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Additional approvals expected shortly

SIGA Technologies 9 November 2021 Update
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SIGA Technologies

Additional approvals expected shortly

Financial update

Pharma & biotech

9 November 2021

Price

US$7.4

Market cap

US$548m

Net cash ($m) at 30 September 2021

92.8

Shares in issue

74.1m

Free float

54.8%

Code

SIGA

Primary exchange

Nasdaq

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

4.4

18.5

3.5

Rel (local)

(2.5)

11.82

(22.8)

52-week high/low

US$7.8

US$5.7

Business description

SIGA Technologies is a commercial-stage health security company focused on the treatment of smallpox and other orthopoxviruses. It has contracts with both the US and Canadian governments for TPOXX, its treatment for smallpox, and is looking to expand internationally.

Next events

Oral TPOXX Canadian regulatory approval

Late 2021/early 2022

Oral TPOXX EMA regulatory approval

Q122

Iv TPOXX FDA approval

Q122

Analysts

Maxim Jacobs

+1 646 653 7027

Jyoti Prakash

+91 981 880 393

SIGA Technologies is a research client of Edison Investment Research Limited

SIGA recently reported Q321 results, which featured $2.3m in oral TPOXX purchases by the Canadian Department of National Defence (CDND). Importantly, the US Biomedical Advanced Research and Development Authority (BARDA) has exercised its procurement option valued at $112.5m, with product deliveries targeted to occur by the end of 2021 (approximately 30% of the procured product was delivered in October alone). The company, however, has indicated that COVID-19 related supply chain issues may delay some of the deliveries, though it is working diligently to avoid that.

Year end

Revenue ($m)

PBT*
($m)

EPS*
($)

DPS
($)

P/E
(x)

Yield
(%)

12/19

26.7

(15.3)

(0.15)

0.0

N/A

N/A

12/20

125.0

82.0

0.82

0.0

9.0

N/A

12/21e

133.3

87.4

0.88

0.0

8.4

N/A

12/22e

124.7

78.5

0.80

0.0

9.3

N/A

Note: *PBT and EPS are normalized, excluding amortization of acquired intangibles, exceptional items and share-based payments.

IV TPOXX approval targeted for Q122

In April, SIGA announced it had filed an NDA with the FDA for the intravenous (iv) formulation of TPOXX. The iv formulation would be used to treat those who are either too sick or unable to swallow oral TPOXX capsules. A total of $85m of the 2018 BARDA contract is allocated for the procurement of 212,000 doses of an iv version of TPOXX. The company is currently estimating Q122 for approval.

EMA and Canada approvals expected by Q122

SIGA submitted an application to the European Medicines Agency (EMA) in July 2020 for oral TPOXX covering all human pathogenic orthopoxviruses, including smallpox, monkeypox, cowpox and complications from vaccinia. In December 2020, the company also filed for marketing authorization for oral TPOXX in Canada. The review process in both jurisdictions is expected to be completed by Q122.

Additional international sales order in the works

SIGA is partnered with Meridian Medical Technologies, a Pfizer subsidiary focused on health security, for the international marketing of TPOXX. So far two separate contracts with the Canadian government for the delivery of up to $47m worth (combined) of TPOXX have been signed and the companies are working on other markets. SIGA is currently working on an order from an additional jurisdiction though precise timing is unknown due to COVID-19.

Valuation: $940m or $12.68 per share

We have adjusted our SIGA valuation to $940m or $12.68 per share from $949m or $12.65 per share. The decline in the total valuation is due to lower net cash, mainly attributable to the stock buyback, while a lower number of outstanding shares has increased the per-share valuation. We expect a significant increase in cash levels once the 2021 BARDA deliveries are completed.

Q321 results

SIGA recently reported Q321 results, which featured $2.3m of international revenue related to oral TPOXX purchases by the CDND. Total revenues were $4.8m for the quarter and included $2.5m in revenue in connection with government funded research activities (which mostly offset R&D expenses). With the exercise of the BARDA option valued at $112.5m, the company is diligently working on completing deliveries by the end of the year and approximately 30% were delivered in October.

Exhibit 1: SIGA pipeline

Program

Region

Formulation

Indication

Status

TPOXX

US

Oral

Treatment of smallpox in those weighing >13kg

FDA approved 2018. $461m BARDA procurement contract (part of 2018 BARDA re-supply contract).

Canada

Oral

Treatment of smallpox in those weighing >13kg

$33m contract with Public Health Agency of Canada and a $14m contract with the Canadian Department of National Defence. Regulatory approval expected in late 2021/early 2022.

US

IV

Treatment of smallpox in those too sick or unable to swallow capsules

$85m worth of procurement in 2018 BARDA contract. NDA filed in April 2021 with approval expected Q122.

US

Liquid (powder for re-constitution)

Treatment of smallpox in people weighing <13kg (children)

Two leading formulations have been transitioned to CRO partner for adaptive pharmacokinetic clinical trials. Development fully funded by BARDA.

US

Oral

Post-exposure prophylaxis (PEP)

Up to $26m contract with the US Department of Defense signed in 2019 (expanded in 2020) for research in PEP. Two human studies planned, one to evaluate if there is interference with the Jynneos smallpox vaccine and an expanded safety study. TPOXX+Jynneos study expected to begin enrolment in Q421 (with data in H222) while the safety study expected to begin in Q122.

EU

Oral

Treatment of all human pathogenic orthopoxviruses (smallpox, monkeypox, cowpox, vaccinia) in those weighing >13kg

MAA submission July 2020. Approval expected Q122.

ST-357

All

Oral

Treatment of smallpox

Distinct mechanism of action from TPOXX and may be more broadly active. Target conserved in all chordopox viruses (orthopox, molluscum contagiosum, cervidpox). In preclinical testing.

ZEMDRI

US

IV

Biodefense

Partnership with ZEMDRI’s manufacturer Cipla was announced in March 2021. SIGA will help Cipla obtain a BARDA contract for a biodefense indication.

Source: SIGA Technologies

With regards to expanding beyond the current oral TPOXX approval, iv TPOXX is under active review by the FDA with approval targeted for Q122. As a reminder, the iv formulation would be used to treat those who are either too sick or unable to swallow oral TPOXX capsules. A total of $85m of the 2018 BARDA contract is allocated for the procurement of 212,000 doses of an iv version of TPOXX.

Additionally, the company had previously filed with the EMA and Health Canada for approval. The EMA approval would cover all human orthopoxvirus pathogens and is expected in Q122 (the company has already responded to the 180-day questions from the agency). The Health Canada approval would cover oral TPOXX for the treatment of smallpox and is expected by Q122 though could come as soon as late Q421.

One of the most important development programs at SIGA is the post-exposure prophylaxis (PEP) label expansion. There is a one- to two-week gap in potential treatment of smallpox infection. Vaccines can protect against infection from before exposure to at most three to seven days after exposure. The current label for TPOXX assumes its use once symptoms have started after the incubation period (approximately 12–14 days after exposure on average). So there is a period of time when an exposed person would be unprotected by a vaccine and not likely to get TPOXX under the current labelling. The PEP program is looking to bridge that gap. Under PEP, TPOXX would be given to anyone who has been exposed to someone with smallpox given the high chance that person would become infected (as a reminder, someone exposed to an infected person has a 90% chance of contracting the disease themselves).1 Colonel Peter Weina, chief of research at Walter Reed Military Medical Center, stated at the 1 May 2018 FDA advisory committee meeting that: ‘The reality is that this [smallpox] is so highly infectious, post-exposure prophylaxis is going to be a knee-jerk reaction to anybody at any time if you've got anybody who's been diagnosed. So anybody who's within eyeball shot of somebody who's got a diagnosed case of smallpox is going to be getting this drug [TPOXX].’

  Grosenbach et al., Oral Tecovirimat for the Treatment of Smallpox. NEJM. 2018;379:44-53.

PEP treatment would be for a 28-day course of therapy (versus 14 days for the approved indication). If BARDA were to purchase an equivalent number of PEP courses compared to the current (post-infection treatment) contract, this opportunity could be double the size (due to double the treatment length and therefore double the number of capsules required). With regards to the development plan, the company and FDA have come to an agreement on trial design and two human studies are planned. There will be an immunogenicity trial to evaluate if there is interference with the Jynneos smallpox vaccine and a 28-day safety study. The Jynneos study is expected to begin in Q421 and provide data in H222, while the safety study is expected to begin in Q122 (no timing on data has been announced).

Additionally, the company announced it has completed a post-marketing commitment to study the pharmacokinetics of oral TPOXX in people weighing over 120kg (approximately 13% of the US population). Based on these results, the TPOXX label is likely to be modified to recommend a dosage of 600mg three times daily for those weighing over 120kg (the current label recommends 600mg twice daily). Note that this labelling change would reduce the number of effective courses in the strategic national stockpile and could lead the US government to increase its orders to make up for that at some point in the future.

Valuation

We have adjusted our SIGA valuation to $940m or $12.68 per share, from $949m or $12.65 per share. The decline in the total valuation is due to lower net cash, mainly attributable to the stock buyback, while a lower number of outstanding shares has increased the per-share valuation. We expect a significant increase in cash levels once the 2021 BARDA deliveries are completed.

Exhibit 2: SIGA valuation table

Product/program

Main indication

Status

Probability of Success

Approval/launch/ first contract year

Peak sales ($m)

rNPV
($m)

TPOXX (US base – oral)

Treatment of smallpox

On market

100%

2018

113

439

TPOXX Canada

Treatment of smallpox

On market

100%

2020

11

35

TPOXX US iv and pediatric formulations

Treatment of smallpox

Iv (to be filed 2021), pediatric (being formulated)

60–90%

2022–25

30

36

TPOXX US PEP

Post-exposure prophylaxis following exposure to smallpox

Development

40%

2025

225

264

TPOXX EU, Japan, Korea, Australia

Treatment of smallpox

Registration

50%

2023

97

74

Total

 

 

 

 

 

847

Net cash (Q321) ($m)

92.82

Total firm value ($m)

940

Total basic shares (m)

74.1

Value per basic share ($)

12.68

Source: Edison Investment Research

Financials

Following Q321 results and the announcement of the BARDA option, we have increased our FY21 revenue estimate by $14.1m. Our FY22 revenue estimate has also increased by $0.3m due to higher R&D revenues (which, as mentioned, mainly offset R&D expenses). We have also increased our operating expense estimates by $0.7m for both FY21 and FY22 due to slightly higher run rates. SIGA reported $92.8m in cash at the end of September. We currently forecast $163.3m in cash at the end of the year, assuming all payments for BARDA deliveries are made by then, though this estimate does not take into account additional stock repurchases.

SIGA is currently working through a $50m stock repurchase program, which was announced in March 2020 and runs through the end of 2021. So far, 7.7m shares have been repurchased for approximately $49m, including $7.1m in Q321. In August 2021 the company announced an additional $50m share repurchase program, which will run through the end of 2023. Shares under the new plan can be repurchased either once the current plan expires or once the maximum amount has been utilized.

Exhibit 3: Financial summary

$000s

2019

2020

2021e

2022e

Year end 31 December

US GAAP

US GAAP

US GAAP

US GAAP

PROFIT & LOSS

Revenue

 

 

26,742

124,959

133,313

124,730

Cost of Sales

(1,783)

(14,797)

(15,955)

(15,956)

Gross Profit

24,959

110,162

117,358

108,773

Research & Development

(13,303)

(10,939)

(11,361)

(11,474)

General & Administrative

(13,978)

(14,722)

(18,630)

(18,816)

EBITDA

 

 

(27)

84,503

87,314

77,953

Operating Profit (before amort. and except.)

 

 

500

85,033

87,444

78,483

Intangible amortization

0

0

0

0

Other

2,822

532

76

0

Exceptionals

5,091

(8,507)

295

0

Operating Profit

5,591

76,525

87,738

78,483

Net Interest

(15,770)

(3,017)

0

0

Other

0

0

0

0

Profit Before Tax (norm)

 

 

(15,270)

82,016

87,444

78,483

Profit Before Tax (reported)

 

 

(10,178)

73,509

87,738

78,483

Tax

2,937

(17,167)

(21,347)

(18,836)

Deferred tax

0

0

0

0

Profit After Tax (norm)

(12,332)

64,849

66,097

59,647

Profit After Tax (reported)

(7,241)

56,342

66,392

59,647

Average Number of Shares Outstanding (m)

81.0

79.3

75.4

74.1

EPS - normalized ($)

 

 

(0.15)

0.82

0.88

0.80

EPS - reported ($)

 

 

(0.09)

0.71

0.88

0.80

Dividend per share ($)

0.00

0.00

0.00

0.00

Gross Margin (%)

93.3

88.2

88.0

87.2

EBITDA Margin (%)

-0.1

67.6

65.5

62.5

Operating Margin (before GW and except.) (%)

1.9

68.0

65.6

62.9

BALANCE SHEET

Fixed Assets

 

 

18,524

6,223

6,626

6,676

Intangible Assets

898

898

898

898

Tangible Assets

2,618

2,104

2,468

2,518

Other

15,008

3,221

3,259

3,259

Current Assets

 

 

180,042

143,608

199,458

260,778

Stocks

0

0

0

0

Debtors

4,168

3,340

3,823

3,823

Cash

160,987

117,890

163,340

224,660

Other

14,887

22,378

32,295

32,295

Current Liabilities

 

 

(91,736)

(10,484)

(18,942)

(18,942)

Creditors

(3,054)

(1,278)

(9,963)

(9,963)

Short term borrowings

(80,045)

0

0

0

Other

(8,637)

(9,205)

(8,979)

(8,979)

Long Term Liabilities

 

 

(9,047)

(9,555)

(9,555)

(10,065)

Long term borrowings

0

0

0

0

Other long term liabilities

(9,047)

(9,555)

(9,555)

(10,065)

Net Assets

 

 

97,784

129,793

177,587

238,447

Minority Interests

0

0

0

0

Shareholder equity

 

 

97,784

129,793

177,587

238,447

CASH FLOW

Operating Cash Flow

 

 

(18,204)

71,519

65,912

61,371

Net Interest

0

0

0

0

Tax

0

0

0

0

Capex

(29)

(16)

(24)

(50)

Acquisitions/disposals

0

0

0

0

Financing

0

0

0

0

Dividends

0

0

0

0

Other

(5,674)

(28,687)

(13,143)

0

Net Cash Flow

(23,907)

42,817

52,745

61,321

Opening net debt/(cash)

 

 

(104,849)

(80,942)

(117,891)

(163,339)

HP finance leases initiated

0

0

0

0

Exchange rate movements

0

0

0

0

Other

0

(5,868)

(7,296)

(0)

Closing net debt/(cash)

 

 

(80,942)

(117,891)

(163,339)

(224,660)

Source: company reports, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by SIGA Technologies and prepared and issued by Edison, in consideration of a fee payable by SIGA Technologies. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

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The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

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This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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General disclaimer and copyright

This report has been commissioned by SIGA Technologies and prepared and issued by Edison, in consideration of a fee payable by SIGA Technologies. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

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The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

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95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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