Emergent BioSolutions Facing Securities Class Action Over Vaccine Manufacturing Woes, Stock Drops

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Emergent BioSolutions and three executives face a proposed class action over what an investor alleges to be “numerous misrepresentations and omissions” about pervasive quality control problems at the COVID-19 vaccine manufacturer’s Baltimore facility, which culminated in the destruction of up to 100 million Johnson & Johnson and AstraZeneca doses. 

The 43-page securities lawsuit alleges none of the statements issued by Emergent and its top executives since last Spring with regard to the company’s manufacturing processes, capabilities, quality control procedures and position as a “leader in the biopharmaceutical manufacturing industry” were true. According to the complaint, a number of incidents that took place within the class period—April 24, 2020 through April 16, 2021—indicate that Emergent was ill-equipped to handle the crucial task of manufacturing COVID-19 vaccines and failed to disclose such to investors. 

Upon the disclosure of the company’s myriad vaccine manufacturing issues, Emergent stockholders were injured financially to the tune of more than $1.5 billion, the case says. 

In the Spring of 2020, Emergent relayed that it had secured production deals with Johnson & Johnson, AstraZeneca and the U.S. government to manufacture COVID-19 vaccine candidates, with the transactions valued at more than $1.5 billion, the lawsuit begins. In announcing the deals, Emergent, the suit says, touted its purported manufacturing expertise and emphasis on quality control, assuring that it was “uniquely prepared” to scale up production given its “proven manufacturing capabilities” already in place.

In June 2020, however, the veracity of Emergent’s statements began to be called into question, according to the case. 

First, an internal audit conducted that month by J&J subsidiary Janssen Pharmaceuticals found two major quality control deficiencies within Emergent’s operation, including “deficient” contamination control and the failure of the company to conform to basic industry standards, the lawsuit says. Second, FDA inspections of Emergent’s Baltimore facility, conducted both prior to and after the company secured COVID-19 vaccine manufacturing contracts, led the company to be notified of “a series of quality control shortcomings” that included the failure to ensure electronic data was protected from manipulation or deletion, carelessness in handling rejected materials and the failure to “follow proper testing and lab procedures,” the complaint states. 

Next, an Operation Warp Speed manufacturing and supply chain adviser tasked with overseeing the production of COVID-19 vaccines on behalf of the government issued a draft report that same month that stated that Emergent’s key manufacturing risk was “remediation of the compliance gaps identified by the FDA inspection held in April 2020,” according to the suit. The adviser added that Emergent’s staffing was “inadequate to enable the Company to manufacture at the required rate,” and the defendant would need to expend significant resources and bolster quality controls in order to meet production scale-up and roll-out deadlines, the lawsuit says. 

The extent of Emergent’s apparent production woes was put on full display on March 31, 2021 when the New York Times published an article on the accidental contamination of COVID-19 vaccines developed by J&J and AstraZeneca at the company’s Baltimore facility, the case continues. The Times article, the suit says, stated that Emergent employees, in February, “mixed up” ingredients of the two different vaccines, which contaminated up to 15 million J&J doses and forced regulators to delay authorization of the plant’s production lines. The Times article also revealed that Emergent’s vaccine contamination troubles went undiscovered for days until it was caught by J&J quality control checks, the lawsuit stresses. 

On April 1, the Associated Press, the complaint goes on, expanded upon Emergent’s “history of violations,” including reporting that the FDA had repeatedly cited the company for, among other issues, poorly trained employees, cracked vials, and mold-management problems and other contamination concerns at its facilities. Two days later, the New York Times chimed in again with a report that President Joe Biden’s administration put J&J in charge of Emergent’s Baltimore plant and blocked Emergent from producing the AstraZeneca vaccine, a move the suit calls an incredible blow to a company that “had touted its ‘unique’ preparedness and ‘proven manufacturing capabilities’ only months prior.” 

As a result of these disclosures, Emergent’s stock price fell $12.45 per share, and the decline continued in subsequent days as additional facts about the defendant’s vaccine manufacturing troubles were released, the lawsuit says.

According to the case, Emergent’s fortunes continued to fall with the April 6 release of another New York Times report that cited undisclosed internal documents and interviews with current and former federal officials and Emergent employees: 

“This article found Emergent to be ill-equipped to take on the important manufacturing task of producing COVID-19 vaccines, despite having received a $163 million federal contract to improve its facility and prepare for high-volume production. Audits and investigations – including ones conducted in 2020 by J&J, AstraZeneca, two federal agencies and Emergent’s own quality evaluators – found that Emergent had not followed basic industry standards at its Baltimore facility, and identified repeated shortcomings in efforts to disinfect and prevent contamination. Specifically, an audit conducted for AstraZeneca highlighted the risks of viral cross-contamination, which experts believe was responsible for tainting the millions of J&J doses.”

The Times article also noted that the most recent loss of J&J doses was not the first time Emergent had to discard its manufactured coronavirus vaccines for fear of contamination, the case says. The defendant, between October 2020 and January 2021, discarded five lots of AstraZeneca vaccine, containing two million to three million doses each, due to contamination or suspected contamination, according to the lawsuit. 

Most recently, Emergent, on April 19, 2021, revealed that it had, at the FDA’s request, “agreed not to initiate the manufacturing of any new material at its Bayview facility and to quarantine existing material manufactured at the Bayview facility pending completion of the [FDA] inspection and remediation of any resulting findings.” 

These disclosures, the lawsuit says, led Emergent’s common stock price to decline by more than 12 percent, from $77.64 per share on April 6 to $67.87 per share on April 19. 

The lawsuit aims to represent anyone who purchased or otherwise acquired common stock of Emergent BioSolutions at any time from April 24, 2020 through April 16, 2021. 

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