SIGA Technologies, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. SIGA is a commercial-stage pharmaceutical company whose principal product is TPOXX, supplied to U.S. and international government customers. The filing was signed November 7, 2023.
Financial results
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenue | $9.2 million | $72.2 million | $23.4 million | $99.4 million |
| Operating income (loss) | ($1.3) million | $42.9 million | ($8.1) million | $44.5 million |
| Net income (loss) | ($0.4) million | $33.0 million | ($4.2) million | $34.7 million |
| Diluted EPS | ($0.01) | $0.45 | ($0.06) | $0.47 |
| Operating cash flow | Not separately stated for quarter | Not separately stated for quarter | $15.8 million | $49.7 million |
- Nine-month product sales and supportive-services revenue was $14.9 million, down from $81.6 million; research and development revenue was $8.5 million, down from $17.9 million.
- At September 30, cash and cash equivalents were $71.1 million, versus $98.8 million at December 31, 2022. Current assets were $146.0 million and current liabilities $30.7 million. The filing reports no debt borrowings; operating lease liabilities totaled $1.6 million, including current and noncurrent amounts.
- Inventory was $65.0 million, up from $39.3 million at year-end, largely reflecting investment in inventory. Cost of sales included a $0.6 million loss from impairment of a manufacturing batch.
Changes, cash and capital allocation
- Revenue and earnings fell sharply from 2022, primarily because the prior-year period included substantial international TPOXX deliveries. International revenue for the first nine months declined to $9.1 million from $66.2 million.
- Lower sales reduced selling, general and administrative expense, mainly because of lower international promotion fees. Lower clinical-trial activity also reduced R&D revenue and expenses. Higher interest income partly offset weaker operating results.
- Operating cash flow declined to $15.8 million from $49.7 million. Cash use reflected inventory building and normal operating needs; cash inflows included collection of most year-end receivables and receipts related to IV bulk drug substance.
- Financing activities used $43.4 million, including a $32.1 million special dividend and approximately $11.0 million of share repurchases. SIGA repurchased about 1.7 million shares during the nine-month period; none were repurchased in Q3. About $21.5 million remained under the $50 million repurchase authorization, which expires December 31, 2023.
Outlook, contracts and risks
- Management stated that available liquidity should be sufficient to meet anticipated obligations for at least the next 12 months. Manufacturing purchase commitments were approximately $18.5 million.
- Remaining performance obligations totaled $189.1 million at September 30. Product-related obligations were expected to be recognized within 12 months, mostly in the next three months; R&D obligations could be recognized over as long as three years. This amount is not equivalent to guaranteed future revenue.
- The BARDA contract provides for up to approximately $602.5 million in payments: $407.1 million related to exercised options and up to $143.7 million of unexercised options, with exercise entirely at BARDA’s discretion. In October 2023, after quarter-end, SIGA delivered and received acceptance for approximately $55 million of oral TPOXX under the contract.
- Management reported approximately $9 million of international deliveries through October 31 and anticipated $18 million of firm commitment orders through the European Commission’s joint procurement mechanism. These were described as anticipated, not completed firm orders. Canada also had a discretionary option for up to $6 million through March 31, 2024.
- SIGA was targeting a 2024 supplemental NDA filing for a smallpox post-exposure prophylaxis indication, subject to trial results. Five randomized, placebo-controlled mpox trials were enrolling as of September 30; timing and viability of a potential mpox label-expansion submission remain uncertain.
- Key risks include government discretion to exercise options, modify or cancel contracts; delays or disruptions in manufacturing and supply; uncertain international demand; and clinical and regulatory outcomes. Government contracts may be terminated or restructured for convenience. The company reported no material change to previously disclosed risk factors and no material adverse effect expected from pending legal matters.
Investor verification priorities
- Confirm delivery, acceptance and revenue recognition for the approximately $55 million BARDA shipment reported after quarter-end, and check whether further orders or options were exercised.
- Distinguish binding orders from anticipated international procurement, discretionary government options and the $189.1 million of remaining performance obligations.
- Track inventory conversion into deliveries, including the elevated work-in-process balance and the impaired manufacturing batch.
- Review clinical-trial progress and evidence supporting the targeted 2024 smallpox PEP filing, as well as the uncertain potential mpox filing.
- Assess cash generation and capital allocation after the special dividend and buybacks, alongside the timing of manufacturing commitments and future government receipts.