Tuesday, February 12, 2013

SIGA: The Wait Winds Down

Andrew Tobias published the following thoughts from me last week (his influence may have contributed to the recent run-up), and I just realized I ought to put it up here, as well, in case any of you own a few shares.

A friend who’s also a SIGA investor tells me that an investment analysis firm hired a distinguished Delaware (retired) judge to look over SIGA’s supreme court appeal and to share his findings for their big-wig investors. The judge agrees that the lower court decision (which “split the baby,” awarding the plaintiff half the future revenue from SIGA’s smallpox drug) was overreaching. He’s confident that SIGA will be on the hook for a much, much, much lower amount (that’s been my expectation, as well). This came to light late on February 6th.

I listened to the oral argument before the Delaware Supreme Court last month, and one judge seemed overtly skeptical of the ruling against SIGA. It turns out that he’s the most powerful and respected judge in the state. This corroborates the likeliness that the Court will drastically lower the penalty.

SIGA has been playing possum throughout this legal dispute, doing everything possible to keep a low profile. That’s why we’re at $3 (even if the ruling stood, and SIGA lost half the billions in profits from their drug, they’d still be worth far more than $3). The Delaware Supreme Court prides itself on turning around decisions within 90-120 days (usually 90) of oral argument, so that puts a likely decision around mid-April.

Meanwhile, biological weapons, including smallpox, are very much in the news, particularly weaponized smallpox (thought to be held by Iran, North Korea, and Syria), which vaccines do NOT address, but which SIGA’s drug very likely does (depending on how novel the weaponization techniques are….i.e. if it’s anything like pox, SIGA’s drug is good).

It made curiously little news, but Israel has flown inside Syria’s borders to attack chemical and biological weapons stores. So smallpox is a big, big deal, and Israel has publicly included SIGA in its war scenario planning for several years. I expect an order there.

Also meanwhile, the FDA approved a drug called raxibacumab against anthrax, based solely on animal testing. This has been the hold-up for SIGA with FDA — it’s not possible to test smallpox on humans, so you must resort to monkeys, and that’s not standard for FDA. But it appears FDA has finally accepted the standard, which is very good news. (Either way, though, SIGA doesn’t require FDA approval to keep selling to the government for their emergency stockpile, and the government has explicitly stated its attention to acquire billions of dollars worth of this drug.)

I think it’s quite likely this could turn out well, although it could take time to shake out: the decision may remand back to the lower court to finalize, plus it will take time for SIGA to regain momentum and re-attract skittish investors. But I’m quite confident.

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