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`https://www.sec.gov/Archives/edgar/data/872589/000120677409002017/regeneron_10q.htm
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`10-Q 1 regeneron_10q.htm QUARTERLY REPORT
`
`UNITED STATES
`
`SECURITIES AND EXCHANGE COMMISSION
`Washington, D.C. 20549
`
`
`
`Form 10-Q
`
`
`(Mark One)
`
`(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
`
`EXCHANGE ACT OF 1934
`
`
`For the quarterly period ended September 30, 2009
`
`
`
`
`
`( )
`
`
`
`
`OR
`
`TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
`EXCHANGE ACT OF 1934
`
`
`For the transition period from ______________to ______________
`
`
`
`
`Commission File Number 0-19034
`
`REGENERON PHARMACEUTICALS, INC.
`
`(Exact name of registrant as specified in its charter)
`
`New York
`(State or other jurisdiction of
`incorporation or organization)
`
`13-3444607
`(I.R.S. Employer Identification No.)
`
`
`777 Old Saw Mill River Road
`Tarrytown, New York
`(Address of principal executive offices)
`
`
`
`10591-6707
`(Zip Code)
`
`(914) 347-7000
`
`(Registrant’s telephone number, including area code)
`
`Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
`Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
`(2) has been subject to such filing requirements for the past 90 days.
`
`Yes X No __
`
`Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
`Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
`months (or for such shorter period that the registrant was required to submit and post such files).
`
`Yes __ No __
`
`Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
`company. See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange
`Act.
`
`Large accelerated filer X
`Non-accelerated filer
` (Do not check if a smaller reporting company)
`
`Accelerated filer __
`Smaller reporting company __
`
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`Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
`
`Number of shares outstanding of each of the registrant’s classes of common stock as of October 15, 2009:
`
`Yes __ No X
`
`Class of Common Stock
`Class A Stock, $0.001 par value
`Common Stock, $0.001 par value
`
`Number of Shares
` 2,246,698
`78,247,674
`
`REGENERON PHARMACEUTICALS, INC.
`Table of Contents
`
`September 30, 2009
`
`
`
`Item 1
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`PART I FINANCIAL INFORMATION
`
`Financial Statements
`
`Condensed balance sheets (unaudited) at September 30, 2009 and December 31, 2008
`
`Condensed statements of operations (unaudited) for the three and nine months ended
`September 30, 2009 and 2008
`
`Condensed statement of stockholders’ equity (unaudited) for the nine months ended
`September 30, 2009
`
`Condensed statements of cash flows (unaudited) for the nine months ended September
`30, 2009 and 2008
`
`Notes to condensed financial statements (unaudited)
`
`Management's Discussion and Analysis of Financial Condition and Results of
`Operations
`
`Quantitative and Qualitative Disclosures About Market Risk
`
`Controls and Procedures
`
`Item 2
`
`Item 3
`
`Item 4
`
`PART II
`
`Item 1
`
`Item 1A
`
`OTHER INFORMATION
`
`Legal Proceedings
`
`Risk Factors
`
`Exhibits
`
`Item 6
`
`SIGNATURE PAGE
`
` Page Numbers
`
`
`
`
`
`3
`
`
`4
`
`
`5
`
`
`6
`
`7-17
`
`18-42
`
`43
`
`43
`
`
`
`43
`
`44-59
`
`59
`
`60
`
`PART I. FINANCIAL INFORMATION
`
`ITEM 1. FINANCIAL STATEMENTS
`
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`REGENERON PHARMACEUTICALS, INC.
`
`CONDENSED BALANCE SHEETS AT SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 (Unaudited)
`(In thousands, except share data)
`
`
`
`ASSETS
`
`Current assets
` Cash and cash equivalents
` Marketable securities
` Accounts receivable from the sanofi-aventis Group
` Accounts receivable - other
` Prepaid expenses and other current assets
` Total current assets
`
`Restricted cash
`Marketable securities
`Property, plant, and equipment, at cost, net of accumulated
` depreciation and amortization
`Other assets
` Total assets
`
`
`LIABILITIES and STOCKHOLDERS' EQUITY
`
`Current liabilities
` Accounts payable and accrued expenses
` Deferred revenue from sanofi-aventis, current portion
` Deferred revenue - other, current portion
` Total current liabilities
`
`Deferred revenue from sanofi-aventis
`Deferred revenue - other
`Facility lease obligation
`Other long-term liabilities
` Total liabilities
`
`Commitments and contingencies
`
`Stockholders' equity
` Preferred stock, $.01 par value; 30,000,000 shares authorized; issued and
` outstanding-none
` Class A Stock, convertible, $.001 par value; 40,000,000 shares authorized;
` shares issued and outstanding - 2,246,698 in 2009 and 2,248,698 in 2008
` Common Stock, $.001 par value; 160,000,000 shares authorized;
` shares issued and outstanding - 78,243,286 in 2009 and 77,642,203 in 2008
` Additional paid-in capital
` Accumulated deficit
` Accumulated other comprehensive income (loss)
` Total stockholders' equity
` Total liabilities and stockholders' equity
`
`September 30, December 31,
`
`2008
`2009
`(Revised -
`see Note 9)
`
`
`
`
`
`$
`
`$
`
`$
`
`250,321
`129,475
`63,953
`3,813
`14,032
`461,594
`
`1,600
`57,200
`
`215,169
`6,629
`742,192
`
`55,291
`21,580
`37,294
`114,165
`
`90,251
`49,421
`62,571
`3,341
`319,749
`
`
`
`$
`
`$
`
`$
`
`247,796
`226,954
`33,302
`1,910
`11,480
`521,442
`
`1,650
`51,061
`
`142,035
`8,032
`724,220
`
`36,168
`21,390
`26,114
`83,672
`
`105,586
`56,835
`54,182
`2,431
`302,706
`
`2
`
`2
`
`78
`1,323,432
`(904,606)
`3,537
`422,443
`742,192
`
`$
`
`78
`1,294,813
`(873,265)
`(114)
`421,514
`724,220
`
`$
`
`
`
`The accompanying notes are an integral part of the financial statements.
`
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`3
`
`REGENERON PHARMACEUTICALS, INC.
`
`CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
`
`(In thousands, except per share data)
`
`Three months ended September 30, Nine months ended September 30,
`
` 2009
`
` 2008
`2009
`2008
`(Revised -
`(Revised -
`see Note 9)
`see Note 9)
`
`
`
`
`
`
`$
`
`68,536
`13,946
`20,000
`10,000
`4,973
`117,455
`
`105,434
`12,840
`472
`118,746
`
`$
`
`42,006
`10,872
`
`10,000
`2,706
`65,584
`
`72,089
`11,103
`292
`83,484
`
`$
`
`178,928
`40,176
`20,000
`30,000
`13,364
`282,468
`
`279,972
`35,892
`1,299
`317,163
`
`$
`
`116,346
`33,568
`
`30,000
`2,706
`182,620
`
`200,335
`35,652
`292
`236,279
`
`(1,291)
`
`(17,900)
`
`(34,695)
`
`(53,659)
`
`Revenues
` Contract research and development from sanofi-
`aventis
` Other contract research and development
` Research progress payments
` Technology licensing
` Net product sales
`
`
`Expenses
` Research and development
` Selling, general, and administrative
` Cost of goods sold
`
`
`Loss from operations
`
`Other income (expense)
` Investment income
` Interest expense
` Loss on early extinguishment of debt
`
`
`Net loss before income tax expense
`
`Income tax expense
`
`Net loss
`
`Net loss per share, basic and diluted
`
`Weighted average shares outstanding, basic and diluted
`
`$
`
`$
`
`857
`(581)
`
`276
`
`(1,015)
`
`(1,015)
`
`(0.01)
`
`79,866
`
`3,674
`(1,772)
`(7)
`1,895
`
`(16,005)
`
`3,079
`
`(19,084)
`
`(0.24)
`
`78,937
`
`3,935
`(581)
`
`3,354
`
`(31,341)
`
`(31,341)
`
`(0.39)
`
`79,663
`
`$
`
`$
`
`15,513
`(7,457)
`(938)
`7,118
`
`(46,541)
`
`3,079
`
`(49,620)
`
`(0.63)
`
`78,706
`
`$
`
`$
`
`$
`
`$
`
`
`
`The accompanying notes are an integral part of the financial statements.
`
`4
`
`REGENERON PHARMACEUTICALS, INC.
`
`CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)
`
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`For the nine months ended September 30, 2009
`
`(In thousands)
`
`Additional
`Class A Stock
`Common Stock
`Paid-in
` Shares Amount Shares Amount Capital
`
`Accumulated
`Other
`Accumulated
`Comprehensive
` Deficit
` Income (Loss)
`
`Total
`Stockholders'
`
`Equity
`
`Comprehensive
`Loss
`
` 2,249
`
`$
`
`2
`
`77,642
`
`$
`
`78
`
`$ 1,294,813
`
`$ (873,265)
`
`$
`
`(114)
`
`$ 421,514
`
`518
`
`4,626
`
`81
`
`2
`
`(2)
`
`1,391
`
`22,602
`
`
`
`
`
`(31,341)
`
`4,626
`
`1,391
`
`22,602
`(31,341)
`
`$
`
`(31,341)
`
`3,651
`
`3,651
`
`3,651
`
`2,247
`
`$
`
`2
`
`78,243
`
`$
`
`78
`
`$ 1,323,432
`
`$ (904,606)
`
`$
`
`3,537
`
`$ 422,443
`
`$
`
`(27,690)
`
`The accompanying notes are an integral part of the financial statements.
`
`Balance, December 31,
`2008
` (Revised - see Note 9)
`Issuance of Common Stock
`in
` connection with
`exercise of
` stock options, net of
`shares
` tendered
`Issuance of Common Stock
`in
` connection with
`Company 401(k)
` Savings Plan
`contribution
`Conversion of Class A
`Stock to
` Common Stock
`Stock-based compensation
`expense
`Net loss
`Change in net unrealized
`gain
` (loss) on marketable
`securities
`Balance, September 30,
`2009
`
`
`
`5
`
`REGENERON PHARMACEUTICALS, INC.
`
`CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
`
`(In thousands)
`
`Cash flows from operating activities
` Net loss
` Adjustments to reconcile net loss to net cash used in
` operating activities
`
` Nine months ended September 30,
`
`2009
`2008
`(Revised -
`see Note 9)
`
`$
`
`(31,341)
`
`$
`
`(49,620)
`
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`

`(56)
`
`(32,554)
`(370)
`(11,379)
`
`17,960
`5,515
`(25,826)
`
`(190,666)
`284,934
`(75,002)
`50
`19,316
`
`5,182
`(773)
`4,626
`9,035
`
`2,525
`
`8,661
`24,716
`938
`1,166
`
`(23,886)
`(5,279)
`(10,076)
`
`134
`(3,626)
`(53,246)
`
`(478,276)
`443,587
`(19,117)
`(50)
`(53,856)
`
`(83,304)
`
`6,165
`(77,139)
`
`(184,241)
`
`498,925
`
`$
`
`314,684
`
`https://www.sec.gov/Archives/edgar/data/872589/000120677409002017/regeneron_10q.htm
`9/13/2017
` Depreciation and amortization
`9,312
` Non-cash compensation expense
`22,602
` Loss on early extinguishment of debt
` Net realized (gain) loss on marketable securities
` Changes in assets and liabilities
` Increase in accounts receivable
` Increase in prepaid expenses and other assets
` Decrease in deferred revenue
` Increase in accounts payable, accrued expenses,
` and other liabilities
` Total adjustments
` Net cash used in operating activities
`
`Cash flows from investing activities
` Purchases of marketable securities
` Sales or maturities of marketable securities
` Capital expenditures
` Decrease (increase) in restricted cash
` Net cash provided by (used in) investing activities
`
`Cash flows from financing activities
` Extinguishment of long-term debt
` Proceeds in connection with facility lease obligation
` Payments in connection with facility lease obligation
` Net proceeds from the issuance of Common Stock
` Net cash provided by (used in) financing activities
`
`Net increase (decrease) in cash and cash equivalents
`
`Cash and cash equivalents at beginning of period
`
`Cash and cash equivalents at end of period
`
`247,796
`
`$
`
`250,321
`
`
`
`The accompanying notes are an integral part of the financial statements.
`
`6
`
`REGENERON PHARMACEUTICALS, INC.
`
`Notes to Condensed Financial Statements (Unaudited)
`
`(Unless otherwise noted, dollars in thousands, except per share data)
`
`1. Interim Financial Statements
`
` The interim Condensed Financial Statements of Regeneron Pharmaceuticals, Inc. (“Regeneron” or the “Company”) 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 adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the Company’s
`financial position, results of operations, and cash flows for such periods. The results of operations for any interim periods are not
`necessarily indicative of the results for the full year. The December 31, 2008 Condensed 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, 2008. In addition, the previously issued balance sheet of the
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`Company at December 31, 2008 contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, and the
`previously issued condensed statement of operations for the three and nine months ended September 30, 2008 and condensed statement of
`cash flows for the nine months ended September 30, 2008, contained in the Company’s Quarterly Report on Form 10-Q for the period
`ended September 30, 2008, have been revised in this Quarterly Report on Form 10-Q with respect to the Company’s December 2006 lease
`of office and laboratory facilities in Tarrytown, New York by applying authoritative guidance issued by the Financial Accounting
`Standards Board (FASB). See Note 9b below.
`
` Included in research and development expenses is the Company’s share of VEGF Trap-Eye development expenses incurred by Bayer
`HealthCare LLC, including the Company’s share of Bayer HealthCare’s estimated VEGF Trap-Eye development expenses for the most
`recent interim fiscal quarter. The Bayer HealthCare estimate each quarter is adjusted to agree with actual expenses for such quarter in the
`subsequent interim fiscal quarter.
`
` Effective in the first quarter of 2009, the estimated useful lives of laboratory and other equipment, which is a component of property,
`plant, and equipment, has been extended from 3 – 5 years to 3 – 10 years. The effect of this change in estimate was to lower depreciation
`expense by $0.2 million and $0.7 million for the three and nine months ended September 30, 2009. The impact on the net loss per share as
`a result of this change in estimate was not material.
`
`2. ARCALYST® (rilonacept) Product Revenue
`
` In February 2008, the Company received marketing approval from the U.S. Food and Drug Administration (“FDA”) for ARCALYST®
`(rilonacept) Injection for Subcutaneous Use for the treatment of Cryopyrin-Associated Periodic Syndromes (“CAPS”). The Company
`recognizes ARCALYST net product sales as revenue when the right of return no longer exists and rebates can be reasonably estimated.
`ARCALYST net product sales revenue totaled $5.0 million and $13.4 million for the three and nine months ended September 30, 2009,
`respectively, and $2.7 million for both the three and nine months ended September 30, 2008. At September 30, 2009 and 2008, deferred
`revenue related to ARCALYST net product sales totaled $5.0 million and $3.8 million, respectively.
`
` Cost of goods sold related to ARCALYST sales, which consisted primarily of royalties, totaled $0.5 million and $1.3 million for the
`three and nine months ended September 30, 2009, respectively, and $0.3 million for both the three and nine months ended September 30,
`2008. To date, ARCALYST shipments to the Company’s customers have consisted of supplies of inventory manufactured and expensed
`prior to FDA approval of ARCALYST; therefore, the costs of these supplies were not included in costs of goods sold. At September 30,
`2009, the Company had $0.4 million of inventoried work-in-process costs related to ARCALYST, which is included in prepaid expenses
`and other current assets. There were no capitalized inventory costs at December 31, 2008.
`
`7
`
`REGENERON PHARMACEUTICALS, INC.
`
`Notes to Condensed Financial Statements (Unaudited)
`
`(Unless otherwise noted, dollars in thousands, except per share data)
`
`3. Per Share Data
`
` The Company’s basic and diluted net loss per share amounts have been computed by dividing net loss by the weighted average number
`of shares of Common Stock and Class A Stock outstanding. Net loss per share is presented on a combined basis, inclusive of Common
`Stock and Class A Stock outstanding, as each class of stock has equivalent economic rights. For the three and nine months ended
`September 30, 2009 and 2008, the Company reported net losses; therefore, no common stock equivalents were included in the
`computation of diluted net loss per share for these periods, since such inclusion would have been antidilutive. The calculations of basic
`and diluted net loss per share are as follows:
`
`Net loss (Numerator)
`
`Weighted-average shares, in thousands (Denominator)
`
`Basic and diluted net loss per share
`
`
`
`Three Months Ended September 30,
`
`2009
`2008
`(1,015)
`(19,084)
`
`$
`
`$
`
`79,866
`
`78,937
`
`$
`
`(0.01)
`
`$
`
`(0.24)
`
`Nine Months Ended September 30,
`
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`2009
`(31,341)
`
`$
`
`$
`
`9/13/2017
`
`
`Net loss (Numerator)
`
`Weighted-average shares, in thousands (Denominator)
`
`Basic and diluted net loss per share
`
`2008
`(49,620)
`
`78,706
`
`79,663
`
`$
`
`(0.39)
`
`$
`
`(0.63)
`
` Shares issuable upon the exercise of stock options, vesting of restricted stock awards, and conversion of convertible debt, which have
`been excluded from the September 30, 2009 and 2008 diluted per share amounts because their effect would have been antidilutive, include
`the following:
`
`Stock Options:
` Weighted average number, in thousands
` Weighted average exercise price
`
`Restricted Stock:
` Weighted average number, in thousands
`
`Convertible Debt:
` Weighted average number, in thousands
` Conversion price
`
`
`
`Stock Options:
` Weighted average number, in thousands
` Weighted average exercise price
`
`Restricted Stock:
` Weighted average number, in thousands
`
`Convertible Debt:
` Weighted average number, in thousands
` Conversion price
`
`Three months ended September 30,
`
`2008
`2009
`
`
`
`
`
`$
`
`19,860
`17.65
`
`500
`
`
`
`$
`
`$
`
`17,454
`17.31
`
`500
`
`3,890
`30.25
`
`Nine months ended September 30,
`2009
`2008
`
`$
`
`20,059
`17.59
`
`500
`
`17,572
`17.24
`
`500
`
`5,450
`30.25
`
`$
`
`$
`
`8
`
`REGENERON PHARMACEUTICALS, INC.
`
`Notes to Condensed Financial Statements (Unaudited)
`
`(Unless otherwise noted, dollars in thousands, except per share data)
`
`4. Statement of Cash Flows
`
` Supplemental disclosure of noncash investing and financing activities:
`
` Included in accounts payable and accrued expenses at September 30, 2009 and December 31, 2008 were $10.5 million and $7.0
`million, respectively, of accrued capital expenditures. Included in accounts payable and accrued expenses at September 30, 2008 and
`December 31, 2007 were $5.1 million and $1.7 million, respectively, of accrued capital expenditures.
`
` In connection with the application of FASB authoritative guidance to the Company’s lease of office and laboratory facilities in
`Tarrytown, New York (see Note 9b), the Company recognized a facility lease obligation of $4.0 million and $23.0 million for the nine
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`9/13/2017
`months ended September 30, 2009 and 2008, respectively, in connection with capitalizing, on the Company’s books, the landlord’s costs of
`constructing new facilities that the Company has leased.
`
` Included in accounts payable and accrued expenses at December 31, 2008 and 2007 were $1.5 million and $1.1 million, respectively,
`of accrued Company 401(k) Savings Plan contribution expense. In the first quarter of 2009 and 2008, the Company contributed 81,086 and
`58,575 shares, respectively, of Common Stock to the 401(k) Savings Plan in satisfaction of these obligations.
`
` Included in marketable securities at September 30, 2009 and December 31, 2008 were $1.0 million and $1.7 million, respectively, of
`accrued interest income. Included in marketable securities at both September 30, 2008 and December 31, 2007 was $2.2 million of
`accrued interest income.
`
`5. Marketable Securities
`
` Marketable securities at September 30, 2009 and December 31, 2008 consisted of debt securities, as detailed below, and equity
`securities, the aggregate fair value of which was $7.1 million and $3.7 million at September 30, 2009 and December 31, 2008,
`respectively, and the aggregate cost basis of which was $4.0 million and $4.1 million at September 30, 2009 and December 31, 2008. The
`following tables summarize the amortized cost basis of debt securities included in marketable securities, the aggregate fair value of those
`securities, and gross unrealized gains and losses on those securities at September 30, 2009 and December 31, 2008. The Company
`classifies its debt securities, other than mortgage-backed and other asset-backed securities, based on their contractual maturity dates.
`Maturities of mortgage-backed and other asset-backed securities have been estimated based primarily on repayment characteristics and
`experience of the senior tranches that the Company holds.
`
`At September 30, 2009
`Maturities within one year
` U.S. government obligations
` Corporate bonds
` Mortgage-backed securities
` U.S. government guaranteed
` collateralized mortgage obligations
`
`
`Maturities between one and three years
` U.S. government guaranteed corporate bonds
` Mortgage-backed securities
`
`
`
`Amortized
`Cost Basis
`
`$ 105,253
`15,819
`3,417
`
`
`
` Fair
`Value
`
`$105,353
`16,109
`3,211
`
`4,717
`129,206
`
`4,802
`129,475
`
`48,608
`1,278
`49,886
`
`49,086
`999
`50,085
`
`Net
`
`Unrealized
`
`(Losses)
`Gains
`
`
`
`
`
`$ 100
`$ 100
`290
`290
`(206)
`
`$ (206)
`
`85
`475
`
`478
`
`478
`
`(206)
`
`(279)
`(279)
`
`85
`269
`
`478
`(279)
`199
`
`$ 179,092
`
`$179,560
`
`$ 953
`
`$ (485)
`
`$ 468
`
`9
`
`REGENERON PHARMACEUTICALS, INC.
`
`Notes to Condensed Financial Statements (Unaudited)
`
`(Unless otherwise noted, dollars in thousands, except per share data)
`
`At December 31, 2008
`Maturities within one year
` U.S. government obligations
` Corporate bonds
` Mortgage-backed securities
` Other asset-backed securities
` U.S. government guaranteed
` collateralized mortgage obligations
`
`Amortized
`Cost Basis
`
`Fair
`Value
`
`
`$ 170,993
`26,894
`9,098
`7,842
`
`
`$ 172,253
`26,662
`8,420
`7,829
`
`Gains
`
`
`$ 1,260
`25
`
`Unrealized
`(Losses)
`
`
`
`$ (257)
`(678)
`(13)
`
`Net
`
`$ 1,260
`(232)
`(678)
`(13)
`
`11,742
`
`11,792
`
`50
`
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`50
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`226,569
`226,956
`1,335
`
`(948)
`
`387
`
`
`Maturities between one and three years
` U.S. government guaranteed corporate bonds
` Corporate bonds
` Mortgage-backed securities
` U.S. government guaranteed
` collateralized mortgage obligations
`
`
`
`29,853
`10,446
`1,821
`
`5,297
`47,417
`
`29,811
`10,414
`1,556
`
`5,570
`47,351
`
`82
`77
`
`273
`432
`
`(124)
`(109)
`(265)
`
`(498)
`
`(42)
`(32)
`(265)
`
`273
`(66)
`
`$ 273,986
`
`$ 274,307
`
`$ 1,767
`
`$ (1,446)
`
`$
`
`321
`
` At September 30, 2009 and December 31, 2008, marketable securities included an additional unrealized gain of $3.1 million and an
`additional unrealized loss of $0.4 million, respectively, related to one equity security in the Company’s marketable securities portfolio.
`
` The following table shows the fair value of the Company’s marketable securities that have unrealized losses and that are deemed to be
`only temporarily impaired, aggregated by investment category and length of time that the individual securities have been in a continuous
`unrealized loss position, at September 30, 2009 and December 31, 2008. The debt securities listed at September 30, 2009 mature at various
`dates through December 2011.
`
`12 Months or Greater
`Less than 12 Months
` Unrealized
`Unrealized
` Fair Value
` Fair Value
`Loss
`Loss
`$
`4,210
`(485)
`$
`4,210
`
`Total
`Unrealized
`Loss
`(485)
`
`$
`
`Fair Value
`
`
`
`
`
`
`$
`
`At September 30, 2009
` Mortgage-backed securities
`
`At December 31, 2008
`Corporate bonds
`Government guaranteed
` corporate bonds
`Mortgage-backed securities
`Other asset-backed securities
`Equity securities
`
`$ 15,559
`
`$
`
`(287)
`
`$
`
`2,933
`
`
`
`$
`
`(79)
`
`$ 18,492
`
`$
`
`(366)
`
`
`
`11,300
`871
`7,829
`3,608
`$ 39,167
`
`(124)
`(74)
`(13)
`(436)
`(934)
`
`$
`
`9,104
`
`(869)
`
`$ 12,037
`
`$
`
`(948)
`
`11,300
`9,975
`7,829
`3,608
`$ 51,204
`
`(124)
`(943)
`(13)
`(436)
`$ (1,882)
`
` Realized gains and losses are included as a component of investment income. For both the three and nine months ended September 30,
`2009, realized gains on sales of marketable securities totaled $0.2 million and realized losses on sales of marketable securities were not
`significant. For the three and nine months ended September 30, 2008, realized gains on sales of marketable securities totaled $1.0 million
`and $1.1 million, respectively, and realized losses on sales of marketable securities were not significant. In computing realized gains and
`losses, the Company computes the cost of its investments on a specific identification basis. Such cost includes the direct costs to acquire
`the security, adjusted for the amortization of any discount or premium.
`
`10
`
`REGENERON PHARMACEUTICALS, INC.
`
`Notes to Condensed Financial Statements (Unaudited)
`
`(Unless otherwise noted, dollars in thousands, except per share data)
`
` The Company’s assets that are measured at fair value on a recurring basis, at September 30, 2009 and December 31, 2008, were as
`follows:
`
`Fair Value Measurements at Reporting Date Using
`
`Quoted Prices in
` Active Markets Significant Other Significant
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`Fair Value at
`for Identical
`Observable
`September 30,
`Assets
`Inputs
`2009
`(Level 1)
`(Level 2)
`
`
`
`Unobservable
`Inputs
`(Level 3)
`
`9/13/2017
`
`Description
`Available-for-sale marketable securities
` U.S. government obligations
` U.S. government guaranteed corporate bonds
` Corporate bonds
` Mortgage-backed securities
` U.S. government guaranteed
` collateralized mortgage obligations
` Equity securities
` Total
`
`$
`
`$
`
`105,353
`49,086
`16,109
`4,210
`
`4,802
`7,115
`186,675
`
`$
`
`105,353
`49,086
`16,109
`4,210
`
`4,802
`
`$
`
`7,115
`7,115
`
`$
`
`179,560
`
`
`
`
`$
`
`Fair Value Measurements at Reporting Date Using
`
`Quoted Prices in
` Active Markets Significant Other Significant
`for Identical
`Observable
`Unobservable
`Assets
`Inputs
`Inputs
`(Level 1)
`(Level 2)
`(Level 3)
`
`Fair Value at
`December 31,
`2008
`
`
`$
`
`$
`
`172,253
`29,811
`37,076
`9,976
`7,829
`
`17,362
`3,708
`278,015
`
`
`$
`
`172,253
`29,811
`37,076
`9,976
`7,829
`
`17,362
`
`$
`$
`
`3,608
`3,608
`
`$
`
`274,307
`
`
`
`$
`$
`
`100
`100
`
`Description
`Available-for-sale marketable securities
` U.S. government obligations
` U.S. government guaranteed corporate bonds
` Corporate bonds
` Mortgage-backed securities
` Other asset backed securities
` U.S. government guaranteed
` collateralized mortgage obligations
` Equity securities
` Total
`
` Marketable securities included in Level 2 were valued using a market approach utilizing prices and other relevant information, such as
`interest rates, yield curves, prepayment speeds, loss severities, credit risks and default rates, generated by market transactions involving
`identical or comparable assets. The Company considers market liquidity in determining the best price for these securities. During the three
`and nine months ended September 30, 2009, the Company did not record any charges for other-than-temporary impairment of its Level 2
`marketable securities. During the third quarter of 2008, deterioration in the credit quality of a marketable security from one issuer
`subjected the Company to the risk of not being able to recover the security’s $2.0 million carrying value. As a result, the Company
`recognized a $1.7 million charge related to this Level 2 marketable security, which the Company considered to be other than temporarily
`impaired.
`
` Marketable securities included in Level 3 were valued using information provided by the Company’s investment advisors, including
`quoted bid prices which take into consideration the securities’ current lack of liquidity. During the nine months ended September 30, 2009
`and 2008, deterioration in the credit quality of a marketable security included in Level 3 subjected the Company to the risk of not being
`able to recover the carrying value of the investment. As such, the Company recorded charges for other-than-temporary impairment of this
`Level 3 marketable security totaling $0.1 million for both the three and nine months ended September 30, 2009, and $0.5 million for the
`nine months ended September 30, 2008.
`
`11
`
`REGENERON PHARMACEUTICALS, INC.
`
`Notes to Condensed Financial Statements (Unaudited)
`
`(Unless otherwise noted, dollars in thousands, except per share data)
`
` There were no unrealized gains or losses related to the Company’s Level 3 marketable securities for the three or nine months ended
`September 30, 2009 and 2008. In addition, there were no purchases, sales, or maturities of Level 3 marketable securities, and no transfers
`
`https://www.sec.gov/Archives/edgar/data/872589/000120677409002017/regeneron_10q.htm
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`9/13/2017
`of marketable securities between the Level 2 and Level 3 classifications, during the three and nine months ended September 30, 2009 and
`2008.
`
` Changes in marketable securities included in Level 3 during the three months ended September 30, 2009 and 2008 were as follows:
`
`Balance, July 1
`Settlements
`Realized gain
`Impairments
`Balance, September 30
`
`Level 3 marketable securities
`
`2008
`2009
`100
`4,995
`(5,665)
`940
`
`$
`
`$
`
`(100)
`
`$
`
`$
`
`270
`
` Changes in marketable securities included in Level 3 during the nine months ended September 30, 2009 and 2008 were as follows:
`
`Balance, January 1
`Settlements
`Realized gain
`Impairments
`Balance, September 30
`
`$
`
`$
`
`Level 3 marketable securities
`
`2008
`2009
`100
`7,950
`
`(8,090)
`940
`(530)
`270
`
`$
`
`
`$
`
`(100)
`
`
` On a quarterly basis, the Company reviews its portfolio of marketable securities, using both quantitative and qualitative factors, to
`determine if declines in fair value below cost are other-than-temporary. With respect to debt securities, this review process also includes an
`evaluation of the Company’s (a) intent to sell an individual debt security or (b) need to sell the debt security before its anticipated recovery
`or maturity. With respect to equity securities, this review process includes an evaluation of the Company’s ability and intent to hold the
`securities until their full value can be recovered.
`
` T