Tuesday, November 9, 2010
SIGA: Second Chances on the 'Small Business Dip?'
Like the recent dip in price for shares of Dendreon - which I consider to be temporary - SIGA's drop in price this week may have also offered up a nice buying opportunity, especially for those who might have mised out on the runup this year - including a near double on the day a big government contract was awarded to produce a small pox vaccine.
The reason for SIGA's dip in price earlier in the week was an announcement that the Small Business Administration had determined that SIGA is not a small business, a requirement called for by the small pox contract. This development could render SIGA ineligible for the contract, and that possibility is what likely convinced investors to bank profits while they could on Monday.
According to recent information, SIGA has 55 full time employees, still a 'small business' by common sense standards, but we all know how little common sense exists in Washington where decisions like this one are made. A chief rival of SIGA, Chimerix, played the sore loser after the contract was announceed and filed a protest leading to the announced decision.
I don't believe it's likely that the contract will be revoked - modified, maybe - and it's my opinion that if the general investing community felt like SIGA was due to lose the award then the price would have dropped to far lower prices than where the stock now trades. As I said previously, the drop-off is more indicative of profit taking on a situation of increased uncertainty than it was a full-blown sell-off.
It's also comical that some headlines read 'SIGA Shares Plummet' as a result of the news, because a 22% drop could hardly be considered a "plummet" in the speculative and volatile biotech sector.
Follow the developments, but I think this will end up being a temporary dip for SIGA as the need for a small box vaccine will not be diminished because feelings where hurt at Chimerix.
The contract is a big one, worth up to $2.8 billion, and the share price had barely reached its potential before this setback was announced. There's still a lot of upside left, especially if this thing drops back down to the ten dollar level.
Disclosure: No position.