SIGA Technologies Inc (SIGA) 2009 Q4 法說會逐字稿

Good day, ladies and gentlemen. And thank you for your patience. You have joined the SIGA fourth quarter and year end business update. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will be given at that time. As a reminder this conference is being recorded. I would now like to turn the call over to your host, Ms. Marybeth Csaby. Ma'am, you may begin.

Thank you Latif. And thank you all for joining us today. This is Marybeth Csaby, Vice President of KCSA Strategic Communications, Investor Relations consultant to SIGA Technologies. Hosting the call today are Dr. Eric Rose, Chief Executive Officer and Chairman, and Ayelet Dugary, Chief Financial Officer. Today's call is being webcast simultaneously, and is available on SIGA's website. A replay of the call will also be available in a recorded format and on the Company's website.

I also want to remind everyone that this afternoon's conference call includes 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 projections 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 including 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, SIGA or its collaborators will not obtain the appropriate or necessary governmental 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. Regulatory approval for SIGA's products may require further or additional testing that will delay or prevent approval. The Biomedical Advanced Research and Development Authority may not complete the procurement set forth in its solicitation for the acquisition of a smallpox antiviral for the strategic national stockpile, or may complete it on different terms. SIGA's proposed drug candidate for responding to any governmental solicitation for purchase may not meet the requirements of the solicitation.

The volatile and competitive nature of the biotechnology industry may hamper SIGA's efforts. Changes in domestic and foreign economic and market conditions may adversely affect SIGA's ability to advance research and its products. And changing federal, state and foreign regulation on SIGA's business may adversely affect SIGA's ability to advance its research or its products. More detailed information about SIGA and risk factors that may affect the realization of forward-looking statements, including the forward-looking statements in this conference call, 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, 2009, 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 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, and except for any obligation under the US Federal Securities Laws SIGA undertakes no obligation to publicly update any forward-looking statements as a result of new information, future events, or otherwise. With that said, I would now like to turn the call over to Dr. Eric Rose. Eric, the floor is yours.

Good afternoon everyone. And thanks for joining us. I would like to update everyone on the call on the progress of our planned transition from a development to a commercial stage company, primarily based obviously on our lead product ST-246, a smallpox antiviral drug. I will talk about the interest of our primary customer the United States Government, and the progress we feel we are making in the RFP acquisition process for this drug.

With regard to our primary customer, we believe that interest on the part of the United States Government in our drug remains strong. We note that there is a constructive and proactive HHS review of the entire countermeasure enterprise that was ordered by HHS Secretary Sebelius at the end of last year. We do not believe that that effort is at all in conflict or slowing down our RFP acquisition process. And we see a very candid recognition of the shortfalls in our biodefense preparedness, and a strong willingness upon the part of government leaders to rectify the deficiencies. We also note the report of the Congressionally empowered Weapons of Mass Destruction Committee, a bipartisan committee created by the Congress, and now being perpetuated as a non-profit foundation.

This Committee also has identified deficiencies in our biodefense preparedness. It is the opinion of that Committee that biological weapons of mass destruction are more likely than any other type of weapons of mass destruction to be potentially deployed in the near future. Smallpox itself is a well-documented potential bioweapon of mass destruction. The Committee has pointed out that we should be seeking countermeasures that would reduce or even potentially eliminate the WMD potential of a host of bioweapons, smallpox certainly in that category. And we strongly believe now that ST-246 stockpiled in sufficient quantities would reduce potentially drastically even potentially eliminate the WMD impact of a smallpox outbreak.

Let me now speak to the RFP process. We are engaged in a very active process with the BARDA acquisition team. That progress is slower than obviously announced in the RFP itself, but it does continue to make progress. Without question, we have seen a narrowing of the scope of questions and issues that have been brought to us. We have achieved I think a degree, a strong degree of agreement with regard to outstanding issues with regard to our own corporate and partner security, with regard to some of the outstanding technical issues, particularly as they related to our manufacturer, and are engaged in a constructive business dialogue with them as well.

That culminated at the end of February and our resubmission of a revised proposal that was requested from us, to provide a restatement particularly focused around our security and technical issues. That has been submitted. We expect a response to that resubmission in a matter of weeks. Whether or not that will be the ultimate step in this process is too early to say, but we certainly sense continuing progress.

We have recently had the opportunity to speak with several other biodefense firms that have gone through the RFP process, and from these discussions we don't think that our experience in this process is at all unique. In fact, we think it is mirrored in the negotiation process we had for the BAA contract that we recently announced for our broad spectrum antiviral ST-669. It is a process that we are learning takes time and patience. We know it is trying the time and patience of our investor base as well, but progress and time seem to be correlating at this point. We have had strong indications of interest on the part of other potential markets outside the United States. We have reported our experience in a smallpox biodefense drill conducted by the state of Israel, and have been contacted again by the state of Israel for follow-up in that regard, and from other countries as well.

We are pleased to have ended 2009 with the strongest balance sheet in our history. Our liquidity, we believe between our present cash on hand and equity line we believe positions us to be self-funding over the next three years. And this is also providing us the flexibility and ability to move forward and invest in new programs. We also welcome a host of new investors that are supporting our Company.

On the regulatory front, we expect an ND filing some time in 2011, but as we have stated before our commercialization is not contingent upon NDA approval, although it is certainly expected by BARDA that we will put forth diligent efforts to achieve that NDA approval. The 2011 target remains in our sights, but of course, to be more specific about that is just not possible for us. We also proceed ahead in parallel with the European regulatory authorities, the EMEA in a process that we think is quite closely tracking the American FDA process as well.

Our other ST-246 activities that are precommercial have made strong progress in this past year. The IV formulation which we were funded to develop in September of 2008 has progressed dramatically, and we have made progress in planning our NDA activities for post-exposure prophylaxis. Our preclinical pipeline is in its most robust state ever. We were pleased by the previously mentioned DoD award to support our broad spectrum antiviral ST-669, we have made good progress with our dengue and Lassa fever programs, and the 669 award has allowed us to dramatically increase our High-Throughput Screening capabilities, and enabled us to embark upon several new High-Throughput Screening programs.

We continue to apply for grants and contracts an area in which we have been in our opinion extraordinarily successful. We have remaining grants and contracts funding that does not appear on our balance sheet that we believe is one of the strongest assets of the Company, and our core competency in getting these grants and contracts we think is in its strongest state ever.

With that, I will conclude my formal comments, I will turn the floor over to Ayelet Dugary, and then we will have a question and answer session.

Thank you, Eric. Following the close of market today we released the financial results for the year ended December 31, 2009, and filed our annual return on Form 10-K. I encourage everyone to take a look at the press release and the Annual Report. They are available on our website and through a link to the SEC website. Let me briefly discuss the financial results for the year ended December 31, 2009.

For the full year 2009, total revenues were $13.8 million, compared to $8.1 million in 2008, and net operating loss was $11.9 million, compared to $8.7 million in 2008. Net loss per common share was $0.47, compared to $0.25 in 2008. SIGA's performance in 2009 was mainly driven by the continued development of ST-246, Completion of the Phase 2 human clinical safety trial, and the initiation of commercial manufacturing validation campaign.

For the fourth quarter 2009, total revenues were $4 million compared to $2.5 million in 2008, and operating loss was $3.7 million, compared to $2.5 million in 2008. I will now discuss the results in more detail starting with our revenue.

For 2009, revenues from research and development contracts and grants were $13.8 million, an increase of $5.7 million, or 71%, from $8.1 million in 2008. This increase is mainly due to revenues recognized from our existing program for the large-scale manufacturing and packaging of ST-246, and revenue recognized from our contracts for additional formations and indications of ST-246.

Turning now to spending. I will start with research and development. During 2009, we continued to advance the development of ST-246 and our product pipeline, which includes preclinical programs focused in the development of a broad spectrum antiviral drugs, dengue, and hemorrhagic fevers. As a result, our 2009 research and development expenses were $17.4 million, an increase of $5.8 million, or 50%, from the $11.6 million spent in 2008. Expenditures related to the manufacturing packaging and stability of ST-246 increased to $3.3 million. Other costs related to ST-246, as well as the development of other lead drug candidates increased $1.2 million from the prior year.

Employee compensation expense increased $1 million, mainly due to the hiring of additional experts, and support and research and development personnel. In 2009, selling, general and administrative expenses were $7.5 million, an increase of $2.9 million or 64% from the $4.6 million we spent in 2008. This increase is mainly due to higher stock based compensation charges, higher legal support, and an increase in accounting fees.

With regards to our spending, we remain focused on controlling our expenses and maintaining our fiscal discipline, all while managing our growth and supporting our prospects. Next our bottom line net loss for 2009 was $17.6 million, as compared to $8.6 million in 2008. The net loss in 2009 included noncash charges of $5.7 million for mark to market of warrants to purchase common stock, and noncash compensation of $2.1 million for options issued under our stock option plan.

Turning now to our balance sheet, as Eric mentioned before, cash and cash equivalents and short term investments at December 31, 2009 were $14.5 million and $5 million respectively, compared to cash and cash equivalents balance of only $2.3 million on December 31, 2008. In 2009, we strengthened our balance sheet with the sale of 2.7 million shares of common stock for net proceeds after offering expenses of $18.6 million. In addition to net proceeds of $7.4 million from exercises of warrants and options to acquire shares of common stock.

In conclusion, our financial results reflect progress towards commercialization of ST-246 and the continued development of our drug pipeline. We continue to build a strong SIGA brand as evidenced by the receipt of new grants and contracts to support our program. With that, I will turn the conference back to the moderator to open it up for questions.

Thank you, ma'am. Ladies and gentlemen, (Operator Instructions). Our first question comes from [Scott Sidley of Essence] Group.

How are you doing?

Very well.

I wanted to find out, is SIGA still on track to file the NDA for the Lassa fever in the near future?

It would not be an NDA. It is an IND. Obviously we are not ready to file for approval and we continue to work towards that.

Okay. Any expectation on when you guys think it might be?

I don't want to --.

We don't have any specific expectations.

Okay. Also the dengue fever continues to spread worldwide, and is considered an emerging threat according to the CDC, can you give us a sense of what progress is being made, and a glimpse at a timeline as to expect with that?

We started as you may recall was the four lead series, and we are down to two at this point that we think are the lead candidates in that regard. We do have an orally bioavailable compound that is showing efficacy in reducing viral load in a mouse model. This is not a clinical mouse model. There is no animal model that shows clinical manifestations of disease, but we feel that is very strong progress and that that program is accelerating.

Thank you.

Our next question from [Jason Coburn] of National Securities.

Actually it is Malcolm sitting in for Jason. How are you all?

Hi, Malcolm.

Hi, Malcolm.

First of all, congratulations with 669. It is really awesome news.

Thank you.

We were wondering, whether you can describe the development stage of the program as it is specifically, i.e., how close you are to identifying a target associated with the virus family, and a target or multiple targets are identified, what is the next step? How do you develop a molecule to attack the target?

We think that this target actually is not a common viral target but more likely a host target, and we find that the target at least for this particular compound seems to be unique to human cells. If we grow the affected viruses in non-human cells, we see no efficacy of the compound. If we grow the viruses in human cells, we see the type of inhibition that has been so exciting. We are obviously trying to drill down to what that mechanism is, and what we presume to be a host factor, and the identification of that will allow optimization, to get to the kind of compound that we like to get to, namely an orally bioavailable non-toxic compound. I think it is very early in the development of this. There is considerable excitement at SIGA and obviously at DoD in this, but we still would call this a very early stage preclinical program.

Great. Thank you so much.

Sure.

Thank you. (Operator Instructions). Our next question comes from Kevin Martin of Garden State.

My question was about you mentioned the High-Throughput Screening. Is that something that could eventually put SIGA in the running for the flu, the seasonal flu bug every year?

We are interested in screening, I think we have said this before, we think that the existing crop of influenza antiviral drugs deserves improvement, and we have begun a High-Throughput screen campaign against the influenza virus.

One other thing on the RFP for 246, the prophylaxis in the IV form that you mentioned, that is not included in this current RFP. Would that be something that a new RFP would have to be put out there for the stockpiling, or purchase of those formulations?

That is correct. The RFP also calls for the development of pediatric and geriatric oral suspensions, and I think a clear theme that has evolved from the HHS review of countermeasure development, is a renewed emphasis on developing countermeasures, particularly for children, which represent 25% of the population.

Thank you.

Sure.

As there are no further questions in queue, I would like to turn the call back over to our speakers.

Once again, we appreciate your joining us for this update. We continue to make progress in our quest to become a commercial stage company. We are confident that we will be able to achieve this on a reasonable timeline, and appreciate your patience and continued interest in SIGA. Thanks very much.

Ladies and gentlemen, this does conclude your SIGA fourth quarter and year end business update. Thank you for your participation, and have a wonderful day. Attendees you may disconnect your lines at this time.