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Entwistle & Cappucci LLP Investigative Alert: Emergent BioSolutions Inc. (EBS)

Entwistle & Cappucci LLP (“Entwistle & Cappucci”) is investigating potential federal securities law violations on behalf of clients that invested in Emergent BioSolutions Inc. (“Emergent” or the “Company”) (NYSE: EBS) based on: (i) the Company’s contamination of at least 15 million doses of the Johnson & Johnson COVID-19 vaccine; (ii) Emergent’s failure to fix known manufacturing quality issues identified by federal regulators and internal audits; (iii) the Company’s repeated misstatements concerning its quality control, manufacturing process, compliance with applicable regulations and delivery schedule of the Johnson & Johnson vaccine; and (iv) the U.S. Department of Health & Human Services’ (“HHS”) resulting announcement that it was directing Johnson & Johnson to assume full responsibility for manufacturing its vaccine on a going-forward basis.

Emergent is a biopharmaceutical manufacturing company headquartered in Maryland. For years prior to the pandemic, Emergent generated hundreds of millions of dollars in revenue from lucrative contracts with the U.S. government to manufacture anthrax vaccines for the national stockpile. In April 2020, as part of the national COVID-19 vaccine program, Operation Warp Speed, Johnson & Johnson and the federal government contracted with Emergent for the production of Johnson & Johnson’s vaccine using hundreds of millions of dollars in taxpayer funds. Several months later, on July 27, 2020, Emergent announced the Company had signed an agreement to provide development and manufacturing services for AstraZeneca’s COVID-19 vaccine. The contract was valuated at $174 million through 2021.

To date, Emergent’s Baltimore facility has produced approximately 150 million doses of the COVID-19 vaccines, but the doses are currently unusable due to long-standing quality control issues identified by the U.S. Food and Drug Administration (“FDA”). Reports on April 1, 2021 disclosed several production lots, including up to 15 million doses of the Johnson & Johnson vaccine, have been discarded due to potential cross-contamination and other FDA compliance issues.

Entwistle & Cappucci’s investigation to date has revealed:

  • Just two weeks before Emergent executed its contract to produce Johnson & Johnson’s vaccine, an inspection by the FDA revealed the Company had “deficient” containment areas for holding rejected manufacturing components to prevent cross-contamination and employees were “not given training in the particular operations they perform as part of their function and good manufacturing practices;”
  • Emergent has a history of alleged manufacturing problems. For example, in 2019, one of Emergent’s partners, Soligenix, Inc., revealed in a securities filing that Emergent supplied it with drugs that were out of specification and participants in a study had already been given doses before Emergent caught the error;
  • FDA inspectors have been critical of Emergent since at least December 2017, when inspectors found uncorrected problems with mold in the Company’s Canton, Massachusetts manufacturing facility. In 2018, FDA inspectors found Emergent had a policy of not conducting routine compliance audits at multiple manufacturing facilities;
  • Audits conducted by Johnson & Johnson, AstraZeneca and federal agencies during 2020 revealed significant issues at Emergent’s Baltimore facility, including: (i) risks of viral cross-contamination, (ii) inadequate disinfectant equipment, (iii) improper testing of raw materials and (iv) inadequate training of employees. Federal regulators also determined that Emergent failed to properly follow-up on audit findings; and
  • Officials at Operation Warp Speed and HHS received a government report in June 2020 that concluded the Company’s vaccine manufacturing plan was inadequate and Emergent’s problems hiring and retaining skilled workers meant it could not guarantee success in producing doses.

Despite these issues, Emergent and its senior executives made a series of allegedly false and misleading statements to investors, including:

  • During Emergent’s July 30, 2020 earnings call held to discuss second quarter financial results, the Company’s Chief Executive Officer Robert Kramer boasted about the Company’s drug manufacturing capabilities and industry expertise, stating the Company’s “ability to manufacture on a large scale has positioned us to contribute to the COVID-19 pandemic response like no other organization;”
  • On November 5, 2020, Senior Vice President Syed Husain told investors “we have an extremely successful track record of development and manufacturing abilities;”
  • During the Company’s earnings call on February 18, 2021, Kramer stated the Company was “right on schedule to support” Johnson & Johnson’s deliverable of 100 million vaccine doses to the U.S. government in the first half of 2021. Kramer also bragged about Emergent’s “eight and counting CDMO COVID-19 partnerships” to manufacture COVID-19 drugs and vaccines; and
  • Emergent’s filings with the Securities and Exchange Commission included materially false and misleading risk factors, such as warning that its products may not be approved “if we fail to comply with regulatory requirements.” These warnings were inadequate because Emergent allegedly knew its facilities were not in compliance with regulatory requirements.

Following the disclosure that Emergent would be forced to destroy 15 million vaccine doses, the Company’s stock price fell $12.45 per share, or 13.4%, to close at $80.46 per share on April 1, 2021, causing approximately $590 million in market capitalization losses.

If you invested in Emergent BioSolutions, or have additional information about the issues discussed herein, please contact attorneys Robert N. Cappucci or Joshua K. Porter at 212-894-7200, or via e-mail at rcappucci@entwistle-law.com or jporter@entwistle-law.com.

About Entwistle & Cappucci

Entwistle & Cappucci is a national law firm providing exceptional legal representation to clients globally in the most complex and challenging legal matters. Our practice encompasses all areas of litigation, including securities, antitrust, corporate transactions, general corporate and commercial, creditor’s rights and bankruptcy, corporate governance and fiduciary duty, government affairs, insurance, investigations and white-collar defense. Our clients include public and private corporations, major hedge funds, public pension funds, governmental entities, leading institutional investors, domestic and foreign financial services companies, emerging business enterprises and individual entrepreneurs.

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