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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2O549
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, 2000
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 (IRS. 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 October 31, 2000.
Common Stock, Par Value $.O1 Per Share 26,566,560
-------------------------------------- ------------------------
Class Number of Shares
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REPLIGEN COPORATION
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
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<S> <C>
Item 1. Financial Statements
Balance Sheets as of September 30, 2000 and March 31, 2000 (Unaudited) 3
Statements of Operations for the Three and Six
Months Ended September 30, 2000 and 1999 (Unaudited) 4
Statements of Cash Flows for the Six-Months
Ended September 30, 2000 and 1999 (Unaudited) 5
Notes to Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities
None
Item 4. Submissions of Matters to a Vote of Security Holders 12
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K 13
Signature 14
Exhibit Index 15
Exhibits 16
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REPLIGEN CORPORATION
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS September 30, 2000 March 31, 2000
------------------ --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 27,372,220 $ 25,226,546
Marketable securities 5,868,542 8,806,367
Accounts receivable, net 154,887 847,838
Inventories 549,881 547,448
Prepaid expenses and other current assets 269,095 241,654
------------ ----------
Total current assets 34,214,625 35,669,853
------------ ----------
Property and equipment, at cost:
Equipment 1,142,605 1,092,831
Furniture and fixtures 208,907 157,476
Leasehold improvements 473,288 473,288
------------ ----------
1,824,800 1,723,595
Less: accumulated depreciation and amortization 1,322,839 1,187,343
------------ ----------
501,961 536,252
Other assets, net 56,882 81,382
------------ ----------
$34,773,468 $36,287,487
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 550,005 $ 425,565
Accrued expenses 418,028 771,520
------------ ----------
Total current liabilities 968,033 1,197,085
------------ ----------
Stockholders' equity:
Preferred stock. $.01 par value --authorized -
5,000,000 shares --outstanding - none -- --
Common stock, $.01 par value --authorized -
40,000,000 shares --outstanding - 26,565,560
shares at September 30, 2000 and 26,315,979
shares at March 31, 2000 265,656 263,159
Additional paid-in capital 166,402,671 165,507,184
Accumulated deficit (132,862,892) (130,679,941)
------------ ----------
Total stockholders' equity 33,805,435 35,090,402
------------ ----------
$ 34,773,468 $ 36,287,487
============ ============
</TABLE>
See accompanying notes to financial statements.
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REPLIGEN CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three-Months Ended Six-Months Ended
September 30, September 30,
2000 1999 2000 1999
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Investment income $ 551,526 $ 156,247 $1,064,130 $ 202,784
Product 323,994 578,996 879,788 811,466
Research and development 141,424 246,782 246,424 655,942
----------- ---------- ----------- -----------
1,016,944 982,025 2,190,342 1,670,192
----------- ---------- ----------- -----------
Costs and expenses
Research and development 1,342,667 733,045 2,425,737 1,221,248
Selling, general and administrative 657,780 767,214 1,388,864 1,193,383
Cost of products sold 228,505 286,534 558,692 482,917
----------- ---------- ----------- -----------
2,228,952 1,786,793 4,373,293 $ 2,897,548
----------- ---------- ----------- -----------
Net loss $(1,212,008) $(804,768) $(2,182,951) $(1,227,356)
=========== ========== =========== ===========
Basic and diluted net loss per share $ (0.05) $ (0.04) $ (0.08) $ (0.06)
=========== ========== =========== ===========
Basic and diluted weighted average common
shares outstanding 26,559,675 21,867,601 26,508,333 20,324,426
=========== ========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
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REPLIGEN CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six-Months Ended
September 30,
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,182,951) $ (1,227,356)
Adjustments to reconcile net loss to net cash
used in operating activities -
Depreciation and amortization 135,497 156,134
Non cash charge for patent acquisition 183,750 --
Non cash charges relating to stock and warrant issuance 218,735 188,265
Changes in assets and liabilities -
Accounts receivable 692,951 (57,802)
Inventories (2,434) 135,436
Prepaid expenses and other current assets (27,441) (128,834)
Accounts payable 124,440 (58,721)
Accrued expenses (353,493) (5,556)
Unearned income -- (49,969)
------------ ------------
Net cash used in operating activities (1,210,946) (1,048,403)
------------ ------------
Cash flows from investing activities:
Redemption of marketable securities 2,937,826 --
Purchases of property and equipment (101,205) (207,970)
Changes in other assets 24,500 7,061
------------ ------------
Net cash provided by (used in) for investing activities 2,861,121 (200,909)
------------ ------------
Cash flows from financing activities:
Net proceeds from the issuance of common stock and
warrants, net of issuance costs -- 8,911,078
Exercise of warrants 482,999 --
Exercise of stock options 12,500 --
------------
Net cash provided by financing activities 495,499 8,911,078
------------ ------------
Net increase in cash and cash equivalents 2,145,674 7,661,766
Cash and cash equivalents, beginning of period 25,226,546 3,250,751
------------ ------------
Cash and cash equivalents, end of period $ 27,372,220 $ 10,912,517
============ ============
</TABLE>
See accompanying notes to financial statements.
5
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REPLIGEN CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The 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, 2000.
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 of the Company. 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. REVENUE RECOGNITION
The Company recognizes revenue related to product sales upon shipment of
the product.
Research and development revenue derived from collaborative arrangements is
recognized as earned under cost plus fixed-fee contracts, or on a straight-line
basis over development contracts, which approximates when work is performed and
costs are incurred. Research and development expenses in the accompanying
statements of operations include funded and unfunded expenses. In addition,
under certain contracts, the Company recognizes research and development
revenues as milestones are achieved. Licensing and royalties from the Company's
licensed technologies are recognized as earned. Unearned income represents
amounts received prior to recognition of revenue,
Staff Accounting Bulletin (SAB) No. 101, REVENUE RECOGNITION, was issued by
the Securities and Exchange Commission in December 1999. SAB 101 will require
companies to recognize certain upfront nonrefundable fees and milestone payments
over the life of the related alliance when such fees are received in conjunction
with alliances that have multiple elements. The Company is required to adopt
this new accounting principle through a cumulative charge to the statement of
operations, in accordance with Accounting Principles Board Opinion (APB) No. 20,
ACCOUNTING CHANGES, no later than the third quarter of fiscal 2001. Management
is currently evaluating the effects on SAB No. 101 on the Company's financial
statements and, based upon current guidance, does not expect it will have a
significant impact on the Company's financial statements.
3. NET LOSS PER SHARE
The Company applies Statement of Financial Accounting Standards (SFAS) No.
128, EARNINGS PER SHARE, effective December 15, 1998. 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. 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
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method in accordance with SFAS No. 128. Diluted weighted average shares
outstanding at September 30, 2000 and 1999 excluded the potential common shares
issuable upon the exercise of warrants and stock options because to do so would
be antidilutive for the periods presented. At September 30, 2000, there were
outstanding options to purchase 1,422,541 shares of the Company's common stock
at a weighted average exercise price of $2.56 per share and warrants to purchase
952,025 shares of the Company's common stock at a weighted average exercise
price of $4.09 price per share. At September 30, 1999, there were outstanding
options to purchase 1,332,791 shares of the Company's common stock at a weighted
average exercise price of $1.94 per share and warrants to purchase 3,307,050
shares of the Company's common stock at a weighted average exercise price of
$3.18 per share.
4. CASH EQUIVALENTS AND MARKETABLE SECURITIES
The Company applies SFAS No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN
DEBT AND EQUITY SECURITIES. At September 30, 2000, the Company's cash
equivalents and marketable securities are classified as held-to-maturity, as the
Company has the positive intent to hold these securities to maturity. The
Company considers highly liquid investments purchased with original maturities
at the date of acquisition of three months or less to be cash equivalents.
Marketable securities are accounted for at amortized cost, which approximates
fair value. All of the marketable securities held at September 30, 2000 mature
in one year or less. Cash, cash equivalents and marketable securities consist of
the following at September 30, 2000 and March 31, 2000:
<TABLE>
<CAPTION>
As of
September 30, 2000 March 31, 2000
<S> <C> <C>
Cash and equivalents
Commercial paper $ 12,906,826 $ 17,031,292
U.S. Government and Agency securities 10,868,889 7,342,874
Money markets 2,473,862 801,434
Cash 1,122,643 50,946
------------ ------------
Total cash and cash equivalents $ 27,372,220 $ 25,226,546
============ ============
Marketable securities
Commercial paper $ 3,905,050 $ 5,854,544
U.S. Government and Agency securities 1,963,492 2,951,823
------------ ------------
$ 5,868,542 $ 8,806,367
============ ============
</TABLE>
5. INVENTORIES
Inventories are stated at the lower of cost (first in, first out) or market
and consist of the following:
<TABLE>
<CAPTION>
As of
September 30, 2000 March 31, 2000
<S> <C> <C>
Raw materials and work-in-process $473,254 $371,405
Finished goods 76,627 176,043
-------- ---------
Total $549,881 $ 547,448
======== =========
</TABLE>
Work in process and finished goods inventories consist of material, labor,
outside processing costs and manufacturing overhead.
6. 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 reported net
loss for all periods presented.
7
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7. DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE, AND SIGNIFICANT CUSTOMERS
The Company applies SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION, in the fiscal year ended March 31, 1999.
SFAS NO. 131 establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. SFAS No. 131 also establishes standards for related disclosures
about products and services and geographic areas. Operating segments are
identified as components of an enterprise about which separate discrete
financial information is available for evaluation by the chief operating
decision maker, or decision making group, in making decisions now to allocate
resources and assess performance. To date, the Company has viewed its operations
and manages its business as principally one operating segment. As a result, the
financial information disclosed herein represents all of the material financial
information related to the Company's principal operating segment.
The following table represents the Company's revenue by geographic area:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
US 91% 61% 83% 59%
Europe 7% 38% 16% 39%
Other 2% 1% 1% 2%
---- ---- ---- ----
Total 100% 100% 100% 100%
</TABLE>
During the three months ended September 30, 2000, there were two
significant customers who accounted for approximately 13% and 11% of the
Company's revenues. During the three months ended September 30, 1999, there were
three significant customers who accounted for approximately 12%, 10% and 11%
of the Company's revenues. There were two significant accounts receivable
balances as a percentage of the Company's total accounts receivable balance at
September 30, 2000, 41% and 11%. There were three significant accounts
receivable balances as a percentage of the Company's total accounts receivable
balance at September 30, 1999, 18%, 13% and 11%:
8. PATENT APPLICATION PURCHASE
In May 2000, the Company purchased from Tolerance Therapeutics LLC the
rights to a U.S. patent application claiming the use of CTLA4-Ig in the
treatment of diseases of the immune system. Under terms of the agreement, the
Company paid cash and issued stock for the purchase. The Company is also
obligated to make an additional cash payment if certain conditions are met. The
Company has expensed the purchase price as research and development expense as
the realizability of the patent is subject to the outcome of additional research
and development and the successful prosecution of the patent.
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 Section 21E of the Securities
Exchange Act of 1934. 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)
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understand, anticipate and respond to rapidly changing technologies and market
trends, (iv) develop, manufacture and deliver high quality, technology ally
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, (vi) recruit and retain highly talented professionals
in a competitive job market, (vii) realize future revenues, (viii) maintain a
timeline for clinical activity, (ix) obtain approval from the FDA for clinical
trials or product marketing approvals (x) obtain successful results, of pending
or future clinical trials, (xi) continue to establish collaborative arrangements
with third parties, and (xii) compete against the biotechnology and
pharmaceutical industries. 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, 2000 (File No.000-14656).
OVERVIEW
We develop innovative therapeutic products for debilitating pediatric
diseases including autism, leukemia, metabolic and immune system diseases based
on naturally occurring peptides and proteins. Our lead therapeutic products are
secretin for autism and CTLA4-Ig for stem cell transplantation and autoimmune
diseases.
On March 9, 1999, we acquired the exclusive rights to patent applications
for the use of secretin in the treatment of autism. Autism is a developmental
disorder characterized by poor communicative and social skills, repetitive and
restricted behaviors and in some patients, gastrointestinal problems and
irregular sleep patterns. Secretin is a hormone produced in the small intestine
which regulates the function of the pancreas as part of the process of
digestion. A form of secretin derived from pigs is approved by the United States
Food and Drug Administration ("FDA") for use in diagnosing problems with
pancreatic function. Recent anecdotal reports indicate that secretin may have
beneficial effects in autism, including improvements in sleep, digestive
function, communicative and social behavior. Following media reports of the
potential benefits of secretin, more than 2,000 autistic children have been
treated with the pig-derived hormone. We intend to manufacture a human,
synthetic form of secretin and evaluate it in clinical trials in order to
evaluate the benefits of secretin in treating autism and to determine the
characteristics of patients most likely to benefit from secretin. In February
2000, we were issued a broad U.S. patent covering the use of secretin in the
treatment of autism. There are currently no drugs approved by the FDA for the
treatment of autism.
We are also developing a product named "CTLA4-Ig," which has been shown
to suppress unwanted immune responses in animal models of organ transplants
and autoimmune diseases, such as lupus or multiple sclerosis, in which the
immune system mistakenly attacks the body. Our product candidate is a
derivative of a natural protein whose role is to turn-off an immune response.
In animal models of organ transplantation and autoimmune diseases, CTLA4-Ig
has been shown to block the rejection of a transplanted organ or the effects
of the autoimmune disease. 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 bone
marrow transplants, a significant number of patients experience a severe and
potentially life-threatening complication known as Graft Versus Host Disease,
in which the newly transplanted immune system attacks the host (i.e., the
patient). In June 1999, results from a Phase I clinical trial reported that
treatment of bone marrow from a family member with Repligen's CTLA4-Ig
prevented Graft Versus Host Disease in eight of eleven transplant patients.
In October 2000, the FDA approved the initiation of a Phase II clinical trial
evaluating CTLA4-Ig in patients receiving stem cell transplant for leukemia
or other malignancies.
We develop, manufacture and market products for the production of
therapeutic antibodies. We currently market a line of products for the
purification of antibodies based on a naturally occurring protein, Protein A,
which can specifically bind to antibodies. Repligen owns composition of matter
patents for recombinant Protein A in the United States and in Europe. In
December 1998, we entered into a ten-year agreement to supply recombinant
Protein A to Amersham Pharmacia Biotech, a leading supplier to the
biopharmaceutical market.
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In October 1999, Repligen obtained a license from ChiRhoClin, Inc., a
private company, to commercialize two diagnostic secretin products. These
products are synthetic, injectable forms of the natural hormone which has
traditionally been used by gastroenterologists to assess the function of the
pancreas. New Drug Applications (NDAs) have been filed for both products. The
NDA for the synthetic porcine product has been reviewed by the FDA which
indicated that it could be approved for marketing in the United States upon
satisfactory response by ChiRhoClin to a request for additional data
concerning the product's manufacturing. Both synthetic products have been
granted orphan drug status by the FDA. If the FDA approves either product,
the license agreement obligates Repligen to pay ChiRhoClin future milestones
in cash and Repligen common stock and royalties. We can not be certain that
the FDA will approve either product.
RESULTS OF OPERATIONS
REVENUES
Total revenues for the three-month period ended September 30, 2000,
compared to the three-month period ended September 30, 1999, were approximately
$1,017,000 and $982,000, respectively, an increase of approximately $35,000 or
4%. Year to date total revenues for the six month period ended September 30,
2000 and 1999, were approximately $2,190,000 and $1,670,000, respectively, an
increase of approximately $520,000 or 31%.
Investment income for the three month period ended September 30, 2000,
compared to the three-month period ended September 30, 1999, was approximately
$552,000 and $156,000, respectively, an increase of approximately $396,000 or
254%. Year to date total investment income for the six month period ended
September 30, 2000 and 1999, were approximately $1,064,000 and $203,000,
respectively, an increase of approximately $861,000 or 424%. This increase
during the three and six-months ended September 30, 2000 is largely attributable
to higher average funds available for investment arising principally out of the
completion of a private placement of common stock for $22,400,000 on March 9,
2000.
Product revenues for the three month period ended September 30, 2000
compared to the three-month period ended September 30, 1999 were approximately
$324,000 and $579,000, respectively, a decrease of $255,000 or 44%. This
decrease is largely attributable to the timing of large production scale orders
of Protein A. Year to date total product sales for the six month period ended
September 30, 2000 and 1999, were approximately $880,000 and $811,000,
respectively, an increase of approximately $69,000 or 9%. This increase is due
to product shipments to Amersham Pharmacia Biotech and demand from monoclonal
antibody producers during such period.
Research and development revenues for the three month period ended
September 30, 2000 compared to the three-month period ended September 30, 1999
were approximately $141,000 and $247,000, respectively, a decrease of
approximately $75,000 or 43%. Year to date total research and development
revenues for the six month period ended September 30, 2000 and 1999, were
approximately $246,000 and $656,000, respectively, a decrease of approximately
$410,000 or 63%. This decrease during the three and six-month periods ended
September 30, 2000 is a result of the discontinuation of government sponsored
research on drug discovery programs that generated revenue in fiscal 2000.
EXPENSES
Total expenses for the three-month period ended September 30, 2000 compared
to the three-month period ended September 30, 1999 were approximately $2,229,000
and $1,787,000, respectively, an increase of $442,000 or 25%. Year to date total
expenses for the six month period ended September 30, 2000 and 1999, were
approximately $4,373,000 and $2,898,000, respectively, an increase of
approximately $1,475,000 or 51%.
Research and development expenses for the three month period ended
September 30, 2000, compared to the three-month period ended September 30,
1999, were approximately $1,343,000 and $733,000, respectively, an increase of
$610,000 or 83%. The increase in research and development
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expenses was partially attributable to non-cash charges incurred from the
issuance of a warrant associated with a licensing agreement. In addition,
increased costs were incurred for the production of clinical material and
expansion of clinical trials for secretin and CTLA4-Ig. Research and development
expenses for the six month period ended September 30, 2000 and 1999, were
approximately $2,426,000 and $1,221,000, an increase of approximately $1,205,000
or 99%. This increase is largely attributable to increased costs associated with
Repligen's drug development programs for secretin and CTLA4-Ig.
Selling, general and administrative expenses (SG&A) for the three month
period ended September 30, 2000 compared to the three-month period ended
September 30, 1999, were approximately $658,000 and $767,000, respectively, a
decrease of $109,000 or 14%. This decrease is largely attributable to
non-recurring expenses fiscal 2000 associated with a financial advisory
agreement with a shareholder, including a non-cash charge for the issuance of
warrants exercisable for shares of common stock of Repligen pursuant to an
agreement signed during the quarter ended September 30, 1999, partially
offset by increased spending on shareholder services, legal and patent costs
during the quarter ended September 30, 2000. SG&A expenses for the six month
period ended September 30, 2000 and 1999, were approximately $1,389,000 and
$1,193,000, respectively, an increase of approximately $196,000 or 16%. This
increase is largely attributable to increased spending on shareholder
services, legal and patent costs.
Cost of products sold for the three months ended September 30, 2000
compared to the three-month period ended September 30, 1999 were
approximately $229,000 and $287,000, respectively, a decrease of $58,000, or
20%. This decrease is attributable to decreased Protein A sales offset by
costs associated with establishing a new subcontractor during the quarter
ending September 30, 2000. Cost of product sales for the six month period
ended September 30, 2000 and 1999, were approximately $559,000 and $483,000,
respectively, an increase of approximately $76,000 or 16%. This increase is
largely attributable to increased Protein A sales and to product mix. Cost of
products sold in the three-month periods ended September 30, 2000 and 1999
were 71% and 49%, respectively, of product revenues. Cost of products sold in
the six-month periods ended September 30, 2000 and 1999 were 64% and 60%,
respectively, of product revenues. This increase in cost as a percentage of
revenue is due primarily to additional staffing and the impact of fixed costs
on decreased revenue for the quarter.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations primarily through private placements of
common stock and revenues derived from product sales, collaborative research
agreements, government grants, and payments received pursuant to licensing and
royalty agreements. Total cash, cash equivalents and marketable securities at
September 30, 2000 equaled $33,241,000, a decrease of $792,000 from $34,033,000
at March 31, 2000.
Repligen's operating activities used cash of approximately $1,211,000
consisting of a net loss from operations incurred during the six month period
ended September 30, 2000 of approximately $2,183,000 and a decrease of accrued
expenses of $353,000. This use of cash was offset by non-cash charges of
$538,000 for depreciation and amortization and charges associated with the
issuance of warrant and stock, an increase in accounts payable of $124,000 and a
decrease in accounts receivable of $693,000. Our investing activities provided
cash of approximately $2,861,000 from the redemption of marketable securities
and $25,000 from changes in other assets. Our cash was reduced by capital
expenditures of $101,000. Our financing activities provided cash of
approximately $495,000 from the proceeds of stock option and warrant exercises.
Working capital decreased to $33,247,000 at September 30, 2000 from
$34,473,000 at March 31, 2000.
While Repligen anticipates that the cost of operations will increase as it
continues to expand its investment in proprietary product development, Repligen
believes it has sufficient funding to satisfy its working capital and capital
expenditure requirements for the next twenty-four months. Should Repligen need
to secure additional financing to meet its future liquidity requirements, there
can be no assurances that Repligen will be able to secure such financing, or
that such financing, if available, will be on terms favorable to Repligen.
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On August 31, 2000, Repligen and the University of Michigan filed a
complaint against Bristol-Myers Squibb Company ("BMS") at the United States
District Court for the District of Michigan in Detroit, Michigan seeking
correction of inventorship of certain United States patents which claim
compositions and methods of use for CTLA4 as well as unspecified monetary
damages. A correction of inventorship would result in the University of Michigan
being designated as a co-assignee on any corrected BMS patent. Repligen would
then have rights to such technology pursuant to a 2000 License Agreement with
the University of Michigan, a 1995 Asset Acquisition Agreement with Genetics
Institute, and other related agreements. Repligen continues to believe that the
University of Michigan is a rightful co-assignee of the aforesaid BMS patents
and we intend to continue to pursue the correction of inventorship. Repligen's
failure to obtain shared ownership rights in the patents may restrict Repligen's
ability to commercialize CTLA4-Ig. We have also filed our own patents related to
compositions of matter and methods of use of CTLA4-Ig. In addition, we believe
that the patents issued to BMS do not extend to the use of CTLA4-Ig in bone
marrow transplantation.
Item 2. CHANGES IN SECURITIES
On July 24, 2000, Repligen issued to a third party a warrant to purchase
50,000 shares of common stock at $7.125 per share exercisable through July
2003 in partial consideration for a licensing agreement entered into with
such third party. There were no underwriters involved in the transaction.
Based on the fact that Repligen was issuing the warrant to only one entity,
Repligen issued the warrant without registration and effected the private
placement on reliance on Rule 4(2) of the Securities Act of 1933.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting of Stockholders (the "Annual Meeting") was
held on September 14, 2000. At the Annual Meeting, the stockholders of the
Company considered and acted 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, 2001
and (iii) amend the 1992 Repligen Stock Option Plan, as amended, to increase
both the number of options the Company automatically grants per year and the
aggregate number of options granted to its non-employee directors.
The Company had 26,558,400 shares of Common Stock of the Company issued and
outstanding and entitled to vote as of the close of business on July 17, 2000,
the record date established by the Board of Directors for the Annual Meeting. At
the Annual Meeting, holders of a total of 20,105,339 shares of Common Stock or
approximately 76% of all stockholders entitled to vote were present in person or
represented by proxy. The following sets forth the information regarding the
results of the voting at the Annual Meeting:
Proposal 1. Election of Directors:
<TABLE>
<CAPTION>
Directors Shares Voting Shares Voting
In Favor Against
------------- -------------
<S> <C> <C>
Robert J. Hennessey* 19,331,309 774,090
Alexander Rich, M.D.* 19,324,109 781,290
Paul Schimmel, Ph.D.* 19,332,694 772,705
Walter C. Herlihy, Ph.D.* 19,332,709 772,690
G. William Miller* 19,325,909 779,490
</TABLE>
*Incumbent
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<PAGE>
Proposal 2. Ratification of Selection of Arthur Andersen LLP as independent
auditors:
Shares voting in favor: 20,023,114
Shares voting against: 44,575
Abstention: 37,710
Proposal 3. Amend the 1992 Repligen Corporation Stock Option Plan to increase
both the number of options the Company automatically grants per year and the
aggregate number of options granted to its non-employee directors:
Shares voting in favor: 18,180,056
Shares voting against: 1,779,431
Abstention: 145,912
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation, dated September 30, 1992
and filed July 13, 1992, as amended (filed as Exhibit 3.1 to
Repligen Corporations Quarterly Report on Form 10-Q dated
September 30, 1999 and incorporated herein by reference).
3.2 By-laws (filed as Exhibit 3.4 to Repligen Corporation's Form
S-1 Registration Statement No. 33-3959 and incorporated herein
by reference).
4.1 Common Stock Purchase Warrant dated July 24, 2000 (filed
herewith).
4.2 The Amended 1992 Repligen Corporation Stock Option Plan,
adopted by the Stockholders on September 14, 2000 (filed
herewith).
10.1 * License Agreement with University of Michigan (filed
herewith).
27.1 Financial Data Schedule (filed herewith).
</TABLE>
*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
The Company filed no current reports on Form 8-K during the quarter
covered by the report.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REPLIGEN CORPORATION
(Registrant)
Date: November 14,2000 By: /S/ Walter C. Herlihy
----------------------
Chief Executive Officer and President,
Principal Financial and Accounting Officer
14
<PAGE>
Repligen Corporation
Exhibit Index
EXHIBIT DESCRIPTION
------- -----------
3.1 Restated Certificate of Incorporation, dated September 30, 1992 and
filed July 13, 1992, as amended (filed as Exhibit 3.1 to Repligen
Corporations Quarterly Report on Form 10-Q dated September 30, 1999
and incorporated herein by reference).
3.2 By-laws (filed as Exhibit 3.4 to Repligen Corporation's Form S-1
Registration Statement No. 33-3959 and incorporated herein by
reference).
4.1 Common Stock Purchase Warrant dated July 24, 2000 (filed herewith).
4.2 The Amended 1992 Repligen Corporation Stock Option Plan, adopted by
the Stockholders on September 14, 2000 (filed herewith).
10.1 * License Agreement with University of Michigan (filed herewith).
27.1 Financial Data Schedule (filed herewith).
*Confidential Treatment has been requested as to omitted portions pursuant to
Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.
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