Sanofi (SNY) Q1 2011 Earnings Report, Transcript and Summary

All right. Thank you, Sébastien. And good morning/good afternoon, everybody. So we had a lot going on in the quarter and obviously I think the context is important to understand. I mean I think the first factor we need to get out of the way is of course the H1N1 sales that were incurred in the first quarter of 2010. I think last year we signaled very clearly that this was non-recurring revenue. I seem to remember answering a question last year from someone who said, how should we value the sales of H1N1? And I think my response was put a multiple of one on it. So I think we were pretty clear last year that we weren’t likely to see those sales come about and that’s the case. So if, obviously we can come back to it, but I think for the sake of simplicity, for all of the numbers we present, we’re going to assume that H1N1 is out of it, to give a better sense of what the underlying performance is. Obviously, as Sébastien said, this is also the first quarter where we’re consolidating Merial sales, but then of course we’ve always done the comparators on that. So with that out of the way, when we look at the business, I mean, welcome to the patent cliff. We’re right in the middle of it. And yet actually if I look at the first sales we’re still moving ahead as a company. And I think that’s an important achievement, and I’ll show you a little bit what the effect is. But there is clearly the transition going on. We’re moving away from the sales of the traditional growth drivers and more and more this company is looking like our growth platforms. So again, that first slide says, excluding the H1N1 sales, you can see that the sales growth was pretty much flat. Now, given how much we have seen lost, I think it was $500 million in the quarter on generic sales, we have been able to compensate that. So the next two slides, I think, for me outline really what’s been going on in the company more than anything else I can say. So this slide, I took the sales of all the products that either have gone generic or are about to go generic over the period 2009 really to 2012. And the first thing you notice is the list. I mean, the interesting thing about Sanofi is that up until 2009, we actually didn’t really have much exposure to generics. This is one of the few companies in the industry that really never had significant generic erosion until so late in the game. However once we start, we really do it in a big way. And we probably have one of the most concentrated patent cliffs of anybody in the industry, if you look down that list of all those products, that’s quite a substantial list. And they’re pretty much all of the things that probably 3, 4 years ago we were talking about as driving our business. So when you look at the bar chart to the right, then you add up the sales of those products. You see that in the first quarter 2009, which was actually the very first quarter that I presented to you, we still had €2 billion of sales of those products. Now we fast forward to the first quarter of 2011, and you see that €2 billion has melted to about €945 million. So there’s a couple of messages. First is that, we are obviously already a long way into the cliff. We’ve got a fair bit of it already behind us. And that amounts to over €1 billion. In the space of two years, we have lost on a quarterly basis €1 billion in sales. You can see that there is still some to go, and most of what you see there is largely around Aprovel in Europe, there is Eloxatin in there. And those are probably the two biggest blocks of that, because as you all know, Plavix and Aprovel in the U.S. are not consolidated in sales, and are not included in this analysis. But there is evidence of the cliff. That we can’t do much about; that everybody has foreseen for years in advance and that was the challenge facing us strategically back in that quarter. At the same time that I was presenting those Q1 2009 sales, though, we were already talking about the strategy to develop that, and that was largely around the development of these growth platforms. So now we are two years later and what happened to those? And I think there has been an awful lot of skepticism about whether or not any company could really match the significant decline in sales of such a concentrated patent cliff. And my view is that that patent cliff and the imminence of that has been the major factor on the share price. But you can see that in Q1 2009, when we added the sales of that up, those amounted to €3 billion. Now, there’s a little footnote on the €3 billion, because obviously in Q1 2009, we weren’t consolidating any sales of Merial. If you add our 50% of Merial then that number would be €3.3 billion. So that’s where we were, because obviously in the meantime we’ve acquired the other half of Merial. So in a lot of ways, I would personally take €3.3 billion as the baseline for that Q1. Now again, fast forward to Q1 of 2011, and you can see that that €3.3 billion has grown to €4.6 billion. So we’ve lost €1 billion on a quarterly basis. But we have made up with €1.3 billion in sales. So, and those growth platforms, first of all, in absolute size, are significantly bigger even in 2010 than what we were facing on the patent cliff. And by the time you get to Q1 2011, we were up €4.6 billion of business that’s growing and €900 million that will decline over the next couple of years. The other thing is the €4.6 billion represent already today 60% to the company sales. Where were we back in 2009? Less than 40%. Now there’s two phenomena behind that. Obviously, one is the significant growth of the platforms and two is obviously the decline of the businesses coming off patent. Nonetheless, I think a business that got 60% of its baseline growing at 15% and you got another €900 million that will decline, and the rest of that is largely stable. Then, to me, that gives me a sense that even without Genzyme, because none of these numbers have any Genzyme numbers in them, I would add. This gives me a lot of confidence that we can not only come through the patent cliffs, but when we come through the patent cliffs with a different structure of sales, which are far less dependent on patents, and which have a greater longevity associated with them. This is what we had set out to do two years ago and so as I look at this two years later, I think the company has made significant progress. Now if you look at the bottom line, essentially we’ve been able to do the same thing. So Q1 business EPS was €1.66, about €0.20 of that was related to H1N1. So without the H1N1, we’re still at 6% lower, but considering the significant impact of the generics, it’s a reasonably close proximity of that and it’s certainly within the range of the guidance that we had for the business. And of course to do that, that’s largely been because of our cost reduction program and of course we are on track to do the €2 billion by the end of this year rather than 2013. I know there will be a question about, well, what’s the next step in the cost reduction? And we’ll update that when we come to our strategic seminar later in the year because I think now we can start to roll in not only what we want to do at Sanofi, but we’ll have a clearer view of what we we’re going to do on synergies, not only with Genzyme but also with Merial, because Merial has clearly changed in where we are and so – we can even go to the slide on Merial. Merial has been a joint venture for many years, as you know, really it was a joint venture for 12 years with Merck. Not consolidated in the accounts, but also a business in which a company like Sanofi was more closely related to being to a shareholder than active management. Over the years I think there was kind of a fluctuation as to the amount of engagement at a management level between the parent companies and the joint venture. But it’s a company that is a fully standalone company, has its own offices, own production, own research and development, own commercial organization. And so now that it is a 100% owned affiliate, I think there are opportunities to seek some synergies. Now, the synergies we’re talking about I think are beyond the obvious, so some of the back-office such as IT systems and things like that. I think one of the most interesting things is to see how we can find, for example, some of the synergies at a research and development and level. The birth of animal health largely came out of products that were being sold for humans that also worked in animals. Maybe you had to change the dosage for them, maybe you had to change the formulation, but that is how this business started and that’s certainly the business I knew 20 years ago when I first encountered animal health. We’ve gotten away from that a little bit, there hasn’t been much contact between the research and development organizations. You got major cancer centers already doing things like developing cancer treatments for melanoma. You may have seen some things in the press recently about the incidence of diabetes in dogs and cats. So I think before we go spend a euro of shareholder money, I mean, the first thing that we’re going to do is say, all right, what can we do organically to really drive more growth out of the business and really realize some of the R&D synergies. Second is, the business is clearly a very strong business in companion animals, number one. Frontline is by far and away, the biggest product of anybody in this industry in animal health. We do have some strong double-digit growth in emerging markets. But I think if we’re honest, we have to say that we’re not where we would really like to be in emerging markets. Now I know an organization that’s extremely strong in emerging markets and that’s of course Sanofi. And so I think we need to look and see what can we do using the footprint, not necessarily in terms of reps, but certainly as a platform for thinking about how we can invest, pay attention to business development, use our government relations expertise, use some of the back-office facilities to think about expanding and reduce some of the infrastructure costs so that we could more money back into the growth of the business. So there’s clearly areas on that. Beyond that, we’re not where we would like to be in production animals either in terms of really just balance of the portfolio. There is a some very interesting businesses in there. We have poultry vaccines for example, and other types of vaccines. But the business is really clearly dominated by Frontline and Heartgard. And so over time, I think we would like to get – to have a more balanced portfolio. Hanspeter Spek is going to talk about this in a moment, but I’ve asked Hanspeter to work with Merial and really over the next couple of months, really do a deep dive strategically into how we can think about building on this business as we go forward. I don’t think we’re going to be doing big acquisitions. I think the experience we have with the Intervet transaction suggests that big types of transactions may be difficult in terms of obtaining regulatory approvals. To the extent that there are assets out there, then I think we’ll be certainly interested in doing the business development. But at the same time if I look at the first quarter results, we’ve had some very interesting double-digit growth. And so I don’t think we’re in an urgent need to actually go do something. We’re a number three company, we’ve got a – I think a strong company there. We’ve got opportunities to drive more organic growth than what we’ve been doing. So and I guess I’ll just finish by saying, when I look at how many people wanted to bid for the assets that we might have had to dispose of during the potential merger between Merial and Intervet, it certainly was confirmation to me that this is a hot space to be in and that strategically it’s a right choice to be there. And of course, the other major event in the quarter was Genzyme. And we’ve already provided a lot of information in there. And we’ve talked about the business accretion, I’ll come back on that. And we tried to give you some medium-term where we think the accretion is going to be. I think the interesting thing for me just on a financial basis is, it’s a no brainer just on the basis of what we see as a significant return on investment on a cost of capital that is below 2% pre-tax. So this is certainly going to help us on showing a return. I think the interesting thing is also that, as we look back, I mean, we had valued Genzyme significantly higher on an intrinsic basis than the market price at that time. So for us, we see Sanofi as being able to capture a significant percentage, and much higher than the traditional percentage, of the synergies. Now we’re just going through this, because the really important next step is integration. And it is absolutely clear that a biotechnology company with 10,000 people, it’s got a different DNA than a big pharmaceutical company with 100,000 people. I think we’re being smart enough to recognize the difference and are trying to take an approach, which really makes sure we understand all of the levers of the different businesses, and that we’re sensitive, I think, to the differences in culture, and to the fact that we don’t necessarily want to impose Sanofi culture on Genzyme. And in fact, what I would really like to see, are elements of Genzyme’s culture be infused back into Sanofi. And I would particularly cite two things. One is the extraordinary patient-centric culture that is obvious the day you walk into a Genzyme office and have a conversation with someone from Genzyme. And the second is really the research approach that they have and Elias can talk more about that. But I think there are some things that we can learn that could be helpful as we look at how we evolve our own research activities within Sanofi. But clearly we took some risk in doing this acquisition last year. In the middle of last year when we initially launched this, this was just shortly after the consent decree. Now I will tell you that to me, obviously, this is a business where we deal with risk every day. My view of this risk was that I’d rather face a risk that is fixable than one that is not. Buying a company just for its research and development portfolio is a risk that is difficult to fix if it turns out to be wrong. I mean, you can’t fix that in a couple of years. Manufacturing though, especially – and we have an awful lot of biological manufacturing capability, people don’t know it, but quite honestly, there are not a lot of similarities particularly between what Sanofi does and what Genzyme does. And so I think we can actually provide some additional resource. At the same time, I think Genzyme has brought in some very strong people, both Scott Canute and Ron Branning, who have come in the last year, have done wonders in terms of really getting the manufacturing turned around. Stock levels are clearly not where we want to be, and I think as a result, we still are exposed to risk if there is any kind of hiccup in manufacturing. We clearly don’t have the levels of inventory to cover that if we need to. That having been said, I think Cerezyme seems to be largely stabilized. We’ve got one of the highest levels of inventory that we’ve had in two years time. And really I think that that looks good. If I look at Q2 sales for example, all of the bulk was produced in Q1. And in Q2, because we obviously had, there was a hiccup when we provided you with revenue information for Genzyme in Q1. We haven’t consolidated that because that wasn’t part of the Sanofi Group in the first quarter. But you can see that there was a hiccup on the release of two batches, one for Cerezyme, one for Fabrazyme. Both of those are a result of fill and finish issues and both of those are related to the infamous fill and finish facility at Allston. What we can say is that it is the intention of the Group to no longer do any fill and finish in Allston, and we’re able to now do all of the fill and finish at Hospira. And so, therefore I think the risk of a repeat of what we’ve seen in Q1 in terms of batch release, has reduced. It’s never risk free and until we get up to 4, 5 months levels of stock, I don’t think we will be there. But having been said, I think the Genzyme forecast that we should be in a position to supply existing patients with a full dose of Fabrazyme seems like a reasonable forecast at this stage from what we know. And again I think all of the resource that is needed is going into that, I mean in the last year or so Genzyme has recruited over 300 people, for example, in quality assurance to deal with both the consent decree and with the ongoing quality issues. LEMTRADA, you’ve seen some data on that, and Elias will say more. I think the next milestone for that is a Phase III result coming out in July. We have an identification of synergies ongoing. I will say that the good surprise that we’ve had is that we so far haven’t seen any bad surprises. And that’s important. At the same time I think there are opportunities for revenue synergies, which we certainly haven’t taken into account and which I think seem quite tangible and I can go into that in the Q&A. But I think we want to spend a little time really to understand the opportunity. We have a culture work stream to be specifically oriented around the differences that we have. And to me, the biggest objective I have is really making sure that we convince Genzyme people that a new Genzyme within a Sanofi group will have the same mission and objectives as Genzyme stand-alone, except that there is the power of Sanofi behind it. To demonstrate my commitment, I’ve taken the unusual step of, at least on an interim basis, stepping into the CEO role of Genzyme until we finalize decisions. We would expect the finalization of the integration-planning Phase to be about the end of June. I won’t say anything about the detail of this, you can see the slide of the upcoming milestones, other than to say really that I remember the first time we presented this slide, and I think there might have been two or three bullet points. In fact, we used to have to scramble to see what could we put on this. And so I think it’s an encouraging sign of progress that the slide is getting fuller and harder to read. And I won’t say more (inaudible) but clearly I think a Sanofi post-Genzyme has also got a different R&D outlook and there are a number of growth assets, both in the marketplace, as well as potentially coming through. Plus, let’s not forget, we’re seeing some good news coming out of Sanofi’s own portfolio. So by no means are we declaring victory on this, but encouraging progress. And so the last slide I’ll say is really on our outlook for the year. H1N1 is a Q1 phenomenon. As of today, there is still no generic of Eloxatin and the court orders have held. That remains an uncertainty for the year. As of today, there is also only one generic of Lovenox, we don’t have any information really, other than what you do, as to when a second generic might come. In the first quarter of this year, we also did not have a generic, for most part, of Taxotere and that was a benefit to the company. So as we look at this in terms of guidance it’s never been our habit to update guidance after Q1. I remember a former boss of mine used to say, two swallows don’t make a spring. And I think one quarter doesn’t make a year. So I’m not about to change the guidance of Sanofi stand-alone. I mean I think it’s fair to say though, that particularly given a little bit of a tailwind from not having a generic for Taxotere in the first quarter, that we’re performing pretty well as Sanofi stand-alone. Jérôme will talk more about Genzyme, all we can say really about Genzyme at the moment is that without allowing for any synergies, whatsoever, and based on current forecasts, which we’ve kind of made more realistic I think, mechanistically, that would be about 3% to 4% without synergies. If there is obviously changes in yields, that might have a positive benefit, and we’ll have a better idea about what synergies might be achievable and what timeframe, by the time we come to the mid-year. But again, I’ll leave this to Jérôme to say more on that. So with that, I’ll turn it over to Hanspeter Spek, who can give us a little bit more detail on some of our growth platforms and the progress of our business.

Yes, thank you, Chris. Good morning or good afternoon to everybody. I would like to guide you through the chart as of page 14. And on 14 in the headline you read, that shows approximately 60% of our today’s sales representing as growth platform, delivered a growth of 15.5% during the first quarter. In absolute sales, we nearly made the sales result of last year, €7.8 billion. And you see then from the bar – we’ll describe H1N1 effect of approximately €400 million. But more importantly, you see that the growth platforms a little bit overachieved what we had lost during the first quarter due to generification, which was €569 million. Also of course, important to mention that we had a positive ForEx effect of €289 million. Now, the emerging markets. The first of the important growth platforms, we continue to perform strongly on the basis of our market leading position. We had a growth of 14.6%, up to €2.4 billion nearly, coming from those markets, which represent now nearly 31% of our total shares and became the most important part as you see, in comparison to the USA is 28% and Western Europe is 29%. So nevertheless, I think it worth to be mentioned that cardio-thrombosis which is more a historical part of our business largely consisting out of Plavix, continues to grow with 10.4%, mainly due to a very strong performance of Plavix in Asia, especially in Japan, but also due to the fact that Lovenox is continuously growing in Asia and in Western Europe, (inaudible) well in the USA in front of the generic competition, where we still achieved more than 50% of our previous sales in the United States. We thought it would be adequate to give you a picture on the Japanese situation which of course was highlighted by the, both disasters the country has suffered during the first quarter. And first of all, we felt it was important to say that all our employees have been safe and secured. Sanofi has contributed significantly in terms of donations, being it pharmaceutical products or being it also cash donations to help to ease the situation. From a business, on a professional point of view, it’s remarkable to note that our sales have increased by nearly 14% in this otherwise disastrous quarter. And you see that all our major products performed extremely well. Allegra benefited from a strong allergy season. Plavix, as mentioned earlier, is growing by nearly 29%, Myslee by nearly 15%, and LANTUS has shown a really significant acceleration in growth, achieving 35%. Of course, most of those products we produce locally in our own plant and despite difficulties to have sufficient energy, the plant never stop producing. And so accordingly we were always able to fulfill the market needs. The performance of diabetes and LANTUS is not only positive in Japan, but also overall, as you see on page 17. LANTUS sales have come back to a strong two digit growth with 13.2% in the first quarter, achieving €925 million of sales. We are happy to report a strong reacceleration of our sales growth in the U.S. We have increased our Share of Voice as I had reported in (inaudible) in the fourth quarter of 2010, and so consequently we see an increase of sales in the U.S. of 14.7%, which we feel very satisfactory. This is comparable to the growth rate of the other, let’s call, the modern insulins. But given the important large base, LANTUS is by far in absolute figures, outperforming any other insulin in the U.S. marketplace, which of course gives us a certain satisfaction. We have to report only small growth in Europe. Europe overall has been hit by price decreases once again. So we have at least succeeded to counterbalance price cut, for example, in Germany by significant volume growth. But also in the field of insulins, Europe remains to be an extremely difficult playground. We have started to launch our devices for measuring blood glucose, with launches in April in Germany, and in May in France and we will continue to roll out our launches all over Europe for the remainder or the year and also by the end of the year in the United States. Now, a short picture on the two new products, JEVTANA and MULTAQ on page 18. Both products continue to perform very well. Jevtana has achieved €48 million of sales in the first quarter. We have achieved 54% as a share of our patients in second line treatment. And ought to receive approval in Europe at March 18. We have immediately after in early April, launch in Germany. Once the product starts to do very well on a similar growth pattern as we have launched about six or eight months ago in the United States and in the rest of the year 2011, we will launch everywhere. MULTAQ achieved €63 million of sales. We consider this as reasonable. You’re probably or definitely aware that we had a labor change during the fourth quarter and this had slowed down the growth of the product which had been on a very, very nice trend before in the U.S. and in Europe. But as well as in the US, as in Europe, we could note that during the first part of 2011, growth of the product came back and we start to get in line with the previous growth and pattern ourself optimistic for the second and the following quarters. Nevertheless, we have to point out that the EMEA benefit/risk assessment is still outstanding for the second quarter and of course we have to be cautious with a further outlook for the product depending on the outcome of this assessment. Another important and very successful growth platform in the first quarter has been Consumer Healthcare. You will probably agree by looking to the bars on the left side of page 19, that it is a remarkable achievement to have more than doubled our CHC sales over two years. We achieved in the first quarter €712 million and this is mainly driven by organic growth and only to a little extent driven by acquisitions. We have made an acquisition, two acquisitions to be precise, in China, but they play a minor role in the first quarter. So what we see is then what you see on the right side, a rather successful launch of Allegra in OTC. Allegra in OTC alone has achieved in the first quarter €18 million sales in the U.S., taking over the second market position in the U.S. market, selling more than Zyrtec, which became now the third brand. We feel that this is also confirmation of our overall strategy, which led us to the acquisition of Chattem to get a foothold in the OTC and CHC market in the U.S., because for Chattem this means more or less doubling previous sales of, since acquisition, of the year 2009. Equally successful, as outlined on page 20, then, our performance in generics; we have a nearly 17% growth with €440 million sales. Included in those are authorized generics, which we launched in the U.S. for Ambien CR and Taxotere. But more important is the continuously positive two-digit growth performance of ZENTIVA and Medley; ZENTIVA which became the third largest generic player and the fastest growing generic player in Europe; and Medley, which continuous its really marvelous performance in Brazil and going beyond of Brazil, expanding into Latin America. Now a last word on animal health to give you a little bit more of insight. Chris has already mentioned the importance, of course, of FRONTLINE. As you see, FRONTLINE has been growing at 15%; inside Merial overall, growth of 11.5%, nearly €600 million of sales. We have to report the first arrival of a generic of FRONTLINE in the U.S. market. We are not overwhelmingly concerned by this launch, mainly for two reasons: first, very, very strong position FRONTLINE holds especially in the sector of pets in the United States; but also our experience in Europe where we have a FRONTLINE generic since more than one year. We have to report in Europe an average loss of approximately 5% market share points due to generics. So of course this has nothing to do with the effect generics have in human pharmaceuticals. Chris had also pointed out that we have to develop stronger in emerging markets. You see that emerging markets inside Merial today present less than 20%. I remind you for Sanofi overall, it is approximately 33%. Nevertheless in the first quarter, we have a 25% growth rate, so we are in the right direction, but evidently we will accelerate this development and bring it close to the overall situation of Sanofi in those markets. We have a good outlook for the rest of the year. We expect to launch in the second quarter, a new product, CERTIFECT, in the United States, which goes once again into pet segment. The product has significant advantages and we are rather confidence to make it another significant product inside our portfolio. So this is what I wanted to share with you on the growth platforms and then pass now on to Olivier Charmeil to give you some comments on Vaccines.

Good morning, good afternoon, everybody. We are having a good start. That was a strong first quarter, showing a growth of 9.6% excluding the pandemic sales. The strong growth comes mainly from the emerging markets where the first quarter showed a growth over 37%. The growth stems from a very strong (inaudible) campaign with regard to flu. We show on (inaudible) a growth that is above 170%. It’s the best ever season we have made in terms of flu in Latin America, with a very, very strong season in Brazil due to the change recommendation, which impacted pediatric sale as well as pregnant women. We maintained an extremely high market share. We have also had a very strong delivery now regarding the (inaudible) sales, where our market shares have gone from 35% to more than 85%. In terms of price uphold, we have seen very minor erosion in terms of price. Our growth in the emerging markets, those have been driven by a strong growth of our combos and more specifically of our plant vaccines that we continue to roll out internationally. In the U.S., our growth continued to be driven by our good performance on our combo, our Pentacel sales, as well as our Adacel and our booster, following the recent outbreak of pertussis in California, which has increased significantly the level of (inaudible) and the need to be immunized. We are happy to report that the FDA has granted us a license for Menactra for infant and toddlers for the age group between 9 months to 23 months, which puts us in a situation as we are the only one today to have this indication. I now hand over to Dr. Elias Zerhouni for the R&D highlights.

Thank you. And good afternoon, everybody. I think in terms of R&D, I’m just going to highlight the significant changes that have occurred in the past quarter. And the latest one is the news on ZALTRAP, or aflibercept, which is a vascular endothelial growth factor trap, which is a fusion protein that essentially captures the ligand and prevents the activation of the receptor, which is a well-validated anti-angiogenic approach. And we’ve had positive Phase III results in the second line metastatic colorectal cancer trial called VELOUR with, essentially the trial has met its primary endpoint of overall survival. We’re obviously looking at the details as we speak and full results will hopefully be presented at ASCO and we’re expecting regulatory filings in the second half of 2011. This will be followed by final results from the VENICE trial, which is a Phase III trial in first-line metastatic [Audio Dip] cancer with an accrual completed already and final results to come. And this is obviously also complemented by the AFFIRM trial, a Phase II trial in first line metastatic colorectal cancer. Again I’ll remind you ALLURE is the second line and we have this trial, which is really trying the molecule in first line with the results expected in the second half of 2011. So this is a novel anti-angiogenic agent. We’re certainly carefully looking at the implications of the positive results we’ve had on this class. Other news, as you know, lixisenatide has been a major project in terms of our opportunity to expand in the GLP-1 market. And the benefits are very clear. First and foremost, I think from my standpoint, it’s an effective GLP-1, it does reduce HbA1-C and prandial plasma glucose. It does demonstrate low incidence of hypoglycaemia and obviously has a positive impact on weight. But the most important thing here is that it’s easy to use. It’s something that primary care doctors can basically prescribe. It’s a once daily injection, it’s a simple titration, simple device. And so from our standpoint, it is a necessary component of our full strategy in diabetes, which is to provide an integrated solution to a largest number of providers and patients. And we have planned submissions in the EU in the second half of 2011 and the U.S. in the second half of 2012. I’m sure you’ve heard about our results in Teriflunomide, a potential first line oral therapy in multiple sclerosis. It will be a new disease modifying therapy. The two-year placebo controlled study called TEMSO was completed. And the second placebo-controlled study, TOWER, is fully recruited. And as you probably know, for those of you who follow this issue, we’re going head-to-head with comparing Teriflunomide with interferon beta-1a, which is fully recruited, the study called TENERE. We’re also going to continue the Phase III adjunctive therapy trial called TERACLES. And there’s good evidence that actually we’ll find potentially synergy between the two, this is the goal of the trial. And depending on all of this progress at this point, the planned submission in the U.S. is the third quarter of 2011, which is ahead of schedule as compared to what we had in mind before, and the EU in the first quarter of 2012. Finally, I think the news on LEMTRADA is remarkably confirming itself from our expectations. The potential for alemtuzumab in multiple sclerosis is obviously the remarkable efficacy as shown in Phase II with over 65% of patients free from clinically active disease at five year; the first trial that shows improvement in disability. The remarkable fact that this is a product that you don’t have to take every two weeks, or every month; you take it at the beginning of treatment and then a year later you have a recall series of injections. And patients really approve of this and value the ease and the convenience of this dosing regimen. The safety is manageable, we feel the tolerability profile is acceptable when we compare it to others in the same category. And at this point, we’re planning U.S. and EU filings in early 2012. And we’ve been granted actually fast track status by the FDA on this drug. So with that, I’ll just turn it back over to Jérôme Contamine.

Thank you, Elias. Before we end with the financials, it’s sort of been said already on the sales, is at slide 29, so I will just add a few comments. A, the contribution of Merial, because as you know, we have presented pro forma figures for 2010. So the contribution of Merial in 2010 for the first quarter would have been on a pro forma basis €513 million, which is to be compared with €594 million for 2011, showing by the way as was highlighted already the strong growth of Merial during the first quarter. The rest of the slide basically shows that on one hand we have had, excluding H1N1, neutral growth, so clearly showing that the organic growth of the growth platform (inaudible) the decline of the genericized products. And on top of that, we had positive headwinds from currencies on exchange rates and if there is one thing to note is that – I’d like to repeat again that is not only the U.S. dollar, which is the euro – versus the euro which is rising our actual figures on the current exchange rate basis. But it is also the Japanese yen, which has become very strong since the crisis in Japan, as well as the real, the Australian dollar and of course the renminbi. So it just highlights how, I mean, the diversity of exposure to various currencies, which is another way to look at the diversity of the growth in terms of geographic – expansion. Now if I move to slide 30, the P&L and maybe I will not spend too much time on this slide, but give more some details on the next slide. So as you know, we have on the consolidation basis, a 5% decline on net sales, but this of course is once again mainly due to H1N1. We see the decline on gross profit. The gross margin declined from the 77.4% to 74.9% with a 2.5% decrease, and I will give clearly some more explanation on that, because it’s somewhat showing how the future will look like. We see a decrease on the R&D expense as well as a decrease of R&D to sales ratio. We see stability of SG&A with a slight increase in ratio and I will comment on that in a few minutes. We see a mature contribution of the other operating income and expenses, basically these are two elements. The first one is at, as you may remember, we still have with first quarter of 2010, the policy contribution of a payment of Teva on Copaxone. In Q1 2011, not only we don’t have these payments any more, but on top of that we took €42 million charge into the Genzyme transaction fees. The contribution from the associates is mainly the contribution from our venture with BMS, which is benefiting from a positive exchange rate as well as increased profitability, Plavix continuing to do well into Europe. So, all in all, our businesses operating margin declined. It declined from 42.7% to 38.9%. While this is obviously, (inaudible) and this is clearly the result of a shift of mix. But it is also above the level which we reached in Q4 2010, which shows that we are now stabilizing the level of margin. If I put aside what may come later on, which is Plavix non-consolidated, but this will be for 2012. But put that aside, I think that we have now come to a plateau level, from which we can improve as a result of those cost savings on productivity improvement. So a few more comments on the main ratios. Cost of sales to sales ratio first, so 2.8 decline. Here, I think really deserve some comments. First one is the impact of H1N1. H1N1 had a reasonably low cost of production. So in fact, we have a negative impact of the absence of H1N1 sales in Q1 2011, if you compare to Q1 2010, which is playing let’s say around 0.8%. The rest is a combination of increase of cost of raw heparin and switch of business mix. Increased cost of raw heparin, you can tell the world now, the price is not increasing anymore, which is true. But in fact there is a time lag between the time you see a decrease or you see the evolution, and is the time to take it into the P&L, just because of the prior production of – 9 months. So we will see some decline going further let’s say in the second half of the year of this negative impact on a like-for-like basis. The second thing I’d like to emphasize is that, yes, on one hand we are losing high margin sales from high margin products, but if I take the direct impact of that, I see that there is still a positive contribution of the productivity of the overall industrial organization. So the impact of the loss of sales from the key genericized products with high margins typically, Ambien CR and Lovenox in the U.S., are partly offset by the productivity, the ongoing productivity. All in all as you can see first of all our cost of sales to sales ratio has now come to a plateau. It’s somewhat better even than what we reached in Q4, 2010. And the 30.4% is basically aligned with what we expect to close for the full year 2011 with a margin of let’s say 2.3% plus or minus. R&D, I mean I will be very short, I think the main message here is that the decline of the ratio and the decline of the overall R&D expenses is totally linked to the reduction of internal R&D spend, in fact fixed cost. So this is really the outcome of our reorganization, so what we did over the last two-year. The extent of spend has remained stable. We have some increase on vaccines with the launch of the Phase III studies on the Dengue vaccine and the Phase II on C. difficile, and as I said, a slight decrease, but still high spend on Phase III studies, which, out of which the ones that Elias referred to a few minutes ago. SG&A, here again some explanations, report in Q1 is that obviously H1N1 did not require any, except for marketing and sales, because we were selling that to public bodies and public governments. So in fact if I include that, the ratio is very close to the one we had reached last year. I mean the gap is around 0.4%. The second thing I’d like to highlight is that we have significantly increased our spend behind our key products. First of all, Allegra OTC, of course, as well as Lantus in the U.S. We also have the impact of excise fee that we took, we take as a charge in this category. And on the other hand, we have the strong decrease of the rest of the U.S. SG&A as well as the ongoing decrease of the reorganization we are implementing in Europe. So it’s really a shift also here of our sales and marketing effort behind where we see the growth, whether it is in products, divisions or regions under the strong decrease on the adaptation of [Safecos] as well as our promotion spend in the more mature markets. G&A as such have been precisely flat and again even if you can see some variation, the Q1, 2011 is clearly in line with what we posted in Q2 and Q3, 2010. Shortly on the EPS, because we discussed that of course at length on slides before. So at the end of the day, I don’t really have much to say on the tax rate, which is at 28.4% for the first quarter. The financial expense are basically close to null. We had a capital gain on the sale of a small asset last year, which we didn’t have this year. And the business EPS is €1.66, it is 10.8% below last year. It is 16% below last year on the consolidated side basis. But you have a significant impact of H1N1 as well as generic competition on this figure, which leads me to the slide 35. That is something I presented already on the full year. And I think it is important to spend a bit of time and hope that you appreciate the transparency we try to give on your – on how the profit of the company evaluates. So on one hand we miss the profit coming from H1N1. We miss a profit coming from products, which we’re not selling any more, the genericized products. We don’t have the revenues from Teva on Copaxone in the first quarter, but on the other hand, the underlying gross of profit of the rest of the business, which is precisely driven by the growth platforms is above 10%. So it’s again a double-digit as we had on the – during last year as I presented in the full year results. Cash flow, here again was strong cash flow generation. The free cash flow generated for the first quarter was €2 billion, it is exactly the same as the one we generated during the Q1 2010. I think it is not visible because on one hand, we see some decline in sales and profit. But in fact, we don’t see any decline on free cash flow, which shows that we have good control on the working capital and improved control on closing capital as well as capital expenditures. We had limited number of acquisition, mainly for the BMP Sunstone. So we end the quarter with a positive net debt. So if we want to make the story short, over the last two years, we made acquisitions for around €10 billion, we paid down dividends for more than €6 billion and despite of that we have even decreased our level of debt, which was very low at the beginning of this 2009 period, coming to a net positive cash position at the end of Q1. So it shows how strong is our cash flow generation. It shows also that the debt, which we raised in connection with the Genzyme acquisition is really something which is manageable. I would even more say, it’s something which is consistent with a reasonable capital structure to maximize the return on equity to shareholders. So just conclusion and hey, I’ll just repeat the two highlights. So we post for the first quarter a strong double-digit sales growth of our growth platforms. We’re on track to deliver the €2 billion cost savings by end of 2011 as we announced at the time of the full year announcements for 2010. We have limited erosion of the business’ EPS excluding the impact of H1N1. And as Chris mentioned already, when we are going to give a full update on this guidance for the full-year 2011 of Q2, I can only just confirm today that the mechanical contribution of Genzyme for the three remaining quarters is not full year contribution of Genzyme, it’s only for three quarters, should be between 3% and 4% of our net earnings. Last but not least, once again strong free cash flow generation, which has led us to be net debt free at the end of year – at the end of the quarter. I think maybe we should now move to questions.

Thank you, Jerome. We’re indeed now ready to answer any questions you may have.

We have a question from Mrs. Alexandra Hauber from JP Morgan. Madam, please go ahead. Alexandra Hauber – JPMorgan: Yes. Hi. I – of course more than one. So I’m trying to – I had actually five. This LANTUS 14% growth in the U.S., prescription growth was about 7%. So is the rest price or is prescription growth not a good measure for volume growth? And the other question is, if you really plan to file Teriflunomide in the third quarter in the U.S., what data will be included in the files, is that just TEMSO? Sébastien Martel: You want to take --

Yes. Your assumption is right. The rest of the growth evidence is price, we have the last price increase in the first quarter 2010. Sébastien Martel: And Teriflunomide...

Well, we’re looking at including actually the TOWER, the interim TOWER studies in addition to TEMSO, and we have already interacted with the FDA, and that seems acceptable. Alexandra Hauber – JPMorgan: Is that just a safety look at, from the TOWER from interim or is that any efficacy also?

No, the interim is actually understanding the safety better. Alexandra Hauber – JPMorgan: Okay, thank you.

We have a question from Mr. Mark Dainty, Citigroup. Sir, please go ahead. Mark Dainty – Citigroup Global Markets Ltd.: Thank you. Just very quickly, Jérôme, I wanted to touch on something you mentioned at the end of your comments. With respect to capital structure you made a hint that more debt might be more efficient. Should we assume that in the future you will maintain a structure that has more debt than you have in the past, and therefore that your repayment of the Genzyme debt might not be very rapid? And then the derivative of that therefore is the use of free cash flow may go to greater returns for shareholders? Thanks.

Okay, Mark, thank you for the question. So let’s go step-by-step. A, I mean, may depend upon which debt you referred to in the past. I mean, clearly it’s not our objective to reimburse the full debt associated to Genzyme. Now, I mean, let’s just keep in mind that if we have no debt by the end of Q1 and then we will add, roughly speaking, $20 billion by construction, let’s say $20 billion by the first of April, and then we have also to pay the dividend. So I mean, we need to monitor that over the coming two years. But you are right that we’re, I mean reviewing how we can optimize the return to shareholders and the cash return to shareholders by optimizing the capital structure. And I will say yes, I mean, keeping a level of debt which could be in the range of, I mean in the range of, we’re gearing of around €10 billion is something that we can definitely sustain. €10 billion. Mark Dainty – Citigroup Global Markets Ltd.: Okay, thanks very much.

We have a question from Mrs. Luisa Hector from Credit Suisse. Madam, please go ahead. Luisa Hector – Credit Suisse Securities: Thank you. Chris, you touched upon the potential revenue synergies with Genzyme, so I wonder if you could just add some color to that and perhaps within that maybe a comment on Renagel where we have the patent expiry looming in 2014, so your thoughts around that? And then I noticed specifically on Renagel in the Genzyme press release that there was this Q1 new tender in Brazil where I think we already have a generic presence. Perhaps you could tie in the generic situation on Renagel with that. And then the second question would be just to get some guidance on the other operating income. Because it did look a lot more positive in Q1 despite the Genzyme bankers’ fees, so I just wondered what the full year outlook is there?

Well on the revenue synergy, I think the most obvious is to look at the geographic footprint of Sanofi. There are a number of products, you mentioned Renagel, there’s a number of others where either the products are approved and there isn’t enough resource to be able to allocate to promote those products, or if there has been some resource, it’s significantly underfunded. I think it’s fair to say for example on the Biosurgery business, which includes particularly Synvisc, Synvisc-One and the SEPRAFILM, that Genzyme has been in a resource constrained environment and has not always had the resource to allocate to that business. So I think if we look at Synvisc-One in places like India we can clearly put some more – simply put more people behind those things and gain some synergies. The other is a little bit longer-term but they are clearly some late-stage assets in research and development that have not been funded due to lack of resource. And I think one of the first decisions that we were able to make was to be able to fund three projects that hadn’t been. And I have to credit Elias and his team because funding these was important from a number of reasons. One is because they’re good projects and deserved to be funded. Two is that it was a good thing to be able to show that, to demonstrate in real money, our commitment to invest in the business. And three, I think it also demonstrated that even a big pharma company can move nimbly and make some timely decisions. And those three projects were for example the progress of the project in Niemann-Pick, which is a rare disease and obviously right at the core of what Genzyme has been doing. We also are going to develop Synvisc-One for hip. And the third one is an ophthalmology project where Genzyme had been working with the Vision Institute in Paris, with whom we have a similar research alliance and that made it easy for us to be able to step in and move that project forward. So as we look at, I mean that’s one of the things that we’re doing right now is going business by business and actually looking at where we could be – I mean, originally, our original vision of this is that we were not going to get any revenue synergies out of rare diseases, because this is the model that Genzyme has developed and Genzyme is the gold standard. I think there may even be some in that area, it’s not a question of mass resources. But you will find in rare diseases that looking for new patients, is looking for needles in haystacks. And we may have some resources that are able to find more patients, for example in Fabry’s disease, there is no real marker, Fabry’s disease is much harder to diagnose. We may be able to help on that. We may be able to, through some of our other medical contacts, be able to – and there has been, for instances, exercises done in Taiwan, and in Korea about how to identify patients and that may be of assistance. So I think there are an awful lot more synergies. We didn’t build significant revenue synergies into our model, clearly, but I think that there are. And I think that’s actually pretty exciting. On Renagel, this is an area where we’re still going through and getting in depth, there is a clearly a patent expiry. This is a product that has – is not going to be able to be easily measured in terms of bioequivalents. There is sort of a mixed experience with the FDA as to what they are willing to accept in terms of bioequivalents where you’ve got products that aren’t actually absorbed and present in the bloodstream. There are manufacturing issues in terms of the quantities needed. So I think, we’re really trying to sort those out. And you asked about Brazil and the Brazilian experience is one where this may not be actually the traditional generic model, because actually Genzyme has been able to maintain a significant share. And I don’t have the number off the top of my head. But I seem to remember that this is something like around 80% market share despite the presence of a generic in Brazil. So we haven’t come to any conclusions on that one yet. What it’s like in a lot of these products, this isn’t a simple tablet that gets metabolized and you can measure bioequivalents on. So exactly what the subtleties are of this and what impact it is, I think we have to just sort out. And it may be a question of, is it 2014 and just a year later, a few years later. So we will work on that. On the other operating income, because we didn’t consolidate it, I have to admit that, I – are you talking about other income in Sanofi or in – must be in Sanofi. Luisa Hector – Credit Suisse Securities: Yeah. It’s in Sanofi.

Okay. So now, I’ll turn that over to Jerome.

So maybe I can take it, I mean this is typically the line when you see a lot of plus or minuses, which may vary from one quarter to another. Last year, I mean we did have some exchange rate losses last year, which were linked to our hedging policy on the high volatility of currencies. This year, we have a slight profit, so this is probablyh one of the explanations where you don’t match exactly what you would expect just by the cut of revenues from Copaxone. We still have on these lines the revenues from (inaudible) and on Actonel. And we had last year the accretion cost of Chattem, which were also the same magnitude (inaudible) enzyme but was also chopped short. Basically on the like-for-like basis, this explains the gap beyond the loss of revenues from Teva on Copaxone. Luisa Hector – Credit Suisse Securities: Okay. Thank you.

And we have a question from Mr. Michael Leuchten from Barclays Capital. Sir, please go ahead. Michael Leuchten – Barclays: Thanks for taking my questions. Question number one for Dr. Zerhouni. On the TEMSO study, despite a good tolerability, the completion rate was quite low, be interested to hear your view on that. And then a quick tricky one for Hanspeter. Going back in time, Taxotere at peak, what were the revenues in prostate cancer in U.S. and in Europe?

Well, I’ll take the first one. And as far as TEMSO, I don’t think it was any lower than the usual. Remember this is a two-year study. I have to check, but I don’t think it was remarkably lower, let me see. Yeah, I think it was well-tolerated, very similar number of patients reporting treatment immersion adverse events. So I’m not sure exactly what you are referring to, but I’m not aware of a significantly different --

We’ll check because, the whole value proposition here is you’ve got nice efficacy and probably one of the most interesting tolerability profiles. And this is not a space where low side effects has been very common amongst competitors. So it’s quite an interesting drug really because of the combination. But we’ll check and get back. Hanspeter, do you have --

On the Taxotere, I just have to give you an estimate and I would say that it was approximately 50% to 60% of sales. But we get back to you with a more precise figure in – which of course has to be in volume and in terms of value because the treatment and substance use is different between the 7 or 8 indications Taxotere has in the USA. But it’s definitely more than half. Michael Leuchten – Barclays: Thank you.

I just have, just a little more information, I was looking at my notes here and so in terms of long-term use, the open label extension of the Phase II study, which we presented showed that Teriflunomide was well tolerated for over eight years of continuous use in that open label study initially. And there was no real difference between the eight years and the 36-week. So I’m not sure exactly what you’re referring to, if you could just e-mail me and I’ll look into that. Michael Leuchten – Barclays: Okay. Thank you.

We have a question from Mr. [Phillip Allen] from Natixis. Sir, please go ahead.

Good afternoon. Two quick questions. One on Menactra which is down 40% in the quarter, so when do you expect the sales to stabilize and what can we expect of the new line extension? And also on the sales that we adapt the (inaudible) product on the growth platform, there are about €2 billion in the quarter of sales, which are, let’s say, tail products, and we find here some old product that they’re back in, et cetera. it’s basically flat in the quarter, but what can we forecast for that midterm, shouldn’t we take some minus 205% in the models? Thank you.

So I’ll start with Menactra. So there are a couple of after effects in our Q1 sales due to large order from CDC at the end of December, December 2010. And secondly, some orders that have not been shipped in the first quarter that I believe will ship at the beginning of the second quarter. When we look to the data in terms of use, we see that overall the use is at the same level, 2011 versus 2010 for the first quarter. Regarding the price, the price remains at the same level and we maintained our market share at the very high level between 85% and 90%.

I mean, the rest is in on the tail products and I’ll let Hanspeter comment.

I would say you are on the safe side if you assume flat sales over time of course those products will continue to diminish due to price, let’s say, in Europe. But referring to the product you mentioned (inaudible) is a product which still has growth in, let’s say, in Latin America and Africa and in (inaudible) I think if you estimate, zero growth you’re on the safe side.

Okay.

We have a question from Mr. Damien Conover from Morningstar. Sir, please go ahead. Damien Conover – Morningstar Research: Great. Thanks for taking the question. Just regarding the Consumer Healthcare division, given the strength in the quarter, I was wondering if you could comment on the competitive position of this division in emerging markets, particularly relating to potential synergies with the rest of the business being branded and generics. And then secondly if you could comment on your comfort level with the current scale of the business in the U.S.? Thank you.

I would start with the U.S. because that’s an easy process, we are, we have a high comfort level because as I mentioned earlier, Chattem is establishing its position by the launch of Allegra, which is probably announced at an event in our business. If Chattem continues to perform like this we have a very nice leading position in CHC, which of course always is a question of definition. if you really define it in the very, very large sense including Coca-Cola and other consumer products. Or are you really defining it as, more stringent sense as consumer health. We’re then amongst the leading five companies in the U.S, which I consider as a good position especially for a company which has been absent in the U.S. three years ago. Now for the other markets, the answer is a little bit more complicated. I think we have to say that today we cannot be entirely satisfied with our position in Europe. And we have some good positions, one of course is here in France. But we have absence in let’s say in the United Kingdom and nearly absence in U.S. – in Germany, which we have to look over time, if there is opportunity, opportunity to switch products or evidently also to make bolt-on acquisitions. And if you go to Latin America we have a market leading position in CHC, which is so far, for Mexico, which is so far Brazil, which is to some extent also true for all of the – more smaller markets in Latin America. And then again in Asia is a position, is mixed, you have made a significant progress in China though the two acquisitions of Sunstone and Minsheng. We have good traditionally strong positions in let’s say Philippines and Indonesia and in other smaller markets, Thailand for example. We have totally redesigned our business in Australia, which has been 100% prescription business 3 years ago. And today it’s depending to 40 – on 45% on CHC sales. And once again a soft spot in Japan, where we have today no CHC position, but where we see significant opportunities and amongst them of course, an analog switch of Allegra into OTC, as following the example of the United Sates. So overall we have made a very, very significant progress as outlined in one of my charts. But we have to continue to work. But if we keep the speed of the last two years we don’t worry.

I think there was an element of your question which was around the synergy with the rest of the portfolio. I think it would be fair to say, as you go into emerging markets, market segmentation is not nearly as crisp as it is in, say Europe and the US. And certainly a broad portfolio in the pharmacy is both a key success factor and a strength of Sanofi. And so I think given the importance of the pharmacy to that chain that shows the demonstration of the importance of CHC and ability to communicate directly to the consumers to build up branding. So for example in Brazil we actually sell CHCs under the Medley brand, but we also sell unbranded generics under the Medley brand as well. So there is some synergy, not necessarily in having branded generic OTC products but, although that may be possible. But I think there is an element of a portfolio effect in that business. Sébastien Martel: Operator, we’re going to take one last question, please.

We have a question from Mr. Graham Parry from Bank of America – Merrill Lynch. Sir, please go ahead. Graham Parry – Merrill Lynch International Ltd.: Great, thanks and just a quick question on the LANTUS manufacturing. Following the warning letter, wondering if you had any further communication with the FDA, or do we just have to wait the six months for their response? And also if you could clue us in on what was in the remediation plan that was submitted in March that wasn’t in the two that the FDA had previously rejected. The second question on the EMA multi benefit risk assessment, any expectation on timeline, when we should get a result for that? Thanks.

So on the warning letter, I mean I’m not sure what you’re talking about remediation, I mean we certainly submitted a remediation plan with the FDA and the FDA has accepted that and the FDA has indicated they’re quite happy to come and do the inspection when we feel that we’re ready. I think you have to recognize that the FDA has something like doubled the number of inspectors over the last two years, and has clearly and correctly, I think, become much tougher and even tougher than they have been in the past. So I think their willingness to escalate to warning letters or their willingness to look at things critically and to make sure they’re sending signals to industry has evolved over time. So, because you remember this inspection was to come in and look at the fexofenadine primary production related to the Allegra switch, and actually the inspectors decided not to look at that and looked at Apidra, which was not what the usual inspection practice has been. That doesn’t change anything about the nature of the letter but we – I think Sanofi has actually got one of the better records in this industry on manufacturing quality. Frankfurt is one of our star sites, so it’s something we’ve taken extremely seriously. We’ve got resources all over this and I think we’re extremely confident that we’ve got this issue resolved. In terms of MULTAQ --

Yeah, as far as MULTAQ is concerned, the review of all data is still ongoing at this point in terms of the risk of liver injury and, associated with MULTAQ and we’re still evaluating this as we go. We are trying to get epidemiology data and we expect the team to deliver their assessment in the coming month. We can’t predict what date that would be. Graham Parry – Merrill Lynch International Ltd.: All right. Thank you.