REPLIGEN CORP - Quarter Report: 2011 September (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2011

OR

For the transition period from              to

Commission File Number 000-14656

REPLIGEN CORPORATION

(exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (781) 250-0111

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of October 31, 2011.

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REPLIGEN CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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REPLIGEN CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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REPLIGEN CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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REPLIGEN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The financial statements included herein have been prepared by Repligen Corporation (the “Company,” “Repligen” or “we”) in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), for quarterly reports on Form 10-Q and Article 10 of Regulation S-X and do not include all of the information and footnote disclosures required by U.S. GAAP. These financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2011.

In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments, consisting of only normal, recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows. The results of operations for the interim periods presented are not necessarily indicative of results to be expected for the entire year.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company generates product revenues from the sale of bioprocessing products to customers in the pharmaceutical and process chromatography industries. The Company recognizes revenue related to product sales upon delivery of the product to the customer as long as there is persuasive evidence of an arrangement, the sales price is fixed or determinable and collection of the related receivable is reasonably assured. Determination of whether these criteria have been met is based on management’s judgments primarily regarding the fixed nature of the fee charged for product delivered and the collectability of those fees. The Company has a few longstanding customers who comprise the majority of revenue and have an excellent payment history and therefore the Company does not require collateral. The Company has had no significant write-offs of uncollectible invoices in the periods presented.

At the time of sale, the Company also evaluates the need to accrue for warranty and sales returns. The supply agreements the Company has with its customers and the related purchase orders identify the terms and conditions of each sale and the price of the goods ordered. Due to the nature of the sales arrangements, inventory produced for sale is tested for quality specifications prior to shipment. Since the product is manufactured to order and in compliance with required specifications prior to shipment, the likelihood of sales return, warranty or other issues is largely diminished. Sales returns and warranty issues are infrequent and have had nominal impact on the Company’s financial statements historically.

In April 2008, the Company settled its litigation with Bristol-Myers Squibb Company (“Bristol”) and began recognizing royalty revenue in fiscal year 2009 for Bristol’s net sales in the United States of Orencia^® which is used in the treatment of rheumatoid arthritis. Pursuant to the settlement with Bristol (“Bristol Settlement”), the Company recognized royalty revenue of approximately $2,789,000 and $2,513,000 for the three months ended September 30, 2011 and 2010, respectively. For the six months ended September 30, 2011 and 2010, the Company recognized Bristol royalty revenue of approximately $5,562,000 and $4,992,000, respectively. Revenue earned from Bristol royalties is recorded in the periods when it is earned based on royalty reports sent by Bristol to the Company. The Company has no continuing obligations to Bristol as a result of this settlement.

Pursuant to the Bristol Settlement, Repligen must remit to the University of Michigan 15% of all royalty revenue received from Bristol. Royalty expense for the three months ended September 30, 2011 and 2010 was approximately $418,000 and $377,000, respectively. For the six months ended September 30, 2011 and 2010, the Company incurred royalty expense of approximately $834,000 and $749,000, respectively. This operating expense has been included in the Company’s Statements of Operations under the line item “Cost of royalty and other revenue.”

For the three months ended September 30, 2011, the Company recognized approximately $100,000 of revenue from a sponsored research and development project under an agreement with Go Friedreich’s Ataxia Research (“GoFar”). For the three months ended September 30, 2010, the Company recognized approximately $378,000 of revenue from sponsored research and development projects under agreements with the Muscular Dystrophy Association, GoFar, and the Friedreich’s Ataxia Research Alliance. For the six months ended September 30, 2011 and 2010, the Company recognized approximately $623,000 and $641,000 of revenue, respectively, under sponsored research and development projects.

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Research revenue is recognized when the expense has been incurred and services have been performed. Determination of which incurred costs qualify for reimbursement under the terms of the Company’s contractual agreements and the timing of when such costs were incurred involves the judgment of management. The Company’s calculations are based on the agreed-upon terms as stated in the arrangements. However, should the estimated calculations change or be challenged by other parties to the agreements, research revenue may be adjusted in subsequent periods. The calculations have not historically changed or been challenged and the Company does not anticipate any subsequent change in its revenue related to sponsored research and development projects.

The Company recognizes milestone payments that meet the definition of a milestone in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) 2010-17 as revenue upon achievement of the milestone. At the inception of each arrangement that includes milestone payments, the Company evaluates whether each milestone is substantive. This evaluation includes an assessment of whether (a) the consideration is commensurate with either (1) the entity’s performance to achieve the milestone, or (2) the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity’s performance to achieve the milestone, (b) the consideration relates solely to past performance and (c) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. The Company evaluates factors such as the clinical, regulatory, commercial and other risks that must be overcome to achieve the respective milestone, the level of effort and investment required and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement in making this assessment. If any of these factors are not met, the Company defers the recognition of revenue underlying the milestone payment and recognizes it over the remaining estimated period of performance under the contract as the Company performs its obligation.

There have been no material changes to the Company’s initial estimates related to revenue recognition in any periods presented in the accompanying consolidated financial statements.

Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Preferred shares are not included in the calculation of net income (loss) per share until their conversion to common shares. Diluted earnings per share is computed by dividing net income by the weighted-average number of common shares and dilutive common share equivalents then outstanding. Potential common stock equivalent shares consist of the incremental common shares issuable upon the exercise of stock options and warrants. Under the treasury stock method, unexercised “in-the-money” stock options are assumed to be exercised at the beginning of the period or at issuance, if later. The assumed proceeds are then used to purchase common shares at the average market price during the period. Share-based payment awards that entitle their holders to receive non-forfeitable dividends before vesting are considered participating securities and are included in the calculation of basic and diluted earnings per share. Common stock equivalent shares have not been included in the net loss per share computation because their effect is anti-dilutive.

Basic and diluted weighted average shares outstanding were as follows:

At September 30, 2011, there were outstanding options to purchase 2,719,100 shares of the Company’s common stock at a weighted average exercise price of $4.09 per share. For the three and six-month periods ended September 30, 2011, respectively, 2,046,700 and 2,025,000 shares of the Company’s common stock were excluded from the calculation of diluted earnings per share because the exercise prices of the stock options were greater than or equal to the average price of the common shares, and were therefore anti-dilutive.

At September 30, 2010, there were outstanding options to purchase 2,579,750 shares of the Company’s common stock at a weighted average exercise price of $4.08 per share. For the three and six-month periods ended September 30, 2010, respectively, 1,928,700 and 1,857,200 shares of the Company’s common stock were excluded from the calculation of diluted earnings per share because the exercise prices of the stock options were greater than or equal to the average price of the common shares, and were therefore anti-dilutive.

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The Company uses the Black-Scholes option pricing model to calculate the fair value of share-based awards on the grant date.

For the three months ended September 30, 2011 and 2010, the Company recorded stock-based compensation expense of approximately $245,000 and $242,000, respectively, for stock options granted under the Second Amended and Restated 2001 Repligen Corporation Stock Plan (the “2001 Plan”). The Company recorded stock-based compensation expense of approximately $527,000 and $505,000 for the six months ended September 30, 2011 and 2010, respectively, for stock options granted under the 2001 Plan.

The 2001 Plan allows for the granting of incentive and nonqualified options and restricted stock and other equity awards to purchase shares of common stock. Incentive options granted to employees under the 2001 Plan generally vest over a four to five-year period, with 20%-25% vesting on the first anniversary of the date of grant and the remainder vesting in equal yearly installments thereafter. Nonqualified options issued to non-employee directors and consultants under the 2001 Plan generally vest over one year. Options granted under the 2001 Plan have a maximum term of ten years from the date of grant and generally, the exercise price of the stock options equals the fair market value of the Company’s common stock on the date of grant. At September 30, 2011, options to purchase 2,719,100 shares were outstanding under the 2001 Plan and the 1992 Repligen Corporation Stock Option Plan (collectively with the 2001 Plan, the “Plans”). At September 30, 2011, 121,809 shares were available for future grant under the 2001 Plan.

The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period based upon options that are ultimately expected to vest, and accordingly, such compensation expense has been adjusted by an amount of estimated forfeitures. Forfeitures represent only the unvested portion of a surrendered option. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Information regarding option activity for the six months ended September 30, 2011 under the Plans is summarized below:

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the closing price of the common stock on September 30, 2011 of $3.26 and the exercise price of each in-the-money option) that would have been received by the option holders had all option holders exercised their options on September 30, 2011.

The weighted average grant date fair value of options granted during the six months ended September 30, 2011 and 2010 was $2.01 and $1.94, respectively. The total fair value of stock options that vested during the six months ended September 30, 2011 and 2010 was approximately $779,000 and $738,000, respectively.

As of September 30, 2011, there was approximately $1,789,000 of total unrecognized compensation cost related to unvested share-based awards. This cost is expected to be recognized over a weighted average remaining requisite service period of 3.17 years. The Company expects approximately 840,000 unvested options to vest over the next five years.

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At September 30, 2011, the Company’s investments included money market funds as well as short-term and long-term marketable securities. Marketable securities are investments with original maturities of greater than 90 days. Long-term marketable securities are securities with maturities of greater than one year. The average remaining contractual maturity of marketable securities at September 30, 2011 was approximately 7.38 months.

Prior to September 30, 2011, the marketable securities were classified as held-to-maturity investments as the Company had the positive intent and ability to hold the investments to maturity. These investments were therefore recorded on an amortized cost basis. As of September 30, 2011, the Company no longer had the intent to hold certain of the marketable securities to maturity as a result of its intent to liquidate certain securities in October 2011 in connection with the Asset Transfer Agreement with Novazymes Biopharma DK A/S and Novazymes Biopharma Sweden AB, as described in Note 17. The Company reassessed the classification of its marketable securities portfolio, accordingly, and concluded that the investment portfolio should be classified as available-for-sale. The transfer of held-to-maturity securities to available-for-sale securities was recorded at fair value, with the unrealized gain (loss) reported in other comprehensive income in accordance with ASC 320-10, Investments-Debt and Equity Securities.

Management reviewed the Company’s investments as of September 30, 2011 and concluded that there are no securities with other than temporary impairments in the investment portfolio. The Company does not intend to sell any investments in an unrealized loss position and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases at maturity.

Investments in debt securities consisted of the following at September 30, 2011:

At September 30, 2011, the Company’s investments included 16 debt securities in unrealized loss positions with a total unrealized loss of approximately $13,000 and a total fair market value of approximately $17,312,000. All investments with gross unrealized losses have been in unrealized loss positions for less than 12 months. The unrealized losses were caused by a temporary change in the market for the securities. There was no change in the credit risk of the securities. There were no realized gains or losses on the investments for the periods ended September 30, 2011 and March 31, 2011.

Investments in debt securities consisted of the following at March 31, 2011:

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The contractual maturities of debt securities at September 30, 2011 were as follows:

In determining the fair value of its assets and liabilities, the Company uses various valuation approaches. The Company employs a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level input that is significant to the overall fair value measurement.

The Company’s fixed income investments are comprised of obligations of U.S. government agencies, corporate debt securities and other interest bearing securities. These investments have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third party pricing services or other market observable data. The pricing services utilize industry standard valuation models, including both income and market based approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events. The Company validates the prices provided by third party pricing services by reviewing their pricing methods and matrices, obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming that the relevant markets are active. After completing our validation procedures, the Company did not adjust or override any fair value measurements provided by the pricing services as of September 30, 2011.

The Company has no other assets or liabilities for which fair value measurement is either required or has been elected to be applied, other than the liability for contingent consideration recorded in connection with the acquisition of BioFlash Partners, LLC (“BioFlash”). The contingent consideration is valued using management’s estimates of royalties to be paid to the former shareholders of BioFlash based on sales of the acquired assets. This valuation is a Level 3 valuation as the primary inputs are unobservable. The following table provides a roll forward of the fair value of the contingent consideration:

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The following fair value hierarchy table presents information about each major category of the Company’s assets measured at fair value on a recurring basis as of September 30, 2011:

There were no remeasurements to fair value during the three months ended September 30, 2011 of financial assets and liabilities that are not measured at fair value on a recurring basis.

Inventories relate to the Company’s bioprocessing business. The Company values inventory at cost or, if lower, fair market value using the first-in, first-out method. The Company reviews its inventories at least quarterly and records a provision for excess and obsolete inventory based on its estimates of expected sales volume, production capacity and expiration dates of raw materials, work-in-process and finished products. Expected sales volumes are determined based on supply forecasts provided by key customers for the next three to twelve months. The Company writes down inventory that has become obsolete, inventory that has a cost basis in excess of its expected net realizable value, and inventory in excess of expected requirements to cost of product revenue. Manufacturing of bioprocessing finished goods is done to order and tested for quality specifications prior to shipment.

A change in the estimated timing or amount of demand for the Company’s products could result in additional provisions for excess inventory quantities on hand. Any significant unanticipated changes in demand or unexpected quality failures could have a significant impact on the value of inventory and reported operating results. During all periods presented in the accompanying financial statements, there have been no material adjustments related to a revised estimate of inventory valuations.

Work-in-process and finished products inventories consist of material, labor, outside processing costs and manufacturing overhead. Inventories consist of the following:

The Company estimates accrued liabilities by identifying services performed on the Company’s behalf, estimating the level of service performed and determining the associated cost incurred for such service as of each balance sheet date. Examples of estimated accrued expenses include: 1) Fees paid to contract manufacturers in conjunction with the production of clinical materials. These expenses are normally determined through a contract or purchase order issued by the Company; 2) Service fees paid to organizations for their performance in conducting clinical trials (these expenses are determined by contracts in place for those services and communications with project managers on costs which have been incurred as of each reporting date); and 3) Professional and consulting fees incurred with law firms, audit and accounting service providers and other third party consultants (these expenses are determined by either requesting those service providers to estimate unbilled services at each reporting date for services incurred, or tracking costs incurred by service providers under fixed fee arrangements).

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The Company has processes in place to estimate the appropriate amounts to record for accrued liabilities, which principally involve the applicable personnel reviewing the services provided. In the event that the Company does not identify certain costs which have begun to be incurred or the Company under or over-estimates the level of services performed or the costs of such services, the reported expenses for that period may be too low or too high. The date on which certain services commence, the level of services performed on or before a given date, and the cost of such services are often determinations that require the exercise of judgment. The Company makes these judgments based upon the facts and circumstances known at the date of the financial statements.

Accrued liabilities consist of the following:

For the three and six-month periods ended September 30, 2011, the Company had income before taxes of approximately $605,000 and $549,000, respectively. The Company did not record a tax provision as the effective income tax rate was 0%. The effective income tax rate was based upon the estimated loss for the year ended March 2012 and the composition of the income in different jurisdictions. The effective tax rate differs from the statutory tax rate due to the utilization of prior year net operating losses and credits.

For the three and six-month periods ended September 30, 2010, the Company had income before taxes of approximately $623,000 and $1,611,000, respectively. The Company did not record a tax provision as the effective income tax rate was 0%. The effective income tax rate was based upon the estimated loss for the year ended March 2011 and the composition of the income in different jurisdictions. The effective tax rate differs from the statutory tax rate due to the utilization of prior year net operating losses and credits.

The Company has net operating loss carryforwards of approximately $56,899,000 and business tax credit carryforwards of approximately $2,309,000 available to reduce future federal income taxes, if any. Additionally, the Company also has net operating loss carryforwards of approximately $4,184,000 and business tax credit carryforwards of approximately $3,231,000 available to reduce future state income taxes, if any. The net operating loss and business tax credit carryforwards will continue to expire at various dates through March 2031. The net operating loss and business tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and may be limited in the event of certain changes in the ownership interest of significant stockholders.

As of September 30, 2011, a full valuation allowance has been provided against the net operating losses, business tax credits and other deferred tax assets, as it is uncertain if the Company will realize the benefits of such deferred tax assets.

Currently, a corporate excise tax audit is underway in the Commonwealth of Massachusetts for the years ended March 31, 2007 and 2008. To date, there are no proposed adjustments and the Company continues to believe no reserve is required under ASC 740 Income Taxes.

Comprehensive income (loss) is the change in equity of a company during a period from transactions and other events and circumstances, excluding transactions resulting from investments by owners and distributions to owners. Comprehensive income (loss) includes net income (loss) and unrealized gain (loss) on marketable securities for the three and six-month periods ended September 30, 2011.

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The Company’s total comprehensive income consists of the following:

The Company views its operations, makes decisions regarding how to allocate resources and manages the business as one operating segment. As a result, the financial information disclosed herein represents all of the material financial information related to the Company’s principal operating segment.

The following table represents the Company’s total revenue by geographic area (based on the location of the customer):

Royalty revenue from Bristol represented 32% and 34% of the Company’s total revenue for the three months ended September 30, 2011 and 2010, respectively. For the six months ended September 30, 2011 and 2010, royalty revenue from Bristol represented 34% and 35% of the Company’s total revenue, respectively.

The Company’s largest bioprocessing customer accounted for 58% and 50% of total revenues for the three months ended September 30, 2011 and 2010, respectively. For the six months ended September 30, 2011 and 2010, the Company’s largest bioprocessing customer represented 51% and 46% of total revenues, respectively.

Bristol’s royalty payment comprised 41% and 55% of the Company’s accounts receivable at September 30, 2011 and 2010, respectively. The Company’s largest bioprocessing products customer accounted for 52% and 38% of accounts receivable as of September 30, 2011 and 2010, respectively.

In May 2011, FASB issued ASU No. 2011-04, “Fair Value Measurement (Topic 82) —Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”). The amendments in this update will ensure that fair value has the same meaning in U.S. GAAP and in International Financial Reporting Standards and that their respective fair value measurement and disclosure requirements are the same. This update is effective prospectively for interim and annual periods beginning after December 15, 2011. Early adoption by public entities is not permitted, and the Company is therefore required to adopt this ASU on January 1, 2012. The Company has not completed its review of ASU 2011-04, but it does not expect the adoption to have a material impact on the Company’s results of operations, financial position or cash flows.

On April 6, 2007, the Company entered into an exclusive worldwide commercial license agreement (“License Agreement”) with The Scripps Research Institute (“Scripps”). Pursuant to the License Agreement, the Company obtained a license to use, commercialize and sublicense certain patented technology and improvements thereon, owned or licensed by Scripps, relating to compounds which may have utility in treating Friedreich’s ataxia, an inherited neurodegenerative disease. Research in tissues derived from patients, as well as from mice, indicates that the licensed compounds increase production of the protein frataxin, which suggests potential utility of these compounds in slowing or stopping progression of the disease. There are currently no approved treatments for Friedreich’s ataxia in the U.S.

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Pursuant to the License Agreement, the Company agreed to pay Scripps an initial license fee of $300,000, certain royalty and sublicense fees and, in the event that the Company achieves specified developmental and commercial milestones, certain additional milestone payments. Total future milestone payments, if all milestones were to be achieved, would be approximately $4.3 million. In addition, the Company issued Scripps and certain of its designees 87,464 shares of the Company’s common stock which had a value of $300,000 on the date of issuance.

In connection with the License Agreement, the Company issued warrants to an individual at Scripps to purchase up to 150,000 shares of common stock. The warrants have a seven year term and are exercisable based on performance criteria as detailed in the warrant agreement. No expense related to these warrants has been recorded through September 30, 2011, as none of the performance criteria have been achieved. At this time, the Company does not believe that the performance criteria are probable of being achieved in the near future.

The License Agreement with Scripps expires or may be terminated (i) when all of the royalty obligations under the License Agreement expire; (ii) at any time by mutual written consent; (iii) by Scripps if the Company (a) fails to make payments under the License Agreement, (b) fails to achieve certain developmental and commercial objectives, (c) becomes insolvent, (d) is convicted of a felony relating to the manufacture, use or sale of the licensed technology, or (e) defaults in its performance under the License Agreement; or (iv) by the Company upon 90 days written notice.

On October 22, 2009, the Company entered into an exclusive worldwide commercial license agreement (“FSMA License Agreement”) with Families of Spinal Muscular Atrophy (“FSMA”). Pursuant to the FSMA License Agreement, the Company obtained an exclusive license to develop and commercialize certain patented technology and improvements thereon, owned or licensed by FSMA, relating to compounds which may have utility in treating spinal muscular atrophy (“SMA”). SMA is an inherited neurodegenerative disease in which a defect in the survival motor neuron gene (“SMN”) results in low levels of the protein SMN and leads to progressive damage to motor neurons, loss of muscle function and, in many patients, early death.

Pursuant to the FSMA License Agreement, the Company paid FSMA an initial license fee of $500,000 and a related sublicense fee of $175,000 in fiscal 2010. In April 2011, the Company paid a $500,000 milestone payment to FSMA in connection with the filing of our Investigational New Drug Application with the FDA. These license fees were recorded as research and development expense in the statements of operations. If all milestones are achieved, total financial obligations under this agreement, including milestone payments, sublicense fees, and other charges, could total approximately $16,000,000. Given the uncertain nature of such a development program, the likelihood that products or services will result from the research program is not known at this time. The Company has therefore ascribed no value to the license or the related liability.

The FSMA License Agreement expires or may be terminated (i) on the later of: (a) when all related patents have expired or been abandoned, or (b) 10 years following the first commercial sale of a licensed product; or (ii) by FSMA if the Company (a) fails to make payments under the FSMA License Agreement, (b) fails to use commercially reasonable efforts towards development and commercial objectives, (c) fails to maintain the required insurance or becomes insolvent, or (d) defaults in its performance under the FSMA License Agreement.

Acquisitions

Amounts paid for acquisitions are allocated to the assets acquired and liabilities assumed, if any, based on their fair values at the date of acquisition. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions determined by management. Any excess of purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. The fair value of contingent consideration includes estimates and judgments made by management regarding the extent of royalties to be earned in excess of the defined minimum royalties. Management updates these estimates and the related fair value of contingent consideration at each reporting period.

Goodwill

There was no change in the carrying value of goodwill during the six months ended September 30, 2011.

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Other Intangible Assets

On January 29, 2010, the Company acquired the assets of BioFlash including a technology platform for the production of pre-packed, “plug and play” chromatography columns for total consideration transferred of $2.6 million. This patented technology enables economical production of chromatography columns in a format that is ready for use in the production of a broad range of biopharmaceuticals including monoclonal antibodies, vaccines and recombinant proteins. The terms of the acquisition included an up-front payment of $1.8 million, a $300,000 payment made in November 2010, and future royalties based on product sales.

Amortization expense for amortized intangible assets was approximately $89,000 for the six months ended September 30, 2011. The Company expects to record amortization expense of approximately $179,000 in each of the next five years.

Intangible assets are amortized over their useful lives using the estimated economic benefit method, as applicable, and the amortization expense is recorded within selling, general and administrative expense in the statements of operations. Intangible assets and their related useful lives are reviewed at least annually to determine if any adverse conditions exist that would indicate the carrying value of these assets may not be recoverable. More frequent impairment assessments are conducted if certain conditions exist, including: a change in the competitive landscape, any internal decisions to pursue new or different technology strategies, a loss of a significant customer, or a significant change in the market place including changes in the prices paid for our products or changes in the size of the market for our products. An impairment results if the carrying value of the asset exceeds the estimated fair value of the asset based on the sum of the future undiscounted cash flows expected to result from the use and disposition of the asset. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. There were no indicators of impairment in the six months ended September 30, 2011.

In June 2008, the Board of Directors authorized a program to repurchase up to 1.25 million shares of our common stock to be repurchased at the discretion of management from time to time in the open market or through privately negotiated transactions. The repurchase program has no set expiration date and may be suspended or discontinued at any time. For the three and six-month periods ended September 30, 2011, the Company repurchased 100,000 shares of common stock for an aggregate purchase price of $330,867. Since June 2008, the Company has repurchased 592,827 shares of common stock, for an aggregate purchase price of approximately $2,303,000, leaving 657,173 shares available for repurchase under this program.

On October 27, 2011, the Company and its newly formed and wholly owned subsidiary, Repligen Sweden AB, entered into an Asset Transfer Agreement (the “Asset Transfer Agreement”) with Novozymes Biopharma DK A/S, a company organized under the laws of Denmark (“Novozymes Denmark”), and Novozymes Biopharma Sweden AB, a company organized under the laws of Sweden and a wholly-owned subsidiary of Novozymes Denmark (“Novozymes Sweden” and, together with Novozymes Denmark, “Novozymes”), to acquire Novozymes’ business headquartered at Novozymes Sweden’s facility in Lund, Sweden and all related operations, including the manufacture and supply of cell culture ingredients and Protein A affinity ligands for use in industrial cell culture, stem and therapeutic cell culture and biopharmaceutical manufacturing, and the provision of contract manufacturing services for ALK Abello A/S (the “Business”). Pursuant to the Asset Transfer Agreement, the Company will (a) purchase all of the assets related to the Business and assume certain specified liabilities related to the Business from Novozymes Sweden and (b) purchase contract rights and licenses used in the Business and other specified assets from Novozymes Denmark (collectively, the “Transferred Business” and the acquisition of the Transferred Business, the “Transaction”). On the date of the consummation of the Transaction, the Company will pay a purchase price of 17.0 million Euros (~$22.7 million) to Novozymes. The Asset Transfer Agreement includes future contingent payments to Novozymes Sweden consisting of:

The Company currently expects to complete the Transaction in the fourth quarter of 2011. The Company does not anticipate seeking preclearance of the acquisition of the Transferred Business from any antitrust authorities or the applicability to the closing timeline of any antitrust-based statutory waiting periods. The Company’s and Novozymes’ obligations to consummate the Transaction are subject to the satisfaction or waiver of customary closing conditions, including, among others, obtaining the transfer of permits used in the Business. The Asset Transfer Agreement provides each party with specified termination rights. The parties may terminate the Asset Transfer Agreement by written mutual assent, due to the material breach of the other parties, or in the event that the closing conditions have not been fulfilled by April 30, 2012. The foregoing description of the Transaction and the Asset Transfer Agreement does not purport to be complete and investors are therefore encouraged to read the Asset Transfer Agreement, which is filed as Exhibit 2.1 to the Current Report on Form 8-K that we filed on October 28, 2011.

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Overview

We are an integrated biopharmaceutical company focused on the development and commercialization of innovative therapies that deliver the benefits of protein therapies to patients and clinicians in the fields of neurology and gastroenterology. We are currently conducting a number of product development programs relating to diseases such as pancreatitis, Friedreich’s ataxia and spinal muscular atrophy. We also have a bioprocessing business that focuses on the development and commercialization of products that are used in the production of biopharmaceuticals. In addition, we have out-licensed certain biologics intellectual property from which we receive royalties from Bristol-Myers Squibb Company (“Bristol”) on their net sales in the United States of their product Orencia^®.

On October 27, 2011, we and our newly formed and wholly owned subsidiary, Repligen Sweden AB, entered into an Asset Transfer Agreement (the “Asset Transfer Agreement”) with Novozymes Biopharma DK A/S, a company organized under the laws of Denmark (“Novozymes Denmark”), and Novozymes Biopharma Sweden AB, a company organized under the laws of Sweden and a wholly-owned subsidiary of Novozymes Denmark (“Novozymes Sweden” and, together with Novozymes Denmark, “Novozymes”), to acquire Novozymes’ business headquartered at Novozymes Sweden’s facility in Lund, Sweden and all related operations, including the manufacture and supply of cell culture ingredients and Protein A affinity ligands for use in industrial cell culture, stem and therapeutic cell culture and biopharmaceutical manufacturing, and the provision of contract manufacturing services for ALK Abello A/S (the “Business”). Pursuant to the Asset Transfer Agreement, we will (a) purchase all of the assets related to the Business and assume certain specified liabilities related to the Business from Novozymes Sweden and (b) purchase contract rights and licenses used in the Business and other specified assets from Novozymes Denmark (collectively, the “Transferred Business” and the acquisition of the Transferred Business, the “Transaction”). On the date of the consummation of the Transaction, we will pay a purchase price of 17.0 million Euros (~$22.7 million) to Novozymes. The Asset Transfer Agreement includes future contingent payments to Novozymes Sweden consisting of:

We currently expect to complete the Transaction in the fourth quarter of 2011. We do not anticipate seeking preclearance of the acquisition of the Transferred Business from any antitrust authorities or the applicability to the closing timeline of any antitrust-based statutory waiting periods. Our and Novozymes’ obligations to consummate the Transaction are subject to the satisfaction or waiver of customary closing conditions, including, among others, obtaining the transfer of permits used in the Business. The Asset Transfer Agreement provides each party with specified termination rights. The parties may terminate the Asset Transfer Agreement by written mutual assent, due to the material breach of the other parties, or in the event that the closing conditions have not been fulfilled by April 30, 2012. The foregoing description of the Transaction and the Asset Transfer Agreement does not purport to be complete and investors are therefore encouraged to read the Asset Transfer Agreement, which is filed as Exhibit 2.1 to the Current Report on Form 8-K that we filed on October 28, 2011.

Critical Accounting Policies and Estimates

A “critical accounting policy” is one which is both important to the portrayal of the Company’s financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For additional information, please see the discussion of our critical accounting policies in Management’s Discussion and Analysis and our significant accounting policies in Note 2 to the Financial Statements included in our Annual Report on Form 10-K for the year ended March 31, 2011. There have been no changes to our critical accounting policies since March 31, 2011.

Results of Operations

Three months ended September 30, 2011 vs. September 30, 2010

Total revenue

Total revenues for the three-month periods ended September 30, 2011 and 2010 were approximately $8,631,000 and $7,307,000, respectively, an increase of $1,324,000 or 18%.

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Sales of bioprocessing products for the three-month periods ended September 30, 2011 and 2010 were approximately $5,742,000 and $4,416,000, respectively, an increase of $1,326,000, or 30%. Substantially all of our bioprocessing products are based on recombinant Protein A and are sold to customers who incorporate our manufactured products into their proprietary antibody purification systems to be sold directly to the pharmaceutical industry. Monoclonal antibodies are a well-established class of drug with applications in rheumatoid arthritis, asthma and a variety of cancers. Sales of our bioprocessing products are therefore impacted by the timing of large-scale production orders and the regulatory approvals for such antibodies, which may result in significant quarterly fluctuations in product revenue. We expect such quarterly fluctuations but do not necessarily believe they are always predictive of future revenue or otherwise indicate a trend.

Pursuant to the settlement with Bristol (the “Bristol Settlement”), we recognized royalty revenue of approximately $2,789,000 and $2,513,000 for the three-month periods ended September 30, 2011 and 2010, respectively.

For the three-month period ended September 30, 2011, we recognized approximately $100,000 of revenue from a sponsored research and development project under an agreement with Go Friedreich’s Ataxia Research (“GoFar”). During the three-month period ended September 30, 2010, we recognized revenue of approximately $331,000 from a sponsored research and development project with the Muscular Dystrophy Association and $47,000 from sponsored research and development projects with the Friedreich’s Ataxia Research Alliance and GoFar.

Costs and operating expenses

Total costs and operating expenses were approximately $8,079,000 and $6,780,000 for the three-month periods ended September 30, 2011 and 2010, respectively, an increase of $1,299,000 or 19%.

Cost of product revenue was approximately $2,093,000 and $1,472,000 for the three-month periods ended September 30, 2011 and 2010, respectively, an increase of $621,000 or 42%. This increase is primarily due to the increase and change in the mix of bioprocessing product sales, as well as other individually insignificant manufacturing variances.

Pursuant to the Bristol Settlement, we must remit 15% of royalty revenue received through the expiration of the settlement agreement in December 2013 to the University of Michigan. For the three-month periods ended September 30, 2011 and 2010, the cost of royalty revenue was approximately $418,000 and $377,000, respectively.

Research and development expenses were approximately $3,075,000 and $3,119,000 for the three-month periods ended September 30, 2011 and 2010, respectively, a decrease of $44,000 or 1%. This decrease is primarily attributable to a $395,000 decrease related to RG2417 for the treatment of patients with bipolar disorder as we discontinued this program in March 2011 and a $812,000 increase in costs associated with drug product manufacturing and other costs associated with the New Drug Application (“NDA”) submission for RG1068 for MRI imaging of the pancreas, offset by a $500,000 settlement related to this program from a dispute with Parexel International Corporation, parent company of Perceptive Informatics, Inc.

Significant fluctuations in research and development expenses may occur from period to period depending on the nature, timing, and extent of development activities over any given period of time. Many resources including personnel, supplies and equipment are shared by all of the development programs. As a result, and due to the significant risks and uncertainties in drug development, we are not able to provide cumulative spending to date or predict total development costs for any particular program.

Selling, general and administrative expenses were approximately $2,493,000 and $1,813,000 for the three-month periods ended September 30, 2011 and 2010, respectively, an increase of $680,000 or 38%. This increase is largely attributable to commercialization efforts as we prepare to launch RG1068 for MRI imaging of the pancreas, pending FDA approval, slightly higher headcount and related personnel expenses, and increased sales and marketing activities related to our bioprocessing business.

Investment income

Investment income was approximately $52,000 and $97,000 for the three-month periods ended September 30, 2011 and 2010, respectively. This decrease of $45,000, or 46%, is primarily due to lower interest rates.

Income tax provision

For the three-month periods ended September 30, 2011 and 2010, we had income before taxes of approximately $605,000 and $623,000, respectively. We did not record a tax provision in either period as the effective income tax rate was 0%. The effective income tax rate was based upon the estimated loss for the year ended March 2012 and the composition of the income in different jurisdictions. The effective tax rate differs from the statutory tax rate due to the utilization of prior year net operating losses and credits, offset by the effects of the alternative minimum tax on income derived during the fiscal year.

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Six months ended September 30, 2011 vs. September 30, 2010

Total revenue

Total revenues for the six-month periods ended September 30, 2011 and 2010 were approximately $16,285,000 and $14,317,000 respectively, an increase of $1,968,000 or 14%.

Sales of bioprocessing products for the six-month periods ended September 30, 2011 and 2010 were approximately $10,100,000 and $8,685,000, respectively, an increase of $1,415,000, or 16%. Substantially all of our bioprocessing products are based on recombinant Protein A and are sold to customers who incorporate our manufactured products into their proprietary antibody purification systems to be sold directly to the pharmaceutical industry. Monoclonal antibodies are a well-established class of drug with applications in rheumatoid arthritis, asthma and a variety of cancers. Sales of our bioprocessing products are therefore impacted by the timing of large-scale production orders and the regulatory approvals for such antibodies, which may result in significant quarterly fluctuations in product revenue. We expect such quarterly fluctuations but do not necessarily believe they are always predictive of future revenue or otherwise indicate a trend.

Pursuant to the Bristol Settlement, we recognized royalty revenue of approximately $5,562,000 and $4,992,000 for the six-month periods ended September 30, 2011 and 2010, respectively.

For the six-month period ended September 30, 2011, we recognized revenue of approximately $474,000 from a sponsored research and development project with the Muscular Dystrophy Association and revenue of approximately $149,000 from sponsored research and development projects with the Friedreich’s Ataxia Research Alliance and GoFar. During the six-month period ended September 30, 2010, we recognized revenue of approximately $594,000 from a sponsored research and development project with the Muscular Dystrophy Association and revenue of approximately $47,000 from sponsored research and development projects with the Friedreich’s Ataxia Research Alliance and GoFar.

Costs and operating expenses

Total costs and operating expenses were approximately $15,854,000 and $12,901,000 for the six-month periods ended September 30, 2011 and 2010, respectively, an increase of $2,953,000 or 23%.

Cost of product revenue was approximately $3,646,000 and $2,737,000 for the six-month periods ended September 30, 2011 and 2010, respectively, an increase of $909,000 or 33%. This increase is primarily due to the increase and change in the mix of bioprocessing product sales, as well as other individually insignificant manufacturing variances.

Pursuant to the Bristol Settlement, we must remit 15% of royalty revenue received through the expiration of the settlement agreement in December 2013 to the University of Michigan. For the six-month periods ended September 30, 2011 and 2010, the cost of royalty revenue was approximately $834,000 and $749,000, respectively.

Research and development expenses were approximately $6,592,000 and $5,814,000 for the six-month periods ended September 30, 2011 and 2010, respectively, an increase of $778,000 or 13%. This increase is primarily attributable to a $1,552,000 increase in costs associated with drug product manufacturing and other costs associated with the NDA submission for RG1068 for MRI imaging of the pancreas, offset by a $500,000 settlement related to this program from a dispute with Parexel International Corporation, parent company of Perceptive Informatics, Inc., and a $945,000 increase related to RG3039 for spinal muscular atrophy which includes a $500,000 milestone payment made in April 2011 upon successful filing of our Investigational New Drug Application with the FDA, as well as other costs associated with the initiation of our Phase 1 clinical trial. These increases are offset by a $1,130,000 decrease related to RG2417 for the treatment of patients with bipolar disorder as we discontinued this program in March 2011.

Significant fluctuations in research and development expenses may occur from period to period depending on the nature, timing, and extent of development activities over any given period of time. Many resources including personnel, supplies and equipment are shared by all of the development programs. As a result, and due to the significant risks and uncertainties in drug development, we are not able to provide cumulative spending to date or predict total development costs for any particular program.

Selling, general and administrative expenses were approximately $4,782,000 and $3,601,000 for the six-month periods ended September 30, 2011 and 2010, respectively, an increase of $1,181,000 or 33%. This increase is largely attributable to commercialization efforts as we prepare to launch RG1068 for MRI imaging of the pancreas, pending FDA approval, slightly higher headcount and related personnel expenses, and increased sales and marketing activities related to our bioprocessing business.

Investment income

Investment income was approximately $118,000 and $196,000 for the six-month periods ended September 30, 2011 and 2010, respectively. This decrease of $78,000, or 40%, is primarily due to lower interest rates.

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Income tax provision

For the six-month periods ended September 30, 2011 and 2010, we had income before taxes of approximately $549,000 and $1,611,000, respectively. We did not record a tax provision as the effective income tax rate was 0%. The effective income tax rate was based upon the estimated loss for the year ended March 2012 and the composition of the income in different jurisdictions. The effective tax rate differs from the statutory tax rate due to the utilization of prior year net operating losses and credits, offset by the effects of the alternative minimum tax on income derived during the fiscal year.

Liquidity and capital resources

We have financed our operations primarily through sales of equity securities, revenues derived from product sales, and research grants, as well as proceeds and royalties from litigation settlements. Our revenue for the foreseeable future will be limited to our bioprocessing product revenue, royalties from Bristol, and research and development grants. Given the uncertainties related to pharmaceutical product development, we are currently unable to reliably estimate when, if ever, our therapeutic product candidates will generate revenue and cash flows. Total cash, cash equivalents and marketable securities at September 30, 2011 were approximately $58,274,000, a decrease of $3,229,000 from $61,503,000 at March 31, 2011. We expect to pay the 17.0 million to 21.0 million Euros purchase price for the Novozymes acquisition with cash on hand.

Operating activities

Our operating activities consumed cash of approximately $2,563,000 for the six-month period ended September 30, 2011. Cash consumed by operating activities is primarily attributable to an increase in accounts receivable of $2,761,000, an increase in inventory of $506,000, an increase in prepaid expenses and other current assets of $433,000, a decrease in accounts payable of $350,000, an increase in royalties receivable of $277,000, and a decrease in accrued liabilities of $120,000, offset by net income of $549,000 and certain non-cash expenses such as $812,000 for depreciation and amortization and $527,000 in stock-based compensation expense.

For the six months ended September 30, 2010, operating activities provided cash of approximately $674,000. Cash provided by operating activities is primarily attributable to net income of $1,611,000, a decrease in prepaid expenses of $261,000, a decrease in inventory of $164,000, and certain non-cash expenses such as $809,000 for depreciation and amortization and $505,000 in stock-based compensation expense, offset by a $1,526,000 increase in accounts receivable, a $92,000 decrease in accounts payable and accrued liabilities, a $217,000 increase in royalties receivable, and a $22,000 decrease in long term liabilities.

Investing activities

Our investing activities consumed approximately $810,000 of cash for the six-month period ended September 30, 2011 as we had $471,000 in net purchases of marketable securities and $339,000 in equipment purchases and improvements to our facility.

For the six-month period ended September 30, 2010, investing activities provided cash of approximately $1,938,000 as we had $2,093,000 in net redemptions of marketable securities offset by approximately $155,000 in equipment purchases and improvements to our facility.

Financing activities

For the six-month period ended September 30, 2011, share repurchases consumed approximately $331,000 of cash and there was an insignificant amount of stock option exercises. For the six-month period ended September 30, 2010, stock option exercises provided cash proceeds of approximately $26,000.

We do not currently use derivative financial instruments. We generally place our marketable security investments in high quality credit instruments as specified in our investment policy guidelines.

Working capital increased approximately $4,642,000 to $55,863,000 at September 30, 2011 from $51,221,000 at March 31, 2011 due to the various changes noted above.

Our future capital requirements will depend on many factors, including the following:

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Absent acquisitions of additional products, product candidates or intellectual property, we believe our current cash and investment balances are adequate to meet our cash needs for the foreseeable future. Our future capital requirements include, but are not limited to, continued investment in our research and development programs, the acquisition of additional products and technologies to complement our manufacturing capabilities, capital expenditures primarily associated with purchases of equipment and continued investment in our intellectual property portfolio.

We plan to continue to invest in our bioprocessing business and in key research and development activities. We actively evaluate various strategic transactions on an ongoing basis, including licensing or acquiring complementary products, technologies or businesses that would complement our existing portfolio of development programs. We continue to seek to acquire such potential assets that may offer us the best opportunity to create value for our shareholders. In order to acquire such assets, we may need to seek additional financing to fund these investments. This may require the issuance or sale of additional equity or debt securities. The sale of additional equity may result in additional dilution to our stockholders. Should we need to secure additional financing to acquire a product, fund future investment in research and development, or meet our future liquidity requirements, we may not be able to secure such financing, or obtain such financing on favorable terms because of the volatile nature of the biotechnology marketplace.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of September 30, 2011.

Commitments

At September 30, 2011, we had the following fixed obligations and commitments:

Cautionary Statement Regarding Forward-Looking Statements

Statements in this Quarterly Report on Form 10-Q, as well as oral statements that may be made by Repligen or by officers, directors or employees of Repligen acting on its behalf, that are not historical facts constitute “forward-looking statements” which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements in this Quarterly Report on Form 10-Q do not constitute guarantees of future performance. Investors are cautioned that statements in this Quarterly Report on Form 10-Q which are not strictly historical statements, including, without limitation, statements regarding the Transaction, the closing of the Transaction and the expected timetable therefor, the performance of our and Novozymes’ combined bioprocessing businesses following the closing of the Transaction, current or future financial performance, management’s strategy, plans and objectives for future operations, clinical trials and results, milestone payments, tax payments and benefits, marketing plans, revenue potential of therapeutic product candidates, product research, intellectual property and development, manufacturing plans and performance, delays in manufacturing by us or our partners, timing of customer orders, the anticipated growth in our target markets, including, without limitation, the markets for pancreatic disease treatment, Friedreich’s ataxia and spinal muscular atrophy, as well as the monoclonal antibody market and the process chromatography industry and projected growth in product sales, costs of operations, sufficiency of funds to meet management objectives and availability of financing and effects of accounting pronouncements constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause our actual results to be materially different from the historical results or from any results expressed or implied by such forward-looking statements, including, without limitation, risks associated with: the success of current and future collaborative relationships, the success of our clinical trials

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and our ability to develop and commercialize products, our ability to obtain required regulatory approvals, our compliance with all Food and Drug Administration regulations, our ability to obtain, maintain and protect intellectual property rights for our products, the risk of litigation regarding our patent and other intellectual property rights, the risk of litigation with collaborative partners, our limited sales and marketing experience and capabilities, our limited manufacturing capabilities and our dependence on third-party manufacturers and value-added resellers, our ability to hire and retain skilled personnel, the market acceptance of our products, our ability to compete with larger, better financed pharmaceutical and biotechnology companies that may develop new approaches to the treatment of our targeted diseases, our history of losses and expectation of incurring continued losses, our ability to generate future revenues, our ability to raise additional capital to continue our drug development programs, our volatile stock price, and the effects of our anti-takeover provisions. Further information on potential risk factors that could affect our financial results are included in the filings made by us from time to time with the Securities and Exchange Commission including under the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, 2011.

Interest Rate Risk

We have investments in commercial paper, U.S. Government and agency securities as well as corporate bonds and other debt securities. As a result, we are exposed to potential loss from market risks that may occur as a result of changes in interest rates, changes in credit quality of the issuer or otherwise.

We generally place our marketable security investments in high quality credit instruments, as specified in our investment policy guidelines. A hypothetical 100 basis point increase in interest rates would result in an approximate $294,000 decrease in the fair value of our investments as of September 30, 2011. We believe, however, that the conservative nature of our investments mitigates our interest rate exposure, and our investment policy limits the amount of our credit exposure to any one issue, issuer (with the exception of U.S. agency obligations) and type of instrument. We do not expect any material loss from our marketable security investments and therefore believe that our potential interest rate exposure is limited.

The Company’s management, with the participation of the principal executive officer and the principal financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, on a timely basis, and is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and the Company’s principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

There was no change in the Company’s internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We are not currently aware of any such proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations.

The matters discussed in this Form 10-Q include forward-looking statements that involve risks or uncertainties. These statements are neither promises nor guarantees, but are based on various assumptions by management regarding future circumstances, over many of which Repligen has little or no control. A number of important risks and uncertainties, including those identified under the caption “Risk Factors” in Item 1A in our Annual Report on Form 10-K for the year ended March 31, 2011 and subsequent filings as well as risks and uncertainties discussed elsewhere in this Form 10-Q, could cause our actual results to differ materially from those in the forward-looking statements. There have been no material changes from the aforementioned risk factors, except as set forth below:

Completion of our proposed acquisition of Novozymes Biopharma is subject to various closing conditions, involves significant costs and will require considerable attention from our management. Failure to complete the acquisition could adversely affect our stock price and our future business and operations.

The completion of our proposed acquisition of Novozymes Biopharma is subject to the satisfaction of various closing conditions and we cannot assure you that such conditions will be satisfied or that the acquisition will be successfully completed. In the event that the acquisition is not consummated, we will have spent considerable time and resources and incurred substantial costs, such as legal, accounting and advisory fees, which must be paid even if the acquisition is not completed. If the acquisition is not consummated, our reputation in our industry and in the investment community could be damaged and, as a result, the market price of our common stock could decline. In addition, successful completion of the acquisition will require the attention of our management and may divert their attention away from our operations.

We may fail to realize benefits estimated from our acquisition of Novozymes Biopharma, if consummated.

The success of our acquisition of Novozymes Biopharma, if completed, will depend, in part, on our ability to realize the anticipated synergies, business opportunities and growth prospects from combining our business with that of Novozymes Biopharma. We may never realize these anticipated synergies, business opportunities and growth prospects. Integrating operations will be complex and will require significant efforts and expenditures. Assumptions underlying estimated benefits may be inaccurate and general industry and business conditions might deteriorate. Our management might have its attention diverted while trying to integrate operations and corporate and administrative infrastructures, particularly extracting information technology and finance systems from the Novozymes Biopharma DK A/S architecture and integrating them within the correlative Repligen systems. If any of these factors limit our ability to integrate our operations with those of Novozymes Biopharma successfully or on a timely basis, the expectations of future results of operations, including synergies and other benefits expected to result from the acquisition, might not be met.

We will incur significant transaction, integration and other costs in connection with our pending acquisition of Novozymes Biopharma and these costs may exceed the realized benefits, if any, of the synergies and efficiencies from the acquisition, if consummated.

We have already incurred significant transaction costs related to our acquisition of Novozymes Biopharma. In addition, if the acquisition is completed, we will incur integration costs as we integrate the Novozymes Biopharma business with our own. Financial, managerial and operational challenges of our pending acquisition of Novozymes Biopharma may include: