SIGA Technologies, Inc. — FY2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. The filing was submitted March 5, 2020. SIGA is a commercial-stage pharmaceutical company whose lead product, oral TPOXX (tecovirimat), is an antiviral treatment for smallpox and is primarily sold to the U.S. government for its Strategic National Stockpile.
Financial performance and liquidity
| Metric | FY2019 | FY2018 |
|---|---|---|
| Total revenue | $26.7 million | $477.1 million |
| Operating income (loss) | $(2.3) million | $355.1 million |
| Net income (loss) | $(7.2) million | $421.8 million |
| Operating cash flow | $(18.2) million | $68.9 million |
| Cash, cash equivalents and restricted cash | $161.0 million | $180.4 million |
| Debt carrying value | $80.0 million | $75.5 million long-term |
- 2019 revenue included $11.2 million from delivery of approximately 35,700 oral TPOXX courses and $15.6 million from research and development contracts and grants. R&D contract revenue rose 91% year over year.
- 2018 results were unusually high: $375.6 million of previously deferred BARDA product revenue was recognized after FDA approval, an additional $90.9 million came from BARDA holdback and shelf-life payments, and SIGA recorded $80.0 million from selling its Priority Review Voucher.
- 2019 net loss included $15.8 million of interest expense, including $4.5 million of noncash accretion, partly offset by a $5.1 million noncash gain from the change in warrant fair value and a $2.9 million income-tax benefit.
- Unrestricted cash was $65.2 million; restricted cash was $95.7 million and is reserved for debt service. Current assets were $180.0 million and current liabilities $91.7 million, including $80.0 million of current debt.
- The term loan matures November 16, 2020, with $80.0 million principal and an additional $4.0 million due at repayment. The stated effective interest rate was 19.1%; the company reported compliance with loan covenants at year-end.
- Quarterly 2019 results: Q4 revenue was $4.3 million, operating loss $3.5 million and net loss $4.5 million. Quarterly figures are unaudited.
Material changes and business developments
- Revenue fell sharply from 2018 because the prior-year recognition of deferred product revenue and PRV proceeds did not recur; 2019 product delivery revenue was $11.2 million versus $468.9 million in 2018.
- Cash and restricted cash declined by $19.4 million in 2019. Operating cash use was $18.2 million, compared with operating cash generation of $68.9 million in 2018, when BARDA payments and the PRV sale supported cash inflows.
- Inventory increased to $9.7 million from $2.9 million, primarily work in process. The company reported $26.8 million in purchase commitments, mostly for manufacturing and R&D.
- In May 2019, BARDA exercised an option for $11.2 million of raw-material procurement tied to at least 363,070 oral courses; further delivery options remain discretionary. In total, the 2018 BARDA contract contemplates up to $602.5 million, including $525.0 million in unexercised options.
Outlook, risks and unusual items
- SIGA expected it could file an IV TPOXX new drug application as early as the second half of 2020, following FDA concurrence that no further clinical studies were required. Approval, timing and any restrictions remain uncertain.
- The company planned to seek oral TPOXX approvals in Europe and Canada over the following 12 months and pursue an expanded orthopox indication. A Department of Defense contract awarded in 2019 supports research toward a smallpox post-exposure prophylaxis indication, with a total stated value of $19.5 million and an initial award of $12.4 million.
- Meridian Medical Technologies received exclusive promotion rights for oral TPOXX outside the United States and South Korea. A Canadian government notice indicated intent to purchase up to 15,235 courses over four years, including an initial 2,500 courses; the notice is not itself a completed purchase contract.
- Revenue prospects are substantially dependent on U.S. government procurement. Most potential value under the 2018 BARDA contract depends on options BARDA may decline to exercise; government contracts may also be modified or terminated. Fixed-price delivery obligations expose SIGA to cost overruns.
- Other material risks include dependence on third-party manufacturers and suppliers, regulatory approval and commercialization uncertainty, product replacement obligations, patent disputes, and the possibility that COVID-19 or other disruptions affect supply chains or government activity.
- After year-end, the board authorized a share-repurchase program of up to $50 million through December 31, 2021. No repurchases had been made as of the filing; the term loan must first be repaid or amended to permit them.
- The auditor issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective at December 31, 2019.
Most important facts for investors to verify
- How much of the $525.0 million in remaining BARDA options is exercised, and on what timetable?
- Whether SIGA repays or refinances the term loan by its November 2020 maturity, and what cash remains unrestricted after debt service.
- Progress, filing timing and FDA decisions for IV TPOXX and planned international applications; distinguish forecasts from approvals or awarded sales.
- Whether manufacturing and inventory execution meet BARDA delivery terms and whether costs, commitments or product replacement obligations change.
- Whether international promotion through Meridian produces actual collected sales after its fees and expenses.