XML 24 R11.htm IDEA: XBRL DOCUMENT
v3.20.4

Acquisitions | 12 Months Ended
--- | ---
Dec. 31, 2020
Acquisitions |
3. | 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, Alphinity, LLC, a Nevada limited liability company (“Alphinity”, and together with Third Creek Holdings, LLC the “Sellers”), and Michael Gagne, solely in his capacity as the representative of the 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 Sellers and approximately $70 million in Repligen 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 10x greater efficiency in biologics manufacturing. The ARTeSYN team has created a number of solutions targeting the single-use space from single-use valves with fully disposable valve liners, XO ® skeletal supports, a hybrid small parts offering for de-bottlenecking traditional facilities, and fully automated SU process systems that have quickly become leading solutions in the bioprocessing industry. In addition to its single-use solutions, ARTeSYN also engages in the manufacture of large-scale systems to be used for biologics manufacturing. ARTeSYN has established downstream processing leadership with a suite of state of the art single-use systems for chromatography, filtration, continuous manufacturing and media/buffer prep workflows. In addition, the Company has integrated unique flow path assemblies utilizing Engineered Molding Technology LLC’s (“EMT”) silicone extrusion and molding technology, to deliver highly differentiated, low hold-up volume systems that minimize product loss during processing. 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 Repligen 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 Repligen. The fair value of the net tangible assets acquired is estimated to be $7.9 million, the fair value of the intangible assets acquired is estimated to be $67.4 million, and the residual goodwill is estimated to be $128.7 million. The estimated consideration and preliminary purchase price information has been prepared using a preliminary valuation. The final purchase price allocation will be completed upon payment of final consideration for working capital and other adjustments. The final allocation may include changes to: (1) deferred revenue; (2) inventory; (3) deferred tax liabilities, net; (4) allocations to intangible assets such as tradenames, developed technology and customer relationships as well as goodwill; (5) final consideration paid related to working capital adjustments; and (6) other assets and liabilities. 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. These estimates were based on assumptions that Repligen believes to be reasonable. However, actual results may differ from these estimates. Total consideration transferred is as follows (amounts in thousands):
Cash consideration |  | $ | 130,713 |
Equity consideration |  |  | 69,422 |
Contingent consideration |  |  | 1,548 |
Settlement of preexisting liabilities |  |  | 2,310 |
Fair value of net assets acquired |  | $ | 203,993 |
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 costs associated with the ARTeSYN acquisition in 2020. The transaction costs are included in selling, general and administrative expenses in the consolidated statements of comprehensive income. The consideration transferred includes $1.5 million related to consideration that was deferred at the acquisition date, with payment to the 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. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to 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 are recorded to our consolidated statements of comprehensive income. 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 December 3, 2020). Any such revision or changes may be material. The components and estimated allocation of the purchase price consists of the following amounts (amounts in thousands):
Cash and cash equivalents |  | $ | 2,982 |
Accounts receivable |  |  | 4,811 |
Inventory |  |  | 8,592 |
Prepaid expenses and other current assets |  |  | 5,561 |
Property and equipment |  |  | 1,836 |
Operating lease right of use asset |  |  | 1,611 |
Other noncurrent assets |  |  | 26 |
Customer relationships |  |  | 38,400 |
Developed technology |  |  | 27,060 |
Trademark and tradename |  |  | 1,630 |
Non-competition agreements |  |  | 300 |
Goodwill |  |  | 128,658 |
Accounts payable |  |  | (2,161 | )
Accrued liabilities |  |  | (8,856 | )
Deferred revenue |  |  | (3,583 | )
Deferred tax liabilities, net |  |  | (1,240 | )
Notes payable |  |  | (24 | )
Operating lease liability |  |  | (417 | )
Operating lease liability, long-term |  |  | (1,193 | )
Fair value of net assets acquired |  | $ | 203,993 |
Acquired Goodwill The goodwill of $128.7 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. Intangible Assets The following table sets forth the components of the identified intangible assets associated with the ARTeSYN Acquisition and their estimated useful lives:
|  | Useful life |  |  | Fair Value |
|  |  |  |  | (Amounts in thousands) |
Customer relationships |  |  | 17 years |  |  | $ | 38,400 |
Developed technology |  |  | 15 years |  |  |  | 27,060 |
Trademark and tradename |  |  | 21 years |  |  |  | 1,630 |
Non-competition agreements |  |  | 3 years |  |  |  | 300 |
|  |  |  |  |  | $ | 67,390 |
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 revenue; (2) inventory; (3) deferred tax liabilities, net; (4) allocations to intangible assets such as tradenames, developed technology and customer relationships as well as goodwill; (5) final consideration paid related to working capital adjustments; and (6) other assets and liabilities. Non-Metallic Solutions, Inc. On October 15, 2020, the Company 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 allows Repligen to expand its line of single-use systems and associated integrated flow path assemblies, streamline the supply chain for current products, and gives the Company more flexibility to scale and expand single-use and systems portfolios. Consideration Transferred The NMS Acquisition was accounted for as a purchase of a business under ASC 805, “ Business Combinations. ” Total consideration paid was $16.2 million, which included $1.3 million deposited into an escrow account against which the Company may make claims for indemnification. As disclosed in the Quarterly Report on Form 10-Q for the period ended June 30, 2020, the Company voluntarily adopted the amendments to financial disclosure requirements around the significance tests in the “significant subsidiaries” definition in Rule 1-02(w), Securities Act Rule 405, and Exchange Act Rule 12b-2. As a result, the Company determined that NMS is not a significant subsidiary and therefore no separate financial statements are required. The fair value of the net tangible assets acquired is estimated to be approximately $0.9 million, the fair value of the intangible assets acquired is estimated to be $8.5 million, and the residual goodwill is estimated to be approximately $6.8 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 acquisition-related costs associated with the NMS Acquisition in 2020. The transaction costs are included in selling, general and administrative expenses in the consolidated statements of comprehensive income. 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 October 20, 2020). The components and estimated allocation of the purchase price consist of the following amounts (amounts in thousands):
Cash and cash equivalents |  | $ | 1,163 |
Accounts receivable |  |  | 415 |
Inventory |  |  | 334 |
Prepaid expenses and other current assets |  |  | 13 |
Property and equipment |  |  | 73 |
Operating lease right of use asset |  |  | 194 |
Customer relationships |  |  | 6,370 |
Developed technology |  |  | 1,810 |
Trademark and tradename |  |  | 190 |
Non-competition agreements |  |  | 90 |
Goodwill |  |  | 6,784 |
Deferred tax assets |  |  | 24 |
Accounts payable |  |  | (96 | )
Accrued liabilities |  |  | (999 | )
Operating lease liability |  |  | (136 | )
Operating lease liability, long-term |  |  | (59 | )
Fair value of net assets acquired |  | $ | 16,170 |
Acquired Goodwill The goodwill of $6.8 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. Intangible Assets The following table sets forth the components of the identified intangible assets associated with the NMS Acquisition and their estimated useful lives:
|  | Useful life |  |  | Fair Value |
|  |  |  |  | (Amounts in thousands) |
Customer relationships |  |  | 14 years |  |  | $ | 6,370 |
Developed technology |  |  | 12 years |  |  |  | 1,810 |
Trademark and tradename |  |  | 15 years |  |  |  | 190 |
Non-competition agreements |  |  | 3 years |  |  |  | 90 |
|  |  |  |  |  | $ | 8,460 |
Engineered Molding Technology LLC On July 13, 2020, the Company completed the acquisition of 100% of the membership interests of EMT, a New York limited liability company, pursuant to a Membership Interest Purchase Agreement, dated June 26, 2020, by and among the Company, EMT, and each of Michael Pandori and Todd Etesse, the legal and beneficial owners of EMT (such acquisition, the “EMT Acquisition”). EMT, headquartered in Clifton Park, New York, is an innovator and manufacturer of single-use silicone assemblies and components used in the manufacturing of biologic drugs. EMT’s standard and custom molding as well as their over-molded connectors and silicone tubing products are key components in single-use filtration and chromatography systems. EMT’s products will complement and expand Repligen’s single-use product offerings. Consideration Transferred The EMT Acquisition was accounted for as a purchase of a business under ASC 805, “Business Combinations”. Total consideration paid was $28.5 million, which included $2.2 million deposited into an escrow account against which the Company may make claims for indemnification. Under the acquisition method of accounting, the net assets of EMT were recorded as of the acquisition date, at their respective fair values, and consolidated with those of Repligen. The fair value of the net tangible assets acquired is estimated to be approximately $1.5 million, the fair value of the intangible assets acquired is estimated to be $14.4 million, and the residual goodwill is estimated to be approximately $12.6 million. The estimated consideration and preliminary purchase price information have been prepared using a preliminary valuation. 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. These estimates were based on assumptions that Repligen believes to be reasonable. However, actual results may differ from these estimates. 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 $1.2 million of acquisition related costs associated with the EMT Acquisition in 2020. The transaction costs are included in selling, general and administrative expenses in the consolidated statements of comprehensive income. 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 13, 2020). Any such revisions or changes may be material. The components and allocation of the purchase price consist of the following amounts (amounts in thousands):
Cash and cash equivalents |  | $ | 69 |
Accounts receivable |  |  | 1,057 |
Inventory |  |  | 449 |
Prepaid expenses and other current assets |  |  | 7 |
Property and equipment |  |  | 472 |
Operating lease right of use assets |  |  | 1,050 |
Customer relationships |  |  | 11,080 |
Developed technology |  |  | 2,910 |
Trademark and tradename |  |  | 320 |
Non-compete agreements |  |  | 50 |
Goodwill |  |  | 12,585 |
Accounts payable |  |  | (283 | )
Accrued liabilities |  |  | (202 | )
Operating lease liability |  |  | (211 | )
Operating lease liability, long-term |  |  | (839 | )
Fair value of net assets acquired |  | $ | 28,514 |
Acquired Goodwill The goodwill of $12.6 million represents future economic benefits expected to arise from anticipated synergies from the integration of EMT. These synergies include certain cost savings, operating efficiencies and other strategic benefits projected to be achieved as a result of the EMT 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 EMT Acquisition and their estimated useful lives:
|  | Useful life |  |  | Fair Value |
|  |  |  |  | (Amounts in thousands) |
Customer relationships |  |  | 14 years |  |  | $ | 11,080 |
Developed technology |  |  | 11 years |  |  |  | 2,910 |
Trademark and tradename |  |  | 14 years |  |  |  | 320 |
Non-competition agreements |  |  | 3 years |  |  |  | 50 |
|  |  |  |  |  | $ | 14,360 |
Revenue, Net Income and Pro Forma Presentation The Company has included the operating results of our 2020 acquisitions of ARTeSYN, NMS and EMT in its consolidated statements of comprehensive income since their respective acquisition dates. The Company does not consider these acquisitions to be material to its consolidated statements of comprehensive income and therefore has not included pro forma results. C Technologies On May 31, 2019, Repligen acquired C Technologies, pursuant to the terms of a Stock Purchase Agreement (the “Agreement”), by and among Repligen, C Technologies and Craig Harrison, an individual and sole stockholder of C Technologies (such acquisition, the “C Technologies Acquisition”). 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 costs in 2019. The transaction costs are included in selling, general and administrative expenses in the consolidated statements of comprehensive income. In connection with the transaction, an additional $9.0 million was paid to employees during the second quarter of 2020, based on their continued employment with the Company one year after the date of the close of the C Technologies Acquisition. The Company has recognized $3.7 million of compensation expense associated with this amount due to employees in 2020 and has recognized $9.0 million of compensation expense associated with this amount due since the C Technologies Acquisition. 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. The Company obtained this information during due diligence and through other sources. In the months after closing, the Company obtained additional information about these assets and liabilities as it learned more about C Technologies. The Company refined the estimates of fair value to more accurately allocate the purchase price. Only items identified as of the acquisition date were considered for subsequent adjustment. We made appropriate adjustments to the purchase price allocation during the measurement period, which was one year from the acquisition date. The components and allocation of the purchase price consists of the following amounts (amounts in thousands):
Cash and cash equivalents |  | $ | 3,795 |
Restricted cash |  |  | 26,933 |
Accounts receivable |  |  | 3,044 |
Inventory |  |  | 3,783 |
Prepaid expenses and other current assets |  |  | 93 |
Fixed assets |  |  | 40 |
Operating lease right of use asset |  |  | 3,836 |
Customer relationships |  |  | 59,680 |
Developed technology |  |  | 28,920 |
Trademark and tradename |  |  | 1,570 |
Non-competition agreements |  |  | 660 |
Goodwill |  |  | 142,314 |
Deferred taxes |  |  | 895 |
Accounts payable |  |  | (436 | )
Accrued liabilities |  |  | (2,767 | )
Accrued bonus |  |  | (26,928 | )
Deferred revenue |  |  | (1,709 | )
Operating lease liability |  |  | (51 | )
Operating lease liability, long-term |  |  | (3,785 | )
Fair value of net assets acquired |  | $ | 239,887 |
Acquired Goodwill The goodwill of $142.3 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. Pursuant to the Company’s business combination accounting policy included in Note 2, “Summary of Significant Accounting Policies – Business Combinations, Goodwill and Intangible Assets,” the Company recorded goodwill adjustments for the effects on goodwill of changes to net assets acquired during the period that such change is identified, provided that any such change is within the measurement period (up to one year from the date of the acquisition). In March 2020, the Company recorded an adjustment to goodwill of $0.3 million related to additional state income tax liabilities to be paid by the seller, which were incurred from the Company’s finalized 338(h)(10) tax election. Revenue, Net Income and Pro Forma Presentation The Company recorded revenue from C Technologies of $16.4 million from May 31, 2019, the date of acquisition, to December 31, 2019. The Company recorded a net loss from C Technologies’ results of operations of $7.4 million from May 31, 2019 to December 31, 2019. The Company has included the operating results of C Technologies in its consolidated statements of comprehensive income since the May 31, 2019 acquisition date. The following pro forma financial information presents the combined results of operations of Repligen and C Technologies as if the acquisition had occurred on January 1, 2019 after giving effect to certain pro forma adjustments. The pro forma adjustments reflected herein include only those adjustments that are directly attributable to the C Technologies Acquisition, factually supportable and have a recurring impact. These pro forma adjustments include amortization expense on the acquired identifiable intangible assets, adjustments to stock-based compensation expense for equity compensation issued to C Technologies employees and the income tax effect of the adjustments made. In addition, acquisition-related transaction costs and an accounting adjustment to record inventory at fair value were excluded from pro forma net income in 2019. Prior to the C Technologies Acquisition, C Technologies did not generate monthly or quarterly financial statements that were prepared in accordance with GAAP. The following pro forma financial information does not reflect any adjustments for anticipated expense savings resulting from the acquisition and is not necessarily indicative of the operating results that would have actually occurred had the transaction been consummated on January 1, 2019 or of future results (amounts in thousands, except per share data):
|  | December 31, |
|  | 2019 |  |  | 2018 |
Total revenue |  | $ | 279,434 |  |  | $ | 217,739 |
Net income |  | $ | 23,394 |  |  | $ | 21,195 |
Earnings per share: |  |  |  |  |  |  |  |
Basic |  | $ | 0.48 |  |  | $ | 0.44 |
Diluted |  | $ | 0.48 |  |  | $ | 0.43 |

X
- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration