1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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
Delaware 04-2729386
- ---------------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Kendall Square
Cambridge, Massachusetts 02139
- ---------------------------------------- -------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (617) 225-6000
- -------------------------------------------------------------------------------
(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 November 2, 1995:
Common Stock, par value $.01 per share 15,358,938
- ---------------------------------------- -------------------------------------
Class Number of Shares
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
--------------------
REPLIGEN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
---------------------------- ----------------------------
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
Revenues:
Research and development $ 3,775,943 $ 2,287,363 $ 5,859,629 $ 5,992,001
Product 981,646 703,054 1,373,737 1,274,947
Investment income 191,009 277,185 462,717 592,540
Other 70,520 174,861 159,351 386,427
------------- ------------- ------------- -------------
5,019,118 3,442,463 7,855,434 8,245,915
------------- ------------- ------------- -------------
Cost and expenses:
Research and development 3,552,624 7,475,864 7,330,659 16,204,016
Selling, general and administrative 1,696,083 1,369,379 3,043,462 3,011,219
Cost of goods 699,530 368,756 989,677 764,198
Interest and other 5,101 124,490 64,476 184,677
Restructuring charge -- 975,000 -- 975,000
------------- ------------- ------------- -------------
5,953,338 10,313,489 11,428,274 21,139,110
------------- ------------- ------------- -------------
Net loss ($934,220) ($6,871,026) ($3,572,840) ($12,893,195)
============= ============= ============= =============
Net loss per common share outstanding ($0.06) ($0.45) ($0.23) ($0.84)
============= ============= ============= =============
Weighted average common shares outstanding 15,358,938 15,357,030 15,358,364 15,355,544
============= ============= ============= =============
<FN>
See accompanying notes to consolidated financial statements.
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REPLIGEN CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
September 30, March 31,
1995 1995
------------- -------------
Current assets:
Cash and cash equivalents $ 11,418,965 $ 13,821,387
Marketable securities 1,395,161 1,480,712
Accounts receivable 1,483,966 1,686,902
Amounts due from affiliates 41,888 962,361
Inventories 1,264,996 1,213,379
Note receivable from affiliate -- 4,620,000
Prepaid expenses 802,579 1,039,197
------------- -------------
Total current assets 16,407,555 24,823,938
Property, plant and equipment, at cost:
Leasehold improvements 11,801,854 11,801,854
Equipment 7,710,597 7,625,094
Furniture and fixtures 840,236 869,590
------------- -------------
20,352,687 20,296,538
Less: accumulated depreciation and amortization 16,056,984 15,312,326
------------- -------------
4,295,703 4,984,212
Restricted cash -- 1,000,000
Other assets, net 1,293,891 521,803
------------- -------------
$ 21,997,149 $ 31,329,953
============= =============
<FN>
See accompanying notes to consolidated financial statements.
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REPLIGEN CORPORATION
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
September 30, March 31,
1995 1995
------------- -------------
Current liabilities:
Accounts payable $ 827,136 $ 1,221,227
Accrued expenses and other 8,086,225 9,709,292
Unearned income 697,471 203,000
Term loan payable to a bank -- 4,620,000
------------- -------------
Total current liabilities 9,610,832 15,753,569
Commitments and contingencies (Notes 7 and 8)
Stockholders' equity:
Preferred stock, $.01 par value--
authorized -- 5,000,000 shares --
outstanding -- none -- --
Common stock, $.01 par value --
authorized -- 30,000,000 shares --
outstanding -- 15,358,938 and 15,357,030
shares at September 30, 1995 and
March 31, 1995, respectively 153,589 153,570
Additional paid-in capital 127,325,679 126,942,925
Accumulated deficit (115,092,951) (111,520,111)
------------- -------------
Total stockholders' equity 12,386,317 15,576,384
------------- -------------
$ 21,997,149 $ 31,329,953
============= =============
<FN>
See accompanying notes to consolidated financial statements.
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REPLIGEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended September 30,
------------------------------
1995 1994
-------------- --------------
Cash flows from operating activities:
Net loss $ (3,572,840) $ (12,893,195)
Adjustments to reconcile net loss to net cash used in operating
activities -
Depreciation and amortization 776,536 1,368,779
Equity in net loss of an affiliate 227,636 31,565
Net proceeds from sales of property, plant and equipment 30,000 --
Changes in assets and liabilities -
Accounts receivable 202,936 775,074
Amounts due from affiliates 920,473 4,561,493
Inventories (51,617) (361,168)
Prepaid expenses 236,618 245,024
Accounts payable (394,141) (1,234,289)
Accrued expenses and other (1,623,067) (486,236)
Unearned income 494,471 99,968
-------------- --------------
Net cash used in operating activities (2,752,995) (7,892,985)
-------------- --------------
Cash flows from investing activities:
Decrease in marketable securities 85,551 977,863
Purchases of property, plant and equipment (118,027) (236,260)
Decrease in other assets 276 638,800
-------------- --------------
Net cash (used in) provided by investing activities (32,200) 1,380,403
-------------- --------------
Cash flows from financing activities:
Proceeds from sales of common stock and issuance of warrants, net of
issuance costs and commissions 382,773 132,374
Proceeds from note receivable due from affiliate 4,620,000 --
Payment of term loan to a bank (4,620,000) --
-------------- --------------
Net cash provided by financing activities 382,773 132,374
-------------- --------------
Net decrease in cash and cash equivalents (2,402,422) (6,380,208)
Cash and cash equivalents, beginning of period 13,821,387 27,655,061
-------------- --------------
Cash and cash equivalents, end of period $ 11,418,965 $ 21,274,853
============== ==============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 276,680 $ 193,697
============== ==============
Supplemental disclosure of non-cash financing activities:
Restricted cash released to lessor of certain equipment $ 1,000,000 $ --
============== ==============
<FN>
See accompanying notes to consolidated financial statements.
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REPLIGEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The financial statements included herein have been prepared by Repligen
Corporation (the "Company" or "Repligen") without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes, however, that the disclosures made are
adequate to ensure that the information presented is not misleading. It is
suggested that these financial statements be read in conjunction with the
audited financial statements and notes thereto included in the Company's
1995 Form 10-K, filed with the Securities and Exchange Commission.
This financial information includes all adjustments (consisting of normal,
recurring adjustments) which the Company considers necessary for a fair
presentation of such information. The results of operations for the
interim periods presented are not necessarily indicative of results to be
expected for the entire year.
The Company has incurred significant operating losses since inception and
is currently undergoing a major restructuring of its operations. The
Company anticipates that without additional significant financing in
calendar 1995 or early 1996 from either an offering by the Company of its
securities, from a third party funding, or the merger of the Company with
or the acquisition of the Company by an entity capable of funding its
operations, the Company will be forced to curtail or cease operations.
2. Net Loss Per Common Share
Primary net loss per common share has been computed by dividing net loss by
the weighted average number of shares outstanding during the period.
Common stock equivalents have not been included for any period as the
effect would be antidilutive. Fully diluted net loss per common share has
not been presented for any period as the amounts would not differ from
primary net loss per common share.
3. Cash Equivalents and Marketable Securities
The Company considers all highly liquid investments with original
maturities of three months or less at the time of acquisition to be cash
equivalents. Included in cash equivalents at September 30, 1995 are
$7,212,000 of money market funds, $3,000,000 of commercial paper and
$900,000 of bank time deposits. Investments with a maturity period of
greater than three months are classified as marketable securities and
consist of $1,000,000 of government agency bonds and notes and $395,000 of
collateralized mortgage obligations at September 30, 1995. These
securities are reported at amortized cost, which approximates fair market
value at September 30, 1995.
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4. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of the following:
September 30, March 31,
1995 1995
------------- -------------
Raw materials and work-in-process $ 278,796 $ 240,044
Finished goods 986,200 973,335
------------- -------------
Total $ 1,264,996 $ 1,213,379
============= =============
Work in process and finished goods inventories consist of material, labor
and manufacturing overhead.
5. Eli Lilly and Company Agreement
In May 1992, the Company entered into a Research, Collaboration and License
Agreement with Eli Lilly and Company ("Lilly"), whereby the Company granted
Lilly an exclusive license to make, use and sell products utilizing
antibodies, antibody fragments and engineered polypeptides that bind to
CD11b (the "Products"). This agreement expired in February 1995. In June
1995, the Company and Lilly announced an extension of their collaboration
and licensing agreement through November 1996. The Company recognized
revenues of approximately $1,133,000, $2,446,000, $1,468,000 and $3,082,000
for research and development performed during the three and six month
periods ended September 30, 1995 and 1994, respectively. In September
1995, following an internal portfolio review, Lilly informed the Company of
its intent to discontinue the inflammatory disease collaboration due to the
reallocation of its resources among other research priorities. Under the
terms of the Development and License Agreement, the entire CD11b program,
including preclinical and clinical data packages for product candidates
m60.1 and h60.1, were returned to the Company. Lilly discontinued funding
the program effective October 8, 1995.
6. Repligen Clinical Partners, L.P.
In February 1992, Repligen Clinical Partners, L.P. (the "Partnership")
completed a private placement of 900 limited partnership units, with net
proceeds of approximately $40,300,000 in cash and notes receivable, to be
received by the Partnership over a three-year period. In connection with
the formation of the Partnership, the Company granted to the Partnership an
exclusive license to all technology and know-how related to the
manufacture, use and sale of recombinant platelet factor-4 (rPF4) in the
United States, Canada and Europe (the "Technology"). A wholly-owned
subsidiary of the Company, Repligen Development Corporation, serves as the
general partner of the Partnership (the "General Partner").
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The Partnership's primary source of funding and capital resources has been
the capital contributions made by the limited partners and the General
Partner. The primary use of the Partnership's capital resources is to fund
research and development performed by the Company pursuant to the Product
Development Agreement (the "Development Agreement") and to develop products
and receive marketing approval for the sale of such products. As of
September 30, 1995, the Partnership had working capital of $1,838,000. As
of October 25, 1995 the Partnership has received $11,792,000 of the
$13,433,000 final installment due from the limited partners and although
the Partnership's working capital and capital requirements may change, the
Company believes that the existing resources of the Partnership, assuming
the remaining $1,641,000 of unpaid installations is not paid, will be
sufficient to fund the operations of the Partnership until at least
March 31, 1996. At that time it is expected that the additional funds
necessary to continue clinical trials and begin commercialization of
products will be provided by the Company if the Company has the necessary
resources or by other corporate partners.
Under the terms of the Development Agreement with the Partnership, the
Company performs research and development activities and will seek to
obtain approval from the U.S. Food and Drug Administration for the sale of
products that may be developed utilizing the licensed technology. The
Partnership is required to reimburse the Company for research and
development expenses incurred under the Development Agreement, and pay a
management fee equal to 10% of such expenses. Included in the accompanying
statements of operations for the three and six month periods ended
September 30, 1995 and 1994 are research and development revenues of
approximately $575,000, $1,346,000, $819,000 and $2,910,000, respectively,
recognized pursuant to the Development Agreement. During fiscal 1995, the
Company incurred an additional $1,641,000 of research and development
expenses which could have been charged to the Partnership, but which was
absorbed by the Company in an effort to preserve the funds of the
Partnership. No such costs were absorbed in the three and six month
periods ended September 30, 1995. Included in other revenues for the three
and six month periods ended September 30, 1995 and 1994 are approximately
$74,000, $173,000, $105,000 and $340,000, respectively, representing the
10% management fee under the Development Agreement.
In June 1994, the Company completed an exchange offer with a majority of
the holders of Limited Partner Warrants and Class B Warrants pursuant to
which their existing warrants ("Existing Warrants") were exchanged for new
warrants ("Exchange Warrants").
In March 1995, the Company subsequently offered to modify the majority of
Existing Warrants and the Exchange Warrants. Each holder of an outstanding
warrant who made the fourth installment payment was free to accept or
reject modifications. During the quarter, the Partnership wrote off
approximately $1,630,000 of notes receivable, relating to 98-1/2 limited
partnership units which were foreclosed for failure to pay the fourth
installment. As of October 25, 1995, 623-1/2 of the 712-1/2 nondefaulted
limited partnership units had accepted the modifications. As a result,
Existing Warrants to purchase 75,400 shares of the Company's common stock,
modified Existing Warrants to purchase 163,850 shares of the Company's
common stock, Exchange Warrants to purchase 198,650 shares of the Company's
common stock and modified Exchange Warrants to purchase 1,722,500 shares of
the Company's common stock are outstanding at October 25, 1995.
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7. Restructuring Charge
During fiscal 1995, the Company substantially restructured its operations
in an effort to reduce its current rate of expenditures and preserve its
available cash and investment balances. In the second quarter of fiscal
1995, the Company recorded a charge of $975,000 to cover severance costs
and related benefits, as well as certain rental losses associated with the
sublease of certain facilities. During the fourth quarter, the Company
recorded a charge of $10,325,000 to cover severance costs and related
benefits, rental losses associated with the sublease of certain facilities,
the write-off of certain leasehold improvements, equipment and intangible
assets that will no longer be utilized and to reserve for future operating
lease payments for equipment that will also no longer be utilized. The
restructurings were done in order to reorganize certain business operations
and to permit its senior management team to focus on the clinical
development of certain lead product candidates. The total restructuring
charge of $11,300,000 included cash related expenditures of $6,545,000 and
a non-cash charge of $4,755,000. The cash related expenditures consisted
of $2,035,000 of severance and related benefits for approximately 140
terminated employees, $3,250,000 of future operating lease payments for
assets no longer being utilized, $940,000 of rental losses associated with
the sublease of surplus lab and office space, and $320,000 of contract
termination fees. The non-cash charge was related to the write-off of
leasehold improvements, equipment and other intangibles no longer being
utilized. As of September 30, 1995, approximately $2,266,000 of the
severance costs, benefit costs and contract termination fees have been
paid. The balance is anticipated to be paid over the following two months.
As of September 30, 1995, approximately $929,000 of the equipment and
facility lease payments have been paid. The balance is scheduled to be
paid through fiscal 1998; however, the Company is currently in default
under the terms of certain equipment leases, which gives the lessors
thereunder the right to accelerate all future payments ($3,375,000 at
September 30, 1995, of which $2,592,000 is included in accrued expenses at
September 30, 1995) under these leases. In September 1995, the lessors
terminated an escrow agreement, released $1,000,000 in funds from the
escrow account and applied these funds to the Company's future liabilities
and obligations under certain equipment leases. The Company is currently
negotiating with the equipment lessors and certain of the facility lessors
for early lease termination and a reduction in lease obligation.
8. Commitments
The Company leases its office, research and manufacturing facilities and
certain equipment under operating lease arrangements. Certain of the
equipment lease arrangements require that the Company maintain certain
restrictive covenants, including cash and cash equivalent balances of not
less than $12,000,000 and certain financial ratios. As discussed in
Note 7, $1,000,000 of cash held in an escrow account under one of these
lease arrangements was released in September 1995. Additionally, payment
under these equipment leases may be accelerated at the option of the
lessors.
In September 1995, the Company adopted an Incentive and Retention Program
(the "Program") to retain employees essential to the operations of the
Company. Under the terms of the Program, the Company will make two
payments of benefits on October 31, 1995 and December 31, 1995 to eligible
individuals who remain employees of the Company on the respective dates.
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The anticipated payments are approximately $324,000 and $640,000,
respectively. As of September 30, 1995, the Company had accrued $320,000
of the anticipated payments.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations
- ---------------------
Revenues -
Total revenues for the three and six month periods ended September 30, 1995
were $5,019,000 and $7,855,000 as compared to $3,442,000 and $8,246,000 in
the comparable fiscal 1995 periods.
Research and development revenues for the three and six month periods ended
September 30, 1995 were $3,776,000 and $5,860,000 compared to $2,287,000
and $5,992,000 in the comparable fiscal 1995 periods. The increase of
$1,489,000, and the decrease of $132,000, for the three and six month
periods ended September 30, 1995, respectively, from the comparable fiscal
1995 periods is due to a $2,000,000 acquisition fee paid by Genetics
Institute, Inc. in September 1995 for the Company's immune modulation
business, which offset reductions in revenue from Lilly for the
anti-inflammation program and from the Partnership related to the
development program for recombinant platelet factor-4 (rPF4). The decline
in revenues from Lilly and the Partnership is caused by a decrease in the
need for process development, pre-clinical research and manufacturing
activity as both products under development have entered phase I/II
clinical trials and is also due to lack of resources of the Partnership,
limiting the Partnership's ability to fund the rPF4 program. In September
1995, following an internal portfolio review, Lilly informed the Company of
its intent to discontinue the inflammatory disease collaboration due to the
reallocation of its resources among other research priorities. Under the
terms of the Development and License Agreement, the entire CD11b program,
including preclinical and clinical data packages for product candidates
m60.1 and h60.1, were to be returned to the company. Lilly discontinued
funding the program effective October 8, 1995.
Product revenues for the three and six month periods ended September 30,
1995 were $982,000 and $1,374,000, respectively, compared to $703,000 and
$1,275,000 in the comparable fiscal 1995 periods. Fiscal 1996 three and six
month periods product revenues increased over the similar fiscal 1995
periods due primarily to the recognition of $430,000 and $520,000,
respectively, of contract service revenues generated by the Company's
Allegro Biologics division. This increase was offset in part by lower
sales volume of the Company's Protein A and diagnostic reagent products.
Investment income decreased in fiscal 1996 over the comparable three and
six month periods primarily because of lower average funds available for
investment offset in part by higher interest rates.
Other revenues for the three and six month periods ended September 30, 1995
decreased from the comparable fiscal 1995 periods primarily because of a
decrease in management fees received from the Partnership.
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Expenses -
During fiscal 1995, the Company substantially restructured its operations
in an effort to reduce its current rate of expenditures and preserve its
available cash and investment balances. The restructurings were done in
order to reorganize certain business operations and to permit its senior
management team to focus on the clinical development of the Company's two
lead product candidates. In the second quarter, the Company recorded a
charge of $975,000 to cover severance costs and related benefits, as well
as certain rental losses associated with the sublease of certain
facilities. During the fourth quarter, the Company recorded a charge of
$10,325,000 to cover severance costs and related benefits, rental losses
associated with the sublease of certain facilities, the write-off of
certain leasehold improvements, equipment and intangible assets which will
no longer be utilized and to reserve for future operating lease payments
for equipment which will also no longer be utilized.
Total expenses for the three and six month periods ended September 30, 1995
were $5,953,000 and $11,428,000, respectively, compared to $10,313,000 and
$21,139,000 in the comparable fiscal 1995 periods. This decrease in the
three and six month periods ended September 30, 1995 reflects lower
operating costs as a result of the fiscal 1995 restructuring efforts.
Research and development expenses for the three and six month periods ended
September 30, 1995 were $3,553,000 and $7,331,000, respectively, compared
to $7,476,000 and $16,204,000 in the comparable fiscal 1995 periods. The
decreased expenses in the three and six month periods of fiscal 1996 from
the comparable periods in fiscal 1995 reflect the Company's efforts to
reduce costs and to focus its resources on the clinical development of its
two lead product candidates and offset partly by the salaries and benefits
in the fiscal 1995 periods relating to employees who were terminated in
July 1994 and February 1995. The Company continues to be committed to its
research and development agreement with the Partnership and to moving the
rPF4 product candidates through clinical trials.
Selling, general and administrative expenses for the three and six month
periods ended September 30, 1995 were $1,696,000 and $3,043,000, an
increase of $327,000 and $32,000, respectively, over the comparable prior
year periods. The increase in expenses is due primarily to the accrual of
$320,000 for the Company's Incentive and Retention Program adopted by the
Company to retain employees essential to the operations of the Company
offset partly by the salaries and benefits in the fiscal 1995 period
relating to employees who were terminated in July 1994 and February 1995.
Cost of goods sold for the three and six month periods ended September 30,
1995 were $700,000 and $990,000, respectively. Cost of goods sold in the
three and six month periods were 71% and 72% of product revenues,
respectively, versus 52% and 60% of product revenues in the comparable
fiscal 1995 periods. The increase in cost of sales as a percentage of
revenue is primarily a result of the change in sales mix between fiscal
years and the addition of contract service revenues in fiscal 1996.
Capital Resources and Liquidity
The Company's total cash, cash equivalents and marketable securities
decreased to $12,814,000 at September 30, 1995 from $15,302,000 at
March 31, 1995, a decrease of $2,488,000 or 16%. The decrease reflects net
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operating losses during the six month period of approximately $3,573,000
and the reduction of current liabilities of $6,143,000, offset by the
receipt of a $2,000,000 acquisition fee from Genetics Institute, Inc., the
reduction in note receivable from affiliate of $4,620,000 and the
collection of amounts due from the Partnership as a result of the receipt
from the partners of their fourth installment. Working capital decreased
to $6,797,000 at September 30, 1995 from $9,070,000 at March 31, 1995
reflecting primarily the loss during the six months ended September 30,
1995.
The Company has funded operations primarily with cash derived from the
sales of its equity securities, research and development contracts, product
sales, investment income, proceeds from a term loan with a bank, the sale
of the Company's share of a joint venture and leasing of certain equipment.
In May 1992, the Company entered into a research and development agreement
with Lilly which provided $6,262,000 and $7,790,000 in research funding in
fiscal 1995 and 1994, respectively, and $1,133,000 and $2,446,000 in
research funding during the three and six month periods ended September 30,
1995. In June 1995, the collaboration and licensing agreement with Lilly
was extended through November 1996. In September 1995, Lilly informed the
Company of its intent to discontinue the inflammatory disease collaboration
due to the reallocation of resources among other research priorities.
Lilly discontinued funding the program effective October 8, 1995.
In September 1995, Genetics Institute, Inc. paid a $2,000,000 acquisition
fee for the Company's immune modulation business. The Company will
maintain the rights to independently commercialize small molecule-based
drugs in the therapeutic area. Genetics Institute will have exclusive
rights to commercialize any protein-based drugs that originate from the
Company's immune modulation technology as well as the right to develop
small molecule drugs based on this technology.
Repligen has determined to focus on its core research and development
activities. As part of its strategy, and in order to ensure that
sufficient funds are available to support these activities, Repligen may
elect to divest its manufacturing operations or seek other alternatives.
The Company is receiving research and development funding and a 10%
management fee from the Partnership pursuant to the Development Agreement.
The Company recorded revenue in the three and six month periods ended
September 30, 1995 of $575,000 and $1,346,000 compared to $819,000 and
$2,910,000 in the comparable fiscal 1995 periods. The Company currently
expects funding from the Partnership to continue into the fourth quarter of
fiscal 1996, although at a reduced rate from fiscal 1995, based upon the
existing resources of the Partnership. Funding into the fourth quarter of
fiscal 1996 is dependent upon reductions in the rate of expenditures by the
Company under the Development Agreement and the absorption by the Company
of certain costs which would qualify for reimbursement under the Product
Development Agreement. At September 30, 1995, the Partnership had working
capital of $1,838,000.
Repligen anticipates that it will need approximately $60,000,000 to
complete the remainder of the rPF4 Research Program, to obtain all FDA and
other regulatory approvals and to commence sales of any rPF4 Products.
Although the Company's working capital and capital requirements may change,
the Company estimates that it has funds sufficient to continue the rPF4
Research Program and its other current operations until at least March 31,
1996. Thus, without additional financing in calendar 1995 or early 1996
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from either an offering by Repligen of its securities, from third party
funding, or the merger of Repligen with or the acquisition of Repligen by
an entity capable of funding the rPF4 Research Program, Repligen and the
Partnership will not have sufficient funding to continue the rPF4 Research
Program and Repligen will be forced to curtail or cease its operations. In
the event that Repligen is unable to continue the rPF4 Research Program on
behalf of the Partnership, it is obligated under one of the agreements
ancillary to the Development Agreement to use its best efforts to license
or sell the Technology to a third party. Repligen does not believe that an
offering of its securities sufficient in aggregate amount to fund the
remainder of the rPF4 Research Program is currently feasible. Repligen is
currently discussing with various pharmaceutical companies options for
funding the remaining rPF4 Research Program and manufacturing and
marketing any rPF4 Products on a joint basis. Because such discussions are
at various stages, the terms of any such arrangements are not known. Any
such third party may seek to modify the Development Agreement, possibly
including a reduction in the royalty rates payable to the Limited Partners
under such agreements. Any such amendment would require the consent of the
Limited Partners. In addition, any such third party may require that the
Partnership be a party to any such joint venture agreement, which may also
require the consent of the Limited Partners.
The General Partner of the Partnership periodically reviews the progress of
the Partnership's research program to determine whether the continuation of
all or any part thereof is in the best interest of the Limited Partners of
the Partnership. If at any time the Board of Directors determines that such
research is infeasible or uneconomic and should be discontinued or
otherwise determines that the program should be discontinued, or if the
Board of Directors of the Company determines not to contribute the
additional funds to the Partnership which are determined to be required
when all Partnership funds have been expended and no FDA marketing approval
has been received for any product developed by the Partnership, the Product
Development Agreement will terminate. The Company believes that rPF4 may
be useful (i) as a neutralizing agent to reverse the anticoagulant effects
of heparin and (ii) as a therapy in the treatment of certain solid tumor
cancers. Repligen is committed to the rPF4 development program and intends
to finance it with third party funding and Repligen's and the Partnership's
remaining funds.
Repligen has entered into certain operating lease agreements which require
the Company to maintain certain restrictive covenants. The Company was not
in compliance with certain of these covenants at September 30, 1995 and
anticipates that it will not meet these financial covenants during 1996,
which will give the lessors thereunder the right to accelerate all future
payments under these leases. In September 1995, the lessors terminated an
escrow agreement, released $1,000,000 in funds from the escrow account and
applied these funds to the Company's future liabilities and obligations
under certain equipment leases. As of September 30, 1995, $3,375,000 was
due on these operating leases, of which $2,592,000 was included in the
accrued restructuring charge.
15
PART II. OTHER INFORMATION
Item 1. Not applicable
Item 2. Not applicable
Item 3. Not applicable
Item 4. Not applicable
Item 5. Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 -- Financial Data Schedule (provided for the
information of the Securities and Exchange
Commission only)
(b) None
16
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
(Registrant)
Date: November 10, 1995 By: /S/ Avery W. Catlin
-------------------------------------
Chief Financial Officer
Signing on behalf of the Registrant
and as Principal Financial and
Accounting Officer