SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30,December 31, 1999
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 0-14656
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.)
117 Fourth Avenue
Needham, Massachusetts 02494
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 449-9560
-----------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report.)
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of OctoberJanuary 31, 1999.
COMMON STOCK, PAR VALUE $.01 PER SHARE 22,320,310
-------------------------------------- ----------------
Class Number of Shares
REPLIGEN CORPORATION
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Balance Sheets as of September 30,December 31, 1999 (Unaudited) and March 31, 1999 (Unaudited) 3
Statements of Operations (Unaudited) for the Three and SixNine Months Ended
September 30,December 31, 1999 and 1998 (Unaudited) 4
Statement of Cash Flows (Unaudited) for the SixNine Months Ended
September 30,December 31, 1999 and 1998 (Unaudited) 5
Notes to Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 98
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 1312
Item 3. Defaults Upon Senior Securities
None
Item 4. Submissions of Matters to a Vote of Security Holders
13None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K 1412
Signature 1513
Exhibit Index 1614
Exhibits 1715
2
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
REPLIGEN CORPORATION
BALANCE SHEETS
(Unaudited)
ASSETS SEPTEMBER 30,DECEMBER 31, 1999 MARCH 31, 1999
----------------------------------- --------------
Current assets:
Cash and cash equivalents ................................... $ 10,912,5179,295,868 $ 3,250,751
Accounts receivable 487,522......................................... 614,675 429,720
Inventories 494,893................................................. 457,698 630,329
Prepaid expenses and other current assets 310,451................... 173,847 181,617
------------ ------------------------- -------------
Total current assets 12,205,383...................................... 10,542,088 4,492,417
Property and equipment, at cost:
Equipment 1,089,331................................................... 1,092,831 944,644
Furniture and fixtures 155,890...................................... 157,475 101,376
Leasehold improvements 469,088...................................... 473,288 460,319
------------ ------------
1,714,309------------- -------------
1,723,594 1,506,339
Less: accumulated depreciation and amortization 1,019,067............. 1,103,051 862,934
------------ ------------
695,242------------- -------------
620,543 643,405
Other assets, net 81,411............................................. 81,382 88,472
------------ ------------------------- -------------
$ 12,982,03611,244,013 $ 5,224,294
------------ ------------
------------ ------------============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................ $ 209,987164,111 $ 268,708
Accrued expenses 308,370............................................ 346,577 313,926
Unearned income ............................................. -- 49,969
------------ ------------------------- -------------
Total current liabilities 518,357................................ 510,688 632,603
Commitments and contingencies ................................. -- --
Stockholders' equity:
Preferred stock, $.01 par value --authorized - 5,000,000
shares --outstanding - none ................................ -- --
Common stock, $.01 par value --authorized - 40,000,000 shares
--outstanding - 21,872,08522,322,310 shares at September 30,December 31, 1999 and
18,264,285 shares at March 31, 1999 218,720...................... 223,222 182,642
Additional paid-in capital 140,335,872.................................. 140,335,660 131,272,607
Accumulated deficit (128,090,913)......................................... (129,825,557) (126,863,558)
------------ ------------------------- -------------
Total stockholders' equity 12,463,679............................... 10,733,325 4,591,691
------------ ------------------------- -------------
$ 12,982,03611,244,013 $ 5,224,294
------------ ------------
------------ ------------============= =============
See accompanying notes to financial statements.
3
REPLIGEN CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
THREE MONTHSTHREE-MONTHS ENDED SEPTEMBER 30, SIX MONTHSDECEMBER 31, NINE-MONTHS ENDED SEPTEMBER 30,DECEMBER 31,
1999 1998 1999 1998
---- ---- ---- ----
Revenues:
Product ....................................... $ 558,028 $ 248,723 $ 1,369,494 $ 674,872
Research and development $ 232,344 $ 470,032 $ 610,847 $ 738,438
Product 578,996 197,010 811,466 426,149...................... 160,446 275,238 771,292 1,013,676
Investment income 156,247 57,491 202,784 119,182............................. 131,406 50,730 334,191 169,912
Other ......................................... 14,438 37,648 45,095 70,83614,437 59,532 85,274
------------ ------------ ------------ ------------
982,025 762,181 1,670,192 1,354,604864,318 589,128 2,534,509 1,943,734
------------ ------------ ------------ ------------
Costs and expenses:
Research and development 733,045 464,955 1,221,248 931,025...................... 1,864,437 421,623 3,085,684 1,352,648
Selling, general and administrative 767,214 354,311 1,193,383 711,243........... 442,743 317,770 1,636,126 1,029,013
Cost of products sold 286,534 141,991 482,917 254,273......................... 291,782 175,528 774,699 429,801
------------ ------------ ------------ ------------
1,786,793 961,258 2,897,548 1,896,5412,598,962 914,921 5,496,509 2,811,462
------------ ------------ ------------ ------------
Net loss ...................................... $ (804,768)(1,734,644) $ (199,077)(325,793) $ (1,227,356)(2,962,000) $ (541,937)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------(867,728)
============ ============ ============ ============
Basic and diluted net loss per share .......... $ (0.04)(0.08) $ (0.01)(0.02) $ (0.06)(0.14) $ (0.03)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------(0.05)
============ ============ ============ ============
Basic and diluted weighted average
21,867,601 18,001,785 20,324,426 18,001,785
common shares outstanding ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------.................. 22,193,696 18,001,785 20,950,890 18,001,785
============ ============ ============ ============
See accompanying notes to financial statements.
4
REPLIGEN CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Six MonthsNine-Months Ended September 30,
--------------------------------December 31,
--------------------------------------------
1999 1998
------ ------------------------- ------------------
Cash flows from operating activities
Net loss ......................................................................... $(2,962,000) $ (1,227,356) $ (541,937)(867,728)
Adjustments to reconcile net loss to net cash used in operating activities -
Depreciation and amortization 156,134 131,586.................................................... 240,118 198,437
Non cash charge for warrant issuance ............................................. 188,265 --
Changes in assets and liabilities -
Accounts receivable (57,802) (247,862)............................................................. (184,955) (114,707)
Inventories 135,436 (56,677)..................................................................... 172,632 (21,183)
Prepaid expenses and other current assets (128,834) 79,115....................................... 7,769 (110,111)
Accounts payable (58,721) 11,202................................................................ (104,596) (48,179)
Accrued expenses (5,556) 111,186................................................................ 32,652 48,499
Unearned income ................................................................. (49,969) (33,332)
------------ -------------27,418
----------- -----------
Net cash used in operating activities (1,048,403) (546,719)......................................... (2,660,084) (887,554)
Cash flows from investing activities
Purchases of property and equipment, at cost (207,970) (78,951).................................... (217,257) (141,357)
Changes in other assets 7,061 --
------------ -------------......................................................... 7,090
----------- -----------
Net cash used in investing activities (200,909) (78,951)........................................ (210,167) (141,357)
Cash flows from financing activities:
Net proceedsProceeds from the issuance of common stock and warrants, net of
issuance costs 8,911,078.................................................................. 8,915,368 --
------------ ------------------------ -----------
Net cash provided by financing activities 8,911,078.................................... 8,915,368 --
------------ ------------------------ -----------
Net increase (decrease) in cash and cash equivalents 7,661,766 (625,670)............................... 6,045,117 (1,028,911)
Cash and cash equivalents, beginning of period ..................................... 3,250,751 4,725,544
------------ ------------------------ -----------
Cash and cash equivalents, end of period ........................................... $ 10,912,5179,295,868 $ 4,099,874
------------ -------------
------------ -------------3,696,633
=========== ===========
See accompanying notes to financial statements.
5
REPLIGEN CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The financial statements included herein have been prepared by Repligen
Corporation (the "Company" or "Repligen"), pursuant to the rules and regulations
of the Securities and Exchange Commission for quarterly reports on Form 10-Q and
do not include all of the information and footnote disclosures required by
generally accepted accounting principles. These financial statements should be
read in conjunction with the audited financial statements and notes thereto
included in the Company's Form 10-K for the year ended March 31, 1999.
In the opinion of management, the accompanying unaudited financial
statements include all adjustments, consisting of only normal, recurring
adjustments, necessary to present fairly, the consolidated financial position,
results of operations and cash flows of the Company. The results of operations
for the interim periods presented are not necessarily indicative of results to
be expected for the entire year.
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 reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. NET LOSS PER SHARE
The Company has adopted Statement of Financial Accounting Standards
(SFAS) No. 128, EARNINGS PER SHARE, effective December 15, 1998. SFAS No. 128
establishes standards for computing and presenting earnings per share and
applies to entities with publicly held common stock or potential common stock.
The Company has applied the provisions of SFAS No. 128, retroactively to all
periods presented. Basic and diluted net loss per share represents net loss
divided by the weighted average number of common shares outstanding during the
period. The dilutive effect of the potential common shares consisting of
outstanding stock options and warrants is determined using the treasury stock
method in accordance with SFAS No. 128. Diluted weighted average shares
outstanding at September 30,December 31, 1999 and 1998 excluded the potential common shares
from warrants and stock options because to do so would be antidilutive for the
periods presented. At September 30,December 31, 1999, there are 1,332,791 options outstanding
with a weighted average exercise price of $1.94$1.83 and 3,307,050 warrants
outstanding with a weighted average exercise price of $3.18. At September 30,December 31,
1998, there are 1,042,0001,030,500 options outstanding with a weighted average exercise
price of $1.34 and 2,832,000 warrants outstanding with a weighted average
exercise price of $3.97.
3. CASH AND CASH EQUIVALENTS
The Company considers highly liquid investments purchased with original
maturities at the date of acquisition of three months or less to be cash
equivalents. Cash equivalents consist of the following at September 30,December 31, 1999 and
March 31, 1999:
6
Three Months Ended
September 30,1999December 31, 1999 March 31, 1999
(Unaudited)
U.S. Government and Agency securities $ 4,989,877 $ 1,197,624................ $2,184,547 $1,197,624
Commercial paper 3,963,497..................................... 4,824,225 1,136,119
Money markets 1,797,830........................................ 2,044,889 802,755
Cash 161,313................................................. 242,208 114,253
---------- ----------
Total cash and cash equivalents $10,912,517 $ 3,250,751
---------- ----------
---------- ----------................. $9,295,868 $3,250,751
========== ==========
6
4. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of the following:
September 30,Three Months Ended
December 31, 1999 March 31,199931, 1999
(Unaudited)
Raw materials and work-in-process $371,305$322,520 $412,480
Finished goods 123,587.................. 135,178 217,849
------- --------------- --------
Total $494,892...................... $457,698 $630,329
------- -------
------- -------======== ========
Work in process and finished goods inventories consist of material,
labor, outside processing costs and manufacturing overhead.
5. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted SFAS No. 130 REPORTING
COMPREHENSIVE INCOME, effective January 1, 1998. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components
in financial statements. Comprehensive income includes all changes in equity
during a period except those resulting from investments by owners and
distributions to owners. The comprehensive net loss is the same as net loss for
all periods presented.
6. DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND SIGNIFICANT
CUSTOMERS
The Company has adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED Information,INFORMATION, in the fiscal year ended March 31, 1999.
SFAS No. 131 establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. SFAS No. 131 also establishes standards for related disclosures
about products and services and geographic areas. Operating segments are
identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision maker, or decision making group, in making decisions now to allocate
resources and assess performance. To date, the Company has viewed its operations
and manages its business as principally one operating segment. As a result, the
financial information disclosed herein, represents all of the material financial
information related to the Company's principal operating segment.
7
The following table represents the Company's revenue by country:
Three Months Ended SixNine Months Ended
September 30, September 30,December 31, December 31,
1999 1998 1999 1998
---- ---- ---- ----
US 61% 85% 59% 73%............................... 72% 60% 75% 63%
Europe ........................... 23% 38% 10% 39% 22% 34%
Other 1%............................ 5% 2% 5%
---- ----3% 3%
--- --- --- ----
Total ............................ 100% 100% 100% 100%
During the three months ended September 30,1999,December 31, 1999, there were threewas one
significant customers whichcustomer who accounted for approximately 12%, 10% and 11%30% of the Company's
revenues or $118,000 $100,000 and $105,300, respectively.$270,000. The related accounts receivable for these three customersthis customer at
September 30,December 31, 1999 was $62,000,
$0$254,000. During the nine months ended December 31, 1999,
there were two customers who account for approximately 18% and $47,000, respectively.15% of the
Company's revenues.
7
7. SALE OF SECURITIES
In October 1999, pursuant to a Common Stock and Warrant Purchase
Agreement dated December 31, 1997, five accredited investors exercised warrants
exercisable at $1.50 per share for an aggregate of 750,000 shares of Repligen
common stock and aggregate consideration of $1,125,000. Because these investors
exercised these warrants pursuant to the "net exercise" provision in the
warrants, Repligen actually issued an aggregate of 425,775 shares of common
stock to such investors upon exercise of the warrants and received no proceeds
from such transaction. Based on representations of the investing parties and a
reasonable belief by Repligen that all such parties were "accredited" (as such
term is defined in Rule 501 of the Securities Act of 1933) and that the parties
were acquiring the shares of common stock of Repligen for investment and not for
resale, the Company issued these securities without registration in reliance
upon Section 4(2) of the Securities Act of 1933. No underwriters were involved
in the offer and sale of the securities.
Pursuant to stock purchase agreements dated April 30, 1999 and May 14,
1999, respectively, Repligen issued to certain accredited investors in a private
placement an aggregate of 3,600,000 shares of Common Stockcommon stock for an aggregate
purchase price of approximately $9 million, resulting in net proceeds to
Repligen of approximately $8.9 million. Repligen closed the private placement
transaction on June 23, 1999. There were no underwriters involved in such
private placement transaction. Repligen filed a registration statement with the
Securities and Exchange Commission on Form S-3 on June 16, 1999 for the resale
of the 3,600,000 shares of Common Stock sold to the parties in the private
placement transaction. The Securities and Exchange Commission declared such
resale registration statement effective on June 23, 1999.
8. SUBSEQUENT EVENTLICENSING AGREEMENT
In October 1999, the Company licensed commercialization rights to two
diagnostic secretin productsRepligen obtained a license from ChiRhoClin Inc., a
private company.company to commercialize two diagnostic secretin products. These
products have been evaluated in clinical trials for the diagnosis of pancreatic
dysfunction and gastrinoma. A New Drug Application (NDA) was filed with the FDA
in May 1999 seeking approval to market synthetic porcine secretin for these
applications. ChiRhoClin has also conducted clinical studies for these
diagnostic indications with a human form of secretin which itChiRhoClin intends to
submit to the FDA in 2000. Under terms of the agreement, Repligen paid
$1,000,000 upon execution of the agreement and, if the NDAs are approved, the
Company will be required to pay future milestones in cash and Repligen common
stock and royalties. 8
The Company has expensed the $1 million payment at December
31, 1999 as the Company believes that a feasible application does not exist
until NDA approval.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS Cautionary Statement Regarding Forward-Looking Statements
Statements in this Quarterly Report on Form 10-Q 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
facts constitute "forward-looking statements" within the meaning of Section 21E
of the Securities Exchange Act of 1934. 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. The Company's future operating results are subject to risks and
uncertainties and are dependent upon many factors, including, without
limitation, the Company's ability to (i) meet its working capital and future
liquidity needs, (ii) successfully implement its strategic growth strategies,
(iii) understand, anticipate and respond to rapidly changing technologies and
market trends, (iv) develop, manufacture and deliver high quality,
technologically advanced products on a timely basis to withstand competition
from competitors which may have greater financial, information gathering and
marketing resources than the Company, (v) obtain and protect licensing and
intellectual property rights necessary for the Company's technology and product
development on terms favorable to the Company, (vi) recruit
8
and retain highly talented professionals in a competitive job market, (vii)
realize future revenues, (viii) maintain a timeline for clinical activity, (ix)
obtain successful results of pending or future clinical trials, (x) continue to
establish collaborative arrangements with third parties, and (xi) compete
against the biotechnology and pharmaceutical industries. Further information on
potential factors that could affect the Company's financial results are included
in filings made by the Company from time to time with the Securities and
Exchange Commission included in the section entitled "Risk Factors" contained in
the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1999 (File No.000-14656).
OVERVIEW
Repligen developsWe develop new drugs for the treatment of autism, organ transplantation and cancer. To
expand our drug development program, inon March 9, 1999, we acquired the exclusive
rights to patent applications for the use of secretin in the treatment of
autism. Autism is a developmental disorder characterized by poor communicationcommunicative
and social skills, negative behavior,repetitive and restricted behaviors and in some patients,
gastrointestinal problems and irregular sleep patterns and diminished ability to learn.patterns. Secretin is a hormone
produced in the small intestine which regulates the function of the pancreas as
part of the process of digestion. A form of secretin derived from pigs is
approved by the United States Food and Drug AdministrationFDA for use in diagnosing problems with pancreatic function.
Recent anecdotal reports indicate that secretin may have beneficial effects in
treating autism, including improvements in sleep, digestive function, speechcommunicative and
social behavior. Following media reports of the potential benefits of secretin,
more than 2,000 autistic children have been treated with the pig-derived
hormone. We intend to manufacture a human, synthetic form of secretin and
evaluate it in FDA approved clinical trials in order to confirm the benefits of secretin in
treating autism and to determine the optimal dosing schedule. Currently thereThere are
currently no drugs approved by the FDA for the treatment of autism.
In October 1999, Repligen obtained a license from ChiRhoClin Inc., a
private company, to commercialize two diagnostic secretin products. These
products have been evaluated in clinical trials for the diagnosis of pancreatic
dysfunction and gastrinoma. A New Drug Application was filed with the FDA in May
1999 by ChiRhoClin, Inc. seeking approval to market synthetic porcine secretin
for these applications. ChiRhoClin has also isconducted clinical studies for these
diagnostic indications with a human form of secretin which ChiRhoClin intends to
submit to the FDA in 2000. Under terms of the agreement, Repligen made a payment
of $1,000,000 upon execution of the agreement and, if the FDA approves the New
Drug Applications, the agreement obligates Repligen to pay ChiRhoClin future
milestones in cash and Repligen common stock and royalties.
We are also developing a product named "CTLA4-Ig," which has been shown
to suppress unwanted immune responses in animal models of organ transplantationtransplants and
autoimmune diseases, such as lupus or multiple sclerosis, in which the immune
system mistakenly attacks the body. Our product candidate is a derivative of a
natural protein whose role is to turn-off an immune response. In animal models
of organ transplantation and autoimmune diseases, CTLA4-
9
IgCTLA4-Ig has been shown to
block the rejection of a transplanted organ or the effects of the autoimmune
disease. Initial clinical testing of CTLA4-Ig has been carried out in patients
receiving a bone marrow transplant, which is a potential cure for several
diseases of the immune system, including leukemia, myeloma, lymphoma and sickle
cell anemia. Despite the clinical success of bone marrow transplants, a
significant number of patients experience a severe and potentially
life-threatening complication known as Graft Versus Host Disease, in which the
newly transplanted immune system attacks the host (i.e., the patient). In June
1999, investigatorsresults from the Dana-Farber Cancer Institute, a research hospital
in Boston,Phase 1 clinical trial reported in the NEW ENGLAND JOURNAL OF MEDICINE that treatment of bone
marrow from a family member with Repligen's CTLA4-Ig prevented Graft Versus Host
Disease in eight of eleven transplant patients. Repligen intendsIn September 1999, we signed a
Clinical Trial Agreement with the National Cancer Institute to further evaluate
CTLA4-Ig in a Phase 2 trial in bone marrow transplantation for leukemia in collaboration
with the National Cancer Institute.
In October 1999 we licensed commercialization rightsleukemia.
Repligen has filed patent applications related to two diagnostic
secretin products from ChiRhoClin Inc., a private company. These productscompositions of matter and
methods of use of CTLA4-Ig including bone marrow transplant. Certain patents
have been evaluated in clinical trials for the diagnosis of pancreatic dysfunction
and gastrinoma. A New Drug Application was filed with the FDA in May 1999
seeking approvalissued to market synthetic porcine secretin for these applications.
ChiRhoClin has also conducted clinical studies for these diagnostic indications
with a human form of secretin which it intends to submitBristol-Myers Squibb Corporation relating to the FDAuse and
manufacture of CTLA4-Ig. We believe that one of our licensees is co-inventor of
one or more of these patents and that the patents issued to Bristol-Myers Squibb
do not extend to the use of CTLA4-Ig in 2000.
Repligen develops, manufacturesbone marrow transplantation.
We develop, manufacture and marketsmarket products for the production of
therapeutic antibodies. We currently market a line of products for the
purification of antibodies based on a naturally occurring protein, Protein A,
which can specifically bind to antibodies. Repligen owns composition of matter
patents for
9
recombinant Protein A in the United States and in Europe. In December 1998, Repligenwe
entered into a ten year relationshipagreement to supply recombinant Protein A to Amersham
Pharmacia Biotech, a leading supplier to the biopharmaceutical market.
RESULTS OF OPERATIONS
REVENUES
Total revenues for the three month period ended September 30,December 31, 1999
and 1998 were approximately $982,000$864,000 and $762,000,$589,000, respectively, an increase
of approximately $220,000$275,000 or 29%47%. Year to date total revenues increased
approximately $591,000, or 30%, to $2,535,000 at December 31, 1999 from
$1,944,000 at December 31, 1998. This increase during the three and
nine-months ended December 31, 1999 was largely attributable to increased
product sales of recombinant Protein A and an increase in investment income. Yearincome
due to date total revenues increased approximately $316,000, or 23%, to $1,670,000 at
September 30,1999 from $1,355,000 at September 30,1998.higher average cash and cash equivalent balances.
Research and development revenues for the three month period ended
September 30,December 31, 1999 and 1998 were approximately $232,000$160,000 and $470,000,$275,000,
respectively, a decrease of approximately $238,000$115,000 or 51%42%. TheYear to date R&D
revenues decreased approximately $243,000 or 24%, to approximately $771,000 from
$1,014,000. This decrease in
quarterly revenue was largely attributable to a licensing payment received during the three monthsand nine-months ended September 30, 1998. Year to date revenues
decreased approximately $128,000 or 17% asDecember 31,
1999 is a result of the discontinuation of research collaborations on Repligen's
drug discovery programs that generated revenue during the six monthsthree and nine-months
ended September 30,December 31, 1998.
Product revenues for the three month period ended September 30,December 31, 1999 and
1998 were approximately $579,000$558,000 and $197,000,$249,000, respectively, an increase of
$382,000$309,000 or 194%124%. Year to date product revenues increased 90%103% or approximately
$385,000$694,000 to $811,000$1,369,000 from $426,000$675,000 at September 30,December 31, 1999 and 1998,
respectively. This increase during the three and nine-months ended December 31,
1999 is attributabledue to increased salesthe initiation of Protein A productsproduct shipments to Amersham Pharmacia Biotech
and strong demand from monoclonal antibody producers during such periods.
10
Investment income for the three month period ended September 30,December 31, 1999
and 1998 was approximately $156,000$131,000 and $57,000,$51,000, respectively, an increase of
approximately $99,000$80,000 or 173%159%. Year to date investment revenue increased 71%97% or
approximately $84,000$164,000 to $203,000$334,000 from $119,000. These increases are$170,000. This increase during the three
and nine-months ended December 31, 1999 is largely attributable to higher
average funds available for investment arising principally out of the completion
of a private placement of common stock to certain investors of $8,900,000 on
June 23, 1999.
Other revenues for the three monththree-month period ended September 30,December 31, 1999 were
approximately $15,000, a decrease of $23,000 or 61% fromthe same as the comparable period ended September 30,December 31,
1998. Year to date revenue was $45,000$60,000 and $71,000$85,000 for the sixnine months ended
September 30,December 31, 1999 and 1998, respectively. This decrease is primarily due to
sales of unused equipment during fiscal year 1999.
EXPENSES
Total expenses for the three monththree-month period ended September 30,December 31, 1999 and
1998 increased to approximately $1,787,000$2,599,000 from $961,000,$915,000, an increase of
$826,000$1,684,000 or 86%184%. For the sixnine months ended September 30,December 31, 1999 and 1998,
expenses were $2,898,000$5,497,000 and $1,897,000,$2,811,000, respectively, an increase of $1,001,000$2,686,000
or 35%96%. The increase in expenses during the three and nine-month period ended
December 31, 1999 is attributable to our increased product development expenses
and CRC's licensing fee.
Research and development expenses for the three month period ended
September 30,December 31, 1999 and 1998 were approximately $733,000$1,864,000 and $465,000,$422,000,
respectively, an increase of $268,000$1,442,000 or 58%342%. Year to date expenses were
$1,221,000$3,086,000 and $931,000$1,353,000 for the sixnine month period September 30,December 31, 1999 and 1998,
respectively. These increases reflectThe increase in R&D expenses during the three and nine-months
ended December 31, 1999 was largely attributable to the $1,000,000 payment
associated with the licensing of two diagnostic secretin products. In addition,
the increase in research and development expenses reflects increased costs
associated with itsRepligen's drug development programs for secretin and CTLA4-Ig.
10
Selling, general and administrative expenses for the three months ended
September 30,December 31, 1999 and 1998 were approximately $767,000$443,000 and $354,000,$318,000,
respectively, an increase of $413,000$125,000 or 117%39%. For the six monthnine-month period ended
September 30,December 31, 1999 and 1998, respectively, selling, general and administrative expenses were
$1,193,000$1,636,000 and $711,000,$1,029,000, respectively, an increase of $482,000$607,000 or 68%59%. ThisThe
increase in the three-month and nine-month period is attributable toa result of increased
spending on shareholder services, legal and patent costs. In addition, included
in the nine-month period ended December 31, 1999 is approximately $293,0000 of
non-recurring expenses associated with a financial advisory agreement with a shareholder, including a non-cash charge for
the issuance of warrants exercisable for shares of Common Stock of Repligen
pursuant to an agreement signed
during the quarter ended September 30, 1999.
Cost of products sold for the three months ended September 30,December 31, 1999 and
1998 were approximately $287,000$292,000 and $142,000,$176,000, respectively, an increase of
$145,000,$116,000, or 102%66%. Year to date costscost of products sold as of September 30,December 31, 1999 and
1998 were $483,000$775,000 and $254,000,$430,000, an increase of $229,000$345,000 or 90%80%. This increase is largely
attributable to costs associated with the commencement of its manufacturing
contract for AP Biotech. Cost of
products sold in the three months ended September 30,December 31, 1999 and 1998 were 50%52% and
72%71%, respectively, of product revenues
and forrevenues. For the sixnine months ended September 30,December 31,
1999 and 1998, 60%cost of products sold were 57% and 60%,64% of product revenues,
respectively. The decrease in cost of revenues as a percentage of revenues
during the three and nine-months periods ended December 31, 1999 is due
primarily to increased Protein A product sales offset by additional expenses
associated with launch activities related to the Amersham Pharmacia
manufacturing contract.
LIQUIDITY AND CAPITAL RESOURCES
Repligen's total cash and cash equivalents increased to $10,913,000$9,296,000 at
September 30,December 31, 1999 from $3,251,000 at March 31, 1999. This increase of $7,662,000$6,045,000
reflects $8,900,000 of proceeds resulting from the sale of Common Stock of
Repligen to certain investors through a private placement that closed during
June 1999, offset by a net loss from operations incurred during the sixnine month
period ended September 30,December 31, 1999 of approximately $1,227,000,$2,962,000, an increase in
accounts receivable of $58,000$185,000 and an increase in 11
accounts payable of $59,000.$56,000.
Working capital increased to $11,762,000$10,031,000 at September 30,December 31, 1999 from $3,860,000 at
March 31, 1999.
Repligen has entered into agreements with a number of collaborative
partners and licensees. Under the terms of these agreements, Repligen may be
eligible to receive research support, additional milestones or royalty revenue
if these collaborations result in clinical evaluation and commercialization of
products developed. The continuation of theseHowever, we cannot be sure that collaborations will continue
or of receivingthat we will receive any future payments related to these agreements cannotagreements. In
addition, under terms of the agreement with ChiRhoClin, if the FDA approves the
New Drug Applications, Repligen will be guaranteed.required to pay ChiRhoClin future
milestones in cash and Repligen common stock and royalties.
While Repligen anticipates that the cost of operations will increase in
fiscal 2000 as Repligen expands its investment in proprietary product
development, Repligen believes that the private placement financing, yielding an
aggregate of $8,900,000 in net proceeds, will provideit has sufficient funding to satisfy Repligen'sits
working capital and capital expenditure requirements for the next twenty-four
months. Should Repligen need to secure additional financing to meet its future
liquidity requirements, Repligen may not be able to secure such financing, or
obtain such financing on favorable terms because of the volatile nature of the
biotechnology market place.
YEAR 2000
RepligenAs of the date of this filing, we have not incurred any significant
business disruptions as a result of year 2000 issues. However, while no such
occurrence has undertaken an initial reviewdeveloped, year 2000 issues that may arise related to key
suppliers and service providers may not become apparent immediately. We have
received assurances of its information technology
computer systems and it believesyear 2000 compliance from key suppliers. We have also
received assurances from key service providers such as financial institutions as
to their year 2000 readiness. We can provide no assurance that the Year 2000 problem does not pose
significant operational problems to its information technology systems. The
majority of Repligen's software and computer equipment has been purchased within
the last five years from third-party vendors who have already provided upgrades
intended to bring their products into Year 2000 compliance. Repligen has begun
to address the small number of internal systems that are not yet Year 2000
compliant, and expects full compliance by the end of 1999. Repligen currently
believes that the costs of addressing these issues should not exceed $50,000 andwe will not have a material adverse impact on Repligen's financial position.
Repligen has recently interviewed various third parties, including
vendorsbe
adversely affected by these suppliers and suppliers of Repligen,service providers due to determine their exposure to Year 2000
issues, their anticipated risks and responses to those risks. To date, the third
parties that have been contacted have indicated that their hardware or software
is or will be Year 2000 compliant in a time frame that meets Repligen's
requirements. Even with the vendor compliance however, Repligen intends to
continue to assess its exposure to Year 2000 noncompliance on the part of any of
its material vendors. Repligen has no control, however, of whether the vendor's
systems will be Year 2000 compliant in a time frame satisfactory to Repligen.
Repligen is working to establish a contingency plan
in the event Year
2000 compliance cannot be achieved in a timely manner. A contingency plan will
be developed immediately upon completion of Repligen's Year 2000 compliance
assessment.future.
11
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
OnAs reported in Form 10-Q dated for the period ended June 30, 1999, on
July 17, 1998, Repligen filed a complaint against Bristol MeyersMyers Squibb ("BMS")
at the United States District Court for the District of Massachusetts in Boston,
Massachusetts seeking correction of inventorship of certain United States
patents which claim compositions and methods of use for CTLA4 as well as
unspecified monetary damages. A correction of inventorship would result in the
University of Michigan being designated as a co-assignee on any corrected BMS
12
patent. Repligen would then have rights to such technology pursuant to a 1992
License Agreement with the University of Michigan, a 1995 Asset Acquisition
Agreement with Genetics Institute, and other related agreements. On July 13,
1999, the court dismissed the complaint without prejudice citing a lack of legal
standing of Repligen to bring such a complaint. We believe that the court's
finding on standing was in error. The court did not rule on the validity of
Repligen's inventorship claim. Repligen continues to believe that the University
of Michigan is a rightful co-assignee of the aforesaid BMS patents and we intend
to continue to pursue the correction of inventorship. Repligen's failure to
obtain shared ownership rights in the patents may restrict Repligen's ability to
commercialize CTLA4-Ig. We have also filed our own patents related to
compositions of matter and methods of use of CTLA4-Ig. In addition, we believe
that the patents issued to Bristol-Myers Squibb do not extend to the use of
CTLA4-Ig in bone marrow transplantation.
Item 2. CHANGES IN SECURITIES
PursuantIn October 1999, pursuant to a Financial AdvisoryCommon Stock and Warrant Purchase
Agreement dated as of July 15, 1999 by
and between Repligen and Paramount Capital, Inc. ("Paramount"), Repligen
engaged Paramount as a non-exclusive financial adviserDecember 31, 1997, five accredited investors exercised warrants
exercisable at $1.50 per share for an initial period
of twelve months from the date thereof. In exchange and as consideration for
Paramount's financial services, Repligen paid to Paramount $100,000 in cash
and issued to Paramount (and its designees) warrants to purchase an aggregate of 100,000750,000 shares of Common StockRepligen
common stock and aggregate consideration of Repligen (the "Warrants"). Each Warrant
is exercisable at $2.75 per share at any time prior$1,125,000. Because these investors
exercised these warrants pursuant to July 15, 2004. Repligen
also agreed to pay Paramount additional fees to be agreed upon between the parties upon the consummation of certain equity financing transactions as set
forth"net exercise" provision in the
Financial Advisory Agreement.warrants, Repligen actually issued an aggregate of 425,775 shares of common
stock to such investors upon exercise of the warrants and received no proceeds
from such transaction. Based on certain representations by
Paramount, Repligen hadof the investing parties and a
reasonable belief by Repligen that Paramount (and its designees)
were acquiring the Warrants (and the shares issuable upon exercise thereof)
for investment and not for distribution and that of the ten designees
receiving the Warrants, at least fiveall such parties were "accredited" (as such
term is defined underin Rule 501 of the Securities Act of 1933). Pursuant thereto, and that the parties
were acquiring the shares of common stock of Repligen for investment and not for
resale, the Company issued the Warrants to such designeesthese securities without registration in a private placement
transaction exempt from the registration requirements of the Securities Act of
1933 pursuant to Regulation D, Rule 506reliance
upon Section 4(2) of the Securities Act of 1933. ThereNo underwriters were no underwritersinvolved
in valued in such private placement transaction. Pursuant
to the Financial Advisory Agreement, Repligen granted Paramount "piggy-back"
registration rights with respect to the shares of Common Stock issuable upon
exerciseoffer and sale of the Warrants, and subject to the terms of the Financial Advisory
Agreement, has agreed to register for resale the shares of Common Stock
issuable upon exercise of the Warrants by May, 2000.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting of Stockholders (the "Annual Meeting") was
held on September 16, 1999. At the Annual Meeting, the stockholders of the
Company considered and acted upon a proposal to: (i) elect five members to
the Board of Directors (ii) ratify the selection of Arthur Andersen LLP as
the independent auditors of the Company for the fiscal year ending March
31, 1999 and (iii) amend Repligen's Restated Certificate of Incorporation
to increase the number of authorized shares of Common Stock, par value $.01
per share, from 30,000,000 shares to 40,000,000 shares.
The Company had 21,868,085 shares of Common Stock of the Company issued
and outstanding and entitled to vote as of the close of business on July
23, 1999, the record date established by the Board of Directors for the
Annual Meeting. At the Annual Meeting, holders of a total of 17,432,216
shares of Common Stock or approximately 79% of all stockholders entitled to
vote were present in person or represented by proxy. The following sets
forth the information regarding the results of the voting at the Annual
Meeting:
13
Proposal 1. Election of Directors:
Directors Shares Voting Shares Voting
in Favor Against
-------- -------
Robert J. Hennessey* 17,339,046 93,170
Alexander Rich, M.D.* 17,319,986 112,230
Paul Schimmel, Ph.D.* 17,344,971 87,245
Walter C. Herlihy, Ph.D.* 17,343,171 89,045
G. William Miller* 17,344,971 112,230
* Incumbent
Proposal 2. Ratification of Selection of Arthur Andersen LLP as independent
auditors:
Shares voting in favor: 17,376,364
Shares voting against: 28,307
Abstention: 27,545
Proposal 3. Amend the Restated Certificate of Incorporation to increase the
number of authorized shares from 30,000,000 shares to 40,000,000 shares:
Shares voting in favor: 17,986,570
Shares voting against: 408,026
Abstention: 37,620
securities.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT DESCRIPTION
2.1 * Licensing Agreement by and between ChiRhoClin Inc. and Repligen Corporation (filed
herewith)
3.1 Restated Certificate of Incorporation, dated
June 30, 1992 and filed July 13, 1992, as
amended (filed herewith)as Exhibit 3.1 to Repligen
Corporations 10-Q dated September 30, 1999)
3.2 By-laws (filed as Exhibit 3.4 to Repligen Corporation's Form S-1 Registration Statement
No. 33-3959 and incorporated herein by reference).
4.1 * Form of Warrant Agreement (filed herewith)
10.1 ** Financial Advisory Agreement with Paramount
Capital, Inc. (filed herewith)
27.1 Financial Data Schedule (filed herewith)
* Repligen issued a Common Stock Purchase Warrant*Confidential Treatment has been requested as to ten designeesomitted portions
pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of Paramount
in connection with Paramount's services to Repligen. Each Warrant was identical
except for the number of shares of Common Stock issuable upon exercise of such
Warrant. ** The Exhibit A1934, as
amended. Appendices 1, 2 and 3 to the Financial AdvisoryLicensing Agreement which isincluded as EXHIBIT
2.1 are not attachedbeing filed herewith. The Company undertakes to furnish a copy of
an omitted Appendix to the Financial Advisory Agreement, is filed by Repligen as Exhibit
4.1 hereunder.Commission upon request (except that such Appendices
shall remain confidential). Pursuant to Item 6.01(b)(2) of Regulation S-K, the
Appendices are set forth below.
12
LICENSE AGREEMENT EXHIBIT 2.1
Appendix 1 Confidentiality Agreement
Appendix 2 Activities of CRC
Appendix 3 Insurance Coverage
(b) Reports on Form 8-K
The Company filed no current reports1. Current Report on Form 8-K duringfiled with the quarter covered by the report.
14
Securities and
Exchange Commission on October 6, 1999 (description of
licensing agreement with ChiRhoClin Inc.).
SIGNATURE
Pursuant to the requirements 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
(Registrant)
Date: November 15, 1999February 14, 2000 By: /s//S/ Walter C. Herlihy
-----------------------------------------------
Chief Executive Officer and President,
Principal Financial and Accounting Officer
1513
Repligen Corporation
Exhibit Index
EXHIBIT DESCRIPTION
2.1 * Licensing Agreement by and between ChiRhoClin Inc. and Repligen Corporation
(filed herewith)
3.1 Restated Certificate of Incorporation, dated June 30, 1992 and filed July 13,
1992, as amended (filed herewith)as Exhibit 3.1 to Repligen Corporations 10-Q dated
September 30, 1999)
3.2 By-laws (filed as Exhibit 3.4 to Repligen Corporation's Form S-1 Registration
Statement No. 33-3959 and incorporated herein by reference).
4.1 * Form of Warrant Agreement (filed herewith)
10.1 ** Financial Advisory Agreement with Paramount
Capital, Inc. (filed herewith)
27.1 Financial Data Schedule (filed herewith)
* Repligen issued a Common Stock Purchase Warrant*Confidential Treatment has been requested as to ten designeesomitted portions
pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of Paramount
in connection with Paramount's services to Repligen. Each Warrant was identical
except for the number of shares of Common Stock issuable upon exercise of such
Warrant. ** The Exhibit A1934, as
amended. Appendices 1, 2 and 3 to the Financial AdvisoryLicensing Agreement which isincluded as EXHIBIT
2.1 are not attachedbeing filed herewith. The Company undertakes to furnish a copy of
an omitted Appendix to the Financial Advisory Agreement, is filed by Repligen as Exhibit
4.1 hereunder.
16Commission upon request (except that such Appendices
shall remain confidential). Pursuant to Item 6.01(b)(2) of Regulation S-K, the
Appendices are set forth below.
LICENSE AGREEMENT EXHIBIT 2.1
Appendix 1 Confidentiality Agreement
Appendix 2 Activities of CRC
Appendix 3 Insurance Coverage
14