ANNUAL
REPORT
DRIVEN TO
MAKE A
DIFFERENCE
Through the dedication and hard work of over
1,100 employees, we continued to deliver
flexible, single-use bioprocessing solutions to
customers around the globe in 2020. Our focus
on innovation continued to differentiate us in
the bioprocessing market and helped to deliver
strong financial performance. This 2020 annual
report is dedicated to our unwavering team,
driven to make a difference by supporting
advances in biologics that are improving the
lives of patients worldwide.
BUSINESS HIGHLIGHTS 2020
$366M
reported
revenue
36%
revenue growth,
29% organic growth
$46M
revenue from
COVID-19
related programs
$54M
revenue from cell
& gene therapy
accounts
55%
increase in
adjusted fully
diluted EPS
$717M
cash and cash
equivalents at
year end
3
key acquisitions
to expand our
Systems strategy
3
total number
of new product
launches
115K
increase in
square footage
of Repligen sites
worldwide
22
3
4
TO OUR VALUED
SHAREHOLDERS
2020 was a challenging yet outstanding year for the company,
highlighted by our focus on meeting the critical needs of COVID-19
vaccine and therapeutic developers while continuing to gain traction
in our core markets of monoclonal antibodies and gene therapy
manufacturing. I am especially proud of how our team rose to the
occasion to help address these critical manufacturing needs, making
tremendous efforts to deliver bioprocessing equipment and consumable
products to all of our customers.
The commitment of our employees drove year-over-year revenue growth
of 36% in 2020, with 29% organic growth. We reported total revenue
of $366.3 million, reflecting a healthy base business, incremental gains
from acquisitions and further penetration into gene therapy accounts.
The $46 million in revenue attributed to COVID programs accounted
for 17 points of our growth, and we finished the year with an 80%
increase in orders, with about half coming from COVID accounts.
With accelerating demand for our products, we focused our efforts on
implementing a five-year capacity expansion plan, while continuing to
execute on our overarching goal to drive sustainable growth through
acquisitions, R&D and new applications. A series of three strategic
acquisitions during 2020 strengthened and expanded our filtration
and chromatography systems offerings and – combined with new
bioprocessing product launches – exemplified our commitment to
“inspiring advances in bioprocessing”.
As we invested in our operations to expand capacity across many of
our product lines, we also increased staffing levels and by year end
our employee base had grown over 50% to over 1,100 individuals at
15 sites worldwide.
5
STRONG FINANCIAL PERFORMANCE
We delivered 36% overall and 29% organic revenue growth in 2020, and a 55% increase in
adjusted earnings per share, with 3-year revenue CAGR* of 37%.
$400
$350
$300
$250
$200
$100
s
n
o
i
l
l
i
M
n
i
)
$
(
e
u
n
e
v
e
R
$1.07
$270.2
$0.66
$194.0
$1.65
$366.3
$1.80
$1.50
$1.20
$0.90
$0.60
$0.30
j
A
d
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s
t
e
d
E
P
S
(
F
u
l
l
y
D
i
l
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e
d
)
FY ‘18
FY ‘19
FY ‘20
*CAGR includes FY ‘17 revenue of $141.2 million
STRONG BASE & NEW MARKETS
In 2020, revenue unrelated to COVID programs grew ~19%. An additional 17 points of
growth were related to COVID demand.
C
O
VID
:
$
4
6
.
1
M
$46.1M
COVID
$366.3M
$366.3M
Total Revenue
Total Revenue
$16.8M
M&A
$303.4M BASE
* Includes Gene Therapy
($54.3M)
NON-COVID: $ 3 2 0 . 2 M
22
6
22
7
In other key developments, we completed our
Environmental, Social and Governance (“ESG”)
materiality assessment in 2020 to identify the
intersection of the Company’s strategic and ESG
goals, and established a Sustainability program based
on four pillars: Principles, People, Product and
Planet.
t
Our four pillars reflect a culture of caring – a desire to make a
difference – where all employees are encouraged to share their
experiences and ideas to advance sustainable practices for the betterment
of our company, stakeholders and communities, and the environment at-large.
We look forward to publishing our first Corporate Social Responsibility report
in 2021.
REPLIGEN VOICES:
“As a member of the Corporate Responsibility Team, and in
my operations role, it makes me proud that our sustainability
pledge incorporates product and packaging assessments to
drive improvements. We do this work through an ESG lens
to align business decisions with environmental stewardship
and a steadfast commitment to quality.”
Dianne M. Heiler
Director of Global Packaging Solutions
8
REVENUE GROWTH DRIVERS
There were four main drivers of our revenue growth in 2020:
1. Continued Success in our Core Monoclonal Antibody and
Gene Therapy Markets
Our core market revenue grew 18%+ year-over-year, even as
biopharmaceutical companies’ priorities shifted in response to the
pandemic. Nearly half of the 80% order growth we saw in 2020
was unrelated to COVID, lending to our confidence in our strategy
and future momentum.
We believe this core strength speaks to the ease-of-use and flexibility
of our bioprocessing solutions and high value differentiation – where
often we are creating a market or displacing traditional approaches
to manufacturing. Across our four franchises, our technologies enable
meaningful product yield improvements and process cost savings.
This is exemplified in plasmid and viral vector manufacturing in
gene therapy, which has been a key area of focus for us over the
last three years. In 2020, we co-authored a paper* that reflects our
work with Oxford BioMedica to evaluate and implement KrosFlo®
TFDF® technology in lentiviral manufacturing.
CELL & GENE THERAPY INSIGHTS:
Oxford Biomedica and Repligen evaluated TFDF® for the
harvest of lentiviral (LV) vectors from cell culture supernatant
from bioreactors. Harvest yields typically exceeded 90%.
9
*Cell & Gene Therapy Insights 2020; 6(3), 455–467 DOI: 10.18609/cgti.2020.053
22
10
We observed significant yield improvements which served as a
driver for additional trials and wins in 2020. With 75 significant
accounts established in gene therapy, related revenue grew 30%
in 2020 to approximately $54 million and accounted for 15% of
our overall revenue. As more than 1,000 cell and gene therapy
clinical trials are underway in 2021, along with 600+ monoclonal
antibodies in development, we believe we are well positioned for
continued adoption and scaling of our products in these markets.
2. Establishing our Products in COVID-19 Vaccine and
Therapeutic Development Programs
All of our businesses were positively impacted in 2020 by
COVID-19 related programs. Our Filtration business accounted
for 60% of our COVID-related revenue, and 35% came from
Chromatography (OPUS® pre-packed columns) and Proteins. Our
products are specified into the manufacturing process for many of
the late stage and commercial vaccines and therapeutics including
mRNA, viral vectors, proteins and monoclonal antibody-based
programs.
:
S
E
C
I
O
V
N
E
G
I
L
P
E
R
11
22
12
Repligen pror vided s criticala bbioioprprococese sisingng ttoooolsls aandn
technologies used in the produd cttioion ofof ccere tatainin
COVID-19 vaccines and therapeutics.
“Implementing SAP at 3 sites across 3 continents was no
easy feat in 2020 – but our cross-functional team worked
relentlessly to claim victory. The integration of 3 companies
acquired in 2020, and increased remote support further
challenged but did not deter IT from delivering optimal
platforms, applications and service. I’m truly honored to
lead our ‘IT Pro Team’ in safeguarding and supporting the
global organization.”
Senior Director, Global Information Services
Our R&D team, working expeditiously with Navigo Proteins GmbH,
developed and delivered an affinity resin in less than nine months, which
simplifies and speeds up the manufacturing of protein-based COVID-19
vaccine candidates. This product was launched in early 2021 and we
expect it will be used in next-generation vaccine processes.
We finished the year with a very strong order book for COVID-related
programs and expect to deliver between $90M and $100M in product
revenue in 2021 to support these lifesaving biologics.
3. First Full Year of Process Analytics Revenue
2020 marked our first full year of sales from our Process Analytics
(C Technologies) business, which delivered $33.3 million in revenue,
and 30% pro forma growth for the year.
During 2020, we followed through on our plans to build out
C Technologies’ commercial organization, expand applications for the
company’s novel Slope Spectroscopy® technology and advance next-
generation products through our R&D organization. We report on our
progress against these goals in the Business Franchise Highlights section
later in this report.
4. Execution on Capacity Expansion
In 2019 and 2020 we spoke to the importance of capacity expansion.
The Filtration and Chromatography buildouts completed over the past
two years proved to be a real benefit in managing the surge that we
experienced in 2020 between our base business and incremental
COVID-related demand. In 2020, we invested in both people and
facilities, spending just over $26 million in capital programs to further
expand our capacity, with a focus on Filtration and single-use products.
We continue to ramp our capital investments, and expect to establish a
European Chromatography center for OPUS® manufacturing by mid-2021,
while adding more Filtration capacity in the U.S. to support the growing
demand for our flat sheet cassettes and hollow fiber product lines.
During 2020, through expansion of existing facilities as well as
acquisitions, we increased our global footprint to a total of approximately
500,000 square feet, an increase of 47%.
13
REPLIGEN VOICES:
“The spirit of teamwork at Repligen is a driver for me. I
enjoy working cross-functionally to deliver our products
and having a hand in helping people lead safer and
healthier lives. In 2020, my group’s priorities included
putting extra safety measures in place in our buildings
– screening, signage and COVID testing as examples
– to protect our personnel. Despite reduced access to
vendor support we successfully kept all our facilities
up and running and expanded operations at multiple
sites.”
William Mara
Senior Facilities Manager
22
14
15
BUSINESS FRANCHISE HIGHLIGHTS
FILTRATION:
Growth Leader, New and Disruptive Products, Expanding Applications
Our Filtration franchise was the big growth driver for Repligen in 2020,
up 46% for the year to reach revenue of $175 million. We benefited from
continued traction at gene therapy accounts and new COVID-related demand,
where 60% of our total COVID revenues for the year came from our Filtration
portfolio. We are a key technology provider in many of these programs and
with strong order load as we exited 2020, we expect 2021 to be another
exceptional year for Filtration.
In 2020, we saw increased adoption and scaling up of our XCell ATF®
single-use and KrosFlo® TFF Systems, especially by contract development and
manufacturing organizations (CDMO) and large pharmaceutical customers
worldwide. Applications for XCell ATF® continued to expand far beyond the
main “N” production bioreactor (perfusion) to “N-1” applications, spanning
monoclonal antibody, viral vector/gene therapy and vaccine applications.
Applications for KrosFlo® TFF single-use systems included monoclonal antibody,
viral vector and vaccine manufacturing customers.
In 2020 we continued to build out this portfolio through the launch of important
new products and acquisitions to support our customers’ workflows.
REVENUE AND GROWTH BY FRANCHISE
48%
$175M
+46%
Revenue
by Franchise
$80M
+24%
$74M
+14%
$33M
+30% proforma
1%
9%
22%
In 2020, we saw robust growth
across all franchises, bringing
our direct sales to 78% of total
revenue, up from 76% in 2019
and 72% in 2018.
Filtration
Proteins
20%
Chromatography
Process Analytics
Other
Percent of total revenue by Franchise
16
FILTRATION - Continued
HARVEST CLARIFICATION SOLUTIONS:
By offering both XCell ATF® devices and
KrosFlo® TFDF® systems, we can address
harvest clarification needs in both perfusion
and fed-batch processes.
XCell A ® 10
ATF
- single
e use
Upstream: Revolutionary Harvest Clarification
In 2019 we launched KrosFlo® TFDF®, a disruptive appproach to fed-batch
harvest clarification, bringing together the benefits of tangential flow and
depth filtration. Beyond the initial application of TFDF® for monoclonal
antibody processes, our field applications team has developed new
applications in the field of viral vector manufacturing. Following the
launch of our benchtop and process scale TFDF® systems, we ramped our
marketing efforts and exceeded our first-year projections for this product
line. We remain enthusiastic about the potential for TFDF® systems to
displace traditional centrifugation and depth filtratiion with a simpler, more
streamlined and efficient solution.
Downstream: TangenX® SIUS® Gamma
In Filtration, we launched a gamma-irradiated
version of our TangenX® SIUS® flat sheet
cassettes, to better serve our gene therapy
customers. This plug-and-play technology
integrates ProConnex® flow paths (or any
pre-existing flow paths) and provides the flexibility
and high performance of our cost-effective
membranes with the convenience of a fully
assembled, closed and irradiated system.
17
G
X®®XXXX SIUSSIUS®® Gamma cassettes provide
TangenX
T
high yield and up to a 30% flux increase over
conventional membranes.
id
tt
KrosFlo® TFDF® is an “industry
first” in combining tangential
flow filtration (TF) with depth
filtration (DF).
22
INNOVATION, UNDETERRED:
A key element to our formula for growth is our R&D engine, that in
2020 advanced new and next-generation products to broaden our
portfolio. R&D successes in 2020 included the launch of TangenX®
SIUS® Gamma cassettes to support gene therapy applications,
KrosFlo® TFDF® systems to support harvest clarification operations
and the rapid advancement of a novel NGL COVID-19 spike
protein affinity resin, to be used for purification of protein-based
SARS-CoV-2 vaccines. We also completed R&D work on our next-
generation FlowVPE® (FlowVPX®) analytics device and new
XCell ATF® controllers for rollout in the first half of 2021.
18
22
Chromatography System (shown above):
• Fully automated and scalable
•
Integrated single-use flow paths
•
Improved gradient control
• Molded tube sets to minimize leakage
• OPUS® compatibility
• Enhanced process yield/low hold-up volumes
19
FILTRATION CHROMATOGRAPHY
Expanding Our Systems Offerings Through M&A
We completed three acquisitions in 2020 – ARTeSYN Biosolutions,
Engineered Molding Technology (EMT) and Non-Metallic Solutions
(NMS) – that further establish Repligen as a premier provider of single-
use systems and fluid management. These acquisitions complement
our pre-existing filtration systems offerings, bringing ARTeSYN’s state-
of-the-art systems into our portfolio to address downstream filtration,
chromatography and buffer/media prep applications.
ARTeSYN TFF Filtration skids will integrate single-use flow paths
and assemblies (EMT), consumable reservoirs and totes (NMS) and
Repligen’s filter membrane technology; hollow fiber (HF) TFF and TFDF
upstream, and flat sheet (FS) TFF downstream.
ARTeSYN Chromatography skids will also integrate single-use flow
paths and assemblies and are compatible with our market-leading
OPUS® pre-packed chromatography columns. Key customer benefits
include customization, simple setup and automation, with very low
hold-up volumes that translate to higher product yield.
Upstream/Downstream
HF and TFDF Filtration
Buffer/Media Prep
REPLIG
E
N
S
Y
S
T
E
M
S
Branching Out on Our Systems Strategy
The plans we set to expand our Systems
offering took a major step forward in
2020 with three acquisitions including
ARTeSYN Biosolutions.
PRE-EXISTING
NEW – ARTeSYN
Downstream
Chromatography
Downstream
FS Filtration
20
CHROMATOGRAPHY:
Strong Volume Growth, Capacity Expansion, New Products
Our Chromatography business was up 14% in 2020, and generated
$73.6 million in revenue. This franchise is anchored by our OPUS®
pre-packed column (“PPC”) product line, where column sales were
up approximately 30% year-over-year. OPUS® growth came from
existing customers scaling up in their manufacturing processes and from
new customers including those working on COVID-19 vaccines and
therapeutics.
With the investments we made in 2019, our capacity increased
significantly and we now have best-in-industry lead times for PPCs. We
continue to migrate customers to drop ship resins for column packing
by Repligen, which has improved our overall margins. We are excited
to bring additional capacity online in Europe in mid-2021, which we
believe will position us to leverage market opportunities over the next
three to five years.
Our Chromatography portfolio is poised for accelerated growth in 2021
with the addition of ARTeSYN single-use chromatography systems and
flow paths to complement our OPUS® PPC portfolio, and through launch
of our NGL COVID-19 Spike Protein Affinity Resin for the purification of
protein-based COVID-19 vaccines.
PROCESS ANALYTICS:
Commercial Buildout, New Accounts, Expanded Applications
As previously mentioned, 2020 marked our first full year
of ownership of C Technologies, which we acquired in
May 2019 to establish our Process Analytics franchise.
In 2020, Process Analytics revenue of $33.3 million
accounted for 9% of overall revenue. During the year, we
built out C Technologies’ sales organization establishing
a direct presence in Europe and expanding our reach in
other regions. We hired and completed the on-boarding
of the commercial team early in the year, then focused on
building the funnel with new accounts. This strategy resulted
in revenue acceleration through the year, with 50% of
Process Analytics system sales coming from new accounts
in the second half of 2020.
21
22
22
PROCESS ANALYTICS - Continued
In addition, we expanded the applications for our Process Analytics
products into gene therapy with a laser focus on viral vector analysis.
Our FlowVPE® team moved more than 20 customers into clinical stage
evaluations with a primary focus on downstream applications. At the
same time, our R&D team delivered on advancing a next-generation
FlowVPE® (FlowVPX®) suitable for cGMP manufacturing, and we began
accepting orders for this device early in 2021.
PROTEINS: Increased Market Demand, Expanding Portfolio
Our Proteins franchise substantially surpassed our initial expectations
coming into 2020, generating revenue of $80.4 million and growing
24% versus prior year. Our Proteins business benefited from increased
demand for our Protein A ligands and our growth factors – a key
component in cell culture media. With the onset of COVID-19, demand
increased for our Protein A ligands and we saw across the board
strength from our main customers Cytiva and Millipore, as well as from
Purolite, where we continue to see strong market traction for our
NGL-Impact® ligand, through the sales of Purolite’s Jetted A50 resin.
SUMMARY OF ACCOMPLISHMENTS
• Met and exceeded our financial goals, including margin expansion
• Executed on strategic M&A opportunities; closed on three acquisitions
that strengthen our systems offering
• Successfully integrated C Technologies, acquired in 2019
• Built an experienced commercial team to support Process Analytics;
broadened the analytics customer base and expanded applications
• Launched new and next-generation products through our R&D team
• Expanded applications for KrosFlo® TFDF®
• Further penetrated gene therapy accounts
• Expanded our manufacturing capacity
• Completed Phase 2 of SAP implementation
• Advanced our Sustainability and DEI initiatives
23
REPLIGEN VOICES:
“As a global organization, we recognize that unique
perspectives and individual talents are integral to
Repligen’s success, and only more so when faced with
extraordinary times. In 2020, we brought Diversity,
Equity and Inclusion to the forefront, initiating impactful
DEI leadership and development programs. I’m inspired
by the commitment and engagement of our leaders and
teams who share the common goal to strengthen our
culture of belonging and support professional growth.”
Lindsey Schrader
Senior Director, Human Resources
22
24
OUR 2021 FOCUS
As we move into 2021, our strategic priorities will center on the following:
1) Supporting ongoing demand for all our customers while continuing
to prioritize the health and safety of all our employees
2) Building out additional capacity to support accelerating growth
across all franchises, with a focus on Filtration and Chromatography
3)
Integrating our acquisitions of ARTeSYN, NMS and EMT including
investments in commercial teams and systems
4) Launching new products including our NGL COVID-19 spike protein
resin, FlowVPX® and new TFF systems
5) Accelerating market adoption at gene therapy accounts
6) Meeting or exceeding our financial goals
We believe we are positioned well to gain further market share in
bioprocessing, relying on our strategy of growth through acquisition,
continuous innovation, and expansion of our customer base. We expect
that our strategic acquisitions and highly differentiated new products
developed and launched over the last 18 months will propel Repligen
to “above industry” organic growth over the next three to five years,
and have set our sights on achieving $1billion in revenue by 2025.
Before concluding, I would like to recognize our 1,100+ employees
around the globe including our new colleagues at ARTeSYN, EMT and
NMS for their commitment and leadership. I also want to thank our
loyal shareholders and customers for their part in Repligen’s success as
we look forward to delivering another strong year here in 2021.
Tony J. Hunt
PrPrPPrrPresesessee idididideneneenennttt t ananananana ddd dd CECECECEC OOOOO
25
22
26
2020
REPLIGEN CORPORATION
FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number 000-14656
REPLIGEN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
41 Seyon Street, Bldg. 1, Suite 100
Waltham, MA
(Address of principal executive offices)
04-2729386
(I.R.S. Employer
Identification No.)
02453
(Zip Code)
Registrant’s telephone number, including area code: (781) 250-0111
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.01 per
share
Trading
Symbol(s)
RGEN
Name of each exchange
on which registered
The Nasdaq Global Select
Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ‘ No È.
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes È No ‘.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes È No ‘.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer È
Non-accelerated filer ‘
Accelerated filer
Smaller reporting company ‘
Emerging growth company ‘
‘
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. Yes ‘ No ‘.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No È.
The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2020, the last business
day of the registrant’s most recently completed second fiscal quarter, was $5,711,511,345.
The number of shares of the registrant’s common stock outstanding as of February 19, 2021 was 54,771,343.
Documents Incorporated By Reference
The registrant intends to file a proxy statement pursuant to Regulation 14A within 120 days of the end of the
fiscal year ended December 31, 2020. Portions of such proxy statement are incorporated by reference into Part III
of this Annual Report on Form 10-K.
Table of Contents
Forward-looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
PAGE
PART I
Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Item 3.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial
Item 9.
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
Item 15.
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16. 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
14
36
36
36
36
37
38
39
57
57
58
58
62
63
64
66
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Summary of the Material Risks Associated with Our Business
Our business is subject to numerous risks and uncertainties that you should be aware of in evaluating our
business. These risks include, but are not limited to, the following:
• Our product revenue may be negatively impacted by a number of factors, including without
limitation, competition in the bioprocessing market, our historical reliance on a limited number
of large customers, our ability to develop or acquire additional bioprocessing products in the
future, our ability to manufacture our bioprocessing products sufficiently and timely, and our
ability to effectively penetrate the bioprocessing products market.
• We rely on a limited number of suppliers or, for certain of our products, one supplier, and we
may not be able to find replacements or immediately transition to alternative suppliers, which
could have a material adverse effect on our financial condition, results of operations and
reputation.
• We may not be able to achieve sufficient market acceptance for our bioprocessing products,
and our results of operations and competitive position could suffer.
• If our products do not perform as expected or the reliability of the technology on which our
products are based is questioned, we could experience lost revenue, delayed or reduced
market acceptance, increased cost and damage to our reputation.
• If we are unable to manufacture our products in sufficient quantities and in a timely manner, our
operating results will be harmed, our ability to generate revenue could be diminished and our
gross margin may be negatively impacted.
• Acquisitions we have completed, including our recent acquisitions of ARTeSYN Biosolutions
Holdings Ireland Limited, Non-Metallic Solutions, Inc. or Engineered Molding Technology LLC,
or may complete in the future, may expose us to risks that could adversely affect our business,
and we may not achieve the anticipated benefits of acquisitions of businesses or technologies.
• Our results of operations could be negatively affected by potential fluctuations in foreign
currency exchange rates.
• If we are unable to hire and retain skilled personnel, including technical, sales and marketing
personnel, then we will have trouble developing and marketing our products.
• If we are unable to obtain, maintain and protect our intellectual property rights related to our
products, we may not be able to compete effectively or succeed commercially.
• The business interruptions resulting from the COVID-19 outbreak or similar public health crises
may disrupt the development, manufacturing and commercial sales of our products and
adversely impact our business.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (“Form 10-K”) contains forward-looking statements which are made
pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-
looking statements in this Form 10-K do not constitute guarantees of future performance. Investors are
cautioned that express or implied statements in this Form 10-K that are not strictly historical statements,
including, without limitation, statements regarding current or future financial performance, potential
impairment of future earnings, management’s strategy, plans and objectives for future operations or
acquisitions, product development and sales, research and development, selling, general and
administrative expenditures, intellectual property and adequacy of capital resources and financing plans
constitute forward-looking statements. Such forward-looking statements are subject to a number of risks
and uncertainties that could cause actual results to differ materially from those anticipated, including,
without limitation, the risks identified under the caption “Risk Factors” and other risks detailed in this
Form 10-K and our other filings with the Securities and Exchange Commission. We assume no obligation
to update any forward-looking information contained in this Form 10-K, except as required by law.
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ITEM 1. BUSINESS
PART I
The following discussion of our business contains forward-looking statements that involve risks and
uncertainties. When used in this report, 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 Annual Report on Form 10-K (“Form 10-K”).
References throughout this Form 10-K to “Repligen Corporation”, “Repligen”, “we”, “us”, “our”, or the
“Company” refer to Repligen Corporation and its subsidiaries, taken as a whole, unless the context
otherwise indicates.
Overview
Repligen Corporation is a global life sciences company that develops and commercializes highly
innovative bioprocessing technologies and systems that increase efficiencies and flexibility in the process
of manufacturing biological drugs.
As the overall market for biologics continues to grow and expand, our primary customers – global
biopharmaceutical companies and contract development and manufacturing organizations (“CDMOs”) –
face critical production cost, capacity, quality and time pressures. Built to address these concerns, our
products are helping to set new standards for the way biologics are manufactured. We are committed to
inspiring advances in bioprocessing as a trusted partner in the production of critical biologic drugs –
including monoclonal antibodies (“mAbs”), recombinant proteins, vaccines and gene therapies – that are
improving human health worldwide.
We currently operate as one bioprocessing business, with a comprehensive suite of products to serve
both upstream and downstream processes in biological drug manufacturing. Building on over 35 years
of industry expertise, we have developed a broad and diversified product portfolio that reflects our
passion for innovation and the customer-first culture that drives our entire organization. We continue to
capitalize on opportunities to maximize the value of our product platform through both organic growth
initiatives (internal innovation and commercial leverage) and targeted acquisitions.
Our corporate headquarters are located in Waltham, Massachusetts, with additional administrative and
manufacturing operations worldwide. The majority of our 15 key manufacturing sites are located in the
United States (California, Massachusetts, New Jersey and New York); and outside the United States, we
have sites in Estonia, Germany, Ireland, the Netherlands and Sweden.
COVID-19 Considerations
In March 2020, the World Health Organization declared the COVID-19 outbreak to be a pandemic.
During 2020, our revenues were positively affected by the COVID-19 pandemic. However, the extent to
which the COVID-19 pandemic affects our future financial results and operations will depend on future
developments which are highly uncertain and cannot be predicted, including the recurrence, severity
and/or duration of the ongoing pandemic, and current or future domestic and international actions to
contain and treat COVID-19.
We are following public and private sector policies and initiatives to reduce the transmission of
COVID-19, such as the imposition of travel restrictions and the promotion of social distancing and work-
from-home arrangements. We are taking a variety of measures to ensure the availability and functioning
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of our critical infrastructure, to promote the safety and security of our employees and to support the
communities in which we operate. These measures include increasing our inventory, requiring remote
working arrangements for employees who are not integral to physically making and shipping our
products or who do not need specialized equipment to perform their work, restricting on-site visits by
non-employees and investing in personal protective equipment. Beginning on April 2, 2020, temperature
screening was required upon entering our facilities and face masks were required to be worn by all
employees and contractors. On December 16, 2020, we expanded this monitoring at select sites by
commencing mandatory, weekly on-site qPCR testing of employees for COVID-19. Currently we require
this testing at our California, Massachusetts, New Jersey and New York sites using a third-party service
provider.
For further discussion of the risks relating to COVID-19, see “The COVID-19 pandemic, or similar public
health crises, could have a material adverse impact on our business, financial condition and results of
operations, including our product sales, and our stock price” in Item 1A. “Risk Factors,” below.
Our Products
Our bioprocessing business is comprised of four main franchises: Filtration; Chromatography; Process
Analytics; and Proteins.
Since 2012, we have significantly expanded and diversified the product lines offered under these
franchises, introducing multiple first-to-market differentiated technologies to our customers. We have
achieved this expansion through innovations and strategic acquisitions of complementary assets or
businesses. Our growth strategy continues to expand our geographic scope, our customer base and
applications of our technologies.
To support our sales growth goals for these products, we make ongoing investments in our commercial
organization, our research and development (“R&D”) team and our manufacturing capacity. We
regularly evaluate and invest in these areas as needed to ensure timely deliveries and to stay ahead of
increased customer demand for our products.
A majority of our revenue is derived from consumable and/or single-campaign (“single-use”) product
sales, as compared to associated equipment. The customization, scalability and plug-and-play
convenience of these products, and in many cases the closed nature of our technologies, make them
ideal for use in biologics manufacturing processes where contamination risk is a critical concern of our
customers.
Filtration
XCell ATF® Cell Retention Systems
Our Filtration products offer a number of advantages to manufacturers of biologic drugs and are used in
process development and process scale (clinical and commercial) production. Our XCell Alternating
Tangential Flow (“ATF”) systems are used in upstream perfusion (continuous) and N-1 (intensified fed-
batch or hybrid perfusion) cell culture processing.
XCell ATF is a cell retention technology. The system is comprised of an advanced hollow fiber (“HF”)
filtration device, a low shear pump and a controller. The XCell ATF system is connected to a bioreactor
and enables the cell culture to be run continuously, with cells being retained in the bioreactor, fresh
nutrients (cell culture media) being fed into the reactor continuously and clarified biological product and
cell waste being removed (harvested) continuously. The cells are maintained in a consistent nutrient-rich
environment and can reach cell densities two- and three-times higher than those achieved by standard
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fed-batch culture. As a result, product yield is increased, which improves facility utilization and can
reduce the size of a bioreactor required to manufacture a given volume of biologic drug product. XCell
ATF systems are available in a wide range of sizes that can easily scale from laboratory use through full
production with bioreactors as large as 5,000 liters.
Through internal innovation, we developed and launched single-use formats of the original stainless steel
XCell ATF devices to address increasing industry demand for single-use sterile systems with “plug-and-
play” technology. The XCell ATF device is now available to customers in both its original configuration
(steel housing and single-use filters) in all sizes (2, 4, 6 and 10), and/or as a single-use device
(disposable housing/filter combination) in most sizes (2, 6, and 10). The availability of XCell ATF
technology in a single-use format reduces implementation time by eliminating the time intensive workflow
associated with autoclaving and enables our customers to accelerate evaluations of the product with a
lower initial overall cost of ownership.
In September 2018, we entered into a collaboration agreement with industry leader Sartorius Stedim
Biotech (“SSB”) to integrate our XCell ATF controller technology into SSB’s BIOSTAT® STR large-scale,
single-use bioreactors, to create novel perfusion-enabled bioreactors.
TangenX® Flat Sheet Cassettes
Our TangenX™ product line (“TangenX”) balances our upstream XCell ATF systems (hollow fiber) with a
portfolio of flat-sheet tangential flow filtration (“TFF”) cassettes used in downstream biologic drug
concentration and formulation processes. The TangenX product portfolio includes our single-use SIUS®
brand, providing customers with a high-performance, cost saving alternative to reusable TFF cassettes.
TFF is a rapid and efficient method for the concentration and formulation of biomolecules that is widely
used in many applications in biopharmaceutical development and manufacturing. SIUS cassettes feature
a high performing membrane and unique cartridge construction that enables a lower price point. Each
disposable cassette is delivered pre-sanitized and ready to be equilibrated and used for tangential flow,
ultrafiltration and diafiltration applications. Use of SIUS TFF cassettes eliminates non-value-added steps
(cleaning, testing between uses, storage and flushing) that are required with reusable TFF products,
providing cost and time savings. The cassettes are interchangeable with filter hardware from multiple
manufacturers, simplifying customer trial and adoption of SIUS products.
In 2020, we introduced SIUS® Gamma, which we engineered to harness the performance and
efficiencies of TangenX® SIUS® membranes and cassettes, while also providing the convenience of a
fully assembled, closed and irradiated system. The device is delivered as a package including the
cassette, manifold, clamps, tubing and connectors. The customizable SIUS Gamma device is ideal for
adenovirus (“AAV”) gene therapy processes where large volumes need to be concentrated prior to
chromatography.
Spectrum® Hollow Fibers
Our filtration business is strengthened by a leading portfolio of Spectrum® HF filtration solutions,
including fully integrated KrosFlo® TFF® Systems with Konduit sensing and ProConnex® Flow Path single-
use assemblies. KrosFlo family of TFF systems for product concentration is fully scalable from 2 milliliters
to 5,000 liters – from lab-scale to commercial manufacturing. Designed for purification and formulation
applications, KrosFlo Systems enable robust downstream ultrafiltration and microfiltration.
We also gained the Spectra/Por® portfolio of laboratory and process dialysis products and in 2019, we
launched the SpectraFlo™ Dynamic Dialysis Systems. Also, in 2019 we introduced the KrosFlo® TFDF™
(Tangential Flow Depth Filtration) Systems, which we believe have the potential to disrupt and displace
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traditional harvest clarification operations. The KrosFlo TFDF system includes control hardware, novel
high throughput tubular depth filters and ProConnex® TFDF® flow paths. When used for cell culture
clarification, single-use KrosFlo TFDF technology delivers unprecedented high flux (>1,000 LMH), high
capacity, low turbidity, and minimal dilution, making the technology a high-performance alternative to
traditional centrifugation and depth filtration approaches to harvest clarification. TFDF technology also
provides benefits such as low hold-up volume, high recovery, small footprint, simple set up and disposal,
scalability and reduced process time.
The Spectrum® product line of HF filters is used in bench-tops through commercial-scale processes,
primarily for the filtration, purification and concentration of biologics and diagnostic products. Our
KrosFlo filtration systems and equipment offer both standard and customized solutions to bioprocessing
customers, with particular strength in consumable and single-use offerings.
The growth of our filtration business has allowed us to substantially increase our direct sales presence in
Europe and Asia and diversify our end markets to include all biologic classes, including mAb, vaccines,
recombinant proteins and gene therapies.
Other Filtration
Over time, we have broadened the application of our Konduit monitor, which automates concentration
and buffer exchange, to include use with both HF TFF systems. We also self-manufacture HF filters that
are used in our XCell ATF, KrosFlo TFF and KrosFlo TFDF systems.
With our acquisition of Engineered Molding Technology LLC (“EMT”) on July 13, 2020, we added
EMT’s silicone-based, single-use components and manifolds to our filtration franchise. These products are
key components in single-use filtration and chromatography systems and will help expand our line of
single-use ProConnex flow paths, streamline our supply chain for ATF and provide more flexibility as we
scale and expand our single-use and systems portfolios.
With our acquisition of the ARTeSYN Biosolutions Holdings Ireland Limited (“ARTeSYN”) business on
December 3, 2020, we expanded our filtration systems offering, and added additional single-use
components and flow path assemblies for fluid management, providing greater flexibility and market
opportunity as we scale and expand our systems portfolio.
Chromatography
Our Chromatography franchise includes a number of products used in downstream purification,
development, manufacturing and quality control of biological drugs. The main driver of growth in this
portfolio is our OPUS® pre-packed column (“PPC”) product line.
In addition to OPUS, with our acquisition of ARTeSYN, we are adding chromatography systems to our
offerings, as well as single-use components and flow path assemblies for fluid management, providing
greater flexibility and market opportunity as we scale and expand our systems portfolio.
Additional chromatography products include our affinity capture resins, such as CaptivA® Protein A
resins, that are used in a small number of commercial drug processes and our ELISA test kits, used by
quality control departments to detect and measure the presence of leached Protein A and/or growth
factor in the final product.
OPUS Pre-Packed Columns
Our Chromatography franchise features a wide range of OPUS columns, which we deliver to our
customers sealed and pre-packed with their choice of resin. These are single-use or campaign-use
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disposable columns that replace the use of customer-packed glass columns for downstream purification.
By designing OPUS columns to be a technologically advanced and flexible option for the purification of
biologics from process development through clinical and commercial-scale manufacturing, Repligen has
become a leader in the PPC market. Our biomanufacturing customers value the significant cost savings
that OPUS columns can deliver by reducing set up time, labor, equipment and facility costs – in addition
to delivering product consistency and “plug-and-play” convenience.
We launched our first production scale OPUS columns in 2012 and have since added larger diameter
options that scale up to use with 2,000 liter bioreactors. Our OPUS 80R column is the largest available
PPC on the market for use in late-stage clinical or commercial purification processes. We offer unique
features such as a resin recovery port on our larger columns, which allows our customers to remove and
reuse the recovered resin in other applications. We believe the OPUS 5-80R product line is the most
flexible product line available in the market, serving the purification needs of customers manufacturing
mAbs and other biologics such as vaccines and gene therapies.
In addition to our larger scale OPUS columns, our portfolio includes our smaller-scale OPUS columns,
including our RoboColumn®, MiniChrom™ and ValiChrom® columns used for process development
(“PD”) and validation. These columns are used in high-throughput PD screening, viral clearance
validation studies and scale down validation of chromatography processes.
We maintain customer-facing centers in both the United States and Europe for our OPUS column
customers, and offer a premier ability to pack any of hundreds of chromatography capture resins
available, as per our customers’ choice.
Process Analytics
Our Process Analytics products complement and support our Filtration, Chromatography and Proteins
franchises as they allow end-users to make at-line or in-line absorbance measurements allowing for the
determination of protein concentration in filtration, chromatography formulation and fill-finish
applications.
SoloVPE® Device
Our SoloVPE Slope Spectroscopy® system is the industry standard for offline and at-line absorbance
measurements for protein concentration determination in process development, manufacturing and
quality control settings.
FlowVPE® Device
Our FlowVPE Slope Spectroscopy system enhances the power of Slope Spectroscopy and provides in-line
protein concentration measurement for filtration, chromatography and fill-finish applications. A key
benefit of this in-line solution is the ability to monitor a manufacturing process in real time. We are
developing a next-generation FlowVPE to incorporate GMP-compliant software for production-scale
biologics manufacturing.
Use of VPE Slope Spectroscopy systems delivers multiple process benefits for our biopharmaceutical
manufacturing customers, compared to traditional UV-Vis approaches. Key benefits include: the
elimination of manual dilutions and sample transfers from process development/manufacturing to labs,
rapid time to results (minutes versus hours), improved precision, built-in data quality for improved
reporting and validation, and ease of use.
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Proteins
Our Proteins franchise is represented by our Protein A affinity ligands, which are a critical component of
Protein A chromatography resins used in downstream purification of virtually all mAb-based drugs on the
market or in development, and cell culture growth factor products, which are a key component of cell
culture media used in upstream bioprocessing to increase cell density and improve product yield. Our
recent addition to the Proteins franchise is a novel spike protein affinity ligand, which has the potential to
be utilized in the purification of COVID-19 vaccines.
Affinity Ligands
We are a leading provider of Protein A affinity ligands to life sciences companies. Protein A ligands are
an essential “binding” component of Protein A affinity chromatography resins used in the purification of
virtually all mAb-based drugs on the market or in development. We manufacture multiple forms of Protein
A ligands under long-term supply agreements with major life sciences companies including Cytiva
(formerly GE Healthcare and now a member of the Danaher Life Sciences platform), MilliporeSigma and
Purolite Life Sciences (“Purolite”), who in turn sell their Protein A chromatography resins to end users
(mAb manufacturers). We have two manufacturing sites supporting overall global demand for our Protein
A ligands: one in Lund, Sweden and another in Waltham, Massachusetts.
Protein A chromatography resins are considered the industry standard for purification of antibody-based
therapeutics due to the ability of the Protein A ligand to very selectively bind to or “capture” antibodies
from crude protein mixtures. Protein A resins are packed into the first chromatography column of typically
three columns used in a mAb purification process. As a result of Protein A’s high affinity for antibodies,
the mAb product is highly purified and concentrated within this first capture step before moving to
polishing steps.
In June 2018, we entered into an agreement with Navigo Proteins GmbH (“Navigo”) for the exclusive
co-development of multiple affinity ligands for which Repligen holds commercialization rights. We
manufacture and exclusively supply the first of these ligands, NGL-Impact® A, to Purolite, for use in their
Jetted A50 Protein A resin product. We have a long-term supply agreement with Purolite for NGL-Impact
and potential additional affinity ligands that may advance from our Navigo collaboration.
In October 2020, we announced the successful development (with Navigo) of a spike protein ligand,
and our plans to manufacture and commercialize the associated chromatography resin as a Repligen
branded product beginning in early 2021. The spike protein is a characterizing feature of SARS-CoV-2,
the virus that causes COVID-19; it is the primary antigen being evaluated in clinical trials to induce an
immune response as a COVID-19 vaccine.
The Navigo Proteins and Purolite agreements are supportive of our strategy to secure and reinforce our
Proteins franchise.
Growth Factors
Most biopharmaceuticals are produced through an upstream mammalian cell culture process. In order to
stimulate increased cell growth and maximize overall yield from a bioreactor, manufacturers often add
growth factors, such as insulin, to their cell culture media. Our cell culture growth factor additives include
LONG® R3 IGF 1 (“LR3”), our insulin-like growth factor that has been shown to be up to 100 times more
biologically potent than insulin (the industry standard), thereby increasing recombinant protein
production in cell culture fermentation applications. LR3 will be sold through a distribution partnership
with MilliporeSigma until we take over the direct selling of our growth factor portfolio in 2021.
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Corporate Information
We are a Delaware corporation with global headquarters in Waltham, Massachusetts. We were
incorporated in 1981 and became a publicly traded company in 1986. Our common stock is listed on The
Nasdaq Global Market under the symbol “RGEN”. We have over 1,100 employees and operate globally
with offices and manufacturing sites located at multiple locations in the United States, Europe and Asia.
Our principal executive offices are located at 41 Seyon Street, Waltham, Massachusetts 02453, our
website is www.repligen.com and our telephone number is (781) 250-0111.
2020 Acquisitions
ARTeSYN Biosolutions Holdings Ireland Limited
On October 27, 2020, we entered into an Equity and Asset Purchase Agreement with ARTeSYN, a
company organized under the laws of Ireland, Third Creek Holdings, LLC, a Nevada limited liability
company, Alphinity, LLC, a Nevada limited liability company (“Alphinity”, and together with Third Creek
Holdings, LLC the “Sellers”), and Michael Gagne, solely in his capacity as the representative of the
Sellers, pursuant to which we acquired (i) all of the outstanding equity securities of ARTeSYN and
(ii) certain assets from Alphinity related to the business of ARTeSYN (collectively, the “ARTeSYN
Acquisition”) for approximately $200 million, comprised of approximately $130 million in cash to the
Sellers and approximately $70 million in our common stock to Third Creek. The transaction closed on
December 3, 2020.
ARTeSYN, headquartered in Waterford, Ireland, is a biosystems innovator that has had success with its
single-use chromatography and filtration systems, which are considered the benchmark in downstream
bioprocessing due to their performance, automation and low hold-up volumes. ARTeSYN offers state of
the art single-use systems for chromatography, filtration, continuous manufacturing and media/buffer
prep workflows and has integrated unique flow path assemblies utilizing EMT’s silicone extrusion and
molding technology to deliver highly differentiated, low hold-up volume systems that minimize product
loss during processing.
Non-Metallic Solutions, Inc.
On October 15, 2020, we entered into a Stock Purchase Agreement with Non-Metallic Solutions, Inc., a
Massachusetts corporation (“NMS”), and each of William Malloneé and Derek Masser, the legal and
beneficial owners of NMS, to purchase NMS, which transaction subsequently closed on October 20,
2020.
NMS, headquartered in Auburn, Massachusetts, is a manufacturer of fabricated plastics, custom
containers, and related assemblies and components used in the manufacturing of biologic drugs. NMS’s
fluid management products complement and expand Repligen’s single-use product offerings.
Engineered Molding Technology LLC
On June 26, 2020, we entered into a Membership Interest Purchase Agreement with EMT and each of
Michael Pandori and Todd Etesse, the legal and beneficial owners of EMT to purchase EMT, which
transaction subsequently closed on July 13, 2020.
EMT, headquartered in Clifton Park, New York, is an innovator and manufacturer of single-use silicone
assemblies and components used in the manufacturing of biologic drugs. EMT’s standard and custom
molded and over-molded connectors and silicone tubing products are key fluid management components
in single-use filtration and chromatography systems. EMT’s products complement and expand our single-
use product offerings.
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2019 Acquisition
C Technologies, Inc.
On May 31, 2019, we acquired C Technologies Inc. (“C Technologies”), pursuant to the terms of a
Stock Purchase Agreement, by and among Repligen, C Technologies and Craig Harrison, an individual
and sole stockholder of C Technologies (such acquisition, the “C Technologies Acquisition”).
C Technologies sells instruments, consumables and accessories that are designed to allow bioprocessing
technicians to measure the protein concentration of a liquid sample using C Technologies’ Slope
Spectroscopy® method, which eliminates the need for manual sample dilution. C Technologies’ lead
product, the SoloVPE® Device, was launched in 2008 for off-line and at-line protein concentration
measurements conducted in quality control, process development and manufacturing labs in the
production of biological therapeutics. C Technologies’ FlowVPE® Device, an extension of the SoloVPE
technology, was designed to allow end users to make in-line protein concentration measurements in
filtration, chromatography and fill-finish applications, designed to allow for real-time process monitoring.
The previous C Technologies Acquisition, combined with the 2020 acquisitions of ARTeSYN, NMS and
EMT, further establishes us as a premier player in single-use systems and associated integrated flow path
assemblies. For more information on these acquisitions, see Note 3, “Acquisitions,” to our consolidated
financial statements included in Part II, Item 8 of this report.
Our Market Opportunity
Bioprocessing Addressable Market
The global addressable market for bioprocessing products is estimated to be over $12 billion of which
we estimate Repligen’s addressable market to be approximately $3.7 billion at year end 2020. This
market includes products used to manufacture therapeutic antibodies, recombinant proteins and
vaccines, as well as gene therapies.
Monoclonal Antibody Market
Antibody-based biologics alone accounted for over $130 billion of global biopharma revenue in 2019.
Industry sources project the mAbs market to grow in the range of approximately 7% to 12% annually
through 2022, driven by new approvals and expanded clinical uses for marketed antibodies as well as
the emergence of biosimilar versions of originator mAbs. As of December 31, 2020, over 120 mAbs
were approved by the U.S. Food and Drug Administration (“FDA”) to treat a diverse range of diseases.
R&D remains robust, with more than 600 mAb clinical trials ongoing to address a wide range of medical
conditions.
In addition to investments in the discovery and development of novel biologic drugs, there has been
substantial investment in follow-on products (biosimilars) by generic and specialty pharmaceutical as well
as large biopharmaceutical companies. Development of follow-on products accelerated as the first major
mAbs came off patent in the European Union and United States. Due to the high cost of biologic drugs,
many countries in developing and emerging markets have been aggressively investing in
biomanufacturing capabilities to supply lower cost biosimilars for the local markets. For both originator
and follow-on biologics manufacturing, Repligen products are well-positioned to enable greater
manufacturing flexibility, production yields and lower costs through improved process efficiencies.
Cell and Gene Therapy Market
Cell and gene therapies (“C>”) have emerged in the past few years to become a rapidly growing
area of biological drug development, with over 1,100 clinical trials underway at year-end 2020
9
according to industry sources. Statements by the FDA are supported by industry reports that estimate
annual revenue growth of 20% to 30% for the C> market over the next five years. This scientifically
advanced therapeutic approach has unique manufacturing challenges that many of our products can
help address. We believe we are well positioned to participate in gene therapy production, particularly
in the manufacture of plasmids and viral vectors.
Our Strategy
We are focused on the development, production and commercialization of differentiated, technology-
leading solutions or products that address specific pressure points in the biologics manufacturing process
and deliver substantial value to our customers. Our products are designed to increase our customers’
product yield, and we are committed to supporting our customers with strong customer service and
applications expertise.
We intend to build on our recent history of developing market-leading solutions and delivering strong
financial performance through the following strategies:
• Continued innovation. We plan to capitalize on our internal technological expertise to develop
products that address unmet needs in upstream and downstream bioprocessing. We intend to
invest further in our Proteins franchise while developing platform and derivative products to
support our Filtration, Chromatography and Process Analytics franchises. We plan to strengthen
our existing product lines with complementary products and technologies that are designed to
allow us to provide customers with a more efficient manufacturing process on one or more
measures including flexibility, convenience, time savings, cost reduction and product yield.
•
•
Platforming our products. A key strategy for accelerating market adoption of our products is
delivery of enabling technologies that become the standard, or “platform,” technology in
markets where we compete. We focus our efforts on winning early-stage technology evaluations
through direct interaction with the key biomanufacturing decision makers in process
development labs. This strategy is designed to establish early adoption of our enabling
technologies at key accounts, with opportunity for customers to scale up as the molecule
advances to later stages of development and potential commercialization. We believe this
approach can accelerate the implementation of our products as platform products, thereby
strengthening our competitive advantage and contributing to long-term growth.
Targeted acquisitions. We intend to continue to selectively pursue acquisitions of innovative
technologies and products. We intend to leverage our balance sheet to acquire technologies
and products that improve our overall financial performance by improving our competitiveness
in filtration, chromatography or process analytics or by moving us into adjacent markets with
common commercial call points.
• Geographical expansion. We intend to expand our global commercial presence by continuing
to selectively build out our global sales, marketing, field applications and services infrastructure.
• Operational efficiency. We seek to expand operating margins through capacity utilization and
process optimization strategies designed to increase our manufacturing yields. We plan to
invest in systems to support our global operations, optimizing resources across our global
footprint to maximize productivity.
Research and Development
Our research activities are focused on developing new high-value bioprocessing products across all of
our franchises. We strive to continue to introduce truly differentiated products that address specific pain
points in the biologics manufacturing process. Our commitment to innovation is core to the Repligen
culture and our success as a company, with approximately 5% to 7% of revenue focused on new product
development and market expansion for existing products.
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Sales and Marketing
Our sales and marketing strategy supports our objective of strengthening our position as a leading
provider of products and services, addressing upstream, downstream and quality control needs of
bioprocessing customers in the biopharmaceutical industry.
Our Commercial Team
To support our sales goals for our direct-to-consumer products, we have invested in our commercial
organization. Since 2014, we have significantly expanded our global commercial organization from
less than 10, to a commercial team of 180 employees as of December 31, 2020. This includes 140
people in field positions (sales, field applications and field service), and 40 people in internal positions
(marketing and customer service). Geographically, 112 members of our commercial team are located in
North America, 28 in Europe and 40 in Asia-Pacific regions.
Our bioprocess account managers are supported in each region by bioprocess sales specialists with
expertise in Filtration, Chromatography or Process Analytics, and by technically trained field applications
specialists and field service providers, who can work closely with customers on product demonstrations,
implementation and support. We believe that this model helps drive further adoption at our key accounts
and also open up new sales opportunities within each region.
Ligand Supply Agreements
For our Proteins franchise, we are committed to be a partner of choice for our customers with distributor
and supply agreements in place with large life sciences companies such as Cytiva (formerly GE
Healthcare), MilliporeSigma and Purolite. The Cytiva Protein A supply agreement relating to our
Waltham, Massachusetts facility runs, pursuant to its terms, through 2021. During 2020, Cytiva moved a
portion of its ligand manufacturing in-house. Our Protein A supply agreement with MilliporeSigma runs,
pursuant to its terms, through 2023, and in 2018 we amended our Protein A supply agreement with
Purolite that runs, pursuant to its terms, to August 2026 with an option for renewal through 2028. Our
dual manufacturing capability provides strong business continuity and reduces overall supply risk for our
ligand customers.
Significant Customers and Geographic Reporting
Customers for our bioprocessing products include major life sciences companies, contract manufacturing
organizations, biopharmaceutical companies, diagnostics companies and laboratory researchers.
The following table represents the Company’s total revenue by geographic area (based on the location
of the customer):
For the Years Ended December 31,
2020
2019
2018
Revenue by customers’ geographic locations:
North America . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
APAC/Other
48%
38%
14%
51%
37%
12%
48%
40%
12%
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100%
100%
100%
MilliporeSigma, one of our biggest customers, accounted for 11%, 13% and 15% of total revenues in
the years ended December 31, 2020, 2019 and 2018, respectively. Another customer, Cytiva (formerly
GE Healthcare) accounted for 12% and 15% of total revenues in the years ended December 31, 2019
and 2018, respectively.
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Human Capital
We view our employees and our culture as key to our success. We aspire to create healthier futures and
accelerate business results by identifying, attracting, developing, motivating and retaining the best and
brightest talent across all dimensions of diversity to perform to their full potential. As of December 31,
2020, we employed 1,128 full-time and part-time employees, an increase of 367 since December 31,
2019. The total includes 181 employees in our commercial organization (140 field and 41 internal),
124 in engineering and R&D, 447 in manufacturing, 129 in quality, 77 in supply chain roles, 34 in
product management and 136 in administrative functions. Each of our employees has signed a
confidentiality agreement. None of our U.S. employees are covered by collective bargaining
agreements. We have one collective bargaining agreement with two unions that covers our 74
employees in Sweden, comprising approximately 7% of our total workforce. We renewed this collective
bargaining agreement in November 2020, and it expires at the end of March 2023. Our focus on
fostering diversity, inclusion, equity and belonging is critical to our global talent strategy and pivotal to
building a culture that embraces individual characteristics, values diversity, minimizes barriers, and
enhances feelings of security and support across the workplace. We consider our employee relations to
be good.
Intellectual Property
We are committed to protecting our intellectual property through a combination of patent, copyright,
trade secret and trademark laws, as well as confidentiality agreements. As further described below, we
own or have exclusive rights to a number of U.S. patents and U.S. pending patent applications as well
as corresponding foreign patents and patent applications.
Filtration
For our Filtration franchise, we are focusing on ATF, TFDF and TFF HF systems, and filters and flow
paths. We continually seek to improve upon these technologies and have multiple new patent filings
including those covering pumps and controllers, methods of harvesting, single-use products, and filters.
Our patent for ATF and associated methods to use such a device in perfusion, acquired from Refine,
expired in 2020, and we are proactively developing technology in an effort to mitigate any effects
resulting from the expiration of this patent.
We currently have 78 patents granted (which expire over the next 20 years) and 186 pending patent
applications in countries that include Australia, Canada, China, France, Germany, India, Japan, Korea,
Sweden, United Kingdom and the United States.
Our policy is to require each of our employees, consultants, business partners, potential collaborators
and major customers to execute confidentiality agreements upon the commencement of an employment,
consulting, business relationship, or product related audit with us. These agreements provide that all
confidential information developed or made known to the other party during the course of the
relationship with us is to be kept confidential and not disclosed to third parties except in specific
circumstances. In the case of employees and consultants, the agreements generally provide that all
inventions conceived by the individual in the course of rendering services to Repligen shall be our
exclusive property and must be assigned to Repligen.
Chromatography
Our issued patents cover certain unique methods and features of our OPUS PPC, including methods of
making and loading these chromatography columns as well as the column structure. We continually seek
to improve upon this technology and have multiple new patent filings, including those covering gamma
irradiation sterilization, packing methods, and methods of removing air using specialized tubing and
valve systems.
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Process Analytics
Through our 2019 acquisition of C Technologies, we hold issued patents to Slope Spectroscopy
instruments and related methods. These include patents to an “Interactive Variable Pathlength Device”
that are set to expire in the United States beginning in April 2028. We also hold granted patents to
methods of making Slope Spectroscopy standards and methods for using an interactive variable
pathlength device.
Proteins
We currently hold a patent for “Nucleic Acids Encoding Recombinant Protein A,” which claims
sequences that encode a truncated recombinant protein A but are otherwise identical to the natural
protein A, which has long been commercialized for bioprocessing applications. This patent will remain
in effect until June 2028. We also have two pending patents covering affinity ligands through our
collaboration with Navigo.
Trademarks
We vigilantly protect our products and services’ branding by maintaining trademark registrations
globally for the Repligen trademark and our key product brands. We have a comprehensive branding
policy that includes trademark usage guidelines to ensure Repligen trademarks are used in a manner that
provides the maximum protection.
We prioritize our “housemark” trademarks, (i.e., Repligen, Spectrum, TangenX and ARTeSYN), and
ensure they are sufficiently protected and registered in key countries or regions globally, such as the
United States, Canada, Europe and China. We also have product trademarks, including OPUS, XCell
ATF, TFDF, KrosFlo, SIUS, ProConnex, Spectra/Por, NGL-Impact, SoloVPE, FlowVPE and XO, that
provide valuable company recognition and goodwill with our customers.
Our ability to compete effectively in the marketplace is dependent in part on our ability to protect our
intellectual property rights, which includes protecting the trademarks we use in connection with our
products and services. We rely on several registered and unregistered trademarks to protect our brand.
Licensing Agreements
We have entered into multiple licensing and collaboration relationships with third-party business partners
in an effort to fully exploit our technology and advance our bioprocessing business strategy.
Competition
Our bioprocessing products compete on the basis of value proposition, performance, quality, cost
effectiveness, and application suitability with numerous established technologies. Additional products
using new technologies that may be competitive with our products may also be introduced. Many of the
companies selling or developing competitive products, which in some cases include Cytiva (formerly GE
Healthcare) and MilliporeSigma (the life sciences business of Merck KGaA), two of our largest
customers, have greater financial and human resources, R&D, manufacturing and marketing experience
than we do. They may undertake their own development of products that are substantially similar to or
compete with our products and they may succeed in developing products that are more effective or less
costly than any that we may develop. These competitors may also prove to be more successful in their
production, marketing and commercialization activities. We cannot be certain that the research,
development and commercialization efforts of our competitors will not render any of our existing or
potential products obsolete.
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Manufacturing
A majority of our 15 key manufacturing sites are located in the United States (California, Massachusetts,
New Jersey and New York). Outside the United States, we have manufacturing sites in Estonia,
Germany, Ireland, the Netherlands and Sweden.
The proteins products we provide are manufactured at our sites in Waltham, Massachusetts and Lund,
Sweden. Native Protein A ligands and our growth factor products are manufactured in Lund, while
recombinant Protein A ligands are manufactured in both Waltham and Lund. Our primary
chromatography assembly and manufacturing sites are located in Waltham and Ravensburg, Germany,
with additional chromatography manufacturing suites being added in Breda, the Netherlands in 2021.
Our primary filtration manufacturing sites are located in Marlborough, Massachusetts and Rancho
Dominguez, California. In Marlborough, the focus is on XCell ATF and flat sheet TFF products, while in
Rancho Dominguez the focus is on Spectrum hollow fiber, TFDF and ProConnex products. Our process
analytics products are manufactured in Bridgewater, New Jersey. Our operating room products are
manufactured in Irving, Texas. With our three acquisitions in 2020, we gained manufacturing sites in
Clifton Park, New York (EMT) and Auburn, Massachusetts (NMS) for fluid management consumables.
ARTeSYN’s primary manufacturing sites for fluid management products and systems are located in
Waterford, Ireland and Harju maakond, Estonia, with additional sites in California.
We utilize our own facilities in Waltham, Massachusetts and Lund, Sweden as well as third-party
contract manufacturing organizations to carry out certain fermentation and recovery operations, while
the purification, immobilization, packaging and quality control testing of our bioprocessing products are
conducted at our facilities. Our facilities located in Waltham, Massachusetts; Lund, Sweden; Ravensburg,
Germany; Bridgewater, New Jersey; Clifton Park, New York; and Rancho Dominguez, California are
ISO 9001:2015 certified and maintain formal quality systems to maintain process control, traceability,
and product conformance. Additionally, our facility in Irving, Texas is ISO 13485:2012 certified. We
practice continuous improvement initiatives based on routine internal audits as well as external feedback
and audits performed by our partners and customers. In addition, we maintain a business continuity
management system that focuses on key areas such as contingency planning, security stocks and off-site
storage of raw materials and finished goods to ensure continuous supply of our products.
Available Information
We maintain a website with the address www.repligen.com. We are not including the information
contained on our website as a part of, or incorporating it by reference into, this Annual Report on
Form 10-K (“Form 10-K”). We make available free of charge through our website our Form 10-Ks,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as
soon as reasonably practicable after we electronically file such materials with, or furnish such materials
to, the Securities and Exchange Commission (“SEC”). Our Code of Business Conduct and Ethics is also
available free of charge through our website.
Our filings with the SEC may be accessed through the SEC’s Electronic Data Gathering, Analysis and
Retrieval (“EDGAR”) system at www.sec.gov.
ITEM 1A. RISK FACTORS
Investors should carefully consider the risk factors described below before making an investment
decision.
If any of the events described in the following risk factors occur, our business, financial condition or
results of operations could be materially harmed. In that case, the trading price of our common stock
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could decline and investors may lose all or part of their investment. Additional risks and uncertainties that
we are unaware of or that we currently deem immaterial may also become important factors that affect
Repligen.
This Annual Report on Form 10-K (“Form 10-K”) 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 Form 10-K.
Risks Related to Our Business
Risks Related to Competition, Sales and Marketing
We compete with life sciences, pharmaceutical and biotechnology companies who are
capable of developing new approaches that could make our products and technology
obsolete.
The bioprocessing market is intensely competitive, subject to rapid change and significantly affected by
new product introductions and other market activities of industry participants.
We compete with several medium and small companies in each of our product categories as well as
several large companies, including Danaher Corporation (Pall Corporation and Cytiva (formerly GE
Healthcare)), Thermo Fisher Scientific Inc., MilliporeSigma and Sartorius. Many of our competitors are
large, well-capitalized companies that may have greater financial, manufacturing, marketing, research
and development resources than we have, as well as stronger name recognition, longer operating
histories and benefits derived from greater economies of scale. As a consequence, they are able to
spend more aggressively on product development, marketing, sales and other product initiatives than we
can. Many of these competitors have:
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significantly greater name recognition;
larger and more established distribution networks;
additional lines of products and the ability to bundle products to offer higher discounts or other
incentives to gain a competitive advantage;
greater experience in conducting research and development, manufacturing, clinical trials,
marketing, obtaining regulatory approval and entering into collaborations or other strategic
partnership arrangements; and
greater financial and human resources for product development, sales and marketing and
patent litigation.
These factors, among others, may enable our competitors to market their products at lower prices or on
terms more advantageous to customers than what we can offer. Competition may result in price
reduction, reduced gross margins and loss of market share, any of which could have a material adverse
effect on our business, financial condition and results of operations.
Our current and future competitors, including certain of our customers, may at any time develop
additional products that compete with our products. If any company develops products that compete with
or are superior to our products, our revenue may decline. Additionally, new approaches by these
competitors may make our products and technologies obsolete or noncompetitive.
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As we evolve from a company dependent on others to commercialize our products to
a company selling directly to end users, we may encounter difficulties in expanding
our product portfolio and our commercial marketing capabilities.
Prior to 2016, we generated most of our revenues through sales of bioprocessing products to a limited
number of life sciences companies, such as Cytiva (formerly GE Healthcare), MilliporeSigma and other
individual distributors. However, due in part to our recent strategic acquisitions, an increasing amount of
our revenue is attributable to our commercialization of bioprocessing products that we sell directly to
end-users, including biopharmaceutical companies and contract manufacturing organizations. This has
required and will continue to require us to invest additional resources in our sales and marketing
capabilities. We may not be able to attract and retain additional sales and marketing professionals, and
the cost of building the sales and marketing function may not generate our anticipated revenue growth.
In addition, our sales and marketing efforts may be unsuccessful. Our failure to manage these risks may
have a negative impact on our financial condition, or results of operations and may cause our stock
price to decline.
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 and marketing
personnel. We also face significant competition in the hiring and retention of such personnel from other
companies, research and academic institutions, government and other organizations who have superior
funding and resources. The loss of key personnel or our inability to hire and retain skilled personnel
could materially adversely affect our product development efforts and our business.
Despite our increasingly diversified client base, we have historically depended on a
limited number of customers for a high percentage of our revenues.
The loss of, or a significant reduction in orders from, any of our large customers, including following any
termination or failure to renew a long-term supply contract, would significantly reduce our revenues and
harm our results of operations. If a large customer purchases fewer of our products, defers orders or fails
to place additional orders with us for any reason, including for business continuity purposes, our revenue
could decline, and our operating results may not meet market expectations.
In addition, if our customers order our products, but fail to pay on time or at all, our liquidity and
operating results could be materially and adversely affected. Furthermore, if any of our current or future
products compete with those of any of our largest customers, these customers may place fewer orders
with us or cease placing orders with us, which would negatively affect our revenues and operating
results.
Certain of our products are used by customers in the production of gene therapies,
which represent a relatively new and still-developing mode of treatment. Unforeseen
adverse events, negative clinical outcomes, or increased regulatory scrutiny of gene
therapy and its financial cost may damage public perception of the safety, utility, or
efficacy of gene therapies and may harm our customers’ ability to conduct their
business. Such events may negatively impact our revenues and have an adverse effect
on our performance.
Gene therapy remains a relatively new and developing treatment method, with only a few gene
therapies approved to date by regulatory authorities. Public perception may be influenced by claims that
gene therapy is unsafe or ineffective, and gene therapy may not gain the acceptance of the public or the
medical community. In addition, ethical, social, legal, and financial concerns about gene therapy and
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genetic testing could result in additional regulations or limitations or even prohibitions on certain gene
therapies or gene-therapy-related products. More restrictive regulations or negative public perception
could reduce certain of our customers’ use of our products, which could negatively affect our revenue
and performance.
In response to the COVID-19 pandemic, certain of our products are used by customers
in the production of COVID-19 vaccines and therapeutics, some of which have not yet
received regulatory approval. Unforeseen adverse events, regulatory interventions, or
the emergence of new variants of the virus rendering current vaccines and
therapeutics ineffective, and the development of next generation vaccines and
therapeutics that do not incorporate our products may negatively impact our revenues
and have an adverse effect on our performance.
Certain of our products are being used by our customers in the development and manufacture of novel
COVID-19 vaccines and therapies. Certain of these therapies continue to be under development, while
others have received regulatory approval in the applicable jurisdictions for distribution. Negative
outcomes in clinical trials and unforeseen adverse events in patients may result in increased regulatory
scrutiny or reduced public trust of such therapies and could reduce certain of our customers’ use of our
products. Such events would have a negative impact on our revenues. In addition, if failure to obtain
certain regulatory approvals or increased competition in the production of COVID-19 vaccines and
therapies causes our customers to discontinue the use of our products in the development of such
therapies, our product revenues may decline, which would negatively impact our financial performance.
Risks Related to the COVID-19 Pandemic
The COVID-19 pandemic, or similar public health crises, could have a material adverse
impact on our business, financial condition and results of operations, including our
product sales, and our stock price.
Since December 2019, an outbreak of a novel strain of a virus named SARS-CoV-2, or coronavirus,
which causes COVID-19, has since spread to countries in which we or our customers and suppliers
operate, including the United States. The COVID-19 pandemic is evolving, and to date, has led to the
implementation of various responses, including government-imposed quarantines, extended business
closures, travel restrictions and other public health safety measures, as well as reported adverse impacts
on healthcare resources, facilities and providers, in Massachusetts, across the United States and in other
countries. The COVID-19 outbreak continues to rapidly evolve.
In response to the COVID-19 pandemic and in accordance with direction from state and local
government authorities, we have restricted and may continue to restrict access to our facilities mostly to
personnel and third parties who must perform critical activities that must be completed on-site, limited the
number of such personnel that can be present at our facilities at any one time, and requested that most of
our personnel work remotely. In the event that governmental authorities were to further modify current
restrictions, our employees conducting research and development or manufacturing activities may not be
able to access our manufacturing space. Certain of our third-party suppliers have also temporarily closed
facilities and have experienced work stoppages due to the spread of COVID-19. Such closures and
stoppages may lead to interruptions in our manufacturing activities and our product supply and could
have a material adverse effect on our business and our results of operation and financial condition. Our
revenues and other operating results depend in large part on our ability to manufacture and assemble
our products in sufficient quantities and in a timely manner.
In addition, the trading prices for our common stock and other biopharmaceutical companies have been
highly volatile as a result of COVID-19. As a result, we may face difficulties raising capital through sales
of our common stock or such sales may be on unfavorable terms.
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We operate on a global basis with offices or activities in Japan, South Korea, China, India, Europe and
North America, and global health crises, such as COVID-19, could result in a widespread economic
downturn in the industries in which we and our customers operate. The extent to which the outbreak
impacts our business and the businesses of our customers will depend on future developments, which
remain highly uncertain and cannot be predicted with confidence, such as the continued geographic
spread of the disease, the duration of the outbreak, and actions taken in the United States and elsewhere
to contain the outbreak and treat the disease, such as social distancing and quarantines, business
closures or business disruptions. Some factors from the COVID-19 pandemic that could delay or
otherwise adversely affect the completion of our customers’ preclinical activities and clinical trials, as well
as the healthcare industry generally, include:
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the potential diversion of resources in the healthcare system away from routine patient
treatment, drug development and clinical trials to focus on pandemic concerns, which could
result in reduced demand for our products or our customer’s products and could significantly
impact our operating results;
limitations on travel that could interrupt our customers’ key preclinical activities and trial
activities, such as clinical trial site initiations and monitoring, domestic and international travel
by customer employees, contractors or patients to clinical trial sites, including any government-
imposed travel restrictions or quarantines that will impact the ability or willingness of patients,
employees or contractors to travel to a customer’s research, manufacturing and clinical trial sites
or secure visas or entry permissions, any of which could delay or adversely impact the conduct
or progress of such customer’s prospective clinical trials;
interruption or delays in the operations of the FDA and comparable foreign regulatory
agencies, which may impact review, inspection, clearance and approval timelines;
interruption in global shipping affecting the transport of our products and other supplies used in
our customer’s prospective clinical trials due to staffing shortages, production slowdowns or
stoppages and disruptions in delivery systems;
limitations on business operations by local, state, or the federal government that could impact
our customers’ ability to conduct preclinical or clinical activities;
business disruptions caused by potential workplace, laboratory and office closures and an
increased reliance on employees working from home, disruptions to or delays in ongoing
laboratory experiments and operations, staffing shortages, travel limitations, or communication
or mass transit disruptions, any of which could adversely impact our business operations or
delay necessary interactions with local regulators, ethics committees, manufacturing sites and
other important agencies and contractors;
business disruptions or cybersecurity risks associated with a substantial portion of our workforce
working from home for extended periods of time; and
the impact on the valuation of our marketable securities and other financial assets due to market
volatility.
Risks Related to Product Development and Acquisitions
If we are unable to expand our product portfolio, our ability to generate revenue
could be adversely affected.
We are increasingly seeking to develop and commercialize our portfolio of products. Our future
financial performance will depend, in part, on our ability to successfully develop and acquire additional
bioprocessing products. There is no guarantee that we will be able to successfully acquire or develop
additional bioprocessing products, and the Company’s financial performance will likely suffer if we are
unable to do so.
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Our acquisitions expose us to risks that could adversely affect our business, and we
may not achieve the anticipated benefits of acquisitions of businesses or technologies.
As a part of our growth strategy, we may make selected acquisitions of complementary products and/or
businesses, such as our recent acquisitions of ARTeSYN Biosolutions Holdings Ireland Limited, Non-
Metallic Solutions, Inc. or Engineered Molding Technology LLC. Any acquisition involves numerous risks
and operational, financial, and managerial challenges, including the following, any of which could
adversely affect our business, financial condition, or results of operations:
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difficulties in integrating new operations, technologies, products, and personnel;
problems maintaining uniform procedures, controls and policies with respect to our financial
accounting systems;
lack of synergies or the inability to realize expected synergies and cost-savings;
difficulties in managing geographically dispersed operations, including risks associated with
entering foreign markets in which we have no or limited prior experience;
underperformance of any acquired technology, product, or business relative to our expectations
and the price we paid;
negative near-term impacts on financial results after an acquisition, including acquisition-related
earnings charges;
the potential loss of key employees, customers, and strategic partners of acquired companies;
claims by terminated employees and shareholders of acquired companies or other third parties
related to the transaction;
the assumption or incurrence of additional debt obligations or expenses, or use of substantial
portions of our cash;
the issuance of equity securities to finance or as consideration for any acquisitions that dilute
the ownership of our stockholders;
the issuance of equity securities to finance or as consideration for any acquisitions may not be
an option if the price of our common stock is low or volatile which could preclude us from
completing any such acquisitions;
any collaboration, strategic alliance and licensing arrangement may require us to relinquish
valuable rights to our technologies or product candidates, or grant licenses on terms that are
not favorable to us;
diversion of management’s attention and company resources from existing operations of the
business;
inconsistencies in standards, controls, procedures, and policies;
the impairment of intangible assets as a result of technological advancements, or worse-than-
expected performance of acquired companies;
assumption of, or exposure to, historical liabilities of the acquired business, including unknown
contingent or similar liabilities that are difficult to identify or accurately quantify; and
risks associated with acquiring intellectual property, including potential disputes regarding
acquired companies’ intellectual property.
In addition, the successful integration of acquired businesses requires significant efforts and expense
across all operational areas, including sales and marketing, research and development, manufacturing,
finance, legal, and information technologies. There can be no assurance that any of the acquisitions we
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may make will be successful or will be, or will remain, profitable. Our failure to successfully address the
foregoing risks may prevent us from achieving the anticipated benefits from any acquisition in a
reasonable time frame, or at all.
If intangible assets and goodwill that we recorded in connection with our acquisitions
become impaired, we may have to take significant charges against earnings.
In connection with the accounting for our completed acquisitions, we recorded a significant amount of
intangible assets, including developed technology and customer relationships relating to the acquired
product lines, and goodwill. Under accounting principles generally accepted in the United States
(“GAAP”), we must assess, at least annually and potentially more frequently, whether the value of
intangible assets and goodwill has been impaired. Intangible assets and goodwill will be assessed for
impairment in the event of an impairment indicator. Any reduction or impairment of the value of
intangible assets and goodwill will result in a charge against earnings, which could materially adversely
affect our results of operations and shareholders’ equity in future periods.
Risks Related to Manufacturing and Supply
If we are unable to manufacture our products in sufficient quantities and in a timely
manner, our operating results will be harmed, our ability to generate revenue could
be diminished and our gross margin may be negatively impacted.
Our revenues and other operating results will depend in large part on our ability to manufacture and
assemble our products in sufficient quantities and in a timely manner. Any interruptions we experience in
the manufacturing or shipping of our products could delay our ability to recognize revenues in a
particular quarter. Manufacturing problems can and do arise, and as demand for our products
increases, any such problems could have an increasingly significant impact on our operating results.
While we have not generally experienced problems with, or delays in, our production capabilities that
resulted in delays in our ability to ship finished products, there can be no assurance that we will not
encounter such problems in the future. We may not be able to quickly ship products and recognize
anticipated revenues for a given period if we experience significant delays in the manufacturing process.
In addition, we must maintain sufficient production capacity in order to meet anticipated customer
demand, which carries fixed costs that we may not be able to offset if orders slow, which would
adversely affect our operating margins. If we are unable to manufacture our products consistently, in
sufficient quantities, and on a timely basis, our bioprocessing revenue, gross margins and our other
operating results will be materially and adversely affected.
We rely on a limited number of suppliers or, for certain of our products, one supplier,
and we may not be able to find replacements or immediately transition to alternative
suppliers, which could have a material adverse effect on our financial condition,
results of operations and reputation.
There are only a limited number of suppliers of materials for certain of our products. An interruption in
operations of the business related to these products could occur if we encounter delays or difficulties in
securing the required materials, or if we cannot then obtain an acceptable substitute. Any such
interruption could significantly affect the business related to these products and our financial condition,
results of operations and reputation.
For example, we believe that only a small number of suppliers are currently qualified to supply materials
for the XCell Alternating Tangential Filtration (“ATF”)™ systems. The use of materials furnished by these
replacement suppliers would require us to alter our operations related to the XCell ATF systems.
Transitioning to a new supplier for our products would be time-consuming and expensive, may result in
interruptions in our operations, could affect the performance specifications of our product lines or could
require that we revalidate the materials. There can be no assurance that we will be able to secure
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alternative materials and bring such materials online and revalidate them without experiencing
interruptions in our workflow. If we should encounter delays or difficulties in securing, reconfiguring or
revalidating the materials required for our products, our business related to these products and our
financial condition, results of operations and reputation could be adversely affected.
Risks Related to Our Financial Position and Need for Additional Capital
Servicing our debt will require a significant amount of cash, and we may not have
sufficient cash flow from our business to make payments on our debt.
In 2019, we incurred significant indebtedness in the amount of $287.5 million in aggregate principal
with additional accrued interest under our 0.375% Convertible Senior Notes due 2024 (the “2019
Notes”). Our ability to make scheduled payments of the principal of, to pay interest on, or to refinance
our indebtedness, including the 2019 Notes, depends on our future performance, which is subject to
economic, financial, competitive and other factors that may be beyond our control. Our business may
not generate cash flow from operations in the future sufficient to service our debt and make necessary
capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or
more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on
terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on
the capital markets and our financial condition at such time. In addition, in the event of a fundamental
change or a default under the 2019 Notes, the holders and/or the trustee under the indentures
governing the 2019 Notes may accelerate the payment obligations or trigger the holders’ repurchase
rights under the 2019 Notes. We may not be able to engage in any of these activities or engage in
these activities on desirable terms, which could result in a default on our debt obligations, including the
2019 Notes.
If a make-whole fundamental change, such as an acquisition of our company, occurs prior to the maturity
of the 2019 Notes, under certain circumstances, the conversion rate for the 2019 Notes will increase
such that additional shares of our common stock will be issued upon conversion of the 2019 Notes in
connection with such make-whole fundamental change. The increase in the conversion rate will be
determined based on the date on which the make-whole fundamental change occurs or becomes
effective and the price paid (or deemed paid) per share of our common stock in such transaction. Upon
conversion of the 2019 Notes, unless we elect to deliver solely shares of our common stock to settle such
conversion (other than paying cash in lieu of delivering any fractional share), we will be required to
make cash payments in respect of the 2019 Notes being converted. We may not have enough available
cash or be able to obtain financing at the time we are required to make repurchases of 2019 Notes
surrendered therefor or notes being converted. Our failure to repurchase 2019 Notes at a time when the
repurchase is required by the indenture or to pay any cash payable on future conversions of the 2019
Notes as required by the indenture would constitute a default under the indenture. If the repayment of the
related indebtedness were to be accelerated after any applicable notice or grace periods, we may not
have sufficient funds to repay the indebtedness and repurchase the 2019 Notes or make cash payments
upon conversions thereof.
In addition, our significant indebtedness, combined with our other financial obligations and contractual
commitments, could have other important consequences. For example, it could:
• make us more vulnerable to adverse changes in general U.S. and worldwide economic,
industry and competitive conditions and adverse changes in government regulation;
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limit our flexibility in planning for, or reacting to, changes in our business and our industry;
place us at a disadvantage compared to our competitors who have less debt; and
limit our ability to borrow additional amounts for working capital and other general corporate
purposes, including to fund possible acquisitions of, or investments in, complementary
businesses, products, services and technologies.
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Any of these factors could materially and adversely affect our business, financial condition and results of
operations. In addition, if we incur additional indebtedness, the risks related to our business and our
ability to service or repay our indebtedness would increase.
Future strategic transactions or acquisitions may require us to seek additional
financing, which we may not be able to secure on favorable terms, if at all.
We plan to continue a strategy of growth and development for our bioprocessing business, and we
actively evaluate various strategic transactions on an ongoing basis, including licensing or acquiring
complementary products, technologies or businesses that would complement our existing portfolio of
development programs. In order to complete such strategic transactions, we may need to seek additional
financing to fund these investments and acquisitions. Should we need to do so, 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. In addition, future acquisitions may require the issuance or sale of additional
equity or debt securities, which may result in additional dilution to our stockholders.
Our exposure to political, economic and other risks that arise from operating a
multinational business has and may continue to increase.
We operate on a global basis with offices or activities in Japan, South Korea, China, India, Europe and
North America. Our operations and sales outside of the United States have increased as a result of our
strategic acquisitions and the continued expansion of our commercial organization. Risks related to these
increased foreign operations include:
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fluctuations in foreign currency exchange rates, which may affect the costs incurred in
international operations and could harm our results of operations and financial condition;
changes in general economic and political conditions in countries where we operate,
particularly as a result of ongoing economic instability within foreign jurisdictions;
the occurrence of a trade war, or other governmental action related to tariffs or trade
agreements;
being subject to complex and restrictive employment and labor laws and regulations, as well as
union and works council restrictions;
changes in tax laws or rulings in the United States or other foreign jurisdictions that may have
an adverse impact on our effective tax rate;
being subject to burdensome foreign laws and regulations, including regulations that may place
an increased tax burden on our operations;
being subject to longer payment cycles from customers and experiencing greater difficulties in
timely accounts receivable collections; and
required compliance with a variety of foreign laws and regulations, such as data privacy
requirements, real estate and property laws, anti-competition regulations, import and trade
restrictions, export requirements, U.S. laws such as the Foreign Corrupt Practices Act of 1977
and the U.S. Department of Commerce’s Export Administration Regulations, and other U.S.
federal laws and regulations established by the Office of Foreign Assets Control, local laws
such as the U.K. Bribery Act of 2010 or other local laws that prohibit corrupt payments to
governmental officials or certain payments or remunerations to customers.
Our business success depends in part on our ability to anticipate and effectively manage these and other
related factors. We cannot assure you that these and other related factors will not materially adversely
affect our international operations or business as a whole.
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In addition, a deterioration in diplomatic relations between the United States and any country where we
conduct business could adversely affect our future operations and lead to a decline in profitability. In
2018 and 2019, the United States imposed tariffs on goods imported from China and certain other
countries, which has resulted in retaliatory tariffs by China and other countries. Additional tariffs or
further retaliatory trade measures taken by China or other countries in response, could affect the demand
for our products and services, impact the competitive position of our products, prevent us from being
able to sell products in certain countries or otherwise adversely impact our results of operations.
We may be unable to efficiently manage our growth as a larger and more
geographically diverse organization.
Our strategic acquisitions, the continued expansion of our commercial sales operations, and our organic
growth have increased the scope and complexity of our business. As a result, we will face challenges
inherent in efficiently managing a more complex business with an increased number of employees over
large geographic distances, including the need to implement appropriate systems, policies, benefits and
compliance programs. Our inability to manage successfully the geographically more diverse (including
from a cultural perspective) and substantially larger combined organization could materially adversely
affect our operating results and, as a result, the market price of our common stock.
Our results of operations could be negatively affected by potential fluctuations in
foreign currency exchange rates.
We conduct a large portion of our business in international markets. For the fiscal year ended
December 31, 2020, 30% of our revenues and 7% of our costs and expenses were denominated in
foreign currencies, primarily the Swedish krona, the British pound sterling, and the Euro. We are
exposed to the risk of an increase or decrease in the value of the foreign currencies relative to the
U.S. Dollar, which could increase the value of our expenses and decrease the value of our revenue when
measured in U.S. Dollars. As a result, our results of operation may be influenced by the effects of future
exchange rate fluctuations and such effects may have an adverse impact on our common stock price.
Natural disasters, geopolitical unrest, war, terrorism, public health issues or other
catastrophic events could disrupt the supply, delivery or demand of products, which
could negatively affect our operations and performance.
We are subject to the risk of disruption by earthquakes, floods and other natural disasters, fire, power
shortages, geopolitical unrest, war, terrorist attacks and other hostile acts, public health issues, epidemics
or pandemics and other events beyond our control and the control of the third parties on which we
depend. Any of these catastrophic events, whether in the United States or abroad, may have a strong
negative impact on the global economy, our employees, facilities, partners, suppliers, distributors or
customers, and could decrease demand for our products, create delays and inefficiencies in our supply
chain and make it difficult or impossible for us to deliver products to our customers.
For example, in December 2019 an outbreak of a novel strain of coronavirus originated in Wuhan,
China, and has since spread to a number of other countries in which we or our suppliers operate,
including the United States. This outbreak has resulted in the extended shutdown of certain businesses in
the Wuhan region, which may in turn result in disruptions to our and our customer’s supply chain and
business operations. These could include disruptions from the temporary closure of third-party supplier
and manufacturer facilities, interruptions in product supply, or restrictions on the export or shipment of
our products. Global health concerns, such as coronavirus, could also result in social, economic, and
labor instability in the countries in which we or our customers and suppliers operate. These uncertainties
could have a material adverse effect on our business and our results of operation and financial
condition.
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In addition, a catastrophic event that results in the destruction or disruption of our data centers or our
critical business or information technology systems would severely affect our ability to conduct normal
business operations and, as a result, our operating results would be adversely affected.
Legal, political and economic uncertainty surrounding the withdrawal of the United
Kingdom from the European Union is a source of instability and uncertainty.
On June 23, 2016, the United Kingdom (“U.K.”) held a referendum in which a majority of voters
approved an exit from the European Union (“EU”). The U.K. formally left the EU on January 31, 2020 in
a process commonly referred to as “Brexit”. Under a withdrawal agreement (the “Withdrawal
Agreement”) between the EU and the U.K., the United Kingdom was subject to a transition period until
December 31, 2020 (the “Transition Period”), during which EU rules continued to apply.
The U.K. and EU have signed an EU-UK Trade and Cooperation Agreement, which became provisionally
applicable on January 1, 2021 and will become formally applicable once ratified by both the U.K. and
the EU. This agreement provides details on how some aspects of the U.K. and EU’s relationship
regarding medicinal products will operate, particularly in relation to Good Manufacturing Practice,
however there are still many uncertainties. Many of the regulations that now apply in the U.K. following
the transition period (including financial laws and regulations, tax, intellectual property rights, data
protection laws, supply chain logistics, environmental, health and safety laws and regulations, medicine
approval and regulations, immigration laws and employment laws), will likely be amended in future as
the U.K. determines its new approach, which may result in significant divergence from EU regulations.
This lack of clarity on future U.K. laws and regulations and their interaction with the EU laws and
regulations increases our regulatory burden of operating in and doing business with both the U.K. and
the EU.
These developments, or the perception that any of them could occur, have had, and may continue to
have, a significant adverse effect on global economic conditions and the stability of global financial
markets, and could significantly reduce global market liquidity and limit the ability of key market
participants to operate in certain financial markets. In particular, it could also lead to a period of
considerable uncertainty in relation to the U.K. financial and banking markets, as well as on the
regulatory process in Europe. Asset valuations, currency exchange rates and credit ratings may also be
subject to increased market volatility.
If the U.K. and the EU are unable to negotiate acceptable trading and customs terms or if other EU
Member States pursue withdrawal, barrier-free access between the U.K. and other EU Member States or
among the European Economic Area (“E.E.A.”) overall could be diminished or eliminated. The long-term
effects of Brexit will depend on any agreements (or lack thereof) between the U.K. and the EU and, in
particular, any arrangements for the U.K. to retain access to EU markets after the Transition Period. Such
a withdrawal from the EU is unprecedented, and it is unclear how the restrictions on the U.K.’s access to
the European single market for goods, capital, services and labor within the EU, or single market, and
the wider commercial, legal and regulatory environment, could impact our U.K. operations.
We may also face new regulatory costs and challenges that could have an adverse effect on our
operations and development programs. For example, the U.K. could lose the benefits of global trade
agreements negotiated by the EU on behalf of its members, which may result in increased trade barriers
that could make our doing business in the EU and the E.E.A. more difficult. There may continue to be
economic uncertainty surrounding the consequences of Brexit, which could adversely affect our financial
condition, results of operations, cash flows and market price of our common stock.
Negotiations between the U.K. and the EU are expected to continue in relation to the customs and
trading relationship between the U.K. and the EU following the expiry of the Transition Period. The
uncertainty concerning the U.K.’s legal, political and economic relationship with the EU may be a source
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of instability in the international markets, create significant currency fluctuations, and/or otherwise
adversely affect trading agreements or similar cross-border co-operation arrangements (whether
economic, tax, fiscal, legal, regulatory or otherwise).
Risks Related to Ownership of Our Common Stock
Risks Related to Investment in Our Securities
Our operating results may fluctuate significantly, our customers’ future purchases are
difficult to predict and any failure to meet financial expectations may result in a
decline in our stock price.
Our quarterly operating results may fluctuate in the future as a result of many factors such as the impact
of seasonal spending patterns, changes in overall spending levels in the life sciences industry, the
inability of some of our customers to consummate anticipated purchases of our products due to changes
in end-user demand, and other unpredictable factors that may affect ordering patterns. Because our
revenue and operating results are difficult to predict, we believe that our past results of operations are
not necessarily a good indicator of our future performance. Additionally, if revenue declines in a quarter,
whether due to a delay in recognizing expected revenue, adverse economic conditions or otherwise, our
results of operations will be harmed because many of our expenses are relatively fixed. In particular, a
large portion of our manufacturing costs, our research and development, sales and marketing and
general and administrative expenses are not significantly affected by variations in revenue. Further, our
gross margins are dependent on product mix. A shift in sales mix away from our higher-margin products
to lower margin products will adversely affect our gross margins. If our quarterly operating results fail to
meet investor expectations, the price of our common stock may decline.
Securities or industry analysts may not publish favorable research or reports about
our business or may publish no information, which could cause our stock price or
trading volume to decline.
The trading market for our common stock is influenced by the research and reports that industry or
securities analysts publish about us and our business. We do not have any control over these analysts
and we cannot provide any assurance that analysts will cover us or provide favorable coverage. If any
of the analysts who cover us issue an adverse opinion regarding our stock price, our business or stock
price would likely decline. If one or more of these analysts cease coverage of our company or fail to
regularly publish reports covering us, we could lose visibility in the market, which in turn could cause our
stock price or trading volume to decline.
Our stock price could be volatile, which could cause shareholders to lose part or all of
their investment.
The market price of our common stock, like that of the common stock of many other companies with
similar market capitalizations, is 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 life sciences, 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.
If we fail to maintain an effective system of internal controls, we may not be able to
accurately report financial results or prevent fraud. If we identify a material weakness
in our internal control over financial reporting, our ability to meet our reporting
obligations and the trading price of our stock could be negatively affected.
Effective internal controls are necessary to provide reliable financial reports and to assist in the effective
prevention of fraud. Any inability to provide reliable financial reports or prevent fraud could harm our
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business. We regularly review and update our internal controls, disclosure controls and procedures, and
corporate governance policies. In addition, we are required under the Sarbanes-Oxley Act of 2002 to
report annually on our internal control over financial reporting. Any system of internal controls, however
well designed and operated, is based in part on certain assumptions and can provide only reasonable,
not absolute, assurances that the objectives of the system are met. If we, or our independent registered
public accounting firm, determine that our internal controls over financial reporting are not effective,
discover areas that need improvement in the future or discover a material weakness, these shortcomings
could have an adverse effect on our business and financial results, and the price of our common stock
could be negatively affected. A material weakness is a deficiency, or a combination of deficiencies, in
internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of our annual or interim financial statements will not be prevented or detected on a timely
basis. Accordingly, a material weakness increases the risk that the financial information we report
contains material errors.
If we cannot conclude that we have effective internal control over our financial reporting, or if our
independent registered public accounting firm is unable to provide an unqualified opinion regarding the
effectiveness of our internal control over financial reporting, investors could lose confidence in the
reliability of our financial statements, which could lead to a decline in our stock price. Failure to comply
with reporting requirements could also subject us to sanctions and/or investigations by the SEC, The
Nasdaq Stock Market or other regulatory authorities. We have previously implemented several
significant ERP modules and expect to implement additional ERP modules in the future. The
implementation of the ERP system represents a change in our internal control over financial reporting.
Although we continue to monitor and assess our internal controls in the new ERP system environment as
changes are made and new modules are implemented, and we have taken additional steps to modify
and enhance the design and effectiveness of our internal control over financial reporting, there is a risk
that deficiencies may occur that could aggregate to a material weakness.
If we fail to remedy any deficiencies or maintain the adequacy of our internal controls, we could be
subject to regulatory scrutiny, civil or criminal penalties or shareholder litigation. In addition, failure to
maintain adequate internal controls could result in financial statements that do not accurately reflect our
operating results or financial condition.
Risks Related to Our Charter and Bylaws
Anti-takeover provisions in our charter documents, certain of our contracts with third
parties, and under Delaware law could make an acquisition of us, even one that may
be beneficial to our stockholders, more difficult and may prevent attempts by our
stockholders to replace or remove our current management.
Provisions in our certificate of incorporation and by-laws may delay or prevent an acquisition of us or a
change in our management. These provisions include the ability of our board of directors to issue
preferred stock without stockholder approval. In addition, because we are incorporated in Delaware, we
are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits
the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine
with us. Although we believe these provisions collectively provide for an opportunity to obtain greater
value for stockholders by requiring potential acquirers to negotiate with our board of directors, they
would apply even if an offer rejected by our board was considered beneficial by some stockholders.
Additionally, certain of our contracts with third parties allow for termination upon specified change of
control transactions. Anti-takeover provisions may frustrate or prevent any attempts by our stockholders to
replace or remove our current management by making it more difficult for stockholders to replace
members of our board of directors, which is responsible for appointing the members of our management,
and anti-takeover or change of control contract termination rights may frustrate or prevent any attempts
by a third-party to acquire or attempt to acquire the Company.
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Risks Related to Tax Matters
The enactment of legislation implementing changes in taxation of international
business activities, the adoption of other corporate tax reform policies, or changes in
tax legislation or policies, or interpretations thereof, could materially impact our
financial position and results of operations.
Corporate tax reform, base-erosion efforts and tax transparency continue to be high priorities in many
tax jurisdictions where we have business operations. As a result, policies regarding corporate income
and other taxes in numerous jurisdictions are under heightened scrutiny and tax reform legislation is
being proposed or enacted in a number of jurisdictions. For example, the Tax Cuts and Jobs Act (the
“2017 Tax Reform Act”), adopting broad U.S. corporate income tax reform will, among other things,
reduce the U.S. corporate income tax rate, but will impose base-erosion prevention measures on
earnings of non-U.S. subsidiaries of U.S. entities as well as the transition tax on mandatory deemed
repatriation of accumulated non-U.S. earnings of U.S. controlled foreign corporations. There is no
assurance that our actual income tax liability will not be materially different than what is reflected in our
income tax provisions and accruals.
In addition, many countries are beginning to implement legislation and other guidance to align their
international tax rules with the Organisation for Economic Co-operation and Development’s Base Erosion
and Profit Shifting recommendations and action plan that aim to standardize and modernize global
corporate tax policy, including changes to cross-border tax, transfer pricing documentation rules, and
nexus-based tax incentive practices. Because of the heightened scrutiny of corporate taxation policies,
prior decisions by tax authorities regarding treatments and positions of corporate income taxes could be
subject to enforcement activities, and legislative investigation and inquiry, which could also result in
changes in tax policies or prior tax rulings. Any such changes in policies or rulings may also result in the
taxes we previously paid being subject to change.
Due to the large scale of our international business activities, any substantial changes in international
corporate tax policies, enforcement activities or legislative initiatives may materially adversely affect our
business, the amount of taxes we are required to pay and our financial condition and results of
operations generally.
Our ability to use net operating loss and tax credit carryforwards and certain built-in
losses to reduce future tax payments is limited by provisions of the Internal Revenue
Code, and it is possible that certain transactions or a combination of certain
transactions may result in material additional limitations on our ability to use our net
operating loss and tax credit carryforwards.
Section 382 and 383 of the Internal Revenue Code of 1986, as amended, contain rules that limit the
ability of a company that undergoes an ownership change, which is generally any change in ownership
of more than 50% of its stock over a three-year period, to utilize its net operating loss and tax credit
carryforwards and certain built-in losses recognized in years after the ownership change. These rules
generally operate by focusing on ownership changes involving stockholders owning directly or indirectly
5% or more of the stock of a company and any change in ownership arising from a new issuance of
stock by the company. Generally, if an ownership change occurs, the yearly taxable income limitation
on the use of net operating loss and tax credit carryforwards and certain built-in losses is equal to the
product of the applicable long-term, tax-exempt rate and the value of the company’s stock immediately
before the ownership change. We may be unable to offset our taxable income with losses, or our tax
liability with credits, before such losses and credits expire and therefore would incur larger federal
income tax liability. While our most recent Section 382 analysis did not show any current exposure,
future transactions or combinations of future transactions may result in a change in control under
Section 382 in the future. Federal net operating losses generated after December 31, 2017 are not
subject to expiration and generally may not be carried back to prior taxable years except that, under the
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Coronavirus Aid, Relief, and Economic Security Act, net operating losses generated in 2018, 2019 and
2020 may be carried back five taxable years. Additionally, for taxable years beginning after
December 31, 2020, the deductibility of such deferral net operating losses is limited to 80% of our
taxable income in any future taxable year.
Risks Related to Government Regulation
Risks Related to Regulations and Compliance
We are subject to export and import control laws and regulations that could impair
our ability to compete in international markets or subject us to liability if we violate
such laws and regulations.
We are subject to U.S. export controls and sanctions regulations that restrict the shipment or provision of
certain products and services to certain countries, governments, and persons. While we take precautions
to prevent our products and services from being exported in violation of these laws, we cannot
guarantee that the precautions we take will prevent violations of export control and sanctions laws. We
believe that, in the past, we and our subsidiaries may have exported certain products without a required
export license in apparent violation of U.S. export control laws. As a result, we have submitted to the
U.S. Department of Commerce’s Bureau of Industry and Security various notices of voluntary self-
disclosure concerning potential violations. If we are found to be in violation of U.S. sanctions or export
control laws, it could result in substantial fines and penalties for us and for the individuals working for us.
We may also be adversely affected through other penalties, reputational harm, loss of access to certain
markets, or otherwise.
Complying with export control and sanctions regulations may be time-consuming and may result in the
delay or loss of sales opportunities or impose other costs. Any change in export or import regulations,
economic sanctions or related legislation, or change in the countries, governments, persons or
technologies targeted by such regulations, could result in our decreased ability to export or sell certain
products to existing or potential customers in affected jurisdictions.
Our business is subject to a number of environmental risks.
Our manufacturing business involves the controlled use of hazardous materials and chemicals and is
therefore subject to numerous environmental and safety laws and regulations and periodic inspections for
possible violations of these laws and regulations. In addition to these hazardous materials and
chemicals, our facility in Sweden also uses Staphylococcus aureus and toxins produced by
Staphylococcus aureus in some of its manufacturing processes. Staphylococcus aureus and the toxins it
produces, particularly enterotoxins, can cause severe illness in humans. The costs of compliance with
environmental and safety laws and regulations are significant. Any violations, even if inadvertent or
accidental, of current or future environmental and safety laws or regulations and the cost of compliance
with any resulting order or fine could adversely affect our operations.
Health care reform measures could adversely affect our business.
The efforts of governmental and third-party payors to contain or reduce the costs of health care may
adversely affect the business and financial condition of pharmaceutical and biotechnology companies,
including ours. Specifically, in both the United States and some foreign jurisdictions, there have been a
number of legislative and regulatory proposals to change the health care system in ways that could affect
our ability to sell our products profitably. For example, in March 2010, the Patient Protection and
Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010
(together, the “ACA”), was passed, which substantially changes the way health care is financed by both
governmental and private insurers and significantly impacts the U.S. life sciences industry. The ACA and
other federal and state proposals and health care reforms could limit the prices that can be charged for
the products we develop and may limit our commercial opportunity. In the United States, the
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Medicare Prescription Drug, Improvement, and Modernization Act of 2003, also called the Medicare
Modernization Act (the “MMA”) changed the way Medicare covers and pays for pharmaceutical
products. These cost reduction initiatives and other provisions of this legislation could ultimately decrease
the coverage and price that we receive for any approved products and could seriously harm our
business. While the MMA applies only to drug benefits for Medicare beneficiaries, private payors often
follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and
any reduction in reimbursement that results from the MMA may result in a similar reduction in payments
from private payors. Efforts by the government and other third-party payors to contain or reduce the costs
of health care through various means may limit our commercial opportunities and result in a decrease in
the price of our common stock or limit our ability to raise capital.
Recent federal government efforts have been aimed at amending or repealing all or portions of existing
health care reform legislation, including the ACA. Changes in existing health care reform measures may
result in uncertainty with respect to legislation, regulation and government policy that could significantly
impact our business and the life sciences industry. Since its enactment, there have been numerous
judicial, administrative, executive, and legislative challenges to certain aspects of the ACA, and we
expect there will be additional challenges and amendments to the ACA in the future. Various portions of
the ACA are currently undergoing legal and constitutional challenges in the United States Supreme
Court; the Trump Administration has issued various Executive Orders that eliminated cost sharing
subsidies and various provisions that would impose a fiscal burden on states or a cost, fee, tax, penalty
or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of
pharmaceuticals or medical devices; and Congress has introduced several pieces of legislation aimed at
significantly revising or repealing the ACA. Also, in December 2018, the Centers for Medicare &
Medicaid Services issued a final rule permitting further collections and payments to and from certain
ACA qualified health plans and health insurance issuers under the ACA risk adjustment program. Since
then, the ACA risk adjustment program payment parameters have been updated annually. It is unclear
whether the ACA will be overturned, repealed, replaced, or further amended. We cannot predict what
affect further changes to the ACA would have on our business.
Additionally, the federal government and individual states in the United States have also become
increasingly active in passing legislation and implementing regulations designed to control
pharmaceutical product pricing, including price or patient reimbursement constraints, discounts,
restrictions on certain product access and marketing cost disclosure and transparency measures, and, in
some cases, designed to encourage importation from other countries and bulk purchasing. We expect
that additional state and federal healthcare reform measures will be adopted in the future.
We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any
determination that we violated the Foreign Corrupt Practices Act could have a material
adverse effect on our business.
We are subject to the Foreign Corrupt Practice Act of 1977 (the “FCPA”) and other laws that prohibit
improper payments or offers of payments to foreign governments and their officials and political parties
by U.S. persons and issuers as defined by the statute for the purpose of obtaining or retaining business.
We have operations and agreements with third parties and make sales in jurisdictions outside of the
United States, which may experience corruption. Our activities in jurisdictions outside of the United
States create the risk of unauthorized payments or offers of payments by one of our employees,
consultants, sales agents or distributors, because these parties are not always subject to our control.
These risks have increased following our recent acquisitions of overseas operations and facilities. It is our
policy to implement safeguards to discourage these practices by our employees. However, our existing
safeguards and any future improvements may prove to be less than effective, and the employees,
consultants, sales agents or distributors of Repligen may engage in conduct for which we might be held
responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be
subject to other liabilities, which could negatively affect our business, operating results and financial
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condition. In addition, the government may seek to hold us liable for successor liability FCPA violations
committed by any companies in which we invest or that we acquire.
Changes in accounting standards and subjective assumptions, estimates, and
judgments by management related to complex accounting matters could significantly
affect our financial results or financial condition.
Generally accepted accounting principles and related accounting pronouncements, implementation
guidelines, and interpretations with regard to a wide range of matters that are relevant to our business,
such as revenue recognition, asset impairment and fair value determinations, inventories, business
combinations and intangible asset valuations, leases, and litigation, are highly complex and involve
many subjective assumptions, estimates, and judgments. Changes in these rules or their interpretation or
changes in underlying assumptions, estimates, or judgments could significantly change our reported or
expected financial performance or financial condition.
Risks Related to Data and Privacy
Our internal computer systems, or those of our customers, collaborators or other
contractors, may be subject to cyber-attacks or security breaches, which could result in
a material disruption of our product development programs.
Despite the implementation of security measures, our internal computer systems and those of our
customers, collaborators “cloud”-based platform service providers, and other contractors are vulnerable
to damage from computer viruses and unauthorized access. Cyber-attacks are increasing in their
frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyber-attacks
could include the deployment of harmful malware, ransomware, denial-of-service attacks, social
engineering and other means to affect service reliability and threaten the confidentiality, integrity and
availability of information. Cyber-attacks also could include phishing attempts or e-mail fraud to cause
payments or information to be transmitted to an unintended recipient. A material cyber-attack or security
breach could cause interruptions in our operations and could result in a material disruption of our
business operations, damage to our reputation or a loss of revenues.
In the ordinary course of our business, we collect and store sensitive data, including, among other things,
personally identifiable information about our employees, intellectual property, and proprietary business
information. Any cyber-attack or security breach that leads to unauthorized access, use or disclosure of
personal or proprietary information could harm our reputation, cause us not to comply with federal and/
or state breach notification laws and foreign law equivalents and otherwise subject us to liability under
laws and regulations that protect the privacy and security of personal information. In addition, we could
be subject to risks caused by misappropriation, misuse, leakage, falsification or intentional or accidental
release or loss of information maintained in the information systems and networks of our company and
our vendors, including personal information of our employees, and company and vendor confidential
data. In addition, outside parties may attempt to penetrate our systems or those of our vendors or
fraudulently induce our personnel or the personnel of our vendors to disclose sensitive information in
order to gain access to our data and/or systems. Like other companies, we have on occasion
experienced, and will continue to experience, data security incidents involving access to company data
threats to our data and systems, including malicious codes and viruses, phishing, business email
compromise attacks, or other cyber-attacks. The number and complexity of these threats continue to
increase over time. If a material breach of our information technology systems or those of our vendors
occurs, the market perception of the effectiveness of our security measures could be harmed and our
reputation and credibility could be damaged.
We could be required to expend significant amounts of money and other resources to respond to these
threats or breaches and to repair or replace information systems or networks and could suffer financial
loss or the loss of valuable confidential information. In addition, we could be subject to regulatory
30
actions and/or claims made by individuals and groups in private litigation involving privacy issues
related to data collection and use practices and other data privacy laws and regulations, including
claims for misuse or inappropriate disclosure of data, as well as unfair or deceptive practices. Although
we procure, develop and maintain systems and controls designed to prevent these events from occurring,
and we have a process to identify and mitigate threats, the procurement, development and maintenance
of these systems, controls and processes is costly and requires ongoing monitoring and updating as
technologies change and efforts to overcome security measures become increasingly sophisticated.
Moreover, despite our efforts, the possibility of these events occurring cannot be eliminated entirely and
there can be no assurance that any measures we take will prevent cyber-attacks or security breaches that
could adversely affect our business.
Changes in laws and regulations governing the privacy and protection of data and
personal information could adversely affect our business.
We are subject to data privacy and protection laws and regulations that apply to the collection,
transmission, storage and use of proprietary information and personally-identifying information, which
among other things, imposes certain requirements relating to the privacy, security and transmission of
certain individually identifiable information. In addition, numerous other federal and state laws, including
state security breach notification laws, state health information privacy laws and federal and state
consumer protection laws, govern the collection, use, disclosure and security of personal information.
These laws continue to change and evolve and are increasing in breadth and impact.
For example, California enacted the California Consumer Privacy Act (“CCPA”), which went into effect
in January 2020 and became enforceable by the California Attorney General in July 2020, and which,
among other things, requires companies covered by the legislation to provide new disclosures to
California consumers and afford such consumers new rights with respect to their personal information,
including the right to request deletion of their personal information, the right to receive the personal
information on record for them, the right to know what categories of personal information generally are
maintained about them, as well as the right to opt-out of certain sales of personal information. The CCPA
provides for civil penalties for violations, as well as a private right of action for certain data breaches
that result in the loss of personal information. This private right of action may increase the likelihood of,
and risks associated with, data breach litigation.
Additionally, a new California ballot initiative, the California Privacy Rights Act (“CPRA”) was passed in
November 2020. Effective starting on January 1, 2023, the CPRA imposes additional obligations on
companies covered by the legislation and will significantly modify the CCPA by expanding consumers’
rights with respect to certain sensitive personal information, among other things. The CPRA also creates a
new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA.
The effects of the CCPA and the CPRA are potentially significant and may require us to modify our data
collection or processing practices and policies and to incur substantial costs and expenses in an effort to
comply and increase our potential exposure to regulatory enforcement and/or litigation.
Certain other state laws impose similar privacy obligations and we also anticipate that more states may
enact legislation similar to the CCPA, which provides consumers with new privacy rights and increases
the privacy and security obligations of entities handling certain personal information of such consumers.
The CCPA has prompted a number of proposals for new federal and state-level privacy legislation. Such
proposed legislation, if enacted, may add additional complexity, variation in requirements, restrictions
and potential legal risk, require additional investment of resources in compliance programs, impact
strategies and the availability of previously useful data and could result in increased compliance costs
and/or changes in business practices and policies.
The regulatory framework governing the collection, processing, storage, use and sharing of certain
information is rapidly evolving and is likely to continue to be subject to uncertainty and varying
31
interpretations. It is possible that these laws may be interpreted and applied in a manner that is
inconsistent with our existing data management practices or the features of our services and platform
capabilities. Any failure or perceived failure by us, or any third parties with which we do business, to
comply with our posted privacy policies, changing consumer expectations, evolving laws, rules and
regulations, industry standards, or contractual obligations to which we or such third parties are or may
become subject, may result in actions or other claims against us by governmental entities or private
actors, the expenditure of substantial costs, time and other resources or the incurrence of significant fines,
penalties or other liabilities. In addition, any such action, particularly to the extent we were found to be
guilty of violations or otherwise liable for damages, would damage our reputation and adversely affect
our business, financial condition and results of operations.
We cannot yet fully determine the impact these or future laws, rules, regulations and industry standards
may have on our business or operations. Any such laws, rules, regulations and industry standards may
be inconsistent among different jurisdictions, subject to differing interpretations or may conflict with our
current or future practices. Additionally, our customers may be subject to different privacy laws, rules and
legislation, which may mean that they require us to be bound by varying contractual requirements
applicable to certain other jurisdictions. Adherence to such contractual requirements may impact our
collection, use, processing, storage, sharing and disclosure of various types of information including
financial information and other personal information, and may mean we become bound by, or
voluntarily comply with, self-regulatory or other industry standards relating to these matters that may
further change as laws, rules and regulations evolve. Complying with these requirements and changing
our policies and practices may be onerous and costly, and we may not be able to respond quickly or
effectively to regulatory, legislative and other developments. These changes may in turn impair our ability
to offer our existing or planned features, products and services and/or increase our cost of doing
business. As we expand our customer base, these requirements may vary from customer to customer,
further increasing the cost of compliance and doing business.
Various foreign countries also have, or are developing, laws governing the collection, use, disclosure,
security, and cross-border transmission of personal information. The legislative and regulatory landscape
for privacy and data protection continues to evolve, and there has been an increasing amount of focus
on privacy and data protection issues with the potential to affect our business. For example, privacy
requirements in the EU govern the transfer of personal information from the European Economic Area to
the United States. While we continue to address the implications of changes to the EU data privacy
regulations, the area remains an evolving landscape with new regulations coming into effect and
continued legal challenges and our efforts to comply with the evolving data protection rules may be
unsuccessful. Failure to comply with laws regarding data protection would expose us to risk of
enforcement actions taken by data protection authorities in the EU and the potential for significant
penalties if we are found to be non-compliant. Similarly, failure to comply with federal and state laws in
the United States regarding privacy and security of personal information could expose us to penalties
under such laws. Even if we are not determined to have violated these laws, government investigations
into these issues typically require the expenditure of significant resources and generate negative
publicity, which could harm our business.
Risks Related to Our Products and Technology
Risks Related to Our Intellectual Property
If we are unable to obtain or maintain our intellectual property, we may not be able
to succeed commercially.
We endeavor to obtain and maintain trade secrets and, to a lesser extent with respect to the products
that currently account for a majority of our revenue, patent protection when available in order to protect
our products and processes from unauthorized use and to produce a financial return consistent with the
32
significant time and expense required to bring our products to market. Our success will depend, in part,
on our ability to:
•
•
•
•
preserve our trade secrets and know-how;
operate without infringing the proprietary rights of third parties;
obtain and maintain patent protection for our products and manufacturing processes; and
secure any necessary licenses from others on acceptable terms.
We consider trade secrets, know-how and other forms of market protection to be among the most
important elements of our proprietary position, in particular, as it relates to the products that currently
account for a majority of our revenue. We also own or have exclusive rights to a number of U.S. patents
and U.S. pending patent applications as well as corresponding foreign patents and patent applications.
We continue to actively and selectively pursue patent protection and seek to expand our patent estate,
particularly for our products currently in development, and we cannot be sure that any patent
applications that we will file in the future or that any currently pending applications will issue on a timely
basis, if ever. 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:
•
•
•
scope of the patent claims;
validity and enforceability of the claims obtained in such patents; and
our willingness and financial ability to enforce and/or defend them.
The patent position of life sciences companies is often highly uncertain and usually involves complex
legal and scientific questions. Patents that may be granted to us in certain foreign 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.
In some cases, litigation or other proceedings may be necessary to assert claims of infringement, to
enforce patents issued to us or our licensors, to protect trade secrets, know-how or other intellectual
property rights we own or to determine the scope and validity of the proprietary rights of third parties.
Such litigation could result in substantial costs to us and diversion of our resources. An adverse outcome
in any such litigation or proceeding could have a material adverse effect on our business, financial
condition and results of operations. 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.
While one of our U.S. patents covering recombinant Protein A had its term adjusted to
expire in 2028, our other U.S. patents covering recombinant Protein A have expired,
and as a result, we may face increased competition, which could harm our results of
operations, financial condition, cash flow and future prospects.
Other companies could begin manufacturing and selling native or some of the commercial forms of
recombinant Protein A in the United States and may directly compete with us on certain Protein A
products. This may induce us to sell Protein A at lower prices and may erode our market share, which
could adversely affect our results of operations, financial condition, cash flow and future prospects.
33
Our freedom to develop our products may be challenged by others, and we may have
to engage in litigation to determine the scope and validity of competitors’ patents and
proprietary rights, which, if we do not prevail, could harm our business, results of
operations, financial condition, cash flow and future prospects.
There has been substantial litigation and other proceedings regarding the complex patent and other
intellectual property rights in the life sciences industry. We have been a party to, and in the future may
become a party to, patent litigation or other proceedings regarding intellectual property rights.
We may become involved in patent litigation or other intellectual property proceedings, including the
following situations:
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 on such third
parties’ patents.
• We may initiate litigation or other proceedings against third parties to seek to enforce our
patents against infringement.
•
•
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.
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 in a way that is unfavorable to us, we or
our collaborative or strategic 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 damages. The failure to
obtain any required license on commercially acceptable terms or at all may harm our business, results of
operations, financial condition, cash flow and future prospects.
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, attention and resources.
Risks Related to Our Products
The market may not be receptive to our new bioprocessing products upon their
introduction.
We expect a portion of our future revenue growth to come from introducing new bioprocessing products,
including line extensions and new features for our OPUS® disposable chromatography columns, our
XCell ATF system, our SIUS® tangential flow filtration (“TFF”) cassettes, our Spectrum® hollow fiber
modules TFF line of cassettes and our growth factors. The commercial success of all of our products will
depend upon their acceptance by the life science and biopharmaceutical industries. Many of the
bioprocessing products that we are developing are based upon new technologies or approaches. As a
result, there can be no assurance that these new products, even if successfully developed and introduced,
will be accepted by customers. If customers do not adopt our new products and technologies, our results
of operations may suffer and, as a result, the market price of our common stock may decline.
Our products are subject to quality control requirements.
Whether a product is produced by us or purchased from outside suppliers, it is subjected to quality
control procedures, including the verification of porosity and with certain products, the complete
34
validation for good manufacturing practices, U.S. Food and Drug Administration, CE and ISO 2001
compliance, prior to final packaging. Quality control is performed by a staff of technicians utilizing
calibrated equipment. In the event we, or our manufacturers, produce products that fail to comply with
required quality standards, it may incur delays in fulfilling orders, write-downs, damage to our reputation
and damages resulting from product liability claims.
If our products do not perform as expected or the reliability of the technology on
which our products are based is questioned, we could experience lost revenue,
delayed or reduced market acceptance of our products, increased costs and damage
to our reputation.
Our success depends on the market’s confidence that we can provide reliable, high-quality
bioprocessing products. We believe that customers in our target markets are likely to be particularly
sensitive to product defects and errors. Our reputation and the public image of our products and
technologies may be impaired if our products fail to perform as expected. Although our products are
tested prior to shipment, defects or errors could nonetheless occur in our products. Furthermore, the
Protein A that we manufacture is subsequently incorporated into products that are sold by other life
sciences companies and we have no control over the manufacture and production of those products. In
the future, if our products experience, or are perceived to experience, a material defect or error, this
could result in loss or delay of revenues, delayed market acceptance, damaged reputation, diversion of
development resources, legal claims, increased insurance costs or increased service and warranty costs,
any of which could harm our business. Such defects or errors could also narrow the scope of the use of
our products, which could hinder our success in the market. Even after any underlying concerns or
problems are resolved, any lingering concerns in our target market regarding our technology or any
manufacturing defects or performance errors in our products could continue to result in lost revenue,
delayed market acceptance, damaged reputation, increased service and warranty costs and claims
against us.
Risks Related to Litigation
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.
In connection with the Company’s decision to focus its efforts on the growth of its core bioprocessing
business, we sought development and commercialization partnerships for our remaining portfolio of
clinical stage assets. Any disputes with such partners that lead 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. If we fail to resolve these disputes quickly and with terms that are no less
favorable to us than the current terms of the arrangements, our business, results of operations, financial
condition, cash flow and future prospects may be harmed.
We may become subject to litigation, which could result in substantial costs and divert
management’s attention and resources from our business.
From time to time, we may become involved in litigation or other legal proceedings relating to claims
arising from the ordinary course of business. Litigation is subject to inherent risks and uncertainties that
may cause actual results to differ materially from our expectations. If we receive an adverse judgment in
any litigation, we could be required to pay substantial damages. With or without merit, litigation can be
complex, can extend for a protracted period of time, can be very expensive and the expense can be
unpredictable. Litigation initiated by us could also result in counter-claims against us, which could
increase the costs associated with the litigation and result in our payment of damages or other judgments
35
against us. In addition, litigation, and any related publicity, may divert the efforts and attention of some
of our management and key personnel, which could adversely affect our business.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
Our material office and manufacturing leases are detailed below:
Location
Square Feet
Principal Use
Waltham, Massachusetts . . . . . .
108,135(1) Corporate headquarters,
manufacturing, research
and development,
marketing and
administrative offices
Lease Expiration
April 1, 2030
Rancho Dominguez,
68,908 Manufacturing, research
November 30, 2025(2)
California . . . . . . . . . . . . . . . .
Marlborough, Massachusetts . . .
Lund, Sweden . . . . . . . . . . . . . .
and development,
marketing and
administrative operations
63,761(3) Manufacturing operations
58,405(4) Manufacturing and
administrative operations
November 30, 2028
December 31, 2026
Bridgewater, New Jersey(5)
. . . .
33,669 Manufacturing and
January 14, 2029
administrative operations
(1)
(2)
(3)
(4)
In 2019, we expanded our facility in Waltham, Massachusetts by approximately 33,000 square
feet to accommodate additional office space and manufacturing.
In 2018, we expanded our facility in Rancho Dominguez, California by approximately 15,000
square feet. The lease for the expanded portion of the facility expires on November 30, 2025.
In July 2020, the Company entered into a First Amendment to the lease agreement for the
Marlborough facility, expanding the space by an additional 66,939 square feet. In December
2020, the Second Amendment to the lease agreement was signed, changing the commencement
date from April 1, 2021 to January 1, 2021.
In December 2020, the Company signed an extension of the existing lease at its Lund, Sweden
facility, which included approximately 13,000 square feet of additional space. The lease
commences in April 2021.
(5) On May 31, 2019, we acquired C Technologies, an analytics company located in Bridgewater,
New Jersey.
During the year ended December 31, 2020, we incurred total rental costs for all facilities of
$7.7 million.
ITEM 3.
LEGAL PROCEEDINGS
From time to time, we may be subject to 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.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
36
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information for Common Stock
Our common stock is traded on the Nasdaq Global Select Market under the symbol “RGEN.”
Stockholders and Dividends
As of February 19, 2021, there were 307 stockholders of record of our common stock. We have not
paid any dividends since our inception and do not intend to pay any dividends on our common stock in
the foreseeable future. We anticipate that we will retain all earnings, if any, to support our operations.
Any future determination as to the payment of dividends will be at the sole discretion of our Board of
Directors and will depend on our financial condition, results of operations, capital requirements and
other factors our Board of Directors deems relevant.
Equity Compensation Plan Information
The following table sets forth information as of December 31, 2020 regarding shares of common stock
that may be issued under the Company’s equity compensation plans, consisting of the Second Amended
and Restated 2001 Repligen Corporation Stock Plan, the Amended and Restated 2012 Stock Option
and Incentive Plan and the 2018 Stock Option and Incentive Plan.
Plan Category
Equity compensation plans
approved by security
holders . . . . . . . . . . . . . . . . . .
Number of securities
to be issued upon
exercise of
outstanding options,
warrants
and rights
Weighted-
average
exercise price of
outstanding
options, warrants
and rights
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding securities
reflected in column (a))
(a)
(b)
(c)
1,362,251(1)
$43.88(2)
2,306,943
(1)
Includes 696,711 shares of common stock issuable upon the exercise of outstanding options and
665,540 shares of common stock issuable upon the vesting of stock units, which include restricted
stock units and performance stock units. No shares of restricted stock are outstanding.
(2) Since stock units do not have any exercise price, such units are not included in the weighted
average exercise price calculation.
Stock Performance Graph
The graph below matches Repligen Corporation’s cumulative 5-year total shareholder return on common
stock with the cumulative total returns of the Nasdaq Composite index, the Nasdaq Pharmaceutical
index, and the Nasdaq Biotechnology index. The graph tracks the performance of a $100 investment in
our common stock and in each index (with the reinvestment of all dividends) from December 31, 2015 to
December 31, 2020. The comparisons shown in the graph below are based upon historical data. We
caution that the stock price performance shown in the graph below is not necessarily indicative of, nor is
it intended to forecast, the potential future performance of our common stock.
37
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Repligen Corporation, the Nasdaq Composite Index,
the Nasdaq Pharmaceutical Index and the Nasdaq Biotechnology Index
$700
$600
$500
$400
$300
$200
$100
$0
12/15
12/16
12/17
12/18
Repligen Corporation
Nasdaq Pharmaceutical
12/19
Nasdaq Composite
Nasdaq Biotechnology
12/20
*$100 invested on 12/31/15 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
The information contained in the performance graph shall not be deemed to be “soliciting material” or to
be “filed” with the Securities and Exchange Commission, and such information shall not be incorporated
by reference into any future filing under the Securities Act of 1933, as amended (the “Securities Act”) or
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent that
Repligen specifically incorporates it by reference into such filing.
Issuer Purchases of Equity Securities
In June 2008, the Board of Directors authorized a program to repurchase up to 1.25 million shares of
our common stock to be repurchased at the discretion of management from time to time in the open
market or through privately negotiated transactions. The repurchase program has no set expiration date
and may be suspended or discontinued at any time. We did not repurchase any shares of common stock
during the year ended December 31, 2020. In prior years, we repurchased a total of 592,827 shares,
leaving 657,173 shares remaining under this authorization.
ITEM 6. RESERVED
38
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Information pertaining to fiscal year 2018 was included in the Company’s Annual Report on Form 10-K
(“Form 10-K”) for the year ended December 31, 2019 on pages 35 through 51 under Part II, Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which was
filed with the SEC on February 26, 2020.
Repligen and its subsidiaries, collectively doing business as Repligen Corporation (“Repligen”, “we”,
“our”, or “the Company”) is a global life sciences company that develops and commercializes highly
innovated bioprocessing technology and systems that increase efficiencies and flexibility in the process
of manufacturing biological drugs. As the overall market for biologics continues to grow and expand,
our customers – primarily large biopharmaceutical companies and contract development and
manufacturing organizations – face critical production cost, capacity, quality and time pressures. Built to
address these concerns, our products helping set new standards for the way biologics are manufactured.
We are committed to inspiring advances in bioprocessing as a trusted partner in the production of
critical biologic drugs – including monoclonal antibodies (“mAbs”), recombinant proteins, vaccines and
gene therapies – that are improving human health worldwide. For more information regarding our
business, products and acquisitions, see above sections in Part I entitled “Overview”, “Our Products”,
“2020 Acquisitions”, “2019 Acquisition” and “Our Market Opportunity”.
Critical Accounting Policies and Estimates
While our significant accounting policies are more fully described in the notes to our consolidated
financial statements, we have identified the policies and estimates below as being critical to our business
operations and the understanding of our results of operations. These policies require management’s most
difficult, subjective or complex judgements, often as a result of the need to make estimates about the
effect of matters that are inherently uncertain. The impact of and any associated risks related to these
policies on our business operations are discussed throughout “Management’s Discussion and Analysis of
Financial Condition,” including in the “Results of Operations” section, where such policies affect our
reported and expected financial results. Although we believe that our estimates, assumptions, and
judgements are reasonable, they are based upon information presently available. Actual results may
differ significantly from these estimates under different assumptions, judgments, or conditions.
Revenue recognition
We generate revenue from the sale of bioprocessing products, equipment devices, and related
consumables used with these equipment devices to customers in the life science and biopharmaceutical
industries. Under ASC 606, “Revenue from Contracts with Customers,” revenue is recognized when, or
as, obligations under the terms of a contract are satisfied, which occurs when control of the promised
products or services is transferred to customers. Revenue is measured as the amount of consideration the
Company expects to receive in exchange for transferring products or services to a customer (“transaction
price”). To the extent the transaction price includes variable consideration, the Company estimates the
amount of variable consideration that should be included in the transaction price utilizing the expected
value method or the most likely amount method, depending on the facts and circumstances relative to the
contract. Variable consideration is included in the transaction price if, in the Company’s judgment, it is
probable that a significant future reversal of cumulative revenue under the contract will not occur.
Estimates of variable consideration and determination of whether to include estimated amounts in the
transaction price are based largely on an assessment of the Company’s anticipated performance and all
information (historical, current and forecasted) that is reasonably available. Sales, value add, and other
taxes collected on behalf of third parties are excluded from revenue.
When determining the transaction price of a contract, an adjustment is made if payment from a customer
occurs either significantly before or significantly after performance, resulting in a significant financing
39
component. Applying the practical expedient in paragraph 606-10-32-18, the Company does not assess
whether a significant financing component exists if the period between when the Company performs its
obligations under the contract and when the customer pays is one year or less. None of the Company’s
contracts contained a significant financing component as of December 31, 2020.
Contracts with customers may contain multiple performance obligations. For such arrangements, the
transaction price is allocated to each performance obligation based on the estimated relative standalone
selling prices of the promised products or services underlying each performance obligation. The
Company determines standalone selling prices based on the price at which the performance obligation
is sold separately. If the standalone selling price is not observable through past transactions, the
Company estimates the standalone selling price taking into account available information such as market
conditions and internally approved pricing guidelines related to the performance obligations.
The Company recognizes product revenue under the terms of each customer agreement upon transfer of
control to the customer, which occurs at a point in time.
Allowance for credit losses
We evaluate our global accounts receivable through a continuous process of assessing our portfolio on
an individual customer and overall basis. This process consists of a thorough review of historical
collection experience, current aging status of the customer accounts, financial condition of our customers,
and whether the receivables involve retainages. We also consider the economic environment of our
customers, both from a marketplace and geographic perspective, in evaluating the need for an
allowance. Based on our review of these factors, we establish or adjust allowances for specific
customers. Credit losses can vary substantially over time and the process involves judgment and
estimation that require a number of assumptions about matters that are uncertain. Accordingly, our
results of operations can be affected by adjustments to the allowance due to actual write-offs that differ
from estimated amounts. See Note 6, “Credit Losses,” to our consolidated financial statements included
in this report for more information.
Inventories
We value inventory at cost or, if lower, net realizable value, using the first-in, first-out method. We
review our inventory at least quarterly and record a provision for excess and obsolete inventory based
on our estimates of expected sales volume, production capacity and expiration dates of raw materials,
work-in-process and finished products. We write down inventory that has become obsolete, inventory
that has a cost basis in excess of its expected net realizable value, and inventory in excess of expected
requirements to cost of product revenue. Manufacturing of bioprocessing finished goods is done to order
and tested for quality specifications prior to shipment.
A change in the estimated timing or amount of demand for our products could result in additional
provisions for excess inventory quantities on hand. Any significant unanticipated changes in demand or
unexpected quality failures could have a significant impact on the value of inventory and reported
operating results. During all periods presented in the accompanying consolidated financial statements,
there have been no material adjustments related to a revised estimate of inventory valuations.
Business combinations
Amounts paid for acquisitions are allocated to the tangible and intangible assets acquired and liabilities
assumed, if any, based on their fair values at the dates of acquisition. This purchase price allocation
process requires management to make significant estimates and assumptions with respect to intangible
assets and deferred revenue obligations. The fair value of identifiable intangible assets is based on
40
detailed valuations that use information and assumptions determined by management. Any excess of
purchase price over the fair value of the net tangible and intangible assets acquired is allocated to
goodwill. While we use our best estimates and assumptions to accurately value assets acquired and
liabilities assumed at the acquisition date as well as any contingent consideration, where applicable, our
estimates are inherently uncertain and subject to refinement. As a result, during the measurement period,
which may be up to one year from the acquisition date, we record adjustments to the assets acquired
and liabilities assumed with the corresponding offset to goodwill. Upon conclusion of the measurement
period or final determination of the values of assets acquired or liabilities assumed, whichever comes
first, any subsequent adjustments are recorded to our consolidated statements of comprehensive income.
The fair value of contingent consideration includes estimates and judgments made by management
regarding the probability that future contingent payments will be made, the extent of royalties to be
earned in excess of the defined minimum royalties, etc. Management updates these estimates and the
related fair value of contingent consideration at each reporting period based on the estimated
probability of achieving the earnout targets and applying a discount rate that captures the risk
associated with the expected contingent payments. To the extent our estimates change in the future
regarding the likelihood of achieving these targets we may need to record material adjustments to our
accrued contingent consideration. During the measurement period these changes in the fair value of
contingent consideration are recorded to goodwill. Subsequent to the measurement period, they will be
recorded in our consolidated statements of comprehensive income.
We use the income approach to determine the fair value of certain identifiable intangible assets
including customer relationships and developed technology. This approach determines fair value by
estimating after-tax cash flows attributable to these assets over their respective useful lives and then
discounting these after-tax cash flows back to a present value. We base our assumptions on estimates of
future cash flows, expected growth rates, expected trends in technology, etc. We base the discount rates
used to arrive at a present value as of the date of acquisition on the time value of money and certain
industry-specific risk factors. We believe the estimated purchased customer relationships, developed
technologies, trademark/tradename, patents, and in process research and development amounts so
determined represent the fair value at the date of acquisition and do not exceed the amount a third-party
would pay for the assets.
Intangible assets and goodwill
Intangible assets
Intangible assets with a definite life are amortized over their useful lives using the straight-line method
and the amortization expense is recorded within cost of product revenue, research and development and
selling, general and administrative expense in the consolidated statements of comprehensive income.
Intangible assets and their related useful lives are reviewed at least annually to determine if any adverse
conditions exist that would indicate the carrying value of these assets may not be recoverable. More
frequent impairment assessments are conducted if certain conditions exist, including a change in the
competitive landscape, any internal decisions to pursue new or different technology strategies, a loss of
a significant customer, or a significant change in the marketplace, including changes in the prices paid
for the Company’s products or changes in the size of the market for the Company’s products. If
impairment indicators are present, the Company determines whether the underlying intangible asset is
recoverable through estimated future undiscounted cash flows. If the asset is not found to be recoverable,
it is written down to the estimated fair value of the asset based on the sum of the future discounted cash
flows expected to result from the use and disposition of the asset. If the estimate of an intangible asset’s
remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized
prospectively over the revised remaining useful life. The Company continues to believe that its definite-
lived intangible assets are recoverable at December 31, 2020.
41
Indefinite-lived intangible assets are tested for impairment at least annually. There has been no
impairment of our intangible assets for the periods presented.
Goodwill
We test goodwill for impairment on an annual basis and between annual tests if events and
circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its
carrying value. Events that would indicate impairment and trigger an interim impairment assessment
include, but are not limited to, current economic and market conditions, including a decline in market
capitalization, a significant adverse change in legal factors, business climate or operational performance
of the business, and an adverse action or assessment by a regulator. Goodwill is tested for impairment
as of December 31st of each year, or more frequently as warranted by events or changes in
circumstances mentioned above. Accounting guidance also permits an optional qualitative assessment
for goodwill to determine whether it is more likely than not that the carrying value of a reporting unit
exceeds its fair value. If, after this qualitative assessment, we determine that it is not more likely than not
that the fair value of a reporting unit is less than its carrying amount, then no further quantitative testing
would be necessary. A quantitative assessment is performed if the qualitative assessment results in a
more likely than not determination or if a qualitative assessment is not performed. The quantitative
assessment considers whether the carrying amount of a reporting unit exceeds its fair value, in which
case an impairment charge is recorded to the extent the reporting unit’s carrying value exceeds its fair
value.
As of December 31, 2018, the Company concluded that it operated as two reporting units and
performed the 2018 goodwill impairment test using two reporting units. In 2019, the Company
reorganized its reporting structure and changed the way the Chief Operating Decision Maker (“CODM”)
views the Company’s operations and allocates its resources. As a result of the change in reporting
structure in 2019, the CODM reviews consolidated results to assist with decision making. Accordingly,
the Company has operated as one reporting unit since this reorganization. The fair value of the reporting
unit is determined using both an income approach and market approach. Our income approach model
used for our reporting unit valuation is consistent with that used for our December 31, 2019 goodwill
impairment valuation noted above, except that cash flows from the entire business enterprise were used
for the reporting unit valuation. Our market approach model estimated the fair value of the reporting unit
based on market prices paid in actual precedent transactions of similar businesses and market multiples
of guideline public companies. As a result of our 2019 quantitative assessment, we concluded that
goodwill was not impaired as of December 31, 2019. During the qualitative assessment of the
Company’s one reporting unit during the 2020 goodwill impairment testing, it was determined that it
was not more likely than not that its fair value was less than its carrying amount. As such, a quantitative
impairment assessment was not required as of December 31, 2020. If an event occurs or circumstances
change that would more likely than not reduce the fair value of its reporting unit below its carrying value,
the Company will evaluate its goodwill for impairment between annual tests.
Accrued liabilities
We estimate accrued liabilities by identifying services performed on our behalf, estimating the level of
service performed and determining the associated cost incurred for such service as of each balance
sheet date. For example, we would accrue for professional and consulting fees incurred with law firms,
audit and accounting service providers and other third-party consultants. These expenses are determined
by either requesting those service providers to estimate unbilled services at each reporting date for
services incurred or tracking costs incurred by service providers under fixed fee arrangements.
We have processes in place to estimate the appropriate amounts to record for accrued liabilities, which
principally involve the applicable personnel reviewing the services provided. In the event that we do not
42
identify certain costs that have begun to be incurred or we under or over-estimate the level of services
performed or the costs of such services, the reported expenses for that period may be too low or too
high. The date on which certain services commence, the level of services performed on or before a given
date, and the cost of such services often require the exercise of judgment. We make these judgments
based upon the facts and circumstances known at the date of the financial statements.
A change in the estimated cost or volume of services provided could result in additional accrued
liabilities. Any significant unanticipated changes in such estimates could have a significant impact on our
accrued liabilities and reported operating results. There have been no material adjustments to our
accrued liabilities in any of the periods presented in the accompanying consolidated financial
statements.
Debt accounting
Our short-term debt balance is related to our 0.375% Convertible Senior Notes due 2024 (the “2019
Notes”), which were issued in July 2019, and are carried at their principal amount less unamortized
debt discount. We account for our convertible notes as separate liability and equity components. We
estimate the carrying amount of the liability component by estimating the fair value of a similar liability
that does not have an associated conversion feature. The Company allocates transaction costs related to
the issuance of convertible notes to the liability and equity components using the same proportions as the
initial carrying value of the convertible notes. The carrying value of the equity component is calculated
by deducting the carrying value of the liability component from the principal amount of the convertible
notes as a whole. The difference represents a debt discount that is amortized to interest expense in our
consolidated statement of comprehensive income over the term of the convertible notes using the effective
interest rate method. We assess the equity classification of the cash conversion feature quarterly. We
allocated transaction costs related to the issuance of the 2019 Notes to the liability and equity
components using the same proportions as the initial carrying value of the 2019 Notes.
During the fourth quarter of 2020, the closing price of the Company’s common stock exceeded 130% of
the conversion price of the 2019 Notes for more than 20 trading days of the last 30 consecutive trading
days of the quarter. As a result, the 2019 Notes are convertible at the option of the holders of the 2019
Notes during the first quarter of 2021, the quarter immediately following the quarter when the conditions
are met, as stated in the terms of the 2019 Notes. Expecting to continue meeting these terms, the
Company reclassified the carrying value of the 2019 Notes from long-term liabilities to current liabilities
on the Company’s balance sheet as of December 31, 2020. This classification is reassessed each
quarter.
Stock-based compensation
We use the Black-Scholes option pricing model to calculate the fair value of stock option awards on the
grant date. The expected term of options granted represents the period of time for which the options are
expected to be outstanding and is derived from our historical stock option exercise experience and
option expiration data. For purposes of estimating the expected term, we have aggregated all individual
option awards into one group, as we do not expect substantial differences in exercise behavior among
our employees. The expected volatility is a measure of the amount by which our stock price is expected
to fluctuate during the expected term of options granted. We determined the expected volatility based
upon the historical volatility of our common stock over a period commensurate with the option’s expected
term. The risk-free interest rate is the implied yield available on U.S. Treasury zero-coupon issues with a
remaining term equal to the option’s expected term on the grant date. We have never declared or paid
any cash dividends on any of our capital stock and do not expect to do so in the foreseeable
future. Accordingly, we use an expected dividend yield of zero to calculate the grant-date fair value of a
stock option.
43
The fair value for stock units, which include restricted stock units and performance stock units, was
calculated using the closing price of the Company’s common stock on the date of grant. We recognize
compensation expense on awards that vest based on service conditions on a straight-line basis over the
requisite service period based upon the number of options that are ultimately expected to vest, and
accordingly, such compensation expense has been adjusted by an amount of estimated forfeitures. We
recognize compensation expense on awards that vest based on performance conditions following our
assessment of the probability that the performance condition will be achieved over the service period.
Forfeitures represent only the unvested portion of a surrendered option. Forfeitures are estimated at the
time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those
estimates. Based on an analysis of historical data, we have calculated an 8% annual forfeiture rate for
non-executive level employees, a 3% annual forfeiture rate for executive level employees, and a 0%
forfeiture rate for non-employee members of the Board of Directors, which we believe are reasonable
assumptions to estimate forfeitures. However, the estimation of forfeitures requires significant judgment
and, to the extent actual results or updated estimates differ from our current estimates, such amounts will
be recorded as a cumulative adjustment in the period estimates are revised.
For the years ended December 31, 2020, 2019 and 2018, we recorded stock-based compensation
expense of $17.0 million, $12.8 million and $10.2 million, respectively, for share-based awards
granted under all of the Company’s stock plans.
As of December 31, 2020, there was $46.7 million of total unrecognized compensation cost related to
unvested share-based awards. This cost is expected to be recognized over a weighted average
remaining requisite service period of 3.55 years. We expect 1,853,028 unvested options and stock
units to vest over the next five years.
Income taxes
Deferred taxes are determined based on the difference between the financial statement and tax basis of
assets and liabilities using enacted tax rates in effect in the years in which the differences are expected
to reverse. Valuation allowances are provided, if, based upon the weight of available evidence, it is
more likely than not that some or all of the deferred tax assets will not be realized. We account for
uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving uncertain
tax positions. The evaluation of uncertain tax positions is based on factors including, but not limited to,
changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the
effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances
related to a tax position. We evaluate our tax position on a quarterly basis. We also accrue for potential
interest and penalties related to unrecognized tax benefits in income tax expense.
In addition, we are subject to the continual examination of our income tax returns by the U.S. Internal
Revenue Service (“IRS”) and other domestic and foreign tax authorities. We expect future examinations
to focus on our intercompany transfer pricing practices as well as other matters. We regularly assess the
likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for
income taxes and have reserved for potential adjustments that may result from such examinations. We
believe such estimates to be reasonable; however, the final determination of any of these examinations
could significantly impact the amounts provided for income taxes in our consolidated financial
statements.
Recent accounting standards update
See Note 2, “Summary of Significant Accounting Policies – Recent Accounting Standards Updates,” to
our consolidated financial statements included in this report for more information.
44
Results of Operations
The following discussion of the financial condition and results of operations should be read in
conjunction with the accompanying consolidated financial statements and the related footnotes thereto.
Revenues
Total revenues for years ended December 31, 2020, 2019, and 2018 were comprised of the following:
For the Years Ended December 31,
2020 vs. 2019
2019 vs. 2018
2020
2019
2018
$ Change % Change $ Change % Change
(Amounts in thousands, except for percentage data)
Revenue:
Product . . . . . . . . . . $366,136 $270,097 $193,891 $96,039
(24)
Royalty and other . .
141
148
124
35.6% $76,206
7
(16.2%)
39.3%
5.0%
Total revenue . . . . . . . . . $366,260 $270,245 $194,032 $96,015
35.5% $76,213
39.3%
Product revenues
Since 2016, we have been increasingly focused on selling our products directly to customers in the
pharmaceutical industry and to our contract manufacturers. These direct sales have increased to
approximately 78.0% of our product revenue during 2020. We expect that direct sales will continue to
account for an increasing percentage of our product revenues, as the largest customer of our protein
products diversified its supply chain in 2020. Sales of our bioprocessing products can be impacted by
the timing of large-scale production orders and the regulatory approvals for such antibodies, which may
result in significant quarterly fluctuations.
Product revenues were comprised of the following:
For the Years Ended December 31,
2020(1)
2019(2)
2018
Filtration products . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chromatography products . . . . . . . . . . . . . . . . . . . . .
Process analytics products . . . . . . . . . . . . . . . . . . . . .
Proteins products . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$174,896
73,551
33,346
80,732
3,611
(Amounts in thousands)
$119,534
64,635
16,405
65,124
4,399
$ 90,586
45,326
—
54,375
3,604
Total product revenue . . . . . . . . . . . . . . . . . . . . .
$366,136
$270,097
$193,891
(1) 2020 revenue for filtration products includes revenue related to EMT from July 13, 2020, NMS from
October 20, 2020 and ARTeSYN from December 3, 2020 through December 31, 2020.
(2) 2019 revenue includes process analytics revenue related to C Technologies from June 1, 2019
through December 31, 2019.
Revenue from our chromatography products includes the sale of our OPUS chromatography columns,
chromatography resins and ELISA test kits. Revenue from our filtration products includes the sale of our
XCell ATF systems and consumables, KrosFlo filtration products, SIUS filtration products, the silicone-
molded products offered by EMT, which we acquired on July 13, 2020 and the products offered by
NMS and ARTeSYN, which were both acquired during the fourth quarter of 2020. Revenue from protein
products includes the sale of our Protein A ligands and cell culture growth factors. Revenue from our
Process Analytics products includes the sale of our SoloVPE and FlowVPE systems, consumables and
45
service. Other revenue primarily consists of revenue from the sale of our operating room products to
hospitals as well as freight revenue.
For 2020, product revenue increased by $96.0 million, or 35.6%, as compared to 2019. The increase
is due to the continued adoption of our products by key bioprocessing customers across all our key
product lines. Beginning in the second quarter of 2020, we experienced an increase in overall sales as
a result of accelerated demand, which was from broad-based covering mAb, gene therapy and
COVID-19 customers working on vaccines and therapeutics. We expect there will be a continued
increase in direct sales during 2021, especially from COVID-19 customers as they scale-up and move
vaccine and therapy drug candidates through clinical trial processes. In 2020, we also had good
performance from our acquisitions executed in 2019 and through 2020. C Technologies revenue
increased by $16.9 million in 2020, compared to 2019, as 2020 represented twelve months of
ownership of C Technologies, which was acquired in May 2019, compared to only seven months of
ownership in 2019. Finally, as a result of our acquisitions of EMT, NMS and ARTeSYN in the second
half of 2020, revenue from our filtration products includes $6.2 million of additional revenue.
Sales of our bioprocessing products are impacted by the timing of orders, development efforts at our
customers or end-users and regulatory approvals for biologics that incorporate our products, which may
result in significant quarterly fluctuations. Such quarterly fluctuations are expected, but they may not be
predictive of future revenue or otherwise indicate a trend.
For 2019, product revenue increased by $76.2 million, or 39.3%, as compared to 2018. The increase
was due to the continued adoption of our products by our key bioprocessing customers, particularly our
chromatography and filtration products. Sales of our bioprocessing products were impacted by the
timing of orders, development efforts targeted at our customers or end-users and regulatory approvals for
biologics that incorporated our products, which may result in significant quarterly fluctuations. Such
quarterly fluctuations were expected. Additionally, there was a $16.4 million increase in the 2019
revenue compared to the 2018 revenue due to revenues generated by C Technologies, which was
acquired in May 2019.
Royalty revenues
Royalty revenues in 2020 and 2019 relate to royalties received from a third-party systems manufacturer
associated with our OPUS chromatography columns. Royalty revenues are variable and are dependent
on sales generated by our partner.
Costs and operating expenses
Total costs and operating expenses for years ended December 31, 2020, 2019 and 2018 were
comprised of the following:
For the Years Ended December 31,
2020 vs. 2019
2019 vs. 2018
2020
2019
2018
$ Change % Change $ Change % Change
(Amounts in thousands, except for percentage data)
Cost of product
revenue . . . . . . . . . . $156,634 $119,099 $ 86,531 $37,535
31.5% $32,568
37.6%
Research and
development
. . . . . .
20,182
19,450
15,821
732
3.8%
3,629
22.9%
Selling, general and
administrative . . . . . .
119,621
95,613
65,692
24,008
25.1% 29,921
45.5%
Total costs
and operating
expenses . . . . . . $296,437 $234,162 $168,044 $62,275
26.6% $66,118
39.3%
46
Cost of product revenue
For 2020, cost of product revenue increased $37.5 million, or 31.5%, as compared to 2019, due
primarily to the increase in product revenue mentioned above and costs associated with higher product
volume. An increase in manufacturing headcount resulted in higher employee-related costs in 2020,
compared to 2019. Additional facility costs, including personal protection equipment purchased for
essential manufacturing personnel on site to protect against COVID-19, were also incurred during 2020
for which there were no comparable amounts in 2019.
Gross margin was 57.2% in 2020, compared to 55.9% in 2019. The gross margin in 2020 includes
$0.7 million of amortization of inventory step-up associated with the EMT and ARTeSYN Acquisitions
and the gross margin for 2019 included $1.5 million of amortization of inventory step-up associated
with the C Technologies Acquisition in May 2019. Excluding the step-up amortization, gross margins in
2020 and 2019 were 57.4% and 56.5%, respectively. The increase in gross margins, excluding the
inventory step-up amortization, in 2020, as compared to 2019, is due primarily to the increase in
revenue mentioned above, and favorable product mix, partially offset by an increase in manufacturing
headcount subsequent to December 31, 2019. Gross margins may fluctuate in future years based on
expected production volume and product mix.
For 2019, cost of product revenue increased $32.6 million, or 37.6%, as compared to 2018, due
primarily to the increase in revenue mentioned above.
Gross margin was 55.9% and 55.4%, in 2019 and 2018, respectively. The gross margin in 2019
includes $1.5 million of amortization of inventory step-up associated with C Technologies Acquisition in
May 2019. The increase in gross margins is a result of higher product revenue mentioned above offset
by an increase in costs associated with additional manufacturing headcount in 2019, as compared to
2018. Gross margins may fluctuate in future years based on expected production volume and product
mix.
Research and development expenses
Research and development (“R&D”) expenses are related to bioprocessing products, which include
personnel, supplies and other research expenses. Due to the size of the Company and the fact that these
various programs share personnel and fixed costs, we do not track all of our expenses or allocate any
fixed costs by program, and therefore, have not provided historical costs incurred by project.
R&D expenses increased $0.7 million, or 3.8% in 2020, compared to 2019. The increase is primarily
due to a $1.1 million increase in C Technologies R&D expenses. C Technologies was acquired on
May 31, 2019. Therefore, only seven months of expenses were recognized in 2019, compared to a full
12 months in 2020. The increase is partially offset by a decrease in R&D spending on external projects,
as certain R&D process development laboratories were not fully functional for most of 2020 due to
COVID-19.
R&D expense also includes investments made to expand our proteins product offering through our
development agreement with Navigo Proteins GmbH (“Navigo”). The Company invested $0.9 million in
2020 and $1.0 million in 2019 in the form of milestone payments to Navigo.
We expect our R&D expenses in 2021 to modestly increase to support new product development.
During 2019 and 2018, R&D expenses were related to bioprocessing products, including personnel,
supplies and product development expenses. Due to the size of the Company and the fact that these
various programs share personnel and fixed costs, we do not track all of our expenses or allocate any
fixed costs by program, and therefore, have not provided historical costs incurred by project.
47
R&D expenses increased $3.6 million in 2019, or 22.9%, as compared to 2018. The increase is
primarily due to an increase in costs associated with an increase in R&D headcount costs and the
addition of $1.7 million of R&D expenses related to C Technologies, which was acquired in May 2019.
The increase in 2019 was partially offset by a $1.4 million decrease in R&D expense for investments
made to Navigo. The Company invested $1.0 million in 2019 compared to $2.4 million in 2018.
Selling, general and administrative expenses
Selling, general and administrative (“SG&A”) expenses include the costs associated with selling our
commercial products and costs required to support our marketing efforts, including legal, accounting,
patent, shareholder services, amortization of intangible assets and other administrative functions.
For 2020, SG&A costs increased by $24.0 million, or 25.1%, as compared to 2019. The increase is
partially due to the continued expansion of our customer-facing activities to drive sales of our
bioprocessing products, and the continued buildout of our administrative infrastructure, primarily through
increased headcount, to support expected future growth. Stock-based compensation expense and other
employee-related costs increased in 2020, as compared to 2019, resulting from an increase in
headcount and higher share prices period over period. In addition, $4.2 million of the increase in
SG&A costs for 2020 was related to the C Technologies operations, which was acquired in May 2019.
C Technologies’ SG&A costs for 2020 include a full year of costs, compared to only seven months in
2019. With the acquisitions of EMT, NMS and ARTeSYN in 2020, an additional $2.2 million of SG&A
costs were included in the consolidated results.
For 2019, SG&A costs increased by $29.9 million, or 45.5%, as compared to 2018. The increase is
due to the addition of $10.9 million of SG&A costs from the acquisition of C Technologies in May 2019,
as well as the continued expansion of our customer-facing activities to drive sales of our bioprocessing
products, and to the continued buildout of our administrative infrastructure, primarily through increased
headcount, to support expected future growth. In addition, during 2019, transaction fees related to the C
Technologies Acquisition of $4.0 million were included in SG&A, for which there were no comparable
costs for 2018. Sales commissions were higher in 2019 due to the increase in revenue. Stock
compensation expense increased as compared to 2018 resulting from the increase in headcount and
higher share prices period over period.
Other expenses, net
The table below provides detail regarding our other expenses, net:
For the Years Ended December 31,
2020 vs. 2019
2019 vs. 2018
2020
2019
2018
$ Change % Change $ Change % Change
(Amounts in thousands, except for percentage data)
Investment income . . . . . . $ 1,741 $ 5,324
Loss on extinguishment of
debt . . . . . . . . . . . . . . .
Interest expense . . . . . . . .
Other (expenses)
(5,650)
(9,292)
(12,133)
—
$ 1,895 $(3,583)
(67.3)% $ 3,429
180.9%
—
(6,709)
5,650
(2,841)
(100.0)% (5,650)
30.6% (2,583)
100.0%
38.5%
income . . . . . . . . . . . .
(214)
(314)
262
100
(31.8)%
(576)
(219.8)%
Total other expenses,
net
. . . . . . . . . . . . $(10,606) $(9,932)
$(4,552) $ (674)
6.8% $(5,380)
118.2%
Investment income
Investment income includes income earned on invested cash balances. The decrease of $3.6 million in
2020, as compared to 2019, was attributable to a decrease in interest rates on our invested cash
48
balances. In March 2020, in response to the outbreak of COVID-19 and to stay ahead of disruptions
and economic slowdown, the Federal Reserve reduced federal funds rates to a range of 0.0% to 0.25%,
which will continue to affect our investment income in future periods. Higher average invested cash
balances during 2020, as compared to 2019 due to the completion of a public offering and the
issuance of our 2019 Notes during the third quarter of 2019, partially offset the decrease in interest
rates mentioned above. We expect investment income to vary based on changes in the amount of funds
invested and fluctuation of interest rates.
Loss on extinguishment of debt
We had no loss on extinguishment of debt in 2020.
The $5.7 million loss on extinguishment of debt for the year ended December 31, 2019 resulted from
the settlement of our outstanding 2.125% Convertible Senior Notes due 2021 (the “2016 Notes”) in the
third quarter of 2019. The loss represents the difference between (i) the fair value of the liability
component and (ii) the sum of the carrying value of the debt component and any unamortized debt
issuance costs at the time of settlement.
Interest expense
Interest expense in 2020 is from our 0.375% Convertible Senior Notes due 2024 (the “2019 Notes”),
which were issued in July 2019. Interest expense in 2019 is from a combination of our 2016 Notes,
which were settled during the third quarter of 2019 and our 2019 Notes. Interest expense increased
$2.8 million in 2020, as compared to 2019 based on the increase in debt issued from $115.0 million
for the 2016 Notes to $287.5 million for the 2019 Notes.
The amortization of debt issuance costs on the 2019 Notes was $11.0 million in 2020. Amortization of
debt issuance costs on the 2019 Notes was $4.7 million in 2019. The amortization of the debt issuance
costs on the 2016 Notes was $2.8 million in 2019.
Contractual coupon interest incurred on the 2019 Notes in 2020 was $1.1 million. Interest calculated
based on the carrying value related to the 2019 Notes for 2019 was $0.5 million. Contractual coupon
interest incurred on the 2016 Notes was $1.3 million in 2019. Since the 2016 Notes were settled
during July 2019, interest no longer accrued on the 2016 Notes subsequent to their settlement.
Other (expenses) income
The change in other expenses during 2020, as compared to 2019, is primarily attributable to realized
foreign currency losses related to amounts due from non-Swedish krona-based customers and vendors. In
addition, $0.5 million was included in other expenses in 2019, which represents a bridge loan
commitment fee incurred as part of the C Technologies Acquisition.
Income tax (benefit) provision
Income tax (benefit) provision for the years ended December 31, 2020, 2019 and 2018 was as
follows:
For the Years Ended December 31,
2020 vs. 2019
2019 vs. 2018
2020
2019
2018
$ Change % Change $ Change % Change
(Amounts in thousands, except for percentage data)
Income tax (benefit)
provision . . . . . . . . . . .
Effective tax rate . . .
$(709)
$4,740
$4,819 $(5,449)
(115.0)% $(79)
(1.6)%
(1.2)%
18.1%
22.5%
49
For the year ended December 31, 2020, we recorded an income tax benefit of $0.7 million. The
effective tax rate was (1.2%) and is based upon the estimated taxable income for the year ending
December 31, 2020 and the composition of income in different jurisdictions. The effective tax rate for
2020 was lower than the U.S. statutory rate of 21% primarily due to windfall benefits on stock option
exercises and the vesting of stock units, an increase in business tax credits and tax benefits related to a
change in U.S. tax law.
For the year ended December 31, 2019, we recorded an income tax provision of approximately
$4.7 million. The effective tax rate was an income tax provision of 18.1% and is based upon the
estimated taxable income for the year ending December 31, 2019 and the composition of the taxable
income in different jurisdictions. The effective tax rate was lower than the U.S. statutory rate of 21% due
primarily to windfall benefits on stock option exercises and the vesting of restricted stock units and to
deductions related to debt extinguishment.
Non-GAAP Financial Measures
We provide non-GAAP adjusted income from operations, non-GAAP adjusted net income and adjusted
EBITDA as supplemental measures to GAAP measures regarding our operating performance. These
financial measures exclude the impact of certain acquisition related items and, therefore, have not been
calculated in accordance with GAAP. A detailed explanation and a reconciliation of each non-GAAP
financial measures to its most comparable GAAP financial measures are described below.
We include this financial information because we believe these measures provide a more accurate
comparison of our financial results between periods and more accurately reflect how management
reviews its financial results. We excluded the impact of certain acquisition related items because we
believe that the resulting charges do not accurately reflect the performance of our ongoing operations for
the period in which such charges are incurred.
Non-GAAP adjusted income from operations
Non-GAAP adjusted income from operations is measured by taking income from operations as reported
in accordance with GAAP and excluding acquisition and integration costs, inventory step-up charges
and intangible amortization booked through our consolidated statements of comprehensive income. The
following is a reconciliation of income from operations in accordance with GAAP to non-GAAP adjusted
income from operations for the years ended December 31, 2020 and 2019:
GAAP income from operations . . . . . . . . . . . . . .
Non-GAAP adjustments to income from
operations:
For the Years Ended December 31,
2020
2019
(Amounts in thousands)
$69,823
$36,083
Acquisition and integration costs . . . . . . . . .
Inventory step-up charges . . . . . . . . . . . . . . .
Intangible amortization . . . . . . . . . . . . . . . . .
11,465
734
16,032
12,508
1,483
13,441
Non-GAAP adjusted income from operations . . . .
$98,054
$63,515
Non-GAAP adjusted net income
Non-GAAP adjusted net income is measured by taking net income as reported in accordance with
GAAP and excluding acquisition and integration costs and related tax effects, inventory step-up charges,
intangible amortization and related tax effects, loss on extinguishment of debt and non-cash interest
expense booked through our consolidated statements of comprehensive income. The following is a
50
reconciliation of net income in accordance with GAAP to non-GAAP adjusted net income for the years
ended December 31, 2020 and 2019:
For the Years Ended December 31,
2020
2019
Amount
Fully Diluted
Earnings per
Share*
Amount
Fully Diluted
Earnings per
Share*
(Amounts in thousands, except per share data)
$59,926
$ 1.11
$ 21,411
$ 0.44
10,479
734
16,032
—
10,970
0.19
0.01
0.30
—
0.20
13,008
1,483
13,441
5,650
7,536
0.26
0.03
0.27
0.11
0.15
(9,050)
(0.17)
(10,003)
(0.20)
GAAP net income . . . . . . . . . . . . . . . .
Non-GAAP adjustments to net income:
Acquisition and integration
costs . . . . . . . . . . . . . . . . . . . .
Inventory step-up charges . . . . . .
Intangible amortization . . . . . . . .
Loss on extinguishment of debt
. .
Non-cash interest expense . . . . . .
Tax effect of intangible
amortization and acquisition
costs . . . . . . . . . . . . . . . . . . . .
Non-GAAP adjusted net income . . . . .
$89,091
$ 1.65
$ 52,526
$ 1.07
* Note that earnings per share amounts may not add due to rounding.
Adjusted EBITDA
Adjusted EBITDA is measured by taking net income as reported in accordance with GAAP, excluding
investment income, interest expense, taxes, depreciation and intangible amortization, and excluding
acquisition and integration costs, inventory step-up charges and loss on extinguishment of debt booked
through our consolidated statements of comprehensive income. The following is a reconciliation of net
income in accordance with GAAP to adjusted EBITDA for years ended December 31, 2020 and 2019:
GAAP net income . . . . . . . . . . . . . .
Non-GAAP EBITDA adjustments to
net income:
Investment income . . . . . . . . . . .
Interest expense . . . . . . . . . . . .
Tax (benefit) provision . . . . . . .
Depreciation . . . . . . . . . . . . . . .
Intangible amortization . . . . . . .
EBITDA . . . . . . . . . . . . . . . . . . . . . .
Other non-GAAP adjustments:
Acquisition and integration
For the Years Ended December 31,
2020
2019
(Amounts in thousands)
$ 59,926
$21,411
(1,741)
12,133
(709)
10,888
16,143
96,640
(5,324)
9,292
4,740
7,317
13,551
50,987
costs . . . . . . . . . . . . . . . . . . .
10,479
13,008
Loss on extinguishment of
debt
. . . . . . . . . . . . . . . . . . .
Inventory step-up charges . . . . .
—
734
5,650
1,483
Adjusted EBITDA . . . . . . . . . . . . . . .
$107,853
$71,128
51
Liquidity and Capital Resources
We have financed our operations primarily through revenues derived from product sales, the issuance of
the 2016 Notes in May 2016 and our 2019 Notes (defined below) in July 2019 and the issuance of
common stock in our December 2020, July 2019 and May 2019 public offerings. Our revenue for the
foreseeable future will primarily be limited to our bioprocessing product revenue.
At December 31, 2020, we had cash and cash equivalents of $717.3 million compared to cash and
cash equivalents of $528.4 million at December 31, 2019. There were no restrictions on cash as of
December 31, 2020.
On December 8, 2020, the Company completed a public offering in which 1,725,000 shares of its
common stock, including the underwriters’ full exercise of an option to purchase up to an additional
225,000 shares, were sold to the public at a price of $181.00 per share. The total proceeds received
by the Company from this offering, net of underwriting discounts and commissions and other estimated
offering expenses payable by the Company, were approximately $297.8 million.
In 2020, we acquired three companies for an aggregate of $175.0 million in cash, net of cash
acquired.
We acquired C Technologies on May 31, 2019 for $239.9 million in cash and shares of our common
stock. The C Technologies Acquisition was funded through payment of approximately $195.0 million in
cash and issuance of 779,221 unregistered shares of the Company’s common stock totaling
$53.9 million.
On July 19, 2019, the Company completed a public offering in which 1,587,000 shares of its common
stock, including the underwriters’ full exercise of an option to purchase an additional 207,000 shares,
were sold to the public at a price of $87.00 per share for $131.1 million in net proceeds to the
Company, after deducting underwriting discounts and commissions and other estimated offering
expenses payable by the Company (the “July Stock Offering”).
On July 19, 2019, the Company issued $287.5 million aggregate principal amount of 0.375%
Convertible Senior Notes due 2024 (“2019 Notes”), which includes the underwriters’ exercise in full of
an option to purchase an additional $37.5 million aggregate principal amount of 2019 Notes (the
“Notes Offering” and, together with the July Stock Offering, the “Offerings”). The net proceeds of the
Notes Offering, after deducting underwriting discounts and commissions and other offering expenses
payable by the Company, were $278.5 million. See Note 12, “Convertible Senior Notes,” included in
this report for more information on this transaction. The Company utilized a portion of the proceeds from
the Offerings to settle its outstanding 2016 Notes during the third quarter of 2019. On July 16, 2019,
the Company entered into separate privately negotiated agreements with certain holders of the 2016
Notes to exchange an aggregate of $92.0 million principal aggregate amount of the 2016 Notes for
shares of the Company’s common stock, together with cash, in private placement transactions (the “Note
Exchanges”). On July 19, 2019 and July 22, 2019, the Company used approximately $92.3 million
(including $0.3 million of accrued interest) and 1,850,155 shares of its common stock valued at
$161.0 million to settle the Note Exchanges for total consideration of $253.3 million, of which
$163.6 million was allocated to the equity component of the 2016 Notes. The Company allocated the
consideration transferred to the liability and equity components using the same proportions as the initial
carrying value of the 2016 Notes. The transaction resulted in a loss on extinguishment of debt of
$4.6 million in the Company’s consolidated statements of comprehensive income as of December 31,
2019.
On May 3, 2019, the Company completed a public offering in which 3,144,531 shares of its common
stock, including the underwriters’ full exercise of an option to purchase up to an additional 410,156
52
shares, were sold to the public at a price of $64.00 per share. The total proceeds received by the
Company from this offering, net of underwriting discounts and commissions and other estimated offering
expenses payable by the Company, totaled approximately $189.6 million. Proceeds from this public
offering were partially used to fund the C Technologies Acquisition on May 31, 2019.
During the fourth quarter of 2020, the closing price of the Company’s common stock exceeded 130% of
the conversion price of the 2019 Notes for more than 20 trading days of the last 30 consecutive trading
days of the quarter. As a result, the 2019 Notes are convertible at the option of the holders of the 2019
Notes during the first quarter of 2021 per the First Supplemental Indenture underlying the 2019 Notes.
The 2019 Notes have a face value of $287.5 million and a carrying value of $243.7 million. The
Company expects to continue meeting these terms and has reclassified the carrying value of the 2019
Notes from long-term liabilities to current liabilities on the Company’s balance sheet as of December 31,
2020. As of the date of this filing, the Company received a request to convert $1,000 aggregate
principal amount of 2019 Notes and we intend to pay or deliver, as the case may be, the settlement
amount to be determined – paying the amount in excess of the aggregate principal portion of the
converted notes in shares of our common stock.
Cash flows
For the Years Ended December 31,
2020
2019
2018
FY20 vs FY19
$ Change
FY19 vs FY18
$ Change
(Amounts in thousands)
Cash provided by (used in):
Operating activities . . . . . . . . . . . $ 62,625 $ 67,216 $ 32,770
(14,037)
Investing activities . . . . . . . . . . . . .
3,407
Financing activities . . . . . . . . . . . .
Effect of exchange rate changes
on cash, cash equivalents and
restricted cash . . . . . . . . . . . . . .
(201,385)
305,916
(205,308)
484,867
12,729
(3,190)
(2,077)
$ (4,591)
3,923
(178,951)
$ 34,446
(191,271)
481,460
15,919
(1,113)
Net increase in cash, cash
equivalents and restricted
cash . . . . . . . . . . . . . . . . . . $ 179,885 $ 343,585 $ 20,063
$(163,700)
$ 323,522
Operating activities
For 2020, our operating activities provided cash of $62.6 million reflecting net income of $59.9 million
and non-cash charges totaling $51.3 million primarily related to depreciation, amortization, non-cash
interest expense, deferred taxes and stock-based compensation charges. An increase in accounts
receivable consumed $21.0 million of cash and was primarily driven by the 35.5% year-to-date increase
in total revenues and an increase in inventory manufactured of $29.3 million to support expected
continued growth in future revenues. In addition, $4.9 million was consumed for increases in prepaid
expenses for annual software and network contracts, as well as the renewal of the Company’s global
insurance policies. These were offset by an increase in accounts payable and accrued liabilities of
$3.5 million due primarily to increased inventory purchases to support customer orders and year-end tax
adjustments, offset by payment of acquisition-related bonuses for C Technologies during the second
quarter of 2020. The remaining cash source of operating activities resulted from favorable changes in
various other working capital accounts.
For 2019, our operating activities provided cash of $67.2 million reflecting net income of $21.4 million
and non-cash charges totaling $46.9 million primarily related to depreciation, amortization, non-cash
interest expense, deferred taxes, loss on extinguishment of debt and stock-based compensation charges.
53
An increase in accounts receivable consumed $7.7 million of cash and was primarily driven by the 39%
year-to-date increase in revenues and an increase in inventory consumed $9.3 million to support future
revenue, due to the addition of C Technologies on May 31, 2019. These were offset by an increase in
accounts payable and accrued liabilities of $13.8 million due to the addition of C Technologies and a
decrease in unbilled receivables of $2.1 million. The remaining cash used in operating activities resulted
from unfavorable changes in various other working capital accounts.
For 2018, our operating activities provided cash of $32.8 million reflecting net income of $16.6 million
and non-cash charges totaling $30.3 million primarily related to depreciation, amortization, non-cash
interest expense, deferred tax expense and stock-based compensation charges. An increase in
receivables consumed $8.7 million of cash and was primarily driven by the 37% year-to-date increase in
revenues. An increase in inventory levels to accommodate future revenue growth consumed $4.0 million
of cash, payment of accrued liabilities consumed $1.4 million of cash and an increase in other assets
used $1.8 million. This utilization of cash is partially offset by $2.3 million of cash provided by an
increase in accounts payable due to the timing of payments to vendors. The remaining cash flow used in
operations resulted from net unfavorable changes in various other working capital accounts.
Investing activities
Our investing activities consumed $201.4 million of cash during 2020. We used $175.0 million in cash
(net of cash received) for the EMT, NMS and ARTeSYN Acquisitions. Capital expenditures consumed
$26.3 million as we continue to increase our manufacturing capacity worldwide. Of these expenditures,
$3.9 million represented capitalized costs related to our internal-use software.
Our investing activities consumed $205.3 million of cash during 2019. We used $182.2 million in cash
(net of cash received) for the C Technologies Acquisition on May 31, 2019. Capital expenditures
consumed $23.2 million as we continue to increase our manufacturing capacity worldwide. Of these
expenditures, $4.7 million represented capitalized costs related to our internal-use software.
For 2018, our investing activities consumed $14.0 million of cash, including $12.8 million for capital
expenditures. Of those expenditures, $2.1 million represented capitalized costs related to our
internal-use software. In addition, a capitalized payment for developed technology of $1.3 million was
paid to Navigo in 2018 to assist in expanding our proteins product offerings through a development
agreement.
Financing activities
In 2020, cash provided by financing activities of $305.9 million included $297.8 million from the
issuance of our common stock resulting from our public offerings completed in December 2020.
Proceeds from stock option exercises during 2020 were $8.2 million.
In 2019, cash provided by financing activities of $484.9 million included $320.7 million from the
issuance of our common stock resulting from our public offerings completed in May and July 2019. In
addition, in July 2019 the Company issued $287.5 million aggregate principal amount of the 2019
Notes for net proceeds of $278.5 million. Proceeds from stock option exercises during 2019 were
$1.2 million. Offsetting these activities was $115.0 million of cash utilized by the Company in July
2019 to settle the 2016 Notes.
In 2018, our financing activities provided $3.4 million of cash from proceeds received from stock option
exercises.
54
Effect of exchange rate changes on cash, cash equivalents and restricted cash
The effect of exchange rate changes on cash during 2020 is a result of the strengthening of the Swedish
krona against the U.S. dollar by 12% and the strengthening of the Euro against the U.S. dollar by 9%.
Off-Balance Sheet Arrangements
We do not have any special purpose entities or off-balance sheet financing arrangements.
Contractual Obligations
As of December 31, 2020, we had the following fixed obligations and commitments:
Total
Less than
one year
One to
three years
Three to
five years
Over five
years
Convertible senior notes(1)
Interest payments related to convertible
. . . . . . . . . . . . $287,500 $287,500
$ — $ —
(Amounts in thousands)
$ —
senior notes . . . . . . . . . . . . . . . . . . . . .
Operating lease obligations . . . . . . . . . . .
Purchase obligations(2) . . . . . . . . . . . . . . .
1,078
44,840
55,253
1,078
7,196
55,253
—
12,252
—
—
9,865
—
—
15,527
—
Total
. . . . . . . . . . . . . . . . . . . . . . . . . $388,671 $351,027
$12,252
$9,865
$15,527
(1) During the fourth quarter of 2020, the closing price of the Company’s common stock exceeded
130% of the conversion price of the 2019 Notes for more than 20 trading days of the last 30
consecutive trading days of the quarter. As a result, the 2019 Notes are convertible at the option of
the holders of the 2019 Notes during the first quarter of 2021, the quarter immediately following
the quarter when the conditions are met, as stated in the terms of the 2019 Notes. Expecting to
continue meeting these terms, the Company reclassified the carrying value of the 2019 Notes from
long-term liabilities to current liabilities on the Company’s balance sheet as of December 31, 2020.
(2) Primarily represents purchase commitments with certain vendors and open purchase orders for the
procurement of raw materials for manufacturing.
The table excludes a liability for uncertain tax positions totaling $3.2 million since we cannot currently
make a reliable estimate of the period in which the liability will be payable, if ever. See Note 9, “Income
Taxes,” to our consolidated financial statements included in this report for more information.
For additional information on our operating lease obligations and convertible senior notes, see Note 4,
“Leases” and Note 12, “Convertible Senior Notes,” in our notes to consolidated financial statements
included in this report.
Capital Requirements
Our future capital requirements will depend on many factors, including the following:
•
•
•
•
•
•
the expansion of our bioprocessing business;
the ability to sustain sales and profits of our bioprocessing products;
our ability to acquire additional bioprocessing products;
the scope of and progress made in our research and development activities;
the extent of any share repurchase activity; and
the success of any proposed financing efforts.
55
Absent acquisitions of additional products, product candidates or intellectual property, we believe our
current cash balances are adequate to meet our cash needs for at least the next 24 months. We expect
operating expenses in 2021 to increase as we continue to expand our bioprocessing business. We
expect to incur continued spending related to the development and expansion of our bioprocessing
product lines and expansion of our commercial capabilities for the foreseeable future. Our future capital
requirements may include, but are not limited to, purchases of property, plant and equipment, the
acquisition of additional bioprocessing products and technologies to complement our existing
manufacturing capabilities, and continued investment in our intellectual property portfolio.
We plan to continue to invest in our bioprocessing business and in key research and development
activities associated with the development of new bioprocessing products. We actively evaluate various
strategic transactions on an ongoing basis, including licensing or acquiring complementary products,
technologies or businesses that would complement our existing portfolio. We continue to seek to acquire
such potential assets that may offer us the best opportunity to create value for our shareholders. In order
to acquire such assets, we may need to seek additional financing to fund these investments. If our
available cash balances and anticipated cash flow from operations are insufficient to satisfy our liquidity
requirements, including because of any such acquisition-related financing needs or lower demand for our
products, we may seek to sell common or preferred equity or convertible debt securities, enter into a
credit facility or another form of third-party funding, or seek other debt funding. The sale of equity and
convertible debt securities may result in dilution to our stockholders, and those securities may have rights
senior to those of our common shares. If we raise additional funds through the issuance of preferred
stock, convertible debt securities or other debt financing, these securities or other debt could contain
covenants that would restrict our operations. Any other third-party funding arrangement could require us
to relinquish valuable rights. We may require additional capital beyond our currently anticipated
amounts. Additional capital may not be available on reasonable terms, if at all.
Net Operating Loss Carryforwards
At December 31, 2020, we had net operating loss carryforwards of $6.4 million remaining. We had
business tax credits carryforwards of $9.4 million available to reduce future federal income taxes, if any.
The business tax credits carryforwards will continue to expire at various dates through December 2039.
Net operating loss carryforwards and available tax credits are subject to review and possible adjustment
by the Internal Revenue Service, state and foreign jurisdictions and may be limited in the event of certain
changes in the ownership interest of significant stockholders.
Foreign Earnings
As of December 31, 2020, the Company has accumulated undistributed earnings generated by our
foreign subsidiaries of approximately $113.1 million. Because $58.0 million of such earnings have
previously been subject to the one-time transition tax on foreign earnings required by the 2017 Tax Act,
any additional taxes due with respect to such earnings or the excess of the amount for financial reporting
over the tax basis of our foreign investments would generally be limited to foreign and state taxes. At
December 31, 2020, we have not provided for taxes on outside basis differences of our foreign
subsidiaries, as we have the ability and intent to indefinitely reinvest the undistributed earnings of our
foreign subsidiaries, and there are no needs for such earnings in the United States that would contradict
our plan to indefinitely reinvest.
Effects of Inflation
Our assets are primarily monetary, consisting of cash and cash equivalents. Because of their liquidity,
these assets are not directly affected by inflation. Since we intend to retain and continue to use our
equipment, furniture, fixtures and office equipment, computer hardware and software and leasehold
56
improvements, we believe that the incremental inflation related to replacement costs of such items will not
materially affect our operations. However, the rate of inflation affects our expenses, such as those for
employee compensation and contract services, which could increase our level of expenses and the rate
at which we use our resources.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of
loss that may impact our financial position due to adverse changes in financial market prices and rates.
Our market risk exposure is primarily a result of fluctuations in interest rates and foreign currency
exchange rates.
Interest Rate Risk
We have historically held investments in commercial paper, U.S. Government and agency securities as
well as corporate bonds and other debt securities. As a result, we have been exposed to potential loss
from market risks that may occur as a result of changes in interest rates, changes in credit quality of the
issuer or otherwise. We do not have any such investments as of December 31, 2020. As a result, a
hypothetical 100 basis point increase in interest rates would have no effect on our cash position as of
December 31, 2020.
We generally place our marketable security investments in high quality credit instruments, as specified in
our investment policy guidelines. We believe that the conservative nature of our investments mitigates our
interest rate exposure, and our investment policy limits the amount of our credit exposure to any one
issue, issuer (with the exception of U.S. agency obligations) and type of instrument. We do not expect
any material loss from our marketable security investments and therefore believe that our potential
interest rate exposure is limited.
Foreign Exchange Risk
The reporting currency of the Company is U.S. dollars, and the functional currency of each of our foreign
subsidiaries is its respective local currency. Our foreign currency exposures include the Swedish krona,
Euro, British pound, Chinese yuan, Japanese yen, Singapore dollar, South Korean won and Indian
rupee; of these, the primary foreign currency exposures are the Swedish kronor, Euro and British pound.
Exchange gains or losses resulting from the translation between the transactional currency and the
functional currency are included in net income. Fluctuations in exchange rates may adversely affect our
results of operations, financial position and cash flows. We currently do not seek to hedge this exposure
to fluctuations in exchange rates.
Although a majority of our contracts are denominated in U.S. dollars, 30% and 29% of total revenues
during 2020 and 2019, respectively, were denominated in foreign currencies while 7% and 17% of our
costs and expenses during 2020 and 2019, respectively, were denominated in foreign currencies,
primarily operating expenses associated with cost of revenue, sales and marketing and general and
administrative. In addition, 22% and 16% of our consolidated tangible assets were subject to foreign
currency exchange fluctuations as of each of December 31, 2020 and 2019, respectively, while 6%
and 5% of our consolidated liabilities were exposed to foreign currency exchange fluctuations as of each
of December 31, 2020 and 2019, respectively.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data required by Item 8 are set forth at the pages indicated in
Item 15(a) below and are incorporated herein by reference.
57
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures.
The Company’s management, with the participation of our principal executive officer and principal
financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as
defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act and as required by paragraph (b) of
Rules 13a-15 or 15d-15 under the Exchange Act) as of the end of the period covered by this report.
Based on such evaluation, our principal executive officer and principal financial officer have concluded
that, as of the end of such period, the Company’s disclosure controls and procedures were effective at
the reasonable assurance level.
(b) Report of Management on Internal Control Over Financial Reporting.
Management of the Company is responsible for establishing and maintaining adequate internal control
over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and
15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the Company’s
principal executive and principal financial officers and effected by the Company’s Board of Directors,
management and other personnel, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with U.S.
generally accepted accounting principles and includes those policies and procedures that:
•
•
•
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of the Company;
provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in
accordance with authorizations of management and directors of the Company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company’s assets that could have a material effect on the
financial statements.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2020. In making this assessment, management used the criteria established in Internal
Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (COSO).
We acquired Engineered Molding Technology LLC (“EMT”), Non-Metallic Solutions, Inc. (“NMS”) and
ARTeSYN Biosolutions Holdings Ireland Limited (“ARTeSYN”) on July 13, 2020, October 20, 2020 and
December 3, 2020, respectively. The financial results of each of these businesses are included in our
audited consolidated financial statements as of December 31, 2020. The Company’s consolidated total
assets as of December 31, 2020 includes $31.9 million, $16.8 million and $226.1 million from the
EMT, NMS and ARTeSYN businesses, respectively. The Company’s consolidated revenues for the year
ended December 31, 2020 includes $3.7 million, $0.6 million and $2.0 million from the EMT, NMS
and ARTeSYN businesses, respectively. As these acquisitions occurred in the third and fourth quarters of
2020, the scope of our assessment of our internal control over financial reporting does not include EMT,
NMS and ARTeSYN. This exclusion is in accordance with the SEC’s general guidance that an
assessment of a recently acquired business may be omitted from our scope in the year of acquisition.
58
In connection with our initiative to integrate and enhance our global information technology systems and
business processes, we continued the phased implementation of a new enterprise resource planning
(“ERP”) system. The ERP system is being implemented in phases through 2021. The second phase was
completed during the third quarter of 2020. As a result of this implementation, we modified certain
existing internal controls over financial reporting as well as implemented new controls and procedures
related to the new ERP system as of December 31, 2020.
Other than the foregoing, there have been no changes in our internal control over financial reporting
identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act
Rule 13a-15 or Rule 15d-15 that occurred in the three months ended December 31, 2020 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
Subject to the foregoing, based on this assessment, our management concluded that, as of
December 31, 2020, our internal control over financial reporting is effective based on those criteria.
Ernst & Young LLP, the independent registered public accounting firm that audited our financial
statements included in this Form 10-K, has issued an attestation report on our internal control over
financial reporting as of December 31, 2020.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that
controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
(c) Attestation Report of the Independent Registered Public Accounting Firm.
59
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Repligen Corporation:
Opinion on Internal Control over Financial Reporting
We have audited Repligen Corporation’s internal control over financial reporting as of December 31,
2020, based on criteria established in Internal Control – Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In
our opinion, Repligen Corporation (the Company) maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2020, based on the COSO criteria.
As indicated in the accompanying Management’s Report Over Financial Reporting, management’s
assessment of and conclusion on the effectiveness of internal control over financial reporting did not
include the internal controls of Engineered Molding Technology LLC (“EMT”), Non-Metallic Solutions, Inc.
(“NMS”) and ARTeSYN Biosolutions Holdings Ireland Limited (“ARTeSYN”), which are included in the
2020 consolidated financial statements of the Company and constituted $31.9 million, $16.8 million
and $226.1 million of total assets, respectively, as of December 31, 2020, and $3.7 million,
$0.6 million and $2.0 million of revenues, respectively, for the year then ended. Our audit of internal
control over financial reporting of the Company also did not include an evaluation of the internal control
over financial reporting of EMT, NMS or ARTeSYN.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31,
2020 and 2019, the related consolidated statements of comprehensive income, stockholders’ equity and
cash flows for each of the three years in the period ended December 31, 2020, and the related notes
and our report dated February 24, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting included in
the accompanying Report of Management on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based
on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
60
control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 24, 2021
61
(d) Changes in Internal Control Over Financial Reporting
Other than the acquisitions of NMS and ARTeSYN mentioned above, there have been no changes in our
internal control over financial reporting identified in connection with the evaluation required by
paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the three months
ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
62
PART III
Pursuant to General Instructions G to Form 10-K, the information required for Part III, Items 10, 11, 12,
13 and 14, is incorporated herein by reference from the Company’s proxy statement for the 2021
Annual Meeting of Stockholders.
63
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this Form 10-K:
(a) (1) Financial Statements:
The financial statements required by this item are submitted in a separate section beginning on page 69
of this report, as follows:
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2020 and December 31, 2019 . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020,
2019 and 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2020, 2019
and 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
69
71
72
73
74
75
(a) (2) Financial Statement Schedules:
None.
(a) (3) Exhibits:
The Exhibits which are filed as part of this Form 10-K or which are incorporated by reference are set
forth in the Exhibit Index hereto.
EXHIBIT INDEX
Exhibit
Number
2.1#
3.1
3.2
3.3
4.1
4.2
Document Description
Stock Purchase Agreement, dated April 25, 2019, by and among Repligen Corporation,
C Technologies and Craig Harrison (filed as Exhibit 2.1 to Repligen Corporation’s Current
Report on Form 8-K filed on April 26, 2019 and incorporated herein by reference).
Restated Certificate of Incorporation dated June 30, 1992, as amended September 17,
1999 (filed as Exhibit 3.1 to Repligen Corporation’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 and incorporated herein by reference).
Certificate of Amendment to the Certificate of Incorporation of Repligen Corporation,
effective as of May 16, 2014 (filed as Exhibit 3.1 to Repligen Corporation’s Current Report
on Form 8-K filed on May 19, 2014 and incorporated herein by reference).
Third Amended and Restated Bylaws (filed as Exhibit 3.1 to Repligen Corporation’s Current
Report on Form 8-K filed on January 28, 2021 and incorporated herein by reference).
Specimen Stock Certificate (filed as Exhibit 4.1 to Repligen Corporation’s Annual Report on
Form 10-K for the year ended March 31, 2002 and incorporated herein by reference).
Base Indenture, dated as of July 19, 2019, by and between Repligen Corporation and
Wilmington Trust, National Association (filed as Exhibit 4.1 to Repligen Corporation’s
Current Report on Form 8-K filed on July 22, 2019 and incorporated herein by reference).
64
Exhibit
Number
4.3
4.4
4.5
10.1*
10.2*
10.3.1*
10.3.2*
10.4
10.5#
10.6*
10.7*
10.8*
10.9
10.10
Document Description
First Supplemental Indenture, dated as of July 19, 2019, by and between Repligen Corporation
and Wilmington Trust, National Association (filed as Exhibit 4.2 to Repligen Corporation’s
Current Report on Form 8-K filed on July 22, 2019 and incorporated herein by reference).
Form of 0.375% Convertible Senior Note due 2024 (included in Exhibit 4.3).
Description of Certain Registrant’s Securities (filed as Exhibit 4.5 to Repligen Corporation’s
Annual Report on Form 10-K for the year ended December 31, 2019 and incorporated by
reference).
Repligen Executive Incentive Compensation Plan (filed as Exhibit 10.1 to Repligen
Corporation’s Current Report on Form 8-K filed on December 14, 2005 and incorporated
herein by reference).
Second Amended and Restated 2001 Repligen Corporation Stock Plan (filed as
Exhibit 10.1 to Repligen Corporation’s Current Report on Form 8-K filed on September 18,
2008 and incorporated herein by reference).
Amended and Restated 2001 Repligen Corporation Stock Option Plan, Form of Incentive
Stock Option Agreement (filed as Exhibit 10.14 to Repligen Corporation’s Annual Report
on Form 10-K for the year ended March 31, 2005 and incorporated herein by reference).
Amended and Restated 2001 Repligen Corporation Stock Plan, Form of Restricted Stock
Agreement (filed as Exhibit 10.1 to Repligen Corporation’s Current Report on Form 8-K filed
on January 9, 2006 and incorporated herein by reference).
Lease Between Repligen Corporation as Tenant and West Seyon LLC as Landlord, 35
Seyon Street, Waltham, MA (as amended to date) (filed as Exhibit 10.4 to Repligen
Corporation’s Annual Report on Form 10-K for the year ended December 31, 2019 and
incorporated herein by reference).
Strategic Supplier Alliance Agreement dated January 28, 2010 by and between Repligen
Corporation and GE Healthcare Bio-Sciences AB) (as amended to date) (filed as
Exhibit 10.1 to Repligen Corporation’s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2016 and incorporated herein by reference).
Repligen Corporation Amended and Restated 2012 Stock Option and Incentive Plan (filed
as Exhibit 99.1 to Repligen Corporation’s Form S-8 filed on June 2, 2014 and incorporated
herein by reference).
Letter Agreement, dated as of June 10, 2014, by and between Repligen Corporation and
Jon K. Snodgres (filed as Exhibit 10.1 to Repligen Corporation’s Current Report on
Form 8-K filed on July 15, 2014 and incorporated herein by reference).
Repligen Corporation Amended and Restated Non-Employee Directors’ Compensation
Policy (filed as Exhibit 10.1 to Repligen Corporation’s Quarterly Report on Form 10-Q for
the quarter ended March 31, 2020 and incorporated herein by reference).
Form of Indemnification Agreement (filed as Exhibit 10.1 to Repligen Corporation’s Current
Report on Form 8-K filed on May 12, 2016 and incorporated herein by reference).
Lease Agreement, dated February 6, 2018, by and between Repligen Corporation and
U.S. REIF 111 Locke Drive Massachusetts, LLC (filed as Exhibit 10.1 to Repligen
Corporation’s Current Report on Form 8-K filed on February 8, 2018 and incorporated
herein by reference).
10.11*
2018 Repligen Corporation Stock Option and Incentive Plan (filed as Exhibit 10.1 to
Repligen Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30,
2018 and incorporated herein by reference).
65
Exhibit
Number
10.12*
10.13*
10.14*
10.15
21.1+
23.1+
24.1+
31.1+
31.2+
32.1+
Document Description
Letter Agreement, dated as of September 3, 2016 by and between Repligen Corporation
and Ralf Kuriyel (filed as Exhibit 10.17 to Repligen Corporation’s Annual Report on
Form 10-K for the year ended December 31, 2018 and incorporated herein by
reference).
Repligen Corporation Named Executive Officer Severance and Change in Control Plan,
effective as of June 13, 2019 (filed as Exhibit 10.1 to Repligen Corporation’s Current
Report on Form 8-K filed on June 19, 2019 and incorporated herein by reference).
Second Amended and Restated Employment Agreement, dated as of June 15, 2019, by
and between Repligen Corporation and Tony J. Hunt (filed as Exhibit 10.2 to Repligen
Corporation’s Current Report on Form 8-K filed on June 19, 2019 and incorporated
herein by reference).
First Amendment to Lease Agreement, dated as of July 7, 2020 by and between Repligen
Corporation and U.S. REIF 111 Locke Drive Massachusetts, LLC (filed as Exhibit 10.1 to
Repligen Corporation’s Current Report on Form 8-K filed on July 10, 2020 and
incorporated herein by reference).
Subsidiaries of the Registrant.
Consent of Ernst & Young LLP, Independent Registered Accounting Firm.
Power of Attorney (included on signature page).
Rule 13a-14(a)/15d-14(a) Certification.
Rule 13a-14(a)/15d-14(a) Certification.
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
101.INS+
Inline XBRL Instance Document-the instance document does not appear in the Interactive
Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH+
Inline XBRL Taxonomy Extension Schema Document.
101.CAL+
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF+
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB+
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE+
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104+
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy
extension information contained in Exhibits 101.*).
# Confidential treatment obtained as to certain portions.
* Management contract or compensatory plan or arrangement.
+ Filed electronically herewith.
The exhibits listed above are not contained in the copy of the Annual Report on Form 10-K distributed to
stockholders. Upon the request of any stockholder entitled to vote at the 2021 Annual Meeting, the
Registrant will furnish that person without charge a copy of any exhibits listed above. Requests should be
addressed to Repligen Corporation, 41 Seyon Street, Waltham, MA 02453.
ITEM 16. 10-K SUMMARY
We may voluntarily include a summary of information required by Form 10-K under Item 16. We have
elected not to include such summary information.
66
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: February 24, 2021
REPLIGEN CORPORATION
By:
/S/ TONY J. HUNT
Tony J. Hunt
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby
makes, constitutes and appoints Tony J. Hunt and Jon K. Snodgres with full power to act without the
other, 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 to sign any or all amendments to this
Form 10-K, 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, and each
of them, full power and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and agents of any of them, or any
substitute or substitutes, lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/S/ TONY J. HUNT
Tony J. Hunt
President, Chief Executive Officer and Director
(Principal executive officer)
February 24, 2021
/S/ JON K. SNODGRES
Jon K. Snodgres
Chief Financial Officer
(Principal financial and accounting officer)
February 24, 2021
/S/ KAREN DAWES
Karen Dawes
Chairperson of the Board
February 24, 2021
/S/ NICOLAS M. BARTHELEMY
Nicolas M. Barthelemy
Director
/S/ CARRIE EGLINTON MANNER
Carrie Eglinton Manner
Director
/S/ ROHIN MHATRE
Rohin Mhatre
/S/ GLENN P. MUIR
Glenn P. Muir
/S/ THOMAS F. RYAN, JR.
Thomas F. Ryan, Jr.
Director
Director
Director
67
February 24, 2021
February 24, 2021
February 24, 2021
February 24, 2021
February 24, 2021
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2020 and December 31, 2019 . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020,
2019 and 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2020, 2019
and 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
69
71
72
73
74
75
68
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Repligen Corporation:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Repligen Corporation (the
Company) as of December 31, 2020 and 2019, and the related consolidated statements of
comprehensive income, stockholders’ equity and cash flows for each of the three years in the period
ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects,
the financial position of the Company at December 31, 2020 and 2019, and the results of its operations
and its cash flows for each of the three years in the period ended December 31, 2020, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (PCAOB), the Company’s internal control over financial reporting as of
December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by
the Committee of the Sponsoring Organizations of the Treadway Commission (2013 framework) and our
report dated February 24, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company‘s management. Our responsibility is to
express an opinion on the Company‘s financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the US federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures include examining, on
a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial statements. We believe that our audits provide
a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matters communicated below are matters arising from the current period audit of the
financial statements that were communicated or required to be communicated to the audit committee and
that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjective or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and
we are not, by communicating the critical audit matters below, providing separate opinions on the
critical audit matters or on the accounts or disclosures to which they relate.
69
Description of the
Matter
Accounting for acquisitions
As disclosed in Note 3 to the consolidated financial statements, during 2020, the
Company completed three acquisitions for total aggregate consideration of
approximately $244.5 million, net of cash acquired. The most significant of these
was the acquisition of all outstanding equity of ARTeSYN Biosolutions Holdings
Ireland Limited for consideration of approximately $201.0 million, net of cash
acquired. The transactions were accounted for as business combinations.
Auditing the Company’s accounting for its acquisitions was complex due to the
significant estimation uncertainty in the Company’s determination of the fair value
of identified intangible assets of $90.2 million, which principally consisted of
customer relationships and developed technology. The significant estimation
uncertainty was primarily due to the sensitivity of the respective fair values to
underlying assumptions about the future performance of the acquired business.
The Company used a discounted cash flow model to measure the customer
relationship and developed technology intangible assets. The significant
assumptions used to estimate the value of the intangible assets included discount
rates and certain assumptions that form the basis of the forecasted results,
including revenue growth rates. These significant assumptions are forward
looking and could be affected by future economic and market conditions.
How We
Addressed the
Matter in Our
Audit
We tested the Company’s controls over its accounting for acquisitions. Our tests
included controls over the process supporting the recognition and measurement
of consideration transferred, customer relationship, and developed technology
intangible assets. We also tested management’s review of assumptions used in
the valuation models.
For each of the Company’s acquisitions, we read the purchase agreements,
evaluated the significant assumptions and methods used in developing the fair
value estimates, and tested the recognition of (1) the tangible assets acquired and
liabilities assumed at fair value; (2) the identifiable intangible assets acquired at
fair value; and (3) goodwill measured as a residual.
To test the estimated fair value of the customer relationship and developed
technology intangible assets, we performed audit procedures that included,
among others, evaluating the Company’s selection of the valuation methodology,
evaluating the methods and significant assumptions used by the Company, and
evaluating the completeness and accuracy of the underlying data supporting the
significant assumptions and estimates. This includes comparing the significant
assumptions to current industry, market and economic trends, to the assumptions
used to value similar assets in other acquisitions, to the historical results of the
acquired business and to other guidelines used by companies within the same
industry. We involved our valuation professionals to assist in our evaluation of the
methodology used by the Company and significant assumptions included in the
fair value estimates.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2002
Boston, Massachusetts
February 24, 2021
70
REPLIGEN CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of reserves of $762 and $525
at December 31, 2020 and December 31, 2019,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Royalties and other receivables . . . . . . . . . . . . . . . . . . . .
Unbilled receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease right of use assets . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2020 December 31, 2019
$ 717,292
—
$ 528,392
9,015
71,257
132
—
95,025
18,676
902,382
66,870
287,100
618,305
2,481
25,176
573
43,068
148
456
54,832
5,917
641,828
48,455
212,552
468,413
2,920
25,707
238
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,902,887
$1,400,113
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liability . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible senior notes, current portion, net . . . . . . . . . .
$
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . .
Convertible senior notes, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liability, long-term . . . . . . . . . . . . . . . . . . . . .
Other liabilities, long-term . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.01 par value, 5,000,000 shares
16,880
5,254
53,085
243,737
318,956
—
27,032
26,425
1,324
373,737
$
11,425
3,557
33,331
—
48,313
232,767
29,944
26,995
2,326
340,345
authorized, no shares issued or outstanding . . . . . . . . . . . .
—
—
Common stock, $0.01 par value; 80,000,000 shares
authorized; 54,760,837 shares at December 31, 2020
and 52,078,258 shares at December 31, 2019 issued and
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss) . . . . . . . . . . .
Accumulated earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . .
548
1,460,748
2,085
65,769
1,529,150
521
1,068,431
(15,027)
5,843
1,059,768
Total liabilities and stockholders’ equity . . . . . . . . . .
$1,902,887
$1,400,113
The accompanying notes are an integral part of these consolidated financial statements.
71
REPLIGEN CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands, except per share data)
For the Years Ended December 31,
2020
2019
2018
Revenue:
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $366,136 $270,097 $193,891
141
Royalty and other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . .
124
148
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
366,260
270,245
194,032
Costs and operating expenses:
Cost of product revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development
Selling, general and administrative . . . . . . . . . . . . . . . . . . . .
156,634
20,182
119,621
119,099
19,450
95,613
86,531
15,821
65,692
Total costs and operating expenses . . . . . . . . . . . . . . . . .
296,437
234,162
168,044
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
69,823
36,083
25,988
Other (expenses) income:
Investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (expenses) income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,741
—
(12,133)
(214)
Other expenses, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10,606)
5,324
(5,650)
(9,292)
(314)
(9,932)
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax (benefit) provision . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59,217
(709)
26,151
4,740
1,895
—
(6,709)
262
(4,552)
21,436
4,819
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,926 $ 21,411 $ 16,617
Earnings per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1.14 $
0.44 $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1.11 $
0.44 $
0.38
0.37
Weighted average common shares outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52,554
48,343
43,767
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
53,892
49,206
45,471
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,926 $ 21,411 $ 16,617
Other comprehensive income (loss):
Foreign currency translation adjustment . . . . . . . . . . . . . . . . .
17,112
(3,134)
(5,530)
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 77,038 $ 18,277 $ 11,087
The accompanying notes are an integral part of these consolidated financial statements.
72
REPLIGEN CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands, except share data)
Common Stock
Number of
Shares(#)
Par
Value
Additional
Paid-In
Capital
Balance at December 31, 2017 . . . . 43,587,079 $436 $ 628,983
Net income . . . . . . . . . . . . . . . . . . . .
—
Issuance of common stock for debt
— —
conversion . . . . . . . . . . . . . . . . . . .
Exercise of stock options and vesting
2
of stock units . . . . . . . . . . . . . . . . . .
330,297
0
3
0
3,415
Stock-based compensation
expense . . . . . . . . . . . . . . . . . . . . .
— —
10,192
Cumulative effect of accounting
changes . . . . . . . . . . . . . . . . . . . . .
Translation adjustment . . . . . . . . . . . .
— —
— —
—
—
Balance at December 31, 2018 . . . . 43,917,378 $439 $ 642,590
—
Net income . . . . . . . . . . . . . . . . . . . .
Issuance of common stock for debt
— —
conversion . . . . . . . . . . . . . . . . . . . 2,316,229
23
198,734
Reduction of equity component from
debt conversion, net of tax . . . . . . .
Exercise of stock options and vesting
of stock units . . . . . . . . . . . . . . . . . .
Issuance of common stock pursuant to
the acquisition of C Technologies,
Inc. . . . . . . . . . . . . . . . . . . . . . . . . .
Tax withholding on vesting of
— —
(200,079)
339,329
779,221
3
8
1,164
53,930
restricted stock . . . . . . . . . . . . . . . .
(5,430)
(0)
(490)
Equity component of 0.375% senior
convertible notes, net of tax . . . . . .
— —
39,070
Proceeds from issuance of common
stock, net of issuance costs of
$18,607 . . . . . . . . . . . . . . . . . . . . 4,731,531
48
320,665
Stock-based compensation
expense . . . . . . . . . . . . . . . . . . . . .
Translation adjustment . . . . . . . . . . . .
— —
— —
12,847
—
Balance at December 31, 2019 . . . . 52,078,258 $521 $1,068,431
Net income . . . . . . . . . . . . . . . . . . . .
—
Exercise of stock options and vesting
— —
of stock units . . . . . . . . . . . . . . . . . .
Issuance of common stock pursuant to
the acquisition of ARTeSYN
Biosolutions . . . . . . . . . . . . . . . . . .
584,589
372,990
Proceeds from issuance of common
stock, net of issuance costs of
$0.4 million . . . . . . . . . . . . . . . . . . 1,725,000
6
4
8,134
69,418
17
297,758
Accumulated
Other
Comprehensive
Income (Loss)
$ (6,363)
—
—
—
—
—
(5,530)
$(11,893)
—
—
—
—
—
—
—
—
—
(3,134)
$(15,027)
—
—
—
—
Stock-based compensation
expense . . . . . . . . . . . . . . . . . . . . .
Translation adjustment . . . . . . . . . . . .
— —
— —
17,007
—
—
17,112
Accumulated
Earnings/
(Deficit)
Total
Stockholders’
Equity
$(31,508) $ 591,548
16,617
16,617
—
—
—
(677)
—
0
3,418
10,192
(677)
(5,530)
$(15,568) $ 615,568
21,411
21,411
—
—
—
—
—
—
—
—
—
198,757
(200,079)
1,167
53,938
(490)
39,070
320,713
12,847
(3,134)
$ 5,843 $1,059,768
59,926
59,926
—
—
—
—
—
8,140
69,422
297,775
17,007
17,112
Balance at December 31, 2020 . . . . 54,760,837 $548 $1,460,748
$ 2,085
$ 65,769 $1,529,150
The accompanying notes are an integral part of these consolidated financial statements.
73
REPLIGEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
For the Years Ended December 31,
2020
2019
2018
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,926 $ 21,411
Adjustments to reconcile net income to net cash provided by operating
$ 16,617
activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt discount and issuance costs . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities, excluding impact of
acquisitions:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Royalties and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unbilled receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease right of use assets . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cash provided by operating activities . . . . . . . . . . . . . . . .
27,067
10,970
17,007
(3,992)
—
267
(21,020)
128
456
(29,260)
(4,870)
3,583
(281)
2,462
1,037
(1,964)
1,109
62,625
20,868
7,536
12,847
(624)
5,650
663
(7,726)
(104)
2,146
(9,314)
(595)
(4,662)
(66)
662
13,096
5,447
(19)
67,216
15,778
4,248
10,192
71
—
(3)
(6,101)
7
(2,602)
(4,042)
(1,769)
—
—
2,266
(1,398)
—
(494)
32,770
Cash flows from investing activities:
Additions to capitalized software costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Developed technology intangible asset payment
Acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cash used in investing activities . . . . . . . . . . . . . . . . . . . .
(3,889)
—
(175,041)
(22,455)
(201,385)
(4,650)
—
(182,154)
(18,504)
(205,308)
(2,147)
(1,255)
—
(10,635)
(14,037)
Cash flows from financing activities:
278,466
Proceeds from issuance of senior convertible notes, net of issuance costs . . .
320,713
Proceeds from issuance of common stock, net of issuance costs . . . . . . . . . . .
1,167
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(114,989)
Repayment of senior convertible notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(490)
Payment of tax withholding obligation on vesting of restricted stock . . . . . . .
484,867
Total cash provided by financing activities . . . . . . . . . . . . . . . .
(3,190)
Effect of exchange rate changes on cash, cash equivalents and restricted cash . .
343,585
Net increase in cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash, beginning of period . . . . . . . . . . . . .
193,822
Cash, cash equivalents and restricted cash, end of period . . . . . . . . . . . . . . . . . . $ 717,292 $ 537,407
—
297,775
8,151
—
(10)
305,916
12,729
179,885
537,407
—
—
3,418
(11)
—
3,407
(2,077)
20,063
173,759
$193,822
Supplemental disclosure of cash flow information:
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,279 $
1,066 $
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
6,505
1,484
Supplemental disclosure of non-cash investing and financing activities:
Assets acquired under operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,349 $
8,663
$
$
$
Fair value of 372,990 shares of common stock issued for acquisition of
ARTeSYN Biosolutions Holdings Ireland Limited . . . . . . . . . . . . . . . . . . . . . $ 69,422 $
— $
Fair value of 2,316,229 shares of common stock issued for conversion of
convertible notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $ 198,757
Fair value of common stock issued for acquisition of C Technologies, Inc. . . . $
— $ 53,938
$
$
4,046
2,444
—
—
—
—
Non-cash effect of adoption of ASU 2016-16 . . . . . . . . . . . . . . . . . . . . . . . . $
Property, plant and equipment related to lease incentives . . . . . . . . . . . . . . . $
— $
— $
— $
5,609
— $
2,270
The accompanying notes are an integral part of these consolidated financial statements.
74
REPLIGEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Nature of Business
Repligen Corporation (NASDAQ:RGEN) is a global life sciences company that develops and
commercializes highly innovative bioprocessing technologies and systems that increase efficiencies and
flexibility in the process of manufacturing biological drugs. The Company’s franchises include Filtration
(XCell ATF™ systems, TangenX™ SIUS™ flat sheet cassettes, Spectrum® Hollow Fibers, KrosFlo® Systems
and ProConnex® single-use flow path assemblies), Chromatography (OPUS® Columns, chromatography
resins, ELISA kits), Process Analytics (SoloVPE® and FlowVPE®), and Proteins (Protein A affinity ligands
and cell culture growth factors). The Company’s bioprocessing products are sold to major life sciences
companies, biopharmaceutical development companies and contract manufacturing organizations
worldwide. The Company operates under one reportable segment. The Company’s chief operating
decision maker (“CODM”) reviews financial information presented on a consolidated basis for purposes
of allocating resources and evaluating financial performance. See Note 2, “Summary of Significant
Accounting Policies – Segment Reporting,” for more information on the Company’s segment.
A majority of our 15 key manufacturing sites are located in the United States (California, Massachusetts,
New Jersey and New York). Outside the United States, we have manufacturing sites in Estonia,
Germany, Ireland, the Netherlands and Sweden.
The Company is subject to a number of risks typically associated with companies in the biotechnology
industry. These risks principally include the Company’s dependence on key customers, development by
the Company or its competitors of new technological innovations, dependence on key personnel,
protection of proprietary technology, compliance with the FDA and other governmental regulations and
approval requirements, as well as the ability to grow the Company’s business and obtain adequate
funding to finance 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 (“GAAP”) requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses during the reporting
periods.
Significant estimates and assumptions by management affect the Company’s revenue recognition for
multiple element arrangements, allowance for credit losses, the net realizable value of inventory,
valuations and purchase price allocations related to business combinations, expected future cash flows
including growth rates, discount rates, terminal values and other assumptions and estimates used to
evaluate the recoverability of long-lived assets, estimated fair values of intangible assets and goodwill,
amortization methods and periods, warranty reserves, certain accrued expenses, stock-based
compensation, tax reserves and recoverability of the Company’s net deferred tax assets and related
valuation allowance.
Although the Company regularly assesses these estimates, actual results could differ materially from these
estimates. Changes in estimates are recorded in the period in which they become known. The Company
bases its estimates on historical experience and various other assumptions that it believes to be
reasonable under the circumstances.
75
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly-owned
subsidiaries, Repligen Sweden AB, Repligen GmbH, Spectrum® LifeSciences LLC and its subsidiaries
(“Spectrum”), C Technologies, Inc. (“C Technologies”), Engineered Molding Technology LLC (“EMT”),
Non-Metallic Solutions, Inc. (“NMS”), ARTeSYN Biosolutions Holdings Ireland Limited (“ARTeSYN”) and
Repligen Singapore Pte. Ltd. All significant intercompany accounts and transactions have been
eliminated in consolidation. Certain prior year balances have changed to reflect current year
presentation.
Foreign Currency
The Company translates the assets and liabilities of its foreign subsidiary at rates in effect at the end of
the reporting period. Revenues and expenses are translated at average rates in effect during the
reporting period. Translation adjustments, including adjustments related to the Company’s intercompany
loan with Repligen Sweden AB and Repligen Sweden AB’s intercompany loan with Repligen GmbH, are
remeasured at each period end and included in accumulated other comprehensive loss.
Revenue Recognition
We generate revenue from the sale of bioprocessing products, equipment devices, and related
consumables used with these equipment devices to customers in the life sciences and biopharmaceutical
industries. Under Accounting Standard Codification No. (“ASC”) 606, “Revenue from Contracts with
Customers,” revenue is recognized when, or as, obligations under the terms of a contract are satisfied,
which occurs when control of the promised products or services is transferred to customers. Revenue is
measured as the amount of consideration the Company expects to receive in exchange for transferring
products or services to a customer (“transaction price”). To the extent the transaction price includes
variable consideration, the Company estimates the amount of variable consideration that should be
included in the transaction price utilizing the expected value method or the most likely amount method,
depending on the facts and circumstances relative to the contract. Variable consideration is included in
the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of
cumulative revenue under the contract will not occur. Estimates of variable consideration and
determination of whether to include estimated amounts in the transaction price are based largely on an
assessment of the Company’s anticipated performance and all information (historical, current and
forecasted) that is reasonably available. Sales, value add, and other taxes collected on behalf of third
parties are excluded from revenue.
When determining the transaction price of a contract, an adjustment is made if payment from a customer
occurs either significantly before or significantly after performance, resulting in a significant financing
component. Applying the practical expedient in paragraph 606-10-32-18, the Company does not assess
whether a significant financing component exists if the period between when the Company performs its
obligations under the contract and when the customer pays is one year or less. None of the Company’s
contracts contained a significant financing component as of December 31, 2020.
Contracts with customers may contain multiple performance obligations. For such arrangements, the
transaction price is allocated to each performance obligation based on the estimated relative standalone
selling prices of the promised products or services underlying each performance obligation. The
Company determines standalone selling prices based on the price at which the performance obligation
is sold separately. If the standalone selling price is not observable through past transactions, the
Company estimates the standalone selling price taking into account available information such as market
conditions and internally approved pricing guidelines related to the performance obligations.
76
The Company recognizes product revenue under the terms of each customer agreement upon transfer of
control to the customer, which occurs at a point in time.
Shipping and handling fees are recorded as a component of product revenue, with the associated costs
recorded as a component of cost of product revenue.
Risks and Uncertainties
The Company evaluates its operations periodically to determine if any risks and uncertainties exist that
could impact its operations in the near term. The Company does not believe that there are any significant
risks that have not already been disclosed in the consolidated financial statements. A loss of certain
suppliers could temporarily disrupt operations, although alternate sources of supply exist for these items.
The Company has mitigated these risks by working closely with key suppliers, identifying alternate
sources and developing contingency plans.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents include cash on hand and on deposit. Highly liquid investments in money
market mutual funds with an original maturity of three months or less are classified as cash equivalents.
All cash equivalents are carried at cost, which approximates fair value. Restricted cash represents cash
that is restricted as to withdrawal or usage. There was no restriction on the Company’s cash balance as
of December 31, 2020. In connection with the Company’s acquisition of C Technologies on May 31,
2019, cash was held and due to employees based on their continued employment with the Company
one year after the date of the close of the acquisition. As of December 31, 2019, $9.0 million, which
represented this amount due to employees, was carried as restricted cash on the Company’s
consolidated balance sheet. Subsequently, during the second quarter of 2020, this $9.0 million was
paid to employees.
The following is a summary of the Company’s cash, cash equivalents, and restricted cash total as
presented in the Company’s consolidated statements of cash flows for the years ended December 31,
2020, 2019 and 2018:
For the Years Ended December 31,
2020
2019
2018
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cash, cash equivalents, and restricted
$717,292
(Amounts in thousands)
$528,392
9,015
—
$193,822
—
cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$717,292
$537,407
$193,822
There were no realized gains or losses on investments for the years ended December 31, 2020, 2019
and 2018.
Fair Value Measurement
In determining the fair value of its assets and liabilities, the Company uses various valuation approaches.
The Company employs a hierarchy for inputs used in measuring fair value that maximizes the use of
observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be
used when available. Observable inputs are inputs that market participants would use in pricing the
asset or liability based on market data obtained from sources independent of the Company.
Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market
77
participants would use in pricing the asset or liability and are developed based on the best information
available in the circumstances. The fair value hierarchy is broken down into three levels based on the
source of inputs as follows:
Level 1 –
Level 2 –
Valuations based on unadjusted quoted prices in active markets for identical assets or
liabilities that the Company has the ability to access.
Valuations based on quoted prices for similar assets or liabilities in active markets, quoted
prices for identical or similar assets or liabilities in markets that are not active and models
for which all significant inputs are observable, either directly or indirectly.
Level 3 –
Valuations based on inputs that are unobservable and significant to the overall fair value
measurement.
The availability of observable inputs can vary among the various types of financial assets and liabilities.
To the extent that the valuation is based on models or inputs that are less observable or unobservable in
the market, the determination of fair value requires more judgment. In certain cases, the inputs used to
measure fair value may fall into different levels of the fair value hierarchy. In such cases, for financial
statement disclosure purposes, the level in the fair value hierarchy within which the fair value
measurement is categorized is based on the lowest level input that is significant to the overall fair value
measurement.
As of December 31, 2020 and 2019, cash and cash equivalents on the Company’s consolidated
balance sheets included $549.0 million and $415.6 million, respectively, in money market accounts.
These funds are valued on a recurring basis using Level 1 inputs.
In July 2019, the Company issued $287.5 million aggregate principal amount of the Company’s
0.375% Convertible Senior Notes due July 15, 2024 (the “2019 Notes”). Interest is payable semi-
annually in arrears on January 15 and July 15 of each year. The 2019 Notes will mature on July 15,
2024 unless earlier converted or repurchased in accordance with their terms. As of December 31,
2020, the carrying value of the 2019 Notes was $243.7 million, net of unamortized discount, and the
fair value of the 2019 Notes was $501.0 million. The fair value of the 2019 Notes is a Level 1
valuation and was determined based on the most recent trade activity of the 2019 Notes as of
December 31, 2020. The 2019 Notes are discussed in more detail in Note 12, “Convertible Senior
Notes,” to these consolidated financial statements.
There were no remeasurements to fair value during the year ended December 31, 2020 of financial
assets and liabilities that are not measured at fair value on a recurring basis.
Allowance for credit losses
We establish an allowance for credit losses through a review of several factors, including historical
collection experience, current aging status of the customer accounts, and current financial condition of
our customers. Losses are charged against the allowance when the customer accounts are determined to
be uncollectible.
Inventories
Inventories relate to the Company’s bioprocessing business. The Company values inventory at cost or, if
lower, net realizable value, using the first-in, first-out method. The Company reviews its inventories at
least quarterly and records a provision for excess and obsolete inventory based on its estimates of
expected sales volume, production capacity and expiration dates of raw materials, work-in-process and
finished products. The Company writes down inventory that has become obsolete, inventory that has a
78
cost basis in excess of its expected net realizable value, and inventory in excess of expected
requirements to cost of product revenue. Manufacturing of bioprocessing finished goods is done to order
and tested for quality specifications prior to shipment.
A change in the estimated timing or amount of demand for the Company’s products could result in
additional provisions for excess inventory quantities on hand. Any significant unanticipated changes in
demand or unexpected quality failures could have a significant impact on the value of inventory and
reported operating results. During all periods presented in the accompanying financial statements, there
have been no material adjustments related to a revised estimate of inventory valuations.
Work-in-process and finished products inventories consist of material, labor, outside processing costs and
manufacturing overhead.
Lease Accounting
The Company adopted ASU 2016-02, “Leases (Topic 842)” (“ASC 842”) as of January 1, 2019. Under
ASC 842, the Company determines whether the arrangement contains a lease at the inception of an
arrangement. If a lease is identified in an arrangement, the Company recognizes a right-of-use asset and
liability on its consolidated balance sheet and determines whether the lease should be classified as a
finance or operating lease. The Company does not recognize assets or liabilities for leases with lease
terms of less than 12 months.
A lease qualifies as a finance lease if any of the following criteria are met at the inception of the lease:
(i) there is a transfer of ownership of the leased asset to the Company by the end of the lease term,
(ii) the Company holds an option to purchase the leased asset that it is reasonably certain to exercise,
(iii) the lease term is for a major part of the remaining economic life of the leased asset, (iv) the present
value of the sum of lease payments equals or exceeds substantially all of the fair value of the leased
asset, or (v) the nature of the leased asset is specialized to the point that it is expected to provide the
lessor no alternative use at the end of the lease term. All other leases are recorded as operating leases.
Finance and operating lease assets and liabilities are recognized at the lease commencement date
based on the present value of the lease payments over the lease term using the discount rate implicit in
the lease. If the rate implicit is not readily determinable, the Company utilizes its incremental borrowing
rate at the lease commencement date. Operating lease assets are further adjusted for prepaid or accrued
lease payments. Operating lease payments are expensed using the straight-line method as an operating
expense over the lease term. Finance lease assets are amortized to depreciation expense using the
straight-line method over the shorter of the useful life of the related asset or the lease term. Finance lease
payments are bifurcated into (i) a portion that is recorded as imputed interest expense and (ii) a portion
that reduces the finance liability associated with the lease.
The Company does not separate lease and non-lease components when determining which lease
payments to include in the calculation of its lease assets and liabilities. Variable lease payments are
expensed as incurred. If a lease includes an option to extend or terminate the lease, the Company
reflects the option in the lease term if it is reasonably certain it will exercise the option.
Finance leases are recorded in property, plant and equipment, net, other current liabilities and long-term
finance lease liabilities and operating leases are recorded in operating lease right of use assets,
operating lease liability and operating lease liability, long-term on the Company’s consolidated balance
sheet.
Certain of the Company’s operating leases where the Company is the lessee provide for minimum
annual payments that increase over the life of the lease. Some of these leases include obligations to pay
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for other services, such as operations and maintenance. For leases of property, the Company accounts
for these other services as a component of the lease. The aggregate minimum annual payments are
expensed on the straight-line basis beginning when the Company takes possession of the property and
extending over the term of the related lease, including renewal options when the exercise of the option is
reasonably assured as an economic penalty may be incurred if the option is not exercised. The
Company also accounts in its straight-line computation for the effect of any “rental holidays.”
Operating lease assets represent the Company’s right to use an underlying asset for the lease term and
lease liabilities represent the Company’s obligation to make lease payments arising from the lease.
Operating lease assets and liabilities are recognized at the lease commencement date based on the
estimated present value of the fixed lease payments, reduced by landlord incentives using a discount rate
based on similarly secured borrowings available to the Company. Most of the leases do not provide
implicit interest rates and therefore the Company determines the discount rate based on its incremental
borrowing rate. The incremental borrowing rate for the Company’s leases is determined based on lease
term and currency in which the lease payments are made.
Accrued Liabilities
The Company estimates accrued liabilities by identifying services performed on the Company’s behalf,
estimating the level of service performed and determining the associated cost incurred for such service as
of each balance sheet date. For example, the Company would accrue for professional and consulting
fees incurred with law firms, audit and accounting service providers and other third-party consultants.
These expenses are determined by either requesting those service providers to estimate unbilled services
at each reporting date for services incurred or tracking costs incurred by service providers under fixed
fee arrangements.
The Company has processes in place to estimate the appropriate amounts to record for accrued
liabilities, which principally involve the applicable personnel reviewing the services provided. In the
event that the Company does not identify certain costs that have begun to be incurred or the Company
under or over-estimates the level of services performed or the costs of such services, the reported
expenses for that period may be too low or too high. The date on which certain services commence, the
level of services performed on or before a given date, and the cost of such services often require the
exercise of judgment. The Company makes these judgments based upon the facts and circumstances
known at the date of the financial statements.
Income Taxes
Deferred taxes are determined based on the difference between the financial statement and tax basis of
assets and liabilities using enacted tax rates in effect in the years in which the differences are expected
to reverse. Valuation allowances are provided, if, based upon the weight of available evidence, it is
more likely than not that some or all of the deferred tax assets will not be realized. The Company
accounts for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving
uncertain tax positions. The evaluation of uncertain tax positions is based on factors including, but not
limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax
returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or
circumstances related to a tax position. The Company evaluates this tax position on a quarterly basis.
The Company also accrues for potential interest and penalties related to unrecognized tax benefits in
income tax expense.
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Property, Plant & Equipment
Property, plant & equipment is recorded at cost less allowances for depreciation. Depreciation is
calculated using the straight-line method over the estimated useful life of the asset as follows:
Classification
Estimated Useful Life
Buildings . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . .
Equipment . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures and office
Thirty years
Shorter of the term of the lease or estimated useful life
Three to twelve years
equipment . . . . . . . . . . . . . . . . . . . .
Computer hardware and software . . .
Three to eight years
Three to seven years or estimated useful life
Upon disposal of property, plant & equipment, the cost of the asset and the accumulated depreciation
are removed from the accounts and the resulting gain or loss is reflected in our results of operations. Fully
depreciated assets are not removed from the accounts until they are physically disposed of.
Certain systems development costs related to the purchase, development and installation of computer
software developed or obtained for internal use are capitalized and depreciated over the estimated
useful life of the related project. Costs incurred prior to the development stage, as well as maintenance,
training costs, and general and administrative expenses are expensed as incurred.
Earnings Per Share
Basic earnings per share is computed by dividing net income available to common shareholders by the
weighted average number of common shares outstanding during the period. Diluted earnings per share
is computed by dividing net income available to common shareholders by the weighted-average number
of common shares and dilutive common share equivalents then outstanding. Potential common share
equivalents consist of restricted stock awards and the incremental common shares issuable upon the
exercise of stock options and warrants. Under the treasury stock method, unexercised “in-the-money”
stock options are assumed to be exercised at the beginning of the period or at issuance, if later. The
assumed proceeds are then used to purchase common shares at the average market price during the
period. In periods when the Company has a net loss, stock awards are excluded from the calculation of
earnings per share as their inclusion would have an antidilutive effect.
A reconciliation of basic and diluted share amounts is as follows:
For the Years Ended
December 31,
2020
2019
2018
(Amounts in thousands, except
per share data)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $59,926 $21,411 $16,617
Weighted average shares used in computing net income per share -
basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,554 48,343 43,767
Effect of dilutive shares:
Options and stock units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
971
367
Dilutive potential common shares . . . . . . . . . . . . . . . . . . . . . . . .
1,338
864
—
864
581
1,123
1,704
Weighted average shares used in computing net income per share -
diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,892 49,206 45,471
Earnings per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.14 $ 0.44 $ 0.38
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.11 $ 0.44 $ 0.37
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At December 31, 2020, there were outstanding options to purchase 696,711 shares of the Company’s
common stock at a weighted average exercise price of $43.88 per share and 665,540 shares of
common stock issuable upon the vesting of stock units which include restricted stock units and
performance stock units. For the year ended December 31, 2020, 98,048 shares of the Company’s
common stock were excluded from the calculation of diluted earnings per share because they would
have had an anti-dilutive effect.
At December 31, 2019, there were outstanding options to purchase 957,559 shares of the Company’s
common stock at a weighted average exercise price of $30.81 per share and 734,984 shares of
common stock issuable upon the vesting of stock units. For the year ended December 31, 2019,
104,316 shares of the Company’s common stock were excluded from the calculation of diluted earnings
per share because the exercise prices of the stock options were greater than or equal to the average
price of the common shares and were therefore, anti-dilutive.
At December 31, 2018, there were outstanding options to purchase 998,226 shares of the Company’s
common stock at a weighted average exercise price of $27.54 per share and 705,413 shares of
common stock issuable upon the vesting of stock units. For the year ended December 31, 2017,
479,854 shares of the Company’s common stock were excluded from the calculation of diluted earnings
per share because the exercise prices of the stock options were greater than or equal to the average
price of the common shares and were therefore, anti-dilutive.
As provided by the terms of the indenture underlying the senior convertible notes, the Company has a
choice to settle the conversion obligation for the 2019 Notes in cash, shares or any combination of the
two. The Company currently intends to settle the par value of the 2019 Notes in cash and any excess
conversion premium in shares. The Company applies the provisions of ASC 260, “Earnings Per Share”,
Subsection 10-45-44, to determine the diluted weighted average shares outstanding as it relates to the
conversion spread on its convertible notes. Accordingly, the par value of the 2019 Notes is not included
in the calculation of diluted income per share, but the dilutive effect of the conversion premium is
considered in the calculation of diluted net income per share using the treasury stock method. The dilutive
impact of the 2019 Notes is based on the difference between the Company’s current period average
stock price and the conversion price of the convertible notes, provided there is a premium. Pursuant to
this accounting standard, there is no dilution from the accreted principal of the 2019 Notes. For the
years ended December 31, 2020 and 2019, the dilutive effect of the conversion premium included in
the calculation of diluted earnings was 366,534 shares and 1,123,139 shares, respectively. There was
no dilutive effect of the conversion premium included in the calculation of diluted earnings per share for
the year ended December 31, 2019.
Segment Reporting
The Company views its operations, makes decisions regarding how to allocate resources and manages
its business as one reportable segment and one reporting unit. As a result, the financial information
disclosed herein represents all of the material financial information related to the Company.
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The following table represents product revenues by product line:
For the Years Ended December 31,
2020(1)
2019(2)
2018
Filtration products . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chromatography products . . . . . . . . . . . . . . . . . . . . .
Process analytics products . . . . . . . . . . . . . . . . . . . . .
Proteins products . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$174,896
73,551
33,346
80,732
3,611
(Amounts in thousands)
$119,534
64,635
16,405
65,124
4,399
$ 90,586
45,326
—
54,375
3,604
Total product revenue . . . . . . . . . . . . . . . . . . . . .
$366,136
$270,097
$193,891
(1) 2020 revenue for filtration products includes revenue related to EMT from July 13, 2020, NMS from
October 20, 2020 and ARTeSYN from December 3, 2020.
(2) 2019 revenue for process analytics products includes revenue related to C Technologies from
May 31, 2019 through December 31, 2019.
Revenue from filtration products includes the XCell ATF systems and consumables as well as the KrosFlo
and SIUS filtration products. Revenue from chromatography products includes the OPUS chromatography
PPCs, chromatography resins and ELISA test kits. Revenue from process analytics products includes the
SoloVPE and FlowVPE devices. Revenue from protein products includes the Protein A affinity ligands and
cell culture growth factors. Other revenue primarily consists of revenue from the sale of operating room
products to hospitals as well as freight revenue.
The following table represents the Company’s total revenue by geographic area (based on the location
of the customer):
For the Years Ended
December 31,
2020
2019
2018
Revenue by customers’ geographic
locations:
North America . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
APAC/Other
48%
38%
14%
51%
37%
12%
48%
40%
12%
Total revenue . . . . . . . . . . . . . . . . . . . . .
100%
100%
100%
The following table represents the Company’s total assets by geographic area:
December 31,
2020
2019
(Amounts in thousands)
Total assets by geographic locations:
North America . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . .
APAC . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,697,149
188,698
17,040
$1,260,217
133,599
6,297
Total assets by geographic location . . . . . . .
$1,902,887
$1,400,113
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The following table represents the Company’s long-lived assets by geographic area:
December 31,
2020
2019
(Amounts in
thousands)
Long-lived assets by geographic locations:
North America . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$78,429
12,918
1,272
$66,756
6,775
869
Total long-lived assets by geographic location . . . . .
$92,619
$74,400
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. Per the Company’s
investment policy, cash equivalents and marketable securities are invested in financial instruments with
high credit ratings and credit exposure to any one issue, issuer (with the exception of U.S. Treasury
obligations) and type of instrument is limited. At December 31, 2020 and 2019, the Company had no
investments 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. While a reserve for the potential write-off of accounts receivable is
maintained, the Company has not written off any significant accounts to date. To control credit risk, the
Company performs regular credit evaluations of its customers’ financial condition.
Revenue from significant customers that represent 10% or more of the Company’s total revenue is as
follows:
MilliporeSigma . . . . . . . . . . . . . . . . . . .
. . . . . .
Cytiva (formerly GE Healthcare)
For the Years Ended
December 31,
2020
11%
N/A
2019
2018
13%
12%
15%
15%
Significant accounts receivable balances representing 10% or more of the Company’s total trade
accounts receivable and royalties and other receivable balances at December 31, 2020 and 2019,
include the accounts receivable balance with Cytiva (formerly GE Healthcare), which represented 11%
and 18%, respectively of the Company’s total trade accounts receivable and royalties and other
receivable balances.
Business Combinations, Goodwill and Intangible Assets
Business Combinations
Total consideration transferred for acquisitions is allocated to the tangible and intangible assets acquired
and liabilities assumed, if any, based on their fair values at the dates of acquisition. This purchase price
allocation process requires management to make significant estimates and assumptions with respect to
intangible assets and deferred revenue. The fair value of identifiable intangible assets is based on
detailed valuations that use information and assumptions determined by management. Any excess of
purchase price over the fair value of the net tangible and intangible assets acquired is allocated to
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goodwill. While the Company uses its best estimates and assumptions to accurately value assets
acquired and liabilities assumed at the acquisition date as well as any contingent consideration, where
applicable, that the Company’s estimates are inherently uncertain and subject to refinement. As a result,
during the measurement period, which may be up to one year from the acquisition date, the Company
records adjustments to the assets acquired and liabilities assumed with the corresponding offset to
goodwill. Upon conclusion of the measurement period or final determination of the values of assets
acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the
Company’s consolidated statements of comprehensive income. Any excess of the fair value of the net
tangible and intangible assets acquired over the purchase price is recognized in the consolidated
statements of comprehensive income. The fair value of contingent consideration includes estimates and
judgments made by management regarding the probability that future contingent payments will be made
and the extent of royalties to be earned in excess of the defined minimum royalties. Management
updates these estimates and the related fair value of contingent consideration at each reporting period.
During the measurement period, these changes in the fair value of contingent consideration are recorded
to goodwill. Subsequent to the end of the measurement period, they will be recorded in the consolidated
statements of comprehensive income.
The Company uses the income approach to determine the fair value of certain identifiable intangible
assets including customer relationships and developed technology. This approach determines fair value
by estimating after-tax cash flows attributable to these assets over their respective useful lives and then
discounting these after-tax cash flows back to a present value. The Company bases its assumptions on
estimates of future cash flows, expected growth rates, expected trends in technology, etc. Discount rates
used to arrive at a present value as of the date of acquisition are based on the time value of money and
certain industry-specific risk factors.
Goodwill
Goodwill is not amortized and is reviewed for impairment at least annually at the reporting unit level. As
of December 31, 2018, the Company concluded that it operated as two reporting units and performed
the 2018 goodwill impairment test using two reporting units. In 2019, the Company reorganized its
reporting structure and changed the way the CODM views the Company’s operations and allocates its
resources. Accordingly, the Company operates as one reporting unit as of the goodwill impairment
measurement date of December 31, 2020. During the qualitative assessment of the Company’s one
reporting unit during the 2020 goodwill impairment testing, it was determined that it was not more likely
than not that its fair value was less than its carrying amount. As such, a quantitative impairment
assessment was not required as of December 31, 2020. If an event occurs or circumstances change that
would more likely than not reduce the fair value of its reporting unit below its carrying value, the
Company will evaluate its goodwill for impairment between annual tests. There was no impairment to
goodwill and therefore no impairment charge recorded for the year ended December 31, 2019.
Intangible Assets
Intangible assets with a definite life are amortized over their useful lives using the straight-line method
and the amortization expense is recorded within cost of product revenue, research and development and
selling, general and administrative expense in the consolidated statements of comprehensive income.
Intangible assets and their related useful lives are reviewed at least annually to determine if any adverse
conditions exist that would indicate the carrying value of these assets may not be recoverable. More
frequent impairment assessments are conducted if certain conditions exist, including a change in the
competitive landscape, any internal decisions to pursue new or different technology strategies, a loss of
a significant customer, or a significant change in the marketplace, including changes in the prices paid
for the Company’s products or changes in the size of the market for the Company’s products. If
impairment indicators are present, the Company determines whether the underlying intangible asset is
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recoverable through estimated future undiscounted cash flows. If the asset is not found to be recoverable,
it is written down to the estimated fair value of the asset based on the sum of the future discounted cash
flows expected to result from the use and disposition of the asset. If the estimate of an intangible asset’s
remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized
prospectively over the revised remaining useful life. The Company continues to believe that its definite-
lived intangible assets are recoverable at December 31, 2020.
Indefinite-lived intangible assets are reviewed for impairment at least annually. There has been no
impairment of our intangible assets for the periods presented.
Stock Based Compensation
The Company measures stock-based compensation cost at the grant date based on the estimated fair
value of the award and recognizes it as expense over the employee’s requisite service period on a
straight-line basis. The Company records the expense for share-based awards subject to performance-
based milestone vesting over the remaining service period when management determines that
achievement of the milestone is probable. Management evaluates whether the achievement of a
performance-based milestone is probable as of the reporting date. The Company has no awards that are
subject to market conditions. The Company recognizes stock-based compensation expense based upon
options that are ultimately expected to vest, and accordingly, such compensation expense has been
adjusted by an amount of estimated forfeitures.
The Company uses the Black-Scholes option pricing model to calculate the fair value of share-based
awards on the grant date. The following assumptions are used in calculating the fair value of share-
based awards:
Expected term – The expected term of options granted represents the period of time for which the options
are expected to be outstanding. For purposes of estimating the expected term, the Company has
aggregated all individual option awards into one group as the Company does not expect substantial
differences in exercise behavior among its employees.
Expected volatility – The expected volatility is a measure of the amount by which the Company’s stock
price is expected to fluctuate during the expected term of options granted. The Company determines the
expected volatility based primarily upon the historical volatility of the Company’s common stock over a
period commensurate with the option’s expected term.
Risk-free interest rate – The risk-free interest rate is the implied yield available on U.S. Treasury
zero-coupon issues with a remaining term equal to the option’s expected term on the grant date.
Expected dividend yield – The Company has never declared or paid any cash dividends on any of its
capital stock and does not expect to do so in the foreseeable future. Accordingly, the Company uses an
expected dividend yield of zero to calculate the grant-date fair value of a stock option.
Estimated forfeiture rates – The Company has applied, based on an analysis of its historical forfeitures,
annual forfeiture rates of 8% for awards granted to non-executive level employees, 3% for awards
granted to executive level employees and 0% for awards granted to non-employee members of the
Board of Directors to all unvested stock options as of December 31, 2020. The Company reevaluates
this analysis periodically and adjusts these estimated forfeiture rates as necessary. Ultimately, the
Company will only recognize an expense for those shares that vest.
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Advertising Costs
The Company expenses advertising costs as they are incurred. Advertising expense for the years ended
December 31, 2020, 2019 and 2018 was $0.3 million, $0.1 million and $0.2 million, respectively.
Recent Accounting Standards Updates
We consider the applicability and impact of all Accounting Standards Updates on the Company’s
consolidated financial statements. Updates not listed below were assessed and determined to be either
not applicable or are expected to have minimal impact on the Company’s consolidated financial position
or results of operations. Recently issued Accounting Standards Updates that we feel may be applicable
to the Company are as follows:
Recently Issued Accounting Standard Updates – Adopted During the Period
On May 21, 2020, the SEC announced that it would adopt amendments to the financial disclosure
requirements for acquisitions and dispositions of businesses in Rules 3-05, 3-14, 8-04, 8-05, 8-06, and
Article 11 of Regulation S-X, all of which relate to financial statement disclosure requirements. In
conjunction with the changes to amendments to these rules, the SEC also amended the significance tests
in the “significant subsidiary” definition in Rule 1-02(w), Securities Act Rule 405, and Exchange Act
Rule 12b-2 to improve their application and to assist registrants in making more meaningful
determinations of whether a subsidiary or an acquired or disposed of business is significant.
Specific changes to the significance test include changes to the investment test component, which
compares the registrant’s and its other subsidiaries’ investment in and advances to the tested subsidiary
to the registrant’s aggregate worldwide market value if available, instead of the registrant’s total assets
on a consolidated basis under the unamended Rule. The amendments also changed the income test
component by adding a revenue component to it.
The amendments are effective on January 1, 2021. However, voluntary compliance with the final
amendments was permitted in advance of the effective date. As a result of the 2020 acquisitions of EMT,
NMS and ARTeSYN, the Company voluntarily adopted the amendments prior to their effective date and
determined the acquired businesses are not significant subsidiaries and therefore no separate financial
statements are required.
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update No. (“ASU”) 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes
to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 includes amendments that
aim to improve the effectiveness of fair value measurement disclosures. The amendments in this guidance
modify the disclosure requirements on fair value measurements based on the concepts in FASB Concepts
Statement, “Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements,”
including the consideration of costs and benefits. The Company adopted ASU 2018-13 on January 1,
2020. The adoption did not have a material impact on the Company’s consolidated financial statements
as of and for the year ended December 31, 2020.
In August 2018, the FASB issued ASU 2018-15, “Intangibles – Goodwill and Other – Internal-Use
Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud
Computing Arrangement That Is a Service Contract.” ASU 2018-15 aligns the requirements for
capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the
requirements for capitalizing implementation costs incurred to develop or obtain internal-use software
(and hosting arrangements that include an internal-use software license). The guidance also requires the
entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract
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over the term of the hosting arrangement, which includes reasonably certain renewals. The Company
adopted ASU 2018-13 on January 1, 2020. The adoption did not have a material impact on the
Company’s consolidated financial statements as of and for the year ended December 31, 2020.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326).” ASU
2016-13 significantly changes how entities will account for credit losses for most financial assets and
certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces
the existing incurred loss model with an expected credit loss model that requires entities to estimate an
expected lifetime credit loss on most financial assets and certain other instruments, including short-term
trade receivables and contract assets, and expands disclosure requirements for credit quality of financial
assets. The Company adopted ASU 2016-13 on January 1, 2020. The Company assessed all potential
impacts that the adoption of this guidance has on its consolidated financial statements. Based on the
composition of the Company’s investment portfolio, accounts receivable, current market conditions and
historical credit loss activity, the adoption of ASU 2016-13 by the Company did not have a material
impact on its consolidated financial position, results of operations or cash flows as of and for the year
ended December 31, 2020. The Company continues to monitor processes and controls for indications of
an adjustment for future economic conditions at quarterly and annual reporting periods. See Note 6,
“Credit Losses,” below for more information on the Company’s adoption of ASC 326.
In November 2018, the FASB issued ASU 2018-18, “Collaborative Arrangements (Topic 808):
Clarifying the Interaction between Topic 808 and Topic 606.” ASU 2018-18 clarifies the interaction
between Topic 808, “Collaborative Arrangements,” and Topic 606, “Revenue from Contracts with
Customers,” by making targeted improvements to GAAP for collaborative arrangements and providing
guidance on whether certain transactions between collaborative arrangement participants should be
accounted for with revenue under Topic 606. This includes improving comparability in the presentation
of revenue for certain transactions between collaborative arrangement participants by allowing
presentation of the units of account in collaborative arrangements that are within the scope of Topic 606
together with revenue accounted for under Topic 606. The Company adopted ASU 2018-13 on
January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial
statements as of and for the year ended December 31, 2020.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) – Simplifying the
Accounting for Income Taxes.” ASU 2019-12 simplifies the accounting for income taxes by removing
certain exceptions to the general principles in Topic 740, including, but not limited to, the exception to
the incremental approach for intraperiod tax allocation when there is a loss from continuing operations
and income or a gain from other items, the exceptions related to the recognition of a deferred tax
liability related to an equity method investment and the exception to methodology for calculating income
taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The
Company adopted ASU 2018-13 on January 1, 2020. The adoption did not have a material impact on
the Company’s consolidated financial statements as of and for the year ended December 31, 2020.
Recently Issued Accounting Standard Updates – Not Yet Adopted
In August 2020, the FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).”
ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock
by reducing the number of accounting models and the number of embedded conversion features that
could be recognized separately from the primary contract. ASU 2020-06 also enhances transparency
and improves disclosures for convertible instruments and earnings per share guidance. ASU 2020-06 is
effective for annual reporting periods beginning after December 15, 2021, including interim periods
within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after
December 15, 2020. This update permits the use of either the modified retrospective or fully
88
retrospective method of transition. The Company is currently evaluating the timing and impact of the
adoption of ASU 2020-06 on the Company’s consolidated financial statements.
3. Acquisitions
ARTeSYN Biosolutions Holdings Ireland Limited
On October 27, 2020, the Company entered into an Equity and Asset Purchase Agreement with
ARTeSYN, a company organized under the laws of Ireland, Third Creek Holdings, LLC, a Nevada
limited liability company, Alphinity, LLC, a Nevada limited liability company (“Alphinity”, and together
with Third Creek Holdings, LLC the “Sellers”), and Michael Gagne, solely in his capacity as the
representative of the Sellers, pursuant to which the Company acquired (i) all of the outstanding equity
securities of ARTeSYN and (ii) certain assets from Alphinity related to the business of ARTeSYN
(collectively, the “ARTeSYN Acquisition”) for approximately $200 million, comprised of approximately
$130 million in cash to the Sellers and approximately $70 million in Repligen common stock to Third
Creek. The transaction closed on December 3, 2020.
ARTeSYN is headquartered in Waterford, Ireland and conducts its operations in Ireland, the United
States and Estonia. Its suite of single-use solutions has been created with the goal of enabling
“abundance in medicine” by allowing 10x greater efficiency in biologics manufacturing. The ARTeSYN
team has created a number of solutions targeting the single-use space from single-use valves with fully
disposable valve liners, XO® skeletal supports, a hybrid small parts offering for de-bottlenecking
traditional facilities, and fully automated SU process systems that have quickly become leading solutions
in the bioprocessing industry. In addition to its single-use solutions, ARTeSYN also engages in the
manufacture of large-scale systems to be used for biologics manufacturing. ARTeSYN has established
downstream processing leadership with a suite of state of the art single-use systems for chromatography,
filtration, continuous manufacturing and media/buffer prep workflows. In addition, the Company has
integrated unique flow path assemblies utilizing Engineered Molding Technology LLC’s (“EMT”) silicone
extrusion and molding technology, to deliver highly differentiated, low hold-up volume systems that
minimize product loss during processing.
Consideration Transferred
The ARTeSYN Acquisition was accounted for as a purchase of a business under ASC 805, “Business
Combinations”. The ARTeSYN Acquisition was funded through payment of $130.7 million in cash, as
well as issuance of 372,990 unregistered shares of the Company’s common stock totaling
$69.4 million, contingent consideration of approximately $1.5 million, and settlement of preexisting
invoices with Repligen of approximately $2.3 million, for a total purchase price of $204.0 million.
Under the acquisition method of accounting, the assets acquired and liabilities assumed of ARTeSYN
were recorded as of the acquisition date, at their respective fair values, and consolidated with those of
Repligen. The fair value of the net tangible assets acquired is estimated to be $7.9 million, the fair value
of the intangible assets acquired is estimated to be $67.4 million, and the residual goodwill is estimated
to be $128.7 million. The estimated consideration and preliminary purchase price information has been
prepared using a preliminary valuation. The final purchase price allocation will be completed upon
payment of final consideration for working capital and other adjustments. The final allocation may
include changes to: (1) deferred revenue; (2) inventory; (3) deferred tax liabilities, net; (4) allocations to
intangible assets such as tradenames, developed technology and customer relationships as well as
goodwill; (5) final consideration paid related to working capital adjustments; and (6) other assets and
liabilities.
The preparation of the valuation required the use of significant assumptions and estimates. Critical
estimates included, but were not limited to, future expected cash flows, including projected revenues and
89
expenses, and the applicable discount rates. These estimates were based on assumptions that Repligen
believes to be reasonable. However, actual results may differ from these estimates.
Total consideration transferred is as follows (amounts in thousands):
Cash consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement of preexisting liabilities . . . . . . . . . . . . . . . . . . . . .
$ 130,713
69,422
1,548
2,310
Fair value of net assets acquired . . . . . . . . . . . . . .
$203,993
Acquisition related costs are not included as a component of consideration transferred but are expensed
in the periods in which the costs are incurred. The Company incurred $4.0 million in transaction costs
associated with the ARTeSYN acquisition in 2020. The transaction costs are included in selling, general
and administrative expenses in the consolidated statements of comprehensive income.
The consideration transferred includes $1.5 million related to consideration that was deferred at the
acquisition date, with payment to the Sellers contingent upon recognizing revenue on a large-scale
system within 120 days of the acquisition date. This consideration is recorded at its estimated fair value
as of the acquisition date, which includes the assumption of high probability of such revenue being
recognized. During the measurement period, which may be up to one year from the acquisition date, we
may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to
goodwill. Upon conclusion of the measurement period or final determination of the values of assets
acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our
consolidated statements of comprehensive income.
Fair Value of Net Assets Acquired
The preliminary allocation of purchase price is based on the fair value of assets acquired and liabilities
assumed as of the acquisition date, based on the preliminary valuation. As additional information
becomes available, the Company may further revise its preliminary purchase price allocation during the
remainder of the measurement period (which will not exceed 12 months from December 3, 2020). Any
such revision or changes may be material.
90
The components and estimated allocation of the purchase price consists of the following amounts
(amounts in thousands):
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . .
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease right of use asset . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Developed technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademark and tradename . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-competition agreements . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities, net
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liability, long-term . . . . . . . . . . . . . . . . . . . . .
$
2,982
4,811
8,592
5,561
1,836
1,611
26
38,400
27,060
1,630
300
128,658
(2,161)
(8,856)
(3,583)
(1,240)
(24)
(417)
(1,193)
Fair value of net assets acquired . . . . . . . . . . . . . .
$203,993
Acquired Goodwill
The goodwill of $128.7 million represents future economic benefits expected to arise from synergies
from combining operations and commercial organizations to increase market presence and the extension
of existing customer relationships. Substantially all of the goodwill recorded is expected to be deductible
for income tax purposes.
Intangible Assets
The following table sets forth the components of the identified intangible assets associated with the
ARTeSYN Acquisition and their estimated useful lives:
Useful life
Fair Value
Customer relationships . . . . . . . . . . . .
Developed technology . . . . . . . . . . . .
Trademark and tradename . . . . . . . .
Non-competition agreements . . . . . . .
17 years
15 years
21 years
3 years
(Amounts in thousands)
$38,400
27,060
1,630
300
$67,390
The preliminary purchase price allocation is subject to adjustment as purchase accounting is finalized.
The final purchase price allocation will be determined upon completion of final valuation analysis, and
the fair value allocation of assets acquired and liabilities assumed could differ materially from the
preliminary valuation analysis. The final allocation may include changes to: (1) deferred revenue;
(2) inventory; (3) deferred tax liabilities, net; (4) allocations to intangible assets such as tradenames,
developed technology and customer relationships as well as goodwill; (5) final consideration paid
related to working capital adjustments; and (6) other assets and liabilities.
91
Non-Metallic Solutions, Inc.
On October 15, 2020, the Company executed a Stock Purchase Agreement with Non-Metallic
Solutions, Inc. (“NMS”), a Massachusetts corporation, and each of William Malloneé and Derek Masser,
the legal and beneficial owners of NMS, to purchase NMS, which transaction subsequently closed on
October 20, 2020 (the “NMS Acquisition”).
NMS, headquartered in Auburn, Massachusetts, is a manufacturer of fabricated plastics, custom
containers, and related assemblies and components used in the manufacturing of biologic drugs. The
acquisition of NMS allows Repligen to expand its line of single-use systems and associated integrated
flow path assemblies, streamline the supply chain for current products, and gives the Company more
flexibility to scale and expand single-use and systems portfolios.
Consideration Transferred
The NMS Acquisition was accounted for as a purchase of a business under ASC 805, “Business
Combinations.” Total consideration paid was $16.2 million, which included $1.3 million deposited into
an escrow account against which the Company may make claims for indemnification. As disclosed in the
Quarterly Report on Form 10-Q for the period ended June 30, 2020, the Company voluntarily adopted
the amendments to financial disclosure requirements around the significance tests in the “significant
subsidiaries” definition in Rule 1-02(w), Securities Act Rule 405, and Exchange Act Rule 12b-2. As a
result, the Company determined that NMS is not a significant subsidiary and therefore no separate
financial statements are required. The fair value of the net tangible assets acquired is estimated to be
approximately $0.9 million, the fair value of the intangible assets acquired is estimated to be
$8.5 million, and the residual goodwill is estimated to be approximately $6.8 million. Acquisition-related
costs are not included as a component of consideration transferred but are expensed in the periods in
which costs are incurred. The Company incurred $0.2 million of acquisition-related costs associated with
the NMS Acquisition in 2020. The transaction costs are included in selling, general and administrative
expenses in the consolidated statements of comprehensive income.
Fair Value of Net Assets Acquired
The preliminary allocation of purchase price is based on the fair value of assets acquired and liabilities
assumed as of the acquisition date, based on the preliminary valuation. As additional information
becomes available, the Company may further revise its preliminary purchase price allocation during the
remainder of the measurement period (which will not exceed 12 months from October 20, 2020).
92
The components and estimated allocation of the purchase price consist of the following amounts
(amounts in thousands):
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . .
Property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease right of use asset . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Developed technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademark and tradename . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-competition agreements . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liability, long-term . . . . . . . . . . . . . . . . . . . . . .
$ 1,163
415
334
13
73
194
6,370
1,810
190
90
6,784
24
(96)
(999)
(136)
(59)
Fair value of net assets acquired . . . . . . . . . . . . . . .
$16,170
Acquired Goodwill
The goodwill of $6.8 million represents future economic benefits expected to arise from anticipated
synergies from the integration of NMS. These synergies include certain cost savings, operating
efficiencies and other strategic benefits projected to be achieved as a result of the NMS Acquisition.
Substantially all of the goodwill recorded is expected to be deductible for income tax purposes.
Intangible Assets
The following table sets forth the components of the identified intangible assets associated with the NMS
Acquisition and their estimated useful lives:
Useful life
Fair Value
Customer relationships . . . . . . . . . . . .
Developed technology . . . . . . . . . . . .
Trademark and tradename . . . . . . . .
Non-competition agreements . . . . . . .
14 years
12 years
15 years
3 years
(Amounts in thousands)
$6,370
1,810
190
90
$8,460
Engineered Molding Technology LLC
On July 13, 2020, the Company completed the acquisition of 100% of the membership interests of EMT,
a New York limited liability company, pursuant to a Membership Interest Purchase Agreement, dated
June 26, 2020, by and among the Company, EMT, and each of Michael Pandori and Todd Etesse, the
legal and beneficial owners of EMT (such acquisition, the “EMT Acquisition”).
EMT, headquartered in Clifton Park, New York, is an innovator and manufacturer of single-use silicone
assemblies and components used in the manufacturing of biologic drugs. EMT’s standard and custom
molding as well as their over-molded connectors and silicone tubing products are key components in
93
single-use filtration and chromatography systems. EMT’s products will complement and expand
Repligen’s single-use product offerings.
Consideration Transferred
The EMT Acquisition was accounted for as a purchase of a business under ASC 805, “Business
Combinations”. Total consideration paid was $28.5 million, which included $2.2 million deposited into
an escrow account against which the Company may make claims for indemnification. Under the
acquisition method of accounting, the net assets of EMT were recorded as of the acquisition date, at their
respective fair values, and consolidated with those of Repligen. The fair value of the net tangible assets
acquired is estimated to be approximately $1.5 million, the fair value of the intangible assets acquired is
estimated to be $14.4 million, and the residual goodwill is estimated to be approximately $12.6 million.
The estimated consideration and preliminary purchase price information have been prepared using a
preliminary valuation. The preparation of the valuation required the use of significant assumptions and
estimates. Critical estimates included, but were not limited to, future expected cash flows, including
projected revenues and expenses, and the applicable discount rates. These estimates were based on
assumptions that Repligen believes to be reasonable. However, actual results may differ from these
estimates.
Acquisition-related costs are not included as a component of consideration transferred but are expensed
in the periods in which the costs are incurred. The Company incurred $1.2 million of acquisition related
costs associated with the EMT Acquisition in 2020. The transaction costs are included in selling, general
and administrative expenses in the consolidated statements of comprehensive income.
Fair Value of Net Assets Acquired
The preliminary allocation of purchase price is based on the fair value of assets acquired and liabilities
assumed as of the acquisition date, based on the preliminary valuation. As additional information
becomes available, the Company may further revise its preliminary purchase price allocation during the
remainder of the measurement period (which will not exceed 12 months from July 13, 2020). Any such
revisions or changes may be material. The components and allocation of the purchase price consist of
the following amounts (amounts in thousands):
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . .
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease right of use assets
. . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Developed technology . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademark and tradename . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Non-compete agreements
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liability, long-term . . . . . . . . . . . . . . . . . .
$
69
1,057
449
7
472
1,050
11,080
2,910
320
50
12,585
(283)
(202)
(211)
(839)
Fair value of net assets acquired . . . . . . . . . . . . . . .
$28,514
94
Acquired Goodwill
The goodwill of $12.6 million represents future economic benefits expected to arise from anticipated
synergies from the integration of EMT. These synergies include certain cost savings, operating
efficiencies and other strategic benefits projected to be achieved as a result of the EMT Acquisition.
Substantially all of the goodwill recorded is expected to be deductible for income tax purposes.
Intangible Assets
The following table sets forth the components of the identified intangible assets associated with the EMT
Acquisition and their estimated useful lives:
Useful life
Fair Value
Customer relationships . . . . . . . . . . . .
Developed technology . . . . . . . . . . . .
Trademark and tradename . . . . . . . .
Non-competition agreements . . . . . . .
14 years
11 years
14 years
3 years
(Amounts in thousands)
$11,080
2,910
320
50
$14,360
Revenue, Net Income and Pro Forma Presentation
The Company has included the operating results of our 2020 acquisitions of ARTeSYN, NMS and EMT
in its consolidated statements of comprehensive income since their respective acquisition dates. The
Company does not consider these acquisitions to be material to its consolidated statements of
comprehensive income and therefore has not included pro forma results.
C Technologies
On May 31, 2019, Repligen acquired C Technologies, pursuant to the terms of a Stock Purchase
Agreement (the “Agreement”), by and among Repligen, C Technologies and Craig Harrison, an
individual and sole stockholder of C Technologies (such acquisition, the “C Technologies Acquisition”).
Acquisition-related costs are not included as a component of consideration transferred but are expensed
in the periods in which the costs are incurred. The Company incurred $4.0 million in transaction costs in
2019. The transaction costs are included in selling, general and administrative expenses in the
consolidated statements of comprehensive income. In connection with the transaction, an additional
$9.0 million was paid to employees during the second quarter of 2020, based on their continued
employment with the Company one year after the date of the close of the C Technologies Acquisition.
The Company has recognized $3.7 million of compensation expense associated with this amount due to
employees in 2020 and has recognized $9.0 million of compensation expense associated with this
amount due since the C Technologies Acquisition.
Fair Value of Net Assets Acquired
The allocation of purchase price is based on the fair value of assets acquired and liabilities assumed as
of the acquisition date, based on the preliminary valuation. The Company obtained this information
during due diligence and through other sources. In the months after closing, the Company obtained
additional information about these assets and liabilities as it learned more about C Technologies. The
Company refined the estimates of fair value to more accurately allocate the purchase price. Only items
identified as of the acquisition date were considered for subsequent adjustment. We made appropriate
adjustments to the purchase price allocation during the measurement period, which was one year from
95
the acquisition date. The components and allocation of the purchase price consists of the following
amounts (amounts in thousands):
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . .
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease right of use asset . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Developed technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademark and tradename . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-competition agreements . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued bonus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liability, long-term . . . . . . . . . . . . . . . . . . . . .
$
3,795
26,933
3,044
3,783
93
40
3,836
59,680
28,920
1,570
660
142,314
895
(436)
(2,767)
(26,928)
(1,709)
(51)
(3,785)
Fair value of net assets acquired . . . . . . . . . . . . . .
$239,887
Acquired Goodwill
The goodwill of $142.3 million represents future economic benefits expected to arise from synergies
from combining operations and commercial organizations to increase market presence and the extension
of existing customer relationships. Substantially all of the goodwill recorded is expected to be deductible
for income tax purposes. Pursuant to the Company’s business combination accounting policy included in
Note 2, “Summary of Significant Accounting Policies – Business Combinations, Goodwill and Intangible
Assets,” the Company recorded goodwill adjustments for the effects on goodwill of changes to net assets
acquired during the period that such change is identified, provided that any such change is within the
measurement period (up to one year from the date of the acquisition). In March 2020, the Company
recorded an adjustment to goodwill of $0.3 million related to additional state income tax liabilities to be
paid by the seller, which were incurred from the Company’s finalized 338(h)(10) tax election.
Revenue, Net Income and Pro Forma Presentation
The Company recorded revenue from C Technologies of $16.4 million from May 31, 2019, the date of
acquisition, to December 31, 2019. The Company recorded a net loss from C Technologies’ results of
operations of $7.4 million from May 31, 2019 to December 31, 2019. The Company has included the
operating results of C Technologies in its consolidated statements of comprehensive income since the
May 31, 2019 acquisition date. The following pro forma financial information presents the combined
results of operations of Repligen and C Technologies as if the acquisition had occurred on January 1,
2019 after giving effect to certain pro forma adjustments. The pro forma adjustments reflected herein
include only those adjustments that are directly attributable to the C Technologies Acquisition, factually
supportable and have a recurring impact. These pro forma adjustments include amortization expense on
the acquired identifiable intangible assets, adjustments to stock-based compensation expense for equity
compensation issued to C Technologies employees and the income tax effect of the adjustments made. In
96
addition, acquisition-related transaction costs and an accounting adjustment to record inventory at fair
value were excluded from pro forma net income in 2019.
Prior to the C Technologies Acquisition, C Technologies did not generate monthly or quarterly financial
statements that were prepared in accordance with GAAP.
The following pro forma financial information does not reflect any adjustments for anticipated expense
savings resulting from the acquisition and is not necessarily indicative of the operating results that would
have actually occurred had the transaction been consummated on January 1, 2019 or of future results
(amounts in thousands, except per share data):
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2019
2018
$279,434
$ 23,394
$217,739
$ 21,195
$
$
0.48
0.48
$
$
0.44
0.43
4. Leases
The Company is a lessee under leases of manufacturing facilities, office spaces, machinery, certain office
equipment and vehicles. A majority of the Company’s leases are operating leases with remaining lease
terms between one month and 10 years. Finance leases are immaterial to the Company’s consolidated
financial statements. The Company determines if an arrangement qualifies as a lease and what type of
lease it is at inception. The Company elected the package of practical expedients permitted under the
transition guidance within the new lease standard, which among other things, allowed it to continue to
account for existing leases based on the historical lease classification. The Company also elected the
practical expedients to combine lease and non-lease components and to exclude right of use assets and
lease liabilities for leases with an initial term of 12 months or less from the balance sheet.
Some of the lease agreements the Company enters into include Company options to either extend and/
or early terminate the lease, the costs of which are included in the Company’s operating lease liabilities
to the extent that such options are reasonably certain of being exercised. Leases with renewal options
allow the Company to extend the lease term typically between 1 and 5 years per option, some of its
leases have multiple options to extend. When determining if a renewal option is reasonably certain of
being exercised, the Company considers several economic factors, including but not limited to, the
significance of leasehold improvements incurred on the property, whether the asset is difficult to replace,
underlying contractual obligations, or specific characteristics unique to that particular lease that would
make it reasonably certain that the Company would exercise such options.
As of December 31, 2020 and 2019, operating lease right of use assets were $25.2 million and
$25.7 million, respectively and operating lease liabilities were $31.7 million and $30.6 million,
respectively. The Company acquired EMT, NMS and ARTeSYN in 2020 and entered into a number of
automobile leases among others. As a result, the operating right of use asset and operating lease liability
balances increased by a total of $3.0 million in 2020 on their commencement dates. On July 7, 2020,
the Company entered into a First Amendment to the current lease agreement associated with our
Marlborough, Massachusetts facility, to expand the existing premises by 66,939 square feet and in
December 2020, the Second Amendment to the current lease agreement was signed, changing the
commencement date of the expansion lease from April 1, 2021 to January 1, 2021. As a result, the
operating right of use asset and operating lease liability balances increased by a total of
97
approximately $2.8 million. Amounts related to financing leases were immaterial. The maturities of the
Company’s operating lease liabilities as of December 31, 2020 are as follows (amounts in thousands):
As of December 31, 2020
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total future minimum lease payments . . . . . . . . . . .
Less: amount of lease payment representing interest . . .
Amount
$ 7,007
5,732
4,614
4,162
3,653
12,949
38,117
6,438
Total operating lease liabilities . . . . . . . . . . . . . . .
$31,679
Total operating lease liabilities included on the Company’s consolidated balance sheet are as follows
(amounts in thousands):
Operating lease liability . . . . . . . . . . . . . . . . . . . . .
Operating lease liability, long-term . . . . . . . . . . . . .
$ 5,254
26,425
$ 3,557
26,995
Minimum operating lease payments . . . . . . . . . . . .
$31,679
$30,552
December 31,
2020
2019
Lease expense for these leases is recognized on a straight-line basis over the lease term, with variable
lease payments recognized in the period those payments are incurred. For the year ended
December 31, 2020 and 2019, total lease cost is comprised of the following:
Lease Cost
For the Years Ended
December 31,
2020
2019
(Amounts in
thousands)
Operating lease cost . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
Variable operating lease cost
$5,645
2,033
$4,480
1,480
Lease cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7,678
$5,960
The following information represents supplemental disclosure for the consolidated statements of cash
flows related to operating leases (amounts in thousands):
For the Years Ended
December 31,
2020
2019
Operating lease cost . . . . . . . . . . . . . . . . . . . . . . . . .
$(5,647) $(4,004)
Most of the leases do not provide implicit interest rates and therefore the Company determines the discount
rate based on its incremental borrowing rate. The incremental borrowing rate for the Company’s leases is
determined based on lease term and currency in which the lease payments are made.
The weighted average remaining lease term and the weighted average discount rate used to measure
the Company’s operating lease liabilities as of December 31, 2020 were:
Weighted average remaining lease term (years) . . . . . . . . .
Weighted average discount rate . . . . . . . . . . . . . . . . . . . . .
7.19
4.90%
98
5. Revenue Recognition
The Company generates revenue from the sale of bioprocessing products, equipment devices, and
related consumables used with these equipment devices to customers in the life science and
biopharmaceutical industries. Under ASC 606, “Revenue from Contracts with Customers,” revenue is
recognized when, or as, obligations under the terms of a contract are satisfied, which occurs when
control of the promised products or services is transferred to customers.
Disaggregation of Revenue
Revenue for the years ended December 31, 2020, 2019 and 2018 was as follows (amounts in
thousands, except percentages):
For the Years Ended December 31,
2020
2019
2018
Product revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Royalty and other income . . . . . . . . . . . . . . . . . . . . .
$366,136
124
(Amounts in thousands)
$270,097
148
$193,891
141
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . .
$366,260
$270,245
$194,032
When disaggregating revenue, the Company considered all of the economic factors that may affect its
revenues. Because all of its revenues are from bioprocessing customers, there are no differences in the
nature, timing and uncertainty of the Company’s revenues and cash flows from any of its product lines.
However, given that the Company’s revenues are generated in different geographic regions, factors such
as regulatory and geopolitical factors within those regions could impact the nature, timing and
uncertainty of the Company’s revenues and cash flows. In addition, a significant portion of the
Company’s revenues are generated from two customers; therefore, economic factors specific to these two
customers could impact the nature, timing and uncertainty of the Company’s revenues and cash flows.
Disaggregated revenue from contracts with customers by geographic region can be found in Note 2.,
“Summary of Significant Accounting Policies – Segment Reporting,” above.
Revenue from significant customers that represent 10% or more of the Company’s total revenue is as
follows (amounts in thousands):
MilliporeSigma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cytiva (formerly GE Healthcare) . . . . . . . . . . . . . . . . . . . .
$39,511
N/A
$36,190
$31,441
$29,843
$29,616
For the Years Ended December 31,
2020
2019
2018
Filtration Products
The Company’s filtration products generate revenue through the sale of KrosFlo® hollow fiber TFF
systems, TangenX® flat sheet cassettes, Spectrum® hollow fiber filters, membranes and modules, XCell
ATF® systems and related consumables. Supporting our systems, we also sell ProConnex® single-use flow
path assemblies and custom silicone-based, single-use flow path assemblies and components from EMT,
NMS and ARTeSYN, three acquisitions completed in 2020.
The Company’s KrosFlo systems are used in the filtration, isolation, purification and concentration of
biologics and diagnostic products. TFF is a rapid and efficient method for separation and purification of
biomolecules that is widely used in laboratory, process development and process scale applications in
biopharmaceutical manufacturing. Sales of large-scale systems generally include components and
99
consumables as well as training and installation services at the request of the customer. Because the
initial sale of components and consumables is necessary for the operation of the system, such items are
combined with the systems as a single performance obligation. Training and installation services do not
significantly modify or customize these systems and therefore represent a distinct performance obligation.
The Company’s TangenX flat sheet cassettes (SIUS®, SIUS Gamma® and PRO) are not highly
interdependent on one another and are therefore considered distinct products that represent separate
performance obligations. Product revenue from the sale of TangenX flat sheet cassettes is generally
recognized at a point in time upon transfer of control of the customer.
The Company’s other filtration product offerings are not highly interdependent of one another and are
therefore considered distinct products that represent separate performance obligations. Revenue on these
products is generally recognized at a point in time upon transfer of control to the customer. The
Company invoices the customer for the installation and training services in an amount that directly
corresponds with the value to the customer of the Company’s performance to date; therefore, revenue
recognized is based on the amount billable to the customer in accordance with the practical expedient
under ASC 606-10-55-18.
The Company also markets the XCell ATF system, a technologically advanced filtration device used in
upstream processes to continuously remove cellular metabolic waste products during the course of a
fermentation run, freeing healthy cells to continue producing the biologic drug of interest. XCell ATF
systems typically include a filtration system and consumables (i.e., tubing sets, metal stands) as well as
training and installation services at the request of the customer. The filtration system and consumables are
considered distinct products and therefore represent separate performance obligations. First time
purchasers of the systems typically purchase a controller that is shipped with the tubing set(s) and metal
stand(s). The controller is not considered distinct as it is a proprietary product that is highly
interdependent with the filtration system; therefore, the controller is combined with the filtration system
and accounted for as a single performance obligation. The training and installation services do not
significantly modify or customize the XCell ATF system and therefore represent a distinct performance
obligation. XCell ATF system product revenue related to the filtration system (including the controller if
applicable) and consumables is generally recognized at a point in time upon transfer of control to the
customer. XCell ATF system service revenue related to training and installation services is generally
recognized over time, as the customer simultaneously receives and consumes the benefits as the
Company performs. The Company invoices the customer for the installation and training services in an
amount that directly corresponds with the value to the customer of the Company’s performance to date;
therefore, revenue recognized is based on the amount billable to the customer in accordance with the
practical expedient under ASC 606-10-55-18.
On July 13, 2020, the Company completed the EMT Acquisition and added EMT’s silicone-based,
single-use components and manifolds to its filtration franchise. These products are key components in
single-use filtration and chromatography systems and will help expand its line of single-use ProConnex
flow paths, streamline its supply chain for ATF and provide more flexibility as the Company scales and
expands its single-use and systems portfolios.
On October 20, 2020, the Company completed the NMS Acquisition and added their fabricated
plastics, custom containers and related assemblies and components to its filtration franchise. These
products will complement and expand Repligen’s single-use product offerings.
On December 3, 2020, the Company completed the ARTeSYN Acquisition and added its suite of
single-use solutions with the goal of enabling “abundance of medicine” by allowing ten times greater
efficiency in biologics manufacturing.
100
Chromatography Products
The Company’s chromatography products include a number of products used in the downstream
purification and quality control of biological drugs. The majority of chromatography revenue relates to
the OPUS® pre-packed chromatography column line. OPUS columns are designed to be disposable
following a production campaign. Each OPUS column is delivered pre-packaged with the customer’s
choice of chromatography resin, which is either provided by the Company for the customer or customer
supplied. In either scenario, the OPUS column and resin are not interdependent of one another and are
therefore considered distinct products that represent separate performance obligations. Chromatography
product revenue is generally recognized at a point in time upon transfer of control to the customer.
Process Analytics Products
The Process Analytics franchise generates revenue primarily through the sale of the SoloVPE and
FlowVPE Slope Spectroscopy systems, consumables and service. These products complement and support
the Company’s existing Filtration, Chromatography and Proteins franchises as they allow end-users to
make in-line protein concentration measurements in filtration, chromatography and fill-finish applications,
designed to allow for real-time process monitoring.
Protein Products
The Company’s Protein franchise generates revenue through the sale of Protein A affinity ligands and
growth factors. Protein A ligands are an essential component of Protein A chromatography resins
(media) used in the purification of virtually all mAb-based drugs on the market or in development. The
Company manufactures multiple forms of Protein A ligands under long-term supply agreements with
major life sciences companies, who in turn sell their Protein A chromatography media to end users
(biopharmaceutical manufacturers). The Company also manufactures growth factors for sale under long-
term supply agreements with certain life sciences companies as well as for direct sales to its customers.
Each protein product is considered distinct and therefore represents a separate performance obligation.
Protein product revenue is generally recognized at a point in time upon transfer of control to the
customer.
Other Products
The Company’s other products include operating room products sold to hospitals. Other product revenue
is generally recognized at a point in time upon transfer of control to the customer.
Transaction Price Allocated to Future Performance Obligations
Remaining performance obligations represent the transaction price of contracts for which work has not
been performed or has been partially performed. The Company’s future performance obligations relate
primarily to the installation and training of certain of its systems sold to customers. These performance
obligations are completed within one year of receipt of a purchase order from its customers.
Accordingly, the Company has elected to not disclose the value of these unsatisfied performance
obligations as provided under ASC 606-10-50-14.
101
Contract Balances from Contracts with Customers
The following table provides information about receivables and deferred revenue from contracts with
customers as of December 31, 2020 (amounts in thousands):
2020
2019
Balances from contracts with customers only:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue (included in accrued liabilities in the
$71,257
$43,068
consolidated balance sheets)
. . . . . . . . . . . . . . . . . . . . . . . . . .
$15,318
$ 5,005
Revenue recognized during years presented relating to:
The beginning deferred revenue balance . . . . . . . . . . . . . . . . . . .
Changes in pricing related to products or services satisfied in
$ 3,361
$
833
previous periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
The timing of revenue recognition, billings and cash collections results in the accounts receivable and
deferred revenue balances on the Company’s consolidated balance sheets.
A contract asset is created when the Company satisfies a performance obligation by transferring a
promised good to the customer. Contract assets may represent conditional or unconditional rights to
consideration. The right is conditional, and recorded as a contract asset if the Company must first satisfy
another performance obligation in the contract before it is entitled to payment from the customer.
Contract assets are transferred to billed receivables once the right becomes unconditional. If the
Company has the unconditional right to receive consideration from the customer, the contract asset is
accounted for as a billed receivable and presented separately from other contract assets. A right is
unconditional if nothing other than the passage of time is required before payment of that consideration
is due.
When consideration is received, or such consideration is unconditionally due, from a customer prior to
transferring goods or services to the customer under the terms of a contract, a contract liability is
recorded. Contract liabilities are recognized as revenue after control of the products or services is
transferred to the customer and all revenue recognition criteria have been met.
Costs to Obtain or Fulfill a Customer Contract
The Company’s sales commission structure is based on achieving revenue targets. The commissions are
driven by revenue derived from customer purchase orders which are short term in nature.
Applying the practical expedient in paragraph 340-40-25-4, the Company recognizes the incremental
costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the
Company otherwise would have recognized is one year or less. These costs are included in selling,
general, and administrative expenses in our consolidated statement of comprehensive income. When
shipping and handling costs are incurred after a customer obtains control of the products, the Company
accounts for these as costs to fulfill the promise and not as a separate performance obligation.
6. Credit Losses
Effective January 1, 2020, the Company adopted ASU 2016-13, “Financial Instruments – Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments,” prospectively. ASU 2016-13
replaces the incurred loss impairment model with an expected credit loss impairment model for financial
instruments, including trade receivables. The guidance requires entities to consider forward-looking
information to estimate expected credit losses, resulting in earlier recognition of losses for receivables
that are current or not yet due. Upon adoption, changes in the allowance were not material for the
transition period starting January 1, 2020 through December 31, 2020.
102
The Company is exposed to credit losses primarily through sales of products and services. The
Company’s expected loss allowance methodology for accounts receivable is developed using historical
collection experience, current and future economic and market conditions and a review of the current
status of customers’ trade accounts receivable. Customers are pooled based on sharing specific risk
factors, including geographic location. Due to the short-term nature of such receivables, the estimated
accounts receivable that may not be collected is based on aging of the accounts receivable balances.
Customers are assessed for credit worthiness upfront through a credit review, which includes assessment
based on the Company’s analysis of their financial statements when a credit rating is not available. The
Company evaluates contract terms and conditions, country and political risk, and may require
prepayment to mitigate risk of loss. Specific allowance amounts are established to record the
appropriate provision for customers that have a higher probability of default. The Company monitors
changes to the receivables balance on a timely basis, and balances are written off as they are
determined to be uncollectable after all collection efforts have been exhausted. Estimates of potential
credit losses are used to determine the allowance. It is based on assessment of anticipated payment and
all other historical, current and future information that is reasonably available.
The accounts receivable balance on the Company’s consolidated balance sheet as of December 31,
2020 was $71.3 million, net of $0.8 million of allowances. The following table provides a roll-forward
of the allowance for credit losses in 2020 that is deducted from the amortized cost basis of accounts
receivable to present the net amount expected to be collected (amounts in thousands):
Balance at January 1, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current period change for expected credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at March 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current period change for write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current period change for expected credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at June 30, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current period change for expected credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at September 30, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current period change for write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current period change for expected credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020
$(525)
(133)
$(658)
37
83
$(538)
(83)
$(621)
65
(206)
Balance at December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(762)
103
7. Goodwill and Intangible Assets
Goodwill
Goodwill represents the difference between the purchase price and the estimated fair value of
identifiable assets acquired and liabilities assumed. Goodwill acquired in a business combination and
determined to have an indefinite useful life is not amortized, but instead is tested for impairment at least
annually in accordance with ASC 350. The following table represents the changes in the carrying value
of goodwill for the years ended December 31, 2020 and 2019 (amounts in thousands):
Balance as of December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of C Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative translation adjustment
Balance as of December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Measurement period adjustment - C Technologies . . . . . . . . . . . . . . . . . . . . .
Acquisition of EMT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of NMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of ARTeSYN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative translation adjustment
$326,735
142,021
(343)
$468,413
293
12,585
6,784
128,658
1,572
Balance as of December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$618,305
During each of the fourth quarters of 2020, 2019 and 2018, the Company completed its annual
impairment assessments and concluded that goodwill was not impaired in any of those years.
Intangible Assets
Intangible assets with a definitive life are amortized over their useful lives using the straight-line method,
and the amortization expense is recorded within cost of product revenue and selling, general and
administrative expense in the Company’s consolidated statements of comprehensive income. Intangible
assets and their related useful lives are reviewed at least annually to determine if any adverse conditions
exist that would indicate the carrying value of these assets may not be recoverable. More frequent
impairment assessments are conducted if certain conditions exist, including a change in the competitive
landscape, any internal decisions to pursue new or different technology strategies, a loss of a significant
customer, or a significant change in the marketplace, including changes in the prices paid for the
Company’s products or changes in the size of the market for the Company’s products. If impairment
indicators are present, the Company determines whether the underlying intangible asset is recoverable
through estimated future undiscounted cash flows. If the asset is not found to be recoverable, it is written
down to the estimated fair value of the asset based on the sum of the future discounted cash flows
expected to result from the use and disposition of the asset. If the estimate of an intangible asset’s
remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized
prospectively over the revised remaining useful life. The Company continues to believe that its definite-
lived intangible assets are recoverable at December 31, 2020.
Indefinite-lived intangible assets are tested for impairment at least annually. There has been no
impairment of our intangible assets for the periods presented.
104
Intangible assets, net consisted of the following at December 31, 2020:
December 31, 2020
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
(Amounts in thousands)
Weighted
Average
Useful Life
(in years)
Finite-lived intangible assets:
Technology - developed . . . . . . . . . . .
Patents . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . .
Trademarks . . . . . . . . . . . . . . . . . . . .
Other intangibles . . . . . . . . . . . . . . . .
Total finite-lived intangible
$114,217
240
217,790
5,893
2,142
$(14,444)
(240)
(37,333)
(541)
(1,324)
$ 99,773
—
180,457
5,352
818
assets . . . . . . . . . . . . . . . . . . .
340,282
(53,882)
286,400
Indefinite-lived intangible
asset:
17
8
16
20
3
16
Trademarks . . . . . . . . . . . . . . . . . . . .
700
—
700
—
Total intangible assets . . . . . . . . . . . .
$340,982
$(53,882)
$287,100
Intangible assets consisted of the following at December 31, 2019:
December 31, 2019
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
(Amounts in thousands)
Weighted
Average
Useful Life
(in years)
Finite-lived intangible assets:
Technology - developed . . . . . . . . . . .
Patents . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . .
Trademarks . . . . . . . . . . . . . . . . . . . .
Other intangibles . . . . . . . . . . . . . . . .
Total finite-lived intangible
$ 82,169
240
160,825
3,752
1,697
$ (9,669)
(240)
(25,642)
(333)
(947)
$ 72,500
—
135,183
3,419
750
assets . . . . . . . . . . . . . . . . . . .
248,683
(36,831)
211,852
Indefinite-lived intangible
asset:
19
8
15
20
3
16
Trademarks . . . . . . . . . . . . . . . . . . . .
700
—
700
—
Total intangible assets . . . . . . . . . . . .
$249,383
$(36,831)
$212,552
105
Amortization expense for finite-lived intangible assets was $16.1 million, $13.6 million and
$10.6 million for the years ended December 31, 2020, 2019 and 2018, respectively. As of
December 31, 2020, the Company expects to record the following amortization expense (amounts in
thousands):
For the Years Ended December 31,
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 and thereafter
Estimated
Amortization
Expense
$ 20,767
20,765
20,648
20,080
19,813
184,327
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$286,400
8. Consolidated Balance Sheet Detail
Inventories, net
Inventories, net consists of the following:
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-process
Finished products . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2020
2019
(Amounts in thousands)
$29,328
$48,746
8,360
8,084
17,144
38,195
Total inventories, net
. . . . . . . . . . . . . . . . . . . .
$95,025
$54,832
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following:
December 31,
2020
2019
(Amounts in thousands)
Equipment maintenance and services . . . . . . . . . . . .
Prepaid income taxes . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid insurance . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,601
2,649
1,936
9,490
$1,662
2,719
80
1,456
Total prepaid expenses and other current
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$18,676
$5,917
106
Property, Plant and Equipment
Property, plant and equipment consist of the following:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . .
Equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures and office equipment . . . . . . . .
Computer hardware and software . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2020
2019
(Amounts in thousands)
$ 1,023
$ 1,023
1,007
764
23,905
31,331
36,257
43,072
6,312
8,714
8,810
15,397
6,707
14,927
56
455
Total property, plant and equipment . . . . . . .
Less - Accumulated depreciation . . . . . . . . . . . . . .
115,926
(49,056)
83,834
(35,379)
Total property, plant and equipment, net
. . .
$ 66,870
$ 48,455
Depreciation expense totaled $10.9 million, $7.3 million and $5.2 million in the fiscal years ended
December 31, 2020, 2019 and 2018, respectively.
Accrued Liabilities
Accrued liabilities consist of the following:
Employee compensation . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . .
Royalty and license fees . . . . . . . . . . . . . . . . . . . . .
Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
December 31,
2020
2019
(Amounts in thousands)
$19,850
$20,288
3,874
1,423
123
466
1,500
1,576
1,081
1,425
5,005
15,318
1,898
12,589
Total accrued liabilities . . . . . . . . . . . . . . . . . . .
$53,085
$33,331
9.
Income Taxes
The components of income before income taxes are as follows:
For the Years Ended December 31,
2020
2019
2018
(Amounts in thousands)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $27,545 $ (5,432) $
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31,672
31,583
(73)
21,509
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $59,217 $26,151 $21,436
107
The components of the income tax provision are as follows:
For the Years Ended December 31,
2020
2019
2018
(Amounts in thousands)
Components of the income tax (benefit) provision:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,193
(5,902)
—
$ 8,290
(5,287)
1,737
$4,354
465
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (709) $ 4,740
$4,819
Jurisdictional components of the income tax (benefit) provision:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(4,741) $ (965)
(1,764)
7,469
(3,011)
7,043
$ (393)
718
4,494
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (709) $ 4,740
$4,819
During 2020, the Company generated $4.0 million in federal net operating losses and $1.1 million in
state net operating losses. At December 31, 2020, the Company had federal net operating loss
carryforwards of $2.9 million and state net operating loss carryforwards of $3.5 million. The federal net
operating loss carryforwards do not expire while the state net operating loss carryforwards will expire at
various dates through December 2040. At December 31, 2020, the Company had federal business tax
credits carryforwards of $6.2 million and state business tax credits carryforwards of $3.2 million
available to reduce future domestic income taxes. The business tax credit carryforwards will expire at
various dates through December 2040. The net operating loss and business tax credit carryforwards 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.
108
The components of deferred income taxes are as follows:
December 31,
2020
2019
(Amounts in thousands)
Deferred tax assets:
Temporary timing differences:
Stock-based compensation expense . . . .
Operating leases . . . . . . . . . . . . . . . . . .
Accrued bonus . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
$ 3,320
7,257
25
5,749
$ 2,922
7,295
1,379
4,994
Total temporary timing
differences . . . . . . . . . . . . . . . . . .
Net operating loss carryforwards . . . . . . . . . .
Tax business credits carryforwards . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . .
Less: valuation allowance . . . . . . . . . . . . . . . .
16,351
1,539
5,553
23,443
(727)
16,590
221
924
17,735
(6)
Net deferred tax assets . . . . . . . . . .
22,716
17,729
Deferred tax liabilities:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired intangible assets . . . . . . . . . . . . . . .
Operating lease right of use assets . . . . . . . .
Conversion option on convertible notes . . . . .
(1,487)
(4,233)
(27,152)
(5,744)
(8,651)
(1,288)
(1,650)
(24,605)
(6,144)
(11,066)
Total deferred tax liabilities . . . . . . .
(47,267)
(44,753)
Total net deferred tax liabilities . . . . . . . . . . . . . . .
$(24,551) $(27,024)
The net change in the total valuation allowance for the year ended December 31, 2020 and 2019 was
an increase of $0.7 million and a decrease of $0.1 million, respectively.
109
The reconciliation of the federal statutory rate to the effective income tax rate for the years ended
December 31, 2020, 2019 and 2018 is as follows:
For the Years Ended December 31,
2020
2019
2018
Amount
%
Amount
%
Amount
%
Income before income taxes . . . . . . . . . . . . . . . $59,217
(Amounts in thousands, except percentages)
$21,436
$26,151
Expected tax at statutory rate . . . . . . . . . . . . . .
Adjustments due to:
Difference between U.S. and foreign
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income and franchise tax . . . . . . . . .
Business tax credits . . . . . . . . . . . . . . . . . .
Permanent differences:
Stock-based compensation expense . . . . .
U.S. taxation of foreign earnings . . . . . . .
Executive compensation . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in U.S. federal tax rates . . . . . . . . . . .
Change in U.S. state tax rates . . . . . . . . . . . . .
Change in Netherlands tax rate . . . . . . . . . . . .
Transition tax . . . . . . . . . . . . . . . . . . . . . . . . . .
Uncertain tax provisions . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . .
Return to provision adjustments . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,436
21.0% 5,492
21.0% 4,502 21.0%
618
133
(4,660)
1.0%
0.2%
(7.9%)
436
(179)
(2,746)
1.7%
(0.7%)
(10.5%)
345
91
(1,760)
1.6%
0.4%
(8.2%)
(9,243)
51
1,401
896
(2,192)
(708)
250
—
(168)
(12)
(89)
578
(15.6%)
(1,877)
0.1% 2,227
841
2.4%
92
1.5%
—
(3.7%)
(1.2%)
—
(193)
0.4%
—
0.0%
(0.3%) 1,069
(125)
(0.0%)
(79)
(0.2%)
(218)
1.0%
(7.2%)
(5.7%)
(1,213)
8.5% 2,190 10.2%
1.7%
367
3.2%
0.5%
97
0.4%
0.0%
—
0.0%
3.5%
0.0%
748
(1.8%)
(388)
(0.7%)
(6.2%)
0.0% (1,338)
4.8%
4.1% 1,021
0.6%
125
(0.5%)
0.2%
33
(0.3%)
(0.1%)
(1)
(0.8%)
Income tax provision . . . . . . . . . . . . . . . . . . . . $
(709)
(1.2%)$ 4,740
18.1% $ 4,819 22.5%
The Company’s tax returns are subject to examination by federal, state and foreign tax authorities. The
Company’s two major tax jurisdictions are subject to examination for the following periods:
Jurisdiction
Fiscal Years Subject
to Examination
United States - federal and state . . . . . . . . . . . . . . . . . .
Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017-2020
2013-2020
110
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:
For the Years Ended December 31,
2020
2019
(Amounts in thousands)
Balance of gross unrecognized tax benefits, beginning of
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,422
$2,852
Gross amounts of increases in unrecognized tax benefits
as a result of tax positions taken in the current period . .
Gross amounts of decreases in unrecognized tax benefits
as a result of tax positions taken in the prior period . . . .
Gross amounts of decrease due to release . . . . . . . . . . . . .
Balance of gross unrecognized tax benefits, end of
154
(337)
(39)
602
(16)
(16)
period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,200
$3,422
Included in the balance of unrecognized tax benefits as of December 31, 2020 are $3.1 million of tax
benefits that, if recognized, would affect the effective tax rate. The Company classifies interest and
penalties related to income taxes as components of its income tax provision. The amount of interest and
penalties recorded in the accompanying consolidated statements of comprehensive income was
approximately $17,000, $5,000 and $1,000 for the years ended December 31, 2020, 2019 and
2018, respectively. The amount of interest and penalties recorded in the accompanying consolidated
balance sheets was approximately $58,000 and $41,000 as of December 31, 2020 and 2019,
respectively. The Company does not anticipate the amount of unrecognized tax benefits to change over
the next twelve months.
On March 27, 2020, President Trump signed the $2.2 trillion bipartisan Coronavirus Aid, Relief, and
Economic Security (“CARES”) Act. The CARES Act, the third congressional bill to address COVID-19,
provides for loans and other benefits to businesses, expanded unemployment insurance, direct payments
to those with middle-income and below wages, new appropriations funding for healthcare and other
priorities, and tax changes, including deferrals of employer payroll tax liabilities, coupled with an
employee retention tax credit and rollbacks of TCJA limitations on net operating losses (“NOLs”) and the
Section 163(j) business interest limitation and a TCJA technical correction on qualified improvement
property. The Company evaluated the provisions of the CARES Act and no provision had a material
effect on the Company’s financial position or results of operations at December 31, 2020 and for the
year then ended.
The Company is subject to a territorial tax system under the Tax Cuts and Jobs Act (“TCJA”) enacted in
December 2017 (the “2017 Tax Act”), in which the Company is required to provide for tax on Global
Intangible Low-Taxed Income (“GILTI”) earned by certain foreign subsidiaries. The Company has
adopted an accounting policy to provide for the tax expense related to GILTI in the year the tax is
incurred as a period expense.
The Company also considered the impact of the newly issued tax regulations in recording its income tax
accounts for the year ending December 31, 2020 which reduced the foreign earnings subject to taxation
under the GILTI provisions for the year ended December 31, 2018 and prospectively.
As of December 31, 2020, the Company has accumulated undistributed earnings generated by its
foreign subsidiaries of approximately $113.1 million. Because $58.0 million of such earnings have
previously been subject to the one-time transition tax on foreign earnings required by the 2017 Tax Act,
any additional taxes due with respect to such earnings or the excess of the amount for financial reporting
over the tax basis of the Company’s foreign investments would generally be limited to foreign and state
111
taxes. At December 31, 2020, the Company has not provided for taxes on outside basis differences of
its foreign subsidiaries, as the Company has the ability and intent to indefinitely reinvest the undistributed
earnings of its foreign subsidiaries, and there are no needs for such earnings in the United States that
would contradict its plan to indefinitely reinvest.
ASU 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory,” requires the income tax
consequences of intra-entity transfers of assets other than inventory to be recognized when the intra-entity
transfer occurs rather than deferring recognition of income tax consequences until the transfer was made
with an outside party. The Company adopted the provisions of this ASU in the first quarter of 2018. The
adoption resulted in a decrease of $5.7 million to other assets, a decrease of $5.0 million to deferred
tax liabilities and a decrease of $0.7 million to accumulated deficit at January 1, 2018.
10. Stockholders’ Equity
Public Offerings of Common Stock
On December 8, 2020, the Company completed a public offering in which 1,725,000 shares of its
common stock, including the underwriters’ exercise in full of an option to purchase an additional
225,000 shares, were sold to the public at a price of $181.00 per share (the “December Stock
Offering”). The net proceeds of the December Stock Offering, after deducting underwriting discounts and
commissions and other estimated offering expenses payable by the Company, were approximately
$297.8 million.
On July 19, 2019, the Company completed a public offering in which 1,587,000 shares of its common
stock, including the underwriters’ exercise in full of an option to purchase an additional 207,000 shares,
were sold to the public at a price of $87.00 per share (the “July Stock Offering”). The net proceeds of
the Stock Offering, after deducting underwriting discounts and commissions and other estimated offering
expenses payable by the Company, were approximately $131.1 million.
On May 3, 2019, the Company completed a public offering in which 3,144,531 shares of its common
stock, including the underwriters’ full exercise of an option to purchase up to an additional 410,156
shares, were sold to the public at a price of $64.00 per share. The total proceeds received by the
Company from this offering, net of underwriting discounts and commissions and other estimated offering
expenses payable by the Company, totaled approximately $189.6 million.
Stock Option and Incentive Plans
At the Company’s 2018 Annual Meeting of Stockholders held on May 16, 2018, the Company’s
shareholders approved the 2018 Stock Option and Incentive Plan (the “2018 Plan”). Under the 2018
Plan the number of shares of the Company’s common stock that are reserved and available for issuance
shall be 2,778,000 plus the number of shares of common stock available for issuance under the
Company’s Amended and Restated 2012 Stock Option and Incentive Plan (the “2012 Plan”). The shares
of common stock underlying any awards under the 2018 Plan, 2012 Plan and the Second Amended
and Restated 2001 Repligen Corporation Stock Plan (the “2001 Plan,” and together with the 2018 Plan
and 2012 Plan, the “Plans”) that are forfeited, canceled or otherwise terminated (other than by exercise)
shall be added back to the shares of stock available for issuance under the 2018 Plan. At December 31,
2020, 2,306,943 shares were available for future grants under the 2018 Plan.
112
Stock-Based Compensation
The Company recorded stock-based compensation expense of $17.0 million, $12.8 million and
$10.2 million for the years ended December 31, 2020, 2019 and 2018, respectively, for share-based
awards granted under the Plans. The following table presents stock-based compensation expense in the
Company’s consolidated statements of comprehensive income:
For the Years Ended December 31,
2020
2019
2018
Cost of product revenue . . . . . . . . . . . . . . . . . . .
Research and development
. . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . .
(Amounts in thousands)
$ 1,368
1,373
10,106
$ 1,929
1,534
13,544
$ 1,019
917
8,256
Total stock-based compensation . . . . . . . . .
$17,007
$12,847
$10,192
The 2018 Plan allows for the granting of incentive and nonqualified options to purchase shares of
common stock, restricted stock and other equity awards. Except for the grant to the Company’s Chief
Executive Officer (“CEO”) in 2018 mentioned below, employee grants under the Plans generally vest
over a three- to five-year period, with 20%-33% vesting on the first anniversary of the date of grant and
the remainder vesting in equal yearly installments thereafter. Nonqualified options issued to
non-employee directors and consultants under the Plans generally vest over one year. In the first quarter
of 2018, to create a longer-term retention incentive, the Company’s Compensation Committee granted
long-term incentive compensation awards to its CEO which consisted of both stock options and restricted
stock units that are subject to time-based vesting over nine years. Options granted under the Plans have a
maximum term of ten years from the date of grant and generally, the exercise price of the stock options
equals the fair market value of the Company’s common stock on the date of grant. At December 31,
2020, options to purchase 696,711 shares and 665,540 stock units were outstanding under the Plans.
The Company uses the Black-Scholes option pricing model to calculate the fair value of stock option
awards on the grant date, and the Company uses the value of the common stock as of the grant date to
value RSUs. The Company measures stock-based compensation costs at the grant date based on the
estimated fair value of the award. The Company recognizes expense on awards with service-based
vesting over the employee’s requisite service period on a straight-line basis. The Company has issued
performance stock units to certain employees which are tied to the achievement of certain Company
financial goal metrics and the passage of time. Finally, during 2020, the Company implemented a
program that issued performance stock units to certain employees set to vest upon the achievement of
individual goals and the passage of time. The Company recognizes expense on performance-based
awards over the vesting period based on the probability that the performance metrics will be achieved.
The Company recognizes stock-based compensation expense for options that are ultimately expected to
vest, and accordingly, such compensation expense has been adjusted for estimated forfeitures.
The fair value of share-based awards granted during the years ended December 31, 2020, 2019 and
2018 were calculated using the following estimated assumptions:
For the Years Ended December 31,
2020
2019
2018
. . . . . . .
Expected term (in years)
Expected volatility (range) . . . . . .
Risk-free interest rate . . . . . . . . . .
Expected dividend yield . . . . . . .
5.5-6.5
5.5-6.5
45.14 – 50.87% 45.14 – 50.87% 45.14 – 50.87%
1.55 – 2.56%
0%
2.63 – 2.96%
0%
0.34 – 1.15%
0%
5.5-7.5
113
Information regarding option activity for the year ended December 31, 2020 under the Plans is
summarized below:
Weighted
average
exercise
price
Weighted-
Average
Remaining
Contractual
Term
(in Years)
Aggregate
Intrinsic
Value
(in Thousands)
Shares
957,559
79,698
$ 30.81
$115.81
(340,546) $ 23.95
—
$ —
696,711
$ 43.88
6.90
$102,958
311,988
$ 31.75
5.91
$ 49,879
Options outstanding at December 31,
2019 . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . .
Forfeited/expired/cancelled . . .
Options outstanding at December 31,
2020 . . . . . . . . . . . . . . . . . . . . . . .
Options exercisable at December 31,
2020 . . . . . . . . . . . . . . . . . . . . . . .
Vested and expected to vest at
December 31, 2020(1) . . . . . . . . . .
667,220
6.86
$ 99,096
(1) Represents the number of vested options as of December 31, 2020 plus the number of unvested
options expected to vest as of December 31, 2020 based on the unvested outstanding options at
December 31, 2020 adjusted for estimated forfeiture rates of 8% for awards granted to
non-executive level employees and 3% for awards granted to executive level employees.
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference
between the closing price of the common stock on December 31, 2020, the last business day of 2020,
of $191.63 per share and the exercise price of each in-the-money option) that would have been
received by the option holders had all option holders exercised their options on December 31, 2020.
The aggregate intrinsic value of stock options exercised during the years ended December 31, 2020,
2019 and 2018 was $36.6 million, $5.5 million and $5.3 million, respectively.
The weighted average grant date fair value of options granted during the years ended December 31,
2020, 2019 and 2018 was $53.06, $31.27 and $18.90, respectively. The total fair value of stock
options that vested during the years ended December 31, 2020, 2019 and 2018 was $2.8 million,
$3.1 million and $2.3 million, respectively.
114
The fair value of stock units is calculated using the closing price of the Company’s common stock on the
date of grant. Information regarding stock unit activity, which includes activity for restricted stock units
and performance stock units, for the year ended December 31, 2020 under the Plans is summarized
below:
Weighted-
Average
Remaining
Contractual
Term
(in Years)
Aggregate
Intrinsic
Value
(in Thousands)
Unvested at December 31, 2019 . . . . . .
Awarded . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/expired/cancelled . . . . . .
Shares
734,984
207,788
(244,648)
(32,584)
Unvested at December 31, 2020 . . . . . .
665,540
3.32
$127,904
Vested and expected to vest at
December 31, 2020(1)
. . . . . . . . . . . .
650,047
3.01
$124,568
(1) Represents the number of vested stock units as of December 31, 2020 plus the number of unvested
stock units expected to vest as of December 31, 2020 based on the unvested outstanding stock units
at December 31, 2020 adjusted for estimated forfeiture rates of 8% for awards granted to
non-executive level employees and 3% for awards granted to executive level employees.
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (equal to the
closing price of the common stock on December 31, 2020, the last business day of 2020, of $191.63
per share, as stock units do not have an exercise price) that would have been received by the stock unit
holders had all holders exercised on December 31, 2020. The aggregate intrinsic value of stock units
vested during the years ended December 31, 2020, 2019 and 2018 was $28.3 million, $17.5 million
and $6.2 million, respectively.
The weighted average grant date fair value of stock units granted during the years ended December 31,
2020, 2019 and 2018 was $109.69, $49.68 and $30.30, respectively. The total fair value of stock
units that vested during the years ended December 31, 2020, 2019 and 2018 was $10.8 million,
$8.5 million and $4.6 million, respectively.
As of December 31, 2020, there was $46.7 million of total unrecognized compensation cost related to
unvested share-based awards. This cost is expected to be recognized over a weighted average
remaining requisite service period of 3.55 years. The Company expects 1,853,028 unvested options
and stock units to vest over the next five years.
11. Commitments and Contingencies
Licensing and Research Agreements
The Company licenses certain technologies that are, or may be, incorporated into its technology under
several agreements and also has entered into several clinical research agreements that require the
Company to fund certain research projects. Generally, the license agreements require the Company to
pay annual maintenance fees and royalties on product sales once a product has been established using
the technologies. Research and development expenses associated with license agreements were
immaterial amounts for the years ended December 31, 2020, 2019 and 2018.
In September 2018, the Company entered into a collaboration agreement with Sartorius Stedim Biotech
(“SSB”), a leading international supplier for the biopharmaceutical industry, to integrate our XCell ATF
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cell retention control technology into Sartorius’s BIOSTAT® STR large-scale, single-use bioreactors to
create novel perfusion-enabled bioreactors. As a result of this collaboration, end-users will stand to
benefit from a single control system for 50L to 2,000L bioreactors used in perfusion cell culture
applications. The single interface is designed to control cell growth, fluid management and cell retention
in continuous and intensified bioprocessing and, ultimately, simplify the development and manufacture of
biotechnological drugs under current good manufacturing practices.
In June 2018, the Company secured an agreement with Navigo for the exclusive co-development of
multiple affinity ligands for which Repligen holds commercialization rights. The Company is
manufacturing and has agreed to supply the first of these ligands, NGL-Impact™ A, exclusively to Purolite
Life Sciences (“Purolite”), who will pair the Company’s high-performance ligand with Purolite’s agarose
jetting base bead technology used in their Jetted A50 Protein A resin product. We also signed a long-
term supply agreement with Purolite for NGL-Impact A and other potential additional affinity ligands that
may advance from the Company’s Navigo collaboration. The Navigo and Purolite agreements are
supportive of the Company’s strategy to secure and reinforce the Company’s proteins business. The
Company made payments to Navigo of $0.9 million and $1.0 million in the years ended December 31,
2020 and 2019, respectively, in connection with this program, which are recorded to research and
development expenses in the Company’s consolidated statements of comprehensive income.
Purchase Orders, Supply Agreements and Other Contractual Obligations
In the normal course of business, the Company has entered into purchase orders and other agreements
with manufacturers, distributors and others. Outstanding obligations at December 31, 2020 of
$55.3 million are expected to be completed within one year.
Legal Proceedings
From time to time, in the normal course of its operations, the Company is subject to litigation matters and
claims relating to employee relations, business practices and patent infringement. Litigation can be
expensive and disruptive to normal business operations. Moreover, the results of complex legal
proceedings are difficult to predict and the Company’s view of these matters may change in the future as
the litigation and events related thereto unfold. The Company expenses legal fees as incurred. The
Company records a provision for contingent losses when it is both probable that a liability has been
incurred and the amount of the loss can be reasonably estimated. An unfavorable outcome to any legal
matter, if material, could have an adverse effect on the Company’s operations or its financial results.
116
12. Convertible Senior Notes
The carrying value of the Company’s convertible senior notes is as follows:
December 31,
2020
2019
(Amounts in thousands)
0.375% convertible senior notes due
2024:
Convertible senior notes, current
portion:
Principal amount . . . . . . . . . . . . . . . . . . . . . . . . .
Unamortized debt discount . . . . . . . . . . . . . . . . .
Unamortized debt issuance costs . . . . . . . . . . . .
$287,500
(38,317)
(5,446)
$
Total convertible senior notes, current
portion . . . . . . . . . . . . . . . . . . . . . . . . . . .
243,737
—
—
—
—
Convertible senior notes:
Principal amount . . . . . . . . . . . . . . . . . . . . . . . . .
Unamortized debt discount . . . . . . . . . . . . . . . . .
Unamortized debt issuance costs . . . . . . . . . . . .
—
—
—
287,500
(47,921)
(6,812)
Total convertible senior notes . . . . . . . . . . . .
$243,737
$232,767
0.375% Convertible Senior Notes due 2024
On July 19, 2019, the Company issued $287.5 million aggregate principal amount of 0.375%
Convertible Senior Notes due 2024 (“2019 Notes”), which includes the underwriters’ exercise in full of
an option to purchase an additional $37.5 million aggregate principal amount of 2019 Notes (the
“Notes Offering”). The net proceeds of the Notes Offering, after deducting underwriting discounts and
commissions and other related offering expenses payable by the Company, were approximately
$278.5 million.
The 2019 Notes are senior, unsecured obligations of the Company, and bear interest at a rate of
0.375% per year. Interest is payable semi-annually in arrears on January 15 and July 15 of each year,
beginning on January 15, 2020. The 2019 Notes will mature on July 15, 2024, unless earlier
repurchased or converted in accordance with their terms. The initial conversion rate for the 2019 Notes
is 8.6749 shares of the Company’s common stock per $1,000 principal amount of 2019 Notes (which
is equivalent to an initial conversion price of approximately $115.28 per share). Prior to the close of
business on the business day immediately preceding April 15, 2024, the 2019 Notes will be convertible
at the option of the holders of 2019 Notes only upon the satisfaction of specified conditions and during
certain periods. Thereafter until the close of business on the second scheduled trading day immediately
preceding the maturity date, the 2019 Notes will be convertible at the options of the holders of 2019
Notes at any time regardless of these conditions. Conversion of the 2019 Notes will be settled in cash,
shares of the Company’s common stock or a combination thereof, at the Company’s election. The 2019
Notes are not redeemable by the Company prior to maturity.
Holders of 2019 Notes may require the Company to repurchase their 2019 Notes upon the occurrence
of a fundamental change prior to maturity at a repurchase price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest to, but excluding, the date of repurchase. In connection with
certain corporate events, the Company will, under certain circumstances, increase the conversion rate for
holders of 2019 Notes who elect to convert their 2019 Notes in connection with such corporate events.
During the fourth quarter of 2020, the closing price of the Company’s common stock exceeded 130% of
the conversion price of the 2019 Notes for more than 20 trading days of the last 30 consecutive trading
117
days of the quarter. As a result, the 2019 Notes are convertible at the option of the holders of the 2019
Notes during the first quarter of 2021, the quarter immediately following the quarter when the conditions
are met, as stated in the terms of the 2019 Notes. Expecting to continue meeting these terms, the
Company reclassified the carrying value of the 2019 Notes from long-term liabilities to current liabilities
on the Company’s balance sheet as of December 31, 2020. As of the date of this filing, the Company
received requests to convert $3,000 aggregate principal amount of 2019 Notes which we intend to pay
or deliver, as the case may be, the settlement amount to be determined – paying the amount in excess of
the aggregate principal portion of the converted notes in shares of our common stock. These conversions
will be settled during the first quarter of 2021.
The Company accounts for the 2019 Notes as separate liability and equity components. The Company
determined the carrying amount of the liability component as the present value of its cash flows using a
discount rate of 4.5% based on comparative convertible transactions for similar companies. The
proceeds allocated to the debt conversion feature were $52.1 million. This amount was calculated by
deducting the carrying value of the liability component from the principal amount of the 2019 Notes as
a whole. The difference represents a debt discount that is amortized to interest expense on the
Company’s consolidated statements of comprehensive income over the term of the 2019 Notes using the
effective interest rate method. The Company will assess the equity classification of the cash conversion
feature quarterly, and it is not remeasured as long as it continues to meet the conditions for equity
classification.
The Company allocates transaction costs related to the issuance of the 2019 Notes to the liability and
equity components using the same proportions as the initial carrying value of the 2019 Notes.
Transaction costs related to the liability component were $7.4 million and are being amortized to interest
expense using the effective interest method over the term of the 2019 Notes. Transaction costs
attributable to the equity component were $1.6 million and are netted with the equity component of the
2019 Notes in stockholders’ equity of the Company’s consolidated balance sheet at December 31,
2020.
Interest expense recognized on the 2019 Notes in 2020 was $1.1 million, $9.6 million and
$1.4 million for the contractual coupon interest, the accretion of the debt discount and the amortization
of the debt issuance costs, respectively. The effective interest rate on the 2019 Notes is 5.1%, which
included the interest on the 2019 Notes, amortization of the debt discount and debt issuance costs. As of
December 31, 2020, the carrying value of the 2019 Notes was $243.7 million and the fair value of the
principal was $501.0 million. The fair value of the 2019 Notes was determined based on the most
recent trade activity of the 2019 Notes as of December 31, 2020.
The 2019 Notes agreement contains customary terms and events of default. If an event of default (other
than certain events of bankruptcy, insolvency or reorganization involving the Company) occurs and is
continuing, the holders of at least 25% in aggregate principal amount of the outstanding 2019 Notes
may declare 100% of the principal of, and any accrued and unpaid interest on, all of the 2019 Notes to
be due and payable. Upon the occurrence of certain events of bankruptcy, insolvency or reorganization
involving the Company, 100% of the principal of and accrued and unpaid interest, if any, on all of the
2019 Notes will become due and payable automatically. Notwithstanding the foregoing, the 2019
Notes provide that, to the extent the Company elects and for up to 270 days, the sole remedy for an
event of default relating to certain failures by the Company to comply with certain reporting covenants
consist exclusively of the right to receive additional interest on the 2019 Notes. The Company is not
aware of any events of default, current events or market conditions that would allow holders to call or
convert the 2019 Notes as of December 31, 2020.
118
Conversion of the 2.125% Convertible Senior Notes due 2021
The Company utilized a portion of the proceeds from the issuance of the 2019 Notes to settle its
outstanding 2.125% Convertible Senior Notes due 2021 (the “2016 Notes”) during the third quarter of
2019. On July 16, 2019, the Company entered into separate privately negotiated agreements with
certain holders of the 2016 Notes to exchange an aggregate of $92.0 million principal aggregate
amount of the 2016 Notes for shares of the Company’s common stock, together with cash, in private
placement transactions (the “Note Exchanges”). On July 19, 2019 and July 22, 2019, the Company
used approximately $92.3 million (including $0.3 million of accrued interest) and 1,850,155 shares of
its common stock valued at $161.0 million to settle the Note Exchanges for total consideration of
$253.3 million, of which $163.6 million was allocated to reacquiring the equity component of the 2016
Notes. The Company allocated the consideration transferred to the liability and equity components using
the same proportions as the initial carrying value of the 2016 Notes. The transaction resulted in a loss
on extinguishment of debt of $4.6 million in the Company’s consolidated statements of comprehensive
income in 2019.
On July 19, 2019, the Company issued a Notice of Redemption in respect of the 2016 Notes, which
provided that, on September 23, 2019, the Company would redeem all 2016 Notes that had not been
converted, repurchased or exchanged prior to such date at a redemption price in cash equal to 100% of
the principal amount thereof plus accrued and unpaid interest. On September 23, 2019, the Company
used $23.0 million and 466,045 shares of its common stock valued at $37.8 million to settle the
remaining 2016 Notes for a total of $60.8 million, of which $38.3 million was allocated to reacquiring
the equity component of the 2016 Notes. This transaction resulted in a loss on extinguishment of debt of
$1.1 million recorded on the Company’s consolidated statements of comprehensive income. The total
loss in 2019 of $5.7 million represents the difference between the fair value of the liability component of
the 2016 Notes and its related carrying value immediately before the exchange.
Interest expense recognized on the 2016 Notes in 2019 prior to conversion was $1.3 million,
$2.4 million and $0.4 million for the contractual coupon interest, the accretion of the debt discount and
the amortization of the debt issuance costs, respectively. The effective interest rate on the 2016 Notes
was 6.6%, which included the interest on the 2016 Notes, amortization of the debt discount and debt
issuance costs.
13. Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) consisted of the following for the years
ended December 31, 2020 and 2019 (amounts in thousands):
Foreign
Currency
Translation
Adjustment
Balance as of December 31, 2018 . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . . . . . . . . . . . . .
$(11,893)
(3,134)
Balance as of December 31, 2019 . . . . . . . . . . . . . .
Other comprehensive income . . . . . . . . . . . . . . . . . . .
(15,027)
17,112
Balance as of December 31, 2020 . . . . . . . . . . . . . .
$ 2,085
14. Employee Benefit Plans
In the United States, 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.
119
All U.S. employees over the age of 21 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 $1.4 million, $1.0 million and $0.7 million in the years
ended December 31, 2020, 2019 and 2018, respectively.
In Sweden, the Company contributes to a government-mandated occupational pension plan that is a
qualified defined contribution plan. All employees in Sweden are eligible for this pension plan. The
Company pays premiums to a third-party occupational pension specialist who administers the pension
plan. These premiums are based on various factors including each employee’s age, salary, employment
history and selected benefits in the pension plan. When an employee terminates or retires, these
premium payments cease for that employee and the Company has no further pension-related obligations
for that employee. The Company contributed $0.6 million to the defined contribution plan for each of the
years ended December 31, 2020, 2019 and 2018.
15. Related Party Transactions
At December 31, 2020, the Company had an outstanding tax liability of $0.5 million due to the seller of
C Technologies. This tax liability was paid subsequent to year end in January 2021 and concluded the
remaining tax liability the Company had with the seller due to the 338(h)(10) tax election. The Company
paid the seller a total of $0.3 million and $1.6 million related to the tax liability associated with the
338(h)(10) election as of December 31, 2020 and 2019, respectively.
Certain facilities leased by Spectrum, a company the Company acquired in 2017, are owned by Roy
Eddleman, the former owner of Spectrum. As of December 31, 2020, Mr. Eddleman owned greater than
5% of the Company’s outstanding shares and the Company considers him to be a related party. The
lease amounts paid to this shareholder prior to the public offering were negotiated in connection with the
Spectrum Acquisition. The Company incurred rent expense totaling $0.7 million for the year ended
December 31, 2020 related to these leases.
120
16. Selected Quarterly Financial Data (Unaudited)
The following table sets forth certain unaudited quarterly results of operations for 2020 and 2019. In the
opinion of management, this information has been prepared on the same basis as the audited
consolidated financial statements and all necessary adjustments, consisting only of normal recurring
adjustments, have been included in the amounts stated below to present fairly the quarterly information
when read in conjunction with the audited consolidated financial statements and notes thereto included
elsewhere in this Form 10-K. The quarterly operating results are not necessarily indicative of future results
of operations.
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit
. . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share:
For the Years Ended December 31, 2020
Q1
Q2
Q3
Q4
(Amounts in thousands, except per share data)
$76,090
44,108
64,184
9,815
$87,462
50,599
67,925
15,861
$94,060
54,434
73,099
14,552
$108,648
60,485
91,229
19,698
Basic . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.19
$ 0.18
$ 0.30
$ 0.30
$ 0.28
$ 0.27
$
$
0.37
0.36
For the Years Ended December 31, 2019
Q1
Q2
Q3
Q4
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share:
(Amounts in thousands, except per share data)
$69,474
$60,634
39,353
33,789
63,580
49,463
3,604
8,053
$69,445
38,020
61,481
1,659
$70,692
39,984
59,638
8,095
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 0.18
$ 0.17
$ 0.17
$ 0.17
$ 0.03
$ 0.03
$ 0.07
$ 0.07
121
Board of Directors
Executive Management
Market for Repligen Stock
Karen A. Dawes
Chairperson
President, Knowledgeable Decisions, LLC
Nicolas M. Barthelemy
Former President,
Global Commercial Operations,
Life Technologies Corporation
Carrie Eglington Manner
Senior Vice President,
Advanced Diagnostics,
Quest Diagnostics
Tony J. Hunt
President and Chief Executive Officer,
Repligen Corporation
Rohin Mhatre, Ph.D.
Senior Vice President,
Product and Technology,
Biogen Inc.
Glenn P. Muir
Former Chief Financial Officer
and Executive Vice President,
Hologic, Inc.
Thomas F. Ryan, Jr.
Former President and
Chief Operating Officer,
American Stock Exchange
Executive Officers:
NASDAQ Global Select Market: RGEN
Tony J. Hunt
President and Chief Executive Officer
Jon K. Snodgres
Chief Financial Officer
Jim Bylund
Senior Vice President,
Global Operations and Information
Technology
Christine Gebski
Senior Vice President,
Filtration and Chromatography
Ralf Kuriyel
Senior Vice President,
Research & Development
Senior Management:
Gautam Choudhary
Vice President, Systems and Automation
Steve Curran
Vice President, Global Operations
Ken Elmer
Global Head, Human Resources
Vikas Gupta
Vice President, Downstream Processing
and Gene Therapy
Transfer Agent and Registrar
American Stock Transfer
& Trust Company, LLC
59 Maiden Lane, Plaza Level
New York, NY 10038
Phone: 877.777.0800, option 1
info@amstock.com
The Transfer Agent is responsible for
handling shareholder questions regarding
lost certificates, address changes and
change of ownership or name in which
shares are held.
Outside Corporate Counsel
Goodwin Procter LLP
100 Northern Avenue
Boston, MA 02210
Independent Accountants
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
Investor Information
Copies of our annual reports on Form
10-K, proxy statements, quarterly
reports on Form 10-Q and current
reports on Form 8-K are available to
shareholders upon request without
charge.
Please visit our website at www.
repligen.com or direct requests to:
Repligen Corporation
41 Seyon Street, Building #1, Suite 100
Waltham, MA 02453
ATTN: Investor Relations
Phone: 781.250.0111
investors@repligen.com
Craig Harrison
Senior Vice President, Process Analytics
Virtual Annual Meeting
Maria Nieradka
Vice President, Business Operations
Kola Otitoju
Senior Vice President, Strategy and
Business Development
Squire Servance
Senior Vice President, General Counsel,
Corporate Secretary and Chief
Compliance Officer
Stephen Tingley
Vice President, Sales
The Annual Meeting of Shareholders
will be held on Thursday, May 13, 2021,
12:00 p.m. EDT
Location
Our 2021 Annual Meeting will be
held online (only) at http://www.
virtualshareholdermeeting.com/
RGEN2021
You can vote your shares if you were
a shareholder of record at the close of
business on April 1, 2021 (the “Record
Date”).
DISCLAIMER: This Annual Report contains forward-looking statements within the meaning of the federal securities laws. When
used, the words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “project,” “result,” “should,” “will” and similar expressions
that do not relate solely to historical matters identify forward-looking statements. Forward-looking statements are subject to risks and
uncertainties, both known and unknown, and often beyond our control, and are not guarantees of future performance insofar as
actual events or results may vary materially from those anticipated. Factors that may cause such a variance include, among others,
those discussed in this Annual Report and from time to time in our filings with the Securities and Exchange Commission. We
expressly disclaim any responsibility to update forward-looking statements except as required by law.
DIFFERENCE2
DRIVEN TO
MAKE A
REPLIGEN CORPORATION
41 Seyon Street, Building 1, Suite 100, Waltham, MA 02453
phone 781.250.0111 | toll-free 800.622.2259 | fax 781.250.0115
www.repligen.com
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