Collaboration and Contract Research Agreements

The Company has entered into various agreements related to its activities to develop and commercialize product candidates and utilize its technology platforms. Significant agreements of this kind are described below.

a. Sanofi

As described in Note 14, Sanofi has purchased a total of 15,816,953 shares of the Company's Common Stock, principally in connection with the companies' ZALTRAPand antibody collaborations described below. Total Company-incurred expenses associated with these Sanofi collaborations, which include reimbursable and non-reimbursable amounts and an allocable portion of general and administrative costs, were $405.8 million in 2012, $318.2 million in 2011, and $282.4 million in 2010.

ZALTRAP(aflibercept)

In September 2003, the Company entered into a collaboration agreement (the “ZALTRAPAgreement”) with Aventis Pharmaceuticals Inc. (predecessor to Sanofi U.S.), to jointly develop and commercialize ZALTRAP. In connection with this agreement, Sanofi made a non-refundable up-front payment of $80.0 million and purchased 2,799,552 newly issued unregistered shares of the Company's Common Stock for $45.0 million. In January 2005, the Company and Sanofi amended the ZALTRAP Agreement to exclude intraocular delivery of aflibercept to the eye (“Intraocular Delivery”) from joint development under the agreement, and product rights to aflibercept in Intraocular Delivery reverted to Regeneron. In connection with this amendment, Sanofi made a $25.0 million non-refundable payment to Regeneron (the “Intraocular Termination Payment”). In December 2005, the Company and Sanofi amended the ZALTRAP Agreement to expand the territory in which the companies are collaborating on the development of ZALTRAP to include Japan. In connection with this amendment, Sanofi agreed to make a $25.0 million non-refundable up-front payment to the Company, which was received in January 2006.

In August 2012, the FDA approved ZALTRAP Injection for Intravenous Infusion, in combination with FOLFIRI, for patients with mCRC that is resistant to or has progressed following an oxaliplatin-containing regimen, and Sanofi commenced ZALTRAP sales in the United States. The Company earned, and recorded as revenue in 2012, a $50.0 million substantive milestone payment from Sanofi upon FDA approval of ZALTRAP. The Company currently manufactures clinical and commercial supplies of ZALTRAP.

Under the ZALTRAP Agreement, as amended, the Company and Sanofi share co-promotion rights and profits and losses on sales of ZALTRAP outside of Japan, for disease indications included in the companies' collaboration. The Company is entitled to a royalty of approximately 35% on annual sales of ZALTRAP in Japan, subject to certain potential adjustments. According to the terms of the ZALTRAP Agreement, the Company may also receive up to $350 million in additional substantive milestone payments upon receipt of specified marketing approvals, including up to $310 million in milestone payments related to the receipt of marketing approvals for up to seven ZALTRAP oncology and other indications in the United States or the European Union and up to $40 million related to the receipt of marketing approvals for up to five ZALTRAP oncology indications in Japan.

Under the ZALTRAP Agreement, as amended, agreed upon worldwide development expenses incurred by both companies during the term of the agreement are funded by Sanofi. If the collaboration becomes profitable, Regeneron will be obligated to reimburse Sanofi for 50% of these development expenses, in accordance with a formula based on the amount of development expenses and Regeneron's share of the collaboration profits and Japan royalties, or at a faster rate at Regeneron's option. In connection with the January 2005 amendment to the ZALTRAP Agreement, the Intraocular Termination Payment of $25.0 million will also be subject to 50% reimbursement by Regeneron to Sanofi if the collaboration becomes profitable. In particular, the Company's total contingent reimbursement obligation to Sanofi for ZALTRAP was approximately $415 million as of December 31, 2012.Regeneron has the option to conduct additional pre-Phase III studies at its own expense.

Sanofi has the right to terminate the agreement without cause with at least twelve months advance notice. Upon termination of the agreement for any reason, Regeneron's obligation to reimburse Sanofi for 50% of ZALTRAP development expenses will terminate, and the Company will retain all rights to ZALTRAP.

In accordance with the Company's revenue recognition policy described in Note 2, the up-front payments received in September 2003 and January 2006, of $80.0 million and $25.0 million, respectively, and reimbursement of Regeneron-incurred development expenses, are being recognized as collaboration revenue over the related performance period.

The collaboration revenue related to ZALTRAP that the Company earned from Sanofi is detailed below:



	Year ended December 31,
ZALTRAP Collaboration Revenue:	2012			2011			2010
Regeneron's share of losses in connection with commercialization of ZALTRAP	$	(25,634	)	$	(9,341	)
Substantive milestone payment	50,000
Reimbursement of Regeneron research and development and other expenses	12,821			16,891			$	16,483
Recognition of deferred revenue related to up-front payments	11,149			9,932			9,932
	$	48,336		$	17,482		$	26,415

In connection with the ZALTRAP Agreement, (i) at December 31, 2012 and 2011, there was a net payable of $2.7 million and $3.7 million, respectively, to Sanofi, and (ii) deferred revenue at December 31, 2012 and 2011 was $14.8 million and $22.9 million, respectively.

Antibodies

In November 2007, the Company entered into a global, strategic collaboration (the “Antibody Collaboration”) with Sanofi to discover, develop, and commercialize fully human monoclonal antibodies. In connection with the collaboration, in December 2007, Sanofi purchased 12 million newly issued, unregistered shares of the Company's Common Stock for $312.0 million (see Note 14).

The Antibody Collaboration is governed by a Discovery and Preclinical Development Agreement (the “Discovery Agreement”) and a License and Collaboration Agreement (the “License Agreement”). In connection with the execution of the Discovery Agreement in 2007, the Company received a non-refundable up-front payment of $85.0 million from Sanofi. In addition, under the Discovery Agreement, Sanofi is funding the Company's research to identify and validate potential drug discovery targets and develop fully human monoclonal antibodies against these targets. In November 2009, the Company and Sanofi amended these collaboration agreements to expand and extend the Antibody Collaboration. Pursuant to the Discovery Agreement, as amended, Sanofi agreed to fund up to $160 million per year of the Company's research activities in 2010 through 2017, subject to a one-time option for Sanofi to adjust the maximum reimbursement amount down to $120 million per year commencing in 2014 if over the prior two years certain specified criteria were not satisfied. In 2010, as the Company scaled up its capacity to conduct antibody discovery activities, Sanofi funded $137.7 million of the Company's preclinical research under the amended Discovery Agreement. The balance between that amount and $160 million, or $22.3 million, was added to the funding otherwise available to the Company in 2011-2012 under the amended Discovery Agreement. The amended Discovery Agreement will expire on December 31, 2017; however, Sanofi has an option to extend the agreement for up to an additional three years for further antibody development and preclinical activities.

For each drug candidate identified under the Discovery Agreement, Sanofi has the option to license rights to the candidate under the License Agreement. If it elects to do so, Sanofi will co-develop the drug candidate with the Company through product approval. Under certain defined circumstances, upon exercising its option to license rights to particular candidates, Sanofi must make a $10 million substantive milestone payment to the Company. If Sanofi does not exercise its option to license rights to a particular drug candidate under the License Agreement, the Company retains the exclusive right to develop and commercialize such drug candidate, and Sanofi will receive a royalty on sales, if any. The Company and Sanofi are currently co-developing six therapeutic antibodies under the License Agreement.

Under the License Agreement, agreed upon worldwide 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. If the Antibody Collaboration becomes profitable, Regeneron will be obligated to reimburse Sanofi for 50% of development expenses that were fully funded by Sanofi and 30% of Shared Phase 3 Trial Costs, in accordance with a defined formula based on the amounts of these expenses and the Company's share of collaboration profits from commercialization of collaboration products. However, the Company is not required to apply more than 10% of its share of the profits from the antibody collaboration in any calendar quarter to reimburse Sanofi for these development costs. In particular, the Company's contingent reimbursement obligation to Sanofi was approximately $510 million as of December 31, 2012.

Sanofi will lead commercialization activities for products developed under the License Agreement, subject to the Company's right to co-promote such products. The parties will equally share profits and losses from sales within the United States. The parties will share profits outside the United States on a sliding scale based on sales starting at 65% (Sanofi)/35% (Regeneron) and ending at 55% (Sanofi)/45% (Regeneron), and losses outside the United States at 55% (Sanofi)/45% (Regeneron). In addition to profit sharing, the Company is entitled to receive up to $250 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 12-month basis.

Regeneron is obligated to use commercially reasonable efforts to supply clinical requirements of each drug candidate under the Antibody Collaboration until commercial supplies of that drug candidate are being manufactured. In connection with the November 2009 amendment of the collaboration's Discovery Agreement, Sanofi funded $30.0 million of agreed-upon costs the Company incurred to expand its manufacturing capacity at its Rensselaer, New York facilities.

With respect to each antibody product which enters development under the License 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 retains exclusive rights to continue the development and/or commercialization of the product. The Company may also opt-out of the further development of an antibody product if it gives notice to Sanofi within thirty days of the date that Sanofi enters joint development of such antibody product under the License Agreement. Each of the Discovery Agreement and the License Agreement contains other termination provisions, including for material breach by the other party. Prior to December 31, 2017, Sanofi has the right to terminate the amended Discovery Agreement without cause with at least three months advance written notice; however, except under defined circumstances, Sanofi would be obligated to immediately pay to the Company the full amount of unpaid research funding during the remaining term of the research agreement through December 31, 2017. Upon termination of the collaboration in its entirety, the Company's obligation to reimburse Sanofi for development costs out of any future profits from collaboration products will terminate. Upon expiration of the amended Discovery Agreement, Sanofi has an option to license the Company's VelocImmune technology for agreed upon consideration.

In connection with the Antibody Collaboration, in August 2008, the Company entered into a separate agreement with Sanofi, which extended through December 2012, to use Regeneron's proprietary VelociGene^® technology platform to supply Sanofi with genetically modified mammalian models of gene function and disease (the “VelociGene Agreement”). The VelociGene Agreement provided for minimum annual order quantities for the term of the agreement, for which the Company expects to receive payments totaling $21.5 million.

In accordance with the Company's revenue recognition policy described in Note 2, the (i) $85.0 million up-front payment received in December 2007, (ii) reimbursement of Regeneron-incurred expenses under the Discovery and License Agreements, (iii) $21.5 million of aggregate minimum payments under the VelociGene Agreement, and (iv) reimbursement of agreed-upon costs to expand the Company's manufacturing capacity are being recognized as collaboration revenue over the related performance period.

In connection with the Antibody Collaboration, the Company recognized $375.5 million, $309.1 million, and $284.9 million of collaboration revenue in 2012, 2011, and 2010, respectively. In addition, at December 31, 2012 and 2011, amounts receivable from Sanofi totaled $102.6 million and $78.5 million and deferred revenue was $78.7 million and $83.1 million, respectively.

b. Bayer HealthCare LLC

In October 2006, the Company entered into a license and collaboration agreement with Bayer HealthCare for the global development and commercialization outside the United States of EYLEA. Under the terms of the agreement, Bayer HealthCare made a non-refundable up-front payment to the Company of $75.0 million. In August 2007, the Company received a $20.0 million milestone payment from Bayer HealthCare following dosing of the first patient in a Phase 3 study of EYLEA for the treatment of wet AMD. In 2009, the Company received a $20.0 million substantive milestone payment from Bayer HealthCare following dosing of the first patient in a Phase 3 study of EYLEA for the treatment of macular edema following CRVO. In 2010, the Company earned two $10.0 million substantive milestone payments (for a total of $20.0 million) from Bayer HealthCare for achieving positive 52-week results in the Phase 3 study of EYLEA in wet AMD and positive 6-month results in the Phase 3 study of EYLEA in CRVO. In 2012, the Company earned and received a $15.0 million and $10.0 million substantive milestone payment related to marketing and pricing approval, respectively, of EYLEA for the treatment of wet AMD in Japan. The Company is eligible to receive up to $25 million in additional future substantive milestone payments related to marketing approvals of EYLEA in other indications in major market countries outside the United States. The Company is also eligible to receive up to $135 million in sales milestone payments when and if total annual sales of EYLEA outside the United States achieve certain specified levels starting at $200 million.

Sales of EYLEA commenced in the fourth quarter of 2012 in the United Kingdom, Germany, Switzerland, Australia, Japan, and certain other countries. Bayer HealthCare will market EYLEA outside the United States, where, for countries other than Japan, the Company and Bayer HealthCare will share equally in profits and losses from sales of EYLEA. The Company is entitled to a tiered royalty of between 33.5% and 40.0% of EYLEA annual sales in Japan. The Company is obligated to reimburse Bayer HealthCare out of its share of the collaboration profits (including royalties on sales of EYLEA in Japan) for 50% of the agreed upon development expenses that Bayer HealthCare has incurred in accordance with a formula based on the amount of development expenses that Bayer HealthCare has incurred and the Company's share of the collaboration profits, or at a faster rate at the Company's option. In particular, the Company's contingent reimbursement obligation to Bayer HealthCare was approximately $273 million as of December 31, 2012. Within the United States, the Company is responsible for commercialization of EYLEA and retains exclusive rights to all profits from such commercialization in the United States.

Starting in 2009, all agreed upon EYLEA development expenses incurred by the Company and Bayer HealthCare, under a global development plan, are being shared equally. The Company is also obligated to use commercially reasonable efforts to supply clinical and commercial product requirements.

Bayer HealthCare has the right to terminate the Bayer Agreement without cause with at least six months or twelve months advance notice depending on defined circumstances at the time of termination. In the event of termination of the agreement for any reason, the Company retains all rights to EYLEA.

The $75.0 million up-front licensing payment and the $20.0 million milestone payment received in August 2007 from Bayer HealthCare are being recognized as collaboration revenue over the related estimated performance period in accordance with the Company's revenue recognition policy as described in Note 2. In periods when the Company recognizes EYLEA development expenses that the Company incurs under the collaboration, the Company also recognizes, as collaboration revenue, the portion of those EYLEA development expenses that is reimbursable from Bayer HealthCare. In periods when Bayer HealthCare incurs agreed upon EYLEA development expenses that benefit the collaboration and Regeneron, the Company also recognizes, as additional research and development expense, the portion of Bayer HealthCare's EYLEA development expenses that the Company is obligated to reimburse.

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



	Year ended December 31,
Bayer HealthCare Collaboration Revenue	2012		2011		2010
Cost-sharing of Regeneron EYLEA development expenses	$	37,191	$	33,681	$	45,509
Substantive milestone payments	25,000				20,000
Regeneron's net profit in connection with commercialization of EYLEA outside the United States	—
Recognition of deferred revenue related to up-front and other milestone payments	7,908		9,390		9,884
	$	70,099	$	43,071	$	75,393

In addition, in 2012, 2011, and 2010, the Company recognized as additional research and development expense $21.9 million, $47.8 million, and $48.9 million, respectively, of EYLEA development expenses that the Company was obligated to reimburse to Bayer HealthCare.

In connection with cost-sharing of EYLEA expenses under the collaboration, $2.8 million and $4.5 million was receivable from Bayer HealthCare at December 31, 2012 and 2011, respectively. In addition, at December 31, 2012 and 2011, deferred revenue from the Company's collaboration with Bayer HealthCare was $36.5 million and $42.4 million, respectively.

c. National Institute of Health

In September 2006, the Company was awarded a grant from the National Institutes of Health (“NIH”) as part of the NIH's Knockout Mouse Project. As amended, the NIH grant provided a minimum of $25.3 million in funding over a five-year period, including $1.5 million in funding to optimize certain existing technology, subject to compliance with its terms and annual funding approvals, for the Company's use of its VelociGene technology to generate a collection of targeting vectors and targeted mouse embryonic stem cells which can be used to produce knockout mice. The Company recorded revenue in connection with the NIH grant using a proportional performance model as it incurred expenses related to the grant, subject to the grant's terms and annual funding approvals. In 2011 and 2010, the Company recognized contract research revenue of $3.6 million and $4.6 million, respectively, from the NIH Grant. As of the end of 2011, no further revenue has been recognized by the Company in connection with this NIH Grant.