ATML Earnings Action

It would be real tempting to look at the Emergent BioSolutions Inc. (EBS) chart and see a double top forming with the potential for a significant retrace. Technically, it would make some sense. After closing at a 52-week high of $18.30 on Oct. 20, the stock fell to re-test support at the $14 level and its 50-day ma at $13.84 before bouncing back over the past week on modest volume to close yesterday at $18.01. But taking a closer look at the small cap biotech business would convince you otherwise.

For some background, Emergent BioSolutions produces BioThrax, the only vaccine licensed by the FDA to prevent anthrax. In early October, the company announced a multi-year deal with the U.S. Department of Health and Human Services to supply 14.5 Million doses of BioThrax for inclusion in the nation’s strategic vaccine stockpile valued between $364 and $404 million – after the current $448 million, 18.75 million dose contract expires. The company appears to be well funded with $84 million in cash and it recently got $24.4 million from the federal government in September to develop its anthrax monoclonal antibody. And so far this biotech has something to show for itself; second quarter 2008 product sales increased by $19.8 million, or 88 percent, to $42.3 million from $22.5 million for the comparable period of 2007 and net income was $1.8 million, or $0.06 per share, in comparison to a net loss of $5.0 million, or $0.17 per share, for the same period last year.

Plus, there are a few short term catalysts to watch out for – third quarter earnings report and conference call Nov. 6, Robert & Renshaw Global Investment Conference on Nov. 12 that could give the company some needed visibility (note; it’s had one analyst initiation in the past year - Caris & Co. on Oct. 14 with an “above average” rating), a major contract expected with the Department of Defense and possibly new developments as it tries to diversify its pipeline. So don’t be surprised if Emergent BioSolutions’ relative strength, momentum and positive money flow in this market continues.