Share-based compensation and stockholders' equity

9 Months Ended

Sep. 30, 2024

Stockholders' Equity Note [Abstract]

Share-based compensation and stockholders' equity

Share-based compensation and stockholders' equity

Share-based compensation

The Company’s share-based compensation expense relates to stock options, performance stock options, restricted stock units, performance stock units and liability classified long-term incentive awards. During the nine months ended September 30, 2024, the Company granted stock options to purchase 4.1 million shares of common stock; performance stock options, subject to market conditions, to purchase 0.8 million shares of common stock; and 0.2 million restricted stock units. The grants were made under the Emergent BioSolutions Inc. Amended and Restated Stock Incentive Plan and the Emergent BioSolutions Inc. Inducement Plan. Additionally, during the nine months ended September 30, 2024, the Company granted an $8.0 million long-term incentive award, subject to market conditions, with the option to settle in any combination of cash or shares, which is accounted for as a liability classified award. The performance stock options and the long-term incentive award were valued using Monte Carlo valuation models, and both have a performance period of five years to vest based on the Company’s stock price performance. The long-term incentive award will be revalued at each reporting period until the award is earned or expires. The Company’s other equity awards typically vest over three equal annual installments beginning on the day prior to the anniversary of the grant date. The performance stock units settle in stock at the end of the three-year performance period based on the Company's results compared to the performance criteria. During

the nine months ended September 30, 2024, 1.0 million stock options, 0.4 million restricted stock units, and 0.1 million performance stock units were forfeited prior to the completion of the applicable vesting requirements or expiration.

Share-based compensation expense, net of forfeitures was recorded in the following financial statement line items:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Cost of Commercial Product sales	$	—	$	—	$	—	$	0.1
Cost of MCM Product sales	0.3		1.0		1.6		3.5
Cost of Bioservices	(0.1)		0.2		0.2		0.8
R&D	—		0.6		1.0		1.7
Selling, general and administrative	2.1		2.2		10.9		13.0
Total share-based compensation expense	$	2.3	$	4.0	$	13.7	$	19.1

Stockholders’ equity

2024 Issuance of Common Stock

In connection with the Term Loan Agreement, the Company entered into a Subscription Agreement, dated as of August 30, 2024 (the “Subscription Agreement”) with the lenders under the Term Loan Agreement, under which on September 17, 2024, the Company issued to the lenders 1.1 million shares of common stock with an aggregate value of $10.0 million, at a price per share of $8.98, which was based on the volume weighted average price per share of common stock for the 30 consecutive trading days ending on, but excluding, the tenth business day of the Term Loan Agreement. At inception, the Subscription Agreement represented a forward sale of the Company’s common stock (the “Forward”).

Because the number of shares issued under the Forward was based on a fixed monetary value known at inception, which would be settled by issuing a variable number of shares, the Forward was classified and recorded as a liability at inception. Because it was liability classified, the Forward was required to be remeasured to fair value at settlement on September 17, 2024, and the Company recognized a gain of $1.6 million recorded within “Other, net” on the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2024. The gain was driven by the decline in stock price between the execution date of the Subscription Agreement and the date the shares were issued. There was no remaining liability related to the Forward on the Condensed Consolidated Balance Sheet as of September 30, 2024.

2024 Warrant Issuance

In connection with the Term Loan Agreement, the Company issued to the lenders Series I Warrants to purchase 1.0 million shares of common stock and Series II Warrants to purchase 1.5 million shares of common stock. The Warrants are currently exercisable and will expire on August 30, 2029. Because the Warrants could be cash settled based on events that are outside the control of the Company, it precludes the Warrants from applying the equity contract scope exception, and so are classified as a liability. As of September 30, 2024, the fair value of the Warrants was $13.9 million. See Note 8, “Fair value measurements,” for more information on the accounting treatment and valuation of the Warrants.

As of September 30, 2024, the Company had the following Warrants outstanding to acquire shares of its common stock:

	Warrants Outstanding	Range of Exercise  Price per Share	Expiration Date
Warrants issued related to the Term Loan Agreement	2.5	$9.88 - $15.72	August 2029
Total	2.5

During the three months ended September 30, 2024, no Warrants expired or were exercised.

At-the-Market Equity Offering Facility

In May 2023, the Company established an “at-the-market” equity offering program (the “ATM Program”) pursuant to which the Company may, from time to time, sell up to $150.0 million aggregate gross sales price of shares of its common stock through Evercore Group L.L.C. and RBC Capital Markets, LLC, as sales agents. There were no sales of the Company’s common stock under the ATM Program during the three months ended September 30, 2024. The Company is not eligible to file a new Registration Statement on Form S-3 until 2025 due to the delayed filing of the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2023. Therefore, the Company will not be eligible to sell any shares under the ATM Program until a new Registration Statement on Form S-3 is filed and becomes effective. During the second quarter of 2023, the Company sold 1.1 million shares of the Company’s common stock under the ATM Program for gross proceeds of $9.1 million, representing an average share price of $8.22 per share. As of September 30, 2024, $140.9 million aggregate gross sales price of shares of the Company’s common stock remains available for issuance under the ATM Program.

Accumulated other comprehensive income (loss), net of tax

The following table includes changes in accumulated other comprehensive income (loss), net of tax by component:

	Defined Benefit Pension Plan		Derivative Instruments		Foreign Currency  Translation Adjustments		Total
Balance at December 31, 2023	$	—	$	—	$	(5.7)	$	(5.7)
Other comprehensive income before reclassifications	—		—		0.2		0.2
Net current period other comprehensive income	—		—		0.2		0.2
Balance at March 31, 2024	$	—	$	—	$	(5.5)	$	(5.5)
Other comprehensive income (loss) before reclassifications	—		—		—		—
Net current period other comprehensive loss	—		—		—		—
Balance at June 30, 2024	$	—	$	—	$	(5.5)	$	(5.5)
Other comprehensive income (loss) before reclassifications	—		—		(1.8)		(1.8)
Net current period other comprehensive loss	—		—		(1.8)		(1.8)
Balance at September 30, 2024	$	—	$	—	$	(7.3)	$	(7.3)
Balance at December 31, 2022	$	3.5	$	6.2	$	(6.6)	$	3.1
Other comprehensive loss before reclassifications	—		(4.4)		(0.1)		(4.5)
Amounts reclassified from accumulated other comprehensive income	—		2.4		—		2.4
Net current period other comprehensive loss	—		(2.0)		(0.1)		(2.1)
Balance at March 31, 2023	$	3.5	$	4.2	$	(6.7)	$	1.0
Other comprehensive income before reclassifications	—		1.2		2.6		3.8
Amounts reclassified from accumulated other comprehensive loss	(3.5)		(2.9)		—		(6.4)
Net current period other comprehensive income (loss)	(3.5)		(1.7)		2.6		(2.6)
Balance at June 30, 2023	$	—	$	2.5	$	(4.1)	$	(1.6)
Other comprehensive income (loss) before reclassifications	—		0.9		1.2		2.1
Amounts reclassified from accumulated other comprehensive income (loss)	—		(3.1)		—		(3.1)
Net current period other comprehensive income (loss)	—		(2.2)		1.2		(1.0)
Balance at September 30, 2023	$	—	$	0.3	$	(2.9)	$	(2.6)

The tables below present the tax effects related to each component of other comprehensive income (loss):

	Three Months Ended September 30,
	2024						2023
	Pretax		Tax Expense		Net of tax		Pretax		Tax Expense		Net of tax
Derivative instruments	$	—	$	—	$	—	$	(3.1)	$	0.9	$	(2.2)
Foreign currency translation adjustments	(1.8)		—		(1.8)		0.9		0.3		1.2
Total adjustments	$	(1.8)	$	—	$	(1.8)	$	(2.2)	$	1.2	$	(1.0)

	Nine Months Ended September 30,
	2024						2023
	Pretax		Tax Expense		Net of tax		Pretax		Tax Expense		Net of tax
Defined benefit pension plan	$	—	$	—	$	—	$	(4.1)	$	0.6	$	(3.5)
Derivative instruments	—		—		—		(8.0)		2.1		(5.9)
Foreign currency translation adjustments	(1.6)		—		(1.6)		2.9		0.8		3.7
Total adjustments	$	(1.6)	$	—	$	(1.6)	$	(9.2)	$	3.5	$	(5.7)