Investors Cheer Probable Government Contract For Emergent Vaccine
May 26 2011 - 3:59PM
Dow Jones News
Emergent BioSolutions Inc. (EBS) shares are trading higher after
the biopharmaceutical company said the U.S. government has issued a
request that could lead to a contract for a large batch of its
anthrax vaccine.
Emergent said it is in discussions with the government to
provide an additional 44.75 million doses of its anthrax vaccine,
BioThrax, over a five-year period for the Centers for Disease
Control's Strategic National Stockpile.
Although the government's request for proposal is no guarantee
of a contract, Emergent is seen as the likely winner, analysts say,
as BioThrax is the only anthrax vaccine currently licensed by the
U.S. Food and Drug Administration.
Emergent's shares soared on the news, reaching a high of $26.41
that was last seen in 2009. It is currently up 16% at $24.87.
It's the long-term commitment that is particularly important for
the company's top-line, analysts say.
"Five-year visibility into sales is exceptional in any
business," Wedbush Securities analyst Gregory Wade. He said
investors are cheering that if the contract is awarded to Emergent,
then the government will essentially be purchasing virtually
"everything" the company can manufacture within its existing
infrastructure.
Assuming it does receive the award, Wade said he estimates
annual BioThrax revenues of about $280 million, yielding annual
profits of about $84 million. WBB Securities analyst Steve Brozak
said it is difficult to speculate the exact value of the contract
without knowing more about shelf life of the doses and stability
issues, but he also expects it to be worth more than $1 billion
over the five-year period.
Emergent said it expects to finalize the contract with the
government during third quarter.
The request also underlines the U.S. government's continued
committment to investing in biodefense, which bodes well for
Emergent, as well as for peer PharmAthene Inc. (PIP) and
pharmaceutical company BioCryst Pharmaceuticals Inc. (BCRX), which
has a contract with the government for flu treatment.
"This is a very good sign in terms of the government reassuring
investors that it is serious about making purchases," said Brozak.
"This is a very good sign for biodefense companies that they are
going to get more contracts into the future."
Earlier this month, Emergent signed a modification to its
current contract with the U.S., increasing the number of BioThrax
doses delivered and shipped to the government to 17.9 million, up
from 14.5 million.
-By Corrie Driebusch, Dow Jones Newswires; 212-416-2143;
corrie.driebusch@dowjones.com;
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