SIGA Technologies, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Filed August 8, 2023. SIGA is a commercial-stage pharmaceutical company whose principal product is TPOXX, sold to U.S. and international governments.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total revenue | $5.9 million | $16.7 million | $14.2 million | $27.2 million |
| Operating income/(loss) | $(4.6) million | $3.1 million | $(6.7) million | $1.6 million |
| Net income/(loss) | $(2.9) million | $2.0 million | $(3.8) million | $1.7 million |
| Diluted EPS | $(0.04) | $0.03 | $(0.05) | $0.02 |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $20.9 million | $54.5 million |
- Q2 product sales and supportive services were $1.3 million, versus $8.6 million; R&D revenue was $4.6 million, versus $8.1 million. Six-month product sales were $7.0 million, versus $15.9 million, and R&D revenue was $7.2 million, versus $11.3 million.
- Q2 cost of sales was $1.0 million; six-month cost of sales was $2.1 million. The filing does not provide a consolidated gross-margin percentage; total revenue includes R&D revenue.
- Other income was $1.2 million for Q2 and $2.1 million for the six months, primarily reflecting higher interest income on cash balances.
- Cash and cash equivalents were $76.2 million at June 30, down from $98.8 million at December 31, 2022. Current assets were $134.3 million and current liabilities $19.0 million. The company reported no outstanding debt in the presented balance sheet; its prior loan had been prepaid and terminated in 2020.
- Six-month financing cash use was $43.4 million, including a $32.1 million special dividend and $11.1 million of share repurchases. The company repurchased 1.7 million shares in the first half.
Material changes and notable items
- Revenue declined year over year, driven by lower product deliveries and lower R&D activity. Q2 2022 included $3.6 million of DoD sales and approximately $5.0 million of international sales; six-month 2022 revenue included $7.2 million of IV TPOXX deliveries to the U.S. Strategic Stockpile.
- For the six months, lower revenue was partly offset by lower operating expenses: total operating expenses were $20.9 million versus $25.6 million. SG&A declined to $8.7 million from $9.6 million, while R&D expense was $10.2 million versus $10.4 million.
- Operating cash flow fell to $20.9 million from $54.5 million. The 2023 period included approximately $35 million collected for prior-year product deliveries, partly offset by increased inventory investment and operating costs; 2022 included approximately $80 million collected for earlier stockpile deliveries.
- Inventory increased to $50.5 million from $39.3 million, including higher work-in-process. A manufacturing batch impairment resulted in a $0.5 million inventory-related loss recognized in cost of sales.
- At June 30, remaining performance obligations were $59.0 million. In July, BARDA exercised options and placed orders adding $138.2 million of product performance obligations; SIGA expected delivery of approximately 363,000 oral TPOXX courses within six months.
Outlook, risks, and contingencies
- Management said available liquidity should be sufficient to meet anticipated obligations for at least the next 12 months. No formal revenue or earnings guidance was provided.
- As of July 31, 2023, the BARDA contract contemplated up to approximately $602.5 million in total payments: $407.1 million associated with exercised options and up to $143.7 million in unexercised options. Unexercised options are at BARDA’s sole discretion and are not assured revenue.
- Two European-country orders represented approximately $8 million of firm commitments as of July 31; approximately $1 million was delivered in April and $7 million in July. Separately, Canada held an option for up to $6 million, exercisable through March 31, 2024.
- Government contracts may be modified, canceled, or terminated, and the U.S. government may choose not to exercise options. The company also cited risks involving supply-chain disruption, international market development, regulatory approvals, clinical-trial results, and TPOXX product efficacy and safety.
- Five randomized, placebo-controlled trials were enrolling patients to assess TPOXX for mpox. The potential timing and viability of an FDA mpox-label submission depend on case patterns, enrollment, and trial results. SIGA had met target enrollment for trials related to a potential smallpox post-exposure prophylaxis label expansion; submission timing depends on trial results.
- Purchase commitments for manufacturing obligations were approximately $24.6 million. SIGA reported no material changes to the risk factors in its prior filings and no off-balance-sheet arrangements.
Most important facts for investors to verify
- Whether BARDA exercises further options and whether SIGA delivers the July 2023 orders on schedule and at expected economics.
- Timing and collection of government and international product orders, including recognition of the $138.2 million of July BARDA obligations and July European deliveries.
- Inventory quality, the impaired manufacturing batch, and whether increased inventory investment converts into deliveries and cash.
- Clinical-trial progress and results for smallpox prophylaxis and mpox, and the resulting regulatory-submission plans.
- Cash use and capital returns after the special dividend and share repurchases, alongside the $24.6 million of manufacturing purchase commitments.