if there was any lost
revenue and related cost
of sales relating to the AZ contract.
Clarify in the filing the nature of the renegotiation, which
appears to be a termination
of the contract, and the status thereof. Specifically state that
AZ's period of
performance was from July 2020-September 2020 and you will not be
recording any
future revenues for the AZ contract.
Tell us why additional disclosure is not required in the notes
to the financial
statements.
Gross Profit Margin for Product Sales and CDMO services, page 59
2. We note your response to our prior comment 2 and your proposed
disclosures. Your
arguments, including your references to your prior response, focused
on the
manufacturing of bulk drug substances and drug products. Your recent
revision of your
revenue recognition policy for the drug substance batch production
indicated a different
pattern for control transfer under ASC 606. Furthermore, your business
has also evolved
to include a large portion of suite reservation operation, which
appears to be bearing a
significantly higher margin. Please tell us how you determined that
disclosure of your
costs related to the CDMO service was not required by Article 5 of
Regulation S-X which
requires separate disclosure of cost of tangible goods sold, cost of
services, and expenses
applicable to rental income if their related revenue is over 10% net
sales and gross
revenues. In addition, please clarify that you will separately present
your leasing income
on the face of the income statement.
Consolidated Financial Statements
17. Segment Information, page 105
3. We note your response to our prior comment 5. Please respond to the
following
comments relating to your segment presentation under ASC 280:
Tell us how often the CODM meets with his/her direct reports,
the financial
information the CODM reviews to prepare for those meetings, the
financial
information discussed in those meetings, and who else attends
those meetings.
If not already covered by your response to bullet 1, describe
the information regularly
provided to the CODM and how frequently it is prepared. More
specifically, clarify if
any business units performance results are presented, or
discussed, as part of, or
outside of the consolidated company-wide performance presentation
that the
CODM reviews.
Richard Lindahl
Emergent BioSolutions Inc.
October 29, 2021
Page 3
Explain how budgets are prepared, who approves the budget at
each step of the
process, the level of detail discussed at each step, and the
level at which the CODM
makes changes to the budget.
Also describe the level of detail communicated to the CODM when
actual results
differ from budgets and who is involved in meetings with the CODM
to discuss
budget-to-actual variances.
You may contact Li Xiao at (202) 551-4391 or Mary Mast at (202) 551-3613
with any
questions.
FirstName LastNameRichard Lindahl Sincerely,
Comapany NameEmergent BioSolutions Inc.
Division of
Corporation Finance
October 29, 2021 Page 3 Office of Life
Sciences
FirstName LastName