10-Q 1 rgen-20220331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

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 000-14656

 

REPLIGEN CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

 

 

 

Delaware

04-2729386

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

 

 

41 Seyon Street, Bldg. 1, Suite 100

Waltham, MA

02453

(Address of Principal Executive Offices)

(Zip Code)

 

(781) 250-0111

Registrant’s Telephone Number, Including Area Code

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

 

 

 

Common Stock, par value $0.01 per share

RGEN

The Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

 

 

 

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

 

1


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes No

The number of shares outstanding of the registrant’s common stock on April 25, 2022 was 55,433,161.

 

 

2


Table of Contents

 

 

 

 

 

 

PAGE

 

 

 

 

PART I -

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements (interim periods unaudited)

 

 

 

 

 

Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021

4

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2022 and 2021

5

 

 

 

 

Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021

6

 

 

 

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021

7

 

 

 

 

Notes to Unaudited Consolidated Financial Statements

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

37

 

 

 

Item 4.

Controls and Procedures

38

 

 

 

PART II -

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

39

 

 

 

Item 1A.

Risk Factors

39

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

39

 

 

 

Item 3.

Defaults Upon Senior Securities

39

 

 

 

Item 4.

Mine Safety Disclosures

39

 

 

 

Item 5.

Other Information

39

 

 

 

Item 6.

Exhibits

40

 

 

Signatures

41

 

 

 

3


PART I – FINANCIAL INFORMATION

 

ITEM 1. Financial Statements

 

REPLIGEN CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited, amounts in thousands, except share data)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

584,640

 

 

$

603,814

 

Accounts receivable, net of reserves of $1,364 and $1,417 at
   March 31, 2022 and December 31, 2021, respectively

 

 

122,435

 

 

 

117,420

 

Inventories, net

 

 

213,775

 

 

 

184,494

 

Prepaid expenses and other current assets

 

 

23,939

 

 

 

25,949

 

Total current assets

 

 

944,789

 

 

 

931,677

 

Noncurrent assets:

 

 

 

 

 

 

Property, plant and equipment, net

 

 

147,627

 

 

 

124,964

 

Intangible assets, net

 

 

329,928

 

 

 

337,274

 

Goodwill

 

 

859,488

 

 

 

860,362

 

Deferred tax assets

 

 

1,611

 

 

 

1,903

 

Operating lease right of use assets

 

 

99,750

 

 

 

101,559

 

Other noncurrent assets

 

 

631

 

 

 

615

 

Total noncurrent assets

 

 

1,439,035

 

 

 

1,426,677

 

Total assets

 

$

2,383,824

 

 

$

2,358,354

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

38,280

 

 

$

36,203

 

Operating lease liability

 

 

9,882

 

 

 

8,303

 

Current contingent consideration

 

 

27,790

 

 

 

 

Accrued liabilities

 

 

65,114

 

 

 

75,498

 

Convertible senior notes, current portion, net

 

 

283,267

 

 

 

255,258

 

Total current liabilities

 

 

424,333

 

 

 

375,262

 

Noncurrent liabilities:

 

 

 

 

 

 

Deferred tax liabilities

 

 

25,858

 

 

 

33,480

 

Noncurrent operating lease liability

 

 

100,435

 

 

 

102,492

 

Noncurrent contingent consideration

 

 

64,037

 

 

 

94,238

 

Other noncurrent liabilities

 

 

2,760

 

 

 

2,815

 

Total noncurrent liabilities

 

 

193,090

 

 

 

233,025

 

Total liabilities

 

 

617,423

 

 

 

608,287

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, $0.01 par value, 5,000,000 shares authorized, no shares
   issued or outstanding

 

 

 

 

 

 

Common stock, $0.01 par value; 80,000,000 shares authorized; 55,429,046
   shares at March 31, 2022 and
55,321,457 shares at December 31, 2021
   issued and outstanding

 

 

554

 

 

 

553

 

Additional paid-in capital

 

 

1,529,144

 

 

 

1,572,340

 

Accumulated other comprehensive loss

 

 

(21,574

)

 

 

(16,886

)

Accumulated earnings

 

 

258,277

 

 

 

194,060

 

Total stockholders’ equity

 

 

1,766,401

 

 

 

1,750,067

 

Total liabilities and stockholders’ equity

 

$

2,383,824

 

 

$

2,358,354

 

The accompanying notes are an integral part of these consolidated financial statements.

4


REPLIGEN CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

Products

 

$

206,363

 

 

$

142,737

 

Royalty and other revenue

 

 

37

 

 

 

100

 

Total revenue

 

 

206,400

 

 

 

142,837

 

Costs and operating expenses:

 

 

 

 

 

 

Cost of product revenue

 

 

82,356

 

 

 

59,747

 

Research and development

 

 

12,155

 

 

 

7,612

 

Selling, general and administrative

 

 

54,300

 

 

 

39,095

 

Contingent consideration

 

 

(2,411

)

 

 

 

Total costs and operating expenses

 

 

146,400

 

 

 

106,454

 

Income from operations

 

 

60,000

 

 

 

36,383

 

Other income (expenses):

 

 

 

 

 

 

Investment income

 

 

77

 

 

 

52

 

Interest expense

 

 

(292

)

 

 

(2,754

)

Amortization of debt issuance costs

 

 

(452

)

 

 

(352

)

Other expenses

 

 

(402

)

 

 

(224

)

Other expenses, net

 

 

(1,069

)

 

 

(3,278

)

Income before income taxes

 

 

58,931

 

 

 

33,105

 

Income tax provision

 

 

11,967

 

 

 

3,655

 

Net income

 

$

46,964

 

 

$

29,450

 

Earnings per share:

 

 

 

 

 

 

Basic

 

$

0.85

 

 

$

0.54

 

Diluted (Note 12)

 

$

0.81

 

 

$

0.52

 

Weighted average common shares outstanding:

 

 

 

 

 

 

Basic

 

 

55,353

 

 

 

54,805

 

Diluted (Note 12)

 

 

58,816

 

 

 

56,869

 

 

 

 

 

 

 

 

Net income

 

$

46,964

 

 

$

29,450

 

Other comprehensive income (loss):

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(4,688

)

 

 

(9,579

)

Comprehensive income

 

$

42,276

 

 

$

19,871

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

5


REPLIGEN CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, amounts in thousands, except share data)

 

 

 

Three Months Ended March 31, 2022

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of
Shares

 

 

Par
Value

 

 

Additional
Paid-In Capital

 

 

Accumulated
Other Comprehensive
Loss

 

 

Retained
Earnings

 

 

Total
Stockholders'
Equity

 

Balance at December 31, 2021

 

 

55,321,457

 

 

$

553

 

 

$

1,572,340

 

 

$

(16,886

)

 

$

194,060

 

 

$

1,750,067

 

Impact of the adoption of ASU 2020-06

 

 

 

 

 

 

 

 

(39,070

)

 

 

 

 

 

17,253

 

 

 

(21,817

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46,964

 

 

 

46,964

 

Issuance of common stock for debt conversion

 

 

8

 

 

 

0

 

 

 

(2

)

 

 

 

 

 

 

 

 

(2

)

Exercise of stock options and vesting of stock
   units

 

 

170,990

 

 

 

2

 

 

 

295

 

 

 

 

 

 

 

 

 

297

 

Tax withholding on vesting of restricted stock units

 

 

(63,409

)

 

 

(1

)

 

 

(12,310

)

 

 

 

 

 

 

 

 

(12,311

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

7,915

 

 

 

 

 

 

 

 

 

7,915

 

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(4,688

)

 

 

 

 

 

(4,688

)

Other

 

 

 

 

 

 

 

 

(24

)

 

 

 

 

 

 

 

 

(24

)

Balance at March 31, 2022

 

 

55,429,046

 

 

$

554

 

 

$

1,529,144

 

 

$

(21,574

)

 

$

258,277

 

 

$

1,766,401

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2021

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of
Shares

 

 

Par
Value

 

 

Additional
Paid-In Capital

 

 

Accumulated
Other Comprehensive
Income (Loss)

 

 

Retained
Earnings

 

 

Total
Stockholders'
Equity

 

Balance at December 31, 2020

 

 

54,760,837

 

 

$

548

 

 

$

1,460,748

 

 

$

2,085

 

 

$

65,769

 

 

$

1,529,150

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,450

 

 

 

29,450

 

Issuance of common stock for debt conversion

 

 

3

 

 

 

0

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Exercise of stock options and vesting of stock
   units

 

 

138,405

 

 

 

1

 

 

 

507

 

 

 

 

 

 

 

 

 

508

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

6,541

 

 

 

 

 

 

 

 

 

6,541

 

True-up of costs related to the December 2020 issuance
     of common stock

 

 

 

 

 

 

 

 

145

 

 

 

 

 

 

 

 

 

145

 

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(9,579

)

 

 

 

 

 

(9,579

)

Balance at March 31, 2021

 

 

54,899,245

 

 

$

549

 

 

$

1,467,942

 

 

$

(7,494

)

 

$

95,219

 

 

$

1,556,216

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

6


REPLIGEN CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, amounts in thousands)

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

46,964

 

 

$

29,450

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Inventory step-up amortization

 

 

-

 

 

 

1,598

 

Depreciation and amortization

 

 

11,834

 

 

 

8,444

 

Amortization of debt discount and issuance costs

 

 

452

 

 

 

2,828

 

Stock-based compensation expense

 

 

7,915

 

 

 

6,541

 

Deferred income taxes, net

 

 

1,045

 

 

 

789

 

Contingent consideration

 

 

(2,411

)

 

 

 

Other

 

 

73

 

 

 

6

 

Changes in operating assets and liabilities, excluding impact of acquisitions:

 

 

 

 

 

 

Accounts receivable

 

 

(6,269

)

 

 

(19,779

)

Unbilled receivables

 

 

11

 

 

 

 

Inventories

 

 

(30,037

)

 

 

(17,025

)

Prepaid expenses and other assets

 

 

272

 

 

 

(2,414

)

Other assets

 

 

1,310

 

 

 

538

 

Accounts payable

 

 

2,200

 

 

 

3,725

 

Accrued expenses

 

 

(9,999

)

 

 

(4,906

)

Long-term liabilities

 

 

(247

)

 

 

(533

)

Total cash provided by operating activities

 

 

23,113

 

 

 

9,262

 

Cash flows from investing activities:

 

 

 

 

 

 

Acquisitions, net of cash acquired

 

 

 

 

 

71

 

Additions to capitalized software costs

 

 

(1,027

)

 

 

(1,484

)

Purchases of property, plant and equipment

 

 

(27,204

)

 

 

(7,584

)

Sale of property, plant and equipment

 

 

17

 

 

 

 

Total cash used in investing activities

 

 

(28,214

)

 

 

(8,997

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

296

 

 

 

508

 

Payment of tax withholding obligation on vesting of restricted stock

 

 

(12,311

)

 

 

 

Repayment of convertible senior notes

 

 

(6

)

 

 

(1

)

Total cash (used in) provided by financing activities

 

 

(12,021

)

 

 

507

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(2,052

)

 

 

(6,746

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(19,174

)

 

 

(5,974

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

603,814

 

 

 

717,292

 

Cash and cash equivalents, end of period

 

$

584,640

 

 

$

711,318

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

Assets acquired under operating leases

 

$

1,119

 

 

$

3,182

 

The accompanying notes are an integral part of these consolidated financial statements.

7


REPLIGEN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1.
Summary of Significant Accounting Policies

 

Basis of Presentation

 

The consolidated financial statements included herein have been prepared by Repligen Corporation (the “Company”, “Repligen”, “our” or “we”) in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”), for Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X and do not include all of the information and footnote disclosures required by GAAP. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the SEC on February 17, 2022 (“Form 10-K”).

 

The preparation of financial statements in conformity with GAAP 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. The business and economic uncertainty resulting from the novel coronavirus pandemic (“COVID-19”) pandemic has made such estimates more difficult to calculate. Accordingly, actual results could differ from those estimates.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Repligen Sweden AB, Repligen GmbH, Spectrum® LifeSciences LLC and its subsidiaries (“Spectrum”), C Technologies, Inc., ARTeSYN Biosolutions Holdings Ireland Limited (“ARTeSYN”), Polymem S.A. (“Polymem”), Avitide LLC, Newton T&M Corp ("NTM"), Bio-Flex Solutions, L.L.C. ("BioFlex") and Repligen Singapore Pte. Ltd. All significant intercompany accounts and transactions have been eliminated in consolidation.

 

The Company made no material changes in the application of its significant accounting policies that were disclosed in its Form 10-K. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments, consisting of only normal, recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows. The results of operations for the interim periods presented are not necessarily indicative of results to be expected for the entire year. Certain prior year balances have been reclassified to conform to current year presentation.

 

Recent Accounting Standards Updates

 

We consider the applicability and impact of all Accounting Standards Updates (“ASUs” or “ASU”) on the Company’s consolidated financial statements. Updates not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s consolidated financial position or results of operations. Recently issued ASUs that we feel may be applicable to the Company are as follows:

 

Recently Issued Accounting Standards Updates – Adopted During the Period

 

Effective January 1, 2022, the Company adopted ASU 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)” using the modified retrospective method of adoption. ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract. Consequently, a convertible instrument will be accounted for as a single liability measured at its amortized cost as long as no other features of such convertible instrument require bifurcation and recognition as derivatives. By removing those separation models, the interest rate of convertible debt instruments will typically be closer to the coupon interest rate when applying the guidance in Topic 835, “Interest.” We now account for our 0.375% convertible senior notes due July 15, 2024 (the "2019 Notes") as a single liability measured at amortized cost. As a result, the adoption of ASU 2020-06 had a material impact on our consolidated financial statements, resulting in adjustments of $39.1 million, $17.3 million, and $27.6 million to the opening balances of additional paid-in capital, retained earnings and convertible senior notes,

8


current portion, net, respectively, on our consolidated balance sheet as of January 1, 2022. Additionally, due to the adoption of ASU 2020-06, we reversed the remaining balance of the deferred tax liability of $6.4 million, which was initially recorded in connection with the 2019 Notes. See Note 7, “Convertible Senior Notes,” for more information, including modified disclosures as required by ASU 2020-06 upon adoption.

9


2.
Fair Value Measurements

The Company uses various valuation approaches in determining the fair value of its assets and liabilities. The Company employs a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

 

Level 1 –

Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

 

 

Level 2 –

Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly.

 

 

Level 3 –

Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level input that is significant to the overall fair value measurement.

Fair Value Measured on a Recurring Basis

Financial assets and financial liabilities measured at fair value on a recurring basis consist of the following as of March 31, 2022 and December 31, 2021 (amounts in thousands):

 

 

 

As of March 31, 2022

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Money market accounts

 

$

435,969

 

 

$

 

 

$

 

 

$

435,969

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Short-term contingent consideration

 

$

 

 

$

 

 

$

27,790

 

 

$

27,790

 

Long-term contingent consideration

 

$

 

 

$

 

 

$

64,037

 

 

$

64,037