Earnings Call Transcript - SIGA Q2 2022

Operator, Operator

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 13, 2021 and its subsequent reports on Form 10-Q and Form 8-K. With that said, I'd like to turn the call over to Mr. Phil Gomez, your host.

Phillip Gomez, CEO

Thank you for taking the time to join today's call. Today, I'm joined by Dan Luckshire, our CFO; and Dr. Dennis Hruby, our CSO. We are pleased to have this opportunity to provide a business, R&D and financial update to our shareholders. We'll then be happy to take questions. With the global monkeypox outbreak, we've been very busy over the last approximately 75 days, responding to inquiries from a broad multitude of people and entities across the public health ecosystem as well as building on existing governmental and public health relationships. One initial result of this activity has been a significant increase in the international procurement orders this year versus 2021 with approximately $60 million of oral TPOXX orders from 10 international jurisdictions this year through July 31 in comparison to approximately $13 million of international orders last year. Of the 10 international jurisdictions who have ordered oral TPOXX in 2022, 9 of the jurisdictions are first-time customers in 2022. We believe that the increasing number of international governments that are procuring oral TPOXX in addition to the large number of continuing inquiries regarding TPOXX usage for monkeypox and its potential procurement highlight two key elements. Firstly, it is essential that governments across the world adopt a more proactive approach to addressing the health risk posed by families of viruses such as the orthopoxvirus family. And secondly, TPOXX is a significant component of any robust public health program designed to protect against orthopoxvirus risks and threats. With respect to the Monkeypox outbreak, the sheer magnitude of inquiries and usage requests and the oftentimes frenetic manner of such inquiries highlight the seriousness of the outbreak, both currently and for what the outbreak could become. The recent WHO designation of the monkeypox outbreak as a public health emergency of international concern reinforces the serious nature of the outbreak and its potential. Currently, we are in the early innings, to use a baseball analogy. The number of global cases of monkeypox has quickly grown to more than 25,000 cases and there are anecdotal reports that the breadth of transmission appears to be expanding. At this early stage, we are in the same position as the public health community in that we have much more to learn in order to get a better sense of what to expect with regard to the ultimate scale and scope of the monkeypox cases to come. Based on what we've learned so far, we believe the following is clear: First, monkeypox is a severe disease as case reports and patient stories have made clear that infection can have significant consequences. Patients are experiencing severe pain, scarring, and hospitalization to manage the complications of the disease when antiviral therapy is not available. Second, quarantines that require three weeks or more have a significant impact on patients who cannot work or interact with family members. Third, although currently focused on the social networks of the men having sex with men (MSM) community, most experts do not anticipate the outbreak will be limited to this population. In other words, it is likely the virus will spread to a variety of segments and real-life examples of this are growing. Fourth, vaccines alone cannot mitigate this outbreak. Supply challenges, vaccine hesitancy, and ongoing cases require both vaccination and treatment to address the impact. Fifth, the outbreak has highlighted the importance of stockpiling TPOXX to mitigate the impact of an orthopoxvirus outbreak. Procurement by governments after an outbreak takes too long for governments to access the drug. Finally, the population needs better access to TPOXX. In sum, we believe the monkeypox outbreak is a clarion call to governments to increase the pace of building stockpiles for smallpox and monkeypox where none exist and resize and expand stockpiles that do exist. As such, we will continue to pursue in coordination with our international promotion partner, Meridian Medical Technologies, tangible procurement activity in regions and countries in which monkeypox continues to grow or become endemic. In addition to being a catalyst for international procurement orders, the monkeypox outbreak has also been a catalyst for opportunities to enroll patients in trials being planned for oral TPOXX. This is important because collecting data from trials and from usage in the population is a key focus point for us as we pursue monkeypox approval with the FDA, which is one way to get better access to TPOXX for monkeypox patients. As background, 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. Dennis will discuss the trial opportunities in a few minutes. Before I hand over the call to Dennis, I would like to touch on a few achievements over the past series of months. On the regulatory front, the IV formulation of TPOXX was approved by the FDA in May. And oral TPOXX was approved in July by the Medicines and Healthcare Products Regulatory Agency (MHRA) in the United Kingdom. With these approvals, we have now achieved four regulatory approvals for TPOXX in the approximate span of a little more than half a year. The other regulatory approvals include the oral TPOXX approval by the European Medicines Agency (EMA) in January and Health Canada approval in December 2021. I will note that the EMA and MHRA approvals include broad labeling for oral TPOXX indicating its use for the treatment of monkeypox, smallpox, cowpox, and vaccinia complications following vaccination against smallpox. All of these regulatory approvals were based on animal efficacy data with human clinical trials conducted to demonstrate safety and pharmacokinetics consistent with the levels that protected nonhuman primates. Those studies published by Dennis in the New England Journal of Medicine in 2018 showed over 90% protection from death in a lethal challenge model. During an outbreak, whether smallpox or monkeypox, we have always anticipated collecting confirmatory efficacy data in humans. Dennis will provide an update on the clinical trials being planned or ongoing to collect that data. These clinical trials are important as they are focused on broader use of TPOXX in outpatient settings. The data in nonhuman primates showed that treatment with TPOXX stopped progression of the disease and reduced viral shedding. We believe these studies will provide a basis for approval in the U.S. for monkeypox and support for wider use of TPOXX to treat a broader set of patients presenting with the infection. On the procurement front, we signed our first procurement contract with the U.S. Department of Defense in May. The procurement contract is for approximately $7.5 million of oral TPOXX, of which approximately half was delivered in the second quarter, and we expect the option for the other half to be likely exercised in 2022. Additionally, we believe there will be opportunities to add to this procurement. One way this procurement is important is that it continues to expand our revenue base. As a reminder, our revenue base expanded in the first quarter when we made our first deliveries of intravenous TPOXX for the U.S. government. At this point, I'd like to hand the call over to Dennis Hruby, who will provide a regulatory and R&D update including details on the post-exposure prophylaxis (PEP) clinical program. Dennis?

Dennis Hruby, CSO

Thank you, Phil. I will start my comments with an update on postexposure prophylaxis, or PEP clinical trials. And then I will comment on the monkeypox outbreak and the oral TPOXX trials in connection with the treatment of monkeypox. With respect to PEP, as a reminder, we're 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 these sites began dosing mid-quarter. I would characterize enrollment as being off to a substantial and strong start. As of the end of July, approximately half the study had been enrolled with most enrollees having completed the 28-day dosing period. For the TPOXX plus Jynneos immunogenicity trial, we have two sites recruiting and screening volunteers. 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've made protocol adjustments and other modifications to normalize the speed of enrollment. Over the past series of weeks, even before the monkeypox outbreak gained a substantial foothold in the U.S., enrollment has begun to improve. With the monkeypox outbreak, we're continuing to work to enhance enrollment in this trial. For both studies, the goal is to have all the volunteers complete the active phase by late in the third quarter of 2022 or early in the fourth quarter. If the study showed the expected results, we would commence assembly activities for a package requesting regulatory approval of TPOXX for PEP. Shifting gears, I'd like to now discuss clinical activity in connection with oral TPOXX in monkeypox. We are currently supporting and assisting with launching up to 10 clinical trials in Africa, Europe, and North America to formally assess the effectiveness of TPOXX to treat and/or prevent monkeypox in human patients. These include both multinational observational studies as well as placebo-controlled research clinical trials. The first of these is launching as I speak, and we hope to quickly accrue data to support potential approval of a monkeypox indication here in the U.S. to facilitate getting the drug to those who need it. Before I turn the call over to Dan, I'd like to highlight something that's been mentioned previously in investor calls and earlier today by Phil, which is that we think of TPOXX through the lens of being a treatment for the orthopox family of viruses. We believe the monkeypox outbreak shows the wisdom of this approach. As such, we will continue to look for opportunities and work with our government partners in pursuit of broad label indications for TPOXX whenever possible. With that update, I'll turn the call over to Dan.

Daniel Luckshire, CFO

Thanks, Dennis. For the three and six months ended June 30, 2022, SIGA's revenue was approximately $17 million and $27 million, respectively. For the second quarter, approximately $5 million of revenue related to international sales of oral TPOXX. Approximately $4 million relates to sales of oral TPOXX to the U.S. Department of Defense, and the remainder relates to research and development activities. In connection with the sales of oral TPOXX, both cases were first-time sales to a new customer. For the six months ended June 30, approximately $7 million of revenue related to sales of intravenous TPOXX to the U.S. government. Approximately $9 million relates to the aforementioned sales to the Department of Defense and the new international jurisdiction, and the remainder relates to research and development activities. Operating income, which excludes interest income, taxes, and adjustments to the fair value of the warrant, was approximately $3.1 million for the three months ended June 30, 2022. For the six months ended June 30, operating income was approximately $1.6 million. Net income for the three months ended June 30, 2022, was approximately $2 million. For the six months ended June 30, net income was approximately $1.7 million. In turn, fully diluted income per share for the three months ended June 30, 2022, was $0.03 per share. And for the six months ended June 30, fully diluted income per share was $0.02. At June 30, 2022, the cash balance for the company was approximately $115 million. During the second quarter, SIGA declared and paid a special cash dividend of $0.45 per share. Additionally, the company repurchased approximately 0.5 million shares of its common stock for approximately $3.6 million. As a quick reminder, please note that in addition to using cash for capital management activities such as the special cash dividend and share repurchases, we expect to use cash to proactively build work-in-process inventory for active pharmaceutical ingredients. With respect to the $60 million of international orders received this year as of July 31, approximately $5 million of these orders were delivered in the second quarter of 2022. Approximately $26 million is expected to be delivered in the third quarter of 2022, and the remaining orders are expected to be fulfilled between October 1, 2022, and July 31, 2023. This concludes the financial update. At this point, I will turn the call back to Phil.

Phillip Gomez, CEO

Thanks, Dan. Before we turn to Q&A, I would like to reiterate a few points, many of 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 products are 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 would like to highlight that the ongoing international sales growth initiative is progressing in a value-creating manner. We now have more than 10 countries, including 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 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 earlier calls, we believe the current size of the stockpile of TPOXX would not be sufficient to treat all those who 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 social risks associated with virus families. Fourth, we continue to be focused on transitioning from our U.S. contract to a long-term Strategic National Stockpile contract that focuses on appropriate size requirements for the TPOXX stockpile, as well as smoothing 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 added the U.S. Department of Defense to our customer list, as well as nine international jurisdictions. Sixth, we continue to pursue and support oncology collaborations and other strategies that can open up new markets for TPOXX. As mentioned earlier, we believe these initiatives, when viewed collectively, have the potential for significant value creation. This concludes our prepared remarks, and we will now begin the Q&A session.

Operator, Operator

Our first question comes from Soo Romanoff with Edison Group.

Soo Romanoff, Analyst

Great. The most interesting thing is your model is pretty straightforward; the ability to predict your revenues is quite easy in the U.S., primarily because of the stockpiles. Could you provide some guidance on expected penetration rates? Are there any supply chain restrictions by state?

Phillip Gomez, CEO

Thanks so much for your question. As you highlight, in the U.S., there is a 1.7 million course stockpile. We've discussed and pointed out that this would likely be inadequate in the case of a smallpox outbreak, and our post-exposure program is looking to add that label to increase the availability of that stockpile and the size of it. To the question internationally, it is a rapidly evolving set of circumstances. So I would say there are two things that are driving our performance that we're reporting today, and it really will be the outbreak that goes forward. The first part is, unfortunately, a lot of public health organizations around the world did not think of monkeypox as a serious threat even when the first cases came. There were a lot of statements around limited morbidity, limited mortality, and a bit of a wait-and-see approach, which was unfortunate. For those governments that did pursue it, we also have to go through the procurement process. I'm very excited we now have nine countries that have procurement mechanisms in place for us to deliver. We have had people make initial orders, which are usually based on the number of cases they have in the immediate area. But we also now have the ability for them to do follow-on orders. We do see that activity increase. I think the public health emergency declaration in the U.S., along with the WHO's declaration, will help public health officials focus on what will be needed for the delivery of products to mitigate this outbreak. And so we stand by ready to execute those orders and deliver. On the supply side, a couple of comments there. We knew that in the U.S., there would be 363,000 courses expiring over the next few years. We know we had European approval. We delivered 363,000 courses in 2020 and 2021. And for those that may not know, we have a U.S.-based supply chain that has been delivering product to the U.S. strategic national stockpile since 2013. So we have the ability with our existing network and their existing capacity to certainly get above the 363,000 courses, certainly above around the 500,000 course a year mark, but it is not a fixed ceiling. It is a network of CMOs that campaign our product. So we have been busy working with the U.S. government in thinking about ways to increase production and find ways to address the outbreak wherever it ultimately may go. So certainly, stay tuned there. The bottom line is that we do have product in a warehouse. We are shipping against orders that get made. So we feel like we're in a good position, at least at this point in the outbreak. Of course, that will depend on the number of courses and the number of cases that we see globally, but we're certainly looking at scenarios to plan for that. So thank you, Soo.

Soo Romanoff, Analyst

Yes. One more question. Where do we stand with the U.S. approval for monkeypox? It seems like there's some positive movement, but do you have any idea about the timing for that?

Phillip Gomez, CEO

Just to clarify, Soo, I think you're probably asking about efficacy data in patients. Maybe I'll hand it over to Dennis. It's early innings. But Dennis, do you have any comment there?

Dennis Hruby, CSO

Yes. The FDA has consistently asked for controlled clinical trials to demonstrate efficacy and safety before they would grant monkeypox approval. As you've probably seen, we are in the process of standing up a number of trials around the globe. Importantly, there's one in the U.S. in the clinical trials network. There's one in the U.K., and there is one in Canada. All these are using essentially the same protocols with the same endpoints. That data should be coming out over the next few months. So as that data accumulates, I think we'll be in a position to apply for approval for monkeypox here in the U.S.

Phillip Gomez, CEO

Thank you, Soo. I think it's important to highlight two key points. The first is the ultimate full approval by the FDA that allows for label expansion for monkeypox. The second point involves ensuring patient access during an outbreak. We've observed challenges with the complexities surrounding the expanded access IND. We've been supportive in responding to the FDA's data requests to help clarify ongoing clinical studies and available resources. The FDA and CDC have indicated their intention to ease the process of distributing the drug to those affected by monkeypox. Additionally, Tony Fauci mentioned in an interview today that he would like to see the paperwork requirement removed, which reflects the sentiments expressed by public health officials and physicians. The public health emergency declaration will likely maintain pressure to expedite access to the drug. Although we anticipated the need to gather human efficacy data, we believe this confirmatory data is expected to be positive based on animal studies. Therefore, it is crucial to provide access to patients who are suffering from the infection. We are optimistic about the progress being made with the FDA and CDC regarding this issue. Thank you.

Operator, Operator

Our next question comes from Ben with StoryTrading.

Unidentified Analyst, Analyst

I got cut off at the beginning of Q&A, so I don't know if you covered this. But can you give me an idea of the opportunity, I guess, in the next 6 to 12 months for smallpox sales versus monkeypox sales. I noticed in Q4, you did over $100 million with that contract with the federal government. So where is the bigger opportunity for you?

Phillip Gomez, CEO

Yes, it's a great question, Ben, and thank you for asking it. So our revenues for those of you that may be new to our story is on the resupply of a current stockpile that's in the U.S. government. The product started to be delivered in 2013 and has a seven-year shelf life. So we started to resupply with the U.S. government. There are lumpy options associated with that. So we have four roughly $112.5 million orders that we anticipate would come between 2020 and 2024. So in 2021 and 2022, we had two orders that would be delivered. As we've said on previous calls, we do not anticipate a high number of expiries this year, so we anticipate starting next year and the year after we would have similar deliveries on the smallpox front for the U.S. government. Obviously, the monkeypox outbreak and the use of the drug could impact that. We think it's important to forward manufacture and get those deliveries in as soon as possible, but that is ultimately up to the U.S. government. Ben, your question on monkeypox is an excellent one. We're monitoring the outbreak closely. I would say a couple of things. What I'd reiterate is that it is early innings. It's around scenario planning and thinking how many people could be using the drug. The studies that are being designed now that are placebo-controlled will focus on outpatients. So people who get diagnosed will get treated, not just the severe disease phase of the disease course. We're going to monitor that carefully. But I do think we think this virus, unfortunately, might be here to stay and become endemic in some regions. What we can say and what we're monitoring closely is ultimately what the market opportunity will be and if it will be larger or smaller than the current smallpox market. But this is a family of viruses. It's important to remember that whether it's monkeypox, whether it's the Central African clade of monkeypox that has been shown to be up to 10% fatal, or whether it's smallpox, whatever it might be, these types of antiviral drugs are critical to have available. Dennis, I don't know if you had anything on your perspective on the outbreak.

Dennis Hruby, CSO

No, I agree, and most experts agree that monkeypox is here to stay. I think we're underestimating how much disease burden there is currently because of the delay in diagnostics and prolonged incubation period of the virus. We're also starting to see its spread from the current MSM population into children and others. We're starting to see some deaths. So I think this is not going to go away and it's going to be a significant problem for a significant period of time.

Unidentified Analyst, Analyst

Great. I just wanted to make sure I heard you correctly. You said not this year, but next year, in 2023, you'd expect a similar sized order from the government, like you're talking about $100 million or so?

Phillip Gomez, CEO

That is correct. In 2023 and 2024, there are two essentially options or orders remaining on our existing contract that we anticipate will be executed in 2023 and 2024. Each of those is $112.5 million.

Unidentified Analyst, Analyst

Okay. Great. Last question. I wanted to know what your thinking is around the share repurchases. Stock is up quite a bit. So going forward at these levels, can we expect that to continue? Or how do you think about the value of the company?

Phillip Gomez, CEO

I would say that we have a strong history of being disciplined in our cash usage. Over the past several years, we've completed over $60 million in share repurchases and issued a $0.45 special dividend. We continuously evaluate all potential uses of cash, including the possibility of accretive acquisitions to enhance our business, but we remain focused on returning cash to shareholders. The current outbreak presents various scenarios that we are assessing. We have been careful in our past decisions to maintain clarity regarding our cash position. Therefore, we will keep considering share repurchases, dividends, and the optimal use of cash. However, for now, we are still gauging the situation with the outbreak and where it may lead. We will definitely keep reviewing our options.

Operator, Operator

Our next question comes from William.

Unidentified Analyst, Analyst

I had a question about your competitor Bavarian Nordic and what edge you guys might have over them? And please confirm if this is correct or not, I did a little bit of research. You guys are still awaiting FDA approval for the monkeypox vaccine, while they are already FDA approved. I'm not sure when that occurred.

Phillip Gomez, CEO

Sure. So thanks for the question. Bavarian Nordic has a vaccine. It was approved, I believe, in 2019, and that approval included monkeypox and smallpox. So that's a vaccine intended to be given pre-exposure to vaccinate someone and create an immune response to protect against it. We're an antiviral drug. We were approved in 2018 for the treatment of smallpox. We actually did apply to the U.S. FDA for a broader indication of smallpox, monkeypox, cowpox, and vaccinia. At the end of the day, the negotiation was to only get the approval for smallpox. So we're an approved drug but we are not currently approved for monkeypox. There are 1.7 million courses in the stockpile and the drug is being used in this outbreak through the expanded access IND process that I mentioned. The one thing I'd also take the opportunity to just mention is that the data that was used to get the approval in the U.S. was also submitted to Europe and the U.K. In their reviews, they looked at that same data and gave us monkeypox approval for treatment as well as smallpox. So that was done based on the animal data and then the human safety data. Thank you for your question.

Operator, Operator

Our next question comes from Brian Adams.

Unidentified Analyst, Analyst

A couple of quick questions. As far as the pricing per dose, could you expand upon that? From what I've read, it looks like it's $250 to $350 per dose, and the dose, of course, I believe, is over several weeks. But what does that look like from an international buyer? Would there be a share structure with your international supplier? And then how quickly can you meet demand if you were to get a large order out of South America and/or Europe?

Phillip Gomez, CEO

I appreciate that. So we don't talk about pricing specifically. But in the U.S. government contracts and the Canadian contracts, the pricing and the volume is too slow. So I can, at a high level, say, in the U.S., we sell between $300 and $400 a course. So that's enough to treat someone for 14 days. In Canada, that number is between $900 and $1,000. That's based on factors when the U.S. government paid for the development of our drug, and they buy at high volume. They have a 1.7 million course stockpile, and in Canada, it was lower volume. Our pricing is directly negotiated with the government. It doesn't go through the traditional commercial sales channel, so that sale is directly to the government. We've commented in our filings around the margins associated with that, including the margin and the fees that we paid in Meridian associated with international sales, so that is available in our filings.

Unidentified Analyst, Analyst

Okay. And then also just a follow-up as far as how quickly you can meet a large order in Western Europe or South America?

Phillip Gomez, CEO

Yes. So it depends on how large is large. Certainly tens of thousands of courses, we have product available. We're ready to deliver. It will really depend on how large those orders come in as to whether we use current inventory, work in progress, or product that's moving along. But right now, with the orders that we have and anticipated, we believe we'll be able to deliver that out of inventory.

Operator, Operator

Our next question is from Peter Imber with North Point Partners.

Peter Imber, Analyst

I have read articles, including one from the New England Journal of Medicine, discussing FDA comments about conducting additional testing for monkeypox related to TPOXX to obtain a more formal approval. They mentioned the need to look for adverse effects. I would like to know if there have been any significant adverse effects in the tests you've conducted so far, and if so, what they were. Can you provide any commentary on this?

Phillip Gomez, CEO

Sure. So Dennis, I'll defer to you to describe our clinical studies in support of licensure.

Dennis Hruby, CSO

Yes. Thus far, our experience in our clinical studies is that TPOXX is a very safe drug. We've had no serious adverse events and very few adverse events. The adverse events we see are typically headache or diarrhea, but they typically occur at about the same rate in the placebo. So we don't anticipate seeing any real side effect profile.

Peter Imber, Analyst

That's helpful. And then my other question, a slightly different path. Given the sort of different applications of this, do you anticipate selling this drug commercially versus typically it's been direct to governments?

Phillip Gomez, CEO

Yes, it's a great question. We're examining that and working on the ability to launch it commercially. As you said, the drug historically has been sold to be stockpiled in the event of an outbreak like this. And right now in the U.S., that's how it's being deployed. But as the outbreak progresses, one scenario would be that it would become endemic. Just like COVID therapies that initially were bought by the U.S. government, the expectation would be that ultimately, they might go through a commercial, more traditional sales channel to access patients. There's also hybrids of that, that have been done over the years. Tamiflu was stockpiled by the U.S. government for an influenza pandemic, but it was also sold in the commercial market. So we're doing the planning and analysis now as to what a commercial launch might look like for that. We think that, that will be important to have that efficacy data in humans for the full FDA and ultimately approvals around distribution. But that will really be driven by the virus and where it lands as the outbreak continues.

Operator, Operator

Our next question comes from Todd Strunk with Strunk Investment.

Unidentified Analyst, Analyst

Great job on the call. I wanted to ask you a couple of questions about one about the new jurisdictions that are becoming customers. How does that conversion look? And what have the conversations been like whether it be an initial order or a commitment to stockpile? Could you provide some visibility on that please?

Phillip Gomez, CEO

Most of the discussions regarding new jurisdictions are focused on the current outbreak and how to deliver product to those countries as quickly as possible. The conversations usually revolve around how to secure a small amount of product, establish a contract, navigate regulatory import issues, and address supply chain logistics. This makes the discussions more urgent compared to previous talks about stockpiling. We expect that after this initial phase, there will be considerations regarding the long-term implications of the outbreak and how to ensure adequate supplies for monkeypox. Ultimately, we hope these discussions will evolve into broader stockpiling conversations. We are currently involved in deliveries to specific countries and have been asked not to disclose this information due to confidentiality agreements, except for Canada. We have not received authorization to reveal the specific countries, but we have announced several in Europe and in the Asia Pacific region. There are also ongoing talks with pooled procurement agencies, and the European Commission along with HERA, the new European health organization, has shown interest in tecovirimat. The Pan American Health Organization has also expressed interest in South and Central America. We engage with individual countries when they have urgent needs and are in conversations with various pooled procurement agencies to improve access for regions that utilize pooled procurement.

Unidentified Analyst, Analyst

Great. And just one other question further to that is, you mentioned earlier that based on the stockpile of what you've already got in the warehouse, at what point do you need to look towards expanding or having secondary partners in order to procure? So is it at around 100,000, 1 million, 10 million? And what's some visibility around how you might partner and meet massive demand, if needed?

Phillip Gomez, CEO

Yes. There's certainly many layers to that answer. As I mentioned, with our current partners and their current performance and scheduling of this, we think we can get up to 500,000 courses a year. We can get well north of that if there was a prioritization of those facilities. We also have support from BARDA to develop a second site for active pharmaceutical ingredients, which is one of the key components of that. We've been working on that development in parallel. So that would come online as time goes on; it's a little ways away, but that's another one that could be accelerated to bring that online. The U.S.-based supply chain is robust and scalable. It really is a question of where the demand goes, but we're working through those scenarios. The good news is our partners in the U.S. government has certainly thought about this with COVID, and so we look to them to be a good partner in this as we think about scale-up options. Beyond that, there could certainly be opportunities internationally. We have certainly had inbound calls and are thinking about what's the best way to scale even more broadly.

Operator, Operator

Our next question is from Chris at Investments.

Unidentified Analyst, Analyst

So I guess if I was looking to build out a model that captures both the international and U.S. TPOXX sales, how should I be thinking about the price per course? And what's a good ballpark number to think about here? And then is there any upside potential on that relative to what you've sold at historically? I have a few others as well.

Phillip Gomez, CEO

Yes. As I mentioned, we have disclosed, I don't know, Dan, if you want to give an overview of that. And then I would say on the future, we look at any customer as with the U.S. government as a long-term partner. We do think there's an important stockpiling component to this. So this is something that certainly in the long run we want to be consistent partners on pricing and availability and be able to deliver. Dan, I don't know if you have any comments, but we can refer to our financials; we have that information in there.

Daniel Luckshire, CFO

I would refer to the financials, and what you can see through them is that for the U.S. government for oral TPOXX, the low $300 range would be a number to use. For IV, it's slightly higher, around the $400 range. Internationally, as Phil mentioned, the pricing has been higher than in the U.S. due to various factors. In Canada, the disclosed numbers were between $900 and $1,000, so that would be a safe range to consider. It's important to note that pricing can vary by country. The size of the order affects potential pricing; larger orders have a greater chance for negotiated numbers that could differ from what was mentioned.

Unidentified Analyst, Analyst

Okay. Great. And I guess with the U.S. government federal emergency declaration, presumably this frees up some additional federal funding. When we think about potential access to funding, how should we be thinking about that? Is that either potentially directly to the company or is it through BARDA? How should we think about, I guess, any expenses that the company may have to incur in order to ramp up production here with the CMOs that you're working with or any CapEx spend? Is there the opportunity to offset some of that cost with potential dollars that may come from the government? How should we be thinking about, I guess, margins going forward in the event that this outbreak continues to accelerate, and you have to meet a substantial amount of volume.

Phillip Gomez, CEO

So I'll have Dan comment on the potential need for CapEx and the scalability of our model. But on your question around the emergency declaration, that does free up some funding, but it's more about the details of the response within the U.S. government. I think the more important thing for considering opportunities beyond the procurement orders, we have about $300 million in remaining procurement orders with the U.S. government over the next few years. If we think about them potentially ramping that up, accelerating them, or considering a different stockpile size, that will likely come through some sort of supplemental appropriation. Historically, when there is an outbreak, Congress looks at the need, and the administration provides an update. That appropriated dollar amount is used for things like procuring drugs like ours. I believe that the Biden administration has been reported, discussing a wide variety, including about a $7 billion appropriation. That would probably be what would provide a material change to our contracting with the public health declaration with the challenges we're seeing around the outbreak. We're certainly supportive of that supplemental appropriation, but that's where any material change in the plans would show up. Dan, do you want to talk about the scalability of the operating model?

Daniel Luckshire, CFO

Yes, we believe our model is very scalable historically and going forward. This is largely due to our outsourcing of the supply chain. As Phil pointed out, our CapEx has been minimal because of this outsourcing, and we expect that production-related CapEx will remain low in the future. However, with the monkeypox outbreak, there are many scenarios to consider. We will keep an eye on the situation, but currently, we do not anticipate any significant CapEx in the near term.

Unidentified Analyst, Analyst

Okay. Great. And last question for me. So I guess when you file presuming that the data will be positive for the clinical trial for the approval in the U.S., what would you anticipate would be the timeline between when you'd be able to get the data, then when you'd be able to file for the supplemental label and then when you would be potentially reviewed? I would imagine there may be some acceleration that could happen if this outbreak continues to worsen.

Phillip Gomez, CEO

Yes. The positive news is that NIAID, NIH, SIGA, the FDA, and the AIDS Clinical Trials Group are collaborating closely. As data is generated, we expect it will be quickly shared with us and sent to the FDA. It's difficult to predict timelines since they may depend on the final data and the possibility of expedited reviews under an EUA, whether that occurs before, during, or after the clinical trial. However, we believe that if the outbreak continues as it stands, we will see quick patient enrollment due to the significant number of patients available, and the urgency of obtaining final approval and broader access to the drug will further expedite the review process. While it’s challenging to forecast right now, Dennis mentioned that we anticipate those trials will commence soon, and we expect to begin seeing data in the fall from the early phases of those studies. Thus, progress is being made swiftly.

Operator, Operator

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Phil Gomez for closing comments.

Phillip Gomez, CEO

I would like to thank everybody for taking the time to join today's call. SIGA has been working on TPOXX for many years in a great partnership with the U.S. government. I just wanted to end by thanking our partners at BARDA, ASPR, NIH, and the U.S. government for working to get us to this point. We have a long way to go. We need to get access to the drug approved. We need to get these clinical trials completed. I believe there is a great history here and a great partnership. The last thing I'd like to do is thank all of my colleagues here at SIGA, people who have been working around the clock, responding to numerous requests and making sure that this drug gets out there. It's with great pride that we deliver this drug that we see some of the initial results from, and we look forward to working with everybody to translate that impact on human health into value creation for our shareholders. I appreciate your time today. Thank you so much.

Operator, Operator

Thank you all for joining the call today. If you have any additional questions, you can find SIGA's investor contact information at the bottom of today's press release. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.