SIGA Technologies Inc (SIGA) 2021 Q2 法說會逐字稿

Welcome to the SIGA business update call. (Operator Instructions) As a reminder, this conference is being recorded.

Before we turn the call over to SIGA management, please note that any forward-looking statements made during this call are based on management's current expectations and observations and are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statements.

SIGA does not undertake any obligation to update publicly any forward-looking statements to reflect events or changed circumstances after this call. For a discussion of factors that could cause results to differ, please see the company's filings with the Securities and Exchange Commission, including, without limitation, the company's annual report on Form 10-K for the year ended December 31, 2020, and its subsequent reports on Form 10-Q and Form 8-K.

I would now like to turn the conference over to Phil Gomez, Chief Executive Officer. Please go ahead.

Thank you for taking the time to join today's call. Today, I'm joined by Dan Luckshire, our CFO. Dan and I are pleased to have this opportunity to provide a quarterly update on our business and upcoming objectives. On this call, I will provide a business update, and Dan will provide a financial update. We'll then be happy to take questions.

The second quarter of 2021 reflects our continuing momentum for international sales. We delivered approximately $7 million of oral TPOXX to Canada this quarter following $3 million in deliveries in the first quarter. We believe these sales represent our first success in a multiyear initiative to build an international business for oral TPOXX. In coordination with Meridian Medical Technologies, we continue to actively work toward turning opportunities into additional sales. Specifically, we are currently working with Meridian in a new foreign jurisdiction towards finalizing an order that would be similar in size to the initial orders received from Canada in 2020 and early 2021. The timing of the completion of the order has been and may continue to be impacted by the COVID-19 pandemic.

On this last point regarding timing, I would like to reiterate comments from the last investor call and provide some incremental color. While we are currently having success in delivering international orders this year, the pandemic has created a headwind, slowing the pace of activity, which we expect will continue in the near term, subjecting SIGA to the continuing risk of international business development activities coming to fruition slower than we would have anticipated pre-pandemic. As noted in the previous investor calls, it is clear to us that the impact of the COVID pandemic continues to stress countries' ability to organize and finalize funding, contracting, logistics and procurement activities that are outside of the COVID-19 response effort.

As we actively pursue regulatory approval for oral TPOXX with the European Medicines Agency and Health Canada, I would like to note that while some countries like Canada can purchase products like TPOXX by relying on FDA approval, others must wait for regulatory approval prior to purchase. This is the case with several large countries in Europe, so EMA approval would be an important step in the procurement discussion with these countries. Dennis Hruby, our Chief Scientific Officer, will provide an update on our next call on the regulatory review status in Europe and Canada. For now, I will summarize the current status by affirming that we continue to track the late 2021, early 2022 approval dates in both Europe and Canada.

With regard to the procurement activities in the United States, we continue to work with ASPR and BARDA staff on the performance of the 19C contract, and we continue to manage our supply chain to build inventory in anticipation and preparation for a procurement option exercise under the 19C contract. We are hopeful to receive clarity from the United States government in the near term regarding the procurement option exercise considering that the new Assistant Secretary for Preparedness and Response, Dawn O'Connell, was sworn into the role approximately a month ago. And we have seen some recent announcement of contract option exercises.

I'd like to note that, since 2013, we have delivered a total of more than 2 million courses of TPOXX with a 7-year shelf life to the Strategic National Stockpile under the Obama and Trump administrations, and we expect the Biden administration will continue to support this decade-plus-long partnership in order to ensure at a minimum maintenance of the current stockpile levels of 1.7 million courses of TPOXX for smallpox.

With respect to pandemic preparedness, I believe it's important to highlight that smallpox should not be the only orthopoxvirus for which the United States government as well as other governments prepare. In June, we announced that we provided TPOXX as a compassionate treatment for a monkeypox case in the United Kingdom. And last week, we announced that we have a collaboration with Oxford University to provide TPOXX as a compassionate treatment for monkeypox cases in the Central African Republic.

Additionally, in July, it was announced there was a monkeypox case here in Texas. These recent events in combination with recent reports highlighting the increase in monkeypox cases in Central Africa, which is likely due to the cessation of smallpox immunization in the '70s that had provided some cross-protection, highlights that monkeypox should be a threat that is top of mind for public health officials. Having an effective treatment would be critical to treat patients and control an outbreak in the U.S. or elsewhere.

In terms of how TPOXX fits within this discussion, we believe it has the potential to effectively treat several different orthopoxviruses, including monkeypox. The approval of TPOXX for smallpox, the current label for TPOXX, was based in part on efficacy data in monkeypox and nonhuman primates. And TPOXX had no serious drug-related adverse events during clinical development. Relying on that same data, SIGA has applied for a broader label, which includes monkeypox in regulatory filings with EMA and Health Canada, and we plan to seek the same broader labeling from the FDA next year.

I'll now pass the call over to Dan, who will provide a financial update. Dan?

Thanks, Phil. For the 3 and 6 months ended June 30, 2021, SIGA's revenue is approximately $8.7 million and $13.5 million, respectively. For the second quarter, approximately $6.9 million of revenue relates to product sales of oral TPOXX to the Public Health Agency of Canada. For the 6 months ended June 30, approximately $10.3 million of revenue relates to product sales of oral TPOXX to the Public Health Agency of Canada. In comparison to the 6 months ended June 30, 2020, international product sales have increased $8 million or more than fourfold.

Operating income, which excludes interest income, taxes and adjustments to the fair value of the warrants, approximated 0 for the 3 months ended June 30, 2021. For the 6 months ended June 30, operating loss was approximately $2 million.

Net income for the 3 months ended June 30, 2021 was approximately $0.2 million. For the 6 months ended June 30, net loss was $0.6 million. In turn, fully diluted loss per share for the 3 months ended June 30, 2021, approximated 0. And for the 6 months ended June 30, fully diluted loss per share was $0.03. At June 30, the cash balance for the company is approximately $98 million.

During the second quarter, SIGA repurchased approximately 1 million shares of its common stock for approximately $6.6 million. As of June 30, 2021, the company has cumulatively repurchased approximately 6.5 million shares of its common stock at a total of approximately $42 million since the inception of the share repurchase program in March of 2020.

This concludes the financial section of the call. At this point, I will turn the call back over to Phil.

Thanks, Dan. A few additional things I'd like to touch on before we turn to Q&A. We have approximately up to $450 million of TPOXX procurement revenues tied to existing contracts, and we continue to work to build on this space of procurement contracts with an international sales effort and initiatives such as the Cipla collaboration. Additionally, we believe the PEP program supports consideration of a larger U.S. government stockpile, which in turn would result in a larger U.S. government procurement contract. Also, as mentioned previously, we continue development of a liquid suspension pediatric formulation of TPOXX with support of BARDA.

As earnings generate cash, we will continue to examine the best use of our cash, including continuing share buyback and as well as potential investments or acquisitions that provide an opportunity to grow earnings, diversify our business and leverage our successful platform.

As we announced in our earnings press release this afternoon, the SIGA Board has authorized a new repurchase program, under which the company may repurchase up to $50 million worth of the company's common stock through December 31, 2023. Shares can be repurchased under this new repurchase program once the maximum amount allowed to be repurchased under the current program, which was authorized in March 2020, has been repurchased or once such program has expired.

Please note that similar to the current program, the timing and actual number of shares repurchased under the new repurchase program will depend on a variety of factors, including exercise of procurement options under government contracts, alternative opportunities for strategic uses of cash, the stock price of the company's common stock, market conditions and other corporate liquidity requirements and priorities.

In summary, we will continue to focus on key initiatives to finish out the year, such as securing a procurement option exercise for oral TPOXX under 19C contract, driving international business development and sales, advancing our PEP program, expanding our label with regulatory submissions in the EU and Canada and, ultimately, FDA, and expanding and supporting our oncology collaborations and development of a second smallpox antiviral with a novel mechanism of action.

This concludes our prepared remarks, and we will now begin the Q&A session.

(Operator Instructions) Our first question comes from the line of Maxim Jacobs with Edison Group.

So just a couple of quick ones. In terms of, like, the timing of U.S. revenues, at this point, are they most likely to be in Q4 rather than Q3?

So Max, thanks so much for the question. Good to talk to you. So we're not giving specific guidance on Q3 versus Q4 because we haven't gotten the procurement option yet. I would say, once we get that, we'll be able to provide a better sense of when deliveries would occur. So for that to happen, we need to have the procurement options.

And as we said, I think with the confirmation of Dawn O'Connell, we've seen some procurement options exercised, and we do have the benefit of we're starting to get until the end of the fiscal year when the government wants to make sure they complete those. We've also said we've been manufacturing in anticipation of delivery of products. And so we need to have the procurement option. We need to have product manufacturer, and we need to have the Strategic National Stockpile sites ready to receive products. So we can control the middle one, which is having product available, but we also need the other 2 things, including access to those sites.

And unfortunately, with Delta, the SNS sites are ramping back up, we believe, with some of the materials that are being used out of those. So we'll have to wait and see. But not providing guidance right now, but our goal is to provide product as soon as possible. And we've certainly been planning to do that as we said at the beginning of the year in the second half of this year. So we'll keep everyone updated on that. Another question, Max?

Yes. Great. That was very helpful. So my second question is just the recent kind of monkeypox cases, has that accelerated any of the discussions with international partners about stockpiling TPOXX?

Yes. So I think the impact has been on increasing interest in making sure they have a mitigation for orthopoxviruses. Obviously, we're not approved yet for monkeypox. But I think when you look at the landscape and the fact that we filed for regulatory approval, countries are concerned about smallpox. But now with the cases in the U.K. and others that have shown up lots of concern, they want to be prepared if something shows up on their shores with monkeypox. So I think it has added another dimension. It's added an urgency and has added a very tangible public health impact that occur -- could occur at really any moment in any country that has flights with people coming in that may bring the disease. So yes, I think it has increased urgency.

Our next question comes from the line of [Teddy Green], private investor.

Phil and Dan, thanks for the report. Good to see progress being made on multiple fronts. I have a couple of questions for you. So the first one is tied into what Max has just asked about monkeypox and EMA -- hopeful EMA approval end of '21, '22. And it's tied into what I have been reading and seeing a testimony about how governments want to prepare for future pandemics.

One of the things I continue to see is -- on a consistent basis is instead of identifying a specific virus, it's possibly identifying a viral family with high lethality. And obviously, orthopoxviruses I think, fit into that category.

So with that talk, and again, what Max just asked and an endemic -- an monkeypox endemic in Nigeria and Central Africa, if you do receive European Medical approval for that broad label, do you think that really kickstarts multiple countries taking a look at TPOXX and stockpiling it?

So I think we've certainly been working with Meridian to educate people on the broad set of national infections that occur, [Teddy]. So we've certainly been making people aware of the disease state and they know our regulatory filing around it. But I do think getting a formal regulatory approval would certainly be helpful especially with some of the larger countries in Europe, as I mentioned, some of which really aren't allowed to be there something unless it is approved in their regulatory district. So I think that will certainly be important.

I'd also echo your comments on pandemic preparedness. There's kind of a spectrum of potential antiviral drugs. There's always been the hope maybe you get a very broad-spectrum antiviral drug that hits multiple viruses. That's proved to be exceedingly difficult. Getting drugs for families of viruses seems to be the sweet spot, and we've really proved that, we think, with TPOXX in the animal models and hope to expand that with our regulatory filings. So we think that's an efficient, effective and very cost-effective way to prepare for these viruses. So I'd agree with you on that front as well.

Okay. Good. I'm glad to hear that. Okay. Another question I see in the press release, you kind of gave a little more color. I know it's kind of hard for you to do in regards to finalizing the foreign order. And you make a reference to -- it could be similar in size to the initial orders received in Canada 2020 and early 2021. So I just wanted to clarify, the way I look at order from Canadian military and in the public health of Canada, it looked like a total of 45,000 courses. So is that what we should be looking at for this potential foreign jurisdiction at this point in time?

Yes. And I think we're thinking of it more from an annual perspective in looking at what we're kind of delivering because, as we've said before, some countries will do a purchase upfront and then ask for deliveries year by year. Some will purchase just a year and then intonate that they're going to do purchase in multiyears. So think of it more as an annual one, but it's order of magnitude, that's what we're thinking.

I'd be happy with that.

Yes, go ahead. Go ahead, Dan. I'm sorry.

Maybe just to add some more color for [Teddy]. We meant this as an order, this is a country that tends to go year by year. And so just as kind of reference is the delivery to Canada in 2020 had a value of $2.3 million, and then the delivery in early 2021 was for approximately $3.4 million. Like this gives you a frame of reference for those orders.

Okay. Okay. Okay. I understand, what you actually delivered. Okay.

And just to highlight, again, this is a 1-year thing, the idea is that this country has a history of doing 1-year orders on a regular basis essentially, so.

Okay. Okay. Understood. Okay. Great. And then one more question, Phil. And obviously, it would be nice if Dennis was on the call, too. But obviously, there are now 2 antivirals approved for smallpox. One has a black box label. One does not. TPOXX does not. Tembexa does, and it has multiple serious adverse events on that -- in that label.

So -- is it -- should I look, or should investors in general look at the government taking a look at these 2 antivirus -- and again, it was mandated back in 2006, they have 2 different mechanisms of action. Is one -- should one be the standard of care and one not? And then also tied into that with one with the black box label warning, what is the progress on 357 at this point in time, too?

Yes. So it's a great point. I'll just comment on our drug that we were very pleased that we had a very high efficacy in the -- not even primate model with monkeypox and rabbits with rabbitpox. We did not have any serious drug-related adverse events in development. So I think we have a very good drug, and we continue to work with the government on the procurement strategies, and ultimately, they will determine what the outbreak use case strategies are and the like. But I'm biased, but I certainly like our drug and where we are. And so we continue to look to expand its label with PEP and to continue to expand the label with other orthopoxviruses. So stay tuned on that.

On 357, it is, as we've said before, preclinic lead optimization, we're doing some work there. And as we've said before, we're also seeking to gain some additional government support in that program. As you may have seen in the President's budget, they talked about continuing to look at increased efficacy and safety and drugs for smallpox and they did do an option for biofactors. So we believe we're well positioned, and we certainly think 357 is early, but we think it's another potential drug that could be brought forward. So we'll probably have Dennis on, as I mentioned in the opening remarks on the next call, and so we can also provide updates there. Thanks, [Teddy].

Okay. Great. And one final question. I don't want to take up all your time, but I did see the reference to other companies receiving option exercises in regards to the second option exercise for the 19C contract. I think you're referring to EBS. They received another option for ACAM beginning of July, and they expect to deliver the full option by the end of the year. Is that something we can hopefully look at, too? Again, I know the delivery schedule from the original contract, and I know what the has company stated in the last 2 quarterly filings. And I would think that the government is still going to stand by that, maybe even have a little bit more sense of an urgency. It seems like the smallpox portfolio is kind of picking up in regards to the SNS right now?

Yes. So as I mentioned in the response to Max, we're certainly working diligently and have been working in building inventory. We need that option. We also need to make sure the SNS is ready to receive it, and we can work through all the final things to be able to get things across the finish line. I'd be remiss if I didn't acknowledge COVID shortages here and there. We continue to fight little fires in our supply chain to make sure we stay on track. And so far, there haven't been any that impact at least our schedules, but we certainly want to be careful and acknowledge that things do and can pop up these days in the supply chain given how long the pandemic is going. So we'll certainly provide guidance as we get closer.

Our next question comes from the line of Paul Saunders with Hutch Capital.

Just a quick one for me. I noticed SG&A this quarter was a little higher, coming in at $5.2 million, where -- when it seems to typically be kind of in the 3s. So just wanted to get a little color on what caused that uptick and if that's what we should sort of assume going forward? Or it's just -- the increase of $1.5 million or so, is that just this quarter specifically? Or should we expect that going forward?

Yes. Paul, so I wouldn't characterize it as representing a trend. SG&A as well as R&D does move around. So I would not characterize that as necessarily starting a new trend. Stated that trend was -- if you sort of look at history, it has popped up at a little different times depending on the composition within the SG&A. One thing to highlight is that within SG&A, it includes the Meridian piece.

Oh, got it. Okay. That's what I was missing then. Okay. That's helpful.

(Operator Instructions) Our next question comes from the line of [Fadi Anton], private investor.

As a private investor, I'm more interested to know your long-term vision. So my question to you, how are you going to reach $1 billion in sales within the next 4 years. So part of my question as well, I'm interested to know, besides purchasing -- repurchasing shares, how are you going to use that cash on your balance sheet, the $98 million? Are you planning to acquire other companies with the same industry or a different industry in order to increase your sales? That's my question.

[Fadi], thank you for the question. We appreciate you joining and I appreciate you asking the question. We've been specific, we haven't talked about very specific revenue targets in the long term because we think we have a great product. We certainly have an ability to generate cash from that product, and we want to do what's best for our investors on what we do with that cash and how we look for opportunities. So having said that, we do have an active share repurchase program as we described. And we do look for opportunities to grow the business. We have looked for opportunities that would have earnings, that would be able to diversify our business. But we've not made specific targets around that because we don't want to bind ourselves into a circumstance where we have to deliver on acquisitions that don't make sense. So we've been very selective and very careful with our cash.

So broadly, I would continue to say we look at all uses for cash. We look at ways to return it to shareholders. We look at acquisition targets that could grow our business and provide an opportunity for us to diversify. We also think there's a growing involvement in the U.S. government in the pharmaceutical industry. So where there might be opportunities for us to expand on that, we'll certainly look at it.

But we've also talked about being disciplined about that. So our Board just authorized the additional share repurchase program that we talked about. And when we look at opportunities, we'll continue to look at infectious disease, where we have a lot of expertise; interactions with governments broadly, where we have a lot of expertise; and things that could add -- accretive to our revenue as we go forward. So we'll continue to look at that. So thank you for the question.

Thank you. And there are no further questions at this time.

Thank you, operator, and thank you, everyone, for joining today. We look forward to talking to you next quarter. Take care.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. .