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Homeland Security Play May Rise on Bio-terror Defense
Breakthroughs
By Michael
Brush
January 05, 2005
Tiny homeland defense play and biotech company SIGA Technologies (SIGA) is
so small, it’s surely off the radar screens of most investors. It has a
market cap of just $40 million. But recently, top managers have been
snapping up shares for $1.44 to $1.68 – around current levels.
That suggests something might be astir that will put this stock on the radar
screen and spark broader market interest down the road, driving up shares
for anyone who buys now.
SIGA is working on ways to combat bio-warfare pathogens like smallpox,
anthrax, the plague, and hemorrhagic fevers like Ebola virus and dengue. The
company – which takes its name from a symbol in biology used to identify an
antibody – also thinks it may find a way to fight the frightening antibiotic
resistant bacteria that pop up in hospitals and public gymnasiums these
days.
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SIGA has three things going for it.
1. The company has dozens of patents that may lead to
breakthroughs. And the areas where it works are considered too small for the
big pharmaceutical companies to touch.
2. Since big pharma isn’t playing a big role, the U.S.
government – through the National Institutes of Health and the Department of
Defense – is offering plenty of money to fund small companies like SIGA
working on breakthroughs against bio-terrorism. The U.S. government’s
Project Bioshield has earmarked billions of dollars for this kind of work.
3. The U.S. Food and Drug Administration has streamlined
approval for biological warfare defense products. Drug companies like SIGA
only have to show that their products work – and are safe -- in animals.
That shortens drug approval to as little as two years.
Will SIGA get something to market in that amount of time?
Who knows, but the pressure is on for breakthroughs. U.S. intelligence
experts believe smallpox supplies from the former Soviet Union have slipped
into the wrong hands. Smallpox is highly infectious. So bio-terrorists
wouldn’t need a sophisticated delivery system to strike. All it would take
is a bio-terrorist willing to self-infect with smallpox, and then walk
around in public for the two weeks during which the disease doesn’t show any
symptoms -- but spreads rapidly.
SIGA recently demonstrated one of its compounds works against a form of
mousepox virus in mice, without side effects. The next step is to prove the
same in primates.
Typically, the shares of small biotech companies advance at each step along
the way towards final approval. So shareholders won’t have to wait two years
to see gains, assuming progress in the meantime.
Does all this make SIGA a buy right now? On the one hand, these insider
purchases are not enormous, and it’s fairly typical for new top managers to
buy shares as a show of strength. A purchase of $77,000 doesn’t represent a
fortune for former Quest Diagnostics (DGX) manager, doctor and pathologist
Bernard Kasten, who joined SIGA as its chief executive in August 2004. He
plunked down that amount to buy SIGA shares at $1.44 in mid-November.
Another Quest veteran named John Odden, who now heads up business
development at SIGA, bought $65,000 worth of stock in November and late
December for up to $1.68.
But $140,000 isn’t pocket change either, for these two nouveaux
entrepreneurs. And they probably loaded up on options when they joined the
company, so they didn’t really need to buy more shares to show their
interests are aligned with those of shareholders.
What’s more, SIGA is clearly in a hot space. Even without breakthroughs,
SIGA shares could take off at any moment on credible threats or news of a
bio-terror attack. So it can serve as a piece of the insurance in your
portfolio against market declines caused by bio-terror attacks. My take:
I’ll buy some shares in the $1.50 to $1.60 range and then wait for insiders
to make bigger purchases – or progress with the testing in primates --
before picking up more.
Disclaimer
At the time of publication, Michael Brush
did not own or control shares in any of the companies listed in this column.
Mr. Brush is an independent correspondent for this web site.
For more on Insiders Corner disclosure, see About Insiders Corner:
http://www.investorideas.com/insiderscorner/. InvestorIdeas.com
Disclaimer:
www.InvestorIdeas.com/About/Disclaimer.asp. InvestorIdeas is not
affiliated or compensated by the companies mentioned in this article.
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