Emergent BioSolutions (EBS): Specialist in immunobiotics

When your goal is to prevent disease, what better partner can you have than the body's own immune system. There is a company in Rockville, Maryland that develops drugs with that notion firmly in mind.

Emergent BioSolutions (NYSE: EBS) is a biopharmaceutical company, focusing on the development and commercialization of products that boost the immune system's ability to stave off diseases. The firm serves both government and commercial clients. For the government, it supplies the only FDA-approved anthrax vaccine. It is also working on a post-exposure treatment for anthrax and a vaccine for botulinum toxin. On the commercial side, the company is developing vaccines for typhoid, hepatitis B, group B streptococcus, meningitis and chlamydia. Emergent operates from offices in the US, the UK, Germany and Singapore.

The firm pleased investors earlier in the week, when it guided FY07 revenues to $183 million. Analysts had been expecting $180.82 million. Management also said it expected FY08 revenues of $180-195 million, versus consensus of $160.19 million. Further, the company announced positive results from its typhoid vaccine work and said it would be enrolling patients in its hepatitis B study.

EBS shares popped on the news and then moved into a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the shares with one "strong buy", two "buys" and one "hold". The EBS P/E ratio (9.23), Price to Sales ratio (1.19), Price to Book ratio (1.49), Price to Cash Flow ratio (8.10), Operating Margin (18.78%), Return on Assets (11.93%), Return on Investment (15.04%) and Return on Equity (21.30%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 21% of the outstanding shares. Over the past 52 weeks, the stock has traded between $4.40 and $17.75. A stop-loss of $6.30 looks good here. Note that the firm is expected to report Q4 results in mid-March.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold a position in the stock discussed above.