SIGA Technologies Stock: Means To Address Monkeypox Outbreak (NASDAQ:SIGA) – Seeking Alpha

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SIGA Technologies (NASDAQ:SIGA) shares have risen in value from ~$7, to $11 across the past month – a gain of 57%. The key catalyst for this $700m market cap biotech was the approval – announced on May 19th – of an intravenous formulation of its TPOXX therapy indicated for treatment of smallpox – although it is hard to ignore a second potential value driver – the outbreak of the Monkeypox virus in non-endemic countries.
SIGA’s core business has been the provision of oral TPOXX to the US Government, which has proven profitable and marks the biotech out as an interesting investment opportunity, but with these 2 new catalysts in play, the ante has been upped slightly, and the question for investors to answer is whether SIGA stock is now worth paying the premium for.
In this post I’ll first discuss SIGA’s core business in more detail, then look at ways the business is expanding, especially through its intravenous offering. Finally, I will look into the Monkeypox outbreak and try to establish whether SIGA stock could experience the kind of price spike that characterized many a biotech in mid 2020, when governments were scrambling to find therapies for the COVID outbreak, and investors were placing massive bets on biotechs to provide solutions, however remote that possibility was.
With its pre-existing relationship with the US government, however, and an approval recently granted to TPOXX by the European Medicine Authority (“EMA”), that covers “smallpox, monkeypox, cowpox, and vaccinia complications”, SIGA appears to be one of only a handful of companies in a position to help tackle a widespread outbreak of Monkeypox – although it is presently unclear if that is likely or not.
First of all, let’s tackle SIGA Technologies and its core business.
In its press release last Thursday, the New York based biotech describes itself as follows:
a commercial-stage pharmaceutical company focused on the health security market. Health security comprises countermeasures for biological, chemical, radiological and nuclear attacks (biodefense market), vaccines and therapies for emerging infectious diseases, and health preparedness.
Together with the US government – specifically the Biomedical Advanced Research and Development Authority (“BARDA”) SIGA has developed TPOXX, otherwise known as tecovirimat, or ST-246 initially as an oral treatment for human smallpox disease caused by variola virus. The oral version was approved in 2018 and is sold to governments for stockpiling purposes in case of an outbreak.
The terms of SIGA’s agreement with the US government are as follows:

SIGA agreed to deliver up to 1,488,000 courses of oral TPOXX to the U.S. Strategic National Stockpile (“Strategic Stockpile”), and to manufacture and deliver to the Strategic Stockpile, or store as vendor-managed inventory, up to 212,000 courses of the intravenous (“IV”) formulation of TPOXX (“IV TPOXX”).
Additionally, the contract includes funding from BARDA for a range of activities, including: advanced development of IV TPOXX, post-marketing activities for oral and IV TPOXX, and procurement activities.
As of March 31, 2022, the contract with BARDA (the “19C BARDA Contract”) contemplates up to approximately $602.5 million of payments, of which approximately $51.7 million of payments are included within the base period of performance of five years, approximately $239.7 million of payments are related to exercised options and up to approximately $311.1 million of payments are currently specified as unexercised options.
In 2020 and 2021, SIGA earned $113m of product sales in connection with its BARDA contract, earning operating income of respectively $85m and $89m, and net income of $56m, and $69m. That translates to a FY21 price to earnings ratio of ~11x based on SIGA’s current price of $9.7, low enough to suggest that SIGA is still attractively valued even after its recent gains.
Oral TPOXX has a 7-year shelf life, meaning SIGA is consistently required to replenish the US stockpile, creating an attractive recurring revenue stream – on the company’s Q421 earnings call, SIGA CEO Philip Gomez told analysts that there are $300m of replenishment orders on the table across the next 3 years.
There is no requirement to replenish in 2022, however, meaning revenues this year may suffer – I have not been able to find any FY22 guidance from management. Nevertheless, the US government is already buying IV TPOXX – $7m in Q122, and SIGA has recently won a new contract to supply TPOXX to an unspecified Asia Pacific company, with this country ordering $3m for delivery in 2022. The Public Health Agency of Canada (“PHAC”) has also become a customer, ordering $13m worth of supply for FY22.
Granted, these are not big numbers, but in January, the European Medicine Authority approved the marketing authorization application (“MAA”) for oral TPOXX with a broader indication, as mentioned above, including monkeypox and cowpox as well as smallpox, potentially establishing a lucrative new market in the EU, Norway, Iceland and Liechtenstein.
The approval for IV TPOXX is important because smallpox can damage patients’ throats, making it impossible for them to swallow the oral formulation.
Of course, naturally occurring smallpox was eradicated worldwide by the 1980’s, but as SIGA puts it:
Samples of smallpox virus have been kept for research purposes. This has led to concerns that smallpox could someday be used as a biological warfare agent. A vaccine can prevent smallpox, but the risk of the current vaccine’s side effects is too high to justify routine vaccination for people at low risk of exposure to the smallpox virus.
According to an Edison research note, $85m of the BARDA contract has been allocated to purchasing IV TPOXX – 212k doses in total – which explains SIGA’s soaring share price on approval, although it is not quite clear if more purchases of of IV TPOXX means fewer purchases of oral TPOXX. Either way, the additional versatility can only be seen as a good thing for the company.
SIGA has an exclusive overseas partner in Meridian Medical Technologies – a subsidiary of the Pharma giant Pfizer (PFE) – which may be able to successfully market IV TPOXX abroad, to augment its successes with the oral version in Canada, Asia, and now potentially Europe.
According to CNBC, by Tuesday this week there had been 131 confirmed cases of monkeypox, and 106 suspected cases across 19 different countries, including the U.S., U.K. Canada, Australia, Italy, Spain and Portugal. The UK, with 56 confirmed cases, and Spain, with 41, are the worst hit to date.
Monkeypox is characterized by rashes, fever, headache, muscle pain, swollen lymph nodes, and general weakness, and it is transmitted, according to the World Health Organization (“WHO”):
from one person to another by close contact with lesions, body fluids, respiratory droplets and contaminated materials such as bedding. The incubation period of monkeypox is usually from 6 to 13 days but can range from 5 to 21 days.
Monkeypox – endemic in some African countries, including Benin, Cameroon, the Central African Republic, the Democratic Republic of the Congo, Gabon, Ghana, Côte d’Ivoire, Liberia, Nigeria, the Republic of the Congo, and Sierra Leone – is a viral zoonosis, meaning it is transmitted to humans from animals, and it is not generally a deadly disease, with a case fatality rate of 3.6% for the West African clade version – the one identified in the outbreak, versus 10.6 for the Congo Basin clade.
Generally, monkeypox only leads to severe cases in immunocompromised individuals, pregnant women, and children, but it is serious enough to warrant media speculation about a possible uncontrollable outbreak, given that patients reporting with the condition have had no history of the disease, and have no travel links to countries where the disease is endemic.
The consensus amongst experts is that the risk of another pandemic is low – prior to a 2017 outbreak, with 42 cases reported, the disease was extremely rare, with no cases reported in Nigeria since 1978. Experts believe the virus has used a “sexual network” to travel around the world, and although some mutations have been observed, there is nothing to suggest the virus has become more transmissible.
There is a more than one vaccine available to treat monkeypox – a smallpox vaccine developed by Emergent BioSolutions (EBS) is one, and a newer vaccine developed by vaccine specialist developer Bavarian Nordic – both companies are listed as direct rivals by SIGA in its 2021 10k Submission. Emergent stock spiked from $28 – $40 this week, currently trading at $32, whilst Bavarian Nordic stock – listed on the Danish stock exchange – leapt from 120DKK, to >200DKK (~$17 – $28).
The Center for Disease Control (“CDC”) in the US has apparently released some of its supply of Bavarian Nordic’s Jynneos vaccine to distribute to health workers who have been in contact with the disease. There are apparently only 1k doses, with the CDC pledging to ramp up supply, although there are >100m of Emergent’s ACAM200 vaccines.
SIGA management has not yet issued a release in response to the outbreak, although its website now states that the company “is monitoring the growing monkeypox outbreak and supports the response”, also providing an email address for governments or medical providers to contact them directly.
SIGA is unlikely to be able to produce a monkeypox vaccine in a short timeframe, and that may well prove to be an unnecessary exercise anyway given that the outbreak has affected <150 people, and for the same reason its therapy is unlikely to be required in large volumes, given that patients are generally expected to recover without specialist treatment.
With that said, given what happened with the Coronavirus pandemic, TPOXX is likely to find some extra demand, in my view, and it would not take many more cases to trigger a much larger demand for any therapy designed to treat monkeypox. Although TPOXX does not have that indication in the US, it does in Europe, and the FDA could soon change the label in the US should it become necessary, given the similarities between monkeypox and smallpox – the former being apparently much less deadly than the latter.
Also, given Coronavirus, the hype around this outbreak is likely to be significant, and the markets volatile in response.
The response to COVID certainly proves that – for example, when the FDA handed an Emergency Use Authorization (“EUA”) to convalescent plasma, Liminal BioSciences (LMNL) – a biotech which ran convalescent plasma collection centers – saw its share price spike >$20, before collapsing when the thesis was disproven. Shares are down >98% from that high. Likewise, Alpha Pro Tech (APT) stock spiked from ~$3, to $22 after it became a rare supplier of protective masks at a time of national shortage. Today, shares trade at $4.6.
A generally under-covered stock operating in a niche market – albeit a profitable one – SIGA’s share price has been meandering for a number of years, although it was always likely to increase on the IV TPOXX approval, and the additional market opportunity that unlocks.
SIGA management also appears to treat its investors well – in June, the company will pay a special dividend of $0.45 per share, and in Q122, the company bought back 1m shares of its own stock, for $6.6m. In fact, its share repurchase program has seen $61m of shares bought back since March 2020. Cash position is also solid, at $153m.
As such, investors shouldn’t think about the recent share price spike as prompted by “hype” surrounding monkeypox and the very few companies equipped to roll out vaccines or therapies. My research suggests that the company fully deserved a slightly higher valuation.
With $300m of sales guaranteed to the US government over the next 3 years, and markets opening up in APAC and in Europe, this would have been an exciting period for SIGA even without the monkeypox outbreak, although the fact that SIGA may well be in a position to assist should the outbreak worsen is undoubtedly an interesting upside opportunity for investors to consider.
It is to be hoped of course that SIGA’s TPOXX therapy remains stockpiled rather than being distributed to a growing number of patients, but that is the biotech’s core business anyway and management appears to be executing well. 2022 revenues may be a concern, since oral TPOXX is not required by the US government – and the company made a slight net loss in Q122 but over a 3-5 year period this ought to even itself out.
That leaves the question of whether prospective investors should wait until the monkeypox hysteria dies down, and capitalize on a share price correction for SIGA, to buy shares cheaper, or whether it is better to buy now in anticipation of further epidemic driven upside, and also based on the expectation that SIGA’s core business justifies its current market cap of >$780m, and perhaps a higher one factoring in the expansion opportunities in play. Personally, I favor the latter argument.
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I write about Biotech, Pharma and Healthcare stocks and share investment tips. Find me at my marketplace channel, Haggerston BioHealth – model portfolio + 4 exclusive stock tips every week. I’m on twitter @edmundingham
Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in SIGA over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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