Company of the Week - November 30, 2008 - Emergent Biosolutions, Inc.

What? An anthrax vaccine company? Yes, apparently there is big business here, at least for now. We might have forgotten about the whole anthrax debacle from 2001, but the government hasn’t. The Rockville, MD based Emergent has the only, the sole, the one vaccine approved in the U.S. for the deadly disease. Over the last decade, it has sold 30 million of its Bio Thrax vaccine to the government, mostly to the Department of Defense and the Department of Health and Human Services. About 2 million of these doses have gone to the troops. The rest have gone to strategic stockpiles to be used in case of a bio-chemical attack. The government is buying the vaccines as fast as the company can make them. They don’t want to be caught flat-footed in case a crisis develops again.
In the past year, the company has signed two large contracts to deliver more than 33 million dosages of the vaccine over the next three years at $25 a piece. The price will increase to $27 if the life of the vaccine can be extended to 4 years, as opposed to 3 years as it is today. This gives insight to company’s earnings until 2011, analysts say, which is valuable in today’s markets.
The race is also to secure government contracts for the next generation of the anthrax vaccines. Emergent is one of the companies in the run to produce a vaccine with faster immunity and fewer risks or side effects. The market could be huge. The government set aside $5.6 billion in 2004 under its Project BioShield to develop and stockpile next generations vaccines.
Emergent also has other products in its pipeline. It is working on two drugs to treat the anthrax toxins for people already infected. It also has two botulinum vaccine in development and other vaccines or treatments for typhoid, tuberculosis, Chlamydia and hepatitis B.
It’s also working to acquire other capabilities. Earlier this year, Emergent tried to buy Protein Sciences and its promising flu vaccine that is in the late stages of testing and approval. The deal is now in the hands of lawyers and there is doubt if it will go through however. The guidance posted by Emergent after its third quarter did not reflect any revenue from Protein Sciences.
The third-quarter earnings per share of 34 cents are up 240% from one year ago. Analysts polled by Thomson Reuters had expected just 18 cents. Sales were up 30% to $56.6 million. For the year the company expects earnings per share between 70 cents and 83 cents. The consensus is 77 cents.
The company’s future is not certain. There is no guarantee that it will win the race for the next generation vaccine, but it may get part of the contracts. Also, having one customer is dangerous. But there are many worse customers than Uncle Sam, in this current environment.