2011: The Year This Biotech Was Told to Share

The United States is working hard to create massive stockpiles of antivirals to protect citizens in the case of biological warfare. If it sounds like a make-believe scene from Outbreak, take notice: Human Genome Sciences (Nasdaq: HGSI  ) and Emergent Biosolutions (NYSE: EBS  ) already provide anthrax vaccines to the government.

But today, we're going to focus on SIGA Technologies (Nasdaq: SIGA  ) , a company that focuses on a smallpox vaccine. The company's year can really be broken down into two acts, but the end result is the same: The stock is down more than 80% in 2011.

Act 1
SIGA was the big winner in February, as it seemed the government rewrote the rules to allow for SIGA to be the sole provider for the procurement of a smallpox vaccine. Things looked so good that some analysts even suggested that investors aggressively accumulate shares of SIGA.

Shares of the stock soared more than 30% in just one month's time as a result of the announcement.

SIGA Technologies Stock Chart

SIGA Technologies Stock Chart by YCharts

Act 2
But, alas, the rise was only temporary. Following the announcement about the government contract, things started to get hairy.

First, earnings in March came in well below analyst expectations. Then the Government Accountability Office began an investigation to see whether there was any impropriety in the contract to be awarded to SIGA.

But the real coup came in September, when a judge ruled that PharmAthene (AMEX: PIP  ) , a fellow biodefense company, had a right to a stake of profits from SIGA. SIGA earlier backed out of its agreement with regard to the smallpox virus when it realized what was on its hands, and the judge told SIGA it was essentially guilty of buyer's remorse.

The story since? It hasn't been pretty.

SIGA Technologies Stock Chart

SIGA Technologies Stock Chart by YCharts

In the end, the government contract could prove lucrative for shareholders buying in right now, but the company doesn't have the potential necessary to be named our Top Stock for 2012. To read about our top pick for 2012 -- a company that promises to be the Costco of Central and South America -- get your copy, absolutely free!

Fool contributor Brian Stoffel owns shares of Costco. You can follow him on Twitter, where he goes by @TMFStoffel. The Motley Fool owns shares of Costco. Motley Fool newsletter services have recommended buying shares of Costco and Emergent BioSolutions. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On December 30, 2011, at 1:16 AM, JohnDoe2b wrote:

    SIGA is 100% reliant on governments for revenue. They will probably churn through most of their cash before reporting any profits, particularly if they throw good money after bad appealing the PIP lawsuit. The bottom line is that this company has no experience at making profits, and possibly never will. It is a straight gamble, not an "investment".

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