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Research: Healthcare
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.
Written by
SIGA Technologies |
Solid Q322, underpinned by international traction |
Q322 results |
Pharma and biotech |
4 November 2022 |
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SIGA Technologies is a research client of Edison Investment Research Limited |
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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 |
EBITDA* |
PBT* |
EPS* |
P/E |
Net cash |
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 $109.8m cash on its books, a debt-free balance sheet and improving sales traction, we expect SIGA to be well-capitalized to support its clinical and market expansion plans.
Exhibit 1: SIGA Technologies Valuation
Product/program |
Main indication |
Status |
Probability of Success |
Approval/launch/ |
Peak sales ($m) |
rNPV |
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
|
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Research: Investment Companies
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