DEF 14A 1 c95145_def14a.htm

SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934 (Amendment No.   )

 

Filed by the Registrant x

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

   
o Preliminary Proxy Statement
   
o Soliciting Material Under Rule 14a-12
   
o

Confidential, For Use of the

Commission Only (as permitted

by Rule 14a-6(e)(2))

x Definitive Proxy Statement
o Definitive Additional Materials

 

Regeneron Pharmaceuticals, Inc.

 

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

     
x No fee required.
   
o Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
     
  1)

Title of each class of securities to which transaction applies:

 

 

  2)

Aggregate number of securities to which transaction applies:

 

 

  3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

  4)

Proposed maximum aggregate value of transaction:

 

 

  5)

Total fee paid:

 

 

   
o Fee paid previously with preliminary materials:
   
o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
     
  1)

Amount previously paid:

 

  2)

Form, Schedule or Registration Statement No.:

 

 

  3)

Filing Party:

 

 

  4)

Dated Filed:

 

 

PROXY STATEMENT
AND NOTICE OF ANNUAL
SHAREHOLDER MEETING

 


 

 

 

 

 

 

PLEASE VIEW OUR 2019 ANNUAL REPORT

 

investor.regeneron.com/2019AR

 

 

 

 

PLEASE VIEW OUR 2019 RESPONSIBILITY REPORT

 

investor.regeneron.com/2019RR

 

 


 

 

LETTER TO SHAREHOLDERS

 

DEAR FELLOW SHAREHOLDERS,

 

As 2020 began, the world was presented with a major crisis as the SARS-CoV-2 (COVID-19) pandemic spread across the globe. Regeneron mobilized quickly, realizing that we were uniquely suited to bring forward potential solutions. We are extremely proud of how our talented team is responding to this public health challenge. Given our more than 30 years of investment in core technologies that improve the drug discovery and development process, and our track record of success with infectious diseases like Ebola, we are optimistic that we can make a meaningful and timely impact. We have two important COVID-19 research and development efforts ongoing: a global clinical trial of our IL-6 inhibitor Kevzara® (sarilumab) in hospitalized patients with severe or critical COVID-19; and the development of a novel antibody cocktail specifically designed to prevent or treat COVID-19 infection. We will be sharing updates on these programs as quickly as possible over the coming weeks and months.

 

Now, more than ever, we must remain focused on our mission to repeatedly bring important new medicines to patients with serious diseases. In 2019 we had a year of strong performance and delivery on this mission. We reached more and more patients through newly-approved indications and record growth for our blockbuster treatments EYLEA® (aflibercept) Injection and Dupixent® (dupilumab), made significant advancements throughout our preclinical and clinical pipelines, and delivered a public health breakthrough with an effective treatment for Ebola which is currently under review by the U.S. Food and Drug Administration.

 

Total revenues for 2019 were $7.9 billion, a 17 percent increase over 2018, which included U.S. EYLEA net product sales of $4.6 billion. Our collaborator Bayer recorded net product sales for EYLEA outside the U.S. of $2.9 billion, bringing EYLEA’s total global net product sales to $7.5 billion, a 12 percent increase compared to 2018. These figures show the continuing strength of this important treatment that has had double-digit sales growth for seven years without a single price increase. We remain confident in EYLEA’s ability to help even more patients as we expand our leadership position in wet age-related macular degeneration and diabetic eye diseases. Dupixent 2019 global net product sales, which are recorded by Sanofi, were $2.3 billion, an increase of 151 percent over the previous year. We have just begun to tap the potential of this first-in-class treatment option for several Type 2 inflammatory diseases, with many more studies underway.

 

In part due to Dupixent’s strong sales, our antibody collaboration with Sanofi became profitable for the first time in 2019, and we took important additional steps to strengthen Regeneron’s financial position. In the second quarter of 2020 we restructured our Antibody Collaboration with Sanofi to enhance profitability further and to simplify the commercial strategy for Praluent® (alirocumab). We will continue to collaborate with Sanofi on studying Kevzara for COVID-19, with Regeneron leading U.S.-based development and Sanofi leading development outside of the United States.

 

Meanwhile our research and development productivity continues, with notable progress in our growing immuno-oncology portfolio and diversification across the pipeline as a whole. We expanded our clinical program with Libtayo® (cemiplimab-rwlc), a PD-1 inhibitor, and moved multiple bispecific antibodies into the clinic, including the first in a whole new class of co-stimulatory bispecifics, which position us to become a leader in this emerging field. We continue to explore Dupixent in a variety of additional Type 2 inflammatory conditions, with late-stage trials underway in eosinophilic esophagitis, chronic obstructive pulmonary disease, prurigo nodularis, and chronic spontaneous urticaria, as well as earlier studies in grass and food allergies.

 

From a public health perspective, we made a breakthrough in the fight against the devastating Ebola outbreak in the Democratic Republic of the Congo (DRC) with REGN-EB3’s impressive reduction in mortality compared to the prior

 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING
 

 

standard-of-care in the PALM clinical trial. We are applying the same technologies against the novel coronavirus and hope for similar success.

 

All of this important research and groundbreaking medicine is built on three decades of investment in our VelociSuite® technologies. These proprietary end-to-end drug discovery and development tools allow us to quickly identify multiple antibody candidates against diseases – from Ebola to cancer to asthma to rare diseases, such as fibrodysplasia ossificans progressiva. Paired with our excellent clinical development and manufacturing capabilities, the possibilities are truly endless, and we feel that we are just at the beginning of what we can do using the power of science and technology.

 

Our commitment to continually advancing research through sophisticated and broadly applicable technology propelled our Regeneron Genetics Center® team to the major milestone of sequencing the exomes of over one million people as of February 2020. We are also applying our genetics and biology expertise to explore new modalities that are complementary to our world-class therapeutic antibodies. Key examples include our preclinical work in viral vector and gene therapy technologies, as well as ongoing collaborations with organizations who bring unique expertise in areas like gene silencing, gene editing, and CAR-Ts.

 

In 2020 and beyond, we will continue to reinvest a significant portion of our growing revenue into our R&D efforts as we believe our scientific innovation and talent are our greatest differentiators. As we look toward the future of Regeneron we have begun to evaluate ex-U.S. commercialization opportunities, starting with exercising our co-commercialization rights for Dupixent in certain countries outside the U.S.

 

2019 was a busy and successful year for Regeneron, and we believe 2020 will be even more impactful. We will innovate against COVID-19 and the other serious diseases that continue to impact lives, even during a time of pandemic. We have our sights firmly set on the future as we expand the types of ailments we can treat and number of people we can help. The world needs us and the power of science, more than ever.

 

Sincerely,

 

     
P. Roy Vagelos, Leonard S. Schleifer, George D. Yancopoulos,
M.D. M.D., Ph.D. M.D., Ph.D.
Chairman of the Board Co-Founder, President and Co-Founder, President and
  Chief Executive Officer Chief Scientific Officer

 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING
 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING

 

 

 

REGENERON PHARMACEUTICALS, INC.

 

777 Old Saw Mill River Road

Tarrytown, New York 10591-6707

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

The 2020 Annual Meeting of Shareholders of Regeneron Pharmaceuticals, Inc. (the “Company”) will be held on Friday, June 12, 2020, commencing at 10:30 a.m., Eastern Time, virtually via the Internet and at the Westchester Marriott Hotel, 670 White Plains Road, Tarrytown, New York, for the following purposes:

 

1 to elect four Class II directors for a three-year term and one Class III director for a one-year term;
   
2 to ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020;
   
3 to approve the Second Amended and Restated Regeneron Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan;
   
4 to cast an advisory vote to approve the compensation of the Company’s Named Executive Officers as disclosed in these proxy materials (say on pay); and
   
5 to act upon such other matters as may properly come before the meeting and any adjournment(s) or postponement(s) thereof.

 

The board of directors has fixed the close of business on April 14, 2020 as the record date for determining shareholders entitled to notice of, and to vote at, the Annual Meeting and at any adjournment(s) or postponement(s) thereof.

 

Pursuant to the rules of the Securities and Exchange Commission (the “SEC”), we have elected to use the “Notice and Access” method of providing our proxy materials over the Internet. Accordingly, we will mail, beginning on or about April 24, 2020, a Notice of Internet Availability of Proxy Materials to our shareholders of record and beneficial owners as of the record date (other than (i) those who previously elected to receive proxy materials by e-mail, (ii) those who have previously asked to receive paper copies of the proxy materials, and (iii) shareholders who participate and hold shares of common stock in the Regeneron Pharmaceuticals, Inc. 401(k) Savings Plan or the Regeneron Ireland Share Participation Plan). As of the date of mailing of the Notice of Internet Availability of Proxy Materials, all shareholders and beneficial owners will have the ability to access all of the proxy materials on a website referenced in the Notice of Internet Availability of Proxy Materials.

 

The Notice of Internet Availability of Proxy Materials also contains a toll-free telephone number, an e-mail address, and a website where shareholders can request a paper or electronic copy of the proxy statement, our 2019 annual report, and/ or a form of proxy relating to the Annual Meeting. These materials are available free of charge. The Notice also contains information on how to access and vote the form of proxy.

 

Due to concerns regarding the coronavirus outbreak (“COVID-19”) and to assist in protecting the health and well-being of our shareholders, directors, and employees, shareholders will be able to attend the meeting and participate electronically as part of the virtual meeting format of the Annual Meeting. This additional means of attending allows shareholders the opportunity to vote their shares on the date of the Annual Meeting even if they are not able or do not wish to attend the meeting in person. In addition, the meeting’s virtual attendance option provides shareholders the ability to participate and ask questions during the meeting. As required by New York law, shareholders have the option to attend the Annual Meeting in person. If the legal requirement to include an in-person option is waived by relevant governmental action, we may opt to hold the Annual Meeting as a virtual-only meeting. We may also change the venue for the in-person meeting option if required by the circumstances. In any such case, we would notify our shareholders in advance on our website and by issuing a press release and filing it as additional proxy material with the SEC. We strongly encourage shareholders to attend virtually in light of COVID-19 and public health concerns and to visit our website at http://newsroom.regeneron.com for the most up-to-date information on the Annual Meeting, any procedures and limitations concerning in-person attendees, and information regarding any government-imposed limits on public gatherings applicable to the Annual Meeting that may be in effect at that time.

 

As Authorized by the Board of Directors,

 

 

 

Joseph J. LaRosa

Executive Vice President, General Counsel and Secretary

April 24, 2020

 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING
   

 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING

 

   

 

TABLE OF CONTENTS

 

Users’ Guide 1
   
Proxy Dashboard 1
   
Proxy Highlights 2
   
General Information about the Meeting 3
   
Board of Directors 9
   
Meet the Board 9
   
Board Committees 22
   
Board Governance 24
   
Board Structure 24
   
Board Meetings and Attendance of Directors 24
   
Procedures Relating to Nominees; Board Succession Planning 24
   
Board and Committee Self-Assessments 25
   
Shareholder Rights to Remove Directors for Cause and to Call Special Shareholder Meeting 26
   
Director Independence 26
   
Board Leadership and Role in Risk Oversight 26
   
Executive Compensation Processes and Procedures; Role of Compensation Consultants 27
   
Compensation of Directors 28
   
PROPOSAL NO. 1  
ELECTION OF DIRECTORS 32
   
The Company 33
   
Executive Officers of the Company 33
   
Corporate Governance 35
   
Overview 35
   
Code of Ethics 35
   
Succession Planning and Talent Development Process 35
   
Corporate Responsibility 36
   
Public Policy Engagement 39
Certain Relationships and Related Transactions 40
   
Review, Approval, or Ratification of Transactions with Related Persons 40
   
Transactions with Related Persons 40
   
Other 43
   
Audit Matters 44
   
Introduction 44
   
Information about Fees Paid to Independent Registered Public Accounting Firm 44
   
Audit Committee Report 45
   
PROPOSAL NO. 2  
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 46
   
Shareholders 47
   
Security Ownership of Certain Beneficial Owners and Management 47
   
Shareholder Communications 50
   
Compensation-Related Matters 51
   
Table of Contents 51
   
Introduction 52
   
Compensation Discussion and Analysis 57
   
Executive Summary 57
   
Our Compensation Philosophy and Objectives 62
   
Driving Innovation and Managing Dilution 62
   
At-Risk, Performance-Based Pay 63
   
Compensation Program Simplicity 64
   
Balancing Year-over-Year Consistency and Flexibility 64
   
Linking Compensation to Long-Term Performance 64
   
Use of Independent Expertise and Comparative Data 65
   
Measurable Results 65


 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING    /   i
   

 

 

TABLE OF CONTENTS (CONT.)

 

Components of Executive Pay: What We Pay and Why We Pay It 66
   
Base Salaries 67
   
Annual Cash Incentives 67
   
Annual Equity Awards 73
   
Perquisites and Personal Benefits 76
   
Potential Severance Payments 76
   
Our Compensation Processes 77
   
Our Compensation Committee 77
   
Management 77
   
Shareholder Input and Outreach 78
   
Independent Compensation Consultant 81
   
Peer Data 81
   
Risk Assessment 83
   
Tax Implications 83
   
Compensation Committee Report 85
   
Compensation Committee Interlocks and Insider Participation 85
   
Compensation Dashboard 86
   
2019 Executive Compensation Tables 86
   
2019 Summary Compensation Table 86
   
2019 Grants of Plan-Based Awards 87
   
Outstanding Equity Awards at 2019 Fiscal Year-End 88


 

NOTE REGARDING FORWARD-LOOKING STATEMENTS AND NON-GAAP FINANCIAL MEASURES: See Appendix A for important information regarding forward-looking statements and financial measures not calculated in accordance with U.S. Generally Accepted Accounting Principles contained in this proxy statement.

 

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USERS’ GUIDE

 

 

PROXY DASHBOARD

 

GENERAL INFORMATION

 

Meeting Date:   Time:   Location:   Record Date:
             
JUNE 12, 2020   10:30 A.M., ET   ONLINE
www.virtualshareholdermeeting.com/REGN2020
  APRIL 14, 2020
             
        OR IN PERSON    
        Westchester Marriott Hotel    
        670 White Plains Road    
        Tarrytown, New York 10591    

 

MEETING AGENDA

 

  Matter Board Vote Recommendation
1 Election of four Class II directors for a three-year term and one Class III director for a one-year term FOR each director nominee
2 Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020 FOR
3 Approval of the Second Amended and Restated Regeneron Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan FOR
4

Advisory vote to approve the compensation of the Company’s Named

Executive Officers as disclosed in these proxy materials (say on pay)

FOR

 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING    /   1
 

USERS’ GUIDE  /  PROXY HIGHLIGHTS

 

PROXY HIGHLIGHTS

WE SEEK YOUR INPUT ON TWO COMPENSATION-RELATED MATTERS

 

Our mission of long-term commitment to science and innovation has shaped our compensation program, which is designed to sustain our business model and drive our product pipeline. We seek your vote on two compensation-related proposals:

 

1 Approval of the second amendment and restatement of our long-term incentive plan—see “Proposal No. 3: Second Amendment and Restatement of Long-Term Incentive Plan”; and
   
2 A non-binding proposal to approve the compensation of our Named Executive Officers—see “Proposal No. 4: Advisory Vote on Compensation of Named Executive Officers (Say on Pay).”

 

As discussed under “Compensation-Related Matters—Introduction,” our compensation model has been instrumental in creating a culture of loyal and motivated employees with an entrepreneurial spirit who are dedicated to the Company’s mission to use the power of science to invent medicines for people with serious diseases. As you consider voting on these proposals, please keep in mind the following:

 

Our equity compensation program supports all of our employees, not just our Named Executive Officers, with approximately 90% of recent annual equity grants awarded to employees other than our Named Executive Officers.
   
We granted performance-based restricted stock units to our CEO and CSO as a component of their 2019 annual equity awards. This and other carefully calibrated changes to our compensation program were based on investor feedback.
   
Our 2019 burn rate was at the lowest level in the last seven years due to specific steps we took to manage dilution from equity compensation.
   
We are asking our shareholders to approve the same number of shares for equity grants that we requested previously and are committed to ensuring that shares available under our long-term incentive plan will be sufficient for at least three years.
   
Our compensation model underpins our strategy of creating and advancing a high-quality, internally developed product pipeline, which delivered six important medicines and eight additional key indications for these products in the past decade.

 

Your support on each of these proposals will help us continue to develop the product pipeline that drives our performance and to harness the power of science for the benefit of people with serious diseases.


 

WE SEEK YOUR INPUT ON OUR BOARD

 

The composition of our board of directors reflects our core principle of “science first”: over half of our directors are members of the National Academy of Sciences, and our board members include two Nobel laureates and holders of many scientific awards. By having our board of directors heavily populated with top scientific talent, we signal to our shareholders and employees our seriousness about the Company’s dedication to science and its core competencies and primary value driver. Our board also includes individuals with experience building shareholder value through all stages of corporate development, as well as governance, financial, and policy expertise. Five of our board’s current 12 members are diverse by gender, race, or national origin.

 

Please refer to “Proposal No. 1: Election of Directors” for additional information.

WE SEEK RATIFICATION OF OUR AUDITORS

 

We pay close attention to the requirements applicable to us as a publicly traded company, including those relating to the audit of Regeneron’s financial statements by our independent registered public accounting firm, PricewaterhouseCoopers LLP. In this proxy statement, we are asking you to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020.

 

Please refer to “Proposal No. 2: Ratification of Appointment of Independent Registered Public Accounting Firm” for additional information.


 

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USERS’ GUIDE / GENERAL INFORMATION ABOUT THE MEETING

 

GENERAL INFORMATION ABOUT THE MEETING

 

ANNUAL MEETING INFORMATION

 

When is the Annual Meeting?

 

June 12, 2020

 

What time is the Annual Meeting?

 

10:30 a.m., ET

 

Where is the Annual Meeting?

 

Virtually via the Internet at www. virtualshareholdermeeting.com/REGN2020 and at the Westchester Marriott Hotel, 670 White Plains Road, Tarrytown, New York 10591. If the legal requirement to include an in-person option is waived by relevant governmental action, we may opt to hold the Annual Meeting as a virtual-only meeting. We may also change the venue for the in-person meeting option if required by the circumstances. In any such case, we would notify our shareholders in advance on our website and by issuing a press release and filing it as additional proxy material with the SEC.

 

What form of identification do I need to be admitted to the meeting?

 

Via the Internet. Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/REGN2020. To vote during the meeting, you will need the 16-digit control number included on the Notice of Internet Availability of Proxy Materials (the “Notice”) or, if you received a paper copy of the proxy materials, the proxy card or voting instruction form you received.

 

In person. You will be asked to present valid, government-issued photo identification, such as a driver’s license.

 

Where can I find directions to the in-person Annual Meeting?

 

Directions to this location are available on our website at http://newsroom.regeneron.com. In-person attendance will be subject to any government-imposed limitations on public gatherings then in effect. As noted above, under certain circumstances we may opt to hold

the Annual Meeting as a virtual-only meeting. Please refer to our website for the most up-to-date information.

 

Can I vote at the Annual Meeting?

 

Only shareholders of record at the close of business on the record date, April 14, 2020, are entitled to vote at the Annual Meeting. As of April 14, 2020, 110,673,311 shares of the Company’s common stock, par value $0.001 per share (“common stock”), and 1,848,970 shares of Class A stock, par value $0.001 per share (“Class A stock”), were issued and outstanding. The common stock and the Class A stock vote together on all matters as a single class, with the common stock being entitled to one vote per share and the Class A stock being entitled to ten votes per share.

 

What is on the agenda for the meeting?

 

1 Election of four Class II directors for a three-year term and one Class III director for a one-year term
   
2 Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020
   
3 Approval of the Second Amended and Restated Regeneron Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan
   
4 Advisory vote to approve the compensation of the Company’s Named Executive Officers as disclosed in these proxy materials (say on pay)

 

Can I ask a question at the Annual Meeting?

 

Via the Internet. Shareholders who use the 16-digit control number that was furnished to them (either on the Notice or, if you received a paper copy of the proxy materials, the proxy card or voting instruction form you received) to log on to the meeting will be able to submit questions during the meeting.

 

In person. Attendees of the meeting will be given an opportunity to ask questions during a designated question-and-answer period.


 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING    /   3
 

USERS’ GUIDE / GENERAL INFORMATION ABOUT THE MEETING

 

VOTING INFORMATION

 

Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a paper copy of the proxy materials?

 

The “Notice and Access” rules of the United States Securities and Exchange Commission (the “SEC”) permit us to furnish proxy materials, including this proxy statement, and our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on February 7, 2020 (the “2019 Annual Report”), to our shareholders by providing access to such documents on the Internet instead of mailing printed copies. Most shareholders received the Notice and will not receive printed copies of the proxy materials unless they request them. This method reduces the environmental impact of the Annual Meeting. The Notice will be mailed beginning on or about April 24, 2020. The Notice includes instructions on how you may access and review all of our proxy materials and the 2019 Annual Report via the Internet. The Notice also includes instructions on how you may vote your shares. If you would like to receive a paper or electronic copy of our proxy materials, you should follow the instructions in the Notice for requesting such materials. Any request to receive proxy materials by mail or e-mail will remain in effect until you revoke it.

 

Can I vote my shares by filling out and returning the Notice?

 

No. The Notice identifies the items to be voted on at the Annual Meeting, but you cannot vote by marking the Notice and returning it. The Notice provides instructions on how to vote by Internet, by requesting and returning a paper proxy card, or by voting at the meeting.

 

Why did I receive the Notice?

 

We sent you the Notice regarding this proxy statement because Regeneron’s board of directors is asking (technically called soliciting) holders of common stock and Class A stock to provide proxies to be voted at our 2020 Annual Meeting of Shareholders or at any adjournment(s) or postponement(s) of the meeting.

How are proxies voted?

 

If you vote by proxy in time for it to be voted at the Annual Meeting, one of the individuals named as your proxy will vote your shares as you have directed. If you submit a proxy, but no indication is given as to how to vote your shares as to a proposal, your shares will be voted in the manner recommended by the board of directors. The board of directors knows of no matter, other than those indicated above under “What is on the agenda at the meeting?”, to be presented at the Annual Meeting. If any other matter properly comes before the Annual Meeting, the persons named and designated as proxies will vote your shares in their discretion.

 

Why didn’t I receive a notice in the mail about the Internet availability of the proxy materials?

 

Shareholders who previously elected to receive proxy materials by e-mail will not receive a notice in the mail about the Internet availability of the proxy materials. Instead, these shareholders should have received an e-mail with links to the proxy materials and the proxy voting website. Shareholders who have previously asked to receive paper copies of the proxy materials and shareholders who participate and hold shares of common stock in the Regeneron Pharmaceuticals, Inc. 401(k) Savings Plan or the Regeneron Ireland Share Participation Plan will receive paper copies of the proxy materials.

 

What constitutes a quorum?

 

The presence at the Annual Meeting, in person or by proxy, of the holders as of the record date of shares of common stock and Class A stock having a majority of the voting power of all shares of common stock and Class A stock outstanding on the record date will constitute a quorum for the transaction of business at the Annual Meeting. Shares held as of the record date by holders who are present or represented by proxy at the Annual Meeting but who have abstained from voting or have not voted with respect to some or all of such shares on any proposal to be voted on at the Annual Meeting will be counted as present for purposes of establishing a quorum.


 

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USERS’ GUIDE / GENERAL INFORMATION ABOUT THE MEETING

 

How can I vote my shares without attending the Annual Meeting?

 

We recommend that shareholders vote by proxy even if they plan to attend the Annual Meeting via the Internet or in person. If you are a shareholder of record, there are three ways to vote by proxy:

 

Via the Internet. You may vote by proxy via the Internet by visiting www.proxyvote.com. You will need the 16-digit control number included on the Notice or, if you received a paper copy of the proxy materials, the proxy card or voting instruction form you received. You may vote via the Internet through 11:59 p.m., Eastern Time, on June 11, 2020.

 

Via telephone. You may vote by proxy via telephone by calling the toll-free number found on the proxy card or the voting instruction form. You will need the 16-digit control number included on the proxy card or voting instruction form. You may vote via telephone through 11:59 p.m., Eastern Time, on June 11, 2020.

 

By mail. If you received printed copies of the proxy materials, you may vote by proxy by completing the proxy card or voting instruction form and returning it in the envelope provided.

 

How can I attend and vote at the Annual Meeting?

 

Via the Internet. You may vote via the Internet at www.virtualshareholdermeeting.com/REGN2020 where you will be able to vote during the meeting. Shareholders who use the 16-digit control number that was furnished to them (either on the Notice or, if you received a paper copy of the proxy materials, the proxy card or voting instruction form you received) to log on to the meeting will be able to vote during the meeting.

 

In person. If you are a shareholder of record, you may vote in person at the Annual Meeting. The Company will give you a ballot when you arrive. If you are a beneficial owner of shares held in the name of your bank, broker, or other nominee, or in “street name,” to vote in person at the Annual Meeting you must obtain from your nominee and bring to the meeting a “legal proxy” authorizing you to vote such shares held as of the record date. We recommend you vote by proxy even if you plan to attend the meeting. So long as you meet the applicable requirements, you can always change your vote at the meeting. Instructions on voting by proxy are included below. As noted above, under certain circumstances we may opt to hold the Annual Meeting as a virtual-only meeting. Please refer to our website for the most up-to-date information.

What if during the Annual Meeting I have technical difficulties or trouble accessing the virtual meeting website?

 

We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting website. If you encounter any difficulties accessing the virtual meeting website during the meeting time, please call the technical support number that will be posted at www.virtualshareholdermeeting.com/ REGN2020.

 

If I am a Regeneron employee or former employee, how do I vote shares in the Company Stock Fund in my 401(k) account or in the Regeneron Ireland Share Participation Plan?

 

If you participate and hold shares of common stock in the Regeneron Pharmaceuticals, Inc. 401(k) Savings Plan, you may provide voting instructions to Fidelity Management Trust Company, the plan’s trustee, (1) through the Internet at www.proxyvote.com by 11:59 p.m., Eastern Time, on June 9, 2020, (2) by calling 1-800-690-6903 by 11:59 p.m., Eastern Time, on June 9, 2020, or (3) by returning your completed proxy card by mail. The trustee will vote your shares in accordance with your instructions. If you do not provide timely voting instructions to the trustee, the trustee will vote your shares in the same proportion as the shares for which the trustee receives voting instructions from other participants in the plan.

 

If you participate and hold shares of common stock in the Regeneron Ireland Share Participation Plan, you may provide voting instructions to Mercer Ireland Limited, who administers the Plan on behalf of Irish Pensions Trust Limited, the trustees of the Plan. You will receive a voting instruction form by mail sent directly to your home address, which you should complete, sign, and return to Mercer by mail using the enclosed pre-paid envelope or as an e-mail attachment in accordance with the instructions provided by Mercer.


 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING    /   5
 

USERS’ GUIDE / GENERAL INFORMATION ABOUT THE MEETING

 

Can I change my vote or revoke my proxy?

 

Yes. You may change your vote or revoke your proxy at any time before the proxy is exercised by voting again electronically through the Internet or by telephone, by mailing a new proxy card or voting instruction form, or by attending the Annual Meeting and voting. If you are a record holder, you may also revoke your proxy by filing with the Secretary of the Company, at or before the taking of the vote at the Annual Meeting, a written notice of revocation bearing a later date than the proxy you previously submitted. Attendance at the Annual Meeting will not have the effect of revoking a proxy unless you are a record holder and give written notice of revocation to the Secretary of the Company before the proxy is exercised or you vote at the Annual Meeting. If you hold your shares through a broker, bank, or other nominee in “street name,” you will need to contact them or follow the instructions in the voting instruction form used by the firm that holds your shares to revoke your proxy. Only your latest dated proxy we receive at or prior to the Annual Meeting will be counted.

 

Who solicits proxies and bears the cost of solicitation?

 

Solicitation of proxies may be made by mail, in person, or by telephone by officers, directors, and other employees of the Company and by employees of the Company’s transfer agent, American Stock Transfer & Trust Company, LLC (“AST”), and employees of Broadridge Financial Solutions, Inc. (“Broadridge”). We will reimburse AST, Broadridge, and our banks, brokers, and other custodians, nominees, and fiduciaries for their respective reasonable costs in the preparation and mailing of proxy materials to shareholders. In addition, we have engaged Innisfree M&A Incorporated to assist in the solicitation of proxies and provide related advice and informational support for a service fee of $25,000 and the reimbursement of customary disbursements and expenses. We will bear all costs of the solicitation of proxies.

What are the board’s recommendations?

 

The board of directors recommends that you vote:

 

FOR election of each of the four nominated Class II directors and the one nominated Class III director (Proposal No. 1);
   
FOR ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2020 (Proposal No. 2);
   
FOR approval of the Second Amended and Restated Regeneron Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan (Proposal No. 3); and
   
FOR approval of the compensation of the Company’s Named Executive Officers as disclosed in these proxy materials (say on pay) (Proposal No. 4).


 

6   /    2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING
 

USERS’ GUIDE / GENERAL INFORMATION ABOUT THE MEETING

 

What vote is required to approve each proposal?

 

The following table summarizes the voting requirements applicable to the proposals to be voted on at the Annual Meeting:

 

Proposal Vote Required Effect of Abstentions* Broker Discretionary Voting Allowed?+
1 Election of Directors        Majority of the votes cast. In accordance with our director resignation policy, an incumbent director who fails to receive the required number of votes in an uncontested election will be required to tender his or her resignation to the Chairman of the board of directors for consideration by the Corporate Governance and Compliance Committee. No effect —
not considered votes cast on this proposal
No —
brokers without voting instructions will not be able to vote on this proposal
2 Ratification of the Appointment of PricewaterhouseCoopers LLP Majority of the votes cast No effect —
not considered votes cast on this proposal
Yes —
brokers without voting instructions will have discretionary authority to vote
3 Approval of the Second Amended and Restated Regeneron Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan Majority of the votes cast No effect —
not considered votes cast on this proposal
No —
brokers without voting instructions will not be able to vote on this proposal
4 Say on Pay Non-binding, advisory proposal. We will consider the matter approved if it receives the affirmative vote of a majority of the votes cast No effect —
not considered votes cast on this proposal
No —
brokers without voting instructions will not be able to vote on this proposal

 

* As noted above, abstentions will be counted as present for purposes of establishing a quorum at the Annual Meeting.
   
+ Only relevant if you are the beneficial owner of shares held in “street name.” If you are a shareholder of record and you do not cast your vote, no votes will be cast on your behalf on any of the items of business at the Annual Meeting.

 

If any other matter is properly brought before the Annual Meeting, such matter also will be determined by the affirmative vote of a majority of the votes cast at the Annual Meeting.

 

Please note that cameras, other photographic equipment, or audio or video recording devices will not be permitted to be used by any in-person attendees of the Annual Meeting.

 

INFORMATION ABOUT REGENERON

 

If you would like to learn more about Regeneron, please visit our website at www.regeneron.com. The topics discussed on our website include:

 

  Working at Regeneron Our Graduate Internship Program
         
  Our Science Research Mentorship Program Our Post-doctoral Training Program
         
  The Regeneron Science Talent Search Regeneron employee volunteer programs
         
  The Regeneron International Science and Engineering Fair Our patient support programs
         
  The Regeneron DNA Learning Center Our environmental sustainability efforts
         
  STEM Teaching Fellowship Our commitment to global transparency

 


 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING     / 7
 

 

From Left: N. Anthony Coles, M.D. / Arthur F. Ryan / Michael S. Brown, M.D. / George L. Sing / Bonnie L. Bassler, Ph.D. / Leonard S. Schleifer, M.D., Ph.D. / P. Roy Vagelos, M.D. / George D. Yancopoulos, M.D., Ph.D. / Christine A. Poon / Joseph L. Goldstein, M.D. / Huda Y. Zoghbi, M.D. / Marc Tessier-Lavigne, Ph.D.

 

 

 

BOARD OF DIRECTORS

 

MEET THE BOARD

 

As the first substantive order of business at the 2020 Annual Meeting, you have an opportunity to vote on five members of our board of directors. This is the right starting point not only because the board oversees Regeneron, but because understanding the Regeneron board leads to a better understanding of the Company and its business model.

 

As our President and CEO has observed, “Our dream when we started Regeneron was to build a company where the scientists would be the heroes.” The composition of Regeneron’s board reflects this founding principle: over half of our directors are members of the National Academy of Sciences, and our board members include two Nobel laureates and holders of many scientific awards. In addition, the board includes individuals with experience building shareholder value through all stages of corporate development. Various members bring substantial governance experience gained from service on other boards and others bring financial, policy, and management expertise. Five of our board’s current 12 members are diverse by gender, race, or national origin.

 

The five members of our board of directors nominated for reelection at the 2020 Annual Meeting are N. Anthony Coles, M.D., Joseph L. Goldstein, M.D., Christine A. Poon, P. Roy Vagelos, M.D., and Huda Y. Zoghbi, M.D., all of whom currently are Class II directors. Consistent with Article VI of the Company’s Certificate of Incorporation and Section 704 of the New York Business Corporation Law, the board of directors has determined that it would be in the best interests of the Company and its shareholders to apportion the directorships equally among the three classes of the board so that each class consists of four directors. To effect this equal apportionment, the board of directors, upon recommendation of the Corporate Governance and Compliance Committee, has nominated for election at the 2020 Annual Meeting Joseph L. Goldstein, M.D., Christine A. Poon, P. Roy Vagelos, M.D., and Huda Y. Zoghbi, M.D. as Class II Directors for a three-year term expiring at the 2023 Annual Meeting and N. Anthony Coles, M.D. as a Class III Director for a one-year term expiring at the 2021 Annual Meeting.

 

The table below summarizes key qualifications, skills, or attributes most relevant to the decision to nominate the director to serve on the board of directors. A mark indicates a specific area of focus or expertise on which the board of directors relies most. The lack of a mark does not mean the director does not possess that qualification or skill. Each director biography below describes these qualifications and relevant experience in more detail. We believe the table below demonstrates the breadth and diversity of the collective experience, expertise, and skills of our board of directors.

 

Experience,
Expertise, or Attribute
   Bonnie
L. Bassler,
Ph.D.
   Michael
S. Brown,
M.D.
   N.
Anthony
Coles, M.D.
   Joseph
L. Goldstein,
M.D.
   Christine
A. Poon
   Arthur
F. Ryan
   Leonard S.
Schleifer,
M.D., Ph.D.
   George
L. Sing
   Marc Tessier-
Lavigne, Ph.D.
   P. Roy
Vagelos,
M.D.
   George D.
Yancopoulos,
M.D., Ph.D.
   Huda Y.
Zoghbi,
M.D.
 
Industry Experience                           
Executive/Leadership Experience                         
Science/Biotech Background                          
Research/Academic Experience                           
Business Strategy/ Operations Experience                              
Financial Expertise                                
Public Company CEO Experience                                  
National Academy of Sciences Membership                              


 

 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING    /   9
 

BOARD OF DIRECTORS  /  MEET THE BOARD

 

NOMINEES FOR CLASS II DIRECTORS
FOR ELECTION AT THE 2020 ANNUAL MEETING FOR A TERM EXPIRING AT THE 2023 ANNUAL MEETING1

 

JOSEPH L. GOLDSTEIN, M.D.

 

 

Director since: 1991

 

Age: 79

 

Independent

 

Scientific Society Memberships

 

The National Academy of Sciences
The National Academy of Medicine
The Royal Society of London

Experience and Qualifications

 

Dr. Goldstein has been a Professor of Molecular Genetics and Internal Medicine and the Chairman of the Department of Molecular Genetics at The University of Texas Southwestern Medical Center at Dallas since 1977. Dr. Goldstein is a member of the National Academy of Sciences, the National Academy of Medicine, and the Royal Society of London. He also serves on the Boards of Trustees of The Rockefeller University and the Howard Hughes Medical Institute. Drs. Goldstein and Brown jointly received the Nobel Prize for Physiology or Medicine in 1985 and the U.S. National Medal of Science in 1988.

 

Dr. Goldstein’s extensive research experience, his distinguished scientific and academic credentials, including his receipt of the Nobel Prize for Physiology or Medicine in 1985, and his substantial understanding of the Company gained through his service as a director since 1991, led to the board’s decision to nominate Dr. Goldstein for reelection to the board.

 

 

Board and Committee Membership—2019 Attendance

 

Board of Directors 6/6
   
Compensation Committee 5/6*
   
Corporate Governance and Compliance Committee 2/2*
   
Technology Committee 4/4

 

* Dr. Goldstein was elected as a member of the Corporate Governance and Compliance Committee on June 14, 2019 and ceased to serve as a member of the Compensation Committee at such time.

 

 

Prior Voting Results—2017

 

For 84.6%
   
Against 15.4%

 

 

Regeneron Securities Beneficially Owned as of April 14, 2020

 

Common Stock 9,000
   
Options 38,554
   
Restricted Stock Units (“RSUs”) 465


 

   
1 Biographical information is given, as of April 14, 2020, for each nominee and for each of the other directors whose term of office will continue after the 2020 Annual Meeting. All the nominees are presently directors and were previously elected by the shareholders. None of the corporations or other organizations referred to below with which a director has been or is currently employed or otherwise associated is a parent, subsidiary, or affiliate of the Company.

 

10   /    2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING
 

BOARD OF DIRECTORS  /  MEET THE BOARD

 

CHRISTINE A. POON

 

 

Director since: 2010

 

Age: 67

 

Independent

 

Other Public Boards

 

Prudential Financial, Inc.
The Sherwin-Williams Company
Royal Philips Electronics

Experience and Qualifications

 

Ms. Poon is an Executive-in-Residence in the Department of Management and Human Resources at The Max M. Fisher College of Business at The Ohio State University, where she served as Dean and the John W. Berry, Sr. Chair in Business from 2009 to 2014. Prior to joining Fisher, Ms. Poon spent eight years at Johnson & Johnson, most recently as vice chairman and worldwide chairman of pharmaceuticals. At Johnson & Johnson, she served on the company’s board of directors and executive committee and was responsible for managing the pharmaceutical businesses of the company. Prior to joining Johnson & Johnson, Ms. Poon spent 15 years at Bristol-Myers Squibb Company, a global pharmaceutical company, where she held senior leadership positions including president of international medicines and president of medical devices. Ms. Poon serves on the boards of directors of Prudential Financial, Inc. and The Sherwin-Williams Company and the Supervisory Board of Royal Philips Electronics.

 

Ms. Poon’s extensive expertise in domestic and international business operations, including sales and marketing and commercial operations, and her deep strategic and operational knowledge of the pharmaceutical industry, led to the board’s decision to nominate Ms. Poon for reelection to the board.

 

 

Board and Committee Membership—2019 Attendance

 

Board of Directors 6/6
   
Compensation Committee (Chairperson) 14/14
   
Corporate Governance and Compliance Committee 5/5

 

 

Prior Voting Results—2017

 

For 84.0%
   
Against 16.0%

 

 

Regeneron Securities Beneficially Owned as of April 14, 2020

 

Common Stock 790
   
Options 120,834
   
RSUs 465


 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING    /   11
 

BOARD OF DIRECTORS  /  MEET THE BOARD

 

P. ROY VAGELOS, M.D.

 

 

Director since: 1995

 

Age: 90

 

Scientific Society Memberships

 

The National Academy of Sciences
The National Academy of Medicine
The American Philosophical Society

Experience and Qualifications

 

Prior to joining Regeneron, Dr. Vagelos was Chairman of the Board and Chief Executive Officer of Merck & Co., Inc., a global pharmaceutical company. He joined Merck in 1975, became a director in 1984, President and Chief Executive Officer in 1985, and Chairman in 1986. Dr. Vagelos retired from all positions with Merck in 1994. Dr. Vagelos served on the board of directors of Theravance, Inc. from 1996 to 2010. Dr. Vagelos is a member of the National Academy of Sciences, the National Academy of Medicine, and the American Philosophical Society. During his tenure as Chairman of Regeneron and previously as Chairman and Chief Executive Officer of Merck, Dr. Vagelos developed an extensive understanding of the complex business, operational, scientific, regulatory, and commercial issues facing the pharmaceutical industry.

 

Dr. Vagelos’s tenure and experience with the Company and Merck, his extensive knowledge of the pharmaceutical industry, his substantial leadership experience, and his significant understanding of the Company led to the board’s decision to nominate Dr. Vagelos for reelection to the board.

 

 

Board and Committee Membership—2019 Attendance

 

Board of Directors 6/6
   
Technology Committee 4/4

 

 

Prior Voting Results—2017

 

For 99.5%
   
Against 0.5%

 

 

Regeneron Securities Beneficially Owned as of April 14, 2020

 

Common Stock 675,911
   
Options 1,145,495


 

12   /    2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING
 

BOARD OF DIRECTORS  /  MEET THE BOARD

 

HUDA Y. ZOGHBI, M.D.

 

 

Director since: 2016

 

Age: 65

 

Independent

 

Scientific Society Memberships

 

The National Academy of Sciences
The Institute of Medicine
The American Association for the Advancement of Science

Experience and Qualifications

 

Dr. Zoghbi is currently a professor in the departments of Pediatrics, Molecular and Human Genetics, and Neurology and Neuroscience at Baylor College of Medicine, the director of the Jan and Dan Duncan Neurological Research Institute at Texas Children’s Hospital, and an investigator of the Howard Hughes Medical Institute. She has been elected to the National Academy of Sciences, the Institute of Medicine, and the American Association for the Advancement of Science, and has been awarded numerous recognitions for her work, including the Pearl Meister Greengard Prize, the March of Dimes Prize in Developmental Biology, and the Vanderbilt Prize in Biomedical Science.

 

Dr. Zoghbi earned her B.Sc. from the American University of Beirut, received her M.D. from Meharry Medical College in Nashville, Tennessee, and completed her pediatrics residency and a joint residency in neurology and pediatric neurology at Baylor College of Medicine, where she then pursued postdoctoral research training in molecular genetics.

 

Dr. Zoghbi’s extensive research experience and her scientific and academic career and accomplishments led to the board’s decision to nominate Dr. Zoghbi for reelection to the board.

 

 

Board and Committee Membership—2019 Attendance

 

Board of Directors 6/6
   
Compensation Committee 14/14
   
Technology Committee 4/4

 

 

Prior Voting Results—2017

 

For 97.7%
   
Against 2.3%

 

 

Regeneron Securities Beneficially Owned as of April 14, 2020

 

Common Stock 0
   
Options 28,465
   
RSUs 465


 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING    /   13
 

BOARD OF DIRECTORS  /  MEET THE BOARD

 

NOMINEE FOR CLASS III DIRECTOR
FOR ELECTION AT THE 2020 ANNUAL MEETING FOR A TERM EXPIRING AT THE 2021 ANNUAL MEETING

 

N. ANTHONY COLES, M.D.

 

 

Director since: 2017

 

Age: 59

 

Independent

 

Other Public Boards

 

McKesson Corporation

Experience and Qualifications

 

Dr. Coles has served as the Executive Chairman and Chief Executive Officer of Cerevel Therapeutics, LLC, a Bain-portfolio biotechnology company specializing in the development of new therapies for diseases of the central nervous system, since 2019. Previously, from 2014 to 2019, Dr. Coles served as Chief Executive Officer of Yumanity Therapeutics, LLC, a private company focused on transforming drug discovery for neurodegenerative diseases, and continues to serve as the Executive Chairman of the Board. From 2013 to 2014, Dr. Coles served as Chairman and CEO of TRATE Enterprises LLC, a privately held company. Dr. Coles served as President, Chief Executive Officer and Chairman of the Board of Onyx Pharmaceuticals, Inc., a biopharmaceutical company, from 2012 until 2013, having served as its President, Chief Executive Officer, and a member of its board of directors from 2008 until 2012. Prior to joining Onyx in 2008, he was President, Chief Executive Officer, and a member of the board of directors of NPS Pharmaceuticals, Inc., a biopharmaceutical company. Before joining NPS in 2005, he served in various leadership positions in the biopharmaceutical and pharmaceutical industries, including at Merck & Co., Inc., Bristol-Myers Squibb Company, and Vertex Pharmaceuticals Incorporated. In addition to having previously served as a director of Onyx and NPS, he was formerly a director of Laboratory Corporation of America Holdings, Campus Crest Communities, Inc., and CRISPR Therapeutics AG.

 

Dr. Coles has been a director of McKesson Corporation since April 2014 and serves on the Compensation Committee and the Finance Committee of its board of directors.

 

The experience of Dr. Coles as a seasoned executive and corporate director with extensive knowledge of highly regulated biopharmaceutical and pharmaceutical companies, as well as his in-depth knowledge and understanding of the regulatory environment in which Regeneron operates, led to the board’s decision to nominate Dr. Coles for reelection to the board.

 

 

Board and Committee Membership—2019 Attendance

 

Board of Directors 5/6
   
Audit Committee 8/9

 

 

Prior Voting Results—2017

 

For 99.7%
   
Against 0.3%

 

 

Regeneron Common Stock Beneficially Owned as of April 14, 2020

 

Common Stock 0
   
Options 23,370
   
RSUs 465


 

14   /    2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING
 

BOARD OF DIRECTORS  /  MEET THE BOARD

 

CLASS III DIRECTORS CONTINUING IN OFFICE
TERM EXPIRES AT THE 2021 ANNUAL MEETING

 

ARTHUR F. RYAN

 

 

Director since: 2003

 

Age: 77

 

Independent

 

Other Public Boards

 

Citizens Financial Group, Inc. (until 2019)

Experience and Qualifications

 

In 2008, Mr. Ryan retired as the Chairman of the Board of Prudential Financial, Inc., one of the largest diversified financial institutions in the world. He served as Chief Executive Officer of Prudential until 2007. Prior to joining Prudential in 1994, Mr. Ryan served as President and Chief Operating Officer of Chase Manhattan Bank since 1990. Mr. Ryan managed Chase’s worldwide retail bank between 1984 and 1990. From 2008 to 2013, Mr. Ryan served as a non-executive director of the Royal Bank of Scotland Group plc. From 2009 to 2019, Mr. Ryan served as a director of Citizens Financial Group, Inc., a retail bank holding company that became publicly traded in 2014, and also served as its lead director, chair of the Compensation and Human Resources Committee, and a member of the Nominating and Corporate Governance Committee.

 

Mr. Ryan’s substantial leadership experience as a chief executive officer of leading companies in the banking and insurance industries, and his extensive business experience and financial expertise, led the board to conclude that Mr. Ryan should serve as a director.

 

 

Board and Committee Membership—2019 Attendance

 

Board of Directors 6/6
   
Audit Committee 9/9
   
Corporate Governance and Compliance Committee (Chairman) 5/5

 

 

Prior Voting Results—2018

 

For 88.8%
   
Against 11.2%

 

 

Regeneron Securities Beneficially Owned as of April 14, 2020

 

Common Stock 28,300
   
Options 52,054
   
RSUs 465


 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING    /   15
 

BOARD OF DIRECTORS  /  MEET THE BOARD

 

GEORGE L. SING

 

 

Director since: 1988

 

Age: 70

 

Independent

Experience and Qualifications

 

Since 1998, Mr. Sing has been a Managing Director of Lancet Capital, a venture capital investment firm in the healthcare field. In addition, since 2016, Mr. Sing has served as Chief Executive Officer of GanD, Inc., a biomedical drug development company. From 2004 to 2015, Mr. Sing served as Chief Executive Officer of Stemnion, Inc. (currently known as Noveome Biotherapeutics, Inc.), a biomedical company in the regenerative medicine field.

 

Mr. Sing’s extensive healthcare and financial expertise as a healthcare venture capital investor and biomedical company chief executive officer, his executive leadership experience, and his substantial knowledge of the Company led the board to conclude that Mr. Sing should serve as a director.

 

 

Board and Committee Membership—2019 Attendance

 

Board of Directors 6/6
   
Audit Committee (Chairman) 9/9
   
Compensation Committee 14/14

 

 

Prior Voting Results—2018

 

For 64.0%
   
Against 36.0%

 

 

Regeneron Securities Beneficially Owned as of April 14, 2020

 

Common Stock 129,872
   
Options 93,804
   
RSUs 465


 

16   /    2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING

 

 

BOARD OF DIRECTORS  /  MEET THE BOARD

 

MARC TESSIER-LAVIGNE, PH.D.

 

 

Director since: 2011

 

Age: 60

 

Independent

 

Scientific Society Memberships

 

The National Academy of Sciences
The National Academy of Medicine
The Royal Society of London
The Royal Society of Canada

 

Other Public Boards

 

Denali Therapeutics Inc.

Experience and Qualifications

 

Dr. Tessier-Lavigne has been the President of Stanford University since 2016. Before assuming his role at Stanford, he served as the President of The Rockefeller University and a Carson Family Professor and head of the Laboratory of Brain Development at The Rockefeller University from 2011. Previously, he served as Executive Vice President and Chief Scientific Officer at Genentech, Inc., which he joined in 2003. He was a professor at Stanford University from 2001 to 2003 and at the University of California, San Francisco from 1991 to 2001. Dr. Tessier-Lavigne is a member of the National Academy of Sciences, the National Academy of Medicine, and a fellow of the Royal Societies of London and Canada. Dr. Tessier-Lavigne is a member of the Board of Directors of Denali Therapeutics Inc., and previously served on the board of directors of Pfizer Inc., Agios Pharmaceuticals, Inc., and Juno Therapeutics, Inc.

 

Dr. Tessier-Lavigne’s distinguished scientific and academic background, and his significant industry experience, including experience in senior scientific leadership roles at a leading biopharmaceutical company, led the board to conclude that Dr. Tessier-Lavigne should serve as a director.

 

 

Board and Committee Membership—2019 Attendance

 

Board of Directors 6/6
   
Technology Committee 4/4

 

 

Prior Voting Results—2018

 

For 94.8%
   
Against 5.2%

 

 

Regeneron Securities Beneficially Owned as of April 14, 2020

 

Common Stock 1,187
   
Options 66,304
   
RSUs 465


 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING    /   17
 

BOARD OF DIRECTORS  /  MEET THE BOARD

 

CLASS I DIRECTORS CONTINUING IN OFFICE
TERM EXPIRES AT THE 2022 ANNUAL MEETING

 

BONNIE L. BASSLER, PH.D.

 

 

Director since: 2016

 

Age: 57

 

Independent

 

Scientific Society Memberships

 

The National Academy of Sciences
The American Academy of Arts and Sciences
The Royal Society of London
The American Philosophical Society

 

Other Public Boards

 

Kaleido Biosciences, Inc.

Experience and Qualifications

 

Dr. Bassler is currently the Chair of the Department of Molecular Biology and the Squibb Professor in Molecular Biology at Princeton University, and a Howard Hughes Medical Institute Investigator. Dr. Bassler has previously served as the President of the American Society for Microbiology, as well as on the boards for the American Association for the Advancement of Science, the National Science Foundation, and the American Academy of Microbiology. She has been elected to the National Academy of Sciences, the American Academy of Arts and Sciences, the Royal Society of London, and the American Philosophical Society, and has received many scientific honors, including a MacArthur Foundation Fellowship, the Lounsbery Award, and the Shaw Prize for Life Science and Medicine. Dr. Bassler received her B.Sc. from the University of California, Davis, and her Ph.D. in Biochemistry from Johns Hopkins University. She served as a Postdoctoral Fellow and Research Scientist at the Agouron Institute in La Jolla, California, before becoming a faculty member at Princeton University. Dr. Bassler served as a director of Sanofi from November 2014 to July 2016 and currently serves on the board of directors of Kaleido Biosciences, Inc.

 

Dr. Bassler’s extensive research experience and her scientific and academic career and accomplishments, as well as her experience as a corporate director, led the board to conclude that Dr. Bassler should serve as a director.

 

 

Board and Committee Membership—2019 Attendance

 

Board of Directors 6/6
   
Corporate Governance and Compliance Committee 5/5
   
Technology Committee 4/4

 

 

Prior Voting Results—2019

 

For 75.4%
   
Against 24.6%

 

 

Regeneron Securities Beneficially Owned as of April 14, 2020

 

Common Stock 0
   
Options 28,465
   
RSUs 465


 

18   /    2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING
 

BOARD OF DIRECTORS  /  MEET THE BOARD

 

MICHAEL S. BROWN, M.D.

 

 

Director since: 1991

 

Age: 79

 

Independent

 

Scientific Society Memberships

 

The National Academy of Sciences
The National Academy of Medicine
The Royal Society of London

Experience and Qualifications

 

Dr. Brown holds the Distinguished Chair in Biomedical Sciences, a position he has held since 1989, and is a Regental Professor of Molecular Genetics and Internal Medicine, and the Director of the Jonsson Center for Molecular Genetics, at The University of Texas Southwestern Medical Center at Dallas, positions he has held since 1985. Drs. Brown and Goldstein jointly received the Nobel Prize for Physiology or Medicine in 1985 and the U.S. National Medal of Science in 1988. Dr. Brown is a member of the National Academy of Sciences, the National Academy of Medicine, and Foreign Member of the Royal Society of London. Dr. Brown retired as a member of the board of directors of Pfizer Inc. in 2012.

 

Dr. Brown’s distinguished scientific and academic background, including his receipt of the Nobel Prize for Physiology or Medicine in 1985, and his significant industry experience gained through his service on the board of directors of the Company and of a leading pharmaceutical company, led the board to conclude that Dr. Brown should serve as a director.

 

 

Board and Committee Membership—2019 Attendance

 

Board of Directors 6/6
   
Corporate Governance and Compliance Committee 5/5
   
Technology Committee (Chairman) 4/4

 

 

Prior Voting Results—2019

 

For 70.7%
   
Against 29.3%

 

 

Regeneron Securities Beneficially Owned as of April 14, 2020

 

Common Stock 17,349
   
Options 38,804
   
RSUs 465


 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING    /   19
 

BOARD OF DIRECTORS  /  MEET THE BOARD

 

LEONARD S. SCHLEIFER, M.D., PH.D.

 

 

Director since: 1988

 

Age: 67

Experience and Qualifications

 

Dr. Schleifer founded the Company in 1988, has been a Director and its President and Chief Executive Officer since its inception, and served as Chairman of the Board from 1990 through 1994. Dr. Schleifer, together with Regeneron’s founding scientist, Dr. Yancopoulos, built and has managed the Company over the past 32 years. Dr. Schleifer is a licensed physician and is certified in Neurology by the American Board of Psychiatry and Neurology. With over 30 years of experience as Chief Executive Officer of the Company, Dr. Schleifer brings to the board an incomparable knowledge of the Company, significant leadership experience, and an in-depth understanding of the complex research, drug development, and business issues facing companies in the biopharmaceutical industry.

 

Dr. Schleifer’s significant industry and leadership experience, as well as his extensive knowledge of the Company, led the board to conclude that Dr. Schleifer should serve as a director.

 

 

Board and Committee Membership—2019 Attendance

 

Board of Directors 5/6
   
Technology Committee 4/4

 

 

Prior Voting Results—2019

 

For 83.8%
   
Against 16.2%

 

 

Regeneron Securities Beneficially Owned as of April 14, 2020

 

Class A Stock 1,726,565
   
Common Stock 580,315
   
Options 1,820,844


 

20   /    2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING
 

BOARD OF DIRECTORS  /  MEET THE BOARD

 

GEORGE D. YANCOPOULOS, M.D., PH.D.

 

 

Director since: 2001

 

Age: 60

 

Scientific Society Memberships

 

The National Academy of Sciences

Experience and Qualifications

 

Dr. Yancopoulos joined Dr. Schleifer in 1989 as founding scientist of the Company, and together they built and have managed the Company since then. Dr. Yancopoulos is currently President and Chief Scientific Officer, and has served on the board since 2001.

 

He received his M.D. and Ph.D. from Columbia University. Dr. Yancopoulos was the 11th most highly cited scientist in the world in the 1990s, and in 2004 he was elected to be a member of the National Academy of Sciences. Dr. Yancopoulos, together with key members of his team, is a principal inventor and/or developer of the seven FDA-approved drugs the Company has developed, EYLEA® (aflibercept) Injection, Praluent® (alirocumab), Dupixent® (dupilumab), Kevzara® (sarilumab), Libtayo® (cemiplimab), ZALTRAP® (ziv-aflibercept) Injection for Intravenous Infusion, and ARCALYST® (rilonacept) Injection for Subcutaneous Use, as well as of its foundation technologies, including the TRAP technology, VelociGene®, and VelocImmune®. As one of the few members of the National Academy of Sciences from industry and as an author of a substantial number of scientific publications, Dr. Yancopoulos has a distinguished record of scientific expertise. Dr. Yancopoulos also brings to the board his experience in building and managing the Company, his in-depth knowledge of the Company’s technologies and research and development programs, and his proven track-record for envisioning successful long-term strategic directions and opportunities.

 

Dr. Yancopoulos’s significant industry and scientific experience, as well as his extensive knowledge of the Company, led the board to conclude that Dr. Yancopoulos should serve as a director.

 

 

Board and Committee Membership—2019 Attendance

 

Board of Directors 5/6
   
Technology Committee 4/4

 

 

Prior Voting Results—2019

 

For 83.7%
   
Against 16.3%

 

 

Regeneron Securities Beneficially Owned as of April 14, 2020

 

Class A Stock 42,750
   
Common Stock 1,105,698
   
Options 1,371,988


 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING    /   21
 

BOARD COMMITTEES

 

The board has a standing Audit Committee, Compensation Committee, and Corporate Governance and Compliance Committee, each of which is comprised entirely of independent directors. The Corporate Governance and Compliance Committee is responsible for reviewing and recommending for the board’s selection candidates to serve on our board of directors and for overseeing all aspects of the Company’s compliance program other than financial compliance. The board also has a standing Technology Committee. The board has adopted charters for the Audit Committee, Compensation Committee, Corporate Governance and Compliance Committee, and Technology Committee, current copies of which are available on our website at www.regeneron.com under the “Corporate Governance” heading on the “Investors & Media” page.

 

We show below information on the membership, key functions, and number of meetings of each board committee during 2019.

 

AUDIT COMMITTEE
       
Members   Key Functions
       

George L. Sing, Chairman

 

N. Anthony Coles, M.D.

 

Arthur F. Ryan

 

Number of Meetings Held in 2019

 

9

 

  Select the independent registered public accounting firm, review and approve its engagement letter, and monitor its independence and performance.
     
  Review the overall scope and plans for the annual audit by the independent registered public accounting firm.
     
  Approve performance of non-audit services by the independent registered public accounting firm and evaluate the performance and independence of the independent registered public accounting firm.
     
  Review and approve the Company’s periodic financial statements and the results of the year-end audit.
     
  Review and discuss the adequacy and effectiveness of the Company’s accounting and internal control policies and procedures.
     
  Evaluate the internal audit process for establishing the annual audit plan; review and approve the appointment and replacement of the Company’s Chief Audit Executive, if applicable, and any outside entities providing internal audit services and evaluate their performance on an annual basis.
     
  Review the independent registered public accounting firm’s recommendations concerning the Company’s financial practices and procedures.
     
  Oversee the Company’s risk management program.
     
  Discuss with management the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures.
     
  Establish procedures for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters and for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
     
  Review and approve any related person transaction.
     
  Prepare an annual report of the Audit Committee for inclusion in the Company’s proxy statement.

 

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BOARD OF DIRECTORS  /  BOARD COMMITTEES

 

COMPENSATION COMMITTEE
       
Members   Key Functions
       

Christine A. Poon, Chairperson

 

Joseph L. Goldstein, M.D.
(until June 14, 2019)

 

George L. Sing

 

Huda Y. Zoghbi, M.D.

 

Number of Meetings Held in 2019

 

14

 

  Evaluate the performance of the Chief Executive Officer and other executive officers of the Company.
     
  Recommend compensation for the Chief Executive Officer for approval by the non-employee members of the board of directors.
     
  Approve compensation for other executive officers.
     
  Approve the total compensation budget for all Company employees.
     
  Oversee the Company’s compensation and benefit philosophy and programs generally.
     
  Review and approve annually the corporate goals and objectives applicable to the compensation of the Chief Executive Officer and the goals and objectives of the Company’s executive compensation programs.
     
  Review and approve the Compensation Discussion and Analysis to be included in the Company’s proxy statement.
     
  Prepare an annual report of the Compensation Committee for inclusion in the Company’s proxy statement.
       
CORPORATE GOVERNANCE AND COMPLIANCE COMMITTEE
       
Members   Key Functions
       

Arthur F. Ryan, Chairman

 

Bonnie L. Bassler, Ph.D.

 

Michael S. Brown, M.D.

 

Joseph L. Goldstein, M.D.
(since June 14, 2019)

 

Christine A. Poon

 

Number of Meetings Held in 2019

 

5

 

  Identify qualified individuals to become members of the board and recommend such candidates to the board.
     
  Assess the functioning of the board and its committees and make recommendations to the board concerning the appropriate size, function, and needs of the board.
     
  Review, and make recommendations to the board regarding, non-employee director compensation.
     
  Make recommendations to the board regarding corporate governance matters and practices.
     
  Oversee all aspects of the Company’s comprehensive compliance program other than financial compliance.
     
  Oversee the Company’s key corporate responsibility initiatives and conduct a periodic review of environmental, social, and governance matters.
       
TECHNOLOGY COMMITTEE  
       
Members   Key Functions
       

Michael S. Brown, M.D., Chairman

 

Bonnie L. Bassler, Ph.D.

 

Joseph L. Goldstein, M.D.

 

Marc Tessier-Lavigne, Ph.D.

 

P. Roy Vagelos, M.D.

 

Huda Y. Zoghbi, M.D.

 

Leonard S. Schleifer, M.D., Ph.D.+

 

George D. Yancopoulos, M.D., Ph.D.+

 

Number of Meetings Held in 2019

 

4

 

  Review and evaluate the Company’s research and clinical development programs, plans, and policies.
+ Ex Officio Member.      

 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING    /   23

 

BOARD GOVERNANCE

 

BOARD STRUCTURE

 

Pursuant to the Company’s Certificate of Incorporation, the board of directors is divided into three classes, denominated Class I, Class II, and Class III, with members of each class holding office for staggered three-year terms. There are currently four members in Class I, five members in Class II, and three members in Class III. As discussed above, the board of directors has determined that it would be in the best interests of the Company and its shareholders to apportion the directorships equally among the three classes of the board so that each class consist of four directors. This equal apportionment will be effected at the 2020 Annual Meeting if all of the nominees for Class II Director and Class III Director are elected at the 2020 Annual Meeting. The respective terms of the directors expire (in all cases, subject to the election and qualification of their successors and to their earlier death, resignation, or removal) as follows:

 

The terms of the Class I Directors expire at the 2022 Annual Meeting;
   
The terms of the Class II Directors expire at the 2020 Annual Meeting; and
   
The terms of the Class III Directors expire at the 2021 Annual Meeting.

 

Dr. Coles is Sanofi’s designee to the board of directors in accordance with the Amended and Restated Investor Agreement between us and Sanofi described under “Certain Relationships and Related Transactions—Transactions with Related Persons—Amended and Restated Investor Agreement with Sanofi; 2018 Letter Agreement.”

 

BOARD MEETINGS AND ATTENDANCE OF DIRECTORS

 

The board held six regular meetings in 2019. All directors attended at least 75% of the total number of meetings of the board and committees of the board on which they served. According to the Regeneron Board of Directors Corporate Governance Guidelines, board members are expected to attend the Company’s Annual Meeting of Shareholders. All of the directors then in office (other than Dr. Coles, who was excused due to an unplanned personal matter) attended our 2019 Annual Meeting of Shareholders.

 

PROCEDURES RELATING TO NOMINEES; BOARD SUCCESSION PLANNING

 

The Corporate Governance and Compliance Committee will consider a nominee for election to the board of directors recommended by a shareholder of record if the shareholder submits the recommendation in compliance with the requirements of our Guidelines Regarding Director Nominations, which are available on our website at www.regeneron.com under the “Corporate Governance” heading on the “Investors & Media” page.

 

In considering potential candidates for the board of directors, the Corporate Governance and Compliance Committee considers factors such as whether or not a potential candidate: (1) possesses relevant expertise; (2) brings skills and experience complementary to those of the other members of the board; (3) has sufficient time to devote to the affairs of the Company; (4) has demonstrated excellence in his or her field; (5) has the ability to exercise sound business judgment; (6) has the commitment to rigorously represent the long-term interests of the Company’s shareholders; (7) possesses a diverse background and experience, including with respect to race, age, and gender; and (8) such other factors as the Corporate Governance and Compliance Committee may determine from time to time.

 

Candidates for director are reviewed in the context of the current composition of the board of directors, the operating requirements of the Company, and the long-term interests of shareholders. In conducting the assessment, the Committee considers the individual’s independence, experience, skills, background, and diversity, including with respect to race, age, and gender, along with such other factors as it deems appropriate, given the current needs of the board and the Company to maintain a balance of knowledge, experience, and capabilities. When recommending a slate of director nominees each year, the Corporate Governance and Compliance Committee reviews the current composition of the board of directors in order to recommend a slate of directors who, with the continuing directors, will provide the board with the requisite diversity of skills, expertise, experience, and viewpoints necessary to effectively fulfill its duties and responsibilities.

 

24   /    2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING

 

BOARD OF DIRECTORS  /  BOARD GOVERNANCE

 

In the case of an incumbent director whose term of office is set to expire, the Corporate Governance and Compliance Committee reviews such director’s overall service to the Company during the director’s term and also considers the director’s interest in continuing as a member of the board. In the case of a new director candidate, the Corporate Governance and Compliance Committee also reviews whether the nominee is “independent,” based on our Corporate Governance Guidelines, applicable listing standards of the Nasdaq Stock Market LLC, and applicable SEC and other relevant rules and regulations, if necessary.

 

The Corporate Governance and Compliance Committee may employ a variety of methods for identifying and evaluating nominees for the board of directors. In addition, the Corporate Governance and Compliance Committee may consider candidates recommended by other directors, management, search firms, shareholders, or other sources. When conducting searches for new directors, the Corporate Governance and Compliance Committee will take reasonable steps to include diverse candidates in the pool of nominees and any search firm will affirmatively be instructed to seek to include diverse candidates. Candidates recommended by shareholders will be evaluated on the same basis as candidates recommended by our directors or management or by third party search firms or other sources. Candidates may be evaluated at regular or special meetings of the Corporate Governance and Compliance Committee.

 

The Corporate Governance and Compliance Committee seeks to ensure that our board of directors as a whole possesses the mix of skills and experiences to provide effective oversight and guidance to management to execute on the Company’s long-term strategy. The Committee also considers succession planning for board and committee chairs for purposes of continuity and to maintain relevant expertise and depth of experience.

 

 

BOARD AND COMMITTEE SELF-ASSESSMENTS

 

On an annual basis, the board of directors, the Audit Committee, the Compensation Committee, and the Corporate Governance and Compliance Committee conduct self-assessments to ensure effective performance and to identify opportunities for improvement. As the first step in the self-assessment process, directors complete a comprehensive questionnaire, which asks them to consider various topics related to board and committee composition, structure, effectiveness, and responsibilities, as well as satisfaction with the schedule, materials, and discussion topics. Each committee, as well as the board as a whole, then reviews and assesses the responses and presents its findings and recommendations to the board of directors. The results of the assessments are then discussed by the board of directors and the respective committees in executive session, with a view toward taking action to address any issues presented. Results requiring additional consideration are addressed at subsequent board and committee meetings, where appropriate.

 

Annual Self-Assessment Process

 

 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING    /   25

 

BOARD OF DIRECTORS  /  BOARD GOVERNANCE

 

While this formal self-assessment is conducted on an annual basis, directors share perspectives, feedback, and suggestions year-round, both inside and outside the boardroom.

 

SHAREHOLDER RIGHTS TO REMOVE DIRECTORS FOR CAUSE AND TO CALL SPECIAL SHAREHOLDER MEETING

 

Regeneron’s charter documents give shareholders the rights to (i) remove directors for cause by an affirmative vote of at least 80% of the outstanding shares of all classes of capital stock entitled to vote for directors; and (ii) call a special shareholder meeting upon the written request of at least 25% of the total number of votes entitled to be cast by shareholders.

 

DIRECTOR INDEPENDENCE

 

The board of directors has determined that each of the following currently serving directors is independent as defined in the listing standards of The Nasdaq Stock Market LLC and our Corporate Governance Guidelines: Bonnie L. Bassler, Ph.D., Michael S. Brown, M.D., N. Anthony Coles, M.D., Joseph L. Goldstein, M.D., Christine A. Poon, Arthur F. Ryan, George L. Sing, Marc Tessier-Lavigne, Ph.D., and Huda Y. Zoghbi, M.D. These individuals are affiliated with numerous educational institutions, hospitals, charities, and corporations, as well as civic organizations and professional associations. The board of directors considered each of these relationships and determined that none of these relationships conflicted with the interests of the Company or would impair their independence or judgment. The board conducts executive sessions of independent directors following each regularly scheduled board meeting.

 

The board of directors has determined that each of the current members of the Audit Committee, Messrs. Ryan and Sing and Dr. Coles, qualifies as an “audit committee financial expert” as that term is defined by SEC rules, and is independent as defined for audit committee members in the listing standards of The Nasdaq Stock Market LLC and SEC rules.

 

In addition, the board of directors has determined that each of the current members of the Compensation Committee, Ms. Poon, Mr. Sing, and Dr. Zoghbi, meets the additional independence criteria applicable to compensation committee members under the listing standards of The Nasdaq Stock Market LLC and qualifies as a “Non-Employee Director” pursuant to Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

BOARD LEADERSHIP AND ROLE IN RISK OVERSIGHT

 

The board of directors recognizes that one of its key responsibilities is to establish and evaluate an appropriate leadership structure for the board so as to provide effective oversight of management. Since 1995, the board has separated the roles of the Chief Executive Officer and the Chairman of the Board, with Dr. Vagelos serving as Chairman and Dr. Schleifer serving as President and Chief Executive Officer. Dr. Vagelos’s extensive leadership experience, his business acumen, and his deep understanding of the healthcare industry have made him an invaluable resource to both the board and Dr. Schleifer. The board has determined that this leadership structure is appropriate for the Company at this time.

 

The board executes its oversight responsibility for risk management directly and through its committees, as follows:

 

The Audit Committee oversees the Company’s risk management program. The risk management program focuses on the most significant risks the Company faces. The Company’s Chief Audit Executive, who reports independently to the Committee, facilitates the risk management program. Audit Committee meetings include discussions of specific risk areas throughout the year, including, among others, those relating to cybersecurity, and reports from the Chief Audit Executive on the Company’s enterprise risk profile on an annual basis.
   
The Compensation, Corporate Governance and Compliance, and Technology Committees oversee risks associated with their respective areas of responsibility. As part of its overall review of the Company’s compensation policies and practices, the Compensation Committee generally considers the risks associated with these policies and practices. The Corporate Governance and Compliance Committee oversees all aspects of the Company’s comprehensive compliance program other than financial compliance and considers legal and regulatory compliance risks. The Technology Committee considers risks associated with our research and development programs.

 

26   /    2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING

 

BOARD OF DIRECTORS  /  BOARD GOVERNANCE

 

The board is kept abreast of its committees’ risk oversight and other activities via reports of the committee chairpersons to the full board at regular board meetings. The board considers specific risk topics, including risks associated with our strategic plan, our finances, and our development activities. In addition, the board receives detailed regular reports from members of our senior management that include discussions of the risks and exposures involved in their respective areas of responsibility. Further, the board is routinely informed by the appropriate members of senior management of developments internal and external to the Company that could affect our risk profile.

 

EXECUTIVE COMPENSATION PROCESSES AND PROCEDURES; ROLE OF COMPENSATION CONSULTANTS

 

The Compensation Committee is responsible for overseeing the Company’s general compensation objectives and programs. We describe below under “Compensation-Related Matters — Compensation Discussion and Analysis — Our Compensation Processes” the role of the Compensation Committee, as well as the role of our executive officers, in decisions regarding executive compensation (particularly with respect to our Named Executive Officers).

 

The Compensation Committee has the sole authority to retain its own third-party compensation consultants, and in 2019 utilized the services of Frederic W. Cook & Co., Inc. (“Frederic W. Cook & Co.”), an independent compensation consultant. Advice and recommendations provided by Frederic W. Cook & Co. relate to both executive compensation (discussed in the section “Compensation-Related Matters” below) and director compensation matters (discussed in the subsection “Compensation of Directors” below). As discussed further below, the Corporate Governance and Compliance Committee has adopted a policy requiring the annual review of non-employee director compensation by an independent compensation consultant and separately engaged Frederic W. Cook & Co. for that purpose.

 

Management also retains another compensation consultant for its own use. In 2019, management used the services of Radford, a compensation consultant focused on the technology and life sciences sectors. Radford provided various consulting services to us, including analyzing the competitiveness of specific compensation programs; preparing surveys of competitive pay practices (including the Market Composite Data discussed in “Compensation-Related Matters — Compensation Discussion and Analysis” below); and assisting management in the development and analysis of executive compensation recommendations. Reports prepared by Radford that relate to executive compensation may also be shared with the Compensation Committee, the full board, or another committee of the board.

 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING    /   27

 

COMPENSATION OF DIRECTORS

 

OVERVIEW

 

The general philosophy we have applied to compensation of our non-employee directors and the Chairman of the Board is similar to the executive compensation philosophy outlined in the “Compensation-Related Matters” section of this proxy statement. This philosophy, including its emphasis on equity compensation, is consistent with the Company’s long-term business orientation and has helped ensure alignment of directors’ interests with those of Regeneron shareholders.

 

Non-employee director compensation matters are subject to annual review. The Corporate Governance and Compliance Committee makes recommendations to the board of directors regarding, and the board of directors determines, the compensation of non-employee directors. The Corporate Governance and Compliance Committee evaluates the appropriate level and form of compensation for non-employee directors and recommends changes to such compensation to the board of directors when appropriate. Directors who are Company employees receive no additional compensation for serving on our board of directors or its committees. In determining compensation recommendations for the non-employee directors, the Corporate Governance and Compliance Committee considers, among other things, the qualifications, expertise, and demands on our directors, practices of similar companies in the biotechnology industry (including the Peer Group2), and any comparative information provided by Frederic W. Cook & Co. In addition, since November 2018, the Corporate Governance and Compliance Committee has required the annual review of non-employee director compensation by an independent compensation consultant, and has engaged Frederic W. Cook & Co. for this purpose in each of the last two years.

 

The process governing the compensation arrangements of the Chairman of the Board is described under “Compensation Arrangements of the Chairman of the Board of Directors” below.

 

The current compensation program for our non-employee directors and the Chairman of the Board (which has been effective for our non-employee directors and the Chairman of the Board since January 2019 and December 2018, respectively, and is further described below) is referred to in this section as the “Current Compensation Program.”3

 

NON-EMPLOYEE DIRECTOR COMPENSATION PHILOSOPHY

 

Our philosophy for non-employee director compensation is simple: to attract the most highly qualified directors with a diverse skillset who will serve as stewards of the Company’s long-term prospects and scientific focus. With this in mind, our non-employee director compensation program emphasizes equity compensation primarily in the form of stock options, which reward increases in stock price, over cash fees. The board of directors believes that this emphasis is consistent with the Company’s long-term business orientation and has helped ensure alignment of directors’ interests with those of Regeneron shareholders. Under the Current Compensation Program, we have utilized value-denominated equity compensation awards (granted in the form of stock options and a relatively small percentage of RSUs) for our non-employee directors. This feature of the Current Compensation Program is meant to, among other things, ensure greater stability in reported non-employee director compensation on a year-over-year basis. The board of directors believes that the Current Compensation Program is consistent with Regeneron’s philosophy for non-employee director compensation.

 

2 See “Compensation-Related Matters—Compensation Discussion and Analysis—Our Compensation Processes—Peer Data” below for a list of the companies included in our Peer Group.
3 The Current Compensation Program was implemented following the previously disclosed settlement of two shareholder derivative actions (the “Settlement”) and complies with the terms of the Settlement.


 

28   /    2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING
 
BOARD OF DIRECTORS  /  COMPENSATION OF DIRECTORS

 

CASH FEES AND MATCHING GIFT PROGRAM

 

In 2019, each non-employee director received an annual retainer of $90,000 and an annual committee retainer of $10,000 for each standing committee of the Company’s board of directors on which the director served. In addition, each chairperson of each standing committee received an additional annual retainer of $10,000. Compared to cash compensation of non-employee directors in our Peer Group, the 2019 annual retainer for board service was below the 75th percentile and the additional retainers provided to our committee chairpersons were below the median.4

 

Non-employee directors are reimbursed for their actual expenses incurred in connection with their activities as directors, which included travel, hotel, and food and entertainment expenses. In addition, directors are eligible to participate in the Regeneron Matching Gift Program, which is also available to eligible employees. Under this program, the Company matches contributions made by directors and employees to eligible tax-exempt organizations up to an annual maximum amount of $5,000 per director or employee.

 

ANNUAL EQUITY AWARDS

 

2019 and 2020 Equity Awards

 

The January 2019 and January 2020 annual equity awards to our non-employee directors were made in accordance with the Current Compensation Program and complied with the respective limits imposed by the Amended and Restated Regeneron Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan and the Settlement. If approved by the shareholders at the 2020 Annual Meeting, such limits will also be incorporated into the Second Amended and Restated Regeneron Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan. See “Proposal No. 3: Second Amendment and Restatement of Long-Term Incentive Plan” for more information on these limits and other terms of this Plan.

 

With respect to each of the January 2019 and January 2020 annual equity awards, the board of directors (upon the recommendation of the Corporate Governance and Compliance Committee) determined that the targeted aggregate grant date fair value of such equity awards would be set at $600,000 per non-employee director and consist of stock options with a grant date fair value of $480,000 (or 80% thereof) and RSUs with a grant date fair value of $120,000 (or 20% thereof). The January 2019 annual equity awards to our non-employee directors are shown in the table below. On January 2, 2020, each of the then-serving nine non-employee directors received an equity award comprised of stock options representing 4,361 shares of common stock (with a grant date fair value of $480,281) and 320 RSUs (with a grant date fair value of $119,718). The aggregate grant date fair value of the January 2020 equity awards was $599,999 per non-employee director.

 

Similar to the process undertaken in respect of the January 2019 annual equity awards, the Corporate Governance and Compliance Committee recommended the approval of, and the board of directors approved, the terms of the January 2020 annual equity awards after consideration of the review, analysis, and recommendations of Frederic W. Cook & Co. Such analysis focused on, among other matters, the market practices of companies in our Peer Group, other relevant industry and market data points, Regeneron’s non-employee director compensation philosophy (including its emphasis on long-term incentives), and the terms of the Settlement.

 

Terms of Equity Awards

 

The exercise price of a non-employee director stock option is equal to the fair market value of a share of common stock on the date of grant (determined as the average of the high and low sales price per share of common stock on the Nasdaq Global Select Market on the date of grant or, if such date is not a trading day, on the last preceding date on which there was a sale of the Company’s common stock on the Nasdaq Global Select Market).

 

Under the Current Compensation Program, a pro-rata portion of each equity award (i.e., each stock option and RSU

 

4 Based on information reported by our Peer Group companies in 2019.

 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING    /   29
 
BOARD OF DIRECTORS   /  COMPENSATION OF DIRECTORS

 

award) equal to the portion of one year that has passed from its date of grant vests on the date of the Company’s first annual shareholder meeting following the date of grant, and the remaining portion vests on the first anniversary of the date of grant. The RSU awards contain mandatory deferral provisions, according to which the shares underlying the RSUs will generally not be delivered to the non-employee director until the earliest of (i) the termination of the non-employee director’s service as a member of the board, (ii) the seventh anniversary of the RSU grant date, and (iii) the date of a change in control (as defined in the Amended and Restated Regeneron Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan). A non-employee director may, subject to compliance with applicable tax rules, elect in writing a maximum deferral period longer than the seventh anniversary of the grant date. Other than as discussed below, the vesting of equity awards is generally subject to continued service on the board, and stock option awards generally expire ten years following the date of grant.

 

To the extent they remain unvested and outstanding, equity awards granted to a non-employee director continue to vest following the retirement of that director provided applicable conditions relating to the length of the director’s service and the director’s age have been met. If a non-employee director’s service as a member of the board is terminated as a result of his or her death, all of the director’s equity awards will immediately vest in full.

 

To the extent they remain unvested and outstanding, equity awards granted to non-employee directors become fully vested automatically upon a change in control of the Company. Each non-employee director has the right to nullify this acceleration of vesting, in whole or in part, if it would cause the director to pay excise taxes under the requirements of the Internal Revenue Code.

 

EQUITY AWARDS TO NEW DIRECTORS

 

Under the Current Compensation Program, any newly elected non-employee director will receive an initial equity award with an aggregate grant date fair value equal to 5/3rds of the aggregate grant date fair value of the most recent annual equity award to a non-employee director; and, with respect to the annual equity award to a non-employee director in respect of the first year of his or her service, the aggregate grant date fair value of such annual award will be prorated based on the date as of which the non-employee director first becomes a member of the board of directors.

 

COMPENSATION ARRANGEMENTS OF THE CHAIRMAN OF THE BOARD OF DIRECTORS

 

On December 31, 1998, we entered into an employment agreement with the Chairman of the board of directors, Dr. Vagelos. Pursuant to the terms of his employment agreement, Dr. Vagelos receives an annual salary of $100,000 as a non-officer employee.

 

Under the Current Compensation Program, the board of directors determined that stock options and performance-based restricted stock units (also referred to as “PSUs”) would comprise 70% and 30% of the 2019 annual equity award to Dr. Vagelos, respectively, and set the targeted aggregate grant date fair value of such award at (but no more than) ten times the aggregate grant date fair value of the corresponding annual equity award for our non-employee directors. As in prior years, Dr. Vagelos’s 2019 annual equity award reflects, among other things, the key contributions that Dr. Vagelos makes as the Company continues to develop into a fully integrated biotech company with multiple class-leading products, as well as Dr. Vagelos’s crucial role as a trusted advisor to the CEO, other senior managers, and the non-employee directors. It is also designed to incentivize further contributions and ensure Dr. Vagelos’s continued service to the Company in the future.

 

The 2019 stock option award granted to Dr. Vagelos vests ratably over four years subject to his continued service and contains change-of-control provisions consistent with those described above for equity grants to non-employee directors. The 2019 PSU award granted to Dr. Vagelos contains vesting conditions consistent with those described below under “Compensation Discussion and Analysis – Components of Executive Pay: What We Pay and Why We Pay It – Annual Equity Awards.” In addition, if any PSUs held by Dr. Vagelos vest upon a change of control (as a result of performance exceeding the relevant TSR goal for the period from the date of grant to the date of the change of


 

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BOARD OF DIRECTORS  /  COMPENSATION OF DIRECTORS

 

control), the earned shares will be delivered within 30 days of the vesting determination. Pursuant to the terms of his employment agreement, if Dr. Vagelos dies or is disabled during the term of his employment, all stock options granted to him by the Company will immediately become vested and exercisable. In addition, the award agreements with Dr. Vagelos relating to his 2018 and 2019 stock option awards and 2019 PSU award provide that each such award will continue to vest in accordance with the terms of the applicable award agreement following his qualified retirement (as defined in the applicable Company policy; Dr. Vagelos currently meets the policy requirement).

 

The following table and explanatory footnotes provide information with respect to compensation paid to Dr. Vagelos and each non-employee director for their service in 2019 in accordance with the policies, plans, and employment agreement described above:

 

Director Compensation

 

A  B  C  D  E  F  G  H
Name  Fees earned
or paid in cash
($)
  Stock awards1
($)
  Option
awards1,2
($)
  Non-equity
incentive plan
compensation
($)
  Change in pension value
and non-qualified deferred
compensation earnings
  All other
compensation3
($)
  Total
($)
Bonnie L. Bassler, Ph.D.   110,000    119,962    480,031            709,993 
Michael S. Brown, M.D.   120,000    119,962    480,031        5,0004   724,993 
N. Anthony Coles, M.D.   100,000    119,962    480,031        5,0004   704,993 
Joseph L. Goldstein, M.D.   110,000    119,962    480,031            709,993 
Christine A. Poon   120,000    119,962    480,031            719,993 
Arthur F. Ryan   120,000    119,962    480,031        5,0004   724,993 
George L. Sing   120,000    119,962    480,031        3,0004   722,993 
Marc Tessier-Lavigne, Ph.D.   100,000    119,962    480,031            699,993 
P. Roy Vagelos, M.D.       1,799,9445    4,199,881        105,0006   6,104,825 
Huda Y. Zoghbi, M.D.   110,000    119,962    480,031        5,0004   714,993 
1 The amounts in columns (c) and (d) reflect the respective aggregate grant date fair values of RSUs or PSUs (as applicable) and options awarded during the year ended December 31, 2019 pursuant to the Amended and Restated Regeneron Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan. Valuation assumptions and methodologies used in the calculation of these amounts do not take into account expected forfeitures and are otherwise described in Note 13 to the Company’s audited financial statements for the fiscal year ended December 31, 2019 included in the 2019 Annual Report.
2 At December 31, 2019, the non-employee directors and Dr. Vagelos had the following aggregate number of stock option awards outstanding: Dr. Bassler: 29,014; Dr. Brown: 41,353; Dr. Coles: 23,743; Dr. Goldstein: 41,103; Ms. Poon: 121,383; Mr. Ryan: 52,603; Mr. Sing: 111,853; Dr. Tessier-Lavigne: 81,132; Dr. Vagelos: 1,258,645; and Dr. Zoghbi: 29,014.
3 See the subsection “Compensation-Related Matters—Compensation Dashboard—Additional Compensation Information—Perquisites and Personal Benefits” for information regarding director air transportation in accordance with guidelines approved by our board of directors.
4 Consists of a Company contribution paid or payable on or before April 14, 2020 under the Regeneron Matching Gift Program in respect of charitable gifts made in 2019.
5 Consists of a PSU award with possible minimum, threshold, and maximum payouts of 2,019 shares, 4,038 shares, and 9,086 shares of common stock, respectively.
6 Consists of (i) $100,000 for the salary paid pursuant to the terms of our employment agreement with Dr. Vagelos and (ii) $5,000 for 401(k) Savings Plan matching contributions in respect of 2019.

 

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PROPOSAL

01

ELECTION OF DIRECTORS

 

The board of directors, upon the recommendation of the Corporate Governance and Compliance Committee, has nominated for election at the 2020 Annual Meeting Joseph L. Goldstein, M.D., Christine A. Poon, P. Roy Vagelos, M.D., and Huda Y. Zoghbi, M.D. as Class II Directors for a three-year term expiring at the 2023 Annual Meeting and N. Anthony Coles, M.D. as a Class III Director for a one-year term expiring at the 2021 Annual Meeting.

 

The board of directors unanimously recommends a vote FOR the election of each of these nominees.

 

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THE COMPANY

 

EXECUTIVE OFFICERS OF THE COMPANY

 

All officers of the Company are appointed annually and serve at the pleasure of the board of directors. The names, positions, ages, and background of the Company’s executive officers as of April 14, 2020 are set forth below. There are no family relationships between any of our directors and executive officers. None of the corporations or other organizations referred to below with which an executive officer has previously been employed or otherwise associated is a parent, subsidiary, or affiliate of the Company.

 

Leonard S. Schleifer, M.D., Ph.D., 67, founded the Company in 1988, has been a Director and its President and Chief Executive Officer since its inception, and served as Chairman of the Board from 1990 through 1994. Dr. Schleifer, together with Regeneron’s founding scientist, Dr. Yancopoulos, built and has managed the Company over the past 32 years. Dr. Schleifer received his M.D. and Ph.D. in Pharmacology from the University of Virginia. Dr. Schleifer is a licensed physician and is certified in Neurology by the American Board of Psychiatry and Neurology.
George D. Yancopoulos, M.D., Ph.D., 60, joined Dr. Schleifer in 1989 as founding scientist of the Company, and together they built and have managed the Company since then. Dr. Yancopoulos is currently President and Chief Scientific Officer, and has served on the board since 2001. He received his M.D. and Ph.D. from Columbia University. Dr. Yancopoulos was the 11th most highly cited scientist in the world in the 1990s, and in 2004 he was elected to be a member of the National Academy of Sciences. Dr. Yancopoulos, together with key members of his team, is a principal inventor and/or developer of the seven FDA-approved drugs the Company has developed, EYLEA®, Praluent®, Dupixent®, Kevzara®, Libtayo®, ZALTRAP®, and ARCALYST®, as well as of its foundation technologies, including the TRAP technology, VelociGene®, and VelocImmune®.
Christopher Fenimore, 49, has been Vice President, Controller since March 2017. From January 2017 to March 2017, he served as Vice President, Deputy Controller, and previously served as Vice President, Financial Planning from January 2012 to December 2016. Prior to joining the Company in 2003, he was Vice President, Finance at Mojave Therapeutics, Inc. Mr. Fenimore’s prior experience includes working as a supervising senior accountant at KPMG, as well as healthcare industry- focused venture capital and investment banking roles. Mr. Fenimore holds an M.A. in Biotechnology from Columbia University, an M.B.A. in Professional Accounting from Rutgers Business School, and a B.A. in Economics from Rutgers University. Mr. Fenimore is a Certified Public Accountant in the State of New York.
Robert E. Landry, 56, has been Executive Vice President, Finance since January 2019 and Chief Financial Officer since October 2013. From September 2013 to December 2018, he served as Senior Vice President, Finance. Previously, Mr. Landry served as Senior Vice President, Treasurer, at Pfizer Inc. from October 2012 to August 2013 and Senior Vice President—Finance, Pfizer’s Diversified Business, from October 2009 to October 2012. Prior to those roles, Mr. Landry held a number of positions at Wyeth, which was acquired by Pfizer Inc. in October 2009, including Treasurer and Principal Corporate Officer from 2007 to 2009, Director of Pharmaceutical Marketing and Sales of Wyeth’s Australian affiliate from 2006 to 2007, and Chief Financial Officer of Wyeth’s Australian and New Zealand affiliates from 2004 to 2006.

 

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THE COMPANY  /  EXECUTIVE OFFICERS OF THE COMPANY

 

Joseph J. LaRosa, 61, has been Executive Vice President, General Counsel and Secretary since January 2019. From September 2011 to December 2018, he served as Senior Vice President, General Counsel and Secretary. Before joining Regeneron, Mr. LaRosa was Senior Vice President, General Counsel, and Secretary at Nycomed US Inc. Mr. LaRosa’s prior experience includes working in a number of senior legal positions at Schering-Plough Corporation from 1993 to 2009, where he was a corporate officer and served most recently as Vice President, Legal Affairs, and a member of the Operations Management Team. Mr. LaRosa received his J.D. from New York University School of Law.
Marion McCourt, 60, has been Senior Vice President, Commercial since February 2018. From April 2017 until joining the Company, Ms. McCourt served as the Principal Operating Officer and the Chief Operating Officer and President of Axovant Sciences, Inc. Ms. McCourt previously served as chief operating officer of Medivation, Inc. from February 2016 until its acquisition by Pfizer Inc. in September 2016. Previously, Ms. McCourt worked at Amgen Inc., where she most recently served as a Vice President in U.S. Commercial Operations from February 2014 to January 2016. From May 2013 to January 2014, Ms. McCourt served as Vice President and General Manager at Amgen where she was responsible for the bone health and primary care business unit. From 2012 to 2013, she was Chief Operating Officer for AstraZeneca U.S., a division of AstraZeneca plc. Her responsibilities included oversight and leadership of all U.S. commercial functions, including medical affairs, business development, finance, human resources, legal, operations, and corporate affairs. During her 12-year tenure at AstraZeneca, Ms. McCourt was President and Chief Executive Officer of AstraZeneca Canada Inc. from 2011 to 2012 and also held various other roles at AstraZeneca Pharmaceuticals LP, a subsidiary of AstraZeneca plc. Ms. McCourt received her B.S. in Biology from Lafayette College.
Andrew J. Murphy, Ph.D., 62, has been Executive Vice President, Research since January 2019. He previously served as Senior Vice President, Research, Regeneron Laboratories from January 2013 to December 2018, as Vice President, Target Discovery from May 2005 to December 2012, as Vice President, Gene Discovery and Bioinformatics from January 2001 to May 2005, and Director of Genomics and Bioinformatics from May 1999 to December 2000. Dr. Murphy is a co-inventor of several of the Company’s key technologies, including VelociGene® and VelocImmune®, and continues to lead several technology centers and therapeutic focus areas. He received his B.S. in Molecular Biology at the University of Wisconsin, and his Ph.D. in Human Genetics from Columbia University, College of Physicians and Surgeons.
Neil Stahl, Ph.D., 63, has been Executive Vice President, Research and Development since January 2015. He previously served as Senior Vice President, Research and Development Sciences from January 2007 to December 2014, as Senior Vice President, Preclinical Development and Biomolecular Sciences from December 2000 to December 2007, and as Vice President, Preclinical Development and Biomolecular Sciences from January 2000 to December 2000. He joined the Company in 1991. Before becoming Vice President, Biomolecular Sciences in 1997, Dr. Stahl was Director, Cytokines and Signal Transduction. Dr. Stahl received his Ph.D. in Biochemistry from Brandeis University.
Daniel P. Van Plew, 47, has been Executive Vice President and General Manager, Industrial Operations and Product Supply since January 2016. From April 2008 to December 2015, Mr. Van Plew served as Senior Vice President and General Manager, Industrial Operations and Product Supply. Prior to that date, he served as Vice President and General Manager, Industrial Operations and Product Supply since joining the Company in 2007. From 2006 until 2007, Mr. Van Plew served as Executive Vice President, R&D and Technical Operations of Crucell Holland B.V., a global biopharmaceutical company. Between 2004 and 2006, Mr. Van Plew held positions of increasing responsibility at Chiron Biopharmaceuticals, part of Chiron Corporation, a biotechnology company, most recently as Senior Director, Vacaville Operations. From 1998 until 2004, Mr. Van Plew held various managerial positions in the health and life sciences practice at Accenture, Ltd., a management consulting business. Mr. Van Plew received his M.S. in Chemistry from The Pennsylvania State University and his M.B.A. from Michigan State University.

 

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CORPORATE GOVERNANCE

 

OVERVIEW

 

Regeneron is committed to good corporate governance, which we believe promotes the long-term interests of shareholders, strengthens the accountability of the board of directors and management, and helps build trust in the Company. The following chart summarizes key information regarding our corporate governance.

 

Board and Other Governance Information 2020*
Size of Board 12
Number of Independent Directors 9
Separate Chairman and Chief Executive Officer
Majority Voting in the Election of Directors
Director Resignation Policy
Number of Meetings of the Board of Directors Held in 2019 6
Independent Directors Meet in Executive Sessions Without Management Present
Code of Business Conduct and Ethics Applicable to All Employees, Officers, and Directors
Annual Board and Committee Self-Evaluations
Stock Ownership Guidelines for Directors and Senior Executives
Active Shareholder Engagement
Shareholder Right to Call Special Shareholder Meeting

 

* As of April 14, 2020.

 

CODE OF ETHICS

 

The board of directors has adopted a code of business conduct and ethics that applies to all of our employees, officers, and directors. You can find links to this code on our website at www.regeneron.com under the “Corporate Governance” heading on the “Investors & Media” page. We may satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or a waiver from, a provision of our code of business conduct and ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, or controller, or persons performing similar functions, by posting such information on our website where it is accessible through the same link noted above.

 

SUCCESSION PLANNING AND TALENT DEVELOPMENT PROCESS

 

Under our Corporate Governance Guidelines, the board of directors is required to periodically review with our CEO Regeneron’s plan for succession to the offices of the CEO and other senior executive positions. In 2017, the Corporate Governance and Compliance Committee, at the request of the board of directors, commenced a multi-year formal succession planning and talent review, which includes succession planning for the CEO and other senior management positions. In 2018 and 2019, the applicable committees of the board of directors advanced this formal review by focusing on certain assigned functions and roles within the Company. As part of this process, the Audit Committee reviewed functions and roles within the Company’s finance, information technology, and real estate & facilities management organizations, while the Compensation Committee and the Technology Committee reviewed functions and roles within the Company’s commercial organization and the Company’s research & development and global development organizations, respectively. Implementation of the succession planning and talent review plan has continued in 2020.

 

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THE COMPANY  /  CORPORATE GOVERNANCE

 

In addition to formal succession planning, directors also have exposure to Regeneron leaders through board and committee presentations and discussions and informal events and interactions with key talent throughout the year, both in small-group and one-on-one settings.

 

CORPORATE RESPONSIBILITY

 

Regeneron’s mission is to use the power of science to repeatedly bring new medicines to patients. We are committed to operating responsibly, communicating transparently about our impacts, and engaging all stakeholders in our mission. We strive to “do well by doing good” and have been publicly disclosing information about significant corporate responsibility matters since 2014.

 

Our board of directors and management team focus closely on corporate responsibility matters. The charter of the board’s Corporate Governance and Compliance Committee expressly delegates board oversight of corporate responsibility to the Committee. The Company’s policy is to take into consideration the long-term interests of the Company, its shareholders, and other stakeholders, including patients, employees, the healthcare community, regulators, partners, suppliers, and local communities. Under our Corporate Governance Guidelines, the Corporate Governance and Compliance Committee is responsible for overseeing the Company’s key corporate responsibility initiatives, including those expected to have a significant impact on the Company’s ability to deliver sustained growth. The Committee also conducts a periodic review of environmental, social, and governance (“ESG”) matters. Management, who has the responsibility for formulating and implementing such initiatives and matters, has established for these purposes a Responsibility Committee comprised of cross-functional business leaders.

 

Our responsibility strategy centers on three focus areas:

 

Improve the lives of people with serious diseases
   
Foster a culture of integrity and excellence
   
Build sustainable communities

 

In 2019, we set global 2025 responsibility goals, which span across these three focus areas and the environmental and social issues that we believe are most significant to our business and stakeholders. These goals, summarized below, are discussed in detail in our 2019 Responsibility Report.

 

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THE COMPANY  /  CORPORATE GOVERNANCE

 

2025 GLOBAL RESPONSIBILITY GOALS

 

 

 

* See the chart below for our specific environmental targets.

 

In 2019, we also announced our support of the United Nations Sustainable Development Goals and identified five of such goals where we intend to focus to deliver the most impact: good health and well-being; quality education; gender equality; responsible consumption and production; and partnerships for the goals. Our support of these goals helped guide our selection of the 2025 responsibility goals listed above.

 

We are proud to have been added to the Dow Jones Sustainability World Index (“DJSI World”) for the first time in 2019, representing one of only four companies from the biotechnology sector recognized. DJSI World is a leading global index comprised of corporate leaders in ESG practices, which recognizes the top 10 percent most sustainable companies in each industry.

 

In 2019 and 2020 to date, we have also continued to enhance our reporting of the Company’s responsibility efforts and results. For the first time, our 2019 Responsibility Report aligned our disclosures with the Sustainability Accounting Standards Board (“SASB”) framework. In addition, we are working toward aligning our reporting for the 2020 Responsibility Report with the climate-specific recommendations developed by the Task Force on Climate-related Financial Disclosures (“TCFD”).

 

Improve the lives of people with serious diseases. As a science-focused company, we operate Regeneron with the long-term outlook required to turn rigorous scientific research into important new medicines. All seven of our approved medicines and the product candidates in our clinical pipeline are homegrown – discovered in Regeneron’s labs using our industry-leading, proprietary technologies. Our support for patients extends beyond the labs to disease education and awareness efforts, product support services, and our commitment to drug access and responsible pricing.

 

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THE COMPANY  /  CORPORATE GOVERNANCE

 

Foster a culture of integrity and excellence. Regeneron’s unique culture makes us who we are. Our culture includes our science-led mindset, our high ethical standards, and our unbridled focus on solving big, complex problems. As we continue to grow, we remain committed to making significant investments to attract and retain top talent and facilitate the diverse and inclusive workforce we require to bring new medicines to people in need. At the end of 2019, 49% of our full-time employees, and 39% of those in leadership positions, were women.

 

We are equally committed to conducting our business responsibly and ethically. This is demonstrated through the range of policies, practices, and initiatives we have implemented, encompassing areas such as compliance, responsible sales and marketing, ethical clinical trials, responsible supply chain, and product quality and safety.

 

Build sustainable communities. We believe that our role in creating a healthier world extends beyond creating life-transforming medicines to building a healthy living environment. In 2019, in connection with the selection of our 2025 responsibility goals, we set ambitious medium- and longer-term environmental sustainability targets, as shown below. We plan to begin reporting on our progress toward these goals in the 2020 Responsibility Report.

 

New Environmental Targets to Help Protect and Restore the Planet

 

                  By 2025, improve water efficiencies by implementing global water mapping strategy and water stewardship program.      
                         
     

By 2021, achieve zero waste to landfill status at all Regeneron sites.*

 

 

By 2021, compost food waste at all sites with more than 2,000 employees.

 

          By 2025, develop and implement waste management plans to further increase our plastic recycling and reduce hazardous waste generation.      
                         
    By 2021, engage our top 30 suppliers, representing more than 50% of spend, to gather and report relevant scope 3 greenhouse gas (GHG) emissions data.     By 2023, set global sciencebased targets for scope 1 and 2 GHG emissions.    

By 2025, match 50% of our electricity consumption with electricity from certified renewable energy sources.

 

 

By 2025, invest in the production of renewable power to meet our long-term electricity needs.

 

 

By 2025, reduce combined scope 1 & 2 (market-based) GHG emissions per square meter by 30% based on 2016 peak baseline.

 

   

By 2035, match 100% of our electricity consumption with electricity from certified renewable energy sources.

 

                         
                         
                         
  2021   2023   2025   2035  

 

 

*Excludes construction and demolition waste

 

We also strengthen our communities through strategic philanthropic investments, product donations, and the power of our employees’ talents and time. We are a long-standing supporter of science, technology, engineering and math (“STEM”) education, and make major philanthropic investments to inspire and celebrate future scientific innovators, including our ten-year, $100-million commitment to the Regeneron Science Talent Search, the nation’s most prestigious pre-college science and mathematics competition; and our new five-year, $24-million commitment to the Regeneron International Science and Engineering Fair, the world’s largest pre-college science and engineering competition. We also launched the Regeneron DNA Learning Center, a program of Cold Spring Harbor Laboratory, in 2019. Equipped with two state-of-the-art teaching labs, this interactive educational center hosts local middle- and high-school field trips during the academic year, summer camps, and extended research projects. Overall, STEM education represents approximately 86% of our corporate philanthropy grants made in 2019, not including medical grants and matched funds.


 

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THE COMPANY  /  CORPORATE GOVERNANCE

 

In 2019, 59% of Regeneron worldwide employees donated more than 27,800 hours to local non-profit organizations through our volunteer programs. This is in the top-quartile of corporate volunteer participation rates, and well above the 33% corporate average rate, according to a benchmarking study published in 2019 by Chief Executives for Corporate Purpose. We also held our third annual Day for Doing Good, a company-wide day of service that had 57% employee participation — a record high for the Company. We are proud to be recognized for the third consecutive year as one of the 50 most community-minded companies in the United States by the non-profit organization Points of Light.

 

For more information about our responsibility efforts and results, please refer to the 2019 Responsibility Report available on our website.

 

PUBLIC POLICY ENGAGEMENT

 

We are committed to adhering to the highest ethical standards when engaging in any political activities. Reflecting this commitment, the board of directors (upon the recommendation of the Corporate Governance and Compliance Committee) has adopted the Company’s Corporate Political Contributions Policy, a formal written policy that, together with our code of business conduct and ethics, sets forth our policies and procedures on political contributions and political activity. The policy is available on our website at www.regeneron.com under the “Transparency & Policies” heading on the “Responsibility” page.

 

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

  REVIEW, APPROVAL, OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS  

 

The board of directors has adopted a written policy for the review, approval, or ratification of related person transactions. The Company considers transactions (or a series of related transactions) in which the Company is a participant, the amount involved exceeds $10,000 in any calendar year, and a director, officer, more than 5% holder of our voting securities, any immediate family member of any of the foregoing, or any related entity of any of the foregoing has a direct or indirect material interest to constitute related person transactions. The policy provides for a standing pre-approval of transactions with any passive institutional shareholder who holds more than 5% of our voting securities, transactions where all shareholders receive proportional benefits, and certain transactions with Sanofi. With respect to any new transaction that is deemed pre-approved, the Audit Committee receives a summary of each such transaction and retains the ability to require that one or more of such transactions be subject to the standard approval procedures. The policy also requires that the arrangements relating to a permanent, full-time employment of an immediate family member of a director or executive officer hired by the Company be approved in accordance with the policy. In addition, in the event a person is or becomes a director or executive officer of the Company and an immediate family member of such person is a permanent, full-time employee of the Company, no material, outside-of-the-ordinary-course-of-business change in the terms of employment, including compensation, are permitted to be made without the prior approval of the Audit Committee (except, if the immediate family member is himself or herself an executive officer of the Company, any proposed change in the terms of employment are reviewed and approved in the same manner as compensatory arrangements of other executive officers).

 

The board of directors has determined that the members of the Audit Committee are best suited to review and approve related person transactions. Accordingly, each related person transaction (other than a transaction that is deemed pre-approved as described above) must be reviewed and approved or ratified by the members of the Audit Committee, other than any member of the Audit Committee that has an interest in the transaction. Under the policy, the Chairman of the Audit Committee is delegated the authority to approve certain related person transactions that require urgent review and approval.

 

When reviewing, approving, or ratifying a related person transaction, the Audit Committee will consider several factors, including the benefits to the Company, the impact on a director’s independence in the event that a director or his/her immediate family is involved in the transaction, the terms of the transaction, and the terms available to unrelated third parties or to employees in general, if applicable. Related person transactions are approved only if the Audit Committee (or the Chairman of the Audit Committee pursuant to delegated authority in the circumstances noted above) determines that they are in, or are not inconsistent with, the best interests of the Company and our shareholders.

 

TRANSACTIONS WITH RELATED PERSONS

 

Collaborations with Sanofi

 

As the beneficial owner of 23,221,451 shares of common stock of the Company, or 21.0% of the common stock outstanding as of April 14, 2020, Sanofi is considered a related person of the Company.

 

In 2019, Sanofi funded $964.3 million of our development and other costs (including $479.9 million of commercialization-related expenses and $206.7 million in connection with reimbursements for manufacturing commercial supplies) under the Amended and Restated License and Collaboration Agreement (the “Antibody License and Collaboration Agreement”). In 2019, we also funded an aggregate of $46.0 million of Sanofi’s Phase 3 development costs for Dupixent, Praluent, and Kevzara under the Antibody License and Collaboration Agreement. In addition, in 2019, we and Sanofi shared profits in connection with commercialization-related activities for Dupixent, Praluent, and Kevzara, which resulted in us receiving $209.3 million of such profits in the aggregate. In 2020, subject to the

 

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THE COMPANY  /  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

following sentence, Sanofi has continued to fund the agreed-upon worldwide research and development expenses incurred by us and Sanofi; we have continued to fund certain Phase 3 development costs; and we and Sanofi have continued to share certain commercialization-related revenues and expenses under the Antibody License and Collaboration Agreement. Effective April 1, 2020, we and Sanofi amended the Antibody License and Collaboration Agreement to remove Praluent from the agreement such that, among other things, the agreement no longer governs the development, manufacture, or commercialization of Praluent; we and Sanofi entered into the Praluent Cross License & Commercialization Agreement whereby we, at our sole cost, are solely responsible for the development and commercialization of Praluent in the United States, and Sanofi, at its sole cost, is solely responsible for the development and commercialization of Praluent outside of the United States; and under the Praluent Cross License & Commercialization Agreement, Sanofi pays us a 5% royalty on Sanofi’s net product sales of Praluent outside the United States until March 31, 2032.

 

In 2019, Sanofi also funded $54.1 million of our research and development expenses under the Amended and Restated Immuno-oncology Discovery and Development Agreement (the “Amended IO Discovery Agreement”) and $108.9 million under the Immuno-oncology License and Collaboration Agreement. In addition, in 2019, Sanofi funded $10.3 million of commercialization-related expenses under the Immuno-oncology License and Collaboration Agreement and we recognized $92.7 million of revenue that was previously deferred from upfront payments received. In connection with the entry into the Amended IO Discovery Agreement, which was effective as of December 31, 2018, Sanofi also made a payment of $461.9 million to us in 2019 as consideration for (x) the termination of the parties’ original Immuno-oncology Discovery and Development Agreement (the “Original IO Discovery Agreement”), (y) the prepayment of certain discovery and development activities conducted by us regarding the development of certain therapeutic bi-specific antibodies, and (z) the reimbursement of costs we incurred under the Original IO Discovery Agreement during the fourth quarter of 2018. In 2020, we and Sanofi have continued to share certain development expenses for cemiplimab under the Immuno-oncology License and Collaboration Agreement (as amended effective as of January 7, 2018 by the letter agreement discussed below). In addition, if Sanofi elects to co-develop a therapeutic bi-specific antibody targeting BCMA and CD3 (a “BCMAxCD3 Program Antibody”) or MUC16 and CD3 (a “MUC16xCD3 Program Antibody”) under our immuno-oncology collaboration, Sanofi will initially fund almost all of the development expenses incurred in connection with the development of such BCMAxCD3 Program Antibody, for which Sanofi will be the principal controlling party, and half of the development expenses incurred in connection with the clinical development of such MUC16xCD3 Program Antibody, for which we will be the principal controlling party.

 

A description of our antibody collaboration and our immuno-oncology collaboration with Sanofi is set forth in Note 3 to our audited financial statements for the fiscal year ended December 31, 2019 included in the 2019 Annual Report under the heading “a. Sanofi — Antibody” and “a. Sanofi — Immuno-Oncology,” respectively.

 

In 2019, we recorded $26.0 million of revenue primarily related to a percentage of net sales of ZALTRAP® (ziv-aflibercept) Injection for Intravenous Infusion and manufacturing ZALTRAP commercial supplies for Sanofi under the amended and restated collaboration agreement relating to ZALTRAP.

 

Amended and Restated Investor Agreement with Sanofi; 2018 Letter Agreement

 

In January 2014, we entered into an Amended and Restated Investor Agreement with Sanofi, which was subsequently amended effective as of January 7, 2018 by the letter agreement discussed below. Pursuant to the Amended and Restated Investor Agreement, Sanofi has agreed to vote its shares as recommended by our board of directors, except that it may elect to vote proportionally with the votes cast by all of our other shareholders with respect to certain change-of-control transactions and to vote in its sole discretion with respect to liquidation or dissolution of our company, stock issuances equal to or exceeding 20% of the outstanding shares or voting rights of common stock and Class A stock (taken together), and new equity compensation plans or amendments if not materially consistent with our historical equity compensation practices.

 

In addition, we are required under the Amended and Restated Investor Agreement to appoint an individual agreed upon by us and Sanofi to our board of directors. Subject to certain exceptions, we are required to use our reasonable efforts (including recommending that our shareholders vote in favor) to cause the election of this designee at our annual shareholder meetings for so long as (other than during the term of the letter agreement discussed below) Sanofi maintains an equity interest in us that is equal to the applicable Highest Percentage Threshold (as defined below). This designee is required to be “independent” of Regeneron, as determined under Nasdaq rules, and to not be a current or

 

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THE COMPANY  /  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

former officer, director, employee, or paid consultant of Sanofi. The current Sanofi designee, Dr. Coles, was elected by the board of directors in January 2017 and by the shareholders at the 2017 Annual Meeting as a Class II director, and has been nominated by the board for reelection at the 2020 Annual Meeting.

 

Under the Amended and Restated Investor Agreement, Sanofi also has three demand rights to require us to use all reasonable efforts to conduct a registered underwritten offering with respect to shares of our common stock held by Sanofi from time to time; however, shares of our common stock held by Sanofi from time to time may not be sold until December 20, 2020 (other than with respect to an aggregate of 1,400,000 shares, as to which we have agreed to waive such “lock-up” during the term of the letter agreement and of which 740,914 shares remained available to be sold as of April 14, 2020). These restrictions on dispositions are subject to earlier termination upon the occurrence of certain events, such as the consummation of a change-of-control transaction involving us or a dissolution or liquidation of Regeneron.

 

Pursuant to the Amended and Restated Investor Agreement, Sanofi is bound by certain “standstill” provisions, which contractually prohibit Sanofi from seeking to directly or indirectly exert control of Regeneron or acquiring more than 30% of our Class A stock and common stock (taken together). This prohibition will remain in place until the earliest of (i) the later of the fifth anniversaries of the expiration or earlier termination of our Antibody License and Collaboration Agreement with Sanofi or our ZALTRAP collaboration agreement with Sanofi, each as amended; (ii) our announcement recommending acceptance by our shareholders of a tender offer or exchange offer that, if consummated, would constitute a change of control involving us; (iii) the public announcement of any definitive agreement providing for a change of control involving us; (iv) the date of any issuance of shares of common stock by us that would result in another party’s having more than 10% of the voting power of our outstanding Class A stock and common stock (taken together) unless such party enters into a standstill agreement containing certain terms substantially similar to the standstill obligations of Sanofi; or (v) other specified events, such as a liquidation or dissolution of Regeneron.

 

Effective January 7, 2018, we and Sanofi and certain of Sanofi’s direct and indirect subsidiaries entered into a letter agreement in connection with (i) the increase of the development budget amount for cemiplimab set forth in the Immuno-oncology License and Collaboration Agreement and (ii) the allocation of additional funds to certain proposed activities relating to the development of dupilumab and REGN3500 and non-approval trials of dupilumab (the “Dupilumab/REGN3500 Eligible Investments”). Pursuant to the letter agreement, we have agreed, among other things, to amend the definition of “Highest Percentage Threshold” to be the lower of (i) 25% of our outstanding shares of Class A stock and common stock (taken together) and (ii) the higher of (a) Sanofi’s percentage ownership of Class A stock and common stock (taken together) on the termination date of the letter agreement and (b) the highest percentage ownership Sanofi attains following such termination date of our outstanding shares of Class A stock and common stock (taken together); and to grant a limited waiver of Sanofi’s obligation to maintain the then-existing Highest Percentage Threshold during the term of the letter agreement in order to allow Sanofi to satisfy in whole or in part (a) its funding obligations with respect to the cemiplimab development costs under the Immuno-oncology License and Collaboration Agreement for the quarterly periods commencing on October 1, 2017 and ending on September 30, 2020 by selling up to 800,000 shares of our common stock directly or indirectly owned by Sanofi (of which 330,253 remained available as of April 14, 2020) and (b) its funding obligations with respect to the costs incurred by or on behalf of the parties to the Antibody License and Collaboration Agreement with respect to the Dupilumab/REGN3500 Eligible Investments for the quarterly periods commencing on January 1, 2018 and ending on September 30, 2020 by selling up to 600,000 shares of our common stock directly or indirectly owned by Sanofi (of which 410,661 remained available as of April 14, 2020). If Sanofi desires to sell shares of our common stock during the term of the letter agreement to satisfy a portion or all of its funding obligations for the cemiplimab development and/or Dupilumab/REGN3500 Eligible Investments, we may elect to purchase, in whole or in part, such shares from Sanofi. If we do not elect to purchase such shares, Sanofi may sell the applicable number of shares (subject to certain daily and quarterly limits) in one or more open-market transactions.

 

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THE COMPANY  /  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

In 2019, Sanofi elected to sell, and we elected to purchase (either in cash or by issuing a credit towards the amount owed by Sanofi), an aggregate of 304,019 shares of our common stock pursuant to the letter agreement. In 2020 to date, Sanofi elected to sell, and we elected to purchase (either in cash or by issuing a credit towards the amount owed by Sanofi), an aggregate of 128,914 shares of our common stock pursuant to the letter agreement.

 

A more detailed description of the letter agreement with Sanofi is set forth in the 2019 Annual Report under Part I. Item 1. “Business —Collaboration Agreements — Collaborations with Sanofi.”

 

Stanford University

 

Effective September 1, 2016, Marc Tessier-Lavigne, Ph.D. became the President of Stanford University. In 2019, we made payments to Stanford University of approximately $162,000 in the aggregate relating to (i) services provided in connection with certain clinical trials entered into in the ordinary course of business and (ii) a medical education fellowship grant. In 2020 through the end of the first quarter, we made one payment to Stanford of less than $2,000 in respect of these services.

 

OTHER

 

Indemnification of Directors and Officers

 

Our Certificate of Incorporation provides that, to the fullest extent permitted under the New York Business Corporation Law, no director or officer of our Company shall be personally liable to the Company or its shareholders for monetary damages for any breach of fiduciary duty in such capacity. In addition, our Amended and Restated By-Laws provide that we shall indemnify our directors and certain of our other personnel against expenses (including attorneys’ fees) and certain other liabilities, including judgments, fines, and amounts paid in settlement, arising out of or incurred as a result of legal actions brought or threatened against them by reason of their position in our Company, subject to certain qualifications and provided that each such person acted in good faith, in a manner that they reasonably believed was in our best interest, and, where applicable, not unlawful. Subject to the provisions of our Certificate of Incorporation, our Amended and Restated By-Laws, and the New York Business Corporation Law, we may also advance expenses of the individuals entitled to indemnification.

 

2019 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING    /   43
 

AUDIT MATTERS

 

  INTRODUCTION  

 

The Audit Committee has appointed PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020. PricewaterhouseCoopers LLP (or its predecessor) has audited the Company’s financial statements for the past 31 years.

 

The board of directors has directed that the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2020 be submitted for ratification by the shareholders at the Annual Meeting. Shareholder ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2020 is not required by the Company’s charter documents or otherwise, but is being pursued as a matter of good corporate practice. If shareholders do not ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2020, the board of directors will consider the matter at its next meeting.

 

PricewaterhouseCoopers LLP has advised the Company that it will have in attendance at the 2020 Annual Meeting a representative who will be afforded an opportunity to make a statement, if such representative desires to do so, and will respond to appropriate questions presented at the 2020 Annual Meeting.

 

  INFORMATION ABOUT FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  

 

Aggregate fees incurred related to services provided to the Company by PricewaterhouseCoopers LLP for the years ended December 31, 2019 and 2018 were:

 

  2019 ($) 2018 ($)
Audit Fees 2,250,341 2,680,642
Audit-Related Fees 85,000
Tax Fees 5,000 19,662
All Other Fees 6,106 6,088
Total Fees 2,261,447 2,791,392

 

Audit Fees. Audit fees in 2019 and 2018 were primarily for professional services rendered for the audit of the Company’s financial statements for the fiscal year, including attestation services required under Section 404 of the Sarbanes-Oxley Act of 2002, technical accounting consultations related to the annual audit, and reviews of the Company’s quarterly financial statements included in its Form 10-Q filings.

 

Audit-Related Fees. Audit-related fees in 2018 were for professional services rendered in connection with the Company’s adoption of the new leasing accounting standard.

 

Tax Fees. Tax fees in 2019 and 2018 were for tax planning and advisory services.

 

All Other Fees. All other fees in 2019 and 2018 were for annual subscriptions to accounting resources.

 

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THE COMPANY  /  AUDIT MATTERS

 

The Audit Committee has adopted a policy regarding the pre-approval of audit and permitted non-audit services to be performed by the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP. The Audit Committee will, on an annual basis, consider and, if appropriate, approve the provision of audit and non-audit services by PricewaterhouseCoopers LLP. The Audit Committee has approved a general provision of $75,000 for accounting advisory and other permissible consulting engagements. Management is responsible for notifying the Audit Committee of the status of accounting advisory and other permissible consulting engagements at regularly scheduled Audit Committee meetings and, if the Audit Committee so determines, the general provision is replenished to $75,000. The Audit Committee did not utilize the de minimis exception to the pre-approval requirements to approve any services provided by PricewaterhouseCoopers LLP during fiscal 2019 and 2018.

 

  AUDIT COMMITTEE REPORT  

 

We have reviewed the audited financial statements of the Company for the year ended December 31, 2019, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and met with both management and PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm, to discuss those financial statements. The Audit Committee has discussed with the Company’s independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) and the Securities and Exchange Commission. The Audit Committee also discussed with the independent registered public accounting firm their independence relative to the Company and received and reviewed the written disclosures and the letter from the independent registered public accounting firm required by the PCAOB.

 

Based on the foregoing discussions and review, the Audit Committee recommended to the board of directors that the audited financial statements of the Company for the year ended December 31, 2019 be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 for filing with the Securities and Exchange Commission.

 

We have appointed PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020. This appointment was based on a variety of factors, including PricewaterhouseCoopers LLP’s competence in the fields of accounting and auditing.

 

The Audit Committee
George L. Sing, Chairman
N. Anthony Coles, M.D.
Arthur F. Ryan

 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING    /   45
 

 

PROPOSAL

02

RATIFICATION OF
APPOINTMENT
OF INDEPENDENT
REGISTERED PUBLIC
ACCOUNTING FIRM

 

The board of directors unanimously recommends a vote FOR ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020.

 

46   /    2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING
 

 

SHAREHOLDERS

 

  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT  

 

The following table sets forth, as of April 14, 2020, the number of shares of the Company’s Class A stock and common stock beneficially owned by each of the Company’s directors, each of the NEOs referred to below under “Executive Compensation,” all directors and executive officers as a group, and each other person or group of persons known by the Company to beneficially own more than 5% of the outstanding shares of Class A stock or common stock, based upon (unless indicated otherwise) information obtained from such persons, and the percentage that such shares represent of the number of outstanding shares of Class A stock and common stock, respectively.

 

The Class A stock is convertible on a share-for-share basis into common stock. The Class A stock is entitled to ten votes per share and the common stock is entitled to one vote per share. We have determined beneficial ownership in accordance with the rules of the SEC. Except as otherwise indicated in the footnotes below, we believe, based on the information furnished or otherwise available to us, that the persons named in the table below have sole voting and investment power with respect to all shares of Class A stock and common stock shown as beneficially owned by them, subject to applicable community property laws. We have based our calculation of percentage of shares of a class beneficially owned on 1,848,970 shares of Class A stock and 110,673,311 shares of common stock outstanding as of April 14, 2020, except that for each person listed who beneficially owns Class A stock (and for directors and executive officers as a group), the number of shares of common stock beneficially owned by that person (and by directors and executive officers as a group) and the percentage ownership of common stock of such person assume the conversion on April 14, 2020 of all shares of Class A stock listed as beneficially owned by such person (or persons in the case of directors and executive officers as a group) into common stock and also that no other shares of Class A stock beneficially owned by others are so converted.

 

In computing the number of shares of common stock beneficially owned by a person (and by directors and executive officers as a group) and the percentage ownership of common stock of such person (and by directors and executive officers as a group), shares of common stock subject to options, PSUs, RSUs, or other convertible securities (if any) held by that person (and by directors and executive officers as a group) that are exercisable or releasable as of April 14, 2020 or are exercisable or releasable within sixty days after April 14, 2020 are deemed to be outstanding. Such shares are not deemed to be outstanding, however, for the purpose of computing the percentage ownership of common stock of any other person.

 

2020 PROXY STATEMENT AND NOTICE OF ANNUAL SHAREHOLDER MEETING    /   47
 
SHAREHOLDERS

 

   Shares of Class A Stock
Beneficially Owned1
  Shares of Common Stock
Beneficially Owned1
Name and Address of Beneficial Owner  Number  Percent of Class  Number2  Percent of Class
Beneficial Owners of More than 5% of Class A Stock or Common Stock (Other than Directors and Executive Officers):                
Sanofi3                
54, rue La Boetie
75008 Paris, France
       23,221,451    21.0%
Capital World Investors4                
333 South Hope Street
Los Angeles, California 90071
       8,351,951    7.5%
The Vanguard Group, Inc.5                
100 Vanguard Blvd.
Malvern, PA 19355
       6,252,303    5.6%
BlackRock, Inc.6                
55 East 52nd Street
New York, New York 10055
       6,138,848    5.5%
                 
Directors and Executive Officers:7                
Leonard S. Schleifer, M.D., Ph.D.  1,726,5658  93.4%   4,127,7249   3.6%
P. Roy Vagelos, M.D.       1,821,40610   1.6%
George D. Yancopoulos, M.D., Ph.D.  42,75011  2.3%   2,520,43612   2.2%
N. Anthony Coles, M.D.       23,83513   26 
Bonnie L. Bassler, Ph.D.       28,93014   26 
Michael S. Brown, M.D.       56,61815   26 
Joseph L. Goldstein, M.D.       48,01916   26 
Andrew J. Murphy, Ph.D.       330,91317   26 
Christine A. Poon       122,08918   26 
Arthur F. Ryan       80,81919   26 
George L. Sing       224,14120   26 
Marc Tessier-Lavigne, Ph.D.       67,95621   26 
Robert E. Landry       158,89122   26 
Daniel P. Van Plew       382,43023   26 
Huda Y. Zoghbi, M.D.       28,93024   26 
All Directors and Executive Officers as a Group (19 persons)  1,769,315  95.7%   10,917,81325   9.2%
       
  1 The inclusion in this table of any Class A stock or common stock, as the case may be, deemed beneficially owned does not constitute an admission of beneficial ownership of those shares.  
  2 For each person listed who beneficially owns Class A stock (and for directors and executive officers as a group), the number of shares of common stock listed includes the number of shares of Class A stock listed as beneficially owned by such person (or persons in the case of directors and executive officers as a group).  
  3 Based solely on a Form 4 filed by Sanofi with the SEC on March 11, 2020. According to this Form 4, 20,421,899 of the shares are held directly by Sanofi and 2,799,552 of the shares are held directly by Aventisub LLC (formerly known as Aventis Pharmaceuticals Inc.). Aventisub LLC is an indirect, wholly-owned subsidiary of Sanofi. Pursuant to the Amended and Restated Investor Agreement, dated as of January 11, 2014 (as amended), by and among Sanofi, sanofi-aventis US LLC, Aventisub LLC, and sanofi-aventis Amérique du Nord (collectively, the “Sanofi Parties”), and the Company, the Sanofi Parties have agreed to vote all shares of our voting securities they are entitled to vote from time to time as recommended by our board of directors, except that they may elect to vote proportionally with the votes cast by all of our other shareholders with respect to certain change-of-control transactions and to vote in their sole discretion with respect to liquidation or dissolution of Regeneron, stock issuances equal to or exceeding 20% of the outstanding shares or voting rights of Class A stock and common stock (taken together), and new equity compensation plans or amendments if not materially consistent with our historical equity compensation practices. See “The Company — Certain Relationships and Related Transactions — Transactions with Related Persons — Amended and Restated Investor Agreement with Sanofi; 2018 Letter Agreement” above for further information regarding the Amended and Restated Investor Agreement with Sanofi.  

 

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SHAREHOLDERS

 

  4 Based solely on an amendment to a Schedule 13G filed by Capital World Investors on February 12, 2020. According to this amendment, Capital World Investors, a division of Capital Research and Management Company (“CRMC”), has sole voting as to 8,308,528 of the shares reported as beneficially owned and dispositive power as to all of the shares reported as beneficially owned.  
  5 Based solely on an amendment to a Schedule 13G filed by The Vanguard Group, Inc. on February 10, 2020. According to this amendment, The Vanguard Group, Inc. has sole voting power as to 120,348, shared voting power as to 23,068, sole dispositive power as to 6,116,133, and shared dispositive power as to 136,170 of the shares reported as beneficially owned. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 91,833 shares as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 71,498 shares as a result of its serving as investment manager of Australian investment offerings.  
  6 Based solely on an amendment to a Schedule 13G filed by BlackRock, Inc. on February 5, 2020. According to this amendment, BlackRock, Inc. has sole voting power as to 5,367,704 of the shares reported as beneficially owned and sole dispositive power as to all of the shares reported as beneficially owned.  
  7 The address for each director and executive officer is c/o Regeneron Pharmaceuticals, Inc., 777 Old Saw Mill River Road, Tarrytown, New York 10591-6707.  
  8 Includes 15,775 shares of Class A stock held in trust for the benefit of Dr. Schleifer’s son, of which Dr. Schleifer is a trustee.  
  9 Includes (i) 1,820,844 shares of common stock purchasable upon the exercise of options granted pursuant to the Regeneron Pharmaceuticals, Inc. Second Amended and Restated 2000 Long-Term Incentive Plan, the Regeneron Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan, or the Amended and Restated Regeneron Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan (collectively, the “Long-Term Incentive Plans”) that are exercisable or become so within sixty days after April 14, 2020; (ii) 100,000 shares of common stock held in a grantor retained annuity trust of which Dr. Schleifer is the trustee; and (iii) 5,816 shares of common stock held in an account under the Company’s 401(k) Savings Plan.  
  10 Includes (i) 1,145,495 shares of common stock purchasable upon exercise of options granted pursuant to the Long-Term Incentive Plans that are exercisable or become so within sixty days after April 14, 2020; (ii) 2,204 shares of common stock held in an account under the Company’s 401(k) Savings Plan; (iii) 143,900 shares of common stock held in a charitable lead annuity trust, of which Dr. Vagelos is the trustee; (iv) 83,652 shares of common stock held in a trust for his grandchildren, of which Dr. Vagelos’s wife is the trustee; (v) 1,203 shares of common stock held in trusts for his grandchildren, of which Dr. Vagelos and/or his wife are trustees; and (vi) 54,146 shares of common stock and 86,321 shares of common stock held by the Marianthi Foundation and the Pindaros Foundation, respectively, both of which are charitable foundations of which Dr. Vagelos is a director and an officer. Dr. Vagelos disclaims beneficial ownership of the shares held by these charitable foundations.  
  11 Of these shares, 23,367 shares are held in trust for the benefit of Dr. Yancopoulos’s children and certain other family members; Dr. Yancopoulos is a trustee of the trust. The remaining 19,383 shares are held in custody for the benefit of Dr. Yancopoulos’s children.  
  12 Includes (i) 1,371,988 shares of common stock purchasable upon exercise of options granted pursuant to the Long-Term Incentive Plans that are exercisable or become so within sixty days after April 14, 2020; (ii) 5,791 shares of common stock held in an account under the Company’s 401(k) Savings Plan; (iii) 557,465 shares held in separate grantor retained annuity trusts, of which Dr. Yancopoulos is the trustee; (iv) 517,799 shares of common stock held in trust for the benefit of Dr. Yancopoulos’s children and certain other family members, of which Dr. Yancopoulos is a trustee; and (v) 24,643 shares of common stock held in trusts for the benefit of Dr. Yancopoulos’s children.  
  13 Consists of (i) 23,370 shares of common stock purchasable upon exercise of options granted pursuant to the Long-Term Incentive Plans that are exercisable or become so within sixty days after April 14, 2020; and (ii) 465 shares of common stock issuable upon settlement of RSUs that are releasable within sixty days after April 14, 2020 upon termination of service.  
  14 Consists of (i) 28,465 shares of common stock purchasable upon exercise of options granted pursuant to the Long-Term Incentive Plans that are exercisable or become so within sixty days after April 14, 2020; and (ii) 465 shares of common stock issuable upon settlement of RSUs that are releasable within sixty days after April 14, 2020 upon termination of service.  
  15 Consists of (i) 38,804 shares of common stock purchasable upon exercise of options granted pursuant to the Long-Term Incentive Plans that are exercisable or become so within sixty days after April 14, 2020, which are held in a trust of which Dr. Brown and his spouse are trustees for the benefit of Dr. Brown’s immediate family members; (ii) 11,349 shares of common stock held in a trust of which Dr. Brown and his spouse are trustees for the benefit of Dr. Brown’s immediate family members; (iii) 5,000 shares of common stock held in a trust of which Dr. Brown’s spouse is trustee for the benefit of Dr. Brown’s immediate family members; (iv) 1,000 shares of common stock held by a family charitable foundation of which Dr. Brown is a director and an officer and his wife is a director; and (v) 465 shares of common stock issuable upon settlement of RSUs that are releasable within sixty days after April 14, 2020 upon termination of service. Dr. Brown disclaims beneficial ownership of the shares referenced in (iii) and (iv).  
  16 Includes (i) 38,554 shares of common stock purchasable upon exercise of options granted pursuant to the Long-Term Incentive Plans that are exercisable or become so within sixty days after April 14, 2020; and (ii) 465 shares of common stock issuable upon settlement of RSUs that are releasable within sixty days after April 14, 2020 upon termination of service.  
  17 Includes (i) 276,750 shares of common stock purchasable upon exercise of options granted pursuant to the Long-Term Incentive Plans that are exercisable or become so within sixty days after April 14, 2020; (ii) 27,625 shares of restricted stock (“RSAs”); and (iii) 4,212 shares of common stock held in an account under the Company’s 401(k) Savings Plan.  
  18 Includes (i) 120,834 shares of common stock purchasable upon exercise of options granted pursuant to the Long-Term Incentive Plans that are exercisable or become so within sixty days after April 14, 2020; and (ii) 465 shares of common stock issuable upon settlement of RSUs that are releasable within sixty days after April 14, 2020 upon termination of service.  
  19 Includes (i) 52,054 shares of common stock purchasable upon exercise of options granted pursuant to the Long-Term Incentive Plans that are exercisable or become so within sixty days after April 14, 2020; and (ii) 465 shares of common stock issuable upon settlement of RSUs that are releasable within sixty days after April 14, 2020 upon termination of service.  
  20 Includes (i) 93,804 shares of common stock purchasable upon exercise of options granted pursuant to the Long-Term Incentive Plans that are exercisable or become so within sixty days after April 14, 2020; (ii) 2,400 shares of common stock held by Mr. Sing’s spouse; (iii) 3,700 shares of common stock held by Mr. Sing’s spouse as custodian for the benefit of their son; (iv) 9,000 shares of common stock held in a trust for benefit of Mr. Sing’s son; and (v) 465 shares of common stock issuable upon settlement of RSUs that are releasable within sixty days after April 14, 2020 upon termination of service.  
  21 Includes (i) 66,304 shares of common stock purchasable upon exercise of options granted pursuant to the Long-Term Incentive Plans that are exercisable or become so within sixty days after April 14, 2020; and (ii) 465 shares of common stock issuable upon settlement of RSUs that are releasable within sixty  

 

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SHAREHOLDERS

 

    days after April 14, 2020 upon termination of service.  
  22 Includes (i) 133,493 shares of common stock purchasable upon exercise of options granted pursuant to the Long-Term Incentive Plans that are exercisable or become so within sixty days after April 14, 2020; (ii) 20,125 RSAs; and (iii) 172 shares of common stock held in an account under the Company’s 401(k) Savings Plan.  
  23 Includes (i) 352,642 shares of common stock purchasable upon exercise of options granted pursuant to the Long-Term Incentive Plans that are exercisable or become so within sixty days after April 14, 2020; (ii) 7,625 RSAs; and (iii) 1,537 shares of common stock held in an account under the Company’s 401(k) Savings Plan.  
  24 Consists of (i) 28,465 shares of common stock purchasable upon exercise of options granted pursuant to the Long-Term Incentive Plans that are exercisable or become so within sixty days after April 14, 2020; and (ii) 465 shares of common stock issuable upon settlement of RSUs that are releasable within sixty days after April 14, 2020 upon termination of service.  
  25 Includes (i) 6,397,730 shares of common stock purchasable upon exercise of options granted pursuant to the Long-Term Incentive Plans that are exercisable or become so within sixty days after April 14, 2020; (ii) 83,108 RSAs; (iii) 4,185 shares of common stock issuable upon settlement of RSUs that are releasable within sixty days after April 14, 2020; and (iv) 27,183 shares of common stock held in an account under the Company’s 401(k) Savings Plan.  
  26 Represents less than 1%.  

 

  SHAREHOLDER COMMUNICATIONS  

 

The Company has established a process for shareholders to send communications to the members of the board of directors. Shareholders may send such communications by mail addressed to the full board, a specific member or members of the board, or a particular committee of the board, at 777 Old Saw Mill River Road, Tarrytown, New York 10591-6707, Attention: Corporate Secretary. All such communications will be opened by our Corporate Secretary for the sole purpose of determining whether the contents represent a message to our directors. Any contents that are not in the nature of advertising, promotions of a product or service, or patently offensive material will be forwarded promptly to the addressee. In the case of communications to the board or any individual director or group or committee of directors, the Corporate Secretary will make sufficient copies of the contents to send to such director or each director who is a member of the group or committee to which the envelope is addressed.

 

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COMPENSATION-RELATED
MATTERS

 

TABLE OF CONTENTS

 

INTRODUCTION   52
     
COMPENSATION DISCUSSION AND ANALYSIS   57
     
Executive Summary   57
     
Our Compensation Philosophy and Objectives   62
     
Driving Innovation and Managing Dilution   62
     
At-Risk, Performance-Based Pay   63
     
Compensation Program Simplicity   64
     
Balancing Year-over-Year Consistency and Flexibility   64
     
Linking Compensation to Long-Term Performance   64
     
Use of Independent Expertise and Comparative Data   65
     
Measurable Results   65
     
Components of Executive Pay:
What We Pay and Why We Pay It
  66
     
Base Salaries   67
     
Annual Cash Incentives   67
     
Annual Equity Awards   73
     
Perquisites and Personal Benefits   76
     
Potential Severance Payments   76
     
Our Compensation Processes   77
     
Our Compensation Committee   77
     
Management   77
     
Shareholder Input and Outreach   78
     
Independent Compensation Consultant   81
     
Peer Data   81
     
Risk Assessment   83
     
Tax Implications   83
     
Compensation Committee Report   85
     
Compensation Committee Interlocks and Insider Participation   85


 

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INTRODUCTION

 

 

2020 COMPENSATION-RELATED PROPOSALS

 

This year, we ask you to cast your vote on two compensation-related proposals:

 

I We seek your authorization for a sufficient number of shares to fund our compensation program (Proposal No. 3).1
   
II We seek your input on our approach to compensation for our “Named Executive Officers”2 through the advisory vote commonly referred to as “say on pay” (Proposal No. 4).

 

To best understand these proposals, it is important to consider our overall approach to compensation and certain key factors that play a significant role in shaping the program’s structure and design. These factors include how closely we tie our pay practices to our mission, strategy, and business model; our ongoing, company-wide pay philosophy; and our process for seeking and carefully considering valuable shareholder feedback each year.

 

As you decide how to vote on these proposals, please keep in mind the following:

 

Key Takeaways

 

1 Our equity compensation program supports all of our employees, not just our NEOs, with approximately 90% of recent annual equity grants awarded to employees other than our NEOs.
   
2 We granted performance-based restricted stock units (“PSUs”) to our CEO and CSO as a component of their 2019 annual equity awards. This and other carefully calibrated changes to our compensation program were based on investor feedback.
   
3 Our 2019 burn rate was at the lowest level in the last seven years due to specific steps we took to manage dilution from equity compensation.
   
4 We are asking our shareholders to approve the same number of shares for equity grants that we requested previously and are committed to ensuring that shares available under our long-term incentive plan will be sufficient for at least three years.
   
5 Our compensation model underpins our strategy of creating and advancing a high-quality, internally developed product pipeline, which delivered six important medicines and eight additional key indications for these products in the past decade.

 

 

 

1 In this section, “we,” “us,” and “our” refer to the Company and, where applicable, to the Compensation Committee of the Company’s board of directors.
2 Our “Named Executive Officers” or “NEOs” are identified below under “Compensation Discussion and Analysis.”

 

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COMPENSATION-RELATED MATTERS  /  INTRODUCTION

 

Our Corporate Culture

 

Stability, consistency, and an unrelenting focus on science and innovation have been important to our Company’s success and long-term approach. Regeneron’s culture is defined by loyal and motivated employees with an entrepreneurial spirit who are dedicated to the Company’s mission to use the power of science to invent medicines for people with serious diseases. This dedication allowed us to bring six important, internally developed medicines to patients and obtain eight additional key indications for these products in the past decade. We have also consistently outperformed the industry in employee retention in recent years, as demonstrated by our employee attrition rate of less than half the industry average in each of the last five years.3

 

We continue to be led by Leonard S. Schleifer, M.D., Ph.D., one of the longest-serving founder CEOs in the S&P 500, and George D. Yancopoulos, M.D., Ph.D., our co-founder and Chief Scientific Officer. Drs. Schleifer and Yancopoulos, along with our management and scientific teams, have been the stewards of our long-term approach and are part of the formula for our success. The Company’s dedication to science is also reflected in a board of directors and senior management team that are both heavily populated with top scientific talent.

 

We firmly believe that our compensation model that emphasizes long-term performance has helped us establish a culture where employees focus on our mission and drug discovery and development. Managing our business for the long term is a core Company belief, as demonstrated by our history of growing through innovation and through a pipeline of internally developed medicines. It also reflects our philosophy of “doing well by doing good,” which encompasses our approach to operating responsibly; making drug-pricing decisions with fairness, affordability, and access at the forefront; and our commitment to patients.

 

Our Pay Philosophy

 

Our compensation program supports our core strategy of creating and advancing a high-quality, internally developed product pipeline. The pipeline is directly created by our talented employees, and their engagement, commitment, and achievements are key drivers of pipeline success and therefore our long-term performance.

 

The primary underpinning of our pay philosophy is to award equity-based pay to all eligible employees to ensure that when we deliver for patients and for shareholders, everyone shares in the upside growth. We award initial equity grants to all new hires, primarily in the form of stock options, in addition to a comprehensive annual equity program. In each of the last five years, approximately 90% of the employee equity grants were awarded to our employees other than our NEOs.4 We believe that our broad-based equity program, which emphasizes long-term performance and ensures that all employees can share in our future potential, represents one of our competitive business advantages.

In each of the last five years, approximately 90% of employee equity grants were awarded to employees other than our NEOs.

 


 

We have primarily used stock options for our employee equity awards because we think stock options are easy to understand, are long-term focused (consistent with the drug discovery and development cycle), and are difficult to manipulate by “managing to metrics.” Importantly, stock options are completely aligned with shareholders’ interests. We also believe that the performance-based nature of stock options is enhanced for companies like Regeneron whose stock price is directly impacted by pipeline developments.

 

We periodically assess our approach to compensation in light of our business objectives, feedback from our shareholders, and market practices in order to adjust our compensation program based on evolving business needs. As discussed further below, in 2019 we introduced PSUs as a component of the annual equity awards for Regeneron’s

 

3 For example, our 2019 turnover rate was 7.8% compared to an industry average of 18.7%, with turnover in our research & development organization ranking lowest of all employee groups. Industry average is based on the Radford U.S. Life Sciences Trends Report for 2019.
4 Based on both the grant date fair value and the number of underlying shares (on an options-equivalent basis). Unless otherwise noted, award percentages below are based on the number of underlying shares (on an options-equivalent basis).

 

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COMPENSATION-RELATED MATTERS  /  INTRODUCTION

 

CEO and CSO (as well as the Chairman of the Board). In addition, we introduced restricted stock (“RSAs”) or restricted stock units (“RSUs”) for all other eligible employees as a component of their annual equity awards. While stock options continue to represent a key component of our equity program, we also believe that utilizing a mix of stock options and RSAs/RSUs will provide flexibility for managing dilution and promoting employee retention.

 

Shareholder Engagement and Feedback

 

We believe our compensation model is appropriate for our Company and is supported by our long-term performance, but also think it is very important to reach out to our shareholders for ideas, input, and direct feedback. We do this formally through our triennial say-on-pay vote, as well as through direct discussions with our shareholders and informal exchanges in other settings.

 

Our annual shareholder outreach program is quite extensive – last year we approached shareholders collectively representing nearly 60% of the shares of common stock outstanding as of December 31, 2019 (excluding shares held by our directors and executive officers and Sanofi), which we refer to as “public shareholders”. As part of our outreach, we engaged in direct one-on-one discussions with shareholders representing over 50% of our public shareholders as well as both leading proxy advisory firms. Our Compensation Committee Chair led many of these discussions. The feedback from shareholders has resulted in specific changes to our compensation and corporate governance practices and policies, including the changes discussed below.

 

Changes that took into account feedback from recent shareholder engagement include the following:

 

What We Heard   What We Have Done
Preference for further pay-for- performance alignment   Granted PSUs to CEO and CSO in 2019 with rigorous performance goals tied to the Company’s absolute total shareholder return (“TSR”) (target = 61% TSR over five years).
Desire for more clarity regarding the process for determining annual cash incentives   Enhanced the existing process for determining 2019 annual cash incentives and provided more detailed disclosure about the Compensation Committee’s determination of the Company performance multiplier in the CD&A section of this proxy statement.*
Support for all-employee equity compensation strategy, but concern about resulting burn rate  

Maintained our all-employee equity compensation strategy while addressing concerns about the resulting burn rate using a two-part approach:

•   Reduce equity award grant guidelines: size of CEO equity awards reduced by almost   60% over the last seven years; and

•   Introduce full-value awards for a portion of the annual equity awards to eligible   employees.

Concern about compensation program for non-employee directors and the Chairman of the Board  

Introduced a new compensation program for our non-employee directors and the Chairman of the Board in November 2018. As a result:

•   Reduced by nearly 50% the grant date fair value of equity awards to both the non-employee directors and the Chairman of the Board (granted in January 2019 and   December 2018, respectively); and

•   Introduced full-value awards (RSUs) as part of the non-employee director equity awards.

 

* See “Compensation Discussion and Analysis – Components of Executive Pay: What We Pay and Why We Pay It – Annual Cash Incentives” for more information.

 

These are just the latest examples of how our compensation program is continually refined. See the subsection “Compensation Discussion and Analysis – Our Compensation Processes – Shareholder Input and Outreach” for additional information on changes recently adopted based on shareholder feedback.

 

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COMPENSATION-RELATED MATTERS  /  INTRODUCTION

 

Our Compensation Program Today: Aligning Pay and Performance

 

We believe that our compensation program today is effective and aligns with our culture, pay philosophy, and shareholder input and interests.

 

Significant Performance-Based (“At-risk”) Pay: At-risk pay accounts for a high proportion of compensation for our NEOs and other senior executives, which has been a consistent and defining feature of our program. For our CEO, over 93% of his direct pay5 is at-risk and directly correlated to performance; in contrast, the average percentage of CEO at-risk compensation in our Peer Group is significantly lower, at 86%.6

 

Use of PSUs for CEO and CSO: As discussed above, in 2019 we introduced long-term PSUs to account for 30% of the annual equity awards of our CEO and CSO, which we believe will further incentivize our top executives to drive long-term, sustainable, and exceptional shareholder value creation.

 

Continual Management of Dilution: Over the last seven years, we have managed dilution from equity compensation by (i) reducing by nearly 60% the number of shares underlying the annual equity awards of our eligible employees, including our CEO; and (ii) adding time-based RSAs/RSUs to the annual long-term incentive mix for our employees (other than those receiving PSUs). Thanks to these measures, 2019 burn rate was at the lowest level in the last seven years. We did this while still maintaining our all-employee equity award strategy and concurrently creating over 6,000 new full-time jobs.7

 

In the last decade, we sought shareholder approval of additional shares for our long-term incentive plans three times. Each time, we requested the same number of shares – 12 million – and lived up to our commitment not to seek additional shares earlier than three years following approval. Once again, we are asking shareholders to approve 12 million additional shares for equity grants and are committed to ensuring that shares available under our long-term incentive plan will be sufficient for at least three years.

 

Regeneron Stock Utilization vs. Headcount*

 

Regeneron’s 2019 burn rate was at the lowest level in the last seven years.

 


 

 

* Burn rate calculated by dividing the number of shares subject to equity awards (stock options, RSAs, and RSUs) granted during the year by the basic weighted-average number of shares of common stock and Class A stock outstanding during the year. PSUs are to be reflected in the burn rate calculation for the year in which they are earned and, therefore, do not impact the burn rate shown in the chart. Headcount numbers based on the number of employees as of December 31 of the applicable year.

 

Alignment of Pay with Performance: As stock options comprise most of our CEO’s reported compensation and do not provide value unless there is positive shareholder return, such compensation is closely aligned with the Company’s performance. The charts below illustrate this alignment based on both (i) the as-reported grant date fair value and (ii) a realizable pay metric.

 

5 We define “direct pay” or “direct compensation” as total compensation as reported in the Summary Compensation Table in the applicable proxy statement, other than the amounts reported as “All other compensation” and (if applicable) amounts reported under “Change in pension value and nonqualified deferred compensation earnings.”
6 Based on the Peer Group median for each compensation component (using data reported for 2018). See the subsection “Compensation Discussion and Analysis – Our Compensation Processes — Peer Data” below for a list of the companies included in our Peer Group.
7 In 2019, we added 730 new jobs and yet reduced the burn rate for that year by 1.1%, from 4.7% to 3.6%.

 

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COMPENSATION-RELATED MATTERS  /  INTRODUCTION

 

1 Alignment Based on Grant Date Fair Value. Over the last five years, our CEO’s total direct compensation tracked our TSR, as shown below.

 

CEO Total Direct Compensation vs. Indexed TSR*
($ millions)

 

 

* “Total direct compensation” or “TDC” means total compensation as reported in the Summary Compensation Table in the applicable proxy statement (other than amounts reported as “All other compensation”). “Indexed TSR” in the period presented in this chart is expressed as a percentage of the closing price of our common stock on 12/31/2015.

 

2 Alignment Based on Realizable Pay. Our CEO’s realized/realizable pay from compensation awarded over the last five years was significantly lower than the values reported for that compensation ($20.3 million of realized/realizable pay versus $148.0 million of reported value). Nearly all of the realized/realizable value was from salary and bonus because there was almost no value provided from equity awards granted during this five-year period. The chart below compares the aggregate, as-reported value of our CEO’s total direct compensation over the last five years with his realized/realizable pay during the same period. We believe this demonstrates that our CEO compensation design rewards performance and, conversely, limits payouts in respect of periods with flat or negative TSR (as was the case in the period depicted below).

 

Five-Year CEO Total Direct Compensation – Reported vs. Realized/Realizable*
($ millions)

 

 

* “Realized/realizable pay” means, for any measurement period, the sum of the (i) as-reported base salaries and annual cash incentives paid during such period, (ii) amounts realized as a result of the exercise of stock options awarded during such period, and (iii) amounts that could have been realized as a result of the exercise of outstanding and “in-the-money” stock options or the sale of shares delivered upon vesting of other equity awards, in each case awarded during such period (using the closing price of our common stock on the last trading day of the period).

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

The following Compensation Discussion and Analysis (“CD&A”) describes the philosophy, objectives, and structure of our fiscal year 2019 executive compensation program. This CD&A is intended to be read in conjunction with the subsequent tables presented under “Compensation Dashboard – 2019 Executive Compensation Tables,” which provide further historical compensation information for our “Named Executive Officers” or “NEOs”.8

 

 

EXECUTIVE SUMMARY

 

Our compensation program underpins our strategy of delivering sustainable, long-term growth through continued innovation. We believe the success of our compensation program and our performance (both financial and operational, in particular with respect to our pipeline progress) are best judged from a long-term perspective. The past decade was a transformational period for Regeneron – the Company evolved from a small biotech with a mostly pre-commercial portfolio to a large-cap company with seven commercialized products, including two with global annual net product sales of over $2 billion; a pipeline with multiple promising product candidates (including a comprehensive immuno-oncology program); a deep bench of scientific and industry talent; proprietary platform technologies that help accelerate and improve the traditional drug development process; one of the largest genetics sequencing efforts in the world; and a strong balance sheet with capital to advance and expand our wholly-owned R&D pipeline. We are proud that in that period we brought six important, internally developed medicines to patients and obtained eight additional key indications for these products. In the most recent period, we made further progress and celebrated significant scientific, operational, and financial accomplishments, as discussed further under “2019 Business Highlights” below.

 

 

8 These are determined in accordance with SEC rules, and for this year consist of our President and Chief Executive Officer (“CEO”); President and Chief Scientific Officer (“CSO”); Executive Vice President, Finance and Chief Financial Officer (“CFO”); and our two other highest-paid executives for 2019, our Executive Vice President and General Manager, Industrial Operations and Product Supply, and our Executive Vice President, Research.
   
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COMPENSATION-RELATED MATTERS  /  COMPENSATION DISCUSSION AND ANALYSIS

 

To keep key managers motivated and focused, we believe that we must continue to provide an executive compensation package that prioritizes achievement of our long-term goals (particularly those related to drug discovery and development), incentivizes high performance, and strongly aligns with the direct interests of our long-term investors.

 

Compensation decisions of the past year balance consistency and flexibility following a thoughtful process for setting CEO and other NEO compensation. We believe the resulting pay outcomes were commensurate with 2019 performance and the NEOs’ contributions in 2019 and will incentivize performance in the years to come.

 

2019 COMPENSATION HIGHLIGHTS

 

Select compensation highlights from the past year include the following:

 

Base Salaries

 

There were minimal changes to the base salaries of our NEOs paid in 2019, with base salary increases reflecting a 3.5% merit increase (consistent with those for other employees) and, in the case of Mr. Landry and Dr. Murphy, base salary adjustments of $26,200 and $64,400, respectively, to reflect promotions.

 

Annual Cash Incentives

 

(New) In response to shareholder input, we enhanced the existing process by which the Compensation Committee determines the annual cash incentive Company performance multiplier and provided additional disclosure about the Committee’s decision-making (see “Components of Executive Pay: What We Pay and Why We Pay It – Annual Cash Incentives” below for additional information).
   
Following a year with a great deal of clinical and operational success, the annual cash incentives paid out at 177% of each NEO’s target bonus, on average, in 2019.

 

Annual Equity Awards

 

(New) In December 2019, following feedback from shareholders and in light of other relevant considerations, we granted PSUs as part of the 2019 annual equity award to our CEO and CSO (as well as the Chairman of the Board). The PSUs are long-term awards intended to motivate exceptional shareholder value creation over the next five years. The PSUs accounted for approximately 30% of each officer’s 2019 annual equity awards, while the remaining 70% consisted of stock options. Key features of the PSUs, which are discussed more fully below under “Components of Executive Pay: What We Pay and Why We Pay It — Annual Equity Awards” below, include:
   
  Long-term, five-year performance period (with an opportunity for accelerated payout after four years if performance is strong); and
     
  Rigorous performance goals tied to the Company’s TSR over the performance period (target is a 61% TSR over five years and minimum threshold payout requires at least a 28% TSR).

 

2019 BUSINESS HIGHLIGHTS

 

Our corporate performance for 2019 was assessed in three categories: (1) factors related to our product pipeline and development for both the near- and long-term; (2) factors regarding our financial performance and operations; and (3) factors related to our talent, culture, and corporate responsibility.

 

As in prior years, the factors analyzed under category (1) continued to be a key measure for the Compensation Committee’s assessment and calculating the Company performance multiplier. This recognizes the importance of science and innovation as well as the critical role of the development pipeline in the Company’s long-term success.

 

We provide a comprehensive overview of our 2019 achievements and the Compensation Committee’s assessment of those achievements in the subsection “Components of Executive Pay: What We Pay and Why We Pay It — Annual Cash Incentives.”

 

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COMPENSATION-RELATED MATTERS  /  COMPENSATION DISCUSSION AND ANALYSIS

 

Select 2019 achievements are highlighted in the table below.

 

Regulatory Approvals   Clinical Advances

•  EYLEA: U.S. Food and Drug Administration approvals for a new indication, diabetic retinopathy, and pre-filled syringe

•  Dupixent:

•  FDA and European Commission approvals for expanded atopic dermatitis indication in adolescent patients (12–17 years of age)

•  FDA and European Commission approvals for a new indication, chronic rhinosinusitis with nasal polyposis

•  European Commission approval for the treatment of asthma in adults and adolescents

•  Libtayo: Conditional European Commission approval for the treatment of advanced cutaneous squamous cell carcinoma

 

•  Dupixent: Completed Phase 3 study in pediatric patients (6–11 years of age) with severe atopic dermatitis

•  Libtayo: Interim objective response rate readout from Phase 3 study in non-small cell lung cancer

•  REGN1979 (bispecific antibody targeting CD20 and CD3): Reported data from non-Hodgkin lymphoma study

•  REGN5458 (bispecific antibody targeting BCMA and CD3): Reported initial data from multiple myeloma study

•  REGN-EB3 (multi-antibody therapy to Ebola virus infection): Shown to be superior to ZMapp in preventing death

     
Commercial Execution   Financial Execution

•  EYLEA:

•  Full-year 2019 global net product sales of $7.54 billion*

•  Fourth quarter 2019 U.S. net product sales increased 13% to $1.22 billion versus fourth quarter 2018

•  Dupixent: Full-year 2019 global net product sales of $2.32 billion**

•  Libtayo: #1 systemic treatment in cutaneous squamous cell carcinoma in the United States

•  Antibody Collaboration with Sanofi:

 Achieved profitability for the first time on a quarterly basis in the second quarter of 2019

•  Increased profitability in the third and fourth quarters of 2019

 

•  Revenue: Full-year 2019 revenues increased 17% to $7.86 billion versus 2018***

•  Non-GAAP Diluted EPS: Non-GAAP net income per share, or EPS, for full-year 2019 increased 8% versus 2018****

•  Business Development: Approximately $850 million of equity investments and upfront payments in connection with our collaboration arrangements

• Share Repurchase Program: Initiated a share repurchase program to repurchase up to $1.0 billion of our common stock

 

 

*Our collaborator Bayer records net product sales of EYLEA outside the United States.

 

**Our collaborator Sanofi records global net product sales of Dupixent.

 

***As reported in the 2019 Annual Report. In the second quarter of 2020, Regeneron announced that it had implemented changes in the presentation of its consolidated financial statements relating to certain reimbursements and other payments for products developed and commercialized with collaborators. These changes were made effective January 1, 2020 and have also been applied retrospectively. After giving effect to these changes, Regeneron’s revenue for fiscal 2018 and fiscal 2019 would have been $5.15 billion and $6.56 billion, respectively. There is no impact from these changes to net income or net income per share.

 

****Non-GAAP net income and non-GAAP net income per share, or EPS, are not measures calculated in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). See Appendix A for a definition of these measures and a reconciliation of each of these measures to the most directly comparable GAAP financial measure.

 

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COMPENSATION-RELATED MATTERS  /  COMPENSATION DISCUSSION AND ANALYSIS

 

TSR Performance

 

Despite progress in many key areas of our business,9 our stock underperformed the S&P 500 Index and the S&P Biotechnology Select Industry Index last year and over the five years ended December 31, 2019, which we believe was due to factors including concerns about competitive threats to our marketed products (particularly EYLEA) and drug-pricing legislation or regulatory reform. However, over the 10-year period ended December 31, 2019, we delivered stock price appreciation of 1,453% and outperformed both the S&P 500 Index (2009–2019 TSR of 256%) and the S&P Biotechnology Select Industry Index (2009–2019 TSR of 442%). While we cannot predict or control the performance of our stock price in any particular time period, we believe that if we continue to deliver operational, pipeline, and financial results, the creation of shareholder value and stock price appreciation will follow.

 

Regeneron 5-Year TSR vs. S&P Indices*

 

 

 

*TSR data reflect total returns (stock price appreciation and, if applicable, reinvested dividends).

 

HOW OUR PAY PROGRAM WORKS

 

Our executive compensation program is designed to support our business model and drive our product pipeline. We operate in an industry with fierce competition for talent, and believe an attractive compensation program is necessary to incentivize, motivate, and retain top talent.

 

The Compensation Committee relies primarily on the following compensation elements to achieve these objectives:

 

  Period Element Objective Performance Measured/Rewarded
FIXED Annual Base Salary Recognizes an individual’s role and responsibilities and serves as an important retention vehicle Reviewed annually and set based on market competitiveness, individual performance, and other internal considerations
PERFORMANCE
- BASED
Annual Annual Cash Incentive Motivates and rewards our executives for short-term achievements and milestones towards our long-term goals Corporate performance (CEO and CSO); corporate performance and individual contributions to that achievement (other NEOs)
Long-Term Stock Options Supports the achievement of strong, long-term share price growth Options vest annually over four years; 10-year term
Long-Term PSUs (CEO and CSO)* Aligns the interests of CEO and CSO and shareholders and serves as an important retention vehicle; rewards strong TSR performance Five-year TSR as primary performance metric with 61% five-year TSR required to earn target
Long-Term RSAs (NEOs other than CEO and CSO) Promotes employee retention Annual awards vest 50% on the second anniversary of the date of grant and 50% on fourth anniversary of the date of grant
   
* As noted above, PSUs were also granted as part of the 2019 annual equity award of the Chairman of the Board. The Chairman’s compensation is outside of the scope of this CD&A and is discussed under the subsection “Board of Directors—Compensation of Directors.”
   
9 Information about additional accomplishments in 2019 is provided below under the subsection “Components of Executive Pay: What We Pay and Why We Pay It – Annual Cash Incentives.”
   
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COMPENSATION-RELATED MATTERS  /  COMPENSATION DISCUSSION AND ANALYSIS

 

KEY GOVERNANCE FEATURES OF OUR COMPENSATION PROGRAM

 

Our Compensation Committee independently oversees the executive compensation program with the support of an independent compensation consultant and management. Our compensation program demonstrates strong governance, minimizing inappropriate risk-taking behavior while protecting shareholder rights and interests. The following is a summary of some of our executive compensation best practices and policies.

 

WHAT WE DO
         
Align pay with performance   Maintain a strong recoupment (clawback) policy
         
Align management and shareholder interests   Review peer group pay as reference point
         
Maintain robust stock ownership guidelines   Retain an independent compensation consultant
         
Apply “double trigger” change-in-control vesting provisions to equity awards   Actively and regularly engage with shareholders on executive compensation matters
         
WHAT WE DON’T DO
         
Reprice or exchange stock options   Provide excise tax gross-ups in any new compensation plans or arrangements
         
Provide excessive perquisites   Allow hedging or pledging of securities

 

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OUR COMPENSATION PHILOSOPHY AND OBJECTIVES

 

We consider the following objectives when determining compensation of our NEOs and other executives:

 

1 Driving innovation through our ownership culture while managing the dilutive impact of equity grants   4 Balancing year-over-year consistency and flexibility in making compensation decisions
         
2 Providing at-risk, performance-based pay to all employees, with increased performance accountability as responsibility increases   5 Aligning our executive compensation with shareholder interests by linking compensation to the core elements of our long-term performance
         
3 Prioritizing design simplicity, long-term orientation, and avoiding too much emphasis on short-term metrics   6 Using independent sources of expertise and comparative data to inform our decision-making
       
    7 Assessing our compensation objectives in light of measurable results
   
1 Driving innovation through our ownership culture while managing the dilutive impact of equity grants

 

We focus on the number of shares underlying equity awards as a percentage of basic shares of capital stock outstanding when making decisions on equity-based pay for our NEOs. We believe this dilution-based approach allows us to evaluate stock option and other equity grants on a consistent basis year-over-year, without regard to fluctuations in the share price, and is aligned more closely with shareholder interests. We also believe this approach allows for a more meaningful comparison to industry peers.

 

The 2019 CEO equity grant as a percentage of basic shares outstanding was below the 75th percentile of the market composite data prepared by Radford from the 2019 Radford Global Life Sciences Survey (U.S. public biotechnology and pharmaceutical companies with between 1,500 and 20,000 employees) and our Peer Group data (we refer to the composite data below as the “Market Composite Data”).10

 

CEO Grant as a Percentage of Basic Shares Outstanding*

 

 

* Based on 2019 equity award information reported in the Summary Compensation Table included in this proxy statement for Regeneron and on the Market Composite Data.
   
   
10 Unless otherwise noted, award percentages in this section are based on the number of underlying shares (on an options-equivalent basis), with RSAs/RSUs and PSUs (PSUs at target) converted into options-equivalents based on a ratio of 4 to 1 and approximately 3 to 1, respectively.
   
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Focusing on the number of shares, rather than targeting a specific grant date fair value, avoids rewarding executives with larger grant sizes following a decline in stock price. In line with this approach, when our stock price declined or remained relatively flat in each of 2016, 2017, 2018, and 2019 compared to the prior year, we continued to reduce the number of stock options awarded to our CEO. In 2019, the number of shares underlying our CEO’s award was reduced by 10%, which contributed to a 22% reduction in the aggregate grant date fair value of his award.

 

CEO Annual Equity Award*

 

 

Share percentages are based on 96.6 million, 99.4 million, 101.7 million, 104.1 million, 105.5 million, 107.4 million, 108.2 million and 109.8 million shares (in each case consisting of common stock and Class A stock) outstanding as of October 12, 2012, October 28, 2013, October 16, 2014, October 16, 2015, October 20, 2016, October 20, 2017, October 19, 2018, and October 24, 2019, respectively, as reported in Regeneron’s Quarterly Report on Form 10-Q for the third quarter of the applicable year. The number of shares underlying PSUs (at target) is converted into options-equivalents based on a ratio of approximately 3 to 1.  
     
2 Providing at-risk, performance-based pay to all employees, with increased performance accountability as responsibility increases

 

All of our CEO’s direct pay, except for base salary, is “at-risk.” At-risk pay comprised 93% of our CEO’s direct pay in 2019 (the breakdown was similar in recent prior years). This is significantly higher than the percentage of at-risk compensation for CEOs in our Peer Group (based on the Peer Group median for each compensation component), as shown in the charts below.

 

 

 

* “At-risk Equity” consists of stock options and any equity awards with performance-based vesting conditions (such as PSUs). “Other Equity” consists of all other equity awards, such as time-based RSAs and RSUs. “At-risk Equity” and “Other Equity” reflect the grant date fair value of such equity awards. “STIP” consists of bonus and/or other applicable compensation provided under short-term, non-equity incentive plans. “At-risk” compensation consists of STIP and At-risk Equity. Total compensation amounts reflect direct compensation (total reported compensation, other than amounts reported as “All other compensation”).
   
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The “at-risk” design of our CEO’s compensation package is also demonstrated by the history of limited payouts in respect of periods with flat or negative TSR. See “Compensation-Related Matters – Introduction – Our Compensation Program Today: Aligning Pay and Performance” above for a comparison of our CEO’s reported versus realized/ realizable pay over the last five years.

 

3 Prioritizing design simplicity, long-term orientation, and avoiding too much emphasis on short-term metrics

 

We primarily rely on stock option grants for our NEOs’ equity-based pay because they are simple, do not deliver realizable compensation if shareholders fail to benefit from a stock price increase, are in sync with the time required for discovery, development, and commercialization of novel therapies, and would be difficult to “game,” unlike some pre-set short-term performance goals. In addition, in 2019 we introduced for our CEO and CSO (as well as the Chairman of the Board) PSUs with a long-term, five-year performance period (with an opportunity for an accelerated payout after four years if performance is strong) and straightforward TSR goals provided in an objective, fixed schedule.

 

We believe that our long-term performance and our robust pipeline are evidence of providing our NEOs and other employees with the right incentives. Tying compensation to long-term, Company-wide success has enabled us to encourage decision-making that we believe is consistent with the long-term sustainability of our Company and our reputation. The types of equity awards we have utilized support our strategy of driving value creation through innovation, our pipeline, and demand for our products.

 

4 Balancing year-over-year consistency and flexibility in making compensation decisions

 

The design and operation of our compensation plans (including our reliance on equity awards as a primary long-term employee incentive) for our NEOs have been consistent since the Company’s inception. Our decision-making process for setting NEO compensation, including their annual salaries, year-end cash incentives, and equity awards, has been similarly consistent in recent years. However, when warranted by the circumstances, we adapt and make adjustments. Based on shareholder feedback and other relevant considerations, in 2019 we introduced PSUs as a component of the annual equity awards for our CEO and CSO and RSAs as a component of the annual equity awards for our other NEOs. See the subsection “Our Compensation Processes” below for further information regarding our compensation decision-making.

 

5 Aligning our executive compensation with shareholder interests by linking compensation to the core elements of our long-term performance

 

Our NEOs’ direct pay, except for base salary, depends on performance. We do this to align these senior executives’ at-risk pay with their levels of authority and with shareholders’ interests. In addition, our NEOs receive no value from their stock option or PSU awards if shareholders do not benefit, which results in a complete alignment of such compensation with shareholder interests. No amount of time will make a stock option deliver any value unless the company’s stock price increases. In addition, stock options reward our NEOs for increasing shareholder value over the entire 10-year option term, which we believe is consistent with the drug discovery and development cycle. Similarly, any PSU vesting is determined over a long-term, five-year performance period (with an opportunity for an accelerated payout after four years if performance is strong). We also believe that the performance-based nature of equity awards such as stock options and PSUs is enhanced for companies like Regeneron whose stock price is directly impacted by pipeline developments. We further link our NEOs’ and other executives’ pay to their decisions that affect our performance by incorporating an assessment of the caliber of our drug-development pipeline into our compensation decisions.

 

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6 Using independent sources of expertise and comparative data to inform our decision-making

 

The Compensation Committee retains its independent compensation consultant, Frederic W. Cook & Co., to perform projects at its direction and to provide professional expertise. We also use data compiled by management’s consultant, Radford. Comparative compensation data are used to review each component of our NEOs’ compensation against the Peer Group as well as their total annual compensation in relation to the Peer Group, while taking into account various factors such as the executive’s performance, past compensation history, experience, and the role in the Company’s success. We also look at survey data for companies in our area, in our industry, and in our size range to inform our compensation deliberations.

 

We use Peer Group data as a point of reference, but Peer Group data do not represent the only factor considered and we do not peg compensation to a specific percentile of our Peer Group. We also consider the practices of our “Biotech R&D Peers”—the 10-company sub-group of peers viewed as having businesses and drug discovery and development cultures that are most similar to Regeneron’s, with similarly-sized employee bases. See the subsection “Our Compensation Processes—Peer Data” below for additional information.

 

The Compensation Committee’s consultant does not perform any other services for the Company (other than those provided to the Corporate Governance and Compliance Committee with respect to non-employee director compensation matters, as discussed under “Board of Directors—Compensation of Directors” above) and has been determined by the Committee to be independent.

 

7 Assessing our compensation objectives in light of measurable results

 

As a science-focused company, we believe in assessing our compensation philosophy and objectives, as they relate to our NEOs and other employees, in light of measurable results. Those include our pipeline productivity and sustaining an engaging employee culture that drives innovation, which we assess based on relevant metrics. For example, we review our attrition rate (which in each of the last five years was at less than half the industry average) and the number of regulatory approvals for our products (approvals for six products and eight additional key indications in the last 10 years). We periodically review our compensation program, seek shareholder feedback, and have an open discussion about our approach to compensation and approaches utilized by other companies in our industry – and make changes based on these considerations.

 

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COMPONENTS OF EXECUTIVE PAY:
WHAT WE PAY AND WHY WE PAY IT

 

OUR NEO COMPENSATION HAS FIVE PRINCIPAL COMPONENTS:

 

 

We use these pay components to achieve the following objectives:    

 

  COMPENSATION COMPONENTS
Objective   Base Salaries    Annual Cash
Incentives
   Annual Equity
Awards
   Perquisites and
Personal Benefits
   Potential
Severance
Payments
 
Attract and retain top talent            
Provide stability and manage risk                  
Reward annual performance                    
Balance immediate focus with pursuit of sustainable long-term performance                  
Align our employees’ interests with those of shareholders and reward exceptional performance                  
Promote a culture of scientific innovation, teamwork, and ethical behavior            

 

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BASE SALARIES

 

The base salary component of NEO pay generally comprises a steadily smaller percentage of overall compensation as executives’ level of responsibility rises.

 

We consider factors including the executive’s scope of responsibilities, experience, and annual performance when setting base salaries. We also consider base salaries of comparable positions in the region, among our peers, and in the broader biopharmaceutical industry. Finally, while there is no target benchmark level for salaries, we generally position total target cash compensation (consisting of base salary and annual cash incentives) at or below the market median based on relevant comparative data. See the subsections “Our Compensation Processes—Independent Compensation Consultant” and “Our Compensation Processes—Peer Data” for further information.

 

A chart of our NEOs’ base salaries follows.

 

    2018 Base   2019 Base   2019 vs. 2018   2020 Base   2020 vs. 2019
Named Executive Officer   Salary ($)   Salary ($)   Change (%)1   Salary ($)   Change (%)1
Leonard S. Schleifer, M.D., Ph.D.   1,330,500   1,377,100   3.5   1,425,300   3.5
George D. Yancopoulos, M.D., Ph.D.   1,130,900   1,170,500   3.5   1,211,500   3.5
Robert E. Landry   680,000   730,000   7.42   795,000   8.93
Daniel P. Van Plew   660,000   683,100   3.5   795,000   16.43
Andrew J. Murphy, Ph.D.   517,500   600,000   15.92   700,000   16.73

 

1 Reflects a 3.5% merit increase consistent with those for other employees.
   
2 Reflects (i) a 3.5% merit increase consistent with those for other employees and (ii) a base salary adjustment of $26,200 and $64,400 to reflect promotions for Mr. Landry and Dr. Murphy, respectively.
   
3 Reflects (i) a 3.5% merit increase consistent with those for other employees and (ii) a base salary adjustment of $39,400, $88,000, and $79,000 to ensure greater market competitiveness for Mr. Landry, Mr. Van Plew, and Dr. Murphy, respectively.

 

ANNUAL CASH INCENTIVES

 

Our NEOs are eligible for cash incentives based on annual performance. We use these annual incentive opportunities to reward short-term achievements and milestones towards our long-term goals.

 

We focus on our overall corporate performance to determine the cash incentives of our CEO and our CSO. Our other NEOs’ cash incentives are assessed on both our overall corporate performance and on their individual contributions. For 2019, annual cash incentive opportunities for each NEO were weighted as shown below:

 

Role Corporate Performance Individual Performance
CEO and CSO 100%
Other NEOs 60% 40%


 

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Corporate Performance

 

Feedback from our shareholder engagement efforts since our last annual meeting suggested that the annual cash incentive goals appeared subjective, and investors expressed a desire for more concrete, objective, and transparent goals so that they could more fully understand how cash incentive payments were linked to corporate and individual performance. Our Compensation Committee listened to this feedback and enhanced the existing process for determining the cash incentive for 2019. The enhanced approach also incorporates greater involvement of all non-employee directors and the Chairman of the Board in reviewing the Company’s performance for purposes of setting the annual cash incentive.

 

Corporate performance for 2019 was assessed in three categories: (1) factors related to our product pipeline and development for both the near- and long-term; (2) factors regarding our financial performance and operations; and (3) factors related to our talent, culture, and corporate responsibility. As in prior years, the factors analyzed under category (1) continued to be a key measure for the Compensation Committee’s assessment and calculating the Company performance multiplier. This recognizes the importance of innovation as a key component of the Company’s business strategy and valuation, as well as the critical role of the development pipeline in the Company’s long-term success.

 

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(1) PRODUCT PIPELINE AND DEVELOPMENT (PRIMARY FACTORS)

Regulatory & Clinical Milestones; Commercial Support

•   Approval of new products or indications by the U.S. Food and Drug Administration (“FDA”) or applicable regulatory authorities outside the United States

•   Regulatory submissions for new products and new indications

•   Breakthrough Therapy or orphan drug designations by the FDA (or their equivalent outside the United States)

•   Data readouts and key publications from potentially pivotal/registrational studies

•   Initiation of new Phase 3 or Phase 2 studies

Achievements in 2019:*    

EYLEA

•   FDA approval for diabetic retinopathy

•   FDA approval of pre-filled syringe; 650,000 doses prepared for launch

 

Dupixent

•   FDA and European Commission (“EC”) approval for adolescents (ages 12-17) with moderate-to-severe atopic dermatitis (“AD”)

•   Supplemental Biologics License Application (“sBLA”) and Marketing Authorization Application (“MAA”) submissions for 300mg auto-injector; MAA approval for 200 mg auto-injector (response to FDA Complete Response Letter for 200 mg in progress)

•   FDA and EC approval for chronic rhinosinusitis with nasal polyposis (“CRSwNP”) (via priority review)

•   Positive results from two Phase 3 trials in CRSwNP published in The Lancet

•   EC approval for adults and adolescents with severe asthma

•   Positive top-line Phase 3 results in pediatric AD (ages 6-11)

•   Initiated Phase 3 trial in chronic obstructive pulmonary disease

•   Submitted sBLA for children ≥6 to <12 years with moderate to severe AD

•   Submitted sBLA for 2mL (300 mg) autoinjector

Libtayo

•   Conditional EC approval for advanced cutaneous squamous cell carcinoma (“CSCC”)

•   Updated positive Phase 2 data in CSCC; initiated Phase 3 adjuvant study

•   Continued to recruit in multiple registrational-intent Phase 2 and Phase 3 studies in cervical cancer, basal cell carcinoma, and non-small cell lung cancer

 

Praluent

•   FDA and EC approval to reduce risk of serious cardiovascular events

•   FDA approval for primary hyperlipidemia (including heterozygous familial hypercholesterolemia)

•   Phase 3 read-out for homozygous familial hypercholesterolemia (“HoFH”) lipid-lowering study

 

REGN-EB3

•   Four-agent trial stopped early due to REGN-EB3 superiority to ZMapp control; full data published in New England Journal of Medicine

•   Breakthrough Therapy designation granted by FDA

•   Rolling BLA submission for Ebola underway

 

Evinacumab (ANGPTL3)

•   Positive Phase 3 results in HoFH

 

Fasinumab (NGF)

•   Completed enrollment in Phase 3 efficacy and safety studies in osteoarthritis pain

Garetosmab (Activin A)

•   Completed enrollment and final visit for double blind (pivotal) portion of the Phase 2 study in fibrodysplasia ossificans progressiva

 

Other Investigational Compounds

•   REGN3500 (IL-33) in asthma: positive Phase 2 results

•   REGN1908-1909 (Feld1) in cat allergy: initiated Phase 2 study

•   Pozelimab (C5) in paroxysmal nocturnal hemoglobinuria: declared proof of concept and initiated Phase 3 program

•   REGN5096 (GFRa3) in osteoarthritis pain: initiated Phase 2 study

•   REGN1979 (CD20XCD3) in non-Hodgkin lymphoma (“NHL”): positive Phase 1 results in relapsed/refractory B-cell NHL; initiated registrational-intent Phase 2 study in relapsed/refractory follicular lymphoma; amendment to expand Phase 2 study into multiple other NHL subtypes is pending at sites

•   Narrowed development scope of evinacumab beyond rare diseases

Progress in Earlier-Stage Clinical Programs; New Candidates into Clinical Development

•   Data readouts and key publications from existing Phase 1 studies

•   Initiation of new Phase 1 studies

•   Notable early research milestones and collaborations

Achievements in 2019:

   

•   Overall, 85 clinical studies in progress (or planned through December 2019) involving 6,800 new patient volunteers in 53 countries vs. 61 clinical trials of 5,600 patients in 44 countries in 2018

•   REGN5458 and REGN5459 (BCMAXCD3) in multiple myeloma: initiated Phase 1 studies; received encouraging first data from advanced myeloma patients

•   REGN5713-5714-5715 (Betv1) in birch allergy: initiated Phase 1 study

•   REGN5093 (METXMET) in MET-altered advanced non-small cell lung cancer: initiated Phase 1 study

•   REGN5678 (PSMAXCD28) in prostate cancer: initiated Phase 1 study

•   Collaboration with Alnylam Pharmaceuticals, Inc. to discover and develop RNA interference therapeutics for ocular and central nervous system diseases; 7 targets selected

•   First 50,000 exomes from UK Biobank health resource sequenced by the Regeneron Genetics Center® (“RGC”) and publicly released

•   1,000,000 exomes sequenced by the RGC (anticipated by early 2020)

•   1,694 worldwide patents issued in 2019 (through December 1)

•   1,376 worldwide patent applications filed in 2019 (through December 1)

•   83 peer-reviewed publications from January through mid-October of 2019

 

* Descriptions of achievements are based on information available to the Committee when setting the Company performance multiplier for 2019.

 

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(2) FINANCE AND OPERATIONS (SECONDARY FACTORS)
Financial Metrics

•   Growth in total revenues

•   Growth in net product sales for key marketed products

•   Growth in profitability metrics

Achievements in 2019:    

•   Total revenue for the first nine months of 2019 was $5.694 billion, a 19% increase over the same period in 2018 ($4.783 billion)

•   Full-year Non-GAAP Net Income and Diluted Non-GAAP EPS forecast exceeded the 2019 Board-approved plan by double digits

•   Double-digit free cash flow growth (net cash provided by operating activities less capital expenditures) for the first nine months of 2019 versus the same period in 2018

•   EYLEA global net product sales of $5.537 billion in the first nine months of 2019 (representing 12% growth vs. the first nine months of 2018)

•   EYLEA net product sales in the U.S. increased on an annual basis for the eighth straight year without a price increase

•   Dupixent global net product sales of $1.564 billion in the first nine months of 2019 (representing 159% growth vs. the first nine months of 2018)

•   Praluent global net product sales of $207 million in the first nine months of 2019 (representing 3% decline vs. the first nine months of 2018)

•   Kevzara global net product sales of $147 million in the first nine months of 2019 (representing 139% growth vs. the first nine months of 2018)

•   Libtayo global net product sales of $119 million in the first nine months of 2019

•   Initiated a share repurchase program to repurchase up to $1.0 billion of common stock

Operational & Manufacturing  

•   Marketing structure & strategy

•   Pricing, policy & legal developments

•   Successful completion of global audits

•   Expansion of facilities

•   Manufacturing volume

Achievements in 2019:

•   Expanded and realigned EYLEA field force to focus on realizing greater opportunity in diabetic eye disease

•   Executed well-received Dupixent DTC TV U.S. campaigns for adult AD and asthma

•   Implemented new pricing strategy for Praluent, reducing U.S. list price

•   U.S. District Court invalidated Amgen Inc.’s asserted patent claims targeting PCSK9

   U.S. and EU patent offices invalidated Immunex Corporation’s patents claiming IL-4R antibodies

   U.S. District Court found that the manufacture, use, offer for sale, sale, or importation into the United States of aflibercept does not infringe Novartis AG’s asserted patent claims

   Continued work with policymakers to develop responsible solutions that address affordability and accessibility while preserving incentives to develop transformative treatments of the future

•   IOPS facility in Raheen fully operational; largest biotech facility in Ireland

•   IOPS completed 7 global successful inspections and partner audits in 2019, including FDA, U.S. Department of Agriculture, and partner audits

 

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(3) TALENT, CULTURE, AND CORPORATE RESPONSIBILITY
Talent Management & Retention

•   Growth of global workforce to support our long-term strategic objectives  

•   Employee retention and below-industry attrition rate  

•   Outside recognition and employee feedback

Achievements in 2019:    

•   Hired ~2,000 individuals to workforce, including nearly 1,200 full-time employees from January 1, 2019 to November 1, 2019; workforce to over 8,000 full-time employees as of the end of that period

•   Continued to maintain a rolling 12-month turnover rate of ~7.5%; less than half the industry average of 19% (based on Radford’s report for the life sciences industry for the second quarter of 2019)  

•   Rolled out The Regeneron Way, Regeneron’s updated cultural values and behaviors that define who we are, what we stand for, and how we work together

•   Science “Top Employers” - #2 company to work for in the global biopharmaceutical industry (ranked #1 or #2 for past nine years, making Regeneron the most highly ranked company over the past decade)

•   Fortune “100 Best Companies to Work For”

•   Forbes “Best Employers for Diversity”

•   Forbes “World’s Best Employers” and “America’s Best Employers by State”

•   Fortune/Great Places to Work “Best Places to Work in Health Care and Biopharma”

•   Great Places to Work “Best Workplaces in Ireland”

•   Fast Company “Best Workplaces for Innovators”

Corporate Responsibility

•   ESG activities, reporting, ratings, and rankings

•   Corporate giving

•   Philanthropic and citizenship programs

Achievements in 2019:      

•   Published second annual Responsibility Report, expanded disclosure on relevant ESG issues, and improved performance on several ESG investor assessments

•   Identified 2025 corporate responsibility goals, including broader environmental priorities

•   Included in the Dow Jones Sustainability World Index, one of only four biotechnology companies on the list

•   Recognized by Forbes and Just Capital as one of “America’s Most JUST  Companies,” ranking of the top 100 companies that are doing right by all their stakeholders while generating profits for shareholders

•   Included in the inaugural Newsweek list of “America’s Most Responsible  Companies” (#25)

•   Recognized for third time on Civic 50 list of most community-minded companies in the U.S.

•   Over 50% employee participation in third annual Day for Doing Good global day of service, more than double the average participation rate at other companies

•   Ongoing $100 million commitment to the Regeneron Science Talent Search

•   December 2019 launch of the Regeneron DNA Learning Center in conjunction with Cold Spring Harbor Laboratory  

Corporate Reputation and Recognition  

•   Company, leadership, and individual recognitions  

•   Other external honors

Achievements in 2019:

   

•   Forbes “World’s Most Innovative Companies” (#16)

•   Shingo Institute “The Shingo Prize” for operational excellence

•   IDEA Pharma “Pharmaceutical Innovation Index” (#7)

•   Genetic Engineering & Biotechnology News “Top 25 Biotech Companies of 2019” (#10)  

•   Optometric Center of New York “Eye on Innovation” award

•   Forbes “America’s Most Innovative Leaders” (#20, Drs. Schleifer and Yancopoulos)

•   Harvard Business Review “Best-Performing CEOs in the World” (#93, Dr. Schleifer)

•   Cornell Entrepreneur of the Year (Dr. Schleifer)

•   Columbia College Alexander Hamilton Medal (Dr. Yancopoulos)

•   Institutional Investor “Best Biotech CEOs & CFOs” (Dr. Schleifer and Mr. Landry)

 

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For each of the factors listed in the table above, the Compensation Committee assessed actual performance for the year. Based on a holistic assessment of these factors, the Compensation Committee set the Company performance multiplier at 1.85, from a possible range of 0 to 2.0.

 

Individual Performance

 

The personal performance multiplier may range from 0 to 1.5. For the explanation of individual factors considered in the cash incentive decisions, see the subsection “Compensation Dashboard—Additional Compensation Information—Annual Cash Incentives.”

 

2019 Earned Cash Incentives

 

In determining the level of 2019 cash incentives earned, we calculated the NEOs’ respective target cash incentive amounts (which, for our CEO, was set approximately at the median of the Peer Group) and applied the Company performance multiplier based on the Company’s achievement of 2019 objectives; and, for the three NEOs who also have a personal performance component, we applied a personal performance multiplier. For the three NEOs with a personal performance component, the personal performance component had a 40% weighting and the Company performance component had a 60% weighting.

 

Based on the achievement of corporate goals (discussed above) and individual goals (discussed in the subsection “Compensation Dashboard—Additional Compensation Information—Annual Cash Incentives”) in the past year, our NEOs earned the followed cash incentives in 2019:

 

Named Executive Officer   2019 Base
Salary ($)
  Cash Incentive Target
(as percentage
of base salary)
  Personal
Performance
Multiplier
  Company
Performance
Multiplier
  Total Cash
Incentive ($)
Leonard S. Schleifer, M.D., Ph.D.   1,377,100   120%      n/a     1.85   3,057,162
George D. Yancopoulos, M.D., Ph.D.   1,170,500   120%     n/a     1.85   2,598,510
Robert E. Landry   730,000   65%     1.5     1.85   811,395
Daniel P. Van Plew   683,100   65%     1.5     1.85   759,266
Andrew J. Murphy, Ph.D.   600,000   65%     1.5     1.85   666,900

 

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ANNUAL EQUITY AWARDS

 

The majority of our NEOs’ pay is designed to reward delivery of sustainable long-term value creation, which we believe is created by focusing on the discovery, development, and commercialization of new medicines. Our equity compensation program is intended to reward this long-term performance simply, using primarily stock options and, in the case of our CEO and CSO, also PSUs and giving effect to the following considerations:

 

 

 

Performance-Based Equity
Our NEOs’ stock option grants, which in 2019 comprised 70% of each NEO’s annual equity awards, are performance-based because we determine the award size after taking into account corporate and/or individual performance assessments, and then the award only delivers value if we deliver stock price appreciation for shareholders after grant.
In addition, our CEO’s and CSO’s PSU grants, which in 2019 comprised the other 30% of each such executive’s annual equity award, are performance-based because we determine the award size after taking into account corporate performance assessments, and then the award only vests if the performance criteria are satisfied (minimum threshold payout requires at least a 28% TSR over five years).
   
Long-Term Value Creation
Our NEOs’ and other employees’ stock option grants have ten-year terms and four-year vesting provisions (generally requiring our employees, including our NEOs, to remain employed for four years in order for all options to vest*) to align with long-term value creation and the development cycle of our products.
Our NEOs’ and other employees’ RSAs/RSUs also promote long-term employment: RSAs awarded as a component of annual equity awards vest 50% on the second anniversary of the date of grant and 50% on fourth anniversary of the date of grant, which is a more backloaded vesting schedule than is typical in the industry.
Our CEO’s and CSO’s PSU grants incorporate a long-term, five-year performance period (with an opportunity for an accelerated payout after four years if performance is strong).
   
Meaningful Holding Requirements
We require NEOs to retain a significant amount of equity within five years of their employment with Regeneron:
  Our CEO and CSO must own shares with a value at least 6-times their respective base salaries.
  Our other NEOs must own shares with a value at least 2-times their respective base salaries.
   
Risk Mitigating Design Features
We have a recoupment (clawback) policy that enables us to reduce or recoup equity and other incentive compensation for compliance violations by NEOs and other covered officers and employees; importantly, the policy covers both financial and non-financial violations.
We prohibit our NEOs from hedging or pledging Regeneron securities they hold, including those acquired through employee equity awards.
   
   
   
* In the case of our CEO, this is subject to the terms of his employment agreement. See the subsection “Compensation Dashboard—2019 Compensation Tables—Post-Employment Compensation—Leonard S. Schleifer, M.D., Ph.D. Employment Agreement.” In the case of our CSO, any unvested stock options granted to him in December 2019 will continue to vest following his qualified retirement (as defined in the applicable Company policy).


As outlined in the chart below, our Compensation Committee utilizes a customized framework for determining the size of the annual equity awards of our NEOs and other executives. The Compensation Committee’s primary consideration is the number of shares underlying the equity awards as a percentage of basic shares of capital stock outstanding, which is evaluated on an options-equivalent basis to allow for a meaningful year-over-year comparison.

 

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PRIMARY CONSIDERATION Targeted Percentage of Total Basic Shares Outstanding
Our evaluation of the awards as a percentage of the total basic shares outstanding compared to our Peer Group and the Market Composite Data. This enables us to evaluate grants on a consistent basis regardless of stock price fluctuations of our or our reference companies’ stock prices. Focusing on the number of shares also avoids an outcome where NEOs are provided larger grants following stock price declines or penalizing high performance with smaller grants. For our CEO, we generally target between the 50th and 75th percentiles of the Market Composite Data.
SECONDARY CONSIDERATIONS Corporate Performance Assessment
Our assessment of Regeneron’s corporate accomplishments for 2019, particularly as they relate to our product pipeline.
  Individual Performance Assessment
  Our assessment of performance against the corporate goals established by the board of directors for the CEO and the goals established by the Committee and/or the CEO for the other NEOs, as well as an assessment of the individual’s importance to the Company’s future performance.
  NEO Grant History and Retention Considerations
  Our evaluation of each NEO’s grant history and prior grant size amounts. For retention purposes, the Committee also assesses the amount of outstanding unvested and/or vested but unexercised stock options and other equity awards (if applicable) held, including whether such awards are “in-the-money.”

 

In applying this framework, the number of shares underlying the annual equity awards (on an options-equivalent basis) granted in 2019 to our CEO and CSO (as well as our other employees, generally) was set 10% lower compared to 2018. The 2019 annual awards to our other NEOs are described in greater detail below. With respect to our CEO and CSO, the grant date fair value of their 2019 annual equity awards was nearly 22% lower than in 2018.

 

Named Executive Officer   Annual Equity Award1
(Options-Equivalents)
  Breakdown of
Annual Equity Award
  Year-over-Year
Change in Shares
Underlying Annual
Equity Award
  Year-over-Year
Change in
Grant Date Fair Value
  Change in Shares Underlying
Annual Equity Award
Compared to 20122
Leonard S. Schleifer,
M.D., Ph.D.
  116,111     81,278 Stock Options (70%)
11,180 Target PSUs (30%)
  -10%    -21.8%    -58.7%  
George D. Yancopoulos,
M.D., Ph.D.
  116,111    81,278 Stock Options (70%)
11,180 Target PSUs (30%)
  -10%    -21.8%    -51.4%  
Robert E. Landry  35,000 3  24,500 Stock Options (70%)
2,625 RSAs (30%)
  75% 3     36.2% 3       N/A 4       
Daniel P. Van Plew  35,000 5    24,500 Stock Options (70%)
2,625 RSAs (30%)
  -24.3% 5  -41.1% 5  -53.3%  
Andrew J. Murphy, Ph.D.  35,000 6  24,500 Stock Options (70%)
2,625 RSAs (30%)
  40% 6  8.9% 6  12.5%  
   
1 Aggregate number representing, on an options-equivalent basis, awards of stock options, PSUs, and/or RSAs. See “Compensation Dashboard – 2019 Executive Compensation Tables – 2019 Grants of Plan-Based Awards” for more information on the terms of these awards.
2 For comparison purposes, this column shows, on an options-equivalent basis, a percentage change over the period in which we reduced, on a year-over-year basis, the number of shares underlying equity awards to our CEO as well as per employee.
3 Mr. Landry’s 2019 annual equity award reflects his promotion to Executive Vice President effective January 1, 2019. Mr. Landry also received a special RSA in 2019, which is not reflected in the table above and is separately reported in “Compensation Dashboard – 2019 Executive Compensation Tables – 2019 Grants of Plan-Based Awards.”
4 Mr. Landry joined the Company in 2013.
5 Mr. Van Plew’s 2019 annual equity award was adjusted to better align with the annual equity awards of other senior executives. Mr. Van Plew also received a special RSA in 2019, which is not reflected in the table above and is separately reported in “Compensation Dashboard – 2019 Executive Compensation Tables – 2019 Grants of Plan-Based Awards.”
6 Dr. Murphy’s 2019 annual equity award reflects his promotion to Executive Vice President effective January 1, 2019. Dr. Murphy also received a special RSA in 2019, which is not reflected in the table above and is separately reported in “Compensation Dashboard – 2019 Executive Compensation Tables –2019 Grants of Plan-Based Awards.”

 

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Annual Stock Option Awards

 

As in years past, stock options remained the principal component of the annual equity awards granted to our NEOs in 2019 (comprising 70% of each NEO’s award). We have used stock options in such a prominent manner because they are inherently performance-based, requiring stock price appreciation before there is any real value earned, and simple. No amount of time will make a stock option deliver any value unless the company’s stock price increases. In addition, stock options reward our NEOs for increasing shareholder value over the entire 10-year option term, which we believe is consistent with the drug discovery and development cycle.

 

The 2019 stock options all have an exercise price of $372.46 per share, the average of the high and low sales price per share of our common stock as quoted on the NASDAQ Global Select Market on the date of grant. All of these grants consist of non-qualified stock options, which vest ratably over a period of four years. Except as set forth below in the subsection “Compensation Dashboard—2019 Compensation Tables—Post-Employment Compensation,” stock option vesting ceases, and unvested stock options are forfeited, upon termination of employment.

 

Annual PSUs

 

In 2019, we introduced PSUs as a secondary component of the annual equity awards for our CEO and CSO (30% of each such executive’s annual equity award on an options-equivalent basis). The PSUs are performance-based because they will not vest and will not deliver realizable compensation if shareholders fail to benefit from a meaningful increase in TSR over the long-term performance period.

 

The PSUs have a primary performance period of five years from the date of grant. Between 50% and 225% of the target number of PSUs granted to each executive (i.e., between 50% and 225% of 11,180 PSUs) may vest upon achievement of predetermined, cumulative TSR goals that were derived from compound annual growth rates of 5% to 15%, as set forth in the schedule below:

 

Performance Level 5-year Cumulative TSR Goal Payout1
Maximum +101% 225%
  +93% 200%
  +84% 175%
  +76% 150%
  +69% 125%
Target +61% 100%
  +44% 75%
Threshold +28% 50%
1 Payouts are expressed as a percentage of the target number of PSUs awarded to each executive.

 

In addition, the terms of the PSU awards provide the recipient an opportunity for accelerated vesting after four years if performance is strong, as measured against four-year cumulative TSR goals derived from the same compound annual growth rates used to calculate the cumulative TSR goals for the five-year performance period.

 

If no PSUs have vested at the end of the five-year performance period as a result of not having achieved the threshold cumulative TSR goals, the recipient will have an opportunity to earn a payout at threshold (50% of the target number of PSUs) if the Company’s cumulative TSR over such five-year period exceeds, on a relative basis, the cumulative TSR of the Nasdaq Biotech Index (composite return) by at least 200 basis points. The rationale for the minimum payout for exceeding the industry five-year index is that there may be circumstances in which Regeneron outperforms the broader market without delivering a positive return, such as in the case of a recession or industry-wide developments outside management’s control.

 

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Annual RSAs

 

In 2019, we introduced time-based RSAs as a secondary component of the annual equity awards for our NEOs other than our CEO and CSO as part of the Company-wide decision to introduce an RSA/RSU component to the regular long-term incentive mix for broad-based employees. RSAs comprise 30% of participating NEOs awards on an options-equivalent basis. We believe diversifying the mix of equity awards in this manner responds to shareholder feedback about dilution (burn rate) and retention, as well as employee input. Each such RSA vests 50% on the second anniversary of the date of grant and 50% on the fourth anniversary of the date of grant, which is a more backloaded vesting schedule than is typical in the industry.

 

Special RSAs to Certain NEOs

 

We supplemented our annual equity awards in 2019 with highly targeted grants of time-based RSAs/RSUs to certain key employees (including three of our NEOs) to further promote employee retention and reward exceptional performance. Based on this determination, in December 2019 Mr. Landry and Mr. Van Plew each received 5,000 RSAs and Dr. Murphy received 10,000 RSAs. Each such RSA vests on the fourth anniversary of the date of grant to promote long-term employment.

 

PERQUISITES AND PERSONAL BENEFITS

 

Similar to other employees, our NEOs may participate in Company-wide health, disability, life insurance, and other benefit plans, as well as our 401(k) Savings Plan. See details concerning the 401(k) Savings Plan in the subsection “Compensation Dashboard—Additional Compensation Information—Perquisites and Personal Benefits.” Our NEOs are eligible to receive a limited number of additional perquisites. These include financial and tax planning assistance, which are taxable benefits.

 

In addition, our CEO is entitled to life insurance, long-term disability, medical malpractice insurance premiums, and additional tax and financial planning services pursuant to his employment agreement. These are described in footnote 4 to the Summary Compensation Table.

 

Our CEO and CSO are also eligible for various benefits under our Company security policy, which was approved by the board of directors in 2015 for the purpose of ensuring increased efficiencies and providing a more secure environment for these executives. Based on the recommendation of an independent, third-party security study, our security policy and related guidelines require our CEO and CSO (as well as their spouses and children when they accompany them) to use, as much as practicable, Company-provided aircraft for all business and personal air travel.

 

Additional information regarding perquisites and other personal benefits provided to our NEOs in, or with respect to, 2019 is given in the applicable footnotes to the Summary Compensation Table and in the subsection “Compensation Dashboard—Additional Compensation Information—Perquisites and Personal Benefits.”

 

POTENTIAL SEVERANCE PAYMENTS

 

We believe the following three points are key to understanding our change-in-control and other severance provisions:

 

Outstanding equity award agreements (with the exceptions and qualifications described in the subsection “Compensation Dashboard—Additional Compensation Information—Potential Severance Payments”) for all employees other than Dr. Vagelos include a governance best-practice “double trigger” provision for the acceleration of vesting of awards granted thereunder only upon a without-cause termination by the Company within two years of a change in control.
   
We have a policy against excise tax gross-up provisions for payments contingent on a change in control of Regeneron in contracts, compensatory plans, and other arrangement with the Company’s officers (including NEOs) with the exception of the CEO under his existing employment agreement or amendments to it.
   
Regeneron has no pension, deferred compensation, or retirement plans other than our 401(k) Savings Plan described above.

 

For additional details, see the subsection “Compensation Dashboard—Additional Compensation Information—Potential Severance Payments.”

 

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OUR COMPENSATION PROCESSES

 

OUR COMPENSATION COMMITTEE

 

The Compensation Committee is responsible for overseeing the Company’s general compensation objectives and programs. The Compensation Committee evaluates the performance of our NEOs and approves their compensation—in the case of the CEO, subject to approval of the non-employee members of the board of directors. The Compensation Committee operates under a written charter adopted by the board of directors and regularly reviews and reassesses the adequacy of its charter. A copy of the current charter is available on our website at www.regeneron.com under the “Corporate Governance” heading on the “Investors & Media” page.

 

Annual salaries for the following year and year-end cash incentives and equity awards for all employees are determined in December of each year based on Company and individual performance, as well as other factors, which may include compensation trends among our Peer Group and in the biotechnology industry in general. With respect to our CEO, this process is formalized in the Compensation Committee’s charter, which specifies that the Compensation Committee is to annually present the proposed annual compensation of the CEO to the non-employee members of the board of directors for approval. The non-employee directors and the Chairman of the Board are also involved in reviewing the Company’s performance for purposes of setting the annual cash incentive.

 

We make our annual equity awards on a regular, pre-set schedule. The meetings at which such grants are approved are generally scheduled well in advance of the grant date, without regard to the timing of earnings or other major announcements. We generally grant annual equity awards to eligible employees whose performance is determined to merit an annual grant, including the NEOs, at a meeting held during December.

 

Pursuant to the terms of the Amended and Restated Regeneron Pharmaceuticals, Inc. 2014 Long-Term Incentive Plan, stock option awards are granted with an exercise price equal to the average of the high and low sales price per share of our common stock as quoted on the NASDAQ Global Select Market on the date of the grant or, if such date is not a trading day, on the last preceding date on which there was a sale of our common stock on the NASDAQ Global Select Market.

 

We periodically evaluate the personal benefits and perquisites afforded to our NEOs. The Compensation Committee also regularly meets in executive session to discuss any of the matters that fall within its responsibilities.

 

MANAGEMENT

 

Members of our senior management play a role in the overall executive compensation process and assess performance of other officers. They also recommend for the Compensation Committee’s approval the salary, cash incentive, and equity grant budgets for non-officers and make specific recommendations for salary increases, cash incentives, and equity grants for other officers. For our NEOs (other than our CEO), recommendations to the Compensation Committee regarding their compensation are made by, or with the approval of, our CEO, who also evaluates their performance. Our CEO’s performance is evaluated directly by the Compensation Committee based on the Company’s overall corporate performance against annual goals that are approved by the board of directors at the beginning of each year, as discussed above.

 

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SHAREHOLDER INPUT AND OUTREACH

 

We believe in casting a broad net for information, and think it is very important to reach out to our shareholders for ideas, input, and direct feedback. We do this formally through our triennial say-on-pay votes, as well as through discussions with our shareholders both in connection with our annual shareholder meetings and in the “off-season,” where we discuss compensation, governance, and other issues of importance and interest to our shareholders. In addition, on a more informal basis, we engage with our shareholders through regular investor relations channels, governance engagements, industry conferences, and informal exchanges in other settings.