FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 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 0-14656 REPLIGEN CORPORATION Delaware 04-2729386 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 117 Fourth Avenue Needham, Massachusetts 02194 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617)-449-9560 ----------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as July 31, 1996: Common Stock, par value $.01 per share 15,602,542 -------------------------------------- ---------------- Class Number of Shares
PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS REPLIGEN CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended June 30, -------------------------------- 1996 1995 ---------------- --------------- Revenues: Research and development $ 257,085 $ 2,083,686 Product 226,099 392,091 Investment income 32,203 271,708 Other 324,868 88,831 ------------ ------------ 840,255 2,836,316 ------------ ------------ Costs and expenses: Research and development 323,763 3,778,035 Selling, general and administrative 833,857 1,347,379 Cost of goods sold 151,649 290,147 Interest -- 59,375 ------------ ------------ 1,309,269 5,474,936 ------------ ------------ Net loss $ (469,014) $ (2,638,620) ============= ============ Net loss per common share $ (0.03) $ (0.17) ============= ============ Weighted average common shares outstanding 15,602,542 15,357,784 ============= ============ See accompanying notes to consolidated financial statements.
REPLIGEN CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) June 30,1996 March 31,1996 ----------------------------- ASSETS Current assets: Cash and cash equivalents $ 3,099,994 $ 6,944,140 Marketable securities 217,410 278,115 Accounts receivable 345,174 421,254 Amounts due from affiliates -- 42,284 Inventories 549,794 701,224 Prepaid expenses and other current assets 92,421 188,554 ------------ ------------ Total current assets 4,304,793 8,575,571 Property, plant and equipment, at cost: Equipment 688,091 688,091 Furniture and fixtures 20,422 20,422 Leasehold improvements 55,598 2,000 ------------ ------------ 764,111 710,513 Less: accumulated depreciation and amortization 213,833 176,946 ------------ ------------ 550,278 533,567 Restricted cash 250,000 -- Other assets, net 121,389 121,389 ------------ ------------ $ 5,226,460 $ 9,230,527 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 176,583 $ 546,129 Accrued expenses and other 603,722 3,720,881 Unearned income 106,650 154,998 ------------ ------------ Total current liabilities 886,955 4,422,008 Stockholders' equity: Preferred stock, $.01 par value -- -- -- authorized -- 5,000,000 shares -- outstanding -- none Common stock, $.01 par value -- 156,025 156,025 authorized -- 30,000,000 shares-- outstanding -- 15,602,542 shares at June 30, 1996 and March 31, 1996 Additional paid-in capital 127,694,145 127,694,145 Accumulated deficit (123,510,665) (123,041,651) ------------ ------------ Total stockholders' equity 4,339,505 4,808,519 ------------ ------------ $ 5,226,460 $ 9,230,527 ============= ============= See accompanying notes to consolidated financial statements.
REPLIGEN CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended June 30, --------------------------- 1996 1995 --------------------------- Cash flows from operating activities: Net loss $ (469,014) $ (2,638,620) Adjustments to reconcile net loss to net cash (used in) provided by operating activities - Depreciation and amortization 36,887 425,813 Equity in net loss of an affiliate -- 13,625 Changes in assets and liabilities - Accounts receivable 76,080 (200,837) Amounts due from affiliates 42,284 730,061 Inventories 151,430 (307,564) Prepaid expenses and other current assets 96,133 259,560 Accounts payable (369,546) (587,264) Accrued expenses and other (3,117,159) (1,398,385) Unearned income (48,348) (203,000) ----------- ---------- Net cash used in operating activities (3,601,253) (3,906,611) ----------- ---------- Cash flows from investing activities: (Increase) decrease in marketable securities 60,705 (2,531,551) Purchases of property, plant and equipment, net (53,598) (15,579) Increase in restricted cash (250,000) -- ----------- ---------- Net cash used in investing activities (242,893) (2,547,130) ----------- ---------- Cash flows from financing activities: Proceeds from sales of common stock and issuance of warrants -- 220,395 Proceeds from note receivable from affiliate -- 4,620,000 Payment of term loan to bank (4,620,000) ----------- ---------- Net cash provided by financing activities -- 220,395 ----------- ---------- -- Net decrease in cash and cash equivalents (3,844,146) (6,233,346) Cash and cash equivalents, beginning of period 6,944,140 13,821,387 ----------- ---------- Cash and cash equivalents, end of period $ 3,099,994 $ 7,588,041 =========== =========== Supplemental disclosure of cash flow information: Cash paid for interest $ -- $ 272,830 =========== ============ See accompanying notes to consolidated financial statements.
REPLIGEN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The financial statements included herein have been prepared by Repligen Corporation (the "Company" or "Repligen") without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The Company believes, however, that the disclosures made are adequate to ensure that the information presented is not misleading. It is suggested that these financial statements be read in conjunction with the audited financial statements and notes thereto included in the Company's 1996 Form 10-K, filed with the Securities and Exchange Commission. This financial information includes all adjustments (consisting of normal, recurring adjustments) which the Company considers necessary for a fair presentation of such information. The results of operations for the interim periods presented are not necessarily indicative of results to be expected for the entire year. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company has incurred significant operating losses since inception and has undergone significant restructuring of its operations in fiscal 1996 and 1995. During 1996, the Company completed a major downsizing and consolidation of its activities, including the termination of certain research programs, in an effort to stabilize its financial condition and preserve its cash resources. 2. Net Loss Per Common Share Primary net loss per common share has been computed by dividing net loss by the weighted average number of shares outstanding during the period. Common stock equivalents have not been included for any period as the effect would be antidilutive. Fully diluted net loss per common share has not been presented for any period as the amounts would not differ from primary net loss per common share. 3. Cash Equivalents and Marketable Securities The Company considers all highly liquid investments with original maturities of three months or less at the time of acquisition to be cash equivalents. Included in cash equivalents at June 30, 1996 are $2,731,000 of money market funds and $300,000 of commercial paper. Investments with a maturity period of greater than three months are classified as marketable securities and consist of $217,000 of collateralized mortgage obligations at June 30, 1996. These securities are reported at amortized cost, which approximates fair market value at June 30, 1996.
4. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following: June 30, March 31, 1996 1996 --------- ------- Raw materials and work-in-process $ 80,000 $ 1,955 Finished goods 469,794 699,269 --------- --------- $ 549,794 $ 701,224 ========= ========= Work in process and finished goods inventories consist of material, labor and manufacturing overhead. The decrease in finished goods inventories is due primarily to sales of the Company's Protein A products. 5. Restructuring of Operations During the fiscal year ended March 31, 1996, the Company completed a major downsizing and consolidation of its operations in an effort to stabilize its financial condition and preserve its cash resources. The restructuring included a substantial reduction in the Company's work force, the termination of several research programs and the closing of its Cambridge research and manufacturing facility. During the fourth quarter of fiscal 1996, the Company recorded a charge of $3,567,000 to cover severance costs and related benefits, the settlement of operating equipment lease and facility lease obligations, the write-off of certain leasehold improvements and equipment no longer being utilized, reduced in part by cash received from the sale of assets and the reversal of certain accruals no longer required. During the first quarter of fiscal 1997, ended June 30, 1996, the Company paid approximately $300,000 and $3,033,000 in settlement fees to the facility landlord and equipment lessors, respectively. The settlement fees with respect to the operating equipment lease agreements represent discounted remaining lease obligations and the purchase price of certain leased equipment from the equipment lessors. In May 1996, a substantial amount of this equipment originally on lease as well as certain surplus Company owned equipment was sold at public auction for approximately $1,314,000, net of selling expenses. In addition to the settlement payment of $300,000 made to the facility landlord, the Company was also required to set aside $250,000 of restricted cash in an escrow account. These funds are to be invested by the Company, with the landlord's prior approval, in leasehold improvements, primarily refurbishment of laboratory spaces at its Needham Massachusetts headquarters.
The accrued restructuring activity for the three-month period ended June 30, 1996 and the year ended March 31, 1996 is as follows: <TABLE> <CAPTION> June 30, March 31, 1996 1996 ---------------------------------- <S> <C> <C> Balance, beginning of period $ 2,594,000 $ 5,469,000 Payments Severance and related benefits for terminated employees (198,000) (1,336,000) Settlement of equipment lease obligations and purchase of leased equipment (3,033,000) (1,840,000) Settlement of facility lease obligations (300,000) (626,000) Legal fees and other (252,000) (498,000) Less--cash received from the sale of surplus equipment 1,314,000 -- ---------- ---------- (2,469,000) (4,300,000) ---------- ---------- Provision -- 2,496,000 Write-off of leasehold improvements, equipment and other intangibles no longer being utilized, net of auction proceeds -- (2,604,000) Less -- reversal of accruals no longer required due to changes in operations -- 1,533,000 ---------- ---------- Balance, end of period $ 125,000 $ 2,594,000 ========= ========== </TABLE> The remaining balance at June 30, 1996 represents accrued severance which will be paid out within the next year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Cautionary Statement Regarding Forward-Looking Statements Statements in this Quarterly Report on Form 10-Q under this caption, "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as oral statements that may be made by the Company or by officers, directors or employees of the Company acting on the Company's behalf, that are not historical fact constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to be materially different from the historical results or from any results expressed or implied by such forward-looking statements. Fiscal 1996 Restructuring During the fiscal year ended March 31,1996, the Company completed a major downsizing and consolidation of its operations in an effort to stabilize its financial condition and preserve its cash resources. The restructuring included a substantial reduction in the Company's work force, the termination of several research programs and the closing of its Cambridge research and manufacturing facility. The Company's research and development programs are now primarily focused on the development of new therapies for chronic and acute inflammation and immunosuppression and the development of enabling technologies for discovery of new drugs by rapid screening of combinatorial chemical libraries. As of June 30, 1996, Repligen had approximately 15 employees including five with doctoral degrees. The Company's strategy is to use internal resources for research and preclinical studies and to use pharmaceutical companies or third party contractors to provide manufacturing and clinical development support and for certain administrative functions. Significant expansion of the Company's research or clinical development efforts is dependent on future financing or new partnerships with pharmaceutical companies. As a result of the reduction of operating expenses and elimination of debt, the Company believes it has adequate cash reserves at June 30, 1996 to sustain its operations at their current levels for at least the next twenty-four months. Results of Operations Revenues - Total revenues for the three month period ended June 30, 1996 were $840,000 as compared to $2,836,000 in the comparable fiscal 1996 period. In the fiscal 1997 period, the Company recorded research and development revenues totaling $257,000, consisting of (1) $65,000 and $50,000 from Pfizer, Inc. and Glaxo Wellcom plc., respectively for work performed by the Company's Glycan subsidiary, (2) licensing revenue of $30,000 from Immunomedics and $50,000 from Neocrin Company, (3) approximately $36,000 of revenue received from the Partnership for promotional activities performed by the Company on behalf of the Partnership's rPF4 program, and (4) $26,000 of other research and development revenue. Product revenues for the three month periods ended June 30, 1996 and 1995 were $226,000 and $392,000, respectively. Product revenue for the first quarter of fiscal 1997
decreased over the similar fiscal 1996 period due primarily to the timing of Protein A product shipments. Investment income decreased in the first quarter of fiscal 1997 over the comparable three month period in fiscal 1996 primarily because of lower average funds available for investment. Other revenues for the three month period ended June 30, 1996 increased from the comparable fiscal 1996 period primarily because of the one-time sale of non-investment securities held by the Company for approximately $300,000. Expenses - During fiscal 1996, the Company substantially restructured its operations, resulting in a significant reduction in its current rate of expenditures. In May 1996, the Company relocated its headquarters operations from Cambridge, Massachusetts to approximately 13,000 square feet of subleased office and laboratory space in Needham, Massachusetts. This move has resulted in a substantial savings in rent and related facility costs. If the move had been effective as of April 1, 1996, expenses during the fiscal quarter ended June 30, 1996 would have been lower by approximately $316,000. Total expenses for the three month periods ended June 30, 1996 and 1995 were $1,309,000 and $5,475,000, respectively. The decrease in expenses in the three month fiscal 1997 period reflects lower operating costs as a result of the fiscal 1996 restructuring efforts, including significantly lower headcounts. Research and development expenses for the three month periods ended June 30, 1996 and 1995 were $324,000 and $3,778,000, respectively. The decreased expenses in the first quarter of fiscal 1997 from the comparable period in fiscal 1996 reflect the Company's efforts to reduce costs. Selling, general and administrative expenses for the three month periods ended June 30, 1996 and 1995 were $834,000 and $1,347,000, which reflects a decrease in administrative personnel and related expenses as part of the Company's cost reduction efforts. Cost of goods sold for the three month periods ended June 30, 1996 and 1995 were $152,000 and $290,000, respectively. Cost of goods sold in the three month periods were 67% and 74% of product revenues, respectively. The decrease in cost of sales as a percentage of revenue are primarily a result of a change in product mix between the two periods. Capital Resources and Liquidity The Company's total cash, cash equivalents and marketable securities decreased to $3,317,000 at June 30, 1996 from $7,222,000 at March 31, 1996, a decrease of $3,905,000 or 54%. The decrease reflects net operating losses during the three month period of approximately $469,000, the reduction of accounts payable of $370,000 and the net payment of accrued restructuring expenses of $2,469,000 (see note 5 of notes to consolidated financial statements), offset in part by the reduction in receivables and inventories of $270,000. Working capital decreased to $3,418,000 at June 30, 1996 from $4,154,000 at March 31, 1996. The Company has funded operations primarily with cash derived from the sales of its equity securities, research and development contracts, product sales, investment income, proceeds from a term loan with a bank, the sale of the Company's share of a joint venture and leasing of certain equipment.
In May 1992, the Company entered into a research and development agreement with Lilly which provided $1,313,000 in research funding during the three-month period ended June 30, 1995. In September 1995, Lilly terminated its collaboration and licensing agreement with the Company. The Company has received research and development funding and a 10% management fee from the Partnership pursuant to the Product Development Agreement. In April 1996, the Company announced the termination of the Product Development Agreement and the Purchase Agreement with the Partnership. Under the terms of the various agreements between the parties, the rights to the rPF4 technologies remain with the Partnership. The Company recognized revenue from the Partnership in the three month periods ended June 30, 1996 and 1995 of $36,000 and $771,000, respectively.
PART II. OTHER INFORMATION Item 1. Not applicable Item 2. Not applicable Item 3. Not applicable Item 4. Not applicable Item 5. Not applicable. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) None (b) None
SIGNATURES Pursuant to the requirements 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. REPLIGEN CORPORATION (Registrant) Date: August 1, 1996 By: /S/ Walter C. Herlihy ---------------------- Chief Executive Officer Signing on behalf of the Registrant and as Principal Financial and Accounting Officer