Working for the government proves extremely profitable for Emergent

With its latest acquisition Emergent Biosolutions is tapping into new ways to access public spending.

Emergent Biosolutions has been busy. In the past 12 months it has struck five deals to bolster its pipeline, the latest of which features a $635m up-front payment for Adapt Pharma, the maker of the overdose treatment Narcan. This follows the group’s $270 all-cash offer for vaccine company Paxvax earlier this month.

While Emergent’s buying habits appear to follow no logical pattern, they all have in common a focus on public health threats, which gives Emergent access to one of the industry’s most reliable payers: the US government.

Indeed, the company is happy to trumpet its 20-year track record “as a trusted partner to the Federal government”. Alongside the Adapt and Paxvax acquisitions, Emergent has recently acquired products for smallpox and anthrax, all of which add to a growing portfolio of businesses with applications in government and commercial markets.

And this focus is proving lucrative. The group estimates that the addition of Narcan, and the recently completed Paxvax acquisition, will help it exceed its own $1bn 2020 sales forecast. Narcan alone is expected to add $200-220m of revenue in 2019, according to Emergent.

Emergent Biosolutions' recent deals
Date Deal type Target/product source Product Therapy area Deal value ($m)
28 Aug 2018 Company acquisition Adapt Pharma - Opioid addiction 735
9 Aug 2018 Company acquisition Paxvax - Vaccines 270
6 Oct 2017 Product acquisition Sanofi ACAM2000 Smallpox vaccine 98*
3 Oct 2017 Product acquisition Glaxosmithkline ABthrax Anti-anthrax agent  Undisclosed
26 Jul 2017 In-licensing Valneva ZIKV-VLA1601 Zika virus vaccine 1*
*Up-front value. Source: EvaluatePharma.      

Narcan, is the only FDA-approved nasal version of naloxone. And with the US struggling with the opioid addiction crisis, estimated to have killed 49,000 people last year, Narcan's ease of use over injectable formulations could give it an edge with emergency response professionals, hospital doctors and clinics.

In April, the US Surgeon General released a public health advisory urging more Americans to carry naloxone. Additionally, laws have been passed in all 50 US states to increase public access to the drug.

Having an easy-to-use product that could help reduce deaths, as well as answering the need to increase access to naloxone, represents a strategic win for Emergent, and could explain why the group paid so much for what is essentially a single-product company.

Hiking ban?

How Emergent now increases Narcan sales will, however, have to be handled sensitively.

The company will want a return on its investment, but could face a public and political backlash if it resorts to price hikes. Mindful of this, Daniel Abdun-Nabi, its chief executive, has already said that the company would maintain the price set by Adapt and that the drug would continue to have a 40% discount when sold to government organisations.

Alongside its new push into the drug dependency market, Emergent has cemented its relationship with the US government through two product acquisition deals struck late last year, which gave it Sanofi’s smallpox franchise for a $97.5m up-front payment, and Glaxosmithkline’s anti-anthrax monocolonal antibody ABthrax.

As part of both deals Emergent gained multi-year stockpiling contracts. Its two-year agreement with the Biomedical Advanced Research and Development Authority, for ABthrax, was valued at roughly $130m, while the acquisition of Sanofi’s ACAM2000 saw Emergent take on the tail end of an existing 10-year smallpox contract with the Centers for Disease Control and Prevention, worth approximately $160m.

With such lucrative contracts to be won, it is not surprising that Emergent has vowed to keep its foot on the M&A pedal, a “priority for the organisation”. And with its focus on public health threats it is almost certain that its new businesses will see it targeting more government dollars.

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