UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SeptemberJune 30, 20212022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to___________ to___________

Commission File Number 000-14656

 

REPLIGEN CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

04-2729386

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

41 Seyon Street, Bldg. 1, Suite 100

Waltham, MA

02453

(Address of Principal Executive Offices)

(Zip Code)

(781) 250-0111

Registrant’s Telephone Number, Including Area Code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

RGEN

The Nasdaq Global Select Market

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 No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

1


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes No

The number of shares outstanding of the registrant’s common stock on October 25, 2021July 29, 2022 was 55,288,52855,491,199.

 

 

21


Table of Contents

 

 

 

PAGE

PART I -

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (interim periods unaudited)

 

 

Consolidated Balance Sheets as of SeptemberJune 30, 20212022 and December 31, 20202021

4

3

 

Consolidated Statements of Comprehensive Income for the Three and NineSix Months Ended SeptemberJune 30, 20212022 and 20202021

5

4

 

Consolidated Statements of Stockholders’ Equity for the Three and NineSix Months Ended SeptemberJune 30, 20212022 and 20202021

6

5

 

Consolidated Statements of Cash Flows for the NineSix Months Ended SeptemberJune 30, 20212022 and 20202021

7

6

 

Notes to Unaudited Consolidated Financial Statements

8

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

27

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

38

37

Item 4.

Controls and Procedures

38

PART II -

OTHER INFORMATION

Item 1.

Legal Proceedings

40

39

Item 1A.

Risk Factors

40

39

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

39

Item 3.

Defaults Upon Senior Securities

40

39

Item 4.

Mine Safety Disclosures

40

39

Item 5.

Other Information

40

39

Item 6.

Exhibits

41

40

Signatures

42

41

32


PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

REPLIGEN CORPORATION

CONSOLIDATED BALANCEBALANCE SHEETS

(Unaudited, amounts in thousands, except share data)

 

 

September 30,

 

December 31,

 

 

June 30,

 

December 31,

 

 

2021

 

2020

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

621,098

 

 

$

717,292

 

 

$

596,512

 

 

$

603,814

 

Accounts receivable, net of reserves of $1,214 and $762 at September 30, 2021
and December 31, 2020, respectively

 

122,048

 

 

 

71,389

 

Accounts receivable, net of reserves of $1,279 and $1,417 at
June 30, 2022 and December 31, 2021, respectively

 

 

121,050

 

 

 

117,420

 

Inventories, net

 

156,163

 

 

 

95,025

 

 

 

239,117

 

 

 

184,494

 

Prepaid expenses and other current assets

 

 

11,545

 

 

 

18,676

 

 

 

19,316

 

 

 

25,949

 

Total current assets

 

910,854

 

 

 

902,382

 

 

 

975,995

 

 

 

931,677

 

Noncurrent assets:

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

99,652

 

 

 

66,870

 

 

 

168,370

 

 

 

124,964

 

Intangible assets, net

 

340,163

 

 

 

287,100

 

 

 

322,208

 

 

 

337,274

 

Goodwill

 

833,559

 

 

 

618,305

 

 

 

854,328

 

 

 

860,362

 

Deferred tax assets

 

1,542

 

 

 

2,481

 

 

 

1,907

 

 

 

1,903

 

Operating lease right of use assets

 

55,007

 

 

 

25,176

 

 

 

121,339

 

 

 

101,559

 

Other noncurrent assets

 

 

620

 

 

 

573

 

 

 

769

 

 

 

615

 

Total noncurrent assets

 

 

1,330,543

 

 

 

1,000,505

 

 

 

1,468,921

 

 

 

1,426,677

 

Total assets

 

$

2,241,397

 

 

$

1,902,887

 

 

$

2,444,916

 

 

$

2,358,354

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

28,194

 

 

$

16,880

 

 

$

40,379

 

 

$

36,203

 

Operating lease liability

 

5,528

 

 

 

5,254

 

 

 

11,692

 

 

 

8,303

 

Current contingent consideration

 

 

17,046

 

 

 

0

 

Accrued liabilities

 

63,394

 

 

 

53,085

 

 

 

70,693

 

 

 

75,498

 

Convertible senior notes, current portion, net

 

 

252,323

 

 

 

243,737

 

Convertible Senior Notes, net

 

 

283,712

 

 

 

255,258

 

Total current liabilities

 

349,439

 

 

 

318,956

 

 

 

423,522

 

 

 

375,262

 

Noncurrent liabilities:

 

 

 

 

 

 

 

 

 

 

 

Deferred tax liabilities

 

39,125

 

 

 

27,032

 

 

 

23,651

 

 

 

33,480

 

Noncurrent operating lease liability

 

55,909

 

 

 

26,425

 

 

 

121,271

 

 

 

102,492

 

Noncurrent contingent consideration

 

79,962

 

 

 

0

 

 

 

67,897

 

 

 

94,238

 

Other noncurrent liabilities

 

 

1,697

 

 

 

1,324

 

 

 

3,211

 

 

 

2,815

 

Total noncurrent liabilities

 

 

176,693

 

 

 

54,781

 

 

 

216,030

 

 

 

233,025

 

Total liabilities

 

 

526,132

 

 

 

373,737

 

 

 

639,552

 

 

 

608,287

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value, 5,000,000 shares authorized, 0 shares issued or outstanding

 

 

 

 

 

 

 

0

 

 

 

0

 

Common stock, $0.01 par value; 80,000,000 shares authorized; 55,283,988 shares at
September 30, 2021 and
54,760,837 shares at December 31, 2020 issued and
outstanding

 

553

 

 

 

548

 

Common stock, $0.01 par value; 80,000,000 shares authorized; 55,465,918
shares at June 30, 2022 and
55,321,457 shares at December 31, 2021
issued and outstanding

 

 

555

 

 

 

553

 

Additional paid-in capital

 

1,559,681

 

 

 

1,460,748

 

 

 

1,533,762

 

 

 

1,572,340

 

Accumulated other comprehensive (loss) income

 

(9,919

)

 

 

2,085

 

Retained earnings

 

 

164,950

 

 

 

65,769

 

Accumulated other comprehensive loss

 

 

(37,091

)

 

 

(16,886

)

Accumulated earnings

 

 

308,138

 

 

 

194,060

 

Total stockholders’ equity

 

 

1,715,265

 

 

 

1,529,150

 

 

 

1,805,364

 

 

 

1,750,067

 

Total liabilities and stockholders’ equity

 

$

2,241,397

 

 

$

1,902,887

 

 

$

2,444,916

 

 

$

2,358,354

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

43


REPLIGEN CORPORATION

CONSOLIDATED STATEMENTS OFOF COMPREHENSIVE INCOME

(Unaudited, amounts in thousands, except per share data)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

178,177

 

 

$

94,029

 

 

$

483,834

 

 

$

257,521

 

Royalty and other revenue

 

 

39

 

 

 

31

 

 

 

179

 

 

 

91

 

Total revenue

 

 

178,216

 

 

 

94,060

 

 

 

484,013

 

 

 

257,612

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product revenue

 

 

75,495

 

 

 

39,626

 

 

 

197,232

 

 

 

108,471

 

Research and development

 

 

9,154

 

 

 

4,422

 

 

 

25,155

 

 

 

13,460

 

Selling, general and administrative

 

 

48,373

 

 

 

29,051

 

 

 

131,809

 

 

 

83,277

 

Total costs and operating expenses

 

 

133,022

 

 

 

73,099

 

 

 

354,196

 

 

 

205,208

 

Income from operations

 

 

45,194

 

 

 

20,961

 

 

 

129,817

 

 

 

52,404

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

Investment income

 

 

44

 

 

 

82

 

 

 

137

 

 

 

1,699

 

Interest expense

 

 

(3,220

)

 

 

(3,052

)

 

 

(9,470

)

 

 

(9,032

)

Other expenses

 

 

(786

)

 

 

(248

)

 

 

(1,789

)

 

 

(632

)

Other expenses, net

 

 

(3,962

)

 

 

(3,218

)

 

 

(11,122

)

 

 

(7,965

)

Income before income taxes

 

 

41,232

 

 

 

17,743

 

 

 

118,695

 

 

 

44,439

 

Income tax provision

 

 

7,734

 

 

 

3,191

 

 

 

19,514

 

 

 

4,211

 

Net income

 

$

33,498

 

 

$

14,552

 

 

$

99,181

 

 

$

40,228

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.61

 

 

$

0.28

 

 

$

1.81

 

 

$

0.77

 

Diluted

 

$

0.58

 

 

$

0.27

 

 

$

1.74

 

 

$

0.75

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

55,015

 

 

 

52,545

 

 

 

54,918

 

 

 

52,341

 

Diluted

 

 

57,368

 

 

 

53,469

 

 

 

57,072

 

 

 

53,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

33,498

 

 

$

14,552

 

 

$

99,181

 

 

$

40,228

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(5,550

)

 

 

4,390

 

 

 

(12,004

)

 

 

5,304

 

Comprehensive income

 

$

27,948

 

 

$

18,942

 

 

$

87,177

 

 

$

45,532

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

207,597

 

 

$

162,920

 

 

$

413,960

 

 

$

305,657

 

Royalty and other revenue

 

 

36

 

 

 

40

 

 

 

73

 

 

 

140

 

Total revenue

 

 

207,633

 

 

 

162,960

 

 

 

414,033

 

 

 

305,797

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product revenue

 

 

86,260

 

 

 

61,990

 

 

 

168,616

 

 

 

121,737

 

Research and development

 

 

10,440

 

 

 

8,389

 

 

 

22,595

 

 

 

16,001

 

Selling, general and administrative

 

 

54,649

 

 

 

44,341

 

 

 

108,949

 

 

 

83,436

 

Contingent consideration

 

 

(6,884

)

 

 

0

 

 

 

(9,295

)

 

 

0

 

Total costs and operating expenses

 

 

144,465

 

 

 

114,720

 

 

 

290,865

 

 

 

221,174

 

Income from operations

 

 

63,168

 

 

 

48,240

 

 

 

123,168

 

 

 

84,623

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

Investment income

 

 

708

 

 

 

41

 

 

 

785

 

 

 

93

 

Interest expense

 

 

(271

)

 

 

(2,787

)

 

 

(563

)

 

 

(5,541

)

Amortization of debt issuance costs

 

 

(453

)

 

 

(357

)

 

 

(905

)

 

 

(709

)

Other expenses

 

 

(3,396

)

 

 

(779

)

 

 

(3,798

)

 

 

(1,003

)

Other expenses, net

 

 

(3,412

)

 

 

(3,882

)

 

 

(4,481

)

 

 

(7,160

)

Income before income taxes

 

 

59,756

 

 

 

44,358

 

 

 

118,687

 

 

 

77,463

 

Income tax provision

 

 

9,895

 

 

 

8,125

 

 

 

21,862

 

 

 

11,780

 

Net income

 

$

49,861

 

 

$

36,233

 

 

$

96,825

 

 

$

65,683

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.90

 

 

$

0.66

 

 

$

1.75

 

 

$

1.20

 

Diluted (Note 12)

 

$

0.88

 

 

$

0.64

 

 

$

1.68

 

 

$

1.16

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

55,444

 

 

 

54,931

 

 

 

55,399

 

 

 

54,868

 

Diluted (Note 12)

 

 

56,721

 

 

 

56,786

 

 

 

57,842

 

 

 

56,824

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

49,861

 

 

$

36,233

 

 

$

96,825

 

 

$

65,683

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(15,517

)

 

 

3,125

 

 

 

(20,205

)

 

 

(6,454

)

Comprehensive income

 

$

34,344

 

 

$

39,358

 

 

$

76,620

 

 

$

59,229

 

The accompanying notes are an integral part of these consolidated financial statements.

54


REPLIGEN CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, amounts in thousands, except share data)

 

Nine Months Ended September 30, 2021

 

 

Six Months Ended June 30, 2022

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

Number of
Shares

 

 

Par
Value

 

 

Additional
Paid-In Capital

 

 

Accumulated
Other Comprehensive
Income (Loss)

 

 

Retained
Earnings

 

 

Total
Stockholders'
Equity

 

 

Number of
Shares

 

 

Par
Value

 

 

Additional
Paid-In Capital

 

 

Accumulated
Other Comprehensive
Loss

 

 

Retained
Earnings

 

 

Total
Stockholders'
Equity

 

Balance at December 31, 2020

 

 

54,760,837

 

 

$

548

 

 

$

1,460,748

 

 

$

2,085

 

 

$

65,769

 

 

$

1,529,150

 

Balance at December 31, 2021

 

 

55,321,457

 

 

$

553

 

 

$

1,572,340

 

 

$

(16,886

)

 

$

194,060

 

 

$

1,750,067

 

Impact of the adoption of ASU 2020-06

 

 

 

 

 

 

 

 

(39,070

)

 

 

 

 

 

17,253

 

 

 

(21,817

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

99,181

 

 

 

99,181

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

96,825

 

 

 

96,825

 

Issuance of common stock for debt conversion

 

 

7

 

 

 

0

 

 

 

2

 

 

 

 

 

 

 

 

 

2

 

 

 

12

 

 

 

0

 

 

 

(5

)

 

 

 

 

 

 

 

 

(5

)

Exercise of stock options and vesting of stock
units

 

 

257,387

 

 

 

2

 

 

 

1,989

 

 

 

 

 

 

 

 

 

1,991

 

 

 

222,727

 

 

 

3

 

 

 

460

 

 

 

 

 

 

 

 

 

463

 

Issuance of common stock pursuant to the acquisition
of Avitide Inc.

 

 

271,096

 

 

 

3

 

 

 

77,573

 

 

 

 

 

 

 

 

 

77,576

 

Tax withholding on vesting of restricted stock units

 

 

(5,339

)

 

 

(0

)

 

 

(1,252

)

 

 

 

 

 

 

 

 

(1,252

)

 

 

(78,278

)

 

 

(1

)

 

 

(14,758

)

 

 

 

 

 

 

 

 

(14,759

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

20,476

 

 

 

 

 

 

 

 

 

20,476

 

 

 

 

 

 

 

 

 

14,900

 

 

 

 

 

 

 

 

 

14,900

 

True up of costs related to the December 2020
issuance of common stock

 

 

 

 

 

 

 

 

145

 

 

 

 

 

 

 

 

 

145

 

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(12,004

)

 

 

 

 

 

(12,004

)

 

 

 

 

 

 

 

 

 

 

 

(20,205

)

 

 

 

 

 

(20,205

)

Balance at September 30, 2021

 

 

55,283,988

 

 

$

553

 

 

$

1,559,681

 

 

$

(9,919

)

 

$

164,950

 

 

$

1,715,265

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

(105

)

 

 

 

 

 

 

 

 

(105

)

Balance at June 30, 2022

 

 

55,465,918

 

 

$

555

 

 

$

1,533,762

 

 

$

(37,091

)

 

$

308,138

 

 

$

1,805,364

 

 

Three Months Ended September 30, 2021

 

 

Three Months Ended June 30, 2022

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

Number of
Shares

 

 

Par
Value

 

 

Additional
Paid-In Capital

 

 

Accumulated
Other Comprehensive
Loss

 

 

Retained
Earnings

 

 

Total
Stockholders'
Equity

 

 

Number of
Shares

 

 

Par
Value

 

 

Additional
Paid-In Capital

 

 

Accumulated
Other Comprehensive
Loss

 

 

Retained
Earnings

 

 

Total
Stockholders'
Equity

 

Balance at June 30, 2021

 

 

54,969,481

 

 

$

550

 

 

$

1,475,436

 

 

$

(4,369

)

 

$

131,452

 

 

$

1,603,069

 

Balance at March 31, 2022

 

 

55,429,046

 

 

$

554

 

 

$

1,529,144

 

 

$

(21,574

)

 

$

258,277

 

 

$

1,766,401

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33,498

 

 

 

33,498

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

49,861

 

 

 

49,861

 

Issuance of common stock for debt conversion

 

 

4

 

 

 

0

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

 

 

4

 

 

 

(0

)

 

 

(3

)

 

 

 

 

 

 

(3

)

Exercise of stock options and vesting of stock
units

 

 

48,746

 

 

 

0

 

 

 

1,131

 

 

 

 

 

 

 

 

 

1,131

 

 

 

51,737

 

 

 

1

 

 

 

166

 

 

 

 

 

 

 

 

 

166

 

Issuance of common stock pursuant to the acquisition
of Avitide Inc.

 

 

271,096

 

 

 

3

 

 

 

77,573

 

 

 

 

 

 

 

 

 

77,576

 

Tax withholding on vesting of restricted stock units

 

 

(5,339

)

 

 

(0

)

 

 

(1,252

)

 

 

 

 

 

 

 

 

(1,252

)

 

 

(14,869

)

 

 

(0

)

 

 

(2,448

)

 

 

 

 

 

 

(2,448

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

6,792

 

 

 

 

 

 

 

 

 

6,792

 

 

 

 

 

 

 

 

 

6,985

 

 

 

 

 

 

 

 

 

6,985

 

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(5,550

)

 

 

 

 

 

(5,550

)

 

 

 

 

 

 

 

 

 

 

 

(15,517

)

 

 

 

 

 

(15,517

)

Balance at September 30, 2021

 

 

55,283,988

 

 

$

553

 

 

$

1,559,681

 

 

$

(9,919

)

 

$

164,950

 

 

$

1,715,265

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

(82

)

 

 

 

 

 

 

 

 

(82

)

Balance at June 30, 2022

 

 

55,465,918

 

 

$

555

 

 

$

1,533,762

 

 

$

(37,091

)

 

$

308,138

 

 

$

1,805,364

 

 

Nine Months Ended September 30, 2020

 

 

Six Months Ended June 30, 2021

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

Number of
Shares

 

 

Par
Value

 

 

Additional
Paid-In Capital

 

 

Accumulated
Other Comprehensive
Loss

 

 

Retained
Earnings

 

 

Total
Stockholders'
Equity

 

 

Number of
Shares

 

 

Par
Value

 

 

Additional
Paid-In Capital

 

 

Accumulated
Other Comprehensive
Income (Loss)

 

 

Retained
Earnings

 

 

Total
Stockholders'
Equity

 

Balance at December 31, 2019

 

 

52,078,258

 

 

$

521

 

 

$

1,068,431

 

 

$

(15,027

)

 

$

5,843

 

 

$

1,059,768

 

Balance at December 31, 2020

 

 

54,760,837

 

 

$

548

 

 

$

1,460,748

 

 

$

2,085

 

 

$

65,769

 

 

$

1,529,150

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40,228

 

 

 

40,228

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

65,683

 

 

 

65,683

 

Issuance of common stock for debt conversion

 

 

3

 

 

 

0

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Exercise of stock options and vesting of stock
units

 

 

528,442

 

 

 

5

 

 

 

7,073

 

 

 

 

 

 

 

 

 

7,078

 

 

 

208,641

 

 

 

2

 

 

 

858

 

 

 

 

 

 

 

 

 

860

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

12,492

 

 

 

 

 

 

 

 

 

12,492

 

 

 

 

 

 

 

 

 

13,684

 

 

 

 

 

 

 

 

 

13,684

 

True-up of costs related to the December 2020 issuance
of common stock

 

 

 

 

 

 

 

 

145

 

 

 

 

 

 

 

 

 

145

 

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

5,304

 

 

 

 

 

 

5,304

 

 

 

 

 

 

 

 

 

 

 

 

(6,454

)

 

 

 

 

 

(6,454

)

Balance as of September 30, 2020

 

 

52,606,700

 

 

$

526

 

 

$

1,087,996

 

 

$

(9,723

)

 

$

46,071

 

 

$

1,124,870

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2021

 

 

54,969,481

 

 

$

550

 

 

$

1,475,436

 

 

$

(4,369

)

 

$

131,452

 

 

$

1,603,069

 

 

Three Months Ended September 30, 2020

 

 

Three Months Ended June 30, 2021

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

Number of
Shares

 

 

Par
Value

 

 

Additional
Paid-In Capital

 

 

Accumulated
Other Comprehensive
Loss

 

 

Retained
Earnings

 

 

Total
Stockholders'
Equity

 

 

Number of
Shares

 

 

Par
Value

 

 

Additional
Paid-In Capital

 

 

Accumulated
Other Comprehensive
Loss

 

 

Retained
Earnings

 

 

Total
Stockholders'
Equity

 

Balance at June 30, 2020

 

 

52,494,884

 

 

$

525

 

 

$

1,082,096

 

 

$

(14,113

)

 

$

31,519

 

 

$

1,100,027

 

Balance at March 31, 2021

 

 

54,899,245

 

 

$

549

 

 

$

1,467,942

 

 

$

(7,494

)

 

$

95,219

 

 

$

1,556,216

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,552

 

 

 

14,552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

36,233

 

 

 

36,233

 

Exercise of stock options and vesting of stock
units

 

 

111,816

 

 

 

1

 

 

 

1,675

 

 

 

 

 

 

 

 

 

1,676

 

 

 

70,236

 

 

 

1

 

 

 

351

 

 

 

 

 

 

 

 

 

352

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,225

 

 

 

 

 

 

 

 

 

4,225

 

 

 

 

 

 

 

 

 

7,143

 

 

 

 

 

 

 

 

 

7,143

 

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

4,390

 

 

 

 

 

 

4,390

 

 

 

 

 

 

 

 

 

 

 

 

3,125

 

 

 

 

 

 

3,125

 

Balance as of September 30, 2020

 

 

52,606,700

 

 

$

526

 

 

$

1,087,996

 

 

$

(9,723

)

 

$

46,071

 

 

$

1,124,870

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2021

 

 

54,969,481

 

 

$

550

 

 

$

1,475,436

 

 

$

(4,369

)

 

$

131,452

 

 

$

1,603,069

 

The accompanying notes are an integral part of these consolidated financial statements.

65


REPLIGEN CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, amounts in thousands)

 

 

Nine Months Ended
September 30,

 

 

Six Months Ended
June 30,

 

 

2021

 

2020

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

Net income

 

$

99,181

 

 

$

40,228

 

 

$

96,825

 

 

$

65,683

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

Inventory step-up amortization

 

 

1,868

 

 

 

 

 

 

0

 

 

 

1,598

 

Depreciation and amortization

 

 

27,430

 

 

 

19,581

 

 

 

23,933

 

 

 

17,420

 

Amortization of debt discount and issuance costs

 

 

8,592

 

 

 

8,175

 

 

 

905

 

 

 

5,690

 

Stock-based compensation expense

 

 

20,476

 

 

 

12,492

 

 

 

14,900

 

 

 

13,684

 

Deferred income taxes, net

 

 

6,071

 

 

 

72

 

 

 

738

 

 

 

5,266

 

Contingent consideration

 

 

(9,295

)

 

 

0

 

Other

 

 

677

 

 

 

228

 

 

 

276

 

 

 

103

 

Changes in operating assets and liabilities, excluding impact of acquisitions:

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(51,927

)

 

 

(11,358

)

 

 

(8,433

)

 

 

(31,940

)

Unbilled receivables

 

 

(23

)

 

 

456

 

Inventories

 

 

(61,598

)

 

 

(22,767

)

 

 

(58,106

)

 

 

(42,773

)

Prepaid expenses and other assets

 

 

471

 

 

 

(2,908

)

 

 

2,402

 

 

 

(563

)

Operating lease right of use assets

 

 

(21,457

)

 

 

3,582

 

Other assets

 

 

751

 

 

 

(260

)

 

 

(406

)

 

 

1,748

 

Accounts payable

 

 

8,968

 

 

 

3,317

 

 

 

6,322

 

 

 

8,317

 

Accrued expenses

 

 

10,051

 

 

 

(2,712

)

 

 

(4,014

)

 

 

4,467

 

Operating lease liabilities

 

 

23,852

 

 

 

(3,713

)

Long-term liabilities

 

 

(1,592

)

 

 

3,210

 

 

 

392

 

 

 

(1,655

)

Total cash provided by operating activities

 

 

69,396

 

 

 

47,754

 

 

 

68,834

 

 

 

46,913

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

Acquisitions, net of cash acquired

 

 

(120,979

)

 

 

(28,445

)

 

 

0

 

 

 

71

 

Additions to capitalized software costs

 

 

(2,945

)

 

 

(3,585

)

 

 

(1,875

)

 

 

(2,191

)

Purchases of property, plant and equipment

 

 

(34,969

)

 

 

(11,067

)

 

 

(52,576

)

 

 

(24,078

)

Other investing activities

 

 

17

 

 

 

0

 

Total cash used in investing activities

 

 

(158,893

)

 

 

(43,097

)

 

 

(54,434

)

 

 

(26,198

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

1,991

 

 

 

7,088

 

 

 

463

 

 

 

860

 

Payment of tax withholding obligation on vesting of restricted stock

 

 

(1,252

)

 

 

(10

)

 

 

(14,759

)

 

 

0

 

Repayment of convertible senior notes

 

 

(9

)

 

 

 

Total cash provided by financing activities

 

 

730

 

 

 

7,078

 

Repayment of Convertible Senior Notes

 

 

(18

)

 

 

(8

)

Total cash (used in) provided by financing activities

 

 

(14,314

)

 

 

852

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(7,427

)

 

 

4,160

 

 

 

(7,388

)

 

 

(4,532

)

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(96,194

)

 

 

15,895

 

 

 

(7,302

)

 

 

17,035

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

717,292

 

 

 

537,407

 

 

 

603,814

 

 

 

717,292

 

Cash and cash equivalents, end of period

 

$

621,098

 

 

$

553,302

 

 

$

596,512

 

 

$

734,327

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Assets acquired under operating leases

 

$

32,518

 

 

$

1,456

 

 

$

21,739

 

 

$

28,605

 

Fair value of 271,096 shares of common stock issued for acquisition of
Avitide, Inc.

 

$

77,576

 

 

$

 

Fair value of earnouts related to acquisition of Avitide, Inc.

 

$

79,962

 

 

$

 

The accompanying notes are an integral part of these consolidated financial statements.

76


REPLIGEN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.
Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements included herein have been prepared by Repligen Corporation (the “Company”, “Repligen”, “our” or “we”) in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”), for Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X and do not include all of the information and footnote disclosures required by GAAP. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020,2021, which was filed with the SEC on February 24, 202117, 2022 (“Form 10-K”).

The preparation of financial statements in conformity with GAAP 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. The business and economic uncertainty resulting from the novel coronavirus pandemic (“COVID-19”) pandemic, the Russia-Ukraine conflict, supply chain challenges, cost pressure and the overall effects of the current high inflation environment on customers' purchasing patterns has made such estimates more difficult to calculate. Accordingly, actual results could differ from those estimates.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Repligen Sweden AB, Repligen GmbH, Spectrum® LifeSciences LLC and its subsidiaries (“Spectrum”), C Technologies, Inc. (“C Technologies”), Non-Metallic Solutions, Inc. (“NMS”), ARTeSYN Biosolutions Holdings Ireland Limited (“ARTeSYN”),and its subsidiaries, Polymem S.A. (“Polymem”), Avitide Inc. (“Avitide”LLC, Newton T&M Corp. ("NTM"), Bio-Flex Solutions, L.L.C. ("BioFlex") and Repligen Singapore Pte. Ltd. All significant intercompany accounts and transactions have been eliminated in consolidation.

TheExcept for the change in the Company's policy on Convertible Senior Notes as required by Accounting Standards Update ("ASU" or "ASUs") 2020-06 and discussed in Note 7, "Convertible Senior Notes," to these consolidated financial statements, the Company made no material changes in the application of its significant accounting policies that were disclosed in its Form 10-K. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments, consisting of only normal, recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows. The results of operations for the interim periods presented are not necessarily indicative of results to be expected for the entire year. Certain prior year balances have been reclassified to conform to current year presentation.

Recent Accounting Standards Updates

We consider the applicability and impact of all Accounting Standards Updates (“ASUs” or “ASU”)ASUs on the Company’s consolidated financial statements. Updates not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s consolidated financial position or results of operations. Recently issued ASUs that we feel may be applicable to the Company are as follows:

Recently Issued Accounting StandardStandards Updates – Not Yet Adopted During the Fiscal Year

In August 2020,Effective January 1, 2022, the Financial Accounting Standards Board (“FASB”) issuedCompany adopted ASU 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). using the modified retrospective method of adoption. ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract. Consequently, a convertible instrument is now accounted for as a single liability measured at its amortized cost as long as no other features of such convertible instrument require bifurcation and recognition as derivatives. By removing those separation models, the interest rate of convertible debt instruments will typically be closer to the coupon interest rate when

7


applying the guidance in Topic 835, “Interest.” The Company now accounts for its 0.375% convertible senior notes due July 15, 2024 (the "2019 Notes") as a single liability measured at amortized cost. As a result, the adoption of ASU 2020-06 also enhances transparencyhad a material impact on the Company's consolidated financial statements, resulting in adjustments of $39.1 million, $17.3 million and improves disclosures for convertible instruments$27.6 million to the opening balances of additional paid-in capital, retained earnings and earnings per share guidance.Convertible Senior Notes, net, respectively, on the Company's consolidated balance sheet as of January 1, 2022. Additionally, due to the adoption of ASU 2020-06, isthe Company reversed the remaining balance of the deferred tax liability of $6.4 million, which was initially recorded in connection with the 2019 Notes. See Note 7, “Convertible Senior Notes,” for more information, including our modified disclosures as required by ASU 2020-06 upon adoption.

Recently Issued Accounting Standard Updates – Not Yet Adopted

In March 2022, the Financial Accounting Standards Board issued ASU 2022-02, “Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” ASU 2022-02 eliminates the accounting guidance for Troubled Debt Restructurings by creditors that have adopted ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” while enhancing disclosure requirements for certain loan refinancing and restructurings made to borrowers experiencing financial difficulty. Additionally, ASU 2022-02 adds the requirement for companies to disclose current period write-offs by year of origination for financing receivables. ASU 2022-02 will become effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years.the Company on January 1, 2023. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020. This update permits the use of either the modified retrospective or fully retrospective method of transition.if an entity has adopted ASU 2016-13. The Company is currently evaluating the timing and impact of the adoption of ASU 2020-062022-02 on the Company'sCompany’s consolidated financial statements.statements and disclosures.

8


2.
Fair Value Measurements

The Company uses various valuation approaches in determining the fair value of its assets and liabilities. The Company employs a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

 

Level 1 –

Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

Level 2 –

Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly.

Level 3 –

Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level input that is significant to the overall fair value measurement.

8


Fair Value Measured on a Recurring Basis

Financial assets and financial liabilities measured at fair value on a recurring basis consist of the following as of SeptemberJune 30, 20212022 and December 31, 2020:2021 (amounts in thousands):

 

As of September 30, 2021

 

 

As of June 30, 2022

 

 

Level 1

 

Level 2

 

 

Level 3

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market accounts

 

$

448,908

 

 

$

 

 

$

 

 

$

448,908

 

 

$

389,374

 

 

$

 

 

$

 

 

$

389,374

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration - earnout obligation

 

$

 

 

$

 

 

$

79,962

 

 

$

79,962

 

Short-term contingent consideration

 

$

 

 

$

 

 

$

17,046

 

 

$

17,046

 

Long-term contingent consideration

 

$

 

 

$

 

 

$

67,897

 

 

$

67,897

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2021

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

Money market accounts

 

$

460,936

 

 

$

 

 

$

 

 

$

460,936

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Long-term contingent consideration

 

$

 

 

$

 

 

$

94,238

 

 

$

94,238

 

 

 

As of December 31, 2020

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Money market accounts

 

$

549,030

 

 

$

 

 

$

 

 

$

549,030

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

As of SeptemberJune 30, 20212022 and December 31, 2020,2021, cash and cash equivalents on the Company's consolidated balance sheets included $448.9389.4 million and $549.0460.9 million, respectively, in money market accounts. These funds are valued on a recurring basis using Level 1 inputs.

Contingent Consideration – Earnout

On September 20, 2021, the Company completed the acquisition of Avitide, Inc. ("Avitide") (the "Avitide Acquisition"), a privately-held affinity ligand discovery and development company headquartered in Lebanon, New Hampshire. The transaction consisted of upfront payments of $150.0 million, comprised of cash and the Company's common stock, and up to an additional $125.0 million (undiscounted) in contingent consideration for performance-based earnout payments made equally in cash and the Company's common stock over a three-year performance period beginning January 1, 2022 and ending December 31, 2024. Refer toSee Note 3, "Acquisitions" below for additional information.

9During 2022, there was a shift in revenue and volume projections, due to the expected timing of achievement over the


three-year performance period, and an increase in risk-free interest rates that are used to calculate the discount rate, that resulted in a material change in amounts reported as of June 30, 2022. A reconciliation of the change in the fair value of contingent consideration - earnout is included in the following table (amounts in thousands):

Balance as of December 31, 2021

 

$

94,238

 

Contingent consideration earnouts

 

 

(9,295

)

Balance as of June 30, 2022

 

$

84,943

 

9

Balance as of December 31, 2020

 

$

0

 

Acquisition date fair value of contingent consideration - earnout

 

 

79,962

 

Change in fair value

 

 

0

 

Balance as of September 30, 2021

 

$

79,962

 

 

 

 

 


The recurring Level 3 fair value measurement of our contingent consideration earnout that we expect to be required to settle include the following significant unobservable inputs:inputs (amounts in thousands, except percent data):

Contingent Consideration Earnout

 

Fair Value as of September 20, 2021
(amounts in thousands)

 

 

Valuation Technique

 

Unobservable Input

 

Range

 

Weighted Average(1)

 

Fair Value as of
 June 30, 2022

 

Valuation Technique

 

Unobservable Input

 

Range

 

Weighted Average(1)

 

 

 

 

Probability of

 

 

 

 

 

 

 

Probability of

 

 

Commercialization-based

 

 

 

Monte Carlo

 

Success

 

100%

 

100%

 

 

 

 

Monte Carlo

 

Success

 

100%

 

100%

payments

 

$

28,553

 

 

Simulation

 

Earnout Discount Rate

 

1.4%-2.6%

 

2%

 

$

 

28,390

 

Simulation

 

Earnout Discount Rate

 

4.5%-5.8%

 

5.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Volatility

 

32.8%

 

32.8%

 

 

 

 

 

 

Volatility

 

23.7%

 

23.7%

Revenue and Volume-

 

 

 

Monte Carlo

 

Revenue & Volume

 

 

 

 

 

 

 

Monte Carlo

 

Revenue & Volume

 

 

 

based payments

 

$

51,409

 

 

Simulation

 

Discount Rate

 

9.4%

 

9.4%

 

$

 

56,553

 

Simulation

 

Discount Rate

 

7.4%

 

7.4%

 

 

 

 

 

 

Earnout Discount Rate

 

1.4%-2.6%

 

2%

 

 

 

 

 

Earnout Discount Rate

 

4.5%-5.8%

 

5.1%

(1)
Unobservable inputs were weighted by the relative fair value of the contingent consideration liability.

The Company estimates the fair value of the contingent consideration earnouts at each subsequent reporting period using a Monte Carlo simulation. Changes in the projected performance of the acquired business could result in a higher or lower contingent consideration obligation in the future.

There were 0 changes in revenue projections during the period from September 20, 2021, the date of the Avitide Acquisition, and September 30, 2021 that would cause a material change in amounts reported as of September 30, 2021.

Fair Value Measured on a Nonrecurring Basis

During the ninethree and six months ended SeptemberJune 30, 2021,2022, there were no re-measurements to fair value of financial assets and liabilities that are measured at fair value on a nonrecurring basis.

Convertible Senior Notes

In July 2019, the Company issued $287.5 million aggregate principal amount of the Company’s 0.375% convertible senior notes due July 15, 2024 (the “2019 Notes”).2019 Notes. Interest is payable semi-annually in arrears on January 15 and July 15 of each year. The 2019 Notes will mature on July 15, 2024, unless earlier converted or repurchased in accordance with their terms. At SeptemberJune 30, 20212022 and December 31, 2020,2021, the carrying value of the 2019 Notes was $252.3283.7 million and $243.7255.3 million, respectively, net of unamortized discount and issuance costs, and the fair value of the 2019 Notes was $732.9432.3 million and $501.0678.5 million, respectively. The fair value of the 2019 Notes is a Level 1 valuation and was determined based on the most recent trade activity of the 2019 Notes as of SeptemberJune 30, 2021.2022. The 2019 Notes are discussed in more detail in Note 12,7, “Convertible senior notes”Senior Notes” to Part II, Item 8, “Financial Statements and Supplementary Data” to our 2020 Annual Report on Form 10-K (“Form 10-K"), which was filed with the SEC on February 24, 2021.this report.

3.
Acquisitions

2021 Acquisitions

Bio-Flex Solutions L.L.C. and Newton T&M Corp.

On November 29, 2021, the Company entered into an Equity Purchase Agreement with BioFlex, NTM and each of Ralph Meola and Jason Nisler (the "Equity Purchase Agreement"), to acquire 100% of the outstanding securities of BioFlex and NTM (collectively, the “NTM Acquisition”). The transaction closed on December 16, 2021.

NTM, which is headquartered in Newton, New Jersey, is the parent company of BioFlex and focuses on manufacturing of products, while BioFlex, also headquartered in Newton, New Jersey, commercializes branded products to biotech customers. The NTM Acquisition complements and expands the Company's filtration offering paths as the industry migrates to single-use flow paths solutions for monoclonal antibody, vaccine and cell and gene therapy ("C&GT") applications, with a focus on single-use fluid management components, including single-use clamps, adapters, end caps and hose assemblies. The NTM Acquisition streamlines and increases control over many components in the Company's single-use supply chain which ultimately should drive reduced lead-times for Repligen customers in the coming years.

Consideration Transferred

10


The NTM Acquisition was accounted for as a purchase of businesses under ASC 805, “Business Combinations,” and the Company engaged a third-party valuation firm to assist with the valuation of the business acquired. Under the terms of the Equity Purchase Agreement, all outstanding shares of capital stock of BioFlex were acquired for consideration with a value totaling $31.6 million, which includes $3.0 million deposited into an escrow against which the Company may make claims for indemnification.

Under the acquisition method of accounting, the assets acquired and liabilities assumed of BioFlex were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company. The fair value of the net assets acquired is estimated to be $4.6 million, the fair value of the intangible assets acquired is estimated to be $17.2 million and the residual goodwill is estimated to be $9.8 million. The estimated consideration and preliminary purchase price information has been prepared using a preliminary valuation. Acquisition-related costs are not included as a component of consideration transferred but are expensed in the periods in which costs are incurred. The Company has incurred $1.9 million of transaction and integration costs associated with the NTM Acquisition from the date of acquisition to June 30, 2022, with $0.7 million and $1.6 million of transaction and integration costs incurred during the three and six months ended June 30, 2022, respectively. The transaction costs are included in operating expenses in the consolidated statements of comprehensive income for the periods ended June 30, 2022.

The preparation of the valuation required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses and the applicable discount rates. These estimates were based on assumptions that the Company believes to be reasonable. However, actual results may differ from these estimates.

Fair Value of Net Assets Acquired

The preliminary allocation of purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date, based on the preliminary valuation. As of June 30, 2022, the purchase accounting for this acquisition had not yet been finalized. As additional information becomes available, the Company may further revise its preliminary purchase price allocation during the remainder of the measurement period. Any such revisions or changes may have a material impact on our accounting treatment of the NTM Acquisition. The final allocation may include changes to deferred tax assets and other assets and liabilities.

The components and estimated allocation of the purchase price consist of the following (amounts in thousands):

Cash and cash equivalents

 

$

2,870

 

Accounts receivable

 

 

1,408

 

Inventory

 

 

741

 

Prepaid expenses and other current assets

 

 

126

 

Property and equipment

 

 

34

 

Operating lease right of use asset

 

 

1,034

 

Customer relationships

 

 

13,240

 

Developed technology

 

 

3,540

 

Trademark and tradename

 

 

310

 

Non-competition agreements

 

 

60

 

Goodwill

 

 

9,804

 

Long term deferred tax asset

 

 

111

 

Accounts payable

 

 

(224

)

Accrued liabilities

 

 

(450

)

Operating lease liability

 

 

(1,030

)

Operating lease liability, long-term

 

 

(3

)

Fair value of net assets acquired

 

$

31,571

 

During the first half of 2022, the Company recorded net working capital adjustments of approximately $0.4 million related to pre-acquisition liabilities, which are included in goodwill and accrued liabilities in the table above.

Acquired Goodwill

11


The goodwill of $9.8 million represents future economic benefits expected to arise from anticipated synergies from the integration of BioFlex and NTM into the Company. These synergies include certain cost savings, operating efficiencies and other strategic benefits projected to be achieved as a result of the NTM Acquisition. Substantially all of the goodwill recorded is expected to be deductible for income tax purposes.

Intangible Assets

The following table sets forth the components of the identified intangible assets associated with the NTM Acquisition and their estimated useful lives:

Useful life

Fair Value

(Amounts in thousands)

Customer relationships

10 years

$

13,240

Developed technology

11 years

3,540

Trademark and tradename

15 years

310

Non-competition agreements

3 years

60

$

17,150

Avitide, Inc.

10


On September 16, 2021, the Company entered into an Agreement and Plan of Merger and Reorganization (“Avitide Merger Agreement”) with Avalon Merger Sub, Inc., a Delaware corporation and a wholly owned direct subsidiary of the Company, (“First Merger Sub”), Avalon Merger Sub LLC, a Delaware limited liability company and a wholly owned direct subsidiary of the Company, (“Second Merger Sub” and together with First Merger Sub, the “Merger Subs”), Avitide, Inc., a Delaware corporation, and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as the representative, agent and attorney-in-fact of Avitide's securityholders (the “Securityholder Representative”) to purchase Avitide. The transaction closed on September 20, 2021 and on the terms set forth in the Avitide Merger Agreement.

Avitide, which is headquartered in Lebanon, New Hampshire, offers diverse libraries and leading technology in affinity ligand discovery and development resulting in best-in-class ligand discovery and development lead-times. The acquisition gives the Company a new platform for affinity resin development, including gene therapy,C&GT, and advances and expands the Company’s proteins and chromatography franchise to address the unique purification needs of gene therapies and other emerging modalities.

Consideration Transferred

The Avitide Acquisition was accounted for as a purchase of a business under ASC 805, “Business Combinations”Combinations,” and the Company engaged a third-party valuation firm to assist with the valuation of the business acquired. Under the terms of the Avitide Merger Agreement, all outstanding shares of capital stock of Avitide were cancelled and converted into the right to receive merger consideration with a value totaling up to $275.0 million, which consisted of upfront payments in aggregate of $150.0 million ($149.4 million, net of cash acquired) and up to an additional $125.0 million (undiscounted) in contingent consideration earnout payments if certain performance targets are achieved. Total consideration paid also included $0.8 million deposited into an escrow account against which the Company may make claims for indemnification. The Avitide Acquisition was funded through payment of $75.0 million in cash, the issuance of 271,096 unregistered shares of the Company’s common stock totaling $77.683.0 million and contingent consideration with a fair value of approximately $80.088.4 million.

Under the acquisition method of accounting, the assets acquired and liabilities assumed of Avitide were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company. The fair value of the net liabilities assumedassets acquired is estimated to be $5.22.1 million, the fair value of the intangible assets acquired is estimated to be $44.346.7 million and the residual goodwill is estimated to be $193.5197.5 million. The estimated consideration and preliminary purchase price information has been prepared using a preliminary valuation. Acquisition-related costs are not included as a component of consideration transferred but are expensed in the periods in which costs are incurred. The Company has incurred $0.63.9 million of transaction and integration costs associated with the Avitide Acquisition from the date of acquisition to SeptemberJune 30, 2021.2022, with $0.7 million and $1.3 million of transaction and integration costs incurred during the three and six months ended June 30, 2022, respectively. The transaction costs are included in operating expenses in the consolidated statements of comprehensive income for the periodperiods ended SeptemberJune 30, 2021.2022. During 2022, due to the change in market inputs used to prepare the valuation of the contingent

12


consideration obligation, the Company also recorded contingent consideration adjustments of ($6.9) million and ($9.3) million to the Company's consolidated statements of comprehensive income for the three and six months ended June 30, 2022, respectively. See Note 2, "Fair Value Measurements" for more information.

The preparation of the valuation required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses and the applicable discount rates. These estimates were based on assumptions that the Company believes to be reasonable. However, actual results may differ from these estimates.

Total consideration transferred is as follows (amounts in thousands):

Cash consideration

 

$

75,004

 

 

$

74,962

 

Equity consideration

 

 

77,576

 

 

 

82,968

 

Contingent consideration - earnout

 

 

79,962

 

 

 

88,373

 

Fair value of net assets acquired

 

$

232,542

 

 

$

246,303

 

 

 

 

 

 

Fair Value of Net Assets Acquired

The preliminary allocation of purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date, based on the preliminary valuation. The fair valueAs of June 30, 2022, the contingent consideration – earnout was measured using a Monte Carlo simulation. The purchase accounting for this acquisition ishad not yet been finalized. As additional information becomes available, the Company may further revise its preliminary purchase price allocation including the fair value of the contingent consideration - earnout during the remainder of the measurement period.period (which will not exceed 12 months from September 20, 2021). Any such revisions or changes may have a material impact on our accounting treatment of the Avitide Acquisition. The final allocation may include changes to: (1)to long-term deferred liabilities and goodwill. Upon conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments will be recorded to our consolidated statement of comprehensive income.

11


deferred revenue; (2) inventory; (3) deferred tax liabilities, net; (4) allocations to intangible assets such as tradenames, developed technology and customer relationships as well as goodwill; (5) final consideration paid related to working capital adjustments; (6) noncurrent contingent consideration; and (7) other assets and liabilities.

The components and estimated allocation of the purchase price consist of the following (amounts in thousands):

Cash and cash equivalents

 

$

572

 

 

$

572

 

Accounts receivable

 

 

228

 

 

 

228

 

Inventory

 

 

400

 

 

 

332

 

Prepaid expenses and other current assets

 

 

114

 

 

 

114

 

Property and equipment

 

 

1,862

 

 

 

1,862

 

Operating lease right of use asset

 

 

2,459

 

 

 

3,648

 

Customer relationships

 

 

23,310

 

 

 

24,580

 

Developed technology

 

 

19,610

 

 

 

20,650

 

Trademark and tradename

 

 

1,150

 

 

 

1,210

 

Non-competition agreements

 

 

200

 

 

 

210

 

Goodwill

 

 

193,463

 

 

 

197,461

 

Long term deferred tax asset

 

 

1,540

 

Accounts payable

 

(215

)

 

 

(215

)

Accrued liabilities

 

 

(2,183

)

 

 

(2,183

)

Operating lease liability

 

 

(782

)

 

 

(698

)

Operating lease liability, long-term

 

 

(1,606

)

 

 

(2,950

)

Long term deferred tax liability

 

 

(5,982

)

Other liabilities

 

 

(58

)

 

 

(58

)

Fair value of net assets acquired

 

$

232,542

 

 

$

246,303

 

 

 

Acquired Goodwill

The goodwill of $193.5197.5 million represents future economic benefits expected to arise from anticipated synergies from the integration of Avitide. These synergies include certain cost savings, operating efficiencies and other strategic benefits projected to be achieved as a result of the Avitide Acquisition. Substantially all of the goodwill recorded is expected to be nondeductible for income tax purposes. In June 2022, the Company recorded an adjustment to goodwill of $1.8 million related to a change in estimated tax benefits associated with the net operating loss carryforward filed on the Avitide pre-acquisition tax return.

13


Intangible Assets

The following table sets forth the components of the identified intangible assets associated with the Avitide Acquisition and their estimated useful lives:

 

Useful life

 

Fair Value

 

 

Useful life

 

Fair Value

 

 

 

(Amounts in thousands)

 

 

 

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

Customer relationships

 

13 years

 

$

23,310

 

 

13 years

 

$

24,580

 

Developed technology

 

15 years

 

 

19,610

 

 

15 years

 

 

20,650

 

Trademark and tradename

 

18 years

 

 

1,150

 

 

18 years

 

 

1,210

 

Non-competition agreements

 

3 years

 

 

200

 

 

3 years

 

 

210

 

 

 

$

44,270

 

 

 

$

46,650

 

 

 

 

 

 

Polymem S.A.

On June 22, 2021, the Company entered into a Stock Purchase Agreement with Polymem, S.A. (“Polymem”), a company organized under the laws of France, and Jean-Michel Espenan and Franc Saux, acting together jointly and severally as the representatives of the sellers pursuant to which the Company acquired all of the outstanding common stock of Polymem for approximately $47.0 million. The transaction closed on July 1, 2021 (the “Polymem Acquisition.”Acquisition”).

Polymem, which is headquartered in, Toulouse, France, is a manufacturer of hollow fiber membranes, membrane modules and systems for industrial and bioprocessing applications. Polymem products will complement and expand the Company’s portfolio of hollow fiber systems and consumables. The acquisition substantially increases Repligen’s membrane and module

12


manufacturing capacity and establishes a world-class center of excellence in Europe to address the accelerating global demand for these innovative products.

Consideration Transferred

The CompanyPolymem Acquisition was accounted for the Polymem Acquisition as a purchase of a business under ASC 805, “Business Combinations”Combinations,” and the Company engaged a third-party valuation firm to assist with the valuation of the business acquired. Payment for the transaction was denominated in Euros but is reflected here in U.S. dollars for presentation purposes based on an exchange rate of 0.8437 as of July 1, 2021, the date of acquisition. Total consideration paid was approximately $47.0$47.0 million, which included approximately $4.3 million deposited into an escrow account against which the Company may make claims for indemnification.

Under the acquisition method of accounting, the assets acquired and liabilities assumed of Polymem were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company. The fair value of the net assumed liabilitiesassets acquired is approximately $2.2 million, the fair value of the intangible assets acquired is approximately $25.79.1 million and the residual goodwill is approximately $23.535.7 million. Acquisition-related costs are not included as a component of consideration transferred but are expensed in the periods in which costs are incurred. The Company has incurred $1.96.3 million of transaction and integration costs associated with the Polymem Acquisition from the date of acquisition to SeptemberJune 30, 2021.2022, with $1.6 million and $3.2 million of transaction and integration costs incurred during the three and six months ended June 30, 2022, respectively. The transaction costs are included in operating expenses in the consolidated statements of comprehensive income for the periodperiods ended SeptemberJune 30, 2021.2022.

Fair Value of Net Assets Acquired

The preliminary allocation of purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date, based on the preliminary valuation. As additional information becomes available,final valuation of Polymem. The Company has made appropriate adjustments to the Company may further revise its preliminary purchase price allocation during the remainder of the measurement period, (which will not exceed 12 months fromwhich ended on July 1, 2021). Any such revisions or changes may have a material impact on our accounting treatment of the Polymem Acquisition.2022.

14


The components and estimatedfinal allocation of the purchase price consist of the following (amounts in thousands):

 

 

 

Cash and cash equivalents

 

$

353

 

 

$

353

 

Net working capital (excluding cash and inventory
step-up)

 

 

375

 

 

 

414

 

Inventory step-up

 

 

543

 

 

 

543

 

Operating lease right of use assets

 

 

1,424

 

 

 

1,424

 

Property and equipment

 

 

3,145

 

 

 

3,145

 

Other assets

 

 

41

 

 

 

41

 

Customer relationships

 

 

17,234

 

Developed technology

 

 

7,545

 

 

 

8,274

 

Trademark and tradenames

 

 

557

 

 

 

510

 

Non-compete agreements

 

 

344

 

 

 

312

 

Goodwill

 

 

23,453

 

 

 

35,680

 

Operating lease liability

 

 

(1,253

)

 

 

(1,253

)

Long term deferred tax liability

 

 

(6,646

)

 

 

(2,327

)

Other long-term liabilities

 

 

(142

)

 

 

(143

)

Fair value of net assets acquired

 

$

46,973

 

 

$

46,973

 

 

 

 

The preliminary purchase price allocation is subject to adjustment as purchase accounting is finalized. The final purchase price allocation will be determined upon completion of final valuation analysis and the fair value allocation of assets acquired and liabilities assumed could differ materially from the preliminary valuation analysis. The final allocation may include changes to: (1) deferred tax liabilities; (2) allocations to intangible assets such as tradenames, developed technology an customer relationships as well as goodwill; (3) final consideration related to working capital adjustments; and (4) other assets and liabilities

Acquired Goodwill

The goodwill of approximately $23.535.7 million represents future economic benefits expected to arise from anticipated synergies from the integration of Polymem. These synergies include certain cost savings, operating efficiencies and other strategic

13


benefits projected to be achieved as a result of the Polymem Acquisition. Substantially all of the goodwill recorded is expected to be nondeductible for income tax purposes.

Intangible Assets

The following table sets forth the components of the identified intangible assets associated with the Polymem Acquisition and their estimated useful lives:

 

 

Useful life

 

Fair Value

 

 

 

 

 

(Amounts in thousands)

 

 

 

 

 

 

 

Customer relationships

 

14 years

 

$

17,234

 

Developed technology

 

13 years

 

 

7,545

 

Trademark and tradename

 

14 years

 

 

557

 

Non-competition agreements

 

5 years

 

 

344

 

 

 

 

 

$

25,680

 

 

 

 

 

 

 

2020 Acquisitions

ARTeSYN Biosolutions Holdings Ireland Limited

On October 27, 2020, the Company entered into an Equity and Asset Purchase Agreement with ARTeSYN, a company organized under the laws of Ireland, Third Creek Holdings LLC, a Nevada limited liability company (“Third Creek”), Alphinity, LLC, a Nevada limited liability company (“Alphinity”, and together with Third Creek the “ARTeSYN Sellers”), and Michael Gagne, solely in his capacity as the representative of the ARTeSYN Sellers, pursuant to which the Company acquired (i) all of the outstanding equity securities of ARTeSYN and (ii) certain assets from Alphinity related to the business of ARTeSYN (collectively, the “ARTeSYN Acquisition”) for approximately $200 million, comprised of approximately $130 million in cash to the ARTeSYN Sellers and approximately $70 million in the Company’s common stock to Third Creek. The transaction closed on December 3, 2020.

ARTeSYN is headquartered in Waterford, Ireland and conducts its operations in Ireland, the United States and Estonia. Its suite of single-use solutions has been created with the goal of enabling “abundance in medicine” by allowing greater efficiency in biologics manufacturing. The ARTeSYN team has created a number of solutions targeting the single-use space from single-use valves with fully disposable valve liners, XO® skeletal supports, a hybrid small parts offering for de-bottlenecking traditional facilities, and fully automated SU process systems that have quickly become leading solutions in the bioprocessing industry. ARTeSYN has established downstream processing leadership with a suite of state of the art single-use systems for chromatography, filtration, continuous manufacturing and media/buffer prep workflows. In addition, the Company has integrated unique flow path assemblies utilizing the Company’s silicone extrusion and molding technology, to deliver highly differentiated, low hold-up volume systems that minimize product loss during processing. The ARTeSYN portfolio expands on the market success of the Company’s hollow fiber systems and complements its chromatography and TFF filtration product lines.

Consideration Transferred

The ARTeSYN Acquisition was accounted for as a purchase of a business under ASC 805, “Business Combinations”. The ARTeSYN Acquisition was funded through payment of $130.7 million in cash, as well as issuance of 372,990 unregistered shares of the Company’s common stock totaling $69.4 million, contingent consideration of approximately $1.5 million, and settlement of preexisting invoices with the Company of approximately $2.3 million, for a total purchase price of $204.0 million. Under the acquisition method of accounting, the assets acquired and liabilities assumed of ARTeSYN were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company. The fair value of the net tangible assets acquired is estimated to be $8.0 million, the fair value of the intangible assets acquired is estimated to be $67.4 million, and the residual goodwill is estimated to be $128.6 million. The estimated consideration and purchase price information was prepared using a valuation. Payment of the final consideration for working capital was made in April 2021.

The preparation of the valuation required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These

14


estimates were based on assumptions that the Company believes to be reasonable. However, actual results may differ from these estimates.

Total consideration transferred is as follows (amounts in thousands):

Cash consideration

 

$

130,713

 

Equity consideration

 

 

69,422

 

Contingent consideration

 

 

1,548

 

Settlement of preexisting liabilities

 

 

2,310

 

Fair value of net assets acquired

 

$

203,993

 

Acquisition related costs are not included as a component of consideration transferred but are expensed in the periods in which the costs are incurred. The Company incurred $4.0 million in transaction and integration costs associated with the ARTeSYN Acquisition from the date of acquisition to December 31, 2020, and an additional $3.4 million of transaction and integration costs during 2021. The transaction costs are included in operating expenses in the consolidated statements of comprehensive income for the period ended September 30, 2021.

The consideration transferred includes approximately $1.5 million related to consideration that was deferred at the acquisition date, with payment to the ARTeSYN Sellers contingent upon recognizing revenue on a large-scale system within 120 days of the acquisition date. This consideration is recorded at its estimated fair value as of the acquisition date, which includes the assumption of high probability of such revenue being recognized.

Fair Value of Net Assets Acquired

The preliminary allocation of purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date, based on the preliminary valuation. As additional information becomes available, the Company may further revise its preliminary purchase price allocation during the remainder of the measurement period (which will not exceed 12 months from December 3, 2020). Any such revisions or changes may be material. The final allocation may include changes to deferred tax liabilities, net and goodwill. Upon conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments will be recorded to our consolidated statements of comprehensive income. During 2021, the Company recorded net working capital adjustments of $0.1 million related to settlement of pre-acquisition liabilities, which offset goodwill in the table below.

The components and estimated allocation of the purchase price consist of the following (amounts in thousands):

Cash and cash equivalents

 

$

2,982

 

Accounts receivable

 

 

4,811

 

Inventory

 

 

8,592

 

Prepaid expenses and other current assets

 

 

5,561

 

Property and equipment

 

 

1,836

 

Operating lease right of use asset

 

 

1,611

 

Other noncurrent assets

 

 

26

 

Customer relationships

 

 

38,400

 

Developed technology

 

 

27,060

 

Trademark and tradename

 

 

1,630

 

Non-competition agreements

 

 

300

 

Goodwill

 

 

128,598

 

Accounts payable

 

 

(2,251

)

Accrued liabilities

 

 

(8,706

)

Deferred revenue

 

 

(3,583

)

Deferred tax liabilities, net

 

 

(1,240

)

Notes payable

 

 

(24

)

Operating lease liability

 

 

(417

)

Operating lease liability, long-term

 

 

(1,193

)

Fair value of net assets acquired

 

$

203,993

 

Acquired Goodwill

15


The goodwill of $128.6 million represents future economic benefits expected to arise from synergies from combining operations and commercial organizations to increase market presence and the extension of existing customer relationships. Substantially all of the goodwill recorded is expected to be deductible for income tax purposes.

Intangible Assets

The following table sets forth the components of the identified intangible assets associated with the ARTeSYN Acquisition and their estimated useful lives:

 

 

Useful life

 

Fair Value

 

 

 

 

 

(Amounts in thousands)

 

 

 

 

 

 

 

Customer relationships

 

17 years

 

$

38,400

 

Developed technology

 

15 years

 

 

27,060

 

Trademark and tradename

 

21 years

 

 

1,630

 

Non-competition agreements

 

3 years

 

 

300

 

 

 

 

 

$

67,390

 

Non-Metallic Solutions, Inc.

On October 15, 2020, the Company entered into a Stock Purchase Agreement with NMS, a Massachusetts corporation, and each of William Malloneé and Derek Masser, the legal and beneficial owners of NMS, to purchase NMS, which transaction subsequently closed on October 20, 2020 (the “NMS Acquisition”).

NMS, headquartered in Auburn, Massachusetts, is a manufacturer of fabricated plastics, custom containers, and related assemblies and components used in the manufacturing of biologic drugs. The acquisition of NMS allows Repligen to expand its line of single-use systems and associated integrated flow path assemblies and streamline the supply chain for current products, providing more flexibility to scale and expand the Company's single-use and systems portfolios.

Consideration Transferred

The NMS Acquisition was accounted for as a purchase of a business under ASC 805, “Business Combinations.” Total consideration paid was $16.1 million, which included $1.3 million deposited into an escrow account against which the Company may make claims for indemnification. The fair value of the net tangible assets acquired was $0.9 million, the fair value of the intangible assets acquired was $8.5 million, and the residual goodwill was $6.7 million. Acquisition-related costs are not included as a component of consideration transferred but are expensed in the periods in which costs are incurred. The Company incurred $0.2 million of transaction and integration costs associated with the NMS Acquisition from the date of acquisition to December 31, 2020, and $0.4 million for the nine months ended September 30, 2021. The transaction costs are included in SG&A expenses in the consolidated statements of comprehensive income.

Fair Value of Net Assets Acquired

The allocation of purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date, based on the preliminary valuation. We have made appropriate adjustments to the purchase price allocation during the measurement period, which ended on October 20, 2021.

The components and allocation of the purchase price consist of the following (amounts in thousands):

16


Cash and cash equivalents

 

$

1,163

 

Accounts receivable

 

 

415

 

Inventory

 

 

334

 

Prepaid expenses and other current assets

 

 

13

 

Property and equipment

 

 

73

 

Operating lease right of use asset

 

 

194

 

Customer relationships

 

 

6,370

 

Developed technology

 

 

1,810

 

Trademark and tradename

 

 

190

 

Non-competition agreements

 

 

90

 

Goodwill

 

 

6,713

 

Deferred tax assets

 

 

24

 

Accounts payable

 

 

(96

)

Accrued liabilities

 

 

(999

)

Operating lease liability

 

 

(136

)

Operating lease liability, long-term

 

 

(59

)

Fair value of net assets acquired

 

$

16,099

 

 

 

 

 

Acquired Goodwill

The goodwill of $6.7 million represents future economic benefits expected to arise from anticipated synergies from the integration of NMS. These synergies include certain cost savings, operating efficiencies and other strategic benefits projected to be achieved as a result of the NMS Acquisition. Substantially all of the goodwill recorded is expected to be deductible for income tax purposes. In February 2021, the Company recorded an adjustment to goodwill of $0.1 million related to the finalization of the working capital true-up.

Intangible Assets

The following table sets forth the components of the identified intangible assets associated with the NMS Acquisition and their estimated useful lives:

 

Useful life

 

Fair Value

 

 

Useful life

 

Fair Value

 

 

 

(Amounts in thousands)

 

 

 

(Amounts in thousands)

 

 

 

 

 

Customer relationships

 

14 years

 

$

6,370

 

Developed technology

 

12 years

 

 

1,810

 

 

13 years

 

$

8,274

 

Trademark and tradename

 

15 years

 

 

190

 

 

14 years

 

 

510

 

Non-competition agreements

 

3 years

 

 

90

 

 

5 years

 

 

312

 

 

 

$

8,460

 

 

 

$

9,096

 

 

 

 

 

 

4.
Revenue Recognition

The Company generates revenue from the sale of bioprocessing products, equipment devices and related consumables used with these equipment devices to customers in the life science and biopharmaceutical industries. Under ASC 606, “Revenue from Contracts with Customers,” revenue is recognized when, or as, obligations under the terms of a contract are satisfied, which occurs when control of the promised products or services is transferred to customers.

Disaggregation of Revenue

Revenues for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 were as follows:

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

2021

 

2020

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

(Amounts in thousands)

 

 

(Amounts in thousands)

 

Product revenue

 

$

178,177

 

 

$

94,029

 

 

$

483,834

 

 

$

257,521

 

 

$

207,597

 

 

$

162,920

 

 

$

413,960

 

 

$

305,657

 

Royalty and other income

 

 

39

 

 

 

31

 

 

 

179

 

 

 

91

 

 

 

36

 

 

 

40

 

 

 

73

 

 

 

140

 

Total revenue

 

$

178,216

 

 

$

94,060

 

 

$

484,013

 

 

$

257,612

 

 

$

207,633

 

 

$

162,960

 

 

$

414,033

 

 

$

305,797

 

 

 

 

 

 

 

 

 

 

 

 

 

1715


When disaggregating revenue, the Company considered all of the economic factors that may affect its revenues. Because substantially all of its revenues are from bioprocessing customers, there are no differences in the nature, timing and uncertainty of the Company’s revenues and cash flows from any of its product lines. However, given that the Company’s revenues are generated in different geographic regions, factors such as regulatory, economic and geopolitical factors within those regions could impact the nature, timing and uncertainty of the Company’s revenues and cash flows. In addition, a significant portion of the Company’s revenuesrevenue is generated from a small number of customers; therefore, economic factors specific to these customers could impact the nature, timing and uncertainty of the Company’s revenues and cash flows.

Disaggregated revenue from contracts with customers by geographic region and revenue from significant customers can be found in Note 14, “Segment Reporting,” included in this report.

Revenue from customers that represented 10% or more of the Company’s total revenue for the three months ended September 30, 2021 and 2020 came from sales to Pfizer Inc. during the three months ended September 30, 2021, which generated $19.1 million, or 11% of the Company's total revenue for the period. Revenue from customers that represented 10% or more of the Company's total revenue for the nine months ended September 30, 2021 and 2020 came from sales to MilliporeSigma during the nine months ended September 30, 2020, which generated $29.4 million in revenue, or 11% of the Company's total revenue for the period. There was 0 revenue from customers that represented 10% or more of the Company's total revenue for the other periods presented.

For more information regarding our product revenue, see Note 5,6, “Revenue Recognition” included in Part II, Item 8, “Financial Statements and Supplementary Data” to our Form 10-K.

Contract Balances from Contracts with Customers

The following table provides information about receivables and deferred revenue from contracts with customers as of SeptemberJune 30, 20212022 (amounts in thousands):

 

 

2021

 

Balances from contracts with customers only:

 

 

 

Accounts receivable, net of reserves

 

$

122,048

 

Deferred revenue (included in accrued liabilities in the consolidated balance sheets)

 

$

16,337

 

 

 

 

 

Revenue recognized during the nine-month period ended September 30, 2021 relating to:

 

 

 

The beginning deferred revenue balance

 

$

13,071

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Balances from contracts with customers only:

 

 

 

 

 

 

Accounts receivable

 

$

121,050

 

 

$

117,420

 

Deferred revenue (included in accrued liabilities in
   the consolidated balance sheets)

 

$

22,161

 

 

$

14,848

 

Revenue recognized during periods presented relating to:

 

 

 

 

 

 

The beginning deferred revenue balance

 

$

11,215

 

 

$

13,708

 

The timing of revenue recognition, billings and cash collections results in the accounts receivable and deferred revenue balances on the Company’s consolidated balance sheets.

A contract asset is created when the Company satisfies a performance obligation by transferring a promised good to the customer. Contract assets may represent conditional or unconditional rights to consideration. The right is conditional and recorded as a contract asset if the Company must first satisfy another performance obligation in the contract before it is entitled to payment from the customer. Contract assets are transferred to billed receivables once the right becomes unconditional. If the Company has the unconditional right to receive consideration from the customer, the contract asset is accounted for as a billed receivable and presented separately from other contract assets. A right is unconditional if nothing other than the passage of time is required before payment of that consideration is due.

When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue after control of the products or services is transferred to the customer and all revenue recognition criteria have been met.

5.
Goodwill and Intangible Assets

Goodwill

16


Goodwill represents the difference between the purchase price and the estimated fair value of identifiable assets acquired and liabilities assumed. Goodwill acquired in a business combination and determined to have an indefinite useful life is not

18


amortized, but instead is tested for impairment at least annually in accordance with ASC 350, “Intangibles – Goodwill and Other”.

The following table represents the change in the carrying value of goodwill for the ninesix months ended SeptemberJune 30, 20212022 (amounts in thousands):

Balance at December 31, 2020

 

$

618,305

 

Measurement period adjustment - NMS

 

 

(71

)

Measurement period adjustments - ARTeSYN

 

 

(60

)

Acquisition of Polymem

 

 

23,453

 

Acquisition of Avitide

 

 

193,463

 

Cumulative translation adjustment

 

 

(1,531

)

Balance at September 30, 2021

 

$

833,559

 

 

 

 

 

Balance as of December 31, 2021

 

$

860,362

 

Measurement period adjustment - BioFlex

 

 

(376

)

Measurement period adjustment - Avitide

 

 

(1,784

)

Cumulative translation adjustment

 

 

(3,874

)

Balance as of June 30, 2022

 

$

854,328

 

During each of the fourth quarters of 2021, 2020 2019 and 2018,2019, the Company completed its annual impairment assessments and concluded that goodwill was not impaired in any of those years. The Company has not identified any “triggering” events which indicate an impairment of goodwill in the three and ninesix months ended SeptemberJune 30, 2021.2022.

Intangible Assets

Intangible assets with a definitive life are amortized over their useful lives using the straight-line method, and the amortization expense is recorded within cost of product revenue and SG&Aselling, general and administrative expenses in the Company’s statements of comprehensive income. Intangible assets and their related useful lives are reviewed at least annually to determine if any adverse conditions existed that would indicate the carrying value of these assets may not be recoverable. More frequent impairment assessments are conducted if certain conditions exist, including a change in the competitive landscape, any internal decisions to pursue new or different technology strategies, a loss of a significant customer, or a significant change in the marketplace, including changes in the prices paid for ourthe Company's products or changes in the size of the market for the Company’s products. An impairment results if the carrying value of the asset exceeds the estimated fair value of the asset. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. The Company continues to believe that its intangible assets are recoverable at SeptemberJune 30, 2021.2022.

Indefinite-lived intangible assets are reviewed for impairment at least annually. There has been 0 impairment of the Company’s intangible assets for the periods presented.

Intangible assets, net consisted of the following at SeptemberJune 30, 2021:2022:

 

 

September 30, 2021

 

 

June 30, 2022

 

 

Gross Carrying Value

 

Accumulated
Amortization

 

Net Carrying Value

 

Weighted Average Useful Life
(in years)

 

 

Gross
Carrying
Value

 

 

Accumulated
Amortization

 

 

Net
Carrying
Value

 

 

Weighted
Average
Useful Life
(in years)

 

 

(Amounts in thousands)

 

 

 

 

(Amounts in thousands)

 

 

 

Finite-lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technology - developed

 

$

141,039

 

 

$

(19,426

)

 

$

121,613

 

 

 

17

 

 

$

145,304

 

 

$

(25,862

)

 

$

119,442

 

 

 

17

 

Patents

 

 

240

 

 

 

(240

)

 

 

 

 

 

8

 

 

 

240

 

 

 

(240

)

 

 

0

 

 

 

8

 

Customer relationships

 

 

257,297

 

 

 

(47,363

)

 

 

209,934

 

 

 

15

 

 

 

253,221

 

 

 

(58,709

)

 

 

194,512

 

 

 

15

 

Trademarks

 

 

7,367

 

 

 

(771

)

 

 

6,596

 

 

 

19

 

 

 

7,675

 

 

 

(1,096

)

 

 

6,579

 

 

 

19

 

Other intangibles

 

 

2,826

 

 

 

(1,506

)

 

 

1,320

 

 

 

4

 

 

 

2,801

 

 

 

(1,826

)

 

 

975

 

 

 

4

 

Total finite-lived intangible assets

 

 

408,769

 

 

 

(69,306

)

 

 

339,463

 

 

 

16

 

 

 

409,241

 

 

 

(87,733

)

 

 

321,508

 

 

 

16

 

Indefinite-lived intangible asset:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trademarks

 

 

700

 

 

 

 

 

 

700

 

 

 

 

 

 

700

 

 

 

 

 

 

700

 

 

 

 

Total intangible assets

 

$

409,469

 

 

$

(69,306

)

 

$

340,163

 

 

 

 

 

$

409,941

 

 

$

(87,733

)

 

$

322,208

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1917


Intangible assets consisted of the following at December 31, 2020:2021:

 

December 31, 2020

 

 

December 31, 2021

 

 

Gross Carrying Value

 

Accumulated
Amortization

 

Net Carrying Value

 

Weighted Average Useful Life
(in years)

 

 

Gross
Carrying
Value

 

 

Accumulated
Amortization

 

 

Net
Carrying
Value

 

 

Weighted
Average
Useful Life
(in years)

 

 

(Amounts in thousands)

 

 

 

 

(Amounts in thousands)

 

 

 

Finite-lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technology - developed

 

$

114,217

 

 

$

(14,444

)

 

$

99,773

 

 

 

17

 

 

$

146,097

 

 

$

(21,553

)

 

$

124,544

 

 

 

17

 

Patents

 

 

240

 

 

 

(240

)

 

 

 

 

 

8

 

 

 

240

 

 

 

(240

)

 

 

0

 

 

 

8

 

Customer relationships

 

 

217,790

 

 

 

(37,333

)

 

 

180,457

 

 

 

16

 

 

 

254,699

 

 

 

(50,719

)

 

 

203,980

 

 

 

15

 

Trademarks

 

 

5,893

 

 

 

(541

)

 

 

5,352

 

 

 

20

 

 

 

7,699

 

 

 

(877

)

 

 

6,822

 

 

 

19

 

Other intangibles

 

 

2,142

 

 

 

(1,324

)

 

 

818

 

 

 

3

 

 

 

2,839

 

 

 

(1,611

)

 

 

1,228

 

 

 

4

 

Total finite-lived intangible assets

 

 

340,282

 

 

 

(53,882

)

 

 

286,400

 

 

 

16

 

 

 

411,574

 

 

 

(75,000

)

 

 

336,574

 

 

 

16

 

Indefinite-lived intangible asset:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trademarks

 

 

700

 

 

 

 

 

 

700

 

 

 

 

 

 

700

 

 

 

 

 

 

700

 

 

 

 

Total intangible assets

 

$

340,982

 

 

$

(53,882

)

 

$

287,100

 

 

 

 

 

$

412,274

 

 

$

(75,000

)

 

$

337,274

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization expense for finite-lived intangible assets was $5.76.6 million and $4.05.2 million for each of the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and $16.113.2 million and $11.810.4 million for each of the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively. As of SeptemberJune 30, 2021,2022, the Company expects to record the following amortization expense in future periods (amounts in thousands):

 

Estimated

 

 

Estimated

 

 

Amortization

 

 

Amortization

 

For the Nine Months Ended September 30,

 

 Expense

 

2021 (remaining three months)

 

$

7,004

 

2022

 

 

25,840

 

For the Years Ended December 31,

 

Expense

 

2022 (remaining six months)

 

$

13,182

 

2023

 

 

25,722

 

 

 

26,246

 

2024

 

 

25,088

 

 

 

25,661

 

2025

 

 

24,821

 

 

 

25,322

 

2026 and thereafter

 

 

230,988

 

2026

 

 

25,322

 

2027 and thereafter

 

 

205,775

 

Total

 

$

339,463

 

 

$

321,508

 

 

 

 

6.
Consolidated Balance Sheet Detail

Inventories, net

Inventories, net consists of the following:

 

 

 

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(Amounts in thousands)

 

Raw materials

 

$

105,157

 

 

$

48,746

 

Work-in-process

 

 

7,860

 

 

 

8,084

 

Finished products

 

 

43,146

 

 

 

38,195

 

Total inventories, net

 

$

156,163

 

 

$

95,025

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(Amounts in thousands)

 

Raw materials

 

$

141,673

 

 

$

123,321

 

Work-in-process

 

 

7,126

 

 

 

8,119

 

Finished products

 

 

90,318

 

 

 

53,054

 

Total inventories, net

 

$

239,117

 

 

$

184,494

 

2018


Property, Plant and Equipment

Property, plant and equipment consist of the following:

 

 

 

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(Amounts in thousands)

 

Land

 

$

1,023

 

 

$

1,023

 

Buildings

 

 

764

 

 

 

1,007

 

Leasehold improvements

 

 

51,778

 

 

 

31,331

 

Equipment

 

 

65,764

 

 

 

43,072

 

Furniture, fixtures and office equipment

 

 

8,355

 

 

 

8,714

 

Computer hardware and software

 

 

21,436

 

 

 

15,397

 

Construction in progress

 

 

14,723

 

 

 

14,927

 

Other

 

 

497

 

 

 

455

 

Total property, plant and equipment

 

 

164,340

 

 

 

115,926

 

Less - Accumulated depreciation

 

 

(64,688

)

 

 

(49,056

)

Total property, plant and equipment, net

 

$

99,652

 

 

$

66,870

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(Amounts in thousands)

 

Land

 

$

876

 

 

$

1,023

 

Buildings

 

 

679

 

 

 

764

 

Leasehold improvements

 

 

54,786

 

 

 

52,505

 

Equipment

 

 

75,132

 

 

 

70,983

 

Furniture, fixtures and office equipment

 

 

10,333

 

 

 

9,137

 

Computer hardware and software

 

 

27,655

 

 

 

22,380

 

Construction in progress

 

 

77,807

 

 

 

38,446

 

Other

 

 

504

 

 

 

443

 

Total property, plant and equipment

 

 

247,772

 

 

 

195,681

 

Less - Accumulated depreciation

 

 

(79,402

)

 

 

(70,717

)

Total property, plant and equipment, net

 

$

168,370

 

 

$

124,964

 

Depreciation expenses totaled $4.35.5 million and $2.83.8 million for each of the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and $11.310.7 million and $7.87.0 million for each of the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively.

 

Accrued Liabilities

Accrued liabilities consist of the following:

 

 

 

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(Amounts in thousands)

 

Employee compensation

 

$

34,056

 

 

$

20,288

 

Income taxes payable

 

 

8,435

 

 

 

1,423

 

Royalty and license fees

 

 

1,497

 

 

 

466

 

Warranties

 

 

1,759

 

 

 

1,576

 

Professional fees

 

 

2,179

 

 

 

1,425

 

Deferred revenue

 

 

16,337

 

 

 

15,318

 

Other

 

 

(869

)

 

 

12,589

 

Total accrued liabilities

 

$

63,394

 

 

$

53,085

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(Amounts in thousands)

 

Employee compensation

 

$

28,232

 

 

$

42,147

 

Deferred revenue

 

 

22,161

 

 

 

14,848

 

Income taxes payable

 

 

4,937

 

 

 

4,984

 

Other

 

 

15,363

 

 

 

13,519

 

Total accrued liabilities

 

$

70,693

 

 

$

75,498

 

7.
Convertible Senior Notes

0.375% Convertible Senior Notes due 2024

On July 19, 2019, the Company issued $287.5 million aggregate principal pursuant to the 2019 Notes, which includes the underwriters’ exercise in full of an option to purchase an additional $37.5 million aggregate principal amount of 2019 Notes (the “Notes Offering”). The net proceeds of the Notes Offering, after deducting underwriting discounts and commissions and other related offering expenses payable by the Company, were approximately $278.5 million. The 2019 Notes are senior, unsecured obligations of the Company, and bear interest at a rate of 0.375% per year. Interest is payable semi-annually in arrears on January 15 and July 15 of each year, beginning on January 15, 2020. The 2019 Notes will mature on July 15, 2024, unless earlier repurchased or converted in accordance with their terms.

During the thirdsecond quarter of 2021,2022, the closing price of the Company’s common stock exceeded 130% of the conversion price of the 2019 Notes for more than 20 trading days of the last 30 consecutive trading days of the quarter. As a result, the 2019 Notes are convertible at the option of the holders of the 2019 Notes during the fourththird quarter of 2021,2022, the quarter immediately following the quarter when the conditions are met, as stated in the terms of the 2019 Notes. These conditions have been met each quarter since the third quarter of 2020. As a result, $6,00024,000 aggregate principal amount of the 2019 Notes have been converted by the noteholdersnote holders since December 31, 2020.the issuance of the 2019 Notes, including $13,000 in the first half of 2022. The conversions resulted in the issuance of a nominal number of shares of the Company’s common stock to the note holders, and the Company recorded a loss of approximately $1,000 and approximately $6,000 on the conversion of these notes, which is included in other expenses, net on our consolidated statements of

21


comprehensive income for the three and nine months ended September 30, 2021.holders. The Company continues to classify the carrying value of the 2019 Notes as current liabilities on the Company’s consolidated balance sheet at SeptemberJune 30, 2021.2022.

Prior to the adoption of ASU 2020-06, the Company accounted for the 2019 Notes as a liability and equity component where the carrying value of the liability component was valued based on a similar debt instrument. In accounting for the issuance of the

19


2019 Notes, the Company separated the 2019 Notes into liability and equity components. The carrying value of the liability component was calculated as the present value of its cash flows using a discount rate of 4.5% based on comparative convertible transactions for similar companies. The carrying value of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the 2019 Notes as a whole. The excess of the principal amount of the liability component over its carrying value amount, referred to as the debt discount, was amortized to interest expense on our consolidated statements of comprehensive income over the five-year term of the 2019 Notes. The equity component was not re-measured as long as it continued to meet the conditions for equity classification. The equity component related to the 2019 Notes recorded at issuance was $52.1 million, which was recorded in additional paid-in capital on the Company's consolidated balance sheets.

In accounting for the transaction costs related to the issuance of the 2019 Notes, the Company allocated the total costs incurred to the liability and equity components of the 2019 Notes using the same proportions as the initial carrying value of the 2019 Notes. Transaction costs related to the liability component were $7.4 million and are amortized to interest expense using the effective interest method over the five-year term of the 2019 Notes. Transaction costs attributable to the equity component were $1.6 million and are netted with the equity component of the 2019 Notes in stockholders' equity of the Company's consolidated balance sheets. Additionally, the Company recorded a net deferred tax liability of $11.4 million.

Effective January 1, 2022, the Company adopted ASU 2020-06. After adoption, the Company now accounts for the 2019 Notes as a single liability measured at amortized cost. As the equity component is no longer required to be split into a separate component, the Company recorded a net adjustment for the initial $50.4 million that was allocated to additional paid-in capital and $22.9 million of life-to-date interest expense recorded as amortization of debt discount. Additionally, the net deferred tax liability recorded for the 2019 Notes was reversed. The principal amount of the liability over its carrying amount is amortized to interest expense over the five-year term of the 2019 Notes. Since the 2019 Notes are classified as a single liability, there is no debt discount required to be amortized for the three and six months ended June 30, 2022.

The net carrying value of the liability component of the 2019 Notes is as follows:

 

 

 

 

September 30,

 

 

December 31,

 

 

June 30,

 

December 31,

 

 

2021

 

2020

 

 

2022

 

 

2021

 

 

(Amounts in thousands)

 

 

(Amounts in thousands)

 

0.375% Convertible Senior Notes due 2024:

 

 

 

 

 

 

 

 

 

 

 

Principal amount

 

$

287,493

 

 

$

287,500

 

 

$

287,476

 

 

$

287,489

 

Unamortized debt discount

 

 

(30,793

)

 

 

(38,317

)

 

 

0

 

 

 

(28,220

)

Unamortized debt issuance costs

 

 

(4,377

)

 

 

(5,446

)

 

 

(3,764

)

 

 

(4,011

)

Net carrying amount

 

$

252,323

 

 

$

243,737

 

 

$

283,712

 

 

$

255,258

 

 

 

 

 

 

The following table sets forth total interest expense recognized related to the 2019 Notes:

Interest expense recognized on the 2019 Notes for the three months ended September

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(Amounts in thousands)

 

Contractual interest expense

 

$

269

 

 

$

269

 

 

$

539

 

 

$

539

 

Amortization of debt issuance costs

 

 

453

 

 

 

357

 

 

 

905

 

 

 

709

 

Amortization of debt discount

 

 

0

 

 

 

2,508

 

 

 

0

 

 

 

4,986

 

Total

 

$

722

 

 

$

3,134

 

 

$

1,444

 

 

$

6,234

 

Effective interest rate of the liability component

 

 

1.0

%

 

 

5.1

%

 

 

1.0

%

 

 

5.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

At June 30, 2021 was $0.3 million, $2.5 million and $0.4 million for the contractual coupon interest, the accretion of the debt discount and the amortization of the debt issuance costs, respectively. Interest expense recognized on the 2019 Notes for the nine months ended September 30, 2021 was $0.8 million, $7.5 million and $1.1 million for the contractual coupon interest, the accretion of the debt discount and the amortization of the debt issuance costs, respectively. The effective interest rate on the 2019 Notes is 5.1%, which included the interest on the 2019 Notes, amortization of the debt discount and debt issuance costs. At September 30, 20212022 and December 31, 2020,2021, the carrying value of the 2019 Notes was $252.3283.7 million and $243.7255.3 million, respectively, net of unamortized discount, and the fair value of the 2019 Notes was $732.9432.3 million and $501.0678.5 million, respectively. The fair value of the 2019 Notes was determined based on the most recent trade activity of the 2019 Notes at SeptemberJune 30, 2022 and December 31, 2021.

8.
Stockholders’ Equity

20


Stock Option and Incentive Plans

Under the Company’s current 2018 Stock Option and Incentive Plan (the “2018 Plan”), the number of shares of the Company’s common stock that are reserved and available for issuance is 2,778,000, plus the number of shares of common stock available for issuance under the Company’s previous equity plans. The shares of common stock underlying any awards under the 2018 Plan and previous equity plans (together, the “Plans”) that are forfeited, canceled or otherwise terminated (other than by exercise) shall be added back to the shares of stock available for issuance under the 2018 Plan. At SeptemberJune 30, 2021, 2,134,9162022, 1,948,381 shares were available for future grants under the 2018 Plan.

Stock-Based Compensation

For each of the three months ended SeptemberJune 30, 20212022 and 2020,2021, the Company recorded stock-based compensation expense of $6.87.0 million and $4.27.1 million, respectively, for share-based awards granted under the Plans. For the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, the Company recorded stock-based compensation expense of $20.514.9 million and $12.513.7 million, respectively. The following table presents stock-based compensation expense in the Company’s consolidated statements of comprehensive income:

 

Three Months Ended
 September 30,

 

Nine Months Ended
September 30,

 

 

Three Months Ended
 June 30,

 

 

Six Months Ended
June 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

(Amounts in thousands)

 

 

(Amounts in thousands)

 

Cost of product revenue

 

$

489

 

 

$

563

 

 

$

1,444

 

 

$

1,421

 

 

$

615

 

 

$

449

 

 

$

1,237

 

 

$

955

 

Research and development

 

 

698

 

 

 

326

 

 

 

2,209

 

 

 

1,092

 

 

 

622

 

 

 

795

 

 

 

1,421

 

 

 

1,511

 

Selling, general and administrative

 

 

5,605

 

 

 

3,336

 

 

 

16,823

 

 

 

9,979

 

 

 

5,748

 

 

 

5,899

 

 

 

12,242

 

 

 

11,218

 

Total stock-based compensation

 

$

6,792

 

 

$

4,225

 

 

$

20,476

 

 

$

12,492

 

 

$

6,985

 

 

$

7,143

 

 

$

14,900

 

 

$

13,684

 

 

 

 

 

 

 

 

 

 

The 2018 Plan allows for the granting of incentive and nonqualified options to purchase shares of common stock, restricted stock and other equity awards. Employee grants under the Plans generally vest over a three to five-year period, with 20%-33% vesting on the first anniversary of the date of grant and the remainder vesting in equal yearly installments thereafter.

Nonqualified options issued to non-employee directors under the Plans generally vest over one year. In the first quarter of 2018, to create a longer-term retention incentive, the Company’s Compensation Committee granted long-term incentive compensation

22


awards to its Chief Executive Officer, consistingwhich consisted of both stock options and restricted stock units (“RSUs”) that are subject to time-based vesting over nine years. Options granted under the Plans have a maximum term of ten years from the date of grant and generally, the exercise price of the stock options equals the fair market value of the Company’s common stock on the date of grant. At SeptemberJune 30, 2021,2022, options to purchase 658,600648,546 shares and 619,761551,029 stock units were outstanding under the Plans.

Stock Options

The Company uses the Black-Scholes option pricing model to calculate the fair value of stock option awards on the grant date, and the Company uses the value of the common stock as of the grant date to value RSUs. The Company measures stock-based compensation costs for stock options at the grant date based on the estimated fair value of the award. The Company recognizes expense on awards with service-based vesting over the employee’s requisite service period on a straight-line basis. Prior to 2020, the Company issued performance stock units to certain employees which are tied to the achievement of certain Company financial goal metrics and the passage of time. Since 2020, the Company has implemented formal programs that issue performance stock units to certain employees set to vest upon the achievement of individual goals and financial goals of the Company, as well as the passage of time. The Company recognizes expense on performance-based awards over the vesting period based on the probability that the performance metrics will be achieved. The Company recognizes stock-based compensation expense for options that are ultimately expected to vest, and accordingly, such compensation expense has been adjusted for estimated forfeitures.

21


Information regarding option activity for the ninesix months ended SeptemberJune 30, 20212022 under the Plans is summarized below:

 

 

Shares

 

 

Weighted
average
exercise
price

 

 

Weighted-Average Remaining Contractual Term
(in Years)

 

 

Aggregate Intrinsic Value
(in Thousands)

 

Options outstanding at December 31, 2020

 

 

696,711

 

 

$

43.88

 

 

 

6.90

 

 

$

102,958

 

Granted

 

 

38,824

 

 

$

202.88

 

 

 

 

 

 

 

Exercised

 

 

(70,935

)

 

$

28.00

 

 

 

 

 

 

 

Forfeited/expired/cancelled

 

 

(6,000

)

 

$

48.05

 

 

 

 

 

 

 

Options outstanding at September 30, 2021

 

 

658,600

 

 

$

54.93

 

 

 

6.55

 

 

$

154,152

 

Options exercisable at September 30, 2021

 

 

343,909

 

 

$

38.68

 

 

 

5.87

 

 

$

86,085

 

Vested and expected to vest at September 30, 2021(1)

 

 

637,504

 

 

 

 

 

 

6.53

 

 

$

149,348

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Weighted
average
exercise
price

 

 

Weighted-
Average
Remaining
Contractual
Term
(in Years)

 

 

Aggregate
Intrinsic
Value
(in Thousands)

 

Options outstanding at December 31, 2021

 

 

625,107

 

 

$

54.15

 

 

 

6.29

 

 

$

131,707

 

Granted

 

 

47,838

 

 

$

180.82

 

 

 

 

 

 

 

Exercised

 

 

(16,399

)

 

$

28.20

 

 

 

 

 

 

 

Forfeited/expired/cancelled

 

 

(8,000

)

 

$

193.86

 

 

 

 

 

 

 

Options outstanding at June 30, 2022

 

 

648,546

 

 

$

62.42

 

 

 

6.09

 

 

$

67,377

 

Options exercisable at June 30, 2022

 

 

381,399

 

 

$

46.21

 

 

 

5.49

 

 

$

44,750

 

Vested and expected to vest at June 30, 2022(1)

 

 

632,147

 

 

 

 

 

 

6.08

 

 

$

65,687

 

 

(1)
Represents the number of vested options as of SeptemberJune 30, 20212022 plus the number of unvested options expected to vest as of SeptemberJune 30, 20212022 based on the unvested outstanding options at SeptemberJune 30, 20212022 adjusted for estimated forfeiture rates of 8% for awards granted to non-executive level employees and 3% for awards granted to executive level employees.

 

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the closing price of the common stock on SeptemberJune 30, 2021,2022, the last business day of the thirdsecond quarter of 2021,2022, of $288.99162.40 per share and the exercise price of each in-the-money option) that would have been received by the option holders had all option holders exercised their options on SeptemberJune 30, 2021.2022. The aggregate intrinsic value of stock options exercised during the ninesix months ended SeptemberJune 30, 20212022 and 20202021 was $14.52.4 million and $30.76.0 million, respectively.

The weighted average grant date fair value of options granted during the ninesix months ended SeptemberJune 30, 20212022 and 20202021 was $88.0176.64 and $48.1386.96, respectively. The total fair value of stock options that vested during the ninesix months ended SeptemberJune 30, 20212022 and 20202021 was $2.62.7 million during each period.and $2.5 million, respectively.

23Stock Units


The fair value of stock units is calculated using the closing price of the Company’s common stock on the date of grant. The Company recognizes expense on awards with service-based vesting over the employee’s requisite service period on a straight-line basis. The Company recognizes expense on performance-based awards over the vesting period based on the probability that the performance metrics will be achieved.Information regarding stock unit activity, which includes activity for RSUs and performance stock units, for the ninesix months ended SeptemberJune 30, 20212022 under the Plans is summarized below:

 

 

Shares

 

 

Weighted-Average Remaining Contractual Term
(in Years)

 

 

Aggregate Intrinsic Value
(in Thousands)

 

Unvested at December 31, 2020

 

 

665,540

 

 

 

3.32

 

 

$

127,904

 

Awarded

 

 

164,968

 

 

 

 

 

 

 

Vested

 

 

(185,922

)

 

 

 

 

 

 

Forfeited/expired/cancelled

 

 

(24,825

)

 

 

 

 

 

 

Unvested at September 31, 2021

 

 

619,761

 

 

 

2.94

 

 

$

179,105

 

Unvested and expected to vest at September 30, 2021(1)

 

 

623,642

 

 

 

2.61

 

 

$

180,226

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Weighted-
Average
Remaining
Contractual
Term
(in Years)

 

 

Aggregate
Intrinsic
Value
(in Thousands)

 

Unvested at December 31, 2021

 

 

606,685

 

 

 

3.07

 

 

$

160,674

 

Awarded

 

 

144,845

 

 

 

 

 

 

 

Vested

 

 

(175,647

)

 

 

 

 

 

 

Forfeited/expired/cancelled

 

 

(24,854

)

 

 

 

 

 

 

Unvested at June 30, 2022

 

 

551,029

 

 

 

3.00

 

 

$

89,487

 

Vested and expected to vest at June 30, 2022(1)

 

 

535,061

 

 

 

2.63

 

 

$

86,894

 

(1)
Represents the number of vested stock units as of SeptemberJune 30, 20212022 plus the number of unvested stock units expected to vest as of SeptemberJune 30, 20212022 based on the unvested outstanding stock units at SeptemberJune 30, 20212022 adjusted for estimated forfeiture rates of 8% for awards granted to non-executive level employees and 3% for awards granted to executive level employees.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (equal to the closing price of the common stock on SeptemberJune 30, 2021,2022, the last business day of the thirdsecond quarter of 2021,2022, of $288.99162.40 per share, as stock units do not

22


have an exercise price) that would have been received by the stock unit holders had all holders exercised on SeptemberJune 30, 2021.2022. The aggregate intrinsic value of stock units vested during the ninesix months ended SeptemberJune 30, 20212022 and 20202021 was $39.237.5 million and $25.035.8 million, respectively.

The weighted average grant date fair value of stock units vestedgranted during the ninesix months ended SeptemberJune 30, 20212022 and 20202021 was $58.10191.09 and $43.73206.15, respectively. The total fair value of stock units that vested during the ninesix months ended SeptemberJune 30, 20212022 and 20202021 was $10.817.9 million and $9.89.6 million, respectively.

As of SeptemberJune 30, 2021,2022, there was $61.370.4 million of total unrecognized compensation cost related to unvested share-based awards. This cost is expected to be recognized over a weighted average remaining requisite service period of 3.083.01 years. The Company expects 1,950,9081,790,901 unvested options and stock units to vest over the next five years.

9.
Commitments and Contingencies

In June 2018, the Company secured an agreement with Navigo Proteins GmbH (“Navigo”) for the exclusive co-development of multiple affinity ligands for which Repligenthe Company holds commercialization rights. The Company is manufacturing and supplying the first of these ligands, NGL-Impact®, exclusively to Purolite Life Sciences, an Ecolab Inc. company (“Purolite”), who is pairing the Company’s high-performance ligand with Purolite’s agarose jetting base bead technology used in their Jetted A50 Protein A resin product. The Company also signed a long-term supply agreement with Purolite for NGL-Impact and other potential additional affinity ligands that may advance from the Company’s Navigo collaboration. In September 2020, the Company and Navigo successfully completed co-development of an affinity ligand targeting the SARS-CoV-2 spike protein, to be utilized in the purification of COVID-19 vaccines. The Company has proceeded with scaling up and manufacturing this ligand and the development and validation of the related affinity chromatography resin, which is marketed by the Company. In September 2021, the Company and Navigo successfully completed co-development of a novel affinity ligand that addresses aggravationaggregation issues associated with pH sensitive antibodies and Fc-fusion proteins. The Company is manufacturing and supplying this ligand, NGL-Impact® HipH, to Purolite for use in a platform use resin product. The Navigo and Purolite agreements are supportive of the Company’s strategy to secure and reinforce the Company’s proteins business. The Company made royalty payments to Navigo of $0.50.7 million and $0.20.3 million for the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively and payments of $1.31.1 million and $0.40.6 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively.

10.
Accumulated Other Comprehensive (Loss) IncomeLoss

24


The following shows the changes in the components of accumulated other comprehensive (loss) incomeloss for the ninesix months ended SeptemberJune 30, 20212022 which consisted of only foreign currency translation adjustments for the periods shown (amounts in thousands):

 

 

 

 

 

 

Foreign

 

 

 

Currency

 

 

 

Translation

 

 

 

Adjustment

 

 

 

 

 

Balance as of December 31, 2020

 

$

2,085

 

Other comprehensive loss

 

 

(12,004

)

Balance at September 30, 2021

 

$

(9,919

)

 

 

 

 

Foreign

Currency

Translation

Adjustment

Balance at December 31, 2021

$

(16,886

)

Other comprehensive loss

(20,205

)

Balance at June 30, 2022

$

(37,091

)

11.
Income Taxes

For the three and ninesix months ended SeptemberJune 30, 2021,2022, we recorded an income tax provision of $7.79.9 million and $19.521.9 million, respectively. The Company’s effective tax rate for the three and ninesix months ended SeptemberJune 30, 20212022 was 18.816.6% and 16.418.4%, respectively, compared to 18.018.3% and 9.515.2% for the corresponding periods in the prior year. The increasedifference in effective tax rates between the periods was primarily due to higher income before income taxes, lower windfall benefits recognized on stock option exercises and the vesting of stock units partially offset by lower U.S. taxation of foreign earnings. The effective tax rates for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 were lower than the U.S. statutory rate of 21% primarily due to business tax credits and windfall benefits on stock option exercises and the vesting of stock units.

12.
Earnings Per Share

23


The Company reports earnings per share (“EPS”) in accordance with ASC 260, “Earnings Per Share,” which establishes standards for computing and presenting earnings per share.EPS. Basic earnings per shareEPS is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per shareEPS is computed by dividing net income available to common shareholders by the weighted-average number of common shares and dilutive common share equivalents then outstanding. Potential common share equivalents consist of RSUs, performance stock units and the incremental common shares issuable upon the exercise of stock options. Under the treasury stock method, unexercised “in-the-money” stock options and warrants are assumed to be exercised at the beginning of the period or at issuance, if later. The assumed proceeds are then used to purchase common shares at the average market price during the period. In periods when the Company has a net loss, stock awards are excluded from the calculation of earnings per shareEPS as their inclusion would have an antidilutive effect.

25


A reconciliation of basic and diluted weighted average shares outstanding is as follows:

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

(Amounts in thousands, except per share data)

 

 

(Amounts in thousands, except per share data)

 

Numerator:

 

 

 

 

 

 

 

 

 

Net income

 

$

49,861

 

 

$

36,233

 

 

$

96,825

 

 

$

65,683

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

Charges associated with convertible debt instruments, net of tax

 

 

0

 

 

 

0

 

 

 

387

 

 

 

0

 

Numerator for diluted earnings per share - net income available to common stockholders after the effect of dilutive securities

 

$

49,861

 

 

$

36,233

 

 

$

97,212

 

 

$

65,683

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

33,498

 

 

$

14,552

 

 

$

99,181

 

 

$

40,228

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used in computing net
income per share - basic

 

55,015

 

 

 

52,545

 

 

 

54,918

 

 

 

52,341

 

 

 

55,444

 

 

 

54,931

 

 

 

55,399

 

 

 

54,868

 

Effect of dilutive shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options and stock units

 

919

 

 

 

916

 

 

 

913

 

 

 

951

 

 

 

598

 

 

 

843

 

 

 

661

 

 

 

903

 

Convertible senior notes

 

1,373

 

 

 

8

 

 

 

1,180

 

 

 

8

 

Convertible Senior Notes

 

 

676

 

 

 

1,012

 

 

 

1,779

 

 

 

1,052

 

Dilutive effect of unvested performance stock units

 

 

61

 

 

 

0

 

 

 

61

 

 

 

0

 

 

 

3

 

 

 

0

 

 

 

3

 

 

 

0

 

Dilutive potential common shares

 

 

2,353

 

 

 

924

 

 

 

2,154

 

 

 

959

 

 

 

1,277

 

 

 

1,855

 

 

 

2,443

 

 

 

1,956

 

Weighted average shares used in computing net
income per share - diluted

 

 

57,368

 

 

 

53,469

 

 

 

57,072

 

 

 

53,300

 

Denominator for diluted earnings per share - adjusted weighted average shares used in computing net income per share - diluted

 

 

56,721

 

 

 

56,786

 

 

 

57,842

 

 

 

56,824

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.61

 

 

$

0.28

 

 

$

1.81

 

 

$

0.77

 

 

$

0.90

 

 

$

0.66

 

 

$

1.75

 

 

$

1.20

 

Diluted

 

$

0.58

 

 

$

0.27

 

 

$

1.74

 

 

$

0.75

 

 

$

0.88

 

 

$

0.64

 

 

$

1.68

 

 

$

1.16

 

 

 

 

 

 

 

 

 

 

At SeptemberJune 30, 2021,2022, there were outstanding options to purchase 658,600648,546 shares of the Company’s common stock at a weighted average exercise price of $54.9362.42 per share and 619,761551,029 shares of common stock issuable upon the vesting of stock units, which include RSUs and performance stock units. For the three and ninesix months ended SeptemberJune 30, 2021,2022, 44,912325,685 shares and 63,770306,400 shares, respectively, of the Company’s common stock were excluded from the calculation of diluted earnings per shareEPS because the exercise prices of the stock options were greater than or equal to the average price of the common shares and were therefore anti-dilutive.

At SeptemberJune 30, 2020,2021, there were outstanding options to purchase 723,914682,913 shares of the Company’s common stock at a weighted average exercise price of $$541.031.71 per share and 675,567618,618 shares of common stock issuable upon the vesting of stock units, which include RSUs and performance stock units. For the three and ninesix months ended SeptemberJune 30, 2020,2021, 60,202 and 117,16069,388 shares of the Company’s common stock were excluded from the calculation of diluted earnings per shareEPS because the exercise prices of the stock options were greater than or equal to the average price of the common shares and were therefore anti-dilutive.

In July 2019, the Company issued $287.5 million aggregate principal amount of the 2019 Notes. As provided by the terms of the indenture underlying the 2019 Notes, prior to March 4, 2022, conversion of the 2019 Notes will becould have been settled in cash, shares of the Company’s common stock or a combination thereof, at the Company’s election. As of September 30, 2021,On March 4, 2022, we entered into the Second Supplemental Indenture for the 2019 Notes, were convertible. Thewhich irrevocably elected to settle the conversion of the 2019 Notes using a

24


combination of cash and shares of the Company’s common stock, settling the par value of the 2019 Notes in cash and any excess conversion premium in shares.

As provided by the terms of the Second Supplemental Indenture underlying the 2019 Notes, the Company currently intendsirrevocably elected to settle the conversion obligation for the 2019 Notes in a combination of cash and shares of the Company's common stock. This means the Company will settle the par value of the 2019 Notes in cash and any excess conversion premium in shares.

As provided by mentioned in Note 7, "Convertible Senior Notes," the termsCompany adopted ASU 2020-06 effective January 1, 2022. Under ASU 2020-06, the Company is required to reflect the dilutive effect of the indenture underlyingconvertible securities by application of the "if-converted" method, which means the denominator of the EPS calculation would include the total number of shares assuming the 2019 Notes had been fully converted at the beginning of the period. Prior to March 4, 2022, the Company hashad the choice to settle the conversion of the 2019 Notes in cash, stock or a choicecombination of the two. Therefore, from January 1, 2022 (the date the Company adopted ASU 2020-06) to March 4, 2022, the Company included 3,474,429 shares in the denominator of the EPS calculation, applying the if converted method. Subsequent to March 4, 2022, after the Second Supplemental Indenture became effective, the Company irrevocably elected to settle the conversion obligation for the 2019 Notes in cash, shares or anya combination of the two. The Company currently intends to settle the par valuecash and shares of the 2019 Notes in cashCompany's common stock, and anyfrom March 5, 2022 forward, only the excess conversion premium inwill be settled with shares. TheUnder the if-converted method of calculating dilutive shares, the Company applieswas also required to exclude amortization of debt issuance costs and interest charges applicable to the convertible debt from the numerator of the dilutive EPS calculation for the period from January 1, 2022 to March 4, 2022, as if the interest on convertible debt was never recognized for that period. For the six months ended June 30, 2022, the Company excluded interest charges of $0.4 million (net of tax) from the numerator.

Prior to the adoption of ASU 2020-06, the Company applied the provisions of ASC 260, “Earnings Per Share”,Share,” Subsection 10-45-44, to determine the diluted weighted average shares outstanding as it relatesrelated to the conversion spread on its convertible notes. Accordingly, the par value of the 2019 Notes iswas not included in the calculation of diluted income per share, but the dilutive effect of the conversion premium iswas considered in the calculation of diluted net income per share using the treasury stock method. The dilutive impact of the 2019 Notes iswas based on the difference between the Company’s current period average stock price and the conversion price of the 2019 Notes, provided there iswas a premium. Pursuant to this accounting standard, there iswas no dilution from the accreted principal of the 2019 Notes. For the three and ninesix months ended SeptemberJune 30, 2022, the dilutive effect of the conversion premium included in the calculation of diluted earnings was 676,166 shares and 1,779,041 shares, respectively. For the three and six months ended June 30, 2021, the dilutive effect of the conversion premium included in the calculation of diluted earnings was 1,373,3411,011,993 shares and 1,180,4251,052,337 shares, respectively. There was 0 dilutive effect of the conversion premium included in the calculation of diluted earnings per share for the three and nine months ended September 30, 2020.

26


On September 20, 2021, as a result of the Avitide Acquisition, the Company assumed a contingent consideration obligation for earnout payments in an aggregate amount of $80.0 million which will be paid equally in cash and the Company’s common stock, contingent upon the achievement of certain performance thresholds and targets each year over a three year period as discussed in Note 2, “Fair Value Measurements,” to these consolidated financial statements. As of September 30, 2021, none of the contingent triggers have occurred.

13.
Related Party Transactions

Certain facilities leased by Spectrum are owned by the Roy T. Eddleman the former owner of Spectrum.Living Trust (the "Trust"). As of SeptemberJune 30, 2021, Mr. Eddleman2022, the Trust owned greater than 5% of the Company’s outstanding shares andshares. Therefore, the Company considers himthe Trust to be a related party. The lease amounts paid to this shareholderthe Trust prior to the public offering were negotiated in connection with the acquisition of Spectrum. The Company incurred rent expense totaling $0.2 million and $0.1 million for each of the three months ended SeptemberJune 30, 20212022 and 2020, respectively,2021 related to these leases and incurred rent expense of $0.50.4 million for each of the ninesix months ended SeptemberJune 30, 20212022 and 2020, respectively.2021.

14.
Segment Reporting

The Company views its operations, makes decisions regarding how to allocate resources and manages its business as 1 reportable segment and one reporting unit. As a result, the financial information disclosed herein represents all of the material financial information related to the Company.

The following table represents the Company’s total revenue by geographic area (based on the location of the customer):

25

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue by customers' geographic locations:

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

 

44

%

 

 

50

%

 

 

42

%

 

 

48

%

Europe

 

 

42

%

 

 

36

%

 

 

40

%

 

 

38

%

APAC/Other

 

 

14

%

 

 

14

%

 

 

18

%

 

 

14

%

Total revenue

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue by customers' geographic locations:

 

 

 

 

 

 

 

 

 

 

 

 

North America

 

 

45

%

 

 

41

%

 

 

43

%

 

 

42

%

Europe

 

 

35

%

 

 

40

%

 

 

39

%

 

 

39

%

APAC/Other

 

 

20

%

 

 

19

%

 

 

18

%

 

 

19

%

Total revenue

 

 

100

%

 

 

100

%

 

 

100

%

 

 

100

%

Concentrations of Credit Risk and Significant Customers

Financial instruments that subject the Company to significant concentrations of credit risk primarily consist of cash and cash equivalents, marketable securities and accounts receivable. Per the Company’s investment policy, cash equivalents and marketable securities are invested in financial instruments with high credit ratings and credit exposure to any one issue, issuer (with the exception of U.S. Treasury obligations) and type of instrument is limited. At SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company had no investments associated with foreign exchange contracts, options contracts or other foreign hedging arrangements.

Concentration of credit risk with respect to accounts receivable is limited to customers to whom the Company makes significant sales. While a reserve for the potential write-off of accounts receivable is maintained, the Company has not written off any significant accounts to date. To control credit risk, the Company performs regular credit evaluations of its customers’ financial condition.

Revenue from customers that represented 10% or more of the Company’s total revenue for the three months ended September 30, 2021 and 2020 came from sales to Pfizer Inc. during the three months ended September 30, 2021, which generated $19.1 million, or 11% of the Company's total revenue for the period. Revenue from customers that represented 10% or more of the Company's total revenue for the nine months ended September 30, 2021 and 2020 came from sales to MilliporeSigma during the nine months ended September 30, 2020, which generated $29.4 million in revenue, or 11% of the Company's total revenue for the period. There was 0 revenue from customers that represented 10% or more of the Company's total revenue for the other periods presented.three and six months ended June 30, 2022 and 2021.

27No accounts receivable balance from a specific customer represented


10% or more of the Company's total trade accounts receivable at June 30, 2022. Significant accounts receivable balances representing 10%10% or more of the Company’s total trade accounts receivable and royalties at December 31, 2021 came from our accounts receivable balance outstanding with Pfizer Inc., which was 14% of our total accounts receivable and other receivable balances at September 30, 2021 and December 31, 2020 are as follows:balance.

26

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Pfizer Inc.

 

 

10

%

 

N/A

 

Cytiva

 

N/A

 

 

 

11

%


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Repligen and its subsidiaries, collectively doing business as Repligen Corporation (“Repligen”, “we”, “our”, or the “Company”) is a global life sciences company that develops and commercializes highly innovative bioprocessing technologies and systems that increase efficiencies and flexibility in the process of manufacturing biological drugs.

As the overall market for biologics continues to grow and expand, our customers – primarily large biopharmaceutical companies and contract development and manufacturing organizations – face critical production cost, capacity, quality and time pressures. Built to address these concerns, our products are helping to set new standards for the way biologics are manufactured. We are committed to inspiring advances in bioprocessing as a trusted partner in the production of critical biologic drugs – including monoclonal antibodies (“mAb”), recombinant proteins, vaccines and cell and gene therapies ("C&GT") – that are improving human health worldwide. For more information regarding our business, products and acquisitions, see Part I, Item 1, “Business” included in our 20202021 Annual Report on Form 10-K (“Form 10-K”), which was filed with the Securities and Exchange Commission (“SEC”) on February 24, 2021.17, 2022.

We currently operate as one bioprocessing business, with a comprehensive suite of products to serve both upstream and downstream processes in biological drug manufacturing. Building on over 3540 years of industry expertise, we have developed a broad and diversified product portfolio that reflects our passion for innovation and the customer-first culture that drives our entire organization. We continue to capitalize on opportunities to maximize the value of our product platform through both organic growth initiatives (internal innovation and commercial leverage) and targeted acquisitions.

2021 Acquisitions

Bio-Flex Solutions LLC and Newton T&M Corp.

On November 29, 2021, the Company entered into an Equity Purchase Agreement with Bio-Flex Solutions, L.L.C. ("BioFlex"), Newton T&M Corp. ("NTM") and each of Ralph Meola and Jason Nisler, to acquire 100% of the outstanding securities of BioFlex and NTM (collectively, the “NTM Acquisition”). The transaction closed on December 16, 2021.

NTM, which is headquartered in Newton, New Jersey, is the parent company of BioFlex and focuses on manufacturing of products, while BioFlex, also headquartered in Newton, New Jersey, commercializes branded products to biotech customers. The NTM Acquisition complements and expands our filtration offering paths as the industry migrates to single-use flow paths solutions for mAb, vaccine and C&GT applications, with a focus on single-use fluid management components, including single-use clamps, adapters, end caps and hose assemblies. The NTM Acquisition streamlines and increases control over many components in our single-use supply chain which ultimately should drive reduced lead-times for our customers in the coming years.

Acquisition of Avitide, Inc.

On September 16, 2021, we entered into an Agreement and Plan of Merger and Reorganization (“Avitide Merger Agreement”) with Avalon Merger Sub, Inc., a Delaware corporation and oura wholly owned direct subsidiary (“First Merger Sub”),of the Company, Avalon Merger Sub LLC, a Delaware limited liability company and oura wholly owned direct subsidiary, (“Second Merger Sub” and together with First Merger Sub, the “Merger Subs”), Avitide, Inc., a Delaware corporation (“Avitide”), and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as the representative, agent and attorney-in-fact of Avitide's securityholders (the “Securityholder Representative”) to purchase Avitide. The transaction closed on September 20, 2021 (the “Avitide Acquisition”) and on the terms set forth in the Avitide Merger Agreement.

Avitide, which is headquartered in Lebanon, New Hampshire, offers diverse libraries and leading technology in affinity ligand discovery and development, resulting in best-in-class ligand discovery and development lead-times. The acquisition gives Repligenus a new platform for affinity resin development, including gene therapy,C&GT, and advances and expands our proteins franchise to address the unique purification needs of gene therapies and other emerging modalities.

27


Acquisition of Polymem S.A.

On June 22, 2021, we entered into a Stock Purchase Agreement with Polymem S.A. (“Polymem”), a company organized under the laws of France, and Jean-Michel Espenan and Franc Saux, acting together jointly and severally as the representatives of the sellers, which subsequently closed on July 1, 2021 (the “Polymem Acquisition.”).2021.

28


Polymem, which is headquartered in Toulouse, France, is a manufacturer of hollow fiber membranes, membrane modules and systems for industrial and bioprocessing applications. Polymem products will complement and expand Repligen’s portfolio of hollow fiber systems and consumables. The acquisition substantially increases our membrane and module manufacturing capacity and establishes a world-class center of excellence in Europe to address the accelerating global demand for these innovative products.

2020 Acquisitions

ARTeSYN Biosolutions Holdings Ireland Limited

On October 27, 2020, we entered into an Equity and Asset Purchase Agreement with ARTeSYN Biosolutions Holdings Ireland Limited (“ARTeSYN”), a company organized under the laws of Ireland, Third Creek Holdings, LLC, a Nevada limited liability company (“Third Creek”), Alphinity, LLC, a Nevada limited liability company (“Alphinity”, and together with Third Creek the “ARTeSYN Sellers”), and Michael Gagne, solely in his capacity as the representative of the ARTeSYN Sellers, pursuant to which the Company acquired (i) all of the outstanding equity securities of ARTeSYN and (ii) certain assets from Alphinity related to the business of ARTeSYN (collectively, the “ARTeSYN Acquisition”).

ARTeSYN is headquartered in Waterford, Ireland and conducts its operations in Ireland, the United States and Estonia. Its suite of single-use solutions has been created with the goal of enabling “abundance in medicine” by allowing greater efficiency in biologics manufacturing. The ARTeSYN team has created a number of solutions targeting the single-use space from single-use valves with fully disposable valve liners, XO® skeletal supports, a hybrid small parts offering for de-bottlenecking traditional facilities, and fully automated SU process systems that have quickly become leading solutions in the bioprocessing industry. ARTeSYN has established downstream processing leadership with a suite of state of the art single-use systems for chromatography, filtration, continuous manufacturing and media/buffer prep workflows. In addition, we have integrated unique flow path assemblies utilizing our silicone extrusion and molding technology, to deliver highly differentiated, low hold-up volume systems that minimize product loss during processing. The ARTeSYN portfolio expands on the market success of the hollow fiber systems and complements our chromatography and TFF filtration product lines.

Non-Metallic Solutions, Inc.

On October 15, 2020, we executed a Stock Purchase Agreement with Non-Metallic Solutions, Inc. (“NMS”), a Massachusetts corporation, and each of William Malloneé and Derek Masser, the legal and beneficial owners of NMS, to purchase NMS, which transaction subsequently closed on October 20, 2020 (the “NMS Acquisition”).

NMS, headquartered in Auburn, Massachusetts, is a manufacturer of fabricated plastics, custom containers, and related assemblies and components used in the manufacturing of biologic drugs. The acquisition of NMS strengthens the Company’s portfolio of single-use integrated systems and flow path assemblies, streamlines our supply chain for current products, and provides greater flexibility to scale and expand single-use and systems portfolios.

Critical Accounting Policies and Estimates

A “critical accounting policy” is one which is both important to the portrayal of our financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a description of our critical accounting policies that affect our more significant judgments and estimates used in the preparation of our consolidated financial statements, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations and our significant accounting policies in Note 2 to the consolidated financial statements included in our Form 10-K.

Results of Operations

The following discussion of the financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and the related footnotes thereto.

Revenues

Total revenue for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 were as follows:

 

 

Three Months Ended
June 30,

 

 

Increase/(Decrease)

 

 

Six Months Ended
June 30,

 

 

Increase/(Decrease)

 

 

 

2022

 

 

2021

 

 

$ Change

 

 

% Change

 

 

2022

 

 

2021

 

 

$ Change

 

 

% Change

 

 

 

(Amounts in thousands, except for percentage data)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

207,597

 

 

$

162,920

 

 

$

44,677

 

 

 

27.4

%

 

$

413,960

 

 

$

305,657

 

 

$

108,303

 

 

 

35.4

%

Royalty and other

 

 

36

 

 

 

40

 

 

 

(4

)

 

 

(10.0

%)

 

 

73

 

 

 

140

 

 

 

(67

)

 

 

(47.9

%)

Total revenue

 

$

207,633

 

 

$

162,960

 

 

$

44,673

 

 

 

27.4

%

 

$

414,033

 

 

$

305,797

 

 

$

108,236

 

 

 

35.4

%

29


 

 

Three Months Ended
September 30,

 

 

Increase/(Decrease)

 

 

Nine Months Ended
September 30,

 

 

Increase/(Decrease)

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

 

(Amounts in thousands, except for percentage data)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

178,177

 

 

$

94,029

 

 

$

84,148

 

 

 

89.5

%

 

$

483,834

 

 

$

257,521

 

 

$

226,313

 

 

 

87.9

%

Royalty and other

 

 

39

 

 

 

31

 

 

 

8

 

 

 

25.8

%

 

 

179

 

 

 

91

 

 

 

88

 

 

 

96.7

%

Total revenue

 

$

178,216

 

 

$

94,060

 

 

$

84,156

 

 

 

89.5

%

 

$

484,013

 

 

$

257,612

 

 

$

226,401

 

 

 

87.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenues

DirectSince 2016, we have been increasingly focused on selling our products directly to customers in the pharmaceutical industry and to our contract manufacturers. These direct sales represented approximately 82%89% and 83% of our product revenue for each of the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and represented 82%88% and 77%82% of our product revenue for each of the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively. We expect that direct sales will continue to account for an increasing percentage of our product revenues, as the largest customer of our OEM products diversified its supply chain in 2020. Sales of our bioprocessing products can be impacted by the timing of large-scale production orders and the regulatory approvals for such antibodies, which may result in significant quarterly fluctuations.

Revenues from our filtration franchise include the sales of our XCell ATF® systems and consumables,consumables; Spectrum filtration systems, including KrosFlo TFF®; SIUS® filtration products and TFDF systems, Polymemsystems; the fluid management assemblies and components offered by Engineered Molding Technology LLC, Non-Metallic Solutions, Inc., ARTeSYN Biosolutions Holdings Ireland Limited ("ARTeSYN") and BioFlex, the latter of which was acquired on December 16, 2021; the hollow fiber membranesmembrane technology offered by Polymem, which we acquired on July 1, 2021; and modules, TangenXour ARTeSYN filtration systems. Revenue from our chromatography products includes the sale of our OPUS pre-packed chromatography columns, ELISA test kits and chromatography systems from Spectrum and ARTeSYN. Revenue from proteins products includes the sale of our Protein A ligands and cell culture growth factors, and sales of affinity products, including adeno-associated virus resins offered by Avitide,®

flat sheet cassettes, ARTeSYN28


®

systems, ProConnex® flow paths and silicone-molded and plastic consumables, including those manufactured by EMT and NMS. Revenueswhich we acquired on September 20, 2021. Revenue from our process analytics franchiseproducts includes the sale of our SoloVPE®, FlowVPE® and FlowVPX® systems, and associated consumables and service. Revenues from our chromatography franchise include the sales of our OPUS® pre-packed columns, resins, ELISA test kits and ARTeSYN® systems. Revenues from our proteins franchise include the sale of our Protein A ligands and cell culture growth factors. Other revenue primarily consists of sales of our operating room products to hospitals as well as freight revenue.

During the three and ninesix months ended SeptemberJune 30, 2021,2022, product revenue increased by $84.1$44.7 million, or 89.5%27.4% and $226.3$108.3 million, or 87.9%35.4%, respectively, as compared to the same periods of 2020,2021, with exceptionally robust demand for our filtration, chromatography and proteinsprocess analytics products. There is continued adoption of our products by key bioprocessing customers across all key product lines. Since the second quarter of 2020, we have experiencedbegan to experience accelerated demand across all of our franchises due to the critical needs of customers working on the novel coronavirus pandemic (“COVID-19”) vaccinesvaccines. However, decreasing demand for vaccination is driving a reduction in future demand of our products from these customers and therapeutics.the recognition of future revenue related to COVID-19. In addition, we sawhave recently seen an increased demand for C&GT and mAb manufacturing. We also experienced an increase in demand for gene therapy and monoclonal antibody manufacturing. The Polymem Acquisition and the Avitide Acquisition during the third quarter of 2021 resulted in an increase in product revenue during the three and ninesix months ended SeptemberJune 30, 2022, compared to the same periods of 2021, due to our 2021 acquisitions which were acquired in the second half of 2021 and for which there werewas no comparable amounts in 2020.the three and six months ended June 30, 2021.

Royalty revenues

Royalty revenues in the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 relate to royalties received from a third-party systems manufacturer associated with our OPUS PD chromatography columns. Royalty revenues are variable and are dependent on sales generated by our partner.

Costs of product revenue and operating expenses

Total costs and operating expenses for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 were comprised of the following:

 

 

Three Months Ended
June 30,

Increase/(Decrease)

 

 

Six Months Ended
June 30,

Increase/(Decrease)

 

 

 

2022

 

 

2021

 

 

$ Change

 

 

% Change

 

 

2022

 

 

2021

 

 

$ Change

 

 

% Change

 

 

 

(Amounts in thousands, except for percentage data)

 

Cost of product revenue

 

$

86,260

 

 

$

61,990

 

 

$

24,270

 

 

 

39.2

%

 

$

168,616

 

 

$

121,737

 

 

$

46,879

 

 

 

38.5

%

Research and development

 

 

10,440

 

 

 

8,389

 

 

 

2,051

 

 

 

24.4

%

 

 

22,595

 

 

 

16,001

 

 

 

6,594

 

 

 

41.2

%

Selling, general and administrative

 

 

54,649

 

 

 

44,341

 

 

 

10,308

 

 

 

23.2

%

 

 

108,949

 

 

 

83,436

 

 

 

25,513

 

 

 

30.6

%

Contingent Consideration

 

 

(6,884

)

 

 

 

 

 

(6,884

)

 

 

(100.0

%)

 

 

(9,295

)

 

 

 

 

 

(9,295

)

 

 

(100.0

%)

Total costs and operating expenses

 

$

144,465

 

 

$

114,720

 

 

$

29,745

 

 

 

25.9

%

 

$

290,865

 

 

$

221,174

 

 

$

69,691

 

 

 

31.5

%

 

 

 

Three Months Ended
September 30,

Increase/(Decrease)

 

 

Nine Months Ended
September 30,

Increase/(Decrease)

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

 

(Amounts in thousands, except for percentage data)

 

Cost of product revenue

 

$

75,495

 

 

$

39,626

 

 

$

35,869

 

 

 

90.5

%

 

$

197,232

 

 

$

108,471

 

 

$

88,761

 

 

 

81.8

%

Research and development

 

 

9,154

 

 

 

4,422

 

 

 

4,732

 

 

 

107.0

%

 

 

25,155

 

 

 

13,460

 

 

 

11,695

 

 

 

86.9

%

Selling, general and
    administrative

 

 

48,373

 

 

 

29,051

 

 

 

19,322

 

 

 

66.5

%

 

 

131,809

 

 

 

83,277

 

 

 

48,532

 

 

 

58.3

%

Total costs and operating
     expenses

 

$

133,022

 

 

$

73,099

 

 

$

59,923

 

 

 

82.0

%

 

$

354,196

 

 

$

205,208

 

 

$

148,988

 

 

 

72.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

��

 

30


Cost of product revenue

Cost of product revenue increased 90.5%39.2% and 81.8%38.5% in the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively, compared to the same periods of 2020,2021, due primarily to the increase in product revenue mentioned above and costs associated with higher product volume. In addition, there wasin order to support our growth and demand for our products, we continue to invest in our manufacturing infrastructure through an increase in headcount related to manufacturing headcount forand occupancy costs. In addition, freight charges and import duties increased during the three and ninesix months ended SeptemberJune 30, 2022, compared to the same periods of 2021, due to increased fuel costs and carrier market conditions. Our depreciation expense increased during the three and six months ended June 30, 2022, as compared to the same periods of 2020, which resulted in higher employee-related costs. Our two acquisitions in 2021, have also contributed toas manufacturing equipment was placed into service during the increase insecond half of 2021. In addition, cost of product revenue increased for the three and ninesix months ended SeptemberJune 30, 2022 due to the addition of Polymem, Avitide and BioFlex during the second half of 2021 sincefor which there were no comparable costs during 2020.the three and six months ended June 30, 2021.

Gross margin was 57.6%58.5% and 59.3%62.0% in the three and nine months ended SeptemberJune 30, 2021.2022 and 2021, respectively. The reduction in gross margin in the three months ended June 30, 2022, as compared to the same period of 2021, is due primarily to the increase in manufacturing and employee-related costs from a rise in manufacturing headcount, an increase in occupancy costs due to added capacity, an increase in depreciation expense, an increase in freight charges and import duties mentioned above.

29


Gross margin was 59.3% and 60.2% in the six months ended June 30, 2022 and 2021, respectively. The reduction in gross margin in the six months ended June 30, 2022, as compared to the same period of 2021, is due primarily to the increase in employee-related costs from a rise in manufacturing headcount, an increase in occupancy costs due to added capacity in 2021 and an increase in depreciation expense mentioned above. The gross margin for the three and ninesix months ended SeptemberJune 30, 2021 also includes $0.3$1.6 million and $1.9 million, respectively, of amortization of inventory step-up associated with the PolymemARTeSYN Acquisition and ARTeSYN Acquisition. The gross margin for the three and nine months ended September 30, 2020 was 57.9%. Excluding the step-up amortization, gross margin for the three and nine months ended September 30, 2021 was 57.8% and 59.6%, respectively. The increase in gross margin, excluding the inventory step-up amortization, in the nine months ended September 30, 2021, as compared to the same period of 2020, is due primarily to the increase in revenue mentioned above, and favorable product mix, partially offset by an increase in manufacturing headcount subsequent to September 30,December 2020. Gross margins may fluctuate in future quarters based on expectedactual production volume and product mix.

Research and development expenses

Research and development (“R&D”) expenses are related to bioprocessing products, which include personnel, supplies and other research expenses. Due to the size of the Company and the fact that these various programs share personnel and fixed costs, we do not track all of our expenses or allocate any fixed costs by program, and therefore, have not provided historical costs incurred by project.

 

R&D expenses increased 107.0%$2.1 million, or 24.4% and $6.6 million, or 41.2%, during the three and six months ended SeptemberJune 30, 2021,2022, respectively, compared to the same periodperiods of 2020.2021. The increase during the periodperiods is primarily due to increased spending on new product development and the addition of R&D expenses incurred by Avitide, Polymem and ARTeSYN during the period,investments in newly acquired businesses, for which there were no comparable costs in 2020,the three and due to the increase in employee related costs as the number of R&D employees has increased since September 30, 2020.

R&D expenses increased 86.9% during the ninesix months ended SeptemberJune 30, 2021, compared to the same period of 2020.2021. The increase during the periodperiods is also due in part to the addition of increased development project-related expenses and employee-related costs.

R&D expense also includes payments made to expand our proteins product offering through our development agreement with Navigo Proteins GmbH (“Navigo”). Such expenses related to operations of Avitide, Polymemwere $0.7 million and ARTeSYN,$1.1 million, respectively, for the three and increased costs associated with a rise in R&D headcount and the ramp up of project spending for new product development during the ninesix months ended SeptemberJune 30, 2021.2022, as compared to $0.3 million and $0.6 million, respectively for the same periods in 2021, in the form of milestone payments to Navigo.

We expect our R&D expenses for the remainder of 20212022 to gradually increase each quarter to support new product development.

Selling, general and administrative expenses

Selling, general and administrative (“SG&A”) expenses include the costs associated with selling our commercial products and costs required to support our marketing efforts, including legal, accounting, patent, shareholder services, amortization of intangible assets and other administrative functions.

During the three and ninesix months ended SeptemberJune 30, 2021,2022, SG&A costs increased by $19.3$10.3 million, or 66.5%23.2%, and $48.5$25.5 million, or 58.3%30.6%, respectively, as compared to the same periods of 2020.2021. The increase isincreases are partially due to the continued expansion of our customer-facing activities to drive sales of our bioprocessing products, and the continued buildout of our administrative infrastructure, primarily through increased headcount, to support expected future growth. Employee-related costs during the three and nine months ended September 30, 2021, as compared to the same periods in 2020, resulted from the increase in headcount period over period. In addition, SG&A costs increased for the three and ninesix months ended SeptemberJune 30, 2021, respectively2022 due to the addition of NMSPolymem, Avitide and ARTeSYNBioFlex during the fourth quarter of 2020 and the addition of Polymem and Avitide during the third quartersecond half of 2021, for which there wereare no comparable costs in the three and six months ended June 30, 2021.

Contingent consideration expense

Contingent consideration expense represents the change in fair value of the contingent consideration obligation included in current and noncurrent contingent consideration on the consolidated balance sheets as of the end of each period. Re-measurement of the contingent consideration obligation is done each quarter and the carrying value of the obligation is adjusted to the current fair value through our consolidated statements of comprehensive income. We recorded an adjustment to the fair value of the contingent consideration obligation for the same periodsthree and six months ended June 30, 2022 of 2020.($6.9) million and ($9.3) million, respectively.

3130


Other expenses, net

The table below provides detail regarding our other expenses, net:

 

Three Months Ended
September 30,

 

 

Increase/(Decrease)

 

 

Nine Months Ended
September 30,

 

 

Increase/(Decrease)

 

 

Three Months Ended
June 30,

 

 

Increase/(Decrease)

 

 

Six Months Ended
June 30,

 

 

Increase/(Decrease)

 

 

2021

 

2020

 

$ Change

 

% Change

 

 

2021

 

2020

 

$ Change

 

% Change

 

 

2022

 

 

2021

 

 

$ Change

 

 

% Change

 

 

2022

 

 

2021

 

 

$ Change

 

 

% Change

 

 

(Amounts in thousands, except for percentage data)

 

 

(Amounts in thousands, except for percentage data)

 

Investment income

 

$

44

 

 

$

82

 

 

$

(38

)

 

 

(46.3

%)

 

$

137

 

 

$

1,699

 

 

$

(1,562

)

 

 

(91.9

%)

 

$

708

 

 

$

41

 

 

$

667

 

 

 

1626.8

%

 

$

785

 

 

$

93

 

 

$

692

 

 

 

744.1

%

Interest expense

 

 

(3,220

)

 

 

(3,052

)

 

 

(168

)

 

 

5.5

%

 

 

(9,470

)

 

 

(9,032

)

 

 

(438

)

 

 

4.8

%

 

 

(271

)

 

 

(2,787

)

 

 

2,516

 

 

 

(90.3

%)

 

 

(563

)

 

 

(5,541

)

 

 

4,978

 

 

 

(89.8

%)

Amortization of debt issuance costs

 

 

(453

)

 

 

(357

)

 

 

(96

)

 

 

26.9

%

 

 

(905

)

 

 

(709

)

 

 

(196

)

 

 

27.6

%

Other expenses

 

 

(786

)

 

 

(248

)

 

 

(538

)

 

 

216.9

%

 

 

(1,789

)

 

 

(632

)

 

 

(1,157

)

 

 

183.1

%

 

 

(3,396

)

 

 

(779

)

 

 

(2,617

)

 

 

335.9

%

 

 

(3,798

)

 

 

(1,003

)

 

 

(2,795

)

 

 

278.7

%

Total other expense, net

 

$

(3,962

)

 

$

(3,218

)

 

$

(744

)

 

 

23.1

%

 

$

(11,122

)

 

$

(7,965

)

 

$

(3,157

)

 

 

39.6

%

 

$

(3,412

)

 

$

(3,882

)

 

$

470

 

 

 

(12.1

%)

 

$

(4,481

)

 

$

(7,160

)

 

$

2,679

 

 

 

(37.4

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment income

Investment income includes income earned on invested cash balances. The decrease of $38 thousand and $1.6Our investment income increased by $0.7 million infor the three and ninesix months ended SeptemberJune 30, 2021, as2022, compared to the same periods of 2020, respectively, was attributable2021 due to a decreasean increase in interest rates on ouraverage invested cash balances. In March 2020, in response to the outbreak of COVID-19 and to stay ahead of disruptions and economic slowdown, the Federal Reserve reduced federal funds rates to a range of 0.0% to 0.25%, which will continue to affect our investment income in future periods.balances since June 30, 2021. We expect investment income to vary based on changes in the amount of funds invested and fluctuation of interest rates.

Interest expense

Interest expense in the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 is primarily from our 0.375% Convertible Senior Notes due 2024 (the “2019 Notes”), which were issued in July 2019. Interest expense whichfor the three and six months ended June 30, 2022 includes the contractual coupon interest on the 2019 Notes. For the three and six months ended June 30, 2021, interest expense includes the amortization of the debt discount as well as the contractual coupon interest. As a result of our adoption of ASU 2020-06, "Debt - Debt with Conversion Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)," effective January 1, 2022, the equity portion of the debt conversion feature recorded upon the issuance of the 2019 Notes, or the debt discount, was reversed along with the total amortization taken on that discount. Since there was no debt discount, no amortization was taken in the three and six months ended June 30, 2022.

Amortization of debt issuance costs

In accounting for the transaction costs related to the issuance of the 2019 Notes, the Company allocated the total costs incurred to the liability and equity components of the 2019 Notes based on their relative values. Transaction costs attributable to the liability component are amortized to amortization of debt issuance costs and contractual coupon interest,on the consolidated statements of comprehensive income. Amortization of debt issuance costs increased $0.2 million and $0.4 million forduring the three and ninesix months ended SeptemberJune 30, 2021,2022, as compared to the same periods in 2020.of 2021. This is a result of the decrease in the balance of debt issuance costs that are being amortized. As these costs decrease, the carrying value of the debt increases and interest calculated based on the carrying value increases as well.

Other expenses

The change in other expenses, net during the three and ninesix months ended SeptemberJune 30, 2021,2022, compared to the same periodperiods of 2020,2021, is primarily attributable to realized foreign currency losses related to amounts due from non-Swedish krona-basedtransactions with customers and vendors.

Income tax provision

Income tax provision for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 was as follows:

 

 

Three Months Ended
June 30,

 

 

Increase/(Decrease)

 

 

Six Months Ended
June 30,

 

 

Increase/(Decrease)

 

 

 

2022

 

 

2021

 

 

$ Change

 

 

% Change

 

 

2022

 

 

2021

 

 

$ Change

 

 

% Change

 

 

 

(Amounts in thousands, except for percentage data)

 

Income tax provision

 

$

9,895

 

 

$

8,125

 

 

$

1,770

 

 

 

21.8

%

 

$

21,862

 

 

$

11,780

 

 

$

10,082

 

 

 

85.6

%

Effective tax rate

 

 

16.6

%

 

 

18.3

%

 

 

 

 

 

 

 

 

18.4

%

 

 

15.2

%

 

 

 

 

 

 

31

 

 

Three Months Ended
September 30,

 

 

Increase/(Decrease)

 

 

Nine Months Ended
September 30,

 

 

Increase/(Decrease)

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

 

(Amounts in thousands, except for percentage data)

 

Income tax provision

 

$

7,734

 

 

$

3,191

 

 

$

4,543

 

 

 

142.4

%

 

$

19,514

 

 

$

4,211

 

 

$

15,303

 

 

 

363.4

%

Effective tax rate

 

 

18.8

%

 

 

18.0

%

 

 

 

 

 

 

 

 

16.4

%

 

 

9.5

%

 

 

 

 

 

 


For the three and ninesix months ended SeptemberJune 30, 2021,2022, we recorded an income tax provision of $7.7$9.9 million and $19.5$21.9 million, respectively. The effective tax rate was 18.8%16.6% and 16.4%18.4% for the three and ninesix months ended SeptemberJune 30, 20212022, respectively, and is based upon the estimated income for the year ending December 31, 20212022 and the composition of income in different jurisdictions. The increasedifference in effective tax rates between the periods was primarily due to higher income before income taxes, lower windfall benefits recognized on stock option exercises and the vesting of stock units partially offset by lower U.S. taxation of foreign earnings. TheOur effective tax rate for the three and ninesix months ended SeptemberJune 30, 20212022 was lower than the U.S. statutory rate of 21% primarily due to business tax credits and windfall benefits on stock option exercises and the vesting of stock units. For the three and ninesix months ended SeptemberJune 30, 2020,2021, we recorded an income tax provision of $3.2$8.1 million and $4.2$11.8 million, respectively. The effective tax rate was 18.0%18.3% and 9.5%15.2% for the three and ninesix months ended SeptemberJune 30, 20202021, respectively, and is based upon the estimated income for the year ending December 31, 20202021 and the composition of income in different jurisdictions.

32


The Our effective tax rate for the three and ninesix months ended SeptemberJune 30, 20202021 was lower than the U.S. statutory rate of 21% primarily due to business tax credits and windfall benefits on stock option exercise and the vesting of stock units.

Non-GAAP Financial Measures

We provide non-GAAP adjusted income from operations; adjusted net income; and adjusted EBITDA as supplemental measures to GAAP, measures regarding our operating performance. These financial measures exclude the items detailed below and, therefore, have not been calculated in accordance with GAAP. A detailed explanation and a reconciliation of each non-GAAP financial measure to its most comparable GAAP financial measure are provided below.

We include this financial information because we believe these measures provide a more accurate comparison of our financial results between periods and more accurately reflect how management reviews its financial results. We excluded the impact of certain acquisition-related items because we believe that the resulting charges do not accurately reflect the performance of our ongoing operations for the period in which such charges are incurred.

Non-GAAP adjusted income from operations

 

Non-GAAP adjusted income from operations is measured by taking income, from operations as reported in accordance with GAAP and excluding inventory step-up charges, acquisition and integration costs, contingent consideration fair value adjustments, and intangible amortization booked through our consolidated statements of comprehensive income. The following is a reconciliation of income from operations in accordance with GAAP to non-GAAP adjusted income from operations for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

2021

 

2020

 

 

2021

 

2020

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

(Amounts in thousands)

 

 

(Amounts in thousands)

 

GAAP income from operations

 

$

45,194

 

 

$

20,961

 

 

$

129,817

 

 

$

52,404

 

 

$

63,168

 

 

$

48,240

 

 

$

123,168

 

 

$

84,623

 

Non-GAAP adjustments to income from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventory step-up charges

 

 

270

 

 

 

144

 

 

 

1,868

 

 

 

144

 

 

 

 

 

 

 

 

 

 

 

 

1,598

 

Acquisition and integration costs

 

 

5,824

 

 

 

1,849

 

 

 

11,593

 

 

 

6,536

 

 

 

2,702

 

 

 

3,218

 

 

 

5,891

 

 

 

5,769

 

Contingent consideration

 

 

(6,884

)

 

 

 

 

 

(9,295

)

 

 

 

Intangible amortization

 

 

5,677

 

 

 

3,925

 

 

 

16,001

 

 

 

11,677

 

 

 

6,572

 

 

 

5,161

 

 

 

13,165

 

 

 

10,323

 

Non-GAAP adjusted income from operations

 

$

56,965

 

 

$

26,879

 

 

$

159,279

 

 

$

70,761

 

 

$

65,558

 

 

$

56,619

 

 

$

132,929

 

 

$

102,313

 

 

 

 

 

 

 

 

 

 

Non-GAAP adjusted net income

Non-GAAP adjusted net income is measured by taking net income as reported in accordance with GAAP and excluding acquisition and integration costs, intangible amortization, inventory step-up charges, loss on conversion of debt, non-cash interest expense, amortization of debt issuance costs, contingent consideration fair value adjustments and the tax effects of these items.

32


The following are reconciliations of net income in accordance with GAAP to non-GAAP adjusted net income for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:

 

Three Months Ended September 30,

 

 

Three Months Ended June 30,

 

 

2021

 

2020

 

 

2022

 

 

2021

 

 

 

 

Fully Diluted

 

 

 

Fully Diluted

 

 

 

 

Fully Diluted

 

 

 

Fully Diluted

 

 

 

 

 

Earnings per

 

 

 

 

 

Earnings per

 

 

 

 

 

Earnings per

 

 

 

 

 

Earnings per

 

 

Amount

 

 

Share

 

 

Amount

 

 

Share

 

 

Amount

 

 

Share*

 

 

Amount

 

 

Share*

 

 

(Amounts in thousands, except per share data)

 

 

(Amounts in thousands, except per share data)

 

GAAP net income

 

$

33,498

 

 

$

0.58

 

 

$

14,552

 

 

$

0.27

 

 

$

49,861

 

 

$

0.88

 

 

$

36,233

 

 

$

0.64

 

Non-GAAP adjustments to net income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventory step-up charges

 

 

270

 

 

 

0.00

 

 

 

144

 

 

 

0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition and integration costs

 

 

5,824

 

 

 

0.10

 

 

 

1,849

 

 

 

0.03

 

 

 

2,702

 

 

 

0.05

 

 

 

3,218

 

 

 

0.06

 

Contingent consideration

 

 

(6,884

)

 

 

(0.12

)

 

 

 

 

 

 

Intangible amortization

 

 

5,677

 

 

 

0.10

 

 

 

3,925

 

 

 

0.07

 

 

 

6,572

 

 

 

0.12

 

 

 

5,161

 

 

 

0.09

 

Loss on conversion of debt

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

0.00

 

Non-cash interest expense

 

 

2,902

 

 

 

0.05

 

 

 

2,759

 

 

 

0.05

 

Amortization of debt issuance costs(1)

 

 

453

 

 

 

0.01

 

 

 

357

 

 

 

0.01

 

Non-cash interest expense(1)

 

 

 

 

 

 

 

 

2,505

 

 

 

0.04

 

Tax effect of non-GAAP charges

 

 

(3,467

)

 

 

(0.06

)

 

 

(2,072

)

 

 

(0.04

)

 

 

(1,317

)

 

 

(0.02

)

 

 

(2,615

)

 

 

(0.05

)

Non-GAAP adjusted net income

 

$

44,705

 

 

$

0.78

 

 

$

21,157

 

 

$

0.40

 

 

$

51,387

 

 

$

0.91

 

 

$

44,863

 

 

$

0.79

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

Fully Diluted

 

 

 

 

 

Fully Diluted

 

 

 

 

 

 

Earnings per

 

 

 

 

 

Earnings per

 

 

 

Amount

 

 

Share

 

 

Amount

 

 

Share

 

 

 

(Amounts in thousands, except per share data)

 

GAAP net income

 

$

96,825

 

 

$

1.68

 

 

$

65,683

 

 

$

1.16

 

Non-GAAP adjustments to net income:

 

 

 

 

 

 

 

 

 

 

 

 

Inventory step-up charges

 

 

 

 

 

 

 

 

1,598

 

 

 

0.03

 

Acquisition and integration costs

 

 

5,891

 

 

 

0.10

 

 

 

5,769

 

 

 

0.10

 

Contingent consideration

 

 

(9,295

)

 

 

(0.16

)

 

 

 

 

 

 

Intangible amortization

 

 

13,165

 

 

 

0.23

 

 

 

10,323

 

 

 

0.18

 

Loss on conversion of debt

 

 

 

 

 

 

 

 

4

 

 

 

0.00

 

Amortization of debt issuance costs(1)

 

 

905

 

 

 

0.01

 

 

 

709

 

 

 

0.01

 

Non-cash interest expense

 

 

 

 

 

 

 

 

4,981

 

 

 

0.09

 

Tax effect of non-GAAP charges

 

 

(2,359

)

 

 

(0.04

)

 

 

(5,437

)

 

 

(0.10

)

Non-GAAP adjusted net income

 

$

105,132

 

 

$

1.82

 

 

$

83,630

 

 

$

1.47

 

33


(1)
See Note 12, "Earnings Per Share," for more information on the effects of adopting ASU 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40),” which we adopted effective January 1, 2022 to these financial statement line items.

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

Fully Diluted

 

 

 

 

 

Fully Diluted

 

 

 

 

 

 

Earnings per

 

 

 

 

 

Earnings per

 

 

 

Amount

 

 

Share

 

 

Amount

 

 

Share

 

 

 

(Amounts in thousands, except per share data)

 

GAAP net income

 

$

99,181

 

 

$

1.74

 

 

$

40,228

 

 

$

0.75

 

Non-GAAP adjustments to net income:

 

 

 

 

 

 

 

 

 

 

 

 

Inventory step-up charges

 

 

1,868

 

 

 

0.03

 

 

 

144

 

 

 

0.00

 

Acquisition and integration costs

 

 

11,593

 

 

 

0.20

 

 

 

6,536

 

 

 

0.12

 

Intangible amortization

 

 

16,001

 

 

 

0.28

 

 

 

11,677

 

 

 

0.22

 

Loss on conversion of debt

 

 

6

 

 

 

 

 

 

 

 

 

 

Non-cash interest expense

 

 

8,592

 

 

 

0.15

 

 

 

8,174

 

 

 

0.15

 

Tax effect of non-GAAP charges

 

 

(8,904

)

 

 

(0.16

)

 

 

(6,334

)

 

 

(0.12

)

Non-GAAP adjusted net income

 

$

128,337

 

 

$

2.25

 

 

$

60,425

 

 

$

1.13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Per share totals may not add due to rounding.

Adjusted EBITDA

Adjusted EBITDA is measured by taking net income as reported in accordance with GAAP, excluding investment income, interest expense, taxes, depreciation and amortization, acquisition and integration costs, inventory step-up charges, loss on conversion of debt and contingent consideration fair value adjustments booked through our consolidated statements of

33


comprehensive income. The following is a reconciliation of net income in accordance with GAAP to adjusted EBITDA for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

2021

 

2020

 

 

2021

 

2020

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

(Amounts in thousands)

 

 

(Amounts in thousands)

 

GAAP net income

 

$

33,498

 

 

$

14,552

 

 

$

99,181

 

 

$

40,228

 

 

$

49,861

 

 

$

36,233

 

 

$

96,825

 

 

$

65,683

 

Non-GAAP EBITDA adjustments to net income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment income

 

 

(44

)

 

 

(82

)

 

 

(137

)

 

 

(1,699

)

 

 

(708

)

 

 

(41

)

 

 

(785

)

 

 

(93

)

Interest expense

 

 

3,220

 

 

 

3,052

 

 

 

9,470

 

 

 

9,032

 

 

 

271

 

 

 

282

 

 

 

563

 

 

 

560

 

Non-cash interest expense(1)

 

 

 

 

 

2,505

 

 

 

 

 

 

4,981

 

Amortization of debt issuance costs

 

 

453

 

 

 

357

 

 

 

905

 

 

 

709

 

Income tax provision

 

 

7,734

 

 

 

3,191

 

 

 

19,514

 

 

 

4,211

 

 

 

9,895

 

 

 

8,125

 

 

 

21,862

 

 

 

11,780

 

Depreciation

 

 

4,308

 

 

 

2,757

 

 

 

11,360

 

 

 

7,820

 

 

 

5,500

 

 

 

3,797

 

 

 

10,713

 

 

 

7,052

 

Amortization

 

 

5,705

 

 

 

3,953

 

 

 

16,084

 

 

 

11,760

 

Intangible amortization

 

 

6,599

 

 

 

5,190

 

 

 

13,220

 

 

 

10,379

 

EBITDA

 

 

54,421

 

 

 

27,423

 

 

 

155,472

 

 

 

71,352

 

 

$

71,871

 

 

$

56,448

 

 

$

143,303

 

 

$

101,051

 

Other non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventory step-up charges

 

 

270

 

 

 

144

 

 

 

1,868

 

 

 

144

 

 

 

 

 

 

 

 

 

 

 

 

1,598

 

Acquisition and integration costs

 

 

5,824

 

 

 

1,849

 

 

 

11,593

 

 

 

6,536

 

 

 

2,702

 

 

 

3,218

 

 

 

5,891

 

 

 

5,769

 

Contingent consideration

 

 

(6,884

)

 

 

 

 

 

(9,295

)

 

 

 

Loss on conversion of debt

 

 

1

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

4

 

Adjusted EBITDA

 

$

60,516

 

 

$

29,416

 

 

$

168,939

 

 

$

78,032

 

 

$

67,689

 

 

$

59,670

 

 

$

139,899

 

 

$

108,422

 

 

 

 

 

 

 

 

 

 

(1)
See Note 12, "Earnings Per Share," for more information on the effects of adopting ASU 2020-06, which we adopted effective January 1, 2022.

Liquidity and Capital Resources

We have financed our operations primarily through revenues derived from product sales, the issuance of the 2019 Notes in July 2019 and the issuance of common stock in our December 2020, July 2019 and May 2019 public offerings (the “Offerings”).offerings. Our revenue for the foreseeable future will primarily be limited to our bioprocessing product revenue.

At SeptemberJune 30, 2021,2022, we had cash and cash equivalents of $621.1$596.5 million compared to cash and cash equivalents of $717.3$603.8 million at December 31, 2020.2021.

During the thirdsecond quarter of 2021,2022, the closing price of the Company’s common stock exceeded 130% of the conversion price of the 2019 Notes for more than 20 trading days of the last 30 consecutive trading days of the quarter. As a result, the 2019 Notes are convertible at the option of the holders of the 2019 Notes during the fourththird quarter of 2021,2022, the quarter immediately following the quarter when the conditions are met, peras stated in the First Supplemental Indenture underlyingterms of the 2019 Notes. These conditions have been met each quarter since the thirdfourth quarter of 2020. As a result, $6,000$24,000 in aggregate principal amount of the

34


2019 Notes have been converted by the noteholders since December 31, 2020.the issuance of the 2019 Notes, including $9,000 during the second quarter of 2022. The conversions resulted in the issuance of a nominal number of shares of the Company’s common stock to the holder, andnoteholders. The Company continues to classify the Company recorded a loss of approximately $6,000 on the conversion of these notes, which is included in other expenses, net on our consolidated statements of comprehensive income for the three and nine months ended September 30, 2021. The 2019 Notes have a face value of $287.5 million and a carrying value and a carrying value of $252.3 million and continue to be classifiedthe 2019 Notes as current liabilities on the Company’s consolidated balance sheet as of Septemberat June 30, 2021. It is the Company’s policy and intent to settle the face value of the 2019 Notes in cash and any excess conversion premium in shares of our common stock.

In July 2020, the Company entered into a First Amendment to the lease agreement for its Marlborough, Massachusetts facility, expanding the leased space by 66,939 square feet. In December 2020, the Company signed the Second Amendment to the lease agreement, changing the commencement date from April 1, 2021 to January 1, 2021. As a result, under the amended lease agreement, the Company will pay an additional $5.7 million in base rent over the life of the lease, which expires on November 30, 2028.

In May 2021, the Company entered into an agreement to lease approximately 64,000 square feet of space at a site in Hopkinton, Massachusetts, which expires on August 15, 2034. This space will be used as an assembly center for our ProConnex® single-use flow path products. Under the lease, the Company will pay $17.7 million in base rent over the term of the lease.2022.

Cash flows

 

 

Six Months Ended
June 30,

 

 

Increase/(Decrease)

 

 

 

2022

 

 

2021

 

 

$ Change

 

 

 

(Amounts in thousands)

 

Operating activities

 

$

68,834

 

 

$

46,913

 

 

$

21,921

 

Investing activities

 

 

(54,434

)

 

 

(26,198

)

 

 

(28,236

)

Financing activities

 

 

(14,314

)

 

 

852

 

 

 

(15,166

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(7,388

)

 

 

(4,532

)

 

 

(2,856

)

Net (decrease) increase in cash and cash equivalents

 

$

(7,302

)

 

$

17,035

 

 

$

(24,337

)

34

 

 

Nine Months Ended
September 30,

 

 

Increase/(Decrease)

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

 

(Amounts in thousands)

 

Operating activities

 

$

69,396

 

 

$

47,754

 

 

$

21,642

 

Investing activities

 

 

(158,893

)

 

 

(43,097

)

 

 

(115,796

)

Financing activities

 

 

730

 

 

 

7,078

 

 

 

(6,348

)

Effect of exchange rate changes on cash, cash equivalents
    and restricted cash

 

 

(7,427

)

 

 

4,160

 

 

 

(11,587

)

Net (decrease) increase in cash, cash equivalents and restricted cash

 

$

(96,194

)

 

$

15,895

 

 

$

(112,089

)

 

 

 

 

 

 

 

 

 

 


Operating activities

For the six months ended June 30, 2022, our operating activities provided cash of $68.8 million reflecting net income of $96.8 million and non-cash charges totaling $31.5 million primarily related to depreciation, amortization, contingent consideration adjustments, deferred income taxes and stock-based compensation charges. An increase in accounts receivable consumed $8.4 million of cash and was primarily driven by the 35.4% year-to-date increase in revenues. Additionally, we had an increase in inventory manufactured of $58.1 million to support expected increases in future revenue. A decrease in accrued liabilities of $4.0 million relates to the payout of employee bonuses and a decrease in our estimated income tax provision during the first half of 2022. Offsetting these uses of cash was a $6.3 million increase in accounts payable which correlates to the increase in inventory and is also a result of the timing of payments to vendors and a decrease in prepaid expenses driven by a decrease in prepaid corporate income taxes. The remaining cash provided by operating activities resulted from favorable changes in various other working capital accounts.

For the ninesix months ended SeptemberJune 30, 2021, our operating activities provided cash of $69.4$46.9 million reflecting net income of $99.2$65.7 million and non-cash charges totaling $65.1$43.8 million primarily related to depreciation, amortization, inventory step-up amortization, deferred income taxes, amortization of debt discount and issuance costsnon-cash interest expense and stock-based compensation charges. An increase in accounts receivable consumed $52.0$31.9 million of cash and was primarily driven by the 87.9%87.0% year-to-date increase in revenues. AnAdditionally, we had an increase in inventory manufactured of $61.6$42.8 million supportsto support expected increases in future revenue. The increases in accounts receivable and inventory manufactured are offset by an increase in accounts payable of $9.0$8.3 million, which was primarily due to increased inventory purchases to support customer orders, an increase in accrued liabilities of $10.1$4.5 million, which was due to an increase in the accrualaccruals for expected costs, and to a decrease in deferred revenue related to products shipped during the first half of 2021. The remaining net cash used in operating activities resulted from unfavorable changes in various other working capital accounts.

For the nine months ended September 30, 2020, our operating activities provided cash of $47.8 million reflecting net income of $40.2 million and non-cash charges totaling $40.5 million primarily related to depreciation, amortization, deferred income taxes, non-cash interest expense and stock-based compensation charges. An increase in accounts receivable consumed $11.5 million of cash and was primarily driven by the 35.4% year-to-date increase in revenues. An increase in inventory consumed $22.8 million to support future revenue. An increase in accounts payable and accrued liabilities of $1.1 million was due primarily to increased inventory purchases to support customer orders, offset by payment of acquisition-related bonuses for C Technologies during the second quarter of 2020. The remaining cash provided by operating activities resulted from favorable changes in various other working capital accounts.

 

Investing activities

35


Our investing activities consumed $158.9$54.4 million of cash during the ninesix months ended SeptemberJune 30, 2021. We used $121.02022 and $26.2 million in cash (net of cash received) forduring the Polymem Acquisition and the Avitide Acquisition, in the aggregate. Capitalsix months ended June 30, 2021, mainly due to capital expenditures consumed $37.9 million as we continue to increase our manufacturing capacity worldwide. Of these expenditures, $2.9$1.9 million and $2.2 million represented capitalized costs related to our internal-use software.software for the six months ended June 30, 2022 and 2021, respectively.

Our investing activities consumed $43.1 million of cash during the nine months ended September 30, 2020 related to the acquisition of Engineered Molding Technology LLC (“EMT”) on July 13, 2020, as well as ongoing capital expenditures. We consumed $28.5 million in cash (net of cash received) for EMT. Capital expenditures included $3.6 million for capitalized costs related to our internal-use software.

Financing activities

Cash provided byOur financing activities consumed $14.3 million of $0.7 millioncash for the ninesix months ended SeptemberJune 30, 20212022, which included proceeds from stock option exercises during the period offset by cash disbursed in relation to shares withheld to cover employee income taxestax due upon the vesting and release of restricted stock units. Proceedsunits of $14.8 million. This was partially offset by proceeds received from stock option exercises during the nine months ended September 30, 2021 were $2.0 million offset by $1.3 millionperiod of cash disbursed to pay tax obligation on the vesting of restricted stock units.$0.5 million.

Cash provided by financing activities of $7.1$0.9 million for the ninesix months ended SeptemberJune 30, 20202021 included proceeds from stock option exercises and the vesting of stock units during the period.

 

Working capital decreased by $22.0$3.9 million to $561.4$552.5 million at SeptemberJune 30, 20212022 from $583.4$556.4 million at December 31, 20202021 due to the various changes noted above.

Our future capital requirements will depend on many factors, including the following:

the expansion of our bioprocessing business;
the ability to sustain sales and profits of our bioprocessing products;products and successfully integrate them into our business;
our ability to acquire additional bioprocessing products;
the scope of and progress made in our R&D activities;
the scope of investment in our intellectual property portfolio;
contingent consideration earnout payments resulting from our acquisitions;

35


the extent of any share repurchase activity; and
the success of any proposed financing efforts.

Absent acquisitions of additional products, product candidates or intellectual property, we believe our current cash balances are adequate to meet our cash needs for at least the next 24 months from the date of this filing. We expect operating expenses for the rest of the year to increase as we continue to expand our bioprocessing business. We expect to incur continued spending related to the development and expansion of our bioprocessing product lines and expansion of our commercial capabilities for the foreseeable future. Our future capital requirements may include, but are not limited to, purchases of property, plant and equipment, the acquisition of additional bioprocessing products and technologies to complement our existing manufacturing capabilities and continued investment in our intellectual property portfolio.

 

We plan to continue to invest in our bioprocessing business and in key R&D activities associated with the development of new bioprocessing products. We actively evaluate various strategic transactions on an ongoing basis, including licensing or acquiring complementary products, technologies or businesses that would complement our existing portfolio. We continue to seek to acquire such potential assets that may offer us the best opportunity to create value for our shareholders. In order to acquire such assets, we may need to seek additional financing to fund these investments. If our available cash balances and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, including because of any such acquisition-related financing needs or lower demand for our products, we may seek to sell common or preferred equity or convertible debt securities, enter into a credit facility or another form of third-party funding, or seek other debt funding. The sale of equity and convertible debt securities may result in dilution to our shareholders, and those securities may have rights senior to those of our common shares. If we raise additional funds through the issuance of preferred stock, convertible debt

36


securities or other debt financing, these securities or other debt could contain covenants that would restrict our operations. Any other third-party funding arrangement could require us to relinquish valuable rights. We may require additional capital beyond our currently anticipated amounts. Additional capital may not be available on reasonable terms, if at all.

Off-Balance Sheet Arrangements

We do not have any special purpose entities or off-balance sheet financing arrangements as of September 30, 2021.

Net Operating Loss Carryforwards

At December 31, 2020, we2021, the Company had federal net operating loss carryforwards of $6.4$46.2 million, remaining.state net operating loss carryforwards of $4.0 million and foreign net operating loss carryforwards of $6.1 million. Federal net operating loss carryforwards of $19.1 million will expire at various dates through 2037. The other $27.1 million of the federal net operating loss carryforwards have unlimited carryforward periods. The total state net operating loss carryforwards will expire at various dates through 2041, while the foreign net operating loss carryforwards do not expire. We had business tax credits carryforwards of $9.4$2.7 million available to reduce future federal and state income taxes, if any. The business tax credits carryforwards will continue to expire at various dates through December 2039.2041. Net operating loss carryforwards and available tax credits are subject to review and possible adjustment by the Internal Revenue Service, state and foreign jurisdictions and may be limited in the event of certain changes in the ownership interest of significant shareholders.

Effects of Inflation

Our assets are primarily monetary, consisting of cash, cash equivalents and marketable securities. Because of their liquidity, these assets are not directly affected by inflation. Since we intend to retain and continue to use our equipment, furniture and fixtures and leasehold improvements, we believe that the incremental inflation related to replacement costs of such items will not materially affect our operations. However, the rate of inflation affects our expenses, such as those for employee compensation and contract services, which could increase our level of expenses and the rate at which we use our resources.

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements in this Quarterly Report on Form 10-Q do not constitute guarantees of future performance. Investors are cautioned that statements in this Quarterly Report on Form 10-Q which are not strictly historical statements, including, without limitation, express or implied statements or guidance regarding current or future financial performance and position, potential impairment of future earnings, management’s strategy, plans and objectives for future

36


operations or acquisitions, product development and sales, product candidate research, development and regulatory approval, SG&A expenditures, intellectual property, development and manufacturing plans, availability of materials and product and adequacy of capital resources, our financing plans and the projected continued impact of, and response to, the COVID-19 coronavirus pandemic and the related downturn of the U.S. and global economies constitute forward-looking statements. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which the Company operates, and management’s beliefs and assumptions. The Company undertakes no obligation to publicly update or revise the statements in light of future developments. In addition, other written and oral statements that constitute forward-looking statements may be made by the Company or on the Company’s behalf. Words such as “expect,” “seek,” “anticipate,” “intend,” “plan,” “believe,” “could,” “estimate,” “may,” “target,” “project,” or variations of such words and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated, including, without limitation, risks associated with the following: the ultimate impact of the coronavirus pandemicCOVID-19 on demand for our products and on our business or financial results; the success of current and future collaborative or supply relationships, including our agreements with Cytiva, MilliporeSigma and Purolite;Purolite Life Sciences, an Ecolab Inc. company; our ability to successfully grow our bioprocessing business, including as a result of acquisitions, commercialization or partnership opportunities, and our ability to develop and commercialize products; our ability to obtain required regulatory approvals; our compliance with all U.S. Food and Drug Administration regulations, our ability to obtain, maintain and protect intellectual property rights for our products; the risk of litigation regarding our patent and other intellectual property rights; the risk of litigation with collaborative partners; our limited manufacturing capabilities and our dependence on third-party manufacturers and value-added resellers; the effect of the COVID-19, coronavirus pandemic, including mitigation efforts and economic effects, on our business operations and the operations of our customers and suppliers; our ability to hire and retain skilled personnel; the market acceptance of our products, reduced demand for our products that adversely impacts our future revenues, cash flows, results of operations and financial condition; our ability to integrate Non-Metallic Solutions,

37


Inc., ARTeSYN Biosolutions Holdings Ireland Limited, Polymem, S.A.Avitide and Avitide, Inc.BioFlex businesses successfully into our business and achieve the expected benefits of the acquisitions; our ability to compete with larger, better financed life sciences companies; our history of losses and expectation of incurring losses; our ability to generate future revenues; our ability to successfully integrate our recently acquired businesses; our ability to raise additional capital to fund potential acquisitions; our volatile stock price; and the effects of our anti-takeover provisions. Further information on potential risk factors that could affect our financial results are included in the filings made by us from time to time with the SEC including under the sections entitled “Risk Factors” in our Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We have historically held investments in commercial paper, U.S. Government and agency securities as well as corporate bonds and other debt securities. As a result, we have been exposed to potential loss from market risks that may occur as a result of changes in interest rates, changes in credit quality of the issuer or otherwise. We do not have any such investments as of SeptemberJune 30, 2021.2022. As a result, a hypothetical 100 basis point increase in interest rates would have no effect on our cash position as of SeptemberJune 30, 2021.2022.

We generally place our marketable security investments in high quality credit instruments, as specified in our investment policy guidelines. We believe that the conservative nature of our investments mitigates our interest rate exposure, and our investment policy limits the amount of our credit exposure to any one issue, issuer (with the exception of U.S. agency obligations) and type of instrument. We do not expect any material losses from our marketable security investments and therefore believe that our potential interest rate exposure is limited.

Foreign Exchange Risk

The reporting currency of the Company is U.S. dollars, and the functional currency of each of our foreign subsidiaries is its respective local currency. Our foreign currency exposures include the Swedish krona, Euro, British pound, Chinese yuan, Japanese yen, Singapore dollar, South Korean won and Indian rupee; of these, the primary foreign currency exposures are the Swedish krona, Euro and British pound. Exchange gains or losses resulting from the translation between the transactional currency and the functional currency are included in net income. Fluctuations in exchange rates may adversely affect our results of operations, financial position and cash flows. We currently do not seek to hedge this exposure to fluctuations in exchange rates.

37


ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management, with the participation of the principal executive officer and the principal financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control

We acquired Polymem S.A. (“Polymem”) on July 1, 2021 and Avitide Inc. (“Avitide”) on September 20, 2021. The financial results of these acquisitions are included in our unaudited consolidated financial statements as of September 30, 2021 and for the quarter then ended. As these acquisitions occurred in the third quarter of 2021, the scope of our assessment of our internal control over financial reporting does not include Polymem and Avitide. These exclusions are in accordance with the Securities and Exchange Commission’s general guidance that an assessment of a recently acquired business may be omitted from our scope in the year of such acquisition.

38


Other than the foregoing, thereThere have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the three months ended SeptemberJune 30, 20212022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

3938


PART II. OTHER INFORMATION

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We are not currently aware of any such proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations.

ITEM 1A. RISK FACTORS

The matters discussed in this Quarterly Report on Form 10-Q include forward-looking statements that involve risks or uncertainties. These statements are neither promises nor guarantees, but are based on various assumptions by management regarding future circumstances, over many of which Repligen has little or no control. A number of important risks and uncertainties, including those identified under the caption “Risk Factors” in Part I, Item 1A of our Form 10-K for the period ended December 31, 20202021 and in subsequent filings, could cause our actual results to differ materially from those in the forward-looking statements. There are no material changes to the risk factors described in our Form 10-K for the period ended December 31, 2020.2021.

ITEM 2. UNREGISTERED SALES OF EQUITYEQUITY SECURITIES AND USE OF PROCEEDS

None.

Avitide Acquisition

Pursuant to the Merger Agreement described in Note 3, "Acquisitions," to the consolidated financial statements, on September 20, 2021, the Company issued 271,096 unregistered shares of the Company's common stock, totaling $77.6 million, as part of the consideration for the Avitide Acquisition. The issuance is not registered under the Securities Act of 1933, as amended, in reliance upon the exemption from registration provided by Rule 506(b) of Regulation D.

ITEM 3. DEFAULTS UPON SENIORSENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

4039


ITEM 6. EXHIBITS

(a)
Exhibits

Exhibit

Number

 

Document Description

 

 

 

3.1

 

Restated Certificate of Incorporation, dated June 30, 1992 and amended September 17, 1999 (filed as Exhibit 3.1 to Repligen Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 and incorporated herein by reference).

 

 

 

3.2

 

Certificate of Amendment to the Certificate of Incorporation of Repligen Corporation, effective as of May 16, 2014 (filed as Exhibit 3.1 to Repligen Corporation’s Current Report on Form 8-K filed on May 19, 2014 and incorporated herein by reference).

 

 

 

3.3

 

Third Amended and Restated Bylaws (filed as Exhibit 3.1 to Repligen Corporation’s Current Report on Form 8-K filed on January 28, 2021 and incorporated herein by reference).

10.1

Repligen Corporation Amended and Restated Severance and Change in Control Plan, effective as of May 26, 2022 (filed as Exhibit 10.1 to Repligen Corporation's Current Report on Form 8-K filed on June 1, 2022 and incorporated herein by reference).

10.2

Third Amended and Restated Employment Agreement, dated as of May26, 2022, by and between Repligen Corporation and Tony J. Hunt (filed as Exhibit 10.2 to Repligen Corporation's Current Report on Form 8-K filed on June 1, 2022 and incorporated herein by reference).

10.3

Repligen Corporation Amended and Restated Non-Employee Directors' Compensation Policy (filed as Exhibit 10.3 to Repligen Corporation's Current Report on Form 8-K filed on June 1, 2022 and incorporated herein by reference).

 

 

 

31.1 +

 

Rule 13a-14(a)/15d-14(a) Certification.

 

 

 

31.2 +

 

Rule 13a-14(a)/15d-14(a) Certification.

 

 

 

32.1 *

 

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

101.INS+

 

XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

 

 

 

101.SCH+

 

Inline XBRL Taxonomy Extension Schema Document.

 

 

 

101.CAL+

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

 

 

 

101.DEF+

 

Inline XBRL Taxonomy Extension Definition Linkbase Document.

 

 

 

101.LAB+

 

Inline XBRL Taxonomy Extension Label Linkbase Document.

 

 

 

101.PRE+

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

 

 

 

104+

 

Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*).

 

+ Filed herewith.

* Furnished herewith.

4140


SIGNATURES

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

Date: October 28, 2021August 2, 2022

 

By:

/S/ TONY J. HUNT

 

 

 

 

Tony J. Hunt

 

 

 

President and Chief Executive Officer

 

 

 

(Principal executive officer)

 

 

 

Repligen Corporation

Date: October 28, 2021August 2, 2022

 

By:

/S/ JON SNODGRES

 

 

 

 

Jon Snodgres

 

 

 

Chief Financial Officer

 

 

 

(Principal financial officer)

 

 

 

Repligen Corporation

 

4241