2.	Acquisitions

Atoll GmbH

On April 1, 2016, the Company’s subsidiary, Repligen Sweden, acquired Atoll GmbH (“Atoll”) from UV-Cap GmbH & Co. KG ( “UV Cap”) pursuant to a Share Purchase Agreement (the “Atoll Share Purchase Agreement”), dated as of March 31, 2016 (such acquisition, the “Atoll Acquisition”), by and among Repligen Sweden, UV Cap, and the Company, in its capacity as guarantor of the obligations of Repligen Sweden under the Atoll Share Purchase Agreement. The Atoll Acquisition was subject to certain closing conditions that did not occur until April 1, 2016. Payment for the Atoll Acquisition was denominated in Euros but is reflected here in U.S. dollars for presentation purposes.

In connection with the Atoll Acquisition, the Company issued and contributed 538,700 shares of the Company’s common stock, par value of $0.01 per share valued at $14.1 million (the “Atoll Stock Consideration”) to Repligen Sweden through a transfer by the Company on behalf of Repligen Sweden to fulfill Repligen Sweden’s obligation to deliver the Atoll Stock Consideration under the Atoll Share Purchase Agreement. The issuance of the Atoll Stock Consideration was not registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act. The Atoll Stock Consideration was based on the fair value of the Company’s common stock on April 1, 2016.

This acquisition strengthened Repligen’s bioprocessing business by adding a complementary extension to an existing product line while expanding its direct sales presence worldwide. On September 20, 2016, Atoll changed its name to Repligen GmbH.

The Atoll Acquisition was accounted for as a purchase of a business under ASC 805, “Business Combinations.” The total purchase price of the Atoll Acquisition was $25.3 million, consisting of an upfront cash payment of $10.2 million, less $74,000 as a result of the final determination of working capital, issuance of the Atoll Stock Consideration, and a future potential milestone payment of $1.1 million if specific revenue growth targets are met for 2016. The $1.1 million potential contingent consideration had an initial probability weighted fair value at the time of the closing of the Atoll Acquisition of approximately $952,000.

Consideration Transferred

The Company accounted for the Atoll Acquisition as the purchase of a business under U.S. GAAP. Under the acquisition method of accounting, the assets of Atoll 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 approximately $25.3 million.

The preparation of the valuation 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 (in thousands):


Cash consideration, less $74 of working capital adjustments	$	10,176
Value of common stock issued		14,138
Estimated fair value of contingent consideration		952

Total consideration transferred	$	25,266

The fair value of contingent consideration was determined based upon a probability weighted analysis of expected future milestone and settlement payments to be made to UV Cap. Pursuant to the terms of the Atoll Share Purchase Agreement, the Company would make a contingent consideration payment of $1.1 million if specific revenue growth targets were met for 2016. Because the specified revenue growth targets were met for 2016, the Company made the contingent consideration payment in March 2017. No further measurement of this liability is required as of June 30, 2017.

Acquisition related costs are not included as a component of consideration transferred, but are expensed in the periods in which the costs are incurred. The Company incurred $1,307,000 in transaction costs in 2016 related to the Atoll Acquisition. The transaction costs are included in selling, general and administrative expenses in the consolidated statements of operations.

Fair Value of Net Assets Acquired

The allocation of purchase price was based on the fair value of assets acquired and liabilities assumed as of April 1, 2016. The components and allocation of the purchase price consists of the following amounts (in thousands):


Cash and cash equivalents	$	1,409
Accounts receivable		697
Inventory		155
Other current assets		169
Fixed assets, net		114
Customer relationships		5,318
Developed technology		2,175
Non-competition agreements		57
Trademark and trade name		11
Deferred tax assets		885
Accounts payable and other liabilities assumed		(599	)
Deferred tax liabilities		(2,202	)
Goodwill		17,077

Net assets acquired	$	25,266

Of the consideration paid, $5.3 million represents the fair value of customer relationships that will be amortized over the determined useful life of 13 years and $2.2 million represents the fair value of developed technology that will be amortized over a determined useful life of 14 years. $57,000 represents the fair value of non-competition agreements and $11,000 represents the fair value of trademarks and trade names that will be amortized over a determined useful life of 2 years. The aforementioned intangible assets will be amortized on a straight-line basis.

The goodwill of $17.1 million represents future economic benefits expected to arise from synergies from combining operations, utilizing the Company’s existing sales infrastructure to increase market presence and the extension of existing customer relationships.

TangenX Technology Corporation

On December 14, 2016, the Company acquired TangenX Technology Corporation (“TangenX”), pursuant to the terms of the Share Purchase Agreement, dated as of December 14, 2016 (the “TangenX Share Purchase Agreement”), by and among the Company, John Connors and Novasep Process SAS (such acquisition, the “TangenX Acquisition”). Through the TangenX Acquisition, the Company acquired all outstanding shares and the business of TangenX, including TangenX’s innovative single-use Sius line of tangential flow filtration (“TFF”) cassettes and hardware used in downstream biopharmaceutical manufacturing processes.

TangenX™ TFF products are used in the filtration of biological drugs, thereby expanding Repligen’s filtration portfolio and complementing the OPUS^® pre-packed column product line in downstream purification. Effective June 30, 2017, the operations of TangenX were merged with and into the Company.

The TangenX Acquisition was accounted for as a purchase of a business under ASC 805, “Business Combinations.” The total purchase price of the TangenX Acquisition was $37.1 million in cash.

Consideration Transferred

The Company accounted for the TangenX Acquisition as a purchase of a business under U.S. GAAP. Under the acquisition method of accounting, the assets of TangenX 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 approximately $37.1 million.

The total consideration transferred follows (in thousands):


Cash consideration	$	37,532
Less: working capital adjustment		(382	)

Net assets acquired	$	37,150

Acquisition related costs are not included as a component of consideration transferred, but are expensed in the periods in which the costs are incurred. The Company incurred $376,000 in transaction costs for the six-month period ended June 30, 2017 and $935,000 in transaction costs for the year ended December 31, 2016 related to the TangenX Acquisition. The transaction costs are included in selling, general and administrative expenses in the consolidated statements of operations.

Fair Value of Net Assets Acquired

The allocation of purchase price was based on the fair value of assets acquired and liabilities assumed as of December 14, 2016. The components and allocation of the purchase price consists of the following amounts (in thousands):


Cash and cash equivalents	$	1,218
Accounts receivable		459
Other receivables		111
Inventory		936
Other current assets		50
Fixed assets, net		215
Customer relationships		6,192
Developed technology		6,044
Non-competition agreements		21
Trademark and trade name		11
Accounts payable and other liabilities assumed		(3,083	)
Deferred tax liabilities		(4,525	)
Goodwill		29,501

Net assets acquired	$	37,150

Of the consideration paid, $6.2 million represents the fair value of customer relationships that will be amortized over the determined useful life of 13 years and $6.0 million represents the fair value of developed technology that will be amortized over a determined useful life of 20 years. $21,000 represents the fair value of non-competition agreements that will be amortized over a determined life of 5 years. $11,000 represents the fair value of trademarks and trade names that will be amortized over a determined useful life of 2 years. The aforementioned intangible assets will be amortized on a straight-line basis.

The goodwill of $29.5 million represents future economic benefits expected to arise from synergies from combining operations and the extension of existing customer relationships.

Revenue, Net Income and Pro Forma Presentation

The Company recorded revenue from TangenX of $119,000 from December 15, 2016 through December 31, 2016 and revenue of $1,865,000 and $3,838,000 for the three- and six-month periods ended June 30, 2017. The Company has included the operating results of TangenX in its consolidated statements of operations since the December 15, 2016 acquisition date. The following table presents unaudited supplemental pro forma information as if the TangenX Acquisition had occurred as of January 1, 2016 (in thousands, except per share data):


	Three months ended June 30, 2016		Six months ended June 30, 2016
Total revenue	$	30,676	$	57,628
Net income	$	4,191	$	9,309

Earnings per share:
Basic	$	0.12	$	0.28

Diluted	$	0.12	$	0.27

The unaudited pro forma information for the three- and six-month periods ended June 30, 2016 was calculated after applying the Company’s accounting policies and the impact of acquisition date fair value adjustments. The unaudited pro forma net income for the three- and six-month periods ended June 30, 2016 was adjusted to include acquisition-related transaction costs, inventory step-up charges, amortization of intangible assets and income tax benefits resulting from the acquisition.

These pro forma condensed consolidated financial results have been prepared for comparative purposes only and include certain adjustments to reflect the pro forma results of operations as if the acquisition had occurred as of the beginning of the periods presented, such as fair value adjustments to inventory and increased amortization for the fair value of acquired intangible assets. The pro forma information does not reflect the effect of costs or synergies that would have been expected to result from the integration of the acquisition. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the combination occurred at the beginning of each period presented, or of future results of the consolidated entities.

Spectrum, Inc.

On August 1, 2017, the Company completed the acquisition of Spectrum, pursuant to the terms of the Agreement and Plan of Merger and Reorganization, dated June 22, 2017 (the “Spectrum Agreement”). See Note 17 for further information.