Ladies and gentlemen, welcome to Sanofi First Quarter 2014 Results Conference Call. I now hand over to Mr. Sébastien Martel, Vice President, Head of Investor Relations at Sanofi. Sir, please go ahead. Sébastien Martel: Thank you. Good afternoon and good morning for those in the U.S. Thanks a lot for joining us today to discuss our Q1 2014 financial results. As always, I remind you that the slides are available on the Investors page of our Web site at www.sanofi.com. Before we begin, as you can see on Slide 2, I'd like to remind you that information presented in today’s call will contain forward-looking statements that involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. I refer you to our Form 20-F on file with the SEC and also our document reference for a description of these risk factors. On Slide 3, you can see the agenda for the call. With us today are Chris Viehbacher, our Chief Executive Officer; and Jérôme Contamine our Executive Vice President and Chief Financial Officer. First, Chris will discuss key highlights, and then Jérôme will review our financial performance. Chris will return and make concluding comments and then we will take your questions. We also have Dr. Elias Zerhouni with us. Dr. Zerhouni as you know is President of Global R&D. He will be with us for the Q&A session. With that I will turn the call over to Chris.

Thank you, Sébastien. Hello everybody. So we will start off with key highlights for the first quarter. We have top and bottom line growth inline with our expectations with sales up 3.5%, business earnings per share up 5.8% all at constant exchange rates. Jérôme will take you through the exchange rate impact which of course continued from last year and which will likely continue at least until the first half of this year. New product launches Nasacort Allergy 24 HR those in U.S. I hope you seeing it on the shelves in pharmacy, its going extremely well. NexGard the chewables in the United States is also going extremely well mostly just in the South of the United States obviously because of the weather. But actually, the stock in has gone well in the first quarter as well. We have – I think it's an extremely strong progress in our R&D pipeline and in fact inside the company significant effort is going on to ramp up all of the launches that are facing us really starting from the second half of this year. We will talk about the dengue vaccine results from yesterday, but obviously a lot of significant advances with Lemtrada alirocumab, LixiLan and dupilumab. And finally, our open innovation model was strengthened, we have strengthened our collaborations with Regeneron and Alnylam and we have two new collaborations with UCB and SK Chemical. So we look at sales, pharmaceutical sales which is essentially everything but vaccines and animal health and which is how we present the numbers in the actual official accounts. Pharmaceuticals were up 4.7% at constant exchange rates. You see a decrease of 4.2% at constant exchange rates for vaccines that is not a continuation of the supply issues that's really just a number of timing issues and…

So we had a good start to the year with results inline with expectations and guidance. I think we are making significant progress in key pipeline assets. We continue our collaborative model and we continue to be attentive to the shareholder returns as you may remember the dividend will achieve a 55% payout ratio for 2013. And we continue the opportunistic buy back of shares. So that will – operator we will turn it open to questions.

(Operator Instructions) We have a question from Michael Leuchten from Barclays. Please go ahead.

Thank you. It's Michael Leuchten from Barclays. A couple of questions. One on Lantus, the €70 million that you mentioned can you clarify that the net change from Q1 to last year Q1 this year or is that a high inventory level that is carried in Q1 lower inventory level that's carried in Q1 and hands were washed out? Then related to that U300 filing strategies, U.S. versus Europe and also the related regulatory requirements around and particularly in cardiovascular side effects, if it is an NDA in the U.S? And if I could tempt you on dengue the press release was fairly limited in terms of the details, if 56% reduction in cases, can you just put that into perspective from a regulatory perspective I understand that this is meaningful from a health economic perspective. But, for filing is that enough, what you need to show what does regulators really want to see? Thank you.

We will start on dengue which was – yes, I mean the FDA required a minimum efficacy level of 25%. So 56% is a very good result and we expect this to be very filable. Just to give you an idea of the Phase IIb study was only around 30% but that was just because the Phase IIb study was a 4000 patient study and here we had 20,000 patients. So clearly you got enough a lot more patients and you can really understand the statistical significance of where we are in the vaccine. Well, with the second question on the cardiovascular, I didn't get that.

It’s on Toujeo, we will mean to cardio…

Oh, yes. We have definitely – we had definitive of FDA guidance that we will not require at cardiovascular outcomes study. Remember we did the –

Yes. This is Elias Zerhouni. I mean as far as cardiovascular outcome study for Toujeo it’s not in – not what we expect – we know for sure that the FDA is looking at Lantus is the competitor and so as far as all of our interactions have been with the agency. There is no expectation to conduct a cardiovascular outcome study in the U.S.

All right. So on the inventory thing Michael; it was a higher inventory level last year, the lower inventory level this year because of the stock – the difference being the €70 million. So it's about 60% related to the higher inventory level last year and 40% related to this year.

Thank you.

The question comes from Vincent Meunier from Morgan Stanley. Please go ahead.

Hello, gentlemen. Thank you for taking my questions. Starting with capital allocation. There is currently a waive of M&A in large pharma and also shrink-to-grow approach which seems to be more trendy currently. What do you think about this? And would you still prefer diversification and then in which area? And then I have a question on Alirocumab, you said that in the U.S. the FDA is likely to have the same position for the different products in the same place with regards to the requirement of the CD trial. Can we assume that if Amgen files and the filing is accepted then Sanofi will be ready to do it almost immediately or will it take a few months for you to prepare the dossier? And the last question is on the buyback, it seems that now the buyback is becoming a more regular and is it still then an opportunistic buyback or is it switching towards a more classical and sustainable program?

Right. Just on Alirocumab, I mean, as its difficult to compare exactly where Amgen is at – the only thing we would say is that from what we understand there is no real reason to suggest we would be ahead or beyond Amgen at this stage. So we would expect that these are all roughly the same time line as far as we can tell from public explanations by Amgen. There is an awful lot of elements we are going to hear but we prefer at this stage not to do that. We just – there is the outcomes study in there – discussions are ongoing, so we prefer not to anymore precise. Coming back to capital allocation, I mean, I think I said this morning for the press, I mean I think there is – the transactions can be grouped into two different camps. I think you have seen some companies – unless they have been building for some time, I certainly heard it on the road myself from investors. That there are some companies who are diversified in terms of having a number of different businesses, but which don't have critical mass. Also, if you start looking at what is the percentage to total sales of some of these diversified businesses, you see that there is actually some pretty dramatic differences. I mean, if you looked at Lilly for example 90% of its business is in pharma and Elanco really only represent actually less than 10%. With the acquisition of it’s – of the Novartis business it starts to significantly increase as a percentage of total sales and this will of course be accelerated by the fact that the pharma business at Lilly is declining. But, it's really a 85% to 90% pharma company. If you look at…

Thank you very much.

Question from Mark Clark from Deutsche Bank. Please go ahead.

Yes. Good afternoon gentlemen. Couple of questions. Firstly, on the dengue, I appreciate that the Tecfidera is still to be presented at Scientific Congress. But, is there anything you can tell us on the reduction hospitalizations, which I think is the key issue. And also can we impute from the 56% efficacy that it was effective in all of the four serotypes? And the second question is on animal health, I mean it sort of follows from the previous question about capital allocation. It's sub-10% of your sales, it's a drag on your growth for the last year. Although, you think it will return to growth, but my suspicion is it won't match the overall growth of the rest of the business, simply because of the drag effect of Frontline. Is there an argument for divesting oral alternatively looking to do a sort of Glaxo, Novartis OTC partnership deal here? Thank you.

Well, yes. I will take the dengue question. This is Elias. I mean, in terms of the specific results, I don't want to really prevent the publication in a top journal which – journals are really anxious to publish this before the end of this quarter. So the results will be out there. But it's trending all in the right direction. Hospitalization definitely down, I don't want to give you specific numbers. But I think that from our standpoint, this is really a landmark event in terms of developing in dengue vaccine. We will have to wait obviously for the second Phase III, all parameters are moving in the right directions.

So coming back to animal health, I mean I think when we acquired the other half from Merial from Merck. We always knew that that Frontline was going to be a drag on the growth in the near term. And you may remember that I actually when we acquired the other half of Merial, the objective was actually to merger it and create a new joint venture with Merck and really to dilute the effective Frontline. Frontline is the only and by far billion dollar blockbuster in the animal health business. I mean a big product in animal health is typically around $100 million. So we have a huge product here. Heartgard is another product, which went off patent many, many years ago. And which is still, I think the fourth biggest product in the animal health industry. But obviously, which doesn't have as much growth. Now, we have got new products coming in. We couldn't do the merger with Merck at the time because of anti-trust. And in fact, it's very limited what you can do in animal health, it all depends on where you are and vaccines in different diseases. I mean they are not just looking at market share as a company, they get into the granular details, we don't have IMS in animal health or something called Vetnosis. But the actual categories and how you define a market is a lot less clear and in particular in Europe, this can be quite challenging. Our approach to animal health has been, this is part of our diversification strategy that actually as a business it's much bigger than other people's business. It's not as big now as a Elanco or Merck's business. But it's still is a pretty big business. And we have a number of new products to come in. Obviously, this is something that has to contribute to Sanofi's growth over time and we expected to do so. And so there is no thought process about doing anything today. I mean, if we could acquire something to make it bigger, we would do so. But, again, there are quite a number of constraints on them on this from an anti-trust point of view.

Okay. Thank you.

Question from Graham Parry from Bank of America. Please go ahead.

Thanks for taking my questions. I'm just picking up on the Regeneron consolidation, the 45 million is about 1% benefit to EPS this year that's if you were to just pay 20% of that non-GAAP earnings it would probably yield more like 3. So can you just help us more through, how you – or what the practice are that bring the number down to just 1% decrease, how much of that looks like it was one-off this year and perhaps appeal for sort of accretion you are thinking about in 2016 – sorry 2015 and beyond? Secondly, on the Lantus destocking, can you just give us a feel for what level inventories are at now they – actually at a very low level. And is that at a level of that stage because of the changes that you are seeing in the inventory pipeline? And also, any comment you put on rebate pressures, how they turn to be as hard as you are flagging at the beginning of the year? And then finally, on Lemtrada, can you just expand on the constructive discussions you had with the FDA given its emphatic view on non-approval in the briefing documents, what's triggered do you think that allows you to actually refile? Thanks.

Well, let me take them in reverse order. On Lemtrada we really can't give you a much more detail. It's generally pretty bad form to talk about discussions with the FDA in public. So we have been – we tried to give you factually what's going on. But really can't go into any more detail on that. Considering, sorry, what's the second question?

Lantus inventory.

Of the inventory, we are down to 12 days. At the end of the quarter it was about 14 days. We are obviously at a pretty low level of inventory. And then, there is a kind of a trend actually obviously in the industry, there is a question always of how things are managed in cash flows. And I think we got to quite a low level of inventory. We have to wait and see where that goes. I suspect that over the course of quarters that could go up and down a bit. But, I think it looks like it’s – as far as I can – as we can tell it’s washed out. Rebate, not a significant impact in this quarter. I think it’s fair to say that the diabetes market is becoming increasingly competitive. And I think some are pushing harder than others for market share. So far we haven't seen anything on the horizon that would cause us to change our business outlook for the year. But there is definitely an increased competitiveness in this field. Jérôme Contamine: On the Regeneron, Graham, so if I'm not wrong, I mean check what was the U.S. GAAP net profit of Regeneron in 2013 and I think it was $524 million. So if I take this net profit maybe not – it could be around $500 million. So if I take 20% of that that's $100 million of the (indiscernible) that $75 million i.e., in the range of €50 million plus or €55 million. So we are very close in fact to what I just mentioned, we showed €45 million in the expense area. The main detailed analyses are mainly coming from deferred tax accounting and to a lower extent the timing of some revenue provision. So now, I mean they are – underneath – dig into the consensus for 2014 and I gave this €45 million. But if you look ahead, I mean currently this is the contribution of (indiscernible). So if I just take 2015, (indiscernible) consensus figure, I don't have any more information. We should be at least at €100 million in 2015 on this trend. And this will continue to increase and of course it depends upon the assumptions they take on the P&L on the sales of Regeneron.

Okay. Thank you.

The question from Philippe Lanone from Natixis. Please go ahead.

Good afternoon, gentlemen. Maybe a question on emerging markets because we have decline in Africa, some specific factor here and how would you see emerging markets going forward especially with China recovering? Second question on tax, the tax guidance for the year was 25% to 26% in the low part of the range. So is there something we can forecast for a year. Maybe a last question on animal health because we have very strong from NexGard and there was another product to be launched, will it be the test in Q2 and when we will see the next launch understand there were others coming? Thank you.

So in Africa. This is really – its Algeria and Morocco principally. There is also a tender in Libya that has a change. So this is all really just one-off effect. So there is nothing fundamentally different we have solid double-digit growth in Africa over the past number of quarters. And we don't see any reason for that to change. In general, our emerging markets was affected a little bit by some of the timing on Pentaxim. This is our pentavalent emerging markets vaccine not produced in Toronto. So it's nothing to do with others just really timing issues. If I take the vaccines part out of that sales of pharmaceuticals in emerging markets were up 8.6%. So you can see that emerging markets from quarter-to-quarter is going to be affected by here and there. And of course, it’s only got one quarter. So you are going to have more of a quarterly impact as we start to see a year-to-date impact with multiple quarters. These one-off effects and have a less impact as you go through the year. I have to say, I had been in China twice this year already. One of things I keep telling people is that just because you see a decrease in the growth in GDP, doesn't necessarily mean that you see a change in the fundamentals of what drives healthcare markets. One is, the emerging middle class. So this continues just because growth slows down doesn't mean, the middle class stops being creative. And the second is, that you see this in general across emerging markets a significant migration of people from rural areas in the cities. And this is extremely important because not only do people make more money in the cities, not only the people suddenly start eating differently and having…

And what about 2015, the 28% you guided on, is it still valid? Jérôme Contamine: No change. Upcoming can we do better. This is something we are working day on day. But I think 28% guidance remains for 2015.

Okay.

Next question please.

A question from Eric Le Berrigaud from Bryan Garnier. Please go ahead.

Yes. Good afternoon. Three questions actually. First, if we put together everything that is expected to be better later in the year and cost of good that deteriorated into Q1 that will improve over the full year animal health and vaccines that will improve quarter-after-quarter. Comp present basis in Brazil and China that will get better also in the second half. The stock in Lantus being negative in Q1 Pentaxim delays and the tax rate being lower than expected. And with Q1 already well in the middle of the range, how could you explain the maintenance of the – of your guidance except that you, you usually are reluctant in moving the guidance up to the first quarter? And also having some more share buy backs potentially on Regeneron? Second question, more general one, as to oncology business, what kind of statement would you make about your position in oncology, would you say that that could be a future for some pharma companies outside oncology or you are not pleased with where you are and you would like to find a partner or find a solution to be back into the game? And thirdly, on LixiLan are you happy with the way LixiLan is going excluding the situation in Germany or do you, would you say that its taking more time than you expected to make this drug a significant drug for you?

Well, Eric, I think you answered your own question. I mean we have never looked at guidance at the end of a quarter. I think it's always a good idea that you give guidance at the beginning of the year and then you look at things again in the mid-year there is still lots of time left in the year. And I think it's good to have a better sense. So the guidance that we gave a few weeks ago was still valid and if you look at oncology, oncology I think is an extraordinary interesting area. We usually had a look at it internally. The classical oncology market is not going to go away anytime soon that's absolutely clear. But, I think we are seeing a real I think shift here in how cancer is going to be treated, we are seeing for the first time with immunotherapy on opportunity that actually cures some cancer patients and we are really just at the beginning of that. So you got a CTLA-4, (indiscernible) that's first out there. That really can help 6% of patients according to clinical trials. You got the PD-1 path coming along that would appear on cancer types such as melanoma, non-small cell lung cancer, renal cancer to have benefit of about 10% of patients. Then obviously, there is going to be thought processes around combinations of these so called checkpoint inhibitors. Then you got other types of transfer cell technologies that are coming on. So I think the cards are going to be redistributed here in oncology and there is an opportunity to be involved in it. We actually happened to have a portfolio of assets and then I think – we will hours to play in this market. We are not going to talk about…

Thank you.

Question from Peter Verdult from Citi. Please go ahead. Mr. Verdult your mic is open.

Hello, hello.

We can hear you.

Yes. It's Peter Verdult here from Citi. Chris, just a couple of views on terms of the capital allocation there we've touched on few other points. When your communication of M&A is being pretty consistent over the past year, you've reiterated again today, yet at the same time you're sitting at one of the stronger balances sheets in the sector. I was wondering given the recent industry activity and attempts by some companies to resist Lantus, do you see scope in the current climate and paying opportunities other than tuck-ins. And then just one add-on to that before you answer it, and I think is just being asked on oncology. I'm happy for you Elias, should be down here, from my perspective it's difficult to see (indiscernible) into credible platform organically given the current pipeline and developments elsewhere? So I just want to get thoughts on that and then I have two follow-ups.

Well, let me just talk about oncology, because there is also kind of seeing in some notes around even on the IL-4 in asthma that, there is kind of an attempt to translate small molecule marketing into large molecule marketing. And I'm not so sure that that's really going to play. Generally for example in a small molecule business there is a huge benefit to being first entry into the market. And that it makes sense when you think about it, because all drugs are relatively inexpensive. We're talking about a couple of dollars a day, four or five dollars a day. And with small molecules you're never too sure around the safety profile and therefore a product that gains physician, gains physician confidence is not overly expensive. It's makes a hurdle much higher for anyone else coming in as a second and third line. A contrast that was a biologic drug, which is by definition a lot more expensive than the small molecule. A biologic is unlikely, or certainly less likely to have some unknown side effects up on it. And so there I think you’re going to be in a model, if you're going to pay enough an awful for drug and you are not as concerned about side effects. I think you are going to have something that really then depends on efficacy. And I'll tell you, I would use this as an analog the years I spent in HIV, and, these were relatively expensive drugs as well. And when you looked at HIV, actually the entry in was a lot less relevant than in some other areas. So whether you're looking at IL-4, or you're are looking at some of these checkpoint inhibitors. I actually think that people coming in potentially where the larger portfolio ability…

The last question from Alexandra Hauber from UBS. Please go ahead.

Thank you for taking my questions, I actually got three. Firstly, is there anything in your, I'm looking at the pharma cost of goods, not at group cost of goods, is there anything special about your product mix in the first quarter that left you – that lead to report always low cost of goods in the first quarter that's certainly was the case last year, the third quarter 2013 cost of goods were 200 basis points below average of the year. And now we're seeing again very, very low cost of goods is that something that is sustainable or we are going to see the same creep of the cost of goods in trauma for the remaining quarters? Second question is on dengue again, I was wondering whether you could educate us a little bit about serotype distribution of Asia versus Latin America and also whether that distribution is relatively stable. And would it be fair to assume that in the Phase III you actually had a similar serotype distribution in the Phase III (indiscernible) results, you had the similar serotype distribution as you had in the Phase II? And third very quick question, just coming back one more time on (indiscernible) counting. Should we assume that your, the IFRS number is actually also going to be the number relevant for your adjusted – for your business net income numbers. So there is no further adjustments or no adjustments it's whole of the U.S. GAAP figure to come to the right number which is your business net income which is guidance basis?

All right. Let me just say on Q1, remember there is a big difference between pharmaceutical manufacturing and biological manufacturing and that you generally have a big fixed cost in biologics and not very much variable cost. And first quarter tends to always be a small quarter for vaccines just because of the nature of our business.

I'm talking about pharma cost of goods, I'm sorry if I interrupt.

Pharma cost of goods.

Same thing in pharma, even if I take on vaccines entirely out of the equation. Jérôme Contamine: So what is your point that if…

The cost of goods is higher in Q1, the only…

It's lower, it's actually lower. Jérôme Contamine: The answer is lower by 0.2%. On the published basis, the cost of good of pharmaceutical is 29.7% ratio in Q1 2014 versus 29.9% in Q1 2013, it is an improvement by 0.2%, which is of course, I mean which is good improvement and of course the equation is, it's sustainable over time. And I think that this is the type of improvement we should see quarter-on-quarter in the coming quarters. Now, we need to think that the mix of business that was with them in coincidence to this month – this quarter we have sold, we have sold Lantus in the U.S. if we don't have any modest, this effect in the U.S. inventory this would be favorable to the to the ratio. On the country, I mean we have sold more Plavix in Japan as we've noticed linked to the impact to the [V8] (ph) issue that as led the trade to be that inventory, which will stable in a little bit ratio. So I mean we cannot look at the ratio on a quarterly basis too precisely, but I can just confirm that over time on for the full year, we will see an improvement of the ratio on the constant exchange rate basis versus last year all in all including vaccines and animal health. And as we know I mean we roughly follow the path that Chris has described as a big quarter, small quarter and this as some impact on their cost of sales ratio, so hopefully it helps. So there will be improvement, provided improvement and we expect to have the cost of sales ratio to be better on a full year basis 2014 versus 2013 as we said already being, anyway when I say better its between (indiscernible) this is a bit where the – having done something light depending directly upon the pattern of what we are going to sell. On your second question, U.S. GAAP IFRS, I mean no, I think that now in the P&L originally its (indiscernible). So P&L is original on these revenues from cost, pre-tax profit impact of stock options on back of tax. So if you look in detail, you will see that because, I believe that's the question, communicates on the non-GAAP U.S. basis which exclude those – the stock option impact or equity remuneration impact as well as some tax impact. If I understand well, the reason why they do that is relevant are not cash. We communicate after cash, along cash elements when you counting tax of anything means remuneration. So basically that fits. So the rest is minor issue, so don't expect a big significant disturbance between IFRS figures on business net income figures on this matter for various reason which I just described.

And I think it’s fair to say there is a non-cash remuneration items, it’s a practice of most of the biotech, it's actually to do below the line where is on the pharma side it tends to be above the line. Yes, just on the margins, I think there has been significant effort done on the pharmaceutical side, as we've seen some significant shift in the mix of business to actually achieve efficiencies. Our real next target is going to be on the biologic side, we've certainly seen some improvement in gross margin on Genzyme as the cost goes down every year of consent decree, the consent decree plan takes us into 2015 and we've been trying to bring cost of that consent decree down every year and we have been able to achieve that. Vaccines have been first and foremost to ensure that all of the issues raised in the warning letter have been adequately addressed. But, I think that's going to be the next biggest area for us to really examine over time as to how we can get a better cost of goods out of our vaccines business and biological manufacturing on a broader basis. You asked about dengue, so I will turn it over to Elias.

This is Elias. So again, I'm not going to give you very specific answer that could jeopardize the prompt publication of a comprehensive paper. I think we owe this to our investigators hoping to do this by the end of this quarter or if possible so that information will be given. But you are asking a very crucial question, was there a difference between Phase II and Phase III. And this is a question that I will answer two ways. One, the Phase III was conducted in the exact same region, in fact Phase III was filed before Phase II was completed. And so there shouldn't be a difference. And I can say that being in the exact same geographic region there is no reason to expect difference between the two in this distribution. But, again, the specific details and the specific numbers I would like to defer the investigators who are writing this paper.

We are already seeing, we don't think its necessarily, I mean, we don't really know until we see the Phase III study whether there is a big difference between Asia and Latin America.

Right. So that's a good point that Chris is making again. I think its really important to realize that we can interpret constantly this Phase III because its conducted in the way we conducted the Phase II. So we have the baseline data. The second Phase III is obviously going to be conducted in eight different regions of the world. And those data obviously will inform us even further about the distribution. But we cannot say that the distribution will be the same in Latin America as it is in Asia. But we can certainly say that it should be similar between the Phase III conducted in the same region as the Phase II.

I think let's not get caught up in the serotypes. First of all, remember the FDA – the Phase III studies were not design to actually examine the statistical significance of efficacy by serotype largely because that agency is looking for overall efficacy because from a public health point of view what you really looking to do again is not only protect people but also reduce the number of people who can in fact others. And this level of efficacy is extremely for serotype circulate and regardless of where you got variations in the serotype. It is really public health people are looking at the overall impact on herd immunity and populations. Most of our investor base lives in area where dengue doesn't really occur. If you travel to dengue endemic areas and this could be Vietnam, this could be Singapore, this could be Brazil, this could be Mexico, this could be all kinds of parts of Africa, India. This is a major, major health issue. When you travel around, I was at APAC last year in Indonesia, you see big signs out, warning people about dengue. You got 100,000 cases of hemorrhagic fever in the Mekong Delta. You got major issues in Singapore with dengue. And because this is particularly in populated areas you can see a rapid increase in the epidemic area when it occurs. So for us this is a major advance in public health in the Southern Hemisphere. Our industry hasn't typically developed drugs for this Southern Hemisphere but this is a real incidence where we have really tried to address that. And I think that's you are seeing some – such strong interest on the scientific community, from governments in all of the Southern Hemisphere. And that's why we are cautious about the results. We…

Ladies and gentlemen, this concludes the conference call. Thank you all for attending. You may now disconnect.