In addition to our clinical programs, we have research programs focused on angiogenesis, metabolic diseases, muscle atrophy and related disorders, inflammatory conditions, and other diseases and disorders. We also use our Velocigene and Trap technology platforms to discover and develop new product candidates.

      Developing and commercializing new medicines entails significant risk and expense. Since inception we have not generated any sales or profits from the commercialization of any of our product candidates and may never receive such revenues. Before revenues from the commercialization of our product candidates can be realized, we (or our collaborators) must overcome a number of hurdles which include successfully completing research and development and obtaining regulatory approval from the FDA and regulatory authorities in other countries. In addition, the biotechnology and pharmaceutical industries are rapidly evolving and highly competitive, and new developments may render our products and technologies uncompetitive or obsolete.

      From inception on January 8, 1988 through December 31, 2003, we had a cumulative loss of $531.5 million. In the absence of revenues from the commercialization of our product candidates or other sources, the amount, timing, nature, or source of which cannot be predicted, our losses will continue as we conduct our research and development activities. We expect to incur substantial losses over the next several years as we:

      Our activities may expand over time and may require additional resources, and we expect our operating losses to be substantial over at least the next several years. Our losses may fluctuate from quarter to quarter

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      As a company that does not expect to generate product revenues or profits over the next several years, management of cash flow is extremely important. The most significant use of our cash is for research and development activities, which include drug discovery, preclinical studies, clinical trials, and the manufacture of drug supplies for preclinical studies and clinical trials. In 2003, our research and development expenses totaled $136.0 million. We expect these expenses to increase 15-30% in 2004, depending on the progress of our clinical programs. The principal sources of cash to-date have been sales of common equity and convertible debt and funding from our collaborators in the form of up-front payments, research progress payments, contract research and development, purchases of our common stock, and loans. We also receive revenue from contract manufacturing.

      A primary driver of our expenses is our number of full-time employees. Our annual average headcount in 2003 was 675 compared to 643 in 2002 and 550 in 2001. In 2004, we expect our average headcount to increase to between 730 and 750, primarily to support our VEGF Trap and IL-1 Trap clinical programs. In 2003, payroll and related costs accounted for 36% of our total operating expenses. We expect this ratio to decline in 2004, as our clinical expenses grow.

      The planning, execution, and results of our clinical programs are significant factors that can affect our operating and financial results. In our four clinical programs, key 2003 events and 2004 plans are as follows:

      In September 2003, we entered into a major collaboration agreement with Aventis to collaborate on the development and commercialization of the VEGF Trap. Aventis made a non-refundable up-front payment of

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      Under the collaboration agreement, we and Aventis will share co-promotion rights and profits on sales, if any, of the VEGF Trap. Aventis has agreed to make a $25.0 million payment to us upon achievement of an early-stage clinical milestone. We may also receive up to $360.0 million in additional milestone payments upon receipt of specified marketing approvals for up to eight VEGF Trap indications in Europe or the United States. Regeneron has agreed to continue to manufacture clinical supplies of the VEGF Trap at our plant in Rensselaer, New York. Aventis has agreed to be responsible for providing commercial scale manufacturing capacity for the VEGF Trap.

      Under the collaboration agreement, agreed upon development expenses incurred by both companies during the term of the agreement will be funded by Aventis. If the collaboration becomes profitable, we will reimburse Aventis for 50 percent of the VEGF Trap development expenses in accordance with a formula based on the amount of development expenses and our share of the collaboration profits, or at a faster rate at our option.

      Aventis has the right to terminate the agreement without cause with at least twelve months advance notice. Upon termination of the agreement for any reason, any remaining obligation to reimburse Aventis for 50 percent of the VEGF Trap development expenses will also terminate and we will retain all rights to the VEGF Trap.

      In March 2003, we entered into a collaboration agreement with Novartis to jointly develop and commercialize the IL-1 Trap. Novartis made a non-refundable payment of $27.0 million and purchased 7,527,050 newly issued unregistered shares of our Common Stock for $48.0 million. On February 27, 2004, we announced that Novartis had provided notice of its intention not to proceed with the joint development of the IL-1 Trap. Under the terms of the collaboration agreement, Novartis remains obligated to fund agreed upon pre-Phase III IL-1 Trap development expenses during the nine-month notice period before its voluntary termination becomes effective. Novartis and we retain rights under the collaboration agreement to elect to collaborate on the development and commercialization of other IL-1 antagonists being developed independently by the other party that are in earlier stages of development than the IL-1 Trap.

Results of Operations

      Our total revenue increased to $57.5 million in 2003 from $22.0 million in 2002 primarily from the recognition of $21.4 million of revenue related to our collaboration with Novartis on the IL-1 Trap and $14.3 million of revenue related to our collaboration with Aventis on the VEGF Trap. This collaboration revenue, as detailed below, consists partly of reimbursement for research and development expenses and partly of the recognition of revenue related to non-refundable up-front payments. Non-refundable up-front payments

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      Contract manufacturing revenue relates primarily to our long-term agreement with Merck, which expires in October of 2005, unless extended by mutual agreement, to manufacture a vaccine intermediate at our Rensselaer, New York facility. Contract manufacturing revenue decreased to $10.1 million in 2003 from $11.1 million in 2002, due primarily to the receipt of a non-recurring $1.0 million payment in the third quarter of 2002 related to services we provided to Merck in prior years. Revenue and the related manufacturing expense are recognized as product is shipped, after acceptance by Merck. Included in contract manufacturing revenue in 2003 and 2002 are $1.7 million and $1.8 million, respectively, of deferred revenue associated with capital improvement reimbursements paid by Merck prior to commencement of production. This deferred revenue is being recognized as product is shipped to Merck based on the total amount of product expected to be shipped over the life of the agreement.

      Research and development expenses increased to $136.0 million in 2003 from $125.0 million in 2002, due primarily to (i) a $4.5 million increase in payroll related expenses associated with an increase in research, regulatory, and manufacturing personnel, (ii) a $6.3 million increase in lab supply, outside testing, and research contract expenses, and (iii) a $9.0 million increase in facility expenses such as rent, utilities, insurance, and depreciation. These facility related increases were due primarily to the costs associated with the plant expansion in Rensselaer which was completed in 2003 and the leasing of additional warehouse and manufacturing facilities in Rensselaer and office and lab space in Tarrytown during the third quarter of 2002. These increases were partially offset by an $8.8 million decrease in clinical expenses, due primarily to the completion of the double-blind treatment portion of the AXOKINE Phase III trial for the treatment of obesity in January of 2003.

      Contract manufacturing expenses increased to $6.7 million in 2003, compared to $6.5 million in 2002, primarily because we shipped more product to Merck.

      General and administrative expenses increased to $14.8 million in 2003 from $12.5 million in 2002, due primarily to (i) a $1.0 million increase in payroll related costs, (ii) a $0.8 million increase in professional fees, principally associated with legal expenses for general corporate matters and the collaborations with Aventis and Novartis, and (iii) a $0.5 million increase in operating expenses including rent, utilities, supplies, and insurance.

               Other Income and Expense:

      Investment income decreased to $4.5 million in 2003 from $9.5 million in 2002 due to lower effective interest rates on investment securities and lower levels of interest-bearing investments for most of 2003 as we funded our operations. Average investment balances decreased to $156.6 million in 2003 from $264.9 million

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      Our total revenue was $22.0 million in both 2002 and 2001. Contract research and development revenue decreased to $10.9 million in 2002 from $12.1 million in 2001 as revenue from Amgen-Regeneron Partners decreased from $1.2 million in 2001 to approximately $2,000 in 2002, due to the completion of studies conducted on behalf of the partnership. Contract manufacturing revenue, related primarily to our long-term agreement with Merck, increased to $11.1 million in 2002 from $9.9 million in 2001, due primarily to the receipt of a non-recurring $1.0 million payment related to services we provided to Merck in prior years. We shipped similar quantities of product to Merck in 2002 and 2001. Revenue and the related manufacturing expense are recognized as product is shipped, after acceptance by Merck. Included in contract manufacturing revenue in both 2002 and 2001 is $1.8 million of deferred revenue associated with capital improvement reimbursements paid by Merck prior to commencement of production. This deferred revenue is being recognized as product is shipped based on the total amount of product expected to be shipped over the life of the agreement.

      Research and development expenses increased to $125.0 million in 2002 from $92.5 million in 2001, due primarily to (i) a $14.0 million increase in clinical expenses associated primarily with our AXOKINE Phase III clinical trial for the treatment of obesity and our IL-1 Trap Phase II clinical trial for the treatment of rheumatoid arthritis, (ii) an $8.7 million increase in payroll related expenses associated with an increase in research, clinical, regulatory, and manufacturing personnel, (iii) a $4.6 million increase in lab supply, outside testing, and research contract expenses, and (iv) a $5.2 million increase in facility expenses such as rent, utilities, insurance, and depreciation.

      Contract manufacturing expenses were $6.5 million in both 2002 and 2001 primarily because we shipped similar quantities of product to Merck each year.

      General and administrative expenses increased to $12.5 million in 2002 from $9.6 million in 2001, due primarily to (i) a $1.0 million increase in payroll related costs, (ii) an $0.8 million increase in patent prosecution and legal expenses related principally to the expansion of our intellectual property portfolio, (iii) a $0.6 million increase in professional fees related to investor relations services, bank fees, and audit services, and (iv) a $0.5 million increase in operating expenses including rent, utilities, supplies, and insurance.

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      Investment income decreased to $9.5 million in 2002 from $13.2 million in 2001, due to lower effective interest rates on investment securities during the full year 2002. Average investment balances increased to $264.9 million in 2002 from $155.5 million in 2001. Interest expense increased to $11.9 million in 2002 from $2.7 million in 2001, due to interest incurred on the $200.0 million of convertible notes that we issued in October 2001, which mature in 2008 and bear interest at 5.5% per annum.

Liquidity and Capital Resources

      Since our inception in 1988, we have financed our operations primarily through offerings of our equity securities, a private placement of convertible debt, revenue earned under our agreements with Novartis, Aventis, Merck, Procter & Gamble, Serono, Amgen, Sumitomo Chemical Co., and Sumitomo Pharmaceuticals Company, Ltd., and investment income.

      At December 31, 2003, we had $366.6 million in cash, cash equivalents, marketable securities, and restricted marketable securities compared with $295.2 million at December 31, 2002. Restricted marketable securities are pledged U.S. government securities which will be sufficient upon receipt of scheduled principal and interest payments to provide for the payment in full of the interest payments on the convertible senior subordinated notes through 2004. Net cash used in operations was $6.1 million in 2003 versus $110.5 million in 2002. The decrease in cash used in operations during 2003 resulted primarily from the receipt of contract research and development revenue and non-refundable up-front payments associated with the Aventis and Novartis collaborations which began in 2003. The effect of the two agreements on net cash used in operations in 2003 was approximately $134.2 million. The majority of cash used in operations was to fund research and development, primarily related to our VEGF Trap and IL-1 Trap programs.

      In September 2003, the Company entered into a collaboration agreement with Aventis to jointly develop and commercialize the VEGF Trap. Aventis made a non-refundable up-front payment of $80.0 million which was recorded to deferred revenue and is being recognized as contract research and development revenue ratably over the period over which we are obligated to perform services. In 2003, we recognized $3.6 million of revenue related to this up-front payment and we anticipate, based on current VEGF Trap product development plans, that we will recognize approximately $10.9 million of revenue over each of the next 7 years. In addition, Aventis has agreed to fund all development expenses incurred by both companies during the term of the agreement. In 2003, Aventis funded $10.7 million of our VEGF Trap development costs, of which $8.9 million was included in accounts receivable as of December 31, 2003.

      In March 2003, we entered into a collaboration agreement with Novartis to jointly develop and commercialize the IL-1 Trap. Novartis made a non-refundable up-front payment of $27.0 million which was recorded to deferred revenue and is being recognized as contract research and development revenue ratably over the period over which we are obligated to perform services. In 2003, we recognized $4.9 million of revenue related to this up-front payment. Development expenses incurred during 2003 were shared equally by Regeneron and Novartis. In 2003, Novartis agreed to reimburse us for $16.5 million of our IL-1 Trap development costs, of which $3.2 million was included in accounts receivable as of December 31, 2003. On February 27, 2004, we announced that Novartis had provided notice of its intention not to proceed with the joint development of the IL-1 Trap. As a result, we will recognize $22.1 million of revenue in 2004, representing the balance of deferred revenue at December 31, 2003 related to Novartis’ non-refundable up-front payment.

      In 2003, we recorded a non-cash expense of $1.5 million associated with the issuance of our Common Stock in connection with a license agreement entered into with Merck.

      In both 2003 and 2002, we made two semi-annual interest payments totaling $11.0 million per year on our convertible senior subordinated notes.

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      Net cash used in investing activities was $63.8 million in 2003 compared to $58.5 million in 2002. The increase is due primarily to purchases of marketable securities which exceeded sales and/or maturities of marketable securities by $10.0 million. Offsetting this increase was a $4.7 million decrease in cash payments made for capital expenditures due to the completion of the Rensselaer plant expansion in 2003.

      Cash provided by financing activities increased to $108.2 million in 2003 compared to $1.7 million in 2002, due primarily to the sale of stock to Aventis and Novartis in 2003 in association with the collaboration agreements. Aventis purchased 2,799,552 newly issued unregistered shares of our Common Stock for $45.0 million. Novartis purchased 7,527,050 newly issued unregistered shares of our Common Stock for $48.0 million. In addition, in accordance with our collaboration agreement with Novartis, we elected to fund our share of 2003 IL-1 Trap development expenses through a loan from Novartis that will be forgiven, together with accrued interest, should certain preclinical and clinical milestones be reached. If these milestones are not reached, the loan is due and payable on July 1, 2004. As of December 31, 2003, we have drawn $13.7 million, excluding interest, against this loan facility and we have drawn an additional $3.8 million during the first quarter of 2004 for expenses incurred during 2003.

      Under the collaboration agreement with Aventis, we and Aventis will share co-promotion rights and profits on sales, if any, of the VEGF Trap. Aventis has agreed to make a $25.0 million payment to us upon achievement of an early-stage clinical milestone. We may also receive up to $360.0 million in additional milestone payments upon receipt of specified marketing approvals for up to eight VEGF Trap indications in Europe or the United States.

      We have agreed to continue to manufacture clinical supplies of the VEGF Trap at our plant in Rensselaer, New York. Aventis has agreed to be responsible for providing commercial scale manufacturing capacity for the VEGF Trap. Under the collaboration agreement, agreed upon development expenses incurred by both companies during the term of the agreement, including costs associated with the manufacture of clinical drug supply, will be funded by Aventis. If the collaboration becomes profitable, we will reimburse Aventis for 50 percent of the VEGF Trap development expenses in accordance with a formula based on the amount of development expenses and our share of the collaboration profits, or at a faster rate at our option. We have the option to conduct additional pre-Phase III studies at our own expense. In 2003, we incurred and were reimbursed by Aventis for $10.7 million in development expenses related to the VEGF Trap program. In addition to expenses incurred by us in 2003, Aventis incurred $0.1 million in development expenses related to the VEGF Trap program.

      In 2004, we and Aventis plan to invest approximately $100 million to support the development of the VEGF Trap. The broad based development program will include multiple Phase I studies to evaluate the VEGF Trap in combination with other therapies in various cancer indications, Phase II single-agent studies of the VEGF Trap in separate cancer indications, and multiple Phase I studies of the VEGF Trap in certain eye diseases.

      Pursuant to the terms of our collaboration agreement with Novartis, in 2004, Novartis will be responsible for agreed upon pre-Phase III development expenses through the expiration of the nine-month termination notice period, which ends at the end of November 2004. In addition, a loan totaling $17.5 million as of March 3, 2004 that relates to our share of 2003 development expense will be forgiven, together with accrued interest, should we meet certain milestones. Otherwise, the loan is due and payable on July 1, 2004.

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      Under the Novartis agreement, Novartis and we retain rights under the collaboration agreement to elect to collaborate on the development and commercialization of other IL-1 antagonists being developed independently by the other party that are in earlier stages of development than the IL-1 Trap.

      In August 2003, Merck granted to us a non-exclusive license to certain patents and patent applications which may be used in the development and commercialization of AXOKINE. As consideration, we issued to Merck 109,450 newly issued unregistered shares of our Common Stock (the Merck Shares), valued at $1.5 million based on the fair market value of shares of our Common Stock on the agreement’s effective date. The agreement requires us to make an additional payment to Merck upon receipt of marketing approval for a product covered by the licensed patents. In addition, we would be required to pay royalties, at staggered rates in the mid-single digits, based on the net sales of products covered by the licensed patents.

      At any time prior to the date that Merck has the right to sell the Merck Shares under the Securities Act of 1933 (the Sales Date), we have the right to buy back the Merck Shares from Merck for a purchase price equal to the greater of (a) $1.5 million and (b) the lesser of (i) the fair market value of the shares and (ii) $1.65 million. Unless Regeneron has previously exercised its right to buy back the Merck Shares, on the Sales Date if the fair market value of the Merck Shares (the Market Price) is less than $1.5 million, we will be required to make a cash payment to Merck equal to the difference between the Market Price and $1.5 million. Conversely, if on the Sales Date the Market Price is greater than $1.65 million, Merck will be required, at its option, to either (i) make a cash payment to us equal to the difference between the Market Price and $1.65 million (the Excess Amount) or (ii) return a number of the Merck Shares to us, calculated by dividing the Excess Amount by the fair market value of a share of our Common Stock on the Sales Date. The fair market value of the shares, based on our closing Common Stock price at December 31, 2003, was $1.6 million.

      In 2001, we issued $200.0 million aggregate principal amount of convertible senior subordinated notes in a private placement and received proceeds, after deducting the initial purchasers’ discount and out-of pocket expenses, of $192.7 million. The notes bear interest at 5.5% per annum, payable semi-annually and mature in 2008. The notes are convertible into shares of our Common Stock at a conversion price of approximately $30.25 per share, subject to adjustment in certain circumstances. We may redeem the notes, in whole or in part, at any time before October 17, 2004, if the closing price of our Common Stock has exceeded 150% of the conversion price then in effect for a specified period of time. Upon any such redemption, we are required to pay interest that would have been due up through October 17, 2004. We may also redeem some or all of the notes at any time on or after October 17, 2004, if the closing price of our Common Stock has exceeded 140% of the conversion price then in effect for a specified period of time.

      As part of this transaction, we pledged $31.6 million of U.S. government securities which will be sufficient upon receipt of scheduled principal and interest payments to provide for the payment in full of the first six scheduled interest payments on the notes when due.

      Our additions to property, plant, and equipment totaled $16.9 million in 2003, $45.9 million in 2002, and $9.5 million in 2001, including a total over the three years of $50.2 million related to the expansion of our manufacturing facilities in Rensselaer, New York. In 2004, we expect to incur approximately $10 million to $15 million in capital expenditures which primarily consists of equipment for our expanded manufacturing, research, and development activities, a portion of which will be reimbursed by Aventis.

      Our total expenses for research and development from inception through December 31, 2003 have been approximately $721 million. We have not historically segregated all the costs associated with each of our

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      We expect to continue to incur substantial funding requirements primarily for research and development activities (including preclinical and clinical testing). We currently anticipate that in 2004 approximately 50-70% of our expenditures will be directed toward the preclinical and clinical development of product candidates, including the VEGF Trap, IL-1 Trap, IL-4/ 13 Trap, and AXOKINE; approximately 10-20% of our expenditures will cover our basic research activities and the continued development of our novel technology platforms; and the remainder of our expenditures will be for capital expenditures and general corporate purposes, including working capital.

      In connection with our funding requirements, the following table summarizes our contractual obligations as of December 31, 2003 for leases and long-term debt. None of these obligations extend beyond 5 years.

      In January 2004, the Company amended its Tarrytown lease and exercised its option to extend the lease for certain parts of the leased space through December 2009. The amended lease contains renewal options for certain parts of the leased space through December 2014.

      The amount we need to fund operations will depend on various factors, including the status of competitive products, the success of our research and development programs, the potential future need to expand our professional and support staff and facilities, the status of patents and other intellectual property rights, the delay or failure of a clinical trial of any of our potential drug candidates, and the continuation, extent, and success of any collaborative research and development collaborations (including those with Aventis, Procter & Gamble, Medarex, and Emisphere). Clinical trial costs are dependent, among other things, on the size and duration of trials, fees charged for services provided by clinical trial investigators and other third parties, the costs for manufacturing the product candidate for use in the trials, supplies, laboratory tests, and other expenses. The amount of funding that will be required for our clinical programs depends upon the results of our research and preclinical programs and early-stage clinical trials, regulatory requirements, the clinical trials underway plus additional clinical trials that we decide to initiate, and the various factors that affect the cost of each trial as described above. In the future, if we are able to successfully develop, market, and sell certain of our product candidates, we may be required to pay royalties or otherwise share the profits generated on such sales in connection with our collaboration and licensing agreements.

      We expect that expenses related to the filing, prosecution, defense, and enforcement of patent and other intellectual property claims will continue to be substantial as a result of patent filings and prosecutions in the United States and foreign countries.

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      We believe that our existing capital resources will enable us to meet operating needs through at least the end of 2005. However, this is a forward-looking statement based on our current operating plan, and there may be a change in projected revenues or expenses that would lead to our capital being consumed significantly before such time. If there is insufficient capital to fund all of our planned operations and activities, we believe we would prioritize available capital to fund preclinical and clinical development of our product candidates. We have no off-balance sheet arrangements and do not guarantee the obligations of any other entity. As of December 31, 2003, we had no established banking arrangements through which we could obtain short-term financing or a line of credit. In the event we need additional financing for the operation of our business, we will consider collaborative arrangements and additional public or private financing, including additional equity financing. Factors influencing the availability of additional financing include our progress in product development, investor perception of our prospects, and the general condition of the financial markets. We may not be able to secure the necessary funding through new collaborative arrangements or additional public or private offerings. If we cannot raise adequate funds to satisfy our capital requirements, we may have to delay, scale-back, or eliminate certain of our research and development activities or future operations. This could harm our business.

Critical Accounting Policies and Significant Judgments and Estimates

      We recognize revenue from contract research and development and research progress payments in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition (SAB 104) and Emerging Issues Task Force 00-21, Accounting for Revenue Arrangements with Multiple Deliverables (EITF 00-21). During the third quarter of 2003, we elected to change the method we use to recognize revenue under SAB 104 related to non-refundable collaborator payments, including up-front licensing payments, payments for development activities, and research progress (milestone) payments, to the Substantive Milestone Method, adopted retroactively to January 1, 2003. Under this method, we recognize revenue from non-refundable up-front license payments, not tied to achieving a specific performance milestone, ratably over the period over which we are obligated to perform services. The period over which we are obligated to perform services is estimated based on product development plans. These estimates are likely to change based on the results and progress of clinical trials and drug production. Changes in these estimates could result in a significant change to the amount of revenue recognized in future periods. In addition, if a collaborator terminates the agreement in accordance with the terms of the contract, we would recognize the remainder of the up-front payment at the time of the termination. Payments for development activities are recognized as revenue as earned, ratably over the period of effort. Substantive at-risk milestone payments, which are based on achieving a specific performance milestone, are recognized as revenue when the milestone is achieved and the related payment is due, provided there is no future service obligation associated with that milestone. Previously, we had recognized revenue from non-refundable collaborator payments based on the percentage of costs incurred to date, estimated costs to complete, and total expected contract revenue. However, the revenue recognized was limited to the amount of non-refundable payments received. The change in accounting method was made because we believe that it better reflects the substance of our collaborative agreements and is more consistent with current practices in the biotechnology industry.

      We have entered into a contract manufacturing agreement with Merck under which we manufacture a vaccine intermediate at our Rensselaer, New York facility and perform services. We recognize contract manufacturing revenue from this agreement after the product is tested and approved by, and shipped (FOB Shipping Point) to, Merck, and as services are performed. In connection with the agreement, we agreed to modify portions of our Rensselaer facility to manufacture Merck’s vaccine intermediate and Merck agreed to reimburse us for the related capital costs. These capital cost payments were deferred and are recognized as revenue as product is shipped to Merck, based upon our estimate of Merck’s order quantities each year through the expected end of the agreement. Since we commenced production of the vaccine intermediate in

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      For each clinical trial that we conduct, certain clinical trial costs, which are included in research and development expenses, are expensed based on the expected total number of patients in the trial, the rate at which patients enter the trial, and the period over which clinical investigators or contract research organizations are expected to provide services. We believe that this method best aligns the expenses we record with the efforts we expend on a clinical trial. During the course of a trial, we adjust our rate of clinical expense recognition if actual results differ from our estimates.

      Property, plant, and equipment are stated at cost. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets. Expenditures for maintenance and repairs which do not materially extend the useful lives of the assets are charged to expense as incurred. The cost and accumulated depreciation or amortization of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in operations. The estimated useful lives of property, plant, and equipment are as follows:

      In some situations, the life of the asset may be extended or shortened if circumstances arise that would lead us to believe that the estimated life of the asset has changed. The life of leasehold improvements may change based on the extension of lease contracts with our landlords. Changes in the lives of assets will result in an increase or decrease in the amount of depreciation recognized in future periods. Costs of construction of certain long-lived assets include capitalized interest which is amortized over the estimated useful life of the related asset.

Future Impact of Recently Issued Accounting Standards

      In December 2003, the Staff of the Securities and Exchange Commission issued SAB 104, Revenue Recognition, which supercedes SAB 101, Revenue Recognition in Financial Statements . SAB 104’s primary purpose is to rescind accounting guidance contained in SAB 101 related to multiple element revenue arrangements, superceded as a result of the issuance of EITF 00-21, Accounting for Revenue Arrangements with Multiple Deliverables . Additionally, SAB 104 rescinds the SEC’s Revenue Recognition in Financial Statements Frequently Asked Questions and Answers (the FAQ) issued with SAB 101 that had been codified in SEC Topic 13, Revenue Recognition . Selected portions of the FAQ have been incorporated into SAB 104. While the wording of SAB 104 has changed to reflect the issuance of EITF 00-21, the revenue recognition principles of SAB 101 remain largely unchanged by the issuance of SAB 104. Adoption of SAB 104 was required immediately and did not have a material effect on our financial statements.

      In December 2003, the FASB issued a revision to Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51 (FIN 46R), which was issued in January 2003. FIN 46R clarifies the application of ARB No. 51, Consolidated Financial Statements , to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. FIN 46R requires the consolidation of these entities, known as variable interest entities (VIEs), by the primary beneficiary of the entity. The primary beneficiary is the entity, if any, that will absorb a majority of the entity’s expected losses, receive a majority of the entity’s expected residual returns, or both. Among other changes, the revisions of FIN 46R (i) clarified some requirements of the original FIN 46, which had been issued in January 2003, (ii) eased some implementation problems, and (iii) added new scope exceptions. FIN 46R deferred the

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      In May 2003, the Financial Accounting Standards Board issued Statement No. 150 (SFAS No. 150), Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity . SFAS No. 150 specifies that instruments within its scope embody obligations of the issuer and that the issuer must classify them as liabilities. SFAS No. 150 requires issuers to classify as liabilities the following three types of freestanding financial instruments: (i) mandatorily redeemable financial instruments, (i) obligations to repurchase the issuer’s equity shares by transferring assets, and (iii) certain obligations to issue a variable number of shares. SFAS No. 150 defines a “freestanding financial instrument” as a financial instrument that (i) is entered into separately and apart from any of the entity’s other financial instruments or equity transactions or (ii) is entered into in conjunction with some other transaction and can be legally detached and exercised on a separate basis. For all financial instruments entered into or modified after May 31, 2003, SFAS No. 150 is effective immediately. For all other instruments of public companies, SFAS No. 150 went into effect at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a material impact on our financial statements. In November 2003, the Financial Accounting Standards Board deferred the effective date for selected provisions of SFAS No. 150, limited to mandatorily redeemable noncontrolling interests associated with finite-lived subsidiaries. The deferral of those selected provisions is not expected to have a material impact on our financial statements.

      In November 2002, the FASB issued Interpretation No. 45 (FIN 45), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34 . FIN 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. FIN 45 also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement provisions of FIN 45 are applicable to guarantees issued or modified after December 31, 2002 and did not have a material impact on our financial statements.

Risk Factors

      Regeneron operates in an environment that involves a number of significant risks and uncertainties. We caution you to read the following risk factors, which have affected, and/or in the future could affect, our business, operating results, financial condition, and cash flows. The risks described below include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also impair our business operations. Furthermore, additional risks and uncertainties are included under other captions in this report and should be considered by our investors.

Risks Related to our Financial Results and Need for Additional Financing

      From inception on January 8, 1988 through December 31, 2003, we had a cumulative loss of $531.5 million. If we continue to incur operating losses and fail to become a profitable company, we may be unable to continue our operations. We have no products that are available for sale and do not know when we will have products available for sale, if ever. In the absence of revenue from the sale of products or other sources, the amount, timing, nature, or source of which cannot be predicted, our losses will continue as we conduct our research and development activities. The extent and timing of our future losses and our profitability, if we are ever to become profitable, are highly uncertain.

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      We will need to expend substantial resources for research and development, including costs associated with clinical testing of our product candidates. We believe our existing capital resources will enable us to meet operating needs through at least the end of 2005. However, this is a forward-looking statement based on our current operating plan and we cannot assure you that there will be no change in projected revenue or expenses that would lead to our capital being consumed significantly before such time. We will likely require additional financing in the future and we cannot make assurances that we will be able to raise such additional funds. The sale of equity or convertible debt securities in the future may be dilutive to our shareholders. Debt financing arrangements may require us to pledge certain assets or enter into covenants that would restrict certain business activities or our ability to incur further indebtedness and may contain other terms that are not favorable to our shareholders. We may be unable to raise sufficient funds to complete the development of our product candidates or to continue operations. As a result, we may face delay, reduction, or elimination of our research and development programs or preclinical or clinical trials, in which case our business, financial condition, or results of operations may be materially harmed.

      We have a significant amount of convertible debt and semi-annual interest payment obligations. The debt, unless converted to shares of our common stock, will mature in October 2008. We may be unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments on our debt. Even if we are able to meet our debt service obligations, the amount of debt we already have could hurt our ability to obtain any necessary financing in the future for working capital, capital expenditures, debt service requirements, or other purposes. In addition, our debt obligations could require us to use a substantial portion of cash to pay principal and interest on our debt, instead of applying those funds to other purposes, such as research and development, working capital, and capital expenditures.

Risks Related to Development of our Product Candidates

      Only a small minority of all research and development programs ultimately result in commercially successful drugs. We have never developed a drug that has been approved for marketing and sale and we may never succeed in developing an approved drug. Even if clinical trials demonstrate safety and effectiveness of any of our product candidates for a specific disease and the necessary regulatory approvals are obtained, the commercial success of any of our product candidates will depend upon their acceptance by patients, the medical community, and third-party payors and on our and our partners’ ability to successfully manufacture and commercialize our product candidate. Our product candidates are delivered either by intravenous or subcutaneous injections, which are generally less well received by patients than tablet or capsule delivery. If our products are not successfully commercialized, we will not be able to recover the significant investment we have made in developing such products and our business would be severely harmed.

      We must conduct extensive testing of our product candidates before we can obtain regulatory approval to market and sell them. We need to conduct both preclinical animal testing and human clinical trials. Conducting these trials is a lengthy, time-consuming, and expensive process. These tests and trials may not achieve favorable results for many causes, including, among others, failure of the product candidate to demonstrate safety or efficacy, the development of serious or life-threatening adverse events (or side effects) caused by or connected with exposure to the product candidate, difficulty in enrolling and maintaining subjects in the clinical trial, lack of sufficient supplies of the product candidate, and the failure of clinical investigators, trial monitors and other

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      We would need to reevaluate any drug candidate that did not test favorably and either conduct new trials, which would be expensive and time consuming, or abandon the drug development program. Even if we obtain positive results from preclinical or clinical trials, we may not achieve the same success in future trials. Many companies in the biopharmaceutical industry, including us, have suffered significant setbacks in clinical trials, even after promising results have been obtained in earlier trials. The failure of clinical trials to demonstrate safety and effectiveness for our desired indications could harm the development of the product candidate, and our business, financial condition, and results of operations may be materially harmed.

      During the conduct of clinical trials, patients report changes in their health, including illnesses, injuries, and discomforts to their study doctor. Often, it is not possible to determine whether or not the drug candidate being studied caused these conditions. Various illnesses, injuries, and discomforts have been reported from time-to-time during clinical trials of our product candidates. Although our current drug candidates appeared to be generally well tolerated in clinical trials, it is possible as we test any of them in larger, longer, and more extensive clinical programs, illnesses, injuries, and discomforts that were observed in earlier trials, as well as conditions that did not occur or went undetected in smaller previous trials, will be reported by patients. If additional clinical experience indicates that any of our product candidates has many side effects or causes serious or life-threatening side effects, the development of the product candidate may fail or be delayed, which would severely harm our business.

      Our VEGF Trap is being studied for the potential treatment of certain types of cancer and diseases of the eye. There are many potential safety concerns associated with significant blockade of vascular endothelial growth factor, or VEGF. These safety concerns may limit our ability to successfully develop the VEGF Trap.

      Genentech and Eyetech are developing VEGF inhibiting molecules for certain diseases of the eye that will be delivered by direct administration to the eye. We are studying the VEGF Trap for the potential treatment of certain diseases of the eye through intravitreal injections in the eye or general administration through intravenous infusions or subcutaneous injections. Although we believe that there are potential clinical advantages to general administration over injections directly in the eye (including patient comfort and acceptance), there are unique potential risks to patients associated with systemic blockage of VEGF by intravenous infusions or subcutaneous injections that could limit or end the VEGF Trap development program. These risks, based on the clinical and pre-clinical experience of systemically delivered VEGF inhibitors, include bleeding, hypertension, and proteinuria. In addition, patients given infusions of any protein, including the VEGF Trap, may develop severe hypersensitivity reactions, referred to as infusion reactions. There may be additional complications or side effects that could harm the development of the VEGF Trap for either the treatment of cancer or diseases of the eye.

      In addition to the safety, efficacy, manufacturing, and regulatory hurdles faced by our product candidates, the administration of recombinant proteins frequently causes an immune response, resulting in the creation of antibodies against the therapeutic protein. The antibodies can have no effect or can totally neutralize the effectiveness of the protein, or require that higher doses be used to obtain a therapeutic effect. In some cases,

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      In March 2003, we reported data from the 12-month treatment period of our initial Phase III pivotal trial of AXOKINE. Although the Phase III study met its primary endpoints and many individuals achieved a medically meaningful weight loss, the average weight loss was small and limited by the development of antibodies.

      In October 2003, we reported results from the first Phase II trial of our IL-1 Trap. While patients treated with the highest dose, 100 milligrams of the IL-1 Trap, exhibited improvements in the primary endpoint of the trial, the proportion of ACR 20 responses versus placebo, the results did not achieve statistical significance. We plan to conduct a Phase IIb study of the IL-1 Trap in a larger patient population, testing higher doses than were tested in the previous Phase II trial and for a longer period of time. However, there is no assurance that higher doses will lead to better results than were demonstrated in the previous Phase II trial. In addition, safety or tolerability concerns may arise which limit our ability to deliver higher doses of the IL-1 Trap to patients. We plan to study higher doses of the IL-1 Trap through increased subcutaneous injections and intravenous delivery. Either approach may affect the safety and/or tolerability of the IL-1 Trap, which may limit its commercial potential if the product candidate is ever approved for marketing and sale.

Regulatory and Litigation Risks

      We cannot sell or market products without regulatory approval. If we do not obtain and maintain regulatory approval for our product candidates, the value of our company and our results of operations will be harmed. In the United States, we must obtain and maintain approval from the U.S. Food and Drug Administration, or FDA, for each drug we intend to sell. Obtaining FDA approval is typically a lengthy and expensive process, and approval is highly uncertain. Foreign governments also regulate drugs distributed in their country and approval in any country is likely to be a lengthy and expensive process, and approval is highly uncertain. None of our product candidates has ever received regulatory approval to be marketed and sold in the United States or any other country. We may never receive regulatory approval for any of our product candidates.

      The testing, manufacturing, marketing, and sale of drugs for use in people expose us to product liability risk. We are currently involved in a product liability lawsuit brought by a subject who participated in a clinical trial of one of our drug candidates. Any informed consent or waivers obtained from people who sign up for our clinical trials may not protect us from liability or the cost of litigation. Our product liability insurance may not cover all potential liabilities or may not completely cover any liability arising from any such litigation. Moreover, we may not have access to liability insurance or be able to maintain our insurance on acceptable terms.

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      In May 2003, securities class action lawsuits were commenced against Regeneron and certain of its officers and directors in the United States District Court for the Southern District of New York. A consolidated amended class action complaint was filed in October 2003. The complaint, which purports to be brought on behalf of a class consisting of investors in the Company’s publicly traded securities between March 28, 2000 and March 30, 2003, alleges that the defendants misstated or omitted material information concerning the safety and efficacy of AXOKINE, in violation of Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. Damages are sought in an unspecified amount. No reserve for damages has been established because we do not believe that a loss is probable. However, if the outcome of the litigation is adverse to us, we could be subject to significant liability, which could exceed our insurance coverage.

      As a biopharmaceutical company with significant manufacturing operations, we are subject to extensive environmental, health, and safety laws and regulations, including those governing the use of hazardous materials. Our research and development and manufacturing activities involve the controlled use of chemicals, viruses, radioactive compounds, and other hazardous materials. The cost of compliance with environmental, health, and safety regulations is substantial. If an accident involving these materials or an environmental discharge were to occur, we could be held liable for any resulting damages, or face regulatory actions, which could exceed our resources or insurance coverage.

Risks Related to our Dependence on Third Parties

      We relied heavily on Novartis to provide their expertise, resources, funding, manufacturing capacity, clinical expertise, and commercial infrastructure to support the IL-1 Trap program. Novartis’ decision to withdraw from participating in the development and commercialization of the IL-1 Trap may delay or disrupt the IL-1 Trap program. We do not have the resources and skills to replace those of Novartis to help the development and potential commercialization of the IL-1 Trap. In addition, we will have to fund the development and commercialization of the IL-1 Trap without Novartis’ long-term commitment, which will require substantially greater expenditures on our part. While the agreement requires Novartis to continue to fund agreed pre-Phase III development expenses for the nine-month period following its termination decision and imposes additional post-termination obligations on the parties, Novartis may not fulfill all payment and other obligations we believe are required of it under the agreement, which may cause us to incur further costs and risk delays and disruptions to the IL-1 Trap program.

      We rely heavily on Aventis to assist with the development of the VEGF Trap. If the VEGF Trap program continues, we will rely on Aventis to assist with providing commercial manufacturing capacity, enrolling and monitoring clinical trials, obtaining regulatory approval, particularly outside the United States, and providing sales and marketing support. While we cannot assure you that the VEGF Trap will ever be successfully developed and commercialized, if Aventis does not perform its obligations in a timely manner, or at all, our ability to develop, manufacture, and commercialize the VEGF Trap will be significantly adversely affected. Aventis has the right to terminate rights to our product candidates under its collaboration agreement with us at any time. If Aventis were to terminate its collaboration agreement with us, we might not have the resources or skills to replace those of our partner, which could cause significant delays in the development and/or manufacture of the VEGF Trap and result in substantial additional costs to us. We have no sales, marketing,

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      Sanofi-Synthelabo has initiated a tender offer in an attempt to acquire Aventis. It is unclear what the impact of this or any other business combination involving Aventis would have on the VEGF Trap collaboration, including the possibility of a termination of the collaboration agreement and a delay in, or disruption to, the VEGF Trap development program.

      We depend upon third-party collaborators, including Aventis and service providers such as clinical research organizations, outside testing laboratories, clinical investigator sites, and third party manufacturers and product packagers and labelers, to assist us in the development of our product candidates. If any of our existing collaborators or service providers breaches or terminates its agreement with us or does not perform its development or manufacturing services under an agreement in a timely manner or at all, we would experience additional costs, delays, and difficulties in the development or ultimate commercialization of our product candidates.

Risks Related to the Manufacture of our Product Candidates

      Before approving a new drug or biologic product, the FDA requires that the facilities at which the product will be manufactured be in compliance with current good manufacturing practices, or cGMP requirements. Manufacturing product candidates in compliance with these regulatory requirements is complex, time-consuming, and expensive. To be successful, our products must be manufactured for development and, following approval, in commercial quantities, in compliance with regulatory requirements and at competitive costs. If we or any of our product collaborators or third-party manufacturers, fillers, or labelers are unable to maintain regulatory compliance, the FDA can impose regulatory sanctions, including, among other things, refusal to approve a pending application for a new drug or biologic product, or revocation of a pre-existing approval. As a result, our business, financial condition, and results of operations may be materially harmed.

      While we believe our current manufacturing facility is adequate for the current production of quantities of active pharmaceutical ingredients, or API, for our product candidates for clinical trials, our manufacturing facility is likely to be inadequate to produce sufficient quantities of product for commercial sale. We intend to rely on our corporate collaborators, as well as contract manufacturers, to produce large quantities of drug material needed for commercialization of our products. We rely entirely on third party manufacturers for filling and finishing services. We will have to depend on these manufacturers to deliver material on a timely basis and to comply with regulatory requirements. If we are unable to supply sufficient material on acceptable terms, or if we should encounter delays or difficulties in our relationships with our corporate collaborators or contract manufacturers, our business, financial condition, and results of operations may be materially harmed.

      We may expand our own manufacturing capacity to support commercial production of API for our product candidates. This will require substantial additional funds, and we would need to hire and train significant numbers of employees and managerial personnel to staff our facility. Start-up costs can be large and scale-up entails significant risks related to process development and manufacturing yields. We may be unable to develop manufacturing facilities that are sufficient to produce drug material for clinical trials or commercial use. In addition, we may be unable to secure adequate filling and finishing services to support our products. As a result, our business, financial condition, and results of operations may be materially harmed.

      We may be unable to obtain key raw materials and supplies for the manufacture of our product candidates. In addition, we may face difficulties in developing or acquiring production technology and managerial personnel to manufacture sufficient quantities of our product candidates at reasonable costs and in compliance with applicable quality assurance and environmental regulations and governmental permitting requirements.

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      We maintain an 8,000 square foot manufacturing facility in Tarrytown, New York and have large-scale manufacturing operations in Rensselaer, New York. Under a long-term manufacturing agreement with Merck, we produce an intermediate for a Merck pediatric vaccine at our facility in Rensselaer, New York. We also use our facilities to produce API for our own clinical and preclinical candidates. If we no longer use our facilities to manufacture the Merck intermediate or clinical candidates are discontinued, we would have to absorb overhead costs and inefficiencies.

Risks Related to Commercialization of Products

      We have no sales or distribution personnel or capabilities and have only a small staff with marketing capabilities. If we are unable to obtain those capabilities, either by developing our own organizations or entering into agreements with service providers, we will not be able to successfully sell our products. In that event, we will not be able to generate significant revenue, even if our product candidates are approved. We cannot guarantee that we will be able to hire the qualified sales and marketing personnel we need. We may not be able to enter into marketing, or distribution agreements with third-party providers on acceptable terms, if at all. Currently, we are relying on Aventis for sales, marketing, and distribution of the VEGF Trap. We will have to rely on a third party or devote significant resources to develop our own sales, marketing, and distribution capabilities for our other product candidates. We may be unsuccessful in developing our own sales, marketing, and distribution organization.

      Changes in product formulations and manufacturing processes may be required as product candidates progress in clinical development and are ultimately commercialized. If we are unable to develop suitable product formulations or manufacturing processes to support large scale clinical testing of our product candidates, including VEGF Trap, IL-1 Trap, IL-4/13 Trap and AXOKINE, we may be unable to supply necessary materials for our clinical trials, which would delay the development of our product candidates. Similarly, if we are unable to supply sufficient quantities of product or develop product formulations suitable for commercial use, we will not be able to successfully commercialize our product candidates. For example, AXOKINE is currently formulated for delivery in single use vials. We are in the process of developing a formulation that may be used in multiple use vials. If we are unable to develop this multiple use vial formulation, potential future AXOKINE sales and profitability may be limited. Another example is our IL-1 Trap. We are in the process of developing formulations that would allow delivery of higher doses of the IL-1 Trap to test in clinical trials. This includes formulations for subcutaneous and intravenous administration. If we are unable to develop or manufacture such a higher dose formulation that can be produced in a cost-effective manner, potential future IL-1 Trap sales and profitability may be limited.

      There is substantial competition in the biotechnology and pharmaceutical industries from pharmaceutical, biotechnology, and chemical companies. Many of our competitors have substantially greater research, preclinical, and clinical product development and manufacturing capabilities, and financial, marketing, and human resources than we do. Our smaller competitors may also be significant if they acquire or discover patentable inventions, form collaborative arrangements, or merge with large pharmaceutical companies. Even if we achieve product commercialization, our competitors have achieved, and may continue to achieve, product commercialization before our products are approved for marketing and sale. Genentech has an approved VEGF antagonist on the market and many different pharmaceutical and biotechnology companies

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      Sales of biopharmaceutical products largely depend on the reimbursement of patients’ medical expenses by government health care programs and private health insurers. Without the financial support of the governments or third-party payors, the market for any biopharmaceutical product will be limited. These third-party payors are increasingly challenging the price and examining the cost-effectiveness of products and services. Significant uncertainty exists as to the reimbursement status of any new therapeutic, particularly if there exist lower-cost standards of care. Third-party payors may not reimburse sales of our products, which would harm our business.

Risks Related to Employees

      We are highly dependent on our executive officers. If we are not able to retain any of these persons or our Chairman, our business may suffer. In particular, we depend on the services of Roy Vagelos, M.D., the Chairman of our Board of Directors, Leonard Schleifer, M.D., Ph.D., our President and Chief Executive Officer, and George D. Yancopoulos, M.D., Ph.D., our Executive Vice President, Chief Scientific Officer and President, Regeneron Research Laboratories. There is intense competition in the biotechnology industry for qualified scientists and managerial personnel in the development, manufacture, and commercialization of drugs. We may not be able to continue to attract and retain the qualified personnel necessary for developing our business.

Risks Related to Intellectual Property

      Our business requires using sensitive and proprietary technology and other information that we protect as trade secrets. We seek to prevent improper disclosure of these trade secrets through confidentiality agreements. If our trade secrets are improperly exposed, either by our own employees or our collaborators, it would help our competitors and adversely affect our business. We will be able to protect our proprietary rights

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      Our commercial success depends significantly on our ability to operate without infringing the patents and other proprietary rights of third parties. Other parties could allege to have blocking patents to our Trap products in clinical development, either because of a proprietary position on fusion proteins or a proprietary position covering components of the Trap or the way it is manufactured. We are aware of certain United States and foreign patents relating to particular IL-4 and IL-13 receptors. Our IL-4/13 Trap includes portions of the IL-4 and IL-13 receptors. In addition, we are aware of a broad patent held by Genentech relating to proteins fused to certain immunoglobulin domains. Our Trap product candidates include proteins fused to immunoglobulin domains. With regard to these patents, we have determined that in our judgment that either our products do not infringe the patents, we do not believe the patents are valid, or we have identified and are testing or developing various modifications that we believe should not infringe the patents.

      Any patent holders could sue us for damages and seek to prevent us from manufacturing, selling, or developing our drug candidates, and a court may find that we are infringing validly issued patents of third parties. In the event that the manufacture, use, or sale of any of our clinical candidates infringes on the patents or violates other proprietary rights of third parties, we may be prevented from pursuing product development, manufacturing, and commercialization of our drugs and may be required to pay costly damages. Such a result may materially harm our business, financial condition, and results of operations. Legal disputes are likely to be costly and time consuming to defend.

      We seek to obtain licenses to patents when, in our judgment, such licenses are needed. If any licenses are required, we may not be able to obtain such licenses on commercially reasonable terms, if at all. The failure to obtain any such license could prevent us from developing or commercializing any one or more of our product candidates, which could severely harm our business.

Risks Related to our Common Stock

      Our stock price may be extremely volatile.

      There has been significant volatility in our stock price and generally in the market prices of biotechnology companies’ securities. Various factors and events may have a significant impact on the market price of our common stock. These factors include, by way of example:

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      The trading price of our common stock has been, and could continue to be, subject to wide fluctuations in response to these and other factors, including the sale or attempted sale of a large amount of our common stock in the market. Broad market fluctuations may also adversely affect the market price of our common stock.

     Future sales of our common stock by our significant shareholders or us may depress our stock price.

      A number of our shareholders own a substantial amount of our common stock. If our significant shareholders or we sell substantial amounts of our common stock in the public market, the market price of our common stock could fall. Sales by our significant shareholders, including Amgen, Aventis, and Novartis, also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deemed appropriate.