J&J Serves Notice To Emergent For Terminating COVID-19 Shot Contract As Two Accuse Each Other Of Breach Of Agreement

Johnson & Johnson JNJ has made another move towards severing its Covid-19 vaccine manufacturing ties with contract manufacturer Emergent Biosolutions, Inc. EBS.

What Happened: J&J has served a formal notice of termination and breach to Gaithersburg, Maryland-based Emergent, the former said in a statement, according to the Wall Street Journal.

The disclosure from the U.S. pharma giant came close on the heels of Emergent's announcement that it has provided the company a notice of material breach of the agreement by deciding not to purchase the required minimum quantity of the shot as agreed upon. Emergent said J&J owes it about $125 million to $420 million if the agreement were to be terminated.

"Emergent's SEC filing today is false and misleading both with respect to the contrived breach allegation against Johnson & Johnson and in its failure to disclose our prior notice that Johnson & Johnson would terminate the supply agreement," J&J reportedly said.

Emergent told Fierce Pharma that it did not receive any notification from J&J ahead of Monday's filing, according to WSJ.

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Why It's Important: For the unversed, J&J and Emergent signed a five-year agreement in July 2020, under which the latter was mandated to provide large-scale drug substance manufacturing to the former's single-shot COVID-19 vaccine, beginning in 2021. The contract was valued at $480 million.

The agreement between the companies was facilitated by the U.S. government in a bid to make COVID-19 shots available at scale at the peak of the pandemic.

Emergent was subsequently mired in a controversy over manufacturing issues at its Baltimore plant, which led to the discarding of several million doses of J&J COVID-19 shots manufactured at the plant. After remedial measures were undertaken, FDA gave its go-ahead to restart manufacturing at the Baltimore plant in July 2021.

J&J meanwhile said in April that it has removed COVID-19 jab sales from its guidance following vaccine sales underperforming expectations.

Price Action: Emergent stock closed Monday's session 4.47% lower at $30.80 and J&J was little changed at $176.40, according to Benzinga Pro data.