Emergent BioSolutions To Buy Sanofi's Smallpox Vaccine Unit

Emergent BioSolutions Inc. (NYSE:EBS) announced that it has inked an agreement to acquire the FDA-licensed smallpox vaccine’s business of Sanofi (NYSE:SNY) in an all-cash deal of up to $125 million.

ACAM2000 is the only vaccine licensed by the FDA for active immunization against smallpox disease for persons determined to be at high risk for smallpox infection. Emergent BioSolutions will also assume responsibility for Sanofi’s existing 10-year Centers for Disease Control and Prevention or CDC contract with a remaining value of up to approximately $160 million for deliveries of ACAM2000 to the Strategic National Stockpile. The CDC contract was originally valued at up to $425 million which will expire and be up for renewal or extension in 2018.

The deal includes a all-cash consideration of $97.5 million upfront and up to $27.5 million in near-term contingent regulatory and manufacturing-related milestones.

Notably shares of Emergent BioSolutions have underperformed the Zacks classified Medical-Biomed/Genetics industry year to date. While the stock is up 5.1%,the industry witnessed a gain of 9% in the same time period.

Emergent BioSolutions will also buy a U.S. based cGMP bulk manufacturing facility and a lease to a cGMP fill/finish facilityalong with their present staff of about 100 employees.

The acquisition of ACAM2000 is a strategic fit for Emergent BioSolutions which will enable the latter to expand its existing smallpox countermeasure offering and will enable Emergent BioSolutions to diversify its portfolio and enable the company to contribute to revenue meaningfully in 2018 and help it in achieving its goal of $1 billion in total revenue by 2020. The company also expects to generate more than 10% of total revenue from international markets from the deal.

This transaction, expected to close in 2017, is subject to customary closing conditions including antitrust regulatory approval.

Zacks Rank & Stocks to Consider

Emergent BioSolutions currently carries a Zacks Rank #4 (Sell).

Some better-ranked health care stocks in the same space are Enzo Biochem, Inc. (NYSE:ENZ) and Exelixis, Inc. (NASDAQ:EXEL) . Both Enzo Biochem and Exelixis sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Enzo Biochem’s loss per share estimates narrowed from 12 cents to 7 cents for 2017 and from 11 cents to 3 cents for 2018, over the last 30 days. The company delivered positive earnings surprises in all the trailing four quarters, with an average beat of 55.83%. The share price of the company has increased 69.9% year to date.

Exelixis’ earnings per share estimates increased from 17 cents to 18 cents for 2017 and from 53 cents to 55 cents for 2018, over last 30 days. The company pulled off positive earnings surprises in all the trailing four quarters, with an average beat of 512.11%. The share price of the company has increased 79.3% year to date.

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