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 June 30, 1997
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
-----------------------------------------------------------------
(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 [check mark]_____ No _____.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of June 30, 1997.
Common Stock, par value $.01 per share 16,001,785
-------------------------------------- ----------------
Class Number of Shares
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REPLIGEN CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1997 and
March 31, 1997 3
Condensed Consolidated Statements of Operations for the Three Months
Ended June 30, 1997 and 1996 4
Condensed Consolidated Statement of Cash Flows for the Three Months Ended
June 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submissions of Matters to a Vote of Security Holders 9
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K 10
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
Signature 11
Exhibit Index 12
Exhibits 13
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
--------------------
REPLIGEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS June 30, 1997 March 31, 1997
------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,478,279 $ 3,465,881
Marketable securities 17,142 72,353
Accounts receivable 375,205 534,929
Inventories 461,467 452,241
Prepaid expenses and other current assets 132,529 165,720
------------- -------------
Total current assets 4,464,622 4,691,124
Property, plant and equipment, at cost:
Equipment 766,903 724,564
Furniture and fixtures 28,820 28,820
Leasehold improvements 386,199 386,199
------------- -------------
1,181,922 1,139,583
Less: accumulated depreciation and amortization 408,005 349,112
------------- -------------
773,917 790,471
Restricted cash 17,773 50,087
Other assets, net 88,909 88,909
------------- -------------
$ 5,345,221 $ 5,620,591
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 78,862 $ 168,269
Accrued expenses 397,700 399,988
Unearned income 83,312 133,313
------------- -------------
Total current liabilities 559,874 701,570
Commitments and contingencies
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 -- 16,001,785 shares at June 30, 1997 and
March 31, 1997 160,017 160,017
Additional paid-in capital 128,309,048 128,309,048
Deferred compensation (16,529) (26,447)
Accumulated deficit (123,667,189) (123,523,597)
------------- -------------
Total stockholders' equity 4,785,347 4,919,021
------------- -------------
$ 5,345,221 $ 5,620,591
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
3
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REPLIGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
--------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Revenues:
Research and development $ 258,284 $ 257,085
Product 282,183 226,099
Investment income 46,678 32,203
Other 88,362 324,868
------------- -------------
675,507 840,255
------------- -------------
Costs and expenses:
Research and development 363,658 323,763
Selling, general and administrative 306,856 833,857
Cost of goods sold 148,585 151,649
------------- -------------
819,099 1,309,269
------------- -------------
Net loss $ (143,592) $ (469,014)
============= =============
Net loss per common share $ (0.01) $ (0.03)
============= =============
Weighted average common shares outstanding 16,001,785 15,602,542
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
4
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REPLIGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------------
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (143,592) $ (469,014)
Adjustments to reconcile net loss to net cash
used in operating activities -
Depreciation and amortization 58,893 36,887
Compensation charge from stock options 9,918 --
Changes in assets and liabilities -
Accounts receivable 159,724 76,080
Amounts due from affiliates -- 42,284
Inventories (9,226) 151,430
Prepaid expenses and other current assets 33,191 96,133
Accounts payable (89,408) (369,546)
Accrued expenses (2,287) (3,117,159)
Unearned income (50,001) (48,348)
------------- -------------
Net cash used in operating activities (32,788) (3,601,253)
------------- -------------
Cash flows from investing activities:
Decrease in marketable securities 55,211 60,705
Purchases of property, plant and equipment, net (42,339) (53,598)
Decrease (increase) in restricted cash 32,314 (250,000)
------------- -------------
Net cash provided by (used in) investing activities 45,186 (242,893)
------------- -------------
Net increase (decrease) in cash and cash equivalents 12,398 (3,844,146)
Cash and cash equivalents, beginning of period 3,465,881 6,944,140
------------- -------------
Cash and cash equivalents, end of period $ 3,478,279 $ 3,099,994
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
REPLIGEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The condensed consolidated 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 ending March 31, 1997.
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. 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.
Reclassifications have been made in condensed consolidated financial
statements to conform with the current year's presentations.
2. Net Loss Per Common Share
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 amounts
would be antidilutive.
In February 1997 the Financial Accounting Standard Board issued SFAS
No. 128 Earnings Per Share, which requires a new method of calculating
earnings per share (EPS). The Company will be required to use this method
for fiscal 1998. The Company anticipates that reported EPS will be
unchanged from amounts presented in the statement of operations.
3. Cash Equivalents and Marketable Securities
The Company considers all highly liquid investments with a maturity of
three months or less at the time of acquisition to be cash equivalents.
Included in cash equivalents at June 30, 1997 are $200,000 of money market
funds and approximately $3,180,000 of commercial paper. Investments with a
maturity period of greater than three months are classified as marketable
securities.
4. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of the following:
6
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<TABLE>
<CAPTION>
June 30, March 31,
1997 1997
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<S> <C> <C>
Raw materials and work-in-process $ 140,000 $ 298,000
Finished goods 321,000 154,000
------------- -------------
Total $461,000 $ 452,000
============= =============
</TABLE>
Work in process and finished goods inventories consist of material,
labor, outside processing and manufacturing overhead.
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 $3,300,000 in settlement fees to the facility
landlord and equipment lessors, which included 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 $1,250,000.
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 facts constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1996. 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.
Certain Factors That May Affect Future Results
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 restructuring and
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
7
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terms favorable to the Company, and (vi) recruit and retain highly
talented professionals in a competitive job market. Each of these factors,
and others, are discussed from time to time in the filings made by the
Company with the Securities and Exchange Commission.
Overview
Repligen Corporation ("Repligen" or the "Company") redirected its focus
in March of 1996 from the clinical development of biological products to
the development of enabling technology for the discovery of new drugs. The
Company is developing technology to increase the efficiency of the process
by which new drug candidates are identified. These technologies include
rapid methods for the synthesis of chemical compound libraries, novel
detection technology for identifying active compounds in drug screening
and specific screening assays based on defined biological targets. In
selected therapeutic areas, Repligen is applying its technology to the
discovery of proprietary drug leads capable of blocking biologically
important protein-protein and protein-carbohydrate interactions.
Repligen also manufactures and markets a line of products for the
production of monoclonal antibodies intended for human clinical use. These
products are based on a recombinant form of Protein A for which Repligen
holds patents in the United States and major foreign markets. In addition,
the Company is seeking to license to third parties certain intellectual
property and other assets of the Company pertaining to its earlier
research and clinical development programs.
Results of Operations
Revenues
Total revenues for the three month period ended June 30, 1997 and 1996
were $676,000 and $840,000, respectively, a decrease of approximately 20%.
This decrease is largely attributable to the one-time sale for
approximately $300,000 of non-investment securities held by the Company
reported as other income in the three month period ending June 30, 1996.
Research and development revenues for the three month period ended June
30, 1997 were $258,000 compared to $257,000 in the comparable fiscal 1997
period. Research and development revenue was generated under research
agreements with Pfizer Inc., Cambridge NeuroScience, Inc. and Glaxo
Wellcome plc. Revenues for the quarter ending June 30, 1997 include a
licensing fee received from Immunomedics, Inc. pursuant to an agreement to
license certain of Repligen's technology for production of antibodies.
Under this licensing agreement, Repligen will receive royalties if a
product using this technology is commercialized by Immunomedics.
Product revenues for the three month period ended June 30, 1997 and
1996 were $282,000 and $226,000, respectively, a 25% increase in product
sales. The increase in product sales is attributable to an increase in
sales of the Protein A product line.
Investment income increased in fiscal 1998 over the comparable three
period in fiscal 1997 primarily due to higher interest generated on funds
available for investment.
Other revenues for the three month period ended June 30, 1997 decreased
from the comparable fiscal 1996 period primarily due to the sale of
non-investment securities held by the Company for approximately $300,000
reported as other income in the three month period ending June 30, 1996.
Expenses
Total expenses for the three month period ended June 30, 1997 and 1996
decreased 37% to $819,000 from $1,309,000. 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 resulted in savings in rent and
related facility costs.
8
<PAGE>
Research and development expenses for the three months ended June 30,
1997 and 1996 were $364,000 and $324,000. The increase in expenses in
fiscal 1998 from the comparable period in fiscal 1997 reflects increased
staffing in research and development.
Selling, general and administrative expenses for the three month period
ended June 30, 1997 were $354,000 which reflects a decrease of $524,000
from the comparable fiscal 1997 period. These decreases resulted from the
reduction of administrative personnel and related expenses as part of the
Company's cost reduction efforts during fiscal 1997
Cost of goods sold for the three month period ended June 30, 1997 were
$149,000 compared to $152,000 for the three month period ended June 30,
1996. Cost of goods sold in the three months ended June 30, 1997 and 1996
were 53% and 67% of product revenues. This decrease is attributable to the
cost efficiencies gained in the new manufacturing facility opened in late
1996.
Liquidity and Capital Resources
The Company's total cash, cash equivalents and marketable securities
decreased to $3,495,000 at June 30, 1997 from $3,538,000 at March 31,
1997, a decrease of $43,000 or 1%. The decrease reflects net losses during
the three month period ended June 30, 1997 of approximately $143,000, the
reduction of accounts payable and accrued expenses of $95,000, offset in
part by the reduction in accounts receivables and prepaid expenses of
$193,000. Working capital decreased to $3,905,000 at June 30, 1997 from
$3,990,000 at March 31, 1997.
The Company has funded operations primarily with cash derived from the
sales of its equity securities, revenue derived from research and
development contracts, product sales, investment income and the sale of
the Company's share of a joint venture. The Company believes it has
sufficient cash equivalents and marketable securities to satisfy working
capital and capital expenditure requirements for the next twenty-four
months. Should the Company need to secure additional financing to meet its
future liquidity requirements, there can be no assurances that the Company
will be able to secure such financing, or that such financing, if
available, will be on terms favorable to the Company. Management believes
that the Company's current operations are not materially impacted by the
effects of inflation.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting of Stockholders (the "Annual Meeting") was
held on July 24, 1997. At the Annual Meeting, the stockholders of the
Company (i) elected Alexander Rich, M.D., Paul Schimmel, Ph.D., Walter C.
Herlihy, Ph.D., and G. William Miller to serve as Directors of the Company
until the 1998 Annual Meeting of Stockholders and (ii) ratified the
selection of Arthur Andersen LLP as auditors for the fiscal year ending
March 31, 1998.
The Company had 16,001,785 shares of Common Stock of the Company issued
and outstanding and entitled to vote as of June 9, 1997, the record date
for the Annual Meeting. At the Annual Meeting, holders of a total of
13,910,871 shares of Common Stock or approximately 86.9% were present in
person or represented by proxy. The following sets forth the information
regarding the results of the voting of the Annual Meeting:
9
<PAGE>
Proposal 1. Election of Directors:
Directors Shares Voting Shares Voting
In Favor Against
------------- -------------
Alexander Rich, M.D. 13,416,793 490,652
Paul Schimmel, Ph.D. 13,422,118 485,327
Walter C. Herlihy, Ph.D. 13,436,502 470,943
G. William Miller 13,495,718 411,727
Proposal 2. Ratification of Selection of Arthur Andersen LLP as independent
auditors:
Votes in favor: 13,795,249
Votes against: 57,344
Abstention: 54,852
No Votes --
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT DESCRIPTION
------- -----------
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No current reports on Form 8-K were filed by the Company during the
quarter covered by this report.
10
<PAGE>
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: July 31, 1997 By: /S/ Walter C. Herlihy
---------------------
Chief Executive Officer
Signing on behalf of the Registrant
and as Principal Financial and
Accounting Officer
11
<PAGE>
REPLIGEN CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
27.1 Financial Data Schedule 13
12
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<NAME> Repligen
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