What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-03-03 compared with 2021-03-04 · 121 added, 175 removed, 157 unchanged (65% of the section changed)

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:

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

As of February 16, 2021, the closing sale price of our common stock was $6.30 per share.

The Company's common stock trades on The Nasdaq Global Market under the symbol "SIGA."

There were 26 holders of record as of February 16, 2022.

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Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Program

Dollar Value of Shares That May Yet Be Purchased Under the Program

Total Number of Shares Purchased as Part of Publicly Announced Programs

Dollar Value of Shares That May Yet Be Purchased Under the Programs

October 1, 2021 to October 31, 2021

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December 1, 2021 to December 31, 2021

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.

On March 5, 2020, the Company announced that the Board of Directors 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.

This program has been fulfilled with the maximum amount being used to repurchase shares.

On August 5, 2021, the Company announced that the Board of Directors authorized an additional share repurchase program under which the Company may repurchase up to $50 million of the Company's common stock through December 31, 2023.

The Company started repurchasing shares under this program in the fourth quarter of 2021.

The timing and actual number of shares repurchased will depend on a variety of factors, including:

exercise of procurement options under government contracts;

the timing of exercise of procurement options under government contracts;

alternative opportunities for strategic uses of cash;

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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.

Performance Graph

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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.”

Selected Financial Data

No disclosure is required pursuant to this item.

Not applicable.

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.

Refer to Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (filed with the SEC on March 4, 2021) for additional discussion of our financial condition and results of operations for the year ended December 31, 2020, as well as our financial condition and results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019.

In addition to historical information, the following discussion and other parts of this Annual Report contain forward-looking information that involves risks and uncertainties.

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®

Our lead product, TPOXX® (“oral TPOXX®”), is a United States Food & Drug Administration ("FDA")-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®

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.

is a novel, patented drug that is easy to store, transport and administer.

Oral TPOXX®

labeling, approved by the FDA, limits sales of oral TPOXX®

to those for the U.S.

Strategic National Stockpile ("Strategic Stockpile").

The Company has been delivering oral TPOXX®

to the Strategic Stockpile since 2013.

On December 1, 2021, the Company announced that Health Canada approved oral tecovirimat as an extraordinary use drug.

On January 10, 2022, a Marketing Authorisation Application ("MAA") with the European Medicines Agency ("EMA") for oral tecovirimat was approved. The MAA was filed under the centralized application process, which authorized the sale of oral tecovirimat in European Union member states, as well as Norway (which granted separate follow-on approval), Iceland, and Liechtenstein.

The EMA approved label indication covers the treatment of smallpox, monkeypox, cowpox, and vaccinia complications following vaccination against smallpox.

With respect to the regulatory approvals by Health Canada and the EMA, oral tecovirimat represents the same formulation that was approved by the FDA in July 2018 under the brand name TPOXX®.

For the intravenous formulation of TPOXX®

("IV TPOXX®"), SIGA filed a New Drug Application ("NDA") with the FDA on April 30, 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.

The Company is targeting the first half of 2022 for completion of this review process.

There can be no assurance that any approval will be granted on a timely basis, if at all.

COVID-19 Pandemic

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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®

Given the uncertain future course of the COVID-19 pandemic, and the uncertain scale and scope of its future direct and indirect 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, with respect to actions and risks caused by the COVID-19 pandemic.

As of the filing date of this report, the Company has not identified or been notified by government customers of impediments to the continued full performance of their government contracts.

With regard to day-to-day operations, the COVID-19 pandemic, and the secondary effects of the pandemic, have at times slowed the daily pace of execution of government contracts as well as new contract generation.

For example, U.S.

and foreign government staffs overseeing health security preparedness have 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.

Additionally, the COVID-19 pandemic, and the secondary effects of the pandemic have increased the risk of delays in connection with a broad range of operational activities, including:

supply chain procurement of raw materials and manufacturing;

and certain research and development activities, such as those that involve clinical trials.

While the Company does not currently expect any pandemic-related delays in such operational activities to have a material adverse impact on the financial condition or annual financial results of the Company, or its long-term performance, the Company cannot give assurances as to the full extent of the impact at this time.

Overall, while the COVID-19 pandemic has not adversely affected the liquidity position of the Company, the pandemic has diverted foreign government staff time normally directed toward contract matters involving SIGA and has affected and could continue to affect the timing of international contract awards for oral TPOXX®.

Additionally, although SIGA has completed delivery of TPOXX®

courses covered by the procurement option exercised in 2021, the pandemic could result in a slower pace of future product deliveries if the pandemic results in shortages or delays in the receipt by the supply chain of raw materials or supplies. Furthermore, Executive Order 14042 by the President of the United States, which subjects federal prime contractors and subcontractors to certain vaccination requirements and other COVID-19 related safety measures, could have a material impact on the availability and/or timing of services provided to SIGA by certain vendors for supply chain activities and research and development activities.

The mandate has been challenged in several cases that are currently pending, and in at least one case a nationwide injunction has barred enforcement of the mandate while the cases are being pursued.

The future outcome of such litigation is uncertain, and consequently the scope and enforceability of the underlying vaccine mandate as it applies to federal contractors and subcontracts, is not known at this time. If the general negative effect of the COVID-19 pandemic becomes more acute, including due to resurgences in infections or lack of vaccination, there could be material adverse effects to our business and cash flows.

Procurement Contracts with the U.S.

19C BARDA Contract

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(“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.

Additionally, the contract includes funding from BARDA for a range of activities, including:

advanced development of IV TPOXX®, post-marketing activities for oral and IV TPOXX®, and procurement activities.

As of December 31, 2021, 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 $239.7 million of payments are related to exercised options and up to approximately $311.1 million of payments are currently specified as unexercised options.

The $239.7 million of payments related to exercised options includes an option exercised on September 7, 2021 for the manufacture and delivery of approximately $112.6 million of oral TPOXX®.

BARDA may choose in its sole discretion when, or whether, to exercise any of the unexercised options.

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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®

As of December 31, 2021, the Company has received $11.1 million for the successful delivery of approximately 35,700 courses of oral TPOXX®

to the Strategic Stockpile, $3.2 million for the manufacture of IV BDS and $13.8 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;

The $3.2 million received for the completed manufacture of IV BDS has been recorded as deferred revenue as of December 31, 2021 and December 31, 2020;

such amount is expected to be recognized as revenue when IV TPOXX®

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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®.

payments up to $11.2 million for the procurement of raw materials used in the 2020 manufacture of certain courses of oral TPOXX®; payments up to $213.9 million for the delivery of up to 726,140 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, 2021, the Company has delivered approximately $225.1 million (including the value of raw materials) of oral TPOXX®

to the Strategic Stockpile, of which approximately $112.5 million was delivered in 2021 (including approximately $79.7 million of oral TPOXX®

that was delivered and invoiced in December 2021, for which full payment was received in January 2022);

and $7.3 million has been received or billed for in connection with post-marketing activities for oral TPOXX®. 

Unexercised options specify potential payments up to approximately $311.1 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®

payments of up to $225.1 million for the delivery 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 $76.8 million for the manufacture of 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®;

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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.     

2 011 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.

Under the terms of this contract, exercise of procurement options is 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 940,000 courses of smallpox antiviral treatment would need to be delivered to the U.S.

Government between 2022 and 2024 in order to maintain stockpile levels of unexpired smallpox antiviral treatment during this period.     

1C BARDA Contract (2011 BARDA Contract)

On May 13, 2011, the Company signed a contract with BARDA ("1C BARDA Contract" or "2011 BARDA Contract") pursuant to which BARDA agreed to buy from the Company 1.7 million courses of oral TPOXX®, as well as provide development funding for certain activities.

The 1C BARDA Contract specifies approximately $508.4 million of payments, of which, as of December 31, 2021, $459.8 million had been received by the Company for the manufacture and delivery of oral TPOXX®

and $45.9 million had been received for certain reimbursements in connection with development and supportive activities.

Approximately $2.7 million remains eligible to be received in the future for reimbursements of development and supportive activities.

The 1C 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®

On January 13, 2021, the Public Health Agency of Canada ("PHAC") awarded a contract to Meridian Medical Technologies, Inc. (“Meridian") (the “Contract”) for the purchase of up to approximately $33 million of oral TPOXX® (tecovirimat) within five years. In January 2022, PHAC published a proposed amendment in which total procurement of oral TPOXX®

under the Contract would be increased to an amount of up to $38 million, with firm commitments for the cumulative purchase of approximately $23 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.

As of December 31, 2021, approximately $10 million of oral TPOXX®

courses had been delivered to and accepted by PHAC. Such courses were delivered in the first six months of 2021.

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.

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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 the second quarter 2020, CDND purchased approximately $2 million of oral TPOXX®.

In the third quarter of 2021, CDND purchased another approximately $2 million of oral TPOXX®

The remaining purchases are at the option of the CDND.

Meridian is the CDND's counterparty under the Canadian Military Contract, and SIGA is responsible for manufacture and delivery of any oral TPOXX®

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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. 

SIGA retains ownership, intellectual property, distribution and supply rights and regulatory responsibilities in connection with TPOXX®, and, in the United States market, also retains sales and marketing rights with respect to oral TPOXX®.

SIGA’s consent is required for the entry into any sales arrangement pursuant to the International Promotion Agreement.

The fee Meridian retains pursuant to the International Promotion Agreement is a specified percentage of the collected proceeds of sales of oral TPOXX®

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%. For purposes of this disclosure, contribution margin (in amount) represents international product sales less applicable cost of sales and the Meridian fee (which is included within selling, general and administrative expenses within the income statement).

Critical Accounting Estimates

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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).

Our most critical accounting estimates include revenue recognition over time, the valuation of warrants granted or issued by the Company, and income taxes (including realization of deferred tax assets).

Revenue Recognition

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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.

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.

Due to the nature of the work required to be performed on many of our performance obligations for which revenue is recognized over time, 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.

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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.

We are subject to U.S.

federal income tax and state income tax in numerous jurisdictions.

Significant judgments and estimates are required in the determination of our income tax expense.

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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®

We also recorded revenue related to the FDA holdback payment and the payment for 84-month expiry for oral TPOXX®.

In addition, we entered into a new contract with BARDA for the sale of up to 1.7 million courses of TPOXX®.

Based on these factors, we determined that sufficient positive evidence existed to conclude that substantially all of our deferred tax assets were realizable on a more-likely-than-not basis.

The amount of deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the net operating loss carryforward period change and/or if significant objective negative evidence is no longer present.

We consider the reversal of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operating results. 

The amount of deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income change and/or if significant objective negative evidence is no longer present or if significant negative evidence becomes available.

Such changes could lead to a change in judgment related to the realization of the net deferred tax asset.

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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

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Revenues from product sales and supportive services for the years ended December 31, 2021 and 2020 were $126.8 million and $115.5 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. 

Such revenues for the year ended December 31, 2021 include $112.5 million of revenue related to sales of oral TPOXX®

Government under the 19C BARDA Contract and $12.7 million of revenue related to international sales of oral TPOXX®.

Such revenues for the year ended December 31, 2020 include $112.6 million of revenue related to sales of oral TPOXX®

Government under the 19C BARDA Contract and $2.3 million of revenue related to international sales of oral TPOXX®.

Revenues from research and development contracts and grants for the years ended December 31, 2021 and 2020, were $6.9 million and $9.5 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®. 

The decrease of $2.6 million, or 27.6%, primarily reflects a decrease in revenue in connection with a decrease in direct vendor-related costs for IV TPOXX®

and post-marketing regulatory activities for oral TPOXX®, partially offset by higher revenues associated with the PEP Label Expansion R&D Contract.

Cost of sales and supportive services for the years ended December 31, 2021 and 2020 were $16.6 million and $14.8 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. 

Such costs in 2021 and 2020 were primarily associated with the manufacture and delivery of oral TPOXX®

courses to the U.S.

Government under the 19C BARDA Contract and in connection with international sales.

Additionally, there was an inventory-related loss of $0.6 million in 2021.

Selling, general and administrative expenses for the years ended December 31, 2021 and 2020 were $17.3 million and $14.0 million, respectively, reflecting an increase of $3.3 million, or 23.7%.

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.

The increase primarily reflects the promotion fees paid in connection with the courses delivered to PHAC and the CDND in 2021 as well as an increase in certain insurance, business development and consulting costs.

Research and development expenses were $9.9 million for the year ended December 31, 2021, a decrease of approximately $1.0 million, or 9.1% from the $10.9 million incurred during the year ended December 31, 2020.

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.

The decrease is primarily attributable to a decrease in direct vendor-related expenses incurred under the BARDA 19C Contract in connection with supporting the development of IV TPOXX®

and post-marketing regulatory activities for oral TPOXX®, partially offset by higher costs associated with the PEP Label Expansion R&D Contract.

Patent expenses for the years ended December 31, 2021 and 2020 were $0.7 million.

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.

In connection with the voluntary repayment of the term loan facility under the Loan Agreement (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 for the year ended December 31, 2020 was $3.0 million. 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).

There was no interest expense recognized for the year ended December 31, 2021 as our Term Loan was paid off in March 2020.

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.

For the year ended December 31, 2021, we recorded a gain of approximately $0.1 million reflecting a decrease in the fair value of the liability-classified warrant.

For the year ended December 31, 2020, we recorded a loss of approximately $3.5 million reflecting an increase in fair value of the liability-classified warrant primarily due to an increase in the price of our common stock.

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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. 

The decrease of approximately $0.4 million is driven by lower cash balances during the year as well as lower interest rates for 2021 when compared to 2020. 

For the year ended December 31, 2021, we recognized a tax provision of $19.9 million on pre-tax income of $89.3 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).

Our effective tax rate for the year ended December 31, 2021 was 22.2% and differs from the statutory rate of 21% primarily as a result of non-deductible executive compensation under IRC Section 162(m), and state and local taxes.

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% and 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 and local taxes.

Liquidity and Capital Resources

As of December 31, 2021, we had $103.1 million in cash and cash equivalents, compared with $117.9 million at December 31, 2020.

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.

There was no restricted cash as of December 31, 2021 or 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.

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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.

Under this method, we reconcile net income (loss) to cash flows from operating activities by adjusting net income (loss) 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. 

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®.

Net cash provided by operations for the years ended December 31, 2021 and 2020 was $11.5 million and $71.5 million, respectively.

 For the year ended December 31, 2021, the receipt of approximately $43.7 million in connection with U.S.

Government and international sales of oral TPOXX® was partially offset by net cash usage primarily related to manufacturing of inventory and customary operating activities.

For the year ended December 31, 2020, the receipt of approximately $114.9 million in connection with U.S.

Government and international sales of oral TPOXX® was partially offset by net cash usage primarily related to manufacturing of inventory and customary operating activities.

On December 31, 2021 and 2020, our accounts receivable balance was approximately $83.7 million (which includes approximately $2.2 million of unbilled receivables) and $3.3 million, respectively.

Our accounts receivable balance as of December 31, 2021 primarily reflects deliveries of approximately $79.7 million of oral TPOXX®

Government in December 2021, for which we received full payment in January 2022.

Our accounts receivable balance as of December 31, 2020 primarily reflects work that was reimbursable by BARDA and was performed during the year ended December 31, 2020 in connection with oral and IV 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. 

Cash used in investing activities for the years ended December 31, 2021 and 2020 was $50,620 and $15,501, respectively, 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.

Cash used in financing activities for the years ended December 31, 2021 and 2020 was $26.2 million and $114.6 million, respectively.

For the year ended December 31, 2021, $26.0 million was associated with our repurchase of approximately 3.8 million shares of common stock.

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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity