The Maryland company that recently had to pause COVID-19 vaccine production over quality issues in its Baltimore plant now also faces a shareholder lawsuit and a congressional investigation for its behavior during the pandemic.
An institutional shareholder filed a lawsuit Monday in U.S. District Court for Maryland that seeks class action status for what it alleges were false statements by Emergent BioSolutions and some of the Gaithersburg-based company’s executives about its readiness to mass-produce vaccine.
The lawsuit by the Amalgamated Transit Union Local 1577 Pension Plan says the “false and misleading” comments by Emergent BioSolutions executives drove up the share price. The share price later substantially dropped when the news media exposed a major mistake that caused the company to trash millions of vaccine doses, as well as a history of problems found in inspections.
Federal regulators asked the company this week to temporarily stop making the Johnson & Johnson vaccine while issues are remedied.
Separately, a congressional subcommittee has called on company executives to appear at a May 19 hearing to look into the problems at the Baltimore plant, paid for in part by federal dollars to help the nation react to pandemics and other bio-threats. The House Select Subcommittee on the Coronavirus also is probing whether the company leveraged its relationship with a key Trump administration official to profit from federal contracts but then failed to meet the contract requirements.
“Emergent received $628 million in June 2020 to establish the primary U.S. facility for manufacturing vaccines developed by Johnson & Johnson and AstraZeneca,” a statement from committee leaders said. “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.”
Matt Hartwig, a spokesman for Emergent, indicated the company officials would respond to the requests from the panel.
“We welcome the opportunity to answer the committees’ questions and to discuss our important work supporting the nation’s public health preparedness and response,” he said in an email.
Regarding the lawsuit, Hartwig said: “We believe this lawsuit is without merit. As this is active litigation, we are unable to provide more details at this time.”
The lawsuit alleges that Emergent and its officials “engaged in a fraudulent scheme to artificially inflate the company’s stock price.”
It says Robert G. Kramer Sr., Emergent president and CEO, said publicly the company was “uniquely prepared to answer the call for [the] COVID-19 pandemic” because of its “proven manufacturing capabilities in place.”
The suit said other officials assured investors of the company’s ability and capacity to mass-produce COVID vaccine. And those comments sent the stock price “soaring” to a peak of more than $134 a share in August.
But the company and officials failed to disclose problems at the company’s Bayview facility in East Baltimore that could affect Emergent’s ability to make vaccine in bulk, as contracted by vaccine developers at Johnson & Johnson and AstraZeneca.
The suit cited inspections by the U.S. Food and Drug Administration, which later called for the manufacturing pause, that showed a host of problems going back years. Investors learned Emergent had to discard millions of doses of vaccines it was producing over time.
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The FDA asked that AstraZeneca, whose vaccine is not yet authorized for use in the United States, produce its vaccine elsewhere. It is widely expected that Emergent will begin making Johnson & Johnson vaccine again. It is considered a crucial vaccine in the United States and globally as it is the only one-dose vaccine currently authorized.
The Emergent plant has not shipped any vaccine to be put in vials and used. All the doses on the U.S. market had been coming from the Netherlands before the FDA separately paused the vaccine’s use so it could investigate a small number of blood clots in recipients.
After the Emergent plant’s troubles came to light, the lawsuit said shares began to fall. Shares, which closed as high as $125.19 each in February, closed at $78.62 on April 5, the lawsuit said. The stock closed Tuesday at $65.62 a share.
In Washington, the congressional coronavirus panel wrote to the Emergent executives asking for information and to appear at a hearing.
The committee will looks at Emergent’s “track record of raising prices and failing to meet contract requirements, and whether these actions impeded our nation’s response to the coronavirus crisis,” according to a statement from Rep. James E. Clyburn, chairman of the coronavirus subcommittee, and Rep. Carolyn Maloney, chairwoman of the House Committee on Oversight and Reform.
Maloney is a New York Democrat and Clyburn is a South Carolina Democrat.
In addition to the federal COVID vaccine contracts, the statement from the congressional panels says officials are looking into Emergent’s actions to “influence” sale of its own anthrax vaccine to the Strategic National Stockpile before the coronavirus pandemic.