The complaint centers around allegations of regulatory, compliance, and manufacturing failures at Emergent BioSolutions’ Baltimore facility, the dissemination of materially false and/or misleading statements and material omissions by Company representatives, and insider sales of Company stock, among other things.
As specifically alleged, in April and June 2020, Emergent signed deals with Johnson & Johnson (“J&J”) and AstraZeneca, respectively, to produce the companies’ COVID-19 vaccine candidates. These deals were worth a combined $875 million. On June 11, 2020, the U.S. government awarded Emergent an approximately $628 million contract to reserve manufacturing space and to upgrade its facilities.
The Company’s President and Chief Executive Officer (“CEO”), Robert G. Kramer Sr. (“Kramer”), stated that the Company was “uniquely prepared to answer the call for [the] COVID-19 pandemic” because of its “proven manufacturing capabilities in place.” The Company and its representatives also assured investors of Emergent’s ability and capacity to manufacture COVID-19 vaccines at its Baltimore Facility in mass. Public announcement of these agreements and the Company’s statements caused Emergent’s stock to soar to over $134 per share on August 13, 2020.
However, the Company and its representatives failed to disclose that (a) Emergent’s Baltimore plant had a history of manufacturing issues, increasing the likelihood for massive contaminations; (b) these contamination risks and quality control issues led to FDA citations; and (c) the Company was forced to discard millions of doses of COVID-19 vaccines after workers at the Baltimore plant deviated from manufacturing standards. For instance, the public was unaware that, in April 2020, the FDA conducted an inspection of the Company’s Baltimore facility, and cited a host of problems that led the regulators to conclude the facility was not scaled to make the drug substance for millions of vaccines. The FDA inspection found that Emergent had “deficient” containment areas for holding rejected manufacturing components “to prevent contamination or mix-ups.” The FDA further concluded that upgrades to technology and personnel were required before the Company could even begin making the drug substance.
The public only began to learn the truth on March 31, 2021, when media reports revealed that employees at the Baltimore Facility “mixed up” ingredients for the J&J and AstraZeneca vaccines, contaminating up to 15 million doses of the J&J vaccine. It was further revealed that this was not an isolated incident, but part of a checkered history of manufacturing issues at the Company’s plant. A New York Times article published that day reported that, in late February 2021, employees at the Baltimore Facility inconceivably “mixed up” ingredients of the two different COVID-19 vaccines, contaminating up to 15 million doses of J&J’s vaccine, and forcing regulators to delay authorization of the plant’s production lines. The article noted that Emergent’s massive vaccine lot contamination went undiscovered for days until J&J’s quality control checks (not the Company’s) uncovered it. It was further reported that by December 2020, Emergent was forced to discard millions of AstraZeneca vaccine doses (between October 2020 and January 2021, Emergent discarded five lots of AstraZeneca vaccine, each the equivalent of two million to three million doses) after they were spoiled by bacterial contamination of equipment at the same Baltimore facility. On April 19, 2021, the Company announced that it had “temporarily shut down operations at the [Baltimore] plant at the request of the Food and Drug Administration.
Rep. Carolyn B. Maloney, Chairwoman of the House Committee on Oversight and Reform, and Rep. James E. Clyburn, Chairman of the Select Subcommittee on the Coronavirus Crisis, sent a letter to the top executives of Emergent, launching an investigation into whether the company leveraged its relationship with a key Trump Administration official to profit from federal contracts despite a track record of raising prices and failing to meet contract requirements, and whether these actions impeded our nation’s response to the pandemic.
We are investigating reports that Emergent received multi-million- dollar contracts to manufacture coronavirus vaccines despite a long, documented history of inadequately trained staff and quality control issues….Emergent received $628 million in June 2020 to establish the primary U.S. facility for manufacturing vaccines developed by Johnson & Johnson and AstraZeneca. Dr. Robert Kadlec, who served as Assistant Secretary for Preparedness and Response under President Trump and previously worked as a consultant for Emergent, appears to have pushed for this award despite indications that Emergent did not have the ability to reliably fulfill the contract. (Emphasis added).
These and other revelations caused the Emergent’s share price to collapse. To make matters worse, during the period which Emergent’s stock price was artificially inflated due to the Company and its representatives materially false and misleading statements and omissions, Company insiders and members of the Board, including its CEO Kramer, sold exorbitant amounts of Company stock for millions of dollars in profit.
A copy of the complaint can be viewed here:
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