SIGA Technologies Inc (SIGA-Outperform): PharmAthene Merges with Theraclone, We Expect Due to Possibility of Re duced Damages from Siga Lawsuit, Reiterate Outperform
Price: $3.23 Price Target: $11.00
PharmAthene announced that it will merge with Theraclone, a private company in a reverse merger transaction. It is an all-stock transaction, with shareholders of each company owning 50% of the new merged entity.
Given the timing of the transaction well before a likely lowering of the damage amount previously awarded by the Delaware Chancery Court indicates to us that PharmAthene is likely admitting limited economic benefit to their shareholders from the Chancery Court.
Next steps in the continuing litigation remain unclear, however we note that in our opinion, time and the law are on the side of SIGA.
Reiterate our OUTPERFORM rating and price target of $11/share. We derive our $11/share price target by determining cash in 12months, and the NPV of the current contract, the potential FDA approval milestone, and the anticipated recurring revenue stream to maintain the SNS at 1.7 million courses of therapy, plus the change in value we would anticipate should SIGA win a second contract to increase the SNS to 8 million courses (reduced by 50% for the risk associated with HHS letting, and SIGA winning this potential contract).