REGENERON PHARMACEUTICALS, INC. 10-K

Item 7. Management's Discussion and Analysis of Financial Condition and Results 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, 2021 (filed with the SEC on February 7, 2022) for additional discussion of our financial condition and results of operations for the year ended December 31, 2020, as well as our financial condition and results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020. Overview Regeneron Pharmaceuticals, Inc. is a fully integrated biotechnology company that invents, develops, manufactures, and commercializes medicines for people with serious diseases. Our products and product candidates in development are designed to help patients with eye diseases, allergic and inflammatory diseases, cancer, cardiovascular and metabolic diseases, pain, hematologic conditions, infectious diseases, and rare diseases. We currently have nine FDA-approved products that have received marketing approval and approximately 35 product candidates in clinical development, almost all of which were homegrown in our laboratories. In addition, REGEN-COV was authorized under an EUA for COVID-19 from November 2020 until January 2022 when the EUA was revised to exclude its use in geographic regions where infection or exposure is likely due to a variant that is not susceptible to the treatment (see Part I, Item 1. "Business - Additional Information - Clinical Development Programs"). Refer to Part I, Item 1. "Business - Products" and "Business - Programs in Clinical Development" for additional information related to marketed products and product candidates. 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, as well as on whether we are able to obtain regulatory approval for aflibercept 8 mg and are successful in commercializing it. 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. In addition, our research and development activities and related costs 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 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 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 Estimates 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. Critical accounting estimates are those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact 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 or acceptance 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 to which we will be entitled. This estimate is based upon contracts with customers, healthcare providers, payors and government agencies, statutorily-defined discounts applicable to government-funded programs, historical experience, estimated payor mix, and other relevant factors. Calculating these provisions involves estimates and judgments. We 77 Table of Contents 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 products and/or product candidates. 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) 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 (see "Results of Operations - Expenses - Other Operating (Income) Expense" below for further information related to amounts recognized in connection with such estimates). 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, potentially resulting in material changes to amounts recognized. If our collaborator performs research and development work or commercialization-related activities and the parties share the related costs, we also recognize, as expense (e.g., 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. The estimates are revised, if necessary, in subsequent periods if actual expenses differ from those estimates. 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: • 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 may be 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 each quarter. The estimates are revised, if necessary, in subsequent periods if our actual share of profits or losses differ from those estimates. 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 (as applicable) 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. 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. In addition, we reassess our forfeiture rate assumptions at least annually, considering both historical forfeiture experience and an estimate of future forfeitures for currently outstanding unvested awards. 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 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. 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 78 Table of Contents securities with maturities approximating the options' expected lives. Expected volatility is 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 director option grants. The expected dividend yield is zero as we have never paid dividends and do not currently anticipate paying any in the foreseeable future. We use a Monte Carlo simulation to compute the estimated fair value of performance-based restricted stock units that are subject to vesting based on the Company's attainment of pre-established performance criteria that include a market condition. For performance-based restricted stock units that contain a performance condition, we recognize stock-based compensation expense if and when we determine that it is probable the performance condition will be achieved (based on the number of shares expected to be vested and issued). We reassess the probability of achievement at each reporting period and adjust compensation cost, as necessary. If there are any changes in our probability assessment, we recognize a cumulative catch-up adjustment in the period of the change in estimate, with the remaining unrecognized expense recognized prospectively over the remaining requisite service period. If we subsequently determine that the performance criteria are not met or are not expected to be met, any amounts previously recognized as compensation expense are reversed in the period when such determination is made. See Note 13 to our Consolidated Financial Statements for stock-based compensation expense and related assumptions used in determining the fair value of our awards. 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. The Company recognizes the financial statement effects of a tax position when 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. Uncertain tax positions are recorded based upon 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 amount of the liability to reflect any subsequent changes in the relevant facts and circumstances surrounding the uncertain tax 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 inventory to its estimated realizable value. See "Results of Operations - Expenses - Cost of Goods Sold" below for further information related to our inventory write-offs and reserves. Intangible Assets Intangible assets acquired in connection with an asset acquisition are recorded at cost. Intangible assets are amortized over the estimated useful lives of the assets based on the pattern in which the economic benefits of the intangible assets are consumed; if that pattern cannot be reliably determined, a straight-line basis is used. If contingent consideration is recognized subsequent to the acquisition date in an asset acquisition, the amount of such consideration is recorded as an addition to the cost basis of the 79 Table of Contents intangible asset with a cumulative catch-up adjustment for amortization expense as if the additional amount of consideration had been accrued from the outset of the acquisition. Our intangible assets are reviewed for recoverability whenever events or changes in circumstances (e.g., changes in economic, regulatory, or legal conditions) indicate that the carrying amount of the asset may not be recoverable. If an indicator of impairment exists, we compare the projected undiscounted cash flows to be generated by the asset to the intangible asset's carrying amount. If the projected undiscounted cash flows of the intangible asset are less than the carrying amount, the intangible asset is written down to its fair value in the period in which the impairment occurs. As described in Part I, Item 1. "Business - Collaboration, License, and Other Agreements - Sanofi - Immuno-Oncology," effective July 1, 2022, the Company obtained the exclusive right to develop, commercialize, and manufacture Libtayo worldwide under the A&R IO LCA with Sanofi. The transaction was accounted for as an asset acquisition and amounts paid to Sanofi in connection with obtaining the worldwide rights to Libtayo, including the up-front payment and any contingent consideration, are recorded as an intangible asset. Due to the complexity of the terms of the amendments to the collaboration agreements in contemplation of the acquisition of the worldwide rights to Libtayo, significant judgment was applied in identifying the elements of the transaction and evaluating the timing and recognition of contingent consideration. See Note 8 to our Consolidated Financial Statements for further information related to our intangible assets. 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. Results of Operations Net Income Year Ended December 31, (In millions, except per share data) 2022 2021 2020 Revenues $ 12,172.9 $ 16,071.7 $ 8,497.1 Operating expenses 7,434.0 7,124.9 4,920.5 Income from operations 4,738.9 8,946.8 3,576.6 Other income (expense) 119.9 379.0 233.8 Income before income taxes 4,858.8 9,325.8 3,810.4 Income tax expense 520.4 1,250.5 297.2 Net income $ 4,338.4 $ 8,075.3 $ 3,513.2 Net income per share - diluted $ 38.22 $ 71.97 $ 30.52 80 Table of Contents Revenues Year Ended December 31, $ Change (In millions) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Net product sales: EYLEA - U.S. $ 6,264.6 $ 5,792.3 $ 4,947.2 $ 472.3 $ 845.1 Libtayo - U.S. 374.5 306.3 270.7 68.2 35.6 Libtayo - ROW 73.0 — — * * Praluent - U.S. ** 130.0 170.0 150.9 (40.0) * REGEN-COV - U.S. — 5,828.0 185.7 (5,828.0) 5,642.3 Evkeeza - U.S. 48.6 18.4 — 30.2 18.4 Inmazeb - U.S. 3.0 — — 3.0 — ARCALYST - U.S. *** — 2.2 13.1 * * Total net product sales $ 6,893.7 $ 12,117.2 $ 5,567.6 $ (5,294.3) $ 6,541.4 Collaboration revenue: Sanofi $ 2,855.7 $ 1,902.2 $ 1,186.4 $ 953.5 $ 715.8 Bayer 1,430.7 1,409.3 1,186.1 21.4 223.2 Roche 627.3 361.8 — 265.5 361.8 Other 0.4 — — 0.4 — Other revenue 365.1 281.2 557.0 83.9 (275.8) Total revenues $ 12,172.9 $ 16,071.7 $ 8,497.1 $ (3,969.6) $ 7,566.4 * Not meaningful ** Net product sales of Praluent in the United States were recorded by Sanofi prior to April 1, 2020. *** Effective April 1, 2021, Kiniksa records net product sales of ARCALYST in the United States. Previously, the Company recorded net product sales of ARCALYST in the United States. Net Product Sales Net product sales of EYLEA in the United States increased in 2022, compared to 2021, due to higher sales volume partly offset by an increase in sales-related deductions. As described in Part I, Item. 1. "Business - Collaboration, License, and Other Agreements - Sanofi - Immuno-oncology", effective July 1, 2022, the Company became solely responsible for the research, development, and commercialization of Libtayo worldwide and began recording net product sales of Libtayo outside the United States. During the years ended December 31, 2021 and 2020, we recorded net product sales of REGEN-COV in connection with our agreements with the U.S. government. As of December 31, 2021, the Company had completed its final deliveries of drug product under its agreements with the U.S. government; as a result, there were no net product sales of REGEN-COV in the United States recorded during the year ended December 31, 2022. Refer to Part I, Item 1. "Business - Agreements Related to COVID-19 - U.S. Government " for further details. 81 Table of Contents 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, 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 Provisions 1,047.1 363.6 150.4 1,561.1 Credits/payments (1,034.7) (360.8) (127.6) (1,523.1) Balance as of December 31, 2021 214.6 80.0 67.6 362.2 Provisions 1,537.3 431.1 141.1 2,109.5 Credits/payments (1,398.0) (399.7) (127.2) (1,924.9) Balance as of December 31, 2022 $ 353.9 $ 111.4 $ 81.5 $ 546.8 Sanofi Collaboration Revenue Year Ended December 31, (In millions) 2022 2021 2020 Antibody: Regeneron's share of profits in connection with commercialization of antibodies $ 2,082.0 $ 1,363.0 $ 785.2 Sales-based milestones earned 100.0 50.0 50.0 Reimbursement for manufacturing of commercial supplies (a) 633.7 488.8 368.0 Other 28.7 — — Total Antibody 2,844.4 1,901.8 1,203.2 Total Immuno-oncology 11.3 0.4 (16.8) Total Sanofi collaboration revenue $ 2,855.7 $ 1,902.2 $ 1,186.4 (a) Corresponding costs incurred by the Company in connection with such production is recorded within Cost of collaboration and contract manufacturing As the A&R IO LCA became effective July 1, 2022, the three months ended June 30, 2022 was the last period in which Sanofi collaboration revenue was recognized in connection with the immuno-oncology collaborative arrangement. Antibody Global net product sales of Dupixent and Kevzara are recorded by Sanofi. The increase in our share of profits in connection with commercialization of antibodies during the year ended December 31, 2022, compared to 2021, was driven by profits associated with higher Dupixent sales, partly offset by the impact of the amendment to the Antibody License and Collaboration Agreement. As described in Part I, Item 1. "Business - Collaboration, License, and Other Agreements - Sanofi - Antibody", 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 in any calendar quarter used to reimburse Sanofi for development costs which were funded by Sanofi increased from 10% to 20%. In addition, the amount of our share of profits we earned in connection with commercialization of antibodies outside the United States was adversely impacted in 2022 by the U.S. dollar strengthening against foreign currencies, including the Japanese yen and the euro. 82 Table of Contents Regeneron's share of profits in connection with the commercialization of Dupixent, Praluent (through March 31, 2020), and Kevzara is summarized below: Year Ended December 31, (In millions) 2022 2021 2020 Dupixent, Praluent, and Kevzara net product sales (a) $ 9,039.2 $ 6,536.3 $ 4,394.5 Regeneron's share of collaboration profits 2,405.5 1,511.5 871.5 Reimbursement of development expenses incurred by Sanofi in accordance with Regeneron's payment obligation (266.6) (148.5) (86.3) One-time payment in connection with amendment to the Antibody License and Collaboration Agreement (56.9) — — Regeneron's share of profits in connection with commercialization of antibodies $ 2,082.0 $ 1,363.0 $ 785.2 Regeneron's share of collaboration profits as a percentage of Dupixent, Praluent, and Kevzara net product sales 23% 21% 18% (a) 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. As described in Part I, Item 1. "Business - Collaboration, License, and Other Agreements - Sanofi - Antibody", effective April 1, 2020, the Company became 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. During the year ended December 31, 2022, we earned two $50.0 million sales-based milestones from Sanofi, upon aggregate annual sales of antibodies outside the United States (including Praluent) exceeding $2.0 billion and $2.5 billion, respectively, on a rolling twelve-month basis. During the year ended December 31, 2021, we earned a $50.0 million sales-based milestone from Sanofi, upon aggregate annual sales of antibodies outside the United States (including Praluent) exceeding $1.5 billion on a rolling twelve-month basis. We are entitled to receive the final sales milestone payment of $50.0 million that would be earned when such sales outside the United States exceed $3.0 billion on a rolling twelve-month basis. The increase in reimbursements for manufacturing of commercial supplies in 2022, compared to 2021, 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. Bayer Collaboration Revenue Year Ended December 31, (In millions) 2022 2021 2020 Regeneron's share of profits in connection with commercialization of EYLEA outside the United States $ 1,317.4 $ 1,349.2 $ 1,107.9 Reimbursement for manufacturing of ex-U.S. commercial supplies (a) 91.4 60.1 78.2 One-time payment in connection with change in Japan arrangement 21.9 — — Total Bayer collaboration revenue $ 1,430.7 $ 1,409.3 $ 1,186.1 (a) Corresponding costs incurred by the Company in connection with such production is recorded within Cost of collaboration and contract manufacturing 83 Table of Contents Bayer records net product sales of EYLEA outside the United States. The amount of the share of profits we earned in connection with commercialization of EYLEA outside the United States was adversely impacted in 2022 by the U.S. dollar strengthening against foreign currencies, including the Japanese yen and the euro. Regeneron's share of profits in connection with commercialization of EYLEA outside the United States is summarized below: Year Ended December 31, (In millions) 2022 2021 2020 EYLEA net product sales outside the United States $ 3,382.8 $ 3,450.9* $ 2,820.7* Regeneron's share of collaboration profit from sales outside the United States $ 1,375.1 $ 1,408.3 $ 1,165.8 Reimbursement of development expenses incurred by Bayer in accordance with Regeneron's payment obligation (57.7) (59.1) (57.9) Regeneron's share of profits in connection with commercialization of EYLEA outside the United States $ 1,317.4 $ 1,349.2 $ 1,107.9 Regeneron's share of profits as a percentage of EYLEA net product sales outside the United States 39% 39% 39% * Effective January 1, 2022, the Company and Bayer commenced sharing equally in profits and losses based on sales from Bayer to its distributor in Japan. Previously, the Company received from Bayer a tiered percentage of sales based on sales by Bayer's distributor in Japan. Consequently, the prior year net product sales amount has been revised for comparability purposes. Roche Collaboration Revenue As described in Part I, Item 1. "Business - Agreements Related to COVID-19 - Roche", Roche distributes and records net product sales of Ronapreve outside the United States, and the parties share gross profits from worldwide sales of REGEN-COV and Ronapreve, depending on the amount of manufactured product supplied by each party to the market. Each quarter, a single payment is due from one party to the other to true-up the global gross profits between the parties. If Regeneron is to receive a true-up payment from Roche, such amount will be recorded to collaboration revenue. If Regeneron is to make a true-up payment to Roche, such amount will be recorded to Cost of goods sold. During the years ended December 31, 2022 and 2021, the Company recognized $627.3 million and $361.8 million, respectively, of global gross profit payments from Roche within collaboration revenue. Other Revenue Other revenue increased in 2022, compared to 2021, primarily due to higher reimbursements for the manufacture of commercial supplies for Sanofi related to Praluent outside the United States. Expenses Year Ended December 31, Change (In millions, except headcount data) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Research and development (a) $ 3,592.5 $ 2,860.1 $ 2,647.0 $ 732.4 $ 213.1 Acquired in-process research and development 255.1 48.0 88.0 207.1 (40.0) Selling, general, and administrative (a) 2,115.9 1,824.9 1,346.0 291.0 478.9 Cost of goods sold 800.0 1,773.1 491.9 (973.1) 1,281.2 Cost of collaboration and contract manufacturing (b) 760.4 664.4 628.0 96.0 36.4 Other operating (income) expense, net (89.9) (45.6) (280.4) (44.3) 234.8 Total operating expenses $ 7,434.0 $ 7,124.9 $ 4,920.5 $ 309.1 $ 2,204.4 Average headcount 11,115 9,884 8,495 1,231 1,389 (a) Includes costs incurred net of any cost reimbursements from collaborators who are not deemed to be our customers (b) Cost of collaboration and contract manufacturing includes costs we incur in connection with producing commercial drug supplies for collaborators and others. 84 Table of Contents Operating expenses in 2022, 2021, and 2020 included a total of $725.0 million, $601.7 million, and $432.0 million, respectively, of stock-based compensation expense related to equity awards granted under our long-term incentive plans. As of December 31, 2022, unrecognized stock-based compensation expense related to unvested stock options and unvested restricted stock (including performance-based restricted stock units) was $572.0 million and $1.064 billion, respectively. We expect to recognize this stock-based compensation expense related to stock options and restricted stock over weighted-average periods of 1.8 years and 2.6 years, respectively. 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) 2022 2021 * 2020 * 2022 vs. 2021 2021 vs. 2020 Direct research and development expenses: Dupixent (dupilumab) $ 156.5 $ 146.4 $ 129.7 $ 10.1 $ 16.7 Libtayo (cemiplimab) 138.0 146.2 155.3 (8.2) (9.1) EYLEA and aflibercept 8 mg 81.2 102.2 72.2 (21.0) 30.0 Pozelimab 72.4 28.3 16.0 44.1 12.3 Odronextamab 66.0 34.9 35.0 31.1 (0.1) Linvoseltamab 45.5 18.7 11.4 26.8 7.3 Fianlimab 43.4 8.7 9.1 34.7 (0.4) REGEN-COV 32.8 309.8 290.7 (277.0) 19.1 Other product candidates in clinical development and other research programs 407.1 401.0 587.8 6.1 (186.8) Total direct research and development expenses 1,042.9 1,196.2 1,307.2 (153.3) (111.0) Indirect research and development expenses: Payroll and benefits 1,195.5 981.4 816.6 214.1 164.8 Lab supplies and other research and development costs 181.0 142.0 138.3 39.0 3.7 Occupancy and other operating costs 508.5 414.9 335.7 93.6 79.2 Total indirect research and development expenses 1,885.0 1,538.3 1,290.6 346.7 247.7 Clinical manufacturing costs 938.3 621.7 686.1 316.6 (64.4) Reimbursement of research and development expenses by collaborators (273.7) (496.1) (636.9) 222.4 140.8 Total research and development expenses $ 3,592.5 $ 2,860.1 $ 2,647.0 $ 732.4 $ 213.1 * Certain prior year amounts have been reclassified to conform to the current year's presentation 85 Table of Contents Total research and development expenses increased in 2022, compared to 2021, partially due to the impact of the amendments to the Sanofi collaboration agreements described above in Part I, Item 1. "Business - Collaboration, License, and Other Agreements - Sanofi," as (i) Sanofi is no longer reimbursing us for 50% of Libtayo development costs, and (ii) effective July 1, 2022, we recognize our 50% share of research and development expenses in connection with the Sanofi Antibody Collaboration. Research and development expenses included stock-based compensation expense of $406.8 million and $316.6 million in 2022 and 2021, respectively. Reimbursement of research and development expenses by collaborators included reimbursements from Roche related to REGEN-COV of $128.1 million for the year ended December 31, 2021. For the year ended December 31, 2022, such reimbursements from Roche related to REGEN-COV were not material. 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 regulatory requirements, changes in the competitive landscape affecting a product candidate, and other risks and uncertainties described in Part I, Item 1A. "Risk Factors". 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. Acquired In-process Research and Development ("IPR&D") Acquired IPR&D in 2022 included a $195.0 million charge related to our acquisition of Checkmate, a $30.0 million up-front payment in connection with our collaboration agreement with CytomX Therapeutics, Inc., and a $20.0 million opt-in payment in connection with a product candidate under our collaboration agreement with Adicet Bio, Inc. Acquired IPR&D in 2021 included $34.0 million in aggregate up-front payments in connection with our collaboration agreement with Nykode Therapeutics and in 2020 included $85.0 million in aggregate up-front payments in connection with our collaboration agreement with Intellia. Selling, General, and Administrative Expenses Selling, general, and administrative expenses increased in 2022, compared to 2021, primarily due to higher headcount and headcount-related costs, an increase in commercialization-related expenses for Libtayo (as effective July 1, 2022, the Company became solely responsible for the commercialization of Libtayo worldwide), and higher contributions to an independent not-for-profit patient assistance organization, partly offset by costs in 2021 for educational campaigns related to COVID-19 that did not recur during 2022. Selling, general, and administrative expenses also included $256.4 million and $213.3 million of stock-based compensation expense in 2022 and 2021, respectively. Cost of Goods Sold Cost of goods sold decreased in 2022, compared to 2021, primarily due to the Company recognizing REGEN-COV net product sales (and corresponding cost of goods sold) in the United States during 2021 and a 2021 payment of $259.6 million owed in connection with global gross profits under our Roche collaboration agreement; such transactions did not recur in 2022. Cost of goods sold also decreased during 2022 since effective July 1, 2022, as a result of the A&R IO LCA described in Part I, Item 1. "Business - Collaboration, License, and Other Agreements - Sanofi - Immuno-Oncology", we are no longer obligated to pay Sanofi for their share of Libtayo U.S. gross profits (during the six months ended June 30, 2022, Cost of goods sold included $70.1 million related to our obligation for Sanofi's share of Libtayo U.S. gross profits compared to $133.0 million for full year 2021). Cost of goods sold in 2022 also decreased, compared to 2021, due to lower inventory write-offs and reserves. Inventory write-offs and reserves were $258.7 million in 2022 (including $157.4 million in the fourth quarter of 2022) compared to $457.1 million in 2021 (including $269.2 million in the fourth quarter of 2021). These inventory write-offs and reserves were primarily related to REGEN-COV. Refer to Part I, Item 1. "Business - Additional Information - Clinical Development Programs - REGEN-COV (casirivimab and imdevimab)" for further information related to regulatory developments for REGEN-COV which negatively impacted the estimated realizable value of inventory on hand. 86 Table of Contents Cost of Collaboration and Contract Manufacturing Cost of collaboration and contract manufacturing increased in 2022, compared to 2021, primarily due to the recognition of costs in connection with manufacturing additional commercial supplies for Sanofi related to Praluent outside the United States and Dupixent, and manufacturing costs associated with EYLEA outside the United States. 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. During 2022, the Company discontinued further clinical development of fasinumab, and, as a result, recorded $44.4 million (as an increase to other operating income) related to our Teva and MTPC collaborative arrangements as we deemed our obligation to provide development services in connection with these collaborative arrangements to be complete. As the A&R IO LCA became effective July 1, 2022, the three months ended June 30, 2022 was the last period in which such amounts were recognized in connection with our Sanofi immuno-oncology collaborative arrangement. During 2021, we updated our estimate of the total research and development costs expected to be incurred (which resulted in a change to the estimate of the stage of completion) in connection with the Sanofi IO Collaboration, and, as a result, recorded a cumulative catch-up adjustment of $66.9 million as a reduction to other operating income. Other Income (Expense) Other income (expense) consists of the following: Year Ended December 31, (In millions) 2022 2021 2020 Unrealized (losses) gains on equity securities, net $ (39.8) $ 386.1 $ 196.0 Interest income 160.1 45.8 75.4 Other 59.0 4.4 19.3 Other income (expense), net 179.3 436.3 290.7 Interest expense (59.4) (57.3) (56.9) Total other income (expense) $ 119.9 $ 379.0 $ 233.8 Income Taxes Year Ended December 31, (In millions, except effective tax rate) 2022 2021 2020 Income tax expense $ 520.4 $ 1,250.5 $ 297.2 Effective tax rate 10.7% 13.4% 7.8% The effective tax rate for 2022, compared to 2021, included a favorable benefit from the proportion of income earned in foreign jurisdictions with tax rates lower than the U.S. federal statutory rate (including the impact from REGEN-COV income earned in the United States during 2021). 87 Table of Contents Liquidity and Capital Resources Our financial condition is summarized as follows: As of December 31, (In millions) 2022 2021 $ Change Financial assets: Cash and cash equivalents $ 3,105.9 $ 2,885.6 $ 220.3 Marketable securities - current 4,636.4 2,809.1 1,827.3 Marketable securities - noncurrent 6,591.8 6,838.0 (246.2) $ 14,334.1 $ 12,532.7 $ 1,801.4 Working capital: Current assets $ 15,884.1 $ 14,014.9 $ 1,869.2 Current liabilities 3,141.3 3,932.5 * (791.2) $ 12,742.8 $ 10,082.4 $ 2,660.4 Borrowings and finance lease liabilities: Long-term debt $ 1,981.4 $ 1,980.0 $ 1.4 Finance lease liabilities $ 720.0 $ 719.7 * $ 0.3 * The $719.7 million related to finance lease liabilities was classified within current liabilities as of December 31, 2021. See "Tarrytown, New York Leases" section below for details. As of December 31, 2022, 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, 2022, 2021, and 2020 As of December 31, $ Change (In millions) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Cash flows provided by operating activities $ 5,014.9 $ 7,081.3 $ 2,618.1 $ (2,066.4) $ 4,463.2 Cash flows used in investing activities $ (3,784.6) $ (5,384.7) $ (70.6) $ 1,600.1 $ (5,314.1) Cash flows used in financing activities $ (1,009.0) $ (1,005.8) $ (1,970.5) $ (3.2) $ 964.7 Cash Flows from Operating Activities 2022 As of December 31, 2022, Accounts receivable had decreased by $707.8 million, compared to December 31, 2021, driven by the Company's collection of amounts due from the U.S. government in connection with REGEN-COV sales in the fourth quarter of 2021. Other non-cash items, net, in 2022 included inventory write-offs and reserves. As of December 31, 2022, deferred tax assets increased by $746.4 million, compared to December 31, 2021, primarily related to the impact of the Tax Cuts and Jobs Act of 2017, which requires, for tax purposes, the capitalization and amortization of research and development expenses effective for years beginning after December 31, 2021. 2021 As of December 31, 2021, Accounts receivable had increased by $1.927 billion, compared to December 31, 2020, primarily due to REGEN-COV sales in connection with our September 2021 agreement to supply drug product to the U.S. government. Other non-cash items, net, in 2021 included inventory write-offs and reserves. Accounts payable, accrued expenses, and other liabilities as of December 31, 2021 included a $259.6 million fourth quarter 2021 payment owed in connection with global gross profits under our Roche collaboration agreement. 88 Table of Contents 2020 As of December 31, 2020, Accounts receivable had increased by $1.356 billion, compared to December 31, 2019, partly as a result of extending payment terms to 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. Cash Flows from Investing Activities Capital expenditures in 2022 included costs associated with the expansion of our manufacturing facilities in Rensselaer, New York (including the ongoing construction of a fill/finish facility and related equipment) and Limerick, Ireland, as well as costs incurred in connection with the expansion of the Tarrytown, New York campus. We expect to incur capital expenditures of $825 million to $950 million in 2023 primarily in connection with the continued expansion of our research, preclinical manufacturing, and support facilities at our Tarrytown, New York campus and our manufacturing facilities (including the fill/finish facility). We expect continued significant capital expenditures over the next several years in connection with the planned expansion of our Tarrytown, New York campus. Payments for Libtayo intangible asset of $1.027 billion in 2022 were related to our acquisition of the exclusive right to develop, commercialize, and manufacture Libtayo worldwide. Asset acquisition, net of cash acquired, of $230.3 million in 2022 was related to our acquisition of Checkmate. Cash Flows from Financing Activities Proceeds from issuances of Common Stock, in connection with exercises of employee stock options, were $1.520 billion during 2022, compared to $1.672 billion during 2021 and $2.575 billion during 2020. For additional information related to cash flows from financing activities, see "Share Repurchase Programs", "Sanofi Funding of Certain Development Costs", "Secondary Offering and Purchase of Regeneron Common Stock Held by Sanofi", and "Issuance of Senior Notes" sections below. Credit Facility In December 2018, we entered into an agreement with a syndicate of lenders (the "2018 Credit Agreement") which provided for a $750.0 million senior unsecured five-year revolving credit facility. The 2018 Credit Agreement, which was set to mature in December 2023, included 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. In December 2022, we entered into an agreement with a syndicate of lenders (the "2022 Credit Agreement") which provides for a $750.0 million senior unsecured five-year revolving credit facility (the "2022 Credit Facility") and replaces the 2018 Credit Agreement, which was contemporaneously terminated. The 2022 Credit Agreement includes an option for the Company to elect to increase the commitments under the 2022 Credit Facility and/or to enter into one or more tranches of term loans in the aggregate principal amount of up to $500.0 million, subject to the consent of the lenders providing the additional commitments or term loans, as applicable, and certain other conditions. The 2022 Credit Agreement also provides a $50.0 million sublimit for letters of credit. As set forth in the 2022 Credit Agreement, we have the option to amend the 2022 Credit Agreement to establish environmental, social, and governance targets which will be used to adjust pricing under the 2022 Credit Facility, subject to parameters to be provided in the 2022 Credit Agreement. Proceeds of the loans under the 2022 Credit Facility may be used to finance working capital needs, and for general corporate or other lawful purposes, of Regeneron and its subsidiaries. Regeneron Pharmaceuticals, Inc. has guaranteed all obligations under the 2022 Credit Facility. The 2022 Credit Agreement includes an option for us to elect to extend the maturity date of the 2022 Credit Facility beyond December 2027, subject to the consent of the extending lenders and certain other conditions. Amounts borrowed under the 2022 Credit Facility may be prepaid, and the commitments under the 2022 Credit Facility may be terminated, at any time without premium or penalty. We had no borrowings outstanding under the 2022 Credit Facility as of December 31, 2022. The 2022 Credit Agreement contains operating covenants and a maximum total leverage ratio financial covenant. We were in compliance with all covenants of the 2022 Credit Agreement as of December 31, 2022. Share Repurchase Programs 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 make repurchases through a variety of methods, including open- 89 Table of Contents 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. 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 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. 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. In November 2021, our board of directors authorized a share repurchase program to repurchase up to $3.0 billion of our Common Stock. The share repurchase program was approved under terms substantially similar to the share repurchase programs described above. The program has no time limit and can be discontinued at any time. As of December 31, 2022, $745.2 million 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 described above and the cost of the shares, which were recorded as Treasury Stock. Year Ended December 31, (In millions) 2022 2021 2020 Number of shares 3.3 3.0 1.6 Total cost of shares $ 2,099.8 $ 1,655.0 $ 746.0 In January 2023, our board of directors authorized a new share repurchase program to repurchase up to an additional $3.0 billion of our Common Stock. The share repurchase program was approved under terms substantially similar to the share repurchase programs described above. The program has no time limit and can be discontinued at any time. Share repurchases may be made from time to time at management's discretion, and the timing and amount of any such repurchases will be determined based on share price, market conditions, legal requirements, and other relevant factors. There can be no assurance as to the timing or number of shares of any repurchases in the future. Sanofi Funding of Certain Development Costs Pursuant to a 2018 agreement, we agreed to allow Sanofi to satisfy in whole or in part its funding obligations with respect to Libtayo development and/or certain activities relating to dupilumab and itepekimab incurred in periods through September 30, 2020 by selling shares of our Common Stock owned by Sanofi. During 2020, Sanofi elected to sell, and we elected to purchase, shares of our Common Stock to satisfy Sanofi's funding obligation related to such activities. Consequently, we recorded the cost of the shares received, or $135.0 million, as Treasury Stock during 2020. Secondary Offering and Purchase of Regeneron Common Stock Held by 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 $5.0 billion (the "Stock Purchase"). 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 bridge loan facility (the "Bridge Facility") which was entered into in May 2020. The Bridge Facility was repaid in August 2020 following the issuance and sale of the Company's senior unsecured notes (as described below). 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 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 until their respective maturity dates. 90 Table of Contents 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 BA Leasing BSC, LCC, an affiliate of Banc of America Leasing & Capital, LLC ("BAL"), as lessor, and a syndicate of lenders (collectively with BAL, 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 for the Facility with BAL for a five-year term that was set to expire in March 2022. In March 2022, we entered into a Second Amended and Restated Lease and Remedies Agreement (the "Restated Lease") with BAL, as lessor (the "Lessor"), which amends, restates, and extends our lease of the Facility. In March 2022, we also entered into a Second Amended and Restated Participation Agreement (the "Restated Participation Agreement") with Bank of America, N.A., as administrative agent, the Lessor, and a syndicate of financial institutions as rent assignees (collectively with the Lessor, the "Participants"), which amends and restates the original Participation Agreement entered into in March 2017. The original Participation Agreement and certain related agreements were amended and restated in order to, among other things, (i) effect a five-year extension of the original March 2022 maturity date of the $720.0 million lease financing and the end of the term of our lease of the Facility from the Lessor to March 2027, at which time all amounts outstanding thereunder will become due and payable in full, and (ii) modify the rate of the interest or yield that is payable to the Participants. In accordance with the terms of the Restated Lease, we continue 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 Restated Lease in an amount equal to a variable rate per annum, which was modified in connection with the Restated Lease, to be an adjusted one-month forward-looking term rate based on the Secured Overnight Financing Rate ("SOFR"), plus an applicable margin that varies with our debt rating and total leverage ratio. 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. The Restated Lease is classified as a finance lease as we have the option to purchase the Facility under terms that make it reasonably certain to be exercised. The agreements governing the Restated Lease financing contain financial and operating covenants. Such financial covenants and certain of the operating covenants are substantially similar to the covenants set forth in our 2018 Credit Agreement. The Company was in compliance with all such covenants as of December 31, 2022. Additional 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 2022 Credit Facility, funds generated by anticipated product sales, and 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. 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 91 Table of Contents each trial, including the size of trials, 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 other expenses. We also anticipate continuing to incur substantial commercialization costs for our marketed products. 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. Liabilities for unrecognized tax benefits totaled $542.8 million as of December 31, 2022. Due to their nature, there is a high degree of uncertainty regarding the period and amounts of potential future cash settlement with tax authorities. See Note 15 to our Consolidated Financial Statements. We enter into collaboration and licensing agreements that may require us to pay (i) amounts contingent upon the occurrence of various future events (e.g., 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. See Note 3 and Note 11 to our Consolidated Financial Statements. Under our collaboration with Bayer for EYLEA outside the United States and our Antibody Collaboration with Sanofi, we and our collaborator share profits and losses in connection with commercialization of drug products. 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 (i.e., "development balance"). These reimbursements are deducted each quarter, in accordance with a formula, from our share of the collaboration profits otherwise payable to us, unless, in the case of EYLEA, we elect to reimburse these expenses at a faster rate. As of December 31, 2022, our contingent reimbursement obligation to Bayer for EYLEA was approximately $273 million and our contingent reimbursement obligation to Sanofi in connection with the companies' Antibody Collaboration was approximately $2.864 billion. 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, 2022, 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.