SIGA Technologies Inc. is receiving about $12 million in government grants to support its newest biodefense research program.

The money, which will be paid over the next two years through two grants from the National Institutes of Health in Bethesda, Md., will fund the development of biowarfare defense assets recently acquired from ViroPharma Inc. SIGA plans to direct the grants toward the preclinical development of antivirals targeting smallpox and arenaviruses, a causative agent of viral hemorrhagic fevers, as well as drug discovery efforts against other hemorrhagic fever viruses such as Ebola.

From the ViroPharma transaction, SIGA received compounds, assays and other intellectual property related to the development of antiviral drugs targeting the smallpox virus and viral hemorrhagic fever viruses.

"We have been working on internal programs to develop anti-pox drugs for some time," SIGA's newly appointed CEO, Bernard Kasten, told BioWorld Today. "When the opportunity came along to acquire some very exciting leads that are far along, we jumped at that."

In exchange, New York-based SIGA paid $1 million in cash and issued 1 million of its common shares to ViroPharma. Given the stock's current price, the total consideration is worth about $2.5 million.

The assets sold to SIGA stem from research ViroPharma began in late 2002 to discover and advance potential antiviral product candidates that address Category A viruses - meaning they pose a threat due to their ease of transmission, high mortality rates and lack of vaccination. Present smallpox treatments cannot be administered to the general population without risk of adverse reactions, and no treatment for arenaviruses exists.

But Exton, Pa.-based ViroPharma decided earlier this year to discontinue its early stage research efforts, including development of molecules targeting viral bioterror threats, and instead focus solely on developing later-stage products. (See BioWorld Today, Jan. 21, 2004.)

Enter SIGA, which houses its research labs in Corvallis, Ore., near Oregon State University. Kasten said the grant funding would allow the company to double its staff at the facility to about 45 employees.

"It's a critical-mass event," he said. "And we think that has a snowball effect - if you put a bunch of bright people in a room, things kind of ferment. So I think we'll be moving the properties that we've acquired from ViroPharma along very quickly, and we'll benefit with enhanced talent applied to our own present internal projects."

The programs from ViroPharma include a lead smallpox antiviral compound ready to be filed with the FDA as an investigational new drug to permit human safety testing. Its efficacy would be tested in two animal models, as per standard bioterror testing protocols. Kasten added that the funding puts SIGA in a position to eventually qualify for another stage of awards called challenge grants.

The company had about $5.1 million in cash and cash equivalents as of June 30, at which time it also had about 23.4 million shares outstanding. SIGA posted a $2.5 million net loss in the preceding three-month period.

Its existing bioterror research programs include a fourth-generation smallpox vaccine that employs a technology that presents the viral antigen on the surface of commensal bacteria located in the mouth. Preclinical results reported in March showed that mice immunized both intranasally and orally with the live vector vaccine delivery system exhibited 100 percent immunity to the vaccinia virus challenge.

Earlier-stage compounds are being developed for arenaviruses, and another internal program is directed at a different smallpox target. As a whole, the company has had a long-standing focus on anti-infective products, and Kasten said it has received substantial government funding in the past.

"You'd like to say it's an overnight success," he added. "But it's an overnight success after 10 years of hard work by [chief scientific officer ] Dennis Hruby and our scientific staff."

On Wednesday, SIGA's stock (NASDAQ:SIGA) gained 15 cents, or 10.1 percent, to close at $1.63. ViroPharma's shares (NASDAQ:VPHM) tacked on 15 cents to close at $2.44.

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