Eyeing $1B in annual sales, Emergent BioSolutions to buy Narcan maker Adapt for $735M

Emergent BioSolutions is mobilizing its M&A war chest again. Hard on the heels of its $270 million deal for vaccine expert PaxVax, the frequent government contractor is buying Adapt Pharma and its opioid overdose-reversing drug Narcan.

The Maryland-based firm is paying $635 million upfront and up to $100 million for potential sales-based milestones through 2022. Narcan, the only FDA-approved nasal spray of naloxone, has been on the market since 2016. Emergent  estimates the drug will contribute $200 million to $220 million to the company’s top line in 2019. In addition to Narcan and an opioid overdose-focused pipeline, about 50 Adapt employees will come aboard Emergent.

The deal, plus the recently announced PaxVax buyout, will vault Emergent to $1 billion in revenue by 2020, a goal the company has been looking to achieve through M&As focused on public health threats. PaxVax, which has typhoid fever vaccine Vivotif and cholera vaccine Vaxchora, could deliver around $70 million to $90 million next year, per Emergent’s estimate.

Narcan could see more upside since President Donald Trump declared the opioid crisis a public health emergency last October. The U.S. Surgeon General, Jerome Adams, in April issued a public health advisory urging more Americans to carry naloxone, which can be lifesaving for people who overdose. After that, more first responders and police officers are carrying naloxone products with them.

An ongoing nationwide push is looking to move naloxone over the counter. Most states in the U.S. have passed orders that allow trained personnel such as pharmacists to distribute naloxone without a doctor’s prescription. Some lawmakers are also pursuing co-prescriptions of naloxone for opioid recipients who are at higher risk of overdose.

RELATED: Emergent BioSolutions to acquire PaxVax and two travel vaccines in $270M deal

However, in a Wednesday memo to investors, Wells Fargo analyst David Maris noted that competition could be on the horizon. Amphastar's nasal naloxone was rejected by the FDA, but Maris said the company might refile in 2019. Additionally, Teva has a generic version of Narcan pending full FDA clearance once the patent litigation is sorted out. Besides Adapt’s nasal spray, Kaleo sells an auto-injectable version called Evzio. Both products don’t need professional training to administer.

During a conference call on Tuesday, Emergent executives said the company doesn’t plan to change Narcan’s pricing and would also maintain the current 40% discount, or $37.50 per 4 mg dose, for state and local governments and medical group purchasers.

Because Narcan is attracting government purchases, the buyout fits the company’s focus on public health preparedness solutions and “allows us to apply our experience gained from two decades of partnering with the U.S. government,” said Emergent CEO Daniel Abdun-Nabi, in a statement.

It already holds stockpiling contracts for anthrax vaccine BioThrax and follow-on shot NuThrax, as well as for small pox vaccine ACAM2000, which it inherited from Sanofi. For the first six months of 2018, Emergent reported revenues increased 55%, to $338 million.

Even though Emergent expects to achieve or exceed its $1 billion revenue goal in 2020 through these acquisitions, it doesn’t seem to be stopping there. Instead, it sees new sales as cashflow to “continue investing in our business and pursue attractive M&A opportunities,” said CFO Richard Lindahl on the call.