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PharmAthene Reports Third Quarter 2016
Financial and Operational Results
ANNAPOLIS, MD - November
4, 2016 - PharmAthene, Inc. (NYSE MKT: PIP), a biodefense company developing medical countermeasures against anthrax,
today reported its financial and operational results for the third quarter of 2016.
PharmAthene received $122.5 million from
SIGA Technologies, Inc. during the nine months ended September 30, 2016, comprised of principle payments of $115 million (which amount is creditable
against final satisfaction of the judgment in PharmAthene's favor and is not refundable), and $7.5 million of payments calculated by SIGA
as interest on the judgment. On October 6, 2016, SIGA paid PharmAthene an additional $10 million. Following this payment, $83.7
million remains due under the total award amount of approximately $208.7 million.
On July 20, 2016, PharmAthene and SIGA filed a Joint Motion which sought approval of amendments to SIGA's Reorganization Plan to extend the deadline
for SIGA to satisfy the judgment owed to PharmAthene from October 19, 2016 to November 30, 2016, conditioned on SIGA's payment
to PharmAthene of $100 million in aggregate (including prior payments of principal and interest) on or prior to October 19, 2016,
such amount to be applied against PharmAthene's judgment. Interest on any unpaid balance will continue to accrue at 8.75%
per year and be paid monthly to PharmAthene by SIGA. The Joint Motion was approved by the Bankruptcy Court on August 18, 2016.
PharmAthene anticipates that eventual receipt
of the full award from SIGA could generate substantial taxable income, which PharmAthene expects to partially offset through its
tax NOL carry forwards. The Company filed its tax returns during the third quarter of 2016 for the tax year ended December 31,
2015. On that return, it recognized a worthless stock deduction and bad debt deduction related to its investment in its UK subsidiary
of approximately $13.9 million and $4.0 million, respectively. The NOL reported for 2015 was approximately $21.5 million which,
when added to the losses carried forward from previous years, gives the Company approximately $176.1 million in cumulative NOLs
available to offset the income received related to the SIGA settlement. As of the end of the third quarter of 2016, the Company
estimates that it has used approximately $114 million of the $176.1 million in cumulative NOLs.
For the three months ended September
30, 2016, PharmAthene recognized revenue of $1.0 million compared to $1.2 million for the corresponding period in 2015. This revenue
was recognized under the Company's contract with the NIAID for the development of a next generation lyophilized anthrax vaccine.
Research and development expenses in the
third quarter of 2016 and 2015 were $1.2 million and $1.1 million, respectively. These expenses resulted from research and development
activities related primarily to the Company's anthrax vaccine programs.
Expenses associated with general and administrative
functions were $3.7 million in the third quarter of 2016 compared to $1.2 million in the third quarter of 2015. The $2.5 million
increase over the corresponding period in 2015 was primarily due to an increase in stock compensation expense and expenses related
to the preparation of the proposal and protest to DHHS in response to the request for a next generation anthrax vaccine.
For the third quarter of 2016, the Company's
net income was $109.2 million, or $1.67 per diluted share, compared to net loss of $1.3 million, or $(0.02) per diluted share,
for the corresponding period in 2015.
Cash and short term investments at the
end of the third quarter of 2016 were $135.9 million compared to a cash balance of $15.6 million at the end of fiscal year 2015.
If SIGA pays PharmAthene cash in full on
the judgment, and barring any unexpected material events, PharmAthene intends to distribute at least 90% of the after tax net cash
proceeds of such payment to its shareholders. The timing and form of such a potential distribution will depend upon PharmAthene's
analysis of its current situation, applicable corporate statutes relating to distributions, and the economic consequences to its
PharmAthene is a biodefense company engaged
in the development of next generation medical countermeasures against biological threats. The Company's development portfolio includes
one next generation anthrax vaccine that is intended to improve protection while having favorable dosage and storage requirements
compared to other anthrax vaccines.
Forward-Looking Statement Disclaimer
Except for the historical information presented
herein, matters discussed may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995 that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future
results, performance or achievements expressed or implied by such statements. Statements that are not historical facts, including
statements preceded by, followed by, or that include the words "potential"; "believe"; "anticipate";
"intend"; "plan"; "expect"; "estimate"; "could"; "may"; "should";
"will"; "project"; or similar statements are forward-looking statements. Risks and uncertainties include risks
associated with our ability to fully collect a money judgment from SIGA; risks relating to the timing of payments, if any, under
the SIGA litigation; our ability to make distributions of a substantial portion of the cash proceeds we may receive from SIGA;
the timing, amount and form of such a distribution; risks relating to our continuing ability to recognize cost reductions; risks
associated with the amount of taxable income actually generated upon the receipt of a full award from
SIGA; risks associated with the availability of our NOLs, the amounts of available NOLs and any increases thereof and preservation
of such NOLs; and other risks detailed from time to time in PharmAthene's Forms 10-K and 10-Q under the caption "Risk Factors"
and in its other reports filed with the U.S. Securities and Exchange Commission. PharmAthene disclaims any intent or obligation
to update these forward-looking statements other than as required by law.
Copies of PharmAthene's public disclosure
filings are available on our website under the investor relations tab at www.PharmAthene.com.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 69,106,979 | $ | 15,569,813 | ||||
| Short-term investments | 66,841,690 | - | ||||||
| Billed accounts receivable | 665,659 | 511,994 | ||||||
| Unbilled accounts receivable | 912,126 | 963,345 | ||||||
| Prepaid expenses and other current assets | 509,857 | 181,714 | ||||||
| Total current assets | 138,036,311 | 17,226,866 | ||||||
| Property and equipment, net | 153,823 | 233,694 | ||||||
| Other long-term assets and deferred costs | - | 53,384 | ||||||
| Goodwill | 2,348,453 | 2,348,453 | ||||||
| Total assets | $ | 140,538,587 | $ | 19,862,397 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 614,543 | $ | 521,122 | ||||
| Accrued expenses and other liabilities | 1,778,193 | 1,248,708 | ||||||
| Accrued restructuring expenses - current | 173,301 | 381,950 | ||||||
| Other short-term liabilities | 11,588 | 11,250 | ||||||
| Current portion of derivative instruments | 1,150,845 | 16,411 | ||||||
| Total current liabilities | 3,728,470 | 2,179,441 | ||||||
| Accrued restructuring expenses, less current portion | - | 108,641 | ||||||
| Other long-term liabilities | 427,077 | 433,407 | ||||||
| Derivative instruments, less current portion | - | 491,791 | ||||||
| Total liabilities | 4,155,547 | 3,213,280 | ||||||
| Stockholders' equity: | ||||||||
| Common stock, $0.0001 par value; 100,000,000 shares authorized; 66,423,033 and 64,382,086 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively | 6,642 | 6,438 | ||||||
| Accumulated other comprehensive income | 12,346 | - | ||||||
| Additional paid-in-capital | 244,035,496 | 240,366,704 | ||||||
| Accumulated deficit | (107,671,444 | ) | (223,724,025 | ) | ||||
| Total stockholders' equity | 136,383,040 | 16,649,117 | ||||||
| Total liabilities and stockholders' equity | $ | 140,538,587 | $ | 19,862,397 |
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Contract revenue | $ | 993,885 | $ | 1,155,839 | $ | 4,110,833 | $ | 9,374,155 | ||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 1,236,692 | 1,125,865 | 3,409,005 | 3,962,019 | ||||||||||||
| General and administrative | 3,714,747 | 1,231,035 | 6,343,426 | 5,246,396 | ||||||||||||
| Restructuring expense | - | 422,482 | - | 2,519,273 | ||||||||||||
| Depreciation | 32,235 | 35,005 | 110,371 | 108,798 | ||||||||||||
| Total operating expenses | 4,983,674 | 2,814,387 | 9,862,802 | 11,836,486 | ||||||||||||
| Loss from operations | $ | (3,989,789 | ) | $ | (1,658,548 | ) | $ | (5,751,969 | ) | $ | (2,462,331 | ) | ||||
| Other income: | ||||||||||||||||
| Interest income (expense), net | 25,186 | (9,888 | ) | 25,614 | (48,492 | ) | ||||||||||
| Realization of cumulative translation adjustment | - | - | - | (229,192 | ) | |||||||||||
| Change in fair value of derivative instruments | (352,057 | ) | 359,796 | (642,643 | ) | 577,426 | ||||||||||
| Other income - litigation | 113,566,451 | - | 122,461,489 | - | ||||||||||||
| Other income (expense) | 659 | (691 | ) | 6,400 | 6,594 | |||||||||||
| Total other income | 113,240,239 | 349,217 | 121,850,860 | 306,336 | ||||||||||||
| Net income (loss) before income taxes | 109,250,450 | (1,309,331 | ) | 116,098,891 | (2,155,995 | ) | ||||||||||
| Income tax provision | (15,437 | ) | (15,437 | ) | (46,310 | ) | (46,310 | ) | ||||||||
| Net income (loss) | $ | 109,235,013 | $ | (1,324,768 | ) | $ | 116,052,581 | $ | (2,202,305 | ) | ||||||
| Basic net income (loss) per share | $ | 1.68 | $ | (0.02 | ) | $ | 1.79 | $ | (0.03 | ) | ||||||
| Diluted net income (loss) per share | $ | 1.67 | $ | (0.02 | ) | $ | 1.79 | $ | (0.03 | ) | ||||||
| Weighted average shares used in calculation of basic net income (loss) per share | 65,001,584 | 64,187,618 | 64,715,647 | 63,858,500 | ||||||||||||
| Weighted average shares used in calculation of diluted net income (loss) per share | 65,814,765 | 64,187,618 | 65,322,158 | 63,858,500 |