SIGA Technologies, Inc. (SIGA) Q2 2013 Earnings Report, Transcript and Summary

Todd Fromer - Managing Partner Eric A. Rose - Executive Chairman, Chief Executive Officer and Member of National Biodefense Science Board Daniel J. Luckshire - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Secretary

Good day, ladies and gentlemen, and welcome to the SIGA 2013 Second Quarter Business Update Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Todd Fromer, Managing Partner, KCSA Strategic Communications. Sir, you may begin.

Thank you, and thank you, all, for joining us today. This is Todd Fromer, Managing Partner of KCSA Strategic Communications, Investor Relations Consultant to SIGA Technologies. Hosting the call today are Dr. Eric Rose, Chief Executive Officer and Chairman; and Daniel Luckshire, the Chief Financial Officer. Today's call is being simultaneously webcast and is available on SIGA's website. A replay of the call will also be available in recorded format and on the company's website. Before we begin today, I would like to remind everyone that this conference call contains statements that constitute forward-looking statements. A Safe Harbor statement covering this call will be read at the end of the call and can be found in our press release for financial results for the second quarter ended June 30, 2013. With that said, I'd like to now turn the call over to Dr. Eric Rose. Eric, the floor is yours.

Thanks, Todd. Good afternoon, and thank you, all, for joining us for our business update call. During this call, we'll provide you with a business update, and then we will open the call for questions. Starting with the commercial side. I'm pleased to report that we've delivered approximately 400,000 courses of Arestvyr to the United States government's Strategic National Stockpile since our last investor call. And with the most recent delivery in July, we passed another significant commercial milestone, in that we now have cumulatively delivered approximately 590,000 courses of Arestvyr to the SNS. With the cumulative delivery of more than 500,000 courses of drug, we've met a key requirement of our BARDA contract, and we have qualified for a payment of approximately $79 million for the courses delivered to date. We have invoiced for this payment and expect to receive payment in the third quarter. These events are important, and they are testament to the perseverance and staying power of our people and to the strength of our commercial operations. We're looking forward to building on this momentum in the quarters to come. On the research and development side, we continue to invest time and resources into key areas. Beyond Arestvyr, our development programs are preclinical. As such, these programs are subject to a high degree of variability. And while preclinical programs are highly variable and are not close to being commercial products, we believe, first, that they are valuable; second, that they warrant significant attention; and third, importantly, a good portion of our development activities are efficiently funded through government contract -- government grants and development contracts. With respect to our preclinical programs, I'd like to specifically talk about dengue fever. As background, we have had a program in this disease because we believe there's a large and important unmet need for a dengue fever antiviral drugs. Right now, there is no vaccine or specific treatment for this disease. And currently, there are 50 million to 100 million people across many countries and regions of the world who contract some form of the disease each year. Moreover, the geographic reach of the disease appears to be expanding, to the point that there have been cases in the mainland United States. In sum, we believe an appropriate antiviral treatment could benefit millions of people living in regions where dengue is endemic, as well as travelers to those regions. Regarding our antiviral program for the disease, we've had a program in place since 2008. The program has always been efficiently funded and efficiently staffed, and now, with steady effort, we have settled on a lead compound against which we will apply our deep reservoir of proprietary knowledge about dengue fever antivirals. We have set the bar high for the characteristics we wanted to see in a lead candidate and believe we now have such a candidate. This compound stands out, in that it appears to have a novel mechanism of action with activity against all 4 serotypes of dengue virus in vitro at the nanomolar level, and it's -- and importantly, it's orally bioavailable. This compound has also demonstrated efficacy in mouse models. With the selection of a lead compound, we expect to start scaleup and formulation work. While selecting a lead compound for dengue is exciting, I'd like to emphasize that we will continue to be disciplined in our approach on the long road ahead that marks any drug development program. At this point, I'd like to hand the call over to Dan.

Thank you, Eric. Good afternoon to those on the call. I'd like to start with further discussion on our commercial operation. As Eric mentioned, we have cumulatively delivered approximately 590,000 courses of Arestvyr, for which we have invoiced BARDA in the amount of approximately $79 million. These proceeds will significantly enhance our cash resources, which were at $33 million at June 30. Going forward, we expect to make another delivery to the SNS within the next 30 days. And over the next 6 months, we expect to deliver approximately 600,000 courses of Arestvyr to the SNS. By the end of 2014, as noted in prior investor calls, we expect to fully deliver 2 million courses to the SNS. This is the number of courses specified for delivery in the BARDA contract. With regard to the anticipated series of product deliveries over than the next 6 months, please note that some deliveries may include courses that are free of charge. Such courses would be at no additional cost to the government, in accordance with the terms of the BARDA contract. In the BARDA contract, we agreed to contribute 300,000 courses of Arestvyr that were manufactured primarily using federal funds provided by the HHS under prior development contracts. The courses to be contributed are separate from the 1.7 million courses, for which BARDA will be invoiced. For the deliveries we expect to make in the coming months, we do not expect to make announcements with each delivery. We will update you during our quarterly business call. This is a return to standard practice. We departed from standard practice for the first 3 product deliveries, in which each product delivery was accompanied by a press release for the unique purpose of providing investors with a roadmap regarding progress toward the 500,000 course threshold. As you know, this important goal has been recently achieved. Before I open the call for questions, I would like to note that with respect to the litigation with PharmAthene, the Supreme Court of Delaware issued a decision on May 24, affirming the Delaware Court of Chancery's judgment in part, reversing it in part and remanding to Vice Chancellor Parsons. In addition, the parties appeared before Vice Chancellor Parsons on June 26 to discuss the remand [ph]. Please refer to our recently filed 10-Q for summary details regarding these events. Consistent with prior investor calls, we will not comment on any questions regarding the PharmAthene litigation. This concludes our prepared remarks. Thank you for attending this business update, and we will now open the line for questions.

[Operator Instructions] At this time, I'm not showing any questions in queue. I'd like to turn it back over to Todd Fromer for any closing remarks.

Thank you. As a reminder, this call included certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, including statements regarding the efficacy or potential of products, the timeline for bringing such products to market and the continued development and possible eventual approval for such products. Forward-looking statements are based on management's estimates, assumptions and projections and are subject to uncertainties, many of which are beyond SIGA's control. Actual results may differ materially from those anticipated in any forward-looking statements. Factors that may cause such differences include: the risk that potential products that appear promising to SIGA or its collaborators cannot be shown to be efficacious or safe in subsequent preclinical or clinical trials; SIGA or its collaborators will not obtain appropriate or necessary governmental approvals to market these or other potential products; SIGA may not be able to obtain anticipated funding for its development projects or other needed funding; SIGA may not be able to secure funding from anticipated government contracts and grants; SIGA may not be able to secure or enforce sufficient legal rights in its products, including patent protection for its products; any challenge to SIGA's patents and other proprietary rights, as is adversely determined, could affect its business and even if determined favorably, could be costly; regulatory requirements applicable to SIGA's products may result in the need for further or additional testing or documentation that will delay or prevent seeking or obtaining needed approvals to market these products; the U.S. Biomedical Advanced Research and Development Authority may not complete the procurement set forth in its solicitation for the acquisition of the smallpox antiviral for the Strategic National Stockpile or may complete it on different terms; any contractual award we may receive to supply smallpox antiviral may be subject to one or more protests, which may cause contract awards to be delayed or denied; the volatile and competitive nature of the biotechnology industry may hamper SIGA's efforts; changes in domestic and foreign economic marketing conditions may adversely affect SIGA's ability to advance its research or its products and the effect of federal, state and foreign regulation on SIGA's businesses. More detailed information about SIGA and risk factors that may affect the realization of forward-looking statements, including the forward-looking statements in this conference call, is set forth in SIGA's filings with the Securities and Exchange Commission, including SIGA's annual report on Form 10-K for the fiscal year ended December 31, 2012, and in other documents that SIGA has filed with the commission. In addition, the risk of what appears now to be attributes of our lead candidate compound may turn out to be different as development progresses; the risk that our lead candidate compound may, at any point, fail to meet our development objectives; and the risk that the expense, unpredictability and extraordinarily time-consuming process of developing drugs may prevent us from ever realizing any value from these efforts. SIGA urges investors and security holders to read all of these documents, free of charge, at the commission's website at www.sec.gov. Interested parties may also obtain these documents free of charge from SIGA. Forward-looking statements speak only to the date they are made, and except for any obligation under the U.S. federal securities laws, SIGA undertakes no obligation to publicly update any forward-looking statements as a result of new information, future events or otherwise. Operator, that concludes our prepared remarks.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. And everyone, have a great day.