SIGA Technologies, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022; filed November 3, 2022. SIGA is a commercial-stage pharmaceutical company whose lead product is TPOXX (tecovirimat), an antiviral approved for smallpox. Oral TPOXX sales increased sharply amid the 2022 global mpox outbreak.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $72.2 million | $4.8 million | $99.4 million | $18.3 million |
| Operating income (loss) | $42.9 million | ($2.9 million) | $44.5 million | ($4.9 million) |
| Net income (loss) | $33.0 million | ($3.1 million) | $34.7 million | ($3.8 million) |
| Diluted EPS | $0.45 | ($0.04) | $0.47 | ($0.05) |
| Operating margin | 59.4% | Negative | 44.8% | Negative |
| Operating cash flow | Not separately stated | Not separately stated | $49.7 million | ($4.6 million) |
- Q3 product sales and supportive services were $65.6 million, including $61.3 million of international sales and approximately $3.8 million of DoD sales. Nine-month product sales were $81.6 million, including $66.2 million internationally, $7.5 million to the DoD, and $7.2 million of IV TPOXX sales to the U.S. Government.
- Research and development revenue was $6.6 million in Q3 and $17.9 million for the first nine months. R&D expense was $5.7 million and $16.1 million, respectively.
- SG&A was $19.7 million in Q3 and $29.2 million year to date, up from $4.5 million and $14.1 million in the comparable periods. The increase mainly reflected Meridian promotion fees associated with higher international sales. Cost of sales was $3.9 million in Q3 and $9.6 million year to date.
- Cash and cash equivalents were $109.7 million at September 30, up from $103.1 million at December 31, 2021. Current assets were $196.9 million and current liabilities $27.5 million. Accounts receivable was $54.9 million, including approximately $46.3 million of unbilled receivables; inventory was $31.3 million.
- Nine-month financing cash outflow was $43.1 million, including a $32.9 million special dividend ($0.45 per share) and $10.1 million of share repurchases. Operating cash flow was $49.7 million; there was no cash-related investing activity. The company reported no off-balance-sheet arrangements and disclosed no funded debt; operating lease liabilities had a present value of $2.2 million.
Material changes and key developments
- Revenue growth chiefly reflected deliveries to international customers during the mpox outbreak, including approximately $35 million delivered to Canada’s PHAC in Q3, as well as U.S. government procurement and increased R&D activity. International revenue was $61.3 million in Q3 versus $2.4 million a year earlier.
- Through October 31, 2022, SIGA had firm international orders totaling approximately $77 million from 13 customers; about $66 million was delivered and recognized by September 30. The filing expected remaining orders to be fulfilled from November 2022 through July 2023.
- The DoD exercised a $3.8 million option under a prior contract and entered a new contract on September 28 with a $5.2 million firm commitment and a further $5.5 million option, exercisable at DoD’s discretion.
- The FDA approved IV TPOXX for smallpox in May 2022. In Q3, clinical trials began in the U.S., U.K., and Democratic Republic of Congo to assess tecovirimat for mpox; efficacy for this use is not established in the filing.
- The outstanding warrant was fully exercised during Q2, eliminating the warrant liability. In the first nine months, SIGA repurchased approximately 1.5 million shares for $10.1 million and issued 824,903 shares on warrant exercise. Shares outstanding at September 30 were 73.0 million.
Outlook, risks, and contingencies
- No formal earnings or revenue guidance is provided. Remaining performance obligations were $82.9 million at September 30, expected to be recognized within three years; this excludes unexercised contract options.
- The BARDA contract contemplates up to approximately $602.5 million in payments: $268.9 million relates to exercised options and $281.9 million to unexercised options. BARDA controls whether and when to exercise those options. The DoD and international contracts also include discretionary options. Government contracts may be modified, terminated, or not fully funded.
- Management estimated international oral TPOXX contribution margins of approximately 65%–80%, depending on annual sales levels, after manufacturing costs and Meridian fees. IV TPOXX sales under current BARDA terms were estimated to have gross margin below 40%, assuming related options are exercised.
- Risks include uncertain future government procurement and international demand, clinical and regulatory uncertainty, manufacturing and supply-chain disruptions, and the possibility that mpox trials do not demonstrate benefit. The filing also cites continuing potential COVID-related supply and labor delays. Management said it had not identified government-contract performance impediments and did not then expect COVID-related delays to materially affect financial condition or long-term operating performance, but gave no assurance.
- Purchase commitments associated with manufacturing obligations were approximately $21.8 million. The company reported that pending legal matters, if any, were not expected to have a material adverse effect; it disclosed no material changes to the risk factors in its 2021 Form 10-K.
Most important facts for investors to verify
- Whether the 2022 outbreak-related international demand continues, and whether the remaining firm orders are delivered and collected on schedule.
- Whether BARDA, DoD, and international customers exercise discretionary options, and the timing, funding, and economics of resulting orders.
- Collections and conversion of the substantial unbilled receivable balance, inventory levels, and the cost and reliability of manufacturing supply.
- Results and timing of the mpox clinical trials; the filing does not establish TPOXX efficacy for mpox.
- Actual Meridian fees, product margins, and cash returned through dividends and repurchases relative to future procurement and operating needs.