-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T4rc2mbvEAHohYaVztpQB7MpSbNKnmL4KkZFYsqQ7drUrjBLQCr5xQmVwXUYrwoX o5t1GbRk+8tzjToS/eERMg== 0000912057-00-006491.txt : 20000215 0000912057-00-006491.hdr.sgml : 20000215 ACCESSION NUMBER: 0000912057-00-006491 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REPLIGEN CORP CENTRAL INDEX KEY: 0000730272 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 042729386 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14656 FILM NUMBER: 541137 BUSINESS ADDRESS: STREET 1: 117 FOURTH AVE CITY: NEEDHAM STATE: MA ZIP: 02494 BUSINESS PHONE: 7814499560 MAIL ADDRESS: STREET 1: 117 FOURTH AVE CITY: NEEDHAM STATE: MA ZIP: 02494 10-Q 1 10-Q 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, 1999 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 22,320,310 -------------------------------------- ---------------- Class Number of Shares
REPLIGEN CORPORATION INDEX
PART I. FINANCIAL INFORMATION PAGE Item 1. Financial Statements Balance Sheets as of December 31, 1999 and March 31, 1999 (Unaudited) 3 Statements of Operations for the Three and Nine Months Ended December 31, 1999 and 1998 (Unaudited) 4 Statement of Cash Flows for the Nine Months Ended December 31, 1999 and 1998 (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 None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K 12 Signature 13 Exhibit Index 14 Exhibits 15
2 PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS REPLIGEN CORPORATION BALANCE SHEETS (Unaudited)
ASSETS DECEMBER 31, 1999 MARCH 31, 1999 ----------------- -------------- Current assets: Cash and cash equivalents ................................... $ 9,295,868 $ 3,250,751 Accounts receivable ......................................... 614,675 429,720 Inventories ................................................. 457,698 630,329 Prepaid expenses and other current assets ................... 173,847 181,617 ------------- ------------- Total current assets ...................................... 10,542,088 4,492,417 Property and equipment, at cost: Equipment ................................................... 1,092,831 944,644 Furniture and fixtures ...................................... 157,475 101,376 Leasehold improvements ...................................... 473,288 460,319 ------------- ------------- 1,723,594 1,506,339 Less: accumulated depreciation and amortization ............. 1,103,051 862,934 ------------- ------------- 620,543 643,405 Other assets, net ............................................. 81,382 88,472 ------------- ------------- $ 11,244,013 $ 5,224,294 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ............................................ $ 164,111 $ 268,708 Accrued expenses ............................................ 346,577 313,926 Unearned income ............................................. -- 49,969 ------------- ------------- Total current liabilities ................................ 510,688 632,603 Commitments and contingencies ................................. -- -- 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 - 22,322,310 shares at December 31, 1999 and 18,264,285 shares at March 31, 1999 ...................... 223,222 182,642 Additional paid-in capital .................................. 140,335,660 131,272,607 Accumulated deficit ......................................... (129,825,557) (126,863,558) ------------- ------------- Total stockholders' equity ............................... 10,733,325 4,591,691 ------------- ------------- $ 11,244,013 $ 5,224,294 ============= =============
See accompanying notes to financial statements. 3 REPLIGEN CORPORATION STATEMENT OF OPERATIONS (Unaudited)
THREE-MONTHS ENDED DECEMBER 31, NINE-MONTHS ENDED DECEMBER 31, 1999 1998 1999 1998 ---- ---- ---- ---- Revenues: Product ....................................... $ 558,028 $ 248,723 $ 1,369,494 $ 674,872 Research and development ...................... 160,446 275,238 771,292 1,013,676 Investment income ............................. 131,406 50,730 334,191 169,912 Other ......................................... 14,438 14,437 59,532 85,274 ------------ ------------ ------------ ------------ 864,318 589,128 2,534,509 1,943,734 ------------ ------------ ------------ ------------ Costs and expenses: Research and development ...................... 1,864,437 421,623 3,085,684 1,352,648 Selling, general and administrative ........... 442,743 317,770 1,636,126 1,029,013 Cost of products sold ......................... 291,782 175,528 774,699 429,801 ------------ ------------ ------------ ------------ 2,598,962 914,921 5,496,509 2,811,462 ------------ ------------ ------------ ------------ Net loss ...................................... $ (1,734,644) $ (325,793) $ (2,962,000) $ (867,728) ============ ============ ============ ============ Basic and diluted net loss per share .......... $ (0.08) $ (0.02) $ (0.14) $ (0.05) ============ ============ ============ ============ Basic and diluted weighted average common shares outstanding .................. 22,193,696 18,001,785 20,950,890 18,001,785 ============ ============ ============ ============
See accompanying notes to financial statements. 4 REPLIGEN CORPORATION STATEMENTS OF CASH FLOWS (Unaudited)
Nine-Months Ended December 31, -------------------------------------------- 1999 1998 -------------------- ------------------ Cash flows from operating activities Net loss ......................................................................... $(2,962,000) $ (867,728) Adjustments to reconcile net loss to net cash used in operating activities - Depreciation and amortization .................................................... 240,118 198,437 Non cash charge for warrant issuance ............................................. 188,265 -- Changes in assets and liabilities - Accounts receivable ............................................................. (184,955) (114,707) Inventories ..................................................................... 172,632 (21,183) Prepaid expenses and other current assets ....................................... 7,769 (110,111) Accounts payable ................................................................ (104,596) (48,179) Accrued expenses ................................................................ 32,652 48,499 Unearned income ................................................................. (49,969) 27,418 ----------- ----------- Net cash used in operating activities ......................................... (2,660,084) (887,554) Cash flows from investing activities Purchases of property and equipment, at cost .................................... (217,257) (141,357) Changes in other assets ......................................................... 7,090 ----------- ----------- Net cash used in investing activities ........................................ (210,167) (141,357) Cash flows from financing activities: Proceeds from the issuance of common stock and warrants, net of issuance costs .................................................................. 8,915,368 -- ----------- ----------- Net cash provided by financing activities .................................... 8,915,368 -- ----------- ----------- Net increase (decrease) in cash and cash equivalents ............................... 6,045,117 (1,028,911) Cash and cash equivalents, beginning of period ..................................... 3,250,751 4,725,544 ----------- ----------- Cash and cash equivalents, end of period ........................................... $ 9,295,868 $ 3,696,633 =========== ===========
See accompanying notes to financial statements. 5 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, 1999. 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. NET LOSS PER SHARE The Company has adopted 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. 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, 1999 and 1998 excluded the potential common shares from warrants and stock options because to do so would be antidilutive for the periods presented. At December 31, 1999, there are 1,332,791 options outstanding with a weighted average exercise price of $1.83 and 3,307,050 warrants outstanding with a weighted average exercise price of $3.18. 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 AND CASH EQUIVALENTS The Company considers highly liquid investments purchased with original maturities at the date of acquisition of three months or less to be cash equivalents. Cash equivalents consist of the following at December 31, 1999 and March 31, 1999:
Three Months Ended December 31, 1999 March 31, 1999 (Unaudited) U.S. Government and Agency securities ................ $2,184,547 $1,197,624 Commercial paper ..................................... 4,824,225 1,136,119 Money markets ........................................ 2,044,889 802,755 Cash ................................................. 242,208 114,253 ---------- ---------- Total cash and cash equivalents ................. $9,295,868 $3,250,751 ========== ==========
6 4. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following:
Three Months Ended December 31, 1999 March 31, 1999 (Unaudited) Raw materials and work-in-process $322,520 $412,480 Finished goods .................. 135,178 217,849 -------- -------- Total ...................... $457,698 $630,329 ======== ========
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. DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND SIGNIFICANT CUSTOMERS The Company has adopted 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 country:
Three Months Ended Nine Months Ended December 31, December 31, 1999 1998 1999 1998 ---- ---- ---- ---- US ............................... 72% 60% 75% 63% Europe ........................... 23% 38% 22% 34% Other ............................ 5% 2% 3% 3% --- --- --- ---- Total ............................ 100% 100% 100% 100%
During the three months ended December 31, 1999, there was one significant customer who accounted for approximately 30% of the Company's revenues or $270,000. The related accounts receivable for this customer at December 31, 1999 was $254,000. During the nine months ended December 31, 1999, there were two customers who account for approximately 18% and 15% of the Company's revenues. 7 7. SALE OF SECURITIES In October 1999, pursuant to a Common Stock and Warrant Purchase Agreement dated December 31, 1997, five accredited investors exercised warrants exercisable at $1.50 per share for an aggregate of 750,000 shares of Repligen common stock and aggregate consideration of $1,125,000. Because these investors exercised these warrants pursuant to the "net exercise" provision in the warrants, Repligen actually issued an aggregate of 425,775 shares of common stock to such investors upon exercise of the warrants and received no proceeds from such transaction. Based on representations of the investing parties and a reasonable belief by Repligen that all such parties were "accredited" (as such term is defined in Rule 501 of the Securities Act of 1933) and that the parties were acquiring the shares of common stock of Repligen for investment and not for resale, the Company issued these securities without registration in reliance upon Section 4(2) of the Securities Act of 1933. No underwriters were involved in the offer and sale of the securities. Pursuant to stock purchase agreements dated April 30, 1999 and May 14, 1999, respectively, Repligen issued to certain accredited investors in a private placement an aggregate of 3,600,000 shares of common stock for an aggregate purchase price of approximately $9 million, resulting in net proceeds to Repligen of approximately $8.9 million. Repligen closed the private placement transaction on June 23, 1999. There were no underwriters involved in such private placement transaction. Repligen filed a registration statement with the Securities and Exchange Commission on Form S-3 on June 16, 1999 for the resale of the 3,600,000 shares of Common Stock sold to the parties in the private placement transaction. The Securities and Exchange Commission declared such resale registration statement effective on June 23, 1999. 8. LICENSING AGREEMENT In October 1999, Repligen obtained a license from ChiRhoClin Inc., a private company to commercialize two diagnostic secretin products. These products have been evaluated in clinical trials for the diagnosis of pancreatic dysfunction and gastrinoma. A New Drug Application (NDA) was filed with the FDA in May 1999 seeking approval to market synthetic porcine secretin for these applications. ChiRhoClin has also conducted clinical studies for these diagnostic indications with a human form of secretin which ChiRhoClin intends to submit to the FDA in 2000. Under terms of the agreement, Repligen paid $1,000,000 upon execution of the agreement and, if the NDAs are approved, the Company will be required to pay future milestones in cash and Repligen common stock and royalties. The Company has expensed the $1 million payment at December 31, 1999 as the Company believes that a feasible application does not exist until NDA approval. 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) 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, (vi) recruit 8 and retain highly talented professionals in a competitive job market, (vii) realize future revenues, (viii) maintain a timeline for clinical activity, (ix) obtain successful results of pending or future clinical trials, (x) continue to establish collaborative arrangements with third parties, and (xi) 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, 1999 (File No.000-14656). OVERVIEW We develop new drugs for autism, organ transplantation and cancer. To expand our drug development program, 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 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 confirm the benefits of secretin in treating autism and to determine the optimal dosing schedule. There are currently no drugs approved by the FDA for the treatment of autism. In October 1999, Repligen obtained a license from ChiRhoClin Inc., a private company, to commercialize two diagnostic secretin products. These products have been evaluated in clinical trials for the diagnosis of pancreatic dysfunction and gastrinoma. A New Drug Application was filed with the FDA in May 1999 by ChiRhoClin, Inc. seeking approval to market synthetic porcine secretin for these applications. ChiRhoClin has also conducted clinical studies for these diagnostic indications with a human form of secretin which ChiRhoClin intends to submit to the FDA in 2000. Under terms of the agreement, Repligen made a payment of $1,000,000 upon execution of the agreement and, if the FDA approves the New Drug Applications, the agreement obligates Repligen to pay ChiRhoClin future milestones in cash and Repligen common stock and royalties. 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 1 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 September 1999, we signed a Clinical Trial Agreement with the National Cancer Institute to further evaluate CTLA4-Ig in a Phase 2 trial in bone marrow transplantation for leukemia. Repligen has filed patent applications related to compositions of matter and methods of use of CTLA4-Ig including bone marrow transplant. Certain patents have been issued to Bristol-Myers Squibb Corporation relating to the use and manufacture of CTLA4-Ig. We believe that one of our licensees is co-inventor of one or more of these patents and that the patents issued to Bristol-Myers Squibb do not extend to the use of CTLA4-Ig in bone marrow transplantation. 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 9 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. RESULTS OF OPERATIONS REVENUES Total revenues for the three month period ended December 31, 1999 and 1998 were approximately $864,000 and $589,000, respectively, an increase of approximately $275,000 or 47%. Year to date total revenues increased approximately $591,000, or 30%, to $2,535,000 at December 31, 1999 from $1,944,000 at December 31, 1998. This increase during the three and nine-months ended December 31, 1999 was largely attributable to increased product sales of recombinant Protein A and an increase in investment income due to higher average cash and cash equivalent balances. Research and development revenues for the three month period ended December 31, 1999 and 1998 were approximately $160,000 and $275,000, respectively, a decrease of approximately $115,000 or 42%. Year to date R&D revenues decreased approximately $243,000 or 24%, to approximately $771,000 from $1,014,000. This decrease during the three and nine-months ended December 31, 1999 is a result of the discontinuation of research collaborations on Repligen's drug discovery programs that generated revenue during the three and nine-months ended December 31, 1998. Product revenues for the three month period ended December 31, 1999 and 1998 were approximately $558,000 and $249,000, respectively, an increase of $309,000 or 124%. Year to date product revenues increased 103% or approximately $694,000 to $1,369,000 from $675,000 at December 31, 1999 and 1998, respectively. This increase during the three and nine-months ended December 31, 1999 is due to the initiation of product shipments to Amersham Pharmacia Biotech and strong demand from monoclonal antibody producers during such periods. Investment income for the three month period ended December 31, 1999 and 1998 was approximately $131,000 and $51,000, respectively, an increase of approximately $80,000 or 159%. Year to date investment revenue increased 97% or approximately $164,000 to $334,000 from $170,000. This increase during the three and nine-months ended December 31, 1999 is largely attributable to higher average funds available for investment arising principally out of the completion of a private placement of common stock to certain investors of $8,900,000 on June 23, 1999. Other revenues for the three-month period ended December 31, 1999 were approximately $15,000, the same as the comparable period ended December 31, 1998. Year to date revenue was $60,000 and $85,000 for the nine months ended December 31, 1999 and 1998, respectively. This decrease is primarily due to sales of unused equipment during fiscal year 1999. EXPENSES Total expenses for the three-month period ended December 31, 1999 and 1998 increased to approximately $2,599,000 from $915,000, an increase of $1,684,000 or 184%. For the nine months ended December 31, 1999 and 1998, expenses were $5,497,000 and $2,811,000, respectively, an increase of $2,686,000 or 96%. The increase in expenses during the three and nine-month period ended December 31, 1999 is attributable to our increased product development expenses and CRC's licensing fee. Research and development expenses for the three month period ended December 31, 1999 and 1998 were approximately $1,864,000 and $422,000, respectively, an increase of $1,442,000 or 342%. Year to date expenses were $3,086,000 and $1,353,000 for the nine month period December 31, 1999 and 1998, respectively. The increase in R&D expenses during the three and nine-months ended December 31, 1999 was largely attributable to the $1,000,000 payment associated with the licensing of two diagnostic secretin products. In addition, the increase in research and development expenses reflects increased costs associated with Repligen's drug development programs for secretin and CTLA4-Ig. 10 Selling, general and administrative expenses for the three months ended December 31, 1999 and 1998 were approximately $443,000 and $318,000, respectively, an increase of $125,000 or 39%. For the nine-month period ended December 31, 1999 and 1998, selling, general and administrative expenses were $1,636,000 and $1,029,000, respectively, an increase of $607,000 or 59%. The increase in the three-month and nine-month period is a result of increased spending on shareholder services, legal and patent costs. In addition, included in the nine-month period ended December 31, 1999 is approximately $293,0000 of non-recurring expenses associated with a financial advisory agreement signed during the quarter ended September 30, 1999. Cost of products sold for the three months ended December 31, 1999 and 1998 were approximately $292,000 and $176,000, respectively, an increase of $116,000, or 66%. Year to date cost of products sold as of December 31, 1999 and 1998 were $775,000 and $430,000, an increase of $345,000 or 80%. Cost of products sold in the three months ended December 31, 1999 and 1998 were 52% and 71%, respectively, of product revenues. For the nine months ended December 31, 1999 and 1998, cost of products sold were 57% and 64% of product revenues, respectively. The decrease in cost of revenues as a percentage of revenues during the three and nine-months periods ended December 31, 1999 is due primarily to increased Protein A product sales offset by additional expenses associated with launch activities related to the Amersham Pharmacia manufacturing contract. LIQUIDITY AND CAPITAL RESOURCES Repligen's total cash and cash equivalents increased to $9,296,000 at December 31, 1999 from $3,251,000 at March 31, 1999. This increase of $6,045,000 reflects $8,900,000 of proceeds resulting from the sale of Common Stock of Repligen to certain investors through a private placement that closed during June 1999, offset by a net loss from operations incurred during the nine month period ended December 31, 1999 of approximately $2,962,000, an increase in accounts receivable of $185,000 and an increase in accounts payable of $56,000. Working capital increased to $10,031,000 at December 31, 1999 from $3,860,000 at March 31, 1999. Repligen has entered into agreements with a number of collaborative partners and licensees. Under the terms of these agreements, Repligen may be eligible to receive research support, additional milestones or royalty revenue if these collaborations result in clinical evaluation and commercialization of products developed. However, we cannot be sure that collaborations will continue or that we will receive any future payments related to these agreements. In addition, under terms of the agreement with ChiRhoClin, if the FDA approves the New Drug Applications, Repligen will be required to pay ChiRhoClin future milestones in cash and Repligen common stock and royalties. While Repligen anticipates that the cost of operations will increase in fiscal 2000 as Repligen expands its investment in proprietary product development, Repligen believes that 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, Repligen may not be able to secure such financing, or obtain such financing on favorable terms because of the volatile nature of the biotechnology market place. YEAR 2000 As of the date of this filing, we have not incurred any significant business disruptions as a result of year 2000 issues. However, while no such occurrence has developed, year 2000 issues that may arise related to key suppliers and service providers may not become apparent immediately. We have received assurances of year 2000 compliance from key suppliers. We have also received assurances from key service providers such as financial institutions as to their year 2000 readiness. We can provide no assurance that we will not be adversely affected by these suppliers and service providers due to noncompliance in the future. 11 PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS As reported in Form 10-Q dated for the period ended June 30, 1999, on July 17, 1998, Repligen filed a complaint against Bristol Myers Squibb ("BMS") at the United States District Court for the District of Massachusetts in Boston, Massachusetts 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 1992 License Agreement with the University of Michigan, a 1995 Asset Acquisition Agreement with Genetics Institute, and other related agreements. On July 13, 1999, the court dismissed the complaint without prejudice citing a lack of legal standing of Repligen to bring such a complaint. We believe that the court's finding on standing was in error. The court did not rule on the validity of Repligen's inventorship claim. 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 Bristol-Myers Squibb do not extend to the use of CTLA4-Ig in bone marrow transplantation. Item 2. CHANGES IN SECURITIES In October 1999, pursuant to a Common Stock and Warrant Purchase Agreement dated December 31, 1997, five accredited investors exercised warrants exercisable at $1.50 per share for an aggregate of 750,000 shares of Repligen common stock and aggregate consideration of $1,125,000. Because these investors exercised these warrants pursuant to the "net exercise" provision in the warrants, Repligen actually issued an aggregate of 425,775 shares of common stock to such investors upon exercise of the warrants and received no proceeds from such transaction. Based on representations of the investing parties and a reasonable belief by Repligen that all such parties were "accredited" (as such term is defined in Rule 501 of the Securities Act of 1933) and that the parties were acquiring the shares of common stock of Repligen for investment and not for resale, the Company issued these securities without registration in reliance upon Section 4(2) of the Securities Act of 1933. No underwriters were involved in the offer and sale of the securities. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
EXHIBIT DESCRIPTION 2.1 * Licensing Agreement by and between ChiRhoClin Inc. and Repligen Corporation (filed herewith) 3.1 Restated Certificate of Incorporation, dated June 30, 1992 and filed July 13, 1992, as amended (filed as Exhibit 3.1 to Repligen Corporations 10-Q dated September 30, 1999) 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) 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. Appendices 1, 2 and 3 to the Licensing Agreement included as EXHIBIT 2.1 are not being filed herewith. The Company undertakes to furnish a copy of an omitted Appendix to the Commission upon request (except that such Appendices shall remain confidential). Pursuant to Item 6.01(b)(2) of Regulation S-K, the Appendices are set forth below. 12 LICENSE AGREEMENT EXHIBIT 2.1 Appendix 1 Confidentiality Agreement Appendix 2 Activities of CRC Appendix 3 Insurance Coverage
(b) Reports on Form 8-K 1. Current Report on Form 8-K filed with the Securities and Exchange Commission on October 6, 1999 (description of licensing agreement with ChiRhoClin Inc.). 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 14, 2000 By: /S/ Walter C. Herlihy -------------------------- Chief Executive Officer and President, Principal Financial and Accounting Officer 13 Repligen Corporation Exhibit Index
EXHIBIT DESCRIPTION 2.1 * Licensing Agreement by and between ChiRhoClin Inc. and Repligen Corporation (filed herewith) 3.1 Restated Certificate of Incorporation, dated June 30, 1992 and filed July 13, 1992, as amended (filed as Exhibit 3.1 to Repligen Corporations 10-Q dated September 30, 1999) 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) 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. Appendices 1, 2 and 3 to the Licensing Agreement included as EXHIBIT 2.1 are not being filed herewith. The Company undertakes to furnish a copy of an omitted Appendix to the Commission upon request (except that such Appendices shall remain confidential). Pursuant to Item 6.01(b)(2) of Regulation S-K, the Appendices are set forth below.
LICENSE AGREEMENT EXHIBIT 2.1 Appendix 1 Confidentiality Agreement Appendix 2 Activities of CRC Appendix 3 Insurance Coverage
14 EX-2.1 2 EXHIBIT 2.1 EXHIBIT 10.1 WHEREVER CONFIDENTIAL INFORMATION IS OMITTED HEREIN (SUCH OMISSIONS ARE DENOTED BY AN ASTERISK), SUCH CONFIDENTIAL INFORMATION HAS BEEN SUBMITTED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT LICENSING AGREEMENT This Agreement is made as of SEPTEMBER 30, 1999 between CHIRHOCLIN INC. ("CRC"), a Maryland corporation with offices at 15500 Gallaudet Avenue, Silver Spring, MD 20905-4176 and REPLIGEN INC. ("Repligen"), a Delaware corporation, with offices at 117 Fourth Avenue, Needham, MA 02494. RECITALS WHEREAS, CRC is engaged in development of synthetic secretin products for marketing under the Federal Food, Drug, and Cosmetic Act ("FFDC Act"), and is the beneficial owner of the INDs and NDAs for the Product(s) (as defined below); and WHEREAS, Repligen desires to commercially market the Product(s) and for that purpose CRC is willing to grant a license to Repligen, on the terms and conditions set out below; NOW, THEREFORE, CRC and Repligen do hereby agree as follows: 1. DEFINITIONS The following expressions have the following meanings: 1.1 "Competitive Product" means any product which is competitive either with Repligen Secretin Product(s) for treatment of autism or with Product(s), but does not include changes in the use or formulation of the Product(s) in accordance with Paragraph 12. 1.2 "Competitor" means anyone engaged in the development of a Competitive Product as defined herein. 1.3 "IND" means an Investigational New Drug application made to the U.S. Food and Drug Administration ("FDA") in support of the marketing of a drug for human use. 1.4 "NDA" means a New Drug Application made to the U.S. Food and Drug Administration ("FDA") in support of the marketing of a drug for human use. 1.5 "NDA Approval" means the combination of: (1) receipt of final approval from the FDA to market the Product(s) and (2) the accompanying grant of market exclusivity via Orphan Drug Status for the Product(s). 1.6 "Net Revenue" means the gross revenue received from Product sales minus the fully loaded, i.e. direct and indirect, costs attributable to the manufacturing, marketing, distribution, and sales of the Product(s), * . 1.7 "Product(s)" means either or both of pSecretin and hSecretin. 1.8 "hSecretin" means that form of synthetic human secretin developed and clinically evaluated by CRC under its INDs and NDAs. 1.9 "pSecretin" means that form of synthetic porcine secretin developed and clinically evaluated by CRC under its INDs and NDAs. 1.10 "Therapeutic Applications" means the treatment or prevention of any human disorder with the exception of *. 1.11 "Repligen Secretin Products" means synthetic human secretin drug substances and finished, formulated, manufactured products developed independently of CRC by Repligen for Therapeutic Applications. 1.12 "Orphan Drug Status" means the grant of seven years of marketing exclusivity for a Product pursuant to the Orphan Drug Act of 1983. 1.13 *. * Confidential Treatment Requested 15 2. GRANT OF LICENSES 2.1 CRC grants to Repligen, and Repligen hereby accepts, for the duration of this Agreement and subject to the conditions of this Agreement and in accordance with Paragraphs 12 and 14, a sole and exclusive worldwide license and right to use, market and sell the Product(s) for uses outside of Therapeutic Applications. 2.2 CRC grants to Repligen, and Repligen hereby accepts, for the duration of this Agreement and subject to the conditions of this Agreement and in accordance with Paragraphs 11 and 12 an exclusive option to negotiate an exclusive royalty-bearing license under a separate agreement to commercialize the Product(s) for Therapeutic Applications. During the term of the Agreement, CRC will not offer any third party a license to commercialize the Product(s) under any terms. 2.3 During the term of this Agreement, CRC will not develop or market any Competitive Product. 2.4 During the term of this Agreement, Repligen will not develop or market new products that are competitive with Product(s) for diagnostic and * indications. 2.5 During the term of this Agreement, Repligen will not sublicense any rights which it may hold under this Agreement without CRC's prior written approval, such approval not to be unreasonably withheld. 2.6 During the term of this Agreement, CRC will not sublicense any rights which it may hold under this Agreement without Repligen's prior written approval, such approval not to be unreasonably withheld. 3. TERM 3.1. This Agreement shall become effective on October 1, 1999. Unless terminated earlier pursuant to Paragraph 4, the initial term of this Agreement shall be from the effective date until the later to occur of: 1) October 1, 2009, or 2) the expiration of marketing exclusivity of the last indication for which Orphan Drug Status has been granted subject to this Agreement including any expansion of Orphan Drug Status authorized under Paragraph 12; but may be extended thereafter by mutual agreement according to Paragraph 3.2. 3.2 In the event that this Agreement is not terminated pursuant to Paragraph 4 prior to its expiration, it may be renewed after its expiration upon written agreement of the Parties. 3.3 Following termination, Repligen will own the trademark and vial and carton artwork for Product(s) and CRC will own those NDAs which relate to diagnostic and * indications and may market the Product(s) under its own trademark for diagnostic indications and, if approved, for ERCP pancreatitis. 3.4 Twelve (12) months prior to the expiration date as defined by Paragraph 3.1 of this Agreement, each Party must notify the other in writing of its intent to extend or renew the term of the Agreement. 4. TERMINATION 4.1 This Agreement shall terminate upon the expiration of the term under Paragraph 3, unless earlier terminated pursuant to Paragraph 4.2, 4.3, or 4.8 hereof. 4.2 CRC may, at its option, terminate this Agreement upon: 4.2.1 failure, inability, or refusal by Repligen to perform any term, covenant, or condition of this Agreement, which failure, inability, or refusal shall continue for sixty (60) days following written notice thereof by CRC specifying such default 4.2.2 sale or transfer of a controlling interest of stock or assets of Repligen to a Competitor of CRC without the prior written approval of CRC; 4.2.3. the insolvency of Repligen; an assignment by it for the benefit of creditors; or, unless vacated or withdrawn within sixty (60) days of the filing or appointment thereof, the filing of a petition in bankruptcy by or against Repligen, or the appointment of a receiver or trustee of any part of Repligen's business; 4.2.4. the assignment by Repligen of this Agreement, or any rights hereunder, without CRC's prior written approval; or 4.2.5. delinquency of Repligen in making payments for Product(s) sold under this Agreement or other payments due hereunder, which delinquency is not cured within sixty (60) days of receiving notice of such delinquency from CRC. 4.3. Repligen may, at its option, terminate this Agreement upon: * Confidential Treatment Requested 16 4.3.1. failure, inability, or refusal by CRC to perform any term, covenant, or condition of this Agreement, which failure, inability, or refusal shall continue for sixty (60) days following written notice thereof by Repligen, specifying such default; 4.3.2. sale or transfer of a controlling interest of stock or assets of CRC to a Competitor of Repligen without the prior written approval of Repligen; 4.3.3. the insolvency of CRC; an assignment by it for the benefit of creditors; or, unless vacated or withdrawn within sixty (60) days of the filing or appointment thereof, the filing of a petition in bankruptcy by or against CRC, or the appointment of a receiver or trustee of any part of CRC's business; 4.3.4. the assignment by CRC of this Agreement, or any rights hereunder, without Repligen's prior written approval; 4.4. Notwithstanding the foregoing, either Party shall have the right to waive the application of any of the foregoing events of termination by written notification to the other. 4.5. Upon termination of this Agreement in accordance with Paragraph 4.1 or 4.2, Repligen will no longer have rights to market the Product(s), and will at CRC's direction return remaining Product(s) to CRC for appropriate disposition. 4.6. In the event that this Agreement is terminated by Repligen in accordance with Paragraph 4.3 prior to the occurrence of any NDA Approval, CRC hereby agrees to return within one year to Repligen any and all payments made under Paragraph 7. In the event of such termination, if Product has been purchased by Repligen according to Paragraph 14.4, Repligen will return said Product to CRC and CRC will reimburse Repligen for the cost of its purchase. 4.7. In the event that this Agreement is terminated by Repligen in accordance with Paragraph 4.3 following an NDA Approval, CRC hereby agrees that: 1) Repligen will have the right to recover all payments made under Paragraph 7 from CRC's share of Net Revenues, 2) Repligen will retain all rights granted under Paragraphs 2 and 8 of this Agreement up until such time as all payments made under Paragraph 7 have been recovered by Repligen, 3) during the period following such termination up until such time as all payments made under Paragraph 7 are recovered by Repligen from CRC's share of Net Revenues, Repligen's share of Net Revenues pursuant to Paragraph 8 will continue to flow to Repligen, 4) CRC, its heirs, assigns, and/or successors, shall provide any and all rights and enablements required in order to permit Repligen to continue to market and sell Product(s) without interruption or restriction during the period following such termination up until such time as all payments made under Paragraph 7 are recovered, and 5) after all payments made under Paragraph 7 are recovered by Repligen all rights granted under this Agreement will revert to CRC. 4.8. From October 1, 1999 up * following the date of submission to the FDA of the NDA for hSecretin, Repligen shall have the right to terminate this Agreement unilaterally, thereby relinquishing all Product rights granted hereunder. In the event that Repligen terminates the Agreement according to this Paragraph 4.8, Repligen shall have the right to recover any and all payments made under Paragraph 7. If termination according to this Paragraph 4.8 occurs prior to NDA Approval, CRC shall return said payments made under Paragraph 7 within one year of the date of such termination. If termination occurs following NDA Approval, CRC will transfer all Net Revenues to Repligen until such time as the total of all Net Revenues transferred equals the payments made by Repligen under Paragraph 7. 4.9 For the purposes of Paragraphs 4.6, 4.7, and 4.8 herein, payments made by Repligen under Paragraph 7 shall include both cash payments and stock granted. In the event of termination pursuant to any of Paragraphs 4.6, 4.7, and 4.8 and in addition to the return of any cash payments, CRC shall return to Repligen any unsold stock and shall repay to Repligen the face value at time of grant of any stock sold. 5. REVERSION OF RIGHTS 5.1 If, * years following NDA Approval of pSecretin, Repligen has failed to obtain FDA approval to commercialize a Repligen Secretin Product; the rights to Product(s) will revert to CRC, and CRC may terminate this Agreement. Notwithstanding the foregoing, Repligen will retain rights to any trademarks and artwork it has obtained for the Product(s). * Confidential Treatment Requested 17 6. TERRITORY 6.1 Repligen is authorized to market the Product(s) worldwide for diagnostic and * indications, provided, that all necessary marketing authorization shall be registered in the name of CRC or one of its subsidiaries. Such authorizations shall be pursued with the written approval of CRC under terms mutually agreeable to the Parties. 6.2 Notwithstanding the above subparagraph, no Product(s) and unapproved versions thereof produced outside the United States may be imported and marketed in the United States by Repligen, its subsidiaries, affiliates, or permitted assigns without the prior written consent of CRC. 7. PAYMENTS 7.1. CRC receives licensing/milestone payments from Repligen totaling * according to the following schedule:
UPFRONT CASH STOCK Upon execution of License Agreement $1,000,000 MILESTONES pSecretin NDA Approval * The earlier to occur of: 1) FDA Approval of * * shares or 2) six (6) months following * NDA Approval FDA Approval of * * hSecretin NDA Approval *
Unless otherwise instructed by CRC, Repligen shall make cash payments via electronic wire transfer to the following address: Chevy Chase Bank 15777 Columbia Pike Burtonsville, MD 20866 Bank ABA or Routing Number: * Customer's Account Number: * Customer's Account Title: ChiRhoClin Inc., in care of Edward D. Purich 7.2 The stock may not be resold for one year following issue after which it may be sold under the provisions of Rule 144 (17 C.F.R.ss.230.144). 7.3. This Agreement is made in reliance upon CRC's express representations that 1) the shares of Repligen Common Stock to be issued to CRC hereunder (the "Shares") are for CRC's own account for the purpose of investment and not with a view to, or for sale in connection with, the distribution thereof, nor with any present intention of distributing or selling the Shares, 2) the Shares will not be sold without registration under the Securities Act of 1933, as amended (the "Securities Act"), or an exemption therefrom, such as Rule 144 as promulgated under the Securities Act, 3) CRC prior to the purchase of the Shares has had the opportunity to ask questions of and receive answers from representatives of Repligen concerning the finances, operations and business of Repligen, and 4) CRC is capable of evaluating the merits and risks of the purchase of the Shares and can afford a complete loss of its investment. Until such time as the Shares shall have been registered under the Securities Act, or shall have been transferred in accordance with an opinion of counsel satisfactory to Repligen that such registration is not required, stop transfer instructions shall be issued to Repligen's transfer agent, and the certificates representing the Shares shall bear a legend substantially as follows: "The shares represented by this certificate have not been registered under the Securities Act of 1933 or applicable state securities laws. These shares have not been acquired with a view to distribution or resale, and may not be sold, mortgaged, pledged, hypothecated or otherwise without an effective registration statement for such shares under the Securities Act of 1933 and any applicable state securities laws, or an opinion of counsel satisfactory to * Confidential Treatment Requested 18 Repligen that registration is not required under the Securities Act of 1933 or under applicable state securities laws." CRC further understands and acknowledges that Repligen is under no obligation to register the Shares under the Securities Act. 7.4 CRC will maintain diligent efforts to obtain NDA Approval for both pSecretin and hSecretin and will use best efforts to complete the preparation of the NDA for hSecretin prior to *. 7.5 The shares shall be duly authorized, validly issued and non-assessable shares of common stock of Repligen. 8. ROYALTIES 8.1 Royalties on Products will be paid by Repligen to CRC on the basis of Net Revenue received from Product sales and according to the following schedule:
--------------------------------------------------------------------------- ------------------------------------ Phase Revenue Share --------------------------------------------------------------------------- ------------------------------------ First * of Net Revenue * Second * of Net Revenue * Thereafter, until FDA approval of a Repligen Secretin Product * Following FDA approval of a Repligen Secretin Product and up until the * expiration of market exclusivity for Products of Net Revenues for last year prior to FDA approval of a Repligen Secretin Product, or, * of diagnostic and * use (such volume of use to be determined according to Paragraph 8.2), whichever is higher --------------------------------------------------------------------------- ------------------------------------
8.2 Following expiration of marketing exclusivity via Orphan Drug Status for Product(s), so long as Repligen has received NDA approval for its own secretin product for autism; Repligen will pay CRC a royalty which is * of the calculated net revenues based solely on the diagnostic sale of Product(s), such diagnostic sale volume to be determined according to a mutually agreeable third party source. 9. REPRESENTATIONS AND WARRANTIES 9.1. CRC hereby represents and warrants that it is entitled to the property rights necessary to enable it to grant to Repligen the license referred to herein and that it is the sole and exclusive owner of said rights. 9.2. CRC will use its best efforts to obtain from the FDA IND and NDA approval for the Product(s). Notwithstanding any other provision in this Agreement to the contrary, delay in obtaining IND or NDA approval for the Product(s) which is not attributable to lack of diligence by CRC shall not be grounds for termination by Repligen. 9.3. CRC will use its best efforts to ensure that all Product(s) manufactured and supplied to Repligen pursuant to this Agreement conforms to manufacturing specifications. CRC reserves the right at any time to make changes in any aspect of the composition, appearance, or formulation of Product(s) as long as: 1) Repligen has had six months prior notification of such changes and has approved such changes such approval not to be unreasonably withheld, and * Confidential Treatment Requested 19 2) they are in compliance with all applicable FDA requirements. CRC at its sole discretion and without prior notification of Repligen may make changes to the manufacturing process which are intended solely for the removal or reduction of impurities. In the event that CRC makes any such changes, CRC will promptly advise Repligen in writing of the respects in which the new Product(s) will differ, if at all, from the then-marketed Product(s). 9.4. CRC will use its best efforts to ensure that manufacturing of Product(s) designated for U.S. marketing complies with FDA's requirements relating to current Good Manufacturing Practices (cGMPs) and any other applicable federal or state regulations and guidelines. 9.5. Repligen will use its best efforts to ensure that Product(s) designated for U.S. marketing comply with FDA promotion and labeling requirements for human drug products. 10. CONFIDENTIALITY 10.1. During the term of this Agreement, The Parties agree to strictly abide by the terms of the Confidentiality Agreement, executed August 4, 1999, and attached hereto as APPENDIX 1. 11. IND/NDA PRODUCT DEVELOPMENT 11.1. CRC will have full operational and financial responsibility for obtaining, and will use best efforts to obtain, NDA Approval for Product(s) for: 1) diagnosis of a) pancreatic exocrine function, b) pancreatic cancer through a procedure for obtaining desquamated pancreatic cells for histopathologic examination, and c) gastrinoma; and 2) * which will include, without limitation, best efforts to complete activities according to APPENDIX 2. At the request of Repligen, CRC will, with appropriate prior notification, afford qualified representatives of Repligen the right to review the hSecretin NDA package, including regulatory correspondence, prior to NDA Approval for hSecretin. Once each year following FDA submission of the hSecretin NDA, CRC will, with appropriate prior notification, afford qualified representatives of Repligen the right to review all material correspondence with regulatory authorities regarding the aforesaid indications to assure ongoing compliance with regulatory requirements. 11.2. CRC will own the INDs and the approved NDAs for Product(s) and will have ongoing responsibility for manufacturing and regulatory affairs with respect to said INDs and NDAs. In the event and to the extent that CRC fails or is unable to carry out or fulfill such responsibilities, CRC, its heirs, assigns, and successors, hereby agree to provide for and/or to Repligen any and all means as may be required in order to allow such fulfillment. 11.3. CRC agrees *. CRC and Repligen will identify a mutually acceptable alternative contractor for the bulk drug substance manufacture of pSecretin and hSecretin and will use best efforts to complete at least one production lot of each prior to March 31, 2000. Repligen will participate in the assessment of the second manufacturer's cGMP capabilities and may perform testing of said production lots. During the term of the Agreement, Repligen will have the right to review the QC and QA batch records related to product release testing and its QA group may audit the manufacturing contractors for general facility related cGMP and regulatory compliance. 11.4. No new clinical studies of Product(s) in Therapeutic Applications will be initiated by Repligen after the signing of this Agreement unless the Parties mutually agree on such initiation. At such time as Repligen and CRC agree to initiate a new clinical study of Product(s) in a Therapeutic Application, the Parties will negotiate a separate exclusive license agreement for the use of Product(s) in said Therapeutic Application. CRC will then provide Repligen with the right to reference its relevant INDs and Repligen will file its own IND and conduct said new study. Repligen acknowledges that CRC has an ongoing clinical study of Product(s) in * in non-autistic patients that will remain under the exclusive control of CRC. 11.5 CRC will keep Repligen fully informed on matters relating to NDA Approval. In the event that deficiencies are identified in the NDA, Repligen may, at its option, participate in the NDA Approval process for the purpose of assisting CRC in remedying the deficiencies, in which case Repligen will have the right to recover its costs from CRC's share of Product(s) revenues. * Confidential Treatment Requested 20 12 EXPANSION OF PRODUCT APPROVAL 12.1. With respect to new diagnostic applications, CRC will use best efforts to gain additional approval and expanded Orphan Drug Status for the Product(s). Administration and financing of these efforts will be the responsibility of CRC. 12.1.1. In the event that CRC elects not to pursue expanded approval for a new diagnostic application, Repligen may proceed under terms mutually agreeable to the Parties. 12.1.2. Sharing of the revenues received from the expanded approval will be the same as for previously approved diagnostic indications following the reimbursement of those costs (plus interest) incurred by Repligen as in Paragraph 8. 13. PATENTS 13.1. In the event that CRC obtains rights to any patents or patent applications that relate to the composition of, method of use, or process for producing secretin, Repligen shall have a first option to negotiate an exclusive royalty-bearing license to such rights for Repligen Secretin Product, said option to extend for the term of this Agreement. Insofar as Repligen may require a license to such rights in order to market and sell Product(s), such license shall be automatically granted and shall be royalty free. 13.1.1. The royalty rate to be paid by Repligen to CRC pursuant to said license will be negotiated between the Parties and become the subject of a separate agreement. Said royalty rate shall in any case be generally consistent with industry standards. 13.1.2. The sale volume upon which royalties will be due will be based upon that fraction of total sales that are covered by valid claims in the licensed CRC patents as determined according to a mutually agreeable third party source. 14. MARKETING OPERATIONS 14.1 Marketing and promotional activities including Product(s) pricing will be mutually agreed in writing in a draft marketing plan prior to November 30, 1999, said plan to be revised and updated by the Parties as needed but at least once annually thereafter. 14.2 Repligen will have the sole right to authorize the distribution of Product(s) for all current clinical studies of Product(s) in Therapeutic Applications and CRC will promptly share with Repligen all results received from such clinical studies. To the extent that CRC has the right to publicly use safety data from such studies, the Parties agree to use such data as appropriate to support marketing activities. 14.3 Following FDA approval of Repligen's Secretin Product, CRC will cease and desist from any and all activities related to the marketing and sale of Product(s) for Therapeutic Applications if any such activities are ongoing. 14.4 Repligen will purchase from CRC a mutually agreed upon inventory of launch stock of the Product(s) and will fund any mutually agreed upon marketing activities that precede the NDA Approval. These costs will be reimbursed from initial gross revenues prior to the revenue split as described in Paragraph 8. 14.5 Annual budgets related to each aspect of operations will be prepared by the responsible Party and will be reviewed and approved by the other Party. Any deviation from such budget will require the prior approval of the other Party. The total expenses of the Parties related to the cost of manufacture, marketing, distribution, and sales of Product(s) shall not exceed * of the gross revenues without prior mutual approval. 14.6 Distribution of Product(s) will be accomplished as specified in the mutually agreed upon marketing plan and revenues will flow through Repligen. Royalties due to CRC will be reconciled on a quarterly basis by Repligen. Estimated payments based on actual revenues received by Repligen from the sale of Product(s) will be paid to CRC monthly in the first year following NDA Approval following which payments will be made quarterly on the basis of actual revenues. 14.7 CRC shall have the right once during each calendar year to inspect, or have an agent, accountant or other representative inspect, during normal business hours, and upon reasonable advance notice (not less than 14 days), such books, records and other supporting data of Repligen as may be necessary to verify Repligen's computation of royalties due under this * Confidential Treatment Requested 21 Agreement. CRC agrees to maintain the confidentiality of any information acquired during such inspection or review. Failure to permit an inspection or audit upon receipt of proper notice is grounds for breach of this Agreement. 14.8 The Parties will work together to develop a plan to maximize revenues worldwide. 15. SUPPLY OF PRODUCT 15.1 Following the execution of this Agreement, the Parties agree to, by December 31, 1999, negotiate and enter into a separate agreement which will govern the supply and transfer of Product(s) by and between the Parties. Said agreement shall include, without limitation: placing and filling of orders for bulk drug substance and drug product, transfer pricing (if applicable), and control and ownership of inventory through the manufacturing and distribution chain, as well as a general plan for minimizing the cost of goods prior to distribution. 16. PRODUCT BRANDING 16.1 Repligen may at its option market pSecretin under its own brand name, trade name, trademark, or logo or under a brand name, trade name, trademark, or logo owned by CRC. For all other Product(s), Repligen may market the Product(s) under its own brand name, trade name, trademark or logo, but may not market the Product(s) under any brand name, trade name, trademark or logo owned by CRC, or any name which is a colorable imitation of, or is likely to be confused with, any names or logos owned by CRC, except as authorized in writing by CRC. Following termination of this Agreement, CRC may market the Product(s) under its own brand name, trade name, trademark or logo, but may not market the Product(s) under any brand name, trade name, trademark or logo owned by Repligen, or any name which is a colorable imitation of, or is likely to be confused with, any names or logos owned by Repligen, except as authorized in writing by Repligen. 16.2 Subject to subparagraph 16.1, trade names of Product(s) and all aspects of artwork and design for vial and carton labels for Product(s) will be owned and controlled exclusively by Repligen. CRC will have right of review of said artwork and design to the extent it is required for the maintenance of regulatory compliance. 17. PUBLICITY 17.1. Press releases related to the announcement of this Agreement and to NDA Approval as well as any press releases related to Therapeutic Applications of Product(s), with the exception of *, will be initiated by Repligen and will originate from Repligen except as specified herein. CRC will have the right of prior review and comment on such press releases to insure accurate representations of subject matter and CRC's contribution. 17.2 CRC will take the lead on joint release of information related to diagnostic and * applications of Product(s). Repligen will have the right of prior review and comment on such press releases. 18. FORCE MAJEURE 18.1 The obligation of the Parties hereunder shall be suspended by the occurrence of such unforeseeable events beyond the control of the Parties as acts of God, war, mobilization, riot, sabotage, explosion, fire or other casualty, a generalized and nation-wide inability to obtain suitable and sufficient materials, or law or regulation restricting performance, provided, however, that each Party shall take reasonable measures to remove the disability and resume operation at the earliest possible date. 19. INDEMNITY 19.1 Repligen agrees to defend, indemnify, and hold CRC harmless from and against any claim, liability, loss, cost, or expense (including reasonable counsel fees) in connection with any claims, suits, actions, demands, or judgments arising out of, or in connection with, or relating in any manner to, this Agreement which are attributable to the negligence or reckless or willful activities of Repligen, its officers, employees, contractors, and agents. 19.2 CRC agrees to defend, indemnify, and hold Repligen harmless from and against any claim, liability, loss, cost, or expense (including reasonable counsel fees) in connection with any * Confidential Treatment Requested 22 claims, suits, actions, demands, or judgments arising out of, or in connection with, or relating in any manner to, this Agreement which are attributable to the negligence or reckless or willful activities of CRC, its officers, employees, contractors, and agents. 20. INSURANCE 20.1 Each Party agrees to carry comprehensive General Liability Insurance (including Directors and Officers Liability coverage and Products Liability coverage) with coverage limits as set forth in Appendix 3. The coverage limits shall be reviewed annually by the Parties, and if appropriate, adjusted by mutual agreement of the Parties. Such policies shall be carried with responsible insurers and shall specifically recognize and insure the covered Party against its contractual liability hereunder. Certificates of such insurance shall be furnished to each Party and shall provide for at least sixty (60) days' written notice to a Party of the cancellation or any material modification thereof. 21. NOTICES 21.1 Any notice or communication under or in connection with this Agreement shall, unless otherwise provided herein, be in writing and shall be delivered personally, or by post, telex, cable, or facsimile to the addresses given in this Agreement or at such other address as the recipient may have notified to the other party in writing. 21.2 A notice or other communication shall be deemed effective, in the case of a letter, on the third day after posting, or, in the case of a telex, cable, or facsimile, on the day immediately following the date of dispatch (other than a Saturday, Sunday, or bank holiday). 21.3 Where delivery of any notice or communication is by post, delivery shall be by first-class mail, postage prepaid, addressed to the respective parties as follows: TO REPLIGEN: Walter C. Herlihy, Ph.D. President, Chief Executive Officer Repligen Inc. 117 Fourth Avenue Needham, MA 02494 TO CRC: Edward D. Purich, Ph.D. Chief Executive Officer ChiRhoClin Inc. 15500 Gallaudet Avenue Silver Spring, MD 20905-4176 21.4 Where delivery of any notice or communication is by telex, cable, facsimile, or other electronic method, such notice or communication shall also be sent promptly by first-class mail, as described in subparagraph 21.3 above. Failure to send such notice by mail shall not, however, render the earlier electronic notice ineffective, unless such notice is demonstrably illegible. 22. ARBITRATION 22.1 The Parties agree that in the event a dispute arises out of or relating to this Agreement, the Parties shall attempt in good faith to resolve the dispute through discussion and alternative dispute resolution according to the following procedure. 22.1.1 Good Faith Discussion - The complaining Party shall notify the other Party of the dispute. All involved Parties shall attempt to discuss the dispute in good faith. 22.1.2 Arbitration - Should the dispute remain unresolved after good faith discussion for sixty (60) days after the notice under subparagraph 22.1.1 above, the Parties agree to arbitrate under the rules of conciliation and arbitration of the American Arbitration Association ("AAA"). There shall be three arbitrators, one being selected by Repligen and one being selected by CRC, and the third being selected by the two arbitrators so * Confidential Treatment Requested 23 selected. If a Party fails to nominate an arbitrator within 15 days from the date of the notification made to it of the other Party's request for arbitration, or if the two arbitrators fail within 15 days from the date of their appointment to reach agreement on the third arbitrator, then the third arbitrator shall be appointed in accordance with the AAA rules. The place of arbitration shall be in New York City, New York. The arbitration expenses shall be paid by the losing party. If the arbitrators do not find for one party's position in its entirety, then the Parties shall share the arbitration expenses equally between the Buyer and the Sellers. The Parties shall also be responsible for their own expenses, including attorney fees. 22.1.3 Enforceability - This Agreement, including the arbitration provision in subparagraph 22.1.2 above and any award, shall be enforceable in any federal or state court in the United States. 22.1.4 Miscellaneous - The Parties waive the defense of inconvenient forum and lack of personal jurisdiction in any proceeding brought in federal or state court in New York City, New York to enforce the arbitration provision in subparagraph 22.1.2 above. Further, the Parties agree that notice under this Agreement shall constitute acceptable and valid service of process for all proceedings to enforce the arbitration provision of subparagraph 22.1.2 above. 23. MISCELLANEOUS 23.1 This instrument and the Appendices hereto constitute the entire Agreement between the Parties, supersede all prior or contemporaneous representations, understandings, or agreements, and shall not be extended, varied, modified, or supplemented except by an agreement in writing and signed by the Party to be charged. 23.2 The headings used herein are for ease of reference only and are not to be used in the interpretation or construction of this Agreement. 23.3 The prevailing Party in any arbitration or litigation involving this Agreement shall be entitled to recover its costs and reasonable counsel fees, in addition to any other remedy or relief to which it may be entitled. 23.4 Neither Party shall have the right to assign this Agreement or any interest therein without the prior written consent of the other. Such consent shall not be unreasonably withheld. 23.5 Repligen shall at all times be, and remain, an independent contractor and not an agent, partner, or joint venturer of CRC for any purpose whatsoever and shall have no authority to create or assume any obligation, express or implied, in the name of, or on behalf of, CRC, or to bind it in any manner whatsoever. 23.6 The failure of either Party to enforce at any time, or for any period of time, any one or more of the provisions hereof, shall not be construed to be a waiver of such provisions or of the right of such Party thereafter to enforce each such provision. 23.7 If any provision of this Agreement shall be held invalid under any applicable law, such invalidity shall not affect any other provision of this Agreement. 23.8 This Agreement shall be binding upon, and inure to the benefit of, the Parties hereto, their successors, and permitted assigns. 23.9 This Agreement shall be construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to applicable statutes or rules regarding conflicts of laws. 23.10 This Agreement may be executed in counterparts by any of the Parties hereto on two counterparts, each of which shall be deemed an original, but both of such respective counterparts shall together constitute one and the same Agreement. [SIGNATURES FOLLOW] * Confidential Treatment Requested 24 IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day and year first above written. CHIRHOCLIN INCORPORATED REPLIGEN INCORPORATED By /s/ Edward D. Purich By: /s/ Daniel P. Witt -------------------------------- ------------------------- Edward D. Purich, Ph.D. Daniel P. Witt Chief Executive Officer Vice President Date: September 30, 1999 Date: September 30, 1999 -------------------- ------------------ 25 EX-27.1 3 EXHIBIT 27-1 FDS
5 THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS FOR REPLIGEN CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS MAR-31-2000 DEC-31-1999 9,296 0 640 (25) 458 10,542 1,724 (1,103) 11,244 511 0 0 0 223 10,510 11,244 1,369 2,535 775 5,497 0 0 0 0 0 0 0 0 0 (2,962) (0.14) (0.14)
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