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 financial position, results of operations, and cash flows 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, 2017 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, 2017.

Certain reclassifications have been made to prior period amounts to conform with the current period's presentation.

We adopted Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers, as of January 1, 2018. The Company adopted the standard using the modified retrospective method, and thus recognized a cumulative-effect adjustment to reduce Retained earnings and increase Deferred revenue on January 1, 2018 by $143.4 million, net of tax. Prior period amounts have not been adjusted in connection with the adoption of this standard.

The new standard did not have an impact on the recognition of revenue from product sales (see Note 2). However, the new standard has resulted in certain changes to the timing of revenue recognition related to our collaboration agreements (see Note 3). As a result of adopting ASC 606, non-refundable upfront payments, which were previously recognized ratably over the performance period, and substantive development milestones, which were previously recognized in the period when the milestone was achieved, will be recognized over the remaining performance period based on the Company's progress towards satisfying its identified performance obligation.

The following tables summarize the impacts of adopting ASC 606 on the Company's condensed consolidated financial statements for the three months ended March 31, 2018 as compared with the guidance that was in effect before the change.



	March 31, 2018
Balance Sheet Data	As Reported		Adjustments			Balance Without Adoption of ASC 606
Deferred tax assets	$	532,268	$	(18,206	)	$	514,062
Total assets	$	9,372,696	$	(18,206	)	$	9,354,490
Accrued expenses and other current liabilities	$	666,216	$	(1,513	)	$	664,703
Deferred revenue from Sanofi (current)	$	231,447	$	(33,632	)	$	197,815
Deferred revenue - other (current)	$	160,466	$	(69,241	)	$	91,225
Total current liabilities	$	1,265,740	$	(104,386	)	$	1,161,354
Deferred revenue from Sanofi (noncurrent)	$	406,778	$	(51,604	)	$	355,174
Deferred revenue - other (noncurrent)	$	257,967	$	18,277		$	276,244
Total liabilities	$	2,805,052	$	(137,713	)	$	2,667,339
Retained earnings	$	3,287,767	$	119,507		$	3,407,274
Total stockholders' equity	$	6,567,644	$	119,507		$	6,687,151
Total liabilities and stockholders' equity	$	9,372,696	$	(18,206	)	$	9,354,490



	Three Months Ended March 31, 2018
Consolidated Statement of Operations Data	As Reported			Adjustments			Balance Without Adoption of ASC 606
Sanofi collaboration revenue	$	189,490		$	(8,407	)	$	181,083
Other revenue	$	86,158		$	(17,310	)	$	68,848
Total revenues	$	1,511,485		$	(25,717	)	$	1,485,768
Income from operations	$	567,231		$	(25,717	)	$	541,514
Income before income taxes	$	585,398		$	(25,717	)	$	559,681
Income tax expense	$	(107,418	)	$	1,789		$	(105,629	)
Net income	$	477,980		$	(23,928	)	$	454,052

The Company also adopted Accounting Standards Update ("ASU") 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, as of January 1, 2018. The amendments require companies to measure equity investments at fair value with changes in fair value recognized in net income. We have elected the measurement alternative for equity investments we hold that do not have readily determinable fair values. Therefore, we will measure such investments at cost minus impairment, if any, and adjust for observable price changes in orderly transactions for identical or similar investments of the same issuer. Upon adoption, the Company recognized a cumulative-effect adjustment, related to unrealized gains on equity securities, to reduce Accumulated other comprehensive income and increase Retained earnings on January 1, 2018 by $6.6 million. See Note 5 and Note 6.