The stock of Emergent BioSolutions (NYSE:EBS) has been on fire of late. Year to date, shares are up by 56.6%, while the S&P 500 is down by 9.3%. What's behind Emergent's strong performance amid a highly volatile stock market and challenging economic conditions? The company has been involved in the race to develop a vaccine for COVID-19.

Specifically, Emergent signed several contract development and manufacturing agreements with other companies that are currently developing vaccines for the coronavirus. Emergent does have more than just its COVID-19 deals going on, though. With that in mind, let's dig into the company's business and find out whether Emergent can continue outperforming the market.

EBS Chart

EBS data by YCharts.

Emergent's involvement in the fight against COVID-19

Emergent has signed coronavirus-related manufacturing deals with three vaccine developers. The first of these, which was announced on March 10, was signed with Novavax (NASDAQ:NVAX). Emergent was given the task of manufacturing and producing Novavax's investigational vaccine for COVID-19. The financial details of this agreement were not disclosed.

A similar deal came on March 18, this time with Vaxart (NASDAQ:VXRT). Emergent agreed to develop and manufacture Vaxart's potential vaccine for COVID-19. The company did not share the financial details of its agreement with Vaxart, either.

Emergent's most recent such agreement was with Johnson & Johnson (NYSE:JNJ). In a deal valued at about $135 million, Emergent agreed to manufacture Johnson & Johnson's investigational COVID-19 vaccine. Johnson & Johnson hasn't started human clinical trials just yet, but plans to do so in September.

Johnson & Johnson is aiming to have this vaccine ready for emergency use in early 2021, and the company says it wants to supply more than 1 billion doses of the vaccine globally. Emergent's role in manufacturing Johnson & Johnson's vaccine will be crucial to the pharma giant's ability to achieve this lofty goal. The two companies are currently negotiating another deal, which would see Emergent sign a long-term manufacturing agreement with Johnson & Johnson that will begin in 2021. 

Blackboard with many question marks drawn on it.

Image source: Getty Images.

It is also worth noting that Emergent recently started work on developing plasma-derived products for the prevention and treatment of COVID-19. The race to develop vaccines and treatments for the deadly disease remains crowded, though, and Emergent is more likely to benefit from its manufacturing agreements with other vaccine developers than it is to make a fortune off its potential COVID-19 vaccine or treatment. 

Recent financial results

Emergent recently reported its fiscal first-quarter results. During the quarter, revenue increased by a measly 1% versus the year-ago period. The mediocre revenue growth was due to several factors. Most notably, the company did not generate any sales from its smallpox vaccine ACAM2000. During the first quarter of 2019, Emergent recorded $45.6 million in sales from ACAM2000. Why didn't the company record any revenue from this vaccine during the first quarter? 

A little bit of background will help. Back in September 2019, Emergent signed a 10-year contract with the U.S. Department of Health and Human Services for the continued supply of ACAM2000 into the U.S. Strategic National Stockpile. The deal included a one-year base period of performance, valued at $170 million, and nine option years.

With this in mind, here are the two reasons CFO Richard Lindahl gave for the company suspending its deliveries of ACAM2000 during the first quarter: "First ... in the fourth quarter, we completed delivery of the full 18 million doses under the base-year performance of the recently signed $2 billion 10-year contract. Second ... we expect the U.S. government will exercise the first one-year option for another 18 million doses to be delivered in calendar 2020."

With deliveries of ACAM2000 set to resume in the second quarter, the company's revenue should pick up from here on out, especially since several of its other products are performing well. For instance, the company's Narcan nasal spray, which treats opioid overdose, recorded sales of $72.2 million during the first quarter, a 10% year-over-year increase.

Also, Emergent's sales of its anthrax vaccines were $51.9 million, compared with $11.7 million reported during the year-ago period. For the quarter, Emergent recorded a net loss of $12.5 million, which was better than the $26 million net loss the company recorded during the first quarter of 2019. Lastly, Emergent ended the quarter with cash and cash equivalents of $181.5 million.

Should you buy?

Emergent has several things going its way: its involvement in the fight against COVID-19 via several manufacturing agreements, its fast-growing Narcan nasal spray, and its smallpox and anthrax vaccines. Thanks to these products, Emergent's revenue and earnings should keep growing steadily, and the company will likely continue to outperform the broader market, at least for the foreseeable future. In short, I think this healthcare stock is worth serious consideration.