SIGA Technologies - Q2 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 expectations and observations, and are subject to risks and uncertainties that could cause actual results to differ from 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, 2022, and its subsequent reports on Form 10-Q and Form 8-K. I will now turn the call over to your host, Phil Gomez, Chief Executive Officer. Mr. Gomez, you may begin, sir.

Phil Gomez (CEO)

Thank you for taking the time to join today's call. Today I'm joined by Dennis E. 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. I'd like to start this call by highlighting our expectations for the second half of 2023, that will be achievable based on the work we have done in the first half of the year.

In the second half of 2023, we expect the company to generate approximately $113 million of revenue from deliveries of oral TPOXX to the U.S. Strategic National Stockpile, and another $30 million–$45 million of revenue from a broad cross-section of domestic and international deliveries, including the deliveries of oral TPOXX to the Department of Defense, IV TPOXX to the U.S. Strategic National Stockpile, and oral TPOXX to international customers. Based on such revenue expectations, we expect to generate full-year 2023 pre-tax operating income of between $90 million–$100 million, representing strong growth over the prior year. These financial expectations reflect successful efforts to diversify our revenue base, anchored by the aforementioned $113 million order from the U.S. Department of Health and Human Services under our 19C contract.

The expected deliveries of TPOXX to a broad cross-section of customers is another example of our commitment to consistently meet global demand for TPOXX. Beyond 2023, we will continue to execute on our strategic plan to maximize growth opportunities. I will ask Dennis to provide details on two growth-related initiatives for SIGA. One, the PEP program for oral TPOXX, and two, the MPOX randomized controlled trials and observational trials. Dennis?

Dennis E. Hruby (Chief Scientific Officer)

Thanks, Phil. Regarding the PEP label expansion program for oral TPOXX, as a quick background update, earlier this year, we noted that the company met enrollment targets for both the immunogenicity trial and the expanded safety trial. For the expanded safety trial, the clinical trial results recently became available. As expected, we did not see any drug-related serious adverse events. For the JYNNEOS plus TPOXX immunogenicity trial, as a quick reminder, the goal of this trial was to show that TPOXX did not reduce the immune response to the vaccine. This is supplemental and separate to our current approval for the treatment of smallpox. In the preliminary analysis of the trial data, we do not see a meaningful difference between the immunogenicity of those that received the JYNNEOS vaccine while on placebo, compared with those that received the JYNNEOS vaccine while on TPOXX, which is consistent with what we expected.

For reasons we don't currently understand, the number of volunteers that had a measurable immune response to the JYNNEOS vaccine in both the placebo and TPOXX groups was lower than expected. At this point in time, pending further investigations into the effect of the lower than expected number of responders, is that we currently do not have sufficient numbers or data points to make the non-inferiority statistical determination as originally planned as the primary endpoint of the immunogenicity trial. We're investigating why we saw a lower overall percentage of volunteers generating an immune response to the vaccine. To be clear, we're investigating the immune response levels of volunteers to the vaccine. The analyses are not about the efficacy or safety of TPOXX, nor are they about TPOXX's impact on those individuals who are showing an immune response.

In terms of getting the maximum and most timely benefit from the immunogenicity trial in the context of stockpile expansion conversations with the government, it's worth the extra time and effort to fully investigate reasons for the overall lower-than-expected response rate. We plan to work through a review of the data, clinical trial processes, and provide an update on the next investor call or when data becomes available. As contextual comments before I shift gears, I'd like to note that in regard to the PEP program, we believe that the totality of the studies and trials that have been conducted, including the immunogenicity trial, as well as previous animal challenge experiments and clinical trials, are supportive of the use for TPOXX in PEP, pending discussions and review with the FDA.

In the case of an orthopox epidemic, be it MPOX or smallpox, use of TPOXX for PEP will be important to reduce the morbidity and mortality in the population. With respect to MPOX trials, five randomized controlled trials, as well as multiple observation studies, continue to enroll patients and collect data. For example, as of August 4, the NIAID STOMP trial had enrolled 117 patients, and the NIAID PALM007 trial being conducted in the DRC had enrolled 188 patients. While the MPOX case count this summer has been mild in comparison to last summer, we will continue to coordinate with government agencies on the active RCTs and observational trials. As noted in the last investor call, 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 continue to believe is that there's a high probability that the United States and other countries across the world will have to deal with the MPOX cases in future years. It's just unknown as to the ultimate magnitude of the 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. At this point, I'd like to turn the call over to Dan for a financial update.

Daniel Luckshire (CFO)

Thanks, Dennis. For the three and six months ended June 30, 2023, SIGA's revenue was approximately $6 million and $14 million, respectively. For the second quarter, approximately $1 million of revenue relates to an international sale of TPOXX, and approximately $5 million relates to research and development activity. In connection with the international sale of TPOXX, it was made to a first-time customer. For the six months ended June 30, approximately $7 million of revenue relates to product sales and supportive activities, and approximately $7 million of revenue relates to research and development activity. In connection with product sales, $5 million of the sales were to the U.S. Department of Defense. Pretax operating loss, which excludes interest income, and taxes, was approximately $5 million for the three months ended June 30, 2023.

For the six months ended June 30, pre-tax operating loss was approximately $7 million. Net loss for the three months ended June 30, 2023, was approximately $3 million. For the six months ended June 30, net loss was approximately $4 million. In turn, fully diluted loss per share for the three months ended June 30, 2023, was $0.04 per share, and for the six months ended June 30, fully diluted loss per share was $0.05. At June 30, 2023, the cash balance for the company was approximately $76 million. During the second quarter, SIGA declared and paid a special cash dividend of $0.45 per share, or approximately $32 million in total. Additionally, for the six months ended June 30, the company repurchased approximately $11 million of its common stock.

As noted by Phil earlier in the call, for the second half of 2023, we are targeting approximately $113 million of revenues from deliveries of oral TPOXX to the U.S. Strategic National Stockpile, and between $30 million–$45 million of revenues from a broad cross-section of domestic and international deliveries, including $10 million–$15 million of revenues from deliveries of IV TPOXX to the U.S. Strategic National Stockpile in connection with a $25 million order by the U.S. government in 2022 under the 19C contract. Such revenues in the second half of the year, when combined with the financial results of the first half of 2023, are expected to generate full-year 2023 pretax operating income of between $90 million–$100 million. This concludes the financial update.

At this point, I will turn the call back to Phil.

Phil Gomez (CEO)

Thanks, Dan. Before we open the call to Q&A, I'd like to reiterate a series of points in connection with our business. First, while the MPOX outbreak has receded over the past several months, it is likely to continue at some level and has also strongly highlighted the long-term importance of TPOXX in connection with the treatment of orthopoxviruses. It is our understanding that TPOXX continues to be the leading and in many countries, the only therapeutic used to treat MPOX in the U.S., Europe, Canada, the Asia-Pacific region, Africa, and other areas. The usage of stockpiling of TPOXX across a broad range of customers highlights the differentiated value of TPOXX. Second, our ongoing international sales growth initiative is progressing in a value-creating manner. We have a solid base of international customers through which we continue to pursue additional customers, as well as follow-on orders.

Order activity over the past 12 months shows that a meaningful international market is taking shape. The PEP-based development program continues to represent a growth initiative in that it may 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 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 viral outbreaks. Fourth, we continue to be focused on transitioning our U.S. government 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. Fifth, the expansion of our portfolio of customers is resulting in a diversification of the company's revenue base, thus enhancing first future revenue prospects. Finally, I'd like to provide a brief update on the CEO search. I am looking forward to retire later this year, and I'm also focused on ensuring a smooth transition to the next CEO.

The board continues to conduct the search in a diligent and deliberative manner, and SIGA will provide an update when the search concludes. 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, if you have a question, please press star one on your phone now. Our first question comes from Puya Hamami from Madison Group. Your line is open.

Puya Hamami (Analyst)

Oh, yes. Thank you very much for taking my questions. Just a question, has there been any further discussion under the 19C BARDA contract regarding incremental orders, or stockpiling, after 2024?

Phil Gomez (CEO)

Yeah, thank you for the question. Certainly with the exercise of the options this year, we have two remaining options, one for oral, one for IV, which we've indicated would be required in 2024 to be able to maintain the stockpile. We continue to have discussions with the U.S. government on the next phase contract, which would go beyond 2024. Those are progressing well. We're able to discuss the requirements as they go forward. The U.S. government at ASPR has indicated they are reviewing requirements broadly in this space, so it's an opportune time to have those conversations, and we'll certainly keep everyone updated as those conversations result. Ultimately, what we anticipate would be an RFP for resupply of TPOXX as well as ultimately a contract award.

Those are continuing with the goal of getting it in place as the options in the current contract are fully executed.

Puya Hamami (Analyst)

Okay, thank you. As, as a follow-up and I guess relating to this, have you seen any incremental traction for international orders? For instance, do you see any interest for international jurisdictions for smallpox and monkeypox-related stock, related stockpiling?

Phil Gomez (CEO)

Yeah, we, we certainly do. I think international sales this year will follow U.S. government sales. We anticipate higher numbers in the second half of the year. We have had countries do follow-on orders. We have had countries start talking much more about smallpox stockpiling versus just getting material for MPOX. As we've said on this call many times, it is an evolutionary process with governments needing to acknowledge the need for TPOXX, identify a requirement, get funding to be able to do it. We do see those conversations progressing and look forward to the second half of the year as we start to recognize some of those sales. Thanks.

Puya Hamami (Analyst)

Thank you. Just one last question on the PEP enrollment study, if, if I will. You had mentioned that there was some immunogenicity data that was different from expectations. How does this affect your timing or, you know, for in terms of potential next steps or label expansion or, or study readouts?

Phil Gomez (CEO)

As we noted, we've completed the safety study, and we didn't see any drug-related serious adverse events. We're focused on a more detailed review of the immunogenicity statistics of the TPOXX plus JYNNEOS study, given we didn't see the number of volunteers have a positive immunogenicity result with JYNNEOS, both in placebo and those receiving TPOXX. Clearly, this is a month or so later than we anticipated in doing the readout, and we will prepare our filing in parallel to the analysis of the immunogenicity study. It'd be speculative right now, however, to comment on how much this may delay our submission, but we're certainly very focused on finalizing that data.

Puya Hamami (Analyst)

Okay, thank you very much.

Operator (participant)

Our next question comes from Scott Sibley, from the Equus Group. Your line is open.

Scott Sibley (President)

Hey, how are you guys doing? I'm glad to see we bought $11 million in stock back. I guess that's about two million shares, which is almost 3% of the company. According to my math, we only have about $12 million left, and if we're already buying this quarter, we're probably about done this quarter. Is the company planning on doing another re-up, another stock buyback, keep going with this at these prices?

Phil Gomez (CEO)

I'll let Dan update on the, on the statistics that we had, Scott. Good to talk to you. I will say, at a high level, the board and management, as we've said, review a multitude of factors as we think about buybacks and special dividends and other uses of cash. As you know, over the past couple of years, we have done the special dividend as well as buybacks, at a level of, I think, in aggregate, about $145 million. Dan, do you want to comment on the specifics?

Daniel Luckshire (CFO)

Yeah, certainly. The existing program has $21 million of the remaining authorization left, and then, once that is used or expires, we would talk to the board about next steps.

Scott Sibley (President)

Gotcha. Okay, I didn't realize we had 21. I thought we were half of that. I guess I read the wrong, but all right, well, it's good news. Good job.

Operator (participant)

If there are any final questions, please press star one on your touch tone keypad now. Seeing no final questions, I'll turn the call back over to our host.

Phil Gomez (CEO)

I'd like to thank everybody for joining today. We look forward to providing additional updates as we get information on the PEP study and talking to you next quarter. Thanks, everybody, for taking the time. Take care. Bye-bye.

Operator (participant)

The meeting has now concluded. Thanks for joining, and have a pleasant day.

Phil Gomez (CEO)

Thank you.

Operator (participant)

The host has ended this call.