REPLIGEN CORPORATION Overview
Repligen and its subsidiaries, collectively doing business asRepligen 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 - 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 theSecurities and Exchange Commission ("SEC") onFebruary 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. AcquisitionsARTeSYN Biosolutions Holdings Ireland Limited 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") for approximately$200 million , comprised of approximately$130 million in cash to the ARTeSYN Sellers and approximately$70 million in our common stock to Third Creek. The transaction closed onDecember 3, 2020 . 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 10x 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. In addition to its single-use solutions, ARTeSYN also engages in the manufacture of large-scale systems to be used for biologics manufacturing. 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 utilizingEngineered Molding Technology LLC's ("EMT") silicone extrusion and molding technology, to deliver highly differentiated, low hold-up volume systems that minimize product loss during processing. Non-MetallicSolutions, Inc. OnOctober 15, 2020 , we executed a Stock Purchase Agreement with Non-MetallicSolutions, 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 allows us to expand its line of single-use systems and associated integrated flow path assemblies, streamline the supply chain for current products, and gives us more flexibility to scale and expand single-use and systems portfolios. 24
-------------------------------------------------------------------------------- Table of ContentsEngineered Molding Technology LLC OnJuly 13, 2020 , we completed the acquisition of 100% of the membership interests of EMT, aNew York limited liability company, pursuant to a Membership Interest Purchase Agreement, datedJune 26, 2020 , by and among the Company, EMT, and each ofMichael Pandori andTodd Etesse , the legal and beneficial owners of EMT (such acquisition, the "EMT Acquisition"). EMT, headquartered inClifton Park, New York , is an innovator and manufacturer of single-use silicone assemblies and components used in the manufacturing of biologic drugs. EMT's standard and custom molding as well as their over-molded connectors and silicone tubing products are key components in single-use filtration and chromatography systems. EMT's products will complement and expand our single-use product offerings. 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 months endedMarch 31, 2021 and 2020 were as follows: Three Months Ended March 31, Increase/(Decrease) 2021 2020 $ Change % Change (Amounts in thousands, except for percentage data) Revenue: Products$ 142,737 $ 76,060 $ 66,677 87.7 % Royalty and other 100 30 70 233.3 % Total revenue$ 142,837 $ 76,090 $ 66,747 87.7 % Product revenues Direct sales represented approximately 80% and 76% of our product revenue for the three months endedMarch 31, 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. Revenue from our chromatography products includes the sale of our OPUS chromatography columns, chromatography resins and ELISA test kits. Revenue from our filtration products includes the sale of our XCell ATF systems and consumables, KrosFlo filtration products, SIUS filtration products, the silicone-molded products offered by EMT, which we acquired in the third quarter of 2020 and the products offered by NMS and ARTeSYN, which were both acquired during the fourth quarter of 2020. Revenue from protein products includes the sale of our Protein A ligands and cell culture growth factors. Revenue from our process analytics products includes the sale of our SoloVPE, FlowVPE and FlowVPX systems, consumables and service. Other revenue primarily consists of revenue from the sale of our operating room products to hospitals as well as freight revenue. 25 -------------------------------------------------------------------------------- Table of Contents During the three months endedMarch 31, 2021 , product revenue increased by$66.7 million , or 87.7%, as compared to the same period of 2020. The increase is due to the continued adoption of our products by our key bioprocessing customers, particularly our chromatography and filtration products. Beginning in the second quarter of 2020, we experienced an increase in overall sales as a result of accelerated demand, which was from broad-based covering mAb, gene therapy and COVID-19 customers working on vaccines and therapeutics. We expect there will be a continued increase in direct sales during 2021, especially from COVID-19 customers as they scale-up and move vaccine and therapy drug candidates through clinical trial processes. During the first quarter of 2021, we also saw good performance from our recent acquisitions, EMT, NMS and ARTeSYN, which were acquired in the second half of 2020. Revenue from these acquisitions represented$10.9 million , or 7.6%, of total revenue for the three months endedMarch 31, 2021 . Additionally, we saw a$3.0 million increase in revenue related to our process analytics business associated with our acquisition ofC Technologies, Inc. ("C Technologies") in 2019, which was due to an increase in demand for our SoloVPE systems. Royalty revenues Royalty revenues in the three months endedMarch 31, 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 months endedMarch 31, 2021 and 2020 were comprised of the following: Three Months Ended March 31, Increase/(Decrease) 2021 2020 $ Change % Change (Amounts in thousands, except for percentage data) Cost of product revenue$ 59,747 $ 31,982 $ 27,765 86.8 % Research and development 7,612 4,702 2,910 61.9 % Selling, general and administrative 39,095 27,500 11,595 42.2 %
Total costs and operating expenses
$ 42,270 65.9 % Cost of product revenue Cost of product revenue increased 86.8% in the three months endedMarch 31, 2021 , compared to the same period of 2020, due primarily to the increase in product revenue mentioned above and costs associated with higher product volume. An increase in manufacturing headcount resulted in higher employee-related costs for the three months endedMarch 31, 2021 , compared to the same period of 2020. Recent acquisitions during the second half of 2020, resulted in an increase in costs of product revenue during the three months endedMarch 31, 2021 for which there were no comparable amounts during 2020. Gross margin was 58.2% in the three months endedMarch 31, 2021 . The gross margin for the three months endedMarch 31, 2021 includes$1.6 million of amortization of inventory step-up associated with the ARTeSYN Acquisition. The gross margin for the three months endedMarch 31, 2020 was 58.0%. Excluding the step-up amortization, gross margin for the three months endedMarch 31, 2021 was 59.3%. The increase in gross margin, excluding the inventory step-up amortization, in the three months endedMarch 31, 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 toMarch 31, 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. 26 -------------------------------------------------------------------------------- Table of Contents R&D expenses increased 61.9% during the three months endedMarch 31, 2021 , compared to the same period of 2020. The increase during the period is primarily due to the addition of$1.0 million of R&D expenses incurred by our recent ARTeSYN Acquisition for which there were not comparable costs in 2020, and due to the ramp up of project spending for new product development during the first quarter of 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 months endedMarch 31, 2021 , SG&A costs increased by$11.6 million , or 42.2%, as compared to the same period 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. Stock-based compensation expense and other employee-related costs increased during the three months endedMarch 31, 2021 , as compared to the same period in 2020, resulting from an increase in headcount period over period. In addition,$3.2 million of the increase in SG&A costs for the three months endedMarch 31, 2021 , was related to the 2020 acquisitions of EMT, NMS and ARTeSYN in the second half of 2020. Other expenses, net The table below provides detail regarding our other expenses, net: Three Months Ended March 31, Increase/(Decrease) 2021 2020 $ Change % Change (Amounts in thousands, except for percentage data) Investment income $ 52$ 1,364 $ (1,312 ) (96.2 %) Interest expense (3,106 ) (2,976 ) (130 ) 4.4 % Other expenses (224 ) 382 (606 ) (158.6 %) Total other expense, net$ (3,278 ) $ (1,230 ) $ (2,048 ) 166.5 % Investment income Investment income includes income earned on invested cash balances. The decrease of$1.3 million in 2021, as compared to the same period of 2020, 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 months endedMarch 31, 2021 and 2020 is primarily from our 0.375% Convertible Senior Notes due 2024 (the "2019 Notes"), which were issued inJuly 2019 . Interest expense increased$0.1 million for the three months endedMarch 30, 2021 , as compared to the same periods in 2020. The amortization of debt issuance costs on the 2019 Notes was$2.8 million for the three months endedMarch 31, 2021 . Amortization of debt issuance costs on the 2019 Notes was$2.7 million for the three months endedMarch 31, 2020 . Contractual coupon interest incurred on the 2019 Notes for the three months endedMarch 31, 2021 and 2020 was$0.3 million for both periods. 27 -------------------------------------------------------------------------------- Table of Contents Other expenses The change in other expenses, net during the three months endedMarch 31, 2021 , compared to the same period of 2020, is primarily attributable to realized foreign currency losses related to amounts due from non-Swedish krona-based customers and vendors. Income tax provision Income tax provision for the three months endedMarch 31, 2021 and 2020 was as follows: Three Months Ended March 31, Increase/(Decrease) 2021 2020 $ Change % Change (Amounts in thousands, except for percentage data) Income tax provision$ 3,655 $ 861 $ 2,794 324.5 % Effective tax rate 11.0 % 8.1 % For the three months endedMarch 31, 2021 , we recorded an income tax provision of$3.7 million . The effective tax rate was 11.0% for the three months endedMarch 31, 2021 and is based upon the estimated income for the year endingDecember 31, 2021 and the composition of income in different jurisdictions. The effective tax rate for the three months endedMarch 31, 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 months endedMarch 31, 2020 , we recorded an income tax provision of$0.9 million . The effective tax rate was 8.1% for the three months endedMarch 31, 2020 and is based upon the estimated income for the year endingDecember 31, 2020 and the composition of income in different jurisdictions. The effective tax rate for the three months endedMarch 31, 2020 was lower than theU.S. statutory rate of 21% primarily due to business tax credits and windfall benefits on stock option exercise and the vesting of stock units. Non-GAAP Financial Measures We provide non-GAAP adjusted income from operations; adjusted net income; and adjusted EBITDA as supplemental measures to GAAP measures regarding our operating performance. These financial measures exclude the items detailed below and, therefore, have not been calculated in accordance with GAAP. A detailed explanation and a reconciliation of each non-GAAP financial measure to its most comparable GAAP financial measure are provided below. We include this financial information because we believe these measures provide a more accurate comparison of our financial results between periods and more accurately reflect how management reviews its financial results. We excluded the impact of certain acquisition-related items because we believe that the resulting charges do not accurately reflect the performance of our ongoing operations for the period in which such charges are incurred. Non-GAAP adjusted income from operations Non-GAAP adjusted income from operations is measured by taking income from operations as reported in accordance with GAAP and excluding acquisition and integration costs, intangible amortization and inventory step-up charges booked through our consolidated statements of comprehensive income. The following is a reconciliation of income from operations in accordance with GAAP to non-GAAP adjusted income from operations for the three months endedMarch 31, 2021 and 2020: Three Months Ended March 31, 2021 2020 (Amounts in thousands) GAAP income from operations$ 36,383 $ 11,906 Non-GAAP adjustments to income from operations: Inventory step-up charges 1,598 - Acquisition and integration costs 2,551 2,553 Intangible amortization 5,162 3,878
Non-GAAP
adjusted income from operations
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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 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 months ended March 31, 2021 and 2020:
Three Months Ended March 31,
2021 2020
Fully Fully
Diluted Diluted
Earnings Earnings
per per
Amount Share Amount Share
(Amounts in thousands, except per share data)
GAAP net income $ 29,450 $ 0.52 $ 9,815 $ 0.18
Non-GAAP
adjustments to net income:
Inventory
step-up
charges 1,598 0.03 - -
Acquisition and integration costs 2,551 0.04 2,553 0.05
Intangible amortization 5,162 0.09 3,878 0.07
Loss on conversion of debt 1 - - -
Non-cash
interest expense 2,828 0.05 2,691 0.05
Tax effect of
non-GAAP
charges (2,822 ) (0.05 ) (2,177 ) (0.04 )
Non-GAAP
adjusted net income $ 38,768 $ 0.68 $ 16,760 $ 0.32
* 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 and loss on conversion of debt 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 months ended
March 31, 2021 and 2020:
Three Months Ended
March 31,
2021 2020
(Amounts in thousands)
GAAP net income $ 29,450 $ 9,815
Non-GAAP
EBITDA adjustments to net income:
Investment income (52 ) (1,364 )
Interest expense 3,106 2,976
Tax provision 3,655 861
Depreciation 3,255 2,485
Amortization 5,189 3,905
EBITDA 44,603 18,678
Other
non-GAAP
adjustments:
Inventory
step-up
charges 1,598 -
Loss on conversion of debt 1 -Acquisition and integration costs 2,551 2,553
Adjusted EBITDA$ 48,753 $ 21,231 Liquidity and Capital Resources We have financed our operations primarily through revenues derived from product sales, the issuance of the 2019 Notes (defined below) inJuly 2019 and the issuance of common stock in ourDecember 2020 ,July 2019 andMay 2019 public offerings. Our revenue for the foreseeable future will primarily be limited to our bioprocessing product revenue. 29 -------------------------------------------------------------------------------- Table of Contents AtMarch 31, 2021 , we had cash and cash equivalents (excluding restricted cash) of$711.3 million compared to cash and cash equivalents (excluding restricted cash) of$717.3 million atDecember 31, 2020 . OnDecember 8, 2020 , the Company completed a public offering in which 1,725,000 shares of its common stock, including the underwriters' full exercise of an option to purchase up to an additional 225,000 shares, were sold to the public at a price of$181.00 per share. The total proceeds received by the Company from this offering, net of underwriting discounts and commissions and other estimated offering expenses payable by the Company, were approximately$297.8 million . In 2020, we acquired three companies for an aggregate of$175.0 million in cash, net of cash acquired. During the first 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 second 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 were met during the fourth quarter of 2020 as well and as a result, the Company received notices from note holders that they would convert$5,000 aggregate principal amount of the 2019 Notes, of which$1,000 principal were settled during the first quarter. The conversion 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 less than$1,000 on the conversion of these notes, which is included in other (expenses) income on our consolidated statements of comprehensive income for the three months endedMarch 31, 2021 . The 2019 Notes have a face value of$287.5 million and a carrying value and a carrying value of$246.6 million and continue to be classified as current liabilities on the Company's consolidated balance sheet as ofMarch 31, 2021 . We intend to use the net proceeds from the Offerings for working capital and other general corporate purposes, including to fund possible acquisitions of, or investments in, complementary businesses, products, services and technologies, such as the acquisitions executed in 2020 as mentioned in Note 3, "Acquisitions," included in this report. 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 . Cash flows Three Months Ended March 31, Increase/(Decrease) 2021 2020 $ Change (Amounts in thousands) Operating activities$ 9,262 $ 9,530 $ (268 ) Investing activities (8,997 ) (5,037 ) (3,960 ) Financing activities 507 1,589 (1,082 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash (6,746 ) (4,923 ) (1,823 ) Net (decrease) increase in cash, cash equivalents and restricted cash$ (5,974 ) $ 1,159 $ (7,133 ) Operating activities For the three months endedMarch 31, 2021 , our operating activities provided cash of$9.3 million reflecting net income of$29.5 million and non-cash charges totaling$20.2 million primarily related to depreciation, amortization, deferred income taxes, amortization of debt discount and issuance costs, and stock-based compensation charges. An increase in accounts receivable consumed$19.8 million of cash and was primarily driven by the 87.7% year-to-date increase in revenues. An increase in inventory manufactured of$17.0 million supports expected increases in future revenue. An increase in accounts payable of$3.7 million was primarily due to increased inventory purchases to support customer orders. These are offset by a$4.9 million decrease in accrued liabilities primarily related to payment of employee bonuses during the three months endedMarch 31, 2021 and related to a decrease in deferred revenue related to products shipped during the first quarter of 2021. The remaining cash used in operating activities resulted from unfavorable changes in various other working capital accounts. 30 -------------------------------------------------------------------------------- Table of Contents For the three months endedMarch 31, 2020 , our operating activities provided cash of$9.5 million reflecting net income of$9.8 million and non-cash charges totaling$13.4 million primarily related to depreciation, amortization, amortization of debt discount and issuance costs and stock-based compensation charges. An increase in accounts receivable consumed$2.4 million of cash and was primarily driven by the 25.5% year-to-date increase in revenues. An increase in inventory consumed$7.2 million to support future revenue, as well as inventory acquired in the C Technologies acquisition in 2019. A decrease in accounts payable and accrued liabilities of$5.7 million was due to the accrued liabilities acquired in the C Technologies acquisition in 2019, the timing of payments of payables, payment of the 2019 incentive compensation programs and an adjustment to the tax liability for the quarter. The remaining cash used in operating activities resulted from unfavorable changes in various other working capital accounts. Investing activities Our investing activities consumed$9.0 million of cash during the three months endedMarch 31, 2021 , primarily related to the ongoing capital expenditures as we continue to increase our manufacturing capacity worldwide. Of these expenditures,$1.5 million represented capitalized costs related to our internal-use software. Capital expenditures for the three months endedMarch 31, 2020 included$0.9 million for capitalized costs related to our internal-use software. Financing activities Cash provided by financing activities of$0.5 million for the three months endedMarch 31, 2021 included proceeds from stock option exercises during the period. Proceeds from stock option exercises during the three months endedMarch 31, 2020 were$1.6 million . Working capital increased by approximately$29.6 million to$613.0 million atMarch 31, 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: • the expansion of our bioprocessing business;
• the ability to sustain sales and profits of our bioprocessing products;
• our ability to acquire additional bioprocessing products;
• the scope of and progress made in our R&D activities;
• the extent of any share repurchase activity; and
• 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
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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 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 March 31, 2021 .
Net Operating Loss Carryforwards
At December 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 through December 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 the U.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
(formerly GE Healthcare ), 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 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 limited manufacturing capabilities and our dependence on
third-party manufacturers and value-added resellers; the effect of the pandemic
of the novel coronavirus disease, including
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Table of Contents 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 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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