SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission File Number 0-14656
REPLIGEN CORPORATION
(exact name of registrant as specified in its charter)
Delaware 04-2729386
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
117 Fourth Avenue
Needham, Massachusetts 02494
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 449-9560
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(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of January 31, 2001.
Common Stock, par value $.01 per share 26,593,700
-------------------------------------- -----------------
Class Number of Shares
REPLIGEN CORPORATION
INDEX
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Balance Sheets as of December 31, 2000 and March 31, 2000 (Unaudited) 3
Statements of Operations for the Three and Nine
Months Ended December 31, 2000 and 1999 (Unaudited) 4
Statements of Cash Flows for the Nine-Months
Ended December 31, 2000 and 1999 (Unaudited) 5
Notes to Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submissions of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K 12
Signature 12
Exhibit Index 13
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REPLIGEN CORPORATION
BALANCE SHEETS
(Unaudited)
ASSETS DECEMBER 31, 2000 MARCH 31, 2000
------------- -------------
Current assets:
Cash and cash equivalents $ 12,638,679 $ 25,226,546
Marketable securities 18,769,878 8,806,367
Accounts receivable, net 622,922 847,838
Inventories 565,706 547,448
Prepaid expenses and other current assets 303,445 241,654
------------- -------------
Total current assets 32,900,630 35,669,853
------------- -------------
Property and equipment, at cost:
Equipment 1,147,653 1,092,831
Furniture and fixtures 227,488 157,476
Leasehold improvements 473,288 473,288
------------- -------------
1,848,429 1,723,595
Less: accumulated depreciation and amortization 1,375,604 1,187,343
------------- -------------
472,825 536,252
Other assets, net 56,882 81,382
------------- -------------
$ 33,430,337 $ 36,287,487
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 572,873 $ 425,565
Accrued expenses 576,731 771,520
------------- -------------
Total current liabilities 1,149,604 1,197,085
------------- -------------
Stockholders' equity:
Preferred stock, $.01 par value --authorized - 5,000,000
shares --outstanding - none -- --
Common stock, $.01 par value --authorized - 40,000,000 shares
--outstanding - 26,585,450 shares at December 31, 2000 and
26,315,979 shares at March 31, 2000
265,855 263,159
Additional paid-in capital 166,460,373 165,507,184
Accumulated deficit (134,445,495) (130,679,941)
------------- -------------
Total stockholders' equity 32,280,733 35,090,402
------------- -------------
$ 33,430,337 $ 36,287,487
============= =============
See accompanying notes to financial statements.
3
REPLIGEN CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three-Months Ended Nine-Months Ended
December 31, December 31,
2000 1999 2000 1999
------------------------------------------------------------------
Revenues:
Product $ 615,154 $ 558,028 $ 1,494,942 $ 1,369,494
Investment income 539,322 131,406 1,603,452 334,191
Other 4,745 174,884 251,169 830,824
------------ ------------ ------------ ------------
1,159,221 864,318 3,349,563 2,534,509
------------ ------------ ------------ ------------
Costs and expenses:
Research and development 1,780,506 1,864,437 4,206,242 3,085,684
Selling, general and administrative 568,289 442,743 1,957,154 1,636,126
Cost of products sold 393,029 291,782 951,721 774,699
------------ ------------ ------------ ------------
2,741,824 2,598,962 7,115,117 5,496,509
------------ ------------ ------------ ------------
Net loss $ (1,582,603) $ (1,734,644) $ (3,765,554) $ (2,962,000)
============ ============ ============ ============
Basic and diluted net loss per share $ (0.06) $ (0.08) $ (0.14) $ (0.14)
============ ============ ============ ============
Basic and diluted weighted average common shares
outstanding 26,576,434 22,193,696 26,531,159 20,950,890
============ ============ ============ ============
See accompanying notes to financial statements.
4
REPLIGEN CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine-Months Ended
December 31,
2000 1999
------------ -----------
Cash flows from operating activities:
Net loss $ (3,765,554) $(2,962,000)
Adjustments to reconcile net loss to net cash
used in operating activities -
Depreciation and amortization 188,263 240,118
Non-cash charge for patent acquisition 183,750 --
Non-cash charges relating to stock and warrant issuance 218,735 188,265
Changes in assets and liabilities -
Accounts receivable 224,916 (184,955)
Inventories (18,259) 172,632
Prepaid expenses and other current assets (61,791) 7,769
Accounts payable 147,308 (104,596)
Accrued expenses (194,789) 32,652
Unearned income -- (49,969)
------------ -----------
Net cash used in operating activities (3,077,421) (2,660,084)
------------ -----------
Cash flows from investing activities:
Net redemption /purchases of marketable securities (9,963,511) --
Purchases of property and equipment (124,834) (217,257)
Decrease in other assets 24,500 7,090
------------ -----------
Net cash used in investing activities (10,063,845) (210,167)
------------ -----------
Cash flows from financing activities:
Net proceeds from the issuance of common stock and warrants, net of
issuance costs -- 8,915,368
Proceeds from exercise of warrants 537,899 --
Proceeds from exercise of stock options 15,500 --
------------ -----------
Net cash provided by financing activities 553,399 8,915,368
------------ -----------
Net increase in cash and cash equivalents (12,587,867) 6,045,117
Cash and cash equivalents, beginning of period 25,226,546 3,250,751
------------ -----------
Cash and cash equivalents, end of period $ 12,638,679 $ 9,295,868
============ ===========
See accompanying notes to financial statements.
5
REPLIGEN CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The financial statements included herein have been prepared by Repligen
Corporation (the "Company" or "Repligen"), pursuant to the rules and regulations
of the Securities and Exchange Commission for quarterly reports on Form 10-Q and
do not include all of the information and footnote disclosures required by
generally accepted accounting principles. These financial statements should be
read in conjunction with the audited financial statements and notes thereto
included in the Company's Form 10-K for the year ended March 31, 2000.
In the opinion of management, the accompanying unaudited financial
statements include all adjustments, consisting of only normal, recurring
adjustments, necessary to present fairly, the consolidated financial position,
results of operations and cash flows of the Company. The results of operations
for the interim periods presented are not necessarily indicative of results to
be expected for the entire year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. REVENUE RECOGNITION
The Company recognizes revenue related to product sales upon shipment
of the product.
Research and development revenue derived from collaborative
arrangements is recognized as earned under cost plus fixed-fee contracts, or on
a straight-line basis over development contracts, which approximates when work
is performed and costs are incurred. Research and development expenses in the
accompanying statements of operations include funded and unfunded expenses. In
addition, under certain contracts, the Company recognizes research and
development revenues as milestones are achieved. Licensing and royalties from
the Company's licensed technologies are recognized as earned.
The Company applies Staff Accounting Bulletin (SAB) No. 101, REVENUE
RECOGNITION. SAB 101 requires companies to recognize certain upfront
nonrefundable fees and milestone payments over the life of the related alliance
when such fees are received in conjunction with alliances that have multiple
elements. Implementation of SAB No. 101 has not had a significant impact on the
Company's financial statements.
3. NET LOSS PER SHARE
The Company applies Statement of Financial Accounting Standards (SFAS)
No. 128, EARNINGS PER SHARE. Basic and diluted net loss per share represents net
loss divided by the weighted average number of common shares outstanding during
the period. The dilutive effect of the potential common shares consisting of
outstanding stock options and warrants is determined using the treasury stock
method. Diluted weighted average shares outstanding for the three and
nine-months ended December 31, 2000 and 1999 exclude the potential common shares
issuable upon the exercise of warrants and stock options because to do so would
be antidilutive for the periods presented. At December 31, 2000, there were
outstanding options to purchase 1,503,441 shares of the Company's common stock
at a weighted average exercise price of $2.65 per share and warrants to purchase
934,625 shares of the Company's common stock at a weighted average exercise
price of $4.11 per share. At December 31, 1999, there were outstanding options
to purchase 1,332,791 shares of the Company's common stock at
6
a weighted average exercise price of $1.83 per share and warrants to purchase
3,307,050 shares of the Company's common stock at a weighted average exercise
price of $3.18 per share.
4. CASH EQUIVALENTS AND MARKETABLE SECURITIES
The Company applies SFAS No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN
DEBT AND EQUITY SECURITIES. At December 31, 2000, the Company's cash equivalents
and marketable securities are classified as held-to-maturity, as the Company has
the positive intent and ability to hold these securities to maturity. The
Company considers highly liquid investments purchased with original maturities
at the date of acquisition of three months or less to be cash equivalents.
Marketable securities are accounted for at amortized cost, which approximates
fair value. All of the marketable securities held at December 31, 2000 mature in
one year or less. Cash, cash equivalents and marketable securities consist of
the following at December 31, 2000 and March 31, 2000:
As of
December 31, 2000 March 31, 2000
Cash and equivalents
Money markets $10,844,690 $ 801,434
Commercial paper 1,489,384 17,031,292
U.S. Government and Agency securities -- 7,342,874
Cash 304,605 50,946
----------- -----------
Total cash and cash equivalents $12,638,679 $25,226,546
=========== ===========
Marketable securities
Commercial paper $11,842,085 $ 5,854,544
U.S. Government and Agency securities 6,927,793 2,951,823
----------- -----------
Total marketable securities $18,769,878 $ 8,806,367
=========== ===========
5. INVENTORIES
Inventories are stated at the lower of cost (first in, first out) or
market and consist of the following:
As of
December 31, 2000 March 31, 2000
Raw materials and work-in-process $508,707 $371,405
Finished goods 56,999 176,043
-------- --------
Total $565,706 $547,448
======== ========
Work in process and finished goods inventories consist of material,
labor, outside processing costs and manufacturing overhead.
6. COMPREHENSIVE INCOME
The Company applies SFAS No. 130 REPORTING COMPREHENSIVE INCOME. SFAS
No. 130 establishes standards for reporting and display of comprehensive income
and its components in financial statements. Comprehensive income includes all
changes in equity during a period except those resulting from investments by
owners and distributions to owners. The comprehensive net loss is the same as
reported net loss for all periods presented.
7. DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND SIGNIFICANT
CUSTOMERS
The Company applies SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 establishes standards for
reporting information regarding operating segments in annual financial
statements and requires selected information for those segments to be presented
in interim
7
financial reports issued to stockholders. SFAS No. 131 also establishes
standards for related disclosures about products and services and geographic
areas. Operating segments are identified as components of an enterprise about
which separate discrete financial information is available for evaluation by the
chief operating decision maker, or decision making group, in making decisions
how to allocate resources and assess performance. To date, the Company has
viewed its operations and manages its business as principally one operating
segment. As a result, the financial information disclosed herein represents all
of the material financial information related to the Company's principal
operating segment.
The following table represents the Company's revenue by geographic
area:
Three Months Ended Nine Months Ended
December 31, December 31,
2000 1999 2000 1999
---- ---- ---- ----
US 62% 72% 76% 75%
Europe 38 23 23 22
Other -- 5 1 3
---- ---- ---- ----
Total 100% 100% 100% 100%
During the three months ended December 31, 2000, there was one
significant customer who accounted for approximately 37% of the Company's
revenues. During the three months ended December 31, 1999, there was one
significant customer who accounted for approximately 30% of the Company's
revenues. During the nine months ended December 31, 2000, there were two
customers who account for approximately 22% and 11% of the Company's revenues.
During the nine months ended December 31, 1999, there were two customers who
account for approximately 18% and 15% of the Company's revenues. There were two
significant accounts receivable balances as a percentage of the Company's total
accounts receivable balance at December 31, 2000, 69% and 17%. There were three
significant accounts receivable balances as a percentage of the Company's total
accounts receivable balance at December 31, 1999, 41%, 14% and 12%:
8. PATENT APPLICATION PURCHASE
In December 2000, the Company purchased from the University of
California, San Diego (UCSD) a right to a U.S. patent application covering
novel methods for the treatment of mitochondrial disease. Under terms of the
agreement, Repligen received exclusive commercial rights to both inventions and
paid UCSD an up-front fee. Repligen will also pay UCSD clinical development
milestones and royalties on product sales. The Company has expensed the purchase
price as research and development expense as the realizability of the patent is
subject to the outcome of additional research and development and the successful
prosecution of the patent.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Cautionary Statement Regarding Forward-Looking Statements
Statements in this Quarterly Report on Form 10-Q, as well as oral
statements that may be made by the Company or by officers, directors or
employees of the Company acting on the Company's behalf, that are not historical
facts constitute "forward-looking statements" within the meaning of Section 21E
of the Securities Exchange Act of 1934. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors that could cause the
actual results of the Company to be materially different from the historical
results or from any results expressed or implied by such forward-looking
statements. The Company's future operating results are subject to risks and
uncertainties and are dependent upon many factors, including, without
limitation, the Company's ability to (i) meet its working capital and future
liquidity needs, (ii) successfully implement its strategic growth strategies,
(iii) understand, anticipate and respond to rapidly changing technologies and
market trends, (iv) develop, manufacture and deliver high quality,
technologically advanced products on a timely basis to withstand competition
from competitors which may have greater financial, information gathering and
marketing resources than the Company, (v) obtain and protect licensing and
intellectual property rights necessary
8
for the Company's technology and product development on terms favorable to the
Company, (vi) recruit and retain highly talented professionals in a competitive
job market, (vii) realize future revenues, (viii) maintain a timeline for
clinical development, (ix) obtain approval from the FDA for clinical trials or
product marketing approvals (x) obtain successful results of pending or future
clinical trials, (xi) continue to establish collaborative arrangements with
third parties, and (xii) compete against the biotechnology and pharmaceutical
industries. Further information on potential factors that could affect the
Company's financial results are included in filings made by the Company from
time to time with the Securities and Exchange Commission included in the section
entitled "Risk Factors" contained in the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 2000 (File No.000-14656).
OVERVIEW
We are developing innovative therapeutic products for debilitating
pediatric diseases including autism, leukemia, metabolic and immune system
diseases based on naturally occurring peptides and proteins. Our lead
therapeutic products are secretin for autism, CTLA4-Ig for stem cell
transplantation and uridine for mitochondrial disease.
In March 1999, we acquired the exclusive rights to patent applications
for the use of secretin in the treatment of autism. Autism is a developmental
disorder characterized by poor communicative and social skills, repetitive and
restricted behaviors and in some patients, gastrointestinal problems and
irregular sleep patterns. Secretin is a hormone produced in the small intestine
which regulates the function of the pancreas as part of the process of
digestion. A form of secretin derived from pigs is approved by the United States
Food and Drug Administration ("FDA") for use in diagnosing problems with
pancreatic function. Recent anecdotal reports indicate that secretin may have
beneficial effects in autism, including improvements in sleep, digestive
function, communicative and social behavior. Following media reports of the
potential benefits of secretin, more than 2,000 autistic children have been
treated with the pig-derived hormone. We intend to manufacture a human,
synthetic form of secretin and carry out in clinical trials to more fully
evaluate the benefits of secretin in treating autism and to determine the
characteristics of patients most likely to benefit from secretin. In February
2000, we were issued a broad U.S. patent covering the use of secretin in the
treatment of autism. There are currently no drugs approved by the FDA for the
treatment of autism.
We are also developing a product named "CTLA4-Ig," which has been shown
to suppress unwanted immune responses in animal models of organ transplants and
autoimmune diseases, such as lupus or multiple sclerosis, in which the immune
system mistakenly attacks the body. Our product candidate is a derivative of a
natural protein whose role is to turn-off an immune response. In animal models
of organ transplantation and autoimmune diseases, CTLA4-Ig has been shown to
block the rejection of a transplanted organ or the effects of the autoimmune
disease. Initial clinical testing of CTLA4-Ig has been carried out in patients
receiving a bone marrow transplant, which is a potential cure for several
diseases of the immune system, including leukemia, myeloma, lymphoma and sickle
cell anemia. Despite the clinical success of bone marrow transplants, a
significant number of patients experience a severe and potentially
life-threatening complication known as Graft Versus Host Disease, in which the
newly transplanted immune system attacks the host (i.e., the patient). In June
1999, results from a Phase I clinical trial reported that treatment of bone
marrow from a family member with Repligen's CTLA4-Ig prevented Graft Versus Host
Disease in eight of eleven transplant patients. In October 2000, the FDA
approved the initiation of a Phase II clinical trial evaluating CTLA4-Ig in
patients receiving stem cell transplant for leukemia or other malignancies.
In December 2000, the Company purchased from the University of
California, San Diego (UCSD) a right to a U.S. patent application covering
novel methods for the treatment of mitochondrial disease. Mitochondria are small
bodies found in every cell, which produce energy for cellular processes.
Mitochondrial diseases are characterized by impaired function of many tissues
particularly skeletal muscles (weakness, poor motor skills), the nervous system
(seizures, poor cognition) and dysfunction of the heart and kidney. Uridine is a
naturally occurring substance required by all cells for the synthesis of RNA,
DNA and other essential factors. Mitochondria are the only cellular
(non-dietary) source of uridine and its synthesis is often impaired in patients
with mitochondrial disease. In a Phase 1 study at UCSD, daily administration of
uridine or a derivative of uridine was well tolerated by the patients and
produced symptom improvements in
9
some patients. Repligen intends to extend these observations in a randomized,
placebo-controlled clinical study in collaboration with UCSD.
We develop, manufacture and market products for the production of
therapeutic antibodies. We currently market a line of products for the
purification of antibodies based on a naturally occurring protein, Protein A,
which can specifically bind to antibodies. Repligen owns composition of matter
patents for recombinant Protein A in the United States and in Europe. In
December 1998, we entered into a ten-year agreement to supply recombinant
Protein A to Amersham Pharmacia Biotech, a leading supplier to the
biopharmaceutical market.
In October 1999, Repligen obtained a license from ChiRhoClin, Inc., a
private company, to commercialize two diagnostic secretin products. These
products are synthetic, injectable forms of the natural hormone which has been
traditionally been used by gastroenterologists to assess the function of the
pancreas. New Drug Applications (NDAs) have been filed for both products. The
NDA for the synthetic porcine product has been reviewed by the FDA which
indicated that it could be approved for marketing in the United States upon
satisfactory response by ChiRhoClin to a request for additional data concerning
the product's manufacturing. Both synthethic products have been granted orphan
drug status by the FDA. If the FDA approves either product, the license
agreement obligates Repligen to pay ChiRhoClin future milestones in cash and
Repligen common stock and royalties. We cannot be certain that the FDA will
approve either product.
RESULTS OF OPERATIONS
REVENUES
Total revenues for the three-month period ended December 31, 2000,
and the three-month period ended December 31, 1999, were approximately
$1,159,000 and $864,000 respectively, an increase of $295,000 or 34%. Year to
date total revenues for the nine month period ended December 31, 2000 and
1999,were approximately $3,350,000 and $2,535,000, respectively, an increase
of $815,000 or 32%.
Product revenues for the three month period ended December 31, 2000,
and the three-month period ended December 31, 1999, were approximately $615,000
and $558,000, respectively, an increase of $57,000 or 10%. This increase is
largely attributable to the timing of large scale production orders of Protein
A. Year to date total product sales for the nine month period ended December 31,
2000 and 1999, were approximately $1,495,000 and $1,369,000, respectively, an
increase of $126,000 or 9%. This increase is due to increased product shipments
to Amersham Pharmacia Biotech and demand from monoclonal antibody producers
during such period.
Investment income for the three month period ended December 31, 2000,
and the three-month period ended December 31, 1999, was approximately $539,000
and $131,000, respectively, an increase of $408,000 or 311%. Year to date total
investment income for the nine -month period ended December 31, 2000 and
1999,was approximately $1,603,000 and $334,000, respectively, an increase of
$1,269,000 or 380%. This increase during the three and nine-months ended
December 31, 2000 is largely attributable to higher average funds available for
investment arising principally out of the completion of a private placement of
common stock for $22,400,000 on March 9, 2000.
Other revenues, which included research and development revenues, for
the three month period ended December 31, 2000, and the three-month period ended
December 31, 1999 were approximately $5,000 and $175,000, respectively, a
decrease of $170,000 or 97%. Year to date other revenues for the nine month
period ended December 31, 2000 and 1999 were approximately $251,000 and
$831,000, respectively, a decrease of $580,000 or 70%. This decrease during the
three and nine-month periods ended December 31, 2000 is a result of the
termination of government sponsored research on drug discovery programs that
generated revenue in fiscal 2000.
EXPENSES
Total expenses for the three-month period ended December 31, 2000 and
the three-month period ended December 31, 1999 were approximately $2,742,000 and
$2,599,000, respectively, an increase of $143,000 or 6%. Year to date total
expenses for the nine month period ended December 31, 2000 and
10
1999, were approximately $7,115,000 and $5,497,000, respectively, an increase of
$1,618,000 or 29%.
Research and development expenses for the three-month period ended
December 31, 2000, and the three-month period ended December 31, 1999, were
approximately $1,781,000 and $1,864,000, respectively, a decrease of $83,000 or
5%. During the three months ended December 31, 2000, research and development
expenses include costs incurred for the production of clinical material and
clinical trials for secretin and CTLA4-Ig and payment associated with the
acquisition of the UCSD patent applications. During December 31, 1999, research
and development costs included a $1,000,000 licensing payment associated with
the licensing of two diagnostic secretin products. Research and development
expenses for the nine month period ended December 31, 2000 and 1999,were
approximately $4,206,000 and $3,086,000, respectively, an increase of $1,120,000
or 36%. This increase is largely attributable to increased costs associated with
Repligen's drug development programs for secretin and CTLA4-Ig.
Selling, general and administrative expenses (SG&A) for the three month
period ended December 31, 2000 and the three-month period ended December 31,
1999, were approximately $568,000 and $443,000, respectively, an increase of
$125,000 or 28%. SG&A expenses for the nine month period ended December 31, 2000
and 1999 were approximately $1,957,000 and $1,636,000, respectively, an increase
of $321,000 or 20%. This increase during the three and nine-month periods ended
December 31, 2000 is largely attributable to increased spending on personnel and
associated costs, increased shareholder services and patent costs during the
quarter ended December 31, 2000.
Cost of products sold for the three months ended December 31, 2000, and
the three-month period ended December 31, 1999, were approximately $393,000 and
$292,000, respectively, an increase of $101,000, or 35%. Cost of product sales
for the nine month period ended December 31, 2000 and 1999,were approximately
$952,000 and $775,000, respectively, an increase of $177,000 or 23%. This
increase during the three and nine-month periods ended December 31, 2000 is
largely attributable to increased Protein A sales and to product mix. Cost of
products sold in the three-month periods ended December 31, 2000 and 1999 were
64% and 52%, respectively, of product revenues. Cost of products sold in the
nine-month periods ended December 31, 2000 and 1999 was 64% and 57%,
respectively, of product revenues. This increase in cost as a percentage of
revenue is due primarily to additional staffing and to product mix.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations primarily through private placements of
common stock and revenues derived from product sales, collaborative research
agreements, government grants, and payments received pursuant to licensing and
royalty agreements. Total cash, cash equivalents and marketable securities at
December 31, 2000 equaled $31,409,000, a decrease of $2,624,000 from $34,033,000
at March 31, 2000.
Repligen's operating activities used cash of approximately $3,077,000
for the nine months period ended December 31, 2000 consisting of a net loss from
operations of approximately $3,766,000, an increase of inventory of $62,000 and
a decrease of accrued expenses of $195,000. This use of cash was offset by
non-cash charges of $591,000 for depreciation and amortization and charges
associated with the issuance of warrants and common stock, an increase in
accounts payable of $147,000 and a decrease in accounts receivable of $225,000.
Our investing activities used cash of approximately $10,064,000 for the purchase
of marketable securities and from changes in other assets. Our cash was reduced
by capital expenditures of $125,000. Our financing activities provided cash of
approximately $553,000 from the proceeds of stock option and warrant exercises.
Working capital decreased to $31,751,000 at December 31, 2000 from
$34,473,000 at March 31, 2000.
While we anticipate that the cost of operations will increase as we
continues to expand its investment in proprietary product development, we
believe we have sufficient funding to satisfy its working capital and capital
expenditure requirements for the next twenty-four months. Should we need to
secure additional
11
financing to meet our future liquidity requirements, there can be no assurances
that we will be able to secure such financing, or that such financing, if
available, will be on terms favorable to us.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On August 31, 2000, Repligen and the University of Michigan filed a
complaint against Bristol-Myers Squibb Company ("BMS") at the United States
District Court for the District of Michigan in Detroit, Michigan seeking
correction of inventorship of certain United States patents which claim
compositions and methods of use for CTLA4 as well as unspecified monetary
damages. A correction of inventorship would result in the University of Michigan
being designated as a co-assignee on any corrected BMS patent. Repligen would
then have rights to such technology pursuant to a 2000 License Agreement with
the University of Michigan, a 1995 Asset Acquisition Agreement with Genetics
Institute and other related agreements. Repligen continues to believe that the
University of Michigan is a rightful assignee or co-assignee of the aforesaid
patents and we intend to continue to pursue the correction of inventorship.
Repligen's failure to obtain shared ownership rights in the patents may restrict
Repligen's ability to commercialize CTLA4-Ig. We have also filed our own patents
related to compositions of matter and methods of use of CTLA4-Ig. In addition,
we believe that the patents issued to BMS do not extend to the use of CTLA4-Ig
in stem cell transplantation.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT DESCRIPTION
------- -----------
3.1 Restated Certificate of Incorporation, dated December 31, 1992 and filed July 13, 1992,
as amended (filed as Exhibit 3.1 to Repligen Corporation's Quarterly Report on Form 10-Q
dated December 31, 1999 and incorporated herein by reference).
3.2 By-laws (filed as Exhibit 3.4 to Repligen Corporation's Form S-1 Registration Statement
No. 33-3959 and incorporated herein by reference).
(b) Reports on Form 8-K
The Company filed no current reports on Form 8-K during the quarter
covered by the report.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
REPLIGEN CORPORATION
(Registrant)
Date: February 14, 2001 By: /s/ Walter C. Herlihy
--------------------------
Chief Executive Officer and President,
Principal Financial and Accounting
Officer
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Repligen Corporation
Exhibit Index
EXHIBIT DESCRIPTION
------- -----------
3.1 Restated Certificate of Incorporation, dated
June 30, 1992 and filed July 13, 1992, as
amended (filed as Exhibit 3.1 to Repligen
Corporation's Quarterly Report on Form 10-Q
dated September 30, 1999 and incorporated
herein by reference).
3.2 By-laws (filed as Exhibit 3.4 to Repligen
Corporation's Form S-1 Registration Statement
No. 33-3959 and incorporated herein by
reference).
13