SIGA Technologies Inc (SIGA) 2011 Q2 法說會逐字稿

Good afternoon. My name is Brandi and I will be your conference operator today.

At this time, I would like to welcome everyone to the SIGA second quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions)

Thank you. I would now like to turn the call over to Mr. Todd Fromer, Managing Partner of KCSA Strategic Communications. Please go ahead, sir.

Thank you, and thank you all for joining us today. This is Todd Fromer, Managing Partner of KCSA Strategic Communications, investor relations consultant to SIGA Technologies. Hosting the call today are Dr. Eric Rose, Chief Executive Officer and Chairman; and Daniel Luckshire, the CFO. Today's call is being simultaneously webcasted and is available on SIGA's website. A replay of the call also be available in reported format and on the Company's website.

Before we begin today, I'd like to remind everyone that this afternoon's call will include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, including statements regarding the efficacy or potential of products, the timeline for bringing such products to market and the continued development and possible eventual approval for such products. Forward-looking statements are based on management's estimates, assumptions and projections and are subject to uncertainties, many of which are beyond SIGA's control. Actual results may differ materially from those anticipated in any forward-looking statements.

Factors that may cause such differences include the risk that potential products that appear promising to SIGA or its collaborators cannot be shown to be efficacious or safe in subsequent pre-clinical or clinical trials. SIGA or its collaborators will not obtain appropriate or necessary governmental approvals to market these or other potential products. SIGA may not be able to obtain anticipated funding for its development projects or other needed funding. SIGA may not be able to secure funding from anticipated government contracts and grants. SIGA may not be able to secure or enforce efficient legal rights in its products including patent protection for its products. Any challenge to SIGA's patents and other proprietary rights as is adversely determined could affect its business and even if determined favorably good be costly.

Regulatory requirements applicable to SIGA's products may result in the need for further or additional testing or documentation that will delay or prevent seeking or obtaining needed approvals to market these products. The US Biomedical Advanced Research and Development Authority may not complete the procurement set forth in its solicitation to the acquisition of the smallpox antiviral for the strategic national stockpile or may complete it on different terms. Any contractual award we may receive to supply a smallpox antiviral may be subject to one or more protests which may cause contract awards to be delayed or denied.

The volatile and competitive nature of the biotechnology industry may hamper SIGA's efforts. Changes in domestic and foreign economic marketing conditions may adversely affect SIGA's ability to advance its research or its products and the effect of federal, state and foreign regulation on SIGA's businesses. More detailed information about SIGA and risk factors that may affect the realization of forward-looking statements including the forward-looking statements in this conference call is set forth in SIGA's filings with the Securities and Exchange Commission including SIGA's annual report on Form 10-K for the fiscal year ended December 31, 2010 and in other documents that SIGA has filed with the Commission.

SIGA urges investors and security holders to read these documents free of charge at the Commission's website at www.SEC.gov. Interested parties may also obtain these documents free of charge from SIGA. Forward-looking statements speak only to the date they are made and except for any obligation under the US federal securities laws, SIGA undertakes no obligation to publicly update any forward-looking statements as a result of new information, future events or otherwise.

With that said, I'd like to turn the call over to Dr. Eric Rose. Eric, the floor is yours.

Thank you, Todd. Good afternoon, and thank you all for joining us for our second quarter earnings call. During this call, I will offer prepared remarks and Dan Luckshire, our Executive Vice President and Chief Financial Officer, will review the financial results. We will then open the call and take your questions.

My remarks will focus on first, SIGA's transformation into a commercial stage biotechnology Company. Second, the smallpox threat. Third, SIGA's ST-246 franchise. And, fourth, our view of the United States bio-defense market going forward.

I've been looking forward to this conference call for a long time. It marks a very important milestone in the evolution of SIGA. With a signed and active BARDA procurement contract we have become a commercial stage Company, the key goal identified in my first investor called more than four years ago. This is a rare accomplishment in our industry and the point of arrival on which we focused our unique scientific prowess and hard work.

We are energized with what we have achieved and what it means for the future. In the last quarter, we signed a sole-source BARDA procurement contract, resolved the protest from a competitor and commenced work with BARDA on the performance of our $433 million base contract. These are value-adding activities, strategically and financially.

This is the start of what we believe will be a long and fruitful commercial future for ST-246. Before I go into details about our drug, I want to first spend time talking about SIGA since I believe it is important to remind existing investors about who we are and to give newer potential investors a chance to hear about SIGA directly from Management. Everything we do starts with a commitment to create long-term value and generate growth for investors.

We as management are and will continue to be long-term investors in SIGA. We seek to create value and growth by discovering and developing what we hope will prove to be efficacious and safe drugs that address significant unmet needs. Scientific discipline, creativity and hard work are at the heart of this strategic, vision not procedural and legal gimmickry. What makes SIGA special in its close and successful scientific and developmental partnering with several different government agencies on most of our programs. Substantive, productive partnerships are a key underlying source of strength for the SIGA business model. ST-246 is the first commercial success of our development efforts addressing a major unmet bio-defense need.

Let's spend a few minutes now on the smallpox threat. Smallpox has been clearly identified by the United States government and international authorities as a potential bioweapon of mass destruction, a virus that is as contagious as influenza while the historical mortality rate for the disease is the range of 30% with heretofore no specific antiviral treatment available. It's worth noting that pandemic influenza mortality is estimated to be 1% to 2%, about 1/30th to 1/15th that of smallpox. And that the United States government presently stockpiles more than 80 million courses of influenza antiviral drugs as a prudent countermeasure.

A smallpox attack would represent an international public health emergency, and with a world population of 7 billion people and less than 1 billion doses of smallpox vaccine presently stockpiled, the potential existential impact of an untreatable worldwide outbreak of the disease is more than obvious. Advances in synthetic biology have substantially increased the feasibility of deploying smallpox as a bioweapon. With the smallpox DNA genome in the public domain, the technology to make the virus de novo is now in place while substitution of less than 50 base pairs in the camelpox genome represents a perhaps even more accessible path to re-create this deadly virus.

Indeed the smallpox threat is clear and real and we believe that wide availability of ST-246 has the potential to meaningfully reduce the mass mortality, societal and economic destruction that a smallpox attack could cause. To remind everyone, ST-246 is a groundbreaking oral therapeutic agent active against orthopoxviruses including smallpox. It is the only oral drug from any source ever to have demonstrated efficacy in non-human primate models of orthopoxvirus disease. ST-246 works by blocking the ability of the orthopoxvirus to spread to other cells, preventing it from causing disease.

This first BARDA procurement contract will add 2 million courses of our drug to the strategic national stockpile for therapeutic use in symptomatic adults. We continue to develop the drug under a separate $33 million advanced development contract for post-exposure prophylaxis as well as an IV formulation for critically ill patients for which we expect to file an IND in 2012. Our new contract for the first time provides US government support for the development of the pediatric formulation of the drug, another critical unmet need. It's worth noting that smallpox mortality in small children can exceed 70%.

We see a robust matrix of formulations, indications and markets with ST-246, the latter including the Department of Defense, state, local and international governments and private purchasers. Thus, ST-246 reflects not just good science, but good business. Since June 27, we've been actively working with BARDA on the performance of our $433 million base contract. Performance of the base contract is our number one short-term priority we are pleased with the impediment of the award protest has been lifted. With respect to the protest, it was unfortunate in some aspects and instructive in other respects.

It was unfortunate in that it caused a short delay. And it is instructive in that BARDA's written justification for the contract award noted that ST-246 is, quote, an essential part of US government's preparedness efforts to protect the United States population against smallpox, unquote. And that, quote, it is in the nation's best interest that HHS award SIGA Technologies Inc. a contract to develop and maintain this capacity, unquote. Let me emphasize the use of the word "maintain."

We believe that these types of statements by BARDA carry a lot of weight when thinking about the business prospect for ST-246 and when considering our relative competitive position. Also when contemplating the contract's modification that came from the protest, we believe that everyone should keep in mind that neither the protest nor the contract modification affect the substantive competitive dynamics in the smallpox therapeutic market which are highly beneficial to SIGA. And neither has any effect on the customer demand for ST-246.

In its justification for sole-source contract, the government identified the rationale for the option to acquire an additional 12 million courses of smallpox antiviral drug as being the need to protect the 4% of the population who would be expected to have an uncertain response to smallpox vaccine. While the option in this sole-source contract was removed, the unmet need remains. SIGA is highly confident that we can successfully compete in any future full and open competitions for smallpox antiviral drug as the government fulfills its identified unmet needs. We believe that the prospects for a scientifically legitimate competitor to ST-246 are highly speculative.

In sum, we are pleased to be actively working with BARDA and we look forward to a fruitful long-term partnership. Let me turn now to our view of the United States bio-defense marketplace. The need for a comprehensive stockpile of bio-defense measures such as ST-246 has engendered strong bipartisan support within Congress and during both Democratic and Republican administrations.

We are pleased that legislation has been introduced in Congress to renew the 2006 PAHPA legislation. PAHPA, to remind you, stands for the Pandemic and All-Hazards Preparedness Act. The PAHPA reauthorization bill is making progress, particularly with the House Energy and Commerce Committee where it has been marked up and was approved last week by a voice vote. In its current form, the new PAHPA bill contains language for the reauthorization of the BioShield Special Reserve Fund at $2.8 billion over five additional years through 2018 and for the continued funding of BARDA advanced development activities.

Considering the current challenging budgetary climate, we believe that the continued bipartisan support for PAHPA reauthorization reflects a strong commitment to bio-defense as a national security priority. Within the context of this good news, please also keep in mind that our $433 million base contract is already covered within the current BioShield Special Reserve Fund. This means that activity relating to PAHPA reauthorization legislation will not impact performance or funding of our base BARDA contract. In other words, we are watching PAHPA legislation with an eye toward future opportunities.

At this point, you can understand why I'm pleased with what we've accomplished and why I'm excited about the future. We've established clear leadership in our product market, we have a positive and long-standing working relationship with a key customer, and our lead product, ST-246, has been picked exclusively by the United States government to begin to address the large unmet need.

Before I turn the call over to Dan, I'd like to quickly highlight that while the spotlight is currently on ST-246, we are continually focused on developing drugs for other unmet needs such as the therapeutic for Dengue. Our development programs are a key long-term priority and we will continue to pursue disciplined progress in this area. Now that I've used all of my pre-allotted time today, I'll discuss our other development initiatives on future calls.

At this point, I'll turn the call over to Dan for a discussion on the financials. Dan?

Thank you, Eric. For today, I will provide a quick update on the quarterly results and the current financial position and then we can move to Q&A. Let's start at the macro level.

Revenue for the three months ended June 30, 2011 was $2.5 million compared to $4.4 million in 2010. And the operating loss for the quarter was $11.1 million compared to a loss of $3 million for the comparable period last year.

Earnings per diluted share for the quarter was $0.44. This amount includes non-operational items such as a one-time $33 million income tax benefit and a $2 million gain relating to the fair market valuation of certain warrants. In second quarter last year, there was a net loss per diluted share of $0.12.

Now let's move to the details. Revenues from research and development grants and contracts was $2.5 million, a decrease of $1.9 million from last year. The decrease is primarily due to a $900,000 decrease in grant and contract usage by the ST-246 program and a $500,000 decrease in grant and contract usage by the broad-spectrum program.

Grant and contract usage has declined this quarter for the ST-246 program because the Company has been focused on low-cost development activities within the program, such as analyzing and organizing data in preparation for submitting study reports to regulatory authorities. Grant and contract usage has declined for the broad-spectrum program due to the conclusion of a contract. On the expense side, let's start with research and development expenses which tend to track with revenues.

For the quarter, R&D expenses were $3.8 million, a decrease of $1.1 million from the corresponding period last year. The decrease is mainly due to slower granulated sending in the development programs, partially offset by an increase in employee-related compensation expense. For SG&A, expenses for the quarter were $9.3 million, an increase of approximately $7.1 million over last year. The increase is primarily attributable to a $6.6 million increase in employee compensation expenses and a $365,000 increase in legal expenses.

In turn, employee compensation expenses increased mainly due to a $6.3 million increase in stock-based compensation. Rounding out the expense discussion is patent preparation. For the quarter, patent preparation expenses were $413,000, a $107,000 increase over the second quarter last year. At this point, before moving on to a liquidity update, I'd like to spend a minute discussing the $33 million income tax benefit that was recorded this quarter.

As background, we had $69 million of net operating losses, or NOLs, at year end December 31, and we incurred operating losses in the first two quarters of this year which had the effect of increasing the NOLs further. These NOLs are available under certain circumstances to offset future taxable revenue and, therefore, translate under the accounting role as a deferred tax asset. Until this quarter, the deferred tax asset was offset by a valuation allowance which means that there was uncertainty about SIGA's ability to generate distorted taxable income that would make the deferred tax asset useful. During this quarter, a substantial portion of the valuation allowance was reduced in light of the expected income from the BARDA contract. The result is an income tax benefit of $33 million.

Now let's finish up the prepared remarks with a quick note on liquidity. As of June 30, cash, cash equivalents and short-term investments were $15 million compared to $21.3 million at year and. We continue to believe our balance sheet assets are sufficient to fund our planned operating activities for 2011 and into 2012.

With that, I would now open the line for questions.

Thank you. (Operator Instructions) Your first question comes from Jason Kantor of RBC Capital Markets.

Thanks for taking the question. Couple questions. First, with regard to cash that is sufficient to get into 2012 with the projected funds from the government, is that, can that actually get you to profitability? Or do you need to some sort of bridging finance? And then, could we get an update, if any, on the legal situation with PharmAthene?

Sure. On your first question, we have the cash on the balance sheet right now to get us to 2012. And then with respect to your question about will get us to profitability? The answer is that it could, it will depend on a series of decisions, one being that if we can make deliveries in 2012, there's a good chance that it can get us to that point. But there's a couple of metrics that we have to satisfy first before we can really answer that definitively.

And then on PharmAthene, we continue to have the same views that we've had historically. And we look forward to hearing from the Delaware court.

Now does, potential outcomes of that weigh into your accounting at all in terms of this tax liability? I mean, one would think that in front of that decision there's still some uncertainty in terms of your go-forward finances. Did that weigh in at all in terms of determining to recognize that revenue?

In terms of releasing that valuation allowance, yes, we looked at all the different factors.

Okay, and what is the soonest you could deliver material to the stockpile and what are the variables? You mentioned that there were -- you dependent on certain situation, maybe you could give us a little more clarity there?

Yes, certainly. So it really relates to the fact that we have API active pharmaceutical ingredient at our fill and finisher CMO. Depending upon dosage, that will generate between 350,000 and 600,000 courses of ST-246. To make a delivery and be paid for it, we have to deliver at least 500,000. So if our dosage is 400 mg, then we're in good shape to deliver greater than 500,000 courses. If our dosage is 600 mg, then we will not have enough API at our fill and finisher to hit that threshold, and if that's the case then we'll also need some new production in order to that threshold and that will take us into early 2013.

Thank you.

Your next question comes from Nathan Cali of Noble Financial.

Hi, guys. Congratulations on finalizing the contract, let's say. On the dosing, when will you find out what the dosing is going to be?

We are in this next couple weeks we will submit reports to the FDA and we will -- we have asked them for a quick response. So it could be at any point from September onwards in terms of getting a response. I would caution that the range of timing could be a wide range. So it could be as soon as September, but it could also be materially later, depending on the FDA.

So low likelihood of delivering any to the stockpile in 2011?

Yes, to be clear. And probably to finish off answering Jason's prior question is, yes, we're not looking at making any deliveries in 2011. The earliest we would be really looking at making deliveries is, I'd say late summer 2012 would be the earliest.

For the API product.

Okay. Any indications on how quickly you guys can deliver the full 2 million courses once you do start to deliver?

We would target that in terms of really fulfilling our obligations for the contract in the 2013, 2014, current period. I understand that's a wide range, but as you start going out into multiple years and we have to deal with the timing of regulators too. It's a wide range, but I think the way to pencil it in is probably late 2013 or target first half of 2014.

So, just to drill down a little bit, one more follow-up question, as quick as you guys can deliver, is that as quick as the government will take the courses? Or is it basically on their request?

Our anticipation is that when we have product available in sufficient size that they would be looking to get the delivery. We'll have to work the logistics on it, there's a lot of different sites where we could shift, so we would have to work the logistics, but our anticipation is when we have size available to delivery that will happen in short order.

Okay. And just a couple more questions, on the pivotal study for ST-246, the final safety study, will you guys start that in 2011, 2012 timeframe? Or?

That's dependent on that dose determination.

Okay. And then any developments ex-US at this point or are you just trying to get to the point of completing this last trial? I know you guys talked about submitting for approval in the US and EU by 2013?

We have a parallel path for EU submissions to the FDA submissions. And both those processes, I think, track closely to each other. And we certainly have ongoing discussions with our government agencies outside of the United States but we can't report anything more specific than that.

Okay. Do you expect the outside, the ex-US to be somewhat close to the US type of 4% range?

I think it would be speculative to say what individual countries' appetites for this will be as well as agencies like the World Health Organization and the like. I think that there is pretty robust understanding of the potential epidemiology of an international smallpox public health emergency. And we expect the authorities in other countries to adapt to a new reality with the therapeutic available.

All right, thanks a lot. Congrats, again.

Thanks.

Thank you.

(Operator Instructions). Your next question comes from [Fred Gray] of [Bee Finance Investment].

Good afternoon, gentlemen. Congratulations on the recent contract, I know you've been working very hard. I've got a couple questions. Just the broadest question is, what do you think the recent BARDA contract means for the future of the Company? And the second one was on the base contract, is there also an up front payment the comes from the government?

And when would the Company realize that? Would that be after a delivery of product? And the third question, and then I'll stop, is if you did get an order from an overseas government, it's going to take you X-amount of years to deliver the US amount. I mean, would you be able to increase production if you got orders from other countries? And those are basically my questions.

Let me start with the first. What does this contract mean to SIGA? We are a commercial stage biotechnology Company now. It's a very robust contract, we think it's abundantly clear that the United States government wants to maintain our ability to produce this drug, not just to have a single order. But they use the word, maintain our capability to provide this material.

We think that the identified epidemiologic need for smallpox antivirals at a minimum an additional $12 million. Americans are scientifically and medically robust. We think those are very promising future markets for us as well. The additional formulations for children, the IV formulation, post-exposure prophylaxis is not part of this contract and the potential use for that arguably. And even tens of millions of potential victims of smallpox outbreak is also a potentially robust stockpiling opportunity for us domestically, as well. With regard to the up front payment I'm going to ask Dan to address that.

Yes, so there is an advance payment for -- it appears advance payment that we can qualify for, through those planning and coordination activities with BARDA. That amount in total would be $41 million, anticipate receiving those advance payments in 2011, they are advance payments. And so it is not revenue, but it is cash flow that will be helpful in terms of producing product.

That's great, so you get that before the end of the year?

Yes.

That's correct.

Yes. And then your last question about capacity, we've set up our supply chain so that we can increase capacity by multiple by what we're planning on producing right now. So we have that flexibility and we should have time to actually increase that capacity in an efficient manner since a lot of these orders spend have long lead times. So we will have the time to respond and increase capacity in our supply chain when we have orders.

Right. I guess what I'm trying to understand is, I just don't understand the price of the stock. You got your first contract ever, it's over $400 million, the options were options. You're probably going to get it anyway. The stock has lost almost half its value, it just doesn't make any sense to me.

I know there's people waiting for the ruling from the judge on the PIP case. But it just doesn't make sense. So I'm just trying to figure it out.

Well, yes, look, we're excited about the substantive progress we've been making and there seems to be a disconnect between the direction we're headed and the stock price recently.

Exactly. Well, thank you. And congratulations again.

Thank you.

Your next question comes from Fred Greenberg of Select Healthcare.

Hi, there.

Hi, Fred.

Giving us those scary mortality numbers particularly in children, I didn't realize it was so terrible. I would think that you would be able, or maybe if you had to partner with pharma, big pharma little pharma, this is not a very complex production as some other productions like -- that are out there. I don't understand why you can't ramp up, because apparently they will take what you can send?

We expect by 2013 to have with our existing resources to be able to produce 1 million courses a year. That in and of itself, we think, is a pretty robust business. And we think that's scalable to a substantial multiple of that million courses per year as we just add production capacity. So we think there's a very stable base that we're looking to create initially.

Let me ask you a theoretical -- I understand that.

Yes.

If you had 2 million courses in 6 months, would the government take it?

Well, we can't speak for the government. But --

Or 1 million?

We think that our ability to make the material, that it is going to make sense to have considerably more in domestic as well as international stock piles that are present.

My sense is that the government would take a substantial amount given these statistics of some other foreign government. That's why I'm wondering why you haven't reached out to someone else, given the returns in an incremental joint venture, or a royalty or anything like that. Maybe you're planning to do it. I don't know.

We think that a big pharma partnership is certainly something potentially in the strategic play book for SIGA.

Okay. On Dengue, which most of us don't know much about, being someone who is down in the southern parts of Florida, I know there's a Dengue that is endemic there, it is a little bit scary, because you could end up with the deadly part of Dengue which is hemorrhagic fever. But it's also in India and Brazil, it's become an extraordinary problem. I don't want to use strong numbers. But it just looked it up on the Web, all Asia, at 2.5 billion and these are first, these are countries that certainly can afford to pay for Dengue oral or injection.

At 80,000 cases in Indonesia, 50,000, 7,000 in Thailand and so on and so forth. Could you just tell us a little more about, you did get a contract of $600 million from the government for Dengue in the first quarter. And I'm wondering how fast this is going to move? Because this is a dramatic source of business in the future.

I think it's the fastest-growing infectious disease on the planet. It has a hemorrhagic form which can be lethal. It's a potential bio weapon, as well. We were just awarded a $6.5 million highly competitive NIH contract which essentially, for all intents and purposes, funds all of our advanced development work.

And Dengue was non-dilutive funding. We have a very active series of compounds that have worked in in vivo models producing one- to two-log reductions in viral load which is the difference between hemorrhagic Dengue and non-lethal Dengue. So we think that's clinically meaningful. We've been working on essentially optimizing the molecules with which we've worked. In particular, we're interested in having an orally bio available molecule, although we certainly would contemplate an injectable as a first step, as well.

So, we're very optimistic about our Dengue program, its commercial prospect, the partnerability of the Dengue program, we think, is substantial, as well. But first and foremost, the underlying science is very robust. And the unmet need is very clear.

Your next question comes from Kevin Martin of Garden State Securities.

Hi, Dr. Rose. The original contract, the base contract is $433 million, you said that you'd received about $40 million before the end of the year. But there is also other earn-out options in there that brings that contract to a total of $611 million, is that correct?

That's correct.

Okay, is there any additional monies that could be earned before the end of the year on top of that $41 million from the additional contract?

We wouldn't expect it, no.

Okay, and then, unfortunately, the stock was kind of mentioned on CNBC with one of our Congressmen with an investigation. And I was just wondering if there was a connection between BARDA and the White House. Has that investigation been laid to rest or is that ongoing or has that been put to bed?

Well, first of all, as we understand it, we are no party to this, but it is not an investigation. There was a letter sent from Congressman Issa's committee to BARDA requesting information. It was not identified as a formal investigation. We've had no direct role in this. We not been asked for any material. We think that the notion, at least the questions that were raised, and the context of that investigation, we think, are implausible, if not down right incorrect. But we believe it will play itself out.

As far as you know, it's been answered and it seems to be put to rest?

We can't speak for the Congressman and the Congressman's committee.

Okay, and then with the pharmacy and lawsuit, in case either party decides to appeal, what is the appeal process? Have you worked through that?

I think for us to comment on legal tactics in the absence of a decision, it would be premature at this point. We, again, we feel that the case that we put on was the case we wanted to put on. We expect the Delaware courts to report quickly and we believe that the risk to SIGA that this litigation represents are imminently manageable by the Company. That's been our position for the four years that we've been dealing with this litigation.

There has been a lot of rumors out there swirling around that you could see this license agreement enforced and a transfer of a contract. With all the security that's gone on that you guys had to jump through to get to this point, is that something that is even of concern to the Company?

Again, I think to specifically discuss potential outcomes of the lawsuit is not prudent on our part at this point.

Okay, thank you.

Sure.

Your next question comes from Nathan Cali of Noble Financial.

Sorry, just had one more follow-up question. On the advance payments of up to $41million, can you just talk about the accounting on that? I know you said it's not going to be revenue, is it going to be payments to the R&D, or can you just talk about that little bit?

Yes, it will just be cash that comes in, so it's going to be cash. Then, it's going to be hung up on the balance sheet as a credit. And the idea of these advanced payments is to fund the production process.

To fund production costs?

Right. It's not specific, it's -- you get the payment and the idea is to help you fund production, but it's not specific as to line-by-line what specifically you're spending it on.

Okay. So, you'll have that cash on the balance sheet specifically for ST-246. You won't be able to use it for anything else?

Yes, the idea is it's for ST-246 and we have to earn it. So we can use the cash, but we have to go off and deliver product to earn it.

Okay. And what --?

It should be an advance payment.

And will that be announced as a payment once it's paid, or --?

Yes, we will announce it once we receive the cash. Whenever we see the cash we will announce it, yes.

Okay, all right. Thanks a lot.

Thank you. At this time, there are no other questions. I'll now turn the call back over for closing remarks.

Once again we thank you for joining us at this update. This is a momentous quarter for SIGA. A lot of changes and the commercial transition is the key focus of our management.

Fulfilling our contract and opening the future for the robust market that we anticipate for our product going forward remains our key concern. Thanks, again, for joining us. We look forward to reporting to you next quarter.

Thank you. That concludes today's conference call. You may now disconnect.