SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 19981999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission File Number 0-14656
REPLIGEN CORPORATION
(exact name of registrant as specified in its charter)
Delaware 04-2729386
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
117 Fourth Avenue
Needham, Massachusetts 02494
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 449-9560
-----------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X/X/ No .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of January 31, 1999.
Common Stock, par value $.01 per share 18,001,785
-
COMMON STOCK, PAR VALUE $.01 PER SHARE 22,320,310
-------------------------------------- ----------------
Class Number of Shares
REPLIGEN CORPORATION
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited) as of December 31, 19981999 and March 31, 19981999 (Unaudited) 3
Condensed Consolidated
Statements of Operations (Unaudited) for the Three and Nine Months Ended
December 31, 1999 and 1998 and 1997(Unaudited) 4
Condensed Consolidated
Statement of Cash Flows (Unaudited)for the Nine Months Ended
December 31, 1999 and 1998 and 1997(Unaudited) 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 78
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 1112
Item 2. Changes in Securities None12
Item 3. Defaults Upon Senior Securities
None
Item 4. Submissions of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K 11
(a) Exhibits
10.1 Manufacturing Transfer Agreement with Amersham Pharmacia Biotech
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None12
Signature 1113
Exhibit Index 1214
Exhibits 1315
2
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
REPLIGEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
DecemberASSETS DECEMBER 31, 1998 March1999 MARCH 31, 19981999
----------------- --------------
ASSETS (Unaudited) (Audited)
Current assets:
Cash and cash equivalents ................................... $ 3,696,6339,295,868 $ 4,725,5443,250,751
Accounts receivable 327,565 212,857......................................... 614,675 429,720
Inventories 692,001 670,818................................................. 457,698 630,329
Prepaid expenses and other current assets 266,339 156,228................... 173,847 181,617
------------- -------------
Total current assets 4,982,538 5,765,447...................................... 10,542,088 4,492,417
Property plant and equipment, at cost:
Equipment 873,265 770,512................................................... 1,092,831 944,644
Furniture and fixtures 61,376 40,563...................................... 157,475 101,376
Leasehold improvements 460,318 442,528...................................... 473,288 460,319
------------- -------------
1,394,959 1,253,6031,723,594 1,506,339
Less: accumulated depreciation and amortization 793,157 594,719............. 1,103,051 862,934
------------- -------------
601,802 658,884620,543 643,405
Other assets, net 88,472............................................. 81,382 88,472
------------- -------------
$ 5,672,81211,244,013 $ 6,512,8035,224,294
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................ $ 52,540164,111 $ 100,719268,708
Accrued expenses 302,811 254,312............................................ 346,577 313,926
Unearned income 60,750 33,332............................................. -- 49,969
------------- -------------
Total current liabilities 416,101 388,363................................ 510,688 632,603
Commitments and contingencies ................................. -- --
Stockholders' equity:
Preferred stock, $.01 par value --
authorized ----authorized - 5,000,000
shares --
outstanding ----outstanding - none ................................ -- --
Common stock, $.01 par value --
authorized -- 30,000,000 shares--
outstanding -- 18,001,785--authorized - 40,000,000 shares
--outstanding - 22,322,310 shares at December 31, 19981999 and
18,264,285 shares at March 31, 1998 180,017 180,0171999 ...................... 223,222 182,642
Additional paid-in capital 130,264,048 130,264,048.................................. 140,335,660 131,272,607
Accumulated deficit (125,187,354) (124,319,625)......................................... (129,825,557) (126,863,558)
------------- -------------
Total stockholders' equity 5,256,711 6,124,440............................... 10,733,325 4,591,691
------------- -------------
$ 5,672,81211,244,013 $ 6,512,8035,224,294
============= =============
See accompanying notes to condensed consolidated financial statements.
3
REPLIGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTSSTATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
DecemberTHREE-MONTHS ENDED DECEMBER 31, DecemberNINE-MONTHS ENDED DECEMBER 31,
December 31, December 31,
------------ ------------ ------------ ------------1999 1998 19971999 1998 1997
---- ---- ---- ----
Revenues:
Product ....................................... $ 558,028 $ 248,723 $ 1,369,494 $ 674,872
Research and development $...................... 160,446 275,238 $ 377,957 $ 1,013,675 $ 802,326
Product 248,723 316,146 674,871 855,532771,292 1,013,676
Investment income ............................. 131,406 50,730 44,862334,191 169,912
159,968
Other ......................................... 14,438 14,437 14,47259,532 85,274 114,447
------------ ------------ ------------ ------------
864,318 589,128 753,437 1,943,732 1,932,2732,534,509 1,943,734
------------ ------------ ------------ ------------
Costs and expenses:
Research and development ...................... 1,864,437 421,623 348,8603,085,684 1,352,648 1,063,061
Selling, general and administrative ........... 442,743 317,770 300,6091,636,126 1,029,013 922,818
Cost of products sold ......................... 291,782 175,528 198,607774,699 429,801 426,425
------------ ------------ ------------ ------------
2,598,962 914,921 848,0765,496,509 2,811,462 2,412,304
------------ ------------ ------------ ------------
Net loss ...................................... $ (1,734,644) $ (325,793) $ (94,639)(2,962,000) $ (867,730) $ (480,031)(867,728)
============ ============ ============ ============
Basic and diluted net loss per share .......... $ (0.08) $ (0.02) $ (.01)(0.14) $ (0.05) $ (0.03)
============ ============ ============ ============
Basic and diluted weighted average
common shares outstanding .................. 22,193,696 18,001,785 16,023,76320,950,890 18,001,785 16,009,084
============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
4
REPLIGEN CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine MonthsNine-Months Ended December 31,
--------------------------------------------------------------------------------
1999 1998
1997
----------- ------------------------------- ------------------
Cash flows from operating activities:activities
Net loss ......................................................................... $(2,962,000) $ (867,730) $ (480,031)(867,728)
Adjustments to reconcile net loss to net cash used in operating activities -
Depreciation and amortization 198,439 182,935
Compensation.................................................... 240,118 198,437
Non cash charge from stock optionsfor warrant issuance ............................................. 188,265 -- 22,912
Changes in assets and liabilities -
Accounts receivable ............................................................. (184,955) (114,707)
170,002
Inventories ..................................................................... 172,632 (21,183) (76,138)
Prepaid expenses and other current assets ....................................... 7,769 (110,111) 32,791
Accounts payable ................................................................ (104,596) (48,179) (103,609)
Accrued expenses and other current liabilities................................................................ 32,652 48,499 (154,266)
Unearned income ................................................................. (49,969) 27,418 (133,313)
----------- -----------
Net cash used in operating activities ......................................... (2,660,084) (887,554) (538,717)
----------- -----------
Cash flows from investing activities:
Decrease in marketable securities -- 72,353activities
Purchases of property plant and equipment, netat cost .................................... (217,257) (141,357)
(105,264)
DecreaseChanges in restricted cash -- 50,087other assets ......................................................... 7,090
----------- -----------
Net cash (used in) provided byused in investing activities ........................................ (210,167) (141,357) 17,176
----------- -----------
Cash flows from financing activities:
Net proceedsProceeds from the issuance of common stock and warrants, net of
issuance costs .................................................................. 8,915,368 -- 1,975,000
----------- -----------
Net cash provided by financing activities .................................... 8,915,368 -- 1,975,000
----------- -----------
Net increase (decrease) increase in cash and cash equivalents ............................... 6,045,117 (1,028,911) 1,453,459
Cash and cash equivalents, beginning of period ..................................... 3,250,751 4,725,544 3,465,881
----------- -----------
Cash and cash equivalents, end of period ........................................... $ 9,295,868 $ 3,696,633 $ 4,919,340
=========== ===========
See accompanying notes to condensed consolidated financial statements.
5
REPLIGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)(UNAUDITED)
1. Basis of PresentationBASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been prepared by Repligen
Corporation (the "Company" or "Repligen"), pursuant to the rules and regulations
of the Securities and Exchange Commission for quarterly reports on Form 10-Q and
do not include all of the information and footnote disclosures required by
generally accepted accounting principles. These financial statements should be
read in conjunction with the audited financial statements and notes thereto
included in the Company's Form 10-K for the year ended March 31, 1998.1999.
In the opinion of management, the accompanying unaudited financial
statements include all adjustments, consisting of only normal, recurring
adjustments, necessary to present fairly, the consolidated financial position,
results of operations and cash flows.flows of the Company. The results of operations
for the interim periods presented are not necessarily indicative of results to
be expected for the entire year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. Net Loss Per ShareNET LOSS PER SHARE
The Company has adopted Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings per Share,EARNINGS PER SHARE, effective December 15, 1997.1998. SFAS No. 128
establishes standards for computing and presenting earnings per share and
applies to entities with publicly held common stock or potential common stock.
The Company has applied the provisions of SFAS No. 128, retroactively to all
periods presented. Basic and diluted net loss per share represents net loss
divided by the weighted average number of common shares outstanding during the
period. The dilutive effect of the potential common shares consisting of
outstanding stock options and warrants is determined using the treasury stock
method in accordance with SFAS No. 128. Diluted weighted average shares
outstanding at December 31, 19981999 and 19971998 excluded the potential common shares
from warrants and stock options because to do so would be antidilutive for the
periods presented. At December 31, 1999, there are 1,332,791 options outstanding
with a weighted average exercise price of $1.83 and 3,307,050 warrants
outstanding with a weighted average exercise price of $3.18. At December 31,
1998, there are 1,030,500 options outstanding with a weighted average exercise
price of $1.34 and 2,832,000 warrants outstanding with a weighted average
exercise price of $3.97.
3. Cash Equivalents
The Company accounts for investments in accordance with SFAS No.
115, Accounting for Certain Investments in Debt and Equity Securities.CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a maturityoriginal
maturities at the date of acquisition of three months or less at the time of acquisition to be cash
equivalents. Included
in cashCash equivalents consist of the following at December 31, 19981999 and
1997 are $241,000 and
$2,086,000 of cash and money market funds and approximately $3,455,000 and
$2,833,000 of commercial paper, respectively.March 31, 1999:
Three Months Ended
December 31, 1999 March 31, 1999
(Unaudited)
U.S. Government and Agency securities ................ $2,184,547 $1,197,624
Commercial paper ..................................... 4,824,225 1,136,119
Money markets ........................................ 2,044,889 802,755
Cash ................................................. 242,208 114,253
---------- ----------
Total cash and cash equivalents ................. $9,295,868 $3,250,751
========== ==========
6
4. InventoriesINVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of the following:
6
December 31, March 31,
1998 1998
(Unaudited) (Audited)
----------- -----------
Raw materials and work-in-process $ 509,659 $ 388,727
Finished goods 182,342 282,091
--------- ---------
Total $ 692,001 $ 670,818
========= =========
Three Months Ended
December 31, 1999 March 31, 1999
(Unaudited)
Raw materials and work-in-process $322,520 $412,480
Finished goods .................. 135,178 217,849
-------- --------
Total ...................... $457,698 $630,329
======== ========
Work in process and finished goods inventories consist of material,
labor, outside processing costs and manufacturing overhead.
5. Comprehensive IncomeCOMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted SFAS No. 130 Reporting Comprehensive Income,REPORTING
COMPREHENSIVE INCOME, effective January 1, 1998. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components
in financial statements. Comprehensive income includes all changes in equity
during a period except those resulting from investments by owners and
distributions to owners. The comprehensive net loss is the same as net loss for
all periods presented.
6. New Accounting StandardsDISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND SIGNIFICANT
CUSTOMERS
The Company has adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION, in the fiscal year ended March 31, 1999.
SFAS No. 131 establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. SFAS No. 131 also establishes standards for related disclosures
about products and services and geographic areas. Operating segments are
identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision maker, or decision making group, in making decisions now to allocate
resources and assess performance. To date, the Company has viewed its operations
and manages its business as principally one operating segment. As a result, the
financial information disclosed herein, represents all of the material financial
information related to the Company's principal operating segment.
The following table represents the Company's revenue by country:
Three Months Ended Nine Months Ended
December 31, December 31,
1999 1998 1999 1998
---- ---- ---- ----
US ............................... 72% 60% 75% 63%
Europe ........................... 23% 38% 22% 34%
Other ............................ 5% 2% 3% 3%
--- --- --- ----
Total ............................ 100% 100% 100% 100%
During the three months ended December 31, 1999, there was one
significant customer who accounted for approximately 30% of the Company's
revenues or $270,000. The related accounts receivable for this customer at
December 31, 1999 was $254,000. During the nine months ended December 31, 1999,
there were two customers who account for approximately 18% and 15% of the
Company's revenues.
7
7. SALE OF SECURITIES
In October 1999, pursuant to a Common Stock and Warrant Purchase
Agreement dated December 31, 1997, five accredited investors exercised warrants
exercisable at $1.50 per share for an aggregate of 750,000 shares of Repligen
common stock and aggregate consideration of $1,125,000. Because these investors
exercised these warrants pursuant to the "net exercise" provision in the
warrants, Repligen actually issued an aggregate of 425,775 shares of common
stock to such investors upon exercise of the warrants and received no proceeds
from such transaction. Based on representations of the investing parties and a
reasonable belief by Repligen that all such parties were "accredited" (as such
term is defined in Rule 501 of the Securities Act of 1933) and that the parties
were acquiring the shares of common stock of Repligen for investment and not for
resale, the Company issued these securities without registration in reliance
upon Section 4(2) of the Securities Act of 1933. No underwriters were involved
in the offer and sale of the securities.
Pursuant to stock purchase agreements dated April 1998,30, 1999 and May 14,
1999, respectively, Repligen issued to certain accredited investors in a private
placement an aggregate of 3,600,000 shares of common stock for an aggregate
purchase price of approximately $9 million, resulting in net proceeds to
Repligen of approximately $8.9 million. Repligen closed the AICPA issued Statements of Position 98-5
Reportingprivate placement
transaction on the Costs of Start-up Activities (SOP 98-5). SOP 98-5
requires all costs associatedJune 23, 1999. There were no underwriters involved in such
private placement transaction. Repligen filed a registration statement with the
pre-opening, pre-operatingSecurities and organization activitiesExchange Commission on Form S-3 on June 16, 1999 for the resale
of the 3,600,000 shares of Common Stock sold to the parties in the private
placement transaction. The Securities and Exchange Commission declared such
resale registration statement effective on June 23, 1999.
8. LICENSING AGREEMENT
In October 1999, Repligen obtained a license from ChiRhoClin Inc., a
private company to commercialize two diagnostic secretin products. These
products have been evaluated in clinical trials for the diagnosis of pancreatic
dysfunction and gastrinoma. A New Drug Application (NDA) was filed with the FDA
in May 1999 seeking approval to market synthetic porcine secretin for these
applications. ChiRhoClin has also conducted clinical studies for these
diagnostic indications with a human form of secretin which ChiRhoClin intends to
submit to the FDA in 2000. Under terms of the agreement, Repligen paid
$1,000,000 upon execution of the agreement and, if the NDAs are approved, the
Company will be expensed as incurred.required to pay future milestones in cash and Repligen common
stock and royalties. The Company will adopt
SOP 98-05 beginning January 1, 1999. Adoption of this statement will not
have a material impact onhas expensed the Company's consolidated financial position or
results of operations.
7. Agreements
On$1 million payment at December
17, 1998,31, 1999 as the Company entered into an agreement with
Amersham Pharmacia Biotech AB (APB) in which the Company became the
preferred manufacturer of APBiotech's recombinant Protein A. Under the
terms of this agreement, APB agreed to pay an initial transfer fee to
cover the costs of transferring certain technology and agreed to purchase
Biotech rPA manufactured by the Company.believes that a feasible application does not exist
until NDA approval.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS Cautionary Statement Regarding Forward-Looking Statements
Statements in this Quarterly Report on Form 10-Q as well as oral
statements that may be made by the Company or by officers, directors or
employees of the Company acting on the Company's behalf, that are not historical
facts constitute "forward-looking statements" within the meaning of Section 21E
of the Private Securities Litigation ReformExchange Act of 1997.1934. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors that could cause the
actual results of the Company to be materially different from the historical
results or from any results expressed or implied by such forward-looking
statements. The Company's future operating results are subject to risks and
uncertainties and are dependent upon many factors, including, without
limitation, the Company's ability to (i) meet its working capital and future
liquidity needs, (ii) successfully implement its strategic growth strategies,
(iii) understand, anticipate and respond to rapidly changing technologies and
market trends, (iv) develop, manufacture and deliver high quality,
technologically advanced products on a timely basis to withstand competition
from competitors which may have greater financial, information gathering and
marketing resources than the Company, (v) obtain and protect licensing and
intellectual property rights necessary for the Company's technology and product
7
development on terms favorable to the Company, and (vi) recruit
8
and retain highly talented professionals in a competitive job market.market, (vii)
realize future revenues, (viii) maintain a timeline for clinical activity, (ix)
obtain successful results of pending or future clinical trials, (x) continue to
establish collaborative arrangements with third parties, and (xi) compete
against the biotechnology and pharmaceutical industries. Further information on
potential factors that could affect the Company's financial results are included
in filings made by the Company from time to time with the Securities and
Exchange Commission included in the section entitled "Risk Factors" contained in
the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
19981999 (File No.000-14656).
Overview
Repligen Corporation ("Repligen" or the "Company") developsOVERVIEW
We develop new drugs for cancer,autism, organ transplantation and cancer. To
expand our drug development program, on March 9, 1999, we acquired the exclusive
rights to patent applications for the use of secretin in the treatment of
autism. Autism is a developmental disorder characterized by poor communicative
and social skills, repetitive and restricted behaviors and in some patients,
gastrointestinal problems and irregular sleep patterns. Secretin is a hormone
produced in the small intestine which regulates the function of the pancreas as
part of the process of digestion. A form of secretin derived from pigs is
approved by the FDA for use in diagnosing problems with pancreatic function.
Recent anecdotal reports indicate that secretin may have beneficial effects in
autism, including improvements in sleep, digestive function, communicative and
social behavior. Following media reports of the potential benefits of secretin,
more than 2,000 autistic children have been treated with the pig-derived
hormone. We intend to manufacture a human, synthetic form of secretin and
evaluate it in clinical trials in order to confirm the benefits of secretin in
treating autism and to determine the optimal dosing schedule. There are
currently no drugs approved by the FDA for the treatment of autism.
In October 1999, Repligen obtained a license from ChiRhoClin Inc., a
private company, to commercialize two diagnostic secretin products. These
products have been evaluated in clinical trials for the diagnosis of pancreatic
dysfunction and gastrinoma. A New Drug Application was filed with the FDA in May
1999 by ChiRhoClin, Inc. seeking approval to market synthetic porcine secretin
for these applications. ChiRhoClin has also conducted clinical studies for these
diagnostic indications with a human form of secretin which ChiRhoClin intends to
submit to the FDA in 2000. Under terms of the agreement, Repligen made a payment
of $1,000,000 upon execution of the agreement and, if the FDA approves the New
Drug Applications, the agreement obligates Repligen to pay ChiRhoClin future
milestones in cash and Repligen common stock and royalties.
We are also developing a product named "CTLA4-Ig," which has been shown
to suppress unwanted immune responses in animal models of organ transplants and
autoimmune diseases, such as lupus or multiple sclerosis, in which the immune
system mistakenly attacks the body. Our product candidate is a derivative of a
natural protein whose role is to turn-off an immune response. In animal models
of organ transplantation and autoimmune diseases. The
Company's most advanced therapeutic product (CTLA4-Ig)diseases, CTLA4-Ig has been shown in
animal models to
selectively block unwanted immune responses inthe rejection of a transplanted organ transplantation andor the effects of the autoimmune
diseases.disease. Initial clinical testing of CTLA4-Ig has been carried out in patients
receiving a bone marrow transplant, which is a potential cure for several
diseases of the immune system, including leukemia, myeloma, lymphoma and sickle
cell anemia. Despite the clinical success of BMTs,bone marrow transplants, a
significant number of patients experience a severe and potentially
life-threatening complication -known as Graft versusVersus Host Disease, (GVHD) in which the
newly transplanted immune system attacks the host. To minimize this complication, most BMTs requirehost (i.e., the patient). In June
1999, results from a search for a genetically "matched" donor which can delay treatment for
months and cost >$25,000 and which only partially eliminates GVHD. An
alternative source of donors would be a parent or sibling who is partially
matched with the patient; however, past experience indicates that this
source of bone marrow would produce a high incidence of severe and
potentially life-threatening GVHD.
In December 1998, investigators from the Dana-Farber Cancer
Institute in BostonPhase 1 clinical trial reported that ex vivo treatment of bone
marrow from a genetically "mismatched" family member with Repligen's CTLA4-Ig substantially reduced
GVHDprevented Graft Versus Host
Disease in twelveeight of eleven transplant patients. The Company intendsIn September 1999, we signed a
Clinical Trial Agreement with the National Cancer Institute to further evaluate
CTLA4-Ig in "matched" and "unmatched"a Phase 2 trial in bone marrow transplants. In
July 1998,transplantation for leukemia.
Repligen filed a complaint relating to certain United States
patents which have been issued to Bristol-Myers Squibb Corporation (see
Legal Proceedings). The Company has filed its own patentspatent applications related to compositions of matter and
methods of use of CTLA4-Ig including bone marrow transplant. Certain patents
have been issued to Bristol-Myers Squibb Corporation relating to the use and
manufacture of CTLA4-Ig. The CompanyWe believe that one of our licensees is also developing low molecular weight compounds which
block angiogenesis by inhibiting the actionco-inventor of
a key growth factor, VEGF.
Inhibitors of angiogenesisone or new blood vessel growth may arrest the
growth of solid tumors and stop the progression of ocular diseases such as
macular degeneration. This program is based on the Company's patented,
high throughput screening assays designed to detect inhibitors of the
growth factors which drive angiogenesis and proprietary libraries of
compounds designed to mimic the natural cell surface ligandsmore of these growth factors. In initial preclinical studies, several compounds
identified from these libraries inhibited angiogenic growth factorspatents and that the patents issued to Bristol-Myers Squibb
do not extend to the use of CTLA4-Ig in vitrobone marrow transplantation.
We develop, manufacture and in vivo at non-toxic doses. The Company is evaluating selected
compounds in animal models of angiogenesis. The Company's angiogenesis
program is supported, in part, by a grant from the National Cancer
Institute. Repligen is also applying its drug discovery technology to
collaborations with pharmaceutical company partners.
Repligen develops, manufactures and marketsmarket products for the production of
protein pharmaceuticals (biopharmaceuticals) by affinity
chromatography. The Companytherapeutic antibodies. We currently marketsmarket a line of products for the
productionpurification of therapeutic monoclonal antibodies based on a recombinant
form ofnaturally occurring protein, Protein A,
a naturally occurring affinity ligandwhich can specifically bind to antibodies. Repligen owns composition of matter
patents for
antibodies.9
recombinant Protein A in the United States and in Europe. In December 1998, the Companywe
entered into a ten year agreement to manufacturesupply recombinant Protein A forto Amersham
Pharmacia Biotech, a leading supplier to the biopharmaceutical marketplace.
8
Results of Operations
Revenuesmarket.
RESULTS OF OPERATIONS
REVENUES
Total revenues for the three month period ended December 31, 19981999
and 19971998 were approximately $864,000 and $589,000, and $753,000, respectively, a
decreasean increase
of approximately $164,000$275,000 or 22%47%. This decrease was largely
attributable to decreased research and development revenue and decreased
product sales. Year to date total revenues increased
approximately $11,000,$591,000, or 1%30%, to $2,535,000 at December 31, 1999 from
$1,944,000 at December 31,1998 from31, 1998. This increase during the three and
nine-months ended December 31, 1997.1999 was largely attributable to increased
product sales of recombinant Protein A and an increase in investment income
due to higher average cash and cash equivalent balances.
Research and development revenues for the three month period ended
December 31, 19981999 and 19971998 were approximately $275,000$160,000 and $378,000,$275,000,
respectively, a decrease of approximately $103,000$115,000 or 27%42%. Year to date R&D
revenues decreased approximately $243,000 or 24%, to approximately $771,000 from
$1,014,000. This decrease was largely attributable to a milestone payment received from Pfizer Inc.
during the third quarterthree and nine-months ended December 31,
1999 is a result of fiscal yearthe discontinuation of research collaborations on Repligen's
drug discovery programs that generated revenue during the three and nine-months
ended December 31, 1998. In the first nine months of
fiscal 1999, the Company recorded research and development revenues
totaling $1,014,000 consisting of approximately $557,000 from contracted
research and development programs and $457,000 from licensing
arrangements. In the first nine months of fiscal 1998, the Company
recorded research and development revenues totaling $802,000 of revenue
with approximately $610,000 from contracted research and $192,000 from
licensing arrangements.
Product revenues for the three month period ended December 31, 19981999 and
19971998 were approximately $558,000 and $249,000, and $316,000, respectively, a
decreasean increase of
$67,000$309,000 or 21%124%. Year to date total product revenues decreasedincreased 103% or approximately
$181,000, or 21%,$694,000 to $1,369,000 from $675,000 fromat December 31, 1997.1999 and 1998,
respectively. This decreaseincrease during the three and nine-months ended December 31,
1999 is attributeddue to variable large production scale ordersthe initiation of Protein A.product shipments to Amersham Pharmacia Biotech
and strong demand from monoclonal antibody producers during such periods.
Investment income for the three month period ended December 31, 19981999
and 19971998 was approximately $51,000$131,000 and $45,000,$51,000, respectively, an increase of
approximately $6,000$80,000 or 13%159%. Year to date investment incomerevenue increased 97% or
approximately $10,000 or 6%$164,000 to $334,000 from year to date$170,000. This increase during the three
and nine-months ended December 31, 1997. These
increases are1999 is largely attributable to higher
average funds available for investment during fiscalarising principally out of the completion
of a private placement of common stock to certain investors of $8,900,000 on
June 23, 1999.
Other revenues for the three monththree-month period ended December 31, 19981999 were
approximately $14,000, unchanged from$15,000, the same as the comparable period ended December 31,
1997.1998. Year to date other income decreased approximately
$29,000 or 25% from December 31, 1997. This decrease is primarily due to
the sale of equipment held by the Company reported as other income in
fiscal 1998.
Expenses
Total expenses for the three month period ended December 31, 1998revenue was $60,000 and 1997 increased approximately $67,000 or 8% to $915,000 from $848,000
and increased 17% or approximately $399,000 to $2,811,000 from $2,412,000$85,000 for the nine months ended
December 31, 1999 and 1998, respectively. This decrease is primarily due to
sales of unused equipment during fiscal year 1999.
EXPENSES
Total expenses for the three-month period ended December 31, 1999 and
1997, respectively.1998 increased to approximately $2,599,000 from $915,000, an increase of
$1,684,000 or 184%. For the nine months ended December 31, 1999 and 1998,
expenses were $5,497,000 and $2,811,000, respectively, an increase of $2,686,000
or 96%. The increase in expenses during the three and nine-month period ended
December 31, 1999 is attributable to our increased product development expenses
and CRC's licensing fee.
Research and development expenses for the three month period ended
December 31, 19981999 and 19971998 were approximately $1,864,000 and $422,000,
respectively, an increase of $1,442,000 or 342%. Year to date expenses were
$3,086,000 and $349,000. For$1,353,000 for the first nine monthsmonth period December 31, 1999 and 1998,
respectively. The increase in R&D expenses during the three and nine-months
ended December 31, 1999 was largely attributable to the $1,000,000 payment
associated with the licensing of fiscal 1999,two diagnostic secretin products. In addition,
the increase in research and development expenses were approximately $1,353,000, or 27% higher than the comparable period in
fiscal 1998. This increase reflects increased staffing in researchcosts
associated with Repligen's drug development programs for secretin and development as the Company expands its investment in proprietary drug
discovery programs.CTLA4-Ig.
10
Selling, general and administrative expenses for the three months ended
December 31, 19981999 and 19971998 were approximately $443,000 and $318,000,
and $301,000,
respectively.respectively, an increase of $125,000 or 39%. For the first nine months of fiscalnine-month period ended
December 31, 1999 and 1998, selling, general and administrative expenses were
$1,636,000 and $1,029,000, respectively, an increase of $607,000 or 59%. The
increase in the three-month and nine-month period is a result of increased
spending on shareholder services, legal and patent costs. In addition, included
in the nine-month period ended December 31, 1999 is approximately $1,029,000, or 12% higher
than$293,0000 of
non-recurring expenses associated with a financial advisory agreement signed
during the comparable period in fiscal 1998. This increase is attributable
to increased costs in patent costs and shareholder services.
9
quarter ended September 30, 1999.
Cost of products sold for the three months ended December 31, 19981999 and
19971998 were approximately $292,000 and $176,000, and $199,000. For the first nine
monthsrespectively, an increase of
fiscal 1999,$116,000, or 66%. Year to date cost of products sold increased by $3,000,as of December 31, 1999 and
1998 were $775,000 and $430,000, an increase of $345,000 or 1%
higher, from the comparable period in fiscal 1998.80%. Cost of
products sold in the three months ended December 31, 1999 and 1998 were 52% and
1997 were 71% and 63%, respectively, of product revenues. InFor the nine month periodmonths ended December 31,
19981999 and 1997,1998, cost of products sold waswere 57% and 64% of product revenues,
respectively. The decrease in cost of revenues as a percentage of revenues
during the three and 50%. This increasenine-months periods ended December 31, 1999 is largely
attributabledue
primarily to increased inventory reserves createdProtein A product sales offset by additional expenses
associated with launch activities related to the introduction
of new protein A products provided in 1998.
Liquidity and Capital Resources
The Company'sAmersham Pharmacia
manufacturing contract.
LIQUIDITY AND CAPITAL RESOURCES
Repligen's total cash and cash equivalents decreasedincreased to $3,697,000$9,296,000 at
December 31, 19981999 from $4,726,000$3,251,000 at March 31, 1998.1999. This decreaseincrease of $1,029,000$6,045,000
reflects $8,900,000 of proceeds resulting from the sale of Common Stock of
Repligen to certain investors through a private placement that closed during
June 1999, offset by a net lossesloss from operations incurred during the nine month
period ended December 31, 19981999 of approximately $868,000, a decrease in
prepaid expenses of $110,000 and capital expenditures of $141,000 offset
in part by the$2,962,000, an increase in
accrued expensesaccounts receivable of $49,000$185,000 and an increase in unearned incomeaccounts payable of $27,000.$56,000.
Working capital decreasedincreased to $4,566,000$10,031,000 at December 31, 19981999 from $5,377,000$3,860,000 at
March 31, 1998.
The Company1999.
Repligen has entered into agreements with a number of collaborative
partners and licensees. Under the terms of these agreements, generally, the CompanyRepligen may be
eligible to receive research support, additional milestones or royalty revenue
if the focus of these collaborations result in clinical evaluation and commercialization. There
cancommercialization of
products developed. However, we cannot be no assurancesure that these collaborations will resultcontinue
or that we will receive any future payments related to these agreements. In
addition, under terms of the agreement with ChiRhoClin, if the FDA approves the
New Drug Applications, Repligen will be required to pay ChiRhoClin future
milestones in future
payments.
The Company has funded operations primarily with cash derived from
the sales of its equity securities, revenue derived from research and development contracts, product salesRepligen common stock and investment income.royalties.
While the
CompanyRepligen anticipates that itsthe cost of operations will increase in
fiscal 19992000 as it continues to expandRepligen expands its investment in proprietary product
development, the CompanyRepligen believes that it has sufficient cash equivalents and
marketable securitiesfunding to satisfy its
working capital and capital expenditure requirements for the next twenty-four
months. Should the
CompanyRepligen need to secure additional financing to meet its future
liquidity requirements, there can be no assurances that the Company willRepligen may not be able to secure such financing, or
thatobtain such financing if available, will be on favorable terms favorable to the Company.
Year 2000
The Company has undertaken an initial review of its information
technology computer systems and believes that the Year 2000 problem does
not pose significant operational problems to its information technology
systems. The majoritybecause of the Company's software and computer equipment has
been purchased within the last five years from third-party vendors who
have already provided upgrades intended to bring their products into Year
2000 compliance. The Company has begun to address the small number of
internal systems that are not yet Year 2000 compliant, and expects full
compliance by the end of 1999. The Company currently believes that the
costs of addressing these issues will not have a material adverse impact
on the Company's financial position.
The Company has also recently begun interviewing third parties,
vendors and suppliersvolatile nature of the
Company to determine their exposure to Yearbiotechnology market place.
YEAR 2000
As of the date of this filing, we have not incurred any significant
business disruptions as a result of year 2000 issues. However, while no such
occurrence has developed, year 2000 issues that may arise related to key
suppliers and service providers may not become apparent immediately. We have
received assurances of year 2000 compliance from key suppliers. We have also
received assurances from key service providers such as financial institutions as
to their anticipated risks and responses to those risks. To
date, those vendors that have been contacted have indicated that their
hardware or software is or will be Yearyear 2000 compliant in time frames that
meet the Company's requirements. However, the Company intends to continue
to assess its exposure to Year 2000 noncompliance on the part of any of
its material vendors and therereadiness. We can beprovide no assurance that their systemswe will not be
Year 2000 compliant.
The Company does not have a contingency planadversely affected by these suppliers and service providers due to noncompliance
in the event Year 2000
compliance cannot be achieved in a timely manner. A contingency plan will
be developed immediately upon completion of the Company's Year 2000
compliance assessment.
10future.
11
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
OnPROCEEDINGS
As reported in Form 10-Q dated for the period ended June 30, 1999, on
July 17, 1998, Repligen filed a complaint against Bristol Myers Squibb ("BMS")
at the United States District Court for the District of Massachusetts in Boston,
Massachusetts (the "Complaint"). The Complaint relatesseeking correction of inventorship of certain United States
patents which claim compositions and methods of use for CTLA4 as well as
unspecified monetary damages. A correction of inventorship would result in the
University of Michigan being designated as a co-assignee on any corrected BMS
patent. Repligen would then have rights to such technology pursuant to a United States patent which1992
License Agreement with the University of Michigan, a 1995 Asset Acquisition
Agreement with Genetics Institute, and other related agreements. On July 13,
1999, the court dismissed the complaint without prejudice citing a lack of legal
standing of Repligen to bring such a complaint. We believe that the court's
finding on standing was issued in 1995error. The court did not rule on the validity of
Repligen's inventorship claim. Repligen continues to believe that the University
of Michigan is a rightful co-assignee of the aforesaid BMS patents and we intend
to continue to pursue the correction of inventorship. Repligen's failure to
obtain shared ownership rights in the patents may restrict Repligen's ability to
commercialize CTLA4-Ig. We have also filed our own patents related to
compositions of matter and methods of use of CTLA4-Ig. In addition, we believe
that the patents issued to Bristol-Myers Squibb Corporation (the "BMS Patent")
which claimsdo not extend to the use of
CTLA4-Ig in bone marrow transplantation.
Item 2. CHANGES IN SECURITIES
In October 1999, pursuant to a methodCommon Stock and Warrant Purchase
Agreement dated December 31, 1997, five accredited investors exercised warrants
exercisable at $1.50 per share for an aggregate of treating immune system diseases with CTLA4-Ig. In
December 1998, related patents were issued to BMS claiming the composition
of CTLA4-Ig. Thereafter, the Complaint was amended to include these
patents. The amended Complaint seeks to correct the inventorship on these
BMS Patents and seeks unspecified monetary damages. If successful in its
claims, a licensor750,000 shares of Repligen
will be named as an inventor on the BMS
Patents which will give Repligencommon stock and Bristol-Myers Squibb shared rightsaggregate consideration of $1,125,000. Because these investors
exercised these warrants pursuant to the patents. There can be"net exercise" provision in the
warrants, Repligen actually issued an aggregate of 425,775 shares of common
stock to such investors upon exercise of the warrants and received no assurancesproceeds
from such transaction. Based on representations of the investing parties and a
reasonable belief by Repligen that all such parties were "accredited" (as such
term is defined in Rule 501 of the Securities Act of 1933) and that the litigation will concludeparties
were acquiring the shares of common stock of Repligen for investment and not for
resale, the Company issued these securities without registration in a result beneficial to the Company. The failurereliance
upon Section 4(2) of the litigation may
restrictSecurities Act of 1933. No underwriters were involved
in the Company's ability to commercialize CTLA4-Ig for certain
applications.offer and sale of the securities.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT DESCRIPTION
------- -----------
10.1* Manufacturing Transfer Agreement
27.1 Financial Data Schedule
* Confidential
EXHIBIT DESCRIPTION
2.1 * Licensing Agreement by and between ChiRhoClin Inc. and Repligen Corporation (filed
herewith)
3.1 Restated Certificate of Incorporation, dated
June 30, 1992 and filed July 13, 1992, as
amended (filed as Exhibit 3.1 to Repligen
Corporations 10-Q dated September 30, 1999)
3.2 By-laws (filed as Exhibit 3.4 to Repligen Corporation's Form S-1 Registration Statement
No. 33-3959 and incorporated herein by reference)
27.1 Financial Data Schedule (filed herewith)
*Confidential Treatment has been requested as to omitted portions
pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as
amended. Appendices 1, 2 and 3 to the Licensing Agreement included as EXHIBIT
2.1 are not being filed herewith. The Company undertakes to furnish a copy of
an omitted Appendix to the Commission upon request (except that such Appendices
shall remain confidential). Pursuant to Item 6.01(b)(2) of Regulation S-K, the
Appendices are set forth below.
12
LICENSE AGREEMENT EXHIBIT 2.1
Appendix 1 Confidentiality Agreement
Appendix 2 Activities of CRC
Appendix 3 Insurance Coverage
(b) Reports on Form 8-K
No current reports1. Current Report on Form 8-K were filed bywith the Company during the
quarter covered by this report.Securities and
Exchange Commission on October 6, 1999 (description of
licensing agreement with ChiRhoClin Inc.).
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
REPLIGEN CORPORATION
(Registrant)
Date: February 12, 199914, 2000 By: /s//S/ Walter C. Herlihy
-------------------------------------------------
Chief Executive Officer and President,
Principal Financial and Accounting Officer
1113
REPLIGEN CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
10.1 Manufacturing Transfer Agreement 13
27.1 Financial Data Schedule 20
12
Manufacturing Transfer Agreement
This agreement (Agreement) is made as of December 17, 1998, by and between
Repligen Corporation
("Repligen"), a Delaware corporation with principal offices
at 117 Fourth Ave., Needham, MA 02494 and Amersham Pharmacia Biotech AB
("Biotech"), a corporation incorporated in Sweden with principal offices at
Bjrkgatan 30, SE-751 84 Uppsala (each a "Party" and collectively "the Parties").
WHEREAS, Repligen possesses capabilities relatingExhibit Index
EXHIBIT DESCRIPTION
2.1 * Licensing Agreement by and between ChiRhoClin Inc. and Repligen Corporation
(filed herewith)
3.1 Restated Certificate of Incorporation, dated June 30, 1992 and filed July 13,
1992, as amended (filed as Exhibit 3.1 to Repligen Corporations 10-Q dated
September 30, 1999)
3.2 By-laws (filed as Exhibit 3.4 to Repligen Corporation's Form S-1 Registration
Statement No. 33-3959 and incorporated herein by reference)
27.1 Financial Data Schedule (filed herewith)
*Confidential Treatment has been requested as to the large scale
manufacture of recombinant proteins including protein A; and
WHEREAS, Biotech possesses technology, documentation, and know-how
relating to the manufacture of that form of recombinant protein A
(hereinafter "Biotech rPA") which is incorporated into a variety of
products marketed and sold by Biotech; and
WHEREAS, the Parties wish to enter an arrangement in which Repligen will
become the preferred manufacturer of Biotech rPA for Biotech's use.
NOW THEREFORE, for the mutual covenants contained herein, and for other
good and valuable considerations, the Parties agree as follows:
1. DEFINITIONS
For the purpose of this Agreement, the terms set forth hereunder shall be
defined as follows:
a. "Biotech IPA" means those forms of immobilized Biotech rPA which are
manufactured, marketed, and sold to the general public by Biotech as
further described in Schedule A attached hereto.
b. "Biotech rPA" means unimmobilized recombinant protein A manufactured
according to either of the Old Process or the New Process.
c. "Biotech Specifications" means the set of physical, chemical, and
functional characteristics that Biotech uses to determine the
acceptability of Biotech rPA manufactured as described in Schedule B
attached hereto. Biotech Specifications may be modified from time to
time by mutual agreement of the Parties.
d. "Confidentiality Agreement" shall mean that confidentiality
agreement dated April 20, 1998 entered into by and between the
Parties.
e. "Equivalency Testing" means any and all testing on Biotech rPA
manufactured by Repligen according to the New Process which Biotech,
in its sole discretion, may consider necessary to conduct prior to
and in support of the Process Change.
f. "First Agreement" means that agreement made by and between the
Parties on September 29, 1992.
g. "License Agreement" means that agreement made by and between Biotech
and Repligen in which Repligen grants to Biotech i) a non-exclusive
license to US Patent No. 5,084,559 ("Protein A Domain Mutants") and
ii) a license to technology and know-how relating to the manufacture
of Repligen IPA.
h. "Launch Stock" means Biotech rPA produced by Repligen according to
the New Process after the completion of the Qualification Lots but
prior to the effective date of the Supply Agreement.
i. "New Process Documentation" means any and all documentation which
will be created by Repligenomitted portions
pursuant to this Agreement in
preparation for establishing the criteria and specifications for,
and implementation of the New Process.
13
j. "New Process" means the process by which Repligen will manufacture
Biotech rPA for sale to Biotech.
k. "Old Process" means the process by which Biotech rPA is produced by
Biotech and any other parties as of the date of this Agreement.
l. "Old Process Documentation" means the English translation of any and
all documentation related to the process which Biotech uses with
respect to the production of Biotech rPA as of the date of this
Agreement.
m. "Process Change" means that date upon which Biotech commences the
marketing and sale to the general public of Biotech IPA which has
been manufactured using Biotech rPA produced by Repligen according
to the New Process.
n. "Process Technology" means any and all know-how, proprietary
materials and reagents, documentation, trade secrets, and technology
relating to the production of Biotech rPA which will be required by
Repligen in order for Repligen to prepare for and manufacture
Biotech rPA in accordance with the New Process. Process Technology
includes but is not limited to bacterial production strains, English
language manufacturing and quality control documents, recipes,
formulae, etc.
o. "Qualification Lots" means the first three full scale production
runs of Biotech rPA made by Repligen according to the New Process.
p. "rPA Products" means either or both of Repligen rPA and Biotech rPA.
q. "Repligen IPA" means those forms of immobilized Repligen rPA,
manufactured and sold by Repligen as of the date of this Agreement.
Specific forms of Repligen IPA referenced herein may be designated
by their respective trade names, e.g. IPA-300, IPA-400, IPA-500,
etc.
r. "Repligen rPA" means those forms of unimmobilized recombinant
protein A which are manufactured and sold by Repligen. Specific
forms of Repligen rPA referenced herein may be designated by their
respective trade names, e.g. rPA-50, rPA-100, and srPA-50.
s. "Process Equipment" means any equipment which is offered for sale or
lease by Biotech and which is determined by the Parties to be
required for the manufacture of Biotech rPA by Repligen in
accordance with the New Process.
t. "Process Validation" means any work requested by Biotech and carried
out by Repligen to define the operating limits of any step of the
New Process during or after the manufacturing of the Qualification
Lots but prior to the Process Change.
u. "Supply Agreement" means that agreement between Biotech and
Repligen, made effective as of the date of Process Change, pursuant
to which Repligen is made the preferred manufacturer to Biotech of
Biotech rPA.
2. PROCESS TRANSFER
a. Biotech shall arrange for the timely, complete, and successful
transfer to Repligen of all Process Technology such that Repligen's
readiness to commence the manufacture of Biotech rPA pursuant to
this Agreement and/or the Supply Agreement is not delayed or
impaired.
14
b. Biotech will provide to Repligen the Old Process Documentation in
English within ten (10) days of the signing of this Agreement and
will cooperate fully with Repligen to adapt the Old Process
Documentation to Repligen's existing manufacturing, quality control,
and document management systems. Any modification which is required
for implementation of the New Process will be mutually agreed upon
by the Parties. Repligen will create the New Process Documentation
and will supply Biotech with a draft copy of the New Process
Documentation within thirty (30) days of receipt of Old Process
Documentation from Biotech. Biotech will have the final right of
approval of all New Process Documentation. New Process Documentation
will be finalized and agreed to by the Parties prior to January 21,
1999 or at such later time as the Parties may establish by mutual
consent.
c. Any and all subcontractors engaged by Repligen to carry out any
aspect of the New Process will be bound by a confidential disclosure
agreement ("CDA") with terms and conditions substantially similar to
the Confidentiality Agreement. Biotech will have the right to
consent to all subcontractors involved in manufacture of Biotech rPA
which consent shall not be unreasonably withheld. Following consent
by Biotech and execution by the subcontractor of a CDA, Repligen may
share Process Technology with such party. Biotech may not contact
Repligen's sub-contractors with specific reference to the
manufacture of Biotech rPA without the prior consent of Repligen.
Repligen may utilize alternative facilities under its control in the
manufacture of Biotech rPA. Repligen will give Biotech nine (9)
months prior written notice of any change in facility or
sub-contractor for approval by Biotech, such approval not to be
unreasonably withheld by Biotech.
d. Biotech will pay Repligen [*] to cover the costs of transferring the
Process Technology within ten (10) days of execution of this
Agreement.
e. Between January 1 and March 31, 1999, Repligen will manufacture [*]
Qualification Lots for Biotech. Each Qualification Lot will be
produced, tested, and released by Repligen according to the New
Process Documentation and the Biotech Specifications. Finished
Biotech rPA from the Qualification Lots will be shipped to Biotech
on or before March 31, 1999. Biotech shall pay Repligen for Biotech
rPA produced from the Qualification Lots and which meets Biotech
Specifications in accordance with Section 4. Equivalency Testing of
the Biotech rPA from the Qualification Lots may be carried out by
either or both of the Parties at the discretion of Biotech.
f. Biotech will insure that Equivalency Testing and any required
customer notification is completed in a timely fashion.
g. Biotech shall implement the Process Change as soon as practical and
thereafter will not undertake to manufacture any products using
Biotech rPA that was produced by the Old Process, except as may be
specifically requested by preexisting customers of Biotech for such
products. Such specific customer requests will be considered custom
orders and products manufactured thereunder will be so labeled.
3. MANUFACTURING
a. During the 1999 calendar year, Biotech shall purchase Biotech rPA to
serve as Launch Stock from Repligen according to the following
schedule: [*]
b. Following the Process Change and thereafter during each year of the
Supply Agreement, Biotech intends to continue to use Repligen as its
preferred manufacturer for Biotech rPA. Consequently, Biotech
intends to purchase from Repligen and Repligen agrees in such case
to manufacture for Biotech [*] of the total annual requirements of
Biotech for Biotech rPA. As long as Repligen retains its status as
Biotech's preferred manufacturer, i.e. so that Repligen's share of
the manufacturing of
[*] indicates material which has been omitted and for which confidential
treatment has been requested. All such material has been filed with the
Commission pursuant to ruleRule 24b-2 promulgated under the Securities Exchange Act of 1934, as
amended. 15
Biotech rPA for Biotech remains at or [*] of Biotech's annual
requirements, Biotech's obligation to pay royalties to Repligen
under the First Agreement shall be waivedAppendices 1, 2 and no royalties shall be
due. If during any calendar year Repligen loses its status as
Biotech's preferred manufacturer, i.e., so that Repligen's share of
Biotech rPA falls below [*] , royalties under the First Agreement
will again be due and payable on all product sales occurring during
that year according3 to the First Agreement.
c. The Parties acknowledge that, prior to Process Change, Biotech, at
its sole discretion, may continue to manufacture or have
manufactured Old Process Biotech rPA and/or Biotech IPA made with
Old Process Biotech rPA and that some inventory of such products may
exist at the time of Process Change. Following the date of Process
Change, Biotech will solely promote Biotech IPA manufactured with
New Process Biotech rPA and will sell Biotech IPA made with Old
Process Biotech rPA only in respect of a repeat order which is
specific for such product.
d. Following the date of Process Change, Biotech shall not manufacture
or have manufactured Old Process Biotech rPA except in the event
that both of the following occur: i) inventories of Old Process
Biotech rPA and/or Biotech IPA made with Old Process Biotech rPA
have been depleted and ii) a repeat order that is specific for such
Biotech IPA made with Old Process Biotech rPA has been received.
Old Process Biotech rPA manufactured under this Section 3d will not
beLicensing Agreement included as partEXHIBIT
2.1 are not being filed herewith. The Company undertakes to furnish a copy of
the volumes of Biotech's annual requirements
referenced in Section 3b.
e. Notwithstanding anythingan omitted Appendix to the contrary, RepligenCommission upon request (except that such Appendices
shall maintainremain confidential). Pursuant to Item 6.01(b)(2) of Regulation S-K, the
exclusive and unrestricted right to manufacture Repligen rPA.
f. Notwithstanding anything to the contrary, Biotech shall maintain the
exclusive and unrestricted right to manufacture Biotech IPA.
4. PRODUCT PRICING
a. Biotech will purchase from Repligen at a price of [*] all Biotech
rPA which is shipped to Biotech from the Qualification Lots and
which meets Biotech Specifications.
b. Biotech represents and warrants that the Old Process yields at least
[*] grams finished Biotech rPA per [*] of fermentation and this
production yield has been used by the Parties to establish a pricing
schedule for the Supply Agreement. The price paid by Biotech to
Repligen for all Qualification Lots, Launch Stock and for all
Biotech rPA manufactured under the Supply Agreement will be
according to this schedule asAppendices are set forth below:
Kilograms ordered per annum Price (USD) per gram
[*] [*]
c. The price for Biotech rPA produced by Repligen in each subsequent
year of the Supply Agreement after the first year will be based upon
the above schedule and adjusted according to the average yield
obtained in the previous year according to the following formula:
[*]
wherein average yield is the average yield obtained over all runs in
the immediately preceding year of production. The adjustment will be
made on the anniversary of the date of Process Change in each year
during the term of the Supply Agreement with the average yield
determined by Repligen and subject to confirmation by Biotech.
d. In addition to annual adjustments made in the price to reflect
actual production yields as set forth
[*] indicates material which has been omitted and for which confidential
treatment has been requested. All such material has been filed with the
Commission pursuant to rule 24b-2 promulgated under the Securities Exchange Act
of 1934, as amended.
16
above, the price will also be adjusted on the anniversary of the
date of Process Change in each year during the term of the Supply
Agreement on the basis of the change in the United States Consumer
Price Index or some other Index mutually agreed upon by both
parties. The Parties may also elect from time to time and by mutual
agreement to adjust the pricing in consideration of other factors,
such as documented changes in Repligen's cost of manufacture,
altered market conditions, process modifications, etc.
e. All pricing is FOB, Needham, MA.
5. PROCESS EQUIPMENT AND MATERIALS
a. All Process Equipment not presently owned by or in the possession of
Repligen will be provided to Repligen by Biotech under a
lease-purchase arrangement. Under such lease-purchase arrangement:
1) Biotech will lease Process Equipment to Repligen for the combined
terms of this Agreement and the Supply Agreement, 2) Repligen will
make an annual lease payment at the end of each year of the Supply
Agreement of [*] of Biotech's actual list price for Process
Equipment in effect on the original date of this Agreement, 3) if
this Agreement terminates without execution of the Supply Agreement
or the Supply Agreement is terminated voluntarily by or as a
consequence of breach by Repligen, the lease will also terminate and
Process Equipment shall be promptly returned to Biotech, 4) if the
Supply Agreement is executed but is subsequently terminated
voluntarily by or as a consequence of breach by Biotech, Repligen
shall have the option of returning Process Equipment or continuing
lease payments under the same terms, 5) upon completion of all ten
lease payments, [*].
b. Process Equipment provided by Biotech under this Section 5 will be
delivered to Repligen upon request and in a timely fashion such that
Repligen's readiness to commence the manufacture of Biotech rPA
pursuant to this Agreement and/or the Supply Agreement is not
delayed or impaired.
c. Any equipment or hardware which the Parties mutually agree is
specifically required for the New Process and which is neither
presently owned by or in the possession of Repligen nor manufactured
and offered for sale by Biotech will be provided by Biotech at no
cost to Repligen for the use of Repligen during the combined terms
of this Agreement and the Supply Agreement. Such equipment will
include: [*].
d. Any equipment provided under this Section 5 which becomes unable to
perform according to the New Process Documentation during the term
of the Agreement for any reason other than misuse or neglect will be
replaced by Biotech at no cost to Repligen. Any equipment provided
under this Section 5 which becomes unable to perform during the term
of the Agreement due to misuse, neglect, or operator error will be
replaced by Repligen at no cost to Biotech.
e. During the term of the Agreement, Biotech will supply Repligen with
any and all requested quantities of chromatography media which are
marketed and sold by Biotech and required by Repligen in the
manufacture of Biotech rPA at a [*] discount to the then current
list price.
f. During the term of the Agreement, Biotech will supply Repligen with
any requested quantities of Sepharose 4FF and Sepharose 6FF at a [*]
discount to the then current list price or to the last listed price.
g. [*]
[*] indicates material which has been omitted and for which confidential
treatment has been requested. All such material has been filed with the
Commission pursuant to rule 24b-2 promulgated under the Securities Exchange Act
of 1934, as amended.
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6. TERM
a. This Agreement will remain in effect from the date of signing until
the effective date of the Supply Agreement, or December 31, 1999,
whichever is earlier.
7. TERMINATION
a. Either Party may terminate this Agreement upon the material breach
of the other Party's performance hereunder, upon 30 days written
notice. The failure to cure such breach to the other Party's
satisfaction within 30 days will result in the immediate termination
of this Agreement.
8. ASSIGNMENT
a. This Agreement is not assignable by either Party absent the other
Party's written consent. If Repligen is purchased by a third party
which is a competitor of Biotech, Biotech has the right to approve
the transfer of the Agreement. For purposes hereof, the term
"purchase" shall mean i) a sale of all or substantially all of the
assets of Repligen or ii) the merger and consolidation of Repligen
with or into another corporation such that the stockholders of
Repligen immediately following such transaction hold, directly or
indirectly, less than 50% of the voting securities of the
corporation surviving such transaction.
9. CONFIDENTIALITY
a. Any and all information disclosed by one Party to the other under
this Agreement shall be handled in accordance with the terms and
conditions of the Confidentiality Agreement and consequently be
treated as confidential - as agreed therein - for the entire
duration of this Agreement, the duration of the Supply Agreement and
for a period of five (5) years thereafter.
10. REPORTING
a. Within 20 days following the completion of each quarter during the
term of this Agreement or the Supply Agreement, Biotech will inform
Repligen as to the status of the inventory of Biotech rPA and
Biotech IPA on hand as well as the aggregate quantity of Biotech rPA
that has been sold during the preceding quarter. Repligen will have
the right to audit all relevant records of Biotech with respect to
this information.
11. DISCLOSURE
a. Upon the execution of this Agreement, either Party will be entitled
to publicly announce this transaction and its general terms,
including the nature and scope of the Supply Agreement, provided
that the wording of such announcement shall be subject to the other
Party's prior review and reasonable satisfaction. Either Party shall
be permitted under this Agreement to make any disclosure which may
be required by law.
12. GENERAL
a. Biotech acknowledges that Repligen markets and sells several forms
of Repligen rPA which include but are not restricted to rPA-50,
rPA-100, and srPA-50. Repligen will retain the exclusive and
unrestricted right to make, have made, market, and sell all forms of
Repligen rPA in all markets and to any party. Repligen will not sell
or transfer Biotech rPA to any party other than Biotech, except with
Biotech's consent.
b. This Agreement is subject to and shall be construed and enforced in
accordance with the laws of the State of New York. Any disputes
arising hereunder shall be resolved with reference to the English
language version of this Agreement regardless of any translations
made for the convenience of the Parties. All disputes between the
Parties shall be resolved by binding arbitration in accordance with
18
the rules and regulations of the American Arbitration Association in
the city of New York, NY. Notwithstanding anything herein to the
contrary, the Parties acknowledge and agree that each shall have the
right to obtain equitable relief against the other provided that
each Party hereby agrees to submit to the jurisdiction of the courts
of the State of New York or the federal courts of the United States
located in New York and that the venue for all such proceedings
shall lie in the State of New York.
IN WITNESS WHEREOF, the Parties hereto have hereunto set their hands and seals
and duly executed this Agreement the day and year first written above.
FOR REPLIGEN CORPORATION FOR AMERSHAM PHARMACIA
BIOTECH AB
/s/ DANIEL P. WITT /s/ ARNE FORSELL
- ------------------------- --------------------------
12/17/98
/s/ PER-ERIK SANDLUND
--------------------------
12/18/98
19below.
LICENSE AGREEMENT EXHIBIT 2.1
Appendix 1 Confidentiality Agreement
Appendix 2 Activities of CRC
Appendix 3 Insurance Coverage
14