Earnings Call Transcript - SIGA Q4 2020

Operator, Operator

Greetings, and welcome to the SIGA Business Update call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. 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, 2020, and its subsequent reports on Form 10-Q and Form 8-K. I would now like to turn the call over to your host Dr. Phil Gomez, CEO of SIGA Technologies. Please go ahead, sir.

Phil 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 quarterly update on our achievements and upcoming objectives. On this call, I will provide a business update, Dennis will provide an R&D update, and Dan will provide a financial update. We'll then be happy to take any questions. I'm pleased to report on an outstanding year for SIGA. For the year ending December 31, 2020, we reported approximately $125 million in revenues as we began the resupply of the 1.7 million course TPOXX stockpile with the US government and as we made our first international delivery of Oral TPOXX. In connection with the international product delivery, I'd like to highlight that over the last 12 months, inclusive of the Public Health Agency of Canada contract awarded in early 2021, $47 million worth of international contracts have been issued for the future delivery of Oral TPOXX, $17 million of which relates to firm commitments and the remainder is subject to option exercise. In light of SIGA's strong operating and financial performance, we were able to repay our term loan in full in March 2020, earlier than maturity, and our Board of Directors authorized a $50 million share repurchase program, under which we repurchased approximately $28 million worth of shares in 2020, which amounted to more than 5% of shares outstanding as of when the share repurchase program started in early 2020. Of course, to state the obvious, 2020 was not a year that anyone anticipated, given the COVID-19 pandemic. From a strictly business perspective, one key impact of the pandemic has been heightened uncertainty with respect to the timing of certain procurement activities. For the most part, we as a company have done a very good job of navigating the uncertainty. One area in which the direct or indirect impact of pandemic-related uncertainty has been magnified pertains to the timing of the international market build for Oral TPOXX. As background, government officials and departments across the world, who we and our partner Meridian work with in terms of stockpiling conversations and decision-making, are usually also the same people and departments who are exquisitely focused on responding to the myriad of complications of the pandemic. Sometimes, health security government departments, in response to these new challenges, are being restructured to meet the near or long-term needs of pandemic response and preparedness. As such, we believe the results of the pandemic over time will be twofold in relation to our business. In the near term, the pandemic will continue to subject SIGA to the risk of international business development activities coming to fruition slower than anticipated in some cases, something that we expect will continue in 2021. Post-pandemic, we believe that international governments will be better situated in terms of resources, experience, and personnel to fully appreciate the importance of health security preparedness and the value that Oral TPOXX provides in that context. As such, we believe this post-pandemic environment will have a net positive impact on our international business development success. Importantly, I want to emphasize that the delay we've experienced with respect to an anticipated international order, as noted in our last investor call, does not change our long-term view of the international prospects for TPOXX. With regard to the aforementioned anticipated order, we still expect the order to occur and conversations with the customer indicate that the order is on track, albeit at a slower pace than planned. As I have said on previous calls, international sales are complex and country-specific, often with long lead times, or with many parts of the government required to act in concert to purchase our product. Although we have seen some delays due to government staff rightfully focused on COVID-19 responses, and current government budgets across the world being dedicated to COVID-19 responses, we remain optimistic about the potential for additional sales this year. That being said, we're also continuing to dedicate ample resources to our R&D efforts and have made significant progress on this front over the past year. We've advanced efforts to achieve regulatory approvals outside the US for the use of TPOXX for a variety of orthopox diseases and to treat during different stages of these disease life cycles. We're also continuing to explore uses of TPOXX in several disease areas, and I will now pass the call to Dennis to run through these updates in more detail.

Dennis Hruby, CSO

Thank you, Phil. I'm pleased to have the opportunity to update our investors on the progress being made by the SIGA research and development team. As Phil mentioned, for Oral TPOXX, we continue to advance our efforts to achieve regulatory approvals outside the US. Both the EMA MAA and the Canadian NDS applications, which were submitted last year, have been validated by the respective agencies and are now undergoing full review. We are responding to any comments or questions that arise in a timely manner in order to expedite the review process as much as possible and we hope to achieve those regulatory approvals in late 2021 or early 2022. As a reminder, both the MAA and NDS applications are requesting an indication for TPOXX for use against orthopoxviruses, which is a broader indication than the current FDA-approved label. This is important as conversations with a broad range of countries as well as NGOs indicate that many government officials are thinking broadly about the best way to pursue health security and a therapy for a broad range of orthopoxviruses such as smallpox, Vaccinia, cowpox, and monkeypox could resonate with this type of preparedness strategy. We have seen monkeypox cases continue to be an issue in Central Africa, and cases outside of Africa in the U.K., Singapore, and Israel. It's important to note that we continue to get requests from around the globe to use TPOXX to treat individuals infected with Vaccinia virus, cowpox, and monkeypox on a compassionate use basis. We review those requests on a case-by-case basis. Separately, we are working on a collaboration that would allow us to reach a broader number of individuals who developed monkeypox in Central Africa and expect to announce that effort later this year. On the FDA regulatory front, we continue to progress our efforts to achieve regulatory approval of Oral TPOXX for post-exposure prophylaxis. As we have discussed previously, the strategy for this program has evolved as we have talked with the FDA to get feedback on our plans. I'm pleased to say we believe we have an agreement on the path to ultimate approval. Together with our colleagues at the U.S. Department of Defense, final protocols for the remaining two clinical studies have been developed and shared, obtaining consensus with the FDA. Having now received agreement from the FDA on our protocols, we are working towards potentially launching both studies concurrently as soon as the third quarter of this year, depending on a series of factors, including the general status of clinical trial availability in light of the COVID-19 pandemic. As a quick reminder, the two human studies we are planning for PEP are: One, a study to evaluate whether there is any interference with the Jynneos vaccine, and two, an expanded safety study. We anticipate these studies will be completed in 2022, with data to support the PEP indication. We are confident based on the mechanism of action of TPOXX it will not interfere with the Jynneos vaccine. Moreover, the outcome of these studies are not required for the purchase of TPOXX doses for PEP, as we already have an FDA-approved product, and stockpiling may occur in advance of the label expansion if the government determines there's a need for it. With regard to IV TPOXX, the NDA is nearing completion and will be submitted to the FDA as soon as April. If all goes well, the U.S. FDA submission for IV TPOXX should receive approval in the early 2022 time frame. In addition to the PEP and IV programs for TPOXX, we also continue to progress our pediatric formulation, which is a powder for reconstitution. Prototype formulations have been developed and tested for dissolution and solubility versus the Oral TPOXX capsules. We are selecting the formulation with the best properties and are preparing to initiate human clinical trials shortly, to evaluate and optimize pharmacokinetic performance. We have shared our development plans for these products with the FDA and they had no comments. Lastly, we continue to explore new avenues for the use of TPOXX outside of orthopox diseases. We have collaborations with several companies in oncology that utilize Vaccinia virus in the product strategy. Given the challenges of advancing products in this field to late-stage development, this may still take time. We continue to be interested in the long-term potential of TPOXX to support these therapies, but recognize that most of the current investigational products are in early clinical testing. It will take time to determine what, if any market potential there is for TPOXX in this regard. In relation to TPOXX, our efforts to develop a second smallpox antiviral ST-357 continue. In collaboration with the National Institute of Health, we're conducting a medicinal chemistry campaign to improve the chemical attributes of the molecule to produce a lead candidate for advancement into development. We continue to seek additional outside funding to accelerate this effort. Finally, let me close by thanking the SIGA staff for their tireless efforts and tremendous contributions. In these difficult and unprecedented times, they pivoted to working remotely and have continued to perform efficiently, effectively, and cooperatively to advance the projects on time, on schedule, and simultaneously execute on our federal contracts and commitments. A special thanks to the SIGA IT team for providing us with the tools to be successful. I'll now pass the call over to Dan, who will discuss our fourth quarter and full year financials.

Dan Luckshire, CFO

Thanks, Dennis. For the three and twelve months ending December 31, 2020, SIGA reported revenues of about $38 million and $125 million, respectively. In the last quarter, around 112,000 courses of oral TPOXX were delivered to the Strategic National Stockpile, generating around $35 million in revenue. For the entire year, about 363,000 courses of oral TPOXX were delivered, resulting in approximately $113 million in revenue. Additionally, revenue for the year included about $2 million from the delivery of oral TPOXX to Canada, marking our first international sale. Operating income, which does not factor in costs related to term loan retirement, interest expenses, interest income, taxes, and fair value adjustments to the warrant, was around $27 million for the quarter and $85 million for the year. Net income for the three and twelve-month periods was approximately $20 million and $56 million, respectively. This translates to fully diluted earnings per share of $0.26 for the quarter and $0.71 for the year. As of December 31, the company's cash balance stood at roughly $118 million. In the fourth quarter, SIGA repurchased around one million shares of its common stock for about $6.7 million. Over the full year of 2020, the company repurchased approximately 4.6 million shares for around $28.5 million, which exceeds 5% of the total outstanding shares at the start of the year. Looking ahead of the 2020 financial results, there is potential for up to $459 million in TPOXX procurement revenue from existing contracts, expected to be earned over the next four years. These revenues are associated with the 19C BARDA contract and the Canadian contracts. The 19C BARDA contract has up to $414 million in procurement options remaining, while up to $45 million is linked to the Canadian contracts for oral TPOXX. Of the $45 million related to Canada, $33 million is associated with a newly announced contract from the Public Health Agency of Canada, with the rest coming from the Canadian military contract. The PHAC contract includes a firm commitment for the purchase of about $17 million of oral TPOXX by March 31, 2023, with additional courses to be purchased afterward based on options exercised by PHAC. We anticipate delivering around $10 million of oral TPOXX to PHAC in 2021, starting with an initial delivery of about $3 million in March. Just to remind everyone, the Canadian contracts were awarded to Meridian Medical Technologies as part of an international promotion agreement established in 2019. This wraps up the financial section of the call. I will now hand it back to Phil for a brief summary.

Phil Gomez, CEO

Thanks, Dan. I want to underscore that we strongly believe that our achievements in 2020 with respect to TPOXX, in combination with the additional formulation, label expansion and geographic expansion goals we are pursuing, provide a bright future for SIGA. We have a combined $459 million of TPOXX procurement revenues tied to existing contracts that we anticipate will mostly be recognized over the next four years. We anticipate building on this base with additional international sales. Also, we believe the PEP program supports consideration of a larger SNS stockpile, which in turn would result in larger US government procurement contracts. While revenue from the government contracts can be lumpy, we believe that the earnings power of the TPOXX business is substantial, as evidenced by the 2020 financial results. It will not be without challenges, however. As I've discussed previously, our current contract for procurement of oral TPOXX is with BARDA and we are now post FDA approval. This means we will ultimately be transitioning to a contract with a strategic national stockpile, and we're working with the US government on option exercises under the BARDA contract and long-term procurement planning. It is, however, challenging to do this during the start of a new administration and in a COVID-19 pandemic. We are focused on ensuring the stockpile is maintained at 1.7 million courses and our manufacturing product for delivery this year. Given these realities, I expect deliveries to begin in the second half of 2021. As earnings generate cash, we will continue to examine the best use of our cash including continuing share buyback as well as potential investments or acquisitions that provide an opportunity to grow earnings and leverage our successful platform. Before I close out with some goals for 2021, I'd like to share a brief corporate update. I would like to welcome Edison Group as our new Investor Relations advisory firm. Edison Group is a global Investor Relations firm that has unique expertise and global reach, which we believe can help SIGA continue to broaden its footprint worldwide and enhance its visibility with key audiences. We look forward to working with Edison. In summary, we will continue to pursue a full range of avenues in 2021 and beyond to create value including continued delivery of oral TPOXX courses under the 19C BARDA contract, pursuit of US stockpile expansion to cover PEP, pursuit of additional international sales through Meridian and international regulatory approvals to support those sales, seek approval for label expansions for TPOXX to include PEP and other orthopoxviruses; expand and support ongoing oncology collaborations for TPOXX and leverage our capabilities for new formulations and potential new products. This concludes our prepared remarks and we will now begin the Q&A session.

Operator, Operator

Thank you. Our first question comes from Max Jacobs with Edison Group. Please proceed with your question.

Max Jacobs, Analyst

Hi, everyone. Thank you for taking my call. I have a couple of quick questions. Can you confirm that there are no additional animal requirements for the PEP study?

Dennis Hruby, CSO

This is Dennis. That is correct. We've had the conversation with the FDA and they've confirmed there are no additional animal studies required.

Max Jacobs, Analyst

Okay great. And then just another quick question, which is just in terms of the stock repurchase program, I mean did you do any repurchasing during the first quarter of 2021?

Phil Gomez, CEO

Dan, I'll hand that to you.

Dan Luckshire, CFO

Sure. We have continued that program in 2021. We're not going to share any details, but consistent with what we've been doing in 2020, we have continued into 2021.

Max Jacobs, Analyst

Okay, great. Thanks for taking my questions.

Phil Gomez, CEO

Thanks, Max.

Operator, Operator

Thank you. Our next question comes from Joaquin Horton, a private investor. Please proceed with your question.