SIGA Technologies, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. SIGA is a commercial-stage pharmaceutical company whose lead product, oral TPOXX, is approved in the U.S. for treatment of smallpox. Its business is substantially driven by government procurement and development contracts.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $4.8 million | $44.3 million | $18.3 million | $87.2 million |
| Operating income (loss) | $(2.9) million | $32.9 million | $(4.9) million | $57.7 million |
| Net income (loss) | $(3.1) million | $24.2 million | $(3.8) million | $36.2 million |
| Diluted EPS | $(0.04) | $0.31 | $(0.05) | $0.45 |
| Operating cash flow | Not separately presented for the quarter | $(4.6) million | $25.6 million |
- Revenue decline primarily reflects the absence of significant U.S. government product deliveries recorded in 2020. Q3 2020 product revenue included approximately $41.4 million from the 19C BARDA contract; nine-month 2020 product revenue included $77.7 million from that contract. In 2021, product revenue primarily came from Canadian contracts.
- Q3 2021 product and supportive-services revenue was $2.3 million, versus $41.8 million a year earlier. R&D revenue was $2.5 million in both quarters. Nine-month R&D revenue decreased 17% to $5.5 million.
- Q3 operating expenses were $7.8 million, down from $11.4 million, mainly because product-delivery costs were much lower. Nine-month SG&A increased 28% to $13.6 million, primarily due to international promotion fees and higher insurance and consulting costs.
- Gross margin is not stated as a single company-wide metric in the filing. Nine-month cost of sales was $1.3 million, including a $0.5 million net inventory-related loss.
- Cash and cash equivalents were $92.8 million at September 30, 2021, down from $117.9 million at year-end 2020. Current assets were $128.9 million and current liabilities $18.9 million. Operating cash use was $4.6 million; share repurchases used $20.3 million. Capital expenditures were $24,424.
- The company reported no Term Loan debt; it repaid the loan in March 2020. The balance sheet included a $6.3 million warrant liability and lease liabilities, including approximately $2.3 million in other liabilities. Stockholders’ equity was $106.6 million.
Material changes and contracts
- On September 7, 2021, BARDA exercised an option for approximately $112.6 million of oral TPOXX manufacture and delivery. The company reported no product-delivery revenue under the 19C BARDA contract in the quarter or nine-month period ended September 30. Approximately $33 million of product was delivered to the Strategic Stockpile on October 20, 2021, after quarter-end.
- The 19C BARDA contract contemplates up to approximately $602.5 million in payments: $239.7 million associated with exercised options and up to $311.1 million of unexercised options, in addition to base-period payments. BARDA may choose whether to exercise remaining options.
- Remaining performance obligations totaled $177.2 million at September 30, 2021; SIGA expected $112.6 million of product-related revenue within the next 12 months. Timing of the rest is uncertain and largely outside the company’s control.
- PHAC’s contract provides for up to approximately $33 million of purchases over five years, including approximately $17 million of firm commitments by March 31, 2023; $10.3 million had been delivered and accepted by September 30. CDND purchased another $2.3 million in Q3 2021, while remaining purchases are optional.
- The company repurchased 3.0 million shares for $20.3 million during the first nine months. A new $50 million authorization was approved in August, available after the prior program is completed or expires; no shares had been repurchased under the new authorization as of quarter-end.
Outlook, commentary and risks
- SIGA targeted FDA completion of its review of the IV TPOXX application in Q1 2022. It also estimated Q1 2022 completion of review processes for oral TPOXX in Europe and Canada. Approvals and timing are not assured.
- The company estimated that approximately one million courses would need to be delivered to the U.S. government between 2021 and 2023 to maintain stockpile levels of unexpired smallpox treatment, based on prior delivery activity and the product’s current approved shelf life. This is an estimate, not a committed procurement schedule.
- Management said COVID-19 had not materially disrupted the supply chain or liquidity to date, but it had slowed some government contract and R&D activity. Potential risks include delays to international awards, supply interruptions, and effects of federal contractor vaccination requirements on vendors, costs, or service availability.
- Key uncertainties include BARDA’s discretion over unexercised options, possible government contract modification or cancellation, regulatory approval and clinical-development outcomes, international market development, and supply-chain and COVID-19 effects. The company reported no material change to previously disclosed risk factors apart from the added COVID-19 contractor-requirements discussion.
- Management reported effective disclosure controls and procedures and no material change in internal control over financial reporting during the quarter. The filing states that there were no off-balance-sheet arrangements and no pending legal matters expected to have a material adverse effect.
Important facts for investors to verify
- Whether and when BARDA exercises additional procurement options, and whether the October 2021 delivery is recognized as revenue and collected.
- Delivery schedules and customer acceptance under the BARDA, PHAC and CDND contracts, including which international purchases remain optional.
- Progress and outcomes of FDA, European and Canadian regulatory reviews, and the related timing and costs.
- Cash use, inventory build and obsolescence exposure, including the $0.9 million inventory write-down partially offset by manufacturer credits.
- Remaining share-repurchase capacity, the effect of continued buybacks on liquidity, and warrant-liability sensitivity to SIGA’s stock price.