* Says Dept of Health & Human Services to give contract
* Contract to supply 1.7 mln courses of smallpox drug
* Contract pending small business protest by rival bidder
* Shares close up 46 pct
(Rewrites; updates with closing share price)
By Shravya Jain
BANGALORE, Oct 13 The United States is spending
up to $2.8 billion to shore up its defenses against biological
warfare, according to a drugmaker who expects to get a
government contract to supply smallpox antiviral drugs.
SIGA Technologies Inc SIGA.O shares jumped 50 percent to
their lifetime high on Wednesday after the company said it
expects to get a contract to supply 1.7 million courses of its
smallpox drug for the strategic national stockpile, with the
base contract worth about $500 million in revenue.
The contract value can go up to $2.8 billion if all options
are exercised, the company said.
"The price of the contract is much better than what we were
expecting," said National Securities' analyst Jason Kolbert.
The company, which develops products for use in defense
against biological warfare agents, had annual revenue of $13.8
million for 2009.
SIGA's Chief Financial Officer Ayelet Dugary declined to
reveal the term of the contract from the U.S. Department of
Health and Human Services.
However, Noble Financial Capital Markets analyst Raghuram
Selvaraju said the contract is for an initial term of five
years, where the first portion of 1.7 million doses should be
for a year and a half.
Selvaraju said he expected the contract to be awarded to
SIGA because ST-246 is the only drug that has gone through
late-stage safety testing review for smallpox -- a potential
The drug works by blocking the ability of the virus to
spread to other cells. It also has a fast-track status by the
U.S. health regulators, according to SIGA website.
The contract is subject to pending resolution of certain
issues as a rival bidder Chimerix Inc has filed a protest
against SIGA that it was not a small business, the company said
in a statement.
SIGA said it was "appropriately qualified" as a small
business concern for the deal.
The company said it intends to respond promptly to the
Small Business Administration concerning Chimerix's protest.
"We see this just as a competitor's delay tactic and not as
a fundamental issue," Kolbert said, adding that he does not
expect to see revenue benefit from the contract until the first
half of 2011.
Furthermore, analysts are also looking at the company's
on-going litigation with PharmAthene PIP.A on a tussle over
the exclusive development and marketing rights to the smallpox
In December 2006, PharmAthene had filed a case against SIGA
pursuant to a merger agreement between the companies that was
terminated in October 2006. The trial is expected to start on
Jan. 3, 2011.
Selvaraju expects the court case with PharmAthene to be
ruled in the latter's favour with PharmAthene getting a
percentage of SIGA's contract with the government.
Roth Capital Partners analyst Joseph Pantginis said the
contract has positive implications to PharmAthene that can now
identify the exact measure of potential damages.
New York-based SIGA's shares, which have gained 25 percent
since it completed successful human safety trial on the drug in
June, closed up $3.91 at $12.47 on Wednesday.
The stock touched a high of $12.85 earlier in the day and
was one of the top percentage gainers on Nasdaq.
PharmAthene shares closed up 16 percent at $1.67 on the
American Stock Exchange. They touched a high of $1.81 earlier
in the day.
(Additional reporting by Esha Dey; Editing by Gopakumar
Warrier, Unnikrishnan Nair)