UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

June 30, ~~2018~~

2019

☐	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~~Name of ~~registrant~~Registrant as ~~specified~~Specified in its ~~charter)~~

Charter)


~~Delaware~~		~~04-2729386~~
Delaware		04-2729386
(State or ~~other jurisdiction~~Other Jurisdiction of ~~incorporation~~ Incorporation or ~~organization)~~ Organization)		(I.R.S. Employer Identification No.)

41 Seyon Street, Bldg. 1, Suite 100 Waltham , MA		02453
(Address of ~~principal executive offices)~~Principal Executive Offices)		(Zip Code)

(
781
)
250-0111

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

Telephone Number, Including Area Code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	RGEN	The Nasdaq Global Select Market

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

☒

☐

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 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 ~~and post~~ such files). Yes

☒

☐

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. ~~(Check one)~~:


Large accelerated filer	☒	Accelerated filer	☐

~~Non-accelerated filer~~	~~☐ (Do not check if a smaller reporting company)~~
Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐		~~Emerging growth company~~	☐

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

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 by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act.): Yes

☐

☒

The number of shares outstanding of ~~each of~~ the ~~issuer’s classes of~~registrant’s common stock ason July 30, 2019 was

51,530,792

Table of ~~July 26, 2018.~~

Contents


~~Class~~		~~Number of Shares~~
~~Common Stock, par value $.01 per share~~		~~43,805,802~~

~~Table of Contents~~

		PAGE
PART I -	FINANCIAL INFORMATION
		~~PAGE~~
~~PART I~~Item 1.	~~FINANCIAL INFORMATION~~Financial Statements (interim periods unaudited)
~~Item 1.~~	~~Unaudited Condensed Consolidated Financial Statements~~
	~~Condensed~~ Consolidated Balance Sheets as of June 30, ~~2018~~2019 and December 31, ~~2017~~2018		3

	~~Condensed~~ Consolidated Statements of Comprehensive Income (Loss) for the ~~Three-~~Three and~~Six-Month~~ ~~Periods~~ Six Months Ended June 30, ~~2018~~2019 and ~~2017~~2018		4

	~~Condensed~~ Consolidated Statements of ~~Cash Flows~~Stockholders’ Equity for the~~Six-Month~~ ~~Periods~~ Three and Six Months Ended June 30, ~~2018~~2019 and ~~2017~~2018		5
	~~Notes to Unaudited Condensed Consolidated Financial Statements~~		6
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018		7

	Notes to Unaudited Consolidated Financial Statements		8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2328

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		3036

Item 4.	Controls and Procedures		3037

PART II -	OTHER INFORMATION		31

Item 1.	Legal Proceedings		3138

Item 1A.	Risk Factors		3138

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		3138

Item 3.	Defaults Upon Senior Securities		3138

Item 4.	Mine Safety Disclosures		3138

Item 5.	Other Information		3138

Item 6.	Exhibits		3139
~~Signatures~~			33
Signatures			40

PART I – FINANCIAL INFORMATION

ITEM 1.

Financial Statements

REPLIGEN

CORPORATION

~~CONDENSED~~

CONSOLIDATED

BALANCE SHEETS

~~(Unaudited)~~

(in thousands, except share data)    June 30, 2018 December 31, 2017
Assets

Current assets:

Cash and cash equivalents
   $ 175,611 $ 173,759
Accounts receivable, less reserve for doubtful accounts of $61 at June 30, 2018 and $58 at December 31, 2017, respectively
   31,713 27,585
Royalties and other receivables
   17 153
Inventories, net
   40,948 39,004
Prepaid expenses and other current assets
   4,620 2,281


Total current assets
   252,909 242,782
Property, plant and equipment, net
   23,993 22,417
Intangible assets, net
   139,182 144,753
Goodwill
   327,095 327,333
Other assets
   1,902 6,234


Total assets
   $ 745,081 $ 743,519


Liabilities and stockholders’ equity

Current liabilities:

Accounts payable
   $ 6,688 $ 7,282
Accrued liabilities
   13,102 17,929
Convertible senior notes, current portion
   101,329 —


Total current liabilities
   121,119 25,211
Convertible senior notes, net
   —   99,250
Deferred tax liabilities
   20,643 25,167
Other long-term liabilities
   4,660 2,343
Commitments and contingencies (Note 14)

Stockholders’ equity:

Preferred stock, $.01 par value, 5,000,000 shares authorized, no shares issued
or outstanding
   —   —
Common stock, $.01 par value, 80,000,000 shares authorized, 43,798,572 shares at June 30, 2018 and 43,587,079 shares at December 31, 2017 issued and outstanding
   438 436
Additionalpaid-in capital
   635,364 628,983
Accumulated other comprehensive loss
   (11,143 ) (6,363 )
Accumulated deficit
   (26,000 ) (31,508 )


Total stockholders’ equity
   598,659 591,548


Total liabilities and stockholders’ equity
   $ 745,081 $ 743,519

(Unaudited, amounts in thousands, except share data)


	June 30,			December 31,
	2019			2018
Assets
Current assets:
Cash and cash equivalents	$	208,888		$	193,822
Restricted cash		8,929			—
Accounts receivable, less reserve for doubtful accounts of $330 and $227 at June 30, 2019 and December 31, 2018, respectively		43,045			33,015
Royalties and other receivables		44			136
Unbilled receivables		460			2,602
Inventories, net		51,275			42,263
Prepaid expenses and other current assets		3,853			3,901

Total current assets		316,494			275,739
Property, plant and equipment, net		38,125			32,180
Intangible assets, net		220,481			135,438
Goodwill		469,510			326,735
Deferred tax assets		3,917			4,355
Operating lease right of use assets		19,501			—
Other assets		239			174

Total assets	$	1,068,267		$	774,621

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	11,304		$	10,489
Operating lease liability		3,287			—
Accrued liabilities		20,618			15,865
Convertible senior notes, current portion		105,704			103,488

Total current liabilities		140,913			129,842
Deferred tax liabilities		27,690			25,086
Operating lease liability, long-term		20,209			—
Other liabilities, long-term		487			4,125

Total liabilities		189,299			159,053

Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.01 par value, 5,000,000 shares authorized, no shares issued or outstanding		—			—
Common stock, $0.01 par value; 80,000,000 shares authorized; 48,086,422 shares at June 30, 2019 and 43,917,378 shares at December 31, 2018 issued and outstanding		481			439
Additional paid-in capital		892,960			642,590
Accumulated other comprehensive loss		(15,053	)		(11,893	)
Accumulated earnings (deficit)		580			(15,568	)

Total stockholders’ equity		878,968			615,568

Total liabilities and stockholders’ equity	$	1,068,267		$	774,621

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

REPLIGEN CORPORATION

~~CONDENSED~~

CONSOLIDATED STATEMENTS

COMPREHENSIVE INCOME

~~(Unaudited)~~

(in thousands, except share and per share data)    Three months ended June 30, Six months ended June 30,
   2018 2017 2018 2017
Revenue:

Product revenue
   $ 47,743 $ 32,434 $ 92,542 $ 63,003
Royalty and other revenue
   (12 ) 21 19 42


Total revenue
   47,731 32,455 92,561 63,045
Operating expenses:

Cost of product revenue
   21,088 13,937 40,756 27,926
Research and development
   5,780 1,860 9,068 3,602
Selling, general and administrative
   16,590 11,185 32,488 20,367


Total operating expenses
   43,458 26,982 82,312 51,895


Income from operations
   4,273 5,473 10,249 11,150
Investment income
   512 110 693 206
Interest expense
   (1,669 ) (1,601 ) (3,321 ) (3,187 )
Other income (expense)
   251 (328 ) 321 (448 )


Income before income taxes
   3,367 3,654 7,942 7,721
Income tax (benefit) provision
   629 (4,784 ) 1,757 (3,785 )


Net income
   $ 2,738 $ 8,438 $ 6,185 $ 11,506


Earnings per share:

Basic
   $ 0.06 $ 0.25 $ 0.14 $ 0.34


Diluted
   $ 0.06 $ 0.24 $ 0.14 $ 0.33


Weighted average shares outstanding:

Basic
   43,743,356 34,097,805 43,682,650 33,995,323


Diluted
   45,015,720 35,094,814 44,694,745 34,715,797


Other comprehensive income:

Unrealized gain on investments
   —   —   —   5
Foreign currency translation (loss) gain
   (5,031 ) 4,046 (4,780 ) 5,073


Comprehensive (loss) income
   $ (2,293 ) $ 12,484 $ 1,405 $ 16,584

(LOSS)

(Unaudited, amounts in thousands, except per share data)


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenue:
Products	$	70,670		$	47,743		$	131,282		$	92,542
Royalty and other revenue		22			(12	)		44			19

Total revenue		70,692			47,731			131,326			92,561

Costs and operating expenses:
Cost of product revenue		30,708			21,088			57,553			40,756
Research and development		5,231			5,780			8,851			9,068
Selling, general and administrative		23,699			16,590			42,697			32,488

Total costs and operating expenses		59,638			43,458			109,101			82,312

Income from operations		11,054			4,273			22,225			10,249

Other income (expenses):
Investment income		1,005			512			1,718			693
Interest expense		(1,743	)		(1,669	)		(3,469	)		(3,321	)
Other (expenses) income		(697	)		251			(339	)		321

Other expenses, net		(1,435	)		(906	)		(2,090	)		(2,307	)

Income before income taxes		9,619			3,367			20,135			7,942
Income tax provision		1,524			629			3,987			1,757

Net income	$	8,095		$	2,738		$	16,148		$	6,185

Earnings per share:
Basic	$	0.17		$	0.06		$	0.36		$	0.14

Diluted	$	0.17		$	0.06		$	0.34		$	0.14

Weighted average common shares outstanding:
Basic		46,367			43,743			45,174			43,683

Diluted		49,056			45,016			47,692			44,695

Net income	$	8,095		$	2,738		$	16,148		$	6,185
Other comprehensive income (loss):
Foreign currency translation adjustment		(1,269	)		(5,031	)		(3,160	)		(4,780	)

Comprehensive income (loss)	$	6,826		$	(2,293	)	$	12,988		$	1,405

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

REPLIGEN CORPORATION

~~CONDENSED~~

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~

~~(Unaudited)~~

(In thousands)    Six months ended June 30,
   2018 2017
Cash flows from operating activities:

Net income
   $ 6,185 $ 11,506
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization
   7,894 3,278
Non-cash interest expense
   2,089 1,956
Stock-based compensation expense
   4,893 3,027
Deferred tax expense
   325 (5,384 )
Loss on conversion of convertible senior notes
   1 —
Loss on disposal of assets
   —   64
Changes in assets and liabilities:

Accounts receivable
   (4,788 ) (6,347 )
Other receivables
   60 226
Inventories
   (3,096 ) (813 )
Prepaid expenses and other current assets
   (144 ) (236 )
Other assets
   (1,241 ) (754 )
Accounts payable
   (701 ) 1,740
Accrued liabilities
   (3,985 ) (4,216 )
Long-term liabilities
   43 (86 )


Net cash provided by operating activities
   7,535 3,961


Cash flows from investing activities:

Purchases of marketable securities
   —   (42 )
Redemptions of marketable securities
   —   16,850
Purchases of property, plant and equipment
   (4,412 ) (2,676 )


Net cash (used in) provided by investing activities
   (4,412 ) 14,132


Cash flows from financing activities:

Exercise of stock options
   1,490 1,505
Repayment of senior convertible notes
   (11 ) —
Payment of contingent consideration
   —   (1,677 )


Net cash provided by (used in) financing activities
   1,479 (172 )


Effect of exchange rate changes on cash and cash equivalents
   (2,750 ) 2,053


Net increase (decrease) in cash and cash equivalents
   1,852 19,974
Cash, cash equivalents and restricted cash, beginning of period
   173,759 122,683


Cash, cash equivalents and restricted cash, end of period
   $ 175,611 $ 142,657


Supplemental disclosure ofnon-cash activities:

Income taxes paid
   $ 1,458 $ 2,150


Non-cash effect of adoption of ASU2016-16
   $ 5,609 $ —


Payment of contingent consideration in common stock
   $ —   $ 1,062

STOCKHOLDERS’ EQUITY

(Unaudited, amounts in thousands, except share data)


	Six Months Ended June 30, 2019
	Common Stock
	Number of Shares		Par Value		Additional Paid- In Capital		Accumulated Other Comprehensive Income (Loss)			Accumulated Earnings (Deficit)			Total Stockholders’ Equity
Balance at December 31, 2018		43,917,378	$	439	$	642,590	$	(11,893	)	$	(15,568	)	$	615,568
Net income		—		—		—		—			16,148			16,148
Issuance of common stock for debt conversion		29		0		2		—			—			2
Exercise of stock options and releases of restricted stock		245,263		3		563		—			—			566
Issuance of common stock pursuant to the acquisition of C Technologies, Inc.		779,221		8		53,930		—			—			53,938
Proceeds from issuance of common stock, net of issuance costs of $0.5 million		3,144,531		31		189,592		—			—			189,623
Stock-based compensation expense		—		—		6,283		—			—			6,283
Translation adjustment		—		—		—		(3,160	)		—			(3,160	)

Balance at June 30, 2019		48,086,422	$	481	$	892,960	$	(15,053	)	$	580		$	878,968


	Three Months Ended June 30, 2019
	Common Stock
	Number of Shares		Par Value		Additional Paid- In Capital		Accumulated Other Comprehensive Income (Loss)			Accumulated Earnings (Deficit)			Total Stockholders’ Equity
Balance at March 31, 2019		44,073,998	$	441	$	645,883	$	(13,784	)	$	(7,515	)	$	625,025
Net income											8,095			8,095
Issuance of common stock for debt conversion		29		0		2		—			—			2
Exercise of stock options and releases of restricted stock		88,643		1		522		—			—			523
Issuance of common stock pursuant to the acquisition of C Technologies, Inc.		779,221		8		53,930		—			—			53,938
Proceeds from issuance of common stock, net of issuance costs of $0.5 million		3,144,531		31		189,592		—			—			189,623
Stock-based compensation expense		—		—		3,031		—			—			3,031
Translation adjustment		—		—		—		(1,269	)		—			(1,269	)

Balance at June 30, 2019		48,086,422	$	481	$	892,960	$	(15,053	)	$	580		$	878,968


	Six Months Ended June 30, 2018
	Common Stock
	Number of Shares		Par Value		Additional Paid- In Capital		Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2017		43,587,079	$	436	$	628,983	$	(6,363	)	$	(31,508	)	$	591,548
Net income		—		—		—		—			6,185			6,185
Issuance of common stock for debt conversion		2		0		0		—			—			0
Exercise of stock options and releases of restricted stock		211,491		2		1,488		—			—			1,490
Stock-based compensation expense		—		—		4,893		—			—			4,893
Cumulative effect of accounting changes		—		—		—		—			(677	)		(677	)
Translation adjustment		—		—		—		(4,780	)		—			(4,780	)

Balance at June 30, 2018		43,798,572	$	438	$	635,364	$	(11,143	)	$	(26,000	)	$	598,659

REPLIGEN CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - CONTINUED

(Unaudited

, amounts in thousands, except share data

)


	Three Months Ended June 30, 2018
	Common Stock
	Number of Shares		Par Value		Additional Paid- In Capital		Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity
Balance at March 31, 2018		43,692,303	$	437	$	631,595	$	(6,112	)	$	(28,737	)	$	597,183
Net income											2,737			2,737
Issuance of common stock for debt conversion		—		0		0		—			—			—
Exercise of stock options and releases of restricted stock		106,269		1		1,144		—			—			1,145
Stock-based compensation expense		—		—		2,625		—			—			2,625
Translation adjustment		—		—		—		(5,031	)		—			(5,031	)

Balance at June 30, 2018		43,798,572	$	438	$	635,364	$	(11,143	)	$	(26,000	)	$	598,659

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

REPLIGEN CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, amounts in thousands

)

Six Months Ended
June 30,

2019

2018

Cash flows from operating activities:

Net income
$
16,148
$
6,185

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

9,053

7,894

Non-cash
interest expense

2,231

2,089

Stock-based compensation expense

6,283

4,893

Deferred tax expense

889

325

Other

3

1

Changes in operating assets and liabilities, excluding impact of acquisitions:

Accounts receivable

(7,317
)
(4,788
)
Royalties and other receivables

114

60

Unbilled receivables

2,142

—

Inventories

(4,137
)
(3,096
)
Prepaid expenses and other assets

114

(144
)
Operating lease right of use assets

1,206

—

Other assets (65 ) (1,241 )
Accounts payable

495

(701
)
Accrued expenses

1,642

(3,985
)
Operating lease liability

(1,216
)
—

Long-term liabilities

(8
)
43

Total cash provided by operating activities

27,577

7,535

Cash flows from investing activities:

Acquisition of C Technologies, Inc., net of cash acquired (182,176 ) —
Additions to capitalized software costs

(3,282
)
—

Purchases of property, plant and equipment

(5,847
)
(4,412
)

Total cash used in investing activities

(191,305
)
(4,412
)

Cash flows from financing activities:

Exercise of stock options

566

1,490

Proceeds from issuance of common stock, net
189,623 —
Repayment of senior convertible notes

(17
)
(11
)

Total cash provided by financing activities

190,172

1,479

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(2,449
)
(2,750
)

Net increase in cash, cash equivalents and restricted cash

23,995

1,852

Cash, cash equivalents and restricted cash, beginning of period

193,822

173,759

Cash, cash equivalents and restricted cash, end of period
$
217,817
$
175,611

Supplemental disclosure of cash flow information:

Income taxes paid
$
2,705
$
1,458

Supplemental disclosure of
non-cash
investing and financing activities:

Fair value of common stock issued for acquisition of C Technologies, Inc.
$
53,938
$
—

Non-cash
effect of adoption of ASU
2016-16
$
—
$
5,609

Business Acquisitions:

Fair value of tangible assets acquired $ 30,756 $ —
Fair value of accounts receivables 3,044 —
Fair value of other assets 3,929 —
Liabilities assumed (35,326 ) —
Fair value of stock issued (53,938 ) —
Cost in excess of fair value of assets acquired (goodwill) 142,881 —
Acquired identifiable intangible assets 90,830 —
Net cash paid for business acquisitions $ 182,176 $ —
The accompanying notes are an integral part of these consolidated financial statements.

REPLIGEN CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~1. Basis of Presentation~~

1.	Basis of Presentation

The ~~condensed~~ consolidated financial statements included herein have been prepared by Repligen Corporation (the “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 Form

10-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 Form

10-K

for the fiscal year ended December 31, ~~2017.~~

2018.

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, ~~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 and its subsidiaries (“Spectrum,” acquired on August 1, 2017)., C Technologies, Inc. (“C Technologies,” acquired on May 31, 2019), and Repligen Singapore Pte. Ltd. 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.

Recent Accounting Standards Updates

We consider the applicability and impact of all Accounting Standards Updates on our consolidated financial statements. Updates not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations. Recently issued Accounting Standards Updates which we feel may be applicable to us are as follows:

Recently Issued Accounting ~~Pronouncements~~

Standard Updates – Not Yet Adopted

In ~~May 2014,~~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 amendments become effective for the Company in the year ending December

2020

and early adoption is permitted. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements.

In August 2018, the FASB issued ASU~~No. 2014-09,~~ ~~“Revenue from Contracts~~

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 ~~Customers~~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 over the term of the hosting arrangement, which includes reasonably certain renewals. The guidance becomes effective for the Company in the year ending December 31, 2020 and early adoption is permitted. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements.

In November 2018, the FASB issued ASU

2018-18,

“Collaborative Arrangements (Topic ~~606),”(“ASC 606”) which supersedes~~808): Clarifying the ~~revenue recognition requirements in Accounting Standards Codification~~Interaction between Topic ~~605,~~~~Revenue Recognition~~,808 and ~~creates a new~~Topic 606.”

ASU

2018-18

clarifies the interaction between Topic 808,

“Collaborative Arrangements,”

and Topic 606,

“Revenue from Contracts with Customers,~~. Two adoption methods are permitted: retrospectively~~”

by making targeted improvements to ~~all prior reporting periods presented,~~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 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 included updates as provided under ASU~~2015-14,~~ ~~“Revenue from Contracts with Customers (Topic 606): Deferral~~transactions between collaborative arrangement participants by allowing presentation of the ~~Effective Date”; ASU2016-08,~~ ~~“Revenue from Contracts~~units of account in collaborative arrangements that are within

the scope of Topic 606 together 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 adopted the provisions of ASC 606 using the modified retrospective method effective January 1, 2018. See Note 3 for further discussion of the effects of this standard on the Company’s consolidated financial statements.

~~In January 2016, the FASB issued ASUNo. 2016-01,~~ ~~“Financial Instruments—Overall (Subtopic825-10):~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities.” This guidance changes how entities measure equity investments that do not result in consolidation and are not~~revenue 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 availableTopic 606. The guidance becomes effective 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~~in the ~~fair value. This guidance also changes certain disclosure requirements~~year ending December 31, 2020 and ~~other aspects of current U.S. GAAP.~~early adoption is permitted. The Company ~~adopted~~is currently assessing the impact that this guidance ~~in the first quarter of 2018. Because the Company does not hold any equity securities as of December 31, 2017 and June 30, 2018, adoption of this standard did not~~will have ~~any impact~~ on its consolidated financial statements.

Recently Issued Accounting Standard Updates – Adopted During the Period

In February 2016, the FASB issued ASU ~~No.~~

2016-02,

“Leases (Topic 842).”

ASU

2016-02,

along with subsequent ASUs issued to clarify certain provisions of ASU

2016-02

(collectively known as “ASC 842”), establishes a

right-of-use

(“~~ASU2016-02”~~ROU”). ~~ASU2016-02~~ model that requires ~~lessees~~a lessee to ~~recognize~~record a~~right-of-use~~ ROU asset and a lease liability on the consolidated balance sheet for ~~most leases. Extensive~~all leases with terms longer than 12 months. Certain qualitative and quantitative disclosures are also required. The Company adopted ASU

2016-02

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 adoptedrelated amendments on January 1, 2019 using ~~either a modified retrospective~~an optional transition ~~approach or retrospectively~~method allowed with the ~~cumulative effect~~issuance of ~~initially adopting~~ASU

2018-11,

“Leases – Targeted Improvements (Topic 842),”

in July 2018. ASU

2018-11

gives entities the ~~ASU recognized at~~option to not provide comparative period financial statements and instead apply 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 leasestransition requirements as ~~part of this standard, but has not finalized its assessment~~ of the ~~impact~~effective date of the new ~~standard~~standard. Pursuant to additional guidance under ASC 842, the Company also elected the optional package of practical expedients, which allowed the Company to not reassess: (i) whether expired or existing contracts contain leases; (ii) lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. As a result, the consolidated balance sheet prior to January 1, 2019 was not restated, continues to be reported under ASC 840,

“Leases”,

which did not require the recognition of operating lease liabilities on ~~its~~the consolidated ~~financial statements.~~balance sheet, and is not comparative. Under ASC 842, all leases are required to be recorded on the balance sheet and are classified as either operating leases or finance leases, which is determined at the inception of the lease. The lease classification affects the expense recognition in the consolidated statements of comprehensive income (loss). The expense recognition for operating leases and finance leases under ASC 842 is substantially consistent with ASC 840. Therefore, there is no significant difference in our results of operations presented in our consolidated statements of comprehensive income (loss) for each period presented. The Company ~~expects this new standard~~also elected under the package of practical expedients, to ~~have~~combine lease and

non-lease

components and not to record leases with an initial term of 12 months or less on the consolidated balance sheet. The Company adopted ASC 842 using the optional transition method for all leases existing at January 1, 2019. The adoption had a ~~material~~substantial impact on our balance sheet. The most significant impact was the recognition of the operating lease ROU assets and lease liabilities for operating leases. Upon adoption, leases that were classified as operating leases under ASC 840 were classified as operating leases under ASC 842, and we recorded ROU assets of $17.0 million and lease liabilities of $21.0 million, before considering deferred taxes. The lease liability is based on the present value of the remaining minimum lease payments, determined under ASC 840, discounted using our incremental borrowing rate at the effective date January 1, 2019. The difference between the ROU assets and the lease liabilities is due to $4.0 million of unamortized lease incentives and deferred rent at the Company’s Marlborough and Waltham facilities as of December 31, 2018. There was no impact to our beginning retained earnings upon adoption of ASC 842. See Note 5,

“Leases,”

below for more information on the Company’s adoption of ASC 842.

2.	Fair Value Measurements

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 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 –		Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

Level 2 –		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 June 30, 2019 and December 31, 2018, cash and cash equivalents on the Company’s consolidated balance ~~sheet.~~

sheets included $118.4 million and $126.6 million, respectively, in a money market account. These funds are valued on a recurring basis using Level 1 inputs.

In ~~August~~May 2016, the ~~FASB~~Company 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 has historically classified payments up to the$115.0 million aggregate principal amount of ~~its contingent consideration liability recognized at~~ the ~~date~~Notes due June 1, 2021 (the “2016 Notes”). Interest is payable semi-annually in arrears on June 1 and December 1 of its acquisition as financing activities, with additional payments classified as operating activities. Because the Company has classified its contingent consideration payments as required by this standard, the adoptioneach year, beginning on December 1, 2016. As of ~~this standard did not have any 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. The Company adopted this standard as of January 1, 2018, and the adoption of ASU~~2017-01~~ ~~did 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. ASU~~No. 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~~2019, the carrying value of the 2016 Notes was $105.7 million, net of unamortized discount, and the fair value of the 2016 Notes was $310.5 million. The fair value of the 2016 Notes is a ~~reporting unit over its~~Level 1 valuation and was determined based on the most recent trade activity of the 2016 Notes as of June 30, 2019. The 2016 Notes are discussed in more detail in Note 8,

“Convertible Senior Notes”

to these consolidated financial statements.

There were no remeasurements to fair ~~value. The impairment charge will be limited to~~value during the ~~amount~~three months ended June 30, 2019 of ~~goodwill allocated to~~financial assets and liabilities that ~~reporting unit. The standard is effective for the Company~~are not measured at fair value on a prospective basis beginning on January 1, 2020, with early adoption permitted. The 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~~recurring basis.

3.	Acquisition of C Technologies, Inc.

On April 25, 2019, Repligen agreed 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 assessed 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. Acquisition of Spectrum LifeSciences, LLC~~

~~On August 1, 2017, the Company completed the acquisition of Spectrum~~acquire C Technologies, pursuant to the terms of a Stock Purchase Agreement (the “Agreement”), by and among Repligen, C Technologies and Craig Harrison, an ~~Agreement~~individual and ~~Plan~~sole stockholder of ~~Merger and Reorganization, dated as of June 22, 2017~~C Technologies (such acquisition, the ~~“Spectrum~~“C Technologies Acquisition”).

~~Spectrum is a diversified filtration company with a differentiated portfolio~~

C Technologies’ business consists of ~~hollow fiber cartridges, benchtop~~two major product categories (i) biotechnology, or Biotech, and (ii) Legacy and Other. Through its Biotech category, C Technologies sells instruments, consumables and accessories that are designed to ~~commercial scale filtration and perfusion systems and a broad portfolio of disposable andsingle-use~~ ~~solutions. Spectrum’s products are primarily used for~~allow bioprocessing technicians to measure the ~~filtration, isolation, purification and~~protein concentration of ~~monoclonal antibodies, vaccines, recombinant proteins, diagnostic products~~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 ~~cell therapies where~~at-line protein concentration measurements conducted in quality control, process development and manufacturing labs in the ~~company offers both standard~~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 ~~customized solutions~~fill-finish applications, designed to ~~its bioprocessing customers.~~

~~Spectrum’s filtration products include its KrosFlo~~^® ~~line of hollow fiber cartridges, tangential flow filtration (“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~~ ~~sets. Outside of filtration, Spectrum products include Spectra/Chrom~~^® ~~liquid chromatography products~~allow for ~~research applications. These bioprocessing products account for the majority of Spectrum revenues. Spectrum also offers a line of operating room products.~~

real-time process monitoring.

Consideration Transferred

The ~~Company~~C Technologies Acquisition was accounted for ~~the Spectrum Acquisition~~ as a purchase of a business under ~~ASC~~Accounting Standards Codification No. (“ASC”) 805, ~~“Business Combinations.”~~

“Business Combinations”

. The ~~Spectrum~~C Technologies Acquisition was funded through payment of approximately ~~$122.9~~$195.0 million in cash, ~~issuance~~$186.0 million of ~~6,153,995~~which will be consideration transferred pursuant to ASC 805, and $9.0 million of which will be compensation expense for future employment, and 779,221 unregistered shares of the Company’s common stock totaling ~~$247.6~~$53.9 million ~~and a working capital adjustment of $425,000~~ for a total purchase price of ~~$370.9~~$239.9 million. Under the acquisition method of accounting, the assets of ~~Spectrum~~C Technologies were recorded as of the acquisition date, at their respective fair values, and consolidated with those of ~~the Company.~~Repligen. The fair value of the net tangible assets acquired ~~was~~is estimated to be approximately ~~$370.9~~$6.2 million, the fair value of the intangible assets acquired is estimated to be approximately $90.8 million, and the residual goodwill is estimated to be approximately $142.9 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 closing of the transaction. The preparation of the valuation ~~that~~ required the use of significant assumptions and ~~estimates in its preparation.~~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~~Repligen believes to be ~~reasonable; however,~~reasonable. However, actual results may differ from these estimates.

~~The total~~

Total consideration transferred is as follows ~~(in~~(amounts in thousands):

Cash consideration
   $ 122,932
Equity consideration
   247,575
Working capital adjustment
   425


Net assets acquired
   $ 370,932


Cash consideration	$	185,971
Equity consideration		53,938

Fair value of net assets acquired	$	239,909

Acquisition ~~and integration-related~~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 ~~$1,508,000~~$3.5 million and $4.0 million in ~~integration~~transaction costs ~~related to the Spectrum Acquisition~~ for the~~six-month~~ ~~period~~ three- and

six-

month periods ended June 30, ~~2018 and $7,060,000 in acquisition and integration~~2019, respectively. The transaction costs ~~for the year ended December 31, 2017. These costs~~ are ~~primarily~~ included in selling, general and administrative expenses in the consolidated statements of ~~operations.~~

comprehensive income (loss). In connection with the transaction, an additional $9.0 million in cash will be due to employees based on their continued employment with the Company one year after the date of the close of the C Technologies Acquisition.

Fair Value of Net Assets Acquired

The allocation of purchase price ~~was~~is based on the fair value of assets acquired and liabilities assumed as of ~~August 1, 2017,~~the acquisition date, based on the preliminary valuation. The Company obtains this information during due diligence and through other sources. In the months after closing, the Company may obtain additional information about these assets and liabilities as it learns more about C Technologies and will refine the estimates of fair value to more accurately allocate the purchase price. Only items identified as of the acquisition date are considered for subsequent adjustment. We will make appropriate adjustments to the purchase price allocation, if any, prior to the completion of the measurement period, which is up to one year from the acquisition date. The components and allocation of the purchase price consists of the following amounts ~~(in~~(amounts in thousands):

Cash and cash equivalents
   $ 10,137
Accounts receivable
   5,075
Inventory
   13,502
Prepaid expenses and other assets
   616
Fixed assets
   6,004
Deferred tax assets
   1,102
Customer relationships
   78,400
Developed technology
   38,560
Trademark and tradename
   2,160
Non-competition agreements
   960
Goodwill
   265,722
Accounts payable
   (1,335 )
Unrecognized tax benefit
   (576 )
Accrued liabilities
   (5,787 )
Deferred tax liabilities
   (43,608 )


Fair value of net assets acquired
   $ 370,932

Of the consideration paid, $78.4 million represents the fair value of customer relationships that is amortized over the weighted average determined useful life of 15 years, and $38.6 million represents the fair value of developed technology that is amortized over a weighted average determined useful life of 20 years. $960,000 represents the fair value of~~non-competition~~ agreements that are 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 are amortized on a straight-line basis.


Cash and cash equivalents	$	3,795
Restricted cash		26,933
Accounts receivable		3,044
Inventory		3,783
Prepaid expenses and other current assets		93
Fixed assets		40
Operating lease right of use asset		3,836
Customer relationships		59,680
Developed technology		28,920
Trademark and tradename		1,570
Non-competition agreements		660
Goodwill		142,881
Accounts payable		(436	)
Accrued liabilities		(2,417	)
Accrued bonus		(26,928	)
Deferred revenue		(1,709	)
Operating lease liability		(51	)
Operating lease liability, long-term		(3,785	)

Fair value of net assets acquired	$	239,909

Acquired Goodwill

The goodwill of ~~$265.7~~$142.9 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~~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 C Technologies Acquisition and their estimated useful lives:


	Useful Life		Fair Value
			(Amounts in thousands)
Customer relationships		17 years	$	59,680
Developed technology		18 years		28,920
Trademark and tradename		20 years		1,570
Non-competition agreements		4 years		660

			$	90,830

The preliminary purchase price allocation ~~may be~~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 ~~as of June 30, 2018 related to inventory valuation.~~valuation analysis. The final allocation may include, but not be limited ~~to,~~to: (1) changes in ~~allocations~~the fair value of fixed assets, (2) changes in allocation to ~~inventory~~intangible assets such as tradenames, technology and ~~goodwill.~~

customer relationships as well as goodwill and (3) other changes to assets and liabilities

Revenue, Net Income and Pro Forma Presentation

The Company recorded revenue from ~~Spectrum~~C Technologies of ~~$12,313,000~~$2.2 million and ~~$24,031,000 for the three- andsix-month~~ ~~periods ended~~a net loss of $

1.5

million from May 31, 2019 to June 30, ~~2018, respectively, and $19,394,000 from August 1, 2017, the date of acquisition, through December 31, 2017.~~2019. The Company has included the operating results of ~~Spectrum~~C Technologies in its consolidated statements of ~~operations~~comprehensive income (loss) since the ~~August 1, 2017~~May 31, 2019 acquisition date. The following ~~table presents unaudited supplemental~~ pro forma financial information ~~as if~~presents the ~~Spectrum Acquisition had occurred as of January 1, 2016 (in thousands, except per share data):~~

   Pro-forma
Six months ended
June 30, 2017
Total revenue
   81,774
Net income
   12,057
Earnings per share:

Basic
   $ 0.28


Diluted
   $ 0.28

~~The unaudited pro forma information for thesix-month~~ ~~period ended June 30, 2018 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 thesix-month~~ period ended June 30, 2018 was adjusted to exclude acquisition-related transaction costs, 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~~combined results of operations of Repligen and C Technologies as if the acquisition had occurred ~~as of~~on January 1, ~~2016.~~2018 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 a $2.2 million and a $2.7 million net increase in amortization expense in 2019 and 2018, respectively, to record amortization expense for the $90.8 million of acquired identifiable intangible assets, adjustments to stock-based compensation of $0.3 million and $0.4 million, respectively, for equity compensation issued to C Technologies employees and the income tax effect of the adjustments made at the statutory tax rate of the United States (approximately 25%). In addition, acquisition-related transaction costs of $4.0 million and a $1.2 million purchase accounting adjustment to record inventory at fair value were excluded from pro forma net income in 2019.

The pro forma financial information does not reflect any adjustments for anticipated expense savings resulting from the ~~effect~~acquisition and is not necessarily indicative of ~~costs or synergies~~the operating results 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~~occurred had the ~~combinations occurred at the beginning of the period presented,~~transaction been consummated on January 1, 2018 or of future ~~results~~results:


	Six Months Ended June 30,
	2019		2018
	(Amounts in thousands, except per share data)
Total revenue	$	140,515	$	102,535
Net income	$	20,560	$	8,060
Earnings per share:
Basic	$	0.46	$	0.17
Diluted	$	0.43	$	0.17

Prior to the C Technologies Acquisition, C Technologies did not generate monthly or quarterly financial statements that were prepared in accordance with U.S. GAAP.

4.	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 ~~consolidated entities.~~

~~3. Revenue Recognition~~

~~Adoption of~~life science and biopharmaceutical industries. Under ASC ~~Topic~~

606
,

“Revenue from Contracts with Customers,

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 reflected the aggregate effect of all modifications when identifying performance obligations and allocating transaction price in accordance with the practical expedient in paragraph ASC~~606-10-65-1-(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 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 June 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 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.~~

Disaggregation of Revenue

Revenues for the ~~three-~~three and~~six-month~~ ~~periods~~ six months ended June 30, ~~2018~~2019 and ~~2017~~2018 were as follows:

(in thousands, except percentages)    Three months ended
June 30, Six months ended
June 30,
   2018 2017    $ Change % Change 2018    2017    $ Change % Change
Product revenue
   $ 47,743 $ 32,434    $ 15,309 47.2 % $ 92,542    $ 63,003    $ 29,539 46.9 %
Royalty and other revenue
   (12 ) 21    (33 ) (157.1 %) 19    42    (23 ) (54.8 %)








Total revenues
   $ 47,731 $ 32,455    $ 15,276 47.1 % $ 92,561    $ 63,045    $ 29,516 46.8 %


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019		2018			2019		2018
	(Amounts in thousands)
Product revenue	$	70,670	$	47,743		$	131,282	$	92,542
Royalty and other income		22		(12	)		44		19

Total revenue	$	70,692	$	47,731		$	131,326	$	92,561

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.

~~The following tables disaggregate the Company’s~~

Disaggregated revenue from contracts with customers by geographic region ~~(in thousands).~~

   Three months ended
June 30,    Six months ended
June 30,
   2018    2017    2018    2017
North America
   $ 22,481    $ 12,437    $ 42,491    $ 24,089
Europe
   19,578    16,155    39,148    32,562
Asia and Australia
   5,617    3,604    10,692    5,926
Other
   55    259    230    468








Total
   $ 47,731    $ 32,455    $ 92,561    $ 63,045

can be found in Note 15,

“Segment Reporting,”

below.

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

   Three months ended
June 30,    Six months ended
June 30,
   2018    2017    2018    2017
MilliporeSigma
   $ 8,679    $ 6,049    $ 15,390    $ 12,504
GE Healthcare
   6,777    9,130    14,510    17,390
follows:

~~Protein~~

Three Months Ended
June 30,

Six Months Ended
June 30,

2019

2018

2019

2018

(Amounts in thousands)

GE Healthcare
$
11,083
$
6,777
$
18,749
$
14,510

MilliporeSigma
$
9,487
$
8,679
$
18,894
$
15,390

Filtration Products

The Company’s ~~protein product line generates~~filtration products generate 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 flow path connectors, flat sheet TFF cassettes and hardware, and XCell™ 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 of

single-use

flow path connectors which were acquired as part of the acquisition of Spectrum ~~in August 2017.~~LifeSciences, LLC (the “Spectrum Acquisition”). These products are used in the filtration, isolation, purification and concentration of biologics and diagnostic products. Sales of large-scale systems generally include components and consumables as well as training and installation services at the request 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 installation services do not significantly modify or customize these systems and therefore represent a distinct performance obligation.

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 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’s

single-use ~~Sius™~~

SIUS

™

TFF cassettes and hardware are not highly interdependent of one another and are therefore considered distinct products that represent separate performance obligations. ~~Sius~~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™~~ 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 single 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 ASC

606-10-55-18.

Chromatography Products

The Company’s chromatography ~~product line includes~~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 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~~

Protein Products

The Company’s ~~other products include ELISA test kits used by quality control departments to detect and measure~~Protein product line generates revenue through the ~~presence~~sale of ~~leached~~ Protein A ~~and/or~~ligands and growth ~~factor~~factors. Protein A ligands are an essential component of Protein A chromatography resins (media) used in the ~~final product.~~purification of virtually all monoclonal antibody (“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 direct sales to its customers. Each ~~ELISA kit~~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.

Process Analytics Products

On May 31, 2019, the Company consummated its acquisition of C Technologies and added a fourth franchise, Process Analytics, to our bioprocessing business. The Process Analytics product line generates revenue primarily through the sale of the SoloVPE and FlowVPE systems and consumables. These products will complement and support our 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.

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 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 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.

Contract Balances from Contracts with Customers

The following table provides information about receivables and deferred ~~revenue~~revenues from contracts with customers as of June 30, ~~2018 (in~~2019 (amounts in thousands):

   2018
Balances from contracts with customers only:

Accounts receivable
   $ 31,713
Deferred revenue
   1,175
Revenue recognized in the period relating to:

The beginning deferred revenue balance
   $ 751
Changes in pricing related to products or services satisfied in previous periods
   —
Impairment losses on receivables
   —


	2019
Balances from contracts with customers only:
Accounts receivable	$	43,045
Deferred revenue (included in accrued liabilities in the consolidated balance sheets)		3,728
Revenue recognized during the six-month period ending June 30, 2019 relating to:
The beginning deferred revenue balance	$	1,668
Changes in pricing related to products or services satisfied in previous periods		—

The timing of revenue recognition, billings and cash collections results in the accounts receivables and deferred revenue balances on the Company’s consolidated balance sheets.

There were

impairment losses recognized on receivables during the three and six months ended J

une 30, 2019.

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 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. 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.

~~4. Accumulated Other Comprehensive Income~~

Leases

On January 1, 2019, the Company adopted ASC 842 using the optional transition method which allows entities to initially apply the lease accounting transition requirements at the adoption date and recognize a cumulative effect adjustment to the opening balance sheet of retained earnings in the period of adoption without restating comparative prior periods presented. The Company recorded operating lease right of use assets of $17.0 million and operating lease liabilities of $21.0 million as of January 1, 2019. The difference between the right of use assets and the lease liabilities was due to $4.0 million of unamortized lease incentives and deferred rent at the Company’s Waltham and Marlborough facilities as of December 31, 2018.

The Company is a lessee under leases of manufacturing facilities, office spaces, machinery, certain office equipment, vehicles and information technology equipment. A majority of the Company’s leases are operating leases with remaining lease terms between three months and 11 years. Finance leases are immaterial to our 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 our 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 June 30, 2019, operating lease right of use assets

were $

19.5

million and operating lease liabilities were

23.5

million.

During the second quarter of 2019 we added leases related to our acquisition of C Technologies on May 31, 2019 which resulted in an increase of right of use assets and lease liabilities of $3.8 million as of June 30, 2019. Amounts related to financing leases were immaterial. The maturity of the Company’s operating lease liabilities as of June 30, 2019 are as follows (amounts in thousands):


As of June 30, 2019	Amount
2019 (remaining six months)	$	2,010
2020		4,657
2021		4,572
2022		3,620
2023		2,654
2024 and thereafter		10,945

Total future minimum lease payments		28,458
Less amount of lease payment representing interest		4,962

Total operating lease liabilities	$	23,496

Total operating lease liabilities is included on the Company’s consolidated balance sheet as of June 30, 2019 as follows (amounts in thousands):


	As of June 30, 2019
Operating lease liability	$	3,287
Operating lease liability, long-term		20,209

Minimum operating lease payments	$	23,496

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 three and six months ended June 30, 2019, total lease cost is comprised of the following:


	Three Months Ended		Six Months Ended
Lease Cost	June 30, 2019		June 30, 2019
	(Amounts in thousands)
Operating lease cost	$	982	$	1,912
Variable operating lease cost		379		660

Lease cost	$	1,361	$	2,572

The following ~~table summarizes~~information represents supplemental disclosure for the ~~changes~~consolidated statements of cash flows related to operating leases (amounts in ~~accumulated other comprehensive income by component (in~~ thousands):

(In thousands)
   Foreign currency
translation gain
(loss)
Balance at December 31, 2017
   $ (6,363 )
Foreign currency translation loss
   $ (4,780 )


Balance at June 30, 2018
   $ (11,143 )

~~5. Earnings Per Share~~


	Six Months Ended
	June 30, 2019
Operating cash flows from operating leases	$	(1,978	)

Most of the leases do not provide implicit interest rates and therefore we determine the discount rate based on our incremental borrowing rate. The ~~Company reports earnings per share~~incremental borrowing rate for our 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 our operating lease liabilities as of June 30, 2019 were:


Weighted average remaining lease term (years)	7.46
Weighted average discount rate	4.74	%

As previously disclosed in the Company’s 2018 Annual Report on Form

10-K

and under the previous lease accounting standard, ASC 840,

“Leases,”

the total commitment for

non-cancelable

operating leases was $18.0 million as of December 31, 2018 (amounts in thousands):


For the Years Ended December 31,	Amount
2019	$	4,021
2020		3,599
2021		3,263
2022		2,213
2023		1,316
2024 and thereafter		3,622

Minimum operating lease payments	$	18,034

6.	Goodwill and Other 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 Topic 260, “Earnings Per Share,” which establishes standards for computing and presenting earnings per share. Basic earnings per share is computed by dividing net income available to common shareholders by350. The following table represents 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. Under the treasury stock method, unexercised~~“in-the-money”~~ stock options and warrants 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. Share-based payment awards that entitle their holders to receive~~non-forfeitable~~ ~~dividends before vesting are considered participating securities and are considered~~change in the ~~calculation~~carrying value of ~~basic and diluted earnings per share. There were no such participating securities outstanding during~~goodwill for the ~~three- andsix-month~~ ~~periods~~six months ended June 30, ~~2018 and 2017.~~

~~Basic and diluted weighted average shares outstanding were as follows:~~

   Three months ended
June 30,    Six months ended
June 30,
   2018    2017    2018    2017
Weighted average common shares
   43,743,356    34,097,805    43,682,650    33,995,323
Dilutive common stock options and restricted stock units
   480,561    437,427    433,961    433,483
Dilutive effect of convertible senior notes
   791,802    559,582    578,134    286,991








Weighted average common shares, assuming dilution
   45,015,720    35,094,814    44,694,745    34,715,797

~~At June 30, 2018, there were outstanding options to purchase1,058,834shares~~2019 (amounts in thousands):


Balance as of December 31, 2018	$	326,735
Cumulative translation adjustment		(106	)
Acquisition of C Technologies, Inc.		142,881

Balance as of June 30, 2019	$	469,510

During each of the ~~Company’s common stock at a weighted average exercise price of$26.72per share and716,996restricted stock units. For~~fourth quarters of 2018, 2017 and 2016, we completed our annual impairment assessments and concluded that goodwill was not impaired in any of those years. The Company has not identified any “triggering” events which indicate an impairment of goodwill in the ~~three- andsix-month~~ ~~periods~~three months ended June 30, 2018,551,012and615,930options to purchase shares of the Company’s common stock, respectively, 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 June 30, 2017, there were outstanding options to purchase 803,532 shares of the Company’s common stock at a weighted average exercise price of $20.16 per share and 393,338 restricted stock units. For the three- and~~six-month~~ periods ended June 30, 2017, 187,072 and 222,001 options to purchase shares of the Company’s common stock, respectively, 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 Company’s 2.125% Convertible Senior Notes due 2021 (the “Notes”), the Company has a choice to settle the conversion obligation~~2019.

Other Intangible Assets

Intangible assets, except for the Notes in cash, shares or any combination of the two. The Company currently intends to settle the par value of the Notes in cash and any excess conversion premium in shares. The Company applies the provisions of ASC 260,~~Earnings Per Share,~~ ~~Subsection10-45-44,~~ 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 Notes will not be included in the calculation of diluted income per share, but the dilutive effect of the conversion premium will be considered in the calculation of diluted net income per share using the treasury stock method. The dilutive impact of the Company’s convertible 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 Notes as of June 30, 2018 and June 30, 2017.

~~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.

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):~~

   June 30, 2018    December 31, 2017
Raw Materials
   $ 23,946    $ 22,351
Work-in-process
   4,389    4,083
Finished products
   12,613    12,570




Total
   $ 40,948    $ 39,004

~~7. Property, Plant and Equipment~~

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

   June 30, 2018    December 31, 2017
Land
   $ 1,023    $ 1,023
Buildings
   764    764
Leasehold improvements
   15,770    15,673
Equipment
   23,199    21,904
Furniture and fixtures
   4,429    4,272
Construction in progress
   4,532    2,581




Total property, plant and equipment
   49,717    46,217
Less: accumulated depreciation
   (25,724 )    (23,800 )




Property, plant and equipment, net
   $ 23,993    $ 22,417

~~Depreciation expense totaled approximately $2,598,000 and $1,858,000 for thesix-month~~ ~~periods ended June 30, 2018 and 2017, respectively.~~

~~8. Intangible Assets~~

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

income (loss). The Company reviews its indefinite-lived intangible assets not subject to amortization, including the ATF tradename, 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 June 30, ~~2018.~~

2019.

Intangible assets, net consisted of the following at June 30, ~~2018 (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

2019:


	June 30, 2019
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Weighted Average Useful Life (in years)
	(Amounts in thousands)
Finite-lived intangible assets:
Technology - developed	$	82,202	$	(7,476	)	$	74,726		19
Patents		240		(240	)		—		8
Customer relationships		160,931		(20,382	)		140,549		15
Trademarks		3,730		(222	)		3,508		20
Other intangibles		1,720		(722	)		998		3

Total finite-lived intangible assets		248,823		(29,042	)		219,781		16
Indefinite-lived intangible asset:
Trademarks		700		—			700		—

Total intangible assets	$	249,523	$	(29,042	)	$	220,481

Intangible assets consisted of the following at December 31, ~~2017 (in thousands):~~

   Gross Carrying
Amount    Accumulated
Amortization    Weighted
Average
Useful Life
(in years)
Technology – developed
   $ 51,801    $ (3,201 )    19
Patents
   240    (238 )    8
Customer relationships
   102,120    (9,636 )    14
Trademarks – definite lived
   2,160    (47 )    20
Trademarks – indefinite lived
   700    —      —
Other intangibles
   1,063    (209 )    3






Total intangible assets
   $ 158,084    $ (13,331 )    16

2018:


	December 31, 2018
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Weighted Average Useful Life (in years)
	(Amounts in thousands)
Finite-lived intangible assets:
Technology - developed	$	53,315	$	(5,942	)	$	47,373		19
Patents		240		(240	)		—		8
Customer relationships		101,460		(16,609	)		84,851		14
Trademarks		2,160		(159	)		2,001		20
Other intangibles		1,061		(548	)		513		3

Total finite-lived intangible assets		158,236		(23,498	)		134,738		16
Indefinite-lived intangible asset:
Trademarks		700		—			700		—

Total intangible assets	$	158,936	$	(23,498	)	$	135,438

The increase in intangible assets during 2019 is related to the acquisition of C Technologies on May 31, 2019. See Note 3,

“Acquisition of C Technologies, Inc.”

for more information.

Amortization expense for ~~amortized~~finite-lived intangible assets was ~~approximately $5,298,000~~$3.1 million and ~~$1,484,000~~$2.6 million for the~~six-month~~ ~~periods~~ three months ended June 30, 2019 and 2018, respectively. Amortization expense for finite-lived intangible assets was $5.7 million and ~~2017,~~$5.3 million for the six months ended June 30, 2019 and 2018, respectively. As of June 30, ~~2018,~~2019, the Company expects to record the following amortization expense ~~as follows (in~~(amounts in thousands):

Years Ending
   Amortization Expense
December 31, 2018 (six months remaining)
   $ 5,284
December 31, 2019
   10,456
December 31, 2020
   9,866
December 31, 2021
   9,365
December 31, 2022
   9,363


	Estimated
	Amortization
Three Months Ended June 30,	Expense
2019 (remaining six months)	$	8,306
2020		15,167
2021		14,656
2022		14,654
2023		14,654
2024 and thereafter		152,344

Total	$	219,781

7.	Consolidated Balance Sheet Detail

Inventories, net

Inventories, net consists of the following:


	As of
	June 30,		December 31,
	2019		2018
	(Amounts in thousands)
Raw materials	$	32,373	$	24,937
Work-in-process		5,866		5,185
Finished products		13,036		12,141

Total inventories, net	$	51,275	$	42,263

Property, Plant and Equipment

Property, plant and equipment consist of the following:


	As of
	June 30,			December 31,
	2019			2018
	(Amounts in thousands)
Land	$	1,023		$	1,023
Buildings		764			764
Leasehold improvements		22,936			16,259
Equipment		30,495			24,092
Furniture and fixtures		6,941			5,448
Construction in progress (1)		7,343			12,906
Other		50			—

Total property, plant and equipment		69,552			60,492
Less - Accumulated depreciation		(31,427	)		(28,312	)

Total property, plant and equipment, net	$	38,125		$	32,180

(1)

Construction in progress as of June 30, 2019 includes $5.6 million in capitalized internal-use software development costs and $0.3 million in manufacturing improvements at our Rancho Dominguez facility among other projects. Construction in progress as of December 31, 2018 included $7.3 million for the buildout of our Marlborough facility, which was put into service and began depreciating on January 1, 2019, $2.1 million in capitalized

internal-use

software development costs and $2.1 million for a casting machine, among other projects.

Depreciation expenses totaled $1.8 million and $1.3 million for the three months ended June 30, 2019 and 2018, respectively. Depreciation expenses totaled $3.3 million and $2.6 million for the six months ended June 30, 2019 and 2018, respectively.

Accrued Liabilities

Accrued liabilities consist of the ~~following (in thousands):~~

   June 30, 2018    December 31, 2017
Employee compensation
   $ 7,703    $ 9,560
Taxes
   937    1,668
Royalty and license fees
   372    1,383
Accrued purchases
   674    1,191
Professional fees
   403    947
Deferred revenue
   1,175    960
Other accrued expenses
   1,838    2,220




Total
   $ 13,102    $ 17,929




following:


	As of
	June 30,		December 31,
	2019		2018
	(Amounts in thousands)
Employee compensation	$	10,487	$	9,953
Taxes		2,353		1,024
Royalty and license fees		163		242
Accrued purchases		407		683
Warranties		796		546
Professional fees		807		942
Deferred revenue		3,728		1,290
Other		1,877		1,185

Total accrued liabilities	$	20,618	$	15,865

~~10. Convertible Senior Notes~~

8.	Convertible Senior Notes

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

   June 30, 2018    December 31, 2017
2.125% Convertible Senior Notes due 2021:

Principal amount
   $ 114,989    $ 115,000
Unamortized debt discount
   (11,617 )    (13,395 )
Unamortized debt issuance costs
   (2,043 )    (2,355 )




Total convertible senior notes
   $ 101,329    $ 99,250
Less: Current portion
   (101,329 )    —




Total convertible senior notes, long term
   $ —      $ 99,250

follows:


	As of
	June 30,			December 31,
	2019			2018
	(Amounts in thousands)
2.125% convertible senior notes due 2021:
Principal amount	$	114,972		$	114,989
Unamortized debt discount		(7,882	)		(9,781	)
Unamortized debt issuance costs		(1,386	)		(1,720	)

Total convertible senior notes	$	105,704		$	103,488

On May 24, 2016, the Company issued ~~$115~~ $115.0

million aggregate principal amount of its 2016 Notes. The net proceeds from the sale of the 2016 Notes, after deducting the underwriting discounts and commissions and other related offering expenses,

were ~~approximately~~ $111.1 million.

The 2016 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

December 1, ~~2016.~~

2016

The 2016 Notes will mature on

June 1, 2021

unless earlier repurchased, redeemed or converted in accordance with their terms. Prior to March 1, 2021, the 2016 Notes will be convertible at the option of holders of the 2016 Notes only upon satisfaction of certain conditions and during certain periods, and thereafter, the ~~notes~~2016 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 2016 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.

On July 19, 2019, the Company exchanged, with a limited number of holders in privately negotiated transactions, $

92.0

million aggregate principal amount of the existing 2016 Notes for a combination of cash and shares of the Company’s common stock. For more information on this transaction, see Note 16,

“Subsequent Events – Exchange and Redemption of 2016 Notes,”

below.

2016 Notes with a par value of $17,000 were submitted for conversion in the first quarter of 2019, and the conversion was settled in the second quarter. 2016 Notes with a par value of $11,000 were submitted for conversion in the fourth quarter of 2017, and this conversion was settled in the first quarter of 2018. The ~~conversion~~conversions resulted in the issuance of a ~~nominal amount~~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.~~

notes of approximately $3,000 in the second quarter of 2019 and $1,000 in the first quarter of 2018 in their consolidated statements of comprehensive

income (loss).

During the second quarter of ~~2018,~~2019, the closing price of the Company’s common stock ~~exceeded~~continued to exceed 130% of the conversion price of the 2016 Notes for more than 20 trading days of the last 30 consecutive trading days of the quarter. As a result, the 2016 Notes are convertible at the option of the holders of the 2016 Notes during the third quarter of ~~2018. The~~2019, the quarter immediately following the quarter when the conditions were met, as stated in the terms of the 2016 Notes. These terms have been met each quarter since the second quarter of 2018 and, expecting to continue meeting these terms, the Company ~~reclassified~~continues to classify the carrying value of the 2016 Notes ~~from long term liabilities to~~as a current ~~liabilities~~liability on the Company’s consolidated balance sheet as of June 30, ~~2018.~~2019. As of June 30, ~~2018,~~2019, the

if-converted

value of the 2016 Notes exceeded the aggregate principal amount by ~~approximately $63.8~~$195.5 million. As mentioned above, $17,000 par value notes were submitted for conversion at the end of the ~~date of this filing, no Notes have been converted by the holders of such Notes in the third~~first quarter of ~~2018.~~2019 and settled during the second quarter. In the event the closing price conditions are met in the third quarter of ~~2018~~2019 or a future fiscal quarter, the 2016 Notes will be convertible at a holder’s option during the immediately following fiscal quarter.

The conversion rate for the 2016 Notes will initially be 31.1813 shares of the Company’s common stock per $1,000 principal amount of 2016 Notes, which is equivalent to an initial conversion price of ~~approximately~~ $32.07 per common share, and is subject to adjustment under the terms of the 2016 Notes. Holders of the 2016 Notes may require the Company to repurchase their 2016 Notes upon the occurrence of a fundamental change prior to maturity for cash at a repurchase price equal to 100% of the principal amount of the 2016 Notes to be repurchased plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.

~~The Company will not have the right to redeem the Notes prior~~

Subsequent to June 5, 2019, ~~but may~~the Company has had the ability to redeem the 2016 Notes, at its option, in whole or in part, on any business day ~~on or after June 5, 2019 and~~ prior to the maturity date if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides written notice of redemption. The redemption price will be equal to 100% of the principal amount of the ~~principal amount of~~2016 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

The 2016 Notes contain 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 2016 Notes may declare 100% of the principal of, and any accrued and unpaid interest on, all of the 2016 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 2016 Notes will become due and payable automatically. Notwithstanding the foregoing, the 2016 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 2016 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 2016 Notes as of June 30, ~~2018.~~

2019.

The cash conversion feature of the 2016 Notes required bifurcation from the 2016 Notes and was initially accounted for as an equity instrument classified to stockholders’ equity, as the conversion feature was determined to be clearly and closely related to the Company’s stock. Based on market data available for publicly traded, senior, unsecured corporate bonds issued by companies in the same industry and asset base and with similar maturity, the Company estimated the implied interest rate, assuming no conversion option. Assumptions used in the estimate represent what market participants would use in pricing the liability component, including market interest rates, credit standing, and yield curves, all of which are defined as Level 2 observable inputs. The estimated implied interest rate was applied to the 2016 Notes, which resulted in a fair value of the liability component of ~~$96,289,000~~$96.3 million upon issuance, calculated as the present value of implied future payments based on the $115 million aggregate principal amount. The equity component of the 2016 Notes was recognized as a debt discount, recorded in additional

paid-in

capital, and represents the difference

between the aggregate principal of the 2016 Notes and the fair value of the 2016 Notes without conversion option on their issuance date. The debt discount is amortized to interest expense using the effective interest method over five years, or the life of the 2016 Notes. The Company assesses the equity classification of the cash conversion feature quarterly, and it is not re-measured as long as it continues to meet the conditions for equity classification.

Interest expense recognized on the 2016 Notes ~~during~~for the ~~three-month period~~three months ended June 30, ~~2018 includes $611,000, $896,000~~2019 was

$0.6 million, $1.0 million and ~~$157,000~~$0.2

million for the contractual coupon interest, the accretion of the debt discount and the amortization of the debt issuance costs, respectively. Interest expense recognized on the 2016 Notes ~~during~~for the~~six-month~~ ~~period~~ six months ended June 30, ~~2018 includes $1,222,000, $1,777,000~~2019 was

$1.2 million, $1.9 million and ~~$312,000~~$0.3

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 is

6.6%,

which ~~includes~~included the interest on the 2016 Notes, amortization of the debt discount and debt issuance costs. As of June 30, ~~2018,~~2019, the carrying value of the 2016 Notes was ~~approximately $101.3~~

$115.0 million

and the fair value of the principal was ~~approximately $178.8~~

$310.5 million.

The fair value of the 2016 Notes was determined based on the most recent trade activity of the 2016 Notes as of June 30, ~~2018.~~

~~11. Stock-Based Compensation~~

~~For the three-month periods ended June 30, 2018 and 2017,~~2019.

9.	Stockholders’ Equity

Public Offering of Common Stock

On May 3, 2019, the Company ~~recorded stock-based compensation expense~~completed a public offering in which 3,144,531

shares of ~~approximately $2,625,000~~its common stock, which includes the underwriters’ exercise in full of an option to purchase up to an additional

410,156 s

hares, 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 ~~$1,496,000, respectively,~~commissions and other estimated offering expenses payable by the Company, totaled approximately

$189.6 million.

Stock Option and Incentive Plans

At our 2018 annual meeting of shareholders held on May 16, 2018, our shareholders approved the 2018 Stock Option and Incentive Plan (the “2018 Plan”). Under the 2018 Plan the number of shares of our common stock that are reserved and available for ~~share-based~~issuance is 2,778,000 plus the number of shares of common stock available for issuance under our Amended and Restated 2012 Stock Option and Incentive Plan (the “2012 Plan”). The shares of common stock underlying any awards ~~granted~~ under the 2018 Plan, 2012 Plan and the Second Amended and Restated 2001 Repligen Corporation Stock Plan (the “2001 ~~Plan”), the Repligen Corporation Amended and Restated 2012 Stock Option and Incentive Plan (the “2012 Plan,”), and the Repligen Corporation 2018 Stock Option and Incentive Plan (the “2018~~ Plan,” and together with the ~~2001~~2018 Plan and ~~the~~ 2012 Plan, the “Plans”)~~. The~~ 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 June 30, 2019, 2,596,600 shares were available for future grant under the 2018 Plan.

Stock-Based Compensation

For the three months ended June 30, 2019 and 2018, the Company recorded stock-based compensation expense of ~~approximately $4,893,000~~$3.0 million and ~~$3,027,000 for thesix-month~~ ~~periods ended June 30, 2018 and 2017,~~$2.6 million, respectively, for share-based awards granted under the Plans.

The Company recorded stock-based compensation

expense of $6.3 million and $4.9 million for the

six-month

periods ended June 30, 2019 and 2018. The following table presents stock-based compensation expense ~~included~~ in the Company’s consolidated statements of comprehensive income ~~(in thousands)~~(loss):

   Three months ended
June 30,    Six months ended
June 30,
   2018    2017    2018    2017
Cost of product revenue
   $ 234    $ 153    $ 500    $ 294
Research and development
   227    79    397    211
Selling, general and administrative
   2,164    1,264    3,996    2,522








Total
   $ 2,625    $ 1,496    $ 4,893    $ 3,027


	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(Amounts in thousands)
Cost of product revenue	$	292	$	234	$	616	$	500
Research and development		319		227		641		397
Selling, general and administrative		2,420		2,164		5,026		3,996

Total stock-based compensation	$	3,031	$	2,625	$	6,283	$	4,893

The 2018 Plan allows for the granting of incentive and nonqualified options to purchase shares of common stock, restricted stock ~~units~~ and other equity awards. Employee grants under the Plans generally vest over a ~~three- to~~

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 ~~and restricted stock units~~ issued tonon-employee directors and consultants under the Plans generally vest over

one ~~year.~~year

. In the first quarter of 2018, to create a ~~longer term~~longer-term retention incentive, the Company’s Compensation Committee granted long-term incentive compensation awards to its ~~chief executive officer~~Chief Executive Officer consisting of both stock options and restricted stock units (“RSUs”) that are subject to time-based vesting over

nine ~~years.~~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 June 30, ~~2018,~~2019, options to purchase ~~1,058,834~~985,266 shares and ~~716,996 restricted stock units~~766,986 RSUs were outstanding under the Plans. ~~At June 30, 2018, 2,933,301 shares were available for future grant under the 2018 Plan.~~

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 ~~restricted stock units.~~RSUs. The Company measures stock-based

compensation cost at the grant date based on the estimated fair value of the award. The Company recognizes expense on awards with ~~service based~~service-based vesting over the employee’s requisite service period on a straight-line basis. In the third quarter of 2017, the Company

issued performance stock units to certain employees related to the Spectrum Acquisition which ~~are~~were tied to the achievement of certain 2018 revenue and gross margin metrics and the passage of time. Additionally, in the first quarter of 2018 and again in the first quarter of 2019, the Company issued performance stock units to certain individuals which are tied to the achievement of certain ~~2018~~annual revenue ~~metrics~~ and ~~the passage of time.~~return on invested capital metrics. The Company recognizes expense on ~~performance based~~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.

Information regarding option activity for the~~six-month~~ ~~period~~ six months ended June 30, ~~2018~~2019 under the Plans is summarized below:

   Options
Outstanding    Weighted-
Average
Exercise
Price Per
Share    Weighted-
Average
Remaining
Contractual
Term
(in years)    (in thousands)
Aggregate
Intrinsic
Value
Options outstanding at December 31, 2017
   734,940    $ 20.80
Granted
   429,678    34.48
Exercised
   (96,196 )    15.49
Forfeited/cancelled
   (9,588 )    29.71



Options outstanding at June 30, 2018
   1,058,834    $ 26.72    7.57    $ 21,518



Options exercisable at June 30, 2018
   448,068    $ 19.14    5.60    $ 12,502



Vested and expected to vest at June 30, 2018⁽¹⁾
   1,008,777    $ 26.37    7.48    $ 20,854


	Shares			Weighted average exercise price		Weighted- Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value (in Thousands)
Options outstanding at December 31, 2018		998,226		$	27.54
Granted		44,996		$	61.98
Exercised		(57,956	)	$	9.75
Forfeited/expired/cancelled		—		$	—

Options outstanding at June 30, 2019		985,266		$	30.16		7.13	$	54,971

Options exercisable at June 30, 2019		521,884		$	23.80		5.85	$	32,437

Vested and expected to vest at June 30, 2019 (1)		945,981					7.07	$	53,042

⁽¹⁾

Represents the number of vested options as of June 30, ~~2018~~2019 plus the number of unvested options expected to vest as of June 30, ~~2018~~2019 based on the unvested outstanding options at June 30, ~~2018~~2019 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 June ~~30, 2018~~28, 2019, the last business day of ~~$47.04~~the second quarter of 2019, of $85.95 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 June 30, ~~2018.~~

2019. The aggregate intrinsic value of stock options exercised during the six months ended June 30, 2019 and 2018 was $3.6 million and $2.4 million, respectively.

The weighted average grant date fair value of options granted during the~~six-month~~ ~~periods~~ six months ended June 30, 2019 and 2018 was $30.07 and ~~2017 was~~ $18.41, ~~and $16.94,~~ respectively. The total fair value of stock options that vested during the~~six-month~~ ~~periods~~ six months ended June 30, 2019 and 2018 was $2.7 million and ~~2017 was approximately $1,783,000 and $1,734,000,~~$1.8 million, respectively.

Information regarding ~~restricted stock unit and performance stock unit~~RSU activity for the~~six-month~~ ~~period~~ six months ended June 30, ~~2018~~2019 under the Plans is summarized below:

   Units
Outstanding    Weighted-
Average
Remaining
Contractual
Term
(in years)    (in thousands)
Aggregate
Intrinsic
Value
Restricted and performance stock units outstanding at December 31, 2017
   505,235
Granted
   367,961
Vested
   (115,295 )
Forfeited/cancelled
   (40,905 )



Restricted stock units outstanding at June 30, 2018
   716,996    3.97    $ 33,727



Vested and expected to vest at June 30, 2018⁽¹⁾
   654,423    3.60    $ 30,784

⁽¹⁾

Represents the number of unvested restricted stock units expected to vest as of June 30, 2018 based on the unvested outstanding restricted stock units at June 30, 2018 adjusted for estimated forfeiture rates of 8% for awards granted to~~non-executive~~ ~~level employees and 3% for awards granted to executive level employees.~~


	Shares			Weighted- Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value (in Thousands)
Unvested at December 31, 2018		707,413
Awarded		266,329
Vested		(187,617	)
Forfeited/expired/cancelled		(19,139	)


Unvested at June 30, 2019		766,986			3.85	$	65,922

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 June ~~30, 2018~~28, 2019, the last business day of ~~$47.04~~the second quarter of 2019, of $85.95 per ~~share)~~share, as RSUs do not have an exercise price) that would have been received by the ~~restricted stock unit~~RSU holders had all ~~restricted stock units vested~~holders exercised on June 30, ~~2018.~~2019. The aggregate intrinsic value of ~~restricted stock units~~RSUs vested during the~~six-month~~ ~~periods~~ six months ended June 30, 2019 and 2018 was $11.7 million and ~~2017 was approximately $4,239,000 and $3,231,000,~~$4.2 million, respectively.

The weighted average grant date fair value of ~~restricted stock units granted~~RSUs vested during the ~~three-month periods~~six months ended June 30, 2019 and 2018 was $31.97 and ~~2017 was~~ $34.47, ~~and $33.06,~~ respectively. The total ~~grant date~~ fair value of ~~restricted stock units~~RSUs that vested during the ~~three-month periods~~six months ended June 30, 2019 and 2018 was $6.0 million and ~~2017 was approximately $3,340,000 and $2,373,000,~~$3.3 million, respectively.

As of June 30, ~~2018,~~2019, there was ~~$30,256,000~~$38.7 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 ~~4.60~~4.15 years.

~~12. Income Taxes~~

The Company expects 1,672,980 unvested options and RSUs to vest over the next

five years

10.	Commitments and Contingencies

Lease Commitments

In May 2019, the Company entered into a fifth amendment of the existing lease to expand the rented space from approximately 76,000 square feet to approximately 108,000 square feet at 41 Seyon Street, Waltham, Massachusetts, the Company’s corporate headquarters and primary location for all manufacturing, research and development, sales and marketing and administrative operations. The Company expects to be completely moved into the new space by the beginning of 2020. Under the terms of the fifth amendment lease, the initial fixed rental rate is $29.00 per square foot, per annum, of the additional square footage (approximately 32,000 square feet) and will increase at a rate of $1.00 per annum.

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 which 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 three months ended June 30, 2019 and 2018.

In September 2018, we entered into a collaboration agreement with Sartorius Stedim Biotech, a leading international supplier for the biopharmaceutical industry, to integrate XCell

™

ATF 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, we secured an agreement with Navigo for the exclusive

co-development

of multiple affinity ligands for which Repligen holds commercialization rights. We are manufacturing and have agreed to supply the first of these ligands,

NGL-Impact

™

A, exclusively to Purolite Life Sciences (“Purolite”), who will pair our 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 our Navigo collaboration. The Navigo and Purolite agreements are supportive of our strategy to secure and reinforce our proteins business. We made payments to Navigo of $2.4 million during the year ended December 31, 2018 in connection with this program, which were recorded to research and development expenses in our consolidated statements of comprehensive income (loss).

11.	Accumulated Other Comprehensive Loss

The following shows the changes in the components of accumulated other comprehensive loss for the six months ended June 30, 2019 which consisted of only foreign currency translation adjustments for the periods shown (amounts in thousands):


	Foreign
	Currency
	Translation
	Adjustment
Balance as of December 31, 2018	$	(11,893	)
Other comprehensive loss		(3,160	)

Balance as of June 30, 2019	$	(15,053	)

12.	Income Taxes

The Company’s effective tax rate for the three- and

six-month

periods ended June 30, ~~2018~~2019 was ~~18.7%~~15.8% and ~~22.1%~~19.8%, respectively, compared to ~~(130.9%)~~18.7% and ~~(49.0%), respectively,~~22.1% for the corresponding periods in the prior year. The effective tax rate for the ~~three-month period~~three and six months ended June 30, 2019 and 2018 was lower than the U.S. statutory rate of 21% due primarily to ~~R&D credit activity and~~ windfall benefits on stock option exercises and ~~restricted stock vestings, partially offset by state tax effects and~~ the ~~impact~~vesting of ~~the Global IntangibleLow-Taxed~~ ~~Income (“GILTI”) tax enacted as part~~RSUs.

ASU

2016-16,

“Intra-Entity Transfers of ~~the Act enacted in December 2017. The effective tax rate for thesix-month~~ ~~period ended June 30, 2018 was higher than the U.S. statutory tax rate of 21% due to state tax effects and the impact of the GILTI tax. For the three- andsix-month~~ periods ended June 30, 2017, the effective tax rate was lower than the U.S. statutory tax rate of 34% primarily due to the sale of intellectual property from Repligen Corporation to Repligen Sweden AB. The Company utilized certain of its U.S. deferred tax assets as a result of this sale and reduced its valuation allowance on these deferred tax assets by approximately $9,200,000 in the second quarter of 2017. The Company recorded a tax benefit of $5,625,000 on the Company’s consolidated statement of operations as a result of the sale of the intellectual property.

~~ASU2016-16~~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 ~~$5,609,000~~$5.7 million to other assets, a decrease of ~~$4,932,000~~$5.0 million to deferred tax liabilities and a decrease of ~~$677,000~~$0.7 million to accumulated deficit at January 1, 2018.

At December 31, ~~2017,~~2018, the Company had ~~net operating loss carryforwards of approximately $19,652,000 in the U.S., net operating loss carryforwards of approximately €603,000 (approximately $743,000) in Germany,~~ federal business tax credit carryforwards of ~~$297,000~~$2.9 million and state business tax credit carryforwards of ~~approximately $99,000~~$0.4 million available to reduce future domestic income taxes, if any. The ~~net operating loss and~~ business tax credits carryforwards will ~~continue to~~ expire

at various dates through December ~~2037.~~2038

. The net operating loss and business tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue ~~Service. While an IRC Section 382 study was completed in the second quarter of 2017,~~Service and ~~no current limitations were identified, use of these net operating loss and business tax credit carryforwards~~ may be limited in the ~~future based on~~event of certain changes in the ownership interest of significant stockholders.

On December 22, 2017, ~~the Act was~~President Trump signed into ~~law.~~law the Act. The Act made significant changes to federal tax law, including, but not limited to, a reduction in the federal income tax rate from 35% to 21%, taxation of certain global intangible

low-taxed

income, allowing for immediate expensing of qualified assets, stricter limits on deductions for interest and certain executive compensation, and aone-time transition tax on previously deferred earnings of certain foreign subsidiaries. ~~Due to~~

In December 2017, the ~~complexities involved in accounting for the enactment of the Act, the~~ SEC staff issued Staff Accounting Bulletin No. 118 ~~(“SAB 118”), which allows~~to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to ~~record~~complete the accounting for certain income tax effects of H.R.1. The Company recognized the provisional tax impacts related to deemed repatriated earnings and the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the year ended December 31, 2017. During 2018, final adjustments noted below were made to the provisional amounts recorded during ~~a measurement period not to extend beyond one year of the enactment date. Under the SAB 118 guidance,~~2017, and the Company ~~has determined that although~~completed its accounting for ~~the effect of certain provisions~~various tax impacts of the ~~Act is incomplete, it is able to make reasonable estimates for certain effects of tax reform and therefore have recorded provisional amounts.~~

Act.

The Act lowered the Company’s U.S. statutory federal tax rate from 35% to 21% effective January 1, 2018. The Company recorded a tax benefit of ~~$12,812,000~~$12.8 million in the year ended December 31, 2017 for the reduction in its US deferred tax assets and liabilities resulting from the rate change.

The ~~Company~~accounting for this item is ~~subject~~complete and no adjustments were made to a territorial tax system under the Act, in which the Company is required to provide for tax on GILTI earned by certain foreign subsidiaries. Additionally, the Company is required to make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred as a period expense. As of June 30, 2018, the Company is still evaluating the effects of the GILTI provisions as guidance and interpretations continue to emerge. Therefore, the Company has not determined its accounting policy on the GILTI provisions. However, the standard requires that the Company reflects the impact of the GILTI provisions as a period expense until the accounting policy is finalized. Therefore, the Company has included the provisional estimate of GILTI related to current-year operations in its estimated annual effective tax rate only and will be updating the impact and accounting policy as the analysis related to the GILTI provisions is completed.

this amount during 2018.

The Act ~~also includes~~included a

one-time

deemed repatriation transition tax whereby entities that are shareholders of a specified foreign corporation must include in gross income the undistributed and previously untaxed post-1986 earnings and profits of the specified foreign corporation. The Company’s provisional amount recorded at December 31, 2017 increased ~~the Company’s~~its tax provision by ~~$3,266,000. This amount may change as~~$3.3 million. As of December 31, 2018, the accounting for this item was complete and the Company ~~refines its~~recorded a tax benefit of $1.3 million as a result of refining our calculations of post-1986 earnings and profits for our foreign ~~subsidiaries, as well as the amounts held in cash.~~

subsidiaries.

The Company ~~anticipates that future guidance and interpretations with respect~~is subject to a territorial tax system under the Act, ~~will cause~~in which the Company is required to ~~further adjust its provisional amounts recorded as of December 31, 2017. No further adjustments have been made~~provide for tax on GILTI earned by certain foreign subsidiaries. The Company has adopted an accounting policy to ~~these provisional amounts~~provide for the tax expense related to GILTI in the ~~first quarter of 2018. Any measurement period adjustments will be reported~~year the tax is incurred as a ~~component of provision for income taxes in the reporting~~ period ~~the amounts are determined. The final accounting will be completed no later than one year from the enactment of the Act.~~

expense.

The Company’s tax returns are subject to examination by federal, state and international tax authorities for the following periods:


~~Jurisdiction~~	~~Fiscal years subject~~ ~~to examination~~
Jurisdiction	Fiscal Years Subject to Examination
United States –- federal and state	~~2014-2017~~	2015-2018
Sweden	~~2011-2017~~	2012-2018
Germany	~~2017~~	2017-2018
Netherlands	~~2012-2017~~	2012-2018

~~13. Fair Value Measurement~~

~~In determining~~

13.	Earnings Per Share

The Company reports earnings per share in accordance with ASC 260,

“Earnings Per Share,”

which establishes standards for computing and presenting earnings per share. Basic earnings per share is computed by dividing net income available to common shareholders by the ~~fair~~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. Under the treasury stock method, unexercised

“in-the-

money”

stock options and warrants 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. Share-based payment awards that entitle their holders to receive

non-forfeitable

dividends before vesting are considered participating securities and are considered in the calculation of basic and diluted earnings per share. There were no such participating securities outstanding during the three-month periods ended June 30, 2019 and 2018.

Basic and diluted weighted average shares outstanding were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(Amounts in thousands, except per share data)
Net income	$	8,095	$	2,738	$	16,148	$	6,185

Weighted average shares used in computing net income per share - basic		46,367		43,743		45,174		43,683
Effect of dilutive shares:
Stock options and restricted stock awards		791		481		760		434
Convertible senior notes		1,898		792		1,758		578

Dilutive potential common shares		2,689		1,273		2,518		1,012

Weighted average shares used in computing net income per share - diluted		49,056		45,016		47,692		44,695

Earnings per share:
Basic	$	0.17	$	0.06	$	0.36	$	0.14

Diluted	$	0.17	$	0.06	$	0.34	$	0.14

At June 30, 2019, there were outstanding options to purchase 985,266 shares of the Company’s common stock at a weighted average exercise price of $30.16 per share and 766,986 shares of common stock issuable upon the vesting of RSUs. For the three and six months ended June 30, 2019, 119,026 and

180,160

options to purchase shares of the Company’s common stock, respectively, 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 June 30, 2018, there were outstanding options to purchase 1,058,834 shares of the Company’s common stock at a weighted average exercise price of $26.72 per share and 716,996 shares issuable upon the vesting of RSUs. For the three- and

six-

month periods ended June 30, 2018, 551,012 and 615,930 options to purchase shares of the Company’s common stock, respectively, 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 2016 Notes, the Company has a choice to settle the conversion obligation for the 2016 Notes in cash, shares or any combination of the two. The Company currently intends to settle the par value of ~~its assets~~the 2016 Notes in cash and ~~liabilities, the Company uses various valuation approaches.~~any excess conversion premium in shares. The Company ~~employs a hierarchy for inputs used in measuring fair~~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 the 2016 Notes. Accordingly, the par 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 participants would use in pricing the asset or liability and are developed based on the best information available2016 Notes is not included in the ~~circumstances. The fair value hierarchy~~calculation of diluted income per share, but the dilutive effect of the conversion premium is ~~broken down into three levels based on the source of inputs as follows:~~


~~Level 1 –~~		~~Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access~~

~~Level 2 –~~		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 unobservableconsidered in the ~~market,~~calculation of diluted net income per share using the ~~determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels~~treasury stock method. The dilutive impact 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~~2016 Notes is based on the ~~lowest level input that is significant to~~difference between the ~~overall fair value measurement.~~

~~The~~ Company’s ~~fixed income investments have historically comprised of obligations of U.S. government agencies and corporate marketable securities. These investments have been initially valued at the transaction~~current period average stock price and ~~subsequently valued, at~~ the end of each reporting period, utilizing third party pricing services or other market observable data. The pricing services utilize industry standard valuation models, including both income and market based approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. At least annually, the Company validates applicable prices provided by third party pricing services by reviewing their pricing methods and matrices, obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming that the relevant markets are active.

~~As of June 30, 2018 and December 31, 2017, the Company had no assets or liabilities for which fair value measurement is either required or has been elected to be applied.~~

~~In May 2016, the Company issued $115 million aggregate principal amount~~conversion price of the 2016 Notes, ~~due June 1, 2021. Interest~~provided there is ~~payable semi-annually in arrears on June 1 and December 1 of each year, beginning December 1, 2016. As of June 30, 2018,~~a premium. Pursuant to this accounting standard, there is no dilution from the ~~carrying value~~accreted principal of the 2016 Notes was approximately $101.3 million, net of unamortized discount, and the fair value of the Notes was approximately $178.8 million. The fair value of the Notes was determined based on the most recent trade activity of the Notes as of June 30, 2018. These valuations are Level 1 valuations, as the valuations are based on unadjusted quoted prices in active markets that the Company has the ability to access. The Notes are discussed in more detail in Note 10, “Convertible Senior Notes.”

~~There were nore-measurements~~ ~~to fair value during thesix-month~~ ~~period ended June 30, 2018 of financial assets and liabilities that are not measured at fair value on a recurring basis.~~

~~14. Commitments and Contingencies~~

~~The Company leases its headquarters in Waltham, Massachusetts as well as certain of its office and manufacturing space around the world.~~

In February 2018, the Company entered into an agreement to lease 63,761 square feet of office and manufacturing space in Marlborough, Massachusetts from U.S. REIF 111 Locke Drive Massachusetts, LLC (the “Premises”).

The term of the lease commenced on June 1, 2018 (the “Commencement Date”) and shall continue for a period of 126 consecutive months, unless earlier terminated in accordance with the terms of the lease (the “Lease Term”). Under the lease, the Company has the option to extend the Lease Term for two additional five-year periods.

~~Fixed rent with respect to 40,000 square feet of the Premises commenced on the Commencement Date, and rent~~ for the full 63,761 square feet of the Premises shall begin 19 months following the Commencement Date. Under the terms of the lease, the Company has provided a letter of credit of approximately $163,000 as a security deposit and is required to pay its pro rata share of any building operating expenses and real estate taxes.

~~Future minimum rental commitments under the Company’s leases as of June 30, 2018 are as follows (in thousands):~~

   Minimum Rental
Commitments
2018 (six months remaining)
   $ 1,817
2019
   3,643
2020
   3,567
2021
   3,257
2022
   2,050
Thereafter
   4,872

~~15. Related Party Transactions~~

periods shown.

14.	Related Party Transactions

Certain facilities leased by Spectrum LifeSciences, LLC (“Spe

ctrum”) are owned by the former owner of ~~Spectrum, who currently holds~~Spectrum.

The former owner held greater than 10% of the Company’s outstanding common ~~stock.~~ stock until the Company completed its public offering of 3,144,531 shares of its common stock on May 3, 2019.

The lease amounts paid to this former owner and current shareholder were negotiated in connection with the Spectrum Acquisition. The Company has incurred rent expense totaling ~~$401,000~~$

0.4

million for the~~six-month~~ ~~period~~ six months ended June

30 ~~2018~~

2019

related to these leases.

As part of the Spectrum Acquisition, the Company iswas responsible for filing all tax returns for Spectrum for the period from January

2017

through July

2017

, the day before the Spectrum Acquisition. The Company iswas responsible for collecting any tax refunds from federal and state authorities and remitting these refunds to the former shareholders of Spectrum, including the former owner of Spectrum who ~~currently holds~~held greater than 10% of the Company’s outstanding common ~~stock. As of June 30,~~ stock

prior to May 3, 2019.

During

2018

, the Company ~~has accrued $80,000~~collected $

1.7

million of these tax refunds, ~~payable~~which the Company paid to the Spectrum ~~shareholders. These amounts are included in accrued liabilities~~shareholders during the fourth quarter of

2018

, net of $

0.2

million of expenses paid by the Company on ~~the Company’s consolidated balance sheet.~~

~~16. Segment Reporting~~

behalf of Spectrum for tax preparation and other fees.

15.	Segment Reporting

The Company views its operations, makes decisions regarding how to allocate resources and manages its business as one operating segment. As a result, the financial information disclosed herein represents all of the material financial information related to the Company’s sole operating segment.

Revenue from filtration products includes our XCell ATF Systems and consumables as well as our KrosFlo and SIUS filtration products. Revenue from chromatography products includes our OPUS and OPUS PD chromatography columns, chromatography resins and ELISA test kits. Revenue from protein products includes our Protein A ligands and cell culture growth factors. Revenue from our process analytics products includes the sale of our SoloVPE and FlowVPE systems and consumables. 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):

   Three months ended
June 30, Six months ended
June 30,
   2018 2017 2018 2017
North America
   47 % 38 % 46 % 38 %
Europe
   41 % 50 % 42 % 52 %
Asia and Australia
   12 % 11 % 12 % 9 %
Other
   — 1 % — 1 %


Total
   100 % 100 % 100 % 100 %


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Revenue by customers’ geographic locations:
North America		51	%		47	%		49	%		46	%
Europe		38	%		41	%		39	%		42	%
APAC		11	%		12	%		12	%		12	%

Total revenue		100	%		100	%		100	%		100	%

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 June 30, 2019 and December 31, 2018, 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 as a percentage of the Company’s total revenue is as follows:

   Three months ended
June 30, Six months ended
June 30,
   2018 2017 2018 2017
MilliporeSigma
   18 % 19 % 17 % 20 %
GE Healthcare
   14 % 28 % 16 % 28 %


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
GE Healthcare		16	%		14	%		14	%		16	%
MilliporeSigma		13	%		18	%		14	%		17	%

Significant accounts receivable balances as a percentage of the Company’s total trade accounts receivable are as follows:

   June 30, 2018 December 31, 2017
GE Healthcare
   17 % 11 %
MilliporeSigma
   14 % 19 %


	June 30,			December 31,
	2019			2018
GE Healthcare		18	%		17	%
MilliporeSigma		10	%		11	%

16.	Subsequent Events

Public Offering of Common Stock

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 “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

130.7

million.

Public Offering of Convertible Senior Notes

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 Stock Offering, the “Offerings”). The net proceeds of the Notes Offering, after deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company, were approximately $278.4 million.

The 2019 Notes will be senior, unsecured obligations of the Company, and will bear interest at a rate of 0.375% per year. Interest will be 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. 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 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 certain events that constitute a fundamental change under the indenture governing the 2019 Notes at a purchase 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.

Exchange and Redemption of 2016 Notes

Substantially concurrent with the closing of the Offerings, the Company used a portion of the net proceeds of the Offerings to exchange, with a limited number of holders in privately negotiated transactions,

92.0

million aggregate principal amount of its existing

2.125

Convertible Senior Notes due 2021 (the “2016 Notes”) for a combination of cash and shares of the Company’s common stock (the “Note Exchanges”). The Company paid

92.3 million in cash, which represents the principal amount exchanged and accrued and unpaid interest thereon and issued

1,850,155 shares of common stock, to settle the Note Exchanges. Contemporaneously with the closing of the Offerings, the Company issued a notice of redemption in respect of the remaining

23.0 million principal amount of 2016 Notes, which the Company expects would result in the conversion of all or substantially all of the remaining 2016 Notes in accordance with their terms prior to the end of our third fiscal quarter of 2019. The Company intends to settle conversions of the remaining 2016 Notes with cash in an amount equal to the principal amount thereof and shares of the Company’s common stock in excess thereof.

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Repligen and its subsidiaries, collectively doing business as Repligen Corporation (“Repligen”, “we”, “our”, or “the Company”) is a leading provider of advanced bioprocessing ~~technology~~technologies and solutions used in the process of manufacturing biologic drugs. Our products are made to substantially increase biopharmaceutical manufacturing efficiencies and flexibility. As the global biologics market continues to experience strong growth and expansion, our customers – primarily large biopharmaceutical companies and contract manufacturing organizations – face critical production cost, capacity, quality and time pressures that our products are made to address. Our commitment to bioprocessing is helping to set new standards for the way our customers manufacture biologic drugs – including monoclonal antibodies (“mAb”), recombinant proteins, vaccines and gene therapies. We are dedicated to ~~inspiring~~“inspiring advances in ~~bioprocessing~~bioprocessing” as a trusted partner in the production of biologic drugs that improve human health worldwide.

~~Prior~~

Our chromatography products feature

pre-packed

chromatography (“PPC”) columns under our OPUS

brand. OPUS columns, which we deliver to ~~2012,~~our customers

pre-packed

with their choice of chromatography resin, are single-campaign

(“single-use”)

disposable columns that replace the ~~Company was focused on~~use of traditional and more permanent glass columns used in downstream purification processes. By designing OPUS to be a technologically advanced and flexible option for the purification of biologics from process development through clinical-scale and some commercial manufacturing, Repligen has become a leader in PPC columns.

Our filtration products offer a number of advantages to manufacturers of biologic drugs at volumes that span from pilot studies to clinical and commercial-scale production. XCell ATF

™

systems are used primarily in upstream perfusion, or continuous manufacturing, processes to increase cell concentration and significantly improve biologic product yield from a bioreactor. To address increasing industry demand for

“plug-and-play”

technology, we developed and launched in 2016

single-use

formats of the original stainless steel XCell ATF device. In December 2016, we acquired TangenX Technology Corporation (“TangenX”), balancing our upstream XCell ATF offering with a downstream portfolio of flat-sheet filters and cassettes used in biologic drug ~~development,~~purification and formulation processes. The TangenX portfolio includes the

single-use

SIUS

™

TFF brand, providing customers with ~~clinical trial costs supported by bioprocessing~~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 ~~sales. At that time~~line and diversifies our ~~bioprocessing business was largely represented by sales~~end markets beyond mAbs to include vaccine, recombinant protein and gene therapies.

We are a leading OEM manufacturer and supplier of Protein A ligands which we sell through long term original equipment manufacturer (“OEM”) supply agreements. Our 2011 acquisition of Novozymes Biopharma Sweden AB further expanded our proteins product portfolio and provided the impetus to ~~set a new direction for the company. Bymid-2012,~~ we permanently discontinued and have since divested all drug development programs. We retained our proteins OEM business and, through internal innovation and strategic acquisitions, we have built chromatography and filtration product offerings that we sell directly to biologics manufacturers. We continue to seek out strategic opportunities to strengthen and expand our bioprocessing business.

We currently operate as one bioprocessing business, with a comprehensive suite of products to serve both upstream and downstream processes in biologic drug manufacturing. Building on over 35 years of industry expertise, we have developed a broad and diversified product portfolio that reflects our commitment to build a~~best-in-class~~ ~~bioprocessing technology company with a world-class direct sales and commercial organization.~~

~~Our Protein products are represented by our~~life sciences companies. Protein A ~~affinity~~ ligands ~~and cell culture growth factor products. In addition to long-standing OEM supply agreements with GE Healthcare, MilliporeSigma and Purolite Life Sciences for these products, in June 2018 we secured~~are an ~~agreement with Navigo Proteins GmbH for the exclusive co-development~~essential “binding” component of ~~multiple affinity ligands for which Repligen holds commercialization rights. We are manufacturing and have agreed to supply the first of these ligands, NGL-Impact~~^™ ~~A, exclusively to Purolite Life Sciences, who will pair our high performance ligand with their agarose jetting base bead technology used in Purolite’s Jetted A50~~ Protein A ~~resin.~~

~~Ourdirect-to~~ ~~customer Chromatography product line includes a number of products~~chromatography resins used in the ~~downstream~~ purification ~~and quality control~~ of ~~biological~~virtually all mAb based drugs on the market or in development that our customers sell to end users, including ~~a broad range of OPUS~~^®~~pre-packed~~ ~~chromatography columns, chromatography resins and ELISA test kits.~~

~~Ourdirect-to-customer~~ ~~Filtration product line includes our XCell™ ATF system for use in upstream process intensification, our Sius™ TFF cassettes~~biopharmaceutical manufacturers, for use in downstream purification of mAbs. We also manufacture and ~~formulation processes,~~sell growth factor products used to supplement cell culture media in order to increase cell growth and productivity in a bioreactor.

Customers use our ~~KrosFlo~~^®~~line~~products to produce initial quantities of ~~hollow fiber cartridges~~a drug for clinical studies and ~~TFF systems,~~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 ~~our ProConnex~~^®~~single-use~~ ~~tubing sets. With~~Drug Administration and the ~~addition~~European Medicines Agency, throughout the clinical trial process and prior to final commercial approval. As a result, products that become part of ~~Spectrum LifeSciences LLC in August 2017 (the “Spectrum Acquisition”), wenow in-house manufacture~~ ~~hollow fiber filters that~~the manufacturing specifications of a late-stage clinical or commercial process can be ~~used~~very sensitive given the costs and uncertainties associated with displacing them.

C Technologies Acquisition

On April 25, 2019, the Company 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 ~~our XCell ATF systems~~2008 for

off-line

and

at-line

protein concentration measurements conducted in quality control, process development and ~~have increased our direct sales presence~~manufacturing labs in ~~Europe~~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 ~~Asia, while diversifying our end markets beyond monoclonal antibodies~~fill-finish applications, designed to ~~include vaccines, recombinant protein~~allow for real-time process monitoring.

The C Technologies Acquisition was accounted for as a purchase of a business under ASC 805,

“Business Combinations.”

The cash paid for the C Technologies Acquisition was $195.0 million, $186.0 million of which will be consideration transferred pursuant to ASC 805, and ~~gene therapies.~~

$9.0 million of which will be compensation expense for future employment, and 779,221 of unregistered common shares totaling $53.9 million (based on a per share price of $69.22), for a total purchase price of $239.9 million.

Critical Accounting Policies and Estimates

A “critical accounting policy” is one which is both important to the portrayal of our financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For ~~additional information, please see the discussion~~a description of our critical accounting policies that affect our more significant judgments and estimates used in the preparation of our consolidated financial statements, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations and our significant accounting policies in Note 2 to the ~~Financial Statements~~consolidated financial statements included in our Annual Report on Form

10-K

for the year ended December 31, ~~2017.~~

2018 filed with the SEC.

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

~~Product~~

Total revenues for the ~~three-~~three and~~six-month~~ ~~periods~~ six months ended June 30, ~~2018~~2019 and ~~2017~~2018 were as follows:


	Three Months Ended June 30,					Increase/ (Decrease)					Six Months Ended June 30,				Increase/ (Decrease)
	2019		2018			$ Change		% Change			2019		2018		$ Change		% Change
	(Amounts in thousands, except for percentage data)
Revenue:
Products	$	70,670	$	47,743		$	22,927		48.0	%	$	131,282	$	92,542	$	38,740		41.9	%
Royalty and other		22		(12	)		34		(283.3	%)		44		19		25		131.6	%

Total revenue	$	70,692	$	47,731		$	22,961		48.1	%	$	131,326	$	92,561	$	38,765		41.9	%

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. Direct sales represent approximately 71% of our product revenue in the second quarter of 2019 and 72% of our product sales for the first half of 2019. We expect that direct sales will continue to account for an increasing percentage of our product revenues. Sales of our bioprocessing products ~~increased 47.2%~~can be impacted by the timing of large-scale production orders and ~~46.9%~~the regulatory approvals for such antibodies, which may result in significant quarterly fluctuations.

Revenue from our chromatography products includes the ~~three-~~sale of our OPUS and ~~six-month periods~~OPUS PD 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 and SIUS filtration products. 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 and consumables. Other revenue primarily consists of revenue from the sale of our operating room products to hospitals as well as freight revenue.

During the three and six months ended June 30, ~~2018,~~2019, product revenue increased by $22.9 million, or 48% and $38.7 million, or 41.9%, respectively, as compared to the ~~corresponding~~same periods of 2018. The increase in ~~the prior year. This increase was primarily~~both periods is due to the continued adoption of our products by our key bioprocessing customers, particularly our chromatography and ~~for the three- andsix-month~~ ~~periods of 2018, the addition of revenues following the Spectrum Acquisition.~~filtration products. 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.

Additionally, there was a $2.2 million increase in revenue for the three and six months ended June 30, 2019, as compared to the same periods of 2018 due to revenues generated by C Technologies.

Royalty revenues

Royalty revenues in the three and six months ended June 30, 2019 and 2018 relate to royalties received from a third-party systems manufacturer associated with our OPUS PD 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 the ~~three-~~three and~~six-month~~ ~~periods~~ six months ended June 30, ~~2018~~2019 and ~~2017~~2018 were comprised of the following:

(in thousands, except percentages)    Three months ended
June 30, Six months ended
June 30,
   2018    2017    $ Change    % Change 2018    2017    $ Change    % Change
Cost of product revenue
   $ 21,088    $ 13,937    $ 7,151    51.3 % $ 40,756    $ 27,926    $ 12,830    45.9 %
Research and development
   5,780    1,860    3,920    210.8 % 9,068    3,602    5,466    151.7 %
Selling, general and administrative
   16,590    11,185    5,405    48.3 % 32,488    20,367    12,121    59.5 %













Total costs and operating expenses
   $ 43,458    $ 26,982    $ 16,476    61.1 % $ 82,312    $ 51,895    $ 30,417    58.6 %


	Three Months Ended June 30,				Increase/ (Decrease)						Six Months Ended June 30,				Increase/ (Decrease)
	2019		2018		$ Change			% Change			2019		2018		$ Change			% Change
	(Amounts in thousands, except for percentage data)
Cost of product revenue	$	30,708	$	21,088	$	9,620			45.6	%	$	57,553	$	40,756	$	16,797			41.2	%
Research and development		5,231		5,780		(549	)		(9.5	%)		8,851		9,068		(217	)		(2.4	%)
Selling, general and administrative		23,699		16,590		7,109			42.9	%		42,697		32,488		10,209			31.4	%

Total costs and operating expenses	$	59,638	$	43,458	$	16,180			37.2	%	$	109,101	$	82,312	$	26,789			32.5	%

Cost of product revenue

Cost of product revenue increased ~~51.3%~~45.6% and ~~45.9%~~41.2% in the ~~three-~~three and ~~six-month periods~~six months ended June 30, ~~2018,~~2019, respectively, compared to the ~~corresponding~~same periods of 2018 due primarily to the increase in product revenue mentioned above.

Gross margins were 56.6% and 56.2% in the ~~prior year. This~~three and six months ended June 30, 2019, respectively. The gross margin for the three and six months ended June 30, 2019 includes $1.2 million of amortization on an inventory

step-up

recorded in purchase accounting related to C Technologies Acquisition. Excluding this

step-up

amortization, gross margins for the three and six months ended June 30, 2019 were 58.2% and 57.1%, respectively. The increase in gross margins is ~~primarily due~~a result of the increase in revenue mentioned above offset by an increase in manufacturing headcount subsequent to ~~the increased product revenues noted above.~~June 30, 2018. Gross margins may fluctuate in ~~the third and fourth~~future quarters ~~of 2018~~ based on expected production volume and product mix.

Research and development expenses

Research and development expenses ~~increased~~are related to bioprocessing products, which include personnel, supplies and other research expenses. Due to the small 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 ~~210.8%~~program, and ~~151.7% in~~therefore, have not provided historical costs incurred by project. In addition to the ~~three-~~legacy product research and ~~six-month periods~~development, the current

single-use

XCell ATF project incurs expenses related to product development, sterilization, validation testing, and other research related expenses.

Research and development expenses decreased 9.5% and 2.4% during the three and six months ended June 30, ~~2018,~~2019, respectively, compared to the ~~corresponding~~same periods ~~in the prior year. This increase~~of 2018. The decrease is ~~driven by~~primarily due to $2.3 million of investments made induring the second quarter of 2018 to expand our proteins product ~~offerings~~offering through our development agreement with Navigo Proteins ~~GmbH. Additionally,~~GmbH compared to only $0.5 million in the three and six months ended June 30, 2019, respectively. This decrease was partially offset by an increase in research and development headcount subsequent to June 30, 2018 and an increase in stock-based compensation expense resulting from the increase ~~is related to product~~in headcount and share price period over period.

We expect our research and development ~~activities acquired as part~~expenses for the rest of the ~~Spectrum Acquisition and increased activity on our various bioprocessing~~year to increase slightly in order to support new product ~~development projects.~~

development.

Selling, general and administrative expenses ~~increased 48.3%~~

Selling, general and ~~59.5% in~~administrative (“SG&A”) expenses include the ~~three-~~costs associated with selling our commercial products and ~~six-month periods~~costs required to support our marketing efforts, including legal, accounting, patent, shareholder services, amortization of intangible assets and other administrative functions.

During the three and six months ended June 30, ~~2018,~~2019, SG&A costs increased by $7.1 million, or 42.9%, and $10.2 million, or 31.4%, respectively, as compared to the ~~corresponding~~same periods ~~in the prior year. This~~of 2018. The increase is due to ~~selling and administrative activities incurred following~~ the ~~Spectrum Acquisition, as well as the continued buildout of our administrative infrastructure to support future growth and~~ continued expansion of our customer-facing activities to drive sales of our bioprocessing ~~products.~~

~~Investment income~~

~~Investment income~~products and to the continued buildout of our administrative infrastructure, primarily through increased headcount, to support expected future growth. In addition, transaction fees related to the C Technologies Acquisition of $3.5 million and $4.0 million for the ~~three-~~three and~~six-month~~ ~~periods~~ six months ended June 30, 2019, respectively, were included in SG&A,

for which there were no comparable costs for the same periods of 2018. Sales commissions were higher in 2019 due to the increase in revenue and stock compensation expense increased during both periods in 2019 as compared to 2018 due to the increase in headcount and ~~2017 was as follows:~~

(in thousands, except percentages)    Three months ended
June 30, Six months ended
June 30,
   2018    2017    $ Change    % Change 2018    2017    $ Change    % Change
Investment income
   $ 512    $ 110    $ 402    365.5 % $ 693    $ 206    $ 487    236.4 %

higher share prices period over period.

Other expenses, net

The table below provides detail regarding our other expenses, net:


	Three Months Ended June 30,						Increase/ (Decrease)						Six Months Ended June 30,						Increase/ (Decrease)
	2019			2018			$ Change			% Change			2019			2018			$ Change			% Change
	(Amounts in thousands, except for percentage data)
Investment income	$	1,005		$	512		$	493			96.3	%	$	1,718		$	693		$	1,025			147.9	%
Interest expense		(1,743	)		(1,669	)		(74	)		4.4	%		(3,469	)		(3,321	)		(148	)		4.5	%
Other (expenses) income		(697	)		251			(948	)		(377.7	%)		(339	)		321			(660	)		(205.6	%)

Total other expense, net	$	(1,435	)	$	(906	)	$	(529	)		58.4	%	$	(2,090	)	$	(2,307	)	$	217			(9.4	%)

Investment income

Investment income includes income earned on invested cash balances. The increase ~~in investment income in~~of $0.5 million and $1.0 million for the ~~three-~~three and~~six-month~~ ~~periods~~ six months ended June 30, ~~2018~~2019, respectively, as compared to the ~~corresponding prior year~~same periods isof 2018 was attributable to higher average invested cash balances and higher interest rates on such invested cash balances.

We expect investment income to vary based on changes in the amount of funds invested and fluctuation of interest rates.

Interest expense

Interest expense primarily includes interest related to our issuance of 2.125% Convertible Senior Notes due 2021 (the “2016 Notes”) in May 2016. Interest expense increased $0.1 million for the ~~three-~~three and~~six-month~~ ~~periods~~ six months ended June 30, 2019, as compared to the same periods of 2018, ~~and 2017 was as follows:~~

(in thousands, except percentages)    Three months ended
June 30, Six months ended
June 30,
   2018 2017 $ Change % Change 2018 2017 $ Change % Change
Interest expense
   $ (1,669 ) $ (1,601 ) $ (68 ) 4.2 % $ (3,321 ) $ (3,187 ) $ (134 ) 4.2 %

~~Increases in interest expense~~due to the decrease in the ~~three-~~balance of debt issuance costs that are being amortized. As these costs decrease, the carrying value of the debt increases and ~~six-month periods~~interest calculated based on the carrying value increases as well.

Other (expenses) income

Changes in other (expenses) income during the three and six months ended June 30, ~~2018, respectively,~~2019, compared to the ~~corresponding~~same periods ~~in the prior year are attributable to interest expense related to the issuance~~ of ~~convertible senior notes in May 2016.~~

~~Other income (expense)~~

~~Other income (expense) for the three- andsix-month~~ ~~periods ended June 30,~~ 2018, ~~and 2017 was as follows:~~

(in thousands, except percentages)    Three months ended
June 30, Six months ended
June 30,
   2018    2017 $ Change    % Change 2018    2017 $ Change    % Change
Other income (expense)
   $ 251    $ (328 ) $ 579    (176.5 %) $ 321    $ (448 ) $ 769    (171.7 )%

~~Changes in other income (expense) in the three- and six-month periods ended June 30, 2018, respectively, compared to the corresponding periods in the prior year~~ are primarily attributable to foreign currency ~~gains and~~ losses related to amounts due from

non-Swedish

kronor-based customers and cash ~~balances~~balance denominated in U.S. dollars and British pounds held by Repligen Sweden AB.

In addition, $0.5 million was included in other (expenses) income for the three and six months ended June 30, 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 ~~three-~~three and~~six-month~~ ~~periods~~ six months ended June 30, ~~2018~~2019 and ~~2017~~2018 was as follows:

(in thousands, except percentages)    Three months ended
June 30, Six months ended
June 30,
   2018    2017 $ Change    % Change 2018    2017 $ Change    % Change
Income tax (benefit) provision
   $ 629    $ (4,784 ) $ 5,413    (113.1 %) $ 1,757    $ (3,785 ) $ 5,542    (146.4 %)


	Three Months Ended June 30,						Increase/ (Decrease)					Six Months Ended June 30,						Increase/ (Decrease)
	2019			2018			$ Change		% Change			2019			2018			$ Change		% Change
	(Amounts in thousands, except for percentage data)
Income tax provision	$	1,524		$	629		$	895		142.3	%	$	3,987		$	1,757		$	2,230		126.9	%
Effective tax rate		15.8	%		18.7	%							19.8	%		22.1	%

For the ~~three-~~three and~~six-month~~ ~~periods~~ six months ended June 30, ~~2018,~~2019, we ~~had~~recorded an income ~~before taxes of $3,367,000 and $7,942,000, respectively, and recorded a~~ tax provision of ~~$629,000~~$1.5 million and ~~$1,757,000,~~$4.0 million, respectively. The effective tax rate was ~~18.7%~~15.8% and ~~22.1%~~19.8% for the ~~three-~~three and~~six-month~~ ~~periods~~ six months ended June 30, ~~2018,~~2019, respectively, and is based upon the estimated income for the year and the composition of the income in different jurisdictions. The effective tax rate for the three-month period ended June 30, 2018 was lower than the U.S. statutory rate of 21% due to R&D credit activity and windfall benefits on stock option exercises and restricted stock vestings, partially offset by state tax effects and the impact of the Global Intangible~~Low-Taxed~~ ~~Income (“GILTI”) tax enacted as part of the Tax Cuts and Jobs Act (the “Act”) enacted in~~ending December ~~2017. The effective tax rate for thesix-month~~ ~~period ended June 30, 2018 was higher than the U.S. statutory tax rate of 21% due to state tax effects and the impact of the GILTI tax.~~

~~For the three- andsix-month~~ periods ended June 30, 2017, we had income before taxes of $3,654,000 and $7,721,000, respectively, and recorded a tax benefit of ($4,784,000) and ($3,785,000), respectively. The effective tax rate was (130.9%) and (49.0%) for the three- and~~six-month~~ ~~periods ended June 30, 2017, respectively, and is based upon the estimated income for the year~~31, 2019 and the composition of the income in different jurisdictions. The effective tax rate was lower than the U.S. statutory ~~tax~~ rate of ~~34%~~21% due primarily ~~due~~ to ~~a benefit~~windfall benefits on stock option exercises and the vesting of approximately $5,625,000 related to the reduction of the Company’s valuation allowance on its deferred tax assets resulting from the sale of certain intellectual property from Repligen Corporation to Repligen Sweden AB in the second quarter of 2017.

restricted stock units.

Non-GAAP

Financial Measures

We provide

non-GAAP

adjusted income from operations; adjusted net income; and adjusted EBITDA as supplemental measures to GAAP measures regarding our operating performance. These financial measures exclude the items detailed below and, therefore, have not been calculated in accordance with GAAP. A detailed explanation and a reconciliation of each

non-GAAP

financial measure to its most comparable GAAP financial measure is provided 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.

~~Adjusted Income~~

Non-GAAP

adjusted income from ~~Operations~~

~~Adjusted~~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, ~~amortization of~~ intangible ~~assets~~amortization and inventory

step-up

charges booked through our consolidated statements of comprehensive ~~income.~~income (loss). The following is a reconciliation of income from operations in accordance with GAAP to

non-GAAP

adjusted income from operations for the ~~three-~~three and~~six-month~~ ~~periods~~ six months ended June 30, ~~2018~~2019 and ~~2017 (in thousands):~~

   Three months ended June 30,    Six months ended June 30,
   2018    2017    2018    2017
GAAP income from operations
   $ 4,273    $ 5,473    $ 10,249    $ 11,150
Adjustments to income from operations:

Acquisition and integration costs
   853    2,385    1,508    2,787
Intangible amortization
   2,634    769    5,298    1,484
Inventorystep-up charges
   —      —      —      224








Adjusted income from operations
   $ 7,760    $ 8,627    $ 17,055    $ 15,645

~~Adjusted Net Income~~

~~Adjusted~~2018:


	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(Amounts in thousands)
GAAP income from operations	$	11,054	$	4,273	$	22,225	$	10,249
Non-GAAP adjustments to income from operations:
Acquisition and integration costs		4,822		853		6,621		1,508
Intangible amortization		3,051		2,634		5,662		5,298
Inventory step-up charges		1,169		—		1,169		—

Non-GAAP adjusted income from operations	$	20,096	$	7,760	$	35,677	$	17,055

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, ~~amortization of~~ intangible ~~assets~~amortization and related tax effects, inventory

step-up

charges and

non-cash

interest ~~expense booked through our consolidated statements of comprehensive income.~~expense. The following ~~is a reconciliation~~are reconciliations of net income in accordance with GAAP to

non-GAAP

adjusted net income for the ~~three-month periods~~three and six months ended June 30, ~~2018~~2019 and ~~2017:~~

   Three Months Ended June 30,
   2018    2017
   (in thousands)
Amount    Fully Diluted
Earnings per
Share    (in thousands)
Amount    Fully Diluted
Earnings per
Share
GAAP net income
   $ 2,738    $ 0.06    $ 8,438    $ 0.24
Adjustments to net income:

Acquisition and integration costs
   853    0.02    2,385    0.07
Intangible amortization
   2,634    0.06    769    0.02
Inventorystep-up charges
   —      —      —      —
Non-cash interest expense
   1,053    0.02    986    0.03
Tax effect of intangible amortization and acquisition and integration costs
   (260 )    (0.01 )    (103 )    (0.00 )
Release of valuation allowance on deferred tax assets
   —      —      (5,625 )    (0.16 )








Adjusted net income
   $ 7,018    $ 0.16    $ 6,850    $ 0.20

2018:


	Three Months Ended June 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	$	8,095		$	0.17		$	2,738		$	0.06
Non-GAAP adjustments to net income:
Acquisition and integration costs		5,322			0.11			853			0.02
Intangible amortization		3,051			0.06			2,634			0.06
Inventory step-up charges		1,169			0.02			—			—
Non-cash interest expense		1,124			0.02			1,053			0.02
Tax effect of intangible amortization and acquisition costs		(3,444	)		(0.07	)		(1,076	)		(0.02	)

Non-GAAP adjusted net income	$	15,317		$	0.31		$	6,202		$	0.14


	Six Months Ended June 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	$	16,148		$	0.34		$	6,185		$	0.14
Non-GAAP adjustments to net income:
Acquisition and integration costs		7,121			0.15			1,508			0.03
Intangible amortization		5,662			0.12			5,298			0.12
Inventory step-up charges		1,169			0.02			—			—
Non-cash interest expense		2,231			0.05			2,089			0.04
Tax effect of intangible amortization and acquisition costs		(3,961	)		(0.09	)		(2,108	)		(0.05	)

Non-GAAP adjusted net income	$	28,370		$	0.59		$	14,054		$	0.29

Per share totals may not add due to rounding.

~~The following is a reconciliation of net income in accordance with GAAP tonon-GAAP~~ ~~adjusted net income for thesix-month~~ ~~periods ended June 30, 2018 and 2017:~~

   Six Months Ended June 30,
   2018    2017
   (in thousands)
Amount    Fully Diluted
Earnings per
Share    (in thousands)
Amount    Fully Diluted
Earnings per
Share
GAAP net income
   $ 6,185    $ 0.14    $ 11,506    $ 0.33
Adjustments to net income:

Acquisition and integration costs
   1,508    0.03    2,787    0.08
Intangible amortization
   5,298    0.12    1,484    0.04
Inventorystep-up charges
   —      —      224    0.01
Non-cash interest expense
   2,089    0.05    1,956    0.06
Tax effect of intangible amortization and acquisition and integration costs
   (531 )    (0.01 )    (204 )    (0.01 )
Release of valuation allowance on deferred tax assets
   —      —      (5,625 )    (0.16 )








Adjusted net income
   $ 14,549    $ 0.33    $ 12,128    $ 0.35

Adjusted EBITDA

Adjusted EBITDA is measured by taking net income as reported in accordance with GAAP, excluding investment income, interest expense, taxes, depreciation and amortization, ~~and excluding~~ acquisition and integration costs and inventory

step-up

charges booked through our consolidated statements of comprehensive ~~income.~~income (loss). The following is a reconciliation of net income in accordance with GAAP to adjusted EBITDA for the ~~three-~~three and~~six-month~~ ~~periods~~ six months ended June 30, ~~2018~~2019 and ~~2017 (in thousands):~~

   Three months ended June 30,    Six months ended June 30,
   2018    2017    2018    2017
GAAP net income
   $ 2,738    $ 8,438    $ 6,185    $ 11,506
Adjustments to net income:

Investment income
   (512 )    (110 )    (693 )    (206 )
Interest expense
   1,669    1,601    3,321    3,187
Tax provision
   629    (4,784 )    1,757    (3,785 )
Depreciation
   1,314    929    2,598    1,858
Amortization
   2,634    769    5,298    1,484








EBITDA
   8,472    6,843    18,466    14,044
Other adjustments:

Acquisition and integration costs
   853    2,385    1,508    2,787
Inventorystep-up charges
   —      —      —      224








Adjusted EBITDA
   $ 9,325    $ 9,228    $ 19,974    $ 17,055

2018:

Three Months Ended
June 30,

Six Months Ended
June 30,

2019

2018

2019

2018

(Amounts in thousands)

GAAP net income
$
8,095
$
2,738
$
16,148
$
6,185

Non-GAAP
EBITDA adjustments to net income:

Investment income

(1,005
)
(512
)
(1,718
)
(693
)
Interest expense

1,743

1,669

3,469

3,321

Tax provision

1,524

629

3,987

1,757

Depreciation

1,762

1,314

3,337

2,598

Amortization

3,079

2,634

5,716

5,298

EBITDA

15,198

8,472

30,939

18,466

Other
non-GAAP
adjustments:

Acquisition and integration costs

5,322

853

7,121

1,508

Inventory
step-up
charges

1,169

—

1,169

—

Adjusted EBITDA
$
21,689
$
9,325
$
39,229
$
19,974

Liquidity and Capital Resources

We have financed our operations primarily through revenues derived from product sales, ~~research grants, proceeds and royalties from license arrangements, sales of equity securities and~~the issuance of ~~convertible debt.~~the 2016 Notes in May 2016 and our 2019 Notes (defined below) in July 2019 and the issuance of common stock in our July 2019, May 2019 and July 2017 public offerings. Our revenue for the foreseeable future will primarily be limited to our bioprocessing product revenue.

At June 30, ~~2018,~~2019, we had cash and cash equivalents of ~~$175,611,000~~$208.9 million compared to cash, ~~and~~ cash equivalents of ~~$173,759,000~~$193.8 million at December 31, ~~2017.~~

2018.

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 779,221 unregistered shares of the Company’s common stock totaling $53.9 million.

During the second quarter of 2019, the closing price of the Company’s common stock exceeded 130% of the conversion price of the 2016 Notes for more than 20 trading days of the last 30 consecutive trading days of the quarter. As a result, the 2016 Notes are convertible at the option of the holders of the 2016 Notes during the third quarter of 2019. The 2016 Notes have a face value of $115.0 million and a carrying value of $105.7 million and are classified as current liabilities on the Company’s consolidated balance sheet as of June 30, 2019.

On May 3, 2019, the Company completed a public offering in which 3,144,531 shares of its common stock, which includes the underwriters’ exercise in full 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, totaled approximately $190.2 million. Proceeds from this public offering were partially used to fund the C Technologies Acquisition on May 31, 2019.

On July 19, 2019, the Company completed a public offering in which 1,587,000 shares of its common stock, which includes 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 for $130.7 million in net proceeds to the Company, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company (the “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 Stock Offering, the “Offerings”). The net proceeds of the Notes Offering, after deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company, were $278.4 million. See Note 16,
“Subsequent Events – Public Offering of Convertible Senior Notes,”
included in this report
for more information on this transaction. We intend to use the net proceeds from the Offerings for working capital and other general corporate purposes, including up to $115 million to finance the redemption, or a portion of the consideration due in connection with an exchange or purchase of, the 2016 Notes and the remainder for working capital and other general corporate purposes, including to fund possible acquisitions of, or investments in, complementary businesses, products, services and technologies. It is the Company’s policy and intent to settle the face value of the 2019 Notes in cash and any excess conversion premium in shares of our common stock.

Substantially concurrent with the closing of the Notes Offerings, the Company completed privately negotiated transactions with certain holders of the 2016 Notes to exchange an aggregate of $92.0 million aggregate principal amount of the 2016 Notes for a combination of cash and shares of the Company’s common stock (the “Note Exchanges”). The Company used $92.3 million in cash and issued 1,850,155 shares of common stock, to settle the Note Exchanges.

Contemporaneously with the closing of the Offerings, the Company issued a notice of redemption in respect of the 2016 Notes, which provides that, on September 23, 2019, the Company will redeem all 2016 Notes that have 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.

Cash flows

Six Months Ended
June 30,

Increase/(Decrease)

2019

2018

$ Change

(Amounts in thousands)

Operating activities
$
27,577
$
7,535
$
20,042

Investing activities

(191,305
)
(4,412
)
(186,893
)
Financing activities

190,172

1,479

188,693

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(2,449
)
(2,750
)
301

Net increase in cash, cash equivalents and restricted cash
$
23,995
$
1,852
$
22,143

Operating activities

For the~~six-month~~ ~~period~~ six months ended June 30, ~~2018,~~2019, our operating activities provided cash of ~~$7,535,000~~$27.6 million reflecting net income of ~~$6,185,000~~$16.1 million and

non-cash

charges totaling ~~$15,202,000~~$18.5 million primarily related to depreciation, amortization,

non-cash

interest expense, deferred tax expense and stock-based compensation charges. An increase in accounts receivable consumed ~~$4,788,000~~$7.3 million of cash and was primarily driven by the ~~47%~~48%

year-to-date

increase in revenues. An increase in inventory consumed ~~$3,096,000~~$4.1 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 $2.1 million due to the addition of C Technologies and a decrease in unbilled receivables of $2.1 million. The remaining cash provided by operating activities resulted from favorable changes in various other working capital accounts.

For the six months ended June 30, 2018, our operating activities provided cash of $7.5 million reflecting net income of $6.2 million and

non-cash

charges totaling $15.2 million, primarily related to depreciation, amortization,

non-cash

interest expense, deferred tax expense and stock-based compensation charges. An increase in accounts receivable consumed $4.8 million of cash and was primarily driven by the 47%

year-to-date

increase in revenues. An increase in inventory consumed $3.1 million of cash, related to

increasing inventory

levels to accommodate future revenue growth. ~~Payments of~~Decreases in accounts payable and accrued liabilities consumed ~~$4,686,000~~$4.7 million of cash, and were mainly due to the timing of payments of payables and payment of 2017 incentive compensation programs. The remaining cash flow used in operations resulted from net unfavorable changes in various other working capital accounts.

~~For thesix-month~~ ~~period ended June 30, 2017, our operating activities provided cash of $3,961,000 reflecting net income of $11,506,000 andnon-cash~~ ~~charges totaling $2,941,000 primarily related to depreciation, amortization,non-cash~~ interest expense, deferred tax expense and stock-based compensation charges. An increase in accounts receivable consumed $6,347,000 of cash, and was primarily due to the increase in revenues and timing of cash receipts from customers. An increase in inventories consumed $813,000 of cash to support future revenues. An increase in accounts payable provided $1,740,000 of cash, which was primarily due to the timing of purchases and payments to vendors. Payments of accrued liabilities consumed $4,216,000 of cash, and were mainly due to the payment of contingent consideration to Refine and Atoll related to 2016 sales milestones. The remaining cash flow provided by operations resulted from net unfavorable changes in various other working capital accounts.

Investing activities

Our investing activities consumed ~~$4,412,000~~$191.3 million of cash ~~related to capital expenditures for~~during the~~six-month~~ ~~period~~ six months ended June 30, ~~2018. Our investing activities provided $14,132,000~~2019. We used $182.2 million in cash (net of cash received) for the~~six-month~~ ~~period~~ C Technologies Acquisition on May 31, 2019. Capital expenditures consumed $9.1 million as we continue to increase our manufacturing capacity worldwide. Of these expenditures, $3.3 million represented capitalized costs related to our

internal-use

software.

Financing activities

Cash provided by financing activities of $190.2 million for the six months ended June 30, ~~2017, primarily due to net redemptions~~2019 included $189.6 million from the issuance of ~~marketable securities of $16,808,000 offset by $2,676,000 used for fixed asset additions.~~

~~Financing activities~~

our common stock resulting from our public offering completed in May 2019. Proceeds from stock option exercises during the

six-month

period were $0.6 million. For the~~six-month~~ ~~period~~ six months ended June 30, 2018, our financing activities provided ~~$1,479,000~~$1.5 million of ~~cash. We~~cash, primarily due to proceeds received ~~proceeds of $1,490,000~~ from stock option exercises, partially offset by cash outlays of $11,000 related to the conversion of certain ~~convertible senior notes~~2016 Notes, which settled in the first quarter of 2018. ~~For thesix-month~~ period ended June 30, 2017, our financing activities used $172,000 of cash. We made contingent consideration payments of $1,677,000 related to the initial valuation of the likelihood that the 2016 XCell™ ATF sales milestones and Atoll revenue growth milestones would be achieved. These payments were partially offset by proceeds from stock option exercises totaling $1,505,000.

~~We do not currently use derivative financial instruments.~~

Working capital ~~decreased~~increased by approximately ~~$85,781,000~~$29.7 million to ~~$131,790,000~~$175.6 million at June 30, ~~2018~~2019 from ~~$217,571,000~~$145.9 million at December 31, ~~2017~~2018 due to the various changes noted ~~above.~~

above, including the C Technologies Acquisition.

Our future capital requirements will depend on many factors, including the following:

the expansion of our bioprocessing business;

~~our identification and execution of strategic acquisitions or business combinations;~~

the ability to sustain sales and profits of our bioprocessing products;

~~market acceptance of our new products;~~

our ability to acquire additional bioprocessing products;

our identification and execution of strategic acquisitions or business combinations;

the resources required to successfully integrate our recently acquired businesses and recognize expected synergies;

the scope of and progress made in our research and development activities;

the extent of any share repurchase activity;

and

~~the election of any Note holders to convert their Notes during an eligible period; and~~

the success of any proposed financing efforts.

Absent acquisitions of additional ~~businesses,~~ products, product candidates or intellectual property, we believe our current cash balances are adequate to meet our cash needs for at least ~~twelve~~the next 24 months from the date of this filing. We expect operating expenses for the rest of the year to increase as we ~~integrate Spectrum into our business,~~ continue to ~~develop~~expand our bioprocessing business. We expect to incur continued spending related to the development and ~~expand~~expansion of our bioprocessing product lines and ~~expand~~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 and future repayment of convertible debt.~~

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 ~~monetizing existing assets and~~ licensing or acquiring complementary products, technologies or businesses that would complement our

existing ~~portfolio of development programs.~~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. ~~This~~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 ~~require the issuance~~seek to sell common or ~~sale of additional~~preferred equity or convertible debt ~~securities.~~securities, enter into a credit facility or another form of third-party funding, or seek other debt funding. The sale of ~~additional~~ equity and convertible debt securities may result in ~~additional~~ dilution to our ~~stockholders. Should~~stockholders, and those securities may have rights senior to those of our common shares. If we ~~need~~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 ~~secure~~relinquish valuable rights. We may require additional ~~financing to acquire a product, fund future investment in research and development, or meet~~capital beyond our ~~future liquidity requirements, we~~currently anticipated amounts. Additional capital may not be ~~able to secure such financing, or obtain such financing~~available on ~~favorable~~reasonable terms, ~~because of the volatile nature of the biotechnology marketplace.~~

~~Contractual Obligations and Commitments~~

In February 2018, we entered into an agreement to lease 63,761 square feet of office and manufacturing space in Marlborough, Massachusetts from U.S. REIF 111 Locke Drive Massachusetts, LLC (the “Premises”).

The lease commences during the second quarter of 2018 (the “Commencement Date”) and shall continue for a period of 126 consecutive months, unless earlier terminated in accordance with the terms of the lease (the “Lease Term”). Under the lease, the Company has the option to extend the Lease Term for two additional five-year periods.

Fixed rent with respect to 40,000 square feet of the Premises only shall commence on the Commencement Date, and rent for the full 63,761 square feet of the Premises shall begin 19 months following the Commencement Date. Under the terms of the lease, the Company has provided a letter of credit of approximately $163,000 as a security deposit and is required to pay its pro rata share of any building operating expenses and real estate taxes.

~~Other than the lease detailed above, there were no material changes to our contractual obligations during the three- andsix-month~~ ~~periods ended June 30, 2018. For a complete discussion of our contractual obligations, please refer to our~~~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~ ~~in our Annual Report on Form10-K~~ ~~for the year ended December 31, 2017.~~

if at all.

Off-Balance

Sheet Arrangements

We do not have any special purpose entities or

off-balance

sheet financing arrangements as of June 30, ~~2018.~~

2019.

Net Operating Loss Carryforwards

At December 31, 2018, we had utilized our remaining $19.5 million of net operating loss carryforwards. We had business tax credits carryforwards of $2.9 million available to reduce future federal income taxes, if any. The business tax credits carryforwards will continue to expire at various dates through December 2038. 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.

Effects of Inflation

Our assets are primarily monetary, consisting of cash, cash equivalents and marketable securities. Because of their liquidity, these assets are not directly affected by inflation. Since we intend to retain and continue to use our equipment, furniture and fixtures and leasehold 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.

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form

10-Q

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 Quarterly Report on Form

10-Q

do not constitute guarantees of future performance. Investors are cautioned that statements in this Quarterly Report on Form

10-Q

which are not strictly historical statements, including, without limitation, express or implied statements or guidance regarding current or future financial performance and position, potential impairment of future earnings, management’s strategy, plans and objectives for future operations or acquisitions, product development and sales, ~~agreements with our current or potential customers,~~ product candidate research, development and regulatory approval, selling, general and administrative expenditures, intellectual property, development and manufacturing plans, availability of materials and product and adequacy of capital resources ~~repayment of our convertible senior notes~~ and financing plans constitute forward-looking statements. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which the Company operates, and management’s beliefs and assumptions. The Company undertakes no obligation to publicly update or revise the statements in light of future developments. In addition, other written and oral statements that constitute forward-looking statements may be made by the Company or on the Company’s behalf. Words such as “expect,” “seek,” “anticipate,” “intend,” “plan,” “believe,” “could,” “estimate,” “may,” “target,” “project,” or variations of such words and similar expressions are intended to identify 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, risks associated with: the success of current and future collaborative or supply relationships, including our agreements with GE Healthcare and MilliporeSigma, our ability to successfully grow our bioprocessing business, including as a result of acquisitions, commercialization or partnership opportunities, and our ability to develop and commercialize products, our ability to obtain required regulatory approvals, our compliance with all Food and Drug Administration regulations, our ability to obtain, maintain and protect intellectual property rights for our products, the risk of litigation regarding our patent and other intellectual property rights, the risk of litigation with collaborative partners, our limited manufacturing capabilities and our dependence on third-party manufacturers and value-added resellers, our ability to hire and retain skilled personnel, the market acceptance of our products, reduced demand for our products that adversely impacts our future revenues, cash flows, results of operations and financial condition, our ability to compete with larger, better financed life sciences companies, our history of losses and expectation of incurring losses, our ability to generate future revenues, our ability to successfully integrate our recently acquired businesses, our ability to raise additional capital to fund potential acquisitions, our volatile stock price, and the effects of our anti-takeover provisions. Further information on potential risk factors that could affect our financial results are included in the filings made by us from time to time with the Securities and Exchange Commission including under the section entitled “Risk Factors” in our Annual Report on Form

10-K

for the year ended December 31, ~~2017.~~

2018.

~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest ~~rate risk~~

Rate Risk

We have historically ~~invested funds~~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. ~~As of June 30, 2018, we~~We do not have any such ~~investments; however, we may seek to invest funds~~investments as of June 30, 2019. As a result, a hypothetical 100 basis point increase in ~~similar investment vehicles~~interest ratees would have no effect on our cash position as of June 30, 2019.

We generally place our marketable security investments in ~~the future,~~high quality credit instruments, as specified in our investment policy guidelines. ~~Our~~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. ~~government and~~ agency ~~securities)~~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~~

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 kronor, 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.

~~ITEM 4. CONTROLS AND PROCEDURES~~

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management, with the participation of the principal executive officer and the principal financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules

13a-15(e)

15d-15(e)

under the ~~Securities~~ Exchange Act ~~of 1934, as amended (the “Exchange Act”)~~ as of the end of the period covered by this report. Based on such evaluation, the 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 in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, on a timely basis, and is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and the Company’s principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control

We acquired ~~Spectrum LifeSciences, LLC (“Spectrum”) in August 2017.~~C Technologies on May 31, 2019. The financial results of ~~Spectrum~~C Technologies are included in our unaudited consolidated financial statements as of June 30, 2019 and for the ~~three-~~quarter then ended. The C Technologies business represented approximately $2.2 million of revenue and~~six-month~~ ~~periods~~ ($1.5) million of net loss, respectively, for the quarter ended June 30, ~~2018. Spectrum represented approximately $36,331,000 of our total assets as of June 30, 2018 and $24,031,000 of revenues for thesix-month~~ ~~period ended June 30, 2018.~~2019. As this acquisition occurred ~~during~~in the second ~~half~~quarter of ~~2017,~~2019, the scope of our assessment of our internal control over financial reporting does not include ~~Spectrum.~~C Technologies. This exclusion is in accordance with the ~~SEC’s~~Securities and Exchange Commission’s general guidance that an assessment of a recently acquired business may be omitted from our scope in the year of acquisition. We are actively reviewing and updating Spectrum’s internal control policies and procedures, and management will include Spectrum in its report on internal control over financial reporting as of and for the year ended December 31, 2018.

Effective January 1, 2018, we adopted the provisions of ASC 606, “Revenue from Contracts with Customers.” As part of the adoption of this standard, we reviewed our control procedures and have modified certain of our processes to ensure compliance with the new standard.

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 June 30, ~~2018~~2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

~~ITEM 1. LEGAL PROCEEDINGS~~

ITEM 1. 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 1A. RISK FACTORS~~

ITEM 1A. RISK FACTORS

The matters discussed in this Quarterly Report onForm

10-Q

include forward-looking statements that involve risks or uncertainties. These statements are neither promises nor guarantees, but are based on various assumptions by management regarding future circumstances, over many of which Repligen has little or no control. A number of important risks and uncertainties, including those identified under the caption “Risk Factors” in Item 1A in our ~~Annual~~Quarterly Report onForm ~~10-K~~

10-Q

for the ~~year~~period ended ~~December~~March 31, ~~2017~~2019 and in subsequent filings, could cause our actual results to differ materially from those in the forward-looking statements. There are no material changes to the ~~Risk Factors~~risk factors described in our ~~Annual~~Quarterly Report onForm ~~10-K~~

10-Q

for the ~~fiscal year~~period ended ~~December~~March 31, ~~2017.~~

2019.

~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

~~None.~~

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

C Technologies Acquisition

Pursuant to the Stock Purchase Agreement described in Note 3,

“Acquisition of C Technologies, Inc.,”

to the consolidated financial statements, on May 31, 2019, the Company issued 779,221 unregistered shares of the Company’s common stock totaling $53.9 million as part of the consideration for the Company’s acquisition of C Technologies. The issuance is not registered under the Securities Act of 1933, as amended, in reliance upon the exemption from registration provided by Rule 506(b) of Regulation D.

Exchange and Redemption of 2016 Notes

On July 16, 2019, the Company entered into separate privately negotiated agreements with certain holders of its outstanding 2.125% Convertible Senior Notes due 2021 (the “2016 Notes”) to exchange an aggregate of $92.0 million aggregate principal amount of the 2016 Notes for shares of the Company’s common stock, together with cash, in private placement transactions pursuant to Section 4(a)(2) of the Securities Act (the “Note Exchanges”).

Each holder of 2016 Notes that participated in the Note Exchanges represented to the Company that it was either institutional “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act or a “qualified institutional buyer” within the meaning of Rule 144A promulgated under the Securities Act.

On July 19, 2019 and July 22, 2019, the Company used $92.3 million and 1,850,155 shares of its common stock to settle the Note Exchanges.

For more information regarding our 2016 Notes, see Note 8,

“Convertible Senior Notes,”

to the consolidated financial statements.

~~ITEM 3. DEFAULTS UPON SENIOR SECURITIES~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

~~ITEM 4. MINE SAFETY DISCLOSURES~~

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

~~ITEM 5. OTHER INFORMATION~~

At our 2018 Annual Meeting of Stockholders held on May 16, 2018, our stockholders approved the Repligen Corporation 2018 Stock Option and Incentive Plan (the “2018 Plan”), which was previously approved by our board of directors on April 3, 2018. The 2018 Plan provides for the grant of equity awards for up to an aggregate of 2,778,000 shares of our common stock, plus the number of shares of stock available for issuance under our Amended and Restated 2012 Stock Option and Incentive Plan. A summary of the material terms and conditions of the 2018 Plan is set forth in our definitive proxy statement on Schedule 14A filed with the Securities and Exchange Commission on April 20, 2018, as amended (the “Proxy Statement”). The full text of the 2018 Plan is filed as Annex B to the Proxy Statement and is incorporated by reference as Exhibit 10.1 to this Quarterly Report on Form~~10-Q.~~

ITEM 5.

OTHER INFORMATION

None.

~~ITEM 6. EXHIBITS~~

~~(a) Exhibits~~

ITEM 6.

EXHIBITS

(a)

Exhibits

~~Exhibit~~ ~~Number~~		~~Document Description~~

~~3.1~~
Exhibit Number			Document Description

	2.1†		Stock Purchase Agreement, dated April 25, 2019, by and among Repligen Corporation, C Technologies and Craig Harrison (incorporated herein by reference to Exhibit 2.1 to Repligen Corporation’s Form 8-K filed on April 26, 2019).

	3.1		Restated Certificate of Incorporation, dated September 30, 1992 and amended September 17, 1999 (filed as Exhibit 3.1 to Repligen Corporation’s Quarterly Report on Form10-Q for the quarter ended September 30, 1999 and incorporated herein by reference).

~~3.2~~
	3.2		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 Form8-K filed on May 19, 2014 and incorporated herein by reference).

~~3.3~~
	3.3		Second Amended and Restated Bylaws (filed as Exhibit 3.1 to Repligen Corporation’s Current Report on Form8-K filed on May 23, 2017 and incorporated herein by reference).


~~Exhibit~~ ~~Number~~		~~Document Description~~

~~10.1 +~~
	4.1			~~2018~~Base Indenture, dated as of July 19, 2019, by and between Repligen Corporation ~~Stock Option~~ and ~~Incentive Plan.~~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).

~~31.1 +~~		~~Rule13a-14(a)/15d-14(a)~~ ~~Certification.~~

~~31.2 +~~		~~Rule13a-14(a)/15d-14(a)~~ ~~Certification.~~

32.1 * 4.2			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).

	4.3			Form of 0.375% Convertible Senior Note due 2024 (included in Exhibit 4.2).

	10.1			Fifth Amendment to Lease, dated as of May 29, 2019, between Repligen Corporation as Tenant and HRE-S-Centerpoint, LLC as Landlord, 41 Seyon Street, Waltham, Massachusetts (filed as Exhibit 10.1 to Repligen Corporation’s Current Report on Form 8-K filed on May 31, 2019 and incorporated herein by reference).

	10.2#			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).

	10.3#			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).

	31.1 +			Rule 13a-14(a)/15d-14(a) Certification.

	31.2 +			Rule 13a-14(a)/15d-14(a) Certification.

	32.1*			Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~101+~~		~~The following materials from Repligen Corporation on Form10-Q~~ ~~for~~
	101.INS +			XBRL Instance Document - the ~~quarterly period ended June 30, 2018, formatted~~instance document does not appear in ~~Extensible Business Reporting Language (xBRL): (i) Condensed Consolidated Statements~~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.*)

†

Portions of ~~Comprehensive Income (Loss), (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements~~this exhibit (indicated by asterisks) have been omitted in accordance with the rules of ~~Cash Flows,~~the Securities and ~~(iv) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.~~Exchange Commission.

#	Management contract or compensatory plan or arrangement.

+	Filed herewith.

*	Furnished herewith.

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

~~Date: August 2, 2018~~		~~By:~~	/S~~/ TONY~~ ~~J. HUNT~~
			~~Tony J. Hunt~~
			~~President and Chief Executive Officer~~

Date: August 1, 2019	By:	/ s / Tony J. Hunt
		Tony J. Hunt
		President and Chief Executive Officer
		(Principal executive officer)
		Repligen Corporation
			~~Repligen Corporation~~

Date: August ~~2, 2018~~1, 2019	By:	~~By:~~	/S s / JON S~~NODGRES~~ Jon Snodgres
			Jon Snodgres
		Chief Financial Officer
	~~Chief Financial Officer~~
			(Principal financial officer)
			Repligen Corporation


(in thousands, except share data)	June 30, 2018			December 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	175,611		$	173,759
Accounts receivable, less reserve for doubtful accounts of $61 at June 30, 2018 and $58 at December 31, 2017, respectively		31,713			27,585
Royalties and other receivables		17			153
Inventories, net		40,948			39,004
Prepaid expenses and other current assets		4,620			2,281

Total current assets		252,909			242,782
Property, plant and equipment, net		23,993			22,417
Intangible assets, net		139,182			144,753
Goodwill		327,095			327,333
Other assets		1,902			6,234

Total assets	$	745,081		$	743,519

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	6,688		$	7,282
Accrued liabilities		13,102			17,929
Convertible senior notes, current portion		101,329			—

Total current liabilities		121,119			25,211
Convertible senior notes, net		—			99,250
Deferred tax liabilities		20,643			25,167
Other long-term liabilities		4,660			2,343
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized, no shares issued or outstanding		—			—
Common stock, $.01 par value, 80,000,000 shares authorized, 43,798,572 shares at June 30, 2018 and 43,587,079 shares at December 31, 2017 issued and outstanding		438			436
Additionalpaid-in capital		635,364			628,983
Accumulated other comprehensive loss		(11,143	)		(6,363	)
Accumulated deficit		(26,000	)		(31,508	)

Total stockholders’ equity		598,659			591,548

Total liabilities and stockholders’ equity	$	745,081		$	743,519


(In thousands)	Six months ended June 30,
(In thousands)	2018			2017
Cash flows from operating activities:
Net income	$	6,185		$	11,506
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,894			3,278
Non-cash interest expense		2,089			1,956
Stock-based compensation expense		4,893			3,027
Deferred tax expense		325			(5,384	)
Loss on conversion of convertible senior notes		1			—
Loss on disposal of assets		—			64
Changes in assets and liabilities:
Accounts receivable		(4,788	)		(6,347	)
Other receivables		60			226
Inventories		(3,096	)		(813	)
Prepaid expenses and other current assets		(144	)		(236	)
Other assets		(1,241	)		(754	)
Accounts payable		(701	)		1,740
Accrued liabilities		(3,985	)		(4,216	)
Long-term liabilities		43			(86	)

Net cash provided by operating activities		7,535			3,961

Cash flows from investing activities:
Purchases of marketable securities		—			(42	)
Redemptions of marketable securities		—			16,850
Purchases of property, plant and equipment		(4,412	)		(2,676	)

Net cash (used in) provided by investing activities		(4,412	)		14,132

Cash flows from financing activities:
Exercise of stock options		1,490			1,505
Repayment of senior convertible notes		(11	)		—
Payment of contingent consideration		—			(1,677	)

Net cash provided by (used in) financing activities		1,479			(172	)

Effect of exchange rate changes on cash and cash equivalents		(2,750	)		2,053

Net increase (decrease) in cash and cash equivalents		1,852			19,974
Cash, cash equivalents and restricted cash, beginning of period		173,759			122,683

Cash, cash equivalents and restricted cash, end of period	$	175,611		$	142,657

Supplemental disclosure ofnon-cash activities:
Income taxes paid	$	1,458		$	2,150

Non-cash effect of adoption of ASU2016-16	$	5,609		$	—

Payment of contingent consideration in common stock	$	—		$	1,062


Cash consideration	$	122,932
Equity consideration		247,575
Working capital adjustment		425

Net assets acquired	$	370,932


Cash and cash equivalents	$	10,137
Accounts receivable		5,075
Inventory		13,502
Prepaid expenses and other assets		616
Fixed assets		6,004
Deferred tax assets		1,102
Customer relationships		78,400
Developed technology		38,560
Trademark and tradename		2,160
Non-competition agreements		960
Goodwill		265,722
Accounts payable		(1,335	)
Unrecognized tax benefit		(576	)
Accrued liabilities		(5,787	)
Deferred tax liabilities		(43,608	)

Fair value of net assets acquired	$	370,932


	Pro-forma Six months ended June 30, 2017
Total revenue		81,774
Net income		12,057
Earnings per share:
Basic	$	0.28

Diluted	$	0.28


(in thousands, except percentages)	Three months ended June 30,											Six months ended June 30,
	2018			2017		$ Change			% Change			2018		2017		$ Change			% Change
Product revenue	$	47,743		$	32,434	$	15,309			47.2	%	$	92,542	$	63,003	$	29,539			46.9	%
Royalty and other revenue		(12	)		21		(33	)		(157.1	%)		19		42		(23	)		(54.8	%)

Total revenues	$	47,731		$	32,455	$	15,276			47.1	%	$	92,561	$	63,045	$	29,516			46.8	%


(In thousands)	Foreign currency translation gain (loss)
Balance at December 31, 2017	$	(6,363	)
Foreign currency translation loss	$	(4,780	)

Balance at June 30, 2018	$	(11,143	)


	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


Years Ending	Amortization Expense
December 31, 2018 (six months remaining)	$	5,284
December 31, 2019		10,456
December 31, 2020		9,866
December 31, 2021		9,365
December 31, 2022		9,363


	Options Outstanding			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (in years)		(in thousands) Aggregate Intrinsic Value
Options outstanding at December 31, 2017		734,940		$	20.80
Granted		429,678			34.48
Exercised		(96,196	)		15.49
Forfeited/cancelled		(9,588	)		29.71

Options outstanding at June 30, 2018		1,058,834		$	26.72		7.57	$	21,518

Options exercisable at June 30, 2018		448,068		$	19.14		5.60	$	12,502

Vested and expected to vest at June 30, 2018⁽¹⁾		1,008,777		$	26.37		7.48	$	20,854


	Units Outstanding			Weighted- Average Remaining Contractual Term (in years)		(in thousands) Aggregate Intrinsic Value
Restricted and performance stock units outstanding at December 31, 2017		505,235
Granted		367,961
Vested		(115,295	)
Forfeited/cancelled		(40,905	)

Restricted stock units outstanding at June 30, 2018		716,996			3.97	$	33,727

Vested and expected to vest at June 30, 2018⁽¹⁾		654,423			3.60	$	30,784


	Minimum Rental Commitments
2018 (six months remaining)	$	1,817
2019		3,643
2020		3,567
2021		3,257
2022		2,050
Thereafter		4,872


	Six Months Ended June 30,						Increase/(Decrease)
	2019			2018			$ Change
	(Amounts in thousands)
Operating activities	$	27,577		$	7,535		$	20,042
Investing activities		(191,305	)		(4,412	)		(186,893	)
Financing activities		190,172			1,479			188,693
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(2,449	)		(2,750	)		301

Net increase in cash, cash equivalents and restricted cash	$	23,995		$	1,852		$	22,143