Wednesday, May 4, 2011

SIGA: Final Bargain Opportunity?

Lots of Slog readers didn't buy SIGA (here's my first posting about this company, and here's all postings in reverse chronological order) when I recommended it at $2.92, or at $4.29, or at $6.28. And when it went to $15, I still said "it will likely double again before the fat lady sings."

But small biotechs are volatile, so the stock price has been whipping around between $12 and $14 as we've waited for the government to get its act together and finally award this contract. I've been reluctant to recommend it again, because I've had no idea when this will actually happen, and both SIGA and the government have been silent.

But now there's a very happy combination of events:

First, the government has finally offered an update, and it shows they're now moving swiftly ahead and not brooking further nuisance complaints from a competitor (Chimerix) with a less developed drug that's been tying up the process in an effort to slow SIGA down. This will be a sole source contract (very unusual for a contract worth billions, but the gov needs to stockpile smallpox antiviral in times like this).

Second, at this writing the stock price is at one of its low ebbs. So this may well be SIGA's final bargain opportunity. I can't promise a timeline, but I'm extremely confident investors will eventually see $22 or more (perhaps lots more).

Third, it's been dangerous for the past couple years to try to time SIGA's stock, because the contract might have been announced at any moment. But we know from this announcement that the contract will definitely not be announced before May 10. So if you want to buy, you can wait for the very lowest price without worrying about missing the big lift-off.

On the other hand, it may not go much lower than this. And you'd better buy quickly if there's another downturn, because I'm surely not the only one with this realization! In fact, the price has moved up a bit since I started writing this.

One wiseguy move: put in a standing buy order for $11.50. I've recently seen two biotech stocks absolutely crater shortly before an announcement of fantastic news. It's a trick market makers do when they know huge news is imminent: panic investors into selling cheap and take out their "stops" (automatic sell orders in case a stock drops a certain amount). So
if you're contrarian enough to disregard panicky hordes, you might want to ride piggyback in case this indeed takes place. And you oughtn't have any "stops" on your SIGA shares, or you may well find yourself out of the investment moments before it comes to fruition.

[An hour after I posted this, the market caught up and SIGA shot to $15.29. I hope some of the buying was yours! In any case, it'll drift down again, at least some. And I'd still suggest keeping a lowball buy offer going.]


Anonymous said...

Hey, I didn't hear it here, but found your post in a google search. Big news tonight!

Jim Leff said...

Hey, if you'd been reading along here for years, though, you WOULD have heard it first! I first wrote about siga in 2008:

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