REGENERON PHARMACEUTICALS, INC. - FORM 10-Q

REGENERON PHARMACEUTICALS, INC. - FORM 10-Q - November 4, 2015

Attached files

Attached files

file	filename
EX-10.2 - IO LICENSE AND COLLABORATION AGREEMENT BY AND BETWEEN THE REGISTRANT AND SANOFI - REGENERON PHARMACEUTICALS, INC.	regn-ex_102x09302015x10q.htm
EX-10.1 - IO DISCOVERY AND DEVELOPMENT AGREEMENT BY AND BETWEEN THE REGISTRANT AND SANOFI - REGENERON PHARMACEUTICALS, INC.	regn-ex_101x09302015x10q.htm
EX-10.3 - AMENDED AND RESTATED DISCO. AGREEMENT BY AND BETWEEN THE REGISTRANT AND SANOFI - REGENERON PHARMACEUTICALS, INC.	regn-ex_103x09302015x10q.htm
EX-10.5 - SECOND AMENDMENT TO WARRANTS BETWEEN MORGAN STANLEY AND THE REGISTRANT - REGENERON PHARMACEUTICALS, INC.	regn-ex_105x09302015x10q.htm
EX-10.7 - COLLABORATION AGREEMENT BY AND BETWEEN REGENERON IRELAND AND MITSUBISHI TANABE - REGENERON PHARMACEUTICALS, INC.	regn-ex_107x09302015x10q.htm
EX-31.2 - CERTIFICATION OF CFO PURSUANT TO RULE 13A-14(A) - REGENERON PHARMACEUTICALS, INC.	regn-ex_312x09302015x10q.htm
EX-31.1 - CERTIFICATION OF CEO PURSUANT TO RULE 13A-14(A) - REGENERON PHARMACEUTICALS, INC.	regn-ex_311x09302015x10q.htm
EX-10.6 - SEVENTEENTH AMENDMENT TO LEASE BY AND BETWEEN BMR-LANDMARK AND THE REGISTRANT - REGENERON PHARMACEUTICALS, INC.	regn-ex_106x09302015x10q.htm
EX-10.4 - AMENDED AND RESTATED COLLAB. AGREEMENT BY AND BETWEEN THE REGISTRANT AND SANOFI - REGENERON PHARMACEUTICALS, INC.	regn-ex_104x09302015x10q.htm
EX-32 - CERTIFICATION OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350 - REGENERON PHARMACEUTICALS, INC.	regn-ex_32x09302015x10q.htm

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 September 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 October 16, 2015:



Class of Common Stock		Number of Shares
Class A Stock, $.001 par value		1,913,776
Common Stock, $.001 par value		102,151,256

Table of Contents

REGENERON PHARMACEUTICALS, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS



		Page Numbers
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3

	Condensed Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014	3

	Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2015 and 2014	4

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	62

Item 4.	Controls and Procedures	62

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	63

Item 1A.	Risk Factors	63

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	91

Item 6.	Exhibits	92

SIGNATURE PAGE		93

"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.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

REGENERON PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands, except share data)



	September 30,			December 31,
	2015			2014
ASSETS
Current assets:
Cash and cash equivalents	$	654,587		$	648,719
Marketable securities	241,055			251,761
Accounts receivable - trade, net	1,088,207			739,379
Accounts receivable from Sanofi	199,117			111,510
Accounts receivable from Bayer HealthCare	151,991			125,483
Inventories	190,668			128,861
Deferred tax assets	60,521			46,179
Prepaid expenses and other current assets	89,494			79,046
Total current assets	2,675,640			2,130,938

Marketable securities	681,326			460,154
Property, plant, and equipment, at cost, net of accumulated depreciation and amortization	1,475,123			974,309
Deferred tax assets	346,243			269,237
Other assets	4,583			3,034
Total assets	$	5,182,915		$	3,837,672

LIABILITIES and STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	577,428		$	483,489
Deferred revenue from Sanofi, current portion	100,908			15,927
Deferred revenue - other, current portion	54,148			58,098
Other current liabilities	2,506			97,146
Total current liabilities	734,990			654,660

Deferred revenue from Sanofi	599,339			62,819
Deferred revenue - other	78,942			72,430
Facility lease obligations	364,144			310,938
Convertible senior notes	30,723			146,773
Other long-term liabilities	77,910			39,801
Total liabilities	1,886,048			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 - 1,914,776 in 2015 and 1,973,368 in 2014	2			2
Common Stock, $.001 par value; 320,000,000 shares authorized; shares issued - 105,572,737 in 2015 and 102,475,154 in 2014	106			102
Additional paid-in capital	2,880,109			2,450,782
Retained earnings	697,706			216,644
Accumulated other comprehensive income	7,721			52,251
Treasury stock, at cost; 3,437,000 shares in 2015 and 2,017,732 in 2014	(288,777		)	(169,530		)
Total stockholders' equity	3,296,867			2,550,251
Total liabilities and stockholders' equity	$	5,182,915		$	3,837,672

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

Table of Contents

REGENERON PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

(In thousands, except per share data)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Statements of Operations
Revenues:
Net product sales	$	737,562		$	448,844		$	1,939,954		$	1,229,244
Sanofi collaboration revenue	224,735			132,925			593,201			406,028
Bayer HealthCare collaboration revenue	157,596			135,853			415,679			358,460
Technology licensing and other revenue	17,529			8,166			56,817			23,496
	1,137,422			725,788			3,005,651			2,017,228

Expenses:
Research and development	425,924			337,728			1,159,367			919,608
Selling, general, and administrative	209,993			144,003			543,572			343,960
Cost of goods sold	67,199			33,655			170,624			91,073
Cost of collaboration and contract manufacturing	41,884			21,938			111,254			54,471
	745,000			537,324			1,984,817			1,409,112

Income from operations	392,422			188,464			1,020,834			608,116

Other income (expense):
Investment and other income	2,603			2,591			4,533			5,205
Interest expense	(1,715		)	(9,232		)	(10,632		)	(31,022		)
Loss on extinguishment of debt	(21		)	—			(16,927		)	(10,787		)
	867			(6,641		)	(23,026		)	(36,604		)

Income before income taxes	393,289			181,823			997,808			571,512

Income tax expense	(182,891		)	(98,448		)	(516,746		)	(323,481		)

Net income	$	210,398		$	83,375		$	481,062		$	248,031

Net income per share - basic	$	2.04		$	0.83		$	4.68		$	2.47
Net income per share - diluted	$	1.82		$	0.73		$	4.18		$	2.19

Weighted average shares outstanding - basic	103,348			100,796			102,825			100,325
Weighted average shares outstanding - diluted	115,944			117,423			115,144			113,203

Statements of Comprehensive Income
Net income	$	210,398		$	83,375		$	481,062		$	248,031
Other comprehensive (loss) income:
Unrealized (loss) gain on marketable securities, net of tax	(11,432		)	22,632			(44,530		)	28,083
Comprehensive income	$	198,966		$	106,007		$	436,532		$	276,114

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

Table of Contents

REGENERON PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)



	Nine Months Ended September 30,
	2015			2014
Cash flows from operating activities:
Net income	$	481,062		$	248,031
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	51,999			38,551
Non-cash compensation expense	300,657			208,732
Loss on extinguishment of debt	16,927			10,787
Other non-cash charges and expenses, net	33,197			28,473
Deferred taxes	(65,975		)	(34,161		)
Changes in assets and liabilities:
(Increase) decrease in Sanofi, Bayer HealthCare, and trade accounts receivable	(462,943		)	53,642
Increase in inventories	(81,459		)	(50,917		)
Increase in prepaid expenses and other assets	(13,223		)	(28,850		)
Increase in deferred revenue	624,063			3,466
Increase in accounts payable, accrued expenses, and other liabilities	164,652			76,506
Total adjustments	567,895			306,229
Net cash provided by operating activities	1,048,957			554,260

Cash flows from investing activities:
Purchases of marketable securities	(550,142		)	(478,436		)
Sales or maturities of marketable securities	265,995			216,478
Capital expenditures	(500,154		)	(215,464		)
Net cash used in investing activities	(784,301		)	(477,422		)

Cash flows from financing activities:
Proceeds (payments) in connection with facility and capital lease obligations	26,405			(810		)
Repayments of convertible senior notes	(146,007		)	(61,125		)
Payments in connection with reduction of outstanding warrants	(523,487		)	(143,041		)
Proceeds from issuance of Common Stock	150,423			80,804
Payments in connection with Common Stock tendered for employee tax obligations	(71,673		)	(175,866		)
Excess tax benefit from stock-based compensation	305,551			334,146
Net cash (used in) provided by financing activities	(258,788		)	34,108

Net increase in cash and cash equivalents	5,868			110,946

Cash and cash equivalents at beginning of period	648,719			535,608

Cash and cash equivalents at end of period	$	654,587		$	646,554

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

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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. and its subsidiaries ("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 nine months ended September 30, 2014 and Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2014 contained in the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 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 in this Quarterly Report on Form 10-Q was previously revised 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 resulted in a reduction to both accounts receivable and deferred revenue by $41.0 million, and reduced 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 nine months ended September 30, 2014 was also revised in this Quarterly Report on Form 10-Q to reflect a $9.4 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 $734.4 million and $445.0 million for the three months ended September 30, 2015 and 2014, respectively, and $1,930.0 million and $1,218.8 million for the nine months ended September 30, 2015 and 2014, respectively. In addition, ARCALYST^® net product sales totaled $3.2 million and $3.8 million for the three months ended September 30, 2015 and 2014, respectively, and $9.9 million and $10.4 million for the nine months ended September 30, 2015 and 2014, respectively.

The Company recorded 65% and 72% for the three months ended September 30, 2015 and 2014, respectively, and 67% and 75% for the nine months ended September 30, 2015 and 2014, respectively, of its total gross product revenue from sales to Besse Medical, a subsidiary of AmerisourceBergen Corporation.

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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 nine months ended September 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	41,290			88,049			6,024			135,363
Credits/payments	(38,011		)	(71,007		)	(6,052		)	(115,070		)
Balance as of September 30, 2015	$	6,362		$	38,208		$	504		$	45,074

Balance as of December 31, 2013	$	4,400		$	19,663		$	538		$	24,601
Provision related to current period sales	23,265			53,689			1,202			78,156
Credits/payments	(23,873		)	(54,878		)	(1,211		)	(79,962		)
Balance as of September 30, 2014	$	3,792		$	18,474		$	529		$	22,795

Under the provisions of the Patient Protection and Affordable Care Act ("PPACA") and the Health Care and Education Reconciliation Act of 2010, a non-tax deductible annual fee (the "Branded Prescription Drug Fee") is imposed on pharmaceutical manufacturers that sell branded prescription drugs to specified government programs. In July 2014, the Internal Revenue Service ("IRS") issued final regulations that provide guidance on the Branded Prescription Drug Fee. The final regulations differ in some respects from the temporary regulations previously issued by the IRS in 2011, including that a company is liable for the fee based on its branded prescription drug sales in the current year, instead of the liability only being applicable upon the first qualifying branded prescription drug sale of the following fee year under the temporary regulations. As a result of the issuance of these final IRS regulations, the Company began recording an estimate of the fee in the same period in which its qualifying branded prescription drug sales occur. Therefore, in the third quarter of 2014, an incremental charge was recorded to (i) recognize a liability for the estimated fee payable based on 2014 sales through the first nine months of 2014, and (ii) expense the remaining prepaid asset recorded under the previous accounting for the estimated fee payable based on 2013 sales. The impact of the incremental charge in the third quarter of 2014 was $40.6 million, which was included in selling, general, and administrative expenses.

3. Collaboration Agreements

a. Sanofi

Sanofi collaboration revenue, as detailed below, consisted primarily of reimbursement for research and development and commercialization expenses that the Company incurred, partly offset by sharing of losses in connection with commercialization of antibodies, under 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". In addition, in July 2015, the Company and Sanofi entered into a collaboration to discover, develop, and commercialize antibody-based cancer treatments in the field of immuno-oncology (the "IO Collaboration").

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REGENERON PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Unless otherwise noted, dollars in thousands, except per share data)



	Three Months Ended September 30,
Sanofi Collaboration Revenue	2015			2014
Antibody:
Reimbursement of Regeneron research and development expenses	$	205,114		$	140,497
Reimbursement of Regeneron commercialization-related expenses	53,341			1,688
Regeneron's share of losses in connection with commercialization of antibodies	(74,865		)	(12,830		)
Other	2,561			2,561
Total Antibody	186,151			131,916
Immuno-oncology:
Reimbursement of Regeneron research and development expenses	18,584			—
Other	20,000			—
Total Immuno-oncology	38,584			—
ZALTRAP^®:
Regeneron's share of losses in connection with commercialization of ZALTRAP	—			(1,008		)
Reimbursement of Regeneron research and development expenses	—			1,261
Other	—			756
Total ZALTRAP	—			1,009
	$	224,735		$	132,925

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REGENERON PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Unless otherwise noted, dollars in thousands, except per share data)



	Nine Months Ended September 30,
Sanofi Collaboration Revenue	2015			2014
Antibody:
Reimbursement of Regeneron research and development expenses	$	585,450		$	405,212
Reimbursement of Regeneron commercialization-related expenses	89,145			7,062
Regeneron's share of losses in connection with commercialization of antibodies	(143,583		)	(17,125		)
Other	7,683			7,683
Total Antibody	538,695			402,832
Immuno-oncology:
Reimbursement of Regeneron research and development expenses	18,584			—
Other	20,000			—
Total Immuno-oncology	38,584			—
ZALTRAP:
Regeneron's share of losses in connection with commercialization of ZALTRAP	—			(4,912		)
Reimbursement of Regeneron research and development expenses	686			3,691
Other	15,236			4,417
Total ZALTRAP	15,922			3,196
	$	593,201		$	406,028

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 September 30, 2015 and 2014, the Company recognized as additional research and development expense $25.1 million and $28.4 million, respectively, and during the nine months ended September 30, 2015 and 2014, the Company recognized as additional research and development expense $72.6 million and $81.3 million, respectively, of antibody development expenses that the Company was obligated to reimburse to Sanofi related to Praluent^® and sarilumab. In July 2014, in connection with the Company’s Antibody Collaboration with Sanofi, the Company purchased a U.S. Food and Drug Administration ("FDA") priority review voucher from a third party for $67.5 million. The Company and Sanofi equally shared the priority review voucher's purchase price, and the Company's share of the cost, or $33.8 million, was recorded as a research and development expense during the third quarter of 2014. The Company subsequently transferred the voucher to Sanofi, which used the priority review voucher in connection with the Biologics License Application submission to the FDA for Praluent.

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 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 the third quarter of 2015, the Company also recorded its share of the Antibody Collaboration's losses in connection with commercialization of Praluent within Sanofi collaboration revenue.

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

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REGENERON PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Unless otherwise noted, dollars in thousands, except per share data)

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 have been reduced from up to $160.0 million to up to $145.0 million in 2015, and from up to $160.0 million to up 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 be funded by Sanofi under the terms of the companies’ new immuno-oncology collaboration.

Immuno-Oncology

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 made 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 ("IO Discovery Budget") 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 Budget 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, if any, from commercialized products 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 product 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 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 made 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

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Unless otherwise noted, dollars in thousands, except per share data)

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.

At the inception of the IO Collaboration, the Company's significant deliverables consisted of (i) license to certain rights and intellectual property, (ii) providing research and development services, and (iii) manufacturing clinical supplies. The Company concluded that the license did not have standalone value, primarily due to the fact that such rights were not sold separately by the Company, nor could Sanofi receive any benefit from the license without the fulfillment of other ongoing obligations by the Company, including the clinical supply arrangement. Therefore, the deliverables were considered a single unit of accounting. Consequently, the $640.0 million in aggregate upfront payments was initially recorded as deferred revenue, and will be recognized ratably as revenue over the related performance period.

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 nine months ended September 30, 2015, the Company recorded $9.0 million and $32.0 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.

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(Unless otherwise noted, dollars in thousands, except per share data)

b. Bayer HealthCare

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).

The collaboration revenue the Company earned from Bayer HealthCare is detailed below:



	Three Months Ended September 30,
Bayer HealthCare Collaboration Revenue	2015		2014
EYLEA:
Regeneron's net profit in connection with commercialization of EYLEA outside the United States	$	130,510	$	85,351
Sales milestones	—		30,000
Cost-sharing of Regeneron EYLEA development expenses	1,827		4,394
Other	21,155		12,745
Total EYLEA	153,492		132,490
PDGFR-beta antibody:
Cost-sharing of REGN2176-3 development expenses	1,508		518
Other	2,596		2,845
Total PDGFR-beta	4,104		3,363
	$	157,596	$	135,853



	Nine Months Ended September 30,
Bayer HealthCare Collaboration Revenue	2015		2014
EYLEA:
Regeneron's net profit in connection with commercialization of EYLEA outside the United States	$	326,567	$	213,291
Sales milestones	15,000		75,000
Cost-sharing of Regeneron EYLEA development expenses	6,948		26,235
Other	50,685		34,490
Total EYLEA	399,200		349,016
PDGFR-beta antibody:
Cost-sharing of REGN2176-3 development expenses	8,688		1,657
Other	7,791		7,787
Total PDGFR-beta	16,479		9,444
	$	415,679	$	358,460

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(Unless otherwise noted, dollars in thousands, except per share data)

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. During the nine months ended September 30, 2014, the Company earned five $15.0 million sales milestones (two of which were recorded in the third quarter of 2014) from Bayer HealthCare upon total aggregate net sales of EYLEA outside the United States exceeding $500 million, $600 million, $700 million, $800 million, and $900 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 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).

c. Mitsubishi Tanabe Pharma

In September 2015, the Company and Mitsubishi Tanabe Pharma Corporation ("MTPC") entered into a collaboration agreement (the "MTPC Collaboration Agreement") providing MTPC with development and commercial rights to fasinumab, the Company's nerve growth factor antibody in late-stage clinical development, in Japan, South Korea, Taiwan, Indonesia, Thailand, the Philippines, Malaysia, Singapore, Vietnam, Myanmar, and Sri Lanka (the "MTPC Territories"). In connection with the MTPC Collaboration Agreement, MTPC made a $10.0 million non-refundable upfront payment, and the Company is entitled to receive up to an aggregate of $65.0 million in development milestones achieved by the Company and $150.0 million in other contingent payments, primarily related to development milestones achieved by MTPC.

Under the MTPC Collaboration Agreement, the Company is obligated to manufacture and supply MTPC with clinical and commercial supplies of fasinumab. If fasinumab is commercialized in the MTPC Territories, the Company will supply the product to MTPC at a tiered purchase price, which ranges from 30% to 50% of net sales of the product (subject to adjustment in certain circumstances), and is eligible for additional payments up to an aggregate of $100.0 million upon the achievement of specified annual net sales amounts starting at $200 million. Unless terminated earlier in accordance with its provisions, the MTPC Collaboration Agreement will continue to be in effect until such time as MTPC has ceased developing or commercializing fasinumab in the MTPC Territories.

At the inception of the MTPC Collaboration Agreement, the Company's significant deliverables consisted of (i) exclusive rights to develop and commercialize fasinumab in the MTPC Territories, and (ii) manufacturing clinical and commercial supplies. The Company concluded that the license did not have standalone value, as such right was not sold separately by the Company, nor could MTPC receive any benefit from the license without the manufacturing services to be rendered by the Company. Therefore, the deliverables were considered a single unit of accounting. Consequently, the $10.0 million upfront payment was initially recorded as deferred revenue, and will be recognized ratably as revenue over the related performance period.

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(Unless otherwise noted, dollars in thousands, except per share data)

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 $102.6 million and $68.1 million for the three months ended September 30, 2015 and 2014, respectively, and $300.7 million and $208.7 million for the nine months ended September 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.

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

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(Unless otherwise noted, dollars in thousands, except per share data)



	Three Months Ended September 30, 2014							Nine Months Ended September 30, 2014
	As Previously Reported		Adjustments			As Revised		As Previously Reported		Adjustments			As Revised
Consolidated Statement of Operations Data:
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



	Nine Months Ended September 30, 2014
	As Previously Reported			Adjustments			As Revised
Consolidated Statement of Cash Flows Data:
Cash flows from operating activities
Net income	$	237,898		$	10,133		$	248,031
Non-cash compensation expense	225,784			(17,052		)	208,732
Deferred taxes	(50,466		)	6,919			(43,547		)

The table below presents the impact of these revisions, including the related tax effects, on previously filed year-end Consolidated Statements of Operations for the three months and year ended December 31, 2014.



	Three Months Ended December 31, 2014							Year Ended December 31, 2014
	As Previously Reported		Adjustments			As Revised		As Previously Reported		Adjustments			As Revised
Consolidated Statement of Operations Data:
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

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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 September 30,
	2015		2014
Net income - basic	$	210,398	$	83,375
Effective of dilutive securities:
Convertible senior notes - interest expense related to contractual coupon interest rate and amortization of discount and note issuance costs	145		2,803
Net income - diluted	$	210,543	$	86,178

(Shares in thousands)
Weighted average shares - basic	103,348		100,796
Effect of dilutive securities:
Stock options	9,632		9,377
Restricted stock	481		430
Convertible senior notes	308		4,033
Warrants	2,175		2,787
Dilutive potential shares	12,596		16,627
Weighted average shares - diluted	115,944		117,423

Net income per share - basic	$	2.04	$	0.83
Net income per share - diluted	$	1.82	$	0.73

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(Unless otherwise noted, dollars in thousands, except per share data)



	Nine Months Ended September 30,
	2015		2014
Net income - basic and diluted	$	481,062	$	248,031

(Shares in thousands)
Weighted average shares - basic	102,825		100,325
Effect of dilutive securities:
Stock options	9,449		9,515
Restricted stock	475		413
Warrants	2,395		2,950
Dilutive potential shares	12,319		12,878
Weighted average shares - diluted	115,144		113,203

Net income per share - basic	$	4.68	$	2.47
Net income per share - diluted	$	4.18	$	2.19

Shares which have been excluded from diluted per share amounts because their effect would have been antidilutive include the following:

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(Unless otherwise noted, dollars in thousands, except per share data)

6. Marketable Securities

Marketable securities as of September 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 September 30, 2015	Cost Basis		Gains		Losses			Value
Unrestricted
Corporate bonds	$	812,137	$	805	$	(988	)	$	811,954
U.S. government and government agency obligations	54,963		155		(3		)	55,115
Municipal bonds	27,741		27		(3		)	27,765
Equity securities	17,005		10,635		(93		)	27,547
	$	911,846	$	11,622	$	(1,087	)	$	922,381

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

The Company classifies its debt security investments based on their contractual maturity dates. The debt securities listed as of September 30, 2015 mature at various dates through August 2020. The fair values of debt security investments by contractual maturity consist of the following:



	September 30, 2015		December 31, 2014
Maturities within one year	$	241,055	$	251,761
Maturities after one year through five years	653,779		360,208
Maturities after five years through ten years	—		1,128
	$	894,834	$	613,097

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Unless otherwise noted, dollars in thousands, except per share data)

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 September 30, 2015	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Corporate bonds	$	373,513	$	(960	)	$	27,779	$	(28	)	$	401,292	$	(988	)
U.S. government and government agency obligations	2,809		(2		)	2,504		(1		)	5,313		(3		)
Municipal bonds	4,658		(3		)	—		—			4,658		(3		)
Equity securities	14,907		(93		)	—		—			14,907		(93		)
	$	395,887	$	(1,058	)	$	30,283	$	(29	)	$	426,170	$	(1,087	)

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 nine months ended September 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 nine months ended September 30, 2015 and 2014 related to unrealized gains and losses on available-for-sale marketable securities. For the three and nine months ended September 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.

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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 September 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	$	811,954	—		$	811,954
U.S. government and government agency obligations	55,115		—		55,115
Municipal bonds	27,765		—		27,765
Equity securities	27,547		$	27,547	—
	$	922,381	$	27,547	$	894,834

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 not record any charges for other-than-temporary impairment of its Level 2 marketable securities during the three and nine months ended September 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 nine months ended September 30, 2015 and 2014. During the nine months ended September 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 three and nine months ended September 30, 2015, and there were no transfers of marketable securities between Levels 1, 2, or 3 classifications during the three and nine months ended September 30, 2014.

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REGENERON PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Unless otherwise noted, dollars in thousands, except per share data)

As of September 30, 2015 and December 31, 2014, the Company had $33.1 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, an additional portion of the Notes was surrendered for conversion during the first nine months of 2015. The fair value of the outstanding Notes was estimated to be $175.2 million and $819.8 million as of September 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:



	September 30,		December 31,
	2015		2014
Raw materials	$	34,983	$	10,923
Work-in-process	110,616		73,519
Finished goods	12,513		10,768
Deferred costs	32,556		33,651
	$	190,668	$	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 September 30, 2015 and 2014, cost of goods sold included inventory write-downs and reserves totaling $1.8 million and $1.6 million, respectively. For the nine months ended September 30, 2015 and 2014, cost of goods sold included inventory write-downs and reserves totaling $9.9 million and $3.5 million, respectively.

9. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:



	September 30,		December 31,
	2015		2014
Accounts payable	$	106,917	$	99,508
Accrued payroll and related costs	120,933		92,778
Accrued clinical trial expense	62,569		41,555
Accrued sales-related charges, deductions, and royalties	160,941		133,085
Other accrued expenses and liabilities	126,068		116,563
	$	577,428	$	483,489

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REGENERON PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Unless otherwise noted, dollars in thousands, except per share data)

10. Debt

a. Convertible Debt

In the first nine months of 2015, the Company settled conversion obligations for $146.0 million principal amount of the Company's Notes that was previously surrendered for conversion. In accordance with the terms of the Notes, the 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 nine months of 2015, the Company paid $146.0 million in cash and issued 1,419,287 shares of Common Stock. In addition, in the first nine months of 2015, the Company allocated $705.9 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. As of September 30, 2015, an aggregate principal amount of $33.1 million of the original $400.0 million aggregate principal amount of Notes remained outstanding.

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 nine months of 2015, the Company also exercised a proportionate amount of its convertible note hedges, for which the Company received 1,419,268 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 $119.2 million, as Treasury Stock during the first nine months of 2015.

In addition to the Note conversions described above, the Company received notifications in the third and fourth quarters of 2015 that an additional $20.5 million aggregate principal amount of the Notes were surrendered for conversion, and settlement is anticipated during the fourth quarter of 2015. The Company has elected to settle the related conversion obligations through a combination of cash and shares (total payment will be based on the average of the volume-weighted-average prices of the Common Stock during the 40 trading-day cash settlement averaging period specified in the indenture governing the Notes). In connection with these Note conversions, the Company exercised a proportionate amount of its convertible note hedges, for which the Company expects to receive shares of Common Stock equivalent to the number of shares the Company will be required to issue to settle the non-cash portion of the related Note conversions.

In the first nine months of 2014, the Company settled conversion obligations for $61.1 million principal amount of the Notes surrendered for conversion. Upon settlement of the Notes, which occurred 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 nine months 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 nine months 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, in the first quarter of 2015, 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

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REGENERON PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Unless otherwise noted, dollars in thousands, except per share data)

under the 2011 issuance. Total losses related to changes in fair value of the warrants during the first quarter of 2015 were not material.

In addition to the warrant transaction described above, during the first nine months of 2015, 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 $399.5 million to the warrant holders during 2015 to reduce the number of shares of Common Stock issuable upon exercise of the warrant by 898,547 in the aggregate. As of September 30, 2015, an aggregate of 2,225,068 warrants (subject to adjustment from time to time as provided in the applicable warrant agreements) remained outstanding.

During the first nine months of 2014, the Company also 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 during 2014 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.

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 September 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 September 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 $182.9 million and $98.4 million for the three months ended September 30, 2015 and 2014, respectively, and $516.7 million and $323.5 million for the nine months ended September 30, 2015 and 2014, respectively. The Company's effective tax rate was 46.5% and 54.1% for the three months ended September 30, 2015 and 2014, respectively, and 51.8% and 56.6% for the nine months ended September 30, 2015 and 2014, respectively. The Company's effective tax rate for the three and nine months ended September 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 negative impact of these items was partly offset by the positive impact of the domestic manufacturing deduction.

The Company's effective tax rate for the three and nine months ended September 30, 2014 was negatively impacted, compared to the U.S. federal statutory rate, by losses incurred in foreign jurisdictions with rates lower than the federal statutory rate, the incremental charge related to the non-tax deductible Branded Prescription Drug Fee (see Note 2), 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 nine months ended September 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 2.2% for the nine months ended September 30, 2014.

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REGENERON PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Unless otherwise noted, dollars in thousands, except per share data)

The Company also recorded an income tax benefit in its Statement of Comprehensive Income of $6.5 million and $25.4 million for the three and nine months ended September 30, 2015, respectively, in connection with unrealized losses on available-for-sale marketable securities. The Company recorded an income tax provision in its Statement of Comprehensive Income of $13.5 million and $14.9 million for the three and nine months ended September 30, 2014, respectively, in connection with the Company's 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 September 30, 2015 and December 31, 2014 were $84.7 million and $56.2 million, respectively, of accrued capital expenditures. Included in accounts payable and accrued expenses as of September 30, 2014 and December 31, 2013 were $38.6 million and $16.1 million, respectively, of accrued capital expenditures.

Included in accounts payable and accrued expenses as of September 30, 2015 and December 31, 2014 was $0.3 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 September 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 September 30, 2015, September 30, 2014, and December 31, 2013.

The Company recognized a facility lease obligation of $27.0 million and $92.6 million during the nine months ended September 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.

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 and, with respect to certain defendants, also European Patent No. 2,264,163 (collectively, as applicable, the "'287 Patent"), as well as its U.S. Patent No. 8,502,018 (the "'018 Patent"). Each of these patents concerns 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.

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REGENERON PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Unless otherwise noted, dollars in thousands, except per share data)

Proceedings Relating to Praluent (alirocumab) Injection

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, which 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. On September 15, 2015, Amgen filed a motion for leave to file a supplemental and second amended complaint. The complaint alleges, among other things, willful infringement of the asserted patents, which would entitle Amgen to treble damages if the court finds willful infringement. The Company and Sanofi have opposed the motion, and the parties are awaiting the court's decision on the motion. The trial is currently set to begin on March 7, 2016, and a permanent injunction hearing (which would be held if the court finds infringement by the Company and Sanofi) is currently scheduled to begin on March 23, 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 (the "'221 Patent") 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. On September 17, 2015, Genentech and City of Hope answered the complaint previously filed by the Company and Sanofi and counterclaimed, alleging that the Company and Sanofi infringe the '221 Patent and seeking, among other types of relief, damages and a permanent injunction. On November 2, 2015, the court set a tentative trial date beginning on September 27, 2016. 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.

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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 sarilumab, dupilumab, fasinumab, and REGN2222; 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 $1,137.4 million in the third quarter and $3,005.7 million in the first nine months of 2015, compared to $725.8 million in the third quarter and $2,017.2 million in the first nine months of 2014. Our net income was $210.4 million, or $1.82 per diluted share, in the third quarter and $481.1 million, or $4.18 per diluted share, in first nine months of 2015, compared to net income of $83.4 million, or $0.73 per diluted share, in the third quarter and $248.0 million, or $2.19 per diluted share, in the first nine months 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, 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 and the EU 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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•

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. In September 2015, the European Commission granted marketing authorization of Praluent for the treatment of adult patients with primary hypercholesterolemia (heterozygous familial hypercholesterolemia (HeFH) and non-familial) or mixed dyslipidemia as an adjunct to diet: (a) in combination with a statin, or statin with other lipid-lowering therapies in patients unable to reach their LDL-cholesterol goals with the maximally-tolerated statin, or (b) alone or in combination with other lipid-lowering therapies for patients who are statin intolerant, or for whom a statin is contraindicated. The effect of Praluent on cardiovascular morbidity and mortality has not been determined. 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 the first quarter of 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 of between 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 14 product candidates in clinical development, all of which were discovered in our research laboratories. These consist of a Trap-based clinical program and 13 fully human monoclonal antibody product candidates, as summarized below. Each of the antibodies in the table below was generated using our VelocImmune^® technology.

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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, aflibercept 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
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. In the third quarter of 2015, the European Commission granted marketing authorization for Praluent for the treatment of LDL cholesterol in certain adult patients with hypercholesterolemia. The effect of Praluent on cardiovascular morbidity and mortality has not been determined.
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).
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.
REGN2810
Antibody to programmed cell death protein 1 (PD-1). Phase 1 clinical study in advanced malignancies initiated in the first quarter of 2015.
Antibody-based Clinical Program in Collaboration with Bayer HealthCare
REGN2176-3
Combination product comprised of an antibody to PDGFR-beta co-formulated with aflibercept for intravitreal injection for use in ophthalmology. Phase 2 clinical study for the treatment of wet AMD initiated in the second quarter of 2015.
Antibody-based Clinical Program in Collaboration with Mitsubishi Tanabe Pharma
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.
Antibody-based Clinical Programs Developing Independently
Evinacumab (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. Partial clinical hold that excluded women of childbearing potential was lifted by the FDA in the third quarter of 2015.
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.
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 aflibercept for intravitreal injection for use in ophthalmology. 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. 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.

REGN1400, an antibody to ErbB3, and REGN1154, an antibody against an undisclosed target, both of which were previously in Phase 1 studies, are no longer in clinical development.

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^®) may then be utilized to discover and produce new product candidates directed against the disease target. Our antibody product candidates currently in clinical trials were developed using VelocImmune. We continue to invest in the development of enabling technologies to assist in our efforts to identify, develop, manufacture, and commercialize new product candidates.

In 2014, we launched a new human genetics initiative via a wholly owned subsidiary, Regeneron Genetics Center LLC (RGC). RGC performs sequencing and genotyping to generate de-identified genomic data. The objective of RGC is to expand the use of human genetics for discovering and validating genetic factors that cause or influence a range of diseases where there are major unmet medical needs, with the prospect of improving the drug discovery and development process. RGC is undertaking both large population-based efforts as well as family- and founder-based approaches. RGC leverages laboratory automation and an innovative approach to cloud computing to achieve high-quality throughput at a rate that exceeds 70,000 unique samples per year.

Marketed Products

EYLEA (aflibercept) Injection

We commenced sales of EYLEA in the United States for the treatment of wet AMD in the fourth quarter of 2011, macular edema following CRVO in the third quarter of 2012, DME in the third quarter of 2014, and macular edema following RVO in the fourth quarter of 2014. In addition, in March 2015, the FDA approved EYLEA for the treatment of diabetic retinopathy in patients with DME. Outside the United States, Bayer HealthCare commenced sales of EYLEA for the treatment of wet AMD in the fourth quarter of 2012, macular edema secondary to CRVO in the fourth quarter of 2013, visual impairment due to DME in the third quarter of 2014, and mCNV in Japan in the fourth quarter of 2014. In February and June 2015, the European Commission and the Japanese Ministry of Health, Labour and Welfare (MHLW), respectively, approved EYLEA for the treatment of macular edema following RVO, which includes macular edema following BRVO. In October 2015, the European Commission granted marketing authorization for EYLEA for the treatment of visual impairment due to mCNV. In the fourth quarter of 2014, Bayer HealthCare submitted a regulatory application in China for EYLEA for the treatment of wet AMD. 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. Bayer HealthCare markets, and records revenue from sales of EYLEA outside the United States, where, for countries other than Japan, the companies share equally the profits and losses from sales of EYLEA. In Japan, we are entitled to receive a percentage of the sales of EYLEA. We maintain exclusive rights to EYLEA in the United States and are entitled to all profits from such sales.

Net product sales of EYLEA in the United States were $734.4 million in the third quarter and $1,930.0 million in the first nine months of 2015, compared to $445.0 million in the third quarter and $1,218.8 million in the first nine months of 2014. Bayer HealthCare records revenue from sales of EYLEA outside the United States, which were $371.1 million in the third quarter and $1,000.7 million in the first nine months of 2015, compared to $277.0 million in the third quarter and $741.9 million in the first nine months of 2014.

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Praluent (alirocumab) Injection

In July 2015, the 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. In addition, in September 2015, the European Commission granted marketing authorization of Praluent for the treatment of adult patients with primary hypercholesterolemia (HeFH and non-familial) or mixed dyslipidemia as an adjunct to diet: (a) in combination with a statin, or statin with other lipid-lowering therapies in patients unable to reach their LDL-cholesterol goals with the maximally-tolerated statin, or (b) alone or in combination with other lipid-lowering therapies for patients who are statin intolerant, or for whom a statin is contraindicated. The effect of Praluent on cardiovascular morbidity and mortality has not been determined. We are collaborating with Sanofi on the global development and commercialization of Praluent. Under our collaboration agreement, Sanofi will record product sales and cost of sales for commercialized products, and Regeneron has the right to co-promote such products. We have exercised our option to co-promote Praluent in the United States. We and Sanofi will equally share profits and losses from sales within the United States.

Net product sales of Praluent in the United States were $4.0 million the third quarter of 2015.

ARCALYST (rilonacept) Injection for Subcutaneous Use

ARCALYST is available in the United States for the treatment of CAPS in adults and children 12 years and older. CAPS are a group of rare, inherited, auto-inflammatory conditions characterized by life-long, recurrent symptoms of rash, fever/chills, joint pain, eye redness/pain, and fatigue. Intermittent, disruptive exacerbations or flares can be triggered at any time by exposure to cooling temperatures, stress, exercise, or other unknown stimuli. Net product sales of ARCALYST were $3.2 million in the third quarter and $9.9 million in the first nine months of 2015, compared to $3.8 million in the third quarter and $10.4 million in the first nine months of 2014.

Trap-based Clinical Programs

EYLEA - Ophthalmologic Diseases

Overview

Vascular Endothelial Growth Factor (VEGF) is a naturally occurring protein in the body. Its normal role in a healthy organism is to trigger formation of new blood vessels (angiogenesis) supporting the growth of the body's tissues and organs. However, in certain diseases, such as wet AMD, it is also associated with the growth of abnormal new blood vessels in the eye, which exhibit abnormal increased permeability that leads to edema. Scarring and loss of fine-resolution central vision often results. CRVO is caused by obstruction of the central retinal vein that leads to a back-up of blood and fluid in the retina. Release of VEGF contributes to increased vascular permeability in the eye and macular edema. In BRVO, a blockage occurs in the blood vessels branching from the main vein draining the retina, resulting in the release of VEGF and consequent retinal edema. For centrally involved DME, VEGF-mediated leakage of fluid from blood vessels in the eye results in interference with vision. Wet AMD, diabetic retinopathy (which includes DME), and RVO are three of the leading causes of adult blindness in the developed world. In these conditions, severe visual loss is caused by neovascular proliferation and/or retinal edema.

EYLEA is a recombinant fusion protein, consisting of portions of human VEGF receptors 1 and 2 extracellular domains fused to the Fc portion of human IgG1 and formulated as an iso-osmotic solution for intravitreal administration. EYLEA acts as a soluble decoy receptor that binds VEGF-A and placental growth factor (PlGF) and thereby can inhibit the binding and activation of these cognate VEGF receptors. EYLEA is specially purified and contains iso-osmotic buffer concentrations, allowing for injection into the eye.

Neovascular Glaucoma

NVG is a secondary glaucoma triggered by the formation of new blood vessels (neovascularization) on the iris and the anterior chamber angle. Neovascularization restricts aqueous outflow and consequently elevates intraocular pressure (IOP). NVG is a serious condition that may lead to permanent loss of vision, a persistently painful eye, and, especially in the advanced stages, is unlikely to respond to treatment. NVG is caused by eye diseases leading to retinal ischemia, mainly CRVO, proliferative diabetic retinopathy (PDR), and ocular ischemic syndrome (OIS).

NVG meets the criteria for an orphan indication in Japan where the estimated number of NVG patients is 30,000 to 40,000. In the second quarter of 2015, Bayer HealthCare initiated a Phase 3 study in Japan to assess the efficacy and safety of intravitreal administration of aflibercept in comparison to sham treatment on the change in IOP in patients with NVG.

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Late-Stage Antibody-based Clinical Programs

Praluent for LDL cholesterol reduction

Overview

Elevated LDL cholesterol ("bad cholesterol") level is a validated risk factor leading to cardiovascular disease. Statins are a class of drugs that lower LDL cholesterol (LDL-C) through inhibition of HMG-CoA, an enzyme regulating the early and rate-limiting step in cholesterol biosynthesis that ultimately results in an increase in LDL receptors to increase the uptake of plasma LDL lipoproteins. Similar to statins, PCSK9 impacts the number of available LDL receptors and therefore plays a key role in modulating LDL-C levels in the body. PCSK9 is a secreted protein that binds to and induces the destruction of the LDL receptor, thereby interfering with cellular uptake and increasing circulating levels of LDL cholesterol. In a landmark study published in The New England Journal of Medicine in March 2006, patients with lower than normal PCSK9 levels due to a genetic abnormality not only had significantly lower levels of LDL-C, but also a significant reduction in the risk of coronary heart disease (CHD). We used our VelocImmune technology to generate a fully human monoclonal antibody inhibitor of PCSK9, called Praluent, that is intended to lower LDL cholesterol.

Clinical Programs

Phase 3 ODYSSEY Program. We and Sanofi initiated the global Phase 3 ODYSSEY program for Praluent in 2012. The ODYSSEY program consists of more than 23,500 patients, and includes clinical trials evaluating the effect of Praluent, dosed every two weeks, on lowering LDL cholesterol. In addition, the potential of Praluent to demonstrate cardiovascular benefit is being prospectively assessed in the ongoing 18,000-patient ODYSSEY OUTCOMES trial. LDL cholesterol reduction is the primary efficacy endpoint for initial regulatory filings. Additionally, the ODYSSEY program includes two trials of Praluent dosed every four weeks, ODYSSEY CHOICE I and ODYSSEY CHOICE II. Patients in the ODYSSEY CHOICE I trial received Praluent 300 mg (most in combination with statins) every four weeks and patients in the CHOICE II trial received Praluent 150 mg monotherapy and in combination with non-statin lipid lowering therapy every four weeks.

In 2013, we and Sanofi reported data from the ODYSSEY MONO trial, which evaluated the efficacy and safety of Praluent monotherapy versus ezetimibe monotherapy in patients with primary hypercholesterolemia. In 2014, we and Sanofi reported detailed positive results from nine additional Phase 3 ODYSSEY studies. All ten studies (ODYSSEY MONO, LONG TERM, FH I, FH II, HIGH FH, COMBO I, COMBO II, OPTIONS I, OPTIONS II, and ALTERNATIVE) met their primary efficacy endpoint of a greater percent reduction from baseline in LDL-C at 24 weeks compared to placebo or active comparator. Based on the positive results of these studies, a Biologics License Application (BLA) for U.S. regulatory approval of Praluent was submitted, and accepted by the FDA in January 2015. An FDA rare pediatric disease priority review voucher was utilized in connection with this BLA submission, as a result of which the submission was accepted by the FDA for priority review. In July 2015, the FDA approved Praluent as an adjunct to diet and maximally tolerated stain therapy for the treatment of adults with heterozygous familial hypercholesterolemia or clinical ASCVD, who require additional lowering of LDL cholesterol. In addition, in September 2015, the European Commission granted marketing authorization of Praluent for the treatment of adult patients with primary hypercholesterolemia (HeFH and non-familial) or mixed dyslipidemia as an adjunct to diet: (a) in combination with a statin, or statin with other lipid-lowering therapies in patients unable to reach their LDL-cholesterol goals with the maximally-tolerated statin, or (b) alone or in combination with other lipid-lowering therapies for patients who are statin intolerant, or for whom a statin is contraindicated. The effect of Praluent on cardiovascular morbidity and mortality has not been determined.

In January 2015, we and Sanofi announced that the ODYSSEY CHOICE I and ODYSSEY CHOICE II studies met their primary efficacy endpoints. The trials compared the reduction from baseline in LDL-C at 24 weeks with Praluent versus placebo in patients with hypercholesterolemia. In these trials dosing every four weeks, the mean percent reduction in LDL-C from baseline was consistent with that seen in previous Phase 3 trials evaluating Praluent in every other week dosing. The most common adverse events (AEs) in the trials (occurring in at least 5% of Praluent-treated patients) were injection site reactions, headache, upper respiratory tract infection, arthralgia, nausea, sinusitis, pain in extremity, and fatigue. Injection site reactions occurred more frequently in the Praluent groups compared to placebo.

In July 2015, we and Sanofi announced that the Phase 3 ODYSSEY JAPAN trial met its primary endpoint. At week 24, patients in the Praluent group experienced an average 64% greater reduction from baseline in their LDL-C when added to current standard of care including statins, compared to standard of care alone (p<0.0001). Patients were started on the lower dose of 75 mg, with the option to adjust their dose to 150 mg if they had not achieved their LDL-C goal (as defined by the Japan Atherosclerosis Society (JAS) guidelines) at week 8. At week 24, 97% of patients in the Praluent group reached their LDL-C treatment goal, compared to 10% for placebo (p<0.0001). Ninety-nine percent of patients who received Praluent at week 8 remained on the initial 75 mg dose, while 1% of patients had their dose adjusted to receive 150 mg every two weeks, also as a single 1 milliliter (mL) injection. The most common adverse events (occurring in at least 5% of patients in the Praluent group) were nasopharyngitis, injection site reaction, and back pain. Results were presented at the Annual Scientific Meeting of the JAS in Sendai, Japan.

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ODYSSEY JAPAN evaluated Praluent (n =144) compared to placebo (n =72), both on top of standard care, in Japanese patients with hypercholesterolemia, with either HeFH or at high CV risk, and who could not reach their LDL-C treatment goal as defined by the JAS guidelines despite lipid-lowering treatments that included statins. The mean LDL-C value at baseline was 141.2 mg/dL. Patients were initially randomized to receive either Praluent 75 mg every two weeks administered as a single 1 mL injection, or placebo. Patients in both groups received statins, with or without other lipid-lowering therapies.

Sarilumab (REGN88; IL-6R Antibody) for inflammatory diseases

Overview

Three Months Ended September 30,

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