Earnings Call Transcript - SIGA Q2 2024

Operator, Operator

Welcome to 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 change 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, 2023 and its subsequent reports on Form 10-Q and form 8-K. With that, I will turn the call over to Diem Nguyen, Chief Executive Officer of SIGA. Diem?

Diem Nguyen, CEO

Good afternoon, everyone, and thank you for joining today's call to review our business results for the second quarter of 2024. I am joined by Dan Luckshire, our Chief Financial Officer, and we appreciate the opportunity to update you on our company. After this update, we will be happy to answer your questions. I am pleased to report that SIGA has continued to generate product revenues that have exceeded revenues from the same periods last year. Product revenues for the three months and six months ending June 30, 2024, were $21 million and $45 million, respectively, surpassing the product revenues of $1 million and $7 million for the same periods in 2023. These strong results highlight SIGA's resilience. Our capital management activities over the past several years, including substantial special cash dividends, reflect this strong long-term performance. Focusing on long-term performance is essential due to the nature of SIGA's business and the inherent quarter-over-quarter fluctuations. We believe the financial results for the first half of 2024 support a significant positive long-term trend. Our sales showcase a diverse mix of oral TPOXX deliveries to the US Strategic National Stockpile, the US Department of Defense, and 11 international customers, alongside IV TPOXX deliveries to the Stockpile. Looking forward, we expect continued diversification of our revenue base will be vital for maximizing long-term performance. Consistent with our previous quarter's discussion, we anticipate that 2024 will be another year of robust product revenues. As a reminder, our 2023 product revenues were the highest in the last five years. Two weeks ago, the US government exercised its procurement option under the 19C BARDA contract for the delivery of around $113 million of oral TPOXX. We plan to collaborate with the US government on the timing of this delivery and currently expect it to begin within the next 90 days. We anticipate that a significant portion of this order will be delivered before the end of the year, aligning with our expectation of substantial product revenues this year. We believe this award underscores the US government's recognition of smallpox as an ongoing threat and its commitment to maintaining a strong stockpile of smallpox antivirals to ensure the health security of the American populace, a matter consistently supported across party lines. TPOXX boasts a favorable safety profile based on preclinical safety and toxicology data, Phase III clinical data in healthy volunteers, and clinical observations. More than 1,500 mpox patients have enrolled in clinical trials to evaluate TPOXX's efficacy for treating mpox, utilizing TPOXX and matching placebo provided by SIGA to trial sponsors at no cost. Consequently, we expect TPOXX will be a preferred antiviral treatment in the event of an outbreak. Our focus is now on securing the next procurement contract with the US government. Our team is actively engaging with various government officials as we prepare for a request for proposal (RFP), which could be issued by the Administration of Strategic Preparedness and Response at any time. Several factors instill confidence as we await this RFP. First, early this year, Congress approved the US government's budget, which includes a significant increase for countermeasures, including the Stockpile. This funding highlights the government's ongoing dedication to preparedness and response. Second, the current public health landscape, particularly the Clade I mpox outbreak in the Democratic Republic of Congo, emphasizes the persistent pandemic risks and the necessity for nations to be prepared, including timely procurement of effective therapies like TPOXX. Third, we have a long-standing partnership with the US government to supply crucial countermeasures against one of the world's most significant bio-threats. Recall that smallpox is one of only six diseases classified as a Category A threat by the CDC, and herd immunity is diminishing within our population. TPOXX was among the first novel small molecule therapies delivered to the Stockpile under Project BioShield, developed in conjunction with BARDA. Overall, from our discussions with government officials and other contracts for procuring medical countermeasures, we are optimistic that the government is receptive to a new long-term contract, likely spanning five to ten years, with an aggregate value surpassing that of our current contract, from which most options have already been exercised. For reference, the current 19C BARDA contract signed in 2018 has a procurement value of $546 million. This is an exciting period for SIGA. As I previously mentioned, the health security of Americans is a bipartisan issue. While we await our next RFP, we remain focused on our long-term objectives. We possess the financial strength to engage current and potential customers outside the US while being ready to collaborate with the US government once the RFP process commences. Dan will provide further details on our financial position shortly. In summary, our balance sheet is strong with no debt. Our cash flow remains healthy, and we have implemented prudent cash management, which enabled us to pay a special cash dividend in April. Additionally, we have made progress in several other critical areas. In April, we amended our International Promotion Agreement with Meridian Medical Technologies, allowing SIGA to begin promoting oral TPOXX outside the US as of June 1. Since then, our team has strengthened ties with key global customers, and we believe these efforts will foster growth over time. In June, we announced an agreement to supply TPOXX to the member states of the Association of Southeast Asian Nations, laying the groundwork for future collaborations in this highly populated region. In Japan, we are having fruitful discussions with our partner, Japan Biotechno Pharma, and regulators regarding the new drug application for TPOXX for the treatment of smallpox, mpox, cowpox, and complications due to the vicinity of virus. Based on the standard review timeline for the new drug application, we expect a final regulatory decision by early next year. If approved, we anticipate TPOXX will be included in the National Stockpile, ready for deployment in the event of an outbreak. We are continuing our pursuit of expanding TPOXX approvals for new applications, such as post-exposure prophylaxis (PEP) and mpox formulations. Regarding PEP, we believe TPOXX has potential benefits against smallpox in post-exposure scenarios. Recently, much of our effort has been on the completed TPOXX JYNNEOS safety and immunogenicity trial designed to evaluate TPOXX when administered alongside JYNNEOS. This trial, requested by the FDA, aimed to test the safety and immunogenicity of the drug-vaccine combination to ensure patient safety and vaccine effectiveness remain intact. The trial data supports the safety objective, and regarding immunogenicity, we are collaborating with the CDC and consulting with the FDA to analyze samples to meet the immunogenicity objective. Simultaneously, we are working on our supplemental NDA submission and targeting submission within the next 12 months. Moving on to ongoing mpox trials, trial sponsors continue to progress significantly. The NIAID PALM 007 trial in the DRC has completed enrollment, and we expect to release top-line data shortly. The NIAID STOMP trial has also seen considerable growth, with 515 patients enrolled as of July, up from 350 reported in our last call. Mpox remains a global threat, especially in the DRC, where cases are rising. To support health agencies and investigators, we donated over 500 courses of TPOXX capsules and the corresponding placebo for the PALM 007 randomized clinical trial last year and recently contributed another 100 courses to ensure patient access during data analysis. Additionally, we are developing broader access programs in Africa. The US government has also distributed about 40,000 courses of TPOXX in response to the 2022 mpox outbreak through the CDC's compassionate use program. We actively monitor this situation, providing assistance when possible to ensure the best outcomes for mpox patients. In summary, our company is strong, profitable, and well-positioned for the future, supported by four key pillars. First, we have a well-structured strategy yielding results. Second, we maintain a prudent capital management approach that has allowed us to pay significant special cash dividends. Third, we have a valuable TPOXX franchise that meets the US government's critical requirements for preparedness against outbreaks. Fourth, our resilient team has proven operational capabilities and is executing our strategy effectively and with urgency. Together, we believe these pillars will enhance shareholder value over time and improve public health. Now, I'll turn it over to Dan to discuss the financial results in more detail.

Daniel Luckshire, CFO

Thanks, Diem. As noted earlier in the call, SIGA's product revenues through the three months and six months ended June 30, 2024, were $21 million and $45 million, respectively, which surpasses product revenues of $1 million and $7 million, respectively, for the comparable period last year. Product revenues for the quarter were primarily related to approximately $18 million of IV TPOXX sales to the US government. For the six months ended June 30, 2024, product revenues reflected a diverse mix, including approximately $15 million of oral TPOXX sales to the US government under the 19C contract, approximately $11 million of international oral TPOXX sales to 11 countries, approximately $1 million oral TPOXX sales to the US Department of Defense, and the previously mentioned approximately $18 million of IV TPOXX sales to the US government. In addition to product revenues, the company had research and development revenues of approximately $1 million and $3 million for the three months and six months ended June 30, 2024, respectively. Pre-tax operating income, which excludes interest income and taxes, was approximately $1 million for the three months ended June 30, 2024. For the six months ended June 30, pre-tax operating income was approximately $12 million. In comparison, there was a pre-tax operating loss for the three months and six months ended June 30, 2023, of approximately $5 million and $7 million, respectively. Net income for the three months ended June 30, 2024 was approximately $2 million. For the six months ended June 30, net income was approximately $12 million. In turn, fully diluted income per share for the three months ended June 30, 2024, was $0.03 per share, and for the six months ended June 30, fully diluted income per share was $0.17. At June 30, 2024, the company continued to maintain a strong balance sheet with a cash balance of approximately $107 million and no debt. On April 11, SIGA paid the previously disclosed special cash dividend of $0.60 per share, which amounted to an approximately $43 million payment to shareholders. Looking forward, as Diem mentioned earlier in the call, we are working diligently to continue our positive momentum. As such, we believe 2024 is lining up to be another year of strong product revenue performance. This concludes the financial update. At this point, I will turn the call back to Diem.

Diem Nguyen, CEO

Thanks, Dan. Leveraging our achievements from 2023 and the positive momentum generated so far this year, we believe SIGA is poised for continued growth and innovation. We remain focused on advancing our strategic goals, including securing a new contract with the US government, optimal capital management, and enhancing our TPOXX franchise. We are confident that this will deliver value to our patients, partners and shareholders over time. Now, I would like to open the call to Q&A. Operator?

Soo Romanoff, Analyst

Hello?

Diem Nguyen, CEO

Yes.

Soo Romanoff, Analyst

Hi, sorry for the technical difficulties. Thank you for taking my question and congratulations on another strong quarter. I have a multi-part question mainly for additional clarity. It was nice to hear about the $113 million BARDA exercise for the remaining part of oral TPOXX. It seems you're set to deliver a significant portion in 2024 despite the manufacturing issues. Any further details on the timeline would be appreciated. The second part of my question is regarding when BARDA will exercise the remaining $26 million IV TPOXX, as I understand the July 23 IV TPOXX order is yet to be delivered. Lastly, could you provide an update on the US government negotiations? I believe we are looking at a recurring arrangement.

Diem Nguyen, CEO

Thank you, Soo. If you can hear me, I'll address your questions in three parts. The first question is about the recent BARDA exercise of our remaining option and the expected delivery timeline. We've been actively coordinating with our supply chain as we prepare for the US government's exercise of this option under the current BARDA contract. We're working with our partners to produce and deliver oral TPOXX according to a schedule that aligns with our customer's needs, the US government. We are confident in our capability to deliver and expect to commence shipping within the next 90 days, with a significant portion scheduled for this year. We're collaborating with the US government to find the best timing, so I can't provide more specific details at this moment. Regarding your second question about the IV TPOXX option, the $18 million discussed today concerning IV TPOXX sales in the second quarter pertains to the 2022 order. After we complete this order, we will work with the US government and our supply chain on the timeline for the 2023 order. Currently, we anticipate that BARDA will exercise the final $26 million option in 2025. Your last question, Soo, was about an update on US government negotiations. As we noted in our prepared remarks, we've been engaging with a wide range of government officials. These discussions indicate clear bipartisan support for ensuring the health security of the American people. Given the growing geopolitical risks globally and the mpox outbreak in the DRC, we are ready to respond when ASPR initiates the RFP process. Our goal is to secure a long-term contract that includes more regular purchases, reflecting the value TPOXX provides both now and in the future. We believe the US government is amenable to a long-term contract, possibly up to 10 years, with a total value higher than the 2018 contract.

Soo Romanoff, Analyst

That's great. If I can ask one more question, if you don't mind..

Diem Nguyen, CEO

Sure, Soo.

Soo Romanoff, Analyst

It's encouraging to see the growing interest, especially with the recent agreement among ASEAN countries for oral TPOXX. We discussed this briefly, but any details on the size and timelines would be appreciated. Additionally, I'm aware that you're collaborating with Meridian; any insights on the fee structure for this new order would also be helpful.

Diem Nguyen, CEO

Sure. I'll talk about the ASEAN agreement and Dan, you can highlight in terms of the Meridian economics. First, I want to really highlight that we are incredibly pleased with this agreement which was signed in June. This agreement further advances our strategy to expand access to TPOXX to even more international markets. Asia is a strategic region for SIGA. This contract represents an important step to a growing orthopoxvirus preparedness in the Asia region and does establish a footprint in a highly populated region. It also sets the groundwork for additional activity for the future. As we noted in our June release, we did receive a $3 million order from a new customer in the ASEAN region. We believe this is the first important step to larger collaboration as the ASEAN member states together represent a population of over 600 million people with a GDP of over $3.6 trillion. And we have not disclosed the financial terms to date. However, as we have emphasized, we're quite optimistic with this collaboration. Dan, would you like to talk about the Meridian amendment?

Daniel Luckshire, CFO

Yes, certainly. So we disclosed the original amendment earlier in the early June timeframe. And with that, what it did was it really allowed us to take over ownership of the international marketing and relationships. With the amendment, the goal was to ensure a very, very smooth handoff for the next period of time. So with that, there were some key countries and regions and we wanted to ensure, especially for the handoff, and that really concentrated in Europe, Australia, and Japan. So it's much more limited in scope than the prior arrangement. In addition, the fee is materially lower than the original fee. We do not disclose the original fee but it is materially lower and the current fee is in the high-single digits.

Soo Romanoff, Analyst

That's great. If you don't mind, can we discuss the new mpox strain and the DRC? I know you mentioned this as well. It seems like the governments are quite alert now. Are we seeing more inquiries from international markets? Also, it appears the mpox trials are making progress. Can we expect the US filing to be submitted soon?

Diem Nguyen, CEO

I can start by addressing the increased inquiries in the international market. TPOXX, or tecovirimat, serves as an important anti-bio treatment for smallpox, which is significant from a public health security standpoint and influences stockpile planning for preparedness. The mpox outbreak in 2022 raised awareness of orthopox threats, leading to international recognition and highlighting the need for targeted responses to mpox outbreaks as well as long-term policy considerations regarding smallpox stockpiles. Although these areas may seem independent, they are interconnected through the rising orthopox threats, whether naturally occurring like mpox or potentially due to intentional actions related to smallpox outbreaks. From 2022 to now, we're dealing with a new mpox strain in the DRC, and we're concerned not just about the increasing mpox cases there but also the higher prevalence of the more lethal Clade I strain compared to Clade II. Mpox cases have continued over the past two years, especially among unvaccinated individuals or those who have only had one dose of JYNNEOS. As a reminder, mpox cases were primarily in Africa in 2022 before spreading worldwide, underscoring the importance of monitoring African case activity in a global context. The mpox clinical trials are advancing well, and we anticipate top-line results from the PALM 007 clinical trial in the DRC in the upcoming weeks. We've also observed that the STOMP trial has enrolled around 515 patients as of July, a significant increase from 350 patients reported in our last call and indicative of the rising cases we're seeing. Assuming the data is positive, we plan to collaborate with our trial sponsors to file an mpox supplemental NDA as early as 2025. We are closely monitoring this situation.

Soo Romanoff, Analyst

Yes, that's great. Okay. Well, thank you for the answers and great quarter again. Congratulations.

Diem Nguyen, CEO

Thank you.

Operator, Operator

Okay. There are no further questions at this time. I would now like to turn the call back over to Diem Nguyen, CEO. Diem?

Diem Nguyen, CEO

Thanks, Nativ. I'd like to thank everyone for making time to join us on today's call and for the ongoing interest in SIGA. We look forward to speaking to you again in our third quarter call. Have a good rest of the evening.