SIGA Technologies, Inc. (NASDAQ:SIGA) Q4 2022 Earnings Conference Call March 2, 2023 4:30 PM ET
Phil Gomez – Chief Executive Officer
Dan Luckshire – Chief Financial Officer
Conference Call Participants
Soo Romanoff – Edison Group
Ladies and gentlemen, greetings and welcome to the SIGA Technologies Fourth Quarter and Full Year 2022 Earnings Conference Call. At this time, all participants’ lines are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] 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 changed 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 31st, 2022 and its subsequent reports on Form 10-Q and Form 8-K.
It is now my pleasure to introduce you to Phil Gomez CEO. Please go ahead.
Thank you for taking the time to join today’s call. Today I’m joined by Dan Luckshire, our CFO. We are pleased to have this opportunity to provide a business and financial update to our shareholders. We’ll then be happy to take questions.
I’d like to start the call by recapping annual performance for 2022. On our prior year end investor call in March of 2022, we highlighted that 2022 would be a transition year with no significant expirations of oral TPOXX in the US Strategic National Stockpile or SNS.
I’m pleased to report we ended this past year with approximately $111 million in revenue for the year, thanks to a diversification of our revenue base. This diversification has been years in the making. And as a result we were prepared to respond to the global mpox or monkeypox outbreak. Our preparation included approval for treatment of mpox by the EMA in January of 2022 and our proactive build of inventory to be able to deliver TPOXX immediately to customers.
Overall, 2022 revenues included $71 million of sales took more than 10 international customers, the first sale of intravenous formulation of TPOXX to the US Government, and the first sales totaling approximately $7 million of oral TPOXX to the US Department of Defense.
As a frame of reference prior to 2022 the company had only one international customer, cumulative international sales of approximately $15 million over the two-year time period of 2020 and 2021, and it only sold oral TPOXX to one buyer within the US Government.
Additionally, it should be noted that 2022 was the first year since the start of TPOXX deliveries in 2013 in which the company had substantial positive cash flows without the benefit of any sales of oral TPOXX to the Strategic National Stockpile.
We believe the trend of financial diversification that SIGA emphasizes the growing recognition by governments in different regions of the world of the overall importance of health security preparedness.
As noted in our last investment call in November, we believe that broadened procurement of TPOXX is being generally driven by a combination of SIGA business development activities and long-term trends that have been building for a while.
Specifically, in connection with 2022 sales of TPOXX, we believe the diversification of international sales was at least partly driven by the initial government responses to the 2022 mpox outbreak.
With respect to the mpox outbreak, in which there have been approximately 86,000 global cases and 30,000 US cases since May of 2022, the outbreak has highlighted the importance of TPOXX, given that TPOXX was used to compassionately treat more than 6,500 mpox cases in the US and many cases internationally and approximately seven clinical trials have been launched, as well as another four scheduled to be launched to study the use of TPOXX for mpox, many of which are randomized placebo-controlled trials, that are sponsored by government agencies or NGOs.
To reiterate what I said in November, in the November investor call, with regard to the trial, the timing and the ultimate number of participants of the trials will depend on the path of the mpox outbreak and the general speed of enrollment. Hence the timing and the likely ultimate enrollment levels of these trials especially the randomized placebo-controlled trials continues to be currently unknown.
In turn, this means the timing and composition of an FDA submission for an mpox label for TPOXX is also currently unknown. While it should be acknowledged that global cases has significantly decreased since the third quarter of 2022, we continue to believe that, it is likely that mpox will continue to have a global presence going forward.
While the short-term path of the mpox outbreak is uncertain, what we have seen and learned to date indicates, there is a high probability that the United States and other countries across the world will have to deal with mpox cases in the future. It is just unknown as to the ultimate magnitude of the cases, the scope of the cases across different communities, and whether case levels become consistent or whether case levels come and go periodically. We believe that in most scenarios, there will be a need for TPOXX.
Looking forward, we expect the company’s streak of positive financial performance will continue into 2023 and 2024. We believe a key driver for sales during this period will be procurement by the US Government. There are two key reasons for our view. First, it should be noted that while there were no scheduled TPOXX expirations in the Strategic National Stockpile during 2022, we estimate there will be substantial TPOXX product expirations in the Strategic National Stockpile during ’23 and ’24.
As a reminder, when BARDA issued the 19C contract in 2018, it contained four procurement options for oral TPOXX, in which each option was valued at approximately $112.5 million. Oral TPOXX has a seven-year shelf life, and as we saw in 2020 and 2021, BARDA exercise procurement options as stockpiled products that have been manufactured in 2013 and 2014 expired.
In substance, we replenished the US Government stockpile with deliveries of oral TPOXX in those calendar years. As such with the scheduled expiration of a substantial number of stockpiled TPOXX courses in 2023 and 2024, such courses being manufactured in 2016 and 2017, we believe the US Government will order a substantial amount of oral TPOXX in 2023. We expect to get a more specific view of the likely order size in the second quarter.
Additionally, we believe the US Government would need to exercise procurement options under the 19C contract in 2024 or make orders under a new procurement contract in order to at least maintain historical unexpired TPOXX levels, within the Strategic National Stockpile.
A second key reason we believe the US Government sales will be a substantial source of revenue in the near term is that, in addition to the company working with the Administration for Strategic Preparedness and Response or ASPR, the SNS and BARDA to get options exercised under the 19C contract. We have continued to engage stakeholders on the benefit of a long-term 10-year contract with annual options to smooth out deliveries and better manage budgets and supply chain.
And as a part of this conversation about a new contract, we’ve been focused on ensuring that the requirements for postexposure prophylaxis or PEP use of TPOXX are also considered by the US Government. As a quick reminder, PEP has an expected 28-day course regimen, which contrasts with a 14-day regimen for the treatment indication. This difference would require a substantial increase in procurement and stockpiling, in order to fully protect 1.7 million Americans, which is the targeted number of course as noted in prior government RFP.
In terms of the ultimate sizing of the stockpile as stated in prior investor calls, we believe that clinical results from the PEP program could play an important role. On this front, I am pleased to report that the PEP clinical trials made substantial progress over the last 12 months with the immunogenicity trial recently completing enrollment and the expanded safety trial on track to meet target enrollment in March of this year. Currently we are performing the immunogenicity testing of the patient samples from the TPOXX Geneos immunogenicity study.
Going forward, we are targeting a data readout in connection with the immunogenicity trial within the next 90 days. At the next investor call, Dr. Dennis Hruby, our Chief Scientific Officer will join the call to provide a more detailed update on the PEP program.
The goal for the PEP program is to make an FDA submission in early 2024 for a PEP Label Expansion for oral TPOXX. I’d like to highlight that a PEP Label Expansion for oral TPOXX would continue an impressive regulatory streak for SIGA. Since the beginning of 2022, the company has achieved regulatory approvals from the EMA in Continental Europe and the MHRA of the United Kingdom for a broad indication for oral TPOXX for the treatment of smallpox mpox, cowpox and vaccinia complications following vaccination against smallpox. Additionally, we achieved regulatory approval in May 2022 from the FDA for the intravenous formulation of TPOXX for the treatment of smallpox.
At this point, I’d like to hand the call over to Dan for the financial update.
Thanks Phil. For the 12 months ended December 31, 2022 SIGA’s revenue was approximately $111 million, of which approximately $71 million of revenue relates to international oral TPOXX sales, another $7 million approximately of revenue related to sales of oral TPOXX to the US Department of Defense and a further $7 million approximately of revenue relates to the first sale of IV TPOXX to the US Government. The remaining revenue is approximately $26 million, mostly related to research and development and supportive activities.
To reiterate Phil’s earlier comments, 2022 revenues represent a meaningful expansion of the TPOXX revenue base with more than 10 new international customers from a narrow base prior to 2022 and the first sales of oral TPOXX to the US Department of Defense and the first sale of IV TPOXX to the US Government. For 2023, we will continue to work on generating revenues from the expanded international customer base, while also procuring replenishment — for pursuing replenishment of the US Government stockpile and resumption of substantial sales to the US Government under the 19C contract.
Furthermore, we will continue to work with the US Department of Defense on potential additional procurement orders and/or contracts to coordinate additional deliveries of IV TPOXX to the Strategic National Stockpile in connection with the 2022 IV option exercise under the 19C contract and to pursue a new contract with the US Government through the administration of strategic preparedness and response.
Returning to the 2022 financial results, pre-tax operating income for the year, which excludes other income, taxes and adjustments to the fair value of the warrant, was approximately $43 million. Net income for 2022 was approximately $34 million and fully diluted income per share was $0.46.
At December 31, 2022, the cash balance for the company was approximately $99 million. For the full year 2022, the company used approximately $46 million for capital management activities. Approximately $33 million was used for a $0.45 per share special cash dividend that was paid in June of 2022, and approximately $13 million was used to repurchase approximately 1.8 million shares of common stock.
Please note that, as mentioned on prior investor calls in addition to using cash for capital management activities, the company has been using cash to proactively build work in process inventory as well as final drug product inventory. This concludes the financial update.
At this point, I’ll turn the call back to Phil.
Thanks, Dan. Before we turn to Q&A, I’d like to highlight a few points in connection with 2023 and beyond. We believe these points support our view that SIGA offers an attractive combination of existing revenue streams that generate strong financial results, when product is ordered and delivered, complemented by organic growth initiatives that hold significant potential, when viewed collectively.
First, I’d like to reiterate that, while the 2022 mpox outbreak has receded over the past series of months, it nonetheless highlighted the long-term importance of TPOXX in connection with the treatment of orthopoxviruses. It is our understanding that TPOXX has been the leading and likely the only in many countries therapeutic that has been and is being used to any significant degree in the US, Europe, Canada, the Asia Pacific region, Africa or other areas. The usage and stockpiling of TPOXX across a broad range of customers highlights the differentiated value of TPOXX.
Second, I’d like to reiterate that, the ongoing international sales growth initiative is progressing in a value-creating manner. With 13 customers outside the US, who have ordered TPOXX, we have a solid base of international customers. As a quick reminder, although, progress on this front is expected to continue to be lumpy and uneven given a variety of factors, we believe that a meaningful international market has been gradually taking shape.
Third, I want to reiterate that, the PEP-based development program represents a growth initiative and that it would provide scientific and regulatory support for any stockpile expansion.
As stated on prior calls, we believe the current size of the stockpile TPOXX in the US would not be sufficient to treat all those who would need care in many outbreak scenarios. A lesson from the COVID pandemic, which has been reinforced by the mpox outbreak is that governments need to be more proactive in addressing the health and societal risks associated with virus families.
Fourth, we continue to be focused on transitioning our US contract to a long-term SNS contract that focuses on appropriate size requirements for the TPOXX stockpile, as well as smoothing the annual delivery, which would be critical to supply chain planning and provide a higher degree of financial predictability.
Fifth, the expansion of our portfolio of customers is resulting in a diversification of the company’s revenue base thus enhancing future revenue prospects.
Sixth, we continue to pursue and support oncology collaborations and other strategic initiatives that could open up new markets for TPOXX. As I mentioned earlier, we believe these initiatives when viewed collectively have a potential for significant value creation.
This concludes our prepared remarks and we will now begin the Q&A session.
Thank you. Ladies and gentlemen, at this time we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Soo Romanoff from Edison Group. Please go ahead.
Thank you for taking my questions. This is Soo Romanoff from Edison Group. Congratulations on the quarter. My first question is likely for Phil. Once you get the data readout from the PEP immunogenicity trial, what are the next steps in terms of pursuing stockpile expansion?
Thanks, Soo and good to talk to you. So a key point for us on the immunogenicity trial is showing we don’t interfere with the immunogenicity that is really the open scientific question that we have. So we’ve been in discussions with the government on the overall TPOXX program. We’ve briefed them on our plans for PEP.
So as we get that data that helps them with getting critical information on their decision-making process to be able to make a determination ultimately on the size of the stockpile. So we can’t predict exactly the time line for the US Government. But given we have several options left in our contract and that data is coming out this year we’ll be pushing very hard to make sure a decision is made as soon as possible. But we do have to defer to the government on their decision process. Thanks.
Yes. That’s great. So maybe the second one is for Dan. Do you expect international sales in 2023 to come from new customers or repeat customers?
So maybe I’ll start but then I’ll let Phil jump in is that as Phil mentioned or as I think the company has mentioned a few times is, we meaningfully expanded the investor base this year. And so there’s more than 10 customers. And the goal has always been to establish relationships and contract vehicles with these customers and then build from there. So that is an ongoing initiative. And definitely some of the customers that ordered amounts last year are the key leaders in the target markets. And then we will look to build out. But I think it’s safe to say that when you sort of think about the international market and the potential big buyers, I would say, most of those customers that are on the list of potential big buyers did order to some degree in 2022. I’ll turn it over to Phil to add some comments.
Yes. I’d echo what Dan said. And I think Canada again is instructive. If those of you on the call remember, we had an initial small order from the military side of Canada then we had a civilian order that came as they started to think broadly about orthopoxviruses. So I think we certainly are looking to existing customers as a key opportunity for us to continue to build those relationships. And there are certainly some new customers we’re pursuing as well as they not only think about the mpox outbreak, but think about orthopoxvirus preparedness broadly. So it will certainly be a mixture. Thanks for the question.
If I could squeeze one more question in. I think this is more for Dennis and Phil. Is there any chance in getting data from the placebo-controlled studies on monkeypox in the near term? And thank you.
Yes. So it’s a complex question as to what the data package could look like for mpox approval with the FDA as those trials roll out. One will be a question about the trajectory of the outbreak. If we see an increase in cases as we did last spring that would certainly make enrollment easier to do. And our partners are working tirelessly at NIH to expand their sites to international sites outside the US. We have the study ongoing in the DRC in Africa. We have the UK study and others that are working to start up in additional geographies.
We also have the real-world evidence that ultimately we anticipate it will be published by CDC. And so there probably is a combination of both some real-world evidence and some placebo-controlled data that could come in the shorter-term. But I think a key thing that all public health people are watching is what happens to the case load. If it continues at the very low levels we’re seeing there certainly were plans for interim readouts of those studies. Maybe a good time to do an interim readout and see what we have for that but we’ll have to see what happens in the spring time with the outbreak. Thanks.
Great. Thank you.
Thank you. Ladies and gentlemen, there are no further questions. The conference of SIGA has now concluded. Thank you for your participation. You may now disconnect your lines.