New BARDA contract to be a key focus in 2025

Q4 was SIGA’s strongest quarter of the year, with product sales of $79.8m, driven by $51.2m of oral and $8.5m of intravenous (IV) TPOXX deliveries to the US SNS, $9m in deliveries to the US Department of Defense and $11m in international orders. While the $70m order book de-risks top-line returns in FY25, we expect investor focus to be on the new, potentially higher-value contract with the US government, with a request for proposal likely in the coming months. We also believe the recent funding cuts to the National Institutes of Health (NIH), while concerning, should not affect decision-making on health security preparedness and therefore see a high likelihood of SIGA securing a new BARDA contract for TPOXX stockpiling in 2025.

Strategic reassessment required after mpox data

With antivirals providing the most benefit when used early or as a prophylactic treatment, we concur that the mpox trial designs may not have been optimized for TPOXX to demonstrate best results. Gaining US approval may now require SIGA to run additional studies, with modified designs to maximize efficacy and potential. While this possibility cannot be ruled out, given the time and resources required, we conservatively remove the US mpox potential from our estimates for now.

Valuation: Adjusts to $14.41 per share

We update our valuation to $1.03bn ($14.41/share) from $1.0bn ($13.93/share) previously. This reflects the inclusion of Japan and the end-FY24 cash balance ($155.4m), partially offset by the removal of the US mpox opportunity and a slight adjustment to timing of sales recognition. Given the cash at hand, we see the likelihood of SIGA declaring another special dividend (decision expected in Q225).

A solid FY24, with broad-based growth

FY24 saw SIGA record its second consecutive year of top-line growth, with product sales of $133.3m, the highest reported annual product revenue since 2018. Domestic markets, contributing $110.4m to the top line, were the key growth drivers, although we note continued traction from international jurisdictions ($23m in revenues in FY24), including first sales to Africa ($0.8m delivery of oral TPOXX to the Ministry of Health in Morocco in Q324) and its largest single contract from Asia-Pacific in Q424 ($11m). Of the $112.5m oral TPOXX option exercised by the Biomedical Advanced Research and Development Authority (BARDA) in July 2024, the company delivered a total of $59.3m in H224, including $51.2m in Q4. The order book remains strong at c $70m (which we estimate includes $53.2m of pending oral TPOXX deliveries and the rest related to IV TPOXX), which the company expects to deliver fully in 2025, beginning in Q225. The gross margin for the year was a healthy 76.5%, although lower than the 86.4% registered in FY23. We believe this to be a direct result of the different sales mix in FY24, with $26.1m in IV TPOXX deliveries, which has a lower gross margin than oral TPOXX (less than 40% vs 85% for oral TPOXX). Operating profit for the year was $70m, which translated to an operating margin of 50.4%. The corresponding figure for FY23 was $83.6m (a margin of 59.8%). The company remains debt free and ended the year with a strong cash balance of $155.4m, which we expect will get further support from the upcoming order book deliveries in FY25. SIGA has declared a special dividend each year since 2022 and management has indicated that the decision on capital allocation for FY25 will be taken in Q225.

New BARDA contract to be a key focus in 2025

SIGA has had a longstanding relationship with the US government authorities and TPOXX has been stockpiled under the SNS since 2011. While the 2011 BARDA contract had a procurement value of $461m, the 2018 contract value was higher at $546m, of which $520m has been exercised to date and c $440m delivered to the SNS. Another $70m in deliveries is expected in FY25. We also anticipate the pending $26m IV TPOXX option to be exercised in 2025, with deliveries in 2026.

We believe that the primary focus for the company in 2025 will be to secure a new and potentially higher-value contract from the US government for oral TPOXX and IV TPOXX for the SNS. Management has communicated that it is in discussions with the relevant US authorities and is preparing for a request for proposal (RFP) from the US government. While we note that the recent funding cuts to the NIH may have generated some uncertainty around the RFP, deliveries to the SNS are a matter of national security preparedness and should typically not be affected by the broader efficiency measures being implemented by the new government, in our view. We also highlight that the 2018 BARDA contract was signed under the previous Trump administration, which reflects favorably on SIGA’s likelihood of securing a new contract.

Smallpox is a highly contagious and serious viral infection, which had a mortality rate of 30% before it was declared eradicated in 1980 following an extensive vaccination program. However, this means that a large proportion of the current population has not been immunized against the virus and remains exposed to potential threats from bioterrorism. Given the latent risk, the Administration for Strategic Preparedness and Response, of which BARDA is a part, mandates stockpiling of two separate smallpox antiviral treatments. TPOXX is one of only two smallpox treatments currently approved by the FDA, which is an additional factor supporting the potential for a new contract. Note that TPOXX has a seven-year shelf life and will need to be replaced periodically to maintain required doses in the SNS. Moreover, TPOXX has an established safety profile, a key differentiator to the other approved antiviral for smallpox, Tembexa, which requires a black box warning for its toxicity and major side effects.

Given this, and the US government’s continued commitment to preparedness against biothreats, we see a high likelihood of SIGA securing a new contract in 2025, although the RFP process may be more protracted than previously anticipated, given several ongoing initiatives by the new US government. Our model assumes that SIGA will be able to secure a new contract in 2025, with an order value similar to the 2018 contract. However, while we previously estimated deliveries under the new contract to commence in 2025, we have now pushed out the timeline to 2026, to account for any potential delays in the RFP and subsequent contract signing. Note that this is subject to modification with further clarity on the new contract.

New board appointment should guide discussion with US authorities

SIGA has announced the appointment of retired General John M. ‘John’ Keane to its board of directors, with immediate effect. General Keane has decades of experience in national security and foreign policy and has served as an adviser to political and business leaders, including presidents, cabinet officials, members of congress and CEOs. We see his appointment to the SIGA board as a positive move by the company and expect SIGA to leverage General Keane’s knowledge on matters regarding national security and the need for preparedness against biothreats to guide discussions with the US authorities on the upcoming RFP for TPOXX.

Mpox trial data signals need for strategic reassessment

While TPOXX is approved in the EU, the UK and now Japan for all orthopoxviruses (including mpox), US approval requires SIGA to conduct in-human studies. The company has been participating in several government-funded, randomized, controlled clinical trials evaluating TPOXX as a treatment for mpox. In December 2024, SIGA announced that the interim data from the STOMP study, testing TPOXX as a treatment for mpox, did not demonstrate improved time to lesion resolution over placebo in the evaluated population of adults with mild to moderate clade II mpox. The STOMP trial (US and South America), undertaken in collaboration with the National Institute of Allergy and Infectious Diseases, was a randomized, placebo-controlled (2:1 TPOXX versus placebo), double-blind study, with an open-label arm to test patients with more severe symptoms, certain skin conditions or significantly suppressed immune systems.

Management highlighted that 75% of patients in the STOMP trial received TPOXX after five days of symptom onset and none were in the high-risk category. We note that antiviral treatments are most effective when administered early (within one to five days of symptom onset) and this was validated by the PALM 007 trial results, which showed benefit in the sub-set of patients (those diagnosed early and those with more serious symptoms). However, given that neither the PALM 007 trial nor the STOMP trial was company-funded, SIGA did not have control over modifying or updating the study design. Noting that the remaining three trials – UNITY (Switzerland, Brazil and Argentina), Platinum-CAN (Canada) and EPOXI (EU) – have comparable designs to the PALM 007 and STOMP trials, management expects these to yield similar results.

While SIGA continues to analyze data for the sub-groups, we believe that gaining US approval will require the company to run additional studies, with a modified study design to maximize efficacy and potential. Management has indicated that, based on TPOXX’s mechanism of action, the treatment is likely to provide optimal results when administered in the early phase of symptom onset or in the post-exposure prophylaxis setting. While we do not rule out this possibility, given the time and resources required we conservatively remove the US mpox potential from our estimates (contributing less than 5% of our valuation for SIGA), but will revisit our assumptions at a later stage.

PEP label filing now expected in early 2026

Under the PEP label expansion program, SIGA is evaluating TPOXX as a prophylaxis treatment for smallpox (following exposure and before symptoms appear) in high-risk individuals. This would require a 28-day regimen, versus 14 days for the treatment indication of TPOXX, and therefore holds double the market potential for the company. As a reminder, while all clinical trial-related activities were completed in 2023 (the expanded safety study did not indicate any drug-related serious adverse events), samples from the immunogenicity trial (testing TPOXX together with JYNNEOS, an FDA-approved smallpox vaccine) are being retested by the Centers for Disease Control and Prevention (CDC) after the trial indicated the measurable immune response to the JYNNEOS vaccine in both groups was lower than expected, which could potentially prevent non-inferior statistical determination from being the primary endpoint of the study as originally planned. During the FY24 earnings conference call, management noted that the CDC is likely to complete the reanalysis of the samples by mid-2025 (H125 previously), and the company is now targeting a regulatory submission with the FDA in early 2026 (Q325 previously). Despite this slight shift in timelines, we continue to model a 2026 approval and launch under the PEP label.

Expanded market reach with Japanese approval

In January 2025, SIGA announced the receipt of regulatory approval in Japan for TPOXX, for the treatment of all orthopoxviruses, including smallpox, mpox and cowpox, in adults and pediatric patients weighing at least 13kg. TPOXX is the first antiviral treatment for orthopoxviruses to be approved by the Japanese Pharmaceuticals and Medical Devices Agency. The approval was based on data from 15 clinical trials, which tested the safety and tolerability of TPOXX in over 800 healthy volunteers, including a repeat-dose Phase I pharmacokinetics trial involving 20 healthy volunteers conducted in Japan. Efficacy was established in animal models, including four studies in non-human primates and two studies in rabbits.

Japan is a key international market for SIGA and we view this approval as a significant milestone for the company.
SIGA will distribute TPOXX in Japan in partnership with its exclusive distributor in the country, Japan Biotechno Pharma (JBP). While the deal terms with JBP have not been disclosed, management has indicated that the Japanese agreement carries substantially lower fees than the promotion agreement the company previously had with Meridian (which entailed a fee equal to at least 20% of sales) before being amended (effective June 2024). We believe that concurrent to the approval, SIGA may have also delivered a TPOXX order to Japan’s SNS. While the company has not disclosed the specifics, we believe that the $11m international order recorded in Q424 by SIGA to an East-Asian country may be related to the SNS in Japan. For FY24, SIGA has reported $22.2m in oral TPOXX sales from Asia-Pacific and EMEA and we note that the $11m order in Q424 was more than double the previous largest single order from the region.

International expansion remains a key growth pillar for SIGA and the company continues to make progress on its strategy to grow its footprint independent of its promotion agreement with Meridian. We remind readers that in Q324 the company made its first entry into Africa, with the signing of an agreement with the Ministry of Health in Morocco to supply its antiviral treatment TPOXX, recording proceeds of $0.8m in the quarter.

Longer-term focus on product diversification

During the FY24 earnings call, management reiterated its focus on expanding the TPOXX franchise but highlighted the longer-term impetus on portfolio diversification with complementary products. As part of this strategy, SIGA had in-licensed a new preclinical portfolio of monoclonal antibodies (mAb) from the Vanderbilt University Medical Center in October 2024. The company plans to develop this as a potential treatment as well as a prophylactic consideration for a range of orthopoxviruses, and we expect it to complement the company’s approved antiviral treatment, TPOXX. The mAb program has reported encouraging preclinical data and has secured funding from the US Department of Defense (DoD) to advance R&D efforts through Phase I clinical development. SIGA plans to develop the program as either a monotherapy or in combination with TPOXX.

Financials

Year capped by a solid Q4…

Q424 was the strongest quarter of the year for SIGA, with the company recording $81.5m in sales, including $79.8m in product sales and $1.6m in R&D-related revenue. The product sales comprised $51.2m and $8.5m of oral and IV TPOXX deliveries to the SNS, $9.0m in deliveries to the US DoD and $11.0m in international sales. The oral TPOXX sales are related to the $112.5m July 2024 BARDA option exercise, and we believe the IV TPOXX exercise completes deliveries under the August 2022 order. Overall, Q424 product revenue declined 31.0% y-o-y ($115.7m in Q423), although given the nature of the business (driven by government contracts, which results in lumpiness of revenues) direct comparability of figures may not be fully accurate. R&D-related revenues remained relatively stable q-o-q ($1.6m in Q424) and comprised activities under the 19C BARDA contract. Note that while the reported Q4 and FY24 product revenues were lower than our last published estimates of $155.6m and $102.1m (we had assumed that 80% of the $112.5m order would be delivered within 2024), this does not materially affect our projections and valuation given that this difference is more related to timing of the deliveries, which now extends by a few months to 2025. R&D expenses have stayed at similar levels in the last four to six quarters ($3.3m in Q424 vs $3.0m in Q324 and $2.9m in Q224) given the reduced R&D activity on the PEP label expansion program. On the other hand, SG&A expenses rose 43.2% q-o-q, which we believe was driven by increased direct sales and marketing activities by SIGA in international markets. This is likely to have been partially offset by the lower promotional fees to Meridian, following the revision of the promotion agreement in March 2024 (effective June 2024). Under the new agreement, Meridian will now be entitled to a fee equal to a high-single-digit percentage of collected proceeds from territories specified in the revised contract, versus at least 20% previously. Overall, the company reported an operating and net profit of $57.1m and $45.8m in Q424 versus $0.5m and $1.3m in Q324, respectively.

FY24 total revenue was reported at $138.7m (down 0.9% q-o-q), including $133.3m in product sales. This comprised $73.9m and $26.2m in oral and IV TPOXX deliveries to the US SNS, $10.1m to the DoD, $23.0m in international sales of oral TPOXX and R&D revenue of $5.4m. As highlighted previously, gross margins on product sales, while healthy, declined by 9.8pp to 76.5% due to the higher proportion of the lower-margin IV TPOXX deliveries in the sales mix. R&D expenses for the year were $12.3m, a 25.1% decline on the FY23 figure of $16.4m. This was attributed to lower vendor-related expenses due to decreased PEP label expansion activities, partially offset by increased compensation related to increased personnel. SG&A expenses rose by 14.0% y-o-y to $25.1m, driven by higher compensation expenses (including stock-based compensation) related to executive hiring. Overall, SIGA reported an FY24 operating profit of $70.0m versus $83.6m in FY23.

… and a stronger balance sheet

SIGA’s FY24 operating performance has translated to strong cash flows, with the company reporting operating cash inflows of $48.8m for the year ($94.8m in FY23) and a period-end net cash figure of $155.4m, with no debt on the books. Note that SIGA has declared special dividends in the past three years and, given the current cash position, we see the possibility of the company announcing another dividend for 2025, which should provide an additional income stream to investors. Management has communicated that capital allocation decisions will be made in Q225 and we expect an update on this in the coming months. For our model, we reflect a special dividend of $0.5/share in 2025.

Estimate revisions based on FY24 results

At the end of FY24, SIGA had an order book worth $70m, which we believe includes c $53.2m of pending oral TPOXX deliveries under the July 2024 BARDA order, with the remaining $17m attributed to deliveries of IV TPOXX under the July 2023 order. As indicated previously, we now assume that any deliveries under the new 2025 BARDA contract will be made in 2026 and have therefore adjusted our projections for oral TPOXX sales in 2025 to $53.2m, from $121.6m previously. We also estimate $25m in IV TPOXX sales in 2025 (fulfilling the July 2023 order entirely) and another $38m from international orders. This translates to total product sales of $116.0m, versus our previous estimate of $178.8m. We also introduce FY26 estimates, projecting $231.3m in product sales, including $113.9m of oral TPOXX deliveries under the new BARDA contract. We note that there may be a degree of variability and uncertainty in our assumptions and therefore these figures are subject to change as new information is made available. Exhibit 1 presents a breakdown of our product revenue estimates for FY25 and FY26.

We keep our estimate for R&D-related revenues broadly unchanged at $5.6m in FY25 (previously $5.5m) and forecast a corresponding figure of $6.8m in FY26. We also adjust our operating expense estimates, reflecting the FY24 trend and run rate. For FY25, we reduce our COGS estimate to $24.9m from $30.7m previously, which corresponds to the lower sales we now assume in FY25. We keep our R&D estimate for FY25 broadly unchanged at $13.5m, but reduce the SG&A projections slightly to $28.3m, from $30.5m previously. Our revised FY25 operating profit estimate is $54.9m ($109.6m previously). For FY26 we estimate an operating profit of $149.8m.

Valuation

We continue to value SIGA on a risk-adjusted net present value (rNPV) basis for its various programs and contracts, forecasting to the end of the patent life in each geography. Reflecting the aforementioned adjustments to our estimates, rolling forward our model and incorporating the new net cash figure has resulted in our valuation adjusting to $1.03bn or $14.41/share, from $1.0bn or $13.93/share previously. The key changes to our valuation are the removal of the US mpox opportunity (less than 5% of our valuation) and inclusion of the Japanese market to our estimates, following regulatory approval in late 2024. The reduction in our implied enterprise value ($0.87bn versus $0.90bn previously) is more than offset by the improved net cash position ($155.4m vs $99.3m at end-Q324). Our revised valuation is presented in Exhibit 2.