SIGA Technologies Inc (SIGA) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the SIGA Technologies first-quarter 2011 business update conference call. At this time, all participant lines are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions). As a reminder, this conference is being recorded.

I would now like to turn the conference over to Mr. Todd Fromer. Sir, you may begin.

Thank you, Tranisha, and thank you all for joining us today. This is Todd Fromer, Managing Partner of KCSH Strategic Communications, Investor Relations consultant to SIGA Technologies. Hosting the call today are Dr. Eric Rose, Chief Executive Officer and Chairman, and Daniel Luckshire, Chief Financial Officer. Today's call is being simultaneously webcast and will 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.

Before we begin today, I want to remind everyone that this afternoon'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 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 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 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 or safe in subsequent preclinical or clinical trials; SIGA or its collaborators will not obtain 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 patent protection for its products and any challenge to SIGA's patent and other property rights if adversely determined could affect its business and if -- 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; BARDA may not complete the procurement set forth in its solicitation for the acquisition of smallpox antiviral for the strategic national stockpile or may complete it on different terms; third parties may protest contracts awarded to us through an RFP process, which may cause such potential awards to be delayed or overturned; depending protests or another future protests may cause an contract award to us through the RFP process to be delayed or overturned; 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 its research or its products; and the effect of federal, state, and foreign regulation on SIGA's businesses.

More detailed information about SIGA and its 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 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 those documents free of charge from SIGA.

Forward-looking statements speak only to the date that 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 like to turn the call over to Dr. Eric Rose. Eric, the floor is yours.

Thanks, Todd. Good afternoon and thank you all for joining us for our first-quarter earnings call. As usual, I will offer brief prepared remarks and Dan Luckshire, our CFO, will review the financial results. We will then open the call and take your questions.

Let me start by providing a quick update on the BARDA request for proposals, something I know is of interest. Many of those on the call today are aware that BARDA has recently announced their intention to negotiate a sole source contract with SIGA. Consistent with our long-standing policy relating to BARDA, we will not comment on our ongoing discussions with BARDA concerning its pending RFP beyond reiterating our prior announcement that the RFP calls for procuring 1.7 million therapeutic courses of smallpox antiviral drug with options for up to 12 million additional courses. We will not provide additional information at this time.

Now I would like to discuss our programs. With regard to ST-246, we have now completed four nonhuman primate studies to date and we are in the midst of comprehensive data analysis that will support a robust study report to the FDA. The purpose of the report is to establish a final decision on the human dose we will use to seek final approval.

We are targeting the third quarter for final human dose selection. Once we establish a definitive human dose, we will be able to move on to the necessary pivotal safety studies.

As mentioned in the earnings call two months ago, the pivotal safety studies will include a large safety trial with roughly 430 subjects and a small cardiac repolarization study. The purpose of the first study is to expand the sample base and safety studies that have already been conducted. These studies must be completed before filing new drug application with the FDA.

Finishing the dosage topic before I move on, it's important to note that the selection of a dose for ST-246 can also affect the timing of the commercial validation campaign, especially with regard to our final packaging. So there are a couple of good reasons to finalize the choice of dose for ST-246.

Moving into a discussion of other components of our antiviral pipeline, I want to spend the remainder of the business update talking about our dengue program. Among our preclinical programs, dengue stands out as being the furthest along and addressing the largest potential market, both the biodefense market and our commercial market.

With regard to dengue, I will first remind those listening that we have identified two compounds in our dengue development work, both of which have demonstrated activity against the virus in mouse models. We started to choose one of those compounds as our lead through medicinal chemistry and preliminary toxicology evaluations.

In the coming months, we plan to pick a lead and commence preclinical studies. If we make progress in the preclinical studies, then we will be targeting the summer of 2012 for a pre-IND meeting with the FDA.

In sum, we view dengue as leading the next wave of antiviral development at SIGA and with this backdrop, I want to highlight that we recently received a $6.5 million grant that we have not previously announced from the National Institute for Allergy and Infectious Disease for the continuing development of the dengue antiviral.

I think it's worth pointing out that this dengue work points out the numerous capabilities that SIGA has. The drug candidates generated here came from our own libraries using our own medicinal chemistry, using our own molecular virology, using our own high throughput screening mechanisms, and identifying targets that were at least in some -- for one of the drugs, a previously unknown antiviral drug target.

So we are very proud of the capabilities that we have. This is the same technology that begat ST-246. We view it as enabling the next generation of SIGA products as well. And to have gotten an award of this size through the highly competitive RO1 mechanism we think is indicative and validates the robustness of our scientific and pharmacologic pursuits.

We are looking forward to working with the NIAID once again on another project that can address the needs for a therapeutic solution to a global viral threat.

At this point, I will turn over the call to Dan for a discussion on the financials. Dan?

Thank you, Eric. As I get started, I would like to remind you that we released our financial results for the first quarter and filed our Form 10-Q at the close of the market today. Both the press release and the quarterly report are available on our website for your review.

Going through the financials, I will provide a brief highlight of our results for the quarter ended March 31, 2011 and will file with details.

For the quarter, revenues were $1.7 million compared to $5.1 million last quarter. Net operating loss this quarter was $6.5 million compared to a $3 million loss in the first quarter of 2010. Including the impact of adjustments to the warrant fair market valuation, which is a non-operating item, the net loss for the quarter was $4.7 million compared to a $4.9 million loss for the first quarter of last year.

On a per share basis, the annual GAAP net loss for the first quarter was $0.09 a share compared to $0.11 a share in the corresponding period last year.

Now let's move to the details. On the revenue side, revenues decreased $3.4 million for the quarter. The decrease is mostly attributable to reduced grant revenues for the ST-246 program. As you are aware, grant usage can and will move up and down depending on the nature and magnitude of R&D activity at any given time. Right now we are going through a time period when grant usage is relatively low. The reason grant usage has slowed this quarter is that resources have been focused on low-cost data analysis and preparation of submitting a study report to regulatory authorities.

On the expense side, let's start with R&D expenses, which tend to track with revenues. For the quarter, research and development expenses were $3.6 million, a decrease of $2.2 million over last year. As is the case with revenues, the ST-246 program was a leading contributor to the decrease. Vendor-related expenses for this program decreased $3 million over the comparable quarter last year. Offsetting this decrease in the ST-246 vendor expenses was a period-over-period increase in employee-related compensation expense of approximately $0.5 million. This increase was mostly due to the hiring of additional R&D personnel.

Headcount has increased to 61 from the low 50s in the first quarter of 2010.

Focusing now on SG&A expenses, these expenses were $4.3 million in the first quarter, an increase of $2.3 million over last year. The increase in these expenses is mainly attributable to two things. Nearly $1 million of non-cash stock-based compensation and $722,000 increase in legal expenses. Employee cash contribution has also increased approximately $400,000 over last year's first quarter.

Rounding out the expense discussion is patent preparation. For the quarter, patent preparation expenses were $342,000, a small increase over the first quarter last year.

At this point, having gone through the income statement, I would like to spend a minute on our balance sheet. As of March 31, cash, cash equivalents, and short-term investments were $18.8 million compared to $21.3 million in the year-end. We continue to believe these balance sheet assets will continue to fund our planned operating activities for 2011 and into 2012.

With this, I would now like to open up the line for questions.

(Operator Instructions) Jason Kantor, RBC Capital Markets.

A quick question for you. Could you give us some sense of administratively what the next steps are after that? Can (inaudible) letter come down? Is it -- can somebody protest it based on that? Can we expect that there would be a signing of a contract very shortly after that May 10 date or is this -- where does this fit in the process?

Jason, thanks for joining us. We really don't think we can comment on the process today.

Okay. You can't give us any guidelines as to what that letter actually means other than what it says in terms of --?

I think that actually the posting is quite explicit in what it says. We are not looking for any Talmudic interpretation of it and don't offer any. I think it means what it says.

Okay, terrific. Best of luck. I'm looking forward to the announcement.

Greg Wade, Wedbush.

Thanks and good afternoon. Thanks for taking my questions. Two questions, one for Daniel. With respect to the potential contract, can you just let us know what the upfront payment is associated with the $500 million in guaranteed demand and whether that fits into your cash runway guidance that you provided?

And then secondly, Eric, with respect to the existing API that you have on hand, you described on the last call, is potentially being suitable to manufacture the first commercial product for the Company. Has there been any progress in negotiating with the government in terms of whether that would be acceptable to them? Thanks.

Greg, this is Dan. In terms of our cash guidance about having sufficient resources for the remainder of the year, that is on an as is basis.

Okay, great. And then with respect to the -- is there an upfront payment associated with the guaranteed component of the contract?

Reiterating what Eric has said, it's not really in a position to comment.

Understood.

I'd say the same answer really with regard to the API. It's -- we are engaged in a process with BARDA and we are not going to comment in any further detail at this point.

I understand, Eric. Thank you so much for taking my questions.

Nathan Cali, Noble Financial.

A couple of the questions have been answered already. Thanks for taking the questions today, though. As far as your cash burn, you are expecting cash until the end of the year. Will you guys consider going to the capital markets sometime in 2011 as that gets closer?

Yes, it's to the degree that we wouldn't want to wait until the last minute to the degree that resources start getting low yes, we would look at it. But right now we are comfortable in the near future. And so we will see what the near future holds and we will evaluate it on a regular basis.

And then in our view, we don't see any other competitors out there. The only one we saw that could potentially compete for this award was Chimerix. Do you guys see anybody else out there that's developing a smallpox antiviral that hasn't been discussed before?

We are not aware of any others.

Okay, great. Thanks.

David Atterbury, Whetstone Capital.

Yes, can you guys hear me? I know you can't discuss the contract, but can you reconfirm the gross dollar amount of the contract with BARDA?

We're not going to comment on that, Dave. That's part of a contract.

Okay, so just we can't assume that -- okay, so we can maybe assume that it's the same numbers from before, but you can't convert -- confirm it's the $500 million and the $2.8 billion for 12 million doses?

We're not going to comment, sorry.

Okay.

(Operator Instructions). I am showing no additional questions at this time. I would now like to turn the call back over to Mr. Todd Fromer for any further remarks.

Thank you, everyone, for joining us today. We look forward to updating you again on SIGA's business next quarter. You can disconnect your lines now.

Ladies and gentlemen, thank you for your participation. That concludes the conference. You may disconnect and have a wonderful day.