Healthy Development
Siga Technologies finds quick payoff from test of smallpox remedy
By BENNETT HALL
Gazette-Times business editor
Tuesday, October 24, 2006
Last modified Sunday, October 22, 2006 10:25 PM PDT
It’s been a long and bumpy road, but the finish line may be in sight for Siga Technologies in its journey toward profitability.
Like many — if not most — small drug-discovery companies, Siga has burned through millions of dollars and posted year after year of losses as it tried to bring a developmental treatment to market. After a successful animal trial announced last week, however, the company could be on the verge of scoring a major coup with the first effective treatment for smallpox.
“In the biodefense area, smallpox is the number one concern, and we would expect this is going to be our big product,” said Dennis Hruby, Siga’s chief scientific officer and a microbiology professor at Oregon State University.
Smallpox was eradicated in nature 30 years ago but is considered a potential terrorist threat, and no proven treatment for the deadly virus exists. The Defense Department and other federal agencies funded the latest test, conducted on monkeys at a secure Centers for Disease Control facility in Atlanta.
Siga claims its drug, a once-daily pill called Siga-246, showed “100 percent protection” against the smallpox virus, both before and after exposure. The drug previously passed a human safety trial.
Additional tests are needed before the company can request approval from the Food & Drug Administration, but the Defense Department is footing the bill with a $16.5 million grant.
The news of a successful test triggered a financial windfall for Siga, which employs 50 people at its Corvallis research labs.
On Wednesday, the day the test results were announced, the company’s stock price more than doubled, shooting up to $4.54 a share after languishing at around $1 for most of the last year.
On Thursday, the company completed a $9 million private stock placement with some of its longtime institutional investors. Five hedge funds — Iroquois Master Fund, Cranshire Capital, Omicron Master Trust, Rockmore Investment Master Fund and Smithfield Fiduciary — bought the issue, consisting of 2 million shares of common stock at $4.54 a share. They also received warrants for an additional 1 million shares exercisable at $4.99 a share.
“It gave us the opportunity to bring in some cash quickly at a nice price,” said chief financial officer and acting CEO Tom Konatich, who’s been with the biotech firm for eight years. “Our balance sheet right now is about as strong as it’s been during my tenure.”
The stock placement caps a resurgence for Siga, which had entered a merger agreement last spring with an East Coast biotech company and faced delisting from the Nasdaq exchange this summer as its market capitalization slipped.
Now, with its cash reserves recharged and a smallpox drug marching toward approval, the merger is off and Siga is on the rebound.
“Siga’s a significantly different company today than it was in February and March,” Konatich said by phone from the company’s New York headquarters Friday. “We will be lobbying and negotiating with various agencies of the federal government for a sale of the drug.”
Konatich declined to speculate on when a deal to supply the drug might be reached or what it might be worth to Siga. But he did say that various industry estimates make it clear that the potential market for smallpox treatments is a lucrative one.
“It’s in the hundreds of millions of dollars, if not more,” he said.
Other potential markets await overseas, particularly in Europe. Hruby has been invited to Geneva to make a presentation to the World Health Organization’s advisory council, which he hopes will help spread the word about Siga’s research.
Hruby said Siga-246 can treat monkeypox and related viral diseases, and the firm is also pursuing drug candidates for a range of other exotic viruses.
“There’s two things: There’s biodefense, and there’s emerging diseases,” Hruby said. “Hopefully, we’ll never need it for biodefense. But it’s nice to have a drug like this on the shelf.”
Bennett Hall is the business editor for the Gazette-Times. He can be reached at 758-9529 or bennett.hall@lee.net.
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