Q4 2016 Real-Time Call Brief

Highlights

We currently have 8 late-stage Phase III programs and a total of 16 product candidates in clinical development.

We expect 2 new major drug approvals in the United States this year. First, we are anticipating regulatory action in the United States at the end of March for DUPILUMAB or DUPIXENT, our breakthrough IL-4R IL-13 blocker for moderate to severe atopic dermatitis. Secondly, we expect regulatory action by the FDA for SARILUMAB, our IL-6 receptor antibody for rheumatoid arthritis.

For the full year 2017, we expect U.S. EYLEA net sales year-over-year percentage growth to be in the single-digits.

Fourth quarter US EYLEA or aflibercept net sales grew 15% year-over-year.

Net US EYLEA's sales in the fourth quarter were $858 million and full year 2016 sales were $3.32 billion.

Net ex-US EYLEA sales in the fourth quarter were $496 million which represents 20% growth year-over-year unadjusted for currency fluctuations.

Net ex-US EYLEA full year 2016 sales were $1.87 billion.

In 2016 global net sales of EYLEA exceeded $5 billion.

Turning now to PRALUENT or alirocumab, as reported by Sanofi, net sales in the fourth quarter were $41 million worldwide, with US accounting for $33 million of the total. Full year net sales were $116 million with the US accounting for $94 million.

In the fourth quarter of 2016, we earned $3.04 per diluted share on non-GAAP net income of $343 million.

For the full year 2016, we earned $11.32 per diluted share from non-GAAP net income of $1.32 billion. This represents the year-over-year increase in non-GAAP diluted EPS and net income of 36% and 37% respectively for the fourth quarter, and a year-over-year increase in non-GAAP diluted EPS and net income of 39% and 40% respectively for the full year 2016.

Regeneron's fourth quarter and full year 2016 non-GAAP net income primarily excludes non-cash share based compensation expense and includes the income tax effect of non-GAAP reconciling items. A full reconciliation of GAAP to non-GAAP earnings is set forth in our earnings release. All of the financial guidance mentioned on this call today and in our fourth quarter 2016 earnings release issued earlier this morning, assumes that PRALUENT will remain on the market throughout 2017.

Total revenues in the fourth quarter of 2016 were $1.23 billion and $4.86 billion for the full year 2016 which represented year-over-year growth of 12% for the three months and 18% for the full year.

Net product sales were $863 million in the fourth quarter of 2016 and $3.34 billion for the full year 2016 compared to $750 million in the fourth quarter of 2015, and $2.69 billion for the full year 2015.

EYLEA net product sales in United States were $858 million in the fourth quarter of 2016 and $3.32 billion for the full year 2016 compared to $746 million in the fourth quarter of 2015 and $2.68 billion for the full year 2015 which represented an increase of 15% and 24% respectively.

During the fourth quarter of 2016 EYLEA experienced a small increase in U.S. distributor inventory levels as compared to the third quarter 2016 yet remained within our normal one to two week targeted range. Additionally we experienced a slight increase in our EYLEA gross to net percentage as a result of an increase in the proportion of Medicaid patients treated with EYLEA.

Ex-US EYLEA sales were $496 million in the fourth quarter of 2016 as compared to $413 million in the fourth quarter of 2015 representing a 20% increase on a reported basis.

Ex-US EYLEA sales for the full year 2016 were $1.87 billion compared to $1.41 billion for 2015 representing a 33% increase on a reported basis. Sales growth on an operational or constant currency basis was consistent with our reported sales growth.

In the fourth quarter of 2016, Regeneron recognized $165 million from our share of net profits from EYLEA sales outside the United States and $649 million for the full year 2016.

Total Bayer collaboration revenue for the fourth quarter of 2016 was $181 million and $744 million for the full year of 2016.

Total Sanofi collaboration revenue was $131 million for the fourth quarter of 2016 and $659 million for the full year of 2016. The Sanofi collaboration revenue line item primarily consists of reimbursement of Regeneron incurred R&D expenses, reimbursement of Regeneron incurred commercialization related expenses, and our share of profits or losses in connection with commercialization of antibodies.

In the fourth quarter of 2016, our share of losses in connection with the commercialization of PRALUENT in pre-commercialization activities and costs in connection with KEVZARA and DUPIXENT was $126 million and was a loss of $459 million for the full year 2016.

Netted within these losses were the global sales of PRALUENT for the fourth quarter of 2016 as recognized by our partner Sanofi of $41 million and $116 million for the full year 2016.

Non-GAAP R&D expenses were $404 million for the fourth quarter of 2016 and $1.64 billion for the full year.

Our non-GAAP unreimbursed R&D expense which is calculated as the total non-GAAP R&D expenses, less R&D reimbursements from our collaborators, was $240 million for the three months ended December 31, 2016, and $882 million for the full year 2016.

For 2017 we would like to reiterate our previously provided guidance for non-GAAP unreimbursed R&D to be in the range of $950 million to $1.025 billion.

Non-GAAP SG&A expenses were $252 million for the fourth quarter of 2016 and $947 million for the full year of 2016.

Non-GAAP SG&A came in below 2016 guidance largely due to lower than expected fourth quarter spending on PRALUENT as well as the delayed KEVZARA launch.

We continue to expect non-GAAP SG&A expense in 2017 to be in the range of $1.175 billion and $1.250 billion. The increase in our forecasted 2017 non-GAAP SG&A expense is primarily driven by the anticipated launches of KEVZARA and DUPIXENT as well as an increase in commercialization related expenses for EYLEA.

Sanofi reimbursement of Regeneron commercialization related expensesm a line item found within Sanofi collaboration revenue, was $97 million for the fourth quarter of 2016 and $322 million for the full year 2016. We expect Sanofi reimbursement of Regeneron commercialization related expenses in 2017 to be in the range of $400 million and $450 million.

Our effective tax rate for the fourth quarter and full year 2016 was approximately 26% and 33% respectively as compared to approximately 32% and 48% for the fourth quarter and full year 2015.

As a reminder due to the adoption of accounting standards update 2016-09 the utilization of excess tax benefits in connection with employee exercises of stock options is now reflected in our effective tax rate. These deductions as well as a change in geographic mix of earnings were the primarily drivers of the reduction in our effective tax rate in 2016 as compared to 2015.

For the full year 2017, we are guiding our effective tax rate to be in the range of 32% to 38%.

From a cash flow and balance sheet perspective, we ended the fourth quarter of 2016 with cash and marketable securities of $1.9 billion.

Our capital expenditures for the full year 2016 were $512 million.

As we enter 2017 we expect our capital expenditure levels to be lower than the previous two years as is reflected in our 2017 guidance of between $375 million and $450 million. The principal driver of these forecasted lower capital expenditures is decreased spending on the renovation of our Limerick manufacturing facility.

As highlighted in our third quarter 2016 conference call, we did take the opportunity in the fourth quarter of 2016 to repurchase for $401 million, all of our remaining outstanding warrants that we issued in 2011 in connection with our convertible debt. Additionally, our remaining outstanding convertible single notes were settled on October 1, 2016.

In total, our full year 2016 cash flow statement reflects the use of funds of $656 million in connection with the reduction of outstanding warrants and repayment of the convertible senior notes which will not recur in 2017.

Additionally in December of 2016, we entered into a purchased agreement with affiliates of Biomed Realty to purchase the properties located at our Headquarters in Tarrytown, New York for $720 million.