SIGA Technologies Inc (SIGA) 2008 Q1 法說會逐字稿

Good day and welcome to the SIGA Technologies first-quarter 2008 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Marybeth Csaby. Please go ahead.

Thank you, Stacey. And thank you all for joining us today. This is Marybeth Csaby, account director with KCSA Strategic Communications, investor relations consultant to SIGA Technologies. At this point, you should have all received the first-quarter 2008 earnings press release. If you have not received the release, please refer to SIGA's corporate website at www.SIGA.com.

Hosting the call today are Dr. Eric A. Rose, Chief Executive Officer, and Tom N. Konatich, SIGA's Chief Financial Officer.

Today's call is being broadcast simultaneously and is 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 website. A transcript of this call will be furnished to the SEC on Form 8-K.

Also, I want to remind everyone that this morning's conference call will include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended, including statements regarding the efficacy of potential products, the timelines for bringing such products to market, and the continued development and possible eventual approval of such products.

Forward-looking statements are based on management's estimates, assumptions, and projection 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 statements.

Factors that may cause such differences include the risks that potential products that appear promising to SIGA or its collaborators cannot be shown to be efficacious or safe in subsequent preclinical or clinical trials; also, SIGA or its collaborators will not obtain appropriate or necessary government approvals to market these or other potential products; SIGA may not be able to obtain anticipated funding for its development projects or other needed funding; SIGA may not be able to secure funding from anticipated government contracts and grants; SIGA may not be able to secure or enforce sufficient legal rights in its products, including sufficient patent protection for its products; and 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 in this press release, is set forth in SIGA's filings with the Securities and Exchange Commission, including SIGA's annual report on Form 10-K for the fiscal year ended December 31, 2007, and in other documents that SIGA has filed with the Commission.

SIGA urges investors and security holders to read those documents free of charge at the Commission's website at http://www.SEC.gov. Interested parties may also obtain those documents free of charge from SIGA.

Forward-looking statements speak only as to the date they are made. Except for any obligation under the US federal securities law, SIGA undertakes no obligation to publicly update any forward-looking statement as a result of new information, future events, or otherwise.

Finally, I need to say a quick 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's safety and effectiveness. SIGA respects those rules, and nothing said today should be taken as a claim regarding the safety and/or effectiveness of ST-246.

Lastly, the question-and-answer session will be open to analysts and institutional investors. We will also be taking your questions by e-mail at info@siga.com.

With that said, I will now turn the call to Eric. Eric, the floor is yours.

Thank you, Mary. Good morning, everyone, and thank you all for joining us today. I know it has been quite some time since our last call. In that time there have been a number of very positive developments that I would like to recap today.

I would also like to use this call as an opportunity to provide you with an update on the status of the earlier drug candidates in our antiviral pipeline, as well as to outline the milestones we anticipate achieving in the next 12 months and beyond, particularly with ST-246. We will keep our comments brief so we can quickly get to the question-and-answer session.

There are three near-term objectives that we set out to accomplish in recent months in relation to ST-246 and that we intend to further advance in 2008.

First, we have taken important steps to facilitate securing and filling purchase orders in the United States government has part of Project BioShield and other biodefense initiatives.

Second, we have received SME status for our European subsidiary with respect to our application for approval of ST-246 in Europe and have initiated the process to obtain Marketing Authorization with the European Medicines Agency.

Finally, we have made significant progress towards the completion of development activities that will support an NDA for full US marketing approval of ST-246.

Let me begin first with an update on the substantial progress we have made and are continuing to make with our drug candidate. Our primary objective is to translate the rapidly increasing animal efficacy and human safety experience with our drug candidate into an expeditiously acquirable product under Project BioShield.

BARDA, the Biomedical Advanced Research and Development Authority, is responsible for purchasing biodefense countermeasures into the strategic national stockpile for the civilian population. The Agency has indicated that it seeks to acquire specific countermeasures, including a smallpox antiviral drug, at the time that specific products are judged by the Agency to meet rigorous product and manufacturing specifications and to be eligible for FDA Emergency Use Authorization, or EUA, in the event of a disease outbreak.

What is an EUA? Following the 9/11 attacks, the government supplemented the normal FDA approval process to provide for special expedited process for drug candidates that could be critical in a declared public health emergency. In this special process, once the government declares that a public health emergency exists, the FDA can authorize through an EUA the use of an unapproved drug that meets the statutory criteria. FDA guidance encourages companies with potentially qualifying drugs to submit supporting data in advance of an emergency.

BARDA has acquired multiple countermeasures in the absence of formal EUA or full FDA approval at the time the acquisitions were initiated, including live smallpox vaccine, the MVA modified smallpox vaccine, stem cells for radiation-related bone marrow failure, and monoclonal antibodies directed against anthrax toxins.

We have recently initiated production of our registration batches of ST-246 and filed information to support an EUA to the FDA. We believe these milestones are indicative that advanced development of ST-246 has progressed enough to warrant its acquisition under Project BioShield.

Another aspect of our preparations for commercial sales is our focus on being ready for commercial scale manufacturing of ST-246. We have been working with our manufacturing vendors on improving our production processes, and we have begun negotiations with the National Institute for Allergy and Infection Disease, part of the NIH, for a contract supplement that will provide, if secured, funding to support these manufacturing initiatives.

Because of our continued progress and BARDA's published intent to acquire a smallpox antiviral drug as early as the fourth quarter of 2008, we believe that a request for application or RFA process for such acquisition could be initiated by BARDA in the near future.

The first stage of the process would be a request for information or RFI to allow interested parties to provide input into the specifications of an RFA.

It is also important to note that in addition to the BARDA opportunity for civilian stockpiling, we believe we also have a significant opportunity for sales of ST-246 to the Department of Defense, which has already provided substantial financial and experimental support for the drug's development.

We also perceive substantial opportunity for non-US sales of St-246 and have therefore initiated activities to support European regulatory approval. Obtaining such approval would open the door for SIGA to begin marketing ST-246 to 27 additional countries.

We have been granted Small and Medium Enterprise status in Europe, which provides access to administrative and financial assistance mechanism that will support our European regulatory strategy. As with any drug approval process, there will still be several hurdles we must clear. We are optimistic, however, given what we have already accomplished in support of our NDA application and the clear benefit that ST-246 has presented thus far.

Finally, with respect to the NDA, we have also made substantial progress. Chemistry and manufacturing and control and preclinical sections are near complete, with numerous supporting documents prepared. In late March, we announced that we have taken a very important step towards production of registration batches of ST-246.

We've also begun the process to ensure commercial supply through contracts with Albemarle Corporation and other vendors. We still how have several steps to complete before we finalize our NDA. In the second half of this year, we expect to complete the final animal efficacy studies for therapeutic use and initiation of a pivotal safety trial in approximately 475 subjects.

The complexity and volume of information required for the NDA filing makes it difficult to set an exact time frame for filing, but our current plan is to file in 2010. It is important to again note, however, that the government can stockpile a drug prior to licensure.

In summary, we believe we have reached an inflection point n our development of ST-246. We have made inroads in our pursuit of regulatory approval through our three main avenues -- EUA, Europe, and NDA. We have solid market opportunities through Project BioShield, the military, and international markets.

While we cannot be more specific in terms of a timeline, we can say that we believe that ST-246 will be acquired by BARDA for the national stockpile in the near future.

Now looking further down the road in terms of growth, our two viral hemorrhagic fever compounds, ST-294 for New World arenaviruses, and ST-193 for Lassa fever, have shown strong preclinical results. We expect that both candidates will advance into IND-enabling activities in the near future.

The other drugs in our pipeline, which includes antiviral programs for dengue fever, Bunyaviruses, and our antibacterial sortase inhibitor program, continue to undergo high-throughput screening, which is a very early stage in the development process. While we're not reporting to anything new at this time, I want to assure all of you that we continue to work in this area.

Lastly, we have received many inquiries about the status of the recent lawsuit by PharmAthene. There is not much to report on this front. What we said in the 10-K holds true today. The discovery phase is proceeding, and we plan to defend ourselves vigorously.

Before I turn the call over to Tom, I just want to reiterate the excitement that we at SIGA feel regarding our prospects for 2008, particularly with regard to ST-246. While there are a number of timing elements that are not within our control, we believe that 2008 will be a critical year for SIGA and its shareholders, and we look forward to continuing to update you on all our progress throughout the year. Tom?

Thanks, Eric. Let me quickly review the highlights of our first-quarter numbers. These are the numbers that were contained in the press release that went out this morning. I encourage anyone who wants to look more deeply into our presentation to go to the SEC website that was discussed by Marybeth earlier, and they can view our 10-Q there.

Our revenues for the first quarter were approximately $2 million from grants and contracts. This number is essentially the same as the revenue number for the prior year.

R&D expenses were $2.8 million, an increase of approximately $186,000 from prior year. The majority of the increase is attributable to increased expenditures on clinical and preclinical testing and manufacturing for our lead drug candidates.

Our operating profit for the year -- or I should say our operating loss for the year was approximately $2 million as compared to $1.8 million of an operating loss for the first quarter of last year. The increase in operating loss was due primarily to the factors I mentioned earlier related to the increase in R&D expense.

Our first-quarter net loss was $858,000 versus a net loss of $3.1 million in the three months ended March 31, 2007. The decrease in net loss for the quarter is primarily attributable to the recognition of a non-cash gain of $1 million reflecting the decline of the fair market value of certain rights and warrants to purchase common shares of the Company, compared to a non-cash charge of $1.5 million in the prior year.

Loss per share on a fully diluted basis for the quarter was $0.03 as compared to a loss of $0.10 for the same period last year.

From a balance sheet perspective, cash and cash equivalents in short-term investments as of March 31, 2008, were approximately $5.1 million as compared to approximately $6.8 million at December 31, 2007.

As we have also mentioned in the past, we've had significant support from the National Institutes of Health and the Department of Defense. In addition to the cash that we receive under these grants and contracts, federal agencies have performed critical studies on our products at no cost to SIGA. When considering SIGA's financial resources and performance, the value of these services should not be underestimated nor overlooked.

As a normal course of business we routinely apply for additional grants and contracts as we become aware of them and have several applications proposals in the pipeline that we hope to secure. We speculate on the probability or timing of receipt of additional monies. We are hopeful based on past experiences that we will continue to receive additional commitments as we go forward.

With that, I will now ask the operator to open the call to questions.

(OPERATOR INSTRUCTIONS) Gary Siperstein with Eliot Rose Asset Management.

Gentlemen, good morning. Dr. Rose, can you give us a handle on how many doses you think would be in the first order or subsequent orders? And do you have any color on pricing per dose?

We can't say definitively what the size of the first acquisition will be. We believe that that discussion will begin probably with the RFI. We think whatever is in the RFI is still something that is also subject to modification.

I think part of it is also whether or not the intent is to purchase for just therapeutic use or for therapeutic and prophylactic use, which we have good reason to believe is BARDA is interested in, in addition to just the therapeutic indication.

In terms of pricing, we have engaged pricing consultants to help us navigate this. We do have a unique drug in that it is an orphan and that, unlike many of the products acquired by BARDA, we have substantial intellectual property in it, as compared for example to the original live smallpox vaccine.

We know at least in the past that recent purchases include monoclonal antibodies to the anthrax antitoxin that were priced at $8,250 per course. We don't think that our drug is going to be priced in quite that high a range, but we are very encouraged to see that that was the price at which the product was acquired.

In terms of with the various organizations and you mentioned civilian defense and foreign countries, is there any sense of the magnitude of the market, then, in terms of doses or in terms of people?

In other words, you mentioned BioShield; that will be a certain potential purchase. Defense Department could be something else. The 27 foreign countries, is there any way you can quantify the potential size of the opportunity?

Other than saying that we believe that it's large, it is hard to quantify individual countries. We have surveyed scientists in many countries and interact with them through the World Health Organization. We have been impressed by the variability of preparedness of countries for a smallpox outbreak.

Some like the United States, have stockpiled substantial quantities of vaccines. Some have literally assembled no stockpile and countermeasures for a smallpox outbreak. Within that range, we believe there is very substantial opportunity for our drug.

Can I push you a little more? So you said large. I mean, are we talking a $100 million opportunity, a $500 million, a $1 billion?

Yes. We think that the overall opportunity for the drug is substantially higher than the $100 million in the original implementation plan, both domestically and internationally.

Okay. What would be the catalyst for a foreign order? Is it the first US defense order? Or would a civilian BioShield order qualify these foreign countries to start ordering?

I would have to say that we don't know the answer to that. There is enormous variability in terms of the regulatory processes of countries. There are some that follow closely to FDA and American management of drugs like this. There are others, for example, in the European Union, that clearly have their own robust regulatory apparatus that we will need to navigate.

Okay. You mentioned, while it's hard to know the timeline, based on what you have seen out there for anthrax and/or other countermeasures, what has been the average turnaround on an RFI and an RFA?

My understanding of the turnaround on an RFI, the time that it will be open for comment is in the range of 30 to 60 days. Following that comment period, the RFA typically comes out in a matter of months.

Then in terms of how long it would take to negotiate a contract based on an RFI, that -- I think it is hard to say how long that could last. But it could take up to a year or so.

Thank you very much.

(OPERATOR INSTRUCTIONS) Joaquin Horton with Nollenberger Capital.

Morning. Your last release maybe two weeks ago, you were talking about negotiating with the government for production of the SIGA 246. I had noticed on the Internet that the federal government announced this around a week prior to that, around the 18th of April.

Now, is it best that the government's negotiating with you? Is this a grant type of authorization that you are talking about?

This is a grant authorization, and we are in the process of negotiating with them now. Dennis, do you have anything more to add to that?

It's actually a contract supplement. It would add monies into our existing contract that funds all the activities out to the NDA. [It only] will accelerate the commercialization portion of the program.

Is that like a multiple year, like two-, three-year type grant then?

Yes. And this is a contract, not a grant.

Contract? Okay, that's even better. You talked about hemorrhagic fever and Lassa fever and dengue fever. Is dengue fever more on the commercial side of the marketplace than say on the BioShield side or the other two?

Dennis, do you want to comment on that?

We certainly believe so. For dengue fever, as you know from reading news releases, it is rapidly becoming recognized as a major world health problem. 50 to 100 million cases a year. It also occurs in both developing and developed countries. In fact, it is encroaching into North America as the mosquito populations change.

So we believe certainly there will be a traditional commercial market both for travelers and for those living in endemic areas.

Thank you.

With no further questions, I would like turn the conference back over to Dr. Rose for any additional or closing remarks.

Again, we want to thank you for joining us. We look forward to continuing our quarterly updates, and we will be back to you soon. Thanks very much.

Thank you. Ladies and gentlemen, that will conclude today's conference. We do thank you for your participation and you may disconnect at this time.