November 2007, Regeneron Pharmaceuticals ($REGN @Regneron) entered into a global, strategic collaboration with Sanofi ($SNY @Sanofi) to discover, develop, and commercialize fully human monoclonal antibodies (the “Antibody Collaboration”). The Antibody Collaboration is governed by the companies’ Discovery and Preclinical Development Agreement (“Antibody Discovery Agreement”) and a License and Collaboration Agreement.

Upfront Payment $85MM for Regeneron

  • In connection with the Antibody Discovery Agreement. In addition, under the Antibody Discovery Agreement, Sanofi is funding the Company’s research to identify and validate potential drug discovery targets and develop fully human monoclonal antibodies against these targets.

November 2009, Regeneron and Sanofi amended these collaboration agreements to expand and extend the Antibody Collaboration. Pursuant to the Antibody Discovery Agreement, as amended, Sanofi agreed to fund up to $160.0MM per year of the Company’s research activities in 2010 through 2017.

July 2015, in connection with Regeneron’s new immuno­oncology collaboration with Sanofi, the Company’s Antibody Discovery Agreement and License and Collaboration Agreement with Sanofi were each amended. In connection with these amendments, Sanofi’s funding of the Company’s antibody discovery activities under the existing Antibody Collaboration was reduced to up to $145.0MM in 2015, and up to $130.0MM in both 2016 and 2017, or an aggregate reduction of $75.0MM over this three­year period.

  • In addition, the Company’s discovery activities to identify and validate potential drug discovery targets in the field of immuno­oncology and develop fully human monoclonal antibodies against these targets will be funded by Sanofi under the terms of the new immuno­oncology collaboration. Sanofi has an option to extend certain antibody development and preclinical activities relating to selected program targets for up to an additional three years after 2017.
  • For each drug candidate identified under the Antibody Discovery Agreement, Sanofi has the option to license rights to the candidate under the License and Collaboration Agreement. If it elects to do so, Sanofi will co­develop the drug candidate with the Company through product approval. Under certain defined circumstances, upon exercising its option to license rights to particular candidates, Sanofi must make a $10MM milestone payment to Regeneron. If Sanofi does not exercise its option to license rights to a particular drug candidate under the License and Collaboration Agreement, or if Sanofi elects not to continue to co­develop a product candidate, Regeneron retains the exclusive right to develop and commercialize such drug candidate and Sanofi will receive a royalty on sales. The Company and Sanofi are currently co­developing various therapeutic antibodies under the License and Collaboration Agreement.
  • Under the License and Collaboration Agreement, agreed ­upon worldwide development expenses incurred by both companies during the term of the agreement are funded by Sanofi, except that following receipt of the first positive Phase 3 trial results for a co­developed drug candidate, subsequent Phase 3 trial­related costs for that drug candidate are shared 80% by Sanofi and 20% by Regeneron.

January 2013, Regeneron recognized as additional research and development expense $92.6 million, $109.7 million, and $17.6 million in 2015, 2014, and 2013, respectively, of antibody development expenses that Regeneron was obligated to reimburse to Sanofi related to Praluent and Sarilumab.

  • If the Antibody Collaboration becomes profitable, Regeneron will be obligated to reimburse Sanofi for 50% of worldwide development expenses that were fully funded by Sanofi and 30% of Shared Phase 3 Trial Costs, in accordance with a defined formula based on the amounts of these expenses and the Company’s share of collaboration profits from commercialization of collaboration products. However, the Company is not required to apply more than 10% of its share of the profits from the Antibody Collaboration in any calendar quarter to reimburse Sanofi for these development costs. The Company’s contingent reimbursement obligation to Sanofi under the Antibody Collaboration was approximately $1,832MM as of December 2015.

Commercialization

Profit Sharing Sanofi will lead commercialization activities for products developed under the License and Collaboration Agreement, subject to the Company’s right to co­promote such products. The parties will equally share profits and losses from sales within the United States. The parties will share profits outside the United States on a sliding scale based on sales starting at 65%(Sanofi)/35% (Regeneron) and ending at 55% (Sanofi)/45% (Regeneron), and losses outside the United States at 55%(Sanofi)/45% (Regeneron).

Sales Milestone Payments Regeneron is entitled to receive up to $250MM with milestone payments commencing only if and after aggregate annual sales outside the United States exceed $1.0 billion on a rolling twelve­month basis.

  • With respect to each antibody product which enters development under the License and Collaboration Agreement, Sanofi or the Company may, by giving twelve months’ notice, opt­out of further development and/or commercialization of the product, in which event the other party retains exclusive rights to continue the development and/or commercialization of the product. Regeneron may also opt­out of the further development of an antibody product if it gives notice to Sanofi within thirty days of the date that Sanofi enters joint development of such antibody product under the License and Collaboration Agreement. Each of the Antibody Discovery Agreement and the License and Collaboration Agreement contains other termination provisions, including for material breach by the other party. Prior to December 2017, Sanofi has the right to terminate the amended Antibody Discovery Agreement without cause with at least three months advance written notice; however, except under defined circumstances, Sanofi would be obligated to immediately pay to the Company the full amount of unpaid research funding during the remaining term of the research agreement through December 2017. Upon termination of the collaboration in its entirety, the Company’s obligation to reimburse Sanofi for development costs out of any future profits from collaboration products will terminate. In the event of termination of the amended Antibody Discovery Agreement, the Company retains exclusive rights to continue the development and/or commercialization of such product(s). Upon expiration of the amended Antibody Discovery Agreement, Sanofi has an option to license the Company’s VelocImmune® technology for an annual license fee plus royalties on any future sales of products developed using VelocImmune technology.
  • Regeneron is obligated to use commercially reasonable efforts to supply clinical requirements of each drug candidate under the Antibody Collaboration until commercial supplies of that drug candidate are being manufactured. In connection with the November 2009 amendment of the collaboration’s Antibody Discovery Agreement, Sanofi funded $30.0MM of agreed­upon costs that Regeneron incurred to expand its manufacturing capacity. Additionally, during 2014, Sanofi agreed to fund up to $17.5MM of agreed­upon costs incurred by Regeneron in connection with expanding the Company’s manufacturing capacity, of which $13.2MM has been received or is receivable as of December 2015.

August 2008, the Company entered into a separate agreement with Sanofi, which extended through December 2012, to use Regeneron’s proprietary VelociGene® technology platform to supply Sanofi with genetically modified mammalian models of gene function and disease (the “VelociGene Agreement”). The VelociGene Agreement provided for minimum annual order quantities for the term of the agreement, for which the Company received payments totaling $21.5MM.

May 2013, the Company acquired from Sanofi full exclusive rights to two families of novel antibodies invented at Regeneron and previously included in the Company’s Antibody Collaboration with Sanofi. The Company acquired full rights to antibodies targeting the platelet derived growth factor (PDGF) family of receptors and ligands in ophthalmology and all other indications and to antibodies targeting the angiopoietin­2 (Ang2) receptor and ligand in ophthalmology. As noted in the “Sanofi collaboration revenue” table above, in 2013, with respect to PDGF antibodies, Regeneron made a $10.0MM up­front payment to Sanofi, and, with respect to Ang2 antibodies in ophthalmology, the Company made a $10.0MM up­front payment to Sanofi. In addition, with respect to PDGF antibodies, the Company made two $5.0MM development milestone payments to Sanofi in 2014 and a $10.0MM development milestone payment to Sanofi in 2015, each of which was recorded as research and development expense. Regeneron is obligated to pay up to $20MM in additional potential development milestones as well as royalties on any future sales of PDGF antibodies.

July 2014, the Company purchased an FDA priority review voucher from a third party for $67.5MM. Regeneron and Sanofi equally shared the priority review voucher’s purchase price, and the Company’s share of the cost, or $33.8MM. Regeneron subsequently transferred the voucher to Sanofi, which used the priority review voucher in connection with the Biologics License Application submission to the FDA for Praluent.