What changed in this filing

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Item 1. Financial Statements

2022-04-27 compared with 2021-10-28 · 427 added, 561 removed, 660 unchanged (60% of the section changed)

3 unchanged sentences

(Unaudited, amounts in thousands, except share data)

September 30,

Current assets:

Cash and cash equivalents

Accounts receivable, net of reserves of $ 1,214 and $ 762 at September 30, 2021

and December 31, 2020, respectively

Accounts receivable, net of reserves of $ 1,364 and $ 1,417 at

March 31, 2022 and December 31, 2021, respectively

Inventories, net

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Operating lease liability

Current contingent consideration

Accrued liabilities

10 unchanged sentences

Stockholders' equity:

Preferred stock, $ 0.01 par value, 5,000,000 shares authorized, no shares issued or outstanding

Preferred stock, $ 0.01 par value, 5,000,000 shares authorized, no shares

issued or outstanding

Common stock, $ 0.01 par value;

80,000,000 shares authorized;

55,283,988 shares at

September 30, 2021 and 54,760,837 shares at December 31, 2020 issued and

shares at March 31, 2022 and 55,321,457 shares at December 31, 2021

issued and outstanding

Additional paid-in capital

Accumulated other comprehensive (loss) income

Retained earnings

Accumulated other comprehensive loss

Accumulated earnings

Total stockholders’

5 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Royalty and other revenue

4 unchanged sentences

Selling, general and administrative

Contingent consideration

Total costs and operating expenses

3 unchanged sentences

Interest expense

Amortization of debt issuance costs

Other expenses

3 unchanged sentences

Earnings per share:

Diluted (Note 12)

Weighted average common shares outstanding:

Diluted (Note 12)

Other comprehensive income (loss):

5 unchanged sentences

(Unaudited, amounts in thousands, except share data)

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Paid-In Capital

Other Comprehensive

Income (Loss)

Stockholders'

Balance at December 31, 2021

Issuance of common stock for debt conversion

Exercise of stock options and vesting of stock

Issuance of common stock pursuant to the acquisition

of Avitide Inc.

Tax withholding on vesting of restricted stock units

Stock-based compensation expense

True up of costs related to the December 2020

issuance of common stock

Translation adjustment

Balance at September 30, 2021

Three Months Ended September 30, 2021

Paid-In Capital

Other Comprehensive

Stockholders'

Balance at June 30, 2021

Impact of the adoption of ASU 2020-06

Issuance of common stock for debt conversion

Exercise of stock options and vesting of stock

Issuance of common stock pursuant to the acquisition

of Avitide Inc.

Tax withholding on vesting of restricted stock units

1 unchanged sentence

Translation adjustment

Balance at September 30, 2021

Nine Months Ended September 30, 2020

Balance at March 31, 2022

Three Months Ended March 31, 2021

Paid-In Capital

Other Comprehensive

Income (Loss)

Stockholders'

Balance at December 31, 2020

Exercise of stock options and vesting of stock

Stock-based compensation expense

Translation adjustment

Balance as of September 30, 2020

Three Months Ended September 30, 2020

Paid-In Capital

Other Comprehensive

Stockholders'

Balance at June 30, 2020

Issuance of common stock for debt conversion

Exercise of stock options and vesting of stock

Stock-based compensation expense

True-up of costs related to the December 2020 issuance

of common stock

Translation adjustment

Balance as of September 30, 2020

Balance at March 31, 2021

The accompanying notes are an integral part of these consolidated financial statements.

2 unchanged sentences

(Unaudited, amounts in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

5 unchanged sentences

Deferred income taxes, net

Contingent consideration

Changes in operating assets and liabilities, excluding impact of acquisitions:

10 unchanged sentences

Purchases of property, plant and equipment

Sale of property, plant and equipment

Total cash used in investing activities

3 unchanged sentences

Repayment of convertible senior notes

Total cash provided by financing activities

Total cash (used in) provided by financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

2 unchanged sentences

Assets acquired under operating leases

Fair value of 271,096 shares of common stock issued for acquisition of

Avitide, Inc.

Fair value of earnouts related to acquisition of Avitide, Inc.

The accompanying notes are an integral part of these consolidated financial statements.

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The consolidated financial statements included herein have been prepared by Repligen Corporation (the “Company”, “Repligen”, “our”

or “we”) in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), for Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X and do not include all of the information and footnote disclosures required by GAAP.

or “we”) in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”), for Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X and do not include all of the information and footnote disclosures required by GAAP.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the SEC on February 17, 2022 (“Form 10-K”).

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The business and economic uncertainty resulting from the novel coronavirus (“COVID-19”) pandemic has made such estimates more difficult to calculate.

The business and economic uncertainty resulting from the novel coronavirus pandemic (“COVID-19”) pandemic has made such estimates more difficult to calculate.

Accordingly, actual results could differ from those estimates.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Repligen Sweden AB, Repligen GmbH, Spectrum ® LifeSciences LLC and its subsidiaries (“Spectrum”), C Technologies, Inc.

(“C Technologies”), Non-Metallic Solutions, Inc.

(“NMS”), ARTeSYN Biosolutions Holdings Ireland Limited (“ARTeSYN”), Polymem S.A.

(“Polymem”), Avitide, Inc.

(“Avitide”) and Repligen Singapore Pte.

(“Polymem”), Avitide LLC, Newton T&M Corp ("NTM"), Bio-Flex Solutions, L.L.C.

("BioFlex") and Repligen Singapore Pte.

All significant intercompany accounts and transactions have been eliminated in consolidation.

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Recently issued ASUs that we feel may be applicable to the Company are as follows:

Recently Issued Accounting Standard Updates –

Not Yet Adopted

In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06, “

Recently Issued Accounting Standards Updates –

Adopted During the Period

Effective January 1, 2022, the Company adopted ASU 2020-06, “

Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)”

using the modified retrospective method of adoption.

ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the primary contract.

ASU 2020-06 also enhances transparency and improves disclosures for convertible instruments and earnings per share guidance.

ASU 2020-06 is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020.

This update permits the use of either the modified retrospective or fully retrospective method of transition.

The Company is currently evaluating the impact of the adoption of ASU 2020-06 on the Company's consolidated financial statements.

Consequently, a convertible instrument will be accounted for as a single liability measured at its amortized cost as long as no other features of such convertible instrument require bifurcation and recognition as derivatives.

By removing those separation models, the interest rate of convertible debt instruments will typically be closer to the coupon interest rate when applying the guidance in Topic 835, “Interest.”

We now account for our 0.375% convertible senior notes due July 15, 2024 (the "2019 Notes") as a single liability measured at amortized cost.

As a result, the adoption of ASU 2020-06 had a material impact on our consolidated financial statements, resulting in adjustments of $ 39.1 million, $ 17.3 million, and $ 27.6 million to the opening balances of additional paid-in capital, retained earnings and convertible senior notes,

current portion, net, respectively, on our consolidated balance sheet as of January 1, 2022.

Additionally, due to the adoption of ASU 2020-06, we reversed the remaining balance of the deferred tax liability of $ 6.4 million, which was initially recorded in connection with the 2019 Notes.

See Note 7, “Convertible Senior Notes,”

for more information, including modified disclosures as required by ASU 2020-06 upon adoption.

Fair Value Measurements

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Fair Value Measured on a Recurring Basis

Financial assets and financial liabilities measured at fair value on a recurring basis consist of the following as of September 30, 2021 and December 31, 2020:

As of September 30, 2021

Financial assets and financial liabilities measured at fair value on a recurring basis consist of the following as of March 31, 2022 and December 31, 2021 (amounts in thousands):

As of March 31, 2022

Money market accounts

Contingent consideration - earnout obligation

Short-term contingent consideration

Long-term contingent consideration

As of December 31, 2021

Money market accounts

Long-term contingent consideration

Cash and cash equivalents

As of September 30, 2021 and December 31, 2020 , cash and cash equivalents on the Company's consolidated balance sheets included $ 448.9 million and $ 549.0 million, respectively, in money market accounts.

As of March 31, 2022 and December 31, 2021, cash and cash equivalents on the Company's consolidated balance sheets included $ 436.0 million and $ 460.9 million, respectively, in money market accounts.

These funds are valued on a recurring basis using Level 1 inputs.

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On September 20, 2021, the Company completed the acquisition of Avitide (the "Avitide Acquisition"), a privately-held affinity ligand discovery and development company headquartered in Lebanon, New Hampshire.

The transaction consisted of upfront payments of $ 150.0 million and up to an additional $ 125.0 million (undiscounted) in contingent consideration earnout payments made equally in cash and the Company's common stock over a three-year performance period beginning January 1, 2022 and ending December 31, 2024.

The transaction consisted of upfront payments of $ 150.0 million and up to an additional $ 125.0 million (undiscounted) in contingent consideration earnout

payments made equally in cash and the Company's common stock over a three-year performance period beginning January 1, 2022 and ending December 31, 2024.

Refer to Note 3, "Acquisitions" below for additional information.

1 unchanged sentence

Balance as of December 31, 2021

Acquisition date fair value of contingent consideration - earnout

Change in fair value

Balance as of September 30, 2021

The recurring Level 3 fair value measurement of our contingent consideration earnout that we expect to be required to settle include the following significant unobservable inputs:

Contingent consideration

Balance as of March 31, 2022

The recurring Level 3 fair value measurement of our contingent consideration earnout that we expect to be required to settle include the following significant unobservable inputs (amounts in thousands, except percentage data):

Contingent Consideration Earnout

Fair Value as of September 20, 2021

(amounts in thousands)

Fair Value as of

March 31, 2022

Valuation Technique

12 unchanged sentences

Changes in the projected performance of the acquired business could result in a higher or lower contingent consideration obligation in the future.

There were no changes in revenue projections during the period from September 20, 2021, the date of the Avitide Acquisition, and September 30, 2021 that would cause a material change in amounts reported as of September 30, 2021.

There were no changes in revenue projections during the three months ended March 31, 2022 that would cause a material change in amounts reported as of March 31, 2022.

Fair Value Measured on a Nonrecurring Basis

During the nine months ended September 30, 2021, there were no re-measurements to fair value of financial assets and liabilities that are measured at fair value on a nonrecurring basis.

During the three months ended March 31, 2022, there were no re-measurements to fair value of financial assets and liabilities that are measured at fair value on a nonrecurring basis.

Convertible Senior Notes

In July 2019, the Company issued $ 287.5 million aggregate principal amount of the Company’s 0.375 % convertible senior notes due July 15, 2024 (the “2019 Notes”).

In July 2019, the Company issued $ 287.5 million aggregate principal amount of the Company’s 2019 Notes.

Interest is payable semi-annually in arrears on January 15 and July 15 of each year.

The 2019 Notes will mature on July 15, 2024, unless earlier converted or repurchased in accordance with their terms.

At September 30, 2021 and December 31, 2020, the carrying value of the 2019 Notes was $ 252.3 million and $ 243.7 million, respectively, net of unamortized discount, and the fair value of the 2019 Notes was $ 732.9 million and $ 501.0 million, respectively.

The fair value of the 2019 Notes is a Level 1 valuation and was determined based on the most recent trade activity of the 2019 Notes as of September 30, 2021.

At March 31, 2022 and December 31, 2021, the carrying value of the 2019 Notes was $ 283.3 million and $ 255.3 million, respectively, net of unamortized discount and issuance costs, and the fair value of the 2019 Notes was $ 490.2 million and $ 678.5 million, respectively.

The fair value of the 2019 Notes is a Level 1 valuation and was determined based on the most recent trade activity of the 2019 Notes as of March 31, 2022.

The 2019 Notes are discussed in more detail in Note 7, “Convertible Senior Notes”

to Part II, Item 8, “

Financial Statements and Supplementary Data”

to our 2020 Annual Report on Form 10-K (“Form 10-K"), which was filed with the SEC on February 24, 2021.

to this report.

2021 Acquisitions

Avitide, Inc.

On September 16, 2021, the Company entered into an Agreement and Plan of Merger and Reorganization (“Merger Agreement”) with Avalon Merger Sub, Inc., a Delaware corporation and a wholly owned direct subsidiary of the Company (“First Merger Sub”), Avalon Merger Sub LLC, a Delaware limited liability company and a wholly owned direct subsidiary of the Company (“Second Merger Sub”

and together with First Merger Sub, the “Merger Subs”), Avitide, Inc., a Delaware corporation, 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 and on the terms set forth in the Merger Agreement.

Avitide, which is headquartered in Lebanon, New Hampshire, offers diverse libraries and leading technology in affinity ligand discovery and development resulting in best-in-class ligand discovery and development lead-times.

The acquisition gives the Company a new platform for affinity resin development, including gene therapy, and advances and expands the Company’s proteins and chromatography franchise to address the unique purification needs of gene therapies and other emerging modalities.

Bio-Flex Solutions L.L.C.

and Newton T&M Corp.

On November 29, 2021, the Company entered into an Equity Purchase Agreement with BioFlex, NTM and each of Ralph Meola and Jason Nisler, to acquire 100 % of the outstanding securities of BioFlex and NTM (collectively, the “NTM Acquisition”).

The transaction closed on December 16, 2021.

NTM, which is headquartered in Newton, New Jersey, is the parent company of BioFlex and focuses on manufacturing of products, while BioFlex, also headquartered in Newton, New Jersey, commercializes branded products to biotech customers.

The NTM Acquisition complements and expands the Company's filtration offering paths as the industry migrates to single-use flow paths solutions for monoclonal antibody ("mAb"), vaccine and cell and gene therapy ("C&GT") applications, with a focus on single-use fluid management components, including single-use clamps, adapters, end caps and hose assemblies.

The NTM Acquisition streamlines and increases control over many components in the Company's single-use supply chain which ultimately should drive reduced lead-times for Repligen customers in the coming years.

Consideration Transferred

The Avitide Acquisition was accounted for as a purchase of a business under ASC 805, “Business Combinations”

and engaged a third-party valuation firm to assist with the valuation of the business acquired.

Under the terms of the Merger Agreement, all outstanding shares of capital stock of Avitide were cancelled and converted into the right to receive merger consideration with a value totaling up to $ 275.0 million, which consisted of upfront payments in aggregate of $ 150.0 million ($ 149.4 million, net of cash acquired) and up to an additional $ 125.0 million (undiscounted) in contingent consideration earnout payments if certain performance targets are achieved.

Total consideration paid also included $ 0.8 million deposited into an escrow account against which the Company may make claims for indemnification.

The Avitide Acquisition was funded through payment of $ 75.0 million in cash, the issuance of 271,096 unregistered shares of the Company’s common stock totaling $ 77.6 million and contingent consideration with fair value of approximately $ 80.0 million.

Under the acquisition method of accounting, the assets acquired and liabilities assumed of Avitide were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company.

The fair value of the net liabilities assumed is estimated to be $ 5.2 million, the fair value of the intangible assets acquired is estimated to be $ 44.3 million, and the residual goodwill is estimated to be $ 193.5 million.

The NTM Acquisition was accounted for as a purchase of businesses under ASC 805, “Business Combinations”

and the Company engaged a third-party valuation firm to assist with the valuation of the business acquired.

Under the terms of the Equity Purchase Agreement, all outstanding shares of capital stock of BioFlex were acquired for consideration with a value totaling $ 31.8 million, which includes $ 3.0 million deposited into an escrow against which the Company may make claims for indemnification.

Under the acquisition method of accounting, the assets acquired and liabilities assumed of BioFlex were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company.

The fair value of the net assets acquired is estimated to be $ 4.4 million, the fair value of the intangible assets acquired is estimated to be $ 17.2 million, and the residual goodwill is estimated to be $ 10.2 million.

The estimated consideration and preliminary purchase price information has been prepared using a preliminary valuation.

Acquisition-related costs are not included as a component of consideration transferred but are expensed in the periods in which costs are incurred.

The Company incurred $ 0.6 million of transaction and integration costs associated with the Avitide Acquisition from the date of acquisition to September 30, 2021.

The transaction costs are included in operating expenses in the consolidated statements of comprehensive income for the period ended September 30, 2021.

The Company has incurred $ 1.2 million of transaction and integration costs associated with the NTM Acquisition from the date of acquisition to March 31, 2022, with $ 0.9 million of transaction and integration costs incurred during the three months ended March 31, 2022.

The transaction costs are included in operating expenses in the consolidated statements of comprehensive income for the period ended March 31, 2022.

The preparation of the valuation required the use of significant assumptions and estimates.

2 unchanged sentences

However, actual results may differ from these estimates.

Total consideration transferred is as follows (amounts in thousands):

Cash consideration

Equity consideration

Contingent consideration - earnout

Fair Value of Net Assets Acquired

The preliminary allocation of purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date, based on the preliminary valuation.

The fair value of the contingent consideration –

earnout was measured using a Monte Carlo simulation.

The purchase accounting for this acquisition is not finalized.

As additional information becomes available, the Company may further revise its preliminary purchase price allocation, including the fair value of the contingent consideration - earnout during the remainder of the measurement period.

Any such revisions or changes may have a material impact on our accounting treatment of the Avitide Acquisition.

As additional information becomes available, the Company may further revise its preliminary purchase price allocation during the remainder of the measurement period.

Any such revisions or changes may have a material impact on our accounting treatment of the NTM Acquisition.

The final allocation may include changes to:

deferred revenue;

(1) inventory;

(3) deferred tax liabilities, net;

(4) allocations to intangible assets such as tradenames, developed technology and customer relationships as well as goodwill;

(2) deferred tax assets, net;

(3) allocations to intangible assets such as trademark and tradename, developed technology and customer relationships as well as goodwill;

(4) final consideration paid related to working capital adjustments;

(6) noncurrent contingent consideration;

and (5) other assets and liabilities.

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Non-competition agreements

Long term deferred tax asset

Accounts payable

2 unchanged sentences

Operating lease liability, long-term

Long term deferred tax liability

Other liabilities

Fair value of net assets acquired

During the first quarter of 2022, the Company recorded net working capital adjustments of approximately $ 4,000 related to pre-acquisition liabilities, which is included in goodwill in the table above.

Acquired Goodwill

The goodwill of $ 193.5 million represents future economic benefits expected to arise from anticipated synergies from the integration of Avitide.

These synergies include certain cost savings, operating efficiencies and other strategic benefits projected to be achieved as a result of the Avitide Acquisition.

Substantially all of the goodwill recorded is expected to be nondeductible for income tax purposes.

The goodwill of $ 10.2 million represents future economic benefits expected to arise from anticipated synergies from the integration of BioFlex and NTM into the Company.

These synergies include certain cost savings, operating efficiencies and other strategic benefits projected to be achieved as a result of the NTM Acquisition.

Substantially all of the goodwill recorded is expected to be deductible for income tax purposes.

Intangible Assets

The following table sets forth the components of the identified intangible assets associated with the Avitide Acquisition and their estimated useful lives:

The following table sets forth the components of the identified intangible assets associated with the NTM Acquisition and their estimated useful lives:

(Amounts in thousands)

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Non-competition agreements

On June 22, 2021, the Company entered into a Stock Purchase Agreement with Polymem S.A.

(“Polymem”), a company organized under the laws of France, and Jean-Michel Espenan and Franc Saux, acting together jointly and severally as the representatives of the sellers for approximately $ 47.0 million.

The transaction closed on July 1, 2021 (the “Polymem Acquisition.”).

Polymem, which is headquartered in, Toulouse, France, is a manufacturer of hollow fiber membranes, membrane modules and systems for industrial and bioprocessing applications.

Polymem products will complement and expand the Company’s portfolio of hollow fiber systems and consumables.

The acquisition substantially increases Repligen’s membrane and module

manufacturing capacity and establishes a world-class center of excellence in Europe to address the accelerating global demand for these innovative products.

Avitide, Inc.

On September 16, 2021, the Company entered into an Agreement and Plan of Merger and Reorganization (“Avitide Merger Agreement”) with Avalon Merger Sub, Inc., a Delaware corporation and a wholly owned direct subsidiary of the Company, Avalon Merger Sub LLC, a Delaware limited liability company and a wholly owned direct subsidiary of the Company, Avitide, Inc.

("Avitide"), a Delaware corporation, 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 to purchase Avitide.

The transaction closed on September 20, 2021 and on the terms set forth in the Avitide Merger Agreement.

The acquisition gives the Company a new platform for affinity resin development, including C&GT, and advances and expands the Company’s proteins and chromatography franchise to address the unique purification needs of gene therapies and other emerging modalities.

Consideration Transferred

The Company accounted for the Polymem Acquisition as a purchase of a business under ASC 805, “Business Combinations”

and engaged a third-party valuation firm to assist with the valuation of the business acquired.

Payment for the transaction was denominated in Euros but is reflected here in U.S.

dollars for presentation purposes based on an exchange rate of 0.8437 as of July 1, 2021, the date of acquisition.

Total consideration paid was approximately $47.0 million, which included approximately $ 4.3 million deposited into an escrow account against which the Company may make claims for indemnification.

The fair value of the net assumed liabilities is approximately $ 2.2 million, the fair value of the intangible assets acquired is approximately $ 25.7 million, and the residual goodwill is approximately $ 23.5 million.

The Avitide Acquisition was accounted for as a purchase of a business under ASC 805, “Business Combinations”

and the Company engaged a third-party valuation firm to assist with the valuation of the business acquired.

Under the terms of the Avitide Merger Agreement, all outstanding shares of capital stock of Avitide were cancelled and converted into the right to receive merger consideration with a value totaling up to $ 275.0 million, which consisted of upfront payments in aggregate of $ 150.0 million ($ 149.4 million, net of cash acquired) and up to an additional $ 125.0 million (undiscounted) in contingent consideration earnout payments if certain performance targets are achieved.

Total consideration paid also included $ 0.8 million deposited into an escrow account against which the Company may make claims for indemnification.

The Avitide Acquisition was funded through payment of $ 75.0 million in cash, the issuance of 271,096 unregistered shares of the Company’s common stock totaling $ 83.0 million and contingent consideration with fair value of approximately $ 88.4 million.

The fair value of the net assets acquired is estimated to be $ 0.4 million, the fair value of the intangible assets acquired is estimated to be $ 46.7 million, and the residual goodwill is estimated to be $ 199.2 million.

The estimated consideration and preliminary purchase price information has been prepared using a preliminary valuation.

Acquisition-related costs are not included as a component of consideration transferred but are expensed in the periods in which costs are incurred.

The Company incurred $ 1.9 million of transaction and integration costs associated with the Polymem Acquisition from the date of acquisition to September 30, 2021.

The transaction costs are included in operating expenses in the consolidated statements of comprehensive income for the period ended September 30, 2021.

Fair Value of Net Assets Acquired

The preliminary allocation of purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date, based on the preliminary valuation.

As additional information becomes available, the Company may further revise its preliminary purchase price allocation during the remainder of the measurement period (which will not exceed 12 months from July 1, 2021).

Any such revisions or changes may have a material impact on our accounting treatment of the Polymem Acquisition.

The components and estimated allocation of the purchase price consist of the following (amounts in thousands):

Cash and cash equivalents

Net working capital (excluding cash and inventory

Inventory step-up

Operating lease right of use assets

Property and equipment

Customer relationships

Developed technology

Trademark and tradenames

Non-compete agreements

Operating lease liability

Long term deferred tax liability

Other long-term liabilities

Fair value of net assets acquired

The preliminary purchase price allocation is subject to adjustment as purchase accounting is finalized.

The final purchase price allocation will be determined upon completion of final valuation analysis and the fair value allocation of assets acquired and liabilities assumed could differ materially from the preliminary valuation analysis.

The final allocation may include changes to:

(1) deferred tax liabilities;

(2) allocations to intangible assets such as tradenames, developed technology an customer relationships as well as goodwill;

(3) final consideration related to working capital adjustments;

and (4) other assets and liabilities

Acquired Goodwill

The goodwill of approximately $ 23.5 million represents future economic benefits expected to arise from anticipated synergies from the integration of Polymem.

These synergies include certain cost savings, operating efficiencies and other strategic

benefits projected to be achieved as a result of the Polymem Acquisition.

Substantially all of the goodwill recorded is expected to be nondeductible for income tax purposes.

Intangible Assets

The following table sets forth the components of the identified intangible assets associated with the Polymem Acquisition and their estimated useful lives:

(Amounts in thousands)

Customer relationships

Developed technology

Trademark and tradename

Non-competition agreements

2020 Acquisitions

ARTeSYN Biosolutions Holdings Ireland Limited

On October 27, 2020, the Company entered into an Equity and Asset Purchase Agreement with ARTeSYN, a company organized under the laws of Ireland, Third Creek Holdings LLC, a Nevada limited liability company (“Third Creek”), Alphinity, LLC, a Nevada limited liability company (“Alphinity”, and together with Third Creek the “ARTeSYN Sellers”), and Michael 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 the Company’s common stock to Third Creek.

The transaction closed on December 3, 2020.

ARTeSYN is headquartered in Waterford, Ireland and conducts its operations in Ireland, the United States and Estonia.

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, the Company has integrated unique flow path assemblies utilizing the Company’s 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 Company’s hollow fiber systems and complements its chromatography and TFF filtration product lines.

Consideration Transferred

The ARTeSYN Acquisition was accounted for as a purchase of a business under ASC 805, “Business Combinations”

The ARTeSYN Acquisition was funded through payment of $ 130.7 million in cash, as well as issuance of 372,990 unregistered shares of the Company’s common stock totaling $ 69.4 million, contingent consideration of approximately $ 1.5 million, and settlement of preexisting invoices with the Company of approximately $ 2.3 million, for a total purchase price of $ 204.0 million.

Under the acquisition method of accounting, the assets acquired and liabilities assumed of ARTeSYN were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company.

The fair value of the net tangible assets acquired is estimated to be $ 8.0 million, the fair value of the intangible assets acquired is estimated to be $ 67.4 million, and the residual goodwill is estimated to be $ 128.6 million.

The estimated consideration and purchase price information was prepared using a valuation.

Payment of the final consideration for working capital was made in April 2021.

The Company has incurred $ 3.2 m illion of transaction and integration costs associated with the Avitide Acquisition from the date of acquisition to March 31, 2022 with $ 0.6 million of transaction and integration costs incurred during the three months ended March 31, 2022.

The transaction costs are included in operating expenses in the consolidated statements of comprehensive income in this report.

During the first quarter of 2022, due to the change in market inputs used to prepare the valuation of the contingent consideration obligation, the Company also recorded a contingent consideration adjustment of ($ 2.4 ) million to the Company's consolidated statement of comprehensive income.

See Note 2, "Fair Value Measurements" for more information.

The preparation of the valuation required the use of significant assumptions and estimates.

Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates.

estimates were based on assumptions that the Company believes to be reasonable.

These estimates were based on assumptions that the Company believes to be reasonable.

However, actual results may differ from these estimates.

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Equity consideration

Contingent consideration

Settlement of preexisting liabilities

Contingent consideration - earnout

Fair value of net assets acquired

Acquisition related costs are not included as a component of consideration transferred but are expensed in the periods in which the costs are incurred.

The Company incurred $ 4.0 million in transaction and integration costs associated with the ARTeSYN Acquisition from the date of acquisition to December 31, 2020, and an additional $ 3.4 million of transaction and integration costs during 2021.

The transaction costs are included in operating expenses in the consolidated statements of comprehensive income for the period ended September 30, 2021.

The consideration transferred includes approximately $ 1.5 million related to consideration that was deferred at the acquisition date, with payment to the ARTeSYN Sellers contingent upon recognizing revenue on a large-scale system within 120 days of the acquisition date.

This consideration is recorded at its estimated fair value as of the acquisition date, which includes the assumption of high probability of such revenue being recognized.

Fair Value of Net Assets Acquired

The preliminary allocation of purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date, based on the preliminary valuation.

Any such revisions or changes may be material.

The final allocation may include changes to deferred tax liabilities, net and goodwill.

Upon conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments will be recorded to our consolidated statements of comprehensive income.

During 2021, the Company recorded net working capital adjustments of $ 0.1 million related to settlement of pre-acquisition liabilities, which offset goodwill in the table below.

Any such revisions or changes may have a material impact on our accounting treatment of the Avitide Acquisition.

The final allocation may include changes to long-term deferred liabilities and goodwill.

The components and estimated allocation of the purchase price consist of the following (amounts in thousands):

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Operating lease right of use asset

Other noncurrent assets

Customer relationships

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Accrued liabilities

Deferred revenue

Deferred tax liabilities, net

Notes payable

Operating lease liability

Operating lease liability, long-term

Long term deferred tax liability

Other liabilities

Fair value of net assets acquired

Acquired Goodwill

The goodwill of $ 128.6 million represents future economic benefits expected to arise from synergies from combining operations and commercial organizations to increase market presence and the extension of existing customer relationships.

Substantially all of the goodwill recorded is expected to be deductible for income tax purposes.

The goodwill of $ 199.2 million represents future economic benefits expected to arise from anticipated synergies from the integration of Avitide.

These synergies include certain cost savings, operating efficiencies and other strategic benefits projected to be achieved as a result of the Avitide Acquisition.

Substantially all of the goodwill recorded is expected to be nondeductible for income tax purposes.

Intangible Assets

The following table sets forth the components of the identified intangible assets associated with the ARTeSYN Acquisition and their estimated useful lives:

The following table sets forth the components of the identified intangible assets associated with the Avitide Acquisition and their estimated useful lives:

(Amounts in thousands)

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Non-competition agreements

Non-Metallic Solutions, Inc.

On October 15, 2020, the Company entered into a Stock Purchase Agreement with NMS, a Massachusetts corporation, and each of William Malloneé

and Derek Masser, the legal and beneficial owners of NMS, to purchase NMS, which transaction subsequently closed on October 20, 2020 (the “NMS Acquisition”).

NMS, headquartered in Auburn, 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 Repligen to expand its line of single-use systems and associated integrated flow path assemblies and streamline the supply chain for current products, providing more flexibility to scale and expand the Company's single-use and systems portfolios.

On June 22, 2021, the Company entered into a Stock Purchase Agreement with Polymem S.A., a company organized under the laws of France, and Jean-Michel Espenan and Franc Saux, acting together jointly and severally as the representatives of the sellers for $ 47.0 million.

The transaction closed on July 1, 2021 (the “Polymem Acquisition”).

Polymem, which is headquartered in, Toulouse, France, is a manufacturer of hollow fiber membranes, membrane modules and systems for industrial and bioprocessing applications.

Polymem products will complement and expand the Company’s portfolio of hollow fiber systems and consumables.

The acquisition substantially increases Repligen’s membrane and module manufacturing capacity and establishes a world-class center of excellence in Europe to address the accelerating global demand for these innovative products.

Consideration Transferred

The NMS Acquisition was accounted for as a purchase of a business under ASC 805, “Business Combinations.”

Total consideration paid was $ 16.1 million, which included $ 1.3 million deposited into an escrow account against which the Company may make claims for indemnification.

The fair value of the net tangible assets acquired was $ 0.9 million, the fair value of the intangible assets acquired was $ 8.5 million, and the residual goodwill was $ 6.7 million.

The Polymem Acquisition was accounted for as a purchase of a business under ASC 805, “Business Combinations”

and the Company engaged a third-party valuation firm to assist with the valuation of the business acquired.

Payment for the transaction was denominated in Euros but is reflected here in U.S.

dollars for presentation purposes based on an exchange rate of 0.8437 as of July 1, 2021, the date of acquisition.

Total consideration paid was approximately $ 47.0 million, which included

approximately $ 4.3 million deposited into an escrow account against which the Company may make claims for indemnification.

Under the acquisition method of accounting, the assets acquired and liabilities assumed of Polymem were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company.

The fair value of the net assets acquired is approximately $ 2.2 million, the fair value of the intangible assets acquired is approximately $ 9.1 million, and the residual goodwill is approximately $ 35.7 million.

Acquisition-related costs are not included as a component of consideration transferred but are expensed in the periods in which costs are incurred.

The Company incurred $ 0.2 million of transaction and integration costs associated with the NMS Acquisition from the date of acquisition to December 31, 2020, and $ 0.4 million for the nine months ended September 30, 2021.

The transaction costs are included in SG&A expenses in the consolidated statements of comprehensive income.

The Company has incurred $ 4.7 m illion of transaction and integration costs associated with the Polymem Acquisition from the date of acquisition to March 31, 2022, with $ 1.6 million of transaction and integration costs incurred during the three months ended March 31, 2022.

The transaction costs are included in operating expenses in the consolidated statements of comprehensive income for the period ended March 31, 2022.

Fair Value of Net Assets Acquired

The allocation of purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date, based on the preliminary valuation.

We have made appropriate adjustments to the purchase price allocation during the measurement period, which ended on October 20, 2021.

The components and allocation of the purchase price consist of the following (amounts in thousands):

The preliminary allocation of purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date, based on the preliminary valuation.

Any such revisions or changes may have a material impact on our accounting treatment of the Polymem Acquisition.

The components and estimated allocation of the purchase price consist of the following (amounts in thousands):

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other current assets

Net working capital (excluding cash and inventory

Inventory step-up

Operating lease right of use assets

Property and equipment

Operating lease right of use asset

Customer relationships

Developed technology

Trademark and tradename

Non-competition agreements

Deferred tax assets

Accounts payable

Accrued liabilities

Trademark and tradenames

Non-compete agreements

Operating lease liability

Operating lease liability, long-term

Long term deferred tax liability

Other long-term liabilities

Fair value of net assets acquired

Acquired Goodwill

The goodwill of $ 6.7 million represents future economic benefits expected to arise from anticipated synergies from the integration of NMS.

These synergies include certain cost savings, operating efficiencies and other strategic benefits projected to be achieved as a result of the NMS Acquisition.

Substantially all of the goodwill recorded is expected to be deductible for income tax purposes.

In February 2021, the Company recorded an adjustment to goodwill of $ 0.1 million related to the finalization of the working capital true-up.

The goodwill of approximately $ 35.7 million represents future economic benefits expected to arise from anticipated synergies from the integration of Polymem.

These synergies include certain cost savings, operating efficiencies and other strategic benefits projected to be achieved as a result of the Polymem Acquisition.

Substantially all of the goodwill recorded is expected to be nondeductible for income tax purposes.

Intangible Assets

The following table sets forth the components of the identified intangible assets associated with the NMS Acquisition and their estimated useful lives:

The following table sets forth the components of the identified intangible assets associated with the Polymem Acquisition and their estimated useful lives:

(Amounts in thousands)

Customer relationships

Developed technology

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Disaggregation of Revenue

Revenues for the three and nine months ended September 30, 2021 and 2020 were as follows:

Revenues for the three months ended March 31, 2022 and 2021 were as follows:

Three Months Ended

Nine Months Ended

September 30,

(Amounts in thousands)

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However, given that the Company’s revenues are generated in different geographic regions, factors such as regulatory and geopolitical factors within those regions could impact the nature, timing and uncertainty of the Company’s revenues and cash flows.

In addition, a significant portion of the Company’s revenues is generated from a small number of customers;

In addition, a significant portion of the Company’s revenue is generated from a small number of customers;

therefore, economic factors specific to these customers could impact the nature, timing and uncertainty of the Company’s revenues and cash flows.

Disaggregated revenue from contracts with customers by geographic region can be found in Note 14, “Segment Reporting,”

Disaggregated revenue from contracts with customers by geographic region and revenue from significant customers can be found in Note 14, “Segment Reporting,”

included in this report.

Revenue from customers that represented 10 % or more of the Company’s total revenue for the three months ended September 30, 2021 and 2020 came from sales to Pfizer Inc.

during the three months ended September 30, 2021, which generated $ 19.1 million, or 11 % of the Company's total revenue for the period.

Revenue from customers that represented 10 % or more of the Company's total revenue for the nine months ended September 30, 2021 and 2020 came from sales to MilliporeSigma during the nine months ended September 30, 2020, which generated $ 29.4 million in revenue, or 11 % of the Company's total revenue for the period.

There was no revenue from customers that represented 10 % or more of the Company's total revenue for the other periods presented.

For more information regarding our product revenue, see Note 6, “Revenue Recognition”

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Contract Balances from Contracts with Customers

The following table provides information about receivables and deferred revenue from contracts with customers as of September 30, 2021 (amounts in thousands):

The following table provides information about receivables and deferred revenue from contracts with customers as of March 31, 2022 (amounts in thousands):

Balances from contracts with customers only:

Accounts receivable, net of reserves

Deferred revenue (included in accrued liabilities in the consolidated balance sheets)

Revenue recognized during the nine-month period ended September 30, 2021 relating to:

Accounts receivable

Deferred revenue (included in accrued liabilities in

the consolidated balance sheets)

Revenue recognized during periods presented relating to:

The beginning deferred revenue balance

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Goodwill represents the difference between the purchase price and the estimated fair value of identifiable assets acquired and liabilities assumed.

Goodwill acquired in a business combination and determined to have an indefinite useful life is not

amortized, but instead is tested for impairment at least annually in accordance with ASC 350, “Intangibles –

Goodwill acquired in a business combination and determined to have an indefinite useful life is not amortized, but instead is tested for impairment at least annually in accordance with ASC 350, “Intangibles –

Goodwill and Other”

The following table represents the change in the carrying value of goodwill for the nine months ended September 30, 2021 (amounts in thousands):

Balance at December 31, 2020

Measurement period adjustment - NMS

Measurement period adjustments - ARTeSYN

Acquisition of Polymem

Acquisition of Avitide

The following table represents the change in the carrying value of goodwill for the three months ended March 31, 2022 (amounts in thousands):

Balance as of December 31, 2021

Measurement period adjustment - BioFlex

Cumulative translation adjustment

Balance at September 30, 2021

Balance as of March 31, 2022

During each of the fourth quarters of 2021 and 2020, the Company completed its annual impairment assessments and concluded that goodwill was not impaired in any of those years.

The Company has not identified any “triggering”

events which indicate an impairment of goodwill in the three and nine months ended September 30, 2021.

events which indicate an impairment of goodwill in the three months ended March 31, 2022.

Intangible Assets

Intangible assets with a definitive life are amortized over their useful lives using the straight-line method, and the amortization expense is recorded within cost of product revenue and SG&A expenses in the Company’s statements of comprehensive income.

Intangible assets with a definitive life are amortized over their useful lives using the straight-line method, and the amortization expense is recorded within cost of product revenue and selling, general and administrative expenses in the Company’s statements of comprehensive income.

Intangible assets and their related useful lives are reviewed at least annually to determine if any adverse conditions existed that would indicate the carrying value of these assets may not be recoverable.

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If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life.

The Company continues to believe that its intangible assets are recoverable at September 30, 2021.

The Company continues to believe that its intangible assets are recoverable at March 31, 2022.

Indefinite-lived assets are reviewed for impairment at least annually.

There has been no impairment of the Company’s intangible assets for the periods presented.

Intangible assets, net consisted of the following at September 30, 2021:

September 30, 2021

Gross Carrying Value

Net Carrying Value

Weighted Average Useful Life

Intangible assets, net consisted of the following at March 31, 2022:

March 31, 2022

(Amounts in thousands)

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December 31, 2021

Gross Carrying Value

Net Carrying Value

Weighted Average Useful Life

(Amounts in thousands)

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Total intangible assets

Amortization expense for finite-lived intangible assets was $ 5.7 million and $ 4.0 million for each of the three months ended September 30, 2021 and 2020, respectively, and $ 16.1 million and $ 11.8 million for each of the nine months ended September 30, 2021 and 2020 , respectively.

As of September 30, 2021, the Company expects to record the following amortization expense in future periods (amounts in thousands):

For the Nine Months Ended September 30,

2021 (remaining three months)

Amortization expense for finite-lived intangible assets was $ 6.6 million and $ 5.2 million for each of the three months ended March 31, 2022 and 2021 , respectively.

As of March 31, 2022, the Company expects to record the following amortization expense in future periods (amounts in thousands):

For the Years Ended December 31,

2022 (remaining nine months)

2027 and thereafter

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Inventories, net consists of the following:

September 30,

(Amounts in thousands)

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Property, plant and equipment consist of the following:

September 30,

(Amounts in thousands)

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Total property, plant and equipment, net

Depreciation expenses totaled $ 4.3 million and $ 2.8 million for each of the three months ended September 30, 2021 and 2020, respectively, and $ 11.3 million and $ 7.8 million for each of the nine months ended September 30, 2021 and 2020, respectively.

Depreciation expenses totaled $ 5.2 million and $ 3.3 million for each of the three months ended March 31, 2022 and 2021, respectively.

Accrued Liabilities

Accrued liabilities consist of the following:

September 30,

(Amounts in thousands)

Employee compensation

Income taxes payable

Royalty and license fees

Professional fees

Deferred revenue

Income taxes payable

Total accrued liabilities

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The 2019 Notes will mature on July 15, 2024 , unless earlier repurchased or converted in accordance with their terms.

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, as stated in the terms of the 2019 Notes.

These conditions have been met since the third quarter of 2020.

As a result, $ 6,000 aggregate principal amount of the 2019 Notes have been converted by the noteholders since December 31, 2020.

The conversions resulted in the issuance of a nominal number of shares of the Company’s common stock to the note holders, and the Company recorded a loss of approximately $ 1,000 and 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 ended September 30, 2021.

The Company continues to classify the carrying value of the 2019 Notes as current liabilities on the Company’s consolidated balance sheet at September 30, 2021.

During the first quarter of 2022, 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 2022, the quarter immediately following the quarter when the conditions are met, as stated in the terms of the 2019 Notes.

These conditions have been met since the fourth quarter of 2020.

As a result, $ 15,000 in aggregate principal amount of the 2019 Notes have been converted by the noteholders since the issuance of the 2019 Notes, including $ 4,000 during the first quarter of 2022.

The conversions resulted in the issuance of a nominal number of shares of the Company’s common stock to the note holders.

The Company continues to classify the carrying value of the 2019 Notes as current liabilities on the Company’s consolidated balance sheet at March 31, 2022.

Prior to the adoption of ASU 2020-06, the Company accounted for the 2019 Notes as a liability and equity component where the carrying value of the liability component was valued based on a similar debt instrument.

In accounting for the issuance of the 2019 Notes, the Company separated the 2019 Notes into liability and equity components.

The carrying value of the liability component was calculated as the present value of its cash flows using a discount rate of 4.5 % based on comparative convertible transactions for similar companies.

The carrying value of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the 2019 Notes as a whole.

The excess of the principal amount of the liability component over its carrying value amount, referred to as the debt discount, was amortized to interest expense on our consolidated statements of comprehensive income over the five-year term of the 2019 Notes.

The equity component was not re-measured as long as it continued to meet the conditions for equity classification.

The equity component recorded at issuance related to the 2019 Notes was $ 52.1 million, which was recorded in additional paid-in capital in our consolidated balance sheets.

In accounting for the transaction costs related to the issuance of the 2019 Notes, the Company allocated the total costs incurred to the liability and equity components of the 2019 Notes using the same proportions as the initial carrying value of the 2019 Notes.

Transaction costs related to the liability component were $ 7.4 million and are amortized to interest expense using the effective interest method over the five-year term of the 2019 Notes.

Transaction costs attributable to the equity component were $ 1.6 million and are netted with the equity component of the 2019 Notes in stockholders' equity of the Company's consolidated balance sheet.

Additionally, the Company recorded a net deferred tax liability of $ 11.4 million.

Effective January 1, 2022, the Company adopted ASU 2020-06.

After adoption, the Company now accounts for the 2019 Notes as a single liability measured at amortized cost.

As the equity component is no longer required to be split into a separate component, the Company recorded a net adjustment for the initial $ 50.4 million that was allocated to additional paid-in capital and $ 22.9 million of life-to-date interest expense recorded as amortization of debt discount.

Additionally, the net deferred tax liability recorded for the 2019 Notes was reversed.

The principal amount of the liability over its carrying amount is amortized to interest expense over the five-year term of the 2019 Notes.

Since the 2019 Notes are classified as a single liability, there is no debt discount required to be amortized for the three months ended March 31, 2022.

The net carrying value of the liability component of the 2019 Notes is as follows:

September 30,

(Amounts in thousands)

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Net carrying amount

Interest expense recognized on the 2019 Notes for the three months ended September 30, 2021 was $ 0.3 million, $ 2.5 million and $ 0.4 million for the contractual coupon interest, the accretion of the debt discount and the amortization of the debt issuance costs, respectively.

Interest expense recognized on the 2019 Notes for the nine months ended September 30, 2021 was $ 0.8 million, $ 7.5 million and $ 1.1 million for the contractual coupon interest, the accretion of the debt discount and the amortization of the debt issuance costs, respectively.

The effective interest rate on the 2019 Notes is 5.1 %, which included the interest on the 2019 Notes, amortization of the debt discount and debt issuance costs.

The fair value of the 2019 Notes was determined based on the most recent trade activity of the 2019 Notes at September 30, 2021 .

The following table sets forth total interest expense recognized related to the 2019 Notes:

Three Months Ended

(Amounts in thousands)

Contractual interest expense

Amortization of debt issuance costs

Amortization of debt discount

Effective interest rate of the liability component

At March 31, 2022 and December 31, 2021, the carrying value of the 2019 Notes was $ 283.3 million and $ 255.3 million, respectively, net of unamortized discount, and the fair value of the 2019 Notes was $ 490.2 million and $ 678.5 million, respectively.

The fair value of the 2019 Notes was determined based on the most recent trade activity of the 2019 Notes at March 31, 2022 and December 31, 2021.

Stockholders’

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Under the Company’s current 2018 Stock Option and Incentive Plan (the “2018 Plan”), the number of shares of the Company’s common stock that are reserved and available for issuance is 2,778,000 , plus the number of shares of common stock available for issuance under the Company’s previous plans.

The shares of common stock underlying any awards under the 2018 Plan and previous plans (together, the “Plans”) that are forfeited, canceled or otherwise terminated (other than by exercise) shall be added back to the shares of stock available for issuance under the 2018 Plan.

At September 30, 2021, 2,134,916 shares were available for future grants under the 2018 Plan.

The shares of common stock underlying any awards under the 2018 Plan and previous plans (together, the “Plans”) that are forfeited, canceled or otherwise terminated (other than by exercise) are added back to the shares of stock available for issuance under the 2018 Plan.

At March 31, 2022, 1,954,613 shares were available for future grants under the 2018 Plan.

Stock-Based Compensation

For each of the three months ended September 30, 2021 and 2020, the Company recorded stock-based compensation expense of $ 6.8 million and $ 4.2 million, respectively, for share-based awards granted under the Plans.

For the nine months ended September 30, 2021 and 2020, the Company recorded stock-based compensation expense of $ 20.5 million and $ 12.5 million, respectively.

For the three months ended March 31, 2022 and 2021, the Company recorded stock-based compensation expense of $ 7.9 million and $ 6.5 million, respectively, for share-based awards granted under the Plans.

The following table presents stock-based compensation expense in the Company’s consolidated statements of comprehensive income:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(Amounts in thousands)

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Nonqualified options issued to non-employee directors under the Plans generally vest over one year.

In the first quarter of 2018, to create a longer-term retention incentive, the Company’s Compensation Committee granted long-term incentive compensation

awards to its Chief Executive Officer consisting of both stock options and restricted stock units (“RSUs”) that are subject to time-based vesting over nine years .

In the first quarter of 2018, to create a longer-term retention incentive, the Company’s Compensation Committee granted long-term incentive compensation awards to its Chief Executive Officer which consisted of both stock options and restricted stock units (“RSUs”) that are subject to time-based vesting over nine years .

Options granted under the Plans have a maximum term of ten years from the date of grant and generally, the exercise price of the stock options equals the fair market value of the Company’s common stock on the date of grant.

At September 30, 2021, options to purchase 658,600 shares and 619,761 stock units were outstanding under the Plans.

The Company uses the Black-Scholes option pricing model to calculate the fair value of stock option awards on the grant date, and the Company uses the value of the common stock as of the grant date to value RSUs.

The Company measures stock-based compensation costs at the grant date based on the estimated fair value of the award.

The Company recognizes expense on awards with service-based vesting over the employee’s requisite service period on a straight-line basis.

Prior to 2020, the Company issued performance stock units to certain employees which are tied to the achievement of certain Company financial goal metrics and the passage of time.

Since 2020, the Company has implemented formal programs that issue performance stock units to certain employees set to vest upon the achievement of individual goals and financial goals of the Company, as well as the passage of time.

The Company recognizes expense on performance-based awards over the vesting period based on the probability that the performance metrics will be achieved.

At March 31, 2022, options to purchase 650,059 shares and 591,377 stock units were outstanding under the Plans.

Stock Options

The Company uses the Black-Scholes option pricing model to calculate the fair value of stock option awards on the grant date and measures stock-based compensation costs for stock options at the grant date based on the estimated fair value of the award.

The Company recognizes expense on awards with service-based vesting over the employee’s requisite service period on a

straight-line basis.

The Company recognizes stock-based compensation expense for options that are ultimately expected to vest, and accordingly, such compensation expense has been adjusted for estimated forfeitures.

Information regarding option activity for the nine months ended September 30, 2021 under the Plans is summarized below:

Weighted-Average Remaining Contractual Term

Aggregate Intrinsic Value

Information regarding option activity for the three months ended March 31, 2022 under the Plans is summarized below:

(in Thousands)

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Forfeited/expired/cancelled

Options outstanding at September 30, 2021

Options exercisable at September 30, 2021

Vested and expected to vest at September 30, 2021 (1)

(1) Represents the number of vested options as of September 30, 2021 plus the number of unvested options expected to vest as of September 30, 2021 based on the unvested outstanding options at September 30, 2021 adjusted for estimated forfeiture rates of 8 % for awards granted to non-executive level employees and 3 % for awards granted to executive level employees.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the closing price of the common stock on September 30, 2021, the last business day of the third quarter of 2021, of $ 288.99 per share and the exercise price of each in-the-money option) that would have been received by the option holders had all option holders exercised their options on September 30, 2021.

The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2021 and 2020 was $ 14.5 million and $ 30.7 million, respectively.

The weighted average grant date fair value of options granted during the nine months ended September 30, 2021 and 2020 was $ 88.01 and $ 48.13 , respectively.

The total fair value of stock options that vested during the nine months ended September 30, 2021 and 2020 was $ 2.6 million during each period.

Options outstanding at March 31, 2022

Options exercisable at March 31, 2022

Vested and expected to vest at March 31, 2022 (1)

(1) Represents the number of vested options as of March 31, 2022 plus the number of unvested options expected to vest as of March 31, 2022 based on the unvested outstanding options at March 31, 2022 adjusted for estimated forfeiture rates of 8 % for awards granted to non-executive level employees and 3 % for awards granted to executive level employees.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the closing price of the common stock on March 31, 2022, the last business day of the first quarter of 2022, of $ 188.09 per share and the exercise price of each in-the-money option) that would have been received by the option holders had all option holders exercised their options on March 31, 2022.

The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2022 and 2021 was $ 1.4 million and $ 2.5 million, respectively.

The weighted average grant date fair value of options granted during the three months ended March 31, 2022 and 2021 was $ 79.96 and $ 92.35 , respectively.

The total fair value of stock options that vested during the three months ended March 31, 2022 and 2021 was $ 2.0 million and $ 1.9 million, respectively.

The fair value of stock units is calculated using the closing price of the Company’s common stock on the date of grant.

Information regarding stock unit activity, which includes activity for RSUs and performance stock units, for the nine months ended September 30, 2021 under the Plans is summarized below:

Weighted-Average Remaining Contractual Term

Aggregate Intrinsic Value

The Company recognizes expense on awards with service-based vesting over the employee's requisite service period on a straight-line basis.

Prior to 2020, the Company issued performance stock units to certain employees which are tied to the achievement of certain company financial goal metrics and the passage of time.

The Company recognizes expense on performance-based awards over the vesting period based on the probability that the performance metrics will be achieved.

Information regarding stock unit activity, which includes activity for RSUs and performance stock units, for the three months ended March 31, 2022 under the Plans is summarized below:

(in Thousands)

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Forfeited/expired/cancelled

Unvested at September 31, 2021

Unvested and expected to vest at September 30, 2021 (1)

(1) Represents the number of vested stock units as of September 30, 2021 plus the number of unvested stock units expected to vest as of September 30, 2021 based on the unvested outstanding stock units at September 30, 2021 adjusted for estimated forfeiture rates of 8 % for awards granted to non-executive level employees and 3 % for awards granted to executive level employees.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (equal to the closing price of the common stock on September 30, 2021, the last business day of the third quarter of 2021, of $ 288.99 per share, as stock units do not have an exercise price) that would have been received by the stock unit holders had all holders exercised on September 30, 2021.

The aggregate intrinsic value of stock units vested during the nine months ended September 30, 2021 and 2020 was $ 39.2 million and $ 25.0 million, respectively.

The weighted average grant date fair value of stock units vested during the nine months ended September 30, 2021 and 2020 was $ 58.10 and $ 43.73 , respectively.

The total fair value of stock units that vested during the nine months ended September 30, 2021 and 2020 was $ 10.8 million and $ 9.8 million, respectively.

As of September 30, 2021, there was $ 61.3 million of total unrecognized compensation cost related to unvested share-based awards.

Unvested at March 31, 2022

Vested and expected to vest at March 31, 2022 (1)

(1) Represents the number of vested stock units as of March 31, 2022 plus the number of unvested stock units expected to vest as of March 31, 2022 based on the unvested outstanding stock units at March 31, 2022 adjusted for estimated forfeiture rates of 8 % for awards granted to non-executive level employees and 3 % for awards granted to executive level employees.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (equal to the closing price of the common stock on March 31, 2022, the last business day of the first quarter of 2022, of $ 188.09 per share, as stock units do not have an exercise price) that would have been received by the stock unit holders had all holders exercised on March 31, 2022.

The aggregate intrinsic value of stock units vested during the three months ended March 31, 2022 and 2021 was $ 30.2 million and $ 27.1 million, respectively.

The weighted average grant date fair value of stock units granted during the three months ended March 31, 2022 and 2021 was $ 196.36 and $ 209.13 , respectively.

The total fair value of stock units that vested during the three months ended March 31, 2022 and 2021 was $ 14.2 million and $ 6.5 million, respectively.

As of March 31, 2022, there was $ 77.4 million of total unrecognized compensation cost related to unvested share-based awards.

This cost is expected to be recognized over a weighted average remaining requisite service period of 3.14 years.

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Commitments and Contingencies

In June 2018, the Company secured an agreement with Navigo Proteins (“Navigo”) for the exclusive co-development of multiple affinity ligands for which Repligen holds commercialization rights.

The Company is manufacturing and supplying the first of these ligands, NGL-Impact ® , exclusively to Purolite Life Sciences (“Purolite”), who is pairing the Company’s high-performance ligand with Purolite’s agarose jetting base bead technology used in their Jetted A50 Protein A resin product.

In June 2018, the Company secured an agreement with Navigo Proteins (“Navigo”) for the exclusive co-development of multiple affinity ligands for which the Company holds commercialization rights.

The Company is manufacturing and supplying the first of these ligands, NGL-Impact ® , exclusively to Purolite Life Sciences, an Ecolab Inc.

company (“Purolite”), who is pairing the Company’s high-performance ligand with Purolite’s agarose jetting base bead technology used in their Jetted A50 Protein A resin product.

The Company also signed a long-term supply agreement with Purolite for NGL-Impact and other potential additional affinity ligands that may advance from the Company’s Navigo collaboration.

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The Navigo and Purolite agreements are supportive of the Company’s strategy to secure and reinforce the Company’s proteins business.

The Company made royalty payments to Navigo of $ 0.5 million and $ 0.2 million for the three months ended September 30, 2021 and 2020, respectively and payments of $ 1.3 million and $ 0.4 million for the nine months ended September 30, 2021 and 2020, respectively.

Accumulated Other Comprehensive (Loss) Income

The following shows the changes in the components of accumulated other comprehensive (loss) income for the nine months ended September 30, 2021 which consisted of only foreign currency translation adjustments for the periods shown (amounts in thousands):

Balance as of December 31, 2020

The Company made royalty payments to Navigo of $ 0.4 million and $ 0.3 million for the three months ended March 31, 2022 and 2021 , respectively.

Accumulated Other Comprehensive Loss

The following shows the changes in the components of accumulated other comprehensive loss for the three months ended March 31, 2022 which consisted of only foreign currency translation adjustments for the periods shown (amounts in thousands):

Balance at December 31, 2021

Other comprehensive loss

Balance at September 30, 2021

For the three and nine months ended September 30, 2021 , we recorded an income tax provision of $ 7.7 million and $ 19.5 million, respectively.

The Company’s effective tax rate for the three and nine months ended September 30, 2021 was 18.8 % and 16.4 %, respectively, compared to 18.0 % and 9.5 % for the corresponding periods in the prior year.

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 lower U.S.

taxation of foreign earnings.

The effective tax rates for the three and nine months ended September 30, 2021 and 2020 were lower than the U.S.

statutory rate of 21 % primarily due to business tax credits and windfall benefits on stock option exercises and the vesting of stock units.

Balance at March 31, 2022

For the three months ended March 31, 2022 and 2021, we recorded an income tax provision of $ 12.0 million and $ 3.7 million, respectively.

The Company’s effective tax rate for the three months ended March 31, 2022 was 20.3 % compared to 11.0 % for

the corresponding period in 2021.

The increase in the effective tax rates was primarily due to higher income before taxes and lower windfall benefits recognized on stock option exercises and the vesting of stock units.

Earnings Per Share

The Company reports earnings per share in accordance with ASC 260, “Earnings Per Share,”

The Company reports earnings per share ("EPS") in accordance with ASC 260, “Earnings Per Share,”

which establishes standards for computing and presenting earnings per share.

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Potential common share equivalents consist of RSUs, performance stock units and the incremental common shares issuable upon the exercise of stock options.

Under the treasury stock method, unexercised “in-the-money”

stock options and warrants are assumed to be exercised at the beginning of the period or at issuance, if later.

The assumed proceeds are then used to purchase common shares at the average market price during the period.

In periods when the Company has a net loss, stock awards are excluded from the calculation of earnings per share as their inclusion would have an antidilutive effect.

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Three Months Ended

September 30,

Nine Months Ended

September 30,

(Amounts in thousands, except per share data)

Weighted average shares used in computing net

income per share - basic

Effect of dilutive securities:

Charges associated with convertible debt instruments, net of tax

Numerator for diluted earnings per share - net income available to common

stockholders after the effect of dilutive securities

Weighted average shares used in computing net income per share - basic

Effect of dilutive shares:

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Dilutive potential common shares

Weighted average shares used in computing net

income per share - diluted

Denominator for diluted earnings per share - adjusted weighted average

shares used in computing net income per share - diluted

Earnings per share:

At September 30, 2021, there were outstanding options to purchase 658,600 shares of the Company’s common stock at a weighted average exercise price of $ 54.93 per share and 619,761 shares of common stock issuable upon the vesting of stock units, which include RSUs and performance stock units.

For the three and nine months ended September 30, 2021, 44,912 shares and 63,770 shares, respectively, of the Company’s common stock were excluded from the calculation of diluted earnings per share because the exercise prices of the stock options were greater than or equal to the average price of the common shares and were therefore anti-dilutive.

At September 30, 2020, there were outstanding options to purchase 723,914 shares of the Company’s common stock at a weighted average exercise price of $ 41.03 per share and 675,567 shares of common stock issuable upon the vesting of stock units, which include RSUs and performance stock units.

For the three and nine months ended September 30, 2020, 60,202 and 117,160 shares of the Company’s common stock were excluded from the calculation of diluted earnings per share because the exercise prices of the stock options were greater than or equal to the average price of the common shares and were therefore anti-dilutive.

At March 31, 2022, there were outstanding options to purchase 650,059 shares of the Company’s common stock at a weighted average exercise price of $ 61.65 per share and 591,377 shares of common stock issuable upon the vesting of stock units, which include RSUs and performance stock units.

For the three months ended March 31, 2022, 137,247 shares of the Company’s common stock were excluded from the calculation of diluted earnings per share because the exercise prices of the stock options were greater than or equal to the average price of the common shares and were therefore anti-dilutive.

In July 2019, the Company issued $ 287.5 million aggregate principal amount of the 2019 Notes.

As provided by the terms of the indenture underlying the 2019 Notes, conversion of the 2019 Notes will be settled in cash, shares of the Company’s common stock or a combination thereof, at the Company’s election.

As of September 30, 2021, the 2019 Notes were convertible.

The Company currently intends to settle the par value of the 2019 Notes in cash and any excess conversion premium in shares.

As provided by the terms of the indenture underlying the 2019 Notes, the Company has a choice to settle the conversion obligation for the 2019 Notes in cash, shares or any combination of the two.

The Company currently intends to settle the par value of the 2019 Notes in cash and any excess conversion premium in shares.

The Company applies the provisions of ASC 260, “Earnings Per Share”, Subsection 10-45-44, to determine the diluted weighted average shares outstanding as it relates to the conversion spread on its convertible notes.

Accordingly, the par value of the 2019 Notes is not included in the calculation of diluted income per share, but the dilutive effect of the conversion premium is considered in the calculation of diluted net income per share using the treasury stock method.

The dilutive impact of the 2019 Notes is based on the difference between the Company’s current period average stock price and the conversion price of the 2019 Notes, provided there is a premium.

Pursuant to this accounting standard, there is no dilution from the accreted principal of the 2019 Notes.

For the three and nine months ended September 30, 2021, the dilutive effect of the conversion premium included in the calculation of diluted earnings was 1,373,341 shares and 1,180,425 shares, respectively.

There was no dilutive effect of the conversion premium included in the calculation of diluted earnings per share for the three and nine months ended September 30, 2020.

On September 20, 2021, as a result of the Avitide Acquisition, the Company assumed a contingent consideration obligation for earnout payments in an aggregate amount of $ 80.0 million which will be paid equally in cash and the Company’s common stock, contingent upon the achievement of certain performance thresholds and targets each year over a three year period as discussed in Note 2, “Fair Value Measurements,”

to these consolidated financial statements.

As of September 30, 2021, none of the contingent triggers have occurred.

As provided by the terms of the indenture underlying the 2019 Notes, prior to March 4, 2022, conversion of the 2019 Notes could have been settled in cash, shares of the Company’s common stock or a combination thereof, at the Company’s election.

On March 4, 2022, we entered into the Second Supplemental Indenture for the 2019 Notes, which irrevocably elected to settle the conversion of the 2019 Notes using a combination of cash and shares of the Company's common stock, settling the par value of the 2019 Notes in cash and any excess conversion premium in shares.

As provided by the terms of the Second Supplemental Indenture underlying the 2019 Notes, the Company irrevocably elected to settle the conversion obligation for the 2019 Notes in a combination of cash and shares of the Company's common stock.

This means the Company will settle the par value of the 2019 Notes in cash and any excess conversion premium in shares.

As mentioned in Note 7, "Convertible Senior Notes," the Company adopted ASU 2020-06 effective January 1, 2022.

Under ASU 2020-06, the Company is required to reflect the dilutive effect of the convertible securities by application of the "if-converted" method, which means the denominator of the EPS calculation would include the total number of shares assuming the 2019 Notes had been fully converted at the beginning of the period.

Prior to March 4, 2022, the Company had the choice to settle the conversion of the 2019 Notes in cash, stock or a combination of the two.

Therefore, from January 1, 2022 (the date the Company adopted ASU 2020-06) to March 4, 2022, the Company included 3,474,429 shares in the denominator of the EPS calculation, applying the if converted method.

Subsequent to March 4, 2022, after the Second Supplemental Indenture became effective, the Company irrevocably elected to settle the conversion obligation for the 2019 Notes in a combination of cash and shares of the Company's common stock, and from March 5, 2022 forward, only the excess premium will be settled with shares.

Under the if-converted method of calculating dilutive shares, the Company was also required to exclude amortization of debt issuance costs and interest charges applicable to the convertible debt from the numerator of the dilutive EPS calculation for the period from January 1, 2022 to March 4, 2022, as if the interest on convertible debt was never recognized for that period.

For the three months ended March 31, 2022, the Company excluded interest charges of $ 0.4 million (net of tax) from the numerator.

Prior to the adoption of ASU 2020-06, the Company applied the provisions of ASC 260, “Earnings Per Share”, Subsection 10-45-44, to determine the diluted weighted average shares outstanding as it related to the conversion spread on its convertible notes.

Accordingly, the par value of the 2019 Notes was not included in the calculation of diluted income per share, but the dilutive effect of the conversion premium was considered in the calculation of diluted net income per share using the treasury stock method.

The dilutive impact of the 2019 Notes was based on the difference between the Company’s current period average stock price and the conversion price of the 2019 Notes, provided there was a premium.

Pursuant to this accounting standard, there was no dilution from the accreted principal of the 2019 Notes.

For the three months ended March 31, 2021, the dilutive effect of the conversion premium included in the calculation of diluted earnings was 1,091,776 shares.

Related Party Transactions

Certain facilities leased by Spectrum are owned by Roy Eddleman, the former owner of Spectrum.

As of September 30, 2021 , Mr.

As of March 31, 2022 , Mr.

Eddleman owned greater than 5 % of the Company’s outstanding shares and the Company considers him to be a related party.

The lease amounts paid to this shareholder prior to the public offering were negotiated in connection with the acquisition of Spectrum.

The Company incurred rent expense totaling $ 0.2 million and $ 0.1 million for each of the three months ended September 30, 2021 and 2020 , respectively, related to these leases and incurred rent expense of $ 0.5 million for each of the nine months ended September 30, 2021 and 2020 , respectively.

The Company incurred rent expense totaling $ 0.2 million for each of the three month periods ended March 31, 2022 and 2021 .

Segment Reporting

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Three Months Ended

Nine Months Ended

September 30,

Revenue by customers' geographic locations:

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Treasury obligations) and type of instrument is limited.

At September 30, 2021 and December 31, 2020, the Company had no investments associated with foreign exchange contracts, options contracts or other foreign hedging arrangements.

At March 31, 2022 and December 31, 2021, the Company had no investments associated with foreign exchange contracts, options contracts or other foreign hedging arrangements.

Concentration of credit risk with respect to accounts receivable is limited to customers to whom the Company makes significant sales.

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financial condition.

Revenue from customers that represented 10 % or more of the Company’s total revenue for the three months ended September 30, 2021 and 2020 came from sales to Pfizer Inc.

during the three months ended September 30, 2021, which generated $ 19.1 million, or 11 % of the Company's total revenue for the period.

There was no revenue from customers that represented 10 % or more of the Company's total revenue for the other periods presented.

Significant accounts receivable balances representing 10% or more of the Company’s total trade accounts receivable and royalties and other receivable balances at September 30, 2021 and December 31, 2020 are as follows:

September 30,

Revenue from sales to Pfizer Inc.

generated $ 21.1 million, or 10 % of the Company's total revenue for the three months ended March 31, 2022.

There was no revenue from customers that represented 10 % or more of the Company's total revenue for the three months ended March 31, 2021.

No accounts receivable balance from a specific customer represented 10 % or more of the Company's total trade accounts receivable at March 31, 2022.

Significant accounts receivable balances representing 10 % or more of the Company’s total trade accounts receivable and royalties came from our accounts receivable balance outstanding with Pfizer Inc at December 31, 2021.

The Company's accounts receivable and other receivable balances with Pfizer at December 31, 2021 was 14 % of our total accounts receivable and other receivable balance.

MANAGEMENT’S DISCUSSION AND ANAL YSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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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 –

including monoclonal antibodies (“mAb”), recombinant proteins, vaccines and cell and gene therapies ("C&GT") –

that are improving human health worldwide.

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2021 Acquisitions

Bio-Flex Solutions LLC and Newton T&M Corp.

On November 29, 2021, the Company entered into an Equity Purchase Agreement with Bio-Flex Solutions, L.L.C.

("BioFlex"), Newton T&M Corp ("NTM") and each of Ralph Meola and Jason Nisler, to acquire 100% of the outstanding securities of BioFlex and NTM (collectively, the “NTM Acquisition”).

The transaction closed on December 16, 2021.

The NTM Acquisition complements and expands our filtration offering paths as the industry migrates to single-use flow paths solutions for mAb, vaccine and cell and gene therapy ("C&GT") applications, with a focus on single-use fluid management components, including single-use clamps, adapters, end caps and hose assemblies.

The NTM Acquisition streamlines and increases control over many components in our single-use supply chain which ultimately should drive reduced lead-times for our customers in the coming years.

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.

On September 16, 2021, we entered into an Agreement and Plan of Merger and Reorganization (“Avitide Merger Agreement”) with Avalon Merger Sub, Inc., a Delaware corporation and a wholly owned direct subsidiary of the Company, Avalon Merger Sub LLC, a Delaware limited liability company and a wholly owned direct subsidiary, 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 to purchase Avitide.

The transaction closed on September 20, 2021 and on the terms set forth in the Avitide Merger Agreement (the “Avitide Acquisition”).

The acquisition gives Repligen a new platform for affinity resin development, including gene therapy, and advances and expands our proteins franchise to address the unique purification needs of gene therapies and other emerging modalities.

The acquisition gives us a new platform for affinity resin development, including C&GT, and advances and expands our proteins franchise to address the unique purification needs of gene therapies and other emerging modalities.

Acquisition of Polymem S.A.

On June 22, 2021, we entered into a Stock Purchase Agreement with Polymem S.A.

(“Polymem”), a company organized under the laws of France, and Jean-Michel Espenan and Franc Saux, acting together jointly and severally as the representatives of the sellers, which subsequently closed on July 1, 2021 (the “Polymem Acquisition.”).

Polymem, which is headquartered in Toulouse, France, is a manufacturer of hollow fiber membranes, membrane modules and systems for industrial and bioprocessing applications.

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The acquisition substantially increases our membrane and module manufacturing capacity and establishes a world-class center of excellence in Europe to address the accelerating global demand for these innovative products.

2020 Acquisitions

ARTeSYN Biosolutions Holdings Ireland Limited

On October 27, 2020, we entered into an Equity and Asset Purchase Agreement with ARTeSYN Biosolutions Holdings Ireland Limited (“ARTeSYN”), a company organized under the laws of Ireland, Third Creek Holdings, LLC, a Nevada limited liability company (“Third Creek”), Alphinity, LLC, a Nevada limited liability company (“Alphinity”, and together with Third Creek the “ARTeSYN Sellers”), and Michael 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 in Waterford, Ireland and conducts its operations in Ireland, the United States and Estonia.

Its suite of single-use solutions has been created with the goal of enabling “abundance in medicine”

by allowing greater efficiency in 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 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.

Non-Metallic Solutions, Inc.

On October 15, 2020, we executed a Stock Purchase Agreement with Non-Metallic Solutions, Inc.

(“NMS”), a Massachusetts corporation, and each of William Malloneé

and Derek Masser, the legal and beneficial owners of NMS, to purchase NMS, which transaction subsequently closed on October 20, 2020 (the “NMS Acquisition”).

NMS, headquartered in Auburn, 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

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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.

Total revenue for the three and nine months ended September 30, 2021 and 2020 were as follows:

Total revenue for the three months ended March 31, 2022 and 2021 were as follows:

Three Months Ended

September 30,

Increase/(Decrease)

Nine Months Ended

September 30,

Increase/(Decrease)

(Amounts in thousands, except for percentage data)

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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.

Since 2016, we have been increasingly focused on selling our products directly to customers in the pharmaceutical industry and to our contract manufacturers.

These direct sales represented approximately 87% and 80% of our product revenue for each of the three months ended March 31, 2022 and 2021, 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.

Revenues from our filtration franchise include the sales of our XCell ATF ® systems and consumables;

Spectrum filtration systems, including KrosFlo ® ;

SIUS ® filtration products and systems;

the fluid management assemblies and components offered by Engineered Molding Technology LLC, Non-Metallic Solutions, Inc.

ARTeSYN Biosolutions Holdings Ireland Limited ("ARTeSYN") and BioFlex, the latter of which was acquired on December 16, 2021;

the hollow fiber membrane technology offered by Polymem, which we acquired on July 1, 2021;

and our ARTeSYN filtration systems.

Revenue from our chromatography products includes the sale of our OPUS pre-packed chromatography columns, ELISA test kits and chromatography systems from Spectrum and ARTeSYN.

Revenue from proteins products includes the sale of our Protein A ligands and cell culture growth factors, and sales of affinity products, including adeno-associated virus resins offered by Avitide, which we acquired on September 20, 2021.

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.

During the three months ended March 31, 2022, product revenue increased by $63.6 million, or 44.6% as compared to the same period of 2021, due to exceptionally robust demand for our filtration, chromatography and process analytics products.

There is continued adoption of our products by key bioprocessing customers across all key product lines.

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 pandemic (“COVID-19”) vaccines.

However, fluctuations in vaccination rates will drive future demand of our products from these customers and the recognition of revenue related to COVID-19.

In addition, we have recently seen an increased demand for C&GT and monoclonal antibody manufacturing.

There was also an approximately $6 million increase in revenue due to our 2021 acquisitions which were acquired in the second half of 2021.

Royalty revenues

Royalty revenues in the three and nine months ended September 30, 2021 and 2020 relate to royalties received from a third-party systems manufacturer associated with our OPUS PD chromatography columns.

Royalty revenues in the three months ended March 31, 2022 and 2021 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 September 30, 2021 and 2020 were comprised of the following:

Total costs and operating expenses for the three months ended March 31, 2022 and 2021 were comprised of the following:

Three Months Ended

September 30,

Increase/(Decrease)

Nine Months Ended

September 30,

Increase/(Decrease)

(Amounts in thousands, except for percentage data)

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Research and development

Selling, general and

administrative

Total costs and operating

Selling, general and administrative

Contingent consideration

Total costs and operating expenses

Cost of product revenue

Cost of product revenue increased 90.5% and 81.8% in the three and nine months ended September 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 ended September 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 ended September 30, 2021 since there were no comparable costs during 2020.

Gross margin was 57.6% and 59.3% in the three and nine months ended September 30, 2021.

The gross margin for the three and nine months ended September 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 ended September 30, 2020 was 57.9%.

Excluding the step-up amortization, gross margin for the three and nine months ended September 30, 2021 was 57.8% and 59.6%, respectively.

The increase in gross margin, excluding the inventory step-up amortization, in the nine months ended September 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 to September 30, 2020.

Cost of product revenue increased 37.8% in the three months ended March 31, 2022, compared to the same period of 2021, due primarily to the increase in product revenue mentioned above and costs associated with higher product volume.

In addition, in order to support our rapid growth and increased demand for our products, we continue to invest in our manufacturing infrastructure through increased manufacturing headcount and increased occupancy costs.

Our depreciation expense increased during the three months ended March 31, 2022, as manufacturing equipment was placed in service during the second half of 2021.

The impact on cost of product revenue from our three 2021 acquisitions was $4.8 million, which has also contributed to the increase in cost of product revenue as there were no comparable costs for these acquisitions in the first quarter of 2021.

Gross margin was 60.1% and 58.2% in the three months ended March 31, 2022 and 2021, respectively.

The increase in gross margin in the three months ended March 31, 2022, as compared to the same period of 2021, is due primarily to the increase in revenue mentioned above, and favorable product mix, partially offset by an increase in employee-related costs from a rise in manufacturing headcount, an increase in occupancy costs due to added capacity in 2021 and an increase in depreciation expense mentioned above.

The gross margin for the three months ended March 31, 2021 also includes $1.6 million of amortization of inventory step-up associated with the ARTeSYN Aquisition in December 2020.

Gross margins may fluctuate in future quarters based on expected production volume and product mix.

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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.

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 $4.5 million, or 59.7%, during the three months ended March 31, 2022, compared to the same period of 2021.

The increase during the period is primarily due to spending on new product development and investments newly acquired businesses during the period, for which there were no comparable costs in the first quarter of 2021.

The increase during the period is also due in part to the increase in employee related costs, as the number of R&D employees has increased since March 31, 2021.

R&D expense also includes investments made to expand our proteins product offering through our development agreement with Navigo Proteins GmbH (“Navigo”).

We invested $0.4 million for the three months ended March 31, 2022, as compared to $0.3 million in 2021, in the form of milestone payments to Navigo.

We expect our R&D expenses for the remainder of 2022 to gradually increase to support new product development.

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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 ended September 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.

During the three months ended March 31, 2022, SG&A costs increased by $15.2 million, or 38.9%, as compared to the same period of 2021.

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 ended September 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 ended September 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.

Employee-related costs increased during the three months ended March 31, 2022, as compared to the same period in 2021, resulting from the 55% increase in general and administrative headcount period over the period and a 42% increase in selling and marketing headcount period over period.

These costs include stock-based compensation, which increased $1.2 million for the three months ended March 31, 2022, as compared to the same period of 2021.

In addition, SG&A costs increased for the three months ended March 31, 2022 due to the addition of Polymem, Avitide and BioFlex during the second half of 2021 for which there are no comparable costs in the three months ended March 31, 2021.

Contingent consideration expense

Contingent consideration expense represents the change in fair value of the contingent consideration obligation included in current and noncurrent contingent consideration on the consolidated balance sheets as of the end of each period.

Re-measurement of the contingent consideration obligation is done each quarter and the carrying value of the obligation is adjusted to the current fair value through our consolidated statement of comprehensive income.

We recorded an adjustment to the fair value of the contingent consideration obligation for the three months ended March 31, 2022 of ($2.4) million.

Other expenses, net

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Three Months Ended

September 30,

Increase/(Decrease)

Nine Months Ended

September 30,

Increase/(Decrease)

(Amounts in thousands, except for percentage data)

1 unchanged sentence

Interest expense

Amortization of debt issuance costs

Other expenses

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Investment income includes income earned on invested cash balances.

The decrease of $38 thousand and $1.6 million in the three and nine months ended September 30, 2021, as compared to the same periods of 2020, respectively, was attributable to a decrease in interest rates on our invested cash balances.

In March 2020, in response to the outbreak of COVID-19 and to stay ahead of disruptions and economic slowdown, the Federal 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.

Our investment income remained relatively stable for three months ended March 31, 2022, compared to the same period of 2021.

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 ended September 30, 2021 and 2020 is primarily from our 0.375% Convertible Senior Notes due 2024 (the “2019 Notes”), which were issued in July 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 ended September 30, 2021, as compared to the same periods in 2020.

Interest expense in the three months ended March 31, 2022 and 2021 is primarily from our 0.375% Convertible Senior Notes due 2024 (the “2019 Notes”), which were issued in July 2019.

Interest expense for the three months ended March 31, 2022 includes the contractual coupon interest on the 2019 Notes.

For the three months ended March 31, 2021, interest expense includes the amortization of the debt discount as well as the contractual coupon interest.

As a result of our adoption of ASU 2020-06, "Debt - Debt with Conversion Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)," effective January 1, 2022, the equity portion of the debt conversion feature recorded upon the issuance of the 2019 Notes, or the debt discount, was reversed along with the total amortization taken on that discount.

Since there was no debt discount, no amortization was taken in the three months ended March 31, 2022.

Amortization of debt issuance costs

Transaction costs attributable to the liability component are amortized to amortization of debt issuance costs on the consolidated statements of comprehensive income.

Amortization of debt issuance costs increased during the three months ended March 31, 2022, as compared to the same period of 2021.

This is a result of the decrease in the balance of debt issuance costs that are being amortized.

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Other expenses

The change in other expenses, net during the three and nine months ended September 30, 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.

The change in other expenses, net during the three months ended March 31, 2022, compared to the same period of 2021, 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 and nine months ended September 30, 2021 and 2020 was as follows:

Income tax provision for the three months ended March 31, 2022 and 2021 was as follows:

Three Months Ended

September 30,

Increase/(Decrease)

Nine Months Ended

September 30,

Increase/(Decrease)

(Amounts in thousands, except for percentage data)

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Effective tax rate

For the three and nine months ended September 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 ended September 30, 2021 and is based upon the estimated income for the year ending December 31, 2021 and the composition of income in different jurisdictions.

taxation of foreign earnings.

The effective tax rate for the three and nine months ended September 30, 2021 was lower than the U.S.

For the three months ended March 31, 2022, we recorded an income tax provision of $12.0 million.

The effective tax rate was 20.3% for the three months ended March 31, 2022 and is based upon the estimated income for the year ending December 31, 2022 and the composition of income in different jurisdictions.

The increase in effective tax rates was primarily due to higher income before income taxes and lower windfall benefits recognized on stock option exercises and the vesting of stock units.

Our effective tax rate for the three months ended March 31, 2022 was lower than the U.S.

statutory rate of 21% primarily due to windfall benefits on stock option exercises and the vesting of stock units.

For the three months ended March 31, 2021, we recorded an income tax provision of $3.7 million.

The effective tax rate was 11.0% for the three months ended March 31, 2021 and is based upon the estimated income for the year ending December 31, 2021 and the composition of income in different jurisdictions.

Our effective tax rate for the three months ended March 31, 2021 was lower than the U.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 ended September 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 ended September 30, 2020 and is based upon the estimated income for the year ending December 31, 2020 and the composition of income in different jurisdictions.

The effective tax rate for the three and nine months ended September 30, 2020 was lower than the U.S.

statutory rate of 21% primarily due to windfall benefits on stock option exercise and the vesting of stock units.

Non-GAAP Financial Measures

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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.

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.

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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 ended September 30, 2021 and 2020:

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, contingent consideration fair value adjustments, 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 months ended March 31, 2022 and 2021:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(Amounts in thousands)

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Acquisition and integration costs

Contingent consideration

Intangible amortization

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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, 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 ended September 30, 2021 and 2020:

Three Months Ended September 30,

Fully Diluted

(Amounts in thousands, except per share data)

GAAP net income

Non-GAAP adjustments to net income:

Inventory step-up charges

Acquisition and integration costs

Intangible amortization

Loss on conversion of debt

Non-cash interest expense

Tax effect of non-GAAP charges

Non-GAAP adjusted net income

Nine Months Ended September 30,

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, amortization of debt issuance costs, 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 months ended March 31, 2022 and 2021:

Three Months Ended March 31,

Fully Diluted

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Acquisition and integration costs

Contingent consideration

Intangible amortization

Loss on conversion of debt

Amortization of debt issuance costs (1)

Non-cash interest expense (1)

1 unchanged sentence

Non-GAAP adjusted net income

(1) See Note 12, "Earnings Per Share," for more information on the effects of adopting ASU 2020-06, “

Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40),”

which we adopted effective January 1, 2022, to these financial statement line items .

* Per share totals may not add due to rounding.

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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 ended September 30, 2021 and 2020:

The following is a reconciliation of net income in accordance with GAAP to adjusted EBITDA for the three months ended March 31, 2022 and 2021:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(Amounts in thousands)

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Interest expense

Non-cash interest expense (1)

Amortization of debt issuance costs

Income tax provision

Intangible amortization

Other non-GAAP adjustments:

1 unchanged sentence

Acquisition and integration costs

Contingent consideration

Loss on conversion of debt

Adjusted EBITDA

(1) See Note 12, "Earnings Per Share," for more information on the effects of adopting ASU 2020-06, which we adopted effective January 1, 2022.

Liquidity and Capital Resources

We have financed our operations primarily through revenues derived from product sales, the issuance of the 2019 Notes in July 2019 and the issuance of common stock in our December 2020, July 2019 and May 2019 public offerings (the “Offerings”).

Our revenue for the foreseeable future will primarily be limited to our bioprocessing product revenue.

At September 30, 2021, we had cash and cash equivalents of $621.1 million compared to cash and cash equivalents of $717.3 million at December 31, 2020.

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.

These conditions have been met each quarter since the third quarter of 2020.

As a result, $6,000 aggregate principal amount of the

2019 Notes have been converted since December 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 ended September 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 of September 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.

In July 2020, the Company entered into a First Amendment to the lease agreement for its Marlborough, Massachusetts facility, expanding the leased space by 66,939 square feet.

In December 2020, the Company signed the Second Amendment to the lease agreement, changing the commencement date from April 1, 2021 to January 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 on November 30, 2028.

In May 2021, the Company entered into an agreement to lease approximately 64,000 square feet of space at a site in Hopkinton, Massachusetts, which expires on August 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.

Nine Months Ended

September 30,

At March 31, 2022, we had cash and cash equivalents of $584.6 million compared to cash and cash equivalents of $603.8 million at December 31, 2021.

During the first quarter of 2022, 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.

These conditions have been met since the fourth quarter of 2020.

As a result, $15,000 in aggregate principal amount of the 2019 Notes have been converted by the noteholders since the issuance of the 2019 Notes, including $4,000 during the first quarter of 2022.

The conversions resulted in the issuance of a nominal number of shares of the Company’s common stock to the noteholders.

The Company continues to classify the carrying value of the 2019 Notes as current liabilities on the Company’s consolidated balance sheet at March 31, 2022.

Three Months Ended

Increase/(Decrease)

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Financing activities

Effect of exchange rate changes on cash, cash equivalents

and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash

Effect of exchange rate changes on cash and cash equivalents

Net decrease in cash and cash equivalents

Operating activities

For the nine months ended September 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.

For the three months ended March 31, 2022, our operating activities provided cash of $23.1 million reflecting net income of $47.0 million and non-cash charges totaling $18.9 million primarily related to depreciation, amortization, inventory step-up amortization, contingent consideration adjustments, deferred income taxes and stock-based compensation charges.

An increase in accounts receivable consumed $6.3 million of cash and was primarily driven by the 44.5% year-to-date increase in revenues.

An increase in inventory manufactured of $30.0 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 ended September 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.

A decrease in accrued liabilities of $10.0 million relates to the payout of employee bonus and a decrease in our estimated income tax provision during the first quarter of 2022.

For the three months ended March 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 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.

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 $4.9 million decrease in accrued liabilities primarily related to payment of employee bonuses during the three months ended March 31, 2021 and related to a decrease in deferred revenue related to products shipped during the first quarter of 2021.

The remaining net cash used in operating activities resulted from unfavorable changes in various other working capital accounts.

Investing activities

Our investing activities consumed $158.9 million of cash during the nine months ended September 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.

Our investing activities consumed $28.2 million of cash during the three months ended March 31, 2022 mainly due to capital expenditures as we continue to increase our manufacturing capacity worldwide.

Of these expenditures, $1.0 million represented capitalized costs related to our internal-use software.

Our investing activities consumed $43.1 million of cash during the nine months ended September 30, 2020 related to the acquisition of Engineered Molding Technology LLC (“EMT”) on July 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 ended September 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 ended September 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 ended September 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 at September 30, 2021 from $583.4 million at December 31, 2020 due to the various changes noted above.

Our financing activities consumed $12.0 million of cash for the three months ended March 31, 2022, which included cash disbursed in relation to shares withheld to cover employee income tax due upon the vesting and release of restricted stock units of $12.3 million.

This was partially offset by proceeds received from stock option exercises during the period of $0.3 million.

Working capital decreased by $36.0 million to $520.5 million at March 31, 2022 from $556.4 million at December 31, 2021 due to the various changes noted above.

Our future capital requirements will depend on many factors, including the following:

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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 actively evaluate various strategic transactions on an ongoing basis, including 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.

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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.

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.

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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 September 30, 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.

At December 31, 2021, the Company had federal net operating loss carryforwards of $46.2 million, state net operating loss carryforwards of $4.0 million, and foreign net operating loss carryforwards of $6.1 million.

Federal net operating loss carryforwards of $19.1 million will expire at various dates through 2037.

The other $27.1 million of the federal net operating loss carryforwards have unlimited carryforward periods.

The total state net operating loss carryforwards will expire at various dates through 2041, while the foreign net operating loss carryforwards do not expire.

We had business tax credits carryforwards of $2.7 million available to reduce future federal and state income taxes, if any.

The business tax credits carryforwards will continue to expire at various dates through December 2041.

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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.

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 continued impact of, and response to, COVID-19 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.

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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 impact of COVID-19 on demand for our products and on our business or financial results;

the success of current and future collaborative or supply relationships, including our agreements with Cytiva, MilliporeSigma and Purolite;

5 unchanged sentences

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 manufacturing capabilities and our dependence on third-party manufacturers and value-added resellers;

the effect of COVID-19, 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,

Inc., ARTeSYN Biosolutions Holdings Ireland Limited, Polymem S.A.

and Avitide, Inc.

businesses successfully into our business and achieve the expected benefits of the acquisitions;

our ability to integrate Polymem, Avitide and BioFlex businesses successfully into our business and achieve the expected benefits of the acquisitions;

our ability to compete with larger, better financed life sciences companies;

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As a result, we have been exposed to potential loss from market risks that may occur as a result of changes in interest rates, changes in credit quality of the issuer or otherwise.

We do not have any such investments as of September 30, 2021.

As a result, a hypothetical 100 basis point increase in interest rates would have no effect on our cash position as of September 30, 2021.

We do not have any such investments as of March 31, 2022.

As a result, a hypothetical 100 basis point increase in interest rates would have no effect on our cash position as of March 31, 2022.

We generally place our marketable security investments in high quality credit instruments, as specified in our investment policy guidelines.

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Exchange gains or losses resulting from the translation between the transactional currency and the functional currency are included in net income.

Fluctuations in exchange rates may adversely affect our results of operations, financial position and cash flows.

Fluctuations in exchange rates may adversely affect our results

of operations, financial position and cash flows.

We currently do not seek to hedge this exposure to fluctuations in exchange rates.

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Changes in Internal Control

We acquired Polymem S.A.

(“Polymem”) on July 1, 2021 and Avitide Inc.

(“Avitide”) on September 20, 2021.

The financial results of these acquisitions are included in our unaudited consolidated financial statements as of September 30, 2021 and for the quarter then ended.

As these acquisitions occurred in the third quarter of 2021, the scope of our assessment of our internal control over financial reporting does not include Polymem and Avitide.

These exclusions are in accordance with the Securities and Exchange Commission’s general guidance that an assessment of a recently acquired business may be omitted from our scope in the year of such acquisition.

Other than the foregoing, there have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the three months ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In connection with our initiative to integrate and enhance our global information technology systems and business processes, we continued the phased implementation of a new enterprise resource planning (“ERP”) system.

The Company is implementing the ERP system in phases through 2024.

The fourth phase of implementation was completed during the first quarter of 2022.

In addition, we completed the implementation of a lease accounting system, LeaseQuery, during the first quarter of 2022.

The implementation of the ERP and LeaseQuery systems is expected to, among other things, automate a number of accounting and reporting processes and activities, thereby decreasing the amount of manual processes previously required.

As a result of these implementations, we modified certain existing internal controls over financial reporting as well as implemented new controls and procedures related to the new ERP system and LeaseQuery system during the three months ended March 31, 2022.

Other than the foregoing, there have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the three months ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements