EX-99.3

EX-99.3 4 d600172dex993.htm EX-99.3 EX-99.3

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

INDEX TO FINANCIAL STATEMENTS


UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS:

Introduction			2

Pro Forma Condensed Combined Consolidated Balance Sheet as of December 31, 2018 (Unaudited)			3

Pro Forma Condensed Combined Consolidated Statements of Income for the Year Ended December 31, 2018 (Unaudited)			4

Notes to Pro Forma Condensed Combined Consolidated Financial Statements (Unaudited)			5

INTRODUCTION

On April 25, 2019, Repligen Corporation (“Repligen”) agreed to acquire C Technologies, Inc. (“C Technologies”), pursuant to the terms of a Stock Purchase Agreement (the “Agreement”), by and among Repligen and C Technologies (such acquisition, the “Acquisition”).

C Technologies’ business consists of two major product categories (i) biotechnology, or Biotech, and (ii) Legacy and Other. Through its Biotech category, C Technologies sells instruments, consumables and accessories that are designed to allow bioprocessing technicians to measure the protein concentration of a liquid sample using C Technologies’ Slope Spectroscopy method, which eliminates the need for manual sample dilution. C Technologies’ lead product, the SoloVPE instrument platform, was launched in 2008 for off-line and at-line protein concentration measurements conducted in quality control, process development and manufacturing labs in the production of biological therapeutics. C Technologies’ FlowVPE platform, an extension of the SoloVPE technology, was designed to allow end users to make in-line protein concentration measurements in filtration, chromatography and fill-finish applications, designed to allow for real-time process monitoring.

The Acquisition will be accounted for as a purchase of a business under ASC 805, Business Combinations. The cash paid for the Acquisition is estimated to be $201.3 million, $192.3 million of which will be consideration transferred pursuant to ASC 805, and $9.0 million of which will be compensation expense for future employment, and an estimated 857,142 unregistered common shares totaling $48.0 million (based on an assumed per share price of $56.00), for a total purchase price of $240.3 million. The estimate of $201.3 million in cash paid for the Acquisition consists of $192.0 million per the terms of the Agreement, $7.7 million for the existing cash balance of C Technologies at December 31, 2018, and $1.6 million of estimated state tax liabilities assumed that are directly related to the 338(h)(10) election expected to be made as part of the Acquisition.

The accompanying unaudited pro forma condensed combined financial statements combine the historical consolidated financial statements of Repligen and those of C Technologies after giving effect to the Acquisition, using the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) 805, “Business Combinations”, and applying the assumptions and adjustments described in the accompanying notes.

The unaudited pro forma condensed combined statement of operations are based on our audited historical consolidated financial statements and the audited historical consolidated financial statements of C Technologies, which are incorporated by reference in this Form 8-K. The unaudited pro forma condensed combined balance sheet gives effect to the Acquisition as if such acquisition had occurred on December 31, 2018. The unaudited pro forma condensed combined statement of operations gives effect to the Acquisition as if such acquisition had occurred on January 1, 2018. The unaudited pro forma condensed combined financial statements include all material pro forma adjustments necessary for this purpose that are directly attributable to the Acquisition, are factually supportable, and with respect to the pro forma condensed combined statements of operations, are expected to have a continuing impact on the combined results following the Acquisition.

The unaudited pro forma condensed combined financial information herein should be read in conjunction with the historical financial statements and the related notes thereto of Repligen Corporation which are presented in the Annual Report on Form 10-K for the year ended December 31, 2018, filed on March 1, 2019 (File No. 000-14656), and the historical financial statements of C Technologies, Inc. which are presented as exhibits to this Form 8-K.

The unaudited pro forma condensed combined financial statements of operations is presented for illustrative purposes only and are not necessarily indicative of the operating results or financial position that would have been achieved if the Acquisition had been consummated as of the beginning of the period presented, nor are they necessarily indicative of the future operating results of the combined company. The pro forma adjustments are based upon available information and assumptions that we believe are reasonable. No effect has been given in the pro forma financial statements for synergistic benefits that may be realized through the combination or costs that may be incurred in integrating operations.

Repligen Corporation

Pro Forma Condensed Combined Consolidated Balance Sheet

December 31, 2018

(Unaudited, amounts in thousands)


	Historical Repligen			Historical C Technologies, Inc.		Pro Forma Adjustments			Notes (1)		Pro Forma Combined
Assets
Current assets
Cash and cash equivalents	$	193,822		$	7,693	$	(77,873	)		(a), (k)	$	123,642
Restricted cash		—			—		35,904			(i)		35,904
Accounts receivable, net		33,015			3,302		—					36,317
Other receivables		136			—		—					136
Unbilled receivables		2,602			—		—					2,602
Inventories		42,263			1,740		1,236			(b)		45,239
Prepaid expenses and other current assets		3,901			31		—					3,932

Total current assets		275,739			12,766		(40,733	)				247,772
Property and equipment, net		32,180			44		—					32,224
Intangible assets, net		135,438			—		87,860			(c)		223,298
Goodwill		326,735			—		142,458			(d)		469,193
Deferred Tax Asset - LT		4,355			—		—					4,355
Other assets		174			17		—					191

Total assets	$	774,621		$	12,827	$	189,585				$	977,033

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	10,489		$	345	$	—				$	10,834
Accrued liabilities		15,865			2,162		29,926			(e), (f), (g), (h), (i)		47,953
Convertible senior notes, current portion		103,488			—		—					103,488
Short term debt		—			—		123,438			(k)		123,438

Total current liabilities		129,842			2,507		153,364					285,713
Deferred tax liabilities		25,086			—		(2,842	)		(n), (o), (p), (q)		22,244
Other long-term liabilities		4,125			92		(17	)		(e)		4,200

Total liabilities		159,053			2,599		150,505					312,157
Commitments and contingencies

Stockholders’ equity:
Preferred stock		—			—		—					—
Common stock		439			—		9			(m)		448
Additional paid-in capital		642,590			—		47,991			(m)		690,581
Accumulated other comprehensive loss		(11,893	)		—		—					(11,893	)
Accumulated (deficit) earnings		(15,568	)		10,228		(8,920	)		(f), (g), (n), (o), (p)		(14,260	)

Total stockholders’ equity		615,568			10,228		39,080					664,876

Total liabilities and stockholders’ equity	$	774,621		$	12,827	$	189,585				$	977,033

(1)	See Note 4 to the accompanying notes to unaudited pro forma condensed combined financial statements.

Repligen Corporation

Pro Forma Condensed Combined Consolidated Statements of Operations

For the Twelve Months Ended December 31, 2018

(Unaudited, amounts in thousands, except share and per share data)


	Historical Repligen Year Ended December 31, 2018			Historical C Technologies, Inc. Year Ended December 31, 2018		C Technologies, Inc. Pro Forma Adjustments			Notes (1)	Pro Forma Combined
Revenue	$	194,032		$	23,707	$	(154	)	(e)	$	217,585
Cost of revenue		86,531			8,172		—				94,703

Gross profit		107,501			15,535		(154	)			122,882

Research and development		15,821			649		—				16,470
Selling, general and administrative		65,692			4,299		5,879		(c), (j)		75,870

Total operating expenses		81,513			4,948		5,879				92,340

Operating income (loss)		25,988			10,587		(6,033	)			30,542
Other (expense) income, net		(4,552	)		75		(14,025	)	(l)		(18,502	)

Income (loss) before income taxes		21,436			10,662		(20,058	)			12,040
Income tax expense		4,819			—		(2,840	)	(n), (o), (p)		1,979

Net income (loss)	$	16,617		$	10,662	$	(17,218	)		$	10,061

Net income per share:
Basic	$	0.38								$	0.23

Diluted	$	0.37								$	0.22

Weighted average common shares outstanding:
Basic		43,767,402					857,142		(m)		44,624,544

Diluted		45,471,169					857,142		(m)		46,328,311

(1)	See Note 4 to the accompanying notes to unaudited pro forma condensed combined financial statements.

Repligen Corporation

Notes to Unaudited Pro Forma Condensed Combined Consolidated Financial Statements

For the Year Ended December 31, 2018

1. Description of the Transaction

2. Basis of Presentation

The unaudited pro forma condensed combined statements of operations combine Repligen’s operating results for the year ended December 31, 2018, with the operating results of C Technologies for the year ended December 31, 2018. The unaudited pro forma condensed combined statements of operations give effect to the Acquisition as if such acquisitions had occurred on January 1, 2018.

The historical consolidated financial statements have been adjusted in the pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the business combination, (2) factually supportable and (3) with respect to the pro forma condensed combined statements of operations, expected to have a continuing impact on the combined results following the business combination. The unaudited pro forma condensed combined financial information herein should be read in conjunction with the historical financial statements and the related notes thereto of Repligen which are presented in the Annual Report on Form 10-K for the year ended December 31, 2018, filed on March 1, 2019 (File No. 000-14656), and the historical financial statements of C Technologies. The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the operating results that would have been achieved if the Acquisition had been consummated as of the beginning of the period presented, nor are they necessarily indicative of the future operating results of the combined company. No effect has been given in these pro forma financial statements for synergistic benefits that may be realized through the combination or costs that may be incurred in integrating operations.

3. Estimated consideration and preliminary purchase price allocation

Repligen accounted for the Acquisition as the purchase of a business under U.S. GAAP. Under the acquisition method of accounting, the assets of C Technologies will be recorded as of the acquisition date, at their respective fair values, and consolidated with those of Repligen. The fair value of the net tangible assets acquired is

estimated to be approximately $10.0 million, the fair value of the intangible assets acquired is estimated to be approximately $87.9 million, and the residual goodwill is estimated to be approximately $142.4 million. The estimated consideration and preliminary purchase price information has been prepared using a preliminary valuation. The final purchase price allocation will be completed upon closing of the transaction. 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 Repligen believes to be reasonable. However, actual results may differ from these estimates.

The total consideration transferred follows (amounts in thousands):


Cash consideration	$	192,335
Equity consideration		48,000
Plus: estimated working capital adjustment		—

Total consideration transferred	$	240,335

Acquisition related costs are not included as a component of consideration transferred, but are expensed in the periods in which the costs are incurred. In connection with the transaction, an additional $9.0 million in cash will be due to employees based on their continued employment with the Company one year after the date of the close of the Acquisition.

Fair Value of Net Assets Acquired

Repligen has performed a preliminary valuation analysis of the fair market value of C Technologies’ assets to be acquired and liabilities to be assumed. Using the total consideration for the Acquisition, Repligen has estimated the allocations to such assets and liabilities. The following table summarizes the allocation of the preliminary purchase price as of December 31, 2018 (amounts in thousands):


Cash and cash equivalents	$	7,693
Restricted cash		26,928
Accounts receivable		3,302
Inventory		2,976
Prepaid expenses and other current assets		31
Fixed assets		44
Customer relationships		57,390
Developed technology		28,390
Trademark and tradename		1,560
Non-competition agreements		520
Other assets		17
Goodwill		142,458
Accounts payable		(345	)
Accrued liabilities		(29,282	)
Deferred revenue		(1,176	)
Deferred tax liability		(171	)

Fair value of net assets acquired	$	240,335

This preliminary purchase price allocation has been used to prepare pro forma adjustments in the pro forma balance sheet and income statement and is subject to adjustment as purchase accounting is finalized. The final purchase price allocation will be determined when Repligen has completed the detailed valuations and necessary calculations. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments. The final allocation may include, but not be limited to: (1) changes in fair values of property, plant and equipment, (2) changes in allocations to intangible assets such as trade names, technology and customer relationships as well as goodwill and (3) other changes to assets and liabilities.

4. Pro Forma Adjustments

This note should be read in conjunction with Notes 1 and 2. Adjustments included in the pro forma adjustments column of the pro forma condensed combined consolidated statement of operations and the pro forma condensed combined consolidated balance sheet include the following, as indicated in the “Notes” column thereto:

(a)	An adjustment to cash of $201.3 million for the estimated cash portion of the transaction price, $192.3 million of which will be consideration transferred, and $9.0 million of which will be compensation expense for future employment.

(b)

This adjustment represents the estimated step-up of C Technologies’ inventory by $1.2 million from the carrying value. The fair value calculation is preliminary and subject to change. After the closing of the Acquisition, the step-up in inventory fair value of $1.2 million will increase cost of sales as the inventory is sold. This increase is not reflected in the pro forma condensed combined statements of operations because it does not have a continuing impact.

(c)

Reflects the adjustment of intangible assets to be acquired by Repligen to their estimated fair values of $87.9 million, with a continuing annual amortization impact of $5.2 million. As part of the preliminary valuation analysis, Repligen identified intangible assets, including developed technology, customer relationships, trade names, and a non-compete. The fair value of identifiable intangible assets is determined primarily using the “income approach,” which requires a forecast of all the expected future cash flows. These preliminary estimates of fair value and estimated useful lives will likely differ from final amounts Repligen will calculate after completing a detailed valuation analysis, and the difference could have a material effect on the accompanying unaudited pro forma condensed combined financial statements.

(d)	Reflects adjustment to record goodwill associated with the Acquisition.

(e)

Represents the estimated adjustment to decrease the assumed deferred revenue obligations to a fair value of approximately $1.2 million, a $171 thousand decrease from the carrying value. The calculation of fair value is preliminary and subject to change. The fair value was determined based on the estimated costs to fulfill the remaining extended maintenance obligations plus a normal profit margin. After the Acquisition, this adjustment will have a continuing impact and will reduce revenue related to the assumed performance obligations as the maintenance services are provided over the next one to three years. The pro forma adjustment to reduce revenue by $154 thousand for the year ended December 31, 2018 reflects the difference between prepayments related to extended maintenance arrangements and the fair value of the assumed performance obligations as they are satisfied, assuming the transaction was completed on January 1, 2018.

(f)

To adjust for bonuses totaling $700 thousand with key management personnel tied to integration activities related to the Acquisition. The adjustment is reflected as an increase to accrued liabilities and accumulated deficit. The pro forma statement of operations does not reflect the adjustment as it will not have a continuing impact on operations.

(g)

To adjust for $1.0 million of estimated transaction costs incurred subsequent to December 31, 2018 that are directly related to the Acquisition. The transaction cost amount has been recorded as an adjustment to accrued liabilities and accumulated deficit, and has not been reflected in the pro forma condensed combined consolidated income statement as these costs will not have a continuing impact.

(h)

To adjust for $1.4 million of estimated state tax liabilities assumed that are directly related to the 338(h)(10) election expected to be made as part of the Acquisition. The estimated amount of the state tax liability has been recorded as an adjustment to accrued liabilities and has not been reflected in the pro forma condensed combined consolidated income statement as these liabilities will not have a continuing impact.

(i)

To adjust for $35.9 million of estimated bonuses payable to C Technologies’ employees that are directly related to the Acquisition. The amount of the bonus will be paid in two installments, the initial $26.9 million of which is an assumed liability will be paid at the time of closing, and the final $9.0 million due to employees based on their continued employment with the Company one year after the date of the close of the Acquisition.

(j)

This pro forma adjustment represents a stock based compensation expense increase of $718 thousand for the year ended December 31, 2018 related to time and performance based restricted stock units issued to two key executives as part of the Acquisition. The fair value of the awards assumes a stock price of $68.89, and will be recognized over post-combination service periods ranging from two to three years assuming the service and performance conditions are achieved.

(k)

Adjustment includes proceeds from a $125 million bridge loan to finance the cash consideration portion of total consideration, less $1.6 million in debt issuance costs incurred to obtain the bridge loan financing. This obligation is classified as current debt based on its term of one year amortization. See (l) below for the amortization of these issuance costs.

(l)

The adjustment to record interest expense assumes the bridge loan was obtained on January 1, 2018 and was outstanding for the entire year ended December 31, 2018. The base interest rate assumed for purposes of preparing this pro forma financial information is 5.22%. This rate comprises the one-year LIBOR rate of 2.72% as of March 26, 2019, plus certain margins specified in the bridge facility agreement. The resulting pro forma adjustment consists of $12.5 million of interest expense and $1.6 million of debt issuance cost amortization.

(m)

Represents the elimination of the historical equity of C Technologies, and the increase to common stock and additional paid in capital resulting from the estimated issuance of 857,142 shares of common stock at a price of $56.00 for the equity portion of the transaction price. The par value of common stock is $0.01 and results in a $9 thousand increase to common stock. The value in excess of par, or $48.0 million is recognized in additional paid-in capital. These preliminary estimates of shares issued and share price will likely differ from the final amounts, and the difference could have a material effect on the accompanying unaudited pro forma condensed combined financial statements.

(n)	Represents the tax effect of pro forma adjustments made as a result of the Acquisition, based on an estimated tax rate of 25%. The resulting tax benefit of $5.1 million is a decrease to accumulated deficit.

(o)	Represents the tax effect of C Technologies’ income being taxed at a corporate rate versus an S-Corporation, based on an estimated tax rate of 25%. The resulting tax expense increase of $2.6 million is an increase to accumulated deficit.

(p)

This adjustment reflects the increase in Repligen’s U.S. Federal Section 250 Deduction for 2018. The Section 250 Deduction is a deduction for Foreign-Derived Intangible Income and Global Intangible Low-Taxed Income that can be limited based on U.S. federal taxable income computed without regards to those deductions. Assuming the transaction closed on January 1, 2018, the Acquisition would result in an increase to U.S. taxable income in 2018, which reduces the limitation on Repligen Section 250 deduction and increases the amount allowed to be deducted for 2018. The resulting estimated tax benefit of $0.5 million is a decrease to accumulated deficit.

(q)

Represents the tax effect related to the difference between book and tax useful lives of intangible assets acquired as a result of the Acquisition. This estimate of $171 thousand in deferred tax liabilities balances is preliminary and subject to change based on management’s final determination of the fair value of assets acquired and liabilities assumed by jurisdiction.