SIGA Technologies — Strong order book moving into Q424

Q324 was a strong quarter for SIGA in terms of its order book, with the company receiving $122m in new TPOXX orders during the period. This includes the $112.5m order received in July under the 19c BARDA contract as well the $9m order from the US DoD for oral TPOXX, and a small amount of IV TPOXX, received in August 2024. Of the BARDA contract, $8.1m was delivered within Q324, making up the bulk of the $8.9m in product revenues recorded in the quarter. The remaining $0.8m was attributable to international sales of oral TPOXX, which we believe was related to delivery of oral TPOXX to the Ministry of Health in Morocco. In contrast, in Q323 SIGA had reported product sales of $8m, attributable to international orders. We highlight that due to SIGA’s business model (deliveries based on government contracts and orders) revenues can be lumpy, and therefore period-on-period comparisons are often difficult. R&D-related revenues amounted to $1.1m ($1.3m in Q323) and comprised activities under the 19C BARDA contract. Note that the R&D-related revenue figures have stayed in this range since Q323, following the conclusion of the $27m BARDA funding for the PEP label expansion program during the period.

R&D expenses were in line with the previous two quarters ($3.0m versus $2.9m and $3.0m in Q224 and Q124, respectively) following decreased R&D activity related to the PEP label expansion program, given the ongoing sample re-analysis by the Centers for Disease Control and Prevention (CDC) (discussed in more detail later in this report). On the other hand, SG&A expenses saw a significant decline due to lower promotion fees paid to distribution partner Meridian, given the decrease in international sales. This was partially offset by higher executive compensation. We note that while Meriden was previously entitled to receive 20% of sales proceeds as fees, the agreement was amended in March 2024 (and effective in June 2024), with SIGA taking primary responsibility for marketing and promotion. Under the revised agreement, Merdian will now be entitled to a fee equal to a high single-digit percentage of collected proceeds from territories specified in the revised contract. Overall, operating and net profit for the quarter were $0.5m and $1.3m, respectively, versus an operating and net loss of $1.3m and $0.4m in Q323.

SIGA ended Q324 with a strong order book, worth $146m, which we understand included $104m of pending deliveries of oral TPOXX and c $8m of IVT (under the August 2022 order) to BARDA, $25m in IVT deliveries under the July 2023 order from BARDA and $9m of TPOXX orders by the DoD, received in August 2024. Of this, $51.2m of oral TPOXX and $8.5m of IVT (we believe this completes deliveries under the August 2022 order) were delivered in October 2024. We continue to expect 80% of the $112.5m order to be delivered within 2024, and therefore model another $30m of oral TPOXX deliveries in Q424. We also keep our estimate of deliveries under the $25m IVT order (July 2023) unchanged to 2025. Management has highlighted that the manufacturing process of IVT is more complex than that of oral TPOXX and uses certain different raw materials, which require longer manufacturing lead times, to oral TPOXX. We believe this accounts for the more protracted delivery of IVT versus oral TPOXX.

We also adjust our FY24 revenue projections for the $9m order received from the DoD in August 2024, estimating it to be fully serviced within Q424. The upside from this inclusion has been partially offset by adjustments we have made to our previous assumptions of deliveries to Canada. We note that SIGA holds a $6.7m contract with the Canada Department of National Defence, which the authority can exercise by 31 December 2025. We had previously assumed $3m to be delivered in 2024 and $3.7m in 2025 but now expect the entire order in 2025. We were also assuming a $3.5m order from the Public Health Agency of Canada, which we have now removed. Overall, we
expect FY24 and FY25 revenues to be $160.2m and $184.4m, respectively, versus $160.4m and $186.9m previously.

We have also adjusted our FY24 SG&A estimate ($24.9m vs $29.6m previously) to reflect the first nine months of 2024 (9M24) performance, while keeping our R&D and COGS assumptions broadly unchanged. Overall, we expect FY24 and FY25 operating profit to be $89.4m and $109.6m, respectively, versus $85.7m and $109.2m previously.

While the end-Q324 order book secures revenues for Q424 and into 2025, management highlighted the company’s continued focus on optimizing long-term value of its orthopox therapeutics franchise through various strategic initiatives. We discuss these in more detail below.

As noted previously, the latest $112.5m BARDA option exercise was the last for oral TPOXX under the 19C BARDA contract, which had a $546m procurement value. There is one pending option for IVT, worth $26.5m, and we expect it to be exercised in 2025, with deliveries in 2026. Management has communicated that it is in discussions with the relevant US authorities and is preparing for an RFP from the US government for a new, higher-value and potentially long-term (up to 10 years) contract. Management expects the new contract to be signed in 2025, including delivery of an initial order under the contract terms.

We highlight that SIGA has a longstanding relationship with the US government authorities and TPOXX has been stockpiled under the SNS since 2011. Moreover, the research and development activities for TPOXX were co-funded by BARDA, and the PEP program was funded by the US DoD. We note that the Administration for Strategic Preparedness and Response (ASPR), 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, with a strong safety profile (the other treatment is Tembexa, which comes with a black box warning). 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. Our model assumes annual oral TPOXX deliveries in 2025 to be similar to those under the 2018 contract, but we note that this is subject to modification as per the timing and value of the new contract.

SIGA’s PEP label expansion program positions TPOXX as a prophylaxis treatment for individuals at high risk of exposure. While antiviral treatments are traditionally administered after symptoms appear, prophylaxis treatment requires the administration of the drug following exposure and before symptoms appear. This entails a 28-day regimen, versus 14 days in the treatment indication of TPOXX, and therefore holds the potential to significantly increase the market opportunity for SIGA. We remind readers that while all clinical trial-related activities have been completed (the expanded safety study did not indicate any drug-related serious adverse events), samples from the immunogenicity trial (testing TPOXX plus JYNNEOS, an FDA-approved smallpox vaccine) are being retested by the CDC after the trial indicated the measurable immune response to the JYNNEOS vaccine in both groups was lower than expected. Management has communicated that the CDC re-analysis is expected to complete in H125, and SIGA now plans to file a supplementary new drug application (NDA) in Q325. Our model currently assumes a 2026 launch under the PEP label.

While TPOXX is approved in the EU and UK for all orthopoxviruses (including mpox), US approval requires SIGA to conduct in-human studies. Management is supporting several randomized controlled clinical trials (funded by government entities) evaluating TPOXX as a treatment for mpox and recruitment is ongoing across four separate trials – STOMP (US and South America), UNITY (Argentina, Brazil, Switzerland), PLATINUM-CAN (Canada) and EPOXI (Europe). In August 2024, SIGA reported top-line results from the PALM 007 trial (studying TPOXX as a treatment of mpox in the Democratic Republic of the Congo), sponsored by the National Institute of Allergy and Infectious Diseases (NIAID). While the study did not meet statistical significance on its primary endpoint of improvement in lesions versus placebo within 28 days post-randomization, SIGA noted significant improvement in a subset of patients – those whose symptoms began up to seven days prior to randomization, and in those with severe disease (≥100 lesions). SIGA and NIAID are pursuing a detailed analysis of the results.

We note that the PALM 007 study was not a registration trial, and SIGA’s priorities in mpox are the four remaining ongoing studies targeting this indication. We believe that results from the STOMP trial, in particular, will be of importance, given that it is the largest ongoing trial and is US-focused. According to the latest update by management, the study had enrolled a total of 670 patients as of the first week of October, up from 515 at the time of the previous update call. We expect top-line results from the trial in H125.

Mpox is caused by two virus strains, Clade I and Clade II, which have further divided into subclades – Clade Ia, Clade Ib and Clade IIa. According to the CDC, Clade IIb, which spread globally in 2022, has resulted in over 100,000 cases of mpox in 122 countries. More recently, the emergence of a more serious strain, Clade I, in the Democratic Republic of the Congo (5% death rate versus 0.2% with Clade II) is worrisome, although the spread is currently limited to neighboring African countries. According to the CDC, since January 2024, a total of 15,994 mpox cases have been reported globally, indicating that mpox continues to be of concern. Management has noted that over 8,000 patients were administered TPOXX under compassionate use during the height of the outbreak and a further 2,000 patients have participated in the TPOXX randomized trials.

International expansion continues to be one of the key priorities for SIGA and the company has significantly expanded its international presence in the past couple of years (over 25 countries now). During Q324, SIGA made its first commercial entry into Africa (currently only available under emergency use protocols) following recent inroads across Europe and Asia-Pacific. In September 2024, the company signed an agreement with the Ministry of Health in Morocco to supply its antiviral treatment TPOXX, recording proceeds of $0.8m in the quarter. We note that this was also the first international agreement undertaken independently by SIGA, without distribution partner Meridian, following the amended agreement, as detailed above. Management also provided an update on the NDA filing (in April 2024) by SIGA’s partner, Japan Biotechno Pharma (for oral TPOXX under the broad orthopox label), for which a regulatory decision is expected in early 2025.

In October 2024, SIGA in-licensed a new preclinical portfolio of monoclonal antibodies (mAb) from the Vanderbilt University Medical Center for an undisclosed consideration. This will be developed 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 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.

Monoclonal antibodies are considered to be a promising treatment option for smallpox, as they work by binding to specific proteins on the variola virus (which causes smallpox) to neutralize it and decrease the viral load in the body for the immune system to fight. One such treatment is under development by BioFactura (Phase I trial is expected to start in H225) with R&D backing from the BARDA.

We value SIGA using the standard risk-adjusted net present value (rNPV) approach, forecasting each of its programs to the end of the patent life in each geography. We make certain minor adjustments to our near-term estimates based on the Q324 results but keep our long-term assumptions broadly unchanged for now. The key change to our valuation comes from the risk sensitivity (50%) we introduce to our mpox projections, to reflect the results from the PALM 007 study. We also assume the approval under the mpox label to come in 2026 versus 2025 previously. These changes, along with the latest net cash figure ($99.3m, the company remains debt free) result in our valuation for SIGA adjusting to $1.0bn or $13.93/share, from $1.13bn or $15.89/share. Exhibit 1 presents a breakdown of our rNPV valuation.