Is SIGA Still Worth the Wait?

May.19.10 | About: SIGA Technologies (SIGA)

Shares of SIGA Technologies have approached the eight dollar level of late, rebounding nicely from the low of under five dollars about six months ago. The SIGA stock reached a high of over ten bucks last December in anticipation of a possible awarding of a BARDA contract for the ST-246 smallpox vaccine. The contract did not pan out at the time, although some modifications to the application process in the interest of creating competition were announced around that time.

A $2.8 million contract was awarded to Siga by the Department of Defense in early March, although this one was for ST-669, a broad-spectrum anti-viral.

That's nothing in comparison to the big BARDA contract that investors of the company are waiting for, but it does have the potential to rake in up to ten million dollars for SIGA when it's all said and done.

It has been a long wait for the BARDA deal to be awarded, and there is always the possibility that the Obama government does not want to spend that kind of money on a biodefense contract during this time of massive deficit spending, but the threat of a bioterror attack cannot be ignored - especially in light of the recent Times Square incident.

SIGA CEO Dr. Eric Rose recently addressed Congress on such a note, as Congress is looking to slash funds that would be used towards the development of biodefense programs by pharmaceutical and biotech companies.

The hesitance by the government to approve money for biodefense in this day and age is contrary to logical thinking, in my opinion, since a bioterror attack - if effective countermeasures and reserves are not already in place - could cripple the very health care system that Washington is trying to 'save'.

Regarding the award of the BARDA contract, it seems like money is the issue right now, but if the contract is announced, and SIGA is in fact the recipient of the award, then the stock price will be trading for significantly higher prices, in my opinion.

The trading range of between under six dollars and nearly eight has allowed investors to trade in and out with both stocks and options over the past few months (I like to be on 'house money' by the time any news hits), but I'm playing mainly an options game with this one.

As always, there is no sure thing in the stock market, and it may be that this BARDA contract never materializes; but the potential rewards still outweigh the risks, in my opinion - even as our government is more concerned with pork-barreling bees wax studies in ho-dunk hillbilly land than it is with concentrating on biodefense measures.

Even without BARDA, SIGA is still worth a look as a longer term investment, and according to the most recent quarterly report, the company has enough cash on hand to conduct operations for at least the next twelve months.

As a long term investment, I like a 'buy the dips' approach and as a 'BARDA play', I like the late in the year options.

I'm also a fan of protecting your investment and taking some profits off the table when the time arises, so anyone hanging on to sub five dollar shares right now may want to take a bit of profit off the table and take that significant other to dinner, or on vacation.

All just my opinion, each investor should do his or her own DD and invest accordingly.

Disclosure: Long SIGA.