Repligen Corporation (RGEN)

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Repligen Corporation (RGEN)

Q1 2013 Earnings Conference Call

May 2, 2013 09:00 ET


Jonathan Lieber - Chief Financial Officer and Treasurer

Walter Herlihy - President and Chief Executive Officer


Drew Jones - Stephens Inc.

Michael Wood - LSA

Larry Smith - SmithOnStocks.com



Good day, ladies and gentlemen, and welcome to the First Quarter 2013 Repligen Corporation Earnings Conference Call. My name is Clinton, and I will be your coordinator for today. There will be a question-and-answer session towards the company’s – after the company’s formal remarks. (Operator Instructions)

I would now like to turn the call over to your host for today’s call, Mr. Jonathan Lieber, Treasurer and Chief Financial Officer for Repligen.

Jonathan Lieber - Chief Financial Officer and Treasurer

Thank you, and good morning. The purpose of today’s call is to discuss our Q1 2013 results, 2013 financial guidance which remained unchanged, and first quarter business highlights. Joining me today on the call is Walter Herlihy, our President and CEO.

At the outset, I would like to state that this discussion may contain forward-looking statements. These statements are subject to risks and uncertainties which may cause our plans to change or results to vary. In particular, unforeseen events outside of our control may adversely impact future results. Additional information concerning these factors is discussed in our Annual Report on Form 10-K, the current reports on Form 8-K we filed today and other filings we make with the Securities and Exchange Commission. Except as required by law, we assume no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise.

This morning, we reported results for the first quarter ending December 31, 2013. Before getting started, I wanted to point out that this is the first financial report for which both the current and preceding years periods reflecting acquisition of December 2011 Novozymes Biopharma AB, now Repligen Sweden AB. For the quarter, we reported bioprocessing product revenue of $11.9 million, an increase of 28% from the prior year. Bioprocessing revenue growth in the first quarter is driven by increased demand from individual products in all three of our product areas, Protein A, growth factors, and chromatography products.

Total revenue for the quarter, including royalty and research revenue, was $16.5 million, which also represented an increase of 28% over the prior year period. Net income for the quarter was $2.3 million, or $0.07 per diluted share, compared to a net income of $1.2 million, or $0.04 per share for the quarter ended March 31, 2011. Cash and marketable securities totaled $54 million, an increase of $4 million from December 31, 2012.

Our gross margins in the first quarter were approximately 42%. Gross margins in the first quarter were negatively impacted by the sale of higher cost material in our Swedish manufacturing facility that was produced in 2012, development work on the new ligand and (indiscernible), and normal variations in manufacturing yields. A higher comp inventory resulted in approximately $1.2 million of additional expense. And if the same goods were produced today at the same quantities, the majority of this higher cost inventory was sold as of the end of the first quarter with the remainder to be sold in the second and third quarters. As a result, we expect gross margins to rise over the remainder of the year as we dropped higher volumes to our Swedish facility and benefit from our cost reduction initiatives there.

Research and development expenses in the first quarter were $2.2 million versus $2.8 million in the first quarter of 2012. The decline was due to a reduction in R&D expenditures on our therapeutic programs. We expect to complete the transition of RG3039 to Pfizer in the second quarter and continue to seek licensing agreements for our other therapeutic candidates.

Selling, general, and administrative expenses in the first quarter decreased to $3.3 million from $3.4 million in the first quarter of 2012. Today, we are updating our financial expectations for 2013. We continued to expect total revenues of between $63 million and $65 million including bioprocessing product revenue of $46 million to $48 million. We continue to forecast gross margins of approximately 50% and operating income of between $20 million and $22 million in 2013 compared to $11.1 million in 2012.

We also forecast net income of $18 million to $20 million compared to $14.2 million in 2012, and we expect our year end cash to be approximately $65 million also consistent with our prior guidance. This guidance is based on expectations for existing business and does not include the impact on our revenue and expenses of potential milestone payments from Pfizer, additional outlicense agreements for our remaining clinical assets, potential bioprocessing acquisitions, or fluctuations in foreign currency exchange rates.

Now, I will turn the call over to Walt who will discuss first quarter business highlights.

Walter Herlihy - President and Chief Executive Officer

Thanks John. On our call in March, I communicated to you that we are working to expand our sales and marketing reach. To this end, we recently participated in several industry conferences, including a podium presentation in a bioprocessing conference in February highlighting how our OPUS line of pre-packed chromatography columns can improve the speed and economics of biologics manufacturing. We also initiated our first print advertising campaign to raise awareness of our OPUS pre-packed columns. These and other drugs sales activities have generated a significant increase in customer interest in this product line particularly from contract manufacturing organizations and large biopharmaceutical companies for production of clinical trial materials.

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