REPLIGEN CORPORATION Overview
As the overall market for biologics continues to grow and expand, our customers
- primarily large biopharmaceutical companies and contract development and
manufacturing organizations - face critical production cost, capacity, quality
and time pressures. Built to address these concerns, our products are helping to
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 ("mAb"), recombinant
proteins, vaccines and gene therapies - that are improving human health
worldwide. For more information regarding our business, products and
acquisitions, see Part I, Item 1, "Business" included in our 2020 Annual Report
on Form 10-K ("Form 10-K"), which was filed with the Securities and Exchange
Commission ("SEC") on February 24, 2021 .
We currently operate as one bioprocessing business, with a comprehensive suite
of products to serve both upstream and downstream processes in biological drug
manufacturing. Building on over 35 years of industry expertise, we have
developed a broad and diversified product portfolio that reflects our passion
for innovation and the customer-first culture that drives our entire
organization. We continue to capitalize on opportunities to maximize the value
of our product platform through both organic growth initiatives (internal
innovation and commercial leverage) and targeted acquisitions.
2021 Acquisitions
Acquisition of Avitide, Inc.
On September 16, 2021 , we entered into an Agreement and Plan of Merger and
Reorganization ("Merger Agreement") with Avalon Merger Sub, Inc. , a Delaware
corporation and our wholly owned direct subsidiary ("First Merger Sub"), Avalon
Merger Sub LLC , a Delaware limited liability company and our wholly owned direct
subsidiary ("Second Merger Sub" and together with First Merger Sub, the "Merger
Subs"), Avitide, Inc. , a Delaware corporation ("Avitide"), and Shareholder
Representative Services LLC , a Colorado limited liability company, solely in its
capacity as the representative, agent and attorney-in-fact of Avitide's
securityholders (the "Securityholder Representative") to purchase Avitide. The
transaction closed on September 20, 2021 (the "Avitide Acquisition") and on the
terms set forth in the Merger Agreement.
Avitide, which is headquartered in
Acquisition of
OnJune 22, 2021 , we entered into a Stock Purchase Agreement withPolymem S.A. ("Polymem"), a company organized under the laws ofFrance , andJean-Michel Espenan andFranc Saux , acting together jointly and severally as the representatives of the sellers, which subsequently closed onJuly 1, 2021 (the "Polymem Acquisition."). 28
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Polymem, which is headquartered in,
2020 Acquisitions
OnOctober 27, 2020 , we entered into an Equity and Asset Purchase Agreement withARTeSYN Biosolutions Holdings Ireland Limited ("ARTeSYN"), a company organized under the laws ofIreland ,Third Creek Holdings, LLC , aNevada limited liability company ("Third Creek"),Alphinity, LLC , aNevada limited liability company ("Alphinity", and together with Third Creek the "ARTeSYN Sellers"), andMichael Gagne , solely in his capacity as the representative of the ARTeSYN Sellers, pursuant to which the Company acquired (i) all of the outstanding equity securities of ARTeSYN and (ii) certain assets from Alphinity related to the business of ARTeSYN (collectively, the "ARTeSYN Acquisition"). ARTeSYN is headquartered inWaterford, Ireland and conducts its operations inIreland ,the United States andEstonia . Its suite of single-use solutions has been created with the goal of enabling "abundance in medicine" by allowing greater efficiency in biologics manufacturing. The ARTeSYN team has created a number of solutions targeting the single-use space from single-use valves with fully disposable valve liners, XO® skeletal supports, a hybrid small parts offering for de-bottlenecking traditional facilities, and fully automated SU process systems that have quickly become leading solutions in the bioprocessing industry. ARTeSYN has established downstream processing leadership with a suite of state of the art single-use systems for chromatography, filtration, continuous manufacturing and media/buffer prep workflows. In addition, we have integrated unique flow path assemblies utilizing our silicone extrusion and molding technology, to deliver highly differentiated, low hold-up volume systems that minimize product loss during processing. The ARTeSYN portfolio expands on the market success of the hollow fiber systems and complements our chromatography and TFF filtration product lines.
OnOctober 15, 2020 , we executed a Stock Purchase Agreement withNon-Metallic Solutions, Inc. ("NMS"), aMassachusetts corporation, and each of William Malloneé andDerek Masser , the legal and beneficial owners of NMS, to purchase NMS, which transaction subsequently closed onOctober 20, 2020 (the "NMS Acquisition"). NMS, headquartered inAuburn, Massachusetts , is a manufacturer of fabricated plastics, custom containers, and related assemblies and components used in the manufacturing of biologic drugs. The acquisition of NMS strengthens the Company's portfolio of single-use integrated systems and flow path assemblies, streamlines our supply chain for current products, and provides greater flexibility to scale and expand single-use and systems portfolios.
Critical Accounting Policies and Estimates
A "critical accounting policy" is one which is both important to the portrayal of our financial condition and results and requires management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a description of our critical accounting policies that affect our more significant judgments and estimates used in the preparation of our consolidated financial statements, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations and our significant accounting policies in Note 2 to the consolidated financial statements included in our Form 10-K. Results of Operations
The following discussion of the financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements and the related footnotes thereto.
Revenues
Total revenue for the three and nine months ended
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Three Months Ended Nine Months Ended
September 30, Increase/(Decrease) September 30, Increase/(Decrease)
2021 2020 $ Change % Change 2021 2020 $ Change % Change
(Amounts in thousands, except for percentage data)
Revenue:
Products $ 178,177 $ 94,029 $ 84,148 89.5 % $ 483,834 $ 257,521 $ 226,313 87.9 %
Royalty and other 39 31 8 25.8 % 179 91 88 96.7 %
Total revenue $ 178,216 $ 94,060 $ 84,156 89.5 % $ 484,013 $ 257,612 $ 226,401 87.9 %
Product revenues
Direct sales represented approximately 82% of our product revenue for each of
the three months ended September 30, 2021 and 2020, respectively, and
represented 82% and 77% of our product revenue for each of the nine months ended
September 30, 2021 and 2020, respectively. We expect that direct sales will
continue to account for an increasing percentage of our product revenues, as the
largest customer of our OEM products diversified its supply chain in 2020. Sales
of our bioprocessing products can be impacted by the timing of large-scale
production orders and the regulatory approvals for such antibodies, which may
result in significant quarterly fluctuations.
Revenues from our filtration franchise include the sales of our XCell ATF®
systems and consumables, KrosFlo TFF and TFDF systems, Polymem hollow fiber
membranes and modules, TangenX® flat sheet cassettes, ARTeSYN® systems,
ProConnex® flow paths and silicone-molded and plastic consumables, including
those manufactured by EMT and NMS. Revenues from our process analytics franchise
includes the sale of our SoloVPE®, FlowVPE® and FlowVPX® systems and associated
consumables and service. Revenues from our chromatography franchise include the
sales of our OPUS® pre-packed columns, resins, ELISA test kits and ARTeSYN®
systems. Revenues from our proteins franchise include the sale of our Protein A
ligands and cell culture growth factors. Other revenue primarily consists of
sales of our operating room products to hospitals as well as freight revenue.
During the three and nine months ended September 30, 2021 , product revenue
increased by $84.1 million , or 89.5% and $226.3 million , or 87.9%, as compared
to the same periods of 2020, with exceptionally robust demand for our filtration
and proteins products. Since the second quarter of 2020, we have experienced
accelerated demand across all of our franchises due to the critical needs of
customers working on the novel coronavirus ("COVID-19") vaccines and
therapeutics. In addition, we saw an increase in demand for gene therapy and
monoclonal antibody manufacturing. The Polymem Acquisition and the Avitide
Acquisition during the third quarter of 2021 resulted in an increase in product
revenue during the three and nine months ended September 30, 2021 for which
there were no comparable amounts in 2020.
Royalty revenues
Royalty revenues in the three and nine months endedSeptember 30, 2021 and 2020 relate to royalties received from a third-party systems manufacturer associated with our OPUS PD chromatography columns. Royalty revenues are variable and are dependent on sales generated by our partner.
Costs of product revenue and operating expenses
Total costs and operating expenses for the three and nine months ended
Three Months Ended Nine Months Ended
September 30, Increase/(Decrease) September 30, Increase/(Decrease)
2021 2020 $ Change % Change 2021 2020 $ Change % Change
(Amounts in thousands, except for percentage data)
Cost of product revenue $ 75,495 $ 39,626 $ 35,869 90.5 % $ 197,232 $ 108,471 $ 88,761 81.8 %
Research and development 9,154 4,422 4,732 107.0 % 25,155 13,460 11,695 86.9 %
Selling, general and
administrative 48,373 29,051 19,322 66.5 % 131,809 83,277 48,532 58.3 %
Total costs and operating
expenses $ 133,022 $ 73,099 $ 59,923 82.0 % $ 354,196 $ 205,208 $ 148,988 72.6 %
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Cost of product revenue
Cost of product revenue increased 90.5% and 81.8% in the three and nine months endedSeptember 30, 2021 , compared to the same periods of 2020, due primarily to the increase in product revenue mentioned above and costs associated with higher product volume. In addition, there was an increase in manufacturing headcount for the three and nine months endedSeptember 30, 2021 , as compared to the same periods of 2020, which resulted in higher employee-related costs. Our two acquisitions in 2021 have also contributed to the increase in cost of product revenue for the three and nine months endedSeptember 30, 2021 since there were no comparable costs during 2020. Gross margin was 57.6% and 59.3% in the three and nine months endedSeptember 30, 2021 . The gross margin for the three and nine months endedSeptember 30, 2021 includes$0.3 million and$1.9 million , respectively, of amortization of inventory step-up associated with the Polymem Acquisition and ARTeSYN Acquisition. The gross margin for the three and nine months endedSeptember 30, 2020 was 57.9%. Excluding the step-up amortization, gross margin for the three and nine months endedSeptember 30, 2021 was 57.8% and 59.6%, respectively. The increase in gross margin, excluding the inventory step-up amortization, in the nine months endedSeptember 30, 2021 , as compared to the same period of 2020, is due primarily to the increase in revenue mentioned above, and favorable product mix, partially offset by an increase in manufacturing headcount subsequent toSeptember 30, 2020 . Gross margins may fluctuate in future quarters based on expected production volume and product mix.
Research and development expenses
Research and development ("R&D") expenses are related to bioprocessing products,
which include personnel, supplies and other research expenses. Due to the size
of the Company and the fact that these various programs share personnel and
fixed costs, we do not track all of our expenses or allocate any fixed costs by
program, and therefore, have not provided historical costs incurred by project.
R&D expenses increased 107.0% during the three months ended September 30, 2021 ,
compared to the same period of 2020. The increase during the period is primarily
due to spending on new product development and the addition of R&D expenses
incurred by Avitide, Polymem and ARTeSYN during the period, for which there were
no comparable costs in 2020, and due to the increase in employee related costs
as the number of R&D employees has increased since September 30, 2020 .
R&D expenses increased 86.9% during the nine months ended September 30, 2021 ,
compared to the same period of 2020. The increase during the period is due to
the addition of R&D expenses related to operations of Avitide, Polymem and
ARTeSYN, and increased costs associated with a rise in R&D headcount and the
ramp up of project spending for new product development during the nine months
ended September 30, 2021 .
We expect our R&D expenses for the remainder of 2021 to gradually increase to support new product development.
Selling, general and administrative expenses
Selling, general and administrative ("SG&A") expenses include the costs associated with selling our commercial products and costs required to support our marketing efforts, including legal, accounting, patent, shareholder services, amortization of intangible assets and other administrative functions.
During the three and nine months endedSeptember 30, 2021 , SG&A costs increased by$19.3 million , or 66.5%, and$48.5 million , or 58.3%, as compared to the same periods of 2020. The increase is partially due to the continued expansion of our customer-facing activities to drive sales of our bioprocessing products, and the continued buildout of our administrative infrastructure, primarily through increased headcount, to support expected future growth. Employee-related costs during the three and nine months endedSeptember 30, 2021 , as compared to the same periods in 2020, resulted from the increase in headcount period over period. In addition, SG&A costs increased for the three and nine months endedSeptember 30, 2021 , respectively due to the addition of NMS and ARTeSYN during the fourth quarter of 2020 and the addition of Polymem and Avitide during the third quarter of 2021, for which there were no comparable costs for the same periods of 2020. 31
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Other expenses, net
The table below provides detail regarding our other expenses, net:
Three Months Ended Nine Months Ended
September 30, Increase/(Decrease) September 30, Increase/(Decrease)
2021 2020 $ Change % Change 2021 2020 $ Change % Change
(Amounts in thousands, except for percentage data)
Investment income $ 44 $ 82 $ (38 ) (46.3 %) $ 137 $ 1,699 $ (1,562 ) (91.9 %)
Interest expense (3,220 ) (3,052 ) (168 ) 5.5 % (9,470 ) (9,032 ) (438 ) 4.8 %
Other expenses (786 ) (248 ) (538 )
216.9 % (1,789 ) (632 ) (1,157 ) 183.1 %
Total other expense, net
23.1 %$ (11,122 ) $ (7,965 ) $ (3,157 ) 39.6 % Investment income Investment income includes income earned on invested cash balances. The decrease of$38 thousand and$1.6 million in the three and nine months endedSeptember 30, 2021 , as compared to the same periods of 2020, respectively, was attributable to a decrease in interest rates on our invested cash balances. InMarch 2020 , in response to the outbreak of COVID-19 and to stay ahead of disruptions and economic slowdown, theFederal Reserve reduced federal funds rates to a range of 0.0% to 0.25%, which will continue to affect our investment income in future periods. We expect investment income to vary based on changes in the amount of funds invested and fluctuation of interest rates. Interest expense Interest expense in the three and nine months endedSeptember 30, 2021 and 2020 is primarily from our 0.375% Convertible Senior Notes due 2024 (the "2019 Notes"), which were issued inJuly 2019 . Interest expense, which includes the amortization of debt issuance costs and contractual coupon interest, increased$0.2 million and$0.4 million for the three and nine months endedSeptember 30, 2021 , as compared to the same periods in 2020. This is a result of the decrease in the balance of debt issuance costs that are being amortized. As these costs decrease, the carrying value of the debt increases and interest calculated based on the carrying value increases as well. Other expenses
The change in other expenses, net during the three and nine months ended
Income tax provision Income tax provision for the three and nine months endedSeptember 30, 2021 and 2020 was as follows: Three Months Ended Nine Months Ended September 30, Increase/(Decrease) September 30, Increase/(Decrease) 2021 2020 $ Change % Change 2021 2020 $ Change % Change (Amounts in thousands, except for percentage data) Income tax provision$ 7,734 $ 3,191 $ 4,543 142.4 %$ 19,514 $ 4,211 $ 15,303 363.4 % Effective tax rate 18.8 % 18.0 % 16.4 % 9.5 % For the three and nine months endedSeptember 30, 2021 , we recorded an income tax provision of$7.7 million and$19.5 million , respectively. The effective tax rate was 18.8% and 16.4% for the three and nine months endedSeptember 30, 2021 and is based upon the estimated income for the year endingDecember 31, 2021 and the composition of income in different jurisdictions. The increase in effective tax rates was primarily due to higher income before income taxes, lower windfall benefits recognized on stock option exercises and the vesting of stock units, partially offset by lowerU.S. taxation of foreign earnings. The effective tax rate for the three and nine months endedSeptember 30, 2021 was lower than theU.S. statutory rate of 21% primarily due to business tax credits and windfall benefits on stock option exercises and the vesting of stock units. For the three and nine months endedSeptember 30, 2020 , we recorded an income tax provision of$3.2 million and$4.2 million , respectively. The effective tax rate was 18.0% and 9.5% for the three and nine months endedSeptember 30, 2020 and is based upon the estimated income for the year endingDecember 31, 2020 and the composition of income in different jurisdictions. 32 -------------------------------------------------------------------------------- The effective tax rate for the three and nine months endedSeptember 30, 2020 was lower than theU.S. statutory rate of 21% primarily due to windfall benefits on stock option exercise and the vesting of stock units. Non-GAAP Financial Measures We provide non-GAAP adjusted income from operations; adjusted net income; and adjusted EBITDA as supplemental measures to GAAP measures regarding our operating performance. These financial measures exclude the items detailed below and, therefore, have not been calculated in accordance with GAAP. A detailed explanation and a reconciliation of each non-GAAP financial measure to its most comparable GAAP financial measure are provided below. We include this financial information because we believe these measures provide a more accurate comparison of our financial results between periods and more accurately reflect how management reviews its financial results. We excluded the impact of certain acquisition-related items because we believe that the resulting charges do not accurately reflect the performance of our ongoing operations for the period in which such charges are incurred.
Non-GAAP adjusted income from operations
Non-GAAP adjusted income from operations is measured by taking income from operations as reported in accordance with GAAP and excluding inventory step-up charges, acquisition and integration costs, and intangible amortization booked through our consolidated statements of comprehensive income. The following is a reconciliation of income from operations in accordance with GAAP to non-GAAP adjusted income from operations for the three and nine months endedSeptember 30, 2021 and 2020: Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 (Amounts in thousands) GAAP income from operations$ 45,194 $ 20,961 $ 129,817 $ 52,404 Non-GAAP adjustments to income from operations: Inventory step-up charges 270 144 1,868 144 Acquisition and integration costs 5,824 1,849 11,593 6,536 Intangible amortization 5,677 3,925 16,001 11,677 Non-GAAP adjusted income from operations$ 56,965 $ 26,879 $ 159,279 $ 70,761 Non-GAAP adjusted net income Non-GAAP adjusted net income is measured by taking net income as reported in accordance with GAAP and excluding acquisition and integration costs, intangible amortization, inventory step-up charges, loss on conversion of debt, non-cash interest expense, contingent consideration fair value adjustments and the tax effects of these items. The following are reconciliations of net income in accordance with GAAP to non-GAAP adjusted net income for the three and nine months endedSeptember 30, 2021 and 2020: Three Months Ended September 30, 2021 2020 Fully Diluted Fully Diluted Earnings per Earnings per Amount Share Amount Share (Amounts in thousands, except per share data) GAAP net income$ 33,498 $ 0.58$ 14,552 $ 0.27 Non-GAAP adjustments to net income: Inventory step-up charges 270 0.00 144 0.00 Acquisition and integration costs 5,824 0.10 1,849 0.03 Intangible amortization 5,677 0.10 3,925 0.07 Loss on conversion of debt 1 - - - Non-cash interest expense 2,902 0.05 2,759 0.05 Tax effect of non-GAAP charges (3,467 ) (0.06 ) (2,072 ) (0.04 ) Non-GAAP adjusted net income$ 44,705 $ 0.78$ 21,157 $ 0.40 33
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Nine Months Ended September 30,
2021 2020
Fully Diluted Fully Diluted
Earnings per Earnings per
Amount Share Amount Share
(Amounts in thousands, except per share data)
GAAP net income $ 99,181 $ 1.74 $ 40,228 $ 0.75
Non-GAAP adjustments to net income:
Inventory step-up charges 1,868 0.03 144 0.00
Acquisition and integration costs 11,593 0.20 6,536 0.12
Intangible amortization 16,001 0.28 11,677 0.22
Loss on conversion of debt 6 - - -
Non-cash interest expense 8,592 0.15 8,174 0.15
Tax effect of non-GAAP charges (8,904 ) (0.16 ) (6,334 ) (0.12 )
Non-GAAP adjusted net income $ 128,337 $ 2.25 * Per share totals may not add due to rounding.
Adjusted EBITDA Adjusted EBITDA is measured by taking net income as reported in accordance with GAAP, excluding investment income, interest expense, taxes, depreciation and amortization, acquisition and integration costs, inventory step-up charges, loss on conversion of debt and contingent consideration fair value adjustments booked through our consolidated statements of comprehensive income. The following is a reconciliation of net income in accordance with GAAP to adjusted EBITDA for the three and nine months endedSeptember 30, 2021 and 2020: Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 (Amounts in thousands) GAAP net income$ 33,498 $ 14,552 $ 99,181 $ 40,228 Non-GAAP EBITDA adjustments to net income: Investment income (44 ) (82 ) (137 ) (1,699 ) Interest expense 3,220 3,052 9,470 9,032 Income tax provision 7,734 3,191 19,514 4,211 Depreciation 4,308 2,757 11,360 7,820 Amortization 5,705 3,953 16,084 11,760 EBITDA 54,421 27,423 155,472 71,352 Other non-GAAP adjustments: Inventory step-up charges 270 144 1,868 144 Acquisition and integration costs 5,824 1,849 11,593 6,536 Loss on conversion of debt 1 - 6 - Adjusted EBITDA$ 60,516 $ 29,416 $ 168,939 $ 78,032
Liquidity and Capital Resources
We have financed our operations primarily through revenues derived from product sales, the issuance of the 2019 Notes inJuly 2019 and the issuance of common stock in ourDecember 2020 ,July 2019 andMay 2019 public offerings (the "Offerings"). Our revenue for the foreseeable future will primarily be limited to our bioprocessing product revenue.
At
During the third quarter of 2021, the closing price of the Company's common stock exceeded 130% of the conversion price of the 2019 Notes for more than 20 trading days of the last 30 consecutive trading days of the quarter. As a result, the 2019 Notes are convertible at the option of the holders of the 2019 Notes during the fourth quarter of 2021, the quarter immediately following the quarter when the conditions are met, per the First Supplemental Indenture underlying the 2019 Notes. These conditions have been met each quarter since the third quarter of 2020. As a result,$6,000 aggregate principal amount of the 34 -------------------------------------------------------------------------------- 2019 Notes have been converted sinceDecember 31, 2020 . The conversions resulted in the issuance of a nominal number of shares of the Company's common stock to the holder, and the Company recorded a loss of approximately$6,000 on the conversion of these notes, which is included in other expenses, net on our consolidated statements of comprehensive income for the three and nine months endedSeptember 30, 2021 . The 2019 Notes have a face value of$287.5 million and a carrying value and a carrying value of$252.3 million and continue to be classified as current liabilities on the Company's consolidated balance sheet as ofSeptember 30, 2021 . It is the Company's policy and intent to settle the face value of the 2019 Notes in cash and any excess conversion premium in shares of our common stock. InJuly 2020 , the Company entered into a First Amendment to the lease agreement for itsMarlborough, Massachusetts facility, expanding the leased space by 66,939 square feet. InDecember 2020 , the Company signed the Second Amendment to the lease agreement, changing the commencement date fromApril 1, 2021 toJanuary 1, 2021 . As a result, under the amended lease agreement, the Company will pay an additional$5.7 million in base rent over the life of the lease, which expires onNovember 30, 2028 . InMay 2021 , the Company entered into an agreement to lease approximately 64,000 square feet of space at a site inHopkinton, Massachusetts , which expires onAugust 15, 2034 . This space will be used as an assembly center for our ProConnex® single-use flow path products. Under the lease, the Company will pay$17.7 million in base rent over the term of the lease. Cash flows Nine Months Ended September 30, Increase/(Decrease) 2021 2020 $ Change (Amounts in thousands) Operating activities$ 69,396 $ 47,754 $ 21,642 Investing activities (158,893 ) (43,097 ) (115,796 ) Financing activities 730 7,078 (6,348 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash (7,427 ) 4,160 (11,587 ) Net (decrease) increase in cash, cash equivalents and restricted cash$ (96,194 ) $ 15,895 $ (112,089 ) Operating activities For the nine months endedSeptember 30, 2021 , our operating activities provided cash of$69.4 million reflecting net income of$99.2 million and non-cash charges totaling$65.1 million primarily related to depreciation, amortization, inventory step-up amortization, deferred income taxes, amortization of debt discount and issuance costs and stock-based compensation charges. An increase in accounts receivable consumed$52.0 million of cash and was primarily driven by the 87.9% year-to-date increase in revenues. An increase in inventory manufactured of$61.6 million supports expected increases in future revenue. The increases in accounts receivable and inventory manufactured are offset by an increase in accounts payable of$9.0 million , which was primarily due to increased inventory purchases to support customer orders, an increase in accrued liabilities of$10.1 million , which was due to an increase in the accrual for expected costs, and to a decrease in deferred revenue related to products shipped during the first half of 2021. The remaining net cash used in operating activities resulted from unfavorable changes in various other working capital accounts. For the nine months endedSeptember 30, 2020 , our operating activities provided cash of$47.8 million reflecting net income of$40.2 million and non-cash charges totaling$40.5 million primarily related to depreciation, amortization, deferred income taxes, non-cash interest expense and stock-based compensation charges. An increase in accounts receivable consumed$11.5 million of cash and was primarily driven by the 35.4% year-to-date increase in revenues. An increase in inventory consumed$22.8 million to support future revenue. An increase in accounts payable and accrued liabilities of$1.1 million was due primarily to increased inventory purchases to support customer orders, offset by payment of acquisition-related bonuses for C Technologies during the second quarter of 2020. The remaining cash provided by operating activities resulted from favorable changes in various other working capital accounts. Investing activities 35
-------------------------------------------------------------------------------- Our investing activities consumed$158.9 million of cash during the nine months endedSeptember 30, 2021 . We used$121.0 million in cash (net of cash received) for the Polymem Acquisition and the Avitide Acquisition, in the aggregate. Capital expenditures consumed$37.9 million as we continue to increase our manufacturing capacity worldwide. Of these expenditures,$2.9 million represented capitalized costs related to our internal-use software. Our investing activities consumed$43.1 million of cash during the nine months endedSeptember 30, 2020 related to the acquisition ofEngineered Molding Technology LLC ("EMT") onJuly 13, 2020 , as well as ongoing capital expenditures. We consumed$28.5 million in cash (net of cash received) for EMT. Capital expenditures included$3.6 million for capitalized costs related to our internal-use software. Financing activities Cash provided by financing activities of$0.7 million for the nine months endedSeptember 30, 2021 included proceeds from stock option exercises during the period offset by cash disbursed in relation to shares withheld to cover employee income taxes due upon the vesting and release of restricted stock units. Proceeds from stock option exercises during the nine months endedSeptember 30, 2021 were$2.0 million offset by$1.3 million of cash disbursed to pay tax obligation on the vesting of restricted stock units. Cash provided by financing activities of$7.1 million for the nine months endedSeptember 30, 2020 included proceeds from stock option exercises and the vesting of stock units during the period. Working capital decreased by$22.0 million to$561.4 million atSeptember 30, 2021 from$583.4 million atDecember 31, 2020 due to the various changes noted above.
Our future capital requirements will depend on many factors, including the following:
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the expansion of our bioprocessing business;
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the ability to sustain sales and profits of our bioprocessing products;
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our ability to acquire additional bioprocessing products;
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the scope of and progress made in our R&D activities;
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contingent consideration earnout payments resulting from our acquisitions;
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the extent of any share repurchase activity; and
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the success of any proposed financing efforts.
Absent acquisitions of additional products, product candidates or intellectual
property, we believe our current cash balances are adequate to meet our cash
needs for at least the next 24 months from the date of this filing. We expect
operating expenses for the rest of the year to increase as we continue to expand
our bioprocessing business. We expect to incur continued spending related to the
development and expansion of our bioprocessing product lines and expansion of
our commercial capabilities for the foreseeable future. Our future capital
requirements may include, but are not limited to, purchases of property, plant
and equipment, the acquisition of additional bioprocessing products and
technologies to complement our existing manufacturing capabilities, and
continued investment in our intellectual property portfolio.
We plan to continue to invest in our bioprocessing business and in key R&D
activities associated with the development of new bioprocessing products. We
actively evaluate various strategic transactions on an ongoing basis, including
licensing or acquiring complementary products, technologies or businesses that
would complement our existing portfolio. We continue to seek to acquire such
potential assets that may offer us the best opportunity to create value for our
shareholders. In order to acquire such assets, we may need to seek additional
financing to fund these investments. If our available cash balances and
anticipated cash flow from operations are insufficient to satisfy our liquidity
requirements, including because of any such acquisition-related financing needs
or lower demand for our products, we may seek to sell common or preferred equity
or convertible debt securities, enter into a credit facility or another form of
third-party funding, or seek other debt funding. The sale of equity and
convertible debt securities may result in dilution to our 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
36
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securities or other debt financing, these securities or other debt could contain
covenants that would restrict our operations. Any other third-party funding
arrangement could require us to relinquish valuable rights. We may require
additional capital beyond our currently anticipated amounts. Additional capital
may not be available on reasonable terms, if at all.
Off-Balance Sheet Arrangements
We do not have any special purpose entities or off-balance sheet financing
arrangements as of
Net Operating Loss Carryforwards
AtDecember 31, 2020 , we had net operating loss carryforwards of$6.4 million remaining. We had business tax credits carryforwards of$9.4 million available to reduce future federal income taxes, if any. The business tax credits carryforwards will continue to expire at various dates throughDecember 2039 . Net operating loss carryforwards and available tax credits are subject to review and possible adjustment by the Internal Revenue Service, state and foreign jurisdictions and may be limited in the event of certain changes in the ownership interest of significant shareholders. Effects of Inflation Our assets are primarily monetary, consisting of cash, cash equivalents and marketable securities. Because of their liquidity, these assets are not directly affected by inflation. Since we intend to retain and continue to use our equipment, furniture and fixtures and leasehold improvements, we believe that the incremental inflation related to replacement costs of such items will not materially affect our operations. However, the rate of inflation affects our expenses, such as those for employee compensation and contract services, which could increase our level of expenses and the rate at which we use our resources.
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The forward-looking statements in this Quarterly Report on Form 10-Q do not constitute guarantees of future performance. Investors are cautioned that statements in this Quarterly Report on Form 10-Q which are not strictly historical statements, including, without limitation, express or implied statements or guidance regarding current or future financial performance and position, potential impairment of future earnings, management's strategy, plans and objectives for future operations or acquisitions, product development and sales, 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 impact of, and response to, the COVID-19 coronavirus pandemic and the related downturn of theU.S. and global economies 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 ultimate impact of the coronavirus pandemic on our business or financial results; the success of current and future collaborative or supply relationships, including our agreements with Cytiva,MilliporeSigma and Purolite; 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 allU.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 limited manufacturing capabilities and our dependence on third-party manufacturers and value-added resellers; the effect of the COVID-19 coronavirus pandemic, including mitigation efforts and economic effects, on our business operations and the operations of our customers and suppliers; 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 Non-Metallic Solutions, 37
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Inc.,ARTeSYN Biosolutions Holdings Ireland Limited, Polymem S.A. andAvitide, Inc. 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; 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 theSEC including under the sections entitled "Risk Factors" in our Form 10-K.
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