SIGA Technologies Inc (SIGA) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen. You've joined the SIGA Technologies 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, Molina, and thank you all for joining us today. This is Marybeth Csaby, Director of Investor Relations at KCSA, Strategic Communications; Investor Relations Consultant to SIGA Technologies. Joining the call today are Dr. Eric Rose, Chief Executive Officer and Chairman, and Daniel Luckshire, CFO. 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 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 or potential products, the timeline for bringing such products to market, and the continued development and possible eventual approval for 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 include the risk that potential products that appear promising to SIGA or its collaborators cannot be shown to be efficacious in safe in subsequent free clinical 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 patent protection for its products.

Any challenge to SIGA's patent and other proprietary rights if it's adversely determined, could affect its business and even if determined favorably could be costly. Regulatory requirements applicable to SIGA's products may result in the need for further or additional testing or documentation that will delay or prevent seeking or obtaining needed approvals to market these products. The US Biomedical Advanced Research and Development Authority may not complete the procurement set forth in its solicitation to the acquisition of a smallpox antiviral for the strategic national stockpile or may complete it on different terms. Any contractual award we may receive to supply smallpox antiviral may be subject to one or more protests, which may cause contract awards to be delayed or denied. The volatile and competitive nature of the biotechnology industry may hamper SIGA's efforts, changes in domestic and foreign economic market conditions may adversely affect SIGA's abilities to advance its research or its products, and the effect of federal, state, and foreign regulation on SIGA's businesses.

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, 2010 and in other documents that SIGA has filed with the Commission. SIGA urges investors and security holders to read these 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 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'd like to turn the call over to Dr. Eric Rose. Eric, the floor is yours.

Thank you, Marybeth. Good afternoon and thank you all for joining us on our year-end call. As usual, I'll offer brief prepared remarks, and then Luckshire, our new Chief Financial Officer, will review the financial results. We will then open the line and take your questions.

First and foremost, let me begin with the status of the BARDA RFP. Since our last earnings call in November the Small Business Administration Office of Hearings and Appeals affirmed the ruling, the original ruling, that we were other than small. Shortly after the SBA affirmation, BARDA canceled the RFP, which contained a small business set-aside, and advised us that it was issuing a new RFP, seeking 1.7 million courses of a smallpox antiviral with an option for 12 million additional courses. At this point in time, beyond what I've just described, I am not able to provide any additional detail other than to say that we submitted a response for the RFP prior to the February 28 deadline, and we continue to believe that we are well positioned to meet the government's needs for counter measures against smallpox.

Moving on to an update of our business, I would like to start by providing a quick report on ST-246 and then walk through a progress report on our antiviral pipeline. With regard to ST-246, our NDA enabling activities for the therapeutic use of ST-246 continue to move forward. We've completed an additional series of dosage related studies and could progress to pivotal safety studies as soon as the third quarter of this year. We believe the progression of these clinical studies in conjunction with continuous dialogue with the FDA highlight the positive momentum of the ST-246 program.

The pivotal safety studies I just mentioned will include a 430 patient study and a cardiac repolarization study. The purpose of the 430 patient study is to expand the sample base of safety studies that have been conducted previously. These studies must be completed before filing a New Drug Application with the FDA. As we talk about NDAs and our march toward commercialization, I want to highlight that our commercial scale validation program has continued at a pace that we are comfortable with and which fits within our overall timing. We expect to complete the campaign in early autumn with the production of 300,000 courses of ST-246.

Moving on now to our dengue program, as we have mentioned in prior calls, we have identified two compounds in our development work which have both demonstrated efficacy in mouse models. We are employing medicinal chemistry to improve the drug-like characteristics of our two lead series with the expectation that we will soon narrow our focus to one compound, which will become our pre-clinical candidate.

Before I move on to the other pipeline programs, I want to emphasize that dengue continues to emerge as a major global health concern. Recently, in light of these concerns, NIAID sponsored a dengue conference in Puerto Rico. We were invited to attend this conference and to present our data, and we are very optimistic about the funding opportunities that we believe will be available to us in the future from an NIAID.

Next on my list is the broad-spectrum antiviral program. This program is supported by both NIAID and DTRA, the Defense Threat Reduction Agency. For this program, we are preparing and in vivo proof-of-concept animal challenge, which is expected to start later this year and will employ one or more category A viral agents. In our arenavirus program, ST-193 has been improved to renew certain undesirable characteristics, and we continue to pursue funding initiatives to advance this program.

Lastly, before we head into the financials, I want to note that we have expanded our high throughput screening library and have upgraded our high throughput screening and bioinformatics capabilities. These state-of-the-art capabilities are being deployed against a new round of viral disease threats in order to efficiently generate the next wave of programs.

Dan will now review the financials. Dan?

Thank you, Eric. Before I get started, I'd like to remind you that we released our financial results of 2010 and the fourth quarter, and filed our form 10-K at the close of the market today. The press release is available right now and the annual report will be available shortly. Going through the financials, I will provide a brief highlight over results for the year and quarter ended December 31, 2010, and will follow with details.

For the year revenues are $19.2 million compared to $13.8 million last year. Net operating loss this year was $12.7 million compared to $11.9 million in 2009. Including the impact of the fair market valuation which is a non-operating item, the net loss for the year was $20.2 million.This compares to $19.4 million for 2009. On a per-share basis the annual GAAP net loss for 2010 was $0.62 per share compared to $0.52 per share in 2009.

Briefly, let me also give you the summary numbers for the quarter. Revenues for the fourth quarter were $3.1 million compared to $4 million in the comparable quarter last year. The net operating loss for this quarter was $4.2 million compared to $3.7 million for the corresponding period last year.

Now, let's get to the details. On the revenue side, revenues increased $5.4 million for the year. The increase is mostly attributable to the activity in the broad-spectrum and the arenavirus antiviral programs. Revenues [or grant deployment] for the broad-spectrum program increased $2.2 million over the prior year. Revenues for the arenavirus program increased $2.4 million over the prior year. These two programs account for most of the revenue change for the year. Revenues also increased for the ST-246 program by approximately $900,000.

On the expense side, let's start with R&D expenses, which tend to track with revenues. For the year, the research and development expenses were $22.6 million, an increase of $5.2 million over the last year. As is the case of revenues, the broad-spectrum of the arenavirus antiviral programs were sizable contributors to the increase. Vendor-related expenses for the arenavirus antiviral program increased $1.8 million, while vendor-related expenses for the broad-spectrum program increased $860,000. Also contributing to the annual increase in R&D expense was a $925,000 increase in employee related compensation costs. R&D employee compensation costs have increased primarily because headcount has increased. Overall, the increase in R&D expenses reflects the broad development initiatives discussed by Eric.

Focusing now on SG&A expenses, these expenses were $8.1 million in 2010, an increase of $600,000 over last year. The increase in these expenses is attributable to higher legal expenses, expenses related to business development, and expenses for risk management activities. Rounding out the expense discussion -- patent preparation. For the year patent preparation expenses were $1.1 million, an increase of approximately $400,000 over last year. The increase was driven by our efforts to protect ST-246 patent rights across a broad geographic area.

At this point, having gone through the income statement, I would like to spend a minute on our liquidity position. As of December 31, 2010, cash, cash equivalents, and short-term investments were $21.3 million. This represents an increase of $1.8 million from last year and September 30, 2010. We believe these balance sheet assets will continue to fund our planned operating activities for 2011 and into 2012. With that, I will now open the line for questions.

Thank you, Sir.

(Operator Instructions).

Our first question comes from Jason Kantor with RBC Capital Markets.

Thank you. I was curious -- You mentioned that you are producing 300,000 courses which could be available in early Autumn. Would that be in a form that would be deliverable to the stockpile? And, then, a related question, how frequently would you be able to turn around and produce the same amount again?

Thanks, Jason. We believe that, that production of 300,000 courses would be deliverable, but it requires the consent of the government to accept them. One difference between the production of these courses versus what the RFP calls for is that they were not produced with the full security requirements the RFP requires.

But, we're more than confident in the purity of these batches and believe that they are -- that they would be appropriate for inclusion in the SNS.That's fully finished product. We also have an additional production lot of active pharmaceutical ingredients that has been produced, which we estimate would yield another 300,000 courses, which would be turned around pretty quickly in addition.

So, it would be possible that the first 300,000 could get delivered in the third quarter and another 300,000 in the fourth quarter, if things got squared away quickly here with BARDA?

I think that's ambitious. I think, certainly, starting deliveries in the fourth quarter of 2011 is possible, but I think I would describe it at this point as a stretch goal.

A stretch goal for Q3 or a stretch goal for Q4?

I think a stretch goal for Q4. I don't think we'll deliver it in Q3.

Okay. And, what's the -- is the timing of the contract the key issue here, or is it just that you don't have things in place to deliver it sooner?

I think timing of the contract is obviously the pivotal issue. And, another issue is whether or not the government find those courses to be accessible for delivery, which we think there is a strong rationale for it, but it would not be our decision to make.

And, the additional material that's in API form, does that have the same risk associated with it, in terms of not being produced with the security?

That's correct.

So, when would you be able to confidently deliver a drug that is produced with everything in place the way it's meant to be?

Our projected timelines, I'd say, extend out 18 to 24 months, after a signed contract.

18 to 24 months to get to the first delivery or to deliver all of it?

No, to get to the first delivery.

All right. Thank you.

Okay.

(Operator Instructions).

We'll pause a moment.

(Operator Instructions).

I'm showing no further questions in the queue. I'd like to turn the call back over to management.

Yes, again, this is Eric Rose, and we thank you for joining us for this conference call. I want to add two brief additional announcements. We have added two important members, we believe, to our Board of Directors. The first, William Bevins, who has been a Chief Officer of Panavision since June of 2009. He is a former Chief Financial Officer of Turner Broadcasting Systems. And, we have added him to the Board in the expectation of him bringing his considerable business expertise to our Board of Directors.

The second addition to our Board of Directors is Frances Fragos Townsend, who is a Senior Vice President of Worldwide Government, Legal and Business Affairs at MacAndrews and Forbes Holdings. Previously, she served as assistant to President George W. Bush for Homeland Security and Counterterrorism and chaired the Homeland Security Council from May 2004 until 2008. Frances, unquestionably, is a widely recognized expert in Homeland Security and Counterterrorism, and I think will be a very valuable addition to the Board, as well. That concludes our remarks for this update. We appreciate your continued interest in SIGA and look forward to bringing you further updates as we make progress towards our commercialization. Thanks.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the conference and you may now disconnect. Everyone have a wonderful day.