SIGA Technologies, Inc. (SIGA) on Q3 2021 Results - Earnings Call Transcript
Operator: Greetings. Welcome to the SIGA Business Update Call. Before we turn the call over to SIGA management, please note that any forward-looking statements made during this call are based on management’s current expectations and observations, and are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statements. SIGA does not undertake any obligations to update publicly any forward-looking statement to reflect the events or changed circumstances after this call. For a discussion of factors that could cause results to differ, please see the company’s filings with the Securities and Exchange Commission, including without limitation, the company’s Annual Report on Form 10-K for the year-ended December 31, 2020, and its subsequent reports on Form 10-Q and Form 8-Q. I would now like to turn the conference over to your host today, Mr. Phil Gomez, Chief Executive Officer. Thank you. You may begin.
Phillip Gomez: Thank you for taking the time to join today’s call. Today I’m joined by Dan Luckshire, our CFO and Dr. Dennis Hruby, our CSO. We’re pleased to have this opportunity to provide a business, R&D, and financial update to our shareholders. We’ll then be happy to take questions. We had a significant third quarter with the exercise of $113 million procurement option under the 19C BARDA contract. In connection with this option exercise, we are targeting multiple deliveries of oral TPOXX to the U.S. government in the fourth quarter, which would have a cumulative value of $113 million. In October, we delivered approximately $33 million of oral TPOXX toward this goal. To complete all targeted deliveries by year-end, we will need to complete manufacturing, secure transportation and have available delivery slots at the U.S. government locations where TPOXX is stockpiled. As we have all read in the news, supply-chain disruptions continue to be a challenge, and our SIGA team is working extremely hard to ensure we do not have delays or barriers to completing the delivery. On a related note, we are proactively coordinating manufacture of Active Pharmaceutical Ingredient, or API, to ensure we are well positioned in the future for domestic and international procurement orders, given the ongoing supply-chain risks. Looking beyond 2021, the 19C contract has approximately $300 million of procurement options available for future exercise by the U.S. government. This amount includes 2 remaining procurement options of approximately $113 million each for oral TPOXX and a series of intravenous or IV procurement options that have a total value of $77 million. If these options are exercised when product in the U.S. government stockpile expires, then we would expect these options to be exercised in the next 3 years. At some point during the next 3 years, the current 19C contract could be replaced with a longer-term 10-year contract which could provide a more consistent and transparent product delivery timeline. Such a contract format is being used for other contracts that cover products delivered to the Strategic National Stockpile. In turn, if the TPOXX contract is transitioned, it would be natural for the smallpox stockpile size, and by extension the TPOXX contract size, to reflect consideration of our post-exposure prophylaxis indication under development. Please note that with respect to COVID-19, even with the highly effective vaccines, the U.S. government is contracted to purchase nearly 5.7 million courses of COVID therapeutics for over $4 billion. We believe the stockpile of 1.7 million courses of TPOXX and the smallpox outbreak would not be sufficient to treat all those who would need care. And that is an active part of our ongoing conversations with the U.S. government. Shifting gears slightly, I’d like to talk about another U.S. stockpile the antibiotics stockpile. As described on previous calls, we have a collaboration with Cipla. The goal of that collaboration is to respond to an anticipated BARDA RFP for antibiotics to be developed for bio-threats and stockpile. The Request for Information or RFI was posted last fall, but the RFP has not yet issued. We now anticipate the RFP will issue early next year, and we will continue to track it closely with our colleagues at Cipla. Given the COVID-19 related work that BARDA is doing, it’s not entirely surprising that this initiative has been delayed. However, we believe the Antimicrobial Resistance initiative at BARDA or AMR, is a continuing focal point and we look forward to responding when the RFP is issued. On the international sales front, it’s been a quarter with progress in many areas, but continued delay on the target contract issuance. On the progress side of the ledger, we delivered $2.3 million of oral TPOXX to the Canadian military during the third quarter, which is ahead of schedule as we anticipated they would not exercise this option until after Health Canada approval. And beyond Canada, we have seen a pickup in opportunities for travel and meetings with customers. As such SIGA presented at conferences in Germany and Italy this quarter with our colleagues at Meridian Medical Technologies. With respect to the aforementioned delay, we continue to work with Meridian in a new foreign jurisdiction toward finalizing an order that would be similar in size to the initial orders received from Canada in 2020 and early 2021. The timing of the completion of the order has been and may continue to be impacted by the COVID 19 pandemic. As background, it is becoming clear that as countries ordered TPOXX for the first time, there are extensive logistics questions that arise as to how the country will import the product, what waivers may be necessary, given that the product will be stockpiled and not immediately used by patients, regulatory requirements, and detailed terms and conditions. We remain optimistic about future sales potential as we gain EMA approval and advanced discussion with customers in Europe, the Middle East and Asia. I’ll now pass the call over to Dennis, who will provide an R&D update. Dennis?
Dennis Hruby: Thank you, Phil. The SIGA R&D team has had a very busy quarter, advancing regulatory filings and directing earlier-stage development activities. First, an update on regulatory filings in progress. The IV TPOXX NDA application is under active review by the FDA. We are responding to questions and providing information as requested. Barring any unforeseen delays, we are targeting approval to be received during the first quarter of 2022. Our Health Canada application is also under active review. And approval could come as soon as late fourth quarter of 2021. Of note, Health Canada is following FDA guidance on approval of products under the Animal Rule guidance. And as such, will restrict the label to treatment of smallpox. Finally, our EMA MAA application is being actively advanced as well. We’ve responded to the 180-day questions and are waiting the EMA response. The MAA approval is targeted for the first quarter 2022. Thus far, the EMA has not objected to our requests for broader indication that includes all human arthropods virus pathogens, vaccinia, cowpox, smallpox and monkeypox. An approval for monkeypox would greatly facilitate the use of TPOXX against this growing disease threat in Africa as well as exported cases elsewhere. In support of this effort, SIGA has provided TPOXX for use in the clinical trial, managed by Oxford University in collaboration with Institut Pasteur to study the use of TPOXX in monkeypox patients in the Central African Republic. All the necessary paperwork is in place, drug is on site, and they’re preparing to treat their first patients. SIGA is also in the process of setting up additional clinical trials with other international partners in additional African countries. We are hopeful that acquisition of safety and efficacy data for the use of TPOXX in monkeypox patients will afford us the opportunity to revisit with the FDA broadening the TPOXX indication to include monkeypox and potentially other orthopox pathogens for which there is strong animal data. Thermal development activities are underway for oral TPOXX. First, we’ve completed a post-marketing commitment to conduct a PK study in volunteers weighing more than 120 kilograms, which is approximately 13% of the U.S. population. Based on the results and after discussions with the FDA, the TPOXX label will be modified to suggest 600 milligrams 3 times a day in these patients. Of note, in case of an outbreak, this adjustment will effectively reduce the size of the stockpile to treat the overall population. Second, we continue to advance our powder for reconstitution pediatric formulation. And as such, our 2 leading formulations have been transitioned to our CRO partner to begin adaptive PK clinical trials. Last and most importantly in terms of TPOXX development activities, our collaboration with the Department of Defense to obtain approval for post-exposure prophylaxis use of TPOXX continues to progress. After iterative discussions with the FDA, we have agreement on clinical trial design. The TPOXX plus JYNNEOS immunogenicity clinical trial will start patient recruitment during the fourth quarter of 2021. The larger TPOXX 28-day safety trial should commence patient recruitment in the first quarter of 2022. If the results are as expected upon completion of these studies, we will file for regulatory approval. The immunogenicity data from the TPOXX plus JYNNEOS study will be the most important data to support the use of TPOXX and PEP. And we anticipate that data will be available in the second half of 2022. With respect to earlier stage programs, we continue to advance our ST-357 smallpox antiviral. Current efforts are aimed at developing cocrystals of ST-357 and its protein target, and conducting computer modeling to predict analogs with improved drug characteristics. Additionally, we’re actively developing the experimental plan for conducting animal experiments to support the development of plazomicin against plague and tularaemia. This work is being done as part of a broader preparation for an antimicrobial resistance RFP that we expect to launch in the coming months to which we will reply in coordination with Cipla as part of our collaboration. With that update, I’ll hand you over to Dan to provide a financial update.
Daniel Luckshire: Thanks, Dennis. For the 3 and 9 months ended September 30, 2021, SIGA’s revenue was approximately $4.8 million and $18.3 million, respectively. For the third quarter, approximately $2.3 million of revenue relates to product sales of oral TPOXX to the Canadian military. For the 9 months ended September 30, 2021, approximately $12.8 million of revenue relates the product sales of oral TPOXX to the Public Health Agency of Canada and the Canadian military. In comparison to the 9 months ended September 30, 2020, international product sales have increased approximately $10 million or more than 4-fold. Operating loss, which excludes interest income, taxes and adjustments to the fair value of the warrant, was approximately $2.9 million for 3 months ended September 30, 2021. For the 9 months ended September 30, 2021, operating loss was approximately $4.9 million. Net loss for the 3 months ended September 30, 2021, was approximately $3.1 million. For the 9 months ended September 30, 2021, net loss was approximately $3.8 million. In turn, fully diluted loss per share for the 3 and 9 months ended September 30, 2021 was $0.04 a share and $0.05 a share, respectively. At September 30, the cash balance for the company was approximately $93 million. During the third quarter, SIGA repurchased approximately 1.1 million shares of its common stock for approximately $7.1 million. As of September 30, 2021, the company has cumulatively repurchased approximately 7.7 million shares of its common stock at a total of approximately $49 million since the inception of the share repurchase program in March of 2020. This concludes the financial section of the call. At this point, I’ll turn the call over to Phil.
Phillip Gomez: Thanks, Dan. Before we turn to Q&A, I’d like to reiterate a few points that have been made in the past. In support of our view that SIGA offers an attractive combination of existing contracts that are currently generating strong financial results complemented by organic growth initiatives that hold significant potential when viewed collectively. First, I’d like to highlight that the ongoing international sales growth initiative is progressing in a value creating manner. In 2020, this initiative generated our first international sale and $2 million of revenue. Year-to-date this year, this initiative has generated approximately $13 million of revenue. While as noted many times before progress on this front is expected to be lumpy and uneven, given that the international market for biodefense is not well developed, we believe that a meaningful international market is gradually taking shape. Second, I want to reiterate that the PEP-based development program represents a growth initiative in that it would provide scientific and regulatory support for any stockpile expansion. As stated earlier, we believe a stockpile of 1.7 million courses of TPOXX and the smallpox outbreak would not be sufficient to treat all those who would need care. Third, we believe collaborations such as the one with Cipla could be an important avenue in the future to expand our government portfolio products and contracts. And, in fact, the aforementioned RFP that we expect to respond to in coordination with Cipla would be a first shot on goal for this growth initiative. And fourth, our portfolio of growth initiatives is diversified including ongoing efforts to broaden the U.S. customer base to potentially include the U.S. Department of Defense and others. As mentioned earlier, we believe these growth initiatives when viewed collectively have potential for significant value creation. And one last point, as we generate cash over time through existing contracts and organic growth initiatives, we will continue to examine the best use of our cash, including continuing share buybacks as well as potential investments or acquisitions that provide an opportunity to grow earnings, diversify our business and leverage our successful platform. As we announced at our last call, the SIGA board authorized the new repurchase program, under which the company may repurchase up to $50 million of the company’s common stock through December 31, 2023. This concludes our prepared remarks and we will now begin the Q&A session.
Operator: Thank you. At this time, we will conduct a question-and-answer session. Our first question comes from Maxim Jacobs with Edison Group. Please proceed.
Maxim Jacobs: Hi, guys. Thanks for the very detailed update. It’s much appreciated. My only question is just on the potential contract transition to a 10-year contract. I was wondering if you can provide any color on what the timing of that might be. I figured, I mean, you probably can’t get too detailed on that.
Phillip Gomez: Yeah. Hi, Max. It’s Phil, and thank you very much for the question. So it is very difficult to predict the U.S. government in their timeline on it. But I would say, historically, once products get FDA approval, there is usually a multi-year transition over to a contract in a separate part of the government. So we are currently under contract with BARDA. BARDA develops and supports the advanced development, the R&D as well as the first procurement into the stockpile, which we did. We in fact got resupply under BARDA, because of the ongoing work with IV and the pediatric formulation. But ultimately, it makes sense to transition over to a different part of the Assistant Secretary for Preparedness and Response. Historically, that’s been the strategic national stockpile. There is a lot of ongoing discussions with the government as to where that’s going to settle out and how that organization is going to be structured, post the learnings of COVID-19. But as I said in my remarks, we have an opportunity over the next 3 years for the remainder of our BARDA contract. And certainly, we’ll be working hard over that time period to make sure we have a smooth transition. So thanks again for the question.
Maxim Jacobs: Wonderful. That was very helpful. Thank you so much.
Operator: Our next question comes from Teddy Green, private investor. Please proceed.
Unidentified Analyst: Hello, guys. Hi, Phil, Dr. Hruby and Dan. Good to see the progress on the Canadian military order. That was I think a little surprising. I wasn’t expecting that until you actually received the approval. So that’s good to see. First question I have for you, the existing label for TPOXX, obviously, only in the U.S. It’s only to be sold and marketed as a product for stockpiling. Is that correct?
Phillip Gomez: That’s correct. That is where the label description.
Unidentified Analyst: Okay. For the future, or at least with the application in European Union, and in Canada, are you including the ability to sell outside of the stockpile for those labels?
Phillip Gomez: So that would be an ongoing conversation that comes near the end of the process as to what the final label has, Teddy. So, certainly, we’re thinking broadly, but I will say there could be a lot of conversations that happen near the end, that we’ll have to wait and see how the regulators feel about the product and the requirements that’d be necessary to do stockpiling versus more wide sales. Clearly, with the monkeypox indication there are patients that routinely have monkeypox, so we’d want to have an ability to get that to patients. But in Europe, as you know, there is a lot more government involvement in healthcare. And so the distinction between what is a private sale and what is a government sale is certainly much narrower, but it is something certainly we’re looking at as we progress, our development and regulatory filings going forward.
Unidentified Analyst: Okay, that’s good to hear. And then, carrying over into the monkeypox question, this might be better answered by Dr. Hruby. It’s been my observation just with the Ebola, that the Ebola clades, say, in Central Africa appear to be more virulent than the clades in West Africa. And I know that you have this trial set up in the Central African Republic with Oxford University. And I’m curious if the monkeypox clades, if that holds true for the monkeypox clades also. Are the monkeypox clades in Central Africa more virulent than, say, the clades in Nigeria or West Africa?
Dennis Hruby: This is Dennis. Thanks for the question. You’re absolutely correct that Central African clades are more virulent. Based on sequence analysis, we may expect TPOXX to be equally effective against both West Africa and Central Africa clades.
Unidentified Analyst: Okay, great. Thank you. And then, also, Dr. Hruby, in regards to ST-357, I had read there were some solubility issues. And have those issues been identified? And has there been any kind of a design come up to overcome those issues?
Dennis Hruby: We’ve certainly identified issues and come up with analogues that we think will address them, we need to initiate a chemistry optimization campaign, and we hope to receive external funding soon to do that.
Unidentified Analyst: Okay, great. Thank you for that. Okay. And then, Phil, final question I have is, obviously, within October, we had a notice of intent to sole source from the Department of Defense, U.S. Army to purchase TPOXX. And then there was just Sources Sought notice that came out, actually – excuse me, I think that was in the middle of September, and then a Sources Sought notice came out at the end of October, which is kind of just the evolution of the original notice of intent to sole source. And this is obviously the joint project manager medical is asking to see the capabilities, industry capabilities to produce courses of TPOXX. So, I guess, my question is, are they asking to see what the company’s capabilities are over and – above and beyond the 19C contract to produce courses of TPOXX?
Phillip Gomez: So we’ll be responding that, I think, that’s a pretty common ask to continue to get capability broadly from organizations to ensure they can respond to the needs of the DoD. And so, we’ll certainly be responding to that and feel like we have not only a very good product with a great safety profile and efficacy profile, but we certainly have the ability as we’ve demonstrated to deliver TPOXX, as the government needs it. So, yeah, we’ll be responding and continuing to work with them in any questions they may have.
Unidentified Analyst: Okay, and then just a follow-up on that too is, I’m curious, is this solely to purchase TPOXX, just with an indication of symptomatic – to treat symptomatic smallpox? Or could this be kind of getting their ducks in a row in anticipation of a PEP label going forward? And – because I understand how these – that the contracting and procurement process works in the government, it does take a lot of time, and they have to submit this one thing and then another thing, and you have to respond to it, and it’s 15 days after that before it goes inactive. I’m just curious, what your thoughts are on that.
Phillip Gomez: So, certainly, that’s not in their intent to purchase TPOXX, there’s no details that they have described, which is not surprising as to what it’s going to be used for, I guess, I would highlight it 2 levels. One, the DoD has been working very closely with Dennis and his team on the PEP program, we’ve received substantial funding, certainly been a focus for them. And, I think, something that certainly they have a point of pride that we’ve been collaborating and getting this clinical study ready to go and launching. And contract vehicles are important when you talk to people that work in government contracting, broadly, having a contract vehicle meaning a contract, and an ability to sell to an agency is the first step in opening a business and being able to broaden it and have conversation. So we’re very excited that they posted a notice for sole source for TPOXX, and we think that’s a great first step. And we’ll work with them on responding to this, on responding to PEP, and having the broad conversation about what the best strategy is for the use of TPOXX, both in the DoD and with other clients within the U.S. government. So, certainly, I think it’s a great first step, as you say, Teddy, but with the data is still evolving and there hasn’t been anything formally set by DoD.
Unidentified Analyst: Okay, great. Thank you very much, guys. I appreciate it.
Phillip Gomez: Thank you very much.
Operator: Thank you. Thank you at this time. There are no further questions in queue. I would like to turn the call back over to Mr. Phil Gomez for closing comments.
Phillip Gomez: I’d like to thank everybody for joining the call today. I’d also like to thank the SIGA team for a whole lot of work and ensuring our supply chain continues to function and our R&D programs continue to advance in the pandemic, there’s still a lot of challenges and work. So our team continues to execute flawlessly, and I’d like to thank them all and we look forward to talking to you all soon as our shareholder. So thank you very much and have a good day.
Operator: Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time. And thank you for your participation and have a great day.
