The small anthrax attack that sparked massive nationwide panic seven years ago may have receded a bit in the public's consciousness. But the government hasn't forgotten. Neither has Emergent BioSolutions (NYSE:EBS - News).
Rockville, Md.-based Emergent has the sole U.S. approved vaccine for the deadly disease. Over the last decade, it has sold 30 million dosages of its BioThrax vaccine, mostly to the Department of Defense and the Department of Health and Human Services.
About 2 million of those doses have gone to troops.
The rest have gone to strategic stockpiles to be used in case of a biological attack.
Everyone hopes those stockpiles are never needed. But policymakers fear being caught flat-footed.
The government is buying BioThrax as fast as Emergent can make it.
"Hurricane Katrina still rings loudly in politicians' ears. Not being prepared for disaster is something no politician wants to be linked with," said Caris & Co. analyst David Moskowitz.
In the past year alone, Emergent has signed two large contracts to deliver more than 33 million dosages of its vaccine over the next three years at almost $25 each.
The price increases to about $27 per dose if the company can deliver vaccines with a four-year shelf life instead of the current three years.
Emergent's results, tied to the timing of such large orders, have been lumpy. But the deals show the government's long-term commitment to combating the anthrax threat. And they give investors sight of some revenue through 2011.
"In today's market environment, that's something that investors find pretty attractive," said Cowen & Co. analyst Eric Schmidt.
And, he notes, it's high-margin revenue.
So while the rest of Wall Street limps along in its own funk, Emergent is one of the few companies with strong earnings growth, marking an all-time high Friday.
"We have demonstrated our ability to secure government contracts. We have established a track record as a proven reliable supplier to the government. And we have managed our business in a financially sound manner," the company's chief executive, Fuad El-Hibri, told investors in a conference call earlier this month after releasing third-quarter results. Company officials could not be reached for comment for this story.
Emergent is one of several companies now racing to answer the government's call for a better next-generation anthrax vaccine. The hope is that a recombinant vaccine, a different vaccine technology than the current BioThrax, will offer immunity faster and with fewer risks or side effects.
That market could be huge. In 2004, the government set aside $5.6 billion under its Project BioShield to develop and stockpile next-generation vaccines to protect Americans from bioterrorism.
In May, Emergent bought a recombinant vaccine formula from former rival VaxGen (OTC BB:VXGN.OB - News) for a mere $2 million. VaxGen had spent millions developing its vaccine, but it lost a government contract worth $877.5 million for 75 million doses because of problems with the drug's stability.
Since buying the vaccine, Emergent has invested millions more to improve its stability.
In the meantime, the company is expanding its Lansing, Mich., plant so that it can make and sell more BioThrax or the next-generation version.
Emergent has other products in the pipeline as well.
It is working on two drugs to treat the anthrax toxins for people already infected. It has two botulinum vaccines in development and other vaccines or treatments for typhoid, tuberculosis, chlamydia and hepatitis B.
And it's 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.
But after both sides announced the deal worth up to $78 million in May, Protein Sciences appears to have balked. It said in July that the deal was off. Emergent says it's still on, and analysts say the deal is now in the hands of lawyers.
Emergent issued updated guidance after its third quarter but said it didn't reflect any possible revenue from Protein Sciences.
The company posted third-quarter earnings per share of 34 cents, up 240% from a year ago. Analysts polled by Thomson Reuters had expected just 18 cents.
Sales were $56.6 million, up 30%.
For the year, the company says to expect earnings per share between 70 cents and 83 cents. The consensus estimate is for 77 cents.
Emergent formed in 2004 as the parent of BioPort, a company that was created in 1998 from the purchase of the anthrax vaccine lab from the state of Michigan. The company still has production facilities in Lansing.
The company went public in 2006.
Emergent's future isn't certain. There's no guarantee that the company will win the race for the more-advanced anthrax vaccine. But analysts think it will probably get at least part of some future contracts.
Also, being so closely tied to any one customer is dangerous. But in the current market, there are worse customers than Uncle Sam.
"It's nice to have a customer like the U.S. government, which at this point is still a pretty creditworthy entity," Moskowitz said. <<<
To a greater extent than any other Big Pharma, JNJ operates as a holding company for operating subsidiaries that are scattered far and wide. Consequent to the $1.1B buyout of Mentor, JNJ has a potential blockbuster neurotoxin called PurTox to compete head-to-head against Botox in both cosmetic and medical applications. But where in JNJ’s array of operating companies should PurTox be positioned?
The initial decision, as reported in JNJ’s PR (#msg-33880205), is to move the entire Mentor operation into Ethicon, JNJ’s subsidiary that specializes in medical devices for wound care and gynecological conditions. But is this really the right place for detailing a potential blockbuster drug to derms and plastic surgeons?
I doubt it. In due course, I expect PurTox to be moved someplace else within the JNJ umbrella, but I’m not sure where.
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