SIGA TECHNOLOGIES INC quarterly report, Q2 FY2022

SIGA Technologies, Inc. — Q2 2022 Form 10-Q

Reporting period: Quarter and six months ended June 30, 2022. SIGA is a commercial-stage pharmaceutical company whose lead product is TPOXX (tecovirimat), an antiviral approved in the U.S. for smallpox; FDA approval of the intravenous formulation was announced in May 2022.

Financial performance and position

Metric	Q2 2022	Q2 2021	Six months 2022	Six months 2021
Total revenue	$16.7 million	$8.7 million	$27.2 million	$13.5 million
Operating income (loss)	$3.1 million	$0.001 million	$1.6 million	$(2.0) million
Net income (loss)	$2.0 million	$0.2 million	$1.7 million	$(0.6) million
Basic EPS	$0.03	$0.00	$0.02	$(0.01)

Q2 revenue comprised $8.6 million of product sales and supportive services and $8.1 million of R&D revenue. Six-month amounts were $15.9 million and $11.3 million, respectively.
Q2 operating expenses were $13.6 million, including $6.8 million of R&D expense and $5.9 million of SG&A. For the six months, operating expenses were $25.6 million.
Six-month operating cash flow was $54.5 million, versus cash used of $6.2 million in the prior-year period. The 2022 inflow was primarily associated with approximately $80 million collected for product delivered to the U.S. Strategic National Stockpile in December 2021, partly offset by approximately $19 million of federal income tax payments.
Cash and cash equivalents were $114.5 million at June 30, 2022, compared with $103.1 million at December 31, 2021. Current assets were $153.6 million and current liabilities $16.7 million. No debt balance is reported on the balance sheet; other liabilities include lease obligations.
Six-month financing cash outflow was $43.1 million, including the $32.9 million special dividend ($0.45 per share) and $10.1 million of share repurchases. The company repurchased approximately 1.5 million shares during the six months.

Changes versus the prior comparable period

Revenue more than doubled year over year for both the quarter and six-month period, with increased U.S. product and R&D revenue. The six-month product-sales increase included approximately $7.2 million of IV TPOXX deliveries, $3.6 million of oral TPOXX sales to the DoD, and $5.0 million of international sales.
R&D revenue growth principally reflected increased clinical-trial activity under the DoD-funded PEP Label Expansion program. R&D expense also rose as related vendor costs increased.
Six-month cost of sales rose to $5.6 million from $1.2 million, principally due to IV TPOXX manufacturing and its higher per-unit cost compared with oral product. SG&A was broadly unchanged for the six-month comparison.
The company moved from a six-month net loss to net income. A fair-value gain on the warrant liability was $0.4 million in the 2022 six-month period, down from $1.4 million in 2021; the warrant was fully exercised in Q2 and no warrant liability remained at June 30.

Outlook, commentary, risks and unusual items

During the 2022 monkeypox outbreak, SIGA reported increased inquiries and procurement orders. By July 31, it had received firm international orders from ten jurisdictions totaling approximately $60 million; approximately $5 million had been delivered in Q2, about $26 million was expected in Q3, and the remainder was expected to be delivered from October 2022 through July 2023. These are management’s stated expectations, not guaranteed future revenue.
After quarter-end, PHAC delivered $16 million of oral TPOXX in July; approximately $19 million of firm orders remained under the amended PHAC contract as of July 31. The DoD contract’s approximately $3.8 million additional purchase option and approximately $6 million of CDND options are discretionary and not firm orders.
The 19C BARDA contract contemplates up to approximately $602.5 million in payments, including $311.1 million of unexercised options. BARDA alone decides whether to exercise those options. The company also estimates approximately $940,000 courses of smallpox antiviral treatment may need delivery to the U.S. stockpile from 2022 through 2024 to maintain unexpired inventory.
Remaining performance obligations across active contracts were $64.8 million at June 30, expected to be recognized within three years. This amount excludes unexercised options. The DoD PEP R&D contract had up to $15.4 million of revenue remaining to recognize.
Manufacturing purchase commitments were approximately $21.7 million at June 30. Government contracts may be terminated or restructured, and options may not be exercised. Supply-chain disruption, regulatory requirements, clinical-trial outcomes, international market development and the timing of government procurement are among the disclosed risks.
Management said COVID-19 had not adversely affected liquidity, but could delay contract activity, manufacturing or R&D. The filing provides no specific full-year revenue or earnings guidance. Management reported effective disclosure controls and no material change in risk factors from the 2021 Form 10-K.
The filing states that ordinary-course legal matters are not expected to have a material adverse effect; it also notes litigation may still entail costs and management distraction. No off-balance-sheet arrangements were reported.

Important facts for investors to verify

Actual delivery, acceptance and collection timing for the international orders, including post-quarter PHAC deliveries, and the revenue and margin recognized on them.
Whether BARDA or other government customers exercise discretionary procurement options, and how much of the $64.8 million remaining performance obligations converts to revenue and cash.
Manufacturing capacity, supply-chain execution and realized costs for IV TPOXX and oral TPOXX, including the $21.7 million purchase commitments.
The financial and regulatory implications of TPOXX use in the monkeypox response; the filing describes outbreak-related demand but does not establish FDA approval for monkeypox treatment.
Cash generation after the unusual collection of prior-year stockpile deliveries, and the effects of dividends, repurchases and future capital allocation on liquidity.