Earnings Call Transcript - SIGA Q4 2021

Operator, Operator

Welcome to the SIGA Business Update Call. Before we turn the call over to SIGA management, please note that any forward-looking statements made during this call are based on management's current expectations and observations and are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statements. SIGA does not undertake any obligation to update publicly any forward-looking statements to reflect events or changed circumstances after this call. For a discussion of factors that could cause results to differ, please see the company's filings with the Securities and Exchange Commission, including, without limitation, the company's Annual Report on Form 10-K for the year ended December 31, 2021, and subsequent reports on Form 10-Q and Form 8-K.

Phillip Gomez, CEO

Thank you for taking the time to join today's call. Today I'm joined by Dan Luckshire, our CFO. We are pleased to have this opportunity to provide a business and financial update to our shareholders. We'll then be happy to take questions. We had a strong fourth quarter in which we delivered approximately $113 million of oral TPOXX to the U.S. government under the 19C BARDA contract. Fourth quarter deliveries to the U.S. government build upon international sales growth we achieved in the first nine months of the year. For 2021, international sales grew to approximately $13 million from approximately $2 million in 2020. In total, revenues in 2021 were approximately $134 million, resulting in approximately $89 million of pre-tax operating income for the year. This performance is attributable to a lot of hard work from the entire SIGA team, especially our supply chain team, as well as our supply chain partners at TPI Pharma Services. Timely delivery involves a team effort in which we collectively work through many challenges. I would also like to thank our partners at BARDA and the Strategic National Stockpile for working so closely with us to deliver product at the end of the year. As we discussed in November, supply chain challenges are an issue for many industries, including the pharmaceutical industry. Our team has been working continuously with our supply chain partners to manage and mitigate issues when they arise, as well as to identify risks and mitigate such risks. We have had success to date in managing issues, but it is important to note that challenges and risks persist. As such, we will continue to take proactive steps to identify and manage risk in order to put us in the best position to meet future procurement demand. As a historical note, the U.S.-based supply chain that we built many years ago and continue to use today was purposely centered in the U.S. as a proactive risk management tool. I believe this strategy has served us well in navigating recent supply chain challenges. Looking forward with respect to procurement activity, I'd like to talk about the next steps with the BARDA 19C contract. As a reminder, we built the initial U.S. government stockpile of TPOXX with final drug product that was manufactured in the years 2013, 2014, 2016, and 2017. When BARDA issued the 19C contract in 2018, it contained former procurement options for oral TPOXX, in which each option was valued at approximately $112.5 million. Oral TPOXX has a seven-year shelf life. And as we saw in 2020 and 2021, BARDA exercised procurement options as stockpiled products that had been manufactured in 2013 and 2014 expired. In substance, we replenished the U.S. government stockpile with deliveries of oral TPOXX in those calendar years. We anticipate that the remaining two procurement options for oral TPOXX, as well as the intravenous, or IV, TPOXX procurement options will be exercised over the next three years, given that we expect significant product expirations over the next three years. These option exercises would generate approximately $300 million of revenue. The exact timing of such option exercises remains to be determined. I will note that since final drug product was not manufactured in 2015, the U.S. government stockpile does not have scheduled expirations this year. As such, there is no immediate need for the U.S. government to secure deliveries in 2022 to replenish expiration. Having said that, we have been working with BARDA and the ASPR to exercise options further in advance and we'll continue to work on a longer-term 10-year contract with annual options to smooth out deliveries and better manage budgets in the supply chain. More importantly, we are focused on ensuring that the requirements for Post-Exposure Prophylactic or PEP. The PEP use of TPOXX are also considered by the US government in any new contract. Given the expected 28-day course of treatment for PEP, the existing stockpile would only be able to protect half the number of Americans in the event of an outbreak. Consequently, as I will discuss more momentarily, we strongly believe that a reevaluation of the size of the stockpile is essential. In sum, we expect significant procurement by the US government over the next three years with the timing among the upcoming calendar years to be determined. In terms of the ultimate sizing of the stockpile, we believe that clinical results from the PEP program could play an important role. And as noted in the prior investor call, we expect to receive immunogenicity data from a PEP clinical trial later this year. Substantial progress in the PEP program is timely and that we believe that the COVID-19 pandemic has highlighted the importance of having access to broad, active antiviral drugs, especially those that could be used prophylactically. I will note that the US government has contracted to purchase approximately seven million doses of COVID monoclonal antibodies and approximately 30 million courses of COVID antiviral drugs for over $17 billion, highlighting from our perspective, that the current stockpile of TPOXX and the smallpox outbreak would not be nearly sufficient to treat all those who would need care. Before I shift to the topic of international procurement, I would like to note that we have begun making deliveries of our intravenous product to the US government. As a reminder, we have 20,000 courses ordered for IV final drug product and our base 19C contract, and we expect to deliver up to approximately 18,000 courses this year, which would equate to approximately $7 million of revenue. As a reminder, the remaining procurement options for IV TPOXX under the 19C contract have a total value of approximately $77 million. Please note that on the regulatory front for IV TPOXX, our FDA PDUFA date for the NDA is May 28, 2022. We had one extension to provide additional data to the FDA and we believe that review is going well, as we reach the final stages. Looking forward with respect to International sales, we believe that the Public Health Agency of Canada or PHAC, proposed amendment to the TPOXX contract lays the groundwork for approximately $12 million of product deliveries to PHAC in 2022. We are also targeting a delivery to the Canadian Department of National Defense CDND, $3 million to $4 million of oral TPOXX in 2022. Beyond Canada, we continue to target an initial order from a new jurisdiction for approximately $3 million. This target country has been noted in prior investor calls. A customer remains focused on a purchase, and the negotiations are frustratingly slow and at this juncture is centered on final terms, conditions, and logistics. In Europe, we believe the EMA regulatory approval announced in January, which includes a broader indication for treatment of not only smallpox but monkeypox, cowpox, and complications from immunization with vaccinia, will be an important milestone as some EU countries would not discuss or advance potential procurement opportunities until we had obtained EMA approval. We are working hard with our partner Meridian to build on the international sales growth of 2021, especially with regard to marketing in Europe but also key jurisdictions in Asia and the Middle East. I would like to note that meetings with potential customers have picked up recently as the COVID-19 pandemic has waned, with recent meetings being held in Europe, the Middle East, and Asia to discuss sales opportunities. We are monitoring the unfortunate events in Ukraine, which may have an impact on our potential customers in Europe. The war could be a distraction for them as they focus on the immediate implications. Still, it is also a reminder of the broad threat Europe faces. I would also note there was a press report from Russia that they completed clinical testing of their candidate smallpox antiviral treatment in December of 2021. In the context of international activity, I would also like to touch on our oncolytic virus collaboration initiative, which had an international bent given the collaboration activity we have announced. As we have described previously, several companies are developing cancer therapies that use the orthopox vaccinia virus, which historically was used in the smallpox vaccine. While there have not been any products approved in vaccinia to date, the use of TPOXX and vaccinia potentially provides an opportunity for higher dosing or more systemic routes of administration. The collaboration we announced with BioArchitect in January focuses on preclinical studies, where their product is TPOXX. Long term, if collaborations with companies like BioArchitect are ultimately successful, it could open up new commercial markets for TPOXX. Finally, before I turn the call over to Dan for a financial update, I would like to provide an update on our collaboration with Cipla. BARDA announced at the 2021 World Antimicrobial Resistance Congress an intent to procure and stockpile three additional novel antibiotics by 2030 as part of the new 4/30 Initiative. They have completed one contract with Paratek, which they are counting as the first award under this initiative, and they intend to issue three additional RFPs for the other three antibiotics. The second RFP was released on January 20 and was designated as a small business set aside. A small business set aside is essentially required when two or more small businesses meet the criteria to complete the work contemplated in a federal contract. BARDA has indicated they did not anticipate that the third RFP will be a small business set aside, but there can be no guarantee that that will be the case. Neither SIGA nor Cipla qualify as small businesses under the criteria of the RFP, and we have indicated our opposition to the small business set aside with BARDA. We believe the small business set aside is unfortunate given the past bankruptcies that have plagued novel antibiotic development and advancements in the field. Limiting the competition for the second RFP does not encourage larger sustainable companies to support the mission of BARDA in antibiotics. We will continue to monitor development around this RFP and future ones with our partner Cipla. I'll now pass the call over to Dan, who will provide a financial update.

Dan Luckshire, CFO

Thanks, Phil. For the 12 months ended December 31, 2021, SIGA's revenue was approximately $134 million, of which approximately $113 million relates to fourth quarter deliveries of oral TPOXX to the US government under the 19C BARDA contract. Approximately $13 million of full year 2021 revenue relates to International sales. This amount represents an increase of approximately $10 million or more than fourfold over 2020 levels. The remainder of 2021 revenue mostly relates to research and development activity. Pre-tax operating income, which excludes interest income, taxes, and adjustments to the fair value of the warrant, was approximately $89 million for 2021. Net income for 2021 was approximately $69 million and fully diluted income per share was $0.91. At December 31, 2021, the cash balance for the company was approximately $103 million. Additionally, please note that with the company's delivery of approximately $80 million of oral TPOXX to the US government in December, the company's balance sheet as of December 31, 2021, includes an $80 million receivable for such delivery, as well as a $19 million tax liability, primarily in connection with taxable income generated by deliveries of oral TPOXX to the US government in the fourth quarter. During the fourth quarter, SIGA repurchased approximately 760,000 shares of its common stock for approximately $5.8 million. For the full year 2021, the company repurchased approximately 3.8 million shares of its common stock for approximately $26 million, which amounts to approximately 5% of shares outstanding as of the start of the year. This concludes the financial update. At this point, I will turn the call back to Phil.

Phillip Gomez, CEO

Thanks, Dan. Before we turn to Q&A, I would like to reiterate a few points that have been made in the past in support of our view that SIGA offers an attractive combination of existing revenue streams that are currently generating strong financial results, complemented by organic growth initiatives that hold significant potential when viewed collectively. First, I'd like to highlight that the ongoing international sales growth initiative is progressing in a value-creating manner. In 2020, this initiative generated our first international sales and $2 million of revenue. In 2021, this initiative has generated approximately $13 million of revenue. While, as noted many times before, progress on this front is expected to be lumpy and uneven given the national market for biodefense products is not well developed, we believe that a meaningful international market is gradually taking shape. Second, I want to reiterate that the PEP-based development program represents a growth initiative in that it would provide scientific and regulatory support for any stockpile expansion. As stated earlier, we believe the current size of the stockpile TPOXX and a smallpox outbreak would not be sufficient to treat all of those who would need care. If we've learned anything from COVID, that certainly appears to be the case. Third, we will be focused on transitioning our US contract to a long-term SNS contract that focuses on appropriate size requirements for the TPOXX stockpile as well as smoothing of the annual delivery, which will be critical to supply chain planning and financial predictability. Fourth, our portfolio of growth initiatives is diversified including ongoing efforts to broaden the US customer base to potentially include the US Department of Defense and others. And fifth, we continue to pursue and support oncology collaborations and other strategies that can open new markets for TPOXX. As mentioned earlier, we believe these growth initiatives when viewed collectively have the potential for significant value creation. And one last point, as we generate cash over time through existing contracts and organic growth initiatives, we will continue to examine the best use of our cash, including share buybacks as well as potential investments or acquisitions that provide an opportunity to grow earnings, diversify our business, and leverage our successful platform. Since the beginning of our share buyback program in 2020, we have purchased approximately $55 million of stock, as of December 31, 2021, or approximately 10% of our outstanding shares. This concludes our prepared remarks, and we will now begin the Q&A session.

Operator, Operator

We will now start the question-and-answer session. Our first question comes from Joaquin Horton, a private investor. Please go ahead with your question.

Unidentified Analyst, Analyst

Hey, Phil. I've got a question about Meridian. How long will we be working with Meridian?

Phillip Gomez, CEO

So we signed the agreement with Meridian, and I believe in 2019. So I believe we're coming up on the third year of that.

Unidentified Analyst, Analyst

Third year, okay. Have you noticed any change since there was a change in management when Pfizer sold to a buyout group?

Phillip Gomez, CEO

So we continue to work with Meridian, Joaquin, and we have been pleased with their focus on the sales of TPOXX as they have ramped up post-EMA approval. So I would say we continue to have an excellent relationship with Meridian and see the same exact team that we had at Pfizer coming across and focusing on the sales currently with TPOXX.

Unidentified Analyst, Analyst

Okay. How many countries have you spoken to because of Meridian? You don’t have to name them, just the number would be fine.

Phillip Gomez, CEO

I don't have a number at the top of my head. I would say certainly more than 10. I'm trying to think about a rough estimate; but as we said when we announced it, I think they have sold to more than 30 countries worldwide. So there may be conversations that I'm forgetting, but it's certainly been quite a number of countries and potential customers that we wouldn't have access to without the historical relationships that Meridian has had.

Unidentified Analyst, Analyst

Okay. Regarding the PEP program you are currently testing, when can we expect some top-line data to come in?

Phillip Gomez, CEO

I believe that the data will be available late this year. One of the challenges we’re facing is related to the studies we are conducting, particularly one involving a vaccine, as many COVID vaccine studies have been completed. Currently, initiating a vaccine study to access clinical sites, activate them, and recruit participants has presented some early difficulties. We are implementing several strategies to speed up this process, but I anticipate that the data will not be ready until late in the year. This timeframe is dependent on successfully recruiting volunteers, clarifying that it’s for a smallpox vaccine rather than a COVID vaccine, and ultimately, gathering the necessary data. At this point, our main focus is on recruiting and ensuring we enlist volunteers as quickly as possible.

Unidentified Analyst, Analyst

Okay. A question for Dan. How long ago, Dan, did we do the deal with Piper to build the company out that $60 million loan or $80 million loan?

Dan Luckshire, CFO

That loan was done in 2016, and we paid it back in 2020.

Unidentified Analyst, Analyst

Okay. We worked with Piper at the time, right?

Dan Luckshire, CFO

Yes, we did work with Piper on that deal.

Unidentified Analyst, Analyst

So was Leerink involved in a fairness opinion on that deal, or were they involved in some other deal that we worked with?

Dan Luckshire, CFO

We worked with them on the sale of the PRV.

Unidentified Analyst, Analyst

I have a question regarding your long tenure of over 10 years. I'm having difficulty understanding why we don't yet have any coverage from Wall Street. I know you've collaborated with a few firms and that many say they're not willing to engage until there's investment banking available. However, there must be an opportunity out there. Do you have any insights?

Dan Luckshire, CFO

Yes, we are still actively seeking coverage. The reason for the current lack of sell-side coverage is that the model has evolved over the years. We acknowledge that we currently have limited financing work, which is usually a significant factor in attracting coverage. While you mentioned the debt deal, it was a private transaction rather than a public financing, which makes a difference. We are actively seeking research coverage and will keep focusing on obtaining quality research coverage.

Phillip Gomez, CEO

And Joaquin, I appreciate all your questions. Thanks for the update today. As you know, Joaquin, we also have the Edison Group which publishes their research which also provides a nice reference for investors if you'd like to take a look at the analysis from the outside in. So I just wanted to thank you for those questions today. Operator we can take the next call.

Operator, Operator

Our next question comes from Ken Mastek with Edison Group. Please go ahead with your question.

Unidentified Analyst, Analyst

Yes. Thank you. I have several questions. First, you mentioned Ukraine and developments there. Can you share with us kind of your thoughts on how investors should view or interpret the impact on SIGA of all that's going on with the situation and the development work on the smallpox antiviral issues?

Phillip Gomez, CEO

Thanks, Ken. I appreciate the question. And as I said I think we're waiting to see broadly how it shakes out. I think there'll certainly be a little disruption in the short-term, but it's a reminder that nation-states certainly can have actions that aren't anticipated and do surprise folks, and thinking about what threats are out there when they may happen. One of the things I did mention as well is that in February there was a translated press report of Russia updating the status of their smallpox antiviral drug. That's something that they had been developing over the years that had been reported in the WHO by Annual Working Group meeting where scientists from around the world talk about research and development they're doing on products that might be able to mitigate the impact of the smallpox attack. It targets the same P-37 protein as our drug did. It is a different drug, but they certainly focus on development, and they announced in December of 2021 that they finished the clinical trial. So it's a reminder that many countries worry about these threats and want to make sure that they have products to mitigate it. So I think that's an important reminder for our potential customers in Europe, the Middle East, and Asia that this is a threat that most large countries take seriously. So I appreciate the question.

Unidentified Analyst, Analyst

Sure. Thank you. Switching gears, Europe definitely seems like it's an area that is going to be good for future expansion. Can you give us some color on the next steps in terms of getting contract awards and things like that?

Phillip Gomez, CEO

Yes, absolutely. There are numerous discussions taking place with customers, particularly in Europe, including conversations with public health and military officials regarding their needs. These discussions typically lead to a governance body that decides which products to purchase, followed by a procurement process that requires funding beforehand. While each country has its own procedures for these steps, the approval from EMA has facilitated broader discussions that allow us to move forward.

Unidentified Analyst, Analyst

Great. And one last question. When do you expect that a new procurement contract with SNS would replace the current BARDA contract you have now?

Phillip Gomez, CEO

Yes. So we are in discussions, and we've started talking to the US government about that. From a pragmatic standpoint, we talked about 19C and it's always helpful to force functional with the government to make sure that we have clear deadlines. The force of function for us is the BARDA 19C contract, and in three years, we will have exercised all its options and resupply. So certainly that's a forcing function that we need to get it done before then. But we're focused on getting it done certainly as soon as we can. Post-COVID, there's been some reorganization within the ASPR within the US government does that. They just named a permanent head of the Strategic National Stockpile. So that's something that needed to get put in place. So we'll have the organization to be able to talk to. And so we'll be focusing on those conversations. The reality is, as I said, there were no expiries this year. So the probability of us being able to do a lot of deliveries this calendar year is not high, but we will continue to push to get options exercised in advance and deliver product on a more consistent basis. But it is going to be a process, Ken, that we'll go through to be able to do that.

Unidentified Analyst, Analyst

Great. Thank you. That’s all the questions I have. Thank you for your time.

Operator, Operator

And our next question comes from the line of Teddy Green with SIGA Technologies. Please proceed with your question.

Unidentified Analyst, Analyst

Hey, Phil and Dan, I am not with SIGA Technologies, but I'm a private investor.

Phillip Gomez, CEO

That was a surprise.

Unidentified Analyst, Analyst

Yes. There was a good quarter. Let's get right to it. I have some questions. So let's talk about the Canadian orders for this year. I heard you say if you could just repeat that for me. And regarding the Department of Defense, you're expecting how much product delivered in 2022?

Phillip Gomez, CEO

Dan I'll let you provide that but I can go back to the comment that you have in front of you, Dan.

Dan Luckshire, CFO

Yes, certainly. So the Department of Defense, the Canadian Department of Defense we're looking at 4,000 courses, which is a value of about $4 million. And then there's the public health component of that value we're looking – we're targeting is $12 million.

Unidentified Analyst, Analyst

Yes, yes. I was looking at the – actually I'm on the Canadian website right now, looking at the Public Health Agency of Canada, and it looks like they're going to complete the firm – the firm year three for 7,400 courses. And then they obviously, in January, they requested another $5.5 million worth of product. So it looks like they've increased the actual total contract value to 22.752. So do you confirm the way that I'm reading that? So the firm year three will be delivered to 7,400 and then roughly 5,900 courses to make it a total of 22.7 total contract value now, and that will be delivered to spread out through 2022?

Dan Luckshire, CFO

Yes. So exactly. And I would say it's – we'll do it as soon as possible. So I would anticipate one delivery to Public Health Canada and other delivery at military, and hopefully, we can efficiently do it around the same time period for both of them. But you're correct in that essentially what you're seeing is those are the two deliveries we're targeting is what you just specified. And then, when you talked about the total contract value, that sort of takes the amounts you talked about for this year as well as the amounts we've delivered in 2020 and 2021, that gets you to that total.

Unidentified Analyst, Analyst

Right.

Dan Luckshire, CFO

There are still some announced leftovers that are options. So what they’re putting on that paper where that posting is really the firm commitments. There are options also behind that too.

Unidentified Analyst, Analyst

Yeah, that's why it was increased, because they're moving into a bit of the options, at least for PHAC, right?

Dan Luckshire, CFO

Right.

Phillip Gomez, CEO

And I did want to provide a little color on the posting. I know you track those. And you've asked about that previously. So, they did post on the website which entered into a conversation for us about when we can deliver it. I wanted to provide a little more color around a new jurisdiction. So we got Health Canada approval late last year. One of the series of challenges we had with the supply chain, and I won't bore everyone with all the challenges we had, was simply getting paper for labels that go on drug packaging. And that area is one of the reasons we very much thank PCI Pharma Services, our packager, because they did a lot of work to be able to do that. And our new Canadian packaging actually is different than US packaging, because it includes both English and French language. So the labels have to be bigger. We have to do a different packaging configuration. So when Canada ordered, we have to have a conversation with them about when we will have the material to package. They obviously have constraints about when deliveries can happen, given fiscal years, et cetera. So it is a conversation. So I wouldn't want some of the things when it comes out on the Canadian website, that's a sign field order that is already gone down the system. There's actually a conversation that happens about how we can deliver it. We've provided the update on what we expect this year, working very closely with them. They're great partners to work with. But I did want to add that because I know you've had that question about what those websites actually mean as they're updated.

Unidentified Analyst, Analyst

Okay, great. I appreciate that information. So Dan, back to you. How should I anticipate deliveries for the Department of Defense and the initial delivery? Also, regarding PHAC, it could be around $6.9 million if they deliver the 7,400 from the Pharmaceutical Industry. Can we expect that in the first quarter, or should I look for it in the second quarter? Do you have a good sense of that?

Dan Luckshire, CFO

We don’t provide specific guidance on that, but the fact that it has been posted shows we are actively working on it. We have inventory being built now. Recently, we received approval in Canada, which means there are some additional steps involved in delivering an approved product in Canada compared to what we had to do before the approval. We will work through those extra steps and aim to deliver as soon as possible. The posting confirms our commitment to this process.

Unidentified Analyst, Analyst

Understood.

Dan Luckshire, CFO

...we're making good progress on that.

Unidentified Analyst, Analyst

Right. And also just looking at the inventory that you carry on the balance sheet also I'm assuming that that product is ready. I mean you want to deliver this as soon as you can.

Dan Luckshire, CFO

We see it as advantageous for the client in terms of being responsive, and it’s also financially beneficial for us. I believe everyone is in agreement on this approach.

Unidentified Analyst, Analyst

Okay. Sounds great.

Dan Luckshire, CFO

...as soon as possible.

Unidentified Analyst, Analyst

Okay. And then, Dan, another question for you, operating expenses for 2022, how should we look at them? Should it be similar to what you reported for 2021 on a quarterly basis? I mean, it could be lumpy. Obviously, depending on when the product is delivered, but are you looking at kind of a similar amount for operating expenses for 2022?

Dan Luckshire, CFO

Yes. Regarding expenses, we do not provide guidance. Historically, we have maintained a very efficient level. I prefer not to comment on specific numbers since we are in an inflationary environment and it is early in the year. However, I can say that we focus on strategic investments in infrastructure. We do not anticipate significant changes to our infrastructure, but we will need to manage the challenges that many companies face in a climate where costs are rising quickly.

Unidentified Analyst, Analyst

Okay. I appreciate it. I understand where you're coming from and fair enough. Okay. Phil, a little clarity on the 19C contract. The way that I understand it and looking at delivery schedules that the original 11C contract. We have $300 million worth of product remaining on the 19C contract. Is that correct?

Phillip Gomez, CEO

Yes.

Unidentified Analyst, Analyst

Okay. And so can you just clarify again to me, my understanding is that you did deliver product in 2015, 373,000 courses at 1,200 milligrams which would expire this year. Am I off on that?

Phillip Gomez, CEO

So I described it as when the product was manufactured, so you are correct. We did make deliveries in 2015, but they were manufactured the year previously. So what I updated on the call was the expiration schedule, and there were no expirations seven years after 2015.

Unidentified Analyst, Analyst

Okay. So then they need to replenish still because to me the action that BARDA has shown is that they want to exactly maintain a proper stockpile of TPOXX. So, they do need to replenish over the next two years, and that's also in the 10-K of the company that you do have expiring product that has to be replenished. So I should be looking for a delivery this year and a delivery next year of oral. I'm not talking about IV. Is that correct?

Phillip Gomez, CEO

There are expiries over the next three years. What I was saying was that I do not anticipate expire this year, but there are substantial ones next year. And so we will work to get those deliveries as soon as possible, so we don't have to do a huge amount in a very short amount of time. It would be much easier to be able to spread those out. But the reality is it's not this year, so I can't say there's a forcing function for the government to absolutely have to be that.

Unidentified Analyst, Analyst

Okay. So then it would just be a double amount the following years what you're saying?

Dan Luckshire, CFO

What we have indicated in the 10-K is that over the next three years, we anticipate expirations of 940,000 courses. On the call, we mentioned that there will be no expirations in 2022, so essentially, the expirations will be focused in 2023 and 2024.

Unidentified Analyst, Analyst

Okay. Now does it make sense? Yes, go ahead.

Dan Luckshire, CFO

Yeah. Thank you. And just to follow up on that, yes, we couldn't have said it better. So yes, we expect expirations in '23 and '24.

Phillip Gomez, CEO

Absolutely. That's a key focus for us. It's something that we always push on, which is that we want to be able to smooth out. We want to be able to provide product in a more consistent way, and we also want to have a longer lead time, so that we're able to actually do that in partnership with them. So yes, that's absolutely a focus for us.

Unidentified Analyst, Analyst

Okay. And then you said you will be delivering IV product this year, and this will be final drug product, correct?

Phillip Gomez, CEO

That's correct.

Unidentified Analyst, Analyst

Okay. And you said around 18,000 courses of that?

Phillip Gomez, CEO

That's correct.

Unidentified Analyst, Analyst

Okay. Is the cost for an IV course approximately $400?

Phillip Gomez, CEO

Yes, if you calculate the order, that's approximately the expected amount, which includes both drug substance that we had previously delivered and the final drug products. I want to highlight that for this year, under the base contract 19C, we have an initial order of 20,000 courses, and we'll be delivering 18,000 courses. During our initial campaign with Patheon, there was a batch failure due to a facility issue that was not related to TPOXX. We will complete the remaining courses of the 20,000 as we resume manufacturing in the next production schedule for the intravenous product, which we have coordinated with BARDA to ensure they are on board with this approach. It is much more efficient to conduct a longer campaign rather than trying to produce one more batch in isolation.

Unidentified Analyst, Analyst

Right. Right. And the bulk drug substance that you had already provided under the base contract was like what, $3.2 million I think, but it was deferred revenue, correct?

Dan Luckshire, CFO

Correct. Yes.

Unidentified Analyst, Analyst

Okay. Okay. And so, once the final drug product is delivered, that will be deferred revenue until you actually get FDA approvals? And how should I look at it?

Dan Luckshire, CFO

No. For this it would be revenue.

Unidentified Analyst, Analyst

Okay. Okay.

Dan Luckshire, CFO

In the prior contract, the old contract we had that deferral until approval because of conditions within the contract. We don't have the same conditions in the current contract, so.

Unidentified Analyst, Analyst

Okay. Excellent. Okay. And then one final question. I see a lot of cash on the balance sheet and a lot more that's going to be coming on. And so, I heard you say that obviously we have a second buyback going on. You've talked about potential acquisitions. Have you discussed with the Board of Directors a dividend policy to return cash to the shareholders?

Phillip Gomez, CEO

So we absolutely look at all potential uses of cash. We think about share buybacks. We think about dividends. We think about acquisitions. So there's always a broad discussion of all the options that are out there. So absolutely.

Unidentified Analyst, Analyst

I haven't really heard you mention this before. I often see you discuss buybacks and potential acquisitions. Are you currently focused on an accretive acquisition? Given the decline in the biotech sector, some things may look more appealing, but it remains a highly competitive environment for finding such acquisitions. I'm curious about the company's stance on a potential dividend policy. Is it something being considered, or is it less important than looking for an accretive acquisition? The cash belongs to us, the shareholders who own this company, right?

Phillip Gomez, CEO

Yes, you are. The shareholders certainly own the company and I would say we look at all of those options and have continuing discussions about it. I would also agree with their comment on accretive acquisitions. They certainly are difficult to identify. And as I've said several times on these calls, we don't want to set some artificial target that we're going to absolutely do an acquisition because we're going to have to be opportunistic about it. I do think we've had a very robust share buyback program. As we've said, we've repurchased quite a number of shares over the past couple of years including 10% of the shares. And certainly we will continue to look at ways to return cash to shareholders and create shareholder value. So your point is very well taken. We certainly think about all those types of strategies and we'll continue to do so. I do think we want to have the optionality to be able to do all of those things. So we're not rushing into one strategy to the next. We've had a share buyback program. We've been very active in it as we updated today, and we'll continue to look at all those options. So absolutely.

Unidentified Analyst, Analyst

I understand your concern regarding the company's buyback strategy. It's frustrating to see the stock price decrease while we generate more cash from the 19C contract, which results in a drop in enterprise value despite improving business fundamentals. I share your frustration. Given the current depressed stock price, I'm curious if the company plans to take a more proactive approach. If the price continues to drop significantly, will there be a chance to be more aggressive? Are there efforts underway to identify shareholders willing to sell their stock?

Phillip Gomez, CEO

So, as you mentioned, there are many regulations surrounding share buybacks and their implementation. We have had a strong share buyback program over the past few years, and we're exploring all options to maximize that program. Additionally, I want to reiterate our goals for growing this business. We have certainly built up cash reserves, but it's also crucial to focus on achieving predictability in our earnings as I engage with both potential and current shareholders. This theme revolves around our cash flows, which are currently quite variable. As government decisions are made, we anticipate gaining more predictability, which will help illustrate the significant value of our platform to both our customers, who receive an essential product, and our shareholders. Another aspect that investors seek clarity on is our international sales. Unfortunately, there is no clear roadmap for this, as there are no comparable products to TPOXX that have been sold to governments, including their timelines and market penetration. We are working towards gathering data and insights that will help us better estimate and provide predictability regarding the international market size. I believe this will further clarify the potential growth of our company and our ability to deliver value to everyone involved. I genuinely appreciate your question; our team is committed to continually enhancing the financial performance of the company and effectively communicating its strengths. Thank you for your inquiries.

Unidentified Analyst, Analyst

Okay. Thank you very much.

Operator, Operator

And we have reached the end of the question-and-answer session. And I'll now turn the call back over to Phillip Gomez for closing remarks.

Phillip Gomez, CEO

So, I'd like to thank everybody for joining today. It really was a tremendous year last year for SIGA. It was also during the pandemic. We had a lot of people working remotely. I'd like to specifically thank Dennis Hruby and his team in the regulatory group that got us the approvals in Health Canada. And Europe, Toby Bolken, who's our Chief Supply Chain Officer; and Dan and the rest of the team spent a lot of time ensuring we found ways to get product delivered and continue to execute on the plans that we had last year to meet our objectives. So I appreciate everybody joining today. Please have a great day. Thanks.

Operator, Operator

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.