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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission File Number 0-14656
REPLIGEN CORPORATION
(exact name of registrant as specified in its charter)
Delaware 04-2729386
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
117 Fourth Avenue
Needham, Massachusetts 02494
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781)-449-9560
_________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of July 31, 1998.
Common Stock, par value $.01 per share 18,001,785
-------------------------------------- ----------------
Class Number of Shares
<PAGE>
REPLIGEN CORPORATION
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1998 and
March 31, 1998 3
Condensed Consolidated Statements of Operations for the
Three Months Ended June 30, 1998 and 1997 4
Condensed Consolidated Statement of Cash Flows for the
Three Months Ended June 30, 1998 and 1997 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 10
Exhibit Index 11
Exhibits 12
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
REPLIGEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS June 30, 1998 March 31, 1998
------------- --------------
Current assets:
Cash and cash equivalents $ 4,286,573 $ 4,725,544
Accounts receivable 406,580 212,857
Inventories 707,929 670,818
Prepaid expenses and other current assets 111,716 156,228
------------- -------------
Total current assets 5,512,799 5,765,447
Property, plant and equipment, at cost:
Equipment 806,858 770,512
Furniture and fixtures 60,170 40,563
Leasehold improvements 442,527 442,528
------------- -------------
1,309,555 1,253,603
Less: accumulated depreciation and
amortization 658,931 594,719
------------- -------------
650,624 658,884
Other assets, net 88,472 88,472
------------- -------------
$ 6,251,895 $ 6,512,803
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 99,511 $ 100,719
Accrued expenses 370,803 254,312
Unearned income -- 33,332
------------- -------------
Total current liabilities 470,314 388,363
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 -- 18,001,785 shares at
June 30, 1998 and March 31, 1998 180,017 180,017
Additional paid-in capital 130,264,048 130,264,048
Accumulated deficit (124,662,485) (124,319,625)
------------- -------------
Total stockholders' equity 5,781,580 6,124,440
------------- -------------
$ 6,512,895 $ 6,512,803
============= =============
See accompanying notes to consolidated financial statements.
3
<PAGE>
REPLIGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30,
-----------------------------
1998 1997
------------ ------------
Revenues: $ 268,406 $ 258,284
Research and development 229,138 282,183
Product 61,691 46,678
Investment income 33,188 88,362
------------ ------------
Other 592,423 675,507
------------ ------------
Costs and expenses: 466,069 363,658
Research and development 356,932 306,856
Selling, general and administrative 112,282 148,585
------------ ------------
Cost of products sold 935,283 819,099
------------ ------------
Net loss $ (342,860) $ (143,592)
============ ============
Basic and diluted net loss per share $ (0.02) $ (0.01)
============ ============
Basic and diluted weighted average shares
outstanding 18,001,785 16,001,785
============ ============
See accompanying notes to consolidated financial statements.
4
<PAGE>
REPLIGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended June 30,
---------------------------
1998 1997
----------- -----------
Cash flows from operating activities:
Net loss $ (342,860) $ (143,592)
Adjustments to reconcile net loss to net cash
used in operating activities -
Depreciation and amortization 64,213 58,893
Compensation charge from stock options -- 9,918
Changes in assets and liabilities -
Accounts receivable (193,724) 159,724
Inventories (37,111) (9,226)
Prepaid expenses and other current assets 44,512 33,191
Accounts payable (1,208) (89,408)
Accrued expenses 116,491 (2,287)
Unearned income (33,332) (50,001)
----------- -----------
Net cash used in operating activities (383,019) (32,788)
----------- -----------
Cash flows from investing activities:
Decrease in marketable securities -- 55,211
Purchases of property, plant and equipment, net (55,953) (42,339)
Decrease in restricted cash -- 32,314
----------- -----------
Net cash (used in) provided by investing
activities (55,953) (45,186)
----------- -----------
Net (decrease) increase in cash and cash
equivalents (438,971) 12,398
Cash and cash equivalents, beginning of period 4,725,544 3,465,881
----------- -----------
Cash and cash equivalents, end of period $ 4,286,573 $ 3,478,279
=========== ===========
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, 1998.
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.
2. Net Loss Per Share
The Company has adopted Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings per Share, effective December 15, 1997. SFAS No.
128 establishes standards for computing and presenting earnings per share
and applies to entities with publicly held common stock or potential
common stock. The Company has applied the provisions of SFAS No. 128,
retroactively to all periods presented. Basic and diluted net loss per
share represents net loss divided by the weighted average number of common
shares outstanding during the period. The dilutive effect of the potential
common shares consisting of outstanding stock options and warrants is
determined using the treasury stock method in accordance with SFAS No.
128. Diluted weighted average shares outstanding at June 30, 1998 and 1997
excluded the potential common shares from warrants and stock options
because to do so would be antidilutive for the periods presented. At June
30, 1998, there are 993,000 options outstanding with a weighted average
exercise price of $1.33 and 2,832,000 warrants outstanding with a weighted
average exercise price of $3.97.
3. Cash Equivalents
The Company accounts for investments in accordance with SFAS No.
115, Accounting for Certain Investments in Debt and Equity 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, 1998 and 1997 are $600,000 and $200,000 of
money market funds and approximately $3,550,000 and $3,180,000 of
commercial paper, respectively.
4. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of the following:
6
<PAGE>
June 30, March 31,
1998 1998
--------- ---------
Raw materials and work-in-process $ 465,167 $ 388,727
Finished goods 242,762 282,091
--------- ---------
Total $ 707,929 $ 670,818
========= =========
Work in process and finished goods inventories consist of material,
labor, outside processing costs and manufacturing overhead.
5. Comprehensive Income
Effective January 1, 1998, the Company adopted SFAS No. 130
Reporting Comprehensive Income, effective January 1, 1998. SFAS No. 130
establishes standards for reporting and display of comprehensive income
and its components in financial statements. Comprehensive income includes
all changes in equity during a period except those resulting from
investments by owners and distributions to owners. The comprehensive net
loss is the same as net loss for all periods presented.
6. New Accounting Standards
In April 1998, the AICPA issued Statements of Position 98-5
Reporting on the Costs of Start-up Activities (SOP 98-5). SOP 98-5
requires all costs associated with the pre-opening, pre-operating and
organization activities to be expenses as incurred. The Company will adopt
SOP 98-05 beginning January 1, 1999. Adoption of this statement will not
have a material impact on the Company's consolidated financial position or
results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement Regarding Forward-Looking Statements
Statements in this Quarterly Report on Form 10-Q as well as oral
statements that may be made by the Company or by officers, directors or
employees of the Company acting on the Company's behalf, that are not
historical facts constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1997. Such
forward-looking statements involve known and unknown risks, uncertainties
and other factors that could cause the actual results of the Company to be
materially different from the historical results or from any results
expressed or implied by such forward-looking statements. The Company's
future operating results are subject to risks and uncertainties and are
dependent upon many factors, including, without limitation, the Company's
ability to (i) meet its working capital and future liquidity needs, (ii)
successfully implement its strategic growth strategies, (iii) understand,
anticipate and respond to rapidly changing technologies and market trends,
(iv) develop, manufacture and deliver high quality, technologically
advanced products on a timely basis to withstand competition from
competitors which may have greater financial, information gathering and
marketing resources than the Company, (v) obtain and protect licensing and
intellectual property rights necessary for the Company's technology and
product development on terms favorable to the Company, and (vi) recruit
and retain highly talented professionals in a competitive job market.
Further information on potential factors that could affect the Company's
financial results are included in filings made by the Company from time to
time with the Securities and Exchange Commission included in the section
entitled "Risk Factors" contained in the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1998 (File No.000-14656).
7
<PAGE>
Overview
Repligen Corporation ("Repligen" or the "Company") develops enabling
technology for the discovery of new drugs including ultra-rapid methods
for the synthesis of chemical compound libraries, and high throughput
screening assays based on defined biological targets. The Company's
technology is designed to identify compounds capable of blocking or
stabilizing pharmaceutically important interactions between proteins and
other macromolecules. To date, this type of interaction has only been
accessible with complex natural products or protein pharmaceuticals both
of which are difficult to develop, administer to patients and manufacture.
The Company's goal is to develop organically synthesized drugs which can
mimic the action of these natural products and proteins.
In selected therapeutic areas, Repligen is applying its technology
to the discovery of proprietary drug leads. The primary proprietary drug
discovery program at the Company is the development of novel inhibitors of
angiogenesis or new blood vessel growth which is essential for solid tumor
growth and in certain ocular diseases. This program is based on
proprietary, high throughput screening assays designed to detect
inhibitors of the growth factors which drive angiogenesis and proprietary
libraries of compounds designed to mimic the natural cell surface ligands
of these growth factors. In initial preclinical studies, a compound
identified from these libraries inhibited angiogenic growth factors in
vitro and in vivo at non-toxic doses.
Repligen also develops, manufactures and markets products for the
production of protein pharmaceuticals (biopharmaceuticals) by affinity
chromatography. The Company currently markets a line of products for the
production of monoclonal antibodies intended for human clinical use based
on a recombinant form of Protein A, a naturally occurring affinity ligand.
The Company believes that its chemical libraries may be the source of
additional affinity ligands for biopharmaceutical manufacturing.
Results of Operations
Revenues
Total revenues for the three month period ended June 30, 1998 and
1997 were approximately $592,000 and $676,000, respectively, a decrease of
approximately $84,000 or 12%. This decrease is largely attributable to the
timing of large production scale orders of Protein A.
Research and development revenues for the three month period ended
June 30, 1998 were approximately $268,000 compared to $258,000 in the
comparable fiscal 1998 period. Research and development revenue was
generated under research agreements with Cambridge Neuroscience, Glaxo
Wellcome plc, Knoll AG, Pfizer Inc. and revenue generated from a Phase II
government grant with the National Cancer Institute. Revenues for the
quarter ended June 30, 1998 also include a licensing fee received from
Theseus, Inc. pursuant to an agreement to license certain of Repligen's
technology for antibodies to the leukocyte integrin CD11b. Under this
licensing agreement, Repligen will receive milestones and royalties if a
product using this technology is commercialized by Theseus.
Product revenues for the three month period ended June 30, 1998 and
1997 were approximately $229,000 and $282,000, respectively, a $53,000 or
19% decrease in product sales. This decrease is largely attributable to
the timing of large production scale orders of Protein A.
Investment income increased in fiscal 1999 over the comparable three
month period in fiscal 1998 primarily due to higher interest generated on
funds available for investment.
8
<PAGE>
Other revenues for the three month period ended June 30, 1998
decreased from the comparable fiscal 1998 period primarily due to the sale
of equipment held by the Company reported as other income in the three
month period ending June 30, 1997.
Expenses
Total expenses for the three month period ended June 30, 1998 and
1997 increased approximately $116,000 or 14% to $935,000 from $819,000.
Research and development expenses for the three months ended June 30, 1998
and 1997 were approximately $466,000 and $364,000. The increase in
expenses in fiscal 1999 from the comparable period in the first quarter of
fiscal 1998 reflects increased staffing in research and development as the
Company expands its investment in proprietary drug discovery programs.
Selling, general and administrative expenses for the three month
period ended June 30, 1998 were approximately $357,000 which reflects an
increase of $50,000 or 16% from the comparable fiscal 1998 period. This
increase is attributable to increased costs in patent and legal services.
Cost of goods sold for the three month period ended June 30, 1998
were approximately $112,000 compared to $149,000 for the three month
period ended June 30, 1997. Cost of goods sold in the three months ended
June 30, 1998 and 1997 were 49% and 53% of product revenues. This decrease
is attributable to a change in product mix.
Liquidity and Capital Resources
The Company's total cash, cash equivalents and marketable securities
decreased to $4,287,000 at June 30, 1998 from $4,726,000 at March 31,
1998. This decrease of $439,000 reflects net losses incurred during the
three month period ending June 30, 1998 of approximately $343,000, an
increase in accounts receivable of $194,000 and capital expenditures of
$56,000 offset in part by the increase in accrued expenses of $116,000 and
decrease of prepaid expenses and other current assets of $45,000. Working
capital decreased to $5,042,000 at June 30, 1998 from $5,377,000 at March
31, 1998.
The Company has entered into agreements with a number of
collaborative partners and licensees. Under the terms of these agreements,
the Company may be eligible to receive research support, additional
milestones or royalty revenue if these collaborations continue to clinical
evaluation and commercialization. The Company cannot be assured of the
continuation of these collaborations and any future payments.
During the fiscal year ended March 31, 1998, 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 and investment income. While the
Company anticipates that its cost of operations will increase in fiscal
1999 as it continues to expand its investment in proprietary product
development, 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.
The Company has completed an assessment of its exposure to the "Year
2000" computer
9
<PAGE>
problem. Based on this assessment, the Company believes that no critical
software systems of the Company will be impacted by this situation. The
Company believes that systems currently used by the Company are "Year
2000" compliant. Although the Company believes that it is taking
appropriate precautions against disruption of its system due to the "Year
2000" problem, there can be no assurance that the Company's suppliers and
customers will not be adversely affected by the "Year 2000" problem.
Nonetheless, the Company believes that the "Year 2000" issue with respect
to the Company's purchased software systems will not have a material
impact on the Company's business operations or financial condition.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting of Stockholders (the "Annual Meeting")
will be held on September 10, 1998. At the Annual Meeting, the
stockholders of the Company will consider and act upon a proposal to: (i)
elect five members to the Board of Directors (ii) ratify the selection of
Arthur Andersen LLP as the independent auditors of the Company for the
fiscal year ending March 31, 1999 and (iii) transact such other business
as may properly come before the Annual Meeting or any adjournments thereof
established by the Board of Directors. The nominees for election to the
Board of Directors are Robert J. Hennessey, Walter C. Herlihy, Ph.D., G.
William Miller, Alexander Rich, M.D. and Paul Schimmel, Ph.D.
The Company had 18,001,785 shares of Common Stock of the Company
issued and outstanding and entitled to vote as of the close of business on
June 22, 1998, the record date established by the Board of Directors for
the Annual Meeting.
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.
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: August 7, 1998 By: /S/ Walter C. Herlihy
---------------------
Chief Executive Officer
Principal Financial and
Accounting Officer
10
<PAGE>
REPLIGEN CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
27.1 Financial Data Schedule 12
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<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> JUN-30-1998
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<RECEIVABLES> 407
<ALLOWANCES> 0
<INVENTORY> 708
<CURRENT-ASSETS> 5,513
<PP&E> 1,310
<DEPRECIATION> 649
<TOTAL-ASSETS> 6,252
<CURRENT-LIABILITIES> 470
<BONDS> 0
0
0
<COMMON> 180
<OTHER-SE> 5,602
<TOTAL-LIABILITY-AND-EQUITY> 6,252
<SALES> 229
<TOTAL-REVENUES> 592
<CGS> 112
<TOTAL-COSTS> 935
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (343)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (343)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
