Item 1. Business
Certain statements in this Annual Report on Form 10-K, including certain statements contained in “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words or phrases “can be,” “expects,” “may affect,” “may depend,” “believes,” “estimate,” “project” and similar words and phrases are intended to identify such forward-looking statements. Such forward-looking statements are subject to various known and unknown risks and uncertainties and SIGA cautions you that any forward-looking information provided by or on behalf of SIGA is not a guarantee of future performance. SIGA’s actual results could differ materially from those anticipated by such forward-looking statements due to a number of factors, some of which are beyond SIGA’s control, including, but not limited to, (i) the risk that potential products that appear promising to SIGA or its collaborators cannot be shown to be efficacious or safe in subsequent pre-clinical or clinical trials, (ii) the risk that SIGA or its collaborators will not obtain appropriate or necessary governmental approvals to market potential products, (iii) the risk that SIGA may not be able to obtain anticipated funding for its development projects or other needed funding, (iv) the risk that SIGA may not be able to secure funding from anticipated governmental contracts and grants, (v) the risk that SIGA may not be able to secure or enforce sufficient legal rights in its products, including patent protection, (vi) the risk that any challenge to SIGA’s patent and other property rights, if adversely determined, could affect SIGA’s business and, even if determined favorably, could be costly, (vii) the risk that regulatory requirements applicable to SIGA’s products may result in the need for further or additional testing or documentation that will delay or prevent seeking or obtaining needed approvals to market these products, (viii) the risk that one or more protests could be filed and upheld in whole or in part or other governmental action taken, in either case leading to a delay of performance under SIGA’s contract (the “BARDA Contract”) with the U.S. Biomedical Advanced Research and Development Authority (“BARDA”) to deliver a smallpox antiviral to the U.S. Strategic National Stockpile (the “Strategic Stockpile”) or other governmental contracts, (ix) the risk that the BARDA Contract is modified or canceled at the request or requirement of the U.S. government, (x) the risk that the adverse portions of the post-trial decision by the Delaware Chancery Court in the litigation brought by PharmAthene, Inc. will be upheld in further proceedings, including any appeal, or that the favorable portions will be modified, (xi) the risk that the volatile and competitive nature of the biotechnology industry may hamper SIGA’s efforts to develop or market its products, (xii) the risk that changes in domestic and foreign economic and market conditions may adversely affect SIGA’s ability to advance its research or its products, and (xiii) the effect of any change to federal, state or foreign regulation, including drug regulation and international trade regulation, on SIGA’s businesses. All such forward-looking statements are current only as of the date on which such statements were made. SIGA does not undertake any obligation to update publicly any forward-looking statement to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events.
Overview
SIGA Technologies, Inc. is referred to throughout this report as “SIGA,” “the Company,” “we” or “us.”
We are a pharmaceutical company specializing in the development and commercialization of pharmaceutical solutions for some of the most lethal disease-causing pathogens in the world - smallpox, Ebola, dengue, Lassa fever and other dangerous viruses. Our business is to discover, develop, manufacture and successfully commercialize drugs to prevent and treat these high-priority threats. Our mission is to disarm dreaded viral diseases and create robust, modern biodefense countermeasures.
Commercial Product - ST-246®
Our lead product, ST-246, is an orally administered antiviral drug that targets orthopoxviruses. On May 13, 2011, we signed the BARDA Contract pursuant to which we agreed to deliver two million courses of ST-246 to the Strategic Stockpile. The five-year base contract award is worth approximately $435 million, and the BARDA Contract also includes various options to be exercised at BARDA’s discretion. As originally issued, the BARDA Contract included an option for the purchase of up to 12 million additional courses of ST-246; however, following a protest by a competitor of the Company, BARDA issued a contract modification on June 24, 2011 pursuant to which it deleted the option to purchase the additional courses. Under the BARDA Contract as modified, BARDA has agreed to buy from SIGA 1.7 million courses of ST-246. Additionally, SIGA will contribute to BARDA 300,000 courses manufactured using federal funds provided by the U.S. Department of Health and Human Services (“HHS”) under prior development contracts. The BARDA Contract as modified also contains options that will permit SIGA to continue its work on pediatric and geriatric versions of the drug as well as use of ST-246 for smallpox prophylaxis. As discussed in Item 3, “Legal Proceedings,” the amount of profits we are likely to retain pursuant to the BARDA Contract is dependent upon resolution of the pending dispute described in such section.
We believe ST-246 will be the first entirely new small-molecule drug delivered to the Strategic Stockpile under the Project
BioShield Act of 2004 (“Project BioShield”). The U.S. Food and Drug Administration (“FDA”) has designated ST-246 for “fast-track status,” creating a path for expedited FDA review and eventual regulatory approval.
ST-246 is a novel, patented drug that is easy to store, transport and administer. ST-246 inhibits vaccinia, cowpox, ectromelia (mousepox), monkeypox, rabbitpox, camelpox, and variola (smallpox) replication in cell culture and in various animal models, but not other unrelated viruses. There could be several uses for an effective smallpox antiviral drug: therapeutically, to reduce mortality and morbidity in those infected with the smallpox virus; prophylactically, to protect the non-immune who risk developing smallpox following virus exposure; and, lastly, as an adjunct to the smallpox vaccine in order to reduce the frequency of serious adverse events due to the live virus used for vaccination. We filed an Investigational New Drug (“IND”) application for ST-246 with FDA in November 2005. In June 2006, we successfully completed the first human clinical safety study of ST-246. The trial showed the drug to be well-tolerated in healthy human volunteers at all tested orally administered doses. In addition, data from blood level exposure was sufficient to support once-a-day dosing. The study was a double-blind, randomized, placebo controlled and ascending single dose study. In 2006, ST-246 became the first oral drug ever to demonstrate 100% protection against human smallpox virus in a primate trial conducted at the U.S. Centers for Disease Control and Prevention (“CDC”). Later in 2006, in two non-human primate trials the drug demonstrated 100% protection for animals injected with high doses of monkeypox virus. One study was sponsored by the National Institute of Allergy and Infectious Diseases (“NIAID”) at the National Institutes of Health (“NIH”). The second study was conducted by the U.S. Army Medical Research Institute of Infectious Diseases (“USAMRIID”) and was funded by the Department of Defense’s Threat Reduction Agency (“DTRA”). Also in late 2006, ST-246 received Orphan Drug designation for both the treatment and prevention of smallpox, and subsequently in September 2010, received Orphan Drug designation for the broader indication of treatment of orthopoxvirus infections (vaccinia, variola, monkeypox and cowpox). An additional Phase I clinical trial started in February 2007 was a 21-day, escalating, multiple-dose, Phase I safety, tolerability and pharmacokinetics study of ST-246 at three different dosages in healthy volunteers. The study was completed in December 2007, and the results indicated that the drug was safe and well tolerated at all tested doses. In August 2008, a Phase I study was performed at the Orlando Clinical Research Center in Orlando, Florida to compare ST-246 polymorph form I to form V. We submitted the final Clinical Study Report for that study to the FDA in May 2009. In December 2009, we completed a Phase II multiple dose clinical trial to evaluate the safety, tolerability and pharmacokinetics of ST-246 when administered as a single, daily oral dose for fourteen days. In that study, ST-246 was well tolerated and did not elicit any serious adverse events. More recently, in 2011, we completed three additional monkeypox efficacy studies in non-human primates to support dose selection, treatment after lesion onset and dose duration. The final reports on these studies have been submitted to FDA for review.
In December 2011, FDA convened an Advisory Committee to consider proposals for using a surrogate orthopoxvirus model in lieu of a reproducible and consistent variola model and to determine what elements of the “animal rule” constitute “enough” evidence for approval of a drug for the treatment of smallpox. The Advisory Committee’s recommendation confirmed that the monkeypox, rabbitpox and ectromelia models, especially in combination, could suitably provide appropriate evidence of efficacy for treatment of smallpox. Animal testing to date has proven ST-246 to be highly effective in all three of these models.
Product Candidates and Market Potential
Dengue Antiviral: Dengue fever, dengue hemorrhagic fever, and dengue shock syndrome are caused by one of four serotypes of dengue virus of the genus Flavivirus. Dengue is considered by the World Health Organization to be the most important arthropod-borne viral disease with an estimated 50-100 million people infected with the virus each year. There is currently no approved antiviral or vaccine for the treatment or prevention of dengue-mediated disease. We currently have two drug series in the pre-clinical development stage, each with activity against all four serotypes of virus. Compounds from these series have recently shown efficacy in a murine model of disease and are undergoing optimization through medicinal chemistry.
Anti-Arenavirus Drug: Arenaviruses are hemorrhagic fever viruses that have been classified as Category A agents by CDC due to the great risk that they pose to public health and national safety. The hemorrhagic fever arenaviruses (Lassa virus in Africa and Junin, Machupo, Guanarito and Sabia viruses in South America) have no available FDA-approved treatment. In order to combat this threat, our scientists have identified one lead drug candidate, which has demonstrated significant antiviral activity in cell culture assays against Lassa fever virus. Lassa fever is an acute viral illness prevalent in West Africa with an estimated 100,000 to 300,000 infections. We have demonstrated therapeutic efficacy of our lead candidate against Lassa fever in several animal challenge studies. We also have programs against other hemorrhagic fever viruses, including Rift Valley Fever, Lymphocytic choriomeningitis virus and Ebola. We believe that the availability of hemorrhagic fever virus antiviral drugs will address national and global security needs by acting as a significant deterrent and defense against the use of arenaviruses as weapons of bioterrorism or biowarfare.
Broad Spectrum Antiviral: We continue research and development efforts aimed at developing a comprehensive biodefense against those microbial agents most likely to be deployed as biological weapons. A broad-spectrum antiviral would have great