A securities class action suit was filed against a multinational specialty biopharmaceutical company and certain executives following claims they violated federal securities laws.
The lawsuit against Emergent Biosolutions Inc. was filed in the U.S. District Court for the District of Maryland on behalf of investors who purchased shares in the company during the class period between Jan. 11, 2016 and June 21, 2016, according to a press release. Emergent develops vaccines and antibody therapeutics. Its treatments are used for oncology and autoimmune disorders and infectious diseases. In addition, it provides medical devices for biodefense.
Emergent’s anthrax vaccine is a key profitability driver
One of emergent’s treatments, BioThrax, is the only anthrax vaccine licensed by the Food and Drug Administration. In fact, the company is known for its line of potential bioweaponry, the Washington Business Journal explained. Each year, the Department of Health and Human Services makes bulk purchases of BioThrax, as part of a five-year, 44.75 million-dose agreement with Emergent. By January 2016, the biopharmaceutical company reported it had run out of the anthrax vaccine and intended to expand production.
In 2015, Emergent’s BioThrax sales totaled $293.9 million, the news outlet reported. This amount comprised around 55 percent of the company’s total revenue for the year. However, in recent years competitors have entered the market with their own anthrax vaccines.
“In recent years competitors have entered the market with their own anthrax vaccines.”
Class action lawsuit alleged false claims regarding government contract
The class action filing against Emergent claimed the company released materially false and misleading statements about its financial and business prospects. For example, the company claimed it renewed its profitable five-year procurement agreement with the government. However, the lawsuit alleged that the defendants had no reason to believe Emergent’s contract with the HHS had been prolonged.
The biopharmaceutical provider also told investors that demand for its anthrax vaccine was growing and that the government would fund the expansion of its BioThrax production facilities, the press release explained. Without “reasonable basis,” Emergent disclosed that because of the aforementioned developments, it would start manufacturing an additional 20 to 25 million additional doses of BioThrax per year. These extra doses would also go to the government over five years, so it could bolster its Strategic National Stockpile to 75 million doses.
The class action lawsuit claimed Emergent’s stock began trading at artificially inflated prices following the defendants’ allegedly materially false and misleading statements. At its highest point during the class period, the company’s stock traded at $43.95 per share. Due to the relatively high price of Emergent securities at the time, the certain defendants were able to sell their shares for a total return of more than $14.5 million.
On June 22, 2016, before the market opened, Emergent disclosed that the government released two official solicitation notices with lower procurement totals than the company previously forecasted. Instead, the government specified it would be purchasing only 29.4 million doses of BioThrax, far less than the nearly 45 million doses in the first agreement or the 75 million Emergent had projected to investors.
Emergent also disclosed that the government was not looking for more of the first generation anthrax vaccine. Instead, it sought new, fast-acting next generation vaccines. Once a treatment was approved, the government added, it would open up bidding to other companies, meaning Emergent would lose exclusivity. On this news, the biopharmaceutical provider’s stock dropped about $8.00 per share to close at $31.33 on June 22.
For more information on this case or other class action litigations, please contact Adam Foulke at 203-987-4949 or firstname.lastname@example.org.