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Emergent BioSolutions: Punished For Answering The Call To Immediate Action

May 03, 2021 10:49 PM ETEmergent BioSolutions Inc. (EBS)10 Comments


  • Emergent BioSolutions has had a rough go over the past couple of months resulting from a cross-contamination mishap at their Baltimore facility.
  • Due to the cross contamination, the company had to toss millions of Johnson & Johnson vaccines. Consequently, the FDA put a halt on vaccine production at that facility.
  • Following the news, EBS share price has been cut in half and crushed to new 52-week lows. I believe there is an opportunity for a quick reversal play.
  • The company's latest quarter earnings and updated guidance point to record revenues in 2021. The market will find it hard to ignore double-digit growth over the rest of 2021.
Healthcare professional in protective gloves & workwear holding & organising a tray of COVID-19 vaccine vials
Photo by Images By Tang Ming Tung/DigitalVision via Getty Images

Emergent BioSolutions (NYSE:EBS) has recently been under public and regulatory scrutiny for the vaccine debacle that transpired at their Bayview facility. In addition, the company’s CEO and the company’s government contracts have also generated some concerning headlines. The negative headlines in conjunction

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Biologics profile picture

Biologics is a full-time healthcare investor who developed a passion for biotech and life saving therapies after working in the medical field for years. His trade focus is around innovative companies developing breakthrough therapies and/or pharmaceuticals with catalysts for potential acquisitions.

He is the leader of the investing group Compounding Healthcare. Features of the group include: Several model healthcare portfolios, a weekly newsletter, a daily watchlist, and chat for dialogue and questions. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in EBS over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (10)

Go and do likewise profile picture
Seems like punished for their own mistakes.

I do like that they have put Mary Oates "who joined Emergent in November after 25 years at Pfizer" in charge of the response to the FDA’s list of concerns Bayview plant. And sounds like J&J is pledging to make sure plant meets FDA standards. Given the huge need for vaccines, would be reasonable to think that every effort will be made to make sure this EBS plant gets up standards and restarts production.
I wonder if the company was under the misguided view that speed was important. Maybe even Warp Speed. Paint chips and brown residue aside, the US Government made the call to develop both AZ and J&J in the same facility. Punishing EBS is a funny concept. It only makes sense today because Modern and Pfiser succeeded. Had they not, this company might have saved millions of lives. That was what drove cutting corners. Seems obvious, no?
Just to give some context to the article and some of the comments, it is not uncommon for pharma manufacturers and compounders to have production difficulties or screwups. And the FDA is pretty good at finding them and dealing with them. The FDA’s open archives contain innumerable horror stories of inspections which reveal rodents, filth, contaminants, measurement errors, etc., in both domestic and overseas facilities, going back many years. Only a few of these stories are publicized by the FDA or others, although many can be found with a little digging.
Duras profile picture
Really fine article Biologics. I was involved with a small, privately held biotech for decades and I can understand your views here, however if sspencer's comments on the motivation for the screw up are correct, and given the CEO's timely insider sale of stock they well might be, I'd pass on the stock. Which means a bit more research this a.m. Glad I'm following you, very interesting.
I've been accumulating EBS over the last few weeks. This too shall pass.
@InvestorMan Sr. Yes, people have short memories.
sspencer profile picture
Hardly an 'over-zealous' reaction to chop the stock. The FDA sets strict standards for good reason. When EBS cut corners and attempted to produce on the cheap, and really screwed up, they deserve to be severely penalized. And they should remain in the penalty box until a new management replaces the current, and maybe then they can restore some faith from potential partners and investors.
@sspencer Spoken like a government regulator.

Since this company is at the mercy of government regulators that’s fairly damning.
@Ignatz Katz Also damning of regulators in the middle of a pandemic! Context matters. Only because we all safely sit with our Pfizer or Modenra vaccines inside us, can we pretend to be outraged by any of this stupidity
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