Emergent BioSolutions has come on strong in the past few weeks with two major announcements that could have a long-term impact on the Rockville company’s earnings.
First, there was the announcement three weeks ago that the company had won a $448 million, three-year contract with the U.S. Department of Health and Human Services to supplement the nation’s stockpile of anthrax vaccine.
Emergent BioSolutions agreed to deliver 18.75 million doses of its vaccine, called BioThrax. It has a shelf life of three years, but Emergent BioSolutions is seeking Food and Drug Administration approval to extend it to four years.
The contract is part of Operation BioShield, a program Congress approved in May 2004 to protect the nation from biological weapons by stockpiling vaccines and medications. The program followed the fall 2001 anthrax attacks.
Last week, the company announced that a typhoid vaccine is showing positive results in Phase II clinical trials in a test on children in Vietnam.
Typhoid fever, a potentially fatal disease, affects about 22 million people worldwide each year with high fever, headaches, constipation and sometimes delirium.
“The recent typhoid data is encouraging and indicates great promise for what would be the first single-dose, drinkable typhoid vaccine,” said Daniel J. Abdun-Nabi, Emergent BioSolutions’ president.
The vaccine “could enable us to secure a significant share of the worldwide typhoid vaccine market,” he said.
The tests are being done on children ages 5 to 14.
Of the two announcements, the contract to supply the government with anthrax vaccine would have the most immediate impact, stock analysts said.
“In my view, it secures their financing for the next three years,” said Gene Mack of HSBC Securities.
“What’s unique is they don’t really have competitors,” Mr. Mack said. “There is no other anthrax vaccine.”
The typhoid vaccine is potentially important, but it is too early in its testing phase to be certain that profits will follow for Emergent BioSolutions, he said.
“It’ll be several years before a regulatory review happens,” Mr. Mack said.
He values the company’s stock as a good deal for investors if it can overcome the image of being too dependent on only a couple of government customers.
BioThrax, Emergent BioSolutions’ main product, is sold to the Defense Department, the Health and Human Services Department and allied foreign governments.
“Given a small client base, there’s more risk [for investors],” Mr. Mack said.
The stock closed yesterday at $9.84 a share, down 17 cents or 1.7 percent from Friday’s closing price. It has declined sharply in the past six months partly because of increased expenses, but has rebounded recently.
Eric Schmidt of Cowen & Co. said the $448 million contract for anthrax vaccine means Emergent BioSolutions’ stock is “undervalued based on the value of this contract alone.”
Emergent BioSolutions was founded in 1998 and had its initial public offering last November. It has about 450 employees
In addition to BioThrax, some of its medications and vaccines in development treat typhoid, hepatitis B and group B streptococcus.
Revenue in the second quarter was $23.2 million, up from $11.4 million in the second quarter of 2006. The company’s net loss for the second quarter of 2007 was $5 million, or 17 cents per share, compared with a net loss of $3.1 million, or 14 cents per share, a year ago.
A $9.9 million increase in operating expenses was a primary reason cited for the bigger loss.
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