Emergent BioSolutions Hits Investors Business Daily

By: TraderMark Monday, December 01, 2008 2:58 PM

Symbols: AVAV, EBS, VXGN

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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.

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.

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.

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%.

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 still a pretty creditworthy entity," Moskowitz said. (oh, is it?)

Long Emergent BioSolutions in fund and personal account

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