Why Repligen Corporation Shares Were Slammed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Repligen (NASDAQ: RGEN  ) , a life-sciences company that develops consumable products used in the process of manufacturing biological drugs, fell as much as 16% after reporting its fourth-quarter earnings results before the opening bell.

So what: According to its report, Repligen delivered total quarterly revenue of $15.4 million, an 18.2% decrease from the year-ago quarter, as adjusted EPS fell by two-thirds to just $0.10 from $0.30. Repligen blamed its reduced revenue on a one-time out-licensing agreement with Pfizer that resulted in a $5 million upfront payment last year, but no payment this year. By comparison, Wall Street estimates had pegged Repligen for $15.9 million in revenue and $0.14 in EPS, meaning it missed on both accounts. If there was a bright spot, it was that Repligen's bioprocessing revenue jumped nearly 7% to $10.4 million.

Looking ahead to fiscal 2014, Repligen issued guidance calling for revenue in the $54 million-$57 million range, including product-revenue growth of 10%-15%. Net income for the year is expected to total $7 million-$9 million, or $0.21-$0.28 in EPS. This estimate, however, bracketed a bit higher than the Street's consensus of $53.1 million and $0.22 in EPS for the full year.

Now what: I wouldn't be too surprised by today's move lower because Repligen doesn't have a lot of Wall Street coverage and is liable to be whipsawed for beating or missing the one or two estimates available. The key takeaway here is that Repligen's bioprocessing business, which is its bread and butter, has the potential to grow organically by low double digits. This seems like a pretty fair growth target for the remainder of the decade, yet I'm still a bit taken back by its projected P/E for 2014, which is close to 60 at the moment. While I appreciate Repligen's organic growth, I'd rather watch it from the sidelines until its bottom-line profit catches up with its current valuation.

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