-----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, A71yowyqAhCRzP4+p1zHlGvm67fg2bGFVEBHC+gaWnaCJOKprKeRpaCYXpASeaBZ dMWOj0NHYs7xY5CyfCN9Ww== 0001047469-98-025477.txt : 19980629 0001047469-98-025477.hdr.sgml : 19980629 ACCESSION NUMBER: 0001047469-98-025477 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980626 SROS: NONE 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-K SEC ACT: SEC FILE NUMBER: 000-14656 FILM NUMBER: 98654803 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-K 1 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 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: 0-21700 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 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 Par Value (Title of Class) Indicate by checkmark 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes ____ No _X_ State the aggregate market value of the voting stock held by non-affiliates of the Registrant. The aggregate market value, computed by reference to the closing sale price of such stock quoted on NASDAQ on June 22, 1998 was approximately $27,002,678. Indicate the number of shares outstanding of each of the registrant's classes of common stock as of June 22, 1998: 18,001,785 DOCUMENTS INCORPORATED BY REFERENCE The Company intends to file a definitive Proxy Statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended March 31, 1998. Portions of such Proxy Statement are incorporated by reference in Part III of this Form 10-K. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 1: BUSINESS FORWARD LOOKING STATEMENTS Any statements which are not historical facts contained in this Annual Report on Form 10-K, including without limitation projections or statements concerning use and success of technology, progress of programs, completion, timing and benefits of development programs, liquidity, suitability of products for specific applications, product performance, advantages or significance of technology, benefits and results of acquisitions, collaborations and strategic and other alliances, and improvements to operating and other results, are forward-looking statements that involve risks and uncertainties, including but not limited to those relating to product demand, pricing, market acceptance, the effect of economic conditions, intellectual property rights and litigation, the results of governmental proceedings, competitive products, risks in product and technology development, the results of financing efforts, the ability to exploit technologies, the ability to complete transactions, and other risks identified under the caption "Certain Factors That May Affect Future Results" and elsewhere in this Annual Report, as well as in the Company's other Securities and Exchange Commission filings. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. THE COMPANY 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. Repligen Corporation was incorporated in March, 1981, under the laws of the State of Delaware. Its principal executive offices are at 117 Fourth Avenue, Needham, Massachusetts 02494 and its telephone number is (781) 449-9560. 2 DRUG DISCOVERY TECHNOLOGY--BACKGROUND Pharmaceutical companies use a drug discovery process which starts with the identification of a "Biological Target" which is implicated in a disease. The target is then formatted into a test (a "High Throughput Screening Assay") which can be used to determine if any of 100,000 to 1,000,000 individual chemical compounds (a "Chemical Compound Library") shows activity against the Biological Target. Compounds from the library which are identified by the screening assay (a "New Drug Lead") may be the basis for chemical analoging to improve their potency, specificity and pharmacology prior to evaluation in animal disease models and ultimately human clinical trials. The new drug lead discovery phase of this process is summarized below: [CHART] Recent advances in human and bacterial genetics (genomics) have identified hundreds of potential Biological Targets for drug discovery. As a result, the pharmaceutical industry has and will likely continue to make substantial investments in its drug discovery infrastructure. In addition to genomics, two principal areas of investment by pharmaceutical companies are the construction of libraries of compounds through combinatorial chemistry and the development of high throughput screening technologies. Enzymes and cellular receptors which naturally bind a small molecule are two classes of Biological Targets well established in the pharmaceutical industry. For many of these types of targets the process outlined above is a relatively efficient approach to identifying a new drug lead. A third class of Biological Targets consists of the interaction of a protein and a second macromolecule such as a carbohydrate, a nucleic acid (DNA or RNA) or another protein. For most of these targets, it remains a formidable challenge to identify New Drug Leads which are organically synthesized small molecules. To date, drugs which target protein-macromolecular interactions have been identified by isolating active compounds from mixtures derived from extracts of plants or microorganisms. For example, * Taxol-TM-, a major drug for the treatment of certain cancers, was identified in extracts of the bark of the pacific yew tree and Cylcosporin A, a leading drug for organ transplant recipients, was identified in a fungal extract. Despite the fact that natural products are often more difficult to develop, manufacture and administer to patients than an organically synthesized drug, no chemically synthesized drugs have been identified which mimic the activity of these two important natural products. In addition, there are no synthetic compounds or natural products available for many interesting biological targets which involve protein-macromolecule interactions. Repligen believes that the development of technology to extend the application of high throughput screening of chemical libraries to the identification of New Drug Leads which modulate protein- macromolecule interactions will have broad application within the pharmaceutical industry. - ------------------------ *Taxol-TM- is a registered trademark of Bristol-Myers Squibb Co. 3 COMBINATORIAL CHEMISTRY In the past five years, the pharmaceutical industry has rapidly adopted combinatorial chemistry as a method to synthesize libraries of chemical compounds. Combinatorial chemical synthesis methods involve systematic variation of three or more chemical groups on a fixed framework or scaffold. For a scaffold in which three positions can each be substituted with twenty different chemical groups, it is possible to synthesize 8,000 (20 x 20 x 20) compounds with the same series of chemical reactions. By repeating this process with multiple scaffolds, libraries containing more than 500,000 compounds have been constructed. The primary application of this technology has been the creation of chemical libraries of small compounds suitable for Biological Targets which are enzymes or receptors which bind a small molecule. These compounds are generally not suitable for identifying drugs which can act on protein-macromolecular targets. Repligen is currently developing ultra-efficient techniques for the synthesis of libraries of chemical compounds for targets involving protein-macromolecule interactions. These techniques rely upon a set of chemical reactions known as multi-component condensations (MCCs) in which three or four components combine in a single step to form the desired product while consuming the starting materials. Libraries of compounds can be synthesized far more rapidly with MCCs than alternative methods since the synthesis step involves simple mixing of reactant solutions instead of the multiple chemical steps and manipulations required by other methods. Repligen has focused the development of its MCC technology on the creation of compounds with size and complexity comparable to natural products which are known to modulate important protein-macromolecule interactions. Like many natural products, these "complex" organic compounds contain 4 to 7 different chemical substituents which can interact with the target and are typically 2-3 times larger than either traditional drugs or the products of existing combinatorial chemical technology. The Company believes that these libraries of "complex structures" may be better sources of leads for biological targets involving protein-macromolecule interactions which are difficult to access with existing technology. HIGH THROUGHPUT SCREENING ASSAYS Repligen has developed a series of high throughput screening assays for the identification of New Drug Leads in its own libraries or those of its partners. Most of these assays detect compounds which inhibit protein-protein and protein-carbohydrate interactions. The Company has applied for patents covering its growth factor and chemokine screening assays. GROWTH FACTOR SCREENING ASSAYS Many clinically important proteins involved in cell signaling and activation bind to a type of carbohydrate on the surface of the target cell known as a glycosaminoglycan. The Company believes that this interaction is important for optimal biological action of these proteins and represents a novel and advantageous point for pharmaceutical intervention. Repligen has developed a series of high throughput binding assays for two classes of glycosaminoglycan-binding proteins: growth factors and chemokines. Two of the Company's growth factor assays can detect inhibitors of glycosaminoglycan binding to Vascular Endothelial Growth Factor (VEGF) and basic Fibroblast Growth Factor (bFGF) both of which have been implicated in the new blood vessel growth which is required for tumor growth and in the progression of certain ocular diseases such as diabetic retinopathy and macular degeneration. The Company has employed its combinatorial chemical technology to construct libraries of compounds customized to contain chemical functional groups similar to those found in glycosaminoglycans. Screening of these libraries in the growth factor assays has identified several lead compounds which are currently undergoing additional testing. 4 In collaboration with Cambridge NeuroScience, Inc. ("CNS"), the Company has also constructed a high throughput screening assay capable of detecting compounds which block the interaction of the growth factor neuregulin with glycosaminoglycans. Neuregulin is believed to be an important factor in some forms of breast, brain and other cancers. The Company has screened a glycosaminoglycan-like library in the neuregulin assay. Several active compounds have been detected which are currently undergoing additional biological characterization. Repligen and CNS will jointly own compounds which result from this collaboration, if any. CHEMOKINE SCREENING ASSAYS Chemokines are a second class of glycosaminoglycan-binding factors which mediate the recruitment and activation of leukocytes or white blood cells. Inhibition of the activity of chemokines may be therapeutically useful in a variety of diseases characterized by excessive leukocyte activity including arthritis, psoriasis, inflammatory bowel disease and atherogenesis. Repligen's high throughput screens are designed to detect inhibitors of chemokine- glycosaminoglycan interaction which it believes is essential for proper leukocyte activation by the chemokine. One of the chemokine assays is the basis for the Company's drug discovery collaboration with Glaxo Wellcome. IMMUNOREGULATORY PROTEIN SCREENING ASSAYS Repligen's immune modulation program is based on modifying the activity of costimulatory factors (CD28, B7, CTLA4), molecules on the surface of certain immune system cells, to selectively suppress or activate an immune response. Published data on animal models of transplantation and autoimmune disease, indicate that drugs which block the activity of these costimulatory factors may suppress unwanted immune responses characteristic of transplantation and certain forms of multiple sclerosis, rheumatoid arthritis and diabetes. In addition, published data indicate that costimulatory factors can be manipulated in animal tumor models to enhance the immune response to a tumor resulting in slower tumor growth. Repligen has constructed high throughput screening assays based on recombinant proteins and cell lines to detect molecules capable of modulating the activity of these costimulatory molecules. HEPARANASE Heparanse is an enzyme which degrades carbohydrate (glycosaminoglycan) components of the extracellular matrix, a process which is essential for movement of cells from the vasculature into tissues. This type of cell migration appears to be essential for tumor cell invasion and metastasis. It is also believed to be an important step of the movement of white blood cells (leukocytes) into tissues, an early step in the initiation of an immune or inflammatory response. Repligen has developed a screening assay to detect small molecule compounds which block the activity of heparanase which it intends to use to screen its compound libraries. Inhibitors of heparanase may be applicable to cancer and a variety of inflammatory diseases. DRUG DISCOVERY PROGRAMS The Company is currently seeking to develop proprietary lead compounds by utilizing its screening assays to identify active compounds in its combinatorial chemical libraries. Its current focus is the development of inhibitors of the angiogenic growth factors VEGF and bFGF. To date, the Company has screened approximately 50,000 compounds from its internal libraries which were specifically designed to mimic the natural, cell surface ligand of VEGF and bFGF. Several families of lead compounds were identified and have subsequently been tested in additional assays for potency 5 and specificity. Selected compounds have been active in blocking the proliferation of endothelial (blood vessel) cells IN VITRO and blocking the intracellular (kinase) signaling pathway triggered by VEGF. A lead compound has demonstrated activity in an animal model of ocular angiogenesis. The Company intends to synthesize additional sets of compounds with structures related to its lead compounds and evaluate them for improvements in potency and pharmacology as well as in additional models of ocular and tumor angiogenesis. The Company is also employing its screening assays and chemical libraries in collaborative arrangements with Pfizer Inc. ("Pfizer"), Glaxo Wellcome plc ("Glaxo"), Cambridge NeuroScience, Inc. ("CNS"), Tularik, Inc. ("Tularik") and T Cell Sciences, Inc. ("T Cell"). The following table summarizes the status of both proprietary and collaborative drug discovery projects:
CURRENT STATUS OF DRUG DISCOVERY PROGRAMS - ------------------------------------------------------------------------------------------------------ BIOLOGICAL TARGET PARTNER APPLICATION STATUS - ----------------------------- --------- ----------------------------- ----------------------------- VEGF / bFGF Repligen Cancer/Ocular Disease Lead Identified Heparanase Repligen Tumor Metastasis Assay Development Growth Factor Pfizer Proliferative Disease Lead Identified Immunomodulator Pfizer Immune Enhancement Screening Chemokine Glaxo Cardiovascular Screening Neuregulin CNS Breast, Brain Cancer Lead Evaluation Multiple Targets Tularik Multiple Screening T Cell Activation T Cell Immune Regulation Screening
AFFINITY PRODUCTS FOR BIOPHARMACEUTICAL MANUFACTURING The manufacture of protein pharmaceuticals (biopharmaceuticals) such as insulin, tissue plasminogen activator and monoclonal antibodies such as * ReoPro-TM- is a complex task which typically involves fermentation of a bacterium or mammalian cell to synthesize the protein followed by the recovery and purification of the product through a series of filtration and chromatographic steps. Two principal challenges in biopharmaceutical manufacturing are the recovery of the product from a large volume of fermentation broth and the purification of the product from a complex feedstream to >99% purity. Affinity chromatography is a protein purification technique based on the specific ("lock and key") interaction of a compound (an "affinity ligand") with the protein of interest. Typically, the fermentation broth is passed over a solid support containing the affinity ligand which binds only to the protein product and not to other components of the feedstream. Thus in a single step the product is captured from a dilute feedstream and substantially purified. The two affinity ligands most widely used in the manufacture of biopharmaceuticals are based on two naturally occurring products: Protein A for the production of monoclonal antibodies and the carbohydrate heparin which is used in the production of certain growth factors and coagulation factors. Protein A is a naturally occurring affinity ligand for certain classes of antibodies. Repligen manufactures and markets a recombinant form of Protein A ("rProtein A-TM-") and immobilized rProtein A-TM- in sufficient quantity and quality to be used in the commercial production of antibodies intended for human clinical use. The Company believes that there are approximately 75 monoclonal antibodies in various stages of human clinical testing worldwide. In contrast, only 4 to 8 monoclonal antibodies have been approved for marketing by the United States Food and Drug Administration - ------------------------ *ReoPro-TM- is a registered tradmark of Centocor, Inc. 6 ("FDA") or comparable foreign regulatory agencies. Additional antibody product approvals may yield significant growth in the Protein A market. Repligen owns a patent in the U.S. covering the manufacture of recombinant Protein A which expires in 2009. Similar patents have been issued in certain European countries and Japan which expire in 2002. Repligen has granted a non-exclusive, royalty bearing license to Pharmacia Biotech AB, a subsidiary of Pharmacia & Upjohn, Inc., to its patents covering recombinant Protein A. With the exception of antibodies and a few other factors, there are currently no suitable affinity ligands for most biopharmaceuticals. The Company believes that its "complex structure" chemical libraries may be sources of novel chemical affinity ligands. Successful application of the Company's technology to the development of new affinity ligands may enable biopharmaceuticals to be applied to applications not currently feasible due to their high cost of manufacture. The use of transgenic plants and animals has dramatically lowered the costs of protein expression; however, there is currently no technology to lower the cost of protein recovery and purification. The availability of new affinity ligands may significantly improve the efficiency of manufacturing and enable biopharmaceuticals to penetrate new, cost-sensitive markets. INTELLECTUAL PROPERTY AND LICENSING Repligen has maintained certain intellectual property rights related to its former clinical development programs. The Company has and continues to seek third parties to license its intellectual property which does not support its current drug discovery or affinity products businesses. As part of its former program to develop immunomodulatory protein drugs directed to the immune cell receptors known as CD28, B7 and CTLA4 (costimulatory factors), Repligen licensed the rights to certain patent applications from the University of Michigan. In addition, the Company independently filed additional patent applications based on internal and collaborative research findings. In September 1995, Repligen assigned these patent rights to Genetics Institute, Inc. and received a fee of $2,000,000. The Company retained the right to independently use the intellectual property and reagents for the discovery of small molecules which block or activate these costimulatory factors (see above). In January 1996, Genetics Institute, Inc. returned all the rights to a specific product candidate, CTLA4-IgG. Repligen has the right to sublicense its rights to CTLA4-IgG and intends to seek a licensee to develop this product candidate. As part of the Company's former program to inhibit acute inflammation it acquired certain patent rights covering the use of antibodies to CD11b to block acute inflammation and a U.S. patent covering the use of antibodies to CD11a, CD11b, CD11c and CD18 to block acute inflammation associated with reperfusion or the resupply of blood to anoxic tissue. In December 1995 the Company licensed its rights to CD11a and CD18 to Genentech, Inc. in exchange for a milestone payment and royalties on the sales of products developed by Genentech under this patent. In 1993 the Company licensed its technology for the production of the HIV envelope protein gp160 to Calypte Biomedical Corporation in exchange for a licensing fee and royalties on the sales of diagnostic products developed under the license. Calypte received approval from the FDA in September of 1997 to market a HIV diagnostic test kit for use with urine samples. REPLIGEN'S BUSINESS STRATEGY Repligen's primary objective is to develop or acquire high throughput screening and chemical synthesis technologies to apply to the discovery of drug leads for those Biological Targets in which a protein binds to another protein, a carbohydrate or a nucleic acid. The Company intends to apply its drug discovery technologies to selected proprietary targets such as angiogenesis where it believes its 7 technology may give it a competitive advantage. If any lead compounds result from these activities, the Company may carry out additional optimization of the lead compound through chemical modification and characterize its biological activity in cell-based assays and animal models of disease. As appropriate, the Company will seek a biotechnology or pharmaceutical partner for clinical development and commercialization of its product candidates. In addition to its proprietary programs, Repligen will seek to form additional drug discovery partnerships in order to maximize the return on its technology base. The primary goal of these partnerships will be to apply the Company's technology to a broad range of Biological Targets to increase the opportunity of identifying New Drug Leads. In these partnerships the Company will seek milestone and royalty revenues based on successful product development by a partner. The Company will also seek to expand its revenues from bioprocessing affinity reagents through sales and marketing efforts, partnerships and new product introductions. It may also endeavor to develop or acquire additional products for the manufacture of pharmaceutical products which can utilize the Company's existing manufacturing capacity and regulatory infrastructure. Profits from drug discovery partnerships and product sales will be applied to further the development of proprietary drug candidates. SALES AND MARKETING The Company currently sells its rProtein A-TM- products directly to end-users and through distributors in certain foreign markets. While the Company has expanded its sales and marketing activities, there can be no assurance that the Company will be able to further expand its sales and distribution capabilities for the research market without undue delays or expenditures or that it will be successful in maintaining market acceptance for its products. CUSTOMERS Sales for the Company's bioprocessing products are distributed between chromatography companies and process development and manufacturing groups at biotechnology and pharmaceutical companies and accounted for 47% of the Company's revenues in fiscal 1998. Research and development revenue is derived from the Company's drug discovery collaborations with Glaxo, Pfizer and CNS and grant awards from the National Institutes of Health. Research and development revenue accounted for 38% of the Company's total revenues in fiscal 1998. During fiscal 1998 the Company received a milestone payment from one of its collaborations. As a result of this extraordinary payment, one customer accounted for more than 10% of the Company's total revenues in fiscal 1998. While the Company has an ongoing relationship with this customer, the customer is not obligated to make any additional milestone payments to the Company and the Company believes the loss of this customer would not have a material adverse effect on the Company's business. COMPETITION The Company's Protein A products compete on the basis of quality, performance, cost effectiveness, and application suitability with numerous established technologies for protein purification including ion exchange chromatography. Additional competitive products using new technologies which may be competitive to the Company's products may also be introduced. Many of the companies selling or developing competitive products have financial, manufacturing and distribution resources significantly greater than those of the Company. The field of drug discovery in which the Company is involved is characterized by rapid technological change. New developments are expected to continue at a rapid pace in both industry and 8 academia. There are many companies, both public and private, including large pharmaceutical companies, chemical companies and specialized biotechnology companies, engaged in developing products competitive with products under development by the Company. Many of these companies have greater capital, human resources and research and development, manufacturing and marketing experience than the Company and may succeed in developing products that are more effective or less costly than any that may be developed by the Company and may also prove to be more successful than the Company in production and marketing. In addition, academic, government and industry-based research is intense, resulting in considerable competition in obtaining qualified research personnel, submitting patent filings for protection of intellectual property rights and establishing corporate strategic alliances. There can be no assurance that research, discoveries and commercial developments by others will not render any of the Company's programs or potential products noncompetitive. MANUFACTURING The Company manufactures its rProtein A-TM- product line from a recombinant strain of E. COLI. Certain fermentation and recovery operations are carried out by a third party under a supply agreement. The purification, immobilization, packaging and quality control testing of rProtein A-TM- are conducted at the Company's facilities in Needham, Massachusetts. See "Properties." The Company maintains an active quality assurance effort to support the regulatory requirements of its customers. GOVERNMENT REGULATION Government regulations play a significant role in the research, development, production and commercialization of pharmaceutical, chemical and biochemical products. While the Company's rProtein A-TM-products do not require FDA approval for sale, many of the Company's customers are required to obtain the approval of the FDA and similar health authorities in foreign countries for the clinical testing and commercial sale of biopharmaceuticals for human use. FDA regulations apply not only to health care products, but also to the process and production facilities used to produce such products. These regulations are called FDA current Good Manufacturing Practices ("cGMP"). The Company is often required to adopt aspects of cGMP regulations to support its customer's use of its products. In support of its customers' requirements to comply with FDA regulations regarding the use of its products, the Company strives to maintain production and documentation procedures for them that parallel certain parts of the FDA cGMP requirements. In addition to the regulatory framework for clinical trials and product approvals, the Company is subject to regulation under federal, state and local law, including requirements regarding occupational safety, laboratory practices, environmental protection and hazardous substance control, and may be subject to other present and possible future local, state, federal and foreign regulation. The Company is also subject to various laws and regulations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances, including radioactive compounds, used in connection with the Company's research. Compliance with laws and regulations relating to the protection of the environment has not had a material effect on capital expenditures or the competitive position of the Company. However, the extent of government regulation which might result from any legislative or administrative action cannot be accurately predicted. 9 PATENTS, LICENSES AND PROPRIETARY RIGHTS The Company's policy is to seek patent protection for certain of its proprietary products. The Company pursues patent protection in the United States and files corresponding patent applications in certain foreign jurisdictions. The Company believes that patent protection is an important element in the protection of its competitive and proprietary position, but other elements, including trade secrets and customer service, are of at least equal importance. The Company owns or has exclusive rights to more than 12 U.S. patents and corresponding foreign equivalents. In addition, the Company has 8 U.S. patent applications pending. The invalidation of key patents owned by the Company or the failure of patents to issue on pending patent applications could create increased competition, with potential adverse effects on the Company and its business prospects. The Company also relies upon trade secret protection for its confidential and proprietary information. There can be no assurance that others will not independently develop substantially equivalent proprietary information or techniques, gain access to the Company's trade secrets or disclose such technology, or that the Company can effectively protect its trade secrets. The unauthorized disclosure of the Company's trade secrets could have a material adverse effect on the Company's business. The Company's policy is to require each of its employees, consultants and significant scientific collaborators to execute confidentiality agreements upon the commencement of an employment or consulting relationship with the Company. These agreements generally provide that all confidential information developed or made known to the individual during the course of the individual's relationship with the Company is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees and consultants, the agreements generally provide that all inventions conceived by the individual in the course of rendering services to the Company shall be the exclusive property of the Company. There can be no assurance, however, that these agreements will provide meaningful protection or adequate remedies for the Company's trade secrets in the event of unauthorized use or disclosure of such information. CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS ADDITIONAL FINANCING REQUIREMENTS. The Company believes additional long-term financing will be required for the development of its drug discovery programs and bioprocessing products business and to support its future operations and capital expenditures. The Company from time to time may raise additional capital through equity or debt financing or by entering into corporate partnering arrangements; however, there can be no assurances that this funding will be made available or that terms acceptable to the Company will be reached. POTENTIAL FLUCTUATIONS IN OPERATING RESULTS. The Company's operating results may vary significantly from quarter to quarter or year to year, depending on factors such as the timing of increased research and development and sales and marketing expenses, the timing and size of product orders, the introduction of new products by the Company and the capital resources of the Company's customers. The Company's current and planned expense levels are based in part on its expectations as to future revenue. Consequently, revenue or profits may vary significantly from quarter to quarter or year to year and revenue or profits in any period will not necessarily be predictive of results in subsequent periods. There can be no assurance that the Company will achieve or maintain profitability or that its revenue growth can be sustained in the future. DEPENDENCE ON KEY PERSONNEL. The Company is highly dependent on the members of its management and scientific staff, the loss of whom could have a material adverse effect on the Company. In addition, the Company believes that its future success will depend in large part upon its ability to 10 attract and retain highly skilled scientific, managerial and marketing personnel. The Company faces significant competition for such personnel from other companies, research and academic institutions, government entities and other organizations. There can be no assurance that the Company will be successful in hiring or retaining the personnel it requires for continued growth. The failure to hire and retain such personnel could materially adversely affect the Company's prospects. The Company's success will depend, in part, on attracting and maintaining key employees, successful integration of recent acquisitions, continued support from current customers, development of new customers and successful enforcement of the Company's patent and proprietary rights. INTENSE COMPETITION AND RISK OF TECHNOLOGICAL OBSOLESCENCE. The Company encounters, and expects to continue to encounter, intense competition in the sale of its current and future products. There can be no assurance that developments by others will not render the Company's products or technologies obsolete or non-competitive. Many of the Company's competitors and potential competitors have substantially greater resources, manufacturing and marketing capabilities, research and development staff and production facilities than those of the Company. EMPLOYEES As of May 29, 1998, the Company had 24 employees. Of the 24 employees, 17 were engaged in research and development and manufacturing and 7 in administrative and marketing functions. Doctorates or other advanced degrees are held by 11 of the Company's employees. Each of the Company's employees has signed a confidentiality agreement. The Company's employees are not covered by a collective bargaining agreement. ITEM 2: DESCRIPTION OF PROPERTY The Company's executive offices, research and manufacturing facilities are located at 117 Fourth Avenue in Needham, Massachusetts. The Company occupies approximately 13,000 square feet under a four year sublease. The 10,500 square feet of laboratory space located at 83 Rogers Street, Cambridge, Massachusetts has been subleased by the Company for the remaining term of the lease. ITEM 3: LEGAL PROCEEDINGS Not applicable. 11 ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders of the Company through solicitation of proxies or otherwise, during the last quarter of the fiscal year ended March 31, 1998. EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth the names, ages and positions of the executive officers of the Company:
NAME AGE POSITIONS - ------------------------------ --- ------------------------------ Walter C. Herlihy President, Chief Executive 45 Officer and Director James R. Rusche Vice President, Research and 43 Development Daniel P. Witt Vice President, Business 49 Development
WALTER C. HERLIHY, PH.D. joined the Company in March 1996 as President, Chief Executive Officer and Director in connection with the Company's merger with Glycan Pharmaceuticals, Inc. From July 1993 to March 1996, Dr. Herlihy was the President and CEO of Glycan Pharmaceuticals, Inc. From October 1981 to June 1993, he held numerous research positions at Repligen, most recently as Senior Vice President, Research and Development. Dr. Herlihy holds an A.B. degree in chemistry from Cornell University and a Ph.D. in chemistry from MIT. JAMES R. RUSCHE, PH.D. joined the Company in March 1996 as Vice President, Research and Development in connection with the Company's merger with Glycan Pharmaceuticals, Inc. From July 1994 to March 1996, Dr. Rusche was Vice President, Research and Development of Glycan Pharmaceuticals, Inc. From February 1985 to June 1994, he held numerous research positions at Repligen, most recently as Vice President, Discovery Research. Dr. Rusche holds a B.S. degree in microbiology from the University of Wisconsin, LaCrosse and a Ph.D. in immunology from the University of Florida. DANIEL P. WITT, PH.D. joined the Company in March 1996 as Vice President, Business Development in connection with the Company's merger with Glycan Pharmaceuticals, Inc. From October 1993 to March 1996, Dr. Witt was Vice President, Business Development of Glycan Pharmaceuticals, Inc. From April 1983 to September 1993, he held numerous research positions at Repligen, most recently as Vice President, Technology Acquisition. Dr. Witt holds a B.A. degree in chemistry from Gettysberg College and a Ph.D. in biochemistry from the University of Vermont. 12 PART II ITEM 5: MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION The Company's Common Stock is traded on the Nasdaq National Market under the symbol "RGEN". The following table sets forth for the periods indicated the high and low closing prices for the Common Stock as reported by Nasdaq:
HIGH LOW --------- --------- FISCAL YEAR 1997: First Quarter......................................................... $ 1.484 $ .938 Second Quarter........................................................ 1.313 .500 Third Quarter......................................................... 1.484 1.063 Fourth Quarter........................................................ 1.750 1.125 FISCAL YEAR 1998: First Quarter......................................................... $ 1.500 $ 1.000 Second Quarter........................................................ 1.375 .969 Third Quarter......................................................... 1.118 .719 Fourth Quarter........................................................ 1.250 .969
On June 22, 1998, the reported closing price of the Common Stock as reported by Nasdaq was $1.50 per share. STOCKHOLDERS AND DIVIDENDS As of June 22, 1998, there were approximately 1,085 stockholders of record of the Company's Common Stock, excluding stockholders whose shares were held in nominee name. The Company has not paid any dividends since its inception and does not intend to pay any dividends on its Common Stock in the foreseeable future. RECENT SALES OF SECURITIES Pursuant to the Stock and Warrant Purchase Agreement dated as of December 31, 1997 (the "Purchase Agreement") among the Company and Biotechnology Value Fund, L.P., certain of its affiliates, and Four Partners, L.P. (collectively, the "Purchasers"), the Purchasers invested an aggregate of $2 million in exchange for 2,000,000 shares of the Company's Common Stock (the "Common Shares"), and warrants to purchase at any time prior to December 31, 2004 an aggregate of 750,000 shares of Common Stock at a price per share of $1.50. The sale of the Common Shares and Warrants was made in reliance upon the exemption from registration under section 4 (2) of the Securities Act as transactions not involving any public offering. The Company has reason to believe that the Purchasers were "accredited investors" (as such term is defined in Regulation D of the Securities Act), were familiar with and had access to information concerning the operations and financial conditions of the Company, and were acquiring the securities for investment and not with a view to the distribution thereof. No underwriter was engaged in connection with the foregoing issuance of securities. The Company intends to file a registration statement with the SEC on Form S-3 on or before June 30, 1998 for the resale of the Common Shares. 13 ITEM 6: SELECTED CONSOLIDATED FINANCIAL DATA The following selected financial data are derived from the consolidated financial statements of the Company which have been audited by Arthur Andersen LLP, independent public accountants. The selected financial data set forth below should be read in conjunction with the consolidated financial statements of the Company and the related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this report.
YEARS ENDED MARCH 31, ----------------------------------------------------- 1998 1997 1996 1995 1994 --------- --------- --------- --------- --------- (IN THOUSANDS , EXCEPT PER SHARE AMOUNTS) OPERATING STATEMENT DATA: Revenues: Research and development........................ $ 917 $ 1,180 $ 7,949 $ 10,988 $ 19,392 Product......................................... 1,114 1,554 1,874 3,885 4,947 Investment and other............................ 354 1,068 1,036 2,069 2,494 --------- --------- --------- --------- --------- 2,385 3,802 10,859 16,942 26,833 --------- --------- --------- --------- --------- Costs and expenses: Research and development........................ 1,420 1,378 11,980 31,012 35,919 Cost of product sales........................... 480 537 1,516 1,535 3,933 Selling, general and administrative............. 1,281 1,940 4,925 4,673 6,206 Restructuring charge (credit)..................... -- (111) 3,567 11,300 -- Charge for acquired research and development.... -- 549 334 -- -- Interest........................................ -- -- 58 372 312 --------- --------- --------- --------- --------- Total costs and expenses........................ 3,181 4,293 22,380 48,892 46,370 --------- --------- --------- --------- --------- Net loss........................................ $ (796) $ (491) $ (11,521) $ (31,950) $ (19,537) --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Net loss per common share....................... $ (0.05) $ (0.03) $ (0.75) $ (2.08) $ (1.53) --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Weighted average common shares outstanding........ 16,502 15,678 15,370 15,356 12,788 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- 1998 1997 1996 1995 1994 --------- --------- --------- --------- --------- (IN THOUSANDS) BALANCE SHEET DATA: Cash and investments............................ $ 4,726 $ 3,538 $ 7,222 $ 15,302 $ 29,215 Working capital................................. 5,377 3,990 4,154 9,070 32,517 Total assets.................................... 6,513 5,621 9,231 31,330 59,611 Long-term debt.................................. -- -- -- -- -- Accumulated deficit............................. (124,320) (123,524) (123,042) (111,520) (79,570) Stockholders' equity............................ 6,124 4,919 4,809 15,576 46,737
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Repligen is a biopharmaceutical company engaged in the research and development of technologies for drug discovery. The Company also devotes a portion of its resources to proprietary drug discovery projects. In addition, the Company receives income from the sale of products that are manufactured by the Company and from its investments. The Company has incurred operating losses since its inception in 1981. As of March 31, 1998, its accumulated deficit was $124,320,000. During fiscal 1996, the Company completed a major downsizing and restructuring of its activities, including the termination of certain research programs, which significantly reduced its level of operating expenses and its cash burn rate. These actions were completed in an effort to stabilize Repligen's financial condition and preserve its cash resources. The Company believes it has adequate cash reserves at March 31, 1998 to finance its operations for at least the next twenty-four months. 14 RESULTS OF OPERATIONS FISCAL YEAR ENDED MARCH 31, 1998 COMPARED WITH FISCAL YEAR ENDED MARCH 31, 1997 REVENUES. Total revenues for fiscal 1998 were $2,385,000 as compared to $3,802,000 in fiscal 1997, a decrease of $1,417,000. Research and development revenues for fiscal 1998 totaled $917,000, including revenues relating to drug discovery collaboration arrangements with pharmaceutical partners, licensing revenue, receipt of a milestone payment, and revenue generated from two Phase I Small Business Innovation Research (SBIR) grants from the National Institutes of Health. The reduction in research and development revenues of $263,000 or 22% from fiscal 1997 levels is primarily attributable to the termination of its collaborations with Eli Lilly and Company ("Lilly") and Repligen Clinical Partners, L.P. (the "Partnership"). Product revenues for fiscal 1998 were $1,114,000 compared to $1,554,000 in fiscal 1997. The decrease in the product sales volume is largely attributed to the timing of large production scale orders of Protein A offset by an increase in sales of reagent products. Investment income decreased by $44,000 from fiscal 1997 levels due primarily to lower average funds available for investment during fiscal 1998. Other revenues for the fiscal 1998 period decreased by approximately $660,000 from the comparable fiscal 1997 period primarily due to the one-time sale of equipment and furnishings by the Company for $317,000 and the one-time sale of non-investment securities held by the Company for approximately $300,000 as part of the restructuring. EXPENSES. During fiscal 1998, total expenses of $3,181,000 were significantly lower than fiscal 1997 expenses of $4,293,000. Higher level of expenses in fiscal 1997 was primarily a result in expenditures associated with the Company's former facility in Cambridge. Research and development expenses for fiscal 1998, totaling $1,420,000, increased by $41,000, or 3%, from fiscal 1997 levels. The Company anticipates that research and development expenses will continue to increase significantly as the Company increases its investment in internal drug discovery programs during fiscal 1999. Cost of product sales for fiscal 1998 decreased by $57,000 from the prior fiscal year. Cost of product sales in fiscal 1998 were 43% of product revenues versus 35% of product revenues for fiscal 1997. The decrease is the result of a change in product mix between fiscal years and the result of the realization of inventory in fiscal 1997 that had previously been reserved for in fiscal 1996. Selling, general and administrative expenses for fiscal 1998 were $1,281,000, a decrease from fiscal 1997 of $659,000. This decrease is a result of the Company's restructuring efforts that took place during fiscal 1997 and 1996. As a result of the Company's relocation to smaller office and laboratory space, the Company has realized savings in rent and related facility costs. In addition, this decrease in expenses is a result the reduction of administrative personnel and related expenses that took place during fiscal 1997. In the year ended March 31, 1997, the Company acquired, in exchange for the Company's common stock, all of the outstanding shares of ProsCure, Inc., a subsidiary of Glycan Pharmaceuticals, Inc. ("Glycan"). ProsCure has licensed the rights to certain drug discovery technologies and lead compounds for application to the field of cancer from Glycan, a wholly owned subsidiary of the Company. Since the technology acquired will require further development by the Company, this acquisition was accounted for as a purchase, with the excess of the purchase price and acquisition costs over the fair value of the assets acquired of approximately $549,000, charged to operations. FISCAL YEAR ENDED MARCH 31, 1997 COMPARED WITH FISCAL YEAR ENDED MARCH 31, 1996 REVENUES. Total revenues for fiscal 1997 were $3,802,000 as compared to $10,859,000 in fiscal 1996, a decrease of $7,057,000. Research and development revenues for fiscal 1997, totaling 15 $1,180,000, decreased by $6,769,000 or 85% from fiscal 1996 levels. This decrease reflects reduced revenues from its collaborations with Eli Lilly and Company ("Lilly") and Repligen Clinical Partners, L.P. (the "Partnership"). Lilly terminated its collaboration and licensing agreement with the Company in September 1995, with respect to the joint development of the CD11b program. Under the terms of the agreement, the entire CD11b program, including preclinical and clinical data packages for product candidates, were returned to the Company. Revenues recognized under the Lilly agreement totaled $62,000 in fiscal 1997 and $2,613,000 in fiscal 1996. The decrease in funding from the Partnership reflects a decrease in billings based on the lack of resources of the Partnership and the Company's termination of its arrangement with the Partnership regarding the development and marketing of the rPF4 program in April 1996. Research and development revenues recognized under the rPF4 program totaled $190,000 and $2,693,000 in fiscal 1997 and fiscal 1996, respectively. In addition, during fiscal 1996, a one-time $2,000,000 fee was paid by Genetics Institute, Inc. for the assignment of intellectual property and the transfer of certain reagents associated with the Company's immune modulation technology and a one-time $525,000 license fee was paid by Genentech, Inc. to sublicense the Company's patent rights for CD11a and CD18. Product revenues for fiscal 1997 were $1,554,000 compared to $1,874,000 in fiscal 1996. The decrease of $320,000 or 17% was due to the discontinuance by Repligen of contract manufacturing and sales of diagnostic reagents that took place during fiscal year 1996. During fiscal year 1996 contract service revenues and sales of diagnostic reagents of $758,000 were generated by the Company. This reduction was offset by an increase in product sales volume of the Company's rProtein A-TM- and reagent products in fiscal year 1997. Investment income decreased by $469,000 from fiscal 1996 levels due primarily to lower average funds available for investment in fiscal 1997. Other revenues for the fiscal 1997 period increased by $501,000 from the comparable fiscal 1996 period primarily due to the one-time sale of equipment and furnishings by the Company for $317,000 and the one-time sale of non-investment securities held by the Company for approximately $300,000, offset by the decrease in management fees received from the Partnership. EXPENSES. During fiscal 1997, total expenses of $4,293,000 were significantly lower than fiscal 1996 expenses of $22,380,000. This decrease resulted from the Company's restructuring in 1996 and 1997. During the fourth quarter of fiscal 1996, the Company substantially downsized and consolidated its operations in order to stabilize the Company's financial condition and preserve its cash reserves. In fiscal 1996, the Company recorded a charge of $3,567,000 to cover severance costs and related benefits, the settlement of equipment and facility lease obligations and the write-off of certain leasehold improvements and equipment no longer being utilized, reduced in part by cash received from the sale of assets and the reversal of certain accruals no longer required due to the downsizing. The total restructuring charge of $3,567,000 included cash related expenditures of $1,246,000 and a non-cash charge of $2,321,000. The non-cash charge related to the write-off of leasehold improvements and equipment no longer being utilized, offset by the reversal of accruals no longer required. (See Note 11 of Notes to Consolidated Financial Statements). In May 1996, the Company relocated its operations from an approximately 97,000 square facility in Cambridge, Massachusetts to approximately 13,000 square feet of subleased office and laboratory space in Needham, Massachusetts. This move resulted in substantial savings in rent and related facility costs. If the move had been effective as of April 1, 1996, rent expense during the year ended March 31, 1997 would have been lower by approximately $381,000. 16 Research and development expenses for fiscal 1997, totaling $1,378,000, decreased by $10,602,000, or 88%, from fiscal 1996 levels. The decrease in expenses reflects a reduction in research and development headcount and related expenses, decreased development activities, lower expenditures for clinical trials and the Company's efforts to reduce costs. Cost of product sales for fiscal 1997 decreased by $979,000 from the prior fiscal year. Cost of product sales in fiscal 1997 were 35% of product revenues versus 81% of product revenues for fiscal 1996. The decrease is the result of a change in product mix between fiscal years and is attributable to lower margins experienced on contract service revenues in fiscal 1996 and the result of the realization of inventory in fiscal 1997 that had previously been reserved for in fiscal 1996. Selling, general and administrative expenses for fiscal 1997 were $1,940,000, a decrease from fiscal 1996 of $2,985,000. This decrease resulted from the reduction of administrative personnel and related expenses as part of the Company's cost reduction efforts. Interest expense for fiscal 1996 reflects interest incurred by the Company through May 1995 when its term loan with a bank was paid in full. In the year ended March 31, 1997, the Company acquired, in exchange for the Company's common stock, all of the outstanding shares of ProsCure, Inc., a subsidiary of Glycan Pharmaceuticals, Inc. ("Glycan"). ProsCure has licensed the rights to certain drug discovery technologies and lead compounds for application to the field of cancer from Glycan, a wholly owned subsidiary of the Company. Since the technology acquired will require further development by the Company, this acquisition was accounted for as a purchase, with the excess of the purchase price and acquisition costs over the fair valued of the assets acquired, charged to operations of approximately $549,000. In the year ended March 31, 1996, the Company issued 243,600 shares of its common stock for all of the common stock of Glycan Pharmaceuticals, Inc. ("Glycan"). The acquisition was accounted for as a purchase, with the excess of the purchase price and acquisition costs over the fair value of the assets acquired of approximately $334,000 charged to operations as the cost of acquired research and development. LIQUIDITY AND CAPITAL RESOURCES The Company's total cash, cash equivalents and marketable securities increased to $4,726,000 at March 31, 1998 from $3,538,000 at March 31, 1997. The increase reflects $2,000,000 of proceeds (before expenses) resulting from the sale of Common Stock and Warrants through a private placement that took place on December 31, 1997 and a reduction of accounts receivable and prepaid expenses of $331,000. This increase in cash was offset by the net losses incurred in the year ended March 31, 1998 of approximately $796,000, an increase in inventory of $219,000 resulting from increased manufacturing and the development and production of new Protein A products during fiscal 1998, and the reduction of accounts payable and accrued expenses of $181,000. Working capital increased to $5,635,000 at December 31, 1997 from $3,990,000 at March 31, 1997. Capital expenditures for fiscal 1998 and 1997 were $114,000 and $429,000, respectively. The capital expenditures in both fiscal 1998 and fiscal 1997 reflect leasehold improvements and the purchase of research and development equipment. 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. 17 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 can not be assured of the continuation of these collaborations and any future payments. The Company has funded operations primarily with cash derived from the sales of its equity securities, revenue derived from research and development contracts, product sales and investment income. While the Company anticipates that its cost of operations will increase in fiscal 1999 as it continues to expand its investment in proprietary product development, the Company believes it has sufficient cash equivalents and marketable securities to satisfy its working capital and capital expenditure requirements for the next twenty-four months. Should the Company need to secure additional financing to meet its future liquidity requirements, there can be no assurances that the Company will be able to secure such financing, or that such financing, if available, will be on terms favorable to the Company. The Company has completed an assessment of its exposure to the "Year 2000" computer problem. Based on this assessment, the Company believes that no critical software systems of the Company will be impacted by this situation. Systems currently used by the Company are already "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 will not have a material impact on the Company's business operations or financial condition. On February 23, 1998, Nasdaq initiated new requirements for listing on the Nasdaq National Market. Currently, the Company believes it is in compliance with all of the new requirements. There can be no assurance, however, that the Company will be able to continue to satisfy all the requirements issued by Nasdaq or that the Company's Common Stock will continue to be listed on the Nasdaq National Market. Should it occur, the delisting of the Company's Common Stock from the Nasdaq National Market could have a material adverse effect on the Company's business, results of operations and financial condition. ITEM 8: FINANCIAL STATEMENTS All financial statements required to be filed hereunder are filed as an exhibit hereto, are listed under item 14 (a) (1) and are incorporated herein by reference. ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding the Company's directors will be set forth under the captions "Elections of Directors" and "The Board of Directors and its Committees" in the Company's definitive proxy statement for its annual meeting of stockholders to be held on September 10, 1998 which will be filed with the Securities and Exchange Commission within 120 days of March 31, 1998 and is incorporated herein by reference. 18 Information regarding the Company's executive officers is contained in Part I of this report. ITEM 11. EXECUTIVE COMPENSATION Information regarding the Company's directors will be set forth under the caption "Executive Compensation" in the Company's definitive proxy statement for its annual meeting of stockholders to be held on September 10, 1998 which will be filed with the Securities and Exchange Commission within 120 days of March 31, 1998 and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information regarding the Company's directors will be set forth under the caption "Security Ownership of Certain Beneficial Owners And Management" in the Company's definitive proxy statement for its annual meeting of stockholders to be held on September 10, 1998 which will be filed with the Securities and Exchange Commission within 120 days of March 31, 1998 and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information regarding the Company's directors will be set forth under the caption "Certain Relationships and Related Transactions" in the Company's definitive proxy statement for its annual meeting of stockholders to be held on September 10, 1998 which will be filed with the Securities and Exchange Commission within 120 days of March 31, 1998 and is incorporated herein by reference. PART IV ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K The following documents are filed as part of this Annual Report on Form 10-K: (a) (1) Financial Statements: The consolidated financial statements required by this item are submitted in a separate section beginning on page F-2 of this Report, as follows:
PAGE ----- Report of Independent Accountants.............................................................. F-2 Consolidated Balance Sheets as of March 31, 1998 and 1997...................................... F-3 Consolidated Statements of Operations for the Years Ended March 31, 1998, 1997 and 1996........ F-4 Consolidated Statements of Stockholders' Equity for the Years Ended March 31, 1998, 1997, and 1996......................................................................................... F-5 Consolidated Statements of Cash Flows for the Years Ended March 31, 1998, 1997 and 1996........ F-6 Notes to Consolidated Financial Statements..................................................... F-7
(a) (2) Exhibits: The Exhibits which are filed as part of this Annual Report or which are incorporated by reference are set forth in the Exhibit Index hereto. (b) Reports on Form 8-K: No Current Reports on Form 8-K were filed by the Company during the last quarter of the period covered by this report. 19 EXHIBIT INDEX
EXHIBIT NUMBER DOCUMENT DESCRIPTION - ----------- ----------------------------------------------------------------------------------------------------------------- 3. Articles of Incorporation and By-Laws 3.1 * Restated Certificate of Incorporation, dated June 30, 1992 and filed July 13, 1992 (filed as Exhibit 4.12 to Repligen Corporation's Annual Report on Form 10-K for the year ended March 31, 1993 and incorporated herein by reference). 3.2 * By-laws (filed as Exhibit 3.4 to Repligen Corporation's Form S-1 Registration Statement No. 33-3959 and incorporated herein by reference). 4. Instruments Defining the Rights of Security Holders 4.1 * Specimen Stock Certificate (filed as Exhibit 4.2 to Repligen Corporation's Form S-1 Registration Statement No. 33-3959 and incorporated herein by reference). 4.2 + Form of Limited Partner Warrant, dated as of February 28, 1992. 4.3 + Form of Modified Limited Partner Warrant, dated as of February 28, 1992. 4.4 * Form of Amended and Restated Limited Partner Warrant (filed as Exhibit 4.13 to Repligen Corporation's Form S-4 Registration Statement No. 33-76830 and incorporated herein by reference). 4.5 * Form of Amended and Restated Class B Limited Partner Warrant (filed as Exhibit 4.14 to Repligen Corporation's Form S-4 Registration Statement No. 33-76830 and incorporated herein by reference). 4.6 * Form of Amended and Restated Fund Warrant (filed as Exhibit 4.15 to Repligen Corporation's Form S-4 Registration Statement No. 33-76830 and incorporated herein by reference). 4.7 * Form of Stock Purchase Warrant (filed as Exhibit 4.1 to Repligen Corporation's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997 and incorporated herein by reference). 10. Material Contracts 10.1 * Consulting Agreement, dated October 1, 1981, between Dr. Paul Schimmel and Repligen Corporation (filed as Exhibit 10.14 to Repligen Corporation's Form S-1 Registration Statement No. 33-3959 and incorporated herein by reference). 10.2 * Consulting Agreement, dated November 1, 1981, between Dr. Alexander Rich and Repligen Corporation (filed as Exhibit 10.15 to Repligen Corporation's Form S-1 Registration Statement No. 33-3959 and incorporated herein by reference). 10.3 * The 1992 Repligen Corporation Stock Option Plan (filed as Exhibit 4.12 to Repligen Corporation's Annual Report on Form 10-K for the year ended March 31, 1993 and incorporated herein by reference). 10.4 * Plan of Reorganization and Agreement of Merger, dated March 14, 1996, between Repligen Corporation and Glycan Pharmaceuticals, Inc. (omitting schedules and exhibits) (filed as Exhibit 10.42 to Repligen Corporation's Annual Report on Form 10-K for the year ended March 31, 1996 and incorporated herein by reference).
20
EXHIBIT NUMBER DOCUMENT DESCRIPTION - ----------- ----------------------------------------------------------------------------------------------------------------- 10.5 * Employment Agreement, dated March 14, 1996, between Repligen Corporation and Walter C. Herlihy (filed as Exhibit 10.43 to Repligen Corporation's Annual Report on Form 10-K for the year ended March 31, 1996 and incorporated herein by reference). 10.6 * Employment Agreement, dated March 14, 1996, between Repligen Corporation and James R. Rusche (filed as Exhibit 10.44 to Repligen Corporation's Annual Report on Form 10-K for the year ended March 31, 1996 and incorporated herein by reference). 10.7 * Employment Agreement, dated March 14, 1996, between Repligen Corporation and Daniel P. Witt (filed as Exhibit 10.45 to Repligen Corporation's Annual Report on Form 10-K for the year ended March 31, 1996 and incorporated herein by reference). 10.8 * Sublease Agreement dated as of May 1, 1996 between T Cell Sciences, Inc. and Repligen Corporation (filed as Exhibit 10.46 to Repligen Corporation's Annual Report on Form 10-K for the year ended March 31, 1996 and incorporated herein by reference). 10.9 * The Amended 1992 Repligen Corporation Stock Option Plan, adopted by the stockholders on September 10, 1996 (filed as Exhibit 4.1 to Repligen Corporation's Annual Report on Form 10-K for the year ended March 31, 1997 and incorporated herein by reference). 10.10 * Stock Exchange Agreement dated as of December 18, 1996 between ProsCure, Inc. Shareholders and Repligen Corporation (filed as Exhibit 10.1 to Repligen Corporation's Quarterly Report on Form 10-Q for the quarter ended December 31, 1996 and incorporated herein by reference). 10.11 * Warrant Exchange Agreement dated as of December 18, 1996 between ProsCure, Inc. Warrant holders and Repligen Corporation (filed as Exhibit 10.2 to Repligen Corporation's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997 and incorporated herein by reference). 10.12 * Stock and Warrant Purchase Agreement dated as of December 31, 1997 among the Company and Biotechnology Value Fund, L.P., certain of its affiliates, and Four Partners, L.P. and Repligen Corporation (filed as Exhibit 10.1 to Repligen Corporation's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997 and incorporated herein by reference). 21 + Subsidiaries of Repligen Corporation. 23 + Consent of Arthur Andersen LLP. 27 + Financial Data Schedule.
- ------------------------ * Previously filed with the Securities and Exchange Commission and Incorporated herein by reference. + Filed herewith. The exhibits listed above are not contained in the copy of the annual report on Form 10-K distributed to stockholders. Upon the request of any stockholder entitled to vote at the 1998 annual meeting, the Registrant will furnish that person without charge a copy of any exhibits listed above. Requests should be addressed to Repligen Corporation, 117 Fourth Avenue, Needham, MA 02494. 21 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 By: /s/ WALTER C. HERLIHY ------------------------------------------ Walter C. Herlihy, PRESIDENT AND CHIEF EXECUTIVE OFFICER Date: June 25, 1998
POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby makes, constitutes and appoints Walter C. Herlihy and Daniel P. Witt, and each of them, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign any or all amendments to this Form 10-K, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents of any of them, or any substitute or substitutes, lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE - ------------------------------ --------------------------- ------------------- /s/ ALEXANDER RICH Co-Chairman of the Board of - ------------------------------ Directors June 25, 1998 Alexander Rich, M.D. /s/ PAUL SCHIMMEL Co-Chairman of the Board of - ------------------------------ Directors June 25, 1998 Paul Schimmel, Ph.D. President, Chief Executive /s/ WALTER C. HERLIHY Officer and Director - ------------------------------ (Principal Financial and June 25, 1998 Walter C. Herlihy Accounting Officer) /s/ G. WILLIAM MILLER Director - ------------------------------ June 25, 1998 G. William Miller 22 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ----------- Report of Independent Public Accountants F-2 Consolidated Balance Sheets as of March 31, 1998 and 1997 F-3 Consolidated Statements of Operations for the Years Ended March 31, 1998, 1997 F-4 and 1996 Consolidated Statements of Stockholders' Equity for the Years Ended March 31, F-5 1998, 1997 and 1996 Consolidated Statements of Cash Flows for the Years Ended March 31, 1998, 1997 F-6 and 1996 Notes to Consolidated Financial Statements F-7
F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Repligen Corporation: We have audited the accompanying consolidated balance sheets of Repligen Corporation (a Delaware corporation) and subsidiaries as of March 31, 1998 and 1997, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended March 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Repligen Corporation and subsidiaries as of March 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1998, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Boston, Massachusetts May 12, 1998 F-2 REPLIGEN CORPORATION CONSOLIDATED BALANCE SHEETS
YEARS ENDED MARCH 31, ------------------------- ASSETS 1998 1997 - ----------------------------------------------------------------------- ----------- ------------ Current assets: Cash and cash equivalents $ 4,725,544 $ 3,465,881 Marketable securities -- 72,353 Accounts receivable, less reserves of $25,000 and $65,000, at March 31,1998 and 1997 respectively 212,857 534,929 Inventories 670,818 452,241 Prepaid expenses and other current assets 156,228 65,720 ----------- ------------ Total current assets 5,765,447 4,691,124 Property, plant and equipment, at cost: Equipment 770,512 724,564 Furniture and fixtures 40,563 28,820 Leasehold improvements 442,528 386,199 ----------- ------------ 1,253,603 1,139,583 Less--accumulated depreciation and amortization 594,719 349,112 ----------- ------------ 658,884 790,471 Restricted cash -- 50,087 Other assets, net 88,472 88,909 ----------- ------------ $ 6,512,803 $ 5,620,591 ----------- ------------ ----------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY - -------------------------------------------------------------------------------------------------- Current liabilities: Accounts payable $ 100,719 $ 168,269 Accrued expenses and other 254,312 399,988 Unearned income 33,332 133,313 ----------- ------------ Total current liabilities 388,363 701,570 Commitments and contingencies (Notes 8 and 10) Stockholders' equity: Preferred stock, $.01 par value--authorized--5,000,000 shares--issued and outstanding--none -- -- Common stock, $.01 par value--authorized--30,000,000 shares--issued and outstanding--18,001,785 shares and 16,008,211 shares at March 31, 1998 and 1997, respectively 180,017 160,082 Additional paid-in capital 130,264,048 128,318,430 Deferred compensation -- (26,447) Accumulated deficit (124,319,625) (123,533,044) ----------- ------------ Total stockholders' equity 6,124,440 4,919,021 ----------- ------------ $ 6,512,803 $ 5,620,591 ----------- ------------ ----------- ------------
The accompanying notes are an integral part of these consolidated financial statements. F-3 REPLIGEN CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, --------------------------------- 1998 1997 1996 --------- --------- ----------- Revenues: Research and development $ 916,726 $1,179,980 $ 5,424,304 Product 1,114,452 1,553,598 1,873,687 Investment income 224,913 268,645 737,536 Other 128,885 799,319 298,350 Sale of intellectual property rights -- -- 2,525,000 --------- --------- ----------- 2,384,976 3,801,542 10,858,877 --------- --------- ----------- Costs and expenses: Research and development 1,419,825 1,378,391 11,980,574 Selling, general and administrative 1,281,090 1,939,881 4,925,345 Cost of product sales 480,089 536,685 1,515,637 Restructuring charge (credit) -- (111,000) 3,567,000 Charge for purchased in-process research & development -- 548,978 333,811 Interest -- -- 58,050 --------- --------- ----------- 3,181,004 4,292,935 22,380,417 --------- --------- ----------- Net loss $(796,028) $(491,393) $(11,521,540) --------- --------- ----------- --------- --------- ----------- Basic and diluted net loss per share $ (0.05) $ (0.03) $ (0.75) --------- --------- ----------- --------- --------- ----------- Basic and diluted weighted average shares outstanding 16,501,785 15,677,998 15,370,252 --------- --------- ----------- --------- --------- -----------
The accompanying notes are an integral part of these consolidated financial statements. F-4 REPLIGEN CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
COMMON NUMBER OF STOCK ADDITIONAL COMMON $.01 PAID-IN DEFERRED ACCUMULATED SHARES PAR VALUE CAPITAL COMPENSATION DEFICIT ------------ ---------- -------------- -------------- --------------- Balance, March 31, 1995 15,357,030 153,570 126,942,925 -- (111,520,111) Net loss -- -- -- -- (11,521,540) Issuance of common stock relating to acquisition of Glycan Pharmaceuticals 243,600 2,436 332,514 -- -- Exercise of stock options 1,912 19 2,978 -- -- Issuance of warrants in connection with Repligen Clinical Partners, L.P. -- -- 415,728 -- -- ------------ ---------- -------------- ------- --------------- Balance, March 31, 1996 15,602,542 156,025 127,694,145 -- (123,041,651) Net loss -- -- -- -- (491,393) Issuance of common stock in connection with the acquisition of ProsCure, Inc. 405,669 4,057 544,921 -- -- Compensation relating to issuance of stock options -- -- 79,364 (26,447) -- ------------ ---------- -------------- ------- --------------- Balance, March 31, 1997 16,008,211 160,082 128,318,430 (26,447) (123,533,044) Net loss -- -- -- -- (796,028) Retirement of common stock issued in connection with the acquisition of ProsCure, Inc. (6,426) (65) (9,382) -- 9,447 Issuance of common stock and warrants, net of issusance costs 2,000,000 20,000 1,955,000 -- -- Compensation relating to issuance of stock option -- -- 26,447 -- ------------ ---------- -------------- ------- --------------- Balance, March 31, 1998 18,001,785 $ 180,017 $ 130,264,048 $ -- $ (124,319,625) ------------ ---------- -------------- ------- --------------- ------------ ---------- -------------- ------- --------------- TOTAL STOCKHOLDERS' EQUITY -------------- Balance, March 31, 1995 15,576,384 Net loss (11,521,540) Issuance of common stock relating to acquisition of Glycan Pharmaceuticals 334,950 Exercise of stock options 2,997 Issuance of warrants in connection with Repligen Clinical Partners, L.P. 415,728 -------------- Balance, March 31, 1996 4,808,519 Net loss (491,393) Issuance of common stock in connection with the acquisition of ProsCure, Inc. 548,978 Compensation relating to issuance of stock options 52,917 -------------- Balance, March 31, 1997 4,919,021 Net loss (796,028) Retirement of common stock issued in connection with the acquisition of ProsCure, Inc. -- Issuance of common stock and warrants, net of issusance costs 1,975,000 Compensation relating to issuance of stock option 26,447 -------------- Balance, March 31, 1998 $ 6,124,440 -------------- --------------
The accompanying notes are an integral part of these consolidated financial statements. F-5 REPLIGEN CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, ---------------------------------- 1998 1997 1996 --------- ---------- ----------- Cash flows from operating activities: Net loss $(796,028) $ (491,393) $(11,521,540) Adjustments to reconcile net loss to net cash used in operating activities-- Depreciation and amortization 245,607 172,167 1,438,356 Issuance of stock options for services 26,447 52,917 -- Equity in net loss of an affiliate -- -- 20,504 In-process research and development charge -- 548,978 333,811 Restructuring (credit) charge, non cash portion -- (111,000) 2,321,000 Changes in assets and liabilities, net of acquisition of Glycan Pharmaceuticals, Inc. Accounts receivable 322,072 (113,675) 1,279,915 Amounts due from affiliates -- 42,284 920,077 Inventories (218,577) 248,983 512,155 Prepaid expenses and other current assets 9,493 22,834 866,212 Accounts payable (67,550) (377,860) (678,022) Accrued expenses and other (145,676) (3,209,893) (4,592,680) Unearned income (99,981) (21,685) (203,000) --------- ---------- ----------- Net cash used in operating activities (724,193) (3,237,344) (9,303,212) --------- ---------- ----------- Cash flows from investing activities: Decrease in marketable securities 72,353 205,762 1,202,597 Acquisition of Glycan Pharmaceuticals, Inc. -- -- (144,836) Purchases of property, plant and equipment, net (114,021) (429,070) (463,378) (Increase) decrease in restricted cash 50,087 (50,087) 1,000,000 Proceeds from a note receivable from affiliate -- -- 4,620,000 Decrease in other assets 437 32,480 412,857 --------- ---------- ----------- Net cash provided by (used in) investing activities 8,856 (240,915) 6,627,240 --------- ---------- ----------- Cash flows from financing activities: Proceeds from issuance of common stock and warrants, net of issuance costs 1,975,000 -- 418,725 Payment of term loan to a bank -- -- (4,620,000) --------- ---------- ----------- Net cash provided by (used in) financing activities 1,975,000 -- (4,201,275) --------- ---------- ----------- Net increase (decrease) in cash and cash equivalents 1,259,663 (3,478,259) (6,877,247) Cash and cash equivalents, beginning of year 3,465,881 6,944,140 13,821,387 --------- ---------- ----------- Cash and cash equivalents, end of year $4,725,544 $3,465,881 $ 6,944,140 --------- ---------- ----------- --------- ---------- ----------- Supplemental disclosure of cash flow information: Cash paid for interest $ -- $ -- $ 58,050 --------- ---------- ----------- --------- ---------- -----------
The accompanying notes are an integral part of these consolidated financial statements. F-6 REPLIGEN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF OPERATIONS Repligen Corporation and subsidiaries ("Repligen" or the "Company") is engaged in the development of a new class of synthetic drugs designed to block important protein-carbohydrate and protein-protein interactions. Clinical experience with complex natural products and monoclonal antibodies has shown that many of these interactions are important in disease, although it has not been possible to identify easily synthesized organic compounds for these types of targets. Repligen is developing technologies to discover drugs which can block protein-macromolecule interactions including methods for the rapid synthesis of chemical compound libraries with "natural product-like" complexity and high throughput screening assays based on specific biological targets. Repligen also manufactures and markets a line of products for the production of monoclonal antibodies intended for human clinical use. These products are based on recombinant Protein A for which Repligen holds patents in the United States and major foreign markets. In addition, the Company has licensed certain intellectual property pertaining to its former programs on biological products. During fiscal 1997, the Company issued 405,669 shares of its common stock for all of the outstanding stock of ProsCure, Inc. ("ProsCure"). The acquisition was accounted for as a purchase, with the excess of the purchase price and acquisition costs over the fair value of the assets acquired of approximately $549,000 charged to operations as the cost of acquired research and development in process. The Company acquired assets having a fair value of approximately $170,000, consisting primarily of cash and receivables. Results of operations for ProsCure are included in the consolidated financial statements of the Company, since March 14, 1996, as ProsCure is a subsidiary of Glycan Pharmaceuticals, Inc. Unaudited pro forma information with respect to ProsCure's pre-acquisition operating results has not been presented as it is not material. On March 14, 1996, the Company issued 243,600 shares of its common stock for all of the common stock of Glycan Pharmaceuticals, Inc. ("Glycan"). The acquisition was accounted for as a purchase, with the excess of the purchase price and acquisition costs over the fair value of the assets acquired of approximately $334,000 charged to operations as the cost of acquired research and development in process. The Company acquired assets having a fair value of approximately $296,000, consisting primarily of cash and equipment, and assumed liabilities of approximately $295,000. Results of operations for Glycan are included in the consolidated financial statements of the Company since the date of acquisition. Unaudited pro forma information with respect to Glycan's pre-acquisition operating results has not been presented as it is not material. The Company has incurred significant operating losses since its inception and underwent significant restructuring of its operations in fiscal 1996 (see Note 12). The Company continues to be subject to certain risks common to biotechnology companies in similar stages of development, including extensive government regulation, uncertainty of market acceptance, limited manufacturing, marketing and sales experience and uncertainty in future profitability. F-7 REPLIGEN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES The accompanying consolidated financial statements reflect the application of certain accounting policies described in this note and elsewhere in the accompanying notes to consolidated financial statements. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS 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. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, ProsCure, Inc. and Glycan Pharmaceuticals, Inc. All material intercompany accounts and transactions have been eliminated in consolidation. REVENUE RECOGNITION 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 the development contract, which approximates when work is performed and costs are incurred. In addition, under certain contracts, the Company recognizes research and development revenues as milestones are achieved. Unearned income represents amounts received prior to recognition of revenue. Research and development expenses in the accompanying consolidated statements of operations include funded and unfunded expenses. The Company recognizes revenue related to product sales upon shipment of the product. Revenues recognized from the one-time sale of equipment and non investment securities are also included as other revenue during the year ended March 31, 1998 and 1997. In fiscal 1997 and 1996, other revenue includes the management fee received from Repligen Clinical Partners, L.P. The management fee revenue is recognized as earned (see Note 11). DEPRECIATION AND AMORTIZATION The Company provides for depreciation and amortization by charges to operations in amounts estimated to allocate the cost of fixed assets over their estimated useful lives, on a straight-line basis, as follows:
DESCRIPTION LIFE - ----------------------------------- --------------------------------------------------------------------- Equipment.......................... 5 years Furniture and fixtures............. 5-7 years Leasehold improvements............. Shorter of term of the lease or estimated useful life
F-8 REPLIGEN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EARNINGS 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 net loss per share represents net loss divided by the weighted average number of common shares outstanding during the period. The dilutive effect of 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 for 1998, 1997 and 1996 exclude the potential common shares from warrants and stock options because to do so would have been antidilutive for the years presented. The potential common shares prior to application of the treasury stock method in 1998, 1997 and 1996 were 3,354,450, 2,568,798 and 3,132,996 shares, respectively. FAIR VALUE OF FINANCIAL INSTRUMENTS SFAS No. 107, DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, requires disclosure about the fair value of financial instruments. The carrying amounts of the Company's cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term nature of these instruments. CONCENTRATIONS OF CREDIT RISK Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company's cash equivalents are invested in financial instruments with high credit ratings. Concentration of credit risk with respect to accounts receivable is limited to customers to whom the Company makes significant sales. The Company does not believe significant risk exists at March 31, 1998. To control credit risk, the Company performs regular credit evaluations of its customers' financial condition and maintains allowances for potential credit losses. 3. CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES The Company accounts for investments in accordance with SFAS No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES. Under SFAS No. 115, investments for which the Company has the positive intent and ability to hold to maturity, consisting of cash equivalents and marketable securities, are reported at amortized cost, which approximates fair market value. These securities include cash, cash equivalents and corporate bonds with maturities of less than one year. The F-9 REPLIGEN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES (CONTINUED) estimated fair market value of marketable securities is based primarily on market quotations. Cash, cash equivalents and marketable securities consist of the following:
YEAR ENDED MARCH 31, -------------------------- 1998 1997 ------------ ------------ Cash and cash equivalents Cash.............................................................................................. $ 225,940 $ 190,174 Money markets..................................................................................... 292,624 542,139 Commercial paper.................................................................................. 3,708,580 2,733,568 U.S. Government and Agency securities............................................................. 498,200 -- ------------ ------------ Total cash and cash equivalents............................................................... $ 4,725,344 $ 3,465,881 ------------ ------------ ------------ ------------ Marketable securities Equity securities................................................................................. $ -- $ 60,000 U.S. Government and Agency securities............................................................. -- 12,353 ------------ ------------ Total Marketable securities................................................................... $ -- $ 72,353 ------------ ------------ ------------ ------------
4. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market. Work-in-process and finished goods inventories consist of material, labor, outside processing costs and manufacturing overhead. Inventories at March 31, 1998 and 1997 consist of the following:
YEAR ENDED MARCH 31, ---------------------- 1998 1997 ---------- ---------- Raw materials and work-in-process..................................................................... $ 388,727 $ 298,287 Finished goods........................................................................................ 282,091 153,954 ---------- ---------- Total............................................................................................. $ 670,818 $ 452,241 ---------- ---------- ---------- ----------
5. ACCRUED EXPENSES Accrued expenses consisted of the following:
YEAR ENDED MARCH 31, ---------------------- 1998 1997 ---------- ---------- Payroll and payroll-related costs..................................................................... $ 60,371 $ 128,399 Professional and consulting fees...................................................................... 113,000 188,589 Other accrued expenses................................................................................ 80,941 83,000 ---------- ---------- Total............................................................................................. $ 254,312 $ 399,988 ---------- ---------- ---------- ----------
6. INCOME TAXES The Company accounts for income taxes under SFAS No. 109, ACCOUNTING FOR INCOME TAXES. At March 31, 1998, the Company had net operating loss carryforwards for income tax purposes of F-10 REPLIGEN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 6. INCOME TAXES (CONTINUED) approximately $91,300,000. The Company also had available tax credit carryforwards of approximately $4,800,000 at March 31, 1998 to reduce future federal income taxes, if any. Net operating loss carryforwards and available tax credits are subject to review and possible adjustment by the Internal Revenue Service and may be limited in the event of certain changes in the ownership interest of significant stockholders. The net operating loss carryforwards and tax credit carryforwards are approximately as follows:
NET OPERATING LOSS TAX CREDIT EXPIRATION DATE CARRYFORWARDS CARRYFORWARDS - -------------------------------------------------------------------------- -------------- -------------- 1999...................................................................... $ 400,000 $ 32,000 2000...................................................................... 1,000,000 104,000 2001...................................................................... 1,300,000 109,000 2002...................................................................... 2,500,000 73,000 2003...................................................................... 4,800,000 346,000 2004-2013................................................................. 81,300,000 4,136,000 -------------- -------------- Total..................................................................... $ 91,300,000 $ 4,800,000 -------------- -------------- -------------- --------------
The deferred tax asset consists of the following:
YEAR ENDED MARCH 31, ---------------------------- 1998 1997 ------------- ------------- Temporary differences....................................................... $ 3,900,000 $ 5,500,000 Operating loss carryforwards................................................ 36,500,000 35,048,000 Tax credit carryforwards.................................................... 4,840,000 4,800,000 ------------- ------------- 45,240,000 45,348,000 Valuation allowance......................................................... (45,240,000) (45,348,000) ------------- ------------- $ -- $ -- ------------- ------------- ------------- -------------
A full valuation allowance has been provided, as it is uncertain if the Company will realize the deferred tax asset. 7. COMMON STOCK On December 31, 1997, the Company completed a $2.0 million private placement of its securities. The Company received net proceeds of $1.975 million for the issuance of 2,000,000 shares of common stock and warrants to purchase an aggregate of 750,000 shares of common stock at a price of $1.50 per share. In connection with the initial capitalization of the Repligen Clinical Partners, L.P. ("the Partnership"), the Company issued warrants to purchase common stock of Repligen to the limited partners of the Partnership (the "Original Warrants"). In June 1994, Repligen completed an exchange pursuant to which a majority of the holders of Original Warrants exchanged their Original Warrants for new warrants (the "Exchange Warrants"). Subsequently, in March 1995, Repligen offered to modify the majority of the remaining Original Warrants and the Exchange Warrants. Each holder of an F-11 REPLIGEN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. COMMON STOCK (CONTINUED) outstanding warrant who was not in default under its obligations to the Partnership was free to accept or reject such modifications. As of March 31, 1998, 620 of the 711.5 nondefaulted limited partnership units had accepted the modifications. Accordingly, as of that date, there were issued and outstanding Original Warrants to purchase 75,400 shares of the Company's common stock at $22.73 per share, modified Original Warrants to purchase 163,850 shares of the Company's common stock at $9.00 per share, Exchange Warrants to purchase 189,950 shares of the Company's common stock at $9.00 per share and modified Exchange Warrants to purchase 1,653,250 shares of the Company's common stock at $2.50 and $3.50 per share. These warrants expire between 1999 and 2001. At March 31, 1998, common stock reserved for issuance was as follows:
RESERVED FOR SHARES - ------------------------------------------------------------------------------------------------------------------ ---------- Incentive and nonqualified stock option plans..................................................................... 3,353,277 Warrants granted in connection with the Repligen Clinical Partners, L.P. offering................................. 2,082,450 Warrants granted in connection with the private placement with BVF and affiliates................................. 750,000 ---------- 6,185,727 ---------- ----------
8. COMMITMENTS The Company leases their facilities. Obligations under noncancellable operating leases as of March 31, 1998 are approximately as follows:
YEAR ENDING MARCH 31, - ---------------------------------------------------------------------------------------------- 1999.......................................................................................... $ 281,000 2000.......................................................................................... 281,000 2001.......................................................................................... 158,000 2002.......................................................................................... 74,000 ---------- Total minimum lease payments.................................................................. $ 794,000 ---------- ----------
Rent expense charged to operations under operating leases was approximately $399,000, $832,000 and $2,932,000 for the years ended March 31, 1998, 1997 and 1996, respectively. 9. STOCK OPTION PLANS The Company has three stock option plans. The plans authorize the grant of either incentive stock options or nonqualified stock options. Incentive stock options are granted to employees at the fair market value at the date of grant. Nonqualified stock options are granted to employees or nonemployees. The options generally vest over four or five years and expire no more than 10 years from the date of grant. As of March 31, 1998, the Company had available for grant options to purchase 2,831,277 shares of common stock. F-12 REPLIGEN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. STOCK OPTION PLANS (CONTINUED) A summary of stock option activity under all plans is as follows:
YEARS ENDED MARCH 31, -------------------------------------------------------------------------- 1998 1997 1996 ----------------------- ----------------------- ------------------------ OPTION OPTION OPTION NO. OF PRICE NO. OF PRICE NO. OF PRICE SHARES PER SHARE SHARES PER SHARE SHARES PER SHARE --------- ------------ --------- ------------ ---------- ------------ Outstanding at beginning of period..................... 486,348 $ 0.50-12.45 953,046 $ 0.05-19.25 1,291,730 $ 0.05-19.25 Granted............................................ 117,500 1.00-1.50 180,500 .50- 1.37 454,550 1.25-2.44 Exercised.......................................... -- -- -- -- (1,912) 1.57 Forfeited.......................................... 81,848 1.25-2.75 (647,198) .05-19.25 (791,322) 1.50-19.25 --------- ------------ --------- ------------ ---------- ------------ Outstanding at end of period........................... 522,000 $ 0.50-12.45 486,348 $ 0.50-12.45 953,046 $ 0.05-19.25 --------- ------------ --------- ------------ ---------- ------------ Exercisable at end of period........................... 243,422 $ 0.50-12.45 148,945 $ 0.50-12.45 343,129 $ 0.05-19.25 --------- ------------ --------- ------------ ---------- ------------ --------- ------------ --------- ------------ ---------- ------------
The Company accounts for its stock-based compensation under SFAS No. 123 ACCOUNTING FOR STOCK BASED COMPENSATION. The Company has adopted the disclosure-only alternative for employee grants and, accordingly, will continue to account for stock based compensation for employees under APB Opinion No. 25. The Company has computed the pro forma disclosures required under SFAS No. 123 for all stock options granted in 1998 and 1997 using the Black-Scholes option pricing model prescribed by SFAS No. 123. The assumptions used and the weighted average information for the years ended March 31, 1998 and 1997 are as follows:
YEAR ENDED MARCH 31, ---------------------- 1998 1997 ---------- ---------- Risk-free interest rates............................................................................. 6.76% 6.44% Expected dividend yield.............................................................................. -- -- Expected lives....................................................................................... 10 years 10 years Expected volatility.................................................................................. 56% 106% Weighted-average grant date fair value of options granted during the period.......................... $1.41 $1.45 Weighted-average exercise price...................................................................... $1.28 $1.44 Weighted-average remaining contractual life of options outstanding................................... 8.4 years 8.9 years Weighted-average exercise price of options exercisable at March 31, 1998 and 1997, respectively...... $1.23 $1.84
F-13 REPLIGEN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. STOCK OPTION PLANS (CONTINUED) If compensation expense for the Company's stock option plan had been determined consistent with SFAS No. 123 pro forma net loss and net loss per share would have been as follows:
YEAR ENDED MARCH 31, ------------------------ 1998 1997 ----------- ----------- Net loss-- As reported..................................................................... $ (796,028) $ (491,393) Pro forma....................................................................... $ (908,353) $ (573,077) Basic and diluted net loss per share-- As reported..................................................................... $ (.05) $ (.03) Pro forma....................................................................... $ (.06) $ (.04)
10. SIGNIFICANT CUSTOMERS Revenues from significant customers as a percentage of the Company's total revenues were as follows:
YEAR ENDED MARCH 31, --------------------------------------- 1998 1997 1996 ----------- ------ ----------- Customer A...................................................................... -- 2% 24% *Customer B...................................................................... 1% 6% 28% Customer C...................................................................... 23% 6% --
- ------------------------ * Denotes related party 11. RELATED PARTIES In February 1992, Repligen Clinical Partners, L.P. (the "Partnership") completed a private placement of 900 limited partnership units, with net proceeds of approximately $40,300,000 in cash and notes receivable, to be received by the Partnership over a three-year period. In connection with the formation of the Partnership, the Company granted to the Partnership an exclusive license to all technology and know-how related to the manufacture, use and sale of recombinant platelet factor-4 ("rPF4") in the United States, Canada and Europe. A wholly owned subsidiary of the Company is the General Partner of the Partnership. The Company has received research and development funding from the Partnership pursuant to a Product Development Agreement, whereby the Company performed research and development work and charged the Partnership for actual costs incurred plus a 10% management fee. The Company recognized $12,000, $190,000 and $2,693,000 of such funding as revenue in fiscal 1998, 1997 and 1996, respectively. Other revenues for the years ended March 31, 1997 and 1996 included $25,000 and $311,000, respectively, representing the 10% management fee under the Product Development Agreement. Profits and losses are allocated 1% to the General Partner and 99% to the Limited Partners. The Company accounts for its investment on the equity method and has recorded losses of approximately $21,000 as its share of the losses from the Partnership in the accompanying consolidated statements of operations for the years ended March 31, 1996. Although the Company was F-14 REPLIGEN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. RELATED PARTIES (CONTINUED) allocated a loss of approximately $1,000 and $2,400 for the years ended March 31, 1998 and 1997, respectively, the Company had previously written down all of its original investment. In April 1996, the Company terminated its arrangements with the Partnership regarding the development and marketing of the rPF4 program. Under the terms of the various agreements between the parties, the rights to the rPF4 technologies remain with the Partnership. 12. RESTRUCTURING OF OPERATIONS During fiscal 1996, the Company completed a significant downsizing and consolidation of its operations in an effort to stabilize its financial condition and preserve its cash resources. The restructuring included a substantial reduction in the Company's work force, the termination of several research programs and the closing of its Cambridge research and manufacturing facility. During the fourth quarter of fiscal 1996, the Company recorded a charge of $3,567,000 to cover (i) severance costs and related benefits ($333,000), (ii) the settlement of operating equipment lease and facility lease obligations ($1,991,000), (iii) the write-off of certain leasehold improvements and equipment no longer being utilized ($3,854,000), net of cash received from the sale of assets ($1,250,000) and (iv) the reversal of certain accruals no longer required ($1,533,000). In fiscal 1997, under the terms of negotiated settlement arrangements, the Company paid approximately $3,300,000 in settlement fees to the facility landlord and equipment lessors, which included the purchase price of certain leased equipment from the equipment lessors. In May 1996, certain equipment originally on lease as well as certain surplus Company owned equipment was sold at public auction for approximately $1,250,000. The obligation for the settlement payments to the lessors and the landlord, net of funds received from the sale of equipment, was reflected in the restructuring accrual at March 31, 1996. During fiscal 1997, the Company made payments of approximately $2,483,000 for amounts accrued in fiscal 1996. In addition in fiscal 1997, the Company reversed accruals of approximately $111,000 no longer required. F-15 EX-4.2 2 EXHIBIT 4.2 EXHIBIT 4.2 LIMITED PARTNER WARRANT REPLIGEN CORPORATION WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK NAME AND ADDRESS OF REGISTERED HOLDER: {NAME} {ADDRESS 1} {ADDRESS 2} {CITY, STATE, COUNTRY} {ZIP/POSTAL CODE} NO. RCP{# OF WARRANTS} {# OF SHARES} SHARES
IN CONSIDERATION OF the grant by the initial registered holder hereof (the "Initial Holder"), as a limited partner of Repligen Clinical Partners, L.P., a Delaware limited partnership (the "Partnership"), to Repligen Corporation, a Delaware corporation (the "Company"), of an option to purchase such Initial Holder's interest in the Partnership pursuant to the Purchase Agreement dated as of February 2, 1992, as amended on February 14, 1992 and as amended and restated on February 28, 1992 (and as further amended from time to time, the "Purchase Agreement") among the Company and each limited partner of the Partnership and for value received, the Company hereby grants the rights herein specified and certifies that the Initial Holder or any registered assignee of the Initial Holder (each of the Initial Holder and any such registered assignee being hereinafter referred to as the "Holder") is entitled, subject to the conditions and upon the terms of this Warrant, to purchase from the Company, at any time or from time to time during the Exercise Period (as defined in Section 1 hereof), {# OF SHARES} shares of Common Stock (as defined in Section 1 hereof). The number of shares of Common Stock to be received upon the exercise of this Warrant and the Exercise Price are subject to adjustment from time to time as hereinafter set forth. This Warrant is one of the Warrants issued in connection with the initial sale of limited partnership interests in the Partnership. 1. CERTAIN DEFINITIONS. Terms defined in the preceding paragraph and elsewhere in this Warrant have the respective meanings provided for therein. The following additional terms, as used herein, have the following respective meanings: "Act" means the Securities Act of 1933, as amended. "Closing Price" means the closing price per share of the Common Stock on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if not listed or traded on any such exchange, on the Nasdaq National Market, or if not listed or traded on any such exchange or system, the average of the bid and asked price per share on Nasdaq National Market or, if such quotations are not available, the fair market value as reasonably determined by the Board of Directors of the Company or any committee of such Board. "Common Stock" means the fully paid and nonassessable shares of common stock of the Company, par value $.01 per share, together with any other equity securities that may be issued by the Company in addition thereto or in substitution therefor, as provided herein. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exercise Period" means the period beginning on April 1, 1994 and ending on March 31, 1999. "Exercise Price" means $22.73, subject to change or adjustment pursuant to Section 8 hereof. "Nasdaq" means the National Association of Securities Dealers Automated Quotation System. "National Market" means the National Market of Nasdaq. "Reorganization Event" means (i) any capital reorganization or leveraged recapitalization of the Company or reclassification of the Common Stock (other than a subdivision, combination or reclassification of the outstanding Common Stock for which adjustment is provided in Section 8(a) hereof and other than a change in the par value of the Common Stock or an increase in the authorized capital stock of the Company not involving the issuance of any shares thereof), (ii) any consolidation of the Company with, or merger of the Company with or into, another person (including any individual, partnership, joint venture, corporation, trust or group thereof) (other than a consolidation or merger with a subsidiary of the Company in which the Company is the continuing corporation for which adjustment is provided in Section 8(a) hereof) or any sale, lease, transfer or conveyance of all or substantially all of the property and assets of the Company or (iii) the announcement or commencement by any "person" or "group" (within the meaning of Section 13(d) and Section 14(d) of the Exchange Act) of a bona fide tender offer or exchange offer in accordance with the rules and regulations of the Exchange Act to purchase, or the acquisition of securities in the Company, such that after such acquisition or proposed purchase, the acquiror "beneficially owns" or would "beneficially own" (as defined in Rule 13d-3 under the Exchange Act), securities in the Company representing 30% or more of the combined voting power of the Company's then outstanding securities having power to vote in the election of directors. "Warrant" means one of the Warrants issued by the Company in connection with the initial sale of limited partnership interests in the Partnership, including this Warrant and any Warrant or Warrants which may be issued pursuant to Section 5 hereof in substitution or exchange for or upon transfer of this Warrant, any Warrant which may be issued pursuant to Section 2 hereof upon partial exercise of this Warrant and any Warrant which may be issued pursuant to Section 6 hereof upon the loss, theft, destruction or mutilation of this Warrant. "Warrant Register" means the register maintained at the principal office of the Company, or at the office of its agent, in which the name of the Holder of this Warrant shall be registered. "Warrant Shares" means the shares of Common Stock, as adjusted from time to time, deliverable upon exercise of this Warrant. 2. EXERCISE OF WARRANT. This Warrant may be exercised, in whole or in part, at any time or from time to time during the Exercise Period, by presentation and surrender hereof to the Company at its principal office at the address set forth on the signature page hereof (or at such other address of the Company or any agent appointed by the Company to act hereunder as the Company or such agent may hereafter designate in writing to the Holder), with the purchase form annexed hereto (the "Purchase Form") duly executed and accompanied by cash or a certified or official bank check drawn to the order of "REPLIGEN CORPORATION" (or its successor in interest, if any) in the amount of the Exercise Price, multiplied by the number of Warrant Shares specified in such Purchase Form. If this Warrant should be exercised in part only, the Company or its agent shall, upon surrender of this Warrant, execute and deliver a Warrant evidencing the right of the Holder thereof to purchase the balance of the Warrant Shares purchasable hereunder. Upon receipt by the Company during the Exercise Period of this Warrant and such Purchase Form in proper form for exercise, together with proper payment of the Exercise Price at its principal office, or by its agent at its office, the Holder shall be deemed to be the holder of record of the number of Warrant Shares specified in such Purchase Form; provided, however, that if the date of such receipt by the Company or its agent is a date on which the stock transfer books of the Company are closed, such person shall be deemed to have become the record holder of such shares on the next business day on which the stock transfer books of the Company are open. The Company shall pay any and all documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of such Warrant Shares. Any Warrant issued upon partial exercise of this Warrant pursuant to this Section 2 shall be dated the date of this Warrant. 3. RESERVATION OF SHARES. The Company agrees that at all times it will keep reserved solely for issuance and delivery pursuant to the Warrants the number of shares of its Common Stock that are or would be issuable from time to time upon exercise of all Warrants issued in connection with the initial sale of limited partnership interests in the Partnership. All such shares shall be duly authorized and, when issued upon such exercise, shall be validly issued, fully paid and nonassessable, free and clear of all liens, security interests, charges and other encumbrances or restrictions on sale and free of all preemptive rights. Before taking any action that would cause an adjustment pursuant to Section 8 hereof reducing the Exercise Price below the then par value (if any) of the Warrant Shares issuable upon exercise of this Warrant, the Company will take any corporate action that may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted. 4. WARRANT SHARE REGISTRATION RIGHTS. (a) The Company has (i) prepared and filed with the Securities and Exchange Commission (the "SEC") under the Act a registration statement with respect to the Warrant Shares issuable upon exercise of all Existing Warrants issued in connection with the initial sale of limited partnership interests in the Partnership and will use its best efforts to cause such registration statement to remain effective under the Act during the Exercise Period while any of such Warrants are outstanding and (ii) register or qualify such Warrant Shares under the securities or Blue Sky laws of each jurisdiction within the United States in which such registration or qualification is necessary in connection with the issuance and delivery of such Warrant Shares to the Holders of the Warrants. (b) In connection with the registration and qualification referred to in subsection (a) of this Section 4, the Company covenants and agrees: (i) as expeditiously as possible, to prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective throughout the Exercise Period; (ii) as expeditiously as possible, to take such action as may be necessary or desirable to maintain the registration and qualification of the Warrant Shares under the securities or Blue Sky laws of the jurisdictions referred to in subsection (a) of this Section 4; and (iii) to pay all expenses incurred by the Company in complying with subsection (a) of this Section 4 and this subsection (b), including (A) all registration and filing fees, (B) all printing expenses, (C) all fees and disbursements of its counsel and independent public accountants and (D) all Blue Sky fees and expenses (including fees and disbursements of counsel). 5. EXCHANGE, TRANSFER OR ASSIGNMENT OF WARRANT. (a) If the Holder has received an opinion of counsel satisfactory to the Company that this Warrant may be freely sold or transferred without registration under the Act, this Warrant may be, at the option of the Holder, and upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, (i) exchanged for other Warrants of different denominations, entitling the Holder or Holders thereof to purchase in the aggregate the same number of Warrant Shares at the Exercise Price or (ii) if delivered together with a written notice specifying the denominations in which new Warrants are to be issued and signed by the Holder hereof, divided or combined with other Warrants that carry the same rights. (b) If the Holder has received an opinion of counsel satisfactory to the Company that this Warrant may be freely sold or transferred without registration under the Act, this Warrant may be assigned, at the option of Holder, upon surrender of this Warrant to the Company or at the office of its stock transfer agent, with the Warrant Assignment Form annexed hereto duly executed and accompanied by funds sufficient to pay any transfer tax. The Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees named in such instrument of assignment and, if the Holder's entire Interest is not being transferred or assigned, in the name of the Holder, and this Warrant shall promptly be canceled. (c) Any transfer or exchange of this Warrant shall be without charge to the Holder and any new Warrant or Warrants issued pursuant to this Section 5 shall be dated the date hereof. 6. LOST, MUTILATED OR MISSING WARRANT. Upon receipt by the Company or its agent of evidence satisfactory to it of the loss, theft or destruction of this Warrant, and of satisfactory indemnification, and upon surrender and cancellation of this Warrant if mutilated, the Company or its agent shall execute and deliver a Warrant of like tenor and date in exchange for this Warrant. 7. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or in equity, and the rights of the Holder are limited to those expressed in this Warrant. 8. ANTI-DILUTION. (a) If the Company shall fix or have fixed a record date at any time after the date hereof and before the expiration of the Exercise Period for: (i) STOCK DIVIDENDS, SUBDIVISIONS, COMBINATIONS, RECLASSIFICATIONS, ETC. (A) The declaration of a dividend or distribution on the Common Stock (or other securities deliverable hereunder) payable in shares of capital stock (whether shares of Common Stock or of capital stock of any other class), (ii) the subdivision of shares of the Common Stock into a greater number of shares, (iii) the combination of the Common Stock into a smaller number of shares or (iv) the issuance of any shares of its capital stock by reclassification of the Common Stock in connection with a consolidation or merger with a subsidiary of the Company in which the Company is the continuing corporation, then, in any such event, the Holder shall be entitled to receive the aggregate number and kind of shares which, if the Warrant had been exercised immediately prior to such record date, he would have been entitled to receive by virtue of such dividend, distribution, subdivision, combination or reclassification, and the Exercise Price shall be appropriately adjusted. Such adjustment shall be made successively whenever any event listed above shall occur. (ii) ISSUANCE AT LESS THAN CURRENT MARKET PRICE. The issuance of Common Stock (or other securities deliverable hereunder), rights, options (excluding options issued in connection with an employee stock option or similar plan) or warrants to all holders of Common Stock (or such other securities deliverable hereunder) entitling them to subscribe for or purchase Common Stock (or such other securities) at a price per share or having a conversion price per share less than the Closing Price on such record date (excluding rights or warrants that are not immediately exercisable and for which provision is made for the Holder to receive comparable rights or warrants), then the number of Warrant Shares to be received hereunder after such record date shall be determined by multiplying the number of shares receivable hereunder immediately prior to such record date by a fraction, the denominator of which shall be the number of shares of Common Stock (or such other securities deliverable hereunder) outstanding on such record date plus the number of shares of Common Stock (or such other securities) that the aggregate offering price of the total number of shares so offered for subscription or purchase would purchase at such Closing Price, and the numerator of which shall be the number of shares of Common Stock (or such other securities) outstanding on such record date plus the number of additional shares of Common Stock (or such other securities) offered for subscription or purchase, and the Exercise Price shall be appropriately adjusted. Shares of Common Stock owned by or held for the account of the Company or any subsidiary of the Company on such record date shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall become effective immediately after such record date. Such adjustment shall be made successively whenever any such event shall occur. If such rights or warrants are not so issued, the number of Warrant Shares receivable hereunder shall again be adjusted to be the number that would have been in effect had such record date not been fixed. On the expiration of such rights or warrants the number of Warrant Shares receivable hereunder shall be adjusted to be the number that would have obtained had the adjustment made upon the issuance of such rights or warrants been made upon the basis of the issuance of only the number of shares of Common Stock (or such other securities deliverable hereunder) actually issued upon the exercise of such rights or warrants. In any case in which this subsection (ii) shall require that an adjustment in the number of shares receivable hereunder or the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event issuing to the Holder of any Warrant exercised after such record date the number of Warrant Shares, if any, issuable upon such exercise over and above the number of Warrant Shares, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; PROVIDED, HOWEVER, that the Company shall deliver to such Holder a due bill or other appropriate instrument evidencing such Holder's right to receive such additional Warrant Shares upon the occurrence of the event requiring such adjustments. (iii) DISTRIBUTION OF SUBSCRIPTION RIGHTS, WARRANTS, EVIDENCES OF INDEBTEDNESS OR ASSETS. The making of a distribution to all holders of Common Stock (or other securities deliverable hereunder) (including any such distribution to be made in connection with a consolidation or merger in which the Company is to be the continuing corporation) of (A) any shares of capital stock of the Company (other than Common Stock), (B) subscription rights or warrants (excluding those for which adjustment is provided in subsection 8(a)(ii) above and excluding those that are not immediately exercisable and for which provision is made for the Holder to receive comparable subscription rights or warrants) or (C) evidences of its indebtedness or assets (excluding (x) dividends paid in or distributions of the Company's capital stock for which the number of Warrant Shares receivable hereunder shall have been adjusted pursuant to paragraph 8(a)(i) and (y) cash dividends or distributions payable out of earnings or surplus not in excess of 10% of the average Closing Price for the thirty trading days prior to the fifth day before the date of declaration) any of the foregoing being hereinafter in this paragraph (iii) called the "Securities"), then in each such case (unless the Company elects to reserve shares or other units of such Securities for distribution to each Holder upon exercise of the Warrant so that, in addition to the shares of the Common Stock (or other securities deliverable hereunder) to which each Holder is entitled, each Holder will receive upon such exercise the amount and kind of such Securities which such Holder would have received if the Company had, immediately prior to the record date for the distribution of the Securities, exercised the Warrant) the number of Warrant Shares receivable hereunder after such record date shall be determined by multiplying the number of Warrant Shares receivable hereunder immediately prior to such record date by a fraction, the denominator of which shall be the Closing Price on the trading day immediately prior to the date the Common Stock (or such other securities deliverable hereunder) trades without the right to receive such Securities, less the fair market value (as determined in the reasonable judgment of the Board of Directors of the Company and described in a statement mailed by certified mail to the Holder) of the portion of the assets or evidences of indebtedness so to be distributed to a holder of one share of the Common Stock or of such subscription rights or warrants applicable to one share of the Common Stock, and the numerator of which shall be the Closing Price of the Common Stock on such trading date; and the Exercise Price shall be appropriately adjusted. Such adjustment shall become effective immediately after such record date and shall be made successively whenever such a record date is fixed. If such distribution is not so made, the number of Warrant Shares receivable hereunder shall again be adjusted to be the number that was in effect immediately prior to such record date. In any case in which this paragraph (iii) shall require that an adjustment in the number of Warrant Shares receivable hereunder or the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event issuing to the Holder of any Warrant exercised after such record date the number of Warrant Shares, if any, issuable upon such exercise over and above the number of Warrant Shares, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; PROVIDED, HOWEVER, that the Company shall deliver to such Holder a due bill or other appropriate instrument evidencing such Holder's right to receive such additional Warrant Shares upon the occurrence of the event requiring such adjustments. (b) REORGANIZATION EVENT. (i) In case of any Reorganization Event the Company shall, as a condition precedent to the consummation of the transaction constituting, or announced as, such Reorganization Event, cause effective provisions to be made so that the Holder shall have the right immediately thereafter, by exercising this Warrant, to receive the aggregate amount and kind of shares of stock and other securities and property that were receivable upon such Reorganization Event by a holder of the number of shares' of Common Stock that would have been received immediately prior to such Reorganization Event upon exercise of this Warrant. Any such provision shall include provision for adjustments in respect of such shares of stock and other securities and property that shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 8(a). The foregoing provisions of this Section 8(b) shall similarly apply to successive Reorganization Events. (ii) The Company shall, at least twenty days before earliest of (1) the date on which a Reorganization Event occurs or (2) the date on which the Company shall agree to effect a Reorganization Event (PROVIDED that if approval of the shareholders of the Company is required in connection with such Reorganization Event then on the date of such approval and PROVIDED FURTHER that if such Reorganization Event was beyond the control of the Company, and the Company did not have knowledge twenty days before the date of such Reorganization Event, as soon as practicable thereafter), cause to be mailed to the Holder a notice describing in reasonable detail such Reorganization Event and informing the Holder of his or her rights pursuant to Section 8(b)(i) above. (c) FRACTIONAL SHARES. No fractional shares of Common Stock (or other securities deliverable hereunder) or scrip shall be issued to any Holder in connection with the exercise of this Warrant. Instead of any fractional share of Common Stock (or other securities deliverable hereunder) that would otherwise be issuable to such Holder, the Company shall pay to such Holder a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the then current Closing Price per share of Common Stock (or other securities deliverable hereunder). (d) CARRYOVER. Notwithstanding any other provision of this Section 8, no adjustment shall be made to the number of shares of Common Stock (or other securities deliverable hereunder) to be delivered to each Holder (or to the Exercise Price) if such adjustment would represent less than one percent of the number of shares to be so delivered, but any such adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustments so carried forward, shall amount to one percent or more of the number of shares to be so delivered. (e) NOTICES OF CERTAIN EVENTS. If at any time after the date hereof and before the expiration of the Exercise Period: (i) the Company authorizes the issuance to all holders of its Common Stock of (A) rights or warrants to subscribe for or purchase shares of its Common Stock or (B) any other subscription rights or warrants; or (ii) the Company authorizes the distribution to all holders of its Common Stock of evidences of its indebtedness or assets (other than cash dividends or distributions excluded from the operation of paragraph 8(a)(iii); or (iii) there shall be any capital reorganization of the Company or reclassification of the Common Stock (other than a change in par value of the Common Stock or an increase in the authorized capital stock of the Company not involving the issuance of any shares thereof) or any consolidation or merger to which the Company is a party (other than a consolidation or merger with a subsidiary in which the Company is the continuing corporation and that does not result in any reclassification or change in the Common Stock outstanding) or a conveyance or transfer of all or substantially all of the properties and assets of the Company; (iv) there shall be any voluntary or involuntary dissolution, liquidation or winding-up of the Company; or (v) there shall be any other event that would result in an adjustment pursuant to this Section 8 in the Exercise Price or the number of Warrant Shares that may be purchased upon the exercise hereof; the Company will cause to be mailed to the Holder, at least twenty days (or ten days in any case specified in clauses (i) or (ii) above) before the applicable record or effective date hereinafter specified, a notice stating (A) the date as of which the holders of Common Stock of record entitled to receive any such rights, warrants or distributions is to be determined, or (B) the date on which any such reorganization, reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding-up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record will be entitled to exchange their shares of Common Stock for securities or other property, if any, deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding-up. (f) FAILURE TO GIVE NOTICE. The failure to give the notice required by Section 8(e) hereof or any defect therein shall not affect the legality or validity of any distribution right, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding-up or the vote upon any such action. 9. OFFICERS' CERTIFICATE. Whenever the number of Warrant Shares that may be purchased on exercise of this Warrant or the Exercise Price is adjusted as required by the provisions of Section 8 hereof, the Company will forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and at the office of its agent an officers' certificate showing the adjusted number of Warrant Shares that may be purchased at the Exercise Price on exercise of this Warrant and the adjusted Exercise Price determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment and the manner of computing such adjustment. Each such officers' certificate shall be signed by the President, Chief Financial Officer or Treasurer of the Company and by the Secretary or an Assistant Secretary of the Company. Each such officers' certificate shall be made available at all reasonable times for inspection by the Holder. The Company shall, forthwith after each such adjustment, cause such certificate to be mailed to the Holder. 10. LISTING ON SECURITIES EXCHANGES. The Company will list on each national securities exchange on which any Common Stock may at any time be listed or quoted and have authorized for quotation on the National Market (if any Common Stock is then authorized for quotation thereon) all shares of Common Stock from time to time issuable upon exercise of all Warrants issued in connection with the initial sale of the limited partnership interests in the Partnership, subject to official notice of issuance (if required), and will maintain such listing or quotation so long as any other shares of its Common Stock are so listed or quoted. The Company shall so list or have authorized for quotation, and shall maintain such listing or quotation of, any other shares of capital stock of the Company issuable upon the exercise of this Warrant if and so long as any shares of capital stock of the same class are so listed or quoted. Any such listing or quotation shall be at the Company's expense. 11. AVAILABILITY OF INFORMATION. The Company shall comply with all applicable public information reporting requirements of the SEC and applicable state securities laws (including those required to make available the benefits of Rule 144 under the Act) to which it may from time to time be subject. The Company will also cooperate with each Holder of any Warrants and each holder of any Warrant Shares in supplying such information concerning the Company as may be necessary for such Holder or holder to complete and file any information reporting forms currently or hereafter required by the SEC as a condition to the availability of an exemption from the Act for the sale of any Warrants or Warrant Shares. 12. WARRANT REGISTER. The Company will register this Warrant in the Warrant Register in the name of the record holder to whom it has been distributed or assigned in accordance with the terms hereof. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof (notwithstanding any notation of ownership or other writing hereon made by anyone) for the purpose of any exercise hereof or any distribution to the Holder and for all other purposes, and the Company shall not be affected by any notice to the contrary. 13. SUCCESSORS. All of the provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of their respective successors and assigns. 14. HEADINGS. The headings of sections of this Warrant have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof. 15. AMENDMENTS. This Warrant may be amended by the affirmative vote of Holders holding Warrants to purchase not less than two-thirds of the Warrant Shares purchasable pursuant to all of the then outstanding Warrants; PROVIDED, that, except as expressly provided herein, this Warrant may not be amended, without the consent of the Holder, to change (i) any price at which this Warrant may be exercised, (ii) the period during which this Warrant may be exercised, (iii) the number or type of securities to be issued upon the exercise hereof or (iv) the provision of this Section 15. 16. NOTICES. Unless otherwise provided in this Warrant, any notice or other communication required or permitted to be made or given to any party hereto pursuant to this Warrant shall be in writing and shall be deemed made or given if delivered by hand, on the date of such delivery to such party or, if mailed, on the fifth day after the date of mailing, if sent to such party by certified or registered mail, postage prepaid, addressed to it (in the case of a Holder) at its address in the Warrant Register or (in the case of the Company) at its address set forth below, or to such other address as is designated by written notice, similarly given to each other party hereto. 17. GOVERNING LAW. This Warrant shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be construed in accordance with the laws of said State as applied to contracts made and to be performed in Delaware between Delaware residents. 18. SIGNATURES. This Warrant and any Warrant issued pursuant to the terms hereof shall be manually signed, or shall bear the facsimile signature of the President or a Vice President of the Company which shall have the same effect as if such Warrant were manually signed. IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed and attested by its duly authorized officers as of October 21, 1997. REPLIGEN CORPORATION By: ------------------------------------------ Walter C. Herlihy President and CEO Address: 117 Fourth Avenue Needham, MA 02194 Attention: Secretary
PURCHASE FORM The undersigned, _____________________ hereby irrevocably elects to exercise the within Warrant to purchase ______shares of Common Stock and hereby makes payment of $_________ in payment of the exercise price thereof. Date: ______________, 19__ ___________________________ [Signed] ___________________________ [Street Address] ___________________________ [City and State]
WARRANT ASSIGNMENT FORM FOR VALUE RECEIVED, the undersigned, _____________________, ("ASSIGNOR"), hereby sells, assigns and transfers unto Name: _______________________ ("Assignee") (Please type or print in block letters.) Address: _______________________________________ _______________________________________ Social Security or Taxpayer I.D. No.: __________
Assignor's right to purchase up to ______ shares of Common Stock represented by this Warrant and does hereby irrevocably constitute and appoint the Company and any of its officers, secretary, or assistant secretaries, as attorneys-in-fact to transfer the same on the books of the Company, with full power of substitution in the premises. Date: ___________, 199__ _______________________ [Signed]
EX-4.3 3 EXHIBIT 4.3 EXHIBIT 4.3 MODIFIED LIMITED PARTNER WARRANT REPLIGEN CORPORATION WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK NAME AND ADDRESS OF REGISTERED HOLDER: {NAME} {ADDRESS 1} {ADDRESS 2} {CITY, STATE, COUNTRY} {ZIP/POSTAL CODE} NO. RCP{# OF WARRANTS} {# OF SHARES} SHARES
IN CONSIDERATION OF the modification of the warrant to purchase common stock of Repligen Corporation, a Delaware corporation (the "Company"), dated as of February 28, 1992 the "Limited Partner Warrant" held by the initial registered holder thereof ("the Initial Holder") and for value received, the Company hereby grants the rights herein specified and certifies that the Initial Holder or any registered assignee of the Initial Holder (each of the Initial Holder and any such registered assignee being hereinafter referred to as the "Holder") is entitled, subject to the conditions and upon the terms of this Warrant, to purchase from the Company, at any time or from time to time during the Exercise Period (as defined in Section 1 hereof), {# OF SHARES} shares of Common Stock (as defined in Section 1 hereof). The number of shares of Common Stock to be received upon the exercise of this Warrant and the Exercise Price are subject to adjustment from time to time as hereinafter set forth. This Warrant is one of the Warrants issued pursuant to the Company's offer (the "Modification Offer") to reduce the exercise price and extend the exercise period under the Limited Partner Warrants, the Class B Warrant and the Fund Warrant issued by the Company in connection with the initial sale of limited partnership interests (the "Existing Warrants") in Repligen Clinical Partners, L.P., a Delaware limited partnership (the "Partnership"), and replaces the Limited Partner Warrant held by the Initial Holder. 1. CERTAIN DEFINITIONS. Terms defined in the preceding paragraph and elsewhere in this Warrant have the respective meanings provided for therein. The following additional terms, as used herein, have the following respective meanings: "Act" means the Securities Act of 1933, as amended. "Closing Price" means the closing price per share of the Common Stock on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if not listed or traded on any such exchange, on the Nasdaq National Market, or if not listed or traded on any such exchange or system, the average of the bid and asked price per share on Nasdaq National Market or, if such quotations are not available, the fair market value as reasonably determined by the Board of Directors of the Company or any committee of such Board. "Common Stock" means the fully paid and nonassessable shares of common stock of the Company, par value $.01 per share, together with any other equity securities that may be issued by the Company in addition thereto or in substitution therefor, as provided herein. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exercise Period" means the period beginning on March 29, 1995 and ending on March 31, 2000. "Exercise Price" means $9.00 per share until the Exercise Price Escalation Date at which time the Exercise Price shall mean $14.00, all subject to change or adjustment pursuant to Section 8 hereof. "Exercise Price Escalation Date" means the date 90 days after the date on which the Company notifies the Holder that the Closing Price has been greater than or equal to $18.00 for any twenty (20) out of thirty (30) consecutive trading days. "Nasdaq" means the National Association of Securities Dealers Automated Quotation System. "National Market" means the National Market of Nasdaq. "Reorganization Event" means (i) any capital reorganization or leveraged recapitalization of the Company or reclassification of the Common Stock (other than a subdivision, combination or reclassification of the outstanding Common Stock for which adjustment is provided in Section 8(a) hereof and other than a change in the par value of the Common Stock or an increase in the authorized capital stock of the Company not involving the issuance of any shares thereof), (ii) any consolidation of the Company with, or merger of the Company with or into, another person (including any individual, partnership, joint venture, corporation, trust or group thereof) (other than a consolidation or merger with a subsidiary of the Company in which the Company is the continuing corporation for which adjustment is provided in Section 8(a) hereof) or any sale, lease, transfer or conveyance of all or substantially all of the property and assets of the Company or (iii) the announcement or commencement by any "person" or "group" (within the meaning of Section 13(d) and Section 14(d) of the Exchange Act) of a bona fide tender offer or exchange offer in accordance with the rules and regulations of the Exchange Act to purchase, or the acquisition of securities in the Company, such that after such acquisition or proposed purchase, the acquiror "beneficially owns" or would "beneficially own" (as defined in Rule 13d-3 under the Exchange Act), securities in the Company representing 30% or more of the combined voting power of the Company's then outstanding securities having power to vote in the election of directors. "Warrant" means one of the Warrants issued by the Company pursuant to the Modification Offer to replace the Existing Warrants issued in connection with the initial sale of limited partnership interests in the Partnership. The term "Warrant" includes this Warrant and any Warrant or Warrants which may be issued pursuant to Section 5 hereof in substitution or exchange for or upon transfer of this Warrant, any Warrant which may be issued pursuant to Section 2 hereof upon partial exercise of this Warrant and any Warrant which may be issued pursuant to Section 6 hereof upon the loss, theft, destruction or mutilation of this Warrant. "Warrant Register" means the register maintained at the principal office of the Company, or at the office of its agent, in which the name of the Holder of this Warrant shall be registered. "Warrant Shares" means the shares of Common Stock, as adjusted from time to time, deliverable upon exercise of this Warrant. 2. EXERCISE OF WARRANT. This Warrant may be exercised, in whole or in part, at any time or from time to time during the Exercise Period, by presentation and surrender hereof to the Company at its principal office at the address set forth on the signature page hereof (or at such other address of the Company or any agent appointed by the Company to act hereunder as the Company or such agent may hereafter designate in writing to the Holder), with the purchase form annexed hereto (the "Purchase Form") duly executed and accompanied by cash or a certified or official bank check drawn to the order of "REPLIGEN CORPORATION" (or its successor in interest, if any) in the amount of the Exercise Price, multiplied by the number of Warrant Shares specified in such Purchase Form. If this Warrant should be exercised in part only, the Company or its agent shall, upon surrender of this Warrant, execute and deliver a Warrant evidencing the right of the Holder thereof to purchase the balance of the Warrant Shares purchasable hereunder. Upon receipt by the Company during the Exercise Period of this Warrant and such Purchase Form in proper form for exercise, together with proper payment of the Exercise Price at its principal office, or by its agent at its office, the Holder shall be deemed to be the holder of record of the number of Warrant Shares specified in such Purchase Form; PROVIDED, HOWEVER, that if the date of such receipt by the Company or its agent is a date on which the stock transfer books of the Company are closed, such person shall be deemed to have become the record holder of such shares on the next business day on which the stock transfer books of the Company are open. The Company shall pay any and all documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of such Warrant Shares. Any Warrant issued upon partial exercise of this Warrant pursuant to this Section 2 shall be dated the date of this Warrant. 3. RESERVATION OF SHARES. The Company agrees that at all times it will keep reserved solely for issuance and delivery pursuant to the Warrants the number of shares of its Common Stock that are or would be issuable from time to time upon exercise of all Warrants issued in connection with the initial sale of limited partnership interests in the Partnership. All such shares shall be duly authorized and, when issued upon such exercise, shall be validly issued, fully paid and nonassessable, free and clear of all liens, security interests, charges and other encumbrances or restrictions on sale and free of all preemptive rights. Before taking any action that would cause an adjustment pursuant to Section 8 hereof reducing the Exercise Price below the then par value (if any) of the Warrant Shares issuable upon exercise of this Warrant, the Company will take any corporate action that may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted. 4. WARRANT SHARE REGISTRATION RIGHTS. (a) The Company has (i) prepared and filed with the Securities and Exchange Commission (the "SEC") under the Act a registration statement with respect to the Warrant Shares issuable upon exercise of all Existing Warrants issued in connection with the initial sale of limited partnership interests in the Partnership and all Warrants issued to replace such Existing Warrants and will use its best efforts to cause such registration statement to remain effective under the Act during the Exercise Period while any of such Warrants are outstanding and (ii) register or qualify such Warrant Shares under the securities or Blue Sky laws of each jurisdiction within the United States in which such registration or qualification is necessary in connection with the issuance and delivery of such Warrant Shares to the Holders of the Warrants. (b) In connection with the registration and qualification referred to in subsection (a) of this Section 4, the Company covenants and agrees: (i) as expeditiously as possible, to prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective throughout the Exercise Period; (ii) as expeditiously as possible, to take such action as may be necessary or desirable to maintain the registration and qualification of the Warrant Shares under the securities or Blue Sky laws of the jurisdictions referred to in subsection (a) of this Section 4; and (iii) to pay all expenses incurred by the Company in complying with subsection (a) of this Section 4 and this subsection (b), including (A) all registration and filing fees, (B) all printing expenses, (C) all fees and disbursements of its counsel and independent public accountants and (D) all Blue Sky fees and expenses (including fees and disbursements of counsel). 5. EXCHANGE, TRANSFER OR ASSIGNMENT OF WARRANT. (a) If the Holder has received an opinion of counsel satisfactory to the Company that this Warrant may be freely sold or transferred without registration under the Act, this Warrant may be, at the option of the Holder, and upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, (i) exchanged for other Warrants of different denominations, entitling the Holder or Holders thereof to purchase in the aggregate the same number of Warrant Shares at the Exercise Price or (ii) if delivered together with a written notice specifying the denominations in which new Warrants are to be issued and signed by the Holder hereof, divided or combined with other Warrants that carry the same rights. (b) If the Holder has received an opinion of counsel satisfactory to the Company that this Warrant may be freely sold or transferred without registration under the Act, this Warrant may be assigned, at the option of Holder, upon surrender of this Warrant to the Company or at the office of its stock transfer agent, with the Warrant Assignment Form annexed hereto duly executed and accompanied by funds sufficient to pay any transfer tax. The Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees named in such instrument of assignment and, if the Holder's entire Interest is not being transferred or assigned, in the name of the Holder, and this Warrant shall promptly be canceled. (c) Any transfer or exchange of this Warrant shall be without charge to the Holder and any new Warrant or Warrants issued pursuant to this Section 5 shall be dated the date hereof. 6. LOST, MUTILATED OR MISSING WARRANT. Upon receipt by the Company or its agent of evidence satisfactory to it of the loss, theft or destruction of this Warrant, and of satisfactory indemnification, and upon surrender and cancellation of this Warrant if mutilated, the Company or its agent shall execute and deliver a Warrant of like tenor and date in exchange for this Warrant. 7. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or in equity, and the rights of the Holder are limited to those expressed in this Warrant. 8. ANTI-DILUTION. (a) If the Company shall fix or have fixed a record date at any time after the date hereof and before the expiration of the Exercise Period for: (i) STOCK DIVIDENDS, SUBDIVISIONS, COMBINATIONS, RECLASSIFICATIONS, ETC. (A) The declaration of a dividend or distribution on the Common Stock (or other securities deliverable hereunder) payable in shares of capital stock (whether shares of Common Stock or of capital stock of any other class), (ii) the subdivision of shares of the Common Stock into a greater number of shares, (iii) the combination of the Common Stock into a smaller number of shares or (iv) the issuance of any shares of its capital stock by reclassification of the Common Stock in connection with a consolidation or merger with a subsidiary of the Company in which the Company is the continuing corporation, then, in any such event, the Holder shall be entitled to receive the aggregate number and kind of shares which, if the Warrant had been exercised immediately prior to such record date, he would have been entitled to receive by virtue of such dividend, distribution, subdivision, combination or reclassification, and the Exercise Price shall be appropriately adjusted. Such adjustment shall be made successively whenever any event listed above shall occur. (ii) ISSUANCE AT LESS THAN CURRENT MARKET PRICE. The issuance of Common Stock (or other securities deliverable hereunder), rights, options (excluding options issued in connection with an employee stock option or similar plan) or warrants to all holders of Common Stock (or such other securities deliverable hereunder) entitling them to subscribe for or purchase Common Stock (or such other securities) at a price per share or having a conversion price per share less than the Closing Price on such record date (excluding rights or warrants that are not immediately exercisable and for which provision is made for the Holder to receive comparable rights or warrants), then the number of Warrant Shares to be received hereunder after such record date shall be determined by multiplying the number of shares receivable hereunder immediately prior to such record date by a fraction, the denominator of which shall be the number of shares of Common Stock (or such other securities deliverable hereunder) outstanding on such record date plus the number of shares of Common Stock (or such other securities) that the aggregate offering price of the total number of shares so offered for subscription or purchase would purchase at such Closing Price, and the numerator of which shall be the number of shares of Common Stock (or such other securities) outstanding on such record date plus the number of additional shares of Common Stock (or such other securities) offered for subscription or purchase, and the Exercise Price shall be appropriately adjusted. Shares of Common Stock owned by or held for the account of the Company or any subsidiary of the Company on such record date shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall become effective immediately after such record date. Such adjustment shall be made successively whenever any such event shall occur. If such rights or warrants are not so issued, the number of Warrant Shares receivable hereunder shall again be adjusted to be the number that would have been in effect had such record date not been fixed. On the expiration of such rights or warrants the number of Warrant Shares receivable hereunder shall be adjusted to be the number that would have obtained had the adjustment made upon the issuance of such rights or warrants been made upon the basis of the issuance of only the number of shares of Common Stock (or such other securities deliverable hereunder) actually issued upon the exercise of such rights or warrants. In any case in which this subsection (ii) shall require that an adjustment in the number of shares receivable hereunder or the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event issuing to the Holder of any Warrant exercised after such record date the number of Warrant Shares, if any, issuable upon such exercise over and above the number of Warrant Shares, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; PROVIDED, HOWEVER, that the Company shall deliver to such Holder a due bill or other appropriate instrument evidencing such Holder's right to receive such additional Warrant Shares upon the occurrence of the event requiring such adjustments. (iii) DISTRIBUTION OF SUBSCRIPTION RIGHTS, WARRANTS, EVIDENCES OF INDEBTEDNESS OR ASSETS. The making of a distribution to all holders of Common Stock (or other securities deliverable hereunder) (including any such distribution to be made in connection with a consolidation or merger in which the Company is to be the continuing corporation) of (A) any shares of capital stock of the Company (other than Common Stock), (B) subscription rights or warrants (excluding those for which adjustment is provided in subsection 8(a)(ii) above and excluding those that are not immediately exercisable and for which provision is made for the Holder to receive comparable subscription rights or warrants) or (C) evidences of its indebtedness or assets (excluding (x) dividends paid in or distributions of the Company's capital stock for which the number of Warrant Shares receivable hereunder shall have been adjusted pursuant to paragraph 8(a)(i) and (y) cash dividends or distributions payable out of earnings or surplus not in excess of 10% of the average Closing Price for the thirty trading days prior to the fifth day before the date of declaration) any of the foregoing being hereinafter in this paragraph (iii) called the "Securities"), then in each such case (unless the Company elects to reserve shares or other units of such Securities for distribution to each Holder upon exercise of the Warrant so that, in addition to the shares of the Common Stock (or other securities deliverable hereunder) to which each Holder is entitled, each Holder will receive upon such exercise the amount and kind of such Securities which such Holder would have received if the Company had, immediately prior to the record date for the distribution of the Securities, exercised the Warrant) the number of Warrant Shares receivable hereunder after such record date shall be determined by multiplying the number of Warrant Shares receivable hereunder immediately prior to such record date by a fraction, the denominator of which shall be the Closing Price on the trading day immediately prior to the date the Common Stock (or such other securities deliverable hereunder) trades without the right to receive such Securities, less the fair market value (as determined in the reasonable judgment of the Board of Directors of the Company and described in a statement mailed by certified mail to the Holder) of the portion of the assets or evidences of indebtedness so to be distributed to a holder of one share of the Common Stock or of such subscription rights or warrants applicable to one share of the Common Stock, and the numerator of which shall be the Closing Price of the Common Stock on such trading date; and the Exercise Price shall be appropriately adjusted. Such adjustment shall become effective immediately after such record date and shall be made successively whenever such a record date is fixed. If such distribution is not so made, the number of Warrant Shares receivable hereunder shall again be adjusted to be the number that was in effect immediately prior to such record date. In any case in which this paragraph (iii) shall require that an adjustment in the number of Warrant Shares receivable hereunder or the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event issuing to the Holder of any Warrant exercised after such record date the number of Warrant Shares, if any, issuable upon such exercise over and above the number of Warrant Shares, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; PROVIDED, HOWEVER, that the Company shall deliver to such Holder a due bill or other appropriate instrument evidencing such Holder's right to receive such additional Warrant Shares upon the occurrence of the event requiring such adjustments. (b) REORGANIZATION EVENT. (i) In case of any Reorganization Event the Company shall, as a condition precedent to the consummation of the transaction constituting, or announced as, such Reorganization Event, cause effective provisions to be made so that the Holder shall have the right immediately thereafter, by exercising this Warrant, to receive the aggregate amount and kind of shares of stock and other securities and property that were receivable upon such Reorganization Event by a holder of the number of shares' of Common Stock that would have been received immediately prior to such Reorganization Event upon exercise of this Warrant. Any such provision shall include provision for adjustments in respect of such shares of stock and other securities and property that shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 8(a). The foregoing provisions of this Section 8(b) shall similarly apply to successive Reorganization Events. (ii) The Company shall, at least twenty days before earliest of (1) the date on which a Reorganization Event occurs or (2) the date on which the Company shall agree to effect a Reorganization Event (PROVIDED that if approval of the shareholders of the Company is required in connection with such Reorganization Event then on the date of such approval and PROVIDED FURTHER that if such Reorganization Event was beyond the control of the Company, and the Company did not have knowledge twenty days before the date of such Reorganization Event, as soon as practicable thereafter), cause to be mailed to the Holder a notice describing in reasonable detail such Reorganization Event and informing the Holder of his or her rights pursuant to Section 8(b)(i) above. (c) FRACTIONAL SHARES. No fractional shares of Common Stock (or other securities deliverable hereunder) or scrip shall be issued to any Holder in connection with the exercise of this Warrant. Instead of any fractional share of Common Stock (or other securities deliverable hereunder) that would otherwise be issuable to such Holder, the Company shall pay to such Holder a cash adjustment in respect of such fractional interest in an amount equal to such fractional interest multiplied by the then current Closing Price per share of Common Stock (or other securities deliverable hereunder). (d) CARRYOVER. Notwithstanding any other provision of this Section 8, no adjustment shall be made to the number of shares of Common Stock (or other securities deliverable hereunder) to be delivered to each Holder (or to the Exercise Price) if such adjustment would represent less than one percent of the number of shares to be so delivered, but any such adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustments so carried forward, shall amount to one percent or more of the number of shares to be so delivered. (e) NOTICES OF CERTAIN EVENTS. If at any time after the date hereof and before the expiration of the Exercise Period: (i) the Company authorizes the issuance to all holders of its Common Stock of (A) rights or warrants to subscribe for or purchase shares of its Common Stock or (B) any other subscription rights or warrants; or (ii) the Company authorizes the distribution to all holders of its Common Stock of evidences of its indebtedness or assets (other than cash dividends or distributions excluded from the operation of paragraph 8(a)(iii); or (iii) there shall be any capital reorganization of the Company or reclassification of the Common Stock (other than a change in par value of the Common Stock or an increase in the authorized capital stock of the Company not involving the issuance of any shares thereof) or any consolidation or merger to which the Company is a party (other than a consolidation or merger with a subsidiary in which the Company is the continuing corporation and that does not result in any reclassification or change in the Common Stock outstanding) or a conveyance or transfer of all or substantially all of the properties and assets of the Company; (iv) there shall be any voluntary or involuntary dissolution, liquidation or winding-up of the Company; or (v) there shall be any other event that would result in an adjustment pursuant to this Section 8 in the Exercise Price or the number of Warrant Shares that may be purchased upon the exercise hereof; the Company will cause to be mailed to the Holder, at least twenty days (or ten days in any case specified in clauses (i) or (ii) above) before the applicable record or effective date hereinafter specified, a notice stating (A) the date as of which the holders of Common Stock of record entitled to receive any such rights, warrants or distributions is to be determined, or (B) the date on which any such reorganization, reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding-up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record will be entitled to exchange their shares of Common Stock for securities or other property, if any, deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding-up. (f) FAILURE TO GIVE NOTICE. The failure to give the notice required by Section 8(e) hereof or any defect therein shall not affect the legality or validity of any distribution right, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding-up or the vote upon any such action. 9. OFFICERS' CERTIFICATE. Whenever the number of Warrant Shares that may be purchased on exercise of this Warrant or the Exercise Price is adjusted as required by the provisions of Section 8 hereof, the Company will forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and at the office of its agent an officers' certificate showing the adjusted number of Warrant Shares that may be purchased at the Exercise Price on exercise of this Warrant and the adjusted Exercise Price determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment and the manner of computing such adjustment. Each such officers' certificate shall be signed by the President, Chief Financial Officer or Treasurer of the Company and by the Secretary or an Assistant Secretary of the Company. Each such officers' certificate shall be made available at all reasonable times for inspection by the Holder. The Company shall, forthwith after each such adjustment, cause such certificate to be mailed to the Holder. 10. LISTING ON SECURITIES EXCHANGES. The Company will list on each national securities exchange on which any Common Stock may at any time be listed or quoted and have authorized for quotation on the National Market (if any Common Stock is then authorized for quotation thereon) all shares of Common Stock from time to time issuable upon exercise of all Warrants issued in connection with the initial sale of the limited partnership interests in the Partnership, subject to official notice of issuance (if required), and will maintain such listing or quotation so long as any other shares of its Common Stock are so listed or quoted. The Company shall so list or have authorized for quotation, and shall maintain such listing or quotation of, any other shares of capital stock of the Company issuable upon the exercise of this Warrant if and so long as any shares of capital stock of the same class are so listed or quoted. Any such listing or quotation shall be at the Company's expense. 11. AVAILABILITY OF INFORMATION. The Company shall comply with all applicable public information reporting requirements of the SEC and applicable state securities laws (including those required to make available the benefits of Rule 144 under the Act) to which it may from time to time be subject. The Company will also cooperate with each Holder of any Warrants and each holder of any Warrant Shares in supplying such information concerning the Company as may be necessary for such Holder or holder to complete and file any information reporting forms currently or hereafter required by the SEC as a condition to the availability of an exemption from the Act for the sale of any Warrants or Warrant Shares. 12. WARRANT REGISTER. The Company will register this Warrant in the Warrant Register in the name of the record holder to whom it has been distributed or assigned in accordance with the terms hereof. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof (notwithstanding any notation of ownership or other writing hereon made by anyone) for the purpose of any exercise hereof or any distribution to the Holder and for all other purposes, and the Company shall not be affected by any notice to the contrary. 13. SUCCESSORS. All of the provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of their respective successors and assigns. 14. HEADINGS. The headings of sections of this Warrant have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof. 15. AMENDMENTS. This Warrant may be amended by the affirmative vote of Holders holding Warrants to purchase not less than two-thirds of the Warrant Shares purchasable pursuant to all of the then outstanding Warrants; PROVIDED, that, except as expressly provided herein, this Warrant may not be amended, without the consent of the Holder, to change (i) any price at which this Warrant may be exercised, (ii) the period during which this Warrant may be exercised, (iii) the number or type of securities to be issued upon the exercise hereof or (iv) the provision of this Section 15. 16. NOTICES. Unless otherwise provided in this Warrant, any notice or other communication required or permitted to be made or given to any party hereto pursuant to this Warrant shall be in writing and shall be deemed made or given if delivered by hand, on the date of such delivery to such party or, if mailed, on the fifth day after the date of mailing, if sent to such party by certified or registered mail, postage prepaid, addressed to it (in the case of a Holder) at its address in the Warrant Register or (in the case of the Company) at its address set forth below, or to such other address as is designated by written notice, similarly given to each other party hereto. 17. GOVERNING LAW. This Warrant shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be construed in accordance with the laws of said State as applied to contracts made and to be performed in Delaware between Delaware residents. 18. SIGNATURES. This Warrant and any Warrant issued pursuant to the terms hereof shall be manually signed, or shall bear the facsimile signature of the President or a Vice President of the Company which shall have the same effect as if such Warrant were manually signed. IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed and attested by its duly authorized officers as of October 21, 1997. REPLIGEN CORPORATION By: ------------------------------------------ Walter C. Herlihy President and CEO Address: 117 Fourth Avenue Needham, MA 02194 Attention: Secretary
PURCHASE FORM The undersigned, _____________________ hereby irrevocably elects to exercise the within Warrant to purchase ______shares of Common Stock and hereby makes payment of $_________ in payment of the exercise price thereof. Date: _____________, 19__ ________________________ [Signed] ________________________ [Street Address] ________________________ [City and State]
WARRANT ASSIGNMENT FORM FOR VALUE RECEIVED, the undersigned, _____________________, ("Assignor"), hereby sells, assigns and transfers unto Name: ____________________________ ("Assignee") (Please type or print in block letters.) Address: ______________________________________ ______________________________________ Social Security or Taxpayer I.D. No.: _________
Assignor's right to purchase up to ______ shares of Common Stock represented by this Warrant and does hereby irrevocably constitute and appoint the Company and any of its officers, secretary, or assistant secretaries, as attorneys-in-fact to transfer the same on the books of the Company, with full power of substitution in the premises. Date: _____________________, 199__ ___________________________ [Signed]
EX-21 4 EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF REPLIGEN CORPORATION Repligen Development Corporation Glycan Pharmaceuticals, Inc. ProsCure, Inc. EX-23.1 5 EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to incorporation of our reports included in this Form 10-K into the Company's previously filed registration statements File No. 33-62796 on Form S-8 and File No. 33-33083 on Form S-3. /s/ ARTHUR ANDERSEN LLP ------------------------- ARTHUR ANDERSEN LLP Boston, Massachusetts June 26, 1998 EX-27 6 EXHIBIT 27
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 12-MOS MAR-31-1998 MAR-31-1998 4,726 0 238 (25) 671 5,765 1,254 (595) 6,513 388 0 0 0 180 5,944 6,513 1,114 2,385 480 3,181 0 0 0 0 0 0 0 0 0 (796) (.05) (.05)
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