SIGA Technologies(SIGA) - 2021 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Condensed Consolidated Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for the period ended September 30, 2021, show a significant decrease in revenue and a shift from net income to net loss compared to the same period in 2020, primarily due to the timing of large government contract deliveries Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $92,819,425 | $117,890,240 | | Total current assets | $128,937,547 | $143,608,091 | | Total assets | $135,563,352 | $149,831,391 | | Liabilities & Equity | | | | Total current liabilities | $18,942,093 | $10,483,510 | | Total liabilities | $29,007,490 | $20,038,122 | | Total stockholders' equity | $106,555,862 | $129,793,269 | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Total revenues | $18,313,206 | $87,229,949 | | Operating (loss)/income | ($4,932,193) | $57,697,298 | | Net and comprehensive (loss)/income | ($3,756,262) | $36,180,584 | | Diluted (loss)/income per share | ($0.05) | $0.45 | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash (used in)/provided by operating activities | ($4,607,926) | $25,572,850 | | Net cash used in investing activities | ($24,424) | ($15,501) | | Net cash used in financing activities | ($20,438,465) | ($107,880,757) | | Net decrease in cash | ($25,070,815) | ($82,323,408) | Notes to Condensed Consolidated Financial Statements The notes detail the company's accounting policies, particularly revenue recognition for long-term contracts, and provide specifics on major procurement and research agreements - As of September 30, 2021, the aggregate amount of transaction price allocated to remaining performance obligations was $177.2 million, with $112.6 million expected to be recognized as product-related revenue within the next twelve months[19] - The 19C BARDA Contract, entered in 2018, contemplates up to approximately $602.5 million in payments for TPOXX®, including a base period of $51.7 million, $239.7 million in exercised options, and up to $311.1 million in unexercised options as of September 30, 2021[27] - On September 7, 2021, BARDA exercised an option under the 19C contract for the manufacture and delivery of approximately $112.6 million of oral TPOXX®[27] - International contracts include a deal with the Public Health Agency of Canada (PHAC) for up to ~$33 million of oral TPOXX® over five years, and a contract with the Canadian Department of National Defence (CDND) for up to ~$14 million over four years[33][34] - The company's Board of Directors authorized a share repurchase program of up to $50 million in March 2020, under which $48.8 million of shares have been repurchased as of September 30, 2021, with a new $50 million authorization approved in August 2021 effective through December 2023[79][80] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant year-over-year decline in revenue and profitability, attributing it to the timing of TPOXX® deliveries under the 19C BARDA contract, while highlighting ongoing government contracts, international expansion, and regulatory progress Overview and COVID-19 Pandemic SIGA is a commercial-stage pharmaceutical company with its lead product, TPOXX®, an FDA-approved antiviral for smallpox, and while the COVID-19 pandemic has caused some operational delays, it is not currently expected to have a material adverse effect on the company's financial condition or 2021 results - The COVID-19 pandemic has slowed the daily pace of execution of government contracts and new contract generation due to the diversion of government staff time[89] - The company's supply chain for TPOXX® has remained operational without material disruption, and sufficient raw materials are secured for current projects[89] - The pandemic is not currently expected to have a material adverse effect on the 2021 financial results, though it could continue to affect the timing of international contract awards[90] Lead Product-TPOXX® and Key Contracts The company's primary revenue driver is TPOXX®, supported by two major contracts with BARDA, with international sales growing and regulatory approval for TPOXX® in Europe and Canada expected by Q1 2022 - The company estimates that approximately one million courses of smallpox antiviral treatment need to be delivered to the U.S. Government between 2021 and 2023 to maintain stockpile levels[97] - International sales of oral TPOXX® are estimated to have a contribution margin of between 65% and 80% of product sales[104] - The company is seeking regulatory approval for oral TPOXX® in Europe and Canada, with review processes for both expected to be completed by the first quarter of 2022[108] - An NDA for an IV formulation of TPOXX® was filed with the FDA in April 2021, with a decision targeted for the first quarter of 2022[107] Results of Operations The company experienced a significant decrease in revenue and a shift to a net loss for both the three and nine months ended September 30, 2021, compared to the same periods in 2020, driven by a sharp drop in product sales due to the timing of large U.S. government deliveries Comparison of Results for the Three Months Ended September 30 | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Product Sales Revenue | $2.3M | $41.8M | -94.5% | | Total Revenues | $4.8M | $44.3M | -89.2% | | Operating (Loss)/Income | ($2.9M) | $32.9M | - | | Pre-tax (Loss)/Income | ($4.0M) | $31.6M | - | Comparison of Results for the Nine Months Ended September 30 | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Product Sales Revenue | $12.8M | $80.5M | -84.1% | | Total Revenues | $18.3M | $87.2M | -79.0% | | Operating (Loss)/Income | ($4.9M) | $57.7M | - | | Pre-tax (Loss)/Income | ($4.6M) | $47.3M | - | - The decrease in product sales revenue in 2021 is primarily due to the timing of deliveries under the 19C BARDA Contract, with significant deliveries occurring in 2020 and 2021 revenue stemming from smaller international sales to Canada (PHAC and CDND)[110][118] Liquidity and Capital Resources As of September 30, 2021, the company held $92.8 million in cash and cash equivalents, a decrease from $117.9 million at year-end 2020, primarily driven by common stock repurchases and operating activities - Cash and cash equivalents decreased to $92.8 million as of September 30, 2021, from $117.9 million at December 31, 2020[129] - For the nine months ended September 30, 2021, net cash used in operating activities was $4.6 million, while net cash used in financing activities was $20.4 million, almost entirely for stock repurchases[131][133] - The company had outstanding purchase commitments of approximately $4.9 million related to manufacturing obligations as of September 30, 2021[134] Quantitative and Qualitative Disclosures about Market Risk The company's market risk is primarily related to interest rate changes affecting its cash and cash equivalents and stock price fluctuations impacting the fair value of its liability-classified warrant - The company is subject to market risk from its liability-classified warrant, where 1.0 million shares can be purchased at $1.50 per share, and for every $1 increase in SIGA's stock price, the intrinsic value of this warrant liability increases by about $1.0 million[139] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2021, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[142] - No changes in internal control over financial reporting occurred during the quarter ended September 30, 2021, that materially affected, or are reasonably likely to materially affect, internal controls[143] PART II - OTHER INFORMATION Legal Proceedings The company may be involved in various claims and proceedings in the ordinary course of business, but management believes that the resolution of any current pending matters will not have a material adverse effect on the company's business or financial position - The company states that it does not expect any currently pending legal matters to have a material adverse effect on its business, financial position, or cash flow[145] Risk Factors There have been no material changes to the risk factors disclosed in the 2020 Annual Report on Form 10-K, except for an update regarding the COVID-19 pandemic, specifically the potential impact of President Biden's Executive Order on government contractors - A new risk factor has been identified related to the COVID-19 pandemic, specifically the U.S. President's Executive Order requiring mandatory employee vaccination for government contractors and subcontractors[147] - The company notes that these vaccination requirements could lead to employee attrition at its subcontractors, impacting the supply chain and research activities, which in turn could affect performance under government contracts and future profits[147] Unregistered Sales of Equity Securities and Use of Proceeds During the third quarter of 2021, the company repurchased 1,110,763 shares of its common stock for approximately $7.1 million under its March 2020 share repurchase program, and an additional $50 million program was authorized in August 2021 Issuer Purchases of Equity Securities (Q3 2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2021 | 399,366 | $6.06 | | August 2021 | 382,000 | $6.43 | | September 2021 | 329,397 | $6.86 | | Total | 1,110,763 | $6.42 | - On August 2, 2021, the Board authorized a new share repurchase program for up to $50 million of common stock through December 31, 2023[150] Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, a modification to the 19C BARDA contract, and certifications by the CEO and CFO as required by the Sarbanes-Oxley Act - Key exhibits filed include an amendment to the 19C BARDA Contract (Exhibit 10.1) and CEO/CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[156]