SIGA Technologies — Solid Q322, underpinned by international traction

SIGA Technologies (NASDAQ: SIGA)

Last close As at 17/07/2024

USD9.01

−0.27 (−2.91%)

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Research: Healthcare

SIGA Technologies — Solid Q322, underpinned by international traction

SIGA reported robust Q322 results, with sales momentum driven by international deliveries of oral TPOXX as governments expedited stockpiling to manage the monkeypox threat. Of the $77m in international orders received year to date, $61m was delivered in Q322 (93% of total product sales) following $5m in Q222. The company benefited from higher international sales margins, leading to a 59.7% reported operating margin. We estimate a strong FY23 for SIGA, with BARDA deliveries for oral and IV TPOXX and upside optionality from additional/recurring government contracts and label expansion opportunities in the domestic markets, predicated on the success of the recently initiated clinical trials in monkeypox. Our valuation is largely unchanged at $19.64/share.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

SIGA Technologies

Solid Q322, underpinned by international traction

Q322 results

Pharma and biotech

4 November 2022

`

Price

US$8.57

Market cap

US$626m

Net cash ($m) at 30 September 2022

109.8

Shares in issue

73.0m

Free float

56%

Code

SIGA

Primary exchange

NASDAQ

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(18.3)

(54.8)

11.2

Rel (local)

(19.2)

(49.5)

39.3

52-week high/low

$26.15

$5.96

Business description

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

Next events

FY22 results

March 2023

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Jyoti Prakash, CFA

+44 (0)20 3077 5700

SIGA Technologies is a research client of Edison Investment Research Limited

SIGA reported robust Q322 results, with sales momentum driven by international deliveries of oral TPOXX as governments expedited stockpiling to manage the monkeypox threat. Of the $77m in international orders received year to date, $61m was delivered in Q322 (93% of total product sales) following $5m in Q222. The company benefited from higher international sales margins, leading to a 59.7% reported operating margin. We estimate a strong FY23 for SIGA, with BARDA deliveries for oral and IV TPOXX and upside optionality from additional/recurring government contracts and label expansion opportunities in the domestic markets, predicated on the success of the recently initiated clinical trials in monkeypox. Our valuation is largely unchanged at $19.64/share.

Year end

Revenue
(US$m)

EBITDA*
(US$m)

PBT*
(US$m)

EPS*
(US$)

P/E
(x)

Net cash
(US$m)

12/20

125.0

88.6

81.5

0.81

10.6

117.9

12/21

133.7

89.7

89.1

0.92

9.4

103.1

12/22e

115.4

47.6

47.1

0.49

17.5

106.8

12/23e

169.0

89.1

88.5

0.96

8.9

106.0

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

Q322 marked by strong international momentum

SIGA’s Q322 performance was marked by the ‘internationalization’ of the hitherto domestically focused business. Of the total $65.6m product sales, $61m was contributed by international deliveries (of the total $77m order received year to date from 12 international jurisdictions; $5m delivered in Q222). We expect the pending $11m order book to be delivered in Q422–FY23, with the possibility of incremental/ recurring contracts contingent on the direction of the monkeypox outbreak takes. Margins also benefited from the higher-priced international contracts and we expect this trend to continue as more international orders are booked. SIGA continues to be debt free and well-capitalized, ending the period with a $109.8m cash balance.

Strong sales visibility into FY23

We expect oral TPOXX expiries in 2023 in the US government stockpile, which can lead to an option exercise for oral TPOXX under the US government 19C contract (worth $112.5m according to our understanding). Given the above and deliveries of $26m worth of IV TPOXX orders from BARDA due in FY23 as well as the pending deliveries from international orders, FY23 looks to be another strong year for SIGA, with incremental contract wins adding to the upside potential. We have adjusted our FY22–23 estimates to factor in performance in the first nine months of FY22 (9M22) and current order book visibility, pushing out part of the revenue realization to FY23 and revising FY22 costs to match the nine-month run rate. For FY23, the revenue upgrade is largely counterbalanced by higher cost estimates. We now expect the FY23 EBITDA margin to be 52.7% versus 51.2% previously.

Valuation: Largely unchanged at $19.64/share

Based on the aforementioned changes to our estimates, incorporating the updated net cash figure and rolling our model forward, our valuation is largely unchanged at $19.64/share (previously $19.8/share).

Estimate revisions

Based on Q322 performance and current visibility on upcoming contractual obligations and the order book, we have made some changes to our forecasts. We now calculate FY22e and FY23e revenues at $115.4m and $169.0m respectively (from $125.0m and $128.1m, previously) as we push out the TPOXX IV delivery timelines to FY23 from our earlier estimate of FY22 and make small adjustments to our revenue expectations for other jurisdictions. We highlight that, unlike oral TPOXX, IV TPOXX is a lower-margin business (gross margin of c 35% versus c 85% for oral TPOXX) and pushing out these deliveries to FY23 reduces our COGS estimates for FY22 ($11.6m versus our previous estimate of $30.6m). We have also made adjustments to our R&D (increased to $21.5m in FY22 from $10.0m previously) and SG&A estimates (increased to $35.2m for FY22 from $21.4m previously) based on the 9M22 performance. The higher R&D estimate is attributed to the company’s efforts in seeking label expansion for TPOXX as a treatment for monkeypox in the US. The higher SG&A expenses estimates are driven by the materially higher Q322 figure ($19.7m versus $5.9m in the previous quarter), which we believe was due to international expansion efforts during the quarter. As a result, our EBITDA margin estimates for FY22 and FY23 now stand at 41.3% and 52.7%, respectively, versus 50.8% and 51.2% previously.

Valuation

The aforementioned changes to our estimates, rolling forward our model and incorporating the new net cash figure has resulted in slightly adjusting our SIGA valuation to $1.43bn or $19.64 per share from $1.45bn or $19.8 per share previously. With $109.8m cash on its books, a debt-free balance sheet and improving sales traction, we expect SIGA to be well-capitalized to support its clinical and market expansion plans.

Exhibit 1: SIGA Technologies 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

122

419

TPOXX Canada

Treatment of smallpox

On Market

100%

2020

19

53

TPOXX US IV and pediatric formulations

Treatment of smallpox

IV (NDA approved May 2022), pediatric (being formulated)

60-100%

2022-2025

33

32

TPOXX US PEP

Post-exposure prophylaxis following exposure to smallpox

Development

50%

2025

149

241

TPOXX EU, Japan, Korea, Australia

Treatment of smallpox

EMA approved

55%

2022

346

312

Commercialization of TPOXX, PEP. US, Canada, Europe, Asia

Treatment of monkeypox

2024

173

269

Total

 

 

 

 

 

1,324

Net cash (Q322) ($m)

109.8

Total firm value ($m)

1,434

Total basic shares (m) as of Q222

73.0

Value per basic share ($)

$19.64

Source: Edison Investment Research


Exhibit 2: Financial summary

$000s

2020

2021

2022e

2023e

Year end 31 December

US GAAP

US GAAP

US GAAP

US GAAP

PROFIT & LOSS

 

Revenue

 

124,959

133,670

115,375

168,952

Cost of Sales

(14,797)

(16,602)

(11,595)

(35,245)

Gross Profit

110,162

117,069

103,781

133,707

Research & Development

(10,939)

(9,942)

(21,493)

(21,708)

General & Administrative

(14,722)

(18,034)

(35,160)

(23,471)

EBITDA

 

88,579

89,716

47,649

89,051

Operating Profit (before amort. and excepts.)

 

84,501

89,093

47,127

88,528

Intangible Amortisation

-

-

-

-

Other

532

101

-

-

Exceptionals

(8,507)

118

-

-

Operating Profit

 

75,993

89,211

47,127

88,528

Net Interest

(3,017)

-

-

-

Other

-

-

-

-

Profit Before Tax (norm)

 

81,484

89,093

47,127

88,528

Profit Before Tax (reported)

 

72,977

89,211

47,127

88,528

Tax

(17,167)

(19,861)

(11,311)

(21,247)

Deferred tax

-

-

-

-

Profit After Tax (norm)

64,317

69,232

35,817

67,281

Profit After Tax (reported)

55,810

69,350

35,817

67,281

Average Number of Shares Outstanding (m)

79

75

73

70

EPS - normalized ($), basic

 

0.81

0.92

0.49

0.96

EPS - normalized fully diluted ($)

 

0.81

0.91

0.48

0.95

EPS - reported ($)

 

0.70

0.92

0.49

0.96

Dividend per share ($)

-

-

0.45

-

Gross Margin (%)

88

88

90

79

EBITDA Margin (%)

71

67

41

53

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

68

67

41

52

BALANCE SHEET

Fixed Assets

 

6,223

5,973

7,615

7,666

Intangible Assets

898

898

898

898

Tangible Assets

2,104

2,366

2,417

2,467

Other

3,221

2,709

4,301

4,301

Current Assets

 

143,608

208,753

203,279

237,675

Stocks

-

19,510

30,000

30,000

Debtors

3,340

83,650

64,232

99,473

Cash

117,890

103,139

106,814

105,968

Other

22,378

2,453

2,233

2,233

Current Liabilities

 

(10,484)

(30,488)

(27,456)

(18,333)

Creditors

(1,278)

(2,028)

(2,445)

(2,445)

Short term borrowings

-

-

-

-

Other

(9,205)

(28,460)

(25,011)

(15,887)

Long Term Liabilities

 

(9,555)

(9,924)

(3,630)

(3,630)

Long term borrowings

-

-

-

-

Other long term liabilities

(9,555)

(9,924)

(3,630)

(3,630)

Net Assets

 

129,793

174,314

179,809

223,378

Minority Interests

-

-

-

-

Shareholder equity

 

129,793

174,314

179,809

223,378

CASH FLOW

Operating Cash Flow

 

71,519

11,495

36,670

24,705

Net Interest

-

-

-

-

Tax

-

-

-

-

Capex

(16)

(51)

(51)

(51)

Acquisitions/disposals

-

-

-

-

Financing

-

-

-

-

Dividends

-

-

(32,944)

-

Other (including share buybacks)

(114,600)

(26,195)

-

(25,500)

Net Cash Flow

(43,097)

(14,751)

3,675

(846)

Opening net debt/(cash)

 

(80,942)

(117,890)

(103,139)

(106,814)

HP finance leases initiated

-

-

-

-

Exchange rate movements

-

-

-

-

Other

80,045

0

-

0

Closing net debt/(cash)

 

(117,890)

(103,139)

(106,814)

(105,968)

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.

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Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

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New Zealand

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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

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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 2022 Edison Investment Research Limited (Edison).

Australia

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

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

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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