We prepare estimates of research and development costs for projects in clinical development, which include direct
`costs and allocations of certain costs such as indirect labor, Non-cash Compensation Expense, and manufacturing
`and other costs related to activities that benefit multiple projects, and, under our collaboration with Bayer HealthCare,
`the portion of Bayer HealthCare's VEGF Trap-Eye development expenses that we are obligated to reimburse. Our
`estimates of research and development costs for clinical development programs are shown below:
`
`Project Costs
`(In millions)
`ARCALYST® ....................................... .
`VEGF Trap-Eye ..................................... .
`Aflibercept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........... .
`REGN88 ........................................... .
`Other antibody candidates in clinical development ......... .
`Other research programs & unallocated costs ............. .
`Total research and development expenses .............. .
`
`Year ended
`December 31,
`2009
`2008
`- - - - - -
`$ 67.7
`$ 39.2
`109.8
`82.7
`23.3
`32.1
`36.9
`21.4
`74.4
`27.4
`86.7
`72.1
`- - - - - -
`$398.8
`$274.9
`
`Increase
`(Decrease}
`$ 28.5
`27.1
`(8.8)
`15.5
`47.0
`14.6
`- - -
`$123.9
`
`For the reasons described above in Results of Operations for the years ended December 31, 2010 and 2009,
`under the caption "Research and Development Expenses", and due to the variability in the costs necessary to develop
`a pharmaceutical product and the uncertainties related to future indications to be studied, the estimated cost and
`scope of the projects, and our ultimate ability to obtain governmental approval for commercialization, accurate and
`meaningful estimates of the total cost to bring our product candidates to market are not available. Similarly, we
`are currently unable to reasonably estimate if our product candidates will generate material product revenues and
`net cash inflows. In 2008, we received FDA approval for ARCALYST® for the treatment of CAPS, a group of rare,
`inherited auto-inflammatory diseases that affect a very small group of people. We currently do not expect to generate
`material product revenues and net cash inflows from the sale of ARCALYST® for the treatment of CAPS.
`
`Selling, General, and Administrative Expenses
`
`Selling, general, and administrative expenses increased to $52.9 million in 2009 from $48.9 million in 2008.
`In 2009, we incurred (i) higher compensation expense, (ii) higher patent-related costs, (iii) higher facility-related
`costs due primarily to increases in administrative headcount, and (iv) higher patient assistance costs related to
`ARCALYST®. These increases were partly offset by (i) lower marketing costs related to ARCALYST®, (ii) a decrease
`in administrative recruitment costs, and (iii) lower professional fees related to various corporate matters.
`
`Cost of Goods Sold
`
`During 2008, we began recognizing revenue and cost of goods sold from net product sales of ARCALYST®. Cost
`of goods sold in 2009 and 2008 was $1.7 million and $0.9 million, respectively, and consisted primarily of royalties
`and other period costs related to ARCALYST® commercial supplies. In 2009 and 2008, ARCALYST® shipments to
`our customers consisted of supplies of inventory manufactured and expensed as research and development costs prior
`to FDA approval in 2008; therefore, the costs of these supplies were not included in costs of goods sold.
`
`Other Income and Expem·e
`
`Investment income decreased to $4.5 million in 2009 from $18.2 million in 2008, due primarily to lower yields
`on, and lower balances of, cash and marketable securities. In addition, in 2009 and 2008, deterioration in the credit
`quality of specific marketable securities in our investment portfolio subjected us to the risk of not being able to
`recover these securities' carrying values. As a result, in 2009 and 2008, we recognized charges of $0.1 million and
`$2.5 million, respectively, related to these securities, which we considered to be other than temporarily impaired. In
`2009 and 2008, these charges were either wholly or partly offset by realized gains of $0.2 million and $1.2 million,
`respectively, on sales of marketable securities during the year.
`
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`

`Interest expense decreased to $2.3 million in 2009 from $7.8 million in 2008. Interest expense in 2009 was
`attributable to the imputed interest portion of payments to our landlord, commencing in the third quarter of 2009,
`to lease newly constructed laboratory and office facilities in Tarrytown, New York. Interest expense in 2008 related
`to $200.0 million of 5.5% Convertible Senior Subordinated Notes until they were retired. During the second and
`third quarters of 2008, we repurchased a total of $82.5 million in principal amount of these convertible notes for
`$83.3 million. ln connection with these repurchases, we recognized a $0.9 million loss on early extinguishment
`of debt, representing the premium paid on the notes plus related unamortized debt issuance costs. The remaining
`$117.5 million of convertible notes were repaid in full upon their maturity in October 2008.
`
`Income Tax Expense (Benefit)
`
`In 2009, we recognized a $4.1 million income tax benefit, consisting primarily of(i) $2.7 million resulting from
`a provision in the Worker, Homeownership, and Business Assistance Act of2009 that allowed us to claim a refund of
`U.S. federal alternative minimum tax that we paid in 2008, as described below, and (ii) $0.7 million resulting from a
`provision in the American Recovery and Reinvestment Act of 2009 that allowed us to claim a refund for a portion of
`our unused pre-2006 research tax credits.
`
`In 2008, we implemented a tax planning strategy which resulted in the utilization of certain net operating loss
`carry-forwards that would otherwise have expired over the next several years, to offset income for tax purposes. As
`a result, we incurred and paid income tax expense of$3.1 million, which relates to U.S. federal and New York State
`alternative minimum taxes and included $0.2 million of interest and penalties. This expense was partly offset by a
`$0.7 million income tax benefit, resulting from a provision in the Housing Assistance Tax Act of 2008 that allowed
`us to claim a refund for a portion of our unused pre-2006 research tax credits.
`
`Liquidity and Capital Resources
`
`Since our inception in 1988, we have financed our operations primarily through offerings of our equity
`securities, a private placement of convertible debt (which was repaid in 2008), purchases of our equity securities
`by our collaborators, including sanofi-aventis, revenue earned under our past and present research and development
`agreements, including our agreements with sanofi-aventis and Bayer HealthCare, our past contract manufacturing
`agreements, and our technology licensing agreements, ARCALYST® product revenue, and investment income.
`
`Sources and Uses of Cash for the Years Ended December 31, 2010, 2009, and 2008
`
`At December 31, 2010, we had $626.9 million in cash, cash equivalents, and marketable securities (including
`$7.5 million of restricted cash and marketable securities) compared with $390.0 million at December 31, 2009
`(including $1.6 million ofrestricted cash) and $527.5 million (including $1.7 million ofrestricted cash) at December
`31, 2008. In October 2010, the Company completed an underwritten public offering of 6,325,000 shares of Common
`Stock and received net proceeds of $174.8 million. Under the terms of our non-exclusive license agreements with
`AstraZeneca and Astellas, each company made $20.0 million annual, non-refundable payments to us in each of 2010,
`2009, and 2008. In addition, in connection with the July 2010 amendment and extension of our license agreement
`with Astellas, we received a $165.0 million up-front payment from Astellas in August 2010. We also received, from
`Bayer HealthCare, a $10.0 million milestone payment in December 2010 in connection with the VlEW 1 study, and
`a $20.0 million milestone payment in July 2009 in connection with the COPERNICUS study.
`
`Cash Provided by (Used in) Operations
`
`Net cash provided by operations was $96.3 million in 2010, compared with net cash used in operations of$72.2
`million in 2009 and $89.1 million in 2008. Our net losses of$104.5 million in 2010, $67.8 million in 2009, and $79.1
`million in 2008 included $39.9 million, $31.3 million, and $32.5 million, respectively, of Non-cash Compensation
`Expense. Our net losses also included depreciation and amortization of$19.7 million, $14.2 million, and $11.3 million
`in 2010, 2009, and 2008, respectively.
`
`At December 31, 2010, accounts receivable increased by $27.5 million, compared to end-of-year 2009, primarily
`due to a higher receivable balance related to our antibody collaboration with sanofi-aventis and a $10.0 million
`milestone payment receivable from Bayer HealthCare, which was earned in December 2010 in connection with
`the COPERNICUS study. Our deferred revenue at December 31, 2010 increased by $158.2 million, compared to
`
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`

`end-of-year 2009, primarily due to (i) the receipt of the $165.0 million up-front payment from Astellas, as described
`above, which was deferred and will be recognized ratably over the seven-year period commencing in mid-2011
`and (ii) sanofi-aventis' funding of $22.9 million of agreed-upon costs incurred by us during 2010 to expand our
`manufacturing capacity at our Rensselaer facilities, which was deferred and is being recognized as collaboration
`revenue prospectively over the related performance period in conjunction with the original $85.0 million up-front
`payment received from sanofi-aventis. These increases were partly offset by amortization of previously received
`deferred payments under our sanofi-aventis and Bayer HealthCare collaborations. Accounts payable, accrued
`expenses, and other liabilities increased $7.6 million at December 31, 2010, compared to end-of-year 2009, primarily
`in connection with our expanded levels of activities and expenditures, including higher liabilities for payroll(cid:173)
`related expenses.
`
`At December 31, 2009, accounts receivable increased by $30.4 million, compared to end-of-year 2008, primarily
`due to a higher receivable balance related to our antibody collaboration with sanofi-aventis. Our defen-ed revenue at
`December 31, 2009 decreased by $27.5 million, compared to end-of-year 2008, primarily due to the amortization of
`previously received deferred payments under our collaborations with sanofi-aventis and Bayer HealthCare. Accounts
`payable, accrued expenses, and other liabilities increased $12.6 million at December 31, 2009, compared to end(cid:173)
`of:.year 2008, primarily in connection with our expanded levels of activities and expenditures, including higher
`liabilities for clinical-related expenses, which were partly offset by an $8.6 million decrease in the cost-sharing
`payment due to Bayer HealthCare in connection with our VEGF Trap-Eye collaboration.
`
`At December 31, 2008, accounts receivable increased by $16.9 million, compared to end-of-year 2007, primarily
`due to a higher receivable balance related to our antibody collaboration with sanofi-aventis. Our deferred revenue
`at December 31, 2008 decreased by $26.8 million, compared to end-of-year 2007, primarily due to the amortization
`of previously received deferred payments under our collaborations with sanofi-aventis and Bayer HealthCare. This
`decrease was partly offset by the deferral of $4.0 million of ARCALYST® net product sales at December 31, 2008.
`
`The majority ofour cash expenditures in 2010, 2009, and 2008 were to fund research and development, primarily
`related to our clinical programs and our preclinical human monoclonal antibody programs. In 2008, we made interest
`payments totaling $9.3 million on our convertible senior subordinated notes. The convertible notes were repaid in
`full in October 2008.
`
`Cash (Used in) Provided by Investing Activities
`
`Net cash used in investing activities was $434.2 million in 2010, compared with net cash provided by investing
`activities of$146,000 in 2009 and $30.8 million in 2008. In 2010, purchases of marketable securities exceeded sales
`or maturities by $335.6 million. In 2009 and 2008, sales or maturities of marketable securities exceeded purchases by
`$97.4 million and $65.7 million, respectively. Capital expenditures in 2010, 2009, and 2008 included costs in connection
`with expanding our manufacturing capacity at our Rensselaer, New York facilities and tenant improvements and
`related costs in connection with our December 2006 Tarrytown, New York lease, as described below.
`
`Cash Provided by (Used in) Financing Activities
`
`Net cash provided by financing activities was $243.3 million in 2010 and $31.4 million in 2009, respectively,
`and net cash used in financing activities was $192.9 million in 2008. In October 2010, we completed an underwritten
`public offering of 6,325,000 shares of our Common Stock and received net proceeds of $174.8 million. In addition,
`proceeds from issuances of our Common Stock in connection with exercises of stock options were $22.0 million in
`2010, $8.6 million in 2009, and $7.9 million in 2008. In 2010 and 2009, we received $47.5 million and $23.6 million,
`respectively, of tenant improvement reimbursements from our landlord in connection with our new Tarrytown
`facilities, which we are deemed to own in accordance with FASB authoritative guidance. In the second and third
`quarters of 2008, we repurchased $82.5 million in principal amount of our convertible senior subordinated notes
`for $83.3 million. The remaining $117.5 million of convertible notes were repaid in full upon their maturity in
`October 2008.
`
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`Fair Value of Marketable Securities
`
`At December 31, 2010 and 2009, we held marketable securities whose aggregate fair value totaled $513.9 million
`and $181.3 million, respectively. The composition of our portfolio of marketable securities on these dates was
`as follows:
`
`2010
`Fair Value
`
`Percent
`
`2009
`Fair Value
`
`Percent
`
`Investment type
`Unrestricted
`U.S. government agency securities ......................... .
`U.S. Treasury securities ................................... .
`U.S. government-guaranteed corporate bonds ................. .
`Equity securities ........................................ .
`U.S. government guaranteed collateralized mortgage obligations .. .
`Corporate bonds ......................................... .
`Other ................................................. .
`Mortgage-backed securities ................................ .
`Total unrestricted marketable securities ................... .
`
`$434.4
`
`85%
`
`13%
`1%
`
`64.0
`3.6
`2.1
`
`1.6
`1.1
`506.8
`
`$ 29.6
`80.4
`48.7
`5.4
`3.7
`10.3
`
`16%
`44%
`27%
`3%
`2%
`6%
`
`99%
`
`3.2
`181.3
`
`2%
`- -
`100%
`
`Restricted
`U.S. government agency securities .......................... .
`Total marketable securities ............................. .
`
`7.1
`$513.9
`
`1%
`100%
`
`$181.3
`
`100%
`
`In addition, at December 31, 2010 and 2009, we had $113.0 million and $208.7 million, respectively, of cash, cash
`equivalents, and restricted cash, primarily held in money market funds that invest in U.S. government securities.
`
`We classify our investments using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring
`fair value. The three tiers are Level 1, defined as observable inputs such as quoted prices in active markets; Level 2,
`defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
`Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to
`develop its own assumptions.
`
`The Company held one Level 3 marketable security, which had no fair value at December 31, 2010 and 2009,
`and whose fair value was $0.1 million at December 31, 2008. This Level 3 security was valued using information
`provided by the Company's investment advisors and other sources, including quoted bid prices which took into
`consideration the securities' lack of liquidity. During the year ended December 31, 2009, the Company recorded
`charges for other-than-temporary impairment of this Level 3 marketable security totaling $0.1 million; therefore,
`as of December 31, 2009, the fair value of this security had been written down to zero. There were no purchases,
`sales, or maturities of Level 3 marketable securities and no unrealized gains or losses related to Level 3 marketable
`securities for the years ended December 31, 2010 and 2009. There were no transfers of marketable securities between
`Levels 1, 2, or 3 classifications during the years ended December 31, 2010 and 2009.
`
`Our methods for valuing our marketable securities are described in Note 2 to our financial statements included
`in this Annual Report on Form 10-K. With respect to valuations for pricing our Level 2 marketable securities,
`we consider quantitative and qualitative factors such as financial conditions and near term prospects of the issuer,
`recommendations of investment advisors, and forecasts of economic, market, or industry trends. For valuations that
`we determine for our Level 3 marketable securities, we regularly monitor these securities and adjust their valuations
`as deemed appropriate based on the facts and circumstances.
`
`Collaborations with sanofi-aventis
`
`Ajlibercept
`
`In September 2003, we entered into a collaboration agreement with Aventis Pharmaceuticals Inc. (predecessor
`to sanofi-aventis U.S.) to collaborate on the development and commercialization ofaflibercept in all countries other
`than Japan, where we retained the exclusive right to develop and commercialize aflibercept. Sanofi-aventis made a
`non-refundable up-front payment of $80.0 million and purchased 2,799,552 newly issued unregistered shares of our
`Common Stock for $45.0 million.
`
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`In January 2005, we and sanofi-aventis amended the collaboration agreement to exclude, from the scope of the
`collaboration, the development and commercialization of aflibercept for intraocular delivery to the eye. In connection
`with this amendment, sanofi-aventis made a $25.0 million non-refundable payment to us.
`
`In December 2005, we and sanofi-aventis amended our collaboration agreement to expand the territory in
`which the companies are collaborating on the development of aflibercept to include Japan. In connection with this
`amendment, sanofi-aventis agreed to make a $25.0 million non-refundable up-front payment to us, which was received
`in January 2006. Under the collaboration agreement, as amended, we and sanofi-aventis will share co-promotion
`rights and profits on sales, if any, of aflibercept outside of Japan for disease indications included in our collaboration.
`In Japan, we are entitled to a royalty of approximately 35% on annual sales of aflibercept. We may also receive up
`to $400 million in milestone payments upon receipt of specified marketing approvals, including up to $360 million
`in milestone payments related to the receipt of marketing approvals for up to eight aflibercept oncology and other
`indications in the United States or the European Union and up to $40 million related to the receipt of marketing
`approvals for up to five aflibercept oncology indications in Japan.
`
`We have agreed to manufacture clinical supplies of aflibercept at our plant in Rensselaer, New York. Sanofi(cid:173)
`aventis has agreed to be responsible for providing commercial scale manufacturing capacity for aflibercept.
`
`Under the collaboration agreement, as amended, agreed upon worldwide aflibercept development expenses
`incurred by both companies during the term of the agreement, including costs associated with the manufacture of
`clinical drug supply, will be funded by sanofi-aventis. If the collaboration becomes profitable, we will be obligated
`to reimburse sanofi-aventis for 50% of these development expenses, including 50% of the $25.0 million payment
`received in connection with the January 2005 amendment to our collaboration agreement, in accordance with a
`formula based on the amount of development expenses and our share of the collaboration profits and Japan royalties,
`or at a faster rate at our option. In addition, if the first commercial sale of an aflibercept product for intraocular
`delivery to the eye predates the first commercial sale of an aflibercept product under the collaboration by two years,
`we will begin reimbursing sanofi-aventis for up to $7.5 million of aflibercept development expenses in accordance
`with a formula until the first commercial aflibercept sale under the collaboration occurs. Since inception of the
`collaboration agreement through December 31, 2010, we and sanofi-aventis have incurred $707.3 million in agreed
`upon development expenses related to aflibercept. Currently, multiple clinical studies to evaluate aflibercept as both
`a single agent and in combination with other therapies in various cancer indications are ongoing.
`
`Sanofi-aventis funded $16.5 million, $26.6 million, and $35.6 million, respectively, of our aflibercept
`development costs in 2010, 2009, and 2008, of which $3.9 million, $3.6 million, and $6.3 million, respectively, were
`included in accounts receivable as of December 31, 2010, 2009, and 2008. In addition, the up-front payments from
`sanofi-aventis of $80.0 million in September 2003 and $25.0 million in January 2006 were recorded to deferred
`revenue and are being recognized as contract research and development revenue over the period during which we
`expect to perform services. In 2010, 2009, and 2008, we recognized $9.9 million, $9.9 million, and $8.8 million of
`revenue, respectively, related to these up-front payments.
`
`Sanofi-aventis has the right to terminate the agreement without cause with at least twelve months advance
`notice. Upon termination of the agreement for any reason, any remaining obligation to reimburse sanofi-aventis for
`50% of aflibercept development expenses will terminate and we will retain all rights to aflibercept.
`
`Antibodies
`
`In November 2007, we and sanofi-aventis entered into a global, strategic collaboration to discover, develop, and
`commercialize fully human monoclonal antibodies. The collaboration is governed by a Discovery and Preclinical
`Development Agreement and a License and Collaboration Agreement. In connection with the execution of the
`discovery agreement in 2007, we received a non-refundable up-front payment of $85.0 million from sanofi-aventis.
`Pursuant to the collaboration, sanofi-aventis is funding our research to identify and validate potential drug discovery
`targets and develop fully human monoclonal antibodies against these targets. Sanofi-aventis funded approximately
`$175 million ofresearch from the collaboration's inception through December 31, 2009. In November 2009, we and
`sanofi-aventis amended these collaboration agreements to expand and extend our antibody collaboration. Under the
`amended discovery agreement, sanofi-aventis agreed to fund up to $160 million per year of our antibody discovery
`activities in 2010 through 2017, subject to a one-time option for sanofi-aventis to adjust the maximum reimbursement
`amount down to $120 million per year commencing in 2014 if over the prior two years certain specified criteria
`
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`

`were not satisfied. In 2010, as we scaled up our capacity to conduct antibody discovery activities, sanofi-aventis
`funded $137.7 million of our preclinical research under the amended discovery agreement. The balance between that
`amount and $160 million, or $22.3 million, has been added to the funding otherwise available to us in 2011-2012
`under the amended discovery agreement. The amended discovery agreement will expire on December 31, 2017;
`however, sanofi-aventis has an option to extend the agreement for up to an additional three years for further antibody
`development and preclinical activities.
`
`For each drug candidate identified through discovery research under the discovery agreement, sanofi-aventis
`has the option to license rights to the candidate under the license agreement. If it elects to do so, sanofi-aventis will
`co-develop the drug candidate with us through product approval. Under the license agreement, agreed upon worldwide
`development expenses incurred by both companies during the term of the agreement are funded by sanofi-aventis,
`except that following receipt of the first positive Phase 3 trial results for a co-developed drug candidate, subsequent
`Phase 3 trial-related costs for that drug candidate (called Shared Phase 3 Trial Costs) are shared 80% by sanofi-aventis
`and 20% by us. If the collaboration becomes profitable, we will be obligated to reimburse sanofi-aventis for 50% of
`development expenses that were fully funded by sanofi-aventis (or half of $341.0 million as of December 31, 2010)
`and 30% of Shared Phase 3 Trial Costs, in accordance with a defined formula based on the amounts of these expenses
`and our share of the collaboration profits from commercialization of collaboration products. However, we are not
`required to apply more than 10% of our share of the profits from collaboration products in any calendar quarter
`towards reimbursing sanofi-aventis for these development costs. If sanofi-aventis does not exercise its option to
`license rights to a particular drug candidate under the license agreement, we retain the exclusive right to develop and
`commercialize such drug candidate, and sanofi-aventis will receive a royalty on sales, if any.
`
`Sanofi-aventis will lead commercialization activities for products developed under the license agreement,
`subject to our right to co-promote such products. The parties will equally share profits and losses from sales within
`the United States. The parties will share profits outside the United States on a sliding scale based on sales starting
`at 65% (sanofi-aventis)/35% (us) and ending at 55% (sanofi-aventis)/45% (us), and losses outside the United States
`at 55% (sanofi-aventis)/45% (us). In addition to profit sharing, we are entitled to receive up to $250 million in sales
`milestone payments, with milestone payments commencing only if and after aggregate annual sales outside the
`United States exceed $1.0 billion on a rolling 12-month basis.
`
`We are obligated to use commercially reasonable efforts to supply clinical requirements of each drug candidate
`under the collaboration until commercial supplies of that drug candidate are being manufactured. In connection
`with the November 2009 amendment of the collaboration's discovery agreement, sanofi-aventis is funding up to
`$30 million of agreed-upon costs incurred by us to expand our manufacturing capacity at our Rensselaer, New
`York facilities, of which $21.6 million had been received, and $1.8 million was included in accounts receivable, at
`December 31, 2010.
`
`In 2010, 2009, and 2008, sanofi-aventis funded $137.7 million, $99.8 million, and $72.2 million, respectively,
`of our expenses under the collaboration's discovery agreement and $138.3 million, $98.3 million, and $25.7 million,
`respectively, of our development costs under the license agreement. Of these amounts, $73.4 million, $57.9 million
`and $25.5 million were included in accounts receivable as of December 31, 2010, 2009, and 2008, respectively. The
`$85.0 million up-front payment received from sanofi-aventis in December 2007 was recorded to deferred revenue
`and is being recognized as collaboration revenue over the period during which we expect to perform services. In
`addition, reimbursements by sanofi-aventis of our costs to expand our manufacturing capacity are recorded to deferred
`revenue and recognized prospectively as collaboration revenue over the same period applicable to recognition of the
`$85.0 million up-front payment. In 2010, 2009, and 2008, we recognized $7.3 million, $9.9 million, and $10.5 million
`of revenue, respectively, related to these deferred payments.
`
`In connection with the antibody collaboration, in August 2008, we entered into a separate agreement with
`sanofi-aventis to use our proprietary VelociGene® technology platform to supply sanofi-aventis with genetically
`modified mammalian models of gene function and disease. The agreement provides for minimum annual order
`quantities for the term of the agreement, which extends through December 2012, for which we expect to receive
`payments totaling a minimum of$21.5 million, of which $9.2 million had been received as of December 31, 2010.
`
`With respect to each antibody product which enters development under the license agreement, sanofi-aventis
`or we may, by giving twelve months notice, opt-out of further development and/or commercialization of the product,
`in which event the other party retains exclusive rights to continue the development and/or commercialization of
`the product. We may also opt-out of the further development of an antibody product if we give notice to sanofi-
`
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`

`aventis within thirty days of the date that sanofi-aventis elects to jointly develop such antibody product under the
`license agreement. Each of the discovery agreement and the license agreement contains other termination provisions,
`including for material breach by the other party. Prior to December 31, 2017, sanofi-aventis has the right to terminate
`the amended discovery agreement without cause with at least three months advance written notice; however, except
`under defined circumstances, sanofi-aventis would be obligated to immediately pay to us the full amount of unpaid
`research funding during the remaining term of the research agreement through December 31, 2017. Upon termination
`of the collaboration in its entirety, our obligation to reimburse sanofi-aventis for development costs out of any future
`profits from collaboration products will terminate.
`
`In December 2007, we sold sanofi-aventis 12 million newly issued, unregistered shares of Common Stock at
`an aggregate cash price of $312.0 million, or $26.00 per share of Common Stock. As a condition to the closing of
`this transaction, sanofi-aventis entered into an investor agreement with us. This agreement, which was amended in
`November 2009, contains certain demand rights, "stand-still provisions", and other restrictions, which are more fully
`described in Note 12 to our Financial Statements. In addition, in October 2010, sanofi-aventis purchased 1,017,401
`shares of Common Stock in our underwritten public offering.
`
`Collaboration with Bayer HealthCare
`
`In October 2006, we entered into a license and collaboration agreement with Bayer HealthCare to globally
`develop, and commercialize outside the United States, VEGF Trap-Eye. Under the terms of the agreement, Bayer
`HealthCare made a non-refundable up-front payment to us of $75.0 million. In August 2007, we received a $20.0
`million milestone payment (which, for the purpose ofrevenue recognition, was not considered substantive) from Bayer
`HealthCare following dosing of the first patient in the VIEW 1 study ofVEGF Trap-Eye in wet AMD. In July 2009,
`we received a $20.0 million substantive performance milestone payment from Bayer HealthCare following dosing of
`the first patient in the COPERNICUS study ofVEGF Trap-Eye in CRVO. In both December 2010 and January 2011,
`we received a $10.0 million substantive milestone payment (for a total of $20.0 million) from Bayer HealthCare for
`achieving positive 52-week results in the VIEW 1 study and positive 6-month results in the COPERNICUS study,
`respectively. We are eligible to receive up to $50 million in future milestone payments related to marketing approvals
`of the VEGF Trap-Eye in major market countries outside the United States. We are also eligible to receive up to $135
`million in sales milestone payments if total annual sales ofVEGF Trap-Eye outside the United States achieve certain
`specified levels starting at $200 million.
`
`We will share equally with Bayer HealthCare in any future profits arising from the commercialization of
`VEGF Trap-Eye outside the United States. IfVEGF Trap-Eye is granted marketing authorization in a major market
`country outside the United States and the collabo