Thursday, October 14, 2010

Smallpox Sends SIGA Shares Soaring

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SIGA shared soared by 45% on Wednesday, when it was announced that Siga would in fact land the long anticipated government BARDA contract to supply the nation's stockpile with a smallpox vaccine.

According to the contract, Siga will deliver 1.7 million courses of its smallpox antiviral for the Strategic National Stockpile, although the finalization of the contract is pending resolution of issues relating to SIGA's status with the Small Business Administration.  Thes issues stem from a protest filed by a Siga competito,r Chimerix, who is suffering from a bout of whining from "I didn't get the bid" syndrome, and instead of just taking the ball and going home, the company is pulling a public tantrum.  This issue should be resolved fairly quickly, in my opinion and the general public probably feels the same, judging by the impressive price increase of SIGA on heavy trading.

The baseline contract, awarded by the U.S. Department of Health and Human Services (HHS), will net revenues of $500 million for Siga, but the contract could be worth as much as nearly $3 billion, if all options are exercised.  As has been stated here before, this contract is huge for the company, and Wednesday's price increase could be the start of much bigger things to come. 

The news took a lot longer to hit the wires than many expected, but we all know how slow the government is to make things happen, so all the days should not have been a surprise.  The demonstration of patience by serious investors through thick and this - especially for those with the moxy to buy when the stock went sub-$5 on a bear raid a while back - has finally paid off.

As always, I'm a fan of taking a little bit off the table during any price spikes and using that free cash to celebrate a nice trade, and give a little bit to those that may need it.  With unemployment high and taxes on the increase - which leaves less cash leftover for charitable giving - let's remember those that may not be so lucky as us.

Congrats, SIGA shareholders, and enjoy.

Disclosure:  Long SIGA options.

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