SIGA TECHNOLOGIES INC - 10-K filing on 2014-03-10

Procurement Contract and Research Agreements	12 Months Ended
Procurement Contract and Research Agreements	Dec. 31, 2013
Research and Development [Abstract]
Procurement Contract and Research Agreements	Procurement Contract and Research Agreements Procurement Contract On May 13, 2011, the Company signed a contract with BARDA (the “BARDA Contract”) pursuant to which SIGA agreed to deliver two million courses of Arestvyr to the Strategic Stockpile. The base contract, worth approximately $463 million, includes $54 million related to development and supportive activities and contains various options to be exercised at BARDA’s discretion. The period of performance for development and supportive activities runs until 2020. As originally issued, the BARDA Contract included an option for the purchase of up to 12 million additional courses of Arestvyr; however, following a protest by a competitor of the Company, BARDA issued a contract modification on June 24, 2011 pursuant to which it deleted the option to purchase the additional courses. Under the BARDA Contract as modified, BARDA has agreed to buy from SIGA 1.7 million courses of Arestvyr. Additionally, SIGA will contribute to BARDA 300,000 courses manufactured primarily using federal funds provided by the U.S. Department of Health and Human Services (“HHS”) under prior development contracts. The BARDA Contract as modified also contains options that will permit SIGA to continue its work on pediatric and geriatric versions of the drug as well as use Arestvyr for smallpox prophylaxis. As described in Note 14, the amount of profits SIGA will retain pursuant to the BARDA Contract may be adversely affected by the outcome of PharmAthene’s action against SIGA. In the fourth quarter of 2011, SIGA received approximately $41.0 million in advance payments under the BARDA Contract. In the fourth quarter of 2012, SIGA received FDA concurrence with respect to its product labeling strategy in accordance with the BARDA Contract and received the related milestone payment of approximately $12.3 million. In May 2013, after BARDA notified SIGA that the Company had successfully completed the milestone requirements for the Final Drug Product Commercial Validation batches, the Company received a milestone payment of approximately $8.2 million. In 2013, in addition to the $8.2 million milestone payment, the Company received approximately $101.5 million from BARDA, of which approximately $96.1 million was for the delivery of 725,000 courses of Arestvyr and approximately $5.4 million was for reimbursement related to research and development services and supportive activities. The BARDA Contract is a multiple deliverable arrangement comprising delivery of courses and covered research and development activities. The BARDA Contract provides certain product replacement rights with respect to delivered courses. For this reason, recognition of revenue that might otherwise occur upon delivery of courses is expected to be deferred until the Company’s obligations related to potential replacement of delivered courses are satisfied. The Company assessed the selling price for each of the aforementioned deliverables - research and development activities and drug product. The selling price of certain reimbursed research and development services was determined by reference to existing and past research and development grants and contracts between the Company and various government agencies. The selling price of drug product was determined by reference to other Companies’ sales of drug products such as antiviral therapeutics, orphan drugs and drugs with potential life-saving impact similar to Arestvyr, including products delivered to the Strategic Stockpile. The Company has recognized revenue for reimbursement of certain BARDA Contract research and development services. Cash inflows related to delivery of courses will continue to be recorded as deferred revenue. In addition, direct costs incurred by the Company to fulfill the delivery of courses under the BARDA Contract are being deferred and will be recognized as expenses over the same period that the related deferred revenue is recognized as revenue. As of December 31, 2013 and 2012, deferred direct costs under the BARDA Contract of approximately $22.6 million and $2.8 million, respectively, are included in deferred costs on the consolidated balance sheets. As of December 31, 2013, the Company recorded $162.2 million of deferred revenue for the delivery of approximately 725,000 courses of Arestvyr to the Strategic Stockpile and certain research and development services provided as part of the BARDA Contract. For the year ended December 31, 2013, revenue from reimbursed research and development was $1.2 million. In addition to the 725,000 courses of Arestvyr that were accepted by the Strategic Stockpile and resulted in payment, the Company also delivered 195,000 courses at no cost to BARDA in accordance with the BARDA Contract, of which 62,000 were accepted in 2013 and 133,000 were accepted in 2014, In February 2014, the Company delivered approximately 256,000 courses of Arestvyr accepted into the Strategic Stockpile, of which approximately 192,000 courses will be invoiced for $25.4 million and the remainder will be at no cost to BARDA. Research Agreements The Company obtains funding from the contracts and grants it obtains from various agencies of the U.S. Government to support its research and development activities. Currently, the Company has one contract and two grants with varying expiration dates through July 2016 that provide for potential future aggregate research and development funding for specific projects of approximately $13.9 million. This amount includes, among other things, options that may or may not be exercised at the U.S. government’s discretion. Moreover, the contract and grants contain customary terms and conditions including the U.S. Government’s right to terminate or restructure a grant for convenience at any time.