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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
x
o
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2019
Or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ________ to ___________
Commission File No. 0-23047
SIGA Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
31 East 62nd Street
New York, NY
(Address of principal executive offices)
13-3864870
(IRS Employer Identification. No.)
10065
(zip code)
Securities registered pursuant to Section 12(b) of the Act:
Registrant’s telephone number, including area code: (212) 672-9100
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
common stock, $.0001 par value
SIGA
The Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes o No x.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act Yes o No x.
Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those
Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth
company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
(check one): Large accelerated filer o Accelerated filer x Non-accelerated filer o Smaller reporting company o Emerging growth company o.
If an emerging growth company, indicate by check mark if the registrant has elected to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13 (a) of the Exchange Act. o
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o No x.
Indicate by check mark whether the registrant has filed all documents and reports required by section 12,13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court. Yes oNo o.
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant, based upon the closing sale price of the common stock on June
30, 2019 as reported on The Nasdaq Global Market was approximately $321,463,623.
As of February 18, 2020 the registrant had outstanding 81,272,518 shares of common stock.
DOCUMENTS INCORPORATED BY REFERENCE
The following document is incorporated herein by reference:
Document
Proxy Statement for the Company’s 2020 Annual
Meeting of Stockholders
Parts Into Which Incorporated
Part III
Table of Contents
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
SIGNATURES
SIGA TECHNOLOGIES, INC.
FORM 10-K
Table of Contents
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
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Forward-Looking Statements
Part I
Certain statements in this Annual Report on Form 10-K, including certain statements contained in “Business” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to the progress of SIGA’s
development programs and timelines for bringing products to market, delivering products to the U.S Strategic National Stockpile ("Strategic Stockpile") and
the enforceability of the 2011 BARDA Contract and the 19C BARDA Contract (each as defined below, and collectively, the "BARDA Contracts") with the
U.S. Biomedical Advanced Research and Development Authority ("BARDA"). The words or phrases “can be,” “expects,” “may affect,” “may depend,”
“believes,” “estimate,” “project” and similar words and phrases are intended to identify such forward-looking statements. Such forward-looking statements
are subject to various known and unknown risks and uncertainties and SIGA cautions you that any forward-looking information provided by or on behalf of
SIGA is not a guarantee of future performance. SIGA’s actual results could differ materially from those anticipated by such forward-looking statements due to
a number of factors, some of which are beyond SIGA’s control, including, but not limited to, (i) the risk that BARDA elects, in its sole discretion as permitted
under the BARDA Contracts, not to exercise all, or any, of the remaining unexercised options under those contracts, (ii) the risk that SIGA may not complete
performance under the BARDA Contracts on schedule or in accordance with contractual terms, (iii) the risk that the BARDA Contracts are modified or
canceled at the request or requirement of the U.S. government, (iv) the risk that the nascent international biodefense market does not develop to a degree that
allows SIGA to successfully market TPOXX® internationally, (v) the risk that potential products, including potential alternative uses or formulations of
TPOXX® that appear promising to SIGA or its collaborators, cannot be shown to be efficacious or safe in subsequent pre-clinical or clinical trials, (vi) the
risk that SIGA or its collaborators will not obtain appropriate or necessary governmental approvals to market these or other potential products or uses, (vii)
the risk that SIGA may not be able to secure or enforce sufficient legal rights in its products, including intellectual property protection, (viii) the risk that any
challenge to SIGA’s patent and other property rights, if adversely determined, could affect SIGA’s business and, even if determined favorably, could be costly,
(ix) the risk that regulatory requirements applicable to SIGA’s products may result in the need for further or additional testing or documentation that will
delay or prevent seeking or obtaining needed approvals to market these products, (x) the risk that the volatile and competitive nature of the biotechnology
industry may hamper SIGA’s efforts to develop or market its products, (xi) the risk that changes in domestic or foreign economic and market conditions may
affect SIGA’s ability to advance its research or may affect its products adversely, (xii) the effect of federal, state, and foreign regulation, including drug
regulation and international trade regulation, on SIGA’s businesses and (xiii) the risk that the U.S. government’s responses (including inaction) to the national
or global economic situation or infectious disease such as COVID-19 may affect SIGA’s business adversely, as well as the risks and uncertainties included in
Item 1A “Risk Factors” of this Form 10-K. All such forward-looking statements are current only as of the date on which such statements were made. SIGA
does not undertake any obligation to update publicly any forward-looking statement to reflect events or circumstances after the date on which any such
statement is made or to reflect the occurrence of unanticipated events.
Item 1. Business
Overview
SIGA Technologies, Inc. is referred to throughout this report as “SIGA,” “the Company,” “we” or “us.”
We are a commercial-stage pharmaceutical company focused on the health security and infectious disease markets. Health security comprises
countermeasures for biological, chemical, radiological and nuclear attacks (biodefense market), vaccines and therapies for emerging infectious diseases, and
health preparedness. Our lead product is an oral formulation of TPOXX® (“oral TPOXX®”), an antiviral drug for the treatment of human smallpox disease
caused by variola virus.
BARDA Contracts-TPOXX®
19C BARDA Contract (2018 BARDA Contract)
On September 10, 2018, the Company entered into a contract with BARDA pursuant to which SIGA agreed to deliver up to 1,488,000 courses of
oral TPOXX® to the Strategic Stockpile, and to manufacture and deliver to the Strategic Stockpile, or store as vendor-managed inventory, up to 212,000
courses of the intravenous (IV) formulation of TPOXX® (“IV TPOXX®”). Additionally, the contract includes funding from BARDA for advanced
development of IV TPOXX®; post-marketing activities for oral and IV TPOXX®, and procurement activities. As of February 18, 2020, the contract with
BARDA (as amended, modified,
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or supplemented from time to time, the "19C BARDA Contract" or “2018 BARDA Contract”) contemplates up to approximately $602.5 million of payments,
of which approximately $51.7 million of payments are included within the base period of performance of five years, approximately $25.8 million of payments
are related to exercised options and up to approximately $525.0 million of payments are currently specified as unexercised options. BARDA may choose in
its sole discretion when, or whether, to exercise any of the unexercised options. The period of performance for options is up to ten years from the date of entry
into the 19C BARDA Contract and such options could be exercised at any time during the contract term, including during the base period of performance. On
May 20, 2019, an option for the manufacture and delivery of 363,070 courses of oral TPOXX® was modified to divide it into four procurement-related
options. One of the four modified procurement-related options provides for the payment of $11.2 million for the procurement of raw materials to be used in
the manufacture of at least 363,070 courses of oral TPOXX®. This option was exercised simultaneously with the aforementioned modification. Each of the
other three options individually specifies the delivery of approximately 121,000 courses of oral TPOXX® for consideration of approximately $33.8 million.
In total, the four options under the May 2019 modification provide for the purchase of raw material for and the manufacture and delivery of 363,070 courses
of oral TPOXX® for consideration of approximately $112.5 million. The option modification did not change the overall total potential value of the 19C
BARDA Contract, nor did it change the total amount to be paid in connection with the manufacture and delivery of oral TPOXX® courses.
The base period of performance specifies potential payments of approximately $51.7 million for the following activities: payments of approximately
$11.1 million for the delivery of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile; payments of $8.0 million for the manufacture of
20,000 courses of final drug product of IV TPOXX® ("IV FDP"), of which $3.2 million of payments are related to the manufacture of bulk drug substance
("IV BDS") to be used in the manufacture of IV FDP; payments of approximately $32.0 million to fund advanced development of IV TPOXX®; and
payments of approximately $0.6 million for supportive procurement activities. As of December 31, 2019, the Company had received $11.1 million for the
successful delivery of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile, $3.2 million for the manufacture of IV BDS and $4.7
million for other base period activities. IV BDS is expected to be used for the manufacture of 20,000 courses of IV FDP. The $3.2 million received for the
manufacture of IV BDS has been recorded as deferred revenue as of December 31, 2019 and 2018; such amount is expected to be recognized as revenue
when IV TPOXX containing the BDS is delivered to the National Stockpile or placed in vendor-managed inventory.
The options that have been exercised to date provide for additional potential payments up to approximately $25.8 million. There are exercised
options for the following activities: payments up to $11.2 million for the procurement of raw materials to be used in the manufacture of at least 363,070
courses of oral TPOXX®; and, payments of up to $14.6 million for funding of post-marketing activities for oral TPOXX®, of which, $2.3 million had been
received as of December 31, 2019.
Unexercised options specify potential payments up to approximately $525.0 million in total (if all options are exercised). There are options for the
following activities: payments of up to $439.0 million for the delivery of up to approximately 1,452,000 courses of oral TPOXX® to the Strategic Stockpile;
payments of up to $76.8 million for the manufacture of up to 192,000 courses of IV FDP, of which up to $30.7 million of payments would be paid upon the
manufacture of IV BDS to be used in the manufacture of IV FDP; payments of up to approximately $3.6 million to fund post-marketing activities for IV
TPOXX®; and payments of up to approximately $5.6 million for supportive procurement activities.
The options related to IV TPOXX® are divided into two primary manufacturing steps. There are options related to the manufacture of bulk drug
substance (“IV BDS Options”), and there are corresponding options (for the same number of IV courses) for the manufacture of final drug product (“IV FDP
Options”). BARDA may choose to exercise any, all, or none of these options in its sole discretion. The 19C BARDA Contract includes: three separate IV
BDS Options, each providing for the bulk drug substance equivalent of 64,000 courses of IV TPOXX®; and three separate IV FDP Options, each providing
for 64,000 courses of final drug product of IV TPOXX®. BARDA has the sole discretion as to whether to simultaneously exercise IV BDS Options and IV
FDP Options, or whether to make independent exercise decisions. If BARDA decides to only exercise IV BDS Options, then the Company would receive
payments up to $30.7 million; alternatively, if BARDA decides to exercise both IV BDS Options and IV FDP Options, then the Company would receive
payments up to $76.8 million. For each set of options relating to a specific group of courses (for instance, the IV BDS and IV FDP options that reference the
same 64,000 courses), BARDA has the option to independently purchase IV BDS or IV FDP.
2011 BARDA Contract
On May 13, 2011, the Company signed a contract with BARDA pursuant to which BARDA agreed to buy from the Company 1.7 million courses of
oral TPOXX®. Additionally, the Company agreed to contribute to BARDA 300,000 courses at no additional cost to BARDA.
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The contract with BARDA (as amended, modified, or supplemented from time to time the "2011 BARDA Contract”) includes a base contract, as
modified, (“2011 Base Contract”) as well as options. The 2011 Base Contract specifies approximately $508.4 million of payments (including exercised
options), of which, as of December 31, 2019, $459.8 million had been received by the Company for the manufacture and delivery of 1.7 million courses of
oral TPOXX® and $44.9 million had been received for certain reimbursements in connection with development and supportive activities. Approximately
$3.7 million remains eligible to be received in the future for reimbursements of development and supportive activities.
For courses of oral TPOXX® that have been physically delivered to the Strategic Stockpile under the 2011 BARDA Contract, there are product
replacement obligations, including: (i) a product replacement obligation in the event that the final version of oral TPOXX® approved by the U.S. Food &
Drug Adinistration ("FDA") was different from any courses of oral TPOXX® that had been delivered to the Strategic Stockpile (the "FDA Approval
Replacement Obligation"); (ii) a product replacement obligation, at no cost to BARDA, in the event that oral TPOXX® is recalled or deemed to be recalled
for any reason; and (iii) a product replacement obligation in the event that oral TPOXX® does not meet any specified label claims. On July, 13, 2018, the
FDA approved oral TPOXX® for the treatment of smallpox, and there was no difference between the approved product and courses in the Strategic
Stockpile. As such, the possibility of the FDA Approval Replacement Obligation resulting in any future replacements of product within the Strategic
Stockpile is remote.
The 2011 BARDA Contract includes options. On July 30, 2018, the 2011 BARDA Contract was modified and BARDA exercised its option relating
to FDA approval of 84-month expiry for oral TPOXX® for which the Company was paid $50.0 million in August 2018. With the option exercise, the 2011
BARDA Contract was modified so that the 2011 Base Contract increased by $50.0 million. Remaining options, if all would be exercised by BARDA, would
result in aggregate payments to the Company of $72.7 million, including up to $58.3 million of funding for development and supportive activities such as
work on a post-exposure prophylaxis ("PEP") indication for TPOXX® and/or $14.4 million of funding for production-related activities related to warm-base
manufacturing. BARDA may choose in its sole discretion not to exercise any or all of the unexercised options. In 2015, BARDA exercised two options
related to extending the indication of the drug to the geriatric and pediatric populations. The stated value of those exercises was minimal.
The 2011 BARDA Contract expires in September 2020.
International Promotion Agreement for Oral TPOXX®
On June 3, 2019, the Company entered into an international promotion agreement with Meridian Medical Technologies, Inc. (“Meridian”), a Pfizer
company (the “International Promotion Agreement”).
Under the terms of the International Promotion Agreement, Meridian was granted exclusive rights to market, advertise, promote, offer for sale, or sell
oral TPOXX® in a field of use specified in the International Promotion Agreement in all geographic regions except for the United States and South Korea
(the “Territory”), and Meridian has agreed not to commercialize any competing product, as defined in the International Promotion Agreement, in the specified
field of use in the Territory. SIGA will retain ownership, intellectual property, distribution and supply rights and regulatory responsibilities in connection with
TPOXX, and, in the United States and South Korean markets, will also retain sales and marketing rights with respect to oral TPOXX®. SIGA’s consent shall
be required for the entry into any sales arrangement pursuant to the International Promotion Agreement.
The International Promotion Agreement did not provide for any cash payments at signing, and each party is responsible for the costs and expenses
associated with its activities. The fee Meridian retains pursuant to the International Promotion Agreement will be a specified percentage of the collected
proceeds of sales of oral TPOXX® net of certain expenses, for years in which customer invoiced amounts net of such expenses are less than or equal to a
specified threshold, and a higher specified percentage of such collected net proceeds for years in which such net invoiced amounts exceed the specified
threshold.
The International Promotion Agreement provides for an initial term of five years, and automatic renewals for successive three-year terms unless (i) either
party provides the other party with written notice of non-renewal prior to the end of the initial term or any renewal term or (ii) the International Promotion
Agreement is earlier terminated in accordance with its terms. Either party may terminate the agreement immediately by written notice in connection with
certain customary events. Either party shall have the right to terminate the agreement (overall and on a country-by-country basis) in the event of an uncured
material breach. The Company shall have the right to terminate the agreement (i) as to certain countries on a country-by-country basis in the event Meridian
does not promote oral TPOXX® in the subject country for a period of time, or (ii) in certain other limited circumstances. Meridian shall have the right to
terminate the Agreement (overall or on a country-by-country basis) without cause subject to a prior written notice period.
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The International Promotion Agreement also contains customary representations, warranties and covenants, including provisions related to regulatory
matters, reporting obligations, indemnity, limitation of liability, confidentiality and other matters.
On December 5, 2019 SIGA announced that the Canadian Department of National Defence ("CDND") issued an advanced contract award notice
("ACAN"), indicating that the CDND intends to purchase up to 15,235 courses of oral TPOXX® over four years as specified in the ACAN, with an initial
purchase of 2,500 courses. As with any international sale of TPOXX® pursuant to the agreement, Meridian would be the counterparty of any contract award
issued by the Canadian government and SIGA would be responsible for the manufacture, regulatory obligations and delivery of product.
Lead Product-TPOXX®
SIGA believes that TPOXX® is among the first new small-molecule drugs delivered to the Strategic Stockpile under Project BioShield. Oral
TPOXX® is a novel, patented drug that is easy to store, transport and administer. On July 13, 2018, the FDA approved oral TPOXX® for the treatment of
smallpox. Oral TPOXX® labeling, approved by the FDA, limits sales of oral TPOXX® in the U.S. to those for the Strategic Stockpile. Under the 2011
BARDA Contract, 1.7 million courses of oral TPOXX® were sold to BARDA and delivered to the Strategic Stockpile between 2013 and 2017. Courses
delivered under the 2011 BARDA Contract have an FDA-approved shelf life of seven years. Under the 19C BARDA Contract, SIGA can deliver up to 1.7
million courses of TPOXX® (of which 1,488,000 courses would be oral TPOXX® and 212,000 courses would be IV TPOXX®) to the Strategic Stockpile, at
the option of BARDA.
For IV TPOXX®, SIGA has reached concurrence with the FDA that no further clinical studies are required. Such concurrence will permit the
Company to file a new drug application ("NDA") for IV TPOXX®. The Company believes such NDA can be filed as early as the second half of 2020. Based
on its review of the NDA, the FDA will decide whether to approve IV TPOXX® and whether to impose any marketing restrictions or require additional post-
approval clinical studies. This review process will typically take ten months. There can be no assurance that any approval will be granted on a timely basis, if
at all.
As noted above, the FDA approved oral TPOXX® for the treatment of smallpox. The Company is currently planning to seek regulatory approval of
oral TPOXX® in Europe and Canada as well. Based on conversations with regulatory authorities, the Company is currently planning to submit applications
for regulatory approval of oral TPOXX® in Europe and Canada during the next twelve months and to seek an expanded indications to cover treatment of
orthopox infections.
Manufacturing
SIGA does not have a manufacturing infrastructure and does not intend to develop one for the manufacture of TPOXX®. SIGA relies on and uses
third parties known as Contract Manufacturing Organizations (“CMOs”) to procure commercial raw materials and supplies, and to manufacture TPOXX®.
SIGA's CMOs apply methods and controls in facilities that are used for manufacturing, processing, packaging, testing, analyzing and holding pharmaceuticals
which conform to current good manufacturing practices (“cGMP”), the standard set by the FDA for manufacture and storage of pharmaceuticals intended for
human use.
Oral TPOXX®:
For the manufacture of oral TPOXX®, the Company uses the following CMOs: Albemarle Corporation (“Albemarle”); Powdersize, LLC
(“Powdersize”); Catalent Pharma Solutions LLC (“Catalent”); and Packaging Coordinators, LLC ("PCI").
In August 2011, SIGA entered into an agreement with Albemarle. Such agreement was amended in April 2015 and expired in April 2018. On
October 1, 2018, SIGA entered into a new agreement with Albemarle pursuant to which Albemarle manufactures, tests and supplies active pharmaceutical
ingredient (“API”) for use in TPOXX®. The agreement provides that, during the term of the new agreement, SIGA will purchase 100% of its internal and
external API requirements for TPOXX® from Albemarle until the later of (i) September 30, 2021 and (ii) such time as SIGA has purchased twelve metric
tons of API from Albemarle under the new agreement. From and after the later of: (i) September 30, 2021, or (ii) such time as SIGA has purchased twelve
metric tons of API from Albemarle, SIGA will purchase at least 70% of its internal and external API requirements for TPOXX® from Albemarle until the
end of the term of the new agreement (as described below), unless the Company receives an offer to purchase API at a price that Albemarle is unable to
match, in which event SIGA will purchase at least 30% of its internal and external API requirements for TPOXX® from Albemarle until September 30, 2023.
There is no minimum amount of API kilograms that must be used or acquired by SIGA. The following events are excluded from the “100% API”
requirement: (i) if a contract entered into by SIGA for the sale of final drug product (“FDP”) requires that the product used as the API for such FDP be
manufactured outside the U.S.
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and Albemarle is unwilling or unable to subcontract such manufacture to a party or parties that meet the terms of the agreement; (ii) if a contract entered into
by SIGA for the sale of FDP in an intravenous formulation requires different specifications than those provided for under the agreement and the parties are
not able to reach agreement on the necessary changes to the specifications or on pricing; or (iii) if Albemarle fails to perform any of its obligations under the
agreement and does not cure such failure within 30 days of written notice from SIGA. SIGA is required to pay Albemarle within 45 days of its invoice date.
Pricing for API is at a fixed price per kilogram, subject to adjustment for increases in raw material costs and/or general manufacturing costs. Albemarle is
required to deliver API that conforms to specifications outlined in the agreement; the Company is not required to pay for API that does not meet
specifications. The Company has 120 days to reject any shipments that do not meet such specifications or are damaged. In addition to receiving payments for
API deliveries, Albemarle is also paid for related services, such as stability testing. The Company’s agreement with Albemarle is currently scheduled to
expire upon the earlier of: (i) September 30, 2023, or (ii) the fulfillment of delivery obligations under the 19C BARDA Contract. Thereafter, the agreement
shall renew for successive one-year renewal terms until either the Company or Albemarle provides notice of non-renewal at least 90 days prior to the
expiration date of a term.
Powdersize, a Lonza Group company, micronizes and tests API for use in oral TPOXX®. The Company’s agreement with Powdersize was amended
on January 11, 2019. The amended term ends on the tenth anniversary of the amendment date.
Catalent granulates, encapsulates, and tests oral TPOXX®. In addition, Catalent provides services related to commercial stability testing of drug
product and preparation for tabulated stability and trend analysis for each time point. The Company’s agreement with Catalent has an initial term that ends on
June 28, 2021. Thereafter, this agreement automatically renews for three years unless either party provides six months' notice of its desire to terminate the
agreement prior to the expiration of the term. During the term of the agreement, SIGA will purchase all of its requirements for bulk product under the 19C
BARDA contract from Catalent.
PCI provides packaging services in connection with oral TPOXX®. Additionally, PCI has contracted with the Company to provide packaging
services in connection with the intravenous formulation of TPOXX®. The Company’s agreement with PCI has an initial term that ends on March 1, 2022.
Thereafter, this agreement automatically renews for successive one-year periods unless either party provides 120 days' notice of its desire to terminate the
agreement prior to the expiration of the term. The agreement can be terminated earlier than March 1, 2022 under certain conditions.
Intravenous (IV) formulation of TPOXX®:
For the manufacture of IV TPOXX® under the BARDA contracts, the Company has agreed to use the following CMOs: Roquette America, Inc.
(“Roquette”); Patheon Manufacturing Services LLC (“Patheon”); and PCI.
Roquette provides an excipient to be used in the manufacturing of the intravenous formulation of TPOXX®. The Company's agreement with
Roquette has no minimum amount of manufacturing services that must be used. The Company’s agreement with Roquette has an initial term that ends on
December 31, 2023. Thereafter, this agreement automatically renews on a year-by-year basis unless either party provides four months’ notice of its desire to
terminate the agreement prior to the expiration of the term.
Patheon manufactures, tests and packages the intravenous formulation of TPOXX®. SIGA agreed that Patheon will be entitled to manufacture at
least 80% of the intravenous formulation of TPOXX® offered for sale by SIGA during the first three years of the agreement, provided Patheon adheres to
reasonable manufacturing standards. Thereafter, the manufacturing percentage will be as mutually agreed upon by the parties. The Company’s agreement with
Patheon has an initial term that ends on the later of: December 31, 2022 or, such date as all government contracts related to the intravenous formulation of
TPOXX® are terminated. Thereafter, this agreement automatically renews for two-year increments unless either party provides twelve months’ notice of its
desire to terminate the agreement prior to the expiration of the term.
As noted above, PCI is expected to provide packaging services for the intravenous formulation of TPOXX®.
Corporate Responsibility and Sustainability
SIGA focuses on the health security market and seeks to advance global health while promoting a sustainable environment.
SIGA seeks to advance global public health though its development and commercial activities, which include (i) delivering medical counter
measures to governments and/or non-governmental organizations ("NGOs") so that governments can cost-effectively stockpile treatments for potential public
health emergencies and (ii) donating therapies to NGOs to treat patients with serious infectious diseases in developing countries or those who are being
treated on a compassionate basis and/or within clinical trials.
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SIGA seeks to promote a sustainable environment by tracking the involvement of its manufacturing supply chain in initiatives and organizations that
prioritize a sustainable environment. All manufacturers within SIGA’s supply chain, including Albemarle, Powdersize, Catalent, PCI, Patheon and Roquette
maintain corporate social responsibility and/or sustainability programs and publicly report on those programs.
SIGA also pursues such policies within its own corporate environment, although the scale is too small to report separately their impact.
Market for Biological Defense Programs
The market for biodefense countermeasures reflects continued awareness of the threat of global terror and biowarfare activity. The U.S. government
is the largest source of development and procurement funding for academic institutions and biopharmaceutical companies conducting biodefense research or
developing vaccines, anti-infectives and immunotherapies directed at potential agents of bioterror or biowarfare. U.S. government spending on biodefense
programs includes development funding awarded by the National Institute of Allergy and Infectious Diseases, BARDA and the Department of Defense
(“DoD”), and procurement of countermeasures by BARDA, the Strategic Stockpile and the DoD. For the fiscal year ending September 30, 2020, the budget
for the U.S. Department of Health and Human Services provides an annual appropriation of approximately $2.0 billion for activities related to advanced
development and procurement of medical countermeasures for biological and other threats to civilian populations.
In addition to the U.S. government, we believe that potential additional markets for the sale of biodefense countermeasures include:
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foreign governments, including both defense and public health agencies;
non-governmental organizations and multinational companies, including transportation and security companies
healthcare providers, including hospitals and clinics; and
state and local governments, which may be interested in these products to protect, among others, emergency responders, such as police, fire and
emergency medical personnel.
At present, oral TPOXX® is not approved for sale in the U.S. beyond sales to the U.S. government for the purpose of stockpiling and/or usage by the
Strategic Stockpile. The Company would need to meet additional regulatory requirements before sales were made in the U.S. beyond the U.S government.
Research Agreements and Grants
The Company has an R&D program for IV TPOXX®. This program is funded by the 19C BARDA Contract and a separate development contract
with BARDA ("IV Formulation R&D Contract"). The IV Formulation R&D Contract has a period of performance that terminates on December 30, 2020. As
of December 31, 2019, the IV Formulation R&D Contract provides for future aggregate research and development funding of approximately $3.1 million. See
Note 3 to the consolidated financial statements regarding the 19C BARDA Contract.
In July 2019, the Company was awarded a multi-year research contract valued at a total of $19.5 million, with an initial award of $12.4 million, from
the DoD to support work in pursuit of a potential label expansion for oral TPOXX® that would include post-exposure prophylaxis ("PEP") of smallpox (such
work known as the "PEP Label Expansion Program" and the contract referred to as the "PEP Label Expansion R&D Contract"). The term of the initial award
is five years. As of December 31, 2019 the PEP Label Expansion R&D Contract provides for future aggregate research and development funding under the
initial award of approximately $12.2 million.
Contracts and grants include, among other things, options that may or may not be exercised at the U.S. Government’s discretion. Moreover, contracts
and grants contain customary terms and conditions including the U.S. Government’s right to terminate or restructure a contract or grant for convenience at
any time. As such, we may not be eligible to receive all available funds.
General
We receive cash payments from BARDA on a monthly basis, as services are performed or goods are purchased. Amounts under contract and grant
agreements are not guaranteed and can be canceled at any time for reasons such as non-performance or convenience of the U.S. government and, if canceled,
we will not receive funds for additional work under the agreements.
7
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Competition
The biotechnology and pharmaceutical industries are characterized by rapidly evolving technology and intense competition. Our competitors include
many major pharmaceutical companies, each of which has financial, technical and marketing resources significantly greater than ours. Biotechnology and
other pharmaceutical competitors in the biodefense space include, but are not limited to, Emergent BioSolutions Inc., Bavarian Nordic AS, and Chimerix Inc.
Academic institutions, governmental agencies and other public and private research organizations are also conducting research activities and seeking patent
protection and may commercialize products on their own or through joint ventures.
TPOXX® faces significant competition for government funding for both development and procurement of medical countermeasures for biological,
chemical, radiological and nuclear threats, diagnostic testing systems, and other emergency preparedness countermeasures.
Our commercial opportunities could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective,
have fewer side effects, are more convenient or are less expensive than products that we may develop. In addition, we may not be able to compete effectively
if our product candidates do not satisfy governmental procurement requirements, particularly requirements of the U.S. government with respect to biodefense
products.
Human Resources and Research Facilities
As of February 18, 2020, we had 41 full-time employees. None of our employees are covered by a collective bargaining agreement, and we consider
our employee relations to be satisfactory. Our research and development facilities are located in Corvallis, Oregon, where we lease approximately 10,276
square feet under a lease agreement that commenced on January 1, 2018 and which expires in December 2021. This lease has one remaining renewal option
for an additional three years.
Intellectual Property and Proprietary Rights
SIGA’s commercial success will depend in part on its ability to obtain and maintain patent and other intellectual property protection in the U.S. and
the rest of the world for its proprietary technologies, drug targets, and potential products and to preserve its trade secrets. Because of the substantial length of
time and expense associated with bringing potential products through the development and regulatory clearance processes to reach the marketplace, the
pharmaceutical industry places considerable importance on obtaining patent and trade secret protection. The patent positions of pharmaceutical and
biotechnology companies can be highly uncertain and involve complex legal and factual questions. No consistent policy regarding the breadth of claims
allowed in biotechnology patents across various jurisdictions has emerged to date. Accordingly, SIGA cannot predict the type and extent of claims that will be
allowed in pending patent applications.
SIGA also relies upon trade secret protection for its confidential and proprietary information. No assurance can be given that other companies will
not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to SIGA’s trade secrets or that SIGA can
meaningfully protect its trade secrets.
SIGA exclusively owns its key patent portfolios, which relate to its leading drug candidate TPOXX® (also known as ST-246, tecovirimat). As of
January 30, 2020, the TPOXX® patent portfolio has seven patent families consisting of 23 U.S. utility patents, 70 issued foreign patents, six U.S. utility
patent applications, and 38 foreign patent applications.
The principal and material issued patents covering TPOXX® are described in the table below.
Patent Number
US 7737168
US 8039504
US 7687641
US 8124643
US 7956197
US 8530509
Country
United States
United States
United States
United States
Protection Conferred
Method of treating orthopoxvirus infection with ST-246
Issue Date
June 15, 2010
Pharmaceutical compositions and unit dosage forms containing ST-246
October 18, 2011
Expiration Date
May 3, 2027^
July 23, 2027
Method of manufacturing ST-246
March 30, 2010
September 27, 2024
Composition of matter for the ST-246 compound and Pharmaceutical
compositions containing ST-246
United States
Method of manufacturing ST-246
United States
Pharmaceutical compositions containing a mixture of compounds
including ST-246
8
February 28, 2012
June 18, 2024^
June 7, 2011
June 18, 2024
September 10, 2013
June 18, 2024
Table of Contents
US 8802714
US 9045418
US 9233097
US 9339466
US 9546137
US 9744154
US 9862683
US 9670158
US 9889119
US 9907859
US 10029985
US 10045963
US 10045964
US 10124071
US 10155723
US 10406137
US 10406103
SG 184201
RU 2578606
OA 16109
NZ 602578
MX 326231
MX 348481
MX 347795
MX 361428
MX 363189
KR 101868117
JP 4884216
JP 5657489
JP 5898196
JP 6018041
JP 6188802
JP 6444460
JP 6564514
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
United States
Method of treating orthopoxvirus infection with a mixture of compounds
including ST-246
Method of manufacturing ST-246
Liquid Pharmaceutical formulations containing ST-246
Certain polymorph of ST-246, method of preparation of the polymorph
and pharmaceutical compositions containing the polymorph
Methods of preparing ST-246
Polymorphic forms of ST-246 and methods of preparation
Methods of preparing Tecovirimat
Amorphous Tecovirimat preparation
Amorphous Tecovirimat preparation
ST-246 liquid formulations and methods
Methods of preparing Tecovirimat
Amorphous Tecovirimat preparation
August 12, 2014
June 18, 2024
June 2, 2015
January 12, 2016
June 18, 2024
August 2, 2031
May 17, 2016
March 23, 2031
January 17, 2017
August 29, 2017
January 9, 2018
June 6, 2017
February 13, 2018
March 6, 2018
July 24, 2018
August 14, 2018
August 14, 2033
March 23, 2031
August 14, 2033
July 11, 2034
July 11, 2034
August 2, 2031
August 14, 2033
July 11, 2034
Certain polymorphs of ST-246, method of preparation of the polymorphs
and pharmaceutical compositions containing the polymorphs
ST-246 liquid formulations and methods
Methods of preparing Tecovirimat
Certain polymorphs of ST-246 and pharmaceutical compositions
containing the polymorphs
August 14, 2018
March 23, 2031
November 13, 2018
August 2, 2031
December 18, 2018
August 14, 2033
September 10, 2019
March 23, 2031
United States
Rehydration of micronized Tecovirimat monohydrate
September 10, 2019
November 14, 2034
Singapore
Russia
OAPI/Africa
New Zealand
Mexico
Mexico
Mexico
Mexico
Mexico
Korea
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Certain polymorphs of ST-246, method of preparation of the polymorphs
and pharmaceutical compositions containing the polymorphs
Certain polymorphs of ST-246, method of preparation of the polymorphs
and their use in treating orthopoxvirus
Certain polymorphs of ST-246, method of preparation of the polymorphs
and their use in treating orthopoxvirus
Certain polymorphs of ST-246, method of preparation of the polymorphs
and their use in treating orthopoxvirus
Pharmaceutical compositions containing ST-246 and one or more
additional ingredients and dosage unit forms containing ST-246
Compounds, compositions and methods for treatment and prevention of
orthopoxvirus infections and associated diseases
ST-246 liquid formulations and methods
Polymorphic forms of ST-246 and methods of preparation
Use of pharmaceutical compositions containing ST-246
ST-246 liquid formulations and methods
Therapeutic agent for treating orthopoxvirus including ST-246,
pharmaceutical composition of matter for the ST-246 compound and
method of manufacturing ST-246
Method of manufacturing ST-246
Liquid Pharmaceutical formulations containing ST-246
Certain polymorphs of ST-246, method of preparation of the polymorphs
and pharmaceutical compositions containing the polymorphs
Methods of preparing Tecovirimat
Methods of preparing Tecovirimat
Methods of preparing Tecovirimat
9
June 22, 2015
March 23, 2031
March 27, 2016
March 23, 2031
October 31, 2013
March 23, 2031
December 2, 2014
March 23, 2031
December 11, 2014
April 23, 2027
June 15, 2017
April 23, 2027
May 15, 2017
December 6, 2018
March 14, 2019
June 8, 2018
August 2, 2031
March 23, 2031
April 23, 2027
August 2, 2031
December 16, 2011
June 18, 2024
December 5, 2014
March 11, 2016
June 18, 2024
August 2, 2031
October 7, 2016
March 23, 2031
August 10, 2017
December 7, 2018
August 2, 2019
August 14, 2033
August 14, 2033
August 14, 2033
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JP 6594303
CN 2011800245893
CN 2013800429237
CA 2529761
CA 2685153
CA 2866037
CA 2807528
CA 2793533
AU 2004249250
AU 2007351866
AU 2011232551
AU 2011285871
AU 2013302764
AU 2012268859
AU 2014290333
AU 2014353235
Japan
China
China
Canada
Canada
Canada
Canada
Canada
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
AP 3221
ARIPO*/Africa
ZA 2012/07141
South Africa
Rehydration of micronized Tecovirimat monohydrate
October 4, 2019
November 14, 2034
Certain polymorphs of ST-246, method of preparation of the polymorphs
and pharmaceutical compositions containing the polymorphs
August 26, 2015
March 23, 2031
Methods of preparing Tecovirimat
June 20, 2017
August 14, 2033
Use of ST-246 to treat orthopoxvirus infection, pharmaceutical
compositions containing ST-246 and composition of matter for the ST-246
compound
Pharmaceutical compositions containing ST-246 and one or more
additional ingredients and dosage unit forms containing ST-246
Chemicals, compositions and methods for treatment and prevention of
orthopoxvirus infections and associated diseases
August 13, 2013
June 18, 2024
December 16, 2014
April 23, 2027
May 16, 2017
April 23, 2027
Liquid Pharmaceutical formulations containing ST-246
September 25, 2018
August 2, 2031
Certain polymorphs of ST-246, method of preparation of the polymorphs
and pharmaceutical compositions containing the polymorphs
Method of treating orthopoxvirus infection, pharmaceutical composition
containing ST-246 and composition of matter for the ST-246 compound
Pharmaceutical compositions containing ST-246 and one or more
additional ingredients and dosage unit forms containing ST-246
Certain polymorphs of ST-246, method of preparation of the polymorphs
and their use in treating orthopoxvirus
Liquid Pharmaceutical formulations containing ST-246
Methods of preparing Tecovirimat
Pharmaceutical compositions containing ST-246 and one or more
additional ingredients and dosage unit forms containing ST-246
February 26, 2019
March 23, 2031
March 29, 2012
June 18, 2024
January 10, 2013
June 18, 2024
February 26, 2015
March 23, 2031
August 6, 2015
April 5, 2018
August 2, 2031
August 14, 2033
August 18, 2016
June 18, 2024
Amorphous Tecovirimat preparation
February 21, 2019
July 11, 2034
Rehydration of micronized Tecovirimat monohydrate
August 22, 2019
November 14, 2034
Certain polymorphs of ST-246, method of preparation of the polymorphs
and their use in treating orthopoxvirus
Certain polymorphs of ST-246, method of preparation of the polymorphs
and pharmaceutical compositions containing the polymorphs
April 3, 2015
March 23, 2031
June 29, 2016
March 23, 2031
ZA 2013/00930
South Africa
Liquid Pharmaceutical formulations containing ST-246
November 25, 2015
August 2, 2031
IL 201736
IL 236944
IL 242666
IL 221991
Israel
Israel
Israel
Israel
Pharmaceutical compositions containing ST-246 and one or more
additional ingredients and dosage unit forms containing ST-246
October 1, 2016
April 23, 2027
Methods of preparing Tecovirimat
February 1, 2017
August 14, 2033
Compounds, compositions and methods for treatment and prevention of
orthopoxvirus infections and associated diseases
Certain polymorphs of ST-246, method of preparation of the polymorphs
and pharmaceutical compositions containing the polymorphs
December 1, 2018
April 23, 2027
October 1, 2019
March 23, 2031
10
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AT 1638938
BE 1638938
BE 2549871
BE 2600715
CH 1638938
CH 2549871
CH 2600715
DE 1638938
DE 2549871
DE 2887938
DE 2600715
DK 1638938
DK 2549871
DK 2600715
ES 1638938
FI 1638938
FR 1638938
FR 2887938
FR 2549871
FR 2600715
GB 1638938
GB 2887938
GB 2549871
GB 2600715
Austria
Belgium
Belgium
Belgium
Switzerland
Switzerland
Switzerland
Germany
Germany
Germany
Germany
Denmark
Denmark
Denmark
Spain
Finland
France
France
France
France
Compounds, compositions and methods for treatment and prevention of
orthopoxvirus infections and associated diseases
Compounds, compositions and methods for treatment and prevention of
orthopoxvirus infections and associated diseases
Polymorphic forms of ST-246
Liquid Pharmaceutical formulations containing ST-246
Compounds, compositions and methods for treatment and prevention of
orthopoxvirus infections and associated diseases
Polymorphic forms of ST-246
Liquid Pharmaceutical formulations containing ST-246
Compounds, compositions and methods for treatment and prevention of
orthopoxvirus infections and associated diseases
Polymorphic forms of ST-246
Methods of preparing Tecovirimat
April 12, 2017
June 18, 2024
April 12, 2017
June 18, 2024
August 22, 2018
December 11, 2019
March 23, 2031
August 2, 2031
April 12, 2017
June 18, 2024
August 22, 2018
December 11, 2019
March 23, 2031
August 2, 2031
April 12, 2017
June 18, 2024
August 22, 2018
January 10, 2018
March 23, 2031
August 14, 2033
Liquid Pharmaceutical formulations containing ST-246
December 11, 2019
August 2, 2031
Compounds, compositions and methods for treatment and prevention of
orthopoxvirus infections and associated diseases
Polymorphic forms of ST-246
Liquid Pharmaceutical formulations containing ST-246
Compounds, compositions and methods for treatment and prevention of
orthopoxvirus infections and associated diseases
Compounds, compositions and methods for treatment and prevention of
orthopoxvirus infections and associated diseases
Compounds, compositions and methods for treatment and prevention of
orthopoxvirus infections and associated diseases
Methods of preparing Tecovirimat
Polymorphic forms of ST-246
Liquid Pharmaceutical formulations containing ST-246
United Kingdom
Compounds, compositions and methods for treatment and prevention of
orthopoxvirus infections and associated diseases
United Kingdom
Methods of preparing Tecovirimat
United Kingdom
Polymorphic forms of ST-246
United Kingdom
Liquid Pharmaceutical formulations containing ST-246
11
April 12, 2017
June 18, 2024
August 22, 2018
December 11, 2019
March 23, 2031
August 2, 2031
April 12, 2017
June 18, 2024
April 12, 2017
June 18, 2024
April 12, 2017
June 18, 2024
January 10, 2018
August 22, 2018
December 11, 2019
August 14, 2033
March 23, 2031
August 2, 2031
April 12, 2017
June 18, 2024
January 10, 2018
August 22, 2018
December 11, 2019
August 14, 2033
March 23, 2031
August 2, 2031
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HK 1179824
Hong Kong
IE 1638938
Ireland
IT 502017000078377
Italy
NL 1638938
Netherlands
PL 1638938
SE 1638938
Poland
Sweden
Certain polymorphs of ST-246, method of preparation of the polymorphs
and pharmaceutical compositions containing the polymorphs
Compounds, compositions and methods for treatment and prevention of
orthopoxvirus infections and associated diseases
Compounds, compositions and methods for treatment and prevention of
orthopoxvirus infections and associated diseases
Compounds, compositions and methods for treatment and prevention of
orthopoxvirus infections and associated diseases
Compounds, compositions and methods for treatment and prevention of
orthopoxvirus infections and associated diseases
Compounds, compositions and methods for treatment and prevention of
orthopoxvirus infections and associated diseases
June 21, 2019
March 23, 2031
April 12, 2017
June 18, 2024
April 12, 2017
June 18, 2024
April 12, 2017
June 18, 2024
April 12, 2017
June 18, 2024
April 12, 2017
June 18, 2024
^ A Patent Term Extension Application is pending for US 7737168, which would change the expiration date from May 3, 2027 to September 4, 2031. A
Patent Term Extension Application is also pending for US 8124643, which would change the expiration date from June 18, 2024 to December 13, 2027. In
the event that both US 7737168 and US 8124643 are found to be eligible for a patent term extension, SIGA would only be able to elect one of the two patents
for which the extension is sought and would elect to extend US 7737168.
* ARIPO has 19 member African States as follows: Botswana, The Gambia, Ghana, Kenya, Lesotho, Malawi, Mozambique, Namibia, Sierra Leone, Liberia,
Rwanda, Sao Tome and Principe, Somalia, Sudan, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe.
In addition to the patents listed in the above chart, the principal and material patent applications covering TPOXX® include patent filings in multiple
jurisdictions, including the United States, Europe, Asia, Australia, and other commercially significant markets. We hold 44 patent applications currently
pending with respect to various compositions of TPOXX®, methods of manufacturing, methods of treatment, and dosage forms. Expiration dates for pending
patent applications, if granted, will fall between 2024 and 2037.
FDA regulations require that patented drugs be sold under brand names that comply with various regulations. SIGA must develop and make efforts
to protect these brand names for each of its products in order to avoid product piracy and to secure exclusive rights to these brand names. SIGA may expend
substantial funds in developing and securing rights to adequate brand names for our products. SIGA currently has proprietary trademark rights in SIGA®,
TPOXX® and other brands used by us in the United States and certain foreign countries, but we may have to develop additional trademark rights in order to
comply with regulatory requirements. SIGA may need to pursue different names and trademarks ex-U.S. in light of native language and other jurisdictional
considerations. SIGA considers securing adequate trademark rights to be important to its business.
Government Regulation
Regulatory Approval Process
Regulation by governmental authorities in the United States and other countries is a significant factor in the manufacture and marketing of any
biopharmaceutical product that we may develop. The nature and the extent to which such regulations may apply to us will vary depending on the nature of
any particular product. Virtually all of our potential pharmaceutical products will require regulatory approval by governmental agencies prior to non-
governmental commercialization. In particular, human therapeutic products are subject to rigorous pre-clinical and clinical testing and other approval
procedures by the FDA and similar health authorities in foreign countries. Various federal statutes and regulations also govern or regulate the manufacturing,
safety, labeling, storage, record keeping and marketing of such products. The process of obtaining these approvals and the subsequent compliance with
appropriate federal and foreign statutes and regulations is complex and requires expertise and the expenditure of substantial resources.
In order to test clinically, and to manufacture and market products for diagnostic or therapeutic use, a company must comply with mandatory
procedures and safety standards established by the FDA and comparable agencies in foreign countries. Before beginning human clinical testing of a potential
new drug in the United States, a company must file an IND application and
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receive clearance from the FDA. An IND application is a summary of the pre-clinical studies that were conducted to characterize the drug, including toxicity
and safety studies, information on the drug’s composition and the manufacturing and quality control procedures used to produce the drug, as well as a
discussion of the human clinical studies that are being proposed to evaluate the safety and efficacy of the product.
The pre-marketing clinical program required for approval by the FDA for a new drug typically involves a time-consuming and costly three-phase
process. In Phase I, trials are conducted with a small number of healthy subjects to determine the early safety profile, the pattern of drug distribution,
metabolism and elimination. In Phase II, trials are conducted with small groups of patients afflicted with a target disease in order to determine preliminary
efficacy, optimal dosages and expanded evidence of safety. In Phase III, large scale, multi-center comparative trials, which may include both controlled and
uncontrolled studies, are conducted with patients afflicted with a target disease in order to provide enough data for statistical proof of efficacy and safety
required by the FDA and other authorities. Additional trials may be required to evaluate how a new drug interacts with other drugs as well as if the drug has
any impact on cardio-vascular or other potential risks.
The FDA closely monitors the progress of each of the three phases of clinical testing and may, in its discretion, reevaluate, alter, suspend or
terminate the testing based on the data that have been accumulated to that point and its assessment of the risk/benefit ratio to the patients involved in the
testing. Estimates of the total time typically required for carrying out such clinical testing vary between two and 10 years. Upon completion of such clinical
testing, a company typically submits an NDA to the FDA that summarizes the results and observations of the drug during the clinical testing. Based on its
review of the NDA, the FDA will decide whether to approve the drug and whether to impose any marketing restrictions or require additional post-approval
clinical studies. This review process can be quite lengthy, and approval for the production and marketing of a new pharmaceutical product can require a
number of years and substantial funding. There can be no assurance that any approval will be granted on a timely basis, if at all. In some circumstances, a new
formulation of an approved product may be reviewed through a supplemental NDA process which relies in part on the prior approval of the initial
formulation.
The FDA amended its regulations, effective June 30, 2002, to include the “Animal Rule” in circumstances that would permit the typical clinical
testing regime to approve certain new drug and biological products used to reduce or prevent the toxicity of chemical, biological, radiological, or nuclear
agents not otherwise naturally present for use in humans based on evidence of safety in healthy subjects and evidence of effectiveness derived only from
appropriate animal studies and any additional supporting data. The FDA has indicated that approval for therapeutic use of TPOXX® was determined under
the “Animal Rule.”
Once the product is approved for sale, FDA regulations govern the manufacturing and marketing activities, and a post-marketing testing and
surveillance program may be required to monitor a product’s usage and effects. Product approvals may be withdrawn if compliance with regulatory standards
is not maintained. Many other countries in which products developed by us may be marketed impose similar regulatory processes.
FDA regulations also make available an alternative regulatory mechanism that may lead to use of the product under limited circumstances. The
Emergency Use Authorization (“EUA”) authority allows the FDA Commissioner to strengthen the public health protections against biological, chemical,
radiological and nuclear agents that may be used to attack the American people or the U.S. armed forces. Under this authority, the FDA Commissioner may
allow medical countermeasures to be used in an emergency to diagnose, treat or prevent serious or life-threatening diseases or conditions caused by such
agents when appropriate findings are made concerning the nature of the emergency, the availability of adequate and approved alternatives, and the quality of
available data concerning the drug candidate under consideration for emergency use.
Legislation and Regulation Related to Bioterrorism Counteragents and Pandemic Preparedness
Because our drug candidates are intended for the treatment of diseases that may result from acts of bioterrorism or biowarfare or for pandemic
preparedness, they may be subject to the specific legislation and regulation described below and elsewhere in this Annual Report on Form 10-K.
Project BioShield
Project BioShield and related 2006 federal legislation provide procedures for biodefense-related procurement and awarding of research grants,
making it easier for the U.S. Department of Health and Human Services (“HHS”) to commit funds to countermeasure projects. Project BioShield provides
alternative procedures under the Federal Acquisition Regulation, the general rubric for acquisition of goods and services by the U.S. government, for
procuring property or services used in performing, administering or supporting biomedical countermeasure research and development. In addition, if the
Secretary of HHS deems that there is a pressing need, Project BioShield authorizes the Secretary of HHS to use an expedited award process, rather than
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the normal peer review process, for grants, contracts and cooperative agreements related to biomedical countermeasure research and development activity.
Under Project BioShield, the Secretary of HHS, with the concurrence of the Secretary of the U.S. Department of Homeland Security and upon the
approval of the President, can contract to purchase unapproved countermeasures for the Strategic Stockpile in specified circumstances. The U.S. Congress is
notified of a recommendation for a Strategic Stockpile purchase after Presidential approval. Project BioShield specifies that a company supplying the
countermeasure to the Strategic Stockpile is paid on delivery of a substantial portion of the countermeasure. To be eligible for purchase under these
provisions, the Secretary of HHS must determine that there are sufficient and satisfactory clinical results or research data, including data, if available, from
pre-clinical and clinical trials, to support a reasonable conclusion that the countermeasure will qualify for approval or licensing within eight years. Project
BioShield also allows the Secretary of HHS to authorize the emergency use of medical products that have not yet been approved by the FDA. To exercise this
authority, the Secretary of HHS must conclude that:
•
•
•
•
the agent for which the countermeasure is designed can cause serious or life-threatening disease;
the product may reasonably be believed to be effective in detecting, diagnosing, treating or preventing the disease;
the known and potential benefits of the product outweigh its known and potential risks; and
there is no adequate alternative to a product that is approved and available.
Although this provision permits the Secretary of HHS to circumvent FDA approval (entirely, or in part) for procurement and use, its use in this
manner would likely be limited to rare circumstances. Prior to the award of the BARDA Contract in May 2011, the Secretary of HHS concluded that
TPOXX® would qualify within eight years for approval by the FDA for therapeutic use against smallpox.
Public Readiness and Emergency Preparedness Act
The Public Readiness and Emergency Preparedness Act (the "PREP Act") provides immunity for manufacturers from claims under state or federal
law for “loss” arising out of the administration or use of a “covered countermeasure” in the United States. However, injured persons may still bring a suit for
“willful misconduct” against the manufacturer under some circumstances. “Covered countermeasures” include security countermeasures and “qualified
pandemic or epidemic products,” including products intended to diagnose or treat pandemic or epidemic disease, as well as treatments intended to address
conditions caused by such products. For these immunities to apply, the Secretary of HHS must issue a declaration in cases of public health emergency or
“credible risk” of a future public health emergency. Since 2007, the Secretary of HHS has issued eight declarations under the PREP Act to protect from
liability countermeasures that are necessary to prepare the nation for potential pandemics or epidemics, including a declaration on October 10, 2008 that
provides immunity from tort liability as it relates to smallpox. The PREP Act was amended in 2015 to extend protection for smallpox and other
countermeasures from December 31, 2015 to December 31, 2022.
Foreign Regulation
As noted above, in addition to regulations in the United States, we might be subject to a variety of foreign regulations governing clinical trials and
commercial sales and distribution of our drug candidates. Regardless of any FDA approval of a product, we may have to obtain approval of that product by
the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The actual
time required to obtain clearance to market a product in a particular foreign jurisdiction varies substantially, based upon the type, complexity and novelty of
the pharmaceutical drug candidate, the specific requirements of that jurisdiction, and in some countries whether the FDA has previously approved the drug for
marketing. The requirements governing the conduct of clinical trials, marketing authorization, pricing and reimbursement vary from country to country.
Certain foreign jurisdictions, including the European Union and Health Canada, have adopted certain biodefense-specific regulations akin to that available in
the United States such as a procedure similar to the “Animal Rule” promulgated by the FDA for review and potential approval of biodefense products.
Regulations Regarding Government Contracting
The status of an organization as a government contractor in the United States and elsewhere means that the organization is also subject to various
statutes and regulations, including the Federal Acquisition Regulation, which governs the procurement of goods and services by agencies of the United States.
These governing statutes and regulations can impose stricter penalties than those normally applicable to commercial contracts, such as criminal and civil
damages liability and suspension and debarment
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from future government contracting. In addition, pursuant to various statutes and regulations, government contracts can be subject to unilateral termination or
modification by the government for convenience in the United States and elsewhere, detailed auditing requirements, statutorily controlled pricing, sourcing
and subcontracting restrictions and statutorily mandated processes for adjudicating contract disputes.
Availability of Reports and Other Information
We file annual, quarterly, and current reports, proxy statements, and other documents with the SEC under the Securities Exchange Act of 1934. The
public may read and copy any material that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The
public may obtain information on the operation of the Public Reference Room by calling the SEC at (800) SEC-0330. Also, the SEC maintains an Internet
website that contains reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC.
The public can obtain any document that we file with or furnish to the SEC at www.sec.gov.
In addition, our website can be found on the internet at www.siga.com. The website contains information about us and our operations. Copies of each
of our filings with the SEC on Form 10-K, Form 10-Q, and Form 8-K, and all amendments to those reports, can be viewed and downloaded free of charge as
soon as reasonably practicable after the reports and amendments are electronically filed with or furnished to the SEC. To view the reports, access
www.siga.com, click on “Investor Relations” and “Financial Information.”
The following corporate governance related documents are also available on our website:
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Audit Committee Charter;
Compensation Committee Charter;
Nominating and Corporate Governance Committee Charter;
Code of Ethics and Business Conduct;
Procedure for Sending Communications to the Board of Directors;
Procedures for Security Holder Submission of Nominating Recommendations;
Policy on Confidentiality of Information and Securities Trading; and
Conflict of Interest Policy.
To review these documents, access www.siga.com and click on “Investor Relations” and “Corporate Governance.”
Any of the above documents can also be obtained in print by any shareholder upon request to the Secretary, SIGA Technologies, Inc., 31 E 62nd Street, 5th
floor, New York, New York 10065.
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Item 1A. Risk Factors
This report contains forward-looking statements and other prospective information relating to future events. These forward-looking statements and other
information are subject to risks and uncertainties that could cause our actual results to differ materially from our historical results or currently anticipated
results including the following:
Risks Related to Our Dependence on U.S. Government Contracts
U.S. government contracts require ongoing funding decisions by the government, and the majority of the potential revenue under the 19C BARDA
Contract is tied to options which may or may not be exercised at the sole discretion of BARDA. Reduced or discontinued BARDA funding, or the non-
exercise of contract options under the 19C BARDA contract, could cause our business, financial condition and operating results, to suffer materially.
The funding of government programs, which fund BARDA’s purchases under the 19C BARDA Contract, is subject to Congressional appropriations,
generally made on a fiscal year basis even though a program may continue for several years. Our government customers are subject to political considerations
and budgetary constraints. Our government customers are also subject to uncertainties as to continued funding of their budgets.
Additionally, government-funded contracts typically consist of a base period of performance and options for the performance of certain future
activities. The value of goods and services subject to options may constitute the majority of the total value of the underlying contract, as in the case of the 19C
BARDA Contract.
The 19C BARDA Contract is primarily option-based, with more than 80% of contract value tied to options which are exercisable in the sole
discretion of BARDA. There is no guarantee that any options will be exercised, or how many options will be exercised. If some or all of the options under the
19C BARDA Contract are not exercised, whether because levels of government expenditures and authorizations for biodefense decrease or shift to programs
other than those under which BARDA purchases are funded for any reason, our business, financial condition and operating results, our business development
efforts or our product development efforts may suffer materially.
Government procurement contracts are mostly set at fixed prices and such pricing is based on estimates of the time, resources and expenses required to
perform these contracts. If our estimates are not accurate, we may not be able to earn an adequate return or may incur a loss under these arrangements.
The remaining unexercised options under the 19C BARDA Contract are predominately fixed-price. We expect that our future contracts with the U.S.
government for TPOXX® as well as contracts for other biodefense product candidates would also be fixed-price arrangements. Under a fixed-price contract,
we are required to deliver our products at a fixed price regardless of the actual costs we incur and to absorb any costs incurred in satisfaction of our
obligations. Estimating costs that are related to performance in accordance with contract specifications can be difficult, particularly where the period of
performance is over several years. Our failure to anticipate technical problems, estimate costs accurately or control costs during performance of a fixed-price
contract could reduce the profitability of such contract or cause a loss, which could in turn negatively affect our operating results.
We expect future operating revenues to come significantly from contracts with BARDA for the provision and maintenance of the U.S. Government’s
stockpile of TPOXX®. If BARDA does not enter into additional contracts after the 19C BARDA Contract to maintain or expand the stockpile of
TPOXX®, our long-term business, financial condition and operating results could be materially harmed.
The success of our business and our operating results for the foreseeable future will be substantially dependent on the U.S. government’s
commitment to maintaining or expanding its stockpile of TPOXX®. Failure to secure and perform additional contracts after the 19C BARDA Contract to
substantially maintain or expand the stockpile of TPOXX® could have a material adverse effect on our long-term business, financial condition and operating
results. Additionally, the 19C BARDA Contract does not necessarily increase the likelihood that we will secure future comparable contracts with the U.S.
government.
The success of our business with the U.S. government depends on our compliance with laws, regulations and obligations under our U.S. government
contracts and various federal statutes and authorities.
Our business with the U.S. government is subject to specific procurement regulations and a variety of other legal and compliance obligations. These
laws and rules include those related to:
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rates and pricing of services and goods to be reimbursed by the U.S. government;
export control;
government security regulations;
employment practices;
protection of the environment;
accuracy of records and the recording and reporting of costs; and
foreign corrupt practices.
Compliance with these obligations increases our performance and compliance costs. A finding that we have failed to comply with these regulations
and requirements could lead to suspension or debarment, for cause, from government contracting or subcontracting for a period of time. The termination of a
government contract or grant or relationship as a result of our failure to satisfy any of these obligations would have a material negative impact on our
operations and harm our reputation and ability to procure other government contracts or grants in the future.
Unfavorable provisions in government contracts and grants, some of which may be customary, may harm our future business, financial condition and
potential operating results.
Government contracts and grants customarily contain provisions that give the government substantial rights and remedies, many of which are not
typically found in commercial contracts, including (but not limited to) provisions that allow the government to:
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terminate existing contracts or grants, in whole or in part, for any reason or no reason;
unilaterally reduce or modify grants, contracts or subcontracts, including through the use of equitable price adjustments;
cancel multi-year contracts or grants and related orders if funds for performance for any subsequent year become unavailable;
decline to exercise an option to renew a contract or grant;
exercise an option to purchase only the minimum amount specified in a contract or grant;
decline to exercise an option to purchase the maximum amount specified in a contract or grant;
claim rights to products, including intellectual property, developed under a contract or grant;
take actions that result in a longer development timeline or higher costs than expected;
suspend or debar the contractor from doing business with the government or a specific government agency due to regulatory or compliance failures;
pursue criminal or civil remedies under the False Claims Act and the False Statements Accountability Act; and
control or prohibit the export of products.
Generally, government contracts contain provisions permitting unilateral termination or modification, in whole or in part, at the government’s
convenience. Under general principles of government contracting law, if the government terminates a contract or grant for convenience, the terminated
company may recover only its incurred or committed costs, settlement expenses and profit on work completed prior to the termination. If the government
terminates a contract or grant for default, the defaulting company is entitled to recover costs incurred and associated profits on accepted items only and may
be liable for excess costs incurred by
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the government in procuring undelivered items from another source. Our government contracts and grants, including the 19C BARDA Contract, could be
terminated under these circumstances.
Some government contracts and grants permit the government the right to use, for or on behalf of the U.S. government, any technologies developed
by the contractor under a government contract. For any technology we develop under a contract or grant with such a provision, we might not be able to
prohibit third parties, including our competitors, from using that technology in providing products and services to the government.
Changing political or social factors and opposition, including protests and potential related litigation, may delay or impair our ability to market TPOXX®
and any other biodefense product candidates and may require us to spend time and money to address these issues.
Products developed to treat diseases caused by or to combat the threat of bioterrorism or biowarfare will be subject to changing political and social
environments. The political and social responses to bioterrorism and biowarfare have been unpredictable and much debated. Changes in the perception of the
risk that military personnel or civilians could be exposed to biological agents as weapons of bioterrorism or biowarfare may delay or cause resistance to
bringing investigational products to market or limit pricing or purchases of approved products, any of which could materially harm our business.
Lawsuits, publicity campaigns or other negative publicity may adversely affect the degree of market acceptance of, and thereby limit the demand for,
TPOXX® and our biodefense product candidates. In such event, our ability to market and sell such products may be hindered, the commercial success of
TPOXX® and other products we develop may be harmed and we may need to expend time, attention and resources addressing such legal or publicity issues,
thereby reducing our revenues and having a material adverse impact on us.
A U.S. Government shutdown could negatively impact our business and liquidity
Each year, the U.S. Congress must pass all spending bills in the federal budget. If any such spending bill is not timely passed, a government
shutdown may close many federally run operations, and halt work for federal employees unless they are considered essential or such work is separately
funded by industry. If a government shutdown were to occur, we could experience a delay in contract funding decisions by the government. Additionally, we
could be materially and permanently harmed by any prolonged government shutdown.
Risks Related to Sales of Biodefense Products to the U.S. Government
Our business could be adversely affected by a negative audit by the U.S. government.
U.S. government agencies such as the Defense Contract Audit Agency (the “DCAA”), routinely audit and investigate government contractors. These
agencies review a contractor’s performance under its contracts and grants, cost structure, and compliance with applicable laws, regulations and standards.
The DCAA also reviews the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s
purchasing, property, estimating, compensation and management information systems. Any cost found to be improperly allocated to a specific contract will
not be reimbursed, and such costs already reimbursed must be refunded. If an audit uncovers improper or illegal activities, we may be subject to civil and
criminal penalties and administrative sanctions, including:
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termination of contracts;
forfeiture of profits;
suspension of payments;
fines; and
suspension, debarment or prohibition from doing business with the U.S. government.
Such actions would also negatively affect our reputation.
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Laws and regulations affecting government contracts and grants might make it more costly and difficult for us to conduct our business.
We must comply with numerous laws and regulations relating to the formation, administration and performance of government contracts and grants,
which can make it more difficult for us to retain our rights under these contracts. These laws and regulations affect how we do business with federal, state and
local governmental agencies. Among the most significant government contracting regulations that affect our business are:
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the Federal Acquisition Regulation and other agency-specific regulations supplemental to the Federal Acquisition Regulation, which
comprehensively regulate the procurement, formation, administration and performance of government contracts;
the business ethics and public integrity obligations, which govern conflicts of interest and the hiring of
former government employees, restrict the granting of gratuities and funding of lobbying activities and incorporate other requirements such as the
Anti-Kickback Act and the Foreign Corrupt Practices Act;
export and import control laws and regulations; and
laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes and the
exportation of certain products and technical data.
Risks Related to Regulatory Approvals
If we are not able to obtain regulatory approvals for certain additional indications or formulations of TPOXX® from the FDA, we may not be able to
realize the full benefits of any BARDA contracts and may not be able to commercialize such formulations or indications other than through sales to
BARDA, and our ability to generate revenue could be materially impaired.
The development and full commercialization of additional indications or formulations of TPOXX® in the U.S., including the testing, manufacture,
safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA
and other regulatory agencies in the United States and by comparable authorities in other countries and jurisdictions. We could fail to achieve FDA or other
regulatory approval of certain indications or formulations of TPOXX®, or there could be delays in such approval of TPOXX®, or the approved version of
TPOXX® may differ from expectations. Failure to obtain regulatory approval of certain indications or formulations for TPOXX® may prevent us from fully
commercializing TPOXX® in the United States other than through sales to BARDA under Project BioShield or from commercializing TPOXX® in other
countries at all, and delays or alterations to regulatory applications could also have a material adverse effect on the Company.
Failure to obtain regulatory approval in international jurisdictions could prevent us from marketing our products abroad.
To market our products in the European Union and many other foreign jurisdictions, we may need to obtain separate regulatory approvals and
comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time
required to obtain approval may differ from that required to obtain FDA approval.
The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatory
approvals on a timely basis, if at all. Approval by FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by
one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or jurisdictions or by the FDA. In addition,
failure to obtain approval in one jurisdiction may impact our ability to obtain approval elsewhere. We may not be able to file for regulatory approvals and may
not receive necessary approvals to commercialize our products in any non-U.S. market. If we fail to obtain the non-U.S. approvals required to market our
product candidates outside the United States or if we fail to comply with applicable non-U.S. regulatory requirements, our target market may be reduced and
our ability to realize the full market potential of our product candidates may be harmed and our business, financial condition, results of operations and
prospects may be adversely affected.
Risks Related to Commercial Activities
Because we must obtain regulatory clearance or otherwise operate under strict legal requirements in order to manufacture and market our products in
the U.S., we cannot predict whether or when we will be permitted to commercialize our products other than the oral formulation of TPOXX® for
smallpox antiviral treatment.
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While we have received FDA approval for oral TPOXX® for use in smallpox treatment, we have not received FDA approval for the IV formulation
of TPOXX® or any other indications for TPOXX®. FDA approval is limited only to those conditions for which a product is demonstrated through clinical
trials to be safe and efficacious as set forth in its approved product label. We cannot ensure that other formulations of TPOXX® or any other compound
developed by us, alone or with others, will prove to be safe and efficacious in pre-clinical or clinical trials or animal efficacy studies, or that oral TPOXX®
will prove to be safe and efficacious in pre-clinical or clinical trials or animal efficacy studies for other indications, nor whether all of the applicable
regulatory requirements needed to receive full marketing clearance for other indications or other formulations will be met.
Our ability to grow our business may depend in part on our ability to achieve sales of TPOXX® to customers other than the U.S. government.
An element of our business strategy is to sell TPOXX® to customers other than the U.S. government. These potential customers include foreign
governments, as well as state and local governments, non-governmental organizations focused on global health like the World Health Organization, health
care institutions like hospitals (domestic and foreign) and certain large business organizations interested in protecting their employees against global threats
and protecting first responders in cases of emergencies.
To the extent we seek such non-government sales in the U.S., we will need to meet additional regulatory requirements in light of the current labeling
approved by the FDA for the Strategic Stockpile only.
The market for sales of TPOXX® to customers other than the U.S. government is undeveloped, and we may not be successful in generating
meaningful sales of TPOXX®, if any, to these potential customers.
If we fail to increase our sales of TPOXX® to customers other than the U.S. government, our business and opportunities for growth could be limited.
If we are unable to expand our internal sales and marketing capabilities or enter into agreements with third parties with expertise in sales and marketing,
we may be unable to generate cash flows from product sales to customers other than the U.S. government.
To achieve commercial success for any approved product, we may need to enhance our own sales and marketing capabilities, enter into
collaborations with third parties able to perform these services or outsource these functions to third parties.
We recently entered into the International Promotion Agreement described under “Business”, pursuant to which we granted a third party, Meridian,
exclusive rights to market, advertise, promote, offer for sale, or sell oral TPOXX® in all geographic regions except for the United States and South Korea (the
“Territory”), and Meridian agreed not to commercialize any competing product, as defined in the International Promotion Agreement, in the specified field of
use in the Territory. Our future revenues may depend heavily on the success of the efforts of Meridian pursuant to the International Promotion Agreement,
which may not be successful.
In the United States and South Korean markets, we will retain sales and marketing rights with respect to oral TPOXX®. In these markets, we
currently employ a small, targeted group to support development and business activities related to TPOXX®. For the South Korean market, we are
continually assessing the best approach for business development. Even if we deem it necessary or advisable, we may have difficulty establishing
relationships with third parties with respect to this market on terms that are acceptable to us or at all. For the United States market, we plan to continue our
current approach for sales to the U.S. government of any other biodefense product candidates that we may successfully develop. If we are unable to
adequately support our development and business activities in the United States, we may be unable to expand our sales of TPOXX® or other product
candidates, which could have an adverse effect on our growth.
We may be required to perform additional clinical trials or change the labeling of TPOXX® if we or others identify side effects after we are on the market,
which could harm future sales of such product.
If we or others identify side effects of any approved product, or if manufacturing problems occur:
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regulatory approval may be withdrawn;
reformulation of our products, additional clinical trials or other testing or changes in labeling of our products may be required;
changes to or re-approvals of manufacturing facilities used by SIGA may be required;
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sales of the affected products may drop significantly;
our reputation in the marketplace may suffer; and
lawsuits, including class action suits, may be brought against us.
Any of the above occurrences could harm or prevent future sales of the affected product or could increase the costs and expenses of commercializing
and marketing these products.
The biopharmaceutical market in which we compete and will compete is highly competitive.
The biopharmaceutical industry is characterized by rapid and significant technological change. Our success will depend on our ability to develop and
apply our technologies in the design and development of our product candidates and to establish and maintain a market for our product candidates. In
addition, there are many companies, both public and private, including major pharmaceutical and chemical companies, specialized biotechnology firms,
universities and other research institutions engaged in developing pharmaceutical and biotechnology products. Many of these companies have substantially
greater financial, technical, research and development resources, and human resources than us. Competitors may develop products or other technologies that
are more effective than any that are being developed by us or may obtain FDA approval for products more rapidly than us. If we commence commercial sales
of products, we still must compete in the manufacturing and marketing of such products, areas in which it is very difficult to succeed and in which we have
limited experience and in which we are partially dependent on third parties. Many potential competitors have manufacturing facilities and established
marketing capabilities that would enable such companies to market competing products through existing channels of distribution which could provide a
substantial advantage.
Product liability lawsuits could cause us to incur liabilities, which could be substantial, and require us to limit commercialization of any products that we
may develop.
We face an inherent business risk related to the sale of TPOXX® and any other products that we successfully develop and the testing of our product
candidates in clinical trials.
TPOXX® is currently identified as a covered countermeasure under the PREP Act declaration issued in October 2008, as amended, which provides
us with substantial immunity with respect to the manufacture, administration or use of TPOXX®. Under our BARDA Contracts, the U.S. government should
indemnify us against claims by third parties for death, personal injury and other damages related to TPOXX®, including reasonable litigation and settlement
costs, to the extent that the claim or loss results from specified risks not covered by insurance or caused by our grossly negligent or criminal behavior. The
collection process under the PREP Act can be lengthy and complicated, and there is no guarantee that we will be able to recover these amounts from the U.S.
government.
If we cannot successfully defend ourselves against future claims that our product or product candidates caused injuries and we are not entitled to or
able to obtain indemnity by the U.S. government with respect to such claims, or if the U.S. government does not honor its indemnification obligations, we
may incur liabilities, which could be substantial. Regardless of merit or eventual outcome, product liability claims may result in:
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decreased demand for any product candidate or product that we may develop;
injury to our reputation;
withdrawal of a product from the market;
costs and management time and focus to defend the related litigation;
substantial monetary awards to trial participants or patients;
loss of revenue;
harm to our reputation; and
the inability to commercialize any products that we may develop.
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We currently have product liability insurance with coverage up to a $10 million annual aggregate limit and a $10 million per occurrence limit. The
amount of insurance that we currently hold may not be adequate to cover all liabilities that may occur. Product liability insurance is difficult to obtain and
increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost and we may not be able to maintain or obtain insurance
coverage that will be adequate to satisfy any liability that may arise.
Additionally, a successful product liability claim or series of claims brought against us could cause our stock price to fall, could decrease our
financial resources and materially exhaust our existing insurance or limit our ability to obtain insurance going forward, all of which would materially
adversely affect our business.
If we seek to sell TPOXX® to non-government customers, healthcare reform and controls on healthcare spending may limit the price we charge for our
products and the amounts that we can sell.
There have been a number of legislative and regulatory proposals in the United States to change the health care system in ways that could affect our
ability to sell our products profitably if we seek to sell TPOXX® to non-government customers. One enacted proposal, the Patient Protection and Affordable
Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Healthcare Reform Act”), substantially changed the
way healthcare is financed by both governmental and private insurers and could have a substantial effect on the pharmaceutical industry. The Healthcare
Reform Act contains a number of provisions, including those governing enrollment in federal healthcare programs like Medicare, reimbursement changes and
rules protecting against fraud and abuse that will change existing healthcare programs and will result in the development of new programs, including
Medicare payment for performance initiatives and improvements to the physician quality reporting system and feedback program. If we obtain marketing
approval for sale of TPOXX® beyond the Strategic Stockpile, it is possible that some of our revenue may be derived from governmental healthcare programs,
including Medicare. Furthermore, beginning in 2011, the Healthcare Reform Act imposed a non-deductible excise tax on pharmaceutical manufacturers or
importers who sell “branded prescription drugs,” which includes innovator drugs and biologics (excluding orphan drugs or generics) to U.S. government
programs. The Healthcare Reform Act and other healthcare reform measures that may be adopted in the future could have an adverse effect on our industry
generally and potential future sales and profitability of our current or future products specifically.
Laws and regulations governing international operations may preclude us from developing, manufacturing and selling certain product candidates outside
of the United States and require us to revise and implement costly compliance programs.
If we expand our operations outside of the United States, we must comply with numerous laws and regulations relating to business operations in
each jurisdiction in which we plan to operate. The creation and implementation of international business practices and compliance programs may be costly
and such programs can be difficult to enforce, particularly where reliance on third parties is required.
The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering
anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign
entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the
United States to comply with certain accounting provisions requiring the Company to maintain books and records that accurately and fairly reflect all
transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for
international operations. The anti-bribery provisions of the FCPA are enforced primarily by the U.S. Department of Justice. The SEC is involved with
enforcement of the books and records provisions of the FCPA.
If we expand our operations outside of the U.S., compliance with the FCPA may be expensive and can be difficult, particularly in countries in which
corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals
are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with
clinical studies and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions. In addition,
biodefense companies like SIGA often sell their products directly to foreign governments.
Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-
U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If we expand
our presence outside of the United States, it may require us to dedicate additional resources to compliance with these laws, and these laws may preclude us
from developing, manufacturing, or selling certain products and product candidates outside of the United States, which could limit our growth potential and
increase our development costs.
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The failure to comply with laws governing international business practices may result in substantial penalties, including suspension or debarment
from government contracting. Violation of the FCPA can result in significant civil and criminal penalties that can be levied on the Company and its
executives.
Indictment alone under the FCPA can lead to suspension of the right to do business with the U.S. government until the pending claims are resolved.
Conviction of a violation of the FCPA can result in long-term disqualification as a government contractor. The termination of a government contract or
relationship as a result of our failure to satisfy any of our obligations under laws governing international business practices could have a material negative
impact on our operations and harm our reputation and ability to procure government contracts. The SEC also may suspend or bar issuers from trading
securities on United States exchanges for violations of the FCPA’s accounting provisions.
Other countries such as the UK have anti-bribery laws similar to or more expansive in scope than the FCPA which may be applicable to our
operations if we expand outside the U.S.
In connection with our International Promotion Agreement with Meridian, Meridian will serve as the entity that markets and promotes oral
TPOXX® (except in the U.S. and South Korea) and will be the counterparty to any agreements with covered foreign jurisdictions. As such, Meridian will be
responsible for anti-corruption compliance related to their activities.
Risks Related to Product Development
Growth of our business may be impacted significantly by our success in completing development and commercialization of drug candidates, or additional
indications for TPOXX®. If we are unable to commercialize new drug candidates or additional indications, or experience significant delays in doing so,
our business may be materially harmed.
We have invested a substantial amount of our efforts and financial resources in the development of our drug candidates. Our ability to generate near-
term cash flows is primarily dependent on the success of our smallpox antiviral drug TPOXX®, which has only been approved by the FDA in oral form. The
commercial success of our current and future drug candidates, or additional indications for TPOXX®, will depend on many factors, including:
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successful development, formulation and cGMP scale-up of drug manufacturing that meets FDA requirements;
successful development of animal models;
successful completion of non-clinical development, including studies in approved animal models;
our ability to pay the expense of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights;
successful completion of clinical trials;
receipt of marketing approvals from FDA for IV TPOXX® and similar foreign regulatory authorities;
establishing arrangements on reasonable terms with suppliers and contract manufacturers;
• manufacturing stable commercial supplies of drug candidates, including availability of raw materials;
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launching commercial sales of the product, whether alone or in collaboration with others; and
acceptance of the product by potential government customers, public health experts, physicians, patients, healthcare payors and others in the medical
community.
We may rely on FDA regulations known as the “Animal Rule” to obtain approval for most of our biodefense drug candidates. The Animal Rule
permits the use of animal efficacy studies together with human clinical safety trials to support an application for marketing approval. These regulations are
relied upon only occasionally. It is possible that results from these animal efficacy studies may not be predictive of the actual efficacy of our drug candidates
in humans. If we are not successful in completing the development and commercialization of our drug candidates, whether due to our efforts or due to
concerns raised by our governmental regulators or customers, our business could be materially adversely harmed.
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We may not be able to fully commercialize the IV formulation of TPOXX®, or other additional indications for TPOXX®, if our clinical trials do not
demonstrate adequate safety or our animal studies do not demonstrate adequate efficacy.
Before obtaining regulatory approval for the sale of our drug candidates, extensive development is required. The goal of development is to use
clinical studies to demonstrate the safety of our drug candidates and animal trials to demonstrate the efficacy of our drug candidates. Clinical trials and animal
studies, and related work, are expensive, difficult to design and implement, can take many years to complete and are uncertain as to outcome. Success in pre-
clinical testing and early clinical trials does not ensure that later clinical trials or animal efficacy studies will be successful, and interim results of a clinical
trial or animal efficacy study do not necessarily predict final results.
A failure of one or more of our clinical trials or animal efficacy studies can occur at any stage of development. We may experience numerous
unforeseen events during, or as a result of, pre-clinical testing and the clinical trial or animal efficacy study process that could delay or prevent our ability to
receive regulatory approval or commercialize our drug candidates, including:
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regulators or institutional review boards may not authorize us to commence a clinical trial or conduct a clinical trial at a prospective trial site;
we may decide, or regulators may require us, to conduct additional pre-clinical testing or clinical trials, or we may abandon projects that we expect to
be promising, if our pre-clinical tests, clinical trials or animal efficacy studies produce negative or inconclusive results;
we might have to suspend or terminate our clinical trials if the participants are being exposed to unacceptable health risks;
regulators or institutional review boards may require that we hold, suspend or terminate clinical development for various reasons, including
noncompliance with regulatory requirements;
the cost of our clinical trials could escalate and become cost prohibitive;
our governmental regulators may impose requirements on clinical trials, pre-clinical trials or animal efficacy studies that we cannot meet or that may
prohibit or limit our ability to perform or complete the necessary testing in order to obtain regulatory approval;
any regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the product not
commercially viable;
we may not be successful in recruiting a sufficient number of qualifying subjects for our clinical trials; or
the effects of our drug candidates may not be the desired effects or may include undesirable side effects or the drug candidates may have other
unexpected characteristics; or
the costs, regulations, or challenges associated with animal studies may increase and make our studies more difficult.
IV TPOXX® is currently in product development and there can be no assurance of successful commercialization beyond the 19C BARDA contract.
The fact that the FDA has approved the oral formulation of TPOXX® does not guarantee that our approach to drug development will be effective or
will result in the successful commercialization of any other drug, the IV formulation of TPOXX® or any new indication of TPOXX®. We cannot predict with
certainty whether any other drug candidate or expanded indication resulting from our research and development efforts will be approved by the FDA.
All of our potential drug candidates are prone to the risks of failure inherent in pharmaceutical product development, including the possibility that
our drug candidates will not or cannot:
•
•
•
be shown to be safe, non-toxic and effective;
otherwise meet applicable regulatory standards;
receive the necessary regulatory approvals;
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•
•
•
•
•
develop into commercially viable drugs;
be manufactured or produced economically and on a large scale;
be successfully marketed;
be paid for by governmental procurers or be reimbursed by governmental or private insurers; or
achieve customer acceptance.
In addition, third parties may seek to preclude us from marketing our drugs through enforcement of their proprietary or intellectual property rights that we are
not aware of, or third parties may succeed in marketing equivalent or superior drug products that do not infringe our intellectual property. Our failure to
develop safe, commercially viable future drug candidates or obtain approval for expanded indications and formulations of TPOXX® would have a material
adverse effect on our ability to grow our business, and impair our financial condition and operations.
Risks Related to Our Dependence on Third Parties
If third parties on whom we rely for manufacturing and raw materials of TPOXX®, and managing our inventory, do not perform as contractually
required or as we expect, we may not be able to successfully satisfy our obligations under the 19C BARDA Contract and our business would suffer.
We currently rely on third-party manufacturers and service providers to provide raw materials and manufacture, package, test and ship TPOXX®.
Under the 19C BARDA Contract, we are responsible for the performance of these third-party contractors, and our contracts with these third parties give us
certain supervisory and quality control rights, but we do not exercise day-to-day control over their activities.
Additionally, we may rely on a third-party provider, or multiple providers, to store a portion of the stockpile of IV TPOXX® under the 19C BARDA
Contract, entrusting such vendor or vendors with the care and handling of a substantial portion of our inventory of IV TPOXX®.
If a third-party provider fails to comply with applicable laws and regulations, fails to meet expected deadlines, experiences shortages or delays, or
otherwise does not carry out its contractual duties to us, or encounters physical damage or natural disaster or disruptions at its facilities, for example as a
result of the coronavirus outbreak, our ability to meet our obligations under the 19C BARDA Contract could be significantly impaired. We do not currently
have the internal capacity to perform these important functions, and we may not be able to maintain commercial arrangements for these services on
reasonable terms.
Our reliance on third parties that we do not control does not relieve us of the responsibilities and requirements imposed by the 19C BARDA
Contract. Third parties may not complete activities on schedule, or may not conduct trials in accordance with regulatory requirements or our stated protocols.
The failure of these third parties to carry out their obligations could delay or prevent the development, approval and commercialization of IV TPOXX® or
other drug candidates.
Risks Related to Manufacturing and Manufacturing Facilities
Problems related to large-scale commercial manufacturing could cause us to delay product launches, an increase in costs or shortages of products.
Manufacturing API and finished drug products, especially in large quantities, is complex. Our drug candidates require several manufacturing steps at
multiple facilities, and may involve complex techniques to assure quality and sufficient quantity, especially as the manufacturing scale increases. Our
products must be made consistently and in compliance with a clearly defined manufacturing process. Accordingly, it is essential to be able to validate and
control the manufacturing process to assure that it is reproducible. Slight deviations anywhere in the manufacturing process, including obtaining materials,
filling, labeling, packaging, storage, shipping, quality control and testing, some of which all pharmaceutical companies, including SIGA, experience from
time to time, may result in lot failures, delay in the release of lots, product recalls or spoilage. Success rates can vary dramatically at different stages of the
manufacturing process, which can lower yields and increase costs. We may experience deviations in the manufacturing process that may take significant time
and resources to resolve and, if unresolved, may affect manufacturing output and/or cause us to fail to satisfy contractual commitments, lead to delays in our
clinical trials or result in litigation or regulatory
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action. Such actions would hinder our ability to meet contractual obligations and could cause material adverse consequences for our business.
If third parties do not manufacture our drug candidates or products in sufficient quantities and at an acceptable cost or in compliance with regulatory or
contractual requirements and specifications, the fulfillment of contractual requirements under the 19C BARDA Contract, or any other procurement
contract, or the development of our drug candidates could be delayed, prevented or impaired.
We currently rely on third parties to manufacture drug candidates, including TPOXX®. Any significant delay in obtaining adequate supplies of our
drug candidates could adversely affect our ability to develop drug candidates or perform commercial contracts. If our contract manufacturers are unable to
generate enough materials to meet commercial obligations or satisfy clinical needs, for example as a result of disruption resulting from the coronavirus
outbreak, the success of drug products may be jeopardized. Our current and anticipated future dependence upon others for the manufacture of our drug
candidates may adversely affect our ability to develop drug candidates and perform on commercial contracts on a timely and competitive basis. If our third-
party manufacturers’ production processes malfunction or contaminate our drug supplies during manufacturing, we may incur significant inventory loss that
may not be covered by our contractual provisions or insurance policies.
We currently rely on third parties to demonstrate regulatory compliance, for regulatory and science support and for quality assurance with respect to
the drug candidates manufactured for us. We intend to continue to rely on these third parties for these purposes with respect to production of commercial
supplies of drugs that we successfully develop. Manufacturers are subject to ongoing, periodic, unannounced inspection by the FDA and corresponding state
and foreign agencies or their designees to ensure strict compliance with applicable laws and regulations.
We cannot be certain that our present or future manufacturers will be able to comply with these regulations and other FDA regulatory requirements
or similar regulatory requirements outside the U.S. Our contracts and grants call for compliance with all applicable legal and regulatory requirements,
however, we do not control third-party manufacturers and their methods for ensuring adherence to regulatory and legal standards. If we or these third parties
fail to comply with applicable regulations, sanctions could be imposed on us which could significantly delay and adversely affect supplies of our drug
candidates.
Our activities may involve hazardous materials, use of which may subject us to environmental regulatory liabilities.
Our biopharmaceutical research and development sometimes may involve the use of hazardous and radioactive materials and generation of
biological waste. We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of these
materials and certain waste products. Although we believe that our CMO's safety procedures for handling and disposing of these materials comply with
legally prescribed standards, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of an accident,
we could be held liable for damages, and this liability could exceed our resources. We use through third parties, for example, small amounts of radioactive
isotopes commonly used in pharmaceutical research, which are stored, used and disposed of in accordance with Nuclear Regulatory Commission regulations.
Our general liability policy provides coverage up to annual aggregate limits of $2 million and coverage of $2 million per occurrence.
We believe that we are in compliance in all material respects with applicable environmental laws and regulations and currently do not expect to make
material additional capital expenditures for environmental control facilities in the near term. However, we may have to incur significant costs to comply with
current or future environmental laws and regulations.
Risks Related to Our Business
We could incur net losses in the future if options are not exercised under the 19C BARDA Contract.
While our current cash position is strong, our ability to continue to fund future operations will be substantially impacted by cash flows from the 19C
BARDA Contract, which may not be sufficient if BARDA elects, in its sole discretion, not to exercise or to significantly delay exercise of some or all of the
options under the 19C BARDA Contract. Given the nature of option-based government contracts, we cannot guarantee that we can sustain or enhance our
current level of operations. Cash flows could fluctuate significantly and could be delayed from one quarter to another based on several factors. As such, if
cash flows from the 19C BARDA Contract are different from expectations, or if operating expenses or other expenses exceed our expectations or cannot be
adjusted accordingly, then our business, results of operations, and financial condition could be materially adversely affected.
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Future acquisitions, strategic investments, partnerships or alliances could be difficult to identify and integrate, divert the attention of management,
disrupt our business, dilute stockholder value and adversely affect our operating results and financial condition.
We may in the future seek to acquire or invest in businesses, products or technologies that we believe could complement or expand our services,
enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and
cause us to incur various expenses in identifying, investigating and pursuing businesses. In addition, we may not be able to find and identify desirable
acquisition targets or be successful in entering into an agreement with any particular target or consummating any such agreement. Even if we do consummate
an agreement, we may not be able to integrate successfully the acquired personnel, operations and technologies, or effectively manage the combined business
following the acquisitions. Acquisitions could also result in dilutive issuances of equity securities or the issuance of debt, which could adversely affect our
operating results. In addition, if an acquired business fails to meet our expectations, our operating results, business and financial condition may suffer.
Our business and operations would suffer in the event of computer system failures, cyber-attacks or a deficiency in our cyber-security.
Despite the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to
damage from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over
the Internet, attachments to emails, persons inside our organization or persons with access to systems inside our organization. The risk of a security breach or
disruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally
increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. If such an event were to occur
and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data
from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or
reproduce the data. Also, confidential patient and other information may be compromised in a cyber-attack or cyber-intrusion. To the extent that any
disruption or security breach was to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary
information, we could incur material legal claims and liability, damage to our reputation, and the further development of our drug candidates could be
delayed.
Global economic, infectious disease or climate-related matters could negatively impact our business.
Occurrence of a global infectious disease outbreak, such as coronavirus (COVID-19) or other climate-related disasters, could have a broad impact on
global economic conditions, sourcing of raw materials and may impact our ability to promote our products successfully to international governments who
may need to divert resources to address such matters.
The loss of key personnel or our ability to recruit or retain qualified personnel could adversely affect our results of operations.
We rely upon the ability, expertise, judgment, discretion, integrity and good faith of our senior management team. Our success is dependent upon our
personnel and our ability to recruit and train high quality employees. We must continue to recruit, retain and motivate management and other employees
sufficient to maintain our current business and support our projected growth. The loss of services of any of our key management could have a material
adverse effect on our business.
Our future success depends on our ability to retain our chief executive officer and other key executives and to attract, retain and motivate qualified
personnel. The loss of the services of any key executive might impede the achievement of our research, development and commercial objectives. Replacing
key employees may be difficult and time-consuming because of the limited number of individuals in our industry with the skills and experiences required to
develop, gain regulatory approval of and commercialize our product candidates successfully. We generally do not maintain key person life insurance to cover
the loss of any of our employees. Recruiting and retaining qualified scientific personnel, clinical personnel and business development personnel will also be
critical to our success. We may not be able to attract and retain these personnel on acceptable terms, if at all, given the competition among numerous
pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from
other companies, universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us
in formulating our research and development, regulatory and commercialization strategy. Our consultants and advisors may be employed by employers other
than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.
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We may have difficulty managing our growth.
Potential future growth could place a significant strain on our management and operations. Our ability to manage any future growth will depend
upon our ability to broaden our management team and our ability to attract, hire and retain skilled employees. Our success will also depend on the ability of
our officers and key employees to continue to implement and improve our operational and other systems and to hire, train and manage our employees.
Our ability to use our net operating loss carryforwards may be limited.
As of December 31, 2019, we had federal net operating loss carryforwards, or NOLs, of $38.2 million to offset future taxable income. The remaining
federal NOLs expire in 2036, if not utilized. Under the provisions of the Internal Revenue Code, substantial changes in our ownership, in certain
circumstances, will limit the amount of NOLs that can be utilized annually in the future to offset taxable income. In particular, section 382 of the Internal
Revenue Code imposes a limitation on a company’s ability to use NOLs if the company experiences a more-than-50% ownership change over a three-year
period. If we are limited in our ability to use our NOLs in future years in which we have taxable income, we may be required to pay more taxes than if we
were able to utilize our NOLs fully.
Risks Related to Our Intellectual Property
Our ability to compete may decrease if we do not adequately protect our intellectual property rights.
Our commercial success will depend in part on our ability to obtain and maintain patent and intellectual property protection for our proprietary
technologies, drug targets and potential products and to preserve our trade secrets and trademark rights. Because of the substantial length of time and expense
associated with bringing potential products through the development and regulatory clearance processes to reach the marketplace, the pharmaceutical industry
places considerable importance on obtaining patent and trade secret protection. The patent positions of pharmaceutical and biotechnology companies can be
highly uncertain and involve complex legal and factual questions. No consistent policy regarding the breadth of claims allowed in biotechnology patents
worldwide has emerged to date. Accordingly, we cannot predict the type and breadth of claims allowed in patents covering our products.
SIGA exclusively owns its key patent portfolios, which relate to its leading drug candidate TPOXX® (also known as ST-246, tecovirimat). As of
January 30, 2020, the TPOXX® patent portfolio has seven patent families consisting of 23 U.S. utility patents, 70 issued foreign patents, six U.S. utility
patent applications, and 38 foreign patent applications.
We also rely on trade secrets, know-how, continuing technological innovation and licensing opportunities. In an effort to maintain the confidentiality
and ownership of trade secrets and proprietary information, we require our employees, consultants and some collaborators to execute confidentiality and
invention assignment agreements upon commencement of a relationship with us. These agreements may not provide meaningful protection for our trade
secrets, confidential information or inventions in the event of unauthorized use or disclosure of such information, and adequate remedies may not exist in the
event of such unauthorized use or disclosure.
If our technologies are alleged or found to infringe the patents or proprietary rights of others, we may be sued, we may have to pay damages or be barred
from pursuing a technology, or we may have to license those rights and pay royalties to or from others on unfavorable terms. If we are sued, even if we
prevail, such litigation may be costly.
Our commercial success will depend significantly on our ability to operate without infringing the patents or proprietary rights of third parties. Our
technologies, or the technologies of third parties on which we may depend, may infringe the patents or proprietary rights of others. If there is an adverse
outcome in any dispute concerning rights to these technologies, then we could be subject to significant liability, required to license disputed rights from or to
other parties and/or required to cease using a technology necessary to carry out our research, development and commercialization activities.
If our patents are challenged and found to be invalid or unenforceable, the value of our products could be harmed, and we could be subject to
competition earlier than we anticipated.
The costs to establish or defend against claims of infringement or interference with patents or other proprietary rights can be expensive, distracting
and time-consuming, even if the outcome is favorable. An outcome of any patent or proprietary rights administrative proceeding or litigation that is
unfavorable to us may have a material adverse effect on us. We could incur substantial costs if we are required to defend ourselves in suits brought by third
parties or if we initiate such suits. We may not have sufficient
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funds or resources in the event of litigation. Additionally, we may not prevail in any such action and such litigation often takes years to resolve creating
business uncertainty if we are not able to resolve it quickly.
Any dispute resulting from claims based on patents and proprietary rights could result in a significant reduction in the coverage of the patents or
proprietary rights owned, optioned by or licensed to us and limit our ability to obtain meaningful protection for our rights. If patents are issued to third parties
that contain competitive or conflicting claims, we may be legally prohibited from researching, developing or commercializing potential products or be
required to obtain licenses to these patents that carry royalty payments or to develop or obtain alternative technology. We may be legally prohibited from
using technology owned by others, may not be able to obtain any license to the patents or technologies of third parties on acceptable terms, if at all, or may
not be able to obtain or develop alternative technologies.
Furthermore, like many biopharmaceutical companies, we may from time to time hire scientific personnel formerly employed by other companies
involved in one or more areas similar to the activities conducted by us. It is possible that we and/or these individuals may be subject to allegations of trade
secret misappropriation or other similar claims as a result of their prior affiliations.
Risks Related to Our Financial Position and Need for Additional Financing
We may need additional funding, which may not be available to us, and which may force us to delay, reduce or eliminate any of our product development
programs or commercial efforts.
While we have raised funds through credit facilities and the issuance of new equity or the exercise of options or warrants in the past, there is no
guarantee that we will continue to be successful in raising such funds should we need to seek to do so. If we are unable to raise additional funds, we could be
forced to discontinue, cease or limit certain operations and equity investors could experience significant or total losses of their investments. Our cash flows
may fall short of our projections or be delayed, or our expenses may increase, which could result in our capital being consumed significantly faster than
anticipated.
Although our current cash position is strong, we may require additional financing and we may not be able to raise additional funds. If we are able to
obtain additional financing through the sale of equity or convertible debt securities, such sales may contain terms, such as liquidation and other preferences
that are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be
necessary to relinquish valuable rights to our technologies or product candidates or grant licenses on terms that may not be favorable to us. Debt financing
arrangements, if available, may require us to pledge certain assets or enter into covenants that could restrict our business activities or our ability to incur
further indebtedness and may be at interest rates and contain other terms that are not favorable to our stockholders.
Indebtedness may make it more difficult to obtain additional financing or reduce our flexibility to act in our best interests, and default on our
indebtedness would have a material adverse effect on our business, financial condition and results of operations.
The level of our indebtedness under our $80.0 million loan and security agreement dated September 2, 2016 (as amended from time to time, the
"Loan Agreement") with OCM Strategic Credit SIGTEC Holdings, LLC ("Lender), could affect us by: making it more difficult to obtain additional financing
for working capital, capital expenditures, debt service requirements or other purposes; shortening the duration of available revolving credit because lenders
may seek to avoid conflicting maturity dates; constraining our ability to react quickly in an unfavorable economic climate or to changes in our business or the
pharmaceutical industry; or potentially requiring the dedication of substantial amounts to service the repayment of outstanding debt, including periodic
interest payments, thereby reducing the amount of cash available for other purposes. In addition, the Loan Agreement contains customary covenants which
could impact our ability to obtain additional financing and restrict our flexibility in carrying out our business strategy.
Under the Loan Agreement, we are obligated to make periodic interest payments on the outstanding principal amount. Any accrued and unpaid
interest or unpaid principal will be due on the maturity date of the loan (November 16, 2020). If we do not generate sufficient operating cash flows to fund
these payments or obtain additional funding from external sources at acceptable terms, we may not have sufficient funds to satisfy our principal and interest
payment obligations when those obligations are due, which would place us into default under the terms of the Loan Agreement (as further described below).
The Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants. These covenants, among
other things, require a minimum cash balance throughout the term of the loan under the Loan Agreement and the achievement of regulatory milestones by
certain dates, and contain certain limitations on the ability of the Company to incur unreimbursed research and development expenditures over a certain
threshold, make capital expenditures over a certain threshold, incur indebtedness, dispose of assets outside of the ordinary course of business and enter into
certain merger
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or consolidation transactions. These covenants could impact our ability to obtain additional financing and restrict our flexibility in carrying out our business
strategy.
The Loan Agreement includes customary events of default, including, among others: (i) non-payment of amounts due thereunder, (ii) the material
inaccuracy of representations or warranties made thereunder, (iii) non-compliance with covenants thereunder, (iv) non-payment of amounts due under, or the
acceleration of, other material indebtedness of the Company and (v) bankruptcy or insolvency events. Such default would have a material adverse effect on
our business, financial condition and results of operations. Upon the occurrence and during the continuance of an event of default under the Loan Agreement,
the interest rate may increase by 2.00% per annum above the rate of interest otherwise in effect, and the Lender would be entitled to accelerate the maturity of
the Company’s outstanding obligations thereunder. In addition, our indebtedness under the Loan Agreement is secured by a first priority lien on all of our
existing and after-acquired property, including intellectual property. If we default on our obligations under the Loan Agreement, the Lender could foreclose on
our assets.
We may issue additional debt or incur other types of indebtedness in the future, subject to compliance with the terms of the Loan Agreement, and
such additional indebtedness may carry with it similar risks.
Risks Related to Our Common Stock
Our stock price is, and we expect it to remain, volatile, which could limit investors’ ability to sell stock at a profit.
The volatile price of our stock makes it difficult for investors to predict the value of their investments, to sell shares at a profit at any given time, or
to plan purchases and sales in advance. A variety of factors may affect the market price of our common stock. These include, but are not limited to:
•
•
•
•
•
•
•
•
•
•
publicity regarding actual or potential clinical or animal test results relating to products under development by our competitors or us;
initiating, completing or analyzing, or a delay or failure in initiating, completing or analyzing, pre-clinical or clinical trials or animal trials or the
design or results of these trials for products in development;
achievement or rejection of regulatory approvals for products in development by our competitors or us;
announcements of technological innovations or new commercial products by our competitors or us;
developments concerning our collaborations and supply chain;
regulatory developments in the United States and foreign countries;
economic or other crises and other external factors;
period-to-period fluctuations in our revenues and other results of operations;
changes in financial estimates by securities analysts; or
publicity or activity involving possible future acquisitions, strategic investments, partnerships or alliances.
Additionally, because the volume of trading in our stock fluctuates significantly at times, any information about us in the media or public domain
may result in significant volatility in our stock price.
We will not be able to control many of these factors, and we believe that period-to-period comparisons of our financial results will not necessarily be
indicative of our future performance.
In addition, the stock market in general, and the market for biotechnology companies in particular, has experienced extreme price and volume
fluctuations that may have been unrelated or disproportionate to the operating performance of individual companies. These broad market and industry factors
may seriously harm the market price of our common stock, regardless of our operating performance.
If securities or industry analysts publish inaccurate or unfavorable research about our business, our stock price could decline.
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The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our
business. If one or more of the analysts who may cover us downgrade our common stock or publish inaccurate or unfavorable research about our business,
our common stock price would likely decline.
A future issuance of preferred stock may adversely affect the rights of the holders of our common stock.
Our certificate of incorporation allows our Board of Directors to issue up to 20,000,000 shares of preferred stock and to fix the voting powers,
designations, preferences, rights and qualifications, limitations or restrictions of these shares without any further vote or action by the stockholders. The rights
of the holders of common stock will be subject to, and could be adversely affected by, the rights of the holders of any preferred stock that we may issue in the
future. The issuance of preferred stock, while providing desirable flexibility in connection with our future activities, could also have the effect of making it
more difficult for a third party to acquire a majority of our outstanding voting stock, thereby delaying, deferring or preventing a change of control.
Concentration of ownership of our capital stock could delay or prevent a change of control.
Our directors, executive officers and principal stockholders beneficially own a significant percentage of our common stock. As a result, these
stockholders, if acting together, have the ability to influence the outcome of corporate actions requiring stockholder approval. Additionally, this concentration
of ownership may have the effect of delaying or preventing a change of control of SIGA. As of February 24, 2020 , directors, executive officers and principal
stockholders (excluding index funds) beneficially owned approximately 42% of our outstanding common stock. In addition to owning common stock of the
Company, directors and certain executive officers have the right to acquire additional stock through the exercise or conversion of certain securities.
Our stock repurchase program could affect the price of our common stock and increase volatility and may be suspended or terminated at any time, which
may result in a decrease in the trading price of our common stock.
On March 5, 2020 our Board of Directors authorized a share repurchase program for up to $50 million of our common stock through December 31,
2021. This stock repurchase program does not obligate the Company to repurchase any dollar amount or number of shares of our common stock and may be
suspended or discontinued at any time, which could cause the market price of our common stock to decline. Repurchases pursuant to our stock repurchase
program could affect the price of our common stock and increase its volatility. Important factors that could cause us to limit, suspend or delay the Company’s
stock repurchases, without prior notice, and that could in any event impact on management’s exercise of its discretion as to the amount and timing of such
repurchases include exercise of procurement options under government contracts, alternative opportunities for strategic uses of cash, the stock price of the
Company’s common stock, market conditions, and other corporate liquidity requirements and priorities. The existence of our stock repurchase program could
cause the price of our common stock to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our
common stock. Additionally, repurchases under our stock repurchase program would diminish our cash reserves, which could impact our ability to pursue
other opportunities, further develop our technology or adversely affect our operating results. There can be no assurance that any stock repurchases would
enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchased such shares. Any failure to
repurchase shares could negatively impact our reputation and investor confidence in us and our stock price.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our headquarters are located in New York, NY and our research and development facilities are located in Corvallis, Oregon. In January 2013, we
entered into a sublease for approximately 6,676 square feet with a related party to sublet office space in a New York, NY location to serve as our corporate
headquarters. The sublease commenced in April 2013 and was scheduled to expire in 2020. In July 2017, we terminated this sublease. In May 2017, we
entered into a new 10-year lease with a related party to let 3,200 square feet in New York, NY to serve as our new corporate headquarters.
In Corvallis, we lease approximately 10,276 square feet. Until its expiration on December 31, 2017, this facility was leased under an amended lease
agreement signed in January 2007, and most recently changed through an addendum in April 2015. On November 3, 2017 we entered into a new lease for the
same space which was scheduled to expire in December 2019. In the second quarter of 2019, we exercised the first renewal option which expires in December
2021. This lease has one remaining renewal option for three years.
Item 3. Legal Proceedings
From time to time, we may be involved in a variety of claims, suits, investigations and proceedings arising from the ordinary course of our business,
collections claims, breach of contract claims, labor and employment claims, tax and other matters. Although such claims, suits, investigations and
proceedings are inherently uncertain and their results cannot be predicted with certainty, we believe that the resolution of such current pending matters, if any,
will not have a material adverse effect on our business, consolidated financial position, results of operations or cash flow. Regardless of the outcome,
litigation can have an adverse impact on us because of legal costs, diversion of management resources and other factors.
Item 4. Mine Safety Disclosures
No disclosure is required pursuant to this item.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Price Range of Common Stock
On March 22, 2018, the Company's common stock commenced trading on The Nasdaq Global Market under the symbol "SIGA." From March 20,
2015 through March 21, 2018, the Company's common stock had been traded on the OTC Pink Sheets. The Company's common stock traded under the
symbol “SIGAQ” from March 20, 2015 until April 17, 2016, and since April 18, 2016, it has traded under the Symbol “SIGA.” From September 9, 1997
through September 2, 2009, the Company's common stock was traded on the Nasdaq Capital Market and from September 3, 2009 until March 19, 2015 it was
traded on the Nasdaq Global Market under the symbol “SIGA.” Prior to September 9, 1997 there was no public market for our common stock.
The following table sets forth, for the periods indicated, the high and low sales prices for our common stock, as reported on The Nasdaq Global Market and
OTC Pink Sheets, as applicable:
2019
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2018
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
$
$
High
Low
8.09 $
6.31
6.08
6.02
High
Low
6.78 $
7.54
8.47
7.94
5.52
5.02
4.92
4.28
4.21
5.72
5.77
4.68
As of February 18, 2020, the closing sale price of our common stock was $4.82 per share. There were 28 holders of record as of February 18, 2020.
We believe that the number of beneficial owners of our common stock is substantially greater than the number of record holders, because a large portion of
common stock is held in broker “street names.”
In March 2020, the Board of Directors authorized the repurchase of up to a total of $50 million of the Company’s common stock. The timing and
actual number of shares repurchased will depend on a variety of factors, including: exercise of procurement options under government contracts, alternative
opportunities for strategic uses of cash, the stock price of the Company’s common stock, market conditions, and other corporate liquidity requirements and
priorities. Prior to executing any repurchases under this program, the Company’s current term loan would need to be fully repaid or its terms would need to
be amended to allow for share repurchases. To date, no share repurchases have been made under this share repurchase program.
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Performance Graph
The following line graph compares the cumulative total stockholder return through December 31, 2019, assuming reinvestment of dividends, by an
investor who invested $100 on December 31, 2014 in each of (i) our common stock; (ii) the Nasdaq Composite; and (iii) the Nasdaq Biotech Composite.
SIGA Technologies, Inc.
NASDAQ Composite Index
NASDAQ Biotech Composite Index
2014
2015
2016
2017
2018
2019
$
$
$
100 $
100 $
100 $
29 $
106 $
111 $
200 $
114 $
87 $
337 $
146 $
106 $
515 $
140 $
96 $
332
189
119
Securities Authorized for Issuance Under Equity Compensation Plans
The information required by this item concerning securities authorized for issuance under equity compensation plans is set forth in Item 12,
“Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”
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Item 6. Selected Financial Data
The selected consolidated financial operating data for the years ended December 31, 2019, 2018 and 2017 and the consolidated balance sheet data as
of December 31, 2019 and 2018 have been derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-
K. The selected consolidated financial operating data for the years ended December 31, 2016 and 2015 and the consolidated balance sheet data as of
December 31, 2017, 2016 and 2015 have been derived from applicable audited consolidated financial statements not included in this Annual Report on Form
10-K. The following table should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” and the consolidated financial statements and related notes to those statements included elsewhere in this Annual Report on Form 10-K.
Revenues
Cost of sales and supportive services
Selling, general and administrative
Research and development
Patent expenses
Litigation expense
Lease termination
Interest on PharmAthene liability
(Loss) income from operations
Decrease (increase) in fair value of common stock warrants
Interest expense, net
Backstop fee
Other income, net
Reorganization items, net
(Loss) income before income taxes
Benefit from (provision for) income taxes
Net (loss) income
Basic (loss) earnings per common share
Diluted (loss) earnings per common share
Weighted average common shares outstanding: basic
Weighted average common shares outstanding: diluted
Cash and cash equivalents and restricted cash
Total assets
Long-term obligations
Stockholders’ equity (deficiency)
Net cash (used in) provided by operating activities
2019
2018
2017
2016
2015
Year Ended December 31,
(in thousands, except share and per share data)
$
26,742
$
477,054
$
1,783
13,252
13,303
726
—
—
—
(2,322)
5,091
(15,770)
—
2,822
—
95,269
12,880
13,016
789
—
—
—
355,100
(6,923)
(15,478)
—
78,941
—
(10,178)
2,937
(7,241)
(0.09)
(0.15)
$
$
$
411,640
10,168
421,808
5.28
5.18
$
$
$
81,031,254
82,175,023
79,923,295
82,708,472
160,987
$
180,397
$
198,566
2,930
97,784
203,444
76,811
102,915
(18,204)
$
68,871
$
$
$
$
$
$
34
12,269 $
—
12,303
16,680
910
—
1,225
—
(18,849)
(4,739)
(14,758)
—
17
—
(38,329)
2,094
(36,235) $
(0.46) $
(0.46) $
14,988 $
—
13,714
19,711
909
—
—
11,669
(31,015)
(895)
(2,396)
(1,764)
102
(3,717)
(39,685)
(14)
(39,699) $
(0.69) $
(0.69) $
8,176
—
10,582
13,131
1,009
14,407
—
—
(30,953)
—
(267)
—
42
(7,811)
(38,989)
(462)
(39,451)
(0.73)
(0.73)
78,874,494
78,874,494
57,188,503
57,188,503
37,102 $
144,670
71,891
(323,138)
(18,387) $
56,174 $
160,982
66,801
(287,418)
(116,813) $
53,777,687
53,777,687
112,711
185,733,000
332
(284,429)
11,109
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this
report. Refer to Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (filed with the SEC on March 5, 2019) for
additional discussion of our financial condition and results of operations for the year ended December 31, 2017, as well as our financial condition and
results of operations for the year ended December 31, 2018 compared to the year ended December 31, 2017. In addition to historical information, the
following discussion and other parts of this Annual Report contain forward-looking information that involves risks and uncertainties.
Overview
We are a commercial-stage pharmaceutical company focused on the health security market. Health security comprises countermeasures for
biological, chemical, radiological and nuclear attacks (biodefense market), vaccines and therapies for emerging infectious diseases, and health preparedness.
Our lead product is an oral formulation of TPOXX® (“oral TPOXX®”), an antiviral drug for the treatment of human smallpox disease caused by variola
virus.
On July 13, 2018 the United States Food & Drug Administration (“FDA”) approved oral TPOXX® for the treatment of smallpox. Oral TPOXX® is
a novel small-molecule drug that has been delivered to the U.S. Strategic National Stockpile (“Strategic Stockpile”) under the Project BioShield Act of 2004
(“Project BioShield”). Concurrent with the approval, the FDA granted the Company's request for a Priority Review Voucher (“PRV”). A PRV is a voucher
that may be used to obtain an accelerated FDA review of a product candidate. On October 31, 2018, the Company sold its PRV for cash consideration of
$80.0 million.
Lead Product-TPOXX®
19C BARDA Contract (2018 BARDA Contract)
On September 10, 2018, the Company entered into a contract with BARDA pursuant to which SIGA agreed to deliver up to 1,488,000 courses of
oral TPOXX® to the Strategic Stockpile, and to manufacture and deliver to the Strategic Stockpile, or store as vendor-managed inventory, up to 212,000
courses of the intravenous (IV) formulation of TPOXX® (“IV TPOXX®”). Additionally, the contract includes funding from BARDA for advanced
development of IV TPOXX®; post-marketing activities for oral and IV TPOXX®, and procurement activities. As of February 18, 2020, the contract with
BARDA (as amended, modified, or supplemented from time to time, the "19C BARDA Contract" or “2018 BARDA Contract”) contemplates up to
approximately $602.5 million of payments, of which approximately $51.7 million of payments are included within the base period of performance of five
years, approximately $25.8 million of payments are related to exercised options and up to approximately $525.0 million of payments are currently specified
as unexercised options. BARDA may choose in its sole discretion when, or whether, to exercise any of the unexercised options. The period of performance
for options is up to ten years from the date of entry into the 19C BARDA Contract and such options could be exercised at any time during the contract term,
including during the base period of performance. On May 20, 2019, an option for the manufacture and delivery of 363,070 courses of oral TPOXX® was
modified to divide it into four procurement-related options. One of the four modified procurement-related options provides for the payment of $11.2 million
for the procurement of raw materials to be used in the manufacture of at least 363,070 courses of oral TPOXX®. This option was exercised simultaneously
with the aforementioned modification. Each of the other three options individually specifies the delivery of approximately 121,000 courses of oral TPOXX®
for consideration of approximately $33.8 million. In total, the four options under the May 2019 modification provide for the purchase of raw material for and
the manufacture and delivery of 363,070 courses of oral TPOXX® for consideration of approximately $112.5 million. The option modification did not change
the overall total potential value of the 19C BARDA Contract, nor did it change the total amount to be paid in connection with the manufacture and delivery of
oral TPOXX® courses.
The base period of performance specifies potential payments of approximately $51.7 million for the following activities: payments of approximately
$11.1 million for the delivery of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile; payments of $8.0 million for the manufacture of
20,000 courses of final drug product of IV TPOXX® ("IV FDP"), of which $3.2 million of payments are related to the manufacture of bulk drug substance
("IV BDS") to be used in the manufacture of IV FDP; payments of approximately $32.0 million to fund advanced development of IV TPOXX®; and
payments of approximately $0.6 million for supportive procurement activities. As of December 31, 2019, the Company had received $11.1 million for the
successful delivery of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile, $3.2 million for the manufacture of IV BDS and $4.7
million for other base period activities. IV BDS is expected to be used for the manufacture of 20,000 courses of IV FDP. The $3.2 million received for the
manufacture of IV BDS has been recorded as deferred revenue as of December 31, 2019 and 2018; such amount is expected to be recognized as revenue
when IV TPOXX containing the BDS is delivered to the National Stockpile or placed in vendor-managed inventory.
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The options that have been exercised to date provide for additional potential payments up to approximately $25.8 million. There are exercised
options for the following activities: payments up to $11.2 million for the procurement of raw materials to be used in the manufacture of at least 363,070
courses of oral TPOXX®; and, payments of up to $14.6 million for funding of post-marketing activities for oral TPOXX®, of which, $2.3 million had been
received as of December 31, 2019.
Unexercised options specify potential payments up to approximately $525.0 million in total (if all options are exercised). There are options for the
following activities: payments of up to $439.0 million for the delivery of up to approximately 1,452,000 courses of oral TPOXX® to the Strategic Stockpile;
payments of up to $76.8 million for the manufacture of up to 192,000 courses of IV FDP, of which up to $30.7 million of payments would be paid upon the
manufacture of IV BDS to be used in the manufacture of IV FDP; payments of up to approximately $3.6 million to fund post-marketing activities for IV
TPOXX®; and payments of up to approximately $5.6 million for supportive procurement activities.
The options related to IV TPOXX® are divided into two primary manufacturing steps. There are options related to the manufacture of bulk drug
substance (“IV BDS Options”), and there are corresponding options (for the same number of IV courses) for the manufacture of final drug product (“IV FDP
Options”). BARDA may choose to exercise any, all, or none of these options in its sole discretion. The 19C BARDA Contract includes: three separate IV
BDS Options, each providing for the bulk drug substance equivalent of 64,000 courses of IV TPOXX®; and three separate IV FDP Options, each providing
for 64,000 courses of final drug product of IV TPOXX®. BARDA has the sole discretion as to whether to simultaneously exercise IV BDS Options and IV
FDP Options, or whether to make independent exercise decisions. If BARDA decides to only exercise IV BDS Options, then the Company would receive
payments up to $30.7 million; alternatively, if BARDA decides to exercise both IV BDS Options and IV FDP Options, then the Company would receive
payments up to $76.8 million. For each set of options relating to a specific group of courses (for instance, the IV BDS and IV FDP options that reference the
same 64,000 courses), BARDA has the option to independently purchase IV BDS or IV FDP.
2011 BARDA Contract
On May 13, 2011, the Company signed a contract with BARDA pursuant to which BARDA agreed to buy from the Company 1.7 million courses of
oral TPOXX®. Additionally, the Company agreed to contribute to BARDA 300,000 courses at no additional cost to BARDA.
The contract with BARDA (as amended, modified, or supplemented from time to time the "2011 BARDA Contract”) includes a base contract, as
modified, (“2011 Base Contract”) as well as options. The 2011 Base Contract specifies approximately $508.4 million of payments (including exercised
options), of which, as of December 31, 2019, $459.8 million has been received by the Company for the manufacture and delivery of 1.7 million courses of
oral TPOXX® and $44.9 million has been received for certain reimbursements in connection with development and supportive activities. Approximately $3.7
million remains eligible to be received in the future for reimbursements of development and supportive activities.
For courses of oral TPOXX® that have been physically delivered to the Strategic Stockpile under the 2011 BARDA Contract, there are product
replacement obligations, including: (i) a product replacement obligation in the event that the final version of oral TPOXX® approved by the FDA was
different from any courses of oral TPOXX® that had been delivered to the Strategic Stockpile (the "FDA Approval Replacement Obligation"); (ii) a product
replacement obligation, at no cost to BARDA, in the event that oral TPOXX® is recalled or deemed to be recalled for any reason; and (iii) a product
replacement obligation in the event that oral TPOXX® does not meet any specified label claims. On July, 13, 2018, the FDA approved oral TPOXX® for the
treatment of smallpox and there was no difference between the approved product and courses in the Strategic Stockpile. As such, the possibility of the FDA
Approval Replacement Obligation resulting in any future replacements of product within the Strategic Stockpile is remote.
The 2011 BARDA Contract includes options. On July 30, 2018, the 2011 BARDA Contract was modified and BARDA exercised its option relating
to FDA approval of 84-month expiry for oral TPOXX® for which the Company was paid $50.0 million in August 2018. With the option exercise, the 2011
BARDA Contract was modified so that the 2011 Base Contract increased by $50.0 million. Remaining options, if all would be exercised by BARDA, would
result in aggregate payments to the Company of $72.7 million, including up to $58.3 million of funding for development and supportive activities such as
work on a post-exposure prophylaxis ("PEP") indication for TPOXX® and/or $14.4 million of funding for production-related activities related to warm-base
manufacturing. BARDA may choose in its sole discretion not to exercise any or all of the unexercised options. In 2015, BARDA exercised two options
related to extending the indication of the drug to the geriatric and pediatric populations. The stated value of those exercises was minimal.
The 2011 BARDA Contract expires in September 2020.
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International Promotion Agreement for oral TPOXX®
On June 3, 2019, the Company entered into an international promotion agreement with Meridian Medical Technologies, Inc. (“Meridian”), a Pfizer
company (the “International Promotion Agreement”).
Under the terms of the International Promotion Agreement, Meridian has been granted exclusive rights to market, advertise, promote, offer for sale, or
sell oral TPOXX® in a field of use specified in the International Promotion Agreement in all geographic regions except for the United States and South Korea
(the “Territory”), and Meridian has agreed not to commercialize any competing product, as defined in the International Promotion Agreement, in the specified
field of use in the Territory. SIGA will retain ownership, intellectual property, distribution and supply rights and regulatory responsibilities in connection with
TPOXX®, and, in the United States and South Korean markets, will retain sales and marketing rights with respect to oral TPOXX®. SIGA’s consent shall be
required for the entry into any sales arrangement pursuant to the International Promotion Agreement.
The International Promotion Agreement did not provide for any cash payments at signing, and each party is responsible for the costs and expenses
associated with its activities. The fee Meridian retains pursuant to the International Promotion Agreement will be a specified percentage of the collected
proceeds of sales of oral TPOXX® net of certain expenses, for years in which customer invoiced amounts net of such expenses are less than or equal to a
specified threshold, and a higher specified percentage of such collected net proceeds for years in which such net invoiced amounts exceed the specified
threshold.
The International Promotion Agreement provides for an initial term of five years, and automatic renewals for successive three-year terms unless (i) either
party provides the other party with written notice of non-renewal prior to the end of the initial term or any renewal term or (ii) the International Promotion
Agreement is earlier terminated in accordance with its terms. Either party may terminate the agreement immediately by written notice in connection with
certain customary events. Either party shall have the right to terminate the agreement (overall and on a country-by-country basis) in the event of an uncured
material breach. The Company shall have the right to terminate the agreement (i) as to certain countries on a country-by-country basis in the event Meridian
does not promote oral TPOXX® in the subject country for a period of time, or (ii) in certain other limited circumstances. Meridian shall have the right to
terminate the Agreement (overall or on a country-by-country basis) without cause subject to a prior written notice period.
The International Promotion Agreement also contains customary representations, warranties and covenants, including provisions related to regulatory
matters, reporting obligations, indemnity, limitation of liability, confidentiality and other matters.
On December 5, 2019 SIGA announced that the Canadian Department of National Defence ("CDND") issued an advanced contract award notice
("ACAN"), indicating that the CDND intends to purchase up to 15,235 courses of oral TPOXX® over four years as specified in the ACAN, with an initial
purchase of 2,500 courses. Meridian would be the counterparty of any contract award issued by the Canadian government and SIGA would be responsible for
the manufacture and delivery of product.
Critical Accounting Estimates
The methods, estimates and judgments we use in applying our accounting policies have a significant impact on the results we report in our
consolidated financial statements, which we discuss under the heading “Results of Operations” following this section of our Management’s Discussion and
Analysis of Financial Condition and Results of Operations. Some of our accounting policies require us to make difficult and subjective judgments, often as a
result of the need to make estimates of matters that are inherently uncertain. Our most critical accounting estimates include revenue recognition, the valuation
of warrants granted or issued by us, and income taxes (including realization of deferred tax assets).
Revenue Recognition
All of our revenue is derived from long-term contracts that can span multiple years. We account for revenue in accordance with ASC Topic 606,
Revenue from Contracts with Customers (“ASC 606”). The unit of account in ASC 606 is a performance obligation. A contract’s transaction price is allocated
to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Our performance obligations are
satisfied over time as work progresses or at a point in time.
Substantially all of our revenue associated with research and development performance obligations is recognized over time. Because control
transfers over time with these performance obligations, revenue is recognized based on the extent of progress towards completion of the performance
obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be
provided. We generally use the cost-to-cost measure of progress for performance obligations connected with research and development activities because it
best depicts the transfer of
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control to the customer, which occurs as we incur costs under our contracts. Under the cost-to-cost measure of progress, the extent of progress towards
completion is measured based on the ratio of costs incurred to date to the total estimated costs to fully satisfy the performance obligation. Contract costs
include labor, material, overhead and third-party services. Any loss on a research and development performance obligation would be recognized at the point
in time that it became probable that a loss was going to be incurred.
Revenue under the 2011 BARDA Contract (see Note 3 to the consolidated financial statements) connected with courses of oral TPOXX® that are
manufactured and delivered to the Strategic Stockpile and related services, milestones and advance payments (activities in combination that constitute one
performance obligation) has been recognized at a point in time. Revenue associated with this performance obligation was recognized when BARDA obtained
control of the asset, which was upon delivery to and acceptance by the customer and at the point in time when the constraint on the consideration was
resolved due to FDA approval of oral TPOXX®. The consideration, which is variable, was constrained until the FDA approved oral TPOXX® for the
treatment of smallpox on July 13, 2018. Prior to FDA approval, consideration had been constrained because the possibility of the FDA Approval
Replacement Obligation (as defined herein) had not been quantified or specified. Following FDA approval, the possibility of having to replace product
pursuant to the FDA Approval Replacement Obligation was essentially eliminated and deemed to be remote since there is no difference between the approved
product and the courses of oral TPOXX® that had been delivered to the Strategic Stockpile. As a result, the deferred revenue associated with the performance
obligation was recorded as product sales and supportive services for the year ended December 31, 2018.
Due to the nature of the work required to be performed on many of our performance obligations, the estimation of total revenue and costs to satisfy
the obligations is complex, subject to many variables and requires significant judgment. The consideration associated with these types of performance
obligations is considered variable. We estimate variable consideration as the most likely amount to which we expect to be entitled. We include estimated
amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur and when any
uncertainty associated with variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated
amounts in the transaction price are based largely on an assessment of our historical and anticipated performance, external factors, trends and all other
information (historical, current and forecasted) that is reasonably available to us.
Contracts are often modified to account for additional services to be performed. We consider contract modifications to exist when the modification
either creates new enforceable rights and obligations, or changes existing enforceable rights and obligations. If the effect of a contract modification on the
transaction price changes our measure of progress for the performance obligation to which it relates, the impact will be recognized in the period of
modification as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.
We have a process in which management reviews the progress and execution of our performance obligations. As part of this process, management
reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule,
identified risks and opportunities and the related changes in estimates of revenues and costs. The risks and opportunities include management’s judgment
about the ability and cost to achieve the schedule, technical requirements and other contract requirements. Management must make assumptions and estimates
regarding labor productivity, the complexity of the work to be performed, customer behavior and execution by our subcontractors, among other variables.
Based on this analysis, any quarterly adjustments to revenues, research and development expenses and cost of sales and supportive services are
recognized as necessary in the period they become known. Changes in estimates of revenues, research and development expenses and cost of sales and
supportive services are recognized quarterly on a cumulative catch-up basis, which recognizes in the current period the cumulative effect of the changes on
current and prior periods based on a performance obligation’s percentage of completion. A significant change in one or more of these estimates could affect
the profitability of one or more of our performance obligations.
Income Taxes
Our income tax expense and, deferred tax assets and liabilities reflect management’s best estimate of current and future taxes to be paid. We are
subject to US federal income tax and state income tax in numerous jurisdictions. Significant judgments and estimates are required in the determination of our
income tax expense.
Deferred income taxes arise from temporary differences between the tax basis of assets and their reported amounts in the financial statements, which
will result in taxable or deductible amounts in the future. Each reporting period, we assess the realizability of our deferred tax assets to determine if the
deductible temporary differences will be utilized on a more-likely-than-not basis. In making this determination, we assess all available positive and negative
evidence to determine if our existing deferred tax assets are realizable on a more-likely-than-not basis. Significant weight is given to positive and negative
evidence that is objectively verifiable. We consider the reversal of existing taxable temporary differences, projected future taxable income, tax
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planning strategies and recent financial operating results. The realization of a deferred tax asset is ultimately dependent on our generation of sufficient taxable
income within the available net operating loss carryback and/or carryforward periods to utilize the deductible temporary differences. During the year ended
December 31, 2018, we received FDA approval and recorded revenue related to the delivery of our oral TPOXX® product. We also recorded revenue related
to the FDA holdback payment and the payment for 84-month expiry for oral TPOXX®. In addition, we entered into a new contract with BARDA for the sale
of up to 1.7 million courses of TPOXX®. Based on these factors, we determined that sufficient positive evidence existed to conclude that substantially all of
our deferred tax assets were realizable on a more-likely-than-not basis.
The amount of deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the net operating
loss carryforward period change and/or if significant objective negative evidence is no longer present. Such changes could lead to a change in judgment
related to the realization of the net deferred tax asset. Future changes in the estimated amount of deferred taxes expected to be realized will be reflected in our
financial statements in the period the estimate is changed with a corresponding adjustment to operating results.
Income tax benefits are recognized for a tax position when, in management’s judgment, it is more likely than not that the position will be sustained
upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold, the tax benefit is measured as the largest
amount that is judged to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority. As of December 31, 2019, we
recorded an uncertain tax position attributable to a reduction related to state net operating loss carryforwards. In the event that we conclude that we are subject
to interest and/or penalties arising from uncertain tax positions, we will present interest and penalties as a component of income taxes.
Warrant Liability
We account for warrants in accordance with the authoritative guidance which requires that free-standing derivative financial instruments with certain
cash settlement features be classified as assets or liabilities at the time of the transaction, and recorded at their fair value. Fair value is estimated using a
model-derived valuation. Determining the fair value for warrants includes the expected volatility of our stock. Any changes in the fair value of the warrants
are reported in earnings or loss as long as they are classified as assets or liabilities.
Recently Issued Accounting Pronouncements
For discussion regarding the impact of accounting standards that were recently issued but are not yet effective, on our consolidated financial
statements, see Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements.
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Results of Operations for the Years ended December 31, 2019 and 2018
Revenues from product sales and supportive services for the years ended December 31, 2019 and 2018 were $11.2 million and $468.9 million,
respectively. Such revenues for the year ended December 31, 2019 were associated with the delivery of approximately 35,700 courses of oral TPOXX® to the
Strategic Stockpile under the 19C BARDA Contract. Such revenues for the year ended December 31, 2018 were primarily associated with revenue
recognition in such period of all cash consideration received in periods prior to FDA approval of oral TPOXX® under the 2011 BARDA Contract that was
related to the delivery to the Strategic Stockpile of courses of oral TPOXX® and related services, milestones and advance payments ($375.6 million in total).
In prior periods, those receipts had been deferred on the balance sheet since revenue recognition had been constrained by the possibility of a product
replacement obligation being applicable. Following FDA approval of oral TPOXX® in the third quarter 2018, the possibility of replacement had been
quantified and deemed to be remote, thus resulting in the recognition of revenues that previously had been deferred. In addition to the above-mentioned
amounts, 2018 product sale revenues also included $91 million received in the third quarter of 2018 under the 2011 BARDA Contract including a $41 million
holdback payment and a $50 million payment for achieving 84-month expiry for oral TPOXX® (see Note 3 to the consolidated financial statements for
further detail on these payments).
Revenues from research and development contracts and grants for the years ended December 31, 2019 and 2018, were $15.6 million and $8.1
million, respectively. The increase of $7.5 million, or 91.2%, partially reflects the conclusion of historical rate reconciliations under the IV Formulation R&D
Contract and a change in the projected amount of contract funding expected to be available for future activities under the IV Formulation R&D Contract.
Such events impacted the progress-towards-completion calculation as required under ASC 606, and resulted in a cumulative catch-up adjustment to revenue
of approximately $3.3 million. The revenue increase is also attributable to an increase in reimbursed post-marketing activities for oral TPOXX® and an
increase in the scale and scope of reimbursed IV TPOXX® development activities. The increase in oral TPOXX® activities increased revenues by $2.1
million and the increase in IV TPOXX® activities increased revenues by $2.1 million.
Cost of sales and supportive services for the years ended December 31, 2019 and 2018 were $1.8 million and $95.3 million, respectively. Such costs
in 2019 were associated with the delivery of approximately 35,700 courses of oral TPOXX® during the year ended December 31, 2019. In contrast, following
FDA approval on July 13, 2018, all costs incurred in previous periods which had been deferred in connection with the deferral of related revenues were
recognized in 2018.
Selling, general and administrative expenses for the years ended December 31, 2019 and 2018 were $13.3 million and $12.9 million, respectively,
reflecting an increase of $0.4 million, or 2.9%. The increase is primarily attributable to an approximate $0.5 million increase in equity compensation expense
and an approximate $0.2 million increase in consulting and professional service costs, partially offset by lower cash compensation costs of approximately
$0.1 million as well as the non-recurrence of Nasdaq application fees that were incurred in 2018.
Research and development expenses were $13.3 million for the year ended December 31, 2019, an increase of approximately $0.3 million, or 2.2%
from the $13.0 million incurred during the year ended December 31, 2018. The increase is primarily attributable to a $0.3 million increase in direct vendor-
related expenses supporting the development of IV and oral TPOXX® as well as a $0.2 million increase in FDA annual fees, partially offset by a decrease of
$0.4 million in compensation expense. Compensation expense decreased primarily as a result of the vesting of one-time equity grants in 2018 in connection
with the FDA approval of oral TPOXX®.
Patent expenses for the years ended December 31, 2019, and 2018 were $0.7 million and $0.8 million, respectively. These expenses reflect our
ongoing efforts to protect our lead drug candidates in varied geographic territories.
Interest expense on the term loan facility under the Loan Agreement (the "Term Loan") for the year ended December 31, 2019 was $15.8 million, an
increase of approximately $0.3 million from the $15.5 million incurred during the year ended December 31, 2018. The $15.8 million of interest for the year
ended December 31, 2019 includes $4.5 million of accretion of unamortized costs and fees related to the Term Loan balance. The $15.5 million of interest for
the year ended December 31, 2018 includes $4.5 million of accretion of unamortized costs and fees related to the Term Loan balance.
Changes in the fair value of liability classified warrants to acquire common stock were recorded within the income statement. For the year ended
December 31, 2019, we recorded a gain of approximately $5.1 million reflecting a decrease in the fair value of the liability-classified warrant primarily due to
the decrease in our stock price. For the year December 31, 2018, we recorded a loss of approximately $6.9 million reflecting an increase in fair value of
liability-classified warrant primarily due to an increase in the price of our common stock.
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Table of Contents
Other income, net for the years ended December 31, 2019 and 2018 was $2.8 million and $78.9 million, respectively. Other income for 2019 reflects
interest income on the Company's cash balance held in restricted and unrestricted accounts. Other income for 2018 reflects the sale of our PRV for $80.0
million, net of related expenses as well as interest income on cash accounts. See Note 4 to the consolidated financial statements regarding the PRV
transaction.
For the year ended December 31, 2019, we recognized a tax benefit of $2.9 million on pre-tax loss of $10.2 million. Our effective tax rate for the
year ended December 31, 2019 was 28.9%. For the year ended December 31, 2019, our effective tax rate differs from the statutory rate of 21% primarily as a
result of a non-taxable adjustment for the fair market value of the Warrant, partially offset by non-deductible executive compensation under IRC Section
162(m).
FASB Accounting Standards Codification Topic 740, Income Taxes ("ASC 740") requires that a valuation allowance be established when it is “more
likely than not” that all or a portion of deferred tax assets will not be realized. At each reporting date, we consider new evidence, both positive and negative,
that could impact our view with regard to future realization of deferred tax assets. During the year ended December 31, 2018, we received FDA approval and
recorded revenue related to the previous delivery of our oral TPOXX® product. We also recorded revenue related to the FDA holdback payment and the
payment for 84-month expiry of oral TPOXX®. In addition, we entered into a new contract with BARDA for the purchase of up to 1.7 million courses of
TPOXX®. Based on these factors, we determined that sufficient positive evidence existed to conclude that substantially all of our deferred tax assets were
realizable on a more-likely-than-not basis.
For the year ended December 31, 2018, we recognized a tax benefit of approximately $10.2 million on a pre-tax income of $411.6 million. Our
effective tax rate for the year ended December 31, 2018 was 2.5%. During 2018, we recognized a benefit of approximately $25.8 million primarily related to
the Company's assessment that our deferred tax assets are realizable on a more-likely-than-not basis and the resulting reduction of the related valuation
allowance. Our effective tax rate for the year ended December 31, 2018 differs from the statutory rate primarily as a result of the reduction of the valuation
allowance.
Liquidity and Capital Resources
As of December 31, 2019, we had $65.2 million in cash and cash equivalents, compared with $100.7 million at December 31, 2018. Additionally, as
of December 31, 2019, we had $95.7 million of restricted cash and cash equivalents compared with $79.7 million at December 31, 2018. The restricted cash
and cash equivalents are available to pay interest, fees and principal on the Term Loan.
The cash and cash equivalents balance in the restricted account increased from $79.7 million to $100.5 million, as of July 24, 2019, in connection
with an amendment to the Term Loan that allowed the Company to diversify the financial institutions at which its remaining unrestricted cash and cash
equivalents are held. The remaining balance in the restricted account represents an approximation of total payments that would be required pursuant to the
Term Loan if it were to remain outstanding until its maturity.
Operating Activities
We prepare our consolidated statement of cash flows using the indirect method. Under this method, we reconcile net (loss) income to cash flows
from operating activities by adjusting net (loss) income for those items that impact net income (loss) but may not result in actual cash receipts or payments
during the period. These reconciling items include but are not limited to stock-based compensation and changes in the fair value of our warrant liability; gains
and losses from various transactions and changes in the consolidated balance sheet for working capital from the beginning to the end of the period.
Net cash (used in) provided by operations for the years ended December 31, 2019 and 2018 was $(18.2) million and $68.9 million, respectively. For
the year ended December 31, 2019, we incurred $11.3 million of cash interest expense on the Term Loan and used approximately $10.6 million in support of
ordinary course working capital (accounts receivable, accounts payable, prepaids, among other items). Additionally, cash was used for customary operating
activities. These cash uses were partially offset by the receipt of approximately $11.1 million from BARDA for product delivery; $15.5 million from R&D
contracts; and $2.8 million of interest income. For the year ended December 31, 2018, the primary sources of cash inflows were a $41.0 million holdback
payment under the 2011 BARDA Contract (see Note 3 to the consolidated financial statements) and a $50.0 million payment from BARDA in connection
with a modification made to the 2011 BARDA Contract, in which BARDA exercised an option relating to FDA approval of 84-month expiry for oral
TPOXX®. These receipts were partially offset by net operating costs and $11.0 million of cash interest expense on the Term Loan.
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On December 31, 2019 and 2018, our accounts receivable balance was approximately $4.2 million (which includes approximately $1.0 million of
unbilled receivables) and $2.0 million, respectively. Our accounts receivable balances primarily reflect work that is reimbursable by BARDA and was
performed during December 31, 2019 and 2018, respectively, in connection with TPOXX®.
Investing Activities
Net cash (used in) provided by investing activities for the years ended December 31, 2019 and 2018 was $(29,094) and $78.2 million, respectively.
In 2019, net cash used related to capital expenditures. In 2018, we received net proceeds of approximately $78.3 million related to the sale of our PRV.
Financing Activities
Net cash used in financing activities for the years ended December 31, 2019 and 2018 was $1.2 million and $3.8 million, respectively. For the year
ended December 31, 2019, $1.2 million was attributable to the payment of tax obligations for employee common stock tendered. For the year ended
December 31, 2018, approximately $4.1 million was attributable to the payment of tax obligations for employee common stock tendered, partially offset by
$0.3 million of proceeds received from option exercises.
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Contractual Obligations, Commercial Commitments and Purchase Obligations
Future contractual obligations and commercial commitments as of December 31, 2019 are expected to be as follows:
Total
Less than 1 year
1 to 3 years
3 to 5 years
Greater than 5
years
$
3,300,386 $
542,340 $
968,829 $
806,336 $
982,881
Operating lease obligations (1)
Term loan obligations at maturity
Interest payment obligations on the Term Loan (2)
10,516,596
10,516,596
84,000,000
84,000,000
—
—
—
—
Purchase obligations (3)
26,787,677
25,715,897
575,326
379,189
Payments under Lease Termination Agreement
231,102
231,102
—
—
—
—
117,265
—
Total contractual obligations
$
124,835,761 $
121,005,935 $
1,544,155 $
1,185,525 $
1,100,146
(1)
(2)
Includes facilities and office space under two operating leases expiring in 2021 and 2027, respectively. These obligations assume non-termination of
agreements and represent expected payments, which are subject to change.
Includes amounts to be paid with restricted cash. Assumes cash interest rate of 13.4% (the rate at December 31, 2019) throughout the duration of the
Term Loan.
(3)
Includes purchase orders for manufacturing and R&D activities.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our investment portfolio includes cash and cash equivalents. Our main investment objective is the preservation of investment capital. We believe
that our investment policy is conservative, both in the duration of our investments and the credit quality of the investments we hold. We do not utilize
derivative financial instruments, derivative commodity instruments or other market risk sensitive instruments, positions or transactions to manage exposure to
interest rate changes. As such, we believe that, the securities we hold are subject to market risk, changes in the financial standing of the issuer of such
securities and our interest income is sensitive to changes in the general level of U.S. interest rates. Additionally, we are also subject to the risk of rising
LIBOR rates; whenever the minimum rates for one-month, two-month, three-month and six-month LIBOR rates (“minimum LIBOR rate”) are above 1%,
then the interest rate charged on the Term Loan could increase materially depending on the magnitude of any increase in LIBOR rates. For every increase of
0.5% in the minimum LIBOR rate (e.g., an increase from a LIBOR rate of 1.50% to 2.00%), annual interest payments on the Term Loan would increase by
approximately $0.4 million. Furthermore, we are subject to the impact of stock price fluctuations of our common stock in that we have a liability-classified
warrant in which 1.5 million shares of SIGA common stock can be purchased at a strike price of $1.50 per share. For every $1 increase in the stock price of
SIGA, the intrinsic value of the liability-classified warrant will increase by approximately $1.5 million.
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Item 8. Financial Statements and Supplementary Data
Index to the Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Income (Loss)
Consolidated Statements of Changes in Stockholders’ Equity/(Deficiency)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
44
45
47
48
49
50
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of SIGA Technologies, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of SIGA Technologies, Inc. and its subsidiary (the “Company”) as of December 31, 2019 and
2018, and the related consolidated statements of operations and comprehensive income (loss), of changes in stockholders' equity/(deficiency) and of cash
flows for each of the three years in the period ended December 31, 2019, including the related notes (collectively referred to as the “consolidated financial
statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of
December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in
conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the COSO.
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in
which it accounts for revenues from contracts with customers and the manner in which it accounts for the classification and presentation of restricted cash in
the consolidated statement of cash flows in 2018.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and
for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial
Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's
internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal
control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
45
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expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Florham Park, New Jersey
March 5, 2020
We have served as the Company’s auditor since 1997.
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ASSETS
Current assets
Cash and cash equivalents
Restricted cash and cash equivalents, short-term
Accounts receivable
Inventory
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment, net
Restricted cash and cash equivalents, long-term
Deferred tax asset, net
Goodwill
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
Accrued expenses and other current liabilities
Term debt, current
Total current liabilities
Warrant liability
Other liabilities
Long-term debt
Total liabilities
Commitments and contingencies (Note 14)
Stockholders' equity
SIGA TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
As of
December 31, 2019 December 31, 2018
$
$
$
$
65,249,072 $
95,737,862
4,167,996
9,652,855
5,234,000
180,041,785
2,618,303
—
14,151,002
898,334
856,766
198,566,190 $
3,054,032 $
8,636,911
80,044,866
91,735,809
6,116,882
2,929,743
—
100,782,434
100,652,809
11,452,078
1,959,133
2,908,210
4,317,615
121,289,845
171,274
68,292,023
11,733,385
898,334
1,058,880
203,443,741
1,688,488
9,648,917
—
11,337,405
12,380,939
1,263,113
75,547,597
100,529,054
8,127
220,808,037
(123,032,408)
97,783,756
198,566,190 $
8,076
218,697,872
(115,791,261)
102,914,687
203,443,741
Common stock ($.0001 par value, 600,000,000 shares authorized, 81,269,868 and 80,763,350 issued and outstanding at
December 31, 2019, and December 31, 2018, respectively)
Additional paid-in capital
Accumulated deficit
Total stockholders' equity
Total liabilities and stockholders' equity
The accompanying notes are an integral part of these financial statements.
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Table of Contents
SIGA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Years Ended December 31
Revenues
Product sales and supportive services
Research and development
Total revenues
Operating expenses
Cost of sales and supportive services
Selling, general and administrative
Research and development
Patent expenses
Lease termination
Total operating expenses
Operating (loss) income
Gain (loss) from change in fair value of warrant liability
Interest expense
Other income, net
(Loss) income before income taxes
Benefit for income taxes
Net and comprehensive (loss) income
Basic (loss) earnings per share
Diluted (loss) earnings per share
Weighted average shares outstanding: basic
Weighted average shares outstanding: diluted
2019
2018
2017
$
11,190,064
$
15,552,021
26,742,085
468,918,468 $
8,135,314
477,053,782
—
12,268,960
12,268,960
1,782,838
13,252,136
13,303,149
726,105
—
29,064,228
(2,322,143)
5,091,256
(15,769,768)
2,822,232
(10,178,423)
2,937,276
(7,241,147)
(0.09)
(0.15)
81,031,254
82,175,023
$
$
$
95,268,974
12,879,738
13,016,183
789,489
—
121,954,384
355,099,398
(6,922,624)
(15,478,203)
78,940,985
411,639,556
10,168,272
421,807,828 $
5.28 $
5.18 $
79,923,295
82,708,472
—
12,303,050
16,679,712
909,946
1,225,421
31,118,129
(18,849,169)
(4,738,753)
(14,758,140)
16,788
(38,329,274)
2,093,790
(36,235,484)
(0.46)
(0.46)
78,874,494
78,874,494
$
$
$
The accompanying notes are an integral part of these financial statements.
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Table of Contents
SIGA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY/(DEFICIENCY)
For the Years Ended December 31, 2019, 2018 and 2017
Additional
Other
Total
Accumulated
Common Stock
Paid-In
Accumulated
Comprehensive
Shares
78,692,612
Amount
$
7,869
$
Capital
213,714,154 $
Deficit
(501,140,292) $
(36,235,484)
Income (Loss)
Balances, December 31, 2016
Net loss
Issuance of common stock upon exercise of stock options
Issuance of common stock upon vesting of RSUs and exercise
of stock-settled appreciation rights
Payment of common stock tendered for employee stock-based
compensation tax obligations
Stock-based compensation
Buy-back of stock options
Balances, December 31, 2017
Net income
33,870
466,328
(153,810)
—
—
3
47
(15)
—
—
79,039,000
$
7,904
$
Issuance of common stock upon exercise of stock options
Issuance of common stock upon vesting of RSUs and exercise
of stock-settled appreciation rights
Issuance of common stock upon exercise of warrants
Payment of common stock tendered for employee stock-based
compensation tax obligations
426,366
1,184,283
760,626
(646,925)
42
118
77
(65)
Cumulative effect of accounting change
Stock-based compensation
Balances, December 31, 2018
Net loss
Issuance of common stock upon exercise of stock options
Issuance of common stock upon vesting of RSUs and exercise
of stock-settled appreciation rights
Issuance of common stock to employees
Issuance of common stock upon exercise of warrants
Payment of common stock tendered for employee stock-based
compensation tax obligations
Stock-based compensation
Balances, December 31, 2019
80,763,350
$
8,076
$
9,769
515,888
53,332
159,782
1
52
5
16
(232,253)
(23)
81,269,868
$
8,127
$
89,495
(47)
(591,052)
1,101,031
(84,000)
214,229,581 $
261,837
(118)
6,007,770
(4,074,375)
2,273,177
218,697,872 $
(1)
(52)
(5)
1,172,785
(1,176,556)
2,113,994
220,808,037 $
(537,375,776) $
421,807,828
(223,313)
(115,791,261) $
(7,241,147)
The accompanying notes are an integral part of these financial statements.
49
Stockholders’
Equity/
(Deficiency)
— $
(287,418,269)
(36,235,484)
89,498
—
(591,067)
1,101,031
(84,000)
— $
(323,138,291)
421,807,828
261,879
—
6,007,847
(4,074,440)
(223,313)
2,273,177
— $
102,914,687
(7,241,147)
—
—
—
1,172,801
(1,176,579)
2,113,994
97,783,756
(123,032,408) $
— $
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SIGA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31
Cash flows from operating activities:
Net (loss) income
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and other amortization
(Gain) loss on change in fair value of warrant liability
Lease termination
Stock-based compensation
Net realization of deferred revenue and costs due to FDA approval
Deferred income taxes benefit
Write down of inventory, net
Non-cash interest expense
Gain on sale of priority review voucher
Changes in assets and liabilities:
Accounts receivable
Inventory
Deferred costs
Prepaid expenses and other assets
Accounts payable, accrued expenses and other liabilities
Deferred revenue
Net cash (used in) provided by operating activities
Cash flows from investing activities:
Capital expenditures
Net proceeds from sale of priority review voucher
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Net proceeds from exercise of stock options
Buy back of stock options
Payment of employee tax obligations for common stock tendered
Net cash used in financing activities
Net (decrease) increase in cash and cash equivalents
Cash, cash equivalents and restricted cash at the beginning of period
Cash, cash equivalents and restricted cash at end of period
Supplemental disclosure of cash inflows information:
Conversion of warrant to common stock
Issuance of common stock upon cashless exercise
Cash income taxes (refund) paid, net
2019
2018
2017
$
(7,241,147)
$
421,807,828 $
(36,235,484)
526,997
(5,091,256)
—
2,113,994
—
(2,417,617)
—
4,497,271
—
(2,208,863)
(6,744,644)
—
(714,272)
936,839
(1,861,605)
(18,204,303)
(29,094)
—
(29,094)
—
—
(1,176,579)
(1,176,579)
(19,409,976)
180,396,910
$
160,986,934
$
69,630
6,922,624
—
2,273,177
(281,950,853)
(9,301,422)
—
4,497,273
(78,338,826)
(49,723)
39
—
(2,579,329)
2,045,191
3,475,714
68,871,323
(102,264)
78,338,826
78,236,562
261,879
—
(4,074,440)
(3,812,561)
143,295,324
37,101,586
180,396,910 $
132,189
4,738,753
1,225,421
1,101,031
—
(2,718,029)
536,000
4,497,271
—
1,352,263
22,690,715
(23,943,057)
(1,125,657)
(2,051,081)
11,412,898
(18,386,767)
(100,124)
—
(100,124)
89,498
(84,000)
(591,067)
(585,569)
(19,072,460)
56,174,046
37,101,586
$
$
$
1,172,801
118,500
(1,276,129)
$
$
$
6,007,847 $
1,681,426 $
251,961 $
—
—
325,000
The accompanying notes are an integral part of these financial statements
50
SIGA TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Basis of Presentation
Description of Business
SIGA Technologies, Inc. (“SIGA” or the “Company”) is a commercial-stage pharmaceutical company focused on the health security market. Health security
comprises countermeasures for biological, chemical, radiological and nuclear attacks (biodefense market), vaccines and therapies for emerging infectious
diseases, and health preparedness. Our lead product is TPOXX®, an orally administered antiviral drug for the treatment of human smallpox disease caused by
variola virus. On July 13, 2018, the United States Food & Drug Administration (“FDA”) approved the Company’s orally-administered drug TPOXX® (“oral
TPOXX®”).
2. Summary of Significant Accounting Policies
Use of Estimates
Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and revenues and expenses during the periods reported. The most significant estimates include the variables
used in the calculation of fair value of warrants granted or issued by the Company, reported amounts of revenue, and the valuation of deferred tax assets.
Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the financial statements in the period they are determined to
be necessary. Actual results could differ from these estimates.
Basis of Presentation
The consolidated financial statements and related disclosures are presented in accordance with generally accepted accounting principles in the United States
of America (“US GAAP”) and reflect the consolidated financial position, results of operations and cash flows for all periods presented.
Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
Restricted Cash and Cash Equivalents
Under the terms of the Loan Agreement (as defined below), net cash proceeds from the Company's Priority Review Voucher ("PRV") sale on October 31,
2018 (see Note 4) are restricted and are held in a reserve account. Cash and cash equivalents held in the reserve account are available to pay interest, fees and
principal related to the Term Loan (see Note 8 for additional information). Prior to the second quarter of 2019, there was also a reserve account for certain
proceeds of the Loan Agreement. This account was also restricted. Amounts in this reserve account were primarily used to pay interest on the Loan
Agreement. This reserve account was closed in the second quarter of 2019.
The following table reconciles cash, cash equivalents and restricted cash per the consolidated statements of cash flows to the consolidated balance sheet for
each respective period:
Cash and cash equivalents
Restricted cash - short-term
Restricted cash - long-term
As of December 31,
2019
2018
2017
2016
$
65,249,072 $
100,652,809 $
19,857,833 $
28,701,824
95,737,862
11,452,078
10,701,305
—
68,292,023
6,542,448
10,138,890
17,333,332
Cash, cash equivalents and restricted cash
$
160,986,934 $
180,396,910 $
37,101,586 $
56,174,046
Concentration of Credit Risk
The Company has cash in bank accounts that exceeds the Federal Deposit Insurance Corporation insured limits. The Company has not experienced any losses
on its cash accounts and no allowance has been provided for potential credit losses because management believes the potential for losses is remote.
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Accounts Receivable
Accounts receivable are recorded net of provisions for doubtful accounts. At December 31, 2019 and 2018, 100% of accounts receivable represented
receivables from the U.S. government. An allowance for doubtful accounts is based on specific analysis of the receivables. At December 31, 2019 and 2018,
the Company had no allowance for doubtful accounts.
Inventory
Inventory is stated at the lower of cost or net realizable value. The Company capitalizes inventory costs associated with the Company’s products when, based
on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized; otherwise, such costs
are expensed as research and development. Inventory is evaluated for impairment periodically to identify inventory that may expire prior to expected sale or
has a cost basis in excess of its net realizable value. If certain batches or units of product no longer meet quality specifications or become obsolete due to
expiration, the Company records a charge to write down such unmarketable inventory to its net realizable value.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is provided on a straight-line method over the estimated useful
lives of the various asset classes. The estimated useful lives are as follows: five years for laboratory equipment; three years for computer equipment; and
seven years for furniture and fixtures. Leasehold improvements are amortized over the shorter of the estimated useful lives of the assets or the lease term.
Maintenance, repairs and minor replacements are charged to expense as incurred.
Warrant Liability
The Company accounts for warrants in accordance with the authoritative guidance which requires that free-standing derivative financial instruments with
certain cash settlement features be classified as assets or liabilities at the time of the transaction, and recorded at their fair value. Fair value is estimated using
model-derived valuations. Any changes in the fair value of the derivative instruments are reported in earnings or loss as long as the derivative contracts are
classified as assets or liabilities.
Revenue Recognition
All of the Company’s revenue is derived from long-term contracts that span multiple years. The Company accounts for revenue in accordance with ASC
Topic 606, Revenue from Contracts with Customers (“ASC 606”).
Adoption of ASC 606. On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method applied to those contracts that
were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period
amounts are not adjusted and continue to be reported in accordance with our historical accounting under ASC 605, Revenue Recognition.
The cumulative impact of adopting ASC 606 as of January 1, 2018 was a decrease to deferred revenue of approximately $1.8 million; a decrease to deferred
costs of approximately $2.1 million; an increase to receivables of approximately $0.1 million and a net increase to opening accumulated deficit of $0.2
million, net of tax. For the year ended December 31, 2018, the impact to revenues as a result of applying ASC 606 was an increase of approximately $1.0
million.
Performance Obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit
of account in ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the
performance obligation is satisfied. As of December 31, 2019, the Company's active performance obligations, for the contracts outlined in Note 3, consist of
the following: five performance obligations relate to research and development services; one relates to manufacture and delivery of product; and one is
associated with storage of product.
Contract modifications may occur during the course of performance of our contracts. Contracts are often modified to account for changes in contract
specifications or requirements. In most instances, contract modifications are for services that are not distinct, and, therefore, are accounted for as part of the
existing contract.
The Company’s performance obligations are satisfied over time as work progresses or at a point in time. Substantially all of the Company’s revenue related to
research and development performance obligations is recognized over time, because control transfers continuously to our customers. Typically, revenue is
recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying the Company’s
performance obligations. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer.
Contract costs include labor, material, and third-party services.
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Revenue connected with the performance obligations related to the delivery of oral TPOXX® to the U.S. Strategic National Stockpile ("Strategic Stockpile")
("Delivery Performance Obligation") is recognized at a point in time. The Delivery Performance Obligation under the 2011 BARDA Contract (Note 3) has
been completed. With respect to this performance obligation, revenue was recognized when the U.S. Biomedical Advanced Research and Development
Authority ("BARDA") obtained control of the asset, which was upon delivery to and acceptance by the customer and at the point in time when the constraint
on the consideration was resolved due to FDA approval of oral TPOXX®. The consideration, which was variable consideration, was constrained until the
FDA approved oral TPOXX® for the treatment of smallpox on July 13, 2018. Prior to FDA approval, consideration had been constrained because the FDA
Approval Replacement Obligation (as defined in Note 3) had not been quantified or specified. Following FDA approval, the possibility of having to replace
product pursuant to the FDA Approval Replacement Obligation was essentially eliminated and deemed to be remote since there was no difference between
the approved product and the courses of oral TPOXX® that had been delivered to the Strategic Stockpile.
Contract Estimates. Accounting for long-term contracts and grants involves the use of various techniques to estimate total contract revenue and
costs.
Contract estimates are based on various assumptions to project the outcome of future events that often span multiple years. These assumptions include labor
productivity; the complexity of the work to be performed; external factors such as customer behavior and potential regulatory outcomes; and the performance
of subcontractors, among other variables.
The nature of the work required to be performed on many of the Company’s performance obligations and the estimation of total revenue and cost at
completion are complex, subject to many variables and require significant judgment. The consideration associated with research and development services is
variable as the total amount of services to be performed has not been finalized. The Company estimates variable consideration as the most likely amount to
which it expects to be entitled. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of
cumulative revenue recognized will not occur and when any uncertainty associated with variable consideration is resolved. The Company’s estimates of
variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our historical
and anticipated performance, external factors, trends and all other information (historical, current and forecasted) that is reasonably available to us.
A significant change in one or more of these estimates could affect the profitability of the Company’s contracts. As such, the Company reviews and updates
its contract-related estimates regularly. The Company recognizes adjustments in estimated revenues, research and development expenses and cost of sales and
supportive services under the cumulative catch-up method. Under this method, the impact of the adjustment on revenues, research and development expenses
and cost of sales and supportive services recorded to date on a contract is recognized in the period the adjustment is identified.
During the year ended December 31, 2019, the Company recognized a cumulative catch-up adjustment to revenue of approximately $3.3 million related to the
conclusion of historical rate reconciliations in connection with the IV Formulation R&D Contract (defined in Note 3), and changes in the projected amount of
contract funding expected to be available under the IV Formulation R&D Contract, which impacts the progress-towards-completion calculation required
under ASC 606.
Contract Balances. The timing of revenue recognition, billings and cash collections may result in billed accounts receivable, unbilled receivables
(contract assets) and customer advances and deposits (contract liabilities) in the consolidated balance sheets. Generally, amounts are billed as work progresses
in accordance with agreed-upon contractual terms either at periodic intervals (monthly) or upon achievement of contractual milestones. Under typical
payment terms of fixed price arrangements, the customer pays the Company either performance-based payments or progress payments. For the Company’s
cost-type arrangements, the customer generally pays the Company for its actual costs incurred, as well as its allocated overhead and G&A costs. Such
payments occur within a short period of time. When the Company receives consideration, or such consideration is unconditionally due, prior to transferring
goods or services to the customer under the terms of a sales contract, the Company records deferred revenue, which represents a contract liability. During the
year ended December 31, 2019, the Company recognized revenue of $1.0 million that was included in deferred revenue at the beginning of the period.
Remaining Performance Obligations. Remaining performance obligations represent the transaction price for which work has not been performed
and excludes unexercised contract options. As of December 31, 2019, the aggregate amount of transaction price allocated to remaining performance
obligations was $30.0 million. The Company expects to recognize this amount as revenue over the next five years as the specific timing for satisfying the
performance obligations is subjective and outside the Company’s control.
Leases
The Company accounts for leases in accordance with ASC 842, Leases (“ASC 842”)
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Adoption of ASC 842. On January 1, 2019, the Company adopted ASC 842 using the modified retrospective approach as of the effective date of the
standard without revising prior periods. In addition, the Company elected the package of practical expedients permitted under the transition guidance within
the new standard, which among other things, allowed the Company to carry forward its historical lease classification. In addition, the Company elected the
hindsight practical expedient to determine the lease term for existing leases. The Company’s election of the hindsight practical expedient resulted in the
extension of the Oregon lease term as it was determined that the first renewal option under this lease was expected to be exercised with a reasonable degree of
certainty. In the second quarter of 2019, the Company exercised the first renewal option under the Oregon lease. The Company was required to record an
operating lease right-of-use ("ROU") asset and a corresponding operating lease liability, equal to the present value of the lease payments at the adoption date.
In the determination of future lease payments, the Company has elected to aggregate lease components such as payments for rent, taxes and insurance costs
with non-lease components such as maintenance costs and account for these payments as a single lease component. The present value of the lease payments
was determined using the Company's incremental borrowing rate. The impact of adopting ASC 842 as of January 1, 2019 was the recording of operating lease
right-of-use assets of approximately $2.9 million; the recording of operating lease liabilities of approximately $3.3 million; and a decrease to deferred rent of
approximately $0.4 million.
The Company determines if an arrangement is a lease at inception. Leases with an initial term less than one year are not recorded on the balance sheet and the
lease costs for these costs are recorded as an expense on a straight-line basis over the lease term. Operating leases with terms greater than one year result in a
lease liability recorded in other liabilities with a corresponding ROU asset recorded in property, plant and equipment.
Operating lease liabilities are recognized at the commencement date based on the present value of future minimum lease payments over the lease term. ROU
assets are recognized based on the corresponding lease liabilities adjusted for qualifying initial direct costs, prepaid or accrued lease payments and
unamortized lease incentives. The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease. Lease
terms may include options to extend or terminate the lease which are incorporated into the Company's measurement when it is reasonably certain that the
Company will exercise the option.
Research and Development
Research and development expenses include costs directly and indirectly attributable to the conduct of research and development programs, and performance
pursuant to the BARDA contracts, including employee related costs, materials, supplies, depreciation on and maintenance of research equipment, the cost of
services provided by outside contractors, including services related to the Company’s clinical trials and facility costs, such as rent, utilities, and general
support services. All costs associated with research and development are expensed as incurred. Costs related to the acquisition of technology rights, for which
development work is still in process, and that have no alternative future uses, are expensed as incurred.
Goodwill
The Company evaluates goodwill for impairment at least annually or as circumstances warrant. The impairment review process compares the fair value of the
reporting unit in which goodwill resides to its carrying value. The Company operates as one business and one reporting unit. Therefore, the goodwill
impairment analysis is performed on the basis of the Company as a whole, using the market capitalization of the Company as an estimate of its fair value.
Share-based Compensation
Stock-based compensation expense for all share-based payment awards made to employees and directors is determined on the grant date; for options awards,
fair value was estimated using the Black-Scholes model. These compensation costs are recognized net of an estimated forfeiture rate over the requisite service
periods of the awards. Forfeitures are estimated on the date of the respective grant and revised if actual or expected forfeiture activity differs from original
estimates.
Income Taxes
The Company recognizes income taxes utilizing the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are
recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities at enacted tax rates expected to be
in effect for the years in which the differences are expected to reverse. A valuation allowance is established if it is more likely than not that some or the entire
deferred tax asset will not be realized. The recognition of a valuation allowance for deferred taxes requires management to make estimates and judgments
about the Company’s future profitability which are inherently uncertain. The Company may recognize tax benefits from an uncertain tax position only if it is
more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax
benefits recognized in the financial statements from such position should be measured based on the largest benefit that has a greater than fifty percent
likelihood of being realized upon ultimate settlement. The Company re-evaluates uncertain tax positions and considers factors, including, but not limited to,
changes in tax law, the measurement of tax
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positions taken or expected to be taken on tax returns, and changes in circumstances related to a tax position. The Company recognizes interest and penalties
related to income tax matters in income tax expense.
(Loss) Earnings per Share
Basic earnings per share is computed by dividing net (loss) income by the weighted-average number of common shares outstanding during the period. Diluted
earnings per share is computed by dividing net (loss) income by the weighted-average number of common shares outstanding during the period, assuming
potentially dilutive common shares from option exercises, SSARs, RSUs, warrants and other incentives had been issued and any proceeds received in respect
thereof were used to repurchase common stock at the average market price during the period. The assumed proceeds used to repurchase common stock is the
sum of the amount to be paid to the Company upon exercise of options and the amount of compensation cost attributed to future services not yet recognized.
Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other
current liabilities approximates fair value due to the relatively short maturity of these instruments. Common stock warrants which are classified as liabilities
are recorded at their fair market value as of each reporting period.
The measurement of fair value requires the use of techniques based on observable and unobservable inputs. Observable inputs reflect market data obtained
from independent sources, while unobservable inputs reflect our market assumptions. The inputs create the following fair value hierarchy:
•
•
•
Level 1 – Quoted prices for identical instruments in active markets.
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active;
and model-derived valuations where inputs are observable or where significant value drivers are observable.
Level 3 – Instruments where significant value drivers are unobservable to third parties.
The Company uses model-derived valuations where certain inputs are unobservable to third parties to determine the fair value of common stock warrants on a
recurring basis and classifies such liability-classified warrants in Level 3.
The Company used a discounted cash flow model to estimate the fair value of the debt by applying a discount rate to future payments expected to be made as
set forth in the Loan Agreement. The fair value of the loan was measured using Level 3 inputs. The discount rate was determined using market participant
assumptions.
There were no transfers between levels of the fair value hierarchy during 2019 or 2018. As of December 31, 2019, the Company had approximately $5.6
million and $90.0 million of restricted cash and cash equivalents classified as Level 1 and Level 2 financial instruments, respectively. There were no Level 1
or Level 2 financial instruments as of December 31, 2018.
The following table presents changes in the liability-classified warrant measured at fair value using Level 3 inputs:
Warrant liability at December 31, 2018
Decrease in fair value of warrant liability
Exercise of warrants
Warrant liability at December 31, 2019
Fair Value Measurements of Level 3 liability-classified
warrant
$
$
12,380,939
(5,091,256)
(1,172,801)
6,116,882
Loss Contingencies
The Company is subject to certain contingencies arising in the ordinary course of business. The Company records accruals for these contingencies to the
extent that a loss is both probable and reasonably estimable. If some amount within a range of loss appears to be a better estimate than any other amount
within the range, that amount is accrued. Alternatively, when no amount within a range of loss appears to be a better estimate than any other amount, the
lowest amount in the range is accrued. The Company expenses legal costs associated with loss contingencies as incurred. We record anticipated recoveries
under existing insurance contracts when recovery is assured.
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Segment Information
The Company is managed and operated as one business. The entire business is managed by a single management team that reports to the chief executive
officer, who is the Chief Operating Decision Maker. The Company does not operate separate lines of business or separate business entities with respect to any
of its product candidates. Accordingly, the Company does not prepare discrete financial information with respect to separate product areas or by location and
has only one reportable segment.
Recent Accounting Pronouncements
On January 26, 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The
guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the
amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment
guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative
impairment test is necessary. The same one-step impairment test will be applied to goodwill at all reporting units, even those with zero or negative carrying
amounts. The revised guidance will be applied prospectively, and is effective for fiscal years beginning after December 15, 2019. The Company believes the
adoption of ASU No. 2017-04 will not have a significant impact on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments ("ASU
2016-13"). ASU 2016-13 requires an entity to measure and recognize expected credit losses for certain financial instruments, including trade receivables, as
an allowance that reflects the entity's current estimate of credit losses expected to be incurred. The standard is effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company does not expect the adoption of this standard to
have a significant impact on its consolidated financial statements.
3. Procurement Contract and Research Agreements
19C BARDA Contract (2018 BARDA Contract)
On September 10, 2018, the Company entered into a contract with BARDA pursuant to which SIGA agreed to deliver up to 1,488,000 courses of oral
TPOXX® to the Strategic Stockpile, and to manufacture and deliver to the Strategic Stockpile, or store as vendor-managed inventory, up to 212,000 courses
of the intravenous (IV) formulation of TPOXX® ("IV TPOXX®"). Additionally, the contract includes funding from BARDA for advanced development of
IV TPOXX®, post-marketing activities for oral and IV TPOXX®, and procurement activities. As of February 18, 2020, the contract with BARDA (as
amended, modified, or supplemented from time to time, the "19C BARDA Contract" or “2018 BARDA Contract”) contemplates up to approximately $602.5
million of payments, of which approximately $51.7 million of payments are included within the base period of performance of five years, approximately
$25.8 million of payments are related to exercised options and up to approximately $525.0 million of payments are currently specified as unexercised options.
BARDA may choose in its sole discretion when, or whether, to exercise any of the unexercised options. The period of performance for options is up to ten
years from the date of entry into the 19C BARDA Contract and such options could be exercised at any time during the contract term, including during the
base period of performance. On May 20, 2019, an option for the manufacture and delivery of 363,070 courses of oral TPOXX® was modified to divide it into
four procurement-related options. One of the four modified procurement-related options provides for the payment of $11.2 million for the procurement of raw
materials to be used in the manufacture of at least 363,070 courses of oral TPOXX®. This option was exercised simultaneously with the aforementioned
modification. Each of the other three options individually specifies the delivery of approximately 121,000 courses of oral TPOXX® for consideration of
approximately $33.8 million. In total, the four options under the May 2019 modification provide for the purchase of raw material for and the manufacture and
delivery of 363,070 courses of oral TPOXX® for consideration of approximately $112.5 million. The option modification did not change the overall total
potential value of the 19C BARDA Contract, nor did it change the total amount to be paid in connection with the manufacture and delivery of oral TPOXX®
courses.
The base period of performance specifies potential payments of approximately $51.7 million for the following activities: payments of approximately $11.1
million for the delivery of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile; payments of $8.0 million for the manufacture of 20,000
courses of final drug product of IV TPOXX® ("IV FDP"), of which $3.2 million of payments are related to the manufacture of bulk drug substance ("IV
BDS") to be used in the manufacture of IV FDP; payments of approximately $32.0 million to fund advanced development of IV TPOXX®; and payments of
approximately $0.6 million for supportive procurement activities. As of December 31, 2019, the Company had received $11.1 million for the successful
delivery of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile, $3.2 million for the manufacture of IV BDS and $4.7 million for other
base period activities. IV BDS is expected to be used for the manufacture of 20,000 courses of IV FDP.
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The $3.2 million received for the manufacture of IV BDS has been recorded as deferred revenue as of December 31, 2019 and 2018; such amount is expected
to be recognized as revenue when IV TPOXX containing the BDS is delivered to the National Stockpile or placed in vendor-managed inventory.
The options that have been exercised to date provide for additional potential payments up to approximately $25.8 million. There are exercised options for the
following activities: payments up to $11.2 million for the procurement of raw materials to be used in the manufacture of at least 363,070 courses of oral
TPOXX®; and, payments of up to $14.6 million for funding of post-marketing activities for oral TPOXX®, of which, $2.3 million had been received as of
December 31, 2019.
Unexercised options specify potential payments up to approximately $525.0 million in total (if all options are exercised). There are options for the following
activities: payments of up to $439.0 million for the delivery of up to approximately 1,452,000 courses of oral TPOXX® to the Strategic Stockpile; payments
of up to $76.8 million for the manufacture of up to 192,000 courses of IV FDP, of which up to $30.7 million of payments would be paid upon the manufacture
of IV BDS to be used in the manufacture of IV FDP; payments of up to approximately $3.6 million to fund post-marketing activities for IV TPOXX®; and
payments of up to approximately $5.6 million for supportive procurement activities.
The options related to IV TPOXX® are divided into two primary manufacturing steps. There are options related to the manufacture of bulk drug substance
(“IV BDS Options”), and there are corresponding options (for the same number of IV courses) for the manufacture of final drug product (“IV FDP Options”).
BARDA may choose to exercise any, all, or none of these options in its sole discretion. The 19C BARDA Contract includes: three separate IV BDS Options,
each providing for the bulk drug substance equivalent of 64,000 courses of IV TPOXX®; and three separate IV FDP Options, each providing for 64,000
courses of final drug product of IV TPOXX®. BARDA has the sole discretion as to whether to simultaneously exercise IV BDS Options and IV FDP
Options, or whether to make independent exercise decisions. If BARDA decides to only exercise IV BDS Options, then the Company would receive
payments up to $30.7 million; alternatively, if BARDA decides to exercise both IV BDS Options and IV FDP Options, then the Company would receive
payments up to $76.8 million. For each set of options relating to a specific group of courses (for instance, the IV BDS and IV FDP options that reference the
same 64,000 courses), BARDA has the option to independently purchase IV BDS or IV FDP.
Revenues in connection with the 19C BARDA Contract are recognized either over time or at a point in time. Performance obligations related to product
delivery generate revenue at a point in time. Other performance obligations under the 19C BARDA Contract generate revenue over time. For the years ended
December 31, 2019 and 2018, the Company recognized revenues of $7.4 million and $0.4 million, respectively, on an over time basis. In contrast, revenue
recognized for product delivery and therefore at a point in time for the year ended December 31, 2019 was $11.1 million. There was no revenue recognized at
a point in time during 2018.
2011 BARDA Contract
On May 13, 2011, the Company signed a contract with BARDA pursuant to which BARDA agreed to buy from the Company 1.7 million courses of oral
TPOXX®. Additionally, the Company agreed to contribute to BARDA 300,000 courses at no additional cost to BARDA.
The contract with BARDA (as amended, modified, or supplemented from time to time the "2011 BARDA Contract") includes a base contract, as modified,
("2011 Base Contract") as well as options. The 2011 Base Contract specifies approximately $508.4 million of payments (including exercised options), of
which, as of December 31, 2019, $459.8 million has been received by the Company for the manufacture and delivery of 1.7 million of oral TPOXX® and
$44.9 million has been received for certain reimbursements in connection with development and supportive activities. Approximately $3.7 million remains
eligible to be received in the future for reimbursements of development and supportive activities.
For courses of oral TPOXX® that have been physically delivered to the Strategic Stockpile under the 2011 BARDA Contract, there are product replacement
obligations, including: (i) a product replacement obligation in the event that the final version of oral TPOXX® approved by the FDA was different from any
courses of oral TPOXX® that had been delivered to the Strategic Stockpile (the “FDA Approval Replacement Obligation”); (ii) a product replacement
obligation, at no cost to BARDA, in the event that oral TPOXX® is recalled or deemed to be recalled for any reason; and (iii) a product replacement
obligation in the event that oral TPOXX® does not meet any specified label claims. On July 13, 2018, the FDA approved oral TPOXX® for the treatment of
smallpox and there is no difference between the approved product and courses in the Strategic Stockpile. As such, the possibility of the FDA Approval
Replacement Obligation resulting in any future replacements of product within the Strategic Stockpile is remote.
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The 2011 BARDA Contract includes options. On July 30, 2018, the 2011 BARDA Contract was modified and BARDA exercised its option relating to FDA
approval of the aforementioned 84-month expiry for oral TPOXX® for which the Company was paid $50.0 million in August 2018. With the option exercise,
the 2011 BARDA Contract was modified so that the 2011 Base Contract increased by $50.0 million. Remaining options, if all were exercised by BARDA,
would result in aggregate payments to the Company of $72.7 million, including up to $58.3 million of funding for development and supportive activities such
as work on a post-exposure prophylaxis ("PEP") indication for TPOXX® and/or $14.4 million of funding for production-related activities related to warm-
base manufacturing. BARDA may choose, in its sole discretion not to exercise any or all of the unexercised options. In 2015, BARDA exercised two options
related to extending the indication of the drug to the geriatric and pediatric populations. The stated value of those exercises was immaterial.
The 2011 BARDA Contract expires in September 2020.
As described in Note 2, cash inflows related to delivery of courses under the 2011 BARDA Contract had been recorded as deferred revenue prior to FDA
approval of oral TPOXX®, which occurred in the third quarter 2018. The deferral was due to the constraint on the consideration received related to the FDA
Approval Replacement Obligation. During the third quarter 2018, the constraint was satisfied with FDA approval of oral TPOXX®. As such, $375.6 million
associated with cash consideration received in prior periods under the 2011 BARDA Contract was recognized as revenue for the year ended December 31,
2018. Separately, as discussed above, $90.9 million of revenues were recognized in the third quarter of 2018 in connection with a $40.9 million holdback
payment (under the 2011 BARDA Contract) and a $50.0 million payment for achieving 84-month expiry for oral TPOXX® (under the 2011 BARDA
Contract). Direct costs incurred by the Company to manufacture and fulfill the delivery of courses had also been deferred. As of December 31, 2017, deferred
direct costs under the 2011 BARDA Contract were approximately $96.5 million. In connection with the FDA approval of oral TPOXX®, all related deferred
costs were recognized in the consolidated statement of operations during the third quarter of 2018.
Revenues in connection with the 2011 BARDA Contract are recognized either over time or at a point in time. Performance obligations related to product
delivery generate revenue at a point in time. Remaining performance obligations under the 2011 BARDA Contract generate revenue over time. For the years
ended December 31, 2019 and 2018, the Company recognized revenue of $0.3 million and $1.7 million, respectively, on an over time basis. In contrast,
revenue recognized for product delivery and therefore at a point in time for the years ended December 31, 2019 and 2018, were $0.1 million and $468.9
million, respectively.
Research Agreements and Grants
The Company has an R&D program for IV TPOXX®. This program is funded by the 19C BARDA Contract and a development contract with BARDA ("IV
Formulation R&D Contract"). The IV Formulation R&D Contract has a period of performance that terminates on December 30, 2020. As of December 31,
2019, the IV Formulation R&D Contract provides for future aggregate research and development funding of approximately $3.1 million.
Revenues in connection with the IV Formulation R&D Contract are recognized over time. For the years ended December 31, 2019 and 2018, the Company
recognized revenue of $7.5 million and $6.0 million, respectively, under this contract. During the year ended December 31, 2019, the Company recognized a
cumulative catch-up adjustment to revenue of approximately $3.3 million related to the conclusion of historical rate reconciliations in connection with the IV
Formulation R&D Contract and changes in the projected amount of contract funding expected to be available under the IV Formulation R&D Contract, which
impacts the progress-towards-completion calculation required under ASC 606.
In July 2019, the Company was awarded a multi-year research contract valued at a total of $19.5 million, with an initial award of $12.4 million, from the DoD
to support work in pursuit of a potential label expansion for oral TPOXX® that would include post-exposure prophylaxis ("PEP") of smallpox (such work
known as the "PEP Label Expansion Program" and the contract referred to as the "PEP Label Expansion R&D Contract"). The term of the initial award is five
years. As of December 31, 2019 the PEP Label Expansion R&D Contract provides for future aggregate research and development funding under the initial
award of approximately $12.2 million. For the year ended December 31, 2019, the Company, under the PEP Label Expansion R&D Contract, recognized
revenue of $0.3 million on an over time basis.
Contracts and grants include, among other things, options that may or may not be exercised at the U.S. Government’s discretion. Moreover, contracts and
grants contain customary terms and conditions including the U.S. Government’s right to terminate or restructure a contract or grant for convenience at any
time. As such, the Company may not be eligible to receive all available funds.
4. Sale of Priority Review Voucher
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Concurrent with the approval of oral TPOXX®, the FDA granted the Company's request for a Priority Review Voucher (“PRV”). A PRV is a voucher that
may be used to obtain an accelerated FDA review of a product candidate. On October 31, 2018 the Company sold its PRV for cash consideration of $80
million which was recognized as other income.
5. Inventory
Inventory consisted of the following:
Work in-process
Finished goods
Inventory
6. Property, Plant and Equipment
Property, plant and equipment consisted of the following:
Leasehold improvements
Computer equipment
Furniture and fixtures
Operating lease right-of-use-asset
Less-accumulated depreciation
Property, plant and equipment, net
As of
December 31, 2019
December 31, 2018
8,693,457 $
959,398
9,652,855 $
1,950,445
957,765
2,908,210
As of
December 31, 2019
December 31, 2018
2,420,028 $
601,797
377,859
2,944,932
6,344,616
(3,726,313)
2,618,303 $
2,420,028
618,248
377,859
—
3,416,135
(3,244,861)
171,274
$
$
$
$
Depreciation and amortization expense on property, plant, and equipment was $526,997, $69,630, and $132,189 for the years ended December 31, 2019,
2018, and 2017, respectively. In connection with the lease termination discussed in Note 15, the Company wrote off $129,000 of leasehold improvements and
furniture and fixtures during the year ended December 31, 2017.
7. Accrued Expenses
Accrued expenses and other current liabilities consisted of the following:
Compensation
Deferred revenue
Interest payable
Research and development vendor costs
Lease liability, current portion
Professional fees
Vacation
Other
Accrued expenses and other current liabilities
8. Debt
59
As of
December 31, 2019
December 31, 2018
$
$
2,966,139 $
2,298,341
977,724
707,685
419,709
288,707
256,402
722,204
8,636,911 $
2,600,839
4,159,946
35,567
1,446,410
—
242,043
294,794
869,318
9,648,917
Table of Contents
On September 2, 2016, the Company entered into a loan and security agreement (as amended from time to time, the “Loan Agreement”) with OCM Strategic
Credit SIGTEC Holdings, LLC (“Lender”), pursuant to which the Company received $80.0 million (less fees and other items) on November 16, 2016 having
satisfied certain pre-conditions. Such $80.0 million had been placed in an escrow account on September 30, 2016 (the “Escrow Funding Date”). Prior to the
Escrow Release Date (November 16, 2016), the Company did not have access to, or any ownership interest in, the escrow account. Until the Escrow Release
Date occurred, the Company did not have an obligation to make any payments under the Loan Agreement, no security was granted under the Loan Agreement
and no affirmative or negative covenants or events of default were effective under the Loan Agreement. Amounts were held in the escrow account until the
satisfaction of certain conditions including the closing of the Rights Offering (see Note 11) on November 16, 2016. As part of the satisfaction of a litigation
claim, funds were released from the escrow account (the date on which such transfer occurred, the “Escrow Release Date”).
The Loan Agreement provides for a first-priority senior secured term loan facility in the aggregate principal amount of $80.0 million (the “Term Loan”), of
which (i) $25.0 million was placed in a reserve account (the “Reserve Account”) only to be utilized to pay interest on the Term Loan as it becomes due; (ii) an
additional $5.0 million was also placed in the Reserve Account and up to the full amount of such $5.0 million was eligible to be withdrawn after June 30,
2018 upon the satisfaction of certain conditions, provided that any of such amount was required to fund any interest to the extent any interest in excess of the
aforementioned $25.0 million was due and owing and any of such $5.0 million remained in the Reserve Account; and (iii) $50.0 million (net of fees and
expenses then due and owing to the Lender) was paid as part of the final payment to satisfy a litigation claim. Interest on the Term Loan is at a per annum rate
equal to the Adjusted LIBOR rate plus 11.5%, subject to adjustments as set forth in the Loan Agreement. At December 31, 2019, the effective interest rate on
the Term Loan, which includes interest payments and accretion of unamortized costs and fees, was 19.1%. The Company incurred $15.8 million of interest
expense during the year-ended December 31, 2019, of which $4.5 million accreted to the Term Loan balance. For the year ended December 31, 2018, the
Company incurred $15.5 million of interest expense, of which $4.5 million accreted to the Term Loan balance. On July 12, 2018, upon confirmation that there
had been no events of default, $5 million was withdrawn by the Company from the Reserve Account and was placed in the Company's cash operating
account. On October 31, 2018, the Loan Agreement was amended to expand the definition of permitted dispositions to include a sale of the PRV. In
connection with the amendment, net cash proceeds from the sale of the PRV ($78.3 million) were placed in a restricted cash account; such restricted account
to be used only for interest, fees and principal payments (other than those in connection with an event of default) on the Term Loan. The cash and cash
equivalents balance in the restricted account was increased to $100.5 million as of July 24, 2019, in connection with an amendment to the Term Loan that
allows the Company to diversify the financial institutions at which its remaining unrestricted cash and cash equivalents can be held. The balance in the
restricted account represents an approximation of total payments that would be required pursuant to the Term Loan if it were to remain outstanding until its
maturity.
The Term Loan matures on the earliest to occur of (i) the four-year anniversary of the Escrow Release Date, and (ii) the acceleration of certain obligations
pursuant to the Loan Agreement. At maturity, $80.0 million of principal will be repaid, and an additional $4.0 million will be paid (see below). Prior to
maturity, there are no scheduled principal payments.
Through the three and one-half year anniversary (May 17, 2020) of the Escrow Release Date, any prepayment of the Term Loan is subject to a make-whole
provision in which interest payments related to the prepaid amount are due (subject to a discount of treasury rate plus 0.50%).
In connection with the Term Loan, the Company has granted the Lender a lien on and security interest in all of the Company’s right, title and interest in
substantially all of the Company’s tangible and intangible assets, including all intellectual property.
The Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants. These covenants, among other
things, require a minimum cash balance throughout the term of the Term Loan and the achievement of regulatory milestones by certain dates, and contain
certain limitations on the ability of the Company to incur unreimbursed research and development expenditures over a certain threshold, make capital
expenditures over a certain threshold, incur indebtedness, dispose of assets outside of the ordinary course of business, make cash distributions (including
share repurchases and dividends) and enter into certain merger or consolidation transactions. The minimum cash requirement was $5.0 million until August
27, 2018 (45 days after FDA approval of oral TPOXX®), at which point the minimum cash requirement became $20.0 million.
The Loan Agreement includes customary events of default, including, among others: (i) non-payment of amounts due thereunder, (ii) the material inaccuracy
of representations or warranties made thereunder, (iii) non-compliance with covenants thereunder, (iv) non-payment of amounts due under, or the acceleration
of, other material indebtedness of the Company and (v) bankruptcy or insolvency events. Upon the occurrence and during the continuance of an event of
default under the Loan Agreement, the interest rate may increase by 2.00% per annum above the rate of interest otherwise in effect, and the Lenders would be
entitled to accelerate the maturity of the Company’s outstanding obligations thereunder.
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As of December 31, 2019, the Company is in compliance with the Loan Agreement covenants.
At December 31, 2019, the fair value of the debt was $85.7 million and the carrying value of the debt was $80.0 million. The Company used a discounted
cash flow model to estimate the fair value of the debt by applying a discount rate to future payments expected to be made as set forth in the Loan Agreement.
The fair value of the loan was measured using Level 3 inputs. The discount rate was determined using market participant assumptions.
In connection with the Loan Agreement, the Company incurred $8.2 million of costs (including interest on amounts held in the escrow account between
September 30, 2016 and November 15, 2016). Furthermore, an additional $4.0 million will become payable when principal of the Term Loan is repaid. As
part of the Company's entry into the Loan Agreement, the Company issued the Warrant (see Note 10) with a fair market value of $5.8 million. The fair value
of the Warrant, as well as costs related to the Term Loan issuance, were recorded as deductions to the Term Loan balance on the Balance Sheet. These
amounts are being amortized on a straight-line basis over the life of the related Term Loan. The Company compared the amortization under the effective
interest method with the straight-line basis and determined the results were not materially different. The $4.0 million that will be paid when principal is repaid
is being accreted to the Term Loan balance.
9. Per Share Data
The Company computes, presents and discloses earnings per share in accordance with the authoritative guidance which specifies the computation,
presentation and disclosure requirements for earnings per share of entities with publicly held common stock or potential common stock. The objective of
basic EPS is to measure the performance of an entity over the reporting period by dividing income (loss) by the weighted average shares outstanding. The
objective of diluted EPS is consistent with that of basic EPS, except that it also gives effect to all potentially dilutive common shares outstanding during the
period.
The following is a reconciliation of the basic and diluted (loss) earnings per share computation:
Net (loss) income for basic earnings per share
Less: Change in fair value of warrants
Net (loss) income, adjusted for change in fair value of warrants
for diluted earnings per share
Weighted-average shares
Effect of potential common shares
Weighted-average shares: diluted
(Loss) earnings per share: basic
(Loss) earnings per share: diluted
Year Ended December 31,
2019
2018
2017
(7,241,147) $
421,807,828 $
(36,235,484)
5,091,256
(6,922,624)
—
(12,332,403) $
428,730,452 $
(36,235,484)
81,031,254
1,143,769
82,175,023
79,923,295
2,785,177
82,708,472
(0.09) $
(0.15) $
5.28 $
5.18 $
78,874,494
—
78,874,494
(0.46)
(0.46)
$
$
$
$
For the year ended December 31, 2019, the diluted earnings per share calculation reflects the effect of the assumed exercise of outstanding warrants and any
corresponding elimination of the impact included in operating results from the change in fair value of the warrants. When applicable, weighted-average
diluted shares include the dilutive effect of in-the-money options and warrants, unvested restricted stock and unreleased restricted stock units. The dilutive
effect of warrants and options is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock
method, the amount the employee or director must pay for exercising stock options, the average amount of compensation cost for future service that the
Company has not yet recognized, and the amount of tax benefits that would be recorded in additional paid-in capital when the award becomes deductible, are
collectively assumed to be used to repurchase shares.
The Company incurred losses for the twelve months ended December 31, 2019 and 2017 and as a result, for such years the equity instruments listed below are
excluded from the calculation of diluted earnings (loss) per share as the effect of the exercise, conversion or vesting of such instruments would be anti-
dilutive. The weighted average number of equity instruments excluded consisted of:
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Stock Options
Stock-Settled Stock Appreciation Rights
Restricted Stock Units
Warrants
Year Ended December 31,
2019
2017
340,284
1,666
525,741
—
1,386,176
333,252
1,396,730
2,690,950
As discussed in Note 12, the appreciation of each stock-settled stock appreciation right was capped at a determined maximum value. As a result, the weighted
average number shown in the table above for stock-settled stock appreciation rights reflects the weighted average maximum number of shares that could be
issued.
10. Financial Instruments
2016 Warrant
On September 2, 2016, in connection with the entry into the Loan Agreement (see Note 8 for additional information), the Company issued a warrant (the
“Warrant”) to the Lender to purchase a number of shares of the Company’s common stock equal to $4.0 million divided by the lower of (i) $2.29 per share
and (ii) the subscription price paid in connection with the Rights Offering (as defined in Note 11). The subscription price paid was $1.50 in connection with
the Rights Offering; accordingly, the exercise price of the Warrant was set at $1.50 per share, and there were 2.7 million shares underlying the Warrant.
During the year ended December 31, 2019, approximately 0.2 million shares on the warrant were exercised. Subsequent to partial exercises of the Warrant,
there are approximately 1.5 million shares underlying the Warrant as of December 31, 2019. The Warrant provides for weighted average anti-dilution
protection and is exercisable in whole or in part for ten (10) years from the date of issuance.
The Company accounted for the Warrant in accordance with the authoritative guidance which requires that free-standing derivative financial instruments with
certain anti-dilution and cash settlement features be classified as assets or liabilities at the time of the transaction, and recorded at their fair value. Any
changes in the fair value of the derivative instruments are reported in earnings or loss as long as the derivative contracts are classified as assets or liabilities.
Accordingly, the Company classified the Warrant as a liability and reports its change in fair value in the consolidated statement of operations.
On September 2, 2016, the issuance date of the Warrant, the fair value of the liability-classified Warrant was $5.8 million. The Company applied a Monte
Carlo Simulation-model to calculate the fair value of the Warrant and compared the Monte Carlo simulation model calculation to a Black-Scholes model
calculation as of December 31, 2016. These models generated substantially equivalent fair values for the Warrant. As such, the Company utilized a Black-
Scholes model at December 31, 2019 and 2018 to determine the fair value of the Warrant.
As of December 31, 2019, the fair value of the Warrant was $6.1 million. A Black Scholes model was applied to calculate the fair value of the Warrant using
the following assumptions: risk free interest rate of 1.81%; no dividend yield; an expected life of 6.7 years; and a volatility factor of 70%.
As of December 31, 2018, the fair value of the Warrant was $12.4 million. A Black Scholes model was applied to calculate the fair value of the Warrant using
the following assumptions: risk free interest rate of 2.6%; no dividend yield; an expected life of 7.7 years; and a volatility factor of 70%.
At December 31, 2019, pursuant to the Warrant agreement, there were no conditions under which current assets would have been required to satisfy the
Warrant obligation.
11. Stockholders’ Equity
On December 31, 2019, the Company’s authorized share capital consisted of 620,000,000 shares, of which 600,000,000 are designated common shares and
20,000,000 are designated preferred shares. The Company’s Board of Directors is authorized to issue preferred shares in series with rights, privileges and
qualifications of each series determined by the Board. As of December 31, 2019 and 2018, no preferred shares were outstanding or issued.
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12. Stock Compensation Plans
The Company’s 2010 Stock Incentive Plan (the “2010 Plan”) was initially adopted in May 2010. The 2010 Plan provided for the issuance of stock options,
restricted stock and unrestricted stock with respect to an aggregate of 2,000,000 shares of the Company’s common stock to employees, consultants and
outside directors of the Company. On May 17, 2011, the 2010 Plan was amended to provide for the issuance of restricted stock units (“RSUs”) and on
February 2, 2012, the 2010 Plan was amended to provide for the issuance of SSARs. Effective April 25, 2012 and May 23, 2017, the 2010 Plan was amended
to increase the maximum number of shares of common stock available for issuance to an aggregate of 4,500,000 shares and 8,500,000 shares, respectively.
The vesting period for awards granted under the 2010 Plan, is determined by the Compensation Committee of the Board of Directors. The Compensation
Committee also determines the expiration date of each equity award, however, stock options and SSARs may not be exercisable more than ten years after the
date of grant as the maximum term of equity awards issued under the 2010 Plan is ten years.
For the years ended December 31, 2019, 2018 and 2017, the Company recorded stock-based compensation expense, including stock options, SSARs, RSUs
and certain warrant amortization, of approximately $2.1 million, $2.3 million and $1.1 million, respectively.
Stock Options
Stock option awards provide holders the right to purchase shares of Common Stock at prices determined by the Compensation Committee, at the time of
grant, and must have an exercise price equal to or in excess of the fair market value of the Company’s common stock at the date of grant.
The fair value of options granted is estimated at the date of grant. Expected volatility has been estimated using a combination of the historical volatility of the
Company's common stock and the historical volatility of a group of comparable companies’ common stock, both using historical periods equivalent to the
options’ expected lives. The expected dividend yield assumption is based on the Company’s intent not to issue a dividend in the foreseeable future. The risk-
free interest rate assumption is based upon observed interest rates for securities with maturities approximating the options’ expected lives. The expected life
was estimated based on historical experience and expectation of employee exercise behavior in the future giving consideration to the contractual terms of the
award.
A summary of the Company’s stock option activity is as follows:
Outstanding at January 1, 2019
Granted
Exercised
Canceled/Expired
Outstanding at December 31, 2019
Vested at December 31, 2019
Exercisable at December 31, 2019
Number of
Options
Weighted
Average Exercise
Price
Weighted
Average
Remaining Life
(in years)
Aggregate
Intrinsic Value
(in thousands)
402,400 $
25,000
(25,000)
(121,400)
281,000 $
281,000 $
281,000 $
9.03
5.90
4.74
7.75
9.68
9.68
9.68
2.51 $
2.51 $
2.51 $
53,750
53,750
53,750
As of December 31, 2019, there is no remaining unrecognized stock-based compensation cost related to stock options expected to be recognized. The total
fair value of stock options which vested during the years ended December 31, 2019 and 2017 was approximately $120,000 and $73,000, respectively. For the
year ended December 31, 2018 there were no stock options that vested.
The total intrinsic value of stock options exercised was approximately $76,000, $2,900,000 and $65,000 for the years ended December 31, 2019, 2018 and
2017, respectively. The intrinsic value represents the amount by which the market price of the underlying stock exceeds the exercise price of an option.
Stock Appreciation Rights
SSARs provided holders the right to purchase shares of Common Stock at prices determined by the Compensation Committee, at the time of grant, and had to
have an exercise price equal to or in excess of the fair market value of the Company’s common stock at the date of grant. Upon exercise, the gain, or intrinsic
value, was settled by the delivery of SIGA stock to the employee.
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There were no SSARs granted during the years ended December 31, 2019 or 2018. During the year ended December 31, 2012, the Company granted 1.4
million shares of SSARs at a weighted average grant-date fair value of $0.68 per share. The exercise price of a SSAR was equal to the closing market price on
the date of grant. The granted SSARs vested in equal annual installments over a period of three years and expired no later than seven years from the date of
grant. Moreover, the appreciation of each SSAR was capped at a determined maximum value.
The fair value of granted SSARs was estimated utilizing a Monte Carlo method. The Monte Carlo method is a statistical simulation technique used to provide
the grant-date fair value of an award. As the issued SSARs were capped at maximum values, such attribute was considered in the simulation.
The Company calculated the expected volatility using a combination of historical volatility of SIGA's common stock and the volatility of a group of
comparable companies' common stock. The expected life from grant date was estimated based on the expectation of exercise behavior in consideration of the
maximum value and contractual term of the SSARs. The dividend yield assumption was based on the Company’s intent not to issue a dividend in the
foreseeable future. The risk-free interest rate assumption was based upon observed interest rates appropriate for the expected life of the SSARs.
A summary of the Company’s SSAR activity is as follows:
Number of
SSARs
Weighted
Average
Exercise
Price
Weighted
Average
Remaining Life
(in years)
Aggregate
Intrinsic Value
(in thousands)
Outstanding at January 1, 2019
Granted
Exercised
Canceled/Expired
Outstanding at December 31, 2019
Vested at December 31, 2019
Exercisable at December 31, 2019
34,100 $
—
(34,100)
—
—
— $
— $
3.53
—
3.53
—
—
—
—
—
— $
— $
—
—
—
The total intrinsic value of SSARs exercised was approximately $0.1 million, $0.7 million and $0.9 million for the years ended December 31, 2019, 2018 and
2017, respectively.
Restricted Stock Awards/Restricted Stock Units
RSUs awarded to employees vest in equal annual installments over a two or three-year period and RSUs awarded to directors of the Company vest over a
one-year period. A summary of the Company’s RSU activity is as follows:
Outstanding at January 1, 2019
Granted
Vested and released
Canceled/Expired
Outstanding at December 31, 2019
Weighted
Average
Grant-Date
Fair Value
3.26
5.84
3.26
5.90
5.83
Number of
RSUs
499,116 $
255,292
(499,116)
(15,000)
240,292 $
As of December 31, 2019, $0.8 million of total remaining unrecognized stock-based compensation cost related to RSUs is expected to be recognized over the
weighted-average remaining requisite service period of 1.4 years. The weighted average fair value at the date of grant for restricted stock awards granted
during the years ended December 31, 2019, 2018 and 2017 was $5.84, $6.53 and $3.51 per share, respectively. Based on the grant date, the total fair value of
restricted stock and restricted stock units vested and released during the years ended December 31, 2019, 2018 and 2017 was approximately $1.6 million,
$2.9 million and $0.6 million, respectively.
13. Income Taxes
The Company's (benefit) provision for income taxes comprises the following:
Current:
Federal
State and local
Total current (benefit) provision
Deferred:
Federal
State and local
Total deferred (benefit)
Total (benefit)
For the year ended December 31,
2019
2018
2017
$
(663,114) $
(1,326,022) $
143,455
(519,659)
459,172
(866,850)
(2,092,585)
(325,032)
(2,417,617)
(9,256,661)
(44,761)
(9,301,422)
$
(2,937,276) $
(10,168,272) $
623,060
1,179
624,239
(2,724,371)
6,342
(2,718,029)
(2,093,790)
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The Company’s deferred tax assets and liabilities comprise the following:
Deferred income tax assets:
Net operating losses
Deferred research and development costs
Amortization of intangible assets
Share-based compensation
Property, plant and equipment
Deferred revenue
Interest expense carryforward
Lease liability
Alternative minimum tax credits
Other
Deferred income tax assets
Less: valuation allowance
As of December 31,
2019
2018
9,353,603 $
9,798,319
—
113,910
451,818
—
719,304
2,617,951
678,993
663,114
1,338,046
15,936,739
(1,047,008)
60,535
171,044
508,089
371,804
—
—
—
1,326,228
1,028,083
13,264,102
(1,051,307)
Deferred income tax assets, net of valuation allowance
$
14,889,731
$
12,212,795
Deferred income tax liabilities:
Amortization of goodwill
Property, plant and equipment
Other
Deferred income tax asset (liability), net
(201,930)
(175,581)
(361,218)
(192,146)
—
(287,264)
$
14,151,002 $
11,733,385
The recognition of a valuation allowance for deferred taxes requires management to make estimates and judgments about the Company’s future profitability
which is inherently uncertain. The Company assesses all available positive and negative evidence to determine if its existing deferred tax assets are realizable
on a more-likely-than-not basis. In making such assessment, the Company considered the reversal of existing taxable temporary differences, projected future
taxable income, tax planning strategies and recent financial operating results. The ultimate realization of a deferred tax asset is ultimately dependent on the
Company's generation of sufficient taxable income within the available net operating loss carryback and/or carryforward periods to utilize the deductible
temporary differences. As of December 31, 2019 and 2018, the Company has a valuation allowance on certain state and local net operating losses which the
Company determined were not realizable on a more-likely-than-not basis.
During the year ended December 31, 2018, the Company received FDA approval and recorded revenue related to the delivery of our oral TPOXX® product.
The Company also received payments for the FDA holdback, the expiry option under the 2011 Base Contract, and for the sale of its PRV. In addition, the
Company entered into a new contract with BARDA for the sale of up to 1.7 million courses of (oral and IV) TPOXX®. Based on these factors, management
determined that sufficient positive evidence existed to conclude that substantially all of our deferred tax assets were realizable on a more-likely-than-not basis
and reversed our valuation allowance. During 2018, the valuation allowance decreased by $101.5 million which relates to the reversal of substantially all of
the Company's valuation allowance against its deferred tax assets with the exception of those related to certain state net operating losses.
As of December 31, 2019, the Company had $38.2 million of federal net operating loss carryforwards, which expire in 2036, to offset future taxable income.
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The benefit for income taxes differs from the expected amount calculated by applying the Company's statutory rate to the income or loss before benefit for
income taxes as follows:
Statutory federal income tax rate
State taxes
Change in fair value of common stock warrant
Section 162(m) limitation
Other
U.S. federal tax law change
Valuation allowance on deferred tax assets
Effective tax rate
As of December 31,
2019
2018
2017
21.0 %
1.3 %
10.5 %
(6.0)%
2.1 %
— %
— %
28.9 %
21.0 %
0.8 %
0.4 %
0.3 %
(0.3)%
— %
(24.7)%
(2.5)%
35.0 %
3.9 %
(4.3)%
— %
1.8 %
5.1 %
(36.0)%
5.5 %
For the year ended December 31, 2019, the Company’s effective tax rate differs from the statutory rate of 21% primarily as a result of non-deductible
executive compensation under IRC Section 162(m) and a non-taxable adjustment for the fair market value of the Warrant. For the year ended December 31,
2018, the Company's effective tax rate differs from the statutory rate of 21% due to the reversal of the Company's valuation allowance as substantially all of
the Company's deferred tax assets became realizable on a more-likely-than-not basis.
A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows:
Balance at beginning of year
Tax positions related to the current and prior years:
Additions
Reductions
Settlements
Lapses in applicable statutes of limitation
Balance at the end of the year
For the year ended December 31,
2019
2018
5,738,964 $
—
—
(89,776)
—
—
—
—
5,738,964
—
—
—
5,649,188 $
5,738,964
$
$
Included in the balance of unrecognized tax benefits as of December 31, 2019, are potential benefits of $5.6 million that, if recognized, would affect the
effective tax rate. There are no uncertain tax positions for which it is reasonably possible that the total amounts of unrecognized benefits will significantly
increase or decrease within twelve months from December 31, 2019.
The Company files federal income tax returns and income tax returns in various state and local tax jurisdictions. The federal tax years open to examination
are 2017 to 2019. The Company's state and local tax years open to examination are 2015-2019.
14. Commitments and Contingencies
Operating lease commitments
The Company leases its Corvallis, Oregon, facilities and office space under an operating lease which was signed on November 3, 2017 and commenced on
January 1, 2018. This lease expires December 31, 2021. The Company had a lease for the same location prior to this lease. On May 26, 2017 the Company
and M&F Incorporated entered into a ten-year office lease agreement (the “New HQ Lease”), pursuant to which the Company agreed to lease 3,200 square
feet at 31 East 62nd Street, New York, New York. The Company is utilizing premises leased under the New HQ Lease as its corporate headquarters. The
Company has no leases that qualify as finance leases.
Operating lease costs totaled $0.6 million and $0.7 million for the year ended December 31, 2019 and 2018, respectively. Cash paid for amounts included in
the measurement of lease liabilities from operating cash flows was $0.6 million and $0.6 million for the years ended December 31, 2019 and 2018,
respectively. As of December 31, 2019, the weighted-average remaining lease term of the Company’s operating leases was 6.3 years while the weighted-
average discount rate was 4.53%.
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The following is a maturity analysis of the Company's lease liabilities as of December 31, 2019:
2020
2021
2022
2023
2024
Thereafter
Total undiscounted cash flows under operating leases
Less: Imputed interest
Present value of lease liabilities
$
$
542,340
600,362
368,467
402,078
404,258
982,881
3,300,386
(482,097)
2,818,289
As of December 31, 2019, approximately $2.4 million of the lease liability is included in Other liabilities on the consolidated balance sheet with the current
portion included in accrued expenses.
As previously disclosed in the Company's 2018 Annual Report on Form 10-K and pursuant to ASC 840, Leases, the predecessor to ASC 842, future
minimum lease payments for operating leases having initial or remaining noncancellable lease terms in excess of one year as of December 31, 2018 were as
follows:
2019
2020
2021
2022
2023
Thereafter
Total
Legal Proceedings
$
$
541,376
304,000
304,000
320,774
352,000
1,197,778
3,019,928
From time to time, we may be involved in a variety of claims, suits, investigations and proceedings arising from the ordinary course of our business,
collections claims, breach of contract claims, labor and employment claims, tax and other matters. Although such claims, suits, investigations and
proceedings are inherently uncertain and their results cannot be predicted with certainty, we believe that the resolution of such current pending matters, if any,
will not have a material adverse effect on our business, consolidated financial position, results of operations or cash flow. Regardless of the outcome,
litigation can have an adverse impact on us because of legal costs, diversion of management resources and other factors.
Purchase Commitments
In the course of our business, the Company regularly enters into agreements with third party organizations to provide contract manufacturing services and
research and development services. Under these agreements, the Company issues purchase orders which obligate the Company to pay a specified price when
agreed-upon services are performed. Commitments under the purchase orders do not exceed our planned commercial and research and development needs. As
of December 31, 2019 the Company has approximately $26.8 million of purchase commitments.
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Table of Contents
15. Related Party Transactions
Board of Directors and Outside Counsel
A member of the Company’s Board of Directors is a member of the Company’s outside counsel. During the years ended December 31, 2019, 2018 and 2017,
the Company incurred expenses of approximately $468,000, $450,000 and $400,000, respectively, related to services provided by the outside counsel. On
December 31, 2019 the Company’s outstanding payables and accrued expenses included a $40,000 liability to the outside counsel.
Board of Directors-Consulting Agreement
On October 13, 2018, the Company, entered into a consulting agreement with a member of the Company’s Board of Directors. Under the agreement, the
consulting services will include assisting the Company on expanded indications for TPOXX® and other business development opportunities as requested by
the Company. The term of the agreement is for two years, with compensation for such services at an annual rate of $200,000. During the year ended
December 31, 2019, the Company incurred $200,000 related to services under this agreement. As of December 31, 2019, the Company’s outstanding payables
and accrued expenses included a $50,000 liability associated with this agreement.
Real Estate Leases
On May 26, 2017 the Company and M&F Incorporated entered into the New HQ Lease, pursuant to which the Company agreed to lease 3,200 square feet at
31 East 62nd Street, New York, New York. The Company is utilizing premises leased under the New HQ Lease as its corporate headquarters. The Company's
rental obligations consist of a fixed rent of $25,333, per month in the first sixty-three months of the term, subject to a rent abatement for the first six months
of the term. From the first day of the sixty-fourth month of the term through the expiration or earlier termination of the lease, the Company's rental obligations
consist of a fixed rent of $29,333 per month. In addition to the fixed rent, the Company will pay a facility fee in consideration of the landlord making
available certain ancillary services, commencing on the first anniversary of entry into the lease. The facility fee will be $3,333 per month for the second year
of the term and increase by five percent each year thereafter, to $4,925 per month in the final year of the term.
On July 31, 2017, the Company and M&F, entered into a Termination of Sublease Agreement (the “Old HQ Sublease Termination Agreement”), pursuant to
which the Company and M&F agreed to terminate the sublease dated January 9, 2013 for 6,676 square feet of rental square footage located at 660 Madison
Avenue, Suite 1700, New York, New York (such sublease being the “Old HQ Sublease” and the location being the “Old HQ”).
Effectiveness of the Old HQ Sublease Termination Agreement was conditioned upon the commencement of a sublease for the Old HQ between M&F and a
new subtenant (the “Replacement M&F Sublease”), which occurred on August 2, 2017. The Old HQ Sublease Termination Agreement obligates the
Company to pay, on a monthly basis, an amount equal to the discrepancy (the “Rent Discrepancy”) between the sum of fixed rent and Additional Rent (as
defined below) under the Old HQ Overlease (as defined below) and the sum of fixed rent and Additional Rent under the Replacement M&F Sublease. Under
the Old HQ Sublease Termination Agreement, the Company and M&F release each other from any liability under the Old HQ Sublease.
Under the Old HQ Sublease, the Company was obligated to pay fixed rent of approximately $60,000 per month until August 2018 and approximately $63,400
per month thereafter until the Old HQ Sublease expiration date of August 31, 2020. Additionally, the Company was obligated to pay certain operating
expenses and taxes (“Additional Rent”), such Additional Rent being specified in the overlease between M&F and the landlord at 660 Madison Avenue (the
“Old HQ Overlease”).
Under the Replacement M&F Sublease, the subtenant’s rental obligations were excused for the first two (2) months of the lease term (“Rent Concession
Period”). Thereafter, the subtenant was obligated to pay fixed rent of $36,996 per month for the first twelve (12) months, and is obligated to pay $37,831 per
month for the next 12 months, and $38,665 per month until the scheduled expiration of the Replacement M&F Sublease on August 24, 2020. In addition to
fixed rent, the subtenant is also obligated to pay, pursuant to the Replacement M&F Sublease, a portion of the Additional Rent specified in the Old HQ
Overlease.
For the time period between August 2, 2017 and August 31, 2020 (the expiration date of the Old HQ Sublease), the Company estimates that it will pay a total
of approximately $0.9 million combined in fixed rent and additional amounts payable under the New HQ Lease and a total of approximately $1.1 million in
Rent Discrepancy under the Old HQ Sublease Termination Agreement, for a cumulative total of $2.0 million. In contrast, fixed rent and estimated Additional
Rent under the Old HQ Sublease, for the aforementioned time period, would have been a total of approximately $2.4 million if each of the New HQ Lease,
Replacement M&F Sublease and Old HQ Sublease Termination Agreement had not been entered into by each of the parties thereto. Because
68
Table of Contents
amounts such as operating expenses and taxes may vary, the foregoing totals can only be estimated at this time and are subject to change.
As a result of the above-mentioned transactions, the Company discontinued usage of Old HQ in the third quarter of 2017. As such, for the year ended
December 31, 2017 the Company recorded a loss of approximately $1.1 million in accordance with ASC 420, Exit or Disposal Obligations. This loss
primarily represented the discounted value of estimated Rent Discrepancy payments to occur in the future, and included costs related to the termination of the
old HQ Sublease. The Company also wrote-off approximately $0.1 million of leasehold improvements and furniture and fixtures related to the Old HQ.
The following table summarizes activity relating to the liability that was recorded as a result of the lease termination:
Beginning Balance
Charges
Cash Payments
Lease Termination Liability
For the years ended December 31,
2019
2018
$
$
509,937 $
45,374
(352,935)
202,376 $
814,622
35,861
(340,546)
509,937
For the year ended December 31, 2019, the entire lease termination liability is included in accrued expenses on the consolidated balance sheet. For the year
ended December 31, 2018, approximately $0.2 million of the lease termination liability is included in Other liabilities on the consolidated balance sheet with
the remainder in accrued expenses.
16. Financial Information By Quarter (Unaudited)
2019
Revenues
Cost of sales and supportive services
Selling, general & administrative
Research and development
Patent preparation fees
Operating income (loss)
Net income (loss)
Net loss per share: basic
Net loss per share: diluted
2018
Revenues
Cost of sales and supportive services
Selling, general and administrative
Research and development
Patent expenses
Operating income (loss)
Net income (loss)
Net loss per share: basic
Net loss per share: diluted
March 31
June 30
September 30
December 31
Three Months Ended
(in thousands, except for per share data)
$
10,459 $
3,908 $
8,111 $
915
3,167
3,997
188
2,192
1,630
—
3,392
2,038
182
(1,705)
(3,162)
$
$
0.02 $
(0.02) $
(0.04) $
(0.05) $
737
3,196
3,344
174
661
(1,206)
(0.01) $
(0.03) $
4,264
130
3,497
3,924
182
(3,470)
(4,503)
(0.06)
(0.06)
March 31
June 30
September 30
December 31
Three Months Ended
(in thousands, except for per share data)
$
1,748 $
2,661 $
471,075 $
—
3,057
3,008
218
(4,535)
(11,582)
—
2,880
3,312
178
(3,710)
(7,051)
95,166
3,115
3,723
186
368,885
388,050
(0.15) $
(0.15) $
(0.09) $
(0.09) $
4.85 $
4.71 $
$
$
69
1,569
103
3,828
2,973
207
(5,541)
52,391
A
0.65
0.65
Table of Contents
A- Includes sale of PRV in October 2018. See Note 4 for additional information
70
Table of Contents
17. Subsequent Event
On March 5, 2020, the Company's Board of Directors authorized a share repurchase program under which the Company may repurchase up to $50 million of
the Company's common stock through December 31, 2021. Repurchases under the program may be made from time to time at the Company's discretion in
open market transactions, through block trades, in privately negotiated transactions and pursuant to any trading plan that may be adopted by the Company's
management in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, or otherwise. Prior to executing any repurchase under this
program, the Company's Term Loan would need to be amended or fully repaid.
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Table of Contents
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure
controls and procedures as of December 31, 2019 in accordance with the framework on Internal Control-Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-
15(e) under the Securities Exchange Act of 1934. Management recognizes that any disclosure controls and procedures no matter how well designed and
operated, can only provide reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
Based on that evaluation, our Chief Executive Office and Chief Financial Officer have concluded that our disclosure controls and procedures were
effective as of December 31, 2019 at a reasonable level of assurance.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2019 that materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-
15(f) or Rule 15d-15(f) of the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:
a.
b.
c.
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the Company’s assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of
management and the directors of the Company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2019 using the
framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on
this evaluation using the COSO criteria, management concluded that the Company’s internal control over financial reporting was effective as of December 31,
2019.
The effectiveness of our internal control over financial reporting as of December 31, 2019 has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, as stated in its report which appears herein.
Item 9B. Other Information
72
Table of Contents
None.
73
Table of Contents
PART III
Item 10. Directors, Executive Officers, and Corporate Governance
Information required by this item is incorporated herein by reference to our definitive proxy statement for the 2020 Annual Meeting of Stockholders.
Item 11. Executive Compensation
Information required by this item is incorporated herein by reference to our definitive proxy statement for the 2020 Annual Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information required by this item is incorporated herein by reference to our definitive proxy statement for the 2020 Annual Meeting of Stockholders.
Equity Compensation Plan Information
The following table sets forth certain compensation plan information with respect to compensation plans as of December 31, 2019:
Plan Category
Equity compensation plans approved by security
holders
Equity compensation plans not approved by
security holders
Total
Number of Securities to be
Issued Upon Exercise of
Outstanding Options, Warrants
and Restricted Stock Units (1)
Weighted-average
Exercise Price of
Outstanding Options,
Warrants and Restricted
Stock Units
Number of Securities
Available for Future
Issuance under Equity
Compensation Plans (2)
521,292 $
—
521,292 $
7.91
—
7.91
4,776,433
—
4,776,433
(1)
(2)
Consists of the 1996 Incentive and Non-Qualified Stock Option Plan and the 2010 Stock Incentive Plan.
Consists of the 2010 Stock Incentive Plan.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information required by this item is incorporated herein by reference to our definitive proxy statement for the 2020 Annual Meeting of Stockholders.
Item 14. Principal Accounting Fees and Services
Information required by this item is incorporated herein by reference to our definitive proxy statement for the 2020 Annual Meeting of Stockholders.
74
Table of Contents
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) (1) and (2). Financial Statements.
See Index to Financial Statements under Item 8 in Part II hereof where these documents are listed. All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and, therefore, have
been omitted.
(a) (3). Exhibits.
The following is a list of exhibits:
Exhibit
No.
Description
2(c)
3(a)
3(b)
3(c)
4(a)
4(b)
10(a)
10(b)
10(c)
10(d)
Asset Purchase Agreement, dated October 31, 2018, by and between Eli Lilly and Company and SIGA Technologies, Inc.
(incorporated by referenced to the Current Report on Form 8-K of the Company filed on November 1, 2018).
Amended and Restated Certificate of Incorporation of SIGA Technologies, Inc. (incorporated by reference to the Current
Report on Form 8-K of the Company filed on April 14, 2016).
Amended and Restated Bylaws of SIGA Technologies, Inc. (incorporated by reference to the Current Report on Form 8-K of
the Company filed on April 14, 2016).
Amendment to Amended and Restated Bylaws of SIGA Technologies, Inc. (incorporated by reference to the Current Report
on Form 8-K of the Company filed on December 13, 2016).
Form of Common Stock Certificate (incorporated by reference to the Form SB-2 Registration Statement of the Company dated
March 10, 1997 (No. 333-23037)).
Description of the Registrant's Securities Registered pursuant to Section 12 of the Securities Exchange Act of 1934.
Contract dated as of May 13, 2011, between SIGA and the Biomedical Advanced Research and Development Authority of the
United States Department of Health and Human Services (portions of this exhibit have been omitted and separately filed with
the Securities and Exchange Commission with a request for confidential treatment) (incorporated by reference to the Current
Report on Form 8-K of the Company filed on May 17, 2011).
Amendment of Solicitation/Modification of Contract dated as of June 24, 2011, to Agreement dated as of May 13, 2011,
between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Health
and Human Services (portions of this exhibit have been omitted and separately filed with the Securities and Exchange
Commission with a request for confidential treatment) (incorporated by reference to the Current Report on Form 8-K of the
Company filed on June 28, 2011).
Director Compensation Program, effective January 1, 2012 (incorporated by reference to the Definitive Proxy Statement on
Form DEF 14A of the Company filed on April 27, 2012).
Amendment of Solicitation/Modification of Contract dated as of September 28, 2011, to Agreement dated as of May 13, 2011,
between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Health
and Human Services (portions of this exhibit have been omitted and separately filed with the Securities and Exchange
Commission with a request for confidential treatment) (incorporated by reference to the Quarterly Report on Form 10-Q of the
Company filed on May 7, 2012).
75
10(e)
10(f)
10(g)
10(h)
10(i)
10(j)
10(k)
10(l)
10(m)
10(n)
Amendment of Solicitation/Modification of Contract dated as of October 7, 2011, to Agreement dated as of May 13, 2011,
between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Health
and Human Services (portions of this exhibit have been omitted and separately filed with the Securities and Exchange
Commission with a request for confidential treatment) (incorporated by reference to the Quarterly Report on Form 10-Q of the
Company filed on May 7, 2012).
Amendment of Solicitation/Modification of Contract dated as of January 25, 2012 to Agreement, dated as of May 13, 2011,
between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Health
and Human Services (portions of this exhibit have been omitted and separately filed with the Securities and Exchange
Commission with a request for confidential treatment) (incorporated by reference to the Quarterly Report on Form 10-Q of the
Company filed on May 7, 2012).
Amendment of Solicitation/Modification of Contract dated as of February 7, 2012, to Agreement, dated as of May 13, 2011,
between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Health
and Human Services (incorporated by reference to the Quarterly Report on Form 10-Q of the Company filed on May 7, 2012).
Amendment of Solicitation/Modification of Contract dated as of December 19, 2012, to Agreement, dated as of May 13, 2011,
between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Health
and Human Services (portions of this exhibit have been omitted and separately filed with the Securities and Exchange
Commission with a request for confidential treatment) (incorporated by reference to the Annual Report on Form 10-K of the
Company filed on March 6, 2013).
Amendment of Solicitation/Modification of Contract dated as of February 28, 2013, to Agreement, dated as of May 13, 2011,
between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Health
and Human Services (incorporated by reference to the Annual Report on Form 10-K of the Company filed on March 10,
2014).
Amendment of Solicitation/Modification of Contract dated as of April 9, 2013, to Agreement, dated as of May 13, 2011,
between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Health
and Human Services (incorporated by reference to the Annual Report on Form 10-K of the Company filed on March 10,
2014).
Amendment of Solicitation/Modification of Contract 0009, dated April 29, 2015, to Agreement, dated May 13, 2011 by and
between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Health
and Human Services (portions of this exhibit have been omitted and separately filed with the Securities and Exchange
Commission with a request for confidential treatment) (incorporated by reference to the Quarterly Report on Form 10-Q of the
Company filed on May 6, 2015).
Amendment of Solicitation/Modification of Contract 0010, dated July 1, 2015, to Agreement, dated May 13, 2011 by and
between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Health
and Human Services (portions of this exhibit have been omitted and separately filed with the Securities and Exchange
Commission with a request for confidential treatment) (incorporated by reference to the Annual Report on Form 10-K of the
Company filed on March 4, 2016).
Amendment of Solicitation/Modification of Contract 0011, dated December 9, 2015, to Agreement, dated May 13, 2011 by
and between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of
Health and Human Services (portions of this exhibit have been omitted and separately filed with the Securities and Exchange
Commission with a request for confidential treatment)(incorporated by reference to the Annual Report on Form 10-K of the
Company filed on March 4, 2016).
Amended and Restated Employment Agreement, dated April 12, 2016, between SIGA Technologies, Inc. and Daniel J.
Luckshire (incorporated by reference to the Current Report on Form 8-K of the Company filed on April 14, 2016).
76
10(o)
Amended and Restated Employment Agreement, dated April 12, 2016, between SIGA Technologies, Inc. and Dennis E. Hruby
(incorporated by reference to the Current Report on Form 8-K of the Company filed on April 14, 2016).
10(p)
10(q)
10(r)
10(s)
10(t)
10(u)
10(v)
10(w)
10(x)
10(y)
10(z)
Amendment of Solicitation/Modification of Contract 0013, dated June 28, 2016, to Agreement, dated May 13, 2011, between
the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human
Services and SIGA (portions of this exhibit have been omitted and separately filed with the Securities and Exchange
Commission with a request for confidential treatment) (incorporated by reference to the Current Report on Form 8-K of the
Company filed on July 5, 2016).
Loan and Security Agreement, dated as of September 2, 2016, by and among SIGA Technologies, Inc., OCM Strategic Credit
SIGTEC Holdings, LLC, Cortland Capital Market Services LLC, in its capacity as administrative agent and collateral agent,
OCM Strategic Credit SIGTEC Holdings, LLC, as sole lead arranger, and each of the other persons who are or thereafter become
parties to the Loan Agreement as guarantors (incorporated by reference to the Current Report on Form 8-K of the Company filed
on September 7, 2016).
Warrant, dated as of September 2, 2016, by the Company in favor of OCM Strategic Credit SIGTEC Holdings, LLC or its
registered assigns (incorporated by reference to the Current Report on Form 8-K of the Company filed on September 7, 2016).
Employment Agreement, dated as of October 13, 2016, between SIGA and Phillip Louis Gomez, III (incorporated by reference
to the Current Report on Form 8-K of the Company filed on October 13, 2016).
Investment Agreement, dated October 13, 2016, by and among SIGA Technologies, Inc., ST Holdings One LLC, Blackwell
Partners LLC-Series A, Nantahala Capital Partners Limited Partnership, Nantahala Capital Partners II Limited Partnership,
Silver Creek CS SAV, L.L.C. and Nantahala Capital Partners SI, LP (incorporated by reference to the Current Report on Form 8-
K of the Company filed on October 19, 2016).
Amendment of Solicitation/Modification of Contract 0012, dated April 22, 2016, to Agreement, dated May 13, 2011, between
the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services
and SIGA (incorporated by reference to the Quarterly Report on Form 10-Q of the Company filed on May 4, 2017).
Amendment of Solicitation/Modification of Contract 0014, dated September 21, 2016, to Agreement, dated May 13, 2011,
between the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human
Services and SIGA (incorporated by reference to the Quarterly Report on Form 10-Q of the Company filed on May 4, 2017).
Office Lease, dated as of May 26, 2017, by and between SIGA Technologies, Inc. and MacAndrews & Forbes Incorporated
(portions of this exhibit have been omitted and separately filed with the Securities and Exchange Commission with a request for
confidential treatment) (incorporated by reference to the Current Report on Form 8-K of the Company filed on May 30, 2017).
Termination of Sublease, dated as of July 31, 2017 (incorporated by reference to the Quarterly Report on Form 10-Q of the
Company filed on August 3, 2017).
Amendment, dated August 29, 2017, to that certain Loan and Security Agreement, dated as of September 2, 2016, by and among
SIGA Technologies, Inc., OCM Strategic Credit SIGTEC Holdings, LLC, Cortland Capital Market Services LLC, in its capacity
as administrative agent and collateral agent, OCM Strategic Credit SIGTEC Holdings, LLC, as sole lead arranger, and each of
the other persons who are or thereafter become parties to the Loan Agreement as guarantors (incorporated by reference to the
Quarterly Report on Form 10-Q of the Company filed on November 7, 2017).
Commercial Lease Agreement for Corvallis, Oregon dated November 3, 2017 (incorporated by reference to the Quarterly Report
on Form 10-Q of the Company filed on November 7, 2017).
77
10(aa)
10(bb)
10(cc)
10(dd)
10(ee)
10(ff)
10(gg)
10(hh)
10(ii)
10(jj)
10(kk)
10(ll)
Second Amendment to Loan and Security Agreement, dated June 25, 2018, by and among the Company, OCM Strategic Credit
SIGTEC Holdings, LLC, as lender, Cortland Capital Market Services LLC, in its capacity as administrative agent and collateral
agent, and OCM Strategic Credit SIGTEC Holdings, LLC, as sole lead arranger (incorporated by reference to the Quarterly
Report on Form 10-Q of the Company filed on August 7, 2018).
Amendment of Solicitation/Modification of Contract 0015, dated July 30, 2018, to Agreement, dated May 13, 2011, between the
Biomedical Advanced Research and Development Authority of the United States Department of Health and Human Services and
SIGA (incorporated by reference to the Current Report on Form 8-K of the Company filed on August 1, 2018).
Second Amended and Restated Employment Agreement, dated August 1, 2018, between SIGA Technologies, Inc. and Robin E.
Abrams (incorporated by reference to the Current Report on Form 8-K of the Company filed on August 3, 2018).
Addendum, dated August 10, 2018, to Seconded Amended and Restated Employment Agreement, dated April 12, 2016, between
SIGA Technologies, Inc. and Dennis E. Hruby (incorporated by reference to the Current Report on Form 8-K of the Company
filed on August 10, 2018).
Contract, dated as of September 10, 2018, between SIGA Technologies, Inc. and the Biomedical Advanced Research and
Development Authority of the United States Department of Health and Human Services (portions of this exhibit have been
omitted and separately filed with the Securities and Exchange Commission with a request for confidential treatment)
(incorporated by reference to the Current Report on Form 8-K of the Company filed on September 11, 2018).
Amendment of Solicitation/Modification of Contract 0016, dated September 21, 2018, to Agreement, dated May 13, 2011,
between the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human
Services and SIGA (incorporated by reference to the Quarterly Report on Form 10-Q of the Company filed on November 6,
2018).
Amendment of Solicitation/Modification of Contract 0017, dated September 28, 2018, to Agreement, dated May 13, 2011,
between the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human
Services and SIGA (incorporated by reference to the Quarterly Report on Form 10-Q of the Company filed on November 6,
2018).
Amendment of Solicitation/Modification of Contract 0018, dated September 28, 2018 to Agreement, dated June 1, 2011,
between the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human
Services and SIGA (incorporated by reference to the Quarterly Report on Form 10-Q of the Company filed on November 6,
2018).
Consulting Agreement and Release, dated October 13, 2018, between SIGA Technologies, Inc. and Dr. Eric A. Rose
(incorporated by reference to the Current Report on Form 8-K of the Company filed on October 18, 2018).
Third Amendment to Loan and Security Agreement, dated October 31, 2018, by and among the Company, OCM Strategic Credit
SIGTEC Holdings, LLC, as lender, Cortland Capital Market Services LLC, in its capacity as administrative agent and collateral
agent, and OCM Strategic Credit SIGTEC Holdings, LLC, as sole lead arranger (incorporated by reference to the Current Report
on Form 8-K of the Company filed on November 1, 2018).
Commercial Manufacturing Agreement, dated October 1, 2018, by and between Albemarle Corporation and SIGA (portions of
this exhibit have been omitted and separately filed with the Securities and Exchange Commission with a request for confidential
treatment) (incorporated by reference to the Annual Report on Form 10-K of the Company filed on March 6, 2019).
Amendment of Solicitation/Modification of Contract 0001, dated February 21, 2019, to Agreement, dated September 10, 2018,
between the Biomedical Advanced Research and Development Authority of the United States Department of Health and Human
Services and SIGA (incorporated by reference to the Annual Report on Form 10-K of the Company filed on March 6, 2019).
78
10(mm)
Amendment of Solicitation/Modification of Contract 0002, dated May 17, 2019, to Agreement, dated September 10, 2018 by
and between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of
Health and Human Services (certain portions of this exhibit have been omitted pursuant to Rule 601(b)(10) of Regulation S-K.
The omitted information is (i) not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed)
(incorporated by reference to the Current Report on Form 8-K of the Company filed on May 20, 2019).
10(nn)
10(oo)
10(pp)
10(qq)
10(rr)
10(ss)
Amendment of Solicitation/Modification of Contract 0019, dated May 22, 2019, to Agreement, dated June 1, 2011 by and
between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Health
and Human Services (certain portions of this exhibit have been omitted pursuant to Rule 601(b)(10) of Regulation S-K. The
omitted information is (i) not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed)
(incorporated by reference to the Quarterly Report on Form 10-Q of the Company filed on August 6, 2019).
Promotion Agreement, dated May 31, 2019, by and between SIGA Technologies, Inc. and Meridian Medical Technologies, Inc.
(certain portions of this exhibit have been omitted pursuant to Rule 601(b)(10) of Regulation S-K. The omitted information is (i)
not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed) (incorporated by reference to the
Current Report on Form 8-K of the Company filed on June 3, 2019).
Amendment to Loan and Security Agreement, dated July 24, 2019, by and among SIGA Technologies, Inc., and OCM Strategic
Credit SIGTEC Holdings, LLC, Cortland Capital Market Services LLC, in its capacity as administrative agent and collateral
agent (incorporated by reference to the Quarterly Report on Form 10-Q of the Company filed on August 6, 2019).
Amendment of Solicitation/Modification of Contract 0003, dated September 9, 2019, to Agreement, dated September 10, 2018
by and between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of
Health and Human Services (certain portions of this exhibit have been omitted pursuant to Rule 601(b)(10) of Regulation S-K.
The omitted information is (i) not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed)
(incorporated by reference to the Quarterly Report on Form 10-Q of the Company filed on November 5, 2019).
Amendment of Solicitation/Modification of Contract 0020, dated November 19, 2019, to Agreement, dated, June 1, 2011 by and
between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of Health
and Human Services (certain portions of this exhibit have been omitted pursuant to Rule 601(b)(10) of Regulation S-K. The
omitted information is (i) not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed).
Amendment of Solicitation/Modification of Contract 0018, dated November 19, 2019, to Agreement, dated, May 13, 2011 by
and between SIGA and the Biomedical Advanced Research and Development Authority of the United States Department of
Health and Human Services (certain portions of this exhibit have been omitted pursuant to Rule 601(b)(10) of Regulation S-K.
The omitted information is (i) not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed).
23.1
Consent of PRICEWATERHOUSECOOPERS LLP, Independent Registered Public Accounting Firm.
31.1
31.2
32.1
32.2
Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002-Chief Executive Officer.
Certification pursuant to Rules 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002-Chief Financial Officer.
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002-Chief Executive
Officer.
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002-Chief Financial
Officer.
79
101.INS
Inline XBRL Instance Document
101.SCH
Inline Taxonomy Extension Schema Document
101.CAL
Inline Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline Taxonomy Extension Definition Linkbase Document
101.LAB
Inline Taxonomy Extension Labels Linkbase Document
101.PRE
Inline Taxonomy Extension Presentation Linkbase Document
80
Table of Contents
Item 16. Form 10-K Summary
None
81
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
SIGA TECHNOLOGIES, INC.
(Registrant)
Date: March 5, 2020
By:
/s/ Phillip L. Gomez
Phillip L. Gomez
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature
/s/ Phillip L. Gomez
Phillip L. Gomez
/s/ Daniel J. Luckshire
Daniel J. Luckshire
/s/ Eric A. Rose
Eric A. Rose, M.D.
/s/ James J. Antal
James J. Antal
/s/ Thomas E. Constance
Thomas E. Constance
/s/ Julie M. Kane
Julie M. Kane
/s/ Jeffrey Kindler
Jeffrey Kindler
/s/ Joseph Marshall
Joseph Marshall
/s/ Michael Plansky
Michael Plansky
/s/ Paul G. Savas
Paul G. Savas
Title of Capacities
Date
March 5, 2020
Chief Executive Officer and Director
Executive Vice President and
March 5, 2020
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Chairman
March 5, 2020
Director
Director
Director
Director
Director
Director
Director
82
March 5, 2020
March 5, 2020
March 5, 2020
March 5, 2020
March 5, 2020
March 5, 2020
March 5, 2020
EXHIBIT 4(b)
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF
THE SECURITIES EXCHANGE ACT OF 1934
DESCRIPTION OF CAPITAL STOCK
The Amended and Restated Certificate of Incorporation (“Certificate of Incorporation”) of SIGA Technologies, Inc. (the
“Company”) authorizes 600,000,000 shares of common stock, par value $0.0001 per share (“common stock”), and 20,000,000
shares of preferred stock, par value $0.0001 per share (“preferred stock”).
The Company has one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended:
our common stock. No preferred stock is outstanding.
Common Stock and Preferred Stock
Dividend Rights. The holders of the common stock and the preferred stock shall be entitled to dividends, when, as and if
declared by the board of directors of the Company, payable at such time or times as the board of directors may determine.
Terms of conversion. Our common stock has no conversion rights. The board of directors shall have the authority to fix by
resolution the voting powers (full, limited, multiple, fractional or none), designations, preferences, qualifications, privileges,
limitations, restrictions, options, conversion rights and other special or relative rights of the preferred stock or any class or series
thereof prior to or concurrently with the issuance of such shares.
Redemption and Sinking Fund Provisions. There are no redemption or sinking fund provisions applicable to the common
stock. All outstanding shares of common stock are fully paid and nonassessable.
Voting Rights. Each holder of common stock is entitled to one vote for each share held of record on all matters submitted to
a vote of the stockholders. The holders of common stock are not entitled to cumulative voting rights with respect to the election of
directors, and, as a consequence, minority stockholders will not be able to elect directors on the basis of their votes alone.
At any meeting of stockholders, all matters other than the election of directors, except as otherwise provided by the
Certificate of Incorporation, the by-laws or any applicable law, shall be decided by the affirmative vote of a majority in voting
power of shares of stock present in person or represented by proxy and entitled to vote thereon.
Liquidation Rights. In the event of a liquidation, dissolution or winding up of the Company, holders of our common stock
would be entitled to share ratably in all assets remaining after payment of liabilities and the satisfaction of any liquidation
preference of any then outstanding series of preferred stock.
Preemption Rights. Holders of common stock have no preemptive rights and no right to convert their common stock into
any other securities.
Our Certificate of Incorporation allows our board of directors to fix the voting powers, designations, preferences, rights and
qualifications, limitations or restrictions of the preferred stock without any further vote or action by the stockholders. The rights of
the holders of common stock will be subject to, and could be adversely affected by, the rights of the holders of any preferred stock
that we may issue in the future. The issuance of preferred stock, while providing desirable flexibility in connection with our future
activities, could also have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting
stock, thereby delaying, deferring or preventing a change of control.
Certain portions of this exhibit have been omitted pursuant to Rule 601(b)(10) of Regulation S-K. The omitted information is (i) not material and (ii)
would likely cause competitive harm to the registrant if publicly disclosed. Information that has been omitted has been noted in this document with
a placeholder identified by the term “{redacted}”.
Exhibit 10(rr)
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT
1. CONTRACT ID CODE
PAGE OF PAGES
2. AMENDMENT/MODIFICATION NO.
P00020
6. ISSUED BY CODE
HHS/OS/ASPR/BARDA
330 Independence Ave., S.W.
Room 640-G
Washington DC 20201
3. EFFECTIVE DATE
See Block 16C
4. REQUISITION/PURCHASE REQ. NO.
5. PROJECT NO. (If applicable)
1
4
HHS/OS/ASPR/BARDA
7. ADMINISTERED BY (If other than Item 6) CODE
ASPR-BARDA02
ASPR-BARDA
330 Independence Ave, SW, Rm G640
Washington DC 20201
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code)
(x)
9A. AMENDMENT OF SOLICITATION NO.
SIGA TECHNOLOGIES, INC. 1385150
SIGA TECHNOLOGIES, INC. 35 E 6
35 E 62ND ST
NEW YORK NY 100658014
9B. DATED (SEE ITEM 11)
x
10A. MODIFICATION OF CONTRACT/ORDER NO.
HHSO100201100023C
CODE
1385150
FACILITY CODE
10B. DATED (SEE ITEM 13)
06/01/2011
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
☐ The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers ☐is extended. ☐ is not extended.
Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and
returning _____________ copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or electronic communication which
includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS
PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be
made by letter or electronic communication, provided each letter or electronic communication makes reference to the solicitation and this amendment, and is received prior to the opening hour and
date specified.
12. ACCOUNTING AND APPROPRIATION DATA (If required)
See Schedule
13. THIS ITEM ONLY APPLIES TO MODIFICATIONS OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
CHECK ONE
A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation data, etc.) SET
FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
X
FAR 43.103(a) - Bilateral modification between the parties
D. OTHER (Specify type of modification and authority)
E. IMPORTANT:
Contractor ☐ is not ☒ is required to sign this document and return 1 copies to the issuing office.
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.)
Tax ID Number: 13-3864870
DUNS Number: 932651516
Modification 20 accomplishes the following administrative actions:
1.) Incorporates Subsection B.4.j outlining reconciliation of contract budget and status of CLINs
2.) Incorporates Subsection B.4.d.11 increasing Contracting Officer’s Authorization threshold from $100,000 to $250,000
3.) Section J – Attachment 1 – Statement of Work – Incorporates additional language into
Continued …
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect.
15A. NAME AND TITLE OF SIGNER (Type or print)
16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Dennis E. Hruby, Chief Scientific Officer
15B. CONTRACTOR/OFFEROR
15C. DATE SIGNED
16B. UNITED STATES OF AMERICA
16C. DATE SIGNED
GEORGE J. KEANE
/s/ Dennis E. Hruby
19 November 2019
/s/ George J. Keane
20 November 2019
(Signature of person authorized to sign)
(Signature of Contracting Officer)
Previous edition unusable
STANDARD FORM 30 (REV. 11/2016)
Prescribed by GSA FAR (48 CFR) 53.243
CONTINUATION SHEET
REFERENCE NO. OF DOCUMENT BEING CONTINUED
HHSO100201100023C/P00020
PAGE OF
2
4
NAME OF OFFEROR OR CONTRACTOR
SIGA TECHNOLOGIES, INC. 1385150
ITEM NO.
(A)
SUPPLIES/SERVICES
(B)
QUANTITY
(C)
UNIT
(D)
UNIT PRICE
AMOUNT
(E)
(F)
CLIN 0003 of the Statement of Work
3.) Revises Subsection G.1 changing the Contracting Officer to George J.
Keane, Jr.
4.) Revises Subsection G.1 changing the Project Officer / Contracting
Officer’s Representative to David Simon, Ph.D.
See supplemental pages for additional information. All other terms and
conditions of contract HHSO100201100023C remain unchanged.
Period of Performance: 05/15/2011 to 12/30/2020
NSN 7540-01-152-8067
OPTIONAL FORM 336 (4-86)
Sponsored by GSA
FAR (48 CFR) 53.110
Beginning with the effective date of this modification, the U.S. Government and Contractor mutually agree as follows:
1)
Incorporate SUBSECTION B.4.j – Is incorporated into the contract and the following language inserted into that subsection:
At the close of FY2018, expiring funds were removed from the contract via Contract Modification 0018 (MOD 18). The sum of funds expiring from the contract
differed between SIGA’s records and what was presented in MOD 18 by $144,272.10 (see below). The source of the mismatched quantities could not be
identified.
Expected de-Obligation per SIGA -$426,647.00
Actual de-obligation per MOD 18 -$570,919.10
Difference $144,272.10
However, Contractor (“SIGA”) and U.S. Government (“BARDA”) are in agreement that the work carried out under Contract CLINs 0001, 0002, 0011, 0012, and
0013 are complete and all invoices associated with these CLINs have been paid by BARDA. These CLINs show a $0 (zero) balance. Further, SIGA and
BARDA are in agreement that as of the start of FY 2019-2020, the funds remaining on the contract (i.e. funds for which SIGA has not yet invoiced the
government) total $4,006,492 (see table).
CLIN
Scope
1
2
3
4
5
6
7
8
11
12
13
{redacted}
{redacted}
{redacted}
{redacted}
{redacted}
{redacted}
{redacted}
{redacted}
{redacted}
{redacted}
{redacted}
Budget ($)
9,346,886
11,625,891
3,442,707
1,716,198
959,798
2,886,375
3,742,304
1,944878
177,104
769,814
2,439,274
Status
Remaining Budget ($)
Complete
Complete
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
Complete
Complete
Complete
0
0
1,721,353
1,102,344
594,591
200,642
48,496
339,066
0
0
0
2)
Incorporate SUBSECTION B.4.d.11 – Is incorporated into the contract and language inserted into that subsection increasing Contracting Officer’s
Authorization (COA) threshold from $100,000 to $250,000 as follows:
Award of any FFP subcontract or FFP consulting agreement in excess of $250,000 or any cost reimbursement, labor hour subcontract or consulting agreement
funded under a Cost Plus Fixed Fee
Remaining funds as of 01 October 2019 (FY19-20)
4,006,492
CLIN shall not proceed without the prior written consent of the Contracting Officer via a Contracting Officer Authorization (COA) Letter upon review of the
supporting documentation required by FAR Clause 52.244-2, Subcontracts. After receiving written consent of the subcontract by the Contracting Officer, a copy
of the signed, executed subcontract and consulting agreement shall be provided to the Contracting Officer.
3) SECTION J – ATTACHMENT 1 – STATEMENT OF WORK
The Statement of Work (SOW) applicable to CLIN 0003 incorporates the following new language:
Based on FDA feedback, CLIN 0003, will include additional regulatory activities and labor in support of the IV product including post NDA filing of FDA
Information Requests, FDA inspections, and IND and NDA life-cycle management submissions.
4) SUBSECTION G.1 PROJECT OFFICER
The Contracting Officer is hereby changed to:
George J. Keane, Jr.
Team Lead / Contracting Officer – CBRN, Flu, PBS
Station Support & Administrative Branch
Division of Contracts Management & Acquisition
Biomedical Advanced Research & Development Authority (BARDA)
Office of Secretary for Preparedness & Response (ASPR)
Department of Health and Human Services
Mailing Address:
{redacted}
The Project Officer (Contracting Officer’s Representative) is hereby changed to:
David Simon, Ph.D.
Health Scientist / Antiviral Antitoxin Branch
Division of CBRN Countermeasures
Biomedical Advanced Research & Development Authority (BARDA)
Office of Secretary for Preparedness & Response (ASPR)
Department of Health and Human Services
Mailing Address:
{redacted}
END OF MODIFICATION 20 of HHSO100201100023C
Exhibit 10(ss)
Certain portions of this exhibit have been omitted pursuant to Rule 601(b)(10) of Regulation S-K. The omitted information is (i) not material and (ii)
would likely cause competitive harm to the registrant if publicly disclosed. Information that has been omitted has been noted in this document with
a placeholder identified by the term “{redacted}”.
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT
1. CONTRACT ID CODE
PAGE OF PAGES
1
4
2. AMENDMENT/MODIFICATION NO.
3. EFFECTIVE DATE
4. REQUISITION/PURCHASE REQ. NO.
5. PROJECT NO. (If applicable)
P00018
6. ISSUED BY CODE
ASPR-BARDA
200 Independence Ave., S.W.
Room 640-G
Washington DC 20201
See Block 16C
ASPR-BARDA
7. ADMINISTERED BY (If other than Item 6) CODE
ASPR-BARDA02
ASPR-BARDA
330 Independence Ave, SW, Rm G640
Washington DC 20201
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code)
(x)
9A. AMENDMENT OF SOLICITATION NO.
SIGA TECHNOLOGIES, INC. 1385150
SIGA TECHNOLOGIES, INC. 35 E 6
35 E 62ND ST
NEW YORK NY 100658014
9B. DATED (SEE ITEM 11)
x
10A. MODIFICATION OF CONTRACT/ORDER NO.
HHSO100201100001C
CODE
1385150
FACILITY CODE
10B. DATED (SEE ITEM 13)
05/13/2011
11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
☐ The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers ☐is extended, ☐ is not extended.
Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation or as amended, by one of the following methods: (a) By completing Items 8 and 15, and
returning _____________ copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or electronic communication which
includes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS
PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be
made by letter or electronic communication, provided each letter or electronic communication makes reference to the solicitation and this amendment, and is received prior to the opening hour and date
specified.
12. ACCOUNTING AND APPROPRIATION DATA (If required)
See Schedule
13. THIS ITEM ONLY APPLIES TO MODIFICATIONS OF CONTRACTS/ORDERS. IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
CHECK ONE
A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.
B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation data, etc.) SET
FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b).
C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:
X
FAR 43.103(a) - Bilateral Modification by Mutual Agreement of the Parties
D. OTHER (Specify type of modification and authority)
E. IMPORTANT:
Contractor ☐ is not ☒ is required to sign this document and return 1 copies to the issuing office.
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.)
Tax ID Number: 13-3864870
DUNS Number: 932651516
Modification 18 accomplishes the following administrative actions:
1.) Revises Subsection B.4.1 outlining reconciliation of contract budget and status of CLINs
2.) Revises Subsection B.6.1.5.2. increasing Contracting Officer’s Authorization threshold from $100,000 to $250,000
3.) Revises Subsection G.1 changing the Contracting Officer to George J. Keane, Jr.
Continued …
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect.
15A. NAME AND TITLE OF SIGNER (Type or print)
16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
Dennis E. Hruby, Chief Scientific Officer
15B. CONTRACTOR/OFFEROR
/s/ Dennis E. Hruby
(Signature of person authorized to sign)
Previous edition unusable
GEORGE J. KEANE
15C. DATE SIGNED
16B. UNITED STATES OF AMERICA
16C. DATE SIGNED
19 November 2019
/s/ George J. Keane
(Signature of Contracting Officer)
20 November 2019
CONTINUATION SHEET
NAME OF OFFEROR OR CONTRACTOR
REFERENCE NO. OF DOCUMENT BEING CONTINUED
HHSO100201100001C/P00018
STANDARD FORM 30 (REV 11/2016)
Prescribed by GSA FAR (48 CFR) 53.243
PAGE OF
2
4
SIGA TECHNOLOGIES, INC. 1385150
ITEM NO.
(A)
SUPPLIES/SERVICES
(B)
QUANTITY
(C)
UNIT
(D)
UNIT PRICE
AMOUNT
(E)
(F)
4.) Revises Subsection G.2 changing the Contracting Officer’s
Representative to David Simon, Ph.D.
See supplemental pages for additional information. All other terms and
conditions of contract HHSO100201100001C remain unchanged.
Period of Performance: 06/28/2016 to 09/24/2020
NSN 7540-01-152-8067
OPTIONAL FORM 336 (4-86)
Sponsored by GSA
FAR (48 CFR) 53.110
Beginning with the effective date of this modification, the U.S. Government and Contractor mutually agree as follows:
1) Revise SUBSECTION B.4.1 – Formerly titled “Reserved” to be retitled “Financial Reconciliation between Contractor and U.S. Government” and the
following language inserted into that subsection:
At the close of FY2018, expiring funds were removed from the contract via Contract Modification 0017 (MOD 17). The sum of funds expiring from the contract
differed between SIGA’s records and what was presented in MOD 17 by $9,845,100.69 (see below). The major source of the discrepancy was the expiration of
approximately $9,364,500 from CLIN 0007, Contract Modification 0006 (effective 19 December 2012). Per BARDA’s internal protocols, the method by which
these particular funds expired prevented them from being captured in MOD 17.
Expected de-Obligation per SIGA -$13,683,010.54
Actual de-obligation per MOD 17 -$3,837,909.85
Difference $9,845,100.69
Other minor, discrepancies were identified; however, Contractor (“SIGA”) and U.S. Government (“BARDA”) are in agreement that the work carried out under
Contract CLINs 0001, 0002, 0003, 0004, 0005, 0006, 0011, 0022, 0007, 0007.2, 0007.6, 0008, 0009, 0009.6, and 0017 are complete and all invoices
associated with these CLINs have been paid by BARDA. These CLINs show a $0 (zero) balance. Further, SIGA and BARDA are in agreement that as of the
start of FY 2019-2020, the funds remaining on the contract (i.e. funds for which SIGA has not yet invoiced the government) total $3,776,740 (see table).
CLIN
1, 2, 3, 4, 5, 6, 11,
22
7.0
7.2
7.6
7.12
7.14
8.0
8.11
9.0
9.6
17.0
18.0
{redacted}
{redacted}
{redacted}
{redacted}
{redacted}
{redacted}
{redacted}
{redacted}
{redacted}
{redacted}
{redacted}
{redacted}
Scope
Budget ($)
Status
Remaining Budget ($)
462,236,945
Complete
10,566,308
Complete
1,925,485
Complete
17,983,134
Complete
4,813,377
2,006,218
Ongoing
Ongoing
4,143,641
Complete
2,082,082
Ongoing
659,877
338,391
Complete
Complete
1,690,598
Complete
0
0
0
0
2,086,201
854,342
0
823,927
0
0
0
12,694
Ongoing
6,190
21.0
{redacted}
12,694
Ongoing
6,080
Remaining funds as of 01 October 2019 (FY19-20)
3,776,740
2) Revise SUBSECTION B.6.1.5.2 – Change language to the following increasing Contracting Officer’s Authorization (COA) threshold from $100,000 to
$250,000:
Award of any FFP subcontract or FFP consulting agreement in excess of $250,000 or any cost reimbursement, labor hour subcontract or consulting agreement
funded under a Cost Plus Fixed Fee CLIN shall not proceed without the prior written consent of the Contracting Officer via a Contracting Officer Authorization
(COA) Letter upon review of the supporting documentation required by FAR Clause 52.244-2, Subcontracts. After receiving written consent of the subcontract
by the Contracting Officer, a copy of the signed, executed subcontract and consulting agreement shall be provided to the Contracting Officer.
3) SUBSECTION G.1 CONTRACTING OFFICER
The Contracting Officer is hereby changed to:
George J. Keane, Jr.
Team Lead / Contracting Officer – CBRN, Flu, PBS
Station Support & Administrative Branch
Division of Contracts Management & Acquisition
Biomedical Advanced Research & Development Authority (BARDA)
Office of Secretary for Preparedness & Response (ASPR)
Department of Health and Human Services
Mailing Address:
{redacted}
4) ARTICLE G.2 CONTRACTING OFFICER’S REPRESENTATIVE (COR)
The COR is hereby changed to:
David Simon, Ph.D.
Health Scientist / Antiviral Antitoxin Branch
Division of CBRN Countermeasures
Biomedical Advanced Research & Development Authority (BARDA)
Office of Secretary for Preparedness & Response (ASPR)
Department of Health and Human Services
Mailing Address:
{redacted}
END OF MODIFICATION 18 of HHSO100201100001C
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-218507, 333-183101, 333-167329, 333-112935,
333-56216, and 333-35992) of SIGA Technologies, Inc. of our report dated March 5, 2020 relating to the financial statements and the effectiveness of internal
control over financial reporting, which appears in this Form 10-K.
Exhibit 23.1
/s/ PRICEWATERHOUSECOOPERS LLP
Florham Park, New Jersey
March 5, 2020
Exhibit 31.1
Certification by Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Phillip L. Gomez, certify that:
1.
I have reviewed this annual report on Form 10-K of SIGA Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: March 5, 2020
/s/ Phillip L. Gomez
Phillip L. Gomez
Chairman and Chief Executive Officer
Exhibit 31.2
Certification by Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Daniel J. Luckshire, certify that:
1.
I have reviewed this annual report on Form 10-K of SIGA Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: March 5, 2020
/s/ Daniel J. Luckshire
Daniel J. Luckshire
Executive Vice President and
Chief Financial Officer
Exhibit 31.2
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of SIGA Technologies, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2019 as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, Phillip L. Gomez, Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and
furnished to the Securities and Exchange Commission or its staff upon request.
/s/ Phillip L. Gomez
Phillip L. Gomez
Chairman and Chief Executive Officer
March 5, 2020
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of SIGA Technologies, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2019 as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel J. Luckshire, Executive Vice President and Chief Financial Officer
of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my
knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and
furnished to the Securities and Exchange Commission or its staff upon request.
/s/ Daniel J. Luckshire
Daniel J. Luckshire
Executive Vice President and Chief Financial Officer
March 5, 2020