Emergent CEO Made Insider Sales Before Vaccine Bungle, Suit Says

Sept. 21, 2021, 5:59 PM

An Emergent BioSolutions Inc. investor sued its current and former leaders in Delaware, claiming they sold millions worth of stock while hiding manufacturing problems that later spoiled millions of doses of the Covid-19 vaccines the company was making for Astrazeneca Plc and Johnson & Johnson.

The derivative lawsuit, made public Tuesday, accuses Emergent CEO Robert G. Kramer and five other board members of insider trading. It also hits other top company officers and directors with fiduciary breach claims that don’t involve insider trading allegations.

They sold a combined $21 million worth of stock—including $10 million in sales by Kramer alone—based on “material negative information” they knew the public didn’t have, according to the partly redacted 96-page shareholder complaint filed in Delaware’s Chancery Court.

“Unbeknownst to stockholders, Emergent’s manufacturing facilities were grossly deficient,” the suit says. But instead of “causing the company to candidly reveal the truth,” company leaders used their inside knowledge about its past safety citations to enrich themselves, the complaint adds.

Emergent didn’t immediately respond to a request for comment Tuesday.

The lawsuit echoes securities fraud and derivative cases filed in federal court in Baltimore—where the Covid vaccine problems surfaced—and an earlier suit brought in the same court by the same investor seeking access to the company’s internal files.

Although only about half the company leaders named as defendants face insider trading allegations, the others allegedly still have “a significant likelihood of liability for the failure to implement sufficient controls” aimed at overseeing Emergent’s safety and regulatory compliance.

The company must now contend with a major loss of goodwill that impairs its “ability to raise equity capital or debt on favorable terms in the future,” according to the complaint.

The suit was originally filed under seal Sept. 15.

Cause of Action: Breach of fiduciary duty; insider trading.

Relief: Damages, an injunction, internal oversight reforms, costs, and fees.

Attorneys: The plaintiff is represented by Cooch & Taylor PA and Glancy Prongay & Murray LLP.

The case is Kim v. Kramer, Del. Ch., No. 2021-0792, complaint unsealed 9/21/21.

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com

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