Collaboration Agreements

Sanofi

Sanofi collaboration revenue, as detailed below, consisted primarily of reimbursement for research and development expenses that the Company incurred, partly offset by sharing of pre-launch commercialization expenses in connection with the companies' antibody collaboration. In addition, Sanofi collaboration revenue for the nine months ended September 30, 2013 was reduced by two $10.0 million up-front payments to Sanofi in connection with the Company's acquisition from Sanofi of full exclusive rights to two families of novel antibodies, as described below.



	Three months ended September 30,
Sanofi Collaboration Revenue	2014			2013
ZALTRAP:
Regeneron's share of losses in connection with commercialization of ZALTRAP	$	(1,008	)	$	(6,575	)
Reimbursement of Regeneron research and development expenses	1,261			1,316
Other	756			2,625
Total ZALTRAP	1,009			(2,634		)
Antibody:
Reimbursement of Regeneron research and development expenses	140,497			133,128
Regeneron's share of commercialization expenses	(12,830		)	—
Other	4,249			3,865
Total Antibody	131,916			136,993
Total Sanofi collaboration revenue	$	132,925		$	134,359



	Nine months ended September 30,
Sanofi Collaboration Revenue	2014			2013
ZALTRAP:
Regeneron's share of losses in connection with commercialization of ZALTRAP	$	(4,912	)	$	(22,581	)
Reimbursement of Regeneron research and development expenses	3,691			5,497
Other	4,417			6,610
Total ZALTRAP	3,196			(10,474		)
Antibody:
Reimbursement of Regeneron research and development expenses	405,212			338,027
Regeneron's share of commercialization expenses	(17,125		)	—
Up-front payments to Sanofi for acquisition of rights related to two antibodies	—			(20,000		)
Other	14,745			11,608
Total Antibody	402,832			329,635
Total Sanofi collaboration revenue	$	406,028		$	319,161

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 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. The Company and Sanofi globally collaborate on the development and commercialization of ZALTRAP. Under the terms of the companies' September 2003 collaboration agreement, as amended, Regeneron and Sanofi share co-promotion rights and profits and losses on sales of ZALTRAP outside of Japan. The Company is entitled to receive a percentage of sales of ZALTRAP in Japan.

Under the Company's antibody collaboration agreement with Sanofi, 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, which first occurred in the fourth quarter of 2013, subsequent Phase 3 trial-related costs for that drug candidate ("Shared Phase 3 Trial Costs") are shared 80% by Sanofi and 20% by Regeneron. Consequently, during the three and nine months ended September 30, 2014, the Company recognized as additional research and development expense $28.4 million and $81.3 million, respectively, of antibody development expenses that the Company was obligated to reimburse to Sanofi related to alirocumab and sarilumab.

Effective in the second quarter of 2014, the Company and Sanofi began sharing pre-launch commercialization expenses related to alirocumab in accordance with the companies’ antibody collaboration agreement.

In May 2013, the Company acquired from Sanofi full exclusive rights to two families of novel antibodies invented at Regeneron and previously included in the Company's antibody collaboration with Sanofi. The Company acquired full rights to antibodies targeting the platelet derived growth factor (PDGF) family of receptors and ligands in ophthalmology and all other indications and to antibodies targeting the angiopoietin-2 (Ang2) receptor and ligand in ophthalmology. With respect to PDGF antibodies, the Company made a $10.0 million up-front payment to Sanofi in the second quarter of 2013. In addition, with respect to Ang2 antibodies in ophthalmology, the Company made a $10.0 million up-front payment to Sanofi in the second quarter of 2013.

With respect to PDGF antibodies, the Company made two $5.0 million development milestone payments to Sanofi in the first quarter of 2014, which were recorded in the Company's Statements of Operations as research and development expense. The Company is also obligated to pay up to $30.0 million in additional potential development milestones as well as royalties on any future sales of PDGF antibodies.

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 intends to use the priority review voucher in connection with a planned Biologics License Application submission to the FDA for alirocumab.

Bayer HealthCare LLC

The Company and Bayer HealthCare globally collaborate on the development and commercialization of EYLEA outside of the United States. Bayer HealthCare commenced sales of EYLEA outside the United States for the treatment of wet AMD in the fourth quarter of 2012, for the treatment of macular edema secondary to CRVO in the fourth quarter of 2013, and for the treatment of DME in the third quarter of 2014. 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	2014		2013
EYLEA:
Regeneron's net profit in connection with commercialization of EYLEA outside the United States	$	85,351	$	31,769
Sales and substantive development milestones	30,000		45,000
Cost-sharing of Regeneron EYLEA development expenses	4,394		3,739
Other	12,745		8,075
Total EYLEA	132,490		88,583
PDGFR-beta antibody:
Cost-sharing of REGN2176-3 development expenses	518		—
Other	2,845		—
Total PDGFR-beta	3,363		—
Total Bayer HealthCare collaboration revenue	$	135,853	$	88,583



	Nine months ended September 30,
Bayer HealthCare Collaboration Revenue	2014		2013
EYLEA:
Regeneron's net profit in connection with commercialization of EYLEA outside the United States	$	213,291	$	57,186
Sales and substantive development milestones	75,000		45,000
Cost-sharing of Regeneron EYLEA development expenses	26,235		13,207
Other	34,490		19,201
Total EYLEA	349,016		134,594
PDGFR-beta antibody:
Cost-sharing of REGN2176-3 development expenses	1,657		—
Other	7,787		—
Total PDGFR-beta	9,444		—
Total Bayer HealthCare collaboration revenue	$	358,460	$	134,594

EYLEA

During the nine months ended September 30, 2014, the Company earned, and recorded as revenue, 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. The Company is eligible to receive one additional $15.0 million sales milestone payment if twelve-month sales of EYLEA outside the United States exceed $1 billion. In addition, in connection with a November 2013 agreement under which Bayer HealthCare obtained rights to use certain of the Company’s EYLEA clinical data for a regulatory filing, the Company became eligible to receive up to $30.0 million in additional sales milestone payments if twelve-month sales of specific commercial supplies of EYLEA outside the United States achieve certain specified levels up to $200 million.

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" for the nine months ended September 30, 2014 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 future profits or losses on sales of EYLEA outside of the United States for the treatment of macular edema following BRVO will also be shared (for countries other than Japan). The Company is entitled to receive a tiered percentage of EYLEA net sales in Japan.

PDGFR-beta Antibody

In January 2014, the Company also 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. REGN2176-3, a combination product candidate comprised of an antibody to PDGFR-beta co-formulated with EYLEA, is being developed under the agreement. Under the agreement, the Company will conduct the initial development of the PDGFR-beta antibody through completion of the first proof-of-concept study, upon which Bayer HealthCare will have a right to opt-in to license and collaborate on further development and commercialization outside the United States.

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. In addition, Bayer HealthCare is 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). Further, in connection with the Company’s initial development of the PDGFR-beta antibody through completion of the first proof-of-concept study, the Company is eligible to receive up to $15.0 million in future development milestone payments from Bayer HealthCare, although certain of these development milestone payments could be reduced by half if Bayer HealthCare does not opt-in to the collaboration.

From inception of the agreement until Bayer HealthCare has the right to opt-in to the collaboration, the Company's sole significant deliverable is research and development services provided in accordance with the agreement. Therefore, the $25.5 million upfront payment was allocated to this deliverable, initially recorded as deferred revenue, and will be recognized as revenue over the related performance period. In addition, the two $2.5 million non-substantive development milestone payments from Bayer HealthCare were also initially recorded as deferred revenue and will be recognized over the same performance period as the upfront payment.

If Bayer HealthCare exercises its right to opt-in to the collaboration, it will obtain exclusive commercialization rights to the product outside the United States, continue to pay for 25% of global development costs and 50% of development costs exclusively for the territory outside the United States, pay a $20.0 million opt-in payment to the Company, pay a $20.0 million development milestone to the Company upon receipt of the first marketing approval in the European Union or Japan, share profits and losses from sales outside the United States equally with the Company, and be responsible for the payment of royalties on sales outside the United States to Sanofi.

Within the United States, the Company has exclusive commercialization rights and will retain all of the profits from sales. If Bayer HealthCare does not opt-in to the collaboration, the Company will have exclusive rights to develop and commercialize PDGFR-beta antibodies (except as a combination product with EYLEA) for use outside the United States.

The Company also has the right to opt-out of the collaboration upon completion of the first proof-of-concept study for the PDGFR-beta antibody. If the Company opts-out of the collaboration and Bayer HealthCare exercises its right to opt-in to the collaboration, Bayer HealthCare will obtain exclusive rights to the PDGFR-beta antibody (except as a combination product with EYLEA) outside of the United States, be responsible for all development costs outside of the United States, be responsible for all royalty and milestone payments to a third party, and will retain all of the profits from sales of the PDGFR-beta antibody outside of the United States.

Unless terminated earlier in accordance with its provisions, the agreement will continue to be in effect until such time as neither party or its respective affiliates or sublicensees is developing or commercializing a PDGFR-beta antibody in the specified field outside of the United States and such discontinuation is acknowledged as permanent by both the Company and Bayer HealthCare in writing.

Avalanche Biotechnologies, Inc.

In May 2014, the Company entered into a research collaboration and license agreement with Avalanche Biotechnologies, Inc. to discover, develop, and commercialize novel gene therapy products for the treatment of ophthalmologic diseases. In connection with the agreement, the Company made a $2.0 million upfront payment and a $6.0 million pre-payment of collaboration research costs, and is obligated to pay potential additional research costs, an aggregate amount of up to $80.0 million per product upon meeting certain potential development and regulatory milestones (for products directed to as many as eight therapeutic targets, or up to an aggregate of $640.0 million), and royalties on any future sales of such products. The Company also purchased an aggregate of $5.0 million of Avalanche preferred stock. Under the agreement, the Company will collaborate with Avalanche to conduct research for the discovery of novel gene therapy vectors. Subsequent to the filing of an Investigational New Drug application ("IND") with the FDA for a product candidate developed under the agreement, Regeneron may exercise its right to obtain exclusive worldwide rights to further research, develop, and commercialize such product candidates directed to the applicable therapeutic target. In addition, Avalanche has the option to share in development costs and profits for products directed toward up to two therapeutic targets of its choice.

In July 2014, Avalanche commenced an initial public offering ("IPO") of its common stock and thereby triggered the Company's obligation under the research collaboration and license agreement to purchase up to $10.0 million of Avalanche common stock in a concurrent private placement. As part of the concurrent private placement, the Company purchased from Avalanche at the closing of the IPO 588,235 shares of Avalanche common stock for an aggregate purchase price of $10.0 million. In addition, at the closing of the IPO, Avalanche preferred stock, including the Avalanche preferred stock held by the Company, automatically converted on a one-for-one basis into Avalanche common stock.