Plaintiffs Prevail in Emergent BioSolutions Securities Case
On July 7, 2017, the Honorable Roger W. Titus of the United States District Court for the District of Maryland issued an order denying defendants’ motion to dismiss in City of Cape Coral Municipal Firefighters' Retirement Plan v. Emergent BioSolutions Inc.
Emergent BioSolutions, Inc. (“Emergent”) is a specialty biopharmaceutical company. The company’s anthrax vaccine, BioThrax (Anthrax Vaccine Adsorbed) (“BioThrax”), is the only anthrax vaccine licensed by the U.S. Food and Drug Administration (“FDA”). The case charges Emergent and certain of its officers and directors with violations of the Securities Exchange Act of 1934. In September 2011, Emergent entered into a five-year procurement contract with the U.S. government for 44.75 million doses of BioThrax. By the start of the class period (January 11, 2016 – June 21, 2016), Emergent was reporting it had sold all of its BioThrax on hand and was working on a massive expansion of its BioThrax production facilities.
The case alleges that Emergent issued materially false and misleading statements regarding its business and financial prospects. Specifically, Emergent claimed it remained on track to receive the lucrative renewal of its five-year exclusive anthrax vaccine procurement contract. Emergent also emphasized an ongoing strong demand for BioThrax in light of the U.S. government’s funding of Emergent’s massive expansion of its BioThrax production facility, claiming that the expansion would enable the company to manufacture some 20 to 25 million additional doses of BioThrax annually, which the U.S. government would purchase over the following five-year period in order to build the U.S. Strategic National Stockpile (“SNS”) of anthrax vaccine to 75 million doses. As a result of defendants’ statements, Emergent common stock traded at artificially inflated prices, reaching a class period high of $43.95 per share, and enabling certain of the defendants to sell their personally held shares of Emergent common stock for proceeds of over $14.5 million.
On June 22, 2016, before the market opened, Emergent announced that the U.S. government would only be purchasing 29.4 million doses of BioThrax – approximately one-third less than the 44.75 million doses in the original contract and far less than the 75 million doses the company had told investors. In response, the price of Emergent stock declined from a close of $39.32 per share on June 21, 2016 to a close of $31.33 per share on June 22, 2016.
City of Cape Coral Municipal Firefighters' Retirement Plan v. Emergent BioSolutions Inc., No. 8:16-cv-02625-RWT (D. Md. July 7, 2017).