UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

For the quarterly period ended SeptemberJune 30, 20172018

OR

For the transition period from                    to                    

Commission File Number000-14656

REPLIGEN CORPORATION

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code:(781) 250-0111

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or 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 Rule12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act.):    Yes  ☐    No  ☒

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule12b-2 of the Securities Exchange Act of 1934.

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of November 2, 2017.July 26, 2018.

Table of Contents

REPLIGEN CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

REPLIGEN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

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

REPLIGEN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

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

REPLIGEN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by Repligen Corporation (the “Company,”“Company”, “Repligen” or “we”) in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), for Quarterly Reports on Form10-Q and Article 10 of RegulationS-X and do not include all of the information and footnote disclosures required by U.S. GAAP. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto included in the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 2016.2017.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Repligen Sweden AB (“Repligen Sweden”), Repligen GmbH, (acquired as Atoll GmbH on April 1, 2016 and renamed on September 20, 2016), Repligen Singapore Pte. Ltd., our former subsidiary, TangenX Technology Corporation (“TangenX,” acquired on December 14, 2016 and merged into the Company as of June 30, 2017) and Spectrum LifeSciences, LLC (“Spectrum,” acquired on August 1, 2017). All significant intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of only normal, recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows. The results of operations for the interim periods presented are not necessarily indicative of results to be expected for the entire year.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued ASUNo. 2014-09, “Revenue from Contracts with Customers (Topic 606),”(“ASC 606”) which supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605,Revenue Recognition, and creates a new Topic 606,Revenue from Contracts with Customers. Two adoption methods are permitted: retrospectively to all prior reporting periods presented, with certain practical expedients permitted; or retrospectively with the cumulative effect of initially adopting the ASU recognized at the date of initial application. The adoption of this ASU will includeincluded updates as provided under ASU2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”; ASU2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”; ASU2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”; and ASU2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.” The Company intends to adoptadopted the provisions of TopicASC 606 using the modified retrospective method effective January 1, 2018. The Company has substantially completed its assessmentSee Note 3 for further discussion of the impacteffects of the new revenuethis standard on the current contracts of all principal revenue streams except those related to the recently acquired business of Spectrum. The Company will complete its assessment of the impact of the new revenue standard on Spectrum’s revenue arrangements in the fourth quarter of 2017. The Company is currently updating its revenue recognition policies and procedures and developing a framework for the newly required financial statement disclosures. While the Company has not made a final determination on the impact of this new revenue standard to its consolidated financial statements, it does not expect this impact to be material.

In July 2015, the FASB issued ASUNo. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory” (“ASU2015-11”). ASU2015-11 requires inventory be measured at the lower of cost and net realizable value, and options that currently exist for market value be eliminated. ASU2015-11 defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The guidance is effective prospectively for reporting periods beginning after December 15, 2016 and interim periods within those fiscal years with early adoption permitted. The Company adopted the provisions of ASU2015-11 as of January 1, 2017, and this standard did not have a material impact on itsCompany’s consolidated financial statements.

In January 2016, the FASB issued ASUNo. 2016-01, “Financial Instruments - Instruments—Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” (“ASU2016-01”) This guidance changes how entities measure equity investments that do not result in consolidation and are not accounted for under the equity method. Entities will be required to measure these investments at fair value at the end of each reporting period and recognize changes in fair value in net income. A practicability

exception will be available for equity investments that do not have readily determinable fair values; however, the exception requires the Company to consider relevant transactions that can be reasonably known to identify any observable price changes that would impact the fair value. This guidance also changes certain disclosure requirements and other aspects of current U.S. GAAP. ThisThe Company adopted this guidance is effective for annual periods beginning afterin the first quarter of 2018. Because the Company does not hold any equity securities as of December 15,31, 2017 and is applicable to the Company in 2018. UponJune 30, 2018, adoption the Company will be required to recognize unrealized gains and lossesof this standard did not have any impact on its equity securities directly through the Company’s consolidated statements of operations, whereas these equity securities currently are designated as available for sale, and unrealized gains and losses are recognized within accumulated other comprehensive income.financial statements.

In February 2016, the FASB issued ASU No.2016-02, “Leases (Topic 842)” (“ASU2016-02”). ASU2016-02 requires lessees to recognize aright-of-use asset and a lease liability for most leases. Extensive quantitative and qualitative disclosures, including significant judgments made by management, will be required to provide greater insight into the extent of revenue and expense recognized and expected to be recognized from existing contracts. The accounting applied by a lessor is largely unchanged from that applied under the current standard. The standard provides for certain practical expedients and must be adopted using either a modified retrospective transition approach and provides for certain practical expedients.or retrospectively with the cumulative effect of initially adopting the ASU recognized at the date of initial application. This ASU is effective for public entities for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company has commenced its review of leases as part of this standard, but has not assessedfinalized its assessment of the impact of the new standard on its consolidated financial statements, but does expectstatements. The Company expects this new standard to have a material impact on the Company’s consolidated balance sheet.

In August 2016, the FASB issued ASUNo. 2016-15, “Statement of Cash Flows (Topic 203): Classification of Certain Cash Receipts and Cash Payments”. ASUNo. 2016-15 addresses eight specific cash flow issues and clarifies their presentation and classification in the Statement of Cash Flows. This ASU is effective for fiscal years beginning after December 15, 2017 and is to be applied retrospectively with early adoption permitted. The Company currently classifieshas historically classified payments up to the amount of its contingent consideration liability recognized at the date of its acquisition as financing activities, with additional payments classified as operating activities. As a result,Because the Company does not expecthas classified its contingent consideration payments as required by this standard, the adoption of ASU2016-15 tothis standard did not have a materialany impact on its consolidated financial statements when applied on a retrospective basis.

In October 2016, the FASB issued ASU2016-16, “Intra-Entity Transfers of Assets Other Than Inventory.” ASU2016-16 requires that the income tax consequences of an intra-entity asset transfer other than inventory are recognized at the time of the transfer. An entity will continue to recognize the income tax consequences of an intercompany transfer of inventory when the inventory is sold to a third party. The Company adopted this standard on a modified-retrospective basis on January 1, 2018. See Note 12 for a discussion of the impact of this ASU on the Company’s financial statements.

In November 2016, the FASB issued ASUNo. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which requires that the statement of cash flows explain the change during the period in the total cash, which is inclusive of cash and cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Restricted cash and restricted cash equivalents will be included with cash and cash equivalents when reconciling the beginning of period and end of period balances on the statement of cash flows upon adoption of this standard. The Company adopted this standard on a retrospective basis on January 1, 2018. The adoption resulted in an increase to cash, cash equivalents and restricted cash of $450,000 in the statement of cash flows at December 31, 2016 and June 30, 2017. The Company did not hold any restricted cash at December 31, 2017 or June 30, 2018.

In January 2017, the FASB issued ASU No.2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”, which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This ASU is effective for public entities for fiscal years beginning after December 15, 2017, with early adoption permitted. The Company does not expectadopted this standard as of January 1, 2018, and the adoption of ASU2017-01 todid not have a material impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASUNo. 2017-04, “Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” eliminating the requirement to calculate the implied fair value, essentially eliminating step two from the goodwill impairment test. The new standardASUNo. 2017-04 requires goodwill impairment to be based upon the results of step one of the impairment test, which is defined as the excess of the carrying value of a reporting unit over its fair value. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard is effective for the Company on a prospective basis beginning on January 1, 2020, with early adoption permitted. This newThe Company adopted this standard as of January 1, 2018, and the adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In February 2018, the FASB issued ASU2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which gives entities the option to reclassify to retained earnings tax effects related to items that have been stranded in accumulated other comprehensive income as a result of the Tax Cuts and Jobs Act (the “Act”). For all entities, the guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Entities can choose whether to apply the amendments retrospectively to each period in which the effect of the Act is recognized or to apply the amendments in the period of adoption. The Company has not expectedassessed the impact of the new standard on its consolidated financial statements, but does not expect this new standard to have a material impact on the Company’s consolidated financial statements.

2. Acquisitions

Acquisition of Spectrum LifeSciences, LLC

On August 1, 2017, the Company completed the acquisition of Spectrum pursuant to the terms of thean Agreement and Plan of Merger and Reorganization, dated as of June 22, 2017 (such acquisition, the “Spectrum Acquisition”).

Spectrum is a diversified filtration company with a differentiated portfolio of hollow fiber cartridges,bench-top benchtop to commercial scale filtration and perfusion systems and a broad portfolio of disposable andsingle-use solutions. Spectrum’s products are primarily used for the filtration, isolation, purification and concentration of monoclonal antibodies, vaccines, recombinant proteins, diagnostic products and cell therapies where the company offers both standard and customized solutions to its bioprocessing customers.

Spectrum’s filtration products include its KrosFlo^® line of hollow-fiberhollow fiber cartridges, tangential flow filtration (TFF)(“TFF:) systems andsingle-use flow path consumables, as well as its Spectra/Por^® portfolio of laboratory dialysis products and itsPro-Connex^®single-use hollow fiberModule-Bag-Tubing (MBT) sets. Outside of filtration, the company sells itsSpectrum products include Spectra/Chrom^® liquid chromatography products for research applications. These bioprocessing products account for the majority of Spectrum revenues. Spectrum also offers a line of operating room products.

The Spectrum Acquisition was accounted for as a purchase of a business under ASC 805, Business Combinations. The Spectrum Acquisition was funded through payment of approximately $122.9 million in cash, 6,153,995 unregistered shares of the Company’s common stock totaling $247.6 million and an estimated working capital adjustment of approximately $1.0 million for a total purchase price of $371.5 million.

Consideration Transferred

The Company accounted for the Spectrum Acquisition as a purchase of a business under U.S. GAAP.ASC 805, “Business Combinations.” The Spectrum Acquisition was funded through payment of approximately $122.9 million in cash, issuance of 6,153,995 unregistered shares of the Company’s common stock totaling $247.6 million and a working capital adjustment of $425,000 for a total purchase price of $370.9 million. Under the acquisition method of accounting, the assets of Spectrum were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company. The fair value of the net assets acquired was approximately $371.5$370.9 million.

The estimated consideration and preliminary purchase price information has been prepared using a preliminary valuation. The preparation of the valuation that required the use of significant assumptions and estimates.estimates in its preparation. 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 the Company believes to be reasonable; however, actual results may differ from these estimates.

The total consideration transferred follows (in thousands):

Acquisition-relatedAcquisition and integration-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 has incurred $3,378,000 and $5,761,000$1,508,000 in integration costs related to the Spectrum Acquisition for the three-six-month period ended June 30, 2018 and nine-month periods$7,060,000 in acquisition and integration costs for the year ended September 30, 2017, respectively.December 31, 2017. These costs are primarily included in selling, general and administrative expenses in the consolidated statements of operations.

Fair Value of Net Assets Acquired

The allocation of purchase price was based on the fair value of assets acquired and liabilities assumed as of August 1, 2017, based on the preliminary valuation. The components and allocation of the purchase price consists of the following amounts (in thousands):

Of the consideration paid, $78.4 million represents the fair value of customer relationships that will beis amortized over the weighted average determined useful life of 1615 years, and $38.6 million represents the fair value of developed technology that will beis amortized over a weighted average determined useful life of 20 years. $960,000 represents the fair value ofnon-competition agreements that will beare amortized over a determined life of 3 years. $2.2 million represents the fair value of trademarks and trade names that are determined to have an indefinite useful life. The aforementioned intangible assets will beare amortized on a straight-line basis.

The goodwill of $265.1$265.7 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. None of the goodwill recorded is expected to be deductible for income tax purposes.

The purchase price allocation ismay be subject to adjustment as purchase accounting is preliminary as of SeptemberJune 30, 2017. The final purchase price allocation will be determined upon completion of a final valuation analysis, and the fair value allocation of assets acquired and liabilities assumed could differ materially from the preliminary valuation analysis.2018 related to inventory valuation. The final allocation may include, but not be limited to, changes in the fair value of property, plant and equipment; changes in allocations to intangible assetsinventory and goodwill; changes in deferred tax assets and liabilities; and changes in the values of other assets and liabilities.goodwill.

Revenue, Net Income and Pro Forma Presentation

The Company recorded revenue from Spectrum of $7,550,000$12,313,000 and $24,031,000 for the three- andsix-month periods ended June 30, 2018, respectively, and $19,394,000 from August 1, 2017, the date of acquisition, through September 30,December 31, 2017. The Company has included the operating results of Spectrum in its consolidated statements of operations since the August 1, 2017 acquisition date. The following table presents unaudited supplemental pro forma information as if the Spectrum Acquisition had occurred as of January 1, 2016 (in thousands, except per share data):

Prior to the Spectrum Acquisition, Spectrum did not generate monthly or quarterly financial statements that were prepared in accordance with U.S. GAAP. Therefore, the effort to create Spectrum interim financial information for 2016 would be administratively impracticable. As a result, the unaudited supplemental pro forma information for the nine-month period ended September 30, 2016 has been omitted.

The unaudited pro forma information for the nine-monthsix-month period ended SeptemberJune 30, 20172018 was calculated after applying the Company’s accounting policies and the impact of acquisition date fair value adjustments. The unaudited pro forma net income for the nine-monthsix-month period ended SeptemberJune 30, 20172018 was adjusted to exclude acquisition-related transaction costs, retention costs solely related to the acquisition, the impact of the fair value step-up to inventory and the release of the valuation allowance on the Company’s deferred tax assets, as these expenses would have been incurred in the prior year assuming the Spectrum Acquisition closed on January 1, 2016.

These pro forma condensed consolidated financial results include certain adjustments to reflect the pro forma results of operations as if the acquisition had occurred as of January 1, 2016. The pro forma information does not reflect the effect of costs or synergies that would have been expected to result from the integration of the acquisition. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the combinations occurred at the beginning of the period presented, or of future results of the consolidated entities.

3. Revenue Recognition

TangenX Technology CorporationAdoption of ASC Topic 606, Revenue from Contracts with Customers

On December 14, 2016,The Company adopted ASC 606 on January 1, 2018, using the modified retrospective method for all contracts not completed as of the date of adoption. For contracts that were modified before the effective date, the Company acquired TangenX, pursuantreflected the aggregate effect of all modifications when identifying performance obligations and allocating transaction price in accordance with the practical expedient in paragraph ASC606-10-65-1-(f)-4, which did not have a material effect on the cumulative impact of adopting ASC 606. Results for reporting periods beginning January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. The impact to the Company’s consolidated financial statements as a result of applying ASC 606 was immaterial. Deferred revenue resulting from contracts with customers is included in accrued expenses on the Company’s consolidated balance sheet.

Revenue Recognition

Revenue is recognized when, or as, obligations under the terms of a contract are satisfied, which occurs when control of the Share Purchase Agreement, datedpromised 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 paragraph606-10-32-18, 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 14, 2016, by and amongJune 30, 2018.

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 John Connorsestimates the standalone selling price taking into account available information such as market conditions and Novasep Process SAS (such acquisition,internally approved pricing guidelines related to the “TangenX Acquisition”). Throughperformance obligations.

The Company recognizes product revenue under the TangenX Acquisition,terms of each customer agreement upon transfer of control to the customer, which occurs at a point in time.

Disaggregation of Revenue

Revenues for the three- andsix-month periods ended June 30, 2018 and 2017 were as follows:

When disaggregating revenue, the Company acquiredconsidered all outstanding sharesof 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 businessCompany’s revenues and cash flows from any of TangenX, including TangenX’s innovativeits 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.

The following tables disaggregate the Company’s revenue from contracts with customers by geographic region (in thousands).

Revenue from significant customers is as follows (in thousands):

Protein Products

The Company’s protein product line generates revenue through the sale of Protein A ligands and growth factors. Protein A ligands are an essential component of Protein A chromatography resins (media) used in the purification of virtually allmAb-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 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.

Filtration Products

The Company’s filtration product line generates revenue through the sale of KrosFlo^® hollow fiber (“HF”) TFF membranes and modules, ProConnex^®single-use Sius line of tangential flow filtration (“TFF”)path connectors, flat sheet TFF cassettes and hardware, usedand XCell™ alternating tangential flow (“ATF”) devices and related consumables.

The Company markets the KrosFlo line of HF cartridges and TFF systems and the ProConnex line ofsingle-use flow path connectors which were acquired as part of the acquisition of Spectrum in downstream biopharmaceutical manufacturing processes.

TangenX™ TFFAugust 2017. These products are used in the filtration, isolation, purification and concentration of biological drugs, thereby expanding Repligen’s filtration portfoliobiologics and complementingdiagnostic products. Sales of large-scale systems generally include components and consumables as well as training and installation services at the OPUS^®pre-packed column product line in downstream purification. Effective June 30, 2017, TangenX was legally mergedrequest of the customer. Because the initial sale of components and consumables are necessary for the operation of the system, such items are combined with the systems as a single performance obligation. Training and into the Company.installation services do not significantly modify or customize these systems and therefore represent a distinct performance obligation.

The TangenX Acquisition wasCompany’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 ASC606-10-55-18.

The Company also markets flat sheet TFF cassettes and hardware. 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. The Company’ssingle-use Sius™ TFF cassettes and hardware are not highly interdependent of one another and are therefore considered distinct products that represent separate performance obligations. Sius TFF product revenue is generally recognized at a point in time upon transfer of control to the customer.

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. ATF Systems typically include a filtration system and consumables (i.e., tube devices, 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 tube device(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 purchasesingle performance obligation. The training and installation services do not significantly modify or customize the ATF system and therefore represent a distinct performance obligation. 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. 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 ASC606-10-55-18.

Chromatography Products

The Company’s chromatography product line includes a number of products used in the downstream purification and quality control of biological drugs. The majority of chromatography revenue relates to the OPUSpre-packed chromatography column line and Protein A chromatography resins. OPUS columns typically consist of the outer hardware of the column with a resin as ordered by the customer packed inside of the column. OPUS columns may also be ordered without the packed resin. 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.

Other Products

The Company’s other products include 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. Each ELISA kit is considered distinct and therefore represents a separate performance obligation. 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 represents 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 businesspurchase order from its customers. Accordingly, the Company has elected to not disclose the value of these unsatisfied performance obligations as provided under ASC 805, “Business Combinations.” The total purchase price of the TangenX Acquisition was $37.1 million in cash.

Consideration TransferredContract Balances from Contracts with Customers

The Company accounted for the TangenX Acquisition as a purchase of a business under U.S. GAAP. Under the acquisition method of accounting, the assets of TangenX were recordedfollowing table provides information about receivables and deferred revenue from contracts with customers as of the acquisition date, at their respective fair values, and consolidated with those of the Company. The fair value of the net assets acquired was approximately $37.1 million.

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 the Company believes to be reasonable. However, actual results may differ from these estimates.

The total consideration transferred followsJune 30, 2018 (in thousands):

Acquisition-related costs are not includedThe timing of revenue recognition, billings and cash collections results in accounts receivables and deferred revenue 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 component of consideration transferred, but are expensedcontract asset, if the Company must first satisfy another performance obligation in the periods in whichcontract before it is entitled to payment from the costscustomer. Contract assets are incurred. Thetransferred to billed receivables once the right becomes unconditional. If the Company incurred $0has the unconditional right to receive consideration from the customer, the contract asset is accounted for as a billed receivable and $376,000 in transaction costs forpresented separately from other contract assets. A right is unconditional if nothing other than the three- and nine-month periods ended September 30, 2017, respectively, and $935,000 in transaction costs for the year ended December 31, 2016 relatedpassage 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 TangenX Acquisition. 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 transactionCompany’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 paragraph340-40-25-4, 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 the consolidated statements of operations.

Fair Value of Net Assets Acquired

The allocation of purchase price was based on the fair value of assets acquiredexpenses. When shipping and liabilities assumed as of December 14, 2016. The components and allocationhandling costs are incurred after a customer obtains control of the purchase price consists of the following amounts (in thousands):

Of the consideration paid, $6.2 million represents the fair value of customer relationships that will be amortized over the determined useful life of 13 years and $6.0 million represents the fair value of developed technology that will be amortized over a determined useful life of 20 years. $21,000 represents the fair value ofnon-competition agreements that will be amortized over a determined life of 2 years. $11,000 represents the fair value of trademarks and trade names that will be amortized over a determined useful life of 5 years. The aforementioned intangible assets will be amortized on a straight-line basis.

The goodwill of $29.5 million represents future economic benefits expected to arise from synergies from combining operations and the extension of existing customer relationships. None of the goodwill recorded is expected to be deductible for income tax purposes.

Atoll GmbH

On April 1, 2016, the Company’s subsidiary, Repligen Sweden, acquired Atoll GmbH (“Atoll”) fromUV-Cap GmbH & Co. KG (“UV Cap”) pursuant to a Share Purchase Agreement (the “Atoll Share Purchase Agreement”), dated as of March 31, 2016 (such acquisition, the “Atoll Acquisition”), by and among Repligen Sweden, UV Cap, andproducts, the Company in its capacityaccounts for these as guarantor of the obligations of Repligen Sweden under the Atoll Share Purchase Agreement. The Atoll Acquisition was subject to certain closing conditions that did not occur until April 1, 2016. Payment for the Atoll Acquisition was denominated in Euros but is reflected here in U.S. dollars for presentation purposes.

In connection with the Atoll Acquisition, the Company issued and contributed 538,700 shares of the Company’s common stock, par value of $0.01 per share valued at $14.1 million (the “Atoll Stock Consideration”) to Repligen Sweden through a transfer by the Company on behalf of Repligen Swedencosts to fulfill Repligen Sweden’s obligation to deliver the Atoll Stock Consideration under the Atoll Share Purchase Agreement. The issuance of the Atoll Stock Consideration waspromise and not registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act. The Atoll Stock Consideration was based on the fair value of the Company’s common stock on April 1, 2016.

This acquisition strengthened Repligen’s bioprocessing business by adding a complementary extension to an existing product line while expanding its direct sales presence worldwide. On September 20, 2016, Atoll changed its name to Repligen GmbH.

The Atoll Acquisition was accounted for as a purchase of a business under ASC 805, “Business Combinations.” The total purchase price of the Atoll Acquisition was $25.3 million, consisting of an upfront cash payment of $10.2 million, less $74,000 as a result of the final determination of working capital, issuance of the Atoll Stock Consideration, and a milestone payment of $1.1 million for achievement of specific revenue growth targets met for 2016. The $1.1 million potential contingent consideration had an initial probability weighted fair value at the time of the closing of the Atoll Acquisition of approximately $952,000.

Consideration Transferred

The Company accounted for the Atoll Acquisition as the purchase of a business under U.S. GAAP. Under the acquisition method of accounting, the assets of Atoll were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company. The fair value of the net assets acquired was approximately $25.3 million.

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 the Company believes to be reasonable. However, actual results may differ from these estimates.

The total consideration transferred follows (in thousands):

The fair value of contingent consideration was determined based upon a probability weighted analysis of expected future milestone and settlement payments to be made to UV Cap. Pursuant to the terms of the Atoll Share Purchase Agreement, the Company would make a contingent consideration payment of $1.1 million if specific revenue growth targets were met for 2016. Because the specified revenue growth targets were met for 2016, the Company made the contingent consideration payment in March 2017. No further measurement of this liability is required as of September 30, 2017.

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 $1,307,000 in transaction costs in 2016 related to the Atoll Acquisition. The transaction costs are included in selling, general and administrative expenses in the consolidated statements of operations.

Fair Value of Net Assets Acquired

The allocation of purchase price was based on the fair value of assets acquired and liabilities assumed as of April 1, 2016. The components and allocation of the purchase price consists of the following amounts (in thousands):

Of the consideration paid, $5.3 million represents the fair value of customer relationships that will be amortized over the determined useful life of 13 years and $2.2 million represents the fair value of developed technology that will be amortized over a determined useful life of 14 years. $57,000 represents the fair value ofnon-competition agreements and $11,000 represents the fair value of trademarks and trade names that will be amortized over a determined useful life of 2 years. The aforementioned intangible assets will be amortized on a straight-line basis.

The goodwill of $17.1 million represents future economic benefits expected to arise from synergies from combining operations, utilizing the Company’s existing sales infrastructure to increase market presence and the extension of existing customer relationships. None of the goodwill recorded is expected to be deductible for income tax purposes.

3. Revenue Recognition

Product Sales

The Company’s revenue recognition policy is to recognize revenues from product sales and services in accordance with ASC 605,Revenue Recognition. These standards require that revenues are recognized when persuasive evidence of an arrangement exists, product delivery, including customer acceptance when required, has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. Determination of whether these criteria have been met are based on management’s judgments primarily regarding the fixed nature of the fee charged for the product delivered and the collectability of those fees. The Company has a few longstanding customers who comprise the majority of revenue and have excellent payment histories and therefore the Company does not require collateral. The Company has had no significant write-offs of uncollectible invoices in the periods presented. When more than one element such as equipment, consumables, and services are contained in a single arrangement, the Company allocates revenue between the elements based on each element’s relative selling price, provided that each element meets the criteria for treatment as a separate unit of accounting. An item is considered a separate unit of accounting if it has value to the customer on a stand-alone basis. The selling price of the undelivered elements is determined by the price charged when the element is sold separately, or in cases when the item is not sold separately, by third-party evidence of selling price or management’s best estimate of selling price.performance obligation.

7.6. Inventories

Inventories relate to the Company’s bioprocessing business. The Company values inventory at cost or, if lower, market value, using thefirst-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. Expected sales volumes are determined based on supply forecasts provided by key customers for the next 3 to 12 months. The Company writes 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. Reserves for excess and obsolete inventory were approximately $406,000 at September 30, 2017 and $435,000 at December 31, 2016.

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. Inventories consist of the following (in thousands):

8.7. Property, Plant and Equipment

Property, plant and equipment consist of the following (in thousands):

Depreciation expense totaled approximately $2,988,000$2,598,000 and $2,360,000$1,858,000 for the nine-monthsix-month periods ended SeptemberJune 30, 20172018 and 2016,2017, respectively.

9.8. Intangible Assets

Intangible assets are amortized over their useful lives using the straight-line method, as applicable, and the amortization expense is recorded within selling, general and administrative expense in the Company’s statements of comprehensive income.

The Company reviews its indefinite-lived intangible assets not subject to amortization to determine if adverse conditions exist or a change in circumstances exists that would indicate an impairment. 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 our products or changes in the size of the market for our products. An impairment results if the carrying value of the asset exceeds the estimated fair value 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 intangible assets are recoverable at SeptemberJune 30, 2017.2018.

Intangible assets consisted of the following at SeptemberJune 30, 20172018 (in thousands):

		Gross Carrying Amount				Accumulated Amortization				Weighted Average Useful Life (in years)
Technology – developed		$	51,701			$	(4,537	)			19
Patents			240				(240	)			8
Customer relationships			101,577				(12,986	)			14
Trademark – definite lived			2,160				(103	)			20
Trademark – indefinite lived			700				—				—
Other intangibles			1,062				(392	)			3
Total intangible assets		$	157,440			$	(18,258	)			16

Intangible assets consisted of the following at December 31, 20162017 (in thousands):

Amortization expense for amortized intangible assets was approximately $3,476,000$5,298,000 and $1,484,000 for the nine-monthsix-month periods ended SeptemberJune 30, 20172018 and 2016,2017, respectively. As of SeptemberJune 30, 2017,2018, the Company expects to record amortization expense as follows (in thousands):

10.9. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

10. Convertible Senior Notes

The carrying value of the Company’s convertible senior notes is as follows:follows (in thousands):

On May 24, 2016, the Company issued $115 million aggregate principal amount of its 2.125% Convertible Senior Notes due 2021 (the “Notes”).Notes. The net proceeds from the sale of the Notes, after deducting the underwriting discounts and commissions and other related offering expenses, were approximately $111.1 million. The Notes bear interest at the rate of 2.125% per annum, payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2016.

The Notes will mature on June 1, 2021, unless earlier repurchased, redeemed or converted in accordance with their terms. Prior to March 1, 2021, the Notes will be convertible at the option of holders of the Notes only upon satisfaction of certain conditions and during certain periods, and thereafter, the notes will be convertible at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, holders of the Notes will receive shares of the Company’s common stock, cash or a combination thereof, at the Company’s election. It is the Company’s current intent and policy to settle all conversions through combination settlement, which involves satisfying the principal amount outstanding with cash and any note conversion value over the principal amount in shares of the Company’s common stock.

DuringNotes with a par value of $11,000 were submitted for conversion in the thirdfourth quarter of 2017, and this conversion was settled in the first quarter of 2018. The conversion resulted in the issuance of a nominal amount of shares of the Company’s common stock, and the Company recorded a loss of $1,000 on the conversion of these Notes.

During the second quarter of 2018, the closing price of the Company’s common stock exceeded 130% of the conversion price of the Notes for more than 20 trading days of the last 30 consecutive trading days of the quarter. As a result, the Notes are convertible at the option of the holders of the Notes during the fourththird quarter of 2017. As a result, the2018. The Company reclassified the carrying value of the Notes to current liabilities from long term liabilities to current liabilities on the Company’s consolidated balance sheet as of SeptemberJune 30, 2017.2018. As of June 30, 2018, theif-converted value of the Notes exceeded the aggregate principal amount by approximately $63.8 million. As of the date of this filing, no Notes have been converted by the holders of such Notes in the third quarter of 2018. In the event the closing price conditions are met in the fourththird quarter of 20172018 or a future fiscal quarter, the Notes will be convertible at a holder’s option during the immediately following fiscal quarter. As of September 30, 2017, theif-converted value of the Notes exceeded the aggregate principal amount by approximately $39.8 million. As of the date of this filing, none of the Notes have been converted by the holders of such Notes.