Repligen Corporation — FY2021 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2021, not a standalone fourth quarter. Repligen develops and sells bioprocessing products used in the manufacture of biologic drugs, across filtration, chromatography, process analytics and proteins. Its customers include biopharmaceutical companies and contract manufacturers. The company reports one operating segment.
Financial performance and position
| Metric | FY2021 | FY2020 |
|---|---|---|
| Total revenue | $670.5 million | $366.3 million |
| Gross margin | 58.3% | 57.2% |
| Income from operations | $167.2 million | $69.8 million |
| Net income | $128.3 million | $59.9 million |
| Diluted EPS | $2.24 | $1.11 |
| Cash from operating activities | $119.0 million | $62.6 million |
| Capital expenditures | $71.3 million | $26.3 million |
| Cash and cash equivalents at year-end | $603.8 million | $717.3 million |
Revenue increased 83.1%. Filtration was the largest product franchise at $403.5 million, followed by proteins at $123.7 million, chromatography at $91.0 million and process analytics at $48.0 million. Operating cash flow rose, but substantial increases in receivables and inventory absorbed cash: receivables increased $46.5 million and inventory $89.8 million. Investing activities used $221.2 million, including $149.9 million for acquisitions, net of acquired cash, and $71.3 million in capital expenditures.
The 2021 gross margin included $2.1 million of acquired-inventory step-up amortization; excluding it, gross margin was 58.7%, compared with 57.4% in 2020. GAAP operating expenses included $18.0 million of acquisition and integration costs, $5.9 million of contingent-consideration expense and $21.9 million of intangible amortization. Management reported non-GAAP adjusted net income of $175.3 million ($3.06 per diluted share) and adjusted EBITDA of $230.5 million; these measures exclude specified items and are not GAAP results.
Year-end current assets were $931.7 million and current liabilities were $375.3 million. The $287.5 million face amount of 0.375% convertible senior notes due 2024 had a $255.3 million net carrying value and was classified as current because holders could convert during Q1 2022 under the note terms. The company reported $94.2 million of noncurrent contingent consideration, principally associated with Avitide, and $110.8 million of operating lease liabilities. No dividend was paid, and management said it did not expect to pay one in the foreseeable future.
Material changes versus FY2020
- Revenue grew 83.1%, driven by demand across product lines, customer adoption and contributions from acquisitions. Management cited demand related to COVID-19 vaccines and therapeutics, as well as mAb and cell and gene therapy manufacturing.
- All four franchises grew: filtration revenue rose to $403.5 million from $174.9 million; chromatography to $91.0 million from $70.7 million; process analytics to $48.0 million from $33.3 million; and proteins to $123.7 million from $83.3 million.
- Net income more than doubled, while gross margin improved 1.1 percentage points to 58.3%. Costs rose with higher volume, increased manufacturing capacity and headcount, acquisitions, and expanded commercial and administrative operations.
- Operating cash flow increased to $119.0 million from $62.6 million; cash declined by $113.5 million during 2021, primarily reflecting acquisitions, capital investment and working-capital needs.
- Repligen acquired Polymem, Avitide, BioFlex and Newton T&M. Avitide added affinity-ligand discovery capabilities, with up to $125 million of undiscounted contingent consideration; the recorded year-end fair value of contingent consideration was $94.2 million.
Outlook, commentary and risks
The filing provides no specific revenue or earnings guidance. Management expected 2022 R&D expense to increase modestly and operating expenses to rise as the company expands its bioprocessing business. It stated that existing cash was expected to meet needs for at least 24 months, absent acquisitions or other significant changes in requirements. Growth plans emphasize product innovation, commercial and geographic expansion, manufacturing capacity and targeted acquisitions.
- Management said COVID-19 positively affected revenue in 2020 and 2021, but future effects are uncertain. Demand could change with pandemic developments, vaccine and therapeutic outcomes, customer programs and new variants.
- Supply constraints, reliance on a limited number of suppliers for certain products, manufacturing execution, and the ability to meet timely customer demand could affect revenue and margins. Inventory was increased to support anticipated demand.
- Customer concentration remains relevant: Pfizer represented 10% of FY2021 revenue and 14% of year-end receivables. Cytiva may bring additional Protein A ligand manufacturing in-house in 2022; other significant ligand supply agreements run through 2023, 2025 or 2026, subject to their terms.
- Acquisition integration, contingent payment estimates and purchase-price allocations involve uncertainty. Avitide’s recorded goodwill was approximately $199.2 million; acquisition valuations depend on forecasts and other significant assumptions.
- Other disclosed risks include competition from larger, well-resourced companies; foreign exchange exposure (37.5% of FY2021 revenue was denominated in foreign currencies, and the company did not hedge this exposure); and potential disruption from COVID-19, cybersecurity events, regulation and geopolitical or trade developments.
- The company disclosed potential export-control violations and voluntary self-disclosures to the U.S. Department of Commerce’s Bureau of Industry and Security. It said no known legal proceedings were expected to have a material adverse effect. Management and the auditor concluded internal control over financial reporting was effective, while the assessment excluded the 2021 acquisitions.
Important facts for investors to verify
- How much of the exceptional 2021 growth reflects durable underlying demand versus pandemic-related demand, acquisitions and order timing.
- Whether the large inventory build converts into sales and cash, and how operating cash flow develops as receivables and capacity spending grow.
- The conversion and settlement status of the 2019 Notes, including potential cash requirements or share dilution, and the final Avitide earnout obligation.
- Acquisition integration progress, final purchase-price allocations and whether expected benefits support the acquired goodwill and intangible-asset values.
- Supplier capacity, Cytiva’s potential insourcing of ligand production, and the company’s ability to maintain margins while scaling manufacturing.
- Developments in the disclosed export-control self-disclosures and any material changes in compliance, legal or internal-control matters.