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 September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission File Number 0-14656
REPLIGEN CORPORATION
(exact name of registrant as specified in its charter)
Delaware 04-2729386
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
117 Fourth Avenue
Needham, Massachusetts 02494
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 449-9560
-----------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No .
___ ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of October 31, 1999.
COMMON STOCK, PAR VALUE $.01 PER SHARE 22,320,310
-------------------------------------- ----------------
Class Number of Shares
REPLIGEN CORPORATION
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Balance Sheets as of September 30, 1999 (Unaudited)
and March 31, 1999 3
Statements of Operations (Unaudited) for the Three and Six
Months Ended September 30, 1999 and 1998 4
Statement of Cash Flows (Unaudited) for the Six Months
Ended September 30, 1999 and 1998 5
Notes to Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities
None
Item 4. Submissions of Matters to a Vote of Security Holders 13
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K 14
Signature 15
Exhibit Index 16
Exhibits 17
2
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
REPLIGEN CORPORATION
BALANCE SHEETS
(Unaudited)
ASSETS SEPTEMBER 30, 1999 MARCH 31, 1999
------------------ --------------
Current assets:
Cash and cash equivalents $ 10,912,517 $ 3,250,751
Accounts receivable 487,522 429,720
Inventories 494,893 630,329
Prepaid expenses and other current assets 310,451 181,617
------------ ------------
Total current assets 12,205,383 4,492,417
Property and equipment, at cost:
Equipment 1,089,331 944,644
Furniture and fixtures 155,890 101,376
Leasehold improvements 469,088 460,319
------------ ------------
1,714,309 1,506,339
Less: accumulated depreciation and amortization 1,019,067 862,934
------------ ------------
695,242 643,405
Other assets, net 81,411 88,472
------------ ------------
$ 12,982,036 $ 5,224,294
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 209,987 $ 268,708
Accrued expenses 308,370 313,926
Unearned income -- 49,969
------------ ------------
Total current liabilities 518,357 632,603
Commitments and contingencies -- --
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 - 21,872,085 shares at September 30, 1999
and 18,264,285 shares at March 31, 1999
218,720 182,642
Additional paid-in capital 140,335,872 131,272,607
Accumulated deficit (128,090,913) (126,863,558)
------------ ------------
Total stockholders' equity 12,463,679 4,591,691
------------ ------------
$ 12,982,036 $ 5,224,294
------------ ------------
------------ ------------
See accompanying notes to financial statements.
3
REPLIGEN CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED SEPTEMBER 30, SIX MONTHS ENDED SEPTEMBER 30,
1999 1998 1999 1998
Revenues:
Research and development $ 232,344 $ 470,032 $ 610,847 $ 738,438
Product 578,996 197,010 811,466 426,149
Investment income 156,247 57,491 202,784 119,182
Other 14,438 37,648 45,095 70,836
------------ ------------ ------------ ------------
982,025 762,181 1,670,192 1,354,604
Costs and expenses:
Research and development 733,045 464,955 1,221,248 931,025
Selling, general and administrative 767,214 354,311 1,193,383 711,243
Cost of products sold 286,534 141,991 482,917 254,273
------------ ------------ ------------ ------------
1,786,793 961,258 2,897,548 1,896,541
------------ ------------ ------------ ------------
Net loss $ (804,768) $ (199,077) $ (1,227,356) $ (541,937)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Basic and diluted net loss per share $ (0.04) $ (0.01) $ (0.06) $ (0.03)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Basic and diluted weighted average 21,867,601 18,001,785 20,324,426 18,001,785
common shares outstanding
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
See accompanying notes to financial statements.
4
REPLIGEN CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended September 30,
--------------------------------
1999 1998
------ -----
Cash flows from operating activities
Net loss $ (1,227,356) $ (541,937)
Adjustments to reconcile net loss to net cash
used in operating activities -
Depreciation and amortization 156,134 131,586
Non cash charge for warrant issuance 188,265 --
Changes in assets and liabilities -
Accounts receivable (57,802) (247,862)
Inventories 135,436 (56,677)
Prepaid expenses and other current assets (128,834) 79,115
Accounts payable (58,721) 11,202
Accrued expenses (5,556) 111,186
Unearned income (49,969) (33,332)
------------ -------------
Net cash used in operating activities (1,048,403) (546,719)
Cash flows from investing activities
Purchases of property and equipment, at cost (207,970) (78,951)
Changes in other assets 7,061 --
------------ -------------
Net cash used in investing activities (200,909) (78,951)
Cash flows from financing activities:
Net proceeds from the issuance of common stock and warrants,
net of issuance costs 8,911,078 --
------------ -------------
Net cash provided by financing activities 8,911,078 --
------------ -------------
Net increase (decrease) in cash and cash equivalents 7,661,766 (625,670)
Cash and cash equivalents, beginning of period 3,250,751 4,725,544
------------ -------------
Cash and cash equivalents, end of period $ 10,912,517 $ 4,099,874
------------ -------------
------------ -------------
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, 1999.
In the opinion of management, the accompanying unaudited financial
statements include all adjustments, consisting of only normal, recurring
adjustments, necessary to present fairly, the consolidated financial position,
results of operations and cash flows of the Company. The results of operations
for the interim periods presented are not necessarily indicative of results to
be expected for the entire year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. NET LOSS PER SHARE
The Company has adopted Statement of Financial Accounting Standards
(SFAS) No. 128, EARNINGS PER SHARE, effective December 15, 1998. SFAS No. 128
establishes standards for computing and presenting earnings per share and
applies to entities with publicly held common stock or potential common stock.
The Company has applied the provisions of SFAS No. 128, retroactively to all
periods presented. Basic and diluted net loss per share represents net loss
divided by the weighted average number of common shares outstanding during the
period. The dilutive effect of the potential common shares consisting of
outstanding stock options and warrants is determined using the treasury stock
method in accordance with SFAS No. 128. Diluted weighted average shares
outstanding at September 30, 1999 and 1998 excluded the potential common shares
from warrants and stock options because to do so would be antidilutive for the
periods presented. At September 30, 1999, there are 1,332,791 options
outstanding with a weighted average exercise price of $1.94 and 3,307,050
warrants outstanding with a weighted average exercise price of $3.18. At
September 30, 1998, there are 1,042,000 options outstanding with a weighted
average exercise price of $1.34 and 2,832,000 warrants outstanding with a
weighted average exercise price of $3.97.
3. CASH AND CASH EQUIVALENTS
The Company considers highly liquid investments purchased with original
maturities at the date of acquisition of three months or less to be cash
equivalents. Cash equivalents consist of the following at September 30, 1999 and
March 31, 1999:
6
Three Months Ended
September 30,1999 March 31, 1999
(Unaudited)
U.S. Government and Agency securities $ 4,989,877 $ 1,197,624
Commercial paper 3,963,497 1,136,119
Money markets 1,797,830 802,755
Cash 161,313 114,253
---------- ----------
Total cash and cash equivalents $10,912,517 $ 3,250,751
---------- ----------
---------- ----------
4. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of the following:
September 30, 1999 March 31,1999
(Unaudited)
Raw materials and work-in-process $371,305 $412,480
Finished goods 123,587 217,849
------- -------
Total $494,892 $630,329
------- -------
------- -------
Work in process and finished goods inventories consist of material,
labor, outside processing costs and manufacturing overhead.
5. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted SFAS No. 130 REPORTING
COMPREHENSIVE INCOME, effective January 1, 1998. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components
in financial statements. Comprehensive income includes all changes in equity
during a period except those resulting from investments by owners and
distributions to owners. The comprehensive net loss is the same as net loss for
all periods presented.
6. DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND SIGNIFICANT
CUSTOMERS
The Company has adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED Information, in the fiscal year ended March 31, 1999.
SFAS No. 131 establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. SFAS No. 131 also establishes standards for related disclosures
about products and services and geographic areas. Operating segments are
identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision maker, or decision making group, in making decisions now to allocate
resources and assess performance. To date, the Company has viewed its operations
and manages its business as principally one operating segment. As a result, the
financial information disclosed herein, represents all of the material financial
information related to the Company's principal operating segment.
7
The following table represents the Company's revenue by country:
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
US 61% 85% 59% 73%
Europe 38% 10% 39% 22%
Other 1% 5% 2% 5%
---- ---- --- ----
Total 100% 100% 100% 100%
During the three months ended September 30,1999, there were three
significant customers which accounted for approximately 12%, 10% and 11% of the
Company's revenues or $118,000 $100,000 and $105,300, respectively. The related
accounts receivable for these three customers at September 30, 1999 was $62,000,
$0 and $47,000, respectively.
7. SALE OF SECURITIES
Pursuant to stock purchase agreements dated April 30, 1999 and May 14,
1999, respectively, Repligen issued in a private placement an aggregate of
3,600,000 shares of Common Stock for an aggregate purchase price of
approximately $9 million. Repligen closed the private placement transaction on
June 23, 1999. There were no underwriters involved in such private placement
transaction. Repligen filed a registration statement with the Securities and
Exchange Commission on Form S-3 on June 16, 1999 for the resale of the 3,600,000
shares of Common Stock sold to the parties in the private placement transaction.
The Securities and Exchange Commission declared such resale registration
statement effective on June 23, 1999.
8. SUBSEQUENT EVENT
In October 1999 the Company licensed commercialization rights to two
diagnostic secretin products from ChiRhoClin Inc., a private company. These
products have been evaluated in clinical trials for the diagnosis of pancreatic
dysfunction and gastrinoma. A New Drug Application was filed with the FDA in May
1999 seeking approval to market synthetic porcine secretin for these
applications. ChiRhoClin has also conducted clinical studies for these
diagnostic indications with a human form of secretin which it intends to submit
to the FDA in 2000. Under terms of the agreement, Repligen paid $1,000,000 upon
execution of the agreement and, if the NDAs are approved, the Company will be
required to pay future milestones and royalties.
8
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 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 activity, (ix) obtain
successful results of pending or future clinical trials, (x) continue to
establish collaborative arrangements with third parties, and (xi) compete
against the biotechnology and pharmaceutical industries. Further information on
potential factors that could affect the Company's financial results are included
in filings made by the Company from time to time with the Securities and
Exchange Commission included in the section entitled "Risk Factors" contained in
the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1999 (File No.000-14656).
OVERVIEW
Repligen develops new drugs for the treatment of autism, organ
transplantation and cancer. To expand our drug development program, 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 communication and social skills, negative behavior,
irregular sleep patterns and diminished ability to learn. 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 for use in diagnosing
problems with pancreatic function. Recent anecdotal reports indicate that
secretin may have beneficial effects in treating autism, including improvements
in sleep, digestive function, speech and social behavior. Following media
reports of the potential benefits of secretin, more than 2,000 autistic children
have been treated with the pig-derived hormone. We intend to manufacture a
human, synthetic form of secretin and evaluate it in FDA approved clinical
trials in order to confirm the benefits of secretin in treating autism and to
determine the optimal dosing schedule. Currently there are no drugs approved by
the FDA for the treatment of autism.
Repligen also is developing a product named "CTLA4-Ig," which has been
shown to suppress unwanted immune responses in animal models of organ
transplantation 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-
9
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, investigators from the Dana-Farber Cancer Institute, a research hospital
in Boston, reported in the NEW ENGLAND JOURNAL OF MEDICINE that treatment of
bone marrow from a family member with CTLA4-Ig prevented Graft Versus Host
Disease in eight of eleven transplant patients. Repligen intends to further
evaluate CTLA4-Ig in bone marrow transplantation for leukemia in collaboration
with the National Cancer Institute.
In October 1999 we licensed commercialization rights to two diagnostic
secretin products from ChiRhoClin Inc., a private company. These products have
been evaluated in clinical trials for the diagnosis of pancreatic dysfunction
and gastrinoma. A New Drug Application was filed with the FDA in May 1999
seeking approval to market synthetic porcine secretin for these applications.
ChiRhoClin has also conducted clinical studies for these diagnostic indications
with a human form of secretin which it intends to submit to the FDA in 2000.
Repligen develops, manufactures and markets 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. In December 1998, Repligen entered
into a ten year relationship to supply recombinant Protein A to Amersham
Pharmacia Biotech, a leading supplier to the biopharmaceutical market.
RESULTS OF OPERATIONS
REVENUES
Total revenues for the three month period ended September 30, 1999 and
1998 were approximately $982,000 and $762,000, respectively, an increase of
approximately $220,000 or 29%. This increase was largely attributable to
increased product sales of recombinant Protein A and investment income. Year to
date total revenues increased approximately $316,000, or 23%, to $1,670,000 at
September 30,1999 from $1,355,000 at September 30,1998.
Research and development revenues for the three month period ended
September 30, 1999 and 1998 were approximately $232,000 and $470,000,
respectively, a decrease of approximately $238,000 or 51%. The decrease in
quarterly revenue was largely attributable to a licensing payment received
during the three months ended September 30, 1998. Year to date revenues
decreased approximately $128,000 or 17% as a result of the discontinuation of
research collaborations on Repligen's drug discovery programs that generated
revenue during the six months ended September 30, 1998.
Product revenues for the three month period ended September 30, 1999
and 1998 were approximately $579,000 and $197,000, respectively, an increase of
$382,000 or 194%. Year to date revenues increased 90% or approximately $385,000
to $811,000 from $426,000 at September 30, 1999 and 1998, respectively. This
increase is attributable to increased sales of Protein A products during such
periods.
10
Investment income for the three month period ended September 30, 1999
and 1998 was approximately $156,000 and $57,000, respectively, an increase of
approximately $99,000 or 173%. Year to date revenue increased 71% or
approximately $84,000 to $203,000 from $119,000. These increases are largely
attributable to higher average funds available for investment arising
principally out of the completion of a private placement of common stock to
certain investors of $8,900,000 on June 23, 1999.
Other revenues for the three month period ended September 30, 1999 were
approximately $15,000, a decrease of $23,000 or 61% from the comparable period
ended September 30, 1998. Year to date revenue was $45,000 and $71,000 for the
six months ended September 30, 1999 and 1998, respectively. This decrease is
primarily due to sales of unused equipment during fiscal year 1999.
EXPENSES
Total expenses for the three month period ended September 30, 1999 and
1998 increased to approximately $1,787,000 from $961,000, an increase of
$826,000 or 86%. For the six months ended September 30, 1999 and 1998, expenses
were $2,898,000 and $1,897,000, respectively, an increase of $1,001,000 or 35%.
Research and development expenses for the three month period ended
September 30, 1999 and 1998 were approximately $733,000 and $465,000,
respectively, an increase of $268,000 or 58%. Year to date expenses were
$1,221,000 and $931,000 for the six month period September 30, 1999 and 1998,
respectively. These increases reflect costs associated with its drug development
programs for secretin and CTLA4-Ig.
Selling, general and administrative expenses for the three months ended
September 30, 1999 and 1998 were approximately $767,000 and $354,000,
respectively, an increase of $413,000 or 117%. For the six month period ended
September 30, 1999 and 1998, respectively, selling, general and administrative
expenses were $1,193,000 and $711,000, respectively, an increase of $482,000 or
68%. This increase is attributable to non-recurring expenses associated with a
financial advisory agreement with a shareholder, including a non-cash charge for
the issuance of warrants exercisable for shares of Common Stock of Repligen
pursuant to an agreement signed during the quarter ended September 30, 1999.
Cost of products sold for the three months ended September 30, 1999 and
1998 were approximately $287,000 and $142,000, respectively, an increase of
$145,000, or 102%. Year to date costs as of September 30, 1999 and 1998 were
$483,000 and $254,000, an increase of $229,000 or 90%. This increase is largely
attributable to costs associated with the commencement of its manufacturing
contract for AP Biotech. Cost of products sold in the three months ended
September 30, 1999 and 1998 were 50% and 72%, respectively, of product revenues
and for the six months ended September 30, 1999 and 1998, 60% and 60%,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
Repligen's total cash and cash equivalents increased to $10,913,000 at
September 30, 1999 from $3,251,000 at March 31, 1999. This increase of
$7,662,000 reflects $8,900,000 of proceeds resulting from the sale of Common
Stock of Repligen to certain investors through a private placement that closed
during June 1999, offset by a net loss from operations incurred during the six
month period ended September 30, 1999 of approximately $1,227,000, an increase
in accounts receivable of $58,000 and an increase in
11
accounts payable of $59,000. Working capital increased to $11,762,000 at
September 30, 1999 from $3,860,000 at March 31, 1999.
Repligen has entered into agreements with a number of collaborative
partners and licensees. Under the terms of these agreements, Repligen may be
eligible to receive research support, additional milestones or royalty revenue
if these collaborations result in clinical evaluation and commercialization of
products developed. The continuation of these collaborations or of receiving any
future payments related to these agreements cannot be guaranteed.
While Repligen anticipates that the cost of operations will increase in
fiscal 2000 as Repligen expands its investment in proprietary product
development, Repligen believes that the private placement financing, yielding an
aggregate of $8,900,000 in net proceeds, will provide sufficient funding to
satisfy Repligen's working capital and capital expenditure requirements for the
next twenty-four months. Should Repligen need to secure additional financing to
meet its future liquidity requirements, Repligen may not be able to secure such
financing, or obtain such financing on favorable terms because of the volatile
nature of the biotechnology market place.
YEAR 2000
Repligen has undertaken an initial review of its information technology
computer systems and it believes that the Year 2000 problem does not pose
significant operational problems to its information technology systems. The
majority of Repligen's software and computer equipment has been purchased within
the last five years from third-party vendors who have already provided upgrades
intended to bring their products into Year 2000 compliance. Repligen has begun
to address the small number of internal systems that are not yet Year 2000
compliant, and expects full compliance by the end of 1999. Repligen currently
believes that the costs of addressing these issues should not exceed $50,000 and
will not have a material adverse impact on Repligen's financial position.
Repligen has recently interviewed various third parties, including
vendors and suppliers of Repligen, to determine their exposure to Year 2000
issues, their anticipated risks and responses to those risks. To date, the third
parties that have been contacted have indicated that their hardware or software
is or will be Year 2000 compliant in a time frame that meets Repligen's
requirements. Even with the vendor compliance however, Repligen intends to
continue to assess its exposure to Year 2000 noncompliance on the part of any of
its material vendors. Repligen has no control, however, of whether the vendor's
systems will be Year 2000 compliant in a time frame satisfactory to Repligen.
Repligen is working to establish a contingency plan in the event Year
2000 compliance cannot be achieved in a timely manner. A contingency plan will
be developed immediately upon completion of Repligen's Year 2000 compliance
assessment.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On July 17, 1998, Repligen filed a complaint against Bristol Meyers
Squibb ("BMS") at the United States District Court for the District of
Massachusetts in Boston, Massachusetts 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
12
patent. Repligen would then have rights to such technology pursuant to a 1992
License Agreement with the University of Michigan, a 1995 Asset Acquisition
Agreement with Genetics Institute, and other related agreements. On July 13,
1999, the court dismissed the complaint without prejudice citing a lack of legal
standing of Repligen to bring such a complaint. We believe that the court's
finding on standing was in error. The court did not rule on the validity of
Repligen's inventorship claim. Repligen continues to believe that the University
of Michigan is a rightful co-assignee of the aforesaid BMS patents and we intend
to continue to pursue the correction of inventorship. Repligen's failure to
obtain shared ownership rights in the patents may restrict Repligen's ability to
commercialize CTLA4-Ig.
Item 2. CHANGES IN SECURITIES
Pursuant to a Financial Advisory Agreement dated as of July 15, 1999 by
and between Repligen and Paramount Capital, Inc. ("Paramount"), Repligen
engaged Paramount as a non-exclusive financial adviser for an initial period
of twelve months from the date thereof. In exchange and as consideration for
Paramount's financial services, Repligen paid to Paramount $100,000 in cash
and issued to Paramount (and its designees) warrants to purchase an aggregate
of 100,000 shares of Common Stock of Repligen (the "Warrants"). Each Warrant
is exercisable at $2.75 per share at any time prior to July 15, 2004. Repligen
also agreed to pay Paramount additional fees to be agreed upon between the
parties upon the consummation of certain equity financing transactions as set
forth in the Financial Advisory Agreement. Based on certain representations by
Paramount, Repligen had a reasonable belief that Paramount (and its designees)
were acquiring the Warrants (and the shares issuable upon exercise thereof)
for investment and not for distribution and that of the ten designees
receiving the Warrants, at least five were "accredited" (as such term is
defined under Rule 501 of the Securities Act of 1933). Pursuant thereto,
Repligen issued the Warrants to such designees in a private placement
transaction exempt from the registration requirements of the Securities Act of
1933 pursuant to Regulation D, Rule 506 of the Securities Act of 1933. There
were no underwriters in valued in such private placement transaction. Pursuant
to the Financial Advisory Agreement, Repligen granted Paramount "piggy-back"
registration rights with respect to the shares of Common Stock issuable upon
exercise of the Warrants, and subject to the terms of the Financial Advisory
Agreement, has agreed to register for resale the shares of Common Stock
issuable upon exercise of the Warrants by May, 2000.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting of Stockholders (the "Annual Meeting") was
held on September 16, 1999. At the Annual Meeting, the stockholders of the
Company considered and acted upon a proposal to: (i) elect five members to
the Board of Directors (ii) ratify the selection of Arthur Andersen LLP as
the independent auditors of the Company for the fiscal year ending March
31, 1999 and (iii) amend Repligen's Restated Certificate of Incorporation
to increase the number of authorized shares of Common Stock, par value $.01
per share, from 30,000,000 shares to 40,000,000 shares.
The Company had 21,868,085 shares of Common Stock of the Company issued
and outstanding and entitled to vote as of the close of business on July
23, 1999, the record date established by the Board of Directors for the
Annual Meeting. At the Annual Meeting, holders of a total of 17,432,216
shares of Common Stock or approximately 79% of all stockholders entitled to
vote were present in person or represented by proxy. The following sets
forth the information regarding the results of the voting at the Annual
Meeting:
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Proposal 1. Election of Directors:
Directors Shares Voting Shares Voting
in Favor Against
-------- -------
Robert J. Hennessey* 17,339,046 93,170
Alexander Rich, M.D.* 17,319,986 112,230
Paul Schimmel, Ph.D.* 17,344,971 87,245
Walter C. Herlihy, Ph.D.* 17,343,171 89,045
G. William Miller* 17,344,971 112,230
* Incumbent
Proposal 2. Ratification of Selection of Arthur Andersen LLP as independent
auditors:
Shares voting in favor: 17,376,364
Shares voting against: 28,307
Abstention: 27,545
Proposal 3. Amend the Restated Certificate of Incorporation to increase the
number of authorized shares from 30,000,000 shares to 40,000,000 shares:
Shares voting in favor: 17,986,570
Shares voting against: 408,026
Abstention: 37,620
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT DESCRIPTION
3.1 Restated Certificate of Incorporation, dated
June 30, 1992 and filed July 13, 1992, as
amended (filed herewith)
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).
4.1 * Form of Warrant Agreement (filed herewith)
10.1 ** Financial Advisory Agreement with Paramount
Capital, Inc. (filed herewith)
27.1 Financial Data Schedule (filed herewith)
* Repligen issued a Common Stock Purchase Warrant to ten designees of Paramount
in connection with Paramount's services to Repligen. Each Warrant was identical
except for the number of shares of Common Stock issuable upon exercise of such
Warrant. ** The Exhibit A to the Financial Advisory Agreement, which is not
attached to the Financial Advisory Agreement, is filed by Repligen as Exhibit
4.1 hereunder.
(b) Reports on Form 8-K
The Company filed no current reports on Form 8-K during the
quarter covered by the report.
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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: November 15, 1999 By: /s/ Walter C. Herlihy
---------------------
Chief Executive Officer and President,
Principal Financial and Accounting Officer
15
Repligen Corporation
Exhibit Index
EXHIBIT DESCRIPTION
3.1 Restated Certificate of Incorporation, dated
June 30, 1992 and filed July 13, 1992, as
amended (filed herewith)
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).
4.1 * Form of Warrant Agreement (filed herewith)
10.1 ** Financial Advisory Agreement with Paramount
Capital, Inc. (filed herewith)
27.1 Financial Data Schedule (filed herewith)
* Repligen issued a Common Stock Purchase Warrant to ten designees of Paramount
in connection with Paramount's services to Repligen. Each Warrant was identical
except for the number of shares of Common Stock issuable upon exercise of such
Warrant. ** The Exhibit A to the Financial Advisory Agreement, which is not
attached to the Financial Advisory Agreement, is filed by Repligen as Exhibit
4.1 hereunder.
16