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Here’s Why Emergent BioSolutions Is Rising Today

By Prosper Junior Bakiny – Apr 24, 2020 at 12:32PM

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The company signed a deal to help manufacture Johnson & Johnson’s lead COVID-19 vaccine candidate.

What happened

Shares of Emergent BioSolutions (EBS -3.69%) were up by 8% as of 12:08 p.m. EDT on Friday. The market is likely responding to the news that Emergent BioSolutions signed a $135 million contract with Johnson & Johnson (JNJ -0.61%). Per the terms of the agreement between the two entities, Emergent BioSolutions -- which manufactures pharmaceutical products for other companies -- will be tasked with manufacturing Johnson & Johnson's investigational COVID-19 vaccine.

So what

Johnson & Johnson said it was aiming to supply more than 1 billion doses of its lead vaccine candidate for COVID-19. Emergent BioSolutions will use its facilities to help ramp up the manufacturing of Johnson & Johnson's vaccine. It is, however, worth noting that Johnson & Johnson's candidate hasn't even reached the clinical trial phase yet.

The pharma giant said it was looking to start clinical trials by September. Johnson & Johnson is hoping to have its potential COVID-19 vaccine ready for emergency use in early 2021, an ambitious goal considering vaccine candidates typically take much longer than that to be approved.

Gloved hand holding test tube containing blood for coronavirus testing.

Image Source: Getty Images.

Now what

Emergent BioSolutions has signed several other COVID-19-related deals. For instance, the company partnered up with Novavax (NVAX -10.14%) to help manufacture Novavax's potential vaccine for the novel coronavirus. Emergent BioSolutions penned a similar deal with Vaxart (VXRT -0.48%), which will see Emergent produce Vaxart's potential vaccine for COVID-19. The financial details of these deals were not disclosed.

While these partnerships are good news for Emergent BioSolutions, investors should temper their expectations. Given that there are at least 70 potential COVID-19 vaccines currently in development -- and most of them will probably never make it to the market -- buying shares of Emergent BioSolutions because of its involvement in the efforts to develop a vaccine for COVID-19 seems risky. There might be good reasons to invest in the biotech company, but this isn't one of them.

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Emergent BioSolutions. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Emergent BioSolutions Inc. Stock Quote
Emergent BioSolutions Inc.
$20.09 (-3.69%) $0.77
Johnson & Johnson Stock Quote
Johnson & Johnson
$165.70 (-0.61%) $-1.02
Novavax, Inc. Stock Quote
Novavax, Inc.
$18.87 (-10.14%) $-2.13
Vaxart, Inc. Stock Quote
Vaxart, Inc.
$2.09 (-0.48%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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