Emergent (EBS), J&J and Chikungunya
Emergent Biosolutions (EBS) has an orphaned factory in Baltimore, capable of churning out a billion doses of J&J and AstraZeneca vaccine every year. I had written good things about it in passing a couple of months ago when the stock was trading at a (then) low of $80 or so. But as fate would have it, trying to handle manufacturing for both J&J and AZ turned out to be a problem for Emergent. Contamination became rife and employees literally ended up mixing up the two vaccines, landing the firm in FDA purgatory.
The stock dropped below $60 and I thought well, you know, this is probably going nowhere. But things may be looking up. The FDA and J&J appear to have reached a deal on re-opening this line as per the WSJ yesterday (stock is up in pre-market). Some snippets:
The emergency use authorization for the plant to produce Covid-19 vaccine could be made next week, the U.S. officials said… One official said that as part of that arrangement to get the plant online, the U.S. and J&J have tentatively agreed that about 60 million doses of J&J vaccine substance made at the Baltimore plant now will be cleared for use either in the U.S. or overseas. AstraZeneca is still doing testing on about 60 million doses, also manufactured at the Emergent plant in Baltimore, that could be the subject of another agreement with the FDA in coming weeks or possibly still part of this one.
Emergent’s Baltimore plant is claimed to have the capability to produce a billion doses every year. This is not very important for the US but may be crucial for the rest of the world. J&J’s vaccine and the world’s 6.5 billion unvaccinated people seem like a good match. No doubt there will be competition with the Chinese or Russian vaccines, but there are reasons why J&J / Emergent could end up in a good position:
J&J is the only one shot covid-19 vaccine thus far
Chinese vaccine capacity yet has to cross the ‘vaccinating China’ hurdle
AstraZeneca’s vaccine capacity has a large India component where they have continuing issues with raw materials, logistics and enormous local demand
The US needs to ramp up its vaccine diplomacy after blundering into a global “vaccine hoarder” image.
On a different note, Emergent got some other good news that it’s vaccine against the Chikungunya virus was provoking a lasting immune response. Western readers may have never heard of this mosquito-borne disease, but it is very nasty and very common in tropical countries. Now, I am not implying that Emergent is about to make revenues from their chikungunya candidate. The dev efforts will take several more years. But it could hep create the sentiment that the company’s prospects have not suffered long-term damage due to the recent issues with the FDA.
Earlier last year, Emergent’s stock had gone up to $120 when people thought EBS was going to be AstraZeneca and J&J’s supplier. Could it go back up there, effectively doubling from $60? It is risky, like all biotechs, but I’ll say the same thing I said two months ago: I can’t say I don’t like it at this price…
Get my newsletter in your inbox every week.
Please read important disclaimers here. Your use of these materials is subject to the terms of these disclaimers.