S&P slices Emergent BioSolutions

S&P said it lowered Emergent BioSolutions Inc.’s issuer rating to B+ from BB and the rating on its unsecured notes due 2028 to B from BB-.

“Quality issues persist at its manufacturing facilities, impairing CDMO operating performance. On Aug. 11, the House committee disclosed that further doses of the J&J Covid-19 vaccine had been designated for destruction between August 2021 and February 2022–after Emergent had purportedly addressed earlier deficiencies and resumed manufacturing. J&J terminated its agreement with Emergent effective July 6,” S&P said in a press release. The U.S. government has also delayed its procurement option for ACAM2000, a vaccine that protects against smallpox.

Furthermore, the agency noted the FDA sent Emergent a warning letter citing deficiencies in cleaning and maintenance of equipment to prevent contamination of drug products at its Camden, N.J. plant.

“We now expect that S&P Global Ratings-adjusted debt to EBITDA will be above 10x in 2022, before reducing to about 3x in 2023, based on our view that the U.S. government will ultimately exercise its procurement option for ACAM2000 in the coming months,” S&P said.

Additionally, Emergent has $610 million of debt due in October 2023 that it has not yet addressed.

The outlook is negative.

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