SIGA Technologies, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. SIGA is a commercial-stage pharmaceutical company whose lead product is oral TPOXX, an antiviral for smallpox. The unaudited interim results are not necessarily indicative of full-year results.
Key financial results
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $8.7 million | $40.3 million | $13.5 million | $43.0 million |
| Operating income (loss) | $0.001 million | $28.8 million | $(2.0) million | $24.8 million |
| Net income (loss) | $0.17 million | $20.9 million | $(0.64) million | $12.0 million |
| Basic earnings (loss) per share | $0.00 | $0.26 | $(0.01) | $0.15 |
| Cash used in operating activities | Not separately stated for the quarter | $(6.2) million | $(5.8) million |
Q2 product sales and supportive-services revenue was $6.9 million, principally from Canadian Public Health Agency deliveries; R&D revenue was $1.7 million. For the first half, product revenue was $10.4 million and R&D revenue was $3.0 million. Approximate operating margins were near zero in Q2 and negative 14.8% for the six-month period.
At June 30, cash and cash equivalents were $98.5 million, down from $117.9 million at year-end 2020. Current assets were $127.1 million versus current liabilities of $8.0 million. Total liabilities were $17.0 million, including a $5.3 million warrant liability; the Term Loan had been fully repaid in March 2020. Stockholders’ equity was $116.7 million. Inventory was $19.6 million. SIGA repurchased approximately 1.9 million shares for $13.1 million during the first half.
Changes and drivers
- Total revenue fell 79% in Q2 and 69% for the first half year over year. The primary driver was the absence of the 2020 delivery of approximately $36.2 million of oral TPOXX to the U.S. Strategic National Stockpile. In 2021, reported product revenue principally reflected deliveries to Canada.
- Q2 net income fell to $0.17 million from $20.9 million; first-half results moved from $12.0 million of net income to a $0.64 million loss. Lower revenue and higher SG&A contributed. First-half SG&A increased 32% to $9.3 million, partly due to international promotion fees and higher insurance and consulting costs.
- First-half R&D expense declined 22% to $4.6 million, primarily from lower vendor costs for IV TPOXX development and oral TPOXX post-marketing activities. Cost of sales included a net $0.6 million inventory-related loss.
- First-half operating cash use was $6.2 million; investing cash use was $0.02 million and financing cash use was $13.1 million, substantially for share repurchases. Cash declined by $19.4 million over the period.
Outlook, contracts and risks
- The filing gives no specific full-year revenue or earnings guidance. Management said COVID-19 had not materially disrupted operations or liquidity as of the filing date, but noted possible delays in research, contract activity and international awards, and potential supply-chain disruption.
- The 19C BARDA contract contemplates up to approximately $602.5 million in payments: $127.1 million of exercised options and $423.7 million of unexercised options, in addition to base-period amounts. BARDA decides at its sole discretion whether to exercise options; contract options and government contracts may also be modified or terminated. SIGA estimated roughly one million courses would need delivery to the U.S. government from 2021–2023 to maintain stockpile levels of unexpired treatment, based on its assumptions.
- Remaining performance obligations were $68.0 million at June 30, 2021. This is not a guarantee of future revenue and excludes unexercised options.
- The PHAC contract provides for up to approximately $33 million of purchases over five years, including firm commitments of approximately $17 million by March 31, 2023; remaining purchases are subject to options. The Canadian military contract’s remaining purchases are also optional, and there were no deliveries under it in the first half of 2021.
- SIGA filed an IV TPOXX new drug application with the FDA on April 30, 2021; the company cited a typical review period of ten months and no assurance of approval. It estimated European and Canadian review processes for oral TPOXX could conclude by Q1 2022, also subject to regulatory uncertainty.
- Management identified risks including unexercised government procurement options, government contract changes or cancellation, regulatory outcomes, international market development, intellectual property challenges, and pandemic-related delays. No material change to the 2020 Form 10-K risk factors was reported. Purchase commitments associated with manufacturing obligations were approximately $15.4 million.
- On August 2, 2021, after quarter-end, the board authorized a further share repurchase program of up to $50 million through December 31, 2023, available after the prior program is completed or expires. The filing also reported effective disclosure controls and no material change in internal control over financial reporting.
Investor verification priorities
- Confirm the timing and acceptance of PHAC deliveries and the cash-collection profile of the $6.1 million of unbilled receivables included in accounts receivable.
- Track BARDA option exercises and delivery schedules; the $423.7 million of unexercised options is discretionary, not committed revenue.
- Review IV TPOXX and European and Canadian oral TPOXX regulatory decisions and timelines.
- Assess cash use, manufacturing commitments, inventory write-down exposure and remaining capacity under the existing repurchase program before evaluating the subsequent $50 million authorization.
- Monitor the warrant liability’s sensitivity to SIGA’s share price and the potential effects of COVID-19 on government contracting, research and supply-chain execution.