Regeneron Pharmaceuticals, Inc.
REGENERON PHARMACEUTICALS INC (Form: 10-Q, Received: 08/04/2015 07:24:47)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
 
(Mark One)
 
 
(X)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended  June 30, 2015
 
 
 
 
 
 
OR
 
 
 
 
 
 
( )
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________ to __________
Commission File Number  
0-19034
 
REGENERON PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
New York
 
13-3444607
(State or other jurisdiction of
 
(I.R.S. Employer Identification No.)
incorporation or organization)
 
 
 
 
 
777 Old Saw Mill River Road, Tarrytown, New York
 
10591-6707
(Address of principal executive offices)
 
(Zip Code)
 
 
 
(914) 847-7000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes 
X
 
No 
 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes 
X
 
No 
 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
X   
 
Accelerated filer
 
Non-accelerated filer
 
(Do not check if a smaller reporting company)
Smaller reporting company
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes 
 
 
No 
X
 
Number of shares outstanding of each of the registrant’s classes of common stock as of July 17, 2015:
Class of Common Stock
 
Number of Shares
Class A Stock, $.001 par value
 
1,951,868
Common Stock, $.001 par value
 
101,736,534



Table of Contents

REGENERON PHARMACEUTICALS, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS

 
 
 
 
Page Numbers
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 










"ARCALYST ® ", "EYLEA ® ", "ZALTRAP ® ", " VelocImmune ® ", " VelociGene ® ", " VelociMouse ® ", " VelociMab ® ", and " VelociSuite ® " are trademarks of Regeneron Pharmaceuticals, Inc. Trademarks and trade names of other companies appearing in this report are, to the knowledge of Regeneron Pharmaceuticals, Inc., the property of their respective owners.



2


Table of Contents

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

REGENERON PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share data)
 
June 30,
 
December 31,
 
2015
 
2014
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
390,554

 
$
648,719

Marketable securities
213,694

 
251,761

Accounts receivable - trade, net
1,071,665

 
739,379

Accounts receivable from Sanofi
197,693

 
111,510

Accounts receivable from Bayer HealthCare
125,767

 
125,483

Inventories
171,266

 
128,861

Deferred tax assets
69,603

 
46,179

Prepaid expenses and other current assets
43,099

 
79,046

Total current assets
2,283,341

 
2,130,938

 
 
 
 
Marketable securities
589,595

 
460,154

Property, plant, and equipment, at cost, net of accumulated depreciation and amortization
1,326,112

 
974,309

Deferred tax assets
323,784

 
269,237

Other assets
4,138

 
3,034

Total assets
$
4,526,970

 
$
3,837,672

 
 
 
 
LIABILITIES and STOCKHOLDERS' EQUITY
Current liabilities:
 
 
 
Accounts payable and accrued expenses
$
529,505

 
$
483,489

Deferred revenue from Sanofi, current portion
18,026

 
15,927

Deferred revenue - other, current portion
51,720

 
58,098

Other current liabilities
2,291

 
97,146

Total current liabilities
601,542

 
654,660

 
 
 
 
Deferred revenue from Sanofi
46,095

 
62,819

Deferred revenue - other
76,748

 
72,430

Facility lease obligations
357,687

 
310,938

Convertible senior notes
30,360

 
146,773

Other long-term liabilities
76,080

 
39,801

Total liabilities
1,188,512

 
1,287,421

 
 
 
 
Stockholders' equity:
 
 
 
Preferred stock, $.01 par value; 30,000,000 shares authorized; issued and outstanding - none

 

Class A Stock, convertible, $.001 par value; 40,000,000 shares authorized; shares issued and outstanding - 1,951,868 in 2015 and 1,973,368 in 2014
2

 
2

Common Stock, $.001 par value; 320,000,000 shares authorized; shares issued - 105,106,034 in 2015 and 102,475,154 in 2014
105

 
102

Additional paid-in capital
3,118,969

 
2,450,782

Retained earnings
487,308

 
216,644

Accumulated other comprehensive income
19,153

 
52,251

Treasury stock, at cost; 3,416,788 shares in 2015 and 2,017,732 in 2014
(287,079
)
 
(169,530
)
Total stockholders' equity
3,338,458

 
2,550,251

Total liabilities and stockholders' equity
$
4,526,970

 
$
3,837,672

 
 
 
 
The accompanying notes are an integral part of the financial statements.

3



REGENERON PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
(In thousands, except per share data)
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2015
 
2014
 
2015
 
2014
Statements of Operations
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
Net product sales
 
$
657,819

 
$
418,022

 
$
1,202,392

 
$
780,400

Sanofi collaboration revenue
 
195,110

 
142,595

 
368,466

 
273,103

Bayer HealthCare collaboration revenue
 
134,237

 
97,295

 
258,083

 
222,607

Technology licensing and other revenue
 
11,451

 
7,788

 
39,288

 
15,330

 
 
998,617

 
665,700

 
1,868,229

 
1,291,440

 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
Research and development
 
390,330

 
294,501

 
733,443

 
581,880

Selling, general, and administrative
 
174,588

 
96,730

 
333,579

 
199,957

Cost of goods sold
 
60,855

 
29,945

 
103,425

 
57,418

Cost of collaboration and contract manufacturing
 
27,985

 
16,434

 
69,370

 
32,533

 
 
653,758

 
437,610

 
1,239,817

 
871,788

 
 
 
 
 
 
 
 
 
Income from operations
 
344,859

 
228,090

 
628,412

 
419,652

 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
Investment and other income
 
1,849

 
1,677

 
1,930

 
2,614

Interest expense
 
(2,748
)
 
(10,177
)
 
(8,917
)
 
(21,790
)
Loss on extinguishment of debt
 
(15,964
)
 
(10,787
)
 
(16,906
)
 
(10,787
)
 
 
(16,863
)
 
(19,287
)
 
(23,893
)
 
(29,963
)
 
 
 
 
 
 
 
 
 
Income before income taxes
 
327,996

 
208,803

 
604,519

 
389,689

 
 
 
 
 
 
 
 
 
Income tax expense
 
(133,353
)
 
(112,452
)
 
(333,855
)
 
(225,033
)
 
 
 
 
 
 
 
 
 
Net income
 
$
194,643

 
$
96,351

 
$
270,664

 
$
164,656

 
 
 
 
 
 
 
 
 
Net income per share - basic
 
$
1.89

 
$
0.96

 
$
2.64

 
$
1.65

Net income per share - diluted
 
$
1.69

 
$
0.85

 
$
2.35

 
$
1.46

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding - basic
 
102,886

 
100,391

 
102,558

 
100,085

Weighted average shares outstanding - diluted
 
115,259

 
113,032

 
114,962

 
113,121

 
 
 
 
 
 
 
 
 
Statements of Comprehensive Income
 
 
 
 
 
 
 
 
Net income
 
$
194,643

 
$
96,351

 
$
270,664

 
$
164,656

Other comprehensive (loss) income:
 
 
 
 
 
 
 
 
Unrealized (loss) gain on marketable securities, net of tax
 
(28,751
)
 
2,798

 
(33,098
)
 
5,451

Comprehensive income
 
$
165,892

 
$
99,149

 
$
237,566

 
$
170,107

 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of the financial statements.


4



REGENERON PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
 
 
Six Months Ended
June 30,
 
 
2015
 
2014
Cash flows from operating activities:
 
 
 
 
Net income
 
$
270,664

 
$
164,656

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
31,325

 
24,546

Non-cash compensation expense
 
198,016

 
140,613

Non-cash interest expense
 
2,745

 
10,871

Loss on extinguishment of debt
 
16,906

 
10,787

Other non-cash charges and expenses, net
 
17,627

 
6,598

Deferred taxes
 
(59,069
)
 
(19,092
)
Changes in assets and liabilities:
 
 
 
 
(Increase) decrease in Sanofi, Bayer HealthCare, and trade accounts receivable
 
(418,753
)
 
84,776

Increase in inventories
 
(49,852
)
 
(37,295
)
Decrease (increase) in prepaid expenses and other assets
 
33,842

 
(29,446
)
(Decrease) increase in deferred revenue
 
(16,685
)
 
16,105

Increase in accounts payable, accrued expenses, and other liabilities
 
129,338

 
16,820

Total adjustments
 
(114,560
)
 
225,283

Net cash provided by operating activities
 
156,104

 
389,939

 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Purchases of marketable securities
 
(340,844
)
 
(374,509
)
Sales or maturities of marketable securities
 
193,769

 
155,850

Capital expenditures
 
(354,055
)
 
(135,695
)
Net cash used in investing activities
 
(501,130
)
 
(354,354
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Proceeds (payments) in connection with facility and capital lease obligations
 
26,780

 
(534
)
Repayments of convertible senior notes
 
(144,001
)
 
(61,125
)
Payments in connection with reduction of outstanding warrants
 
(124,531
)
 
(143,041
)
Proceeds from issuance of Common Stock
 
115,825

 
63,057

Payments in connection with Common Stock tendered for employee tax obligations
 
(35,930
)
 
(64,990
)
Excess tax benefit from stock-based compensation
 
248,718

 
235,575

Net cash provided by financing activities
 
86,861

 
28,942

 
 
 
 
 
Net (decrease) increase in cash and cash equivalents
 
(258,165
)
 
64,527

 
 
 
 
 
Cash and cash equivalents at beginning of period
 
648,719

 
535,608

 
 
 
 
 
Cash and cash equivalents at end of period
 
$
390,554

 
$
600,135

 
 
 
 
 
The accompanying notes are an integral part of the financial statements.


5



REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in thousands, except per share data)

1. Interim Financial Statements
The interim Condensed Consolidated Financial Statements of Regeneron Pharmaceuticals, Inc. ("Regeneron" or the "Company") have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and disclosures necessary for a presentation of the Company's financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, these financial statements reflect all normal recurring adjustments and accruals necessary for a fair statement of the Company's financial position, results of operations, and cash flows for such periods. The results of operations for any interim periods are not necessarily indicative of the results for the full year. The December 31, 2014 Condensed Consolidated Balance Sheet data were derived from audited financial statements, but do not include all disclosures required by accounting principles generally accepted in the United States of America. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.
The previously issued (i) Consolidated Balance Sheet as of December 31, 2014 contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2014, and (ii) Condensed Consolidated Statement of Operations and Comprehensive Income for the three and six months ended June 30, 2014 and Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2014 contained in the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014, have each been revised in this Quarterly Report on Form 10-Q to reflect a correction in the Company's accounting for certain stock option awards. See Note 4.
In addition, the previously issued Consolidated Balance Sheet as of December 31, 2014 has been revised in this Quarterly Report on Form 10-Q to reflect a correction related to the accounting for costs incurred in connection with commercial bulk drug product manufactured by the Company, but not billed, under the Company's collaboration agreements with Sanofi and Bayer HealthCare, and the related tax impacts. The correcting adjustments results in a reduction to both accounts receivable and deferred revenue by $41.0 million , and reduce both income tax assets, net and additional paid-in capital by $14.2 million . The previously issued Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2014 was also revised in this Quarterly Report on Form 10-Q to reflect an $8.6 million increase in cash flows from operating activities and a corresponding reduction in cash flows from financing activities related to the tax impact of these adjustments. These adjustments had no impact on the Company's previously issued Consolidated Statements of Operations and Comprehensive Income in any reporting period. The Company determined that the error is not material to any previously-issued financial statements.
Certain reclassifications have been made to prior period amounts to conform with the current period’s presentation.
2. Product Sales
EYLEA ® net product sales in the United States totaled $654.6 million and $414.8 million for the three months ended June 30, 2015 and 2014, respectively, and $1,195.7 million and $773.8 million for the six months ended June 30, 2015 and 2014, respectively. In addition, ARCALYST ® net product sales totaled $3.2 million for each of the three-month periods ended June 30, 2015 and 2014, respectively, and $6.7 million and $6.6 million for the six months ended June 30, 2015 and 2014, respectively.
The Company recorded 69% and 73% for the three months ended June 30, 2015 and 2014, respectively, and 69% and 76% for the six months ended June 30, 2015 and 2014, respectively, of its total gross product revenue from sales to Besse Medical, a subsidiary of AmerisourceBergen Corporation.

6



REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in thousands, except per share data)


Revenue from product sales is recorded net of applicable provisions for rebates and chargebacks under governmental programs, distribution-related fees, and other sales-related deductions. The following table summarizes the provisions, and credits/payments, for these sales-related deductions during the six months ended June 30, 2015 and 2014.
 
Rebates &
Chargebacks
 
Distribution-
Related
Fees
 
Other Sales-
Related
Deductions
 
Total
Balance as of December 31, 2014
$
3,083

 
$
21,166

 
$
532

 
$
24,781

Provision related to current period sales
25,481

 
54,747

 
3,454

 
83,682

Credits/payments
(23,090
)
 
(36,433
)
 
(3,482
)
 
(63,005
)
Balance as of June 30, 2015
$
5,474

 
$
39,480

 
$
504

 
$
45,458

 
 
 
 
 
 
 
 
Balance as of December 31, 2013
$
4,400

 
$
19,663

 
$
538

 
$
24,601

Provision related to current period sales
14,817

 
36,206

 
818

 
51,841

Credits/payments
(15,077
)
 
(35,449
)
 
(834
)
 
(51,360
)
Balance as of June 30, 2014
$
4,140

 
$
20,420

 
$
522

 
$
25,082

3. Collaboration Agreements
a. Sanofi
Sanofi collaboration revenue, as detailed below, consisted primarily of reimbursement for research and development expenses that the Company incurred, partly offset by sharing of pre-launch commercialization expenses, in connection with the companies' Discovery and Preclinical Development Agreement ("Antibody Discovery Agreement") and License and Collaboration Agreement (each as amended), collectively referred to as the "Antibody Collaboration".
 
 
Three Months Ended
June 30,
Sanofi Collaboration Revenue
 
2015
 
2014
Antibody:
 
 
 
 
Reimbursement of Regeneron research and development expenses
 
$
211,516

 
$
137,893

Reimbursement of Regeneron commercialization-related expenses
 
27,347

 
4,307

Regeneron's share of losses in connection with commercialization of antibodies
 
(46,313
)
 
(4,295
)
Other
 
2,560

 
2,560

Total Antibody
 
195,110

 
140,465

ZALTRAP:
 
 
 
 
Regeneron's share of losses in connection with commercialization of ZALTRAP
 

 
(692
)
Reimbursement of Regeneron research and development expenses
 

 
1,338

Other
 

 
1,484

Total ZALTRAP
 

 
2,130

 
 
$
195,110

 
$
142,595



7



REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in thousands, except per share data)


 
 
Six Months Ended
June 30,
Sanofi Collaboration Revenue
 
2015
 
2014
Antibody:
 
 
 
 
Reimbursement of Regeneron research and development expenses
 
$
380,336

 
$
264,715

Reimbursement of Regeneron commercialization-related expenses
 
35,805

 
5,375

Regeneron's share of losses in connection with commercialization of antibodies
 
(68,718
)
 
(4,295
)
Other
 
5,121

 
5,121

Total Antibody
 
352,544

 
270,916

ZALTRAP:
 
 
 
 
Regeneron's share of losses in connection with commercialization of ZALTRAP
 

 
(3,904
)
Reimbursement of Regeneron research and development expenses
 
686

 
2,430

Other
 
15,236

 
3,661

Total ZALTRAP
 
15,922

 
2,187

 
 
$
368,466

 
$
273,103

Antibodies
Under the Company's November 2007 Antibody Collaboration with Sanofi, as amended, agreed upon worldwide research and development expenses incurred by both companies during the term of the agreement are funded by Sanofi, except that following receipt of the first positive Phase 3 trial results for a co-developed drug candidate, subsequent Phase 3 trial-related costs for that drug candidate ("Shared Phase 3 Trial Costs") are shared 80% by Sanofi and 20% by Regeneron. During the three months ended June 30, 2015 and 2014, the Company recognized as additional research and development expense $22.5 million and $29.1 million , respectively, and during the six months ended June 30, 2015 and 2014, the Company recognized as additional research and development expense $47.5 million and $52.9 million , respectively, of antibody development expenses that the Company was obligated to reimburse to Sanofi related to Praluent ® and sarilumab.
Effective in the second and fourth quarters of 2014, the Company and Sanofi began sharing pre-launch commercialization expenses related to Praluent and sarilumab, respectively, in accordance with the companies’ License and Collaboration Agreement. In July 2015, the U.S. Food and Drug Administration ("FDA") approved Praluent for the treatment of adults with heterozygous familial hypercholesterolemia or clinical atherosclerotic cardiovascular disease, who require additional lowering of low-density lipoprotein ("LDL") cholesterol.
In May 2013, the Company acquired from Sanofi full exclusive rights to antibodies targeting the platelet derived growth factor (PDGF) family of receptors and ligands in ophthalmology. With respect to PDGF antibodies, the Company made two $5.0 million development milestone payments to Sanofi in the first quarter of 2014 and a $10.0 million development milestone payment to Sanofi in the second quarter of 2015, each of which was recorded as research and development expense. The Company is also obligated to pay up to $20.0 million in additional potential development milestones as well as royalties on any future sales of PDGF antibodies.
In July 2015, in connection with the Company’s new immuno-oncology collaboration with Sanofi, as described below, the Company’s Antibody Discovery Agreement and License and Collaboration Agreement with Sanofi were each amended. In connection with these amendments, Sanofi's funding of the Company’s antibody discovery activities under the existing Antibody Collaboration will be reduced from $160.0 million to $145.0 million in 2015, and from $160.0 million to $130.0 million in both 2016 and 2017, or an aggregate reduction of $75.0 million over this three -year period. In addition, the Company's discovery activities to identify and validate potential drug discovery targets in the field of immuno-oncology and develop fully human monoclonal antibodies against these targets will now be funded by Sanofi under the terms of the companies’ new immuno-oncology collaboration.

8



REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in thousands, except per share data)


ZALTRAP ®  
In September 2003, the Company entered into a collaboration agreement ("ZALTRAP Collaboration Agreement") with Aventis Pharmaceuticals Inc. (predecessor to Sanofi U.S.) to jointly develop and commercialize ZALTRAP. Under the terms of the ZALTRAP Collaboration Agreement, as amended, Regeneron and Sanofi shared co-promotion rights and profits and losses on sales of ZALTRAP outside of Japan, and the Company was entitled to receive a percentage of sales of ZALTRAP in Japan. Sanofi commenced sales of ZALTRAP (ziv-aflibercept) Injection for Intravenous Infusion, in combination with 5-fluorouracil, leucovorin, irinotecan ("FOLFIRI"), for patients with metastatic colorectal cancer ("mCRC") that is resistant to or has progressed following an oxaliplatin-containing regimen, in the United States in the third quarter of 2012 and in certain European and other countries in the first quarter of 2013.
In February 2015, the Company and Sanofi entered into an amended and restated ZALTRAP agreement ("Amended ZALTRAP Agreement"), with an effective date of July 1, 2014. Under the terms of the Amended ZALTRAP Agreement, Sanofi is solely responsible for the development and commercialization of ZALTRAP for cancer indications worldwide. Sanofi bears the cost of all development and commercialization activities and reimburses Regeneron for its costs for any such activities. Sanofi pays the Company a percentage of aggregate net sales of ZALTRAP during each calendar year, which percentage shall be from 15% to 30% , depending on the aggregate net sales of ZALTRAP in such calendar year. The Company will also be paid for all quantities of ZALTRAP manufactured by it, pursuant to a supply agreement, through the earlier of 2021 or the date Sanofi receives regulatory approval to manufacture ZALTRAP at one of its facilities, or a facility of a third party. In addition, Regeneron no longer has a contingent contractual obligation to reimburse Sanofi for 50% of the development expenses that Sanofi previously funded for the development of ZALTRAP under the ZALTRAP Collaboration Agreement. Unless terminated earlier in accordance with its provisions, the Amended ZALTRAP Agreement will continue to be in effect until such time as neither Sanofi nor its affiliates or sublicensees is developing or commercializing ZALTRAP.
As a result of entering into the Amended ZALTRAP Agreement, in the first quarter of 2015, the Company recognized $14.9 million of collaboration revenue, which was previously recorded as deferred revenue under the ZALTRAP Collaboration Agreement, related to (i) amounts that were previously reimbursed by Sanofi for manufacturing commercial supplies of ZALTRAP since the risk of inventory loss no longer existed, and (ii) the unamortized portion of up-front payments from Sanofi as the Company had no further performance obligations. In addition, during the three and six months ended June 30, 2015, the Company recorded $3.2 million and $23.0 million , respectively, in technology licensing and other revenue, primarily related to (i) revenues earned from Sanofi based on a percentage of net sales of ZALTRAP and (ii) revenues earned from Sanofi for manufacturing ZALTRAP commercial supplies.
Immuno-Oncology
In July 2015, the Company and Sanofi entered into a global strategic collaboration to discover, develop, and commercialize antibody-based cancer treatments in the field of immuno-oncology (the "IO Collaboration"). The IO Collaboration is governed by an Immuno-oncology Discovery and Development Agreement ("IO Discovery Agreement"), and an Immuno-oncology License and Collaboration Agreement ("IO License and Collaboration Agreement"). In connection with the IO Discovery Agreement, Sanofi will make a $265.0 million non-refundable upfront payment to the Company. Pursuant to the IO Discovery Agreement, the Company will spend up to $1,090.0 million to identify and validate potential immuno-oncology targets and develop therapeutic antibodies against such targets through clinical proof-of-concept. Sanofi will reimburse the Company for up to $825.0 million ("IO Discovery Funding") of these costs, subject to certain annual limits, which consists of (i) $750.0 million in new funding and (ii) $75.0 million of funding that would have otherwise been available to Regeneron under the existing Antibody Discovery Agreement, as described above. The term of the IO Discovery Agreement will continue through the later of five years from the effective date of the IO Collaboration or the date the IO Discovery Funding is exhausted, subject to Sanofi’s option to extend it for up to an additional three years for the continued development (and funding) of selected ongoing programs. Pursuant to the IO Discovery Agreement, the Company will be primarily responsible for the design and conduct of all research activities, including target identification and validation, antibody development, preclinical activities, toxicology studies, manufacture of preclinical and clinical supplies, filing of Investigational New Drug ("IND") Applications, and clinical development through proof-of-concept. The Company will reimburse Sanofi for half of the development costs they funded that are attributable to clinical development of antibody product candidates under the IO Discovery Agreement from Regeneron's share of future profits to the extent they are sufficient for this purpose. However, the Company is not required to apply more than 10% of its share of the profits from IO Collaboration products in any calendar quarter towards reimbursing Sanofi for these development costs. With regard to product candidates for which proof-of-concept is established, Sanofi will have the option to license rights to the candidate pursuant to the IO License and Collaboration Agreement (as further described below). If Sanofi does not exercise its option to license rights to a

9



REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in thousands, except per share data)


product candidate, the Company will retain the exclusive right to develop and commercialize such product candidate and Sanofi will be entitled to receive a royalty on sales.
In connection with the IO License and Collaboration Agreement, Sanofi will make a $375.0 million non-refundable upfront payment to the Company. If Sanofi exercises its option to license rights to a product candidate thereunder, it will co-develop the drug candidate with the Company through product approval. Principal control of development of each product candidate that enters development under the IO License and Collaboration Agreement will alternate between the Company and Sanofi on a candidate-by-candidate basis. Sanofi will fund drug candidate development costs up front for the candidates for which it is the principal controlling party and the Company will reimburse half of the total development costs for all such candidates from its share of future profits to the extent they are sufficient for this purpose, subject to the same 10% reimbursement limitation described above. In addition, Sanofi and the Company will share equally, on an ongoing basis, the development costs for the drug candidates for which the Company is the principal controlling party. The party having principal control over the development of a product candidate will also lead the commercialization activities for such product candidate in the United States. For all products commercialized under the IO License and Collaboration Agreement, Sanofi will lead commercialization activities outside of the United States. Each party will have the right to co-promote licensed products in countries where it is not the lead commercialization party. The parties will share equally in any profits from worldwide sales of collaboration products. Regeneron is obligated to use commercially reasonable efforts to supply clinical requirements of each drug candidate under the IO License and Collaboration Agreement until commercial supplies of that IO drug candidate are being manufactured.
Under the terms of the IO License and Collaboration Agreement, the parties will also co-develop the Company’s antibody product candidate targeting the receptor known as Programmed Cell Death protein 1, or PD-1 ("REGN2810"). The parties will share equally, on an ongoing basis, development expenses for REGN2810 up to a total of $650.0 million . The Company will have principal control over the development of REGN2810 and will lead commercialization activities in the United States, subject to Sanofi’s right to co-promote, while Sanofi will lead commercialization activities outside of the United States and the parties will equally share profits from worldwide sales. The Company will be entitled to a milestone payment of $375.0 million in the event that sales of all licensed products targeting PD-1 (including REGN2810), together with sales of any other products licensed under the IO License and Collaboration Agreement and sold for use in combination with a licensed product targeting PD-1, equal or exceed $2.0 billion in any consecutive twelve -month period.
With respect to each product candidate that enters development under the IO License and Collaboration Agreement, Sanofi or the Company may, by giving twelve months’ notice, opt-out of further development and/or commercialization of the product, in which event the other party will retain exclusive rights to continue the development and/or commercialization of such product.
b. Bayer HealthCare LLC
The Company and Bayer HealthCare globally collaborate on the development and commercialization of EYLEA outside of the United States. In addition, in January 2014, the Company entered into a license and collaboration agreement with Bayer HealthCare governing the joint development and commercialization outside the United States of an antibody product candidate to Platelet Derived Growth Factor Receptor Beta (PDGFR-beta).

10



REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in thousands, except per share data)


The collaboration revenue the Company earned from Bayer HealthCare is detailed below:
 
 
Three Months Ended
June 30,
Bayer HealthCare Collaboration Revenue
 
2015
 
2014
EYLEA:
 
 
 
 
Regeneron's net profit in connection with commercialization of EYLEA outside the United States
 
$
106,631

 
$
66,781

Sales milestones
 

 
15,000

Cost-sharing of Regeneron EYLEA development expenses
 
2,464

 
1,494

Other
 
16,618

 
10,813

Total EYLEA
 
125,713

 
94,088

PDGFR-beta antibody:
 
 
 
 
Cost-sharing of REGN2176-3 development expenses
 
5,926

 
626

Other
 
2,598

 
2,581

Total PDGFR-beta
 
8,524

 
3,207

 
 
$
134,237

 
$
97,295

 
 
Six Months Ended
June 30,
Bayer HealthCare Collaboration Revenue
 
2015
 
2014
EYLEA:
 
 
 
 
Regeneron's net profit in connection with commercialization of EYLEA outside the United States
 
$
196,057

 
$
127,940

Sales milestones
 
15,000

 
45,000

Cost-sharing of Regeneron EYLEA development expenses
 
5,121

 
21,841

Other
 
29,530

 
21,745

Total EYLEA
 
245,708

 
216,526

PDGFR-beta antibody:
 
 
 
 
Cost-sharing of REGN2176-3 development expenses
 
7,180

 
1,139

Other
 
5,195

 
4,942

Total PDGFR-beta
 
12,375

 
6,081

 
 
$
258,083

 
$
222,607

EYLEA outside the United States
In the first quarter of 2015, the Company earned a $15.0 million sales milestone from Bayer HealthCare upon total aggregate net sales of specific commercial supplies of EYLEA outside the United States exceeding $200 million over a twelve -month period. In the first half of 2014, the Company earned three $15.0 million sales milestones from Bayer HealthCare upon total aggregate net sales of EYLEA outside the United States exceeding $500 million , $600 million , and $700 million , respectively, over a twelve -month period.
In January 2014, Bayer HealthCare decided to participate in the global development and commercialization of EYLEA outside the United States for the treatment of macular edema following branch retinal vein occlusion ("BRVO"). In connection with this

11



REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in thousands, except per share data)


decision, Bayer HealthCare reimbursed Regeneron $15.7 million for a defined share of the EYLEA global development costs that the Company had incurred prior to February 2014 for the BRVO indication, which was recognized as Bayer HealthCare collaboration revenue in the first quarter of 2014 and is included with "Cost-sharing of Regeneron EYLEA development expenses" in the table above. In addition, all future agreed upon global EYLEA development expenses incurred in connection with BRVO are being shared equally, and any profits or losses on sales of EYLEA outside of the United States for the treatment of macular edema following BRVO are also shared (for countries other than Japan). The Company is entitled to receive a tiered percentage of EYLEA net sales in Japan.
PDGFR-beta antibody outside the United States
In January 2014, the Company entered into an agreement with Bayer HealthCare governing the joint development and commercialization outside the United States of an antibody product candidate to PDGFR-beta, including in combination with EYLEA, for the treatment of ocular diseases or disorders. In connection with the agreement, Bayer HealthCare made a $25.5 million non-refundable upfront payment to the Company in January 2014, and is obligated to pay 25% of global development costs and 50% of development costs exclusively for the territory outside the United States under the initial development plan. The $25.5 million upfront payment was initially recorded as deferred revenue, and will be recognized as revenue over the related performance period. Bayer HealthCare is also obligated to reimburse the Company for 50% of development milestone payments to Sanofi related to the Company's acquisition of rights to antibodies targeting the PDGF family of receptors in May 2013, as described above. In that regard, Bayer HealthCare made two $2.5 million development milestone payments to the Company in the first quarter of 2014 (both of which, for the purpose of revenue recognition, were not considered substantive) and a $5.0 million development milestone payment to the Company in the second quarter of 2015 (which was recognized as a substantive milestone).
4. Stock-based Compensation
The Company recognizes stock-based compensation expense for grants of stock option awards and restricted stock under the Company's applicable Long-Term Incentive Plan based on the grant-date fair value of those awards. The Company recognized stock-based compensation expense of $94.3 million and $64.8 million for the three months ended June 30, 2015 and 2014, respectively, and $198.0 million and $140.6 million for the six months ended June 30, 2015 and 2014, respectively.
Revisions of Previously-Issued Financial Statements
During the first quarter of 2015, the Company determined that for certain stock option awards granted to an employee in prior periods, the incorrect requisite service period was utilized in determining the period over which the related compensation expense should have been recorded. Such awards were made as part of the Company's annual employee option grants in December of each applicable year. As a result, compensation expense for the three months and years ended December 31, 2014 and 2013 was understated, and compensation expense for the three months ended March 31, 2014 and 2013, June 30, 2014 and 2013, and September 30, 2014 and 2013 was overstated. These revisions consisted entirely of non-cash adjustments, and therefore had no impact on the Company's previously reported total cash flows from operating activities and total cash flows in its Statements of Cash Flows. The Company evaluated the impact of these items on prior periods, assessing materiality quantitatively and qualitatively, and concluded that the errors were not considered to be material to any previously-issued quarterly or annual financial statements. However, the Company concluded that it would revise the applicable prior period amounts in this filing to reflect the impact of these corrections because the cumulative amount of such corrections is expected to be material to the year ending December 31, 2015. The Company's prior-period financial statements will reflect these revisions for the applicable periods presented in future filings.

12



REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in thousands, except per share data)


The table below presents the impact of these revisions, including the related tax effect, on the Company's previously-filed financial statements.
 
December 31, 2014
 
As Previously Reported
 
Adjustments
 
As Revised
Balance Sheet Data:
 
 
 
 
 
Deferred tax assets (noncurrent)
$
266,869

 
$
22,152

 
$
289,021

Total assets
3,871,827

 
22,152

 
3,893,979

Additional paid-in capital
2,404,118

 
60,890

 
2,465,008

Retained earnings
255,382

 
(38,738
)
 
216,644

Total stockholders' equity
2,542,325

 
22,152

 
2,564,477

Total liabilities and stockholders' equity
3,871,827

 
22,152

 
3,893,979

 
Three Months Ended
June 30, 2014
 
Six Months Ended
June 30, 2014
 
As Previously Reported
 
Adjustments
 
As Revised
 
As Previously Reported
 
Adjustments
 
As Revised
Consolidated Statement of Operations Data:
 
 
 
 
 
 
 
 
 
 
 
Selling, general, and administrative
$
102,414

 
$
(5,684
)
 
$
96,730

 
$
211,264

 
$
(11,307
)
 
$
199,957

Total operating expenses
443,294

 
(5,684
)
 
437,610

 
883,095

 
(11,307
)
 
871,788

Income from operations
222,406

 
5,684

 
228,090

 
408,345

 
11,307

 
419,652

Income before income taxes
203,119

 
5,684

 
208,803

 
378,382

 
11,307

 
389,689

Income tax expense
110,384

 
2,068

 
112,452

 
220,204

 
4,829

 
225,033

Net income
92,735

 
3,616

 
96,351

 
158,178

 
6,478

 
164,656

Net income per share - basic
$
0.92

 
$
0.04

 
$
0.96

 
$
1.58

 
$
0.07

 
$
1.65

Net income per share - diluted
$
0.82

 
$
0.03

 
$
0.85

 
$
1.40

 
$
0.06

 
$
1.46

 
Six Months Ended
June 30, 2014
 
As Previously Reported
 
Adjustments
 
As Revised
Consolidated Statement of Cash Flows Data:
 
 
 
 
 
Cash flows from operating activities
 
 
 
 

  Net income
$
158,178

 
$
6,478

 
$
164,656

  Non-cash compensation expense
151,920

 
(11,307
)
 
140,613

  Deferred taxes
(32,543
)
 
4,829

 
(27,714
)

13



REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in thousands, except per share data)


The tables below present the impact of these revisions, including the related tax effects, on additional previously-filed interim and year-end Consolidated Statements of Operations for the three and nine months ended September 30, 2014, and for the three months and year ended December 31, 2014.
 
Three Months Ended
September 30, 2014
 
Nine Months Ended
September 30, 2014
 
As Previously Reported
 
Adjustments
 
As Revised
 
As Previously Reported
 
Adjustments
 
As Revised
Selling, general, and administrative
$
149,748

 
$
(5,745
)
 
$
144,003

 
$
361,012

 
$
(17,052
)
 
$
343,960

Total operating expenses
543,069

 
(5,745
)
 
537,324

 
1,426,164

 
(17,052
)
 
1,409,112

Income from operations
182,719

 
5,745

 
188,464

 
591,064

 
17,052

 
608,116

Income before income taxes
176,078

 
5,745

 
181,823

 
554,460

 
17,052

 
571,512

Income tax expense
96,358

 
2,090

 
98,448

 
316,562

 
6,919

 
323,481

Net income
79,720

 
3,655

 
83,375

 
237,898

 
10,133

 
248,031

Net income per share - basic
$
0.79

 
$
0.04

 
$
0.83

 
$
2.37

 
$
0.10

 
$
2.47

Net income per share - diluted
$
0.70

 
$
0.03

 
$
0.73

 
$
2.10

 
$
0.09

 
$
2.19


 
Three Months Ended
December 31, 2014
 
Year Ended
December 31, 2014
 
As Previously Reported
 
Adjustments
 
As Revised
 
As Previously Reported
 
Adjustments
 
As Revised
Selling, general, and administrative
$
143,743

 
$
31,564

 
$
175,307

 
$
504,755

 
$
14,512

 
$
519,267

Total operating expenses
554,962

 
31,564

 
586,526

 
1,981,126

 
14,512

 
1,995,638

Income from operations
247,367

 
(31,564
)
 
215,803

 
838,431

 
(14,512
)
 
823,919

Income before income taxes
221,287

 
(31,564
)
 
189,723

 
775,747

 
(14,512
)
 
761,235

Income tax expense
111,111

 
(11,483
)
 
99,628

 
427,673

 
(4,564
)
 
423,109

Net income
110,176

 
(20,081
)
 
90,095

 
348,074

 
(9,948
)
 
338,126

Net income per share - basic
$
1.09

 
$
(0.20
)
 
$
0.89

 
$
3.46

 
$
(0.10
)
 
$
3.36

Net income per share - diluted
$
0.96

 
$
(0.18
)
 
$
0.78

 
$
3.07

 
$
(0.09
)
 
$
2.98


14



REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in thousands, except per share data)


5. Net Income Per Share
The Company’s basic net income per share amounts have been computed by dividing net income by the weighted average number of shares of Common Stock and Class A Stock outstanding. Net income per share is presented on a combined basis, inclusive of Common Stock and Class A Stock outstanding, as each class of stock has equivalent economic rights. Diluted net income per share includes the potential dilutive effect of other securities as if such securities were converted or exercised during the period, when the effect is dilutive. The calculations of basic and diluted net income per share are as follows:
 
 
Three Months Ended June 30,
 
 
2015
 
2014
Net income - basic and diluted
 
$
194,643

 
$
96,351

 
 
 
 
 
(Shares in thousands)
 
 
 
 
Weighted average shares - basic
 
102,886

 
100,391

Effect of dilutive securities:
 
 
 
 
Stock options
 
9,438

 
9,359

Restricted stock
 
474

 
405

Warrants
 
2,461

 
2,877

Dilutive potential shares
 
12,373

 
12,641

Weighted average shares - diluted
 
115,259

 
113,032

 
 
 
 
 
Net income per share - basic
 
$
1.89

 
$
0.96

Net income per share - diluted
 
$
1.69

 
$
0.85

 
 
Six Months Ended June 30,
 
 
2015
 
2014
Net income - basic and diluted
 
$
270,664

 
$
164,656

 
 
 
 
 
(Shares in thousands)
 
 
 
 
Weighted average shares - basic
 
102,558

 
100,085

Effect of dilutive securities:
 
 
 
 
Stock options
 
9,441

 
9,615

Restricted stock
 
471

 
403

Warrants
 
2,492

 
3,018

Dilutive potential shares
 
12,404

 
13,036

Weighted average shares - diluted
 
114,962

 
113,121

 
 
 
 
 
Net income per share - basic
 
$
2.64

 
$
1.65

Net income per share - diluted
 
$
2.35

 
$
1.46


15



REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in thousands, except per share data)


Shares which have been excluded from diluted per share amounts because their effect would have been antidilutive include the following:
 
 
Three Months Ended June 30,
(Shares in thousands)
 
2015
 
2014
Stock options
 
3,366

 
3,765

Convertible senior notes
 
1,539

 
4,662

 
 
Six Months Ended June 30,
(Shares in thousands)
 
2015
 
2014
Stock options
 
3,370

 
3,714

Convertible senior notes
 
1,733

 
4,711

6. Marketable Securities
Marketable securities as of June 30, 2015 and December 31, 2014 consist of both debt securities issued by investment grade institutions as well as equity securities. The Company also held restricted marketable securities as of December 31, 2014, consisting of the Company's investment in Avalanche Biotechnologies, Inc. common shares, which were subject to customary transfer restrictions until January 2015 under a lock-up agreement with the underwriters of Avalanche's initial public offering.
The following tables summarize the Company's investments in marketable securities:
 
 
Amortized
 
Unrealized
 
Fair
As of June 30, 2015
 
Cost Basis
 
Gains
 
Losses
 
Value
Unrestricted
 
 
 
 
 
 
 
 
Corporate bonds
 
$
661,084

 
$
256

 
$
(951
)
 
$
660,389

U.S. government and government agency obligations
 
56,998

 
31

 
(24
)
 
57,005

Municipal bonds
 
39,764

 
17

 
(10
)
 
39,771

Equity securities
 
17,005

 
29,119

 

 
46,124

 
 
$
774,851

 
$
29,423

 
$
(985
)
 
$
803,289

 
 
 
 
 
 
 
 
 
As of December 31, 2014
 
 
 
 
 
 
 
 
Unrestricted
 
 
 
 
 
 
 
 
Corporate bonds
 
$
548,832

 
$
136

 
$
(1,462
)
 
$
547,506

U.S. government and government agency obligations
 
28,596

 
3

 
(46
)
 
28,553

Municipal bonds
 
37,044

 
37

 
(43
)
 
37,038

Equity securities
 
2,005

 
5,374

 

 
7,379

 
 
616,477

 
5,550

 
(1,551
)
 
620,476

Restricted
 

 

 

 


Equity securities
 
15,000

 
76,439

 

 
91,439

 
 
$
631,477

 
$
81,989

 
$
(1,551
)
 
$
711,915



16



REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in thousands, except per share data)


The Company classifies its debt security investments based on their contractual maturity dates. The debt securities listed as of June 30, 2015 mature at various dates through August 2024. The fair values of debt security investments by contractual maturity consist of the following:
 
 
June 30, 2015
 
December 31, 2014
Maturities within one year
 
$
213,694

 
$
251,761

Maturities after one year through five years
 
542,369

 
360,208

Maturities after five years through ten years
 
1,102

 
1,128

 
 
$
757,165

 
$
613,097

The following table shows the fair value of the Company’s marketable securities that have unrealized losses and that are deemed to be only temporarily impaired, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.
 
Less than 12 Months
 
12 Months or Greater
 
Total
As of June 30, 2015
Fair Value
 
Unrealized Loss
 
Fair Value
 
Unrealized Loss
 
Fair Value
 
Unrealized Loss
Corporate bonds
$
413,794

 
$
(920
)
 
$
7,602

 
$
(31
)
 
$
421,396

 
$
(951
)
U.S. government and government agency obligations
20,397

 
(24
)
 

 

 
20,397

 
(24
)
Municipal bonds
12,675

 
(10
)
 



 
12,675

 
(10
)
 
$
446,866


$
(954
)
 
$
7,602

 
$
(31
)
 
$
454,468

 
$
(985
)
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
Corporate bonds
$
390,613

 
$
(1,462
)
 

 

 
$
390,613

 
$
(1,462
)
U.S. government and government agency obligations
25,549

 
(46
)
 

 

 
25,549

 
(46
)
Municipal bonds
10,779

 
(43
)
 

 

 
10,779

 
(43
)
 
$
426,941

 
$
(1,551
)
 

 

 
$
426,941

 
$
(1,551
)
For the three and six months ended June 30, 2015 and 2014, total realized gains and losses on sales of marketable securities were not material.
Changes in the Company's accumulated other comprehensive income (loss) for the three and six months ended June 30, 2015 and 2014 related to unrealized gains and losses on available-for-sale marketable securities. For the three and six months ended June 30, 2015 and 2014, amounts reclassified from accumulated other comprehensive income (loss) into investment income in the Company's Statements of Operations were related to realized gains and losses on sales of marketable securities.

17



REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in thousands, except per share data)


7. Fair Value Measurements
The Company’s assets that are measured at fair value on a recurring basis consist of the following:
 
 
 
Fair Value Measurements at Reporting Date Using
As of June 30, 2015
Fair Value
 
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
Available-for-sale marketable securities:
 
 
 
 
 
Unrestricted
 
 
 
 
 
Corporate bonds
$
660,389

 

 
$
660,389

U.S. government and government agency obligations
57,005

 

 
57,005

Municipal bonds
39,771

 

 
39,771

Equity securities
46,124

 
$
46,124

 

 
$
803,289

 
$
46,124

 
$
757,165

 
 
 
 
 
 
As of December 31, 2014
 
 
 
 
 
Available-for-sale marketable securities:
 
 
 
 
 
Unrestricted
 
 
 
 
 
Corporate bonds
$
547,506

 

 
$
547,506

U.S. government and government agency obligations
28,553

 

 
28,553

Municipal bonds
37,038

 

 
37,038

Equity securities
7,379

 
$
7,379

 

 
620,476

 
7,379

 
613,097

Restricted
 
 
 
 
 
Equity securities
91,439

 

 
91,439

 
$
711,915

 
$
7,379

 
$
704,536

Marketable securities included in Level 2 are valued using quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or model-based valuations in which significant inputs used are observable. The Company considers market liquidity in determining the fair value for these securities. The Company did no t record any charges for other-than-temporary impairment of its Level 2 marketable securities during the three and six months ended June 30, 2015 and 2014 .
There were no purchases, sales, or maturities of Level 3 marketable securities and no unrealized gains or losses related to Level 3 marketable securities for the three and six months ended June 30, 2015 and 2014 . During the six months ended June 30, 2015, transfers of marketable securities from Level 2 to Level 1 were $91.4 million in connection with the lapse of the transfer restrictions on the Company's investment in Avalanche common shares in January 2015. The Company's policy for recognition of transfers between levels of the fair value hierarchy is to recognize any transfer at the beginning of the fiscal quarter in which the determination to transfer was made. There were no other transfers of marketable securities between Levels 1, 2, or 3 classifications during the six months ended June 30, 2015, and there were no transfers of marketable securities between Levels 1, 2, or 3 classifications during the six months ended June 30, 2014.

18



REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in thousands, except per share data)


As of June 30, 2015 and December 31, 2014 , the Company had $33.3 million and $169.4 million , respectively, in aggregate principal amount of 1.875% convertible senior notes (the "Notes") that will mature on October 1, 2016 unless earlier converted or repurchased. As described in Note 10, a portion of the Notes was surrendered for conversion during the first half of 2015. The fair value of the outstanding Notes was estimated to be $201.6 million and $819.8 million as of June 30, 2015 and December 31, 2014 , respectively, and was determined based on Level 2 inputs, such as market and observable sources.
Additionally, as described in Note 10, pursuant to a November 2014 amendment agreement with a warrant holder, a portion of the Company's warrants were classified as a liability and measured at fair value as of December 31, 2014. The fair value of this liability was estimated to be $87.5 million as of December 31, 2014 , and was determined based on Level 2 inputs, such as market and observable sources. During the first quarter of 2015, upon expiration of the November 2014 amendment agreement, the remaining warrants were re-measured at fair value and reclassified back to additional paid-in capital.
8. Inventories
Inventories consist of the following:
 
June 30,
 
December 31,
 
2015
 
2014
Raw materials
$
20,999

 
$
10,923

Work-in-process
111,564

 
73,519

Finished goods
9,495

 
10,768

Deferred costs
29,208

 
33,651

 
$
171,266

 
$
128,861

Deferred costs represent the costs of product manufactured and shipped to the Company's collaborators for which recognition of revenue has been deferred. For the three months ended June 30, 2015 and 2014, cost of goods sold included inventory write-downs and reserves totaling $6.4 million and $0.8 million , respectively. For the six months ended June 30, 2015 and 2014, cost of goods sold included inventory write-downs and reserves totaling $8.1 million and $1.9 million , respectively.
9. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following:
 
June 30,
 
December 31,
 
2015
 
2014
Accounts payable
$
130,016

 
$
99,508

Accrued payroll and related costs
83,105

 
92,778

Accrued clinical trial expense
48,084

 
41,555

Accrued sales-related charges, deductions, and royalties
196,095

 
133,085

Other accrued expenses and liabilities
72,205

 
116,563

 
$
529,505

 
$
483,489

10. Debt
a. Convertible Debt
In the first half of 2015, the Company settled conversion obligations for $144.0 million principal amount of the Company's Notes that was previously surrendered for conversion. As of June 30, 2015, an aggregate principal amount of $33.3 million of the original $400.0 million aggregate principal amount of Notes remained outstanding. In accordance with the terms of the Notes, the

19



REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in thousands, except per share data)


Company elected to settle these conversion obligations through a combination of cash, in an amount equal to the principal amount of the converted Notes, and shares of the Company's Common Stock in respect of any amounts due in excess thereof. Consequently, in the first half of 2015, the Company paid $144.0 million in cash and issued 1,399,069 shares of Common Stock. In addition, in the first half of 2015, the Company allocated $694.7 million of the settlement consideration provided to the Note holders to the reacquisition of the equity component of the Notes, and recognized such amount as a reduction of stockholders' equity, and recognized a $16.9 million loss on the debt extinguishment.
In connection with the initial offering of the Notes in October 2011, the Company entered into convertible note hedge and warrant transactions with multiple counterparties, which were recorded to additional paid-in capital. As a result of the Note conversions described above, in the first half of 2015, the Company also exercised a proportionate amount of its convertible note hedges, for which the Company received 1,399,056 shares of Common Stock, which was approximately equal to the number of shares the Company was required to issue to settle the non-cash portion of the related Note conversions. The Company recorded the cost of the shares received, or $117.5 million , as Treasury Stock during the first half of 2015.
In the first half of 2014, the Company settled conversion obligations for $61.1 million principal amount of the Notes surrendered for conversion. Upon settlement of the Notes during the second quarter of 2014, the Company paid $61.1 million in cash and issued 521,876 shares of Common Stock. In addition, during the second quarter of 2014, the Company allocated $156.7 million of the settlement consideration provided to the Note holders to the reacquisition of the equity component of the Notes, and recognized such amount as a reduction of stockholders' equity, and recognized a $10.8 million loss on the debt extinguishment. In connection with the Note conversions in the first half of 2014, the Company also exercised a proportionate amount of its convertible note hedges, for which the Company received 521,876 shares of Common Stock, which was equivalent to the number of shares the Company was required to issue to settle the non-cash portion of the related Note conversions. The Company recorded the cost of the shares received, or $43.8 million , as Treasury Stock during the first half of 2014.
In November 2014, the Company entered into an amendment agreement with a warrant holder whereby the parties agreed to reduce a portion of the number of warrants held by the warrant holder by up to a maximum of 493,229 . The reduction in the number of warrants was determined based on the number of warrants with respect to which the warrant holder had closed out its hedge position, provided that the warrant holder did not effect any purchases at a price per share exceeding $397.75 per share, during the period starting on November 26, 2014 and ending no later than February 12, 2015. The Company was obligated to settle any payments due under the amendment agreement in February 2015. Given that the amendment agreement contained a conditional obligation that required settlement in cash, and the Company's obligation was indexed to the Company's share price, the Company reclassified the estimated fair value of the 493,229 warrants from additional paid-in capital to a liability in November 2014, with such liability subsequently measured at fair value with changes in fair value recognized in earnings. As a result of the warrant holder closing out a portion of its hedge position prior to December 31, 2014, the Company recorded a $59.8 million accrued liability as of December 31, 2014 in connection with the warrant holder reducing the number of warrants it held. During the first quarter of 2015, the warrant holder closed out additional portions of its hedge position, and, as a result, in February 2015 the Company paid a total of $124.0 million to reduce the number of warrants held by such warrant holder by 416,480 . Upon expiration of the November 2014 amended agreement, the remaining warrants were re-measured at fair value, and $23.3 million was reclassified back to additional paid-in capital, consistent with the original classification of the warrants under the 2011 issuance. Total losses related to changes in fair value of the warrants during the first quarter of 2015 were not material.
During the first half of 2014, the Company entered into agreements to reduce the number of warrants held by warrant holders. Pursuant to the agreements, the Company paid an aggregate amount of $143.0 million to the warrant holders to reduce the maximum number of shares of Common Stock issuable upon exercise of the warrants by 727,516 in the aggregate.
b. Credit Facility
In March 2015, the Company entered into an agreement with a syndicate of lenders (the "Credit Agreement") which provides for a $750.0 million senior unsecured five -year revolving credit facility (the "Credit Facility"). The Credit Agreement includes an option for the Company to elect to increase the commitments under the Credit Facility and/or to enter into one or more tranches of term loans in the aggregate principal amount of up to $250.0 million subject to the consent of the lenders providing the additional commitments or term loans, as applicable, and certain other conditions. Proceeds of the loans under the Credit Facility may be used to finance working capital needs, and for general corporate or other lawful purposes, of Regeneron and its subsidiaries. The Credit Agreement also provides a $100.0 million sublimit for letters of credit. The Credit Agreement includes an option for the Company to elect to extend the maturity date of the Credit Facility beyond March 2020, subject to the consent of the extending lenders and certain other conditions. Amounts borrowed under the Credit Facility may be prepaid, and the commitments under the Credit Facility may be terminated, at any time without premium or penalty.

20



REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in thousands, except per share data)


Any loans under the Credit Facility have a variable interest rate based on either the London Interbank Offered Rate ("LIBOR") or an alternate base rate, plus an applicable margin that varies with the Company's debt rating and total leverage ratio. The Company had no borrowings outstanding under the Credit Facility as of June 30, 2015.
The Credit Agreement contains financial and operating covenants. Financial covenants include a maximum total leverage ratio and a minimum interest expense coverage ratio. The Company was in compliance with all covenants of the Credit Facility as of June 30, 2015.
11. Income Taxes
The Company is subject to U.S. federal, state, and foreign income taxes. The Company recorded an income tax provision in its Statement of Operations of $133.4 million and $112.5 million for the three months ended June 30, 2015 and 2014, respectively, and $333.9 million and $225.0 million for the six months ended June 30, 2015 and 2014, respectively. The Company's effective tax rate was 40.7% and 53.9% for the three months ended June 30, 2015 and 2014, respectively, and 55.2% and 57.7% for the six months ended June 30, 2015 and 2014, respectively. The Company's effective tax rate for the three and six months ended June 30, 2015 was negatively impacted, compared to the U.S. federal statutory rate, by (i) losses incurred in foreign jurisdictions with rates lower than the U.S. federal statutory rate, (ii) the non-deductible Branded Prescription Drug Fee, and (iii) expiration, at the end of 2014, of the federal tax credit for increased research activities.
The Company's effective tax rate for the three and six months ended June 30, 2014 was negatively impacted by losses incurred in foreign jurisdictions with rates lower than the federal statutory rate and expiration at the end of 2013 of the federal tax credit for increased research activities. In addition, the Company's effective tax rate for the six months ended June 30, 2014 was negatively impacted by New York State tax legislation enacted in the first quarter of 2014. This tax legislation reduced the New York State income tax rate to zero percent for "qualified manufacturers", including Regeneron, effective in 2014; however, it also resulted in the Company reducing its related deferred tax assets as a discrete item in the first quarter of 2014. As a result, this tax legislation caused a net increase in the Company's effective tax rate by 3.9% for the six months ended June 30, 2014.
The Company also recorded an income tax benefit in its Statement of Comprehensive Income of $16.3 million and $18.9 million for the three and six months ended June 30, 2015, in connection with unrealized losses on available-for-sale marketable securities. For both the three and six months ended June 30, 2014, the Company recorded an income tax provision in its Statement of Comprehensive Income of $1.4 million in connection with unrealized gains on available-for-sale marketable securities.
12. Statement of Cash Flows
Supplemental disclosure of non-cash investing and financing activities
Included in accounts payable and accrued expenses as of June 30, 2015 and December 31, 2014 were $67.9 million and $56.2 million , respectively, of accrued capital expenditures. Included in accounts payable and accrued expenses as of June 30, 2014 and December 31, 2013 were $35.1 million and $16.1 million , respectively, of accrued capital expenditures.
Included in accounts payable and accrued expenses as of June 30, 2015 and December 31, 2014 was $2.0 million and $7.5 million , respectively, for the Company's conversion settlement obligation related to the Company's Notes which were surrendered for conversion but not settled as of the end of the respective period. No such amounts were payable as of June 30, 2014 and December 31, 2013.
Included in accounts payable and accrued expenses as of December 31, 2014 was $59.8 million related to the Company's payment obligation for a reduction in the number of warrants based on a warrant holder closing out a portion of its hedge position. Additionally, included within other current liabilities as of December 31, 2014 was $87.5 million in connection with the estimated fair value of the remaining warrant liability. See Note 10. There were no such liabilities recorded in connection with warrants as of June 30, 2015, June 30, 2014, and December 31, 2013.
The Company recognized a facility lease obligation of $20.1 million and $50.6 million during the six months ended June 30, 2015 and 2014, respectively, in connection with capitalizing, on the Company's books, the landlord's costs of constructing new facilities that the Company has leased.

21



REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in thousands, except per share data)


13. Legal Matters
From time to time, the Company is a party to legal proceedings in the course of the Company's business. Costs associated with the Company's involvement in legal proceedings are expensed as incurred.
Proceedings Relating to ' 287 Patent and ' 018 Patent
The Company is a party to patent infringement litigation involving its European Patent No. 1,360,287 (the "'287 Patent") and its U.S. Patent No. 8,502,018 (the "'018 Patent"), both of which concern genetically altered mice capable of producing chimeric antibodies that are part human and part mouse. Chimeric antibody sequences can be used to produce high-affinity fully human monoclonal antibodies. In these proceedings (the "'287 Patent Infringement Litigation" and "'018 Patent Infringement Litigation," respectively), the Company claims infringement of several claims of the '287 Patent and the '018 Patent (as applicable), and seeks, among other types of relief, an injunction and an account of profits in connection with the defendants' infringing acts, which may include, among other things, the making, use, keeping, sale, or offer for sale of genetically engineered mice (or certain cells from which they are derived) that infringe one or more claims of the '287 Patent and the '018 Patent (as applicable). At this time, the Company is not able to predict the outcome of, or an estimate of gain, if any, related to, these proceedings.
Proceedings Relating to PCSK9 Antibody (Praluent)
On October 17, 2014 and October 28, 2014, Amgen Inc. filed complaints against Regeneron, Sanofi, Aventisub LLC (subsequently removed and replaced with Sanofi-Aventis U.S. LLC), and Aventis Pharmaceuticals, Inc. in the United States District Court for the District of Delaware seeking an injunction to prohibit Regeneron and the other defendants from manufacturing, using, offering to sell, or selling within the United States (as well as importing into the United States) Praluent, the antibody to PCSK9 for LDL cholesterol reduction Regeneron is jointly developing with Sanofi. On November 11, 2014 and November 17, 2014 Amgen filed complaints against Regeneron, Sanofi, Sanofi-Aventis U.S. LLC, and Aventis Pharmaceuticals, Inc. in the same court seeking the same relief. Amgen asserts U.S. Patent Nos. 8,563,698, 8,829,165, and 8,859,741 in the first complaint, U.S. Patent Nos. 8,871,913 and 8,871,914 in the second complaint, U.S. Patent No. 8,883,983 in the third complaint, and U.S. Patent No. 8,889,834 in the fourth complaint. Amgen also seeks a judgment of patent infringement of the asserted patents, monetary damages (together with interest), costs and expenses of the lawsuits, and attorneys' fees. On December 15, 2014, all of the four proceedings were consolidated into a single case. In its April 21, 2015 Scheduling Order, the court set a trial date of March 7, 2016. This matter has not yet progressed sufficiently through discovery and/or development of important factual information and legal issues to enable the Company to estimate a range of possible loss, if any.
Proceedings Relating to Patents Owned by Genentech and City of Hope
On July 27, 2015, the Company and Sanofi-Aventis U.S. LLC filed a complaint in the United States District Court for the Central District of California (Los Angeles division) seeking a declaratory judgment of invalidity, as well as non-infringement by the manufacture, use, sale, offer of sale, or importation of Praluent (alirocumab), of U.S. Patent No. 7,923,221 jointly owned by Genentech, Inc. ("Genentech") and City of Hope relating to the production of recombinant antibodies in host cells. On the same day, the Company and Sanofi-Aventis U.S. LLC initiated an inter partes review in the United States Patent and Trademark Office seeking a declaration of invalidity of U.S. Patent No. 6,331,415 jointly owned by Genentech and City of Hope relating to the production of recombinant antibodies in host cells. At this time, the Company is not able to predict the outcome of these proceedings.
14. Recently Issued Accounting Standards
In May 2014, the FASB issued a new standard related to revenue recognition, Revenue from Contracts with Customers , which will replace existing revenue recognition guidance. The new standard requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. To achieve that core principle, an entity must identify the contract(s) with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) the entity satisfies the performance obligation. In July 2015, the FASB decided to delay the effective date of the new standard by one year; as a result, the new standard will be effective for annual and interim reporting periods beginning after December 15, 2017. Early adoption will be permitted, but no earlier than 2017 for calendar year-end entities. The standard allows for two transition methods - retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial adoption. The Company has not yet determined its method of transition and is evaluating the impact that this guidance will have on the Company's financial statements.

22



ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion below contains forward-looking statements that involve risks and uncertainties relating to future events and the future performance of Regeneron Pharmaceuticals, Inc. ("Regeneron," "Company," "we," "us," and "our"), and actual events or results may differ materially from these forward-looking statements. Words such as "anticipate," "expect," "intend," "plan," "believe," "seek," "estimate," variations of such words, and similar expressions are intended to identify such forward-looking statements, although not all forward-looking statements contain these identifying words. These statements concern, and these risks and uncertainties include, among others, the nature, timing, and possible success and therapeutic applications of our products, product candidates, and research and clinical programs now underway or planned, including without limitation Regeneron's human genetics initiative; unforeseen safety issues resulting from the administration of products and product candidates in patients, including serious complications or side effects in connection with the use of our product candidates in clinical trials; the likelihood and timing of possible regulatory approval and commercial launch of our late-stage product candidates and new indications for marketed products, including without limitation Praluent ® (alirocumab) Injection, sarilumab, dupilumab, fasinumab, and REGN2222; ongoing regulatory obligations and oversight impacting our marketed products (such as EYLEA ® (aflibercept) Injection and Praluent), research and clinical programs, and business, including those relating to patient privacy; determinations by regulatory and administrative governmental authorities which may delay or restrict our ability to continue to develop or commercialize our products and product candidates; competing drugs and product candidates that may be superior to our products and product candidates; uncertainty of market acceptance and commercial success of our products and product candidates; our ability to manufacture and manage supply chains for multiple products and product candidates; coverage and reimbursement determinations by third-party payers, including Medicare and Medicaid; unanticipated expenses; the costs of developing, producing, and selling products; our ability to meet any of our sales or other financial projections or guidance, including without limitation capital expenditures and income tax obligations, and changes to the assumptions underlying those projections or guidance; the potential for any license or collaboration agreement, including our agreements with Sanofi and Bayer HealthCare LLC, to be cancelled or terminated without any further product success; and risks associated with intellectual property of other parties and pending or future litigation relating thereto. These statements are made based on management's current beliefs and judgment, and the reader is cautioned not to rely on any such statements. In evaluating such statements, shareholders and potential investors should specifically consider the various factors identified under Part II, Item 1A. "Risk Factors," which could cause actual events and results to differ materially from those indicated by such forward-looking statements. We do not undertake any obligation to update publicly any forward-looking statement, whether as a result of new information, future events, or otherwise.
Overview
Regeneron Pharmaceuticals, Inc. is a fully integrated biopharmaceutical company that discovers, invents, develops, manufactures, and commercializes medicines for the treatment of serious medical conditions. We commercialize medicines for eye diseases, high low-density lipoprotein (LDL) cholesterol, and a rare inflammatory condition and have product candidates in development in other areas of high unmet medical need, including oncology, rheumatoid arthritis (RA), asthma, atopic dermatitis, pain, and infectious diseases.
Our total revenues were $998.6 million in the second quarter and $1,868.2 million in the first half of 2015, compared to $665.7 million in the second quarter and $1,291.4 million in the first half of 2014 . Our net income was $194.6 million , or $1.69 per diluted share, in the second quarter and $270.7 million , or $2.35 per diluted share, in first half of 2015 , compared to net income of $96.4 million , or $0.85 per diluted share, in the second quarter and $164.7 million , or $1.46 per diluted share, in the first half of 2014 . Refer to the "Results of Operations" section below for further details of our financial results.
We currently have three marketed products:
EYLEA (aflibercept) Injection , known in the scientific literature as VEGF Trap-Eye, which is available in the United States, European Union (EU), Japan, and certain other countries outside the United States for the treatment of neovascular age-related macular degeneration (wet AMD), diabetic macular edema (DME), macular edema following central retinal vein occlusion (CRVO), and macular edema following retinal vein occlusion (RVO), which includes macular edema following branch retinal vein occlusion (BRVO). EYLEA is also available in Japan for the treatment of myopic choroidal neovascularization (mCNV) and in the United States for the treatment of diabetic retinopathy in patients with DME. Bayer HealthCare has additional regulatory applications for EYLEA for the treatment of wet AMD, macular edema secondary to CRVO and BRVO, DME, and mCNV pending in other countries. We are collaborating with Bayer HealthCare on the global development and commercialization of EYLEA outside the United States.

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Table of Contents

Praluent (alirocumab) Injection , which is available in the United States for the treatment of adults with heterozygous familial hypercholesterolemia or clinical atherosclerotic cardiovascular disease (ASCVD), who require additional lowering of LDL cholesterol. We are collaborating with Sanofi on the global development and commercialization of Praluent.
ARCALYST ® (rilonacept) Injection for Subcutaneous Use , which is available in the United States for the treatment of Cryopyrin-Associated Periodic Syndromes (CAPS), including Familial Cold Auto-inflammatory Syndrome (FCAS) and Muckle-Wells Syndrome (MWS), in adults and children 12 years and older.
In February 2015, we and Sanofi entered into an amended and restated ZALTRAP ® agreement (Amended ZALTRAP Agreement). Under the terms of the Amended ZALTRAP Agreement, Sanofi is solely responsible for the development and commercialization of ZALTRAP (ziv-aflibercept) Injection for Intravenous Infusion for cancer indications worldwide. Sanofi bears the cost of all development and commercialization activities and reimburses Regeneron for its costs for any such activities. Sanofi pays us a percentage of aggregate net sales of ZALTRAP during each calendar year, which percentage shall be from 15% to 30%, depending on the aggregate net sales of ZALTRAP in such calendar year. Refer to "Collaboration Agreements - Collaborations with Sanofi - ZALTRAP" below for further details of the Amended ZALTRAP Agreement. ZALTRAP is currently available in the United States, EU, and certain other countries for treatment, in combination with 5-fluorouracil, leucovorin, irinotecan (FOLFIRI), of patients with metastatic colorectal cancer (mCRC) that is resistant to or has progressed following an oxaliplatin-containing regimen.
We have 16 product candidates in clinical development, all of which were discovered in our research laboratories. These consist of a Trap-based clinical program and 15 fully human monoclonal antibody product candidates, as summarized below. Each of the antibodies in the table below was generated using our VelocImmune ® technology.






















24


Table of Contents

Trap-based Clinical Programs
EYLEA
In Phase 3 clinical development for the treatment of Neovascular Glaucoma (NVG) (in Japan) in collaboration with Bayer HealthCare. As described below, EYLEA is also being studied in combination with (i) an antibody to Platelet Derived Growth Factor Receptor Beta (PDGFR-beta), and (ii) an antibody to angiopoietin-2 (Ang2).
Antibody-based Clinical Programs in Collaboration with Sanofi
Praluent (alirocumab)
Antibody to PCSK9. In Phase 3 clinical development for LDL cholesterol reduction and for the prevention of cardiovascular events. In the third quarter of 2015, the U.S. Food and Drug Administration (FDA) approved Praluent as an adjunct to diet and maximally tolerated statin therapy for the treatment of adults with heterozygous familial hypercholesterolemia or clinical ASCVD, who require additional lowering of LDL cholesterol.
Sarilumab (REGN88)
Antibody to the interleukin-6 receptor (IL-6R). In clinical development in rheumatoid arthritis (Phase 3) and non-infectious uveitis (Phase 2).
Dupilumab (REGN668)
Antibody to the interleukin-4 receptor (IL-4R) alpha subunit. In clinical development in atopic dermatitis in adults (Phase 3), atopic dermatitis in children (Phase 2), asthma (Phase 3), nasal polyps in patients who also have chronic sinusitis (NPwCS) (Phase 2), and eosinophilic esophagitis (EoE) (Phase 2).
REGN2810
Antibody to programmed cell death protein 1 (PD-1). Phase 1 clinical study in advanced malignancies initiated in the first quarter of 2015.
REGN2222
Antibody to the Respiratory Syncytial Virus-F (RSV-F) protein. Phase 3 clinical study in RSV initiated in the second quarter of 2015. In the fourth quarter of 2014, Sanofi provided notice to Regeneron that it had elected not to continue co-development of REGN2222 effective December 2015, and will be entitled to receive royalties on any future sales of the product candidate.
Antibody-based Clinical Programs in Collaboration with Bayer HealthCare
REGN2176-3
Combination product comprised of an antibody to PDGFR-beta co-formulated with EYLEA for use in ophthalmology, via intravitreal administration. Phase 2 clinical study for the treatment of wet AMD initiated in the second quarter of 2015.
Antibody-based Clinical Programs Developing Independently
Fasinumab (REGN475) *
Antibody to Nerve Growth Factor (NGF). Phase 2b/3 study in pain due to osteoarthritis initiated in the second quarter of 2015; currently on partial clinical hold by the FDA limiting duration of trials in osteoarthritis to 16 weeks.
REGN1500 *
Antibody to Angptl-3. Phase 2 clinical study for the treatment of dyslipidemia in homozygous familial hypercholesterolemia initiated in the first quarter of 2015. Studies are ongoing under a partial clinical hold by the FDA that excludes women of childbearing potential.
REGN1033 *
Antibody to myostatin (GDF8). In Phase 2 clinical development in skeletal muscle disorders. In the second quarter of 2015, Sanofi provided notice to Regeneron that it had elected not to continue co-development of REGN1033.
REGN1908-1909 *
Antibody to Feld1 in Phase 1/Phase 2 clinical development against allergic disease.
REGN1400
Antibody to ErbB3. In Phase 1 clinical development in oncology.
REGN1154 *
Antibody against an undisclosed target. Phase 1 clinical study in Australia completed.
REGN1193 *
Antibody to glucagon receptor (GCGR). In Phase 1 clinical development.
REGN1979
Bispecific antibody against CD20 and CD3. In Phase 1 clinical development for Non-Hodgkin's Lymphoma and Chronic Lymphocytic Leukemia.
REGN910-3 **
Combination product comprised of an antibody to Ang2 co-formulated with EYLEA for use in ophthalmology, via intravitreal administration. In Phase 1 clinical development for the treatment of wet AMD and DME.

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*  Sanofi did not opt-in to or elected not to continue to co-develop the product candidate and we have sole global rights. Under the terms of our agreement, Sanofi is entitled to receive a mid-single digit royalty on future sales of the product candidate.
**  We acquired from Sanofi full exclusive rights to antibodies targeting the Ang2 receptor and ligand in ophthalmology, which were previously included in our antibody collaboration with Sanofi. Under the terms of our agreement, Sanofi is entitled to receive a potential development milestone and royalties on any future sales of the product candidate.
Our core business strategy is to maintain a strong foundation in basic scientific research and discovery-enabling technologies, and to combine that foundation with our clinical development, manufacturing, and commercial capabilities. We are executing our long-term objective to build a successful, integrated, multi-product biopharmaceutical company that provides patients and medical professionals with innovative options for preventing and treating human diseases.
We believe that our ability to develop product candidates is enhanced by the application of our VelociSuite ® technology platforms. Our discovery platforms are designed to identify specific proteins of therapeutic interest for a particular disease or cell type and validate these targets through high-throughput production of genetically modified mice using our VelociGene ® technology to understand the role of these proteins in normal physiology, as well as in models of disease. Our human monoclonal antibody technology ( VelocImmune ) and cell line expression technologies ( VelociMab ®