As the company made its second acquisition in a month, Emergent Biosolutions Inc. CEO Daniel Abdun-Nabi vowed that the hunt for more prospects will continue and could include "vaccines, therapeutics, devices across the chemical, biological, radiological, nuclear and explosives [or CBRNE federal countermeasures spectrum], as well as emerging infectious disease spaces. They could be products. They could be full businesses. The whole portfolio of opportunities that we're looking at is quite broad."

Gaithersburg, Md.-based Emergent entered an agreement with Glaxosmithkline plc (GSK), of London, to gain control of the latter's raxibacumab (raxi), a fully human monoclonal antibody approved by the FDA for treatment and prophylaxis of inhalational anthrax. Emergent will assume responsibility for a multiyear contract with the Biomedical Advanced Research and Development Authority (BARDA), valued as high as $130 million, to supply the product to the U.S. Strategic National Stockpile (SNS). The all-cash transaction consists of a $76 million up-front payment and up to $20 million in product sale and manufacturing-related milestone payments, all of which would likely become due in 2019.

Earlier this month, Emergent said it was buying Paris-based Sanofi SA's ACAM-2000 business for $97.5 million up front and up to $27.5 million in near-term contingent regulatory and manufacturing-related milestones related to moving the FDA-approved smallpox vaccine along. The deal includes Sanofi's contract with the CDC that has a remaining value of up to approximately $160 million for deliveries of ACAM-2000 to the SNS, a cGMP bulk manufacturing facility and a lease to a cGMP fill/finish facility.

Abdun-Nabi said during a conference call with investors that Emergent is "at various stages of evaluation, from very early stage to more mature," and noted that takeovers represent "a core competency of ours. It's something that we've identified as a key driver to our growth plan" and "continues to move forward on multiple fronts. The company has conducted numerous acquisitions in the past, and we find that our ability to integrate is clearly quite robust," he added.

Asked for specifics about how much remains of the $130 million BARDA contract, Abdun-Nabi said the agreement has been "amended numerous times over the course of the last several years, so I don't have the specific number to give you. There have been increases in the procurements of this product over time. I can't give you a sense of the percentage of the total contract that was initially awarded, but over time, they procured more than $300 million worth of raxi, and that's over the last seven years or so."

Manufacturing questions raised

Last March, Pinebrook, N.J.-based Elusys Pharmaceuticals Inc. won FDA approval of Anthim (obiltoxaximab), a monoclonal antibody anthrax antitoxin. Anthim is indicated in adult and pediatric patients for the treatment of inhalational anthrax due to Bacillus anthracis in combination with appropriate antibacterial drugs, and for prophylaxis of inhalational anthrax when alternative therapies are not available or are not appropriate. "On the competitive landscape, I'll just summarize by saying after doing a fair amount of evaluation and due diligence around that, we've concluded that [raxi] is the product of choice by the U.S. government, so we're highly confident that this is the right product for our portfolio," Abdun-Nabi said.

Elusys in January said it has received $16.35 million for completing the second delivery of Anthim as part of its $45 million procurement contract to provide the product for the SNS. The company had previously received $8 million for its first delivery of Anthim under this same contract in 2016.

Laidlaw analyst Francois Brisebois, covering Emergent, said that, "although estimates of follow-on contract size seem more complex for the raxi acquisition vs. ACAM-2000, we are encouraged by the fact that raxi won't have to pass through regulatory approval hurdles for the $130 million remaining in the current contract." The company, he wrote in a research report, has made "major strides toward the 2020 $1 billion top-line goal, in only five days. While both acquisitions rely on many variables, we see as a real positive Emergent's ability to enter into these agreements as 2020 is quickly approaching."

He reiterated his "buy" rating with a $50 price target. Shares of the company (NYSE:EBS) closed Thursday at $36.04, up $1.15.

Raxi will continue to be made at GSK's existing facility through 2019, with Emergent purchasing the product from GSK until manufacturing is transferred to Emergent's Baltimore plant in 2020. During the call, Brisebois wanted details about the switchover. "If this transfer to existing facility basically wouldn't be until 2020, does that mean that you don't expect new contract deliveries to come until then, in terms of negotiations? How do you ensure that there's no disruption in deliveries?"

Abdun-Nabi said deliveries that are contemplated in the figures that have been provided run through the end of 2019. In parallel, there will be the tech transfer process that's underway, for both the fill/finish and the bulk manufacturing. He conceded that "the timing for the discussions with the government around the follow-on contract [is] hard to predict" but "our anticipation is that the government would require continued uninterrupted supply of this product to ensure that the capabilities for this countermeasure remain in place."

Raxi was the first monoclonal antibody approved by the FDA for treatment and post-exposure prophylaxis of inhaled anthrax, winning clearance in December 2012 with orphan drug designation.

GSK's BARDA contract began in 2009 as a development contract. Cowen and Co. analyst Eric Schmidt noted that "how demand may have fluctuated" over the length of the agreement is not known. "Expected government demand for raxi is somewhat uncertain, but we think it likely that Emergent could receive approximately $30 million to $40 million annually in sales starting in 2018," he wrote in a report.

Raxi "also complements Emergent's existing anthrax product, Anthrasil, an immune globulin G containing polyclonal antibodies that targets the anthrax toxins of Bacillus anthracis. The U.S. government has indicated interest in stockpiling both polyclonal and monoclonal antibodies that target anthrax, such that raxibacumab doesn't pose a competitive threat to Emergent's existing anthrax franchise," Schmidt pointed out. "Looking ahead, investors will be keen to monitor progress in obtaining FDA approval for raxi's new manufacturing facility, government negotiations surrounding the fulfillment of the existing contract as well as a new raxi contract, and the profitability impact" of the compound on Emergent's bottom line," he said.