Repligen Acquires Business of Novozymes Biopharma Sweden AB

Repligen Corporation has announced the execution of a definitive agreement to acquire the business of Novozymes Biopharma Sweden AB in a cash transaction of 17 million euros (~$22.7 million) and future potential milestone payments of 4 million euros (~$5.6 million).

This transformative acquisition will elevate Repligen to a world-leading supplier of products for manufacturing biologic drugs with the potential to yield sustainable growth and profitability in fiscal year 2013, beginning April 1, 2012.

The combined company is expected to generate total revenues of approximately $50 million in fiscal year 2013.

“Earlier this year we announced our strategic objective to transition into a commercially focused company, and the acquisition of the Novozymes business will deliver on that goal by significantly augmenting our product portfolio and providing a path to sustainable profitability.”

The Novozymes Biopharma acquisition diversifies and expands Repligen’s product offering and customer base while doubling the company’s manufacturing capacity.

Novozymes Biopharma AB is a leader in the manufacture and supply of growth factors used in mammalian cell culture and Protein A affinity ligands used in the production of monoclonal antibodies.

The company is located in Lund, Sweden and operates a 45,000 sq. ft., c-GMP capable production facility which was recently renovated in 2008 with an investment of ~$25 million.

The products acquired in the Novozymes transaction are anticipated to generate $16-$17 million in revenue in 2011, and are sold primarily under long-term supply agreements with major life sciences companies including EMD Millipore, Sigma-Aldrich Corporation and GE Healthcare.

“This acquisition positions Repligen as a leading producer of high value, consumable products that will directly benefit from the long-term growth of the biologics market,” stated Walter C. Herlihy, President and Chief Executive Officer of Repligen Corporation.

Herlihy continued, “Earlier this year we announced our strategic objective to transition into a commercially focused company, and the acquisition of the Novozymes business will deliver on that goal by significantly augmenting our product portfolio and providing a path to sustainable profitability.”

Repligen is currently a leader in the supply of four different forms of recombinant Protein A, a key ingredient used in the production of most monoclonal antibodies.

Through this transaction, Repligen will acquire Novozymes “native” Protein A product which is used in the production of several of the early blockbuster monoclonal antibody drugs.

The combined company will be well positioned to fully benefit from the long-term growth of the monoclonal antibody market. There are more than 50 approved monoclonal antibody products and 200 candidates currently in clinical development, most of which are manufactured using Protein A.

Importantly, as part of the acquisition, GE Healthcare and Repligen have extended the term of their existing supply agreement for recombinant Protein A from 2014 to 2021.

A further key benefit of the acquisition is Repligen’s expansion into the cell culture ingredients market which increases our product breadth and opens a market opportunity for us in the production of fermentation ingredients and a future market opportunity as stem and cell-based therapies emerge.

Strategic Benefits of the Transaction
Diversifies Repligen’s revenue source and customer base: the combined company will manufacture and sell more than 20 products to the biopharmaceutical industry which are incorporated into the manufacture of more than 50 approved products and 200 products in clinical development.

The products will be sold under long-term supply agreements with four leading life sciences companies as well as directly to a variety of end-users and will expand our customer base.

The key products that Novozymes produces include insulin like growth factor (LONG®R3 IGF-I), native and recombinant Protein A products, and other growth factors which have potential applications in cell based therapies.

Expands manufacturing capacity: Novozymes Biopharma operates a state of the art, 45,000 sq. ft. manufacturing facility in Lund, Sweden which was extensively renovated in 2008 to double its fermentation capacity to approximately 6,000 liters and to provide the opportunity to manufacture under cGMP.

The combined company will operate two independent manufacturing sites with the potential to manufacture products at both locations increasing efficiency and security.

In addition, the two facilities are expected to support anticipated growth for the next several years without the need for significant additional capital expenditures.

Repligen and Novozymes Biopharma each have more than 15 years of experience in the manufacture of biologic products and employ highly skilled and experienced workforces.

Additional Financial Details
This is a cash transaction of 17 million euros with contingent milestone payments of 4 million euros which are payable in 2012-2015 based on the complete transfer of specific manufacturing technology and the achievement of specified revenue targets for the products used in cell culture in 2012-2014.

We expect that the profit generated by the combined company will benefit from our $57 million in net operating loss Federal tax credits. The acquisition is anticipated to close by the end of the year, upon the transfer of key permits and satisfaction of other customary closing conditions.

Repligen does not anticipate seeking preclearance of the acquisition from any antitrust authorities or the applicability of any antitrustbased statutory waiting periods.

The combined bioprocessing businesses are expected to have low selling, general and administrative expenses since the majority of the revenue derives from long-term supply agreements.

Based on our projections and a previously secured exchange rate of $1.337/euro for the upfront payment, we expect to have $35-$37 million in cash and no debt at the end of our current fiscal year, ending March 31, 2012.