Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this report. Refer to Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (filed with the SEC on February 7, 2020) for additional discussion of our financial condition and results of operations for the year ended December 31, 2018, as well as our financial condition and results of operations for the year ended December 31, 2019 compared to the year ended December 31, 2018.
Overview
We are a fully integrated biotechnology company that discovers, invents, develops, manufactures, and commercializes medicines for the treatment of serious diseases. Our commercialized medicines and product candidates in development are designed to help patients with eye diseases, allergic and inflammatory diseases, cancer, cardiovascular and metabolic diseases, pain, infectious diseases, and rare diseases.
As described in Part I, Item 1. "Business," we currently have eight products that have received marketing approval and approximately 30 product candidates in clinical development, almost all of which were homegrown in our laboratories. In addition, REGEN-COV received Emergency Use Authorization from the FDA for the treatment of mild to moderate COVID-19 in certain patients at high-risk for progressing to severe COVID-19 and/or hospitalization. Refer to Part I, Item 1. "Business - Products" and "Business - Programs in Clinical Development" for additional information.
Our ability to generate profits and to generate positive cash flow from operations over the next several years depends significantly on the continued success in commercializing EYLEA and Dupixent. We expect to continue to incur substantial expenses related to our research and development activities, a portion of which we expect to be reimbursed by our collaborators. Also, our research and development activities outside our collaborations, the costs of which are not reimbursed, are expected to expand and require additional resources. We also expect to incur substantial costs related to the commercialization of our marketed products. Our financial results may fluctuate from quarter to quarter and will depend on, among other factors, the net sales of our marketed products; the scope and progress of our research and development efforts; the timing of certain expenses; the continuation of our collaborations, in particular with Sanofi and Bayer, including our share of collaboration profits or losses from sales of commercialized products and the amount of reimbursement of our research and development expenses that we receive from collaborators; and the amount of income tax expense we incur, which is partly dependent on the profits or losses we earn in each of the countries in which we operate. We cannot predict whether or when new products or new indications for marketed products will receive regulatory approval or, if any such approval is received, whether we will be able to successfully commercialize such product(s) and whether or when they may become profitable.
Critical Accounting Policies and Use of Estimates
A summary of the significant accounting policies that impact us is provided in Note 1 to our Consolidated Financial Statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if:
• it requires an assumption (or assumptions) regarding a future outcome; and
• changes in the estimate or the use of different assumptions to prepare the estimate could have a material effect on our results of operations or financial condition.
Management believes the current assumptions used to estimate amounts reflected in our Consolidated Financial Statements are appropriate. However, if actual experience differs from the assumptions used in estimating amounts reflected in our Consolidated Financial Statements, the resulting changes could have a material adverse effect on our results of operations, and, in certain situations, could have a material adverse effect on our liquidity and financial condition. The critical accounting estimates that impact our Consolidated Financial Statements are described below.
Revenue Recognition - Product Revenue
We recognize revenue from product sales at a point in time when our customer is deemed to have obtained control of the product, which generally occurs upon receipt by our customer.
The amount of revenue we recognize from product sales may vary due to rebates, chargebacks, and discounts provided under governmental and other programs, distribution-related fees, and other sales-related deductions. In order to determine the transaction price, we estimate, utilizing the expected value method, the amount of variable consideration that we will be entitled to. This estimate is based upon contracts with customers and government agencies, statutorily-defined discounts applicable to
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government-funded programs, historical experience, estimated payor mix, and other relevant factors. Calculating these provisions involves estimates and judgments. We review our estimates of rebates, chargebacks, and other applicable provisions each period and record any necessary adjustments in the current period's net product sales. Refer to the "Results of Operations - Revenues - Net Product Sales " section below for further details regarding our provisions, and credits/payments, for sales-related deductions.
Collaborative Arrangements
We have entered into various collaborative arrangements to research, develop, manufacture, and commercialize product candidates and utilize our technology platforms.
Our collaboration agreements may require us to deliver various rights, services, and/or goods across the entire life cycle of a product or product candidate. In agreements involving multiple goods or services promised to be transferred to our collaborator, we must assess, at the inception of the contract, whether each promise represents a separate obligation ( i.e. , is "distinct"), or whether such promises should be combined as a single unit of account. When we have a combined unit of account which includes a license and providing research and development services to our collaborator, recognition of up-front payments and development milestones earned from our collaborator is deferred (as a liability) and recognized over the development period ( i.e. , over time). In arrangements where we satisfy our obligation(s) during the development phase over time, we recognize amounts initially deferred over time typically using an input method on the basis of our research and development costs incurred relative to the total expected cost which determines the extent of our progress toward completion. We review our estimates each period and make revisions to such estimates as necessary. Due to the variability in the scope of activities and length of time necessary to develop a drug product, potential delays in development programs, changes to development plans and budgets as programs progress, including if we and our collaborators decide to expand or contract our clinical plans for a drug candidate in various disease indications, and uncertainty in the ultimate requirements to obtain governmental approval for commercialization, revisions to our estimates are likely to occur periodically and could result in material changes to amounts recognized each year in the future.
When we are entitled to reimbursement of all or a portion of the expenses ( e.g. , research and development expenses) that we incur under a collaboration, we record those reimbursable amounts in the period in which such costs are incurred.
If both we and our collaborator perform development work or commercialization-related activities and share costs, we also recognize, as expense ( i.e. , research and development expense or selling, general and administrative expense, as applicable) in the period when our collaborator incurs such expenses, the portion of the collaborator's expenses that we are obligated to reimburse. Our collaborators provide us with estimated expenses for the most recent fiscal quarter. Our collaborators' estimates are reconciled to their actual expenses for such quarter in the subsequent fiscal quarter, and our portion of our collaborators' expenses that we are obligated to reimburse is adjusted on a prospective basis accordingly, as necessary.
Under certain of the Company's collaboration agreements, product sales and cost of sales may be recorded by the Company's collaborators as they are deemed to be the principal in the transaction. In arrangements where we:
• are obligated to use commercially reasonable efforts to supply commercial product to our collaborator, we may be reimbursed for our manufacturing costs as commercial product is shipped to the collaborator; however, recognition of such cost reimbursements is deferred until the product is sold by our collaborator to third-party customers;
• share in any profits or losses arising from the commercialization of such products, we record our share of the variable consideration, representing net product sales less cost of goods sold and shared commercialization and other expenses, in the period in which such underlying sales occur and costs are incurred by the collaborator; and
• receive royalties and/or sales-based milestone payments from our collaborator, we recognize such amounts in the period earned.
Our collaborators provide us with estimates of product sales and our share of profits or losses, as applicable, for such quarter. These estimates are reconciled to actual results in the subsequent fiscal quarter, and collaboration revenue is adjusted accordingly, as necessary.
Stock-based Compensation
We recognize stock-based compensation expense for equity grants under our long-term incentive plans to employees and non-employee members of our board of directors based on the grant-date fair value of those awards. The grant-date fair value of an award is generally recognized as compensation expense over the award's requisite service period.
We use the Black-Scholes model to compute the estimated fair value of stock option awards. Using this model, fair value is calculated based on assumptions with respect to (i) expected volatility of our Common Stock price, (ii) the periods of time over which employees and members of our board of directors are expected to hold their options prior to exercise (expected lives), (iii) expected dividend yield on our Common Stock, and (iv) risk-free interest rates, which are based on quoted U.S. Treasury rates for securities with maturities approximating the options' expected lives. Expected volatility has been estimated based on actual movements in our stock price over the most recent historical periods equivalent to the options' expected lives. Expected lives are principally based on our historical exercise experience with previously issued employee and board of directors option grants. The
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expected dividend yield is zero as we have never paid dividends and do not currently anticipate paying any in the foreseeable future.
Stock-based compensation expense also includes an estimate, which is made at the time of grant, of the number of awards that are expected to be forfeited. This estimate is revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
We use a Monte Carlo simulation to compute the estimated fair value of performance-based restricted stock units, which are subject to vesting based on the Company's attainment of pre-established market performance goals.
The assumptions used in computing the fair value of equity awards reflect our best estimates but involve uncertainties related to market and other conditions, many of which are outside of our control. Changes in any of these assumptions may materially affect the fair value of awards granted and the amount of stock-based compensation recognized in future periods.
Income Taxes
We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns, including deferred tax assets and liabilities for expected amounts of global intangible low-taxed income ("GILTI") inclusions. Deferred tax assets and liabilities are determined as the difference between the tax basis of assets and liabilities and their respective financial reporting amounts ("temporary differences") at enacted tax rates in effect for the years in which the differences are expected to reverse. A valuation allowance is established for deferred tax assets for which it is more likely than not that some portion or all of the deferred tax assets will not be realized. We periodically re-assess the need for a valuation allowance against our deferred tax assets based on all available evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, results of recent operations, and our historical earnings experience by taxing jurisdiction. Significant judgment is required in making this assessment.
Uncertain tax positions, for which management's assessment is that there is more than a 50% probability that the position will be sustained upon examination by a taxing authority based upon its technical merits, are subjected to certain recognition and measurement criteria. Significant judgment is required in making this assessment, and, therefore, we re-evaluate uncertain tax positions and consider various factors, including, but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, and changes in facts or circumstances related to a tax position. We adjust the level of the liability to reflect any subsequent changes in the relevant facts and circumstances surrounding the uncertain positions.
Inventories
We capitalize inventory costs associated with our products prior to regulatory approval when, based on management's judgment, future commercialization is considered probable and the future economic benefit is expected to be realized; otherwise, such costs are expensed. The determination to capitalize inventory costs is based on various factors, including status and expectations of the regulatory approval process, any known safety or efficacy concerns, potential labeling restrictions, and any other impediments to obtaining regulatory approval.
We periodically analyze our inventory levels to identify inventory that may expire prior to expected sale or has a cost basis in excess of its estimated realizable value, and write-down such inventories as appropriate. In addition, our products are subject to strict quality control and monitoring which we perform throughout the manufacturing process. If certain batches or units of product no longer meet quality specifications or become obsolete due to expiration, we record a charge to write down such unmarketable inventory to its estimated realizable value.
Contingencies
We accrue, based on management's judgment, for an estimated loss when the potential loss from claims or legal proceedings is considered probable and the amount can be reasonably estimated. As additional information becomes available, or, based on specific events such as the outcome of litigation or settlement of claims, we reassess the potential liability related to pending claims and litigation, and may change our estimates.
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Results of Operations
Certain revisions have been made to the previously reported December 31, 2019 and 2018 amounts below in connection with changing the presentation of certain amounts earned from collaborators; see Note 1 to our Consolidated Financial Statements for further details.
Net Income
Year Ended December 31,
(In millions, except per share data) 2020 2019 2018
Revenues $ 8,497.1 $ 6,557.6 $ 5,145.6
Operating expenses 4,920.5 4,347.8 2,611.2
Income from operations 3,576.6 2,209.8 2,534.4
Other income (expense), net 233.8 219.3 19.1
Income before income taxes 3,810.4 2,429.1 2,553.5
Income tax expense 297.2 313.3 109.1
Net income $ 3,513.2 $ 2,115.8 $ 2,444.4
Net income per share - diluted $ 30.52 $ 18.46 $ 21.29
Revenues
Year Ended December 31, $ Change
(In millions) 2020 2019 2018 2020 vs. 2019 2019 vs. 2018
Net product sales in the United States:
EYLEA $ 4,947.2 $ 4,644.2 $ 4,076.7 $ 303.0 $ 567.5
Libtayo 270.7 175.7 14.8 95.0 160.9
Praluent 150.9 * * * *
REGEN-COV 185.7 — — 185.7 —
ARCALYST 13.1 14.5 14.7 (1.4) (0.2)
Sanofi and Bayer collaboration revenue:
Sanofi 1,186.4 403.6 (125.7) 782.8 529.3
Bayer 1,186.1 1,145.6 1,036.1 40.5 109.5
Other revenue 557.0 174.0 129.0 383.0 45.0
Total revenues $ 8,497.1 $ 6,557.6 $ 5,145.6 $ 1,939.5 $ 1,412.0
* Net product sales of Praluent in the United States were recorded by Sanofi prior to April 1, 2020
Net Product Sales
Net product sales of EYLEA in the United States increased in 2020, compared to 2019, due to higher sales volume partly offset by an increase in sales-related deductions primarily due to higher rebates and discounts. Net product sales of EYLEA in the United States were lower in the second quarter of 2020, compared to the second quarter of 2019, due to lower sales volume attributable to the impact of the COVID-19 pandemic. While we observed an increase in U.S. EYLEA demand during the remainder of 2020 relative to the second quarter of 2020, we are unable to predict whether there will be additional adverse impacts on net product sales from shelter-in-place, social distancing, and other similar measures due to the COVID-19 pandemic (refer to Part I, Item 1A. "Risk Factors - Our business may be further adversely affected by the effects of the COVID-19 pandemic ). Refer also to Part I, Item 1A. "Risk Factors - Sales of our marketed products are dependent on the availability and extent of reimbursement from third-party payors, and changes to such reimbursement may materially harm our business, prospects, operating results, and financial condition " for information and potential future risks concerning the MFN Interim Final Rule issued by the HHS on Medicare reimbursements for EYLEA.
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Effective April 1, 2020, the Company is solely responsible for the development and commercialization of Praluent in the United States and records net product sales of Praluent in the United States. Refer to Part I, Item. 1. "Collaboration, License, and Other Agreements - Sanofi - Antibody " for further details.
During the third and fourth quarters of 2020, net product sales of REGEN-COV were recorded in connection with our July 2020 agreement with the U.S. government. In January 2021, the Company announced an agreement to manufacture and deliver additional filled and finished drug product of REGEN-COV to the U.S. government. Refer to Part I, Item 1. "Agreements Related to COVID-19 - U.S. Government " section above for further details.
Revenue from product sales is recorded net of applicable provisions for rebates, chargebacks, and discounts; distribution-related fees; and other sales-related deductions. The following table summarizes the provisions, and credits/payments, for sales-related deductions.
(In millions) Rebates,
Chargebacks, and Discounts Distribution-
Related Fees Other Sales-
Related Deductions Total
Balance as of December 31, 2017 $ 29.9 $ 34.1 $ 21.3 $ 85.3
Provisions
223.4 211.0 44.5 478.9
Credits/payments (212.2) (203.1) (57.5) (472.8)
Balance as of December 31, 2018 41.1 42.0 8.3 91.4
Provisions
423.2 242.9 61.8 727.9
Credits/payments (384.0) (238.5) (40.7) (663.2)
Balance as of December 31, 2019 80.3 46.4 29.4 156.1
Provisions
762.9 279.9 94.1 1,136.9
Credits/payments (641.0) (249.1) (78.7) (968.8)
Balance as of December 31, 2020 $ 202.2 $ 77.2 $ 44.8 $ 324.2
Sanofi Collaboration Revenue
Year Ended December 31,
(In millions) 2020 2019 2018
Antibody:
Regeneron's share of profits (losses) in connection with commercialization of antibodies $ 785.2 $ 209.3 $ (227.0)
Sales-based milestone earned 50.0 — —
Reimbursement for manufacturing of commercial supplies (1)
368.0 216.0 113.7
Total Antibody 1,203.2 425.3 (113.3)
Immuno-oncology:
Regeneron's share of losses in connection with commercialization of Libtayo outside the United States
(25.7) (21.7) (12.4)
Reimbursement for manufacturing of commercial supplies (1)
8.9 — —
Total Immuno-oncology (16.8) (21.7) (12.4)
Total Sanofi collaboration revenue $ 1,186.4 $ 403.6 $ (125.7)
(1) Corresponding costs incurred by us in connection with such production is recorded within Cost of collaboration and contract manufacturing
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Antibody
The increase in our share of profits in connection with commercialization of antibodies in 2020, compared to 2019, was driven by higher Dupixent profits and, to a lesser extent, our new agreement with Sanofi under which, effective April 1, 2020, we are no longer sharing in losses with Sanofi in connection with the commercialization of Praluent (see further information below).
During 2020, the Company earned, and recognized as revenue, the first $50.0 million sales-based milestone from Sanofi, upon aggregate annual sales of Dupixent, Kevzara, and Praluent outside the United States exceeding $1.0 billion on a rolling twelve-month basis. We are entitled to receive up to an aggregate of $200.0 million in additional milestone payments from Sanofi, including the second sales milestone in the amount of $50.0 million, when such sales outside the United States exceed $1.5 billion on a rolling twelve-month basis.
The increase in reimbursements for manufacturing of commercial supplies in 2020, compared to 2019, was primarily due to higher Dupixent sales, as revenue for such cost reimbursements is recognized when the product is sold by Sanofi to third-party customers.
Regeneron's share of profits (losses) in connection with the commercialization of Dupixent, Praluent (through March 31, 2020), and Kevzara is summarized below:
Year Ended December 31,
(In millions) 2020 2019 2018
Dupixent, Praluent, and Kevzara net product sales *
$ 4,394.5 $ 2,811.0 $ 1,325.4
Regeneron's share of collaboration profits (losses)
871.5 233.0 (227.0)
Reimbursement of development expenses incurred by Sanofi in accordance with Regeneron's payment obligation
(86.3) (23.7) —
Regeneron's share of profits (losses) in connection with commercialization of antibodies
$ 785.2 $ 209.3 $ (227.0)
Regeneron's share of collaboration profits as a percentage of Dupixent, Praluent, and Kevzara net product sales
18% 7% **
* Global net product sales of Dupixent and Kevzara are recorded by Sanofi. The quarter ended March 31, 2020 was the last quarter for which Sanofi and the Company shared profits and losses in connection with Sanofi's global net sales and the related commercialization of Praluent (see further details below); therefore, the quarter ended March 31, 2020 was the last quarter for which net product sales of Praluent were included in the table above.
** Percentage not meaningful
As described in Part I, Item 1. "Collaboration, License, and Other Agreements - Sanofi - Antibody", effective April 1, 2020, the Company is solely responsible for the development and commercialization of Praluent in the United States. Under the new agreement, Sanofi is solely responsible for the development and commercialization of Praluent outside of the United States, and pays the Company a 5% royalty on Sanofi’s net product sales of Praluent outside the United States.
Bayer Collaboration Revenue
Year Ended December 31,
(In millions) 2020 2019 2018
Regeneron's net profit in connection with commercialization of EYLEA outside the United States $ 1,107.9 $ 1,091.4 $ 992.3
Reimbursement for manufacturing of commercial supplies (1)
78.2 54.2 43.8
Total Bayer collaboration revenue $ 1,186.1 $ 1,145.6 $ 1,036.1
(1) Corresponding costs incurred by us in connection with such production is recorded within Cost of collaboration and contract manufacturing
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Bayer records net product sales of EYLEA outside the United States. Regeneron's net profit in connection with commercialization of EYLEA outside the United States is summarized below:
Year Ended December 31,
(In millions) 2020 2019 2018
EYLEA net product sales outside the United States
$ 2,961.5 $ 2,897.4 $ 2,668.9
Regeneron's share of collaboration profit from sales outside the United States
$ 1,165.8 $ 1,148.0 $ 1,045.9
Reimbursement of development expenses incurred by Bayer in accordance with Regeneron's payment obligation
(57.9) (56.6) (53.6)
Regeneron's net profit in connection with commercialization of EYLEA outside the United States
$ 1,107.9 $ 1,091.4 $ 992.3
Regeneron's net profit as a percentage of EYLEA net product sales outside the United States
37% 38% 37%
Other Revenue
Other revenue increased in 2020, compared to 2019, primarily due to recognition of revenue of $186.7 million in connection with our agreement with BARDA related to funding of certain development activities for antibodies for the treatment of COVID-19. In addition, other revenue increased, to a lesser extent, due to the following:
• recognition of revenue in connection with our agreement with BARDA related to funding of certain development activities for Inmazeb for the treatment of Ebola;
• effective April 1, 2020, Sanofi's reimbursement for our manufacturing of Praluent commercial supplies and royalties of 5% on Sanofi’s net product sales of Praluent outside the United States; and
• royalties in connection with a June 2009 agreement with Novartis, under which we receive royalties on worldwide sales of Novartis' Ilaris ® (canakinumab). The royalty rates in the agreement start at 4% and reach 15% when annual sales exceed $1.5 billion.
Expenses
Year Ended December 31, $ Change
(In millions, except headcount data) 2020 2019 2018 2020 vs. 2019 2019 vs. 2018
Research and development (1)
$ 2,735.0 $ 2,450.0 $ 1,468.8 $ 285.0 $ 981.2
Selling, general, and administrative (1)
1,346.0 1,341.9 1,127.2 4.1 214.7
Cost of goods sold (2)
491.9 362.3 180.0 129.6 182.3
Cost of collaboration and contract manufacturing (3)
628.0 402.8 237.5 225.2 165.3
Other operating (income) expense, net (280.4) (209.2) (402.3) (71.2) 193.1
Total operating expenses $ 4,920.5 $ 4,347.8 $ 2,611.2 $ 572.7 $ 1,736.6
Average headcount
8,495 7,773 6,906 722 867
(1) Includes costs incurred as well as cost reimbursements from collaborators who are not deemed to be our customers
(2) Cost of goods sold includes costs in connection with producing commercial supplies for products that are sold by Regeneron in the United States ( i.e. , for which we record net product sales) and any royalties we are obligated to pay on such sales, period costs for our Limerick manufacturing facility, and amounts we are obligated to pay to Sanofi for its share of Libtayo U.S. gross profits
(3) Cost of collaboration and contract manufacturing includes costs we incur in connection with producing commercial drug supplies for collaborators and others
Operating expenses in 2020, 2019, and 2018 included a total of $432.0 million, $464.3 million, and $427.4 million, respectively, of non-cash compensation expense related to equity awards granted under our long-term incentive plans. As of December 31, 2020, unrecognized non-cash compensation expense related to outstanding stock options and unvested restricted stock (including performance-based restricted stock units) was $491.5 million and $685.5 million, respectively. We expect to recognize this non-cash compensation expense related to stock options and restricted stock over weighted-average periods of 1.8 years and 3.7 years, respectively.
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Research and Development Expenses
The following table summarizes our estimates of direct research and development expenses by clinical development program and other significant categories of research and development expenses. Direct research and development expenses are comprised primarily of costs paid to third parties for clinical and product development activities, including costs related to preclinical research activities, clinical trials, and the portion of research and development expenses incurred by our collaborators that we are obligated to reimburse. Indirect research and development expenses have not been allocated directly to each program, and primarily consist of costs to compensate personnel, overhead and infrastructure costs to maintain our facilities, and other costs related to activities that benefit multiple projects. Clinical manufacturing costs primarily consist of costs to manufacture bulk drug product for clinical development purposes as well as related external drug filling, packaging, and labeling costs. Clinical manufacturing costs also includes pre-launch commercial supplies which did not meet the criteria to be capitalized as inventory (see "Critical Accounting Policies and Use of Estimates - Inventories" above). The table below also includes reimbursements of research and development expenses by collaborators, as when we are entitled to reimbursement of all or a portion of such expenses that we incur under a collaboration, we record those reimbursable amounts in the period in which such costs are incurred.
Year Ended December 31, $ Change
(In millions) 2020 2019 *
2018 *
2020 vs. 2019 2019 vs. 2018
Direct research and development expenses:
REGEN-COV (casirivimab and imdevimab)
$ 290.7 — — $ 290.7 —
Fasinumab 167.8 $ 203.4 $ 174.3 (35.6) $ 29.1
Libtayo (cemiplimab) 155.3 160.8 129.4 (5.5) 31.4
Dupixent (dupilumab) 129.7 104.3 102.9 25.4 1.4
Kevzara (sarilumab) 73.4 13.7 7.1 59.7 6.6
EYLEA 72.2 55.4 28.8 16.8 26.6
Evkeeza (evinacumab) 33.8 36.1 21.9 (2.3) 14.2
Up-front payments related to license and collaboration agreements
85.0 430.0 — (345.0) 430.0
Other product candidates in clinical development and other research programs
387.3 305.9 219.0 81.4 86.9
Total direct research and development expenses
1,395.2 1,309.6 683.4 85.6 626.2
Indirect research and development expenses:
Payroll and benefits 816.6 705.8 607.0 110.8 98.8
Lab supplies and other research and development costs
138.3 119.9 95.4 18.4 24.5
Occupancy and other operating costs 335.7 304.7 246.3 31.0 58.4
Total indirect research and development expenses
1,290.6 1,130.4 948.7 160.2 181.7
Clinical manufacturing costs
686.1 596.6 554.0 89.5 42.6
Reimbursement of research and development expenses by collaborators (636.9) (586.6) (717.3) (50.3) 130.7
Total research and development expenses
$ 2,735.0 $ 2,450.0 $ 1,468.8 $ 285.0 $ 981.2
* Certain prior year amounts have been reclassified to conform to the current year's presentation
Research and development expenses in 2020 included $85.0 million in aggregate up-front payments made in connection with our collaboration agreement with Intellia. Research and development expenses in 2019 included a $400.0 million up-front payment to Alnylam. See Part I, Item 1. "Collaboration, License, and Other Agreements" for further information. Research and development expenses in 2020 also included costs in connection with investigating the use of REGEN-COV and Kevzara for COVID-19. Research and development expenses included non-cash compensation expense of $238.6 million, $250.4 million, and $229.0 million in 2020, 2019, and 2018, respectively.
There are numerous uncertainties associated with drug development, including uncertainties related to safety and efficacy data from each phase of drug development, uncertainties related to the enrollment and performance of clinical trials, changes in
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regulatory requirements, changes in the competitive landscape affecting a product candidate, and other risks and uncertainties described in Part I, Item 1A. "Risk Factors" (including those relating to the disruptions caused by the COVID-19 pandemic). There is also variability in the duration and costs necessary to develop a pharmaceutical product, potential opportunities and/or uncertainties related to future indications to be studied, and the estimated cost and scope of the projects. The lengthy process of seeking FDA and other applicable approvals, and subsequent compliance with applicable statutes and regulations, require the expenditure of substantial resources. Any failure by us to obtain, or delay in obtaining, regulatory approvals could materially adversely affect our business. We are unable to reasonably estimate if our product candidates in clinical development will generate material product revenues and net cash inflows.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses increased in 2020, compared to 2019, primarily due to higher headcount-related costs, an increase in commercialization-related expenses for EYLEA and Libtayo, higher contributions to independent not-for-profit patient assistance organizations, and, effective April 1, 2020, no longer receiving Praluent-related cost reimbursements from Sanofi for Regeneron-incurred expenses. These increases were largely offset by a reversal of accruals for litigation-related loss contingencies as a result of the October 2020 ruling by the Technical Board of Appeal of the EPO and its impact on certain patent infringement actions in Europe relating to Praluent (see Note 15 to our Consolidated Financial Statements for additional details). In addition, in 2019, we recorded a $35.2 million charge related to employee separation costs, as the Company eliminated certain commercialization activities and related headcount in connection with the restructuring of the antibody agreement with Sanofi (as described in Part I, Item 1. "Business - Collaboration, License, and Other Agreements - Sanofi - Antibody "). Selling, general, and administrative expenses also included $153.0 million, $167.7 million, and $169.2 million of non-cash compensation expense in 2020, 2019, and 2018, respectively.
Cost of Goods Sold
Cost of goods sold increased in 2020, compared to 2019, primarily due to the recognition of manufacturing costs in connection with the initiation of product sales of REGEN-COV (which commenced in the third quarter of 2020) and Praluent in the United States (which were recorded by Sanofi prior to April 1, 2020), as well as higher product sales of Libtayo and EYLEA in the United States. These increases were partly offset by lower period costs for our Limerick commercial manufacturing facility. In addition, Cost of goods sold for the years ended December 31, 2020 and 2019 included inventory write-downs and reserves totaling $39.2 million and $73.8 million, respectively.
Cost of Collaboration and Contract Manufacturing
The increase in Cost of collaboration and contract manufacturing in 2020, compared to 2019, was primarily due to the recognition of manufacturing costs associated with higher sales of Dupixent and recognition of costs in connection with manufacturing ex-U.S. commercial supplies of Praluent for Sanofi. In addition, Cost of collaboration and contract manufacturing increased in 2020, compared to 2019, due to process validation costs in connection with manufacturing Inmazeb under our BARDA agreement.
Other Operating (Income) Expense
Other operating (income) expense, net, includes recognition of a portion of amounts previously deferred in connection with up-front and development milestone payments, as applicable, received in connection with Sanofi IO, Teva, and MTPC collaborative arrangements. In these arrangements, we satisfy our obligation(s) during the development phase over time, and, as a result, recognize amounts initially deferred over time using an input method on the basis of our research and development costs incurred relative to the total expected cost which determines the extent of our progress toward completion. See the Critical Accounting Policies and Use of Estimates section above for further details.
During 2020, we updated our estimate of the total research and development costs expected to be incurred (which resulted in changes to the estimate of the stage of completion) in connection with the aforementioned collaboration agreements, and therefore recorded cumulative catch-up adjustments of $99.8 million, net, as an increase to other operating income. During 2018, we updated our estimate of the total research and development costs expected to be incurred for the Sanofi IO Collaboration, including in connection with the termination of the 2015 IO Discovery Agreement, and, as result, a cumulative catch-up adjustment of $135.0 million was recorded as an increase to other operating income.
Other Income (Expense)
Other income (expense), net, in 2020, compared to 2019, was positively impacted by the recognition of unrealized and realized gains on marketable securities. Other income (expense), net, in 2020, compared to 2019, was negatively impacted by a decrease in interest income earned on available-for-sale debt securities primarily due to lower interest rates. In addition, interest expense in 2020, compared to 2019, increased as a result of the 2020 bridge loan facility and issuance of senior notes (as described below).
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Income Taxes
Year Ended December 31,
(In millions, except effective tax rate) 2020 2019 2018
Income tax expense
$ 297.2 $ 313.3 $ 109.1
Effective tax rate
7.8% 12.9% 4.3%
Our effective tax rate for 2020 was positively impacted, compared to the U.S. federal statutory rate, primarily by stock-based compensation, and, to a lesser extent, federal tax credits for research activities and income earned in foreign jurisdictions with tax rates lower than the U.S. federal statutory rate. Our effective tax rate for 2019 was positively impacted, compared to the U.S. federal statutory rate, primarily by federal tax credits for research activities, stock-based compensation, and the foreign-derived intangible income deduction. Our effective tax rate for 2018 was positively impacted, compared to the U.S. federal statutory rate, primarily by the sale of non-inventory related assets between foreign subsidiaries (for which we recorded a $162.1 million net income tax benefit), and, to a lesser extent, the federal tax credit for research activities, stock-based compensation, income earned in foreign jurisdictions with tax rates lower than the U.S. federal statutory rate, and tax planning in connection with the bill known as the "Tax Cuts and Jobs Act". During 2018, we also recorded an income tax benefit of $68.0 million as a final adjustment to the provisional amount recorded as of December 31, 2017 in connection with the Tax Cuts and Jobs Act.
Liquidity and Capital Resources
Our financial condition is summarized as follows:
As of December 31,
(In millions) 2020 2019 $ Change
Financial assets:
Cash and cash equivalents $ 2,193.7 $ 1,617.8 $ 575.9
Marketable securities - current 1,393.3 1,596.5 (203.2)
Marketable securities - noncurrent 3,135.6 3,256.8 (121.2)
$ 6,722.6 $ 6,471.1 $ 251.5
Borrowings:
Long-term debt $ 1,978.5 — $ 1,978.5
Working capital:
Current assets $ 9,779.1 $ 7,689.1 $ 2,090.0
Current liabilities 2,697.4 2,096.6 600.8
$ 7,081.7 $ 5,592.5 $ 1,489.2
As of December 31, 2020, we also had borrowing availability of $750.0 million under a revolving credit facility (see further description under " Credit Facility " below).
Sources and Uses of Cash for the Years Ended December 31, 2020, 2019, and 2018
As of December 31, $ Change
(In millions) 2020 2019 2018 2020 vs. 2019 2019 vs. 2018
Cash flows provided by operating activities $ 2,618.1 $ 2,430.0 $ 2,195.1 $ 188.1 $ 234.9
Cash flows used in investing activities $ (70.6) $ (2,027.8) $ (1,463.0) $ 1,957.2 $ (564.8)
Cash flows used in financing activities $ (1,970.5) $ (252.1) $ (77.1) $ (1,718.4) $ (175.0)
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Cash Flows from Operating Activities
2020
Our net income of $3.513 billion in 2020 included net unrealized gains on equity securities (included in other non-cash items) of $196.0 million . As of December 31, 2020, trade, Sanofi, and other accounts receivables increased by $1.356 billion, compared to December 31, 2019, partly as a result of extending payment terms to certain of our EYLEA customers due to the COVID-19 pandemic. Inventories increased as of December 31, 2020, compared to December 31, 2019, partially as a result of purchasing additional raw materials in anticipation of potential disruptions to our supply chain due to the COVID-19 pandemic. Deferred taxes as of December 31, 2020 decreased by $75.6 million, compared to December 31, 2019, primarily due to non-cash compensation expense and unrealized gains (net) on equity securities as described above.
2019
Our net income of $2.116 billion in 2019 was negatively impacted by an up-front payment of $400.0 million made to Alnylam pursuant to our collaboration agreement. Our net income in 2019 was impacted by several non-cash items, including unrealized gains (net) on equity securities and inventory write-downs and reserves (see "Results of Operations" above), as well as the impact of Sanofi satisfying its Libtayo development funding obligation in shares of Regeneron stock (see "Sanofi Funding of Certain Development Costs" below). Deferred taxes as of December 31, 2019 increased by $130.6 million, compared to December 31, 2018, primarily due to the tax treatment of the up-front payment made to Alnylam and non-cash compensation expense. Other liabilities as of December 31, 2019 increased compared to December 31, 2018 partially due to the impact of the receipt of a $461.9 million payment from Sanofi in connection with the termination of the 2015 IO Discovery Agreement (as described in Part I, Item 1. "Collaboration Agreements - Collaborations with Sanofi - Immuno-Oncology ").
2018
Our net income of $2.444 billion in 2018 included the cumulative catch-up adjustments of $135.0 million recorded to other operating income primarily in connection with the termination of the 2015 IO Discovery Agreement and other non-cash items, including $75.8 million in connection with Sanofi satisfying its Libtayo development funding obligation in shares of Regeneron stock and $41.9 million related to unrealized losses (net) on equity securities. Deferred tax assets as of December 31, 2018 increased by $140.0 million, compared to December 31, 2017, primarily due to the impact of the Company's sale of non-inventory related assets between foreign subsidiaries.
Cash Flows from Investing Activities
Sales of marketable securities in 2020 included proceeds from such sales to fund a portion of our stock repurchase from Sanofi (as described below). In 2019, we purchased $400.0 million of Alnylam common stock in connection with entering into the collaboration agreement. Capital expenditures in 2020 included costs associated with (i) the expansion of our manufacturing facilities in Rensselaer, New York and Limerick, Ireland, including construction of a fill/finish facility and related equipment, and (ii) laboratory expansion and renovations at our Tarrytown, New York facilities. We expect to incur capital expenditures of $600 million to $680 million in 2021 primarily in connection with the continued expansion of our manufacturing facilities, including the fill/finish facility and equipment, and the expansion of our research facilities.
Cash Flows from Financing Activities
During 2020, we purchased shares of our Common Stock from Sanofi, a portion of which was funded with the proceeds from a $1.5 billion senior unsecured 364-day bridge loan facility. See additional information under " Secondary Offering and Purchase of Regeneron Common Stock Held by Sanofi " below. During 2020 and 2019, we also repurchased shares of our Common Stock under our share repurchase program (see " Share Repurchase Program " below). During 2020, we issued and sold $2.0 billion aggregate principal amount of senior unsecured notes and used a portion of the net proceeds to repay in full the bridge loan facility. See additional information under " Issuance of Senior Notes " below.
Proceeds from issuances of Common Stock, in connection with exercises of employee stock options, were $2.575 billion during 2020, compared to $211.8 million during 2019 and $114.5 million during 2018.
Credit Facility
In December 2018, we entered into an agreement with a syndicate of lenders (the "Credit Agreement") which provides for a $750.0 million senior unsecured five-year revolving credit facility (the "Credit Facility"), and contemporaneously terminated our then-existing credit agreement (the "Prior Credit Agreement"). The Credit Agreement was entered into on terms substantially similar to those of the Prior Credit Agreement. No borrowings were outstanding under the Prior Credit Agreement at the time of its termination.
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The Credit Agreement includes an option for us to elect to increase the commitments under the Credit Facility and/or to enter into one or more tranches of term loans in the aggregate principal amount of up to $250.0 million, subject to the consent of the lenders providing the additional commitments or term loans, as applicable, and certain other conditions. Proceeds of the loans under the Credit Facility may be used to finance working capital needs, and for general corporate or other lawful purposes, of Regeneron and its subsidiaries. The Credit Agreement also provides a $50.0 million sublimit for letters of credit. The Credit Agreement includes an option for us to elect to extend the maturity date of the Credit Facility beyond December 2023, subject to the consent of the extending lenders and certain other conditions. Amounts borrowed under the Credit Facility may be prepaid, and the commitments under the Credit Facility may be terminated, at any time without premium or penalty. We had no borrowings outstanding under the Credit Facility as of December 31, 2020.
The Credit Agreement contains financial and operating covenants. Financial covenants include a maximum total leverage ratio and a minimum interest expense coverage ratio. We were in compliance with all covenants of the Credit Facility as of December 31, 2020.
Share Repurchase Program
In November 2019, our board of directors authorized a share repurchase program to repurchase up to $1.0 billion of our Common Stock. The share repurchase program permitted the Company to effect repurchases through a variety of methods, including open-market transactions (including pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Exchange Act), privately negotiated transactions, accelerated share repurchases, block trades, and other transactions in compliance with Rule 10b-18 of the Exchange Act. During 2020 and 2019, we repurchased 1,605,582 and 722,596 shares of our Common Stock, respectively, under the program and recorded the cost of the shares received, or $746.0 million and $254.0 million, respectively, as Treasury Stock. As of December 31, 2020, the Company had repurchased the entire $1.0 billion of its Common Stock that it was authorized to repurchase under the program.
In January 2021, our board of directors authorized a new share repurchase program to repurchase up to $1.5 billion of our Common Stock. The share repurchase program was approved under terms substantially similar to the November 2019 share repurchase program described above.
Sanofi Funding of Certain Development Costs
As described in Part I, Item 1. "Collaboration, License, and Other Agreements - Sanofi ," effective January 7, 2018, we agreed to allow Sanofi to satisfy in whole or in part its funding obligations with respect to Libtayo development and/or Dupilumab/Itepekimab Eligible Investments incurred in periods through September 30, 2020 by selling shares of our Common Stock directly or indirectly owned by Sanofi. During 2020, Sanofi elected to sell, and we elected to purchase (by issuing a credit towards the amount owed by Sanofi), 77,677 shares of the Company's Common Stock to satisfy Sanofi's funding obligation related to Libtayo development costs. Consequently, we recorded $41.7 million related to the shares received as Treasury Stock during 2020. In addition, during 2020, Sanofi elected to sell, and we elected to purchase (in cash), 171,471 shares of the Company's Common Stock in connection with Sanofi's funding obligation for Dupilumab/Itepekimab Eligible Investments. Consequently, we recorded the cost of the shares received, or $93.3 million, as Treasury Stock during 2020.
Secondary Offering and Purchase of Regeneron Common Stock Held by Sanofi
As described in Part I, Item 1. "Collaboration, License, and Other Agreements - Sanofi ," in May 2020, a secondary offering of 13,014,646 shares of our Common Stock (the "Secondary Offering") held by Sanofi was completed. In connection with the Secondary Offering, we also purchased 9,806,805 shares of our Common Stock directly from Sanofi for an aggregate purchase amount of $5 billion (the "Stock Purchase"). As a result of the Secondary Offering and the Stock Purchase, Sanofi disposed of all of its shares of our Common Stock, other than 400,000 shares that it retained as of the closing of the Secondary Offering and the Stock Purchase (which Sanofi was able to use for the funding of certain Libtayo development costs and/or Dupilumab/Itepekimab Eligible Investments as described above).
We funded the Stock Purchase with a combination of cash on hand, proceeds from the sale of marketable securities, and proceeds from loans under a $1.5 billion senior unsecured 364-day bridge loan facility (the "Bridge Facility") which was entered into in May 2020. The loans under the Bridge Facility bore interest at a variable interest rate based on either LIBOR or the alternate base rate, plus an applicable margin that varied with our debt rating and total leverage ratio. As described below, the Bridge Facility was repaid in August 2020 following the issuance and sale of the Company's senior unsecured notes.
Issuance of Senior Notes
In August 2020, we issued and sold $1.250 billion aggregate principal amount of senior unsecured notes due 2030 (the "2030 Notes") and $750 million aggregate principal amount of senior unsecured notes due 2050 (the "2050 Notes" and, together with the 2030 Notes, the "Notes"). Net proceeds from the issuance and sale of the Notes (after deducting underwriting discounts and
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offering expenses) were used in part to repay in full the Bridge Facility described above, including accrued interest and related fees and expenses in connection therewith.
The 2030 Notes accrue interest at the rate of 1.750% per year and will mature on September 15, 2030. The 2050 Notes accrue interest at the rate of 2.800% per year and will mature on September 15, 2050. Interest on each series of Notes is payable semi-annually in arrears on March 15 and September 15 of each year, commencing on March 15, 2021, until their respective maturity dates.
The Notes may be redeemed at the Company’s option at any time at 100% of the principal amount plus accrued and unpaid interest, and, until a specified period before maturity, a specified make-whole amount. The Notes contain a change-of-control provision that, under certain circumstances, may require the Company to offer to repurchase the Notes at a price equal to 101% of the principal amount plus accrued and unpaid interest.
The Notes also contain certain limitations on the Company’s ability to incur liens and enter into sale and leaseback transactions, as well as customary events of default.
Tarrytown, New York Leases
We lease laboratory and office facilities in Tarrytown, New York (the "Facility"). In 2016, we entered into a Purchase Agreement with the then lessor, pursuant to which we agreed to purchase the Facility for a purchase price of $720.0 million. In March 2017, we entered into a Participation Agreement with Banc of America Leasing & Capital LLC ("BAL"), as lessor, and a syndicate of lenders (collectively, the "Lease Participants"), which provided for lease financing in connection with the acquisition by BAL of the Facility and our lease of the Facility from BAL. In March 2017, we assigned our right to take title to the Facility under the Purchase Agreement to BAL, and the Lease Participants advanced $720.0 million, which was used by BAL to finance the purchase price for the Facility.
Concurrent with entering into the Participation Agreement, we also entered into a lease agreement (the "Lease") for the Facility with BAL for a five-year term ending in March 2022. The Lease requires us to pay all maintenance, insurance, taxes, and other costs arising out of the use of the Facility. We are also required to make monthly payments of basic rent during the term of the Lease in an amount equal to a variable rate per annum based on the one-month LIBOR, plus an applicable margin that varies with our debt rating and total leverage ratio.
The Participation Agreement and the Lease include an option for us to elect to extend the maturity date of the Participation Agreement and the term of the Lease for an additional five-year period, subject to the consent of all the Lease Participants and certain other conditions. We also have the option prior to the end of the term of the Lease to (a) purchase the Facility by paying an amount equal to the outstanding principal amount of the Lease Participants' advances under the Participation Agreement, all accrued and unpaid interest and yield thereon, and all other outstanding amounts under the Participation Agreement, the Lease, and certain related documents or (b) sell the Facility to a third party on behalf of BAL. The advances under the Participation Agreement mature, and all amounts outstanding thereunder will become due and payable in full at the end of the term of the Lease.
The Participation Agreement and the Lease contain financial and operating covenants, which are substantially similar to the covenants set forth in our Credit Facility. We were in compliance with all covenants of the Participation Agreement and the Lease as of December 31, 2020.
Funding Requirements
The amount required to fund operations will depend on various factors, including the potential regulatory approval and commercialization of our product candidates and the timing thereof and the extent and cost of our research and development programs. We believe that our existing capital resources, borrowing availability under the Credit Facility, funds generated by anticipated product sales, and, as described above under Part I, Item 1. "Collaboration, License, and Other Agreements," funding for reimbursement of research and development costs that we are entitled to receive under our collaboration agreements, will enable us to meet our anticipated operating needs for the foreseeable future.
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The following table summarizes our contractual obligations as of December 31, 2020.
Payments Due by Period
(In millions) Total Less than one year 1 to 3 years 3 to 5 years Greater than 5 years
Purchase and other obligations (1)
$ 2,357.9 $ 1,452.0 $ 658.2 $ 225.5 $ 22.2
Operating and finance lease obligations (2)
60.4 23.1 20.2 10.8 6.3
Long-term debt (3)
2,853.0 59.4 128.6 128.6 2,536.4
Total contractual obligations $ 5,271.3 $ 1,534.5 $ 807.0 $ 364.9 $ 2,564.9
(1) Primarily includes research and development commitments, including those related to clinical trials and capital expenditures. Our obligation to pay certain of these amounts may increase or be reduced based on relevant future events.
(2) Includes rent payments with respect to finance lease obligations in connection with our property leases in Tarrytown, New York, as described under " Tarrytown, New York Leases " above and Note 10 to our Consolidated Financial Statements. Amounts in the table above exclude the $720.0 million purchase price we would be obligated to pay if we were to exercise our option to purchase the Facility.
(3) Includes principal and interest for our 2030 Notes and 2050 Notes, as described under " Issuance of Senior Notes " above
Liabilities for unrecognized tax benefits, totaling $267.0 million at December 31, 2020, are not included in the table of contractual obligations above as, due to their nature, there is a high degree of uncertainty regarding the period of potential future cash settlement with taxing authorities. See Note 14 to our Consolidated Financial Statements.
We expect continued increases in our expenditures, particularly in connection with our research and development activities (including preclinical and clinical programs). The amount of funding that will be required for our clinical programs depends upon the results of our research and preclinical programs and early-stage clinical trials, regulatory requirements, the duration and results of clinical trials underway and of additional clinical trials that we decide to initiate, and the various factors that affect the cost of each trial. Under certain collaboration agreements, the amount of funding for reimbursement of research and development costs that we are entitled to receive is capped at a specified amount; therefore, we may elect to independently fund certain research and development costs in excess of such capped amounts.
Clinical trial costs are dependent, among other things, on the size and duration of trials (for example, we have several ongoing late-stage clinical trials which are large and for which we expect to incur significant costs), fees charged for services provided by clinical trial investigators and other third parties, the costs for manufacturing the product candidate for use in the trials, and for supplies, laboratory tests, and other expenses.
We expect to continue to incur substantial development and manufacturing costs for REGEN-COV in 2021. Though the amount of funding that will be required will be subject to clinical data results, the duration of the COVID-19 pandemic, and other factors, including regulatory outcomes, as described in Part I, Item 1. "Agreements Related to COVID-19," we have entered into agreements with the U.S. government to purchase supplies of the drug product and with Roche to fund certain of our development costs.
We anticipate continuing to incur substantial commercialization costs for EYLEA, Dupixent, and Libtayo. Commercialization costs over the next few years will depend on, among other things, the market potential for product candidates, whether commercialization costs are shared with a collaborator, and regulatory approval of additional product candidates.
We expect that expenses related to the filing, prosecution, defense, and enforcement of patents and other intellectual property will be substantial.
We enter into collaboration and licensing agreements that may require us to pay (i) amounts upon the achievement of various development and commercial milestones, which, in the aggregate, could be significant, and/or (ii) royalties calculated based on a percentage of net product sales. The payment of these amounts, however, is contingent upon the occurrence of various future events, which have a high degree of uncertainty of occurring and for which the specific timing cannot be predicted. Because of these factors, such payments are not included in the table of contractual obligations above. See Note 3 and Note 10 to our Consolidated Financial Statements.
Under our collaboration with Bayer for EYLEA outside the United States and our Antibody and IO Collaborations with Sanofi, we and our collaborator share profits and losses in connection with commercialization of drug products. Profits or losses under each collaboration are measured by calculating net sales less cost of goods sold and shared commercialization and other expenses. If the applicable collaboration is profitable, we have contingent contractual obligations to reimburse Bayer and Sanofi for a defined percentage (generally 50%) of agreed-upon development expenses funded by Bayer and Sanofi and Bayer ( i.e. , "development balance"). These reimbursements are deducted each quarter, in accordance with a formula, from our share of the
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collaboration profits (and, for our EYLEA collaboration with Bayer, inclusive of our percentage on product sales in Japan) otherwise payable to us, unless, in the case of EYLEA, we elect to reimburse these expenses at a faster rate. As of December 31, 2020, our contingent reimbursement obligation to Bayer for EYLEA was approximately $276 million and our contingent reimbursement obligation to Sanofi in connection with the companies' Antibody Collaboration and IO Collaboration was approximately $3.103 billion and $107 million, respectively. Therefore, we expect that, for the foreseeable future, a portion of our share of profits from sales under our collaborations with Bayer and Sanofi will be used to reimburse our collaborators for these obligations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that are currently material or reasonably likely to be material to our consolidated financial position or results of operations.
Future Impact of Recently Issued Accounting Standards
As of December 31, 2020, the future adoption of recently issued accounting standards is not expected to have a material impact on the Company's financial position or results of operations.