RGEN
#Thank you, <UNK>, and good morning.
2014 was an excellent year for Repligen.
As reported today, we had record sales of our bioprocessing products of $60.4 million, an increase of 27% over 2013.
Our results derived from strong organic growth of approximately 13% in addition to $6.8 million in sales of the ATF product line which we acquired from Refine Technology in June.
We also expanded our gross margin to 53.6%, an improvement of approximately 98 basis points despite a $400,000 or 68 basis point headwind due to ATF inventory re-evaluation and nonrecurring ATF manufacturing transition costs.
Our R&D group completed designs or prototypes for three new products scheduled for launch this year and they developed yield improvements for several high-volume processes to support continued improvements of gross margins.
We bolstered our management team with the hiring of <UNK> <UNK> as our Chief Operating Officer and <UNK> <UNK> as our Chief Financial Officer to effectively manage our expanding business.
I am pleased that <UNK> will be our next CEO and I'm confident that his commercial experience in the bioprocessing market will serve Repligen well.
To prepare for this next phase of growth, we also significantly expanded our sales force and commercial infrastructure to enable us to more effectively sell our OPUS and ATF product lines directly to end-users worldwide and to support the launch of new products in 2015.
With the opening of our new ATF manufacturing facility in January of this year and additional office space last quarter, we have completed our capital investment program to support our expansion for the next three years.
And we ended the year with a strong balance sheet including $62 million in cash and no debt.
In summary, we believe we have in place the product portfolio, the management expertise, the facilities and the financial resources to support sustained growth and increase profitability in the growing market for biologic drugs.
Our business strategy is based in part on our belief that the market for monoclonal antibodies will continue to expand driven by the introduction of new antibodies which address significant unmet medical needs and a growing contribution from Asia.
In 2014, there were a record eight new antibody products approved including two exciting new products for cancer from Merck and Bristol-Myers respectively.
We also saw the filing of marketing applications for two monoclonals developed by both Amgen and Sanofi which address the significant need to reduce elevated levels of cholesterol.
And there are many other exciting products in the pipeline.
We believe that the monoclonal market will expand at 8% to 10% for the next five years driving the growth of both our Protein A business and the opportunity for our proprietary products.
Now I will turn the call over to <UNK> for a review of our 2014 results and our expectations for 2015.
Thank you, Walt.
Good morning.
Today we reported our financial results for the fourth quarter of 2014 which were highlighted by strong sales of our key bioprocessing products.
We reported product sales of $15.4 million, an increase of approximately 49% compared to Q4 of 2013 despite a 6% headwind from foreign currency fluctuations in the quarter.
We experienced increased demand for Protein A affinity ligands in our OPUS line of pre-packed chromatography columns during the order.
In addition, we had record sales of ATF products with strength in both benchtop and production scale units.
As a reminder in the fourth quarter of 2013, Repligen received $5 million of royalty revenue from Bristol-Myers Squibb based on their US sales of Orencia under an agreement that expired on December 31, 2013.
For the fourth quarter of 2014, gross profit from bioprocessing product sales was $7.3 million or 47.5% of product revenue compared with $5.7 million or 55.3% for the same period in 2013.
The lower margin percent versus 2013 was the result of expected Refine integration costs and reduced capacity utilization in our Swedish factory.
Research and development expenses of $1.3 million were approximately equal to the fourth quarter of 2013 as we continued to invest in three key product development programs scheduled to launch in 2015.
SG&A expenses increased from $3.4 million to $5 million as a result of expected investments in our management and commercial teams and costs associated with the buildout of infrastructure and personnel to support our future growth.
The acceleration of ATF sales in 2014 resulted in an achievement of the 2014 Refine contingent consideration sales milestone.
This coupled with an increased probability of achieving the 2015 sales milestone required an additional $2 million of contingent consideration expense to be recorded in the fourth quarter.
The fourth quarter of 2014, we reported an income of $61,000 and realized a net loss of $399,000 largely driven by the impact of the $2 million Refine contingent consideration expense and timing of income tax recognition.
Now turning to the full-year 2014, we reported product sales of $60.4 million, an increase of 27% over 2013.
We had a modest negative impact of 0.5% on full-year product sales from foreign exchange fluctuations.
Product gross profit was $32.4 million or 53.6% of product revenue compared with $25 million or 52.7% for 2013.
The higher margin percentage in 2014 was the result of higher production volumes and benefits from yield improvement programs in our factories.
Full-year research and development expenses of $5.6 million were $1.7 million lower than 2013 due to discontinuation of the Company's drug development programs.
SG&A expenses increased from $12.7 million to $17.2 million as a result of expected investments in our management team and commercial organization as well as costs associated with the buildout of infrastructure and personnel to support our future growth.
Full-year operating income of $10.7 million is below the $22.9 million in 2013 due to lower royalty income of $15.2 million and the aforementioned Refine consideration expense.
Net income for the full-year 2014 is $8.2 million versus $16.1 million in 2013.
Cash and investments as of December 31, 2014, totaled $62 million compared to $73.8 million as of December 31, 2013.
The reduction was driven by the Refine acquisition and CapEx related to the expansion and buildout of our Waltham facility, partially asset by cash generated from business operations.
Today we are also issuing full-year guidance for 2015 which is based on current foreign exchange rates.
We are projecting total revenue in 2015 of $72 million to $75 million comprised exclusively of product sales and reflecting 19% to 24% total sales growth.
This is comprised of organic growth of 18% to 23% less a foreign exchange headwind of 7% plus an 8% gain from the full-year effect of ATF product sales.
Product gross margin is expected to be 55% to 57% as we continue to increase capacity utilization and implement process improvements.
We expect gross profit to be largely hedged from foreign exchange exposure as we have a significant percentage of both our sales and manufacturing costs denominated in Swedish krona.
Operating expenses for the year of 2015 are expected to be $60 million to $62 million including SG&A expenses of $21 million to $23 million.
The expense increases are driven by higher product volumes and investments in selling and infrastructure to support our growth.
We expect R&D expense of $5 million to $6 million as we complete the development of three new products in 2015.
Total income from operations is expected to be $12 million to $14 million including a $1.5 million Refine contingent consideration expense that will be required if we achieve the 2015 revenue milestone.
Net income is expected to be $8 million to $10 million including estimated taxes of approximately $4 million.
Our forecast for the year also includes $4.5 million to $5 million of depreciation and amortization expense compared to $4 million in 2014.
Key drivers include amortization from the refined technology acquisition and depreciation from our Waltham facility expansion.
Capital expenditures are expected to be approximately $2 million to $3 million to maintain existing facilities and equipment and to complete the Waltham renovations in the first quarter of 2015.
Based on the aforementioned projections, we are expecting year-end cash of $73 million to $75 million.
Our guidance for 2015 does not include the impact of future fluctuations in foreign exchange rates, potential milestone payments from BioMarin or possible future acquisitions.
I will now turn the call over to <UNK> for his view of 2015.
We expect to file on or before the 17th.
Sure.
We have actually, from prior guidance, seen growth in generally of our product lines, <UNK>.
So it spans from affinity ligands all the way through ATF and OPUS as well as growth factor, so we are seeing demand up by everywhere.
I think that's reasonable but those numbers are folded into of course the estimates for OPUS being up 50% for example.
That includes the new product contribution there.
I think for us the story and the revision of the guidance, as <UNK> said, was just a ground swell across all product lines growing with affinity 8% to 10% and the other lines much more robustly.
And typically we've seen in past periods some product lines advancing more robustly than others.
What we are seeing this year is all product lines advancing together leading to a much higher organic growth projection for the year.
That is all encompassed within our projections of 55% to 57% margins.
So that would represent expansion over 2014.
Also the fact that as we increase the projection for the affinity ligands, we get incremental better capacity utilization both in the Lund factory and the plant here in Waltham as well.
It's a combination of both of those effects.
There is always media ---+ it's Walt.
There is always media involved but what we do see as the columns get larger and the media acquisition costs get larger, we see customers actually supplying the media, consigning it to us, so with the 45 centimeter it was closer to the 50-50 ratio of columns versus media as compared to a higher ratio of media in some of the really small columns where we always buy the media.
So I expect at the end of the day as we look forward with the 45 centimeter and 60 centimeter, it will be 50-50 columns of media as more and more customers take advantage of large volume discounts they get from the media suppliers themselves.
