Andrew Kim Ian Gorkis andrew-kim@uiowa.edu ian-gorkis@uiowa.edu

Drivers of Thesis

• Promising drug pipeline progress: Regeneron’s REGN-EB3 wasgranted breakthrough therapy designation for Ebola in November2019. Using the same proprietary technology, Regeneron announcedit will be partnering with the U.S. Department of Health and HumanServices to develop a treatment for the novel COVID-19.

• Eylea remains successful: Eylea accounts for nearly 60% of totalrevenue and it has maintained sales growth through innovation andreliability despite increasing competition. We project that Eylea willsustain 10-14% sales growth until its 2023 U.S. patent expiration.

• Low debt obligations and increasing free cash flow: Regeneronremains virtually debt-free and can continue allocating resources toR&D without being limited by interest obligations like its competitors.

Risks to Thesis:

• Heavy reliance on revenues: >80% of Regeneron’s revenue is reliedon just two drugs. If more effective alternatives are approved fromthe biotech or pharmaceutical competitors, sales could fall greatly.

• Failure to gain FDA approval: Although Regeneron has a robustpipeline, failure to gain FDA approval for these drugs on a timelybasis, or if at all, will adversely affect the company’s sales growth.

DDM $312 DCF/EP $589 Current Price $512

Market Capitalization (MM) 5,464 Shares Outstanding (MM) 108 52 Week Range $271.37-518 Beta 0.52 P/E Ratio ’20E 25.7x

R&D (% of Sales) 36% ROE ‘20E 15.4% Drugs in Phase III 17

Krause Fund Research

Spring 2020

Regeneron Pharmaceuticals (NASDAQ: REGN) Healthcare: Biotechnology

BUY April 15, 2020 Stock Rating:

Analysts Target Price: $585-595

Investment Thesis

Earnings Estimates

12-Month Performance

Stock Values

Key Statistics

Industry Metrics

Financial Ratios

Current Ratio 4.73 Debt-to-Capital Ratio 5%

Company Description

Regeneron is a biopharmaceutical company specializing in antibody treatments for rare and serious diseases. The company’s primary product is Eylea, which is a market leader in the treatment of a chronic eye disorder called wet macular degeneration. Regeneron currently markets seven products, five of which are sold in collaboration with either Bayer or Sanofi.

Relative Financial Performance

We recommend a BUY rating for Regeneron Pharmaceuticals because of their promising antibody focused drug pipeline, continued security in Eylea, and strong balance sheet. Our target price is $585-590 which represents a 14% upside to the current price.

Source: Yahoo Finance17 Source: FactSet.net21

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Regeneron Pharmaceuticals (NASDAQ: REGN) is a biotechnology company operating within the healthcare industry. We are issuing a BUY recommendation for Regeneron which represents a 14-15% upside from the 4/15 close price of $512. With thecurrent, volatile conditions of the economy, we believe that thehealthcare industry presents an optimal investment opportunitydue to its countercyclical nature. Previous discussions ofpotentially harmful drug pricing reform have abated in light ofthe greater COVID-19 situation which has also presented a profitopportunity for Regeneron.We are optimistic that Regeneron’s two antibody candidates to cure COVID-19 will see success due to its proprietary researchplatform and collaboration with experienced partners.Furthermore, Regeneron has been successful in diversifying itsrevenues amongst its currently marketed products as well asinvesting heavily in R&D to develop its pipeline into the lucrativeoncology market.

Demographics

Demographics are one of the most prevalent drivers of growth in the healthcare sector. Three major components that are shaping the demographic outlook include Baby Boomers entering their elderly years (65+), upward trending life expectancy, and declining U.S. fertility rates.

Baby Boomers represent the largest generation in the U.S. and will enter their elderly years beginning in 2030. Elderly Americans will make up roughly 21% of the population at this point, up from 15% in 2018. Statistically, elderly people tend to be more susceptible to adverse health conditions such as chronic diseases and injuries. This will fuel demand for additional healthcare products and services.

Source: Statista.com1

Life expectancy is trending upwards due to declining mortality rates from cancer and declining fatalities from drug overdose.2 This means that the elderly population in the U.S. will hold longer lifespans on average. Consequently, elderly people will require continued treatments for this extended duration. A longer living

and growing elderly population will dramatically increase demand for healthcare products and services.

U.S. fertility rates are declining and hitting all-time lows since early 2008.3 Over the last decade, the fertility rate has been on a steady decline, reinforcing the age distribution skew to older aged citizens. As stated previously, a larger proportion of elderly people should increase revenue for healthcare companies.

Government

Government regulation plays a crucial role in the healthcare industry and can cause drastic changes in how the sector operates. Due to the upcoming Presidential election, the government impact on healthcare is up in the air. The largest impact that the government could have on the sector is any changes made to the Affordable Care Act (ACA). The continuation or potential dismantling of the ACA is contingent on who wins the election.

The potential implications of a win for the Democratic candidate would be a continuation of the ACA. Hospitals would continue to save on servicing fewer uninsured patients as the ACA lowers the uninsured population. There has been speculation around Medicare-for-All (MFA), however we do not foresee this materializing in the near future.

If the Republican candidate wins, we will most likely see further attempts to dismantle the ACA. This will likely lead to less individuals being covered by insurance and a declining willingness to undergo expensive treatments.4 The most significant impact of the ACA’s dismantlement will be the increasing number of uninsured or underinsured individuals.

Source: kff.org5

Medicare has a large impact on the sector and accounts for approximately 15% of total federal spending. Over the last decade, we have seen a $200 billion increase in Medicare spending and predict that this trend will continue due to the aging population. This could be potentially beneficial for the companies who receive revenue from patients covered by Medicare. In addition, this trend suggests that hospitals will be less likely to be left with the bill from uninsured and underinsured patients. The government also has the potential to regulate the healthcare industry through the FDA. There have been recent discussions from both Republicans and Democrats about the high prices of

EXECUTIVE SUMMARY

ECONOMIC ANALYSIS

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drugs. We do not predict that there will be any price control measures taken by the FDA that will drastically impact revenues in the short-term. Our conclusion is supported by the fact that there is a division between the government arms with the House controlled by Democrats and the Senate and President being largely Republican. However, we believe that action to control and reduce drug pricing is probable in the future as we have seen that the medical care index has grown at a drastically higher rate than other sectors. This means that, in relation to other sectors, people tend to spend more on medical care currently. It would be reasonable that consumers will no longer stand for this disproportional growth and will demand some form of legislation to curb these high prices. This would have adverse effects for many companies in the sector. Regeneron would not be excluded from that group and potential price controls could be detrimental to its revenues. This action is a possibility, but it is not probable in the short-term.

Source: fred.stlouisfed.org6

Interest Rates In the current economic environment, U.S. Treasury yields have bottomed out to historical lows. With such attractive interest rates, firms can acquire cheaper debt financing to fund their capital expenditures. Pharmaceutical and biotechnology companies, especially, focus on pursuing inorganic growth through mergers and acquisitions as acquisitions can save on expensive R&D trials. We believe that the low interest rates may encourage companies in these industries to take advantage of the affordable debt to acquire targets at favorable costs. While Regeneron almost exclusively uses equity to fund its operations, these low interest rates could present opportunities for them to take on cheap debt if they believe that it could be beneficial to their expansion efforts. COVID-19 The economy was shocked with the outbreak and spread of the novel virus, COVID-19, which has had wide reaching negative impacts on the economy and financial markets. The fear over the pandemic sent the market into a frenzy where volatility reached unprecedented highs. The biggest impact can be seen in unemployment. The total number of Americans who have filed

for unemployment reached 22 million. The impact of this mass unemployment will likely continue to ripple through the economy. While the market is down about 11% year-to-date, the biotechnology industry is only down 3.92%. Regeneron’s stock has increased approximately 35% year-to-date. Several biotechnology companies including Gilead Sciences, AbbVie, and Regeneron have been developing a treatment for the novel virus. The potential for an approved treatment is a strong factor in why markets have felt bullish on Regeneron. If Regeneron’s treatment does not earn approval, the market could react harshly to that news.

Industry Description Regeneron is part of the biotechnology industry, which strives to enhance the quality of human life through the use of proprietary drugs created from natural ingredients. The biotech industry is comprised of four primary markets: agricultural, environmental, industrial, and most notably, the medical market. Biotech companies are characterized by the expensive and risky nature of their drug research and development (R&D) expenses which cost between tens and hundreds of millions of dollars for clinical trials. These drugs can take up to a decade to develop and reach FDA approval to be sold in public markets. It is improbable that a prospective drug will reach approval as 85%-95% of all drug applicants fail to reach approval by the FDA. However, if granted approval, biotechnology companies are able to market their drugs without direct competition due to the patents they acquire for their treatments.

Source: Standard & Poor’s NetAdvantage Database20

Rise in FDA Drug Approvals Drugs must go through a five-step approval process, facilitated by the FDA, before they can be sold to the public market. In 2019, the FDA approved 48 novel drugs which was the third largest approval class in the past 25 years. Prior to that in 2018, the FDA approved a record 59 drugs. FDA approval rates in the past few years have been favorable, in 2019 for example, 35% of

INDUSTRY ANALYSIS

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the 48 drugs approved were “fast-track” designated because of their potential to treat unmet medical conditions.7

Biotech companies will continue spending more on R&D and creating new pipelines if they think the FDA is more lenient (continued strong approval rates). We expect increased investor confidence from this trend since the greater the number of approved drugs, the greater the probability for biotech companies to generate revenue from their existing drug pipelines.

Source: Standard & Poor’s NetAdvantage Database20

Increased R&D spending R&D spending has been on a steady incline since 2016 and is expected to grow at a CAGR of 3.0% from 2018 to 2024. Having spent a substantial amount on initial R&D expenses, biotech companies are poised to venture into later stages of FDA approval and potentially earn further equity investments from confident investors. As a second-string effect, this will also support the companies in securing the foundations to their future pipelines. With the trend of increasing spending on R&D within the industry, we can reasonably expect that this will continue to increase and lead to further revenue from new biotechnology products.19 Regeneron has followed this trend of upward R&D spending and we expect that it will realize revenues from these projects within the next few years.

Source: Standard & Poor’s NetAdvantage Database20

Orphan Drugs The NIH is a government agency incentivizing companies to research and develop medicines for rare diseases that affect small proportions of the American population. The NIH provides grants, tax incentives, and exclusive marketing rights for collaborating companies for a duration of seven years. They have been steadily increasing their budget over the past six years and we believe that this upward trend will continue. Based on these movements, we believe that an increasing number of companies will attempt to grow revenue via orphan drugs as their development costs are reduced by the NIH. Furthermore, orphan drugs are also seeing an upward trend in their average annual price per patient, with the average price rising to over $150,854 in 2018 compared to just $33,654 in the same year for regular drugs.8 The reduced cost to develop and the increasing revenues per patient has made the orphan drug market an attractive investment opportunity for biotech companies.3 Regeneron currently has Orphan drug status for its Ebola treatment, REGN-EB3, however is still awaiting FDA approval. Regeneron has demonstrated an interest in the development of orphan drugs as can be seen through their REGN-EB3 pipeline drug. Porter’s Five Forces Competition - High The biotech industry exhibits very aggressive competition, especially amongst the top firms. Large firms such as Novartis and Amgen retain billions of dollars in cash to compete in the development of novel drugs and capitalize on patent expirations by creating biosimilars of competitors’ drugs. This competition is propelled by the fact that customer loyalty is nonexistent in this industry and drug demand strictly follows benefits to the patient or price.20 Potential of new entrants - Low The barriers of entry into the biotech industry are very high due to its dependency on federal regulation, substantial R&D costs and significant guarding of drug patents through patent litigation. Biotech startups do not realize positive cashflows until their products gain FDA approval, a process which can take up to a decade. This creates a significant barrier to the majority of parties that cannot fund the costly initial trial process.20

Power of suppliers - Medium The power of suppliers is relatively low in this space as many of the materials and equipment used in biotech can be sourced from multiple suppliers. Firms can also outsource their R&D to research labs and work with universities for clinical trials. Some biotech companies that require specialized equipment or startups, that source their entire drug development process, rely more heavily on their suppliers.20

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Power of buyers - Medium

End consumers have little negotiating power in the biotech industry. The most significant negotiating power is upstream in the supply chain with the pharmacy benefit managers (PBMs) and third-party payers (insurance providers). PBMs control the prescription list available to healthcare providers so they retain a level of influence in buying power. Further, PBM consolidation has increased the negotiating power of PBM’s due to the decreasing number of parties drug producers can sell to. Third-party healthcare providers hold a similar level of price influence as they determine if their beneficiaries are reimbursed for their prescriptions.20

Threat of substitute products – Medium

Biotech companies enjoy the protection of a patent on newly approved drugs, typically for 20 years. However, companies must apply for these patents long before the drug comes to market which can significantly reduce the life of the patent. After the patent expires, competitors have the ability to launch generic brands of the drug called biosimilars. Biosimilars are widely accepted in Europe, but are newer and not as prevalent in the U.S. The FDA has made it expensive for biosimilars to prove that they are interchangeable with the original which has minimized the risk of biosimilar alternatives. Substitutes outside of the biotech industry, such as chemical drugs from the pharmaceutical industry, pose as greater threats.20

Competitive Landscape

The competitive landscape of the biopharmaceutical industry is based on the ability to efficiently develop a potential treatment, push it through the FDA approval process, and secure a patent. Regeneron is a smaller player among its big pharma peers, but it is seeking to expand from its ophthalmology niche in the fragmented biotechnology market.

Based on its growing size and product developments, we believe that Regeneron is most closely comparable to Novartis (NVS), Amgen (AMGN), Bristol-Myers Squibb (BMS), and Vertex Pharmaceuticals (VRTX).

Number of Drugs in Phase III

The phase 3 FDA clinical trials last up to 1-4 years. These are the pipelines that could contribute revenue in the near future. Drugs in the late stages of FDA clinical trials are valuable assets to biotech firms as they have a relatively high likelihood of making it to market and providing value to shareholders. Currently, Regeneron has 8 phase 3 trials which is a smaller number than its larger competitors like Novartis and Bristol-Myers Squibb. However, Regeneron’s peers have 3-4x its market value and a greater amount of resources to deploy. Compared to its most similarly sized competitor, Vertex, Regeneron’s trial progress is impressive and shows their efficiency in the R&D process.

Source: sec.gov/edgar22

R&D as a Percentage of Sales

R&D is often the most significant expense for biotech companies as the drugs produced from the process are the key revenue drivers for the firms. This is an important metric to look at when comparing firms to each other to see which companies are innovating and continuing to develop their drug pipeline. This metric also reveals that some of the larger well-established biotech companies may not need to spend as much of their revenue on R&D.

Regeneron is much smaller compared to the majority of its competitors in terms of both enterprise value and sales. However, it is spending significantly more of its revenues on R&D expenditures. By leveraging its proprietary research platform and expertise in the antibody treatment field, we are confident that the R&D spending will produce approvals and other growth opportunities for the company. We believe that this higher R&D spending relative to sales will demonstrate to investors that Regeneron is continuing to innovate and build their drug pipeline.

Source: Factset.net21

Revenue Growth

Regeneron is an established biotech firm with significant revenues nearing half of its smaller big pharma peers such as Amgen. However, its revenue growth still reflects the growth of smaller biotech startups. Between 2018 and 2019, Regeneron’s revenue grew at an impressive 17.2% while the peer median grew at only 6.9%. We project that Regeneron’s primary product, Eylea, will grow at 15% for the next two years which will sustain its high growth levels. While its larger competitors see stagnant

COMPETITIVE ANALYSIS

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or, even negative, growth, we expect Regeneron’s increasing revenues to fund its expansion efforts.

Source: Factset.net21

EBITDA Margin Margins are an important indicator of a company’s operational profitability. Regeneron’s smallest big-pharma peer is over 100% larger in terms of enterprise value. Despite this, its R&D expenses are only 30% larger than Regeneron’s. While EBITDA margins consider other expenses, R&D expenses are the most significant expense to biotech firms. To level out another major expense, interest expense, we conducted this peer comparison using EBITDA margins to neutralize the effects of capital structures. Regeneron spends an unproportionally large amount on R&D expenses while still maintaining an EBITDA margin that has been greater than most of its much larger peers. We see this as an advantage to Regeneron for two reasons. Firstly, it shows the operations can be run using relatively low cash expenses and that earnings are stable. We have also observed that Regeneron has maintained strong margins while pricing their drugs at market, or even discounted, prices. This indicates that it has the flexibility to reduce pricing to support the company in times of difficulty.

Source: Macrotrends.net9-13

Debt to EBITDA The Debt/EBITDA ratio is a measure of how leveraged a company is. This is an especially important metric in today’s economy due to the uncertainty in earnings and, in effect, the ability to service

debt interest payments. The healthcare industry is countercyclical, however, companies in this space can still be limited in funding their growth if they are strapped by their debt requirements. Regeneron has the lowest Debt/EBITDA ratio in its peer group at a mere 0.29. With the unpredictable market ahead, relatively highly levered companies such as Bristol-Myers Squibb and Amgen may choose to reduce R&D spending to reserve cash for their debt obligations. We believe that Regeneron’s low level of leverage is an advantage and that they will continue increasing their R&D spending to further their product development.

Source: Factset.net21

Return on Equity (ROE) ROE measures a company’s ability to generate earnings from capital provided by equity holders. Regeneron has the second lowest ROE in comparison to its competitors, but it also has significantly less debt and lacks dividend payments. Debt can increase ROE by shrinking equity and adding cash to assets while dividends increase ROE by reducing the equity denominator. Regeneron and Vertex are both smaller companies compared to their competitors so they reinvest their earnings and may have a more difficult time accessing debt markets. This could be a reason for their low debt levels.

Source: Factset.net21

Overview and Business Description Regeneron Pharmaceuticals is a biopharmaceutical company that participates in all stages of production and commercialization of treatments for rare diseases. Using its proprietary VelociSuite platform, the company has been able to accelerate the discovery process of antibody-based drugs and efficiently build up its

COMPANY ANALYSIS

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pipeline. Regeneron has found success in marketing and research partnerships with other pharmaceutical companies and is currently sharing profits for five of their seven marketed products.

Source: sec.gov/edgar22

Its operational revenues are segmented into product, collaboration, and other revenue. The product and collaboration revenues consist of sales generated by Regeneron and royalty payments from their collaboration partners, respectively. Other revenues also represent income from Regeneron’s collaboration agreements; however, they are paid in the form of R&D reimbursements and grants from governmental agencies.

Marketed Products

Source: sec.gov/edgar22

Eylea Eylea is Regeneron’s main revenue driver accounting for 59% of total revenue and over $4.5 billion in sales for the year of 2019. Since its FDA approval in 2011, Eylea has been the primary treatment for an eye disease called wet age-related macular degeneration (wet AMD). Since then, Eylea has been approved for four additional vision-related diseases and most recently, a prefilled syringe which has simplified the administration of the drug. Regeneron maintains the exclusive rights to U.S. sales of Eylea while Bayer holds the rights for rest of world profits. Eylea loses its patent exclusivity in 2022 in China and Japan, 2023 in the US, and 2025 in Europe.

Currently, Eylea’s greatest competitors include Novartis and Roche’s Lucentis and Novartis’ Beovu which pose as threats to Eylea’s wet AMD sales. Despite the competition, Eylea has seen continued growth due to its less frequent dosing schedules and negative safety concerns from Beovu. We believe that Eylea will remain as the preferred treatment for wet AMD in the short-

term, but it will be subject to increasing competition beyond its 2023 patent expiration.

Source: sec.gov/edgar22

Dupixent Dupixent is a versatile immunology medicine indicated for atopic dermatitis (eczema), asthma, and chronic rhinosinusitis with nasal polyposis. The drug is a part of Regeneron and Sanofi’s 50/50 partnership and garnered over $2 billion globally for the year of 2019. While it currently holds only three indications, Dupixent is showing promising approval progress for multiple Type 2 inflammatory diseases including esophagitis and chronic obstructive pulmonary disease (COPD). Dupixent has consistently posted triple-digit growth year-over-year since its atopic dermatitis approval in 2017. We project that the Sanofi collaboration, the bulk of which is attributed to Dupixent, will reach $4 billion by 2023 propelled by similar growth from additional indications. Given this growth rate combined with a distant patent expiration in 2027, we predict that Dupixent will overtake Eylea in revenue by 2024.

Libtayo Libtayo is the cornerstone of Regeneron’s oncology business, currently indicated for the treatment of metastatic or locally advanced cutaneous squamous cell carcinoma (CSCC), the second most common skin cancer. Despite the intense competition from Merck & Co’s Keytruda and other PD-1/PD-L1 inhibitors, Libtayo has earned over $100 million in its first twelve months of sales. Currently, Regeneron is seeking to expand Libtayo’s indications to the previously untreated lung cancer space. Libtayo has proved to be a promising starting point to the lucrative oncology market and we will have to continue monitoring its clinical trial progress.

Kevzara Kevzara is a collaborative treatment for moderate to severe rheumatoid arthritis (RA) by Regeneron and Sanofi. Since its FDA approval in 2017, Kevzara has produced negligible sales and displayed very modest growth. However, it has been the subject of phase 2/3 clinical studies for treatment of the novel COVID-19. Regeneron believes that the drug’s interleukin-6 pathway inhibition functionality will extend to COVID-19 patients and reduce inflammation in their lungs. Kevzara faces significant competition in the arthritis space and is seen as a second-hand RA treatment to the preferred TNF inhibitors. Without the

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COVID-19 indication, we do not foresee Kevzara to produce substantial sales.

Pipeline Drugs

Regeneron has maintained consistent revenue growth through its blockbusters Eylea and Dupixent, but we also observe further growth opportunities developing in its pipeline. Currently, Regeneron has 22 product candidates in clinical development, eight of which are in phase 3 trials. These trials include additional indications for existing products as well as new drugs in diverse therapeutic areas. If approved, these trials will increase the addressable market for existing products and allow Regeneron to penetrate underrepresented markets such as the oncology market.

Source: sec.gov/edgar22

We believe that the most pivotal phase 3 trials fall under Dupixent and Kevzara. As the major successor to Eylea, Dupixent’s additional approvals will be crucial in buffering the impact of Eylea’s 2023 patent cliff. We are optimistic in Dupixent’s approval probability for its pediatric use in atopic dermatitis and asthma due to its preexisting approval for adults. Additionally, the vast market and limited competition for COPD treatments present a significant opportunity for profits. Kevzara is competing in the race to find a cure for the COVID-19 disease. Regeneron and Sanofi have made considerable progress in the approval process with a phase 2/3 trial already underway outside of the U.S. Regeneron is also working with the U.S. Department of Health and Human Services to create a separate cocktail treatment consisting of two antibodies.14 Leveraging its VelociSuite technology, Regeneron aims to complete this treatment in 3-6 months as opposed to years with traditional processes. We view Regeneron’s COVID-19 treatment efforts favorably as the boost in earnings upon approval outweigh the losses from failure. While an FDA rejection would cause major losses in profits, Regeneron is not fundamentally staked to this project and maintains a strong, immediate pipeline.

Recent Developments

4th Quarter Fiscal Year 2019

Regeneron reported strong double-digit growth driven by its three major revenue drivers: Eylea, Dupixent, and Libtayo. In the

fourth quarter 2019, total revenues increased 13% to $2.17 billion beating analyst estimates by $70 million. Regeneron’s Q4 EPS of $7.50 also beat the consensus estimate by $0.59. The strong quarter was primarily driven by a 13% increase in U.S. Eylea sales to $1.22 billion. The Sanofi collaboration revenues also grew largely due to Dupixent’s 136% increase to $752 million in global net sales versus quarter four 2018. However, Regeneron incurred a loss from the other products included in the Sanofi collaboration which led to a restructuring of the agreement. Under the revised terms, Sanofi gained sole global rights to Kevzara and ex-U.S. rights to Praluent to shift the partnership’s focus on Dupixent. Recently, the original Kevzara agreement was reinstated due to its potential approval for COVID-19. Finally, Regeneron announced that it is entering a research agreement with Vyriad Inc. to discover and develop new oncolytic virus-based treatments.

Regeneron displayed great financial momentum coming into 2020 and we believe that trend will continue. They have shown progress in their oncology efforts both commercially and in their pipeline, with Libtayo taking leadership in U.S. CSCC sales as well as Regeneron’s recent partnership with Vyriad. Strong growth rates from Eylea and Dupixent as well as the new growth opportunities in oncology lead us to believe that Regeneron will post equally impressive growth in 2020.15

Key Investment Positives/Negatives

Positives:

• Regeneron has successfully taken steps to reinforce itspotential successors to Eylea such as Dupixent andLibtayo. As mentioned in the 10-K, they are increasingthe commercialization of these drugs through increasedspending on marketing and seeking additionalindications to broaden their markets. We believe thatthe impact of Eylea’s expiration is considerablydampened due to these measures as well as continued,projected earnings from Eylea.

• The FDA’s recent approval for priority review of REGN-EB3, a cure for Ebola, has positioned Regeneron for apotential approval by October later this year.16 Thereare currently no approved treatments for Ebola whichpresents an exclusive opportunity for Regeneron tocapture high demand from vulnerable locations such asCongo.

• Regeneron and Sanofi’s collaboration to treat COVID-19using Kevzara has progressed to phase 2/3 trials. Earlierthis year, the partners announced a restructuringagreement that would allow Sanofi to gain global rightsto Kevzara with Regeneron only receiving royaltypayments. Since then, the two companies have agreedto reinstate their 50/50 profit share for Kevzara as theyseek its COVID-19 indication. If approved, Regeneronwill receive a much greater payout compared to itsoriginal royalty-based deal.

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Negatives:

• Regeneron is attempting to break into multiple marketsin which they have minimal approval experience.Through Libtayo, they are expanding their presence inoncology, a disease area that is excluded from theircurrently marketed products. Eight out of nine phase 1trials Regeneron is undergoing specialize in oncology.With little experience, Regeneron could potentiallydeplete their resources instead of realizing profits onmore certain opportunities. Despite this, we believe thatthe cancer market will provide earnings that outweighthe uncertainty.

• In the last year, Regeneron’s stock has grown by 50%and is relatively close to its 52-week high of $572.17 Werealize that optimism from the development of a COVID-19 treatment has been pushing the stock higher. If acompetitor such as Gilead gains patent exclusivity forthe treatment, the stock price could suffer.

Methods of Valuation

We arrived at our target stock price using three valuation methodologies: discounted cash flow, economic profit, and relative valuation. By incorporating our assumptions of the economy, healthcare industry, and firm-specific financials into these models, we calculated Regeneron’s intrinsic equity value. Given that Regeneron does not pay dividends, we determined that the dividend discount model estimate was not completely representative of the company.

Revenue Growth

We broke down Regeneron’s revenues in accordance with its 10-K: marketed products and collaboration revenues. To forecast these segments, we focused intently on the company’s historical performance, patent expirations, and industry comparisons. Eylea was the most dynamic forecast we made as it has a nearing patent expiration as well as new competition preceding that date. For the three years prior to the 2023 U.S. expiration, we expected that Eylea will slowly taper off its growth due to increased relevance of Novartis’ Beovu. After the expiration, we projected that Eylea will lose sales at roughly -30% through 2029. This is in line with the patent cliff losses exhibited by similarly sized biotech drugs.18

We were optimistic in Libtayo’s outlook based on its strong initial response to the market as well as its ventures into additional indications. Moving into the forecasting period, we normalized the growth rates to 100% and gradually reduced the growth rate. The nature of Arcalyst’s rare disease area makes it improbable for the addressable market to change significantly and Regeneron is not seeking additional approvals for this drug.

Therefore, we forecasted its growth at a fixed growth rate representative of its past performance. We grew the Sanofi collaboration revenue at 30%, the average of its historical performance over the last 3 years. Most of the growth is attributed to Dupixent, which has six additional indications in phase 3 trials. We extended this growth to 2024 with Kevzara’s potential COVID-19 approval and Libtayo’s European growth in consideration.

The Bayer collaboration revenue is purely impacted by Eylea’s European expiration in 2025. We felt that a heightened decrease in sales compared to the U.S. was appropriate due to European regulation’s more flexible approach to biosimilars.

Other revenues represent income from manufacturing and R&D reimbursements from Regeneron’s partners and agreements. We forecasted a slightly lower number than the most recent average growth rates as we expect to see steadily increasing growth in Regeneron’s collaborative R&D expenses.

Continuing Value Growth

The continuing value of growth we set for Regeneron was 1%. This growth rate was determined based on the nature of the investment as well as our projection of the future economy’s GDP and inflation growth rate. Additionally, when running the CV growth rate through our sensitivity tests, we found that 1% gave us the most fitting target price in accordance with our beliefs.

Cost of Goods Sold

We projected cost of goods sold as the average percentage of sales from the most recent three years. However, we felt that the 2019 COGS growth was inflated due to the temporary increase in spending on commercialization efforts for Dupixent and Libtayo as stated by management. We adjusted for this by slightly decreasing the fixed percentage growth rate.

SG&A

SG&A was calculated similarly to cost of goods sold, using a historical average of the last three years. In Regeneron’s more recent years, SG&A has not deviated greatly from 23% so we decided to keep it at the fixed rate without adjustments.

R&D

In the last five years, Regeneron has stayed within a consistent range of R&D spending between 30-40% of sales. We found that the average growth rate of the last three years was in the middle of this range, so we decided to forecast R&D growth using this rate of 35.5% of sales. The earlier years were outliers from normalized growth and were excluded from the calculation.

Capital Expenditures

For forecasting Regeneron’s capital expenditures, we followed management’s guidance for 2020. Management predicted that

VALUATION ANALYSIS

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capital expenditures for 2020 would reach between $520 and $620 million due to continued expansion of their manufacturing facilities in Tarrytown, New York. This guidance only covers 2020 capital expenditures, so for the rest of our model we used the average capital expenditures as a percentage of sales over the last few years. We figured that this rate would be an appropriate assumption to increase capital expenditures by as Revenues for the company continue to grow.

Weighted Average Cost of Capital (WACC)

The WACC that we calculated for Regeneron came out to 6.44% which we used in our DCF and EP models. To calculate the WACC for Regeneron, we had to determine appropriate assumptions for the Risk-Free Rate, Beta, Equity Risk Premium, Pre-tax Cost of Debt, and the Marginal Tax Rate. We also had to calculate the weights of their debt and equity which came out to be 99.96% equity and .04% debt. Regeneron doesn’t issue any formal debt and only had lease obligations which explains why they are so heavily equity weighted.

Cost of Equity

Our calculated Cost of Equity came out to be 6.445% which was calculated using the Risk-Free Rate, Beta, and Equity Risk Premium. For the Risk-Free Rate, we used the 10-year Treasury yield on April 15, 2020 of .63%. The Beta that we used in the calculation was the average weekly Beta of all of the last 10 years. For the Equity Risk Premium, we used the Implied Equity Risk Premium to counter the effects from the uniquely low Risk-Free Rate and factor in a more realistic Cost of Equity.

Cost of Debt

For the Cost of Debt figure, we first had to calculate the Pre-Tax Cost of Debt. As Regeneron doesn’t issue any debt of their own, we used the 30-year yield on a Biogen issued bond plus the Risk-Free Rate to calculate the implied Pre-Tax Cost of Debt of 3.35%. Next, we calculated the After-Tax Cost of Debt which came out to be 2.35%.

Valuation Models DCF & EP

We believe that the DCF and EP models are the most accurate method of valuation for Regeneron due to its control over every major assumption when calculating intrinsic value. We chose to forecast out 9 years and then capture the continuing value using our perpetuity growth rate of 1%. Given these parameters, the DCF and EP models estimated a target price of $588.73. Our target price comes at a much higher figure than the median analyst price of $500. Consensus revenue estimates for 2020 are $8.3B and $9.2B while we have forecasted $9.3B and $10.8B in respective order.19 We believe that analysts are undervaluing Regeneron’s pipeline by projecting revenues using conservative assumptions.

DDM Regeneron, like most younger biotech companies, does not pay a dividend and reinvests their money instead. The DDM’s implied price target was $313.29 which was much smaller than our other valuation models. This is not an accurate representation of Regeneron’s valuation and we excluded it from our final target price conclusion.

Relative P/E

For our relative P/E model, it was difficult to find a large number of similar firms, so we expanded our comparable universe to competitors in both the biotechnology and biopharmaceutical industries. In the end, we compiled a group of 10 comparable peers with positive earnings. The average P/E ratio that was calculated was 21.88. This positioned Regeneron’s implied relative value at $436.88 and indicated that Regeneron is overvalued compared to its peers. We believe that Regeneron is valued at a premium compared to its peers because of their recent highlights in the news for their COVID-19 efforts, causing their stock price to jump and increasing the P/E ratio.

We decided to test various assumptions built into our model in order to observe the relational impact on our calculated intrinsic value. The different assumptions tested as well as the results of our sensitivity analysis are below:

Beta vs. ERP

We felt that it was important to test these two variables against each other. Regeneron’s capital structure is almost entirely made up of equity and holds very little debt, so the Beta and ERP have a significant impact on the WACC calculation. Our ERP assumption that we used is the Implied Equity Risk Premium that accounts for the extremely volatile markets and low interest rates. For our Beta assumption, we calculated the average weekly Beta for each of the last 10 years for a comprehensive average.

As expected, a lower Beta significantly increases our calculated target price for Regeneron and a higher Beta significantly decreases the target price. The ERP assumption also greatly impacts the WACC and, therefore, the target price.

SENSITIVITY ANALYSIS

11

The CV Growth of NOPLAT is a variable that has a huge impact on Regeneron’s intrinsic value. We wanted to test and see exactly how much the CV growth would move the target price. Due to current market slowdowns, we felt an appropriate assumption for our growth would be 1%. We also predict that Sanofi collaboration revenue will grow slightly higher than 2019 rates with increased sales in Dupixent, however, growth in sales could differ and we wanted to see the impact that would have on the calculated implicit price. Therefore, we assume that the revenue growth rate for Sanofi in 2020 would be 30%.

The Growth of NOPLAT has a drastic impact on our calculated target price for Regeneron as we expected. Sanofi revenue growth also increased Regeneron’s intrinsic value but to a lesser extent than the changes in NOPLAT.

Risk-Free Rate vs. 2023 EYLEA Revenue Growth

We felt that the Risk-Free Rate is a very important assumption that we should test because it greatly impacts Regeneron’s WACC. We used the current 10-year treasury yield of .7%, which is currently very low, and we wanted to see what the calculated price would be in a normal environment. Eylea accounts for almost 60% of Regeneron’s revenue so it was important to test the impact of its U.S. patent expiration. The growth rate we assumed was -15%.

The differences in the Risk-Free Rate assumption had a large impact on the intrinsic value of the firm. In a more normalized environment, Regeneron’s target price would have been substantially lower. The impact of Eylea’s patent cliff revenue loss was not as extreme, and this shows that Regeneron still has value without exclusivity of their top drug.

Marginal Tax Rate vs. Normal Cash

We felt that the Marginal Tax Rate assumption was important to test as it has varied in the past and will likely change in the future as well. Our current assumption is 29.8% based on their 2019 Marginal tax rate. Our Normal Cash assumption is 11.01%. Normal Cash is another assumption that could fluctuate, and we wanted to test the impact of a discrepancy in its assumption.

The Marginal Tax Rate had a significant impact on Regeneron’s implicit value and increased the value as it was lowered. However, we observed that the Normal Cash did not have much of an impact on the implicit value. Our models were much more sensitive to a change in Marginal Tax Rate.

Cost of Equity vs. CV ROIC

The Cost of Equity was an important variable to test as Regeneron is almost entirely structured on equity funding. Our assumption for Regeneron’s Cost of equity was 6.45%. The CV ROIC is another assumption that would be valuable to test and it is subject to vary based on our growth assumptions. The assumption for CV ROIC that we used was 47.19%.

In running our sensitivity analysis, the models proved to be very sensitive to the Cost of Equity as it has a major impact on Regeneron’s WACC calculation. Our models did not react very strongly to a differing CV ROIC.

CV Growth of NOPLAT vs. 2020 Sanofi Revenue Growth

12

References

1. Duffin, Erin. “U.S. - Seniors as a Percentage of thePopulation 2050.” Statista, 17 Oct. 2019,www.statista.com/statistics/457822/share-of-old-age-population-in-the-total-us-population/.

2. Howard, Jacqueline. “US Life Expectancy Climbs forthe First Time in Four Years.” CNN, Cable NewsNetwork, 30 Jan. 2020,www.cnn.com/2020/01/30/health/us-life-expectancy-drug-overdose-deaths-cdc-study/index.html.

3. Bauer, Elizabeth. “Another Record Low: Will TheU.S. Fertility Rate's Collapse Ever End?” Forbes,Forbes Magazine, 30 Nov. 2019,www.forbes.com/sites/ebauer/2019/11/30/another-record-low-will-the-us-fertility-rates-collapse-ever-end/#30d692bc5e45.

4. Simmons-Duffin, Selena. “Trump Is Trying Hard ToThwart Obamacare. How's That Going?” NPR, NPR,14 Oct. 2019, www.npr.org/sections/health-shots/2019/10/14/768731628/trump-is-trying-hard-to-thwart-obamacare-hows-that-going.

5. Juliette Cubanski Follow, et al. “The Facts onMedicare Spending and Financing.” The Henry J.Kaiser Family Foundation, 20 Aug. 2019,www.kff.org/medicare/issue-brief/the-facts-on-medicare-spending-and-financing/.

6. “FRED Graph Download.” FRED,fred.stlouisfed.org/graph/?g=q2ZS.

7. Center for Drug Evaluation and Research. “NewDrug Therapy Approvals 2019.” U.S. Food and DrugAdministration, FDA, www.fda.gov/drugs/new-drugs-fda-cders-new-molecular-entities-and-new-therapeutic-biological-products/new-drug-therapy-approvals-2019.1

8. “EvaluatePharma Orphan Drug Report2019.” Evaluate.com, 27 Feb. 2020,www.evaluate.com/thought-leadership/pharma/evaluatepharma-orphan-drug-report-2019.

9. “Regeneron Pharmaceuticals EBITDA Margin 2006-2019: REGN.” Macrotrends,www.macrotrends.net/stocks/charts/REGN/regeneron-pharmaceuticals/ebitda-margin.

10. “Amgen EBITDA Margin 2006-2019:AMGN.” Macrotrends,www.macrotrends.net/stocks/charts/AMGN/amgen/ebitda-margin.

11. “Bristol-Myers Squibb EBITDA Margin 2006-2019:BMY.” Macrotrends,www.macrotrends.net/stocks/charts/BMY/bristol-myers-squibb/ebitda-margin.

12. “Novartis AG EBITDA Margin 2006-2019:NVS.” Macrotrends,www.macrotrends.net/stocks/charts/NVS/novartis-ag/ebitda-margin.

13. “Vertex Pharmaceuticals EBITDA 2006-2019:VRTX.” Macrotrends,www.macrotrends.net/stocks/charts/VRTX/vertex-pharmaceuticals/ebitda.

14. Keown, Alex. “Sanofi and Regeneron Launch SecondKevzara Trial Against COVID-19.” BioSpace,BioSpace, 1 Apr. 2020,www.biospace.com/article/sanofi-and-regeneron-launch-second-kevzara-trial-against-covid-19/.

15. “Events & Presentations.” RegeneronPharmaceuticals Inc.,investor.regeneron.com/index.php/events-and-presentations.

16. Taylor, Nick Paul. “Regeneron Gets FDA PriorityReview for Ebola Sibling of COVID-19Prospect.” FierceBiotech, 16 Apr. 2020,www.fiercebiotech.com/biotech/regeneron-gets-fda-priority-review-for-ebola-sibling-covid-19-prospect.

17. “Regeneron Pharmaceuticals, Inc. (REGN) StockPrice, Quote, History & News.” Yahoo! Finance,Yahoo!, 20 Apr. 2020,finance.yahoo.com/quote/REGN?p=REGN.

18. Team, Trefis. “Is Roche In Trouble With $21 BillionIn Sales Nearing Patent Expiry?” Forbes, ForbesMagazine, 4 Sept. 2019,www.forbes.com/sites/greatspeculations/2019/09/04/what-to-make-of-roches-drugs-with-21-billion-in-sales-nearing-patent-expiry/#36aeb9724417.

19. “Regeneron Pharmaceuticals, Inc. (REGN) AnalystRatings, Estimates & Forecasts.” Yahoo! Finance,Yahoo!, 20 Apr. 2020,finance.yahoo.com/quote/regn/analysis/.

20. Standard & Poor’s NetAdvantage Database

21. Factset.net

22. sec.gov/edgar

13

Important Disclaimer

This report was created by students enrolled in the Security Analysis (6F:112) class at the University of Iowa. The report was originally created to offer an internal investment recommendation for the University of Iowa Krause Fund and its advisory board. The report also provides potential employers and other interested parties an example of the students’ skills, knowledge and abilities.

Members of the Krause Fund are not registered investment advisors, brokers or officially licensed financial professionals. The investment advice contained in this report does not represent an offer or solicitation to buy or sell any of the securities mentioned. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Krause Fund may hold a financial interest in the companies mentioned in this report

Regeneron PharmaceuticalsRevenue Decomposition

Fiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E

EYLEA (Patent Expiration 2023 in US) 3701.9 4076.7 4644.2 5294.39 5929.71 6522.69 5544.28 4989.85 4740.36 4645.55 4552.64 4461.59 4599.01

Growth (%) 11.40% 10.12% 13.92% 14.00% 12.00% 10.00% ‐15.00% ‐10.00% ‐5.00% ‐2.00% ‐2.00% ‐2.00% 3.08%

Libtayo (Patent Expiration 2035) 0 14.8 175.7 351.40 439.25 549.06 686.33 857.91 1029.49 1163.33 1279.66 1330.85 1371.84

Growth (%) 0 0 1087.16% 100.00% 25.00% 25.00% 25.00% 25.00% 20.00% 13.00% 10.00% 4.00% 3.08%

ARCALYST (Patent Epiration 2020‐2028) 16.6 14.7 14.5 14.65 14.79 14.94 15.09 15.24 15.39 15.55 15.70 15.86 16.35

Growth (%) 10.67% ‐11.45% ‐1.36% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 3.08%

Other Product Revenues 0 0 0 0 0 0 0 0 0 0

Total Product Revenues 3718.50 4106.20 4834.40 5660.43 6383.76 7086.69 6245.70 5863.00 5785.25 5824.43 5848.00 5808.29 5987.19

Revenues ‐ Sanofi collaboration revenue 877.19 1111.10 1426.80 1854.84 2411.29 3134.68 4075.08 5297.61 6622.01 7946.41 9138.37 9778.06 10079.23

Growth (%) 33.18% 26.67% 28.41% 30.00% 30.00% 30.00% 30.00% 30.00% 25.00% 20.00% 15.00% 7.00% 3.08%

Revenues ‐ Bayer collaboration revenue 938.05 1076.70 1188.80 1343.34 1517.98 1609.06 1705.60 1364.48 1309.90 1283.70 1258.03 1232.87 1270.84

Growth (%) 26.04% 14.78% 10.41% 13.00% 13.00% 6.00% 6.00% ‐20.00% ‐4.00% ‐2.00% ‐2.00% ‐2.00% 3.08%

Revenues ‐ other collaboration revenue 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Growth (%) 0 0 0 0 0 0 0 0 0 0 0 0 0

Total Collaboration Revenues 1815.25 2187.80 2615.60 3198.18 3929.27 4743.74 5780.68 6662.09 7931.91 9230.12 10396.40 11010.93 11350.07

Other Revenues 338.52 416.80 413.40 454.74 500.21 550.24 605.26 665.78 732.36 805.60 886.16 974.78 1004.80

Growth (%) 184.23% 23.12% ‐0.82% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 3.08%

Total Revenues 5872.26 6710.80 7863.40 9313.36 10813.24 12380.66 12631.64 13190.88 14449.52 15860.14 17130.57 17794.00 18342.05

Total Revenue Growth (%) 20.83% 14.28% 17.18% 18.44% 16.10% 14.50% 2.03% 4.43% 9.54% 9.76% 8.01% 3.87% 3.08%

Regeneron PharmaceuticalsIncome Statement

Fiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029ERevenues:Revenues 5872.23 6710.80 7863.40 9313.36 10813.24 12380.66 12631.64 13190.88 14449.52 15860.14 17130.57 17794.00 18342.05

Expenses:Research and development 2075.14 2186.10 3036.60 3307.48 3840.14 4396.79 4485.92 4684.52 5131.51 5632.47 6083.64 6319.24 6513.88

Selling, general, and administrative 1320.43 1556.20 1834.80 2142.38 2487.41 2847.96 2905.70 3034.34 3323.87 3648.36 3940.60 4093.21 4219.28

Cost of goods sold 57.01 31.80 152.00 93.44 108.49 124.22 126.74 132.35 144.98 159.13 171.88 178.53 184.03

Depreciation & Amortization 145.50 148.20 210.30 244.08 271.60 268.18 266.07 265.22 265.59 267.12 269.79 273.56 278.41

Cost of collaboration & contract manufacturing 194.55 254.10 419.90 320.80 394.13 475.83 579.84 668.26 795.63 925.85 1042.84 1104.48 1138.49

Total expenses 3792.64 4176.40 5653.60 6108.19 7101.78 8112.98 8364.27 8784.69 9661.57 10632.92 11508.74 11969.02 12334.10

Income from operations 2079.59 2534.40 2209.80 3205.17 3711.46 4267.68 4267.38 4406.19 4787.95 5227.22 5621.83 5824.98 6007.96

Other income (expense):Investment income (expense) 24.04 47.30 249.50 34.94 52.90 74.81 99.01 125.57 145.22 164.40 185.46 208.74 234.35

Gain (loss) on extinguishment of debt 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Interest expense ‐25.12 ‐28.20 ‐30.20 ‐13.92 ‐15.65 ‐17.60 ‐19.78 ‐22.24 ‐25.01 ‐28.12 ‐31.61 ‐35.54 ‐39.96

Total other income (expense) ‐1.08 19.10 219.30 21.02 37.24 57.21 79.22 103.33 120.21 136.29 153.84 173.20 194.40

Income before income taxes 2078.51 2553.50 2429.10 3226.19 3748.71 4324.90 4346.60 4509.52 4908.16 5363.51 5775.67 5998.18 6202.35Income tax expense ‐880.00 ‐109.10 ‐313.30 ‐961.40 ‐1117.12 ‐1288.82 ‐1295.29 ‐1343.84 ‐1462.63 ‐1598.32 ‐1721.15 ‐1787.46 ‐1848.30

Net income 1198.51 2444.40 2115.80 2264.79 2631.59 3036.08 3051.31 3165.68 3445.53 3765.18 4054.52 4210.72 4354.05Net income per share ‐ basic (in dollars per share) 11.27 22.65 19.38 19.92 22.27 24.74 23.99 24.78 27.00 29.52 31.82 33.06 34.21Weighted average shares outstanding ‐ basic (in shares) 106.34 107.90 109.20 113.69 118.19 122.70 127.21 127.74 127.63 127.53 127.44 127.35 127.27Dividend 0 0 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Regeneron PharmaceuticalsBalance Sheet

Fiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E

Cash & cash equivalents 812.73 1467.70 1617.80 4911.76 8939.10 13388.70 18276.89 21883.87 25405.52 29272.11 33552.29 38263.49 43262.64

Marketable securities 596.85 1342.20 1596.50 1606.56 1616.68 1626.86 1637.11 1647.43 1657.81 1668.25 1678.76 1689.34 1699.98

Accounts receivable ‐ trade, net 1538.64 1723.70 2100.00 2487.23 2887.78 3306.38 3373.41 3522.76 3858.89 4235.61 4574.89 4752.07 4898.43

Accounts receivable from Sanofi 193.68 226.40 260.60 308.65 358.36 410.31 418.62 437.16 478.87 525.62 567.72 589.71 607.87

Accounts receivable from Bayer HealthCare LLC 242.01 293.10 311.60 369.06 428.49 490.60 500.55 522.71 572.59 628.48 678.83 705.12 726.83

Inventories 726.14 1151.20 1415.50 1676.51 1946.50 2228.66 2273.84 2374.51 2601.08 2855.00 3083.69 3203.12 3301.78

Deferred tax assets, current 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Prepaid expenses & other current assets 224.97 243.30 387.10 458.48 532.31 609.48 621.83 649.36 711.32 780.76 843.30 875.96 902.94

Total current assets 4335.03 6447.60 7689.10 11818.24 16709.24 22060.99 27102.25 31037.79 35286.07 39965.84 44979.49 50078.80 55400.47

Marketable securities 1486.49 1755.00 3256.80 3277.32 3297.96 3318.74 3339.65 3360.69 3381.86 3403.17 3424.61 3446.18 3467.89

Property, plant, & equipment, gross 2924.90 3304.50 3812.80 4382.80 4613.84 4857.06 5113.10 5382.64 5666.39 5965.10 6279.55 6610.58 6959.06

Less: accumulated depreciation & amortization ‐566.29 ‐728.70 ‐922.40 ‐1166.48 ‐1438.08 ‐1706.25 ‐1972.32 ‐2237.54 ‐2503.13 ‐2770.25 ‐3040.04 ‐3313.60 ‐3592.01

Property, plant & equipment, net 2358.61 2575.80 2890.40 3216.32 3175.76 3150.81 3140.78 3145.10 3163.26 3194.85 3239.51 3296.98 3367.05

Deferred tax assets 506.29 828.70 824.20 760.17 685.78 599.94 513.68 424.19 326.78 220.33 105.71 ‐13.33 ‐136.42

Other noncurrent assets 77.87 127.40 144.70 145.61 146.53 147.45 148.38 149.32 150.26 151.20 152.16 153.11 154.08

Total assets 8764.29 11734.50 14805.20 19217.67 24015.27 29277.94 34244.75 38117.08 42308.23 46935.39 51901.48 56961.75 62253.07

Accounts payable 178.18 218.20 418.10 495.19 574.94 658.28 671.63 701.36 768.29 843.29 910.84 946.11 975.25

Income Taxes Payable 0.23 20.80 49.40 95.23 110.65 127.66 128.30 133.11 144.88 158.32 170.49 177.05 183.08

Accrued expenses & other current liabilities 636.94 751.30 1037.40 1228.69 1426.57 1633.35 1666.46 1740.24 1906.29 2092.39 2260.00 2347.52 2419.82

Deferred revenue, current 320.14 452.50 591.70 700.81 813.67 931.61 950.50 992.58 1087.29 1193.43 1289.03 1338.95 1380.19

Total current liabilities 1135.48 1442.80 2096.60 2519.92 2925.83 3350.91 3416.89 3567.30 3906.75 4287.43 4630.35 4809.64 4958.35

Deferred revenue, noncurrent 629.20 464.20 619.00 733.14 868.33 1028.44 1218.08 1442.68 1708.70 2023.77 2396.94 2838.92 3362.40

Finance Lease Liabilities 703.45 708.50 713.90 802.64 902.41 1014.58 1140.69 1282.48 1441.89 1621.12 1822.63 2049.18 2303.89

Other long‐term liabilities 152.07 361.70 286.00 318.37 354.41 394.52 439.17 488.88 544.21 605.81 674.38 750.71 835.68

Total liabilities 2620.21 2977.20 3715.50 4374.07 5050.97 5788.44 6214.83 6781.33 7601.55 8538.14 9524.30 10448.45 11460.32

Class A stock, convertible 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Common stock  3512.94 3911.70 4428.70 5992.41 7556.12 9119.83 10683.55 10898.30 10898.30 10898.30 10898.30 10898.30 10898.30

Retained earnings (accumulated deficit) 2946.73 5254.30 7379.80 9644.59 12276.18 15312.26 18363.57 21529.25 24974.78 28739.96 32794.48 37005.20 41359.25

AOCI (loss) 0.64 ‐12.30 21.10 21.10 21.10 21.10 21.10 21.10 21.10 21.10 21.10 21.10 21.10

Treasury stock, at cost ‐316.24 ‐396.40 ‐739.90 ‐814.50 ‐889.10 ‐963.70 ‐1038.30 ‐1112.90 ‐1187.50 ‐1262.10 ‐1336.70 ‐1411.30 ‐1485.90

Total stockholders' equity 6144.08 8757.30 11089.70 14843.60 18964.30 23489.49 28029.92 31335.75 34706.68 38397.26 42377.18 46513.30 50792.75Total Liabilities & Stockholders' Equity 8764.29 11734.50 14805.20 19217.67 24015.27 29277.94 34244.75 38117.08 42308.23 46935.39 51901.48 56961.75 62253.07

Regeneron PharmaceuticalsForecasted Cash Flow Statement

Fiscal Years Ending Dec. 31 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029EOperating Activities:Net Income 2264.79 2631.59 3036.08 3051.31 3165.68 3445.53 3765.18 4054.52 4210.72 4354.05

Depreciation and Ammortization 244.08 271.60 268.18 266.07 265.22 265.59 267.12 269.79 273.56 278.41

Allowance for doubtful accounts 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Change in deferred tax assets 64.03 74.40 85.83 86.26 89.50 97.41 106.44 114.62 119.04 123.09

Changes in Working CapitalAccounts receivable ‐ trade, net ‐387.23 ‐400.56 ‐418.60 ‐67.03 ‐149.35 ‐336.13 ‐376.72 ‐339.28 ‐177.18 ‐146.36

Accounts receivable from Sanofi ‐48.05 ‐49.71 ‐51.95 ‐8.32 ‐18.53 ‐41.71 ‐46.75 ‐42.10 ‐21.99 ‐18.16

Accounts receivable from Bayer HealthCare LLC ‐57.46 ‐59.44 ‐62.11 ‐9.95 ‐22.16 ‐49.88 ‐55.90 ‐50.34 ‐26.29 ‐21.72

Inventories ‐261.01 ‐270.00 ‐282.15 ‐45.18 ‐100.67 ‐226.57 ‐253.93 ‐228.69 ‐119.43 ‐98.66

Prepaid expenses & other current assets ‐71.38 ‐73.84 ‐77.16 ‐12.36 ‐27.53 ‐61.96 ‐69.44 ‐62.54 ‐32.66 ‐26.98

Accounts payable 77.09 79.75 83.34 13.34 29.73 66.92 75.00 67.55 35.27 29.14

Income Taxes Payable 45.83 15.42 17.01 0.64 4.81 11.77 13.44 12.17 6.57 6.03

Accrued expenses & other current liabilities 191.29 197.88 206.79 33.11 73.78 166.05 186.10 167.60 87.53 72.30

Long‐Term Liabilities 32.37 36.03 40.11 44.65 49.71 55.33 61.60 68.57 76.33 84.97

Deferred revenue, current 223.24 248.05 278.06 208.52 266.69 360.73 421.22 468.77 491.90 564.72

Net cash provided by operating activities 2317.60 2701.19 3123.42 3561.09 3626.87 3753.07 4093.37 4500.63 4923.38 5200.83Investing Activities:(Increase) decrease in short‐term investments ‐10.06 ‐10.12 ‐10.19 ‐10.25 ‐10.31 ‐10.38 ‐10.44 ‐10.51 ‐10.58 ‐10.64

(Increase) decrease in long‐term investments ‐20.52 ‐20.65 ‐20.78 ‐20.91 ‐21.04 ‐21.17 ‐21.31 ‐21.44 ‐21.58 ‐21.71

Capital expenditures (Change in gross PPE) ‐570.00 ‐231.04 ‐243.22 ‐256.04 ‐269.54 ‐283.75 ‐298.71 ‐314.45 ‐331.03 ‐348.48

(Increase) decrease in other assets ‐0.91 ‐0.92 ‐0.92 ‐0.93 ‐0.93 ‐0.94 ‐0.95 ‐0.95 ‐0.96 ‐0.96

Net Cash Used for Investing Activities ‐601.49 ‐262.73 ‐275.11 ‐288.13 ‐301.83 ‐316.24 ‐331.40 ‐347.36 ‐364.14 ‐381.80Financing Activities:Payments for finance lease liabilities 88.74 99.77 112.17 126.11 141.79 159.41 179.23 201.51 226.55 254.71

Proceeds from Issuance of Common Stock 1563.71 1563.71 1563.71 1563.71 214.75 0.00 0.00 0.00 0.00 0.00

Repurchases of Common Stock ‐74.60 ‐74.60 ‐74.60 ‐74.60 ‐74.60 ‐74.60 ‐74.60 ‐74.60 ‐74.60 ‐74.60

Changes in AOCI  0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Net cash provided by financing activities 1577.85 1588.88 1601.28 1615.22 281.94 84.81 104.63 126.91 151.95 180.11Change in Cash 3293.96 4027.34 4449.60 4888.19 3606.98 3521.65 3866.59 4280.18 4711.19 4999.15Cash, Beginning of the Year 1617.80 4911.76 8939.10 13388.70 18276.89 21883.87 25405.52 29272.11 33552.29 38263.49

Cash, End of the Year 4911.76 8939.10 13388.70 18276.89 21883.87 25405.52 29272.11 33552.29 38263.49 43262.64

Regeneron PharmaceuticalsHistorical Cash Flow Statement

Fiscal Years Ending Dec. 31 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Cash flows from operating activities:Net income 104.468 221.76 750.269 424.362 348.074 636.056 895.522 1198.511 2444.4 2115.8

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 19.687 31.082 36.94 41.204 52.686 74.909 104.745 145.467 148.2 210.3

Non0cash compensation expense 39.897 56.094 94.157 198.399 307.238 459.049 559.878 507.277 427.4 464.3

Loss on extinguishment of debt 0 0 0 0 33.469 18.861 0 0 0 0

Other non0cash items, net 0 10.366 56.974 46.75 48.055 33.701 45.139 63.581 12.1 29.3

Deferred taxes 0 0 340.156 63.601 66.604 121.623 360.078 318.809 140 130.6

Changes in assets and liabilities:Net realized loss (gain) on marketable securities 0.29 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Increase in Sanofi, Bayer, and trade accounts receivable 27.54 21.12 590.09 198.66 62.43 491.42 143.83 362.72 268.90 473.10

Increase in inventories 0.00 0.00 0.00 47.96 60.90 111.83 149.78 314.20 387.90 335.50

Increase in prepaid expenses and other assets 2.72 6.03 52.62 52.77 37.77 79.48 23.54 113.33 55.70 130.40

Increase (decrease) in deferred revenue 158.15 40.33 41.08 27.97 19.10 608.89 244.27 113.10 194.50 294.00

Increase (decrease) in accounts payable, accrued expenses, and other liabilities 7.61 50.02 10.98 136.68 162.24 303.66 253.98 23.19 210.00 444.50

Total adjustments 200.81 80.08 824.88 159.29 395.08 694.72 577.87 108.60 249.30 314.20Net cash provided by operating activities 305.28 301.84 1575.15 583.65 743.16 1330.78 1473.40 1307.11 2693.70 2430.00Cash flows from investing activities:Purchases of marketable and other securities 605.12 240.39 470.39 577.28 564.19 557.11 809.42 1277.14 1845.50 3202.40

Sales or maturities of marketable securities 276.60 426.36 439.21 378.15 476.42 327.44 274.46 544.58 775.60 1604.20

Decrease (increase) in restricted cash 1.12 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Purchases of restricted cash & marketable securities 7.06 0.28 0.55 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Capital expenditures 99.69 57.22 49.34 156.32 333.01 677.93 511.94 272.63 383.10 429.60

Other 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 10.00 0.00

Net cash used in investing activities 434.15 128.47 81.07 355.46 420.78 907.60 1046.90 1005.18 1463.00 2027.80Cash flows from financing activities:Proceeds (payments) in connection with facility & capital lease obligations 46.52 1.67 2.20 2.02 1.10 26.02 27.69 0.00 0.00 0.00

Proceeds in connection with finance lease liabilities 0.00 0.00 0.00 0.00 0.00 0.00 0.00 57.00 0.00 0.00

Payments in connection with finance lease liabilities 0.00 0.00 0.00 0.00 0.00 0.00 0.00 19.93 0.00 0.00

Repayments of convertible senior notes 0.00 0.00 0.00 0.00 220.64 166.47 12.89 0.00 0.00 0.00

Payments in connection with reduction of outstanding warrants 0.00 0.00 0.00 0.00 294.55 573.49 643.37 0.00 0.00 0.00

Proceeds from issuance of Common Stock 196.79 18.51 63.55 57.39 126.05 206.36 126.74 240.21 114.50 211.80

Payments in connection with Common Stock tendered for employee tax obligations 0.00 0.00 163.30 195.09 267.58 160.54 143.18 301.69 187.20 188.00

Repurchases of Common Stock 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 4.40 275.90

Excess tax benefit from stock0based compensation 0.00 0.00 4.31 216.86 448.56 405.32 0.00 0.00 0.00 0.00

Proceeds in connection with issuance of convertible notes, net of debt issuance costs 0.00 391.11 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Proceeds in connection with issuance of warrants 0.00 93.80 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Payment in connection with purchase of convertible note hedges 0.00 117.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Net cash used in financing activities 243.31 384.25 97.65 77.14 209.27 262.80 700.39 24.40 77.10 252.10Net increase in cash, cash equivalents, and restricted cash 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 655.00 150.10

Cash, cash equivalents, and restricted cash at beginning of period 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 825.20 1480.20

Cash, cash equivalents, and restricted cash at end of period 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1480.20 1630.30

Cash, cash equivalents, and restricted cash at beginning of period 207.08 112.57 483.61 230.28 535.61 648.72 809.10 535.20 0.00 0.00

Cash, cash equivalents, and restricted cash at end of period 112.57 483.61 230.28 535.61 648.72 809.10 535.20 812.73 0.00 0.00

Supplemental disclosure of cash flow information:Cash paid for interest (net of amounts capitalized) 12.74 14.73 21.95 23.84 20.61 10.58 5.45 18.68 22.30 25.00

Cash paid for income taxes 0.00 0.00 0.00 0.00 59.85 276.09 481.36 754.84 205.60 342.30

Regeneron PharmaceuticalsCommon Size Income Statement

Fiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029ERevenues:Revenues 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Expenses:Research and development 35.34% 32.58% 38.62% 35.51% 35.51% 35.51% 35.51% 35.51% 35.51% 35.51% 35.51% 35.51% 35.51%

Selling, general, and administrative 22.49% 23.19% 23.33% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00%

Cost of goods sold 0.97% 0.47% 1.93% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%

Depreciation & Amortization 2.48% 2.21% 2.67% 2.62% 2.51% 2.17% 2.11% 2.01% 1.84% 1.68% 1.57% 1.54% 1.52%

Cost of collaboration & contract manufacturing 3.31% 3.79% 5.34% 3.44% 3.64% 3.84% 4.59% 5.07% 5.51% 5.84% 6.09% 6.21% 6.21%

Total expenses 64.59% 62.23% 71.90% 65.59% 65.68% 65.53% 66.22% 66.60% 66.86% 67.04% 67.18% 67.26% 67.24%Income from operations 35.41% 37.77% 28.10% 34.41% 34.32% 34.47% 33.78% 33.40% 33.14% 32.96% 32.82% 32.74% 32.76%

Other income (expense):Investment income (expense) 0.41% 0.70% 3.17% 0.38% 0.49% 0.60% 0.78% 0.95% 1.00% 1.04% 1.08% 1.17% 1.28%

Gain (loss) on extinguishment of debt 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Interest expense ‐0.43% ‐0.42% ‐0.38% ‐0.15% ‐0.14% ‐0.14% ‐0.16% ‐0.17% ‐0.17% ‐0.18% ‐0.18% ‐0.20% ‐0.22%

Total other income (expense) ‐0.02% 0.28% 2.79% 0.23% 0.34% 0.46% 0.63% 0.78% 0.83% 0.86% 0.90% 0.97% 1.06%

Income before income taxes 35.40% 38.05% 30.89% 34.64% 34.67% 34.93% 34.41% 34.19% 33.97% 33.82% 33.72% 33.71% 33.81%Income tax expense ‐14.99% ‐1.63% ‐3.98% ‐10.32% ‐10.33% ‐10.41% ‐10.25% ‐10.19% ‐10.12% ‐10.08% ‐10.05% ‐10.05% ‐10.08%

Net income 20.41% 36.42% 26.91% 24.32% 24.34% 24.52% 24.16% 24.00% 23.85% 23.74% 23.67% 23.66% 23.74%Net income per share ‐ basic (in dollars per share) 0.19% 0.34% 0.25% 0.21% 0.21% 0.20% 0.19% 0.19% 0.19% 0.19% 0.19% 0.19% 0.19%Net income per share ‐ diluted (in dollars per share) 0.19% 0.34% 0.25% 0.21% 0.21% 0.20% 0.19% 0.19% 0.19% 0.19% 0.19% 0.19% 0.19%Weighted average shares outstanding ‐ basic (in shares) 1.81% 1.61% 1.39% 1.22% 1.09% 0.99% 1.01% 0.97% 0.88% 0.80% 0.74% 0.72% 0.69%

Regeneron PharmaceuticalsCommon Size Balance Sheet % of Sales

Fiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E

Cash & cash equivalents 13.84% 21.87% 20.57% 52.74% 82.67% 108.14% 144.69% 165.90% 175.82% 184.56% 195.86% 215.04% 235.87%

Marketable securities 10.16% 20.00% 20.30% 17.25% 14.95% 13.14% 12.96% 12.49% 11.47% 10.52% 9.80% 9.49% 9.27%

Accounts receivable ‐ trade, net 26.20% 25.69% 26.71% 26.71% 26.71% 26.71% 26.71% 26.71% 26.71% 26.71% 26.71% 26.71% 26.71%

Accounts receivable from Sanofi 3.30% 3.37% 3.31% 3.31% 3.31% 3.31% 3.31% 3.31% 3.31% 3.31% 3.31% 3.31% 3.31%

Accounts receivable from Bayer HealthCare LLC 4.12% 4.37% 3.96% 3.96% 3.96% 3.96% 3.96% 3.96% 3.96% 3.96% 3.96% 3.96% 3.96%

Inventories 12.37% 17.15% 18.00% 18.00% 18.00% 18.00% 18.00% 18.00% 18.00% 18.00% 18.00% 18.00% 18.00%

Deferred tax assets 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Prepaid expenses & other current assets 3.83% 3.63% 4.92% 4.92% 4.92% 4.92% 4.92% 4.92% 4.92% 4.92% 4.92% 4.92% 4.92%

Total current assets 73.82% 96.08% 97.78% 126.90% 154.53% 178.19% 214.56% 235.30% 244.20% 251.99% 262.57% 281.44% 302.04%

Marketable securities 25.31% 26.15% 41.42% 35.19% 30.50% 26.81% 26.44% 25.48% 23.40% 21.46% 19.99% 19.37% 18.91%

Property, plant, & equipment, gross 49.81% 49.24% 48.49% 47.06% 42.67% 39.23% 40.48% 40.81% 39.22% 37.61% 36.66% 37.15% 37.94%

Less: accumulated depreciation & amortization ‐9.64% ‐10.86% ‐11.73% ‐12.52% ‐13.30% ‐13.78% ‐15.61% ‐16.96% ‐17.32% ‐17.47% ‐17.75% ‐18.62% ‐19.58%

Property, plant & equipment, net 40.17% 38.38% 36.76% 34.53% 29.37% 25.45% 24.86% 23.84% 21.89% 20.14% 18.91% 18.53% 18.36%

Deferred tax assets 8.62% 12.35% 10.48% 8.16% 6.34% 4.85% 4.07% 3.22% 2.26% 1.39% 0.62% ‐0.07% ‐0.74%

Other noncurrent assets 1.33% 1.90% 1.84% 1.56% 1.36% 1.19% 1.17% 1.13% 1.04% 0.95% 0.89% 0.86% 0.84%

Total assets 149.25% 174.86% 188.28% 206.35% 222.09% 236.48% 271.10% 288.97% 292.80% 295.93% 302.98% 320.12% 339.40%

Accounts payable 3.03% 3.25% 5.32% 5.32% 5.32% 5.32% 5.32% 5.32% 5.32% 5.32% 5.32% 5.32% 5.32%

Accrued expenses & other current liabilities 10.85% 11.20% 13.19% 1.02% 1.02% 1.03% 1.02% 1.01% 1.00% 1.00% 1.00% 1.00% 1.00%

Deferred revenue, current 5.45% 6.74% 7.52% 13.19% 13.19% 13.19% 13.19% 13.19% 13.19% 13.19% 13.19% 13.19% 13.19%

Total current liabilities 19.34% 21.50% 26.66% 7.52% 7.52% 7.52% 7.52% 7.52% 7.52% 7.52% 7.52% 7.52% 7.52%

Deferred revenue, noncurrent 10.71% 6.92% 7.87% 27.06% 27.06% 27.07% 27.05% 27.04% 27.04% 27.03% 27.03% 27.03% 27.03%

Finance Lease Liabilities 11.98% 10.56% 9.08% 7.87% 8.03% 8.31% 9.64% 10.94% 11.83% 12.76% 13.99% 15.95% 18.33%

Other long‐term liabilities 2.59% 5.39% 3.64% 8.62% 8.35% 8.19% 9.03% 9.72% 9.98% 10.22% 10.64% 11.52% 12.56%

Total liabilities 44.62% 44.36% 47.25% 3.42% 3.28% 3.19% 3.48% 3.71% 3.77% 3.82% 3.94% 4.22% 4.56%

Class A stock, convertible 0.00% 0.00% 0.00% 46.97% 46.71% 46.75% 49.20% 51.41% 52.61% 53.83% 55.60% 58.72% 62.48%

Common stock 59.82% 58.29% 56.32% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Retained earnings (accumulated deficit) 50.18% 78.30% 93.85% 64.34% 69.88% 73.66% 84.58% 82.62% 75.42% 68.71% 63.62% 61.25% 59.42%

Accumulated other comprehensive income (loss) 0.01% ‐0.18% 0.27% 103.56% 113.53% 123.68% 145.38% 163.21% 172.84% 181.21% 191.44% 207.96% 225.49%

Treasury stock, at cost ‐5.39% ‐5.91% ‐9.41% 0.23% 0.20% 0.17% 0.17% 0.16% 0.15% 0.13% 0.12% 0.12% 0.12%

Total stockholders' equity 104.63% 130.50% 141.03% ‐8.75% ‐8.22% ‐7.78% ‐8.22% ‐8.44% ‐8.22% ‐7.96% ‐7.80% ‐7.93% ‐8.10%Total Liabilities & Stockholders' Equity 149.25% 174.86% 188.28% 159.38% 175.38% 189.73% 221.90% 237.56% 240.19% 242.10% 247.38% 261.40% 276.92%

Regeneron PharmaceuticalsCommon Size Balance Sheet % of Assets

Fiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E

Cash & cash equivalents 9.27% 12.51% 10.93% 25.56% 37.22% 45.73% 53.37% 57.41% 60.05% 62.37% 64.65% 67.17% 69.49%

Marketable securities 6.81% 11.44% 10.78% 8.36% 6.73% 5.56% 4.78% 4.32% 3.92% 3.55% 3.23% 2.97% 2.73%

Accounts receivable ‐ trade, net 17.56% 14.69% 14.18% 12.94% 12.02% 11.29% 9.85% 9.24% 9.12% 9.02% 8.81% 8.34% 7.87%

Accounts receivable from Sanofi 2.21% 1.93% 1.76% 1.61% 1.49% 1.40% 1.22% 1.15% 1.13% 1.12% 1.09% 1.04% 0.98%

Accounts receivable from Bayer HealthCare LLC 2.76% 2.50% 2.10% 1.92% 1.78% 1.68% 1.46% 1.37% 1.35% 1.34% 1.31% 1.24% 1.17%

Inventories 8.29% 9.81% 9.56% 8.72% 8.11% 7.61% 6.64% 6.23% 6.15% 6.08% 5.94% 5.62% 5.30%

Deferred tax assets 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Prepaid expenses & other current assets 2.57% 2.07% 2.61% 2.39% 2.22% 2.08% 1.82% 1.70% 1.68% 1.66% 1.62% 1.54% 1.45%

Total current assets 49.46% 54.95% 51.94% 61.50% 69.58% 75.35% 79.14% 81.43% 83.40% 85.15% 86.66% 87.92% 88.99%

Marketable securities 16.96% 14.96% 22.00% 17.05% 13.73% 11.34% 9.75% 8.82% 7.99% 7.25% 6.60% 6.05% 5.57%

Property, plant, & equipment, gross 33.37% 28.16% 25.75% 22.81% 19.21% 16.59% 14.93% 14.12% 13.39% 12.71% 12.10% 11.61% 11.18%

Less: accumulated depreciation & amortization ‐6.46% ‐6.21% ‐6.23% ‐6.07% ‐5.99% ‐5.83% ‐5.76% ‐5.87% ‐5.92% ‐5.90% ‐5.86% ‐5.82% ‐5.77%

Property, plant & equipment, net 26.91% 21.95% 19.52% 16.74% 13.22% 10.76% 9.17% 8.25% 7.48% 6.81% 6.24% 5.79% 5.41%

Deferred tax assets 5.78% 7.06% 5.57% 3.96% 2.86% 2.05% 1.50% 1.11% 0.77% 0.47% 0.20% ‐0.02% ‐0.22%

Other noncurrent assets 0.89% 1.09% 0.98% 0.76% 0.61% 0.50% 0.43% 0.39% 0.36% 0.32% 0.29% 0.27% 0.25%

Total assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Accounts payable 2.03% 1.86% 2.82% 2.58% 2.39% 2.25% 1.96% 1.84% 1.82% 1.80% 1.75% 1.66% 1.57%

Accrued expenses & other current liabilities 7.27% 6.40% 7.01% 0.50% 0.46% 0.44% 0.37% 0.35% 0.34% 0.34% 0.33% 0.31% 0.29%

Deferred revenue, current 3.65% 3.86% 4.00% 6.39% 5.94% 5.58% 4.87% 4.57% 4.51% 4.46% 4.35% 4.12% 3.89%

Total current liabilities 12.96% 12.30% 14.16% 3.65% 3.39% 3.18% 2.78% 2.60% 2.57% 2.54% 2.48% 2.35% 2.22%

Deferred revenue, noncurrent 7.18% 3.96% 4.18% 13.11% 12.18% 11.45% 9.98% 9.36% 9.23% 9.13% 8.92% 8.44% 7.96%

Finance Lease Liabilities 8.03% 6.04% 4.82% 3.81% 3.62% 3.51% 3.56% 3.78% 4.04% 4.31% 4.62% 4.98% 5.40%

Other long‐term liabilities 1.74% 3.08% 1.93% 4.18% 3.76% 3.47% 3.33% 3.36% 3.41% 3.45% 3.51% 3.60% 3.70%

Total liabilities 29.90% 25.37% 25.10% 1.66% 1.48% 1.35% 1.28% 1.28% 1.29% 1.29% 1.30% 1.32% 1.34%

Class A stock, convertible 0.00% 0.00% 0.00% 22.76% 21.03% 19.77% 18.15% 17.79% 17.97% 18.19% 18.35% 18.34% 18.41%

Common stock  40.08% 33.34% 29.91% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Retained earnings (accumulated deficit) 33.62% 44.78% 49.85% 31.18% 31.46% 31.15% 31.20% 28.59% 25.76% 23.22% 21.00% 19.13% 17.51%

Accumulated other comprehensive income (loss) 0.01% ‐0.10% 0.14% 50.19% 51.12% 52.30% 53.62% 56.48% 59.03% 61.23% 63.19% 64.97% 66.44%

Treasury stock, at cost ‐3.61% ‐3.38% ‐5.00% 0.11% 0.09% 0.07% 0.06% 0.06% 0.05% 0.04% 0.04% 0.04% 0.03%

Total stockholders' equity 70.10% 74.63% 74.90% ‐4.24% ‐3.70% ‐3.29% ‐3.03% ‐2.92% ‐2.81% ‐2.69% ‐2.58% ‐2.48% ‐2.39%Total Liabilities & Stockholders' Equity 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Regeneron PharmaceuticalsValue Driver Estimation

Fiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E

NOPLAT:Operating Revenues 5872.23 6710.80 7863.40 9313.36 10813.24 12380.66 12631.64 13190.88 14449.52 15860.14 17130.57 17794.00 18342.05

(COGS) 57.01 31.80 152.00 93.44 108.49 124.22 126.74 132.35 144.98 159.13 171.88 178.53 184.03

(SG&A) 1320.43 1556.20 1834.80 2142.38 2487.41 2847.96 2905.70 3034.34 3323.87 3648.36 3940.60 4093.21 4219.28

(Cost of collaboration & contract manufacturing) 194.55 254.10 419.90 320.80 394.13 475.83 579.84 668.26 795.63 925.85 1042.84 1104.48 1138.49

(R&D) 2075.14 2186.10 3036.60 3307.48 3840.14 4396.79 4485.92 4684.52 5131.51 5632.47 6083.64 6319.24 6513.88

(Depreciation and Amortization) 145.50 148.20 210.30 244.08 271.60 268.18 266.07 265.22 265.59 267.12 269.79 273.56 278.41

Implied Interest on Operating Leases 1.46 0.68 0.78 0.79 0.88 0.78 0.79 0.79 0.80 0.80 0.80 0.81 0.81

EBITA 2081.05 2535.08 2210.58 3205.96 3712.35 4268.47 4268.16 4406.98 4788.75 5228.02 5622.63 5825.78 6008.77Marginal Tax Rate 0.36 0.42 0.30 0.30 0.30 0.30 0.30 0.30 0.30 0.30 0.30 0.30 0.30

Income Tax Provision 880.00 109.10 313.30 961.40 1117.12 1288.82 1295.29 1343.84 1462.63 1598.32 1721.15 1787.46 1848.30

Tax shield on Operating Leases 0.52 0.28 0.23 0.24 0.26 0.23 0.23 0.24 0.24 0.24 0.24 0.24 0.24

Tax shield on Investment income (expense) 24.04 47.30 249.50 34.94 52.90 74.81 99.01 125.57 145.22 164.40 185.46 208.74 234.35

Tax shield on Gain (loss) on extinguishment of debt 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Tax shield on Interest expense ‐25.12 ‐28.20 ‐30.20 ‐13.92 ‐15.65 ‐17.60 ‐19.78 ‐22.24 ‐25.01 ‐28.12 ‐31.61 ‐35.54 ‐39.96

Tax shield on Total other income (expense) ‐1.08 19.10 219.30 21.02 37.24 57.21 79.22 103.33 120.21 136.29 153.84 173.20 194.40

Total Adjusted Taxes 832.45 14.78 ‐185.47 891.75 1011.59 1139.43 1097.51 1092.93 1172.44 1269.75 1350.48 1370.22 1379.83Deferred Tax Liability 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Deferred Tax Asset 506.29 828.70 824.20 760.17 685.78 599.94 513.68 424.19 326.78 220.33 105.71 ‐13.33 ‐136.42

Change in Deferred Tax 319.01 ‐322.41 4.50 64.03 74.40 85.83 86.26 89.50 97.41 106.44 114.62 119.04 123.09NOPLAT 1567.62 2197.89 2400.55 2378.24 2775.16 3214.87 3256.92 3403.55 3713.72 4064.71 4386.78 4574.61 4752.03

Invested Capital (IC):Operating Current AssetsNormal Cash 89.49 161.61 178.14 540.86 984.32 1474.29 2012.55 2409.73 2797.51 3223.28 3694.59 4213.36 4763.84

Accounts receivable ‐ trade, net 1538.64 1723.70 2100.00 2487.23 2887.78 3306.38 3373.41 3522.76 3858.89 4235.61 4574.89 4752.07 4898.43

Accounts receivable from Sanofi 193.68 226.40 260.60 308.65 358.36 410.31 418.62 437.16 478.87 525.62 567.72 589.71 607.87

Accounts receivable from Bayer HealthCare LLC 242.01 293.10 311.60 369.06 428.49 490.60 500.55 522.71 572.59 628.48 678.83 705.12 726.83

Inventory 726.14 1151.20 1415.50 1676.51 1946.50 2228.66 2273.84 2374.51 2601.08 2855.00 3083.69 3203.12 3301.78

Prepaid Expenses & Other Current Assets 224.97 243.30 387.10 458.48 532.31 609.48 621.83 649.36 711.32 780.76 843.30 875.96 902.94

Operating Current Assets (CA) 3014.94 3799.31 4652.94 5840.78 7137.78 8519.71 9200.80 9916.22 11020.26 12248.76 13443.03 14339.34 15201.69

Operating Current LiabilitiesAccounts Payable 178.18 218.20 418.10 495.19 574.94 658.28 671.63 701.36 768.29 843.29 910.84 946.11 975.25

Accrued Expenses 636.94 751.30 1037.40 1228.69 1426.57 1633.35 1666.46 1740.24 1906.29 2092.39 2260.00 2347.52 2419.82

Deferred Revenue 320.14 452.50 591.70 700.81 813.67 931.61 950.50 992.58 1087.29 1193.43 1289.03 1338.95 1380.19

Income Taxes Payable 0.23 20.80 49.40 95.23 110.65 127.66 128.30 133.11 144.88 158.32 170.49 177.05 183.08

Non Interest‐Bearing Current Liabilities (CL) 1135.48 1442.80 2096.60 2519.92 2925.83 3350.91 3416.89 3567.30 3906.75 4287.43 4630.35 4809.64 4958.35

Net Operating Working Capita 1879.46 2356.51 2556.34 3320.86 4211.95 5168.80 5783.90 6348.92 7113.51 7961.33 8812.68 9529.70 10243.34Net PPE 2358.61 2575.80 2890.40 3216.32 3175.76 3150.81 3140.78 3145.10 3163.26 3194.85 3239.51 3296.98 3367.05Other Operating AssetsCapitalized PV of Operating Leases 43.65 20.18 23.17 26.63 28.04 29.52 31.07 32.71 34.43 36.25 38.16 40.17 42.29

Total Other Long Term Operating Assets 43.65 20.18 23.17 26.63 28.04 29.52 31.07 32.71 34.43 36.25 38.16 40.17 42.29(‐)Other Operating Liabilities

Deferred revenue (long‐term) 629.20 464.20 619.00 733.14 868.33 1028.44 1218.08 1442.68 1708.70 2023.77 2396.94 2838.92 3362.40

Total Other Long Term Operating Liabilities 629.20 464.20 619.00 733.14 868.33 1028.44 1218.08 1442.68 1708.70 2023.77 2396.94 2838.92 3362.40Invested Capital 3652.52 4488.29 4850.91 5830.67 6547.42 7320.69 7737.68 8084.05 8602.51 9168.65 9693.41 10027.93 10290.28Economic Profit 1418.94 1962.54 2111.35 2065.68 2399.47 2793.00 2785.22 2904.98 3192.84 3510.42 3796.01 3950.03 4105.89FCF from Operating Activities 222.63 1362.11 2037.93 1398.47 2058.41 2441.61 2839.92 3057.17 3195.27 3498.56 3862.02 4240.09 4489.67ROIC 67.94% 60.17% 53.48% 49.03% 47.60% 49.10% 44.49% 43.99% 45.94% 47.25% 47.85% 47.19% 47.39%

Free Cash Flow (FCF):NOPLAT 1567.62 2197.89 2400.55 2378.24 2775.16 3214.87 3256.92 3403.55 3713.72 4064.71 4386.78 4574.61 4752.03

Change in IC 1344.99 835.78 362.62 979.76 716.75 773.26 417.00 346.37 518.45 566.14 524.76 334.52 262.36

FCF 222.63 1362.11 2037.93 1398.47 2058.41 2441.61 2839.92 3057.17 3195.27 3498.56 3862.02 4240.09 4489.67

Return on Invested Capital (ROIC):NOPLAT 1567.62 2197.89 2400.55 2378.24 2775.16 3214.87 3256.92 3403.55 3713.72 4064.71 4386.78 4574.61 4752.03

Beg. IC 2307.52 3652.52 4488.29 4850.91 5830.67 6547.42 7320.69 7737.68 8084.05 8602.51 9168.65 9693.41 10027.93

ROIC 67.94% 60.17% 53.48% 49.03% 47.60% 49.10% 44.49% 43.99% 45.94% 47.25% 47.85% 47.19% 47.39%

Economic Profit (EP):Beg. IC 2307.52 3652.52 4488.29 4850.91 5830.67 6547.42 7320.69 7737.68 8084.05 8602.51 9168.65 9693.41 10027.93

x (ROIC ‐ WACC) 0.61 0.54 0.47 0.43 0.41 0.43 0.38 0.38 0.39 0.41 0.41 0.41 0.41EP 1418.94 1962.54 2111.35 2065.68 2399.47 2793.00 2785.22 2904.98 3192.84 3510.42 3796.01 3950.03 4105.89

Regeneron PharmaceuticalsWeighted Average Cost of Capital (WACC) Estimation

Cost of Equity: ASSUMPTIONS:Risk‐Free Rate 0.63% 10 year treasury rateBeta 0.94  Average of 1‐10 year weekly beta Equity Risk Premium 6.16% Implied Equity Risk PremiumCost of Equity 6.4450%

Cost of Debt:Risk‐Free Rate 0.63% 10 year treasury rateImplied Default Premium 6.16% Implied Equity Risk PremiumPre‐Tax Cost of Debt 3.35% YTM on peer competitor 30‐year bond Marginal Tax Rate 30%

After‐Tax Cost of Debt 2.35%

Market Value of Common Equity: MV WeightsTotal Shares Outstanding 110

Current Stock Price $511.69

MV of Equity 56,285.90  99.96%

Market Value of Debt:Short‐Term Debt 0

Current Portion of LTD 0

Long‐Term Debt 0

PV of Operating Leases 23.7032807

MV of Total Debt 23.70  0.04209%

Market Value of the Firm 56,309.60  100.00%

Estimated WACC 6.443318%

Regeneron PharmaceuticalsDiscounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models

Key Inputs:

     CV Growth of NOPLAT 1.00% 3% gNOPLAT

     CV Year ROIC 47.19% IR 0.055209

     WACC 6.44%

     Cost of Equity 6.45%

Fiscal Years Ending Dec. 31 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029CV

DCF Model:Free Cash Flow (FCF) 1398.47 2058.41 2441.61 2839.92 3057.17 3195.27 3498.56 3862.02 4240.09 4489.67

Continuing Value (CV) 85450.31

PV of FCF 1313.82 1816.75 2024.51 2212.24 2237.32 2196.83 2259.75 2343.51 2417.18 48713.35

Value of Operating Assets: 67535.28

Non‐Operating Adjustments Add: Excess Cash

3277.32 Add: Marketable Securities

‐23.70 Less: PV of Operating Leases

‐7592.30 Less: ESOP

Value of Equity 63196.59

Shares Outstanding 109.20

Intrinsic Value of Last FYE 578.72$     

Implied Price as of Today 588.78$     

EP Model:Economic Profit (EP) 2065.68 2399.47 2793.00 2785.22 2904.98 3192.84 3510.42 3796.01 3950.03 4105.89

Continuing Value (CV) 75422.38

PV of EP 1940.63 2117.77 2315.88 2169.63 2125.94 2195.16 2267.41 2303.46 2251.83 42996.65

Total PV of EP 62684.36

Invested Capital (last FYE) 4850.91

Value of Operating Assets: 67535.28

Non‐Operating Adjustments Add: Excess Cash

3277.32 Add: Marketable Securities

‐23.70 Less: PV of Operating Leases

‐7592.30 Less: ESOP

63196.59

109.20

Intrinsic Value of Last FYE 578.72$     

Implied Price as of Today 588.78$     

Regeneron PharmaceuticalsDividend Discount Model (DDM) or Fundamental P/E Valuation Model

Fiscal Years Ending Dec. 31 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029EEPS 19.92 22.27 24.74 23.99 24.78 27.00 29.52 31.82 33.06 34.21

Key Assumptions

   CV growth of EPS 1.00%

   CV Year ROE 9.05%

   Cost of Equity 6.45%

Future Cash Flows

     P/E Multiple (CV Year) 16.34

     EPS (CV Year) 33.06$    

     Future Stock Price 540.16$  

     Dividends Per Share ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐

     Discounted Cash Flows ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐

307.935

Intrinsic Value as of Last FYE 307.93$      

Implied Price as of Today 313.29$      

Regeneron PharmaceuticalsRelative Valuation Models

EPS EPS Est. 5yrTicker Company Price 2020E 2021E P/E 20 P/E 21 EPS gr. PEG 20 PEG 21NVS Novartis $82.12 $5.35  $5.91  15.35        13.90         7.47 2.05          1.86         

BIIB Biogen $321.05 $31.19  $30.99  10.29        10.36         3.16 3.26          3.28         

GILD Gilead Sciences $73.51 $5.22  $5.19  14.08        14.16         0.79 17.83        17.93       

BSX Boston Scientific  $36.83 $0.79  $1.26  46.62        29.23         7.7 6.05          3.80         

AGN Allergan $182.20 $3.89  $6.34  46.84        28.74         3.4 13.78        8.45         

BMY Bristol‐Myers Squibb $58.91 $3.67  $7.58  16.05        7.77           18.3 0.88          0.42         

AMGN Amgen $218.21 $13.05  $14.85  16.72        14.69         6.73 2.48          2.18         

ABBV AbbVie $79.75 $8.06  $9.65  9.89          8.26           4.87 2.03          1.70         

MRK Merck & Co., Inc. $82.49 $5.04  $5.27  16.37        15.65         8.16 2.01          1.92         

VRTX Vertex $246.61 $6.52  $8.86  37.82        27.83         27.53 1.37          1.01         ALXN Alexion Pharmaceuticals $96.23 $9.04  $10.70  10.64        8.99           13.1 0.81          0.69         

Average 21.88        16.33         4.78          3.93         

REGN Regeneron Pharmaceuticals $511.69 $19.92  $22.27  25.7          23.0           6.85 3.7            3.4           

Implied Relative Value:   P/E (EPS20)  $     435.87    P/E (EPS21) 363.53$        PEG (EPS20) 652.27$        PEG (EPS21) 599.81$     

Regeneron PharmaceuticalsSensitivity Tables

588.78             0.80              0.85              0.90              0.94              1.00              1.05              1.10             

5.00% 942.15          873.59          813.41          766.23          712.75          670.25          631.96          588.78              23.00% 25.00% 27.00% 29.80% 31.00% 32.00% 35.00%

5.50% 836.57          775.48          721.81          679.71          631.96          593.99          559.76          6.00% 660.96           643.91          626.89          603.09          592.90          584.41         558.98       

6.00% 750.25          695.20          646.81          608.83          565.73          531.45          500.53          8.00% 654.84           637.92          621.02          597.38          587.26          578.84         553.58       

6.16% 725.87          672.51          625.61          588.78          546.99          513.75          483.77          10.00% 648.73           631.93          615.14          591.67          581.62          573.26         548.18       

6.50% 678.39          628.33          584.31          549.74          510.49          479.27          451.11          11.01% 645.64           628.90          612.17          588.78          578.77          570.44         545.45       

7.00% 617.68          571.81          531.45          499.75          463.75          435.11          409.27          14.00% 636.50           619.94          603.39          580.25          570.35          562.10         537.38       

7.50% 565.73          523.42          486.18          456.94          423.72          397.28          373.43          16.00% 630.39           613.94          597.51          574.55          564.71          556.52         531.98       

18.00% 624.28           607.95          591.64          568.84          559.07          550.94         526.58       

588.78             0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6%

25.00% 538.31          550.39          563.32          577.19          592.13          608.26          625.71          588.78              5.80% 6.00% 6.30% 6.45% 6.80% 7.00% 7.20%

27.00% 542.59          554.77          567.82          581.82          596.89          613.16          630.77          30.00% 676.63           645.02          602.16          583.15          540.72          519.07         498.83       

29.00% 546.88          559.17          572.33          586.46          601.66          618.08          635.84          35.00% 679.27           647.52          604.45          585.36          542.74          520.98         500.66       

30.00% 549.03          561.38          574.60          588.78          604.06          620.54          638.38          40.00% 681.25           649.39          606.17          587.02          544.25          522.42         502.02       

31.00% 551.19          563.59          576.86          591.11          606.45          623.01          640.93          47.19% 683.36           651.38          608.01          588.78          545.86          523.95         503.48       

33.00% 555.50          568.01          581.40          595.78          611.25          627.95          646.03          50.00% 684.02           652.01          608.59          589.34          546.36          524.43         503.94       

35.00% 559.83          572.45          585.96          600.46          616.06          632.91          651.14          55.00% 685.03           652.96          609.46          590.18          547.13          525.16         504.63       

60.00% 685.87           653.75          610.19          590.88          547.77          525.77         505.22       

588.78             0.55% 0.57% 0.60% 0.63% 1.00% 1.50% 2.00%‐25.00% 578.26          575.72          571.94          568.21          525.40          475.71          433.51         

‐20.00% 588.73          586.14          582.30          578.50          534.90          484.31          441.34         

‐17.00% 595.01          592.40          588.51          584.67          540.61          489.47          446.04         

‐15.00% 599.20          596.57          592.65          588.78          544.41          492.91          449.17         

‐13.00% 603.39          600.74          596.80          592.90          548.21          496.35          452.30         

‐10.00% 609.68          607.00          603.01          599.07          553.92          501.51          457.00         

‐5.00% 620.15          617.42          613.37          609.36          563.43          510.11          464.83         

Marginal Tax Rate

Norm

al Cash

Cost of Equity

CV ROIC

2023 EYLEA

 Reven

ue 

Growth

Beta

ERP

CV Growth of NOPLAT

2020 Sanofi Reven

ue 

Growth

Risk Free Rate

Regeneron PharmaceuticalsKey Management Ratios

Fiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E

Liquidity Ratios:Quick Ratio (current assets‐inventory/current liablities) 1.29 1.70 1.58 2.21 2.82 3.32 3.89 4.13 4.21 4.26 4.31 4.40 4.47

Current Ratio (current assets/current liablities) 3.82 4.47 3.67 4.69 5.71 6.58 7.93 8.70 9.03 9.32 9.71 10.41 11.17

Cash Ratio (cash+marketable securities/current liabilities) 1.24 1.95 1.53 2.59 3.61 4.48 5.83 6.60 6.93 7.22 7.61 8.31 9.07

Asset‐Management Ratios:Inventory Turnover Ratio (net sales/inventory) 8.09 5.83 5.56 5.56 5.56 5.56 5.56 5.56 5.56 5.56 5.56 5.56 5.56

Net Working Capital Turnover Ratio (sales/NWC) 1.84 1.34 1.41 1.00 0.78 0.66 0.53 0.48 0.46 0.44 0.42 0.39 0.36

Days Sales in Inventory (365/Inventory Turnover Ratio) 45.13 62.61 65.70 65.70 65.70 65.70 65.70 65.70 65.70 65.70 65.70 65.70 65.70

Financial Leverage Ratios:Debt‐to‐Equity Ratio (total liablities/total shareholders' equity) 0.43 0.34 0.34 0.29 0.27 0.25 0.22 0.22 0.22 0.22 0.22 0.22 0.23

Debt‐To‐Capital Ratio (debt/debt+s.h. equity) 0.10 0.07 0.06 0.05 0.05 0.04 0.04 0.04 0.04 0.04 0.04 0.04 0.04

Debt Ratio (debt/total assets) 0.08 0.06 0.05 0.04 0.04 0.03 0.03 0.03 0.03 0.03 0.04 0.04 0.04

Profitability Ratios:Return on Assets (operating income/total assets) 23.73% 21.60% 14.93% 16.68% 15.45% 14.58% 12.46% 11.56% 11.32% 11.14% 10.83% 10.23% 9.65%

Return on Equity (net income/shareholder's equity) 19.51% 27.91% 19.08% 15.26% 13.88% 12.93% 10.89% 10.10% 9.93% 9.81% 9.57% 9.05% 8.57%

Return on Research Capital (Current Gross Profit/Previous Year R&D) 2.83 3.22 3.53 3.04 3.24 3.19 2.84 2.91 3.05 3.06 3.01 2.90 2.87

Payout Policy Ratios:Dividend Payout Ratio (Dividend/EPS) 0 0 0 0 0 0 0 0 0 0 0 0 0

Total Payout Ratio ((Divs. + Repurchases)/NI) 0 0 0 0 0 0 0 0 0 0 0 0 0

Regeneron PharmaceuticalsPresent Value of Operating Lease Obligations

Fiscal Years Ending Dec. 31 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Year 1 6.306 6.323 7.260 8.752 10.934 10.819 15.488 9.884 8.963 10.400 7.600

Year 2 6.496 5.586 7.562 7.827 9.853 10.191 11.757 5.685 3.912 3.800 6.600

Year 3 5.068 6.641 7.463 7.772 9.919 9.605 11.747 5.090 3.139 3.400 3.300

Year 4 6.161 6.733 7.583 7.857 9.429 9.779 11.740 4.283 2.431 2.200 2.000

Year 5 6.262 6.866 7.738 7.517 9.606 9.957 11.375 3.993 1.927 1.500 2.300

Thereafter 65.883 64.196 59.631 52.520 67.849 58.271 50.746 22.336 1.506 4.100 4.300

Total Minimum Payments 96.2 96.3 97.2 92.2 117.6 108.6 112.9 51.3 21.9 25.4 26.1

Less: Cumulative Interest 22.3 21.2 19.2 17.0 21.9 18.7 16.9 7.6 1.7 2.2 2.4

PV of Minimum Payments 73.9 75.2 78.0 75.2 95.7 89.9 95.9 43.6 20.2 23.2 23.7

Implied Interest in Year 1 Payment 2.5 2.5 2.6 2.5 3.2 3.0 3.2 1.5 0.68 0.777

Pre‐Tax Cost of Debt 3.35% 3.35% 3.35% 3.35% 3.35% 3.35% 3.35% 3.35% 3.35% 3.35% 3.35%

Years Implied by Year 6 Payment 10.5 9.3 7.7 7.0 7.1 5.9 4.5 5.6 1.0 2.7 1.9

Expected Obligation in Year 6 & Beyond 6.262 6.866 7.738 7.517 9.606 9.957 11.375 3.993 1.506 1.5 2.3

Present Value of Lease Payments

PV of Year 1 6.1 6.1 7.0 8.5 10.6 10.5 15.0 9.6 8.7 10.1 7.4

PV of Year 2 6.1 5.2 7.1 7.3 9.2 9.5 11.0 5.3 3.7 3.6 6.2

PV of Year 3 4.6 6.0 6.8 7.0 9.0 8.7 10.6 4.6 2.8 3.1 3.0

PV of Year 4 5.4 5.9 6.6 6.9 8.3 8.6 10.3 3.8 2.1 1.9 1.8

PV of Year 5 5.3 5.8 6.6 6.4 8.1 8.4 9.6 3.4 1.6 1.3 2.0

PV of 6 & beyond 46.4 46.1 43.9 39.1 50.5 44.2 39.4 17.0 1.2 3.3 3.5

Capitalized PV of Payments 73.9 75.2 78.0 75.2 95.7 89.9 95.9 43.6 20.2 23.2 23.7

Regeneron PharmaceuticalsEffects of ESOP Exercise and Share Repurchases on Common Stock Account and Number of Shares Outstanding

Number of Options Outstanding (shares):  29

Average Time to Maturity (years): 6.17

Expected Annual Number of Options Exercised: 5

Current Average Strike Price: 337.24$                

Cost of Equity: 6.45%

Current Stock Price: $511.69

Fiscal Years Ending Dec. 31 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029EIncrease in Shares Outstanding: 4.64 4.64 4.64 4.64 0.64 0.00 0.00 0.00 0.00 0.00

Average Strike Price: 337.24 337.24 337.24 337.24 337.24 337.24 337.24 337.24 337.24 337.24

Increase in Common Stock Account: 1,563.71 1,563.71 1,563.71 1,563.71 214.75 0.00 0.00 0.00 0.00 0.00

Change in Treasury Stock 74.60 74.60 74.60 74.60 74.60 74.60 74.60 74.60 74.60 74.60

Expected Price of Repurchased Shares: 511.69 544.67 579.77 617.14 656.91 699.25 744.32 792.29 843.35 897.71

Number of Shares Repurchased: 0.15 0.14 0.13 0.12 0.11 0.11 0.10 0.09 0.09 0.08

Shares Outstanding (beginning of the year) 109.20 113.69 118.19 122.70 127.21 127.74 127.63 127.53 127.44 127.35

Plus: Shares Issued Through ESOP 4.64 4.64 4.64 4.64 0.64 0.00 0.00 0.00 0.00 0.00

Less: Shares Repurchased in Treasury 0.15 0.14 0.13 0.12 0.11 0.11 0.10 0.09 0.09 0.08

Shares Outstanding (end of the year) 113.69 118.19 122.70 127.21 127.74 127.63 127.53 127.44 127.35 127.27

Regeneron PharmaceuticalsValuation of Options Granted under ESOP

Current Stock Price $511.69

Risk Free Rate 0.63%

Current Dividend Yield 0.00%

Annualized St. Dev. of Stock Returns 40.00%

Average Average B‐S ValueRange of Number Exercise Remaining Option of OptionsOutstanding Options of Shares Price Life (yrs) Price GrantedRange 1 28.609 337.24 6.17 267.61$       7,656$  

Total 29 337.24$       6.17 267.61$       7,592$