| REPLIGEN CORP Item 1A RISK FACTORS CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS Investors should carefully consider the risk factors described below before making an investment decision |
| If any of the events described in the following risk factors occur, our business, financial condition or results of operations could be materially harmed |
| In that case the trading price of our common stock could decline, and Investors may lose all or part of their investment |
| Additional risks and uncertainties that we are unaware of or that we currently deem immaterial may also become important factors that affect Repligen |
| This annual report on Form 10-K contains forward looking statements that involve risks and uncertainties |
| Our actual results could differ materially from those anticipated in these forward looking statements as a result of certain factors, including the risks faced by us described below and elsewhere in this annual report on Form 10-K We are dependent on others to develop, conduct clinical trials for, manufacture, market and sell our principal products |
| We conduct some of our development activities, and conduct most of our commercialization activities, through collaborations |
| These collaborations include academic researchers as well as contracts with vendors |
| Our collaborations are heavily dependent on the efforts and activities of our collaborative partners |
| Our existing and any future collaborations may not be technically or commercially successful |
| For example, if any of our collaborative partners were to breach or terminate an agreement with us, reduce its funding or otherwise fail to conduct the collaboration successfully, we may need to devote additional internal resources to the program that is the subject of the collaboration, scale back or terminate the program or seek an alternative partner, any of which could lead to delays in development and/or commercialization of our products |
| If our clinical trials are not successful, we will not be able to develop and commercialize any related products |
| In order to obtain regulatory approvals for the commercial sale of our future products, we and our collaborative partners will be required to complete extensive clinical trials in humans to demonstrate the safety and efficacy of the products |
| We have limited experience in conducting clinical trials |
| The submission of an IND may not result in FDA authorization to commence clinical trials |
| If clinical trials begin, we or our collaborative partners may not complete testing successfully within any specific time period, if at all, with respect to any of our products |
| Furthermore, we, our collaborative partners, or the FDA, may suspend clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to unacceptable health risks |
| Clinical trials, if completed, may not show any potential product to be safe or effective |
| Thus, the FDA and other regulatory authorities may not approve any of our potential products for any indication |
| The rate of completion of clinical trials is dependent in part upon the rate of enrollment of patients |
| Patient enrollment is a function of many factors, including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the study, and the existence of competitive clinical trials |
| Delays in planned patient enrollment may result in increased costs and delays in completion of clinical trials |
| We may not obtain regulatory approvals; the approval process is costly and lengthy |
| We must obtain regulatory approval for our ongoing development activities and before marketing or selling any of our future products |
| We may not receive regulatory approvals to conduct clinical trials of our products or to manufacture or market our products |
| In addition, regulatory agencies may not grant such approvals on a timely basis or may revoke previously granted approvals |
| 10 ______________________________________________________________________ [11]Table of Contents The process of obtaining FDA and other required regulatory approvals is lengthy and expensive |
| The time required for FDA and other clearances or approvals is uncertain and typically takes a number of years, depending on the complexity and novelty of the product |
| Our analysis of data obtained from preclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval |
| Any delay in obtaining or failure to obtain required clearance or approvals could materially adversely affect our ability to generate revenues from the affected product |
| We have only limited experience in filing and prosecuting applications necessary to gain regulatory approvals |
| We are also subject to numerous foreign regulatory requirements governing the design and conduct of the clinical trials and the manufacturing and marketing of our future products |
| The approval procedure varies among countries |
| The time required to obtain foreign approvals often differs from that required to obtain FDA approvals |
| Moreover, approval by the FDA does not ensure approval by regulatory authorities in other countries (or vice versa) |
| All of the foregoing regulatory risks also are applicable to development, manufacturing and marketing undertaken by our collaborative partners or other third parties |
| Even if we obtain marketing approval, our products will be subject to ongoing regulatory review which will be expensive and may affect our ability to successfully commercialize our products |
| Even if we or our collaborative partners receive regulatory approval of a product, such approval may be subject to limitations on the indicated uses for which the product may be marketed, which may limit the size of the market for the product or contain requirements for costly post-marketing follow-up studies |
| The manufacturers of our products for which we or our collaborative partners have obtained marketing approval will be subject to continued review and periodic inspections by the FDA and other regulatory authorities |
| The subsequent discovery of previously unknown problems with the product, clinical trial subjects, or with a manufacturer or facility may result in restrictions on the product or manufacturer, including withdrawal of the product from the market |
| If we or our collaborative partners fail to comply with applicable regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions, and criminal prosecution |
| If we are unable to obtain, maintain and enforce patents for our products, we will not be able to succeed commercially |
| We must obtain and maintain patent and trade secret protection for those of our products and processes for which patent protection is available in order to protect them from unauthorized use and to produce a financial return consistent with the significant time and expense required to bring our products to market |
| Our success will depend, in part, on our ability to: • obtain and maintain patent protection for our products and manufacturing processes; • preserve our trade secrets; • operate without infringing the proprietary rights of third parties; and • secure licenses from others on acceptable terms |
| We cannot be sure that any patent applications relating to our products that we will file in the future or that any currently pending applications will issue on a timely basis, if ever |
| Since patent applications in the United States filed prior to November 2000 are maintained in secrecy until patents issue and since publication of discoveries in the scientific or patent literature often lag behind actual discoveries, we cannot be certain that we were the first to make the inventions covered by each of our pending patent applications or that we were the first to file patent applications for such inventions |
| Even if patents are issued, the degree of protection afforded by such patents will depend upon the: • scope of the patent claims; 11 ______________________________________________________________________ [12]Table of Contents • validity and enforceability of the claims obtained in such patents; and • our willingness and financial ability to enforce and/or defend them |
| The patent position of biotechnology and pharmaceutical firms is often highly uncertain and usually involves complex legal and scientific questions |
| Moreover, no consistent policy has emerged in the United States and in many other countries regarding the breadth of claims allowed in biotechnology patents |
| Patents which may be granted to us in certain foreign countries may be subject to opposition proceedings brought by third parties or result in suits by us, which may be costly and result in adverse consequences for us |
| In some cases, litigation or other proceedings may be necessary to assert claims of infringement, to enforce patents issued to us or our licensors, to protect trade secrets, know-how or other intellectual property rights we own or to determine the scope and validity of the proprietary rights of third parties |
| Such litigation could result in substantial cost to us and diversion of our resources |
| An adverse outcome in any such litigation or proceeding could have a material adverse effect on our business, financial condition and results of operations |
| If our competitors prepare and file patent applications in the United States that claim technology also claimed by us, we may be required to participate in interference proceedings declared by the US Patent and Trademark Office to determine priority of invention, which would result in substantial costs to us |
| We are currently and may in the future be involved in expensive patent litigation or other intellectual property proceedings which could result in liability for damages or stop our development and commercialization efforts |
| There has been substantial litigation and other proceedings regarding the complex patent and other intellectual property rights in the pharmaceutical and biotechnology industries |
| We are a party to, and in the future may become a party to, patent litigation or other proceedings regarding intellectual property rights |
| Other types of situations in which we may become involved in patent litigation or other intellectual property proceedings include: • We may initiate litigation or other proceedings against third parties to seek to invalidate the patents held by such third parties or to obtain a judgment that our products or services do not infringe such third parties’ patents |
| • We may initiate litigation or other proceedings against third parties to seek to enforce our patents against infringement |
| • If our competitors file patent applications that claim technology also claimed by us, we may participate in interference or opposition proceedings to determine the priority of invention |
| • If third parties initiate litigation claiming that our processes or products infringe their patent or other intellectual property rights, we will need to defend against such claims |
| The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial |
| Some of our competitors may be able to sustain the cost of such litigation or proceedings more effectively than we can because of their substantially greater financial resources |
| If a patent litigation or other intellectual property proceeding is resolved unfavorably to us, we or our collaborative partners may be enjoined from manufacturing or selling our products and services without a license from the other party and be held liable for significant damages |
| We may not be able to obtain any required license on commercially acceptable terms or at all |
| Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace |
| Patent litigation and other proceedings may also absorb significant management time, attention and resources |
| 12 ______________________________________________________________________ [13]Table of Contents For more information about the legal proceeding in which we are involved, please see “Legal Proceedings |
| ” We may become involved in litigation or other proceedings with collaborative partners, which may be time consuming, costly and could result in delays in our development and commercialization efforts |
| We conduct some of our development activities, and conduct most of our commercialization activities, through collaborations with collaborative partners |
| Therefore, any disputes with such partners that lead to litigation or similar proceedings may result in us incurring legal expenses, as well as facing potential legal liability |
| Such disputes, litigation or other proceedings are also time consuming and may cause delays in our development and commercialization efforts |
| We have limited sales and marketing experience and capabilities |
| We have limited sales, marketing and distribution experience and capabilities |
| We may, in some instances, rely significantly on sales, marketing and distribution arrangements with our collaborative partners and other third parties |
| In these instances, our future revenues will be materially dependent upon the success of the efforts of these third parties |
| If in the future we determine to perform sales, marketing and distribution functions ourselves, we would face a number of additional risks, including: • we may not be able to attract and build a significant marketing staff or sales force; • the cost of establishing a marketing staff or sales force may not be justifiable in light of any product revenues; and • our direct sales and marketing efforts may not be successful |
| We have limited manufacturing capabilities and will be dependent on third party manufacturers |
| We have limited manufacturing experience and no commercial or pilot scale manufacturing facilities for the production of pharmaceuticals |
| In order to continue to develop pharmaceutical products, apply for regulatory approvals and, ultimately, commercialize any products, we may need to develop, contract for, or otherwise arrange for the necessary manufacturing capabilities |
| We currently rely upon third parties to produce material for preclinical and clinical testing purposes and expect to continue to do so in the future |
| We also expect to rely upon third parties, including our collaborative partners, to produce materials required for the commercial production of certain of our products if we succeed in obtaining necessary regulatory approvals |
| We believe that there is no proprietary aspect to the manufacture of our products |
| However, there are only a limited number of manufacturers that operate under the FDA’s regulations for good manufacturing practices which are capable of and/or approved to manufacture our products |
| Timing for the initiation of new manufacturers is uncertain, and, if we are unable to arrange for third party manufacturing of our products on a timely basis, or to do so on commercially reasonable terms, we may not be able to complete development of our products or market them |
| We currently rely upon third parties for fermentation relating to our Protein A products |
| We believe that there is no proprietary aspect to the manufacture of our commercial products |
| However, timing for the initiation of new manufacturers is uncertain, and, if we are unable to arrange for third party manufacturing of our products on a timely basis, or to do so on commercially reasonable terms, we may not be able to complete development of our products or market them |
| To the extent that we enter into manufacturing arrangements with third parties, we are dependent upon these third parties to perform their obligations in a timely manner |
| If such third party suppliers fail to perform their obligations, we may be adversely affected in a number of ways, including: • we may not be able to meet commercial demands for our products; 13 ______________________________________________________________________ [14]Table of Contents • we may not be able to initiate or continue clinical trials of products that are under development; • we may be delayed in completing our clinical trials of products under development; and • we may be delayed in submitting applications for regulatory approvals for our products |
| The manufacture of products by us and our collaborative partners and suppliers is subject to regulation by the FDA and comparable agencies in foreign countries |
| Delay in complying or failure to comply with such manufacturing requirements could materially adversely affect the marketing of our products |
| We rely on a single supplier (ChiRhoClin) for our SecreFlo^® product We rely on a single supplier (ChiRhoClin) for our SecreFlo^® product |
| Under the terms of our settlement agreement, ChiRhoClin is obligated to deliver a certain amount of SecreFlo^® to Repligen over the next few years |
| After depletion of all supplies of SecreFlo^®, including those to be delivered under the settlement agreement, Repligen will cease marketing and selling SecreFlo^® |
| In the event that we are unable to acquire additional products, our revenues may be negatively impacted |
| (For more information about the settlement agreement regarding SecreFlo^®, please see “Legal Proceedings |
| ”) If we are unable to continue to hire and retain skilled personnel, then we will have trouble developing and marketing our products |
| Our success depends largely upon the continued service of our management and scientific staff and our ability to attract, retain and motivate highly skilled technical, scientific, management, regulatory compliance and marketing personnel |
| Potential employees with an expertise in the field of molecular biology, biochemistry, regulatory affairs and/or clinical development of new drug and biopharmaceutical manufacturing are not generally available in the market and are difficult to attract and retain |
| We also face significant competition for such personnel from other companies, research and academic institutions, government and other organizations who have superior funding and resources to be able to attract such personnel |
| The loss of key personnel or our inability to hire and retain personnel who have technical, scientific or regulatory compliance backgrounds could materially adversely affect our product development efforts and our business |
| The market may not be receptive to our products upon their introduction |
| The commercial success of our products that are approved for marketing will depend upon their acceptance by the medical community and third party payors as being clinically useful, cost effective and safe |
| All of the products that we are developing are based upon new technologies or therapeutic approaches |
| As a result, it is hard to predict market acceptance of our products |
| Other factors that we believe will materially affect market acceptance of our products and services include: • the timing of receipt of marketing approvals and the countries in which such approvals are obtained; • the safety, efficacy and ease of administration of our products; • the success of physician education programs; • the availability of government and third party payor reimbursement of our products; and • competition from products which may offer better safety, efficacy or lower cost |
| We compete with pharmaceutical and biotechnology companies who are capable of developing new approaches that could make our products and technology obsolete |
| The market for therapeutic and commercial products is intensely competitive, rapidly evolving and subject to rapid technological change |
| Pharmaceutical and biotechnology companies may have substantially greater 14 ______________________________________________________________________ [15]Table of Contents financial, manufacturing, marketing, and research and development resources than we have |
| New approaches by these competitors may make our products and technologies obsolete or noncompetitive |
| We have incurred substantial losses, we expect to continue to incur operating losses and we will not be successful until we reverse this trend |
| We have incurred operating losses in each year since our founding in 1981 |
| We expect to continue to incur operating losses for the foreseeable future |
| While we generate revenue from product sales, this revenue is not sufficient to cover the costs of our clinical trials and drug development programs |
| We plan to continue to invest in key research and development activities |
| As a result, we will need to generate significant revenues in order to achieve profitability |
| We cannot be certain whether or when this will occur because of the significant uncertainties that affect our business |
| If we do not obtain additional capital for our drug development programs, we will be unable to develop or discover new drugs |
| We need additional long-term financing to develop our drug development programs through the clinical trial process as required by the FDA and to develop our commercial products business |
| We also need additional long-term financing to support future operations and capital expenditures, including capital for additional personnel and facilities |
| If we spend more money than currently expected for our drug development programs and our commercial products business, we will need to raise additional capital by selling debt or equity securities, by entering into strategic relationships or through other arrangements |
| We may be unable to raise any additional amounts on reasonable terms or when they are needed due to the volatile nature of the biotechnology marketplace |
| If we are unable to raise this additional capital, we may have to delay or postpone critical clinical studies or abandon other development programs |
| Our stock price could be volatile, which could cause you to lose part or all of your investment |
| The market price of our common stock, like that of the common stock of many other development stage biotechnology companies, is highly volatile |
| In addition, the stock market has experienced extreme price and volume fluctuations |
| This volatility has significantly affected the market prices of securities of many biotechnology and pharmaceutical companies for reasons frequently unrelated to or disproportionate to the operating performance of the specific companies |
| These broad market fluctuations may adversely affect the market price of our common stock |
| Anti-takeover provisions may deter a third party from acquiring us, limiting our stockholders’ ability to profit from such a transaction |
| Our Board of Directors has the authority to issue up to 5cmam000cmam000 shares of preferred stock, of which 40cmam000 have been reserved for issuance in connection with our stockholder rights plan, and to determine the price, rights, preferences and privileges of those shares without any further vote or action by our stockholders |
| We also adopted a “poison pill” stockholder rights plan that will dilute the stock ownership of acquirers of our common stock upon the occurrence of certain events |
| This stockholder rights plan could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock |
| We are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which prohibits us from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person becomes an interested stockholder, unless the business combination is approved in a prescribed manner |
| This provision could have the effect of delaying or preventing a change of control of the Company |
| Section 203 and the stockholder rights plan may have the effect of deterring hostile takeovers or delaying or preventing changes in our management, including transactions in which stockholders might otherwise receive a premium for their shares over then current market prices |
| 15 ______________________________________________________________________ [16]Table of Contents Changes in the securities laws and regulations have increased, and are likely to continue to increase our costs |
| The Sarbanes-Oxley Act of 2002, which became law in July 2002, has required changes in some of our corporate governance, securities disclosure and compliance practices |
| In response to the requirements of that Act, the SEC and the Nasdaq have promulgated new rules and listing standards covering a variety of subjects |
| Compliance with these new rules and listing standards have increased our legal costs and financial and accounting costs, and we expect these increased costs to continue |
| Likewise, these developments may make it more difficult for us to attract and retain qualified members of our board of directors, particularly independent directors |