SIGA Technologies Inc (SIGA) 2012 Q1 法說會逐字稿

Good day, ladies and gentlemen and welcome to the SIGA Technologies quarterly business update. (Operator Instructions) As a reminder, today's conference is being recorded. I would now like to turn the conference over to your host, Todd Fromer, Managing Partner, KCSA Strategic Communications. Please begin.

Thank you and thank you all for joining us today. This is Todd Fromer, Managing Partner of KCSA Strategic Communications, Investor Relations Consultant to SIGA Technologies. Hosting the call today are Dr. Eric Rose, Chief Executive Officer and Chairman; Daniel Luckshire, the Chief Financial Officer and Dennis Hruby, Chief Scientific Officer.

Today's call is being simultaneously webcasted and is available on SIGA's website. A replay of the call will also be available in a reported format and on the Company's website. Before we begin today, I would like to remind everyone that this conference call contains statements that can constitute forward-looking statements. A Safe Harbor Statement covering this call will be read at the end of the call and can be found in our press release for financial results for the first quarter ended March, 2012.

With that said, I'd like to turn the call over to Dr. Eric Rose. Eric, the floor is yours.

Thank you, Todd. Good afternoon and thank you all for joining us for our business update call. During this call we will provide you with a business update and then we will open the call for questions.

With regard to the ST-246 program, we continue to perform the operational activities that were set in place in the fourth quarter of 2011 and are arranged in coordination with BARDA. As discussed in prior calls, these activities are scheduled to lead to product deliveries by the end of the first quarter of 2013. We expect to deliver the full 2.0 million courses under the contract within 24 months of the date of initial delivery.

The size and exact timing of each delivery will be determined in the future based on a variety of factors. Once we meet the 500,000 course delivery threshold, as noted in the contract, we'll be able to invoice BARDA for payment of all amounts then due.

In addition to executing the operational plans for delivery of ST-246 oral therapeutic, we've also been busy on the development front, which continues to be a key focus for us. Beyond our commercial and regulatory development work on the oral formulation of ST-246, we continue our IND-enabling work on the intravenous IV formulation of ST-246. We're targeted an IND filing for this formulation as early as the fourth quarter of this year.

Additionally, our BARDA contract includes initial funding for a pediatric formulation. Work on the IV in pediatric is important, because it seeks to address the unmet needs of particularly vulnerable populations.

We continue to make progress on the regulatory front as well. We were discussing the FDA various matters relating to our eventual marketing approval application, including final efficacy testing that would support our application. It would be premature to say anything else at this point.

Beyond our development work on ST-246, we continue to focus on progressing, enhancing and, whenever commercially appropriate, accelerating our cross section of preclinical development programs. I've asked Dennis Hruby, our Chief Scientific Officer, to provide a quick update today on our preclinical development programs. Dennis?

Thank you, Eric. As mentioned, beyond ST-246 we have a diverse mix of preclinical programs that build off our expertise in virology and high throughput screening, with a focus on both bio-threat agents and emerging pathogens. These programs are at varying stages of discovery or development.

Our discovery program continues to seek lead molecules against agents that have been identified by our federal partners as high priority targets. Our development programs include a broad-spectrum antiviral targeting Lassa Virus, and other Category A arenavirus pathogens, and antivirals against Dengue, Ebola and influenza.

With respect to the Lassa Virus program, we have conducted a very successful chemistry authorization program and we're in the final stages of selecting a clinical lead. The availability and timing of future federal funding will continue to drive the pace of Lassa developments going forward.

Within the Dengue program, we have multiple drug series' that we view of attractive. One series in particular is viewed as the lead series. Right now, these series' are formulated for parenteral administration.

We believe oral administration could provide a much larger commercial opportunity. And as such, we're investing time into pursuing new candidates that would permit oral administration in addition to the candidates currently under review that appear to require parenteral administration. We believe this is time well spent and we believe process can improve the opportunity for commercial success down the road.

In addition to the laboratory work, our scientists continue to conduct due diligence activity on potential in-licensing opportunities and they continue to monitor federal grant and contract opportunities to identify opportunities to obtain nondilutive funding to advance our research and development programs.

Eric?

Thank you for the update, Dennis. At this point I'd like to hand the call over to Dan, who will provide a quick update on our financial position and the PharmAthene litigation.

Thank you, Eric and yes, my update will be brief so that we may proceed to questions.

Regarding our financial position, we had $42.6 million of cash or cash equivalents on our balance sheet as of March 31st. This compares to $49.3 million of cash or cash equivalents at December 31, 2011. As is evident, we continue to maintain a substantial cash position, which can be used to fund performance of the BARDA contract, research and development activities, and business operations.

With respect to the PharmAthene litigation, there has been no change since our last investor call. As a reminder, both SIGA and PharmAthene have submitted their own separate definitions of net profit to the court. There are substantial differences between the parties' approaches to net profit and the parties' views on the appropriate implementation of the Chancery Court's post-trial ruling.

In clarity, with respect to the impact of these rulings on SIGA, we'll have to await a ruling by Vice Chancellor Parsons on this issue. Once the court enters a final judgment implementing a net profit definition, we will evaluate this judgment and determine the best course for SIGA going forward, including the possibility of an appeal of the judgment to the Delaware Supreme Court.

This concludes our prepared remarks. Thank you for attending this business update and we will now open the line for questions.

(Operator Instructions) Jason Cantor, RBC Capital Markets

Thanks for taking the questions. Could you give us some sense of sort of operationally what progress you've made towards the contract and I guess, are you continuing to be on track for delivering? And if you could, give us any updates that you might have on your thinking as to what you need to do to get the FDA, to get a submission into for FDA approval for ST-246?

Well, let me take that in two parts. I'm going to ask Dan to address the issue of where we stand in terms of contract execution, because we're making good progress there and let me speak just to the FDA approval issue.

Animal Rule approval, needless to say, is a complicated and difficult place to be in the regulatory universe. We feel that we've made very, very good progress with them in terms of being able to outline, at this point, a path for development of ST-246 that should allow us to make a submission, ultimately, for full FDA approval. Beyond the EUA mechanism, that's what will be the initial mechanism used for our drug stockpiling by the Strategic National Stockpile.

Dan, you want to address where we are operationally?

Yes. The quick answer on operations is yes. To confirm, we are still on target in terms of we're focusing on starting to deliver by the end of the first quarter 2013. And in terms of what needs to be done, we got to keep doing the detailed execution activities. We have three contract manufacturing organizations and we have a product that going to go through different parts of the supply chain and manufacturing chain and we just got to keep executing. I know it's no overly exciting, but it's very important to us and that's why it has been, is going to be our focus, for the remainder of 2012.

Then, when you think about the 500,000 doses and if you start making deliveries sometime in Q1, is it your anticipation that you would essentially make up that amount delivered in total at that time, or would that be spread out over a longer period of time? When do you think you would book first revenue, I guess?

Yes, well, we always address these calls in terms of cash flows, but in terms of hitting that threshold, our expectation is that once we start delivering, we'll be delivering on a pretty consistent basis, probably at least once a quarter if not more. I would not expect, at this point in time, that that very first delivery to be 500,000. We'll have to do a series of deliveries to reach that threshold.

Thank you.

Nathan Cali, Noble Financial

Hey guys, thanks for taking the questions. As far as the on-pace to deliver Q1 2113, do you know if and I don't know if you already answered this question, will you be able to deliver all of that in the first quarter? I know you said it's going to be done in trenches, but will it all be completed in the first quarter or?

What do you mean by "if"? Do you mean 500,000 courses, Nathan?

Yes.

Well, no --.

Because that's what's needed before you guys receive payment, is that correct?

Correct and referring back to the prior question is that it's not our expectation that that first delivery will be 500,000. We expect it will be less than 500,000 courses, so to hit the threshold, there'll be a series of deliveries.

Okay and so do you think that'll be done over the first quarter or you don't have guidance on that yet?

We're not giving specific guidance on the pace and size of deliveries.

Okay.

What we're telling you is that we plan to start delivering by the end of the first quarter 2013 and then, after that point, we expect that deliveries will be made on a relatively consistent basis and we would expect that at least one delivery will happen each quarter, if not more per quarter.

Okay.

We'll complete the contract over 24 months after that initial delivery.

Okay, that's great. Congrats on the progress there.

Yes, to be clear, within 24 months is delivering the full 2 million courses.

Right.

And then, with respect to the litigation where SIGA is expected to receive $40 million in revenues prior to any profit split between SIGA and PharmAthene, is that $40 million part of what you already received, or is that $40 million in revenue?

Yes, on that, that sort of goes to the litigation and some of the issues being ligated right now, so we're not really going to directly comment on that.

Okay. Any expectations on the final opinion by the judge on the profit split?

We're not going to comment.

We're not going to comment on that, no.

Okay and then to my knowledge, I think, if I have this correctly, there's 30 days to submit for an appeal and you were allowed an extension up to an additional 15 days. Is that the timing?

It sounds right, but we --.

Yes. We're not going to get into the mechanics. So first things first is we're still awaiting word from Judge Parsons on the net profit definitions.

Okay. Alright, thanks a lot, guys, for taking the questions.

Sure.

Thank you.

P.J. Solit, Potomac Capital Management

Thank you. Most of my questions have been answered, but I was wondering if you could quantify at all regarding the definition of net profits. You said that the two sides have substantially different methodologies or numbers. Could you quantify that all in terms of is it more or less than a 20% difference, or just put any numbers on that?

I'm sorry. I can understand your interest in it, but we're just not going to comment on it. If you want to go through it, the difference is that those papers have been filed with the court, but we're not going to get into those types of details.

Okay. Thank you.

Joaquin Horton, Sterne, Agee & Leach, Inc.

Good afternoon, guys.

Good afternoon.

Hey, Joaquin.

A question. We do expect some milestone payments. Could you give me a timeline on the next milestone payments here this year?

Sure.

Yes, so we are targeting the milestone payment for the labeling plant for this summer and then that's a $12 million milestone and then there's an $8.0 million milestone for approval of our commercial validation report and we're targeting early 2013 for that.

Okay. Is there no milestone for filing an IND for the IV formulation?

Right, so for that, that ties into the timing for the development plan. That's a $20 million milestone and once we have a little more specificity on the development plan we'll be able to come back to you with a better timing, more detailed timing.

Okay. Back in March, or maybe it was before March, the BARDA announced that they were going to issue a BAA, broad agency announcement, on three areas of biodefense, etc., wherein they were going to give some grants. Have we heard anything from BARDA lately?

Dennis, do you want to comment on that?

Yes, Joaquin, this is Dennis. That -- we've asked. They're still delayed in putting that solicitation out. It's still expected to come out shortly. We check on a daily basis and as soon as it comes out and we can see what the topics are we will certainly formulate contract submissions, if and when they're appropriate.

Okay. Now, regarding the FDA, at one time you said we were expecting a letter from the FDA kind of giving us a clear path to approval. Have we -- I know there's been a lull in the negotiations back and forth, but have we finally reached that milestone?

Joaquin, this Eric. Yes, we've had I think very good ongoing communication with the FDA, both verbally now and expected written communications from them, so we're very happy with our level of communication with the FDA.

Great. Thanks. I'll get back in the queue.

Good.

I'm not showing any other questions at this time.

Great. Thank you all. As a reminder, everyone, this call included 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 of 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 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 efficient legal rights in its products, including patent protection for its products.

Any challenge to SIGA's patents and other proprietary rights, as is 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 the smallpox antiviral for the Strategic National Stockpile or may complete it on different terms. Any contractual award we may receive to supply a 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 marketing 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 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, 2011 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.

It's been a pleasure having you as our guests today for the SIGA quarterly business update. Look forward to seeing you next quarter. You may now disconnect all of your lines.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This concludes the conference. You can now disconnect. Good day.