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Long Siga Technologies ($5.80)
Siga represents an interesting investment for the current environment and a compelling risk/reward. I am not a biotech expert, and came across the name looking at defense companies...and think it is more a defense play than a biotech although there is a free call on a biotech portfolio. Siga has an interesting history. They have a backlog of drugs/vaccines designed to combat infectious diseases especially ones that might be used in biological warfare. They have some promising drugs for diseases like Denge fever - which the WHO is seemingly focused on. I have no strong view on what the value of that pipeline is, and I don't think you have to worry about it to invest here (it's a free option).
One drug that Siga does have is ST-246. ST-246 is the only proven cure for smallpox. We stopped vaccinating people against smallpox in 1972, and as a result, much of the world population is no longer resistant. The release of any amount of smallpox as part of a terrorist plot or otherwise, would have devastating consequences. It's not worth going through the history of smallpox - but it has devastated entire populations throughout history and given our modern world travel it would represent a global catastrophe within a very short time frame. In fact the NIH believes smallpox has killed more people than all over infectious diseases combined. As part of our government's effort to stockpile drugs for our biodefense - a government entity was set up and funded called BARDA to spearhead this effort. BARDA realizes that smallpox is one of the largest threats we are currently unprepared for. Looking at the vaccination process, including the public resistance and the logistical issues of the swine flu epidemic, vaccination after a release of smallpox somewhere would be less than ideal and almost impossible to implement as a preventative measure. In addition, the smallpox vaccine carries with it serious side effects and significant risks that dwarf any issue people had with the swine flu vaccine. As such, BARDA has put out an RFP to stockpile a smallpox cure (link):
It contemplates and initial order of 1.7 million doses with potential follow-up orders of 12 million doses. All of which would then need to be replenished overtime as the stockpile ages (unclear what the shelf life is - seems about 3 years). In addition, an order by the US would most likely be met with orders by other countries (Canada, Israel, etc) as well as by the WHO. Dr. Rose, the CEO talked about $300/dose being a conservative estimate for a "fair price." The cost of making the drug is minimal - margins likely in the 90+% range. So the initial 1.7 million order could be worth $500+ million conservatively. The more likely scenario seems maybe north of $300/dose given the discussion below, and then there is the addition 12 million doses BARDA wants as well as the International/WHO opportunity and the perpetuity of restocking the inventory overtime. That gets you a multi-billion dollar revenue opportunity and one that will need to be replaced/reordered every few years. Its not hard to come up with a $30+ ($50+?) stock price - and perhaps more and that is not valuing the non-ST-246 portfolio. There is downside only if the world decides it doesn't want to be protected from a potential smallpox threat - which given even recent events (terrorism, pandemics) to me seems unlikely.
The only other drug that is being used to address smallpox is CMX-001, developed by a private company called Chimerix. Chimerix has yet to show its effectiveness in a primate study and according to Dr. Rose is at least 3 years away from being in a position to pass the needed hurdles (they have thus far fallen short). In fact I think that all the monkeys died in the study - which, although as I said before I am not a biotech guy, strikes me as problematic to say the least. In addition, there seems to be some recent questioning as to whether it has even been shown effective in mice - but I am not an expert.
Some other key points -
Other issues to note -
In sum, the contract seems to be forthcoming. Wall Street coverage should be forthcoming. And the actual latest amendment should be any day. All of these seem to be large positive catalysts the sum total of which should drive the stock north of $30.
Street coverage, Actual Posting of latest amendment, and government contract
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