SIGA Technologies Inc (SIGA) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen, you've joined the SIGA first quarter business update. (Operator Instructions). 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, Tyrone, and thank you all for joining us today. This is Marybeth Csaby, Managing Director 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 simultaneously webcast, and is available on SIGA's website. A replay of the call will also be available in recorded format and on the Company's website. Before we begin today, I want to remind everyone that this afternoon's conference includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended.

This includes statements regarding the efficacy of potential products, the timeline for bringing such products to market, and the continued development in possible eventual approval for such products. Forward-looking statements are based on management's estimates, assumptions, and projects, 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 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 appropriate or necessary governmental approval 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 efficient 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 the solicitation for the acquisition of the smallpox antiviral for the strategic national stockpile, or may complete it on different terms.

SIGA's proposed drug candidate, corresponding to any governmental solicitation for purchase, may not meet the requirement of this 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 also adversely affect SIGA's ability to advance research and its products.

Changing federal, state, and foreign regulation on SIGA's [unintelligible] 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, are 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 these documents free-of-charge from SIGA. Forward-looking statements speak only to the date they are made, and except for any obligation under US Federal Securities laws, SIGA undertakes no obligation to publicly update any forward-looking as a result of new information, future events, or otherwise. With that said, I would like to turn the call over to Dr. Eric Rose. Eric, the call is yours.

Thank you, Marybeth, and good afternoon. I'd like to thank all of you for joining us for our first quarter call. We have brief prepared remarks today. And as usual, we'll open the call for investor questions following these remarks.

Let me begin by noting that in regard to our efforts to transition from a development-stage to a commercial-stage enterprise, we continue to be deeply involved in the BARDA RFP smallpox antiviral drug acquisition process. At this time, however, I am unable to say more because of the sensitive nature of the federal acquisition process.

We will not be making any further public comment on the process while it remains ongoing, nor will we be answering any questions from investors on this subject. I recognize that this subject is of great interest to SIGA's shareholders, and I'm sure that you appreciate our objective to ensure that comments made outside of the process do not jeopardize our efforts.

Regarding our lead drug candidate, ST-246, our R&D team continues to pursue and complete the prerequisites to approval of the drug as a therapeutic. We're also designing the development plan to achieve approval for use of ST-246 for the indication of post-exposure prophylaxis.

Furthermore, we're actively developing an IV version of the drug for critically ill patients and those who cannot absorb oral drug. We've created a suitable formulation in recent months that has shown appropriate safety and exposure in non-human primates. For those who may be new investors, in 2008, we received approximately $55 million in government contracts to support the development of our drug for post-exposure prophylaxis and the IV formulation.

Looking now to NDA-enabling activities related to the therapeutic use of ST-246, the commercial scale validation campaign is underway. So far, we have completed the NDA registration batches of GMP drug product, which are now undergoing stability testing to validate our expected shelf life. Additionally, we believe that we have completed the work necessary on the toxicology studies that will support ST-246, and the accompanying NDA module is currently being written.

As many of you are aware, a recent publication indicated that good progress was being made with our clinical studies. A recent electronically published study reported on the initial subset of our experience now with more than 150 volunteers receiving drug to-date with no observed serious adverse events, and achievement of blood levels in all volunteers at which we had demonstrated a mortality reduction in otherwise lethally infected non-human primates exposed to monkey pox virus. I caution, however, that the full analysis here is not complete and fully documented.

Finally, we continue to work with our federal partners at NIAID, the Department of Defense, CDC, BARDA, and the FDA to develop an animal efficacy data package that will support drug approval under the animal rule and human dose selection.

At the same time we continue to pursue our anticipated NDA filing, we're also working on obtaining eventual approval in the European Union. Much, if not most of the information that we're submitting to the FDA to gain approval will also be used in the process with the European Medicines Agency, known now as the EMA.

With regard to our other funded programs, in February we were awarded a $2.8 million contract with options up to an additional $9.9 million from the Defense Threat Reduction Agency, DTRA, to support the preclinical development and IND filing of a broad-spectrum antiviral drug. Medicinal chemistry activities have already started using this funding.

Our arenavirus program or Lassa program, as many of you know it, continues to progress with continued activities underway around our lead compound ST-193 and other potential drug candidates. In our dengue program, we are very excited about the progress being made, as well.

We have identified two lead series, both of which appear efficacious in the animal models tested to-date. We know the target of each drug series, and one of the candidates shows oral bioavailability. Lead optimization efforts are in progress to identify a suitable clinical candidate. We have acquired and are installing upgraded high throughput screening capabilities and plan to launch another screening campaign this summer against both biodefense and traditional human viral pathogens.

Lastly, we eagerly await the release of the revised PHEMCE Implementation Plan and associated federal funding so we can accelerate our drug development activities and bring our programs to the same level of success as we have had with ST-246. Let me now turn the call to a discussion of the financials by Ayelet.

Thank you. (inaudible). Our performance in Q1 2010 was mainly driven by the continued development of ST-246, continuation of our commercial manufacturing validation campaign, and the preparation for our Phase II multi-dose safety trials, as we continued to pursue activities necessary for approval of ST-246 for therapeutic use.

I will now discuss the results of [corporations] in more details starting with our revenue. For Q1 2010, revenues from research and development contracts and grants were $5.1 million, an increase of $3.4 million, or 164% from the $1.9 million in Q1 2009.

This increase in revenue is mainly driven by three factors. First, activities supporting our $36.5 million program for the large-scale manufacturing and packaging of ST-246, revenue from this program increased by $2.4 million. Second, an increase of $338,000 in revenue recognized from $65 million contract for additional formulations and indications of ST-246, and finally, $305,000 that we recognized from our two new contracts for the development of a broad-spectrum antiviral drug.

Turning now to operating expenditures, I'll start with the research and development. In Q1 2010, we made significant progress pressing forward with the commercial manufacturing validation campaign of ST-246, and continued to advance the development of our product pipeline, including our preclinical programs for the development of a broad spectrum antiviral drug, dengue fever drug, and drug for hemorrhagic fevers.

Specifically, research and development expenses in Q1 2010 were $5.8 million, an increase of $3.1 million, or 116% from the $2.7 million in Q1 2009. Expenditures related to the manufacturing, packaging, and stability of ST-246 increased $2.3 million.

Other costs related to ST-246, as well as the development of other lead drug candidates, increased $546,000 from Q1 2009. To a lesser extent, employee compensation expenses increased $200,000 in Q1 2010, highlighting the increasing our R&D personnel from 40 employees in March 2009 to 51 employees in March 2010.

Selling, general, and administrative expenses in Q1 2010 were $2 million, compared to $2.1 million in Q1 2009. The small decline of $100,000, or 4.4%, relates to lower compensation expenses incurred in 2010. [Unintelligible] expenses in Q1 2010 increased to $320,000 from $109,000 in Q1 2009, reflecting our efforts to protect our lead drug candidate in expanded geographic territories.

We do expect that our future spending will remain focused in our product pipeline and the activities that support its development. We will continue to fund these activities with our strengthened balance sheet, including cash, cash equivalence, and short-term investment of $17.3 million, and our expanding portfolio of [unintelligible] government funding.

Our bottom line and loss for Q1 2010 was $4.4 million, as compared to $6.9 million in Q1 2009. Net loss in Q1 2010 included non-cash charges of $1.4 million from mark-to-market of [unintelligible] to purchase common stock, compared to $3.9 million of non-cash charges recognized in Q1 2009.

In conclusion, we advanced toward our goal of commercializing ST-246. This is clearly demonstrated in this quarter's financials, not only on the revenue side, through the recognition of grants and contracts [proceeds], but also in terms of our spending. This also holds true for the rest of our research and development pipeline. Thank you, again, for your support and shareholders. And with that, I will turn the conference back to the moderator to open it up for questions.

Thank you, ladies and gentlemen. (Operator Instructions). Our first question is from Jason Kantor. Your line's open.

Great. Any chance you could tell us when you're going to get the contract? I'm just kidding. That's a big black hole in terms of what we're not allowed to talk about, so I'll try to figure something else out here. Could you give us an update on where you are with the pharmacy and in that litigation?

We disclosed the progress in our 10-Q. We are still in expert discovery. We did file a partial motion in March. And there is no court date yet.

Partial Motion for Summary Judgment.

There is no court date as of yet.

Okay. And then, you provided some breakdown of the revenue, or at least the portions that changed. Can you just tell us the 5.1 million, what are the components, and what were the values for those components?

The majority of this revenue, Jason, is from the recognition of revenue on our ST-246 program. So, close to $4.5 million comes from ST-246-related revenue.

Okay. All right, I guess that's it for me. Thanks.

Thank you.

Thank you.

Thank you, our next question or comment is from Nathan [Kelly]. Your line is open.

Hi, guys. Good afternoon. Just had a quick question, what would be the current manufacturing capacity on an annual basis for ST-246? And if other countries did come in and award for a contract, would there be enough capacity to supply on that basis?

Nathan, our capacity is not limited. We're doing the commercial validation for manufacturing on a scale that is about 10 times higher than our registration manufacturing. And we believe that if it would be necessary, we can manufacture as much as we need during every given year, any submitted, too. We can validate more lines and validate lines outside the United States.

Okay, thank you.

Thank you. Our next question or comment is from Kevin Martin. Your line is open.

Hi, guys, good afternoon. With the high throughput screening, I'm assuming that would come into play with the different flu seasons. I'm not sure how far along you are in that area, but when do you think that you would be able to supply either vaccines or medications in the flu arena? And how far off is that?

Well, we are not a flu vaccine--we don't manufacture or develop any vaccines. So, this is not a space that we plan to enter. And our high throughput screening activity is not something that would be relevant to a seasonal flu vaccine. We are interested, as we said on past calls, in developing novel influenza antiviral drugs. And we've already initiated a high throughput screening program against influenza.

And how far off do you think that would be, where you would be able to supply that if that was something that the government or somebody called upon for you to produce?

We do not have a drug candidate. So, to speculate on when we would have something to offer in the even of a new flu pandemic would be purely speculative at this point.

Okay, thank you.

Sure.

Thank you. (Operator Instructions).

Well, that concludes our conference this afternoon. We appreciate our interest and appreciate your patience and looks forward to speaking to you again soon. Thanks.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Have a wonderful day.