## Table 0 ##
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview We are a biopharmaceutical company that discovers, develops, and commercializes pharmaceutical products for the treatment of serious medical conditions.
We currently have one marketed product: ARCALYST?
Injection for Subcutaneous Use, which is available for prescription in the United States for the treatment of CAPS, including FCAS and MWS in adults and children 12 and older.
We have 11 product candidates in clinical development, including three that are in late-stage (Phase 3).
All of these product candidates were discovered in our research laboratories.
Our late-stage programs are VEGF Trap-Eye, which is being developed using intraocular delivery for the treatment of serious eye diseases; ARCALYST?, which is being developed for the prevention of gout flares in patients initiating uric acid-lowering treatment; and aflibercept, which is being developed in oncology in collaboration with sanofi-aventis.
Our earlier stage clinical programs include the following fully human antibodies, which are being developed in collaboration with sanofi-aventis: ?
REGN727, an antibody to PCSK9 for LDL cholesterol reduction; ?
REGN88, an antibody to IL-6R, which is being developed in rheumatoid arthritis and ankylosing spondylitis; ?
REGN668, an antibody to IL-4R, which is being developed in atopic dermatitis and asthma; ?
REGN421, an antibody to Dll4, a novel angiogenesis target, which is being developed in oncology, ?
REGN910, an antibody to ANG2, another novel angiogenesis target, which is being developed in oncology; ?
REGN475, an antibody to NGF, which is being developed for the treatment of pain (currently on clinical hold); and ?
REGN728 and REGN846, two antibodies in clinical development against undisclosed targets.
Developing and commercializing new medicines entails significant risk and expense.
Since inception we have not generated any significant sales or profits from the commercialization of ARCALYST?
or any of our other product candidates.
Before significant revenues from the commercialization of ARCALYST?
or our other product candidates can be realized, we (or our collaborators) must overcome a number of hurdles which include successfully completing research and development and obtaining regulatory approval from the FDA and regulatory authorities in other countries.
In addition, the biotechnology and pharmaceutical industries are rapidly evolving and highly competitive, and new developments may render our products and technologies uncompetitive or obsolete.
Recognition of deferred revenue related to sanofi-aventis’ $85.0 million up-front payment decreased in 2010 compared to 2009 due to the November 2009 amendments to expand and extend the companies’ antibody collaboration.
In connection with the November 2009 amendment of the discovery agreement, sanofi-aventis is funding up to $30 million of agreed-upon costs incurred by us to expand our manufacturing capacity at our Rensselaer, New York facilities, of which $23.4 million was received or receivable from sanofi-aventis as of December 31, 2010.
Revenue related to these payments for such funding from sanofi-aventis is deferred and recognized as collaboration revenue prospectively over the related performance period in conjunction with the recognition of the original $85.0 million up-front payment.
As of December 31, 2010, $79.8 million of the sanofi-aventis payments was deferred and will be recognized as revenue in future periods.
In August 2008, we entered into a separate VelociGene?
agreement with sanofi-aventis.
In 2010 and 2009, we recognized $1.6 million and $2.7 million, respectively, in revenue related to this agreement.
Bayer HealthCare Collaboration Revenue The collaboration revenue we earned from Bayer HealthCare, as detailed below, consisted of cost sharing of Regeneron VEGF Trap-Eye development expenses, substantive performance milestone payments, and recognition of revenue related to a non-refundable $75.0 million up-front payment received in October 2006 and a $20.0 million milestone payment received in August 2007 (which, for the purpose of revenue recognition, was not considered substantive).
## Table 1 ##
Cost-sharing of our VEGF Trap-Eye development expenses with Bayer HealthCare increased in 2010 compared to 2009 due to higher internal development activities and higher clinical development costs in connection with our Phase 3 COPERNICUS trial in CRVO.
In the fourth quarter of 2010, we earned two $10.0 million substantive milestone payments from Bayer HealthCare for achieving positive 52-week results in the VIEW 1 study and positive 6-month results in the COPERNICUS study.
In July 2009, we earned a $20.0 million substantive performance milestone payment from Bayer HealthCare in connection with the dosing of the first patient in the COPERNICUS study.
In connection with the recognition of deferred revenue related to the $75.0 million up-front payment and $20.0 million milestone payment received in August 2007, as of December 31, 2010, $47.0 million of these payments was deferred and will be recognized as revenue in future periods.
Technology Licensing Revenue In connection with our VelocImmune?
license agreements with AstraZeneca and Astellas, each of the $20.0 million annual, non-refundable payments were deferred upon receipt and recognized as revenue ratably over approximately the ensuing year of each agreement.
In both 2010 and 2009, we recognized $40.0 million of technology licensing revenue related to these agreements.
In addition, in connection with the amendment and extension of our license agreement with Astellas, in August 2010, we received a $165.0 million up-front payment, which was deferred upon receipt and will be recognized as revenue ratably over a seven-year period beginning in mid-2011.
As of December 31, 2010, $176.6 million of these technology licensing payments was deferred and will be recognized as revenue in future periods.
Net Product Sales In 2010 and 2009, we recognized as revenue $25.3 million and $18.4 million, respectively, of ARCALYST?
net product sales for which both the right of return no longer existed and rebates could be reasonably estimated.
The Company had limited historical return experience for ARCALYST?
beginning with initial sales in 2008 through the end of 2009; therefore, ARCALYST?
net product sales were deferred until the right of return no longer existed and rebates could be reasonably estimated.
Effective in the first quarter of 2010, the Company determined that it had
We prepare estimates of research and development costs for projects in clinical development, which include direct costs and allocations of certain costs such as indirect labor, Non-cash Compensation Expense, and manufacturing and other costs related to activities that benefit multiple projects, and, under our collaboration with Bayer HealthCare, the portion of Bayer HealthCare’s VEGF Trap-Eye development expenses that we are obligated to reimburse.
Our estimates of research and development costs for clinical development programs are shown below:
## Table 2 ##
Drug development and approval in the United States is a multi-step process regulated by the FDA.
The process begins with discovery and preclinical evaluation, leading up to the submission of an IND to the FDA which, if successful, allows the opportunity for study in humans, or clinical study, of the potential new drug.
Clinical development typically involves three phases of study: Phases 1, 2, and 3.
The most significant costs in clinical development are in Phase 3 clinical trials, as they tend to be the longest and largest studies in the drug development process.
Following successful completion of Phase 3 clinical trials for a biological product, a BLA must be submitted to, and accepted by, the FDA, and the FDA must approve the BLA prior to commercialization of the drug.
It is not uncommon for the FDA to request additional data following its review of a BLA, which can significantly increase the drug development timeline and expenses.
We may elect either on our own, or at the request of the FDA, to conduct further studies that are referred to as Phase 3B and 4 studies.
Phase 3B studies are initiated and either completed or substantially completed while the BLA is under FDA review.
These studies are conducted under an IND.
Phase 4 studies, also referred to as post-marketing studies, are studies that are initiated and conducted after the FDA has approved a product for marketing.
In addition, as discovery research, preclinical development, and clinical programs progress, opportunities to expand development of drug candidates into new disease indications can emerge.
We may elect to add such new disease indications to our development efforts (with the approval of our collaborator for joint development programs), thereby extending the period in which we will be developing a product.
For example, we, and our collaborators where applicable, continue to explore further development of ARCALYST?, aflibercept, and VEGF Trap-Eye in different disease indications.
There are numerous uncertainties associated with drug development, including uncertainties related to safety and efficacy data from each phase of drug development, uncertainties related to the enrollment and performance of clinical trials, changes in regulatory requirements, changes in the competitive landscape affecting a product candidate, and other risks and uncertainties described in Item 1A, “Risk Factors” under “Risks Related to ARCALYST?
and the Development of Our Product Candidates,” “Regulatory and Litigation Risks,” and “Risks Related to Commercialization of Products.
” The lengthy process of seeking FDA approvals, and subsequent compliance with applicable statutes and regulations, require the expenditure of substantial resources.
Any failure by us to obtain, or delay in obtaining, regulatory approvals could materially adversely affect our business.
For these reasons and due to the variability in the costs necessary to develop a pharmaceutical product and the uncertainties related to future indications to be studied, the estimated cost and scope of the projects, and our ultimate ability to obtain governmental approval for commercialization, accurate and meaningful estimates of the total cost to bring our product candidates to market are not available.
Similarly, we are currently unable to reasonably estimate if our product candidates will generate material product revenues and net cash inflows.
In 2008, we received FDA approval for ARCALYST?
for the treatment of CAPS, a group of rare, inherited auto-inflammatory diseases that affect a very small group of people.
We currently do not expect to generate material product revenues and net cash inflows from the sale of ARCALYST?
for the treatment of CAPS.

<table><tr><td></td><td colspan="5">At December 31,</td></tr><tr><td></td><td>2010</td><td>2009</td><td>2008</td><td>2007</td><td>2006</td></tr><tr><td></td><td colspan="5">(In thousands)</td></tr><tr><td>Balance Sheet Data</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Unrestricted and restricted cash, cash equivalents, and</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>marketable securities (current and non-current)</td><td>$626,939</td><td>$390,010</td><td>$527,461</td><td>$846,279</td><td>$522,859</td></tr><tr><td>Total assets</td><td>1,089,432</td><td>741,202</td><td>724,220</td><td>957,881</td><td>585,090</td></tr><tr><td>Notes payable (current and non-current)</td><td></td><td></td><td></td><td>200,000</td><td>200,000</td></tr><tr><td>Facility lease obligations (current and non-current)</td><td>160,030</td><td>109,022</td><td>54,182</td><td>21,623</td><td></td></tr><tr><td>Capital lease obligations (current and non-current)</td><td>2,829</td><td></td><td></td><td></td><td></td></tr><tr><td>Stockholders’ equity</td><td>527,815</td><td>396,762</td><td>421,514</td><td>459,348</td><td>216,624</td></tr></table>
<table><tr><td>Bayer HealthCare Collaboration Revenue</td><td>Years ended December 31,</td></tr><tr><td>(In millions)</td><td>2010</td><td>2009</td></tr><tr><td>Cost-sharing of Regeneron VEGF Trap-Eye development expenses</td><td>$45.5</td><td>$37.4</td></tr><tr><td>Substantive performance milestone payments</td><td>20.0</td><td>20.0</td></tr><tr><td>Recognition of deferred revenue related to up-front and other milestone payments</td><td>9.9</td><td>9.9</td></tr><tr><td>Total Bayer HealthCare collaboration revenue</td><td>$75.4</td><td>$67.3</td></tr></table>
<table><tr><td></td><td colspan="2">Year ended December 31,</td><td>Increase</td></tr><tr><td>Project Costs</td><td>2010</td><td>2009</td><td>(Decrease)</td></tr><tr><td>(In millions)</td><td></td><td></td><td></td></tr><tr><td>ARCALYST®</td><td>$56.8</td><td>$67.7</td><td>$-10.9</td></tr><tr><td>VEGF Trap-Eye</td><td>138.5</td><td>109.8</td><td>28.7</td></tr><tr><td>Aflibercept</td><td>13.5</td><td>23.3</td><td>-9.8</td></tr><tr><td>REGN88</td><td>25.0</td><td>36.9</td><td>-11.9</td></tr><tr><td>REGN727</td><td>36.0</td><td>21.1</td><td>14.9</td></tr><tr><td>Other antibody candidates in clinical development</td><td>65.5</td><td>53.3</td><td>12.2</td></tr><tr><td>Other research programs & unallocated costs</td><td>153.9</td><td>86.7</td><td>67.2</td></tr><tr><td>Total research and development expenses</td><td>$489.2</td><td>$398.8</td><td>$90.4</td></tr></table>

Question: In which year is the value of Total assets on December 31 the highest ?
Answer: 2010