SIGA Technologies — Additional international deal possible in Q2

SIGA Technologies (NASDAQ: SIGA)

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Research: Healthcare

SIGA Technologies — Additional international deal possible in Q2

SIGA recently reported Q121 results, which featured $3.4m of revenue for the delivery of oral TPOXX to the Public Health Agency of Canada (PHAC). The company also announced that in April it delivered an additional $6.9m worth of product to the agency. Importantly, during the Q121 earnings call, SIGA announced it is working towards sales to one or more new jurisdictions in 2021, with the next sale estimated to occur by the end of June of this year. Precise details on this upcoming contract are unknown.

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Written by

Healthcare

SIGA Technologies

Additional international deal possible in Q2

Financial update

Pharma & biotech

10 May 2021

Price

US$7.3

Market cap

US$558m

Net cash ($m) at 31 March 2021

106.5

Shares in issue

76.1m

Free float

56.0%

Code

SIGA

Primary exchange

Nasdaq

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

5.2

7.8

28.4

Rel (local)

1.4

(1.0)

(12.6)

52-week high/low

US$7.8

US$5.4

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

Additional international deal

Q221

Canadian regulatory approval

Late 2021/early 2022

EMA regulatory approval

Late 2021/early 2022

Analysts

Maxim Jacobs

+1 646 653 7027

Nathaniel Calloway

+1 646 653 7036

SIGA Technologies is a research client of Edison Investment Research Limited

SIGA recently reported Q121 results, which featured $3.4m of revenue for the delivery of oral TPOXX to the Public Health Agency of Canada (PHAC). The company also announced that in April it delivered an additional $6.9m worth of product to the agency. Importantly, during the Q121 earnings call, SIGA announced it is working towards sales to one or more new jurisdictions in 2021, with the next sale estimated to occur by the end of June of this year. Precise details on this upcoming contract are unknown.

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

8.9

N/A

12/21e

119.2

75.2

0.75

0.0

9.7

N/A

12/22e

124.5

79.4

0.79

0.0

9.2

N/A

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

International sales are a key growth driver

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 estimates that another contract may be signed in a new jurisdiction in Q221. Uptake from Europe, Japan, South Korea and Australia could potentially lead to a meaningful market opportunity.

Cipla agreement provides upside

In March, SIGA announced a strategic partnership with Cipla Therapeutics in which SIGA will leverage its expertise in biodefense for the purpose of a US Biomedical Advanced Research and Development Authority (BARDA) contract for Cipla’s novel antibiotic ZEMDRI, currently approved for complicated urinary tract infections (cUTI). As a frame of reference, Paratek received a contract award from BARDA worth up to $285m in 2019 for the development of Nuzyra for pulmonary anthrax.

IV TPOXX NDA filed with the FDA

In April, SIGA announced it had filed an NDA with the FDA for the intravenous (IV) formulation of TPOXX. The IV version of TPOXX 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.

Valuation: $957m or $12.58 per share

We adjusted our SIGA valuation to $957m or $12.58 per share, from $968m or $12.61 per share. The decline is due to lower net cash, mainly attributable to the stock buyback, while a lower number of outstanding shares mitigated the per-share decrease. SIGA has a $50m stock repurchase program in place (announced in Q120) and had bought $35m in total by the end of Q121 ($6.5m in Q121 alone).

Q1 update

SIGA recently reported Q121 results, which featured $3.4m of international revenue for the delivery of oral TPOXX to PHAC. This is a significant improvement over 2020 when the company reported approximately $2m in international sales. In April, the company delivered an additional $6.9m worth of oral TPOXX to the agency. Total revenues were $4.8m compared to $2.6m in the same quarter last year. We reiterate the timing of TPOXX deliveries can fluctuate significantly, which has created volatility and lumpiness with SIGA’s revenues in the past. The company continues to expect that US deliveries will be concentrated in the second half of the year due to government procurement and budget schedules as well as due to a new administration, with many appointees yet to be confirmed.

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 all human pathogenic orthopoxviruses (smallpox, monkeypox, cowpox, vaccinia) 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

US

Liquid (powder for re-constitution)

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

Currently being formulated. 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

EU

Oral

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

MAA submission July 2020

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

Importantly the company announced on the Q121 earnings conference call that the company continues to work towards sales in one or more new jurisdictions, with the next sale estimated to occur by the end of June of this year. SIGA is partnered with Meridian Medical Technologies, a Pfizer subsidiary focused on health security with a 50-year history of selling medical countermeasures globally, for the marketing of TPOXX outside the US. Other products marketed by Meridian include an antidote treatment for organophosphorus nerve agents such as Sarin and VX, and a treatment for cyanide poisoning, among others.

So far two separate contracts with the Canadian government for the delivery of up to $47m (both contracts combined) worth of TPOXX have been signed and the companies are working on other markets. We believe SIGA and Meridian will focus on key US allies, such as Europe, Australia, Japan and South Korea, and that SIGA will seek partnerships for other territories.

Also, in March, SIGA announced a strategic partnership with Cipla Therapeutics in which SIGA will leverage its expertise in biodefense for the purpose of a BARDA contract for Cipla’s novel antibiotic ZEMDRI, currently approved for complicated urinary tract infections (cUTI) caused by E. coli, K. pneumoniae, P. mirabilis and E. cloacae and generally reserved as a last line of defense. The product was launched in 2018 and had approximately $38m in 2020 sales according to Evaluate Pharma. Financial terms of the agreement have not been disclosed nor the precise market opportunity. As a frame of reference, Paratek received a contract award from BARDA worth up to $285m in 2019 for the development of its novel antibiotic Nuzyra for pulmonary anthrax. Initial funding was approximately $59m for the development of Nuzyra and the purchase of 2,500 treatment courses to add to the strategic national stockpile (SNS). An additional $77m may be provided for FDA post-marketing requirements, $20m for manufacturing related requirements, $13m for the development of Nuzyra for prophylaxis and up to $115m for the additional purchase of 7,500 courses for the SNS. In over 10 years of partnerships with industry, BARDA has invested over $1.5bn in antibiotics.

Valuation

We have adjusted our valuation for SIGA to $957m or $12.58 per share, from $968m or $12.61 per share. The total valuation decline is due to lower net cash, mainly attributable to the stock buyback, while a lower number of outstanding shares mitigated the decline in the per-share value. Our valuation for SIGA may change in the future as additional international deals are announced and when we receive greater clarity on the Cipla partnership (such as timing and economic terms), which is not currently included in our valuation.

Exhibit 2: SIGA valuation

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

442

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

 

 

 

 

 

850

Net cash (Q121) ($m)

106.5

Total firm value ($m)

957

Total basic shares (m)

76.1

Value per basic share ($)

$12.58

Source: Edison Investment Research

Financials

Following Q121 results, we have kept our forecasts for SIGA largely the same, though we did increase our SG&A estimate by $1.9m in 2021 and $2.0m in 2022, mainly due to a higher run rate. SIGA reported $106.5m in cash at the end of March and is profitable (although profitability for any specific period will depend on the timing of government orders and payments). SIGA also has a $50m stock-repurchase program in place (announced March 2020) and bought $35m of stock from March 2020 through the end of March 2021, including $6.5m in Q121.

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

119,172

124,465

Cost of Sales

(1,783)

(14,797)

(15,696)

(15,956)

Gross Profit

24,959

110,162

103,476

108,508

Research & Development

(13,303)

(10,939)

(11,048)

(11,158)

General & Administrative

(13,978)

(14,722)

(17,255)

(17,945)

EBITDA

 

 

(27)

84,503

75,069

78,875

Operating Profit (before amort. and except.)

 

 

500

85,033

75,199

79,405

Intangible Amortization

0

0

0

0

Other

2,822

532

26

0

Exceptionals

5,091

(8,507)

919

0

Operating Profit

5,591

76,525

76,118

79,405

Net Interest

(15,770)

(3,017)

0

0

Other

0

0

0

0

Profit Before Tax (norm)

 

 

(15,270)

82,016

75,199

79,405

Profit Before Tax (reported)

 

 

(10,178)

73,509

76,118

79,405

Tax

2,937

(17,167)

(18,286)

(19,057)

Deferred tax

0

0

0

0

Profit After Tax (norm)

(12,332)

64,849

56,913

60,348

Profit After Tax (reported)

(7,241)

56,342

57,832

60,348

Average Number of Shares Outstanding (m)

81.0

79.3

76.2

76.1

EPS - norm ($)

 

 

(0.15)

0.82

0.75

0.79

EPS - reported ($)

 

 

(0.09)

0.71

0.76

0.79

Dividend per share (c)

0.00

0.00

0.00

0.00

Gross Margin (%)

93.3

88.2

86.8

87.2

EBITDA Margin (%)

-0.1

67.6

63.0

63.4

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

1.9

68.0

63.1

63.8

BALANCE SHEET

Fixed Assets

 

 

18,524

6,223

5,917

5,967

Intangible Assets

898

898

898

898

Tangible Assets

2,618

2,104

2,027

2,077

Other

15,008

3,221

2,992

2,992

Current Assets

 

 

180,042

143,608

192,625

254,431

Stocks

0

0

0

0

Debtors

4,168

3,340

4,001

4,001

Cash

160,987

117,890

166,263

228,070

Other

14,887

22,378

22,361

22,361

Current Liabilities

 

 

(91,736)

(10,484)

(7,512)

(7,512)

Creditors

(3,054)

(1,278)

(447)

(447)

Short term borrowings

(80,045)

0

0

0

Other

(8,637)

(9,205)

(7,065)

(7,065)

Long Term Liabilities

 

 

(9,047)

(9,555)

(9,555)

(8,570)

Long term borrowings

0

0

0

0

Other long term liabilities

(9,047)

(9,555)

(9,555)

(8,570)

Net Assets

 

 

97,784

129,793

181,476

244,317

Minority Interests

0

0

0

0

Shareholder equity

 

 

97,784

129,793

181,476

244,317

CASH FLOW

Operating Cash Flow

 

 

(18,204)

71,519

54,969

61,857

Net Interest

0

0

0

0

Tax

0

0

0

0

Capex

(29)

(16)

(53)

(50)

Acquisitions/disposals

0

0

0

0

Financing

0

0

0

0

Dividends

0

0

0

0

Other

(5,674)

(28,687)

(6,543)

0

Net Cash Flow

(23,907)

42,817

48,373

61,807

Opening net debt/(cash)

 

 

(104,849)

(80,942)

(117,891)

(166,263)

HP finance leases initiated

0

0

0

0

Exchange rate movements

0

0

0

0

Other

0

(5,868)

(0)

0

Closing net debt/(cash)

 

 

(80,942)

(117,891)

(166,263)

(228,070)

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 £49,500 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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New Zealand

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.

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.

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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 £49,500 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.

New Zealand

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

Level 4, Office 1205

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

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Research: Industrials

Delignit — Further recovery anticipated in FY21

Delignit’s FY20 results exceeded company guidance due to the recovery in automotive segments in the second half of the year. Revenues declined 9% in FY20 with good growth of 3% in the second half. The normalised EBITDA margin increased 40bp, fuelled by lower ramp-up costs of the motor caravan order. Delignit’s FY21 guidance assumes at least 14% growth in revenues and >30% growth in normalised EBITDA. In the longer term, Delignit will benefit from expected growth in commercial vehicles, further geographical expansion and broadening of its product offering.

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