SIGA Trial Verdict Pending, Could Send Shares Higher

A long awaited trial verdict for SIGA Technologies

is poised to be revealed in the coming weeks, as investors are eager to see whether the company will hold on to exclusive rights for its lead drug, ST-246. ST-246 is the world's first treatment for smallpox, a potential bioterrism threat. While the disease has been eradicated from human populations for several decades, small strands remain available in various government labs around the world for scientific purposes. ST-246 has drawn interest from BARDA, a U.S. agency within the Department of Health and Human Services responsible for the development and purchase of necessary drugs and therapies for public health medical emergencies. In January 2006, SIGA Technologies collaborated with PharmAthene

on an agreement that could have potentially merged the companies together. SIGA received a $3 million bridge loan from PIP to use for the development of ST-246. The two companies established a License Agreement Term Sheet, with the objective "to establish a partnership to further develop and commercialize SIGA-246 for the treatment of smallpox related infections and to develop other virus therapeutics". The LATS also covered patents, license, fees, and royalties. However, neither company officially signed the agreement. Each page also contained a footer that stated that the terms were non binding. The primary issue of this trial is whether the LATS constituted an agreement to merge the two companies, or provide PIP with partial rights to ST-246. SIGA was awarded a $433 million contract to supply BARDA with 1.7 million of smallpox antiviral courses. As the two companies never came to a final merger agreement, PIP sued SIGA for royalties. Both sides have a very different perspective on what happened during those 2006 negotiations. PIP believes that the two sides had an oral agreement in place, and the LATS constituted an "agreement to agree or pursue a merger or license to ST-246". SIGA counters that the LATS contained a non-binding agreement, and that both companies had engaged in good faith discussions to merge. The presiding Judge Parsons has stated that he expects a verdict for the trial to occur 6 months after the trial closed. As closing arguments were made in late January, the anticipated verdict could occur any day now. SIGA shareholders hope for a verdict that only requires the company to pay a small amount of damages to cover PIP's legal fees, while an adverse judgment could see the company forfeiting royalties or even the complete license to ST-246 to PIP. Shares of SIGA have fallen dramatically since the BARDA contract award, as investors do not see any catalysts to propel the stock higher in the near term. However, ST-246 has a 3-year shelf life and supplies will need to be replenished. The drug has also generated interest from Israel, and SIGA may have an opportunity to draw additional revenue from international sales. If a favorable verdict comes down, as well as international orders, SIGA's share price may again see the low teens that it saw when the BARDA contract was still pending.