Emergent has faced setback after setback in its ambitious push to help produce COVID-19 vaccines for pharma giants Johnson & Johnson and AstraZeneca. While the contract manufacturer is working to remedy those issues, angry investors are now targeting the company with charges of insider trading and more.
In the latest suit, filed on June 29 by the Lincolnshire (Ill.) Police Pension Fund, plaintiffs claim that company leaders sold Emergent stock “while in possession of material, nonpublic information that artificially inflated the price.” The fund also maintains that company management “profited from their misconduct and were unjustly enriched through their exploitation of material and adverse inside information.”
The filing names 12 executives and board members as defendants, and it charges seven of them with alleged insider trading. Among them is CEO Robert Kramer, who sold 88,555 shares between Jan. 15 and Feb. 8 of this year for proceeds that totaled $10.1 million. The windfall came on top of his $5.57 million salary for 2020, the suit points out.
Citing numerous quotes from conference calls and other public events, the suit alleges that Kramer and other Emergent leaders misled investors about the company's fitness to manufacture COVID-19 vaccines.
The suit also breaks down Kramer’s stock sales by date, asserting that they “were timed to maximize profit from Emergent’s then artificially inflated stock price.” The plaintiffs also claim that Kramer’s sales were “drastically” out of line with his past practices. Between May 2019 and April 2020, Kramer didn’t sell any of his personally held company stock, the suit notes.
Emergent declined comment on Wednesday, saying it didn't have anything to add beyond its comments Tuesday to the New York Times. Spokesman Matt Hartwig told the Times that the lawsuits were "without merit."
Before running into manufacturing hurdles, Emergent was sitting pretty last summer when it won a $628 million government contract to produce COVID-19 vaccines for AstraZeneca and Johnson & Johnson.
But the rush to crown Emergent was premature. The company had a poor record of FDA compliance and proved ill-equipped for a rapid scale up.
In late March, the New York Times reported that workers at Emergent's Baltimore plant ruined up to 15 million doses of the Johnson & Johnson shot. Since that revelation, Emergent has stopped production at the plant to remedy issues discovered by the FDA and lawmakers have started a probe into the company.
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With the revelations, Emergent's shares have dropped from a high of $135 in August to $60 and as a result, its market capitalization has plummeted by $4 billion.
The most recent lawsuit is one of at least four Emergent faces from investors. Three class-action suits—brought The Schall Law firm of Los Angeles, Block & Leviton LLP of Boston and Alan I. Roth of Lousiville—allege violations by Emergent of federal securities laws.
Not all the recent news has been bad for Emergent. On Friday the FDA authorized use of another batch of Johnson & Johnson COVID-19 vaccines produced at Emergent's Baltimore plant. This is the fourth batch of J&J shots the FDA has certified since it shut down vaccine manufacturing at the site, leaving a substantial stock of finished vaccines in storage.