What happened
Shares of Emergent BioSolutions (EBS 1.79%) jumped 10.2% on Tuesday after the bioterrorism expert said that it's working with Novavax (NVAX 3.99%) to develop its vaccine against the coronavirus that causes COVID-19.
So what
The announcement shouldn't have come as much of a surprise. On its fourth-quarter conference call last month, Emergent's president and CEO, Robert Kramer, said the company was in talks with the U.S. government, non-governmental organizations, and other companies to see how Emergent could use its resources and expertise to help develop a vaccine, treatment, or diagnostic for COVID-19.
Emergent is known for manufacturing its own products, many of which are purchased by the government and stockpiled in case of an attack or emergence of an infectious disease, but the company also has a contract manufacturing business where it makes products for other drugmakers.
Image source: Getty Images.
Now what
While the contract is good news for Emergent BioSolutions, the company didn't provide financial details for the contract, so it's impossible for investors to know how much Emergent will benefit from producing Novavax's vaccine. For reference, last year, Emergent brought in $80 million from its contract development and manufacturing services, which was 7.2% of total revenue. https://investors.emergentbiosolutions.com/news-releases/news-release-details/emergent-biosolutions-reports-financial-results-fourth-quarter-1?field_nir_news_date_value[min]=
Even if we did know how much Emergent was making per dose of the vaccine, it would still be very difficult to anticipate how much Emergent would profit from the contract because there are multiple drug companies developing vaccines for the coronavirus, including some who are ahead of Novavax. Of course, give that almost every human on the planet will want a vaccine, the companies are likely to be supply constrained, so not being first to market may not be a major issue.
