Transcript
Welcome to the SIGA business update call. Before we turn the call over to SIGA management, please note that any forward-looking statements made during this call are based on management’s current expectations and observations, and are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statements. SIGA does not undertake any obligation to update publicly any forward-looking statement to reflect events or changed circumstances after this call. For a discussion of factors that could cause results to differ, please see the company’s filings with the Securities and Exchange Commission, including, without limitation, the company’s annual report on Form 10-K for the year ended December 31, 2021, and its subsequent reports on Form 10-Q and Form 8-K. I would now like to hand the conference over to Mr. Phil Gomez.
Thank you for taking the time to join today’s call. Today, I’m joined by Dan Luckshire, our CFO. We are pleased to have this opportunity to provide a business and financial update to our shareholders. We’ll then be happy to take questions. With $61 million of international sales this quarter, spread over 12 international customers, SIGA’s third quarter financial results continue a trend of substantial financial diversification at SIGA. In combination with the first sales of the intravenous formulation of TPOXX, IV TPOXX, in the first quarter of 2022 and the first sale of oral TPOXX to the U.S. Department of Defense in the second quarter of 2022, the sale of oral TPOXX or tecovirimat to 12 international customers in the third quarter of 2022 highlights the continuing and substantial diversification of SIGA’s revenue base. Importantly, I would like to note that the new procurement order in August for approximately $26 million of IV TPOXX by BARDA and the new DoD procurement contract award in September for up to approximately $11 million of oral TPOXX highlight how diversification can lay the groundwork for future revenues. In total, we have received approximately $115 million of firm commitment procurement orders for TPOXX this year, a portion of which will be recognized as revenue in 2023. Overall, we believe the expanded number of customers and recent repeat order activity by the DoD emphasizes the growing recognition by the government of the overall importance of health security preparedness and that by increasing both the scale and scope of TPOXX stockpiling, countries can better be prepared for the outbreak risks of smallpox, monkeypox, and other viruses in the orthopoxvirus family. We believe that broadened procurement of TPOXX is being driven by a combination of trends that have been in place for a while as well as by activity in connection with the current monkeypox outbreak. With respect to the monkeypox outbreak in which there have been approximately 77,000 global cases and 28,000 U.S. cases since May, the outbreak is shining a light on the importance of TPOXX given that TPOXX has been used to compassionately treat approximately 4,000 monkeypox cases in the U.S. and many cases internationally, and approximately 10 clinical trials have been launched or are planned to be launched in the near term, all of which will study the use of TPOXX for monkeypox and half of which are randomized placebo-controlled trials. With regard to the randomized placebo-controlled trials, two of the trials are sponsored by the National Institute of Allergy and Infectious Diseases, or NIAD, and the other one is funded by the National Institute for Healthcare and Research in the U.K., the NIHR. Among the NIHR trials, one study is U.S.-based, and the other study, which is being done in collaboration with INRB, is based in the Democratic Republic of Congo. The U.S.-based study seeks to enroll more than 500 participants and will include an open-label arm. And the DRC-based trial seeks to enroll more than 450 participants. The NIHR's U.K.-based study seeks to recruit at least 500 participants. Randomized placebo-controlled trials, such as the three trials just mentioned, are important because they could provide required data that could be used in any submission with the U.S. FDA for an approved monkeypox label for TPOXX. The other trials mentioned at the beginning of this discussion will be observational in nature, also providing important information. All of the trials that have started are at the early stages of enrollment with some of the active trials opening trial sites on a staggered basis. The timing and the ultimate number of participants of the trials will depend on the path of the monkeypox outbreak and the general speed of enrollment. Hence, the timing and the likely ultimate enrollment levels of the trials, especially the randomized placebo-controlled trial, is currently unknown. In turn, this means the timing and likely composition of an FDA submission for a monkeypox label for TPOXX is also currently unknown. Despite the variability of the specific path of the monkeypox outbreak, we do believe there are some things related to the outbreak that offer a degree of clarity when viewed with a long-term perspective. For instance, we believe that monkeypox will have a continuing global impact going forward. While the short-term path of the monkeypox outbreak is uncertain, what we have seen and learned to date indicates there’s a meaningful high probability that the United States and other countries across the world will have to deal with monkeypox cases in future years. It is just unknown as to the ultimate magnitude of the cases, the scope of the cases across different communities, and where the case levels become consistent or whether case levels come and go periodically. We believe that in most scenarios, there will be a need for TPOXX, and at least some of the scenarios could lead to significant sales of TPOXX. Over the coming years, the ultimate amount of TPOXX U.S. sales related to monkeypox will be impacted by case levels, obviously. Additionally, labeling of TPOXX for monkeypox likely will also materially impact future U.S. sales in connection with monkeypox treatment. As a reminder, the FDA has indicated that it wants efficacy data in the treatment of monkeypox for full approval of TPOXX in the U.S. for the monkeypox indication. Moving to a tangential topic, I’d like to spend a few minutes discussing our initiative to get a PEP label for TPOXX. We believe that a post-exposure prophylaxis or PEP label for TPOXX could be an important catalyst for U.S. sales growth in the coming years in the context of supporting an expansion of the U.S. strategic stockpile. With respect to PEP, as a reminder, we are working with our DoD colleagues on executing two clinical trials needed to support regulatory approval of TPOXX for post-exposure prophylaxis. For the expanded safety study, we have set up nine clinical sites around the U.S., and such sites began dosing in the middle of the second quarter of this year. Enrollment continues to be strong. The majority of the study has been enrolled, and enrollment is on track to be completed within the next 90 days at the current rate of compliance and activity. For the TPOXX plus JYNNEOS immunogenicity trial, we have two sites recruiting and screening volunteers. As a reminder, this trial started in early 2022 and enrollment got off to a slow start. This was due in part to post-COVID vaccine hesitancy in the U.S., among other factors. In coordination with the DoD, we made protocol adjustments and other adjustments to normalize the speed of enrollment. In light of the adjustments and the impact of the monkeypox outbreak, enrollment has been running at a substantial rate. If the current rate of activity continues, we expect that enrollment will be complete in the fourth quarter. Thus, in recap, the goal is to have all the volunteers in both studies complete the active phase within the next 90 days. If the study shows the expected results, we would commence assembly activities for package requesting regulatory approval of TPOXX for PEP. At this point, I’d like to hand the call over to Dan for the financial update.
Thanks, Phil. For the three and nine months ended September 30, 2022, SIGA’s revenue was approximately $72 million and $99 million, respectively. For the third quarter, approximately $61 million of revenue relates to international sales of oral TPOXX to 12 customers, of which 10 are new customers. The quarter also includes approximately $4 million of oral TPOXX sales to the U.S. Department of Defense and the remainder mostly relates to research and development activity. For the nine months ended September 30, approximately $66 million of revenue relates to international oral TPOXX sales, approximately $7 million of revenue related to sales of oral TPOXX to the U.S. Department of Defense, approximately $7 million of revenue related to sales of IV TPOXX to the U.S. government, and the remainder mostly relates to research and development activity. Operating income, which excludes interest income, taxes, and adjustments to the fair value of the warrant, was approximately $43 million for the three months ended September 30, 2022. For the nine months ended September 30, operating income was approximately $45 million. Net income for the three months ended September 30, 2022, was approximately $43 million. For the nine months ended September 30, net income was approximately $45 million. In turn, fully diluted income per share for the three months ended September 30 was $0.45 per share. And for the nine months ended September 30, fully diluted income per share was $0.47. At September 30, 2022, the cash balance for the company was approximately $110 million. This concludes the financial update. At this point, I will turn the call back to Phil.
Thanks, Dan. Before we turn to Q&A, I’d like to reiterate a few points, which have been made in the past in support of our view that SIGA offers an attractive combination of existing revenue streams that generate strong financial results when product is ordered and delivered, complemented by organic growth initiatives that hold significant potential when viewed collectively. First, I’d like to reiterate that the monkeypox outbreak has heightened the importance of TPOXX in connection with the treatment of monkeypox. It is our understanding that TPOXX is the leading and likely the only in many countries therapeutic that is being used or expected to be used in the U.S., Europe, Canada, Asia Pacific region, Africa, and other areas. We will continue to work with various levels of the medical community and governments to provide TPOXX to monkeypox patients and to pursue appropriate stockpiles. Second, I’d like to highlight that our ongoing international sales growth initiative is progressing in a value-creating manner. We now have more than 10 countries outside the U.S. that have ordered TPOXX, and we continue to work hard to expand that base. While as noted many times before, progress on this front is expected to be lumpy and uneven given a variety of factors, we believe that a meaningful international market is gradually taking shape. Third, I want to reiterate that the PEP-based development program represents a growth initiative in that it would provide scientific and regulatory support for any stockpile expansion. As stated on prior calls, we believe the current size of the stockpile of TPOXX in the U.S. would not be sufficient to treat all those who would need care in many outbreak scenarios, a lesson from the COVID pandemic which is being reinforced by the monkeypox outbreak. is that governments need to be more proactive in addressing the health and societal risks associated with virus family. Fourth, we continue to be focused on transitioning our U.S. contract to a long-term SNS contract that focuses on appropriate size requirements for the TPOXX stockpile as well as smoothing the annual deliveries, which will be critical to supply chain planning and financial predictability. Fifth, our portfolio of customers is becoming more diversified. This year, we’ve added the U.S. Department of Defense to our customer list as well as 11 international customers. Sixth, we continue to pursue and support oncology collaborations and other strategies that could open new markets for TPOXX. As mentioned earlier, we believe these initiatives, when viewed collectively, have potential for significant value creation. This concludes our prepared remarks, and we will now begin the Q&A session.
Your first question comes from Ben Rabizadeh with StoryTrading.
Last quarter, you guys had a $0.45 dividend and 500,000 shares, I believe, you bought back. And I didn’t see any updates on that. Wondering if you can walk me through the thought process why we had that then and nothing this quarter.
Yes, absolutely. So I appreciate the question, Dan. Over the past couple of years, we’ve certainly taken a very disciplined approach to both share buybacks. Over the past couple of years, we’ve done about $60 million in buybacks. As we talked on the first quarter call around the special dividend, when we looked at our balance sheet, we had an excess of cash in our needs and we did that dividend. Going forward, we’ll continue to take that disciplined approach in looking at all uses for cash, certainly dividends, certainly share buybacks. As we’ve said over time, we would also look at any potential M&A that could be accretive and diversify our income base. But the Board and the management team take a very disciplined approach to that. Let me just hand it over to Dan if you want to just give the numbers for the quarter and then we can take the next question. Thanks.
Yes. I’m sorry, go ahead. If you have another question.
I’m sorry. Yes, I did. I’m sorry, I didn’t realize you were waiting for me. My name is Ben, sorry, not Dan, but I get confused.
I’m sorry, Dan.
I heard a lot about monkeypox on the call today, but last year most of the revenue came from smallpox. It seems you had more revenue last year compared to this year, primarily from smallpox stockpiling. Can you provide any insight into that and whether there is any visibility for 2023? Is there any high-level guidance on the expected revenue from smallpox stockpiling?
Yes, absolutely. So sorry, Ben. Our smallpox sales are predominantly with the U.S. government. They have a stockpile of 1.7 million courses, and that is resupplied on a seven-year shelf life basis. It is lumpy. It was not delivered evenly over a seven-year period. So we essentially have, in our current contract, four options, each of about $112.5 million. As product expired in 2020 and 2021, we had orders from the government to resupply that product. So you saw that in our revenue in 2020 and 2021. This year, at the beginning of the year, we highlighted there were not a lot of expirations in the stockpile. So we did not anticipate an order this year. But in both 2023 and 2024, we’ve projected that product will expire and those options are anticipated to be exercised next year and the year after that. So we do anticipate those $112.5 million orders for oral TPOXX to come through over the next couple of years. As we said on this call, we’ve been diversifying with the Department of Defense. So we’ll continue to work with the U.S. Department of Defense, and we’ll continue to work with international customers because, as we highlighted on the last call, the orders that we received internationally are mostly focused on getting immediate product available to treat monkeypox patients in the current outbreak. What we’re turning to in those conversations is the importance of stockpiling and the broader preparedness for things like monkeypox but also smallpox because, as we discussed on the last call, the monkeypox strain that’s circulating is fortunately one that historically had a very low fatality rate, less than 1% in Africa. But there’s a second strain that’s circulated predominantly in the Central African Republic, Democratic Republic of Congo, and Nigeria that has up to a 10% fatality rate. We kind of dodged the bullet by having the one with a lower mortality. But certainly, there are concerns that could come out, and there’s concerns the virus could evolve, etc. We are talking with governments globally that they need to be ready for an immediate potential outbreak of monkeypox in their geography, but they have to consider could the virus evolve. Very importantly, they have to think about smallpox, which will be just much more devastating and much more fast-moving. So we certainly discuss that opportunity broadly with our international customers as well.
Great. Just final question, if I can just circle back to the question of stock buyback. The stock is much lower than it was, I believe, than what you purchased that last quarter. With over $100 million in cash, is there any reason why you wouldn’t want to pursue some buybacks now at these prices?
Yes. We certainly have an active share buyback authorization that our Board did. We have demonstrated over the past couple of years, as you highlight, we bought back about $60 million worth of shares. With the large increase and uncertainty around the monkeypox outbreak, we’re not in the market as we reported this quarter. But it’s something the Board is very focused on. We certainly had many conversations with investors on the importance of share buyback. So stay tuned on that. I appreciate the question.
Your next question comes from Ken Mestemacher with Edison.
Congrats again on the solid results. I’m calling in for Soo Romanoff today. I guess my first question is, you talked about countries kind of looking to build up their stockpiles of treatments like TPOXX. What kind of levels of coverage are you seeing them consider, say, Europe or in the Asia Pacific, say, 10 bps in the population, 100 bps or even higher? What are you kind of seeing on, on first clients?
Yes, Ken, thank you for the question and your comments. Historically, governments have considered smallpox regarding its potential for transmission, which usually occurs through respiratory means like speaking. They understand the significant threat it poses. We've observed during the monkeypox outbreak that it's not feasible to order products in the midst of an outbreak; they need to have them available and ready for use. As I've mentioned multiple times, this is a complex discussion with our customers. We generally begin by collaborating with our partner, Meridian Medical Technologies, to engage with policymakers and public health officials to educate them about TPOXX and how it can complement vaccines. Some countries conduct their internal modeling and may share that information, but often we don't see the outcomes until we receive an order. It's crucial for them to secure support and allocate funds from their budgets. One lesson learned from COVID was that many governments lack the pre-established infrastructure for pandemic planning. The positive development is the emergence of organizations like HERA in Europe, which are now working with the EU to enhance preparedness. Recently, they made an emergency procurement with us and have announced work on broader requirements involving additional procurements. This situation is certainly evolving. In Canada, we received initial orders worth about $50 million focused on smallpox preparedness. They appear to be reassessing their needs in light of the monkeypox outbreak. We need to wait for the final outcomes to clarify the requirements and budget. However, last quarter showed that monkeypox has significantly increased the urgency of these conversations and highlighted the necessity for preparedness.
Recently, there are several deaths in the U.S. from monkeypox. And how, especially domestically, has that kind of impacted the demand or interest for TPOXX, especially in vaccines for the treatments?
Yes. One of the unfortunate things in this outbreak was there wasn’t a lot of investigation. There certainly was great work by researchers understanding monkeypox in Africa where it has unfortunately had ongoing outbreaks for a number of years. But there wasn’t a real understanding of what the morbidity and mortality would be. There’s really been an evolution of the perspective of the disease. I would say upfront, there was an initial thought that it seems self-limiting in a lot of patients. We haven’t seen a lot of deaths. There certainly was some lack of urgency, and I think I talked about that on the last call with the initial outbreak. Subsequent to that, we’ve learned an incredible amount about monkeypox, and most of it has been very unfortunate and surprising. One is it can have debilitating pain, and it can have complications, as we know with orthopoxviruses that could lead to blindness if you have an infection in the eye. What you’re highlighting with the deaths is, unfortunately, that especially in severely immunocompromised patients, it can be deadly. That’s not a big surprise; any antiviral drug does not kill a virus. What it does is stop the replication. Unfortunately, for people in whom the CDC reported on this, if you have a severely compromised immune system and aren’t able to eventually generate an immune response, those people have succumbed to infection. I think it has raised awareness in the public health community. It certainly raised awareness with patient groups who realize with their communities the impact it’s had, not only with the morbidity and the mortality but having to quarantine for six weeks, which has huge economic implications. I think we are in a better place where people understand the implications of the disease much better than they did early on, and we’re certainly hopeful that will result in better understanding of the requirements for stockpiling and access for patients, which we’re working very hard on.
Great. So I guess my last question, you kind of talked about the treatments in the U.S. with the CDC’s expanded access protocol for TPOXX. What sort of feedback have you seen so far from patients, practitioners, anyone involved?
Yes. It certainly is an FDA-regulated company. We want to be very transparent about the fact that all of those would be anecdotal and reported. But certainly, we’ve read with great pride some of the reports from CDC and the MMWR from the results from patients that have been interviewed in the media and from physicians who we’ve worked with over this time period to deliver TPOXX. We’re certainly encouraged when people have reported that within a day or two, they’ve seen symptoms dramatically improve. That’s consistent with the animal data that was used to gain approval. But as I said, at the end of the day, regulators are very focused on controlled, placebo-controlled studies. That’s where you get the most important data to show the benefit that the drug provided, and we’re very focused on collecting that while also looking at the details of the EA-IND process that CDC is collecting supportive data to help us understand the benefit of the drug. One of the most encouraging things that has been very consistent with the validated pivotal study is that it was done with monkeypox in nonhuman primates. So that’s been encouraging and obviously the reason the EMA approved TPOXX for monkeypox earlier this year.
Your next question comes from Brian Adams with Carter, Terry.
I have a couple of quick questions. Regarding the pricing for foreign buyers, you mentioned in the last call that the prices were approximately $800 to $1,000 per dose. Can you confirm if that is still accurate?
Yes. Our pricing is based on volume. The publicly disclosed numbers from the published contracts indicate that in Canada, the orders we received are slightly above $900. We are seeing consistent pricing with that, and for smaller volumes, it is higher. This serves as a good indication of our government sales in bulk. I want to reiterate for those who are new to the call that these are all bulk sales made directly to governments. We are evaluating and planning for the private market as we conduct these randomized controlled trials, especially regarding the value we anticipate providing to patients after obtaining placebo-controlled data. That will be a different sales channel. I just wanted to emphasize that point. Thank you for your question. I believe you had another one.
In relation to the trials, which was mentioned in the previous question and referenced in some of the press releases and anecdotal evidence, do you have any information on what the actual endpoint is that either the FDA or the CDC is seeking? Is it a specific number of days for symptom relief? Is it a significant reduction in the pain scale? Do you have any anecdotal or concrete insights into what they are looking for?
Yes, we do. Certainly, the primary one that’s being evaluated is time to resolution of symptoms. So when lesions heal over, scab falls off, and you see the resolution of symptoms, and we’re looking for the impact of the drug on that. There are a variety of secondary endpoints around fiber load and other things that will be looked at, but the primary one is the resolution of symptoms and the speed at which that happens in placebo versus those that are on drug.
Your next question is a follow-up from Ken Mestemacher with Edison.
One thing that’s really interesting was you were talking about expanding to 10 other countries outside the U.S. and especially with a lot of the new customers. You had mentioned a couple of calls ago about getting kind of your first APAC customer growing out there. Can you share any progress on what sort of countries or areas are you seeing a lot of attention from, say, Indonesia, Japan, China, some of those areas?
Yes. So I appreciate the follow-up, Ken. As we’ve said, a lot of countries require us not to disclose. Some have publicly announced the arrival of product. So there was a press release out of South Korea, for example, that they had their first delivery that they talked about. Broadly, we have multiple customers in the Pacific Asia region and continue to have conversations with additional countries there. We’ve had our first customers in this quarter in the Middle East region. So certainly, continuing discussions broadly in that region. And then as you highlighted, we have both a HERA procurement, which was an emergency procurement on behalf of the European Union, and we’ve had specific sales inside the European Union. So it’s been geographically very broadly diverse. We also talked to pooled procurement organizations that help regional areas purchase products like this to deliver. Some of our contracts ultimately will be with people like HERA on behalf of pools of countries. It is very broad geographically, and we certainly expect that as countries in specific regions start to announce and talk about the arrival of the product, we’ve seen that pick up conversations in that region with other players that don’t want to be caught without having drug on hand. So we continue to press those sales with our partner, Meridian.
Your next question comes from Scott Sibley with indiscernible.
My main question was about the stock buyback, one of the things you’ve been excited about over the last couple of years. I know during the Q2, we stopped by the end of May when it got around $758 a share. I suspect that this quarter we didn’t buy anything back. Now moving past that, with more attractive prices, I just want to reiterate that I hope that we’re getting aggressive in the buyback, especially since I hope it’s tied to a PE ratio, not just a price, because I feel like it’s a better value because the company is growing. So hopefully, we’re still active against that. The only question I had is I was kind of a little bit involved in the government CR, the continued resolution bill with some of my representatives and got stripped out at the last minute due to some politics. I mean, expecting it hopefully to be put back in the bill in December with COVID money and stuff, debated on some merits. Do you guys have any light to shed on that of what’s going on with any more funding from monkeypox?
Yes. So Scott, I appreciate the question. It’s always hard to predict what the U.S. government is going to do, but we certainly are very active in those conversations, both with the administration and Capitol Hill, emphasizing the importance of monkeypox. We’re also, importantly, different congressional representatives have different perspectives on preparedness. I would say some are very concerned about the biological threat of smallpox and the way the world has a lot of conflicts around it, that we should be very concerned about that. There are others that are very worried about emerging infectious disease and the fact these viruses can show up over and over again and they worry about other strains of monkeypox that could show up. We’re certainly focused on whatever the best supplemental funding strategy could be. The White House updated their biodefense strategy recently. They do it every couple of years. There’s nothing dramatically new in it, but they reiterate that in a virus family, one of the things you want is an antiviral that has efficacy and pre-developed. This was a perfect example for both Congress and administration that having, at least in the U.S., 1.7 million courses put us in a good position. Now we kind of fell down on how we distributed that efficiently and effectively, and there’s a lot of discussions around that. I would broaden your question to broader preparedness for both the threat of national security smallpox but also monkeypox. So I appreciate the question.
This concludes our question-and-answer session. I would like to turn the conference over to Mr. Phil Gomez for any closing remarks.
I’d just like to thank everybody for joining the update call. It’s been a very busy quarter for us with working on international sales and getting a lot of clinical studies up and running. As always, I would like to extend a great thanks to all the members of the SIGA team and our partners for doing an incredible volume of work this past quarter to launch these studies, get products delivered throughout the world, and we look forward to talking to you on the next quarterly call and I’m sure in between. So take care, and thank you again.
The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.