Long-Term Incentive Plans

12 Months Ended

Dec. 31, 2011

Long-Term Incentive Plans [Abstract]

Long-Term Incentive Plans

14.   Long-Term Incentive Plans

During 2000, the Company established the Regeneron Pharmaceuticals, Inc. 2000 Long-Term Incentive Plan which, as amended and restated (the “2000 Incentive Plan”), provides for the issuance of up to 41,307,016 shares of Common Stock in respect of awards.  Employees of the Company, including officers, and nonemployees, including consultants and nonemployee members of the Company’s board of directors, (collectively, “Participants”) may receive awards as determined by a committee of independent directors (“Committee”).  The awards that may be made under the 2000 Incentive Plan include: (a) Incentive Stock Options (“ISOs”) and Nonqualified Stock Options, (b) shares of Restricted Stock, (c) shares of Phantom Stock, (d) Stock Bonuses, and (e) Other Awards.

Stock Option awards grant Participants the right to purchase shares of Common Stock at prices determined by the Committee; however, in the case of an ISO, the option exercise price will not be less than the fair market value of a share of Common Stock on the date the Option is granted.  Options vest over a period of time determined by the Committee, generally on a pro rata basis over a three to five year period.  The Committee also determines the expiration date of each Option; however, no ISO is exercisable more than ten years after the date of grant.  The maximum term of options that have been awarded under the 2000 Incentive Plan is ten years.

Restricted Stock awards grant Participants shares of restricted Common Stock or allow Participants to purchase such shares at a price determined by the Committee.  Such shares are nontransferable for a period determined by the Committee (“vesting period”).  Should employment terminate, as defined by the 2000 Incentive Plan, the ownership of the Restricted Stock, which has not vested, will be transferred to the Company, except under defined circumstances with Committee approval, in consideration of amounts, if any, paid by the Participant to acquire such shares.  In addition, if the Company requires a return of the Restricted Shares, it also has the right to require a return of all dividends paid on such shares.

Phantom Stock awards provide the Participant the right to receive, within 30 days of the date on which the share vests, an amount, in cash and/or shares of the Company’s Common Stock as determined by the Committee, equal to the sum of the fair market value of a share of Common Stock on the date such share of Phantom Stock vests and the aggregate amount of cash dividends paid with respect to a share of Common Stock during the period from the grant date of the share of Phantom Stock to the date on which the share vests.  Stock Bonus awards are bonuses payable in shares of Common Stock which are granted at the discretion of the Committee.

Other Awards are other forms of awards which are valued based on the Company’s Common Stock.  Subject to the provisions of the 2000 Incentive Plan, the terms and provisions of such Other Awards are determined solely on the authority of the Committee.

The 2000 Incentive Plan contains provisions that allow for the Committee to provide for the immediate vesting of awards upon a change in control of the Company, as defined in the plan.

As of December 31, 2011, there were 10,244,318 shares available for future grants under the 2000 Incentive Plan.

a. Stock Options

Transactions involving stock option awards during 2011 under the 2000 Incentive Plan is summarized in the table below.

Stock Options:	Number of Shares	Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Term (in years)	Intrinsic Value (in thousands)
Outstanding at December 31, 2010	23,362,248	$19.93
2011:   Granted	4,286,640	$51.96
Forfeited	(247,898)	$28.11
Expired	(551,456)	$13.31
Exercised	(4,523,173)	$18.73
Outstanding at December 31, 2011	22,326,361	$26.40	6.90	$663,376
Vested and expected to vest at December 31, 2011	21,755,141	$26.04	6.84	$653,990
Exercisable at December 31, 2011	11,963,345	$18.27	5.27	$451,478

The Company satisfies stock option exercises with newly issued shares of the Company’s Common Stock.  The total intrinsic value of stock options exercised during 2011, 2010, and 2009 was $49.2 million, $21.4 million, and $13.2 million,    respectively.  The intrinsic value represents the amount by which the market price of the underlying stock exceeds the exercise price of an option.

The Company grants stock options with exercise prices that are equal to or greater than the average market price of the Company’s Common Stock on the date of grant (“Market Price”).  The table below summarizes the weighted-average exercise prices and weighted-average grant-date fair values of options issued during the years ended December 31, 2011, 2010, and 2009.  The fair value of each option granted under the 2000 Incentive Plan during 2011, 2010, and 2009 was estimated on the date of grant using the Black-Scholes option-pricing model.

	Number of Options Granted	Weighted-Average Exercise Price	Weighted-Average Fair Value
2011:
Exercise price equal to Market Price	4,286,640	$51.96	$23.82
2010:
Exercise price equal to Market Price	4,319,856	$29.43	$13.36
2009:
Exercise price equal to Market Price	3,490,560	$20.69	$10.89

For the years ended December 31, 2011, 2010, and 2009, the Company recognized $39.2 million, $29.4 million, and $27.4 million, respectively, of non-cash stock-based compensation expense related to non-performance based stock option awards.  As of December 31, 2011, there was $93.6 million of stock-based compensation cost related to outstanding non-performance based stock options, net of estimated forfeitures, which had not yet been recognized.  The Company expects to recognize this compensation cost over a weighted-average period of 1.9 years.

In addition, there were 2,195,429 performance-based options which were outstanding and unvested as of December 31, 2011 of which, subject to the optionee satisfying certain service conditions, 203,429 options that were issued in 2005 would vest upon achieving certain defined sales targets for the Company’s products and 1,992,000 options that were issued in 2011, 2010, and 2009 would vest upon achieving certain development milestones for the Company’s product candidates.  In light of the Company’s receipt of marketing approval for EYLEAÒ for the treatment of wet AMD in November 2011, and the status of the Company’s development programs at December 31, 2011, the Company estimates that all of the remaining performance-based options issued in 2005, 2009, and 2010 will vest and approximately 50% of the performance-based options issued in 2011 will vest.

For the years ended December 31, 2011 and 2010, the Company recognized $11.7 million and $8.1 million, respectively, of non-cash stock-based compensation expense related to these performance options.  As of December 31, 2011 there was $17.4 million of stock-based compensation cost which had not yet been recognized related to the performance–based options that the Company currently estimates will vest.  The Company expects to recognize this compensation cost over a weighted-average period of 2.5 years.  In addition, potential compensation cost of $10.2 million related to the performance options issued in 2011, whose performance conditions (based on current facts and circumstances) are not currently considered by the Company to be probable of attainment, will begin to be recognized only if and when the Company estimates that it is probable that these options will vest.  The Company’s estimates of the number of performance-based options that will vest will be revised, if necessary, in subsequent periods.  Changes in these estimates may materially affect the amount of stock-based compensation recognized in future periods related to performance-based options.

Fair value Assumptions:

The following table summarizes the weighted average values of the assumptions used in computing the fair value of option grants during 2011, 2010, and 2009.

	2011	2010	2009
Expected volatility	48%	47%	54%
Expected lives from grant date	6.1 years	5.6 years	5.9 years
Expected dividend yield	0%	0%	0%
Risk-free interest rate	1.31%	2.11%	2.87%

Expected volatility has been estimated based on actual movements in the Company’s stock price over the most recent historical periods equivalent to the options’ expected lives.  Expected lives are principally based on the Company’s historical exercise experience with previously issued employee and board of directors’ option grants.  The expected dividend yield is zero as the Company has never paid dividends and does not currently anticipate paying any in the foreseeable future.  The risk-free interest rates are based on quoted U.S. Treasury rates for securities with maturities approximating the options’ expected lives.

b. Restricted Stock

A summary of the Company’s activity related to Restricted Stock awards for the year ended December 31, 2011 is summarized below:

Restricted Stock:	Number of Shares	Weighted-Average Grant Date Fair Value
Outstanding at December 31, 2010	845,000	$25.37
2011:   Granted	16,500	$58.59
Released	(110,001)	$30.63
Outstanding at December 31, 2011	751,499	$25.33

The Company recognized non-cash stock-based employee compensation expense from Restricted Stock awards of $5.7 million, $2.4 million, and $2.2 million in 2011, 2010, and 2009, respectively.  As of December 31, 2011, there were 751,499 unvested shares of Restricted Stock outstanding and $9.8 million of stock-based compensation cost related to these unvested shares which had not yet been recognized.  The Company expects to recognize this compensation cost over a weighted-average period of 1.4 years.