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(Mark One)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒
☐
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2020
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
Securities registered pursuant to Section 12(g) of the Act:
SIGA
None
The Nasdaq Global Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes ☐ No ☒.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act Yes ☐ No ☒.
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 ☒ No ☐.
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 such files).
Yes ☒ No ☐.
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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth
company" in Rule 12b-2 of the Exchange Act: Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company
☒ Emerging growth company ☐.
If an emerging growth company, indicate by check mark if the registrant has elected not 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. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
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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 ☐ No ☒.
Indicate by check mark whether the registrant has filed all documents and reports required to be filed 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 ☐ No ☐.
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, 2020 as reported on The Nasdaq Global Market was approximately $306,491,182.
As of February 16, 2021 the registrant had outstanding 76,748,446 shares of common stock.
DOCUMENTS INCORPORATED BY REFERENCE
The following document is incorporated herein by reference:
Document
Proxy Statement for the Company’s 2021 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
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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. Our lead product, TPOXX® (“oral TPOXX®”), is a U.S. Food & Drug Administration
("FDA")-approved oral formulation antiviral drug for the treatment of human smallpox disease caused by variola virus.
BARDA Contracts-TPOXX®
19C BARDA Contract
On September 10, 2018, the Company entered into a contract with the U.S. Biomedical Advanced Research and Development Authority
("BARDA") pursuant to which SIGA agreed to deliver up to 1,488,000 courses of oral TPOXX® to the U.S. Strategic National Stockpile ("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 December 31, 2020, the contract with BARDA (as amended, modified, or
supplemented from time to time, the "19C 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 $127.1 million of payments are related to
exercised options and up to approximately $423.7 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.
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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, 2020, the Company had received or
billed for $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 $9.7 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, 2020 and December 31, 2019; such
amount is expected to be recognized as revenue when IV TPOXX® containing such IV BDS is delivered to the Strategic Stockpile or placed in vendor-
managed inventory.
The options that have been exercised to date provide for payments up to approximately $127.1 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®, payments up to $101.3 million for the delivery of up to 363,070 courses of oral TPOXX®; and, payments of up to $14.6 million for funding of
post-marketing activities for oral TPOXX®. As of December 31, 2020, the Company has received the following payments in connection with exercised
options: $11.2 million was received for the procurement of raw materials and such amount was initially recorded as deferred revenue and was recognized
as revenue during the year ended December 31, 2020, with deliveries of approximately 363,000 courses, in the aggregate, of oral TPOXX®; $101.3 million
was received in connection with the June, September and October deliveries, in total, of approximately 363,000 courses of oral TPOXX®; and $5.4 million
has been received or billed for in connection with post-marketing activities for oral TPOXX®.
Unexercised options specify potential payments up to approximately $423.7 million in total (if all such options are exercised). There are options
for the following activities: payments of up to $337.7 million for the delivery of up to approximately 1,089,000 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 exercise options at different points in time (or alternatively, to only exercise the IV BDS Option but not the IV
FDP Option). 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. The Company estimates that sales of the IV formulation under this contract (under current terms),
assuming the IV FDP Options were exercised, would have a gross margin (sales less cost of sales, as a percentage of sales) that is less than 40%.
Under the terms of this contract, exercise of procurement options are at the sole discretion of BARDA. The request for proposal that preceded the
award of the 19C BARDA Contract indicated that the expected purpose of the contract was to maintain the level of smallpox antiviral preparedness in the
Strategic Stockpile. Based on prior product delivery activity, and current FDA-approved shelf life of oral TPOXX®, the Company estimates that
approximately one million courses of smallpox antiviral treatment would need to be delivered to the U.S. Government between 2021 and 2023 in order to
maintain stockpile levels of unexpired smallpox antiviral treatment during this period.
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, 2020, $459.8 million has been received by the Company for the manufacture and delivery of 1.7 million courses of
oral TPOXX® and $45.6 million has been received for certain reimbursements in connection with development and supportive activities. Approximately
$3.0 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.
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 December 2024.
International Procurement Contracts
Contract with Public Health Agency of Canada
On January 13, 2021, the Public Health Agency of Canada ("PHAC") awarded a contract to Meridian Medical Technologies, Inc. (“Meridian,” a Pfizer
Company) (the “Contract”) for the purchase of up to approximately $33 million of oral TPOXX® (tecovirimat) within five years. The Contract specifies
firm commitments for the purchase of approximately $3.4 million of oral TPOXX® to occur by March 31, 2021 and a cumulative purchase of
approximately $17 million of oral TPOXX® by March 31, 2023; the remaining courses under the Contract are targeted for delivery after March 31, 2023
and are subject to option exercise by PHAC. To date, SIGA has not finalized any deliveries yet in connection with this contract. The contract award was
coordinated between SIGA and Meridian under an international promotion agreement, as amended (the "International Promotion Agreement") that was
entered into by the parties on June 3, 2019. As such, Meridian is the PHAC's counterparty under the Contract, and SIGA is responsible for manufacture and
delivery of any oral TPOXX® purchased thereunder.
Canadian Military Contract
On April 3, 2020, the Company announced that the Canadian Department of National Defence (“CDND”) awarded a contract (the "Canadian Military
Contract") to Meridian, pursuant to which the CDND will purchase up to approximately $14 million of oral TPOXX® over four years. In the second
quarter 2020, CDND purchased $2.3 million of oral TPOXX®. The remaining purchases are at the option of the CDND, and are expected to occur after
regulatory approval of oral TPOXX® in Canada. Meridian is the CDND's counterparty under the Canadian Military Contract, and SIGA is responsible for
manufacture and delivery of any oral TPOXX® purchased thereunder.
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 (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 market, 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 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. Taking into
account Meridian’s fee and manufacturing costs of oral TPOXX®, it is currently estimated by the Company that international sales of oral TPOXX® will
have a contribution margin (as expressed as a percentage of product sales, and before any consideration of expenses not directly related to manufacturing or
Meridian activities) of between approximately 65% and 80%.
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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 expects to file a new drug application ("NDA") for IV TPOXX® as early as during the second quarter of 2021. 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 seeking regulatory approval of oral
TPOXX® in Europe and Canada as well. In July 2020, the Company filed a Marketing Authorisation Application ("MAA") with the European Medicines
Agency ("EMA") for oral tecovirimat, the same formulation that was approved by the FDA in July 2018 under the name TPOXX®. The MAA was filed
under the centralized application process, which, upon approval, will enable sales and marketing of oral tecovirimat in all EU member states, as well
as Norway, Iceland, and Liechtenstein. SIGA has filed its application for oral tecovirimat seeking a broader label indication covering the treatment of
smallpox, monkeypox, cowpox, and complications from Vaccinia infection.
In December, 2020, the Company filed an application for marketing authorization in Canada for oral tecovirimat, using the same formulation
approved by the FDA.
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 kilograms of API 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. 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.
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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; as of the filing date, the Company has not provided nor received notice of termination. 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 IV 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 IV TPOXX®. SIGA agreed that Patheon will be entitled to manufacture at least 80% of IV 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 IV 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 IV 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 through its development and commercial activities, which include (i) delivering medical
countermeasures to governments and/or non-governmental organizations ("NGOs") so that governments and/or NGOs 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.
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.
Table of Contents
Market for Biological Defense Programs
6
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, 2021, 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 response to the COVID-19 pandemic, Congress has appropriated over $45 billion over the past year across four supplemental appropriations for
the purposes of developing necessary countermeasures and vaccines, prioritizing platform-based technologies with U.S.-based manufacturing capabilities,
the purchase of vaccines, therapeutics, diagnostics, necessary medical supplies, as well as medical surge capacity, and other preparedness and response
activities. While the focus of such appropriations is to support a broad-based response to the COVID-19 pandemic, funds from these appropriations could,
depending on the COVID-19 response, be available to support biodefense activities related to the development of new medical countermeasures, building
and upgrading of facilities, improvement in surge capacity, and procurement of ancillary medical supplies.
We believe that potential markets for the sale of biodefense countermeasures in addition to the U.S. Government include:
•
•
•
•
foreign governments, including both defense and public health agencies;
NGOs 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 could be 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 in February 2024. As of
December 31, 2020, the IV Formulation R&D Contract provides for future aggregate research and development funding of up to approximately $2.1
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 initial available funding 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"). In May
2020, the DoD increased the scope and the contract value to a total of $26 million with current available funding of $23 million. As of December 31, 2020,
the PEP Label Expansion R&D Contract provides for future aggregate research and development funding under the award, as modified, of up to
approximately $22.4 million. The period of performance for this contract, as modified, terminates on July 31, 2025.
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.
7
Table of Contents
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.
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 Capital Resources and Research Facilities
As of February 16, 2021, we had 42 full-time employees. None of our employees are covered by a collective bargaining agreement, and we
consider our employee relations to be satisfactory. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining,
incentivizing and integrating our existing and new employees, advisors and consultants with the overall goal of having an employee base that embraces
teamwork and shares a focus for using each person’s individual skills, experience and expertise in order to develop and maximize the value of corporate
assets, and achieve long-term revenue and earnings growth.
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 product, TPOXX® (also known as ST-246, tecovirimat). As of
January 12, 2021, the TPOXX® patent portfolio has seven patent families consisting of 27 U.S. utility patents, 86 issued foreign patents, three U.S. utility
patent applications, and 30 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
Country
United States
United States
United States
US 8124643
United States
US 7956197
United States
US 8530509
United States
Protection Conferred
Method of treating orthopoxvirus infection with ST-246
Pharmaceutical compositions and unit dosage forms containing ST-246
Method of manufacturing ST-246
Composition of matter for the ST-246 compound and Pharmaceutical
compositions containing ST-246
Method of manufacturing ST-246
Pharmaceutical compositions containing a mixture of compounds
including ST-246
Issue Date
June 15, 2010
October 18, 2011
March 30, 2010
Expiration Date
May 3, 2027^
July 23, 2027
September 27, 2024
February 28, 2012 June 18, 2024^
June 7, 2011
June 18, 2024
September 10, 2013June 18, 2024
Table of Contents
US 8802714
United States
US 9045418
US 9233097
United States
United States
US 9339466
United States
US 9546137
US 9744154
US 9862683
US 9670158
US 9889119
US 9907859
US 10029985
US 10045963
United States
United States
United States
United States
United States
United States
United States
United States
US 10045964
United States
US 10124071
US 10155723
United States
United States
US 10406137
United States
US 10406103
US 10576165
US 10864282
US 10662155
US 10716759
United States
United States
United States
United States
United States
SG 184201
Singapore
RU 2578606
Russia
OA 16109
OAPI/Africa
NZ 602578
New Zealand
MX 326231
Mexico
MX 348481
MX 347795
MX 361428
MX 363189
MX 368106
KR 101868117
JP 4884216
JP 5657489
JP 5898196
JP 6018041
JP 6188802
JP 6444460
JP 6564514
Mexico
Mexico
Mexico
Mexico
Mexico
Korea
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Table of Contents
JP 6594303
BR 112012023743-
8
Japan
Brazil
CN 2011800245893China
CN 2013800429237China
CN 2017103075357China
CN 2014800653387China
CA 2529761
Canada
CA 2685153
Canada
8
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
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
Rehydration of micronized Tecovirimat monohydrate
Liquid Pharmaceutical formulations containing ST-246
Methods of preparing liquid formulations containing ST-246
Methods of preparing Tecovirimat
Rehydration of micronized Tecovirimat monohydrate
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
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
August 12, 2014
June 18, 2024
June 2, 2015
January 12, 2016 August 2, 2031
June 18, 2024
May 17, 2016
March 23, 2031
January 17, 2017 August 14, 2033
August 29, 2017 March 23, 2031
August 14, 2033
January 9, 2018
June 6, 2017
July 11, 2034
February 13, 2018 July 11, 2034
March 6, 2018
July 24, 2018
August 14, 2018
August 2, 2031
August 14, 2033
July 11, 2034
August 14, 2018 March 23, 2031
November 13, 2018 August 2, 2031
December 18, 2018 August 14, 2033
September 10, 2019March 23, 2031
September 10, 2019November 14, 2034
March 3, 2020
August 2, 2031
December 15, 2020 August 2, 2031
August 14, 2033
May 26, 2020
November 14, 2034
July 21, 2020
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
August 2, 2031
December 6, 2018 March 23, 2031
March 14, 2019
April 23, 2027
September 19, 2019August 2, 2031
August 2, 2031
June 8, 2018
December 16, 2011 June 18, 2024
December 5, 2014 June 18, 2024
March 11, 2016
August 2, 2031
October 7, 2016 March 23, 2031
August 10, 2017
August 14, 2033
December 7, 2018 August 14, 2033
August 14, 2033
August 2, 2019
9
Rehydration of micronized Tecovirimat monohydrate
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 pharmaceutical compositions containing the polymorphs
Methods of preparing Tecovirimat
Methods of preparing Tecovirimat
Rehydration of micronized Tecovirimat monohydrate
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
October 4, 2019
November 14, 2034
February 18, 2020 March 23, 2031
August 26, 2015 March 23, 2031
June 20, 2017
March 6, 2020
February 7, 2020 November 14, 2034
August 14, 2033
August 14, 2033
August 13, 2013
June 18, 2024
December 16, 2014 April 23, 2027
CA 2866037
CA 2807528
CA 2966466
CA 2882506
CA 2793533
Canada
Canada
Canada
Canada
Canada
AU 2004249250
Australia
AU 2007351866
Australia
AU 2011232551
Australia
AU 2011285871
AU 2013302764
Australia
Australia
AU 2012268859
Australia
AU 2014290333
AU 2014353235
AU 2018201499
AU 2019208252
Australia
Australia
Australia
Australia
AP 3221
ARIPO*/Africa
ZA 2012/07141
South Africa
ZA 2013/00930
South Africa
IL 201736
IL 236944
IL 242665
IL 224430
IL 242666
IL 221991
Israel
Israel
Israel
Israel
Israel
Israel
Table of Contents
AT 1638938
Austria
BE 1638938
BE 2549871
BE 2600715
Belgium
Belgium
Belgium
CH 1638938
Switzerland
CH 2549871
CH 2600715
Switzerland
Switzerland
DE 1638938
Germany
DE 2549871
DE 2887938
DE 2600715
DE 3321253
DE 3021836
Germany
Germany
Germany
Germany
Germany
DK 1638938
Denmark
DK 2549871
DK 2600715
Denmark
Denmark
ES 1638938
Spain
FI 1638938
Finland
FR 1638938
FR 2887938
FR 2549871
FR 2600715
FR 3321253
FR 3021836
France
France
France
France
France
France
additional ingredients and dosage unit forms containing ST-246
Chemicals, compositions and methods for treatment and prevention of
orthopoxvirus infections and associated diseases
Liquid Pharmaceutical formulations containing ST-246
Use of ST-246 to treat orthopoxvirus infections
Methods of preparing Tecovirimat
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
Amorphous Tecovirimat preparation
Rehydration of micronized Tecovirimat monohydrate
Methods of preparing Tecovirimat
Rehydration of micronized Tecovirimat monohydrate
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
Liquid Pharmaceutical formulations containing ST-246
Pharmaceutical compositions containing ST-246 and one or more
additional ingredients and dosage unit forms containing ST-246
Methods of preparing Tecovirimat
Methods of preparing intermediate in the preparation of Tecovirimat
Liquid Pharmaceutical formulations containing ST-246
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
10
May 16, 2017
April 23, 2027
September 25, 2018August 2, 2031
August 25, 2020
April 23, 2027
October 20, 2020 August 14, 2033
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
February 21, 2019 July 11, 2034
August 22, 2019
May 21, 2020
July 2, 2020
November 14, 2034
August 14, 2033
November 14, 2034
April 3, 2015
March 23, 2031
June 29, 2016
March 23, 2031
November 25, 2015 August 2, 2031
October 1, 2016
April 23, 2027
February 1, 2017 August 14, 2033
February 1, 2020 April 23, 2027
December 27, 2019 August 2, 2031
December 1, 2018 April 23, 2027
October 1, 2019 March 23, 2031
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
Liquid Pharmaceutical formulations containing ST-246
Methods of preparing Tecovirimat
Amorphous Tecovirimat preparation
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
Methods of preparing Tecovirimat
Amorphous Tecovirimat preparation
April 12, 2017
June 18, 2024
April 12, 2017
June 18, 2024
August 22, 2018 March 23, 2031
December 11, 2019 August 2, 2031
April 12, 2017
June 18, 2024
August 22, 2018 March 23, 2031
December 11, 2019 August 2, 2031
April 12, 2017
June 18, 2024
August 22, 2018 March 23, 2031
January 10, 2018 August 14, 2033
December 11, 2019 August 2, 2031
February 12, 2020 August 14, 2033
August 27, 2020
July 11, 2034
April 12, 2017
June 18, 2024
August 22, 2018 March 23, 2031
December 11, 2019 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 14, 2033
August 22, 2018 March 23, 2031
December 11, 2019 August 2, 2031
February 12, 2020 August 14, 2033
August 27, 2020
July 11, 2034
GB 1638938
United Kingdom Compounds, compositions and methods for treatment and prevention of
April 12, 2017
June 18, 2024
orthopoxvirus infections and associated diseases
GB 2887938
GB 2549871
GB 2600715
United Kingdom Methods of preparing Tecovirimat
United Kingdom Polymorphic forms of ST-246
United Kingdom Liquid Pharmaceutical formulations containing ST-246
January 10, 2018 August 14, 2033
August 22, 2018 March 23, 2031
December 11, 2019 August 2, 2031
Table of Contents
11
GB 3321253
GB 3021836
United Kingdom Methods of preparing Tecovirimat
United Kingdom Amorphous Tecovirimat preparation
HK 1179824
Hong Kong
IE 1638938
Ireland
IT
502017000078377
Italy
NL 1638938
Netherlands
PL 1638938
Poland
SE 1638938
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
February 12, 2020 August 14, 2033
August 27, 2020
July 11, 2034
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 33 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 2027 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, recordkeeping 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 Investigational New Drug ("IND") application and 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.
Table of Contents
12
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 the
normal peer review process, for grants, contracts and cooperative agreements related to biomedical countermeasure research and development activity.
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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:
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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 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 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.
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Availability of Reports and Other Information
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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 Government Contracts
Government contracts require ongoing funding decisions by governments. A substantial percentage of potential contract revenues would come from the
19C BARDA Contract, 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, results of operations and prospects to suffer materially.
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 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, which result in uncertainties as to continued funding of their ongoing programs, including SIGA’s
contracts.
More than 90% of remaining contract value of the 19C BARDA Contract is tied to options exercisable in the sole discretion of BARDA. There is
no guarantee that any of the remaining options will be exercised, or if they are exercised when such exercise of options will occur. If some of these
options are not exercised, because levels of government expenditures and authorizations for biodefense decrease or shift to other programs, or for any other
reason, our business, financial condition, results of operations and prospects may suffer materially.
Government procurement contracts are mostly set at fixed prices determined at inception of the contract 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.
Remaining unexercised options under current government procurement contracts, including the 19C BARDA Contract, are predominately fixed-
price. We expect that our future contracts with the U.S. Government and foreign governments 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 determined
at the inception of the contract regardless of the actual costs we incur, and to absorb any costs incurred in satisfaction of our obligations. 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, results of
operations and prospects. Additionally, the 19C BARDA Contract does not necessarily increase the likelihood that we will secure future comparable
contracts with the U.S. Government.
Laws and regulations affecting government contracts and grants might make it more costly and difficult for us to successfully conduct our business.
Our business with the U.S. Federal Government, and any future business with state and local governmental agencies are subject to specific
procurement regulations and a variety of other legal and compliance obligations. These laws and rules include those related to procurement integrity, 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. 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;
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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.
Compliance with these obligations increases our performance and compliance costs. Failure 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 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;
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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, or to exercise the maximum amount specified in, a contract or grant;
exercise an option to purchase only the minimum amount specified in a contract or grant;
claim rights to products or assets, 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 a 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 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.
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A U.S. Government shutdown could negatively impact our business and liquidity
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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 a continuing resolution or 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 harmed by any prolonged government shutdown.
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 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.
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 existing
sales to BARDA, and our ability to generate future revenue could be materially impaired.
The development and full commercialization of additional indications or formulations of TPOXX® in the U.S., such as the intravenous
formulation or indication of use for post-exposure prophylaxis, 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 labeling for such indications or formulations 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 existing sales to BARDA and may impact other regulatory authorities' review of
TPOXX®, which in turn, could adversely impact commercializing TPOXX® in other countries, and such delays or required alterations to regulatory
applications could also have a material adverse effect on the Company.
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Failure to obtain regulatory approval in international jurisdictions could prevent us from marketing our products abroad.
To market our products in Canada, the European Union and certain 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 and differing manufacturing or labeling requirements. Complying with such requirements may take additional time prior to approval and delay
commercial activities in those jurisdictions.
The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval for expanded indications or new
formulations of TPOXX®. We may not obtain foreign regulatory approvals on a timely basis, if at all. Regulatory approval by the FDA, which we obtained
for oral TPOXX®, or by a foreign regulatory authority such as Canada or the European Medicines Agency (EMA) does not ensure approval by regulatory
authorities in other foreign countries or jurisdictions or by the FDA for expanded indications or new formulations. In addition, failure to obtain approval in
one jurisdiction may impact our ability to obtain approvals elsewhere. We may not be able to file for or receive necessary regulatory approvals to
commercialize our products in any non-U.S. market, in which case, 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
We cannot predict whether or when we will be permitted to commercialize TPOXX® other than the oral formulation for smallpox treatment.
We have only received FDA approval for the oral formulation of TPOXX®, not the intravenous or liquid suspension/pediatric formulation, or any
other indication beyond treatment for smallpox, for TPOXX®. Because pharmaceutical manufacturers are only permitted to commercialize indications and
formulations that have received FDA approval (or in other jurisdictions according to their applicable regulatory and legal frameworks), any regulatory or
legal setbacks as described above could have an adverse impact on the Company’s ability to sell other formulations or for other uses of TPOXX® pending
such approvals.
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.
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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® internationally to foreign governments, as well as to customers other than the U.S.
Government. These potential non-U.S. Government 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 may need to meet additional regulatory requirements.
The market for sales of TPOXX® to U.S. 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.
We expect our future international revenues to depend heavily on the success of the efforts of Meridian pursuant to an International Promotion
Agreement, which may not be successful.
Pursuant to the International Promotion Agreement described under “Business," we granted a third party, Meridian Medical Technologies, a
division of Pfizer, exclusive rights to market, advertise, promote, offer for sale, or sell oral TPOXX® in all geographic regions except for the United
States (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 international revenues will likely depend heavily on the success of the efforts of Meridian pursuant to the
International Promotion Agreement, which may not be successful.
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 expand our sales of TPOXX® or other product candidates in the U.S., including to U.S. customers other than the U.S.
Government.
In the United States market, we have retained all sales and marketing rights with respect to oral TPOXX®. In this market, we currently employ a
small, targeted group to support development and business activities related to TPOXX®. 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. This approach may prove insufficient to adequately support our
development and business activities in the United States.
In order to expand our sales of TPOXX® or other product candidates in the U.S., including to U.S. customers other than the U.S. Government, we
may need to enhance our own sales and marketing capabilities, and/or enter into collaborations with third parties able to perform these services or
outsource these functions to third parties. There is no assurance that we will be able to do so successfully, and even if we are able to do so that it will have
a significant impact on our growth or profitability.
Although TPOXX® is currently stockpiled only by the U.S. and Canadian governments and not sold commercially, in the future 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.
If we obtain the necessary marketing approval to sell TPOXX® to non-government customers and are able to charge higher prices than we do to the
U.S. Government, healthcare reform and controls on healthcare spending may nonetheless 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
pricing 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 had 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 affect existing healthcare programs. If we obtain marketing approval for sale of TPOXX® beyond the U.S.
government customers and are able to charge higher prices than we do to the U.S. Government, healthcare reform and controls on healthcare spending may
nonetheless limit the price we charge for our products and the amounts that we can sell. For example, 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 hinder us from developing, manufacturing and selling certain product candidates
outside of the United States and require us to revise and implement costly compliance programs.
As 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 time-
consuming and costly, and such programs can be challenging to oversee and 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.
As we expand our operations outside of the U.S., compliance with the FCPA, U.K. Bribery Act and similar anti-corruption provisions in other
jurisdictions may be expensive and can be difficult, particularly in countries in which corruption is a recognized problem. 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. As we
expand our presence outside of the United States, we may require additional resources to ensure compliance with these laws.
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 as 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 United States) and will be the counterparty to any agreements with covered foreign jurisdictions. As such, Meridian will be
responsible for anti-corruption compliance related to its activities.
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We could incur net losses in the future if options are not exercised under the 19C BARDA Contract.
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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 remaining options under the 19C BARDA Contract. If cash flows from the 19C BARDA Contract are significantly different from expectations, or if
operating expenses or other expenses meaningfully exceed our expectations or cannot be adjusted accordingly, then our business, financial condition,
results of operations and prospects could be materially adversely affected.
Risks Related to Manufacturing, Storage and 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 or transport 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 IV TPOXX® inventory.
If a third-party provider fails to comply with applicable laws and regulations, fails to meet expected deadlines, fails to conduct trials in accordance
with regulatory requirements or our stated protocols, 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 novel coronavirus COVID-19 pandemic, our
ability to meet our obligations under the 19C BARDA Contract or to develop, obtain approval and commercialization of IV TPOXX® or other drug
candidates, could be significantly impaired or delayed. 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.
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.
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 novel coronavirus COVID-19 pandemic, 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. In addition, due to the novel coronavirus COVID-19 pandemic, regulatory authorities may
not conduct required inspections at our CMO facilities, and without such inspections, drug approvals could be delayed. Our government 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.
Problems related to large-scale commercial manufacturing could cause an increase in costs or shortages of products or a delay in product launches.
Manufacturing API and finished drug products, especially in large quantities, is complex. Our products 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 action. Such actions would hinder our ability to meet contractual obligations and could cause
material adverse consequences for our business.
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Risks Related to Product Development
22
Growth of our business may be impacted significantly by our success in completing development and commercialization of drug candidates, new
formulations or additional indications for TPOXX®. If we are unable to commercialize new drug candidates, new formulations, 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, new formulations or additional indications for TPOXX®, will depend on many
factors, including:
•
•
•
•
•
•
•
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 and liquid suspension/pediatric formulations of 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;
•
•
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 affected.
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23
We may not be able to fully commercialize the IV and liquid suspension/pediatric 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 resource-intensive, 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:
•
•
•
•
•
•
•
•
•
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 resources required to manage and oversee 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 required resources, regulations, or challenges associated with animal studies may increase and make our studies more difficult.
IV and Liquid Suspension/Pediatric TPOXX® formulations are currently in product development and there can be no assurance of successful
development or ultimate 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 the IV or liquid suspension/pediatric formulation of TPOXX®, any new indication such as post-
exposure prophylaxis, of TPOXX® or any other drug. 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;
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® could have a material
adverse effect on our ability to grow our business, and impair our financial condition and operations.
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Risks Related to Our Intellectual Property
24
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 regulatory exclusivity, patent and other 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 regulatory, 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 definitively 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 product, TPOXX® (also known as ST-246, tecovirimat). As of
January 12, 2021, the TPOXX® patent portfolio has seven patent families consisting of 27 U.S. utility patents, 86 issued foreign patents, three U.S. utility
patent applications, and 30 foreign patent applications.
With FDA regulatory approval of oral TPOXX® in July 2018, we were awarded seven years of regulatory exclusivity by the U.S. Patent and
Trademark Office based on orphan drug designation for the product. Such protection is separate from, and in addition to, our patent and other intellectual
property rights and provides for exclusivity to July 2025.
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. We do not
currently license any patent rights from third parties relative to TPOXX®.
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 cause us to incur significant costs, and have a material adverse effect on us. 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.
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 Common Stock
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.
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25
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 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.
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 could 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.
General
Global infectious disease outbreaks, such as the COVID-19 pandemic, or climate-related matters could negatively impact the global economy on a
broad scale and our business in particular.
Occurrence of a global infectious disease outbreak, such as the novel coronavirus (COVID-19) that escalated into a worldwide pandemic, or
climate-related disasters, could have a broad impact on global economic conditions, sourcing of raw materials and may continue to impact our ability to
promote our products successfully to international governments who may need to divert resources to address the ongoing pandemic and other such matters.
Such delays may reduce our expected revenue from international sales to foreign governments and thereby adversely impact our projected business growth.
The COVID-19 pandemic, for example, has caused significant societal and economic disruption. Such disruption, and the associated risks and
costs, are expected to continue for an indeterminate period of time. Given the uncertain future course of the COVID-19 pandemic, and the uncertain scale
and scope of its future impact, the Company is continually reviewing business and financial risks related to the pandemic and seeking coordination with its
government partners with respect to the performance of current and future government contracts. Additionally, the Company is continually coordinating
with service providers and vendors, in particular Contract Manufacturing Organizations ("CMOs") that constitute our supply chain, to review actions and
risks caused by the COVID-19 pandemic.
As of the filing date of this document, the Company has not identified or been notified by government customers of impediments to the continued
full performance of their government contracts. Additionally, the Company’s supply chain for the manufacture of TPOXX® has remained operational on
current projects without material COVID-19 related disruption, and in the ordinary course of operations, the supply chain has secured sufficient raw
materials to support manufacture and product delivery activities on current projects. With regard to day-to-day operations, the COVID-19 pandemic has at
times slowed the daily pace of execution of government contracts as well as new contract generation, as U.S. and foreign government staff overseeing
health security preparedness has been involved directly or indirectly in governmental responses to the pandemic, which has diverted government staff time
that would normally be directed toward contract matters involving SIGA. The Company expects to experience delays, or slower-than-usual pace, in
connection with certain research and development activities, such as those that involve clinical trials. The Company does not currently expect any
pandemic-related delays in research and development activities to have a material adverse impact on the financial condition or annual financial results of
the Company, or its long-term performance, but there can be no assurance that such delays will not have such a material adverse impact in the future.
While to date the COVID-19 pandemic has not adversely affected the liquidity position of the Company, and is not currently expected to have a
material adverse effect on the financial condition of the Company, there can be no assurance that it will not have such adverse effects, which may be
material, in the future. Given that the pandemic has diverted foreign government staff time normally directed toward contract matters involving SIGA, the
COVID-19 pandemic could affect the timing of international contract awards for oral TPOXX, which could potentially have a material adverse effect on
the short-term financial results of the Company. The pandemic has resulted in almost all of our employees working from home; however, the shift in
location for employees has not had a material adverse impact on the day-to-day operations of the Company. If the general negative effect of the COVID-19
pandemic becomes more acute or is prolonged, there could be potentially be a material adverse impact on our business and cash flows.
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, materially change the risk profile of the Company and/or 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 acquisition, in connection therewith we may be required to issue equity (thereby diluting our current stockholders) or debt, we may not be
able to integrate successfully the acquired personnel, operations and technologies, or effectively manage the combined business following the acquisition,
or the acquired business could otherwise fail to meet our expectations, which, in each case, could have a material adverse effect on our business
projections, financial condition, results of operations and prospects.
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The health security market in which we compete and will compete is highly competitive.
26
The health security 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, health security 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 may 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.
Like all pharmaceutical companies, 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 would 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 decreased demand for
any product candidate or product that we may develop; 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; the inability to commercialize any
products that we may develop. 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 and financial position.
We currently have product liability insurance with coverage up to a $10 million annual aggregate limit and a $10 million per occurrence limit.
Product liability insurance is difficult to obtain and increasingly expensive. Should we face claims, 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.
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, and may have to incur significant costs to comply with current or future environmental laws and regulations.
Although we believe that our CMOs’ 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.
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, including our Chief Executive
Officer, Chief Scientific Officer and other key executives. Our success is dependent upon our personnel and our ability to recruit, retain 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 members of our key management team could have a material adverse effect on our business.
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27
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 and been targeted at
pharmaceutical companies in particular. 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.
We may need additional funding, which may not be available to us, and which may force us to delay, reduce or limit proposed acquisitions or strategic
investments or any of our non-government funded product development programs or commercial efforts.
Although our current cash position is strong, we may require additional financing and, 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 strategic transactions or
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. 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.
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 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 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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28
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:
2020
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2019
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
$
$
High
Low
5.53 $
6.32
8.10
7.85
High
Low
8.09 $
6.31
6.08
6.02
3.96
4.45
5.35
6.28
5.52
5.02
4.92
4.28
As of February 16, 2021, the closing sale price of our common stock was $6.30 per share. There were 28 holders of record as of February 16,
2021. 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.”
Issuer Purchases of Equity Securities
Period
October 1, 2020 to October 31, 2020
November 1, 2020 to November 30, 2020
December 1, 2020 to December 31, 2020
Total
Total Number
of Shares
Purchased
Average Price
Paid per Share
520,433 $
144,841
302,952
968,226 $
6.79
6.94
7.21
6.94
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Program
520,433 $
144,841
302,952
968,226
Dollar Value
of Shares That
May Yet Be
Purchased
Under the
Program
24,685,392
23,680,112
21,497,054
On March 5, 2020, the Company announced that the Board of Directors had authorized a share repurchase program under which the Company
may repurchase, from time to time, up to an aggregate of $50 million of the Company’s common stock through December 31, 2021. 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 Term Loan needed to be fully repaid or its terms needed to be amended to
allow for share repurchases.
Unregistered Sale of Equity Securities and Use of Proceeds
On November 19, 2020, the Company issued 393,646 shares of its common stock to an investor on a net basis upon the partial exercise of a
warrant to purchase common stock of the Company. To exercise the warrant, the investor surrendered to the Company 106,354 shares of common stock
otherwise issuable under the warrant in order to effect the partial warrant exercise. The exercise price of the warrant was $1.50 per share. Such shares were
issued pursuant to the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and/or Regulation
D promulgated thereunder, and the issuance did not involve any underwriters, underwriting discounts or commissions, or any public offering. The
purchaser is an accredited investor, and the Company issued the shares without any general solicitation or advertisement.
29
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Performance Graph
The following line graph compares the cumulative total stockholder return through December 31, 2020, assuming reinvestment of dividends, by
an investor who invested $100 on December 31, 2015 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
$
$
$
100 $
100 $
100 $
686 $
108 $
78 $
1,155 $
138 $
95 $
1,881 $
133 $
86 $
1,136 $
179 $
107 $
1,731
257
134
2015
2016
2017
2018
2019
2020
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
No disclosure is required pursuant to this item.
30
31
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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, 2019 (filed with the SEC on March 5, 2020) for
additional discussion of our financial condition and results of operations for the year ended December 31, 2018, as well as our financial condition and
results of operations for the year ended December 31, 2019 compared to the year ended December 31, 2018. 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. Our lead product, TPOXX® (“oral TPOXX®”), is an FDA-approved oral
formulation 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.
COVID-19 Pandemic
The COVID-19 pandemic has caused significant societal and economic disruption. Such disruption, and the associated risks and costs, are
expected to continue for an indeterminate period of time. Given the uncertain future course of the COVID-19 pandemic, and the uncertain scale and scope
of its future impact, the Company is continually reviewing business and financial risks related to the pandemic and seeking coordination with its
government partners with respect to the performance of current and future government contracts. Additionally, the Company is continually coordinating
with service providers and vendors, in particular Contract Manufacturing Organizations ("CMOs") that constitute our supply chain, to review actions and
risks caused by the COVID-19 pandemic.
As of the filing date of this document, the Company has not identified or been notified by government customers of impediments to the continued
full performance of their government contracts. Additionally, the Company’s supply chain for the manufacture of TPOXX® has remained operational on
current projects without material COVID-19 related disruption, and in the ordinary course of operations, the supply chain has secured sufficient raw
materials to support manufacture and product delivery activities on current projects. With regard to day-to-day operations, the COVID-19 pandemic has at
times slowed the daily pace of execution of government contracts as well as new contract generation, as U.S. and foreign government staff overseeing
health security preparedness has been involved directly or indirectly in governmental responses to the pandemic, which has diverted government staff time
that would normally be directed toward contract matters involving SIGA. The Company expects to experience delays, or slower-than-usual pace, in
connection with certain research and development activities, such as those that involve clinical trials. The Company does not currently expect any
pandemic-related delays in research and development activities to have a material adverse impact on the financial condition or annual financial results of
the Company, or its long-term performance, but cannot give assurances as to the full extent of the impact at this time.
Overall, the COVID-19 pandemic has not adversely affected the liquidity position of the Company, nor is it currently expected to have a material
adverse effect on the financial condition of the Company. Given that the pandemic has diverted foreign government staff time normally directed toward
contract matters involving SIGA, the COVID-19 pandemic could affect the timing of international contract awards for oral TPOXX®; otherwise, the
pandemic is not currently expected to have a material adverse effect on the 2021 financial results of the Company. The pandemic has resulted in almost all
of our employees working from home; however, the shift in location for employees has not had a material adverse impact on the day-to-day operations of
the Company. If the general negative effect of the COVID-19 pandemic becomes more acute or is prolonged, there could be potential risks to our business
and cash flows.
Lead Product-TPOXX®
19C BARDA Contract
On September 10, 2018, the Company entered into a contract with the U.S. Biomedical Advanced Research and Development Authority
("BARDA") pursuant to which SIGA agreed to deliver up to 1,488,000 courses of oral TPOXX® to the U.S. Strategic National Stockpile ("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 December 31, 2020, the contract with BARDA (as amended, modified, or
supplemented from time to time, the "19C 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 $127.1 million of payments are related to
exercised options and up to approximately $423.7 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.
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, 2020, the Company had received or
billed for $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 $9.7 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, 2020 and December 31, 2019; such
amount is expected to be recognized as revenue when IV TPOXX® containing such IV BDS is delivered to the Strategic Stockpile or placed in vendor-
managed inventory.
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32
The options that have been exercised to date provide for payments up to approximately $127.1 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®, payments up to $101.3 million for the delivery of up to 363,070 courses of oral TPOXX®; and, payments of up to $14.6 million for funding of
post-marketing activities for oral TPOXX®. As of December 31, 2020, the Company has received the following payments in connection with exercised
options: $11.2 million was received for the procurement of raw materials and such amount was initially recorded as deferred revenue and was recognized
as revenue during the year ended December 31, 2020, with deliveries of approximately 363,000 courses, in the aggregate, of oral TPOXX®; $101.3 million
was received in connection with the June, September and October deliveries, in total, of approximately 363,000 courses of oral TPOXX®; and $5.4 million
has been received or billed for in connection with post-marketing activities for oral TPOXX®.
Unexercised options specify potential payments up to approximately $423.7 million in total (if all such options are exercised). There are options
for the following activities: payments of up to $337.7 million for the delivery of up to approximately 1,089,000 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 exercise options at different points in time (or alternatively, to only exercise the IV BDS Option but not the IV
FDP Option). 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. The Company estimates that sales of the IV formulation under this contract (under current terms),
assuming the IV FDP Options were exercised, would have a gross margin (sales less cost of sales, as a percentage of sales) that is less than 40%.
Under the terms of this contract, exercise of procurement options are at the sole discretion of BARDA. The request for proposal that preceded the
award of the 19C BARDA Contract indicated that the expected purpose of the contract was to maintain the level of smallpox antiviral preparedness in the
Strategic Stockpile. Based on prior product delivery activity, and current FDA-approved shelf life of oral TPOXX®, the Company estimates that
approximately one million courses of smallpox antiviral treatment would need to be delivered to the U.S. Government between 2021 and 2023 in order to
maintain stockpile levels of unexpired smallpox antiviral treatment during this period.
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, 2020, $459.8 million has been received by the Company for the manufacture and delivery of 1.7 million courses of
oral TPOXX® and $45.6 million has been received for certain reimbursements in connection with development and supportive activities. Approximately
$3.0 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.
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 December 2024.
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International Procurement Contracts
Contract with Public Health Agency of Canada
On January 13, 2021, the Public Health Agency of Canada ("PHAC") awarded a contract to Meridian Medical Technologies, Inc. (“Meridian," a Pfizer
Company) (the “Contract”) for the purchase of up to approximately $33 million of oral TPOXX® (tecovirimat) within five years. The Contract specifies
firm commitments for the purchase of approximately $3.4 million of oral TPOXX® to occur by March 31, 2021 and a cumulative purchase of
approximately $17 million of oral TPOXX® by March 31, 2023; the remaining courses under the Contract are targeted for delivery after March 31, 2023
and are subject to option exercise by PHAC. To date, SIGA has not finalized any deliveries yet in connection with this contract. The contract award was
coordinated between SIGA and Meridian under an international promotion agreement, as amended (the "International Promotion Agreement") that was
entered into by the parties on June 3, 2019. As such, Meridian is the PHAC's counterparty under the Contract, and SIGA is responsible for manufacture and
delivery of any oral TPOXX® purchased thereunder.
Canadian Military Contract
On April 3, 2020, the Company announced that the Canadian Department of National Defence (“CDND”) awarded a contract (the "Canadian Military
Contract") to Meridian, pursuant to which the CDND will purchase up to approximately $14 million of oral TPOXX® over four years. In the second
quarter 2020, CDND purchased $2.3 million of oral TPOXX®. The remaining purchases are at the option of the CDND, and are expected to occur after
regulatory approval of oral TPOXX® in Canada. Meridian is the CDND's counterparty under the Canadian Military Contract, and SIGA is responsible for
manufacture and delivery of any oral TPOXX® purchased thereunder.
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 (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 market, 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 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. Taking into
account Meridian’s fee and manufacturing costs of oral TPOXX®, it is currently estimated by the Company that international sales of oral TPOXX® will
have a contribution margin (as expressed as a percentage of product sales, and before any consideration of expenses not directly related to manufacturing or
Meridian activities) of between approximately 65% and 80%.
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 over time,
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. Revenue connected with performance obligations related to product delivery and
supportive services are recognized at a point in time. Revenue connected with performance obligations related to research and development are recognized
over time.
Revenue connected with the performance obligations related to the delivery of oral TPOXX® to the Strategic Stockpile ("Delivery Performance
Obligation") under the 2011 BARDA Contract (Note 3) is recognized at a point in time. The Delivery Performance Obligation has been completed. With
respect to this performance obligation, revenue 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 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.
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34
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
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.
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35
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,
2020, 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.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19
pandemic. Under ASC 740, the effects of changes in tax rates and laws are recognized in the period which the new legislation is enacted. The CARES Act
made various tax law changes, including among other things: (i) increasing the limitation under IRC Section 163(j) for 2019 and 2020 to permit additional
expensing of interest; (ii) enacting a technical correction so that qualified improvement property can be immediately expensed under IRC Section
168(k); (iii) making modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020
to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes; and (iv) enhancing recoverability of
AMT tax credit carryforwards.
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity
in accounting standards. The amendments in the ASU are effective for fiscal years beginning after December 15, 2020, including interim periods therein.
Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The
Company is currently evaluating the effect, if any, that the ASU will have on its consolidated financial statements.
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. An increase or decrease in the
expected volatility of our stock of 10% would result in an additional gain or loss of approximately $0.1 million. 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, 2020 and 2019
36
Revenues from product sales and supportive services for the years ended December 31, 2020 and 2019 were $115.5 million and $11.2 million,
respectively. Such revenues for the year ended December 31, 2020 include $112.6 million of revenue related to the delivery and acceptance of
approximately 363,000 courses of oral TPOXX® to the Strategic Stockpile under the 19C BARDA Contract and $2.3 million of revenue related to courses
of oral TPOXX® that were delivered and accepted by the CDND. Such revenues for the year ended December 31, 2019 were associated with the delivery
and acceptance of approximately 35,700 courses of oral TPOXX® to the Strategic Stockpile under the 19C BARDA Contract.
Revenues from research and development contracts and grants for the years ended December 31, 2020 and 2019, were $9.5 million and $15.6
million, respectively. The decrease of $6.1 million, or 39.0%, partially reflects the impact of a cumulative catch-up adjustment recognized during the year
ended December 31, 2019. During the year December 31, 2019, the Company completed its negotiation with representatives of the U.S. Government for a
change in the application of certain reimbursement rates in the contract. The change in the application of those reimbursement rates increased the overall
transaction price of the IV Formulation R&D Contract but did not change the estimate of costs to complete under the input method calculation. As a result,
the Company accounted for this as a change in the transaction price and recognized a cumulative catch-up adjustment to revenue of approximately $3.3
million representing the impact of the change in the application of those reimbursement rates from January 2016 through March 2019. Additionally, the net
decrease in revenues from research and development activities reflects a $2.0 million revenue decrease in connection with a decrease in direct vendor-
related costs for IV TPOXX® as well as an approximately $0.8 million revenue decrease associated with variability in connection with post-marketing
regulatory activities for oral TPOXX®.
Cost of sales and supportive services for the years ended December 31, 2020 and 2019 were $14.8 million and $1.8 million, respectively. Such
costs in 2020 and 2019 were associated with the manufacture and delivery of approximately 366,000 and 35,700 courses of oral TPOXX®, respectively.
The change in gross margin (cost of sales as a percentage of product sales) is primarily attributable to pricing differences between countries, as well as an
update to the terms of production agreements.
Selling, general and administrative expenses for the years ended December 31, 2020 and 2019 were $14.0 million and $13.3 million, respectively,
reflecting an increase of $0.7 million, or 5.7%. The increase primarily reflects the commission expense associated with the sale of oral TPOXX® to the
CDND in May 2020 as well as higher regulatory costs associated with our submission of a Marketing Authorisation Application (MAA) with the European
Medicines Agency for oral TPOXX® and increased insurance costs, which were only partially offset by a decrease of $0.4 million in compensation
expense.
Research and development expenses were $10.9 million for the year ended December 31, 2020, a decrease of approximately $2.4 million,
or 17.8% from the $13.3 million incurred during the year ended December 31, 2019. The decrease is primarily attributable to a decrease in direct vendor-
related expenses supporting the development of IV TPOXX® as well as a decrease in direct-related expenses supporting the performance of post-marketing
regulatory activities for oral TPOXX®.
Patent expenses for the years ended December 31, 2020 and 2019 were $0.7 million and $0.7 million, respectively. These expenses reflect our
ongoing efforts to protect our lead drug candidates in varied geographic territories.
In connection with the voluntary repayment of the Term Loan on March 13, 2020, we recognized a loss on the extinguishment of the Term Loan of
approximately $5.0 million for the year ended December 31, 2020.
Interest expense on the term loan facility under the Loan Agreement (the "Term Loan") for the year ended December 31, 2020 was $3.0 million,
a decrease of approximately $12.8 million from the $15.8 million incurred during the year ended December 31, 2019. The $3.0 million of interest for the
year ended December 31, 2020 includes $0.9 million of accretion of unamortized costs and fees (prior to repayment of the Term Loan). 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.
Changes in the fair value of the liability classified warrant to acquire common stock were recorded within the income statement. For the year
ended December 31, 2020, we recorded a loss of approximately $3.5 million reflecting an increase in the fair value of the liability-classified warrant
primarily due to an increase in our stock price. For the year ended December 31, 2019, we recorded a gain of approximately $5.1 million reflecting a
decrease in fair value of the liability-classified warrant primarily due to the decrease in the price of our common stock.
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37
Other income, net for the years ended December 31, 2020 and 2019 was $0.5 million and $2.8 million, respectively. Other income
primarily reflects interest income on the Company's cash balance held in restricted and unrestricted accounts. The decrease of approximately $2.3 million is
driven by lower cash balances during the year as well as lower interest rates for 2020 when compared to 2019.
For the year ended December 31, 2020, we recognized a tax provision of $17.2 million on pre-tax income of $73.5 million. Our effective tax rate
for the year ended December 31, 2020 was 23.4%. For the year ended December 31, 2020, 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, non-deductible executive compensation under IRC Section
162(m), and state taxes.
For the year ended December 31, 2019, we recognized a tax benefit of approximately $2.9 million on a 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).
Liquidity and Capital Resources
As of December 31, 2020, we had $117.9 million in cash and cash equivalents, compared with $65.2 million at December 31, 2019. Additionally,
in comparison to $95.7 million of restricted cash and cash equivalents at December 31, 2019, there was no restricted cash as of December 31, 2020 given
that the Term Loan was repaid in March 2020. The restricted cash and cash equivalents were available to pay interest, fees and principal on the Term Loan.
The Company voluntarily prepaid the Term Loan on March 13, 2020 in an approximate amount of $87.2 million, including accrued interest. As a result of
repayment of the Term Loan, there are no restrictions on the use of our cash and cash equivalents.
Operating Activities
We prepare our consolidated statement of cash flows using the indirect method. Under this method, we reconcile net income (loss) 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 provided by (used in) operations for the years ended December 31, 2020 and 2019 was $71.5 million and $(18.2) million, respectively.
For the year ended December 31, 2020, the receipt of approximately $114.9 million for product delivery and acceptance of oral TPOXX® courses
delivered to the SNS and CDND was partially offset by net cash usage primarily related to manufacturing of inventory and customary operating activities.
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.
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38
On December 31, 2020 and 2019, our accounts receivable balance was approximately $3.3 million (which includes approximately $1.3 million of
unbilled receivables) and $4.2 million, respectively. Our accounts receivable balances primarily reflect work that is reimbursable by BARDA and was
performed during December 31, 2020 and 2019, respectively, in connection with TPOXX®.
Investing Activities
Net cash used in investing activities for the years ended December 31, 2020 and 2019 was $15,501 and $29,094, respectively. In 2020 and 2019,
net cash used related to capital expenditures.
Financing Activities
Net cash used in financing activities for the years ended December 31, 2020 and 2019 was $114.6 million and $1.2 million, respectively. For the
year ended December 31, 2020, $85.9 million was associated with our voluntary prepayment of the Term Loan and approximately $28.5 million was
associated with the repurchase of approximately 4.6 million shares of common stock. For the year ended December 31, 2019, $1.2 million was attributable
to the payment of tax obligations for employee common stock tendered.
Future Cash Requirements
As of December 31, 2020, we have outstanding purchase orders associated with manufacturing obligations in the aggregate amount of approximately $12.5
million.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
39
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 subject to the impact of stock price
fluctuations of our common stock in that we have a liability-classified warrant in which 1.0 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 $1.0 million.
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Item 8. Financial Statements and Supplementary Data
40
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
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41
42
44
45
46
47
48
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of SIGA Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of SIGA Technologies, Inc. and its subsidiaries (the “Company”) as of December 31, 2020
and 2019, 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, 2020, including the related notes (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as
of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in
conformity with accounting principles generally accepted in the United States of America.
Changes in Accounting Principles
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 in 2018.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
consolidated financial statements 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 of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our
audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits 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. We believe that our audits provide a reasonable basis
for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was
communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated
financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
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42
Revenue Recognition – Estimated Costs to Complete the Research and Development Services (“R&D”) Performance Obligations for the 19C BARDA and
IV Formulation R&D Contracts
As discussed in Notes 2 and 3 to the consolidated financial statements, all of the Company’s revenue for the year ended December 31, 2020 was generated
from long-term contracts. For these contracts, all revenue associated with R&D performance obligations for the 19C BARDA and IV Formulation R&D
Contracts, which totaled approximately $7.5 million and $1.4 million respectively, is recognized over time, because the customer simultaneously receives
and consumes the benefits provided by the services as the Company performs these services. Management recognizes revenue based on the progress toward
complete satisfaction of the performance obligation and measures this progress under an input method, which is based on the Company’s costs incurred
relative to total estimated costs. Under this method, progress is measured based on the cost of resources consumed compared to the total estimated costs to
completely satisfy the performance obligation. As disclosed by management, due to the nature of the work required to be performed on many of the
performance obligations, management’s estimation of total revenue and costs to satisfy the obligations is complex, subject to many variables, and requires
significant judgment. The incurred and estimated costs used in the measure of progress include third-party services performed, direct labor hours, and
material consumed.
The principal considerations for our determination that performing procedures relating to revenue recognition – estimated costs to complete the R&D
performance obligations for the 19C BARDA and IV Formulation R&D Contracts is a critical audit matter are the significant judgment by management
when determining the estimated costs to completely satisfy the performance obligations. This in turn led to significant auditor judgment, subjectivity and
effort in performing procedures and in evaluating the estimates of the costs to complete related to management’s estimates of total forecasted costs.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated
financial statements. These procedures included, among others, evaluating and testing management’s process for determining the estimated costs to
completely satisfy each performance obligation for the 19C BARDA and IV Formulation R&D Contracts, which included evaluating the reasonableness of
management’s estimates of total forecasted costs. Evaluating the reasonableness of management’s estimates of total forecasted costs involved assessing
management’s ability to reasonably estimate costs to complete the performance obligation by (i) comparing, on a test basis, the underlying cost estimates to
approved contracts or modifications; (ii) comparing, on a test basis, the underlying transaction price to original contracts or modifications; and (iii) testing
actual costs incurred and their eligibility for billing under the research and development performance obligations.
43
SIGA TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
As of
/s/ PricewaterhouseCoopers LLP
Florham Park, New Jersey
March 4, 2021
We have served as the Company’s auditor since 1997.
Table of Contents
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
Deferred tax asset, net
Goodwill
December 31, 2020 December 31, 2019
$
117,890,240 $
—
3,340,263
20,265,519
2,112,069
143,608,091
2,103,990
2,544,053
898,334
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
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
Total liabilities
Commitments and contingencies (Note 14)
Stockholders' equity
Common stock ($.0001 par value, 600,000,000 shares authorized, 77,195,704 and 81,269,868
issued and outstanding at December 31, 2020 and December 31, 2019, respectively)
Additional paid-in capital
Accumulated deficit
Total stockholders' equity
Total liabilities and stockholders' equity
$
$
$
676,923
149,831,391 $
856,766
198,566,190
1,278,217 $
9,205,293
—
10,483,510
6,639,211
2,915,401
20,038,122
3,054,032
8,636,911
80,044,866
91,735,809
6,116,882
2,929,743
100,782,434
7,720
224,978,430
(95,192,881)
129,793,269
149,831,391 $
8,127
220,808,037
(123,032,408)
97,783,756
198,566,190
The accompanying notes are an integral part of these financial statements.
44
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
Total operating expenses
Operating income (loss)
(Loss) gain from change in fair value of warrant liability
Loss on extinguishment of Term Loan
Interest expense
Other income, net
Income (loss) before income taxes
(Provision) benefit for income taxes
Net and comprehensive income (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Weighted average shares outstanding: basic
Weighted average shares outstanding: diluted
2020
2019
2018
$
115,471,071 $
9,488,233
124,959,304
11,190,064 $
15,552,021
26,742,085
468,918,468
8,135,314
477,053,782
14,797,419
14,003,184
10,938,930
719,141
40,458,674
84,500,630
(3,525,846)
(4,981,461)
(3,016,817)
532,085
73,508,591
(17,166,581)
56,342,010 $
0.71 $
0.71 $
79,259,000
79,437,306
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
$
$
$
The accompanying notes are an integral part of these financial statements.
45
Table of Contents
SIGA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY/(DEFICIENCY)
For the Years Ended December 31, 2020, 2019 and 2018
Common Stock
Additional
Paid-In
Accumulated
Other
Accumulated Comprehensive Stockholders’
Total
Balances, December 31, 2017
Net income
79,039,000 $
7,904 $ 214,229,581 $ (537,375,776) $
421,807,828
Shares
Amount
Capital
Deficit
Income (Loss)
Equity/
(Deficiency)
— $ (323,138,291)
421,807,828
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
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
Net income
Repurchase of common stock
Issuance of common stock upon exercise of stock
options
Issuance of common stock upon vesting of RSUs
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, 2020
426,366
42
261,837
1,184,283
118
(118)
760,626
77
6,007,770
(646,925)
(65)
(4,074,375)
80,763,350 $
(223,313)
2,273,177
8,076 $ 218,697,872 $ (115,791,261) $
(7,241,147)
9,769
515,888
53,332
1
52
5
(1)
(52)
(5)
159,782
16
1,172,785
(232,253)
(23)
(1,176,556)
2,113,994
81,269,868 $
(4,628,473)
8,127 $ 220,808,037 $ (123,032,408) $
56,342,010
(28,502,483)
(463)
— $
11,822
177,876
1
18
(1)
(18)
393,646
40
3,003,477
(29,035)
(3)
(184,013)
1,350,948
77,195,704 $
7,720 $ 224,978,430 $ (95,192,881) $
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
56,342,010
(28,502,946)
—
—
3,003,517
(184,016)
1,350,948
— $ 129,793,269
The accompanying notes are an integral part of these financial statements.
46
Table of Contents
SIGA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and other amortization
Loss (gain) on change in fair value of warrant liability
Stock-based compensation
Net realization of deferred revenue and costs due to FDA approval
Deferred income taxes provision (benefit)
Loss on extinguishment of Term Loan
Non-cash interest expense
Gain on sale of priority review voucher
Changes in assets and liabilities:
Accounts receivable
Inventory
Prepaid expenses and other assets
Accounts payable, accrued expenses and other liabilities
Deferred revenue
Net cash provided by (used in) 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
Payment of employee tax obligations for common stock tendered
Repurchase of common stock
Repayment of Term Loan
2020
2019
2018
$
56,342,010 $
(7,241,147) $
421,807,828
529,814
3,525,846
1,350,948
—
11,606,949
4,981,461
887,132
—
827,733
(8,009,992)
699,102
(2,204,381)
982,606
71,519,228
(15,501)
—
(15,501)
—
(184,016)
(28,502,946)
(85,913,459)
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)
—
—
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)
—
—
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 paid (refund), net
(114,600,421)
(43,096,694)
160,986,934
117,890,240 $
(1,176,579)
(19,409,976)
180,396,910
160,986,934 $
(3,812,561)
143,295,324
37,101,586
180,396,910
3,003,517 $
97,250 $
3,718,581 $
1,172,801 $
118,500 $
(1,276,129) $
6,007,847
1,681,426
251,961
$
$
$
$
Table of Contents
The accompanying notes are an integral part of these financial statements
47
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. The Company's lead product, TPOXX® (“oral
TPOXX®”) is a United States Food & Drug Administration-approved oral formulation antiviral drug for the treatment of human smallpox disease caused
by variola virus. On July 13, 2018, the FDA approved 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) were restricted and were held in a reserve account. Cash and cash equivalents held in the reserve account were available to pay interest,
fees and principal related to the Term Loan (see Note 8 for additional information). Prior to the second quarter of 2020, 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 2020.
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
Cash, cash equivalents and restricted cash
As of December 31,
2020
$
$
117,890,240 $
—
—
117,890,240 $
2019
65,249,072 $
95,737,862
—
160,986,934 $
2018
100,652,809 $
11,452,078
68,292,023
180,396,910 $
2017
19,857,833
10,701,305
6,542,448
37,101,586
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.
48
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Accounts Receivable
Accounts receivable are recorded net of provisions for doubtful accounts. At December 31, 2020 and 2019, 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, 2020 and
2019, 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.
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, 2020, the Company's active performance obligations, for the contracts outlined in Note 3, consist
of the following: six 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. All of the Company’s revenue related to current
research and development performance obligations is recognized over time, because the customer simultaneously receives and consumes the benefits
provided by the services as the Company performs these services. The Company recognizes revenue related to these services based on the progress toward
complete satisfaction of the performance obligation and measures this progress under an input method, which is based on the Company’s cost incurred
relative to total estimated costs. Under this method, progress is measured based on the cost of resources consumed (i.e., cost of third-party services
performed, cost of direct labor hours incurred, and cost of materials consumed) compared to the total estimated costs to completely satisfy the performance
obligation. Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. The incurred
and estimated costs used in the measure of progress include third-party services performed, direct labor hours, and material consumed.
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Table of Contents
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.
As discussed in Note 3, 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 negotiation with representatives of the U.S. Government for a change in the application of certain reimbursement rates under the
IV Formulation R&D Contract (defined in Note 3).
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; as of
December 31, 2020, the accounts receivable balance in the balance sheet includes approximately $1.3 million of unbilled receivables. 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 from billing. 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, 2020, the Company recognized revenue of $0.1 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, 2020, the aggregate amount of transaction price allocated to remaining
performance obligations was $63.5 million. The Company expects to recognize this amount as revenue within 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 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 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 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.
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Repurchase of shares
When shares recognized as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognized as a
deduction from equity. The excess of the purchase price above par value of repurchased shares that are retired is presented as an increase to accumulated
deficit (or a reduction of retained earnings, if any).
(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 the liability-classified warrant as 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 2020 or 2019. As of December 31, 2020, the Company had approximately $0.1
million of cash and cash equivalents classified as Level 1 financial instruments. There were no Level 2 financial instruments as of December 31, 2020. 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.
The following table presents changes in the liability-classified warrant measured at fair value using Level 3 inputs:
Warrant liability at December 31, 2019
Increase in fair value of warrant liability
Exercise of warrants
Warrant liability at December 31, 2020
Fair Value Measurements of Level 3
liability-classified warrant
$
$
6,116,882
3,525,846
(3,003,517)
6,639,211
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
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 adoption of this standard had no impact on the
consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in
accounting standards. The amendments in the ASU are effective for fiscal years beginning after December 15, 2020, including interim periods therein.
Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The
Company is currently evaluating the effect, if any, that the ASU will have on its consolidated financial statements.
3. Procurement Contract and Research Agreements
19C 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 December 31, 2020, the contract with
BARDA (as amended, modified, or supplemented from time to time, the "19C 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 $127.1
million of payments are related to exercised options and up to approximately $423.7 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.
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, 2020, the Company had received or billed for $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 $9.7 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, 2020 and December 31, 2019; such amount is expected
to be recognized as revenue when IV TPOXX® containing such IV BDS is delivered to the Strategic Stockpile or placed in vendor-managed inventory.
The options that have been exercised to date provide for payments up to approximately $127.1 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®,
payments up to $101.3 million for the delivery of up to 363,070 courses of oral TPOXX®; and, payments of up to $14.6 million for funding of post-
marketing activities for oral TPOXX®. As of December 31, 2020, the Company has received the following payments in connection with exercised options:
$11.2 million was received for the procurement of raw materials and such amount was initially recorded as deferred revenue and was recognized as revenue
during the year ended December 31, 2020, with deliveries of approximately 363,000 courses, in the aggregate, of oral TPOXX®; $101.3 million was
received in connection with the June, September and October deliveries, in total, of approximately 363,000 courses of oral TPOXX®; and $5.4 million has
been received or billed for in connection with post-marketing activities for oral TPOXX®.
Unexercised options specify potential payments up to approximately $423.7 million in total (if all such options are exercised). There are options for the
following activities: payments of up to $337.7 million for the delivery of up to approximately 1,089,000 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.
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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 exercise options at different points in time (or alternatively, to only exercise the IV BDS Option but not the IV
FDP Option). 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. Revenue from other performance obligations under the 19C BARDA Contract are recognized over time using
an input method using costs incurred to date relative to total estimated costs at completion. For the years ended December 31, 2020 and 2019, the Company
recognized revenues of $7.5 million and $7.4 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, 2020 and 2019, was $112.6 million and $11.1 million, respectively.
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, 2020, $459.8 million has been received by the Company for the manufacture and delivery of 1.7 million courses of oral
TPOXX® and $45.6 million has been received for certain reimbursements in connection with development and supportive activities. Approximately $3.0
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.
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 December 2024.
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, 2020 and 2019, the Company recognized revenue of $0.2 million and $0.3 million, respectively, on an over time basis. In
contrast, revenue recognized for product delivery and supportive services and therefore at a point in time for the years ended December 31, 2020 and 2019,
were $0.4 million and $0.1 million, respectively.
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International Procurement Contracts
On January 13, 2021, the Public Health Agency of Canada ("PHAC") awarded a contract to Meridian Medical Technologies, Inc. (“Meridian,” a Pfizer
Company) (the “Contract”) for the purchase of up to approximately $33 million of oral TPOXX® (tecovirimat) within five years. The Contract specifies
firm commitments for the purchase of approximately $3.4 million of oral TPOXX® to occur by March 31, 2021 and a cumulative purchase
of approximately $17 million of oral TPOXX® by March 31, 2023; the remaining courses under the Contract are targeted for delivery after March 31, 2023
and are subject to option exercise by PHAC. To date, SIGA has not finalized any deliveries yet in connection with this contract.
On April 3, 2020, the Company announced that the Canadian Department of National Defence (“CDND”) awarded a contract (the "Canadian Military
Contract") to Meridian, pursuant to which the CDND will purchase up to approximately $14 million of oral TPOXX® over four years. In the second
quarter 2020, CDND purchased $2.3 million of oral TPOXX®. The remaining purchases are at the option of the CDND, and are expected to occur after
regulatory approval of oral TPOXX® in Canada. Meridian is the CDND's counterparty under the Canadian Military Contract, and SIGA is responsible for
manufacture and delivery of any oral TPOXX® purchased thereunder.
The PHAC and CDND contract awards were both coordinated between SIGA and Meridian under the international promotion agreement, as amended (the
"International Promotion Agreement") that was entered into by the parties on June 3, 2019.
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 (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 market, 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 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.
Revenue in connection with international procurement contracts for the delivery of product are recognized at a point in time. During the year ended
December 31, 2020, the Company recognized $2.3 million of revenue for delivery to CDND.
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 in February 2024. As of
December 31, 2020, the IV Formulation R&D Contract provides for future aggregate research and development funding of up to approximately $2.1
million.
Revenues in connection with the IV Formulation R&D Contract are recognized over time. For the years ended December 31, 2020 and 2019, the Company
recognized revenue of $1.4 million and $7.5 million, respectively, under this contract. During the year ended December 31, 2019, the Company completed
its negotiation with representatives of the U.S. Government for a change in the application of certain reimbursement rates in the contract. The change in the
application of those reimbursement rates increased the overall transaction price of the IV Formulation R&D Contract, but did not change the estimate of
costs to complete under the input method calculation. As a result, the Company accounted for this as a change in the transaction price and recognized a
cumulative catch-up adjustment to revenue of approximately $3.3 million representing the impact of the change in the application of those reimbursement
rates from January 2016 through March 2019.
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
Department of Defense ("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"). In May 2020, the DoD increased the scope and the contract value to a total of $26 million with current available funding of $23 million. As of
December 31, 2020, the PEP Label Expansion R&D Contract provides for future aggregate research and development funding under the award, as
modified, of up to approximately $22.4 million. The period of performance for this contract, as modified, terminates on July 31, 2025. For the years ended
December 31, 2020 and 2019, the Company, under the PEP Label Expansion R&D Contract, recognized revenue of $0.3 million and $0.3 million,
respectively, 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.
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4. Sale of Priority Review Voucher
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:
Raw materials
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, 2020
$
2,628,153 $
15,415,425
2,221,941
20,265,519 $
$
As of
December 31, 2020
$
2,420,028 $
532,125
377,859
2,944,932
6,274,944
(4,170,954)
2,103,990 $
$
December 31,
2019
—
8,693,457
959,398
9,652,855
December 31,
2019
2,420,028
601,797
377,859
2,944,932
6,344,616
(3,726,313)
2,618,303
Depreciation and amortization expense on property, plant, and equipment was $529,814, $526,997, and $69,630 for the years ended December 31, 2020,
2019, and 2018, respectively.
7. Accrued Expenses
Accrued expenses and other current liabilities consisted of the following:
As of
Deferred revenue
Compensation
Lease liability, current portion
Other
Vacation
Research and development vendor costs
Professional fees
Inventory
Interest payable
Income tax payable
Accrued expenses and other current liabilities
$
56
December 31, 2020
$
December 31,
2019
2,298,341
2,966,139
419,709
643,570
256,402
707,685
288,707
71,541
977,724
7,093
8,636,911
3,280,947 $
2,933,738
449,940
486,158
405,176
327,606
251,824
150,349
—
919,555
9,205,293 $
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8. Debt
On March 13, 2020, the Company voluntarily prepaid the Loan Agreement in an approximate aggregate amount of $87.2 million. The prepayment was
made from restricted cash, including $80.0 million in respect of outstanding principal of the Term Loan, $4.0 million that was payable upon the repayment
of the Loan Agreement, approximately $1.2 million of accrued interest, and a prepayment premium amount of approximately $1.9 million. The prepayment
was made upon the Company and the Lender agreeing to and entering into customary mutual releases reflecting that, subject to such prepayment in
accordance with the terms of the Loan Agreement, all of the obligations under the Loan Agreement were released, discharged and satisfied in full. Upon
such prepayment and release, the Loan Agreement was terminated. For the year ended December 31, 2020, the Company recognized approximately $5.0
million of a loss on the extinguishment of the Term Loan related to the remaining unamortized discount and the prepayment premium.
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 (the "Term Loan") (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 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”). Interest on the Term Loan was at a per annum rate equal to the Adjusted LIBOR rate plus 11.5%, subject to adjustments as set forth in the Loan
Agreement.
The Term Loan had a maturity date 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.
Through the three and one-half year anniversary ( May 17, 2020) of the Escrow Release Date, any prepayment of the Term Loan was subject to a
makewhole provision in which interest payments related to the prepaid amount were due (subject to a discount of treasury rate plus 0.50%). Upon
repayment of the Term Loan, an additional $4.0 million payment was required. Such payment had been accreting to the Term Loan balance since the
Escrow Release Date.
In connection with the issuance of 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 was payable upon repayment of Term Loan
principal. 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 were 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.
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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 income (loss) for basic earnings per share
Less: Change in fair value of warrants
Net income (loss), 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
Earnings (loss) per share: basic
Earnings (loss) per share: diluted
$
$
$
$
2020
Year Ended December 31,
2019
56,342,010 $
—
56,342,010 $
79,259,000
178,306
79,437,306
0.71 $
0.71 $
(7,241,147) $
5,091,256
(12,332,403) $
81,031,254
1,143,769
82,175,023
(0.09) $
(0.15) $
2018
421,807,828
(6,922,624)
428,730,452
79,923,295
2,785,177
82,708,472
5.28
5.18
For the year ended December 31, 2020, diluted shares outstanding include the dilutive effect of in-the-money options, unvested restricted stock and
unreleased restricted stock units. The dilutive effect of 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 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. Warrants were presumed to be cash-settled and therefore excluded from the
diluted earnings per share calculations for the year ended December 31, 2020 because the net effect of their inclusion, including the elimination of the
impact in the operating results of the change in fair value of the warrants, would have been anti-dilutive. For the year ended December 31, 2020, the
weighted average number of shares under the warrant excluded from the calculation of diluted earnings per share was 1,124,585.
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The Company incurred losses for the twelve months ended December 31, 2019 and as a result, for such year 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:
Stock Options
Stock-Settled Stock Appreciation Rights
Restricted Stock Units
Year Ended
December 31,
2019
340,284
1,666
525,741
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, 2020, 0.5 million shares on the warrant were exercised. Subsequent to partial exercises of the Warrant, there are
approximately 1.0 million shares underlying the Warrant as of December 31, 2020. 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, 2020 and 2019 to determine the fair value of the Warrant.
As of December 31, 2020, the fair value of the Warrant was $6.6 million. A Black Scholes model was applied to calculate the fair value of the Warrant
using the following assumptions: risk free interest rate of 0.46%; no dividend yield; an expected life of 5.7 years; and a volatility factor of 80%.
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%.
At December 31, 2020, 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, 2020, 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, 2020 and 2019, no preferred shares were outstanding or issued.
On March 5, 2020, the Company announced that the Board of Directors had authorized a share repurchase program under which the Company may
repurchase, from time to time, up to an aggregate of $50 million of the Company's common stock through December 31, 2021. 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. 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. During the year ended December 31, 2020, the Company repurchased 4.6 million shares of
common stock, respectively, for approximately $28.5 million.
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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 stock-settled stock appreciation rights ("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 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, 2020, 2019 and 2018, the Company recorded stock-based compensation expense, including stock options and RSUs, of
approximately $1.4 million, $2.1 million and $2.3 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:
Weighted
Average
Number of
Options
Exercise
Price
Weighted Aggregate
Intrinsic
Average
Remaining
Life
(in years)
Value
(in thousands)
Outstanding at January 1, 2020
Granted
Exercised
Canceled/Expired
Outstanding at December 31, 2020
Vested at December 31, 2020
Exercisable at December 31, 2020
281,000 $
75,000
(25,000)
(78,000)
253,000 $
253,000 $
253,000 $
9.68
6.47
3.89
8.13
9.78
9.78
9.78
3.47 $
3.47 $
3.47 $
170,000
170,000
170,000
As of December 31, 2020, 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, 2020 and 2019 was approximately $383,000 and $120,000, respectively. For
the year ended December 31, 2019 there were no stock options that vested.
The total intrinsic value of stock options exercised was approximately $87,000, $76,000 and $2,900,000 for the years ended December 31, 2020, 2019 and
2018, respectively. The intrinsic value represents the amount by which the market price of the underlying stock exceeds the exercise price of an option.
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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, 2020
Granted
Vested and released
Canceled/Expired
Outstanding at December 31, 2020
Number of
RSUs
240,292 $
135,000
(177,876)
(30,000)
167,416 $
Weighted
Average
Grant-Date
Fair Value
5.83
5.95
5.84
6.20
5.86
As of December 31, 2020, $0.5 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 0.5 years. The weighted average fair value at the date of grant for restricted stock awards
granted during the years ended December 31, 2020, 2019 and 2018 was $5.95, $5.84 and $6.53 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, 2020, 2019 and 2018 was approximately
$1.0 million, $1.6 million and $2.9 million, respectively.
13. Income Taxes
The Company's provision (benefit) for income taxes comprises the following:
Current:
Federal
State and local
Total current provision (benefit)
Deferred:
Federal
State and local
Total deferred provision (benefit)
Total provision (benefit)
For the year ended December 31,
2019
2020
2018
$
$
5,111,667 $
447,965
5,559,632
11,375,962
230,987
11,606,949
17,166,581 $
(663,114) $
143,455
(519,659)
(2,092,585)
(325,032)
(2,417,617)
(2,937,276) $
(1,326,022)
459,172
(866,850)
(9,256,661)
(44,761)
(9,301,422)
(10,168,272)
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The Company’s deferred tax assets and liabilities comprise the following:
Deferred income tax assets:
Net operating losses
Amortization of intangible assets
Share-based compensation
Deferred revenue
Interest expense carryforward
Lease liability
Alternative minimum tax credits
Other
Deferred income tax assets
Less: valuation allowance
Deferred income tax assets, net of valuation allowance
Deferred income tax liabilities:
Amortization of goodwill
Property, plant and equipment
Other
Deferred income tax asset, net
As of December 31,
2020
2019
1,293,842 $
80,930
398,165
709,480
—
520,830
—
1,141,705
4,144,952
(1,022,135)
3,122,817 $
(199,172)
(81,065)
(298,527)
2,544,053 $
9,353,603
113,910
451,818
719,304
2,617,951
678,993
663,114
1,338,046
15,936,739
(1,047,008)
14,889,731
(201,930)
(175,581)
(361,218)
14,151,002
$
$
$
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, 2020 and 2019, 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. The Company’s valuation allowance
decreased by $24,873 during the year ended December 31, 2020.
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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 and local taxes
Change in fair value of common stock warrant
Section 162(m) limitation
Other
Valuation allowance on deferred tax assets
Effective tax rate
2020
As of December 31,
2019
2018
21.0%
0.7%
1.0%
0.5%
0.2%
—
23.4%
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)%
For the year ended December 31, 2020, 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), state and local taxes, and a non-taxable adjustment for the fair market value of the Warrant. 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.
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
2020
2018
5,649,188 $
—
—
(57,601)
—
—
5,591,587 $
5,738,964 $
—
—
(89,776)
—
—
5,649,188 $
—
—
5,738,964
—
—
—
5,738,964
$
$
Included in the balance of unrecognized tax benefits as of December 31, 2020, are potential benefits of $5.6 million that, if recognized, would affect the
effective tax rate. For the years ended December 31, 2020 and December 31, 2019, interest and penalties on unrecognized tax benefits were $65,000 and
$38,000 respectively. 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, 2020.
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 2020. The Company's state and local tax years open to examination are 2016-2020.
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 $0.7 million and $0.6 million for the years ended December 31, 2020 and 2019, 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, 2020 and 2019,
respectively. As of December 31, 2020, the weighted-average remaining lease term of the Company’s operating leases was 5.7 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, 2020:
2021
2022
2023
2024
2025
Thereafter
Total undiscounted cash flows under operating leases
Less: Imputed interest
Present value of lease liabilities
550,904
368,467
402,078
404,258
406,994
575,887
2,708,588
(359,467)
2,349,121
$
As of December 31, 2020, approximately $1.9 million of the lease liability is included in Other liabilities on the consolidated balance sheet with the current
portion included in accrued expenses.
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.
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, 2020, the Company has approximately $12.5 million of purchase commitments associated with manufacturing obligations.
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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, 2020, 2019 and
2018, the Company incurred expenses of approximately $478,000, $468,000 and $450,000, respectively, related to services provided by the outside
counsel. On December 31, 2020 the Company’s outstanding payables and accrued expenses included a $78,000 liability to the outside counsel.
Board of Directors-Consulting Agreement
On October 13, 2018, the Company, entered into a consulting agreement with Dr. Eric A. Rose, a member, and former Executive Chairman, of the
Company’s Board of Directors. Under the agreement, the consulting services included assisting the Company on expanded indications for TPOXX® and
other business development opportunities as requested by the Company. The term of the agreement expired on October 13, 2020 and the agreement has not
been renewed. Compensation under the agreement was at an annual rate of $200,000. During the year ended December 31, 2020, the Company incurred
$157,000 related to services under this agreement. As of December 31, 2020, the Company’s outstanding payables and accrued expenses included a $7,000
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 in September 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 was 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 in September, 2020. In
addition to fixed rent, the subtenant was also obligated to pay, pursuant to the Replacement M&F Sublease, a portion of the Additional Rent specified in the
Old HQ Overlease.
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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, 2020 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 Officer and Chief Financial Officer have concluded that our disclosure controls and procedures
were effective as of December 31, 2020 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, 2020 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:
•
•
•
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, 2020 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, 2020.
Table of Contents
Item 9B. Other Information
None.
Table of Contents
66
67
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 2021 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 2021 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 2021 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, 2020:
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
420,416 $
—
420,416 $
8.22
—
8.22
Number of Securities
Available for Future
Issuance under Equity
Compensation Plans (2)
4,688,646
—
4,688,646
(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 2021 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 2021 Annual Meeting of
Stockholders.
Table of Contents
Item 15. Exhibits and Financial Statement Schedules
(a) (1) and (2). Financial Statements.
68
PART IV
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)
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
(incorporated by reference to the Annual Report on Form 10-K of the Company filed on March 5, 2020).
Securities Purchase Agreement, dated as of August 13, 2003, between the Company and MacAndrews & Forbes Holdings
Inc. (incorporated by reference to the Current Report on Form 8-K of the Company filed on August 18, 2003).
Letter Agreement dated October 8, 2003 among the Company, MacAndrews & Forbes Holdings Inc. and TransTech
Pharma, Inc. (incorporated by reference to the Current Report on Form 8-K of the Company filed on October 9, 2003).
10(c)
10(d)
10(e)
10(f)
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).
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69
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.
10(g)
10(h)
10(i)
10(j)
10(k)
10(l)
10(m)
10(n)
10(o)
10(p)
Luckshire (incorporated by reference to the Current Report on Form 8-K of the Company filed on April 14, 2016).
Table of Contents
70
10(q)
10(r)
10(s)
10(t)
10(u)
10(v)
10(w)
10(x)
10(y)
10(z)
10(aa)
10(bb)
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).
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).
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71
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).
10(cc)
10(dd)
10(ee)
10(ff)
10(gg)
10(hh)
10(ii)
10(jj)
10(kk)
10(ll)
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).
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).
10(mm)
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72
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).
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
10(nn)
10(oo)
10(pp)
10(qq)
10(rr)
10(ss)
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 Annual Report on Form 10-K of the Company filed on
March 5, 2020).
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) (incorporated by reference to the Annual Report on Form 10-K of the Company filed on
March 5, 2020).
Amendment of Solicitation/Modification of Contract 0004, dated February 4, 2020, 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
May 6, 2020).
Amendment of Solicitation/Modification of Contract 0005, dated April 29, 2020, 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
August 6, 2020).
Amendment of Solicitation/Modification of Contract 00021, dated July 2, 2020, 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 November 5, 2020).
Amendment of Solicitation/Modification of Contract 00019, dated July 20, 2020, 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) (incorporated by reference to the Quarterly Report on Form 10-Q of the Company filed on November
5, 2020).
10(tt)
10(uu)
10(vv)
10(ww)
10(xx)
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.
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73
101.INS
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded
within the Inline XBRL 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
104
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
74
Table of Contents
Item 16. Form 10-K Summary
None
Table of Contents
75
SIGNATURES
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.
Date: March 4, 2021
SIGA TECHNOLOGIES, INC.
(Registrant)
By:
/s/ Phillip L. Gomez, Ph.D.
Phillip L. Gomez, Ph.D.
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, Ph.D.
Phillip L. Gomez, Ph.D.
/s/ Daniel J. Luckshire
Daniel J. Luckshire
/s/ Eric A. Rose, M.D.
Eric A. Rose, M.D.
/s/ James J. Antal
James J. Antal
/s/ Thomas E. Constance
Thomas E. Constance
/s/ Jaymie Durnan
Jaymie Durnan
/s/ Julie M. Kane
Julie M. Kane
/s/ Joseph Marshall
Joseph Marshall
/s/ Julian Nemirovsky
Julian Nemirovsky
/s/ Michael Plansky
Michael Plansky
Title of Capacities
Chief Executive Officer and Director
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Date
March 4, 2021
March 4, 2021
Chairman
March 4, 2021
Director
Director
Director
Director
Director
Director
Director
76
March 4, 2021
March 4, 2021
March 4, 2021
March 4, 2021
March 4, 2021
March 4, 2021
March 4, 2021
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, and 333-167329) of SIGA
Technologies, Inc. of our report dated March 4, 2021 relating to the financial statements, which appears in this Form 10-K.
Exhibit 23.1
/s/ PRICEWATERHOUSECOOPERS LLP
Florham Park, New Jersey
March 4, 2021
Exhibit 31.1
I, Phillip L. Gomez, Ph.D., certify that:
Certification by Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I have reviewed this annual report on Form 10-K of SIGA Technologies, Inc.;
1.
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
4.
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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 4, 2021
/s/ Phillip L. Gomez, Ph.D.
Phillip L. Gomez, Ph.D.
Chief Executive Officer
Exhibit 31.2
I, Daniel J. Luckshire, certify that:
Certification by Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I have reviewed this annual report on Form 10-K of SIGA Technologies, Inc.;
1.
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
4.
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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 4, 2021
/s/ Daniel J. Luckshire
Daniel J. Luckshire
Executive Vice President and
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
Exhibit 32.1
In connection with the Annual Report of SIGA Technologies, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2020 as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Phillip L. Gomez, Ph. D., 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, Ph.D.
Phillip L. Gomez, Ph.D.
Chief Executive Officer
March 4, 2021
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of SIGA Technologies, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2020 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 4, 2021