Oct. 31, 2019, 3:32 p.m. EDT

10-Q: REPLIGEN CORP

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(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview







        SIUS
        ?
        TFF brand, providing customers with a high-performance,
        low-cost
        alternative to reusable TFF products. In August 2017, we completed our
        acquisition of Spectrum LifeSciences, LLC ("Spectrum"). Our Spectrum filtration
        brands include the KrosFlo
        �
        family of products, ProConnex
        �
        disposable flow-path products, TFF systems and others. The Spectrum Acquisition
        significantly strengthened our Filtration product line and diversifies our end
        markets beyond mAbs to include vaccine, recombinant protein and gene therapies.
        We are a leading OEM manufacturer and supplier of Protein A ligands to life
        sciences companies. Protein A ligands are an essential "binding" component of
        Protein A chromatography resins used in the purification of virtually all mAb
        based drugs on the market or in development that our customers sell to end
        users, including biopharmaceutical manufacturers, for use in downstream
        purification of mAbs. We also manufacture and sell growth factor products used
        to supplement cell culture media in order to increase cell growth and
        productivity in a bioreactor.
        Customers use our products to produce initial quantities of a drug for clinical
        studies and then
        scale-up
        to larger volumes as the drug progresses to commercial production following
        regulatory approval. Detailed specifications for a drug's manufacturing process
        are included in the applications that biopharmaceutical companies file for
        marketing approval with regulators, such as the U.S. Food and Drug
        Administration and the European Medicines Agency, throughout the clinical trial
        process and prior to final commercial approval. As a result, products that
        become part of the manufacturing specifications of a late-stage clinical or
        commercial process can be very sensitive given the costs and uncertainties
        associated with displacing them.
        C Technologies Acquisition
        On April 25, 2019, we entered into a Stock Purchase Agreement ("Purchase
        Agreement") with C Technologies, Inc. ("C Technologies"), a New Jersey
        corporation, and Craig Harrison, an individual and sole stockholder of C
        Technologies. The deal was consummated on May 31, 2019, the acquisition date
        (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
        instrument platform, was launched in 2008 for
        off-line
        and
        at-line
        protein concentration measurements conducted in quality control, process
        development and manufacturing labs in the production of biological therapeutics.
        C Technologies' FlowVPE platform, an extension of the SoloVPE technology, was
        designed to allow end users to make
        in-line
        protein concentration measurements in filtration, chromatography and fill-finish
        applications, designed to allow for real-time process monitoring.
        


Table of Contents







                                           Three Months Ended                                             Nine Months Ended
                                              September 30,              Increase/ (Decrease)               September 30,              Increase/ (Decrease)
                                            2019          2018        $ Change          % Change         2019          2018          $ Change          % Change
                                                                           (Amounts in thousands, except for percentage data)
        Revenue:
        Products                         $   69,419     $ 49,500     $    19,919             40.2 %    $ 200,701     $ 142,042     $     58,659             41.3 %
        Royalty and other                        26           29              (3 )          (10.3 %)          70            48               22             45.8 %
        Total revenue                    $   69,445     $ 49,529     $    19,916             40.2 %    $ 200,771     $ 142,090     $     58,681             41.3 %
        


Product revenues

Table of Contents







                                                Three Months Ended                                             Nine Months Ended
                                                   September 30,              Increase/ (Decrease)               September 30,              Increase/ (Decrease)
                                                 2019          2018         $ Change          % Change        2019          2018          $ Change          % Change
                                                                                (Amounts in thousands, except for percentage data)
        Cost of product revenue               $   31,425     $ 22,183     $       9,242            41.7 %   $  88,978     $  62,939     $      26,039            41.4 %
        Research and development                   5,427        3,601             1,826            50.7 %      14,278        12,669             1,609            12.7 %
        Selling, general and administrative       24,629       15,859             8,770            55.3 %      67,326        48,347            18,979            39.3 %
        Total costs and operating expenses    $   61,481     $ 41,643     $      19,838            47.6 %   $ 170,582     $ 123,955     $      46,627            37.6 %
        


Cost of product revenue

Table of Contents







                                               Three Months Ended                                          Nine Months Ended
                                                  September 30,             Increase/ (Decrease)             September 30,             Increase/ (Decrease)
                                                2019          2018        $ Change        % Change         2019          2018        $ Change        % Change
                                                                            (Amounts in thousands, except for percentage data)
        Investment income                    $    1,898     $    558     $     1,340          240.1 %    $   3,616     $  1,251     $     2,365          189.0 %
        Loss on extinguishment of debt           (5,650 )         -           (5,650 )        100.0 %       (5,650 )         -           (5,650 )        100.0 %
        Interest expense                         (2,857 )     (1,687 )        (1,170 )         69.4 %       (6,326 )     (5,008 )        (1,318 )         26.3 %
        Other income (expenses)                     316         (134 )           450         (335.8 %)         (23 )        187            (210 )       (112.3 %)
        Total other expense, net             $   (6,293 )   $ (1,263 )   $    (5,030 )        398.3 %    $  (8,383 )   $ (3,570 )   $    (4,813 )       134.8. %
        


Investment income

Table of Contents







                                               Three Months Ended                                            Nine Months Ended
                                                  September 30,              Increase/ (Decrease)              September 30,             Increase/ (Decrease)
                                               2019           2018         $ Change         % Change          2019         2018        $ Change         % Change
                                                                              (Amounts in thousands, except for percentage data)
        Income tax provision                 $     12       $  1,829     $     (1,817 )         (99.3 %)   $    3,999     $ 3,586     $      413             11.5 %
        Effective tax rate                        0.7 %         27.6 %                                           18.3 %      24.6 %
        


For the three and nine months ended September 30, 2019, we recorded an income tax provision of less than $0.1 million and $4.0 million, respectively. The effective tax rate was an income tax provision of 0.7% and 18.3% for the three and nine months ended September 30, 2019, respectively, 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. Non-GAAP







                                                   Three Months Ended          Nine Months Ended
                                                      September 30,              September 30,
                                                    2019          2018         2019          2018
                                                               (Amounts in thousands)
        GAAP income from operations              $    7,964     $  7,886     $  30,189     $ 18,135
        Non-GAAP
        adjustments to income from operations:
        Acquisition and integration costs             2,953          805         9,573        2,313
        Intangible amortization                       3,900        2,608         9,562        7,906
        Inventory
        step-up
        charges                                         314           -          1,483           -
        Non-GAAP
        adjusted income from operations          $   15,131     $ 11,299     $  50,807     $ 28,354
        


Table of Contents







                                                                 Three Months Ended September 30,
                                                             2019                                2018
                                                                    Fully
                                                                   Diluted                          Fully Diluted
                                                                Earnings per                        Earnings per
                                                  Amount            Share            Amount             Share
                                                           (Amounts in thousands, except per share data)
        GAAP net income                          $  1,659       $        0.03       $  4,794       $          0.10
        Non-GAAP
        adjustments to net income:
        Acquisition and integration costs           2,953                0.06            805                  0.02
        Intangible amortization                     3,900                0.08          2,608                  0.06
        Loss on extinguishment of debt              5,650                0.11             -                     -
        Inventory
        step-up
        charges                                       314                0.01             -                     -
        Non-cash
        interest expense                            2,631                0.05          1,071                  0.02
        Tax effect of intangible
        amortization and acquisition costs         (3,781 )             (0.07 )       (1,063 )               (0.02 )
        Non-GAAP
        adjusted net income                      $ 13,326       $        0.26       $  8,215       $          0.18
        








                                                                  Nine Months Ended September 30,
                                                             2019                                 2018
                                                                     Fully
        . . .
        


Oct 31, 2019

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