SIGA - SIGA: Monkeypox We Are Out Of The Woods Downgrading To A Sell

Summary

• We are downgrading SIGA to a sell rating because of the continued decline in the number of monkeypox cases in the US and the lukewarm retail interest in monkeypox.
• The lack of a near-term catalyst further complicates the investment case around SIGA.
• Because monkeypox spreads primarily through close, prolonged contact, monkeypox is far less transmissible than COVID-19, and it is unlikely that we will encounter periodic spikes in new cases like COVID-19.
• Monkeypox trial is ongoing in the US, UK, and Democratic Republic of Congo (DRC), but likely won't move the needle.

U.S. Monkeypox cases have plummeted, we don't think it is likely the case numbers jump materially from here

We believe monkeypox is significantly less virulent and considering that transmission is mainly from direct contact with blood, unlike COVID-19 that can be transmitted with non-direct contacts, once the number of cases drops to a certain level, it is unlikely for it to spike again to a level that we have seen around August 2022.

SARS-CoV-2 is a respiratory virus - it spreads when an infected person breathes out small virus-laden droplets . If someone else inhales these droplets, or they land on their eyes, nose or mouth, the exposed individual can become infected. Because SARS-CoV-2 spreads efficiently through the air, it is particularly challenging to control-a single person has the potential to infect many others just by breathing. Moreover, people can spread COVID-19, even if they are asymptomatic.

While MPV can be transmitted through respiratory secretions, it is not a respiratory virus. Rather, it primarily spreads through direct (usually prolonged) contact with monkeypox rash, scabs or body fluids from someone who is infected. It can also be spread congenitally, or by touching objects and surfaces that have been used by someone with monkeypox. Activities like trying on clothing at a store , however, pose a low risk-an individual would need to have extended contact with clothing that had come into prolonged contact with monkeypox lesions or sores to increase their risk of infection. This is more likely when living with a person with a confirmed case of monkeypox, but less relevant to the usual clothes-on, clothes-off routine of the fitting room.

Though MPV is transmitted through sexual contact, scientists are still investigating whether the virus spreads specifically through sexual transmission routes (i.e., semen or vaginal fluids), as well as whether the virus can be transmitted prior to symptom onset. What is clear is that, because MPV spreads primarily through close, prolonged contact, monkeypox is far less transmissible than COVID-19.

Source: American Society of Microbiology

Public interest & retail interest around Monkeypox has plummeted, and so did SIGA's stock price

Furthermore, we highlight that the retail interest (which we believe correlates with Google searches) in monkeypox has dropped significantly since July, which overlaps with the trend in infection that we have seen with Monkeypox. Unless the number of cases spikes again to a level that we have seen in July, which we believe is unlikely considering how it is transmitted amongst individuals, we do not believe the momentum in the stock to come back.

A randomized, placebo-controlled trial is ongoing, but likely the positive results wouldn't move the needle

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