Hey investors, COVID-19 vaccine manufacturing partner Emergent won't suffer from AZ, J&J trial holds: analysts

Shares of Emergent BioSolutions have been on a roller coaster of late, plummeting last month when customer AstraZeneca had to put its COVID-19 vaccine trial on hold, then taking a beating again yesterday on news that Johnson & Johnson had paused its own vaccine trial.

But as Emergent’s stock was falling more than 10% before the market opened yesterday, some analysts urged investors to cool down. Why? Because the company’s contracts with both AstraZeneca and J&J will provide some protection should either vaccine fail.

Emergent has two contracts with J&J. The first, for setup and tech transfer, is worth $135 million in 2020 and 2021. The second, for drug-substance manufacturing, will pay out $480 million in the first two years, with a yet-to-be valued three-year extension, Cantor Fitzgerald explained in a note to investors.

When added to the value of Emergent’s contracts with AstraZeneca and the U.S. Department of Health and Human Services, the company is assured $1.5 billion that “is largely protected from clinical trial risk, through contract protections, meaning that [Emergent] will highly likely recognize the majority of the $1.5B in revenue, irrespective of the clinical outcome of these trials,” Cantor Fitzgerald said.

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J&J said Monday it had paused the phase 3 trial of its COVID-19 vaccine candidate after one of the participants fell ill. The company has yet to provide details as it awaits the results of an investigation.

Analysts at Wells Fargo echoed Cantor Fitzgerald’s opinion, saying in a note to investors that the decline in Emergent’s stock was “an overreaction.”

What investors should be focusing on, Wells Fargo added, is Emergent’s ability to market Narcan, its nasal spray for reversing opioid overdoses. Emergent acquired the product in 2018 when it bought Adapt Pharma for $735 million.

In July, Emergent launched a new nasal-spray device for Narcan, which prompted the FDA to extend the shelf life of the 4-milligram dose from 24 months to 36 months. Narcan brought in $145 million in sales in the first half of the year, up 5% from the same period in 2019.

RELATED: Emergent's next-gen nasal spray device snares shelf life extension for opioid overdose drug Narcan

As for J&J, it hasn’t changed its manufacturing plans for the COVID-19 vaccine, said Janssen R&D head Mathai Mammen during the company’s third-quarter conference call yesterday. Trial pauses are “not at all unusual” he added.

Cantor Fitzgerald, in fact, warned investors that with tens of thousands of volunteers participating in COVID-19 vaccine trials, interruptions should be expected.

"Our view is that all vaccine makers are taking an extremely cautious approach to any safety events in the COVID-19 vaccine trials," the analysts wrote. "We believe there will be a number of pauses across COVID-19 trials as they work through the vast numbers of patients being included in the trials across all companies."