The Gang who Couldn’t Shoot Strait at Emergent BioSolutions gain more largesse from the USG. Yet this company cannot do anything right except obtain government contracts, kill off the competition, co-opt watchdog nonprofits and set up their own education agencies. See “Anthrax Vaccine: to the Victor the Spoils”
“This award underscores Emergent’s core competencies not only in product development and manufacturing, [They have developed no products–Nass] but also our expertise in contracting with the U.S. government and navigating the regulatory process,” CEO Daniel J. Abdun-Nabi said in a statement.
Rockville-based Emergent BioSolutions Inchas formed a public-private partnership with the Department of Health and Human Services to establish a Center for Innovation in Advanced Development and Manufacturing.
The contract has an initial run of eight years worth $220 million with up to 17 additional one-year options. The partnership, with HHS’s Biomedial Advanced Research and Development Authority [BARDA], will initially develop a new pandemic influenza vaccine and construct facilities to produce it.
It will also develop chemical, biological, radiological and nuclear medical countermeasures.
Emergent (NYSE: EBS) announced the partnership shortly before the markets closed Monday. Its stock gained 77 cents, or 5.6 percent, in late-day trading and closed at $14.41 per share.
From Scott Lilly, former staff director of the House Appropriations Committee, who wrote a report on Emergent BioSolutions’ financial whiz-bangery in 2010:
… A report I recently completed for the Center for American Progress examines one particular set of contracts involving the purchase of a vaccine for exposure to Anthrax. Normally it is virtually impossible to estimate the profit margin that a government contractor is making on a particular contract with information available in the public domain. This contract was different, however, because the contractor was a public corporation which had only one product and only one customer. Because the Securities and Exchange Commission requires disclosure of revenues and expenditures to stock holders, it is possible to see how much it cost the company to produce what it was selling to the federal government.
In the Form 10K released by this contractor in March, the company disclosed that its revenues for the sale of its vaccine totaled $217 million. The cost of sales according to the report was only $46 million. Further research indicated that the company has enjoyed such margins for nearly a decade with sales exceeding $1.3 billion and expenses of less than $0.3 billion.
The company, Emergent BioSolutions, argues that such margins are justified because it has faced a high level of financial risk in being a provider to the government. But an examination of the risks it has faced since its founding in 1998 turned up a remarkable lack of risk compared to almost any other type of commercial endeavor. The vaccine which is now sold under the name of BioThrax was developed by the U.S. Army in the 1960s. The license to manufacture the vaccine was obtained by the state of Michigan and the state also built the facilities used for manufacture. Those facilities were bought by Emergent with a down payment of $2.25 million. They were then upgraded almost entirely at the expense of the U.S. government.
The price of the vaccine was raised from a little less than $3 a dose which the government was paying to the state of Michigan to $10.60 a dose after Emergent took over. The price was then inexplicably raised again to more than $27 a dose—yielding the enormous profit margins detailed in the company’s annual report. To protect those hefty margins, Emergent has probably the largest and most expensive lobbying team in Washington when lobby expenditures are compared to company revenues.
We don’t have any idea how many high profit margin contracts the government has and it is only a result of the rather odd business model of this company that its high margins were uncovered. Annual reports for companies that have multiple products and sell to customers other than the government ordinarily yield little information that would permit an estimation of the markup they get out of their government sales…