Repligen Corp: Form 10-Q for the period ended Sep 30, 2024

Overview

Repligen and its subsidiaries, collectively doing business as Repligen Corporation (“Repligen”, “we”, “our”, or the “Company”) is a global life sciences company that develops and commercializes highly innovative bioprocessing technologies and systems that increase efficiencies and flexibility in the process of manufacturing biological drugs.

As the overall market for biologics continues to grow and expand, our customers – primarily large biopharmaceutical companies and contract development and manufacturing organizations and other life sciences companies (integrators) – face critical production cost, capacity, quality and time pressures. Built to address these concerns, our products help set new standards for the way 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, recombinant proteins, vaccines and cell and gene therapies – that are improving human health worldwide. Increasingly, our technologies are being implemented to overcome challenges in processing plasmid DNA (a starting material for the production of mRNA) and gene delivery vectors such as lentivirus and adeno-associated viral vectors. For more information regarding our business, products and acquisitions, see Part I, Item 1, “Business”, included in our 2023 Annual Report on Form 10-K, as amended, which was filed with the Securities and Exchange Commission (“SEC”) on November 18, 2024 (“Form 10-K/A”).

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 40 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 leveraging commercial opportunities) and targeted acquisitions.

Restatement

As previously described in the Note 1 to our unaudited condensed consolidated financial statements, we have restated our previously issued unaudited condensed consolidated financial statements and related notes as of December 31, 2023 and for the three and nine months ended September 30, 2023. As a result, the previously reported financial information as of December 31, 2023 and for the three and nine months ended September 30, 2023 in this Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” has been updated to reflect the relevant restatement. Refer to Note 1 in our unaudited condensed consolidated financial statements for additional information related to the restatement, including descriptions of the adjustments and the impacts on our unaudited condensed consolidated financial statements.

Macroeconomic Trends

As a result of our global presence, a significant portion of our revenue and expenses is denominated in currencies other than the U.S. dollar. We are therefore subject to non-U.S. exchange exposure. Exchange rates can be volatile and a substantial weakening or strengthening of foreign currencies against the U.S. dollar could increase or reduce our revenue and gross profit margin and impact the comparability of results from period to period.

We have experienced, and expect to continue to experience, cost inflation, primarily in raw materials, and other supply chain costs, as a result of global macroeconomic trends, including global geopolitical conflicts and labor shortages. Actions taken to mitigate supply chain disruptions and inflation, including price increases and productivity improvements, have generally been successful in offsetting the impact of these trends. In addition, decreasing demand for vaccines for the COVID-19 pandemic, including all subsequent variants of the SARS-CoV-1 coronavirus is driving a reduction in future demand of our products related to these vaccines.

2024 Acquisition

Pending Acquisition of Tantti Laboratory Inc.

On July 29, 2024, we announced that we entered into a definitive agreement to acquire privately-held Tantti Laboratory Inc. (“Tantti”). Tantti, which is headquartered in Taoyuan City, Taiwan, is expected to accelerate our expansion into new modality markets with unique, scalable purification solutions for large molecule biologics.

We expect the acquisition of Tantti to be completed in the fourth quarter of 2024 subject to the satisfaction of customary closing conditions, including clearance through the Taiwanese regulatory channel.

2023 Acquisitions

Acquisition of FlexBiosys, Inc.

On April 17, 2023, we completed the acquisition of all of the outstanding equity interests in FlexBiosys, Inc. (“FlexBiosys”), pursuant to an Equity Purchase Agreement with FlexBiosys, TSAP Holdings Inc. (“NJ Seller”), Gayle Tarry and Stanley Tarry, as individuals (collectively with NJ Seller, the “Sellers”), and Stanley Tarry, in his capacity as the representative of the Sellers (the “FlexBiosys Acquisition”).

FlexBiosys, which is headquartered in Branchburg, New Jersey, offers expert design and custom manufacturing of single-use bioprocessing products and a comprehensive range of products that include bioprocessing bags, bottles, and tubing assemblies. These products will complement and expand our fluid management portfolio of offerings.

Acquisition of Metenova Holding AB

On October 2, 2023, we completed the acquisition of all of the outstanding equity interests in Metenova Holding AB (“Metenova”), pursuant to a Share Sale and Purchase Agreement with, inter alia, Metenova for approximately $173 million in cash and the Company's equity. Metenova will further strengthen our fluid management portfolio with its magnetic mixing and drive train technologies that are widely used by global biopharmaceutical companies and contract development and manufacturing organizations.

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 condensed consolidated financial statements, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations and our significant accounting policies in Note 3, “Summary of Significant Accounting Policies”, to the consolidated financial statements included in our Form 10-K/A.

Results of Operations

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

Revenues (As Restated)

Total revenue for the three and nine months ended September 30, 2024 and 2023 were as follows:

(Amounts in thousands, except for percentage data)

Product revenues

During the three and nine months ended September 30, 2024, product revenue increased by $13.7 million, or 9.7%, and $1.2 million, or 0.2%, respectively, as compared to the same periods of 2023. The increase in the three-month period is mainly due to the increase in revenue of $12.3 million from our filtration franchise. The increase in the nine-month period is primarily driven by growth in our filtration franchise of $27.5 million, offset by decreasing revenue in our Proteins and Chromatography franchises of $21.9 million and $6.6 million, respectively.

Royalty and other revenues

Royalty and other revenues in the three and nine months ended September 30, 2024 and 2023 relate to royalties received from a third-party systems manufacturer associated with our OPUS® chromatography columns. Royalty revenues are variable and are dependent on sales generated by our partners.

Costs of goods sold and operating expenses (As Restated)

Total costs and operating expenses for the three and nine months ended September 30, 2024 and 2023 were comprised of the following:

(Amounts in thousands, except for percentage data)

Cost of goods sold

Cost of goods sold decreased $27.3 million, or 26.0%, and $34.7 million, or 13.1% for the three and nine months ended September 30, 2024, compared to the same periods of 2023.

During the three and nine months ended September 30, 2023, the Company incurred specific restructuring charges, including a $17.2 million inventory write-off to adjust inventory to net realizable value, a $3.8 million charge for accelerated depreciation on equipment related to manufacturing facilities to be closed and $3.0 million in severance and other charges, as a result of the restructuring activities, which commenced in July 2023, for a total of $24.0 million. See Note 5, “Restructuring Plan” for more information on the Restructuring Plan. Cost of goods decreased further due to less materials consumed in the production process and reduction in overhead costs as a direct result of the restructuring activities.

For the three months ended September 30, 2024, excluding the impact of the restructuring charges accounted for in the three months ended September 30, 2023, material and overhead costs decreased by $5.0 million and labor costs increased by $1.7 million, compared to the same period in 2023. For the nine months ended September 30, 2024, excluding the impact of the restructuring charges accounted for in the three months ended September 30, 2023, material and overhead costs and labor costs decreased by $10.0 million and $0.7 million, respectively.

Gross margin was 50.0% and 25.9% in the three months ended September 30, 2024 and 2023, respectively and gross margin was 50.5% and 42.9% in the nine months ended September 30, 2024 and 2023, respectively. The primary driver of the margin improvement is the non-recurring restructuring charges incurred in the prior year, discussed earlier. In addition, we benefited from higher volume and year-over-year productivity, with some offset from inflation.

Research and development expenses

Research and development (“R&D”) expenses are related to the development of products supporting bioprocessing operations. The expenses include personnel compensation, supplies, and other research expenses. Due to the fact that these various programs share personnel and fixed costs, we have not provided historical costs incurred by project.

R&D expenses decreased $0.9 million, or 8.2%, during the three months ended September 30, 2024, compared to the same period of 2023. The decrease is primarily due to the reduction in product development and R&D research services of $0.6 million.

R&D expenses decreased $0.9 million, or 2.8%, during the nine months ended September 30, 2024, as compared to the same period of 2023, due to the reduction in R&D research services of $1.6 million and laboratory and other R&D supplies of $1.2 million, offset by increased payroll and consulting costs of $1.5 million.

R&D expense also includes payments made to expand our proteins product offering through our agreement with Navigo Proteins GmbH (“Navigo”). Such expenses were $1.1 million and $2.9 million for the three and nine months ended September 30, 2024, as compared to $0.8 million and $3.1 million, respectively, for the same periods in 2023, in the form of milestone payments to Navigo.

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. It also includes legal, accounting, patent, shareholder services, amortization of intangible assets and other administrative functions.

SG&A costs increased by $20.0 million, or 36.0%, during the three months ended September 30, 2024 and increased $41.9 million, or 26.1%, during the nine months ended September 30, 2024, as compared to the same periods of 2023.

One of the primary drivers of this increase was the incremental stock compensation expense of $17.4 million for the three months ended September 30, 2024 and $22.4 million for the nine months ended September 30, 2024, associated with the modification of our former Chief Executive Officer’s (“CEO”) unvested equity awards resulting from the announcement of his transition from CEO to Executive Chair of our Board, which was announced on June 12, 2024 and effective September 1, 2024. For more information on the former CEO’s transition to Executive Chair of our Board, see Note 10, “Stockholders’ Equity - Chief Executive Officer Accounting Modifications” included in this report.

Excluding the impact of the incremental stock compensation expense mentioned above, SG&A expenses for the three months ended September 30, 2024 increased by $2.6 million which is predominantly driven by increased incentive and commission expenses of $2.1 million and incremental intangible asset amortization of $1.0 million.

Excluding the impact of the incremental stock compensation expense mentioned above, SG&A expenses for the nine months ended September 30, 2024 increased by $19.5 million which is predominantly driven by increased incentive and commission expenses of $9.8 million, incremental salary expense of $5.2 million and incremental intangible asset amortization of $3.2 million.

The increase in SG&A costs also reflects the results of the operations of FlexBiosys and Metenova, which have been included in our consolidated results of operations since the acquisition dates in April 2023 and October 2023, respectively.

Contingent consideration

Contingent consideration expense represents the change in fair value of the contingent consideration obligation included in current and noncurrent contingent consideration on the condensed consolidated balance sheets as of the end of each period. Remeasurement of the contingent consideration obligation is done each quarter and the carrying value of the obligation is adjusted to the current fair value through our condensed consolidated statements of comprehensive income (loss). Expected results and a change in market inputs used to calculate the discount rate, resulted in a change reported for the three and nine months ended September 30, 2023 of $(34.3) million and $(31.3) million, respectively. No adjustment was recorded for the three and nine months ended September 30, 2024 as management’s assessment was that the balances of the contingent consideration obligations already represented fair value.

Other income, net

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

(Amounts in thousands, except for percentage data)

Investment income

Investment income includes income earned on invested cash balances. Our investment income increased by $2.5 million and $9.4 million for the three and nine months ended September 30, 2024, as compared to the same periods of 2023 due to an increase in interest rates on higher average invested cash balances since September 30, 2023. Offsetting this increase was a decrease in interest earned on U.S. treasury bills purchased at the end of 2022, for which there was no comparable amount recorded in 2024. We expect investment income to vary based on changes in the amount of funds invested and fluctuation of interest rates.

Interest expense

Interest expense for the three and nine months ended September 30, 2024 is primarily from contractual coupon interest on the convertible debt outstanding as of September 30, 2024. On December 14, 2023, we entered into a privately negotiated exchange and subscription agreement with certain holders of our 0.375% Convertible Senior Notes due 2024 (the “2019 Notes”) and certain new investors pursuant to which we issued $600.0 million aggregate principal amount of 1.00% Convertible Senior Notes due 2028 (the “2023 Notes”). Interest expense of the 2019 Notes for the three months ended September 30, 2024 was immaterial. Interest expense for the nine months ended September 30, 2024 was $0.1 million of interest on the 2019 Notes, compared to $0.3 million and $0.8 million, respectively of interest expense on the 2019 Notes in the same periods of 2023. Interest expense for the three and nine months ended September 30, 2024 also includes $1.5 million and $4.5 million, respectively, of contractual coupon interest on the 2023 Notes as well as $3.5 million and $10.2 million, respectively, in accretion of the $82.1 million debt discount on the modified notes, which includes the accretion of an increase in principal and the accretion of increased fair value of the conversion option for the three and nine months ended September 30, 2024, for which there were no comparable costs in the same periods of 2023. See Note 9, “Convertible Senior Notes,” to our condensed consolidated financial statements included in this report for more information on this transaction.

Amortization of debt issuance costs

Transaction costs related to the issuance of the 2019 Notes and the 2023 Notes are amortized to amortization of debt issuance costs on the condensed consolidated statements of comprehensive income (loss). For the nine months ended September 30, 2024, amortization of debt issuance costs included $0.2 million of amortization of costs related to the 2019 Notes. For the three and nine months ended September 30, 2024, amortization of debt issuance costs included $0.4 million and $1.2 million, respectively, of amortization of costs related to the 2023 Notes. For the three and nine months ended September 30, 2023, amortization of debt issuance costs included $0.5 million and $1.4 million, respectively, of amortization related to the 2019 Notes.

Other (expenses) income

The change in other (expenses) income for the three and nine months ended September 30, 2024, compared to the same periods of 2023, is primarily attributable to realized and unrealized foreign currency gains and losses related to transactions with customers and vendors, as well as the revaluation impact of intercompany loans with subsidiaries.

Income tax provision (As Restated)

Income tax provision for the three and nine months ended September 30, 2024 and 2023 was as follows:

(Amounts in thousands, except for percentage data)

For the three and nine months ended September 30, 2024, we recorded an income tax benefit of $(0.5) million and an income tax expense of $3.2 million, respectively. The effective tax rate was 43.0% and 27.8% for the three and nine months ended September 30, 2024, respectively, and is based upon the estimated income for the year ending December 31, 2024 and the composition of income in different jurisdictions. The difference in effective tax rates between the periods was primarily due to lower income before income taxes, nondeductible stock compensation and nonrecurring tax benefits from nontaxable contingent consideration and a deductible foreign exchange loss on certain long-term intercompany debt. Our effective tax rates for the three and nine months ended September 30, 2024 were higher than the U.S. statutory rate of 21% primarily due to nondeductible stock compensation partially offset by stock windfall tax benefits.

For the three and nine months ended September 30, 2023, we recorded an income tax benefit of $(5.5) million and an income tax expense of $2.8 million, respectively. The effective tax rate was (48.7%) and 5.1% for the three and nine months ended September 30, 2023, respectively, and is based upon the estimated income for the year ending December 31, 2023 and the composition of income in different jurisdictions. The difference in effective tax rates between the periods was primarily due to lower income before income taxes and increased benefits from business tax credits, nontaxable contingent consideration and a deductible foreign exchange loss on certain long-term intercompany debt, partially offset by lower foreign-derived intangible income and nondeductible executive compensation. Our effective tax rates for three and nine months ended September 30, 2023 were lower than the U.S. statutory rate of 21% primarily due to business tax credits, foreign-derived intangible income, windfall tax benefits on stock option exercise and the vesting of stock units, nontaxable contingent consideration and a deductible foreign exchange loss on certain long-term intercompany debt.

In 2021, the Organization of Economic Co-operation and Development announced an Inclusive Framework on Base Erosion and Profit Sharing with the goal of achieving consensus around substantial changes to international tax policies, including the implementation of a minimum global effective tax rate of 15%. We continue to evaluate the impacts of enacted legislation and pending legislation in the tax jurisdictions in which we operate. While various countries have implemented the legislation as of January 1, 2024, we do not expect a resulting material impact to our income tax provision for the 2024 fiscal year.

Liquidity and Capital Resources (Restated)

We have financed our operations primarily through revenues derived from product sales, the issuance of the 2019 Notes in July 2019, the 2023 Notes in December 2023 and the issuance of common stock in our December 2020, July 2019 and May 2019 public offerings. Our revenue for the foreseeable future will primarily be limited to our bioprocessing product revenue.

On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver. Subsequently, the U.S. Treasury, Federal Reserve and FDIC announced that SVB depositors would have access to all of their money. We have a banking relationship with SVB and hold cash, cash equivalents and marketable securities of $0.3 million as of September 30, 2024 in SVB depository accounts to cover short-term operational payments. While we have not experienced any losses in such accounts, the failure of SVB in 2023 caused us to utilize our accounts at other financial institutions in order to mitigate potential operational risks stemming from the temporary inability to access funds in our SVB operating accounts. As a result of bank failures, such as SVB, our access to funding sources in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired and could negatively impact the financial institutions with which we have direct arrangements, or the financial services industry or economy in general.

At September 30, 2024, we had cash and cash equivalents of $784.0 million compared to cash and cash equivalents of $751.3 million at December 31, 2023.

Working capital increased by $76.8 million to $1,023.2 million at September 30, 2024 from $946.4 million at December 31, 2023 due to the various changes noted below.

On December 14, 2023, the Company issued $600.0 million aggregate principal amount of its 2023 Notes in a private placement pursuant to separate, privately negotiated exchange and subscription agreements (the “Exchange and Subscription Agreements”) with a limited number of holders of its outstanding 2019 Notes and certain other qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (“Securities Act”). Pursuant to the Exchange and Subscription Agreements, the Company exchanged $217.7 million of its 2019 Notes for $309.9 million aggregate principal amount of the 2023 Notes (the “Exchange Transaction”) and issued $290.1 million aggregate principal amount of the 2023 Notes (the “Subscription Transactions”) for $290.1 million in cash. Proceeds from the Subscription Transactions amounted to $276.1 million after debt issuance costs of $13.9 million. The 2023 Notes are senior, unsecured obligations of the Company, and bear interest at a rate of 1.00% per year. Interest is payable semi-annually in arrears on each June 15 and December 15, commencing on June 15, 2024. The 2023 Notes will mature on December 15, 2028, unless earlier redeemed, repurchased or converted. During the third quarter of 2024, the closing price of the Company's common stock did not exceed 130% of the conversion price of the 2023 Notes for more than 20 trading days of the last 30 consecutive trading days of the quarter. As a result, the 2023 Notes are not convertible at the option of the holders of the 2023 Notes during the fourth quarter of 2024, the quarter immediately following the quarter when the conditions are met, as stated in the indenture governing the 2023 Notes. For more information on the 2023 Notes, see Note 9, "Convertible Senior Notes," to this report.

The remaining 2019 Notes matured and were paid off in full on July 15, 2024. As mentioned above, the Company used net proceeds from the Exchange Transaction to fund the repayment of the 2019 Notes at maturity and to pay accrued and unpaid interest with respect to such notes. The Company irrevocably elected to settle the conversion of the 2019 Notes using a combination of cash and the Company’s common stock, settling the par value of the 2019 Notes in cash and any excess conversion premium in shares. In connection with the conversion, the Company paid $69.6 million in cash, which included principal and accrued interest, and issued 100,942 shares of the Company’s common stock representing the conversion premium.

Cash Flows

(Amounts in thousands)

Operating activities (As Restated)

For the nine months ended September 30, 2024, our operating activities provided cash of $136.2 million reflecting net income of $8.4 million and non-cash charges totaling $113.3 million primarily related to depreciation and intangible amortization, amortization of debt discount and issuance costs, stock-based compensation, deferred income taxes and operating lease right of use asset amortization. Accounts receivable increased by $4.6 million, while inventory manufactured decreased by $20.1 million. Accounts payable and accrued liabilities had a net increase of $7.1 million, primarily due to an increase in unearned revenue and accrued employee payroll and bonuses, and there was a net increase in operating lease liability due to new operating leases entered into during 2024 providing cash of $5.8 million. Prepaid expenses increased by $1.8 million, primarily related to prepayment of corporate taxes. The remaining cash used in operating activities resulted from unfavorable changes in various other working capital accounts.

For the nine months ended September 30, 2023, our operating activities provided cash of $84.9 million reflecting net income of $52.0 million and non-cash charges totaling $40.7 million primarily related to depreciation and amortization, contingent consideration fair value adjustments, deferred income taxes, non-cash interest income, stock-based compensation charges and operating lease right of use asset amortization. A decrease in accounts receivable provided $8.3 million of cash and was primarily driven by lower revenue. Additionally, we had a decrease in inventory manufactured that provided $26.0 million of which $17.2 million was related to the Restructuring Plan. An increase in prepaid expenses, primarily related to prepaid taxes and subscriptions consumed $12.7 million. A decrease in accounts payable and accrued expenses consumed $21.3 million and was due to the timing of payments to vendors as well as the payment of employee bonuses related to 2022 during the nine months ended September 30, 2023. The remaining cash provided by operating activities resulted from favorable changes in various other working capital accounts.

Investing activities

Our investing activities consumed $21.6 million of cash during the nine months ended September 30, 2024, which was primarily driven by capital expenditures of $22.9 million during 2024. Included in this amount were capitalized costs related to our internal-use software for the nine months ended September 30, 2024.

Our investing activities provided $46.6 million of cash during the nine months ended September 30, 2023, primarily due to the maturity of our short-term investment in U.S. treasury securities in June 2023, which provided cash of $102.3 million. We used $27.8 million in cash (net of cash received) for the FlexBiosys Acquisition. Capital expenditures consumed $27.8 million in 2023 as we continue to increase our manufacturing capacity worldwide. Of these expenditures, $2.7 million represented capitalized costs related to our internal-use software for the nine months ended September 30, 2023.

Financing activities

Our financing activities consumed $84.4 million of cash for the nine months ended September 30, 2024, driven primarily by the settlement of the 2019 Notes of $69.9 million, of which $69.6 million occurred in the three months ended September 30, 2024. A further $9.4 million was disbursed in cash for shares withheld to cover employee income tax due upon the vesting and release of restricted stock units, and the payments of $2.2 million and $5.2 million to settle the cash portion of the contingent earnout obligations related to our acquisition of FlexBiosys in April 2023 and Avitide in September 2021, respectively. These payments were partially offset by proceeds received from stock option exercises during the period.

Our financing activities consumed $19.2 million of cash for the nine months ended September 30, 2023, primarily for $12.2 million in cash disbursed for shares withheld to cover employee income tax due upon the vesting and release of restricted stock units and the payment of $7.3 million to settle the cash portion of the First Earnout Year contingent earnout obligation related to our acquisition of Avitide in September 2021. This was partially offset by proceeds received from stock option exercises during the period.

Effect of exchange rate changes on cash and cash equivalents

The effect of exchange rate changes on cash during the nine months ended September 30, 2024 is a result of using multiple currencies across the group, with the Euro and Swedish Krona being significant currencies for the group outside of the US Dollar.

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 and successfully integrate them into our business;
• our ability to acquire additional bioprocessing products;
• the scope of and progress made in our R&D activities;
• the scope of investment in our intellectual property portfolio;
• contingent consideration earnout payments resulting from our acquisitions;
• the extent of any share repurchase activity;
• the success of any proposed financing efforts;
• general economic and capital markets;
• change in accounting standards;
• the impact of inflation on our operations, including our expenditures on raw materials and freight charges;
• fluctuations in foreign currency exchange rates; and
• costs associated with our ability to comply with, emerging environmental, social and governance standards.

Absent acquisitions of additional products, product candidates or intellectual property and absent the need to satisfy any debt conversions, 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 remainder of the fiscal 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 R&D activities associated with the development of new bioprocessing products. We actively evaluate various strategic transactions on an ongoing basis, including acquiring 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, the need to fund debt conversions, or due to 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 shareholders, 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.

Net Operating Loss Carryforwards (As Restated)

At December 31, 2023, the Company had federal net operating loss carryforwards of $31.1 million, state net operating loss carryforwards of $4.8 million and foreign net operating loss carryforwards of $4.9 million. The state net operating loss carryforwards will expire at various dates through 2043, while the federal and foreign net operating loss carryforwards have unlimited carryforward periods and do not expire. We had federal and state business tax credits carryforwards of $5.8 million available to reduce future federal and state income taxes. The business tax credits carryforwards will expire at various dates through December 2043. 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 shareholders.

Effects of Inflation

Our assets are primarily monetary, consisting mainly of cash and cash equivalents. Because of their liquidity, these assets are not directly affected by inflation. Since we intend to retain and continue to use our equipment, furniture, fixtures and office equipment, computer hardware and software 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, expectations and beliefs for recently-completed acquisitions, product development and sales, restructuring activities and the expected results thereof, product candidate research, development and regulatory approval, SG&A expenditures, intellectual property, development and manufacturing plans, availability of materials and product and adequacy of capital resources, our financing plans and the projected continued impact of, and response to, the COVID-19 pandemic constitute forward-looking statements. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which the Company operates, and management’s beliefs and assumptions. The

Company undertakes no obligation to publicly update or revise the statements in light of future developments. In addition, other written and oral statements that constitute forward-looking statements may be made by the Company or on the Company’s behalf. Words such as “expect,” “seek,” “anticipate,” “intend,” “plan,” “believe,” “could,” “estimate,” “may,” “target,” “project,” or variations of such words and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated, including, without limitation, risks associated with the following: the success of current and future collaborative or supply relationships, including our agreements with Cytiva, MilliporeSigma and Purolite Life Sciences, an Ecolab Inc. company; our ability to successfully grow our bioprocessing business, including as a result of acquisitions, commercialization or partnership opportunities, and our ability to develop and commercialize products; our ability to obtain required regulatory approvals; our compliance with all U.S. Food and Drug Administration regulations, our ability to obtain, maintain and protect intellectual property rights for our products; the risk of litigation regarding our patent and other intellectual property rights; the risk of litigation with collaborative partners; our manufacturing capabilities and our dependence on third-party manufacturers and value-added resellers; our ability to hire and retain skilled personnel; the market acceptance of our products, reduced demand for our products that adversely impacts our future revenues, cash flows, results of operations and financial condition; our ability to integrate acquired businesses successfully into our business and achieve the expected benefits of the acquisitions; our ability to compete with larger, better financed life sciences companies; our history of losses and expectation of incurring losses; our ability to generate future revenues; our ability to successfully integrate our recently acquired businesses; our ability to raise additional capital to fund potential acquisitions; risks related to the restatement of our consolidated financial statements included in our Form 10-K/A and for other periods impacted by the restatement identified in our Current Report on Form 8-K filed with the SEC on September 18, 2024; our plans to mitigate our material weaknesses in our internal controls over financial reporting; the impact of the restatement on our reputation and investor confidence in us and the increased possibility of legal proceedings and regulatory inquiries; our volatile stock price; and the effects of our anti-takeover provisions. Further information on potential risk factors that could affect our financial results are included in the filings made by us from time to time with the SEC including under the sections entitled “Risk Factors” in our Form 10-K/A.

For information regarding our exposure to certain market risks, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report on Form 10-K/A for the year ended December 31, 2023. There were no material changes to our market risk exposure during the three months ended September 30, 2024.

Disclosure Controls and Procedures

The Company’s management is responsible for establishing and maintaining adequate DCPs (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). DCPs are those controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company carried out an evaluation as of September 30, 2024 of the effectiveness of the design and operation of the Company’s DCPs pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). 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 not effective because of the previously reported material weaknesses in our internal control over financial reporting, which are described in Part II, Item 9A, “Controls and Procedures” of our Annual Report on Form 10-K/A for the year ended December 31, 2023.

Material Weaknesses in Internal Control Over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. As of December 31, 2023 and disclosed in the Company’s Form 10-K/A, the Company identified the following material weaknesses in internal control over financial reporting:

1. A material weakness in the operation of our controls over the deferred income tax accounting for complex and non-routine transactions. Specifically, management did not have adequate supervision and review controls over the complex accounting for deferred income tax on the exchange of our outstanding 0.375% Convertible Senior Notes due 2024 and the issuance of 1.00% Convertible Senior Notes due 2028, including work performed by external advisors and the internal review of such transaction and related analyses.

2. In connection with the restatement of the Company’s financial statements, a material weakness related to the design and operating effectiveness of controls related to revenue recognition specific to the evaluation of accounting for contract terms.

As of September 30, 2024, the Company has not remediated these material weaknesses.

Remediation Plan for Material Weaknesses

As previously disclosed in the Form 10-K/A, management is implementing remedial actions under the oversight of the Audit Committee of the Board of Directors to address the identified deficiencies.

Our income tax remediation efforts include the following activities:

• Improving our process to identify and select qualified third-party advisors, including enhanced review of capabilities and work performed, specifically related to the review of tax advice and related accounting guidance.
• Implementing a process to verify the controls, processes and internal reviews performed by third-party advisors.
• Considering whether the non-routine transaction warrants additional advisor oversight or validation of analyses based on complexity or changes in applicable regulations.
• Increasing education for internal resources on complex transactions to enhance diligence capabilities with third-party advisors.

Our revenue recognition remediation efforts include the following activities:

• Designing new internal controls to validate there is a complete listing of revenue contracts that have non-standard terms, which require incremental accounting analysis under ASC 606.
• Designing new internal controls evaluating the accounting for contract amendments, including amendments accounted for as contract modifications.
• Enhancing and expanding our existing revenue recognition control procedures and attributes when evaluating the accounting impact of non-standard contract terms and contract modifications.
• Increasing education for internal resources on accounting for contracts within the scope of ASC 606 and deploying enablers to facilitate documentation of accounting analyses and conclusions.

We will continue to monitor the design and operating effectiveness of these and other processes, procedures and controls and make any further changes management determines appropriate.

Changes in Internal Control

Except for the material weaknesses described above, there have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the three months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The matters discussed in this Quarterly Report on Form 10-Q (“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 Factors” in Part I, Item 1A of our Annual Report on Form 10-K/A for the period ended December 31, 2023 (“Form 10-K/A”) and in subsequent filings, could cause our actual results to differ materially from those in the forward-looking statements.

As contemplated in Item 1A, entitled “Risk Factors,” in the Company's Form 10-K/A, the Company has in the past and may in the future experience data security incidents. If successful, these attacks could affect service reliability and threaten the confidentiality, integrity, and availability of information. The Company is updating the risk factor captioned ”Our internal computer systems, or those of our customers, collaborators or other contractors, may be subject to cyber-attacks or security breaches, which could result in a material disruption of our product development programs” to reference the following incident:

As described on the Current Report on Form 8-K filed on July 15, 2024, on July 9, 2024, the Company discovered that an unauthorized third party had accessed certain files on the Company’s information systems. Based on information currently known as of the date of this Form 10-Q and management’s current assessment of quantitative and qualitative factors (including reputational harm, adverse impacts on relationships with vendors, customers and other business partners, and the impact of the foregoing on the Company’s stockholders), the Company does not believe this incident will have a material impact on its financial condition and results of operations. In addition, as of the date this Form 10-Q other than the Company’s response and remediation activities, the incident has not had an impact on the Company’s business or operations.

Other than the foregoing, there have been no material changes to the risk factors disclosed in Item 1A, entitled “Risk Factors,” in the Company’s Form 10-K/A.