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Article by DailyStocks_admin    (03-19-12 01:32 AM)

Description

Filed with the SEC from Mar 01 to Mar 07:

Repligen (RGEN)
Ronald Chez sent a letter to management seeking changes to the procedure for nominating board members.
In the March 5 letter, Chez cited "the non-transparent nature of the committee's deliberations and the short window for providing information to the committee."
He asked that the deadline for his submission of director candidates to the board be "extended for 90 days or waived entirely."
Chez also disclosed that he continues to own 2,815,631 shares (9.2%). He did not report buying or selling any shares since his prior filing, on Jan. 25.
BUSINESS OVERVIEW

Overview

Repligen Corporation (“Repligen,” the “Company” or “we”) is a leading supplier of critical products used to manufacture biologic drugs. We manufacture Protein A for major life science companies under long term supply agreements and also sell products directly to end users for use in their manufacturing processes. We also apply our expertise in biologic product development to SecreFlo TM (RG1068), for which our first new drug application (“NDA”) has been submitted and accepted for priority review by the U.S. Food and Drug Administration (“FDA”) and for which we have submitted a marketing authorization application (“MAA”) to the European Medicines Agency (“EMA”). SecreFlo is a synthetic human hormone being developed by the Company as a novel imaging agent for the diagnosis of pancreatitis and potentially a variety of pancreatic diseases. We also have two early stage central nervous system (“CNS”) rare disease programs underway in Friedreich’s ataxia and spinal muscular atrophy that are advancing into Phase 1 clinical trials. In addition, we have out-licensed certain intellectual property to Bristol-Myers Squibb Company (“Bristol”) from which we receive royalties on their net sales in the United States of their product Orencia ® .

Corporate Background

We were incorporated in May 1981, under the laws of the State of Delaware. Our principal executive offices are located at 41 Seyon Street, Waltham, Massachusetts 02453 and our telephone number is (781) 250-0111. We also have a manufacturing facility located in Lund, Sweden.

Acquisition of Novozymes Biopharma Sweden AB

On December 20, 2011, pursuant to the terms of the Asset Transfer Agreement, dated as of October 27, 2011 (the “Asset Transfer Agreement”), by and among the Company, Repligen Sweden AB, a company organized under the laws of Sweden and a wholly-owned subsidiary of the Company (“Repligen Sweden”), Novozymes Biopharma DK A/S, a company organized under the laws of Denmark (“Novozymes Denmark”), and Novozymes Biopharma Sweden AB, a company organized under the laws of Sweden and a wholly-owned subsidiary of Novozymes Denmark (“Novozymes Sweden” and, together with Novozymes Denmark, “Novozymes”), we acquired Novozymes’ business headquartered at Novozymes Sweden’s facility in Lund, Sweden and all related operations, including the manufacture and supply of cell culture ingredients and Protein A affinity ligands for use in industrial cell culture, stem and therapeutic cell culture and biopharmaceutical manufacturing (the “Novozymes Biopharma Business”). Pursuant to the Asset Transfer Agreement, Repligen Sweden (a) purchased all of the assets related to the Novozymes Biopharma Business and assumed certain specified liabilities related to the Novozymes Biopharma Business from Novozymes Sweden and (b) purchased contract rights and licenses used in the Novozymes Biopharma Business and other specified assets from Novozymes Denmark (collectively, the “Transferred Business” and the acquisition of the Transferred Business, the “Novozymes Acquisition”). The Novozymes Biopharma Business now operates as Repligen Sweden. We paid a purchase price of 17.0 million Euros (~$22.1 million) plus an additional net working capital adjustment of 3.65 million Euros (~$4.8 million) for a total upfront cash payment of 20.65 million Euros (~$26.9 million) to Novozymes for the Transferred Business upon the consummation of the Novozymes Acquisition. In addition, Novozymes has the right to contingent payments of up to 4.0 million Euros (~$5.2 million) consisting of: (i) an earn-out of 1.0 million Euros (~$1.3 million) if the Transferred Business achieves sales of a minimum quantity of a Novozymes product between January 1, 2012 and December 31, 2012; (ii) two milestone payments of 1.0 million Euros (~$1.3 million) each if sales of certain Novozymes products achieve agreed levels for the combined calendar years 2012 and 2013 and for calendar year 2014, respectively; and (iii) technology transfer payments totaling 1.0 million Euros (~$1.3 million) following the successful transfer of certain Novozymes manufacturing technology.

Change in Fiscal Year

As previously announced, in 2011 we changed our fiscal year end from March 31 to December 31. This Transition Report on Form 10-K reports our financial results for the nine-month period from April 1, 2011 through December 31, 2011, which we refer to as “the nine-month fiscal year ended December 31, 2011” throughout this report. Following this Transition Report, we will report on a twelve-month fiscal year beginning on January 1 and ending on December 31 of each year.

Currently Marketed Products

We currently sell various commercial bioprocessing products based on Protein A and IFG-1 growth factors, as well as a line of pre-packed chromatography columns, which are used in the production of monoclonal antibodies and other biopharmaceutical products.

Products for Biologics Manufacturing

Repligen is a leading manufacturer of a number of bioprocessing products including multiple products based on Protein A, growth factors used in fermentation and a line of pre-packed chromatography columns. Our bioprocessing products are used in the production of biologic drugs which include a wide range of recombinant therapeutic proteins, monoclonal antibodies and vaccines. Demand for our bioprocessing products has grown in concert with the expanding markets for biologics, particularly monoclonal antibodies. Most major pharmaceutical and biotechnology companies have made a significant investment in the development and commercialization of biologic drugs. The global biologics market was valued at approximately $150 billion in 2010 and is expected to grow at a rate in the high single digits annually. Monoclonal antibodies are highly valuable therapeutic agents, examples of which include some of the best-selling drugs in the world such as Enbrel ® and Remicade ® for rheumatoid arthritis and other inflammatory disorders, and Rituxan ® for Non-Hodgkin’s Lymphoma. There are more than 50 approved monoclonal antibody products and 200 product candidates currently in clinical development, most of which are manufactured using Protein A.

For more than ten years, Repligen has been a well-respected global supplier of Protein A, a key consumable used in the purification of monoclonal antibody pharmaceuticals. Through the Novozymes Acquisition, we now manufacture a “native” Protein A product which is used in the production of several of the early blockbuster monoclonal antibody drugs. The combined company now manufactures all five forms of commercial scale Protein A and is well positioned to benefit from the expansion of the biologics market and in particular the growth of the monoclonal antibody market which will create increased demand for Protein A.

To be useful in manufacturing, Protein A is chemically bound to various manufacturers’ proprietary chromatography media or small beads, which provide a rigid support required for processing. This media is then packed by end-users into cylindrical columns. After fermentation of a monoclonal antibody, the broth containing the monoclonal of interest as well as numerous fermentation by-products and contaminants is passed over a column filled with Protein A chromatography media which selectively captures the monoclonal. Protein A has a highly specific affinity for the monoclonal antibody and as a result, the antibody stays bound to the Protein A media and the impurities wash through. After the impurities are washed away, a change in conditions releases the purified antibody. The result is a highly purified and concentrated monoclonal antibody from a single purification step. Further purification steps are usually necessary to increase purity to a level greater than 98%.

The Company manufactures Protein A for major life science companies including GE Healthcare, EMD Millipore, and Life Technologies under long term supply agreements which extend to 2015-2021. Our customers incorporate various forms of Protein A products into their proprietary chromatography media that they sell directly to the biopharmaceutical industry. The majority of our product sales for the last three years have been sales of Protein A products.

Most biopharmaceuticals are produced in mammalian fermentation supplemented by growth factors. Through the Novozymes Acquisition, the Company acquired four fermentation growth factor products. LONG ® R3 IGF-I is a growth factor that is more biologically potent than either insulin or native IGF-1 and has been shown to significantly increase recombinant protein production in fermentation applications. LONG ® R3 IGF-I is sold under a distribution agreement with Sigma-Aldrich Corporation (“Sigma”) which extends to 2021. Sigma has distribution rights for industrial cell culture applications, and the product is currently used in the manufacture of nine commercial biopharmaceuticals. Repligen sells the product for use in stem cell and other cell-based therapies. In addition, we acquired long epidermal growth factor (LONG ® EGF), transforming growth factor alpha (LONG ® TGF-a) supplements for serum-free or low serum culture in cell-based therapy application as well as recombinant transferrin (rTransferrin) which has been developed as an iron supplement for cell culture. There may be additional applications for these growth factors in stem cell and other cell-based therapies.

In January 2010, we acquired patented technology from BioFlash Partners, LLC (“BioFlash”) that enables reliable production of pre-packed chromatography columns for the purification of biologic drugs and vaccines. OPUS TM columns have the potential to improve manufacturing efficiencies by reducing time for column packing, set-up and cleaning. Based on specific customer feedback and rising market demand for disposable biomanufacturing technologies, we have reengineered and expanded our OPUS product line to include larger scale columns. We recently introduced a new, process-scale product line which is suitable for the production of a broad range of clinical trial material and niche commercial products such as orphan biologics.

Research and Development

We have devoted substantial resources to the research and development of therapeutic and imaging product candidates and our commercial products discussed herein. For the nine-month fiscal year ended December 31, 2011, we spent $9,462,000 on company-sponsored research and development activities. For the fiscal years ended March 31, 2011 and 2010, we spent $12,529,000 and $14,160,000, respectively, on company-sponsored research and development activities.

Development Stage Products

We currently have three active development stage programs underway including our diagnostic imaging program and two early stage central nervous system (“CNS”) rare disease programs. SecreFlo (RG0168, synthetic human secretin) is being developed to be used in combination with magnetic resonance imaging (“MRI”) to improve the detection of pancreatic abnormalities in patients with pancreatitis. SecreFlo has completed a successful pivotal Phase 3 study, and we submitted our first New Drug Application (“NDA”) to the Food and Drug Administration (“FDA”) for SecreFlo in December 2011. The FDA has granted our NDA priority review. Under the Prescription Drug User Fee Act (“PDUFA”), the FDA’s goal for completing a priority review and delivering a decision on marketing approval is reduced to six months, compared to ten months for a standard review. The FDA has assigned a PDUFA goal date of June 21, 2012 to our SecreFlo NDA. In March 2012, we submitted a marketing authorization application (“MAA”) for SecreFlo for review by the European Medicines Agency (“EMA”) in the same initial indication. We also have two early stage rare disease clinical programs underway to evaluate the potential for our product candidates RG3039 and RG2822 to treat spinal muscular atrophy (“SMA”) and Friedreich’s ataxia, respectively.

SecreFlo for Pancreatic Imaging

SecreFlo is a synthetic version of the human hormone secretin. Secretin is a well-known gastrointestinal hormone produced in the small intestine that regulates the function of the pancreas as part of the process of digestion. We have completed a Phase 3 clinical trial evaluating the sensitivity and specificity of SecreFlo in combination with MRI to improve the detection of structural abnormalities of the pancreas relative to MRI alone. Structural abnormalities of the pancreas are often the cause of significant abdominal pain and can be associated with diseases such as pancreatitis. When the pancreas is at rest and the pancreatic duct is ‘empty’, it is quite narrow and can be hard to visualize by MRI. SecreFlo stimulates secretion of watery fluid into the pancreatic ducts expanding the ducts and enabling them to be more effectively visualized by MRI as this imaging technique images water (water looks white in certain MRI images). Improvement in the detection and delineation of normal and abnormal structures with MRI is attractive for patient care as it can obviate the need for additional and potentially risky procedures such as endoscopy (“ERCP”). The FDA has granted Fast Track designation to the development of SecreFlo. Fast Track is a process designed to facilitate the development and expedite the review of drugs that treat serious diseases and fill an unmet medical need.

Our pivotal Phase 3 clinical trial was initiated in March 2008 and completed in December 2009. This was a multi-center, baseline controlled, single dose study in which 258 patients were enrolled at 23 clinical sites within the United States and Canada. Each patient in the study received an MRI of the pancreas with and without SecreFlo, and separately underwent ERCP as a diagnostic reference. The MRI images were randomized and independently read and reviewed by three central radiologists. The primary objectives of the Phase 3 study were to demonstrate that SecreFlo increases the sensitivity in detecting structural abnormalities of the pancreas by MRI, with minimal loss of specificity. The predetermined criteria for a successful study included the achievement of a statistically significant improvement in sensitivity with minimal loss in specificity from two of the three central radiologists reading the MRI images. In the initial read of the study, one radiologist achieved a statistically significant improvement in sensitivity with SecreFlo, while a second radiologist showed a trend but did not achieve statistical significance. There was minimal loss in specificity for all radiologists. Based on inconsistencies in the analysis of the radiographic images by the three radiologists hired to review the Phase 3 images, we submitted a request to the FDA and the EMA to re-analyze the Phase 3 data set (“Phase 3 re-read”). In May 2010, the FDA and EMA approved our plan for a re-analysis of images obtained from the Phase 3 trial. In March 2011, we announced positive results of the Phase 3 re-read, in which all three independent radiologists achieved a statistically significant improvement in sensitivity (all radiologists p<0.0001) with minimal loss in specificity (<7.5%). All three secondary endpoints were also met, with each demonstrating highly statistically significant improvements (p<0.0001) in image quality, visualization of the main pancreatic duct and diagnostic confidence when compared to MRI alone.

Based on the positive re-read of the Phase 3 data, we filed an NDA with the FDA for SecreFlo on December 21, 2011, with a request for priority review. In February 2012, the FDA granted priority review for this NDA for SecreFlo. Under PDUFA, the FDA’s goal for completing a priority review and delivering a decision on marketing approval is reduced to six months compared to ten months for a standard review. The FDA has assigned a PDUFA goal date of June 21, 2012 for a determination on this NDA for SecreFlo.

In March 2012, we filed an MAA for SecreFlo in the same indication, for potential approval by the EMA. Pending successful validation, the EMA would then require its Committee for Medicinal Products for Human Use (CHMP) to complete a full scientific assessment and deliver its opinion on marketing approval for SecreFlo, a process that is expected to be completed in approximately twelve months.

Pending FDA approval of SecreFlo, we expect to build a commercial infrastructure to support the launch of SecreFlo in the U.S., and we plan to seek to establish one or more partnerships for commercialization of SecreFlo outside the U.S. We have received an Orphan Drug designation from the FDA covering the use of SecreFlo in MRI which, if we are the first company to receive FDA approval for this use of secretin in the U.S., will provide seven years of marketing exclusivity in the U.S. following approval of the NDA.

We believe that there may be additional uses for SecreFlo, and we intend to evaluate whether SecreFlo has the potential to improve the detection of pancreatic cancer in combination with contrast-enhanced MRI or computed tomography (“CT”). We will also seek to acquire products that are complementary to SecreFlo, which we may be able to sell to gastroenterologists or radiologists.

RG3039 for Spinal Muscular Atrophy

We are pursuing development of RG3039 for treatment of patients with spinal muscular atrophy (“SMA”). Our inhibitors have the potential to be first in class treatment for the disease. SMA is an inherited neurodegenerative disease in which a defect in the survival motor neuron gene (“SMN”) results in low levels of the protein SMN which leads to progressive damage to motor neurons, loss of muscle function and, in many patients, early death. There are approximately 20,000 people worldwide with SMA.

On October 22, 2009, we entered into an exclusive worldwide commercial license agreement (the “FSMA License Agreement”) with Families of Spinal Muscular Atrophy (“FSMA”). Pursuant to the FSMA License Agreement, we obtained an exclusive license to develop and commercialize certain patented technology, and improvements thereon, owned or licensed by FSMA, relating to compounds which may have utility in treating SMA. If all milestones are achieved, total future financial obligations under this agreement, including milestone payments, sublicense fees, and other charges, could total approximately $11,250,000.

In May 2011, we initiated a Phase 1 clinical study of RG3039 in healthy volunteers. We have received an Orphan Drug designation from the FDA for RG3039, which, if we are the first company to obtain market approval for RG3039 for SMA in the United States, will provide seven years of marketing exclusivity in the United States following NDA approval. We have received an Orphan Drug designation from the European Commission for RG3039, which, if granted, and if we are the first company to obtain market approval for RG3039 for SMA in Europe, will provide ten years of marketing exclusivity in Europe following MAA approval. The composition of RG3039 is covered by patent applications in the United States and Europe (see Patents, Licenses and Proprietary Rights section below.)

Histone Deacetylase Inhibitors for Friedreich’s Ataxia, Huntington’s Disease and Memory Disorders

Friedreich’s ataxia is an inherited neurodegenerative disease caused by a single gene defect that results in inadequate production of the protein frataxin. Low levels of frataxin lead to degeneration of both the nerves controlling muscle movements in the arms and legs and nerve tissue in the spinal cord. Symptoms of Friedreich’s ataxia typically emerge between the ages of five and fifteen and often progress to severe disability, incapacitation or loss of life in early adulthood. There are approximately 15,000 patients worldwide with Friedreich’s ataxia. There is currently no treatment for Friedreich’s ataxia.

Repligen is developing RG2833, a class I histone deacetylase (“HDAC”) inhibitor, for the treatment of Friedreich’s ataxia. In May 2010, we filed an Investigational New Drug Application (“IND”) for RG2833 with the FDA which is currently on clinical hold. In July 2011, we filed an application with the Italian Superior Institute of Health, commonly known as the “ISS”, to initiate a Phase 1 study of RG2833 in Italy. We plan to initiate a single, ascending dose Phase 1 study of RG2833 in Friedreich’s ataxia patients in Italy, in the first quarter of 2012. We have developed methods to measure changes in frataxin levels in patient cells for use in our clinical trial which may enable us to gain an early insight into the potential benefit of treating patients with RG2833. We have received an Orphan Drug designation from the FDA for RG2833, which, if we are the first company to obtain market approval for RG2833 for Friedreich’s ataxia in the U.S., will provide seven years of marketing exclusivity in the U.S. following NDA approval. We have also received Orphan Drug designation from the European Commission for RG2833, which, if we are the first company to obtain market approval for RG2833 for Friedreich’s ataxia in Europe, will provide ten years of marketing exclusivity in Europe following MAA approval. The composition of RG2833 is covered by patent applications in the U.S. and Europe (see Patents, Licenses and Proprietary Rights section below.)

Repligen is also exploring the applicability of HDAC inhibitors in the treatment of memory disorders and Huntington’s disease. In 2010, the National Institute of Neurological Disorders and Stroke (“NINDS”) awarded a grant of $6,000,000 over four years to The Scripps Research Institute and Repligen for the development of a novel HDAC inhibitor for Huntington’s disease. Repligen is part of a collaborative network receiving the grant and has the potential to receive $2,900,000 based on successful completion of various milestones during the four year program. The goals of the grant include the identification, characterization, optimization and preclinical GLP toxicology and safety testing of a novel HDAC inhibitor for Huntington’s disease.

Uridine for Bipolar Depression

Bipolar disorder, also known as manic depression, is a chronic illness marked by extreme changes in mood, thought, energy and behavior. Uridine is a biological compound that is essential for multiple biosynthetic processes including the synthesis of DNA and RNA, the basic hereditary material found in all cells and numerous other factors essential for cell metabolism. Researchers at McLean Hospital previously demonstrated that uridine is active in a well-validated animal model of depression. Literature reports indicate that certain genes that encode for mitochondrial proteins are significantly down-regulated in the brains of bipolar patients. This insight suggested that the symptoms of bipolar disorder may be linked to dysregulation of energy metabolism in the brain.

In March 2006, we initiated a Phase 2a clinical trial of RG2417, an oral formulation of uridine, in patients with bipolar disorder. The study showed a statistically significant improvement in the symptoms of depression in the patients treated with RG2417 when compared to placebo. Our Phase 2a data was reviewed by the FDA and served as the basis for a Phase 2b proof-of-concept clinical trial, which we initiated in November 2008. In March 2011, we announced the results from this Phase 2b study, which did not demonstrate a statistically significant improvement when compared to placebo in treating the symptoms of depression. At this time, we do not plan to invest additional resources in RG2417.

Intellectual Property on CTLA4-Ig

Orencia ® (CTLA4-Ig) Royalties

CTLA4 is a key regulator of the activity of the immune system. CTLA4 “turns off” the immune system after it has successfully cleared a bacterial or viral infection by blocking the activation of T-cells, the immune cells responsible for initiating an immune response. In the 1990’s, our collaborators at the University of Michigan and the U.S. Navy demonstrated in animal models that a fusion protein consisting of fragments of CTLA4 and an antibody (“CTLA4-Ig”) could be used to treat certain autoimmune diseases. This research finding resulted in the granting of U.S. patent No. 6,685,941 (“the ‘941 Patent”) covering the treatment of certain autoimmune disorders including rheumatoid arthritis with CTLA4-Ig. CTLA4-Ig’s mechanism of action is different from the current therapies for autoimmune disease or organ transplant rejection, thus, it may provide a treatment for patients who are refractory to existing therapies.

In December 2005, the FDA approved Bristol’s application to market CTLA4-Ig, under the brand name Orencia ® , for treatment of rheumatoid arthritis. In January 2006, Repligen and the University of Michigan jointly filed a lawsuit against Bristol in the United States District Court for the Eastern District of Texas for infringement of the ‘941 Patent. In April 2008, Repligen and the University of Michigan entered into a settlement agreement with Bristol pursuant to which, Bristol made an initial payment of $5 million to us and agreed to pay us royalties on the U.S. net sales of Orencia ® for any clinical indication at a rate of 1.8% for the first $500 million of annual sales, 2.0% for the next $500 million and 4.0% of annual sales in excess of $1 billion for each year from January 1, 2008 until December 31, 2013.

The ‘941 Patent is owned by the University of Michigan and exclusively licensed to Repligen. In consideration of this exclusive license, Repligen agreed to pay the University of Michigan 15% of all royalty income received from Bristol, after deducting legal expenses. There are no annual or other fees associated with this agreement. As of December 31, 2011, we have paid approximately $5,290,000 to the University of Michigan under this agreement.

Sales and Marketing

We sell our bioprocessing products through our direct sales force, partners such as GE Healthcare, EMD Millipore, Life Technologies, Sigma Aldrich and distributors in certain foreign markets.

In December 2011, we filed an NDA covering the use of SecreFlo in combination with MRI to improve the detection of pancreatic duct abnormalities in patients with pancreatitis. In February 2012, the FDA granted priority review for this NDA for SecreFlo and assigned a PDUFA goal date of June 21, 2012 for completing its review and delivering a decision on marketing approval. Pending regulatory approvals, we plan to build a commercial infrastructure to support the launch of SecreFlo in the U.S. and to establish one or more partnerships for commercialization of SecreFlo outside the U.S.

CEO BACKGROUND

Walter C. Herlihy, Ph.D . joined Repligen in March 1996 as President, Chief Executive Officer and Director in connection with Repligen’s merger with Glycan Pharmaceuticals, Inc. From July 1993 to March 1996, Dr. Herlihy was the President and CEO of Glycan Pharmaceuticals, Inc. From October 1981 to June 1993, he held numerous research positions at Repligen, most recently as Senior Vice President, Research and Development. Dr. Herlihy holds an A.B. in chemistry from Cornell University and a Ph.D. in chemistry from MIT.

William J. Kelly joined Repligen in March 2008 as Vice President, Finance and Administration and currently serves as Chief Financial Officer. Prior to joining Repligen, Mr. Kelly worked for Haemonetics Corporation, a medical device manufacturer, where he held the positions of Corporate Controller from 2005 to 2008 and Assistant Corporate Controller from 2001 to 2005. From 2000 to 2001, Mr. Kelly was Corporate Controller for SiteScape Corporation. Mr. Kelly is a Certified Public Accountant and previously worked for Deloitte and Touche LLP, most recently as audit manager, as well as Ernst & Young LLP. Mr. Kelly holds a B.A. in psychology from the College of the Holy Cross and an MS/MBA from Northeastern University.

James R. Rusche, Ph.D . joined Repligen in March 1996 as Vice President, Research and Development in connection with Repligen’s merger with Glycan Pharmaceuticals, Inc. In 2001, Dr. Rusche became Senior Vice President, Research and Development. From July 1994 to March 1996, Dr. Rusche was Vice President, Research and Development of Glycan Pharmaceuticals, Inc. From February 1985 to June 1994, he held numerous research positions at Repligen, most recently as Vice President, Discovery Research. Dr. Rusche holds a B.S. in microbiology from the University of Wisconsin, LaCrosse and a Ph.D. in immunology from the University of Florida.

Daniel P. Witt, Ph.D . joined Repligen in March 1996 as Vice President, Business Development in connection with Repligen’s merger with Glycan Pharmaceuticals, Inc. In 2006, Dr. Witt became Vice President, Operations. From October 1993 to March 1996, Dr. Witt was Vice President, Business Development of Glycan Pharmaceuticals, Inc. From April 1983 to September 1993, he held numerous research positions at Repligen, most recently as Vice President, Technology Acquisition. Dr. Witt holds a B.A. in chemistry from Gettysburg College and a Ph.D. in biochemistry from the University of Vermont.

Glenn L. Cooper, M.D. has served as a Director of Repligen since August 2009 and is currently the Executive Chairman of Coronado BioSciences, Inc. Dr. Cooper served as the Chairman and Chief Executive Officer of Indevus Pharmaceuticals, Inc., a specialty pharmaceutical company focused on urology and endocrinology, from 2000 to 2009 and as Chief Executive Officer and Director from 1993 to 2000. Prior to joining Indevus in 1993, Dr. Cooper held numerous executive level positions including President and Chief Executive Officer of Progenitor, Inc., Executive Vice President and Chief Operating Officer of Sphinx Pharmaceuticals Corporation, and various clinical and regulatory positions with Eli Lilly and Company. Dr. Cooper has participated in the development, approval and commercialization of numerous drugs including Prozac ® , Axid ® , Lorabid ® , Ceclor ® , SANCTURA ® , SANCTURA XR ® , Supprelin-LA ® and Vantas ® . Dr. Cooper received an M.D. from Tufts University School of Medicine, performed his postdoctoral training in Internal Medicine and Infectious Diseases at the New England Deaconess Hospital and the Massachusetts General Hospital and received a B.A. from Harvard College. Dr. Cooper also serves as a Director of Gentium SpA.

Karen A. Dawes , Co-Chairperson of the Board effective July 2011, has served as a Director of Repligen since September 2005. She is currently President of Knowledgeable Decisions, LLC, a management consulting firm. Ms. Dawes served from 1999 to 2003 as Senior Vice President and U.S. Business Group Head for Bayer Corporation’s U.S. Pharmaceuticals Group. Prior to joining Bayer, she was Senior Vice President, Global Strategic Marketing, at Wyeth, a pharmaceutical company (formerly known as American Home Products), where she held responsibility for worldwide strategic marketing. Ms. Dawes also served as Vice President, Commercial Operations for Genetics Institute, Inc., which was acquired by Wyeth in January 1997, designing and implementing that company’s initial commercialization strategy to launch BeneFIX ® and Neumega ® . Ms. Dawes began her pharmaceuticals industry career at Pfizer, Inc. where, from 1984 to 1994, she held a number of positions in Marketing, serving most recently as Vice President, Marketing of the Pratt Division. At Pfizer, she directed launches of Glucotrol ® /Glucotrol XL ® , Zoloft ® , and Cardura ® . Ms. Dawes also serves as a Director of Depomed, Inc., Inspiration Biopharmaceuticals, Inc. and Seaside Therapeutics LLC.

Alfred L. Goldberg, Ph.D. has served as a Director of Repligen since July 2008. Dr. Goldberg is currently a Professor of Cell Biology at Harvard Medical School. Dr. Goldberg has been associated with Harvard University during his entire academic career. He was appointed an Assistant Professor of Physiology at Harvard Medical School in 1969 and Dr. Goldberg has been a Professor at Harvard Medical School since 1977. Dr. Goldberg has served as a consultant to many biotechnology and pharmaceutical companies and served on Scientific Advisory Boards of numerous foundations (including the Michael J. Fox Foundation and the Gladstone Foundation of the University of California) and biotechnology companies (including Biogen, ArQule, Elan and ProScript). Dr. Goldberg earned an A.B. from Harvard College in 1963, was a Churchill Scholar at Cambridge University and after studying at Harvard Medical School, earned his Ph.D. from Harvard University in 1968. He is internationally recognized for his multiple discoveries relating to protein degradation in cells and especially relating to the physiological functions and mechanisms of the ubiquitin-proteasome pathway. These discoveries provided the basis for the development of proteasome inhibitors which are widely used in cancer cachexia. Dr. Goldberg is a member of the Institute of Medicine of the National Academy of Sciences and American Academy of Arts and Sciences.

Earl Webb Henry, M.D. has served as a Director of Repligen since December 2007. Dr. Henry is currently Managing Director for H 2 O Clinical, effective June 2011. From March 2009 to June 2011, Dr. Henry was Chief Medical Officer for inVentiv Clinical Solutions. From 2004 to 2009, Dr. Henry was Senior Vice President, Medical Affairs for inVentiv Clinical Solutions. From 2001 to 2004, Dr. Henry served as the Medical Director for HHI Clinical Research and Statistical Services, LLC until it was acquired by inVentiv Health, Inc. in 2004. Other positions held by Dr. Henry include Senior Vice President and Head, Worldwide Clinical Research and Regulatory Affairs for Cephalon, Inc., Vice President, Clinical Research for Guilford Pharmaceuticals Inc., Global Head of Central Nervous System Therapeutic Area for Sandoz Research Institute, and Senior Associate Director of Clinical Research for Pfizer Central Research. Dr. Henry holds a B.S. in Chemistry from the University of Illinois and an M.D. from the University of Chicago and completed his residency and fellowship at Harvard Medical School in neurology and neuropathology.

Alexander Rich, M.D ., Co-Founder and Co-Chairperson of the Board of Repligen, has been on the faculty of MIT since 1958 and is the Sedgwick Professor of Biophysics. Internationally recognized for his contributions to the molecular biology of nucleic acids, he has determined their three-dimensional structure and has investigated their activity in biological systems. He is widely known for his work in elucidating the three-dimensional structure of transfer RNA, which is a component of the protein synthesizing mechanism, and for his discovery of a novel, left-handed form of DNA. He is a member of the National Academy of Sciences, the American Philosophical Society, the Pontifical Academy of Sciences, Rome, and a foreign member of the French Academy of Sciences, Paris. Dr. Rich has served as a Director of Repligen since May 1981. He also serves as a Director of Alkermes, Inc. and as a Director of Profectus Biosciences, Inc.

Thomas F. Ryan Jr . has served as a Director of Repligen since September 2003 and is currently a private investor. Mr. Ryan served as the President and Chief Operating Officer of the American Stock Exchange from October 1995 to April 1999. Prior to 1995, he held a variety of positions at the investment banking firm of Kidder, Peabody & Co., Inc., serving as the firm’s Chairman in 1995. He holds a bachelor’s degree from Boston College and is a graduate of the Boston Latin School. Mr. Ryan is a Director for the New York State Independent System Operator, a Director for Mellon Asset Management Mutual Funds Board and a Trustee for Boston College.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview

We are a world-leading supplier of critical biologic products used to manufacture biologic drugs. In December 2011, we acquired certain assets and assumed certain liabilities of Novozymes Biopharma Sweden, AB thereby diversifying and expanding our bioprocessing product offering and customer base, as well as doubling our manufacturing capacity. We also apply our expertise in biologic product development to SecreFlo, for which our first new drug application (“NDA”) has been submitted and accepted for priority review by the U.S. Food and Drug Administration (“FDA”) and for which we have submitted a marketing authorization application (“MAA”) to the European Medicines Agency (“EMA”). SecreFlo is a synthetic version of the human hormone secretin being developed by the Company as a novel imaging agent for use in combination with magnetic resonance imaging (“MRI”) to improve the detection of pancreatic duct abnormalities in patients with pancreatitis. We have begun expending substantial resources on pre-commercialization activities for SecreFlo. If our NDA is approved, we expect these expenditures to increase materially as we seek to commence commercial sales of SecreFlo. We also have two early stage central nervous system (“CNS”) rare disease programs that are advancing through Phase 1 clinical trials in Friedreich’s ataxia and spinal muscular atrophy. In addition, we have out-licensed certain intellectual property from which we receive royalties from Bristol-Myers Squibb Company (“Bristol”) on their net sales in the U.S. of their product Orencia ® . Total revenue in the nine-month fiscal year ended December 31, 2011 increased as compared to the nine months ended December 31, 2010 and is primarily due to an increase in bioprocessing product sales orders from our single largest customer as well as increased royalty revenue from Bristol as their product Orencia ® continues to penetrate the market.

On December 20, 2011, pursuant to the terms of the Asset Transfer Agreement, dated as of October 27, 2011 (the “Asset Transfer Agreement”), by and among the Company, Repligen Sweden AB, a company organized under the laws of Sweden and a wholly-owned subsidiary of the Company (“Repligen Sweden”), Novozymes Biopharma DK A/S, a company organized under the laws of Denmark (“Novozymes Denmark”), and Novozymes Biopharma Sweden AB, a company organized under the laws of Sweden and a wholly-owned subsidiary of Novozymes Denmark (“Novozymes Sweden” and, together with Novozymes Denmark, “Novozymes”), we completed the acquisition of Novozymes’ business headquartered at Novozymes Sweden’s facility in Lund, Sweden and all related operations, including the manufacture and supply of Protein A affinity ligands and cell culture ingredients for use in industrial cell culture, stem and therapeutic cell culture and biopharmaceutical manufacturing (the “Novozymes Biopharma Business”). Pursuant to the Asset Transfer Agreement, Repligen Sweden (a) purchased all of the assets related to the Novozymes Biopharma Business and assumed certain specified liabilities related to the Novozymes Biopharma Business from Novozymes Sweden and (b) purchased contract rights and licenses used in the Novozymes Biopharma Business and other specified assets from Novozymes Denmark (collectively, the “Transferred Business” and the acquisition of the Transferred Business, the “Novozymes Acquisition”). The Novozymes Biopharma Business now operates as Repligen Sweden. We paid a purchase price of 17.0 million Euros (~$22.1 million) plus an additional net working capital adjustment of 3.65 million Euros (~$4.8 million) for a total upfront cash payment of 20.65 million Euros (~$26.9 million) to Novozymes for the Transferred Business upon the consummation of the Novozymes Acquisition. In addition, Novozymes has the right to contingent payments of up to 4.0 million Euros (~$5.2 million) consisting of: (i) an earn-out of 1.0 million Euros (~$1.3 million) if the Transferred Business achieves sales of a minimum quantity of a Novozymes product between January 1, 2012 and December 31, 2012; (ii) two milestone payments of 1.0 million Euros (~$1.3 million) each if sales of certain Novozymes products achieve agreed levels for the combined calendar years 2012 and 2013 and for calendar year 2014, respectively; and (iii) technology transfer payments totaling 1.0 million Euros (~$1.3 million) following the successful transfer of certain Novozymes manufacturing technology. The Novozymes Acquisition has led to substantial increases in both the size and revenue of the combined company as well as operational costs associated with the combined business.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

While our significant accounting policies are more fully described in the notes to our financial statements, we have identified the policies and estimates below as being critical to our business operations and the understanding of our results of operations. The impact of and any associated risks related to these policies on our business operations are discussed throughout “Management’s Discussion and Analysis of Financial Condition,” including in the “Results of Operations” section, where such policies affect our reported and expected financial results.

Revenue recognition

We generate product revenues from the sale of bioprocessing products to customers in the life science and biopharmaceutical industries. We recognize revenue related to product sales upon delivery of the product to the customer as long as there is persuasive evidence of an arrangement, the sales price is fixed or determinable and collection of the related receivable is reasonably assured. Determination of whether these criteria have been met are based on management’s judgments primarily regarding the fixed nature of the fee charged for the product delivered and the collectability of those fees. We have a few longstanding customers who comprise the majority of revenue and have excellent payment histories and therefore we do not require collateral. We have had no significant write-offs of uncollectible invoices in the periods presented.

At the time of sale, we also evaluate the need to accrue for warranty and sales returns. The supply agreements we have with our customers and related purchase orders identify the terms and conditions of each sale and the price of the goods ordered. Due to the nature of the sales arrangements, inventory produced for sale is tested for quality specifications prior to shipment. Since the product is manufactured to order and in compliance with required specifications prior to shipment, the likelihood of sales return, warranty or other issues is largely diminished. Sales returns and warranty issues are infrequent and have had nominal impact on our financial statements historically.

In April 2008, we settled our outstanding litigation with Bristol and began recognizing royalty revenue from that settlement in fiscal year 2009 for Bristol’s net sales in the United States of Orencia ® , which is used in the treatment of rheumatoid arthritis. Pursuant to the settlement with Bristol, we recognized royalty revenue of $8,769,000 for the nine-month fiscal year ended December 31, 2011 and $10,251,000 and $8,980,000 for the fiscal years ended March 31, 2011 and 2010, respectively. Revenue earned from Bristol royalties is recorded in the periods when it is earned based on royalty reports sent by Bristol to us. We have no continuing obligations to Bristol as a result of this settlement. Our royalty agreement with Bristol provides that we will receive such royalty payments on sales of Orencia ® by Bristol through December 31, 2013.

Additionally, during the year ended March 31, 2010, we earned and recognized approximately $1,009,000 in royalty revenue from ChiRhoClin, Inc. (“ChiRhoClin”) for their sales of secretin. Revenue earned from ChiRhoClin royalties was recorded in the periods when it was earned based on royalty reports sent by ChiRhoClin to us. As of December 31, 2009, ChiRhoClin had fulfilled its royalty obligations to us for its sales of secretin. We do not expect to recognize any further royalty revenue from ChiRhoClin.

For the nine-month fiscal year ended December 31, 2011, we recognized approximately $1,466,000 of revenue from sponsored research and development projects under agreements with the Muscular Dystrophy Association, the National Institutes of Health / Scripps Research Institute, the European Friedrich’s Ataxia Consortium for Translational Studies, Go Friedreich’s Ataxia Research (“GoFar”), and the Friedreich’s Ataxia Research Alliance. For the nine months ended December 31, 2010, we recognized $1,102,000 of revenue from sponsored research and development projects under agreements with the Muscular Dystrophy Association, the National Institutes of Health / Scripps Research Institute, GoFar, and the Friedreich’s Ataxia Research Alliance. During the year ended March 31, 2011, we recognized approximately $1,346,000 of revenue from sponsored research and development projects under agreements with the Muscular Dystrophy Association, the National Institutes of Health / Scripps Research Institute, GoFar, and the Friedreich’s Ataxia Research Alliance. In the fiscal year ended March 31, 2011, we also recognized approximately $733,000 in one-time grants under the Qualifying Therapeutic Discovery Project Program, which was created in March 2010 as part of the Patient Protection and Affordability Care Act. In the fiscal year ended March 31, 2010, we recognized approximately $677,000 of revenue from sponsored research and development projects under agreements with the Muscular Dystrophy Association, the Friedreich’s Ataxia Research Alliance and the National Ataxia Foundation.

Research revenue is recognized when the expense has been incurred and services have been performed. Determination of which incurred costs qualify for reimbursement under the terms of our contractual agreements and the timing of when such costs were incurred involves the judgment of management. Our calculations are based upon the agreed-upon terms as stated in the arrangements. However, should the estimated calculations change or be challenged by other parties to the agreements, research revenue may be adjusted in subsequent periods. The calculations have not historically changed or been challenged, and we do not anticipate any significant subsequent change in revenue related to sponsored research and development projects.

There have been no material changes to our initial estimates related to revenue recognition in any periods presented in the accompanying financial statements.

We do not currently have any revenue arrangements with multiple deliverables that would be accounted for pursuant to Accounting Standards Board Update (“ASU”) No. 2009-13, “ Multiple Deliverable Revenue Arrangements ,” (“ASU No. 2009-13”) or arrangements pursuant to which we expect to receive significant milestone payments that would be accounted for under ASU No. 2010-17, “ Revenue Recognition - Milestone Method .”

Inventories

Inventories relate to our bioprocessing business. We value inventory at cost or, if lower, fair market value, using the first-in, first-out method. We review our inventory at least quarterly and record a provision for excess and obsolete inventory based on our estimates of expected sales volume, production capacity and expiration dates of raw materials, work-in-process and finished products. Expected sales volumes are determined based on supply forecasts provided by key customers for the next three to 12 months. We write down inventory that has become obsolete, inventory that has a cost basis in excess of its expected net realizable value, and inventory in excess of expected requirements to cost of product revenue. Manufacturing of bioprocessing finished goods is done to order and tested for quality specifications prior to shipment.

A change in the estimated timing or amount of demand for our products could result in additional provisions for excess inventory quantities on hand. Any significant unanticipated changes in demand or unexpected quality failures could have a significant impact on the value of inventory and reported operating results. During all periods presented in the accompanying consolidated financial statements, there have been no material adjustments related to a revised estimate of inventory valuations.

Business combinations

Amounts paid for acquisitions are allocated to the assets acquired and liabilities assumed, if any, based on their fair values at the dates of acquisition. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions determined by management. Any excess of purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. The fair value of contingent consideration includes estimates and judgments made by management regarding the probability that future contingent payments will be made, the extent of royalties to be earned in excess of the defined minimum royalties, etc. Management updates these estimates and the related fair value of contingent consideration at each reporting period. Changes in the fair value of contingent consideration are recorded in our Statement of Operations.

We use the income approach to determine the fair value of certain identifiable intangible assets including customer relationships and developed technology. This approach determines fair value by estimating after-tax cash flows attributable to these assets over their respective useful lives and then discounting these after-tax cash flows back to a present value. We base our assumptions on estimates of future cash flows, expected growth rates, expected trends in technology, etc. We base the discount rates used to arrive at a present value as of the date of acquisition on the time value of money and certain industry-specific risk factors. We believe the estimated purchased customer relationships and developed technology amounts so determined represent the fair value at the date of acquisition and do not exceed the amount a third party would pay for the assets.

The allocation of consideration transferred for the acquisition of the Novozymes Biopharma Business is preliminary as a result of a preliminary valuation report that includes a preliminary fair value assigned to fixed assets. We intend to finalize the valuation report and the fair value of fixed assets in the near term. As a result, the fair values assigned to intangible assets and fixed assets, and the resulting gain on bargain purchase could change in future reporting periods.

Intangible assets and goodwill

Intangible Assets

We amortize our intangible assets that have finite lives using the straight-line method. Amortization is recorded over the estimated useful lives ranging from 8 to 8.5 years. We review our intangible assets subject to amortization to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. If the carrying value of an asset exceeds its undiscounted cash flows, we will write-down the carrying value of the intangible asset to its fair value in the period identified. In assessing fair value, we must make assumptions regarding estimated future cash flows and discount rates. If these estimates or related assumptions change in the future, we may be required to record impairment charges. We generally calculate fair value as the present value of estimated future cash flows to be generated by the asset using a risk-adjusted discount rate. If the estimate of an intangible asset’s remaining useful life is changed, we will amortize the remaining carrying value of the intangible asset prospectively over the revised remaining useful life.

Goodwill

We test goodwill for impairment on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. Events that would indicate impairment and trigger an interim impairment assessment include, but are not limited to current economic and market conditions, including a decline in market capitalization, a significant adverse change in legal factors, business climate or operational performance of the business, and an adverse action or assessment by a regulator. Our annual impairment test date is the last day of our fiscal fourth quarter. For the nine-month fiscal year ended December 31, 2011, the impairment test date was December 31, 2011.

Accrued liabilities

We estimate accrued liabilities by identifying services performed on our behalf, estimating the level of service performed and determining the associated cost incurred for such service as of each balance sheet date. Examples of estimated accrued expenses include:




Fees paid to contract manufacturers in conjunction with the production of clinical materials. These expenses are normally determined through a contract or purchase order issued by us;




Service fees paid to organizations for their performance in conducting clinical trials. These expenses are determined by contracts in place for those services and communications with project managers on costs that have been incurred as of each reporting date; and




Professional and consulting fees incurred with law firms, audit and accounting service providers and other third party consultants. These expenses are determined by either requesting those service providers to estimate unbilled services at each reporting date for services incurred or tracking costs incurred by service providers under fixed fee arrangements.

We have processes in place to estimate the appropriate amounts to record for accrued liabilities, which principally involve the applicable personnel reviewing the services provided. In the event that we do not identify certain costs that have begun to be incurred or we under or over-estimate the level of services performed or the costs of such services, the reported expenses for that period may be too low or too high. The date on which certain services commence, the level of services performed on or before a given date, and the cost of such services often require the exercise of judgment. We make these judgments based upon the facts and circumstances known at the date of the financial statements.

A change in the estimated cost or volume of services provided could result in additional accrued liabilities. Any significant unanticipated changes in such estimates could have a significant impact on our accrued liabilities and reported operating results. There have been no material adjustments to our accrued liabilities in any of the periods presented in the accompanying financial statements.

Stock-based compensation

We use the Black-Scholes option pricing model to calculate the fair value of share-based awards on the grant date.

The expected term of options granted represents the period of time for which the options are expected to be outstanding and is derived from our historical stock option exercise experience and option expiration data. Accordingly, the expected term is presumed to be the midpoint between the vesting date and the end of the contractual term. In addition, for purposes of estimating the expected term, we have aggregated all individual option awards into one group as we do not expect substantial differences in exercise behavior among our employees. The expected volatility is a measure of the amount by which our stock price is expected to fluctuate during the expected term of options granted. We determined the expected volatility based upon the historical volatility of our common stock over a period commensurate with the option’s expected term, exclusive of any events not reasonably anticipated to recur over the option’s expected term. The risk-free interest rate is the implied yield available on U.S. Treasury zero-coupon issues with a remaining term equal to the option’s expected term on the grant date. We have never declared or paid any cash dividends on any of our capital stock and do not expect to do so in the foreseeable future. Accordingly, we use an expected dividend yield of zero to calculate the grant-date fair value of a stock option.

We recognize compensation expense on a straight-line basis over the requisite service period based upon options that are ultimately expected to vest, and accordingly, such compensation expense has been adjusted by an amount of estimated forfeitures. Forfeitures represent only the unvested portion of a surrendered option. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Based on an analysis of historical data, we have calculated an 8% annual forfeiture rate for non-executive level employees, a 3% annual forfeiture rate for executive level employees, and a 0% forfeiture rate for non-employee members of the Board of Directors, which we believe is a reasonable assumption to estimate forfeitures. However, the estimation of forfeitures requires significant judgment and, to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised.

For the nine-month fiscal year ended December 31, 2011 and the nine-month period ended December 31, 2010, we recorded stock-based compensation expense of approximately $730,000 and $748,000, respectively, for stock options granted under the Second Amended and Restated 2001 Repligen Corporation Stock Plan (the “2001 Plan”). For the fiscal years ended March 31, 2011 and 2010, we recorded stock-based compensation expense of approximately $1,003,000 and $1,007,000, respectively, for stock options granted under the 2001 Plan.

As of December 31, 2011, there was $1,764,675 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 2.86 years. We expect 939,769 unvested options to vest over the next five years.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Overview

We are an integrated biopharmaceutical company focused on the development and commercialization of innovative therapies that deliver the benefits of protein therapies to patients and clinicians in the fields of neurology and gastroenterology. We are currently conducting a number of product development programs relating to diseases such as pancreatitis, Friedreich’s ataxia and spinal muscular atrophy. We also have a bioprocessing business that focuses on the development and commercialization of products that are used in the production of biopharmaceuticals. In addition, we have out-licensed certain biologics intellectual property from which we receive royalties from Bristol-Myers Squibb Company (“Bristol”) on their net sales in the United States of their product Orencia ® .

On October 27, 2011, we and our newly formed and wholly owned subsidiary, Repligen Sweden AB, entered into an Asset Transfer Agreement (the “Asset Transfer Agreement”) with Novozymes Biopharma DK A/S, a company organized under the laws of Denmark (“Novozymes Denmark”), and Novozymes Biopharma Sweden AB, a company organized under the laws of Sweden and a wholly-owned subsidiary of Novozymes Denmark (“Novozymes Sweden” and, together with Novozymes Denmark, “Novozymes”), to acquire Novozymes’ business headquartered at Novozymes Sweden’s facility in Lund, Sweden and all related operations, including the manufacture and supply of cell culture ingredients and Protein A affinity ligands for use in industrial cell culture, stem and therapeutic cell culture and biopharmaceutical manufacturing, and the provision of contract manufacturing services for ALK Abello A/S (the “Business”). Pursuant to the Asset Transfer Agreement, we will (a) purchase all of the assets related to the Business and assume certain specified liabilities related to the Business from Novozymes Sweden and (b) purchase contract rights and licenses used in the Business and other specified assets from Novozymes Denmark (collectively, the “Transferred Business” and the acquisition of the Transferred Business, the “Transaction”). On the date of the consummation of the Transaction, we will pay a purchase price of 17.0 million Euros (~$22.7 million) to Novozymes. The Asset Transfer Agreement includes future contingent payments to Novozymes Sweden consisting of:




an earn-out payment of 1.0 million Euros (~$1.3 million) if the Transferred Business achieves sales of a minimum quantity of a Novozymes product between January 1, 2012 and December 31, 2012;




two milestone payments of 1.0 million Euros (~$1.3 million) each if sales of certain Novozymes products achieve agreed levels for the combined calendar years 2012 and 2013 and for calendar year 2014, respectively; and




technology transfer payments totaling 1.0 million Euros (~$1.3 million) following the successful transfer of certain Novozymes manufacturing technology.

We currently expect to complete the Transaction in the fourth quarter of 2011. We do not anticipate seeking preclearance of the acquisition of the Transferred Business from any antitrust authorities or the applicability to the closing timeline of any antitrust-based statutory waiting periods. Our and Novozymes’ obligations to consummate the Transaction are subject to the satisfaction or waiver of customary closing conditions, including, among others, obtaining the transfer of permits used in the Business. The Asset Transfer Agreement provides each party with specified termination rights. The parties may terminate the Asset Transfer Agreement by written mutual assent, due to the material breach of the other parties, or in the event that the closing conditions have not been fulfilled by April 30, 2012. The foregoing description of the Transaction and the Asset Transfer Agreement does not purport to be complete and investors are therefore encouraged to read the Asset Transfer Agreement, which is filed as Exhibit 2.1 to the Current Report on Form 8-K that we filed on October 28, 2011.

Critical Accounting Policies and Estimates

A “critical accounting policy” is one which is both important to the portrayal of the Company’s financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For additional information, please see the discussion of our critical accounting policies in Management’s Discussion and Analysis and our significant accounting policies in Note 2 to the Financial Statements included in our Annual Report on Form 10-K for the year ended March 31, 2011. There have been no changes to our critical accounting policies since March 31, 2011.

Results of Operations

Three months ended September 30, 2011 vs. September 30, 2010

Total revenue

Total revenues for the three-month periods ended September 30, 2011 and 2010 were approximately $8,631,000 and $7,307,000, respectively, an increase of $1,324,000 or 18%.

Sales of bioprocessing products for the three-month periods ended September 30, 2011 and 2010 were approximately $5,742,000 and $4,416,000, respectively, an increase of $1,326,000, or 30%. Substantially all of our bioprocessing products are based on recombinant Protein A and are sold to customers who incorporate our manufactured products into their proprietary antibody purification systems to be sold directly to the pharmaceutical industry. Monoclonal antibodies are a well-established class of drug with applications in rheumatoid arthritis, asthma and a variety of cancers. Sales of our bioprocessing products are therefore impacted by the timing of large-scale production orders and the regulatory approvals for such antibodies, which may result in significant quarterly fluctuations in product revenue. We expect such quarterly fluctuations but do not necessarily believe they are always predictive of future revenue or otherwise indicate a trend.

Pursuant to the settlement with Bristol (the “Bristol Settlement”), we recognized royalty revenue of approximately $2,789,000 and $2,513,000 for the three-month periods ended September 30, 2011 and 2010, respectively.

For the three-month period ended September 30, 2011, we recognized approximately $100,000 of revenue from a sponsored research and development project under an agreement with Go Friedreich’s Ataxia Research (“GoFar”). During the three-month period ended September 30, 2010, we recognized revenue of approximately $331,000 from a sponsored research and development project with the Muscular Dystrophy Association and $47,000 from sponsored research and development projects with the Friedreich’s Ataxia Research Alliance and GoFar.

Costs and operating expenses

Total costs and operating expenses were approximately $8,079,000 and $6,780,000 for the three-month periods ended September 30, 2011 and 2010, respectively, an increase of $1,299,000 or 19%.

Cost of product revenue was approximately $2,093,000 and $1,472,000 for the three-month periods ended September 30, 2011 and 2010, respectively, an increase of $621,000 or 42%. This increase is primarily due to the increase and change in the mix of bioprocessing product sales, as well as other individually insignificant manufacturing variances.

Pursuant to the Bristol Settlement, we must remit 15% of royalty revenue received through the expiration of the settlement agreement in December 2013 to the University of Michigan. For the three-month periods ended September 30, 2011 and 2010, the cost of royalty revenue was approximately $418,000 and $377,000, respectively.

Research and development expenses were approximately $3,075,000 and $3,119,000 for the three-month periods ended September 30, 2011 and 2010, respectively, a decrease of $44,000 or 1%. This decrease is primarily attributable to a $395,000 decrease related to RG2417 for the treatment of patients with bipolar disorder as we discontinued this program in March 2011 and a $812,000 increase in costs associated with drug product manufacturing and other costs associated with the New Drug Application (“NDA”) submission for RG1068 for MRI imaging of the pancreas, offset by a $500,000 settlement related to this program from a dispute with Parexel International Corporation, parent company of Perceptive Informatics, Inc.

Significant fluctuations in research and development expenses may occur from period to period depending on the nature, timing, and extent of development activities over any given period of time. Many resources including personnel, supplies and equipment are shared by all of the development programs. As a result, and due to the significant risks and uncertainties in drug development, we are not able to provide cumulative spending to date or predict total development costs for any particular program.

Selling, general and administrative expenses were approximately $2,493,000 and $1,813,000 for the three-month periods ended September 30, 2011 and 2010, respectively, an increase of $680,000 or 38%. This increase is largely attributable to commercialization efforts as we prepare to launch RG1068 for MRI imaging of the pancreas, pending FDA approval, slightly higher headcount and related personnel expenses, and increased sales and marketing activities related to our bioprocessing business.

Investment income

Investment income was approximately $52,000 and $97,000 for the three-month periods ended September 30, 2011 and 2010, respectively. This decrease of $45,000, or 46%, is primarily due to lower interest rates.

Income tax provision

For the three-month periods ended September 30, 2011 and 2010, we had income before taxes of approximately $605,000 and $623,000, respectively. We did not record a tax provision in either period as the effective income tax rate was 0%. The effective income tax rate was based upon the estimated loss for the year ended March 2012 and the composition of the income in different jurisdictions. The effective tax rate differs from the statutory tax rate due to the utilization of prior year net operating losses and credits, offset by the effects of the alternative minimum tax on income derived during the fiscal year.

Six months ended September 30, 2011 vs. September 30, 2010

Total revenue

Total revenues for the six-month periods ended September 30, 2011 and 2010 were approximately $16,285,000 and $14,317,000 respectively, an increase of $1,968,000 or 14%.

Sales of bioprocessing products for the six-month periods ended September 30, 2011 and 2010 were approximately $10,100,000 and $8,685,000, respectively, an increase of $1,415,000, or 16%. Substantially all of our bioprocessing products are based on recombinant Protein A and are sold to customers who incorporate our manufactured products into their proprietary antibody purification systems to be sold directly to the pharmaceutical industry. Monoclonal antibodies are a well-established class of drug with applications in rheumatoid arthritis, asthma and a variety of cancers. Sales of our bioprocessing products are therefore impacted by the timing of large-scale production orders and the regulatory approvals for such antibodies, which may result in significant quarterly fluctuations in product revenue. We expect such quarterly fluctuations but do not necessarily believe they are always predictive of future revenue or otherwise indicate a trend.

Pursuant to the Bristol Settlement, we recognized royalty revenue of approximately $5,562,000 and $4,992,000 for the six-month periods ended September 30, 2011 and 2010, respectively.

For the six-month period ended September 30, 2011, we recognized revenue of approximately $474,000 from a sponsored research and development project with the Muscular Dystrophy Association and revenue of approximately $149,000 from sponsored research and development projects with the Friedreich’s Ataxia Research Alliance and GoFar. During the six-month period ended September 30, 2010, we recognized revenue of approximately $594,000 from a sponsored research and development project with the Muscular Dystrophy Association and revenue of approximately $47,000 from sponsored research and development projects with the Friedreich’s Ataxia Research Alliance and GoFar.

Costs and operating expenses

Total costs and operating expenses were approximately $15,854,000 and $12,901,000 for the six-month periods ended September 30, 2011 and 2010, respectively, an increase of $2,953,000 or 23%.

Cost of product revenue was approximately $3,646,000 and $2,737,000 for the six-month periods ended September 30, 2011 and 2010, respectively, an increase of $909,000 or 33%. This increase is primarily due to the increase and change in the mix of bioprocessing product sales, as well as other individually insignificant manufacturing variances.

Pursuant to the Bristol Settlement, we must remit 15% of royalty revenue received through the expiration of the settlement agreement in December 2013 to the University of Michigan. For the six-month periods ended September 30, 2011 and 2010, the cost of royalty revenue was approximately $834,000 and $749,000, respectively.

Research and development expenses were approximately $6,592,000 and $5,814,000 for the six-month periods ended September 30, 2011 and 2010, respectively, an increase of $778,000 or 13%. This increase is primarily attributable to a $1,552,000 increase in costs associated with drug product manufacturing and other costs associated with the NDA submission for RG1068 for MRI imaging of the pancreas, offset by a $500,000 settlement related to this program from a dispute with Parexel International Corporation, parent company of Perceptive Informatics, Inc., and a $945,000 increase related to RG3039 for spinal muscular atrophy which includes a $500,000 milestone payment made in April 2011 upon successful filing of our Investigational New Drug Application with the FDA, as well as other costs associated with the initiation of our Phase 1 clinical trial. These increases are offset by a $1,130,000 decrease related to RG2417 for the treatment of patients with bipolar disorder as we discontinued this program in March 2011.

Significant fluctuations in research and development expenses may occur from period to period depending on the nature, timing, and extent of development activities over any given period of time. Many resources including personnel, supplies and equipment are shared by all of the development programs. As a result, and due to the significant risks and uncertainties in drug development, we are not able to provide cumulative spending to date or predict total development costs for any particular program.

Selling, general and administrative expenses were approximately $4,782,000 and $3,601,000 for the six-month periods ended September 30, 2011 and 2010, respectively, an increase of $1,181,000 or 33%. This increase is largely attributable to commercialization efforts as we prepare to launch RG1068 for MRI imaging of the pancreas, pending FDA approval, slightly higher headcount and related personnel expenses, and increased sales and marketing activities related to our bioprocessing business.

Investment income

Investment income was approximately $118,000 and $196,000 for the six-month periods ended September 30, 2011 and 2010, respectively. This decrease of $78,000, or 40%, is primarily due to lower interest rates.

Income tax provision

For the six-month periods ended September 30, 2011 and 2010, we had income before taxes of approximately $549,000 and $1,611,000, respectively. We did not record a tax provision as the effective income tax rate was 0%. The effective income tax rate was based upon the estimated loss for the year ended March 2012 and the composition of the income in different jurisdictions. The effective tax rate differs from the statutory tax rate due to the utilization of prior year net operating losses and credits, offset by the effects of the alternative minimum tax on income derived during the fiscal year.

Liquidity and capital resources

We have financed our operations primarily through sales of equity securities, revenues derived from product sales, and research grants, as well as proceeds and royalties from litigation settlements. Our revenue for the foreseeable future will be limited to our bioprocessing product revenue, royalties from Bristol, and research and development grants. Given the uncertainties related to pharmaceutical product development, we are currently unable to reliably estimate when, if ever, our therapeutic product candidates will generate revenue and cash flows. Total cash, cash equivalents and marketable securities at September 30, 2011 were approximately $58,274,000, a decrease of $3,229,000 from $61,503,000 at March 31, 2011. We expect to pay the 17.0 million to 21.0 million Euros purchase price for the Novozymes acquisition with cash on hand.

Operating activities

Our operating activities consumed cash of approximately $2,563,000 for the six-month period ended September 30, 2011. Cash consumed by operating activities is primarily attributable to an increase in accounts receivable of $2,761,000, an increase in inventory of $506,000, an increase in prepaid expenses and other current assets of $433,000, a decrease in accounts payable of $350,000, an increase in royalties receivable of $277,000, and a decrease in accrued liabilities of $120,000, offset by net income of $549,000 and certain non-cash expenses such as $812,000 for depreciation and amortization and $527,000 in stock-based compensation expense.

For the six months ended September 30, 2010, operating activities provided cash of approximately $674,000. Cash provided by operating activities is primarily attributable to net income of $1,611,000, a decrease in prepaid expenses of $261,000, a decrease in inventory of $164,000, and certain non-cash expenses such as $809,000 for depreciation and amortization and $505,000 in stock-based compensation expense, offset by a $1,526,000 increase in accounts receivable, a $92,000 decrease in accounts payable and accrued liabilities, a $217,000 increase in royalties receivable, and a $22,000 decrease in long term liabilities.

Investing activities

Our investing activities consumed approximately $810,000 of cash for the six-month period ended September 30, 2011 as we had $471,000 in net purchases of marketable securities and $339,000 in equipment purchases and improvements to our facility.

For the six-month period ended September 30, 2010, investing activities provided cash of approximately $1,938,000 as we had $2,093,000 in net redemptions of marketable securities offset by approximately $155,000 in equipment purchases and improvements to our facility.

Financing activities

For the six-month period ended September 30, 2011, share repurchases consumed approximately $331,000 of cash and there was an insignificant amount of stock option exercises. For the six-month period ended September 30, 2010, stock option exercises provided cash proceeds of approximately $26,000.

CONF CALL

William Kelly

Thank you and good morning. The purpose of today’s call is to briefly review our financial results for Q3 of our fiscal year 2010, update our financial projections for the year and to update the status of our development programs. Joining me today is Walter Herlihy, our President and CEO.

At the outset, I'd like to state that this discussion will contain certain forward-looking statements which are not guarantees of future performance such as our financial projections and projections for the U.S. sales of Orencia, opportunities for licensing, our intellectual property portfolio and our plans and projections for clinical trials.

These statements are subject to certain factors which may cause Repligen's plans to materially differ or results to materially vary from those expected including market acceptance of our products, unexpected preclinical or clinical results or delays, delays in manufacturing by us or our partners, failure to receive adequate supply of clinical materials from our partners, timing of product orders, delays in or failure of regulatory approval, adverse changes in commercial relationships and a variety of other risks set forth in our filings with the Securities and Exchange Commission including, but not limited to, our Annual Report on Form 10-K. Except in circumstances in which prior disclosure becomes materially misleading in light of subsequent events, we do not intend to update any of these forward-looking statements.

This morning, we released our financial results for the third quarter fiscal year 2010 which ended on December 31, 2010. For the quarter, we recorded total revenue of $5.6 million, including product sales of $2.9 million and royalty and other revenue of $2.7 million. Product royalty and other revenue benefited from a 20% increase in Orencia sales versus the same quarter of last year.

Operating expenses has increased $400,000 compared to the prior year as the company continued to invest in our product pipeline and business development efforts most notably with the acquisition of our spinal muscular atrophy program announced in October.

Our cash and investments on December 31 was $61.4 million. Today, we are updating our financial expectations for fiscal year 2010 which ends on March 31, 2010, primarily to reflect the status of our secretin program which we will discuss in a moment as well as to reflect our expectations on the timing of certain other expenditures in relation to upcoming fiscal year end.

We are confirming today a total revenue projection for fiscal year 2010 between $21 and $22 million including approximately $10 million in product sales, $10 million in royalty income and $1 million in other revenues.

R&D spending is projected to be between $14 and $15 million and SG&A spending is projected to be about $6 to 7$ million. As a result, we expect our cash burn to be approximately $5 million and cash and investments on March 31, 2010 are projected to be approximately $58 to $59 million.

While we are actively evaluating additional licensing and asset acquisition opportunities to strengthen our therapeutic and bio-processing businesses, these projections exclude the impact of any such transactions.

We are also providing preliminary guidance for fiscal year 2011. We currently project double-digit growth in both product and royalty and other revenue. R&D spending should approximate $14 million and we expect net cash on hand on March 31st 2011 to be approximately $53 to $54 million. We will provide further details on our fiscal year 2011 guidance next quarter.

At this point, I like to turn the call over to Walter Herlihy for an update on our bio-processing business in our therapeutic pipeline.

Walter Herlihy

Thank you, Bill. Today, I like to describe our plans to revitalize our bioprocesing business. As many of you know for years, Repligen has been selling Protein A, primarily to our commercial partners GE Healthcare and more for in applied Biosystems.

Over the years this business grows our commercial partners sold increasing amounts of Protein A based resins to end users who were producing monoclonal antibodies. Over the past year, the recession has market reduced demand from these end users which has negatively impacted our sales.

Last year, we put in place to plant to diversify our business and expand the revenue opportunity. The first step in this plan is to secure our future revenues and our bulk Protein A manufacturing business.

Last week, we announced an important step in this effort by signing a five year supply agreement with GE Healthcare, one of the worlds largest consumer of Protein A. Yesterday, we announced our Pat Allowance for our next generation Protein A product which is an exact replica of the naturally derived form of Protein A using in the production of many of the World’s monoclonal antibodies.

This recombinant product is now available in commercial qualities which allow us to compete head-to-head with naturally derived Protein A. This product will also be the basis of future collaborations or our own internal development efforts.

The second step in the diversification and growth plan is to develop a series of products which can be sold directly to end users which will allow us to address larger market opportunities, with potentially higher gross margins.

The bulk Protein A market is approximately $20 million of which we have a share of approximately 50%, when our commercial partners attach our Protein A Resin and resell to end users. Its value increases by 5 to 10 fold.

We intended to develop products for this $150 million end user market for Protein A Resins. Capturing even the small share of this market has the potential to significantly grow our business.

Finally, we also seek to acquire non Protein A base products which can be sold to the same end user customer base. And this will further increase the opportunity to expand our business.

Our vision is to provide a range of high value products to end users who are producing not just part of a land of ours but other types of biological drugs and vaccines, a report updating you on additional developments in 2010, to diversify our business and provide us new growth opportunities.

Turning now to our pipeline last quarter, we report the Phase 3 clinical trial results for RG1068, our imaging agent for MRI of the pancreas. Subsequent analysis of the trial has convinced us that it was carried out at the clinical sites, according to the protocol and that the drug performed as expected.

There were however multiple problems with analysis of the image, images which was carried out by a contract research organization. For this reason, we are requesting feedback from the FDA and the European Medicines Agency, for our proposal to reanalyze the images with three new evaluating radiologists.

We expect initial feedback from the FDA in March and from the European Medicines Agency soon or after.

In the past quarter we continued our market research and believe there is a previously unrecognized significant market opportunity in Asia, which was approximately as large as the U.S. opportunity. We now believe that more than 600,000 MRI procedures worldwide which could benefit from the use of our product.

We are also developing RG2417, our formulation of uridine for acute treatment of depression and patients with bipolar disorder. Our Phase 2b trial is actively recruiting at 15 sites and we have enrolled approximately 110 of the planned 150 patients.

At the current revolving rate, we expect to be able to report data by the end of the year. Today's numbers, series adverse events is consistent with the excellent safety profile absorb in our Phase 2a study.

There are at least five million patients worldwide with bipolar disorder. A new safe and effective drug for this population has the potential to be a blockbuster.

We are also developing inhibitors HDAC-3 for the treatment of Friedreich's ataxia. We have completed the evaluation of one of our lead compounds in two species toxicology study, which is required by the FDA prior to initiation of clinical trials. Manufacturing our clinical drug supply is in progress and we expect to found IND to initiate Phase 1 clinical trials by mid 2010.

These studies are being partially supported by the Muscular Dystrophy association, which provide us with the second research graph in December. Our [global] goal is to cross over from one of our [tool] studies to Friedreich's patients as soon as possible, to enable us to get an early lead on the potentially efficacy of our drug by moderating changes in the blood levels of frataxin, the protein missing in Friedreich's patients.

Recent data suggest that this biomarker is exposed that a consistent level and patients, which will facilitate the observation of a potential increase in frataxin in a levels following drug treatment. We believe that they are 15000 Friedreich's ataxia patients worldwide, which represents a market opportunity of more than $300 million even with very modest pricing assumptions.

Last October, we license certain intellectual property for potential treatment for Spinal Muscular Atrophy or SMA from families for SMA. SMAs are demonstrating our muscular diseases caused by defect in a single gene, which results in low levels of protein known as SMN1. Families for SMA had identified potential clinical candidate and we are making rapid progress in determining this lead has a toxicity profile suitable for clinical development.

If so, we expect to file in IND in the second half of 2010. We believe that they are more than 20,000 SMA patients worldwide, which represents market opportunity of more than $500 million again using very modest pricing assumptions.

In summary, despite the outcome of the RG1068 trial the drug is clearly active and we believe there is a path forward. In addition, we have a rich pipeline of therapeutic product candidates addressing significant market opportunities and growth plan for above processing business as well as the financial resource is to develop them. We are looking for to updating you on our progress in 2010.

Operator, at this time, I’d like to open the call to questions.

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