Considering that Emergent BioSolutions (NYSE: EBS ) has regular government contracts and other manufacturing contracts -- so regular that it's willing to give quarterly guidance, which many companies wouldn't dream of -- it was a little surprising to see by how much the biotech beat the guidance it gave three months earlier. Third-quarter revenue came in at $138 million, substantially higher than the guidance of $110 million to $125 million it gave three months ago.
But, as it turns out, this is just an accounting issue. In the third quarter, Emergent BioSolutions set up a collaboration with MorphoSys to develop its prostate cancer drug candidate ES414. Under the terms of the agreement, Emergent BioSolutions got a $20 million upfront payment -- the biotech recognized $15.3 million of this in the third quarter. Back out the payment, and Emergent BioSolutions' revenue falls within its previous guidance, fortunately at the upper-end.