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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 19951996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ..........____________ to .........._____________
Commission file number: 0-21700
REPLIGEN CORPORATION
...............................................................................
(Exact name of registrant as specified in its charter)
Delaware 04-2729386
............................................ .................................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Kendall Square, Cambridge,117 Fourth Avenue, Needham, Massachusetts 02139
............................................ .................................02194
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 617-225-6000617-449-9560
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
............................................ ................................------------------- -----------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $0.01 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X]X No [ ]..
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[ ]
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State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The approximate aggregate market value, computed by reference to
the closing sale price of such stock quoted on NASDAQ on June 15, 199514, 1996 was
approximately $ 35,517,544.$17,552,859.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of June 15, 1995: 15,358,938.14, 1996: 15,602,542.
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PART I
Item 1: BUSINESS
Repligen Corporation is a biopharmaceutical company engaged in the
research development and manufacturedevelopment of therapeutic products for human health care. TheDuring
fiscal year 1996 the Company has activecompleted a major downsizing and consolidation of
its operations, including the termination of certain research programs, in three therapeutic areas: cancer,
cardiovascular conditionsorder
to stabilize its financial condition and immunology.preserve its cash resources. The
Company's research and development programs are now primarily focused on the
development of new therapies for chronic and acute inflammation and
immunosuppression and the development of enabling technologies for discovery of
new drugs by rapid screening of combinatorial chemical libraries.
As of June 14, 1996, Repligen had approximately 15 employees including
five with doctoral degrees. The Company's strategy is to use internal resources
for research and preclinical studies and to use pharmaceutical companies or
third party contractors to provide manufacturing and clinical development
support and for certain administrative functions. Significant expansion of the
Company's research or clinical development efforts is dependent on future
financing or new partnerships with pharmaceutical companies.
Repligen was incorporated in May 1981. The Company's principal executive
offices are located at One Kendall Square, Cambridge,117 Fourth Avenue, Needham, Massachusetts 02139,02194, and its
telephone number is (617) 225-6000.449-9560. As used herein, "Repligen" or the "Company"
refers to Repligen Corporation and its wholly-owned subsidiaries, RGEN
Corporation, Amira, Inc. and, Repligen Development Corporation.Corporation and Glycan
Pharmaceuticals, Inc.
Recent Developments
Restructuring. During the past year the Company restructured its
operations in order to preserve its capital and ensure continued operations. The
restructuring included a substantial reduction in its workforce, the termination
of several programs and in May 1996 the closing of its Cambridge research and
manufacturing facility. The corporate headquarters has been transferred to
facilities previously used by the Company for manufacturing in Needham,
Massachusetts. In April and May 1996 the Company negotiated settlements with the
holders of certain equipment and facility lease agreements which were in default
for an aggregate cost of $3,300,000. Subsequently, surplus equipment owned by
Repligen was sold for approximately $1,250,000, net of expenses. As a result of
the reduction of operating expenses and elimination of debt, the Company
believes it has adequate cash reserves at March 31, 1996 to sustain its
operations at their current levels for at least the next twenty four months.
Acquisition of Glycan Pharmaceuticals, Inc. In March 1996, Repligen
acquired Glycan Pharmaceuticals, Inc. ("Glycan"), a private company in
Cambridge, Massachusetts founded by three former senior managers of Repligen.
Simultaneously with the acquisition, Repligen's strategysenior management resigned or
announced their resignations to take place shortly after the acquisition, and
Glycan's management assumed senior management positions at the Company. Glycan
has focused on the development of enabling technologies for the commercializationdiscovery of its product candidates isnew
drugs by rapid screening of combinatorial chemical libraries. As a consequence
of the Glycan acquisition, Repligen acquired a majority interest in ProsCure,
Inc., a subsidiary of Glycan. ProsCure has licensed the rights to initially target specific medical indications with defined clinical
endpoints using novel therapeutics that have more than one potential clinical
application. This enablescertain Glycan
discovery technologies and lead compounds for application to the field of
cancer.
PF4 Program Termination. Since February 1992, Repligen has carried out
research and development on recombinant Platelet Factor-4 ("rPF4") on behalf of
Repligen Clinical Partners, L.P. (the "Partnership"). The Partnership's funding
for the development of rPF4 has been substantially consumed, and the Company
to pursue multiple indications
concurrently with each product candidate. The Company believes this approach
may increase the probability of commercial success. The Company has assembled
an experienced team of senior medical, regulatory, process development,
manufacturing and marketing personnel from both the biotechnology and
pharmaceutical industries to manage its clinical programs andthat significant additional funding will be required to commercialize
any resulting products.rPF4. In April 1995, the Company announced the termination of the Product
Development Agreement and the Purchase Agreement with the Partnership and
stopped development of rPF4. Repligen will assist the Partnership in exploring
alternatives to maximize the value of the rPF4 program for the benefit of the
Partnership.
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Repligen's Research and Development Programs
The following table lists theRepligen's research and development programs,
potential therapeutic indications or applications for,clinical trial populations and current
status, of, Repligen's products in research or
development and is qualified in its entirety by reference to the more detailed
descriptions elsewhere in this report.
Program Indication/ApplicationClinical Trial Status
- ----------------- ------------------------------------------------- ----------------------------- ------------------------- ------
rPF4 Heparin neutralization -- cardiac catheterizationCD11b Acute Inflammation
Healthy volunteers Phase III (completed)
Heparin neutralization -- cardiopulmonary bypass
graft surgery (CABG) Phase I/II
Kaposi's sarcoma (intralesional) Phase II (completed)
Kaposi's sarcoma (systemic-IV) Phase I/II
Colon cancer Phase I/II (completed)
Malignant melanoma/renal cell carcinoma Phase I/II (completed)
Glioma (brain cancer) Phase I/II
m60.1/h60.1
Chronic lung inflammation Phase I (completed)
Healthy volunteer study (inflammation)Cardiopulmonary bypass surgery Phase II/II (completed)
Thorocoabdominal aortic aneurysm Phase I/II Cardiopulmonary bypass surgery (CPB) Phase I(completed)
Immune Modulation Transplantation, autoimmune disease gene therapy Preclinical
Chemokine Mutants Myeloprotection Preclinical
Glyceptor Antagonists Chronic inflammation, Preclinicalatherogenesis Research
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rPF4CD11b Program
Platelet factor-4 ("PF4") is a naturally-occurring protein which Repligen
has produced using recombinant DNA technology. Repligen is conducting
multiple clinical trials for recombinant PF4 ("rPF4") which the Company
believes may be useful as (i) a neutralizing agent to reverse the
anticoagulant effects of heparin and (ii) a therapy in the treatment of
certain solid tumor cancers.
Heparin Neutralization. The Company believes that rPF4 may restore
natural coagulation which is disrupted by heparin in anticoagulated patients
undergoing cardiovascular surgical procedures such as coronary artery bypass
graft surgery. Heparin is an anticoagulant used to prevent blood from
clotting during these cardiovascular procedures. In certain acute settings,
the effects of heparin are reversed chemically with the generic drug
protamine, which is widely used but has been associated with some serious side
effects. These side effects, while usually mild to moderate, are occasionally
serious, such as a loss of blood pressure (systemic hypotension), respiratory
distress (pulmonary hypertension) or allergic reactions (anaphylaxis). Over
500,000 patients in the United States undergo open heart surgery and are
treated with protamine each year. The Company believes that rPF4 may reverse
the anticoagulant effects of heparin both more quickly than protamine and
without its potential side effects. Repligen has a United States patent on
the use of rPF4 or purified PF4 to neutralize heparin.
Preclinical trials conducted in rats indicated that rPF4 reversed heparin
without causing the systemic hypotension often associated with protamine.
Repligen subsequently conducted further studies in monkeys and baboons which
confirmed that rPF4 reverses heparin and is safe and effective in those
animals. Because a baboon's cardiovascular system closely resembles that of a
human, Repligen was able to conduct in vivo studies of the reversal of heparin
in the baboon's blood following simulated cardiopulmonary bypass that provided
further support that rPF4 would be safe in human bypass operations.
Subsequent ex vivo studies of human blood removed from a cardiopulmonary
bypass circuit demonstrated that rPF4 neutralized heparin effectively
following exposure to typical bypass conditions.
In March 1993, the Company began a Phase I clinical trial of rPF4 in
cardiac catherization patients to evaluate its safety. The results of the
study were reported at the annual meeting of the American Heart Association in
November 1993 and demonstrated that rPF4 safely reversed the anticoagulant
effects of heparin in this patient population. Results of the study were
published in the journal "Circulation" in April 1995. In November 1993, the
Company initiated a double-blind, multi-center Phase II clinical trial to
evaluate the efficacy of rPF4Company's program for the reversal of the anticoagulant effects of
heparin in cardiac catherization patients in comparison to protamine. As of
March 31, 1995, the preliminary results of this study indicate that rPF4 is at
least as safe as protamine. These safety data support continued clinical
development of rPF4 for use in coronary artery bypass graft surgery. The
Company initiated a Phase I/II clinical study for the use of rPF4 in
cardiopulmonary bypass graft surgery patients in May 1994. This trial is
expected to be completed in the second half of 1995.
Thus far, all of the Company's clinical trials for PF4 have been conducted
using a recombinant form of PF4 manufactured by Repligen in quantities
sufficient for preclinical and clinical research. In order to produce rPF4 in
sufficient quantities and at necessary cost levels for commercial
introduction, the Company changed its manufacturing process for rPF4 which had
limited the availability of rPF4 for use in clinical studies. Repligen and
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the United States Food and Drug Administration (the "FDA") have agreed on
additional clinical studies to support this process change for a new PF4
product form. During the first quarter of 1995, the Company filed an
Investigational New Drug ("IND") application for RG1001, the new PF4 product
form, and initiated a safety study in healthy volunteers and a bioequivalency
study in patients undergoing CABG with RG1001. These trials are expected to
be completed in the second half of 1995.
Cancer. Repligen believes that rPF4's ability to inhibit the process of
new blood vessel growth (angiogenesis) represents a novel approach to
inhibiting the growth of solid tumors and that rPF4 may be an effective
therapy for a variety of cancers. Solid tumor development is a complex
process that requires the establishment and expansion of a blood vessel
network through angiogenesis. As a tumor grows beyond microscopic size,
passive diffusion from neighboring tissue is no longer sufficient to meet the
nutritional demands of the tumor, and direct access to capillaries or blood
vessels becomes necessary. While the exact process of angiogenesis is not
fully understood, it is believed that new blood vessels form in response to
growth factors that stimulate endothelial cells (blood vessel lining cells).
Angiogenic growth factors are released by neighboring tissues that need
additional blood supply or by cancer cells. Once stimulated by these growth
factors, the endothelial cells proliferate and migrate to form the framework
for new capillaries and blood vessels. The inhibition of angiogenesis could
be effective in suppressing the growth and development of solid tumors.
Cancer is treated primarily with surgery, chemotherapy and radiation
therapy. These treatments often fail to prevent disease progression and
spread of cancer and may have serious side effects. By inhibiting the process
of angiogenesis, rPF4 offers a new approach to the treatment of cancer which
could be effective in treating a broad spectrum of cancers, since virtually
all tumors require angiogenesis in order to survive and grow.
In preclinical testing using several animal cancer models, Repligen has
shown that the administration of rPF4 significantly inhibits the growth of
solid tumors by a mechanism that is consistent with its anti-angiogenic
activity. Repligen believes that rPF4 may also be useful in retarding the
progression of Kaposi's sarcoma ("KS"), an AIDS-associated cancer which
produces tumors in the skin and internal organs and affects approximately
18,000 persons in the United States. In June 1992, the Company began Phase I
clinical trials of rPF4 for treatment of skin lesions of KS patients by
intralesional injection. No significant adverse reactions attributable to
rPF4 were reported during this safety study. In July 1993, Repligen began a
Phase II clinical trial of intralesional injection in KS patients. Interim
results of this study were reported at the conference of the American Society
of Clinical Oncology held in May 1994. Evidence of biologic activity, and no
significant adverse reactions to rPF4 were reported. A Phase I/II study to
evaluate the subcutaneous administration of rPF4 in KS patients was canceled
because it was duplicative to the aforementioned Phase II study. A Phase I/II
clinical study of systemic (intravenous) administration of rPF4 to KS patients
is in progress and is expected to be completed in the second half of 1995.
The Company has conducted several Phase I/II clinical studies of systemic
administration of rPF4 in patients with refractory solid tumors, including
patients with colon carcinoma, renal cell carcinoma, and malignant melanoma.
These studies demonstrated that systemic administration of the product was not
associated with clinically significant adverse events. Due to the current
limitation on clinical material and based on what Repligen has learned in the
Phase I and Phase I/II studies being conducted with respect to Kaposi's
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sarcoma, colon cancer and malignant melanoma/renal cell carcinoma, Repligen
now believes that it can focus on and pursue the clinical development of local
administration of rPF4 for brain tumors. A Phase I/II clinical study of
locally administered rPF4 in malignant glioma (brain cancer) has recently been
initiated. In this study, patients with recurrent disease undergo tumor
removal and a catheter is implanted into the site of the tumor bed. rPF4 is
then administered directly into the tumor bed. This study is expected to be
completed by the end of 1995. Repligen has been awarded two United States
patents, including a patent related to the systemic administration of rPF4 to
inhibit tumor growth, and has an exclusive license under four other U.S.
patents related to rPF4 and derivatives thereof which may have angiogenic
inhibitory activity.
Funding for the Company's rPF4 program is being provided primarily by the
Partnership. The Company granted the Partnership an exclusive, royalty-free
license to certain patent rights and other technology owned or controlled by
Repligen relating to rPF4 for human therapeutic use in the United States,
Canada and Europe (the "Territory"), subject to Repligen's right to repurchase
such patent rights and technology pursuant to terms which were agreed upon in
connection with the formation of the Partnership. Partnership funding is not
available to pay for Kaposi's sarcoma research, although marketing rights to
rPF4 for KS have been granted to the Partnership. See "Certain Contracts -
Product Development Agreement" and "Purchase Agreement."
Inflammation Inhibition Program
CD11b. The Company'sacute inflammation inhibition program, initiated in
November 1990, is based
on the use of monoclonal antibodies to CD11b, proteins
that appeara protein on the surface of
certain white blood cells called neutrophils, to inhibit neutrophil-mediated
inflammation and tissue damage. The Company has
initially targeted acute inflammatory conditions such as interstitial
pulmonary fibrosis (chronic lung inflammation) and thorocoabdominal aortic
aneurysm. The Company believes that these diseases may serve as models for
more complex diseases such as trauma, adult respiratory distress syndrome or
related disorders inNeutrophils are a type of white blood cell which over-activation of the neutrophil may lead to
disease manifestations. The Company's rights with respect to the technology
employed in this program are derived from licenses to issued patents.
White blood cells, specifically neutrophils,
normally protect the body from bacteria.bacterial infection. Once activated by a bacterialan
infection, neutrophils bind to receptors on the endothelial cells that line the
blood vessels. The
neutrophils then leavevessels and subsequently migrate through the vessel and congregate inwall to the tissue at thesite of
infection site where they eliminate the bacteria by producing cytotoxic products.
In the absence of a bacterial infection, neutrophilsNeutrophils can also cause injury following reperfusion, an event in which blood
flow to tissue is interrupted and subsequently restored. Restricted blood flow
causes a lack of oxygen for tissue adjacent to the restriction site, and
neutrophil activation signals are inappropriately produced. When blood flow is
restored, the site is flooded with activated neutrophils capable of damaging
healthy tissue, resulting in reperfusion injury. The activated neutrophils also can create secondary blood
stoppage by binding with each other and preventing complete blood flow
restoration.
Animal studiesmodels of reperfusion
injury have demonstrated that antibody blocking of CD11b with a monoclonal antibody prevents
the neutrophils from binding to the blood vessel wall and enteringdamaging otherwise
healthy tissue.
Monoclonal antibodies to CD11b have demonstrated in animal
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models an ability to prevent tissue damage caused by the inappropriate white
blood cell activity that occurs during tissue reperfusion.
In June 1993,November 1990, the Company beganentered into an exclusive, worldwide
license agreement with the University of Michigan for two issued U.S. patents
and corresponding foreign patent applications covering the use of monoclonal
antibodies capable of blocking CD11b to inhibit inflammation. In January 1991,
the Company entered into an exclusive, worldwide license agreement with the Fred
Hutchinson Cancer Research Center for a Phase I clinical trial of its lead
anti-inflammation product candidate,hybridoma cell line designated as 60.1
that secretes a murine monoclonal antibody fragment
called m60.1, in patients with chronic lung inflammation. Repligen believes
that m60.1 may be used as a therapeuticcapable of specifically binding to inhibit the acute inflammatory
response associated with organ transplantation, heart attack, adult
respiratory distress syndrome and trauma-induced shock.CD11b
antigen. In September 1993,1991, Kabi Pharmacia AB licensed to the Company beganon an
exclusive basis a Phase I clinical trialU.S. patent relating to the use of anti-CD11b and anti-CD18
antibodies in healthy volunteers. In November
1994, Repligen commenced a Phase I/II trial of m60.1 in thorocoabdominal
aortic aneurysm patients. During 1995, clinical trials with a humanized formreperfusion therapy. With the exception of the monoclonal antibody called h60.1 will begin.
InFred Hutchinson
Cancer Research Center license, these licenses are subject to the United States, interstitial pulmonary fibrosis affects
approximately 14,000 patients annually. Nearly 90,000 patients are treated for
abdominal aortic aneurysms each year and adult respiratory distress syndrome
affects approximately 160,000 individuals annually.payment of
royalties by Repligen.
In May 1992, the Company entered into a research, collaboration and
license agreement with Eli Lilly and Company ("Lilly") pursuant to which the
Company and Lilly agreed to develop test and market antibody-based anti-inflammatory
therapeutics that have been under development at the
Company, and inincluding particular antibodies and antibody fragments that bind to
CD11b. In June 1995,1993, the Company and Lilly announcedbegan Phase I clinical testing of its lead
product candidate for acute inflammation, a murine monoclonal antibody fragment
called m60.1. Initial studies evaluated the safety and pharmacology of m60.1 in
patients with chronic lung inflammation and in healthy volunteers. These two
studies indicated that m60.1 was well tolerated and had an extensionacceptable half-life
in circulation. Following these trials, the Company and Lilly initiated two
Phase I/II studies of their
collaborationm60.1 in patients undergoing cardiopulmonary bypass
surgery and licensing agreement through November 1996. Underin patients undergoing scheduled surgery to treat thorocoabdominal
aortic aneurysm. The Company has initially targeted the termsacute inflammatory
response associated with these surgical procedures since they most closely
resemble the models of reperfusion injury for which antibodies to
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CD11b have shown efficacy in animal models. Additional potential clinical
indications include more complex diseases such as trauma, myocardial infarct
(heart attack), adult respiratory distress syndrome or related disorders in
which over-activation of the newneutrophil may lead to significant morbidity and
mortality.
In September 1995, Lilly terminated its licensing and collaboration
agreement with the Company and the rights to the CD11b program were returned to
Repligen. Since September 1995 patient accrual for the cardiopulmonary bypass
trial and the thorocoabdominal aortic aneurysm trial has been completed and the
data analysis will be completed in 1996. Repligen has also produced a humanized
form of this monoclonal antibody called h60.1 which may have a reduced potential
for eliciting an antibody response in patients. Preclinical studies completed to
date indicate that m60.1 and h60.1 are substantially equivalent in their ability
to bind to CD11b and block neutrophil activity in animal models and the Company
intends to carry out future clinical studies with h60.1 following regulatory
approval. The Company believes that the clinical data collected to date justify
continued development of 60.1, and licensing agreement, Lilly will acquire
responsibility for commercial manufacturing ofit intends to seek additional financing or a
corporate partner to support the products developed during
the collaboration. Repligen will receive significantly higher royalties on
sales of any products developed under the agreement and may receive certain
additional milestone payments, as set forth in the agreement.program.
Immune Modulation Program
Repligen's immune modulation program focuses on the manipulation of
costimulatory factors (CD28, B7, CTLA4), molecules on the surface of certain
immune system cells, to suppress or activate an immune response. Repligen and its
collaborators identified B7-2, an important costimulatory factor. TheBased on
preclinical data, the Company believes that potential product candidates coulddrugs which block the activity of
B7-2
and thusthese costimulatory factors could suppress unwanted immune responses following
transplantation and could treat autoimmune diseases such as certain forms of
multiple sclerosis, rheumatoid arthritis and diabetes. The Company expects the first clinical
application for specific immune suppression will be to study the prevention of
graft rejection in transplant patients. The currently available
treatments to prevent transplant rejection are powerful drugs which prevent rejection but cause
overall immune suppression, leaving recipients dangerously vulnerable to
infection. The
Company is also seeking other ways to manipulateOver the costimulatory pathway to
activate an immune response, including a technology to activate production of
T cells for cell replacement and a technology for gene therapy.
In July 1993,last four years, Repligen secured exclusive, worldwide rights under four
pendingto a series of
patent applications covering novel B7several costimulatory moleculesfactors and their methods of
use.
UnderThe Company has produced a soluble form of the termsfactor CTLA4 as a hybrid
with an immunoglobulin ("CTLA4-IgG"). The molecule binds to B7 on the surface of
an agreementcertain antigen processing cells and appears to block the activation of T cells
which is mediated through the CD28 receptor. CTLA4-IgG has demonstrated activity
in several animal models of organ transplant including heart transplant and bone
marrow transplant. Activity has also been observed in animal models of multiple
sclerosis and autoimmune diabetes. These results support continued development
of CTLA4-IgG as a product candidate, and Repligen intends to seek a corporate
partner or licensee for this technology. The animal data obtained with Dana-Farber CancerCTLA4-IgG
validate the importance of CD28 as a modulator of the immune response, and
Repligen intends to pursue the discovery of small molecules capable of blocking
the activation of CD28 by high throughput screening of libraries of compounds.
In September 1995, Repligen assigned its patent rights for these three
costimulatory factors to Genetics Institute, ("Dana-Farber"),Inc. and received a fee of
$2,000,000. The Company retained the right to independently use the intellectual
property and reagents for the discovery of small molecules which block or
activate these costimulatory factors. In January 1996, Genetics Institute
returned all the rights to a specific product candidate, CTLA4-IgG. Repligen has
exclusivethe right to sublicense its rights to CTLA4-IgG and the small molecule discovery
program and intends to seek licensees or partners to develop this technology.
Chemokine Mutants Program
Many existing agents for cancer chemotherapy are toxic because they
destroy the myeloid progenitor cells which ultimately mature into platelets, red
blood cells and certain white blood cells. This can lead to anemia or
susceptibility to infection in therapeuticthe patient and prophylactic fields,limit use of the drug. If an
agent were available to one B7-1 patent application owned by Dana-Farbertemporarily block the maturation and exclusive rights under three patent applications on B7-2 and related molecules
thatproliferation of
the myeloid progenitor cells during chemotherapy thereby protecting them from
destruction, it may allow for higher doses of therapy to be used with fewer side
effects.
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The chemokines are co-owned by Dana-Farber and Repligen. Dana-Farber will receive
8
royalties from Repligen on net sales of products commercialized under the
agreement. Repligen and Dana-Farber have jointly filed patent applications on
B7-2 and related molecules.
Chemokine Program
Repligen is studying thea family of closely related proteins collectively called
chemokines. These proteins include PF4,that produce a
number of important biological effects included mediating inflammatory responses
and blocking the proliferation of the myeloid progenitor cells. Repligen has
generated modified versions ("mutants") of the proinflammatory chemokine
interleukin 8 ("IL-8"), which lack the inflammatory neutrophil activating
protein-2 ("NAP-2") and others, allproperty of the parent molecule, but which retain the ability to suppress the
proliferation of the progenitor cells. Certain of the mutant proteins are believed to play
important rolesactive
in directing and controlling the functions of various cell
types. The Company has identified key portions of several chemokines which
are responsible for neutrophil activation, movement of neutrophils into
tissues, inhibition of angiogenesis and stopping the growth of blood-forming
cells. Using this information, the Company has been successful in creating
novel molecules with enhanced activities which are desirable and with
decreased undesirable activities. Thesmall animals models. These novel molecules may have therapeutic utility in
protecting blood-formingthese progenitor cells from the toxic effects of anti-
cancer drugs,anti-cancer drugs.
Patent applications covering the composition of the mutant proteins have been
filed in the United States and the protein structure/function information will assist the
Company in developing small organic molecules with specific therapeutic
applications. Repligen has also cloned two receptors for IL-8, an important
attractor and activator of certain white blood cells implicated in
inappropriate immune and inflammatory processes.foreign countries. The Company is seeking to
develop antagonists to the IL-8 receptor. Such antagonists may have a
beneficial effect in a variety of acute and chronic inflammatory disorders,
including asthma and rheumatoid arthritis.
To search for IL-8 receptor antagonists, Repligen used the cloned
receptors to develop a drug screening assay that is now being used to screen
libraries of chemical compounds. Preclinical data indicate that IL-8 and
related molecules may have direct utility in the treatment of asthma. The
Company plans to study the effects of IL-8 on asthma symptoms in animal models
of this disease.
Terminated Programs
Small Molecule (AM285) Program. Repligen had been developing small
molecules as novel therapeutics for cancer, viral diseases and other medical
conditions. These therapeutic agents are designed to regulate the means by
which energy is utilized within cells during tumor growth or viral infection.
In order for these diseases to progress, affected cells require more efficient
energy utilization than is needed for normal cell activity. Repligen believes
that regulating the use of energy in affected cells, therefore, will inhibit
tumor growth and viral replication. The energy that fuels a highly
specialized cell's metabolism is provided in part by the action of an enzyme
called creatine kinase ("CK"). A number of small molecules that regulate CK
have been synthesized and shown to inhibit viral replication and cancer cell
growth in preclinical animal models. From this group of compounds, AM285 had
been selected as Repligen's lead small molecule product candidate. In June
1994, the Company was awarded two United States patents related to the use of
AM285 and related small molecules as therapeutics for cancer and viral
diseases.
In July 1994, the Company elected to discontinue this program in order to
focus its limited financial resources on other programs. The Company is
actively seekingseek a
partner to license this technology.
9
HIV Vaccine Program.develop its chemokine mutants.
Glyceptor Antagonist Program
Through the acquisition of Glycan, Repligen acquired a series of high
throughput screening assays to facilitate the discovery of new compounds capable
of blocking the interaction of certain proteins, including inflammatory factors,
with a type of cell surface carbohydrate known as a glycosaminoglycan. The
Company believes that such compounds will have anti-inflammatory action.
Glycan's research on two specific inflammatory factors is supported by a
research contract with Glaxo Wellcome plc., a leading international
pharmaceutical company. Glycan has filed a patent application in the U.S. and
certain foreign countries.
Glycan has also developed a combinatorial chemistry technology which is
capable of rapidly producing large libraries of compounds. This technology is
capable of efficiently producing compounds which resemble natural peptides
("peptidomimetic"). Unlike natural peptides, however, the Company's
peptidomimetic compounds have a wider range of chemical functional groups than
are found in the twenty natural amino acids. In June 1993,addition, the Company initiatedbelieves
that the peptidomimetic compounds may be significantly more stable in vivo than
natural peptides, a Phase I human
clinical trial of its lead AIDS product candidate, RP400c, a peptide-based
therapeutic vaccineproblem that may slow or block the progression of viral infection
in individuals who are HIV- infected.often prevents natural peptides from being
suitable drug candidates. The selected vaccine candidateGlycan synthesis technology is a
subunit vaccine based on solution
phase synthesis which is accomplished by simple mixing of solutions containing
the V3 loop,reactive starting materials, a small segmentprocess which can be automated to construct
large libraries very efficiently.
Glycan has employed this technology to construct libraries of compounds
whose structures are customized to the characteristics of the HIV envelope
protein, thatdrug discovery
target thereby increasing the probability of finding lead compounds. Repligen
discovered wasintends to further develop this technology and will seek to apply it to
additional drug discovery targets through the principal neutralizing determinantconstruction of customized
libraries. The Company will also seek to develop or license additional
technologies which may improve the efficiency of the virus. The therapeutic vaccine program is based upon the Company'sdrug discovery that antibodies capable of neutralizing the virus can be produced in
response to the V3 loop. In July 1994, the Company elected to discontinue
this program in order to focus its limited financial resources on other
programs.with high
throughput screening.
Commercial Products
Recombinant Protein A. Protein A is a naturally occurring molecule in
bacteria which
has the ability to bind tightly to certain classes of antibodies. The Company
has developed and produces recombinant Protein A ("rProtein A") in sufficient
quantity and of sufficient quality to be used in the commercial production of purified antibodies.
The development, manufacture and marketing of rProtein A has been funded
and conducted by Repligen without the assistance of a commercial partner.
Repligen sells rProtein A directly and through distributors, including Itochu
Techno Chemical, Ltd. (Japan), Kem-En-Tec (Denmark), Pelichem A.G.
(Switzerland), Atlas Bioscan Ltd. (United Kingdom), Tarom Applied Technology
(Israel) and Inter Medico (Canada).
In August 1991, the United States Patent and Trademark Office (the
"PTO") ruled in favor of Repligen in an interference proceeding with Pharmacia
AB involving competing patent applications for rProtein A. A cross-licensing
agreement between the Company and Pharmacia AB with respect to rProtein A
remains in effect. Repligen has now been awarded patents covering rProtein A in
the United States, Europe and Canada. In addition, the Company has been awarded
patents in the United States covering a modified version of Protein A.
Diagnostic Reagents. Repligen is selling reagents that are used in
diagnostic test kits. These test kits are used to detect the presence of
antibodies circulating in the blood stream. The Company does not intend to
become a kit manufacturer.
Certain Contracts
Lilly Agreement. On May 15, 1992, the Company and Lilly entered into a
Research, Collaboration and License agreement (the "Lilly Agreement"), whereby
the Company granted Lilly the exclusive license to use and sell products
utilizing antibodies, antibody fragments and engineered polypeptides that bind
to CD11b. Lilly received exclusive, worldwide marketing and sales rights for
products resulting from the collaboration. Repligen retained manufacturing
rights for any products produced under the Lilly Agreement. Marketing and
sales rights for certain other products resulting from the collaboration will
be available to Repligen.
Under the terms of the agreement, Lilly paid the Company $3,250,000 for
past research and development and $500,000 for the grant of the license. In
addition, subject to Lilly's right to terminate the agreement upon six months
notice, Lilly will pay the Company certain amounts for research and5
10
development pertaining to CD11b performed by the Company through February
1995. If the Company attains certain milestones, Lilly is obligated to make
additional payments to the Company. The Company also will receive royalties
from Lilly based on sales of any products developed under the agreement. In
conjunction with this agreement, Lilly paid the Company $4,000,000 for the
purchase of 283,286 shares of the Company's common stock. During the fiscal
year ended March 31, 1995, the Company recognized $6,262,000 of revenue
(approximately 37% of the Company's total revenue) pursuant to the Lilly
Agreement.
In June 1995, the Company and Lilly announced an extension of their
collaboration and licensing agreement through November 1996. Under the terms
of the new development and licensing agreement, Lilly will acquire
responsibility for commercial manufacturing of the products developed during
the collaboration. Repligen will receive significantly higher royalties on
sales of any products developed under the agreement and may receive certain
additional milestone payments, as set forth in the agreement.
Product Development Agreement. In February 1992, the Partnership sold 900
units of limited partnership interest with aggregate gross proceeds to the
Partnership of approximately $45 million. A wholly-owned subsidiary of the
Company, Repligen Development Corporation, serves as the general partner of
the Partnership (the "General Partner"). Each unit of limited partnership
interest was sold for $50,000 and entitled the investor to receive 2,900
warrants to purchase shares of the Company's common stock.
In connection with the organization of the Partnership, the Company and
the Partnership entered into a certain Product Development Agreement, dated
February 28, 1992 (the "Product Development Agreement"). Pursuant to the
terms of the Product Development Agreement, the Company granted to the
Partnership an exclusive, royalty-free license to certain patent rights and
other technology owned or controlled by the Company relating to the
manufacture, use and sale of rPF4-related products covered by such agreement
(the "Products"). The license granted to the Partnership is limited to
Background Technology (as defined in the Product Development Agreement)
necessary or materially useful for the development and commercialization of
Products for human therapeutic use in the Territory (the "Field of Activity").
The Product Development Agreement requires the Company, to the extent
permitted by Partnership funds, to use its best efforts to perform the
research and development necessary to engage in the Field of Activity (the
"Research Program") and seek to obtain approval from the FDA for the sale of
products that may be developed utilizing the licensed technology. The
Partnership is required to reimburse the Company for its research and
development expenses on behalf of the Partnership, plus a management fee of
ten percent (10%) of such expenses. If at any time the Partnership's funds
(or any additional funds provided by the Company) shall have been expended and
no FDA marketing approval shall have been received for the sale by or on
behalf of the Partnership of any Product in the Field of Activity, the General
Partner will determine the amount of additional funds required by the
Partnership in the upcoming year, and the Company will have the right to
contribute such funds to the Partnership. Any such contribution will not
result in dilution of the limited partners' interest in the Partnership.
During the fiscal year ended March 31, 1995, the Company recorded revenue from
the Partnership in the aggregate of $4,902,000, consisting of (i) research and
development expenditure reimbursement of $4,352,000 and (ii) management fees
of $550,000 pursuant to the Product Development Agreement.
11
The Company has agreed to use its best efforts to manufacture and market
the Products in the Field of Activity directly or through third parties in the
Territory (the "Marketing Program"). The Company will have the right but not
the obligation to bring patent infringement actions against third parties that
infringe any of the Partnership's rights with respect to the Technology. The
Company will pay all expenses incurred in connection with such infringement
action, subject to a limited right of reimbursement by the Partnership.
Prior to the end of each quarter of each year, commencing on June 30,
1992, the General Partner will review the progress of the Research Program and
the Marketing Program during the preceding three-month period to determine
whether the continuation of all or any part thereof is in the best interests
of the limited partners of the Partnership. If at any time the Board of
Directors of the General Partner determines that the Research Program is
infeasible or uneconomic and should be discontinued with respect to all
Products, or if the Board of Directors of the General Partner determines not
to contribute the additional funds to the Partnership which are determined by
the General Partner to be required when all Partnership funds have been
expended and no FDA marketing approval has been received for the sale of any
Product in the Field of Activity, the Product Development Agreement and the
Purchase Option (as defined below under "Purchase Agreement") will terminate.
In order for the Company to fulfill its obligations under the Product
Development Agreement, the Partnership granted to Repligen an exclusive
royalty-bearing right and license (the "Interim License") to make, use, modify
and improve the Technology within the Field of Activity. Upon the first
marketing approval of rPF4 by the FDA, the Partnership will receive a payment
equal to twenty percent (20%) of the aggregate capital contributions of all
limited partners payable at the Company's option in cash or in Common Stock
(the "Milestone Payment"). During the term of the Interim License, the
Partnership will receive royalty payments within 60 days after the end of each
calendar quarter based on sales by Repligen, initially equal to 12.85% of Net
Revenues on any sales of rPF4 (the "Interim License Payments"). Such payments
may be reduced if sales in Europe are made through sublicensees or other third
parties. "Net Revenues" is defined as the proceeds from sales in the
Territory of rPF4 or any product used, or having regulatory approval for use,
in lieu of rPF4, or obviating the use of rPF4 (a "Competitive Product")
received by the Company, any affiliate of the Company or any licensee or
sublicensee of the Company (excluding sales to any Affiliate, licensee or
sublicensee for resale), less certain trade discounts, allowances, taxes and
commissions. The Interim License will terminate if Repligen does not exercise
the Purchase Option, but royalties on sales of competitive products will be
payable until the fifth anniversary of the expiration or termination of the
Purchase Option.
Purchase Agreement. Also in connection with the organization of the
Partnership, the Company and the Partnership entered into a certain Purchase
Agreement, dated February 28, 1992 (the "Purchase Agreement"). Under the
terms of the Purchase Agreement, each of the limited partners of the
Partnership granted the Company an irrevocable option (the "Purchase Option")
to purchase its interest in the Partnership. The Purchase Option is
exercisable only if all interests are to be purchased and such option is
exercised by sending a notice to all limited partners on a date during the
forty-five day period commencing on the date which is the earlier of (i) the
date which is the later of the last day of the first month in which the
Partnership shall have received Interim License Payments equal to fifteen
percent (15%) of the limited partners' capital contributions (excluding the
Milestone Payment) and the last day of the twenty-fourth month period after
12
the date of the Company's first commercial sale of any Product within the
Field of Activity and (ii) the last day of the forty-eighth month after the
date of such first commercial sale.
The Purchase Option will terminate upon the occurrence of any of the
following termination events: (i) the bankruptcy of the Company, (ii) the
cessation of operations by the Company, (iii) the seizure or attachment of all
or a substantial part of the Company's assets or (iv) the termination of the
Product Development Agreement. In addition, the Purchase Option will
terminate upon the earlier of (i) the Company's notice to the Partnership and
the limited partners that it does not intend to exercise the Purchase Option
or (ii) the expiration unexercised of the Purchase Option. Upon any such
termination, the Partnership will be free to license or sell the Technology.
If the Company exercises the Purchase Option, the Company will pay to each
limited partner an advance payment of $40,000 per interest plus certain
royalty payments, both of which are payable in the manner described below.
If, however, a limited partner elects pursuant to the Purchase Agreement to
receive one fixed payment of Common Stock in full satisfaction of his right to
receive the payments described in the preceding sentence, the Company shall
pay to such limited partner 2,750 shares of Common Stock per Unit (the "Fixed
Share Payment") subject to appropriate adjustments in the event of stock
splits, stock dividends, recapitalizations, mergers and similar appropriate
adjustments, less the amount which the Class B Limited Partner of the
Partnership will be entitled to receive, as described below. The Fixed Share
Payment for each Class A Limited Partnership Interest will be reduced by the
number of shares (the "Fixed Share Class B Threshold Amount") equal to the
quotient the numerator of which is (x) five percent (5%) of the amount which
all distributions with respect to such interest plus the value of the
aggregate Fixed Share Payment have exceeded $50,000 (unless Payout (as defined
in subparagraph 4.1.1 of the Partnership Agreement) has occurred under the
Partnership Agreement, in which case five percent (5%) of the value of the
aggregate Fixed Share Payment shall be the numerator) and the denominator of
which is (y) the average closing price per share of the Common Stock for the
15 trading days immediately preceding the fifth trading day prior to the
purchase date. The advance payment may be paid, at the Company's option, in
(i) cash or (ii) Common Stock in an amount equal to the number of shares of
Common Stock obtained by dividing $40,000 by ninety-five percent (95%) of the
average closing price per share of Common Stock for the 15 trading days
immediately preceding the fifth trading day prior to the date the Purchase
Option is exercised (subject to adjustments as aforesaid).
Under the terms of the Purchase Agreement, the Company agreed that it
will, on or prior to the date that it exercises the Purchase Option, register
under the Securities Act of 1933, as amended, all shares of Common Stock to be
delivered to Investors under the Purchase Agreement. Shares of Common Stock
may be used to make the advance payment only if they are then listed on a
national securities exchange or quoted on the Nasdaq National Market System.
In addition to the advance payment described above, but subject to the
limitations stated below, each Class A Limited Partner that has not elected to
receive the Fixed Share Payment will receive quarterly payments equal to such
Class A Limited Partner's pro rata portion (based on the ratio that such Class
A Limited Partner's capital contribution to the Partnership bears to the
aggregate capital contributions of (i) all limited partners or (ii) after the
Class B Threshold Date (as defined below), all Class A Limited Partners) of
twelve percent and 85/100 percent (12.85%) of revenues on sales of Products
in the Field of Activity; provided that such payments may be reduced if such
13
sales in Europe are made through sublicensees or other third parties. After
each Class A Limited Partner has received payments pursuant to the Purchase
Agreement aggregating seven hundred percent (700%) of its capital
contribution, such royalties will be reduced to seventy-five percent (75%) of
the amounts stated above, and after each such Class A Limited Partner has
received payment pursuant to the Purchase Agreement aggregating one thousand
percent (1,000%) of its capital contribution, such royalties will be reduced
to thirty-three and one-third percent (33 1/3%) of the amount stated above.
Beginning with the first day (the "Class B Threshold Date") of the calendar
quarter following the calendar quarter by the end of which each Class A
Limited Partner will have received distributions pursuant to the Partnership
Agreement and the Purchase Agreement in an aggregate amount equal to or
greater than $50,000 for each Unit (or $25,000 for each half Unit) owned by
such Class A Limited Partner, the Class A Limited Partners will receive only
ninety-five percent (95%) of the above royalties. Such royalties will
terminate on the last day of the calendar quarter in which the eleventh
anniversary of the Purchase Date occurs (the "Cut-Off Date"). Under the terms
of the registration statement filed in March 1994 (see "1994 Exchange Offer")
the holders of Limited Partner Warrants and Class B Warrants had the option to
exchange their existing warrants for new warrants with an exercise price
reduced from $22.73 to $9.00. In addition, the initial royalty rate will be
reduced from 12.85% to 9.00% and the warrant exercise period will be extended
for one year, until March 31, 2000. Acceptance of this offer constituted an
agreement to amend the Purchase Agreement. In March 1995, Repligen offered to
modify the Existing Warrants and Exchange Warrants for those Limited Partners
who made all their installment payments (see "1995 Warrant Modification
Offer").
If the Company exercises the Purchase Option, the Class B Limited Partner
will receive (i) a number of shares of Common Stock equal to 5,500 multiplied
by the percentage of Class A Limited Partnership Interests being purchased
with Fixed Share Payments, (ii) the number of additional shares of Common
Stock equal to the Fixed Share Class B Threshold Amount (as defined above)
multiplied by the number of Class A Limited Partnership Interests being
purchased with Fixed Share Payments and (iii) an amount equal to the following
amounts multiplied by the percentage of Class A Limited Partnership Interests
not being purchased with Fixed Share Payments: A) an advance payment of
$80,000, payable in cash or stock in the same manner as described above for
Class A Limited Partners not receiving Fixed Share Payments, and (B) quarterly
payments equal to (x) prior to the Class B Threshold Date, the Class B Limited
Partner's pro rata portion (based on the ratio that the Class B Limited
Partner's capital contribution bears to the aggregate capital contributions of
all limited partners) of the royalties described in the preceding paragraph
and (y) beginning with the Class B Threshold Date and ending with the Cut-Off
Date, five percent (5%) of all such royalties.
The Purchase Agreement provides that, at any time after the Company has
purchased the interests, the Company will have the right to make offers to pay
cash or other consideration in satisfaction of its outstanding royalty payment
obligations under the Purchase Agreement. If at any time Class A Limited
Partners holding at least sixty-six and two-thirds percent (66 2/3%) in value
of the interests of all former Class A Limited Partners who are receiving
royalty payments ("Class A Royalty Payment Recipients") shall have accepted
the terms of any such offer, the Company will have the right, for 60 days
after the date on which such Class A Royalty Payment Recipients have indicated
acceptance, to prepay its obligations to all such Class A Royalty Payment
Recipients. Such prepayment will be on the terms of the most recent offer
accepted by such Class A Royalty Payment Recipients.
14
The Company also agreed to use its best efforts to manufacture Products
and to sell the Products for use in the Field of Activity or, if the Company
determines that such manufacture and sale is not commercially practicable, it
will use its best efforts to license or sell the Technology to a third party.
The Company is not permitted to assign, delegate or transfer its rights
under the Purchase Agreement (with certain exceptions) without the prior
written consent of (i) sixty-six and two-thirds percent (66 2/3%) of the Class
A Limited Partners from whom the Company has purchased the Class A Interests
for which the Company shall not have made all payments required to be made
pursuant to the Purchase Agreement and (ii) the Class B Limited Partner, which
consent shall not be unreasonably withheld. The Partnership Agreement
provides for the allocation among the limited partners of any proceeds
resulting from the assignment, delegation or transfer of the Company's rights
under the Purchase Agreement. The limited partners are not permitted to
assign, transfer, or sell their rights under the Purchase Agreement without
the prior written consent of the Company, which consent may be withheld in the
Company's absolute discretion, except that (i) the Limited Partners may assign
the Common Stock delivered to them pursuant to the Purchase Agreement and
(ii) the Class B Limited Partner may assign its rights to any present or
former officer(s) or director(s) of PaineWebber Development Corporation.
1994 Exchange Offer. In June 1994, Repligen completed an exchange offer
pursuant to which the Company offered to the holders (the "warrantholders") of
Limited Partner Warrants and Class B Warrants the opportunity to exchange
their existing warrants (the "Existing Warrants") for newly issued warrants
(the "Exchange Warrants"). Warrantholders holding warrants to purchase
approximately 2,069,150 shares of Repligen's common stock accepted the
exchange offer. The principal effects of acceptance of the exchange offer are
(i) the exercise price under the Exchange Warrants is $9.00 per share instead
of $22.73 per share under the Existing Warrants but will increase to $14.00
per share 90 days after the Company notifies the warrantholders that the
closing price of Repligen's common stock is equal to or exceeds $18.00 per
share for any 20 out of 30 consecutive trading days; (ii) an extension by one
year in the exercise period of the Exchange Warrants to March 31, 2000,
instead of March 31, 1999 for the Existing Warrants; and (iii) a reduction in
the royalty rate during the Royalty Period, as defined, to 9.00% of net
revenue from any sales of rPF4 instead of 12.85% of such net revenues as
currently provided for in the Purchase Agreement. Acceptance of the exchange
offer resulted in pro rata reductions in certain other royalties and amended
the Purchase Agreement between Repligen and each exchanging warrantholder.
The Company believes that the reduction in royalties payable under the
Purchase Agreement will facilitate its ability to fund rPF4 development costs
through the negotiation of joint venture or other collaboration arrangements
relating to rPF4 with third parties.
1995 Warrant Modification Offer. In March 1995, Repligen offered to
modify the Existing Warrants and Exchange Warrants as follows for those
Limited Partners who made all their installment payments:
Existing Warrants:
* Existing Warrants were modified to reduce the exercise price from
$22.73 per share to $9.00 per share;
* the exercise period was extended by one year to March 31, 2000; and
15
* the exercise price will increase to $14.00 per share 90 days after
Repligen notifies holders of Existing Warrants that the closing price
of Repligen's common stock is equal to or exceeds $18.00 per share for
20 out of 30 consecutive trading days.
Exchange Warrants:
* Exchange Warrants were modified to reduce the exercise price from
$9.00 per share to $2.50 per share for 1,000 shares and $3.50 per
share for 1,900 shares for each full Unit;
* the exercise period was extended by one year to March 31, 2001; and
* the exercise price will increase to $8.00 per share 90 days after
Repligen notifies holders of Exchange Warrants that the closing price
of Repligen's common stock is equal to or exceeds $12.00 per share for
20 out of 30 consecutive trading days.
Each holder of an outstanding warrant who made the fourth installment
payment is free to accept or reject these modifications. As of June 9, 1995,
601 of the 811 non-defaulted Class A Units had accepted the modifications.
Included in the operating loss for fiscal years 1995, 1994 and 1993 is
$1,150,000, $1,345,000 and $854,000, respectively, of amortization of the
aggregate value of the Existing Warrants and Exchange Warrants. The remaining
unamortized value of all warrants outstanding will be amortized in full during
the Company's fiscal year ending March 31, 1996. There will not be a
corresponding reduction in the respective royalty rates as a result of these
modifications.
Dana-Farber Agreement. In July 1993, Repligen secured exclusive,
worldwide rights under pending patent applications covering novel B7
costimulatory molecules from Dana-Farber. Under the terms of the agreement
with Dana-Farber, Repligen has exclusive rights to B7-1 patent applications
owned by Dana-Farber in therapeutic and prophylactic fields. Repligen and
Dana-Farber have jointly filed patent applications on B7-2 and related
molecules. Dana-Farber will receive royalties from Repligen on net sales of
products commercialized under the agreement.
Patents, Licenses and Proprietary Rights
The Company seeks to protect its products and technologies under United
States and international patent laws and other intellectual property laws. As
of March 31, 1995, Repligen has been awarded approximately 75 patents in the
United States and foreign countries. In addition, the Company has licenses
and rights to obtain licenses (many of which are, or, if options are
exercised, will be, exclusive licenses) under patents and patent applications
which have been filed by its institutional collaborators.
In April 1993, the United States Patent and Trademark Office (the "PTO")
issued Repligen a patent covering the use of PF4 and rPF4 to neutralize
heparin. In February 1994, the PTO issued Repligen a patent for the systemic
administration of rPF4 to inhibit tumor growth in patients with metastatic
cancer. Patent applications have been filed by Repligen for these uses in
Canada, Europe and Japan and certain other uses of rPF4 in the United States,
Canada, Europe and Japan. See "Description of the Business of the Company -
rPF4 Program". In June 1994, the Company was awarded two United States
16
patents covering the use of AM285 and other related small molecules, one for
the treatment of viral infections and the other for inhibition of tumor
growth.
In November 1990, the Company entered into an exclusive, worldwide license
agreement with the University of Michigan under two issued U.S. patents and
corresponding foreign patent applications covering the use of monoclonal
antibodies capable of blocking CD11b to inhibit inflammation. In January
1991, the Company entered into an exclusive, worldwide license agreement with
the Fred Hutchinson Cancer Research Center for a hybridoma cell line
designated as 60.1 that secretes a monoclonal antibody capable of specifically
binding to the CD11b antigen. In July 1991, the Company obtained from Boston
University exclusive, royalty-bearing worldwide rights to certain patent
applications and technology related to Interleukin-8 receptor polypeptides.
In September 1991, Kabi Pharmacia AB licensed to the Company on an exclusive
basis a U.S. patent relating to the use of anti-CD11b and anti-CD18 antibodies
in reperfusion therapy. In May 1992, Repligen obtained from the University of
Michigan exclusive, royalty-bearing worldwide rights to certain patent
applications covering methods of immune modulation involving the B7/CD28
pathway. In September 1992, Rockefeller University licensed to the Company on
an exclusive, worldwide basis certain patent applications related to a
synthetic multiple antigen peptide system which could be used to develop AIDS
vaccines. One of the patent applications licensed from Rockefeller University
was issued a United States patent in July 1993. In April 1995, Repligen
notified Rockefeller University it was terminating the license agreement. In
September 1992, Repligen's wholly-owned subsidiary, Amira, Inc., obtained from
the University of Connecticut exclusive, royalty-bearing rights under an
issued United States patent covering the use of cyclocreatine to treat
ischemia in muscle tissue. In July 1993, Repligen secured exclusive,
worldwide rights under pending patent applications covering novel B7
costimulatory molecules from Dana-Farber. In July 1993, the Company secured
exclusive worldwide rights from Bristol-Myers Squibb under an issued U.S.
patent and pending foreign patent applications relating to the use of PF4 to
inhibit the growth and proliferation of neoplastic cells.
In addition, the Company has entered into a non-exclusive license
agreement with Stanford University for use of basic recombinant DNA technology
which is purportedly covered by three issued patents (the Cohen-Boyer patents)
belonging to Stanford University. In February 1992, the Company entered into
a license agreement with Texas A&M University for use of a patent covering
basic recombinant baculovirus expression vector systems ("BEVS") and methods
for the introduction and expression of heterologous genes in cultured insect
cells using BEVS. In addition, the Company has entered into a sublicense
agreement with Cambridge BioScience Corporation for the use of certain patents
pending or issued to the Harvard School of Public Health relating to gp120 and
gp160. The Company also has acquired license rights to a Kabi Pharmacia AB
patent covering methods for immobilization of Protein A for purification of
immunoglobulins.
All of the above licenses, with the exception of the Bristol-Myers Squibb
license and the Fred Hutchinson Cancer Research Center license, are subject to
the payment of royalties by Repligen.
It is not known how the PTO or a court will resolve issues that may
arise relating to the validity, scope and inventorship of patents owned by, or
licensed by, the Company. In general, the patent position of biotechnology firms
is highly uncertain and involves complex legal, scientific and factual
questions. Issues remain as to whether patent applications of the type made 17 by,
or licensed by, the Company will ultimately be granted as well as to the
ultimate degree of protection or commercial benefit that will be afforded to
Repligen by any patents issuing from such applications. There can be no
assurance that any patents issued to, or licensed by, the Company will not be
infringed or circumvented by others or will provide any commercial benefit to
the Company.
The Company's products and processes might conflict with patents that
have been or may be granted to competitors, universities or others. Issues may
arise with respect to claims of others to rights in the Company's patents or
patent applications. As the biotechnology industry expands and more patents are
issued, the risk increases that the Company's processes and products may give
rise to claims that they infringe the patents of others. Such other person could
bring legal actions against Repligen or its commercial partners claiming damages
and seeking to enjoin them from manufacturing, marketing and clinically testing
the affected product or process. If any such action were successful, in addition
to any potential liability for damages, Repligen or its commercial partners
could be required to obtain a license in order to continue to manufacture or
market the affected product or to use the affected process. No assurance can be
given that Repligen or its commercial partners could prevail in any such action
or that any license required under any such patent would be made available or,
if available, would be available on acceptable terms. Repligen expects that
there may be significant litigation in the industry regarding patent and other
intellectual property rights and that such litigation could consume substantial
resources.
The Company requires all employees, members of the Scientific Advisory
Board, members of the Clinical Advisory Board, consultants and commercial partners
to agree to keep the Company's proprietary information confidential. There can
be no assurance, however, that these agreements will be honored.
Competition
Repligen is engaged in a business characterized by extensive research
efforts, rapid developments and intense competition. Competition can only be
expected to increase in the future. Repligen competes with specialized
biotechnology companies and large pharmaceutical companies, many of which have
more capital, more extensive research and development capabilities and greater
marketing and human resources than the Company. With respect to the cancer and heparin reversal product candidates which
the Company is developing on behalf of the Partnership, Repligen is not aware
of any other efforts to develop rPF4 for therapeutic use. However, several
competitors in the pharmaceutical and biopharmaceutical industries have
substantial research programs underway in oncology utilizing a broad spectrum
of therapeutic approaches, including monoclonal antibody-, antisense-, and
gene therapy-based technologies. Repligen is aware of a compound, heparinase
I, in Phase I clinical study for post-surgical reversal of heparin. However,
several substitutes for heparin itself which may have anticoagulant
applications are currently under development which would not be reversible by
either rPF4 or protamine. There may be other angiogenesis inhibitors and
heparin neutralizers of which Repligen is unaware.
There are numerous competitors
in the developmentarea of anti-inflammatory
molecules.anti-inflammatories, immune modulation and the Company's other
research programs. At this time, it is impossible to determine which approach,
if any, currently being pursued will ultimately become successful, and
consequently, any one of Repligen's competitors has the potential to develop a 18
successful approach to inflammation inhibition. However, the Company believes
that its multiple approaches to the inhibition of inflammation are unique and
prosecutable by patents and may give the Company a potential competitive
advantage in this market.
Government Regulation
The Company's business activities are subject to extensive regulation
for safety and efficacy by numerous governmental authorities in the United
States and other countries. In the United States, the Company's activities are
subject to rigorous regulation by the FDA,United States Food and Drug Administration
("FDA"), and other Federal, state and local agencies governing, among other
things, research and development activities and the testing, manufacturing,
safety, effectiveness, labeling, storage, record keeping, approval, advertising
and promotion of the Company's current products and any products which may be
developed by the Company and its commercial partners. Further, additional
government regulation may be established which could affect regulatory approval
of the Company's products.
The standard process required by the FDA before a pharmaceutical agent
may be marketed in the United States includes (i) preclinical laboratory and
animal tests, (ii) submission to the FDA of an Investigational New Drug
("IND") application, which must become effective before human clinical trials
may commence, (iii) adequate and well-controlled human clinical trials to
establish the safety and efficacy of the drug in its intended indication, (iv)(iii)
submission to the
6
FDA of a New Drug Application ("NDA") with respect to drugs and a Product
License Application ("PLA") with respect to biologics and (v)
FDAfor approval of the NDA or PLA prior to any
commercial sale or shipment of the drug or biologic. In addition to obtaining FDA approval for each product,
each domestic drug manufacturing establishment must be registered or licensed
by the FDA. Domestic manufacturing establishments are subject to inspections
by the FDA and by other Federal, state and local agencies and must comply with
FDA good manufacturing practices ("GMP") as appropriate for production. Clinical trials are
typically conducted in three sequential phases, which may overlap. In Phase I,
the initial introduction of the drug to humans, the drug is tested for safety
(adverse effects), dosage tolerance, mechanism of action and metabolism. Phase
II involves studies in a limited patient population to (i) evaluate the
effectiveness of the drug for specific targeted indications, (ii) determine
dosage tolerance and optimal dosage and (iii) identify possible adverse effects
and safety risks. When a compound is found to be effective and to have an
acceptable safety profile in Phase II evaluations, Phase III trials are
undertaken to further evaluate clinical effectiveness and to further test for
safety within an expanded patient population at geographically dispersed
clinical study sites. There can be no assurance that Phase I, Phase II or Phase
III testing will be completed successfully within any specified time period, if
at all, with respect to any of the Company's products subject to such testing.
Repligen will have its product candidates manufactured by third parties who are
able to comply with the good manufacturing requirements of the FDA.
The process of completing clinical testing and obtaining FDA approval
for a new human drug or biologic is likely to take a number of years and require
the expenditure of substantial resources. Even after initial FDA approval has
been obtained, further studies may be required to provide additional data on
safety or to gain approval for the use of a product as a treatment for clinical
indications other than those for which the product was initially tested. Also,
the FDA may require post-marketing testing and surveillance programs to monitor
the drug's efficacy and side effects. Results of these 19
post-marketing programs
may prevent or limit the further marketing of the products.
Repligen's commercial partners are generally responsible for funding and
managing regulatory compliance necessary to commercialize their products
incorporating Repligen's products. The Company is responsible for funding and
managing regulatory compliance necessary for any products manufactured and
supplied by it. There can be no
assurance that required regulatory approvals for processes or products
containing Company products will be sought or obtained, that significant delays
will not be encountered or that substantial expenses will not be incurred.
Product Liability
The manufacturing, testing and marketing of products entails an inherent
risk of product liability. While the Company has taken and will continue to take
what it believes are adequate precautions, there can be no assurance that it
will avoid significant product liability exposure. The Company maintains limited
product liability insurance. There can be no assurance that adequate insurance
coverage will be available at acceptable costs, if at all, to cover potential
liability claims. An inability to obtain insurance at acceptable costs or to
otherwise protect against potential product liability claims could inhibit or
prevent the commercialization of products developed by the Company. The
obligation to pay any product liability claim or recall could have a material
adverse effect on the business or financial condition of the Company.
Employees
On March 31, 1995,As of June 14, 1996, the Company had 104 full-time15 employees. Of the 10415 employees,
827 were engaged in research and development operations and production and 228 in administrative and marketing
functions. Doctoral degrees are held by 225 of the Company's full-time employees.
Cautionary Statement Regarding Forward-Looking Statements
Statements in this Annual Report on Form 10-K under the captions
"Business" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," as well as oral statements that may be made by the
Company or by officers, directors or employees of the Company acting on the
Company's behalf, that are not historical fact constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that could cause the actual results of the
Company to be materially different from the historical results or from any
results expressed or implied by such forward-looking statements.
7
Item 2: DESCRIPTION OF PROPERTY
The Company's principal executive offices, primary research facilities and
microbial production pilot plantfacilities are located at 117 Fourth Avenue in Needham,
Massachusetts. The Company occupies approximately 13,000 square feet of
research, manufacturing and office space in Needham under a four year sublease
from T Cell Sciences, Inc. In May 1996 the Company's lease at One Kendall
Square, in
Cambridge, Massachusetts. The Company's facilitiesMassachusetts expired and the Company terminated all of its
operations at One Kendall Square in
Cambridge currently occupies approximately 97,000 square feet containing 20
research laboratories, an animal facility, an on-site cell culture/virology
facility (including a BL-3 containment area), a pilot production facility
meeting GMP for the production of clinical materials and office space for both
scientific and administrative purposes. The Company's 44,600 square foot cell
culture and purification facility is located in Needham Heights,
Massachusetts. Approximately 25,000 square feet of this facility consisting
primarily of laboratory and office space have been subleased to T Cell
Sciences, Inc.facility. The 10,500 square feet of laboratory space located
at 83 Rogers Street, Cambridge, Massachusetts formerly occupied by Amira has been subleased by the Company
to BIODEVELOPMENT Laboratories, Inc. TheIn conjunction with the acquisition of
Glycan, the Company has available production capabilitiesassumed a lease for microbial
fermentationapproximately 2,000 square feet of
office and purification in Cambridge. This intermediate stage
production facility has provided the Company's ability to produce clinical
grade materials in compliance with GMP. Prior to the commercial manufacture
and sale of any products currently being developed by it, the Company will
20
need to either engage a contract manufacturer or construct additional
manufacturing facilities and obtain appropriate licenses for such facilities
from regulatory authorities, including the FDA.laboratory space at 100 Inman Street, Cambridge, Massachusetts which
terminates on September 30, 1996.
Item 3: LEGAL PROCEEDINGS
Not applicable.
Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company
through solicitation of proxies or otherwise, during the last quarter of the
fiscal year ended March 31, 1995.1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names, ages and positions of the
executive officers of the Company:
Name Age Positions
---- --- ---------
Walter C. Herlihy 44 President, Chief Executive Officer and Director
James R. Rusche 42 Vice President, Research and Development
Daniel P. Witt 48 Vice President, Business Development
Avery W. Catlin* 48 Vice President, Finance and Chief Financial Officer
* In April 1996, Mr. Catlin left the Company to pursue other interests.
Walter C. Herlihy, Ph.D. joined the Company in March 1996 as President,
Chief Executive Officer and Director in connection with the Company's merger
with Glycan Pharmaceuticals, Inc. From 1993 to 1996, Dr. Herlihy was the
President and CEO of Glycan. From 1981 to 1993, he held numerous research
positions at Repligen, most recently as Senior Vice President, Research and
Development. Dr. Herlihy holds an A.B. degree in chemistry from Cornell
University and a Ph.D. in chemistry from MIT.
James R. Rusche, Ph.D. joined the Company in March 1996 as Vice
President, Research and Development in connection with the Company's merger
with Glycan Pharmaceuticals, Inc. From 1994 to 1996, Dr. Rusche was a Vice
President, Research and Development of Glycan. From 1985 to 1993, he held
numerous research positions at Repligen, most recently as Vice President,
Discovery Research. Dr. Rusche holds a B.S. degree in microbiology from the
University of Wisconsin, LaCrosse and a Ph.D. in immunology from the University
of Florida.
8
21Daniel P. Witt, Ph.D. joined the Company in March 1996 as Vice President,
Business Development in connection with the Company's merger with Glycan
Pharmaceuticals, Inc. From 1993 to 1996, Dr. Witt was Vice President, Business
Development of Glycan. From 1981 to 1993, he held numerous research positions at
Repligen, most recently as Vice President, Technology Acquisition. Dr. Witt
holds a B.A. degree in chemistry from Gettysberg College and a Ph.D. in
biochemistry from the University of Vermont.
Avery W. Catlin left the Company in April 1996 to pursue other interests.
Prior to leaving, he was Vice President, Finance, Chief Financial Officer,
Secretary and Treasurer of the Company. He joined the Company in June 1992 as
Corporate Controller.
9
PART II
Item 5: MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Market Information
The Company's Common Stock is traded on the Nasdaq National Market
System under the symbol RGEN. The following table sets forth for the periods
indicated the high and low sale prices for the Common Stock as reported by
NASDAQ.
Fiscal 1994: High Low
- --------------------------------------------------- ----------- ----------
First Quarter $ 7 3/4 $ 5 1/2
Second Quarter 7 1/4 6
Third Quarter 10 1/2 6
Fourth Quarter 8 5
Fiscal 1995: High Low
- --------------------------------------------------- ----------- ----------
First Quarter $ 6 $ 3 1/4
Second Quarter 4 1/8 2 1/8
Third Quarter 3 3/8 1 5/8
Fourth Quarter 3 1/8 1 5/8
Fiscal 1995: High Low
----------- ---- ---
First Quarter $6.00 $3.25
Second Quarter 4.125 2.125
Third Quarter 3.375 1.625
Fourth Quarter 3.125 1.625
Fiscal 1996:
-----------
First Quarter $3.00 $1.25
Second Quarter 2.125 1.188
Third Quarter 1.938 0.875
Fourth Quarter 1.688 0.938
On June 15, 1995,14, 1996, the reported closing price of the Common Stock as
reported by NASDAQ was $2 5/16$1.125 per share.
Stockholders
As of June 15, 1995,14, 1996, there were approximately 1,2201,092 stockholders of
record of the Company's common stock.stock, excluding stockholders whose shares were
held in nominee name.
Dividends
The Company has not paid any dividends since its inception and does not
intend to pay any dividends on its Common Stock in the foreseeable future.
10
22
Item 6: SELECTED CONSOLIDATED FINANCIAL DATA
Years Ended March 31,
----------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
1991
---------- ---------- ---------- ---------- ------------------ --------- -------- -------- ---------
(In thousands, except per share amounts)
Operating Statement Data:
Revenues:
Research and development:development $ 7,949 $ 10,988 $ 19,392 $ 21,444 $ 6,658
$ 6,564
Product 1,874 3,885 4,947 2,113 1,998
1,026
Investment and other 1,036 2,069 2,494 3,765 3,003
2,659
---------- ---------- ---------- ---------- ------------------- --------- -------- -------- --------
10,859 16,942 26,833 27,322 11,659
10,249
---------- ---------- ---------- ---------- ------------------- --------- -------- -------- --------
Costs and expenses:
Research and development 12,314 31,012 35,919 30,705 13,741
11,696
Cost of goods sold 1,516 1,535 3,933 1,194 865
344
Selling, general and
administrative 4,925 4,673 6,206 6,710 4,064
3,922
Interest 58 372 312 -- --
1
Restructuring charge 3,567 11,300 -- -- -- --
Charge for acquired
research and development -- -- -- -- 5,764
--
---------- ---------- ---------- ---------- ------------------- --------- -------- -------- --------
22,380 48,892 46,370 38,609 24,434
15,963
---------- ---------- ---------- ---------- ------------------- --------- -------- -------- --------
Net loss $ (11,521) $ (31,950) $(19,537) $(11,287) $(12,775)
$ (5,714)
========== ========== ========== ========== =================== ========= ========= ========= =========
Net loss per common share $ (0.75) $ (2.08) $ (1.53) $ (0.93) $ (1.14)
$ (0.63)
========== ========== ========== ========== =================== ========= ======== ======== ========
Weighted average common
shares outstanding 15,370 15,356 12,788 12,085 11,218
9,048
========== ========== ========== ========== =================== ========= ======== ======== ========
March 31,
----------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
1991
---------- ---------- ---------- ---------- ------------------ --------- -------- -------- ---------
(In thousands)
Balance Sheet Data:1/
Cash and investments investments2/ $ 7,222 $ 15,302 $ 29,215 $ 40,090 $ 38,685
$ 30,089Working capital 4,154 9,070 32,517 31,026 34,185
Total assets 9,231 31,330 59,611 63,483 54,191
37,051
Long-term debt -- -- -- 4,620 -- --
Accumulated deficit (123,042) (111,520) (79,570) (60,033) (48,745)
(35,971)
Stockholders' equity 15,576 46,737 48,877 50,937 33,7914,809 15,576 46,737 48,877 50,937
- ----------------
1/ No dividends were declared or paid during any of the periods presented.
2/ Includes long-term investment securities of $4,591,000 and $7,329,000 in
fiscal years 1993 and 1992, respectively.
11
23
- ---------------
No dividends were declared or paid during any of the periods presented.
Includes long-term investment securities of $ -- , $ -- , $4,591,000, $7,329,000 and $7,526,000,
respectively.
Item 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Repligen is a biopharmaceutical company engaged in the research development and
manufacturedevelopment of therapeutic products for human health care. A substantial portion
of the Company's revenues and expenses ishas been associated with research and
development activities conducted in collaboration with commercial partners and
Repligen Clinical Partners, L.P. (the "Partnership"). In September 1995 and
April 1996, respectively, the Company's arrangements with its primary commercial
partner, Eli Lilly and Company ("Lilly") and the Partnership were terminated.
The Company currently does not have any significant research and development
funding arrangements. The Company also devotes significant resources to the
research and development of proprietary products and scale-up of research and manufacturing facilities.products. In addition, the Company
receives income from its investments and through the sale of products that are
manufactured by the Company. The Company has incurred cumulative operating
losses since its inception in 1981. As of March 31, 1995,1996, its accumulated
deficit was $111,520,000.$123,042,000. During fiscal 1996, the Company completed a major
downsizing and restructuring of its activities, including the termination of
certain research programs, which significantly reduced its cash burn rate. These
actions were completed in an effort to stabilize Repligen's financial condition
and preserve its cash resources. As a result of the reduction of operating
expenses and elimination of debt, the Company believes it has adequate cash
reserves at March 31, 1996 to finance its operations at their current levels for
at least the next twenty four months.
Results of operations
Fiscal Year Ended March 31, 1996 Versus Fiscal Year Ended March 31, 1995
Revenues. Total revenues for fiscal 1996 were $10,859,000 as compared to
$16,942,000 in fiscal 1995, a decrease of $6,083,000. Research and development
revenues for fiscal 1996, totaling $7,949,000, decreased by $3,040,000 or 28%
from fiscal 1995 levels. This decrease reflects reduced product development
funding from Lilly with respect to the Company's inflammation inhibition (CD11b)
program and from the Partnership with respect to rPF4, offset in part by a
$2,000,000 fee paid by Genetics Institute, Inc. in September 1995 for the
assignment of intellectual property and the transfer of certain reagents
associated with the Company's immune modulation technology and a $525,000
license fee paid by Genentech, Inc. in December 1995 for the exclusive
sublicense to make and sell antibody fragments, engineered peptides and other
small molecules that bind to CD18 and CD11a. The decrease in funding from Lilly
in fiscal 1996 was due to the termination of the CD11b program. Lilly terminated
its collaboration and licensing agreement with the Company in September 1995,
with respect to the joint development of the CD11b program. Under the terms of
the agreement, the entire CD11b program, including preclinical and clinical data
packages for product candidates m60.1 and h60.1, were returned to the Company.
Revenues recognized under the Lilly agreement totaled $2,613,000 in fiscal 1996.
The decrease in funding from the Partnership reflects a decrease in billings
based on lower levels of research activity and a decrease in the need for
process development and manufacturing activity as both products under
development had entered Phase I/II clinical trials and is also due to lack of
resources of the Partnership, limiting the Partnership's ability to fund the
rPF4 program. Research and development revenues recognized under the rPF4
program totaled $2,693,000 in fiscal 1996.
Product revenues for fiscal 1996 were $1,874,000 compared to $3,885,000
in fiscal 1995. The decrease of $2,011,000 or 52% was due to a reduction in
product sales volume of the Company's rProtein A(TM) and diagnostic reagent
products by $590,000, sales of product to Hoffmann-LaRoche and Abbott
Laboratories totaling $2,049,000 in fiscal 1995 which were not realized in
fiscal 1996, offset in part by the recognition of contract service revenues of
$549,000 generated by the Company.
Investment income decreased by $687,000 from fiscal 1995 levels due
primarily to lower average funds available for investment in fiscal 1996. The
Company anticipates that without additional financingexpects investment income to continue to decrease due to its current
cash position. Other revenues for the fiscal 1996 period decreased by $346,000
from fiscal 1995 due primarily to a decrease in calendar 1995 or earlymanagement fees received from
the Partnership.
12
Expenses. During fiscal 1996, from either an offering by Repligen of its securities, from a third party
funding, or the merger of Repligen with or the acquisition of Repligen by an
entity capable of fundingCompany substantially downsized and
consolidated its operations Repligen willin order to stabilize the Company's financial
condition and preserve its cash reserves. During the fourth quarter, the Company
recorded a charge of $3,567,000 to cover severance costs and related benefits,
the settlement of equipment and facility lease obligations and the write-off of
certain leasehold improvements and equipment no longer being utilized, reduced
in part by cash received from the sale of assets and the reversal of certain
accruals no longer required due to the downsizing. The total restructuring
charge of $3,567,000 included cash related expenditures of $1,246,000 and a
non-cash charge of $2,321,000. The cash related expenditures consisted of
$333,000 of severance and related benefits for approximately 20 terminated
employees, $1,991,000 of lease settlement payments and $172,000 in legal fees
associated with the restructurings, offset by cash of $1,250,000 received from
the sale of excess equipment. The non-cash charge related to the writeoff of
leasehold improvements and equipment no longer being utilized, offset by the
reversal of accruals no longer required. See Note 2 of Notes to Consolidated
Financial Statements.
Research and development expenses for fiscal 1996, totaling $12,314,000,
decreased by $18,698,000, or 60%, from fiscal 1995 levels. The decrease in
expenses reflects a reduction in research and development headcount and related
expenses, decreased development activities, lower expenditures for clinical
trials and the Company's efforts to reduce costs. The Company expects research
and development expenses to be forcedsignificantly reduced in 1997 as compared to curtail
or cease1996
due to the restructuring.
Cost of goods sold for fiscal 1996 decreased by $20,000 from the prior
fiscal year. Cost of goods sold in fiscal 1996 were 80% of product revenues
versus 40% of product revenues for fiscal 1995. The increase in this percentage
is the result of a change in product mix between fiscal years and is
attributable to lower margins experienced on contract service revenues in fiscal
1996 and the writeoff of products no longer being sold.
Selling, general and administrative expenses for fiscal 1996, totaling
$4,925,000, increased $251,000 from fiscal 1995 due primarily to increases in
legal expenses and employee retention costs offset in part by a decrease in
administrative personnel and related expenses as part of the Company's cost
reduction efforts. The Company expects administrative expenses to be
significantly reduced in 1997 as compared to 1996 due to the restructuring.
Interest expense for fiscal 1996 reflects interest incurred by the
Company through May 1995 when its operations.
Resultsterm loan with a bank was paid in full and the
decrease from the comparable fiscal 1995 period reflects a full twelve months of
operationsinterest incurred in fiscal 1995.
Fiscal Year Ended March 31, 1995 Versus Fiscal Year Ended March 31, 1994
Revenues. Total revenues for fiscal 1995 were $16,942,000 as compared to
$26,833,000 in fiscal 1994, a decrease of $9,891,000. Research and development
revenues for fiscal 1995 decreased by $8,403,000 or 43% from fiscal 1994 levels.
This decrease reflects reduced product development funding from Lilly with
respect to the Company's inflammation inhibition (m60.1/h60.1)CD11b program and from the Partnership with respect to
rPF4. The decrease in funding from Lilly in fiscal 1995 was caused by a decrease
in the need for process development, preclinical research and manufacturing
activity as the product under development hashad entered phase I/II trials.
Revenues recognized under the Lilly agreement totaled $6,262,000 in fiscal 1995.
The decrease in funding from the Partnership reflects a decrease in billings
based on lower levels of research activity and the decision of Repligen
management to fund a greater portion of the program out of its own cash reserves
in order to preserve the funds available of the Partnership. Research and
development revenues recognized under the rPF4 program totaled $4,352,000 in
fiscal 1995. In fiscal 1995, Repligen financed approximately $1,641,000 of the
program with its own funds through absorption of such expenditures.
Product revenues for fiscal 1995 were $3,885,000 compared to $4,947,000
in fiscal 1994. The decrease of $1,062,000 or 21% was due to reductions in
product sales volume and contract manufacturing revenues resulting from a 24
supply
arrangement obtained as part of the Company's acquisition of certain assets from
Abbott Biotech, Inc. in May 1992.
13
Investment income increased by $44,000 from fiscal 1994 levels due to
higher interest rates, offset in part by lower average funds available for
investment in fiscal 1995. Other revenues for the fiscal 1995 period decreased by $469,000
from the comparable fiscal 1994 period due primarily to a decrease in management fees received from
the Partnership.
Expenses. During fiscal 1995, the Company substantially restructured its
operations in an effort to reduce its current rate of expenditures and preserve its
available cash and investment balances. In the second quarter, the Company
recorded a charge of $975,000 to cover severance costs and related benefits, as
well as certain rental losses associated with the sublease of certain
facilities. During the fourth quarter of fiscal 1995, the Company recorded a
charge of $10,325,000 to cover severance costs and related benefits, rental
losses associated with the sublease of certain facilities, the write-off of
certain leasehold improvements, equipment and intangible assets which willwere no
longer
be utilized and to reserve for future operating lease payments for equipment
which willwas also no longer be utilized. The restructurings were done in order to
reorganize certain business operations and the Company's senior management team
to focus on the clinical development of certain lead product candidates. The
total restructuring charge of $11,300,000 included cash related expenditures of
$6,545,000 and a non-cash charge of $4,755,000. The cash related expenditures
consist of $2,035,000 of severance and related benefits for approximately 140
terminated employees, $3,250,000 of future operating lease payments for assets
no longer being utilized, $940,000 of rental losses associated with the sublease
of surplus lab and office space, and $320,000 of contract termination fees.
Approximately $1,076,000 of these expenses were paid during fiscal 1995 with the
majority of the balance expected to be paid during fiscal 1996. The non-cash charge related to
leasehold improvements, equipment and other intangibles no longer being
utilized. See Note 2 of Notes to Consolidated Financial Statements.
Research and development expenses for fiscal 1995 decreased by
$4,907,000, or 14%, from fiscal 1994 levels. The decrease in expenses reflects
decreased development activities, lower expenditures for clinical trials and the
Company's efforts to reduce costs and to focus its resources on the clinical
development of its two lead product candidates. The Company continues to be
committed to its research and development agreements with the Partnership and
Lilly and to moving these product candidates through clinical trials.
Cost of goods sold for fiscal 1995 decreased by $2,398,000 from the
prior fiscal year due primarily to decreased contract manufacturing revenues in
fiscal 1995. Cost of goods sold in fiscal 1995 were 40% of product revenues
versus 79% of product revenues for fiscal 1994. The decrease in this percentage
is the result of a change in product mix between fiscal years and is
attributable to higher margins experienced on contract manufactured products
shipped in fiscal 1995 which had been partly reserved in fiscal 1994 due to
uncertainty in future shipments.
Selling, general and administrative expenses for fiscal 1995 decreased
$1,533,000 from fiscal 1994 due primarily to decreases in administrative
personnel and related expenses as part of the Company's cost reduction efforts.
Interest expense for fiscal 1995 reflects interest incurred by the Company on
its term loan with a bank and the increase from the comparable fiscal 1994
period reflects increased interest rates.
25
Fiscal Year Ended March 31, 1994 Versus Fiscal Year Ended March 31, 1993
Revenues. Total revenues for fiscal 1994 were $26,833,000 as compared to
$27,322,000 in fiscal 1993, a decrease of $489,000. Research and development
revenues for fiscal 1994 increased by $1,698,000 or 10% from fiscal 1993
levels after exclusion of a one-time payment of $3,750,000 received in May
1992 from Eli Lilly and Company (Lilly) . This increase reflects product
development funding from the Partnership with respect to rPF4 and from Lilly
with respect to the Company's inflammation inhibition program. The increase
in funding from the Partnership and Lilly for fiscal 1994 is partially offset
by the lack of any research and development revenues from a supply agreement
with Abbott Laboratories that was completed in September 1992. Revenues
recognized under this agreement totaled $1,847,000 in fiscal 1993.
Product revenues for fiscal 1994 were $4,947,000 compared to $2,113,000 in
fiscal 1993. The increase of $2,834,000 or 134% is due to changes in product
sales volume and the timing of contract manufacturing revenues resulting from
a supply arrangement obtained as part of the Company's acquisition of certain
assets from Abbott Biotech, Inc. in May 1992.
Investment income decreased by $595,000 from fiscal 1993 levels due to
lower average funds available for investment and lower interest rates. Other
revenues for the fiscal 1994 period decreased by $675,000 from the comparable
fiscal 1993 period due primarily to the sale of the Company's 40% equity share
in Repligen Sandoz Research Corporation (RSRC) for $1,000,000 which was
recorded in fiscal 1993.
Expenses. Research and development expenses for fiscal 1994 increased
$5,213,000, or 17%, from fiscal 1993 levels. The increased expenses reflect
increased development activities and greater expenditures for clinical trials.
This increase also reflects the Company's continued commitment to its research
and development agreements with the Partnership and Lilly and to moving
product candidates through clinical trials.
Cost of goods sold for fiscal 1994 increased $2,739,000 from the prior
fiscal year due primarily to increased contract manufacturing revenues in
fiscal 1994. Cost of goods sold in fiscal 1994 were 79% of product revenues
versus 56% of product revenues for fiscal 1993. The increase in this
percentage is the result of a change in product mix between fiscal year
periods and is attributable to lower margins experienced on contract
manufactured products.
Selling, general and administrative expenses for fiscal 1994 decreased
$503,000 from fiscal 1993 due primarily to decreases in legal expenses,
relocation and recruitment costs and certain occupancy expenses. Interest
expense for fiscal 1994 reflects interest incurred by the Company on its term
loan with a bank.
Capital Resources and Liquidity
The Company's total cash, cash equivalents and marketable securities
decreased to $7,222,000 at March 31, 1996 from $15,302,000 at March 31, 1995 from $29,215,000 at March 31, 1994,
a decline of $13,913,000, or 48%.1995.
This decrease is due in part to net losses during the period of $31,950,000,$11,522,000,
reductions in payables and accruals of $6,664,000 and the payment of a term loan
payable to a bank of $4,620,000, offset primarily from noncash related charges
of $7,357,000 of$3,759,000 for depreciation and amortization and restructuring related
charges, reductions in receivables and the collection of $5,894,000amounts due from the
Partnership totaling $6,806,000, a reduction in prepaid expenses of $851,000 and
an increasea reduction in accrualsother assets of $4,483,000 which relates primarily to deferred restructuring related costs.
26$1,400,000. Working capital decreased to
$4,153,563 at March 31, 1996 from $9,070,000 at March 31, 1995 from $32,517,000 at
March 31, 1994, reflecting primarily the loss for fiscal 1995.
The Company has funded operations primarily with cash derived from sales
of its equity securities, research and development contracts, product sales,
investment income, proceeds from a term loan with a bank, the sale of the
Company's share of a joint venture and leasing of certain equipment. In May
1992, the Company sold 283,286 shares of common stock pursuant to an agreement
with Lilly, which resulted in gross proceeds to the Company of $4,000,000.
The Company also entered into a research and development agreement with Lilly
which provided $2,613,000, $6,262,000 $7,790,000 and
$9,822,00014
$7,790,000 in research funding in fiscal 1996, 1995 1994 and 1993,1994, respectively.
In JuneSeptember 1995, theLilly terminated its collaboration and licensing agreement
with Lilly was extended through November 1996. In
December 1992, the Company sold 320,000 shares of its common stock pursuant to
an agreement with Sandoz Pharma Ltd. which resulted in gross proceedsrespect to the Companyjoint development of $4,000,000.the CD11b Program and
the rights to the Program were returned to Repligen.
The Company also sold its 40% equity interest in RSRC
to Sandoz Corporation for $1,000,000 in December 1992.
The Company is receivinghas received research and development funding from the
Partnership pursuant to the Product Development Agreement. The Company
recognized $2,693,000, $4,352,000 $10,762,000 and $6,832,000$10,762,000 of such funding as revenue in
fiscal 1996, 1995 1994 and 1993,1994, respectively. In 1993, the Partnership also
paid Repligen a one-time nonrefundable fee of $1,750,000 as reimbursement for
research and development related to the technology developed by Repligen prior
to the formation of the Partnership. Repligen anticipates that it will need
approximately $60,000,000 to complete the remainder of the rPF4 Research
Program, to obtain all FDA and other regulatory approvals and to commence
sales of any rPF4 Products. Although the Company's working capital and
capital requirements may change,April 1996, the Company estimates that it has funds
sufficient to continueannounced
the rPF4 Research Program and its other current
operations until at least March 31, 1996, based on the receipt, as at June 9,
1995,termination of $10,811,000 in aggregate payments by the Limited Partners of their
fourth installment on their Investor Notes and assuming no additional payments
are made. Thus, without additional financing in calendar 1995 or early 1996
from either an offering by Repligen of its securities, from third party
funding, or the merger of Repligen with or the acquisition of Repligen by an
entity capable of funding the rPF4 Research Program, Repligen and the
Partnership will not have sufficient funding to complete the rPF4 Research
Program and Repligen will be forced to curtail or cease its operations. In the
event that Repligen is unable to continue the rPF4 Research Program on behalf
of the Partnership, it is obligated under the Purchase Agreement to use its
best efforts to license or sell the Technology to a third party. Given the
current market for biotechnology securities, Repligen does not believe that an
offering of its securities sufficient in aggregate amount to fund the
remainder of the rPF4 Research Program is currently feasible. Repligen is
currently at the preliminary stages of discussing with various pharmaceutical
companies a joint venture pursuant to which such pharmaceutical company would
fund the remaining rPF4 Research Program along with Repligen and together they
would manufacture and market any rPF4 Products. Because such discussions are
at a preliminary stage, the terms of any such joint venture are not known.
Any such third party may seek to modify the Product Development Agreement and/orand the Purchase Agreement
possibly including a reduction inwith the royalty
rates payable toPartnership. Under the Limited Partners under such agreements. Any such
amendment would require the consentterms of the Limited Partners. In addition, any
such third party may require thatvarious agreements between the
Partnership be a party to any such joint
venture agreement, which may also requireparties, the consent of the Limited Partners.
27
The General Partner periodically reviews the progress of the Partnership's
research program to determine whether the continuation of all or any part
thereof is in the best interest of the Limited Partners of the Partnership. If
at any time the Board of Directors determines that such research is infeasible
or uneconomic and should be discontinued or otherwise determines that the
program should be discontinued, or if the Board of Directors of the Company
determines not to contribute the additional funds to the Partnership which are
determined to be required when all Partnership funds have been expended and no
FDA marketing approval has been received for any product developed by the
Partnership, the Product Development Agreement will terminate. The Company
believes that rPF4 may be useful (i) as a neutralizing agent to reverse the
anticoagulant effects of heparin and (ii) as a therapy in the treatment of
certain solid tumor cancers. Repligen is committedrights to the rPF4 development
program and intends to finance ittechnologies remain with third party funding and Repligen'sthe Partnership.
In September 1995, Genetics Institute, Inc. paid a $2,000,000 fee for
the assignment of intellectual property and the Partnership's remaining funds.
Repligentransfer of certain reagents
associated with the Company's immune modulation technology. Genetics Institute
has entered into certainexclusive rights to commercialize any protein-based drugs that originate
from this technology with the exception of CTLA4-IgG, for which the Company
retains its rights, and to develop small molecule drugs based on this
technology. The Company retained the rights to independently commercialize small
molecule-based drugs in the therapeutic area. In December 1995, Genentech, Inc.
paid a $525,000 license fee for the exclusive sublicense to make, use and sell
antibody fragments, engineered polypeptides and other small molecules that bind
to CD18 and CD11a.
At March 31, 1996, the Company was in default under a facility lease and
three equipment lease agreements. Subsequent to year end, under the terms of
negotiated settlement arrangements, the Company paid approximately $300,000 and
$3,000,000 in settlement fees to the facility landlord and equipment lessors,
respectively. The settlement fees with respect to the operating equipment lease
agreements which requirerepresent discounted remaining lease obligations and the purchase
price of certain leased equipment from the equipment lessors. In May 1996, a
substantial amount of this equipment originally on lease as well as certain
surplus Company owned equipment was sold at pubic auction for approximately
$1,250,000, net of selling expenses. The obligation for the settlement payments
to maintain certain restrictive covenants. The Company was notthe lessors and landlord, net of funds received from the sale of equipment,
has been reflected in compliance with certain of these covenantsthe restructuring accrual at March 31, 1995 and anticipates
that it will not meet these financial covenants during 1996, resulting in all
future payments under these leases being immediately payable. As of March 31,
1995, $5,720,000 was due on these operating leases, of which $3,250,000 was
included in the accrued restructuring charge.1996.
In March 1993, the Company entered into an unsecured term loan agreement
with a bank whereby the bank loaned the Company $4,620,000 at such bank's base
rate plus one-half of one percent. The loan matured in MayMarch 1995 and was
subsequently paid in full.
In addition, the Company has a $4,000,000
unsecured demand line of credit with a bank which was unused at March 31,
1995. This line of credit expires on June 30, 1995. The applicable interest
rate on such line of credit, if used, is at such bank's base rate.
Capital expenditures for fiscal 1996 and 1995 were $643,000 and
1994 were $556,000, and
$3,804,000, respectively. These expenditures were partially financed through
equipment operating leases that provided $363,000 and $1,127,000 of operating
lease financing in fiscal 1995 and 1994, respectively. The capital expenditures in fiscal 19951996 and 19941995
primarily reflect the purchase of research, development and manufacturing
equipment.
In connection with the acquisition of Amira in November 1991, the Company
may in the future be required to pay up to an additional $5,250,000 in shares
of the Company's Common Stock upon the achievement of certain product
development milestones by Amira or upon the sale or licensing of the
technology acquired in its acquisition of Amira.15
28
Item 8: FINANCIAL STATEMENTS
REPLIGEN CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Public Accountants 2917
Consolidated Financial Statements:
Consolidated Balance Sheets at March 31, 1996 and 1995 and 1994 3018
Consolidated Statements of Operations for Years
Ended March 31, 1996, 1995 and 1994 and 1993 3219
Consolidated Statements of Stockholders' Equity for Years
Ended March 31, 1996, 1995 and 1994 and 1993 3320
Consolidated Statements of Cash Flows for Years
Ended March 31, 1996, 1995 and 1994 and 1993 3421
Notes to Consolidated Financial Statements 3622
16
29
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Repligen Corporation:
We have audited the accompanying consolidated balance sheets of Repligen
Corporation (a Delaware corporation) and subsidiaries as of March 31, 19951996 and
1994,1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended March 31,
1995.1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Repligen Corporation
and subsidiaries as of March 31, 19951996 and 1994,1995, and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 1995,1996, in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 17, 19958, 1996 (except with respect
to the matters discussed in Notes
122 and 1310 as to which the date
is June 9, 1995)May 30, 1996)
17
30
REPLIGEN CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31,
------------------------------------------------------------------
1996 1995
1994
-------------- ------------------------- -----------
ASSETS
Current assets:
Cash and cash equivalents $6,944,140 $ 13,821,387
$ 27,655,061
Marketable securities 278,115 1,480,712 1,560,392
Accounts receivable, less reserves
of $152,000 and $300,000, and $205,000, respectively 421,254 1,686,902 2,626,048
Amounts due from affiliate 42,284 962,361
5,917,504
Inventories 701,224 1,213,379 1,310,335
Note receivable from affiliate 4,620,000-- 4,620,000
Prepaid expenses and other current assets 188,554 1,039,197
1,702,610
-------------- ------------------------- ------------
Total current assets 8,575,571 24,823,938 45,391,950
Property, plant and equipment, at cost:
Leasehold improvements 11,801,854 11,745,756
Equipment 688,091 7,625,094 7,491,980
Furniture and fixtures 20,422 869,590
865,541
-------------- --------------Leasehold improvements 2,000 11,801,854
----------- ------------
710,513 20,296,538 20,103,277
Less -- accumulated depreciation and amortization 176,946 15,312,326
8,330,551
-------------- ------------------------- ------------
533,567 4,984,212 11,772,726
Restricted cash 1,000,000-- 1,000,000
Other assets, net 121,389 521,803
1,446,660
-------------- ------------------------- ------------
$ 9,230,527 $ 31,329,953
$ 59,611,336
============== ========================= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,221,277546,129 $ 2,025,8581,221,277
Accrued expenses and other 3,720,881 9,709,292 5,226,018
Unearned income 154,998 203,000 1,002,740
Term loan payable to a bank -- 4,620,000
4,620,000
-------------- ------------------------- ------------
Total current liabilities 4,422,008 15,753,569 12,874,616
Commitments and contingencies (Notes 2, 9, 10 and 13)12)
Stockholders' equity:
Preferred stock, $.01 par value -- authorized --
5,000,000 shares -- outstanding -- none -- --
Common stock, $.01 par value -- authorized --
30,000,000 shares -- outstanding -- 15,357,03015,602,542
shares and 15,302,67515,357,030 shares
at March 31, 1996 and 1995, and 1994, respectively 156,025 153,570 153,027
Additional paid-in capital 127,694,145 126,942,925 126,153,487
31
Accumulated deficit (123,041,651) (111,520,111)
(79,569,794)
-------------- -------------------------- -----------
Total stockholders' equity 4,808,519 15,576,384
46,736,720
-------------- -------------------------- -----------
$ 31,329,953 $ 59,611,336
============== ==============
9,230,527 $31,329,953
============ ===========
The accompanying notes are an integral part of these consolidated
financial statements.
18
32
REPLIGEN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended March 31,
---------------------------------------------------------------------------------------------
1996 1995 1994
1993
-------------- -------------- -------------------------- ----------- -----------
Revenues:
Research and development $5,424,304 $10,988,567 $19,391,977
$ 21,444,153Sale of intellectual property rights 2,525,000 -- --
Product 1,873,687 3,884,642 4,946,893
2,113,252
Investment income 737,536 1,424,558 1,380,672
1,976,019
Other 298,350 644,548 1,113,152
1,788,457
-------------- -------------- -------------------------- ------------ ------------
10,858,877 16,942,315 26,832,694
27,321,881
-------------- -------------- -------------------------- ------------ ------------
Costs and expenses:
Research and development 12,314,385 31,011,893 35,918,605
30,705,537Selling, general and administrative 4,925,345 4,673,580 6,206,511
Cost of goods sold 1,515,637 1,535,026 3,932,732
1,193,698
Selling, general and administrative 4,673,580 6,206,511 6,709,895
Interest 58,050 372,133 312,007
--
Restructuring charge 3,567,000 11,300,000 --
--
-------------- -------------- -------------------------- ------------ ------------
22,380,417 48,892,632 46,369,855
38,609,130
-------------- -------------- -------------------------- ------------ ------------
Net loss $(11,521,540) $(31,950,317) $(19,537,161)
$(11,287,249)
============== ============== ========================== ============ ============
Net loss per common share $ (0.75) $ (2.08) $ (1.53)
$ (0.93)
============== ============== ======================= ========= ========
Weighted average common
shares outstanding 15,370,252 15,356,136 12,788,406
12,084,937
============== ============== ==============
============ ============ ============
The accompanying notes are an integral part of these consolidated
financial statements.
19
33
REPLIGEN CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock
---------------------------------------------------------
Number of Additional Accumulated
Shares Par Value Paid-in Capital Deficit
---------- --------- --------------- --------------- --------------- -----------------------------
Balance, March 31, 1992 11,751,277 $117,513 $99,565,199 $(48,745,384)
Net loss -- -- --
(11,287,249)
Exercise of stock options 14,454 145 103,296 --
Contribution of common stock
to ESOP 31,058 310 294,741 --
Sale of common stock, net of
issuance costs of $25,707 603,286 6,033 7,968,260 --
Issuance of warrants in
connection with
Repligen Clinical Partners, L.P. -- -- 853,925 --
--------------- --------------- --------------- ---------------
Balance, March 31, 1993 12,400,075 124,001 108,785,421 (60,032,633)$124,001 $108,785,421 $(60,032,633)
Net loss -- -- -- (19,537,161)
Exercise of stock options 27,600 276 138,714 --
Sale of common stock, net of issuance costs
of $302,034 and underwriters'
commissions 2,875,000 28,750 15,884,216 --
Issuance of warrants in connection with
Repligen Clinical Partners, L.P. -- -- 1,345,136 --
--------------- --------------- --------------- ------------------------- -------- ------------ -------------
Balance, March 31, 1994 15,302,675 153,027 126,153,487 (79,569,794)
Net loss -- -- -- (31,950,317)
Contribution of common stock to ESOP 54,355 543 373,140 --
Issuance of warrants in connection with
Repligen Clinical Partners, L.P., net of
exchange warrants costs of $733,613 -- -- 416,298 --
--------------- --------------- --------------- ------------------------- -------- ------------ -------------
Balance, March 31, 1995 15,357,030 $153,570 $126,942,925 $(111,520,111)
=============== =============== =============== ===============
153,570 126,942,925 (111,520,111)
Net loss -- -- -- (11,521,540)
Issuance of common stock in connection
with the acquisition of Glycan
Pharmaceutical, Inc. 243,600 2,436 332,514 --
Exercise of stock options 1,912 19 2,978 --
Issuance of warrants in connection with
Repligen Clinical Partners, L.P. -- -- 415,728 --
---------- -------- ------------ -------------
Balance, March 31, 1996 15,602,542 $156,025 $127,694,145 $(123,041,651)
=========== ======== ============ =============
The accompanying notes are an integral part of these consolidated
financial statements.
20
34
REPLIGEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended March 31,
----------------------------------------------------------------------------------------------------
1996 1995 1994
1993
--------------- --------------- ---------------------------- ------------ -------------
Cash flows from operating activities:
Net loss $(11,521,540) $(31,950,317) $(19,537,161) $(11,287,249)
Adjustments to reconcile net loss to net cash
used in operating activities --
Depreciation and amortization 1,438,356 2,602,182 2,362,587 1,726,443
Contribution of common stock to ESOP -- 373,683 -- 295,051
Equity in earnings of joint venture -- -- (47,115)
Equity in net loss of an affiliate 20,504 65,766 138,709
112,199Research and development charge associated with
the acquisition of Glycan Pharmaceuticals, Inc. 333,811 -- --
Restructuring charge associated with the
write-off of leasehold improvements,
equipment and other intangibles 2,321,000 4,754,593 -- --
Changes in assets and liabilities, net of
acquisition of Glycan Pharmaceuticals, Inc.
Accounts receivable 1,279,915 939,146 (1,510,362) 132,895
Amounts due from affiliates 920,077 4,955,143 (4,845,753)
1,521,008
Inventories 512,155 96,956 601,088 (1,498,874)
Prepaid expenses and other current assets 866,212 663,413 (286,918)
414,866
Accounts payable (678,022) (804,581) (2,024,345) 3,523,368
Accrued expenses and other (4,592,680) 4,483,274 745,825
1,753,271
Unearned income (203,000) (799,740) (453,432)
1,456,172
--------------- --------------- --------------------------- ------------ ------------
Net cash used in operating activities (9,303,212) (14,620,482) (24,809,762)
(1,897,965)
--------------- --------------- --------------------------- ------------ ------------
Cash flows from investing activities:
Decrease (increase) in marketable securities 1,202,597 79,680 3,382,349 (4,942,736)
Decrease in investment securities -- -- 4,591,063
2,738,321
Increase in restricted cashAcquisition of Glycan Pharmaceuticals, Inc. (144,836) -- -- (1,000,000)
Purchase of Abbott Biotech, Inc. assets --
Property, plant and equipment -- -- (5,455,346)
Intangible assets -- -- (600,000)
Purchases of property, plant and equipment, net (463,378) (556,174) (3,804,404)
(12,138,320)Decrease in restricted cash 1,000,000 -- --
Proceeds from a note receivable from affiliate 4,620,000 -- --
Decrease (increase) in other assets 412,857 484,091 (199,633)
552,600
--------------- --------------- --------------------------- ------------ ------------
Net cash (used in) provided by
investing activities 6,627,240 7,597 3,969,375
(20,845,481)
--------------- --------------- --------------------------- ------------ ------------
Cash flows from financing activities:
Proceeds from sales of common stock and issuance of
warrants, net of issuance costs and commissions 418,725 416,298 16,812,092
8,931,659
Proceeds from long-term debtPayment of term loan to a bank (4,620,000) -- -- 4,620,000
Proceeds from leasing transactions -- 362,913 1,126,951
8,392,798
--------------- --------------- --------------------------- ------------ -----------
Net cash (used in) provided by
financing activities (4,201,275) 779,211 17,939,043
21,944,457
--------------- --------------- ---------------
35------------ ------------ -----------
Net decrease in cash and cash equivalents (6,877,247) (13,833,674) (2,901,344) (798,989)
Cash and cash equivalents, beginning of year 13,821,387 27,655,061 30,556,405
31,355,394
--------------- --------------- ---------------------------- ------------ ------------
Cash and cash equivalents, end of year $ 6,944,140 $ 13,821,387 $ 27,655,061
$ 30,556,405
=============== =============== =========================== ============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 58,050 $ 372,133 $ 312,007
$ --
=============== =============== ===============
============ ============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
21
36
REPLIGEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Operations and Significant Accounting Policies
Repligen Corporation (the "Company") is a biopharmaceutical company
engaged in the research development and manufacturedevelopment of therapeutic products for human health
care. The Company's productresearch and development programs are primarily focused on
three therapeutic areas: cancer, cardiovascular
conditionsthe development of new therapies for chronic and immunology.acute inflammation and
immunosuppression and the development of enabling technologies for discovery of
new drugs by rapid screening of combinatorial chemical libraries.
The Company has incurred significant operating losses since inception
and is currently undergoing a majorhas undergone significant restructuring of its operations in fiscal 1996 and
1995 (see Note 2). During fiscal 1996, the Company completed a major downsizing
and consolidation of its activities, including the termination of certain
research programs, in an effort to stabilize its financial condition and to
preserve its cash resources. The Company anticipates that without additional financing in calendar 1995 or
earlyhas completed the restructurings and
has consolidated its 15 employees into a new facility.
On March 14, 1996, from either an offering by the Company issued 243,600 shares of its securities, fromcommon stock
for all of the common stock of Glycan Pharmaceuticals, Inc. ("Glycan"). The
acquisition was accounted for as a third party funding, orpurchase, with the mergerexcess of the purchase
price and acquisition costs over the fair value of the assets acquired charged
to operations of approximately $334,000 as the cost of acquired research and
development. The Company acquired assets having a fair value of approximately
$296,000, consisting primarily of cash and equipment, and assumed liabilities of
approximately $295,000. Results of operations for Glycan are included in the
consolidated financial statements of the Company subsequent to March 14, 1996.
Unaudited pro forma information with orrespect to Glycan's pre-acquisition
operating results has not been presented as it is not material.
2. Restructuring of Operations
During fiscal 1996, the acquisitionCompany completed a major downsizing and
consolidation of its operations in an effort to stabilize its financial
condition and preserve its cash resources. The restructuring included a
substantial reduction in the Company's work force, the termination of several
research programs and the closing of its Cambridge research and manufacturing
facility. During the fourth quarter of fiscal 1996, the Company recorded a
charge of $3,567,000 to cover severance costs and related benefits, the
settlement of operating equipment lease and facility lease obligations, the
write-off of certain leasehold improvements and equipment no longer being
utilized, reduced in part by cash received from the sale of assets and the
reversal of certain accruals no longer required.
From October 1992 through March 1995, the Company entered into three
operating equipment lease arrangements involving the sale and leaseback of
certain equipment at its Cambridge and Needham facilities. At March 31, 1996,
the Company was in default under a facility lease and these operating equipment
leases. Subsequent to year end, under the terms of negotiated settlement
arrangements, the Company paid approximately $300,000 and $3,000,000 in
settlement fees to the facility landlord and equipment lessors, respectively.
The settlement fees with respect to the operating equipment lease agreements
represent discounted remaining lease obligations and the purchase price of
certain leased equipment from the equipment lessors. In May 1996, a substantial
amount of this equipment originally on lease as well as certain surplus Company
owned equipment was sold at public auction for approximately $1,250,000, net of
selling expenses. The obligation for the settlement payments to the lessors and
the landlord, net of funds received from the sale of equipment, has been
reflected in the restructuring accrual at March 31, 1996.
During fiscal 1995, the Company also substantially restructured its
operations in an effort to reduce its rate of expenditures and preserve its
available cash and investment balances. In the second quarter of fiscal 1995,
the Company recorded a charge of $975,000 to cover severance costs and related
benefits, as well as certain rental losses associated with the sublease of
certain facilities. During the fourth quarter of fiscal 1995,
22
the Company recorded a charge of $10,325,000 to cover severance costs and
related benefits, certain rental losses associated with the sublease of certain
facilities, the write-off of certain leasehold improvements, equipment and other
intangible assets that were no longer utilized and to reserve for future
operating lease payments for equipment that was longer utilized. The
restructurings in fiscal 1995 were done in order to reorganize certain business
operations and the senior management team to focus on the clinical development
of certain lead product candidates. The details of the Company by an entity capable of funding its operations, the Company will
be forced to curtail or cease its operations.total restructuring
charges for both fiscal years are as follows:
Amounts (in 000s) 1996 1995
- ----------------- ----- -------
Severance and related benefits for terminated employees $ 333 $ 2,035
Reserve for future operating lease payments
for assets no longer being utilized 1,991 3,250
Reserve for rental losses associated with
the sublease of surplus lab and office space -- 940
Contract termination fees -- 320
Legal fees 172 --
Less -- cash received from the sale of surplus
equipment (1,250) --
------ -------
Cash related expenditures 1,246 6,545
Write-off of leasehold improvements, equipment
and other intangibles no longer being utilized 3,854 4,755
Less -- reversal of accruals no longer required due to
changes in operations (1,533) --
------ -------
Non-cash related expenditures 2,321 4,755
------ -------
$3,567 $11,300
====== =======
The accrued restructuring activity for fiscal 1996 is as follows:
Balance, beginning of year $5,490,000 $ --
Payments (4,321,000) (1,076,000)
Provision 2,496,000 6,545,000
Write-off of leasehold improvements, equipment
and other intangibles no longer being utilized,
net of auction proceeds (2,604,000) --
Less -- reversal of accruals no longer required
due to changes in operations 1,533,000 --
---------- -----------
Balance, end of year $2,594,000 $ 5,467,000
========== ===========
3. Significant Accounting Policies
The accompanying consolidated financial statements reflect the
application of certain accounting policies described in this note and elsewhere
in the accompanying notes to consolidated financial statements.
0
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the
23
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All material intercompany accounts
and transactions have been eliminated in consolidation.
Revenue Recognition
Substantially all of the Company's research and development revenues are
derived from collaborative arrangements. Research and development revenue is
recognized as earned under cost plus fixed-fee contracts, or on a straight-line
basis over the development contract, which approximates when work is performed
and costs are incurred. In addition, under certain contracts, the Company
recognizes research and development revenues as milestones are achieved.
Unearned income represents amounts received prior to recognition of revenue.
Research and development expenses in the accompanying consolidated statements of
operations include funded and unfunded expenses. See Note 12 for a discussion of
research and development agreements.
During 1996, the Company recognized $2 million of revenue related to the
sale of patent rights of its immune modulation technology and $525,000 for the
sale of certain sublicenses related to CD18 and CD11a rights as part of the
restructuring of operations.
The Company recognizes revenue related to product sales upon shipment of
the product.
Other revenue includes the management fee received from Repligen
Clinical Partners, L.P. The management fee revenue is recognized as earned. Also
included in other revenue for the year ended March 31, 1993 are $1,000,000 of
the proceeds from the Company's sale of its interest in Repligen Sandoz
Research Corporation ("RSRC") and a $260,000 dividend declared by RSRC.
37earned (see
Note 12).
Depreciation and Amortization
The Company provides for depreciation and amortization by charges to
operations in amounts estimated to allocate the cost of fixed assets over their
estimated useful lives, on a straight-line basis, as follows:
Description Life
- ---------------------- -----------------------------------------------------
Description Life
- ----------- ----
Equipment 5 years
Furniture and fixtures 5-7 years
Leasehold improvements Shorter of term of the lease or
estimated useful life
Marketable Securities
The Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS No.115"No.
115"), effective March 31, 1994. Under SFAS No. 115, securities that the Company
has the positive intent and ability to hold to maturity are classified as
"held-to-maturity." These securities include cash, cash equivalents and
corporate bonds with maturities of less than one year. The held-to-maturity
securities are reported at amortized cost, which approximates fair market value
at March 31, 19951996 and 1994.1995. Securities purchased to be held for indefinite
periods of time, and not intended at the time of purchase to be held until
maturity, are classified as "available-for-sale" securities. These securities
consist of collateralized mortgage obligations with average maturities in excess
of 10 years. The Company also carries these investments at amortized cost, which
approximates fair market value at March 31, 19951996 and 1994.1995. The estimated fair
market value of marketable securities is based primarily on market quotations.
Net Loss Per Common Share
Primary net loss per common share has been computed by dividing net loss
by the weighted average number of shares outstanding during the period. Common
stock equivalents have not been included for any
24
period, as the amounts would be antidilutive. Fully diluted net loss per
common share has not been presented for any period, as the amounts would not
differ from primary net loss per common share.
Post-retirement Benefits
The Company has no obligation for post-retirement benefits.
Reclassifications
The Company has reclassified certain prior year information to conform
with the current year's presentation.
38
2. Restructuring Charge
During fiscal 1995, the Company substantially restructured its operations
in an effort to reduce its current rateFinancial Instruments
SFAS No. 107, "Disclosure About Fair Value of expenditures and preserve its
available cash and investment balances. In the second quarter, the Company
recorded a charge of $975,000 to cover severance costs and related benefits,
as well as certain rental losses associated with the sublease of certain
facilities. During the fourth quarter, the Company recorded a charge of
$10,325,000 to cover severance costs and related benefits, certain rental
losses associated with the sublease of certain facilities, the write-off of
certain leasehold improvements, equipment and other intangible assets that
will no longer be utilized and to reserve for future operating lease payments
for equipment that will also no longer be utilized. The restructurings were
done in order to reorganize certain business operations and its senior
management team to focus on the clinical development of certain lead product
candidates. The detail of the total restructuring charge is as follows:
Amount (000s)
-------------
Severance and related benefits for
approximately 140 terminated employees $ 2,035
Reserve for future operating lease payments
for assets no longer being utilized 3,250
Reserve for rental losses associated with
the sublease of surplus lab and office space 940
Contract termination fees 320
-------------
Cash related expenditures 6,545
Write-off of leasehold improvements, equipment
and other intangibles no longer being utilized 4,755
-------------
$11,300
=============
39
As of March 31, 1995, approximately $1,076,000 of the severance costs,
benefit costs and contract termination fees have been paid. The balance is
anticipated to be paid over the following six months. The future operating
lease payments and facility rent is scheduled to be paid as follows:
Amounts (000s)
---------------------
Fiscal Year Equipment Facility
Leases Leases
- ------------------------------------------------------ --------- ---------
1996 $ 1,310 $ 642
1997 1,260 298
1998 680 --
--------- ---------
$ 3,250 $ 940
========= =========
These amounts have been recognized as a current liability as of March 31,
1995 due to the anticipated default during fiscal 1996 on certain financial
covenants required to be maintained under the equipment leases (see Note 10)
and the Company's intended negotiations with facilities' lessors for early
lease termination.
3. Acquisition of Assets from Abbott Biotech, Inc.
In May 1992, the Company acquired substantially all of the fixed assets of
a cell culture and purification facility from Abbott Biotech, Inc. ("Abbott
Biotech")Financial Instruments",
a wholly owned subsidiary of Abbott Laboratories. The total
purchase price of approximately $6,000,000 consisted of $5,800,000 in cash and
acquisition costs of approximately $200,000. The Company acquired fixed
assets and certain technology and intangible assets owned by Abbott Biotech.
The purchase price has been allocated to the assets acquired based on therequires disclosure about fair value of the assets at the timefinancial instruments. Financial
instruments consist of acquisition. Intangible assets were fully
amortized at March 31, 1995 (see Note 2).cash equivalents, marketable securities and accounts
receivable. The estimated fair value of these financial instruments approximates
their carrying value.
4. Cash Equivalents and Marketable Securities
The Company considers all highly liquid investments with original
maturities of three months or less at the time of acquisition to be cash
equivalents. Included in cash equivalents at March 31, 1996 are approximately
$5,498,000 of money market funds and $1,300,000 of commercial paper. Cash
equivalents at March 31, 1995 areinclude $10,821,000 of money market funds and
$3,000,000 of bank time deposits. Cash equivalents
at March 31, 1994 include $20,927,000 of money market funds, $1,800,000 of
bank time deposits and $1,496,000 of banker's acceptances. Investments with a maturity period of greater
than three months are classified as marketable securities and consist of
approximately $278,000 of collateralized mortgage obligations at March 31, 1996
and $984,000 of corporate bonds and $497,000 of collateralized mortgage
obligations at March 31, 1995 and consisted of
collateralized mortgage obligations on March 31, 1994.
401995.
5. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of the following:
March 31,
------------------------
1995 1994
----------- -----------
Raw materials and work-in-process................... $ 240,044 $ 848,648
Finished goods...................................... 973,335 461,687
----------- -----------
Total........................................... $ 1,213,379 $ 1,310,335
=========== ===========
March 31,
-----------------------
1996 1995
-------- ----------
Raw materials and work-in-process $ 1,955 $ 240,044
Finished goods 699,269 973,335
-------- ----------
Total $701,224 $1,213,379
======== ==========
Work-in-process and finished goods inventories consist of material,
labor and manufacturing overhead.
Included in inventories at March 31, 1994 is
approximately $420,000 of inventories manufactured under a supply arrangement
obtained as part of the Company's acquisition of certain assets from Abbott
Biotech. At March 31, 1995 this supply arrangement is no longer in place and
thus there were no inventories held for the arrangement.
6. Accrued Expenses and Other
March 31,
------------------------
1995 1994
----------- -----------
Restructuring charges............................... $ 5,468,656 $ --
Payroll and payroll-related costs................... 1,709,831 2,166,138
Professional and consulting fees.................... 1,607,047 1,694,884
Other accrued expenses.............................. 923,758 1,364,996
----------- -----------
Total........................................... $ 9,709,292 $ 5,226,018
=========== ===========
Accrued expenses and other consisted of the following:
March 31,
-----------------------
1996 1995
-------- ----------
Restructuring charges $ 2,594,478 $ 5,468,656
Payroll and payroll-related costs 78,958 1,709,831
Professional and consulting fees 677,818 1,607,047
Other accrued expenses 369,627 923,758
----------- ------------
Total $ 3,720,881 $ 9,709,292
=========== ============
25
7. Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting StandardsSFAS No. 109, "Accounting
for Income Taxes." At March 31, 1995,1996, the Company had net operating loss
carryforwards for income tax purposes of approximately $71,900,000.$83,700,000. The Company
also had available tax credit 41
carryforwards of approximately $4,940,000$4,846,000 at March
31, 19951996 to reduce future federal income taxes, if any. Net operating loss
carryforwards and available tax credits are subject to review and possible
adjustment by the Internal Revenue Service and may be limited in the event of
certain changes in the ownership interest of significant stockholders.
The net operating loss carryforwards and tax credit carryforwards expire
approximately as follows:
Expiration Date Net Operating Tax Credit
Loss Carryforwards Carryforwards
------------------ ------------------
1997.................................. $ 200,000 $ 17,000
1998.................................. 300,000 11,000
1999.................................. 400,000 32,000
2000.................................. 1,000,000 104,000
2001.................................. 1,300,000 109,000
2002-2010............................. 68,700,000 4,667,000
------------------ ------------------
Total............................. $ 71,900,000 $ 4,940,000
================== ==================
Net Operating Tax Credit
Expiration Date Loss Carryforwards Carryforwards
- --------------- ------------------ -------------
1997 $ 200,000 $ 17,000
1998 300,000 11,000
1999 400,000 32,000
2000 1,000,000 104,000
2001 1,300,000 109,000
2002-2011 80,500,000 4,573,000
----------- ----------
Total $83,700,000 $4,846,000
=========== ==========
The components of the deferred tax amounts, carryforwards and the
valuation allowance are approximately as follows:
March 31,
--------------------------
1995 1994
------------ ------------
Temporary differences............................. $10,100,000 $ 5,100,000
Operating loss carryforwards...................... 28,800,000 22,400,000
Tax credit carryforwards.......................... 4,900,000 4,400,000
------------ ------------
43,800,000 31,900,000
Valuation allowance............................... (43,800,000) (31,900,000)March 31,
-----------------------
1996 1995
-------- ----------
Temporary differences $ 6,000,000 $10,100,000
Operating loss carryforwards 33,500,000 28,800,000
Tax credit carryforwards 4,900,000 4,900,000
----------- ------------
44,400,000 43,800,000
Valuation allowance (44,400,000) (43,800,000)
----------- ------------
$ -- $ --
=========== ============ ============
A valuation allowance has been provided, as it is uncertain if the
Company will realize the deferred tax asset. The increase in the valuation
allowance during the year ended March 31, 19951996 was primarily the result of the
current year operations.
42
8. Term Loan and Line of Credit
In March 1993, the Company entered into an unsecured term loan agreement
with a bank whereby the bank loaned the Company $4,620,000. Interest accrues
at the bank's base rate (9.0% at March 31, 1995) plus one-half of one percent
and is payable quarterly in arrears. The loan originally scheduled to mature
in March 1995, was extended to May 1995 and was subsequently paid in
full.
The Company has a $4,000,000 unsecured demand line of credit with a bank,
bearing interest at the bank's base rate, which expires on June 30,full in May 1995.
There were no amounts outstanding under the line of credit at March 31, 1995
and 1994.
9. Common Stock
At March 31, 1995,1996, common stock reserved for issuance was as follows:
Reserved for Shares
- ---------------------------------------------------------------- ------------
Incentive and nonqualified stock option plans 3,358,263
Warrants granted in connection with the Repligen Clinical
Partners, L.P. offering (see Notes 12 and 13) 2,446,050
Fixed Shared Payments related to Repligen Clinical Partners, L.P. 2,230,250
-----------
8,034,563
===========
Reserved for Shares
------------ ---------
Incentive and nonqualified stock option plans 3,356,351
Warrants granted in connection with the Repligen
Clinical Partners, L.P. offering (see Note 12) 2,158,950
Warrants assumed in connection with the Glycan acquisition 21,000
---------
5,536,301
=========
26
10. Commitments
In addition,May 1996, the Company must,terminated its leases at all times, haveits former corporate
headquarters in Cambridge, Massachusetts and moved its primary operations to a
13,000 square foot facility in Needham, Massachusetts, which it leases under a
four year sublease agreement with T Cell Sciences, Inc. In connection with the
numberacquisition of shares
reserved,Glycan, the Company assumed a lease for approximately 2,000
square feet of laboratory space at 100 Inman Street, Cambridge, Massachusetts,
which would be issuable upon the achievement of certain milestones,terminates September 30, 1996.
Obligations under the Amira, Inc. acquisition as discussed in Note 10 (3,111,111 sharesthese noncancellable operating leases as of March 31,
1995).
During February 1994, the Company sold 2,875,000 shares of its common
stock in a public offering with net proceeds to the Company of approximately
$15,913,000. During fiscal 1993, the Company sold 320,000 shares of its
common stock in a private placement for $4,000,000.
10. Commitments
Leases
The Company leases its office, research and manufacturing facilities and
certain equipment under operating lease arrangements. During October 1992,
the Company entered into an operating lease arrangement involving the sale and
leaseback of substantially all of the assets of its cell culture and
purification facility which were purchased from Abbott Biotech in May 1992.
During the period from December 1992 through March 1995, the Company entered
into additional operating lease arrangements involving the sale and leaseback
of certain equipment at its Cambridge and Needham facilities. The Company
43
received aggregate proceeds of approximately $363,000, $1,127,000 and
$8,393,000 from these sale and leaseback transactions during fiscal 1995, 1994
and 1993, respectively. Certain of the lease arrangements require that the
Company maintain certain restrictive covenants, including cash and cash
equivalent balances of not less than $12,000,000 and certain financial ratios.
In addition, one of the lease arrangements requires that the Company maintain
$1,000,000 of restricted cash in an escrow account. The Company was not in
compliance with certain of these covenants at March 31, 1995 and anticipates
that it will not meet these financial covenants during fiscal 1996, resulting
in all future payments under these equipment leases being immediately payable.
Obligations under these and other noncancellable operating leases,
exclusive of those discussed in Note 2, as of March 31, 1995, exclusive of those accrued as part of the restructuring charge discussed
in Note 2, are approximately as follows:
Year ending March 31 Facilities Equipment Total
- ----------------------------- -------------- -------------- --------------
1996 $ 2,539,000 $1,118,000 $ 3,657,000
1997 2,273,000 1,057,000 3,330,000
1998 2,640,000 232,000 2,872,000
1999 2,504,000 63,000 2,567,000
2000 2,491,000 -- 2,491,000
Thereafter 3,521,000 -- 3,521,000
-------------- -------------- --------------
Total minimum lease payments $15,968,000 $2,470,000 $18,438,000
============== ============== ==============
Year ending March 31,
1997 $532,000
1998 110,000
1999 110,000
2000 110,000
2001 9,000
--------
Total minimum lease payments $871,000
========
Rent expense charged to operations under operating leases was
approximately $2,932,000, $5,926,000 $6,091,000 and $4,296,000$6,091,000 for the years ended March
31, 1996, 1995 and 1994, and 1993, respectively.
Stock
In connection with the November 1991 acquisition of Amira, Inc., the
Company is required to issue up to $5,250,000 of its common stock in the event
that certain performance milestones are met or upon the sale or licensing of
the technology acquired. As of March 31, 1995, no performance milestones had
been achieved.
11. Employee Stock Ownership and Stock Option Plans
The Company maintains a qualified employee stock ownership plan ("ESOP")
with a plan year ending on December 31. Under the plan, contributions by the
Company may be in the form of cash, capital stock or other property and are
allocated to eligible employees based on each participant's relative
compensation. Individual benefits vest at a rate of 20% each year after one year
of service. For the plan year ended December 31, 1992, the Company
contributed approximately $295,000 in shares of its common stock, as valued on
44
the date of contribution. For the plan year ended December 31, 1993, the Company contributed,
in April 1994, approximately $374,000 in shares of its common stock, as valued
on the date of contribution. The Company elected not to make a contributioncontributions for
the December 31, 1994 and 1995 plan year.years. At March 31, 1995, approximately $150,0001996, no amount has been
accrued for the December 31, 19951996 plan year contribution.
During fiscal 1993, the Company adopted the 1992 Repligen Corporation
Stock Option Plan (the "1992 Plan"). The 1992 Plan authorizes the grant of
either incentive stock options or nonqualified stock options to employees for
the purchase of the Company's common stock at a price not less than the fair
market value at the date of grant and also allows for the grant of nonqualified
stock options to other participants. The 1992 Plan allows for the grant of up to
2,000,000 shares of the Company's common stock plus any shares previously
authorized but unused under the Company's previous plans. The options generally
vest over five years and expire no more than 10 years from the date of grant. At
March 31, 1995,1996, the Company had 2,066,5332,403,305 options available for grant under the 1992 Plan. The Company discontinued issuing
options under the 1982 Incentive Stock Option Plan and the 1987 Non-Statutory
Stock Option Plan upon the effective date of the
1992 Plan. Options previously issued and outstanding under thesethe 1982 Incentive
Stock Option and 1987 Non-Statutory Stock Option plans generally vest over a
five-year period.
27
A summary of stock option activity under all plans is as follows:
Years Ended March 31,
----------------------------------------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
1993
------------------------ ------------------------ ---------------------------- ---- ----
Option Option Option
No. of Price No. of Price No. of Price
Shares Per Share Shares Per Share Shares Per Share
---------- ----------- ----------- ----------- ----------- ----------- -------------------- -------------
Outstanding at
beginning of
period 2,045,905 $0.05-19.25 1,971,191 $0.05-19.25 1,207,945 $0.05-19.25
Granted 1,524,056 2.06-5.25 382,775 6.43-8.47 811,000 6.81-12.45
Exercised -- -- (27,600) 0.79-8.00 (14,454) 0.79-11.25
Forfeited (2,278,231) 2.59-19.25 (280,461) 1.90-19.25 (33,300) 7.25-19.25
----------- ----------- ----------- ----------- ----------- -----------
Outstanding at end of period 1,291,730 $0.05-19.25 2,045,905 $0.05-19.25 1,971,191 $0.05-19.25
Granted 454,550 1.25-2.44 1,524,056 2.06-5.25 382,775 6.43-8.47
Exercised (1,912) 1.57 -- -- (27,600) 0.79-8.00
Forfeited (791,322) 1.50-19.25 (2,278,231) 2.59-19.25 (280,461) 1.90-19.25
--------- ---------- ----------- ---------- --------- ----------
Outstanding at
end of period 953,046 $0.05-19.25 1,291,730 $0.05-19.25 2,045,905 $0.05-19.25
======= =========== ========= =========== =========== =========== ==================== ===========
Exercisable at
end of period 343,129 $0.05-19.25 137,395 $0.05-19.25 891,383 $0.05-19.25
752,947 $0.05-19.25======= =========== ========= =========== =========== =========== ==================== ===========
In August 1994, the Board of Directors authorized the issuance of new
stock options to employees who voluntarily terminated their existing outstanding
stock options. New options were issued which covered either 72.5% or 85% of the
original amount of those previously outstanding options priced above market
value for an aggregate 872,721 new options granted. Such new options were
granted at an exercise price of $2.75 per share and vest over a three year
period.
45In connection with the acquisition of Glycan, the Company granted to the
three officers of Glycan options to purchase an aggregate 220,000 shares of the
Company's common stock at $1.25 (the fair market value at that date).
12. Research and Development Agreements and Significant Customers
Revenues received from related parties and other significant customers
are approximately as follows:
Years Ended March 31,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
Eli Lilly and Company $6,262,000 $ 7,790,000 $9,822,000
Repligen Clinical Partners, L.P. 4,902,000 11,973,000 7,601,000
Hoffmann-LaRoche, Inc. 1,300,000 3,034,000 --
Merck & Co., Inc. -- 147,000 1,183,000
Sandoz, Ltd.Years Ended March 31,
----------------------------------------
1996 1995 1994
---------- ---------- -----------
Eli Lilly and Company $2,613,000 $6,262,000 $ 7,790,000
Repligen Clinical Partners, L.P. 2,693,000 4,902,000 11,973,000
Hoffmann-LaRoche, Inc. -- 1,300,000 3,034,000
Genetics Institute, Inc. 2,000,000 -- -- 284,000
Eli Lilly and Company
In May 1992, the Company entered into a Research, Collaboration and
License Agreement with Eli Lilly and Company ("Lilly"), whereby the Company
granted Lilly an exclusive license to make, use and sell products utilizing
antibodies, antibody fragments and engineered polypeptides that bind to CD11b
(the "Products"). Lilly has granted the Company the right to manufacture and
supply the Products to Lilly. Under the terms of the agreement, which expired
in February 1995, Lilly paid the Company
$3,250,000 for past research and development and $500,000 for the grant of the
license, both of which are included in research and development revenues for the
year ended March 31, 1993. In addition, the Company recognized revenues of
approximately $2,613,000, $6,262,000 $7,790,000 and $6,072,000$7,790,000 for research and development
performed in fiscal 1996, 1995 and 1994, and 1993, respectively. If the Company attains certain
milestones,In September 1995, Lilly
is obligated to make certain milestone payments to the
Company. The Company will also receive revenues on manufactured products as
well as royalties from Lilly based on sales of products developed under the
agreement. In conjunction with this agreement, Lilly purchased 283,286 shares
of the Company's common stock for $4,000,000. Lilly has certain piggy-back
registration rights with respect to such shares of common stock.
In June 1995, the Company and Lilly announced an extension of theirterminated its collaboration and licensing agreement through November 1996. Underwith the termsCompany with
respect to the joint development of the new developmentCD11b Program and licensing agreement, Lilly will acquire
responsibility for commercial manufacturing of the products developed duringrights to the
collaboration. Repligen will receive higher royalties on sales of
products developed under the agreement and may receive certain additional
milestones, as defined in the agreement.Program were returned to Repligen.
28
Repligen Clinical Partners, L.P.
In February 1992, Repligen Clinical Partners, L.P. (the "Partnership")
completed a private placement of 900 limited partnership units, with net
proceeds of approximately $40,300,000 in cash and notes receivable, to be
received by the Partnership over a three-year period. In connection with the 46
formation of the Partnership, the Company granted to the Partnership an
exclusive license to all technology and know-how related to the manufacture, use
and sale of recombinant platelet factor-4 ("rPF4") in the United States, Canada
and Europe. A wholly owned subsidiary of the Company is the General Partner of
the Partnership.
In April 1996, the Company terminated its arrangements with the
Partnership regarding the development and marketing of the rPF4 program. Under
the terms of the various agreements between the parties, the rights to the rPF4
technologies remain with the Partnership. The Company will assist the
Partnership in exploring alternatives to maximize the value of the rPF4 program
for the benefit of the Partnership.
The Partnership's primary source of funding and capital resources has
been the capital contributions made by the Limited Partners and General Partner,
which totaled $31,215,000approximately $40,582,000 through March 31, 1995.1996. During fiscal
1996 and 1995, the Partnership wrote off approximately $1,637,000 and
$3,325,000, respectively, of notes receivable relating to limited partnership
units which were foreclosed on for failure to pay either
the second or thirdtheir installments.
As of March 31, 1995, 811 of the original
900 Class A Units were outstanding. The final installment of nondefaulted
units totaling $13,433,000 (assuming no additional defaults) was due on March
15, 1995 but was extended to April 19, 1995. As of June 9, 1995, the
Partnership has received $10,811,000 of the notes receivable1996 and the balance
of unpaid installments due was $2,622,000.
As of March 31, 1995, and 1994, the Partnership owed the Company
(i) a note
payable of $4,620,000 due March 15, 1995approximately $42,000 and (ii) approximately $962,000, and
$2,109,000, respectively, for amounts due under the
Product Development Agreement and interest relating to the note payable. TheIn
addition, at March 31, 1995, the Partnership owed Repligen a note payable is aof
$4,620,000 which was the result of a loan from the Company to the Partnership to
fund certain organization and syndication costs. The note evidencing such loan is secured by a pledge of
the notes receivable from the partners and bears interest at 8.5% payable
annually in arrears. Subsequent to March 31,In May 1995, the Partnership has paid
the $4,620,000 note payable
and all ofrelated interest due was paid in full by the amounts due to Repligen as of
March 31, 1995.
Under the terms of the Development Agreement with the Partnership, thePartnership.
The Company performshas received research and development activities and will seek to obtain
approvalfunding from the
U.S. Food and Drug Administration ("FDA") for the sale of
products that may be developed utilizing the licensed technology. The
Partnership will reimburse the Company for research and development costs
incurred under the Development Agreement, plus pay a management fee equal to
10% of such costs. Included in the accompanying consolidated statements of
operations for the years ended March 31, 1995, 1994 and 1993 are research and
development revenues of approximately $4,352,000, $10,762,000 and $6,832,000,
respectively, recognized pursuant to the Product Development Agreement. The Company
recognized $2,693,000, $4,352,000 and $10,762,000 of such funding as revenue in
fiscal 1996, 1995 and 1994, respectively. During fiscal 1995, the Company
incurred an additional $1,641,000 of research and development costs which could
have been charged to the Partnership, but which was absorbed by the Company in
an effort to preserve the funds of the Partnership. Included in other revenues
for the years ended March 31, 1996, 1995 1994 and 19931994 are approximately $311,000,
$550,000 $1,211,000, and $769,000,$1,211,000, respectively, representing the 10% management fee under
the Product Development Agreement. Profits and losses are allocated 1% to the
General Partner and 99% to the Limited Partners. The Company accounts for its
investment on the equity method and has recorded losses of approximately
$21,000, $66,000 $139,000 and $112,000$139,000 as its share of the losses from the Partnership in
the accompanying consolidated statements of operations for the years ended March
31, 1996, 1995 and 1994, and 1993, respectively.
The Company was granted an exclusive license to manufacture and market anyIn connection with the initial capitalization of the Partnership's products inPartnership, the United States, Canada and Europe. The
Company has retained rights to market any products in the rest of the world.
Upon the first marketing approval of rPF4 by the FDA, the Company is obligated
to make a milestone payment of approximately $8,220,000 to the Partnership,
payable in cash or common stock of the Company. The Company is also obligated
47
to make royalty payments to the Partnership based on net revenues of the
Partnership's products in the United States, Canada and Europe.
The Company has been granted an option to purchase all of the Limited
Partners' interests in the Partnership (the "Purchase Option"), exercisable
upon the earlier of (a) two years after the first commercial sale of rPF4 and
the payment of $6,097,000 in aggregate royalty payments as noted above or (b)
four years after the first commercial sale of rPF4. If the Company exercises
the Purchase Option, it is required to pay to the Limited Partners an advance
payment of $32,520,000 in cash or $34,232,000 of the Company's common stock,
plus additional quarterly payments equal to specified percentages of net
revenues of rPF4 sales in the United States, Canada and Europe for 11 years
subsequent to the purchase of the Limited Partnership interests. In lieu of
receiving this payment and the future royalties, each Limited Partner may
elect to receive 2,750 shares of the Company's common stock for each
partnership unit held ("Fixed Share Payments").
The
Company issued warrants to the Limited Partners to purchase an
aggregatecommon stock of 2,629,100 shares of its common stock. The warrants are
exercisable between April 1, 1994 and March 31, 1999, at an exercise price of
$22.73 per share. In addition, the Company issued a warrantRepligen to the sales
agentlimited
partners of the private placement to purchase 75,050 shares of its common stock
exercisable between April 1, 1994 and March 31, 1997, at an exercise price of
$23.64 per share. The Company has agreed to use its best efforts to register
the common stock issuable upon exercise of the warrants prior to the time that
the warrants become exercisable. These warrants were valued at $3,803,119 and
are being recorded as an increase to additional paid-in capital and a
reduction of research and development revenues on a pro rata basis as amounts
are received pursuant to the Development Agreement. During fiscal 1995, the
Company exchanged the majority of these warrants in connection with an
exchange offer and has subsequently offered to modify those warrants not
originally exchanged as well as the new warrants issued during fiscal 19957
(see Note 13).
13. Offers by Repligen to Modify Warrants Issued to Limited Partners
of The Partnership 1994 Exchange Offer.(the "Original Warrants"). In June 1994, the Company
completed an exchange offer pursuant to which a majority of the Company offered toholders of the
Limited Partners and the
sales agent (the "Warrantholders") the opportunity to exchangeOriginal Warrants exchanged their existing
warrants (the "Existing Warrants")Original Warrants for newly issuednew warrants (the
"Exchange Warrants"). Warrantholders holding warrants to purchase approximately
2,161,850 shares of the Company's common stock accepted the exchange offer.
The principal effects of acceptance of the exchange offer are (i) the exercise
price under the Exchange Warrants is $9.00 per share instead of $22.73 per
share under the Existing Warrants but will increase to $14.00 per share 90
days after the Company notifies the warrantholders that the closing price of
the Company's common stock is equal to or exceeds $18.00 per share for any 20
out of 30 consecutive trading days; (ii) an extension by one yearSubsequently, in the
exercise period of the Exchange Warrants to March 31, 2000 instead of March
31, 1999 for the Existing Warrants; and (iii) a reduction in the royalty rate
during the royalty period, as defined, to 9.00% of net revenue from any sales
of rPF4 instead of 12.85% of such net revenues as currently provided for in
the Purchase Agreement. Acceptance of the exchange offer resulted in pro rata
reductions in certain other royalties and amended the Purchase Agreement
between the Company and each exchanging warrantholder.
48
1995 Warrant Modification Offer. In March 1995, Repligenthe Company offered to modify
a majority of the Existingremaining Original Warrants and the Exchange Warrants as follows for those
Limited Partners who made all of their installment payments:
Existing Warrants:
* Existing Warrants were modified to reduce the exercise price from
$22.73 per share to $9.00 per share;
* the exercise period was extended by one year to March 31, 2000; and
* the exercise price will increase to $14.00 per share 90 days after
Repligen notifies holders of Existing Warrants that the closing price
of Repligen's common stock is equal to or exceeds $18.00 per share for
20 out of 30 consecutive trading days.
Exchange Warrants:
* Exchange Warrants were modified to reduce the exercise price from
$9.00 per share to $2.50 per share for 1,000 shares and $3.50 per
share for 1,900 shares for each full Unit;
* the exercise period was extended by one year to March 31, 2001; and
* the exercise price will increase to $8.00 per share 90 days after
Repligen notifies holders of Exchange Warrants that the closing price
of Repligen's common stock is equal to or exceeds $12.00 per share for
20 out of 30 consecutive trading days.Warrants. Each
warrant holder of an outstanding warrant who makeswas not then in default of its
obligations to the fourth installment
payment isPartnership was free to accept or reject thesesuch modifications.
As of June 9, 1995,
601March 31, 1996, 623 1/2 of the 811712 nondefaulted limited partnership units
had accepted the modifications. As a result, ExistingAccordingly, as of that date, there were issued
and outstanding Original Warrants to purchase 130,50075,400 shares of the Company's
common stock, modified ExistingOriginal Warrants to purchase 153,700163,850 shares of the
Company's common stock, Exchange Warrants to purchase 466,900197,200 shares of the
Company's common stock and modified Exchange Warrants to purchase 1,694,9501,722,500
shares of the Company's common stock were outstanding at
June 9, 1995. The remaining unamortized value of all warrants outstanding
will be amortized in full during the Company's fiscal year ending March 31,
1996.stock.
29
Item 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
49
PART III
Item 10:10-13: INFORMATION WITH RESPECT TO DIRECTORS AND EXECUTIVE OFFICERS
Directors and Executive OfficersThe information required for Part III of this Annual Report on Form 10-K
is hereby incorporated by reference from the Registrant
The following table sets forthCompany's definitive proxy
statement relating to the names, ages and positionsannual meeting of the
directors and executive officers of the Company:
Name Age Position
- ----------------------- --- -----------------------------------------------
Alexander Rich, M.D. 70 Co-Chairman of the Board of Directors
Paul Schimmel, Ph.D. 54 Co-Chairman of the Board of Directors
Sandford D. Smith 48 President, Chief Executive Officer and Director
Leslie Hudson, Ph.D. 48 Executive Vice President and
Chief Operating Officer
Avery W. Catlin 47 Vice President, Finance and
Chief Financial Officer
James C. Leung, Ph.D. 41 Senior Vice President, Operations
Eric M. Bonnem, M.D. 43 Vice President, Medical Research
Don C. Stark 41 Vice President, Marketing and Corporate Strategy
Boruch B. Frusztajer 64 Director
G. William Miller 70 Director
Alfred M. Zeien 65 Director
Elizabeth M. Greetham 45 Director
Directorsstockholders of the Company
are elected annually and hold office until the
next annual meeting of stockholders. Officers serve at the pleasure of the
Board of Directors or until the next annual meeting of the Board of Directors.
Biographical Information
Certain information about the executive officers and directorsscheduled to be held on September 10, 1996, which statement is set
forth below. This information has been furnished to the Company by the
individuals named.
Alexander Rich, M.D., Co-Founder and Co-Chairman of the Board of Directors
of the Company, has been on the faculty of MIT since 1958 and is the Sedgwick
Professor of Biophysics. Internationally recognized for his contributions to
the molecular biology of nucleic acids, he has determined their three-
dimensional structure and has investigated their activity in biological
systems. He is widely known for his work in elucidating the three-dimensional
structure of transfer RNA, which is a component of the protein synthesizing
mechanism and for his discovery of a novel, left-handed form of DNA. He is a
member of the National Academy of Sciences, the American Philosophical
Society, the Pontifical Academy of Sciences, Rome and a foreign member of the
French Academy of Sciences, Paris. Dr. Rich has been a Director of the
Company since 1981. Dr. Rich is a director of Bristol-Myers Squibb
Corporation and Alkermes, Inc.
Paul Schimmel, Ph.D., Co-Founder and Co-Chairman of the Board of Directors
of the Company, has been on the faculty of MIT since 1967 and is a Professor
50
of Biochemistry and Biophysics. He is well known for his work in biophysical
chemistry and molecular biology. His field of specialty is the mechanism of
action of proteins and the manner in which they act upon the nucleic acids in
the cell. This work involves broad applications of recombinant DNA
technology. He is a member of the National Academy of Sciences, received the
1978 ACS/Pfizer award for excellence in enzyme research, and is co-author of a
widely read textbook on biophysical chemistry. He also served as the previous
Chairman, Director of Biological Chemistry, American Chemical Society. Dr.
Schimmel has been a Director of the Company since 1981. Dr. Schimmel is a
director of Alkermes, Inc.
Sandford D. Smith joined the Company in October 1986 as President, Chief
Executive Officer and Director. From 1977 to 1986, Mr. Smith was employed by
Bristol-Myers Company in various executive positions. Mr. Smith serves on the
boards of Ariad Pharmaceutical Company Inc., CSP, Inc. and Chemex
Pharmaceutical, Inc.
Leslie Hudson, Ph.D. joined the Company in December 1994 as Executive Vice
President and Chief Operating Officer. From January 1991 to November 1994,
Dr. Hudson was employed by Glaxo Inc., a subsidiary of Glaxo Holding PLC, a
multinational pharmaceutical company, as Vice President for Discovery Research
and Director of the Cancer and Hyperproliferative Disease Therapeutic Area.
In those capacities, Mr. Hudson was responsible for directing all of Glaxo's
research and early exploratory development activities in the United States.
From 1988 to 1993, Mr. Hudson also served as Director of the Division of
Cellular and Molecular Sciences at Glaxo Research and Development Ltd. in the
United Kingdom. Prior to joining Glaxo, Dr. Hudson was a Professor of
Immunology and taught in both the preclinical and clinical pathology program
at St. George's Hospital Medical School in the United Kingdom.
Avery W. Catlin joined the Company in June 1992 as Corporate Controller.
He is currently Vice President, Finance, Chief Financial Officer, Secretary
and Treasurer of the Company. From June 1991 to June 1992, he was Director,
Finance and Administration, for Boston Coach Corp., a ground transportation
services company which is a subsidiary of Fidelity Investments. From April
1990 to June 1991, he was Vice President, Finance and Chief Financial Officer
for AquaLife, Inc., N.A., an environmental services company. In each of those
positions, Mr. Catlin served as the principal financial officer of the entity.
Mr. Catlin is a Certified Public Accountant.
James C. Leung, Ph.D. joined Repligen in March 1993 as Vice President of
Process Development. He is currently Senior Vice President Operations. From
1982 to 1993, Dr. Leung held various positions at Genentech, Inc., a publicly
owned biopharmaceutical company. From 1990 until December 1991, he was a
Senior Scientist in Genentech's Cell Culture Development Department. In that
capacity, he oversaw the development of a cell culture process for the
production of recombinant protein for human therapeutic uses. From January
1992 until February 1993, Dr. Leung was Associate Director of Fermentation
Operations at Genentech. The Fermentations Department was responsible for the
fermentations of licensed products. Concurrently, he served as project leader
for two development project teams which developed and implemented new product
strategies.
Eric M. Bonnem, M.D. joined the Company in July 1992 as Vice President of
Medical Research. From 1982 to July 1992, Dr. Bonnem held various positions
at Schering-Plough International, a multinational pharmaceutical company,
including, most recently, Senior Medical Director. In those capacities, he
had primary responsibility for the development of biologic compounds and the
51
implementation of clinical trials designed to secure regulatory approvals.
Two of the products over which Dr. Bonnem had oversight responsibility at
Schering-Plough were ultimately approved for use in the U.S., Europe and Asia.
Dr. Bonnem is board certified in both oncology and internal medicine.
Don C. Stark joined Repligen in August 1992 as Director of Marketing. He
is currently Vice President, Marketing and Corporate Strategy. Prior to
joining the Company, Mr. Stark was Director of Marketing at Immunex
Corporation, a biopharmaceutical company, from June 1990 to July 1992. In
that capacity, he was responsible for establishing marketing and market
research functions for Immunex.
Boruch B. Frusztajer has served as a Director of the Company since January
1982. He is the President of BBF Corp., a company which manages the
operations of a group of electronics and chemical companies. He has served in
that capacity since 1984. Mr. Frusztajer serves on the boards of directors of
CSP Inc.and PRI Automation, Inc.
G. William Miller has served as a Director of the Company since January
1982. Mr. Miller is the Chairman of the Board, G. Miller & Co. Inc., a
private merchant banking firm. He has served in that capacity for over five
years. From January 1990 until February 1992, Mr. Miller was Chairman and
Chief Executive Officer of Federated Stores, Inc., an owner and operator of
retail department stores, supermarkets and real estate interests . Mr. Miller
is a former Chairman of the Board of Governors of the Federal Reserve System
and served as Secretary of the Treasury under President Carter. Mr. Miller is
a director of the DeBartolo Realty Corporation, a real estate investment
trust, and Kleinwort Benson Australian Income Fund, Inc.
Alfred M. Zeien has served as a Director of the Company since September
1981. He is Chairman and Chief Executive Officer of The Gillette Company,
where he has worked in various capacities since 1968 and was elected its
President in 1990. He was Gillette's Vice Chairman --
International/Diversified Operations from 1987 until 1990, its Vice Chairman -
- - Technical Operations and New Business Development from 1981 to 1987, and its
Senior Vice President -- Technical Operations from 1978 to 1981. He is a
director of Polaroid Corporation, The First National Bank of Boston,
Massachusetts Mutual Life Insurance Co. and Raytheon Company.
Elizabeth M. Greetham has served as a Director of the Company since
October 1994. Ms. Greetham has been employed as a portfolio manager and
analyst for Weiss, Peck & Greer, an investment advisory firm ("WPG"), since
January 1993. She presently manages WPG's biotechnology limited partnership
fund. From 1990 until December 1992, Ms. Greetham acted as a consultant to
WPG. Ms. Greetham is a director of Medco Research, Inc. and Chemex
Pharmaceutical.
No family relationship exists among the officers and directors of the
Company.
Compliance with Section 16 (a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers, and persons who own more than ten
percent of the Company's Common Stock, to filebe filed with
the Securities and Exchange Commission initial reportsCommission. Such information will be contained in
the sections of ownership and reportssuch proxy statement captioned "Election of changes in
ownership of Common Stock of the Company. Officers, directors and greater
52
than ten-percent shareholders are required by SEC regulation to furnish the
CompanyDirectors",
"Information with copies of all Section 16(a) reports they file. Except as set
forth below,Respect to the Company's knowledge, based solely upon review of the
copies of such reports furnished to the Company and written representations
that no other reports were required, during the fiscal year ended March 31,
1995, all Section 16(a) filing requirements applicable to its officers,
directors and greater than ten-percent beneficial owners were fulfilled in a
timely manner. The table below shows the officers and directors who failed to
file reports required by Section 16(a) during the last fiscal year, showing,
for each of them, the number of late reports, the number of transactions that
were not reported on a timely basis and, to the Company's knowledge, the
number of reports not filed.
Name Late Reports Reports Not Filed Transactions
- ------------------------------- ------------ ----------------- ------------
Alexander Rich, M.D. 0 1 1
Sandford D. Smith 0 1 1
Eric M. Bonnem, M.D. 0 1 1
Ramesh L. Ratan 0 1 1
Leslie Hudson, Ph.D 0 1 1
James C. Leung, Ph.D. 0 1 2
Don C. Stark 0 1 2
Avery W. Catlin 0 1 2
Additionally, Don C. Stark inadvertently omitted to include in his
Section 16(a) reports 1,000 shares of Common Stock owned by him. The Company
is assisting its officers and directors in bringing their Section 16(a)
reports up to date and has taken steps to assist them in complying with their
reporting obligations in the future.
53
Item 11: SUMMARY OF EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information with respect to the
annual and long-term compensation for services in all capacities to the
Company for the fiscal years ended March 31, 1995, 1994, and 1993, of the
Company's "named executive officers" (the "Named Executive Officers") within
the meaning of Item 402(a)(3) of Regulation S-K of the Securities Act of 1933,
as amended.
All Other
Annual Long-Term Compensation
Compensation Compensation ($)
------------------- -------------------- -----------------
Shares Underlying
Name and Salary Bonus Options Granted
Principle Position Fiscal Year ($) ($) (#)
- --------------------- ----------- ------- ---------- --------------------
Sandford D. Smith 1995 277,659 -- 256,738 4,100
President and Chief 1994 269,250 -- 24,000 15,110
Executive Officer 1993 252,842 90,000 30,000 15,812
Eric M. Bonnem, M.D. 1995 203,654 -- 50,225 4,500
Vice President, 1994 198,627 -- 5,000 15,110
Medical Research 1993 143,317 47,500 50,000 1,425
Ramesh L. Ratan 1995 145,897 -- 98,738 4,500
Former Sr. V.P. 1994 159,583 -- 12,000 13,590
Administration 1993 152,234 45,000 15,000 14,216
James C. Leung, Ph.D. 1995 162,000 -- 67,000 4,423
Senior Vice 1994 140,000 -- -- 2,100
President, 1993 11,667 -- 20,000 --
Operations
Don C. Stark 1995 144,025 -- 36,663 4,289
Vice President, 1994 136,250 -- 7,500 4,028
Marketing 1993 78,125 -- 15,000 938
Avery W. Catlin 1995 112,500 -- 42,000 3,168
Vice President, 1994 94,583 6,700 -- 7,907
Finance, Chief 1993 65,682 12,750 12,500 1,063
Financial Officer
- ---------------
The aggregate amount of perquisites and other personal benefits for each of the Named Executive
Officers did not exceed the lesser of either $50,000 or 10% of the total of such individual's base
salary and bonus, as reported herein, for the applicable fiscal years, and is not reflected in the
table.
54
No bonuses were awarded to the Named Executive Officers for Fiscal Years 1995 and 1994, except that
a $6,700 bonus was awarded to Mr. Catlin in Fiscal 1994.
Certain of the stock options reported for Fiscal Year 1995 represent previously issued options which
were repriced by the Compensation Committee and reissued to the named individuals in August 1994.
See "Option Grants in Last Fiscal Year."
Amounts reported under this column include the dollar value of the following:
Name Year Contributions to Contributions to
401(k) Employee Employee Stock
Savings Plan ($) Ownership Plan ($)
----------------------- ---- ------------------ ------------------
Sandford D. Smith 1995 4,100 --
1994 4,497 10,613
1993 4,364 11,448
Eric M. Bonnem, M.D. 1995 4,500 --
1994 4,497 10,613
1993 1,425 --
Ramesh L. Ratan 1995 4,500 --
1994 4,497 9,093
1993 4,364 9,852
James C. Leung, Ph.D. 1995 4,423 --
1994 2,100 --
1993 -- --
Don C. Stark 1995 4,289 --
1994 4,028 --
1993 938 --
Avery W. Catlin 1995 3,168 --
1994 3,145 4,762
1993 1,063 --
In January 1995, Mr. Ratan left the Company to pursue other interests.
55
Option Grants in Last Fiscal Year
The following table sets forth certain information regarding stock option
grants during the fiscal year ended March 31, 1995 and the value of stock
options held as of March 31, 1995 by the Named Executive Officers.
Potential
Realizable Value
at Assumed
Percent of Annual Rates of
Shares Total Options Stock Price
Underlying Granted to Exercise Appreciation for
Options Employees in Price Per Expiration Option Terms
Name Granted Fiscal Year Share Date
- --------------------- ------------ ------------ ------------ ------------ -----------------------------
5% 10%
------------ ------------
Sandford D. Smith 228,738 15.3% $2.75 8/4/04 $395,593 $1,002,511
28,000 1.8% 5.25 4/29/04 92,448 234,280
Eric M. Bonnem, M.D. 44,225 2.9% 2.75 8/4/04 76,485 193,829
6,000 0.4% 5.25 4/29/04 19,810 50,203
Ramesh L. Ratan 83,738 5.5% 2.75 8/4/04 144,822 367,006
15,000 1.0% 5.25 4/29/04 49,525 125,507
James C. Leung, Ph.D 23,200 1.5% 2.75 8/4/04 40,123 101,681
31,800 2.1% 2.75 8/4/04 54,997 139,373
12,000 0.8% 5.25 4/29/04 39,620 100,406
Don C. Stark 20,663 1.4% 2.75 8/4/04 35,736 90,562
10,000 0.7% 2.75 8/4/04 17,295 43,828
6,000 0.4% 5.25 4/29/04 20,829 52,785
Avery W. Catlin 20,000 1.3% 2.06 1/18/05 25,942 65,742
14,500 1.0% 2.75 8/4/04 25,077 63,550
7,500 0.5% 5.25 4/29/04 24,763 62,754
- ---------------
The options reported above were issued pursuant to the 1992 Repligen Corporation Stock Option Plan
(the "Plan"). Certain of the options, identified by a double asterisk above, represent previously
issued stock options which were repriced by the Compensation Committee and reissued to the named
individuals in August 1994 (the "Amended Options"). Options awarded under the Plan generally vest
in equal annual increments of 20% of the underlying shares commencing on the one year anniversary of
the date of grant, except that the Amended Options are subject to a three year vesting schedule.
The options are exercisable at the fair market value of the Common Stock on the date of grant
(determined in accordance with the terms of the Plan). The options have a term of 10 years, subject
to early termination in the event of death or termination of employment.
Amounts represent hypothetical gains that could be achieved from the exercise of the respective
options and the subsequent sale of the Common Stock underlying such options if the options were
exercised at the end of the option term. These gains are based on assumed rates of stock price
56
appreciation of 5% and 10% compounded annually from the date the respective options were granted.
These rates of appreciation are mandated by the rules of the SEC and do not represent the Company's
estimate or projection of the future Common Stock price.
In January 1995, Mr. Ratan left the Company to pursue other interests.
Represents the Amended Options.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
The following table sets forth certain information regarding stock options
held as of March 31, 1995 by the Named Executive Officers.
Value of Unexercised
Number of Shares In-the-Money Options
Shares Underlying Unexercised at Fiscal Year-End
Acquired Value Options at Fiscal Year-End Exercisable\
Name on Exercise Realized Exercisable\Unexercisable Unexercisable
- --------------------- --------------- -------- ----------------------------- --------------------
Sandford D. Smith -- -- 4,800 247,938 -- --
Eric M. Bonnem, M.D. -- -- -- 44,225 -- --
Ramesh L. Ratan -- -- -- 83,738 -- --
James C. Leung, Ph.D. -- 55,000 -- --
Don C. Stark -- -- -- 30,663 -- --
Avery W. Catlin -- -- -- 34,500 -- --
- ---------------
None of the Named Executive Officers exercised any stock options during the fiscal year ended
March 31, 1995.
Represents the aggregate number of stock options held as of March 31, 1995 which can and cannot be
exercised pursuant to the terms and provisions of the applicable stock option agreements and the
Plan.
All of the unexercised stock options held by the Named Executive Officers at fiscal year end were
"out of the money", i.e., the exercise price of the options exceeded the fair market value of the
Common Stock.
CompensationBoard of Directors Outside directors who are notand Committees", "Stock
Ownership of Principal Stockholders and Management", "Summary of Executive
Compensation" and "Compensation Committee Report to Stockholders." Information
regarding executive officers of the Company or representativesis also furnished in Part I of onethis
Annual Report on Form 10-K, "Executive Officers of the Company's major corporate shareholders receive $1,500Registrant." See Cross
Reference Sheet for each
Board and Committee meeting which they attend. Drs. Schimmel and Rich, the
Co-Chairmen of the Board of Directors, are compensated pursuant to consultingPart III.
30
57
agreements described below and receive no separate compensation for attendance
at meetings or otherwise as directors.
Under the terms of the Plan, each non-employee director, other than the
Co-Chairmen of the Board of Directors, is entitled to receive every three
years, beginning in fiscal year 1993, an option to purchase 5,000 shares of
Common Stock at an option price equal to the fair market value of the Common
Stock on the date of grant, determined in accordance with the terms of the
Plan (the "Board Options"). Additionally, each non-employee director who
joins the Board after the effective date of the Plan is entitled to receive a
Board Option to purchase 10,000 shares of Common Stock on the date he or she
joins the Board. The Board Options vest in equal annual installments of 20%
of the underlying shares commencing on the one year anniversary of the date of
grant. Board Options have a term of ten years, subject to early termination
in the event of death or removal or resignation from the Board. No director
is entitled to receive Board Options covering more than an aggregate of 20,000
shares.
The Company paid to each of Drs. Schimmel and Rich $43,200 during the
fiscal year ended March 31, 1995 pursuant to consulting agreements which have
similar terms. These agreements are automatically extended for successive
one-year terms unless terminated by either party at least 90 days prior to the
next anniversary date. Dr. Schimmel's agreement continues until September 30,
1995 and Dr. Rich's agreement continues until October 31, 1995. Drs. Schimmel
and Rich have advised the Company that they have no present intention of
terminating their agreements. The Company's subsidiary, Amira, Inc., also has
a consulting arrangement with Dr. Schimmel under which he was paid $22,000 for
the fiscal year ended March 31, 1995.
Employment Agreements
On August 28, 1986, the Company entered into a letter agreement with
Sandford D. Smith pursuant to which he became the President, Chief Executive
Officer and a Director of the Company (the "Smith Agreement"). Under the
terms of the Smith Agreement, Mr. Smith is entitled to a minimum salary of
$150,000 per annum, subject to periodic increases at the discretion of the
Board of Directors. Mr. Smith's salary is currently set by the Board at
$278,000 per annum. Additionally, Mr. Smith is eligible to receive
discretionary bonuses and to participate in all of the Company's welfare,
profit sharing, retirement and savings plans on the same basis as other
employees of the Company. Mr. Smith received a stock option to purchase
175,000 shares of Common Stock pursuant to the Smith Agreement. Mr. Smith's
employment by the Company may be terminated, with or without cause, by either
party upon 30 days prior written notice. In such event, Mr. Smith would be
entitled to continue receiving his salary for a period of eight months or
until he finds other employment, whichever occurs first.
On May 9, 1992, the Company entered into a letter agreement with Avery W.
Catlin pursuant to which he joined the Company (the "Catlin Agreement").
Under the terms of the Catlin Agreement, Mr. Catlin is entitled to a minimum
salary of $85,000 per annum, subject to periodic increases at the discretion
of the Board of Directors. Mr. Catlin's salary is currently set by the Board
at $140,000 per annum. Additionally, Mr. Catlin is eligible for participation
in the Company's Senior Staff Initiative Plan and in all of the Company's
welfare, profit sharing, retirement and savings plans on the same basis as
other employees of the Company. Mr. Catlin received a stock option to
purchase 12,500 shares of Common Stock pursuant to the Catlin Agreement. On
58
February 17, 1995, the Catlin Agreement was amended to provide that, if Mr.
Catlin's employment is terminated, he would be entitled to continue receiving
his salary for a period of nine months following termination.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee currently consists of Mr. Frusztajer, Dr.
Schimmel and Mr. Zeien. No member of the Compensation Committee is a current
or former employee of the Company. There are no Compensation Committee
interlocks between the Company and any other entities involving any of the
executive officers or directors of such entities.
Item 12: STOCK OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information as of June 15, 1995
concerning beneficial ownership by (i) all shareholders known by the Company
to own more than five percent of the Company's outstanding voting securities,
(ii) each of the Named Executive Officers, (iii) all directors and nominees,
and (iv) all directors and executive officers as a group. The number of
shares beneficially owned by each director or executive officer is determined
under rules of the Securities and Exchange Commission, and the information is
not necessarily indicative of beneficial ownership for any other purpose.
Under such rules, beneficial ownership includes any shares as to which the
individual has the right to acquire within 60 days of June 15, 1995 through
the exercise of any stock option or other right. Unless otherwise indicated,
each person has sole investment and voting power (or shares such power with
his or her spouse) with respect to the shares set forth in the following
table. The inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of those shares.
Number of Shares Percentage of
Names Beneficially Owned Common Stock
- ---------------------------------------- --------------------- -------------
Paul Schimmel, Ph.D. 536,732 3.5%
Alexander Rich, M.D. 403,400 2.6%
Elizabeth M. Greetham 198,500 1.3%
Sandford D. Smith 93,471
Boruch B. Frusztajer 58,500
G. William Miller 33,000
Eric M. Bonnem, M.D. 18,594
James C. Leung, Ph.D. 14,016
Alfred M. Zeien 13,000
Don C. Stark 9,818
Avery W. Catlin 8,285
All directors and executive officers
as group (12 persons) 1,387,316 8.9%
- ---------------
Includes shares held jointly with Dr. Schimmel's spouse; also includes
26,650 shares held in a charitable trust of which Dr. Schimmel is a
59
trustee; excludes shares held by Dr. Schimmel's adult children.
Dr. Schimmel disclaims beneficial ownership of the shares held by
these children.
Includes 60,000 shares held by Dr. Rich's spouse; excludes shares held
by Dr. Rich's adult children. Dr. Rich disclaims beneficial ownership
of the shares held by these children.
Consists solely of shares owned by a biotechnology limited partnership
fund for which Ms. Greetham serves as portfolio manager. Ms. Greetham
disclaims beneficial ownership as to all of these shares.
Includes 85,083 shares beneficially owned by Mr. Smith which may be
acquired within 60 days pursuant to an option.
Excludes shares held by Mr. Frusztajer's adult children. Mr
Frusztajer disclaims beneficial ownership of the shares. Includes
13,000 shares beneficially owned by Mr. Frusztajer which may be
acquired within 60 days pursuant to Board Options. See "Compensation
of Directors".
Includes 13,000 shares beneficially owned by Mr. Miller which may be
acquired within 60 days pursuant to Board Options. See "Compensation
of Directors".
Includes 14,594 shares beneficially owned by Dr. Bonnem which may be
acquired within 60 days pursuant to an option.
Consists solely of shares beneficially owned by Dr. Leung which may be
acquired within 60 days pursuant to an option.
Excludes 421,408 shares of Common Stock held by The Gillette Company,
of which Mr. Zeien is the Chairman and Chief Executive Officer. See
"Biographical Information". Includes 13,000 shares which may be
acquired within 60 days pursuant to two non-statutory stock options
held by Mr. Zeien for the benefit of The Gillette Company. Mr. Zeien
disclaims beneficial ownership of these shares.
Consists of 1,000 shares held jointly with Mr. Stark's wife and 8,818
shares beneficially owned by Mr. Stark which may be acquired within 60
days pursuant to an option.
Includes 4,785 shares beneficially owned by Mr. Catlin which may be
acquired within 60 days pursuant to an option.
Includes 166,296 shares beneficially owned by all executive officers
and directors as a group which may be acquired within 60 days pursuant
to various options.
The table does not include the beneficial ownership of Ramesh L.
Ratan, formerly the Senior Vice President, Administration, Chief
Financial Officer, Secretary and Treasurer of the Company, who
resigned from the Company in January 1995 to pursue other interests.
Represents less than 1% of the outstanding shares.
60
Item 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
NONE
61
PART IV
Item 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
Item 14(a) The following documents are filed as part of this Annual Report
on Form 10-K:
Item 14(a)(1) Financial Statements: See "Index to Consolidated Financial
Statement and
Supplementary Data "inStatement" in Item 8.
Item 14(a)(2) Financial Statement Schedules:
1. Schedule II - Valuation and Qualifying Accounts
Other financial statement schedules have not been included because they
are not applicable or the information is included in financial statements or
notes thereto.
Item 14(a)(3) Exhibits.
The following is a list of exhibits filed as part of this Annual Report
on Form 10-K:
3. Articles of Incorporation and By-laws
3.1 -- Restated Certificate of Incorporation, dated June
30, 1992 and filed July 13, 1992 (filed as Exhibit
4.12 to Repligen Corporation's Annual Report on Form
10-K for the year ended March 31, 1993 and
incorporated herein by reference).
3.2 -- By-laws (filed as Exhibit 3.4 to Repligen
Corporation's Form S-
1S-1 Registration Statement
No. 33-3959 and incorporated herein by reference).
4. Instruments Defining the Rights of Security Holders
4.1 -- Stockholder Agreement, dated May 29, 1981, among Dr. Alexander
Rich, Dr. Paul Schimmel, and Dr. William M. Jackson and
Repligen Corporation (filed as Exhibit 4.1 to Repligen
Corporation's Form S-1 Registration Statement No. 33-3959 and
incorporated herein by reference).
4.2 -- Specimen Stock Certificate (filed as Exhibit 4.2 to
Repligen Corporation's Form S-1 Registration
Statement No. 33-3959 and
incorporated herein by reference).
4.3 -- Form of Subscription Documents for Series A Preferred Stock
(filed as Exhibit 4.3 to Repligen Corporation's Form S-1
Registration Statement No. 33-3959 and incorporated herein by
reference).
4.4 -- Form of Subscription Documents for Series B Preferred Stock
(filed as Exhibit 4.4 to Repligen Corporation's Form S-1
Registration Statement No. 33-3959 and incorporated herein by
reference).
62
4.5 -- Common Stock Purchase Agreement, dated May 21, 1985, between
The Gillette Company and Repligen Corporation (filed as Exhibit
4.5 to Repligen Corporation's Form S-1 Registration Statement
No. 33-3959 and incorporated herein by reference).
4.6 -- Common Stock Purchase Agreement, dated July 10, 1985, between
Tiedemanns and Repligen Corporation (filed as Exhibit 4.6 to
Repligen Corporation's Form S-1 Registration Statement No. 33-
3959 and incorporated herein by reference).
4.7 -- Purchase and Option Agreement dated as of March 31, 1987
between Centocor, Inc. and Repligen Corporation (filed as an
Exhibit to Repligen Corporation's Form 8-K filed June 5, 1987 and incorporated herein by
reference).
4.8 -- Form of Limited Partner Warrant, dated as of
February 28, 1992 (filed as Exhibit 4.9 to Repligen
Corporation's Annual Report on Form 10-K for the year
ended March 31, 1992 and incorporated herein by
reference).
4.9 -- Form of Class B Limited Partner Warrant, dated as
of February 28, 1992 (filed as Exhibit 4.10 to
Repligen Corporation's Annual Report on Form 10-K for
the year ended March 31, 1992 and incorporated herein
by reference).
4.10 -- Form of Incentive Warrant, dated as of February 28,
1992 (filed as Exhibit 4.11 to Repligen Corporation's
Annual Report on Form 10-K for the year ended March
31, 1992 and incorporated herein by reference).
4.11 -- Form of Fund Warrant, dated as of February 28, 1992
(filed as Exhibit 4.12 to Repligen Corporation's
Annual Report on Form 10-K for the year ended March
31, 1992 and incorporated herein by reference).
4.12 -- The 1992 Repligen Corporation Stock Option Plan
(filed as Exhibit 4.12 to Repligen Corporation's
Annual Report on Form 10-K for the year ended March
31, 1993 and incorporated herein by reference).
31
10. Material Contracts
10.1 -- License Agreement, dated December 2, 1980, between
the Trustees of Leland Stanford Junior University and
Repligen Corporation (filed as Exhibit 10.1 to Repligen Corporation's Form S-1
Registration Statement No. 33-3959 and incorporated herein by
reference).
10.2 -- Biological Supply Agreement, dated November 26, 1985, between
Applied ImmuneSciences, Inc. and Repligen Corporation, with
schedules (filed as Exhibit 10.5 to Repligen Corporation's Form
S-1 Registration Statement No. 33-3959 and incorporated herein
by reference).
63
10.3 -- Lease, dated August 15, 1984, between Robert A. Jones, K.
George Najarian and David E. Clem, Trustees of Old Kendall
Realty Trust and Repligen Corporation relating to premises
located at One Kendall Square in Cambridge, Massachusetts
(filed as Exhibit 10.6 to Repligen Corporation's Form S-1
Registration Statement No. 33-3959 and incorporated herein by
reference).
10.4 -- Letter, dated December 30, 1985, from The First National Bank
of Boston to Repligen Corporation establishing a $4,000,000
line of credit (filed as Exhibit 10.11 to
Repligen Corporation's Form S-1 Registration Statement
No. 33-3959 and incorporated herein by reference).
10.5 -- Consulting Agreement, dated October 1, 1981, between
Dr. Paul Schimmel and Repligen Corporation (filed as
Exhibit 10.14 to Repligen Corporation's Form S-1
Registration Statement No. 33-
395933-3959 and incorporated
herein by reference).
10.6 -- Consulting Agreement, dated November 1, 1981, between
Dr. Alexander Rich and Repligen Corporation (filed as
Exhibit 10.15 to Repligen Corporation's Form S-1
Registration Statement No. 33-3959 and incorporated herein by reference).
10.7 -- Purchase and Option Agreement, as amended, dated March 31,
1987, and Transfer, License and Collaborative Research
Agreement, dated March 31, 1987, both between Centocor, Inc.
and Repligen Corporation, (filed as an Exhibit to Repligen
Corporation's Form 8-K filed April 21, 1987 and incorporated
herein by reference).
10.8 -- Research Collaboration and License Agreement, dated May 26,
1987, between Merck & Co., Inc. and Repligen Corporation (filed
as an Exhibit to Repligen Corporation's Form 8-K filed June 5,
1987 and incorporated herein by reference).
10.9 -- Supply Agreement, dated May 26, 1987, between Merck and Co.,
Inc. and Repligen Corporation (filed as an Exhibit to Repligen
Corporation's Form 10-K filed June 29, 1987 and incorporated
herein by reference).
10.10 -- Letter, dated May 27, 1987, from The First National Bank of
Boston to Repligen Corporation regarding a $4,000,000 line of
credit (filed as an Exhibit to Repligen Corporation's Annual
Report on Form 10-K filed June 29, 1987 and incorporated herein
by reference).
10.11 -- Amendment Agreement No. 6, dated April 1, 1989, between
Centocor, Inc. and Repligen Corporation (filed as Exhibit 10.20
to Repligen Corporation's Form 10-K Annual Report for the year
ended December 31, 1988, between Centocor, Inc. and Repligen
Corporation and incorporated herein by reference).
10.12 -- National Institute of Allergy and Infectious Diseases grant no.
[SRC (91)] 1-U01-AID28243-01 dated March 22, 1989 (filed as
Exhibit 10.19 to Repligen Corporation's Annual Report on Form
10-K for the year ended March 31, 1990 and incorporated herein
by reference).
64
10.13 -- Lease Modification, dated January 6, 1989, among Robert A.
Jones, K. George Najarian and David E. Clem, Trustees of Old
Kendall Realty Trust and Repligen Corporation relating to
premises located at One Kendall Square in Cambridge,
Massachusetts (filed as Exhibit 10.23 to Repligen Corporation's
Form 10-K Annual Report for the year ended December 31, 1988,
and incorporated herein by reference).
10.14 -- Purchase Agreement, dated October 2, 1989, between various
selling shareholders of Repligen Corporation (filed as Exhibit
28.1 to Repligen Corporation's Form S-3 Registration Statement
No. 33-31705 and incorporated herein by reference).
10.15 -- Sublicense Agreement, dated as of March 30, 1990, among
Repligen Corporation and Cambridge BioScience Corporation
(filed as Exhibit 10.24 to Repligen Corporation's Annual Report
on Form 10-K for the year ended March 31, 1990 and incorporated
herein by reference).
10.16 -- Amendment Agreement No. 7, dated March 31, 1990, between
Centocor, Inc. and Repligen Corporation (filed as Exhibit 10.25
to Repligen Corporation's Annual Report on Form 10-K for the
year ended March 31, 1990 and incorporated
herein by reference).
10.17 -- Employment Agreement, dated August 28, 1986,
between Sandford D. Smith and Repligen Corporation
(filed as Exhibit 10.26 to Repligen Corporation's
Annual Report on Form 10-K for the year ended March
31, 1990 and incorporated herein by reference).
10.18 -- License Agreement, dated November 14, 1990, between
the Regents of the University of Michigan and Repligen
Corporation (filed as Exhibit 10.27 to Repligen
Corporation's Annual Report on Form 10-K for the year
ended March 31, 1991 and incorporated herein by
reference).
10.19 -- Agreement and Plan of Merger, dated as of September
30, 1991, by and among Repligen Corporation, AI
Acquisition Corp. and Amira, Inc. (filed as Exhibit
2.1 to Repligen Corporation's Form 8-K filed December
3, 1991 and incorporated herein by reference).
10.20 -- Amendment No. 1 to Agreement and Plan of Merger,
dated as of October 29, 1991, by and among Repligen
Corporation, AI Acquisition Corp. and Amira, Inc.
(filed as Exhibit 2.2 to Repligen Corporation's Form
8-K filed December 3, 1991 and incorporated herein
by reference).
10.21 -- Reacquisition Agreement, dated January 27, 1992, between
Repligen Corporation and Merck & Co., Inc. (filed as Exhibit
10.28 to Repligen Corporation's Annual Report on Form 10-K for
the year ended March 31, 1992 and incorporated herein by
reference).
65
10.22 -- Product Development Agreement, dated as of February
2, 1992, between Repligen Corporation and Repligen
Clinical Partners, L.P. (filed as Exhibit 10.29 to
Repligen Corporation's Annual Report on Form 10-K for
the year ended March 31, 1992 and incorporated herein
by reference).
10.23 -- Purchase Agreement, dated February 2, 1992, between
Repligen Corporation and each of the Limited Partners
from time to time of Repligen Clinical Partners, L.P.
(filed as Exhibit 10.30 to Repligen Corporation's
Annual Report on Form 10-K for the year ended March
31, 1992 and incorporated herein by reference).
10.24 -- Asset Purchase Agreement, dated as of May 14, 1992, by and
among Repligen Corporation, Abbott Biotech, Inc. and Abbott
Laboratories (filed as Exhibit 10.1 to Repligen Corporation's
Form 8-K filed May 29, 1992 and incorporated herein by
reference).
10.25 -- Lease, dated May 14, 1992, between Repligen Corporation and
Damon Clinical Laboratories, Inc. (filed as Exhibit 10.32 to
Repligen Corporation's Annual Report on Form 10-K for the year
ended March 31, 1992 and incorporated herein by reference).
10.26 -- Research, Collaboration and License Agreement, dated as of May
16, 1992, by and between Repligen Corporation and Eli Lilly and
Company (filed as Exhibit 10.33 to Repligen Corporation's
Annual Report on Form 10-K for the year ended March 31, 1992
and incorporated herein by reference).
10.27 -- Supply Agreement, dated as of May 15, 1992, by and between
Repligen Corporation and Eli Lilly and Company (filed as
Exhibit 10.34 to Repligen Corporation's Annual Report on Form
10-K for the year ended March 31, 1992 and incorporated herein
by reference).
10.28 -- Stock Purchase Agreement, dated as of May 15, 1992, by and
between Repligen Corporation and Eli Lilly and Company (filed
as Exhibit 10.35 to Repligen Corporation's Annual Report on
Form 10-K for the year ended March 31, 1992 and incorporated
herein by reference).
10.29 -- License Agreement, dated as of July 9, 1991, by and between
Repligen Corporation and the Trustees of Boston University
(filed as Exhibit 10.36 to Repligen Corporation's Annual Report
on Form 10-K for the year ended March 31, 1992 and incorporated
herein by reference).
10.30 -- License Agreement, dated as of September 1, 1991,
by and between Repligen Corporation and Kabi Pharmacia
AB (filed as Exhibit 10.37 to Repligen Corporation's
Annual Report on Form 10-K for the year ended March
31, 1992 and incorporated herein
by reference).
10.31 -- Master Lease Agreement, dated as of October 30, 1992, between
Comdisco Inc. and Repligen Corporation (filed as Exhibit 10.31
to Repligen Corporation's Annual Report on Form 10-K for the
year ended March 31, 1993 and incorporated herein by
reference).
66
10.32 -- Equipment Lease Agreement, dated December 31, 1992, between
General Electric Capital Corporation and Repligen Corporation
(filed as Exhibit 10.32 to Repligen Corporation's Annual
Report on Form 10-K for the year ended March 31, 1993 and
incorporated herein by reference).
10.33 -- Stock Purchase Agreement, dated December 31, 1992, between
Repligen Corporation, Sandoz Ltd., Sandoz Chemicals
Corporation, Sandoz Pharma Ltd. and Repligen Sandoz Research
Corporation (filed as Exhibit 10.33 to Repligen Corporation's
Annual Report on Form 10-K for the year ended March 31, 1993
and incorporated herein by reference).
10.34 -- Building Lease, dated April 15, 1993, among Robert A. Jones, K.
George Najarian and David E. Clem, Trustees of Old Cambridge
Realty Trust and Repligen Corporation, relating to premises
located at One Kendall Square, Building 200, in Cambridge,
Massachusetts (filed as Exhibit 10.34 to Repligen Corporation's
Annual Report on Form 10-K for the year ended March 31, 1993
and incorporated herein by reference).
10.35 -- Letter Agreement, dated April 30, 1993, between Merck and Co.,
and Repligen Corporation, concerning Research Collaboration and
License Agreement and Supply Agreement both dated as of May 26,
1987 (filed as Exhibit 10.35 to Repligen Corporation's Annual
Report on Form 10-K for the year ended March 31, 1993 and
incorporated herein by reference).
10.36 -- Term Loan Agreement, dated March 31, 1993, among Repligen
Corporation and Amira, Inc., as Borrowers and the First
National Bank of Boston (filed as Exhibit 10.36 to Repligen
Corporation's Annual Report on Form 10-K for the year ended
March 31, 1993 and incorporated herein by reference).
10.37 -- Building Lease, dated July 10, 1992, between Trustees
of the Cambridge East Trust and Amira, Inc., relating
to 79 and 83 Rogers Street, Cambridge, Massachusetts
(filed as Exhibit 10.37 to Repligen Corporation's
Annual Report on Form 10-K for the year ended March
31, 1993 and incorporated herein by reference).
10.38 -- Licensing Agreement, dated July 20, 1993, between Repligen
Corporation and the Dana-Farber Cancer Institute, Inc. (filed
as Exhibit 10.38 to Repligen Corporation's Form S-3
Registration Statement No. 33-72078 and incorporated herein by
reference).
10.39 -- Development and License Agreement, dated as of March 1, 1995,
between Repligen Corporation and Eli Lilly and Company
(omitting schedules and exhibits).
- ---------------
Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application
for Confidential Treatment. Such blocked out omissions have been
filed separately with the Securities and Exchange Commission. The
Registrant shall furnish all omitted schedules and exhibits to this
document upon the request of the Securities and Exchange Commission.
67
10.40 -- Employment Agreement dated November 18, 1994 between Repligen
Corporation and Dr. Leslie Hudson.
10.41 -- Employment Agreement, dated May 8, 1992, between
Repligen Corporation and Avery W. Catlin.Catlin (filed as
Exhibit 10.41 to Repligen Corporation's Annual Report
32
on Form 10-K for the year ended March 31, 1995 and
incorporated herein by reference).
10.42 -- Plan of Reorganization and Agreement of Merger,
dated March 14, 1996, between Repligen Corporation
and Glycan Pharmaceuticals, Inc. (omitting
schedules and exhibits).
10.43 -- Employment Agreement, dated March 14, 1996, between
Repligen Corporation and Walter C. Herlihy.
10.44 -- Employment Agreement, dated March 14, 1996, between
Repligen Corporation and James R. Rusche.
10.45 -- Employment Agreement, dated March 14, 1996, between
Repligen Corporation and Daniel P. Witt.
10.46 -- Sublease Agreement dated as of May 1, 1996 between
T Cell Sciences, Inc. and Repligen Corporation.
22 -- Subsidiaries of Repligen Corporation (filed as Exhibit 22 to
Repligen Corporation's Form S-3 Registration Statement No. 33-
72078 and incorporated herein by reference).
23 -- Consent of Independent Public Accountants.
27 -- Financial Data Schedule (provided for the information of the
Securities and Exchange Commission only).Corporation.
Item 14(b) Reports on Form 8-K.
No Current Reports on Form 8-K were filed by the Company during the last
quarter of the period covered by this report.
33
68
FINANCIAL STATEMENT SCHEDULESSCHEDULE
Schedule II - Valuation and Qualifying Accounts
34
69CROSS REFERENCE SHEET
Form 10-K Items
Incorporated By Page of 1996
Reference Proxy Statement
- ---------------- ----------------------
PART III
Item 10 Directors and Executive Officers of Registrant
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners and Managers
Item 13 Certain Relationships and Transactions
35
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To Repligen Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in this Form 10-K, and have issued
our report thereon dated May 17, 1995.8, 1996. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The schedule listed in
Item 14(a)(2) is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
/s/ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 17, 19958, 1996
36
70
SCHEDULE II
REPLIGEN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Item Balance at BeginningAddition Deduction Balance at End
ItemBeginning of Period Addition Deduction of Period
- ------------------- -------------------- -------- --------- -------------------------------------------------------------------------------------------------------------------
Allowance for
Doubtful Accounts
1996 $300,000 $102,000 $250,000 $152,000
1995 $205,000 $205,000 95,000 $ -- $300,000300,000
1994 10,000 195,000 -- 205,000
1993 -- 10,000 -- 10,000205,000
37
71
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
REPLIGEN CORPORATION
By: /S/ Sandford D. Smith
------------------------------------
Sandford D. Smith,Walter C. Herlihy
----------------------------
Walter C. Herlihy, President
and Chief Executive Officer
Date: July 11, 1995June 24, 1996
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby makes, constitutes and appoints Sandford D. SmithWalter C. Herlihy and Avery W.
Catlin,Daniel P.
Witt, and each of them, with full power to act without the other, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities to sign any or all amendments to this Form 10-K, and to file the same
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-
factattorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents of any of
them, or any substitute or substitutes, lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
- ------------------------ ------------------------------------- ------------
/s/ Alexander Rich Co-Chairman of the Board of Directors July 12, 1995
- ------------------------
Alexander Rich, M.D.
Co-Chairman of the Board of Directors July __, 1995
- ------------------------
Signature Title Date
--------- ----- ----
/s/ Alexander Rich
- -------------------------- Co-Chairman of the Board of Directors June 25, 1996
Alexander Rich, M.D.
/s/ Paul Schimmel
- -------------------------- Co-Chairman of the Board of Directors June 25, 1996
Paul Schimmel, Ph.D.
/s/ Walter C. Herlihy
- -------------------------- President, Chief Executive Officer and Director June 24, 1996
Walter C. Herlihy (Principal Financial and Accounting Officer)
/s/ Boruch B. Frusztajer
- -------------------------- Director June 25, 1996
Boruch B. Frusztajer
/s/ G. William Miller
- -------------------------- Director June 25, 1996
G. William Miller
- -------------------------- Director June ___, 1996
Alfred M. Zeien
- -------------------------- Director June ___, 1996
Elizabeth Greetham
- -------------------------- Director June ___, 1996
Sandford D. Smith
President, Chief Executive Officer July 11, 1995
- ------------------------ and Director
Sandford D. Smith
/s/ Boruch B. Frusztajer Director July 12, 1995
- ------------------------
Boruch B. Frusztajer
/s/ G. William Miller Director July 13, 1995
- ------------------------
G. William Miller
72
/s/ Alfred M. Zeien Director July 12, 1995
- ------------------------
Alfred M. Zeien
Director July __, 1995
- ------------------------
Elizabeth Greetham
/s/ Avery W. Catlin Vice President, Finance July 11, 1995
- ------------------------ and Chief Financial Officer
Avery W. Catlin (Principal and Accounting Officer)
73
EXHIBIT INDEX
ITEM DESCRIPTION
- ---- ---------------------------------------------------------------------
10.39 Development-----------
10.42 Plan of Reorganization and
LicenseAgreement of Merger dated March
14, 1996 between Repligen
Corporation and Glycan
Pharmaceuticals, Inc. (omitting
schedules and exhibits).
10.43 Employment Agreement, dated March
14, 1996, between Repligen
Corporation and Walter C. Herlihy.
10.44 Employment Agreement, dated March
14, 1996, between Repligen
Corporation and James R. Rusche.
10.45 Employment Agreement, dated March
14, 1996, between Repligen
Corporation and Daniel P. Witt.
10.46 Sublease Agreement dated as of MarchMay
1, 1995,1996 between T Cell Sciences,
Inc. and Repligen Corporation and Eli Lilly and Company
(omitting schedules and exhibits)
10.40 Employment Agreement dated November 18, 1994 betweenCorporation.
22 Subsidiaries of Repligen
Corporation and Dr. Leslie Hudson.
10.41 Employment Agreement dated May 8, 1992 between Repligen
Corporation and Avery W. Catlin.Corporation.
23 Consent of Independent Public
Accountants
27 Financial Data Schedule (provided for the information of the
Securities and Exchange Commission only).
- ---------------
Confidential treatment requested. Portions of this document have been
omitted by blocking out the relevant text pursuant to an Application
for Confidential Treatment. Such blocked out omissions have been
filed separately with the Securities and Exchange Commission. The
Registrant shall furnish all omitted schedules and exhibits to this
document upon the request of the Securities and Exchange Commission.