Review of Q225 results
Robust Q2 revenues driven by US SNS deliveries…
SIGA reported a strong Q225 topline, with total revenues of $81.1m, including $79.1m
in product sales and $2.0m in R&D-related revenue. Product sales comprised $53.3m
of oral TPOXX deliveries and $25.8m of IV TPOXX deliveries to the SNS. No international
sales were booked in the quarter ($5.8m in Q125). The oral TPOXX revenues reflect
completion of the remaining deliveries under the $112.5m BARDA option exercised in
July 2024, while IV TPOXX revenue is likely linked to the fulfilment of the July 2023
order. Overall, the Q225 product revenues were nearly four times the Q224 figure of
$20.7m (which included $17.6m of IV TPOXX deliveries to the SNS and another $3.1m
of oral TPOXX international sales). We note, however, that period-on-period comparisons
are not always meaningful for SIGA given the inherently lumpy nature of government
procurement-driven sales.
R&D-related revenues grew by 76% y-o-y to $2.01m in Q225 (Q224: $1.1m) attributable
to activities under the 19C BARDA contract. We believe the year-on-year growth was
driven by increased R&D activities following the additional $27m in BARDA funding
announced in Q225. Of this, $14m is earmarked for manufacturing activities over the
next two to three years, while the other $13m is dedicated to the development of TPOXX
for pediatric patients (weighing <13kg).
… driving healthy operating profitability
SIGA delivered a robust Q225 operating profit of $45.7m, representing a 57.7% operating
margin on product sales, a sharp improvement from $1.1m in Q224 and a $2.3m loss in
Q125. Cost of sales rose to $25.6m (vs $12.3m in Q224), including a $0.9m inventory
write-off. Note that while oral TPOXX maintains a typical gross margin of 85%, the
more complex manufacturing of IV TPOXX yields significantly lower margins (<40%).
With IV TPOXX representing 32.6% of the Q225 product sales, the blended gross margin
for the period stood at 67.7%, which in our view is still strong.
R&D expenses increased to $4.4m, higher than the run-rate in the past few quarters,
which has averaged c $3m ($2.9m in Q224 and $3.5m in Q125). The company attributes
this to higher vendor-related research and development, IT upgrades, employee compensation
and regulatory consulting costs. With the pediatric study set to begin in the coming
months, we expect the R&D spend to trend higher. SG&A expenses, on the other hand,
stayed broadly flat on both a year-on-year basis and a quarter-on-quarter basis ($5.5m
vs $5.5m in Q224 and $5.7m in Q125). Management notes that while expenses associated
with international sales and marketing activity came down year-on-year (following
the revision of the international distribution agreement with Meridian in March 2024),
they were offset by higher compensation expenses.
Cash generation strengthens the balance sheet
Operating cash flow surged to $63.1m in Q2 (vs $6.0m in Q224), supported by strong
profitability and working capital management. Period-end net cash stood at $182.5m,
up from $162.3m in Q1, despite a $42.9m dividend payout during the quarter. We view
SIGA as well-capitalized to support operations ahead of the anticipated RFP process,
contract negotiations, and subsequent deliveries.
Estimate revisions reflect European sales caution
Based on the Q225 results and subsequent developments, we make certain changes to
our FY25 and FY26 estimates. Following the $27m new R&D funding from BARDA, we raise
our R&D-related revenue forecasts to $10.8m and $11.9m in FY25 and FY25, respectively,
from $5.6m and $6.1m previously. Conversely, we trim our product sales estimates to
$94.6m and $214.7m in FY25 and FY26 ($116.0m and $231.3m previously), incorporating
greater near-term conservatism for European TPOXX sales given the ongoing CHMP referral
process (discussed in more detail later). While we had previously estimated $25m and
$28m in product sales in FY25 and FY26 from international markets (ex-Canada), we
revise these figures down to $2.8m and $11.2m, respectively. However, our long-term
outlook remains unchanged given TPOXX’s extensive clinical dataset and BARDA’s continued
support (as a reminder, BARDA funded the initial R&D development for TPOXX prior to
approval and also supported the PEP label expansion studies prior to the recent pediatric
development contribution). We do not view the CHMP’s action as a structural threat
to longer-term demand but acknowledge potential near-term disruptions. We will continue
to monitor the situation as it develops and will revisit our assumptions accordingly.
We also make minor modifications to our COGS and opex estimates, with the biggest
change coming from SG&A expenses, which we revise downwards, in line with the H125
trend ($23.5m in FY25 vs $28.3m previously; $26.6m in FY26 vs $29.6m previously).
Overall, we now estimate operating profit of $42.5m in FY25 ($54.8m previously) and
$142.9m in FY26 (from $149.8m).
