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 June 30, 1996
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.)
117 Fourth Avenue
Needham, Massachusetts 02194
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617)-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 July 31, 1996:
Common Stock, par value $.01 per share 15,602,542
-------------------------------------- ----------------
Class Number of Shares
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
REPLIGEN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30,
--------------------------------
1996 1995
---------------- ---------------
Revenues:
Research and development $ 257,085 $ 2,083,686
Product 226,099 392,091
Investment income 32,203 271,708
Other 324,868 88,831
------------ ------------
840,255 2,836,316
------------ ------------
Costs and expenses:
Research and development 323,763 3,778,035
Selling, general and administrative 833,857 1,347,379
Cost of goods sold 151,649 290,147
Interest -- 59,375
------------ ------------
1,309,269 5,474,936
------------ ------------
Net loss $ (469,014) $ (2,638,620)
============= ============
Net loss per common share $ (0.03) $ (0.17)
============= ============
Weighted average common shares
outstanding 15,602,542 15,357,784
============= ============
See accompanying notes to consolidated financial statements.
<PAGE>
REPLIGEN CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30,1996 March 31,1996
-----------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,099,994 $ 6,944,140
Marketable securities 217,410 278,115
Accounts receivable 345,174 421,254
Amounts due from affiliates -- 42,284
Inventories 549,794 701,224
Prepaid expenses and other current assets 92,421 188,554
------------ ------------
Total current assets 4,304,793 8,575,571
Property, plant and equipment, at cost:
Equipment 688,091 688,091
Furniture and fixtures 20,422 20,422
Leasehold improvements 55,598 2,000
------------ ------------
764,111 710,513
Less: accumulated depreciation and amortization 213,833 176,946
------------ ------------
550,278 533,567
Restricted cash 250,000 --
Other assets, net 121,389 121,389
------------ ------------
$ 5,226,460 $ 9,230,527
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 176,583 $ 546,129
Accrued expenses and other 603,722 3,720,881
Unearned income 106,650 154,998
------------ ------------
Total current liabilities 886,955 4,422,008
Stockholders' equity:
Preferred stock, $.01 par value -- -- --
authorized -- 5,000,000 shares --
outstanding -- none
Common stock, $.01 par value -- 156,025 156,025
authorized -- 30,000,000 shares--
outstanding -- 15,602,542 shares
at June 30, 1996 and March 31, 1996
Additional paid-in capital 127,694,145 127,694,145
Accumulated deficit (123,510,665) (123,041,651)
------------ ------------
Total stockholders' equity 4,339,505 4,808,519
------------ ------------
$ 5,226,460 $ 9,230,527
============= =============
See accompanying notes to consolidated financial statements.
<PAGE>
REPLIGEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended June 30,
---------------------------
1996 1995
---------------------------
Cash flows from operating activities:
Net loss $ (469,014) $ (2,638,620)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities -
Depreciation and amortization 36,887 425,813
Equity in net loss of an affiliate -- 13,625
Changes in assets and liabilities -
Accounts receivable 76,080 (200,837)
Amounts due from affiliates 42,284 730,061
Inventories 151,430 (307,564)
Prepaid expenses and other current assets 96,133 259,560
Accounts payable (369,546) (587,264)
Accrued expenses and other (3,117,159) (1,398,385)
Unearned income (48,348) (203,000)
----------- ----------
Net cash used in operating activities (3,601,253) (3,906,611)
----------- ----------
Cash flows from investing activities:
(Increase) decrease in marketable securities 60,705 (2,531,551)
Purchases of property, plant and equipment, net (53,598) (15,579)
Increase in restricted cash (250,000) --
----------- ----------
Net cash used in investing activities (242,893) (2,547,130)
----------- ----------
Cash flows from financing activities:
Proceeds from sales of common stock and
issuance of warrants -- 220,395
Proceeds from note receivable from affiliate -- 4,620,000
Payment of term loan to bank (4,620,000)
----------- ----------
Net cash provided by financing activities -- 220,395
----------- ----------
--
Net decrease in cash and cash equivalents (3,844,146) (6,233,346)
Cash and cash equivalents, beginning of period 6,944,140 13,821,387
----------- ----------
Cash and cash equivalents, end of period $ 3,099,994 $ 7,588,041
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ -- $ 272,830
=========== ============
See accompanying notes to consolidated financial statements.
<PAGE>
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 1996 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 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.
The Company has incurred significant operating losses since inception
and has undergone significant restructuring of its operations in fiscal
1996 and 1995. During 1996, the Company completed a major downsizing and
consolidation of its activities, including the termination of certain
research programs, in an effort to stabilize its financial condition and
preserve its cash resources.
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 June 30, 1996 are $2,731,000
of money market funds and $300,000 of commercial paper. Investments with a
maturity period of greater than three months are classified as marketable
securities and consist of $217,000 of collateralized mortgage obligations
at June 30, 1996. These securities are reported at amortized cost, which
approximates fair market value at June 30, 1996.
<PAGE>
4. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of the following:
June 30, March 31,
1996 1996
--------- -------
Raw materials and work-in-process $ 80,000 $ 1,955
Finished goods 469,794 699,269
--------- ---------
$ 549,794 $ 701,224
========= =========
Work in process and finished goods inventories consist of material,
labor and manufacturing overhead. The decrease in finished goods
inventories is due primarily to sales of the Company's Protein A products.
5. Restructuring of Operations
During the fiscal year ended March 31, 1996, the Company completed a
major downsizing and consolidation of its operations in an effort to
stabilize its financial condition and preserve its cash resources. The
restructuring included a substantial reduction in the Company's work
force, the termination of several research programs and the closing of its
Cambridge research and manufacturing facility. During the fourth quarter
of fiscal 1996, the Company recorded a charge of $3,567,000 to cover
severance costs and related benefits, the settlement of operating
equipment lease and facility lease obligations, the write-off of certain
leasehold improvements and equipment no longer being utilized, reduced in
part by cash received from the sale of assets and the reversal of certain
accruals no longer required.
During the first quarter of fiscal 1997, ended June 30, 1996, the
Company paid approximately $300,000 and $3,033,000 in settlement fees to
the facility landlord and equipment lessors, respectively. The settlement
fees with respect to the operating equipment lease agreements represent
discounted remaining lease obligations and the purchase price of certain
leased equipment from the equipment lessors. In May 1996, a substantial
amount of this equipment originally on lease as well as certain surplus
Company owned equipment was sold at public auction for approximately
$1,314,000, net of selling expenses.
In addition to the settlement payment of $300,000 made to the facility
landlord, the Company was also required to set aside $250,000 of
restricted cash in an escrow account. These funds are to be invested by
the Company, with the landlord's prior approval, in leasehold
improvements, primarily refurbishment of laboratory spaces at its Needham
Massachusetts headquarters.
<PAGE>
The accrued restructuring activity for the three-month period ended
June 30, 1996 and the year ended March 31, 1996 is as follows:
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
----------------------------------
<S> <C> <C>
Balance, beginning of period $ 2,594,000 $ 5,469,000
Payments
Severance and related benefits for terminated employees
(198,000) (1,336,000)
Settlement of equipment lease obligations and purchase of
leased equipment (3,033,000) (1,840,000)
Settlement of facility lease obligations (300,000) (626,000)
Legal fees and other (252,000) (498,000)
Less--cash received from the sale of surplus equipment 1,314,000 --
---------- ----------
(2,469,000) (4,300,000)
---------- ----------
Provision -- 2,496,000
Write-off of leasehold improvements, equipment and other
intangibles no longer being utilized, net of auction proceeds -- (2,604,000)
Less -- reversal of accruals no longer required due to
changes in operations -- 1,533,000
---------- ----------
Balance, end of period $ 125,000 $ 2,594,000
========= ==========
</TABLE>
The remaining balance at June 30, 1996 represents accrued severance which
will be paid out within the next year.
<PAGE>
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 under this caption,
"Management's Discussion and Analysis of Financial Condition and Results
of Operations," 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 fact constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. 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.
Fiscal 1996 Restructuring
During the fiscal year ended March 31,1996, the Company completed a
major downsizing and consolidation of its operations in an effort to
stabilize its financial condition and preserve its cash resources. The
restructuring included a substantial reduction in the Company's work
force, the termination of several research programs and the closing of its
Cambridge research and manufacturing facility. The Company's research and
development programs are now primarily focused on the development of new
therapies for chronic and acute inflammation and immunosuppression and the
development of enabling technologies for discovery of new drugs by rapid
screening of combinatorial chemical libraries. As of June 30, 1996,
Repligen had approximately 15 employees including five with doctoral
degrees. The Company's strategy is to use internal resources for research
and preclinical studies and to use pharmaceutical companies or third party
contractors to provide manufacturing and clinical development support and
for certain administrative functions. Significant expansion of the
Company's research or clinical development efforts is dependent on future
financing or new partnerships with pharmaceutical companies. As a result
of the reduction of operating expenses and elimination of debt, the
Company believes it has adequate cash reserves at June 30, 1996 to sustain
its operations at their current levels for at least the next twenty-four
months.
Results of Operations
Revenues -
Total revenues for the three month period ended June 30, 1996 were
$840,000 as compared to $2,836,000 in the comparable fiscal 1996 period.
In the fiscal 1997 period, the Company recorded research and
development revenues totaling $257,000, consisting of (1) $65,000 and
$50,000 from Pfizer, Inc. and Glaxo Wellcom plc., respectively for work
performed by the Company's Glycan subsidiary, (2) licensing revenue of
$30,000 from Immunomedics and $50,000 from Neocrin Company, (3)
approximately $36,000 of revenue received from the Partnership for
promotional activities performed by the Company on behalf of the
Partnership's rPF4 program, and (4) $26,000 of other research and
development revenue.
Product revenues for the three month periods ended June 30, 1996 and
1995 were $226,000 and $392,000, respectively. Product revenue for the
first quarter of fiscal 1997
<PAGE>
decreased over the similar fiscal 1996 period due primarily to the timing
of Protein A product shipments.
Investment income decreased in the first quarter of fiscal 1997 over
the comparable three month period in fiscal 1996 primarily because of
lower average funds available for investment.
Other revenues for the three month period ended June 30, 1996
increased from the comparable fiscal 1996 period primarily because of the
one-time sale of non-investment securities held by the Company for
approximately $300,000.
Expenses -
During fiscal 1996, the Company substantially restructured its
operations, resulting in a significant reduction in its current rate of
expenditures. In May 1996, the Company relocated its headquarters
operations from Cambridge, Massachusetts to approximately 13,000 square
feet of subleased office and laboratory space in Needham, Massachusetts.
This move has resulted in a substantial savings in rent and related
facility costs. If the move had been effective as of April 1, 1996,
expenses during the fiscal quarter ended June 30, 1996 would have been
lower by approximately $316,000.
Total expenses for the three month periods ended June 30, 1996 and
1995 were $1,309,000 and $5,475,000, respectively. The decrease in
expenses in the three month fiscal 1997 period reflects lower operating
costs as a result of the fiscal 1996 restructuring efforts, including
significantly lower headcounts.
Research and development expenses for the three month periods ended
June 30, 1996 and 1995 were $324,000 and $3,778,000, respectively. The
decreased expenses in the first quarter of fiscal 1997 from the comparable
period in fiscal 1996 reflect the Company's efforts to reduce costs.
Selling, general and administrative expenses for the three month
periods ended June 30, 1996 and 1995 were $834,000 and $1,347,000, which
reflects a decrease in administrative personnel and related expenses as
part of the Company's cost reduction efforts.
Cost of goods sold for the three month periods ended June 30, 1996 and
1995 were $152,000 and $290,000, respectively. Cost of goods sold in the
three month periods were 67% and 74% of product revenues, respectively.
The decrease in cost of sales as a percentage of revenue are primarily a
result of a change in product mix between the two periods.
Capital Resources and Liquidity
The Company's total cash, cash equivalents and marketable securities
decreased to $3,317,000 at June 30, 1996 from $7,222,000 at March 31,
1996, a decrease of $3,905,000 or 54%. The decrease reflects net operating
losses during the three month period of approximately $469,000, the
reduction of accounts payable of $370,000 and the net payment of accrued
restructuring expenses of $2,469,000 (see note 5 of notes to consolidated
financial statements), offset in part by the reduction in receivables and
inventories of $270,000. Working capital decreased to $3,418,000 at June
30, 1996 from $4,154,000 at March 31, 1996.
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.
<PAGE>
In May 1992, the Company entered into a research and development
agreement with Lilly which provided $1,313,000 in research funding during
the three-month period ended June 30, 1995. In September 1995, Lilly
terminated its collaboration and licensing agreement with the Company.
The Company has received research and development funding and a 10%
management fee from the Partnership pursuant to the Product Development
Agreement. In April 1996, the Company announced the termination of the
Product Development Agreement and the Purchase Agreement with the
Partnership. Under the terms of the various agreements between the
parties, the rights to the rPF4 technologies remain with the Partnership.
The Company recognized revenue from the Partnership in the three month
periods ended June 30, 1996 and 1995 of $36,000 and $771,000,
respectively.
<PAGE>
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) None
(b) None
<PAGE>
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: August 1, 1996 By: /S/ Walter C. Herlihy
----------------------
Chief Executive Officer
Signing on behalf of the Registrant
and as Principal Financial and
Accounting Officer
