Long-Term Incentive Plans

The Company has used long-term incentive plans for the purpose of granting equity awards to employees of the Company, including officers, and nonemployees, including consultants and nonemployee members of the Company's board of directors (collectively, "Participants"). The Participants may receive awards as determined by a committee of independent members of the Company's board of directors or, to the extent authorized by such committee with respect to certain Participants, a duly authorized employee (collectively, the "Committee"). The incentive plan currently used by the Company is the Amended and Restated Regeneron Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan (the "Amended and Restated 2014 Incentive Plan"). It was adopted in 2017 and the Company registered an additional 12,000,000 shares of Common Stock for issuance thereunder. As of the shareholder approval date, the Amended and Restated 2014 Incentive Plan provided for the issuance of up to 18,559,431 shares of Common Stock in respect of awards. In addition, upon expiration, forfeiture, surrender, exchange, cancellation, or termination of any award previously granted under the Amended and Restated 2014 Incentive Plan, the Regeneron Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan (the "Original 2014 Incentive Plan"), or the Second Amended and Restated 2000 Long-Term Incentive Plan (the predecessor to the Original 2014 Incentive Plan), any shares subject to such award are added to the pool of shares available for grant under the Amended and Restated 2014 Incentive Plan.

The awards that may be made under the Amended and Restated 2014 Incentive Plan include: (a) incentive stock options and nonqualified stock options, (b) shares of restricted stock, (c) shares of phantom stock (also referred to as restricted stock units), and (d) other awards.

Stock option awards grant Participants the right to purchase shares of Common Stock at prices determined by the Committee, with exercise prices that are equal to or greater than the average of the high and low market prices of the Company's Common Stock on the date of grant (the "Market Price"). 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. The maximum term of options that have been awarded under the 2000 Incentive Plan, the Original 2014 Incentive Plan, and the Amended and Restated 2014 Incentive Plan (collectively, the "Incentive Plans") 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 Incentive Plans, except as determined by the Committee in its discretion and subject to the applicable Incentive Plan documents, the ownership of any unvested restricted stock will be transferred to the Company.

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.

The Incentive Plans contain 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 Incentive Plans.

As of December 31, 2018, there were 12,115,845 shares available for future grants under the Amended and Restated 2014 Incentive Plan. No additional awards may be made under the 2000 Incentive Plan or the Original 2014 Incentive Plan.


a.	Stock Options

Transactions involving stock option awards during 2018 under the Company's Incentive Plans are summarized in the table below.



		Number of Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Intrinsic Value
Outstanding as of December 31, 2017		26,205,373		$	295.98
2018:	Granted	4,665,320		$	378.51
	Forfeited	(668,550	)	$	422.56
	Expired	(205,030	)	$	467.40
	Exercised	(1,717,417	)	$	66.87
Outstanding as of December 31, 2018		28,279,696		$	319.28	6.43	$	2,290.5

Vested and expected to vest as of December 31, 2018		27,192,461		$	316.51	6.32	$	2,289.1

Exercisable as of December 31, 2018		17,893,976		$	275.10	4.98	$	2,276.2

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 2018, 2017, and 2016 was $510.6 million, $735.6 million, and $550.4 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 table below summarizes the weighted-average exercise prices and weighted-average grant-date fair values of options issued during the years ended December 31, 2018, 2017, and 2016. The fair value of each option granted under the Company's Incentive Plans during these periods 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
2018:
Exercise price equal to Market Price	4,665,320	$	378.51	$	114.39
2017:
Exercise price equal to Market Price	4,235,015	$	383.56	$	118.70
2016:
Exercise price equal to Market Price	4,201,978	$	386.44	$	126.68

For the years ended December 31, 2018, 2017, and 2016, the Company recognized $421.8 million, $492.8 million, and $546.0 million, respectively, of non-cash stock-based compensation expense related to stock option awards (net of amounts capitalized to inventory of $17.1 million, $16.8 million, and $14.6 million, respectively). As of December 31, 2018, there was $702.6 million of stock-based compensation cost related to outstanding 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.

Fair Value Assumptions:

The following table summarizes the weighted average values of the assumptions used in computing the fair value of option grants during 2018, 2017, and 2016.



	2018		2017		2016
Expected volatility	29	%	31	%	34	%
Expected lives from grant date	4.9 years		5.1 years		5.1 years
Expected dividend yield	0	%	0	%	0	%
Risk-free interest rate	2.69	%	2.16	%	1.84	%

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 Awards and Restricted Stock Units

A summary of the Company's activity related to restricted stock awards and restricted stock units (collectively, "restricted stock") during 2018 is summarized below:



		Number of Shares/Units		Weighted-Average Grant Date Fair Value
Balance as of December 31, 2017		106,260		$	404.72
2018:	Granted	380,980		$	381.21
	Vested	(6,090	)	$	276.46
	Forfeited/Cancelled	(8,520	)	$	478.19
Balance as of December 31, 2018		472,630		$	386.10

The Company recognized non-cash stock-based compensation expense from restricted stock of $5.6 million, $14.5 million, and $13.9 million in 2018, 2017, and 2016, respectively (net of amounts capitalized to inventory, which were not material for each of the three years). As of December 31, 2018, there was $124.4 million of stock-based compensation cost related to unvested restricted stock which had not yet been recognized. The Company expects to recognize this compensation cost over a weighted-average period of 4.6 years.