Sorry Sorry Sorry One More SIGA

Just one last SIGA posting. I beg your patience as I respond to a blog posting you haven't read about a topic you're sick of reading about!

Andrew Tobias - a favorite writer of mine for most of my life - has been investing in SIGA, as well. He wrote about it today, linking to my two articles and including response from a reader.

Tobias and his reader seem to find my reversal a bit petulant and random. But I tried to back up my thoughts with facts and informed observations. Here, fwiw, are my responses to their issues:

I think the lawsuit will come to a conclusion anywhere from next month to at most 12 months from now.
That may (may!) grant SIGA a greater share of revenue on ST-246. For that to matter, there must be revenue. The follow-up contract didn't happen, and shows no signs of happening, and while SIGA may be sand-bagging ST-246 news, the US government has no incentive to do so.

There are more opportunities ahead for ST-246 including with our government
Outside the country, everyone's waiting for FDA approval, and there are no indications that's forthcoming.

The main opportunity from our government is the $1B or so poised to contract in 2011. Again, it never happened. BARDA continues to stockpile all sorts of other bioterror drugs, but smallpox countermeasures - the subject of intense media and political targeting - have nary been mentioned. It's insane that this happened (we badly need this protection), and shameful, too (re: the catastrophic implications of letting politicians short stocks). But it happened, and it's not the first insane, shameful thing our government's ever done.

If Glenn knows other impending US government sources aside from BARDA's explicitly promised, vitally necessary, and never-again-mentioned-by-anyone-in-position-of-power contract, then he ought to inform the company. Because while he "believes" they are "setting up" for acquisition, SIGA announced months ago that they're trying to sell out ASAP.

They have over $100M cash (though not yet booked) and another $200M or so coming in from the present contract. If there's plenty more revenue on the horizon, then it's hard to understand why they're scorching earth (closing R&D) and putting the operation on the block. Or, for that matter, why they haven't already been snatched off that block.

"The huge potential for their dengue fever drug"
The drug's nowhere near ready for approval. It requires further development. What part of "shutting down R&D" isn't being understood?

It's easy to be distracted by the many tendrils of this ever-unfolding saga. It took me a couple months to fully awaken to the implications of that November quarterly statement (see previous link). But if you take your eye off of the all-important component of revenue, this becomes a novella rather than an investment.

"Potentially Pfizer"
That's a knowing and enticing aside, but where Glenn got that from is the fact that a former Pfizer CEO happens to sit on the board. That appointment excited SIGA investors at the time. But there's not a scintilla of evidence Pfizer will buy SIGA.

As for Tobias' suspicion that my prior enthusiasm was "overdone", well, maybe, but how does one judge? Judging by the fact that the investment didn't work out, well...yeah! But that's a fallacious gauge. You've got to measure from what was actually knowable at the time. Having taken a huge bath on this, I've gone over that question a number of times. But, as I said two postings ago, "to this day, I can't spot any error in my original thesis for investing in SIGA, aside from an over reliance on rationality."

I couldn't have predicted people in positions of power drumming up phony outrage about stockpiling an anti-smallpox drug in order to make hay by short-selling. I figured the US government's long-standing partnership in developing and acquiring this drug - a perfectly safe and effective cure for the world's top bioterror threat - made a $2.87 stock a very smart buy. It still strikes me as having been smart. And, indeed, it popped over $15 before the blackest of swans flocked.

Looking ahead, from what's actually knowable now (i.e. no more revenue unless the gov comes through with a contract and/or FDA approves, with neither showing signs of happening...plus the company dismantling R&D and praying for acquisition - which, months later, has not yet occurred), I'd say Tobias' "high hopes" are the unsupported position. Though I sure hope he's right, because I haven't sold all my shares!