Krause Fund Research Spring 2020

Regeneron Pharmaceuticals (NASDAQ: REGN) April 15, 2020 BUY Healthcare: Biotechnology Stock Rating: Analysts Target Price: $585-595 Andrew Kim Ian Gorkis [email protected] [email protected] Stock Values Investment Thesis DDM $312 We recommend a BUY rating for Regeneron Pharmaceuticals because of DCF/EP $589 their promising antibody focused drug pipeline, continued security in Eylea, Current Price $512 and strong balance sheet. Our target price is $585-590 which represents a Key Statistics 14% upside to the current price. Market Capitalization (MM) 5,464 Drivers of Thesis Shares Outstanding (MM) 108 • Promising drug pipeline progress: Regeneron’s REGN-EB3 was 52 Week Range $271.37-518 granted breakthrough therapy designation for Ebola in November Beta 0.52 2019. Using the same proprietary technology, Regeneron announced P/E Ratio ’20E 25.7x it will be partnering with the U.S. Department of Health and Human Services to develop a treatment for the novel COVID-19. Industry Metrics • Eylea remains successful: Eylea accounts for nearly 60% of total revenue and it has maintained sales growth through innovation and R&D (% of Sales) 36% reliability despite increasing competition. We project that Eylea will ROE ‘20E 15.4% sustain 10-14% sales growth until its 2023 U.S. patent expiration. Drugs in Phase III 17 • Low debt obligations and increasing free cash flow: Regeneron Financial Ratios remains virtually debt-free and can continue allocating resources to R&D without being limited by interest obligations like its competitors. Current Ratio 4.73 Risks to Thesis: Debt-to-Capital Ratio 5% • Heavy reliance on revenues: >80% of Regeneron’s revenue is relied on just two drugs. If more effective alternatives are approved from Company Description the biotech or pharmaceutical competitors, sales could fall greatly. • Failure to gain FDA approval: Although Regeneron has a robust Regeneron is a biopharmaceutical company pipeline, failure to gain FDA approval for these drugs on a timely specializing in antibody treatments for rare basis, or if at all, will adversely affect the company’s sales growth. and serious diseases. The company’s primary product is Eylea, which is a market leader in Earnings Estimates 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.

12-Month Performance Relative Financial Performance

Source: Yahoo Finance17 Source: FactSet.net21 EXECUTIVE SUMMARY and growing elderly population will dramatically increase demand for healthcare products and services. Regeneron Pharmaceuticals (NASDAQ: REGN) is a biotechnology company operating within the healthcare industry. We are U.S. fertility rates are declining and hitting all-time lows since issuing a BUY recommendation for Regeneron which represents a early 2008.3 Over the last decade, the fertility rate has been on a 14-15% upside from the 4/15 close price of $512. With the steady decline, reinforcing the age distribution skew to older current, volatile conditions of the economy, we believe that the aged citizens. As stated previously, a larger proportion of elderly healthcare industry presents an optimal investment opportunity people should increase revenue for healthcare companies. due to its countercyclical nature. Previous discussions of potentially harmful drug pricing reform have abated in light of Government the greater COVID-19 situation which has also presented a profit opportunity for Regeneron. Government regulation plays a crucial role in the healthcare We are optimistic that Regeneron’s two antibody candidates to industry and can cause drastic changes in how the sector cure COVID-19 will see success due to its proprietary research operates. Due to the upcoming Presidential election, the platform and collaboration with experienced partners. government impact on healthcare is up in the air. The largest Furthermore, Regeneron has been successful in diversifying its impact that the government could have on the sector is any revenues amongst its currently marketed products as well as changes made to the Affordable Care Act (ACA). The continuation investing heavily in R&D to develop its pipeline into the lucrative or potential dismantling of the ACA is contingent on who wins oncology market. the election.

The potential implications of a win for the Democratic candidate ECONOMIC ANALYSIS would be a continuation of the ACA. Hospitals would continue to save on servicing fewer uninsured patients as the ACA lowers the Demographics uninsured population. There has been speculation around Medicare-for-All (MFA), however we do not foresee this Demographics are one of the most prevalent drivers of growth in materializing in the near future. the healthcare sector. Three major components that are shaping the demographic outlook include Baby Boomers entering their If the Republican candidate wins, we will most likely see further elderly years (65+), upward trending life expectancy, and attempts to dismantle the ACA. This will likely lead to less declining U.S. fertility rates. individuals being covered by insurance and a declining willingness to undergo expensive treatments.4 The most Baby Boomers represent the largest generation in the U.S. and significant impact of the ACA’s dismantlement will be the will enter their elderly years beginning in 2030. Elderly Americans increasing number of uninsured or underinsured individuals. 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: 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 Source: Statista.com1 companies who receive revenue from patients covered by Medicare. In addition, this trend suggests that hospitals will be Life expectancy is trending upwards due to declining mortality less likely to be left with the bill from uninsured and 2 rates from cancer and declining fatalities from drug overdose. underinsured patients. This means that the elderly population in the U.S. will hold longer The government also has the potential to regulate the healthcare lifespans on average. Consequently, elderly people will require industry through the FDA. There have been recent discussions continued treatments for this extended duration. A longer living from both Republicans and Democrats about the high prices of

2 drugs. We do not predict that there will be any price control for unemployment reached 22 million. The impact of this mass measures taken by the FDA that will drastically impact revenues unemployment will likely continue to ripple through the in the short-term. Our conclusion is supported by the fact that economy. While the market is down about 11% year-to-date, the there is a division between the government arms with the House biotechnology industry is only down 3.92%. Regeneron’s stock controlled by Democrats and the Senate and President being has increased approximately 35% year-to-date. largely Republican. Several biotechnology companies including Gilead Sciences, However, we believe that action to control and reduce drug AbbVie, and Regeneron have been developing a treatment for pricing is probable in the future as we have seen that the medical the novel virus. The potential for an approved treatment is a care index has grown at a drastically higher rate than other strong factor in why markets have felt bullish on Regeneron. If sectors. This means that, in relation to other sectors, people tend Regeneron’s treatment does not earn approval, the market could to spend more on medical care currently. It would be reasonable react harshly to that news. that consumers will no longer stand for this disproportional growth and will demand some form of legislation to curb these INDUSTRY ANALYSIS 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. Industry Description

This action is a possibility, but it is not probable in the short- term. 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

Source: fred.stlouisfed.org6 for their treatments.

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 Source: Standard & Poor’s NetAdvantage Database20 their expansion efforts. Rise in FDA Drug Approvals COVID-19 Drugs must go through a five-step approval process, facilitated The economy was shocked with the outbreak and spread of the by the FDA, before they can be sold to the public market. In novel virus, COVID-19, which has had wide reaching negative 2019, the FDA approved 48 novel drugs which was the third impacts on the economy and financial markets. The fear over the largest approval class in the past 25 years. Prior to that in 2018, pandemic sent the market into a frenzy where volatility reached the FDA approved a record 59 drugs. FDA approval rates in the unprecedented highs. The biggest impact can be seen in past few years have been favorable, in 2019 for example, 35% of unemployment. The total number of Americans who have filed

3 the 48 drugs approved were “fast-track” designated because of Orphan Drugs their potential to treat unmet medical conditions.7 The NIH is a government agency incentivizing companies to Biotech companies will continue spending more on R&D and research and develop medicines for rare diseases that affect creating new pipelines if they think the FDA is more lenient small proportions of the American population. The NIH provides (continued strong approval rates). We expect increased investor grants, tax incentives, and exclusive marketing rights for confidence from this trend since the greater the number of collaborating companies for a duration of seven years. They have approved drugs, the greater the probability for biotech been steadily increasing their budget over the past six years and companies to generate revenue from their existing drug we believe that this upward trend will continue. pipelines. 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 20 Source: Standard & Poor’s NetAdvantage Database REGN-EB3 pipeline drug.

Increased R&D spending Porter’s Five Forces

R&D spending has been on a steady incline since 2016 and is Competition - High expected to grow at a CAGR of 3.0% from 2018 to 2024. Having spent a substantial amount on initial R&D expenses, biotech The biotech industry exhibits very aggressive competition, companies are poised to venture into later stages of FDA especially amongst the top firms. Large firms such as Novartis approval and potentially earn further equity investments from and Amgen retain billions of dollars in cash to compete in the confident investors. As a second-string effect, this will also development of novel drugs and capitalize on patent expirations support the companies in securing the foundations to their by creating biosimilars of competitors’ drugs. This competition is future pipelines. With the trend of increasing spending on R&D propelled by the fact that customer loyalty is nonexistent in this within the industry, we can reasonably expect that this will industry and drug demand strictly follows benefits to the patient continue to increase and lead to further revenue from new 20 19 or price. biotechnology products. Regeneron has followed this trend of upward R&D spending and we expect that it will realize revenues Potential of new entrants - Low from these projects within the next few years. 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 20 Source: Standard & Poor’s NetAdvantage Database biotech companies that require specialized equipment or startups, that source their entire drug development process, rely more heavily on their suppliers.20

4 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 Source: sec.gov/edgar22

Biotech companies enjoy the protection of a patent on newly R&D as a Percentage of Sales approved drugs, typically for 20 years. However, companies must apply for these patents long before the drug comes to market R&D is often the most significant expense for biotech companies which can significantly reduce the life of the patent. After the as the drugs produced from the process are the key revenue patent expires, competitors have the ability to launch generic drivers for the firms. This is an important metric to look at when brands of the drug called biosimilars. Biosimilars are widely comparing firms to each other to see which companies are accepted in Europe, but are newer and not as prevalent in the innovating and continuing to develop their drug pipeline. This U.S. The FDA has made it expensive for biosimilars to prove that metric also reveals that some of the larger well-established they are interchangeable with the original which has minimized biotech companies may not need to spend as much of their the risk of biosimilar alternatives. Substitutes outside of the revenue on R&D. biotech industry, such as chemical drugs from the pharmaceutical industry, pose as greater threats.20 Regeneron is much smaller compared to the majority of its competitors in terms of both enterprise value and sales. COMPETITIVE ANALYSIS However, it is spending significantly more of its revenues on R&D expenditures. By leveraging its proprietary research platform and Competitive Landscape expertise in the antibody treatment field, we are confident that the R&D spending will produce approvals and other growth The competitive landscape of the biopharmaceutical industry is opportunities for the company. We believe that this higher R&D based on the ability to efficiently develop a potential treatment, spending relative to sales will demonstrate to investors that push it through the FDA approval process, and secure a patent. Regeneron is continuing to innovate and build their drug Regeneron is a smaller player among its big pharma peers, but it pipeline. 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). Source: Factset.net21 Number of Drugs in Phase III Revenue Growth 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 Regeneron is an established biotech firm with significant in the late stages of FDA clinical trials are valuable assets to revenues nearing half of its smaller big pharma peers such as biotech firms as they have a relatively high likelihood of making it Amgen. However, its revenue growth still reflects the growth of to market and providing value to shareholders. Currently, smaller biotech startups. Between 2018 and 2019, Regeneron’s Regeneron has 8 phase 3 trials which is a smaller number than its revenue grew at an impressive 17.2% while the peer median larger competitors like Novartis and Bristol-Myers Squibb. grew at only 6.9%. We project that Regeneron’s primary product, However, Regeneron’s peers have 3-4x its market value and a Eylea, will grow at 15% for the next two years which will sustain greater amount of resources to deploy. Compared to its most its high growth levels. While its larger competitors see stagnant similarly sized competitor, Vertex, Regeneron’s trial progress is impressive and shows their efficiency in the R&D process.

5 or, even negative, growth, we expect Regeneron’s increasing debt interest payments. The healthcare industry is revenues to fund its expansion efforts. 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

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, Source: Factset.net21 interest expense, we conducted this peer comparison using EBITDA margins to neutralize the effects of capital structures. Return on Equity (ROE) Regeneron spends an unproportionally large amount on R&D expenses while still maintaining an EBITDA margin that has been ROE measures a company’s ability to generate earnings from greater than most of its much larger peers. We see this as an capital provided by equity holders. Regeneron has the second advantage to Regeneron for two reasons. Firstly, it shows the lowest ROE in comparison to its competitors, but it also has operations can be run using relatively low cash expenses and significantly less debt and lacks dividend payments. Debt can that earnings are stable. We have also observed that Regeneron increase ROE by shrinking equity and adding cash to assets while has maintained strong margins while pricing their drugs at dividends increase ROE by reducing the equity denominator. market, or even discounted, prices. This indicates that it has the Regeneron and Vertex are both smaller companies compared to flexibility to reduce pricing to support the company in times of their competitors so they reinvest their earnings and may have a difficulty. more difficult time accessing debt markets. This could be a reason for their low debt levels.

Source: Factset.net21

COMPANY ANALYSIS

Overview and Business Description Source: Macrotrends.net9-13

Regeneron Pharmaceuticals is a biopharmaceutical company that Debt to EBITDA participates in all stages of production and commercialization of

treatments for rare diseases. Using its proprietary VelociSuite The Debt/EBITDA ratio is a measure of how leveraged a company platform, the company has been able to accelerate the discovery is. This is an especially important metric in today’s economy due process of antibody-based drugs and efficiently build up its to the uncertainty in earnings and, in effect, the ability to service

6 pipeline. Regeneron has found success in marketing and research term, but it will be subject to increasing competition beyond its partnerships with other pharmaceutical companies and is 2023 patent expiration. currently sharing profits for five of their seven marketed products.

Source: sec.gov/edgar22

Dupixent Source: sec.gov/edgar22 Dupixent is a versatile immunology medicine indicated for atopic dermatitis (eczema), asthma, and chronic rhinosinusitis with Its operational revenues are segmented into product, nasal polyposis. The drug is a part of Regeneron and Sanofi’s collaboration, and other revenue. The product and collaboration 50/50 partnership and garnered over $2 billion globally for the revenues consist of sales generated by Regeneron and royalty year of 2019. While it currently holds only three indications, payments from their collaboration partners, respectively. Other Dupixent is showing promising approval progress for multiple revenues also represent income from Regeneron’s collaboration Type 2 inflammatory diseases including esophagitis and chronic agreements; however, they are paid in the form of R&D obstructive pulmonary disease (COPD). Dupixent has consistently reimbursements and grants from governmental agencies. posted triple-digit growth year-over-year since its atopic dermatitis approval in 2017. We project that the Sanofi Marketed Products 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, Source: sec.gov/edgar22 currently indicated for the treatment of metastatic or locally advanced cutaneous squamous cell carcinoma (CSCC), the Eylea second most common skin cancer. Despite the intense Eylea is Regeneron’s main revenue driver accounting for 59% of competition from Merck & Co’s Keytruda and other PD-1/PD-L1 total revenue and over $4.5 billion in sales for the year of 2019. inhibitors, Libtayo has earned over $100 million in its first twelve Since its FDA approval in 2011, Eylea has been the primary months of sales. Currently, Regeneron is seeking to expand treatment for an eye disease called wet age-related macular Libtayo’s indications to the previously untreated lung cancer degeneration (wet AMD). Since then, Eylea has been approved space. Libtayo has proved to be a promising starting point to the for four additional vision-related diseases and most recently, a lucrative oncology market and we will have to continue prefilled syringe which has simplified the administration of the monitoring its clinical trial progress. drug. Regeneron maintains the exclusive rights to U.S. sales of Eylea while Bayer holds the rights for rest of world profits. Eylea Kevzara loses its patent exclusivity in 2022 in China and Japan, 2023 in Kevzara is a collaborative treatment for moderate to severe the US, and 2025 in Europe. rheumatoid arthritis (RA) by Regeneron and Sanofi. Since its FDA approval in 2017, Kevzara has produced negligible sales and Currently, Eylea’s greatest competitors include Novartis and displayed very modest growth. However, it has been the subject Roche’s Lucentis and Novartis’ Beovu which pose as threats to of phase 2/3 clinical studies for treatment of the novel COVID-19. Eylea’s wet AMD sales. Despite the competition, Eylea has seen Regeneron believes that the drug’s interleukin-6 pathway continued growth due to its less frequent dosing schedules and inhibition functionality will extend to COVID-19 patients and negative safety concerns from Beovu. We believe that Eylea will reduce inflammation in their lungs. Kevzara faces significant remain as the preferred treatment for wet AMD in the short- competition in the arthritis space and is seen as a second-hand RA treatment to the preferred TNF inhibitors. Without the

7 COVID-19 indication, we do not foresee Kevzara to produce fourth quarter 2019, total revenues increased 13% to $2.17 substantial sales. billion beating analyst estimates by $70 million. Regeneron’s Q4 EPS of $7.50 also beat the consensus estimate by $0.59. The Pipeline Drugs strong quarter was primarily driven by a 13% increase in U.S. Eylea sales to $1.22 billion. The Sanofi collaboration revenues Regeneron has maintained consistent revenue growth through also grew largely due to Dupixent’s 136% increase to $752 its blockbusters Eylea and Dupixent, but we also observe further million in global net sales versus quarter four 2018. However, growth opportunities developing in its pipeline. Currently, Regeneron incurred a loss from the other products included in Regeneron has 22 product candidates in clinical development, the Sanofi collaboration which led to a restructuring of the eight of which are in phase 3 trials. These trials include additional agreement. Under the revised terms, Sanofi gained sole global indications for existing products as well as new drugs in diverse rights to Kevzara and ex-U.S. rights to Praluent to shift the therapeutic areas. If approved, these trials will increase the partnership’s focus on Dupixent. Recently, the original Kevzara addressable market for existing products and allow Regeneron to agreement was reinstated due to its potential approval for penetrate underrepresented markets such as the oncology COVID-19. Finally, Regeneron announced that it is entering a market. 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

22 Source: sec.gov/edgar Positives:

We believe that the most pivotal phase 3 trials fall under • Regeneron has successfully taken steps to reinforce its Dupixent and Kevzara. As the major successor to Eylea, potential successors to Eylea such as Dupixent and Dupixent’s additional approvals will be crucial in buffering the Libtayo. As mentioned in the 10-K, they are increasing impact of Eylea’s 2023 patent cliff. We are optimistic in the commercialization of these drugs through increased Dupixent’s approval probability for its pediatric use in atopic spending on marketing and seeking additional dermatitis and asthma due to its preexisting approval for adults. indications to broaden their markets. We believe that Additionally, the vast market and limited competition for COPD the impact of Eylea’s expiration is considerably treatments present a significant opportunity for profits. Kevzara dampened due to these measures as well as continued, is competing in the race to find a cure for the COVID-19 disease. projected earnings from Eylea. Regeneron and Sanofi have made considerable progress in the approval process with a phase 2/3 trial already underway outside • The FDA’s recent approval for priority review of REGN- of the U.S. Regeneron is also working with the U.S. Department EB3, a cure for Ebola, has positioned Regeneron for a of Health and Human Services to create a separate cocktail potential approval by October later this year.16 There treatment consisting of two antibodies.14 Leveraging its are currently no approved treatments for Ebola which VelociSuite technology, Regeneron aims to complete this presents an exclusive opportunity for Regeneron to treatment in 3-6 months as opposed to years with traditional capture high demand from vulnerable locations such as processes. We view Regeneron’s COVID-19 treatment efforts Congo. favorably as the boost in earnings upon approval outweigh the losses from failure. While an FDA rejection would cause major • Regeneron and Sanofi’s collaboration to treat COVID-19 losses in profits, Regeneron is not fundamentally staked to this using Kevzara has progressed to phase 2/3 trials. Earlier project and maintains a strong, immediate pipeline. this year, the partners announced a restructuring agreement that would allow Sanofi to gain global rights Recent Developments to Kevzara with Regeneron only receiving royalty payments. Since then, the two companies have agreed th 4 Quarter Fiscal Year 2019 to reinstate their 50/50 profit share for Kevzara as they seek its COVID-19 indication. If approved, Regeneron Regeneron reported strong double-digit growth driven by its will receive a much greater payout compared to its three major revenue drivers: Eylea, Dupixent, and Libtayo. In the original royalty-based deal.

8 Negatives: Therefore, we forecasted its growth at a fixed growth rate representative of its past performance. • Regeneron is attempting to break into multiple markets We grew the Sanofi collaboration revenue at 30%, the average of in which they have minimal approval experience. its historical performance over the last 3 years. Most of the Through Libtayo, they are expanding their presence in growth is attributed to Dupixent, which has six additional oncology, a disease area that is excluded from their indications in phase 3 trials. We extended this growth to 2024 currently marketed products. Eight out of nine phase 1 with Kevzara’s potential COVID-19 approval and Libtayo’s trials Regeneron is undergoing specialize in oncology. European growth in consideration. With little experience, Regeneron could potentially deplete their resources instead of realizing profits on The Bayer collaboration revenue is purely impacted by Eylea’s more certain opportunities. Despite this, we believe that European expiration in 2025. We felt that a heightened decrease the cancer market will provide earnings that outweigh in sales compared to the U.S. was appropriate due to European the uncertainty. regulation’s more flexible approach to biosimilars.

• In the last year, Regeneron’s stock has grown by 50% Other revenues represent income from manufacturing and R&D and is relatively close to its 52-week high of $572.17 We reimbursements from Regeneron’s partners and agreements. We realize that optimism from the development of a COVID- forecasted a slightly lower number than the most recent average 19 treatment has been pushing the stock higher. If a growth rates as we expect to see steadily increasing growth in competitor such as Gilead gains patent exclusivity for Regeneron’s collaborative R&D expenses. the treatment, the stock price could suffer. Continuing Value Growth VALUATION ANALYSIS The continuing value of growth we set for Regeneron was 1%. This growth rate was determined based on the nature of the Methods of Valuation investment as well as our projection of the future economy’s GDP and inflation growth rate. Additionally, when running the CV We arrived at our target stock price using three valuation growth rate through our sensitivity tests, we found that 1% gave methodologies: discounted cash flow, economic profit, and us the most fitting target price in accordance with our beliefs. relative valuation. By incorporating our assumptions of the economy, healthcare industry, and firm-specific financials into Cost of Goods Sold these models, we calculated Regeneron’s intrinsic equity value. Given that Regeneron does not pay dividends, we determined We projected cost of goods sold as the average percentage of that the dividend discount model estimate was not completely sales from the most recent three years. However, we felt that the representative of the company. 2019 COGS growth was inflated due to the temporary increase in spending on commercialization efforts for Dupixent and Libtayo Revenue Growth as stated by management. We adjusted for this by slightly decreasing the fixed percentage growth rate. We broke down Regeneron’s revenues in accordance with its 10- K: marketed products and collaboration revenues. To forecast SG&A these segments, we focused intently on the company’s historical performance, patent expirations, and industry comparisons. SG&A was calculated similarly to cost of goods sold, using a Eylea was the most dynamic forecast we made as it has a nearing historical average of the last three years. In Regeneron’s more patent expiration as well as new competition preceding that recent years, SG&A has not deviated greatly from 23% so we date. For the three years prior to the 2023 U.S. expiration, we decided to keep it at the fixed rate without adjustments. expected that Eylea will slowly taper off its growth due to increased relevance of Novartis’ Beovu. After the expiration, we R&D projected that Eylea will lose sales at roughly -30% through 2029. This is in line with the patent cliff losses exhibited by similarly In the last five years, Regeneron has stayed within a consistent sized biotech drugs.18 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 We were optimistic in Libtayo’s outlook based on its strong initial of this range, so we decided to forecast R&D growth using this response to the market as well as its ventures into additional rate of 35.5% of sales. The earlier years were outliers from indications. Moving into the forecasting period, we normalized normalized growth and were excluded from the calculation. the growth rates to 100% and gradually reduced the growth rate. The nature of Arcalyst’s rare disease area makes it improbable Capital Expenditures for the addressable market to change significantly and Regeneron is not seeking additional approvals for this drug. For forecasting Regeneron’s capital expenditures, we followed management’s guidance for 2020. Management predicted that

9 capital expenditures for 2020 would reach between $520 and DDM $620 million due to continued expansion of their manufacturing Regeneron, like most younger biotech companies, does not pay a facilities in Tarrytown, New York. This guidance only covers 2020 dividend and reinvests their money instead. The DDM’s implied capital expenditures, so for the rest of our model we used the price target was $313.29 which was much smaller than our other average capital expenditures as a percentage of sales over the valuation models. This is not an accurate representation of last few years. We figured that this rate would be an appropriate Regeneron’s valuation and we excluded it from our final assumption to increase capital expenditures by as Revenues for target price conclusion. the company continue to grow. Relative P/E

Weighted Average Cost of Capital (WACC) For our relative P/E model, it was difficult to find a large number of similar firms, so we expanded our comparable universe to The WACC that we calculated for Regeneron came out to 6.44% competitors in both the biotechnology and biopharmaceutical which we used in our DCF and EP models. To calculate the WACC industries. In the end, we compiled a group of 10 comparable for Regeneron, we had to determine appropriate assumptions peers with positive earnings. The average P/E ratio that was for the Risk-Free Rate, Beta, Equity Risk Premium, Pre-tax Cost of calculated was 21.88. This positioned Regeneron’s implied Debt, and the Marginal Tax Rate. We also had to calculate the relative value at $436.88 and indicated that Regeneron weights of their debt and equity which came out to be 99.96% is overvalued compared to its peers. We believe that Regeneron equity and .04% debt. Regeneron doesn’t issue any formal debt is valued at a premium compared to its peers because of and only had lease obligations which explains why they are so their recent highlights in the news for their COVID-19 efforts, heavily equity weighted. causing their stock price to jump and increasing the P/E ratio.

Cost of Equity SENSITIVITY ANALYSIS

Our calculated Cost of Equity came out to be 6.445% which was We decided to test various assumptions built into our model in calculated using the Risk-Free Rate, Beta, and Equity Risk order to observe the relational impact on our calculated intrinsic Premium. For the Risk-Free Rate, we used the 10-year Treasury value. The different assumptions tested as well as the results of yield on April 15, 2020 of .63%. The Beta that we used in the our sensitivity analysis are below: calculation was the average weekly Beta of all of the last 10 years. For the Equity Risk Premium, we used the Implied Equity Beta vs. ERP Risk Premium to counter the effects from the uniquely low Risk- Free Rate and factor in a more realistic Cost of Equity. We felt that it was important to test these two variables against each other. Regeneron’s capital structure is almost entirely made Cost of Debt up of equity and holds very little debt, so the Beta and ERP have a significant impact on the WACC calculation. For the Cost of Debt figure, we first had to calculate the Pre-Tax Our ERP assumption that we used is the Implied Equity Risk Cost of Debt. As Regeneron doesn’t issue any debt of their own, Premium that accounts for the extremely volatile markets and we used the 30-year yield on a Biogen issued bond plus the Risk- low interest rates. For our Beta assumption, we calculated the Free Rate to calculate the implied Pre-Tax Cost of Debt of 3.35%. average weekly Beta for each of the last 10 years for a Next, we calculated the After-Tax Cost of Debt which came out to comprehensive average. be 2.35%. As expected, a lower Beta significantly increases our calculated target price for Regeneron and a higher Beta significantly Valuation Models decreases the target price. The ERP assumption also greatly DCF & EP impacts the WACC and, therefore, the target price.

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.

10 CV Growth of NOPLAT vs. 2020 Sanofi Revenue Growth The Marginal Tax Rate had a significant impact on Regeneron’s implicit value and increased the value as it was lowered. The CV Growth of NOPLAT is a variable that has a huge impact on However, we observed that the Normal Cash did not have much Regeneron’s intrinsic value. We wanted to test and see exactly of an impact on the implicit value. Our models were much more how much the CV growth would move the target price. Due to sensitive to a change in Marginal Tax Rate. 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 Cost of Equity vs. CV ROIC target price for Regeneron as we expected. Sanofi revenue growth also increased Regeneron’s intrinsic value but to a lesser The Cost of Equity was an important variable to test as extent than the changes in NOPLAT. 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 Risk-Free Rate vs. 2023 EYLEA Revenue Growth strongly to a differing CV ROIC.

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.

11 References 1. Duffin, Erin. “U.S. - Seniors as a Percentage of the 11. “Bristol-Myers Squibb EBITDA Margin 2006-2019: Population 2050.” Statista, 17 Oct. 2019, BMY.” Macrotrends, www.statista.com/statistics/457822/share-of-old- www.macrotrends.net/stocks/charts/BMY/bristol- age-population-in-the-total-us-population/. myers-squibb/ebitda-margin.

2. Howard, Jacqueline. “US Life Expectancy Climbs for 12. “Novartis AG EBITDA Margin 2006-2019: the First Time in Four Years.” CNN, Cable News NVS.” Macrotrends, Network, 30 Jan. 2020, www.macrotrends.net/stocks/charts/NVS/novartis- www.cnn.com/2020/01/30/health/us-life- ag/ebitda-margin. expectancy-drug-overdose-deaths-cdc- study/index.html. 13. “Vertex Pharmaceuticals EBITDA 2006-2019: VRTX.” Macrotrends, 3. Bauer, Elizabeth. “Another Record Low: Will The www.macrotrends.net/stocks/charts/VRTX/vertex- U.S. Fertility Rate's Collapse Ever End?” Forbes, pharmaceuticals/ebitda. Forbes Magazine, 30 Nov. 2019, www.forbes.com/sites/ebauer/2019/11/30/anothe 14. Keown, Alex. “Sanofi and Regeneron Launch Second r-record-low-will-the-us-fertility-rates-collapse- Kevzara Trial Against COVID-19.” BioSpace, ever-end/#30d692bc5e45. BioSpace, 1 Apr. 2020, www.biospace.com/article/sanofi-and-regeneron- 4. Simmons-Duffin, Selena. “Trump Is Trying Hard To launch-second-kevzara-trial-against-covid-19/. Thwart Obamacare. How's That Going?” NPR, NPR, 14 Oct. 2019, www.npr.org/sections/health- 15. “Events & Presentations.” Regeneron shots/2019/10/14/768731628/trump-is-trying- Pharmaceuticals Inc., hard-to-thwart-obamacare-hows-that-going. investor.regeneron.com/index.php/events-and- presentations. 5. Juliette Cubanski Follow, et al. “The Facts on Medicare Spending and Financing.” The Henry J. Kaiser Family Foundation, 20 Aug. 2019, 16. Taylor, Nick Paul. “Regeneron Gets FDA Priority www.kff.org/medicare/issue-brief/the-facts-on- Review for Ebola Sibling of COVID-19 medicare-spending-and-financing/. Prospect.” FierceBiotech, 16 Apr. 2020, www.fiercebiotech.com/biotech/regeneron-gets- 6. “FRED Graph Download.” FRED, fda-priority-review-for-ebola-sibling-covid-19- fred.stlouisfed.org/graph/?g=q2ZS. prospect.

7. Center for Drug Evaluation and Research. “New 17. “Regeneron Pharmaceuticals, Inc. (REGN) Stock Drug Therapy Approvals 2019.” U.S. Food and Drug Price, Quote, History & News.” Yahoo! Finance, Administration, FDA, www.fda.gov/drugs/new- Yahoo!, 20 Apr. 2020, drugs-fda-cders-new-molecular-entities-and-new- finance.yahoo.com/quote/REGN?p=REGN. therapeutic-biological-products/new-drug-therapy- approvals-2019.1 18. Team, Trefis. “Is Roche In Trouble With $21 Billion In Sales Nearing Patent Expiry?” Forbes, Forbes 8. “EvaluatePharma Orphan Drug Report Magazine, 4 Sept. 2019, 2019.” Evaluate.com, 27 Feb. 2020, www.forbes.com/sites/greatspeculations/2019/09/ www.evaluate.com/thought- 04/what-to-make-of-roches-drugs-with-21-billion- leadership/pharma/evaluatepharma-orphan-drug- in-sales-nearing-patent-expiry/#36aeb9724417. report-2019. 19. “Regeneron Pharmaceuticals, Inc. (REGN) Analyst 9. “Regeneron Pharmaceuticals EBITDA Margin 2006- Ratings, Estimates & Forecasts.” Yahoo! Finance, 2019: REGN.” Macrotrends, Yahoo!, 20 Apr. 2020, www.macrotrends.net/stocks/charts/REGN/regene finance.yahoo.com/quote/regn/analysis/. ron-pharmaceuticals/ebitda-margin. 20. Standard & Poor’s NetAdvantage Database 10. “Amgen EBITDA Margin 2006-2019: AMGN.” Macrotrends, 21. Factset.net www.macrotrends.net/stocks/charts/AMGN/amge n/ebitda-margin. 22. sec.gov/edgar

12 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

13 Regeneron Pharmaceuticals Revenue 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 0000000000 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 (%) 00 0 0000000000 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 Pharmaceuticals Income Statement

Fiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E Revenues: 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 6202.35 Income 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 4354.05 Net 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 34.21 Weighted average shares outstanding ‐ basic (in shares) 106.34 107.90 109.20 113.69 118.19 122.70 127.21 127.74 127.63 127.53 127.44 127.35 127.27 Dividend 0 0 0 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Regeneron Pharmaceuticals Balance 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 50792.75 Total 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 Pharmaceuticals Forecasted Cash Flow Statement

Fiscal Years Ending Dec. 31 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E Operating 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 Capital Accounts 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 5200.83 Investing 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 ‐381.80 Financing 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 84.81 104.63 126.91 151.95 180.11 Change in Cash 3293.96 4027.34 4449.60 4888.19 3606.98 3521.65 3866.59 4280.18 4711.19 4999.15 Cash, 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 Pharmaceuticals Historical Cash Flow Statement

Fiscal Years Ending Dec. 31 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Cash 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 000033.469 18.861 0000 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 80.08 824.88 159.29 395.08 694.72 577.87 108.60 249.30 314.20 Net cash provided by operating activities 305.28 301.84 1575.15 583.65 743.16 1330.78 1473.40 1307.11 2693.70 2430.00 Cash 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 2027.80 Cash 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 77.10 252.10 Net 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 Pharmaceuticals Common Size Income Statement

Fiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E Revenues: 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 Pharmaceuticals Common 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 Pharmaceuticals Common 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 Pharmaceuticals Value 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 6008.77 Marginal 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 1379.83 Deferred 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 97.41 106.44 114.62 119.04 123.09 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

Invested Capital (IC): Operating Current Assets Normal 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 Liabilities 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 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 10243.34 Net 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 3367.05 Other Operating Assets Capitalized 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 3362.40 Invested 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 10290.28 Economic 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 4105.89 FCF 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 4489.67 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%

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 0.41 EP 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 Pharmaceuticals Weighted Average Cost of Capital (WACC) Estimation

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

Cost of Debt: Risk‐Free Rate 0.63% 10 year treasury rate Implied Default Premium 6.16% Implied Equity Risk Premium Pre‐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 Weights Total 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 Pharmaceuticals Discounted 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 Pharmaceuticals Dividend Discount Model (DDM) or Fundamental P/E Valuation Model

Fiscal Years Ending Dec. 31 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E EPS 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 Pharmaceuticals Relative Valuation Models

EPS EPS Est. 5yr Ticker Company Price 2020E 2021E P/E 20 P/E 21 EPS gr. PEG 20 PEG 21 NVS 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 Pharmaceuticals Sensitivity Tables

Beta 588.78 0.80 0.85 0.90 0.94 1.00 1.05 1.10 Marginal Tax Rate 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 Cash ERP 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 Normal 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

CV Growth of NOPLAT 588.78 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% Cost of Equity

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 Revenue 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 Growth Sanofi

33.00% 555.50 568.01 581.40 595.78 611.25 627.95 646.03 ROIC 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 CV 55.00% 685.03 652.96 609.46 590.18 547.13 525.16 504.63 2020 60.00% 685.87 653.75 610.19 590.88 547.77 525.77 505.22

Risk Free Rate 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 Revenue

‐13.00% 603.39 600.74 596.80 592.90 548.21 496.35 452.30

Growth ‐10.00% 609.68 607.00 603.01 599.07 553.92 501.51 457.00 EYLEA ‐5.00% 620.15 617.42 613.37 609.36 563.43 510.11 464.83 2023 Regeneron Pharmaceuticals Key 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 0000000000 Total Payout Ratio ((Divs. + Repurchases)/NI) 0 0 0 0000000000 Regeneron Pharmaceuticals Present Value of Operating Lease Obligations

Fiscal Years Ending Dec. 31 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Year 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 Pharmaceuticals Effects 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 2029E Increase 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 Pharmaceuticals Valuation 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 Value Range of Number Exercise Remaining Option of Options Outstanding Options of Shares Price Life (yrs) Price Granted Range 1 28.609 337.24 6.17 267.61$ $ 7,656 Total 29 337.24$ 6.17 267.61$ $ 7,592