SIGA Technologies(SIGA) - 2021 Q4 - Annual Report

PART I Business SIGA Technologies is a commercial-stage pharmaceutical company whose lead product, TPOXX®, is an FDA-approved oral antiviral for smallpox, with revenue primarily from U.S. government contracts and expanding international sales Lead Product-TPOXX® TPOXX®, an FDA-approved oral antiviral for smallpox, has secured international approvals and an IV formulation is currently under FDA review - Oral TPOXX® was FDA-approved on July 13, 2018, for smallpox treatment, with U.S. sales restricted to the Strategic National Stockpile[17] - International approvals for TPOXX® include Health Canada (December 2021) and the European Medicines Agency (January 2022), covering smallpox, monkeypox, cowpox, and vaccinia complications[18][19] - An NDA for an intravenous (IV) TPOXX® formulation was filed with the FDA in April 2021, with a decision anticipated in the first half of 2022[21] Procurement Contracts with the U.S. Government U.S. Government contracts, particularly the 19C BARDA Contract with $311.1 million in unexercised options, are SIGA's primary revenue source 19C BARDA Contract Status (as of Dec 31, 2021) | Category | Value (approx.) | | :--- | :--- | | Total Potential Value | $602.5 million | | Base Period | $51.7 million | | Exercised Options | $239.7 million | | Unexercised Options | $311.1 million | - In 2021, $112.5 million of oral TPOXX® was delivered to the Strategic Stockpile under the 19C BARDA contract[25] - The 1C BARDA Contract (2011) is largely fulfilled, with $505.7 million of its $508.4 million total value received as of December 31, 2021[31] International Procurement Contracts SIGA is expanding internationally via Meridian Medical Technologies, securing contracts with Canadian agencies for up to $47 million in oral TPOXX® sales with a 65-80% contribution margin - A contract with the Public Health Agency of Canada (PHAC) is for up to $33 million of oral TPOXX® over five years, with $10 million delivered by year-end 2021[34] - A contract with the Canadian Department of National Defence (CDND) is for up to $14 million over four years, with $4 million in cumulative purchases by year-end 2021[35] - International sales are managed through an exclusive promotion agreement with Meridian Medical Technologies, with an estimated contribution margin between 65% and 80%[36][37] Manufacturing SIGA employs a fabless manufacturing model, relying on third-party Contract Manufacturing Organizations (CMOs) for all TPOXX® production, including both oral and IV formulations - SIGA utilizes third-party Contract Manufacturing Organizations (CMOs) for all TPOXX® production, lacking its own manufacturing infrastructure[42] - Key CMOs for oral TPOXX® include W.R. Grace (API), Powdersize, Catalent, and PCI[43] - Key CMOs for the IV formulation of TPOXX® include Roquette, Patheon, and PCI[48] Intellectual Property and Proprietary Rights SIGA's TPOXX® patent portfolio, comprising 28 U.S. and 97 foreign patents, is crucial for commercial success, with key U.S. patents expiring between 2024 and 2034 - As of January 10, 2022, the TPOXX® patent portfolio includes 28 U.S. utility patents, 97 issued foreign patents, and 26 pending applications globally[68][80] Key U.S. Patents for TPOXX® | Patent Number | Protection Conferred | Expiration Date | | :--- | :--- | :--- | | US 8124643 | Composition of matter for the ST-246 compound | June 18, 2024 | | US 7687641 | Method of manufacturing ST-246 | September 27, 2024 | | US 7737168 | Method of treating orthopoxvirus infection | May 3, 2027 | | US 9233097 | Liquid Pharmaceutical formulations | August 2, 2031 | | US 9670158 | Amorphous Tecovirimat preparation | July 11, 2034 | - Patent Term Extension Applications are pending for two key patents, potentially extending their expiration dates to 2031 and 2027 respectively[77] Risk Factors The company faces significant risks including heavy dependence on U.S. government contracts, regulatory approval challenges, reliance on third-party manufacturers, and intellectual property protection - A substantial percentage of potential revenue from the 19C BARDA Contract is tied to unexercised options, which BARDA may or may not exercise at its sole discretion[101][104] - Reliance on third-party manufacturers (CMOs) for TPOXX® production poses a significant risk, as their failure to perform could impair contractual obligations[140] - Failure to obtain regulatory approvals for additional TPOXX® formulations or indications could limit commercialization and future revenue[117] - International revenue heavily depends on the success of the promotion agreement with Meridian Medical Technologies, which may not be successful[128] - The COVID-19 pandemic poses risks of supply chain disruption, R&D delays, and diversion of government attention and funding[169][170] Unresolved Staff Comments The company reports no unresolved staff comments - None[184] Properties The company leases corporate headquarters in New York, NY, and research and development facilities in Corvallis, Oregon - Corporate headquarters are leased in New York, NY (3,200 sq. ft.)[185] - Research and development facilities are leased in Corvallis, Oregon (10,276 sq. ft.), with the lease expiring in December 2024[186] Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business or financial condition - The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business, financial position, or cash flow[188] Mine Safety Disclosures This item is not applicable to the company - Not applicable[189] PART II Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities SIGA's common stock trades on Nasdaq, with an active $50 million share repurchase program authorized through December 2023, under which 762,993 shares were repurchased in Q4 2021 - The company's common stock trades on The Nasdaq Global Market under the symbol 'SIGA'[191] - A share repurchase program for up to $50 million was authorized in August 2021, extending through December 31, 2023[193] Issuer Purchases of Equity Securities (Q4 2021) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Dollar Value Remaining Under Program | | :--- | :--- | :--- | :--- | | Oct 2021 | 286,059 | $7.26 | $49,156,221 | | Nov 2021 | 199,697 | $7.73 | $47,612,331 | | Dec 2021 | 277,237 | $7.71 | $45,475,535 | | Total Q4 | 762,993 | $7.55 | $45,475,535 | Management's Discussion and Analysis of Financial Condition and Results of Operations In 2021, total revenue increased to $133.7 million and net income grew to $69.5 million, driven by TPOXX® deliveries, maintaining a strong financial position with $103.1 million in cash and no debt Results of Operations In 2021, total revenues increased to $133.7 million and net income rose to $69.5 million, or $0.91 per diluted share, driven by international product sales Financial Performance Comparison (Years ended Dec 31) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Total Revenues | $133.7 million | $125.0 million | | Product Sales Revenue | $126.8 million | $115.5 million | | R&D Revenue | $6.9 million | $9.5 million | | Total Operating Expenses | $44.6 million | $40.5 million | | Cost of Sales | $16.6 million | $14.8 million | | SG&A | $17.3 million | $14.0 million | | R&D Expenses | $9.9 million | $10.9 million | | Net Income | $69.5 million | $56.3 million | | Diluted EPS | $0.91 | $0.71 | - 2021 product sales revenue comprised $112.5 million from the U.S. Government and $12.7 million from international sales[239] - The increase in Selling, General and Administrative (SG&A) expenses to $17.3 million was primarily driven by promotion fees for international sales[242] Liquidity and Capital Resources As of December 31, 2021, cash and cash equivalents were $103.1 million, a decrease primarily due to $26.2 million in share repurchases, with $11.5 million net cash from operations and no outstanding debt Cash and Liquidity (as of Dec 31) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Cash and Cash Equivalents | $103.1 million | $117.9 million | | Accounts Receivable | $83.7 million | $3.3 million | | Restricted Cash | $0 | $0 | - Net cash provided by operations was $11.5 million in 2021, compared to $71.5 million in 2020[253] - Cash used in financing activities totaled $26.2 million in 2021, primarily for the repurchase of 3.8 million shares of common stock[257] - The company had outstanding purchase commitments of approximately $20.1 million related to manufacturing obligations as of December 31, 2021[258] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks stem from interest rate changes affecting cash and stock price fluctuations impacting its liability-classified warrant, with a $1 stock price increase raising warrant value by $1.0 million - The company's interest income is sensitive to changes in U.S. interest rates[260] - The company faces market risk from common stock price fluctuations due to a liability-classified warrant, where a $1 stock price increase raises the warrant's intrinsic value by approximately $1.0 million[260] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for 2021, including balance sheets, statements of operations, changes in equity, cash flows, and accompanying notes Consolidated Balance Sheets As of December 31, 2021, total assets increased to $214.7 million, total liabilities to $40.4 million, and total stockholders' equity to $174.3 million Consolidated Balance Sheet Highlights (as of Dec 31) | Account | 2021 | 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $103.1 million | $117.9 million | | Accounts receivable | $83.7 million | $3.3 million | | Inventory | $19.5 million | $20.3 million | | Total Assets | $214.7 million | $149.8 million | | Total current liabilities | $30.5 million | $10.5 million | | Warrant liability | $6.5 million | $6.6 million | | Total Liabilities | $40.4 million | $20.0 million | | Total Stockholders' Equity | $174.3 million | $129.8 million | Consolidated Statements of Operations For 2021, total revenues were $133.7 million and net income was $69.5 million, resulting in diluted EPS of $0.91 Consolidated Statement of Operations Highlights (Year ended Dec 31) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Total Revenues | $133,670,454 | $124,959,304 | | Operating Income | $89,092,799 | $84,500,630 | | Income Before Taxes | $89,311,741 | $73,508,591 | | Net Income | $69,450,766 | $56,342,010 | | Diluted EPS | $0.91 | $0.71 | Notes to Consolidated Financial Statements The notes detail accounting policies and financial activities, including revenue recognition, inventory, debt, warrant liability, stock compensation, and income taxes - Revenue Recognition (Note 3): Product delivery revenue is recognized at a point in time, while R&D services revenue is recognized over time; in 2021, $112.5 million from 19C BARDA and $12.7 million from international contracts were recognized[339][350] - Debt (Note 7): The company fully prepaid its Term Loan in March 2020 for approximately $87.2 million, resulting in no outstanding debt as of December 31, 2021[357] - Financial Instruments (Note 9): A 2016 warrant is classified as a liability and re-measured to fair value, representing approximately 1.0 million shares at a $1.50 exercise price with a $6.5 million fair value as of December 31, 2021[366][369] - Stockholders' Equity (Note 10): The company completed a $50 million share repurchase program from March 2020 and authorized a new $50 million program in August 2021, repurchasing $4.5 million of stock in 2021[372][373] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021, with no material changes in Q4 2021 - Management concluded that disclosure controls and procedures were effective as of December 31, 2021[401] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2021[405] - There were no material changes to internal controls over financial reporting in the quarter ended December 31, 2021[402] PART III Directors, Executive Officers, and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the company's 2022 Proxy Statement - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the Company's 2022 Annual Meeting of Stockholders Proxy Statement[411][412][413] Executive Compensation Information on executive compensation is incorporated by reference from the company's 2022 Proxy Statement - Information regarding executive compensation is incorporated by reference from the Company's 2022 Proxy Statement[414] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership information is incorporated by reference from the 2022 Proxy Statement, with 4,318,050 securities available for future issuance under equity compensation plans as of December 31, 2021 - Information regarding security ownership is incorporated by reference from the Company's 2022 Proxy Statement[415] Equity Compensation Plan Information (as of Dec 31, 2021) | Plan Category | Securities to be Issued Upon Exercise | Weighted-average Exercise Price | Securities Available for Future Issuance | | :--- | :--- | :--- | :--- | | Approved by security holders | 479,333 | $6.62 | 4,318,050 | | Not approved by security holders | — | — | — | | Total | 479,333 | $6.62 | 4,318,050 | Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the company's 2022 Proxy Statement - Information regarding related party transactions and director independence is incorporated by reference from the Company's 2022 Proxy Statement[418] Principal Accounting Fees and Services Information detailing fees billed by the principal accountant is incorporated by reference from the company's 2022 Proxy Statement - Information regarding principal accounting fees and services is incorporated by reference from the Company's 2022 Proxy Statement[419] PART IV Exhibits, Financial Statement Schedules This section lists financial statements from Item 8 and provides a comprehensive list of all exhibits filed with the Form 10-K, including material contracts and certifications - This section provides a list of all exhibits filed with the Form 10-K, including material contracts and required certifications[422] Form 10-K Summary The company has not provided a summary for its Form 10-K - None[431]