SIGA Technologies, Inc. — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015. SIGA develops and commercializes treatments for unmet medical needs and biothreats; its lead product is investigational smallpox antiviral Tecovirimat (ST-246). The company was operating as a Chapter 11 debtor-in-possession following its September 16, 2014 filing.
Financial performance and liquidity
| Metric | Q1 2015 | Q1 2014 / comparison |
|---|---|---|
| Revenue | $1.19 million, from research and development contracts and grants | $0.55 million; increase of 117% |
| Operating expenses | $6.23 million | $6.19 million |
| Operating loss | $5.04 million | $5.64 million |
| Net loss | $7.15 million; loss per share $0.13 | $3.38 million; loss per share $0.06 |
| Cash from operating activities | Used $6.17 million | Provided $16.59 million |
| Cash and cash equivalents | $95.55 million at March 31 | $99.71 million at December 31, 2014 |
SG&A and R&D expenses were each approximately $3.1 million and $2.8 million, respectively, broadly unchanged year over year. The net loss increased mainly with $1.78 million of reorganization costs and a less favorable income-tax comparison: Q1 2015 had an $0.08 million tax provision, versus a $2.24 million tax benefit in Q1 2014. Interest expense was $0.25 million, up from $0.14 million, primarily reflecting GE loan termination fees. Product-delivery revenue and related cost recognition remained deferred under the BARDA contract, so product gross margin is not presented as a meaningful reported-period measure.
At March 31, current assets were $131.31 million and current liabilities $6.98 million. Total liabilities were $426.44 million, including $399.04 million of liabilities subject to compromise; stockholders’ deficit was $253.20 million. Deferred revenue was $13.53 million outside liabilities subject to compromise, with a further $203.65 million classified within them. Deferred BARDA costs were $38.29 million. The $2.0 million GE term loan was repaid in January; no current debt remained at quarter-end.
Material changes and business developments
- R&D revenue rose $0.64 million, driven by Tecovirimat-related federal work and dengue research grant revenue.
- Q1 operating cash use contrasted with Q1 2014 cash generation, when SIGA received approximately $25.4 million from BARDA product deliveries. Q1 2015 cash use reflected operating and Chapter 11/litigation costs; $0.92 million was paid to contract manufacturers.
- Accounts receivable increased to $14.27 million from $0.49 million, principally following delivery of 100,000 Tecovirimat courses. SIGA collected $13.3 million in April 2015 for that delivery.
- Cash increased by $4.0 million from release of restricted cash collateral after the GE loan payoff; financing activities used $2.0 million for the repayment.
Outlook, risks and contingencies
BARDA and Tecovirimat: The contract is valued at approximately $463 million, including $409.8 million for manufacture and delivery of 1.7 million courses and $54 million of potential development/support reimbursements. SIGA expects to provide another 300,000 courses at no additional cost. As of April 30, 2015, approximately 1.4 million courses had been accepted and cumulative receipts were $211.6 million, including $13.3 million received in April. BARDA had not exercised contract options as of March 31. Following FDA guidance, the provisional dosage changed from 600 mg once daily to 600 mg twice daily; SIGA expects to supplement previously delivered courses at no cost to BARDA and warned of significant incremental production costs. The contract amendment was approved in April, after quarter-end.
PharmAthene litigation and bankruptcy: A January 15, 2015 Delaware judgment awarded PharmAthene $194.65 million, including damages, prejudgment interest, and fees, with post-judgment interest then accruing at $30,663.89 per day. Both parties appealed; SIGA’s appeal and PharmAthene’s cross-appeal were pending. SIGA accrued approximately $187.82 million for expectation damages and $3.23 million for legal and expert fees, classified as liabilities subject to compromise. The outcome and ultimate allowed claims remain uncertain. SIGA stated that the judgment and Chapter 11 case raise substantial doubt about its ability to continue as a going concern. Management said existing resources, BARDA receipts and continuing government work should support operations beyond the next 12 months, but that assessment is subject to the litigation outcome.
SIGA had not filed a reorganization plan and could not predict its terms, confirmation, or treatment of pre-petition claims and equity. It sought an extension of its plan and solicitation exclusivity periods. In April, the court authorized assumption of the amended BARDA and Albemarle manufacturing agreements and the amended Oregon facility lease; the Albemarle amendment provides improved future API pricing, and the lease amendment reduces rent by about $35,000 monthly beginning May 2015. These were post-quarter-end developments. SIGA’s shares were delisted from Nasdaq in March and began trading on OTC Markets as SIGAQ. Tecovirimat was not FDA-approved; regulatory, contract-performance, dosage, manufacturing, funding, litigation and Chapter 11 risks remain material.
Important facts for investors to verify
- Developments and rulings in the Delaware appeals, including changes to the judgment, interest and the recorded litigation accrual.
- Chapter 11 plan timing, confirmation prospects, creditor-claim reconciliation, and the eventual treatment of equity and pre-petition liabilities.
- BARDA contract performance, acceptance and payment for deliveries, dosage requirements, and the cost and timing of required supplementation.
- Cash burn, collection of receivables, and whether available resources remain adequate as litigation and reorganization costs continue.
- Tecovirimat regulatory status and any exercise of BARDA options or changes to contract terms.