SIGA Technologies, Inc. — FY 2014 Form 10-K
Reporting period: Fiscal year ended December 31, 2014. The company filed its 10-K on March 6, 2015. SIGA develops biodefense and medical products; its lead product is investigational antiviral Tecovirimat (ST-246), supplied to the U.S. Strategic National Stockpile under a BARDA contract.
Financial performance and position
| Metric | FY 2014 | FY 2013 |
|---|---|---|
| Revenue | $3.14 million | $5.52 million |
| Operating loss | $209.67 million | $23.52 million |
| Net loss | $265.46 million | $17.18 million |
| Operating cash flow | $14.18 million provided | $58.44 million provided |
| Cash and cash equivalents at year-end | $99.71 million | $91.31 million |
| Total assets | $166.39 million | $193.82 million |
| Total liabilities | $412.89 million | $176.85 million |
| Stockholders’ equity (deficit) | $(246.50) million | $16.98 million |
- Revenue consisted of research and development contract and grant work; the filing reports 100% of recognized revenue from NIH and BARDA. Revenue fell 43% year over year as government-funded development and grant activity declined.
- Net loss included a $188.5 million PharmAthene litigation accrual, a $53.5 million non-cash tax charge to establish a deferred-tax valuation allowance, and $2.1 million of Chapter 11 reorganization costs. These unusual items dominated reported results.
- Operating cash flow decreased from 2013. The 2014 figure includes substantial effects from bankruptcy accounting, including liabilities subject to compromise and changes in deferred revenue; it should not be read as a straightforward measure of recurring cash generation.
- At year-end, $4.0 million was restricted as loan collateral; SIGA repaid its approximately $2.0 million GE term loan in January 2015 and the collateral was released. Year-end liabilities subject to compromise were $399.0 million, including $203.7 million of deferred BARDA revenue and litigation-related accruals.
- No conventional operating margin is meaningful given the litigation accrual; revenue was far below operating expenses. The filing does not provide a clear recurring or adjusted margin measure.
Material changes and business developments
- Revenue declined from $5.52 million to $3.14 million; R&D expense fell 22% to $10.83 million, primarily due to the 2013–14 optimization program, reduced staffing and lower vendor costs. SG&A decreased 4% to $12.52 million.
- SIGA filed for Chapter 11 protection on September 16, 2014, and continued operating as a debtor-in-possession. It had not filed a reorganization plan by the 10-K filing date; the treatment of pre-petition claims and existing equity remained uncertain.
- The Delaware Court of Chancery entered a $194.65 million judgment for PharmAthene on January 15, 2015, including $113.12 million in expectation damages plus interest, fees and costs. SIGA accrued approximately $187.8 million for damages and $3.2 million for fees at December 31, 2014. SIGA appealed; PharmAthene cross-appealed. The bankruptcy stay prevented enforcement at that time.
- Revenue recognition for BARDA product deliveries remains deferred because SIGA has product replacement obligations. By year-end, SIGA had received $198.3 million under the BARDA Base Contract and delivered 1.3 million courses; $203.7 million of deferred revenue was classified as subject to compromise.
Outlook, risks and contingencies
- The BARDA contract is valued at approximately $463 million, including $409.8 million for manufacture and delivery of 1.7 million purchased courses and $54 million of potential development and support reimbursements. BARDA options of approximately $178.4 million had not been exercised and may never be exercised. The contract expires in September 2020.
- Following FDA guidance, future courses are expected to use 600 mg twice daily rather than the prior 600 mg once daily. SIGA expects to supplement previously delivered courses at no cost to BARDA, incurring significant incremental costs. The contract amendment was subject to bankruptcy court approval.
- Tecovirimat was not FDA-approved. SIGA was pursuing approval under the animal rule and expected first dosing in an expanded human safety trial in Q2 or Q3 2015, with completion and data analysis targeted for 18–24 months after first dosing. Approval and timing were uncertain.
- Management said existing resources and anticipated BARDA and government-contract cash flows were expected to support operations beyond 12 months, but the auditor reported substantial doubt about SIGA’s ability to continue as a going concern because of the PharmAthene judgment and Chapter 11 case.
- NASDAQ continued listing conditionally, including a requirement to emerge from Chapter 11 and meet initial-listing standards by March 16, 2015. SIGA did not expect to emerge by that date, creating a material delisting risk.
- Key exposures include the outcome of both PharmAthene appeals and the reorganization, liquidity and financing needs, possible equity dilution or cancellation, BARDA funding and contract-assumption approval, added dosage costs, FDA development and approval risks, reliance on third-party manufacturers, and dependence on U.S. government contracts.
Important facts for investors to verify
- Latest status and outcome of the Chapter 11 case, any confirmed reorganization plan, and the treatment of common equity and creditor claims.
- Current PharmAthene judgment and appeal status, allowed claim amount, interest accrual, and cash or asset impact.
- Whether the bankruptcy court approved assumption of the BARDA contract and its dosage amendment; actual replacement costs, delivery schedule, and remaining payments.
- Updated unrestricted liquidity and cash burn, including the distinction between deferred BARDA receipts and revenue recognized in earnings.
- FDA trial progress, dosage guidance, and regulatory milestones for Tecovirimat, as well as the NASDAQ listing status.