Tuesday, September 11, 2012

SIGA's Frozen Winter

For background, see my first posting on SIGA, and the zillions of follow-ups

Oral arguments in SIGA's appeal will begin in early January. The soonest we'll hear a verdict is June. Meanwhile, SIGA will continue to play possum. The company that's suing, Pharmathene, has precious little going for it besides this lawsuit, so its stock price is closely linked to SIGA's. And so SIGA has taken steps to keep its stock price as low as possible (via insider selling, dismal conference calls, no press releases, no pipeline announcements, no foreign sales action, and a very relaxed timetable re: delivery of current contract to BARDA...which pushes back payments). Hence this ridiculously low price, which keeps Pharmathene starved and much more amenable to settlement and much cheaper to buy out.

In the absurdly long view, nothing's changed. Smallpox is still the worst bioterror threat, and there's still nothing to rival the safety and effectiveness of SIGA's drug. And their R&D staff may be making great quiet headway with the pipeline - we wouldn't hear a peep if they were. And there are reasons to think the fake political cloud has cleared (it had been whipped up by a competitor, Chimerix, and its lobbyist, McKenna, Long, and Aldrigde, but there's been a regime change at Chimerix, they no longer seem to be using ML&A, and they appear to have abandoned their government-alienating strategy of continual SIGA harassment). So, within the glacial slowness, amid the stark silence, and under a stock price chart evoking Edward Munch's "The Scream", everything's weirdly good to go, once the legal cloud's eliminated. Except, that is, for my aggravation level and yours.

I believe SIGA will be successful in its appeal. If so, we stand a chance of an eventual stock price of $30-50. If not, Pharmathene will keep 50% of profits from the smallpox drug, and we could see $15-25 (higher if there's success with the pipeline, which is untouched by the lawsuit). Hell, if the pipeline's entirely a dud, the appeal fails, and the smallpox drug fails to pick up foreign orders but just continues to sell to the US government (including the portion of the original contract not yet awarded), we're still worth at least $10! So the current stock price is a tremendous opportunity for investors with saintly patience (as plentiful as snakes in Hawaii?).

But what to do meanwhile? Unless there's a settlement with or buyout of Pharmathene, we won't see any stock action until June 2013 at the earliest (appeals in this system almost always take six months or more). So one strategy would be to sell and reenter next spring. But a settlement/buyout could be announced at any time, changing everything. So while I haven't yet replaced the shares I sold for tax balancing last winter, I'll hold onto my current SIGA investment, and buy some more next May.

Meanwhile, as always, it's best to disregard the day-to-day low volume ups and downs. And I'll continue to have little to say - but don't read desperation in my silence. Just patient waiting....

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