Q4 2022 SIGA Technologies Inc Earnings Call
Speaker 2: Ladies and gentlemen, greetings and welcome to the SICA Technologies 4th Quarter and full year 2022 earnings conference call.
Speaker 2: At this time, all participant lines are in a listen-only mode. A brief Q&A session will follow the formal presentation.
Speaker 2: If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad.
Speaker 2: As a reminder, this conference is being recorded.
Speaker 2: Before we turn the call over to SIGAR 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.
Speaker 2: PICA does not undertake any obligation to update publicly any forward looking statement to reflect events or changed circumstances after this call.
Speaker 2: 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.
Speaker 2: The company's annual report on Form 10-K for the year ended December 31, 2022 and a subsequent report on Form 10-Q and Form 8-K.
Speaker 2: It is now my pleasure to introduce you to Phil Gomez CEO . Please go ahead.
Speaker 3: Thank you for taking the time to joined today's call. Today I'm joined by the luxshire, our CFO . We are pleased to have this opportunity to provide a business and financial update to our shareholders. We'll then be happy to take questions.
Speaker 3: I'd like to start the call by recapping annual performance for 2022. On our prior year and investor call in March of 2022, we highlighted that 2022 would be a transition year with no significant expirations of oral teapots in the US strategic national stockpile or SNS.
Speaker 3: I'm pleased to report we ended this past year with approximately $111 million in revenue for the year thanks to a diversification of our revenue base.
Speaker 3: This diversification has been years in the making and as a result we were prepared to respond to the global monkeypox outbreak.
Speaker 3: Our preparation included approval for treatment of MPOCs by the EMA in January of 2022, and our proactive build of inventory to be able to deliver TPOCs immediately to customers.
Speaker 3: Overall, 2022 revenues included $71 million of sales to more than 10 international customers, the first sale of intravenous formulation of T-POCs to the U.S. government, and the first sales totaling approximately $7 million of oral T-POCs to the U.S. Department of Defense.
Speaker 3: As a frame of reference, prior to 2022, the company had only one international customer. Cumulative international sales were approximately $15 million over the two-year time period of 2020 and 2021, and it only sold oral teapots to one buyer within the U.S. government.
Speaker 3: Additionally, it should be noted that 2022 was the first year since the start of teapots deliveries in 2013 in which the company had substantial positive cash flows without the benefit of any sales of oral teapots to the Strategic National Stockpile.
Speaker 3: We believe the trend of financial diversification at CEGA emphasizes a growing recognition by governments in different regions of the world of the overall importance of health security preparedness.
Speaker 3: As noted in our last investment call in November , we believe that broadened procurement of T-POCs is being generally driven by a combination of SEGA business development activities and long-term trends that have been building for a while. Specifically, in connection with 2022 sales of T-POCs, we believe the diversification of international sales was at least partly driven by the initial government responses.
Speaker 3: more than 6,500 MPOCs cases in the US, and many cases internationally, and approximately seven clinical trials have been launched, as well as another four are scheduled to be launched, to study the use of TPOCs for MPOCs, many of which are randomized placebo-controlled trials that are sponsored by government agencies or NGOs. To reiterate what I said in November ,
Speaker 3: in the November investor call with regard to the trial.
Speaker 3: The timing and the ultimate number of participants of the trials will depend on the path of the impasse outbreak and the general speed of enrollment.
Speaker 3: Hence, the timing and the likely ultimate enrollment levels of these trials, especially the randomized placebo-controlled trials, continues to be currently unknown. In turn, this means the timing and composition of an FDA submission for an mPox label for TPox is also currently unknown.
Speaker 3: While it should be acknowledged that global cases have significantly decreased since the third quarter of 2022.
Speaker 3: We continue to believe that it is likely that MPOCs will continue to have a global presence going forward.
Speaker 3: While the short-term path of the MPOCs outbreak is uncertain, what we have seen and learned to date indicates there is a high probability that the United States and other countries across the world will have to deal with MPOCs cases in the future. It is just unknown as to the ultimate magnitude of the cases, the scope of the cases across different communities. On this day using exponents and scoping cameras at multiple countries, MPOCs have Pressley
Speaker 3: and whether case levels become consistent or whether case levels come and go periodically.
Speaker 3: We believe that in most scenarios there will be a need for TPOCs.
Speaker 3: Looking forward, we expect the company's streak of positive financial performance will continue into 2023 and 2024. We believe a key driver for sales during this period will be procurement by the U.S. government. There are two key reasons for our view.
Speaker 3: First, it should be noted that while there were no scheduled teapox expirations in the Strategic National Stockpile during 2022, we estimate there will be substantial teapox product expirations in the Strategic National Stockpile during 2023 and 2024. As a reminder, when BARDA issued the 19C contract in 2018, it contained four procurement options for oral teapots, in which each option...
Speaker 3: was valued at approximately $112.5 million.
Speaker 3: Oral T-POCs as a seven-year shelf life, and as we saw in 2020 and 2021, BARDA exercised procurement options as a stockpile product that had been manufactured in 2013 and 2014 expired.
Speaker 3: In substance, we replenish the US government stockpile with deliveries of oral tea pots in those calendar years.
Speaker 3: As such, with the scheduled expiration of a substantial number of stockpiled teapox courses in 2023 and 2024, such courses being manufactured in 2016 and 2017, we believe the U.S. government will order a substantial amount of oral teapox in 2023. We expect to get a more specific view of the likely order size in the second quarter.
Speaker 3: Additionally, we believe the U.S. government would need to exercise procurement options under the 19-seat contract in 2024 or make orders under a new procurement contract to note or at least maintain historical and expired T-POTS levels within the Strategic National Stock Pile.
Speaker 3: A second key reason we believe the U.S. government sales will be a substantial source of revenue in the near term is that, in addition to the company working with the Administration for Strategic Preparedness and Response, or ASPR, the S&S, and BARDA to get options exercised under the 19-seat contract, we have continued to engage stakeholders on the benefits of a long-term 10-year contract with annual options to support the U.S. government.
Speaker 3: 8-day course regimen, which contrasts with a 14-day regimen for the treatment indication. This difference would require a substantial increase in procurement and stockpiling in order to fully protect 1.7 million Americans, which is the targeted number of courses noted in prior government RFPs.
Speaker 3: In terms of the ultimate sizing of the stockpile as stated in prior investor calls, we believe that clinical results from the PEP program could play an important role. On this front, I am pleased to report that the PEP clinical trials made substantial progress over the last 12 months, with the immunogenicity trial recently completing enrollment and the expanded safety trial on Trac to meet target enrollment in March of this year.
Speaker 3: Currently, we are performing the immunogenicity testing of the patient samples from the TPOCS Jynneos immunogenicity study. Going forward, we are targeting a data readout in connection with the immunogenicity trial within the next 90 days. At the next investor call, Dr. Dennis Ruby, our Chief Scientific Officer, will join the call to provide a more detailed update on the PEP program.
Speaker 3: The goal for the PEP program is to make an FDA submission in early 2024 for a PEP label expansion.
Speaker 3: for oral teapots. I'd like to highlight that a PEP label expansion for oral teapots would continue an impressive regulatory streak for SEGA.
Speaker 3: Since the beginning of 2022, the company has achieved regulatory approvals from the EMA in continental Europe and the MHRA of the United Kingdom for a broad indication for oral T-pox for the treatment of smallpox, mpox, cowpox, and vaccinia complications following vaccination against smallpox.
Speaker 3: Additionally, we attribute regulatory approval in May 2022 from the FDA for the intravenous formulation of T-Pox for the treatment smallpox. At this point, I'd like to hand the call over to Dan for the financial update.
Speaker 4: Thanks, Bill. For the 12 months ended December 31, 2022, VEGA's revenue was approximately $111 million.
Speaker 4: of which approximately $71 million of revenue relates to international wall pockets sales.
Speaker 4: Another $7 million approximately of revenue relates to sales of oral cheap hocks to the U.S. Department of Defense.
Speaker 4: And a further $7 million approximately, a revenue relates to the first sale of IVT Cheap Ocks to the U.S. government.
Speaker 4: The remaining revenue is approximately $26 million.
Speaker 4: mostly relate to research and development and supportive activities.
Speaker 4: of the TPOCs revenue base.
Speaker 4: with more than 10 new international customers from a narrow base prior to 2022, and the first sales of Orelteepox to the U.S. Department of Defense.
Speaker 4: and the first sale of IVT POCs to the US government.
Speaker 4: For 2023, we will continue to work on generating revenues from the expanded international customer base.
Speaker 4: While also procuring replenishment.
Speaker 4: for pursuing replenishment of the U.S. Government stockpile and resumption of substantial sales to the U.S. Government under the 19C contract. Furthermore, we will continue to work with the U.S. Department of Defense on potential additional procurement orders and or contracts.
Speaker 4: to coordinate additional deliveries of IV TPOCs to the Strategic National Stockpile in connection with the 2022 IV Option Exercise under the 19C contract.
Speaker 4: and to pursue a new contract with the U.S. government through the administration of strategic preparedness and response.
Speaker 4: Returning to the 2022 financial results.
Speaker 4: Protect operating income for the year.
Speaker 4: which excludes other income, taxes and adjustments to the fair value of the warrant.
Speaker 4: was approximately $43 million.
Speaker 4: Net income for 2022 is approximately $34 million.
Speaker 4: and fully diluted income per share was 46 cents.
Speaker 4: At December 31, 2022, the cash balance for the company was approximately $99 million.
Speaker 4: For the full year 2022, the company used approximately $46 million for capital management activities.
approximately $33 million was used for a
45 cents per share special cash dividends.
That was paid in June of 2022.
And approximately $13 million was used to repurchase approximately 1.8 million shares of common stock.
Please note that, as mentioned on prior investor calls, the
In addition to using cash for capital management activities,
The company has been using cash to proactively build work in process inventory as well as final drug product inventory.
This concludes the financial update. At this point, I'll turn the call back to sales.
Thanks, Dan. Before we turn to Q&A, I'd like to highlight a few points in connection with 2023 and beyond. We believe these points support our view that Seager offers an attractive combination of existing revenue streams that generate strong financial results when product is ordered and delivered.
complemented by organic growth initiatives that hold significant potential when viewed collectively. First, I'd like to reiterate that while the 2022 mPox outbreak has receded over the past series of months, it nonetheless highlighted the long-term importance of tPox in connection with the treatment of orthopoxviruses.
It is our understanding that TPOCS has been the leading and likely the only in many countries therapeutic that has been and is being used to any significant degree in the US, Europe , Canada, the Asia-Pacific region, Africa, or other areas.
The usage and stockpiling of TPOCs across a broad range of customers highlights the differentiated value of TPOCs.
Second, I'd like to reiterate that the ongoing international sales growth initiative is progressing in a value-creating manner. With 13 customers outside the U.S. who have ordered TPOCs, we have a solid base of international customers.
As a quick reminder, although progress on this front is expected to continue to be lumpy and uneven given a variety of factors, we believe that a meaningful international market has been gradually taking shape.
Third, I want to reiterate that the PEP-based development program represents a growth initiative in that it would provide scientific and regulatory support for any stockpile expansion.
As stated on prior calls, we believe the current size of the stockpiled TPOCs in the U.S. would not be sufficient to treat all those who would need care in many outbreak scenarios.
A lesson from the COVID pandemic, which has been reinforced by the MPOCs outbreak, is that governments need to be more proactive in addressing the health and societal risks associated with virus families.
Fourth, we continue to be focused on transitioning our U.S. contract to a long-term S&S contract that focuses on appropriate size requirements for the TPOC stockpile as well as smoothing the annual delivery, which would be critical to supply chain planning and provide a higher degree of financial predictability. Fifth, the expansion of our portfolio of customers is resulting in a diversification of the company's
This concludes our prepared remarks, and we will now begin the Q&A session.
Thank you. Ladies and gentlemen, at this time we will be conducting a question and answer session. If you would like to ask a question please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the screen.
Our first question comes from the line of Sue Romanoff from Edison Group. Go ahead.
Thank you for taking my questions. This is Sue Romanoff from the Medicine Group. Congratulations on the quarter. My first question is likely for Phil. Once you get the data readout from the PEP immunogenicity trial, what are the next steps in terms of pursuing stockpile expansion?
Thanks, Sue, and good to talk to you. So a key point for us on the Immunity Trials Showing, we don't interfere with the Immunity. That is really the open scientific question that we have. So we've been in discussions with the government on the overall T-Pox program. We've briefed them on our plans for PEP. So as we get that data,
to be able to make a determination ultimately on the size of a stockpile. So we can't predict exactly the timeline for the U.S. government, but given we have several options left in our contract and that data is coming out this year, we'll be pushing very hard to make sure a decision is made as soon as possible. But we do have to defer to the government.
So maybe I'll start, but then I'll let Phil jump in. As Phil mentioned...
As the company has mentioned a few times, we've meaningfully expanded the investor base this year. There are more than ten customers. The goal has always been to establish relationships and contract vehicles with these customers.
and then build from there. That is an ongoing initiative. Definitely, some of the customers that ordered amounts last year are the key leaders in the target markets. We will look to build out, but I think it is safe to say that when you think about
the international market and the potential big buyers, I would say most of those customers that are on the list of potential big buyers did order to some degree in 2022.
I'll turn it over to Phil to add some comments. Yeah, I'd echo what Dan said and I think Canada again is instructive. If those of you on the call remember we had an initial small order from the military side of Canada then we had a civilian order that came as they started to think broadly about orthopoxviruses. So I think we
If I could squeeze one more question in, I think this was more for Dennis and so, is there any chance in getting data from the placebo controlled studies on monkeypox in the near term? And thank you.
Yeah, so it's a complex question as to what the data package could look like for MPOC's approval with the FDA as those trials roll out. One will be a question about the trajectory of the outbreak. If we see an increase in cases as we did last spring, that would certainly make enrollment easier to do. And our partners...
are working tirelessly at NIH to expand their sites, to international sites outside the U.S. We have the study ongoing in the DRC in Africa. We have the UK study and others that are working to start up in additional geographies. We also have the real-world evidence that ultimately we anticipate will be published by CDC. And so there probably is a combination of both some real-world evidence and some real-world evidence.
some placebo-controlled data that could come in the shorter term. But I think a key thing that all public health people are watching is what happens to the caseload. If it continues at the very low levels we're seeing, there certainly were plans for interim readouts of those studies. It may be a good time to do an interim readout and see what we have for that, but we'll have to see what happens in the springtime.
With the outbreak. Thanks. Great. Thank you.
Thank you.
Ladies and gentlemen, there are no further questions.
There are no further questions.
CIGAR has now concluded. Thank you for your participation. You may now disconnect your lines.