Saturday, December 12, 2009

SIGA Update

Ugh, there will be yet another delay on the long path to wild success for SIGA Technologies.

We've been waiting for announcement of a huge (possibly $500M to $1B) contract with the government to stockpile SIGA's smallpox drug. Its been due any day. But Friday, Health and Human Services posted an amendment to the deal, which will delay the award, probably for months (see below for further explanation). The stock plunged to the fives, from a high of ten a few days ago, as a result.

Nothing fundamental has changed; the company's future is just as assured. It will just take a few more months to get there. The contract will eventually be awarded, FDA approval is still likely for mid-year, and negotiations continue with Europe, Israel, India, Canada, and anyone else with an interest in defending against weaponized smallpox (i.e. everybody). Plus, there's reason to believe that progress has been made with SIGA's pipeline (which I've written about
previously), but the company may have been waiting for the contract announcement to speak about that.

SIGA also issued a shelf offering worth $20M the day before the government announced the contract delay, presumably to ensure they have capital to continue their work in the interim. The result is, unfortunately, dilution for stockholders, but nothing egregious. And, as a final piece of bad - but not critically bad - news, it appears that the contract will be split between SIGA and a competing company, whose drug isn't as safe (it has a nasty tendency to kill monkeys in safety trials). The government is prudent in stockpiling both, however. In the event of a smallpox attack, it's smart to have more than one agent on hand, in case of unforeseen problems.

SIGA will be updating their situation via a
conference call Monday at 8:30 am, eastern. If you've bought this stock, my suggestion is to hold it and forget it. We pee-ons have had a remarkable opportunity to get in early and cheaply, and the trade-off is the necessity of parking that money in a fraught waiting game. You even may want to consider parking a little extra, especially if the stock price falls any further. Again, the science, the product, and the prospects remain unaffected by last weeks news and market tumult.

Here's what happened, in more detail. Kathleen Sebelius, HHHS Secretary, has decided to reconsider all terrorism countermeasure contract proposals (as reported in
Washington Post). They cancelled the sketchy ones, and amended the good ones. That's what happened here. This was likely a political move, and is awfully risky re: the country's security. It's also likely to discourage upstart pharmas from going into this sector in the future.

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