`
`REGENERON PHARMACEUTICALS,INC.
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`(Unless otherwise noted, dollars in millions, except per share data)
`
`The Notes may be redeemed at the Company’s option at any time at 100% ofthe principal amountplus accrued and unpaid interest, and, until a specified
`period before maturity, a specified make-whole amount. The Notes contain a change-of-control provision that, under certain circumstances, may require the
`Companyto offer to repurchase the Notes at a price equal to 101% ofthe principal amountplus accrued and unpaidinterest.
`
`The Notes also contain certain limitations on the Company’s ability to incur liens and enter into sale and leaseback transactions, as well as customary
`events of default.
`
`10. Commitments and Contingencies
`
`See Note 15 for disclosures related to legal contingencies.
`
`a. Leases
`
`We conduct certain of our research, development, and administrative activities at leased facilities. We also lease certain warehouses and vehicles. As
`described in Note 1, during the first quarter of 2019, we adopted ASC 842,Leases.
`
`Operating leases
`
`Amounts recognized in our Consolidated Balance Sheets and Statements of Operations included in this report associated with operating leases were not
`material. Operating lease right-of-use assets are included within Other noncurrentassets, and lease liabilities are included in Accrued expenses and other
`currentliabilities and Other noncurrentliabilities.
`
`Finance leases
`
`In March 2017, we entered into a Participation Agreement with BA Leasing BSC, LLC,an affiliate of Banc of America Leasing & Capital LLC ("BAL"),
`as lessor, and a syndicate of lenders (collectively, the "Lease Participants"). In March 2017, we also entered into a Lease and Remedies Agreement with
`BAL,pursuant to which we have leased laboratory and office facilities in Tarrytown, New York (the "Facility") for a five-year term ending in March 2022.
`The Participation Agreement, the Lease and Remedies Agreement, and certain other related agreements were amended andrestated in May 2019, among
`other things, to revise certain covenants, representations and warranties, and events of default to be substantially similar to those set forth in the agreement
`governing the Company's revolving credit facility (as so amended andrestated, the "Participation Agreement" and the "Lease," respectively). The Lease
`requires us to pay all maintenance, insurance, taxes, and othercosts arising out of the use of the Facility. We are also required to make monthly payments of
`basic rent during the term of the Lease in an amount equal to a variable rate per annum based on the one-month LIBOR, plus an applicable margin that
`varies with our debtrating andtotal leverage ratio. The Participation Agreement and the Lease include an option for us to elect to extend the maturity date
`of the Participation Agreementand the term of the Lease for an additional five-year period, subject to the consent of all the Lease Participants and certain
`other conditions. We also have the option prior to the end of the term of the Lease to (a) purchase the Facility by paying an amount equal to the outstanding
`principal amount of the Lease Participants’ advances underthe Participation Agreement, all accrued and unpaid interest and yield thereon, and all other
`outstanding amounts underthe Participation Agreement, the Lease, and certain related documents or (b)sell the Facility to a third party on behalf of BAL.
`The advances underthe Participation Agreement mature, and all amounts outstanding thereunder will become dueandpayablein full, at the end of the term
`ofthe Lease.
`
`Prior to January 1, 2019, for certain of the premises under the Lease we were deemed, in substance, to be the owner of the buildings (collectively, the
`"Build-to-Suit Buildings"). Upon the adoption of ASC 842,the classification of the Build-to-Suit Buildings, for which the construction period had been
`completed, was reassessed and, consequently, they were derecognized and recognized as a finance lease. These premises, along with the other premises
`underthe Lease, are classified as a finance lease as we have the option to purchase the Facility under terms that make it reasonably certain to be exercised.
`
`The agreements governing the Lease financing contain financial and operating covenants. The Company was in compliance with all such covenants as of
`December31, 2020.
`
`
`
`F-29
`
`Exhibit 2254
`
`Page 131 of 264
`
`Exhibit 2254
`Page 131 of 264
`
`
`
`Table of Contents
`
`REGENERON PHARMACEUTICALS,INC.
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`(Unless otherwise noted, dollars in millions, except per share data)
`
`Amounts recognized in the Consolidated Balance Sheet related to the Lease are included in the table below. Other than the Lease described above, we had
`no leases accounted for as finance leases as of December 31, 2020 and 2019.
`
`Finance lease right-of-use assets
`Finance lease liabilities
`
`Classification
`Property, plant, and equipment, net)
`Financelease liabilities (noncurrent)
`
`As of December 31,
`2020
`2019
`
`$
`$
`
`645.7
`717.2
`
`$
`$
`
`660.1
`713.9
`
`©Financelease right-of-use assets are recorded net of accumulated amortization of $90.5 million and $76.1 million as of December 31, 2020 and 2019,
`respectively.
`
`Financelease costs consist of the following:
`
`Amortization of right-of-use assets
`Interest on lease liabilities
`
`Year Ended December 31,
`2020
`2019
`
`$
`
`$
`
`144
`15.7
`
`30.1
`
`$
`
`$
`
`14.4
`27.6
`
`42.0
`
`Other informationrelated to our finance lease includes the following:
`
`Remaining lease term (in years)
`Discountrate
`
`Supplemental information
`
`The followingis a maturity analysis of our financelease liabilities:
`
`2021
`2022
`2023
`2024
`2025
`Thereafter
`
`Total undiscounted lease payments
`Imputed interest
`Debt financing costs
`Total lease liabilities
`
`As of December 31,
`2020
`2019
`
`1.17
`1.66%
`
`2.17
`3.05%
`
`$
`
`As of December 31, 2020
`12.1
`723.1
`
`735.2
`
`(15.1)
`(2.9)
`717.2
`
`$
`
`F-30
`
`Exhibit 2254
`
`Page 132 of 264
`
`Exhibit 2254
`Page 132 of 264
`
`
`
`Table of Contents
`
`REGENERON PHARMACEUTICALS,INC.
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`(Unless otherwise noted, dollars in millions, except per share data)
`
`b. Research Collaboration and Licensing Agreements
`
`As part of our research and development efforts, we enter into research collaboration and licensing agreements with other companies, universities, and
`other organizations. These agreements contain varying terms and provisions which include fees to be paid by the Company, services to be provided, and
`license rights to certain proprietary technology developed under the agreements. Some of these agreements may require the Company to pay additional
`amounts upon the achievementof various development and commercial milestones, contingent upon the occurrence of various future events. Additionally,
`we have in-licensed patent and/or technology pursuant to agreements which contain provisions that require the Companyto pay royalties, as defined, at
`rates that range from 0.5% to 11.5%,in the event the Companysells or licenses any proprietary products developed under the respective agreements. The
`Companyalso has contingent reimbursement obligations to its collaborators Sanofi and Bayer out of the respective collaboration's profits, if they are
`sufficient for that purpose. See Note 3 for a more detailed description of collaboration, license, and other agreements.
`
`For the years ended December 31, 2020, 2019, and 2018, the Company recorded royalty expense (net of reimbursements from collaborators, as applicable)
`in Cost of goods sold and Cost of collaboration and contract manufacturing of $56.5 million, $47.0 million, and $30.1 million, respectively, based on
`product sales of commercial products undervarious licensing agreements.
`
`11. Stockholders’ Equity
`
`The Company's Restated Certificate of Incorporation, as amended, provides for the issuance of up to 40 million shares of Class A Stock, par value $0.001
`per share, and 320 million shares of CommonStock, par value $0.001 per share. Shares of Class A Stock are convertible, at any time, at the option of the
`holder into shares of Common Stock on a share-for-share basis. Holders of Class A Stock have rights and privileges identical to Common Stockholders
`except that each share of Class A is entitled to ten votes per share, while each share of CommonStockis entitled to one vote per share. Class A Stock may
`only be transferred to specified Permitted Transferees, as defined. Under the Company's Restated Certificate of Incorporation, the Company's board of
`directors is authorized to issue up to 30 million shares of Preferred Stock, in series, with rights, privileges, and qualifications of each series determined by
`the board of directors.
`
`Share Repurchase Program
`
`In November 2019, our board of directors authorized a share repurchase program to repurchase up to $1.0 billion of our CommonStock. The share
`repurchase program permitted the Companyto effect repurchases through a variety of methods, including open-markettransactions (including pursuant to a
`trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act), privately negotiated transactions, accelerated share repurchases, block trades,
`and other transactions in compliance with Rule 10b-18 of the Exchange Act. As of December 31, 2020, the Company had repurchased the entire
`$1.0 billion it was authorized to repurchase underthe program.
`
`The table below summarizes the shares of our Common Stock we repurchased underthe program and the cost of the shares received, which were recorded
`as Treasury Stock.
`
`Number of shares repurchased
`Total cost of shares received
`
`Year Ended December 31,
`2020
`2019
`
`1,605,582
`746.0
`
`$
`
`$
`
`722,596
`254.0
`
`In January 2021, our board of directors authorized a new share repurchase program to repurchase up to $1.5 billion of our Common Stock. The share
`repurchase program was approved underterms substantially similar to the November 2019 share repurchase program described above.
`
`Arrangements with Sanofi
`
`In 2007, Sanofi purchased 12 million newly issued, unregistered shares of the Company's Common Stock. As a condition to the closing of this transaction,
`Sanofi entered into an investor agreement, as amended andrestated, with the Company. Under the amended andrestated investor agreement, Sanofi agreed
`not to dispose of any shares of the Company's Common Stock beneficially owned by Sanofi from time to time until December 20, 2020 (subject to the
`limited waiver described below).
`
`Further, pursuant to the amended andrestated investor agreement, Sanofi is bound bycertain "standstill" provisions, which contractually prohibit Sanofi
`from seekingto directly or indirectly exert control of the Company or acquiring more than 30% of
`
`
`
`F-31
`
`Exhibit 2254
`
`Page 133 of 264
`
`Exhibit 2254
`Page 133 of 264
`
`
`
`Table of Contents
`
`REGENERON PHARMACEUTICALS,INC.
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`(Unless otherwise noted, dollars in millions, except per share data)
`
`the outstanding shares of the Company's Class A Stock and CommonStock (taken together). This prohibition will remain in place until the earliest of (i)
`the later of the fifth anniversaries of the expiration or earlier termination of the Company's License and Collaboration Agreement with Sanofi and the
`Company's ZALTRAP Agreement with Sanofi, each as amended, and(ii) other specified events. Sanofi has also agreed to vote as recommended by the
`Company's board of directors, except that it may elect to vote proportionally with the votes cast by all of the Company's other shareholders with respect to
`certain change-of-controltransactions, and to votein its sole discretion with respect to liquidation or dissolution, stock issuances equal to or exceeding 20%
`of the outstanding shares or voting rights of the Company's Class A Stock and CommonStock (taken together), and new equity compensation plans or
`amendments if not materially consistent with the Company's historical equity compensation practices. The rights and restrictions under the investor
`agreementare subject to termination upon the occurrence of certain events and have been amended in connection with the Secondary Offering and the
`Stock Purchase (each as defined below).
`
`As described in Note 3, effective January 2018, we and Sanofi entered into a Letter Agreement, which, amongother things, amended certain provisions of
`the amended andrestated investor agreement. Pursuant to the Letter Agreement, we granted Sanofi a limited waiver of the lock-up obligations under the
`investor agreement in order to allow Sanofi to satisfy in whole or in part its funding obligations with respect to Libtayo development costs and/or
`Dupilumab/Itepekimab Eligible Investments for quarterly periods ending on September 30, 2020 by selling our CommonStockdirectly or indirectly owned
`by Sanofi. The table below summarizes the shares of our CommonStock Sanofi elected to sell, and we elected to purchase, to satisfy Sanofi's funding
`obligations andthe cost of the shares received, which were recorded as Treasury Stock.
`
`Libtayo:
`Number of shares purchased (by issuing a credit towards the
`amount owed by Sanofi)
`Total cost of shares received
`
`Dupilumab/Itepekimab:
`Number of shares purchased (in cash)
`Total cost of shares received
`
`2020
`
`As of December 31,
`2019
`
`2018
`
`77,677
`41.7
`
`171,471
`93.3
`
`$
`
`$
`
`$
`
`$
`
`210,733
`73.3 $
`
`215,387
`75.8
`
`93,286
`294 §$
`
`10,766
`44
`
`In May 2020, a secondary offering of 13,014,646 shares of our CommonStock (the "Secondary Offering") held by Sanofi was completed. In connection
`with the Secondary Offering, we also purchased 9,806,805 shares directly from Sanofi for an aggregate purchase amount of $5 billion (the "Stock
`Purchase"). See Note 9 for additional information. As a result of the Secondary Offering and the Stock Purchase, Sanofi disposed ofall of its shares of our
`CommonStock, other than 400,000 shares that it retained as of the closing of the Secondary Offering and the Stock Purchase (a portion of which Sanofi
`has used for the funding of certain developmentcosts described above).
`
`In May 2020, the Company entered into an amendment to the amended andrestated investor agreement, which provides, among other things, that
`following the Secondary Offering and Share Purchase, (1) the “standstill” provisions, which contractually prohibit Sanofi from seeking to directly or
`indirectly exert control of the Company, continue to apply pursuantto their terms; (2) the voting commitments contained in the investor agreement continue
`to apply to the shares of CommonStock held by Sanofi andits affiliates following the secondary offering and stock repurchase, for so long as such shares
`are held by them; and (3) the lock-uprestrictions in the investor agreement continued to apply to the shares of CommonStock held by Sanofi following the
`Secondary Offering and Stock Purchase until December 20, 2020 (except those shares which could be used to satisfy certain funding obligations of Sanofi).
`
`Arrangements with Other Collaborators
`
`In connection with the Company's license and collaboration agreements with Bayer for the joint development and commercialization outside the United
`States of antibody product candidates to PDGFR-beta and Ang2, Bayeris bound bycertain "standstill" provisions, which contractually prohibit Bayer from
`seeking to influence the control of the Companyor acquiring more than 20% of the Company's outstanding shares of Class A Stock and Common Stock
`(taken together). With respect to each of these agreements,this prohibition will remain in place until the earliest of(i) the fifth anniversary of the
`
`F-32
`
`Exhibit 2254
`
`Page 134 of 264
`
`Exhibit 2254
`Page 134 of 264
`
`
`
`Table of Contents
`
`REGENERON PHARMACEUTICALS,INC.
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`(Unless otherwise noted, dollars in millions, except per share data)
`
`termination of the agreement (which, in the case of the PDGFR-beta license and collaboration agreement, occurred on July 31, 2017, and, in the case of the
`Ang2 agreement, occurred on November1, 2018)or(ii) other specified events.
`
`Further, pursuant to the 2016 Teva Collaboration Agreement, Teva andits affiliates are bound by certain "standstill" provisions, which contractually
`prohibit them from seekingto directly or indirectly exert control of the Company or acquiring more than 5% of the Company's Class A Stock and Common
`Stock (taken together). This prohibition will remain in place until the earliest of (i) the fifth anniversary of the expiration or earlier termination of the
`agreementor(ii) other specified events.
`
`12. 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 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 Second
`Amended and Restated Regeneron Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan (the "Second Amended and Restated 2014 Incentive Plan"). It
`was mostrecently adopted and approved by the Company's shareholders in 2020, at which time the Companyregistered an additional 12,000,000 shares of
`CommonStock for issuance thereunder. As of the most recent shareholder approval date, the Second Amended and Restated 2014 Incentive Plan provided
`for the issuance of up to 22,269,970 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 Regeneron Pharmaceuticals, Inc. 2014 Long-Term Incentive
`Plan (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 "2000 Incentive Plan"), any shares subject to such award are
`added to the poolof shares available for grant under the Second Amended andRestated 2014 Incentive Plan.
`
`The awards that may be made under the Second Amended andRestated 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, which may be time- or performance-based), and
`(d) other awards. Any award granted may (but is not required to) be subject to vesting based on the attainment by the Company of performancegoals pre-
`established by the Committee.
`
`Stock option awards grant Participants the right to purchase shares of CommonStock 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 CommonStock onthe 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, the
`Amended and Restated 2014 Incentive Plan, and the Second Amended and Restated 2014 Incentive Plan (collectively, the "Incentive Plans") is ten years.
`
`Restricted stock awards grant Participants shares of restricted CommonStock 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 employmentterminate, 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 CommonStock or an amountof cash based on the value of the CommonStock at a future
`date. The award is subject to such restrictions, if any, as the Committee may impose at the date of grant or thereafter, including a specified period of
`employment or the achievement of performance goals. Time-based restricted stock units and performance-based restricted stock units are each a type of
`phantom stock award permitted under the Second Amended and Restated 2014 Incentive Plan.
`
`The Incentive Plans contain provisions that allow for the Committee to provide for the immediate vesting of awards upon a changein control of the
`Company,as defined in the Incentive Plans.
`
`As of December 31, 2020, there were 18,916,095 shares available for future grants under the Second Amended and Restated 2014 Incentive Plan. No
`additional awards may be madeunderthe 2000 Incentive Plan, the Original 2014 Incentive Plan, or the Amended and Restated 2014 Incentive Plan.
`
`
`
`F-33
`
`Exhibit 2254
`
`Page 135 of 264
`
`Exhibit 2254
`Page 135 of 264
`
`
`
`Table of Contents
`
`a.
`
`Stock Options
`
`REGENERON PHARMACEUTICALS,INC.
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`(Unless otherwise noted, dollars in millions, except per share data)
`
`Transactions involving stock option awards during 2020 under the Company's Incentive Plans are summarized in the table below.
`
`Outstanding as of December 31, 2019
`2020: Granted
`Forfeited
`Expired
`Exercised
`Outstanding as of December 31, 2020
`
`Number of
`Shares
`$
`28,609,277
`$
`2,850,590
`(562,629) $
`(56,282) $
`(9,139,287) $
`21,701,669
`$
`
`Weighted-
`Average
`Exercise
`Price
`337.24
`492.60
`379.02
`473.77
`281.90
`379.51
`
`Weighted-
`Average
`Remaining
`Contractual
`Term (in years)
`
`Intrinsic Value
`
`6.34 $
`
`2,347.4
`
`Vested and expected to vest as of December31,
`2020
`
`Exercisable as of December 31, 2020
`
`20,764,534
`
`13,648,899
`
`$
`
`$
`
`377.23
`
`357.65
`
`6.22 $
`
`496 $
`
`2,294.1
`
`1,799.1
`
`The Companysatisfies stock option exercises with newly issued shares of the Company's CommonStock. Thetotal intrinsic value of stock options
`exercised during 2020, 2019, and 2018 was $2.251 billion, $558.9 million, and $510.6 million, respectively. The intrinsic value represents the amount by
`whichthe marketprice of the underlying stock exceeds the exercise price of an option.
`
`The table below summarizes the weighted-average exercise prices and weighted-average grant-date fair values of options issued during the years ended
`December31, 2020, 2019, and 2018.
`
`2020:
`
`Exercise price equal to Market Price
`2019:
`
`Exercise price equal to Market Price
`2018:
`
`Exercise price equal to Market Price
`
`Numberof
`Options
`Granted
`
`Weighted-
`Average
`Exercise Price
`
`Weighted-
`Average Fair
`Value
`
`2,850,590
`
`3,271,222
`
`4,665,320
`
`$
`
`$
`
`$
`
`492.60
`
`366.65
`
`378.51
`
`$
`
`$
`
`§$
`
`126.50
`
`100.80
`
`114.39
`
`For the years ended December 31, 2020, 2019, and 2018, the Company recognized $329.5 million, $422.8 million, and $421.8 million, respectively, of
`non-cash stock-based compensation expense related to stock option awards (net of amounts capitalized as inventory of $8.3 million, $2.4 million, and
`$17.1 million, respectively). As of December 31, 2020, there was $491.5 million of stock-based compensationcost 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
`1.8 years.
`
`F-34
`
`Exhibit 2254
`
`Page 136 of 264
`
`Exhibit 2254
`Page 136 of 264
`
`
`
`Table of Contents
`
`Fair Value Assumptions:
`
`REGENERON PHARMACEUTICALS,INC.
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`(Unless otherwise noted, dollars in millions, except per share data)
`
`The following table summarizes the weighted average values of the assumptions used in computing the fair value of option grants during 2020, 2019, and
`2018.
`
`Expected volatility
`Expected lives from grant date
`Expected dividend yield
`Risk-free interest rate
`
`2020
`
`2019
`
`2018
`
`28 %
`5.0 years
`0%
`0.47 %
`
`28 %
`5.0 years
`0%
`1.74%
`
`29 %
`4.9 years
`0%
`2.69 %
`
`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 dividendyield is zero as the Companyhas neverpaid 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 Time-Based Restricted Stock Units
`
`A summary of the Company's activity related to restricted stock awards and time-based restricted stock units (excluding performance-based restricted stock
`units, which are detailed further below) (collectively, "restricted stock") during 2020 is summarized below.
`
`Balance as of December 31, 2019
`2020: Granted
`Vested
`Forfeited/Cancelled
`Balance as of December 31, 2020
`
`Number of
`Shares/Units
`
`Weighted-Average
`Grant
`Date Fair Value
`
`$
`1,102,390
`§$
`646,844
`(15,630) $
`(46,061) $
`1,687,543
`$
`
`377.32
`496.44
`526.62
`377.85
`421.58
`
`The Company recognized non-cash stock-based compensation expense related torestricted stock of $102.5 million, $29.7 million, and $5.6 million in
`2020, 2019, and 2018, respectively (net of amounts capitalized as inventory, which were not material for each of the three years). As of December 31,
`2020, there was $425.5 million of stock-based compensation cost related to unvested restricted stock which had not yet been recognized. The Company
`expects to recognize this compensation cost over a weighted-average period of 2.7 years.
`
`
`
`F-35
`
`Exhibit 2254
`
`Page 137 of 264
`
`Exhibit 2254
`Page 137 of 264
`
`
`
`Table of Contents
`
`REGENERON PHARMACEUTICALS,INC.
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`(Unless otherwise noted, dollars in millions, except per share data)
`
`c.
`
`Performance-based Restricted Stock Units
`
`Performance-based restricted stock units ("PSUs") have been granted to certain executive officers of the Company. The PSUswill be earned based upon the
`achievement of predetermined, cumulative total shareholder return goals with respect to the Company's CommonStock price over a specified (generally
`five-year) period beginning on the grant date. The number of PSUs granted shown in the table below represents the maximum number of units that are
`eligible to be earned. Depending on the terms of the PSUs and the outcomeof the performance goals, a recipient may ultimately earn 0% to 250% (as
`specified for each PSU grant) of the target number of PSUs granted. A summary of the Company's activity related to PSUs during 2020 is summarized
`below.
`
`Balance as of December 31, 2019
`2020: Granted
`Vested
`Forfeited/Cancelled
`
`Balance as of December 31, 2020
`
`Number of
`Shares/Units
`
`Weighted-
`Average Grant
`Date Fair Value
`
`$
`$
`
`59,396
`1,240,540
`—
`—_
`
`1,299,936
`
`$
`
`198.10
`209.59
`—
`—_—
`
`209.06
`
`The Company did not recognize non-cash stock-based compensation expense related to PSUsin 2020 (as PSUsgranted in 2020 were granted on December
`31, 2020 and will be expensed over the vesting period). The Company recognized non-cash stock-based compensation expense related to PSUs of
`$11.7 million in 2019 (net of amounts capitalized as inventory, which were not material). PSUs were not granted during 2018. As of December 31, 2020,
`there was $260.0 million of stock-based compensation cost related to unvested PSUs which had not yet been recognized. The Company expects to
`recognize this compensationcost on a straight-line basis over a period of 5.0 years.
`
`Fair Value Assumptions:
`
`The following table summarizes the weighted average values of the assumptions used in computing the fair value of PSUs during 2020 and 2019.
`
`Expected volatility
`Expected dividend yield
`Risk-free interest rate
`
`2020
`
`2019
`
`35%
`0%
`0.36%
`
`33%
`0%
`1.63%
`
`13. Employee Savings Plans
`
`The Company maintains the Regeneron Pharmaceuticals, Inc. 401(k) Savings Plan, as amended andrestated (the "Savings Plan"). The terms of the Savings
`Plan allow U.S. employees (as defined by the Savings Plan) to contribute to the Savings Plan a percentage of their compensation. In addition, the Company
`may makediscretionary contributions ("Contribution"), as defined, to the accounts of participants under the Savings Plan. The Company recognized $44.7
`million, $38.1 million, and $27.0 million of Contribution expense in 2020, 2019, and 2018, respectively.
`
`The Companyalso maintains additional employee savings plans outside of the United States, which cover eligible employees. Expenses recognized by the
`Companyrelated to contributions to such plans were not material during 2020, 2019, and 2018.
`
`F-36
`
`Exhibit 2254
`
`Page 138 of 264
`
`Exhibit 2254
`Page 138 of 264
`
`
`
`Table of Contents
`
`14. Income Taxes
`
`REGENERON PHARMACEUTICALS,INC.
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
`(Unless otherwise noted, dollars in millions, except per share data)
`
`The Companyis subject to U.S. federal, state, and foreign income taxes. Components of incomebefore incometaxes consist of the following:
`
`2020
`
`Year Ended December 31,
`2019
`
`2018
`
`United States
`Foreign
`
`$
`
`$
`
`2,442.3
`1,368.1
`3,810.4
`
`$
`
`$
`
`2,011.2
`417.9
`2,429.1
`
`$
`
`$
`
`2,151.7
`401.8
`2,553.5
`
`Components of incometax expense consist of the following:
`
`Current:
`Federal
`State
`
`Foreign
`Total current tax expense
`Deferred:
`
`Federal
`State
`Foreign
`Total deferred tax (benefit) expense
`
`2020
`
`Year Ended December 31,
`2019
`
`2018
`
`$
`
`$
`
`199.0
`nEZ
`
`21.4
`221.6
`
`109.0
`(2.0)
`(31.4)
`75.6
`297.2
`
`$
`
`$
`
`4446 $
`eS
`
`(2.6)
`443.9
`
`(132.0)
`(1.7)
`3.1
`(130.6)
`313.3
`
`$
`
`223.7
`48
`
`20.6
`249.1
`
`687.6
`(1.9)
`(825.7)
`(140.0)
`109.1
`
`A reconciliation of the U.S. statutory incometax rate to the Company's effective incometax rate is as follows:
`
`U.S.federal statutory tax rate
`Stock-based compensation
`Incometax credits
`Taxation of non-U.S. operations
`Sale of non-inventory related assets between foreign subsidiaries
`Foreign-derived intangible income deduction
`Non-deductible Branded Prescription Drug Fee
`Impact of changein U.S. corporate tax rate (the Act)
`Other permanent differences
`Effective income tax rate
`
`F-37
`
`2020
`
`Year Ended December31,
`2019
`
`2018
`
`210 %
`(7.6)
`(2.8)
`(1.8)
`(0.8)
`—
`0.5
`—
`(0.7)
`78
`
` %
`
`210 %
`(2.5)
`(4.6)
`(1.0)
`—_—
`(1.6)
`0.7
`—
`0.9
`129 %
`
`21.0
`(2.5)
`(2.6)
`(1.9)
`(6.3)
`(1.0)
`0.6
`(2.7)
`(0.3)
`4.3
`
`%
`
`Exhibit 2254
`
`Page 139 of 264
`
`Exhibit 2254
`Page 139 of 264
`
`
`
`Table of Contents
`
`REGENERON PHARMACEUTICALS,INC.
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`(Unless otherwise noted, dollars in millions, except per share data)
`
`In December 2017,the bill known as the "Tax Cuts and Jobs Act" (the "Act") was signed into law. The Act, which became effective with respect to most of
`its provisions as of January 1, 2018, significantly revised U.S. corporate income tax laws by, among other things, reducing the U.S. federal corporate
`incometax rate from 35% to 21%.As a result of the Act being signed into law, the Company recognized a provisional charge in the fourth quarter of 2017
`related to the re-measurement of its U.S. net deferred tax assets at the lower enacted corporate tax rate, and, during 2018, we recorded an income tax
`benefit of $68.0 million as a final adjustment to the provisional amount recorded as of December 31, 2017, which was partly attributable to our election to
`record deferred tax assets and liabilities for expected amounts of GILTI inclusions.
`
`Deferred incometaxes reflect the net tax effects of temporary differences between the carrying amounts ofassets and liabilities for financial reporting
`purposes and the amounts used for incometax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:
`
`Deferred tax assets:
`
`Deferred compensation
`Fixed assets and intangible assets
`Accrued expenses
`Deferred revenue
`Total deferred tax assets
`
`Valuation allowance
`Deferred tax assets, net of valuation allowance
`
`Deferred tax liabilities:
`
`Other
`Netdeferred tax assets
`
`As of December 31,
`2020
`2019
`
`$
`
`$
`
`$
`
`436.6
`140.5
`139.8
`44.6
`761.5
`
`—
`761.5
`
`519.7
`192.0
`75.9
`22.0
`809.6
`
`(7.0)
`802.6
`
`(42.8)
`718.7
`
`$
`
`(11.2)
`791.4
`
`The Company's federal incometax returns for 2015 through 2019 remain open to examination by the IRS. The Company's 2015 and 2016 federal income
`tax returns are currently under audit by the IRS. In general, the Company's state income tax returns from 2016 to 2019 remain open to examination