SIGA Technologies Inc (SIGA) 2007 Q1 法說會逐字稿

Good day ladies and gentlemen, and welcome to the First Quarter 2007 SIGA Technologies Earnings Conference Call. My name is Eric and I will be your coordinator for today.

(OPERATOR INSTRUCTIONS)

I would now like to turn our presentation over to Dr. Eric Rose. Please proceed sir.

Thank you, Eric. Good morning everyone and welcome to the first investor update conference call hosted by SIGA Technologies. We expect this to be the initiation of a series of conference calls that the Company will host in conjunction with its quarterly and annual results of operation.

With the initiation of our second human safety trial in mid-February, the Company's has passed another milestone on the road to its first FDA approval, and we thought that our investors would appreciate the opportunity to hear more about our organization and our business plans.

Today's call is being broadcast over this conference line and is also available via the Web as noted in our press release. It will be available after the call in a recorded format through the conference service and on our Web site, and a transcript of this call will be furnished to the SEC on Form 8-K.

With me on the line today is Tom Konatich, our Chief Financial Officer; and Dennis Hruby, our Chief Scientific Officer.

Before we begin our review of operations, I will ask Al Palombo of our Investor Relations firm, Cameron Associates, to read our disclaimer regarding forward-looking statements. Al?

Thanks, Eric. This morning's conference call will include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the efficacy of potential products, the timelines for bringing such products to market, and the availability of funding sources for continued development of such products.

Forward-looking statements are based on management's estimates and assumptions, and are subject to uncertainties, many of which are beyond SIGA's control. Actual results may differ materially from those anticipated in any forward-looking statement.

Factors that may cause such differences include risks that; A) potential products that appear promising to SIGA or its collaborators cannot be shown to be efficacious or safe in subsequent pre-clinical or clinical trials; B) SIGA or its collaborators will not obtain appropriate or necessary governmental approvals to market these or other potential products; C) SIGA may not be able to obtain anticipated funding for its development projects or other needed funding; D) SIGA may not be able to secure funding from anticipated government contracts and grants; E) SIGA may not be able to secure or enforce adequate legal protection, including patent protection for its products; and F) regulatory approval for SIGA's products may require further or additional testing that will delay or prevent approval.

More detailed information about SIGA and risk factors that may affect the realization of forward-looking statements, including the forward-looking statements made this morning, are set forth in SIGA's filings with the SEC, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

SIGA urges investors and security holders to read those documents free of charge at the Commission's Web site at www.sec.gov or obtain them from SIGA.

Forward-looking statements speak only as to the date they are made, and SIGA undertakes no obligation to publicly update any forward-looking statement as a result of new information, future events or otherwise except as required by law.

Finally, I need to say a word about the FDA approval process. As you know, SIGA's principal product is an unapproved drug. As such, the FDA has strict rules regarding what can be said about the drug safety and effectiveness.

SIGA respects those rules and nothing said today should be taken as a definitive claim regarding the safety and effectiveness of ST-246.

With that said, I will now turn the call back to Eric.

Thank you, Al. This has been an exciting and eventful year for SIGA from a number of perspectives and I am pleased to review with you our achievements in 2006 and some of the objectives we look to achieve in 2007.

Because this is our first conference call, I would like to take a moment to welcome those of you who are new to the SIGA Technologies story, and briefly review what our Company does and some history.

I will also provide you with some background information on myself. Tom Konatich, our CFO, will provide a brief synopsis of our year-end financial and our overall economics. And Dr. Hruby, our Chief Scientific Officer, will give you an update on our progress with ST-246.

I will then provide some closing remarks regarding our business strategy in the comparative landscape. At the end of the call, we will have some time for your questions. With that said, let's begin.

SIGA's mission is to discover and develop effective, selective and safe oral antiviral drugs directed to treating, preventing and complementing vaccines for high threat biowarfare agents.

Our goal to lead the development and provision of these drugs domestically and throughout the world to ensure a leading edge biodefense capability and to prevent and treat naturally occurring illness caused by the agents we target.

Our key milestones to date include the following. First, we have identified ST-246 as a potent orthopox antiviral.

Second, we have established ST-246's efficacy in preventing orthopox virus infections in multiple small and large animal models.

We have also prevented lethal mutant orthopoxvirus infection and have prevented smallpox itself in our primate model. We have successfully prevented disease in an animal model regardless of the route of virus administration.

Third, we have observed in our ongoing human toxicology studies remarkably low instance of side effects or complications in ST-246.

Fourth, we have successfully completed single-dose human safety studies of ST-246 and are continuing our ongoing multi-dose safety trials so that we may finalize our recommended human dosing.

Fifth, we provided ST-246 to an emergency compassionate use process to successfully treat a critically ill child at the Comer Children's Hospital in Chicago.

The child had eczema vaccinatum, which is potentially lethal form of vaccinia virus infection. This illness led to multiple organ failure and he was apparently unresponsive to standard treatments. The child's vaccinia is now completely resolved and he showed no sign of drug toxicity.

And sixth, we are continuing to make progress in the laboratory on our other antiviral programs, including hemorrhagic fever illnesses and Ebola.

Having told you a little bit about where our Company is today, let me tell you a little bit about myself.

I have a long history of involvement with translational research and development efforts. For 13 years, I chaired the Department of Surgery at the Columbia University.

Its research efforts included the prior development of bacitracin and silvadene, and whose more recent contributions include crucial work in solid organ transplantation, artificial heart technology, cancer vaccine, and the discovery of the receptor for advanced glycation end products known as RAGE.

Under my leadership, Columbia's heart transplant and artificial circulatory support program grew to be the largest in the nation. I co-founded TransTech Pharma, which license the RAGE technology from Columbia and developed a family of RAGE antagonists, now licensed to Pfizer.

As SIGA Board members from 2001, I have been working with Tom and Dennis for many years, and have been an active participant in formulating and implementing the strategy that brought us ST-246 and that continues to generate novel antivirals in our earlier stage programs.

I would like to hand over the call now to Tom Konatich, who will give you a brief financial overview.

Thank you, Eric. Before I review the information we reported in our year-end financial statements and the numbers we have announced today for the first quarter of 2007, I would like to provide you with an overview of how our organization currently generates revenues and the basic economics of SIGA.

Since mid-2004, SIGA has been successful with financing a major portion of its product development through grants and contracts from a number of federal government agencies, including the National Institutes for Health and the Department of Defense. We cooperate very closely with our governmental partners.

During the [three] years ended 12/31/06, we generated $15.8 [billion] in revenue from research grants and contracts with these agencies. The funding received represented 75% of the cash used in our operations over this two year period.

In addition to cash received under the grants and contracts, federal agencies have performed critical studies on our products at no cost to SIGA. When considering SIGA's financial resources, the value of this service should not be -- value of these services should not be overlooked or underestimated.

During the second half of 2006, SIGA entered into contracts and received grants totaling $29.6 million. The funding from these grants and contracts began in the first quarter of the federal fiscal year, which started October 1, 2006, and will continue through September 30, 2009.

Using the resources provided by these close relationships with the federal government, we have made and will continue to make significant progress in the development of our smallpox antiviral ST-246 and other products with relatively little dilution to our shareholders compared to other companies in our market space.

We routinely apply for additional grants and contracts as we become aware of them and have several applications and proposals in the pipeline that we hope to secure.

We do not speculate on the probability of receipt of any additional grant funding, but we are hopeful based on past experience that we will receive additional commitments as we go forward.

We also raised $9.1 million in a project placement in October 2006 and we received $4.3 million in cash from the exercise of options and warrants in the fourth quarter of 2006. $3.1 million of the funds received were used to repay bridge loans that were associated with the discontinued merger transaction.

We ended the year with $10.6 million in cash. We do not have a capital raise planned at this time, but if market conditions are favorable, we would consider raising additional funds.

In brief, the major highlights for the year-ended December 31, 2006 were as follows -- revenues, all from grants and contracts, totaled $7.3 million, selling, general and administrative expenses totaled $4.6 million, which is higher than the previous year as a result of approximately $1.3 million legal, accounting, and consulting expenses that arose from the proposed merger. There was also $500,000 of non-cash share-based compensation expense. Without those charges, SG&A expenses really slightly increased from the prior year.

R&D expenses were $9.1 million, which reflected increased activity on our lead drug candidate ST-246.

As mentioned, our cash position at year-end 2006 was $10.6 million. For the first quarter of 2007, we announced revenue of $1.9 million compared to $1.4 million for the prior year.

SG&A expenses dropped slightly from $941,000 in 2006 to $877,000 this year.

R&D expenses increased to $2.65 million in Q1 of 2007 from $1.66 million last year. The increase was largely due to the costs associated with the clinical development of ST-246. Cash on hand at the end of the quarter was $9.7 million.

Now, I would like to turn the call over to my colleague at SIGA for over nine years, Dr. Dennis Hruby, for an update on the testing of ST-246 and an overview of the general FDA process.

Thanks, Tom. To begin, I would like to give you a brief description of our drug development philosophy and in particular, the progress we have made to date on ST-246.

I would also like to clarify for our listeners the general parameters of an FDA approval process and how it relates to ST-246, as well as the other drug candidates in our pipeline.

SIGA is developing drugs to combat bio-threat agents and emerging diseases. We believe that disease agents like these require a new drug development paradigm and the establishment of effective working relationships amongst SIGA, academic laboratories, and federal partners.

We are using a two-pronged approach to drug development. Traditional, high throughput screening and rational drug design with associated chemi-informatic capabilities. Lead molecules are extensively characterized and optimized prior to initiating proof of concept animal efficacy trials.

The reason for this are both the limited availability of appropriate animal models and the dangers associated with conducting experiments in humans using deadly pathogens. The FDA has also adapted to this new threat of bioterror.

In light of the fact that humans are unlikely to suffer from diseases like smallpox, unless a bioterror incidence occurs, the FDA has modified its usual requirements for human clinical testing.

SIGA must demonstrate that ST-246 is safe when given to healthy humans and it must also show that ST-246 is effective in two different animal species that are likely to be good models for the progress of smallpox disease in humans, the so-called two-animal rule. This criteria will also apply to other antiviral drug candidates being developed for biowarfare applications.

We are currently focusing our efforts to develop antiviral drugs to prevent or to treat diseases caused by the category A bioviral threat agents. These include smallpox and the hemorrhagic fever viruses, Ebola, Lassa fever virus and Junin.

I would note the need for countermeasures against these agents was specifically mentioned in the implementation plan for biowarfare threats recently released by the U.S. Department of Health and Human Services.

In addition to SIGA's ongoing development programs in these areas, we also have a discovery program in place that targets other important viral pathogens such as Rift Valley fever and dengue virus. The intense is to enlarge and broaden the product portfolio as the later stage products move towards approval and eventual marketing.

With regard to the hemorrhagic fever virus program, we are in a very exciting juncture. Lead candidates have been identified for treating Ebola, Lassa fever and Junin. Each of these leads is moving into a proof of concept animal efficacy model this year.

While these are challenging models, and there are undoubtedly lead optimization and formulation issues to be addressed, we are hopeful that one or more of these programs will achieve the necessary milestones to advance IND enabling activities in the near future.

With regard to our lead smallpox antiviral ST-246, we continue to aggressively advance this product towards licensure.

A summary of the program to date is as follows. In the laboratory, ST-246 has been shown to be extremely potent and selective as an inhibitor of orthopox virus replication.

ST-246 has been effective in multiple animal challenge models ranging from mice to non-human primates protecting against all manifestations of the disease, including death.

Furthermore, the drug has shown virtually no toxicity in extensive animal testing. ST-246 is orally bio-available with excellent pharmacokinetic properties. In humans, its long serum half-life should support once a day oral dosing as a pill.

We believe that the availability of an effective oral therapeutic is essential for an effective or an adequate defense and we believe no other oral therapeutic is as advanced in development as ST-246 or shows as much promise.

We have successfully completed all needed pre-clinical development steps for ST-246 to be tested for safety in humans, although additional non-clinical work, including finalizing commercial scale manufacturing processes, safety in toxicology work, and additional animal efficacy studies are ongoing.

As many of you know, the IND for ST-246 was reviewed and approved by the FDA in December of 2005, and the FDA has designated this drug for fast track status.

This designation ensures that we have regular and prompt interactions with the agency to facilitate expedited development.

The FDA granted our application to have ST-246 designated as an orphan drug in the areas of prevention and treatment of smallpox.

Finally, a second round of human clinical studies with ST-246 is underway. In 2006, a placebo controlled double blind ascending dose study was conducted in healthy 18 to 45 year old volunteers to assess safety, tolerability in pharmacokinetics of ST-246, when administered as a single dose.

No severe adverse events were observed and we use the resulting [PKE] data to inform dose selection for the placebo controlled double blind ascending multiple dose 21-day study that is currently in progress.

It should be noted here that 21 days does not mean data will be available on 21 days, rather data is collected on each cohort tested after 21 days of dosing. After collection, the data is subjected to quality control and quality assurance, QC and QA, analysis.

A report is written and all of this information is provided to the safety monitoring committee for its review. The final results of this trial are not expected until the fall of 2007.

To date, we have completed the first dose group and will be initiating the second dose group shortly. The results of the first dose group indicate that no severe adverse events were observed and that the drug is exhibiting good bio-availability.

Our experimental design calls for a total of three individual dose groups. All the other activities necessary to support a New Drug Application, NDA, are in progress.

These include additional safety and toxicology work as well as work relating to ensuring the quality of the manufacturing process on a commercial scale and final animal efficacy studies. SIGA obviously not guarantee the outcome or the precise timing of any of these further studies.

To summarize, our smallpox antiviral lead product, ST-246, is steadily progressing on track through studies to support an NDA for regulatory approval.

Our hemorrhagic fever programs are entering proof of concept animal studies, which if successful, will support the initiation of IND enabling activities to begin in the near future.

Our early stage programs will identify inhibitors of other important viral bio-threat agents are progressing and promise to expand our portfolio of products.

We have in place $29.6 million in grants and contracts to support our activities, and we will continue to compete and seek additional federal funds where and when appropriate.

With that said, I am going to turn the call back to Eric for some additional information on the market forces affecting SIGA.

Thank you, Dennis. Before we open up the call for questions, I would like to give you a brief description into our markets, and the environment in which we operate.

Due to the unique nature of our products among our most important markets, are the federal, state, local and international governmental bodies charged with protecting civilians and military populations from bio-warfare threat.

We believe that SIGA will also be able to assist corporations and other organizations because our antiviral agents could ameliorate a potentially devastating disruption of their work forces and businesses resulting from a bio-terrorist attack.

We note that more than 300 American corporations have stockpiled Tamiflu to protect an estimated 5 million employees from the event of a Bird Flu outbreak.

Our lead drug, ST-246, has demonstrated both in the laboratory and in various animal models potent preventive and therapeutic actions against smallpox and all other orthopoxviruses.

We believe it's effectiveness for these viruses could be analogous to that of penicillin in preventing and treating streptococcal infection.

We believe it meets the critical criteria for defense countermeasures -- biodefense countermeasures enumerated in the recently released HHS implementation plan, in that it is particularly suitable for post exposure prevention and treatment of smallpox.

Unlike all the available smallpox vaccines, which require skin scratch administration or injection by medical professionals, our drug can be self administered by mouth.

Our animal models lead us to believe that the preventive and therapeutic action of ST-246 would begin soon after first administration compared to the known delay of up to 14 days between vaccination and the development of protective immunity in vaccinated individuals.

ST-246 does not however substitute for vaccination.

In contrast to the use of vaccination alone, ST-246 administration may provide smallpox protection during the critical interval of vulnerability between the first identification of an outbreak and the time when widespread vaccination should generate protective immunity across the population.

We believe that our drug in combination with either synchronous or delayed vaccination with live viral vaccine, most people will develop durable protective immunity for smallpox approximately 10 to 14 days after administration of the vaccine by a medical professional.

Under this scenario, the drug can be stopped safely after immunity develops without risk of subsequent smallpox infection.

Widespread availability of the drugs provide immediate protection to first responders, including healthcare workers, police, fire fighters, and military personal, as well as for patients already hospitalized in healthcare institutions receiving outbreak victims.

We believe widespread access to ST-246 could also reduce or even eliminate the needs for broad quarantine programs for suspected exposed individual.

We agree with the opinion of the segment of public health experts that quarantine programs are highly impractical in most urban and suburban environments in the developed world, while the restriction on mobility would have devastating economic and emotional effects.

Based on these considerations, we believe that nations would be prudent to stockpile for rapid deployment enough ST-246 to treat all first responders in the event of a smallpox attack.

We also believe that it's advisable to stockpile enough drugs to protect those with some standard smallpox vaccination should not be administered due to potentially serious complication, and those who might refuse vaccination.

We estimate domestically that this would require acquisition of approximately 30 million courses of drug, while the international market is probably larger. We believe that even broader availability of ST-246 provides greater protection.

We were pleased to see that the recently published HHS BioShield implementation plan included the stated intent to purchase smallpox antiviral drugs in the federal fiscal year beginning October 2008.

We note that HHS' estimate that less than $100 million would be spent on such drugs over a four-year period, it's preliminary and subject to review.

We believe that this estimate was determined without full knowledge of the wide scale deployability, potency, and safety of ST-246.

We are enjoying ongoing dialog with HHS, the Department of Defense, and other governmental personnel here and abroad to educate them regarding our capabilities and to understand their specific concern. ST-246 was the focus of a recent rural health organization conference on smallpox antiviral.

We have received widespread print and television media coverage recently, and ST-246 was discussed in a recent Nature Medicine article on the Chicago area vaccinia case.

As we continue on our educational activities, we believe that governments and other purchases will come to appreciate the value of robust purchasing of ST-246.

Regarding competition, various preparation of cidofavir until recently has been viewed as the leading potential smallpox antiviral drugs for potential stockpiling.

Compared to cidofavir, ST-246 has 8,000 [sole] greater potency in-vitro.

Cidofavir has provided only partial efficacy against smallpox and monkey-pox clinical manifestations in the primate trials, in which ST-246 eliminated all manifestations of disease.

Our drug can be self-administered as a once-a-drug by mouth compared to cidofavir's intravenous administration by medical professional.

In addition, ST-246 has no major identified toxicity compared to cidofavir's recognized severe kidney toxicity potential.

Cidofavir's requirement for intravenous administration and its known toxicity has precluded preventive use.

SIGA owns all rights to ST-246 and owes no royalty to anyone else for the product. ST-246 is subject to U.S. and international patent applications, that when granted, should confer intellectual protection through 2025.

In summary, we like where we are today. We have a meaningful business that we will continue to build. Our business model is a good one, we have the resources to execute our plan, and we enjoy a team of talented employees who have made it happen, and are making it happen.

SIGA will continue to work to discover and develop effective, selective, and safe oral antiviral drugs directed at treating, preventing, and complementing vaccines for high threat biowarfare agents.

Our goal is to lead the development and provision of these drugs domestically and throughout the world to ensure leading-edge biodefense capabilities, and to prevent and treat naturally occurring illness caused by the agents we target.

That's the end of our prepared comments. We appreciate you taking the time to hear our update. With that said, I would like to now open up the call for questions. Operator, may we have your assistance please?

(OPERATOR INSTRUCTIONS) Your first question comes from the line of [Andre Garnett with Financial Incorporated]. Please proceed.

Good morning.

Good morning.

I would like to congratulate SIGA and everybody (inaudible - highly accented language) down there who stayed focused in the last few months, and I would like to ask a couple of questions. The first one is having to do with the clinical trial underway for ST-246.

Are we to expect that this particular set of trials will be the last one?

Dennis, could you answer that question please?

No. What we expect is that, following the completion of the ongoing clinical trial, that will allow us to assess and determine the appropriate human dosage. We will then use that information to do a pivotal safety trial later in the development program.

I see. May I also ask, how many people altogether are involved in this particular trial? I mean, how many volunteers?

The current trial involves about 30 volunteers. We estimate the pivotal safety trial will involve on the order of 400 to 500 volunteers.

All right, sounds good. Okay, and when do you expect the pivotal trial might begin?

That is difficult to forecast at the present time. It will depend on the timing of the completion of the ongoing trail, analysis of the data, and the preparation of the appropriate regulatory documents.

Right. I assume that you have a contract research organization helping you with the clinical trials?

That is correct.

Is that organization going to help you also with the submission of the NDA?

That is correct.

Okay. May I ask what the company is?

We don't think it's appropriate to disclose that company. We want to be sure that all communications are coming through us.

Currently, as I understand it, the orphan drug designation and the intended use of the product is for prevention and treatment of smallpox infection. Am I correct?

That is correct.

Would it make a difference sometimes if the trials and speeding things up, if the two were split, would it make any sense to split the two uses, meaning prevention and/or treatment?

We don't believe so. We don't want to get into this kind of detail at this time.

All right. I have been following the literature, including the government study that was just released about the BioShield program, and I have noticed that the orders that are coming was placed for anthrax and smallpox vaccines, made mention of a concept called one facility concept, meaning that the orders were tailored so as to give enough work to occupy a facility and keep it going until the next order. Is that the type of concept that would apply for a small molecule like ST-246, as opposed to a vaccine?

I don't believe that would apply to a small molecule like ST-246. Thank you for your questions. We would like to move on to the next questioner please.

Thank you.

Thank you.

Your next question comes from the line of [William Kim with Warmill Capital]. Please proceed.

Good afternoon. My question was, I was curious as to why SIGA had not been able to attract any analyst coverage as of now, because usually a biotech company, with a compound that is shortly to be reviewed by the FDA or within 18 months of being approved by the FDA, has usually -- always has some type of analyst coverage and I was wondering why we were not at this stage yet?

Analyst coverage is up to the analysts. We think that that kind of attention could be coming our way, but again, that's not under our control. Thanks for the question.

Your next question comes from the line of [Daniel Walsh with Montauk Financial]. Please proceed.

(inaudible) at what price did you buy it at?

Mr. Walsh, your line is open.

Hello?

It appears we have no more questions at this time. I would like to turn the call over to management for closing remarks.

We want to thank you for joining us this morning. We intend to continue with these conference calls at regular intervals to be sure that we are communicating well to our investor base. Thanks again for joining us.

Thank you for your participation in today's conference. This concludes our presentation. You may now disconnect and have a good day.