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 September 30, ~~2019~~2020

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

For the transition period from

~~For the transition period from~~

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

☒

☐

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

☒

☐

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	☐
~~Large accelerated~~
Non-accelerated filer	☒ ☐	~~Accelerated filer~~ Smaller reporting company	☐

~~Non-accelerated filer~~	☐	~~Smaller reporting company~~	☐

~~Emerging growth company~~	☐		Emerging growth company	☐

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

☐

☒

The number of shares outstanding of the registrant’s common stock on

~~October~~

~~, 2019~~ November 2, 2020 was ~~52,058,850.~~52,619,271.

Table of Contents

~~PAGE~~

~~PART I—FINANCIAL INFORMATION~~

PAGE

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements (interim periods unaudited)

Consolidated Balance Sheets as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019

Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019

Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019

Notes to Unaudited Consolidated Financial Statements

Item 2.

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

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Item 4.

Controls and Procedures

PART ~~II—~~II - OTHER INFORMATION

Item 1.

~~Item 1.~~

Legal Proceedings

Item 1A.

~~Legal Proceedings~~Risk Factors

Item ~~1A.~~

~~Risk Factors~~

~~Item 2.~~

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

~~Item 5.~~

Other Information

Item 6.

~~Other Information~~Exhibits

~~Item 6.~~

Signatures

~~Exhibits~~

~~Signatures~~

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1.

Financial Statements

REPLIGEN CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited, amounts in thousands, except share data)

September 30,

December 31,

2019

2018

Assets

Current assets:

Cash and cash equivalents
$
513,454
$
193,822

Restricted cash

8,975

—

Accounts receivable, less reserve for doubtful accounts of $420 and $227 at September 30, 2019 and

December

31, 2018, respectively

41,968

33,015

Royalties and other receivables

68

136

Unbilled receivables

555

2,602

Inventories, net

51,579

42,263

Prepaid expenses and other current assets

4,941

3,901

Total current assets

621,540

275,739

Property, plant and equipment, net

43,034

32,180

Intangible assets, net

216,289

135,438

Goodwill

468,845

326,735

Deferred tax assets

3,917

4,355

Operating lease right of use assets

24,845

—

Other assets

238

174

Total assets
$
1,378,708
$
774,621

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable
$
9,951
$
10,489

Operating lease liability

3,044

—

Accrued liabilities

25,770

15,865

Convertible senior notes, current portion

—

103,488

Total current liabilities

38,765

129,842

Convertible senior notes

230,182

—

Deferred tax liabilities

38,059

25,086

Operating lease liability, long-term

26,056

—

Other liabilities, long-term

528

4,125

Total liabilities

333,590

159,053

Commitments and contingencies (Note 10)

Stockholders’ equity:

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

—

—

Common stock, $0.01 par value; 80,000,000 shares authorized; 52,052,581 shares at September 30, 2019 and 43,917,378 shares at December 31, 2018 issued and outstanding

521

439

Additional paid-in capital

1,064,152

642,590

Accumulated other comprehensive loss

(21,794
)
(11,893
)
Accumulated earnings (deficit)

2,239

(15,568
)

Total stockholders’ equity

1,045,118

615,568

Total liabilities and stockholders’ equity
$
1,378,708
$
774,621


	September 30, 2020			December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	553,302		$	528,392
Restricted cash		—			9,015
Accounts receivable, net of allowances of $621 and $525 at September 30, 2020 and December 31, 2019, respectively		55,830			43,068
Royalties and other receivables		95			148
Unbilled receivables		—			456
Inventories, net		78,531			54,832
Prepaid expenses and other current assets		8,970			5,917

Total current assets		696,728			641,828
Property, plant and equipment, net		55,355			48,455
Intangible assets, net		215,385			212,552
Goodwill		482,043			468,413
Deferred tax assets		2,192			2,920
Operating lease right of use assets		24,201			25,707
Other assets		412			238

Total assets	$	1,476,316		$	1,400,113

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	14,483		$	11,425
Operating lease liability		4,460			3,557
Accrued liabilities		32,041			33,331

Total current liabilities		50,984			48,313
Convertible senior notes, net		240,942			232,767
Deferred tax liabilities		29,435			29,944
Operating lease liability, long-term		26,378			26,995
Other liabilities, long-term		3,707			2,326

Total liabilities		351,446			340,345

Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.01 par value, 5,000,000 shares authorized, 0 shares issued or outstanding		—			—
Common stock, $0.01 par value; 80,000,000 shares authorized; 52,606,700 shares at September 30, 2020 and 52,078,258 shares at December 31, 2019 issued and outstanding		526			521
Additional paid-in capital		1,087,996			1,068,431
Accumulated other comprehensive loss		(9,723	)		(15,027	)
Retained earnings		46,071			5,843

Total stockholders’ equity		1,124,870			1,059,768

Total liabilities and stockholders’ equity	$	1,476,316		$	1,400,113

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

Table of Contents

REPLIGEN CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Revenue:

Products
$
69,419
$
49,500
$
200,701
$
142,042

Royalty and other revenue

26

29

70

48

Total revenue

69,445

49,529

200,771

142,090

Costs and operating expenses:

Cost of product revenue

31,425

22,183

88,978

62,939

Research and development

5,427

3,601

14,278

12,669

Selling, general and administrative

24,629

15,859

67,326

48,347

Total costs and operating expenses

61,481

41,643

170,582

123,955

Income from operations

7,964

7,886

30,189

18,135

Other income (expenses):

Investment income

1,898

558

3,616

1,251

Loss on extinguishment of debt

(5,650
)
—

(5,650
)
—

Interest expense

(2,857
)
(1,687
)
(6,326
)
(5,008
)
Other income (expenses)

316

(134
)
(23
)
187

Other expenses, net

(6,293
)
(1,263
)
(8,383
)
(3,570
)

Income before income taxes

1,671

6,623

21,806

14,565

Income tax provision

12

1,829

3,999

3,586

Net income
$
1,659
$
4,794
$
17,807
$
10,979

Earnings per share:

Basic
$
0.03
$
0.11
$
0.38
$
0.25

Diluted
$
0.03
$
0.10
$
0.37
$
0.24

Weighted average common shares outstanding:

Basic

50,852

43,822

47,087

43,729

Diluted

51,809

45,828

47,930

45,132

Net income
$
1,659
$
4,794
$
17,807
$
10,979

Other comprehensive income (loss):

Foreign currency translation adjustment

(6,741
)
(630
)
(9,901
)
(5,410
)

Comprehensive (loss) income
$
(5,082
) $
4,164
$
7,906
$
5,569


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Revenue:
Products	$	94,029		$	69,419		$	257,521		$	200,701
Royalty and other revenue		31			26			91			70

Total revenue		94,060			69,445			257,612			200,771

Costs and operating expenses:
Cost of product revenue		39,626			31,425			108,471			88,978
Research and development		4,422			5,427			13,460			14,278
Selling, general and administrative		29,051			24,629			83,277			67,326

Total costs and operating expenses		73,099			61,481			205,208			170,582

Income from operations		20,961			7,964			52,404			30,189

Other income (expenses):
Investment income		82			1,898			1,699			3,616
Loss on extinguishment of debt		—			(5,650	)		—			(5,650	)
Interest expense		(3,052	)		(2,857	)		(9,032	)		(6,326	)
Other (expenses) income		(248	)		316			(632	)		(23	)

Other expenses, net		(3,218	)		(6,293	)		(7,965	)		(8,383	)

Income before income taxes		17,743			1,671			44,439			21,806
Income tax provision		3,191			12			4,211			3,999

Net income	$	14,552		$	1,659		$	40,228		$	17,807

Earnings per share:
Basic	$	0.28		$	0.03		$	0.77		$	0.38

Diluted	$	0.27		$	0.03		$	0.75		$	0.37

Weighted average common shares outstanding:
Basic		52,545			50,852			52,341			47,087

Diluted		53,469			51,809			53,300			47,930

Net income	$	14,552		$	1,659		$	40,228		$	17,807
Other comprehensive income (loss):
Foreign currency translation adjustment		4,390			(6,741	)		5,304			(9,901	)

Comprehensive income (loss)	$	18,942		$	(5,082	)	$	45,532		$	7,906

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

Table of Contents

REPLIGEN CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, amounts in thousands, except share data)

Nine Months Ended September 30, 2019

Common Stock

Number of Shares

Par Value

Additional Paid-

In Capital

Accumulated Other Comprehensive Income (Loss)

Accumulated Earnings (Deficit)

Total Stockholders’ Equity

Balance at December 31, 2018

43,917,378
$
439
$
642,590
$
(11,893
) $
(15,568
) $
615,568

Net income

—

—

—

—

17,807

17,807

Issuance of common stock for debt conversion

2,316,229

23

198,734

—

—

198,757

Reduction for equity component from debt conversion
, net of tax

—

—

(200,079
)
—

—

(200,079
)
Exercise of stock options and releases of restricted stock

311,299

3

1,055

—

—

1,058

Issuance of common stock pursuant to the acquisition of C Technologies, Inc.

779,221

8

53,930

—

—

53,938

Tax withholding on vesting of restricted stock units

(3,077
)
—

(290
)
—

—

(290
)
Equity component of 0.375% senior convertible notes, net
of tax

—

—

38,088

—

—

38,088

Proceeds from issuance of common stock, net of issuance costs
of $18,607

4,731,531

48

320,665

—

—

320,713

Stock-based compensation expense

—

—

9,459

—

—

9,459

Translation adjustment

—

—

—

(9,901
)
—

(9,901
)

Balance as of September 30, 2019

52,052,581
$
521
$

1,064,152
$
(21,794
) $
2,239
$
1,045,118

Three Months Ended September 30, 2019

Common Stock

Number of Shares

Par Value

Additional Paid-

In Capital

Accumulated Other Comprehensive Income (Loss)

Accumulated Earnings

Total Stockholders’ Equity

Balance at June 30, 2019

48,086,422
$
481
$
892,960
$
(15,053
) $
580
$
878,968

Net income

—

—

—

—

1,659

1,659

Issuance of common stock for debt conversion

2,316,200

23

198,732

—

—

198,755

Reduction for equity component from debt conversion
, net of tax

—

—

(200,079
)
—

—

(200,079
)
Exercise of stock options and releases of restricted stock

66,036

1

493

—

—

494

Tax withholding on vesting of restricted stock units

(3,077
)
—

(290
)
—

—

(290
)
Equity component of 0.375% senior convertible notes, net
of tax

—

—

38,088

—

—

38,088

Proceeds from issuance of common stock, net of issuance costs
of $6,981

1,587,000

16

131,073

—

—

131,089

Stock-based compensation expense

—

—

3,175

—

—

3,175

Translation adjustment

—

—

—

(6,741
)
—

(6,741
)

Balance as of September 30, 2019

52,052,581
$
521
$
1,064,152
$
(21,794
) $
2,239
$
1,045,118

Nine Months Ended September 30, 2018

Common Stock

Number of Shares

Par Value

Additional Paid-

In Capital

Accumulated Other Comprehensive Income (Loss)

Accumulated Deficit

Total Stockholders’ Equity

Balance at December 31, 2017

43,587,079
$
436
$
628,983
$
(6,363
) $
(31,508
) $
591,548

Net income

—

—

—

—

10,979

10,979

Issuance of common stock for debt conversion

2

0

0

—

—

0

Exercise of stock options and releases of restricted stock

266,308

3

2,372

—

—

2,375

Stock-based compensation expense

—

—

7,672

—

—

7,672

Cumulative effect of accounting changes

—

—

—

—

(677
)
(677
)
Translation adjustment

—

—

—

(5,410
)
—

(5,410
)

Balance as of
September 30
, 2018

43,853,389
$
439
$
639,027
$
(11,773
) $
(21,206
) $
606,487


	Nine Months Ended September 30, 2020
	Common Stock				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 December 31, 2019		52,078,258	$	521	$	1,068,431	$	(15,027	)	$	5,843	$	1,059,768
Net income		—		—		—		—			40,228		40,228
Exercise of stock options and vesting of stock units		528,442		5		7,073		—			—		7,078
Stock-based compensation expense		—		—		12,492		—			—		12,492
Translation adjustment		—		—		—		5,304			—		5,304

Balance as of September 30, 2020		52,606,700	$	526	$	1,087,996	$	(9,723	)	$	46,071	$	1,124,870


	Three Months Ended September 30, 2020
	Common Stock				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
Net income		—		—		—		—			14,552		14,552
Exercise of stock options and vesting of stock units		111,816		1		1,675		—			—		1,676
Stock-based compensation expense		—		—		4,225		—			—		4,225
Translation adjustment		—		—		—		4,390			—		4,390

Balance as of September 30, 2020		52,606,700	$	526	$	1,087,996	$	(9,723	)	$	46,071	$	1,124,870


	Nine Months Ended September 30, 2019
	Common Stock					Additional Paid- In Capital			Accumulated Other Comprehensive Loss			Retained Earnings/ (Accumulated Deficit)			Total Stockholders’ Equity
	Number of Shares			Par Value		Additional Paid- In Capital			Accumulated Other Comprehensive Loss			Retained Earnings/ (Accumulated Deficit)			Total Stockholders’ Equity
Balance at December 31, 2018		43,917,378		$	439	$	642,590		$	(11,893	)	$	(15,568	)	$	615,568
Net income		—			—		—			—			17,807			17,807
Issuance of common stock for debt conversion		2,316,229			23		198,734			—			—			198,757
Reduction for equity component from debt conversion, net of tax		—			—		(200,079	)		—			—			(200,079	)
Exercise of stock options and vesting of stock units		311,299			3		1,055			—			—			1,058
Issuance of common stock pursuant to the acquisition of C Technologies, Inc.		779,221			8		53,930			—			—			53,938
Tax withholding on vesting of restricted stock units		(3,077	)		—		(290	)		—			—			(290	)
Equity component of 0.375% senior convertible notes, net of tax		—			—		38,088			—			—			38,088
Proceeds from issuance of common stock, net of issuance cost of $18,607		4,731,531			48		320,665			—			—			320,713
Stock-based compensation expense		—			—		9,459			—			—			9,459
Translation adjustment		—			—		—			(9,901	)		—			(9,901	)

Balance as of September 30, 2019		52,052,581		$	521	$	1,064,152		$	(21,794	)	$	2,239		$	1,045,118

Table of Contents

~~REPLIGEN CORPORATION~~

~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY—CONTINUED~~

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

Three Months Ended September 30, 2018

Common Stock

Accumulated

Additional

Other

Total

Number of

Par

Paid-

Comprehensive

Accumulated

Stockholders’

Shares

Value

In Capital

Income (Loss)

Deficit

Equity

Balance at June 30, 2018

43,798,572
$

438
$
635,364
$
(11,143
) $
(26,000
) $
598,659

Net income

—

—

—

—

4,794

4,794

Exercise of stock options and releases of restricted stock

54,817

1

884

—

—

885

Stock-based compensation expense

—

—

2,779

—

—

2,779

Translation adjustment

—

—

—

(630
)
—

(630
)

Balance as of
September 30
, 2018

43,853,389
$
439
$
639,027
$
(11,773
) $
(21,206
) $
606,487


	Three Months Ended September 30, 2019
	Common Stock					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, 2019		48,086,422		$	481	$	892,960		$	(15,053	)	$	580	$	878,968
Net income		—			—		—			—			1,659		1,659
Issuance of common stock for debt conversion		2,316,200			23		198,732			—			—		198,755
Reduction of equity component from debt conversion, net of tax		—			—		(200,079	)		—			—		(200,079	)
Exercise of stock options and vesting of stock units		66,036			1		493			—			—		494
Tax withholding on vesting of restricted stock units		(3,077	)		—		(290	)		—			—		(290	)
Equity component of 0.375% senior convertible notes, net of tax		—			—		38,088			—			—		38,088
Proceeds from issuance of common stock, net of issuance cost of $6,981		1,587,000			16		131,073			—			—		131,089
Stock-based compensation expense		—			—		3,175			—			—		3,175
Translation adjustment		—			—		—			(6,741	)		—		(6,741	)

Balance as of September 30, 2019		52,052,581		$	521	$	1,064,152		$	(21,794	)	$	2,239	$	1,045,118

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

Table of Contents

REPLIGEN CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, amounts in thousands)

Nine Months Ended September 30,

2019

2018

Cash flows from operating activities:

Net income
$
17,807
$
10,979

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

Depreciation and amortization

14,791

11,775

Non-cash interest expense

4,863

3,160

Stock-based compensation expense

9,459

7,672

Deferred tax
es

(9,680
)
472

Loss on extinguishment of debt

5,650

—

Other

114

108

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

Accounts receivable

(6,734
)
(1,583
)
Royalties and other receivables

26

(149
)
Unbilled receivables

2,047

—

Inventories

(4,891
)
(4,805
)
Prepaid expenses and other assets

(1,075
)
(1,437
)
Operating lease right of use assets

787

—

Other assets

(66
)
(1,348
)
Accounts payable

(780
)
3,354

Accrued expenses

7,263

(1,070
)
Operating lease liability

(607
)
—

Long-term liabilities

10,568

87

Total cash provided by operating activities

49,542

27,215

Cash flows from investing activities:

Acquisition of C Technologies, Inc., net of cash acquired

(182,154
)
—

Additions to capitalized software costs

(4,630
) (1,212 )
Purchases of property, plant and equipment

(11,413
)
(7,368
)

Total cash used in investing activities

(198,197
)
(8,580
)

Cash flows from financing activities:

Exercise of stock options

1,058

2,374

Payment of tax withholding obligation on vesting of restricted stock

(290
)
—

Proceeds from issuance of convertible debt, net

278,555

—

Proceeds from issuance of common stock, net

320,713

—

Repayment of senior convertible notes

(114,989
)
(11
)

Total cash provided by financing activities

485,047

2,363

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

(7,785
)
(4,453
)

Net increase in cash, cash equivalents and restricted cash

328,607

16,545

Cash, cash equivalents and restricted cash, beginning of period

193,822

173,759

Cash, cash equivalents and restricted cash, end of period
$
522,429
$
190,304

Supplemental disclosure of cash flow information:

Income taxes paid
$
4,206
$
3,120

Interest paid
$
1,484
$
1,222

Supplemental disclosure of non-cash investing and financing activities:

Fair value of 2,316,229 shares of common stock issued for conversion of convertible notes
$
198,757
$
—

Fair value of common stock issued for acquisition of C Technologies, Inc.
$
53,938
$
—

Property, plant and equipment related to lease incentives
$
—
$
2,270

Non-cash effect of adoption of ASU 2016-16
$
—
$
5,609

Business Acquisitions:

Fair value of tangible assets acquired
$
30,756
$
—

Fair value of accounts receivables

3,044

—

Fair value of other assets

3,929

—

Liabilities assumed

(35,370
)
—

Fair value of stock issued

(53,938
)
—

Cost in excess of fair value of assets acquired (goodwill)

142,903

—

Acquired identifiable intangible assets

90,830

—

Net cash paid for business acquisitions
$
182,154
$
—


	Nine Months Ended September 30,
	2020			2019
Cash flows from operating activities:
Net income	$	40,228		$	17,807
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		19,581			14,791
Non-cash interest expense		8,175			4,863
Stock-based compensation expense		12,492			9,459
Deferred income taxes, net		72			(9,680	)
Loss on extinguishment of debt		—			5,650
Other		228			114
Changes in operating assets and liabilities, excluding impact of acquisitions:
Accounts receivable		(11,515	)		(6,734	)
Royalties and other receivables		157			26
Unbilled receivables		456			2,047
Inventories		(22,767	)		(4,891	)
Prepaid expenses and other assets		(2,908	)		(1,075	)
Operating lease right of use assets		2,574			787
Other assets		(260	)		(66	)
Accounts payable		3,317			(780	)
Accrued expenses		(2,712	)		7,263
Operating lease liability		(831	)		(607	)
Long-term liabilities		1,467			10,568

Total cash provided by operating activities		47,754			49,542

Cash flows from investing activities:
Acquisitions, net of cash acquired		(28,445	)		(182,154	)
Additions to capitalized software costs		(3,585	)		(4,630	)
Purchases of property, plant and equipment		(11,067	)		(11,413	)

Total cash used in investing activities		(43,097	)		(198,197	)

Cash flows from financing activities:
Proceeds from exercise of stock options		7,088			1,058
Payment of tax withholding obligation on vesting of restricted stock		(10	)		(290	)
Proceeds from issuance of convertible debt, net		—			278,555
Proceeds from issuance of common stock, net		—			320,713
Repayment of senior convertible notes		—			(114,989	)

Total cash provided by financing activities		7,078			485,047

Effect of exchange rate changes on cash, cash equivalents and restricted cash		4,160			(7,785	)

Net increase in cash, cash equivalents and restricted cash		15,895			328,607

Cash, cash equivalents and restricted cash, beginning of period		537,407			193,822

Cash, cash equivalents and restricted cash, end of period	$	553,302		$	522,429

Supplemental disclosure of non-cash investing and financing activities:
Assets acquired under operating leases	$	1,456		$	—

Fair value of 2,316,229 shares of common stock issued for conversion of convertible notes	$	—		$	198,757

Fair value of common stock issued for acquisition of C Technologies, Inc.	$	—		$	53,938

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

Table of Contents

REPLIGEN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	~~Basis~~ Summary of ~~Presentation~~Significant Accounting Policies

Basis of Presentation

The consolidated financial statements included herein have been prepared by Repligen Corporation (the “Company”, “Repligen” or “we”) in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the 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

(“Form

10-K”)

for the fiscal year ended December 31, ~~2018.~~2019.

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. 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,” acquired on May 31, 2019)~~Technologies”), Engineered Molding Technology (“EMT”) and Repligen Singapore Pte. Ltd. All significant intercompany accounts and transactions have been eliminated in consolidation.

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.

Risks and Uncertainties

The ultimate impact that the current pandemic of the novel coronavirus (“COVID-19”), may have on the Company and its customers, employees, suppliers, vendors, business partners and distribution channels is currently unknown. The Company is closely monitoring the impact of this evolving situation on all aspects of its business. While COVID-19 did not materially affect the Company’s financial results and business operations in the Company’s three and nine months ended September 30, 2020, the Company is unable to predict the impact that COVID-19 may have on its financial position and operations moving forward due to numerous uncertainties. These estimates may change as new events occur and additional information is obtained, and actual results could differ materially from these estimates under different assumptions or conditions. The Company will continue to assess the evolving impact of COVID-19 and will make adjustments to its operations as necessary.

Recent Accounting Standards Updates

We consider the applicability and impact of all Accounting Standards Updates on ~~our~~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 ~~our~~the Company’s consolidated financial position or results of operations. Recently issued Accounting Standards Updates ~~which~~that we feel may be applicable to usthe Company are as follows:

Recently Issued Accounting Standard Updates – ~~Not Yet~~ Adopted During the Period

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. (“ASU”)

2018-13,

“Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.”

ASU

2018-13

includes amendments that aim to improve the effectiveness of fair value measurement disclosures. The amendments in this guidance modify the disclosure requirements on fair value measurements based on the concepts in FASB Concepts Statement,

“Conceptual Framework for Financial ~~Reporting—~~Reporting - Chapter 8: Notes to Financial Statements

”

including the consideration of costs and benefits. The ~~amendments become effective~~Company adopted ASU

2018-13

on January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements as of and for the ~~Company in the year ending December 31, 2020~~three and ~~early adoption is permitted. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements.~~nine months ended September 30, 2020.

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In August 2018, the FASB issued ASU

2018-15,

“Intangibles – Goodwill and Other –

Internal-Use

Software (Subtopic

350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.”

ASU

2018-15

aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain

internal-use

software (and hosting arrangements that include an

internal-use

software license). The guidance also requires the entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement, which includes reasonably certain renewals. The ~~guidance becomes effective~~Company adopted ASU

2018-13

on January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements as of and for the ~~Company in~~three and nine months ended September 30, 2020.

In June 2016, the ~~year ending December 31, 2020~~FASB issued ASU

2016-13,

“

Financial Instruments-Credit Losses (Topic 326).”

ASU

2016-13

significantly changes how entities will account for credit losses for most financial assets and ~~early adoption is permitted.~~certain other instruments that are not measured at fair value through net income. ASU

2016-13

replaces the existing incurred loss model with an expected credit loss model that requires entities to estimate an expected lifetime credit loss on most financial assets and certain other instruments, including short-term trade receivables and contract assets, and expands disclosure requirements for credit quality of financial assets. The Company ~~is currently assessing~~adopted ASU

2016-13

on January 1, 2020. The Company assessed all potential impacts that the ~~impact that~~adoption of this guidance ~~will have~~has on its consolidated financial statements. Based on the composition of the Company’s investment portfolio, accounts receivable, current market conditions and historical credit loss activity, the adoption of ASU

2016-13

by the Company did not have a material impact on its consolidated financial position, results of operations or cash flows as of and for the three and nine months ended September 30, 2020. The Company continues to monitor processes and controls for indications of an adjustment for future economic conditions at quarterly and annual reporting periods. See Note 5,

“Credit Losses,”

below for more information on the Company’s adoption of ASC 326.

In November 2018, the FASB issued ASU

2018-18,

“Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606.”

ASU

2018-18

clarifies the interaction between Topic 808,

“Collaborative Arrangements,”

and Topic 606,

“Revenue from Contracts with Customers,”

by making targeted improvements to GAAP for collaborative arrangements and providing guidance on whether certain transactions between collaborative arrangement participants should be accounted for with revenue under Topic 606. This includes improving comparability in the presentation of revenue for certain transactions between

collaborative arrangement participants by allowing presentation of the units of account in collaborative arrangements that are within

~~Table of Contents~~

the scope of Topic 606 together with revenue accounted for under Topic 606. The ~~guidance becomes effective~~Company adopted ASU

2018-13

on January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements as of and for the ~~Company in the year ending~~three and nine months ended September 30, 2020.

In December ~~31, 2020 and early adoption is permitted. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements.~~

~~In June 2016,~~2019, the FASB issued ASU ~~2016-13,~~

2019-12,

“

~~Financial Instruments-Credit Losses~~

Income Taxes (Topic ~~326).~~740) – Simplifying the Accounting for Income Taxes.”

ASU ~~2016-13 significantly changes how entities will account~~

2019-12

simplifies the accounting for ~~credit losses~~income taxes by removing certain exceptions to the general principles in Topic 740, including, but not limited to, the exception to the incremental approach for ~~most financial assets~~intraperiod tax allocation when there is a loss from continuing operations and ~~certain~~income or a gain from other ~~instruments that are not measured at fair value through net income. ASU 2016-13 replaces~~items, the ~~existing incurred~~ exceptions related to the recognition of a deferred tax liability related to an equity method investment and the exception to methodology for calculating income taxes in an interim period when a

year-to-date

loss ~~model with an expected credit~~exceeds the anticipated loss ~~model that requires entities to estimate an expected lifetime credit loss on most financial assets and certain other instruments, including short-term trade receivables and contract assets~~

~~and expands disclosure requirements for credit quality of financial assets. ASU 2016-13 becomes effective~~ for the ~~Company in the year ending December 31, 2020, including interim periods. Early adoption is permitted.~~year. The Company ~~is currently assessing~~adopted ASU

2018-13

on January 1, 2020. The adoption did not have a material impact on the ~~potential impact of the adoption of ASU 2016-13 on its~~Company’s consolidated financial ~~statements.~~

statements as of and for the three and nine months ended September 30, 2020.

Recently Issued Accounting Standard Updates – Not Yet Adopted ~~During the Period~~

In ~~February 2016,~~August 2020, the FASB issued ASU

~~2016-02,~~2020-06,

“

Debt - Debt with Conversion and Other Options (Subtopic

470-20)

and Derivatives and Hedging - Contracts in Entity

~~“Leases (Topic 842)~~’

s Own Equity (Subtopic

815-40).

”

ASU

~~2016-02,~~2020-06

~~along with subsequent ASUs issued to clarify certain provisions~~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. ASU

2020-06

also enhances transparency and improves disclosures for convertible instruments and earnings per share guidance. ASU

2020-06

is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years. 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. The Company is currently evaluating the timing and impact of the adoption of ASU

~~2016-02~~2020-06

~~(collectively known as “ASC 842”), establishes a~~

~~right-of-use~~

(“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the consolidated balance sheet for all leases with terms longer than 12 months. Certain qualitative and quantitative disclosures are also required. The Company adopted ASU

~~2016-02~~

~~and related amendments on January 1, 2019 using an optional transition method allowed with the issuance of ASU~~

~~2018-11,~~

~~“Leases – Targeted Improvements (Topic 842),”~~

~~in July 2018. ASU~~

~~2018-11~~

gives entities the option to not provide comparative period financial statements and instead apply the transition requirements as of the effective date of the new standard. Pursuant to additional guidance under ASC 842, the Company also elected the optional package of practical expedients, which allowed the Company to not reassess: (i) whether expired or existing contracts contain leases; (ii) lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. As a result, the consolidated balance sheet prior to January 1, 2019 was not restated, continues to be reported under ASC 840,

~~“Leases”,~~

which did not require the recognition of operating lease liabilities on the consolidated balance sheet, and is not comparative. Under ASC 842, all leases are required to be recorded on the balance sheet and are classified as either operating leases or finance leases, which is determined at the inception of the lease. The lease classification affects the expense recognition in the consolidated statements of comprehensive income (loss). The expense recognition for operating leases and finance leases under ASC 842 is substantially consistent with ASC 840. Therefore, there is no significant difference in our results of operations presented in our consolidated statements of comprehensive income (loss) for each period presented. The Company also elected under the package of practical expedients, to combine lease and

~~non-lease~~

components and not to record leases with an initial term of 12 months or less on the consolidated balance sheet. The Company adopted ASC 842 using the optional transition method for all leases existing at January 1, 2019. The adoption had a substantial impact on our balance sheet. The most significant impact was the recognition of the operating lease ROU assets and lease liabilities for operating leases. Upon adoption, leases that were classified as operating leases under ASC 840 were classified as operating leases under ASC 842, and we recorded ROU assets of $17.0 million and lease liabilities of $21.0 million, before considering deferred taxes. The lease liability is based on the present value of the remaining minimum lease payments, determined under ASC 840, discounted using our incremental borrowing rate at the effective date January 1, 2019. The difference between the ROU assets and the lease liabilities is due to $4.0 million of unamortized lease incentives and deferred rent at the Company’s Marlborough and Waltham facilities as of December 31, 2018. There was no impact to our beginning retained earnings upon adoption of ASC 842. See Note 5,

~~“Leases,”~~

~~below for more information~~ on the Company’s ~~adoption~~consolidated financial statements.

Table of ~~ASC 842.~~Contents

2.	Fair Value Measurements

InThe Company uses various valuation approaches in determining the fair value of its assets and ~~liabilities, the Company uses various valuation approaches.~~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.

~~Table of Contents~~

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.

As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, cash and cash equivalents on the Company’s consolidated balance sheets included ~~$414.7~~$395.6 million and ~~$126.6~~$415.6 million, respectively, in a money market account. These funds are valued on a recurring basis using Level 1 inputs.

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”). 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. As of September

30, ~~2019,~~2020, the carrying value of the 2019 Notes was ~~$230.2~~

$240.9 million, net of unamortized discount, and the fair value of the 2019 Notes was ~~$287.9~~

$416.0 million. 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 September

30, ~~2019.~~2020. The 2019 Notes are discussed in more detail in Note 8,

“Convertible Senior Notes”

to these consolidated financial statements.

The Company’s

~~Nonrecurring Fair Value Measurements~~non-financial

~~We hold certain~~ assets include goodwill and ~~liabilities that~~other intangible assets, which we classify as Level 3 items. These assets are measured at fair value on a ~~nonrecurring~~

non-recurring

basis ~~in periods subsequent~~as part of our impairment testing. See Note 6,

“Goodwill and Intangible Assets,”

below for additional information related to ~~initial recognition. Refer~~goodwill and intangible assets, and our impairment testing.

During the three and nine months ended September 30, 2020, there were no remeasurements to ~~Note 8,~~

~~“Convertible Senior Notes,”~~

~~to these consolidated~~fair value of financial ~~statements for disclosure~~assets and liabilities that are not measured at fair value on a recurring basis.

3.	Acquisitions

Engineered Molding Technology LLC

On July 13, 2020, the Company completed the acquisition of 100% of the ~~nonrecurring~~membership interests of Engineered Molding Technology LLC (“EMT”), a New York limited liability company

pursuant to a Membership Interest Purchase Agreement, dated June 26, 2020, by and among the Company, EMT, and Michael Pandori and Todd Etesse, the legal and beneficial owners of EMT (such acquisition, the “EMT Acquisition”).

EMT, which is headquartered in Clifton Park, New York, is an innovator and manufacturer of

single-use

silicone assemblies and components used in the manufacturing of biologic drugs. EMT’s standard and custom molding as well as their over-molded connectors and silicone tubing products are key components in

single-use

filtration and chromatography systems. EMT’s products will complement and expand Repligen’s

single-use

product offerings.

Consideration Transferred

The EMT

Acquisition

was accounted for as a purchase of a business under ASC 805,

“Business Combinations”.

Total consideration paid was $28.5 million

which included $2.2 million

deposited into an escrow account against which the Company may make claim

for indemnification

Under the acquisition method of accounting, the net assets of EMT were recorded as of the acquisition date, at their respective fair values, and consolidated with those of Repligen. The fair value ~~measurement~~ of the net tangible assets acquired is estimated to be approximately $1.5 million, the fair value of the intangible assets acquired is estimated to be $14.4 million, and the residual goodwill is estimated to be approximately $12.6 million. The estimated consideration and preliminary purchase price information has been prepared using a preliminary valuation. The preparation of the valuation required the use of significant assumptions and

estimates

. Critical estimates included, but were not

Table of Contents

limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that Repligen believes to be reasonable. However, actual results may differ from these estimates.

Acquisition

related ~~to the $5.6 million loss on extinguishment~~costs are not included as a component of ~~debt recorded~~consideration transferred but are expensed in the ~~third quarter~~periods in which the costs are incurred. The Company incurred $1.0 million and $1.1 million of ~~2019.~~acquisition related costs during the three and nine months ended September 30, 2020. The transaction costs are included in selling, general and

administrative

expenses in the consolidated statements of comprehensive income (loss).

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. 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 July 13, 2020). Any such revisions or changes may be material. The components and allocation of the purchase price consists of the following amounts (amounts in thousands):


Cash and cash equivalents	$	69
Accounts receivable		1,057
Inventory		449
Prepaid expenses and other current assets		7
Fixed assets, net		472
Operating lease right of use assets		1,050
Customer relationships		11,080
Developed technology		2,910
Trademark and tradename		320
Non-compete agreements		50
Goodwill		12,573
Accounts payable		(283	)
Accrued liabilities		(190	)
Operating lease liability		(211	)
Operating lease liability, long-term		(839	)

Fair value of net assets acquired	$	28,514

Acquired Goodwill

The goodwill of $12.6 million represents future economic benefits expected to arise from anticipated synergies from the integration of EMT. These synergies include certain cost savings, operating efficiencies and other strategic benefits projected to be achieved as a result of the EMT 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 EMT Acquisition and their estimated useful lives:


	Useful life		Fair Value
			(Amounts in thousands)
Customer relationships		14 years	$	11,080
Developed technology		11 years		2,910
Trademark and tradename		14 years		320
Non-competition agreements		3 years		50

			$	14,360

3.	~~Acquisition of C Technologies, Inc.~~

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Revenue, Net Income and Pro Forma Presentation

The Company has included the operating results of EMT in its consolidated statements of comprehensive income (loss) since the July 13, 2020 acquisition date. The Company does not consider this acquisition to be material to its consolidated statements of comprehensive income (loss) and therefore has not included pro forma results.

C Technologies, Inc.

On ~~April 25,~~May 31, 2019, Repligen ~~agreed to acquire~~acquired C Technologies, pursuant to the terms of a Stock Purchase Agreement (the “Agreement”), by and among Repligen, C Technologies and Craig Harrison, an individual and sole stockholder of C Technologies (such acquisition, the “C Technologies Acquisition”).

C Technologies’ business consists of two major product categories (i) biotechnology, or Biotech, and (ii) Legacy and Other. Through its Biotech category, C Technologies sells instruments, consumables and accessories that are designed to allow bioprocessing technicians to measure the protein concentration of a liquid sample using C Technologies’ Slope Spectroscopy method, which eliminates the need for manual sample dilution. C Technologies’ lead product, the SoloVPE instrument platform, was launched in 2008 for

~~off-line~~

~~and~~

~~at-line~~

protein concentration measurements conducted in quality control, process development and manufacturing labs in the production of biological therapeutics. C Technologies’ FlowVPE platform, an extension of the SoloVPE technology, was designed to allow end users to make

~~in-line~~

~~protein concentration measurements in filtration, chromatography and fill-finish applications, designed to allow for real-time process monitoring.~~

~~Consideration Transferred~~

~~The C Technologies Acquisition was accounted for as a purchase of a business under Accounting Standards Codification No. (“ASC”) 805,~~

~~“Business Combinations”~~

~~. The C Technologies Acquisition was funded through payment of approximately $195.0 million in cash, $186.0 million of which~~

consideration transferred pursuant to ASC 805, and $9.0 million of which will be compensation expense for future employment, and 779,221 unregistered shares of the Company’s common stock totaling $53.9 million for a total purchase price of $239.9 million. Under the acquisition method of accounting, the assets of C Technologies were recorded as of the acquisition date, at their respective fair values, and consolidated with those of Repligen. The fair value of the net tangible assets acquired is estimated to be approximately $6.2 million, the fair value of the intangible assets acquired is estimated to be approximately $90.8 million, and the residual goodwill is estimated to be approximately $142.9 million. The estimated consideration and preliminary purchase price information has been prepared using a preliminary valuation. The final purchase price allocation will be completed upon closing of the transaction. 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 Repligen believes to be reasonable. However, actual results may differ from these estimates.

~~Table of Contents~~

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

Cash consideration
$
185,949

Equity consideration

53,938

Fair value of net assets acquired

$
239,887

~~Acquisition related~~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 ~~an immaterial amount of acquisition related costs in the third quarter of 2019 and~~ $4.0 million in transaction costs for the ~~nine-month period~~nine months ended September 30, 2019. The transaction costs are included in selling, general and administrative expenses in the consolidated statements of comprehensive income (loss)

. In connection with the transaction, an additional $9.0 million ~~in cash will be due~~was paid to employees during the second quarter of 2020, based on their continued employment with the Company one year after the date of the close of the C Technologies Acquisition.

The

Company has recognized $3.7 million of compensation expense associated

with

this amount due to employees

during the nine months ended September 30, 2020

and has recognized $9.0 million of compensation expense associated with this amount due since the C Technologies Acquisition.

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. The Company ~~obtains~~obtained this information during due diligence and through other sources. In the months after closing, the Company ~~may obtain~~obtained additional information about these assets and liabilities as it ~~learns~~learned more about C ~~Technologies and will refine~~Technologies. The Company refined the estimates of fair value to more accurately allocate the purchase price. Only items identified as of the acquisition date ~~are~~were considered for subsequent adjustment. We ~~will make~~made appropriate adjustments to the purchase price allocation ~~if any, prior to the completion of~~during the measurement period, which ~~is up to~~was one year from the acquisition date. The components and allocation of the purchase price consists of the following amounts (amounts in thousands):

Cash and cash equivalents
$
3,795

Restricted cash

26,933

Accounts receivable

3,044

Inventory

3,783

Prepaid expenses and other current assets

93

Fixed assets

40

Operating lease right of use asset

3,836

Customer relationships

59,680

Developed technology

28,920

Trademark and tradename

1,570

Non-competition
agreements

660

Goodwill

142,903

Accounts payable

(436
)
Accrued liabilities

(2,461
)
Accrued bonus

(26,928
)
Deferred revenue

(1,709
)
Operating lease liability

(51
)
Operating lease liability, long-term

(3,785
)

Fair value of net assets acquired
$
239,887


Cash and cash equivalents	$	3,795
Restricted cash		26,933
Accounts receivable		3,044
Inventory		3,783
Prepaid expenses and other current assets		93
Fixed assets		40
Operating lease right of use asset		3,836
Customer relationships		59,680
Developed technology		28,920
Trademark and tradename		1,570
Non-competition agreements		660
Goodwill		142,314
Deferred taxes		895
Accounts payable		(436	)
Accrued liabilities		(2,767	)
Accrued bonus		(26,928	)
Deferred revenue		(1,709	)
Operating lease liability		(51	)
Operating lease liability, long-term		(3,785	)

Fair value of net assets acquired	$	239,887

Acquired Goodwill

The goodwill of ~~$142.9~~$142.3 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.

Pursuant to the Company’s business combination accounting policy included in Note 2,

“

Summary of Significant Accounting Policies – Business Combinations, Goodwill and Intangible Assets,

”

of the Company’s Annual Report on Form

10-K

for the fiscal year ended December 31, 2019, the Company

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~~Intangible Assets~~

~~The following table sets forth~~recorded goodwill adjustments for the ~~components~~effects on goodwill of changes to net assets acquired during the period that such change is identified, provided that any such change is within the measurement period (up to one year from the date of the ~~identified intangible assets associated with~~acquisition). In March 2020, the ~~C Technologies Acquisition and their estimated useful lives:~~Company recorded an adjustment to goodwill of $0.3 million related to additional state income tax liabilities to be paid to the seller, which were incurred from the Company’s finalized 338(h)(10) tax election.

Useful Life

Fair Value

(Amounts in thousands)

Customer relationships

17 years
$
59,680

Developed technology

18 years

28,920

Trademark and tradename

20 years

1,570

Non-competition
agreements

4 years

660

$
90,830

Revenue, Net Income and Pro Forma Presentation

The Company recorded revenue from C Technologies of ~~$7.0~~$9.0 million and $23.3 million for the three and nine months ended September 30, 2020, respectively, and $16.4 million from May 31, 2019, the date of acquisition, to December 31, 2019. The Company recorded a net income from C Technologies’ results of operations of $2.1 million and a net loss of ~~$1.2~~$0.8 million for the three and nine months ended September 30, ~~2019 and revenue of $9.1 million~~2020, respectively, and a net loss of ~~$2.7~~$7.4 million from May 31, 2019

~~the date of acquisition~~

to ~~September 30,~~December 31, 2019. The Company has included the operating results of C Technologies in its consolidated statements of comprehensive income (loss) ~~income~~ since the May 31, 2019 acquisition date. The following pro forma financial information presents the combined results of operations of Repligen and C Technologies as if the acquisition had occurred on January 1, ~~2018~~2019 after giving effect to certain pro forma adjustments. The pro forma adjustments reflected herein include only those adjustments that are directly attributable to the C Technologies Acquisition, factually supportable and have a recurring impact. These pro forma adjustments include ~~a $3.6 million and a $4.0 million net increase in~~ amortization expense ~~in 2019 and 2018, respectively, to record amortization expense for~~on the ~~$90.8 million of~~ acquired identifiable intangible assets, adjustments to stock-based compensation ~~of $0.5 million in both years,~~expense for equity compensation issued to C Technologies employees and the income tax effect of the adjustments ~~made at the~~

~~blended federal and state~~

~~statutory tax rate (approximately 25%).~~made. In addition, acquisition-related transaction costs ~~of $4.0 million~~ and ~~a $1.5 million purchase~~an accounting adjustment to record inventory at fair value were excluded from pro forma net income in 2019.

Prior to the C Technologies Acquisition, C Technologies did not generate monthly or quarterly financial statements that were prepared in accordance with GAAP.

The

following

pro forma financial information does not reflect any adjustments for anticipated expense savings resulting from the acquisition and is not necessarily indicative of the operating results that would have actually occurred had the transaction been consummated on January 1, ~~2018~~2019 or of future ~~results:~~results (amounts in thousands, except per share data):

Nine Months Ended
September 30,

2019

2018

(Amounts in thousands, except per share data)

Pro forma total revenue
$
209,960
$
159,173

Pro forma net income
$
21,012
$
15,205

Pro forma earnings per share:

Basic
$
0.45
$
0.32

Diluted
$
0.44
$
0.31

~~Prior to the C Technologies Acquisition, C Technologies did not generate monthly or quarterly financial statements that were prepared in accordance with U.S. GAAP.~~


	Nine Months Ended September 30,
	2019
Pro forma total revenue	$	209,960
Pro forma net income	$	21,012
Pro forma earnings per share:
Basic	$	0.45

Diluted	$	0.44

4.	Revenue Recognition

~~We generate~~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.

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Disaggregation of Revenue

Revenues for the three and nine m

~~nths~~months ended September 30, ~~2019~~2020 and ~~2018~~2019 were as follows:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

(Amounts in thousands)

Product revenue
$
69,419
$
49,500
$
200,701
$
142,042

Royalty and other income

26

29

70

48

Total revenue
$
69,445
$
49,529
$
200,771
$
142,090


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(Amounts in thousands)
Product revenue	$	94,029	$	69,419	$	257,521	$	200,701
Royalty and other income		31		26		91		70

Total revenue	$	94,060	$	69,445	$	257,612	$	200,771

When disaggregating revenue, the Company considered all of the economic factors that may affect its revenues. Because all of its revenues are from bioprocessing customers, there are no differences in the nature, timing and uncertainty of the Company’s

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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 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 revenues are generated from two customers; therefore, economic factors specific to these two 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 can be found in Note 15,

“Segment Reporting,”

below.

Revenue from significant customers that represent 10% or more of the Company’s total revenue is as follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

(Amounts in thousands)

GE Healthcare
$
5,010
$
7,743
$
23,759
$
22,253

MilliporeSigma
$
9,458
$
8,791
$
28,354
$
24,181


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(Amounts in thousands)
Cytiva (formerly GE Healthcare)		N/A		N/A		N/A	$	23,759
MilliporeSigma		N/A	$	9,458	$	29,387	$	28,354

Chromatography Products

The Company’s chromatography products include a number of products used in the downstream purification and quality control of biological drugs. The majority of chromatography revenue relates to the OPUS

pre-packed

chromatography column line. OPUS columns are designed to be disposable following a production campaign. Each OPUS column is delivered

pre-packaged

with the customer’s choice of chromatography resin, which is either provided by the Company for the customer or customer supplied. In either scenario, the OPUS column and resin are not interdependent of one another and are therefore considered distinct products that represent separate performance obligations. Chromatography product revenue is generally recognized at a point in time upon transfer of control to the customer.

Filtration Products

The Company’s filtration products generate revenue through the sale of KrosFlo

hollow fiber ~~(“HF”)~~ TFF systems, TangenX

flat sheet cassettes, Spectrum

hollow fiber filters, membranes and modules, XCell ATF

systems and related consumables

Supporting our systems, we also sell

ProConnex

single-use

flow path ~~connectors, flat sheet TFF cassettes~~ assemblies

and ~~hardware, and XCell~~

™

~~alternating tangential flow (“ATF”) devices and related consumables.~~

~~The Company markets the KrosFlo line of HF cartridges and TFF systems and the ProConnex line of~~

custom silicone-based, single-use

flow path ~~connectors which were acquired as part of the acquisition of Spectrum LifeSciences, LLC (the “Spectrum Acquisition”)~~assemblies and components from EMT

. ~~These products~~

The Company’s KrosFlo systems are used in the filtration, isolation, purification and concentration of biologics and diagnostic products. TFF is a rapid and efficient method for separation and purification of biomolecules that is widely used in laboratory, process development and process scale applications in biopharmaceutical manufacturing. Sales of large-scale systems generally include components and consumables as well as training and installation services at the request of the customer. Because the initial sale of components and consumables are necessary for the operation of the system, such items are combined with the systems as a single performance obligation. Training and installation services do not significantly modify or customize these systems and therefore represent a distinct performance obligation.

The Company’s TangenX flat sheet cassettes (SIUS

, SIUS Gamma

and PRO) are not highly interdependent on one another and are therefore considered distinct products that represent separate performance obligations. Product revenue from the sale of TangenX flat sheet cassettes are generally recognized at a point in time upon transfer of control of the customer.

The Company’s other filtration product offerings are not highly interdependent of one another and are therefore considered distinct products that represent separate performance obligations. Revenue on these products is generally recognized at a point in time upon transfer of control to the customer. The Company invoices the customer for the installation and training services in an amount that directly corresponds with the value to the customer of the Company’s performance to date; therefore, revenue recognized is based on the amount billable to the customer in accordance with the practical expedient under ASC

606-10-55-18.

The Company also markets flat sheet TFF cassettes and hardware. TFF is a rapid and efficient method for separation and purification of biomolecules that is widely used in laboratory, process development and process scale applications in biopharmaceutical manufacturing. The Company’s

~~single-use~~

~~SIUS~~

™

TFF cassettes and hardware are not highly interdependent of one another and are therefore considered distinct products that represent separate performance obligations. SIUS TFF product revenue is generally recognized at a point in time upon transfer of control to the customer.

The Company also markets the XCell

™

ATF ~~System,~~system, a technologically advanced filtration device used in upstream processes to continuously remove cellular metabolic waste products during the course of a fermentation run, freeing healthy cells to continue producing the biologic drug of interest. XCell ATF ~~Systems~~systems typically include a filtration system and consumables (i.e., ~~tube devices,~~tubing sets, metal stands) as well as training and installation services at the request of the customer. The filtration system and consumables are considered distinct products and therefore represent separate performance obligations. First time purchasers of the systems typically purchase a controller that is shipped with the ~~tube device(s)~~tubing set(s) and metal stand(s). The controller is not considered distinct as it is a proprietary product that is highly interdependent with the filtration system; therefore, the controller is combined with the filtration system and accounted for as a single performance obligation. The training and installation services do not significantly modify or customize the XCell ATF system and therefore represent a distinct performance obligation. XCell

ATF system product revenue related to the filtration system (including the controller if applicable) and consumables is generally

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recognized at a point in time upon transfer of

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control to the customer. XCell ATF system service revenue related to training and installation services is generally recognized over time, as the customer simultaneously receives and consumes the benefits as the Company performs. The Company invoices the customer for the installation and training services in an amount that directly corresponds with the value to the customer of the Company’s performance to date; therefore, revenue recognized is based on the amount billable to the customer in accordance with the practical expedient under ASC

606-10-55-18.

On July 13, 2020, the Company consummated the EMT Acquisition and added EMT’s silicone-based,

single-use

components and manifolds to its filtration franchise. These products are key components in

single-use

filtration and chromatography systems and will help expand its line of

single-use

ProConnex flow paths, streamline its supply chain for ATF and provide more flexibility as the Company scales and expands its

single-use

and systems portfolios.

Process Analytics Products

The Process Analytics franchise generates revenue primarily through the sale of the SoloVPE and FlowVPE Slope Spectroscopy systems, consumables and service. These products complement and support the Company’s existing Filtration, Chromatography and Proteins franchises as they allow end users to make

in-line

protein concentration measurements in filtration, chromatography and fill-finish applications, designed to allow for real-time process monitoring.

Protein Products

The Company’s ~~chromatography products include a number of products used in the downstream purification and quality control of biological drugs. The majority of chromatography revenue relates to the OPUS~~

~~pre-packed~~

~~chromatography column line and~~ Protein A chromatography resins. OPUS columns typically consist of the outer hardware of the column with a resin as ordered by the customer packed inside of the column. OPUS columns may also be ordered without the packed resin. In either scenario, the OPUS column and resin are not interdependent of one another and are therefore considered distinct products that represent separate performance obligations. Chromatography product revenue is generally recognized at a point in time upon transfer of control to the customer.

~~Protein Products~~

~~The Company’s Protein product line~~franchise generates revenue through the sale of Protein A affinity ligands and growth factors. Protein A ligands are an essential component of Protein A chromatography resins (media) used in the purification of virtually all ~~monoclonal antibody (“mAb”)-based~~

mAb-based

drugs on the market or in development. The Company manufactures multiple forms of Protein A ligands under long-term supply agreements with major life sciences companies, who in turn sell their Protein A chromatography media to end users (biopharmaceutical manufacturers). The Company also manufactures growth factors for sale under long-term supply agreements with certain life sciences companies as well as

for

direct sales to its customers. Each protein product is considered distinct and therefore represents a separate performance obligation. Protein product revenue is generally recognized at a point in time upon transfer of control to the customer.

~~Process Analytics Products~~

On May 31, 2019, the Company consummated its acquisition of C Technologies and added a fourth franchise, Process Analytics, to our bioprocessing business. The Process Analytics product line generates revenue primarily through the sale of the SoloVPE and FlowVPE systems and consumables. These products will complement and support our existing Filtration, Chromatography and Proteins franchises as they allow end users to make

~~in-line~~

~~protein concentration measurements in filtration, chromatography and fill-finish applications, designed to allow for real-time process monitoring.~~

Other Products

The Company’s other products include operating room products sold to hospitals. Other product revenue is generally recognized at a point in time upon transfer of control to the customer.

Transaction Price Allocated to Future Performance Obligations

Remaining performance obligations represents the transaction price of contracts for which work has not been performed or has been partially performed. The Company’s future performance obligations relate primarily to the installation and training of certain of its systems sold to customers. These performance obligations are completed within one year of receipt of a purchase order from its customers. Accordingly, the Company has elected to not disclose the value of these unsatisfied performance obligations as provided under ASC

~~606-10-50-14.~~

606-10-50-14.

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Contract Balances from Contracts with Customers

The following table provides information about receivables and deferred revenues from contracts with customers as of September 30, ~~2019~~2020 (amounts in thousands):

2019

Balances from contracts with customers only:

Accounts receivable
$
41,968

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

4,286

Revenue recognized during the nine

month period ending September 30, 2019 relating to:

The beginning deferred revenue balance
$
2,768

Changes in pricing related to products or services satisfied in previous periods

—


	2020
Balances from contracts with customers only:
Accounts receivable	$	55,830
Deferred revenue (included in accrued liabilities in the consolidated balance sheets)	$	10,141
Revenue recognized during the nine-month period ended September 30, 2020 relating to:
The beginning deferred revenue balance	$	3,133
Changes in pricing related to products or services satisfied in previous periods	$	0

The timing of revenue recognition, billings and cash collections results in the accounts receivables and deferred revenue balances on the Company’s consolidated balance sheets. ~~There were 0 impairment losses recognized on receivables during the three and nine months ended September 30, 2019.~~

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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.

Costs to Obtain or Fulfill a Customer Contract

The Company’s sales commission structure is based on achieving revenue targets. The commissions are driven by revenue derived from customer purchase orders which are short term in nature.

Applying the practical expedient in paragraph

340-40-25-4,

the Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in selling, general, and administrative expenses. When shipping and handling costs are incurred after a customer obtains control of the products, the Company accounts for these as costs to fulfill the promise and not as a separate performance obligation.

5.	~~Leases~~ Credit Losses

OnEffective January 1, ~~2019,~~2020, the Company adopted ~~ASC 842 using~~ASU

2016-13,

“Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,”

prospectively. ASU

2016-13

replaces the ~~optional transition method which allows~~incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade receivables. The guidance requires entities to ~~initially apply the lease accounting transition requirements at the~~consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due. Upon adoption, ~~date and recognize a cumulative effect adjustment to the opening balance sheet of retained earnings~~changes in the allowance were not material for the transition period ~~of adoption without restating comparative prior periods presented. The Company recorded operating lease right of use assets of $17.0 million and operating lease liabilities of $21.0 million as of~~starting January 1, ~~2019. The difference between~~2020 through the ~~right of use assets and the lease liabilities was due to $4.0 million of unamortized lease incentives and deferred rent at the Company’s Waltham and Marlborough facilities as of December 31, 2018.~~nine months ended September 30, 2020.

The Company is exposed to credit losses primarily through sales of products and services. The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a ~~lessee under leases of manufacturing facilities, office spaces, machinery, certain office equipment, vehicles and information technology equipment. A majority~~review of the ~~Company’s leases~~current status of customers’ trade accounts receivables. Customers are ~~operating leases with remaining lease terms between two months and 11 years. Finance leases~~pooled based on sharing specific risk factors, including geographic location. Due to the short-term nature of such receivables, the estimated accounts receivable that may not be collected is based on aging of the accounts receivable balances.

Customers are ~~immaterial to our consolidated financial statements. The Company determines if an arrangement qualifies as~~assessed for credit worthiness upfront through a ~~lease and what type of lease it is at inception. The Company elected the package of practical expedients permitted under the transition guidance within the new lease standard,~~credit review, which ~~among other things, allowed it to continue to account for existing leases~~includes assessment based on the ~~historical lease classification.~~Company’s analysis of their financial statements when a credit rating is not available. The Company ~~also elected~~evaluates contract terms and conditions, country and political risk, and may require prepayment to mitigate risk of loss. Specific allowance amounts are established to record the ~~practical expedients~~appropriate provision for customers that have a higher probability of default. The Company monitors changes to ~~combine lease~~the receivables balance on a timely basis, and

~~non-lease~~

~~components~~ balances are written off as they are determined to be uncollectable after all collection efforts have been exhausted. Estimates of potential credit losses are used to determine the allowance. It is based on assessment of anticipated payment and ~~to exclude right~~all other historical, current and future information that is reasonably available.

The accounts receivable balance on the Company’s consolidated balance sheet as of ~~use assets and lease liabilities~~September 30, 2020 was $55.8 million, net of $0.6 million of allowances. The following table provides a roll-forward of the allowance for ~~leases with an initial term of 12 months or less~~credit losses in 2020 that is deducted from the ~~balance sheet.~~

~~Some~~amortized cost basis of accounts receivable to present the ~~lease agreements the Company enters into include Company options~~net amount expected to ~~either extend and/or early terminate the lease, the costs of which are included~~be collected (amounts in our operating lease liabilities to the extent that such options are reasonably certain of being exercised. Leases with renewal options allow the Company to extend the lease term typically between 1 and 5 years per option, some of its leases have multiple options to extend. When determining if a renewal option is reasonably certain of being exercised, the Company considers several economic factors, including but not limited to, the significance of leasehold improvements incurred on the property, whether the asset is difficult to replace, underlying contractual obligations, or specific characteristics unique to that particular lease that would make it reasonably certain that the Company would exercise such options.thousands):

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~~As of September 30, 2019, operating lease right of use assets were $24.8 million and operating lease liabilities were $29.1 million. NaN material leases~~

~~as defined under ASC 842,~~

~~to expand our facility in Waltham, Massachusetts~~

~~commenced during the third quarter of 2019~~

. As a result, the operating right of use asset and operating lease liability balances increased by a total of $6.2 million on their commencement dates. Amounts related to financing leases were immaterial. The maturity of the Company’s operating lease liabilities as of September 30, 2019 are as follows (amounts in thousands):

As of September 30, 2019

Amount

2019 (remaining three months)
$
920

2020

4,966

2021

5,388

2022

4,438

2023

3,517

2024 and thereafter

17,530

Total future minimum lease payments

36,759

Less
:
amount of lease payment representing interest

7,659

Total operating lease liabilities
$
29,100


	2020
Balance at January 1, 2020	$	(525	)
Current period change for expected credit losses		(133	)

Balance at March 31, 2020		(658	)
Current period change for write-offs		37
Current period change for expected credit losses		83

Balance at June 30, 2020		(538	)
Current period change for expected credit losses		(83	)

Balance at September 30, 2020	$	(621	)

~~Total operating lease liabilities is included on the Company’s consolidated balance sheet~~

~~as follows (amounts in thousands):~~

As of September 30, 2019

Operating lease liability
$
3,044

Operating lease liability, long-term

26,056

Minimum operating lease payments
$
29,100

Lease expense for these leases is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred. For the three and nine months ended September 30, 2019, total lease cost is comprised of the following:

Three Months Ended

Nine Months Ended

Lease Cost

September 30, 2019

September 30, 2019

(Amounts in thousands)

Operating lease cost
$
1,207
$
3,119

Variable operating lease cost

242

902

Lease cost
$
1,449
$
4,021

~~The following information represents supplemental disclosure for the consolidated statements of cash flows related to operating leases (amounts in thousands):~~

Nine Months Ended

September 30, 2019

Operating cash flows from operating leases
$
(2,962
)

Most of the leases do not provide implicit interest rates and therefore we determine the discount rate based on our incremental borrowing rate. The incremental borrowing rate for our leases is determined based on lease term and currency in which the lease payments are made.

~~The weighted average remaining lease term and the weighted average discount rate used to measure our operating lease liabilities as of September 30, 2019 were:~~


~~Weighted average remaining lease term (years)~~6.	~~8.09~~ Goodwill and Intangible Assets
~~Weighted average discount rate~~	~~4.89~~	%

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~~As previously disclosed in the Company’s~~

~~2018~~

~~Annual Report on Form~~

~~10-K~~

~~and under the previous lease accounting standard, ASC~~

~~840~~

~~“Leases,”~~

~~the total commitment for~~

~~non-cancelable~~

~~operating leases was $~~

~~18.0~~

~~million as of December~~

~~2018~~

~~(amounts in thousands):~~

For the Years Ended December 31,

Amount

2019
$
4,021

2020

3,599

2021

3,263

2022

2,213

2023

1,316

2024 and thereafter

3,622

Minimum operating lease payments
$
18,034

~~6. Goodwill and Other Intangible Assets~~

Goodwill

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 amortized, but instead is tested for impairment at least annually in accordance with ASC ~~350.~~350,

“Intangibles – Goodwill and Other”

. The following table represents the change in the carrying value of goodwill for the nine months ended September 30, ~~2019~~2020 (amounts in thousands):

Balance as of December 31, 2018
$
326,735

Cumulative translation adjustment

(793
)
Acquisition of C Technologies, Inc.

142,903

Balance as of September 30, 2019
$
468,845


Balance as of December 31, 2019	$	468,413
Acquisition of Engineered Molding Technology		12,573
Goodwill adjustment related to C Technologies, Inc.		293
Cumulative translation adjustment		764

Balance as of September 30, 2020	$	482,043

During each of the fourth quarters of 2019, 2018 and 2017, ~~and 2016, we~~the Company completed ~~our~~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 nine months ended September 30, ~~2019.~~2020.

~~Other~~ Intangible Assets

Intangible assets ~~except for the ATF tradename,~~with a definitive life are amortized over their useful lives using the ~~estimated economic benefit~~straight-line method, ~~as applicable,~~ and the amortization expense is recorded within cost of product revenue and selling, general and administrative ~~expense~~expenses in the Company’s statements of comprehensive income (loss). The Company reviews its indefinite-lived intangible assets not subject to amortization, including the ATF tradename, to determine if adverse conditions exist or a change in circumstances exists that would indicate an impairment. Intangible assets and their related useful lives are reviewed at least annually to determine if any adverse conditions exist 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 our products or changes in the size of the market for ~~our~~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 September 30, ~~2019.~~2020.

Indefinite-lived assets are reviewed for impairment at least annually. There has been no impairment of the Company’s intangible assets for the periods presented.

Table of Contents

Intangible assets, net consisted of the following at September 30, ~~2019:~~

September 30, 2019

Gross
Carrying
Value

Accumulated
Amortization

Net
Carrying
Value

Weighted
Average
Useful Life
(in years)

(Amounts in thousands)

Finite-lived intangible assets:

Technology
—
developed
$
82,088
$
(8,533
) $
73,555

19

Patents

240

(240
)
—

8

Customer relationships

160,467

(22,769
)
137,698

15

Trademarks

3,751

(286
)
3,465

20

Other intangibles

1,696

(825
)
871

3

Total finite-lived intangible assets

248,242

(32,653
)
215,589

16

Indefinite-lived intangible asset:

Trademarks

700

—

700

—

Total intangible assets
$
248,942
$
(32,653
) $
216,289

2020:


	September 30, 2020
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Weighted Average Useful Life (in years)
	(Amounts in thousands)
Finite-lived intangible assets:
Technology - developed	$	85,196	$	(13,054	)	$	72,142		18
Patents		240		(240	)		—		8
Customer relationships		172,325		(33,861	)		138,464		15
Trademarks		4,072		(480	)		3,592		19
Other intangibles		1,750		(1,263	)		487		3

Total finite-lived intangible assets		263,583		(48,898	)		214,685		16
Indefinite-lived intangible asset:
Trademarks		700		—			700		—

Total intangible assets	$	264,283	$	(48,898	)	$	215,385

Intangible assets consisted of the following at December 31, ~~2018:~~2019:

December 31, 2018

Gross
Carrying
Value

Accumulated
Amortization

Net
Carrying
Value

Weighted
Average
Useful Life
(in years)

(Amounts in thousands)

Finite-lived intangible assets:

Technology
—
developed
$
53,315
$
(5,942
) $
47,373

19

Patents

240

(240
)
—

8

Customer relationships

101,460

(16,609
)
84,851

14

Trademarks

2,160

(159
)
2,001

20

Other intangibles

1,061

(548
)
513

3

Total finite-lived intangible assets

158,236

(23,498
)
134,738

16

Indefinite-lived intangible asset:

Trademarks

700

—

700

—

Total intangible assets
$
158,936
$
(23,498
) $
135,438

~~The increase in intangible assets during 2019 is related to the acquisition of C Technologies on May 31, 2019. See Note 3,~~

~~“Acquisition of C Technologies, Inc.”~~

~~for more information.~~


	December 31, 2019
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Weighted Average Useful Life (in years)
	(Amounts in thousands)
Finite-lived intangible assets:
Technology - developed	$	82,169	$	(9,669	)	$	72,500		19
Patents		240		(240	)		—		8
Customer relationships		160,825		(25,642	)		135,183		15
Trademarks		3,752		(333	)		3,419		20
Other intangibles		1,697		(947	)		750		3

Total finite-lived intangible assets		248,683		(36,831	)		211,852		16
Indefinite-lived intangible asset:
Trademarks		700		—			700		—

Total intangible assets	$	249,383	$	(36,831	)	$	212,552

Amortization expense for finite-lived intangible assets was ~~$3.9~~$4.0 million and ~~$2.6~~$3.9 million for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. Amortization expense ~~for finite-lived intangible assets~~ was ~~$9.6~~$11.8 million and ~~$7.9~~$9.6 million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. As of September 30, ~~2019,~~2020, the Company expects to record the following amortization expense in future periods (amounts in thousands):

Estimated

Amortization

Nine Months Ended September 30,

Expense

2019 (remaining three months)
$
3,918

2020

15,129

2021

14,633

2022

14,631

2023

14,631

2024 and thereafter

152,647

Total
$
215,589


For the Nine Months Ended September 30,	Estimated Amortization Expense
2020 (remaining three months)	$	3,964
2021		15,855
2022		15,853
2023		15,749
2024		15,298
2025 and thereafter		147,966

Total	$	214,685

Table of Contents

7. ~~Consolidated Balance Sheet Detail~~

Consolidated Balance Sheet Detail

Inventories, net

Inventories, net consists of the following:

As of

September 30,

December 31,

2019

2018

(Amounts in thousands)

Raw materials
$
29,197
$
24,937

Work-in-process

5,438

5,185

Finished products

16,944

12,141

Total inventories, net
$
51,579
$
42,263


	As of
	September 30, 2020		December 31, 2019
	(Amounts in thousands)
Raw materials	$	42,201	$	29,328
Work-in-process		6,192		8,360
Finished products		30,138		17,144

Total inventories, net	$	78,531	$	54,832

Property, Plant and Equipment

Property, plant and equipment consist of the following:

As of

September 30,

December 31,

2019

2018

(Amounts in thousands)

Land
$
1,023
$
1,023

Buildings

764

764

Leasehold improvements

22,953

16,259

Equipment

31,144

24,092

Furniture and fixtures

14,214

5,448

Construction in progress
(1)

5,721

12,906

Other

50

—

Total property, plant and equipment

75,869

60,492

Less—Accumulated depreciation

(32,835
)
(28,312
)

Total property, plant and equipment, net
$
43,034
$
32,180

~~(1)~~

~~Construction in progress as of September 30, 2019~~

~~includes $4.9 million~~

~~, which is~~

~~primarily~~

~~related to various manufacturing expansion projects at our Waltham~~

~~, Massachusetts~~

~~and Rancho~~

~~Dominguez, California~~

~~facilities.~~

~~Construction in progress as of December 31, 2018 includes $~~

~~2.1~~

~~million of capitalized~~

~~internal-use~~

~~software development costs and $~~

~~7.3~~

~~million for the buildout of our Marlborough~~

~~, Massachusetts~~

~~facility. Both projects have since been placed into service~~

~~and as a result~~

~~, $6.5 million of internal-use software development costs are now included in furniture and fixtures as of September 30, 2019~~


	As of
	September 30, 2020			December 31, 2019
	(Amounts in thousands)
Land	$	1,023		$	1,023
Buildings		989			764
Leasehold improvements		29,776			23,905
Equipment		39,094			36,257
Furniture, fixtures and office equipment		8,055			6,312
Computer hardware and software		14,468			8,810
Construction in progress		6,416			6,707
Other		348			56

Total property, plant and equipment		100,169			83,834
Less - Accumulated depreciation		(44,814	)		(35,379	)

Total property, plant and equipment, net	$	55,355		$	48,455

Depreciation ~~expenses~~expense totaled ~~$1.8~~$2.8 million and ~~$1.3~~$1.8 million for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. Depreciation expenses totaled ~~$5.2~~$7.8 million and ~~$3.9~~$5.2 million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively.

Accrued Liabilities

Accrued liabilities consist of the following:

As of

September 30,

December 31,

2019

2018

(Amounts in thousands)

Employee compensation
$
14,451
$
9,953

Taxes

3,071

1,024

Royalty and license fees

707

242

Warranties

1,255

546

Professional fees

715

942

Deferred revenue

4,286

1,290

Other

1,285

1,868

Total accrued liabilities
$
25,770
$
15,865


	As of
	September 30, 2020		December 31, 2019
	(Amounts in thousands)
Employee compensation	$	14,652	$	19,850
Taxes		2,759		3,874
Royalty and license fees		1,000		123
Warranties		737		1,500
Professional fees		1,745		1,081
Deferred revenue		10,141		5,005
Other		1,007		1,898

Total accrued liabilities	$	32,041	$	33,331

~~Table of Contents~~

8. ~~Convertible Senior Notes~~

Convertible Senior Notes

0.375% Convertible Senior Notes due 2024

On July 19, 2019, the Company issued $287.5 million aggregate principal amount of 0.375% Convertible Senior Notes due 2024 (“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~~ (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

~~$278.6~~ $278.5 million.

Table of Contents

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~~

.terms. The initial conversion rate for the 2019 Notes is 8.6749 shares of the Company’s common stock per $1,000 principal amount of 2019 Notes (which is equivalent to an initial conversion price of approximately $115.28 per share). Prior to the close of business on the business day immediately preceding April 15, 2024, the 2019 Notes will be convertible at the option of the holders of 2019 Notes only upon the satisfaction of specified conditions and during certain periods. Thereafter until the close of business on the second scheduled trading day

immediately

preceding the maturity date, the 2019 Notes will be convertible at the options of the holders of 2019 Notes at any time regardless of these conditions. Conversion of the 2019 Notes will be settled in cash, shares of the Company’s common stock or a combination thereof, at the Company’s election. The 2019 Notes are not redeemable by the Company prior to maturity.

Holders of 2019 Notes may require the Company to repurchase their 2019 Notes upon the occurrence of a fundamental change

prior to maturity

at a

~~purchase~~ repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to, but excluding, the date of repurchase. In connection with certain corporate events, the Company will, under certain circumstances, increase the conversion rate for holders of 2019 Notes who elect to convert their 2019 Notes in connection with such corporate events.

As of September 30, ~~2019,~~2020, the conditions allowing holders of the 2019 Notes to convert have not been met and therefore the 2019 Notes are not yet convertible and are recorded as a long-term liability in ~~our~~the Company’s consolidated balance sheet at September 30, ~~2019.~~2020. No 2019 Notes were converted by the holders of such notes in the third quarter of 2020. In the event the closing price conditions are met in the fourth quarter of 2020 or a future fiscal quarter, the 2019 Notes will be convertible at a holder’s option during the immediately following fiscal quarter.

~~We account~~The Company accounts for the 2019 Notes as separate liability and equity components. We determined the carrying amount of the liability component as the present value of its cash flows using a discount rate of 4.5% based on comparative convertible transactions for similar companies. The

proceeds allocated to

the

debt

conversion

feature

~~ere~~

were $52.1 ~~million~~

.million. This amount

was calculated by deducting the carrying value of the liability component from the principal amount of the 2019 Notes as a whole. The difference represents a debt discount that is amortized to interest expense on ~~our~~the Company’s consolidated statement of comprehensive income (loss) over the term of the 2019 Notes using the effective interest rate method. The Company will assess the equity classification of the cash conversion feature quarterly, and it is not

re-measured

as long as it continues to meet the conditions for equity classification.

~~We allocate~~The Company allocates transaction costs related to the issuance of the 2019 Notes to the liability and equity components using the same proportions as the initial carrying value of the 2019 Notes. Transaction costs related to the liability component were ~~$7.3~~$7.4 million and are being amortized to interest expense using the effective interest method over the 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 ~~our~~the Company’s consolidated balance sheet at September 30, ~~2019.~~2020.

The net carrying value of the liability component of the 2019 Notes is as ~~follows (amounts in thousands, except percentages):~~follows:

September 30,

2019

0.375% Convertible Senior Notes due July 15, 2024
$
287,500

Less:
u
namortized debt discount

(50,247
)
Less:
u
namortized debt issuance costs

(7,071
)

Total debt

230,182

Less:
c
urrent portion

—

Net carrying amount
$
230,182

~~Table of Contents~~

~~The net carrying value of the equity component of the 2019 Notes is as follows (amounts in thousands, except percentages):~~

September 30,

2019

Proceeds allocated to the conversion feature
$
52,062

Less:
transaction
costs
allocated to the conversion feature

(1,621
)
Less: deferred taxes

(
12,353
)

Net carrying value
$
38,088


	As of
	September 30, 2020			December 31, 2019
	(Amounts in thousands)
0.375% convertible senior notes due 2024:
Principal amount	$	287,500		$	287,500
Less: unamortized debt discount		(40,764	)		(47,921	)
Less: unamortized debt issuance costs		(5,794	)		(6,812	)

Total debt		240,942			232,767
Less: current portion		—			—

Net carrying amount	$	240,942		$	232,767

Interest expense recognized on the 2019 Notes for the three months ended September 30, 2020 was $0.3 million, $2.4 million and $0.3 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, ~~2019~~2020 was ~~$0.2~~$0.8 million, ~~$1.8~~$7.2 million and ~~$0.3~~$1.0 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

Table of Contents

2019 Notes, amortization of the debt discount and debt issuance costs. As of September 30, ~~2019,~~2020, the carrying value of the 2019 Notes was ~~$230.2~~$240.9 million and the fair value of the principal was ~~$287.9~~$416.0 million. The fair value of the 2019 Notes was determined based on the most recent trade activity of the ~~201~~

2019 Notes as of September 30, ~~2019.~~2020.

Conversion of the 2.125% Convertible Senior Notes due 2021

The Company utilized a portion of the proceeds from the issuance of the 2019 Notes to settle its outstanding 2.125% Convertible Senior Notes due 2021 (the “2016 Notes”) during the third quarter of 2019. On July 16, 2019, the Company entered into separate privately negotiated agreements with certain holders of the 2016 Notes to exchange an aggregate of $92.0 million principal aggregate amount of the 2016 Notes for shares of the Company’s common stock, together with cash, in private placement

transactions (the “Note Exchanges”). On July 19, 2019 and July 22, 2019, the Company used approximately $92.3 million (including $0.3 million of accrued interest) and 1,850,155 shares of its common stock valued at $161.0 million to settle the Note Exchanges for total consideration of $253.3 million, of which $163.6 million was allocated to

reacquiring

the equity component of the 2016 Notes.

The Company allocated

the consideration transferred to the liability and equity components using the same proportions as the initial carrying value of the 2016 Notes. The transaction resulted in a loss on extinguishment of debt of ~~$4.5~~$4.6 million in the Company’s consolidated ~~statement~~statements of comprehensive income (loss)

for the three and nine months ended

September 30, 2019.

On July 19, 2019, the Company issued a Notice of Redemption in respect of the 2016 Notes, which provided that, on September 23, 2019, the Company would redeem all 2016 Notes that had not been converted, repurchased or exchanged prior to such date at a redemption price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest. On September 23, 2019, the Company used $23.0 million and 466,045 shares of its common stock valued at $37.8 million to settle the remaining 2016 Notes for a total of $60.8 million, of which $38.3 million was allocated to

reacquiring

the equity component of the 2016 Notes. This transaction resulted in a loss on extinguishment of debt of $1.1 million recorded on the Company’s consolidated ~~statement~~statements of comprehensive income (loss).

The total loss for the three and nine months ended September 30, 2019 of ~~$5.6~~$5.7 million represents the difference between the fair value of the liability component of the 2016 Notes and its related carrying value immediately before the exchange.

The fair value of the liability component was calculated using a discounted cash flow technique with an effective interest rate of 3.9%, representing the estimated nonconvertible debt borrowing rate with a maturity as of the measurement date consistent with the 2016 Notes maturity date of June 1, 2021. In addition, in accordance with this guidance, a portion of the fair value of the consideration transferred is allocated to the reacquisition of the equity component, which is the difference between the fair value of the consideration transferred and the fair value of the liability component immediately before the exchange. As a result, on a gross basis, $200.1 million was allocated to the reacquisition of the equity component of the original instrument, which is recorded net of deferred taxes within additional

paid-in

capital on ~~our~~the Company’s consolidated balance sheet.

The cash conversion feature of the 2016 Notes required bifurcation from the 2016 Notes and was initially accounted for as an equity instrument classified to stockholders’ equity, as the conversion feature was determined to be clearly and closely related to the Company’s stock. Based on market data available for publicly traded, senior, unsecured corporate bonds issued by companies in the same industry and asset base and with similar maturity, the Company estimated the implied interest rate, assuming no conversion option. Assumptions used in the estimate represent what market participants would use in pricing the liability component, including market interest rates, credit standing, and yield curves, all of which are defined as Level 2 observable inputs. The estimated implied interest rate was applied to the 2016 Notes, which resulted in a fair value of the liability component of $96.3 million upon issuance, calculated as the present value of implied future payments based on the ~~$115~~$115.0 million aggregate principal amount. The equity component of the 2016 Notes was recognized as a debt discount, recorded in additional

paid-in

capital, and represents the difference between the aggregate principal of the 2016 Notes and the fair value of the 2016 Notes without conversion option on their issuance date. The debt discount was amortized to interest expense using the effective interest method over five years, or the life of the 2016 Notes.

~~Table of Contents~~

Interest expense recognized on the 2016 Notes for the three months ended September 30, 2019 ~~prior to conversion~~ was $0.1 million, $0.5 million and $0.1 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 2016 Notes for the nine months ended September 30, 2019 was $1.3 million, $2.4 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. The effective interest rate on the 2016 Notes was 6.6%, which included the interest on the 2016 Notes, amortization of the debt discount and debt issuance costs.

Table of Contents

9.	Stockholders’ Equity

Public Offerings of Common Stock

On July 19, 2019, the Company completed a public offering in which 1,587,000 shares of its common stock, including the underwriters’ exercise in full of an option to purchase an additional 207,000 shares, were sold to the public at a price of $87.00 per share (the “Stock Offering”). The net proceeds of the Stock Offering, after deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company, were approximately $131.1 million.

On May 3, 2019, the Company completed a public offering in which 3,144,531 shares of its common stock, which includes the underwriters’ exercise in full of an option to purchase up to an additional 410,156 shares, were sold to the public at a price of $64.00 per share. The total proceeds received by the Company from this offering, net of underwriting discounts and commissions and other estimated offering expenses payable by the Company, totaled approximately $189.6 million.

Stock Option and Incentive Plans

At ~~our~~the Company’s 2018 annual meeting of shareholders held on May 16, 2018, ~~our~~the Company’s shareholders approved the 2018 Stock Option and Incentive Plan (the “2018 Plan”). Under the 2018 Plan the number of shares of ~~our~~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 ~~our~~the Company’s Amended and Restated 2012 Stock Option and Incentive Plan (the “2012 Plan”). The shares of common stock underlying any awards under the 2018 Plan ~~2012 Plan and the Second Amended and Restated 2001 Repligen Corporation Stock Plan (the “2001 Plan,” and together with the 2018 Plan~~ and 2012 Plan (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 September 30, ~~2019, 2,571,611~~2020, 2,325,314 shares were available for future grant under the 2018 Plan.

Stock-Based Compensation

For the three months ended September 30, 2020 and 2019, ~~and 2018, the~~th

Company recorded stock-based compensation expense of ~~$3.2~~$4.2 million and ~~$2.8~~$3.2 million, respectively, for share-based awards granted under the Plans. ~~The~~For the nine months ended September 30, 2020 and 2019, the Company recorded stock-based compensation expense of $12.5 million and $9.5 million, ~~and $7.7 million for the nine~~

~~month periods ended September 30, 2019 and 2018.~~respectively. The following table presents stock-based compensation expense in the Company’s consolidated statements of comprehensive income (loss):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

(Amounts in thousands)

Cost of product revenue
$
375

$
277

$
992

$
777

Research and development

351

253

992

650

Selling, general and administrative

2,449

2,249

7,475

6,245

Total stock-based compensation
$

3,175
$

2,779
$
9,459
$
7,672


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
			(Amounts in thousands)
Cost of product revenue	$	563	$	375	$	1,421	$	992
Research and development		326		351		1,092		992
Selling, general and administrative		3,336		2,449		9,979		7,475

Total stock-based compensation	$	4,225	$	3,175	$	12,492	$	9,459

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~~three to ~~five~~five-year

~~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 ~~and consultants~~ 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 awards to its Chief Executive Officer consisting 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 September 30, ~~2019,~~2020, options to purchase ~~959,916~~723,914 shares and ~~740,213 RSUs~~675,567 stock units were outstanding under the Plans.

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 cost at the grant date based on the estimated fair value of the award. The Company recognizes expense on awards

~~Table of Contents~~

with service-based vesting over the employee’s requisite service period on a straight-line basis. ~~In the third quarter of 2017, the~~The Company ~~issued~~issues performance stock units to certain employees related to the Spectrum Acquisition which were tied to the achievement of certain 2018 revenue and gross margin metrics and the passage of time. Additionally, in the first quarter of 2018 and again in the first quarter of 2019, the Company issued performance stock units to certain individuals whichthat are tied to ~~the achievement of certain annual revenue~~company and/or individual performance metrics and ~~return on invested capital metrics. 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.

Table of Contents

Information regarding option activity for the nine months ended September 30, ~~2019~~2020 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, 2018

998,226
$
27.54

Granted

44,996
$
61.98

Exercised

(83,306
) $
12.70

Forfeited/expired/cancelled

—
$
—

Options outstanding at September 30, 2019

959,916
$
30.44

6.93
$
44,396

Options exercisable at September 30, 2019

503,934
$
24.18

5.64
$
26,464

Vested and expected to vest at September 30, 2019
(1)

923,962

6.87
$
42,961


	Shares			Weighted average exercise price		Weighted- Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value (in Thousands)
Options outstanding at December 31, 2019		957,559		$	30.81
Granted		69,698		$	104.61
Exercised		(303,343	)	$	23.37
Forfeited/expired/cancelled		—		$	—

Options outstanding at September 30, 2020		723,914		$	41.03		7.02	$	77,102

Options exercisable at September 30, 2020		339,191		$	31.00		6.05	$	39,528

Vested and expected to vest at September 30, 2020 (1)		693,689					6.98	$	74,178

(1)

Represents the number of vested options as of September 30, ~~2019~~2020 plus the number of unvested options expected to vest as of September 30, ~~2019~~2020 based on the unvested outstanding options at September 30, ~~2019~~2020 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 September 30, ~~2019,~~2020, the last business day of the

third

quarter of ~~2019,~~2020, of ~~$76.69~~$147.54 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 September 30, ~~2019.~~2020. The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2020 and 2019 was $30.7 million and ~~2018 was~~ $5.2 million, ~~and $3.5 million,~~ respectively.

The weighted average grant date fair value of options granted during the nine months ended September 30, 2020 and 2019 was $48.13 and ~~2018 was~~ $30.07, ~~and $18.56,~~ respectively. The total fair value of stock options that vested during the nine months ended September 30, 2020 and 2019 ~~and 2018~~ was ~~$2.9~~$2.6 million and ~~$2.1~~$2.9 million, respectively.

The fair value of stock units is calculated using the closing price of the Company’s common stock on the date of grant. Information regarding ~~RSU~~stock unit activity, which includes activity for restricted stock units and performance stock units, for the nine months ended September 30, ~~2019~~2020 under the Plans is summarized below:

Shares

Weighted-
Average
Remaining
Contractual
Term
(in Years)

Aggregate
Intrinsic Value
(in Thousands)

Unvested at December 31, 2018

707,413

Awarded

297,086

Vested

(228,103
)
Forfeited/expired/cancelled

(36,183
)

Unvested at September 30, 2019

740,213

3.85
$
56,767


	Shares			Weighted- Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value (in Thousands)
Unvested at December 31, 2019		734,984
Awarded		187,942
Vested		(225,204	)
Forfeited/expired/cancelled		(22,155	)

Unvested at September 30, 2020		675,567			3.39	$	99,673

Vested and expected to vest at September 30, 2020 (1)		650,436			3.20	$	95,965

(1)

Represents the number of vested stock units as of September 30, 2020 plus the number of unvested stock units expected to vest as of September 30, 2020 based on the unvested outstanding stock units at September 30, 2020 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 September 30, ~~2019,~~2020, the last business day of the

~~thi~~

third quarter of ~~2019,~~2020, of ~~$76.69~~$147.54 per share, as ~~RSUs~~stock units do not have an exercise price) that would have been received by the ~~RSU~~stock unit holders had all holders exercised on September 30, ~~2019.~~2020. The aggregate intrinsic value of ~~RSUs~~stock units vested during the nine months ended September 30, 2020 and 2019 was $25.0 million and ~~2018 was~~ $15.5 million, ~~and $5.2 million,~~ respectively.

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The weighted average grant date fair value of ~~RSUs~~stock units vested during the nine months ended September 30, 2020 and 2019 was $66.00 and ~~2018 was~~ $33.46, ~~and $30.21,~~ respectively. The total fair value of ~~RSUs~~stock units that vested during the nine months ended September 30, 2020 and 2019 ~~and 2018~~ was ~~$7.6~~$9.8 million and ~~$4.1~~$7.6 million, respectively.

As of September 30, ~~2019,~~2020, there was ~~$37.7~~$47.0 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 ~~4.13~~3.61 years. The Company expects ~~1,676,976~~1,833,239 unvested options and ~~RSUs~~stock units to vest over the next

five years.

10.	Commitments and Contingencies

~~Lease Commitments~~

In May 2019, the Company entered into a fifth amendment of the existing lease to expand the rented space from approximately 76,000 square feet to approximately 108,000 square feet at 41 Seyon Street, Waltham, Massachusetts, the Company’s corporate headquarters and primary location for all manufacturing, research and development, sales and marketing and administrative operations. The Company expects to be completely moved into the new space by the third quarter of 2020. Under the terms of the fifth amendment lease, the initial fixed rental rate is $29.00 per square foot, per annum, of the additional square footage (approximately 32,000 square feet) and will increase at a rate of $1.00 per annum.

Licensing and Research Agreements

The Company licenses certain technologies that are, or may be, incorporated into its technology under several agreements and also has entered into several clinical research agreements which require the Company to fund certain research projects. Generally, the license agreements require the Company to pay annual maintenance fees and royalties on product sales once a product has been established using the technologies. Research and development expenses associated with license agreements were immaterial amounts for the three and nine months ended September 30, ~~2019~~2020 and ~~2018.~~2019.

~~In September 2018, we entered into a collaboration agreement with Sartorius Stedim Biotech, a leading international supplier for the biopharmaceutical industry, to integrate XCell~~

™

~~ATF cell retention control technology into Sartorius’s BIOSTAT~~

~~STR large-scale,~~

~~single-use~~

~~bioreactors to create novel perfusion-enabled bioreactors. As a result of this collaboration,~~

~~end-users~~

will stand to benefit from a single control system for 50L to 2,000L bioreactors used in perfusion cell culture applications. The single interface is designed to control cell growth, fluid management and cell retention in continuous and intensified bioprocessing and, ultimately, simplify the development and manufacture of biotechnological drugs under current good manufacturing practices.

In June 2018, wethe Company secured an agreement with Navigo

Proteins

for the exclusive

co-development

of multiple affinity ligands for which Repligen holds commercialization rights. ~~We are~~The Company is manufacturing and ~~have~~has agreed to supply the first of these ligands,

NGL-Impact

™®

A,, exclusively to Purolite Life Sciences (“Purolite”), who will pair ~~our~~the Company’s high-performance ligand with Purolite’s agarose jetting base bead technology used in their Jetted A50 Protein A resin product. WeThe Company also signed a long-term supply agreement with Purolite for

NGL-Impact

A and other potential additional affinity ligands that may advance from ~~our~~the Company’s Navigo collaboration.

In September 2020, Repligen and Navigo Proteins 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 will be marketed by Repligen.

The Navigo and Purolite agreements are supportive of ~~our~~the Company’s strategy to secure and reinforce ~~our~~the Company’s proteins business. WeThe Company made royalty payments to Navigo of ~~$2.4~~$0.2 million and $0.4 million during the ~~year~~three and nine months ended ~~December 31, 2018 in connection with this program, which were recorded to research and development expenses in our consolidated statements of comprehensive income (loss)~~September 30, 2020

, respectively

11.	Accumulated Other Comprehensive Loss

The following shows the changes in the components of accumulated other comprehensive loss for the nine months ended September 30, ~~2019~~2020 which consisted of only foreign currency translation adjustments for the periods shown (amounts in thousands):

Foreign
Currency
Translation
Adjustment

Balance as of
December 31
, 2018
$

(11,893
)
Other comprehensive loss

(9,901
)

Balance as of September 30, 2019
$
(21,794
)


	Foreign
	Currency
	Translation
	Adjustment
Balance as of December 31, 2019	$	(15,027	)
Other comprehensive income		5,304

Balance as of September 30, 2020	$	(9,723	)

12.	Income Taxes

The Company’s effective tax rate for the three and nine months ended

~~month~~

sSeptember

~~ended September~~ 30, ~~2019~~2020 was

~~n income tax~~

~~provision~~

18.0% and 9.5%, compared to 0.7%

and 18.3%

~~, respectively, compared~~

~~income tax~~

~~provision~~

~~27.6% and 24.6%~~ for the corresponding periods in the prior year. The effective tax ~~rate~~rates for the three and nine months ended

September

30, 2020 and 2019 ~~was~~were lower than the U.S. statutory rate of 21% primarily due ~~primarily~~ to

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windfall benefits on stock option exercises and the vesting of ~~RSUs. The effective tax rate for the three and nine months~~stock units.

ended September 30, 2018 was higher than the U.S. statutory rate of 21% due to state tax effects and the impact of the Global Intangible Low-Taxed Income (“GILTI”) tax enacted as part of the of the Tax Cuts and Jobs Act enacted in December 2017

~~ASU~~

~~2016-16,~~

~~“Intra-Entity Transfers of Assets Other Than Inventory,”~~

requires the income tax consequences of intra-entity transfers of assets other than inventory to be recognized when the intra-entity transfer occurs rather than deferring recognition of income tax consequences until the transfer was made with an outside party. The Company adopted the provisions of this ASU in the first quarter of 2018. The adoption resulted in a decrease of $5.7 million to other assets, a decrease of $5.0 million to deferred tax liabilities and a decrease of $0.7 million to accumulated deficit at January 1, 2018.

At December 31, 2018, the Company had federal business tax credit carryforwards of $2.9 million and state business tax credit carryforwards of $0.4 million available to reduce future domestic income taxes, if any. The business tax credits carryforwards will expire at various dates through December 2038. The net operating loss and business tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and may be limited in the event of certain changes in the ownership interest of significant stockholders.

On December 22, 2017, President Trump signed into law the Act. The Act made significant changes to federal tax law, including, but not limited to, a reduction in the federal income tax rate from 35% to 21%, taxation of certain global intangible

~~low-taxed~~

~~income, allowing for immediate expensing of qualified assets, stricter limits on deductions for interest and certain executive compensation, and a~~

~~one-time~~

~~transition tax on previously deferred earnings of certain foreign subsidiaries.~~

In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118 to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of H.R.1. The Company recognized the provisional tax impacts related to deemed repatriated earnings and the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the year ended December 31, 2017. During 2018, final adjustments noted below were made to the provisional amounts recorded during 2017, and the Company completed its accounting for various tax impacts of the Act.

The Act lowered the Company’s U.S. statutory federal tax rate from 35% to 21% effective January 1, 2018. The Company recorded a tax benefit of $12.8 million in the year ended December 31, 2017 for the reduction in its US deferred tax assets and liabilities resulting from the rate change. The accounting for this item is complete and no adjustments were made to this amount during 2018.

~~The Act included a~~

~~one-time~~

deemed repatriation transition tax whereby entities that are shareholders of a specified foreign corporation must include in gross income the undistributed and previously untaxed post-1986 earnings and profits of the specified foreign corporation. The Company’s provisional amount recorded at December 31, 2017 increased its tax provision by $3.3 million. As of December 31, 2018, the accounting for this item was complete and the Company recorded a tax benefit of $1.3 million as a result of refining our calculations of post-1986 earnings and profits for our foreign subsidiaries.

The Company is subject to a territorial tax system under the Tax Cuts and Jobs Act (“TCJA”) enacted in December 2017, in which the Company is required to provide for tax on ~~GILTI~~Global Intangible

Low-Taxed

Income (“GILTI”) earned by certain foreign subsidiaries. The Company has adopted an accounting policy to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense.

On March 27, 2020, President Trump signed the $2.2 trillion bipartisan Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act, the third congressional bill to address

COVID-19,

provides for loans and other benefits to businesses, expanded unemployment insurance, direct payments to those with middle-income and below wages, new appropriations funding for healthcare and other priorities, and tax changes, including deferrals of employer payroll tax

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liabilities, coupled with an employee retention tax credit and rollbacks of TCJA limitations on net operating losses (“NOLs”) and the Section 163(j) business interest limitation and a TCJA technical correction on qualified improvement property. The Company evaluated the provisions of the CARES Act and no provision had a material effect on the Company’s financial position or results of operations at September 30, 2020 and the three and nine months then ended.

The Company’s tax returns are subject to examination by federal, state and international tax authorities for the following periods:


Jurisdiction	Fiscal Years Subject to Examination
United ~~States—~~States - federal and state		~~2015~~ - ~~2018~~ 2016-2019
Sweden		~~2012~~ - ~~2018~~ 2013-2019
Germany		~~2017~~ - ~~2018~~ 2019
Netherlands		~~2012~~ - ~~2018~~ 2013-2019

13.	Earnings Per Share

The Company reports earnings per share in accordance with ASC 260,

“Earnings Per Share,”

which establishes standards for computing and presenting earnings per share. Basic earnings per share 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 share 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 restricted stock awards, performance stock units and the

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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. ~~Share-based payment~~In periods when the Company has a net loss, stock awards ~~that entitle their holders to receive~~

~~non-forfeitable~~

~~dividends before vesting~~ are ~~considered participating securities and are considered in~~excluded from the calculation of ~~basic and diluted~~ earnings per ~~share. There were no such participating securities outstanding during the three~~

~~month periods ended September 30, 2019 and 2018.~~share as their inclusion would have an antidilutive effect.

Basic and diluted weighted average shares outstanding were as follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

(Amounts in thousands, except per share data)

Net income
$
1,659
$
4,794
$

17,807
$
10,979

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

50,852

43,822

47,087

43,729

Effect of dilutive shares:

Stock options and restricted stock awards

957

651

843

511

Convertible senior notes

—

1,355

—

892

Dilutive potential common shares

957

2,006

843

1,403

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

51,809

45,828

47,930

45,132

Earnings per share:

Basic
$
0.03
$
0.11
$
0.38
$
0.25

Diluted
$
0.03
$
0.10
$

0.37
$
0.24


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(Amounts in thousands, except per share data)
Net income	$	14,552	$	1,659	$	40,228	$	17,807

Weighted average shares used in computing net income per share - diluted		52,545		50,852		52,341		47,087
Effect of dilutive shares:
Stock options and restricted stock awards		916		957		951		843
Dilutive effect of unvested performance stock units		8		—		8		—

Dilutive potential common shares		924		957		959		843

Weighted average shares used in computing net income per share - diluted		53,469		51,809		53,300		47,930

Earnings per share:
Basic	$	0.28	$	0.03	$	0.77	$	0.38

Diluted	$	0.27	$	0.03	$	0.75	$	0.37

At September 30, ~~2019,~~2020, there were outstanding options to purchase ~~959,916~~723,914 shares of the Company’s common stock at a weighted average exercise price of ~~$30.44~~$41.03 per share and ~~740,213~~675,567 shares of common stock issuable upon the vesting of ~~RSUs.~~stock units, which include RSUs and performance stock units. For the three and nine months ended September 30, ~~2019, 47,705~~2020, 60,202 and ~~85,503 options to purchase~~117,160 shares of the Company’s common stock ~~respectively,~~ were excluded from the calculation of diluted earnings per share 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 September 30, ~~2018,~~2019, there were outstanding options to purchase ~~1,033,312~~959,916 shares of the Company’s common stock at a weighted average exercise price of ~~$26.99~~$30.44 per share and ~~707,716~~740,213 shares issuable upon the vesting of ~~RSUs.~~stock units. For the three and nine ~~month periods~~months ended September 30, ~~2018, 329,409~~2019, 47,705 and ~~485,520 options to purchase~~85,503 shares of the Company’s common stock ~~respectively,~~ were excluded from the calculation of diluted earnings per share 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.

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As provided by the terms of the indenture underlying the

2016

Notes, the Company

had a choice to ~~settle~~settl

the conversion obligation for the

2016

Notes in cash, shares or any combination of the two. During the third quarter of

2019

~~of 2019~~

, the Company settled the remaining

2016

Notes for a ~~$115.0 million~~ total aggregate principal of $

115.0

million and

2,316,200

shares of its common stock. As of March

2019

, the par value of the

2016

Notes is not included in the calculation of diluted earnings per share, but the dilutive effect of the conversion premium is considered in the calculation of diluted earnings per share using the treasury stock method. The dilutive impact of the

2016

Notes was based on the difference between the Company’s current period average stock price and the conversion price of the

2016

Notes, provided there was a premium.

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, conversion of the 2019 Notes will be settled in cash, shares of the Company’s common stock or a combination thereof, at the Company’s election. As of

September

30, ~~2019,~~2020, the 2019 Notes were not convertible. The Company currently intends to settle the par value of the 2019 Notes in cash and any excess conversion premium in shares. The Company applies the provisions of ASC 260,

“Earnings Per Share”,

Subsection

10-45-44,

to determine the diluted weighted average shares outstanding as it relates to the conversion spread on the 2019 Notes. Accordingly, the par value of the 2019 Notes is not included in the calculation of diluted income per share, but the dilutive effect of the conversion premium is considered in the calculation of diluted net income per share using the treasury stock method. The dilutive impact of the 2019 Notes is based on the difference between the Company’s current period average stock price and the conversion price of the 2019 Notes, provided there is a premium. Pursuant to this accounting standard, there is no dilution from the accreted principal of the 2019 Notes for the ~~periods show~~

n.three and nine months ended September 30, 2020.

14.	Related Party Transactions

Certain facilities leased by Spectrum ~~LifeSciences, LLC (“Spectrum”)~~ are owned by Roy Eddleman, the former owner of Spectrum. ~~The former owner held~~As of September 30, 2020, Mr. Eddleman owned greater than ~~10%~~5% of the Company’s outstanding ~~commons stock until~~shares and the Company ~~completed its public offering of 3,144,531 shares of its common stock on May 3, 2019.~~considers him to be a related party. The lease amounts paid to this ~~former owner and current~~ shareholder prior to the public offering were negotiated in connection with the Spectrum Acquisition. The Company ~~has~~ incurred rent expense totaling ~~$0.4~~$0.1 million and $0.5 million for the three and nine months ended September 30, ~~2019~~2020 related to these leases.

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As part of the Spectrum Acquisition, the Company was responsible for filing all tax returns for Spectrum for the period from January 1, 2017 through July 31, 2017, the day before the Spectrum Acquisition. The Company was responsible for collecting any tax refunds from federal and state authorities and remitting these refunds to the former shareholders of Spectrum, including the former owner of Spectrum who held greater than 10% of the Company’s outstanding common stock prior to May 3, 2019. During 2018, the Company collected $1.7 million of these tax refunds, which the Company paid to the Spectrum shareholders during the fourth quarter of 2018, net of $0.2 million of expenses paid by the Company on behalf of Spectrum for tax preparation and other fees.

15.	Segment Reporting

The Company views its operations, makes decisions regarding how to allocate resources and manages its business as 1 ~~operating segment.~~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’s sole operating segment.~~

Revenue from filtration products includes our XCell ATF Systems and consumables as well as our KrosFlo and SIUS filtration products. Revenue from chromatography products includes our OPUS and OPUS PD chromatography columns, chromatography resins and ELISA test kits. Revenue from protein products includes our Protein A ligands and cell culture growth factors. Revenue from our process analytics products includes the sale of our SoloVPE and FlowVPE systems and consumables. Other revenue primarily consists of revenue from the sale of operating room products to hospitals as well as freight revenue.Company.

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

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Revenue by customers’ geographic locations:

North America

54
%
49
%
51
%
47
%
Europe

33
%
39
%
37
%
41
%
APAC

13
%
12
%
12
%
12
%
Other

0
%
0
%
0
%
0
%
Total revenue

100
%
100
%
100
%
100
%


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Revenue by customers’ geographic locations:
North America		50	%		54	%		48	%		51	%
Europe		36	%		33	%		38	%		37	%
APAC /Other		14	%		13	%		14	%		12	%

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 September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, 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.

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Revenue from significant customers ~~as a percentage~~that represent 10% or more of the Company’s total revenue is as follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

GE Healthcare

N/A

16
%
12
%
16
%
MilliporeSigma

14
%
18
%
14
%
17
%


	Three Months Ended September 30,					Nine Months Ended September 30,
	2020		2019			2020			2019
Cytiva (formerly GE Healthcare)		N/A		N/A			N/A			12	%
MilliporeSigma		N/A		14	%		11	%		14	%

~~Significant~~There were 0 accounts receivable balances as ~~a percentage~~of September 30, 2020 representing 10% or more of the Company’s total trade accounts receivable ~~are as follows:~~and royalties and other receivable balances. As of December 31, 2019, the accounts receivable balance with Cytiva (formerly GE Healthcare) represented 18% of the Company’s total trade accounts receivable and royalties and other receivables balances.

September 30,

December 31,

2019

2018

GE Healthcare

10
%
17
%
MilliporeSigma

N/A

11
%

16.	Subsequent Events

Acquisition of

Non-Metallic

Solutions, Inc.

On October 15, 2020, the Company entered into a Stock Purchase Agreement with

Non-Metallic

Solutions, Inc. (“NMS”), a Massachusetts corporation, and 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, which is headquartered in Auburn, Massachusetts, is a manufacturer of fabricated plastics, custom containers, and related assemblies and components used in the manufacturing of biologic drugs. NMS’s products will complement and expand Repligen’s

single-use

product offerings.

The Company will account for the NMS Acquisition as a purchase of a business under the acquisition method of accounting and has engaged a third-party valuation firm to assist with the valuation of the business acquired. The estimated purchase price allocation for the NMS Acquisition will be included in the Annual Report on Form

10-K

for the period ended December 31, 2020. As disclosed in the Quarterly Report on Form 10-Q for the period ended June 30, 2020, the Company voluntarily adopted the amendments to financial disclosure requirements around the significance tests in the “significant subsidiaries” definition in Rule 1-02(w), Securities Act Rule 405, and Exchange Act Rule 12b-2. As a result, the Company determined that NMS is not a significant subsidiary and therefore no separate financial statements are required.

Proposed Acquisition of ARTeSYN Biosolutions

On October 27, 2020, the Company executed an Equity and Asset Purchase Agreement (“Purchase Agreement”) with ARTeSYN Biosolutions Holdings Ireland Limited, a company organized under the laws of Ireland (“ARTeSYN”), Third Creek Holdings, LLC, a Nevada limited liability company, Alphinity, LLC, a Nevada limited liability company (“Alphinity”, and together with Third Creek Holdings, LLC the “Sellers”), and Michael Gagne, solely in his capacity as the representative of the Sellers, pursuant to which the Company will acquire (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 Third Creek and Alphinity and approximately $70 million in Repligen common stock to Third Creek. Subject to certain closing conditions, including the expiration and termination of the waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, the transaction is expected to close in the fourth quarter of 2020.

ARTeSYN, headquartered in Waterford, Ireland, is a biosystems innovator that has had success with its single-use chromatography and filtration systems, which are considered the gold standard in downstream bioprocessing due to their performance, automation and low hold-up volumes. The proposed ARTeSYN Acquisition, combined with the recent acquisitions of EMT and NMS, further establishes Repligen as a premier player in single-use systems and associated integrated flow path assemblies. 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 EMT’s silicone extrusion and molding technology, to deliver highly differentiated, low hold-up volume systems that minimize product loss during processing.

The Company will account for the ARTeSYN Acquisition as a purchase of a business under ASC 805. Under the acquisition method of accounting, the net assets of ARTeSYN will be recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company. The Company has engaged a third-party valuation firm to assist with the valuation of the business acquired, which is expected to be completed in the fourth quarter of 2020. The preparation of the valuation requires the use of significant assumptions and estimates. Critical estimates will include, but are not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. Actual results may differ from these estimates.

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~~ITEM 2.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

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 ~~leading provider of advanced~~global life sciences company that develops and commercializes highly innovated bioprocessing technologies and ~~solutions used~~systems that increase efficiencies and flexibility in the process of manufacturing ~~biologic~~biological drugs. ~~Our products are made to substantially increase biopharmaceutical manufacturing efficiencies and flexibility.~~

As the ~~global~~overall market for biologics ~~market~~ continues to ~~experience strong growth~~grow and ~~expansion,~~expand, our customers – primarily large biopharmaceutical companies and contract development and manufacturing organizations – face critical production cost, capacity, quality and time ~~pressures that~~pressures. Built to address these concerns, our products are ~~made~~helping to ~~address. Our commitment to bioprocessing is helping~~ set new standards for the way ~~our customers manufacture~~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 gene ~~therapies. We~~therapies – that are ~~dedicated to “inspiring advances in bioprocessing” as a trusted partner in the production of biologic drugs that improve~~improving human health worldwide.

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 35 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.

Our ~~chromatography~~Products

Our bioprocessing business is comprised of four main franchises, three of which we sell directly to

end-users

(Chromatography, Filtration and Process Analytics) and one that we sell primarily through supply agreements (Proteins).

Direct-to-Customer

Products

Since 2012, we have significantly expanded our

direct-to-customer

presence through our Chromatography, Filtration and Process Analytics franchises, each of which includes novel and differentiated technologies. We have diversified and grown our

direct-to-customer

product offering through internal innovation and through strategic, accretive acquisitions of assets or businesses that leverage existing product lines and/or expand our customer and geographic scope.

To support our sales growth goals for these products, ~~feature~~

~~pre-packed~~

~~chromatography~~we make ongoing investments in our commercial organization, our research and development (“~~PPC”~~R&D”) ~~columns under~~team and our manufacturing capacity. Our commercial and R&D teams work together to develop and launch new products and applications that address specific biomanufacturing challenges, and to build new markets for acquired technologies. We have seven key manufacturing sites across the United States, Sweden and Germany, with additional capacity being added by the end of 2021 in the Netherlands. We regularly evaluate and invest in capacity as needed to ensure timely deliveries and to stay ahead of increased customer demand for our products.

A substantial piece of our revenue comes from consumable and/or single-campaign

(“single-use”)

products as compared to associated equipment. The customization, scalability and

plug-and-play

convenience of consumable and/or

single-use

products, and in many cases the closed nature of our technologies, make them ideal for use in biologics manufacturing processes where contamination risk is a critical concern of our customers.

Chromatography

Our Chromatography franchise includes a number of products used in downstream purification, development, manufacturing and quality control of biological drugs. The main driver of growth in this portfolio is our OPUS

~~brand.~~

pre-packed

column product line.

Additional chromatography products include our affinity capture resins, such as CaptivA

Protein A resins, that are used in a small number of commercial drug processes and our ELISA test kits, used by quality control departments to detect and measure the presence of leached Protein A and/or growth factor in the final product.

OPUS

Pre-Packed

Columns

Our Chromatography franchise features a wide range of OPUS columns, which we deliver to our customers sealed and

pre-packed

with their choice of ~~chromatography resin,~~resin. These are ~~single-campaign~~

~~(“single-use”)~~single-use

multiple-use

disposable columns that replace the use of ~~traditional and more permanent~~customer-packed glass columns used in downstream purification processes. By designing OPUS columns to be a technologically advanced and flexible option for the purification of biologics from process development through ~~clinical-scale~~clinical and ~~some commercial~~commercial-scale manufacturing, Repligen has become a leader in the

pre-packed

column (“PPC”) market. Our biomanufacturing customers value the significant cost savings that OPUS columns deliver by reducing set up time, labor, equipment and facility costs – in addition to delivering product consistency and “plug and play” convenience.

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We launched our first production-scale OPUS columns in 2012 and have since added larger diameter options that scale up to use with 2,000 liter bioreactors. Our OPUS 80R column is the largest available PPC on the market for use in late-stage clinical or commercial purification processes. We have also introduced next-generation features such as a resin recovery port on our larger columns, which allows our customers to remove and reuse the recovered resin in other applications. We believe the OPUS

5-80R

product line is the most flexible and platformable PPC product offered in the marketplace today, and is serving the purification needs of customers manufacturing monoclonal antibodies (“mAb”) and other biologics such as vaccines and cell and gene therapies (“C&GT”).

In addition to our larger scale OPUS columns, our portfolio includes our smaller-scale OPUS columns, including specifically RoboColumn

, MiniChrom

™

and ValiChrom

™

columns for process development and validation. These columns are used in high-throughput process development screening, viral clearance validation studies and scale down validation of chromatography processes.

We maintain customer-facing centers in both the United States and Europe for OPUS columns, and offer our customers an unmatched ability to pack any of over 100 resins in our OPUS

5-80R

range and any of over 300 resin choices in our small-scale OPUS columns.

Other Chromatography

Our ~~filtration~~Chromatography portfolio also includes ELISA kits, which are analytical test kits to quantitate the proteins and growth factors, and chromatography resins, including our CaptivA brand.

Filtration

XCell ATF

Cell Retention Systems

Our Filtration products offer a number of advantages to manufacturers of biologic drugs ~~at volumes that span from pilot studies to~~and are used in development, clinical and commercial-scale production. Our XCell ~~ATF~~

™

Alternating Tangential Flow (“ATF”) systems are used primarily in upstream perfusion (continuous) cell culture processing.

XCell ATF is a cell retention technology. The system is comprised of an advanced hollow fiber (“HF”) filtration device, a low shear pump and a controller. The XCell ATF system is connected to a bioreactor and enables the cell culture to be run continuously, with cells being retained in the bioreactor, fresh nutrients (cell culture media) being fed into the reactor continuously and clarified biological product and cell waste being removed continuously. The cells are maintained in a consistent nutrient-rich environment and can reach cell densities

two-

and three-times higher than those achieved by standard

fed-batch

culture. By continuously removing waste products from the fermenter, the XCell ATF systems routinely increases cell densities to

two-

or ~~continuous manufacturing, processes to increase cell concentration and significantly improve biologic~~three-times the levels achieved by standard

fed-batch

culture. As a result, product yield is increased, which improves facility utilization and can reduce the size of a bioreactor required to manufacture a given volume of biologic drug product. XCell ATF systems are available in a wide range of sizes that can easily scale from ~~a bioreactor. To address increasing industry demand for~~laboratory use through full production with bioreactors as large as 5,000 liters.

~~“plug-and-play”~~

~~technology,~~Through internal innovation, we developed and launched ~~in 2016~~

single-use

formats of the original stainless steel XCell ATF ~~device.~~ devices to address increasing industry demand for

single-use

sterile systems with

“plug-and-play”

technology. The XCell ATF device is now available to customers in both its original configuration (steel housing and

single-use

filters) in all sizes (2, 4, 6 and 10), and/or as a

single-use

device (disposable housing/filter combination) in most sizes (2, 6, and 10). The availability of XCell ATF technology in a

single-use

format eliminates the time intensive workflow associated with autoclaving, leading to an 80% reduction in implementation speed. The

single-use

format also enables our customers to accelerate evaluations of the product with a lower initial overall cost of ownership.

In September 2018, we entered into a collaboration agreement with industry leader Sartorius Stedim Biotech (“SSB”) to integrate our XCell ATF controller technology into SSB’s BIOSTAT

STR large-scale,

single-use

bioreactors, to create novel perfusion-enabled bioreactors.

TangenX

Flat Sheet Cassettes

In December 2016, we acquired TangenX

™

Technology Corporation (“TangenX”), balancing our upstream XCell ATF ~~offering~~systems with a ~~downstream~~ portfolio of flat-sheet ~~filters and~~tangential flow filtration (“TFF”) cassettes used in downstream biologic drug ~~purification~~concentration and formulation processes. The TangenX product portfolio includes ~~the~~our

single-use

SIUS

™

~~TFF~~ brand, providing customers with a high-performance,

~~low-cost~~

cost saving alternative to reusable TFF cassettes.

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TFF is a rapid and efficient method for the concentration and formulation of biomolecules that is widely used in many applications in biopharmaceutical development and manufacturing. SIUS cassettes are the only purpose built

single-use

TFF cassettes on the market. The cassette features a high performing membrane and unique cartridge construction that enables a lower price point. Each disposable cassette is delivered

pre-sanitized

and ready to be equilibrated and used for tangential flow, ultrafiltration and diafiltration applications. Use of SIUS TFF cassettes eliminates

non-value-added

steps of cleaning, testing between uses, storage and flushing required in reusable TFF products, providing cost and time savings. The cassettes are interchangeable with filter hardware from multiple manufacturers, simplifying customer trial and adoption of SIUS products. In

Spectrum

Hollow Fibers

We acquired Spectrum Life Sciences LLC (“Spectrum”) and its subsidiaries in August 2017 to strengthen our filtration business with the addition of a leading portfolio of HF filtration solutions, including fully integrated KrosFlo

TFF Systems with Konduit sensing and ProConnex

Flow Path

single-use

assemblies. KrosFlo family of TFF systems for product concentration is fully scalable from 2 milliliters to 5,000 liters – from

lab-scale

to commercial manufacturing. Designed for purification and formulation applications, KrosFlo Systems enable robust downstream ultrafiltration and microfiltration.

We also gained the Spectra/Por

portfolio of laboratory and process dialysis products and in 2019, we ~~completed~~launched the SpectraFlo

™

Dynamic Dialysis Systems. Also, in 2019 we introduced the KrosFlo

TFDF

™

(Tangential Flow Depth Filtration) Systems, which we believe have the potential to disrupt and displace traditional harvest clarification operations. The KrosFlo TFDF system includes control hardware, novel high throughput tubular depth filters and ProConnex

single-use

TFDF flow paths. When used for cell culture clarification,

single-use

KrosFlo TFDF technology delivers unprecedented high flux (>1,000 LMH), high capacity, low turbidity, and minimal dilution, making the technology a high-performance alternative to traditional centrifugation and depth filtration approaches to harvest clarification. TFDF technology also provides benefits such as low

hold-up

volume, high recovery, small footprint, simple set up and disposal, scalability and reduced process time.

The Spectrum product line of HF filters and systems are used in

bench-top

through commercial-scale processes, primarily for the filtration, purification and concentration of biologics and diagnostic products. Our KrosFlo filtration systems and equipment offer both standard and customized solutions to bioprocessing customers, with particular strength in consumable and

single-use

offerings.

With the acquisition of Spectrum, we substantially increased our direct sales presence in Europe and Asia, and we diversified our end markets to include all biologic classes, including mAb, vaccines, recombinant proteins and gene therapies.

Other Filtration

In 2018, we introduced our Konduit monitor to automate concentration and buffer exchange. We have broadened the application for Konduit monitor to include use with both HF TFF from Spectrum and our TangenX flat sheet TFF systems. We also self-manufacture HF filters that are used in our XCell ATF, KrosFlo TFF and KrosFlo TFDF systems.

On July 13, 2020, we consummated the acquisition of Engineered Molding Technology LLC (“EMT”), a New York liability company, and added EMT’s silicone-based,

single-use

components and manifolds to our filtration franchise. These products are key components in

single-use

filtration and chromatography systems and will help expand the Company’s line of

single-use

ProConnex flow paths, streamline our supply chain for ATF and provide more flexibility we scale and expand our

single-use

and systems portfolios.

Process Analytics

In May 2019, we consummated our acquisition of ~~Spectrum LifeSciences, LLC~~C Technologies, Inc. (“~~Spectrum”~~C Technologies”). and added a fourth franchise, Process Analytics, to our bioprocessing business. Our ~~Spectrum filtration brands include the KrosFlo~~

~~family of~~Process Analytics products ~~ProConnex~~

~~disposable flow-path products, TFF systems~~complement and ~~others. The Spectrum Acquisition significantly strengthened~~support our Filtration, ~~product line~~Chromatography and ~~diversifies our end markets beyond mAbs~~ Proteins franchises as they allow

end-users

to ~~include vaccine, recombinant~~make

at-line

in-line

absorbance measurements allowing for the determination of protein concentration in filtration, chromatography formulation and ~~gene therapies.~~fill-finish applications.

SoloVPE

Device

Our SoloVPE Slope Spectroscopy

system is the industry standard for offline and

at-line

absorbance measurements for protein concentration determination in process development, manufacturing and quality control settings.

FlowVPE

Device

Our FlowVPE Slope Spectroscopy system enhances the power of Slope Spectroscopy and provides

in-line

protein concentration measurement for filtration, chromatography and fill-finish applications. A key benefit of this

in-line

solution is the ability to monitor a manufacturing process in real time. We are developing a next-generation FlowVPE to incorporate

GMP-compliant

software for production-scale biologics manufacturing.

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Use of VPE Slope Spectroscopy delivers multiple process benefits for our biopharmaceutical manufacturing customers, compared to traditional

UV-Vis

approaches. Key benefits include: the elimination of manual dilutions and sample transfers from process development/manufacturing to labs, rapid time to results (minutes versus hours), improved precision,

built-in

data quality for improved reporting and validation, and ease of use.

OEM Products (Proteins)

Our Proteins products are represented by our Protein A affinity ligands, which are a critical component of Protein A chromatography resins used in downstream purification of mAb, and cell culture growth factor products, which are a key component of cell culture media used in upstream bioprocessing to increase cell density and improve product yield.

Proteins - Ligands

Through our Proteins business, we are a leading ~~OEM manufacturer and supplier~~provider of Protein A affinity ligands and cell culture growth factors to life sciences companies. Protein A ligands are an essential “binding” component of Protein A affinity chromatography resins used in the purification of virtually all ~~mAb based~~monoclonal antibody-based drugs on the market or in ~~development that our customers~~development. We manufacture multiple forms of Protein A ligands under long-term supply agreements with major life sciences companies including GE Healthcare (“GE”), MilliporeSigma and Purolite Life Sciences (“Purolite”), who in turn sell their Protein A chromatography resins to end users ~~including biopharmaceutical manufacturers,~~(mAb manufacturers). We have two manufacturing sites supporting overall global demand for ~~use~~our Protein A ligands: one in ~~downstream~~Lund, Sweden and another in Waltham, Massachusetts.

Protein A chromatography resins are considered the industry standard for purification of ~~mAbs.~~antibody-based therapeutics due to the ability of the Protein A ligand to very selectively bind to or “capture” antibodies from crude protein mixtures. Protein A resins are packed into the first chromatography column of typically three columns used in a mAb purification process. As a result of Protein A’s high affinity for antibodies, the mAb product is highly purified and concentrated within this first capture step before moving to polishing steps.

In June 2018, we entered into an agreement with Navigo Proteins GmbH (“Navigo”) for the exclusive

co-development

of multiple affinity ligands for which Repligen holds commercialization rights. We are manufacturing and have agreed to supply the first of these ligands,

NGL-Impact

A, exclusively to Purolite, who will pair our high-performance ligand with Purolite’s agarose jetting base bead technology used in their Jetted A50 Protein A resin product. We also ~~manufacture~~signed a long-term supply agreement with Purolite for

NGL-Impact

A and ~~sell growth factor products used~~potential additional affinity ligands that may advance from our Navigo collaboration. The Navigo and Purolite agreements are supportive of our strategy to ~~supplement~~secure and reinforce our Proteins franchise.

Proteins - Growth Factors

Most biopharmaceuticals are produced through an upstream mammalian cell culture ~~media in~~process. In order to ~~increase~~stimulate increased cell growth and ~~productivity in~~maximize overall yield from a ~~bioreactor.~~

~~Customers use our products to produce initial quantities of a drug for clinical studies and then~~

~~scale-up~~

to larger volumes as the drug progresses to commercial production following regulatory approval. Detailed specifications for a drug’s manufacturing process are included in the applications that biopharmaceutical companies file for marketing approval with regulators,bioreactor, manufacturers often add growth factors, such as ~~the U.S. Food and Drug Administration and the European Medicines Agency, throughout the clinical trial process and prior~~insulin, to ~~final commercial approval. As~~their cell culture media. Our cell culture growth factor additives include LONG

IGF 1 (“LR3”), our insulin-like growth factor that has been shown to be up to 100 times more biologically potent than insulin (the industry standard), thereby increasing recombinant protein production in cell culture fermentation applications. LR3 is primarily sold through a ~~result, products that become part of the manufacturing specifications of a late-stage clinical or commercial process can be very sensitive given the costs and uncertainties associated~~distribution partnership with ~~displacing them.~~MilliporeSigma.

~~C Technologies~~2020 Acquisitions

Proposed Acquisition of ARTeSYN Biosolutions

On ~~April 25, 2019, we~~October 27, 2020, the Company entered into an Equity and Asset Purchase Agreement (“Purchase Agreement”) with ARTeSYN Biosolutions Holdings Ireland Limited, a company organized under the laws of Ireland (“ARTeSYN”), Third Creek Holdings, LLC, a Nevada limited liability company, Alphinity, LLC, a Nevada limited liability company (“Alphinity”, and together with Third Creek Holdings, LLC the “Sellers”), and Michael Gagne, solely in his capacity as the representative of the Sellers, pursuant to which the Company will acquire (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 Third Creek and Alphinity and approximately $70 million in Repligen common stock to Third Creek. Subject to certain closing conditions, including the expiration and termination of the waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, the transaction is expected to close in the fourth quarter of 2020.

ARTeSYN, headquartered in Waterford, Ireland, is a biosystems innovator that has had success with its single-use chromatography and filtration systems, which are considered the gold standard in downstream bioprocessing due to their performance, automation and low hold-up volumes. The proposed ARTeSYN Acquisition, combined with the recent acquisitions of EMT and Non-Metallic Solutions, Inc., further establishes Repligen as a premier player in single-use systems and associated integrated flow path assemblies. 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 EMT’s silicone extrusion and molding technology, to deliver highly differentiated, low hold-up volume systems that minimize product loss during processing.

Non-Metallic

Solutions, Inc.

On October 15, 2020, the Company entered into a Stock Purchase Agreement ~~(“Purchase Agreement”)~~ with ~~C Technologies,~~

Non-Metallic

Solutions, Inc. (“~~C Technologies”~~NMS”), a ~~New Jersey~~Massachusetts corporation, and ~~Craig Harrison, an individual~~William Malloneé and ~~sole stockholder~~Derek Masser, the legal and beneficial owners of ~~C Technologies. The deal was consummated~~NMS, to purchase NMS, which transaction subsequently closed on ~~May 31, 2019, the acquisition date~~October 20, 2020 (the ~~“C Technologies~~“NMS Acquisition”).

~~C Technologies sells instruments, consumables~~NMS, which is headquartered in Auburn, Massachusetts, is a manufacturer of fabricated plastics, custom containers, and accessories that are designed to allow bioprocessing technicians to measure the protein concentration of a liquid sample using C Technologies’ Slope Spectroscopy method, which eliminates the need for manual sample dilution. C Technologies’ lead product, the SoloVPE instrument platform, was launched in 2008 for

~~off-line~~

~~and~~

~~at-line~~

~~protein concentration measurements conducted in quality control, process development~~related assemblies and ~~manufacturing labs~~components used in the ~~production~~manufacturing of ~~biological therapeutics. C Technologies’ FlowVPE platform, an extension of the SoloVPE technology, was designed to allow end users to make~~

~~in-line~~

~~protein concentration measurements in filtration, chromatography~~biologic drugs. NMS’s products will complement and ~~fill-finish applications, designed to allow for real-time process monitoring.~~expand Repligen’s

single-use

product offerings.

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Engineered Molding Technology

On June 26, 2020, we entered into a Membership Interest Purchase Agreement with EMT and Michael Pandori and Todd Etesse, the legal and beneficial owners of EMT to purchase EMT, which transaction subsequently closed on July 13, 2020 (the “EMT Acquisition”).

EMT, which is headquartered in Clifton Park, New York, is an innovator and manufacturer of

single-use

silicone assemblies and components used in the manufacturing of biologic drugs. EMT’s standard and customer molding and over-molded connectors and silicone tubing products are key components in

single-use

filtration and chromatography systems. Its products complement and expand our

single-use

product offerings.

The ~~C Technologies~~EMT Acquisition was accounted for as a purchase of a business under ~~ASC~~Accounting Standards Codification No. (“ASC”) 805,

“Business Combinations.”

The cash paid for the ~~C Technologies~~EMT Acquisition was ~~$195.0~~$28.5 million, ~~$186.0 million of~~ which will be consideration transferred ~~pursuant to~~under ASC ~~805, and $9.0~~805. This includes $2.2 million deposited into escrow for indemnification obligations of which will be compensation expense for future employment, and 779,221 of unregistered common shares totaling $53.9 million (based on a per share price of $69.22), for a total purchase price of $239.9 million.the sellers.

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 Annual Report on Form

10-K

for the year ended December 31, ~~2018~~2019 filed with the SEC.

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 ~~revenues~~revenue for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 were as follows:

Three Months Ended
September 30,

Increase/ (Decrease)

Nine Months Ended
September 30,

Increase/ (Decrease)

2019

2018

$ Change

% Change

2019

2018

$ Change

% Change

(Amounts in thousands, except for percentage data)

Revenue:

Products
$
69,419
$
49,500
$
19,919

40.2
% $
200,701
$
142,042
$
58,659

41.3
%
Royalty and other

26

29

(3
)
(10.3
%)
70

48

22

45.8
%

Total revenue
$
69,445
$
49,529
$
19,916

40.2
% $
200,771
$
142,090
$
58,681

41.3
%


	Three Months Ended September 30,				Increase/(Decrease)					Nine Months Ended September 30,				Increase/(Decrease)
	2020		2019		$ Change		% Change			2020		2019		$ Change		% Change
	(Amounts in thousands, except for percentage data)
Revenue:
Products	$	94,029	$	69,419	$	24,610		35.5	%	$	257,521	$	200,701	$	56,820		28.3	%
Royalty and other		31		26		5		19.2	%		91		70		21		30.0	%

Total revenue	$	94,060	$	69,445	$	24,615		35.4	%	$	257,612	$	200,771	$	56,841		28.3	%

Product revenues

Since 2016, we have been increasingly focused on selling our products directly to customers in the pharmaceutical industry and to our contract manufacturers. Direct sales ~~represent~~represented approximately

~~80%~~ 82% and 75

%80% of our product revenue infor the three months ended September 30, 2020 and 2019, respectively, and represented approximately 77% and 75% of our product revenue for the nine months ended September 30, 2020 and 2019,

~~, respectively~~

. 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 ~~diversifies~~has begun to diversify its supply chain ~~starting~~ 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.

Revenue from our chromatography products includes the sale of our OPUS ~~and OPUS PD~~ chromatography columns, chromatography resins and ELISA test kits. Revenue from our filtration products includes the sale of our XCell ATF ~~Systems~~systems and consumables, KrosFlo filtration products, ~~and~~ SIUS filtration ~~products.~~products and the silicone-molded products offered by EMT, which we acquired on July 13, 2020. Revenue from protein products includes the sale of our Protein A ligands and cell culture growth factors. Revenue from our Process Analytics products includes the sale of our SoloVPE and FlowVPE systems and consumables. Other revenue primarily consists of revenue from the sale of our operating room products to hospitals, as well as freight revenue.

During the three and nine months ended September 30, ~~2019,~~2020, product revenue increased by ~~$19.9~~$24.6 million, or ~~40.2%~~35.5%, and ~~$58.7~~$56.8 million, or ~~41.3%~~28.3%, ~~respectively,~~ as compared to the same periods of ~~2018.~~2019. The increase ~~in both periods~~ is due to the continued adoption of our products by

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our key bioprocessing customers, particularly our chromatography and filtration products. Beginning in the second quarter of 2020, we have experienced an increase in overall sales as a result of accelerated demand for our protein and filtration products. The demand was broad-based covering mAb, gene therapy and

COVID-19

customers working on vaccines and therapeutics. We expect there will be a continued increase in direct sales through the remainder of 2020, especially from

COVID-19

customers as they

scale-up

and move candidates through the clinical trial process. In addition, demand for our protein and ligands products increased during the three and nine months ended September 30, 2020, as compared to the same periods of 2019. Sales of our bioprocessing products are impacted by the timing of orders, development efforts at our customers or

end-users

and regulatory approvals for biologics that incorporate our products, which may result in significant quarterly fluctuations. Such quarterly fluctuations are expected, but they may not be predictive of future revenue or otherwise indicate a trend. ~~Additionally, there~~There was also a ~~$7.0 million and $9.1~~$14.6 million increase in revenue for the ~~three and~~ nine months ended September 30, ~~2019, respectively,~~2020, as compared to the same periods of ~~2018~~2019 due to revenues generated by C Technologies.

~~Table~~ Since the acquisition date was in May 2019, only four months of ~~Contents~~revenue were included in the nine months ended September 30, 2019.

Royalty revenues

Royalty revenues in the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 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 nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 were comprised of the following:

Three Months Ended
September 30,

Increase/ (Decrease)

Nine Months Ended
September 30,

Increase/ (Decrease)

2019

2018

$ Change

% Change

2019

2018

$ Change

% Change

(Amounts in thousands, except for percentage data)

Cost of product revenue
$
31,425
$
22,183
$
9,242

41.7
% $
88,978
$
62,939
$
26,039

41.4
%
Research and development

5,427

3,601

1,826

50.7
%
14,278

12,669

1,609

12.7
%
Selling, general and administrative

24,629

15,859

8,770

55.3
%
67,326

48,347

18,979

39.3
%

Total costs and operating expenses
$
61,481
$
41,643
$
19,838

47.6
% $
170,582
$
123,955
$
46,627

37.6
%


	Three Months Ended September 30,				Increase/(Decrease)						Nine Months Ended September 30,				Increase/(Decrease)
	2020		2019		$ Change			% Change			2020		2019		$ Change			% Change
	(Amounts in thousands, except for percentage data)
Cost of product revenue	$	39,626	$	31,425	$	8,201			26.1	%	$	108,471	$	88,978	$	19,493			21.9	%
Research and development		4,422		5,427		(1,005	)		(18.5	%)		13,460		14,278		(818	)		(5.7	%)
Selling, general and administrative		29,051		24,629		4,422			18.0	%		83,277		67,326		15,951			23.7	%

Total costs and operating expenses	$	73,099	$	61,481	$	11,618			18.9	%	$	205,208	$	170,582	$	34,626			20.3	%

Cost of product revenue

Cost of product revenue increased ~~41.7%~~26.1% and ~~41.4%~~21.9% in the three and nine months ended September 30, ~~2019, respectively,~~2020, compared to the same periods of ~~2018~~2019, due primarily to the increase in product revenue mentioned ~~above.~~

~~Gross margins were 54.7%~~above and ~~55.7%~~costs associated with higher product volume. An increase in manufacturing headcount resulted in higher employee-related costs for the three and nine months ended September 30, ~~2019, respectively.~~2020, compared to the same periods of 2019. Additional facility costs, including personal protection equipment purchased for essential manufacturing personnel on site to protect against

COVID-19,

were also incurred during the three and nine months ended September 30, 2020 for which there were no comparable amounts in 2019.

Gross margins were 57.9% in both the three and nine months ended September 30, 2020. The gross margin for the three months ended September 30, 2020 includes $0.1 million of amortization of inventory

step-up

associated with the EMT Acquisition. The gross margins for the three and nine months ended September 30, 2019, ~~includes~~which include $0.3 million and $1.5 million ~~respectively,~~ of amortization on an inventory

step-up

~~recorded in purchase accounting related to~~associated with the C Technologies ~~Acquisition.~~Acquisition in May 2019, were 54.7% and 55.7%, respectively. Excluding ~~this~~the

step-up

amortization, gross margins for the three and nine months ended September 30, 2019 were 55.2% and 56.4%~~, respectively.~~. The increase in gross margins, excluding the inventory

step-up

amortization, in the three and nine months ended September 30, 2020, as compared to the same period of 2019, is ~~a result of~~due primarily to the increase in revenue mentioned above, and favorable product volumes and mix, partially offset by an increase in manufacturing headcount subsequent to September 30, ~~2018.~~2019. Gross margins may fluctuate in future quarters based on expected 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 ~~small~~ 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. ~~In addition to the legacy product research~~

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R&D expenses decreased 18.5% and ~~development, the current~~

~~single-use~~

~~XCell ATF project incurs expenses related to product development, sterilization, validation testing, and other research related expenses.~~

~~Research and development expenses increased 50.7% and 12.7%~~5.7% during the three and nine months ended September 30, 2019, respectively, compared to the same periods of 2018. The increases during both periods are primarily due to an increase in research and development headcount, an increase in stock-based compensation expense resulting from the increased headcount and the increase in share price period over period and to the addition of $0.7 million and $0.9 million, respectively of research and development expenses related to C Technologies, which was acquired in May 2019. The increase during the nine months ended September 30, 2019, as2020, compared to the same period of ~~2018 was~~2019. The decrease during the periods is primarily due to a decrease in R&D spending on projects, as most R&D personnel worked remotely for most of 2020 due to

COVID-19.

This is partially offset by a ~~decrease~~$1.2 million increase in ~~research and development expense of $2.3 million in investments made in the second quarter of 2018~~R&D expenses year over year, related to ~~expand our proteins product offering through our development agreement with Navigo Proteins GmbH compared to an immaterial amount of these costs in the~~C Technologies operations. The nine months ended September 30, 2020 only had four months of expenses since the acquisition was consummated on May 31, 2019.

We expect our ~~research and development~~R&D expenses for the ~~rest~~remainder of ~~the year~~2020 to gradually increase ~~slightly in order~~ 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 nine months ended September 30, ~~2019,~~2020, SG&A costs increased by ~~$8.8~~$4.4 million, or ~~55.3%~~18.0%, and ~~$19.0~~$16.0 million, or ~~39.3%~~23.7%, ~~respectively,~~ as compared to the same periods of ~~2018.~~2019. The increase is partially due ~~to the addition of $4.7 million and $6.2 million of SG&A costs from the acquisition of C Technologies in May 2019,~~ to the continued expansion of our customer-facing activities to

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drive sales of our bioprocessing products, and to the continued buildout of our administrative infrastructure, primarily through increased headcount, to support expected future growth. ~~In addition,~~Stock-based compensation expense and other employee-related costs increased during the three and nine months ended September 30, ~~2019, transaction fees related~~2020, as compared to ~~the C Technologies Acquisition of $4.0 million were included in SG&A, for which there were no comparable costs for~~ the same period ~~of 2018. Sales commissions were higher~~ in 2019, ~~due to the increase in revenue and stock compensation expense increased during both periods in 2019 as compared to 2018~~ resulting from an increase in headcount and higher share prices period over period. In addition, $5.9 million of the increase in SG&A costs for the nine months ended September 30, 2020, was related to the C Technologies operations, which was acquired in May 2019. C Technologies’ SG&A costs for the nine months ended September 30, 2020 include nine months of costs, compared to only four months in the same period of 2019.

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)

2019

2018

$ Change

% Change

2019

2018

$ Change

% Change

(Amounts in thousands, except for percentage data)

Investment income
$
1,898
$
558
$
1,340

240.1
% $
3,616
$
1,251
$
2,365

189.0
%
Loss on extinguishment of debt

(5,650
)
—

(5,650
)
100.0
%
(5,650
)
—

(5,650
)
100.0
%
Interest expense

(2,857
)
(1,687
)
(1,170
)
69.4
%
(6,326
)
(5,008
)
(1,318
)
26.3
%
Other income (expenses)

316

(134
)
450

(335.8
%)
(23
)
187

(210
)
(112.3
%)

Total other expense, net
$
(6,293
) $
(1,263
) $
(5,030
)
398.3
% $
(8,383
) $
(3,570
) $
(4,813
)
134.8.
%


	Three Months Ended September 30,						Increase/(Decrease)						Nine Months Ended September 30,						Increase/(Decrease)
	2020			2019			$ Change			% Change			2020			2019			$ Change			% Change
	(Amounts in thousands, except for percentage data)
Investment income	$	82		$	1,898		$	(1,816	)		(95.7	%)	$	1,699		$	3,616		$	(1,917	)		(53.0	%)
Loss on extinguishment of debt		—			(5,650	)		5,650			(100.0	%)		—			(5,650	)		5,650			(100.0	%)
Interest expense		(3,052	)		(2,857	)		(195	)		6.8	%		(9,032	)		(6,326	)		(2,706	)		42.8	%
Other expenses		(248	)		316			(564	)		(178.5	%)		(632	)		(23	)		(609	)		2647.8	%

Total other expense, net	$	(3,218	)	$	(6,293	)	$	3,075			(48.9	%)	$	(7,965	)	$	(8,383	)	$	418			(5.0	%)

Investment income

Investment income includes income earned on invested cash balances. The ~~increase~~decrease of ~~$1.3~~$1.8 million and ~~$2.4~~$1.9 million for the three and nine months ended September 30, ~~2019, respectively,~~2020, as compared to the same periods of ~~2018~~2019, was attributable to ~~higher~~a decrease in interest rates on our average 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 rate to a range of 0.0% to 0.25%, which will continue to affect our investment income in future periods. Higher average invested cash balances during the three and ~~higher~~nine months ended September 30, 2020, as compared to the same periods of 2019 due to the completion of a public offering and the issuance of our 2019 Notes during the third quarter of 2019, partially offset the decrease in interest rates ~~on such invested cash balances.~~mentioned above. We expect investment income to vary based on changes in the amount of funds invested and fluctuation of interest rates.

Loss on extinguishment of debt

The $5.6 million loss on extinguishment of debt in the three and nine months ended September 30, 2019, resulted from the settlement of our outstanding 2.125% Convertible Senior Notes due 2021 (the “2016 Notes”). The loss represents the difference between (i) the fair value of the liability component and (ii) the sum of the carrying value of the debt component and any unamortized debt issuance costs at the time of settlement.

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Interest expense

Interest expense ~~primarily includes interest related to~~in the three and nine months ended September 30, 2020 is from our ~~issuance of the 2016 Notes in May 2016, which were settled during the third quarter of 2019, and our issuance of~~ 0.375% Convertible Senior Notes due 2024 (the “2019 Notes”), which were issued in July 2019. Interest expense in the three and nine months ended September 30, 2019 is from our 2016 Notes, which were settled during the third quarter of 2019. Interest expense increased ~~$1.2~~$0.2 million and ~~$1.3~~$2.7 million for the three and nine months ended September 30, ~~2019, respectively,~~2020, as compared to the same periods in ~~2018. Interest calculated based~~2019.

The amortization of debt issuance costs on the ~~carrying value related to the 2016~~2019 Notes was ~~$0.1~~$2.8 million and ~~$1.3~~$8.2 million infor the three and nine months ended September 30, ~~2019, respectively, compared to $0.6 million and $1.8 million, respectively for the same periods~~2020. Amortization of ~~2018. As aforementioned, the 2016 Notes were settled during July 2019. As a result, interest no longer accrued~~debt issuance costs on the ~~2016~~2019 Notes ~~subsequent to their settlement. Interest calculated based on the carrying value related to the 2019 Notes~~was $2.1 million for both the three and nine months ended September 30, ~~2019 was $0.2 million and there was no comparable amount for the prior periods.~~

2019. The amortization of the debt issuance costs on the 2016 Notes was $0.6 million and $2.8 million for the three and nine months ended September 30, 2019, ~~respectively, compared to $1.1 million and $3.2 million for the same periods of 2018. The decrease in this amortization is a result of the settlement of the 2016 Notes and subsequent~~respectively.

~~write-off~~

~~of the remaining debt issuance costs in July 2019. Amortization of debt issuance costs~~

Contractual coupon interest incurred on the 2019 Notes for the three and nine months ended September 30, 2020 was ~~$2.1~~$0.3 million and $0.8 million, respectively. Interest calculated based on the carrying value related to the 2019 Notes for both the three and nine months ended September 30, 2019 was $0.2 million. Contractual coupon interest incurred on the 2016 Notes was $0.1 million and $1.3 million in the three and nine months ended September 30, 2019. ~~There were no comparable amounts in 2018 as~~Since the ~~2019~~2016 Notes were ~~issued in~~settled during July ~~2019.~~2019, interest no longer accrued on the 2016 Notes subsequent to their settlement.

Other ~~(expenses) income~~expenses

~~Changes~~The change in other ~~(expenses) income~~expenses during the three and nine months ended September 30, ~~2019,~~2020, compared to the same ~~periods~~period of ~~2018, are~~2019, is primarily attributable to foreign currency losses related to amounts due from

non-Swedish

~~kronor-based~~krona-based customers and cash balance denominated in U.S. dollars and British pounds held by Repligen Sweden AB. In addition, $0.5 million was included in other (expenses) income for the nine months ended September 30, 2019, which represents a bridge loan commitment fee incurred as part of the C Technologies Acquisition.vendors.

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Income tax provision

Income tax provision for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 was as follows:

Three Months Ended
September 30,

Increase/ (Decrease)

Nine Months Ended
September 30,

Increase/ (Decrease)

2019

2018

$ Change

% Change

2019

2018

$ Change

% Change

(Amounts in thousands, except for percentage data)

Income tax provision
$
12
$
1,829
$
(1,817
)
(99.3
%) $
3,999
$
3,586
$
413

11.5
%
Effective tax rate

0.7
%
27.6
%
18.3
%
24.6
%


	Three Months Ended September 30,						Increase/(Decrease)					Nine Months Ended September 30,						Increase/(Decrease)
	2020			2019			$ Change		% Change			2020			2019			$ Change		% Change
	(Amounts in thousands, except for percentage data)
Income tax provision	$	3,191		$	12		$	3,179		26491.7	%	$	4,211		$	3,999		$	212		5.3	%
Effective tax rate		18.0	%		0.7	%							9.5	%		18.3	%

For the three and nine months ended September 30, ~~2019,~~2020, we recorded an income tax expense of $3.2 million and $4.2 million, respectively. The effective tax rate was 18.0% and 9.5% for the three and nine months ended September 30, 2020 and is based upon the estimated income for the year ending December 31, 2020 and the composition of income in different jurisdictions and impacts of various discrete tax adjustments. The effective tax rate for the three and nine months ended September 30, 2020 was lower than the U.S. statutory rate of 21% primarily due to windfall benefits on stock option exercises and the vesting of stock units. We recorded a tax provision of less than $0.1 million and $4.0 million, ~~respectively.~~respectively for the three and nine months ended September 30, 2019. The effective tax rate was ~~an income tax provision of~~ 0.7% and 18.3% for the three and nine months ended September 30, 2019 ~~respectively, and is based upon the estimated taxable income for the year ending December 31, 2019~~ and the composition of ~~the taxable~~ income in different ~~jurisdictions.~~jurisdictions and the impacts of various discrete tax adjustments. The effective tax rate for the three and nine months ended September 30, 2019 was lower than the U.S. statutory rate of 21% primarily due ~~primarily~~ to windfall benefits on stock option ~~exercises~~exercise and the vesting of ~~restricted~~ 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 is 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.

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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 acquisition and integration costs, intangible amortization and inventory

step-up

charges booked through our consolidated statements of comprehensive income (loss). The following is a reconciliation of income from operations in accordance with GAAP to

non-GAAP

adjusted income from operations for the three and nine months ended September 30, ~~2019~~2020 and ~~2018:~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

(Amounts in thousands)

GAAP income from operations
$
7,964
$
7,886
$
30,189
$
18,135

Non-GAAP
adjustments to income from operations:

Acquisition and integration costs

2,953

805

9,573

2,313

Intangible amortization

3,900

2,608

9,562

7,906

Inventory
step-up
charges

314

—

1,483

—

Non-GAAP
adjusted income from operations
$
15,131
$
11,299
$
50,807
$
28,354

2019:

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(Amounts in thousands)
GAAP income from operations	$	20,961	$	7,964	$	52,404	$	30,189
Non-GAAP adjustments to income from operations:
Acquisition and integration costs		1,849		2,953		6,536		9,573
Intangible amortization		3,925		3,900		11,677		9,562
Inventory step-up charges		144		314		144		1,483

Non-GAAP adjusted income from operations	$	26,879	$	15,131	$	70,761	$	50,807

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 extinguishment of debt,

non-cash

interest expense and the tax effects of these items. The following are reconciliations of net income in accordance with GAAP to

non-GAAP

adjusted net income for the three and nine months ended September 30, ~~2019~~2020 and ~~2018:~~2019:

Three Months Ended September 30,

2019

2018

Amount

Fully
Diluted
Earnings per
Share

Amount

Fully Diluted
Earnings per
Share

(Amounts in thousands, except per share data)

GAAP net income
$
1,659
$
0.03
$
4,794
$
0.10

Non-GAAP
adjustments to net income:

Acquisition and integration costs

2,953

0.06

805

0.02

Intangible amortization

3,900

0.08

2,608

0.06

Loss on extinguishment of debt

5,650

0.11

—

—

Inventory
step-up
charges

314

0.01

—

—

Non-cash
interest expense

2,631

0.05

1,071

0.02

Tax effect of intangible amortization and acquisition costs

(3,781
)
(0.07
)
(1,063
)
(0.02
)

Non-GAAP
adjusted net income
$
13,326
$
0.26
$
8,215
$
0.18


	Three Months Ended September 30,
	2020						2019
	Amount			Fully Diluted Earnings per Share			Amount			Fully Diluted Earnings per Share
	(Amounts in thousands, except per share data)
GAAP net income	$	14,552		$	0.27		$	1,659		$	0.03
Non-GAAP adjustments to net income:
Acquisition and integration costs		1,849			0.03			2,953			0.06
Intangible amortization		3,925			0.07			3,900			0.08
Loss on extinguishment of debt		—			—			5,650			0.11
Inventory step-up charges		144			0.00			314			0.01
Non-cash interest expense		2,759			0.05			2,631			0.05
Tax effect of intangible amortization and acquisition costs		(2,072	)		(0.04	)		(3,781	)		(0.07	)

Non-GAAP adjusted net income	$	21,157		$	0.40		$	13,326		$	0.26

Nine Months Ended September 30,

2019

2018

Amount

Fully
Diluted
Earnings per
Share

Amount

Fully Diluted
Earnings per
Share

(Amounts in thousands, except per share data)

GAAP net income
$
17,807
$
0.37
$
10,979
$
0.24

Non-GAAP
adjustments to net income:

Acquisition and integration costs

10,074

0.21

2,313

0.05

Intangible amortization

9,562

0.20

7,906

0.18

Inventory
step-up
charges

1,483

0.03

—

—

Loss on extinguishment of debt

5,650

0.12

—

—

Non-cash
interest expense

4,863

0.10

3,160

0.07

Tax effect of intangible amortization and acquisition costs

(7,742
)
(0.16
)
(3,171
)
(0.07
)

Non-GAAP
adjusted net income
$
41,697
$
0.87
$
21,187
$
0.47

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	Nine Months Ended September 30,
	2020						2019
	Amount			Fully Diluted Earnings per Share			Amount			Fully Diluted Earnings per Share
	(Amounts in thousands, except per share data)
GAAP net income	$	40,228		$	0.75		$	17,807		$	0.37
Non-GAAP adjustments to net income:
Acquisition and integration costs		6,536			0.12			10,074			0.21
Intangible amortization		11,677			0.22			9,562			0.20
Inventory step-up charges		144			0.00			1,483			0.03
Loss on extinguishment of debt		—			—			5,650			0.12
Non-cash interest expense		8,174			0.15			4,863			0.10
Tax effect of intangible amortization and acquisition costs		(6,334	)		(0.12	)		(7,742	)		(0.16	)

Non-GAAP adjusted net income	$	60,425		$	1.13		$	41,697		$	0.87

* Per share totals may not add due to rounding.

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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 and loss on extinguishment of debt booked through our consolidated statements of comprehensive income (loss). The following is a reconciliation of net income in accordance with GAAP to adjusted EBITDA for the three and nine months ended September 30, ~~2019~~2020 and ~~2018:~~2019:

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

(Amounts in thousands)

GAAP net income
$
1,659
$
4,794
$
17,807
$
10,979

Non-GAAP
EBITDA adjustments to net income:

Investment income

(1,898
)
(558
)
(3,616
)
(1,251
)
Interest expense

2,857

1,687

6,326

5,008

Tax provision

12

1,829

3,999

3,586

Depreciation

1,810

1,273

5,147

3,871

Amortization

3,928

2,608

9,644

7,906

EBITDA

8,368

11,633

39,307

30,099

Other
non-GAAP
adjustments:

Acquisition and integration costs

2,953

805

10,074

2,313

Loss on extinguishment of debt

5,650

—

5,650

—

Inventory
step-up
charges

314

—

1,483

—

Adjusted EBITDA
$
17,285
$
12,438
$
56,514
$
32,412


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
	(Amounts in thousands)
GAAP net income	$	14,552		$	1,659		$	40,228		$	17,807
Non-GAAP EBITDA adjustments to net income:
Investment income		(82	)		(1,898	)		(1,699	)		(3,616	)
Interest expense		3,052			2,857			9,032			6,326
Tax provision		3,191			12			4,211			3,999
Depreciation		2,757			1,810			7,820			5,147
Amortization		3,953			3,928			11,760			9,644

EBITDA		27,423			8,368			71,352			39,307
Other non-GAAP adjustments:
Acquisition and integration costs		1,849			2,953			6,536			10,074
Loss on extinguishment of debt		—			5,650			—			5,650
Inventory step-up charges		144			314			144			1,483

Adjusted EBITDA	$	29,416		$	17,285		$	78,032		$	56,514

Liquidity and Capital Resources

We have financed our operations primarily through revenues derived from product sales, the issuance of the 2016 Notes in May 2016 and our 2019 Notes (defined below) in July 2019 and the issuance of common stock in our July 2019, May 2019 and July 2017 public offerings. Our revenue for the foreseeable future will primarily be limited to our bioprocessing product revenue.

At September 30, ~~2019,~~2020, we had

~~non-restricted~~

cash and cash equivalents (excluding restricted cash) of ~~$513.5~~$553.3 million compared to ~~non-restricted~~ cash and cash equivalents (excluding restricted cash) of ~~$193.8~~$528.4 million at December 31, ~~2018.~~

We acquired C Technologies on May 31, 2019 for $239.9 million in cash and shares of our common stock. The C Technologies Acquisition was funded through payment of approximately $195.0 million in cash and 779,221 unregistered shares of the Company’s common stock totaling $53.9 million.

On July 19, 2019, the Company completed a public offering in which 1,587,000 shares of its common stock, which includes the underwriters’ exercise in full of an option to purchase an additional 207,000 shares, were sold to the public at a price of $87.00 per share for $131.1 million in net proceeds to the Company, after deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company (the “Stock Offering”).

On July 19, 2019, the Company issued $287.5 million aggregate principal amount of 0.375% Convertible Senior Notes due 2024 (“2019 Notes”), which ~~includes~~included the underwriters’ exercise in full of an option to purchase an additional $37.5 million aggregate principal amount of 2019 Notes (the “Notes Offering” and, together with the Stock Offering in July 2019 as mentioned in Note 9,

“Stockholders’ Equity”

included in this report, the “Offerings”). The net proceeds of the Notes Offering, after deducting underwriting discounts and commissions and other offering expenses payable by the Company, were ~~$278.6~~$278.5 million. See Note 8,

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“Convertible Senior Notes,”

included in this report

for more information on this transaction. The Company utilized a portion of the proceeds from the Offerings to settle its outstanding 2016 Notes during the third quarter of 2019. On July 16, 2019, the Company entered into separate privately negotiated agreements with certain holders of the 2016 Notes to exchange an aggregate of $92.0 million principal aggregate amount of the 2016 Notes for shares of the Company’s common stock, together with cash, in private placement transactions (the “Note Exchanges”). On July 19, 2019 and July 22, 2019, the Company used approximately $92.3 million (including $0.3 million of accrued interest) and 1,850,155 shares of its common stock valued at $161.0 million to settle the Note Exchanges for total consideration of $253.3 million, of which $163.6 million was allocated to the equity component of the 2016 Notes. The Company allocated the consideration transferred to the liability and equity components using the same proportions as the initial carrying value of the 2016 Notes. ~~The transaction resulted in a loss on extinguishment of debt of $4.5 million in the Company’s consolidated statement of comprehensive income (loss) as of September 30, 2019.~~

~~Table of Contents~~

During the third quarter of ~~2019,~~2020, the closing price of the Company’s common stock did not exceed 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. Therefore, the 2019 Notes are not convertible at the option of the holders of the 2019 Notes during the fourth quarter of ~~2019~~2020 per the First Supplemental Indenture underlying the 2019 Notes. The 2019 Notes have a face value of $287.5 million and a carrying value of ~~$230.2~~$240.9 million and are classified as long-term liabilities on the Company’s consolidated balance sheet as of September 30, ~~2019.~~2020.

We intend to use the remaining net proceeds from the Offerings for working capital and other general corporate purposes, including to fund possible acquisitions of, or investments in, complementary businesses, products, services and ~~technologies.~~technologies, such as the acquisitions mentioned in Note 16,

“Subsequent Events,”

included in this report. 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.

Cash flows

Nine Months Ended
September 30,

Increase/(Decrease)
$ Change

2019

2018

(Amounts in thousands)

Operating activities
$
49,542
$
27,215
$
22,327

Investing activities

(198,197
)
(8,580
)
(189,617
)
Financing activities

485,047

2,363

482,684

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

(7,785
)
(4,453
)
(3,332
)

Net increase in cash, cash equivalents and restricted cash
$
328,607
$
16,545
$
312,062


	Nine Months Ended September 30,						Increase/(Decrease)
	2020			2019			$ Change
	(Amounts in thousands)
Operating activities	$	47,754		$	49,542		$	(1,788	)
Investing activities		(43,097	)		(198,197	)		155,100
Financing activities		7,078			485,047			(477,969	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		4,160			(7,785	)		11,945

Net increase in cash, cash equivalents and restricted cash	$	15,895		$	328,607		$	(312,712	)

Operating activities

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 manufactured of $22.8 million supports expected increases in future revenue. An increase in accounts payable and accrued liabilities of $1.1 million was primarily due 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.

For the nine months ended September 30, 2019, our operating activities provided cash of $49.5 million reflecting net income of $17.8 million

and

non-cash charges

~~charges~~ totaling $25.2 million primarily related to depreciation,

amortization,

non-cash interest

~~interest~~ expense, deferred taxes, loss on extinguishment of debt and stock-based compensation charges. An increase in accounts receivable consumed $6.7 million of cash and was primarily driven by the 41.3%

year-to-date

increase in revenues. An increase in inventory consumed $4.9 million to support future revenue, due to the addition of C Technologies on May 31, 2019. These movements were offset by an increase in accounts payable and accrued liabilities of $6.5 million due to the addition of C Technologies ~~and~~as well as a decrease in unbilled receivables of $2.0 million. The remaining cash provided by operating activities resulted from favorable changes in various other ~~operating assets and liabilities.~~

~~For the nine months ended September 30, 2018, our operating activities provided cash of $27.2 million reflecting net income of $11.0 million and~~

~~non-cash~~

~~charges totaling $23.2 million, primarily related to depreciation, amortization,~~

~~non-cash~~

~~interest expense, deferred tax expense and stock-based compensation charges. An increase in accounts receivable consumed $1.6 million of cash and was primarily driven by the 43%~~

~~year-to-date~~

increase in revenues. An increase in inventory levels to accommodate future revenue growth consumed $4.8 million of cash and payment of accrued liabilities consumed $1.1 million of cash. This utilization of cash is partially offset by $3.4 million of cash provided by an increase in accounts payable due to the timing of payments to vendors. The remaining cash flow used in operations resulted from net unfavorable changes in various other working capital accounts.

Investing activities

Our investing activities consumed ~~$198.2~~$43.1 million of cash during the nine months ended September 30, ~~2019.~~2020 related to the EMT Acquisition on July 13, 2020, as well as ongoing capital expenditures. Our investing activities consumed $198.2 million in the nine months ended September 30, 2019 related to the purchase of C Technologies, and capital expenditures. We ~~used~~consumed $28.5 million in cash (net of cash received) for the EMT Acquisition on July 13, 2020 and $182.2 million in cash (net of cash received) for the C Technologies Acquisition on May 31, 2019.

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Capital expenditures ~~consumed $16.0~~in 2020 and 2019 included $3.6 million ~~as we continue to increase our manufacturing capacity worldwide. Of these expenditures,~~and $4.6 million, ~~represented~~respectively, for capitalized costs related to our

internal-use

software.

Financing activities

Cash provided by financing activities of $7.1 million for the nine months ended September 30, 2020 included proceeds from stock option exercises and the vesting of stock units during the period. Cash provided by financing activities of $485.0 million for the nine months ended September 30, 2019 included $320.7 million from the issuance of our common stock resulting from our public offerings completed in May and ~~July~~June 2019. In addition, in July 2019 ~~the Company~~we issued $287.5 million aggregate principal amount of the 2019 Notes for net proceeds of $278.6 million. Proceeds from stock option exercises during the nine ~~month period~~months ended September 30, 2019 were $1.1 million. Offsetting these movements was $115.0 million of cash utilized by ~~the Company~~us in July 2019 to settle the 2016 Notes.

For the nine months ended September 30, 2018, our financing activities provided $2.4 million of cash, primarily due to proceeds received from stock option exercises, partially offset by cash outlays of $11,000 related to the conversion of certain 2016 Notes, which settled in the first quarter of 2018.

Working capital increased by approximately ~~$436.9~~$52.2 million to ~~$582.8~~$645.7 million at September 30, ~~2019~~2020 from ~~$145.9~~$593.5 million at December 31, ~~2018~~2019 due to the various changes noted ~~above, including the C Technologies Acquisition.~~above.

~~Table of Contents~~

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;

our ability to acquire additional bioprocessing products;

our identification and execution of strategic acquisitions or business combinations;

~~the resources required to successfully integrate our recently acquired businesses and recognize expected synergies;~~

the scope of and progress made in our ~~research and development~~R&D activities;

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 ~~research and development~~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 stockholders, 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 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, ~~2019.~~2020.

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Net Operating Loss Carryforwards

At December 31, ~~2018,~~2019, we had ~~utilized our remaining $19.5 million of~~ net operating loss ~~carryforwards.~~carryforwards of $0.2 million remaining. We had business tax credits carryforwards of ~~$2.9~~$2.1 million available to reduce future federal income taxes, if any. The business tax credits carryforwards will continue to expire at various dates through December ~~2038.~~2039. 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 stockholders.

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

~~Table of Contents~~

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 operations or acquisitions, product development and sales, product candidate research, development and regulatory approval, ~~selling, general and administrative~~SG&A expenditures, intellectual property, development and manufacturing plans, availability of materials and product and adequacy of capital resources, ~~and~~our financing plans, and the projected 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:~~with the following: the ultimate impact of the coronavirus pandemic on our business or financial results; the success of current and future collaborative or supply relationships, including our agreements with Cytiva (formerly GE ~~Healthcare~~Healthcare), MilliporeSigma and ~~MilliporeSigma,~~Purolite; 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,~~products; our ability to obtain required regulatory ~~approvals,~~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,~~products; the risk of litigation regarding our patent and other intellectual property ~~rights,~~rights; the risk of litigation with collaborative ~~partners,~~partners; our limited manufacturing capabilities and our dependence on third-party manufacturers and value-added ~~resellers,~~resellers; the effect of the pandemic of the novel coronavirus disease, 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,~~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,~~condition; our ability to compete with larger, better financed life sciences ~~companies,~~companies; our history of losses and expectation of incurring ~~losses,~~losses; our ability to generate future ~~revenues,~~revenues; our ability to successfully integrate our recently acquired ~~businesses,~~businesses; our ability to raise additional capital to fund potential ~~acquisitions,~~acquisitions; our volatile stock ~~price,~~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 Securities and Exchange Commission including under the ~~section~~sections entitled “Risk Factors” in our Annual Report on Form

10-K

for the year ended December 31, ~~2018.~~2019 and our Quarterly Report on Form

10-Q

for the quarter ended March 31, 2020.

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 September 30, ~~2019.~~2020. As a result, a hypothetical 100 basis point increase in interest ~~ratees~~rates would have no effect on our cash position as of September 30, ~~2019.~~2020.

Table of Contents

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 ~~loss~~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 ~~kronor,~~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 ~~kronor,~~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.

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)

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 ~~in ensuring that information required to be disclosed by~~at the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, on a timely basis, and is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and the Company’s principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.reasonable assurance level.

~~Table of Contents~~

Changes in Internal Control

We acquired ~~C Technologies~~Engineered Molding Technology LLC (“EMT”) on ~~May 31, 2019.~~July 13, 2020. The financial results of ~~C Technologies~~EMT are included in our unaudited consolidated financial statements as of September 30, ~~2019~~2020 and for the quarter then ended. ~~The C Technologies business represented approximately $7.0 million of revenue and ($1.2) million of net loss, respectively, for the quarter ended September 30, 2019.~~ As this acquisition occurred in the ~~second~~third quarter of ~~2019,~~2020, the scope of our assessment of our internal control over financial reporting does not include ~~C Technologies.~~EMT. This exclusion is 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 acquisition.

In connection with our initiative to integrate and enhance our global information technology systems and business processes, we ~~initiated~~continued the phased implementation of a new enterprise resource planning (“ERP”) system. The ERP system is being implemented in phases through ~~2020.~~2021. The ~~first~~second phase was completed during the third quarter of ~~2019.~~2020. As a result of this implementation, we modified certain existing internal controls over financial reporting as well as implemented new controls and procedures related to the new ERP system as of September 30, ~~2019.~~2020.

Other than the foregoing, there 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 September 30, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

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

~~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~~

“Risk Factors”

in Part I, Item 1A inof our ~~Quarterly~~Annual Report on Form

~~10-Q~~10-K

for the period ended ~~March~~December 31, 2019 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 Annual Report on Form

10-K

for the period ended December 31, 2019 and our Quarterly Report on Form

10-Q

for the ~~period~~quarter ended March 31, ~~2019.~~2020.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~C Technologies Acquisition~~

~~Pursuant to the Stock Purchase Agreement described in Note 3,~~

~~“Acquisition of C Technologies, Inc.,”~~

to the consolidated financial statements, on May 31, 2019, the Company issued 779,221 unregistered shares of the Company’s common stock totaling $53.9 million as part of the consideration for the Company’s acquisition of C Technologies. 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.

~~Exchange and Redemption of 2016 Notes~~

None.

On July 16, 2019, the Company entered into separate privately negotiated agreements with certain holders of its outstanding 2.125% Convertible Senior Notes due 2021 (the “2016 Notes”) to exchange an aggregate of $92.0 million aggregate principal amount of the 2016 Notes for shares of the Company’s common stock, together with cash, in private placement transactions pursuant to Section 4(a)(2) of the Securities Act (the “Note Exchanges”).

Each holder of 2016 Notes that participated in the Note Exchanges represented to the Company that it was either institutional “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act or a “qualified institutional buyer” within the meaning of Rule 144A promulgated under the Securities Act.

On July 19, 2019 and July 22, 2019, the Company used $92.3 million and 1,850,155 shares of its common stock to settle the Note Exchanges. On September 23, 2019, the Company used $23.0 million and 466,045 shares of its common stock to settle the remaining 2016 Notes.

~~For more information regarding our 2016 Notes, see Note 8,~~

~~“Convertible Senior Notes,”~~

~~to the consolidated financial statements.~~

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

None.

Table of Contents

ITEM 6.

EXHIBITS

(a) Exhibits

~~(a)~~

~~Exhibits~~


Exhibit Number			Document Description

3.1
	~~3.1~~			Restated Certificate of Incorporation, dated September 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
	~~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
	~~3.3~~			Second Amended and Restated Bylaws (filed as Exhibit 3.1 to Repligen Corporation’s Current Report on Form 8-K filed on May 23, 2017 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.

	~~4.1~~ 32.1*			Base Indenture, dated as of July 19, 2019, by and between Repligen Corporation and Wilmington Trust, National Association (filed as Exhibit 4.1 to Repligen Corporation’s Current Report on Form 8-K filed on July 22, 2019 and incorporated herein by reference).

	~~4.2~~			First Supplemental Indenture, dated as of July 19, 2019, by and between Repligen Corporation and Wilmington Trust, National Association (filed as Exhibit 4.2 to Repligen Corporation’s Current Report on Form 8-K filed on July 22, 2019 and incorporated herein by reference).

	~~4.3~~			~~Form of 0.375% Convertible Senior Note due 2024 (included in Exhibit 4.2).~~

	~~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+
	~~101.INS+~~			~~Inline~~ XBRL Instance ~~Document—~~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+
	~~101.SCH+~~			Inline XBRL Taxonomy Extension Schema Document.

101.CAL+
	~~101.CAL+~~			Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF+
	~~101.DEF+~~			Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB+
	~~101.LAB+~~			Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE+
	~~101.PRE+~~			Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104+
	~~104+~~			Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*).

†	~~Portions of this exhibit (indicated by asterisks) have been omitted in accordance with the rules of the Securities and Exchange Commission.~~

#	Management contract or compensatory plan or arrangement.

+	Filed herewith.

*	Furnished herewith.

Table of Contents

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: November 5, 2020	By:	~~REPLIGEN CORPORATION~~/S/ TONY J. HUNT

~~Date: October 31, 2019~~		~~By:~~	~~/s/ T~~ ~~ony~~ ~~J. H~~ ~~unt~~
			Tony J. Hunt
			President and Chief Executive Officer (Principal executive officer) Repligen Corporation

~~Date: October 31, 2019~~		~~By:~~	~~/s/ J~~ on S ~~nodgres~~
			~~Jon Snodgres~~ (Principal executive officer)
			Repligen Corporation

Date: November 5, 2020	By:	/S/ JON SNODGRES
		Jon Snodgres
		Chief Financial Officer
		(Principal financial officer)
		Repligen Corporation

4144


	September 30,			December 31,
	2019			2018
Assets
Current assets:
Cash and cash equivalents	$	513,454		$	193,822
Restricted cash		8,975			—
Accounts receivable, less reserve for doubtful accounts of $420 and $227 at September 30, 2019 and December 31, 2018, respectively		41,968			33,015
Royalties and other receivables		68			136
Unbilled receivables		555			2,602
Inventories, net		51,579			42,263
Prepaid expenses and other current assets		4,941			3,901

Total current assets		621,540			275,739
Property, plant and equipment, net		43,034			32,180
Intangible assets, net		216,289			135,438
Goodwill		468,845			326,735
Deferred tax assets		3,917			4,355
Operating lease right of use assets		24,845			—
Other assets		238			174

Total assets	$	1,378,708		$	774,621

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	9,951		$	10,489
Operating lease liability		3,044			—
Accrued liabilities		25,770			15,865
Convertible senior notes, current portion		—			103,488

Total current liabilities		38,765			129,842
Convertible senior notes		230,182			—
Deferred tax liabilities		38,059			25,086
Operating lease liability, long-term		26,056			—
Other liabilities, long-term		528			4,125

Total liabilities		333,590			159,053

Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.01 par value, 5,000,000 shares authorized, 0 shares issued or outstanding		—			—
Common stock, $0.01 par value; 80,000,000 shares authorized; 52,052,581 shares at September 30, 2019 and 43,917,378 shares at December 31, 2018 issued and outstanding		521			439
Additional paid-in capital		1,064,152			642,590
Accumulated other comprehensive loss		(21,794	)		(11,893	)
Accumulated earnings (deficit)		2,239			(15,568	)

Total stockholders’ equity		1,045,118			615,568

Total liabilities and stockholders’ equity	$	1,378,708		$	774,621


	Nine Months Ended September 30, 2019
	Common Stock
	Number of Shares			Par Value		Additional Paid- In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Earnings (Deficit)			Total Stockholders’ Equity
Balance at December 31, 2018		43,917,378		$	439	$	642,590		$	(11,893	)	$	(15,568	)	$	615,568
Net income		—			—		—			—			17,807			17,807
Issuance of common stock for debt conversion		2,316,229			23		198,734			—			—			198,757
Reduction for equity component from debt conversion , net of tax		—			—		(200,079	)		—			—			(200,079	)
Exercise of stock options and releases of restricted stock		311,299			3		1,055			—			—			1,058
Issuance of common stock pursuant to the acquisition of C Technologies, Inc.		779,221			8		53,930			—			—			53,938
Tax withholding on vesting of restricted stock units		(3,077	)		—		(290	)		—			—			(290	)
Equity component of 0.375% senior convertible notes, net of tax		—			—		38,088			—			—			38,088
Proceeds from issuance of common stock, net of issuance costs of $18,607		4,731,531			48		320,665			—			—			320,713
Stock-based compensation expense		—			—		9,459			—			—			9,459
Translation adjustment		—			—		—			(9,901	)		—			(9,901	)

Balance as of September 30, 2019		52,052,581		$	521	$	1,064,152		$	(21,794	)	$	2,239		$	1,045,118


	Three Months Ended September 30, 2019
	Common Stock
	Number of Shares			Par Value		Additional Paid- In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Earnings			Total Stockholders’ Equity
Balance at June 30, 2019		48,086,422		$	481	$	892,960		$	(15,053	)	$	580		$	878,968
Net income		—			—		—			—			1,659			1,659
Issuance of common stock for debt conversion		2,316,200			23		198,732			—			—			198,755
Reduction for equity component from debt conversion , net of tax		—			—		(200,079	)		—			—			(200,079	)
Exercise of stock options and releases of restricted stock		66,036			1		493			—			—			494
Tax withholding on vesting of restricted stock units		(3,077	)		—		(290	)		—			—			(290	)
Equity component of 0.375% senior convertible notes, net of tax		—			—		38,088			—			—			38,088
Proceeds from issuance of common stock, net of issuance costs of $6,981		1,587,000			16		131,073			—			—			131,089
Stock-based compensation expense		—			—		3,175			—			—			3,175
Translation adjustment		—			—		—			(6,741	)		—			(6,741	)

Balance as of September 30, 2019		52,052,581		$	521	$	1,064,152		$	(21,794	)	$	2,239		$	1,045,118


	Nine Months Ended September 30, 2018
	Common Stock
	Number of Shares			Par Value		Additional Paid- In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2017		43,587,079		$	436	$	628,983		$	(6,363	)	$	(31,508	)	$	591,548
Net income		—			—		—			—			10,979			10,979
Issuance of common stock for debt conversion		2			0		0			—			—			0
Exercise of stock options and releases of restricted stock		266,308			3		2,372			—			—			2,375
Stock-based compensation expense		—			—		7,672			—			—			7,672
Cumulative effect of accounting changes		—			—		—			—			(677	)		(677	)
Translation adjustment		—			—		—			(5,410	)		—			(5,410	)

Balance as of September 30 , 2018		43,853,389		$	439	$	639,027		$	(11,773	)	$	(21,206	)	$	606,487


	Three Months Ended September 30, 2018
	Common Stock
							Accumulated
					Additional		Other						Total
	Number of		Par		Paid-		Comprehensive			Accumulated			Stockholders’
	Shares		Value		In Capital		Income (Loss)			Deficit			Equity
Balance at June 30, 2018		43,798,572	$	438	$	635,364	$	(11,143	)	$	(26,000	)	$	598,659
Net income		—		—		—		—			4,794			4,794
Exercise of stock options and releases of restricted stock		54,817		1		884		—			—			885
Stock-based compensation expense		—		—		2,779		—			—			2,779
Translation adjustment		—		—		—		(630	)		—			(630	)

Balance as of September 30 , 2018		43,853,389	$	439	$	639,027	$	(11,773	)	$	(21,206	)	$	606,487


Cash consideration	$	185,949
Equity consideration		53,938

Fair value of net assets acquired	$	239,887


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(Amounts in thousands)
Product revenue	$	69,419	$	49,500	$	200,701	$	142,042
Royalty and other income		26		29		70		48

Total revenue	$	69,445	$	49,529	$	200,771	$	142,090


As of September 30, 2019	Amount
2019 (remaining three months)	$	920
2020		4,966
2021		5,388
2022		4,438
2023		3,517
2024 and thereafter		17,530

Total future minimum lease payments		36,759
Less : amount of lease payment representing interest		7,659

Total operating lease liabilities	$	29,100


	Three Months Ended		Nine Months Ended
Lease Cost	September 30, 2019		September 30, 2019
	(Amounts in thousands)
Operating lease cost	$	1,207	$	3,119
Variable operating lease cost		242		902

Lease cost	$	1,449	$	4,021


	Nine Months Ended
	September 30, 2019
Operating cash flows from operating leases	$	(2,962	)


For the Years Ended December 31,	Amount
2019	$	4,021
2020		3,599
2021		3,263
2022		2,213
2023		1,316
2024 and thereafter		3,622

Minimum operating lease payments	$	18,034


Balance as of December 31, 2018	$	326,735
Cumulative translation adjustment		(793	)
Acquisition of C Technologies, Inc.		142,903

Balance as of September 30, 2019	$	468,845


	September 30, 2019
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Weighted Average Useful Life (in years)
	(Amounts in thousands)
Finite-lived intangible assets:
Technology — developed	$	82,088	$	(8,533	)	$	73,555		19
Patents		240		(240	)		—		8
Customer relationships		160,467		(22,769	)		137,698		15
Trademarks		3,751		(286	)		3,465		20
Other intangibles		1,696		(825	)		871		3

Total finite-lived intangible assets		248,242		(32,653	)		215,589		16
Indefinite-lived intangible asset:
Trademarks		700		—			700		—

Total intangible assets	$	248,942	$	(32,653	)	$	216,289


	December 31, 2018
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Weighted Average Useful Life (in years)
	(Amounts in thousands)
Finite-lived intangible assets:
Technology — developed	$	53,315	$	(5,942	)	$	47,373		19
Patents		240		(240	)		—		8
Customer relationships		101,460		(16,609	)		84,851		14
Trademarks		2,160		(159	)		2,001		20
Other intangibles		1,061		(548	)		513		3

Total finite-lived intangible assets		158,236		(23,498	)		134,738		16
Indefinite-lived intangible asset:
Trademarks		700		—			700		—

Total intangible assets	$	158,936	$	(23,498	)	$	135,438


	Estimated
	Amortization
Nine Months Ended September 30,	Expense
2019 (remaining three months)	$	3,918
2020		15,129
2021		14,633
2022		14,631
2023		14,631
2024 and thereafter		152,647

Total	$	215,589


	September 30,
	2019
0.375% Convertible Senior Notes due July 15, 2024	$	287,500
Less: u namortized debt discount		(50,247	)
Less: u namortized debt issuance costs		(7,071	)

Total debt		230,182
Less: c urrent portion		—

Net carrying amount	$	230,182


	September 30,
	2019
Proceeds allocated to the conversion feature	$	52,062
Less: transaction costs allocated to the conversion feature		(1,621	)
Less: deferred taxes		( 12,353	)

Net carrying value	$	38,088


	Shares			Weighted average exercise price		Weighted- Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value (in Thousands)
Options outstanding at December 31, 2018		998,226		$	27.54
Granted		44,996		$	61.98
Exercised		(83,306	)	$	12.70
Forfeited/expired/cancelled		—		$	—

Options outstanding at September 30, 2019		959,916		$	30.44		6.93	$	44,396

Options exercisable at September 30, 2019		503,934		$	24.18		5.64	$	26,464

Vested and expected to vest at September 30, 2019 (1)		923,962					6.87	$	42,961


	Foreign Currency Translation Adjustment
Balance as of December 31 , 2018	$	(11,893	)
Other comprehensive loss		(9,901	)

Balance as of September 30, 2019	$	(21,794	)


	Three Months Ended September 30,				Increase/ (Decrease)						Nine Months Ended September 30,				Increase/ (Decrease)
	2019		2018		$ Change			% Change			2019		2018		$ Change		% Change
	(Amounts in thousands, except for percentage data)
Revenue:
Products	$	69,419	$	49,500	$	19,919			40.2	%	$	200,701	$	142,042	$	58,659		41.3	%
Royalty and other		26		29		(3	)		(10.3	%)		70		48		22		45.8	%

Total revenue	$	69,445	$	49,529	$	19,916			40.2	%	$	200,771	$	142,090	$	58,681		41.3	%


	Nine Months Ended September 30,						Increase/(Decrease) $ Change
	2019			2018			Increase/(Decrease) $ Change
	(Amounts in thousands)
Operating activities	$	49,542		$	27,215		$	22,327
Investing activities		(198,197	)		(8,580	)		(189,617	)
Financing activities		485,047			2,363			482,684
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(7,785	)		(4,453	)		(3,332	)

Net increase in cash, cash equivalents and restricted cash	$	328,607		$	16,545		$	312,062