Wednesday, July 25, 2018

SIGA Prospects

If any of you are still holding shares of SIGA (the Smallpox/Animalpox/Weaponized-Smallpox wonder antiviral - not vaccine - which I first recommended at $3.50, and shot to $15, pulled back to the $2s and is now hovering in the $7s), here's an update:

SIGA will never be, like, Pfizer. There will never be a brisk, broad-revenue trade in smallpox antivirals. There’s likely some boffo revenue ahead, but I’d be astonished if there were more than a dozen individual events in all. Probably way less.

So it’s a game of baked-in expectations, "selling the news" (e.g. FDA approval a few weeks ago didn’t do much for us, though it did rise in anticipation), and tons of shorting and other manipulation. All of which continue to spook the bejesus out of me.

I’ve decided that all that matters is having new revenue on horizon. Not benchmarks, not news, not investor exuberance, but hard revenue. When such prospects appear, the stock price rises in expectation, then usually snaps back fast after they're fulfilled - if (and only if) there’s nothing new on horizon. The reason we’ve remained in $6s/7s so long lately is the large government (BARDA) contract that’s been on horizon for several months. Once that's awarded, if there are no tangible new revenue events ahead, look out!

So, again: scary.

The good news re: that new BARDA contract is that SIGA seems sure to score (though who knows what shenanigans may ensue, with Congressmen still permitted to short stocks). Pricing is still uncertain. But, per above, if there’s nothing else serious brewing at the time of that award announcement, it may be be very hard to exit anywhere near peak. A fast up-and-down. So it might not be dumb to set a limit sell order at $10-15.

Aside from the BARDA award, here’s potential revenue:

Benchmark payments
More revenue gets released from their old BARDA contract as they hit certain benchmarks, e.g. FDA approval (which just happened)

Replenishment contracts
Like all drugs, this expires and must be restockpiled

These two are healthy but not huge, and I believe they’re largely baked in (a third is alternative formulations, a realm I don't completely understand, and consider a mere "kicker"). That leaves, in terms of future revenue, a few faith-based prospects:

Foreign Orders
SIGA investors have been waiting for foreign orders (including W.H.O.) for years. It’s true that foreign govs may have been awaiting the signal of FDA approval, but that’s come and gone with no foreign news. OTOH, SIGA’s notoriously tight-lipped, so we may hear nothing until a sale actually gets booked. I'm not banking on this, and the market clearly is not, either. Yes, South Korea and Israel and many more would be smart to stockpile this drug. Similarly, Betamax was a way smarter format than VCR.

Diehard SIGA investors still hold hopes re: the pipeline of in-progress drug candidates. SIGA had years and years and years to work on these while its smallpox drug was caught in legal/legislative quagmires, and they had the money for it, too (from the big BARDA order), but nothing happened. In fact, several years ago they tried to sell the entire pipeline outright...but nobody went for it, which I took as a bad sign (though there was one sleepy licensing deal we haven’t heard much about). In my mind, the pipeline should be entirely disregarded.

Idunno. If big pharma wanted SIGA’s drug or tech, they could have bought the company cheap a couple years ago. Which doesn’t mean it’s out of the question now that the legal cloud’s finally been dispelled. But I’m not banking on it (and I’m not sure it would bring us a huge premium, anyway).

If something juicy appears on horizon before the BARDA award announcement, that could keep the price up for a while. If not, I’ll expect a fast up/down upon that announcement, followed by an uncertain, becalmed wait for something new. I don’t want to be holding this stock in that scenario. So I’ve set a limit sell order, and will raise or cancel it if I hear anything new/exciting before contract is announced.

Here's my previous update from May.

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