Sondra Newman - Senior Director, IR Jon Snodgres - CFO Tony Hunt - COO Walter Herlihy - CEO.

Drew Jones - Stephens Inc. Bryan Kipp - Janney Capital Markets.

Good day, ladies and gentlemen and welcome to the Repligen Corporation’s First Quarter of 2015 Earnings Conference Call. My name is Michelle and I will be your coordinator. Please note that there will be a question-and-answer period following the company’s formal remarks.

[Operator Instructions] I would now like to turn the call over to your host for today’s call, Sondra Newman, Senior Director of Investor Relations for Repligen..

Thank you and good morning. The purpose of today’s call is to discuss our first quarter of 2015 results to review our financial guidance for the year and to discuss recent business highlights. Joining me today are Walter Herlihy, our President and CEO; Jon Snodgres, our CFO; and Tony Hunt, our COO and designated President and CEO.

At the outset, I would like to state that this discussion may contain forward-looking statements. These statements are subject to risks and uncertainties which may cause our plans to change or results to vary. In particular, unforeseen events outside of our control may adversely impact future results.

Additional information concerning these factors is discussed in our annual report on Form 10-K, the current report on Form 8-K, which we filed this morning and other filings that we make with the Securities and Exchange Commission. The forward-looking statements in this discussion reflect management’s current views.

They may become obsolete as a result of new information, future events or otherwise. We may not update such forward-looking statements except as required by law. Now, I will turn the call over to Jon for a financial review..

Thank you, Sondra. Good morning. Today we reported our financial results for the first quarter of 2015 which were highlighted by record product sales of $20.8 million, an increase of approximately 45% compared to the first quarter of 2014.

Despite a 12% headwind from foreign currency fluctuations, we saw strength in our sales of Protein A affinity ligand and growth factor products, solid revenue gains from our OPUS line of pre-packed chromatography columns and continued momentum in ATF System sales.

As a reminder, in the first quarter of 2014, total revenue included an upfront payment of $2 million from BioMarin under the terms of our therapeutic out-licensing agreement. All revenue for the first quarter of 2015 was derived from bioprocessing product sales.

Gross profit for the first quarter of 2015 was $12.7 million or 61.2% of product revenue compared with $8 million or 55.3% of product revenue for the same period in 2014. The higher margin achieved in 2015 was a result of overall higher sales resulting in strong volume leverage in our factories as well as favorable product mix.

Research and development expenses of $1.6 million for the first quarter of 2015 were $400,000 higher than the first quarter of 2014. We continue to invest in the development of new products. During the first quarter of 2015, we’ve launched the first of three new products planned for 2015, which Tony will provide an update on later.

SG&A expenses of $6 million for the first quarter of 2015 were $2.6 million higher than the same period in 2014, driven by expected investments in our management and commercial teams and a $1.2 million increase in professional fees and other costs associated with the transfer and integration of the ATF business into our Waltham facility and systems.

Total operating expense for the first quarter of 2015 included $1.1 million of contingent consideration expense related to continued strength of sales in ATF Systems which we acquired from Refine Technology, LLC in June of 2014.

We reported this expense due to an increase probability that we will achieve the 2015 revenue milestone set forth in our asset purchase agreement with Refine. Operating income for the first quarter of 2015 was $4 million, including the $1.1 million of contingent consideration expense.

This compares to operating income of $5.3 million for the first quarter of 2014 which included the previously mentioned of $2 million of non-product income. Net income was $2.9 million for the first quarter of 2015 compared to $4.3 million for the first quarter of 2014.

These figures again include the contingent consideration expense and the license fee income respectively. Lastly, EBITDA for the first quarter of 2015 was $5.3 million compared to $6.2 million in the prior year. Please note that EBITDA is a non-GAAP financial measure and should not be viewed as an alternative to GAAP measures of performance.

We are providing EBITDA based on our belief that this measure better enables investors to benchmark the company’s results against historical performance and the performance of peers. Today we are revising our financial guidance for the year 2015.

We are raising our total revenue guidance to $75 million to $78 million, an increase from our previous guidance of $72 million to $75 million. Our revenue projection for 2015 is comprised exclusively of bioprocessing product sales and reflects a 24% to 29% sales growth, an increase from our previous guidance of 19% to 24% growth.

We expect organic sales growth in the same range of 24% to 29%. This includes a foreign exchange headwind of 8% that we expect will be offset by 12 months of ATF sales in 2015 versus 7 months of ATF sales in 2014.

We now expect product gross margin to be 56% to 58%, an improvement from our prior forecast of 55% to 57% due to increased capacity utilization in our factories. We expect gross profit to be largely hedged from foreign exchange exposure as we have a significant percentage of our manufacturing cost denominated in Swedish krona.

Operating expense for 2015 are expected to be $62 million to $64 million, an increase from our prior guidance of $60 million to $62 million.

2015 operating expenses include SG&A expenses of $21 million to $23 million, R&D expenses of $6 million to $7 million and contingent consideration of $1.5 million of which we reported $1.1 million in the first quarter. The expense increases are driven by higher product volumes and incremental investments in product development.

Total income from operations for 2015 is expected to be $14 million to $16 million, an increase from our previous guidance of $12 million to $14 million. We are raising our net income guidance to $10 million to $12 million from our previous guidance of $8 million to $10 million, including estimated income taxes of approximately $4 million.

Our 2015 guidance does not include the impact of future fluctuations in foreign exchange rates, potential milestone payments from BioMarin or potential acquisitions. I will now turn the call over to Tony to comment on business highlights for the first quarter..

Thanks, Jon. So adding some more color to our first quarter results. While our core affinity and growth factor businesses were very strong performers, all of our product groups contributed to our growth in Q1. Affinity sales were driven by increased amount not only for the newer ligands but also for the legacy Protein A ligands that we manufacture.

Strength in affinity ligands aligns with the market for monoclonal antibodies, including expansion of established antibodies, rapid market penetration of newly approved antibodies and commercial preparation for anticipated approvals. For example, Roche in April reported continued growth for mature monoclonal antibodies such as Herceptin and Rituxan.

Merck’s first quarter sales of its recently approved PD-1 antibody came through the - exceeded $80 million and additional anticipated approvals of PC SK9 antibodies to lower LDL cholesterol levels are contributing to the momentum.

With respect to our proprietary bioprocessing products, we’ve seen a recent uptick in demand for our growth factors as products in development move in to scale up our pre-commercial manufacturing. We continue to be impressed with market adoption for both OPUS and ATF Systems.

OPUS pre-packed comp sales in Q1 were driven by our larger units, particularly our OPUS 45 centimeter diameter columns. ATF sales were driven by demand for both benchtop and processed systems.

We view the continued strength in benchtop sales as a leading indicator of future demand as customers typically purchase benchtop units to develop processes that are scaled up to our larger ATF units. During the fourth quarter call in March, we discussed the importance of executing on multiple fronts from R&D to operations and commercial.

Our R&D team successfully completed the development of the 67 meter diameter OPUS column which we formally launched in the U.S. in March and Europe in April. The OPUS 60 columns are suitable for use with 2,000 liter bioreactors which are fast-becoming a standard in single-use facilities.

Our customers are enthusiastic about this latest product offering and similar to our experience in launching the OPUS 45, we are already filling multiple column orders for the OPUS 60 from leading pharma customers.

As a reminder, we are the only company supplying 45 and 60 centimeter diameter columns ad we believe that this combination positions us well to capture not only technology leadership but also market leadership. We expect that our larger OPUS columns will continue to be the major drivers of growth of the OPUS line.

Our R&D team is now focusing on finalizing the development and commercialization of our Protein A media and single-use ATF products. And both programs are on schedule to hit their launch dates this year. With respect to operations, in February we announced the completion of an 11,000 square foot expansion of our U.S.

manufacturing facility, including dedicated areas for the production and assembly of ATF Systems and additional suite space for OPUS. When we acquired the ATF Systems in June last year, we knew that the technology was market-leading and was considered by customers to be the gold standard in the industry for cell retention.

Our plan was to accelerate the adoption of ATF by building out this dedicated manufacturing facility and adding in a quality infrastructure along with field service to better support product implementation customer sites. We are pleased that we are now producing and shipping ATF Systems from our Waltham facility under our quality system.

With our expanded commercial team, we are now well-positioned to support our new product introductions and to accelerate the adoption of our existing portfolio and key global accounts. The pipeline of OPUS and ATF opportunities is growing rapidly and we anticipate we will see the full impact of the commercial organization in the second half of 2015.

To support our sales efforts, we are rolling out a series of customer-facing global technical seminars in the U.S., Europe and Asia in Q2 and Q3. Our global seminar series leverages our deep customer relationships where we are viewed as a trusted partner.

We look forward to hearing from our customers on their implementation of our technologies, spanning upstream and downstream workflows.

As we continue to gain momentum, we are confident that we will be able to expand further into high growth bioprocess markets through internal development programs, partnerships and acquisitions that will allow us to deliver on our medium to long term business goals which include achieving sustainable operating margins in the mid-20s.

In summary, our team remains focused on providing best-in-class products and services to our customers and we’ve executed well to deliver exceptional financial results during Q1.

Now, before handing over to Walt to share some concluding remarks, I’d like to take this opportunity on behalf of all Repligen employees, management, board and shareholders, thank Walt for his many years of service, including his 20 years at the helm as CEO here at Repligen. As you know, Walt will be retiring in a few weeks.

And he has set the vision, the strategy for Repligen in bioprocessing. And it’s his passion, his leadership and integrity that has brought us to where we are today. So we aim to act with a similar sense of purpose and passion as we build upon this great foundation. So, Walt, wishing you much success in your next endeavors.

And we all know you will be keeping an eye on us..

Thank you, Tony, and good morning. I’m pleased to be able to transition the company to a new leadership team at a point in which we are experiencing strong organic growth and impressive financial metrics.

In 2011, we made a commitment to build our bioprocessing business which indirectly was also a bet on the continued advancement of the monoclonal antibody sector. In 2012, this became our sole focus.

Since then, we have scaled our business through a combination of internal product development and several strategic acquisitions that diversified our product offering and enabled us to cost effectively build a commercial organization.

I’m particularly proud that our expansion has been accompanied by improving margins that are our consistent with our shared vision of creating a best in class life sciences company. I look forward to Repligen’s continued success in 2015 and beyond as the team executes on our growth plan and continues to focus on building shareholder value.

Finally, I’d like to thank our dedicated employees for all their efforts and our shareholders for your continued support. Operator, as this point, we would like to open the call to questions..

[Operator Instructions] Our first question comes from Brandon Couillard of Jefferies. Your line is open..

Hi, good morning. This is Sechanin [ph] for Brandon..

Good morning..

Walter Herlihy:.

Good morning.

Tony, as you look at across the business, how much visibility do you have around second half revenues? What would be the two or three variables that will put you toward the higher end of that range potentially?.

Yes. So we’ve raised our guidance up to $75 million to $78 million. And that’s really based on our visibility now - better visibility into the second half of the year. So we’re very comfortable with the range. And I think when get to our next earnings call, we’ll obviously have a little bit more information on how the second half is shaping up.

But right now, we’re confident about the year and comfortable about the numbers that we’re guiding to..

Got it. And what were the biggest drivers in gross margin expansion in the current quarter? Your revised guidance for the year suggests like a steep step down over the balance of the year.

Why would that necessarily be the case?.

This is Jon. If you look at our history, typically we have higher, better mix of affinity ligands and at times higher growth factor volumes in the first half of the year and a little bit lower on the second half of the year.

We also have seasonality effects with higher vacation and things like that contribute to lower margins in the summer months and also in the holiday periods. So those are some of the key drivers.

This year in particular, we had a very strong mix of our growth factor in affinity ligands in the first half of the year which tend to drive higher margins because we have higher contribution margins potentially from incremental volumes of those products. So we had a very good mix.

In addition, just strong volume in general, so we had very strong leverage of our factory here in the first quarter as you could tell by the $20.8 million sales number..

All right. And one last one for Tony.

In light of the strong demand environment, how do you think about the reach of your expanded sales force? Are they scoped to make additional sales hires in the second half given the growth factor up?.

Yes. I think our commercial organization as I said a few moments ago is pretty much up to speed. We’ve completed the training.

We’re rolling out a series of technical seminars and I think with the training in place and the goals set for each sales rep, I think we’re very confident about their performance in the second half And clearly, we would expect to see an uptick from our sales team in H2 and obviously first year next year in 2016.

Finally, I would say that in Asia, we’re definitely seeing an uptick and that’s a direct result of having a salesperson dedicated there plus the contribution from our distributors. So we’re very excited about the business so far this year in Asia and the potential as we go into the second of the year..

All right. Thank you..

Our next question comes from Drew Jones of Stephens Inc. Your line is open. If your telephone is muted, please unmute..

Good morning. Thank you.

Jon, could you tell us what the organic growth was in the first quarter?.

I will say we’ve guided 24 to 29 for the year. We’ve indicated that we’ve had a 12% FX headwind. And I would be happy to say that our organic growth is in excess - nicely in excess of our full year organic growth in the first quarter putting us in a very, very good position to achieve the revised guidance. I hope that helps..

Yes. And then Tony, you touched on this a little bit. Just the strength of Protein A and IGF in the first quarter. Given new approvals, given the PCF [ph] came out and how that could be a needle mover for volumes.

Is this the new normal for those two products as far as you guys are concerned?.

Great question. I would say based on the discussions we’ve had with our partners on affinity, they’ve up their forecast for the rest of the year. And it’s obviously based on - and when you look at the data, it’s across the legacy ligands and also obviously new product launches. So for 2015, I think this is the new norm.

I can’t really say what 2016 is going to look like at this stage..

And then last one for me, you guys with the new 60 centimeter launch at the end of March, can you give us a peek as to what maybe orders look like in April or how the initial does look?.

Yes, we have multiple orders that we’ll be delivering here in Q2. And we have an exciting pipeline as we look into the second half of the year..

Great. Thanks, guys. And congrats to both of you and Walt..

Thank you..

Thanks..

[Operator Instructions] Our next question comes from Paul Knight of Janney Capital Markets. Your line is open..

Hi. This is actually Bryan Kipp on behalf. Well, first off, Walt, congratulations. It’s been a pleasure working with you. You’ll surely be missed. Hope you have a good time on your boat, et cetera..

Thanks..

I guess I wanted to tease out a little bit more on 1Q. You guys continued to site the lumpiness. And we all the lumpiness that exists in Protein A ligands and growth factors.

Can you give us an idea of what the incremental volume was in the quarter, a couple of million here and there? The reason why I’m asking is in context, 1Q is typically your second softest quarter despite the strength there. And with new products coming online in light of your guidance, it would be likely the strongest quarter for you during the year.

So I’m just trying to think of the strength in Protein A and IGF in 1Q product launches in light of your guidance. I’m just trying to think about how you look at it going forward..

I’ll start and then maybe Jon can fill in as Walt. Typically, Q2 is the strongest quarter for affinity ligands. And we think we’re going to have a very good Q2. So I don’t think Q1 is going to be an outlier versus the second, third and fourth quarter.

Typically, as you know, Q4 is on the weaker side and then we would continue to forecast that as part of our overall annual forecasts..

I concur. And that also kind of ties in to the gross margin discussion that we talked about earlier as well. So we expect a very strong first half of the year continued.

And one thing we noticed last year with the business as we’ve acquired ATF which is more capital and product intensive business, we saw that some of the lower affinity volumes in the fourth quarter were kind of picked up by the capital intensive ATF business which kind of helped kind of level our sales for the year.

So we expect similar dynamics to occur this year..

Okay. I just want to circle back. So you still think Q2 will probably be one of your strongest quarters. You do have support from new products and then there should be some inherent capitulation on seasonality just because of the nature of your products allow the launch of the single use, the ATF consolidation, et cetera in 4Q..

Yes. So to go back to the affinity, clearly Q2 is always a strong quarter for us. And as I’ve said a few moments ago, we’ve had increased demand and updated forecast from our two partners and they’re very strong for the year. So we’re confident about the affinity business and the guidance that we put forward today.

Clearly, the other businesses are also going really well. So as we move in to H2, we expect to have a strong second half for ATF and also on the other products on our portfolio..

And Bryan, you had asked about new products as well. And I think we had previously guided and we’re still kind of sticking to a $1 million to $2 million contribution from the new products mostly in the second half of the year. And we expect some time delays in terms of adoption which is kind of normal for our industry over the new products..

Okay. I mean that’s helpful. And then have you guys seen any bookings related to your media? I know your ongoing conversions, it plays right in the COMs - a sweet spot for CMOs.

Have you seen any conversations or have any contracts in hand once you launch the media?.

I mean the products are not launched yet. And currently, we’re, like a new product launch, you go through alpha, beta testing. We’re doing that. We’re getting feedback and the product is very positive. So that’s really where we are. We’re really in a seeking mode..

Okay. And then I guess the last one for me.

You’ve talked about a little bit that the conversions towards 2,000 liter, I just want to kind of get your thoughts on the overall dynamics, do you think, Walt or Tony, do you still think we’re two years away from a fully continuous workflow on the 2,000 liter bioreactor in commercial scale? Or do you think it could be faster than that or do you think the tail might even be longer?.

I think in terms of the use of 2,000 liter bioreactors disposable, that’s clearly happening. When you look at what we have with the ATF System, that allows you to do continuous processing the upstream, part of the workflow.

I do think it’s going to be two plus years, maybe even longer than that before the customers start to connect upstream and downstream in more of a continuous fashion. But for sure, the upstream part of the workflow is trending and moving towards a continuous, I think downstream is going to take a little longer. Maybe Walt has some other comments..

Yes. I think either way there, we’ll be able to benefit from the adoption of 2,000 whether it’s continuous or batched. Either way, they’re going to need that 60 centimeter column. So we’re somewhat agnostic to continuous versus batched..

Okay. But it’s still primarily clinical trial based Phase II, Phase III 2,000 liter bioreactors.

We’re still not kind of seeing that sweet spot on the CMO and on the pharma side for commercialization, right?.

Yes. I think the 2,000 liter bioreactor and the 60 centimeter OPUS column gets us into the Phase II, Phase III. But there will be commercial processes using 60 centimeter. It’s just they’re going to be more of the orphan drugs or highly potent drugs that long to acquire 10,000 liter bioreactors..

Appreciate it, guys..

I’m showing no further questions. At this time, I’d like to turn the call back over to Sondra Newman for any closing remarks..

Thank you, everyone, for joining our call today. Please feel free to ring me if you have follow-up questions. Have a great day. And we look forward to updating you on our Q2 call..

Ladies and gentlemen, thank you for participating in today’s conference..