SIGA Technologies Inc.

During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star and zero. As a reminder, this conference is being recorded. Before we turn the call over to see the medicine, please note that any forward-looking statements made during this call are based on management's current expectations and observations and are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statement. SIGA does not undertake any obligation to update publicly any forward-looking statement to reflect events or change circumstances after this call. For a discussion of factors that could cause results to differ, please see the company's filings with the Securities and Exchange Commission, including, without limitation, the company's annual report on Form 10-K's for the year ended December 31, 2020, and its subsequent reports on Form 10Q and Form 8K. I would now like to turn the conference over to Phil Gomez, Chief Executive Officer. Please go ahead.

Thank you for taking the time to join today's call. Today I'm joined by Dan Luckshire, our CFO. Dan and I are pleased to have this opportunity to provide a quarterly update on our business and upcoming objectives. On this call, I will provide a business update and Dan will provide a financial update. We'll then be happy to take any questions you may have. The first quarter of 2021 reflects our continuing momentum for international sales. We delivered approximately $3 million worth of oral teapots to the Public Health Agency of Canada, PHAC, in the first quarter. And in April, we delivered an additional $7 million worth of oral teapots to PHAC. Supplementing these international deliveries, we are working towards further sales to one or more new jurisdictions in 2021. with the second quarter being the most likely scenario for the next sale. As general background on the international market, I would like to reiterate comments from the last investor call. While we are currently having success in generating international orders this year, we expect the pandemic will continue to subject SIGA to the risk of international business development activities coming to fruition slower than anticipated. In contrast, post-pandemic, we believe that international governments will be better situated in terms of resources, experience, focus, and personnel to fully appreciate the importance of health security preparedness and the value that oral TPOX provides in that context. As such, we believe that the post-pandemic environment should have a net positive impact on our international business development success. In sum, we expect international sales in 2021 may be concentrated in the first half of the year and gain additional momentum in 2022. With respect to the BARDA-19C contract, we continue to expect sales related to this contract, based upon an option exercise, to be concentrated in the second half of 2021 as the new administration leadership gets confirmed and COVID-19 response activities hopefully become less burdensome on the staff with whom we work on our programs. Like many people here in the U.S., we are encouraged by the progress in addressing COVID-19, especially the rapid rollout of vaccines led by our government partners at BARDA and the ASPR office at HHS. We know this year has been extremely challenging, especially for them as well as many others, but support for the development and rollout of the vaccines has been an amazing accomplishment. With regard to the pandemic, we continue to monitor its impact on our operation. As a general comment, we as a company have done a good job navigating the uncertainty of the pandemic. The filing of our intravenous formulation of TPOX with the FDA announced this week is an example of continuous, steady progress toward our corporate objectives amidst the evolving environment. And concurrent with the FDA filing process for IV teapots, we have started commercial manufacturing for IV teapots with a goal of delivering this year approximately 20,000 IV courses of teapots under the base period activities within the 19C contract. As referenced, the revenue value of 20,000 IV courses is $8 million. As we look at planning for IV teapots in the context of option exercises under the 19C contract, It should be noted that the production of COVID-19 vaccines has significantly impacted the availability of materials for sterile products. This includes items like vials, filters, excipients, among other things. We will work with BARDA should they exercise options for IV TPOCs in terms of securing necessary supplies and manufacturing capacity. In the interim, we are able to fully support the $1.7 million core stockpile with oral courses as long as we receive option exercises in a timely manner. At this point, I'd like to take a few minutes to talk about our new partnership with Cipro Therapeutics. By way of background, there are a number of products that the U.S. government is seeking to support through development and procurement for the Strategic National Stockpile, or SNS. One category is novel antibiotics to replace the generic antibiotics in the SNS for bacterial pathogen threats. For example, in 2019, the U.S. government awarded a contract for a novel antibiotic which potentially could be used for a biodefense indication. This contract includes up to approximately $150 million of procurement funding, as well as over $100 million of potential development funding. Last year, BARDA issued a Request for Information, or RFI, for other potential novel antibiotics, which could potentially lead to a contract award similar to the award made in 2019. As such, we have teamed with CIPLA to pursue a potential future RFP in this area. As background, CIPLA's antibiotic Xemdry is approved by the FDA in the U.S. for a commercial indication, but was supported by BARDA during its development for treatment of bacterial threats. In the collaboration with CIPLA, we are seeking to leverage our extensive expertise in animal rule product development to support new biodefense indications for Xemdry and to be the prime contractor with the U.S. government if there is a contract award. In turn, CIPLA brings to the table Zemdry and extensive experience with manufacturing and a global supply chain. In addition to the near-term focus on a potential RFP, we continue to look for additional opportunities to collaborate with CIPLA and other companies to bring needed products to the U.S. government. I'll now pass the call over to Dan, who will provide a financial update. Dan?

Thanks, Phil. As noted earlier in the call, We expect international sales likely to be concentrated in the first half of the year and sales to the U.S. government to be concentrated in the second half of the year following an option exercise. As such, product revenues for the first quarter reflect approximately $3.4 million of international oral TPOX deliveries. This amount already surpasses total international sales for the entirety of last year. Total revenues for the quarter, including research and development-related revenues, were approximately $4.8 million. Operating loss for the first quarter, which excludes interest income, taxes, and adjustments to the fair value of the warrant, was approximately $2 million. Net loss for the first quarter was approximately $1 million. In turn, FOIA diluted loss per share was 2 cents per share for the quarter. At March 31st, the cash bounce for the company was approximately $107 million. But during the first quarter, Tega repurchased approximately 1 million shares of its common stock for approximately $6.5 million. As of March 31st, 2021, the company has cumulatively repurchased approximately 5.6 million shares of its common stock since the inception of the Share Repurchase Program in March of 2020. Looking beyond the first quarter financial results, there remains approximately $450 million of TPOC's procurement revenues tied to existing contracts, most of which is currently expected to be earned approximately over the next four years. That is, between March 31st, 2021 and the end of 2024. These revenues would come from the 19C BARDA contract and the Canadian contract, with the 19C BARDA contract containing up to $414 million of procurement-related options remaining for future exercise by BARDA. In April, the company delivered approximately $7 million of Royal Teapots to the Public Health Agency of Canada, under an existing contract. Such amount will be included in the second quarter financial results. As a quick reminder, the Canadian contracts were both awarded to Meridian Medical Technologies under the International Promotion Agreement that was entered into by the parties in 2019. This concludes the financial section of the call. At this point, I'll pass it back to Phil for a brief summary.

Thanks, Dan. I want to underscore that we strongly believe that our achievements in 2020 and the first quarter of 2021 provide a solid foundation to continue to grow our business. We have approximately $450 million of TPOCs procurement revenues tied to existing contracts, and we are working to build on this base of procurement contracts with international sales and initiatives such as the CIPLA collaboration I noted earlier in this call. Additionally, we believe the PEP program supports consideration of a larger F&S stockpile, which in turn would result in larger U.S. government procurement contracts. Moreover, as mentioned previously, we also continue development of a liquid suspension pediatric formulation of TPOCs with the support of BARDA. While revenue from government contracts can be lumpy, we believe the earnings power of the TPOCs business is substantial. As earnings generate cash, we will continue to examine the best use of our cash, including continuing share buybacks as well as potential investments or acquisitions that provide an opportunity to grow earnings, diversify our business, and leverage our successful platform. Before I close out with some goals for 2021, I'd like to share a brief corporate update. And as many of you have seen in our proxy filing, we have two longstanding board members retiring in June. I'd like to personally thank Dr. Eric Rose and Tom Constance, both of whom have served on the FIGA board for 20 years. They came to FIGA before the horrible events of 9-11 and the COVID pandemic, and thanks to their leadership, FIGA has helped make the world a more secure place with a highly effective smallpox antiviral in the U.S. stockpile. Our board and management team are dedicated to building on their legacies. In sum, as we look ahead, we will continue to pursue a full range of avenues in 2021 and beyond to create value, including continued delivery of oral TPOX courses under the 19C BARDA contract, pursuit of U.S. stockpile expansion to cover PEP, pursuit of additional international sales through Meridian and international regulatory approvals in Canada and the EU to support those sales, seeking approval for label expansions for TPOX to include PEP and other orthopoxviruses, expanding and supporting ongoing oncology collaborations for TPOC, and leveraging our capabilities for new formulations and potential new products. This concludes our prepared remarks, and we will now begin the Q&A session.

Thank you. If you would like to register a question, please press the 1 followed by the 4 on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you'd like to withdraw your registration, please press the 1, followed by the 3. One moment, please, for the first question. Our first question comes from the line of Maxim Jacobs with Edison Group. Please go ahead.

Hi, guys. Thanks for taking my questions. So I was just wondering on the international deal that you mentioned that might be coming up, anything you could say about what that deal might look like?

Hey, Max, thanks so much for joining the call and thanks for the question. Yeah, there's not much we really can comment on this point until we get there. I would say as we continue to partner with Meridian, we continue to understand the international market. And what I mean by that is, We understand that militaries and civilian agencies tend to think about these things separately. We also see that unlike in the U.S. where there was a large bolus of funds put in to Project BioShield, which allowed for multi-year procurements, what we tend to see is people thinking about starting a procurement and having that be a bit of an annual procurement, which allows them to build a stockpile. over a number of years. So that's certainly what we saw in Canada, and I wouldn't be surprised as we go forward to see that as other countries develop. I would say, as I said on the last call, these agreements do take time. Governments have many approval processes. Folks are focused on COVID. In many of the agencies we work with, but we continue to work closely with Meridian and the countries to advance these sales and ensure that they have access to what we think is an important product. So stay tuned, Max. Thanks for the question.

Wonderful. That was very helpful. And then just one other question. I mean, anything you can say about, like, the economics of the CIPLA collaboration and what they might look like?

Yeah, so I think a key part of that collaboration is we're both bringing a lot to the table. Part of what the RFI wants to do is develop these products for things like tauremia, anthrax, plague. So it requires animal rule development. So we think we bring some real expertise there. And as I mentioned, the plan there is for us to be the prime contractor. There's two parts to the contract. There's the cost reimbursement part. So our investors that have been with us a long time know that We get reimbursed for our R&D expenses, so we expect that to be there. In the previous contract from 2019 awarded to another company, that was about $100 million. So those tend to be, you know, net very slightly positive for us. But more importantly, there will be procurement. And it will not be, we don't anticipate, of the order of magnitude of teapots. The last contract was for about $150 million. and certainly we will share the economics of CIPLA, recognizing the substantial benefits that both of us will provide. So it will be competitive, so stay tuned as it gets released and we compete for it, and then we'll provide updates on the economics going forward. But I hope that outline of the contract gives you a general sense of what the opportunity is. We think it's meaningful, but certainly not anywhere near the opportunities that we have with CPOCs.

Yeah, that was very helpful. Thank you. And that's all my questions. So, yeah, thanks for taking my questions. Thanks, Matt.

As a reminder, if you wish to register for a question, please press the 1 followed by the 4 on your telephone. We do have a question from the line of Teddy Green. Please go ahead.

Good afternoon, guys. Thanks for the press release and the info you're providing, Phil. Just to clarify again, you said that another foreign order could come in the second quarter, not from Canada?

That's correct, Teddy, and thanks for joining and thanks for the question. So, yes, this would be another jurisdiction outside Canada. Correct.

Okay. And then so I like your input on this. So If you see, say you see, you know, a country order, say, the smallpox vaccine, would it make sense for them to not order an antiviral or would it make sense for them to also have a smallpox antiviral in addition to the smallpox vaccine?

That's a great question, Teddy. So we actually, as we think about the market and certainly with our partners at Meridian, we think about a lot of variables. We actually think A country that stockpiles a smallpox vaccine is more likely to also purchase TPOX. And the reason I say that is the inertia of getting a country to really focus on such an important threat of smallpox tends to be the bigger lift. Once they understand the threat, we're very confident they see the value in an antiviral drug like TPOX. because they have certainly gone through the exercise of knowing if smallpox emerged, it would take a while to diagnose, there's the 14-day symptomatic stage, and there would be a substantial risk to people even with a relatively rapid vaccination. So we actually think that's a supporting indication of their potential purchase of T-pox.

Okay, thanks for that answer, and I agree with that. I would just like to then, you know, clarify, I did see Bavarian Nordic did announce delivery to three unnamed European countries of their smallpox vaccine. So hopefully those countries are maybe looking at purchasing T-pox too. Obviously timing is hard with the pandemic, but I feel pretty confident that those three countries, they're unnamed obviously, but would hopefully be looking at purchasing T-pox in addition to the smallpox vaccine. I have another question for you, and this is actually two questions for the 19-C contract. Let's talk about the IV first, and I'm just looking at ASPR's justification for budget requests for fiscal year 2021, and I'll quote from them, and they'll say, Project BioShield in fiscal year 21 budget request reports late-stage development and procurement of an IV formulation of a currently stockpiled smallpox antiviral drug. and this will support execution of an existing contract option. And they requested $20 million. So I know I heard you say that you are going to be delivering IV from the base contract. So are you anticipating, and I'm assuming this is for CLIN0006, so could there conceivably be another order on top of the base contract deliveries of IV formulations?

So I'll let Dan answer the CLIN number. I just want to make sure I have that right. So we certainly will work with BARDA on the IV and any orders they have. We're not giving guidance on it. We just haven't been to a place where we understand their intentions. Certainly they supported the development. They put 180,000 roughly courses in the 19C contract with options, so we anticipate they will have additional options. and we'll work with it. I assume, Teddy, you're probably looking at the multi-year budget justification, the multi-year professional judgment budget, which they do project out on that. It doesn't always have the timing that they hope to have, but certainly we believe IV is a very important part of the stockpile and will work with BARDA to make sure we exercise options and get the right amount for them in the stockpile. Dan, do you want to just clarify on the base contract, the IV option that we're talking about, or the IV part playing in the base contract?

Right, so it's CLIN IV, I believe, that's related to the IV within the base, and that's the 20,000 courses. And then there's a series of options within the contract for the IV. One of them is CLIN XIII, and then another one is CLIN XVIII, and then another one is CLIN XXIII. So there's a series of options which I just went through the numbers.

Okay. I did see, though, I think it was earlier this month, there was like a very, very small nominal amount of money for Clin0006, which also was for an IV formulation. Maybe is that for more, instead of procurement, more like, you know, money for clinical studies or, you know, non-clinical studies? Yes.

Yes, I appreciate it. I appreciate the question, Teddy. We do have, and I imagine you're probably looking at the SAM.gov website, we do have a variety of non-material type modifications like that. I think it was $10,000 for various R&D activities. So, you know, it could be a variety of things that are slightly more expensive or less expensive, and we work with the government to say, okay, if it's more expensive, Do they agree it's a reasonable reason that it's more so that's modified? But that would be those types of things are typically associated with our R&D cost reimbursement work we're doing under those contracts.

Understood. And, look, I mean, just to see movement on that is a positive. And my interpretation confirms that you will be delivering IV formulation hopefully sooner rather than later. And also, Phil, just so you know, what I was quoting from was not from the multi-year budget, but for the justification of the budget request for fiscal year 2020 solely. Okay, thanks. And so here's my next question, just maybe my final question. This is for Oral now from 19C contract. And also from that same document, the S&S budget request, They say that fiscal year 21 prioritizes funding for S&S's smallpox and anthrax portfolios. And then I'm looking at the 10K. I'll quote from your 10K that came out in March. Based on prior product delivery activity and current FDA-approved shelf life of oral TPOX, the company estimates that approximately one million courses of smallpox antiviral treatment would need to be delivered to the U.S. government between 2021 and 2023. in order to maintain stockpile levels of unexpired smallpox antibody treatment during this period. First of all, I looked at your product deliveries, you know, starting in 2013 all the way up to 2018. I do agree with that estimate. I also know for the 19C contract, there is only 1,089,000 oral courses remaining after the first option was exercised. So that would look to me that the majority of the three unexercised options would be be procured between this period, and I'm assuming the second half of 21, into the end of 2023. So after all that stuff I just said, can you give me your opinion on whether I am thinking correctly on that?

Sure. So I appreciate it, Teddy. As always, you do very good diligence, and I always have very detailed questions, so I appreciate that. I'll talk to the strategy at the end and talk to the details. So, you know, from a strategy perspective, look, we know when they established the contract in 2018, the intent was to essentially resupply oral and IV and maintain their stockpile. I am careful not to speak, obviously, for the government. It's entirely under their prerogative. But We certainly believe that what we put in the queue, and as everyone knows, we continue to manufacture products to make sure we can support that stockpile. So we continue to work closely with the Strategic National Stockpile, with BARDA, and with the Assistant Secretary for Preparedness and Response Office, who is not confirmed yet. by the Biden administration. But certainly what you outlined is how we've been thinking about it and we continue to work with our government party to execute on that. Dan, anything else you want to add?

Yeah, just as background is we delivered product when creating the stockpile between 2013 and 2017. And that product has seven-year shelf life. So when you roll forward, that means that the whole stockpile would turn over between 2020 and 2024. So far, under the 19C contract, when you take into account the option exercise, as well as the small amount of oral courses delivered under the base period activities, we've delivered approximately 400,000 courses. So that leaves approximately 1.3 million courses that will be expiring and need replenishment between now and the end of 2024. And as you pointed out in the 10-K, we essentially just pointed out the next three years.

Okay, great. Thanks a lot, guys. I appreciate it.

Once again, to register for a question, please press the 1 followed by the 4 on your telephone. Our next question comes from the line of Andrew Sol with Esopus Creek Advisors. Please go ahead.

Thank you, Phil and Dan. Thank you for taking my question. I just had two brief questions. The first one, with respect to your CIPLA strategic partnership, were there any research and development expenses incurred in the first quarter for the partnership?

Dan, do you want to comment on that?

Yes, certainly. So there have not been any research and development expenses incurred related to that partnership. We have been coordinating with our partner, but so far expenses of any material nature haven't been incurred.

Okay, great. Thank you. And then my last question. The president put forth this infrastructure bill, and I think one of the iterations had some commentary about increasing biodefense funding, and specifically not necessarily related to COVID. Do you have any color around that bill and sort of where things are at the moment?

Yeah, so Andrew, thanks for the question. So there's been some encouraging signs out of the new administration that this is obviously an important area. There was some language in the initial stimulus back in January, February that had some language around countermeasures for not only COVID, but other pandemic potential products. And as you point out, the infrastructure bill also has some flexible language. We're obviously supportive of that. We think preparedness is a lot cheaper than response and have been sharing that message with our, with our colleagues that do that funding. I will say though, the other color part of that is the new administration has come in. They're very focused on COVID and there's a lot of moving pieces there. So we are encouraging and continue to talk to the administration, both through trade groups, as well as ourselves in, in focusing on that. And the, the, the, Probability of the infrastructure bill is certainly not 100%. We can all probably put our own handicap on it. But if that language was in there, we'd certainly be supportive and think that's important. We have seen language that people recognize there are things that really would be helpful to have in the stockpile and unfortunately weren't there predominantly for funding reasons. And so it's very timely and important for us to reiterate with everybody, now is the time with the lessons we've had in the last year to prepare, and certainly something like smallpox is at the top of the list, given the potential threat that it poses, and that's been, you know, articulated by countries around the world, as Teddy pointed out, by buying smallpox vaccine. Bill Gates pointing out it can be, unfortunately, synthetically made pretty easily, and a whole host of other threats. So we continue to monitor it closely, but unfortunately, the infrastructure bill hasn't passed yet, so we'll continue to monitor it. Thank you.

Okay, great. Thank you, guys. Thanks for taking my question, and I look forward to hearing the news in the room for the second half, first half. Thank you.

I'm showing no further questions at this time. I'll turn the call back over to the presenters.

Hi, it's Phil again. I'd just like to thank everybody for joining today's call. I appreciate you following, and I will look forward to continuing your reporting updates and providing an update next quarter. Thank you all very much.

Thank you. That does conclude the conference call for today. We thank you all for your participation and ask that you please disconnect your lines.