Emergent BioSolutions will be paid even if the Astra-Zeneca (Oxford) vaccine flops

AstraZeneca was humming right along with its partnered COVID-19 vaccine with the University of Oxford before a sudden trial hold threw its plans into disarray. So what does that uncertainty mean for AstraZeneca’s expectant manufacturing partners on the shot? For at least one, it could be no issue at all. 

Despite a major commitment from AstraZeneca to help produce bulk drug substance for the University of Oxford’s adenovirus-based COVID-19 shot, Maryland’s Emergent BioSolutions isn’t likely to feel a financial pinch if the British drugmaker’s candidate doesn’t make it across the finish line, Cantor analysts wrote in a note to investors Wednesday.
On the heels of AstraZeneca’s troubling phase 3 trial hold, Emergent’s share price dropped 5% in early Wednesday trading to $100.22 as investors appeared to show concern that AstraZeneca’s setback would hit the CDMO’s bottom line.

But according to Cantor, Emergent wouldn’t likely come out worse for wear if AstraZeneca’s candidate flops, as the partners’ contract includes protections for Emergent that will see it rake in most of the $174 million owed to it in year one of the deal. 

Part of that deal, signed in July, is an $87 million portion for tech transfer and preparation that is underway, Cantor said. That money has already come Emergent’s way, and further contract protections will see Emergent made whole on most of the rest, analysts argued.
The only unknowns in the event of AstraZeneca’s failure would be the second and third years of the proposed contract, which could be waived, according to Cantor. However, given Emergent’s close relationship with the Department of Health and Human Services’ Biomedical Advanced Research and Development Authority (BARDA), another vaccine maker could easily step into AstraZeneca’s place to continue driving revenues for Emergent.
Moreover, that alternate partner could secure an even longer-term CDMO contract with Emergent at its Baltimore Bayview facility, largely taking the manufacturer’s risk off the table. 

Despite the uncertainty of AstraZeneca’s fate in the COVID-19 vaccine hunt, Emergent can rest easy knowing it has at least one other major player in the field on its side. In early July, Johnson & Johnson and Emergent inked a five-year work order worth at least $480 million to help produce the New Jersey-based drugmaker’s COVID-19 vaccine candidate.

Emergent will provide “large-scale” drug substance manufacturing for J&J’s recombinant DNA shot beginning in 2021, starting with a $480 million order for the first two years of the deal. For the final three years, the partners will use a “flexible capacity deployment model” to provide annual batches as needed, Emergent said.

UPDATE October 14: from FiercePharma:
Emergent has two contracts with J&J. The first, for setup and tech transfer, is worth $135 million in 2020 and 2021. The second, for drug-substance manufacturing, will pay out $480 million in the first two years…
When added to the value of Emergent’s contracts with AstraZeneca and the U.S. Department of Health and Human Services, the company is assured $1.5 billion that “is largely protected from clinical trial risk, through contract protections, meaning that [Emergent] will highly likely recognize the majority of the $1.5B in revenue, irrespective of the clinical outcome of these trials,” Cantor Fitzgerald said.
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