Emergent Biosolutions shares plunge by more than 38% after U.S. cancels deal with Covid vaccine maker

Emergent Biosolutions shares plunged 38.6% on Friday after the company disclosed that the federal government had canceled its multimillion-dollar contract with the Covid-19 vaccine manufacturer.

Emergent, the Maryland-based company blamed in March for ruining millions of Johnson & Johnson‘s Covid doses after the shots were contaminated with ingredients intended for the AstraZeneca vaccine, was awarded a $628 million U.S. government contract last year to help make the shots.

An inspection by the Food and Drug Administration later found its plant in Baltimore was unsanitary and unsuitable to manufacture the shots. In a 13-page report, inspectors wrote that the facility used to manufacture the vaccine was “not maintained in a clean and sanitary condition” and was “not of suitable size, design, and location to facilitate cleaning, maintenance, and proper operations.” The U.S. would put J&J in charge of the plant and end the production of the AstraZeneca vaccine at the facility.

The company will forgo $180 million due to the contract’s termination, executives told investors on a call Thursday, according to a transcript by FactSet.

It also said it will continue working with J&J to produce its vaccines at the Baltimore plant as its deal with the company is separate from its contract with the federal government. As of late September, Emergent has contributed “over 100 million dose equivalents of Covid vaccine” for global distribution, the company told investors.

The work “we accomplished under the program and related task order contracts with the U.S. government served a critically important purpose,” Emergent CEO Robert Kramer said on the call, “one that our entire organization is immensely proud of.”

When he testified before a House committee in May, Kramer expressed disappointment that conditions at the plant caused the doses to become contaminated and required them to suspend manufacturing.

Emergent spokesman Matt Hartwig told CNBC on Friday that the company and the federal government “mutually agreed upon final payments to close out all open task orders and end the base CIADM contract.”

“These are mutually agreed upon terminations for convenience and neither party is alleging breach of default by the other,” he added.