11.

Acquisitions

Novozymes Biopharma Sweden AB

On December 20, 2011, the Company acquired the Novozymes Biopharma Business from Novozymes, for total consideration transferred of $28,495,000. The terms of the transaction required that the payment be denominated in Euros, but it is reflected here in U.S. dollars for presentation purposes. The Novozymes Acquisition diversified and expanded Repligen’s bioprocessing product offering and customer base while doubling the Company’s manufacturing capacity. The terms of the acquisition included an upfront payment of $26,884,000 and future potential milestone payments totaling up to €4,000,000, if specific sales targets are met for certain products by various dates ending on December 31, 2014 and upon the transfer of manufacturing processes for certain products. This business operates as the Company’s wholly-owned subsidiary, Repligen Sweden AB. The €4,000,000 contingent consideration had an initial probability-weighted fair value at acquisition of $1,611,000.

Consideration Transferred

The Company accounted for the Novozymes Acquisition as the purchase of a business under GAAP. Under the acquisition method of accounting, the assets and certain liabilities of the Novozymes Biopharma Business were recorded as of the acquisition date, at their respective fair values, and consolidated with those of Repligen. The fair value of the net assets acquired was originally estimated to be $28,922,000, which exceeded the total consideration transferred of $28,495,000. Accordingly, the Company recognized the excess of the fair value of the net assets over the purchase price of approximately $427,000 as a gain on bargain purchase. During the year ended December 31, 2012, the fair value of the net assets acquired increased to $29,236,000, due primarily to working capital adjustments on the purchased assets. These adjustments resulted in an additional gain on bargain purchase of $314,000 which was recorded in the year ended December 31, 2012 and is shown separately within income from operations in the consolidated statements of operations.

The Company believes that it was able to acquire the Novozymes Biopharma Business for less than the fair value of its assets because of (i) the Company’s unique position as a market leader in this industry segment and (ii) the seller’s intent to exit this industry segment, which was only a small part of the seller’s overall business and no longer fit its strategy.

The preparation of the valuation to support the fair value of acquired assets and liabilities required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that the Company believes to be reasonable. However, actual results may differ from these estimates.

The total consideration transferred follows:


Cash consideration	$	26,445,000
Estimated fair value of contingent consideration		1,611,000

Total consideration transferred	$	28,056,000

The fair value of contingent consideration was determined based upon a probability weighted analysis of expected future milestone payments to be made to the seller. The Company could make payments of up to €4,000,000 if specific sales targets are met for certain products by various dates ending on December 31, 2014 and upon the transfer of manufacturing processes for certain products. The Company recorded a $618,000 increase in the liability for contingent consideration in the year ended December 31, 2012 to reflect updates to the Company’s probability analysis and for the time value of money. At December 31, 2012, $1,322,000 of the liability for contingent consideration is included in current liabilities and $1,033,000 is included in other long-term liabilities in the consolidated balance sheet. The liability will be remeasured at each reporting period until the contingency is resolved.

The Company incurred approximately $1.7 million in transaction costs related to the Novozymes Acquisition. The transaction costs are included in selling, general and administrative expenses in the consolidated statements of operations in the period ended December 31, 2011.

Fair Value of Net Assets Acquired

The following chart summarizes the allocation of the fair value of assets acquired and liabilities assumed:


Accounts receivable	$	5,088,000
Inventory		10,497,000
Prepaid expenses		180,000
Fixed assets		9,089,000
Customer relationships and acquired technology		6,705,000
Deferred tax liability		(198,000	)
Accounts payable and other liabilities assumed		(2,563,000	)

Net assets acquired	$	28,798,000
Less total consideration transferred		(28,056,000	)

Gain on bargain purchase	$	742,000

The Company finalized its fixed asset valuation analysis in the quarter ended September 30, 2012 and the purchase price allocation is now considered final.

BioFlash Partners, LLC

On January 29, 2010, the Company acquired the assets of BioFlash Partners, LLC (“BioFlash”), including a technology platform for the production of pre-packed, “plug and play” chromatography columns for total consideration transferred of $2.6 million. This patented technology enables economical production of chromatography columns in a format that is ready for use in the production of a broad range of biopharmaceuticals, including monoclonal antibodies, vaccines and recombinant proteins. The terms of the acquisition included an upfront payment of $1.8 million and a milestone payment of $300,000 that was made in November 2010.

The Company manufactures and sells these pre-packed columns under the brand name OPUS. OPUS pre-packed chromatography columns have the potential to improve manufacturing efficiencies by reducing time for column packing, set-up and cleaning.

Total consideration transferred was $2,640,000 comprised of cash payments of $2,080,000 and the fair value of contingent consideration of $560,000.

The fair value of contingent consideration was determined based upon a probability weighted analysis of expected future royalty payments to be made to former shareholders of BioFlash. The liability for contingent consideration is included in current and long-term liabilities on the consolidated balance sheets and will be remeasured at each reporting period until the contingency is resolved.

Allocation of Consideration Transferred

The following chart summarizes the allocation of consideration transferred:


Intangible assets subject to amortization	$	1,430,000
Goodwill		994,000
Equipment		216,000

Total	$	2,640,000