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Last close As at 26/05/2023
USD5.58
▲ −0.10 (−1.76%)
Market capitalisation
USD398m
Research: Healthcare
SIGA’s Q123 results were largely driven by US TPOXX deliveries under existing contracts. Q123 product revenues of $5.7m ($7.3m in Q122) were primarily attributed to $5.1m in TPOXX deliveries to the US Department of Defense (DoD). An additional $2.6m in R&D-related income took total revenue to $8.3m (down 21% y-o-y). While TPOXX deliveries (oral and intravenous, IV) to the US strategic national stockpile and international expansion remain key growth areas, the potential post-exposure prophylactic (PEP) label expansion following the projected data readout within the next two months (FDA submission targeted for early 2024) is anticipated to be the next key revenue growth catalyst. With a longer duration of treatment required (28 days versus 14 for smallpox), the PEP opportunity could materially expand SIGA’s addressable market, in our view. SIGA remains well capitalized (end-Q123 cash of $115.7m), resulting in the company announcing a special cash dividend of $0.45/share, payable in June 2023. We now obtain a valuation of $17.53/share (ex-dividend), from $17.70/share previously.
SIGA Technologies |
US stockpiles front and center in Q1 and FY23 |
Q123 update |
Pharma and biotech |
15 May 2023 |
Share price performance
Business description
Next events
Analysts
SIGA Technologies is a research client of Edison Investment Research Limited |
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SIGA’s Q123 results were largely driven by US TPOXX deliveries under existing contracts. Q123 product revenues of $5.7m ($7.3m in Q122) were primarily attributed to $5.1m in TPOXX deliveries to the US Department of Defense (DoD). An additional $2.6m in R&D-related income took total revenue to $8.3m (down 21% y-o-y). While TPOXX deliveries (oral and intravenous, IV) to the US strategic national stockpile and international expansion remain key growth areas, the potential post-exposure prophylactic (PEP) label expansion following the projected data readout within the next two months (FDA submission targeted for early 2024) is anticipated to be the next key revenue growth catalyst. With a longer duration of treatment required (28 days versus 14 for smallpox), the PEP opportunity could materially expand SIGA’s addressable market, in our view. SIGA remains well capitalized (end-Q123 cash of $115.7m), resulting in the company announcing a special cash dividend of $0.45/share, payable in June 2023. We now obtain a valuation of $17.53/share (ex-dividend), from $17.70/share previously.
Year |
Revenue (US$m) |
EBITDA* |
PBT* |
EPS* |
P/E |
Net cash |
12/21 |
133.7 |
89.7 |
89.1 |
0.92 |
6.4 |
103.1 |
12/22 |
110.8 |
44.3 |
42.7 |
0.45 |
13.1 |
98.8 |
12/23e |
175.2 |
97.2 |
96.7 |
1.05 |
5.6 |
110.7 |
12/24e |
181.0 |
102.3 |
101.8 |
1.16 |
5.1 |
164.5 |
Note: *EBITDA, PBT and EPS (diluted) are normalized, excluding amortization of acquired intangibles, exceptional items and share-based payments.
FY23 BARDA deliveries in sight
In Q123, SIGA recorded $8.3m in revenue (vs $10.5m in Q122), mainly led by oral TPOXX deliveries ($5.1m) to the US DoD and R&D-related revenue ($2.6m) from the government-sponsored PEP label program. We project strong top-line performance in FY23, driven by anticipated oral and IV TPOXX deliveries (worth $113m and $26m, respectively) under the 19C BARDA contract, the pending $5.5m in deliveries to the US DoD and $8m from international orders (including $7m of orders contracted but not delivered in FY22). Further upside could come from any additional orders received through FY23.
PEP trial data readout a crucial upcoming milestone
With patient enrolment for both immunogenicity and expanded safety trials under the PEP label expansion program complete, we expect all eyes to be focused on data readouts, expected within the next two months. If favourable, this should lead to a supplementary new drug application by early 2024, followed by a possible initiation of PEP sales in 2025.
Valuation: Adjusts to $17.53 per share (ex-dividend)
SIGA ended Q123 with a strong balance sheet, allowing it to announce a $32.1m ($0.45/share) cash dividend (similar to FY22). The 8% dividend yield, in particular, is encouraging, given the current macro market environment. Incorporating the ex-dividend cash balance ($83.6m), lower share count (71.3m vs 72.2m previously), and slight tweaks to our FY23 and FY24 estimates, we have adjusted our valuation (ex-dividend) to $1.25bn ($17.53/share), from $1.28m ($17.7/share).
Financials
SIGA reported total revenue of $8.3m in Q123, of which $5.7m ($7.3m in Q122) were product-related revenues, primarily attributed to oral TPOXX deliveries for the existing US DoD contract ($5.1m of the total $10.7m order). The Q122 product revenues in comparison were related to sales of IV TPOXX to the US government under the 19C BARDA contract. R&D-related revenue was also lower year-on-year in the quarter ($2.6m vs $3.2m in Q122) and was primarily related to a change in the estimated profitability of the PEP label expansion R&D contract. Based on the upcoming expirations in the US strategic national stockpile, we continue to estimate oral TPOXX deliveries for BARDA of $112.5m each in FY23 and FY24. Additionally, we anticipate upside from international oral TPOXX orders of c $8m (including $1m or oral TPOXX delivered in April 2023 and $7m in pending order deliveries for contracts signed in FY22 and to be delivered by July 2023) and IV TPOXX orders worth c $26m, to be fulfilled during the year. We also expect the pending $5.5m of deliveries under the original $10.7m DoD contract (oral TPOXX worth $5.1m delivered in Q123) to materialise in FY23. Though we expect a strong operating performance in FY23 and FY24, we note the possibility of variability in timings of these orders.
Gross profit on product sale for the period improved to $4.6m from $2.6m (Q122), due to a significant decline in cost of sales ($1.2m in Q123 vs $4.7m in Q122), primarily related to lower manufacturing cost associated with oral TPOXX deliveries during the quarter as compared to IV TPOXX deliveries in Q122. We note that stockpile orders for oral TPOXX under the 19c BARDA contract have a relatively higher margin (c 85% gross margin) versus IV TPOXX (less than 40% gross margin).
Operating loss for the quarter came in at $2.1m in Q123 ($1.4m in Q122). Of the total operating expenses, R&D expenses rose to $5.0m (Q123) from $3.5m (Q122) due to higher fees for EMA regulatory submissions and increased vendor-related expenses for the PEP label expansion study and BARDA contract, which could not be fully offset by the R&D revenue recognized during the quarter. SG&A expenses were up 14.1% y-o-y to $4.2m, primarily due to higher professional service fees. SIGA recorded net loss of $0.9m in Q123 compared to $0.4m in Q122.
We make minor adjustments to our revenue forecasts, deferring some of the anticipated deliveries under the Canadian Department of National Defence’s option (until 31 March 2024) to purchase up to $6m of additional oral TPOXX. We now forecast FY23 and FY24 revenue of $175m and $181m versus $176m and $177m, respectively. Our revised estimates for operating profit are $96.7m and $101.8m ($97.6m and $98.8m previously) for FY23 and FY24, respectively.
Valuation
We value SIGA on a risk-adjusted NPV basis for its various programs and contracts, forecasting to the end of the patent life in each geography. Our updated valuation for SIGA stands at $1.25bn or $17.53 per share ($1.28bn or $17.70/share previously). Incorporating the discussed changes to our estimates, rolling forward our model and incorporating the updated net cash figure (adjusted for the $0.45/share cash dividend announced post-period) has resulted in our valuation re-adjusting to $1.25bn or $17.53 per share from $1.28bn or $17.70/share previously.
Exhibit 1: SIGA’s valuation
Product/program |
Main indication |
Status |
Probability of success |
Approval/launch/ |
Peak sales ($m) |
rNPV |
|
TPOXX (US base - oral) |
Treatment of smallpox |
On market |
100% |
2018 |
123 |
363 |
|
TPOXX Canada |
Treatment of smallpox |
On market |
100% |
2020 |
19 |
49 |
|
TPOXX US IV and pediatric formulations |
Treatment of smallpox |
IV (NDA approved May 2022), pediatric (being formulated) |
60–100% |
2022–25 |
30 |
29 |
|
TPOXX US PEP |
Post-exposure prophylaxis following exposure to smallpox |
Development |
50% |
2025 |
128 |
234 |
|
TPOXX EU, Japan, Korea, Australia |
Treatment of smallpox |
EMA approved |
55% |
2022 |
346 |
223 |
|
Commercialization of TPOXX, PEP. US, Canada, Europe, Asia |
Treatment of mpox |
2024 |
173 |
269 |
|||
Total |
|
|
|
|
|
1,166 |
|
Pro-forma net cash (Q123) ($m) |
83.6 |
||||||
Total firm value ($m) |
1,249 |
||||||
Total basic shares (m) outstanding |
71.3 |
||||||
Value per basic share ($) |
$17.53 |
||||||
Source: Edison Investment Research
SIGA ended Q123 with a healthy net cash balance of $115.7m, which enabled it to declare a $0.45/share special cash dividend in May 2023. At the current outstanding share count of 71.3m, this comes to a payout of $32.1m and translates to a healthy 8% dividend yield and a payout ratio of c 44% of our projected FY23 net income of $73.5m. The dividend is payable on 1 June 2023 to shareholders of record at the close of business on 16 May 2023. We note that the company announced a similar dividend payout in May 2022, highlighting sustained balance sheet strength. This is particularly encouraging given the recent challenging macroeconomic environment for the biotech sector. We do note that SIGA is a commercial-stage, revenue generating company, which differentiates it from the typical development-stage or non-profitable biotechs. SIGA also continued share buybacks in Q123 and we calculate a total 1.14m shares bought back in the quarter for $7.6m. We note that (including the recent dividend declaration) the company has spent close to $150m in capital management since early 2020.
Note that our current valuation of SIGA ($17.53/share) incorporates pro-forma cash that is ex-dividend ($83.6m) and therefore investors may consider the incremental income from dividends (in addition to the expected capital gains) while evaluating return potential from the business. However, it is uncertain if the company expects to provide similar payouts in future years.
Mpox still a potential opportunity, albeit uncertain timing
In our last note, we had highlighted the US Centers for Disease Control and Prevention cautioning regarding mpox (monkeypox) recurrence and possible future outbreaks, and emphasizing the importance of being prepared. Despite the waning numbers globally, an increased number of cases has been reported recently in certain Asian countries such as Japan, South Korea and China. While not alarming, this highlights the continued latent threat of future escalations and therefore the ongoing requirement for both preventative vaccines and therapeutics, such as TPOXX, which is currently the only antiviral treatment approved for treatment of all orthopoxvirus pathogens, including mpox, in both the UK (July 2022) and the European Union (January 2022).
TPOXX has been used to treat more than 6,900 mpox patients in the United States on a compassionate basis and SIGA is participating in a total of nine trials (Q322 onwards) to assess the safety and efficacy of TPOXX in participants with mpox (the trials are required to receive regulatory approval from the US FDA). Five of these are randomized, placebo-controlled clinical trials and, as per latest available information, 175 patients have been enrolled across the studies. The pace of recruitment has been hindered by the reducing caseload globally, creating uncertainty in terms of full enrolment, readouts and FDA submission. SIGA has highlighted possible discussions with regulators to allow pooling of interim data from various studies as an alternative to completing the originally planned enrolment targets from a single study. If things progress of this front, it may allow for faster regulatory submission.
Exhibit 2: Financial summary
$000s |
2020 |
2021 |
2022 |
2023e |
2024e |
||
Year end 31 December |
US GAAP |
US GAAP |
US GAAP |
US GAAP |
US GAAP |
||
PROFIT & LOSS |
|
|
|||||
Revenue |
|
|
124,959 |
133,670 |
110,776 |
175,159 |
180,974 |
Of which Product revenue |
115,471 |
126,803 |
86,662 |
154,684 |
160,294 |
||
Of which R&D revenue |
9,488 |
6,868 |
24,114 |
20,476 |
20,681 |
||
Cost of Sales |
(14,797) |
(16,602) |
(10,433) |
(34,391) |
(33,059) |
||
Gross Profit on product sales |
100,674 |
110,201 |
76,229 |
120,293 |
127,235 |
||
Research & Development |
(10,939) |
(9,942) |
(22,526) |
(22,751) |
(22,978) |
||
General & Administrative |
(14,722) |
(18,034) |
(35,117) |
(21,360) |
(23,123) |
||
EBITDA |
|
|
88,579 |
89,716 |
44,250 |
97,183 |
102,338 |
Operating Profit (before amort. and excepts.) |
|
|
84,501 |
89,093 |
42,700 |
96,658 |
101,814 |
Intangible Amortisation |
- |
- |
- |
- |
- |
||
Other |
532 |
101 |
1,032 |
- |
- |
||
Exceptionals |
(8,507) |
118 |
401 |
- |
- |
||
Reported operating Profit |
|
|
76,525 |
89,312 |
44,133 |
96,658 |
101,814 |
Net Interest |
(3,017) |
- |
- |
- |
- |
||
Other |
- |
- |
- |
- |
- |
||
Profit Before Tax (norm) |
|
|
81,484 |
89,093 |
42,700 |
96,658 |
101,814 |
Profit Before Tax (reported) |
|
|
73,509 |
89,312 |
44,133 |
96,658 |
101,814 |
Tax |
(17,167) |
(19,861) |
(10,228) |
(23,198) |
(24,435) |
||
Deferred tax |
- |
- |
- |
- |
- |
||
Profit After Tax (norm) |
64,317 |
69,232 |
32,472 |
73,460 |
77,379 |
||
Profit After Tax (reported) |
56,342 |
69,451 |
33,905 |
73,460 |
77,379 |
||
Average Number of Shares Outstanding (m) |
79 |
75 |
73 |
70 |
67 |
||
EPS - normalized ($), basic |
|
|
0.81 |
0.92 |
0.45 |
1.05 |
1.16 |
EPS - normalised fully diluted (c) |
|
|
80.97 |
90.61 |
44.15 |
104.47 |
114.90 |
EPS - reported ($) |
|
|
0.70 |
0.92 |
0.46 |
1.05 |
1.16 |
Gross Margin (%) |
87 |
87 |
88 |
78 |
79 |
||
EBITDA Margin (%) |
71 |
67 |
40 |
55 |
57 |
||
Operating Margin (before GW and except.) (%) |
68 |
67 |
39 |
55 |
56 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
6,223 |
5,973 |
9,250 |
10,659 |
10,134 |
Intangible Assets |
898 |
898 |
898 |
898 |
898 |
||
Tangible Assets |
2,104 |
2,366 |
1,848 |
1,324 |
799 |
||
Other |
3,221 |
2,709 |
6,503 |
8,437 |
8,437 |
||
Current Assets |
|
|
143,608 |
208,753 |
185,786 |
208,014 |
269,068 |
Stocks |
- |
19,510 |
39,273 |
43,200 |
45,360 |
||
Debtors |
3,340 |
83,650 |
45,407 |
49,948 |
54,942 |
||
Cash |
117,890 |
103,139 |
98,791 |
110,733 |
164,482 |
||
Other |
22,378 |
2,453 |
2,316 |
4,133 |
4,283 |
||
Current Liabilities |
|
|
(10,484) |
(30,488) |
(21,518) |
(20,730) |
(20,846) |
Creditors |
(1,278) |
(2,028) |
(3,355) |
(2,568) |
(2,683) |
||
Short term borrowings |
- |
- |
- |
- |
- |
||
Other |
(9,205) |
(28,460) |
(18,162) |
(18,162) |
(18,162) |
||
Long Term Liabilities |
|
|
(9,555) |
(9,924) |
(3,358) |
(3,358) |
(3,358) |
Long term borrowings |
- |
- |
- |
- |
- |
||
Other long term liabilities |
(9,555) |
(9,924) |
(3,358) |
(3,358) |
(3,358) |
||
Net Assets |
|
|
129,793 |
174,314 |
170,160 |
194,585 |
254,998 |
Minority Interests |
- |
- |
- |
- |
- |
||
Shareholder equity |
|
|
129,793 |
174,314 |
170,160 |
194,585 |
254,998 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
71,519 |
11,495 |
41,611 |
62,613 |
72,349 |
Net Interest |
- |
- |
- |
- |
- |
||
Tax |
- |
- |
- |
- |
- |
||
Capex |
(16) |
(51) |
- |
- |
- |
||
Acquisitions/disposals |
- |
- |
- |
- |
- |
||
Financing |
- |
- |
- |
- |
- |
||
Dividends |
- |
- |
(32,940) |
(32,071) |
- |
||
Other (including share buybacks) |
(114,600) |
(26,195) |
(13,019) |
(18,600) |
(18,600) |
||
Net Cash Flow |
(43,097) |
(14,751) |
(4,348) |
11,942 |
53,749 |
||
Opening net debt/(cash) |
|
|
(80,942) |
(117,890) |
(103,139) |
(98,791) |
(110,733) |
HP finance leases initiated |
- |
- |
- |
- |
- |
||
Exchange rate movements |
- |
- |
- |
- |
- |
||
Other |
80,045 |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(117,890) |
(103,139) |
(98,791) |
(110,733) |
(164,482) |
Source: Company reports, Edison Investment Research
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