REPLIGEN CORP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Restatement of Previously Issued Financial Statements

In the third quarter of 2024, Repligen Corporation (the “Company”, “Repligen”, “our” or “we”) identified a material accounting error related to the timing of revenue recognition which impacts the Company’s condensed consolidated financial statements as of December 31, 2023 and for the three and nine month periods ended September 30, 2023. Within this Quarterly Report on Form 10-Q, the Company has restated all impacted financial information and footnote disclosures impacted by the error. A description of the error and its impact on the previously issued financial statements is included below.

Description of restatement adjustments

During the first quarter of 2023, a customer cancelled two COVID-related, non-cancellable product purchase orders (“Cancelled PO’s”) in exchange for a $17.3 million one-time cash payment (the “Payment”), which the Company received in April 2023. At the time of cancellation, no product units had been delivered under the Cancelled PO’s and the Company had two other open purchase orders from the same customer for the same product (“Open PO’s”). The Company originally accounted for the Cancelled PO’s as a single contract and recognized the $17.3 million payment as component of product revenue in the first quarter of 2023.

In the third quarter of 2024, the Company reassessed the accounting treatment of the Payment and concluded that the Cancelled PO’s and Open PO’s represented a combined contract such that the February 2023 transaction should have been analyzed and accounted for as a contract modification, which required the Payment to be deferred and recognized as product units were delivered under the Open PO’s ( the "Misstatement"). All Open PO product units were fully delivered to the customer by June 30, 2024.

The correction of the error affects certain financial statement line items in both the three and nine month periods ended September 2023 included in these condensed consolidated financial statements, including but not limited to product revenues, income tax provision, foreign currency translation, deferred revenues, prepaid expenses, deferred taxes and earnings-per-share.

Consolidated Financial Statements - Restatement Reconciliation Tables

The following tables present the impact of the financial statement adjustments on the Company's previously reported condensed consolidated financial statements. The "Previously Reported" amounts in the following tables are amounts derived from our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 22, 2024, and our Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2023, originally filed with the SEC on October 31, 2023. The amounts in the columns labeled "Revenue Adjustments" represent the effect of adjustments resulting from the correction of the overstatement of revenues associated with the Payment and related tax impact. The amounts in the columns labeled "Other Adjustments" represent the effect of other adjustments that relate to other unrelated errors in previously filed financial statements that were not material, individually or in the aggregate, to those filed financial statements. The effects of both the restatement for the Revenue Adjustments and the Other Adjustments have been corrected in all impacted tables and footnotes throughout these condensed consolidated financial statements.

Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated interim financial statements included herein have been prepared by Repligen Corporation in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the United States 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 GAAP in annual financial statements. These condensed consolidated 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/A for the fiscal year ended December 31, 2023, which was filed with the SEC on November 18, 2024 (“Form 10-K/A”).

The preparation of financial statements in conformity with 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 periods. The business and economic uncertainty resulting from global geopolitical conflicts, supply chain challenges and cost pressures on customers' purchasing patterns has made such estimates more difficult to calculate. Accordingly, actual results could differ from those estimates.

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

The Company made no material changes in the application of its significant accounting policies that were disclosed in its Form 10-K/A. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of only normal, recurring adjustments necessary for a fair presentation of its financial position as of September 30, 2024, its results of operations for the three and nine months ended September 30, 2024 and 2023 and cash flows for the nine months ended September 30, 2024 and 2023. The results of operations for the interim periods presented are not necessarily indicative of results to be expected for the entire year.

Assets Held for Sale

An asset is considered to be held for sale when all the following criteria are met: (i) management commits to a plan to sell the asset; (ii) it is unlikely that the disposal plan will be significantly modified or discontinued; (iii) the asset is available for immediate sale in its present condition; (iv) actions required to complete the sale of the asset have been initiated; (v) sale of the asset is probable and the completed sale is expected to occur within one year; and (vi) the asset is actively being marketed for sale at a price that is reasonable given its current market value.

Convertible Instruments

The Company evaluates the embedded conversion feature within its convertible debt instruments under Accounting Standards Codification (“ASC”) 815,”Derivatives and Hedging.”The Company refers to ASC 815-15 and ASC 815-40 to determine if the conversion feature meets the definition of a derivative and, if so, whether to bifurcate the conversion feature and account for it as a separate derivative liability. Based on the Company’s analysis, its Convertible Senior Notes do not have an embedded conversion feature requiring bifurcation under ASC 815-15 and thus are accounted for as a single unit of account, a liability under ASC 470, “Debt.”

Recent Accounting Guidance

The Company considers the applicability and impact of all Accounting Standards Updates (“ASU” or “ASUs”) and other recently issued guidance or rule decisions on their condensed consolidated financial statements. Updates not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s condensed consolidated financial position or results of operations. Recently issued accounting guidance that the Company believes may be applicable to them is as follows:

Recently Issued Accounting Guidance – Not Yet Adopted

In March 2024, the SEC adopted final rules under SEC Release No. 33-11275 requiring public companies to provide certain climate-related information in their registration statements and annual reports. As part of the disclosures, registrants will be required to quantify certain effects of severe weather events and other natural conditions in a note to their audited financial statements. The rules were immediately challenged in a number of lawsuits, which were subsequently consolidated by the U.S. Court of Appeals for the Eighth Circuit. In April 2024, the SEC announced that it is staying implementation of the new rules pending resolution of the consolidated litigation before the Eighth Circuit. The Company is assessing the effect of compliance with the new rules on its condensed consolidated financial statements and related disclosures.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “Income Taxes (Topic 740) - Improvements to Income Tax Disclosures.”ASU 2023-09 enhances the transparency and decision usefulness of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. ASU 2023-09 will be effective for the Company in its income tax disclosure included in its 2025 Annual Report on Form 10-K and will be applied on a prospective basis. However, retrospective application is permitted. Early adoption is also permitted. Besides a change in income tax disclosures, the Company does not expect the adoption of ASU 2023-09 to have a material impact on its condensed consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 820) - Improvements to Reportable Segment Disclosures.”ASU 2023-07 will improve reportable segment disclosure requirements, primarily through enhanced annual and interim disclosures about significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”). The disclosures required under ASU 2023-07 are also required for public entities with a single reportable segment. ASU 2023-07 will be effective for the Company for annual periods beginning on January 1, 2024 and interim periods beginning on January 1, 2025. The amendments of this guidance apply retrospectively to all prior periods presented. Early adoption is permitted. Besides a change in presentation in the segment footnote, the Company does not expect the adoption of ASU 2023-07 to have a material impact on its condensed consolidated financial statements.

Fair Value Measurements

The Company uses various valuation approaches in determining the fair value of its assets and liabilities. 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.

Fair Value Measured on a Recurring Basis

Financial assets and financial liabilities measured at fair value on a recurring basis consist of the following as of September 30, 2024 and December 31, 2023 (amounts in thousands):

Cash and cash equivalents

As of September 30, 2024 and December 31, 2023, cash and cash equivalents on the Company's condensed consolidated balance sheets included $669.3 million and $658.6 million, respectively, in money market accounts. These funds are valued on a recurring basis using Level 1 inputs.

Contingent Consideration – Earnouts

As of September 30, 2024, the maximum amount of future contingent consideration (undiscounted) that we could be required to pay in connection with completed acquisitions is: $125.0 million over a three-year earnout period for Avitide, Inc. (“Avitide”), which was acquired in September 2021 and for which the earnout periods run from January 1, 2022 through December 31, 2024; $42.0 million over a two-year earnout period for FlexBiosys, Inc. (“FlexBiosys”), which was acquired in April 2023 and for which the earnout periods run from January 1, 2023 through December 31, 2024; and approximately $10 million over a one-year earnout period for Metenova Holding AB (“Metenova”), which was acquired in October 2023 and for which the earnout period runs from January 1, 2024 through December 31, 2024. See Note 4, “Acquisitions”to this report for additional information on the contingent consideration earnouts.

Since the date of acquisition, expected results and changes in market inputs used to calculate the discount rate related to Avitide, FlexBiosys and Metenova, have, at times, resulted in changes in amounts reported as the Company’s contingent consideration obligation. As of September 30, 2024, management assessed the remaining contingent consideration obligation balances and the existing market inputs used and decided that no changes in fair value were required. A reconciliation of the change in the fair value of contingent consideration – earnouts is included in the following table (amounts in thousands):

The recurring Level 3 fair value measurement of our contingent consideration obligations for Avitide, FlexBiosys and Metenova include the following significant unobservable inputs (amounts in thousands, except percent data):

(1)

Unobservable inputs were weighted by the relative fair value of the contingent consideration liability.

Fair Value Measured on a Nonrecurring Basis

During the three and nine months ended September 30, 2024, there were no re-measurements to the fair value of financial assets and liabilities that are measured at fair value on a nonrecurring basis.

Convertible Senior Notes

In July 2019, the Company issued $287.5 million aggregate principal amount of 0.375% Convertible Senior Notes due 2024 (the “2019 Notes”), which matured and were paid in July 2024. At December 31, 2023, the carrying value of the 2019 Notes was$69.5 million, net of unamortized debt issuance costs and the fair value of the 2019 Notes was $109.8 million using a Level 1 valuation and determined based on the most recent trade activity of the 2019 Notes as of December 31, 2023.

On December 14, 2023, the Company issued $600.0 million aggregate principal amount of 1.00% Convertible Senior Notes due 2028 (the “2023 Notes”) in a private placement pursuant to separate, privately negotiated exchange and subscription agreements (the “Exchange and Subscription Agreements”) with a limited number of holders of its outstanding 2019 Notes and certain other qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (“Securities Act”). Pursuant to the Exchange and Subscription Agreements, the Company exchanged $217.7 million of its 2019 Notes for $309.9 million aggregate principal amount of the 2023 Notes (the “Exchange Transaction”) and issued $290.1 million aggregate principal amount of the 2023 Notes (the “Subscription Transactions”) for $290.1 million in cash. At September 30, 2024 and December 31, 2023, the carrying value of the 2023 Notes was$521.6 millionand $510.1 million, respectively, net of unamortized debt discount and debt issuance cost and the fair value of the 2023 Notes was$553.3 million and $596.0 million, respectively. The fair value of the 2023 Notes is a Level 1 valuation and was determined based on the most recent trade activity of the 2023 Notes as of September 30, 2024 and December 31, 2023. The 2023 Notes and 2019 Notes are discussed in more detail in Note 9, “Convertible Senior Notes,”to these condensed consolidated financial statements.

Acquisitions

2024 Acquisition

Pending Acquisition of Tantti Laboratory Inc.

On July 29, 2024, the Company announced that it entered into a definitive agreement to acquire privately-held Tantti Laboratory Inc. (“Tantti”). Tantti, which is headquartered in Taoyuan City, Taiwan, is expected to accelerate the Company’s expansion into new modality markets with unique, scalable purification solutions for large molecule biologics.

The Company expects the acquisition of Tantti to be completed in the fourth quarter of 2024 subject to the satisfaction of customary closing conditions, including clearance through the Taiwanese regulatory channel.

2023 Acquisitions

Metenova Holding AB

On October 2, 2023, the Company's subsidiary, Repligen Sweden AB, acquired Metenova from the former shareholders of Metenova (the “Metenova Seller”) pursuant to a Share Sale and Purchase Agreement (the “Share Purchase Agreement”), dated as of September 23, 2023 (such acquisition, the “Metenova Acquisition”), by and among Repligen Sweden AB, the Metenova Seller, and the Company, in its capacity as guarantor of the obligations of Repligen Sweden AB under the Share Purchase Agreement.

Metenova, which is headquartered in Molndal, Sweden, offers magnetic mixing and drive train technologies that are widely used by global biopharmaceutical companies and contract development and manufacturing organizations. The Metenova Acquisition further strengthens our fluid management portfolio with these products.

Consideration Transferred

The Company accounted for the Metenova Acquisition as a purchase of business under ASC 805, “Business Combinations,”and the Company engaged a third-party valuation firm to assist with the valuation of Metenova. Under the Share Purchase Agreement, all outstanding equity interests of Metenova were acquired for consideration with a value totaling $172.6 million. The Metenova Acquisition was funded through payment of $164.5 million in cash, the issuance of 52,299 unregistered shares of the Company's common stock totaling $8.1 million and contingent consideration with an immaterial fair value.

Under the acquisition method of accounting, the assets acquired and liabilities assumed of Metenova were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company. The fair value of the net liabilities acquired is $1.9 million, the fair value of the intangible assets acquired is $58.8 million and the residual goodwill is $115.7 million. Acquisition-related costs are not included as a component of consideration transferred but are expensed in the periods in which costs are incurred. The Company has incurred $6.5 millionof transaction and integration costs associated with the Metenova Acquisition from the date of acquisition to September 30, 2024, with $0.4 million and $3.0 million of transaction and integration costs incurred during the three and nine months ended September 30, 2024, respectively. The transaction costs are included in operating expenses in the condensed consolidated statements of comprehensive income (loss) for the period ended September 30, 2024.

Fair Value of Net Assets Acquired

The allocation of purchase price is based on the fair value of assets acquired and liabilities assumed based on the final valuation of Metenova. The Company has made appropriate adjustments to the purchase price allocation during the measurement period, which ended on October 2, 2024.

The components and final allocation of the purchase price consist of the following (amounts in thousands):

Acquired Goodwill

The goodwill of $115.7 million represents future economic benefits expected to arise from anticipated synergies from the integration of Metenova into the Company. These synergies include operating efficiencies and strategic benefits projected to be achieved as a result of the Metenova Acquisition. Substantially all of the goodwill recorded is expected to be nondeductible for income tax purposes.

Intangible Assets

The following table sets forth the components of the identified intangible assets associated with the Metenova Acquisition and their estimated useful lives:

FlexBiosys, Inc.

On April 17, 2023, the Company completed its acquisition of all of the outstanding equity interests in FlexBiosys, pursuant to an Equity Purchase Agreement (the “FlexBiosys Agreement”) with FlexBiosys, TSAP Holdings Inc. (“NJ Seller”), Gayle Tarry and Stanley Tarry, as individuals (collectively with NJ Seller, the "Sellers"), and Stanley Tarry, in his capacity as the representative of the Sellers (the “FlexBiosys Acquisition”).

FlexBiosys, which is headquartered in Branchburg, New Jersey, offers expert design and custom manufacturing of single-use bioprocessing products and a comprehensive range of products that include bioprocessing bags, bottles, and tubing assemblies. These products will complement and expand our fluid management portfolio of offerings.

Consideration transferred

The FlexBiosys Acquisition was accounted for as a purchase of a business under ASC 805, and the Company engaged a third-party valuation firm to assist with the valuation of FlexBiosys. Under the terms of the FlexBiosys Agreement, all outstanding equity interests of FlexBiosys were acquired for consideration with a value totaling $41.0 million. The FlexBiosys Acquisition was funded through payment of $29.0 million in cash, which includes $6.3 million deposited in escrow for future payments, the issuance of 31,415 unregistered shares of the Company's common stock totaling $5.4 million and contingent consideration with fair value of approximately $6.6 million.

Under the acquisition method of accounting, the assets acquired and liabilities assumed of FlexBiosys were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company. The fair value of the net assets acquired is $14.1 million, the fair value of the intangible assets acquired is $12.6 million and the residual goodwill is $14.3 million. Acquisition-related costs are not included as a component of consideration transferred but are expensed in the periods in which costs are incurred. The Company has incurred $1.1 million of transaction and integration costs associated with the FlexBiosys Acquisition from the date of acquisition to September 30, 2024. There wereno transaction and integration costs incurred for the FlexBiosys Acquisition during the three and nine months ended September 30, 2024.

Fair Value of Net Assets Acquired

The allocation of purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date, based on the final valuation of FlexBiosys. The Company has made appropriate adjustments to the purchase price allocation during the measurement period, which ended on April 17, 2024. The purchase price allocation was completed as of March 31, 2024.

The components and final allocation of the purchase price consist of the following (amounts in thousands):

Acquired Goodwill

The goodwill of $14.3 million represents future economic benefits expected to arise from anticipated synergies from the integration of FlexBiosys into the Company. These synergies include operating efficiencies and strategic benefits projected to be achieved as a result of the FlexBiosys Acquisition. Substantially all of the goodwill recorded is expected to be deductible for income tax purposes.

Intangible Assets

The following table sets forth the components of the identified intangible assets associated with the FlexBiosys Acquisition and their estimated useful lives:

Restructuring Plan

In July 2023, the Board of Directors authorized the Company's management team to undertake restructuring activities to simplify and streamline our organization and strengthen the overall effectiveness of our operations. Since the initial streamlining and re-balancing efforts contemplated in July, the Company continues to undertake further restructuring activities (collectively, the “2023 Restructuring Plan”) which has included consolidating a portion of our manufacturing operations between certain U.S. locations, discontinuing the sale of certain product SKUs, and evaluating the fair value of finished goods and raw materials, mostly secured during the 2020-2022 COVID-19 pandemic period (the “COVID-19 Period”) to meet increasing demand during a challenging supply chain environment in the industry.

The Company recorded pre-tax restructuring activity of$2.9 million and$5.3 million, respectively, for the three and nine months ended September 30, 2024, and$24.0 million for the three and nine months ended September 30, 2023, related to the 2023 Restructuring Plan, which the Company expects to complete during the fourth quarter of 2024.

The following tables summarize the charges related to restructuring activities by type of cost for the periods presented on the Company’s condensed consolidated statements of comprehensive income (loss):

Severance and employee-related costs under the Restructuring Plan are primarily associated with actual headcount reductions. Costs incurred include cash severance and non-cash severance, including other termination benefits. Severance and other termination benefit packages are based on established benefit arrangements or local statutory requirements and we recognized the contractual component of these benefits when payment was probable and could be reasonably estimated.

The inventory write-off in 2023 includes the impact of the Company discontinuing the sale of certain product SKUs and the impact of having proactively secured materials during the COVID-19 Period to meet accelerated demand during a challenging supply chain environment in the industry. Where demand has reduced, finished goods and raw materials, the value of which exceeded the projected requirements to be used before reaching their expiration date, were written down to their realizable value. The 2023 Restructuring Plan also includes the closing of manufacturing facilities and production lines, which include inventory that could not be re-purposed.

Non-cash charges for accelerated depreciation were recognized on long-lived assets that were taken out of service before the end of their normal service due to the shutdown of manufacturing facilities and production lines, in which case depreciation estimates were revised to reflect the use of the assets over their shortened useful life.

The restructuring accrual is included in accrued liabilities in the condensed consolidated balance sheet as of September 30, 2024. Activity related to the Restructuring Plan for the nine months ended September 30, 2024 was as follows (amounts in thousands):

Revenue Recognition

Disaggregation of Revenue

Revenues for thethree and nine months ended September 30, 2024 and 2023 were as follows:

When disaggregating revenue, the Company considered all of the economic factors that may affect its revenues. Because its revenues are from bioprocessing customers, there are no differences in the nature, timing and uncertainty of the Company’s revenues and cash flows from any of its product lines. However, given that the Company’s revenues are generated in different geographic regions, factors such as regulatory, economic and geopolitical developments within those regions could impact the nature, timing and uncertainty of the Company’s revenues and cash flows.

Disaggregated revenue from contracts with customers by geographic region and revenue from significant customers can be found in Note 15,“Segment Reporting,” included in this report.

For more information regarding our product revenue, see Note 8,“Revenue Recognition”included in Part II, Item 8, “Financial Statements and Supplementary Data”to the Company’s Form 10-K/A.

Contract Balances from Contracts with Customers

The following table provides information about receivables and deferred revenue from contracts with customers as of September 30, 2024 and December 31, 2023 (amounts in thousands):

The timing of revenue recognition, billings and cash collections results in the accounts receivable and deferred revenue balances on the Company’s condensed consolidated balance sheets.

Goodwill and Intangible Assets

Goodwill

The following table represents the change in the carrying value of goodwill for thenine months ended September 30, 2024 (amounts in thousands):

The Company has not identified any “triggering” events which indicate an impairment of goodwill in the three and nine months ended September 30, 2024.

Intangible assets (As Restated)

Indefinite-lived intangible assets are reviewed for impairment at least annually. There has beenno impairment of the Company’s intangible assets for the periods presented.

Intangible assets, net, consisted of the following at September 30, 2024:

Intangible assets, net, consisted of the following at December 31, 2023:

Amortization expense for finite-lived intangible assets was $8.6 million and $7.6 million for each of the three months ended September 30, 2024 and 2023, respectively, and $26.0 million and $22.8 million for each of the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, the Company expects to record the following amortization expense in future periods (amounts in thousands):

Consolidated Balance Sheet Detail

Inventories, net

Inventories, net consists of the following:

Assets held for sale

During the first quarter of 2024, the Company’s management decided it would explore a sale of the Company’s property located at 119 Fredon Springdale Road, Fredon, New Jersey (the “BioFlex Property”) and engaged a broker to assist with the sale process. As a result of these actions, the Company determined that the sale of the BioFlex Property met the criteria to be classified as assets held-for-sale pursuant to ASC 360, “Impairment and Disposal of Long-Lived Assets”beginning in the first quarter of 2024. The Company recorded $1.0 million in assets held for sale in our condensed consolidated balance sheet at the end of the first and second quarters of 2024. The sale of the BioFlex Property closed on August 2, 2024 and the Company recorded a gain of $0.2 million on the sale of the BioFlex Property to its condensed consolidated statement of comprehensive income (loss) for the three and nine months ended September 30, 2024.

Property, plant and equipment, net

Property, plant and equipment, net consist of the following:

Accrued liabilities

Accrued liabilities consist of the following:

Convertible Senior Notes

The carrying value of the Company's Convertible Senior Notes is as follows:

1.00% Convertible Senior Notes due 2028

On December 14, 2023, the Company issued $600.0 million aggregate principal amount of its 2023 Notes in the Exchange and Subscription Agreements with a limited number of holders of its outstanding 2019 Notes and certain other qualified institutional buyers pursuant to Rule 144A under the Securities Act. Pursuant to the Exchange and Subscription Agreements and to the Exchange Transaction, the Company issued $290.1 million aggregate principal amount of the 2023 Notes in a private placement to accredited institutional buyers (the “Subscription Transactions”) for $290.1 million in cash.

The Company evaluated the Exchange Transaction and determined approximately $29.6 million of the $217.7 million principal of the exchanged 2019 Notes should be accounted for as extinguishments of debt and approximately $188.1 million should be accounted for as modification of debt. As a result, the Company recognized a $12.7 million loss on extinguishments of debt in its consolidated statements of comprehensive income (loss) for the year ended December 31, 2023, inclusive of $0.1 million of unamortized debt issuance costs. Under debt modification accounting, the carrying amount of the modified 2019 Notes was reduced by $2.8 million, with a corresponding increase to additional paid-in capital, to account for the increase in the fair value of the embedded conversion option, representing a debt discount of the modified 2019 Notes. The aggregate debt discount of$71.3 millionas of September 30, 2024, comprised of $68.9 million increase in principal of the modified 2019 Notes and a$2.4 million increase in the fair value of the embedded conversion option. The aggregate debt discount of $81.5 million as of December 31, 2023, comprised of $78.7 million increase in principal of the modified 2019 Notes and a $2.8 million increase in the fair value of the embedded conversion option. These amounts are presented as a direct reduction from the carrying value of the convertible debt in their respective periods presented in our condensed consolidated balance sheets. This amount is being accreted into interest expense in the condensed consolidated statements of comprehensive income (loss) using the effective interest method over the term of the 2023 Notes.

Proceeds from the Subscription Transactions were $276.1 million, net of debt issuance costs of $13.9 million. The Exchange Transaction resulted in $6.2 million of the debt issuance costs related to the modified 2019 Notes, which were expensed as incurred in accordance with debt modification accounting, and $7.7 million of deferred debt issuance costs related to the 2023 Notes, which were recorded as a direct deduction to the carrying value of the 2023 Notes on the Company’s condensed consolidated balance sheets. The Company is amortizing the $7.7 million of debt issuance costs of the 2023 Notes into amortization of debt issuance costs in the Company’s condensed consolidated statements of comprehensive income (loss) over the remaining term of the 2023 Notes. The carrying value of the 2023 Notes of$521.6 millionand $510.1 million is included in long-term debt on the Company's condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023, respectively.

The Company used $14.4 million of the proceeds from the Subscription Transactions to repurchase shares of its common stock from certain purchasers of the 2023 Notes. For more information regarding this repurchase, see Note 13,“Stockholders’ Equity - Share Repurchases”included in Part II, Item 8, “Financial Statements and Supplementary Data,”to the Company's Form 10-K/A. The Company also used a portion of the proceeds to finance in part, the settlement upon redemption of the remaining 2019 Notes at maturity. The remainder of the proceeds will be used for working capital.

The 2023 Notes are senior, unsecured obligations of the Company, and bear interest at a rate of 1.00% per year. Interest is payable semi-annually in arrears on each of June 15 and December 15, which commenced on June 15, 2024. The 2023 Notes will mature on December 15, 2028, unless earlier redeemed, repurchased or converted. During the third quarter of 2024, the closing price of the Company’s common stock did not exceed 130% of the conversion price of the 2023 Notes for more than 20 trading days of the last 30 consecutive trading of the quarter. As a result, the 2023 Notes are not convertible at the option of the holders of the 2023 Notes during the fourth quarter of 2024, the quarter immediately following the quarter when the conditions are met, as stated in the indenture governing the 2023 Notes. Because the 2023 Notes were not convertible as of September 30, 2024, the Company continues to classify the carrying value of the 2023 Notes of $521.6 million as noncurrent liabilities on the Company’s condensed consolidated balance sheet at September 30, 2024. The initial conversion rate for the 2023 Notes is 4.9247 shares of the Company’s common stock per $1,000 principal amount of 2023 Notes, which is equivalent to an initial conversion price of $203.06 per share and represents a 30% premium over the last reported sale price of $156.20 per share on December 6, 2023, the date on which the 2023 Notes were priced. Prior to the close of business on the business day immediately preceding September 15, 2028, the 2023 Notes will be convertible at the option of the holders of 2023 Notes only upon the satisfaction of the specified conditions mentioned above and during certain quarters commencing after the calendar quarter ending on March 31, 2024, into cash up to their principal amount, and into cash, shares of the Company’s common stock or a combination thereof, at the Company’s election, for the conversion value above the principal amount, if any. Thereafter until the close of business on the second scheduled trading day immediately preceding the maturity date, the 2023 Notes will be convertible at the option of the holders of 2023 Notes at any time regardless of these conditions. The Company may redeem for cash, all or a portion of the 2023 Notes, at its option, on or after December 18, 2026 and prior to the 21 st scheduled trading day immediately preceding the maturity date at a redemption price of 100%of the principal amount of the 2023 Notes to be redeemed, plus accrued and unpaid interest to, butexcluding the redemption date, if certain conditions are met in accordance to the 2023 Notes Indenture. For more information on the 2023 Notes, see Note 15, “Convertible Senior Notes,”included in Part II, Item 8, “Financial Statements and Supplementary Data,”to the Company’s Form 10-K/A.

The following table sets forth total interest expense recognized related to the 2023 Notes for the three and nine months ended September 30, 2024 for which there were no comparable amounts for the same periods of 2023:

At September 30, 2024 and December 31, 2023, the carrying value of the 2023 Notes was $521.6 millionand $510.1 million, respectively, net of unamortized discount, and the fair value of the 2023 Notes was $553.3 million and $596.0 million, respectively. The fair value of the 2023 Notes was determined based on the most recent trade activity of the 2023 Notes at September 30, 2024 and December 31, 2023.

0.375% Convertible Senior Notes due 2024

The Company issued $287.5 million aggregate principal amount of the 2019 Notes on July 19, 2019 in a transaction which included the underwriters’ exercise in full of an option to purchase an additional $37.5 million aggregate principal amount of the 2019 Notes (the “Notes Offering”). The net proceeds of the Notes Offering, after deducting underwriting discounts and commissions and other related offering expenses payable by the Company, were approximately $278.5 million. Immediately following the closing of the Exchange Transaction mentioned above, $69.7 million in aggregate principal amount of the 2019 Notes remained outstanding as of December 31, 2023. During 2024, $0.2 million aggregate principal amount of the 2019 Notes converted, bringing the remaining outstanding 2019 Notes to $69.5 million in aggregate principal amount. The remaining 2019 Notes matured and were paid off in full on July 15, 2024. As mentioned above, the Company used net proceeds from the Exchange Transaction to fund the repayment of the 2019 Notes at maturity and to pay accrued and unpaid interest with respect to such notes. The Company irrevocably elected to settle the conversion of the 2019 Notes using a combination of cash and the Company’s common stock, settling the par value of the 2019 Notes in cash and any excess conversion premium in shares. In connection with the conversion, the Company paid $69.6 million in cash, which included principal and accrued interest, and issued 100,942 shares of the Company’s common stock representing the conversion premium. For more information on the 2023 Notes, see Note 15, “Convertible Senior Notes,”included in Part II, Item 8, “Financial Statements and Supplementary Data,”to the Company’s Form 10-K/A.

The following table sets forth total interest expense recognized related to the 2019 Notes:

At December 31, 2023, the carrying value of the 2019 Notes was $69.5 million, net of unamortized discount, and the fair value of the 2019 Notes was $109.8 million. The fair value of the 2019 Notes was determined based on the most recent trade activity of the 2019 Notes at December 31, 2023.

Stockholders’ Equity

Stock Option and Incentive Plans

Under the Company’s current 2018 Stock Option and Incentive Plan (the “2018 Plan”), the number of shares of the Company’s common stock that were reserved and available for issuance is 2,778,000, plus the number of shares of common stock that were availablefor issuance under the Company’s previous equity plans. The shares of common stock underlying any awards under the 2018 Plan and previous equity plans (together, the “Plans”) that are forfeited, canceled or otherwise terminated (other than by exercise) shall be added back to the shares of stock available for issuance under the 2018 Plan. At September 30, 2024,1,487,289 shares were available for future grants under the 2018 Plan.

Former Chief Executive Officer Accounting Modifications

On June 12, 2024, upon approval by the Board, the Company entered into the Fourth Amended and Restated Employment Agreement (the “Transition Agreement”) with the Company's former Chief Executive Officer (“CEO”), Tony J. Hunt, which amends and restates Mr. Hunt's Third Amended and Restated Employment Agreement with the Company dated as of May 26, 2022. Under the terms of the Transition Agreement, Mr. Hunt relinquished his position as the Company's CEO effective September 1, 2024 (the “Transition Date”) and transitioned to a new role as Executive Chair of the Board beginning on the Transition Date (the “CEO Transition”). It is anticipated that Mr. Hunt will continue to be involved in the business as the Executive Chair of the Board until March 2026 and will continue to be employed by the Company as an advisor thereafter, until March 2027.

Under the terms of the Transition Agreement and the award agreements governing Mr. Hunt’s outstanding equity awards, Mr. Hunt’s unvested stock awards will continue to vest in accordance with their original terms. Furthermore, on June 28, 2024, the Company entered into an amendment (the “2024 Award Amendment”) to the equity awards granted to Mr. Hunt in 2024, which consisted of a stock option, restricted stock units (“RSUs”) and performance stock units (“PSUs” and together the “2024 Grants”). Pursuant to the terms of the 2024 Award Amendment, two-thirds of the 2024 Grants were forfeited, which equates to 32,776 shares of the Company’s common stock.

Although Mr. Hunt’s unvested equity awards continue to vest in accordance with their original terms and there has been no amendment to Mr. Hunt’s outstanding equity awards other than the 2024 Award Amendment, the Company determined that under ASC 718,”Compensation - Stock Compensation”, the CEO Transition represented a significant reduction in Mr. Hunt’s operating role with the Company for accounting purposes. This determination resulted in a Type III accounting modification of certain of Mr. Hunt’s unvested stock awards (improbable to probable) under ASC 718 (the “Equity Modification”) on June 12, 2024. As a result, for accounting purposes only, Mr. Hunt’s unvested awards were deemed cancelled and a new grant issued for his unvested shares with the value of these awards recalculated using a price of $136.00 per share, which was the opening stock price of the first day of trading following the public announcement of the CEO Transition.

As a result of the Equity Modification, the Company recognized stock-based compensation expense for the modified awards of $22.4 million over the remaining requisite service period, which the Company determined to be between June 13, 2024 and September 1, 2024 and represented the remaining service period of Mr. Hunt’s role as CEO.

The Company determined that the PSUs granted to Mr. Hunt in 2022 and 2023 should be accounted for as a Type IV accounting modification (improbable to improbable) in accordance with ASC 718, because vesting conditions before and after June 12, 2024 were improbable of being achieved.

As a result of the Equity Modification and the forfeiture of the pro-rata portion of Mr. Hunt’s 2024 Grants, the Company recognized $17.4 million and $22.4 million of incremental stock-based compensation expense for the three and nine months ended September 30, 2024.

Stock Issued for Earnout Payments

In April 2024, the Company issued 28,638 shares of its common stock to former securityholders of Avitide to satisfy the contingent consideration obligation established under the Agreement and Plan of Merger and Reorganization (the “Avitide Agreement”) which the Company entered into as part of the acquisition of Avitide in September 2021.

In March 2024, the Company issued 2,770 shares of its common stock to former securityholders of FlexBiosys to satisfy the contingent consideration obligation established under the FlexBiosys Agreement, which the Company entered into as part of the acquisition of FlexBiosys in April 2023.

See Note 5, “Acquisitions”, included in Part II, Item 8, “Financial Statements and Supplementary Data,”to the Company’s Form 10-K/A for additional information on the acquisitions of Avitide and FlexBiosys and the contingent consideration. The shares issued to FlexBiosys represent 20%of the earnout consideration earned in the First Earnout Year (as defined in the FlexBiosys

Agreement)and the shares issued to Avitide represents 50% of the earnout consideration earned in the Second Earnout Year (as defined in the Avitide Agreement).

Stock-Based Compensation

The following table presents stock-based compensation expense in the Company’s condensed consolidated statements of comprehensive income (loss):

(1)

Selling, general and administrative stock-based compensation for the three and nine months ended September 30, 2024 includes$17.4 million and$22.4 million of expense related to the Equity Modification discussed above.

Stock Options

Information regarding option activity for thenine months ended September 30, 2024 under the Plans is summarized below:

(1)

Includes 13,057 options forfeited pursuant to the 2024 Award Amendment discussed above under“Chief Executive Officer Accounting Modifications”.

(2)

Represents the number of vested options as of September 30, 2024 plus the number of unvested options expected to vest as of September 30, 2024 based on the unvested outstanding options at September 30, 2024 adjusted for estimated forfeiture rates of 8% for awards granted to non-executive level employees and 3% for awards granted to executive level employees.

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, 2024, the last business day of the third quarter of 2024, of $148.82 per share 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, 2024. The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2024 and 2023 was $4.7 million and $3.4 million, respectively.

The weighted average grant date fair value of options granted during the nine months ended September 30, 2024 and 2023 was $89.09 and $85.70, respectively.

Stock Units

Thefair value of stock units is calculated using the closing price of the Company’s common stock on the date of grant. The Company recognizes expense on awards with service-based vesting over the employee’s requisite service period on a straight-line basis. The Company recognizes expense on performance-based awards over the vesting period based on the probability that the performance metrics will be achieved. Information regarding stock unit activity, which includes activity for restricted stock units and performance stock units, for thenine months ended September 30, 2024 under the Plans is summarized below:

(1)

Includes 1,462 stock units that had vested but not settled as of September 30, 2024.

(2)

Includes 13,146 RSUs and 6,573 PSUs forfeited pursuant to the 2024 Award Amendment discussed above under”Chief Executive Officer Accounting Modifications”.

(3)

Represents the number of vested stock units as of September 30, 2024 plus the number of unvested stock units expected to vest as of September 30, 2024 based on the unvested outstanding stock units at September 30, 2024 adjusted for estimated forfeiture rates of 8% for awards granted to non-executive level employees and 3% for awards granted to executive level employees.

The aggregate intrinsic value of stock units vested during the nine months ended September 30, 2024 and 2023 was $25.1 million and $32.3 million, respectively.

The weighted average grant date fair value of stock units granted during the nine months ended September 30, 2024 and 2023 was $180.02 and $174.86, respectively.

As of September 30, 2024, there was $62.1 million 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 2.82 years. The Company expects 2,300,804 unvested options and stock units to vest over the next five years.

Commitments and Contingencies

Collaboration Agreements

The Company licenses certain technologies that are, or may be, incorporated into its technology under several agreements and also has entered into several clinical research agreements that require the Company to fund certain research projects. Generally, the license agreements require the Company to pay annual maintenance fees and royalties on product sales once a product has been established using the technologies. Research and development expenses associated with license agreements were immaterial amounts for the three and nine months ended September 30, 2024 and 2023.

In June 2018, the Company secured an agreement with Navigo Proteins GmbH (“Navigo”) for the exclusive co-development of multiple affinity ligands for which the Company holds commercialization rights. The Company is manufacturing and supplying the first of these ligands, NGL-Impact®, exclusively to Purolite Life Sciences, an Ecolab Inc. company (“Purolite”), who is pairing the Company’s high-performance ligand with Purolite’s agarose jetting base bead technology used in their Jetted A50 Protein A resin product. The Company also signed a long-term supply agreement with Purolite for NGL-Impact and other potential additional affinity ligands that may advance from the Company’s Navigo collaboration. In September 2020, the Company and Navigo successfully completed co-development of an affinity ligand targeting the SARS-CoV-2 spike protein, that was used in the purification of vaccines for the COVID-19 pandemic, including emerging variants of the SARS-CoV-2 coronavirus. The Company has proceeded with scaling up and manufacturing this ligand and the development and validation of the related affinity chromatography resin, which is marketed by the Company. In September 2021, the Company and Navigo successfully completed co-development of a novel affinity ligand that addresses aggregation issues associated with pH sensitive antibodies and Fc-fusion proteins. The Company is manufacturing and supplying this ligand, NGL-Impact® HipH, to Purolite. The Navigo and Purolite agreements are supportive of the Company’s strategy to secure and reinforce the Company’s proteins business. The Company made royalty payments to Navigo of $1.1 million and $0.8 million for thethree months ended September 30, 2024 and 2023, respectively, and payments of $2.9 million and $3.1 million for thenine months ended September 30, 2024 and 2023, respectively.

Legal Proceedings

From time to time, in the normal course of its operations, the Company is subject to litigation matters and claims relating to employee relations, business practices and patent infringement. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict, and the Company's view of these matters may change in the future as the litigation and events related thereto unfold. The Company expenses legal fees as incurred. The Company records a provision for contingent losses when it is both probably that a liability has been incurred and the amount of the loss can be reasonably estimated. An unfavorable outcome to any legal matter, if material, could have an adverse effect on the Company's operations or its financial results.

Income Taxes (As Restated)

For the three and nine months ended September 30, 2024, the Company recorded an income tax benefit of $(0.5) million and an income tax expense of $3.2 million, respectively. The Company’s effective tax rate for thethree and nine months ended September 30, 2024 was 43.0% and 27.8%, respectively, compared to (48.7%) and 5.1% for the corresponding periods in the prior year.

In 2021, the Organization of Economic Co-operation and Development announced an Inclusive Framework on Base Erosion and Profit Sharing with the goal of achieving consensus around substantial changes to international tax policies, including the implementation of a minimum global effective tax rate of 15%. The Company continues to evaluate the impacts of enacted legislation and pending legislation in the tax jurisdictions in which the Company operates. While various countries have implemented the legislature as of January 1, 2024, the Company does not expect a resulting material impact to its income tax provision for the 2024 fiscal year.

Earnings Per Share

A reconciliation of basic and diluted weighted average shares outstanding is as follows:

(1)

Represents the dilutive impact for the Company's 2019 Notes. As of September 30, 2024, the if-converted value is less than the outstanding principal of the 2023 Notes and are therefore anti-dilutive. Refer to Note 9,"Convertible Senior Notes,"above for more information.

As the Company was in a net loss position for the three months ended September 30, 2024,358,372 shares of potentially dilutive options and stock units are considered anti-dilutive for the three months ended September 30, 2024. For thethree and nine months ended September 30, 2024,491,206 shares and 404,989 shares, respectively, of the Company’s common stock were excluded from the calculation of diluted (loss) 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. Comparatively, for the three and nine months ended September 30, 2023,301,404 shares and 328,179 shares, respectively, were considered anti-dilutive.

In July 2019, the Company issued $287.5 million aggregate principal amount of its 2019 Notes. As provided by the terms of the Second Supplemental Indenture underlying the 2019 Notes, upon conversion of the 2019 Notes, the Company will use a combination of cash and shares of the Company's common stock, settling the par value of the 2019 Notes in cash and any excess conversion premium in shares. On December 14, 2023, the Company exchanged, in a privately negotiated exchange, $309.9 million principal amount of 2023 Notes for $217.7 million principal amount of 2019 Notes and issued $290.1 million aggregate principal amount of 2023 Notes for $290.1 million in cash. Immediately following the closing of the Exchange Transaction mentioned above, $69.7 million in aggregate principal amount of the 2019 Notes remained outstanding as of December 31, 2023 with terms unchanged. During 2024, $0.2 million aggregate principal amount converted, bringing the remaining outstanding 2019 Notes to $69.5 million in aggregate principal amount. The remaining 2019 Notes matured and were paid off in full on July 15, 2024.

As mentioned above and as provided by the terms of the Second Supplemental Indenture underlying the 2019 Notes, the Company irrevocably elected to settle the conversion obligation for the 2019 Notes in a combination of cash and shares of the Company’s common stock. This means the Company settled the par value of the 2019 Notes in cash and any excess conversion premium in shares. The Company is required to reflect the dilutive effect of the convertible securities by application of the “if-converted” method, which means the denominator of the EPS calculation would include the total number of shares assuming the 2019 Notes had been fully converted at the beginning of the period. Accordingly, the par value of the 2019 Notes was not included in the calculation of diluted earnings per share, but the dilutive effect of the conversion premium was considered in the calculation of diluted earnings per share for any period the 2019 Notes were not matured, using the treasury stock method. The dilutive impact of the 2019 Notes was based on the difference between the Company’s current period average stock price and the conversion price of the 2019 Notes, provided there was a premium. Because the remaining 2019 Notes were redeemed at September 30, 2024 as mentioned above, there wasno dilutive effect of the conversion premium included in the calculation of diluted earnings per share for thethree and nine months ended September 30, 2024. For the three and nine months ended September 30, 2023, the dilutive effect of the conversion premium included in the calculation of diluted earnings was 735,150 shares and 776,339 shares, respectively.

Related Party Transactions

Certain facilities leased by our subsidiary, Spectrum LifeSciences LLC (“Spectrum”) are owned by the Roy Eddleman Living Trust (the “Trust”). As of September 30, 2024, the Trust owned greater than 5% of the Company’s outstanding shares. Therefore, the Company considers the Trust to be a related party. The lease amounts paid to the Trust were negotiated in connection with the acquisition of Spectrum. The Company incurred rent expense totaling $0.1 million for each of thethree months ended September 30, 2024 and 2023 related to these leases and incurred $0.5 million for each of thenine months ended September 30, 2024 and 2023.

Segment Reporting

Operating segments are components of an enterprise that engage in business activities for which discrete financial information is available and regularly reviewed by the CODM in deciding how to allocate resources and assess performance. Our CEO has been identified as the CODM.

The Company views its operations, makes decisions regarding how to allocate resources and manages its business asone operating segment and one reportable segment. Our CODM evaluates financial information on a consolidated basis. As a result, the required financial segment information can be found in the condensed consolidated financial statements of the Company disclosed herein.

The following table represents the Company’s total revenue by customers’ geographic locations:

Concentrations of Credit Risk and Significant Customers

Financial instruments that subject the Company to significant concentrations of credit risk primarily consist of cash and cash equivalents and accounts receivable. Per the Company’s investment policy, cash equivalents and marketable securities are invested in financial instruments with high credit ratings, and credit exposure to any one issue, issuer (with the exception of U.S. Treasury obligations) and type of instrument is limited. At September 30, 2024 and December 31, 2023, the Company had no investments associated with foreign exchange contracts, options contracts or other foreign hedging arrangements.

Concentration of credit risk with respect to accounts receivable is limited to customers to whom the Company makes significant sales. While a reserve for the potential write-off of accounts receivable is maintained, the Company has not written off any significant accounts to date. To control credit risk, the Company performs regular credit evaluations of its customers’ financial condition.

There wasno revenue from customers that represented 10% or more of the Company's total revenue for the three and nine months ended September 30, 2024 and 2023.

No accounts receivable balance from a specific customer represented 10% or more of the Company's total trade accounts receivable at September 30, 2024 and December 31, 2023.