Long-Term Incentive Plans

During 2000, the Company established the Regeneron Pharmaceuticals, Inc. 2000 Long-Term Incentive Plan which, as amended and restated and approved by the Company's shareholders (the "2000 Incentive Plan"), provided for the issuance of up to 35,397,043 shares of Common Stock in respect of awards, in addition to any shares subject to awards that were returned to the 2000 Incentive Plan upon expiration, forfeiture, surrender, exchange, cancellation, or termination of previously granted awards.

During 2014, the Company established, and the Company's shareholders approved, the Regeneron Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan (the "2014 Incentive Plan"). As of the shareholder approval date, the 2014 Incentive Plan provides for the issuance of up to 16,485,333 shares of Common Stock in respect of awards (including 4,485,333 shares of Common Stock rolled over into the 2014 Incentive Plan from the 2000 Incentive Plan), in addition to any shares subject to awards under the 2000 Incentive Plan or the 2014 Incentive Plan that are added to the pool of shares available for grant under the 2014 Incentive Plan upon the expiration, forfeiture, surrender, exchange, cancellation, or termination of previously granted awards. In connection with the establishment of the 2014 Incentive Plan, the Company registered an aggregate of 16,485,333 shares of Common Stock, which corresponds to the number of shares newly available for issuance under the Plan and the aggregate number of shares rolled over into the 2014 Plan from the 2000 Plan as of the shareholder approval date. 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 2014 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 four-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 2014 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 specified in the 2014 Incentive Plan, except as determined by the Committee in its discretion and subject to the applicable 2014 Incentive Plan documents, the ownership of any unvested Restricted Stock will be transferred to the Company. In such an event, the Company will be obligated to repay the Participant the amount, if any, paid by the Participant for such shares. In addition, if the Company requires a return of the Restricted Stock, 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 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 Common Stock. Subject to the provisions of the 2014 Incentive Plan, the terms and provisions of such Other Awards are determined solely on the authority of the Committee.

The 2014 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, 2014, there were 13,558,022 shares available for future grants under the 2014 Incentive Plan.


a.	Stock Options

Transactions involving stock option awards during 2014 under the Company's Incentive Plans are 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 as of December 31, 2013		21,408,268		$	98.10
2014:	Granted	3,913,368		$	385.33
	Forfeited	(252,126	)	$	155.37
	Expired	(350	)	$	64.35
	Exercised	(3,562,900	)	$	44.72
Outstanding as of December 31, 2014		21,506,260		$	158.54	6.99	$	5,467,783

Vested and expected to vest as of December 31, 2014		20,988,044		$	154.81	6.94	$	5,414,258

Exercisable as of December 31, 2014		12,104,560		$	65.48	5.53	$	4,203,941

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 2014, 2013, and 2012 was $1,081.2 million, $727.5 million, and $566.7 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, 2014, 2013, and 2012. The fair value of each option granted under the Company's Incentive Plans during 2014, 2013, and 2012 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
2014:
Exercise price equal to Market Price	3,913,368	$	385.33	$	140.38
2013:
Exercise price equal to Market Price	3,937,989	$	263.77	$	104.90
2012:
Exercise price equal to Market Price	4,162,653	$	167.96	$	67.66

For the years ended December 31, 2014, 2013, and 2012, the Company recognized $291.6 million, $176.4 million, and $67.7 million, respectively, of non-cash stock-based compensation expense related to non-performance based stock option awards. As of December 31, 2014, there was $706.0 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.

For the years ended December 31, 2014, 2013, and 2012, the Company recognized $4.1 million, $8.0 million, and $15.3 million, respectively, of non-cash stock-based compensation expense related to performance-based options. The 770,250 performance-based options issued in 2011, which were outstanding and unvested as of December 31, 2013, vested during 2014. There were no additional performance-based options that were unvested as of December 31, 2014.

Fair Value Assumptions:

The following table summarizes the weighted average values of the assumptions used in computing the fair value of option grants during 2014, 2013 and 2012.



	2014		2013		2012
Expected volatility	39	%	42	%	45	%
Expected lives from grant date	5.2 years		5.3 years		5.4 years
Expected dividend yield	0	%	0	%	0	%
Risk-free interest rate	1.62	%	1.73	%	0.86	%

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, 2014 is summarized below:



Restricted Stock:		Number of Shares		Weighted-Average Grant Date Fair Value
Outstanding as of December 31, 2013		538,580		$	112.16
2014:	Granted	7,500		$	338.32
	Vested	(20	)	$	237.68
Outstanding as of December 31, 2014		546,060		$	115.26

The Company recognized non-cash stock-based compensation expense from Restricted Stock awards of $11.5 million, $14.0 million, and $11.1 million in 2014, 2013, and 2012, respectively. As of December 31, 2014, there was $34.5 million of stock-based compensation cost related to unvested shares of Restricted Stock which had not yet been recognized. The Company expects to recognize this compensation cost over a weighted-average period of 2.8 years.