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 December 31, 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 January 31, 1999.
Common Stock, par value $.01 per share 18,001,785
- -------------------------------------- ----------------
Class Number of Shares
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REPLIGEN CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
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PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited) as of December 31, 1998 and
March 31, 1998 3
Condensed Consolidated Statements of Operations (Unaudited) for the Three and
Nine Months Ended December 31, 1998 and 1997 4
Condensed Consolidated Statement of Cash Flows (Unaudited)for the Nine Months
Ended December 31, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
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 11
(a) Exhibits
10.1 Manufacturing Transfer Agreement with Amersham Pharmacia Biotech
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
Signature 11
Exhibit Index 12
Exhibits 13
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
REPLIGEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1998 March 31, 1998
----------------- --------------
ASSETS (Unaudited) (Audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,696,633 $ 4,725,544
Accounts receivable 327,565 212,857
Inventories 692,001 670,818
Prepaid expenses and other current assets 266,339 156,228
------------- -------------
Total current assets 4,982,538 5,765,447
Property, plant and equipment, at cost:
Equipment 873,265 770,512
Furniture and fixtures 61,376 40,563
Leasehold improvements 460,318 442,528
------------- -------------
1,394,959 1,253,603
Less: accumulated depreciation and amortization 793,157 594,719
------------- -------------
601,802 658,884
Other assets, net 88,472 88,472
------------- -------------
$ 5,672,812 $ 6,512,803
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 52,540 $ 100,719
Accrued expenses 302,811 254,312
Unearned income 60,750 33,332
------------- -------------
Total current liabilities 416,101 388,363
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 December 31,
1998 and March 31, 1998 180,017 180,017
Additional paid-in capital 130,264,048 130,264,048
Accumulated deficit (125,187,354) (124,319,625)
------------- -------------
Total stockholders' equity 5,256,711 6,124,440
------------- -------------
$ 5,672,812 $ 6,512,803
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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REPLIGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
December 31, December 31, December 31, December 31,
------------ ------------ ------------ ------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Research and development $ 275,238 $ 377,957 $ 1,013,675 $ 802,326
Product 248,723 316,146 674,871 855,532
Investment income 50,730 44,862 169,912 159,968
Other 14,437 14,472 85,274 114,447
------------ ------------ ------------ ------------
589,128 753,437 1,943,732 1,932,273
------------ ------------ ------------ ------------
Costs and expenses:
Research and development 421,623 348,860 1,352,648 1,063,061
Selling, general and administrative 317,770 300,609 1,029,013 922,818
Cost of products sold 175,528 198,607 429,801 426,425
------------ ------------ ------------ ------------
914,921 848,076 2,811,462 2,412,304
------------ ------------ ------------ ------------
Net loss $ (325,793) $ (94,639) $ (867,730) $ (480,031)
============ ============ ============ ============
Basic and diluted net loss per share $ (0.02) $ (.01) $ (0.05) $ (0.03)
============ ============ ============ ============
Basic and diluted weighted average
common shares outstanding 18,001,785 16,023,763 18,001,785 16,009,084
============ ============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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REPLIGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended December 31,
------------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (867,730) $ (480,031)
Adjustments to reconcile net loss to net cash
used in operating activities -
Depreciation and amortization 198,439 182,935
Compensation charge from stock options -- 22,912
Changes in assets and liabilities -
Accounts receivable (114,707) 170,002
Inventories (21,183) (76,138)
Prepaid expenses and other current assets (110,111) 32,791
Accounts payable (48,179) (103,609)
Accrued expenses and other current liabilities 48,499 (154,266)
Unearned income 27,418 (133,313)
----------- -----------
Net cash used in operating activities (887,554) (538,717)
----------- -----------
Cash flows from investing activities:
Decrease in marketable securities -- 72,353
Purchases of property, plant and equipment, net (141,357) (105,264)
Decrease in restricted cash -- 50,087
----------- -----------
Net cash (used in) provided by investing activities (141,357) 17,176
----------- -----------
Cash flows from financing activities:
Net proceeds from the issuance of common stock
and warrants, net of issuance costs -- 1,975,000
----------- -----------
Net cash provided by financing activities -- 1,975,000
----------- -----------
Net (decrease) increase in cash and cash equivalents (1,028,911) 1,453,459
Cash and cash equivalents, beginning of period 4,725,544 3,465,881
----------- -----------
Cash and cash equivalents, end of period $ 3,696,633 $ 4,919,340
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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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 ended 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 December 31, 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
December 31, 1998, there are 1,030,500 options outstanding with a weighted
average exercise price of $1.34 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 December 31, 1998 and 1997 are $241,000 and
$2,086,000 of cash and money market funds and approximately $3,455,000 and
$2,833,000 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:
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December 31, March 31,
1998 1998
(Unaudited) (Audited)
----------- -----------
Raw materials and work-in-process $ 509,659 $ 388,727
Finished goods 182,342 282,091
--------- ---------
Total $ 692,001 $ 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 expensed 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.
7. Agreements
On December 17, 1998, the Company entered into an agreement with
Amersham Pharmacia Biotech AB (APB) in which the Company became the
preferred manufacturer of APBiotech's recombinant Protein A. Under the
terms of this agreement, APB agreed to pay an initial transfer fee to
cover the costs of transferring certain technology and agreed to purchase
Biotech rPA manufactured by the Company.
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
7
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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).
Overview
Repligen Corporation ("Repligen" or the "Company") develops new
drugs for cancer, organ transplantation and autoimmune diseases. The
Company's most advanced therapeutic product (CTLA4-Ig) has been shown in
animal models to selectively block unwanted immune responses in organ
transplantation and autoimmune diseases. Initial clinical testing of
CTLA4-Ig has been carried out in patients receiving a bone marrow
transplant, which is a potential cure for several diseases of the immune
system including leukemia, myeloma, lymphoma and sickle cell anemia.
Despite the clinical success of BMTs, a significant number of patients
experience a severe and potentially life-threatening complication - Graft
versus Host Disease (GVHD) in which the newly transplanted immune system
attacks the host. To minimize this complication, most BMTs require a
search for a genetically "matched" donor which can delay treatment for
months and cost >$25,000 and which only partially eliminates GVHD. An
alternative source of donors would be a parent or sibling who is partially
matched with the patient; however, past experience indicates that this
source of bone marrow would produce a high incidence of severe and
potentially life-threatening GVHD.
In December 1998, investigators from the Dana-Farber Cancer
Institute in Boston reported that ex vivo treatment of bone marrow from a
genetically "mismatched" family member with CTLA4-Ig substantially reduced
GVHD in twelve transplant patients. The Company intends to further
evaluate CTLA4-Ig in "matched" and "unmatched" bone marrow transplants. In
July 1998, Repligen filed a complaint relating to certain United States
patents which have been issued to Bristol-Myers Squibb Corporation (see
Legal Proceedings). The Company has filed its own patents related to
compositions of matter and methods of use of CTLA4-Ig.
The Company is also developing low molecular weight compounds which
block angiogenesis by inhibiting the action of a key growth factor, VEGF.
Inhibitors of angiogenesis or new blood vessel growth may arrest the
growth of solid tumors and stop the progression of ocular diseases such as
macular degeneration. This program is based on the Company's patented,
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, several compounds
identified from these libraries inhibited angiogenic growth factors in
vitro and in vivo at non-toxic doses. The Company is evaluating selected
compounds in animal models of angiogenesis. The Company's angiogenesis
program is supported, in part, by a grant from the National Cancer
Institute. Repligen is also applying its drug discovery technology to
collaborations with pharmaceutical company partners.
Repligen 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 therapeutic monoclonal antibodies based on a recombinant
form of Protein A, a naturally occurring affinity ligand for antibodies.
In December 1998, the Company entered into a ten year agreement to
manufacture recombinant Protein A for Amersham Pharmacia Biotech, a
leading supplier to the biopharmaceutical marketplace.
8
<PAGE>
Results of Operations
Revenues
Total revenues for the three month period ended December 31, 1998
and 1997 were approximately $589,000 and $753,000, respectively, a
decrease of approximately $164,000 or 22%. This decrease was largely
attributable to decreased research and development revenue and decreased
product sales. Year to date total revenues increased approximately
$11,000, or 1%, to $1,944,000 at December 31,1998 from December 31, 1997.
Research and development revenues for the three month period ended
December 31, 1998 and 1997 were approximately $275,000 and $378,000,
respectively, a decrease of approximately $103,000 or 27%. This decrease
was largely attributable to a milestone payment received from Pfizer Inc.
during the third quarter of fiscal year 1998. In the first nine months of
fiscal 1999, the Company recorded research and development revenues
totaling $1,014,000 consisting of approximately $557,000 from contracted
research and development programs and $457,000 from licensing
arrangements. In the first nine months of fiscal 1998, the Company
recorded research and development revenues totaling $802,000 of revenue
with approximately $610,000 from contracted research and $192,000 from
licensing arrangements.
Product revenues for the three month period ended December 31, 1998
and 1997 were approximately $249,000 and $316,000, respectively, a
decrease of $67,000 or 21%. Year to date total product revenues decreased
approximately $181,000, or 21%, to $675,000 from December 31, 1997. This
decrease is attributed to variable large production scale orders of
Protein A.
Investment income for the three month period ended December 31, 1998
and 1997 was approximately $51,000 and $45,000, respectively, an increase
of approximately $6,000 or 13%. Year to date investment income increased
approximately $10,000 or 6% from year to date December 31, 1997. These
increases are largely attributable to higher average funds available for
investment during fiscal 1999.
Other revenues for the three month period ended December 31, 1998
were approximately $14,000, unchanged from the comparable period ended
December 31, 1997. Year to date other income decreased approximately
$29,000 or 25% from December 31, 1997. This decrease is primarily due to
the sale of equipment held by the Company reported as other income in
fiscal 1998.
Expenses
Total expenses for the three month period ended December 31, 1998
and 1997 increased approximately $67,000 or 8% to $915,000 from $848,000
and increased 17% or approximately $399,000 to $2,811,000 from $2,412,000
for the nine months ended December 31, 1998 and 1997, respectively.
Research and development expenses for the three month period ended
December 31, 1998 and 1997 were approximately $422,000 and $349,000. For
the first nine months of fiscal 1999, research and development expenses
were approximately $1,353,000, or 27% higher than the comparable period in
fiscal 1998. This increase 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 months
ended December 31, 1998 and 1997 were approximately $318,000 and $301,000,
respectively. For the first nine months of fiscal 1999, selling, general
and administrative expenses were approximately $1,029,000, or 12% higher
than the comparable period in fiscal 1998. This increase is attributable
to increased costs in patent costs and shareholder services.
9
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Cost of products sold for the three months ended December 31, 1998
and 1997 were approximately $176,000 and $199,000. For the first nine
months of fiscal 1999, cost of products sold increased by $3,000, or 1%
higher, from the comparable period in fiscal 1998. Cost of products sold
in the three months ended December 31, 1998 and 1997 were 71% and 63% of
product revenues. In the nine month period ended December 31, 1998 and
1997, cost of products sold was 64% and 50%. This increase is largely
attributable to increased inventory reserves created by the introduction
of new protein A products provided in 1998.
Liquidity and Capital Resources
The Company's total cash and cash equivalents decreased to
$3,697,000 at December 31, 1998 from $4,726,000 at March 31, 1998. This
decrease of $1,029,000 reflects net losses incurred during the nine month
period ended December 31, 1998 of approximately $868,000, a decrease in
prepaid expenses of $110,000 and capital expenditures of $141,000 offset
in part by the increase in accrued expenses of $49,000 and increase in
unearned income of $27,000. Working capital decreased to $4,566,000 at
December 31, 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,
generally, the Company may be eligible to receive research support,
additional milestones or royalty revenue if the focus of these
collaborations result in clinical evaluation and commercialization. There
can be no assurance that these collaborations will result in future
payments.
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.
Year 2000
The Company has undertaken an initial review of its information
technology computer systems and believes that the Year 2000 problem does
not pose significant operational problems to its information technology
systems. The majority of the Company's software and computer equipment has
been purchased within the last five years from third-party vendors who
have already provided upgrades intended to bring their products into Year
2000 compliance. The Company has begun to address the small number of
internal systems that are not yet Year 2000 compliant, and expects full
compliance by the end of 1999. The Company currently believes that the
costs of addressing these issues will not have a material adverse impact
on the Company's financial position.
The Company has also recently begun interviewing third parties,
vendors and suppliers of the Company to determine their exposure to Year
2000 issues, their anticipated risks and responses to those risks. To
date, those vendors that have been contacted have indicated that their
hardware or software is or will be Year 2000 compliant in time frames that
meet the Company's requirements. However, the Company intends to continue
to assess its exposure to Year 2000 noncompliance on the part of any of
its material vendors and there can be no assurance that their systems will
be Year 2000 compliant.
The Company does not have a contingency plan in the event Year 2000
compliance cannot be achieved in a timely manner. A contingency plan will
be developed immediately upon completion of the Company's Year 2000
compliance assessment.
10
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Item 1. LEGAL PROCEEDINGS.
On July 17, 1998, Repligen filed a complaint at the United States
District Court for the District of Massachusetts in Boston, Massachusetts
(the "Complaint"). The Complaint relates to a United States patent which
was issued in 1995 to Bristol-Myers Squibb Corporation (the "BMS Patent")
which claims a method of treating immune system diseases with CTLA4-Ig. In
December 1998, related patents were issued to BMS claiming the composition
of CTLA4-Ig. Thereafter, the Complaint was amended to include these
patents. The amended Complaint seeks to correct the inventorship on these
BMS Patents and seeks unspecified monetary damages. If successful in its
claims, a licensor of Repligen will be named as an inventor on the BMS
Patents which will give Repligen and Bristol-Myers Squibb shared rights to
the patents. There can be no assurances that the litigation will conclude
in a result beneficial to the Company. The failure of the litigation may
restrict the Company's ability to commercialize CTLA4-Ig for certain
applications.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT DESCRIPTION
------- -----------
10.1* Manufacturing Transfer Agreement
27.1 Financial Data Schedule
* Confidential Treatment has been requested as to omitted portions
pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as
amended.
(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: February 12, 1999 By: /s/ Walter C. Herlihy
-----------------------
Chief Executive Officer
Principal Financial and
Accounting Officer
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REPLIGEN CORPORATION AND SUBSIDIARIES
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
10.1 Manufacturing Transfer Agreement 13
27.1 Financial Data Schedule 20
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Manufacturing Transfer Agreement
This agreement (Agreement) is made as of December 17, 1998, by and between
Repligen Corporation ("Repligen"), a Delaware corporation with principal offices
at 117 Fourth Ave., Needham, MA 02494 and Amersham Pharmacia Biotech AB
("Biotech"), a corporation incorporated in Sweden with principal offices at
Bjrkgatan 30, SE-751 84 Uppsala (each a "Party" and collectively "the Parties").
WHEREAS, Repligen possesses capabilities relating to the large scale
manufacture of recombinant proteins including protein A; and
WHEREAS, Biotech possesses technology, documentation, and know-how
relating to the manufacture of that form of recombinant protein A
(hereinafter "Biotech rPA") which is incorporated into a variety of
products marketed and sold by Biotech; and
WHEREAS, the Parties wish to enter an arrangement in which Repligen will
become the preferred manufacturer of Biotech rPA for Biotech's use.
NOW THEREFORE, for the mutual covenants contained herein, and for other
good and valuable considerations, the Parties agree as follows:
1. DEFINITIONS
For the purpose of this Agreement, the terms set forth hereunder shall be
defined as follows:
a. "Biotech IPA" means those forms of immobilized Biotech rPA which are
manufactured, marketed, and sold to the general public by Biotech as
further described in Schedule A attached hereto.
b. "Biotech rPA" means unimmobilized recombinant protein A manufactured
according to either of the Old Process or the New Process.
c. "Biotech Specifications" means the set of physical, chemical, and
functional characteristics that Biotech uses to determine the
acceptability of Biotech rPA manufactured as described in Schedule B
attached hereto. Biotech Specifications may be modified from time to
time by mutual agreement of the Parties.
d. "Confidentiality Agreement" shall mean that confidentiality
agreement dated April 20, 1998 entered into by and between the
Parties.
e. "Equivalency Testing" means any and all testing on Biotech rPA
manufactured by Repligen according to the New Process which Biotech,
in its sole discretion, may consider necessary to conduct prior to
and in support of the Process Change.
f. "First Agreement" means that agreement made by and between the
Parties on September 29, 1992.
g. "License Agreement" means that agreement made by and between Biotech
and Repligen in which Repligen grants to Biotech i) a non-exclusive
license to US Patent No. 5,084,559 ("Protein A Domain Mutants") and
ii) a license to technology and know-how relating to the manufacture
of Repligen IPA.
h. "Launch Stock" means Biotech rPA produced by Repligen according to
the New Process after the completion of the Qualification Lots but
prior to the effective date of the Supply Agreement.
i. "New Process Documentation" means any and all documentation which
will be created by Repligen pursuant to this Agreement in
preparation for establishing the criteria and specifications for,
and implementation of the New Process.
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j. "New Process" means the process by which Repligen will manufacture
Biotech rPA for sale to Biotech.
k. "Old Process" means the process by which Biotech rPA is produced by
Biotech and any other parties as of the date of this Agreement.
l. "Old Process Documentation" means the English translation of any and
all documentation related to the process which Biotech uses with
respect to the production of Biotech rPA as of the date of this
Agreement.
m. "Process Change" means that date upon which Biotech commences the
marketing and sale to the general public of Biotech IPA which has
been manufactured using Biotech rPA produced by Repligen according
to the New Process.
n. "Process Technology" means any and all know-how, proprietary
materials and reagents, documentation, trade secrets, and technology
relating to the production of Biotech rPA which will be required by
Repligen in order for Repligen to prepare for and manufacture
Biotech rPA in accordance with the New Process. Process Technology
includes but is not limited to bacterial production strains, English
language manufacturing and quality control documents, recipes,
formulae, etc.
o. "Qualification Lots" means the first three full scale production
runs of Biotech rPA made by Repligen according to the New Process.
p. "rPA Products" means either or both of Repligen rPA and Biotech rPA.
q. "Repligen IPA" means those forms of immobilized Repligen rPA,
manufactured and sold by Repligen as of the date of this Agreement.
Specific forms of Repligen IPA referenced herein may be designated
by their respective trade names, e.g. IPA-300, IPA-400, IPA-500,
etc.
r. "Repligen rPA" means those forms of unimmobilized recombinant
protein A which are manufactured and sold by Repligen. Specific
forms of Repligen rPA referenced herein may be designated by their
respective trade names, e.g. rPA-50, rPA-100, and srPA-50.
s. "Process Equipment" means any equipment which is offered for sale or
lease by Biotech and which is determined by the Parties to be
required for the manufacture of Biotech rPA by Repligen in
accordance with the New Process.
t. "Process Validation" means any work requested by Biotech and carried
out by Repligen to define the operating limits of any step of the
New Process during or after the manufacturing of the Qualification
Lots but prior to the Process Change.
u. "Supply Agreement" means that agreement between Biotech and
Repligen, made effective as of the date of Process Change, pursuant
to which Repligen is made the preferred manufacturer to Biotech of
Biotech rPA.
2. PROCESS TRANSFER
a. Biotech shall arrange for the timely, complete, and successful
transfer to Repligen of all Process Technology such that Repligen's
readiness to commence the manufacture of Biotech rPA pursuant to
this Agreement and/or the Supply Agreement is not delayed or
impaired.
14
<PAGE>
b. Biotech will provide to Repligen the Old Process Documentation in
English within ten (10) days of the signing of this Agreement and
will cooperate fully with Repligen to adapt the Old Process
Documentation to Repligen's existing manufacturing, quality control,
and document management systems. Any modification which is required
for implementation of the New Process will be mutually agreed upon
by the Parties. Repligen will create the New Process Documentation
and will supply Biotech with a draft copy of the New Process
Documentation within thirty (30) days of receipt of Old Process
Documentation from Biotech. Biotech will have the final right of
approval of all New Process Documentation. New Process Documentation
will be finalized and agreed to by the Parties prior to January 21,
1999 or at such later time as the Parties may establish by mutual
consent.
c. Any and all subcontractors engaged by Repligen to carry out any
aspect of the New Process will be bound by a confidential disclosure
agreement ("CDA") with terms and conditions substantially similar to
the Confidentiality Agreement. Biotech will have the right to
consent to all subcontractors involved in manufacture of Biotech rPA
which consent shall not be unreasonably withheld. Following consent
by Biotech and execution by the subcontractor of a CDA, Repligen may
share Process Technology with such party. Biotech may not contact
Repligen's sub-contractors with specific reference to the
manufacture of Biotech rPA without the prior consent of Repligen.
Repligen may utilize alternative facilities under its control in the
manufacture of Biotech rPA. Repligen will give Biotech nine (9)
months prior written notice of any change in facility or
sub-contractor for approval by Biotech, such approval not to be
unreasonably withheld by Biotech.
d. Biotech will pay Repligen [*] to cover the costs of transferring the
Process Technology within ten (10) days of execution of this
Agreement.
e. Between January 1 and March 31, 1999, Repligen will manufacture [*]
Qualification Lots for Biotech. Each Qualification Lot will be
produced, tested, and released by Repligen according to the New
Process Documentation and the Biotech Specifications. Finished
Biotech rPA from the Qualification Lots will be shipped to Biotech
on or before March 31, 1999. Biotech shall pay Repligen for Biotech
rPA produced from the Qualification Lots and which meets Biotech
Specifications in accordance with Section 4. Equivalency Testing of
the Biotech rPA from the Qualification Lots may be carried out by
either or both of the Parties at the discretion of Biotech.
f. Biotech will insure that Equivalency Testing and any required
customer notification is completed in a timely fashion.
g. Biotech shall implement the Process Change as soon as practical and
thereafter will not undertake to manufacture any products using
Biotech rPA that was produced by the Old Process, except as may be
specifically requested by preexisting customers of Biotech for such
products. Such specific customer requests will be considered custom
orders and products manufactured thereunder will be so labeled.
3. MANUFACTURING
a. During the 1999 calendar year, Biotech shall purchase Biotech rPA to
serve as Launch Stock from Repligen according to the following
schedule: [*]
b. Following the Process Change and thereafter during each year of the
Supply Agreement, Biotech intends to continue to use Repligen as its
preferred manufacturer for Biotech rPA. Consequently, Biotech
intends to purchase from Repligen and Repligen agrees in such case
to manufacture for Biotech [*] of the total annual requirements of
Biotech for Biotech rPA. As long as Repligen retains its status as
Biotech's preferred manufacturer, i.e. so that Repligen's share of
the manufacturing of
[*] indicates material which has been omitted and for which confidential
treatment has been requested. All such material has been filed with the
Commission pursuant to rule 24b-2 promulgated under the Securities Exchange Act
of 1934, as amended.
15
<PAGE>
Biotech rPA for Biotech remains at or [*] of Biotech's annual
requirements, Biotech's obligation to pay royalties to Repligen
under the First Agreement shall be waived and no royalties shall be
due. If during any calendar year Repligen loses its status as
Biotech's preferred manufacturer, i.e., so that Repligen's share of
Biotech rPA falls below [*] , royalties under the First Agreement
will again be due and payable on all product sales occurring during
that year according to the First Agreement.
c. The Parties acknowledge that, prior to Process Change, Biotech, at
its sole discretion, may continue to manufacture or have
manufactured Old Process Biotech rPA and/or Biotech IPA made with
Old Process Biotech rPA and that some inventory of such products may
exist at the time of Process Change. Following the date of Process
Change, Biotech will solely promote Biotech IPA manufactured with
New Process Biotech rPA and will sell Biotech IPA made with Old
Process Biotech rPA only in respect of a repeat order which is
specific for such product.
d. Following the date of Process Change, Biotech shall not manufacture
or have manufactured Old Process Biotech rPA except in the event
that both of the following occur: i) inventories of Old Process
Biotech rPA and/or Biotech IPA made with Old Process Biotech rPA
have been depleted and ii) a repeat order that is specific for such
Biotech IPA made with Old Process Biotech rPA has been received.
Old Process Biotech rPA manufactured under this Section 3d will not
be included as part of the volumes of Biotech's annual requirements
referenced in Section 3b.
e. Notwithstanding anything to the contrary, Repligen shall maintain
the exclusive and unrestricted right to manufacture Repligen rPA.
f. Notwithstanding anything to the contrary, Biotech shall maintain the
exclusive and unrestricted right to manufacture Biotech IPA.
4. PRODUCT PRICING
a. Biotech will purchase from Repligen at a price of [*] all Biotech
rPA which is shipped to Biotech from the Qualification Lots and
which meets Biotech Specifications.
b. Biotech represents and warrants that the Old Process yields at least
[*] grams finished Biotech rPA per [*] of fermentation and this
production yield has been used by the Parties to establish a pricing
schedule for the Supply Agreement. The price paid by Biotech to
Repligen for all Qualification Lots, Launch Stock and for all
Biotech rPA manufactured under the Supply Agreement will be
according to this schedule as set forth below:
Kilograms ordered per annum Price (USD) per gram
[*] [*]
c. The price for Biotech rPA produced by Repligen in each subsequent
year of the Supply Agreement after the first year will be based upon
the above schedule and adjusted according to the average yield
obtained in the previous year according to the following formula:
[*]
wherein average yield is the average yield obtained over all runs in
the immediately preceding year of production. The adjustment will be
made on the anniversary of the date of Process Change in each year
during the term of the Supply Agreement with the average yield
determined by Repligen and subject to confirmation by Biotech.
d. In addition to annual adjustments made in the price to reflect
actual production yields as set forth
[*] indicates material which has been omitted and for which confidential
treatment has been requested. All such material has been filed with the
Commission pursuant to rule 24b-2 promulgated under the Securities Exchange Act
of 1934, as amended.
16
<PAGE>
above, the price will also be adjusted on the anniversary of the
date of Process Change in each year during the term of the Supply
Agreement on the basis of the change in the United States Consumer
Price Index or some other Index mutually agreed upon by both
parties. The Parties may also elect from time to time and by mutual
agreement to adjust the pricing in consideration of other factors,
such as documented changes in Repligen's cost of manufacture,
altered market conditions, process modifications, etc.
e. All pricing is FOB, Needham, MA.
5. PROCESS EQUIPMENT AND MATERIALS
a. All Process Equipment not presently owned by or in the possession of
Repligen will be provided to Repligen by Biotech under a
lease-purchase arrangement. Under such lease-purchase arrangement:
1) Biotech will lease Process Equipment to Repligen for the combined
terms of this Agreement and the Supply Agreement, 2) Repligen will
make an annual lease payment at the end of each year of the Supply
Agreement of [*] of Biotech's actual list price for Process
Equipment in effect on the original date of this Agreement, 3) if
this Agreement terminates without execution of the Supply Agreement
or the Supply Agreement is terminated voluntarily by or as a
consequence of breach by Repligen, the lease will also terminate and
Process Equipment shall be promptly returned to Biotech, 4) if the
Supply Agreement is executed but is subsequently terminated
voluntarily by or as a consequence of breach by Biotech, Repligen
shall have the option of returning Process Equipment or continuing
lease payments under the same terms, 5) upon completion of all ten
lease payments, [*].
b. Process Equipment provided by Biotech under this Section 5 will be
delivered to Repligen upon request and in a timely fashion such that
Repligen's readiness to commence the manufacture of Biotech rPA
pursuant to this Agreement and/or the Supply Agreement is not
delayed or impaired.
c. Any equipment or hardware which the Parties mutually agree is
specifically required for the New Process and which is neither
presently owned by or in the possession of Repligen nor manufactured
and offered for sale by Biotech will be provided by Biotech at no
cost to Repligen for the use of Repligen during the combined terms
of this Agreement and the Supply Agreement. Such equipment will
include: [*].
d. Any equipment provided under this Section 5 which becomes unable to
perform according to the New Process Documentation during the term
of the Agreement for any reason other than misuse or neglect will be
replaced by Biotech at no cost to Repligen. Any equipment provided
under this Section 5 which becomes unable to perform during the term
of the Agreement due to misuse, neglect, or operator error will be
replaced by Repligen at no cost to Biotech.
e. During the term of the Agreement, Biotech will supply Repligen with
any and all requested quantities of chromatography media which are
marketed and sold by Biotech and required by Repligen in the
manufacture of Biotech rPA at a [*] discount to the then current
list price.
f. During the term of the Agreement, Biotech will supply Repligen with
any requested quantities of Sepharose 4FF and Sepharose 6FF at a [*]
discount to the then current list price or to the last listed price.
g. [*]
[*] indicates material which has been omitted and for which confidential
treatment has been requested. All such material has been filed with the
Commission pursuant to rule 24b-2 promulgated under the Securities Exchange Act
of 1934, as amended.
17
<PAGE>
6. TERM
a. This Agreement will remain in effect from the date of signing until
the effective date of the Supply Agreement, or December 31, 1999,
whichever is earlier.
7. TERMINATION
a. Either Party may terminate this Agreement upon the material breach
of the other Party's performance hereunder, upon 30 days written
notice. The failure to cure such breach to the other Party's
satisfaction within 30 days will result in the immediate termination
of this Agreement.
8. ASSIGNMENT
a. This Agreement is not assignable by either Party absent the other
Party's written consent. If Repligen is purchased by a third party
which is a competitor of Biotech, Biotech has the right to approve
the transfer of the Agreement. For purposes hereof, the term
"purchase" shall mean i) a sale of all or substantially all of the
assets of Repligen or ii) the merger and consolidation of Repligen
with or into another corporation such that the stockholders of
Repligen immediately following such transaction hold, directly or
indirectly, less than 50% of the voting securities of the
corporation surviving such transaction.
9. CONFIDENTIALITY
a. Any and all information disclosed by one Party to the other under
this Agreement shall be handled in accordance with the terms and
conditions of the Confidentiality Agreement and consequently be
treated as confidential - as agreed therein - for the entire
duration of this Agreement, the duration of the Supply Agreement and
for a period of five (5) years thereafter.
10. REPORTING
a. Within 20 days following the completion of each quarter during the
term of this Agreement or the Supply Agreement, Biotech will inform
Repligen as to the status of the inventory of Biotech rPA and
Biotech IPA on hand as well as the aggregate quantity of Biotech rPA
that has been sold during the preceding quarter. Repligen will have
the right to audit all relevant records of Biotech with respect to
this information.
11. DISCLOSURE
a. Upon the execution of this Agreement, either Party will be entitled
to publicly announce this transaction and its general terms,
including the nature and scope of the Supply Agreement, provided
that the wording of such announcement shall be subject to the other
Party's prior review and reasonable satisfaction. Either Party shall
be permitted under this Agreement to make any disclosure which may
be required by law.
12. GENERAL
a. Biotech acknowledges that Repligen markets and sells several forms
of Repligen rPA which include but are not restricted to rPA-50,
rPA-100, and srPA-50. Repligen will retain the exclusive and
unrestricted right to make, have made, market, and sell all forms of
Repligen rPA in all markets and to any party. Repligen will not sell
or transfer Biotech rPA to any party other than Biotech, except with
Biotech's consent.
b. This Agreement is subject to and shall be construed and enforced in
accordance with the laws of the State of New York. Any disputes
arising hereunder shall be resolved with reference to the English
language version of this Agreement regardless of any translations
made for the convenience of the Parties. All disputes between the
Parties shall be resolved by binding arbitration in accordance with
18
<PAGE>
the rules and regulations of the American Arbitration Association in
the city of New York, NY. Notwithstanding anything herein to the
contrary, the Parties acknowledge and agree that each shall have the
right to obtain equitable relief against the other provided that
each Party hereby agrees to submit to the jurisdiction of the courts
of the State of New York or the federal courts of the United States
located in New York and that the venue for all such proceedings
shall lie in the State of New York.
IN WITNESS WHEREOF, the Parties hereto have hereunto set their hands and seals
and duly executed this Agreement the day and year first written above.
FOR REPLIGEN CORPORATION FOR AMERSHAM PHARMACIA
BIOTECH AB
/s/ DANIEL P. WITT /s/ ARNE FORSELL
- ------------------------- --------------------------
12/17/98
/s/ PER-ERIK SANDLUND
--------------------------
12/18/98
19
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