-----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, ItcXna5AQeAjMCXr5/KBT3NGhiK2wraiPsLfMIo9Of3D8YylLJwvfPFw8qEaPZGm Ty/sEOr2sH41N/tAh+mDfQ== 0001005477-98-002341.txt : 19980810 0001005477-98-002341.hdr.sgml : 19980810 ACCESSION NUMBER: 0001005477-98-002341 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980807 SROS: NYSE 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: 98679767 BUSINESS ADDRESS: STREET 1: 117 FOURTH AVE CITY: NEEDHAM STATE: MA ZIP: 02194 BUSINESS PHONE: 7814499560 MAIL ADDRESS: STREET 1: 117 FOURTH AVE CITY: NEEDHAM STATE: MA ZIP: 02194 10-Q 1 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 June 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ____________________ Commission File Number 0-14656 REPLIGEN CORPORATION (exact name of registrant as specified in its charter) Delaware 04-2729386 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 117 Fourth Avenue Needham, Massachusetts 02494 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (781)-449-9560 _________________________________________________________________ (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_|. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of July 31, 1998. Common Stock, par value $.01 per share 18,001,785 -------------------------------------- ---------------- Class Number of Shares REPLIGEN CORPORATION INDEX PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets as of June 30, 1998 and March 31, 1998 3 Condensed Consolidated Statements of Operations for the Three Months Ended June 30, 1998 and 1997 4 Condensed Consolidated Statement of Cash Flows for the Three Months Ended June 30, 1998 and 1997 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submissions of Matters to a Vote of Security Holders 9 Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K 10 (a) Exhibits 27.1 Financial Data Schedule (b) Reports on Form 8-K None Signature 10 Exhibit Index 11 Exhibits 12 2 PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS REPLIGEN CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) ASSETS June 30, 1998 March 31, 1998 ------------- -------------- Current assets: Cash and cash equivalents $ 4,286,573 $ 4,725,544 Accounts receivable 406,580 212,857 Inventories 707,929 670,818 Prepaid expenses and other current assets 111,716 156,228 ------------- ------------- Total current assets 5,512,799 5,765,447 Property, plant and equipment, at cost: Equipment 806,858 770,512 Furniture and fixtures 60,170 40,563 Leasehold improvements 442,527 442,528 ------------- ------------- 1,309,555 1,253,603 Less: accumulated depreciation and amortization 658,931 594,719 ------------- ------------- 650,624 658,884 Other assets, net 88,472 88,472 ------------- ------------- $ 6,251,895 $ 6,512,803 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 99,511 $ 100,719 Accrued expenses 370,803 254,312 Unearned income -- 33,332 ------------- ------------- Total current liabilities 470,314 388,363 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value -- authorized -- 5,000,000 shares -- outstanding -- none -- -- Common stock, $.01 par value -- authorized -- 30,000,000 shares-- outstanding -- 18,001,785 shares at June 30, 1998 and March 31, 1998 180,017 180,017 Additional paid-in capital 130,264,048 130,264,048 Accumulated deficit (124,662,485) (124,319,625) ------------- ------------- Total stockholders' equity 5,781,580 6,124,440 ------------- ------------- $ 6,512,895 $ 6,512,803 ============= ============= See accompanying notes to consolidated financial statements. 3 REPLIGEN CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended June 30, ----------------------------- 1998 1997 ------------ ------------ Revenues: $ 268,406 $ 258,284 Research and development 229,138 282,183 Product 61,691 46,678 Investment income 33,188 88,362 ------------ ------------ Other 592,423 675,507 ------------ ------------ Costs and expenses: 466,069 363,658 Research and development 356,932 306,856 Selling, general and administrative 112,282 148,585 ------------ ------------ Cost of products sold 935,283 819,099 ------------ ------------ Net loss $ (342,860) $ (143,592) ============ ============ Basic and diluted net loss per share $ (0.02) $ (0.01) ============ ============ Basic and diluted weighted average shares outstanding 18,001,785 16,001,785 ============ ============ See accompanying notes to consolidated financial statements. 4 REPLIGEN CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended June 30, --------------------------- 1998 1997 ----------- ----------- Cash flows from operating activities: Net loss $ (342,860) $ (143,592) Adjustments to reconcile net loss to net cash used in operating activities - Depreciation and amortization 64,213 58,893 Compensation charge from stock options -- 9,918 Changes in assets and liabilities - Accounts receivable (193,724) 159,724 Inventories (37,111) (9,226) Prepaid expenses and other current assets 44,512 33,191 Accounts payable (1,208) (89,408) Accrued expenses 116,491 (2,287) Unearned income (33,332) (50,001) ----------- ----------- Net cash used in operating activities (383,019) (32,788) ----------- ----------- Cash flows from investing activities: Decrease in marketable securities -- 55,211 Purchases of property, plant and equipment, net (55,953) (42,339) Decrease in restricted cash -- 32,314 ----------- ----------- Net cash (used in) provided by investing activities (55,953) (45,186) ----------- ----------- Net (decrease) increase in cash and cash equivalents (438,971) 12,398 Cash and cash equivalents, beginning of period 4,725,544 3,465,881 ----------- ----------- Cash and cash equivalents, end of period $ 4,286,573 $ 3,478,279 =========== =========== See accompanying notes to consolidated financial statements. 5 REPLIGEN CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The condensed consolidated financial statements included herein have been prepared by Repligen Corporation (the "Company" or "Repligen"), pursuant to the rules and regulations of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all of the information and footnote disclosures required by generally accepted accounting principles. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Form 10-K for the year ending March 31, 1998. In the opinion of management, the accompanying unaudited financial statements include all adjustments consisting of only normal, recurring adjustments necessary to present fairly, the consolidated financial position, results of operations and cash flows. The results of operations for the interim periods presented are not necessarily indicative of results to be expected for the entire year. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. Net Loss Per Share The Company has adopted Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Share, effective December 15, 1997. SFAS No. 128 establishes standards for computing and presenting earnings per share and applies to entities with publicly held common stock or potential common stock. The Company has applied the provisions of SFAS No. 128, retroactively to all periods presented. Basic and diluted net loss per share represents net loss divided by the weighted average number of common shares outstanding during the period. The dilutive effect of the potential common shares consisting of outstanding stock options and warrants is determined using the treasury stock method in accordance with SFAS No. 128. Diluted weighted average shares outstanding at June 30, 1998 and 1997 excluded the potential common shares from warrants and stock options because to do so would be antidilutive for the periods presented. At June 30, 1998, there are 993,000 options outstanding with a weighted average exercise price of $1.33 and 2,832,000 warrants outstanding with a weighted average exercise price of $3.97. 3. Cash Equivalents The Company accounts for investments in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. The Company considers all highly liquid investments with a maturity of three months or less at the time of acquisition to be cash equivalents. Included in cash equivalents at June 30, 1998 and 1997 are $600,000 and $200,000 of money market funds and approximately $3,550,000 and $3,180,000 of commercial paper, respectively. 4. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following: 6 June 30, March 31, 1998 1998 --------- --------- Raw materials and work-in-process $ 465,167 $ 388,727 Finished goods 242,762 282,091 --------- --------- Total $ 707,929 $ 670,818 ========= ========= Work in process and finished goods inventories consist of material, labor, outside processing costs and manufacturing overhead. 5. Comprehensive Income Effective January 1, 1998, the Company adopted SFAS No. 130 Reporting Comprehensive Income, effective January 1, 1998. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in financial statements. Comprehensive income includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. The comprehensive net loss is the same as net loss for all periods presented. 6. New Accounting Standards In April 1998, the AICPA issued Statements of Position 98-5 Reporting on the Costs of Start-up Activities (SOP 98-5). SOP 98-5 requires all costs associated with the pre-opening, pre-operating and organization activities to be expenses as incurred. The Company will adopt SOP 98-05 beginning January 1, 1999. Adoption of this statement will not have a material impact on the Company's consolidated financial position or results of operations. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Statement Regarding Forward-Looking Statements Statements in this Quarterly Report on Form 10-Q as well as oral statements that may be made by the Company or by officers, directors or employees of the Company acting on the Company's behalf, that are not historical facts constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1997. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to be materially different from the historical results or from any results expressed or implied by such forward-looking statements. The Company's future operating results are subject to risks and uncertainties and are dependent upon many factors, including, without limitation, the Company's ability to (i) meet its working capital and future liquidity needs, (ii) successfully implement its strategic growth strategies, (iii) understand, anticipate and respond to rapidly changing technologies and market trends, (iv) develop, manufacture and deliver high quality, technologically advanced products on a timely basis to withstand competition from competitors which may have greater financial, information gathering and marketing resources than the Company, (v) obtain and protect licensing and intellectual property rights necessary for the Company's technology and product development on terms favorable to the Company, and (vi) recruit and retain highly talented professionals in a competitive job market. Further information on potential factors that could affect the Company's financial results are included in filings made by the Company from time to time with the Securities and Exchange Commission included in the section entitled "Risk Factors" contained in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998 (File No.000-14656). 7 Overview Repligen Corporation ("Repligen" or the "Company") develops enabling technology for the discovery of new drugs including ultra-rapid methods for the synthesis of chemical compound libraries, and high throughput screening assays based on defined biological targets. The Company's technology is designed to identify compounds capable of blocking or stabilizing pharmaceutically important interactions between proteins and other macromolecules. To date, this type of interaction has only been accessible with complex natural products or protein pharmaceuticals both of which are difficult to develop, administer to patients and manufacture. The Company's goal is to develop organically synthesized drugs which can mimic the action of these natural products and proteins. In selected therapeutic areas, Repligen is applying its technology to the discovery of proprietary drug leads. The primary proprietary drug discovery program at the Company is the development of novel inhibitors of angiogenesis or new blood vessel growth which is essential for solid tumor growth and in certain ocular diseases. This program is based on proprietary, high throughput screening assays designed to detect inhibitors of the growth factors which drive angiogenesis and proprietary libraries of compounds designed to mimic the natural cell surface ligands of these growth factors. In initial preclinical studies, a compound identified from these libraries inhibited angiogenic growth factors in vitro and in vivo at non-toxic doses. Repligen also develops, manufactures and markets products for the production of protein pharmaceuticals (biopharmaceuticals) by affinity chromatography. The Company currently markets a line of products for the production of monoclonal antibodies intended for human clinical use based on a recombinant form of Protein A, a naturally occurring affinity ligand. The Company believes that its chemical libraries may be the source of additional affinity ligands for biopharmaceutical manufacturing. Results of Operations Revenues Total revenues for the three month period ended June 30, 1998 and 1997 were approximately $592,000 and $676,000, respectively, a decrease of approximately $84,000 or 12%. This decrease is largely attributable to the timing of large production scale orders of Protein A. Research and development revenues for the three month period ended June 30, 1998 were approximately $268,000 compared to $258,000 in the comparable fiscal 1998 period. Research and development revenue was generated under research agreements with Cambridge Neuroscience, Glaxo Wellcome plc, Knoll AG, Pfizer Inc. and revenue generated from a Phase II government grant with the National Cancer Institute. Revenues for the quarter ended June 30, 1998 also include a licensing fee received from Theseus, Inc. pursuant to an agreement to license certain of Repligen's technology for antibodies to the leukocyte integrin CD11b. Under this licensing agreement, Repligen will receive milestones and royalties if a product using this technology is commercialized by Theseus. Product revenues for the three month period ended June 30, 1998 and 1997 were approximately $229,000 and $282,000, respectively, a $53,000 or 19% decrease in product sales. This decrease is largely attributable to the timing of large production scale orders of Protein A. Investment income increased in fiscal 1999 over the comparable three month period in fiscal 1998 primarily due to higher interest generated on funds available for investment. 8 Other revenues for the three month period ended June 30, 1998 decreased from the comparable fiscal 1998 period primarily due to the sale of equipment held by the Company reported as other income in the three month period ending June 30, 1997. Expenses Total expenses for the three month period ended June 30, 1998 and 1997 increased approximately $116,000 or 14% to $935,000 from $819,000. Research and development expenses for the three months ended June 30, 1998 and 1997 were approximately $466,000 and $364,000. The increase in expenses in fiscal 1999 from the comparable period in the first quarter of fiscal 1998 reflects increased staffing in research and development as the Company expands its investment in proprietary drug discovery programs. Selling, general and administrative expenses for the three month period ended June 30, 1998 were approximately $357,000 which reflects an increase of $50,000 or 16% from the comparable fiscal 1998 period. This increase is attributable to increased costs in patent and legal services. Cost of goods sold for the three month period ended June 30, 1998 were approximately $112,000 compared to $149,000 for the three month period ended June 30, 1997. Cost of goods sold in the three months ended June 30, 1998 and 1997 were 49% and 53% of product revenues. This decrease is attributable to a change in product mix. Liquidity and Capital Resources The Company's total cash, cash equivalents and marketable securities decreased to $4,287,000 at June 30, 1998 from $4,726,000 at March 31, 1998. This decrease of $439,000 reflects net losses incurred during the three month period ending June 30, 1998 of approximately $343,000, an increase in accounts receivable of $194,000 and capital expenditures of $56,000 offset in part by the increase in accrued expenses of $116,000 and decrease of prepaid expenses and other current assets of $45,000. Working capital decreased to $5,042,000 at June 30, 1998 from $5,377,000 at March 31, 1998. The Company has entered into agreements with a number of collaborative partners and licensees. Under the terms of these agreements, the Company may be eligible to receive research support, additional milestones or royalty revenue if these collaborations continue to clinical evaluation and commercialization. The Company cannot be assured of the continuation of these collaborations and any future payments. During the fiscal year ended March 31, 1998, the Company entered into a $450,000 note receivable with a licensee for past due licensing fees. As the Company has historically recorded licensing fees under this agreement on a cash basis, the Company has not recorded this note receivable as an asset. The note requires full payment of principal and interest in August 1998. The Company will continue to record this license fee on a cash basis. The Company has funded operations primarily with cash derived from the sales of its equity securities, revenue derived from research and development contracts, product sales and investment income. While the Company anticipates that its cost of operations will increase in fiscal 1999 as it continues to expand its investment in proprietary product development, the Company believes it has sufficient cash equivalents and marketable securities to satisfy its working capital and capital expenditure requirements for the next twenty-four months. Should the Company need to secure additional financing to meet its future liquidity requirements, there can be no assurances that the Company will be able to secure such financing, or that such financing, if available, will be on terms favorable to the Company. The Company has completed an assessment of its exposure to the "Year 2000" computer 9 problem. Based on this assessment, the Company believes that no critical software systems of the Company will be impacted by this situation. The Company believes that systems currently used by the Company are "Year 2000" compliant. Although the Company believes that it is taking appropriate precautions against disruption of its system due to the "Year 2000" problem, there can be no assurance that the Company's suppliers and customers will not be adversely affected by the "Year 2000" problem. Nonetheless, the Company believes that the "Year 2000" issue with respect to the Company's purchased software systems will not have a material impact on the Company's business operations or financial condition. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company's Annual Meeting of Stockholders (the "Annual Meeting") will be held on September 10, 1998. At the Annual Meeting, the stockholders of the Company will consider and act upon a proposal to: (i) elect five members to the Board of Directors (ii) ratify the selection of Arthur Andersen LLP as the independent auditors of the Company for the fiscal year ending March 31, 1999 and (iii) transact such other business as may properly come before the Annual Meeting or any adjournments thereof established by the Board of Directors. The nominees for election to the Board of Directors are Robert J. Hennessey, Walter C. Herlihy, Ph.D., G. William Miller, Alexander Rich, M.D. and Paul Schimmel, Ph.D. The Company had 18,001,785 shares of Common Stock of the Company issued and outstanding and entitled to vote as of the close of business on June 22, 1998, the record date established by the Board of Directors for the Annual Meeting. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits EXHIBIT DESCRIPTION ------- ----------- 27.1 Financial Data Schedule (b) Reports on Form 8-K No current reports on Form 8-K were filed by the Company during the quarter covered by this report. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. REPLIGEN CORPORATION (Registrant) Date: August 7, 1998 By: /S/ Walter C. Herlihy --------------------- Chief Executive Officer Principal Financial and Accounting Officer 10 REPLIGEN CORPORATION AND SUBSIDIARIES EXHIBIT INDEX EXHIBIT NO. DESCRIPTION PAGE ----------- ----------- ---- 27.1 Financial Data Schedule 12 EX-27.1 2 FDS
5 1,000 3-MOS MAR-31-1999 JUN-30-1998 4,287 0 407 0 708 5,513 1,310 649 6,252 470 0 0 0 180 5,602 6,252 229 592 112 935 0 0 0 (343) 0 0 0 0 0 (343) (.02) (.02)
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