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Item 1. Financial Statements

2022-08-03 compared with 2022-05-04 · 150 added, 95 removed, 561 unchanged (30% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In millions, except share data)

March 31, December 31,

(In millions, except per share data)

June 30, December 31,

Current assets:

23 unchanged sentences

Stockholders' equity:

Preferred Stock, $ .01 par value;

Preferred Stock, par value $ .01 per share;

30.0 shares authorized;

issued and outstanding - no ne

Class A Stock, convertible, $ .001 par value;

Class A Stock, convertible, par value $ .001 per share;

40.0 shares authorized;

shares issued and outstanding - 1.8 in 2022 and 2021

Common Stock, $ .001 par value;

Common Stock, par value $ .001 per share;

320.0 shares authorized;

13 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Statements of Operations

47 unchanged sentences

Balance, March 31, 2022 1.8 — 127.6 0.1 8,754.1 19,941.8 ( 170.1 ) ( 19.9 ) ( 8,611.2 ) 19,914.7

Issuance of Common Stock for equity awards granted under long-term incentive plans — — 0.8 — 228.0 — — — — 228.0

Common Stock tendered upon exercise of stock options and vesting of restricted stock for employee tax obligations — — ( 0.1 ) — ( 41.9 ) — — — — ( 41.9 )

Issuance/distribution of Common Stock for 401(k) Savings Plan — — — — 14.0 — — — 2.2 16.2

Repurchases of Common Stock — — — — — — — ( 0.7 ) ( 393.6 ) ( 393.6 )

Stock-based compensation charges — — — — 166.0 — — — — 166.0

Net income — — — — — 852.1 — — — 852.1

Other comprehensive loss, net of tax — — — — — — ( 53.7 ) — — ( 53.7 )

Balance, June 30, 2022 1.8 $ — 128.3 $ 0.1 $ 9,120.2 $ 20,793.9 $ ( 223.8 ) ( 20.6 ) $ ( 9,002.6 ) $ 20,687.8

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (continued)

Class A Stock Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stockholders' Equity

Shares Amount Shares Amount Shares Amount

Balance, December 31, 2020 1.8 $ — 121.5 $ 0.1 $ 6,716.2 $ 10,893.0 $ 29.3 ( 16.4 ) $ ( 6,613.3 ) $ 11,025.3

7 unchanged sentences

Balance, March 31, 2021 1.8 — 121.9 0.1 6,887.8 12,008.2 16.2 ( 17.1 ) ( 6,935.3 ) 11,977.0

Issuance of Common Stock for equity awards granted under long-term incentive plans — — 0.7 — 216.6 — — — — 216.6

Common Stock tendered upon exercise of stock options and vesting of restricted stock for employee tax obligations — — ( 0.1 ) — ( 26.1 ) — — — — ( 26.1 )

Issuance/distribution of Common Stock for 401(k) Savings Plan — — — — 11.6 — — — 2.5 14.1

Repurchases of Common Stock — — — — — — — ( 0.6 ) ( 288.6 ) ( 288.6 )

Stock-based compensation charges — — — — 135.9 — — — — 135.9

Net income — — — — — 3,098.9 — — — 3,098.9

Other comprehensive loss, net of tax — — — — — — ( 0.5 ) — — ( 0.5 )

Balance, June 30, 2021 1.8 $ — 122.5 $ 0.1 $ 7,225.8 $ 15,107.1 $ 15.7 ( 17.7 ) $ ( 7,221.4 ) $ 15,127.3

The accompanying notes are an integral part of the financial statements.

2 unchanged sentences

(In millions)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

6 unchanged sentences

Deferred taxes ( 381.0 ) 51.8

Acquired in-process research and development in connection with asset acquisition 195.0 —

Changes in assets and liabilities:

3 unchanged sentences

Increase (decrease) in deferred revenue 109.7 ( 64.8 )

Decrease in accounts payable, accrued expenses, and other liabilities ( 250.4 ) ( 34.7 )

(Decrease) increase in accounts payable, accrued expenses, and other liabilities ( 325.7 ) 423.7

Total adjustments 840.5 ( 2,918.9 )

4 unchanged sentences

Capital expenditures ( 295.4 ) ( 263.8 )

Asset acquisition, net of cash acquired ( 230.3 ) —

Net cash used in investing activities ( 2,119.2 ) ( 933.2 )

3 unchanged sentences

Repurchases of Common Stock ( 717.1 ) ( 612.1 )

Net cash provided by (used in) financing activities 64.7 ( 366.4 )

Net cash used in financing activities ( 36.4 ) ( 484.6 )

Net increase (decrease) in cash, cash equivalents, and restricted cash 510.5 ( 122.6 )

13 unchanged sentences

These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Certain reclassifications have been made to prior period amounts to conform with the current period's presentation.

Beginning with the first quarter of 2022, the Company added a new line item, Acquired in-process research and development, to its Condensed Consolidated Statements of Operations and Comprehensive Income.

This line item includes in-process research and development acquired in connection with asset acquisitions as well as up-front/opt-in payments related to license and collaboration agreements.

Amounts recorded in this line item for the three months ended March 31, 2022 would have historically been recorded to Research and development expenses.

No such amounts were recorded for the three months ended March 31, 2021.

Amounts recorded in this line item for the three and six months ended June 30, 2022 would have historically been recorded to Research and development expenses.

No such amounts were recorded for the three and six months ended June 30, 2021.

Product Sales

1 unchanged sentence

(In millions) Three Months Ended

June 30, Six Months Ended

Net Product Sales in the United States

2022 2021 2022 2021

$ 1,621.2 $ 1,424.7 $ 3,138.8 $ 2,771.7

90.9 78.0 169.8 147.1

31.2 41.9 64.8 85.2

REGEN-COV ®**

— 2,591.2 — 2,853.4

11.1 2.0 19.6 2.5

ARCALYST ®***

$ 1,754.4 $ 4,137.8 $ 3,393.0 $ 5,862.1

** Net product sales of REGEN-COV in the United States relate to product sold in connection with our agreements with the U.S.

2 unchanged sentences

Previously, the Company recorded net product sales of ARCALYST in the United States.

As of March 31, 2022 and December 31, 2021, the Company had $ 3.664 billion and $ 5.059 billion, respectively, of trade accounts receivable that were recorded within Accounts receivable, net.

The Company had product sales to certain customers that accounted for more than 10% of total gross product revenue for the three months ended March 31, 2022 and 2021.

* Prior to July 1, 2022, Regeneron recorded net product sales of Libtayo in the United States and Sanofi recorded net product sales of Libtayo outside the United States.

Effective July 1, 2022, the Company will record global net product sales of Libtayo.

See Note 3 for further details.

As of June 30, 2022 and December 31, 2021, the Company had $ 3.888 billion and $ 5.059 billion, respectively, of trade accounts receivable that were recorded within Accounts receivable, net.

The Company had product sales to certain customers that accounted for more than 10% of total gross product revenue for the three and six months ended June 30, 2022 and 2021.

Sales to each of these customers as a percentage of the Company's total gross product revenue are as follows:

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Besse Medical, a subsidiary of AmerisourceBergen Corporation

57 % 22 % 56 % 30 %

McKesson Corporation 28 % 14 % 29 % 19 %

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Statement of Operations Classification Three Months Ended

June 30, Six Months Ended

(In millions) 2022 2021 2022 2021

2 unchanged sentences

Reimbursement for manufacturing of commercial supplies Collaboration revenue $ 145.5 $ 110.9 $ 306.3 $ 216.5

Other Collaboration revenue $ 28.9 $ — $ 28.9 $ —

Reimbursement of research and development expenses Reduction of Research and development expense $ 52.7 $ 46.5 $ 89.2 $ 77.1

12 unchanged sentences

The Company is party to a global, strategic collaboration with Sanofi to research, develop, and commercialize fully human monoclonal antibodies (the "Antibody Collaboration"), which currently consists of Dupixent ® (dupilumab), Kevzara ® (sarilumab), and itepekimab .

Under the terms of the Antibody License and Collaboration Agreement, Sanofi is generally responsible for funding 80 %– 100 % of agreed-upon development costs.

Under the terms of the Antibody License and Collaboration Agreement, Sanofi is generally responsible for funding 80 % to 100 % of agreed-upon development costs.

We are obligated to reimburse Sanofi for 30 % to 50 % of worldwide development expenses that were funded by Sanofi based on our share of collaboration profits from commercialization of collaboration products.

Under the terms of the Antibody License and Collaboration Agreement, we were required to apply 10 % of our share of the profits from the Antibody Collaboration in any calendar quarter to reimburse Sanofi for these development costs.

On July 1, 2022, an amendment to the Antibody License and Collaboration Agreement became effective, pursuant to which the percentage of Regeneron’s share of profits used to reimburse Sanofi for such development costs increased from 10 % to 20 %.

Sanofi leads commercialization activities for products under the Antibody Collaboration, subject to the Company's right to co-commercialize such products.

In addition to profit and loss sharing, the Company is entitled to receive sales milestone payments from Sanofi.

In addition to profit and loss sharing, the Company is entitled to receive sales milestone payments

During the three months ended March 31, 2022, the Company earned a $ 50.0 million sales-based milestone from Sanofi, upon aggregate annual sales of antibodies outside the United States (including Praluent) exceeding $ 2.0 billion on a rolling twelve-month basis.

1 unchanged sentence

The following table summarizes contract balances in connection with the Company's Antibody Collaboration with Sanofi:

March 31, December 31,

June 30, December 31,

(In millions) 2022 2021

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Immuno-oncology

The Company is party to a collaboration with Sanofi to research, develop, and commercialize antibody-based cancer treatments in the field of immuno-oncology (the "IO Collaboration").

Under the terms of the Immuno-oncology License and Collaboration Agreement, the parties are co-developing and co-commercializing Libtayo (cemiplimab).

The parties share equally, on an ongoing basis, agreed-upon development and commercialization expenses for Libtayo.

The Company has principal control over the development of Libtayo and leads commercialization activities in the United States (see Note 2 for related product sales information), while Sanofi leads commercialization activities outside of the United States.

The parties share equally in profits and losses in connection with the commercialization of Libtayo.

The Company has been party to a collaboration with Sanofi for antibody-based cancer treatments in the field of immuno-oncology (the "IO Collaboration").

Under the terms of the Immuno-oncology License and Collaboration Agreement, the parties were co-developing and co-commercializing Libtayo.

The parties shared equally, on an ongoing basis, development and commercialization expenses for Libtayo.

The Company had principal control over the development of Libtayo and led commercialization activities in the United States (see Note 2 for related product sales information), while Sanofi led commercialization activities outside of the United States.

The parties shared equally in profits and losses in connection with the commercialization of Libtayo.

Effective July 1, 2022, the Company obtained the exclusive right to develop, commercialize, and manufacture Libtayo worldwide under an Amended and Restated Immuno-oncology License and Collaboration Agreement with Sanofi (the "A&R IO LCA").

Consequently, in July 2022, the Company made a $ 900.0 million up-front payment to Sanofi, and Sanofi is eligible to receive a $ 100.0 million regulatory milestone and up to an aggregate of $ 100.0 million in sales-based milestones upon achieving certain amounts of worldwide net product sales of Libtayo through 2023.

The Company will also pay Sanofi an 11 % royalty on net product sales of Libtayo through March 31, 2034.

Amounts paid to Sanofi in connection with obtaining the worldwide rights to Libtayo, including the up-front payment and any contingent consideration, will be recorded as an intangible asset.

The Company was obligated to reimburse Sanofi for half of the development costs it funded that were attributable to clinical development of antibody product candidates under the Amended and Restated Immuno-oncology Discovery and Development Agreement from our share of profits from commercialized IO Collaboration products.

Under the A&R IO LCA, the amount of development costs incurred under the IO Collaboration for which we are obligated to reimburse Sanofi is $ 35.0 million, and the Company will reimburse Sanofi for such development costs by paying Sanofi a 0.5 % royalty on net product sales of Libtayo until all such development costs have been reimbursed by Regeneron.

The following table summarizes contract balances in connection with the Company's IO Collaboration with Sanofi:

March 31, December 31,

June 30, December 31,

(In millions) 2022 2021

5 unchanged sentences

$ 241.0 $ 276.1

Other liabilities include up-front payments received from Sanofi for which recognition has been deferred.

The aggregate amount of the estimated consideration under the IO Collaboration related to the Company's obligation that was unsatisfied (or partially unsatisfied) as of March 31, 2022 was $ 532.8 million.

This amount is expected to be recognized over the remaining period in which the Company is obligated to satisfy its obligation in connection with performing development activities.

Other liabilities include up-front payments received from Sanofi for which recognition had been deferred.

During the third quarter of 2022, in connection with the A&R IO LCA, the remaining IO Collaboration Other liabilities balance will be recorded as a reduction to the intangible asset described above.

The Company is party to a license and collaboration agreement with Bayer for the global development and commercialization of EYLEA (aflibercept) and aflibercept 8 mg outside the United States.

All agreed-upon development expenses incurred by the Company and Bayer are shared equally.

Agreed-upon development expenses incurred by the Company and Bayer are generally shared equally.

Bayer markets EYLEA outside the United States and the companies share equally in profits and losses from sales.

2 unchanged sentences

Statement of Operations Classification Three Months Ended

June 30, Six Months Ended

(In millions) 2022 2021 2022 2021

6 unchanged sentences

Reduction of Research and development expense

$ 9.9 $ 20.9 $ 20.7

Regeneron's obligation for its share of Bayer research and development expenses

2 unchanged sentences

The following table summarizes contract balances in connection with our Bayer collaboration:

March 31, December 31,

June 30, December 31,

(In millions) 2022 2021

2 unchanged sentences

$ 133.7 $ 129.4

The Company and Teva are parties to a collaboration agreement (the "Teva Collaboration Agreement") to develop and commercialize fasinumab globally, excluding certain Asian countries that are subject to our collaboration agreement with Mitsubishi Tanabe Pharma Corporation.

The Company leads global development activities, and the parties share development costs equally, on an ongoing basis, under a global development plan.

Amounts recognized in our Statements of Operations in connection with the Teva Collaboration Agreement were not material for the three months ended March 31, 2022 and 2021.

In addition, contract balances in our Balance Sheets were not material as of March 31, 2022 and December 31, 2021.

The aggregate amount of the estimated consideration under the Teva Collaboration Agreement related to the Company's obligation that was unsatisfied (or partially unsatisfied) as of March 31, 2022 was $ 83.6 million.

This amount is expected to be recognized over the remaining period in which the Company is obligated to satisfy its obligation in connection with performing development activities.

In 2020, we announced an expansion of our Other Transaction Agreement with the Biomedical Advanced Research Development Authority ("BARDA"), pursuant to which the U.S.

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As of December 31, 2021, the Company had completed its final deliveries of drug product under its agreements with the U.S.

See Note 2 for REGEN-COV net product sales recognized during 2021.

See Note 2 for REGEN-COV net product sales recognized during the three and six months ended June 30, 2021.

In 2020, we entered into a collaboration agreement (the "Roche Collaboration Agreement") with Roche to develop, manufacture, and distribute the casirivimab and imdevimab antibody cocktail (known as REGEN-COV in the United States and Ronapreve ™ in other countries).

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Statement of Operations Classification Three Months Ended

June 30, Six Months Ended

(In millions) 2022 2021 2022 2021

Global gross profit payment from Roche in connection with sales of Ronapreve Collaboration revenue $ 8.2 $ 167.9 $ 224.5 $ 234.7

Reimbursement of research and development expenses from Roche was $ 86.8 million for the three months ended March 31, 2021.

Such amounts were not material for the three months ended March 31, 2022.

Reimbursement of research and development expenses from Roche (recorded as a reduction of Research and development expense) was $ 41.0 million and $ 127.8 million for the three and six months ended June 30, 2021.

Such amounts were not material for the three and six months ended June 30, 2022.

The following table summarizes contract balances in connection with the Roche Collaboration Agreement:

March 31, December 31,

June 30, December 31,

(In millions) 2022 2021

Accounts receivable, net $ 204.3 $ —

Accrued expenses and other current liabilities $ 5.8 $ 268.8

7 unchanged sentences

Under the C5 siRNA Co-Commercialization Collaboration Agreement, the parties share costs equally and under the License Agreement, the licensee is responsible for its own costs and expenses.

Amounts recognized in our Statements of Operations in connection with the Alnylam agreements described above were not material for the three months ended March 31, 2022 and 2021.

In addition, contract balances in our Balance Sheets were not material as of March 31, 2022 and December 31, 2021.

In April 2022, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") to acquire Checkmate Pharmaceuticals, Inc.

at a total equity value of approximately $ 250 million.

On May 2, 2022, the Company commenced a tender offer to acquire any and all outstanding shares of common stock of Checkmate at a price of $ 10.50 per share, to be paid to each shareholder tendering Checkmate shares in cash, without interest, subject to reduction for any applicable withholding taxes.

The consummation of the tender offer is subject to certain conditions, including the tender of at least a majority of the outstanding shares of Checkmate common stock, the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, and other customary closing conditions.

If the tender offer is successfully consummated, the Company will acquire all shares not acquired in the tender offer through a merger that does not require the vote of Checkmate stockholders.

The transaction is expected to close in mid-2022.

Amounts recognized in our Statements of Operations in connection with the Alnylam agreements described above were not material for the three and six months ended June 30, 2022 and 2021.

In addition, contract balances in our Balance Sheets were not material as of June 30, 2022 and December 31, 2021.

In May 2022, the Company completed its acquisition of Checkmate Pharmaceuticals, Inc.

(“Checkmate”) for a total equity value of approximately $ 250 million.

The Company made an assessment as to whether the set of assets acquired constituted a business and should be accounted for as a business combination.

Given that substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset, vidutolimod, which is in clinical development for oncology, the transaction was accounted for as an asset acquisition.

As a result of the acquisition, the Company recorded (i) a charge of $ 195.0 million to Acquired in-process research and development and (ii) net assets of $ 35.3 million, net of cash, related to the assets acquired (including deferred tax assets and investments) and liabilities assumed.

Net Income Per Share

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(In millions, except per share data) 2022 2021 2022 2021

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(Shares in millions) 2022 2021 2022 2021

1 unchanged sentence

Marketable Securities

Marketable securities as of March 31, 2022 and December 31, 2021 consist of both available-for-sale debt securities of investment grade issuers (see below and Note 6) as well as equity securities of publicly traded companies (see Note 6).

Marketable securities as of June 30, 2022 and December 31, 2021 consist of both available-for-sale debt securities of investment grade issuers (see below and Note 6) as well as equity securities of publicly traded companies (see Note 6).

The following tables summarize the Company's investments in available-for-sale debt securities:

(In millions) Amortized Unrealized Fair

As of March 31, 2022 Cost Basis Gains Losses Value

As of June 30, 2022

Cost Basis Gains Losses Value

Corporate bonds $ 7,849.1 $ 0.1 $ ( 271.0 ) $ 7,578.2

14 unchanged sentences

The Company classifies its investments in available-for-sale debt securities based on their contractual maturity dates.

The available-for-sale debt securities listed as of March 31, 2022 mature at various dates through March 2027.

The available-for-sale debt securities listed as of June 30, 2022 mature at various dates through April 2027.

The fair values of available-for-sale debt securities by contractual maturity consist of the following:

March 31, December 31,

June 30, December 31,

(In millions) 2022 2021

5 unchanged sentences

(In millions)

As of March 31, 2022

As of June 30, 2022

Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss

14 unchanged sentences

$ 6,516.3 $ ( 42.3 ) $ — $ — $ 6,516.3 $ ( 42.3 )

For the three months ended March 31, 2022, realized gains and losses on sales of marketable securities were no t material.

For the three months ended March 31, 2021, realized gains were no t material and there were no realized losses on sales of marketable securities.

With respect to marketable securities, for the three months ended March 31, 2022 and 2021, amounts reclassified from Accumulated other comprehensive loss into Other (expense) income, net were related to realized gains and losses on sales of available-for-sale debt securities.

With respect to marketable securities, for the three and six months ended June 30, 2022 and 2021, amounts reclassified from Accumulated other comprehensive loss into Other (expense) income, net were related to realized gains and losses on sales of available-for-sale debt securities.

For the three and six months ended June 30, 2022 and 2021, realized gains and losses on sales of marketable securities were not material.

Fair Value Measurements

5 unchanged sentences

(In millions) Fair Value Measurements at Reporting Date

As of March 31, 2022 Fair Value Level 1 Level 2

As of June 30, 2022

Fair Value Level 1 Level 2

Available-for-sale debt securities:

19 unchanged sentences

$ 9,647.1 $ 1,249.9 $ 8,397.2

The Company held certain restricted equity securities as of March 31, 2022 which are subject to transfer restrictions that expire at various dates through 2024.

During the three months ended March 31, 2022 and 2021, we recorded $ 211.2 million of net unrealized losses and $ 143.9 million of net unrealized gains, respectively, on equity securities in Other (expense) income, net.

In addition to the investments summarized in the table above, as of March 31, 2022 and December 31, 2021, the Company had $ 46.7 million and $ 40.0 million, respectively, in equity investments that do not have a readily determinable fair value.

The Company held certain restricted equity securities as of June 30, 2022 which are subject to transfer restrictions that expire at various dates through 2024.

During the three and six months ended June 30, 2022, we recorded $ 163.7 million and $ 374.9 million of net unrealized losses, respectively, on equity securities in Other (expense) income, net.

During the three and six months ended June 30, 2021, we recorded $ 409.0 million and $ 552.9 million of net unrealized gains, respectively, on equity securities in Other (expense) income, net.

In addition to the investments summarized in the table above, as of June 30, 2022 and December 31, 2021, the Company had $ 47.3 million and $ 40.0 million, respectively, in equity investments that do not have a readily determinable fair value.

These investments are recorded within Other noncurrent assets.

The fair value of our long-term debt (see Note 8), which was determined based on Level 2 inputs, was estimated to be $ 1.686 billion and $ 1.887 billion as of March 31, 2022 and December 31, 2021, respectively.

The fair value of our long-term debt (see Note 8), which was determined based on Level 2 inputs, was estimated to be $ 1.513 billion and $ 1.887 billion as of June 30, 2022 and December 31, 2021, respectively.

Inventories consist of the following:

March 31, December 31,

June 30, December 31,

(In millions) 2022 2021

4 unchanged sentences

$ 2,218.5 $ 1,951.3

Inventory balances in the table above are net of reserves of $ 566.5 million and $ 510.0 million as of March 31, 2022 and December 31, 2021, respectively.

Deferred costs represent the costs of product manufactured and shipped to the Company's collaborators for which recognition of revenue has been deferred.

For the three and six months ended June 30, 2022, Cost of goods sold included inventory write-offs and reserves totaling $ 19.2 million and $ 66.6 million, respectively.

For the three and six months ended June 30, 2021, Cost of goods sold included inventory write-offs and reserves totaling $ 139.9 million and $ 149.3 million, respectively.

In 2020, we issued and sold $ 1.250 billion aggregate principal amount of senior unsecured notes due 2030 and $ 750 million aggregate principal amount of senior unsecured notes due 2050.

Long-term debt in connection with our senior unsecured notes (collectively, the "Notes"), net of underwriting discounts and offering expenses, consists of the following:

March 31, December 31,

June 30, December 31,

(In millions) 2022 2021

3 unchanged sentences

$ 1,980.7 $ 1,980.0

Interest expense related to the Notes was $ 11.1 million for each of the three months ended March 31, 2022, and 2021.

Interest expense related to the Notes was $ 11.1 million and $ 22.2 million, respectively, for each of the three and six months ended June 30, 2022, and 2021.

In March 2022, we entered into a Second Amended and Restated Lease and Remedies Agreement (the "Restated Lease") with BA Leasing BSC, LLC, an affiliate of Banc of America Leasing & Capital, LLC ("BAL"), as lessor (the "Lessor"), which amends, restates, and extends our lease of laboratory and office facilities in Tarrytown, New York (the "Facility").

4 unchanged sentences

The Restated Participation Agreement and Restated Lease include an option for us to elect to further extend the maturity date of the Restated Participation Agreement and the term of the Restated Lease for an additional five-year period, subject to the consent of all the Participants and certain other conditions.

We also have the option prior to the end of the term of the Restated Lease to (a) purchase the Facility by paying an amount equal to the outstanding principal amount of the Participants' advances under the Restated Participation Agreement, all accrued and unpaid yield thereon, and all other outstanding amounts under the Restated Participation Agreement, Restated Lease, and certain related documents or (b) sell the Facility to a third party on behalf of the Lessor.

Restated Participation Agreement, Restated Lease, and certain related documents or (b) sell the Facility to a third party on behalf of the Lessor.

Consistent with the original lease, the Restated Lease continues to be classified as a finance lease as we have the option to purchase the Facility under terms that make it reasonably certain to be exercised.

1 unchanged sentence

Such financial covenants and certain of the operating covenants are substantially similar to the covenants set forth in our $ 750.0 million revolving credit facility.

The Company was in compliance with all such covenants as of March 31, 2022.

The Company was in compliance with all such covenants as of June 30, 2022.

The Company is subject to U.S.

federal, state, and foreign income taxes.

The Company's effective tax rate was 8.3 % and 11.0 % for the three months ended March 31, 2022 and 2021, respectively.

The Company's effective tax rate for the three months ended March 31, 2022 was positively impacted, compared to the U.S.

The Company's effective tax rate was 11.5 % and 17.4 % for the three months ended June 30, 2022 and 2021, respectively and 9.8 % and 15.8 % for the six months ended June 30, 2022 and 2021, respectively.

The Company's effective tax rate for the three and six months ended June 30, 2022 was positively impacted, compared to the U.S.

federal statutory rate, primarily by income earned in foreign jurisdictions with tax rates lower than the U.S.

federal statutory rate and stock-based compensation.

The Company's effective tax rate for the three months ended March 31, 2021 was positively impacted, compared to the U.S.

federal statutory rate, primarily by the reversal of liabilities related to uncertain tax positions, stock-based compensation, income earned in foreign jurisdictions with tax rates lower than the U.S.

federal statutory rate, and, to a lesser extent, stock-based compensation.

The Company's effective tax rate for the three and six months ended June 30, 2021 was positively impacted, compared to the U.S.

federal statutory rate, primarily by income earned in foreign jurisdictions with tax rates lower than the U.S.

federal statutory rate and federal tax credits for research activities.

In addition, the effective tax rate for the six months ended June 30, 2021 was positively impacted by the reversal of liabilities related to uncertain tax positions.

During the six months ended June 30, 2021, we reduced the amount of liabilities for uncertain tax positions related to the Company’s federal income tax returns for 2015 and 2016, as these audits were effectively settled.

Stockholders' Equity

2 unchanged sentences

The share repurchase program permitted the Company to make 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 the three months ended March 31, 2021, we repurchased 690,265 shares of our Common Stock under the program and recorded the cost of the shares received, or $ 323.5 million, as Treasury Stock.

As of December 31, 2021, the Company had repurchased the entire $ 1.5 billion of its Common Stock that it was authorized to repurchase under the program.

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There can be no assurance as to the timing or number of shares of any repurchases in the future.

During the three months ended March 31, 2022, we repurchased 566,973 shares of our Common Stock under the program and recorded the cost of the shares received, or $ 352.0 million, as Treasury Stock.

As of March 31, 2022, $ 2.493 billion remained available for share repurchases under the November 2021 program.

As of June 30, 2022, $ 2.099 billion remained available for share repurchases under the November 2021 program.

The table below summarizes the shares of our Common Stock we repurchased under the programs and the cost of the shares received, which were recorded as Treasury Stock.

Three Months Ended

June 30, Six Months Ended

(In millions) 2022 2021 2022 2021

Number of shares repurchased 0.7 0.6 1.2 1.3

Total cost of shares received $ 393.6 $ 288.6 $ 745.5 $ 612.1

Statement of Cash Flows

7 unchanged sentences

Supplemental disclosure of non-cash investing and financing activities

March 31, December 31, March 31, December 31,

June 30, December 31, June 30, December 31,

(In millions) 2022 2021 2021 2020

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The Company recognizes accruals for loss contingencies associated with such proceedings when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated.

As of March 31, 2022 and December 31, 2021, the Company's accruals for loss contingencies were not material.

As of June 30, 2022 and December 31, 2021, the Company's accruals for loss contingencies were not material.

If the Company were unable to prevail in any such proceedings, its consolidated financial position, results of operations, and future cash flows may be materially impacted.

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See Note 3 of the Company's Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 for a description of the Company's and Sanofi's arrangement regarding the costs resulting from or associated with such actions.

In addition, as described below, the Company filed a lawsuit against Amgen alleging that Amgen engaged in an anticompetitive bundling scheme which was designed to exclude Praluent from the market in violation of federal and state laws.

United States

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On November 18, 2021, Amgen filed a petition for writ of certiorari with the United States Supreme Court.

On May 27, 2022, the Company filed a lawsuit against Amgen in the United States District Court for the District of Delaware, alleging that, beginning in 2020, Amgen engaged in an anticompetitive bundling scheme which was designed to exclude Praluent from the market in violation of federal and state laws.

The lawsuit seeks damages for harm caused by the alleged scheme, as well as injunctive relief restraining Amgen from continuing its alleged anticompetitive conduct.

On August 1, 2022, Amgen filed a motion to dismiss the complaint.

Amgen has asserted European Patent No.

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Immunex filed a notice of appeal of the EPO's decision on January 31, 2018, which appeal was withdrawn at an oral hearing before the TBA on March 10, 2022 following the TBA's ruling discussed below.

On May 18, 2022, the revocation action in the U.K.

Patents Court was dismissed following the EPO's revocation of the '665 Patent.

On September 20, 2017 and September 21, 2017, respectively, the Company and Sanofi initiated opposition proceedings in the EPO against Immunex's European Patent No.

2,990,420 (the "'420 Patent"), a divisional patent of the '665 Patent (i.e., a patent that shares the same priority date, disclosure, and patent term of the parent '665

Patent but contains claims to a different invention).

2,990,420 (the "'420 Patent"), a divisional patent of the '665 Patent (i.e., a patent that shares the same priority date, disclosure, and patent term of the parent '665 Patent but contains claims to a different invention).

The oral hearing before the EPO on the oppositions occurred on February 14–15, 2019, at which the '420 Patent was revoked in its entirety.

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Proceedings Relating to EYLEA (aflibercept) Injection

United States

On February 11, 2020, anonymous parties filed two requests for ex parte reexamination of the Company's U.S.

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2,944,306 (the "'306 Patent") seeking revocation of the '306 Patent in its entirety.

On June 15 and July 15, 2022, the Company and Bayer Inc.

filed patent infringement lawsuits against BGP Pharma ULC d.b.a Viatris Canada and two additional defendants in the Federal Court of Canada seeking a declaration that the making, constructing, using, or selling of an aflibercept biosimilar would directly or indirectly infringe one or more claims of the Company's Canadian Patent Nos.

2,654,510 and 3,007,276 (in the lawsuit filed on June 15, 2022) and the Company's Canadian Patent No.

2,965,495 (in the lawsuit filed on July 15, 2022).

Proceedings Relating to EYLEA (aflibercept) Injection Pre-filled Syringe

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On October 26, 2021, the USPTO issued a decision instituting the IPR proceeding.

An oral hearing has been scheduled for July 22, 2022.

An oral hearing was held on July 21, 2022.

On July 17, 2020, the Company filed an antitrust lawsuit against Novartis and Vetter Pharma International Gmbh ("Vetter") in the United States District Court for the Southern District of New York seeking a declaration that the '631 Patent is unenforceable and a judgment that the defendants' conduct violates Sections 1 and 2 of the Sherman Antitrust Act of 1890, as amended (the "Sherman Antitrust Act").

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On September 4, 2020, Novartis filed, and Vetter moved to join, a motion to dismiss the complaint, to transfer the lawsuit to the Northern District of New York, or to stay the suit;

and on October 19, 2020, Novartis filed, and Vetter moved to join, a second motion to

dismiss the complaint on different grounds.

and on October 19, 2020, Novartis filed, and Vetter moved to join, a second motion to dismiss the complaint on different grounds.

On January 25, 2021, the Company filed an amended complaint seeking a judgment that Novartis's conduct violates Section 2 of the Sherman Antitrust Act based on additional grounds, as well as a judgment of tortious interference with contract.

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On January 31, 2022, the court denied the Company's motion to stay these proceedings and granted Novartis and Vetter's motion to dismiss the amended complaint.

On February 25, 2022, the Company filed a notice of appeal of the court's decision to dismiss the amended complaint with the U.S.

On June 10, 2022, the Company filed an appeal of the District Court's decision to dismiss the amended complaint with the U.S.

Court of Appeals for the Second Circuit.

Proceedings Related to "Most Favored Nation" Interim Final Rule

On December 11, 2020, the Company filed a lawsuit in the United States District Court for the Southern District of New York against the U.S.

Department of Health and Human Services, the Secretary of HHS, the Centers for Medicare & Medicaid Services ("CMS"), and the Administrator of CMS seeking declaratory and injunctive relief related to the interim final rule with comment period entitled "Most Favored Nation (MFN) Model" issued on November 20, 2020 by HHS, acting through CMS (the "MFN Rule").

On the same day, the Company filed a motion for a preliminary injunction and temporary restraining order, seeking to prevent implementation of the MFN Rule.

On December 22, 2020, the court heard oral argument on the Company's motion for a preliminary injunction and temporary restraining order.

On December 31, 2020, the court granted the Company's motion and issued a preliminary injunction.

On February 2, 2021, the government stated to the court that the Solicitor General had determined not to appeal the preliminary injunction.

On February 10, 2021, the court entered a 90-day stay of the litigation and subsequently extended the stay, with the most recent 60-day extension granted on March 7, 2022.

On December 27, 2021, CMS published a final rule that rescinded the MFN Rule;

and, on March 28, 2022, the Company filed a notice of voluntary dismissal of this litigation.

Proceedings Relating to fasinumab

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On January 14, 2022, the Company filed a motion to dismiss the amended complaint in its entirety.

An oral hearing has been scheduled for May 6, 2022.

In June 2021, the Company received a CID from the U.S.

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and by Blue Cross and Blue Shield of Massachusetts, Inc.

and Blue Cross and Blue Shield of Massachusetts HMO Blue, Inc., Medical Mutual of Ohio, and Horizon Healthcare Services, Inc.

d/b/a Horizon Blue Cross Blue Shield of New Jersey in the U.S.

District Court for the District of Massachusetts on December 20, 2021, February 23, 2022, and April 4, 2022, respectively.

and Blue Cross and Blue Shield of Massachusetts HMO Blue, Inc.

(collectively, "BCBS"), Medical Mutual of Ohio ("MMO"), Horizon Healthcare Services, Inc.

d/b/a Horizon Blue Cross Blue Shield of New Jersey ("Horizon"), and Local 464A United Food and Commercial Workers Union Welfare Service Benefit Fund ("Local 464A") in the U.S.

District Court for the District of Massachusetts on December 20, 2021, February 23, 2022, April 4, 2022, and June 17, 2022, respectively.

These lawsuits allege causes of action under state law and the federal Racketeer Influenced and Corrupt Organizations Act and seek monetary damages and equitable relief.

The MMO and Local 464A lawsuits are putative class action lawsuits.

On December 29, 2021, the lawsuits filed by UHC and Humana were stayed by the United States District Court for the Southern District of New York pending resolution of the proceedings before the U.S.

District Court for the District of Massachusetts discussed under "Department of Justice Matters" above.

In the BCBS, MMO, and Horizon matters, on May 31, 2022, June 6, 2022, and June 13, 2022, respectively, the Company filed motions to transfer the actions to the United States District Court of the Southern District of New York or, in the alternative, to stay the actions in favor of the proceedings before the U.S.

District Court for the District of Massachusetts discussed under "Department of Justice Matters" above;

or to dismiss the complaints with prejudice.

Shareholder Demands

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements