G

Source: Repligen

What: After reporting third quarter financial results, updating investors on its outlook, and receiving a Wall Street downgrade, shares in Repligen Corporation (NASDAQ:RGEN) tumbled by nearly 20% today.

So what: In the third quarter, sales at Repligen climbed 31% to $19.8 million, bringing sales through the first nine months to $62.1 million, up from $45 million for the same period last year.

Revenue came entirely from bioprocessing products that are used by drugmakers to make biologics. Sales growth was led by demand for Repligen's OPUS pre-packed chromatography columns, ATF systems, and growth factors.

In the quarter, the company's gross margin improved to 57.4% from 54.3% last year, and its net income totaled $2.5 million, or $0.08 per share, up from $1.5 million, or $0.04 per share, last year.

Take Long View

Now what:  During its Q3 update, Repligen also bumped up its full year sales and income outlook.

The company expects to deliver top-line revenue of between $81 million and $83 million, up from its prior forecast for between $78 million and $82 million, and to report net income of between $11 million and $12 million this year, up from prior expectations for between $10 million and $12 million.

Overall, the company's third quarter performance and outlook appear solid, but they weren't enough to convince analysts at Jefferies to maintain their buy rating. Jefferies downgraded Repligen to a hold earlier today.

On Repligen's third quarter earnings conference call, Jefferies' analyst Brandon Couillard asked for insight into the book-to-bill ratio for the company's ATF systems and whether Repligen's management could offer any color on its 2016 revenue growth visibility.

Couillard also sought additional insight into why Repligen chose to shelve plans to commercialize its protein A program that Jefferies had previously viewed as a future growth driver. 

In the case of ATF systems, Repligen reminded investors that ATF systems are a capital expense and as such, orders are typically greater at the end of a quarter and the end of a year. In terms of 2016 visibility, management said they had yet to receive enough insight from their biggest customers to provide an answer, but that they would offer up insight when they report fourth quarter results in a few months.

As to their decision to shelve protein A, the company concluded that the time and expense necessary to build up meaningful product sales could be better spent on its OPUS and ATF systems opportunity.

Undeniably, Repligen continues to deliver solid sales and profit growth, but its shares are trading at a lofty 52 times forward earnings, and they've returned a whopping 92% (including today's drop) since the end of 2013. That return is roughly three times better than the return for the Healthcare Select SPDR ETF during the period. All told, this may suggest that given its valuation, it's not a bad time to take a little profit off the table, at least until Repligen offers up its 2016 sales and profit outlook.

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.