SecProbe.io

CORRESP
1
filename1.htm

Response Letter

 April 5, 2007

 United States Securities and Exchange Commission

 Division of Corporation Finance

 100 F Street, N.E.

 Washington, D.C. 20549-7010

 Attention: Jim B. Rosenberg

Re:
Repligen Corporation

 Form 10-K for Fiscal Year
Ended March 31, 2006

 File No. 0-14656

 Dear Ladies and Gentlemen:

 This letter is being furnished on behalf of Repligen Corporation (the “Company”) in response to
comments in the letter dated March 5, 2007 (the “Letter”) from Jim B. Rosenberg of the Staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) to Walter C. Herlihy,
President and Chief Executive Officer of the Company, with respect to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2006 (the “Form 10-K”) that was filed with the Commission on June 9,
2006.

 The responses and supplementary information set forth below have been organized in the same manner in which the Commission’s comments were
organized. The text of the Staff’s comments are copied below in italics and indented for your reference. Copies of this letter are being sent under separate cover to Mark Brunhofer of the Commission.

 Form 10-K for the fiscal year ended March 31, 2006

 Management’s Discussion and Analysis of Financial Condition and Results of Operations

 Critical Accounting
Estimates, page 20

1.
Your revenue recognition disclosure does not appear to disclose the judgments you must make each period and the uncertainties surrounding those judgments. In addition, your
revenue recognition, inventory reserve and accrued liabilities disclosures do not appear to discuss the potential variability of reasonably likely changes in your underlying estimates nor do your disclosures appear to discuss how accurate your
estimates have been in prior periods. Please provide us in a disclosure-type format, revised discussions of your critical accounting estimates that discuss specifically the judgments you make, why your estimates or assumptions bear the risk of
change, the impact on your financial results, financial condition and liquidity of reasonably likely changes in the underlying assumptions and the extent to which actual subsequent experience has differed materially from your initial estimates in
each of the periods presented. Please see FR-72.

 Jim B. Rosenberg

 April 5,
2007

  Page
 2

 RESPONSE:

 We agree with the Staff’s recommendation that further discussion of our critical accounting policies is appropriate. In response to the Staff’s comment, we
would have made the following revised disclosure as of March 31, 2006 and we are planning to include equivalent disclosure in our future filings on Form 10-K. We have included the entirety of the related disclosure as of March 31, 2006
below for completeness. All proposed changes or additions to such disclosure to incorporate the Staff’s recommendations are highlighted in bold italic print.

 Revenue Recognition

 We apply Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB
No. 104”) to our revenue arrangements.

 We generate product revenues from
the sale of our Protein A products to customers in the pharmaceutical and process chromatography industries and from the sale of SecreFlo® to hospital-based gastroenterologists. In accordance with SAB No. 104, we recognize 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 are based on management’s judgments primarily
regarding the fixed nature of the fee charged for product delivered, and the collectibility of those fees. We have a few longstanding customers who comprise the majority of our revenue and have excellent payment history. We have had no significant
write-offs of uncollectible invoices in the periods presented. Should changes in conditions cause management to determine that these criteria are not met for certain future transactions, revenue recognized for any reporting period could be adversely
affected.

 At the time of sale, we also evaluate the need to accrue for warranty and sales returns. The supply agreements we have with our
customers and related purchase orders identify the terms and conditions of each sale and the price of the goods ordered. Due to the nature of our 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 our financial statements historically. Should changes in conditions cause management to determine that warranty, returns or other sale-related reserves are necessary for certain future transactions, revenue recognized for any
reporting period could be adversely affected.

 Jim B. Rosenberg

 April 5,
2007

  Page
 3

 During the fiscal
year ended March 31, 2006, we received $310,000 of cash from a sponsored research and development project under an agreement with the Stanley Medical Research Institute (SMRI). Research revenue is recognized when the expense has been
incurred and services have been performed. Determination of which costs incurred qualify for reimbursement under the terms of our contractual agreement and the timing of when such costs were incurred involves the judgment of management. We believe
our calculations are based upon the agreed-upon terms as stated in our arrangement. However, should our estimated calculations change or be challenged by SMRI, research revenue may be adjusted in subsequent periods. Our calculations have not
historically changed or been challenged and we do not anticipate any subsequent change in our revenue related to this sponsored research and development project.

 During fiscal 2004 we generated non-product revenues from sponsored research and development projects under a Small Business Innovation Research (“SBIR”) Phase I grant. Research expenses in the accompanying
statements of operations include funded and unfunded expenses. Additionally, during fiscal year 2006, the Company earned and recognized approximately $72,000 in royalty revenue from ChiRhoClin, Inc. Revenues earned from ChiRhoClin royalties
are recorded in the periods when they are earned based on royalty reports sent by ChiRhoClin to the Company.

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

 Inventory

 Inventories relate to our Protein A business. We value inventory at cost or, if lower, fair market value. We determine cost using the
first-in, first-out method. We review our inventories at least quarterly and record a provision for excess and obsolete inventory based on our estimates of expected sales volume, production capacity and expiration dates of raw
materials, work-in process and finished goods. Expected sales volumes are determined based on supply forecasts provided by our key customers for the next three to twelve months. We write 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 goods sold. Manufacturing of Protein A 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 our 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 our inventory and reported operating results. During all periods presented in
the accompanying financial statements, there has been no material adjustments related to a revised estimate of inventory valuations.

 Jim B. Rosenberg

 April 5,
2007

  Page
 4

 Accrued Liabilities

 We prepare our financial statements in accordance with accounting principles generally accepted in the United States. These principles require that we
estimate accrued liabilities. This process involves identifying services, which have been performed on our behalf, and estimating the level of service performed and the associated cost incurred for such service as of each balance sheet date.
Examples of estimated accrued expenses include: 1) Fees paid to our 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 our 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. 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. We have 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 we do not identify certain costs which have begun to be incurred or we under or over-estimate the level of services performed
or the costs of such services, our 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
judgmental. We make these judgments based upon the facts and circumstances known to us at the date of the financial statements.

 A
change in the estimated cost or volume of services provided could result in additional accrued liabilities. Any significant unanticipated changes in such estimates could have a significant impact on our accrued liabilities and reported operating
results. There has been no material adjustments to our accrued liabilities in any of the periods presented in the accompanying financial statements.

 Results of Operations, page 22

2.
Please provide us in a disclosure-type format, revised discussions of your revenue fluctuations from period to period that clearly differentiate between volume and pricing
changes as required by Item 303(a)(3)(iii) of Regulation S-K.

 RESPONSE:

 We agree with the Staff’s recommendation that further discussion of the volume and pricing changes impacting our revenue fluctuations is appropriate. In response to
the Staff’s comment, we would have made the following revised disclosure as of March 31, 2006 and we are planning to include equivalent disclosure in our future filings on Form 10-K. We have included the entirety of the related disclosure
as of March 31, 2006 below for completeness. All proposed changes or additions to such disclosure to incorporate the Staff’s recommendations are highlighted in bold italic print.

 Jim B. Rosenberg

 April 5,
2007

  Page
 5

 Revenues

 Total revenue for fiscal 2006, 2005 and 2004 were $12,911,000, $9,360,000 and $6,914,000. Revenues for the years
ending March 31, 2006, 2005 and 2004 were primarily comprised of sales of our commercial products, Protein A and SecreFlo®. During the fiscal year ended March 31, 2006, 2005 and 2004 sales of our commercial products were:

Year ended March 31

% Change

2006

2005

2004

2006 vs. 2005

2005 vs. 2004

(in thousands, except percentages)

 Protein A

$
10,540

$
7,134

$
4,976

48
%

43
%

 SecreFlo®

1,989

2,189

1,867

-9
%

17
%

 Other product revenue

—

37

—

 Product revenue

$
12,529

$
9,360

$
6,843

34
%

37
%

 Substantially all of our products based on recombinant Protein A 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, Crohn’s
disease and a variety of cancers. Sales of Protein A are therefore impacted by the timing of large-scale production orders and on the regulatory approvals for such antibodies, which may result in significant quarterly fluctuations.

 During fiscal 2006, Protein A sales increased by $3,406,000 or 48%, primarily as a result of a rise in the demand for our Protein A products. The increase in sales
volume of Protein A resulted in an increase in revenues of 49%. This increase was slightly offset by a decrease in the total sales price of those products, which had an unfavorable impact of 1% on total revenues. During fiscal 2005, Protein A sales
increased by $2,158,000 or 43%, primarily as a result of a rise in the demand for our Protein A products. The increase in sales volume of Protein A resulted in an increase in revenues of 60%. This increase was partially offset by a decrease in the
total sales price of those products, which had an unfavorable impact of 17% on total revenues. The company sells different Protein A products at different price points. The mix of products sold varies and impacts the fluctuations in
total sales price from year to year. During the fourth quarter of fiscal 2005, a supply agreement with a key customer was amended to expand the scope of manufacturing and extend the term of the agreement through 2010 which resulted in
increased sales volume. During fiscal 2004, manufacturing problems experienced by one of our significant customers negatively impacted our sales of Protein A. We anticipate that sales of Protein A will continue to grow during the next year, but at a
reduced rate compared to the last two fiscal years and will continue to be subject to quarterly fluctuations due to timing of large-scale production orders.

 Jim B. Rosenberg

 April 5,
2007

  Page
 6

 Sales of SecreFlo® decreased $200,000 or 9% in fiscal 2006
primarily as a result of direct competition with our sole supplier of SecreFlo®. and as a
result of a reduction in sales and marketing efforts. To remain competitive we reduced sales prices, which had an unfavorable impact of 6% on SecreFlo® revenues and a decrease in volume of SecreFlo® vials sold, unfavorably impacting revenue by 3%.

 SecreFlo®
sales increased $322,000 or 17% in fiscal 2005 from $1,867,000 in fiscal 2004, primarily as a result of a delay during fiscal 2004 in the delivery of a new lot of
SecreFlo® from the manufacturer which negatively impacted 2004 revenue. A higher volume of
vials sold in 2005 increased revenues by 15% and an increase in sales prices increased revenues by an additional 2%. The settlement in fiscal 2005 with our sole supplier of SecreFlo® provides for a certain amount of vials of product that we can ultimately ship. The last shipment of Secreflo to the Company from
ChiRhoClin should be in late calendar year 2007 and will be sold to customers at least into fiscal year 2009.

3.
Although you identify the nature of the expense items associated with your fluctuations in operating expenses, you do not appear to discuss the underlying causes of those
changes. The following lists examples of your disclosure and is not intended to be exhaustive:

•

 higher clinical trial expenses of $192,000 (in your R&D disclosure);

•

 increased personnel costs of $124,000 (in your R&D disclosure);

•

 increased license expense of $59,000 (in your R&D disclosure);

•

 clinical material decreased by $124,000 (in your R&D disclosure);

•

 increased personnel expenses of $291