SIGA Technologies, Inc. — FY 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015; filed March 4, 2016. SIGA develops biodefense treatments. Its lead product, investigational antiviral Tecovirimat (ST-246), is being delivered to the U.S. Strategic National Stockpile under a BARDA contract. The product was not FDA-approved as of the filing.
Financial performance and liquidity
| Metric | FY 2015 | FY 2014 |
|---|---|---|
| Revenue | $8.2 million | $3.1 million |
| Operating loss | $31.0 million | $209.7 million |
| Net loss | $39.5 million | $265.5 million |
| Operating cash flow | $11.1 million | $14.2 million |
| Cash and cash equivalents at year-end | $112.7 million | $99.7 million |
- Revenue rose 160%, primarily due to increased Tecovirimat development work and dengue grant activity. Revenue recognized was principally for government-funded research and development; product-delivery receipts are largely deferred under the BARDA contract because replacement obligations remain.
- FY 2015 net loss included $14.4 million of additional PharmAthene litigation accrual and $7.8 million of Chapter 11 reorganization expense. FY 2014 included a much larger litigation accrual ($188.5 million) and a $53.5 million non-cash tax charge to establish a valuation allowance.
- Operating cash flow remained positive, but included significant contract-related cash and deferred-revenue effects; it should not be read as recurring earnings. SIGA received approximately $50.9 million from BARDA for product deliveries in 2015.
- Year-end total assets were $185.7 million, total liabilities $470.2 million, and stockholders’ deficit $284.4 million. Deferred revenue was $255.3 million, with $52.9 million of related deferred costs. No debt remained after repayment of the GE term loan in January 2015. The filing does not provide a meaningful product gross margin.
- Operating lease and purchase obligations totaled $39.2 million, excluding the approximately $205 million PharmAthene obligation.
Material changes and developments
- Revenue increased from $3.1 million in 2014 to $8.2 million in 2015; R&D expense rose 22.6% to $13.1 million, while SG&A fell 15.5% to $10.6 million.
- On December 23, 2015, the Delaware Supreme Court affirmed the PharmAthene judgment. SIGA accrued approximately $205 million, including interest and fees. The judgment is stayed from enforcement while the Chapter 11 case proceeds.
- SIGA’s shares were delisted from Nasdaq in March 2015 and began trading over the counter as SIGAQ.
- In April 2015, the bankruptcy court authorized assumption of the amended BARDA and manufacturing agreements. SIGA also reduced Corvallis facility rent by approximately $35,000 per month.
Outlook, risks and unusual items
- The BARDA contract is valued at approximately $466 million, including $409.8 million tied to manufacture and delivery of 1.7 million paid courses and $56 million of potential development and support reimbursements. SIGA had received $249.2 million under the paid-course component by year-end and reported 1.4 million courses delivered, including courses delivered at no charge. The contract runs through September 2020.
- SIGA expected remaining paid-course delivery payments of $37.6 million by the first or second quarter of 2017, subject to performance. A further $20.5 million milestone depends on submitting a complete FDA application; a $102.5 million holdback depends on FDA approval and satisfaction of replacement obligations. BARDA’s separate options are discretionary and should not be assumed.
- After FDA guidance, the provisional dosage increased from 600 mg once daily to 600 mg twice daily. SIGA expects to supplement previously delivered courses at no cost to BARDA and anticipates significant incremental manufacturing costs. Dosage requirements may change again.
- SIGA targeted completion and analysis of an expanded human safety trial in Q2–Q3 2017 and an NDA filing in late 2017, pursuing the FDA animal-rule pathway. These are targets, not assurances of approval. An IV-formulation Phase 1 study was expected to begin in 2016.
- The proposed reorganization, supported by the creditors’ committee, required bankruptcy-court confirmation. Under its terms, SIGA would have 120 days, potentially extendable by 90 days for a $20 million payment, to resolve PharmAthene’s claim through cash payment, issuance of all newly issued equity to PharmAthene (with existing shares cancelled), or a mutually agreed alternative. A further $5 million payment was due on the plan’s effective date. The filing reported the confirmation hearing scheduled for April 5, 2016.
- Management and the auditor stated that substantial doubt existed about SIGA’s ability to continue as a going concern, citing Chapter 11, the judgment and the $284 million capital deficit. The financial statements were prepared on a going-concern basis without adjustments that could be required if SIGA cannot continue.
- Major risks include loss of existing shareholder value under the reorganization, dependence on U.S. government funding and BARDA, FDA approval and replacement obligations, manufacturing and cost overruns, and the uncertainty of other bankruptcy claims. The company also reported that the BARDA claim of $109.3 million for potential repayment was withdrawn after the contract was assumed.
Important facts for investors to verify
- Current status and terms of the Chapter 11 plan, PharmAthene claim, required payments, and potential cancellation of existing shares.
- BARDA delivery milestones, remaining contract cash receipts, product replacement requirements, dosage costs, and whether BARDA exercises any options.
- Progress of the expanded safety trial, NDA submission timing, FDA requirements, and likelihood and timing of approval.
- Cash runway and operating cash flow excluding deferred-revenue and other working-capital effects; also reconcile deferred revenue with deferred costs.
- Resolution of remaining bankruptcy claims and any implications for the going-concern basis, OTC trading and shareholder liquidity.