Just about two months into his CEO job at Emergent BioSolutions, Joseph Papa has laid out his turnaround plan for the CDMO-turned-biopharma company. And it involves a major organizational restructuring.
Emergent will reduce its current workforce by about 300 employees “across all areas of the company” and will eliminate about 85 job openings, the company said Wednesday.
Simultaneously, the company will close its Baltimore-Bayview drug substance manufacturing facility and its Rockville drug product facility, both of which are located in Maryland. The firm’s sites in Winnipeg, Cananda, and Lansing, Michigan, will conduct the bulk of operations going forward, while the company “actively explores strategic alternatives for its other sites throughout the year.”
After the overhaul is fully implemented, Emergent expects to save about $80 million in annual costs. Emergent expects to take a financial hit of around $18 million to $21 million in the second half of 2024 in connection with the restructuring.
“Today’s actions are about the future of Emergent,” Papa said in a statement. “We have put in place a multi-year plan to position Emergent for sustainable and long-term success, and that starts by stabilizing our operations, strengthening our balance sheet and managing our debt.”
On a call with investors Wednesday afternoon, Papa admitted that the decision to lay off employees was “very difficult.” At the same time, the CEO stressed that the company’s internal review of its business emphasized the need to restructure the way Emergent operates.
With regards to Emergent’s continued operations in Lansing and Winipeg, the company sought to prioritize sites that had “the most flexibility” to help the company streamline its facility footprint while still being able to meet demand for its products, Papa said.
The reorganization comes as Emergent on Wednesday reported $300 million in first-quarter revenues, which were higher than its previous expectations of between $200 million and $250 million.
However, the company’s cash position kept worsening. By the end of March, Emergent had $78.5 million in cash and cash equivalents, down from $112 million at the end of 2023 or $643 million a year prior to that.
In another blow to Emergent’s business, the company said Wednesday in a securities filing that the Department of Health and Human Services (HHS) has cut back a 10-year contract signed in 2019 for the smallpox vaccine ACAM2000. For an option to purchase ACAM2000 from year 5 to 9 of the contract, the HHS is reducing the minimum number of doses set for purchase from 9 million to 3.5 million annually.
Papa, who previously served as CEO of Valeant and Bausch Health, was tapped in February to run the show at Emergent as the company works through its transformation from a CDMO to a drug developer. Papa took over for Haywood Miller, who transitioned from an advisory role to become interim CEO last June after Emergent’s previous helmsman Robert Kramer retired.
Papa has a history of spearheading turnaround projects at struggling biopharmas, as was the case when he jumped from Perrigo to Valeant Pharmaceuticals in 2016. Under Papa’s leadership, Valeant managed to reduce its debt by more than $6 billion by 2018—the same year the company changed its name to Bausch Health.
Emergent, for its part, garnered praise in the early days of the COVID-19 pandemic when the CDMO stepped up to help manufacture vaccines for AstraZeneca and Johnson & Johnson. Things quickly went south, however, after a cross-contamination snafu forced the company to discard hundreds of millions of COVID vaccine doses.
In the aftermath of the cross-contamination controversy, Emergent in August unveiled a sweeping plan to de-emphasize its contract manufacturing and development business—alongside plans to scale back operations at its Bayview facility in Baltimore—in order to better focus on its core portfolio of medical countermeasures and the opioid overdose reversal spray Narcan.
At the time, Emergent said it would continue to “maintain a level of operations” at its sites in Baltimore and Canton, Massachusetts, in order to respond to future production demand.
As part of its business reform, Emergent at the time telegraphed the layoffs of around 400 employs across the entire company.
Troubles aside, Emergent has managed to rack up a number of wins over the past year.
Last March, the company made history by securing an over-the-counter nod for Narcan, in a move that many hailed as a breakthrough for harm reduction efforts in the U.S.
A few months after, Emergent snagged a full approval for its anthrax vaccine Cyfendus in adults ages 18 to 65. And in January, the company picked up a 5-year, $238.5 million contract with the U.S. Department of Defense to supply its previous anthrax immunization, BioThrax, to various branches of the military.
Meanwhile, Emergent recently received a clean bill of health at its Baltimore Bayview facility—now slated for closure—when the FDA granted the plant a “No Action Indicated” classification. The NAI tag means the FDA found the Bayview facility to be in an acceptable state of compliance with U.S. manufacturing standards.
Editor's note: This story has been updated with additional details from a securities filing and Emergent's first-quarter earnings call.