SIGA Technologies Q3 2023 Earnings Call Transcript

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November 7, 2023

There are 7 speakers on the call.

Operator

Welcome to the CIGA Business Update Call. Before we turn the call over to CIGA 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 may differ from the forward looking statements. CIGA 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 change commission, including without limitation, the company's annual report on Form 10 ks for the year ended December 31, 2022 and its subsequent reports on Form 10 Q and Form 8 ks. I would now like to turn the conference over to Phil Comas, Chief Executive Officer.

Operator

Thank you. Please go ahead.

Speaker 1

Thank you for taking the time to join today's call. Today, I'm joined by Dennis Ruby, are Chief Scientific Officer Jay Varma, our Chief Medical Officer and Dan Luxchar, our CFO. We are pleased to have this opportunity to provide an update to our shareholders. Will then be happy to take questions. I'd like to start this call by highlighting key financial targets for 2023.

Speaker 1

We expect orders for oral and IV TPOXX to be approximately $164,000,000 in 2023, with a substantial percentage of those orders to be delivered in 2023. As such, as previously disclosed, we are targeting 2023 pretax operating income comes of between $90,000,000 $100,000,000 based on the timing of deliveries that are currently being coordinated among the company, are supply chain and our government customers. Target pretax operating income for 2023 is based on the following target revenues: approximately $113,000,000 of revenues from 4th quarter deliveries of oral teapots to the U. S. Strategic national stockpile Approximately $5,000,000 of revenue from 4th quarter deliveries of oral TPOXX to the U.

Speaker 1

S. Department of Defense $15,000,000 to $18,000,000 of revenue from 4th quarter International deliveries of oral TPOXX to the 2 European countries in connection with the recently announced Hera joint procurement framework contract and up to $50,000,000 of revenue from 4th quarter deliveries of IV TPOXX to the U. S. Strategic national stockpile. To the degree that any target deliveries and related target revenues and pre tax operating income do not occur in the Q4 of this occur in January of 2024.

Speaker 1

In particular, one thing that could impact the timing of deliveries between Q4 2023 and January 2024 is the packaging of final drug product. This step of the process has been taking longer this year than in prior years and longer than expected so far this year. Needless to say, we have been in daily contact with our packaging vendor and we continue to work together on getting packaging will be done as soon as possible and with an eye toward making the remaining target deliveries in 2023. Beyond 2023, we will continue to execute on our strategic plan to maximize growth opportunities. I will now ask Dennis to provide an update on the PEP and MPOS programs for oral TPOXX.

Speaker 1

Dennis?

Speaker 2

Thanks, Phil. I'd like to provide a summary of the strategy for PEP as we received some questions Based on the studies and trials that have been conducted, we believe TPOXX will work for PEP. The FDA has not asked for any additional studies to prove the efficacy of TPOXX per pet. They have asked for extended safety data in humans were treatment for 28 days, which we've completed. In a smallpox outbreak, TPOXX would likely be used in combination with the smallpox vaccine.

Speaker 2

The JYNNEOS plus tPOXX study we will discuss is designed to solely evaluate if tPOXX interferes with the generation have an immune response to the vaccine. Let me now provide a quick recap of what was noted in the last investor call. Earlier this year, the company met enrollment targets for both the immunogenicity trial and the expanded safety trial. For the expanded safety trial as expected, the clinical trial results did not show any drug related serious adverse events. For the JYNNEOS plus tpox immunogenicity trial, as a quick reminder, the goal of this trial was to show that tpox did not reduce the immune response to the vaccine.

Speaker 2

This is supplemental and separate to our current approval for the treatment of smallpox. In the preliminary analysis of the trial data performed by our CRO, the results did not show a meaningful difference between the immunogenicity of those that received JYNNEOS vaccine while on placebo compared with those that received Jynneos vaccine while on tpox, which is consistent with what we expected. However, As noted on the last investor call, the CRO results indicated that a number of volunteers that had measurable immune response to the Jynneos vaccine in both placebo and T BOX groups was lower than expected. Given that This result, 1, will prevent non inferior statistical determination from being the primary endpoint as originally planned 2, is unexpected and 3, is scientifically odd, we've been investigating the CRO results over the past several months. Since the last investor call, in addition to conducting many other investigations, we sent a subset of the Jynneos post TPOXX samples are to our colleagues at CDC who performed their validated TRNT analyses on them.

Speaker 2

These samples showed the expected immune responses. As such, we're now working on getting the entire set of samples reanalyzed and in parallel working toward a supplemental NDA submission in 2024. We are grateful to our colleagues at CDC for this collaboration and are pleased to have identified a path forward. In terms of getting the maximum and most will benefit from the immunogenicity trial in the context of stockpile expansion conversations with the government. We believe the steps taken over the past several months is worth the extra time and effort to ensure the highest quality data.

Speaker 2

To be clear, are working on finalizing the immune response levels of volunteers in the vaccine. The analyses are not about the efficacy or safety of TPOXX, nor are they about TPOXX's impact on those individuals who are showing an immune response. To reiterate contextual are actual comments made on the prior investor call. We believe that in regard to the PEP program, the totality of the studies and trials that have been conducted, including the immunogenicity trial, as well as previous animal challenge experiments and clinical trials are supportive of the use of TPOXX for PEP, are pending discussions and review with the FDA. In the case of an orthopoxvirus epidemic, be it mpox or smallpox, use of TPOXX for PEP will be important to reduce the morbidity and mortality in the population.

Speaker 2

Shifting gears, let me also provide an update are on the current AMPOXX trials involving TPOXX, which include 5 randomized controlled trials as well as multiple observational studies. As a general comment, these studies continue to enroll patients and collect data. To provide a couple of specific data points, in Africa, as of October 19, the NIAID POM trial being conducted in the DRC has enrolled 314 patients, are a big jump from the 188 patients noted in the last investor call. In the NIAID STOMP trial, as of October 31, there were 169 patients. The increase in patient numbers in the aforementioned trials highlights that case counts continue to accumulate, especially in Africa.

Speaker 2

Importantly, it also provides a glimpse to the overall global health risk are caused by orthopox viruses. Jay will provide further comments on mpox and orthopox viruses. Before I turn the call over Jay, I'd like to provide a quick update on our pediatric program for TPOXX. Having completed a clinical trial that demonstrates equivalence of drug exposure and volunteers given the TPOXX oral capsules or the powder for reconstitution liquid formulation, we are commencing advanced development. We've chosen a scale up manufacturer to prepare clinical supplies and we're in the process of designing a clinical development program, which will support licensure.

Speaker 2

Will consider this program to be an exciting path for potentially providing protection to the pediatric population. At this point, I'll turn the call over to Jay.

Speaker 3

Thanks, Dennis. As Phil and Dennis have mentioned on this call in prior calls, mpox preparedness and more broadly, orthopoxvirus preparedness are essential from a public health perspective. As such, I am glad to have joined CIGA as an officer. As the Chief Medical I am responsible for leading medical affairs. This means that I am providing support for the overall goals of CIGA and in particular, and leading our efforts to build broader awareness of the risk and public health impacts of smallpox, hemppox and other orthopoxvirus outbreaks and to promote strategies in procurement and treatment that can support the highest levels of public and individual safety.

Speaker 3

I will represent CIGA in engagement with leaders from patient advocacy, medical organizations, professional societies, will be available at global and regional health agencies and other public health and defense organizations around the world. As background, One of the key reasons that I was highly interested in joining the CIGA team was that I believe my experience and skills are a good fit with CIGA. As a quick introduction, let me provide a brief summary of my professional background. I am a physician and epidemiologist could lead epidemic responses, develop global and national policies and lead large scale programs that have saved 2020 1, I worked for the U. S.

Speaker 3

Centers For Disease Control and Prevention with postings in Atlanta, I served as the principal scientific spokesperson and lead for New York City's COVID-nineteen response. Before I turn the call over to Dan, I would like to make some brief remarks in connection with the smallpox and mPox threat. The risk of these threats is growing with many public health officials arguing that we have entered a new age of pandemics. With development, Urbanization, migration and climate change, humans are interacting with animals and the environment in new ways, accelerating the risk of new diseases spilling over into humans. Humans are also increasingly conducting research on pathogens using novel techniques in biology.

Speaker 3

This increases the risk of the accidental spillover of a dangerous pathogen in a lab or are more worrisome to deliberate release of a dangerous pathogen as an act of bioterrorism. Specifically with respect to smallpox, This threat has increased. Armed conflict around the world, particularly involving countries that are believed to have developed biological weapons, increases the likelihood that a rogue actor or nation could deliberately release the virus. For mPox, while cases have declined globally since the 2022 pandemic, outbreaks continue to occur in East and Southeast Asia and Latin America. Particularly concerning are the high and rising cases in the Democratic Republic of Congo involving a subtype of the virus known as CLADE I, that causes more severe illness and death than the subtypes that circulated around the world during the recent pandemic.

Speaker 3

In the May 2023 issue of the medical journal, The Lancet, several prominent public health experts flagged their concern that this subtype is more similar to smallpox and that failure to stop transmission in Central Africa could lead to a far worse mpox pandemic are in the 2022-1. In response, as detailed by Dennis, we are working closely with NIH and other health agencies are randomized clinical trials to demonstrate whether tpox is safe and effective for treating mpox in Africa, the U. S. And other parts of the world. And I am working with the team to get the best possible results from a public health and company perspective.

Speaker 3

At this point, I would like to turn the call over to Dan for our financial update.

Speaker 4

Thanks, Jag. For the 3 9 months ended September 30, 2023, Gigas revenue was approximately $9,000,000 23,000,000 will be subject to the Q3. For the Q3, approximately $8,000,000 of revenue relates to international sales of World GPOXX and approximately $1,000,000 relates to research and development activity. In connection with the international sales of the Royal Teapot's, included a sale to a first time customer. For the 9 months ended September 30, approximately $15,000,000 of revenue relates to product sales and supportive activities and approximately $8,000,000 of revenue relates to research and development activities.

Speaker 4

In connection with product sales, dollars 5,000,000 of the sales were to the U. S. Department of Defense and approximately $9,000,000 of sales are international. Pre tax operating loss, which excludes interest income and taxes, was approximately $1,000,000 for the are 3 months ended September 30, 2023. For the 9 months ended September 30, pretax operating loss was approximately $8,000,000 Net loss for the 3 months ended September 30, in 2023 was less than $1,000,000 For the 9 months ended September 30, net loss was approximately $4,000,000 in turn, fully diluted loss per share for the 3 months ended September 30 was $0.01 per share and for the 9 months ended September 30, fully diluted loss per share was $0.06 At September 30, 2023, The cash balance for the company was approximately $71,000,000 For the 1st 9 months of the year, CIGA spend approximately $43,000,000 on capital management with a special cash dividend of approximately $32,000,000 and share repurchases are approximately $11,000,000 As noted by Phil earlier in the call, We are targeting 2023 pretax operating income of between $90,000,000 $100,000,000 based on the timing of deliveries that are currently being coordinated among the company, our supply chain and our government customers.

Speaker 4

Target pre tax operating income for 2023 is based on the following target revenues: approximately $113,000,000 of revenues from 4th quarter deliveries of Oral TPOXX due to the U. S. Strategic National Stock File are approximately $5,000,000 of revenues for 4th quarter deliveries of Oral TPOXX to the U. S. Department of Defense, $15,000,000 to $18,000,000 of revenues from Q4 international deliveries of World GPOXX to European countries in connection with the recently announced Era joint procurement framework contract and are up to $15,000,000 of revenues from 4th quarter deliveries of IV TPOXX to the U.

Speaker 4

S. Strategic National Stockpile. To the degree that any target delivery and related target revenues and pre tax operating income do not occur in the Q4 of this year due to any timing constraints in connection with our customers or our packaging vendor. We expect that such deliveries and revenues would occur in January of 2024. This concludes the financial update.

Speaker 4

At this point, I'll turn the call back to Phil.

Speaker 1

Thanks, Dan. Before we open the call for Q and A, I'd like to make a few concluding remarks. First, mpox continues to be a worrisome are subject to a significant impact and potential to grow. As Dennis and Jay have highlighted, we continue to see cases of the global outbreak has receded. 2nd, our ongoing international sales growth initiative is progressing in a value creating manner as evidenced by the recently announced pan European joint procurement contract.

Speaker 1

We have a solid base of international customers through which we continue to pursue additional customers as well as follow on orders. 3rd, the pep based development program continues to represent a growth initiative and that it may provide scientific and regulatory support for any stockpile expansion. The team is working hard to complete the follow on immunogenicity testing and file for FDA approval of Beth. 4th, we continue to be focused on transitioning our U. S.

Speaker 1

Government contract to a long term SNS contract that focuses on appropriate size are the requirements for the T Box stockpile as well as smoothing the annual deliveries, which would be critical to supply chain planning and provide a higher degree of financial predictability. This concludes our prepared remarks and we will now begin the Q and A session.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. You will hear a 3 tone prompt acknowledging your request. Questions will be taken in the order received. Thank you.

Operator

And your first question comes from the line of Piyya Himami from Edison Group. Please go ahead.

Speaker 5

Yes. Hello. Thank you for taking my questions. I have a question on the HERA aspect. You expect about $80,000,000 worth of orders over the next 2 months.

Speaker 5

Given that there are several other EU nations under the guidance of HERA, do you expect or do we expect to receive incremental countries from other countries They're not part of those 13 right now?

Speaker 1

Yes. Thanks for the question. We certainly do. This essentially provides a contract vehicle with price that's been negotiated for all EU countries, And this represents the first order. There is pricing that is based on volume.

Speaker 1

So there's an incentive to pool orders before they go forward. But the vehicle has The concept of quarterly review with customers and the ability to put in orders on a quarterly basis, I think that will be based on how many in the volume to make sure they feel they're getting the right volume discounts that they want to get. But in essence, this is broadly a hunting license as well because now we can go to countries haven't purchased and said there's a vehicle to do this. The terms have been negotiated. The price has been negotiated.

Speaker 1

So we do feel like this is a nice step. It is I would say our understanding is it's the 1st vehicle that has been ever put in place in Europe for chemical biological products like this. So we're excited that we opened up this vehicle and we look forward to talking now to customers directly about follow on orders. So thank you for the question.

Speaker 5

And thank you. And as a follow-up to that and dry on your last remarks, do you envision that this arrangement with HERA will develop into something similar into what you have with BARDA, which covers a certain percentage of the U. S. Population in theory. What kind of upside potential do you foresee here?

Speaker 1

Yes. So the mechanism that Harrah is using is not the same as BARDA. In the U. S, the U. S.

Speaker 1

Government determines what a stockpile size should be. They then procure product to meet that stockpile size on behalf of the entire U. S. Population. It's evolving in Europe, but right now, Hera does not set a are hard yet for all of Europe.

Speaker 1

They do emergency small procurements. So people may remember last year, they did do a direct procurement For $10,000,000 roughly $10,000,000 to get some initial courses, but really what they're doing in this vehicle is allowing countries to procure under it, But each country ultimately is determining what their budget is, what they're doing to start stockpiling on their behalf. There have been broader discussions at the European Commission level to set up targets, central funding that just hasn't gotten to the point yet where they're making targets, but we're encouraged that there's a lot more conversation in Europe there was historically and certainly as evidenced by this initial order under this contract, there is some opportunity here that we look forward to pursuing.

Speaker 5

Okay. Thank you very much.

Operator

Thank you. And your next question comes from the line of Paul Sanders from Hutch Capital. Please go ahead.

Speaker 6

Yes. Hi, guys. Thanks for taking my question. First question is just On the buyback, I noticed that you didn't buy any shares back this quarter. So I was just curious if you had any

Speaker 1

So as we've said in our conference calls, any buyback decision is a multi year and certainly multifaceted set of The circumstances around cash flow, orders, other opportunities, and the Board and management review that. So we don't comment on specific quarters or buybacks, but as Dan highlighted, we did have the special dividend and the $11,000,000 purchase. So we've certainly been active this year in capital management, But we don't comment on quarter by quarter buying decisions, but appreciate the question.

Speaker 6

Yes. And one more for me, if you don't mind, just a question on the inventory. I know it sounds like This delivery got pushed back because of it sounds like packaging issues. So I know it's sort of inflated due to that, but Just kind of running the rough math, if that were fully finished, it looks like it's like 1,500,000 courses of inventory. I'm just kind of curious, that's obviously a lot more than what you're going to deliver in the next quarter or 2.

Speaker 6

So just kind of can you provide any color on that inventory build in excess of what you're going to deliver this upcoming quarter?

Speaker 1

Yes. So for those that may not know, the cycle time for making our product is is certainly given normal scheduling and proactive scheduling of batches and manufacturing, we Good visibility into how that replenishment is going to go. And historically, we had a long lead time. But we are now at a more mature place in our business where we want to make sure that we're able to have a responsive supply chain that doesn't start from 0, but may have are targeted at the pharmaceutical ingredient in inventory. And so if we have an opportunity for a sale, we're able translate that into product in months as opposed to over a year.

Speaker 1

So you will see in general an increase on our balance sheet of inventory that we manage to make sure if we have an opportunity to accelerate orders with a customer, we can do that. If we ever had a disruption in our supply chain, we'd be ready to do that. And we have a lot of flexibility given the stability of our API. And as you point out, we do have a bolus That's getting ready for a large delivery to BARDA. We also anticipate next year, as we've said many times, an expiry schedule that will have another $13,000,000 option that would be exercised and another IV option.

Speaker 1

So we're also building inventory to make sure we're ready for those orders, not just the next quarter.

Speaker 6

Yes. That makes a lot of sense. I appreciate that. And if you don't mind, I assume it was the packaging why that option exercise didn't get delivered this quarter. Was that Can you also provide any more color on what happened there with the packaging?

Speaker 6

And I guess maybe how to sort of avoid that in the future?

Speaker 1

Yes, it's a great question, Paul. We work with a lot of service providers. And as we said, we haven't run into any problems per se, but it's just taken longer to get into those Facilities get it packaged and get it out. We certainly plan in advance for that, but then we have a sprint once we get the order and have to do the packaging. Historically, that's actually been an area that's gone very smoothly and rapidly.

Speaker 1

It just turns out this year, we run into delays there, not any technical challenges, simply delays. And I can assure everyone our team has been working really hard to are ways to make sure we hit the target, but we wanted to highlight that as the challenge that we're focused on right now.

Speaker 6

Sounds good. Thanks, Phil.

Speaker 1

Thanks, Paul.

Operator

Thank you. There are no further questions at this time. Please proceed.

Speaker 1

I'd like to thank everybody for their time today. We really appreciate the update and look forward to

Operator

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you all for participating. You may all disconnect.

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Key Takeaways

  • The company is targeting $90M–$100M pretax operating income in 2023 based on approximately $164M of oral and IV TPOXX orders, though packaging delays could shift some Q4 deliveries into early 2024.
  • CIGA believes TPOXX is effective for post-exposure prophylaxis (PEP) and, after extended human safety studies, is collaborating with the CDC to reanalyze immunogenicity trial samples ahead of a supplemental NDA submission in 2024.
  • Ongoing AMPOXX trials for mpox include five randomized controlled studies and observational cohorts, with patient enrollments rising (e.g., 314 in DRC POM trial and 169 in STOMP), highlighting continued global orthopoxvirus risk.
  • Through a new HERA joint procurement framework contract, CIGA secured an initial €15M–€18M Q4 order for oral TPOXX from two European countries and gains a pricing vehicle to expand into additional EU markets.
  • After demonstrating equivalent drug exposure in pediatric formulations, CIGA is now advancing its pediatric TPOXX program with scale-up manufacturing and clinical development to support future licensure.
A.I. generated. May contain errors.
Earnings Conference Call
SIGA Technologies Q3 2023
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