SIGA Technologies - Q1 2023

Transcript

Operator (participant)

Welcome to the 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 expectation and observations and are subject to risk 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 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, 2022, and its subsequent report on Form 10-Q and Form 8-K.

Phil Gomez (CEO)

Thank you for taking the time to join today's call. Today I'm joined by Dr. Dennis Hruby, our Chief Scientific Officer, and Daniel Luckshire, our CFO. We are pleased to have this opportunity to provide a business R&D and financial update to our shareholders. We'll then be happy to take questions. On our last call, we noted that we expect the company's streak of positive financial performance to continue in 2023, with deliveries of oral TPOXX to the Strategic National Stockpile being a key driver. With this expectation, we have been proactively building inventory in anticipation of a substantial replenishment order of oral TPOXX for the Strategic National Stockpile. Based on a series of considerations, we are currently targeting for 2023 approximately $113 million of oral TPOXX deliveries to the Strategic National Stockpile. These deliveries would occur under the current 19C contract.

Additionally, we are targeting approximately $11 million of oral TPOXX deliveries to the U.S. Department of Defense for 2023. Furthermore, in addition to pursuing U.S. government sales of oral TPOXX, we will also continue to work toward generating revenues in 2023 from deliveries of IV TPOXX to the Strategic National Stockpile, as well as generating international sales of oral TPOXX. With respect to the international sales effort, as of March 31st, 2023, there were firm commitment orders from two European countries for the delivery in 2023 of approximately $8 million of oral TPOXX. Additionally, we are currently engaged in active negotiation to add to this amount. In sum, we will continue to work hard to build on the 2023 international base as the year progresses. With an eye towards growth, we continue to make progress on two key initiatives.

One, the monkeypox observational clinical trials, two, the PEP program for oral TPOXX. At this point, I will turn the call over to Dennis to discuss these two important initiatives.

Dennis Hruby (EVP and Chief Scientific Officer)

Thanks, Phil. With respect to mpox, TPOXX has been an essential component of the public health response to the global outbreak. TPOXX has been used to compassionately treat more than 6,900 mpox cases in the U.S., as well as many cases internationally. Nine clinical trials have been launched to study the use of TPOXX for mpox, five of which are randomized, placebo-controlled trials that are sponsored by government agencies or NGOs. To date, more than 175 mpox patients have been enrolled in these trials. While the number of mpox cases have ebbed over the last series of months in the U.S., the clinical trials continue to enroll a global cross-section of patients as they become available. It's worth noting that there has been an uptick in mpox cases in some locations, a development we will continue to monitor in consultation with government officials.

Overall, I would like to reiterate what we said on prior investor calls in connection with the timing, the ultimate number of participants of the trials. These factors will depend on the path of the mpox outbreak and the general speed of enrollment. The timing and likely ultimate enrollment levels of the trials, especially the randomized placebo-controlled trials, continues to be currently unknown. For example, it remains to be seen whether there will be any type of mpox case count increase over the coming summer months in the northern hemisphere to roughly mirror the spike in mpox case counts last year, as the CDC has predicted. Given the currently unknown factors, the timing and composition of an FDA submission for an mpox label for TPOXX remains to be determined.

That said, it's encouraging to note that the various RCTs are contemplating an aggregation of their data as it is unblinded, with the idea of potentially reaching sufficient subject numbers for regulatory evaluation. While the short term path of the mpox outbreak is uncertain, what we have seen and learned to date indicates there's a high probability that the United States and other countries across the world will have to deal with mpox cases in future years. It's just unknown as to the ultimate magnitude of cases, the scope of the cases across different communities, and whether case levels become consistent or whether case levels come and go periodically. We believe that in most scenarios there will be a need for TPOXX. Shifting gears, I would like to provide an update on the PEP label expansion program for oral TPOXX.

I'm happy to report that the company has recently met enrollment targets for both the immunogenicity trial and the expanded safety trial. As a quick reminder, the JYNNEOS plus TPOXX immunogenicity trial tests subjects as to whether oral TPOXX interferes with JYNNEOS vaccination, while the expanded safety trial tests the safety of oral TPOXX over a 28-day PEP regimen. In contrast, the treatment indication for oral TPOXX is 14 days. Samples are currently being analyzed for both trials. We expect unblinded results and data lock for both trials to occur within the next 60 days if everything goes according to schedule.

With respect to the PEP program, I'd like to note a few things. Based on previous animal challenge experiments and clinical trials, we expect both trials will be successful and supported for the use of TPOXX for PEP. In the case of an Orthopoxvirus epidemic, be it mpox or smallpox, use of TPOXX for PEP will be important to reduce the morbidity and mortality in the population. Provided unblinded results from the trials are supportive of a regulatory submission, the next step after sample analysis would be to commence preparation activities for an NDA supplemental submission. For such a submission, we're targeting early 2024. At this point, I would like to turn the call over to Dan for a financial update.

Dan Luckshire (EVP and CFO)

Thanks, Dennis. For the three months ended March 31st, 2023, SIGA's revenue was approximately $8 million, of which approximately $5 million relates to the sale of oral TPOXX to the U.S. Department of Defense. This is the third sale of oral TPOXX to the Department of Defense over the past 12 months. The remainder of the first quarter revenues are primarily related to research and development activity. For the full year 2023, as noted by Phil in his remarks, the company is targeting revenues of approximately $113 million on sales of oral TPOXX to the Strategic National Stockpile and revenues of approximately $11 million on sales of oral TPOXX to the U.S. Department of Defense. These targets are based on a series of considerations and are subject to change.

In addition to the targets just mentioned, the company is pursuing deliveries and sales of IV TPOXX to the strategic stockpile under an exercised option in the 19C contract and is also pursuing international sales of oral TPOXX. We have not provided specific 2023 targets for IV TPOXX and international sales because details are still building for these markets. In connection with the international sales efforts, as noted by Phil earlier in the call, on March 31st, 2023, there were firm commitment orders from two European countries for the delivery in 2023 of approximately $8 million of oral TPOXX. Additionally, we are currently engaged in active negotiations to add to this amount. Returning to the first quarter financial results, pre-tax operating loss, which excludes interest income and taxes, was approximately $2 million through the three months ended March 31st, 2023.

Net loss through the three months ended March 31, 2023, was approximately $1 million, fully diluted loss per share was $0.01. At March 31, 2023, the cash balance for the company was approximately $116 million. During the first quarter, SIGA repurchased approximately 1.1 million shares of its common stock for approximately $7.5 million. This concludes the financial update. At this point, I'll turn the call back to Phil.

Phil Gomez (CEO)

Thanks, Dan Luckshire. As a complement to the operational R&D and financial updates discussed earlier in this call, I would like to highlight that we have announced a special cash dividend of $0.45 a share that will be payable on June 1, 2023, based on a record date of May 16, 2023. As background, we continually evaluate the best use of cash. We are focused on a disciplined process to deploy cash where it can generate the best long-term return for our shareholders. As part of this process, we consider a wide range of possibilities and a wide range of considerations. Time and place is among the considerations. With one, strong financial performance over the last series of years, two, a solid balance sheet, we believe it is an appropriate time to declare a special cash dividend.

The implementation of this action reflects confidence that comes from historical financial performance and also reflects optimism about the business going forward. Before we shift to Q&A, I'd like to emphasize a couple of context points in connection with the PEP program. First, I want to reiterate that the PEP-based development program represents a growth initiative in that it would provide scientific and regulatory support for any stockpile expansion. As stated on prior calls, we believe the current size of the stockpile of TPOXX in the U.S. would not be sufficient to treat all of those who would need care in many outbreak scenarios. A lesson from the COVID pandemic, which has been reinforced by the mpox outbreak, is that governments need to be more proactive in addressing the health and societal risks associated with virus families.

Second, we continue to be focused on transitioning our U.S. contract to a long-term SNS contract that focuses on appropriate size requirements for the TPOXX stockpile, as well as smoothing the annual deliveries, which would be critical to supply chain planning and provide a higher degree of financial predictability. With this in mind, I want to highlight that we believe the clinical trial results from the PEP program, especially the immunogenicity trial, are an important part of long-term contract conversation. This concludes our prepared remarks, and we will now begin the Q&A session.

Operator (participant)

If you would like to ask a question, please press star one on your telephone keypad now. You'll be placed into the queue in the order received. Please be prepared to ask your question when prompted. Once again, to ask a question, please press star one on your phone now. Our first question comes from Adam McCarter from the Edison Group. Please state your question.

Adam McCarter (Healthcare Associate Analyst)

Hi there. Thanks for taking my question today. Really great to hear about the progress that SIGA's been making. Just wanted to hear a little bit more about sort of the... You mentioned already about the international orders, and just wanted to know whether or not you're getting just a little bit more color around the interest regarding the stockpiling.

Phil Gomez (CEO)

Sure, Adam. Thanks for the question. We are getting, I would say, a mix of certainly countries that are continuing to follow up on the mpox outbreak and making sure they have drug on board. I would say we'll see a mix of both existing and new countries this year based on the conversation. I would anticipate going to build some new conversations. As we've talked before, we've also been reflecting those conversations back to include smallpox because many of the countries had not thought about that. We're encouraged. We certainly have at least one country that looks like it's committing to doing more of a smallpox stockpile than an initial procurement for mpox, and we continue to have those studies. As Dan said, it continues to evolve, a lot of discussions.

It's a slow process, as we've seen, over time, but encouraged that we still have a growing number of countries we're talking to and starting to be able to also talk about smallpox as well.

Adam McCarter (Healthcare Associate Analyst)

Fantastic. Thank you very much. If I could just follow that with another question as well. Just wondering about if you just in terms of sort of data coming from your placebo-controlled studies in mpox, can you give any guidance on when we might expect to see some sort of data from those from those studies coming out in the near term?

Phil Gomez (CEO)

Yeah, I can add a little bit. I mean, Dennis talked about this, that we have a lot of placebo-controlled studies ongoing. Case levels have come down substantially. Although we have seen, for example, in Japan, there's a slowly growing number of cases that are there. I think there's two parts of that driving the timeline. One is, what is the caseload? If we see an increase as we did last spring in cases, I think the good news is, there are placebo-controlled studies throughout the world that will try and catch those, both in the U.S., Europe, South America, Asia. There's a lot of work that's been done to set up those studies and try and catch those.

If we don't see the caseload increase, it's gonna be hard to do that. The second part is, as Dennis highlighted, which is I think very important, the groups which are predominantly governments, places like NIH in the U.S., University of Oxford and the U.K. government in the U.K., WHO has helped support some of the studies in Europe. They're starting to talk amongst the clinical network and also talk to regulators to make sure whatever dataset we have, we can try and pool that, use all of that data to be able to go for approval, so we don't have to wait for one study to get to critical mass. There's been conversations that are encouraging, but we'll have to stay tuned and see where that goes.

Adam McCarter (Healthcare Associate Analyst)

Excellent. Thank you very much. No further questions from me.

Operator (participant)

All right. Our next question comes from Joaquin Horton, an investor. Please state your question.

Joaquin Horton (Shareholder)

Hi, guys. My question is, we've been kicking around this PEP program for the last several years. Is there any way you can quantify as to what the size or the potential of this program could be?

Phil Gomez (CEO)

Thanks, Joaquin. I appreciate the question. Hope, all is well in retirement for you, and appreciate you calling in. There's a couple of ways to answer that question, but the one that we've very specifically thought about is the implications for the use of TPOXX for PEP in smallpox, which is that you would go from a 14-day treatment to a 28-day treatment. Currently, our contract is for a 1.7 million course requirement. If you wanted to maintain the ability to treat 1.7 million people with the potential for a lot of those being PEP, you would need to double the amount of drug in the stockpile.

Certainly the initial messaging we've had is at the very least, given the requirements that are already on the books, there's an opportunity to potentially double what the U.S. government buys. I would also add in two kind of other perspectives on that. One is, for those of you that have been following SIGA a very long time, our original contract in 2011 contemplated up to 12 million courses in options, and BARDA cited PEP as one of the reasons they may need more than the 1.7. There has been a long history of evaluating that with even potentially higher numbers. The other part is, the Strategic National Stockpile has stated repeatedly, including in their multi-year budget, they don't have full funding for all the things they would like to buy.

There'll certainly be a lens of affordability that could evolve over time. We think the doubling of the stockpile is a important way to think about it immediately and continue to think about the long-term preparedness that we think the U.S. government ultimately should do.

Joaquin Horton (Shareholder)

Thank you. That's it from me.

Phil Gomez (CEO)

Thanks, Joaquin.

Operator (participant)

Once again, if you would like to ask a question, please press star one on your phone now. Our next question comes from Ralph Weil from R. Weil Investment. Please state your question.

Ralph Weil (President)

Thank you again for the special dividend and for the confidence you show in purchasing the shares. I have one question. Are you, besides smallpox and mpox, are you actively involved at this point in working on any vaccine or countermeasure for any other emerging infectious diseases or other attacks, perhaps biodefense attacks?

Phil Gomez (CEO)

Yes. Ralph, thank you very much for the question. As you've heard, TPOXX is our licensed product with sales. That is by far our lead product. We do have a candidate product that's in preclinical that also has the potential to treat orthopox infection. We are doing some work on that, but it's very early on, so I wouldn't say that's a major one. We know the government's always wanted to have two products, and the second product that was licensed had a boxed warning on it. We think it's important to continue to think about second-generation products there. We do scan for potential products, countermeasures, things that would be in this space to bring on board.

We look at the science, we look at the market potential, we have not brought anything on board to date, we continue to look at those assets. We continue to monitor the antibiotic space at BARDA for a RFP we expect will come probably this next fiscal year. We have a partnership with Cipla to go after that RFP with an antibiotic they have. That's again, a little further off, and that's a partnership, not an asset that we have. We do very actively look at the space and look at things that we could bring on board that would help us bring products either to the government or to the commercial market. Thank you for your question.

Ralph Weil (President)

Okay. Thank you for that.

Operator (participant)

At this time, we have no further questions.

Phil Gomez (CEO)

Like to thank everybody for joining us, at this first quarter conference call. We appreciate your time, we appreciate your support, and look forward to continued great value for our shareholders. Thank you again, and have a great day.

Operator (participant)

This concludes today's conference call. Thank you for attending.