Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS:
Introduction
Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2016
Unaudited Pro Forma Condensed Combined Statement of Operations for the Nine Months Ended September 30, 2016
Unaudited Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 2015
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
INTRODUCTION
On December 14, 2016, the Company acquired TangenX Technology Corporation (“TangenX”), pursuant to the terms of the Share Purchase Agreement, dated as of December 14, 2016 (the “Share Purchase Agreement”), by and among the Company and TangenX (such acquisition, the “TangenX Acquisition”). The Company acquired all outstanding shares and the business of TangenX, including TangenX’s innovative single-use Sius line of tangential flow filtration (“TFF”) cassettes and hardware used in downstream biopharmaceutical manufacturing processes.
Sius TFF is used in the filtration of biological drugs, complimenting Repligen’s OPUS line of pre-packed chromatography columns used in downstream purification. Pursuant to the Share Purchase Agreement, Repligen acquired all of the outstanding shares of TangenX, as well as certain assets and liabilities.
The TangenX Acquisition was accounted for as a purchase of a business under ASC 805, “Business Combinations.” The total purchase price of the TangenX Acquisition was $37.1 million in cash.
The accompanying unaudited proforma condensed combined financial statements combine the historical consolidated financial statements of Repligen Corporation with the historical financial information of the TangenX after giving effect to the acquisition of substantially all of the assets and assumption of liabilities of TangenX by Repligen.
The unaudited pro forma condensed combined statements of operations combine Repligen’s operating results for the nine months and year ended, September 30, 2016 and December 31, 2015, respectively, with the operating results of TangenX for the nine months and year ended, September 30, 2016 and December 31, 2015, respectively. The unaudited pro forma condensed combined balance sheet combines the balances of Repligen as of September 30, 2016 with the balances of TangenX as of September 30, 2016. The unaudited pro forma condensed combined statements of operations give effect to the acquisition as if it had occurred on January 1, 2015, and the unaudited pro forma condensed combined balance sheet gives effect to the acquisition as if it had occurred on September 30, 2016. The unaudited pro forma condensed combined financial information includes all material pro forma adjustments necessary for this purpose that are directly attributable to the acquisition and are factually supportable. The unaudited pro forma condensed combined financial information herein should be read in conjunction with the historical financial statements and the related notes thereto of Repligen Corporation which are presented in the Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 25, 2016 (File No. 000-14656), the Quarterly Report on Form 10-Q for the nine months ended September 30, 2016, filed on December 15, 2016 (File No.000-14656), and the financial statements of TangenX that are presented as exhibits to this Form 8-K.
The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the operating results or financial position that would have been achieved if the acquisition had been consummated as of the beginning of the periods presented, nor are they necessarily indicative of the future operating results or financial position of the combined Company. No effect has been given in these pro forma financial statements for synergistic benefits that may be realized through the combination or costs that may be incurred in integrating operations.
Repligen Corporation
Pro Forma Combined Condensed Consolidated Balance Sheet
September 30, 2016
(Unaudited)
(in thousands)
Repligen | TangenX | Pro Forma Adjustments | Note | Pro Forma | ||||||||||||||||
Assets | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash and cash equivalents | $ | 157,651 | $ | 3,170 | $ | (38,000 | ) | (a | ) | $ | 122,821 | |||||||||
Marketable securities | 21,060 | 21,060 | ||||||||||||||||||
Accounts receivable, net | 15,154 | 779 | 15,933 | |||||||||||||||||
Other receivables | 226 | 226 | ||||||||||||||||||
Inventories | 24,463 | 406 | 179 | (b | ) | 25,048 | ||||||||||||||
Prepaid expenses and other current assets | 1,279 | 40 | 1,319 | |||||||||||||||||
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Total current assets | 219,833 | 4,395 | (37,821 | ) | 186,407 | |||||||||||||||
Property and equipment, net | 14,935 | 202 | 15,137 | |||||||||||||||||
Long-term marketable securities | ||||||||||||||||||||
Intangible assets, net | 18,671 | 12,267 | (c | ) | 30,938 | |||||||||||||||
Goodwill | 31,161 | 26,558 | (d | ) | 57,719 | |||||||||||||||
Restricted cash | 450 | 450 | ||||||||||||||||||
Deferred tax assets | 33 | 33 | ||||||||||||||||||
Other assets | 1 | 1 | ||||||||||||||||||
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Total assets | $ | 285,050 | $ | 4,631 | $ | 1,004 | $ | 290,685 | ||||||||||||
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Liabilities and Stockholders’ Equity | ||||||||||||||||||||
Current liabilities | ||||||||||||||||||||
Accounts payable | $ | 5,061 | $ | 35 | $ | 5,096 | ||||||||||||||
Accrued liabilities | 15,131 | 665 | 15,796 | |||||||||||||||||
Payable for stock repurchase | 1,345 | 1,345 | ||||||||||||||||||
Put option liability | 7,574 | (7,574 | ) | (k | ) | — | ||||||||||||||
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Total current liabilities | 20,192 | 9,619 | (7,574 | ) | 22,237 | |||||||||||||||
Convertible senior notes | 94,318 | 94,318 | ||||||||||||||||||
Deferred tax liabilities | 2,124 | 285 | (e | ) | 2,409 | |||||||||||||||
Other long-term liabilities | 1,894 | 1,894 | ||||||||||||||||||
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Total liabilities | 118,528 | 9,619 | (7,289 | ) | 120,858 | |||||||||||||||
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Commitments and contingencies | ||||||||||||||||||||
Stockholders’ equity (deficit): | ||||||||||||||||||||
Preferred stock | ||||||||||||||||||||
Common stock | 338 | 338 | ||||||||||||||||||
Additional paid-in capital | 240,571 | 335 | (335 | ) | (f | ) | 240,571 | |||||||||||||
Accumulated other comprehensive loss | (9,496 | ) | (9,496 | ) | ||||||||||||||||
Accumulated deficit (earnings) | (64,891 | ) | (5,323 | ) | 8,628 | (a | ), (e), (f) | (61,586 | ) | |||||||||||
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Total stockholders’ equity (deficit) | 166,522 | (4,988 | ) | 8,293 | 169,827 | |||||||||||||||
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Total liabilities and stockholders’ equity (deficit) | $ | 285,050 | $ | 4,631 | $ | 1,004 | $ | 290,685 | ||||||||||||
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See accompanying notes to unaudited pro forma combined condensed financial statements which are an integral part of these financial statements.
Repligen Corporation
Pro Forma Combined Condensed Consolidated Statements of Operations
For the Year Ended December 31, 2015
(Unaudited)
(In thousands except share information)
Historical Repligen Year Ended December 31, 2015 | Historical TangenX Period Ended December 31, 2015 | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||
Revenue | $ | 83,537 | $ | 4,900 | $ | — | $ | 88,437 | ||||||||
Cost of revenue | 35,251 | 1,761 | — | 37,012 | ||||||||||||
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Gross profit | 48,286 | 3,139 | — | 51,425 | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 5,740 | 5,740 | ||||||||||||||
Selling, general and administrative | 24,699 | 1,133 | 791 | (g) | 26,623 | |||||||||||
Contingent consideration – fair value adjustment | 4,083 | 4,083 | ||||||||||||||
Change in fair value of put option liability | 3,535 | (3,535 | )(j) | — | ||||||||||||
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Total operating expenses | 34,522 | 4,668 | (2,744 | ) | 36,446 | |||||||||||
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Operating income (loss) | 13,764 | (1,529 | ) | 2,744 | 14,979 | |||||||||||
Other income (expense), net | (341 | ) | 2 | (61 | )(h) | (400 | ) | |||||||||
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Income (loss) before income taxes | 13,423 | (1,527 | ) | 2,683 | 14,579 | |||||||||||
Income tax expense | 4,078 | 609 | (19 | )(i) | 4,668 | |||||||||||
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Net income (loss) | $ | 9,345 | $ | (2,136 | ) | $ | 2,702 | $ | 9,911 | |||||||
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Net income per share: | ||||||||||||||||
Basic | $ | 0.28 | $ | 0.30 | ||||||||||||
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Diluted | $ | 0.28 | $ | 0.30 | ||||||||||||
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Weighted average common shares outstanding: | ||||||||||||||||
Basic | 32,881,940 | 32,881,940 | ||||||||||||||
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Diluted | 33,577,091 | 33,577,091 | ||||||||||||||
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See accompanying notes to unaudited pro forma combined condensed financial statements which are an integral part of these financial statements.
Repligen Corporation
Pro Forma Combined Condensed Consolidated Statements of Income
For the Nine Months Ended September 30, 2016
(Unaudited)
(In thousands except share information)
Historical Repligen Nine Months Ended September 30, 2016 | Historical TangenX Nine Months Ended September 30, 2016 | Pro Forma Adjustments For Nine Months Ended September 30, 2016 | Pro Forma Combined | |||||||||||||
Revenue | $ | 78,942 | $ | 4,716 | $ | — | $ | 83,658 | ||||||||
Cost of revenue | 34,955 | 1,801 | — | 36,756 | ||||||||||||
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Gross profit | 43,987 | 2,915 | — | 46,902 | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 5,316 | 5,316 | ||||||||||||||
Selling, general and administrative | 22,286 | 977 | 593 | (g) | 23,856 | |||||||||||
Contingent consideration – fair value adjustment | 3,317 | 3,317 | ||||||||||||||
Change in fair value of put option liability | (1,143 | ) | 1,143 | (j) | — | |||||||||||
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Total operating expenses | 30,919 | (166 | ) | 1,736 | 32,489 | |||||||||||
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Operating income | 13,068 | 3,081 | (1,736 | ) | 14,413 | |||||||||||
Other income (expense), net | (2,943 | ) | 3 | (119 | )(h) | (3,059 | ) | |||||||||
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Income before income taxes | 10,125 | 3,084 | (1,855 | ) | 11,354 | |||||||||||
Income tax expense | 3,474 | 785 | (41 | )(i) | 4,218 | |||||||||||
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Net income | $ | 6,651 | $ | 2,299 | $ | (1,814 | ) | $ | 7,136 | |||||||
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Net income per share: | ||||||||||||||||
Basic | $ | 0.20 | $ | 0.21 | ||||||||||||
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Diluted | $ | 0.20 | $ | 0.21 | ||||||||||||
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Weighted average common shares outstanding: | ||||||||||||||||
Basic | 33,485,448 | 33,485,448 | ||||||||||||||
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Diluted | 34,011,534 | 34,011,534 | ||||||||||||||
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Repligen Corporation
Notes to Pro Forma Combined Condensed Consolidated Financial Statements
As of September 30, 2016 and for the Nine Months Ended September 30, 2016
and the Year Ended December 31, 2015
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
1. Description of the Transaction
On December 14, 2016, the Company acquired TangenX Technology Corporation (“TangenX”), pursuant to the terms of the Share Purchase Agreement, dated December 14, 2016 (the “Share Purchase Agreement”), by and among the Company and TangenX (such acquisition, the “TangenX Acquisition”). The Company acquired all outstanding shares and the business of TangenX, including TangenX’s innovative single-use Sius line of tangential flow filtration (“TFF”) cassettes and hardware used in downstream biopharmaceutical manufacturing processes.
Sius TFF is used in the filtration of biological drugs, complimenting Repligen’s OPUS line of pre-packed chromatography columns used in downstream purification. Pursuant to the Share Purchase Agreement, Repligen acquired all of the outstanding shares of TangenX, as well as certain assets and liabilities.
The TangenX Acquisition was accounted for as a purchase of a business under ASC 805, “Business Combinations.” The total purchase price of the TangenX Acquisition was $37.1 million in cash.
2. Basis of Presentation
The accompanying unaudited proforma condensed combined financial statements combine the historical consolidated financial statements of Repligen Corporation with the historical financial information of TangenX after giving effect to the acquisition of substantially all of the assets and assumption of liabilities of TangenX using the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) 805, Business Combinations, and applying the assumptions and adjustments described in the accompanying notes. The unaudited pro forma condensed combined statements of operations combine Repligen’s operating results for the nine months and year ended, September 30, 2016 and December 31, 2015, respectively, with the operating results of TangenX for the nine months and year ended, September 30, 2016 and December 31, 2015, respectively. The unaudited pro forma condensed combined balance sheet combines the balances of Repligen as of September 30, 2016 with the balances of TangenX as of September 30, 2016. The unaudited pro forma condensed combined statements of operations give effect to the acquisition as if it had occurred on January 1, 2015, and the unaudited pro forma condensed combined balance sheet gives effect to the acquisition as if it had occurred on September 30, 2016. The unaudited pro forma condensed combined financial information includes all material pro forma adjustments necessary for this purpose that are directly attributable to the acquisition and are factually supportable. The unaudited pro forma condensed combined financial information herein should be read in conjunction with the historical financial statements and the related notes thereto of Repligen Corporation which are presented in the Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 25, 2016 (File No. 000-14656), the Quarterly Report on Form 10-Q for the nine months ended September 30, 2016, filed on December 15, 2016 (File No.000-14656), and the financial statements of TangenX that are presented as exhibits to this Form 8-K. The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the operating results or financial position that would have been achieved if the acquisition had been consummated as of the beginning of the periods presented, nor are they necessarily indicative of the future operating results or financial position of the combined Company. No effect has been given in these pro forma financial statements for synergistic benefits that may be realized through the combination or costs that may be incurred in integrating operations.
3. Consideration Transferred
The Company accounted for the TangenX Acquisition as the purchase of a business under U.S. GAAP. Under the acquisition method of accounting, the assets of the TangenX were recorded as of the acquisition date, at their respective fair values, and consolidated with those of Repligen. The fair value of the net assets acquired was approximately $37,065,000. The preparation of the valuation required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that the Company believes to be reasonable. However, actual results may differ from these estimates.
The total consideration transferred follows (in thousands):
Cash consideration | $ | 37,532 | ||
Less: working capital adjustment | (467 | ) | ||
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Net assets acquired | $ | 37,065 | ||
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Fair Value of Net Assets Acquired
The allocation of purchase price was based on the fair value of assets acquired and liabilities assumed as of December 14, 2016. The components and allocation of the purchase price consists of the following amounts (in thousands):
Cash and cash equivalents | $ | 1,218 | ||
Accounts receivable | 459 | |||
Other receivables | 111 | |||
Inventory | 936 | |||
Other current assets | 50 | |||
Fixed assets, net | 215 | |||
Customer relationships | 6,192 | |||
Developed technology | 6,044 | |||
Non-competition agreements | 21 | |||
Trademark and trade name | 11 | |||
Accounts payable and other liabilities assumed | (3,083 | ) | ||
Deferred tax liabilities | (4,525 | ) | ||
Goodwill | 29,416 | |||
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Net assets acquired | $ | 37,065 | ||
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The allocation of the purchase price related to this acquisition is preliminary and is based on management’s judgments after evaluating several factors, including preliminary valuation assessments of tangible and intangible assets, and preliminary estimates of the fair value of liabilities assumed. The final allocation of the purchase price to the assets acquired and liabilities assumed will be completed when the final valuation assessments of tangible and intangible assets are completed and estimates of the fair value of liabilities assumed are finalized.
Of the consideration paid, $6.2 million represents the fair value of customer relationships that will be amortized over the determined useful life of 13 years and $6.0 million represents the fair value of developed technology that will be amortized over a determined useful life of 20 years. $21,000 represents the fair value of non-competition agreements that will be amortized over a determined life of five (5) years. $11,000 represents the fair value of trademarks and trade names that will be amortized over a determined useful life of two (2) years. The aforementioned intangible assets will be amortized on a straight-line basis.
The goodwill of $29.4 million represents future economic benefits expected to arise from synergies from combining operations and the extension of existing customer relationships.
4. Pro Forma Adjustments
This note should be read in conjunction with Notes 1, 2 and 3. Adjustments included in the pro forma columns include the following:
(a) To record adjustment to cash for the transaction price and transaction costs of $935,000, to reflect the transaction occurring on September 30, 2016. The transaction cost amount has been recorded as an adjustment to accumulated deficit.
(b) To adjust inventory to fair value.
(c) To reflect the fair value of acquired intangible assets.
(d) To record adjustment for purchase price in excess of fair value of net assets acquired to goodwill.
(e) To adjust deferred tax liabilities to fair value, and to adjusted deferred tax liabilities for the non-recurring tax benefit resulting from the transaction. The non-recurring tax benefit is not reflected in the pro forma statement of income. It is reflected as an adjustment to accumulated deficit.
(f) To eliminate the TangenX historic equity.
(g) To adjust amortization expense based on fair value of acquired intangible assets.
(h) To adjust investment income to reflect foregone investment earnings on cash used to fund the acquisition.
(i) To record income tax expense effect resulting from pro forma adjustments.
(j) To adjust operating expenses for the change in value of put option related to TangenX shares.
(k) To eliminate the put liability related to the TangenX shares.