Repligen Corporation — Q1 2023 Form 10-Q
Business context and reporting period. Repligen develops and sells bioprocessing technologies used in biologic drug manufacturing. This unaudited report covers the three months ended March 31, 2023, compared with Q1 2022. The company reports one operating segment.
Key financial metrics
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $182.7 million | $206.4 million | Down 11.5% |
| Gross margin | 55.2% | 60.1% | Down 4.9 percentage points |
| Income from operations | $31.3 million | $60.0 million | Down 47.9% |
| Net income | $28.8 million | $47.0 million | Down 38.6% |
| Diluted EPS | $0.51 | $0.81 | Down 37.0% |
| Operating cash flow | $11.2 million | $23.1 million | Down $12.0 million |
Cost of product revenue was $81.8 million, and R&D expense was $12.2 million. SG&A rose 3.4% to $56.2 million. Investment income increased to $5.5 million from $0.1 million, supporting pretax results despite weaker operating income. The effective tax rate was 20.1%, versus 20.3%.
Management-reported non-GAAP adjusted income from operations was $40.9 million (versus $67.4 million); adjusted net income was $36.3 million, or $0.64 per diluted share (versus $53.7 million, or $0.92); adjusted EBITDA was $48.9 million (versus $72.2 million). These non-GAAP measures exclude specified items; see the filing’s reconciliations.
At March 31, 2023, cash and cash equivalents were $516.6 million and short-term held-to-maturity Treasury bills were $101.4 million. Working capital was $613.5 million. Total assets were $2.54 billion and total liabilities were $597.7 million. Convertible notes had a $285.1 million net carrying value; they bear 0.375% interest and mature in July 2024. The filing classifies them as current liabilities. Operating cash flow was affected by working-capital movements, including higher receivables and inventory and lower accrued liabilities. Capital expenditures were $8.5 million.
Material changes and management commentary
- Product revenue declined 11.5%, mainly because of lower COVID-19-related demand, particularly in filtration, and unfavorable foreign exchange. Growth in chromatography and proteins, including large-scale OPUS columns and cell culture growth factors, partly offset the decline.
- Gross margin fell with lower sales and production volumes, mix shift away from higher-margin COVID-related products, added facility and depreciation costs, and freight inflation.
- Management said inflation and supply-chain pressures, including raw-material and freight costs, were expected to continue affecting results for a significant part of 2023. Price increases and productivity improvements had generally helped offset these pressures. The company expects lower future demand for products related to COVID-19 vaccines.
- R&D expense was flat year over year; management expects it to gradually increase during the remainder of 2023. It also expects operating expenses to rise as the business and commercial capabilities expand.
- The filing provides no specific revenue or earnings guidance. Management stated existing cash was adequate for at least 24 months from the filing date, absent acquisitions of additional products, candidates, or intellectual property.
- On April 17, 2023, after quarter-end, Repligen acquired FlexBiosys, a maker of single-use bioprocessing products intended to complement its fluid-management portfolio. Purchase-price and valuation details were not provided in this filing.
Risks, contingencies, and unusual items
- Approximately 11.0% of Q1 2023 revenue came from Pfizer. The company also identifies customer concentration, demand variability, foreign-exchange exposure, inflation, supply constraints, and acquisition integration as risks. It does not hedge its foreign-currency exposure.
- Repligen held approximately $0.1 million in SVB accounts at March 31, 2023 for short-term operating payments. It reported no losses there and said it shifted use to other financial institutions after SVB’s failure; the filing highlights broader financial-system and liquidity risks.
- Avitide contingent consideration was $66.7 million at quarter-end, including $27.8 million classified as current; $14.5 million of the current amount was expected to be paid in Q2 2023. Maximum undiscounted future contingent consideration was $125.0 million.
- The 2019 convertible notes were convertible at holders’ option in Q2 2023 under their terms. Of $39.0 million of principal requested for conversion since issuance, $9.0 million remained to settle in Q2 2023; prior conversions resulted in only a nominal number of shares issued.
- The company reported no legal proceedings it believed would have a material adverse effect and no material changes to previously disclosed risk factors other than additional financial-services-industry risks. Disclosure controls were assessed as effective.
Investor facts to verify
- Whether demand outside COVID-19-related programs and the chromatography and proteins franchises offsets continued declines in COVID-related sales.
- Whether gross margin stabilizes as volume, product mix, manufacturing capacity, and input costs change.
- Receivables, inventory, and accrued-liability trends, and the resulting conversion of earnings into operating cash flow.
- Settlement of the remaining $9.0 million of convertible notes and the cash impact of future Avitide earnout payments.
- FlexBiosys acquisition economics, purchase accounting, integration progress, and contribution to results when disclosed.
- Exposure to major customers, currency movements, suppliers, and financial institutions, including developments affecting liquidity access.