As filed with the Securities and Exchange Commission on June 13, 2003
Registration No. ___________
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Repligen Corporation
(Exact name of Registrant as specified in its charter)
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Delaware 04-2729386
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
41 Seyon Street, Building #1, Suite 100
Waltham, MA 02453
(781) 250-0111
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
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Walter C. Herlihy
President and Chief Executive Officer
Repligen Corporation
41 Seyon Street, Building #1, Suite 100
Waltham, MA 02453
(781) 250-0111
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies of all communications, including all communications sent to the agent for
service, should be sent to:
Lawrence S. Wittenberg, Esq.
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, Massachusetts 02110
(617) 248-7000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_| _________________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| _______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following. |_|
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Securities to be Amount to be Offering Price Per Aggregate Offering Registration
Registered Registered Share(1) Price(1) Fee(2)
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Common Stock, $0.01 par value per share (3) 2,500,000 $5.89 $14,725,000 $1,191.25
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933, as amended.
(2) Pursuant to Rule 457(c) under the Securities Act of 1933, the registration
fee has been calculated based upon the average of the high and low prices
per share of the common stock of Repligen Corporation on the Nasdaq
National Market on June 10, 2003.
(3) Each share of the common stock includes one preferred stock purchase right
pursuant to the Rights Agreement dated March 3, 2003 between Repligen
Corporation and American Stock Transfer & Trust Company, as rights agent.
Repligen hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until Repligen shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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The information in this prospectus is not complete and may be changed. The
selling stockholder may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell securities, and it is not soliciting offers
to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JUNE 13, 2003
REPLIGEN CORPORATION
2,500,000 Shares
Common Stock
The Riverview Group, LLC is offering for sale up to 2,500,000 shares of
our common stock.
Repligen's common stock is traded on the Nasdaq National Market under the
symbol "RGEN." The last reported sale price of our common stock on the Nasdaq
National Market on June 11, 2003 was $6.10 per share.
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is June ___, 2003.
In determining whether to invest in our common stock, you should rely only on
the information contained or incorporated by reference in this prospectus and
any supplement to this prospectus. We have not authorized anyone to provide you
with information different from that contained in this prospectus. The
information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any sale
of the common stock.
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TABLE OF CONTENTS
Page
Repligen................................................................ 2
Risk Factors............................................................ 4
Legal Proceedings....................................................... 11
Selected Consolidated Financial Data.................................... 13
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 15
Use of Proceeds......................................................... 21
Selling Stockholders.................................................... 22
Plan of Distribution.................................................... 23
Legal Matters........................................................... 25
Experts................................................................. 25
Where You Can Find More Information..................................... 25
Index to Financial Statements........................................... F-1
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Our executive offices are located at 41 Seyon Street, Building #1, Suite
100, Waltham, MA 02453, and our telephone number is (781) 250-0111.
REPLIGEN
Our goal is to become the leader in the development of new products for
profound pediatric developmental disorders. Our therapeutic product candidates
are secretin for autism and schizophrenia, CTLA4-Ig for autoimmune disorders and
uridine for neurologic and metabolic diseases. These products are synthetic
forms of naturally-occurring substances which may correct improperly regulated
biological processes with minimal toxicity or side-effects. Our product
candidates have the potential to produce clinical benefits not attainable with
any existing drug in diseases for which there are few alternative therapies or
treatments.
Autism is a profound developmental disorder characterized by deficits in
social interaction, impaired communication, and repetitive behaviors. A recent
study by the Centers for Disease Control found a prevalence rate for autism in
children of 1 in 300, a rate greater than leukemia, cystic fibrosis and multiple
sclerosis combined. Based on our Phase 2 clinical data and discussions with the
FDA, we are currently conducting two randomized, placebo-controlled,
double-blind Phase 3 clinical trials to evaluate the impact of secretin on the
social interaction deficits of autism in children 2.7 to 4.9 years of age. Each
child will receive six doses of secretin or a placebo over 18 weeks and will be
evaluated with the social interaction scale of the Autism Diagnostic Observation
Schedule and with the Clinical Global Impression of Change scale. There are
currently no drugs approved by the FDA for the treatment of autism.
Schizophrenia is a serious and chronic mental disorder characterized by
thought disorders such as delusions or hallucinations, as well as social
withdrawal, lack of initiative, and blunting of emotional expression. Current
antipsychotic drugs can be effective at reducing thought disorders but have
limited effects on the social withdrawal symptoms. We intend to evaluate
secretin in schizophrenic patients who have significant social withdrawal
symptoms in a placebo-controlled Phase 2 clinical study. Sales of antipsychotic
drugs for schizophrenia were approximately $5 billion in the United States in
2002.
In February 2000, we were issued a broad U.S. patent covering the use of
secretin in the treatment of autism. We are currently prosecuting additional
patent applications for therapeutic uses of secretin in the United States,
Europe and Japan.
CTLA4 is a naturally occurring protein which signals the immune system to
"turn off" after it has successfully cleared a bacterial or viral infection.
Published animal studies indicate that a soluble, injectable form of CTLA4
("CTLA4-Ig") can suppress the immune system in multiple animal models of
auto-immune disease and organ transplantation. We are currently conducting a
Phase 1/2 clinical trial of CTLA4-Ig in patients with refractory Immune
Thrombocytopenic Purpura, an autoimmune disease in which the patient's immune
system mounts an attack on his or her own blood platelets which can result in
internal bleeding.
In September 2002, we were granted a U.S. patent for the specific form of
CTLA4-Ig which we are developing. Repligen has also obtained an exclusive
license to the patent rights of the University of Michigan which pertain to
CTLA4-Ig. The University is prosecuting patents related to therapeutic uses of
CTLA4-Ig for auto-immune diseases and organ transplantation.
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We also believe that the University of Michigan and Repligen are entitled to
rights to certain U.S. patents on compositions and therapeutic uses of CTLA4-Ig
which have been issued to Bristol-Myers Squibb Company. (For more information on
our intellectual property rights to CTLA4-Ig, please see "Legal Proceedings.")
Uridine is a naturally occurring molecule essential for the synthesis of
DNA, RNA and certain proteins, lipids and carbohydrates. We are evaluating the
potential of uridine (or analogs of uridine) for several neurological disorders
for which there is unmet medical need. Preclinical studies have demonstrated
that uridine is active in a widely accepted model of depression. A trial of a
prodrug of uridine has been initiated at McLean Hospital in patients with either
bipolar disease or major depression. In addition to standard clinical
evaluations of safety and efficacy, the trial will evaluate potential changes in
brain chemistry by Magnetic Resonance Imaging.
"Purine autism" is a form of autism in which patients appear to have a
defect in the way they metabolize purines, which are essential components of
RNA, DNA and other essential biological factors. Research at Repligen has
confirmed that approximately 15-20% of patients with autistic symptoms have
evidence of this metabolic abnormality. Several patients with "purine autism"
have been treated by others with daily, oral dosing of uridine. We plan to
initiate a clinical trial of a prodrug of uridine in "purine autism" later this
year.
In November and December of 2000, we licensed from the University of
California, San Diego rights to U.S. patent applications covering the use of
uridine for the treatment of mitochondrial disease and for the treatment of
purine autism. (For more information on our intellectual property rights to
uridine and related compounds for the treatment of mitochondrial disease, please
see "Legal Proceedings.")
Our business strategy is to partially fund the development of our
proprietary therapeutic products with the profits derived from the sales of our
Specialty Pharmaceutical products: Protein A and SecreFlo(TM). This will enable
us to independently advance our proprietary drug development programs while at
the same time minimizing our operating losses. We may also seek corporate
partners for development or marketing of our therapeutic product candidates.
We manufacture and market products for the production of therapeutic
monoclonal antibodies based on a naturally occurring protein, Protein A, which
can specifically bind to antibodies. We own composition of matter patents for
recombinant Protein A in the United States. In December 1998, we entered into a
ten-year agreement to supply recombinant Protein A to Amersham Pharmacia Biotech
("Amersham"), a leading supplier to the biopharmaceutical market.
In October 1999, we licensed exclusive commercial rights to two diagnostic
products based on synthetic forms of porcine (pig) and human secretin from a
private company. Both of these products have been evaluated in clinical trials
for their safety and efficacy in diagnosing chronic pancreatitis, gastrinoma, a
form of cancer, and as an aid during ERCP. In April 2002, the FDA approved the
use of secretin for injection ("SecreFlo(TM)") to aid in the diagnosis of
pancreatic exocrine dysfunction or chronic pancreatitis and diagnosis of
gastrinoma. In November 2002, the FDA approved the use of SecreFlo(TM) to aid in
a gastrointestinal procedure
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called ERCP. The FDA has granted SecreFlo(TM) Orphan Drug Designation, which
means it is the only form of secretin marketed for these indications in the
United States until 2009. We market SecreFlo(TM) in the U.S. directly to
hospital-based gastroenterologists by our gastroenterology sales specialists. In
October 2002, we commenced selling SecreFlo(TM).
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision.
If any of the following risks occur, our business, financial condition or
results of operations could be materially harmed. In that case the trading price
of our common stock could decline, and you may lose all or part of your
investment. Additional risks and uncertainties that we are unaware of or that we
currently deem immaterial also may become important factors that affect
Repligen.
This prospectus also contains forward looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
prospectus.
We may be dependent on our collaborative partners to develop, conduct clinical
trials for, and manufacture, market and sell our principal products.
We conduct some of our development activities, and conduct most of our
commercialization activities, through collaborations. Our collaborations are
heavily dependent on the efforts and activities of our collaborative partners.
Our existing and any future collaborations may not be technically or
commercially successful.
For example, if any of our collaborative partners were to breach or
terminate an agreement with us, reduce its funding or otherwise fail to conduct
the collaboration successfully, we may need to devote additional internal
resources to the program that is the subject of the collaboration, scale back or
terminate the program or seek an alternative partner, any of which could lead to
delays in development and/or commercialization of our products.
If our clinical trials are not successful, we will not be able to develop and
commercialize any related products.
In order to obtain regulatory approvals for the commercial sale of our
future products, we and our collaborative partners will be required to complete
extensive clinical trials in humans to demonstrate the safety and efficacy of
the products. We have limited experience in conducting clinical trials.
The submission of an IND may not result in FDA authorization to commence
clinical trials. If clinical trials begin, we or our collaborative partners may
not complete testing
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successfully within any specific time period, if at all, with respect to any of
our products. Furthermore, we, our collaborative partners, or the FDA, may
suspend clinical trials at any time on various grounds, including a finding that
the subjects or patients are being exposed to unacceptable health risks.
Clinical trials, if completed, may not show any potential product to be safe or
effective. Thus, the FDA and other regulatory authorities may not approve any of
our potential products for any indication.
The rate of completion of clinical trials is dependent in part upon the
rate of enrollment of patients. Patient enrollment is a function of many
factors, including the size of the patient population, the proximity of patients
to clinical sites, the eligibility criteria for the study, and the existence of
competitive clinical trials. Delays in planned patient enrollment may result in
increased costs and delays in completion of clinical trials.
We may not obtain regulatory approvals; the approval process is costly and
lengthy.
We must obtain regulatory approval for our ongoing development activities
and before marketing or selling any of our future products. We may not receive
regulatory approvals to conduct clinical trials of our products or to
manufacture or market our products. In addition, regulatory agencies may not
grant such approvals on a timely basis or may revoke previously granted
approvals.
The process of obtaining FDA and other required regulatory approvals is
lengthy and expensive. The time required for FDA and other clearances or
approvals is uncertain and typically takes a number of years, depending on the
complexity and novelty of the product. Our analysis of data obtained from
preclinical and clinical activities is subject to confirmation and
interpretation by regulatory authorities, which could delay, limit or prevent
regulatory approval. Any delay in obtaining or failure to obtain required
clearance or approvals could materially adversely affect our ability to generate
revenues from the affected product. We have only limited experience in filing
and prosecuting applications necessary to gain regulatory approvals.
We also are subject to numerous foreign regulatory requirements governing
the design and conduct of the clinical trials and the manufacturing and
marketing of our future products. The approval procedure varies among countries.
The time required to obtain foreign approvals often differs from that required
to obtain FDA approvals. Moreover, approval by the FDA does not ensure approval
by regulatory authorities in other countries.
All of the foregoing regulatory risks also are applicable to development,
manufacturing and marketing undertaken by our collaborative partners or other
third parties.
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Even if we obtain marketing approval, our products will be subject to ongoing
regulatory review which will be expensive and may effect our ability to
successfully commercialize our products.
Even if we receive regulatory approval of a product, such approval may be
subject to limitations on the indicated uses for which the product may be
marketed, which may limit the size of the market for the product or contain
requirements for costly post-marketing follow-up studies. The manufacturers of
our products for which we have obtained marketing approval will be subject to
continued review and periodic inspections by the FDA and other regulatory
authorities. The subsequent discovery of previously unknown problems with the
product, clinical trial subjects, or with a manufacturer or facility may result
in restrictions on the product or manufacturer, including withdrawal of the
product from the market.
If we fail to comply with applicable regulatory requirements, we may be
subject to fines, suspension or withdrawal of regulatory approvals, product
recalls, seizure of products, operating restrictions, and criminal prosecution.
If we are unable to obtain and maintain patents for our products, we will not be
able to succeed commercially.
We must obtain and maintain patent and trade secret protection for our
products and processes in order to protect them from unauthorized use and to
produce a financial return consistent with the significant time and expense
required to bring our products to market. Our success will depend, in part, on
our ability to:
o obtain and maintain patent protection for our products and
manufacturing processes;
o preserve our trade secrets; and
o operate without infringing the proprietary rights of third parties.
We can not be sure that any patent applications relating to our products
that we will file in the future or that any currently pending applications will
issue on a timely basis, if ever. Since patent applications in the United States
are maintained in secrecy until patents issue and since publication of
discoveries in the scientific or patent literature often lag behind actual
discoveries, we cannot be certain that we were the first to make the inventions
covered by each of our pending patent applications or that we were the first to
file patent applications for such inventions. Even if patents are issued, the
degree of protection afforded by such patents will depend upon the:
o scope of the patent claims;
o validity and enforceability of the claims obtained in such patents;
and
o our willingness and financial ability to enforce and/or defend them.
The patent position of biotechnology and pharmaceutical firms is often
highly uncertain and usually involves complex legal and scientific questions.
Moreover, no consistent policy has emerged in the United States and in many
other countries regarding the breadth of claims allowed in biotechnology
patents. Patents which may be granted to us in certain foreign
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countries may be subject to opposition proceedings brought by third parties or
result in suits by us which may be costly and result in adverse consequences for
us.
If our competitors prepare and file patent applications in the United
States that claim technology also claimed by us, we may be required to
participate in interference proceedings declared by the U.S. Patent and
Trademark Office to determine priority of invention, which would result in
substantial costs to us.
In addition, patents blocking our manufacture, use or sale of our products
could be issued to third parties in the United States or foreign countries. The
issuance of blocking patents or an adverse outcome in an interference or
opposition proceeding, could subject us to significant liabilities to third
parties and require us to license disputed rights from third parties on
unfavorable terms, if at all, or cease using the technology.
We are currently and may in the future be involved in expensive patent
litigation or other intellectual property proceedings which could result in
liability for damages or stop our development and commercialization efforts.
There has been substantial litigation and other proceedings regarding the
complex patent and other intellectual property rights in the pharmaceutical and
biotechnology industries. We are a party to, and in the future may become a
party to, patent litigation or other proceedings regarding intellectual property
rights.
Other types of situations in which we may become involved in patent
litigation or other intellectual property proceedings include:
o We may initiate litigation or other proceedings against third
parties to enforce our patent rights.
o We may initiate litigation or other proceedings against third
parties to seek to invalidate the patents held by such third parties
or to obtain a judgment that our products or services do not
infringe such third parties' patents.
o If our competitors file patent applications that claim technology
also claimed by us, we may participate in interference or opposition
proceedings to determine the priority of invention.
o If third parties initiate litigation claiming that our processes or
products infringe their patent or other intellectual property
rights, we will need to defend against such claims.
The cost to us of any patent litigation or other proceeding, even if
resolved in our favor, could be substantial. Some of our competitors may be able
to sustain the cost of such litigation or proceedings more effectively than we
can because of their substantially greater financial resources. If a patent
litigation or other intellectual property proceeding is resolved unfavorably to
us, we or our collaborative partners may be enjoined from manufacturing or
selling our products and services without a license from the other party and be
held liable for significant
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damages. We may not be able to obtain any required license on commercially
acceptable terms or at all.
Uncertainties resulting from the initiation and continuation of patent
litigation or other proceedings could have a material adverse effect on our
ability to compete in the marketplace. Patent litigation and other proceedings
may also absorb significant management time.
We may become involved in litigation or other proceedings with collaborative
partners, which may be time consuming, costly and could result in delays in our
development and commercialization efforts.
We conduct some of our development activities, and conduct most of our
commercialization activities, through collaborations with collaborative
partners. Therefore, any disputes with such partners that leads to litigation or
similar proceedings may result in us incurring legal expenses, as well as facing
potential legal liability. Such disputes, litigation or other proceedings are
also time consuming and may cause delays in our development and
commercialization efforts.
We have limited sales and marketing experience and capabilities.
We have limited sales, marketing and distribution experience and
capabilities. We may, in some instances, rely significantly on sales, marketing
and distribution arrangements with our collaborative partners and other third
parties. In these instances, our future revenues will be materially dependent
upon the success of the efforts of these third parties.
If in the future we determine to perform sales, marketing and distribution
functions ourselves, we would face a number of additional risks, including:
o we may not be able to attract and build a significant marketing
staff or sales force;
o the cost of establishing a marketing staff or sales force may not be
justifiable in light of any product revenues; and
o our direct sales and marketing efforts may not be successful.
We have limited manufacturing capabilities and will be dependent on third party
manufacturers.
We have limited manufacturing experience and no commercial or pilot scale
manufacturing facilities for the production of pharmaceuticals. In order to
continue to develop pharmaceutical products, apply for regulatory approvals and,
ultimately, commercialize any products, we will need to develop, contract for,
or otherwise arrange for the necessary manufacturing capabilities.
We currently rely upon third parties to produce material for preclinical
and clinical testing purposes and expect to continue to do so in the future. We
also expect to rely upon third parties, including our collaborative partners, to
produce materials required for the commercial production of certain of our
products if we succeed in obtaining necessary regulatory approvals. We believe
that there is no proprietary aspect to the manufacture of our products. However,
there are only a
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limited number of manufacturers that operate under the FDA's regulations for
good manufacturing practices which are capable of and/or approved to manufacture
our product. Timing for the initiation of new manufacturers is uncertain, and,
if we are unable to arrange for third party manufacturing of our products on a
timely basis, or to do so on commercially reasonable terms, we may not be able
to complete development of our products or market them.
We currently rely upon third parties for fermentation relating to our
Protein A products. We rely on a single supplier for our SecreFlo(TM) product.
We believe that there is no proprietary aspect to the manufacture of our
products. However, timing for the initiation of new manufacturers is uncertain,
and, if we are unable to arrange for third party manufacturing of our products
on a timely basis, or to do so on commercially reasonable terms, we may not be
able to complete development of our products or market them.
To the extent that we enter into manufacturing arrangements with third
parties, we are dependent upon these third parties to perform their obligations
in a timely manner. If such third party suppliers fail to perform their
obligations, we may be adversely affected in a number of ways, including:
o we may not be able to meet commercial demands for our products;
o we may not be able to initiate or continue clinical trials of
products that are under development;
o we may be delayed in completing our clinical trials of products
under development; and
o we may be delayed in submitting applications for regulatory
approvals for our products.
The manufacture of products by us and our collaborative partners and
suppliers is subject to regulation by the FDA and comparable agencies in foreign
countries. Delay in complying or failure to comply with such manufacturing
requirements could materially adversely affect the marketing of our products.
If we are unable to continue to hire and retain skilled personnel, then we will
have trouble developing and marketing our products.
Our success depends largely upon the continued service of our management
and scientific staff and our ability to attract, retain and motivate highly
skilled technical, scientific, management, regulatory compliance and marketing
personnel. Potential employees with an expertise in the field of molecular
biology, biochemistry, regulatory affairs and/or clinical development of new
drug and biopharmaceutical manufacturing are not generally available in the
market and are difficult to attract and retain. We also face significant
competition for such personnel from other companies, research and academic
institutions, government and other organizations who have superior funding and
resources to be able to attract such personnel. The loss of key personnel or our
inability to hire and retain personnel who have technical, scientific or
regulatory compliance backgrounds could materially adversely affect our product
development efforts and our business.
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The market may not be receptive to our products upon their introduction.
The commercial success of our products that are approved for marketing
will depend upon their acceptance by the medical community and third party
payors as being clinically useful, cost effective and safe. All of the products
that we are developing are based upon new technologies or therapeutic
approaches. As a result, it is hard to predict market acceptance of our
products.
Other factors that we believe will materially affect market acceptance of
our products and services include:
o the timing of receipt of marketing approvals and the countries in
which such approvals are obtained;
o the safety, efficacy and ease of administration of our products;
o the success of physician education programs; and
o the availability of government and third party payor reimbursement
of our products.
We compete with larger, better financed and more mature pharmaceutical and
biotechnology companies who are capable of developing new approaches that could
make our products and technology obsolete.
The market for therapeutic and specialty pharmaceutical products is
intensely competitive, rapidly evolving and subject to rapid technological
change. Pharmaceutical and mature biotechnology companies have substantially
greater financial, manufacturing, marketing, research and development resources
than we have. New approaches to the treatment of our targeted diseases by these
competitors may make our products and technologies obsolete or noncompetitive.
We have incurred substantial losses, we expect to continue to incur losses and
we will not be successful until we reverse this trend.
We have incurred losses in each year since our founding in 1981. We expect
to continue to incur operating losses for the foreseeable future.
While we generate revenue from product sales, this revenue is not
sufficient to cover the costs of our clinical trials and drug development
programs. We expect to increase our spending significantly as we continue to
expand our research and development programs and commercialization activities.
As a result, we will need to generate significant revenues in order to achieve
profitability. We cannot be certain whether or when this will occur because of
the significant uncertainties that affect our business.
If we do not obtain additional capital for our drug development programs, we
will be unable to develop or discover new drugs.
We need additional long-term financing to develop our drug development
programs through the clinical trial process as required by the FDA and our
specialty pharmaceutical products business. We also need additional long-term
financing to support future operations and capital expenditures, including
capital for additional personnel and facilities. If we spend more money than
currently
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expected for our drug development programs and our specialty pharmaceutical
products business, we will need to raise additional capital by selling debt or
equity securities, by entering into strategic relationships or through other
arrangements. We may be unable to raise any additional amounts on reasonable
terms or when they are needed due to the volatile nature of the biotechnology
marketplace. If we are unable to raise this additional capital, we may have to
delay or postpone critical clinical studies or abandon other development
programs.
Our stock price could be volatile, which could cause you to lose part or all of
your investment.
The market price of our common stock, like that of the common stock of
many other development stage biotechnology companies, may be highly volatile. In
addition, the stock market has experienced extreme price and volume
fluctuations. This volatility has significantly affected the market prices of
securities of many biotechnology and pharmaceutical companies for reasons
frequently unrelated to or disproportionate to the operating performance of the
specific companies. These broad market fluctuations may adversely affect the
market price of our common stock.
Anti-takeover provisions may deter a third party from acquiring us, limiting our
stockholders' ability to profit from such a transaction.
Our Board of Directors has the authority to issue up to 5,000,000 shares
of preferred stock, of which 40,000 have been reserved for issuance in
connection with our stockholder rights plan, and to determine the price, rights,
preferences and privileges of those shares without any further vote or action by
our stockholders. We also adopted a "poison pill" stockholder rights plan that
will dilute the stock ownership of acquirers of our common stock upon the
occurrence of certain events. This stockholder rights plan could have the effect
of making it more difficult for a third party to acquire a majority of our
outstanding voting stock.
We are subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which prohibits us from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person becomes an
interested stockholder, unless the business combination is approved in a
prescribed manner. This provision could have the effect of delaying or
preventing a change of control of the Company. Section 203 and the stockholder
rights plan may have the effect of deterring hostile takeovers or delaying or
preventing changes in our management, including transactions in which
stockholders might otherwise receive a premium for their shares over then
current market prices.
LEGAL PROCEEDINGS
In November 2000 and December 2000, Repligen entered into two License
Agreements (the "UCSD License Agreements") with the University of California,
San Diego ("UCSD") related to certain patent applications pertaining to the use
of uridine and uridine derivatives for the treatment of mitochondrial disease
and purine autism. On June 21, 2001, Pro-Neuron, Inc. filed a complaint (the
"Pro-Neuron Complaint") against the Regents of the University of
- 11 -
California (the "Regents") and Repligen in the Superior Court of California,
County of San Diego seeking to void the license agreement related to treatment
of mitochondrial disease entered into between Repligen and UCSD. Pro-Neuron
subsequently sought to void the license agreement related to purine autism, and
asserted claims for misappropriation of trade secrets.
On June 4, 2003, Repligen, the Regents and Pro-Neuron entered into a
binding term sheet for settlement (the "Settlement") under which the Pro-Neuron
complaint will be dismissed upon execution of definitive agreements between the
parties. Under the terms of the Settlement, Repligen will receive $750,000.
Repligen and the Regents agreed to restructure the UCSD License Agreements to
exclude the field of acylated pyrimidines, including triacetyluridine ("TAU").
Repligen will discontinue its clinical trial of TAU in mitochondrial disease and
will continue its clinical trials of TAU in bipolar disorder/major depression
and purine autism for up to two years. Repligen will assign to Pro-Neuron any
inventions from these trials, for which it has rights, involving the use of
acylated pyrimidines, but will retain the rights to any inventions for all other
chemical entities. Repligen may still direct future clinical trials and product
development efforts to prodrugs or derivatives of uridine which are not acylated
pyrimidines.
Repligen is the exclusive licensee of all CTLA4 patent rights owned by the
University of Michigan ("the University"). Repligen and the University believe
that the University has a rightful claim to ownership of certain CTLA4 related
patents of Bristol-Myers Squibb Company ("Bristol"). Repligen and the University
filed a complaint against Bristol in the United States District Court for the
Eastern District of Michigan in August 2000 seeking a correction of
inventorship. The lawsuit asserts that a scientist from the University made
inventive contributions as part of a collaboration with Bristol scientists and
is a rightful inventor on the patents issued to Bristol. On April 2, 2003, a
bench trial of this matter commenced before the Honorable George C. Steeh. The
submission of evidence to the court concluded on May 5, 2003. A correction of
inventorship would result in the University and Repligen having rights to some
or all of Bristol's patents on CTLA4-Ig. Repligen's failure to obtain ownership
rights in the Bristol patents may restrict Repligen's ability to commercialize
CTLA4-Ig. Repligen and the University have also filed patents related to
compositions of matter and methods of use of CTLA4-Ig. In September 2002,
Repligen was issued a U.S. patent covering the composition of the CTLA4-Ig
product form that it is developing.
On March 14, 2003, ChiRhoClin, Inc. ("ChiRhoClin") filed an arbitration
proceeding against Repligen with the American Arbitration Association in New
York. ChiRhoClin alleges that reimbursement of certain marketing expenses to
Repligen breaches the license agreement between the parties by lowering the
amount of royalties paid to ChiRhoClin. ChiRhoClin claims damages of
approximately $800,000. Repligen believes that ChiRhoClin's arbitration claims
have no merit and will vigorously defend its rights. This arbitration is at an
early stage and has been stayed pending the outcome of settlement discussions
between the parties.
From time to time, we may be subject to other legal proceedings and claims
in the ordinary course of business. We are not currently aware of any such
proceedings or claims that we believe will have, individually or in the
aggregate, a material adverse effect on our business, financial condition or
results of operations.
- 12 -
SELECTED FINANCIAL DATA
The following selected financial data are derived from the audited
financial statements of Repligen as of and for the years ended March 31, 2003,
2002, 2001, 2000 and 1999. The financial statements for the year ended March 31,
2003 have been audited by Ernst & Young LLP. The financial statements for the
years ended 1999 through 2002 were audited by Arthur Andersen LLP, which has
ceased operations. The selected financial data set forth below should be read in
conjunction with our financial statements and the related notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus and our annual report on Form
10-K for the years ended March 31, 2002, 2001, 2000 and 1999.
- 13 -
Years Ended March 31,
-------------------------------------------------------------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
(In thousands, except per share amounts)
Operating Statement Data:
Revenues
Product revenue .......................... $ 7,743 $ 4,302 $ 2,084 $ 2,041 $ 1,010
Licensing and research revenue ........... 29 -- 171 863 1,268
--------- --------- --------- --------- ---------
Total revenue ......................... 7,772 4,302 2,255 2,904 2,278
Cost of revenue ............................ 3,480 1,993 1,400 1,107 689
--------- --------- --------- --------- ---------
Gross margin .......................... 4,292 2,309 855 1,797 1,589
Operating expenses
Research and development ................. 5,227 5,361 5,787 3,754 1,847
Selling, general and administrative ...... 4,159 2,526 2,401 2,406 1,463
Charge for purchased R&D ................. -- -- -- -- 1,035
--------- --------- --------- --------- ---------
Total operating expenses .............. 9,386 7,887 8,188 6,160 4,345
--------- --------- --------- --------- ---------
Loss from operations ....................... (5,094) (5,578) (7,333) (4,363) (2,756)
--------- --------- --------- --------- ---------
Investment income .......................... 557 1,117 2,054 547 212
--------- --------- --------- --------- ---------
Net loss ................................... $ (4,537) $ (4,461) $ (5,279) $ (3,816) $ (2,544)
========= ========= ========= ========= =========
Net loss per common share .................. $ (0.17) $ (0.17) $ (0.20) $ (0.18) $ (0.14)
========= ========= ========= ========= =========
Weighted average common shares outstanding . 26,813 26,640 26,548 21,538 18,018
(In thousands)
As of March 31,
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
Balance Sheet Data:
Cash and marketable securities ............. $ 18,909 $ 25,250 $ 30,298 $ 34,033 $ 3,263
Working capital ............................ 15,602 20,577 24,398 34,473 3,860
Total assets ............................... 26,793 29,111 32,148 36,287 5,224
Accumulated deficit ........................ (144,956) (140,419) (135,959) (130,680) (126,964)
Stockholders' equity ....................... 24,550 26,445 30,891 35,090 4,592
- 14 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements that involve risks
and uncertainties. When used in this prospectus, the words "intend,"
"anticipate," "believe," "estimate," "plan" and "expect" and similar expressions
as they relate to us are included to identify forward-looking statements. Our
actual results could differ materially from those anticipated in these
forward-looking statements and are a result of certain factors, including those
set forth under "Risk Factors" and elsewhere in this prospectus.
Overview
We are engaged in the development of new products for profound pediatric
developmental disorders. Our therapeutic product candidates are secretin for
autism and schizophrenia, CTLA4-Ig for autoimmune disorders and uridine for
neurologic and metabolic diseases. These products are synthetic forms of
naturally-occurring substances which may correct improperly regulated biological
processes with minimal toxicity or side-effects. Our product candidates have the
potential to produce clinical benefits not attainable with any existing drug in
diseases for which there are few alternative therapies or treatments.
Our business strategy is to partially fund the development of our
proprietary therapeutic products with the profits derived from the sales of our
specialty pharmaceutical products: Protein A and SecreFlo(TM). This will enable
us to independently advance our proprietary drug development programs while at
the same time minimizing our operating losses. We may also seek corporate
partners for development or marketing of our therapeutic product candidates.
Recent Accounting Pronouncements
In July 2002, the FASB issued SFAS 146, "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS 146 requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan and nullifies
Emerging Issues Task Force Issue No. 94-3. "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit and Activity (including
Certain Costs Incurred in a Restructuring)". SFAS 146 is to be applied
prospectively to exit or disposal activities initiated after December 31, 2002.
The Company does not believe the adoption of this standard will have a
significant impact on its financial position or results of operations.
In December 2002, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 148, Accounting for Stock-Based Compensation -- Transition
and Disclosure, which amends SFAS 123, Accounting for Stock-Based Compensation.
In response to a growing number of companies announcing plans to record expenses
for the fair value of stock options, SFAS 148 provides alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, SFAS 148
- 15 -
amends the disclosure requirements of FAS 123 to require more prominent and more
frequent disclosures in financial statements about the effects of stock-based
compensation. The amendments to Statement 123 in paragraphs 2(a)-2(e) of this
Statement is effective for our fiscal year ending March 31, 2003. The Company
believes that adoption of this statement did not have a significant impact on
its financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." This
Statement establishes standards for how an issuer classifies and measures in its
statement of financial position certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances) because that financial instrument embodies an
obligation of the issuer. This Statement is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003, except for
mandatorily redeemable financial instruments of nonpublic entities. The Company
does not expect that the adoption of this standard will have a significant
impact on its financial position or results of operations.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Securities and Exchange Commission requires that reporting companies
discuss their most "critical accounting policies" in management's discussion and
analysis of financial condition and results of operations. The SEC indicated
that a "critical accounting policy" is one that is important to the portrayal of
a company's financial condition and operating results and requires management's
most difficult, subjective or complex judgments, often as a result of the need
to make estimates about the effect of matters that are inherently uncertain.
We have identified the policies and estimates below as critical to our
business operations and the understanding of our results of operations. The
impact and any associated risks related to these policies on our business
operations is discussed throughout Management's Discussion and Analysis of
Financial Condition and Results of Operations where such policies affect our
reported and expected financial results. For a detailed discussion on the
application of these and other accounting policies, see Note 2 in the Notes to
the Consolidated Financial Statements of this prospectus. The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States 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.
Revenue Recognition
The Company applies Staff Accounting Bulletin No. 101, "Revenue
Recognition" (SAB 101) to its revenue arrangements. The Company generates
product revenues from the sale of its Protein A products to customers in the
pharmaceutical and process chromatography industries, and from the sale of
SecreFlo(TM), the first synthetic version of the hormone secretin, to
hospital-based gastroenterologists. In accordance with SAB 101, the Company
recognizes revenue related to product sales upon shipment of
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the product to the customer as long as there is persuasive evidence of an
arrangement, the fee is fixed or determinable and collection of the related
receivable is probable.
License and research revenue derived from collaborative arrangements is
recognized as earned under cost plus fixed-fee contracts, or on a straight-line
basis over the term of contract, which approximates when work is performed and
costs are incurred. Research expenses in the accompanying statements of
operations include funded and unfunded expenses. In addition, under certain
contracts, the Company recognizes research and development milestones as they
are achieved assuming the milestone is deemed to be substantive.
Impairment Analysis of Long-lived Assets
During 2002, under the terms of a 1999 licensing agreement with
ChiRhoClin, Inc. (CRC) we made a milestone payment to CRC that consisted of
$1,250,000 in cash and 696,223 shares of our common stock. We have recorded the
fair value of the shares issued, $2,576,025, and the cash paid of $1,250,000, as
a long-term intangible asset. (See Note 6 of our consolidated financial
statements for further discussion). Beginning in April 2002, we began to
amortize this intangible asset to cost of revenue over the remaining term of the
license, approximately seven years. In October 2002, we commenced commercial
shipment of SecreFlo(TM), our synthetic version of the hormone secretin. We
amortized $510,132 during the year ended March 31, 2003. At March 31, 2003, in
accordance with the provisions of SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets," we performed an impairment analysis of this
intangible asset in order to determine if an impairment loss existed and should
be recognized. The impairment analysis consisted of an evaluation of the
expected cash flows from the sale of SecreFlo(TM) over the term of the license
and also included various assumptions and estimates concerning selling price,
cost and volume of unit sales. We concluded that there was no impairment loss as
of March 31, 2003. We believe that our assumptions and estimates are reasonable,
however, actual results could differ from these estimates.
Clinical Trial Estimates
Our clinical development trials related to our proprietary drug products
are primarily performed by outside parties. It is not unusual at the end of each
accounting period to estimate both the total cost of the trials and the percent
completed as of that accounting date. We then need to adjust our estimates when
final invoices are received. To date, these adjustments have not been material
to our financial statements, and we believe that the estimates that we made as
of March 31, 2003 are reflective of the actual expenses incurred as of that
date. However, readers should be cautioned that the possibility exists that the
timing or cost of certain trials might be longer or shorter or cost more or less
than we have estimated and that the associated financial adjustments would be
reflected in future periods.
Results of Operations
Fiscal Year Ended March 31, 2003 Compared with Fiscal Year Ended March 31, 2002
Total revenue
- 17 -
Total revenue for the fiscal year 2003 was $7,772,000 as compared to
$4,302,000 in fiscal 2002, resulting in an increase of $3,470,000 or 81%. During
fiscal year 2003 we commenced selling SecreFlo(TM), a diagnostic product that is
marketed in the U.S. to hospital based gastroenterologists. In addition, this
increase in product sales is attributable to increased demand from value-added
resellers who incorporate our Protein A products into their proprietary antibody
purification systems, which they sell to the biotechnology and pharmaceutical
industry.
Cost of revenue
Cost of revenue for fiscal 2003 and 2002, was approximately $3,480,000 and
$1,993,000, respectively, reflecting an increase of $1,487,000 or 75%. This
increase is due primarily to increased costs associated with the increase in
volume of product shipments and costs associated with our recently launched
SecreFloTM. Gross profit in fiscal 2003 and 2002 was $4,292,000 or 55% and
$2,309,000 or 54%, respectively. This increase in gross profit is due primarily
to a change from period to period in the mix of Protein A product sales and the
commencement of SecreFlo(TM) sales.
Operating expenses
Total operating expenses for fiscal 2003 and 2002 were approximately
$9,386,000 and $7,887,000, respectively, resulting in an increase of $1,499,000
or 19% during 2003.
Research and development expenses for fiscal 2003 and 2002 were
approximately $5,227,000 and $5,361,000, respectively, a decrease of $134,000 or
2%. This decrease is largely attributable to a decrease in clinical material
expenses partially offset by an increase in personnel costs and clinical trial
expenses incurred during fiscal 2003.
Selling, general and administrative expenses (SG&A) for fiscal 2003 and
2002 were approximately $4,159,000 and $2,526,000, respectively, resulting in an
increase of $1,633,000 or 65%. This increase is largely attributable to
increased staffing, investor relations and litigation expenses partially offset
by a reimbursement by CRC of premarketing and launch expenses associated with
the launch of SecreFlo(TM). We anticipate that SG&A expenses will increase as
our litigation activities continue and an expected increase in marketing
expenses as we expand our commercial operations.
Investment income
Investment income for fiscal 2003 and 2002, was approximately $557,000 and
$1,117,000, respectively, a decrease of $560,000 or 50% in 2003. This decrease
is attributable to lower average funds available for investment and lower
interest rates during fiscal 2003 as compared to fiscal 2002. We expect interest
income to vary based on changes in the amount of funds invested and fluctuation
of interest rates.
Fiscal Year Ended March 31, 2002 Compared with Fiscal Year Ended March 31, 2001
Total revenue
- 18 -
Total revenue for fiscal 2002 were $4,302,000 compared to $2,255,000 in
fiscal 2001, an increase of $2,047,000 or 91%. This increase in revenue is a
result of increased Protein A sales driven predominantly by the rapid market
growth and success of antibody therapeutic drugs.
Product revenue for fiscal 2002 was $4,302,000 compared to $2,083,000 in
fiscal 2001, an increase of $2,219,000 or 107%. This increase is due to
increased product shipments to Amersham and increased demand from several
monoclonal antibody producers during the year.
Licensing and research revenue for fiscal 2002 was $0 compared to $172,000
in fiscal 2001, a decrease of $172,000 or 100%. During fiscal 2001, we received
non-recurring licensing payments from certain intellectual property pertaining
to our former programs.
Cost of revenue
Cost of revenue for fiscal 2002 was $1,993,000, compared to $1,400,000 in
fiscal 2001, an increase of $593,000 or 42%. This increase is largely
attributable to an increase in Protein A sales and to the mix of product sales
partially offset by manufacturing efficiencies. Gross profit in fiscal 2002 was
$2,309,000 or 54% versus 855,000 or 41% of product revenue for fiscal 2001. This
increase is a result of changes in product mix and improvements in manufacturing
efficiencies.
Operating expenses
Total operating expenses for fiscal 2002 were $7,887,000 compared to
$8,188,000 in fiscal 2001, a decrease of $301,000 or 4%.
Research and development expenses for fiscal 2002 were $5,361,000 compared
to $5,786,000 in fiscal 2001, a decrease of $425,000 or 7%. This decrease is
largely due to decreased clinical trial costs, pharmacology-toxicology testing,
and manufacturing costs related to development activities for our product
candidates.
Selling, general and administrative expenses for fiscal 2002 were
$2,526,000 compared to $2,402,000 in fiscal 2001, an increase of $124,000 or 5%.
This increase was attributable to increases in payroll and related expenses, and
litigation expense. These increases were partially offset by a decrease in
non-cash charges related to the issuance of warrants that were incurred during
fiscal 2001.
Investment income
Investment income for fiscal 2002 was $1,117,000, compared to $2,054,000
in fiscal 2001, a decrease of $937,000 or 46%. This decrease is attributable to
lower average funds available for investment and lower interest rates during
fiscal 2002 compared to fiscal 2001.
Liquidity and Capital Resources
We have financed our operations primarily through sales of equity
securities and revenues derived from product sales, collaborative research
agreements, government grants, and payments received from licensing and royalty
agreements.
- 19 -
At March 31, 2003 we had cash and marketable securities of $18,909,000,
compared to $25,250,000 at March 31, 2002. Our operating activities in 2003 used
cash of approximately $5,258,000, consisting of the net loss from operations for
the year of $4,537,000 and a decrease in accounts payable of $439,000. These
uses of cash were offset by non-cash charges of $802,000 for depreciation and
amortization and a decrease in accounts receivable of $67,000, a decrease in
inventory of $26,000, a decrease in prepaid expenses of $100,000 and an increase
in accrued expenses of $16,000. During fiscal 2003, we purchased $1,084,000 of
capital equipment, consisting of laboratory and office equipment.
In May 2003, a certain investor purchased approximately $12.5 million of
our common stock through a private placement of 2,500,000 shares. Repligen
received net proceeds of approximately $11.8 million after deducting the
estimated expenses of the transaction.
We have leased, pursuant to a ten-year lease agreement, a new corporate
headquarters in Waltham, Massachusetts. We anticipate that this new facility
will increase operating efficiencies and manufacturing capacity to meet the
growing demand for our Protein A products, and to better meet corporate goals
and objectives. We relocated to this facility in May 2002. In connection with
this lease agreement, a letter of credit in the amount of $500,000 was issued to
our landlord. In October 2002, this letter of credit was reduced to $200,000.
The letter of credit is collateralized by a certificate of deposit held by the
bank that issued the letter of credit. The certificate of deposit is included as
restricted cash in the accompanying balance sheet as of March 31, 2003.
During April 2002 and as required by the terms of our license agreement
with ChiRhoClin, we paid a milestone payment of $1,250,000 in connection with
the FDA's approval of SecreFlo(TM), our synthetic porcine secretin product. Also
pursuant to such license agreement, we issued to ChiRhoClin approximately,
696,000 shares of our common stock in fiscal 2003. We have not granted
registration rights to ChiRhoClin with respect to the shares issued under the
license agreement. In addition, under the terms of the licensing agreement with
ChiRhoClin, if the FDA approves the NDA for human secretin diagnostic, we will
be required to pay ChiRhoClin future milestones in cash. We will also be
required to pay royalties on sales of both synthetic porcine and human products.
We expect to incur significantly higher costs in fiscal 2004 as a result
of the expansion of research and development costs associated with the clinical
trials of our proprietary drug candidates and the commercialization of our
diagnostic product, SecreFlo(TM). We believe that we have sufficient resources
to satisfy our working capital and capital expenditure requirements for the next
twenty-four months. Should we need to secure additional financing to meet our
future liquidity requirements, we may not be able to secure such financing, or
obtain such financing on favorable terms because of the volatile nature of the
biotechnology marketplace.
At March 31, 2003, we had net operating loss carryforwards of
approximately $122,438,000 and research and development credit carryforwards of
approximately $7,161,000 to reduce future federal income taxes, if any. The net
operating loss and tax credit carryforwards will expire at various dates,
beginning in 2004, if not used. Net operating loss carryforwards and available
tax credits are subject to review and possible adjustment by the Internal
Revenue
- 20 -
Service and may be limited in the event of certain changes in the ownership
interest of significant stockholders.
We do not currently use derivative financial instruments. We generally
place our marketable security investments in high quality credit instruments, as
specified in our investment policy guidelines. Our investment policy also limits
the amount of credit exposure to any one issue, issuer, and type of investment.
We do not expect any material loss from our investment in marketable securities.
We believe that inflation has not had a material effect on our operations.
Cautionary Statement Regarding Forward-Looking Statements
Statements in this prospectus, as well as in the documents that are and
will be incorporated into this prospectus, that are not historical facts
constitute "forward-looking statements" which are made pursuant to the safe
harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. The forward-looking statements in this
prospectus do not constitute guarantees of future performance. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that could cause our actual results to be materially different
from the historical results or from any results expressed or implied by such
forward-looking statements, including, without limitation, risks associated with
the success of current and future collaborative relationships, market acceptance
of our products, our ability to compete with larger, better financed
pharmaceutical and biotechnology companies, new approaches to the treatment of
our targeted diseases, our expectation of incurring continued losses, our
ability to generate future revenues, our ability to raise additional capital to
continue our drug development programs, the success of our clinical trials, our
ability to develop and commercialize products, our ability to obtain required
regulatory approvals, our compliance with all Food and Drug Administration
regulations, our ability to obtain, maintain and protect intellectual property
rights for our products, the risk of litigation regarding our intellectual
property rights, our limited sales and manufacturing capabilities, our
dependence on third-party manufacturers and value-added resellers, our ability
to hire and retain skilled personnel, and our volatile stock price. Further
information on potential risk factors that could affect our financial results
are included under the caption entitled "Risk Factors" and elsewhere in this
prospectus and in the filings made by us from time to time with the Securities
and Exchange Commission including under the caption entitled "Certain Factors
that may Affect Future Results" in our annual report on Form 10-K for the year
ended March 31, 2002.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of our common stock
by The Riverview Group, LLC. See "Selling Stockholder" and "Plan of
Distribution". The principal purpose of this offering is to effect an orderly
disposition of the shares of our common stock being offered and sold from time
to time by The Riverview Group, LLC.
- 21 -
SELLING STOCKHOLDER
Unless otherwise noted below in the table, The Riverview Group, LLC has
sole voting and investment power over the shares shown as beneficially owned
except as provided under applicable law and except as set forth in the footnotes
to the table. Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission.
The table below was prepared based upon information furnished to us by The
Riverview Group, LLC and lists the following:
o the number of shares of our common stock beneficially owned by
The Riverview Group, LLC as of June 12, 2003 and before this
offering;
o the maximum number of shares of our common stock that The
Riverview Group, LLC may offer and sell pursuant to this
prospectus; and
o the number of shares owned by The Riverview Group, LLC after
completion of the offering (assuming that The Riverview Group,
LLC sells all of the shares offered pursuant to this
prospectus).
Shares Beneficially
Shares Shares Owned After Offering (1)
Beneficially Offered ------------------------
Owned Prior Pursuant To
Selling Stockholder To Offering This Prospectus Number
----------------------------- ---------------- --------------- ------
The Riverview Group, LLC 2,500,000 2,500,000 0
-------------
* Represents less than 1% of the outstanding shares.
(1) Assumes that The Riverview Group, LLC will sell all of the shares
registered hereunder. The Riverview Group, LLC may sell all or part of
their shares pursuant to this prospectus.
-------------
We are filing this registration statement to register for public sale the
shares of common stock currently held by The Riverview Group, LLC in order to
permit The Riverview Group, LLC to offer such shares for resale from time to
time.
On May 1, 2003, we sold 2,500,000 shares of our common stock to The
Riverview Group, LLC for aggregate consideration of $12,500,000 in a private
placement pursuant to a stock purchase agreement by and between The Riverview
Group, LLC and us (the "Purchase Agreement"). The Riverview Group, LLC is
offering for sale these 2,500,000 shares of our common stock pursuant to this
prospectus. Rodman & Renshaw, Inc. acted as the placement agent for the
transaction and we paid them approximately $625,000 for their services.
- 22 -
As a part of the Purchase Agreement, we have agreed not to sell any shares
of common stock to institutional investors in a private placement until 14 days
after this registration statement is declared effective by the SEC. After such
date and until December 31, 2003, prior to selling any shares of common stock to
institutional investors in a private placement, we are required to offer to The
Riverview Group, LLC (and affiliated persons) 25% of the common stock proposed
to be offered to institutional investors in a private placement and to keep such
offer open for ten (10) business days before proceeding with the sale.
Except as noted above and based on representations by The Riverview Group,
LLC, to the best of our knowledge, The Riverview Group, LLC has not had a
material relationship with us or any of our affiliates within the three-year
period ending on the date of this prospectus.
PLAN OF DISTRIBUTION
The shares of our common stock covered by this prospectus may be sold by
The Riverview Group, LLC from time to time for their own account or by pledgees,
donees, transferees, designees, or other successors in interest. We will pay the
expenses incurred in connection with the registration of the shares of our
common stock sold hereunder, except that The Riverview Group, LLC will pay or
assume brokerage commissions and similar charges, their legal fees and expenses
of counsel and any stock transfer taxes or other expenses incurred in connection
with the sale of the shares of our common stock. We will not receive any of the
proceeds from the resale of the shares of common stock by The Riverview Group,
LLC.
The distribution of the shares of our common stock by The Riverview Group,
LLC is not subject to any underwriting agreement. The shares of our common stock
offered by The Riverview Group, LLC may be sold from time to time in
transactions on the Nasdaq National Market, on any national securities exchange
or quotation service on which our common stock may be listed or quoted at the
time of sale, in the over-the-counter market, in negotiated transactions
(otherwise than on these exchanges or systems or in the over-the-counter
market), through the writing of options on the shares of our common stock
(whether such options are listed on an options exchange or otherwise), through
the settlement of short sales, or a combination of such methods of sale, at
fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices relating to such prevailing market prices or at negotiated
prices. The sales may be effected in transactions that may involve cross or
block transactions.
If The Riverview Group, LLC effects such transactions by selling shares of
our common stock to or through underwriters, broker-dealers or agents, the
underwriters, broker-dealers or agents may receive commissions in the form of
discounts, concessions or commissions from The Riverview Group, LLC or
commissions from purchasers of the shares of common stock for whom they may act
as agent or to whom they may sell as principal. These discounts, concessions or
commissions as to particular underwriters, broker-dealers or agents may be in
excess of those customary in the types of transactions involved. In connection
with sales of our common stock or otherwise, The Riverview Group, LLC may enter
into hedging transactions with broker-dealers, which may in turn engage in short
sales of the common stock in the course of hedging in positions they assume. The
Riverview Group, LLC may also sell shares of our common stock short and deliver
shares of our common stock covered by this prospectus to close out short
- 23 -
positions. The Riverview Group, LLC may also loan or pledge shares of our common
stock to broker-dealers that in turn may sell such shares.
The Riverview Group, LLC may pledge or grant a security interest in some
or all of the shares of our common stock they own and, if The Riverview Group,
LLC defaults in the performance of its secured obligations, the pledgees or
secured parties may offer and sell the shares of our common stock from time to
time under this prospectus or any amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933, as
amended, amending, if necessary, the list of selling stockholders to include the
pledgee, transferee or other successors in interest as selling stockholders
under this prospectus. The Riverview Group, LLC also may transfer and donate the
shares of our common stock in other circumstances in which case the transferees,
donees, pledgees or other successors in interest will be the selling beneficial
owners for purposes of this prospectus.
Under applicable rules and regulations under the Securities Exchange Act
of 1934, any person engaged in a distribution of the shares of common stock
covered by this prospectus may be limited in their ability to engage in market
activities with respect to such shares. The Riverview Group, LLC, for example,
will be subject to applicable provisions of such Act and the rules and
regulations under it, including, without limitation Regulation M, which
provisions may restrict certain activities of the selling stockholders and limit
the timing of purchases and sales of any shares of common stock by The Riverview
Group, LLC. Furthermore, under Regulation M, persons engaged in a distribution
of securities are prohibited from simultaneously engaging in market making and
certain other activities with respect to such securities for a specified period
of time prior to the commencement of such distributions, subject to specified
exceptions or exemptions. The foregoing may affect the marketability of the
shares offered by this prospectus.
We will indemnify The Riverview Group, LLC against liabilities, including
some liabilities under the Securities Act, in accordance with the Stock Purchase
Agreement. We may be indemnified by The Riverview Group, LLC against civil
liabilities, including liabilities under the Securities Act, that may arise from
any written information The Riverview Group, LLC furnishes to us specifically
for use in this prospectus, in accordance with the Stock Purchase Agreement.
Subject to limitations under the Securities Act, once sold under the
registration statement of which this prospectus forms a part, the shares of our
common stock should, in general, be freely tradable in the hands of persons
other than our affiliates.
Any broker-dealers that participate with The Riverview Group, LLC in the
distribution of shares of our common stock may be deemed to be underwriters and
any commissions received by them and any profit on the resale of shares of our
common stock placed by them might be deemed to be underwriting discounts and
commissions within the meaning of the Securities Act, in connection with such
sales. The Riverview Group, LLC will also be subject to the prospectus delivery
requirements of the Securities Act for sales of our common stock made pursuant
to this prospectus.
- 24 -
Any shares covered by the prospectus that qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under Rule 144 rather than
pursuant to this prospectus.
Since The Riverview Group, LLC is not restricted as to the price or prices
at which it may sell its shares of our common stock, sales of such shares of our
common stock at less than the market prices may depress the market price of the
our common stock.
American Stock Transfer & Trust Company, 59 Maiden Lane, Plaza Level, New
York, NY 10038, is the transfer agent for the shares of common stock of
Repligen.
LEGAL MATTERS
The validity of the shares of our common stock offered hereby will be
passed upon for us by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.
EXPERTS
The financial statements of Repligen Corporation at March 31, 2003, and
for the year then ended, appearing in this Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent auditors, and at March 31,
2002 and for each of the two years in the period ended March 31, 2002, by Arthur
Andersen LLP, independent auditors, as set forth in their respective reports
thereon appearing elsewhere herein, and are included in reliance upon such
reports given on the authority of such firms as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
Repligen files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file with
the SEC at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on operation of the public reference room. Our SEC filings are also
available to the public from the SEC's website at "http://www.sec.gov." Our
website is located at "http://www.repligen.com." Information contained on our
website is not part of this prospectus.
The SEC allows Repligen to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. Repligen
incorporates by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act (File No. 000-14656):
1. Annual report on Form 10-K for the year ended March 31, 2002;
2. Proxy statement, filed on July 22, 2002, for the 2002 annual meeting of
shareholders;
- 25 -
3. Quarterly reports on Form 10-Q for the quarters ended December 31, 2002,
September 30, 2002 and June 30, 2002;
4. Current reports on Form 8-K filed on April 9, 2002, May 24, 2002, June 19,
2002 (as amended by Form 8-K/A filed on June 28, 2002), October 7, 2002,
October 21, 2002, November 12, 2002, March 4, 2003, May 1, 2003, May 2,
2003 and June 5, 2003;
5. The description of our common stock that is contained in our registration
statement on Form 8-A, dated May 28, 1986 and in our current report on
Form 8-K filed on May 24, 2002; and
6. The description of our stockholder rights plan that is contained in our
registration statement on Form 8-A, dated March 4, 2003.
You may request a copy of these filings, at no cost, by writing or
telephoning our Chief Financial Officer at the following address: Repligen
Corporation, 41 Seyon Street, Building #1, Suite 100, Waltham, MA 02453, (781)
250-0111.
This prospectus is part of a registration statement we filed with the SEC.
You should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different information.
We are not making an offer of these securities in any state where the offer is
not permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of the document.
- 26 -
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Auditors F-2
Balance Sheets as of March 31, 2003 and 2002 F-4
Statements of Operations for the Years
Ended March 31, 2003, 2002 and 2001 F-5
Statements of Stockholders' Equity for the Years
Ended March 31, 2003, 2002 and 2001 F-6
Statements of Cash Flows for the Years
Ended March 31, 2003, 2002 and 2001 F-7
Notes to Financial Statements F-8
F-1
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders of
Repligen Corporation
We have audited the accompanying balance sheet of Repligen Corporation as
of March 31, 2003, and the related statements of operations, stockholders'
equity, and cash flows for the year then ended. 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 audit. The financial
statements of Repligen Corporation as of March 31, 2002 and the years ended
March 31, 2002 and 2001 were audited by other auditors who have ceased
operations and whose report dated May 13, 2002, expressed an unqualified opinion
on those statements.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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 audit provides 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 as of
March 31, 2003, and the results of its operations, stockholders' equity, and
cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
May 21, 2003,
except with respect to
the matter discussed in
Note 12, as to which the
date is June 4, 2003
F-2
This is a copy of a report previously issued by Andersen and Andersen has not
reissued this report.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Repligen Corporation:
We have audited the accompanying balance sheets of Repligen Corporation (a
Delaware corporation) as of March 31, 2002 and 2001, and the related statements
of operations, stockholders' equity and cash flows for each of the three years
in the period ended March 31, 2002. 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 auditing standards generally
accepted in the United States. 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 as of
March 31, 2002 and 2001, and the results of its operations and its cash flows
for each of the three years in the period ended March 31, 2002, in conformity
with accounting principles generally accepted in the United States.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 13, 2002
F-3
REPLIGEN CORPORATION
BALANCE SHEETS
As of March 31,
2003 2002
------------------------------
Assets
Current assets:
Cash $ 6,108,004 $ 8,696,194
Marketable securities 9,417,224 12,143,170
Accounts receivable, less reserves of $50,000 and $25,000 in
2003 and 2002, respectively 907,501 865,861
Inventories 889,924 916,091
Prepaid expenses and other current assets 522,569 622,309
------------- -------------
Total current assets 17,845,222 23,243,625
------------- -------------
Property, plant and equipment, at cost:
Leasehold improvements 2,585,152 1,657,416
Equipment 1,317,086 1,169,080
Furniture and fixtures 360,003 352,174
------------- -------------
4,262,241 3,178,670
Less - accumulated depreciation and amortization (2,013,828) (1,721,732)
------------- -------------
2,248,413 1,456,938
------------- -------------
Long-term marketable securities 3,183,727 3,910,852
Restricted cash 200,000 500,000
Other assets, net (Note 6) 3,315,894 --
------------- -------------
Total Assets $ 26,793,256 $ 29,111,415
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 968,551 $ 1,407,955
Accrued expenses 1,274,837 1,258,804
------------- -------------
Total current liabilities 2,243,388 2,666,759
------------- -------------
Commitments and contingencies (Notes 5,10)
Stockholders' equity:
Preferred stock, $0.01 par value, 5,000,000 shares
authorized, no shares issued or outstanding -- --
Common stock, $0.01 par value, 40,000,000 shares
authorized, 27,338,973 and 26,642,750 shares issued and
outstanding, in 2003 and 2002, respectively 273,390 266,427
Additional paid-in capital 169,232,975 166,597,654
Accumulated deficit (144,956,497) (140,419,425)
------------- -------------
Total stockholders' equity 24,549,868 26,444,656
------------- -------------
Total liabilities and stockholders' equity $ 26,793,256 $ 29,111,415
============= =============
See accompanying notes.
F-4
REPLIGEN CORPORATION
STATEMENTS OF OPERATIONS
Years Ended March 31,
2003 2002 2001
--------------------------------------------
Revenue:
Product revenue $ 7,742,667 $ 4,301,565 $ 2,083,529
Licensing and research revenue 29,114 -- 171,615
------------ ------------ ------------
Total revenue 7,771,781 4,301,565 2,255,144
Cost of revenue 3,480,441 1,992,734 1,399,849
------------ ------------ ------------
Gross profit 4,291,340 2,308,831 855,295
Operating expenses:
Research and development 5,226,524 5,360,720 5,786,392
Selling, general and administrative 4,159,220 2,525,827 2,401,460
------------ ------------ ------------
Total operating expenses 9,385,744 7,886,547 8,187,852
------------ ------------ ------------
Loss from operations (5,094,404) (5,577,716) (7,332,557)
------------ ------------ ------------
Investment income 557,332 1,117,099 2,053,690
------------ ------------ ------------
Net loss $ (4,537,072) $ (4,460,617) $ (5,278,867)
============ ============ ============
Basic and diluted net loss per share $ (0.17) $ (0.17) $ (0.20)
============ ============ ============
Basic and diluted weighted average
shares outstanding 26,812,981 26,639,525 26,547,238
============ ============ ============
See accompanying notes.
F-5
REPLIGEN CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock
------------
Additional Total
Number of Paid- Accumulated Stockholders'
Shares Amount in Capital Deficit Equity
------ ------ ---------- ------- ------
------------------------------------------------------------------------------------------------------------
Balance at March 31, 2000 26,315,979 $ 263,159 $ 165,507,184 ($130,679,941) $ 35,090,402
------------------------------------------------------------------------------------------------------------
Issuance of common stock for
patent acquisition 30,000 300 183,450 -- 183,750
Issuance of warrants for services -- -- 218,735 -- 218,735
Exercise of stock options 34,200 342 24,354 -- 24,696
Exercise of warrants 248,771 2,488 649,961 -- 652,449
Net loss -- -- -- (5,278,867) (5,278,867)
------------------------------------------------------------------------------------------------------------
Balance at March 31, 2001 26,628,950 266,289 166,583,684 (135,958,808) 30,891,165
------------------------------------------------------------------------------------------------------------
Exercise of stock options 13,800 138 13,970 -- 14,108
Net loss -- -- -- (4,460,617) (4,460,617)
------------------------------------------------------------------------------------------------------------
Balance at March 31, 2002 26,642,750 266,427 166,597,654 (140,419,425) 26,444,656
------------------------------------------------------------------------------------------------------------
Issuance of common stock for
payment of license 696,223 6,963 2,569,063 -- 2,576,026
Compensation expense related to
issuance of stock options to
employees 66,258 66,258
Net loss -- -- -- (4,537,072) (4,537,072)
------------------------------------------------------------------------------------------------------------
Balance at March 31, 2003 27,338,973 $ 273,390 $ 169,232,975 ($144,956,497) $ 24,549,868
------------------------------------------------------------------------------------------------------------
See accompanying notes.
F-6
REPLIGEN CORPORATION
STATEMENTS OF CASH FLOWS
Years Ended March 31,
2003 2002 2001
--------------------------------------------
Cash flows from operating activities:
Net loss $ (4,537,072) $ (4,460,617) $ (5,278,867)
Adjustments to reconcile net loss to net cash
used in operating activities --
Depreciation and amortization 802,228 257,537 276,852
Common stock warrants issued for payment for
services -- -- 218,735
Compensation expense related to issuance of
stock options to employees 66,258 -- --
Bad debt reserve 25,000 -- --
Common stock issued for payment of patent
acquisition -- -- 183,750
Changes in assets and liabilities:
Accounts receivable (66,640) (422,101) 404,078
Inventories 26,167 (281,368) (87,276)
Prepaid expenses and other current assets 99,740 (352,057) (28,598)
Other assets (1,250,000) 56,882 24,500
Accounts payable (439,404) 19,306 104,350
Accrued expenses 16,033 428,246 (44,610)
------------ ------------ ------------
Net cash used in operating activities (5,257,690) (4,754,172) (4,227,086)
------------ ------------ ------------
Cash flows from investing activities:
Purchases of marketable securities (8,329,507) (22,801,063) (50,328,259)
Redemptions of marketable securities 11,782,578 20,881,667 45,000,000
Decrease/(Increase) in restricted cash 300,000 (500,000) --
Purchases of property, plant and equipment (1,083,571) (307,971) (184,721)
------------ ------------ ------------
Net cash provided by (used in) investing
activities 2,669,500 (2,727,367) (5,512,980)
------------ ------------ ------------
Cash flows from financing activities:
Exercise of warrants -- -- 652,449
Exercise of stock options -- 14,108 24,696
------------ ------------ ------------
Net cash provided by financing activities -- 14,108 677,145
------------ ------------ ------------
Net decrease in cash and cash equivalents (2,588,190) (7,467,431) (9,062,921)
Cash, beginning of year 8,696,194 16,163,625 25,226,546
------------ ------------ ------------
Cash, end of year $ 6,108,004 $ 8,696,194 $ 16,163,625
============ ============ ============
Supplemental disclosure of noncash activities:
Common stock issued for payment of license $ 2,576,025 $ -- $ --
Purchases of leasehold improvements $ -- $ 962,383 $ --
See accompanying notes.
F-7
REPLIGEN CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. Organization and Nature of Business
Repligen Corporation ("Repligen," "Company," "we," "us" or "our") is
engaged in the development of new products for profound pediatric developmental
disorders. Our therapeutic product candidates are secretin for autism and
schizophrenia, CTLA4-Ig for autoimmune disorders and uridine for neurologic and
metabolic diseases. These products are synthetic forms of naturally-occurring
substances which may correct improperly regulated biological processes with
minimal toxicity or side-effects. Our product candidates have the potential to
produce clinical benefits not attainable with any existing drug in diseases for
which there are few alternative therapies or treatments.
Our business strategy is to partially fund the development of our
proprietary therapeutic products with the profits derived from the sales of our
specialty pharmaceutical products: Protein A and SecreFlo(TM). This will enable
us to independently advance our proprietary drug development programs while at
the same time minimizing our operating losses. We may also seek corporate
partners for development or marketing of our therapeutic product candidates.
The Company is subject to a number of risks typically associated with
companies in the biotechnology industry. Principally those risks associated with
the Company's dependence on collaborative arrangements, development by the
Company or its competitors of new technological innovations, dependence on key
personnel, protection of proprietary technology, compliance with the U.S. Food
and Drug Administration and other governmental regulations and approval
requirements, as well as the ability to grow the Company's business and
obtaining adequate funding to fund this growth.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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.
Reclassifications
The Company has reclassified certain prior-year information to conform to
the current year's presentation.
Revenue Recognition
F-8
The Company applies Staff Accounting Bulletin No. 101, "Revenue
Recognition" (SAB 101) to its revenue arrangements. The Company generates
product revenues from the sale of its Protein A products to customers in the
pharmaceutical and process chromatography industries, and from the sale of
SecreFlo(TM), the first synthetic version of the hormone secretin, to
hospital-based gastroenterologists. In accordance with SAB 101, the Company
recognizes revenue related to product sales upon shipment of the product to the
customer as long as there is persuasive evidence of an arrangement, the fee is
fixed or determinable and collection of the related receivable is probable.
License and research revenue derived from collaborative arrangements is
recognized as earned under cost plus fixed-fee contracts, or on a straight-line
basis over the term of contract, which approximates when work is performed and
costs are incurred. Research expenses in the accompanying statements of
operations include funded and unfunded expenses. In addition, under certain
contracts, the Company recognizes research and development milestones as they
are achieved assuming the milestone is deemed to be substantive.
Comprehensive Income
The Company applies Statement of Financial Accounting Standards (SFAS) No.
130, "Reporting Comprehensive Income." SFAS No. 130 requires disclosure of all
components of comprehensive income on an annual and interim basis. Comprehensive
income is defined as the change in equity of a business enterprise during a
period from transactions and other events and circumstances from nonowner
sources. The Company's comprehensive loss is equal to its reported net loss for
all periods presented.
Cash & Marketable Securities
The Company applies SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." At March 31, 2003, the Company's cash equivalents
and marketable securities are classified as held-to-maturity investments as the
Company has the positive intent and ability to hold to maturity. As a result,
these investments are recorded at amortized cost. Marketable securities are
investments with original maturities of greater than 90 days. Long-term
marketable securities are investment grade securities with maturities of greater
than one year. The Company recognized a realized gain of $5,558 during the year
ended March 31, 2002 on sales of its marketable securities.
Cash and marketable securities consist of the following at March 31, 2003
and 2002:
Unrealized Holding
Gain (Loss)
Years Ended March 31, Years Ended March 31,
2003 2002 2003 2002
-----------------------------------------------------
Cash $ 6,108,004 $ 8,696,194 -- --
----------- ----------- ----------- -----------
Marketable securities
U.S. Government and agency securities $ 715,459 $ 1,414,994 $ 252 $ (774)
Corporate and other debt securities $ 8,701,765 $10,728,176 $ 23,774 $ 51,610
----------- ----------- ----------- -----------
(Average of remaining maturity of
approximately 4 months at March 31, 2003) $ 9,417,224 $12,143,170 $ 24,026 $ 50,836
=========== =========== =========== ===========
F-9
Long-term marketable securities
U.S. Government and agency securities $ 1,101,265 $ -- $ 2,598 $ --
Corporate and other debt securities $ 2,082,463 $ 3,910,852 $ 3,628 $ (9,334)
----------- ----------- ----------- -----------
(Average of remaining maturity of
approximately 14 months at March 31, 2003) $ 3,183,727 $ 3,910,852 $ 6,226 $ (9,334)
=========== =========== =========== ===========
Restricted cash of $200,000 is related to the Company's facility lease
obligation (see note 5).
Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments which
represent cash and cash equivalents, marketable securities, accounts receivable
and accounts payable generally approximate fair value due to the short-term
nature of these instruments.
Concentrations of Credit Risk and Significant Customers
Financial instruments that subject the Company to significant
concentrations of credit risk primarily consist of cash and cash equivalents,
marketable securities and accounts receivable. The Company's cash equivalents
and marketable securities are invested in financial instruments with high credit
ratings. At March 31, 2003, the Company has no items such as those associated
with foreign exchange contracts, options contracts or other foreign hedging
arrangements.
Concentration of credit risk with respect to accounts receivable is
limited to customers to whom the Company makes significant sales. The Company
maintains reserves for the potential write-off of accounts receivable. To date,
the Company has not written off any significant accounts. To control credit
risk, the Company performs regular credit evaluations of its customers'
financial condition and maintains allowances for potential credit losses.
Revenue from significant customers as a percentage of the Company's total
revenue is as follows:
Years Ended March 31,
2003 2002 2001
-----------------------------
Customer A 43% 56% 42%
Customer B 23% 23% 19%
Significant accounts receivable balances as a percentage of the Company's
total trade accounts receivable balances are as follows:
As of March 31,
2003 2002
-----------------
Customer A 65% 69%
Customer B --% 24%
Customer C 10% --
F-10
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, 2003 and 2002 consist of the following:
As of March 31,
2003 2002
---- ----
Raw materials ...... $114,130 $182,117
Work-in process .... 303,631 470,823
Finished goods ..... 472,163 263,151
-------- --------
Total ........... $889,924 $916,091
======== ========
Depreciation and Amortization
Depreciation and amortization are calculated using the straight-line
method over the estimated useful life of the asset as follows:
Description Estimated Useful Life
----------- ---------------------
Leasehold improvements Shorter of term of the lease or estimated useful life
Equipment 3-5 years
Furniture and fixtures 5-7 years
The Company recorded depreciation expense and amortization of $292,096,
$257,537 and $276,852 in 2003, 2002 and 2001, respectively.
Earnings Per Share
The Company applies SFAS No. 128, "Earnings per Share." SFAS No. 128
establishes standards for computing and presenting earnings per share. 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 2003, 2002 and 2001 do not
include the potential common shares from warrants and stock options because to
do so would have been antidilutive. Accordingly, basic and diluted net loss per
share is the same. The number of potential common shares excluded from the
calculation of diluted earnings per share during the years ended March 31, 2003,
2002 and 2001 was 2,344,996, 2,106,846, and 1,904,387 shares, respectively.
Segment Reporting
The Company applies SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards for
reporting information regarding operating segments in annual financial
statements and requires selected information for those segments to be presented
in interim financial reports issued to stockholders. SFAS No. 131 also
F-11
establishes standards for related disclosures about products and services and
geographic areas. The chief operating decision maker, or decision-making group,
in making decisions how to allocate resources and assess performance, identifies
operating segments as components of an enterprise about which separate discrete
financial information is available for evaluation. To date, the Company has
viewed its operations and manages its business as one operating segment. As a
result, the financial information disclosed herein represents all of the
material financial information related to the Company's principal operating
segment.
The following table represents the Company's revenue by geographic area
(based on the location of the customer):
Year Ended March 31,
2003 2002 2001
---- ---- ----
Europe 53% 63% 42%
United States 46% 35% 56%
Other 1% 2% 2%
---- ---- ----
Total 100% 100% 100%
==== ==== ====
As of March 31, 2003 and 2002, all of the Company's assets are located in
the United States.
Recent Accounting Pronouncements
In July 2002, the FASB issued SFAS 146, "Accounting for Cost Associated
with Exit or Disposal Activities". SFAS 146 requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan and nullifies
Emerging Issues Task Force Issue No. 94-3 "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit and Activity (including
Certain Costs Incurred in a Restructuring)". SFAS 146 is to be applied
prospectively to exit or disposal activities initiated after December 31, 2002.
The Company does not believe the adoption of this standard will have a
significant impact on the Company's financial position or results of operations.
In December 2002, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 148, "Accounting for Stock-Based Compensation -- Transition
and Disclosure", which amends SFAS 123, "Accounting for Stock-Based
Compensation". In response to a growing number of companies announcing plans to
record expenses for the fair value of stock options, SFAS 148 provides
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, SFAS
148 amends the disclosure requirements of FAS 123 to require more prominent and
more frequent disclosures in financial statements about the effects of
stock-based compensation. The amendments to Statement 123 in paragraphs
2(a)-2(e) of this Statement were effective for the current fiscal year. The
Company believes that the adoption of this statement has not resulted in a
significant impact on its financial position or results of operations.
F-12
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." This
Statement establishes standards for how an issuer classifies and measures in its
statement of financial position certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances) because that financial instrument embodies an
obligation of the issuer. This Statement is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003, except for
mandatorily redeemable financial instruments of nonpublic entities. The Company
does not expect that the adoption of this standard will have a significant
impact on its financial position or results of operation.
Stock Based Compensation
The Company accounts for its stock-based compensation under SFAS No. 123
"Accounting for Stock-Based Compensation." The Company continues to apply APB
No. 25 for employee stock options awards and elected the disclosure-only
alternative for the same under SFAS No. 123.
The Company has computed the pro forma disclosures required under SFAS
Nos. 123 and 148 for all stock options granted to employees in 2003, 2002 and
2001 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, 2003, 2002 and 2001 are as follows:
Years Ended March 31,
2003 2002 2001
---------------------------------------------
Risk-free interest rates 1.16%-5.02% 4.31%-5.06% 5.28%-6.33%
Expected dividend yield -- -- --
Expected lives 7 years 7 years 7 years
Expected volatility 91% 101% 108%
Weighted average grant date fair value of options
granted during the period $2.57 $2.21 $5.78
Weighted average remaining contractual life of
options outstanding 5.9 years 6.1 years 6.6 years
If compensation expense for the Company's stock option plans had been
determined consistent with SFAS No. 123, the pro forma net loss and net loss per
share would have been as follows:
F-13
Years Ended March 31,
2003 2002 2001
---- ---- ----
Net Loss as reported $(4,537,072) $(4,460,617) $(5,278,867)
Add: Stock-based employee compensation expense included
in reported net loss 66,258 -- --
Deduct: Stock-based employee compensation
expense determined under fair value based
method for all employee awards (687,908) (745,797) (402,444)
----------- ----------- -----------
Pro forma net loss $(5,158,722) $(5,206,414) $(5,681,311)
=========== =========== ===========
Basic and diluted net loss per share:
As reported (.17) (.17) (.20)
Pro forma $ (.19) $ (.20) $ (.21)
Impairment of Long-Lived Assets
Effective April 1, 2002, the Company adopted Financial Accounting
Standards Board (FASB) SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets," which supersedes SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
This new statement also supersedes certain aspects of Accounting Principles
Board Opinion No. 30 (APB 30), "Reporting the Results of Operations-Reporting
the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transaction," with regard to reporting the
effects of a disposal of a segment of a business and requires expected future
operating losses from discontinued operations to be reported in the period
incurred (rather than as of the measurement dates as formerly required by APB
30). The provisions of this statement are required to be applied for fiscal
years beginning after December 15, 2001 and interim periods within those fiscal
years. At March 31, 2003, in accordance with the provisions of SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," we performed
an impairment analysis of this intangible asset in order to determine if an
impairment loss existed and should be recognized. The impairment analysis
consisted of an evaluation of the expected cash flows from the sale of
SecreFlo(TM) over the term of the license and also included various assumptions
and estimates concerning selling price, cost and volume of unit sales. We
concluded that there was no impairment loss as of March 31, 2003. We believe
that our assumptions and estimates are reasonable, however, actual results could
differ from these estimates.
3. Income Taxes
The Company accounts for income taxes under SFAS No. 109, "Accounting for
Income Taxes." At March 31, 2003, the Company had net operating loss
carryforwards for income tax purposes of approximately $122,438,000. The Company
also had available tax credit carryforwards of approximately $7,161,000 at March
31, 2003 to reduce future federal income taxes, if any. The net operating loss
and tax credit carryforwards will expire at various dates, beginning in 2004.
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.
Deferred tax assets consist of the following:
Years Ended March 31,
2003 2002
---- ----
Temporary differences ................ $ 6,216,000 $ 5,375,000
Operating loss carryforwards ......... 48,975,000 45,708,000
Tax credit carryforwards ............. 7,161,000 7,192,000
------------ ------------
62,352,000 58,275,000
Valuation allowance .................. (62,352,000) (58,275,000)
------------ ------------
$ -- $ --
============ ============
F-14
A full valuation allowance has been provided, as it is uncertain if the
Company will realize its deferred tax asset.
4. Stockholders' Equity
(a) Common Stock & Warrants
On October 4, 2002, Repligen Corporation issued 696,223 shares of common
stock to ChiRhoClin, Inc. ("CRC") in connection with the FDA's approval of
SecreFloTM, its secretin for injection product. The issuance of the shares was a
milestone payment in consideration of CRC's success in obtaining FDA approval to
market secretin for injection. Pursuant to the Licensing Agreement, CRC has
granted Repligen exclusive worldwide rights to market SecreFlo(TM), secretin for
injection.
On July 24, 2000, Repligen issued to a third party a warrant to purchase
50,000 shares of common stock at $7.125 per share exercisable through July 2003
in partial consideration for a licensing agreement entered into with such third
party. The Company recorded the value of this warrant, as determined using
Black-Scholes option pricing model, as research and development expense. As of
March 31, 2003 the warrant was still outstanding and no warrants had been
exercised.
On May 10, 2000, pursuant to a patent purchase agreement, Repligen issued
to Tolerance Therapeutics LLC ("Tolerance"), in partial consideration for the
assignment by Tolerance to Repligen of a U.S. patent application claiming the
use of CTLA4-Ig in treatment of diseases of the immune system, 30,000 shares of
Repligen common stock. The Company recorded the value of these shares as
research and development expense. During fiscal 2002, the Company elected not to
make its final payment and as a result its interest in these assets was returned
to Tolerance.
On March 9, 2000, Repligen sold an aggregate of 2,598,927 shares of common
stock to investors at $8.625 per share for an aggregate consideration of $22.4
million in a private placement. Repligen engaged Paramount Capital, Inc.
("Paramount") to act as placement agent for this transaction. For this
transaction, Repligen paid Paramount approximately $1.57 million for its
services, plus related transactional expenses, and issued to Paramount warrants
to purchase up to 129,946 shares of common stock at $9.49 per share, exercisable
through March 2005. As of March 31, 2003, this warrant remains outstanding.
In connection with a financial advisory agreement in May 2000, the Company
issued warrants to purchase an aggregate of 100,000 shares of common stock. Each
warrant is exercisable at $2.75 per share at any time prior to July 15, 2004. As
of March 31, 2003, these warrants remain outstanding.
F-15
Also pursuant to a patent purchase agreement executed in 1999 the Company
issued a warrant to purchase 350,000 shares of common stock with an exercise
price of $1.59 per share which expires in March 2004. As of March 31, 2003,
225,000 of the common shares underlying the warrant have been issued and 125,000
shares remain eligible to be exercised.
At March 31, 2003, common stock reserved for issuance is as follows:
Reserved for Shares
Incentive and nonqualified stock option plans 3,240,819
Warrants granted in connection with the Patent Purchase Agreement 125,000
Warrants granted in connection with the Licensing Agreement 50,000
Warrants granted for payment of services 229,946
---------
3,645,765
=========
(b) Stock Options
The Company's 2001 stock option plan authorizes 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, 2003, the Company had 1,300,769 options available
for future grant.
A summary of stock option activity under all plans is as follows:
Years Ended March 31,
2003 2002 2001
Range of Weighted Range of Weighted Range of Weighted
Number of Exercise Average Number of Exercise Average Number of Exercise Average
Shares Prices Price per Shares Prices Price per Shares Prices Price per
Share Share Share
------ ------ --------- ------ ------ --------- ------ ------ ---------
Outstanding
at beginning
of period 1,701,900 $.50-$12.45 $ 2.64 1,479,441 $.50-$12.45 $ 2.64 1,288,041 $.50-$12.45 $ 1.81
Granted 281,650 $.01-$3.47 2.88 276,900 $2.35-$2.60 2.60 258,400 $4.13-$8.56 6.59
Exercised -- -- -- (13,800) $.50-$1.53 1.01 (34,200) $.50-$1.37 0.72
Forfeited (43,500) $2.29-$12.45 8.36 (40,641) $1.03-$7.19 2.62 (32,800) $1.25-$7.17 3.73
--------- ---------- --------- ---------- --------- ----------
Outstanding
at end of
period 1,940,050 $.01-$8.56 $ 2.55 1,701,900 $.50-$12.45 $ 2.64 1,479,441 $.50-$12.45 $ 2.64
--------- ---------- --------- ---------- --------- ----------
Exercisable
at end of
period 1,360,130 $.01-$8.56 $ 2.10 1,115,900 $.50-$12.45 $ 2.25 894,941 $.50-$12.45 $ 1.92
========= ========== ========= ========== ========= ==========
F-16
As of March 31, 2003
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Average Average Average
Number Remaining Exercise Price Number Exercise Price
Outstanding Contractual Life Per Share Outstanding Per Share
----------- ---------------- --------- ----------- ---------
$.01-$1.38 403,150 3.32 $1.10 399,150 $1.09
$1.41-$1.63 572,000 4.86 $1.43 571,400 $1.43
$2.29-$3.00 496,900 6.62 $2.64 238,780 $2.65
$3.13-$6.56 330,000 8.02 $3.78 71,600 $4.57
$7.19-$8.56 138,000 7.20 $8.15 79,200 $7.99
------------------------------------------------------------------------------------------------
1,940,050 5.70 $2.55 1,360,130 $2.10
--------- ---- ----- --------- -----
(c) Shareholder Rights Plan
In March 2003, the Company adopted a Rights Agreement (the "Rights
Agreement"). Under the Rights Agreement, the Company distributed certain rights
to acquire shares of the Company's Series A junior participating preferred stock
(the "Rights") as a dividend for each share of Common Stock held of record as of
March 17, 2003. Each share of Common Stock issued after the March 17, 2003
record date has an attached Right. Under certain conditions involving an
acquisition by any person or group of 15% or more of the Common Stock, each
Right permits the holder (other than the 15% holder) to purchase Common Stock
having a value equal to twice the exercise price of the Right, upon payment of
the exercise price of the Right. In addition, in the event of certain business
combinations after an acquisition by a person or group of 15% or more of the
Common Stock (20% in the case of a certain stockholder), each Right entitles the
holder (other than the 15% holder) to receive, upon payment of the exercise
price, Common Stock having a value equal to twice the exercise price of the
Right. The Rights have no voting privileges and, unless and until they become
exercisable, are attached to, and automatically trade with, the Company's Common
Stock. The Rights will terminate upon the earlier of the date of their
redemption or March 2013.
5. Commitments
In October 2001, the Company leased, pursuant to a ten-year lease
agreement, a new corporate headquarters in Waltham, Massachusetts. The Company
anticipates that this new facility will increase operating efficiencies and
manufacturing capacity to meet the growing demand for its Protein A products,
and to better meet corporate goals and objectives. The Company relocated to this
facility in May 2002. In connection with this lease agreement, the Company
issued a letter of credit in the amount of $500,000 to its landlord. In October
2002, this letter of credit was reduced to $200,000. The letter of credit is
collateralized by a certificate of deposit held by the bank that issued the
letter of credit. The certificate of deposit is classified as restricted cash in
the accompanying balance sheet as of March 31, 2003.
Obligations under noncancellable operating leases, including the new
facility lease discussed above, as of March 31, 2003 are approximately as
follows:
F-17
Years Ending March 31,
----------------------
2004 ........................... 330,000
2005 ........................... 379,000
2006 ........................... 379,000
2007 ........................... 379,000
2008 ........................... 404,000
Thereafter ..................... 1,689,000
----------
Minimum lease payments ......... $3,560,000
==========
Rent expense charged to operations under operating leases was
approximately $372,000, $308,000, and $377,000 for the years ended March 31,
2003, 2002 and 2001, respectively.
6. Certain Technologies and Product Candidates
In April 2002, the United States Food and Drug Administration granted
approval to market SecreFlo(TM) (synthetic porcine secretin), the first
synthetic version of the hormone secretin. SecreFlo(TM) has been approved for
stimulation of pancreatic secretions to aid in the diagnosis of pancreatic
exocrine dysfunction, or chronic pancreatitis, stimulation of gastrin secretion
to aid in the diagnosis of gastrinoma, a gastrointestinal tumor and to aid
during a gastrointestinal procedure called Endoscopic Retrograde
Cholangiopancreatography (ERCP). Under the terms of its licensing agreement with
ChiRhoClin, Inc. (CRC), Repligen made a milestone payment to CRC during April
2002 of $1,250,000 in cash. The Company also issued 696,223 shares of its
unregistered common stock to CRC in October 2002 related to the same milestone.
During the quarter ended June 30, 2002, the Company recorded the fair value of
these shares, $2,576,025, and the cash of $1,250,000, as a long-term intangible
asset. Beginning in April 2002, this amount will be amortized to cost of revenue
over the remaining term of the license, approximately seven years. The Company
amortized $510,132 for the year ended March 31, 2003. In addition, under the
terms of the licensing agreement with ChiRhoClin, if the FDA approves the NDA
for human secretin diagnostic, we will be required to pay ChiRhoClin future
milestones in cash. We will also be required to pay royalties on sales of both
synthetic porcine and human products.
In December 2000, the Company purchased from the University of California,
San Diego ("UCSD") a right to a U.S. patent application covering novel methods
for the treatment of mitochondrial disease. Under terms of the agreement,
Repligen received the exclusive right under the license to commercialize
products to treat mitochondrial disease and paid UCSD an up-front fee. Repligen
will also pay UCSD clinical development milestones and royalties on product
sales. The Company has expensed the purchase price as research and development
expense as the realizability of the patent is subject to the outcome of
additional research and development and the successful prosecution of the
patent. (See Note 12)
In May 2000, the Company purchased from Tolerance Therapeutics LLC the
rights to a U.S. patent application claiming the use of CTLA4-Ig in the
treatment of diseases of the immune system. Under terms of the agreement, the
Company paid cash and issued stock for the purchase. The Company has expensed
the purchase price as research and development expense as the realizability of
the patent is subject to the outcome of additional research and development and
the successful prosecution of the patent.
F-18
In October 1999, the Company acquired the commercial rights to two
diagnostic products based on synthetic forms of porcine and human secretin from
ChiRhoClin, Inc. a private company. Both of these products have been evaluated
in clinical trials for their safety and efficacy in diagnosing pancreatic
function and gastrinoma. A New Drug Application ("NDA") for each product has
been filed with the United States Food and Drug Administration ("FDA"). In April
2002, the FDA approved the use of synthetic porcine secretin ("SecreFlo(TM)") to
aid in the diagnosis of pancreatic function and the diagnosis of gastrinoma, a
form of cancer. In November 2002, the FDA approved the use of SecreFlo(TM) to
aid in a gastrointestinal procedure called ERCP. In December of 2001, the FDA
issued an "approvable letter" for a synthetic form of human secretin which
contained questions concerning the manufacture and quality control of the
product.
7. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following:
As of March 31,
------------------
2003 2002
------------------
Clinical Trial Expenses $225,238 $400,820
Marketing Expenses 52,500 2,500
Prepaid Insurance 145,960 70,708
Equipment and Services 89,204 88,399
Other 9,667 59,882
-------- --------
$522,569 $622,309
======== ========
8. Accrued Expenses
Accrued expenses consist of the following:
As of March 31,
2003 2002
----------------------
Research & development costs $ 528,323 $ 771,465
Payroll & payroll related costs 378,347 337,786
Professional and consulting costs 66,689 78,803
Other accrued expenses 301,478 70,750
---------- ----------
$1,274,837 $1,258,804
========== ==========
9. Employee Benefit Plan
The Repligen Corporation 401(k) Savings and Retirement Plan (the 401(k)
Plan) is a qualified defined contribution plan in accordance with Section 401(k)
of the Internal Revenue Code. All employees over the age of 21 who have
completed four months of service are eligible to make pre-tax contributions up
to a specified percentage of their compensation. Under the 401(k) Plan, the
Company may, but is not obligated to match a portion of the employees'
contributions up to a defined maximum. The match is calculated on a calendar
year basis. The Company matched $26,066, $13,271 and $0 for the calendar years
ended December 31, 2002, 2001, and 2000 respectively.
F-19
10. Legal Proceedings
On June 21, 2001, Pro-Neuron, Inc. filed a complaint (the "Pro-Neuron
Complaint") against the Regents of the University of California (the "Regents")
and Repligen in the Superior Court of California, County of San Diego seeking to
void the License Agreement relating to treatment of mitochondrial disease
entered into between Repligen and the University of California, San Diego
("UCSD") in December 2000 (the "UCSD License Agreement"). The Pro-Neuron
Complaint, among other things, requests that the court order the Regents to
assign all rights licensed to Repligen pursuant to the UCSD License Agreement to
Pro-Neuron. Pro-Neuron subsequently amended the complaint to include claims for
misappropriation of trade secrets. The Regents and Repligen believe that the
Pro-Neuron Complaint is without merit and intend to vigorously defend their
rights. If Pro-Neuron is successful in this action, Repligen's ability to
commercialize uridine may be limited. (See Note 12)
Repligen is the exclusive licensee of all CTLA4 patent rights owned by the
University of Michigan ("the University"). Repligen and the University believe
that the University has a rightful claim to ownership of certain CTLA4 related
patents of Bristol-Myers Squibb Company ("Bristol"). Repligen and the University
filed a complaint against Bristol in the United States District Court for the
Eastern District of Michigan in August 2000 seeking a correction of
inventorship. The suit asserts that a scientist from the University made
inventive contributions as part of a collaboration with Bristol scientists and
is a rightful inventor on the patents issued to Bristol.
In March 2002, Repligen and the University jointly filed a motion for
summary judgment on their claims and Bristol filed a motion requesting that
judgment be entered against Repligen and the University. On October 17, 2002 the
court denied both motions for summary judgment, determining there are material
facts in dispute which must be resolved at a trial. However, the court granted a
separate summary judgment motion filed by Repligen and the University denying
Bristol's ability to assert the defenses of equitable estoppel and laches in
this matter. A trial began on April 2, 2003 in the United States District Court
of Eastern Michigan. To date, no judgment has been rendered. A correction of
inventorship would result in the University and Repligen having rights to some
or all of Bristol's patents on CTLA4-Ig. Repligen's failure to obtain ownership
rights in the Bristol patents may restrict Repligen's ability to commercialize
CTLA4-Ig. Repligen and the University have also filed patents related to
compositions of matter and methods of use of CTLA4-Ig. In September 2002,
Repligen was issued a U.S. patent covering the composition of the CTLA4-Ig
product form that it is developing.
An arbitration proceeding has been filed against the Company entitled,
ChiRhoClin, Inc. vs. Repligen Corporation (Arbitration No. 131810059003) on
March 14, 2003 with the American Arbitration Association in New York on March
14, 2003. ChiRhoClin, Inc. alleges a breach of contract for non-payment of
royalties due under our licensing agreement based on a dispute regarding certain
marketing expense reimbursements taken by the Company. ChiRhoClin, Inc.'s claim
is approximately $800,000. We believe these claims have no merit and will
vigorously contest these claims. This arbitration is at an early stage and has
been stayed pending the outcome of settlement discussions between the parties.
F-20
From time to time, we may be subject to other legal proceedings and claims
in the ordinary course of business. We are not currently aware of any such
proceedings or claims that we believe will have, individually or in the
aggregate, a material adverse effect on our business, financial condition or
results of operations.
11. Subsequent Event
On May 2, 2003, a certain investor purchased approximately $12.5 million
of the Company's common stock through a private placement of 2,500,000 shares.
As a condition of closing, the Company agreed to file a registration statement
with the Securities and Exchange Commission covering the resale of the shares
issued in connection with this private placement. Repligen received net proceeds
of approximately $11.8 million after deducting the estimated expenses of the
transaction.
12. Settlement
On June 4, 2003 Repligen, the Regents and Pro-Neuron entered into a
binding term sheet for settlement (the "Settlement") under which the Pro-Neuron
complaint will be dismissed upon execution of definitive agreements between the
parties. Under the terms of the Settlement, Repligen will receive $750,000.
Repligen and the Regents agreed to restructure the UCSD License Agreements to
exclude the field of acylated pyrimidines, including triacetyluridine ("TAU").
Repligen will discontinue its clinical trial of TAU in mitochondrial disease and
will continue its clinical trials of TAU in bipolar disorders/major depression
and purine autism for up to two years. Repligen will assign to Pro-Neuron any
inventions from these trials, for which it has rights, involving the use of
acylated pyrimidines, but will retain the rights to any inventions for all other
chemical entities. Repligen may still direct future clinical trials and product
development efforts to prodrugs or derivatives of uridine which are not acylated
pyrimidines.
13. Selected Quarterly Financial Data (Unaudited)
The following table contains Statement of Operations information for each
quarter of fiscal 2003 and 2002. The Company believes that the following
information reflects all normal recurring adjustments necessary for a fair
presentation of the information for the periods presented. The operating results
for any quarter are not necessarily indicative of results for any future period.
F-21
(in thousands, except per share amounts)
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
FY03 FY03 FY03 FY03 FY02 FY02 FY02 FY02
---- ---- ---- ---- ---- ---- ---- ----
Revenue:
Product revenue $ 2,018 2,417 $ 1,688 $ 1,620 $ 1,522 $ 1,180 $ 887 $ 713
Research revenue 29 -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total revenue 2,047 2,417 1,688 1,620 1,522 1,180 887 713
-------- -------- -------- -------- -------- -------- -------- --------
Cost of revenue 1,008 1,141 662 670 496 585 555 357
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit 1,039 1,276 1,026 950 1,026 595 33 356
-------- -------- -------- -------- -------- -------- -------- --------
Costs and expenses:
Research and development 1,381 1,363 1,255 1,228 1,583 1,021 1,330 1,426
Selling, general and administrative 1,448 819 1,010 882 578 650 681 617
-------- -------- -------- -------- -------- -------- -------- --------
Total operating expenses 2,829 2,182 2,265 2,110 2,161 1,671 2,011 2,043
-------- -------- -------- -------- -------- -------- -------- --------
Loss from operations (1,790) (906) (1,239) (1,160) (1,135) (1,076) (1,679) (1,687)
-------- -------- -------- -------- -------- -------- -------- --------
Investment income 93 140 156 169 212 259 302 344
-------- -------- -------- -------- -------- -------- -------- --------
Net loss $ (1,697) $ (766) $ (1,083) $ (991) $ (923) $ (817) $ (1,377) $ (1,343)
======== ======== ======== ======== ======== ======== ======== ========
Net loss per common share $ (0.06) $ (0.03) $ (0.04) $ (0.04) $ (0.03) $ (0.03) $ (0.05) $ (0.05)
Weighted average common
shares outstanding 27,339 27,316 26,643 26,643 26,643 26,642 26,639 26,633
======== ======== ======== ======== ======== ======== ======== ========
14. Valuation and Qualifying Accounts
Balance at
Beginning of Balance at End
Period Additions Deletions of Period
------ --------- --------- ---------
Allowance for Doubtful Accounts:
2001 $25,000 -- -- $25,000
2002 $25,000 -- -- $25,000
2003 $25,000 $25,000 -- $50,000
F-22
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth an estimate (other than with respect to the
Registration Fee) of the expenses expected to be incurred in connection with the
issuance and distribution of the securities being registered, other than
underwriting discounts and commissions:
Registration Fee -- Securities and Exchange Commission........ $ 1,191.25
Blue Sky Fees and Expenses.................................... $ 500.00
Accounting Fees and Expenses.................................. $10,000.00
Legal Fees and Expenses....................................... $40,000.00
Transfer Agent Fees and Expenses.............................. $ 100.00
Miscellaneous................................................. $ 708.75
----------
TOTAL................................................ $52,500.00
==========
Repligen will bear all expenses shown above.
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (DGCL) permits
Repligen to indemnify its directors, officers, employees and agents against
actual and reasonable expenses (including attorneys' fees) incurred by them in
connection with any action, suit or proceeding brought against them by reason of
their status or service as a director, officer, employee or agent by or on
Repligen's behalf and against expenses (including attorneys' fees), judgments,
fines and settlements actually and reasonably incurred by him or her in
connection with any such action, suit or proceeding, if:
o He or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of Repligen,
and
o In the case of a criminal proceeding, he or she had no reasonable
cause to believe his or her conduct was unlawful.
Article Seventh of Repligen's Restated Certificate of Incorporation, as
amended, and Article V of Repligen's Bylaws generally provide that Repligen
shall, to the fullest extent permitted by Section 145 of the DGCL, indemnify any
and all persons whom it shall have power to indemnify under that Section against
any expenses, liabilities or other matters referred to in or covered by that
Section.
Article Eighth of Repligen's Restated Certificate of Incorporation, as
amended, provides that directors of Repligen shall not be personally liable to
Repligen or its stockholders for monetary damages for breach of fiduciary duty
as a director, except for liability (i) for any breach of the director's duty of
loyalty to Repligen or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under
II - 1
Section 174 of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit. Article Eight further provides that, in
the event that the DGCL is amended to authorize the further elimination or
limitation of the liability of directors, then the liability of directors shall
be eliminated or limited to the full extent authorized by the DGCL, as so
amended.
Repligen maintains directors and officers liability insurance for the
benefit of its directors and certain of its officers.
Item 16. Exhibits.
The following exhibits, required by Item 601 of Regulation S-K, are filed
as a part of this Registration Statement. Exhibit numbers, where applicable, in
the left column correspond to those of Item 601 of Regulation S-K.
Exhibit No. Item and Reference
----------- ------------------
4.1 -- Stock Purchase Agreement dated as of May 1, 2003, by
and among Repligen Corporation and the Investors listed
on Schedule I thereto (filed as Exhibit 4 to Repligen's
Current Report on Form 8-K filed May 2, 2003 and
incorporated herein by reference)
5 -- Legal Opinion of Testa, Hurwitz & Thibeault, LLP (filed
herewith)
23.1 -- Consent of Ernst & Young LLP (filed herewith)
23.2 -- Consent of Testa, Hurwitz & Thibeault, LLP (included in
Exhibit 5)
24 -- Power of Attorney (included on signature pages)
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represents a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
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(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to provisions described in Item 15 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Waltham, Commonwealth of Massachusetts on June
13, 2003.
Repligen Corporation
By: /s/ Walter C. Herlihy
-------------------------------
Walter C. Herlihy
President and Chief Executive
Officer
Power of Attorney
Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints Walter C. Herlihy with full power to act as 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 (until revoked in writing) to sign any and all amendments (including
post-effective amendments and amendments thereto) to this Registration Statement
on Form S-3 of Repligen Corporation, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary fully to all intents and purposes as he might or could do in person
thereby ratifying and confirming all that said attorney-in-fact and agents or
any of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated.
Name Capacity Date
---- -------- ----
/s/ Walter C. Herlihy President and Chief Executive Officer, June 13, 2003
------------------------------- Chief Financial Officer and Director
Walter C. Herlihy (principal executive, financial and
accounting officer)
/s/ Alexander Rich, M.D. Co-Chairman of the Board of Directors June 13, 2003
-------------------------------
Alexander Rich, M.D.
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/s/ Paul Schimmel, Ph.D. Co-Chairman of the Board of Directors June 13, 2003
-------------------------------
Paul Schimmel, Ph.D.
/s/ Robert J. Hennessey Director June 13, 2003
-------------------------------
Robert J. Hennessey
/s/ G. William Miller Director June 13, 2003
-------------------------------
G. William Miller
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INDEX TO EXHIBITS
Exhibit No. Item and Reference
----------- ------------------
4.1 -- Stock Purchase Agreement dated as of May 1, 2003, by
and among Repligen Corporation and the Investors listed
on Schedule I thereto (filed as Exhibit 4 to Repligen's
Current Report on Form 8-K filed May 2, 2003 and
incorporated herein by reference)
5 -- Legal Opinion of Testa, Hurwitz & Thibeault, LLP (filed
herewith)
23.1 -- Consent of Ernst & Young LLP (filed herewith)
23.2 -- Consent of Testa, Hurwitz & Thibeault, LLP (included in
Exhibit 5)
24 -- Power of Attorney (included on signature pages)