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Emergent BioSolutions Triples Its Coronavirus-Vaccine Manufacturing Contract With AstraZeneca

By Brian Orelli, PhD – Jul 27, 2020 at 1:29PM

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There could be an even larger contract coming if the vaccine to prevent COVID-19 is successful.

Chalk up another contract to manufacture a coronavirus vaccine for Emergent BioSolutions (EBS -1.32%). This time from a repeat customer: AstraZeneca (AZN -3.07%).

Emergent BioSolutions, which is focused on bioterrorism and emergent diseases but also has a contract-manufacturing division, has previously partnered with Johnson & JohnsonNovavax, and Vaxart, as well as the aforementioned AstraZeneca, to help manufacture vaccines to prevent COVID-19.

The previous deal between Emergent and AstraZeneca, which was established in June, provided Emergent with $87 million in exchange for setting up the manufacturing process, and an initial reservation for raw materials and capacity to manufacture AZD1222, AstraZeneca's coronavirus vaccine, which it licensed from the University of Oxford and its spin-out company, Vaccitech.

The new deal adds another $174 million for the expanded manufacturing of AZD1222 this year through 2021. Last week's solid data from an early-stage study were likely the impetus for AstraZeneca extending the initial contract.

Emergent noted that it has flexible capacity, and AstraZeneca may reserve additional manufacturing space over the next three years. Presumably, AstraZeneca will wait for data from an ongoing phase 3 clinical trial before signing a long-term contract.

Gloved hands giving an injection into a shoulder.

Image source: Getty Images.

While the new contract appears to be good news for Emergent, the lack of details beyond the contract value makes it hard for investors to know how much the contract really adds to Emergent's valuation. Without knowing the company's costs or even how many doses of the vaccine are covered by the contract, it's impossible to know how the news will affect earnings.

Fortunately, investors won't have to wait too long for additional information; management plans to update its 2020 guidance when Emergent releases second-quarter results on Thursday.

Brian Orelli, PhD 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.
$20.86 (-1.32%) $0.28
AstraZeneca PLC Stock Quote
AstraZeneca PLC
$54.58 (-3.07%) $-1.73

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