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 manufacturer of bioprocessing products used in the development of monoclonal antibodies and biologic drugs, jumped by as much as 10% after announcing the acquisition Refine Technology's bioprocessing business.
So what: As announced yesterday, Repligen will acquire Refine's bioprocessing business, which includes Refine's Alternating Tangential Flow System, "a market-leading device used to significantly increase product yield during the fermentation step of the biologic drug manufacturing process." Under the terms of the deal, Repligen will pay $20.5 million in cash and 215,285 shares of Repligen common stock for a total payment of $24.5 million. In addition, Refine is eligible for various milestone and royalty revenue payments based on the sales potential of its bioprocessing business. Repligen anticipates its purchase will add $3.5 million-$4 million in revenue for 2014, and as such boosted its full-year revenue forecast to a fresh range of $56 million-$59 million from its prior forecast of $52 million-$55 million. Furthermore, it lowered its operating income forecast to a range of $10 million-$12 million from $11 million-$13 million as a result of one-time costs associated with this transaction.
Now what: Overall the purchase looks like a smart move over the long run for Repligen, which has been actively looking for new avenues for growth. While I do see value in its bioprocessing business, its shares have vaulted higher by nearly 200% over the trailing 52-weeks despite the fact that its growth rate is probably pacing in the high single-digits at best, and its forward P/E is a dizzying 67 as of this writing. I'd need to see a rapid acceleration in growth or a serious decline in Repligen's share price before I'd even consider this as a viable investment going forward. For now, consider me a sideline spectator.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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