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Why Emergent BioSolutions Shares Are Crashing Today

By Keith Speights – Jun 8, 2020 at 10:33AM

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An adverse court decision is weighing on the biotech stock.

What happened

Shares of Emergent BioSolutions (EBS 2.19%) were crashing 18.4% lower as of 11:13 a.m. EDT on Monday. The big drop came after the U.S. District Court for the District of New Jersey reached a decision after the market closed on Friday in a patent lawsuit regarding opioid overdose treatment NARCAN, a nasal spray. The court ruled in favor of Teva Pharmaceuticals (TEVA 0.65%) and against Emergent and its partner, Opiant Pharmaceuticals.

So what

The decision by the U.S. District Court is a huge blow to Emergent. NARCAN generated $72.2 million in sales for the company in the first quarter of 2020, nearly 38% of its total revenue.

Gavel on top of $100 bills

Image source: Getty Images.

Technically, the court decision applies only to the NARCAN 4 mg nasal spray. Emergent also markets a 2 mg version of the product. However, Emergent and Opiant are also in litigation with Teva over the lower-dose version of the product.

Should the court's ruling stand, Emergent will face generic competition from Teva for its top-selling product. It also is involved in similar patent litigation with Perrigo over NARCAN 4 mg nasal spray. 

Now what

Emergent BioSolutions stated that it intends to appeal the decision by the U.S. District Court. The company, though, plans to provide an update to its 2020 financial outlook as a result of the negative ruling when it announces its second-quarter results.

In the meantime, the main catalysts to look forward to with the biotech stock are related to its COVID-19 efforts. Emergent recently won a contract with the U.S. government worth around $628 million to manufacture novel coronavirus vaccines. It's also developing plasma-derived therapies targeting COVID-19.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Emergent BioSolutions. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Emergent BioSolutions Inc. Stock Quote
Emergent BioSolutions Inc.
$20.53 (2.19%) $0.44
Teva Pharmaceutical Industries Limited Stock Quote
Teva Pharmaceutical Industries Limited
$7.74 (0.65%) $0.05
Perrigo Company plc Stock Quote
Perrigo Company plc
$36.17 (-3.96%) $-1.49
Opiant Pharmaceuticals, Inc. Stock Quote
Opiant Pharmaceuticals, Inc.
$10.16 (-3.24%) $0.34

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

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