SIGA Technologies, Inc. (NASDAQ:SIGA) Q2 2024 Earnings Call Transcript

SIGA Technologies, Inc. (NASDAQ:SIGA) Q2 2024 Earnings Call Transcript August 1, 2024

Operator: Welcome to SIGA Business Update Call. 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 statement to reflect events or change 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, 2023 and its subsequent reports on Form 10-Q and form 8-K. With that, I will turn the call over to Diem Nguyen, Chief Executive Officer of SIGA. Diem?

Diem Nguyen: Good afternoon, everyone, and thank you for joining today’s call and the review of our business results for the second quarter of 2024. I am joined by Dan Luckshire, our Chief Financial Officer, and we appreciate this opportunity to provide an update on our company. After the update, we’ll be happy to answer your questions. I am pleased to report that SIGA has continued to generate product revenues that outpaced revenues in the comparable periods last year. Product revenues for the three months and six months ended June 30, 2024, were $21 million and $45 million, respectively. This surpassed product revenues of $1 million and $7 million, respectively, for the periods in 2023. These strong results are reflective of SIGA’s staying power.

Our capital management activity over the past several years, including substantial special cash dividends reflects and has been made possible by this strong long-term performance. Our focus on long-term performance is critical due to the nature of SIGA’s business and the inherent quarter-over-quarter fluctuations. We believe the financial results for the first six months of 2024 supports an important positive long-term trend. Our sales reflects a diverse mix of oral TPOXX deliveries to the US Strategic National Stockpile, or SNS, the US Department of Defense, and 11 international customers, as well as IV TPOXX deliveries to the SNS. Looking ahead, we anticipate a continued diversification of our revenue base will be important for maximum long-term performance.

Consistent to — with what we said last quarter, we expect 2024 to be another year of strong product revenues. As a reminder, our 2023 product revenues were the highest achieved over the past five years. Two weeks ago, the US government exercised its procurement option under the 19C BARDA contract for the delivery of approximately $113 million of oral TPOXX. We plan to work with the US government on the timing of delivery and currently anticipate deliveries will begin within the next 90 days. We foresee a meaningful portion of this order will be delivered before year-end, supporting our expectation that product revenues will again be substantial this year. It is our view that this award illustrates the US government’s belief that smallpox continues to be a threat.

It also demonstrates its ongoing commitment to maintaining a robust stockpile of smallpox antivirals to help ensure the health security of American people and an issue that is consistently garnered bipartisan support. TPOXX has a strong safety profile based upon preclinical safety and toxicology data, Phase III clinical data in healthy volunteers, as well as clinical observations. Over 1,500 mpox patients have been enrolled in clinical trials to assess the efficacy of TPOXX for the treatment of mpox, utilizing TPOXX and its matching placebo provided by SIGA to trial sponsors at no cost. As a result, we anticipate it will be a preferred antiviral treatment in the event of an outbreak. Our attention is now firmly set on securing the next procurement contract with the US government.

Q&A Session

Our team continues to be actively engaged with a broad range of government officials as we prepare for a request for a proposal, or RFP, which can be issued by the Administration of Strategic Preparedness and Response at any time. While we wait for this next RFP, there are a number of factors that give us confidence. First, earlier this year, Congress approved the budget for the US government, which includes another substantial increase in the federal budget for countermeasures, including the SNS. This funding outcome underscores the government’s ongoing commitment to preparedness and response. Second, the current public health environment, including the Clade I impact outbreak in the Democratic Republic of Congo or the DRC, highlights the heightened pandemic risks and continued need for nations to be response-ready.

This includes the timely procurement of effective therapies like TPOXX. And third, we have a long-standing partnership with the US government to provide a critical countermeasure against one of the world’s most dangerous bio-threats. As a reminder, smallpox is one of only six diseases considered a Category A threat by the CDC, and herd immunity is waning among our population. In fact, TPOXX was among the first novel small molecule therapy delivered to the SNS under Project BioShield and was developed in collaboration with BARDA. All in all, based on our conversations with the government officials as well as other SNS contracts to procure medical countermeasures, we are confident that the government is receptive to a new, long-dated contract, most likely between five years and 10 years, and the aggregate value of this contract should surpass the aggregate value of our current contract, under which most options have now been exercised.

As a frame of reference, the current 19C BARDA contract signed in 2018, has a procurement value of $546 million. This is an exciting time for SIGA. As I said earlier, the health insecurity of Americans is an issue that continues to garner bipartisan support. So while we wait for the receipt of this — our next RFP, we are keeping our focus on our longer-term goals. We have the financial strength to advance our business with current and potential customers outside the US while remaining ready to collaborate with the US government once it initiates the RFP process. Dan will provide further details on our financial position shortly. In summary, our balance sheet is robust with no debt. Our cash flow remains strong and we have exercised prudent cash management.

This allows us to recently pay a special cash dividend in April. Moving on, we’ve also made progress in several other key areas. In April, we announced an amendment to our International Promotion Agreement with Meridian Medical Technologies, under which SIGA began driving promotional activities outside the US for oral TPOXX starting June 1. Since then, our team has strengthened relationships with key global customers, and we are confident these efforts will lead to growth over time. In June, we announced an agreement to sell TPOXX to the member states and Association of Southeast Asian Nations. This agreement is a foundational step in a highly populated region for strong collaboration in the future. In Japan, we continue to have productive conversations with our partner, Japan Biotechno Pharma and regulators on the new drug application for TPOXX for the treatment of smallpox, mpox, cowpox and complications due to the vicinity of virus.

Based upon the standard review timeline for the new drug application, we expect a final regulatory decision by early next year. If approved, we anticipate the TPOXX will be placed in National Stockpile ready for deployment in the event of an outbreak. We continue to pursue the expansion of TPOXX approvals in new indications such as PEP and mpox and formulations. First, on PEP, as I stated before, we believe that TPOXX has a potential benefit against smallpox and a post-exposure prophylaxis. Currently, most of — much of our work has been focused in the completed TPOXX JYNNEOS safety and immunogenicity trial to evaluate TPOXX when administered together with JYNNEOS. As a reminder, this trial was requested by the FDA because of the likely use of TPOXX and JYNNEOS together in events of an outbreak.

The trial was designed to test this drug-vaccine combination to ensure there would be no impact to patient safety or vaccine immunogenicity. As a reminder, the data from the trial is supportive of the safety objective. Regarding immunogenicity, we are continuing to work with the CDC in consultation with the FDA to complete an analysis of samples collected to support the immunogenicity objective. At the same time, we are working on our supplemental NDA submission and targeting submitting it within the next 12 months. Turning to the ongoing mpox trials. The trial sponsors continue to make significant progress. The NIAID PALM 007 trial in the DRC has now completed enrollment. We anticipate release of top-line data in the coming weeks. The NIAID STOMP trial has seen considerable growth with 515 patients enrolled as of July, up from 350 reported from our last call.

Mpox remains a global threat, and particularly in the DRC, where cases continue to rise. To support investigators and health agencies, in 2022, we donated over 500 courses of TPOXX capsules and its corresponding placebo for the randomized clinical trial PALM 007. Recently, we donated another 100 courses to ensure patient access continues during data analysis. We’re also working to support broader access programs in Africa. Additionally, the US government has distributed approximately 40,000 courses of TPOXX in response to the 2022 mpox outbreak through the CDC’s compassionate use program. We continue to monitor this situation actively, providing assistance when possible to achieve the best possible outcomes for mpox patients. In summary, our company is strong, profitable and well-positioned for the future and supported by the following four pillars.

Number one; we have a well-crafted strategy that is yielding results. Two, we have a prudent approach to capital management which has afforded us the opportunity to pay significant special cash dividends. We have a valuable TPOXX franchise that fulfills our critical requirement, established by the US government to ensure the country is prepared in the event of a natural, accidental or intentional outbreak. And four, we have a resilient team with proven operational capabilities who are executing on our strategy with urgency and effectiveness. Combined, we believe these pillars will enhance shareholder value over time and improve public health. With that, I’ll turn over to Dan to review the financial results in more detail.

Daniel Luckshire: Thanks, Diem. As noted earlier in the call, SIGA’s product revenues through the three months and six months ended June 30, 2024, were $21 million and $45 million, respectively, which surpasses product revenues of $1 million and $7 million, respectively, for the comparable period last year. Product revenues for the quarter were primarily related to approximately $18 million of IV TPOXX sales to the US government. For the six months ended June 30, 2024, product revenues reflected diverse mix, including approximately $15 million of oral TPOXX sales to the US government under the 19C contract, approximately $11 million of international oral TPOXX sales to 11 countries, approximately $1 million oral TPOXX sales to the US Department of Defense, and the previously mentioned approximately $18 million of IV TPOXX sales to the US government.

In addition to product revenues, the company had research and development revenues of approximately $1 million and $3 million for the three months and six months ended June 30, 2024, respectively. Pre-tax operating income, which excludes interest income and taxes, was approximately $1 million with the three months ended June 30, 2024. For the six months ended June 30, pre-tax operating income was approximately $12 million. In comparison, there was a pre-tax operating loss for the three months and six months ended June 30, 2023, of approximately $5 million and $7 million, respectively. Net income for the three months ended June 30, 2024 was approximately $2 million. For the six months ended June 30, net income was approximately $12 million. In turn, fully diluted income per share for the three months ended June 30, 2024, was $0.03 per share, and for the six months ended June 30, fully diluted income per share was $0.17.

At June 30, 2024, the company continued to maintain a strong balance sheet with a cash balance of approximately $107 million and no debt. On April 11, SIGA paid the previously disclosed special cash dividend of $0.60 per share, which amounted to an approximately $43 million payment to shareholders. Looking forward, as Diem mentioned earlier in the call, we are working diligently to continue our positive momentum. As such, we believe 2024 is lining up to be another year of strong product revenue performance. This concludes the financial update. At this point, I will turn the call back to Diem.

Diem Nguyen: Thanks, Dan. Leveraging our achievements from 2023 and the positive momentum generated so far this year, we believe SIGA is poised for continued growth and innovation. We remain focused on advancing our strategic goals, including securing a new contract with the US government, optimal capital management, and enhancing our TPOXX franchise. We are confident that this will deliver the value to our patients, partners and shareholders over time. Now, I would like to open the call to Q&A. Operator?

Q – Soo Romanoff: [Technical Difficulty] Hello?

Diem Nguyen: Yes.

Soo Romanoff: Hi, sorry. I had some technical difficulties here. Thank you for taking my question. Congratulations on another strong quarter. I have a multi-part question and these are mostly just to garner a little more color. It sounds like you’ve delivered — it was nice to hear the $113 million BARDA exercise for the remaining part of oral TPOXX come across. It sounds like you’re going to deliver a meaningful portion in 2024 despite the manufacturing bottlenecks. Any more color on the timeline would be helpful. The second part would be could you provide a sense of when BARDA will exercise the remaining $26 million IV TPOXX? I believe the July 23 IV TPOXX order was yet to be delivered. And the last part is could you provide an update on the US government negotiations? I believe we’re looking at some kind of recurring arrangement.

Diem Nguyen: Thank you, Soo. If you can hear me, I’m going to try to tackle your questions in three parts. The first question relates to the recent BARDA exercise of our remaining option and when do we anticipate the delivery. And what I would state here is that we’ve been proactively coordinating with our supply chain in preparation for the US government’s exercise of this option under the current BARDA contract. And we are working with our partners to produce and deliver oral TPOXX on schedule that makes sense for our customer, the US government. We are confident in our ability to deliver and expect to start shipping within the next 90 days with a meaningful portion of this to be delivered this year. We are collaborating with the US government to determine the optimal timing and therefore cannot be more specific at this time.

As it relates to your second question, you had asked about the IV TPOXX option. And just to give you a little bit of background, the $18 million that was discussed today of the IV TPOXX sales in the second quarter relates to the 2022 order. Once we finish this 2022 order, we will then coordinate with the US government and our supply chain on the timeline for producing and delivering on the 2023 order. Based on what we know today, we do anticipate that BARDA will exercise the final $26 million option in 2025. I guess the last question that you had, Soo, was an update on the US government negotiations. As we mentioned during our prepared remarks, Soo, we have been having discussions with a broad range of government officials. From these conversations, there is a clear bipartisan support in helping to ensure the health security of the American people.

And given the increased geopolitical risk globally and mpox outbreak in the DRC, we are prepared to respond when ASPR is ready for the start of that RFP process. As mentioned, our aim is to secure a long-term contract with more regular purchases, and that — this contract reflects the value of TPOXX that’s provided today as well as in the future. We do believe the US government is open to a long-term contract, potentially up to 10 years, and one with a higher aggregate value than the 2018 contract.

Soo Romanoff: That’s great. If I can ask one more question, if you don’t mind..

Diem Nguyen: Sure, Soo.

Soo Romanoff: It’s good to see the — there’s a lot more interest, I mean, with the recent ASEAN country agreement for oral TPOXX. We touched on this a little bit, but any clarity on the size timelines would be helpful. And then also, I know you’re working with Meridian. Any kind of color on the fee structure economics for this new order would be kind of nice too.

Diem Nguyen: Sure. I’ll talk about the ASEAN agreement and Dan, you can highlight in terms of the Meridian economics. First, I want to really highlight that we are incredibly pleased with this agreement which was signed in June. This agreement further advances our strategy to expand access to TPOXX to even more international markets. Asia is a strategic region for SIGA. This contract represents an important step to a growing orthopoxvirus preparedness in the Asia region and does establish a footprint in a highly populated region. It also sets the groundwork for additional activity for the future. As we noted in our June release, we did receive a $3 million order from a new customer in the ASEAN region. We believe this is the first important step to larger collaboration as the ASEAN member states together represent a population of over 600 million people with a GDP of over $3.6 trillion.

And we have not disclosed the financial terms to date. However, as we have emphasized, we’re quite optimistic with this collaboration. Dan, would you like to talk about the Meridian amendment?

Daniel Luckshire: Yes, certainly. So we disclosed the original amendment earlier in the early June timeframe. And with that, what it did was it really allowed us to take over ownership of the international marketing and relationships. With the amendment, the goal was to ensure a very, very smooth handoff for the next period of time. So with that, there were some key countries and regions and we wanted to ensure, especially for the handoff, and that really concentrated in Europe, Australia and Japan. So it’s much more limited in scope than the prior arrangement. In addition, the fee is materially lower than the original fee. We do not disclose the original fee but it is materially lower and the current fee is in the high-single digits.

Soo Romanoff: That’s great. If you don’t mind if we can touch on the new mpox strain and the DRC, I know you touched on this also. It seems like the governments are pretty alert now. I mean, are we getting more inquiries from international markets? And then are the mpox — it sounds like the mpox trials are progressing and if we can expect the US filing to be made soon.

Diem Nguyen: Yes, maybe I can take on and I’ll start with just the more inquiries in the international market. Clearly, TPOXX or tecovirimat has the benefit of the anti-bio treatment for smallpox, which is quite important from the consideration from a public health security perspective and as such driving stockpile considerations from a preparedness perspective. The mpox outbreak in 2022 heightened the awareness of orthopox threats and has driven, certainly, international recognition, as well as the need to one address mpox outbreaks at a targeted level, but then a broader long-term consideration from a policy perspective from a smallpox stockpile. So while they’re a bit independent, when you think about how to look at the volumes and the preparedness requirements, they are intertwined in the consistency of increased orthopox threats, whether that’s naturally occurring, such as mpox, or whether it could be potentially intentionally driven from a smallpox outbreak perspective.

In particular, from 2022 to where we are today, we are facing another new mpox strain in the DRC, and we also share the concern of not only the rising number of mpox cases in the DRC but also the increased prevalence of the Clade I strain, which is much more legal than Clade II. Mpox cases have persisted over the past two years, including in the US, particularly in people who are not vaccinated and who — or who have only received one dose of JYNNEOS. As a quick reminder, mpox cases were concentrated in Africa in 2022 before spreading globally. This highlights the importance of monitoring case activity in Africa when thinking globally. The mpox clinical trials as mentioned, and are progressing well, and we look forward to the top-line results in the PALM 007 clinical trial in the DRC in the coming weeks.

We also have noted the STOMP trial has enrolled roughly 515 patients as of July. This is a substantial increase from the 350 patients noted in our last call, which is also highlighting the increased cases that we’re observing. Assuming the positive data, we’ll work with our trial sponsors with the goal of filing an mpox supplemental NDA as early as 2025. We’re monitoring this situation quite closely, Soo.

Soo Romanoff: Yes, that’s great. Okay. Well, thank you for the answers and great quarter again. Congratulations.

Diem Nguyen: Thank you.

Operator: [Operator Instructions] Okay. There are no further questions at this time. I’d now like to return the call back over to Diem Nguyen, CEO. Diem?

Diem Nguyen: Thanks, Nativ. I’d like to thank everyone for making time to join us on today’s call and for the ongoing interest in SIGA. We look forward to speaking to you again in our third quarter call. Have a good rest of the evening.