Good day, ladies and gentlemen and welcome to the Repligen Corporation’s Fourth Quarter and Full Year 2015 Earnings Conference Call. My name is Kat and I will be your coordinator. At this time all participants are in a listen-only mode. [Operator Instructions]. Please note there will be a question-and-answer period following the company's formal remarks. In order to accommodate all individuals, who wish to ask questions there will be a limit of three questions at a time. I would now like to turn the call over to your host for today’s call, Sondra Newman, Senior Director of Investor Relations for Repligen.

Thank you and good morning. The purpose of today's call is to discuss our financial results for the fourth quarter and the full year 2015, to provide financial guidance for 2016, and to discuss recent business highlights. Joining me are Tony Hunt, our President and CEO; and Jon Snodgres, our CFO. During the course of this call we will make forward-looking statements, regarding business goals and our expectations for the financial performance of the company. We caution you that such statements are subject to risks and uncertainties that may cause actual events or results to differ. In particular, unanticipated events outside of our control may adversely impact future results. Additional information concerning these risk factors is discussed in our annual report on Form 10-K, the current report on Form 8-K which we filed this morning, and our other filings that we make with the Securities and Exchange Commission. The forward-looking statements in today's discussion reflect management’s current views and may become obsolete as a result of new information, future events, or otherwise. The company does not obligate or commit itself to update forward-looking statements except as required by law. Consistent with our public life science company peers, Repligen as of this call is presenting its financial results on an adjusted or non-GAAP basis as well as on a GAAP basis. Adjusted figures will include the following; revenue growth at constant currency, adjusted operating income, EBITDA, adjusted EBITDA, adjusted net income, and adjusted fully diluted earnings per share. A reconciliation of GAAP to non-GAAP financial measures is included as an attachment to our press release issued this morning. While these adjusted financial measures cannot be viewed as an alternative to GAAP, the company believes that the use of these non-GAAP measures better enables investors to benchmark its results against historical performance and the performance of peers and to evaluate investment opportunities. With that I’ll turn the call over to Jon Snodgres for a financial update. Go ahead Jon.

Thank you, Sondra. Good morning. Today we are reporting our financial results for the fourth quarter and full year 2015 as well as our financial guidance for the year 2016. Our financial results for the fourth quarter of 2015 were highlighted by strong sales of our bio-processing products. We reported product revenue of 21.4 million, an increase of 45% at constant currency or 39% as reported compared to the fourth quarter of 2014. We realized an exceptionally strong quarter with greater than 50% year-over-year growth in our growth factors, ATF Systems and Consumables, and our chromatography group with includes our OPUS columns, Protein A resins, and ELISA Kits. Our gross profit for the fourth quarter was 11.3 million an increase of 4 million or 55% compared to 2014. Our product gross margin is 52.7% for the quarter compared to 47.5% in 2014 reflecting a year-over-year increase of 520 basis points driven by higher sales volumes. Now moving on to our operating expenses. Research and development expenses of 1.4 million were modestly higher than the fourth quarter of 2014 as we continued to invest in key product development programs including single use ATF and OPUS. SG&A expenses increased to 6.5 million from 5 million in the fourth quarter of 2014, due to investments in our growing commercial organization as well as facilities, personnel, and systems infrastructure to support the fully integrated ATF business and the ongoing growth of the company. Also included in our fourth quarter operating expenses is an additional 2 million of contingent consideration expense based on the increased probability of achieving the ATF sales milestones for 2016. The company’s final year of contingent consideration obligation under the refined asset purchase agreement. This 2 million represents 36% of the 5.55 million of total potential payout for 2016. Or 48%…

Great, thank you Jon. 2015 was clearly a great year for our company. As I close in on the completion of my first year as CEO I am especially proud of the extraordinary efforts by all our employees worldwide to deliver an outstanding year in terms of performance well ahead of our projections from a year ago. As reported today, we had record sales of our bio-processing products of 83.5 million, an increase of 47% over 2015 at constant currency. We also grew our adjusted EPS by 67%. Our record performance is attributed to three main factors, strength in the biological drug market, across the board growth and adoption of our proprietary products, and expansion of our commercial organization and global footprint. More importantly we’ve established the Repligen brand throughout the biologics manufacturing industry representing technology leadership in both upstream and downstream production, innovation in driving more efficient and flexible manufacturing, and a relentless focus on improving customer service by providing a high level of customized support for our end users. Looking back to the beginning of 2015 we set up care priorities for the business specifically accelerating sales and market adoption for our bio-processing products, expanding our commercial presence, investing in operations and driving gross margin expansion, and finally developing and launching new products. We still have areas where we can improve, but overall we did a very good job executing against these priorities. So let me drill down on the performance of our various product lines. During Q4 we saw an acceleration and adoption of our ATF product portfolio as customers scaled up and implemented the ATF Systems in late stage and commercial processes. Our ATF business finished the year north of $15 million in revenue, representing greater than 40% growth over an annualized 2014 number. This reinforces…

Thank you. [Operator Instructions]. Our first question comes from the line of Drew Jones with Stephens Inc. Your line is open. Please go ahead.

Thanks, good morning all.

Good morning.

Wanted to start with OPUS. It sounds like lot of good things going on there. The large pharma partners, I guess how big is their average order and are those going to be your customers that are going to be putting the media to you on consignment?

Yes, great question Drew. When we look at our pharma partners, clearly 2015 was a year where we were able to move beyond our core CMO base. And so when we are looking at now these pharma customers they are talking about 10s of columns a year and maybe even more than that. It just depends a little bit on each customer and the number of campaigns that they want to run in a given year. And I think its split in terms of who will consign versus where we go ahead and procure ourselves. So that’s a customer by customer basis that we will make that decision.

And what is the capacity increase you guys are shooting for?

Well we are going to add basically two more suites so we’ll double the overall capacity in terms of physical space. But one of the other things we are doing is we want to use the capacity to drive down lead times. So we’d like to get our lead times down to even shorter than where they are today.

Okay. And then on the new agreements with GE and Merck Millipore, anything new with those agreements or is it the same price-volume discounts we've been seeing?

Yes, they’re very similar to what we've done in the past. Obviously, the negotiations are always around price volume and we're very excited obviously that we've extended both agreements out to -- one to the end of the 2019, the other to the end of 2023. But very typical terms, very similar to what we've had in the past.

And then last one from me. You talked about the strength in ATF and the fact that you still expect growth in 2016, how much tapering is there from the legacy stainless steel product as the disposable comes on?

Yes, good question. So the way we look at 2016, we've started off the year strong with orders on ATF. As we get into the second half of the year we just don’t have as much visibility so that’s -– we're being cautious in terms of where we are and overall growth, we expect we’ll have a good year. But overall I think when we launched the single-use product we believe though the -– that the customers who were going to adopt the single-use product are going to be using it in pre-clinical Phase 1 type opportunities. So this year is all going to be about exceeding the market and when we get into 2017 I expect to see a ramp up. Don’t expect to see a whole lot of cannibalization of the stainless steel business.

Thanks, guys.

Thank you. Our next question comes from the line of Matt Tiampo with Craig-Hallum. Your line is open. Please go ahead.

Good morning, gentlemen and congratulations on a nice finish to the year. I just wanted to ask, seems like gross margin ticked down pretty meaningfully in Q4, maybe a little bit more than we would’ve expected. Can you give us some sense for what the mix was like and what else might have caused that?

Sure, Matt. This is Jon, I’d be happy to answer that question. Actually, yes we had a really, really strong year in gross margin in 2015 and we did see a little bit of a deceleration similar to what we saw in 2014. And basically one of the dynamics that happens in our business in the fourth quarter, we have a higher amount of time off and factory downtime as we retool the factory. And so that was one of the bigger factors in the lower margins. We didn’t have as much throughput through the factory in the fourth quarter. The other dynamic, there was some dynamic of product mix but that was to a smaller extent than the downtime.

Okay, great. And then….

And we expect as we go forward that we will, obviously the margins will ramp back up into that 57% to 59% range.

Great, thank you. And then as I think about seasonality through 2016, should we think about -– in terms of the mix of business coming in and out in a similar fashion to 2015, is that the right way to think about the year on a quarterly basis?

Yes, I think that’s the right way to think about the year.

Okay, great. And then just finally for me, if you could give us a maybe a little bit of a sense of capital allocation in 2016 and what your thoughts are and what your sort of -– how you would rank the different options that are out there in front of you? Thanks.

Sure, sure. So first and foremost we are going to continue to reinvest in the business to support the future growth that we're expecting to see. Also I think of equal importance really is M&A and we continue to be active on the M&A front looking for opportunities and that’s a really, really high priority for us next year. We will be reinvesting in CAPEX as we talked about but that will be not significantly above where we were at this year but a little bit above this year.

Great, thanks, guys.

Thank you. Our next question comes from the line of Paul Knight with Janney Montgomery Scott. Your line is open. Please go ahead.

Hi Tony, could you talk about OPUS a little and then I know you were doing single shipments and you were maybe seeing a move towards multiple orders per customer or multiple OPUS units per customer, is that still -– do you see that improving, accelerating on OPUS?

Yes Paul, absolutely. So I think one of the things that really has helped us in 2015 and as we go into 2016 is the expansion of the commercial organization. So we have been able to now broaden our customer base in both the U.S. and in Europe. We’re seeing an uptick in Asia as well. Really pull through from the strength that we have in ATF. So as we broaden the customer base, the opportunities to get into more processes and to ship multiple columns is absolutely the case. So when we look at our top customers it's not one or two columns it is probably 5 to 10 columns per year that we are shipping to those sites. And as I said a little earlier it depends a little bit on the number of campaigns that a customer would run in a given year. So if you are a CMO there is a kind of a fix set of campaigns they run. When you start to get into the large pharma accounts clearly if we can move into their preclinical Phase 1, Phase 2 opportunities, the number of columns goes up significantly. So we’re pretty pleased of all this as we have kicked off this year, that we have a number of customers now that are asking about going a 100% committing to our pre-pack column. So that’s exciting for us and that’s what spearheading our investment in manned capacity and physical capacity for OPUS.

And then on your distribution channels, you talk about Asia more it seems every call but is it adding sales people within the organization, is it Asia Expansion. I mean what are your top three most important channel moves this year Tony?

Yes, I think it is -- obviously the distributors that we’ve brought on have worked out really well for us and we have put Repligen people into Asia as well and that’s also played a big part in our success in 2015. It is clear to me that we need to continue to add more people into Asia and we think that the right balance of applications, people to support the customers especially on ATF evaluations and implementation, this probably is our number one priority. So we’ll be looking at China and Korea as the two areas where we want to add in the applications people and additional sales people. We have a very strong distributor in India and so we think we can manage that territory quite nicely through the folks that we have on the ground right now.

And lastly does it matter to you Tony if the biosimilars are expanding or are they still willing -- are they still in the same price point you want to have?

Yes, so for us the biosimilar story is really strengthened the biologics market. So whether it is an originator molecule that moves through Phase 3 into approval or it’s a biosimilar, we’re agnostic because from a Protien A ligand point of view its purely a volume play and so we will ship to our top two customers in GE and Millipore, the same amount of Ligand to do purification of a biosimilar as it would be to do with the purification of an originator molecule. So we like the fact that the biosimilar market continues to mature and it is exciting to see biosimilar is coming through now for a final approval and I think that’s going to help the overall growth in the market going forward.

Thank you.

[Operator instructions]. Our next question comes from the line of Brandon Couillard with Jeffries. Your line is open. Please go ahead.

Thanks, good morning. Just back on the M&A pipeline, I mean do you feel like we are any closer today to potentially find a suitable asset than we were perhaps three or six months ago and what you really view as the primary guiding factor, is it valuation or finding the right asset?

Yes, it’s a great question. So I’d say since mid 2015 I personally have been very focused on driving the M&A strategy for the company and I think we made a lot of progress. We have an active pipeline of targets that we are working with. I can't really speak to timing of when a deal there may not get done but we are making progress. I don’t think it is an issue. Well, every company that you deal with there is always a valuation piece but I think it is just a matter of getting the targets that we’re interested in getting deals done with to a point where they are comfortable with getting a deal done with Repligen. And that’s really what we are working towards and you know it is our strategic priority for this year and our goal is to get some deals done this year for sure.

And then one for Jon, could you give us a sense of operating cash flow for 2016? And then secondly, do you expect to actually pay out the milestones to refine this year and I think the max was about $11 million, will that fall in 2016 or 2017?

Sure, sure. So I’ll touch on the refined question first, your contingent consideration. So we paid out a -– it’s a three-year program, obviously we paid out in the first quarter of 2015 the $1 million earn out that occurred for the 2014 year. And the 2015 year we achieved the full maximum amount of payout and will be paying out another $4.35 million in the first quarter of 2016. We accrued $2 million towards the 2016 milestone in Q4 and there are additional amounts of about $2.25 million to $3.55 million that we could payout if our sales actually hit the lower end to the high end of the milestone schedules. So we can’t really say right now whether we're going to hit those milestones or not, but right now we're accrued to about 48% of the lower end of the milestone which gives you the level of confidence that we think we’ll be able to hit that milestone. In terms of cash flow, we guided basically a few minutes ago that we have a good solid forecast for next year and we expect to generate about $13 million to $15 million of free cash flow and spend about $3 million to $3.5 million obviously in CAPEX. So the total next year finishing around $87 million to $89 million is our expectation. Obviously, that excludes any M&A activity.

Got it. Sorry I missed that. Alright, thank you.

Thank you. [Operator Instructions]. And I'm showing no further questions at this time. I’d like to turn the call back over to Sondra Newman for any closing remarks.

Okay. Well, thank you all for joining the call today. As you process all the information and if you have any questions please feel free to reach out to investors@repligen.com. Thank you.