Quarterly Report (10-q)

Date : 08/06/2019 @ 11:56AM
Source : Edgar (US Regulatory)
Stock : Regeneron Pharmaceuticals Inc (REGN)
Quote : 348.3  -0.11 (-0.03%) @ 4:59AM
After Hours
Last Trade
Last $ 348.30 ◊ 0.00 (0.00%)

Quarterly Report (10-q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended
June 30, 2019
 
 
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 incorporation or organization)
 
(I.R.S. Employer Identification No.)
777 Old Saw Mill River Road
Tarrytown,
New York
10591-6707
(Address of principal executive offices, including zip code)

( 914 ) 847-7000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock - par value $.001 per share
REGN
NASDAQ Global Select Market

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
No
 
 
 
 
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
 
Non-accelerated filer
 
Smaller reporting company
 
Emerging growth company
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
 
 
 
 
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
No

The number of shares outstanding of each of the registrant's classes of common stock as of July 22, 2019:
Class of Common Stock
 
Number of Shares
Class A Stock, $.001 par value
 
1,848,970
Common Stock, $.001 par value
 
107,983,401




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

 
 
 
 
Page Numbers
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 









"ARCALYST ® ", "EYLEA ® ", "Libtayo ® " (in the United States), "Regeneron ® ", "Regeneron Genetics Center ® ", "Veloci-Bi TM ", "VelociGene ® ", "VelociMab ® ", "VelocImmune ® ", "VelociMouse ® ", "VelociSuite ® ", and "ZALTRAP ® " 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.



PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REGENERON PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In millions, except share data)
 
June 30,
 
December 31,
 
2019
 
2018
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
1,045.5

 
$
1,467.7

Marketable securities
1,624.2

 
1,342.2

Accounts receivable - trade, net
1,920.2

 
1,723.7

Accounts receivable from Sanofi
252.0

 
226.4

Accounts receivable from Bayer
283.7

 
293.1

Inventories
1,317.2

 
1,151.2

Prepaid expenses and other current assets
208.2

 
243.3

Total current assets
6,651.0

 
6,447.6

 
 
 
 
Marketable securities
2,884.6

 
1,755.0

Property, plant, and equipment, net
2,676.6

 
2,575.8

Deferred tax assets
821.6

 
828.7

Other noncurrent assets
139.8

 
127.4

Total assets
$
13,173.6

 
$
11,734.5

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 
 
 
Accounts payable
$
244.0

 
$
218.2

Accrued expenses and other current liabilities
876.7

 
772.1

Deferred revenue from Sanofi
424.3

 
246.7

Deferred revenue - other
168.1

 
205.8

Total current liabilities
1,713.1

 
1,442.8

 
 
 
 
Finance lease liabilities
711.3

 
708.5

Deferred revenue from Sanofi
544.2

 
279.3

Deferred revenue - other
181.2

 
184.9

Other noncurrent liabilities
267.9

 
361.7

Total liabilities
3,417.7

 
2,977.2

 
 
 
 
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 - 1,911,354 in 2019 and 2018

 

Common Stock, $.001 par value; 320,000,000 shares authorized; shares issued - 111,889,570 in 2019 and 111,084,951 in 2018
0.1

 
0.1

Additional paid-in capital
4,263.6

 
3,911.6

Retained earnings
5,918.2

 
5,254.3

Accumulated other comprehensive income (loss)
15.8

 
(12.3
)
Treasury Stock, at cost; 4,018,269 shares in 2019 and 3,990,021 shares in 2018
(441.8
)
 
(396.4
)
Total stockholders' equity
9,755.9

 
8,757.3

Total liabilities and stockholders' equity
$
13,173.6

 
$
11,734.5

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

2



REGENERON PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
(In millions, except per share data)
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2019
 
2018
 
2019
 
2018
Statements of Operations
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
Net product sales
 
$
1,205.3

 
$
996.4

 
$
2,309.7

 
$
1,984.3

Sanofi collaboration revenue
 
349.1

 
237.8

 
595.5

 
427.2

Bayer collaboration revenue
 
289.0

 
262.9

 
565.2

 
510.8

Other revenue
 
90.3

 
110.9

 
175.1

 
197.2

 
 
1,933.7

 
1,608.0

 
3,645.5

 
3,119.5

 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
Research and development
 
1,048.3

 
529.3

 
1,690.1

 
1,027.9

Selling, general, and administrative
 
417.3

 
364.8

 
828.1

 
695.6

Cost of goods sold
 
67.0

 
36.0

 
137.9

 
105.2

Cost of collaboration and contract manufacturing
 
85.5

 
55.7

 
193.8

 
101.4

 
 
1,618.1

 
985.8

 
2,849.9

 
1,930.1

 
 
 
 
 
 
 
 
 
Income from operations
 
315.6

 
622.2

 
795.6

 
1,189.4

 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
Other (expense) income, net
 
(82.9
)
 
40.8

 
(9.1
)
 
65.4

Interest expense
 
(8.0
)
 
(6.9
)
 
(15.7
)
 
(13.3
)
 
 
(90.9
)
 
33.9

 
(24.8
)
 
52.1

 
 
 
 
 
 
 
 
 
Income before income taxes
 
224.7

 
656.1

 
770.8

 
1,241.5

 
 
 
 
 
 
 
 
 
Income tax expense
 
(31.6
)
 
(104.7
)
 
(116.6
)
 
(212.1
)
 
 
 
 
 
 
 
 
 
Net income
 
$
193.1

 
$
551.4

 
$
654.2

 
$
1,029.4

 
 
 
 
 
 
 
 
 
Net income per share - basic
 
$
1.77

 
$
5.12

 
$
6.00

 
$
9.56

Net income per share - diluted
 
$
1.68

 
$
4.82

 
$
5.69

 
$
8.97

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding - basic
 
109.2

 
107.8

 
109.1

 
107.7

Weighted average shares outstanding - diluted
 
114.6

 
114.5

 
115.0

 
114.7

 
 
 
 
 
 
 
 
 
Statements of Comprehensive Income
 
 
 
 
 
 
 
 
Net income
 
$
193.1

 
$
551.4

 
$
654.2

 
$
1,029.4

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
Unrealized gain (loss) on debt securities
 
14.4

 
3.4

 
30.5

 
(7.7
)
Unrealized (loss) gain on cash flow hedges
 
(1.4
)
 
0.6

 
(2.4
)
 
2.0

Comprehensive income
 
$
206.1

 
$
555.4

 
$
682.3

 
$
1,023.7

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


3



REGENERON PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
(In millions)
 
 
Class A Stock
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Treasury Stock
 
Total Stockholders' Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Shares
 
Amount
 
Balance, December 31, 2018
 
1.9

 

 
111.1

 
$
0.1

 
$
3,911.6

 
$
5,254.3

 
$
(12.3
)
 
(4.0
)
 
$
(396.4
)
 
$
8,757.3

Issuance of Common Stock in connection with exercise of stock options
 

 

 
0.6

 

 
140.9

 

 

 

 

 
140.9

Common Stock tendered upon exercise of stock options and vesting of restricted stock in connection with employee tax obligations
 

 

 

 

 
(10.7
)
 

 

 

 

 
(10.7
)
Issuance/distribution of Common Stock in connection with Company 401(k) Savings Plan
 

 

 

 

 
4.3

 

 

 
0.1

 
6.2

 
10.5

Repurchases of Common Stock from Sanofi
 

 

 

 

 

 

 

 
(0.1
)
 
(54.0
)
 
(54.0
)
Stock-based compensation charges
 

 

 

 

 
114.8

 

 

 

 

 
114.8

Adjustment upon adoption of new accounting standard
 

 

 

 

 

 
9.7

 

 

 

 
9.7

Net income
 

 

 

 

 

 
461.1

 

 

 

 
461.1

Other comprehensive gain, net of tax
 

 

 

 

 

 

 
15.1

 

 

 
15.1

Balance, March 31, 2019
 
1.9

 

 
111.7

 
0.1

 
4,160.9

 
5,725.1

 
2.8

 
(4.0
)
 
(444.2
)
 
9,444.7

Issuance of Common Stock in connection with exercise of stock options
 

 

 
0.3

 

 
13.9

 

 

 

 

 
13.9

Common Stock tendered upon exercise of stock options and vesting of restricted stock in connection with employee tax obligations
 

 

 
(0.1
)
 

 
(29.7
)
 

 

 

 

 
(29.7
)
Issuance/distribution of Common Stock in connection with Company 401(k) Savings Plan
 

 

 

 

 
9.3

 

 

 

 
2.4

 
11.7

Stock-based compensation charges
 

 

 

 

 
109.2

 

 

 

 

 
109.2

Net income
 

 

 

 

 

 
193.1

 

 

 

 
193.1

Other comprehensive gain, net of tax
 

 

 

 

 

 

 
13.0

 

 

 
13.0

Balance, June 30, 2019
 
1.9

 

 
111.9

 
$
0.1

 
$
4,263.6

 
$
5,918.2

 
$
15.8

 
(4.0
)
 
$
(441.8
)
 
$
9,755.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

4



 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (continued)
 
 
Class A Stock
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Treasury Stock
 
Total Stockholders' Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Shares
 
Amount
 
Balance, December 31, 2017
 
1.9

 

 
109.5

 
$
0.1

 
$
3,512.9

 
$
2,946.7

 
$
0.6

 
(3.8
)
 
$
(316.2
)
 
$
6,144.1

Issuance of Common Stock in connection with exercise of stock options
 

 

 
0.1

 

 
13.6

 

 

 

 

 
13.6

Issuance of Common Stock in connection with Company 401(k) Savings Plan
 

 

 
0.1

 

 
(0.7
)
 

 

 

 

 
(0.7
)
Stock-based compensation charges
 

 

 

 

 
85.8

 

 

 

 

 
85.8

Cumulative-effect adjustment upon adoption of new accounting standards
 

 

 

 

 

 
(136.9
)
 
(6.6
)
 

 

 
(143.5
)
Net income
 

 

 

 

 

 
478.0

 

 

 

 
478.0

Other comprehensive loss, net of tax
 

 

 

 

 

 

 
(9.7
)
 

 

 
(9.7
)
Balance, March 31, 2018
 
1.9

 

 
109.7

 
0.1

 
3,611.6

 
3,287.8

 
(15.7
)
 
(3.8
)
 
(316.2
)
 
6,567.6

Issuance of Common Stock in connection with exercise of stock options
 

 

 
0.4

 

 
19.8

 

 

 

 

 
19.8

Common Stock tendered upon exercise of stock options and vesting of restricted stock in connection with employee tax obligations
 

 

 
(0.2
)
 

 
(31.9
)
 

 

 

 

 
(31.9
)
Repurchases of Common Stock from Sanofi
 

 

 

 

 

 

 

 
(0.1
)
 
(37.6
)
 
(37.6
)
Stock-based compensation charges
 

 

 

 

 
113.1

 

 

 

 

 
113.1

Net income
 

 

 

 

 

 
551.4

 

 

 

 
551.4

Other comprehensive gain, net of tax
 

 

 

 

 

 

 
4.1

 

 

 
4.1

Balance, June 30, 2018
 
1.9

 

 
109.9

 
$
0.1

 
$
3,712.6

 
$
3,839.2

 
$
(11.6
)
 
(3.9
)
 
$
(353.8
)
 
$
7,186.5

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


5



REGENERON PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In millions)
 
 
Six Months Ended
June 30,
 
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net income
 
$
654.2

 
$
1,029.4

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
103.1

 
70.0

Non-cash compensation expense
 
213.7

 
189.2

Other non-cash items, net
 
110.7

 
(54.9
)
Deferred taxes
 
(125.3
)
 
(15.5
)
Changes in assets and liabilities:
 
 
 
 
Increase in Sanofi, Bayer, and trade accounts receivable
 
(256.8
)
 
(64.9
)
Increase in inventories
 
(168.2
)
 
(182.1
)
Decrease in prepaid expenses and other assets
 
42.5

 
59.4

Increase (decrease) in deferred revenue
 
401.1

 
(84.2
)
Increase in accounts payable, accrued expenses, and other liabilities
 
110.3

 
67.0

Total adjustments
 
431.1

 
(16.0
)
Net cash provided by operating activities
 
1,085.3

 
1,013.4

 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Purchases of marketable and other securities
 
(2,189.1
)
 
(1,181.2
)
Sales or maturities of marketable securities
 
745.9

 
462.2

Capital expenditures
 
(168.9
)
 
(191.4
)
Net cash used in investing activities
 
(1,612.1
)
 
(910.4
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Proceeds from issuance of Common Stock
 
155.1

 
34.1

Payments in connection with Common Stock tendered for employee tax obligations
 
(40.5
)
 
(31.9
)
Repurchases of Common Stock
 
(10.0
)
 

Net cash provided by financing activities
 
104.6

 
2.2

 
 
 
 
 
Net (decrease) increase in cash, cash equivalents, and restricted cash
 
(422.2
)
 
105.2

 
 
 
 
 
Cash, cash equivalents, and restricted cash at beginning of period
 
1,480.2

 
825.2

 
 
 
 
 
Cash, cash equivalents, and restricted cash at end of period
 
$
1,058.0

 
$
930.4

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


6



REGENERON PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Unless otherwise noted, dollars in millions, except per share data)
1. Interim Financial Statements
The interim Condensed Consolidated Financial Statements of Regeneron Pharmaceuticals, Inc. and its subsidiaries ("Regeneron," "Company," "we," "us," and "our") 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 condensed consolidated financial statements for such periods. The results of operations for any interim period are not necessarily indicative of the results for the full year. The December 31, 2018 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, 2018 .
Certain reclassifications have been made to prior period amounts to conform with the current period's presentation.
We adopted Accounting Standards Codification ("ASC") 842, Leases , on January 1, 2019 (the "effective date") and used the effective date as our date of initial application. See Note 8. The new standard requires a lessee to recognize on its balance sheet (for both finance and operating leases) a liability for future lease payments and a right-of-use asset representing its right to use the underlying asset over the lease term. We elected the practical expedients upon transition, which permitted companies to not reassess lease identification, classification, and initial direct costs under the new standard for leases that commenced prior to the effective date. Upon adoption of the new standard, we recognized right-of-use assets of $33.2 million related to operating leases as of January 1, 2019. The impact of adopting the standard for the facilities that we had historically applied build-to-suit and capital lease accounting was not material to our Condensed Consolidated Financial Statements. Prior period amounts have not been adjusted in connection with the adoption of this standard.
2. Product Sales
Net product sales consist of the following:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
Net Product Sales in the United States
 
2019
 
2018
 
2019
 
2018
EYLEA ®
 
$
1,160.3

 
$
992.0

 
$
2,234.4

 
$
1,976.0

Libtayo ®
 
40.8

 

 
67.6

 

ARCALYST ®
 
4.2

 
4.4

 
7.7

 
8.3

 
 
$
1,205.3

 
$
996.4

 
$
2,309.7

 
$
1,984.3


The Company had product sales to certain customers that accounted for more than 10% of total gross product revenue for each of the three and six months ended June 30, 2019 and 2018 . Sales to each of these customers as a percentage of the Company's total gross product revenue are as follows:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2019
 
2018
 
2019
 
2018
Besse Medical, a subsidiary of AmerisourceBergen Corporation
 
56
%
 
56
%
 
57
%
 
55
%
McKesson Corporation
 
34
%
 
35
%
 
32
%
 
37
%

The following table summarizes the provisions, and credits/payments, for sales-related deductions during the six months ended June 30, 2019 and 2018 .

7



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


 
Rebates, Chargebacks, and Discounts
 
Distribution-
Related
Fees
 
Other Sales-
Related
Deductions
 
Total
Balance as of December 31, 2018
$
41.1

 
$
42.0

 
$
8.3

 
$
91.4

Provisions
185.1

 
114.0

 
33.3

 
332.4

Credits/payments
(139.5
)
 
(87.9
)
 
(30.9
)
 
(258.3
)
Balance as of June 30, 2019
$
86.7

 
$
68.1

 
$
10.7

 
$
165.5

 
 
 
 
 
 
 
 
Balance as of December 31, 2017
$
29.9

 
$
34.1

 
$
21.3

 
$
85.3

Provisions
97.7

 
102.1

 
19.9

 
219.7

Credits/payments
(91.1
)
 
(98.5
)
 
(24.4
)
 
(214.0
)
Balance as of June 30, 2018
$
36.5

 
$
37.7

 
$
16.8

 
$
91.0


3. Collaboration Agreements
a. Sanofi
The collaboration revenue we earned from Sanofi is detailed below:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
Sanofi Collaboration Revenue
 
2019
 
2018
 
2019
 
2018
Antibody:
 
 
 
 
 
 
 
 
Reimbursement of Regeneron research and development expenses
 
$
81.8

 
$
64.5

 
$
156.3

 
$
124.9

Reimbursement of Regeneron commercialization-related expenses
 
121.1

 
103.7

 
237.7

 
189.1

Regeneron's share of profits (losses) in connection with commercialization of antibodies
 
38.8

 
(68.8
)
 
11.0

 
(143.7
)
Other
 
36.5

 
31.7

 
49.4

 
49.0

Total Antibody
 
278.2

 
131.1

 
454.4

 
219.3

Immuno-oncology:
 
 
 
 
 
 
 
 
Reimbursement of Regeneron research and development expenses
 
36.5

 
77.0

 
82.9

 
150.9

Reimbursement of Regeneron commercialization-related expenses
 
1.7

 
2.1

 
4.0

 
3.2

Other
 
32.7

 
27.6

 
54.2

 
53.8

Total Immuno-oncology
 
70.9

 
106.7

 
141.1

 
207.9

 
 
$
349.1

 
$
237.8

 
$
595.5

 
$
427.2



8



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


Antibody
The Company is party to a global, strategic collaboration with Sanofi to discover, develop, and commercialize fully human monoclonal antibodies (the "Antibody Collaboration") . Under the companies' Antibody License and Collaboration Agreement, 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. All other agreed-upon worldwide development expenses incurred by both companies are funded by Sanofi. The Company recognized as research and development expense $10.3 million and $9.9 million during the three months ended June 30, 2019 and 2018, respectively, and during the six months ended June 30, 2019 and 2018, the Company recognized as research and development expense  $19.6 million  and  $23.8 million , respectively, its share of antibody development expenses that Sanofi incurred related to Dupixent ® (dupilumab), Praluent ® (alirocumab), and Kevzara ® (sarilumab).
Effective January 7, 2018, the Company and Sanofi entered into a letter agreement (the "Letter Agreement") in connection with, among other matters, the allocation of additional funds to certain activities relating to dupilumab and REGN3500 (collectively, the "Dupilumab/REGN3500 Eligible Investments"). Refer to the " Immuno-Oncology " section below for further details regarding the Letter Agreement. During the first quarter of 2019, Sanofi elected to sell, and we elected to purchase (in cash), 24,143 shares of the Company's Common Stock in connection with Sanofi's funding obligation for Dupilumab/REGN3500 Eligible Investments. Consequently, we recorded the cost of the shares received, or $10.0 million , as Treasury Stock during the first quarter of 2019.
Sanofi leads commercialization activities for products developed under the Antibody Collaboration, subject to the Company's right to co-promote such products. In addition to profit and loss sharing, the Company is entitled to receive up to $250.0 million in sales milestone payments, with milestone payments commencing only if and after aggregate annual sales outside the United States exceed $1.0 billion on a rolling twelve -month basis. The amount of variable consideration related to our share of profits and losses, as well as sales milestones, is deemed to be constrained as of June 30, 2019 , and therefore has not been included in the transaction price.
The following table summarizes contract balances in connection with the Company's Antibody Collaboration with Sanofi:
 
 
June 30,
 
December 31,
 
 
2019
 
2018
Accounts receivable
 
$
248.8

 
$
138.2

Deferred revenue
 
$
339.4

 
$
236.1

Significant changes in deferred revenue balances are as follows:
 
 
Six Months Ended
June 30, 2019
Increase due to shipments of commercial supplies to Sanofi
 
$
172.8

Revenue recognized that was included in deferred revenue at the beginning of the period
 
$
(75.1
)

As we recognize Sanofi antibody collaboration revenue in an amount equal to the amount we have the right to invoice and such amount corresponds directly with the value to Sanofi of our performance to date, we do not disclose the value of the transaction price allocated to our remaining unsatisfied performance obligations.
Immuno-Oncology
In 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"). The IO Collaboration is governed by an Amended and Restated Immuno-oncology Discovery and Development Agreement ("Amended IO Discovery Agreement"), and an Immuno-oncology License and Collaboration Agreement ("IO License and Collaboration Agreement").
Effective December 31, 2018, the Company and Sanofi entered into an Amended IO Discovery Agreement, which narrowed the scope of the existing discovery and development activities conducted by the Company ("IO Development Activities") under the 2015 IO Discovery Agreement to developing therapeutic bispecific antibodies targeting (i) BCMA and CD3 (the "BCMAxCD3

9



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


Program") and (ii) MUC16 and CD3 (the "MUC16xCD3 Program") through clinical proof-of-concept. The Amended IO Discovery Agreement provided for Sanofi’s payment of $461.9 million to the Company as consideration for (x) the termination of the 2015 IO Discovery Agreement, (y) the prepayment for certain IO Development Activities regarding the BCMAxCD3 Program and the MUC16xCD3 Program, and (z) the reimbursement of costs incurred by the Company under the 2015 IO Discovery Agreement during the fourth quarter of 2018.
If Sanofi exercises its option to license rights to a BCMAxCD3 Program antibody or MUC16xCD3 Program antibody thereunder, it will co-develop these drug candidates with the Company through product approval. Sanofi will fund development costs up front for a BCMAxCD3 Program antibody and we will reimburse half of the total development costs for such antibody from our share of future IO Collaboration profits to the extent they are sufficient for this purpose. In addition, we and Sanofi will share equally, on an ongoing basis, the development costs for a MUC16xCD3 Program antibody.
Under the terms of the IO License and Collaboration Agreement, the parties are co-developing Libtayo (cemiplimab), an antibody targeting the receptor known as programmed cell death protein 1 (PD-1). The parties share equally, on an ongoing basis, agreed-upon development expenses for Libtayo. Pursuant to the Letter Agreement, the Libtayo development budget was increased and the Company has agreed to allow Sanofi to satisfy in whole or in part its funding obligations with respect to the Libtayo development and Dupilumab/REGN3500 Eligible Investments by selling up to an aggregate of 1,400,000 shares (of which 1,042,732 currently remains available) of our Common Stock directly or indirectly owned by Sanofi through September 30, 2020. If Sanofi desires to sell shares of our Common Stock during the term of the Letter Agreement to satisfy a portion or all of its funding obligations for the Libtayo development and/or Dupilumab/REGN3500 Eligible Investments, we may elect to purchase, in whole or in part, such shares from Sanofi. If we do not elect to purchase such shares, Sanofi may sell the applicable number of shares (subject to certain daily and quarterly limits) in one or more open-market transactions. During the first quarter of 2019, Sanofi elected to sell, and we elected to purchase (by issuing a credit towards the amount owed by Sanofi), 106,972 shares of the Company's Common Stock to satisfy Sanofi's funding obligation related to Libtayo development costs. Consequently, we recorded the cost of the shares received, or $44.0 million as Treasury Stock during the first quarter of 2019. Refer to the " Antibody " section above for a description of share transactions related to Dupilumab/REGN3500 Eligible Investments.
The Company has principal control over the development of Libtayo and leads commercialization activities in the United States, while Sanofi leads commercialization activities outside of the United States and the parties equally share profits and losses from worldwide sales. As it relates to the IO Collaboration, "Reimbursement of Regeneron commercialization-related expenses" in the table above represents reimbursement of costs by Sanofi in connection with the commercialization of Libtayo outside of the United States.
The following table summarizes contract balances in connection with the Company's IO Collaboration with Sanofi:
 
 
June 30,
 
December 31,
 
 
2019
 
2018
Accounts (payable) receivable
 
$
(0.8
)
 
$
77.9

Deferred revenue
 
$
629.1

 
$
289.9

Significant changes in deferred revenue balances are as follows:
 
 
Six Months Ended
June 30, 2019
Increase as a result of payment received from Sanofi
 
$
415.9

Revenue recognized that was included in deferred revenue at the beginning of the period
 
$
(55.3
)
Revenue recognized that was added to deferred revenue during the period
 
$
(25.0
)


10



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


The aggregate amount of the transaction price under the IO Collaboration allocated to the Company's performance obligation that was unsatisfied (or partially unsatisfied) as of June 30, 2019 was $1,251.1 million . This amount is expected to be recognized as revenue over the remaining period in which the Company is obligated to satisfy its performance obligation in connection with performing development activities.
b. Bayer
Revenue earned in connection with our Bayer EYLEA collaboration is as follows (note that the table excludes amounts in connection with our Bayer Ang2 antibody and PDGFR-beta antibody collaboration agreements, which were previously terminated):
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
Bayer EYLEA Collaboration Revenue
 
2019
 
2018
 
2019
 
2018
Regeneron's net profit in connection with commercialization of EYLEA outside the United States
 
$
269.0

 
$
246.3

 
$
518.3

 
$
478.4

Reimbursement of Regeneron EYLEA development expenses
 
8.0

 
3.7

 
10.6

 
7.1

Other
 
12.0

 
12.7

 
36.3

 
24.6

 
 
$
289.0

 
$
262.7

 
$
565.2

 
$
510.1


The Company is party to a license and collaboration agreement with Bayer for the global development and commercialization of EYLEA outside the United States. Bayer markets EYLEA outside the United States, where, for countries other than Japan, the companies share equally in profits and losses from sales of EYLEA. In Japan, the Company is entitled to receive a tiered percentage of between 33.5% and 40.0% of EYLEA net product sales. In addition, the Company and Bayer share the funding of agreed-upon EYLEA development costs.
c. Teva
In September 2016, the Company and Teva entered into a collaboration agreement (the "Teva Collaboration Agreement") to develop and commercialize fasinumab globally, excluding certain Asian countries that are subject to our collaboration agreement with Mitsubishi Tanabe Pharma Corporation. In connection with the Teva Collaboration Agreement, Teva made a $250.0 million non-refundable up-front payment in September 2016. The Company leads global development activities, and the parties share development costs equally, on an ongoing basis, under a global development plan. The Company is also responsible for the manufacture and supply of fasinumab globally.
The Company recognized $61.1 million and $68.8 million of revenue for the three months ended June 30, 2019 and 2018 , respectively, and $114.8 million and $127.4 million for the six months ended June 30, 2019 and 2018 , respectively, in connection with the Teva Collaboration Agreement.
The following table summarizes contract balances in connection with the Teva Collaboration Agreement:
 
 
June 30,
 
December 31,
 
 
2019
 
2018
Accounts receivable (recorded within Prepaid expenses and other current assets)
 
$
36.7

 
$
28.8

Deferred revenue
 
$
149.1

 
$
194.5

Significant changes in deferred revenue balances are as follows:
 
 
Six Months Ended
June 30, 2019
Revenue recognized that was included in deferred revenue at the beginning of the period
 
$
(45.9
)


11



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


The aggregate amount of the transaction price under the Teva Collaboration Agreement allocated to the Company's performance obligation that was unsatisfied (or partially unsatisfied) as of June 30, 2019 was $357.7 million . This amount is expected to be recognized as revenue over the remaining period in which the Company is obligated to satisfy its performance obligation in connection with performing development activities.
d. Alnylam
In April 2019, the Company and Alnylam Pharmaceuticals, Inc. entered into a global, strategic collaboration to discover, develop, and commercialize RNA interference (RNAi) therapeutics for a broad range of diseases by addressing therapeutic disease targets expressed in the eye and central nervous system ("CNS"), in addition to a select number of targets expressed in the liver. The collaboration is governed by a Master Collaboration Agreement (the "Master Agreement") (including the form of a License Agreement and a Co-Commercialization Collaboration Agreement). Under the terms of the Master Agreement, we made an up-front payment of $400.0 million to Alnylam, which was recorded in Research and development expense during the second quarter of 2019. For each program, we will provide Alnylam with a specified amount of funding at program initiation and at lead candidate designation, and Alnylam is eligible to receive up to $200.0 million in clinical proof-of-principle milestones for eye or CNS programs.
Under the collaboration, the parties plan to perform discovery research until designation of lead candidates. Following designation of a lead candidate, the parties may further advance such lead candidate under either a License Agreement or a Co-Commercialization Collaboration Agreement structure. The initial target nomination and discovery period is five years (which may under certain situations automatically be extended for up to seven years in the aggregate) (the "Research Term"). In addition, we have an option to extend the Research Term for an additional five -year period for a research extension fee ranging from $200.0 million to $400.0 million ; the actual amount of the fee will be determined based on the acceptance of one or more INDs (or their equivalent in certain other countries) for programs in the eye and CNS.
In connection with the collaboration, we and Alnylam also entered into a Stock Purchase Agreement. Pursuant to the terms of the Stock Purchase Agreement, we purchased shares of Alnylam common stock for aggregate cash consideration of $400.0 million .
4. Net Income Per Share
The Company's basic net income per share amounts have been computed by dividing net income by the weighted average number of shares of Common Stock and Class A Stock outstanding. Net income per share is presented on a combined basis, inclusive of Common Stock and Class A Stock outstanding, as each class of stock has equivalent economic rights. Diluted net income per share includes the potential dilutive effect of other securities as if such securities were converted or exercised during the period, when the effect is dilutive. The calculations of basic and diluted net income per share are as follows:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2019
 
2018
 
2019
 
2018
Net income - basic and diluted
 
$
193.1

 
$
551.4

 
$
654.2

 
$
1,029.4

 
 
 
 
 
 
 
 
 
(Shares in millions)
 
 
 
 
 
 
 
 
Weighted average shares - basic
 
109.2

 
107.8

 
109.1

 
107.7

Effect of dilutive securities:
 
 
 
 
 
 
 
 
Stock options
 
5.4

 
6.7

 
5.9

 
7.0

Weighted average shares - diluted
 
114.6

 
114.5

 
115.0

 
114.7

 
 
 
 
 
 
 
 
 
Net income per share - basic
 
$
1.77

 
$
5.12

 
$
6.00

 
$
9.56

Net income per share - diluted
 
$
1.68

 
$
4.82

 
$
5.69

 
$
8.97



12



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


Shares which have been excluded from diluted per share amounts because their effect would have been antidilutive include the following:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(Shares in millions)
 
2019
 
2018
 
2019
 
2018
Stock options
 
18.3

 
14.9

 
18.1

 
14.9

Restricted stock
 
0.4

 
0.1

 

 
0.1


5. Marketable Securities
Marketable securities as of June 30, 2019 and December 31, 2018 consist of both available-for-sale debt securities of investment grade issuers (see below and Note 6) as well as equity securities of publicly traded companies (see Note 6).
The following tables summarize the Company's investments in available-for-sale debt securities:
 
 
Amortized
 
Unrealized
 
Fair
As of June 30, 2019
 
Cost Basis
 
Gains
 
Losses
 
Value
Corporate bonds
 
$
3,774.2

 
$
22.1

 
$
(1.7
)
 
$
3,794.6

U.S. government and government agency obligations
 
119.4

 
0.2

 
(0.2
)
 
119.4

Sovereign bonds
 
26.8

 
0.5

 

 
27.3

Commercial paper
 
99.6

 
0.1

 

 
99.7

Certificates of deposit
 
53.7

 
0.1

 

 
53.8

 
 
$
4,073.7

 
$
23.0

 
$
(1.9
)
 
$
4,094.8

 
 
 
 
 
 
 
 
 
As of December 31, 2018
 
 
 
 
 
 
 
 
Corporate bonds
 
$
2,734.8

 
$
1.0

 
$
(17.4
)
 
$
2,718.4

U.S. government and government agency obligations
 
110.4

 

 
(1.0
)
 
109.4

Sovereign bonds
 
7.6

 

 

 
7.6

Commercial paper
 
113.8

 

 

 
113.8

Certificates of deposit
 
60.0

 

 

 
60.0

 
 
$
3,026.6

 
$
1.0

 
$
(18.4
)
 
$
3,009.2

The Company classifies its investments in available-for-sale debt securities based on their contractual maturity dates. The available-for-sale debt securities listed as of June 30, 2019 mature at various dates through June 2024. The fair values of available-for-sale debt security investments by contractual maturity consist of the following:
 
 
June 30,
2019
 
December 31,
2018
Maturities within one year
 
$
1,624.2

 
$
1,342.2

Maturities after one year through five years
 
2,470.6

 
1,667.0

 
 
$
4,094.8

 
$
3,009.2



13



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


The following table shows the fair value of the Company's available-for-sale debt securities that have unrealized losses and that are deemed to be only temporarily impaired, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.
 
Less than 12 Months
 
12 Months or Greater
 
Total
As of June 30, 2019
Fair Value
 
Unrealized Loss
 
Fair Value
 
Unrealized Loss
 
Fair Value
 
Unrealized Loss
Corporate bonds
$
312.8

 
$
(0.2
)
 
$
564.7

 
$
(1.5
)
 
$
877.5

 
$
(1.7
)
U.S. government and government agency obligations

 

 
76.4

 
(0.2
)
 
76.4

 
(0.2
)
 
$
312.8

 
$
(0.2
)
 
$
641.1

 
$
(1.7
)
 
$
953.9

 
$
(1.9
)