10-Q 1 a2037750z10-q.txt FORM 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, 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 (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, 2001. Common Stock, par value $.01 per share 26,593,700 -------------------------------------- ----------------- Class Number of Shares REPLIGEN CORPORATION INDEX PART I. FINANCIAL INFORMATION PAGE ---- Item 1. Financial Statements Balance Sheets as of December 31, 2000 and March 31, 2000 (Unaudited) 3 Statements of Operations for the Three and Nine Months Ended December 31, 2000 and 1999 (Unaudited) 4 Statements of Cash Flows for the Nine-Months Ended December 31, 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 None Item 3. Defaults Upon Senior Securities None Item 4. Submissions of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K 12 Signature 12 Exhibit Index 13
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS REPLIGEN CORPORATION BALANCE SHEETS (Unaudited)
ASSETS DECEMBER 31, 2000 MARCH 31, 2000 ------------- ------------- Current assets: Cash and cash equivalents $ 12,638,679 $ 25,226,546 Marketable securities 18,769,878 8,806,367 Accounts receivable, net 622,922 847,838 Inventories 565,706 547,448 Prepaid expenses and other current assets 303,445 241,654 ------------- ------------- Total current assets 32,900,630 35,669,853 ------------- ------------- Property and equipment, at cost: Equipment 1,147,653 1,092,831 Furniture and fixtures 227,488 157,476 Leasehold improvements 473,288 473,288 ------------- ------------- 1,848,429 1,723,595 Less: accumulated depreciation and amortization 1,375,604 1,187,343 ------------- ------------- 472,825 536,252 Other assets, net 56,882 81,382 ------------- ------------- $ 33,430,337 $ 36,287,487 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 572,873 $ 425,565 Accrued expenses 576,731 771,520 ------------- ------------- Total current liabilities 1,149,604 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 - 26,585,450 shares at December 31, 2000 and 26,315,979 shares at March 31, 2000 265,855 263,159 Additional paid-in capital 166,460,373 165,507,184 Accumulated deficit (134,445,495) (130,679,941) ------------- ------------- Total stockholders' equity 32,280,733 35,090,402 ------------- ------------- $ 33,430,337 $ 36,287,487 ============= =============
See accompanying notes to financial statements. 3 REPLIGEN CORPORATION STATEMENTS OF OPERATIONS (Unaudited)
Three-Months Ended Nine-Months Ended December 31, December 31, 2000 1999 2000 1999 ------------------------------------------------------------------ Revenues: Product $ 615,154 $ 558,028 $ 1,494,942 $ 1,369,494 Investment income 539,322 131,406 1,603,452 334,191 Other 4,745 174,884 251,169 830,824 ------------ ------------ ------------ ------------ 1,159,221 864,318 3,349,563 2,534,509 ------------ ------------ ------------ ------------ Costs and expenses: Research and development 1,780,506 1,864,437 4,206,242 3,085,684 Selling, general and administrative 568,289 442,743 1,957,154 1,636,126 Cost of products sold 393,029 291,782 951,721 774,699 ------------ ------------ ------------ ------------ 2,741,824 2,598,962 7,115,117 5,496,509 ------------ ------------ ------------ ------------ Net loss $ (1,582,603) $ (1,734,644) $ (3,765,554) $ (2,962,000) ============ ============ ============ ============ Basic and diluted net loss per share $ (0.06) $ (0.08) $ (0.14) $ (0.14) ============ ============ ============ ============ Basic and diluted weighted average common shares outstanding 26,576,434 22,193,696 26,531,159 20,950,890 ============ ============ ============ ============
See accompanying notes to financial statements. 4 REPLIGEN CORPORATION STATEMENTS OF CASH FLOWS (Unaudited)
Nine-Months Ended December 31, 2000 1999 ------------ ----------- Cash flows from operating activities: Net loss $ (3,765,554) $(2,962,000) Adjustments to reconcile net loss to net cash used in operating activities - Depreciation and amortization 188,263 240,118 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 224,916 (184,955) Inventories (18,259) 172,632 Prepaid expenses and other current assets (61,791) 7,769 Accounts payable 147,308 (104,596) Accrued expenses (194,789) 32,652 Unearned income -- (49,969) ------------ ----------- Net cash used in operating activities (3,077,421) (2,660,084) ------------ ----------- Cash flows from investing activities: Net redemption /purchases of marketable securities (9,963,511) -- Purchases of property and equipment (124,834) (217,257) Decrease in other assets 24,500 7,090 ------------ ----------- Net cash used in investing activities (10,063,845) (210,167) ------------ ----------- Cash flows from financing activities: Net proceeds from the issuance of common stock and warrants, net of issuance costs -- 8,915,368 Proceeds from exercise of warrants 537,899 -- Proceeds from exercise of stock options 15,500 -- ------------ ----------- Net cash provided by financing activities 553,399 8,915,368 ------------ ----------- Net increase in cash and cash equivalents (12,587,867) 6,045,117 Cash and cash equivalents, beginning of period 25,226,546 3,250,751 ------------ ----------- Cash and cash equivalents, end of period $ 12,638,679 $ 9,295,868 ============ ===========
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, 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. The Company applies Staff Accounting Bulletin (SAB) No. 101, REVENUE RECOGNITION. SAB 101 requires 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. Implementation of SAB No. 101 has not had 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. 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. Diluted weighted average shares outstanding for the three and nine-months ended December 31, 2000 and 1999 exclude 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 December 31, 2000, there were outstanding options to purchase 1,503,441 shares of the Company's common stock at a weighted average exercise price of $2.65 per share and warrants to purchase 934,625 shares of the Company's common stock at a weighted average exercise price of $4.11 per share. At December 31, 1999, there were outstanding options to purchase 1,332,791 shares of the Company's common stock at 6 a weighted average exercise price of $1.83 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 December 31, 2000, the Company's cash equivalents and marketable securities are classified as held-to-maturity, as the Company has the positive intent and ability 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 December 31, 2000 mature in one year or less. Cash, cash equivalents and marketable securities consist of the following at December 31, 2000 and March 31, 2000:
As of December 31, 2000 March 31, 2000 Cash and equivalents Money markets $10,844,690 $ 801,434 Commercial paper 1,489,384 17,031,292 U.S. Government and Agency securities -- 7,342,874 Cash 304,605 50,946 ----------- ----------- Total cash and cash equivalents $12,638,679 $25,226,546 =========== =========== Marketable securities Commercial paper $11,842,085 $ 5,854,544 U.S. Government and Agency securities 6,927,793 2,951,823 ----------- ----------- Total marketable securities $18,769,878 $ 8,806,367 =========== ===========
5. INVENTORIES Inventories are stated at the lower of cost (first in, first out) or market and consist of the following:
As of December 31, 2000 March 31, 2000 Raw materials and work-in-process $508,707 $371,405 Finished goods 56,999 176,043 -------- -------- Total $565,706 $547,448 ======== ========
Work in process and finished goods inventories consist of material, labor, outside processing costs and manufacturing overhead. 6. COMPREHENSIVE INCOME The Company applies SFAS No. 130 REPORTING COMPREHENSIVE INCOME. 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. DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND SIGNIFICANT CUSTOMERS The Company applies SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. 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 7 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 how 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:
Three Months Ended Nine Months Ended December 31, December 31, 2000 1999 2000 1999 ---- ---- ---- ---- US 62% 72% 76% 75% Europe 38 23 23 22 Other -- 5 1 3 ---- ---- ---- ---- Total 100% 100% 100% 100%
During the three months ended December 31, 2000, there was one significant customer who accounted for approximately 37% of the Company's revenues. During the three months ended December 31, 1999, there was one significant customer who accounted for approximately 30% of the Company's revenues. During the nine months ended December 31, 2000, there were two customers who account for approximately 22% and 11% of the Company's revenues. During the nine months ended December 31, 1999, there were two customers who account for approximately 18% and 15% of the Company's revenues. There were two significant accounts receivable balances as a percentage of the Company's total accounts receivable balance at December 31, 2000, 69% and 17%. There were three significant accounts receivable balances as a percentage of the Company's total accounts receivable balance at December 31, 1999, 41%, 14% and 12%: 8. PATENT APPLICATION PURCHASE In December 2000, the Company purchased from the University of California, San Diego (UCSD) a right to a U.S. patent application covering novel methods for the treatment of mitochondrial disease. Under terms of the agreement, Repligen received exclusive commercial rights to both inventions and paid UCSD an up-front fee. Repligen will also pay UCSD clinical development milestones and royalties on product sales. 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) 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 8 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 development, (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 are developing 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, CTLA4-Ig for stem cell transplantation and uridine for mitochondrial disease. In March 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 carry out in clinical trials to more fully 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. In December 2000, the Company purchased from the University of California, San Diego (UCSD) a right to a U.S. patent application covering novel methods for the treatment of mitochondrial disease. Mitochondria are small bodies found in every cell, which produce energy for cellular processes. Mitochondrial diseases are characterized by impaired function of many tissues particularly skeletal muscles (weakness, poor motor skills), the nervous system (seizures, poor cognition) and dysfunction of the heart and kidney. Uridine is a naturally occurring substance required by all cells for the synthesis of RNA, DNA and other essential factors. Mitochondria are the only cellular (non-dietary) source of uridine and its synthesis is often impaired in patients with mitochondrial disease. In a Phase 1 study at UCSD, daily administration of uridine or a derivative of uridine was well tolerated by the patients and produced symptom improvements in 9 some patients. Repligen intends to extend these observations in a randomized, placebo-controlled clinical study in collaboration with UCSD. 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. 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 been 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 synthethic 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 cannot be certain that the FDA will approve either product. RESULTS OF OPERATIONS REVENUES Total revenues for the three-month period ended December 31, 2000, and the three-month period ended December 31, 1999, were approximately $1,159,000 and $864,000 respectively, an increase of $295,000 or 34%. Year to date total revenues for the nine month period ended December 31, 2000 and 1999,were approximately $3,350,000 and $2,535,000, respectively, an increase of $815,000 or 32%. Product revenues for the three month period ended December 31, 2000, and the three-month period ended December 31, 1999, were approximately $615,000 and $558,000, respectively, an increase of $57,000 or 10%. This increase is largely attributable to the timing of large scale production orders of Protein A. Year to date total product sales for the nine month period ended December 31, 2000 and 1999, were approximately $1,495,000 and $1,369,000, respectively, an increase of $126,000 or 9%. This increase is due to increased product shipments to Amersham Pharmacia Biotech and demand from monoclonal antibody producers during such period. Investment income for the three month period ended December 31, 2000, and the three-month period ended December 31, 1999, was approximately $539,000 and $131,000, respectively, an increase of $408,000 or 311%. Year to date total investment income for the nine -month period ended December 31, 2000 and 1999,was approximately $1,603,000 and $334,000, respectively, an increase of $1,269,000 or 380%. This increase during the three and nine-months ended December 31, 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. Other revenues, which included research and development revenues, for the three month period ended December 31, 2000, and the three-month period ended December 31, 1999 were approximately $5,000 and $175,000, respectively, a decrease of $170,000 or 97%. Year to date other revenues for the nine month period ended December 31, 2000 and 1999 were approximately $251,000 and $831,000, respectively, a decrease of $580,000 or 70%. This decrease during the three and nine-month periods ended December 31, 2000 is a result of the termination of government sponsored research on drug discovery programs that generated revenue in fiscal 2000. EXPENSES Total expenses for the three-month period ended December 31, 2000 and the three-month period ended December 31, 1999 were approximately $2,742,000 and $2,599,000, respectively, an increase of $143,000 or 6%. Year to date total expenses for the nine month period ended December 31, 2000 and 10 1999, were approximately $7,115,000 and $5,497,000, respectively, an increase of $1,618,000 or 29%. Research and development expenses for the three-month period ended December 31, 2000, and the three-month period ended December 31, 1999, were approximately $1,781,000 and $1,864,000, respectively, a decrease of $83,000 or 5%. During the three months ended December 31, 2000, research and development expenses include costs incurred for the production of clinical material and clinical trials for secretin and CTLA4-Ig and payment associated with the acquisition of the UCSD patent applications. During December 31, 1999, research and development costs included a $1,000,000 licensing payment associated with the licensing of two diagnostic secretin products. Research and development expenses for the nine month period ended December 31, 2000 and 1999,were approximately $4,206,000 and $3,086,000, respectively, an increase of $1,120,000 or 36%. 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 December 31, 2000 and the three-month period ended December 31, 1999, were approximately $568,000 and $443,000, respectively, an increase of $125,000 or 28%. SG&A expenses for the nine month period ended December 31, 2000 and 1999 were approximately $1,957,000 and $1,636,000, respectively, an increase of $321,000 or 20%. This increase during the three and nine-month periods ended December 31, 2000 is largely attributable to increased spending on personnel and associated costs, increased shareholder services and patent costs during the quarter ended December 31, 2000. Cost of products sold for the three months ended December 31, 2000, and the three-month period ended December 31, 1999, were approximately $393,000 and $292,000, respectively, an increase of $101,000, or 35%. Cost of product sales for the nine month period ended December 31, 2000 and 1999,were approximately $952,000 and $775,000, respectively, an increase of $177,000 or 23%. This increase during the three and nine-month periods ended December 31, 2000 is largely attributable to increased Protein A sales and to product mix. Cost of products sold in the three-month periods ended December 31, 2000 and 1999 were 64% and 52%, respectively, of product revenues. Cost of products sold in the nine-month periods ended December 31, 2000 and 1999 was 64% and 57%, respectively, of product revenues. This increase in cost as a percentage of revenue is due primarily to additional staffing and to product mix. 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 December 31, 2000 equaled $31,409,000, a decrease of $2,624,000 from $34,033,000 at March 31, 2000. Repligen's operating activities used cash of approximately $3,077,000 for the nine months period ended December 31, 2000 consisting of a net loss from operations of approximately $3,766,000, an increase of inventory of $62,000 and a decrease of accrued expenses of $195,000. This use of cash was offset by non-cash charges of $591,000 for depreciation and amortization and charges associated with the issuance of warrants and common stock, an increase in accounts payable of $147,000 and a decrease in accounts receivable of $225,000. Our investing activities used cash of approximately $10,064,000 for the purchase of marketable securities and from changes in other assets. Our cash was reduced by capital expenditures of $125,000. Our financing activities provided cash of approximately $553,000 from the proceeds of stock option and warrant exercises. Working capital decreased to $31,751,000 at December 31, 2000 from $34,473,000 at March 31, 2000. While we anticipate that the cost of operations will increase as we continues to expand its investment in proprietary product development, we believe we have sufficient funding to satisfy its working capital and capital expenditure requirements for the next twenty-four months. Should we need to secure additional 11 financing to meet our future liquidity requirements, there can be no assurances that we will be able to secure such financing, or that such financing, if available, will be on terms favorable to us. 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 assignee or co-assignee of the aforesaid 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 stem cell transplantation. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits
EXHIBIT DESCRIPTION ------- ----------- 3.1 Restated Certificate of Incorporation, dated December 31, 1992 and filed July 13, 1992, as amended (filed as Exhibit 3.1 to Repligen Corporation's Quarterly Report on Form 10-Q dated December 31, 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).
(b) Reports on Form 8-K The Company filed no current reports on Form 8-K during the quarter covered by the report. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. REPLIGEN CORPORATION (Registrant) Date: February 14, 2001 By: /s/ Walter C. Herlihy -------------------------- Chief Executive Officer and President, Principal Financial and Accounting Officer 12 Repligen Corporation Exhibit Index
EXHIBIT DESCRIPTION ------- ----------- 3.1 Restated Certificate of Incorporation, dated June 30, 1992 and filed July 13, 1992, as amended (filed as Exhibit 3.1 to Repligen Corporation's 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).
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