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, 2019~~

March 31, 2020

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

For the transition period from

Commission File Number

000-14656

REPLIGEN CORPORATION

(Exact Name of Registrant as Specified in its Charter)


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

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

(

~~781~~

)(781)

250-0111

Registrant’s 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes

☒

☐

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.:

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 the registrant’s common stock on ~~July 30, 2019~~May 4, 2020 was

~~51,530,792~~

. 52,305,744.

Table of Contents


		PAGE
PART I -	FINANCIAL INFORMATION
Item 1.
~~Item 1.~~	Financial Statements (interim periods unaudited)
	Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019			3
	Consolidated ~~Balance Sheets as~~Statements of ~~June 30,~~Comprehensive Income for the Three Months Ended March 31, 2020 and 2019 ~~and December 31, 2018~~		3
			4
	~~Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2019 and 2018~~		4

	Consolidated Statements of Stockholders’ Equity for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~		5

	Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~		7
			6
	Notes to Unaudited Consolidated Financial Statements		8 7
Item 2.
~~Item 2.~~	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28 25
Item 3.
~~Item 3.~~	Quantitative and Qualitative Disclosures About Market Risk		36
Item 4.
~~Item 4.~~	Controls and Procedures		37 36

PART II -	OTHER INFORMATION

Item 1.	Legal Proceedings		38

Item 1A.	Risk Factors		38
Item 2.
~~Item 2.~~	Unregistered Sales of Equity Securities and Use of Proceeds		38
Item 3.
~~Item 3.~~	Defaults Upon Senior Securities		38
Item 4.
~~Item 4.~~	Mine Safety Disclosures		38

~~Item 5.~~	~~Other Information~~		38 39

Item 6.5.	~~Exhibits~~Other Information		39

Item 6.	~~Signatures~~Exhibits		40
Signatures			41

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1.

Financial Statements

REPLIGEN

CORPORATION

CONSOLIDATED

BALANCE SHEETS

(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


	March 31, 2020			December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	529,525		$	528,392
Restricted cash		9,041			9,015
Accounts receivable, net of allowances of $658 and $525 at March 31, 2020 and December 31, 2019, respectively		44,726			43,068
Royalties and other receivables		30			148
Unbilled receivables		456			456
Inventories, net		61,781			54,832
Prepaid expenses and other current assets		5,819			5,917

Total current assets		651,378			641,828
Property, plant and equipment, net		50,373			48,455
Intangible assets, net		208,526			212,552
Goodwill		468,382			468,413
Deferred tax assets		2,904			2,920
Operating lease right of use assets		24,688			25,707
Other assets		230			238

Total assets	$	1,406,481		$	1,400,113

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	10,176		$	11,425
Operating lease liability		3,747			3,557
Accrued liabilities		27,930			33,331

Total current liabilities		41,853			48,313
Convertible senior notes, net		235,458			232,767
Deferred tax liabilities		29,868			29,944
Operating lease liability, long-term		27,038			26,995
Other liabilities, long-term		2,506			2,326

Total liabilities		336,723			340,345

Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.01 par value, 5,000,000 shares authorized, 0 shares issued or outstanding		—			—
Common stock, $0.01 par value; 80,000,000 shares authorized; 52,278,083 shares at March 31, 2020 and 52,078,258 shares at December 31, 2019 issued and outstanding		523			521
Additional paid-in capital		1,074,183			1,068,431
Accumulated other comprehensive loss		(20,606	)		(15,027	)
Accumulated earnings		15,658			5,843

Total stockholders’ equity		1,069,758			1,059,768

Total liabilities and stockholders’ equity	$	1,406,481		$	1,400,113

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

Table of Contents

REPLIGEN CORPORATION

CONSOLIDATED STATEMENTS

COMPREHENSIVE INCOME

~~(LOSS)~~

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


	For the Three Months Ended March 31,
	2020			2019
Revenue:
Products	$	76,060		$	60,612
Royalty and other revenue		30			22

Total revenue		76,090			60,634

Costs and operating expenses:
Cost of product revenue		31,982			26,845
Research and development		4,702			3,620
Selling, general and administrative		27,500			18,998

Total costs and operating expenses		64,184			49,463

Income from operations		11,906			11,171

Other income (expenses):
Investment income		1,364			713
Interest expense		(2,976	)		(1,726	)
Other income		382			358

Other expenses, net		(1,230	)		(655	)

Income before income taxes		10,676			10,516
Income tax provision		861			2,463

Net income	$	9,815		$	8,053

Earnings per share:
Basic	$	0.19		$	0.18

Diluted	$	0.18		$	0.17

Weighted average common shares outstanding:
Basic		52,139			43,968

Diluted		53,109			46,279

Net income	$	9,815		$	8,053
Other comprehensive income (loss):
Foreign currency translation adjustment		(5,579	)		(1,891	)

Comprehensive income	$	4,236		$	6,162

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 consolidated financial statements.

Table of Contents

REPLIGEN CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, amounts in thousands, except share data)


	Common Stock
	Number of Shares		Par Value		Additional Paid - In Capital		Accumulated Other Comprehensive Loss			Accumulated Earnings		Total Stockholders’ Equity
Balance at December 31, 2019		52,078,258	$	521	$	1,068,431	$	(15,027	)	$	5,843	$	1,059,768
Net income		—		—		—		—			9,815		9,815
Exercise of stock options and releases of restricted stock		199,825		2		1,587		—			—		1,589
Stock-based compensation expense		—		—		4,165		—			—		4,165
Translation adjustment		—		—		—		(5,579	)		—		(5,579	)

Balance at March 31, 2020		52,278,083	$	523	$	1,074,183	$	(20,606	)	$	15,658	$	1,069,758


	Common Stock
	Number of Shares		Par Value		Additional Paid - In Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2018		43,917,378	$	439	$	642,590	$	(11,893	)	$	(15,568	)	$	615,568
Net income		—		—		—		—			8,053			8,053
Exercise of stock options and releases of restricted stock		156,620		2		42		—			—			44
Stock-based compensation expense		—		—		3,251		—			—			3,251
Translation adjustment		—		—		—		(1,891	)		—			(1,891	)

Balance at March 31, 2019		44,073,998	$	441	$	645,883	$	(13,784	)	$	(7,515	)	$	625,025

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

Table of Contents

REPLIGEN CORPORATION

CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS’ EQUITY~~CASH FLOWS

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

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


	Three Months Ended March 31,
	2020			2019
Cash flows from operating activities:
Net income	$	9,815		$	8,053
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		6,390			4,213
Non-cash interest expense		2,691			1,107
Stock-based compensation expense		4,165			3,251
Deferred tax expense		—			892
Other		140			—
Changes in operating assets and liabilities, excluding impact of acquisitions:
Accounts receivable		(2,399	)		(6,692	)
Royalties and other receivables		148			112
Unbilled receivables		—			2,602
Inventories		(7,191	)		(1,478	)
Prepaid expenses and other assets		36			215
Operating lease right of use assets		919			784
Accounts payable		(709	)		(570	)
Accrued expenses		(4,989	)		(1,855	)
Operating lease liability		334			(840	)
Long-term liabilities		180			(6	)

Total cash provided by operating activities		9,530			9,788

Cash flows from investing activities:
Additions to capitalized software costs		(911	)		(1,740	)
Purchases of property, plant and equipment		(4,126	)		(2,088	)

Total cash used in investing activities		(5,037	)		(3,828	)

Cash flows from financing activities:
Exercise of stock options		1,599			44
Payment of tax withholding obligation on vesting of restricted stock		(10	)		—

Total cash provided by financing activities		1,589			44

Effect of exchange rate changes on cash, cash equivalents and restricted cash		(4,923	)		(3,691	)

Net increase in cash, cash equivalents and restricted cash		1,159			2,313

Cash, cash equivalents and restricted cash, beginning of period		537,407			193,822

Cash, cash equivalents and restricted cash, end of period	$	538,566		$	196,135

Supplemental disclosure of cash flow information:
Income taxes paid	$	1,756		$	1,055
Interest paid	$	527		$	—
Supplemental disclosure of non-cash investing and financing activities:
Assets acquired under operating leases	$	17		$	—

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

Contents

REPLIGEN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	~~Basis~~Summary of ~~Presentation~~Significant Accounting Policies

Basis of Presentation

The 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 (“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 Regulation

S-X

and do not include all of the information and footnote disclosures required by GAAP. These 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, ~~2018.~~2019.

The preparation of financial statements in conformity with 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 consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Repligen Sweden AB, Repligen GmbH, Spectrum LifeSciences, LLC and its subsidiaries (“~~Spectrum,” acquired on August 1, 2017)~~Spectrum”), C Technologies, Inc. (“C ~~Technologies,” acquired on May 31, 2019)~~Technologies”

)

, and Repligen Singapore Pte. Ltd. All significant intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited 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.

Risks and Uncertainties

There are many

uncertainties

regarding the current pandemic of the novel coronavirus (“COVID-19”), and the Company is closely monitoring the impact of

COVID-19

on all aspects of its business, including how it will impact its customers, employees, suppliers, vendors, business partners and distribution channels. While

COVID-19

did not materially affect the Company’s financial results and business operations in the Company’s first quarter ended March 31, 2020, the Company is unable to predict the impact that COVID-19 may have on its financial position and operations moving forward due to numerous uncertainties. These estimates may change as new events occur and additional information is obtained, and actual results could differ materially from these estimates under different assumptions or conditions. The Company will continue to assess the evolving impact of COVID-19 and will make adjustments to its operations as necessary.

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~~that we feel may be applicable to us are as follows:

Recently Issued Accounting Standard Updates – ~~Not Yet~~ Adopted During the Period

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. (“ASU”)

2018-13,

“Fair Value Measurement (Topic 820): Disclosure

Framework – Changes

to the Disclosure Requirements for Fair Value Measurement.”

ASU

2018-13

includes amendments that aim to improve the effectiveness of fair value measurement disclosures. The amendments in this guidance modify the disclosure requirements on fair value measurements based on the concepts in FASB Concepts Statement,

“Conceptual Framework for Financial ~~Reporting~~

—

Reporting—Chapter 8: Notes to Financial Statements

”

including the consideration of costs and benefits. The ~~amendments become effective~~Company adopted ASU

2018-13

on January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements as of and for the ~~Company in the year ending December~~

three months ended March 31,

~~2020~~

~~and early adoption is permitted. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements.~~ 2020.

In August 2018, the FASB issued ASU

2018-15,

“Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.”

ASU

2018-15

aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain

internal-use

software (and hosting arrangements that include an

internal-use

software license). The guidance also requires the entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement, which includes reasonably certain renewals. The ~~guidance becomes effective~~Company adopted ASU

2018-13

on January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements as of and for the ~~Company in~~three months ended March 31, 2020.

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In June 2016, the ~~year ending December 31, 2020~~FASB issued ASU

2016-13,

“

Financial Instruments-Credit Losses (Topic 326).”

ASU

2016-13

significantly

changes how entities will account for credit losses for most financial assets and ~~early adoption is permitted.~~certain other instruments that are not measured at fair value through net income. ASU

2016-13

replaces the existing incurred loss model with an expected credit loss model that requires entities to estimate an expected lifetime credit loss on most financial assets and certain other instruments, including short-term trade receivables and contract assets, and expands disclosure requirements for credit quality of financial assets. The Company ~~is currently assessing~~adopted ASU

2016-13

on January 1, 2020. The Company assessed all potential impacts that the ~~impact that~~adoption of this guidance ~~will have~~has on its consolidated financial statements. Based on the composition of the Company’s investment portfolio, accounts receivable, current market conditions and historical credit loss activity, the adoption of ASU

2016-13

by the Company does not have a material impact on its consolidated financial position, results of operations or cash flows as of and for the three months ended March 31, 2020.

The Company continues to monitor processes and controls for indications of an adjustment for future economic conditions at quarterly and annual reporting periods. See Note 5,

“Credit Losses,”

below for more information on the Company’s adoption of ASC 326.

In November 2018, the FASB issued ASU

2018-18,

“Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606.”

ASU

2018-18

clarifies the interaction between Topic 808,

“Collaborative Arrangements,”

and Topic 606,

“Revenue from Contracts with Customers,”

by making targeted improvements to GAAP for collaborative arrangements and providing guidance on whether certain transactions between collaborative arrangement participants should be accounted for with revenue under Topic 606. This includes improving comparability in the presentation of revenue for certain transactions between collaborative arrangement participants by allowing presentation of the units of account in collaborative arrangements that are within

the scope of Topic 606 together with revenue accounted for under Topic 606. The ~~guidance becomes effective~~Company adopted ASU

2018-13

on January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements as of and for the ~~Company in the year ending December~~three months ended March 31, ~~2020 and early adoption is permitted. The Company is currently assessing the impact that this guidance will have on its consolidated financial statements.~~

~~Recently Issued Accounting Standard Updates – Adopted During the Period~~

2020.

In ~~February 2016,~~December 2019, the FASB issued ASU

~~2016-02,~~2019-12,

“

~~“Leases~~Income Taxes (Topic ~~842).~~740) – Simplifying the Accounting for Income Taxes.”

ASU

~~2016-02,~~2019-12

~~along with subsequent ASUs issued~~simplifies the accounting for income taxes by removing certain exceptions to ~~clarify certain provisions~~the general principles in Topic 740, including, but not limited to, the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items, the exceptions related to the recognition of ~~ASU~~

~~2016-02~~

~~(collectively known as “ASC 842”), establishes~~a deferred tax liability related to an equity method investment and the exception to methodology for calculating income taxes in an interim period when a

~~right-of-use~~year-to-date

~~(“ROU”) model that requires a lessee to record a ROU asset and a lease liability on~~loss exceeds the ~~consolidated balance sheet~~anticipated loss for ~~all leases with terms longer than 12 months. Certain qualitative and quantitative disclosures are also required.~~the year. The Company adopted ASU

~~2016-02~~2018-13

~~and related amendments~~ on January 1, ~~2019 using an optional transition method allowed with the issuance of ASU~~

~~2018-11,~~

~~“Leases – Targeted Improvements (Topic 842),”~~

~~in July 2018. ASU~~

~~2018-11~~

gives entities the option to not provide comparative period financial statements and instead apply the transition requirements as of the effective date of the new 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~~2020. The adoption did not require the recognition of operating lease liabilities on the consolidated 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 also elected under the package of practical expedients, to 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 hadhave a ~~substantial~~material 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~~consolidated financial statements as of ~~ASC 842.~~and for the three months ended March 31, 2020.

2.	Fair Value Measurements

The Company uses various valuation approaches in

determining the fair value of its assets and ~~liabilities, the Company uses various valuation approaches.~~liabilities. 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~~March 31, 2020 and December 31, ~~2018,~~2019, cash and cash equivalents on the Company’s consolidated balance sheets included ~~$118.4~~$414.2 million and ~~$126.6~~$415.6 million, respectively, in a money market account. These funds are valued on a recurring basis using Level 1 inputs.

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In ~~May 2016,~~

July 2019

, the Company issued ~~$115.0~~$

287.5

million aggregate principal amount of the Company’s

0.375

% Convertible Senior Notes due ~~June 1, 2021 (the “2016~~ July

2024

(the “

2019

Notes”). Interest is payable

semi-annually

in arrears on ~~June 1~~ January

and ~~December 1~~ July

of each ~~year, beginning~~year. The

2019

Notes will mature on ~~December 1, 2016.~~

July 15, 2024

unless earlier converted or repurchased in accordance with their terms. As of ~~June 30, 2019,~~March

2020

, the carrying value of the ~~2016~~

2019

Notes was ~~$105.7~~$

235.5

million, net of

unamortized

discount, and the fair value of the ~~2016~~

2019

Notes was ~~$310.5~~$

304.1

million. The fair value of the ~~2016~~

2019

Notes is a Level

valuation and was determined based on the most recent trade activity of the ~~2016~~

2019

Notes as of ~~June 30, 2019.~~March

2020

. The ~~2016~~

2019

Notes are discussed in more detail in Note

“Convertible Senior Notes”

to these consolidated financial statements.

~~There~~

uring the three months ended March 31, 2020

here were no remeasurements to fair value ~~during the three months ended June 30, 2019~~

of financial assets and liabilities that are not measured at fair value on a recurring basis.

3.	Acquisition of C Technologies, Inc.

On April 25, 2019, Repligen agreed to acquire C Technologies, pursuant to the terms of a Stock Purchase Agreement (the “Agreement”), by and among Repligen, C Technologies and Craig Harrison, an individual and sole stockholder of C Technologies (such acquisition, the “C Technologies Acquisition”).

C Technologies’ business consists of 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 allow bioprocessing technicians to measure the protein concentration of a liquid sample using C Technologies’ Slope Spectroscopy

method, which eliminates the need for manual sample dilution. C Technologies’ lead product, the SoloVPE instrument platform, was launched in 2008 for

off-line

and

at-line

protein concentration measurements conducted in quality control, process development and manufacturing labs in the production of biological therapeutics. C Technologies’ FlowVPE platform, an extension of the SoloVPE technology, was designed to allow end users to make

in-line

protein concentration measurements in filtration, chromatography and fill-finish applications, designed to allow for real-time process monitoring.

Consideration Transferred

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

“Business Combinations”

(“ASC

805

”)

. The C Technologies Acquisition was funded through payment of approximately $195.0 million in cash, $186.0 million of which ~~will be~~is 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 $53.9 million for a total purchase price of $239.9 million. Under the acquisition method of accounting, the assets of C Technologies were

recorded as of the acquisition date, at their respective fair values, and consolidated with those of ~~Repligen.~~

Repligen

. The fair value of the net tangible assets acquired ~~is estimated to be approximately $6.2~~

was

6.8

million, the fair value of the intangible assets acquired ~~is estimated to be approximately $90.8~~

was

90.8

million, and the residual goodwill ~~is estimated to be approximately $142.9~~

was

142.3

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. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that

Repligen

believes to be ~~reasonable. However,~~reasonable

owever, actual results may differ from these estimates.

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


Cash consideration	$	185,971	$	185,949
Equity consideration		53,938		53,938

Fair value of net assets acquired	$	239,909	$	239,887

~~Acquisition related~~

Acquisition-related costs are not included as a component of consideration transferred but are expensed in the periods in which the costs are incurred. The Company incurred ~~$3.5 million and~~ $4.0 million in transaction costs ~~for the three- and~~

~~six-~~

~~month periods ended June 30, 2019, respectively.~~in 2019. The transaction costs are included in selling, general and administrative expenses in the consolidated statements of comprehensive ~~income (loss).~~income. 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.

For the period ended March 31, 2020, the Company recognized $2.2 million of compensation expense associated with this amount due to employees. The Company has recognized a total of $7.5 million of compensation expense associated with this amount due to employees

since the C Technologies Acquisition.

Fair Value of Net Assets Acquired

The allocation of purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date, based on the preliminary valuation. The Company 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

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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 (amounts in thousands):


Cash and cash equivalents	$	3,795		$	3,795
Restricted cash		26,933			26,933
Accounts receivable		3,044			3,044
Inventory		3,783			3,783
Prepaid expenses and other current assets		93			93
Fixed assets		40			40
Operating lease right of use asset		3,836			3,836
Customer relationships		59,680			59,680
Developed technology		28,920			28,920
Trademark and tradename		1,570			1,570
Non-competition agreements		660			660
Goodwill		142,881			142,314
Deferred taxes					895
Accounts payable		(436	)		(436	)
Accrued liabilities		(2,417	)		(2,767	)
Accrued bonus		(26,928	)		(26,928	)
Deferred revenue		(1,709	)		(1,709	)
Operating lease liability		(51	)		(51	)
Operating lease liability, long-term		(3,785	)		(3,785	)

Fair value of net assets acquired	$	239,909		$	239,887

Acquired Goodwill

The goodwill of ~~$142.9~~$

142.3

million represents future economic benefits expected to arise from synergies from combining operations and commercial organizations to increase market presence and the extension of existing customer relationships. Substantially all of the goodwill recorded is expected to be deductible for income tax purposes. Pursuant to the Company’s business combination accounting policy included in Note

“Summary of Significant Accounting Policies – Business Combinations, Goodwill and Intangible Assets,”

of our

Annual Report on Form

10-K

for the fiscal year ended December 31, 2019

the Company recorded goodwill adjustments for the effects on goodwill of changes to net assets acquired during the period that such change is identified, provided that any such change is within the measurement period (up to one year from the date of the acquisition). In

December 2019

, the Company recorded a deferred tax asset for the C Technologies Acquisition of $

0.9

million as an adjustment to goodwill. In

March 2020

, the Company recorded an additional adjustment to goodwill of $

0.3

million related to additional state income tax liabilities to be paid to the seller, which were incurred from the Company’s finalized

338

(h)

(10)

tax election.

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		Useful life		Fair Value
			(Amounts in thousands)				(Amounts in thousands)
Customer relationships		17 years	$	59,680		17 years	$	59,680
Developed technology		18 years		28,920		18 years		28,920
Trademark and tradename		20 years		1,570		20 years		1,570
Non-competition agreements		4 years		660		4 years		660
							$	90,830
			$	90,830

The preliminary purchase price allocation is subject to adjustment as purchase accounting is finalized. The final purchase price allocation will be determined upon completion of final valuation analysis, and the fair value allocation of assets acquired and liabilities assumed could differ materially from the preliminary valuation analysis. The final allocation may include, but not be limited to: (1) changes in the fair value of fixed assets, (2) changes in allocation to intangible assets such as tradenames, technology and 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 C Technologies of $6.6 million for the three months ended March 31, 2020 and $16.4 million from May 31, 2019, the date of acquisition, to December 31, 2019. The Company recorded a net loss from C Technologies’ results of operations of $2.2 million for the three months ended March 31, 2020 and a net loss of $

~~1.5~~

$7.4 million from May 31, 2019 to ~~June 30,~~December 31, 2019. The Company has included the operating results of C Technologies in its consolidated statements of comprehensive income ~~(loss)~~ since the May 31, 2019 acquisition date. The following pro forma financial information presents the

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combined results of operations of

Repligen

and C Technologies as if the acquisition had occurred on January

1 ~~2018~~

2019

after giving effect to certain pro forma adjustments. The pro forma adjustments reflected herein include only those adjustments that are directly attributable to the C Technologies Acquisition, factually supportable and have a recurring impact. These pro forma adjustments include ~~a $2.2 million and a $2.7 million net increase in~~ amortization expense ~~in 2019 and 2018, respectively, to record amortization expense for~~on the ~~$90.8 million of~~ acquired identifiable intangible assets, adjustments to stock-based compensation ~~of $0.3 million and $0.4 million, respectively,~~expense 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%).~~made. In addition, acquisition-related transaction costs ~~of $4.0 million~~ and ~~a $1.2 million purchase~~an accounting adjustment to record inventory at fair value were excluded from pro forma net income in ~~2019.~~

2019

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

The following pro forma financial information does not reflect any adjustments for anticipated expense savings resulting from the acquisition and is not necessarily indicative of the operating results that would have actually occurred had the transaction been consummated on January 1, ~~2018~~2019 or of future 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


	Three Months Ended March 31, 2019
Total revenue	$	66,052
Net income	$	10,664
Earnings per share:
Basic	$	0.24

Diluted	$	0.23

~~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 life science and biopharmaceutical industries. Under ASC

606,

“Revenue from Contracts with Customers,”

revenue is recognized when, or as, obligations under the terms of a contract are satisfied, which occurs when control of the promised products or services is transferred to customers.

Disaggregation of Revenue

Revenues for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ were as follows:

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


	Three Months Ended March 31,
	2020		2019
	(Amounts in thousands)
Product revenue	$	76,060	$	60,612
Royalty and other income		30		22

Total revenue	$	76,090	$	60,634

When disaggregating revenue, the Company considered all of the economic factors that may affect its revenues. Because all of its revenues are from bioprocessing customers, there are no differences in the nature, timing and uncertainty of the Company’s revenues and cash flows from any of its product lines. However, given that the Company’s revenues are generated in different geographic regions, factors such as regulatory and geopolitical factors within those regions could impact the nature, timing and uncertainty of the Company’s revenues and cash flows. In addition, a significant portion of the Company’s revenues are generated from two customers; therefore, economic factors specific to these two customers could impact the nature, timing and uncertainty of the Company’s revenues and cash flows.

Disaggregated revenue from contracts with customers by geographic region can be found in Note 15,

“Segment Reporting,”

below.

Revenue from significant customers that represent 10% or more of the Company’s total revenue is as follows:

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	Three Months Ended March 31,
	2020		2019
	(Amounts in thousands)
MilliporeSigma	$	10,873	$	9,407
GE Healthcare		N/A	$	7,666

Chromatography Products

~~Revenue from significant customers~~The Company’s chromatography products include a number of products used in the downstream purification and quality control of biological drugs. The majority of chromatography revenue relates to the

OPUS

pre-packed

chromatography column line. OPUS columns 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 ~~as follows:~~generally recognized at a point in time upon transfer of control to the customer.

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 filtration products generate revenue through the sale of KrosFlo

hollow fiber ~~(“HF”)~~ TFF systems, KrosFlo flat sheet TFF systems, TangenX

™

flat sheet cassettes, Spectrum

hollow fiber filters, membranes and modules, ~~ProConnex~~XCell ATF

~~single-use flow path connectors, flat sheet TFF cassettes and hardware, and XCell~~

™

~~alternating tangential flow (“ATF”)~~

devices and related ~~consumables.~~

~~The Company markets the KrosFlo line of HF cartridges~~consummables and ~~TFF systems and the~~ ProConnex ~~line of~~

single-use

flow path ~~connectors which were acquired as part of the acquisition of Spectrum LifeSciences, LLC (the “Spectrum Acquisition”). These products~~assemblies.

The Company’s KrosFlo systems are used in the filtration, isolation, purification and concentration of biologics and diagnostic products. TFF is a rapid and efficient method for separation and purification of biomolecules that is widely used in laboratory, process development and process scale applications in biopharmaceutical manufacturing. Sales of large-scale systems generally include components and 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 TangenX flat sheet cassettes (SIUS

™

, SIUS Gamma and SIUS Pro) are not highly interdependent on one another and are therefore considered distinct products that represent separate performance obligations. Product revenue from the sale of TangenX flat sheet cassettes are generally recognized at a point in time upon transfer of control of the customer.

The Company’s other filtration product offerings are not highly interdependent of one another and are therefore considered distinct products that represent separate performance obligations. Revenue on these products is generally recognized at a point in time upon transfer of control to the customer. The Company invoices the customer for the installation and training services in an amount that directly corresponds with the value to the customer of the Company’s performance to date; therefore, revenue recognized is based on the amount billable to the customer in accordance with the practical expedient under ASC

606-10-55-18.

The Company also markets 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~~

™

TFF cassettes and hardware are not highly interdependent of one another and are therefore considered distinct products that represent separate performance obligations. SIUS TFF product revenue is generally recognized at a point in time upon transfer of control to the customer.

~~The Company also markets~~ the XCell

™

ATF ~~System,~~system, a technologically advanced filtration device used in upstream processes to continuously remove cellular metabolic waste products during the course of a fermentation run, freeing healthy cells to continue producing the biologic drug of interest. XCell ATF ~~Systems~~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 XCell ATF system and therefore represent a distinct performance obligation. XCell ATF system product revenue related to the filtration system (including the controller if applicable) and consumables is generally recognized at a point in time upon transfer of control to the customer. XCell ATF system service revenue related to training and installation services is generally recognized over time, as the customer simultaneously receives and consumes the benefits as the Company performs. The Company invoices the customer for the installation and training services in an amount that directly corresponds with the value to the customer of the Company’s performance to date; therefore, revenue recognized is based on the amount billable to the customer in accordance with the practical expedient under ASC

606-10-55-18.

Process Analytics Products

On May 31, 2019, the Company consummated its acquisition of C Technologies and added a fourth franchise, Process Analytics, to its bioprocessing business. The Process Analytics franchise generates revenue primarily through the sale of the SoloVPE and FlowVPE Slope Spectroscopy systems. These products complement and support the Company’s existing Filtration, Chromatography and Proteins franchises as they allow end users to make

in-line

protein concentration measurements in filtration, chromatography and fill-finish applications, designed to allow for real-time process monitoring.

Table of Contents

Protein Products

The Company’s ~~chromatography products include a number of products used in the downstream purification and quality control of biological drugs. The majority of chromatography revenue relates to the OPUS~~

~~pre-packed~~

~~chromatography column line 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.

~~Protein Products~~

~~The Company’s Protein product line~~franchise generates revenue through the sale of Protein A affinity ligands and growth factors. Protein A ligands are an essential component of Protein A chromatography resins (media) used in the purification of virtually all ~~monoclonal antibody (“mAb”)-based~~

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 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 revenues from contracts with customers as of ~~June 30, 2019~~March 31, 2020 (amounts in thousands):

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

—


	2020
Balances from contracts with customers only:
Accounts receivable	$	44,726
Deferred revenue (included in accrued liabilities in the consolidated balance sheets)		6,305
Revenue recognized for the three months ended March 31, 2020 relating to:
The beginning deferred revenue balance	$	1,911
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,~~March 31, 2020 or for the same period in 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.

Table of Contents

Applying the practical expedient in paragraph

340-40-25-4,

the Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in selling, general, and administrative expenses. 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.

5.	~~Leases~~ Credit L o s ses

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 information represents supplemental disclosure for the consolidated statements of cash flows related to operating leases (amounts in thousands):~~

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 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~~

Effective January 1, 2020, the Company adopted ASU

2016-13,

“Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,”

prospectively. ASU

2016-13

replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade receivables. The guidance requires entities to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due. Upon adoption, changes in the allowance were not material for the transition period starting January 1, 2020 through the three months ended March 31, 2020.

The Company is exposed to credit losses primarily through sales of products and services. The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers’ trade accounts receivables. Customers are pooled based on sharing specific risk factors, including geographic location. Due to the short-term nature of such receivables, the estimated accounts receivable that may not be collected is based on aging of the accounts receivable balances.

Customers are assessed for credit worthiness upfront through a credit review, which includes assessment based on our analysis of their financial statements when a credit rating is not available. The Company evaluates contract terms and conditions, country and political risk, and may require prepayment to mitigate risk of loss. Specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company monitors changes to the receivables balance on timely basis, and balances are written off as they are determined to be uncollectable after all collection efforts have been exhausted. Estimates of potential credit losses are used to determine the allowance. It is based on assessment of anticipated payment and all other historical, current and future information that is reasonably available.

The accounts receivable balance on our consolidated balance sheet as of March 31, 2020 was $44.7 million, net of $0.7 million of allowances. Changes in the allowance were not material for the three months ended March 31, 2020. The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected (amounts in thousands):


	2020
Balance at January 1, 2020	$	(525	)
Current period change for expected credit losses		(133	)

Balance at March 31, 2020	$	(658	)

6.	Goodwill and Intangible Assets

Goodwill

Goodwill represents the difference between the purchase price and the estimated fair value of identifiable assets acquired and liabilities assumed. Goodwill acquired in a business combination and determined to have an indefinite useful life is not amortized, but instead is tested for impairment at least annually in accordance with ASC 350. The following table represents the change in the carrying value of goodwill for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 (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


Balance as of December 31, 2019	$	468,413
Goodwill adjustment related to C Technologies, Inc.		293
Cumulative translation adjustment		(324	)

Balance as of March 31, 2020	$	468,382

During each of the fourth quarters of 2019, 2018 ~~2017~~ and ~~2016,~~2017, 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 months ended ~~June 30, 2019.~~March 31, 2020.

~~Other~~

Intangible Assets

Intangible assets ~~except for the ATF tradename,~~with a definitive life are amortized over their useful lives using the ~~estimated economic benefit~~straight-line method, ~~as applicable,~~ and the amortization expense is recorded within cost of product revenue and selling, general and administrative expense

in the Company’s statements of comprehensive 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.income. Intangible assets and their related useful lives are reviewed at least annually to determine if any

adverse conditions exist that would indicate the carrying value of these assets may not be recoverable. More frequent impairment assessments are conducted if certain conditions exist, including a change in the competitive landscape, any internal decisions to pursue new or different technology strategies, a loss of a significant customer, or a significant change in the marketplace, including changes in the prices paid for 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, 2019.~~March 31, 2020.

Indefinite-lived assets are reviewed for impairment at least annually. There has been no impairment of our intangible assets for the periods presented.

Intangible assets, net consisted of the following at ~~June 30, 2019:~~March 31, 2020:

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


	March 31, 2020
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Weighted Average Useful Life (in years)
	(Amounts in thousands)
Finite-lived intangible assets:
Technology—developed	$	82,095	$	(10,725	)	$	71,370		19
Patents		240		(240	)		—		8
Customer relationships		160,425		(27,970	)		132,455		15
Trademarks		3,752		(380	)		3,372		20
Other intangibles		1,696		(1,067	)		629		3

Total finite-lived intangible assets		248,208		(40,382	)		207,826		16
Indefinite-lived intangible asset:
Trademarks		700		—			700		—

Total intangible assets	$	248,908	$	(40,382	)	$	208,526

Intangible assets consisted of the following at December 31, ~~2018:~~2019:

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


	December 31, 2019
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value		Weighted Average Useful Life (in years)
	(Amounts in thousands)
Finite-lived intangible assets:
Technology—developed	$	82,169	$	(9,669	)	$	72,500		19
Patents		240		(240	)		—		8
Customer relationships		160,825		(25,642	)		135,183		15
Trademarks		3,752		(333	)		3,419		20
Other intangibles		1,697		(947	)		750		3

Total finite-lived intangible assets		248,683		(36,831	)		211,852		16
Indefinite-lived intangible asset:
Trademarks		700		—			700		—

Total intangible assets	$	249,383	$	(36,831	)	$	212,552

Table of Contents

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 finite-lived intangible assets was ~~$3.1~~$

3.9

million and ~~$2.6~~$

2.6

million for the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. ~~Amortization expense for finite-lived intangible assets was $5.7 million and $5.3 million for the six months ended June 30, 2019 and 2018, respectively.~~

As of ~~June 30, 2019,~~March 31, 2020, the Company expects to record the following amortization expense (amounts in thousands):

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


	Estimated
	Amortization
For the Three Months Ended March 31,	Expense
2020 (remaining nine months)	$	11,348
2021		14,728
2022		14,726
2023		14,630
2024		14,188
2025 and thereafter		138,206

Total	$	207,826

7.	Consolidated Balance Sheet Detail

Inventories, net

Inventories, net consists of the following:


	As of				As of
	June 30,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
	(Amounts in thousands)				(Amounts in thousands)
Raw materials	$	32,373	$	24,937	$	34,752	$	29,328
Work-in-process		5,866		5,185		7,227		8,360
Finished products		13,036		12,141		19,802		17,144

Total inventories, net	$	51,275	$	42,263	$	61,781	$	54,832

Property, Plant and Equipment

Property, plant and equipment consist of the following:


	As of
	March 31,			December 31,
	2020			2019
	(Amounts in thousands)
Land	$	1,023		$	1,023
Buildings		764			764
Leasehold improvements		28,652			23,905
Equipment		36,987			36,257
Furniture, fixtures and office equipment		6,441			6,312
Computer hardware and software		9,007			8,810
Construction in progress		4,703			6,707
Other		50			56

Total property, plant and equipment		87,627			83,834
Less—Accumulated depreciation		(37,254	)		(35,379	)

Total property, plant and equipment, net	$	50,373		$	48,455

Depreciation expenses totaled $2.5 million and $1.6 million for the three months ended March 31, 2020 and 2019, respectively.

Accrued Liabilities

~~Property, Plant and Equipment~~

~~Property, plant and equipment~~Accrued liabilities 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


	As of
	March 31,		December 31,
	2020		2019
	(Amounts in thousands)
Employee compensation	$	16,770	$	19,850
Taxes		2,148		3,874
Royalty and license fees		887		123
Warranties		762		1,500
Professional fees		546		1,081
Deferred revenue		6,305		5,005
Other		512		1,898

Total accrued liabilities	$	27,930	$	33,331

~~(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:~~

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

8.	Convertible Senior Notes

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

0.375% Convertible Senior Notes due 2024

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,~~July 19, 2019, the Company issued ~~$115.0~~

$287.5 million aggregate principal amount of ~~its 2016 Notes.~~0.375% Convertible Senior Notes due 2024 (“2019 Notes”), which includes the underwriters’ exercise in full of an option to purchase an additional $37.5 million aggregate principal amount of 2019 Notes (the “Notes Offering”). The net proceeds ~~from the sale~~ of the ~~2016~~ Notes Offering, after deducting ~~the~~ underwriting discounts and commissions and other related offering expenses

payable by the Company, were ~~$111.1~~approximately $278.5 million.

The ~~2016~~2019 Notes are senior, unsecured obligations of the Company, and bear interest at ~~the~~a rate

of ~~2.125%~~0.375% per ~~annum,~~year. Interest is payable

~~semiannually~~

semi-annually in arrears on ~~June 1~~January 15 and ~~December 1~~July 15 of each year, beginning

~~December 1, 2016~~

on January 15, 2020. The ~~2016~~2019 Notes will mature on

~~June 1, 2021~~

July 15, 2024, unless earlier repurchased ~~redeemed~~ or converted in accordance with their terms. The initial conversion rate for the 2019 Notes is 8.6749 shares of the Company’s common stock per $1,000 principal amount of 2019 Notes (which is equivalent to an initial conversion price of approximately $115.28 per share). Prior to ~~March 1, 2021,~~ the ~~2016~~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 ~~the 2016~~2019 Notes only upon the satisfaction of ~~certain~~specified conditions and during certain ~~periods, and thereafter, the 2016 Notes will be convertible at any time~~periods. Thereafter until the close of business on the second scheduled trading day immediately preceding the maturity ~~date. Upon conversion,~~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 ~~2016~~2019 Notes will ~~receive~~be settled in cash, shares of the Company’s common stock ~~cash~~ or a combination thereof, at the Company’s election. ~~It is~~The 2019 Notes are not redeemable by the ~~Company’s current intent and policy~~Company prior to ~~settle all conversions through combination settlement, which involves satisfying~~maturity.

Holders of 2019 Notes may require the Company to repurchase their 2019 Notes upon the occurrence of a fundamental change prior to maturity at a repurchase price equal to 100% of the principal amount ~~outstanding~~thereof, plus accrued and unpaid interest to, but excluding, the date of repurchase. In connection with ~~cash and any note~~certain corporate events, the Company will, under certain circumstances, increase the conversion ~~value over~~rate for holders of 2019 Notes who elect to convert their 2019 Notes in connection with such corporate events.

As of March 31, 2020, the ~~principal amount in shares~~conditions allowing holders of the ~~Company’s common stock. On July 19,~~ 2019 Notes to convert have not been met and therefore the ~~Company exchanged, with~~2019 Notes are not yet convertible and are recorded as a ~~limited number~~long-term liability in our consolidated balance sheet at March 31, 2020.

o 2019 Notes were converted by the holders 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~~such notes 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 conversions resulted in the issuance of a nominal-amount of shares of the Company’s common stock, and the Company recorded a loss on conversion of these 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 2019, the closing price of the Company’s common stock 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 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 continues to classify the carrying value of the 2016 Notes as a current liability on the Company’s consolidated balance sheet as of June 30, 2019. As of June 30, 2019, the

~~if-converted~~

value of the 2016 Notes exceeded the aggregate principal amount by $195.5 million. As mentioned above, $17,000 par value notes were submitted for conversion at the end of the first quarter of 2019 and settled during the second quarter.2020. In the event the closing price conditions are met in the ~~third~~second quarter of ~~2019~~2020 or a future fiscal quarter, the ~~2016~~2019 Notes will be convertible at a holder’s option during the immediately following fiscal quarter.

The Company accounts for the 2019 Notes as separate liability and equity components. We determined the carrying amount of the liability component as the present value of its cash flows using a discount rate of 4.5% based on comparative convertible transactions for similar companies. The proceeds allocated to the debt conversion feature were $52.1 million. This amount was calculated by deducting the carrying value of the liability component from the principal amount of the 2019 Notes as a whole. The difference represents a debt discount that is amortized to interest expense on our consolidated statement of comprehensive income over the term of the 2019 Notes using the effective interest rate method. The Company will assess the equity classification of the cash conversion feature quarterly, and it is not

re-measured

as long as it continues to meet the conditions for equity classification.

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The Company

allocate

transaction costs related to the issuance of the 2019 Notes to the liability and equity components using the same proportions as the initial carrying value of the 2019 Notes. Transaction costs related to the liability component were $7.4 million and are being amortized to interest expense using the effective interest method over the term of the 2019 Notes. Transaction costs attributable to the equity component were $1.6 million and are netted with the equity component of the 2019 Notes in stockholders’ equity of our consolidated balance sheet at March 31, 2020.

The net carrying value of the liability component of the 2019 Notes is as follows:


	As of
	March 31,				December 31,
	2020				2019
	(Amounts in thousands)
0.375% convertible senior notes due 2024:
Principal amount	$	287,500		��	$	287,500
Less: unamortized debt discount		(45,565	)			(47,921	)
Less: unamortized debt issuance costs		(6,477	)			(6,812	)

Total debt		235,458				232,767
Less: current portion		—				—

Net carrying amount	$	235,458			$	232,767

The net carrying value of the equity component of the 2019 Notes is as follows:


	March 31,			December 31,
	2020			2019
	( Amounts in thousands)
Proceeds allocated to the conversion feature	$	52,062		$	52,062
Less: transaction costs allocated to the conversion feature		(1,621	)		(1,621	)
Less: deferred taxes		(11,371	)		(11,371	)

Net carrying value	$	39,070		$	39,070

Interest expense recognized on the 2019 Notes for the three months ended March 31, 2020 was $0.3 million, $2.4 million and $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 2019 Notes is 5.1%, which included the interest on the 2019 Notes, amortization of the debt discount and debt issuance costs. As of March 31, 2020, the carrying value of the 2019 Notes was $235.5 million and the fair value of the principal was $304.1 million. The fair value of the 2019 Notes was determined based on the most recent trade activity of the 2019 Notes as of March 31, 2020.

Conversion of the 2.125% Convertible Senior Notes due 2021

The Company utilized a portion of the proceeds from the issuance of the 2019 Notes to settle its outstanding 2.125% Convertible Senior Notes due 2021 (the “2016 Notes”) during the third quarter of 2019. On July 16, 2019, the Company entered into separate privately negotiated agreements with certain holders of the 2016 Notes ~~will initially be 31.1813~~to exchange an aggregate of $92.0 million principal aggregate amount of the 2016 Notes for shares of the Company’s common stock, ~~per $1,000 principal amount~~together with cash, in private placement transactions (the “Note Exchanges”). On July 19, 2019 and July 22, 2019, the Company used approximately $92.3 million (including $0.3 million of ~~2016 Notes,~~accrued interest) and 1,850,155 shares of its common stock valued at $161.0 million to settle the Note Exchanges for total consideration of $253.3 million, of which ~~is equivalent~~$163.6 million was allocated to ~~an initial conversion price of $32.07 per common share, and is subject to adjustment under~~reacquiring the ~~terms~~equity component of the 2016 Notes. ~~Holders~~The Company allocated the consideration transferred to the liability and equity components using the same proportions as the initial carrying value of the 2016 Notes. The transaction resulted in a loss on extinguishment of debt of $4.6 million in the Company’s consolidated statements of comprehensive income in 2019.

On July 19, 2019, the Company issued a Notice of Redemption in respect of the 2016 Notes, ~~may require~~which provided that, on September 23, 2019, the Company ~~to repurchase their~~would redeem all 2016 Notes ~~upon the occurrence of a fundamental change~~that had not been converted, repurchased or exchanged prior to ~~maturity for cash~~such date at a ~~repurchase~~redemption price in cash equal to 100% of the principal amount thereof plus accrued and unpaid interest. On September 23, 2019, the Company used $23.0 million and 466,045 shares of its common stock valued at $37.8 million to settle the remaining 2016 Notes for a total of $60.8 million, of which $38.3 million was allocated to reacquiring the equity component of the 2016 Notes. This transaction resulted in a loss on extinguishment of debt of $1.1 million recorded on the Company’s consolidated statements of comprehensive income. The total loss in 2019 of $5.7 million represents the difference between the fair value of the liability component of the 2016 Notes ~~to be repurchased plus accrued~~ and ~~unpaid~~its related carrying value immediately before the exchange.

The fair value of the liability component was calculated using a discounted cash flow technique with an effective interest ~~if any, to, but excluding,~~rate of 3.9%, representing the ~~repurchase date.~~

~~Subsequent to June 5, 2019,~~estimated nonconvertible debt borrowing rate with a maturity as of the ~~Company has had the ability to redeem~~measurement date consistent with the 2016 Notes ~~at its option,~~maturity date of June 1, 2021. In addition, in ~~whole or in part, on any business day prior~~accordance with this guidance, a portion of the fair value of the

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consideration transferred is allocated to the ~~maturity date if the last reported sale price~~reacquisition of the ~~Company’s common stock has been at least 130%~~equity component, which is the difference between the fair value 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,~~consideration transferred 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%~~fair value of the ~~principal amount~~liability component immediately before the exchange. As a result, on a gross basis, $200.1 million was allocated to the reacquisition of the ~~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 amountequity component of the ~~outstanding 2016 Notes may declare 100%~~original instrument, which is recorded net 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 receivedeferred taxes within additional ~~interest~~

paid-in

capital 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, 2019.~~Company’s consolidated balance sheet.

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 $96.3 million upon issuance, calculated as the present value of implied future payments based on the ~~$115~~$115.0 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 iswas 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 for the three months ended ~~June 30,~~March 31, 2019 was

~~$0.6~~ $0.6 million, ~~$1.0~~$0.9 million and $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 for the six months ended June 30, 2019 was

~~$1.2 million, $1.9 million and $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

was 6.6%,

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

~~$115.0 million~~

~~and the fair value of the principal was~~

~~$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, 2019.~~

9.	Stockholders’ Equity

Public ~~Offering~~Offerings 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 $131.1 million.

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 s

~~hares,~~shares, were sold to the public at a price

of $64.00 per share.

The total proceeds received by the Company from this offering, net of underwriting discounts and commissions and other estimated offering expenses payable by the Company, totaled approximately

~~$189.6~~ $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 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 under the 2018 Plan ~~2012 Plan and the Second Amended and Restated 2001 Repligen Corporation Stock Plan (the “2001 Plan,” and together with the 2018 Plan~~ and 2012 Plan (

together,

the “Plans”) that are forfeited, canceled or otherwise terminated (other than by exercise) shall be added back to the shares of stock available for issuance under the 2018 Plan. At ~~June 30, 2019, 2,596,600~~March 31, 2020, 2,419,406 shares were available for future grant under the 2018 Plan.

Stock-Based Compensation

For the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ the Company recorded stock-based compensation expense of ~~$3.0~~$4.2 million and ~~$2.6~~$3.3 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 in the Company’s consolidated statements of comprehensive ~~income (loss):~~income:

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

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	Three Months Ended March 31,
	2020		2019
	(Amounts in thousands)
Cost of product revenue	$	433	$	324
Research and development		372		321
Selling, general and administrative		3,360		2,606

Total stock-based compensation	$	4,165	$	3,251

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

three

~~-to~~

~~five-year~~

to five-year period, with

20%-33%

vesting on the first anniversary of the date of grant and the remainder vesting in equal yearly installments thereafter. Nonqualified options issued to

non-employee

directors and consultants under the Plans generally vest over

one ~~year~~

.year. In the first quarter of 2018, to create a longer-term retention incentive, the Company’s Compensation Committee granted long-term incentive compensation awards to its Chief Executive Officer consisting of both stock options and restricted stock units ~~(“RSUs”~~

(

“

RSU

s”

)

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, 2019,~~March 31, 2020, options to purchase ~~985,266~~915,518 shares and ~~766,986 RSUs~~716,630 stock units were outstanding under the Plans.

The Company uses the Black-Scholes option pricing model to calculate the fair value of stock option awards on the grant date, and the Company uses the value of the common stock as of the grant date to value RSUs. The Company measures stock-based

compensation cost at the grant date based on the estimated fair value of the award. The Company recognizes expense on awards with service-based vesting over the employee’s requisite service period on a straight-line basis. In the third quarter of 2017, the Company issued performance stock units to certain employees related to the Spectrum Acquisition which 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 annual revenue and return on invested capital metrics. The Company recognizes expense on performance-based awards over the vesting period based on the probability that the performance metrics will be achieved. The Company recognizes stock-based compensation expense for options that are ultimately expected to vest, and accordingly, such compensation expense has been adjusted for estimated forfeitures.

Information regarding option activity for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 under the Plans is summarized below:

Weighted-
Average
Remaining
Contractual
Term

Aggregate
Intrinsic Value

Options outstanding at December 31, 2018

Forfeited/expired/cancelled

Options outstanding at June 30, 2019

Options exercisable at June 30, 2019

Vested and expected to vest at June 30, 2019

(1)


	Shares			Weighted average exercise price		Weighted- Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value (in Thousands)
Options outstanding at December 31, 2019		957,559		$	30.81
Granted		25,836		$	86.10
Exercised		(67,877	)	$	23.56
Forfeited/expired/cancelled		—		$	—

Options outstanding at March 31, 2020		915,518		$	32.91		6.64	$	58,257

Options exercisable at March 31, 2020		555,159		$	26.77		5.65	$	38,734

Vested and expected to vest at March 31, 2020 (1)		885,461					6.59	$	56,522

(1)

Represents the number of vested options as of ~~June 30, 2019~~March 31, 2020 plus the number of unvested options expected to vest as of ~~June 30, 2019~~March 31, 2020 based on the unvested outstanding options at ~~June 30,~~March 31, 2020 adjusted for estimated forfeiture rates of 8% for awards granted to

non-executive

level employees and 3% for awards granted to executive level employees.

The aggregate intrinsic value in the table above represents the total

pre-tax

intrinsic value (the difference between the closing price of the common stock on March 31, 2020, the last business day of the first quarter of 2020, of $96.54 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 March 31, 2020. The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2020 and 2019 was $4.7 million and $0.1 million, respectively.

The weighted average grant date fair value of options granted during the three months ended March 31, 2020 and 2019 was $41.77 and $30.21, respectively. The total fair value of stock options that vested during the three months ended March 31, 2020 and 2019 was $2.0 million and $2.2 million, respectively.

The fair value of stock units is calculated using the closing price of the Company’s common stock on the date of grant. Information regarding stock unit activity, which includes activity for restricted stock units and performance stock units, for the three months ended March 31, 2020 under the Plans is summarized below:


	Shares			Weighted- Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value (in Thousands)
Unvested at December 31, 2019		734,984
Awarded		127,286
Vested		(132,053	)
Forfeited/expired/cancelled		(13,587	)

Unvested at March 31, 2020		716,630			3.69	$	69,183

Vested and expected to vest at March 31, 2020 (1)		656,225			3.43	$	63,352

(1)

Represents the number of vested stock units as of March 31, 2020 plus the number of unvested stock units expected to vest as of December 31, 2019 based on the unvested outstanding stock units at December 31, 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 28, 2019, the last business day of 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, 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 months ended June 30, 2019 and 2018 was $30.07 and $18.41, respectively. The total fair value of stock options that vested during the six months ended June 30, 2019 and 2018 was $2.7 million and $1.8 million, respectively.

~~Information regarding RSU activity for the six months ended June 30, 2019 under the Plans is summarized below:~~

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 28, 2019,~~March 31, 2020, the last business day of the ~~second~~first quarter of ~~2019,~~2020, of ~~$85.95~~$96.54 per share, as ~~RSUs~~stock units do not have an exercise price) that would have been received by the ~~RSU~~stock unit holders had all holders exercised on ~~June 30, 2019.~~March 31, 2020. The aggregate intrinsic value of ~~RSUs~~stock units vested during the ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ was ~~$11.7~~$11.8 million and ~~$4.2~~$9.5 million, respectively.

The weighted average grant date fair value of ~~RSUs~~stock units vested during the ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019 was $57.85 and ~~2018 was $31.97 and $34.47,~~$31.79, respectively. The total fair value of ~~RSUs~~stock units that vested during the ~~six~~three months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ was ~~$6.0~~$5.3 million and ~~$3.3~~$4.9 million, respectively.

As of ~~June 30, 2019,~~March 31, 2020, there was ~~$38.7~~$43.7 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 ~~4.15~~3.90 years. The Company expects ~~1,672,980~~1,721,681 unvested options and ~~RSUs~~stock units to vest over the next

five ~~years~~

.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~~years ended ~~June 30,~~December 31, 2019, 2018 and ~~2018.~~2017.

In September 2018, wethe Company entered into a collaboration agreement with Sartorius Stedim Biotech (“SSB”), a leading international supplier for the biopharmaceutical industry, to integrate our 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, wethe Company secured an agreement with Navigo for the exclusive

co-development

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

NGL-Impact

™

A, exclusively to Purolite Life Sciences (“Purolite”), who will pair ~~our~~the Company’s high-performance ligand with Purolite’s agarose jetting base bead technology used in their Jetted A50 Protein A resin product. We also signed a long-term supply agreement with Purolite for

NGL-Impact

A and other potential additional affinity ligands that may advance from ~~our~~the Company’s Navigo collaboration. The Navigo and Purolite agreements are supportive of ~~our~~the Company’s strategy to secure and reinforce ~~our~~the Company’s proteins business. WeThe Company made 0 payments to Navigo during the three months ended March 31, 2020 and 2019. Payments of $1.0 million and $2.4 million to Navigo during the ~~year~~years ended December 31, 2019 and 2018, respectively, in connection with this program, ~~which~~ were recorded to research and development expenses in ~~our~~the Company’s consolidated statements of comprehensive ~~income (loss).~~income.

11.	Accumulated Other Comprehensive Loss

The following shows the changes in the components of accumulated other comprehensive loss for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 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
)

Balance as of December 31, 2019

Other comprehensive loss

Balance as of March 31, 2020

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

~~six-month~~

~~periods~~three months ended ~~June 30, 2019~~March 31, 2020 was ~~15.8% and 19.8%~~8.1%, ~~respectively,~~ compared to ~~18.7% and 22.1%~~23.4% for the corresponding ~~periods~~period in the prior year. The effective tax rate for the three ~~and six~~ months ended ~~June 30, 2019 and 2018~~March 31, 2020 was lower than the U.S. statutory rate of 21% due primarily to windfall benefits on stock option exercises and the vesting of ~~RSUs.~~stock units. The effective tax rate for the three months ended March 31, 2019 was higher than the U.S. statutory rate of 21% due to state tax effects and the impact of the Global Intangible

Low-Taxed

~~ASU~~

~~2016-16,~~.

~~“Intra-Entity Transfers of Assets Other Than Inventory,”~~

requires the income tax consequences of intra-entity transfers of assets other than inventory to be recognized when the intra-entity transfer occurs rather than deferring recognition of income tax consequences until the transfer was made with an outside party. The Company adopted the provisions of this ASU in the first quarter of 2018. The adoption resulted in a decrease of $5.7 million to other assets, a decrease of $5.0 million to deferred tax liabilities and a decrease of $0.7 million to accumulated deficit at January 1, 2018.

At December 31, ~~2018,~~2019, the Company had federal business tax credit

carryforwards

of ~~$2.9~~$

1.2

million and state business tax credit

carryforwards

of ~~$0.4~~$

0.9

million available to reduce future domestic income taxes, if any. The business tax credits

carryforwards

will expire

at various dates through December ~~2038~~

.2039. The net operating loss and business tax credit

carryforwards

are subject to review and possible adjustment by the Internal Revenue Service and may be limited in the event of certain changes in the ownership interest of significant stockholders.

On December 22, 2017, President Trump signed into 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 a one-time transition tax on previously deferred earnings of certain foreign subsidiaries.

In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118 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 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 2017, and the Company completed its accounting for various tax impacts of the 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 $12.8 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 accounting for this item is complete and no adjustments were made to this amount during 2018.

~~The Act 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 its tax provision by $3.3 million. As of December 31, 2018, the accounting for this item was complete and the Company 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.

The Company is subject to a territorial tax system under the ~~Act,~~TCJA, in which the Company is required to provide for tax on GILTI earned by certain foreign subsidiaries. The Company has adopted an accounting policy to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense.

On March 27, 2020, President Trump signed the $2.2 trillion bipartisan Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act, the third congressional bill to address

COVID-19

, provides for loans and other benefits to businesses, expanded unemployment insurance, direct payments to those with middle-income and below wages, new appropriations funding for healthcare and other priorities, and tax changes, including deferrals of employer payroll tax liabilities, coupled with an employee retention tax credit and rollbacks of TCJA limitations on net operating losses (“NOLs”) and the Section 163(j) business interest limitation and a TCJA technical correction on qualified improvement property. The Company evaluated the provisions of the CARES Act and no provision had a material effect on the Company’s financial position or results of operations at March 31, 2020 and the three months then ended.

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

Fiscal Years
Subject to
Examination

United ~~States -~~ States—federal and state

~~2015-2018~~2016-2019

~~2012-2018~~2013-2019

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 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”~~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~~In periods when the Company has a net loss, stock awards ~~that entitle their holders to receive~~

~~non-forfeitable~~

~~dividends before vesting~~ are ~~considered participating securities and are considered in~~excluded from 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.~~share as their inclusion would have an antidilutive effect.

Basic and diluted weighted average shares outstanding were as follows:

(Amounts in

thousands,

except per

share data)

Weighted average shares used in computing net income per share - basic

Effect of dilutive shares:

Stock options and restricted stock awards

Convertible senior notes

Dilutive potential common shares

Weighted average shares used in computing net income per share - diluted

(Amounts in thousands, except per share data)

Weighted average shares used in computing net income per share—basic

Effect of dilutive shares:

Stock options and restricted stock awards

Convertible senior notes

Dilutive potential common shares

Weighted average shares used in computing net income per share—diluted

At ~~June 30, 2019,~~March 31, 2020, there were outstanding options to purchase ~~985,266~~915,518 shares of the Company’s common stock at a weighted average exercise price of ~~$30.16~~$32.91 per share and ~~766,986~~716,630 shares of common stock issuable upon the vesting of ~~RSUs.~~stock units, which include

RSU

s and performance stock units. For the three ~~and six~~ months ended ~~June 30, 2019, 119,026 and~~

~~180,160~~

~~options to purchase~~March 31, 2020, 39,711 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,~~March 31, 2019, there were outstanding options to purchase ~~1,058,834~~1,027,831 shares of the Company’s common stock at a weighted average exercise price of ~~$26.72~~$28.53 per share and ~~716,996~~680,549 shares issuable upon the vesting of ~~RSUs.~~stock units. For the ~~three- and~~

~~six-~~

~~month periods~~three months ended ~~June 30, 2018, 551,012 and 615,930 options to purchase~~March 31, 2019, 210,388 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~~had a choice to settle the conversion obligation for the 2016 Notes in cash, shares or any combination of the two. During the third quarter of 2019, the Company settled the remaining 2016 Notes for a total aggregate principal

of $

115.0

million

nd 2,316,200 shares of its common stock. As of March 31, 2019, the par value of the 2016 Notes is not included in the calculation of diluted earnings per share, but the dilutive effect of the conversion premium is considered in the calculation of diluted earnings per share using the treasury stock method. The dilutive impact of the 2016 Notes was based on the difference between the Company’s current period average stock price and the conversion price of the 2016 Notes, provided there was a premium.

In July 2019, the Company issued $287.5 million aggregate principal amount of the 2019 Notes. As provided by the terms of the indenture underlying the 2019 Notes, 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. As of March 31, 2020, the 2019 Notes were not convertible. The Company currently intends to settle the par value of the ~~2016~~2019 Notes in cash and any excess conversion premium in shares. The Company applies the provisions of ASC 260,

“Earnings Per Share”,

Subsection

10-45-44,

to determine the diluted weighted average shares outstanding as it relates to the conversion spread on the ~~2016~~2019 Notes. Accordingly, the par value of the ~~2016~~2019 Notes is not included in the calculation of diluted income per share, but the dilutive effect of the conversion premium is considered in the calculation of diluted net income per share using the treasury stock method. The dilutive impact of the ~~2016~~2019 Notes is based on the difference between the Company’s current period average stock price and the conversion price of the ~~2016~~2019 Notes, provided there is a premium. Pursuant to this accounting standard, there is no dilution from the accreted principal of the ~~2016~~2019 Notes for the periods shown.

14.	Related Party Transactions

Certain facilities leased by Spectrum ~~LifeSciences, LLC (“Spe~~

~~ctrum”)~~ are owned by Roy Eddleman, the former owner of Spectrum.

~~The former owner held~~As of March 31, 2020, Mr. Eddleman owned greater than ~~10%~~5% of the Company’s outstanding ~~common stock until~~shares and the Company ~~completed its public offering of 3,144,531 shares of its common stock on May 3, 2019.~~

considers him to be a related party. The lease amounts paid to this ~~former owner and current~~ shareholder prior to the public offering were negotiated in connection with the Spectrum Acquisition. The Company ~~has~~ incurred rent expense totaling $

~~0.4~~

$0.2 million for the ~~six~~three months ended ~~June~~

~~2019~~

March 31, 2020 related to these leases.

~~As part of the Spectrum Acquisition, the Company was 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 was 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 held greater than 10% of the Company’s outstanding common stock

~~prior to May 3, 2019.~~

~~During~~

~~2018~~

~~, the Company collected $~~

~~1.7~~

~~million of these tax refunds, which the Company paid to the Spectrum shareholders during the fourth quarter of~~

~~2018~~

~~, net of $~~

~~0.2~~

~~million of expenses paid by the Company on behalf of Spectrum for tax preparation and other fees.~~

~~15.~~

~~Segment Reporting~~

15.	Segment Reporting

The Company views its operations, makes decisions regarding how to allocate resources and manages its business as 1 reportable segment and one ~~operating segment.~~reporting unit. As a result, the financial information disclosed herein represents all of the material financial information related to the ~~Company’s sole operating segment.~~Company.

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

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
%


	Three Months Ended
	March 31,
	2020			2019
Revenue by customers’ geographic locations:
North America		48	%		47	%
Europe		41	%		40	%
APAC		11	%		13	%
Other		0	%		0	%

Total revenue		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~~March 31, 2020 and December 31, ~~2018,~~2019, the Company had no investments associated with foreign exchange contracts, options contracts or other foreign hedging arrangements.

Concentration of credit risk with respect to accounts receivable is limited to customers to whom the Company makes significant sales. While a reserve for the potential

write-off

of accounts receivable is maintained, the Company has not written off any significant accounts to date. To control credit risk, the Company performs regular credit evaluations of its customers’ financial condition.

Revenue from significant customers ~~as a percentage~~that represent 10% or more of the Company’s total revenue is as follows:

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
%


	Three Months Ended March 31,
	2020			2019
MilliporeSigma		14	%		16	%
GE Healthcare		N/A			13	%

~~Significant~~There were 0 accounts receivable balances as ~~a percentage~~of March 31, 2020 representing 10% or more of the Company’s total trade accounts receivable ~~are as follows:~~and royalties and other receivables balances. As of December 31, 2019, the accounts receivable balance with GE Healthcare represented 18% of the Company’s total trade accounts receivable and royalties and other receivables balances.

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.~~

Table of Contents

~~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

Overview

Repligen and its subsidiaries, collectively doing business as Repligen Corporation (“Repligen”, “we”, “our”, or “the Company”) is a ~~leading provider of advanced~~global life sciences company that develops and commercializes highly innovated bioprocessing technologies and ~~solutions used~~systems that increase efficiencies and flexibility in the process of manufacturing ~~biologic~~biological drugs. ~~Our products are made to substantially increase biopharmaceutical manufacturing efficiencies and flexibility.~~

As the ~~global~~overall market for biologics ~~market~~ continues to ~~experience strong growth~~grow and ~~expansion,~~expand, our customers – primarily large biopharmaceutical companies and contract development and manufacturing organizations – face critical production cost, capacity, quality and time ~~pressures that~~pressures. Built to address these concerns, our products are ~~made~~helping to ~~address. Our commitment to bioprocessing is helping~~ set new standards for the way ~~our customers manufacture~~biologics are manufactured. We are committed to inspiring advances in bioprocessing as a trusted partner in the production of critical biologic drugs – including monoclonal antibodies (“mAb”), recombinant proteins, vaccines and gene ~~therapies. We~~therapies – that are ~~dedicated to “inspiring advances in bioprocessing” as a trusted partner in the production of biologic drugs that improve~~improving human health worldwide.

We currently operate as one bioprocessing business, with a comprehensive suite of products to serve both upstream and downstream processes in biological drug manufacturing. Building on over 35 years of industry expertise, we have developed a broad and diversified product portfolio that reflects our passion for innovation and the customer-first culture that drives our entire organization. We continue to capitalize on opportunities to maximize the value of our product platform through both organic growth initiatives (internal innovation and commercial leverage) and targeted acquisitions.

Our ~~chromatography~~Products

Our bioprocessing business is comprised of four main franchises, three of which we sell directly to

end-users

(Chromatography, Filtration and Process Analytics) and one that we sell through supply agreements (Proteins).

Direct-to-Customer

Products

Since 2012, we have significantly expanded our

direct-to-customer

presence through our Chromatography, Filtration and Process Analytics franchises, each of which includes novel and differentiated technologies. We have diversified and grown our

direct-to-customer

product offering through internal innovation and through strategic, accretive acquisitions of assets or businesses that leverage existing product lines and/or expand our customer and geographic scope.

To support our sales growth goals for these products, ~~feature~~

~~pre-packed~~

~~chromatography~~we make ongoing investments in our commercial organization, our research and development (“~~PPC”~~R&D”) ~~columns under~~team and our manufacturing capacity. Our commercial and R&D teams work together to develop and launch new products and applications that address specific biomanufacturing challenges, and to build new markets for acquired technologies. We have six key manufacturing sites across the United States, Sweden and Germany, with additional capacity being added by the end of 2020 in the Netherlands. We regularly evaluate and invest in capacity as needed to ensure timely deliveries and to stay ahead of increased customer demand for our products.

A substantial piece of our revenue comes from consumable and/or single-campaign

(“single-use”)

products as compared to associated equipment. The customization, scalability and

plug-and-play

convenience of consumable and/or

single-use

products, and in many cases the closed nature of our technologies, make them ideal for use in biologics manufacturing processes where contamination risk is a critical concern of our customers.

Chromatography

Our Chromatography franchise includes a number of products used in downstream purification, development, manufacturing and quality control of biological drugs. The main driver of growth in this portfolio is our OPUS

~~brand.~~Column product line.

Additional chromatography products include our affinity capture resins, such as CaptivA

Protein A Resins, that are used in a small number of commercial drug processes and our ELISA test kits, used by quality control departments to detect and measure the presence of leached Protein A and/or growth factor in the final product.

OPUS

Pre-Packed

Columns

Our Chromatography franchise features a wide range of OPUS columns, which we deliver to our customers sealed and

pre-packed

with their choice of ~~chromatography resin,~~resin. These are ~~single-campaign~~

~~(“single-use”)~~single-use

multiple-use

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

pre-packed

column (“PPC”) market. Our biomanufacturing customers value the significant cost savings that OPUS columns deliver by reducing set up time, labor, equipment and facility costs – in addition to delivering product consistency and “plug and play” convenience.

Table of Contents

We launched our first production-scale OPUS columns in 2012 and have since added larger diameter options that scale up to use with 2,000 liter bioreactors. Our OPUS 80R column is the largest available PPC on the market for use in late-stage clinical or commercial purification processes. We have also introduced next-generation features such as a resin recovery port on our larger columns, which allows our customers to remove and reuse the recovered resin in other applications. We believe the OPUS

5-80R

product line is the most flexible and platformable PPC product offered in the marketplace today, and is serving the purification needs of customers manufacturing monoclonal antibodies (“mAb”) and other biologics such as cell and gene therapies (“C&GT”).

In addition to our larger scale OPUS columns, our portfolio includes our smaller-scale OPUS columns, including specifically RoboColumn

, MiniChrom

™

and ValiChrom

™

columns for process development and validation. These columns are used in high-throughput process development screening, viral clearance validation studies and scale down validation of chromatography processes.

We maintain customer-facing centers in both the United States and Europe for OPUS columns, and offer our customers an unmatched ability to pack any of over 100 resins in our OPUS

5-80R

range and any of over 300 resin choices in our small-scale OPUS columns.

Other Chromatography

Our ~~filtration~~Chromatography portfolio also includes ELISA kits, which are analytical test kits to quantitate the proteins and growth factors, and chromatography resins, including our CaptivA brand.

Filtration

XCell ATF

™

Cell Retention Systems

Our Filtration products offer a number of advantages to manufacturers of biologic drugs ~~at volumes that span from pilot studies to~~and are used in development, clinical and commercial-scale production. We first moved into Filtration technology with our acquisition of XCell Alternating Tangential Flow (“ATF”) assets from Refine Technology (“Refine”) in 2014. XCell ATF

™

systems are used primarily in upstream perfusion (continuous) cell culture processing.

XCell ATF is a cell retention technology. The system is comprised of an advanced hollow fiber (“HF”) filtration device, a low shear pump and a controller. The XCell ATF system is connected to a bioreactor and enables the cell culture to be run continuously, with cells being retained in the bioreactor, fresh nutrients (cell culture media) being fed into the reactor continuously and clarified biological product and cell waste being removed continuously. The cells are maintained in a consistent nutrient-rich environment and can reach cell densities

two-

and three-times higher than those achieved by standard

fed-batch

culture. By continuously removing waste products from the fermenter, the XCell ATF systems routinely increases cell densities to

two-

or ~~continuous manufacturing, processes to increase cell concentration and significantly improve biologic~~three-times the levels achieved by standard

fed-batch

culture. As a result, product yield is increased, which improves facility utilization and can reduce the size of a bioreactor required to manufacture a given volume of biologic drug product. XCell ATF systems are available in a wide range of sizes that can easily scale from ~~a bioreactor. To address increasing industry demand for~~laboratory use through full production with bioreactors as large as 5,000 liters.

~~“plug-and-play”~~

~~technology,~~Through internal innovation, we developed and launched ~~in 2016~~

single-use

formats of the original stainless steel XCell ATF ~~device.~~ devices to address increasing industry demand for

single-use

sterile systems with

“plug-and-play”

technology. The XCell ATF device is now available to customers in both its original configuration (steel housing and

single-use

filters) in all sizes (2, 4, 6 and 10), and/or as a

single-use

device (disposable housing/filter combination) in most sizes (2, 6, and 10). The availability of XCell ATF technology in a

single-use

format eliminates the time intensive workflow associated with autoclaving, leading to an 80% reduction in implementation speed. The

single-use

format also enables our customers to accelerate evaluations of the product with a lower initial overall cost of ownership.

In September 2018, we entered into a collaboration agreement with industry leader Sartorius Stedim Biotech (“SSB”) to integrate our XCell ATF controller technology into SSB’s BIOSTAT

STR large-scale,

single-use

bioreactors, to create novel perfusion-enabled bioreactors.

TangenX

™

Flat Sheet Cassettes

In December 2016, we acquired TangenX

™

Technology Corporation (“TangenX”), balancing our upstream XCell ATF ~~offering~~systems with a ~~downstream~~ portfolio of flat-sheet ~~filters and~~tangential flow filtration (“TFF”) cassettes used in downstream biologic drug ~~purification~~concentration and formulation processes. The TangenX product portfolio includes ~~the~~our

single-use

SIUS

™

~~TFF~~

brand, providing customers with a high-performance,

~~low-cost~~

cost saving alternative to reusable TFF cassettes.

TFF is a rapid and efficient method for the concentration and formulation of biomolecules that is widely used in many applications in biopharmaceutical development and manufacturing. SIUS cassettes are the only purpose built

single-use

TFF cassettes on the market. The cassette features a high performing membrane and unique cartridge construction that enables a lower price point. Each disposable cassette is delivered

pre-sanitized

and ready to be equilibrated and used for tangential flow, ultrafiltration and diafiltration applications. Use of SIUS TFF cassettes eliminates

non-value

added steps of cleaning, testing between uses, storage and flushing required in reusable TFF products, providing cost and time savings. The cassettes are interchangeable with filter hardware from multiple manufacturers, simplifying customer trial and adoption of SIUS products. In

Spectrum

Hollow Fibers

We acquired Spectrum Life Sciences LLC (“Spectrum”) and its subsidiaries in August 2017 to strengthen our filtration business with the addition of a leading portfolio of HF filtration solutions, including fully integrated KrosFlo

TFF Systems with Konduit sensing and ProConnex

Flow Path

single-use

assemblies. KrosFlo family of TFF systems for product concentration is fully scalable from 2 milliliters to 5,000 liters – from

lab-scale

to commercial manufacturing. Designed for purification and formulation applications, KrosFlo Systems enable robust downstream ultrafiltration and microfiltration.

We also gained the Spectra/Por

portfolio of laboratory and process dialysis products and in 2019, we ~~completed~~launched the SpectraFlo

™

Dynamic Dialysis Systems. Also, in 2019 we introduced the KrosFlo

TFDF

™

(Tangential Flow Depth Filtration) Systems, which we believe have the potential to disrupt and displace traditional harvest clarification operations. The KrosFlo TFDF system includes control hardware, novel high throughput tubular depth filters and ProConnex

single-use

TFDF flow paths. When used for cell culture clarification,

single-use

KrosFlo TFDF technology delivers unprecedented high flux (>1,000 LMH), high capacity, low turbidity, and minimal dilution, making the technology a high-performance alternative to traditional centrifugation and depth filtration approaches to harvest clarification. TFDF technology also provides benefits such as low

hold-up

volume, high recovery, small footprint, simple set up and disposal, scalability and reduced process time.

The Spectrum product line of HF filters is used in

bench-top

through commercial-scale processes, primarily for the filtration, purification and concentration of biologics and diagnostic products. Our KrosFlo filtration systems and equipment offer both standard and customized solutions to bioprocessing customers, with particular strength in consumable and

single-use

offerings.

With the acquisition of Spectrum, we substantially increased our direct sales presence in Europe and Asia, and we diversified our end markets to include all biologic classes, including mAb, vaccines, recombinant proteins and gene therapies.

Other Filtration

In 2018, we introduced our Konduit monitor to automate concentration and buffer exchange. We have broadened the application for Konduit monitor to include use with both HF TFF from Spectrum and our TangenX flat sheet TFF systems. We also self-manufacture HF filters that are used in our XCell ATF, KrosFlo TFF and KrosFlo TFDF systems.

Process Analytics Products

In May 2019, we consummated our acquisition of ~~Spectrum LifeSciences, LLC~~C Technologies, Inc. (“~~Spectrum”~~C Technologies”). and added a fourth franchise, Process Analytics, to our bioprocessing business. Our ~~Spectrum filtration brands include the KrosFlo~~

~~family of~~Process Analytics products ~~ProConnex~~

~~disposable flow-path products, TFF systems~~complement and ~~others. The Spectrum Acquisition significantly strengthened~~support our Filtration, ~~product line~~Chromatography and ~~diversifies our end markets beyond mAbs~~ Proteins franchises as they allow

end-users

to ~~include vaccine, recombinant~~make

at-line

in-line

absorbance measurements allowing for the determination of protein concentration in filtration, chromatography formulation and ~~gene therapies.~~fill-finish applications.

SoloVPE

Device

Our SoloVPE Slope Spectroscopy

system is the industry standard for offline and

at-line

absorbance measurements for protein concentration determination in process development, manufacturing and quality control settings.

FlowVPE

Device

Our FlowVPE Slope Spectroscopy system enhances the power of Slope Spectroscopy and provides

in-line

protein concentration measurement for filtration, chromatography and fill-finish applications. A key benefit of this

in-line

solution is the ability to monitor a manufacturing process in real time. We are developing a next-generation FlowVPE to incorporate

GMP-compliant

software for production-scale biologics manufacturing.

Use of VPE Slope Spectroscopy delivers multiple process benefits for our biopharmaceutical manufacturing customers, compared to traditional

UV-Vis

approaches. Key benefits include: the elimination of manual dilutions and sample transfers from process development/manufacturing to labs, rapid time to results (minutes versus hours), improved precision,

built-in

data quality for improved reporting and validation, and ease of use.

OEM Products (Proteins)

Our OEM products are represented by our Protein A affinity ligands, which are a critical component of Protein A chromatography resins used in downstream purification of mAb, and cell culture growth factor products, which are a key component of cell culture media used in upstream bioprocessing to increase cell density and improve product yield.

Proteins—Ligands

Through our Proteins business, we are a leading ~~OEM manufacturer and supplier~~provider of Protein A affinity ligands and cell culture growth factors to life sciences companies. Protein A ligands are an essential “binding” component of Protein A affinity chromatography resins used in the purification of virtually all ~~mAb based~~monoclonal antibody-based drugs on the market or in ~~development that our customers~~development. We manufacture multiple forms of Protein A ligands under long-term supply agreements with major life sciences companies including GE Healthcare (“GE”), MilliporeSigma and Purolite Life Sciences (“Purolite”), who in turn sell their Protein A chromatography resins to end users ~~including biopharmaceutical manufacturers,~~(mAb manufacturers). We have two manufacturing sites supporting overall global demand for ~~use~~our Protein A ligands: one in ~~downstream~~Lund, Sweden and another in Waltham, Massachusetts.

Protein A chromatography resins are considered the industry standard for purification of ~~mAbs.~~antibody-based therapeutics due to the ability of the Protein A ligand to very selectively bind to or “capture” antibodies from crude protein mixtures. Protein A resins are packed into the first chromatography column of typically three columns used in a mAb purification process. As a result of Protein A’s high affinity for antibodies, the mAb product is highly purified and concentrated within this first capture step before moving to polishing steps.

In June 2018, we entered into an agreement with Navigo Proteins GmbH (“Navigo”) for the exclusive

co-development

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

NGL-Impact

A, exclusively to 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 ~~manufacture~~signed a long-term supply agreement with Purolite for

NGL-Impact

A and ~~sell growth factor products used~~potential additional affinity ligands that may advance from our Navigo collaboration. The Navigo and Purolite agreements are supportive of our strategy to ~~supplement~~secure and reinforce our Proteins franchise.

Proteins—Growth Factors

Most biopharmaceuticals are produced through an upstream mammalian cell culture ~~media in~~process. In order to ~~increase~~stimulate increased cell growth and ~~productivity in~~maximize overall yield from a ~~bioreactor.~~

~~Customers use our products to produce initial quantities of a drug for clinical studies and then~~

~~scale-up~~

to larger volumes as the drug progresses to commercial production following regulatory approval. Detailed specifications for a drug’s manufacturing process are included in the applications that biopharmaceutical companies file for marketing approval with regulators,bioreactor, manufacturers often add growth factors, such as ~~the U.S. Food and Drug Administration and the European Medicines Agency, throughout the clinical trial process and prior~~insulin, to ~~final commercial approval. As~~their cell culture media. Our cell culture growth factor additives include LONG

IGF 1 (“LR3”), our insulin-like growth factor that has been shown to be up to 100 times more biologically potent than insulin (the industry standard), thereby increasing recombinant protein production in cell culture fermentation applications. LR3 is currently sold through a ~~result, products that become part of the manufacturing specifications of a late-stage clinical or commercial process can be very sensitive given the costs and uncertainties associated~~distribution partnership with ~~displacing them.~~MilliporeSigma.

C Technologies Acquisition

On April 25, 2019, ~~the Company~~we entered into a Stock Purchase Agreement (“Purchase Agreement”) with C Technologies, Inc. (“C Technologies”), a New Jersey corporation, and Craig Harrison, an individual and sole stockholder of C Technologies. The deal was consummated on May 31, 2019, the acquisition date (the “C Technologies Acquisition”).

C Technologies sells instruments, consumables and accessories that are designed to allow bioprocessing technicians to measure the protein concentration of a liquid sample using C Technologies’ Slope Spectroscopy

method, which eliminates the need for manual sample dilution. C Technologies’ lead product, the SoloVPE ~~instrument platform,~~

Device, was launched in 2008 for

off-line

and

at-line

protein concentration measurements conducted in quality control, process development and manufacturing labs in the production of biological therapeutics. C Technologies’ FlowVPE ~~platform,~~

Device, an extension of the SoloVPE technology, was designed to allow end users to make

in-line

protein concentration measurements in filtration, chromatography and fill-finish applications, designed to allow for real-time process monitoring.

~~The 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 $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 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 consolidated financial statements included in our Annual Report on Form

10-K

for the year ended December 31, ~~2018~~2019 filed with the SEC.

Results of Operations

We did not observe significant impacts on our results of operations for the three months ended March 31, 2020 due to the global outbreak of novel strain of coronavirus,

SARS-CoV-2,

which causes coronavirus disease 2019

(“COVID-19”).

The ultimate impacts of

COVID-19

on our business and results of operations are currently unknown. We expect to continue to actively monitor the situation and may take further precautionary and preemptive actions as may be required by federal, state or local authorities or that we determine are in the best interests of public health and safety and that of our patient community, employees, partners, suppliers and stockholders. We cannot predict the effects that such actions, or the impact of

COVID-19

on global business operations and economic conditions, may have on our business or strategy, including the effects on our financial and operating results.

The following discussion of the financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and the related footnotes thereto.

Revenues

Total ~~revenues~~revenue for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 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
%


	Three Months Ended March 31,				Increase/ (Decrease)
	2020		2019		$ Change		% Change
	(Amounts in thousands, except for percentage data)
Revenue:
Product	$	76,060	$	60,612	$	15,448		25.5	%
Royalty and other		30		22		8		36.4	%

Total revenue	$	76,090	$	60,634	$	15,456		25.5	%

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%~~76% and 73% of our product revenue in the ~~second quarter of~~three months ended March 31, 2020 and 2019, ~~and 72% of our product sales for the first half of 2019.~~respectively. We expect that direct sales will continue to account for an increasing percentage of our product ~~revenues.~~revenues, as the largest customer of our OEM products has begun to diversify its supply chain in 2020. Sales of our bioprocessing products can be impacted by the timing of large-scale production orders and the regulatory approvals for such antibodies, which may result in significant quarterly fluctuations.

Revenue from our chromatography products includes the sale of our OPUS ~~and OPUS PD~~ chromatography columns, chromatography resins and ELISA test kits. Revenue from our filtration products includes the sale of our XCell ATF ~~Systems~~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, 2019,~~March 31, 2020, product revenue increased by ~~$22.9~~$15.4 million, or ~~48% and $38.7 million, or 41.9%~~25.5%, ~~respectively,~~ as compared to the same ~~periods~~period of ~~2018.~~2019. The increase ~~in both periods~~ is due to the continued adoption of our products by our key bioprocessing customers, particularly our chromatography and 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~~$6.6 million increase in revenue for the three ~~and six~~ months ended ~~June 30, 2019,~~March 31, 2020, as compared to the same ~~periods~~period of ~~2018~~2019 due to revenues generated by C ~~Technologies.~~Technologies, which was acquired in May 2019.

Royalty revenues

Royalty revenues in the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 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 of product revenue and operating expenses

Total costs and operating expenses for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ were comprised of the following:

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
%


	Three Months Ended March 31,				Increase/ (Decrease)
	2020		2019		$ Change		% Change
	(Amounts in thousands, except for percentage data)
Cost of product revenue	$	31,982	$	26,845	$	5,137		19.1	%
Research and development		4,702		3,620		1,082		29.9	%
Selling, general and administrative		27,500		18,998		8,502		44.8	%

Total costs and operating expenses	$	64,184	$	49,463	$	14,721		29.8	%

Cost of product revenue

Cost of product revenue increased ~~45.6% and 41.2%~~19.1% in the three ~~and six~~ months ended ~~June 30, 2019, respectively,~~March 31, 2020, compared to the same ~~periods~~period of ~~2018~~2019 due primarily to the increase in product revenue mentioned above.

Gross margins were ~~56.6%~~58.0% and ~~56.2%~~55.7% in the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 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 a result of the increase in revenue mentioned above, and favorable product mix, partially offset by an increase in manufacturing headcount subsequent to ~~June 30, 2018.~~March 31, 2019. Gross margins may fluctuate in future quarters based on expected production volume and product mix.

Research and development expenses

Research and development (“R&D”) expenses are related to bioprocessing products, which include personnel, supplies and other research expenses. Due to the ~~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 program, and therefore, have not provided historical costs incurred by project. In addition to the legacy product ~~research and development,~~R&D, the current

single-use

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

~~Research and development~~R&D expenses ~~decreased 9.5% and 2.4%~~increased 29.9% during the three ~~and six~~ months ended ~~June 30, 2019, respectively,~~March 31, 2020, compared to the same ~~periods~~period of ~~2018.~~2019. The ~~decrease~~increase during the period is primarily due to ~~$2.3 million of investments made during the second quarter of 2018 to expand our proteins product offering through our development agreement~~increased costs associated with ~~Navigo Proteins 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~~R&D headcount, ~~subsequent to June 30, 2018 and~~ an increase in stock-based compensation expense resulting from the ~~increase in~~increased headcount and the higher share price period over ~~period.~~period, as well as the addition of $0.8 million in R&D expenses related to C Technologies’ operations.

We expect our ~~research and development~~R&D expenses for the ~~rest~~remainder of ~~the year~~2020 to increase ~~slightly~~ in order to support new product development.

Selling, general and administrative expenses

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

During the three ~~and six~~ months ended ~~June 30, 2019,~~March 31, 2020, SG&A costs increased by ~~$7.1~~$8.5 million, or ~~42.9%~~44.8%, ~~and $10.2 million, or 31.4%, respectively,~~ as compared to the same ~~periods~~period of ~~2018.~~2019. The increase is due to the addition of $4.9 million SG&A costs from C Technologies’ operations, the continued expansion of our customer-facing activities to drive sales of our bioprocessing products, and to the continued buildout of our administrative infrastructure, primarily through increased headcount, to support expected future growth. ~~In addition, transaction fees related to the C Technologies Acquisition of $3.5 million and $4.0 million for the three and 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~~Stock-based compensation expense increased during ~~both periods in 2019~~the three months ended March 31, 2020, as compared to ~~2018 due to~~ the same period in 2019 resulting from an increase in headcount and 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
%)


	Three Months Ended March 31,						Increase/ (Decrease)
	2020			2019			$ Change			% Change
	(Amounts in thousands, except for percentage data)
Investment income	$	1,364		$	713		$	651			91.3	%
Interest expense		(2,976	)		(1,726	)		(1,250	)		72.4	%
Other income		382			358			24			6.7	%

Total other expense, net	$	(1,230	)	$	(655	)	$	(575	)		87.8	%

Investment income

Investment income includes income earned on invested cash balances. The increase of ~~$0.5 million and $1.0~~$0.7 million for the three ~~and six~~ months ended ~~June 30, 2019, respectively,~~March 31, 2020, as compared to the same ~~periods~~period of ~~2018~~2019 was attributable to higher average invested cash balances ~~and higher~~partially offset by a decrease in interest rates ~~on such invested cash balances.~~during the three months ended March 31, 2020. We expect investment income to vary based on changes in the amount of funds invested and fluctuation of interest rates. In March 2020, in response to the recent outbreak of

COVID-19

and to stay ahead of disruptions and economic slowdown, the Federal Reserve reduced the federal funds rate to a range of 0.0% to 0.25%, which will continue to affect our investment income in future periods.

Interest expense

Interest expense primarily includes interest related to our ~~issuance~~2016 Notes, which were settled during the third quarter of ~~2.125%~~2019, and our 0.375% Convertible Senior Notes due ~~2021~~2024 (the ~~“2016~~“2019 Notes”), which were issued in ~~May 2016.~~July 2019. Interest expense increased ~~$0.1~~$1.3 million for the three ~~and six~~ months ended ~~June 30, 2019,~~March 31, 2020, as compared to the same ~~periods~~period in 2019. Contractual coupon interest incurred on the 2019 Notes for the three months ended March 31, 2020 was $0.3 million and there was no comparable amount for the same period of ~~2018, due to~~2019. Contractual coupon interest incurred on the ~~decrease~~2016 Notes was $0.6 million in the ~~balance~~three months ended March 31, 2019. Since the 2016 Notes were settled during July 2019, interest no longer accrued on the 2016 Notes subsequent to their settlement.

The amortization of debt issuance costs ~~that are being amortized. As these costs decrease,~~on the ~~carrying value~~2019 Notes was $2.7 million for the three months ended March 31, 2020. There were no comparable amounts during the same period of 2019 as the 2019 Notes were issued in July 2019. The amortization of the debt ~~increases and interest calculated based~~issuance costs on the ~~carrying value increases as well.~~2016 Notes was $1.1 million for the three months ended March 31, 2019 for which there was no comparable amount recorded during the same period of 2020.

Other ~~(expenses)~~ income

~~Changes~~The change in other ~~(expenses)~~ income during the three ~~and six~~ months ended ~~June 30, 2019,~~March 31, 2020, compared to the same ~~periods~~period of ~~2018, are~~2019, is primarily attributable to foreign currency ~~losses~~gains related to amounts due from

non-Swedish

~~kronor-based~~krona-based customers and cash 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 provision

Income tax provision for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ was as follows:


	Three Months Ended March 31,						Increase/ (Decrease)
	2020			2019			$ Change			% Change
	(Amounts in thousands, except for percentage data)
Income tax provision	$	861		$	2,463		$	(1,602	)		(65.0	%)
Effective tax rate		8.1	%		23.4	%

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 and 2019, we recorded an income tax provision of ~~$1.5~~$0.9 million and ~~$4.0~~$2.5 million, respectively. The effective tax rate ~~was 15.8% and 19.8% for the three and six months ended June 30, 2019, respectively, and~~ is based upon the estimated taxable income for the ~~year ending~~years ended December 31, 2020 and 2019, ~~and~~respectively, as well as the composition of the taxable income in different jurisdictions. The effective tax rate was lower than the U.S. statutory rate of 21% in the three months ended March 31, 2020 due primarily to windfall benefits on stock option exercises and the vesting of restricted stock units. The effective tax rate for the three months ended March 31, 2019 was higher than the U.S. statutory rate of 21% due to state tax effects and the impact of the Global Intangible

Low-Taxed

Income (“GILTI”) tax enacted as part of the of the Tax Cuts and Jobs Act (“TCJA”) enacted in December 2017.

Table of Contents

On March 27, 2020, President Trump signed the $2.2 trillion bipartisan Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act, the third congressional bill to address

COVID-19

, provides for loans and other benefits to businesses, expanded unemployment insurance, direct payments to those with middle-income and below wages, new appropriations funding for healthcare and other priorities, and tax changes, including deferrals of employer payroll tax liabilities, coupled with an employee retention tax credit and rollbacks of TCJA limitations on net operating losses and the Section 163(j) business interest limitation and a TCJA technical correction on qualified improvement property. The Company evaluated the provisions of the CARES Act and no provision had a material effect on the Company’s financial position or results of operations at March 31, 2020 and the three months then ended.

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.

Non-GAAP

adjusted income from operations

Non-GAAP

adjusted income from operations is measured by taking income from operations as reported in accordance with GAAP and excluding acquisition and integration costs and intangible amortization ~~and inventory~~

~~step-up~~

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

non-GAAP

adjusted income from operations for the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 and ~~2018:~~2019:

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


	Three Months Ended March 31,
	2020		2019
	(Amounts in thousands)
GAAP income from operations	$	11,906	$	11,171
Non-GAAP adjustments to income from operations:
Acquisition and integration costs		2,553		1,799
Intangible amortization		3,878		2,611

Non-GAAP adjusted income from operations	$	18,337	$	15,581

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, intangible amortization,

non-cash

interest expense and ~~related~~the tax effects ~~intangible amortization and related tax effects, inventory~~

~~step-up~~

~~charges and~~

~~non-cash~~

~~interest expense.~~of these items. The following are reconciliations of net income in accordance with GAAP to

non-GAAP

adjusted net income for the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 and ~~2018:~~2019:


	Three Months Ended June 30,												Three Months Ended March 31,
	2019						2018						2020						2019
				Fully Diluted						Fully Diluted						Fully Diluted						Fully Diluted
				Earnings per						Earnings per						Earnings per						Earnings per
	Amount			Share			Amount			Share			Amount			Share *			Amount			Share
	(Amounts in thousands, except per share data)												(Amounts in thousands, except per share data)
GAAP net income	$	8,095		$	0.17		$	2,738		$	0.06		$	9,815		$	0.18		$	8,053		$	0.17
Non-GAAP adjustments to net income:
Acquisition and integration costs		5,322			0.11			853			0.02			2,553			0.05			1,799			0.04
Intangible amortization		3,051			0.06			2,634			0.06			3,878			0.07			2,611			0.06
Inventory step-up charges		1,169			0.02			—			—
Non-cash interest expense		1,124			0.02			1,053			0.02			2,691			0.05			1,107			0.02
Tax effect of intangible amortization and acquisition costs		(3,444	)		(0.07	)		(1,076	)		(0.02	)		(2,177	)		(0.04	)		(1,351	)		(0.03	)

Non-GAAP adjusted net income	$	15,317		$	0.31		$	6,202		$	0.14		$	16,760		$	0.32		$	12,219		$	0.26

*	Per share totals may not add due to rounding.

Table of Contents

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.~~

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 acquisition and integration costs ~~and inventory~~

~~step-up~~

~~charges~~ booked through our consolidated statements of comprehensive ~~income (loss).~~income. The following is a reconciliation of net income in accordance with GAAP to adjusted EBITDA for the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 and ~~2018:~~2019:

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


	Three Months Ended March 31,
	2020			2019
	(Amounts in thousands)
GAAP net income	$	9,815		$	8,053
Non-GAAP EBITDA adjustments to net income:
Investment income		(1,364	)		(713	)
Interest expense		2,976			1,726
Tax provision		861			2,463
Depreciation		2,485			1,575
Amortization		3,905			2,638

EBITDA		18,678			15,742
Other non-GAAP adjustments:
Acquisition and integration costs		2,553			1,799

Adjusted EBITDA	$	21,231		$	17,541

Liquidity and Capital Resources

We have financed our operations primarily through revenues derived from product sales, the issuance of the 2016 Notes in May 2016 and our 2019 Notes (defined below) in July 2019 and the issuance of common stock in our 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, 2019,~~March 31, 2020, we had

non-restricted

cash and cash equivalents of ~~$208.9~~$529.5 million compared to

non-restricted

cash, cash equivalents of ~~$193.8~~$528.4 million at December 31, ~~2018.~~

2019.

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 and other estimated offering expenses payable by the Company, totaled approximately ~~$190.2~~$189.6 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~~$131.1 million in net proceeds to the Company, after deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company (the “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~~included 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~~$278.5 million. See Note ~~16,~~8,

“~~Subsequent Events – Public Offering of~~ Convertible Senior Notes,”

included in this report

for more information on this transaction. The Company utilized a portion of the proceeds from the Offerings to settle its outstanding 2016 Notes during the third quarter of 2019. On July 16, 2019, the Company entered into separate privately negotiated agreements with certain holders of the 2016 Notes to exchange an aggregate of $92.0 million principal aggregate amount of the 2016 Notes for shares of the Company’s common stock, together with cash, in private placement transactions (the “Note Exchanges”). On July 19, 2019 and July 22, 2019, the Company used approximately $92.3 million (including $0.3 million of accrued interest) and 1,850,155 shares of its common stock valued at $161.0 million to settle the Note Exchanges for total consideration of $253.3 million, of which $163.6 million was allocated to the equity component of the 2016 Notes. The Company allocated the consideration transferred to the liability and equity components using the same proportions as the initial carrying value of the 2016 Notes.

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During the first quarter of 2020, the closing price of the Company’s common stock did not exceed 130% of the conversion price of the 2019 Notes for more than 20 trading days of the last 30 consecutive trading days of the quarter. Therefore, the 2019 Notes are not convertible at the option of the holders of the 2019 Notes during the second quarter of 2020 per the First Supplemental Indenture underlying the 2019 Notes. The 2019 Notes have a face value of $287.5 million and a carrying value of $235.5 million and are classified as long-term liabilities on the Company’s consolidated balance sheet as of March 31, 2020.

We intend to use the remaining 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


	Three Months Ended March 31,						Increase/(Decrease)
	2020			2019			$ Change
	(Amounts in thousands)
Operating activities	$	9,530		$	9,788		$	(258	)
Investing activities		(5,037	)		(3,828	)		(1,209	)
Financing activities		1,589			44			1,545
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(4,923	)		(3,691	)		(1,232	)

Net increase in cash, cash equivalents and restricted cash	$	1,159		$	2,313		$	(1,154	)

Operating activities

For the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, our operating activities provided cash of ~~$27.6~~$9.5 million reflecting net income of ~~$16.1~~$9.8 million and

non-cash

charges totaling ~~$18.5~~$13.4 million primarily related to depreciation, amortization,

non-cash

interest ~~expense, deferred tax~~ expense and stock-based compensation charges. An increase in accounts receivable consumed ~~$7.3~~$2.4 million of cash and was primarily driven by the ~~48%~~25.5%

year-to-date

increase in revenues. An increase in inventory consumed ~~$4.1~~$7.2 million to support future revenue, ~~due to~~as well as inventory acquired in the ~~addition~~acquisition of C Technologies ~~on May 31, 2019. These were offset by an increase~~Acquisition. A decrease in accounts payable and accrued liabilities of ~~$2.1~~$5.7 million was due to accrued liabilities acquired in the ~~addition~~acquisition of C Technologies Acquisition, the timing of payments of payables, payment of the 2019 incentive compensation programs and ~~a decrease in unbilled receivables of $2.1 million.~~an adjustment to the tax liability for the quarter. The remaining cash provided by operating activities resulted from favorable changes in various other working capital accounts.

For the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, our operating activities provided cash of ~~$7.5~~$9.8 million reflecting net income of ~~$6.2~~$8.1 million and

non-cash

charges totaling ~~$15.2~~$9.5 million primarily related to depreciation, amortization,

non-cash

interest expense, deferred tax expense and stock-based compensation charges. An increase in accounts receivable consumed ~~$4.8~~$6.7 million of cash and was primarily driven by the ~~47%~~

~~year-to-date~~

35% quarter over quarter increase in revenues. ~~An increase in inventory consumed $3.1 million~~Payments of ~~cash, related to increasing inventory~~

~~levels to accommodate future revenue growth. Decreases in~~ accounts payable and accrued liabilities consumed ~~$4.7~~$2.4 million of cash and were mainly due to the timing of payments of payables and payment of ~~2017~~2018 incentive compensation programs. These were offset by a decrease in unbilled receivables of $2.6 million. The remaining cash ~~flow~~ used in ~~operations~~operating activities resulted from net unfavorable changes in various other working capital accounts.

Investing activities

Our investing activities consumed ~~$191.3~~$5.0 million and $3.8 million of cash during the ~~six~~three months ended ~~June 30, 2019. We used $182.2 million in cash (net of cash received) for the C Technologies Acquisition on May~~March 31, ~~2019. Capital expenditures consumed $9.1 million as we continue~~2020 and 2019, respectively, related to ~~increase our manufacturing capacity worldwide.~~capital expenditures. Of these capital expenditures, ~~$3.3~~$0.9 million and $1.7 million represented capitalized costs related to our

internal-use

~~software.~~software, respectively.

Financing activities

Cash provided by financing activities of ~~$190.2~~$1.6 million for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 included ~~$189.6 million from the issuance of our common stock resulting from our public offering completed in May 2019. Proceeds~~proceeds from stock option exercises during the

~~six-month~~ period.

period were $0.6 million. For the six months ended June 30, 2018, our financing activities provided $1.5 million of cash, primarily due to proceeds received from stock option exercises, partially offset by cash outlays of $11,000 related to the conversion of certain 2016 Notes, which settled in the first quarter of 2018.

Working capital increased by approximately ~~$29.7~~$16.0 million to ~~$175.6~~$609.5 million at ~~June 30, 2019~~March 31, 2020 from ~~$145.9~~$593.5 million at December 31, ~~2018~~2019 due to the various changes noted ~~above, including the C Technologies Acquisition.~~above.

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

the expansion of our bioprocessing business;

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

our ability to acquire additional bioprocessing products;

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~~R&D activities;

the extent of any share repurchase activity; and

the success of any proposed financing efforts.

Absent acquisitions of additional products, product candidates or intellectual property, we believe our current cash balances are adequate to meet our cash needs for at least the next 24 months from the date of this filing. We expect operating expenses for the rest of the year to increase as we continue to expand our bioprocessing business. We expect to incur continued spending related to the development and expansion of our bioprocessing product lines and expansion of our commercial capabilities for the foreseeable future. Our future capital requirements may include, but are not limited to, purchases of property, plant and equipment, the acquisition of additional bioprocessing products and technologies to complement our existing manufacturing capabilities, and continued investment in our intellectual property portfolio.

We plan to continue to invest in our bioprocessing business and in key ~~research and development~~R&D activities associated with the development of new bioprocessing products. We actively evaluate various strategic transactions on an ongoing basis, including licensing or acquiring complementary products, technologies or businesses that would complement our existing portfolio. We continue to seek to acquire such potential assets that may offer us the best opportunity to create value for our shareholders. In order to acquire such assets, we may need to seek additional financing to fund these investments. If our available cash balances and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, including because of any such acquisition-related financing needs or lower demand for our products, we may seek to sell common or preferred equity or convertible debt securities, enter into a credit facility or another form of third-party funding, or seek other debt funding. The sale of equity and convertible debt securities may result in dilution to our stockholders, and those securities may have rights senior to those of our common shares. If we raise additional funds through the issuance of preferred stock, convertible debt securities or other debt financing, these securities or other debt could contain covenants that would restrict our operations. Any other third-party funding arrangement could require us to relinquish valuable rights. We may require additional capital beyond our currently anticipated amounts. Additional capital may not be available on reasonable terms, if at all.

Off-Balance

Sheet Arrangements

We do not have any special purpose entities or

off-balance

sheet financing arrangements as of ~~June 30, 2019.~~March 31, 2020.

Net Operating Loss Carryforwards

At December 31, ~~2018,~~2019, we had ~~utilized our remaining $19.5 million of~~ net operating loss ~~carryforwards.~~carryforwards of $0.2 million remaining. We had business tax credits carryforwards of ~~$2.9~~$2.1 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.~~2039. Net operating loss carryforwards and available tax credits are subject to review and possible adjustment by the Internal Revenue Service, state and foreign jurisdictions and may be limited in the event of certain changes in the ownership interest of significant stockholders.

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

Table of Contents

development and sales, product candidate research, development and regulatory approval, ~~selling, general and administrative~~SG&A expenditures, intellectual property, development and manufacturing plans, availability of materials and product and adequacy of capital resources, the projected impact of, and response to, the coronavirus pandemic, 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:~~with the following: the ultimate impact of the coronavirus pandemic on our business or financial results; the success of current and future collaborative or supply relationships, including our agreements with GE Healthcare and ~~MilliporeSigma,~~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,~~products; our ability to obtain required regulatory ~~approvals,~~approvals; our compliance with all U.S. Food and Drug Administration regulations, our ability to obtain, maintain and protect intellectual property rights for our ~~products,~~products; the risk of litigation regarding our patent and other intellectual property ~~rights,~~rights; the risk of litigation with collaborative ~~partners,~~partners; our limited manufacturing capabilities and our dependence on third-party manufacturers and value-added ~~resellers,~~resellers; the effect of the pandemic of the novel coronavirus disease, including mitigation efforts and economic effects, on our business operations; our ability to hire and retain skilled ~~personnel,~~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,~~condition; our ability to compete with larger, better financed life sciences ~~companies,~~companies; our history of losses and expectation of incurring ~~losses,~~losses; our ability to generate future ~~revenues,~~revenues; our ability to successfully integrate our recently acquired ~~businesses,~~businesses; our ability to raise additional capital to fund potential ~~acquisitions,~~acquisitions; our volatile stock ~~price,~~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~~sections entitled “Risk Factors” in this Quarterly Report on Form

10-Q

and in our Annual Report on Form

10-K

for the year ended December 31, ~~2018.~~2019.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We have historically held investments in commercial paper, U.S. Government and agency securities as well as corporate bonds and other debt securities. As a result, we have been exposed to potential loss from market risks that may occur as a result of changes in interest rates, changes in credit quality of the issuer or otherwise. We do not have any such investments as of ~~June 30, 2019.~~March 31, 2020. As a result, a hypothetical 100 basis point increase in interest ~~ratees~~rates would have no effect on our cash position as of ~~June 30, 2019.~~March 31, 2020.

We generally place our marketable security investments in high quality credit instruments, as specified in our investment policy guidelines. We believe that the conservative nature of our investments mitigates our interest rate exposure, and our investment policy limits the amount of our credit exposure to any one issue, issuer (with the exception of U.S. agency obligations) and type of instrument. We do not expect any material ~~loss~~losses from our marketable security investments and therefore believe that our potential interest rate exposure is limited.

Foreign Exchange Risk

The reporting currency of the Company is U.S. dollars, and the functional currency of each of our foreign subsidiaries is its respective local currency. Our foreign currency exposures include the Swedish ~~kronor,~~krona, Euro, British pound, Chinese yuan, Japanese yen, Singapore dollar, South Korean won and Indian rupee; of these, the primary foreign currency exposures are the Swedish ~~kronor,~~krona, 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

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 Exchange ~~Act~~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~~at 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.reasonable assurance level.

~~Changes~~36

Table of Contents

hanges in Internal Control

We acquired C Technologies on May 31, 2019. The financial results of C Technologies are included in our unaudited consolidated financial statements as of June 30, 2019 and for the quarter then ended. The C Technologies business represented approximately $2.2 million of revenue and ($1.5) million of net loss, respectively, for the quarter ended June 30, 2019. As this acquisition occurred in the second quarter of 2019, the scope of our assessment of our internal control over financial reporting does not include C Technologies. This exclusion is in accordance with the 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.

~~Other than the foregoing, there~~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, 2019~~March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

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

The matters discussed in this Quarterly Report on Form

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~~

“Risk Factors”

in Part I, Item 1A inof our ~~Quarterly~~Annual Report on Form

~~10-Q~~10-K

for the period ended ~~March~~December 31, 2019 and in subsequent filings, could cause our actual results to differ materially from those in the forward-looking statements. ~~There~~Other than the additional risk factors set forth below, there are no material changes to the risk factors described in our ~~Quarterly~~Annual Report on Form

~~10-Q~~10-K

for the period ended ~~March~~December 31, 2019.

The

COVID-19

pandemic, or similar public health crises, could have a material adverse impact on our business, financial condition and results of operations, including our product sales, and our stock price.

Since December 2019, an outbreak of a novel strain of coronavirus,

SARS-CoV-2,

which causes coronavirus disease 2019 (“

COVID-19”

), has since spread to countries in which we or our customers and suppliers operate, including the United States. The global spread of

COVID-19

has led local and national governmental authorities to implement various responses to combat the virus, including government-imposed quarantines, extended business closures, travel restrictions and other public health safety measures. The

COVID-19

outbreak continues to rapidly evolve. The extent to which the outbreak impacts our business, including our financial results, will depend on future developments, which are highly uncertain and cannot be predicted at this time with confidence, such as the continued geographic spread of the disease, the duration of the outbreak, and actions taken in the United States and elsewhere to contain the outbreak and treat the disease, such as social distancing and quarantines, business closures or business disruptions.

In response to the

COVID-19

pandemic, in accordance with direction from state and local government authorities, we have restricted access to our facilities mostly to personnel and third parties who must perform critical activities that must be completed

on-site,

limited the number of such personnel that can be present at our facilities at any one time, and requested that most of our personnel work remotely. In the event that governmental authorities were to further modify current restrictions, our employees conducting research and development or manufacturing activities may not be able to access our manufacturing space. Certain of our third-party suppliers have also temporarily closed facilities and have experienced work stoppages due to the spread of

COVID-19.

Our revenues and other operating results depend in large part on our ability to manufacture and assemble our products in sufficient quantities and in a timeline manner. Business closures and work stoppages at our facilities and our third-supply suppliers’ facilities as a result of

COVID-19

may lead to interruptions in our manufacturing activities and our product supply and could have a material adverse effect on our business and our results of operation and financial condition.

We operate on a global basis with offices or activities in Japan, South Korea, China, India, Europe and North America, and global health crises, such as

COVID-19,

could result in a widespread economic downturn in the industries in which we and our customers operate. Such an economic downturn could result in delays or otherwise adversely affect the completion of our customers’ preclinical activities and clinical trials, as well as the healthcare industry generally. In addition, the diversion of financial resources in the healthcare system away from routine patient treatment, drug development and clinical trials in order to focus on pandemic concerns could result in reduced demand for our products or our customer’s products and could significantly impact our operating results.

In addition, the trading prices for our common stock and other bioprocessing and life sciences companies have been highly volatile as a result of the

COVID-19

pandemic. As a result, we may face difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms.

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~~

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

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ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

None.

Table of Contents

ITEM 6.

~~EXHIBITS~~

~~(a)~~

~~Exhibits~~EXHIBITS

(a) Exhibits


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 Form 10-Q for the quarter ended September 30, 1999 and incorporated herein by reference).

	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 Form 8-K filed on May 19, 2014 and incorporated herein by reference).

	3.3	Second Amended and Restated Bylaws (filed as Exhibit 3.1 to Repligen Corporation’s Current Report on Form 8-K filed on May 23, 2017 and incorporated herein by reference).

	~~4.1~~ 10.1+#	~~Base Indenture, dated as of July 19, 2019, by and between~~ Repligen Corporation Amended and ~~Wilmington Trust, National Association (filed as Exhibit 4.1 to Repligen Corporation’s Current Report on Form 8-K filed on July 22, 2019 and incorporated herein by reference).~~Restated Non-Employee Directors’ Compensation Policy.

	~~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.INS +~~101.INS+	XBRL Instance Document -– the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL ~~document~~document.

	~~101.SCH +~~101.SCH+	Inline XBRL Taxonomy Extension Schema ~~Document~~Document.

	~~101.CAL +~~101.CAL+	Inline XBRL Taxonomy Extension Calculation Linkbase ~~Document~~Document.

	~~101.DEF +~~101.DEF+	Inline XBRL Taxonomy Extension Definition Linkbase ~~Document~~Document.

	~~101.LAB +~~101.LAB+	Inline XBRL Taxonomy Extension Label Linkbase ~~Document~~Document.

	~~101.PRE +~~101.PRE+	Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.

	~~104 +~~104+	Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*).

†	~~Portions of this exhibit (indicated by asterisks) have been omitted in accordance with the rules of the Securities and Exchange Commission.~~

#	Management contract or compensatory plan or arrangement.

+	Filed herewith.

*	Furnished herewith.

3940

Table of Contents

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 1, 2019~~May 6, 2020	By:	/ s / s/ Tony J. Hunt
		Tony J. Hunt
		President and Chief Executive Officer
		(Principal executive officer)
		Repligen Corporation

Date: ~~August 1, 2019~~May 6, 2020	By:	/ s / s/ Jon Snodgres
		Jon Snodgres
		Chief Financial Officer
		(Principal financial officer)
		Repligen Corporation

4041


	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


	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


	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


	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


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


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

Minimum operating lease payments	$	23,496


	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


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


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


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


	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


	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	)


Jurisdiction	Fiscal Years Subject to Examination
United ~~States -~~ States—federal and state		~~2015-2018~~2016-2019
Sweden		~~2012-2018~~2013-2019
Germany		~~2017-2018~~2019
Netherlands		~~2012-2018~~2013-2019


	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

Large accelerated filer

Accelerated filer

Non-accelerated filer
~~filer~~

Smaller reporting company

Emerging growth company