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spk07: Welcome to CIGA business update call. Before we turn the call over to CIGA management, 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 statements. CIGA 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. For the year ended December 31st, 2023, and its subsequent reports on Form 10Q and Form 8K.
spk03: With that, I will turn the call over to Zem Nguyen, Chief Executive Officer of CIGA. Zem.
spk02: Good afternoon, everyone, and thank you for joining today's call and the review of our business results for the second quarter of 2024. I am joined by Dan Lockshire, our Chief Financial Officer, and we appreciate this opportunity to provide an update on our company. After the update, we'll be happy to answer your questions. I am pleased to report that CECA has continued to generate product revenues that outpaced revenues in the comparable periods last year. Product revenues for the three and six months ended June 30, 2024, were $21 million and $45 million, respectively. This surpassed product revenues of $1 million and $7 million, respectively, for the periods in 2023. These strong results are reflective of CIGA's staying power. Our capital management activity over the past several years, including substantial special cash dividends, reflects and has been made possible by this strong long-term performance. Our focus on long-term performance is critical due to the nature of CIGA's business and the inherent quarter-over-quarter fluctuations. We believe the financial results for the first six months of 2024 supports an important positive long-term trend. Our sales reflects a diverse mix of oral TPOC deliveries to the U.S. Strategic National Stockpile, or SNS, the U.S. Department of Defense, and 11 international customers, as well as IV TPOC deliveries to the SNS. Looking ahead, we anticipate a continued diversification of our revenue base will be important for maximum long-term performance. Consistent with what we said last quarter, we expect 2024 to be another year of strong product revenues. As a reminder, our 2023 product revenues were the highest achieved over the past five years. Two weeks ago, the U.S. government exercised its procurement option under the 19C BARDA contract for the delivery of approximately 113 million of oral teapots. We plan to work with the U.S. government on the timing of delivery and currently anticipate deliveries will begin within the next 90 days. We foresee a meaningful portion of this order will be delivered before year-end, supporting our expectation that product revenues will again be substantial this year. It is our view that this award illustrates the U.S. government's belief that smallpox continues to be a threat. It also demonstrates its ongoing commitment to maintaining a robust stockpile of smallpox antivirals to help ensure the health security of American people, and an issue that has consistently garnered bipartisan support. TPOC has a strong safety profile based upon preclinical safety and toxicology data, phase three clinical data and healthy volunteers, as well as clinical observations. Over 1,500 MPOC patients have been enrolled in clinical trials to assess efficacy of TPOC for the treatment of MPOC, utilizing TPOX and its matching placebo provided by CIGA to trial sponsors at no cost. As a result, we anticipate it will be a preferred antiviral treatment in an event of an outbreak. Our attention is now firmly set on securing the next procurement contract with the U.S. government. Our team continues to be actively engaged with a broad range of government officials as we prepare for a request for proposal, or RFP, which can be issued by the administration of strategic preparedness and response at any time. While we wait for this next RFP, there are a number of factors that give us confidence. First, earlier this year, Congress approved the budget for the U.S. government, which includes another substantial increase in the federal budget for countermeasures, including the S&S. This funding outcome underscores the government's ongoing commitment to preparedness and response. Second, the current public health environment, including the Clade 1 Mpox outbreak in the Democratic Republic of Congo, or the DRC, highlights the heightened pandemic risk and continued need for nations to be response ready. This includes the timely procurement of effective therapies like TPOX. And third, we have a longstanding partnership with the U.S. government to provide a critical countermeasure against one of the world's most dangerous bio threats. As a reminder, Smallpox is one of only six diseases considered a category A threat by the CDC, and herd immunity is waning among our population. In fact, TPOX was among the first novel small molecule therapy delivered to the SNS under Project BioShield and was developed in collaboration with BARDA. All in all, based on our conversations with the government officials, as well as other SNS contracts to procure medical countermeasures, We are confident that the government is receptive to a new, long-dated contract, most likely between 5 and 10 years. And the aggregate value of this contract should surpass the aggregate value of our current contract, under which most options have now been exercised. As a frame of reference, the current 19C BARDA contract signed in 2018 has a procurement value of $546 million. This is an exciting time for CEGA. As I said earlier, the health and security of Americans is an issue that continues to garner bipartisan support. So while we wait for the receipt of this next RFP, we are keeping our focus on our longer-term goals. We have the financial strength to advance our business with current and potential customers outside the U.S. while remaining ready to collaborate with the U.S. government once it initiates the RFP process. Dan will provide further details on our financial position shortly. In summary, our balance sheet is robust with no debt, our cash flow remains strong, and we have exercised prudent cash management. This allows us to recently pay a special cash dividend in April. Moving on, we've also made progress in several other key areas. In April, we announced an amendment to our international promotion agreement with Meridian Medical Technologies. under which SIGA began driving promotional activities outside the U.S. for oral TPOCs starting June 1st. Since then, our team has strengthened relationships with key global customers, and we are confident these efforts will lead to growth over time. In June, we announced an agreement to sell TPOCs to the member states in the Association of Southeast Asian Nations. This agreement is a foundational step in a highly populated region for strong collaboration in the future. In Japan, we continue to have productive conversations with our partner, Japan Biotechnopharma, and regulators on the new drug application for TPOX for the treatment of smallpox, mpox, cowpox, and complications due to the Vicinia virus. Based upon the standard review timeline for the new drug application, we expect a final regulatory decision by early next year. If approved, we anticipate that TPOCs will be placed in national stockpiles ready for deployment in the event of an outbreak. We continue to pursue the expansion of TPOCs approvals and new indications such as PEP and MPOCs and formulations. First, on PEP, as I stated before, we believe that TPOCs has a potential benefit against smallpox and a post-exposure prophylaxis. Currently, much of our work has been focused in the completed TPOX, JYNNEOS safety and immunogenicity trial to evaluate TPOX when administered together with JYNNEOS. As a reminder, this trial was requested by the FDA because of the likely use of TPOX and JYNNEOS together in event of an outbreak. The trial was designed to test this drug vaccine combination to ensure there would be no impact to patient safety or vaccine immunogenicity. As a reminder, The data from the trial is supportive of the safety objective. Regarding immunogenicity, we are continuing to work with the CDC in consultation with the FDA to complete an analysis of samples collected to support the immunogenicity objective. At the same time, we are working out our supplemental NDA submission and targeting submitting it within the next 12 months. Turning to the ongoing MPOCS trial, the trial sponsors continue to make significant progress. POM 007 trial in the DRC has now completed enrollment. We anticipate release of top-line data in the coming weeks. The Di-AIDS stop trial has seen considerable growth with 515 patients enrolled as of July, up from 350 reported from our last call. MPOC remains a global threat, and particularly in the DRC where cases continue to rise. To support investigators and health agencies, in 2022, we donated over 500 courses of TPOC capsules and its corresponding placebo for the randomized clinical trial POM007. Recently, we donated another 100 courses to ensure patient access continues during data analysis. We're also working to support broader access programs in Africa. Additionally, the US government has distributed approximately 40,000 courses of TPOC in response to the 2022 MPOCS outbreak through the CDC's Compassionate Use Program. We continue to monitor the situation actively, providing assistance when possible to achieve the best possible outcomes for MPOCS patients. In summary, our company is strong, profitable, and well positioned for the future and supported by the following four pillars. Number one, we have a well crafted strategy that is yielding results. We have a prudent approach to capital management, which has afforded us the opportunity to pay significant special cash dividends. We have a valuable TPOC franchise that fulfills our critical requirement established by the U.S. government to ensure the country is prepared in the event of a natural, accidental, or intentional outbreak. And four, we have a resilient team with proven operational capabilities who are executing on our strategy with urgency and effectiveness. Combined, we believe these pillars will enhance shareholder value over time and improve public health. With that, I'll turn over to Dan to review the financial results in more detail.
spk00: Thanks, Sam. As noted earlier in the call, DIGA's product revenues through the three and six months ended June 30, 2024, for $21 million and $45 million, respectively. which surpasses product revenues of $1 million and $7 million, respectively, for the comparable periods last year. Product revenues for the quarter were primarily related to approximately $18 million of IVT pox sales to the U.S. government. For the six months ended June 30, 2024, product revenues reflected diverse mix. including approximately $15 million of oral TPOC sales to the U.S. government under the 19C contract, approximately $11 million of international oral TPOC sales to 11 countries, approximately $1 million of oral TPOC sales to the U.S. Department of Defense, and the previously mentioned approximately $18 million of IV TPOC sales to the U.S. government. In addition to product revenues, The company had research and development revenues of approximately $1 million and $3 million for the three and six months ended June 30th, 2024, respectively. Pre-tax operating income, which excludes interest income and taxes, was approximately $1 million for the three months ended June 30th, 2024. For the six months ended June 30th, pre-tax operating income was approximately $12 million. In comparison, there was a pre-tax operating loss for the three and six months ended June 30th, 2023 of approximately $5 million and $7 million, respectively. Debt income for the three months ended June 30th, 2024 was approximately $2 million. For the six months ended June 30th, debt income was approximately $12 million. In turn, fully diluted income per share for the three months ended June 30th, 2024 was $0.03 per share, and for the six months ended June 30th, fully diluted income per share was $0.17. At June 30th, 2024, the company continued to maintain a strong balance sheet with a cash balance of approximately $107 million and no debt. On April 11th, Sega paid the previously disclosed special cash dividend of $0.60 per share, which amounted to an approximately $43 million payment to shareholders. Looking forward, as Zem mentioned earlier in the call, we are working diligently to continue our positive momentum. As such, we believe 2024 is lining up to be another year of strong product revenue performance. This concludes the financial update. At this point, I will turn the call back to Zem.
spk02: Thanks, Dan. Leveraging our achievements from 2023 and the positive momentum generated so far this year, we believe CIGA is poised for continued growth and innovation. We remain focused on advancing our strategic goals, including securing a new contract with the U.S. government, optimal capital management, and enhancing our TPOC franchise. We are confident this will deliver value to our patients, partners, and shareholders over time. Now I would like to open the call to Q&A.
spk05: Operator? Thank you.
spk04: Hello?
spk06: Yes.
spk01: Hi. Sorry. I had some technical difficulties here. Thank you for taking my question. Congratulations on another strong quarter. I have a multi-part question, and these are mostly just to garner a little more color. It sounds like you've delivered. It was nice to hear the 113 million BARDA exercise for the remaining part of oral TPOCs come across. It sounds like you're going to deliver a meaningful portion in 2024, despite the manufacturing bottlenecks. Any more color on the timeline would be helpful. The second part would be, Could you provide a sense of when BARDA will exercise the remaining 26 million IV TPOCs? I believe the July 23 IV TPOCs order was yet to be delivered. And the last part is, could you provide an update on the U.S. government negotiations? I believe we're looking at some kind of recurring arrangement.
spk02: Thank you, Sue. If you can hear me, I'm going to try to tackle your questions in three parts. The first question relates to the recent barter exercise of our remaining option and when do we anticipate the delivery. And what I would state here is that we've been proactively coordinating with our supply chain in preparation for the U.S. government's exercise of this option under the current barter contract. And we are working with our partners to produce and deliver oral teapots on schedule that make sense for our customer, the U.S. government. We are confident in our ability to deliver and expect to start shipping within the next 90 days with a meaningful portion of this to be delivered this year. We are collaborating with the U.S. government to determine the optimal timing and therefore cannot be more specific at this time. As it relates to your second question, you had asked about the IV TPOPS option. And just to give you a little bit of background, the $18 million that was discussed today of the IV TPOC sales in the second quarter relates to the 2022 order. Once we finish this 2022 order, we will then coordinate with the U.S. government and our supply chain on the timeline for producing and delivering on the 2023 order. Based on what we know today, we do anticipate that BARDA will exercise the final $26 million option in 2025. I guess the last question that you had, Sue, was an update on the U.S. government negotiations. As we mentioned during our prepared remarks, we have been having discussions with a broad range of government officials. From these conversations, there is a clear bipartisan support in helping to ensure the health security of the American people. And given the increased geopolitical risk globally and the MPOC outbreak and the DRC, We are prepared to respond when ASPR is ready for the start of that RFP process. As mentioned, our aim is to secure a long-term contract with more regular purchases, and this contract reflects the value of TPOCs that's provided today as well as in the future. We do believe the U.S. government is open to a long-term contract, potentially up to 10 years, and one with a higher aggregate value than the 2018 contract.
spk05: That's great. If I can ask one more question, if you don't mind.
spk01: Sure. It's good to see that, you know, there's a lot more interest, I mean, with the recent ASEAN country agreement for oral TPOCs. We touched on this a little bit, but any clarity on the size timelines would be helpful. And then also, I know you're working with Meridian. Any kind of... color on the fee structure economics for this new order would be kind of nice, too.
spk02: Sure. I'll talk about the ASEAN agreement, and Dan, you can highlight in terms of the meridian economics. First, I want to really highlight that we are incredibly pleased with this agreement, which was signed in June. This agreement further advances our strategy to expand access to TPOCs to even more international markets. Asia is a strategic region for SIGA. This contract represents an important step to growing orthopoxvirus preparedness in the Asia region and does establish a footprint in a highly populated region. It also sets the groundwork for additional activity for the future. As we noted in our June release, we did receive 3 million orders from a new customer in the ASEAN region. We believe this is the first important step to larger collaboration as the ASEAN member states together represent a population of over 600 million people with a GDP of over $3.6 trillion. We have not disclosed the financial terms to date. However, as we have emphasized, we're quite optimistic with this collaboration. Dan, would you like to talk about the Meridian Amendment?
spk00: Yes, certainly. So we disclosed the original amendment earlier in the early June timeframe. And with that, what it did was it really allowed us to take over ownership of the international marketing and relationships. With the amendment, the goal was to ensure a very, very smooth handoff for the next period of time. So with that, there were some key countries and regions that we wanted to ensure, especially for the handoff. And that really concentrated in Europe, Australia, and Japan. So it's much more limited in scope than the prior arrangement. In addition, the fee is materially lower than the original fee. We do not disclose the original fee, but it is materially lower, and the current fee is in the high single digits.
spk01: That's great. If you don't mind, if we can touch on the new POC strain in the DRC. I know you touched on this also. It seems like the governments are pretty alert now. I mean, are we getting more inquiries from international markets and then Are the MPOCs, you know, it sounds like the MPOCs trials are progressing, and if we can expect the U.S. filing to be made soon.
spk02: Yeah, maybe I can take on, and I'll start with just the more inquiries in the international market. Clearly, TPOCs or tecovirumab has the benefit of an anti-bio treatment for smallpox, which is quite important from the consideration from a public health security perspective and as such driving stockpile considerations from a preparedness perspective. The MPOC outbreak in 2020 to heighten the awareness of orthopox threats and has driven certainly international recognition as well as the need to, one, address MPOC outbreaks at a targeted level, but then a broader long-term consideration from a policy perspective from a smallpox stockpile. So while they're a bit independent when you think about how to look at the volumes and the preparedness requirements, they are intertwined in the consistency of increased orthopox threats, whether that's naturally occurring, such as MPOX, or whether it could be potentially intentionally driven from a smallpox outbreak perspective. In particular, from 2022 to where we are today, we are facing another new mpox strain in the DRC, and we also share the concern of not only the rising number of mpox cases in the DRC, but also the increased prevalence of the clade 1 strain, which is much more legal than Clay 2. MPOCS cases have persisted over the past two years, including in the U.S., particularly in people who are not vaccinated or who have only received one dose of JYNNEOS. As a quick reminder, MPOCS cases were concentrated in Africa in 2022 before spreading globally. This highlights the importance of monitoring case activity in Africa when thinking globally. The MPOCS clinical trials, as mentioned, are progressing well, and we look forward to the top-line results in the POM007 clinical trial and the DRC in the coming weeks. We also have noted the STOMP trial has enrolled roughly 515 patients as of July. This is a substantial increase from the 350 patients noted in our last call, which is also highlighting the increased cases that we're observing. Assuming the positive data, we'll work with our trial sponsors with the goal of filing an MPOC supplemental NDA as early as 2025. We're monitoring this situation quite closely, Sue.
spk01: Yeah, that's great. Okay. Well, thank you for the answers and great quarter. Again, congratulations.
spk05: Thank you.
spk03: Once again, if you do want to ask a question, press star followed by the one on your touch-tone phone.
spk07: Okay. There are no further questions at this time. I'd now like to return the call back over to Zim Nguyen, CEO. Zim?
spk02: Thanks, Lateef. I'd like to thank everyone for making time to join us on today's call and for the ongoing interest in SIGA. We look forward to speaking to you again in our third quarter call.
spk05: Have a good rest of the evening. Thank you.
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