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, 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
(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 02194
(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, 1997.
Common Stock, par value $.01 per share 16,001,785
-------------------------------------- ----------------
Class Number of Shares
<PAGE>
REPLIGEN CORPORATION
Form 10-Q for the Quarter Ending September 30, 1997
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 1997 and
March 31, 1997 3
Condensed Consolidated Statements of Operations for the Three and
Six Months Ended September 30, 1997 and 1996 4
Condensed Consolidated Statement of Cash Flows for the Six Months
Ended September 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
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K 9
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
Signature 10
Exhibit Index 11
Exhibits 12
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
REPLIGEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS September 30, 1997 March 31, 1997
------------------ --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,080,267 $ 3,465,881
Marketable securities 17,142 72,353
Accounts receivable 268,541 534,929
Inventories 563,169 452,241
Prepaid expenses and other current assets 115,591 165,720
------------- -------------
Total current assets 4,044,710 4,691,124
Property, plant and equipment, at cost:
Equipment 766,903 724,564
Furniture and fixtures 28,820 28,820
Leasehold improvements 442,528 386,199
------------- -------------
1,238,251 1,139,583
Less: accumulated depreciation and amortization 469,806 349,112
------------- -------------
768,445 790,471
Restricted cash -- 50,087
Other assets, net 88,909 88,909
------------- -------------
$ 4,902,064 $ 5,620,591
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 63,634 $ 168,269
Accrued expenses 254,015 399,988
Unearned income 33,311 133,313
------------- -------------
Total current liabilities 350,960 701,570
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 September
30, 1997 and March 31, 1997 160,017 160,017
Additional paid-in capital 128,309,048 128,309,048
Deferred compensation (8,972) (26,447)
Accumulated deficit (123,908,989) (123,523,597)
------------- -------------
Total stockholders' equity 4,551,104 4,919,021
------------- -------------
$ 4,902,064 $ 5,620,591
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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REPLIGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Research and development $ 166,085 $ 193,376 $ 424,369 $ 450,460
Product 257,202 394,679 539,385 620,778
Investment income 68,428 75,596 115,106 107,799
Other 11,613 317,719 99,975 642,587
----------- ----------- ----------- ----------
503,328 981,370 1,178,835 1,821,624
----------- ----------- ----------- ----------
Costs and expenses:
Research and development 350,544 370,697 714,201 694,460
Selling, general and administrative 315,352 352,505 622,208 1,186,361
Cost of goods sold 79,233 -- 227,818 151,649
----------- ----------- ---------- -------
745,129 723,202 1,564,227 2,032,470
----------- ----------- ----------- ----------
Net (loss) income $ (241,801) $ 258,168 $ (385,392) (210,846)
=========== =========== =========== ==========
Net (loss) income per common share $ (0.02) $ .02 $ (0.02) $ (0.01)
=========== =========== =========== ==========
Weighted average common shares
outstanding 16,001,785 15,602,542 16,001,785 15,602,542
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
REPLIGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended September 30,
------------------------------------------
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (385,392) $ (210,846)
Adjustments to reconcile net loss to net cash
used in operating activities -
Depreciation and amortization 120,692 84,132
Compensation charge from stock options 17,475 10,000
Changes in assets and liabilities -
Accounts receivable 266,388 188,647
Amounts due from affiliates -- 37,518
Inventories (110,928) 96,489
Prepaid expenses and other current assets 50,129 105,202
Accounts payable (104,635) (518,203)
Accrued expenses (145,972) (3,217,103)
Unearned income (100,002) (121,683)
------------ ------------
Net cash used in operating activities (392,245) (3,545,847)
------------ ------------
Cash flows from investing activities:
Decrease in marketable securities 55,211 176,349
Purchases of property, plant and equipment, net (98,667) (49,731)
Decrease (increase) in restricted cash 50,087 (229,056)
------------ ------------
Net cash provided by (used in) investing activities 6,631 (102,438)
------------ ------------
Net decrease in cash and cash equivalents (385,614) (3,648,285)
Cash and cash equivalents, beginning of period 3,465,881 6,944,140
------------ ------------
Cash and cash equivalents, end of period $ 3,080,267 $ 3,295,855
============ ============
</TABLE>
See accompanying notes to condensed 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 prior year condensed
consolidated financial statements to conform with the current year's
presentations.
2. Net Loss/Income Per Common Share
Net loss/income per common share has been computed by dividing net
loss/income 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
beginning with the annual financial statements for year ended March 31,
1998, as early adoption is not permitted. 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 September 30, 1997 are approximately
$80,000 of money market funds and approximately $2,800,000 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
<PAGE>
September 30, March 31,
1997 1997
------------- --------------
Raw materials and work-in-process $305,000 $298,000
Finished goods 258,000 154,000
-------- --------
Total $563,000 $452,000
======== ========
Work in process and finished goods inventories consist of material,
labor, outside processing and manufacturing overhead.
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 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 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.
7
<PAGE>
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 periods ended September 30, 1997
and 1996 were $503,000 and $981,000, respectively, a decrease of
approximately 49%. Year to date total revenues decreased approximately 35%
to $1,179,000 at September 30, 1997 from $1,822,000 at September 30, 1996.
This decrease is largely attributable to the one-time sales of securities
and equipment for approximately $505,000 reported as "Other Income" in the
six month period ended September 30, 1996.
Research and development revenues for the three month period ended
September 30, 1997 were $166,000 compared to $193,000 in the comparable
fiscal 1997 period. In the first six months of fiscal 1998, the Company
recorded research and development revenues totaling $424,000 consisting
primarily of approximately $264,000 from contracted research and
development programs and $160,000 from licensing revenues. In the first
six months of fiscal 1997, research and development revenues were
$450,000.
Product revenues for the three months ended September 30, 1997 and
1996 were $257,000 and $395,000, respectively, and were $539,000 and
$621,000 for the six months ended September 30, 1997 and 1996,
respectively. This decrease is attributed to the timing of large
production scale orders of Protein A.
Investment income decreased in fiscal 1998 over the comparable three
month period in fiscal 1997 primarily due to lower average funds available
for interest. In the first six months of fiscal 1998 investment income is
$115,000 compared to $108,000 in the six months ended September 30, 1996
primarily due to the sale of marketable securities held by the Company
during the six months ending September 30, 1997.
Other revenues for the three and six month periods ended September
30, 1997 decreased from the comparable fiscal 1997 periods primarily due
to the Company's one-time sales of equipment and furnishings of
approximately $205,000 and non-investment securities of approximately
$300,000 during fiscal 1997.
Expenses
Total expenses for the three month periods ended September 30, 1997
and 1996 increased 3% to $745,000 from $723,000 and decreased 23% to
$1,564,000 from $2,032,000 for the six months ended September 30, 1997 and
1996, respectively.
Research and development expenses for the three months ended
September 30, 1997 and 1996 were $351,000 and $371,000, a decrease of 5%.
For the six months ended September 30, 1997 and 1996, research and
development expenses were $714,000 and $694,000, an increase of 3%. This
increase is largely attributable to increased staffing levels during
fiscal 1998 offset by decreases in rent generated by the move to a new
facility in fiscal 1997.
Selling, general and administrative expenses for the three month and
six month periods ended September 30, 1997 were $315,000 and $622,000,
respectively, which reflects a decrease of $37,000 and $564,000 from the
comparable 1997 periods. These decreases resulted from the reduction of
administrative personnel and related expenses as part of the Company's
cost reduction
8
<PAGE>
efforts during the first six months of fiscal 1997.
Cost of goods sold for the three month and six month periods ended
September 30, 1997 were $79,000 and $228,000 respectively, as compared to
$0 and $152,000 for the three and six months ended September 30, 1996.
Cost of goods sold in the three month periods ended September 30, 1997 and
1996 were 31% and 0% of product revenues. The decrease in cost of goods
sold from the quarter ended June 30, 1997 of 53% to 31% at the three month
period at September 30, 1997 is attributable to product mix. In the six
month periods ended September 30, 1997 and 1996, cost of goods sold was
42% and 24% of product sales. The increase in cost of sales as a
percentage of revenue is primarily a result of the realization of
inventory that had been previously reserved for in the three month and six
month period ended September 30, 1996.
Liquidity and Capital Resources
The Company's total cash, cash equivalents and marketable securities
decreased to $3,097,000 at September 30, 1997 from $3,538,000 at March 31,
1997, a decrease of $441,000 or 12%. The decrease reflects net losses
during the six month period ended September 30, 1997 of approximately
$385,000, an increase in inventory of $111,000, the reduction of accounts
payable and accrued expenses of $251,000, offset in part by the reduction
in accounts receivables and prepaid expenses of $317,000. Working capital
decreased to $3,694,000 at September 30, 1997 from $3,990,000 at March 31,
1997.
During the quarter, the Company entered into a $450,000 note
receivable with a licensee for past due licensing fees. As the Company has
historically recorded licensing fees under this agreement on a cash basis,
the Company has not recorded this note receivable as an asset. The note
requires full payment of principal and interest in August 1998. The
Company will continue to record this license fee on a cash basis.
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 its
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 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.
9
<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.
SIGNATURE
REPLIGEN CORPORATION
(Registrant)
Date: November 13, 1997 By: /S/ Walter C. Herlihy
---------------------
Chief Executive Officer
Signing on behalf of the Registrant
and as Principal Financial and
Accounting Officer
10
<PAGE>
REPLIGEN CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
27.1 Financial Data Schedule 12
11
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 3,080
<SECURITIES> 17
<RECEIVABLES> 269
<ALLOWANCES> 0
<INVENTORY> 563
<CURRENT-ASSETS> 4,465
<PP&E> 1,238
<DEPRECIATION> 470
<TOTAL-ASSETS> 4,902
<CURRENT-LIABILITIES> 351
<BONDS> 0
0
0
<COMMON> 160
<OTHER-SE> 4,391
<TOTAL-LIABILITY-AND-EQUITY> 4,902
<SALES> 539
<TOTAL-REVENUES> 1179
<CGS> 228
<TOTAL-COSTS> 1564
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (385)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (385)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
