Sebastien Martel - Vice President, Head of Investor Relations Serge Weinberg - Chairman of the Board, Interim Chief Executive Officer Jerome Contamine - Executive Vice President, Chief Financial Officer, Member of the Executive Committee and Global Leadership Team Peter Guenter - Executive Vice President, Global Commercial Operations, Member of the Executive Committee and the Global Leadership Team Pascale Witz - Executive Vice President, Global Divisions & Strategic Commercial Development, Member of the Executive Committee and the Global Leadership Team Olivier Charmeil - Senior Vice President, Vaccines, Member of the Executive Committee and Global Leadership Team David Meeker - Member of the Executive Board and Executive Vice President of Genzyme and Member of the Global Leadership Team Carsten Hellmann - Executive Vice President of Animal Health and Member of the Global Leadership Team Elias Zerhouni - President, Global R&D

Graham Parry - Bank of America Merrill Lynch Michael Leuchten - Barclays Vincent Meunier - Morgan Stanley Jo Walton - Credit Suisse Florent Cespedes - Societe Generale Luisa Hector - Exane Philippe Lanone - Natixis Steve Scala - Cowen

Ladies and gentlemen, welcome to the Sanofi 2014 full year's results conference call. I will now hand over to Mr. Sebastien Martel, Head of Investor Relations. Sir, please go ahead.

Thank you. Good morning and good afternoon to everyone. Thank you for joining us today to discuss Sanofi's financial results for the fourth quarter and full year 2014. As always, the slides to this call are available on the Investors page of our website at www.sanofi.com. Before we begin, as you can see on slide two, I would like to remind you that information presented in this call will contain forward-looking statements that involves known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. I refer you to our Form 20-F documents on file with the SEC and also our document reference for a description of these risk factors. On slide three, you can see the agenda for the call. We have with a full house today and we expect the call to last approximately 90 minutes. So with us today are Serge Weinberg, Chairman of the Board of Directors, Chief Executive Officer, Jerome Contamine, Executive Vice President and Chief Financial Officer, Peter Guenter, Executive Vice President, Global Commercial Operations, Pascale Witz, Executive Vice President, Global Divisions & Strategic Development, Olivier Charmeil, Executive Vice President, Vaccines, David Meeker, Executive Vice President & Chief Executive Officer of Genzyme, Carsten Hellmann, Executive Vice President of Merial and Elias Zerhouni, President of Global R&D. First, Serge will discuss key highlights of the fourth quarter and the full year 2014, then Jerome will review our financial performance during the period. After that, our business heads will review their respective operations and Elias will provide you with an update on our R&D portfolio. We will then open the call for your questions. I will now turn the call over to Serge.

Thank you, Sebastien. Good morning and good afternoon to everyone who has joined our conference call today. I am glad to have this opportunity to review with you the key highlights of Sanofi's performance in 2014 and to provide you with our business outlook for 2015. However, before I start, I would like to make a few comments on where we stand with the company today. First, we have finished 2014 with a solid performance and can look back at a successful year. We returned to growth and we delivered financial results in line with our guidance. Our late stage pipeline of innovative compounds has never been so robust. As has we have entered into 2015, further milestones have already been reached in bringing our new medicines and vaccines to market. Over the past few months, in my current role as a CEO, I have been impressed by the incredible resilience of our diversified businesses, the depth and breadth of our organization and the commitment of our teams across all the world. Today Sanofi is operationally and financially very strong and we are well prepared for the execution of our multiple new product launches. Under the leadership of the members of the executive committee, including those who are with me on this call today, we continue to execute our strategy and focus on the growth of our operations in 2015. At the same time, the Board is making good progress with the search for a permanent CEO, as c we are talking to a limited number of candidates. The search for a business leader with a deep understanding of our industry and a broad management experience is well underway and we hope to make an announcement in the course of the first quarter. So today, I feel extremely confident about…

Well, thank you, Serge and good morning and good afternoon, everyone. So we will take you a bit more in detail through our financial results for both the full year and on Q4. So I start with slide 15 which is focusing on the FX impact. So as you can see, in the fourth quarter of 2014, the impact of foreign exchange rates on bottomline turned positive, mainly due to the weakened Euro versus the U.S. Dollar, of course. Sales were positively impacted by €229 million or plus 2.7% in the quarter. At the business EPS level, we experienced a positive currency impact of 1.5% or €0.02 in the same period. However, still on the full year basis, exchange rate movements had an unfavorable effect on minus €792 million, negative 2.4% points on net sales or minus €0.22, negative 4.3% points at the business EPS level. Other currencies impacted sales in the fourth quarter primary included the Russian Ruble and the Japanese Yen. So as Serge has already mentioned and I will detail a bit more later one, one can expect this positive impact of FX to continue to impact positively our P&L in 2015, also showing that Sanofi is well-positioned to take advantage of the U.S. Dollar/Euro evolution in 2015 versus 2014. So I now would turn to slide 16. And I will take you a bit more in detail with certain items, which were relevant to the P&L in the fourth quarter. So net sales were €9.1 billion, up 4.6% at constant exchange rates. Other revenues were €98 million, an increase of 5.7% at CER as well. Fourth quarter gross profit was €6.1 billion, up 5.5% at constant exchange rates as cost of sales increased only 2.8% at CER. The ratio of cost of sales to net sales…

Yes. Thank you, Jerome and hello to everybody on the call. So we move to slide 25 and you can see from the slide that we really enjoy a very well balanced geographical split, basically you could think of sales being divided in three buckets, roughly one-third in the U.S., roughly one-third in emerging markets and one-third in Western Europe and Rest of the World. Now emerging markets and U.S. actually showed quite solid growth in 2014. Also a point of satisfaction is that we were able to manage the stabilization of our sales in Western Europe, despite well-known government austerity measures. As for Rest of the World, where the largest shrink is obviously, Japan, sales were down as a result of loss of exclusivity of a number of products over there, such as Allegra, Myslee, Amaryl and Taxotere. When looking at the emerging markets, our growth in Latin America was boosted obviously by the recovery of generics in Brazil. But even when excluding Brazil, emerging markets still were growing by 6.5% at constant exchange rates. Clearly, it is obvious that a number of countries in Africa, Middle East were affected by geopolitical instability but yet this region was also growing by 2.5%. Also noteworthy to can see that Asia and then the cluster of Eastern Europe, Russia, Turkey continue to perform well. Obviously, we definitely closely monitor what is going on in Russia and for those who are interested, I can tell you that Russia represents 2.3% of our global sales in 2014. But I think it's really important to underline that we are absolutely convinced that our global presence is an absolute core strength of the group. We move to slide 26. So you can see that in 2014, the diabetes business continues to deliver double-digit growth, 12.1%,…

Thank you, Peter. So first I would like to emphasize, as Peter mentioned, all the efforts that have been made within Sanofi in the past two years to build the capabilities and coordinate all the activities across R&D, medical, market access, marketing and commercial, to get our organization ready for such an important year 2015 which will have several major product launches. So I am now going to talk to you about those launches. Three have been this year, Afreeza, Toujeo and Praluent. So if you see on slide 28, I will start with Afreeza. Afreeza is the only inhaled insulin available, as Peter mentioned, since Tuesday in the U.S. Afreeza is a real innovation, a technological breakthrough, which underlines Sanofi's commitments to develop solutions that fit patient's life. So Afreeza is a drug device combination product with great innovation on both, the drug and the device. On the drug side, Afreeza is a dry formulation of human insulin rapidly absorbed and has a short duration of action. It is meant to be administered at the beginning of the meal to help patient achieve blood sugar control. On the device side, the inhaler itself is remarkable. It is small, actually smaller than my lipstick. It is discrete, easy to use and requires limited training with no changing parts or any type of maintenance. So Afreeza is intended to address people living with diabetes who show resistance to insulin initiation, mostly by fear of injection, but also those who need intensifying of insulin therapy. So Afreeza is an important addition to Sanofi's growing portfolio in portfolio, a portfolio of integrated personalized offerings and it is one that highlights our long-term commitment to patients living with diabetes and our dedication to bringing innovative therapies to people living with a disease. The next…

Thank you, Pascale. So starting with slide 31, Sanofi Pasteur delivered robust growth in 2014, driven by the performance of our flu franchise and our pediatric portfolio in the second half of the year. Vaccine full year sales grew by 7.2% at constant exchange rates, reaching €3.9 billion. This solid performance was achieved despite remaining capacity constraints which we will continue to address in 2015 in the context of strong demand. As expected, after an almost flat first half, the second half of 2014 grew double digits with sales growth accelerating in Q4 2014 to 16.2 compared to Q4 2013. Overall 2014 vaccine sales were supported by two main drivers, flu and pediatric vaccines. First, our flu franchise. Sales exceeded €1 billion for the firs time in 2014, confirming our global leadership position in the flu vaccine market. Sales of flu vaccine grew 25.2% to €1.2 billion as a result our differentiation strategy in the U.S. and a strong performance in the emerging markets. In the U. S. alone, we sold 64 million doses this season. In emerging market, we delivered strong growth in Mexico, our second market by size now, after the U.S., following an expansion of recommendation to our flu vaccine. In China, we supplied for the first time flu vaccines out of Shenzhen facility. Second driver, Polio/Pertussis/Hib vaccine. Full year sales reached €1.1 billion, up 1.9%, reflecting the recovery of Pentacel in the U.S. In 2014, Pentacel supplies steadily increased each quarter. Now for 2015, we anticipate lower sales in the first quarter, year-on-year. Southern Hemispehere flu campaign will be delayed because of two flu strain changes compared to no change last year. However, beyond Q1 2015 we expect to grow at a high single digit rate over the remaining nine months. Overall our growth will be…

Thank you, Olivier. So beginning on slide 34. So 2014 was a very good year overall for Genzyme growing at 24% plus. And if you look at the rare disease business specifically, it grew 11% to €2.1 billion driven by the Fabrazyme franchise growing 23%, Myozyme growing at almost 10% and Cerezyme growing at more than 8%. At the beginning of last year, we announced a deal with Alnylam which we have reference a few times in this call and those programs are progressing well. We have got two of their lead programs. One, Patisiran for familial amyloid polyneuropathy and Revusiran for the familial amyloid cardiomyopathy, are both in pivotal trials and recruiting well. They also have a very interesting program in hemophilia. It's quite early, but I have to say, I am quite interested and excited about the potential there. Internally, we remain committed to lifecycle management of these products. Our oral small molecule inhibitor has initiated Phase II trials for Fabry and continuing our lifecycle, our commitment to these diseases and our lifecycle investments, we also have a next-generation Myozyme in clinical trials and Phase I/II trial. Now, as noted, Cerdelga launch is approved in the U.S. in September of 2014 and just recently in January 2015 in the EU. Again it's early, but we are pleased with progress. We have good reimbursement coverage in the U.S. We will be working our way through reimbursement approvals, payor approvals in the EU over the coming months and the pie chart on right of the slide down simply shows you in the U.S. market on the early distribution where patients are coming from. Not surprisingly, the majority are coming from clinical trial patients who convert over. But as you can see we are getting good numbers from Cerezyme switches, of…

Thank you, David. After a challenging 2013, animal health came back in 2014 with almost €2.1 billion sales, up 6.7% to last year. This is composed of high single-digit growth in companion animals and we also managed to grow the market growth in our production animals. In 2014, we also had the very successful launch of NexGard, which is new soft, beef-flavored chew treating the fleas and ticks for dogs with first year sales of more than €113 million. Very importantly, while launching NexGard, we managed to stabilize the Frontline product family, which we did by a heavy investments in ads, but also good lifecycle management of these products. With this, I would like to hand it over to Elias.

Thank you, Carsten. I think that you have seen that throughout the presentation of the late stage portfolio of R&D we have working on over the past two years as it is emerging as a core contributor to new growth beyond that of existing growth platforms, which are performing well. I think what I will do here instead of repeating what you have heard is really focus on the fact that we are not resting on our laurels and we are working very hard to sustain the momentum of innovation that is really the turning point in 2015. We have made significant progress last year in assets that are going to Phase III. You have flow the date on page 40. And again, I think we are on target. We are within the budget discipline that we impose ourselves and frankly I think the excellent execution of our teams is really paying off as we go forward. LixiLan, we have completed the recruitment of two Phase III studies. As you know, LixiLan is a product that we intend to file at the end of 2016. Sarilumab is making its progress. Dupilumab, really a remarkable molecule, which in atopic dermatitis has been named has received by the FDA a breakthrough designation along with significant results throughout 2014. Insulin lispro, we have started the Phase IIIs and again as a result of the work we did with Alnylam, we are now in Phase IIIs for two of the rare disease applications of this technology on the familial amyloid polyneuropathy and familial amyloid cardiomyopathy. What I would like to show you on the next slide, slide 41, is that the returns from R&D are really expected to improve and in many ways we are turning the corner. If you look at the 2007…

Thank you, Elias. So as you have seen, there is a lot happening inside this group today. I think we have a unique combination of a strong innovation engine and a diversified, geographically and activity wise, business. We are in a very solid position. But I want to draw your attention to the list of priorities on which we will have to deliver this year. Our success in 2015 will be defined by how well we will perform against our strategy. Then focus will be on securing leadership positions in our core franchises, executing powerful new product launches, concentrating our resources on strategic priorities and maintaining a financial discipline, which will look for value enhancing external growth opportunities. So our focus on these priorities will determine Sanofi's success in 2015 and for the years to come. So now I would like to turn back to Sebastien to start the Q&A session.

Thank you, Serge. Operator, we are now ready to open the call to questions. I will ask all participants to ask only one or two questions at a time, so that we can get as many people as we can into the Q&A session.

[Operator Instructions]. We have the first question from Graham Parry from Bank of America Merrill Lynch. Sir, please go ahead.

Hi. Thanks for taking my questions. Firstly on the guidance, just wondering if you can help us understand what the margin progression you are factoring in is? Is it fair to say that margins are going to be flattish or maybe slightly down? And then if you could discuss the potential for operational leverage from 2016 onwards as you start to get more topline growth in the pipeline? And then secondly on Praluent, I just wondered if you could comment on the comments from Express Scripts on expected pricing of PCSK9 as being expensive and an area that they are already looking for savings. I guess that's a bit surprising, given the products haven't launched yet. Are those comments being made based on preliminary price discussions they have had with you already? And have your thoughts on pricing in the market changed at all, especially prior to OUTCOMES data? Thanks.

So Graham, I start on your question on the margin. So I mean A, as you know Graham, we don't like to give guidance on sales. So clearly, this is not something I am going to do even more in the year where we are going to launch products because the timing on the takeoff of these products, of course, will have an impact on the overall net sales. But at the same time, as you noticed, on one hand we said that the business EPS should be flat to stable to slightly growing and at the same time I said that the overall OpEx should grow by 5%. So you can basically assume that this is not the year for leveraging the P&L. Let it be clear, we are going to firstly focus on the launches. Clearly we need to do what we have to support these as well as progressing in our late-stage pipeline as presented by Elias. But at the same time, we have made a lot of efforts to prioritize our investments and this is what we do all over the last two months through the budget cut and the outcome is the guidance we gave today. So I am no going to give you an exact target for sales, clearly. But no, it's not a year for leverage P&L. But clearly, I mean, when you go forward, when you start to see sales coming from these new drugs coming and being booked, clearly, this would be helping the P&L as we go into 2016, I think the outlook would be somewhat better. Pascale, on Praluent?

On Praluent, Graham, well, obviously, I mean Praluent has been designed for a patient with higher med needs and Regeneron and Sanofi will be working with the peers on making sure that the drug will be used for the right patients at the right dose and we will deliver the necessary value add. So of course, we want to make sure that we provide patients with right access, but we also want to make sure that the value that we have demonstrate where it brings a reduction in LDL-cholesterol level on top of statin and ezetimibe can be really appropriately understood. And we are working on that currently with the payors.

Next question, please.

Yes. We have a question from Michael Leuchten from Barclays. Sir, please go ahead.

Thank you. It's Michael Leuchten from Barclays. Two questions, one for Serge and one for Jerome, please. Serge, you have been talking about the dengue company within Sanofi and you created some SWAT teams for the launches. If you look at the setup of the company, from a structural perspective, do you think the structure is right to allow for cross-synergies? Or do you anticipate there will be need for further changes of the structure of the business overall? And then a question for Jerome. From a gross margin perspective, looking ahead, the step down in Lantus price will likely put some pressure on your gross margin and I was just wondering what the levers are that you have at your disposal to work against that gross margin pressure going forward? Thank you.

And I will answer the first question. Clearly, focusing on execution excellence means increasing accountability inside the group and this is what we are working on. At the same time, of course, the benefit of being in a group is being able to extract synergies. So we have to both, improve accountability and we have a lot of structures that already are very accountable. In some others, they are a little bit less accountable. So we are working on this is in order to improve the efficiency, but at the same time we will try to extract as many synergies as necessary. It is clear that a diversified group, as in marriage, if it is able give to each of our businesses additional value, otherwise it's just adding businesses to businesses. And I guess that at the very end of the day, shareholders could be able to do that directly themselves. But the benefit of a group should be to deliver extra value through synergies. So it's two moves that are not contradictory, but that are deepening the capacity to execute in a more efficient way.

Michael, so on the gross margin question. So you are right. Sorry to say that everything being equal, the pressure on launches prices will put some pressure on the cost margin as well. At the same time, we have a few levers. The first one is clearly the ongoing productivity on efficiency which are ongoing in all the whole industrial footprint on organization. There are a few reorganization ongoing by now and there will be some and all of others as well to a certain extent. And also structurally, as long as we launch new products, we can expect to average margins from the new products will be higher than the average margin of the group which clearly is driven down by other businesses that the newly innovative products which have been launched. The second lever is clearly linked to the biological activities. And this is clearly with Genzyme but also vaccines will be a strong lever for potentially and hopefully for continued improved margin. If you look at what Genzyme achieved over the last three years, we regularly and consistently announced that Genzyme has been one of the drivers of the improvement of the gross margin. Again last year, it was the largest deriver. And the reason is basically that when you are able to fix your manufacturing issues in biologics, where the cost of good is mainly fixed cost and 80% of the cost of goods in biologics is fixed against 50% for small molecules you clearly have a leverage. See what Genzyme has achieved and will continue to achieve. And I think that this is also what the vaccine business is going to achieve time passing. There are some issues which are still being handled and we have been spending money to fix manufacturing issues. So this will be positively visible but this would be visible over time. So these, I think, are the three levers which will drive the gross margin up. These being said, I think I said that the best guidance I can give is a flat gross margin for 2015, everything being taking into account for 2015 and including the pressure on the price and the net price of launches which you need to.

Thank you, Jerome. Next question, please.

Yes. We have a question from Vincent Meunier from Morgan Stanley. Sir, please go ahead.

Good afternoon. Thank you for taking my questions. So first on diabetes. Do you confirm your guidance of global diabetes sales broadly in line in 2015? And could you elaborate on the expected trends and the net net price effect in 2015? And the second question is on the tax. With the tax rate 25% in 2015, do you continue to guide for a gradual increase of the tax rate towards 30%, as you were previously saying? Or is it now no more valid?

Look I will maybe start with tax and, well you know, tax people, it has always to be very cautious and we are in an environment with a lot of moving parts when it comes to tax. So it's not always that easy to forecast the actual tax rate. And as you saw, even in 2014, I mean it came to the very end of the year to exactly what was the business mix, where the margin or inventory which you have to eliminate on a conservative basis are allocated. And this may either be moved by plus 1% or plus 0.5% to minus 0.5% on a year-on-year basis. Now this being said, I mean it's clear that on one hand, the tax rates tend to increase because we have less revenues coming from patent and in general in many countries, patents, or royalty linked to patents, tend to have a lower tax rate than the normal income tax rate. At the same time, if we succeed on new launches, we should benefit from a lower tax rate coming from the profit we generate from these new launches. So if I look, let's say, short to medium term, I think that there will be a tendency to increase the tax rate. And I think you remember, I gave this medium-term guidance of 28%. Maybe 28% is a bit high but probably we can do better. If I look long-term and if I just look at the contribution of the new products, then we could again decrease the tax rate, yet again, everything being equal and you read the press, as I do, there are things happening every day. So to be shocked, that's 25% for 2015. Going upward in 2016 to 2017 and probably stabilizing somewhere between 26% and 28%.

And on the question of the guidance on the diabetes franchise for 2015. Basically we did not repeat it because there is no news there. So it means that we confirm that guidance that was given three months ago.

Thank you, Serge. Next question, please.

Yes. We have a question from Jo Walton from Credit Suisse. Please go ahead.

Thank you. Just a few quick ones. I wonder if you could tell us a little bit about the patient base for some of the new products. A number of companies have told us about their exciting new drugs, but have emphasized that the ramp up in sales might be slow, especially where there are Medicare patients and you have to get on to formularies. I wonder if you could just address whether you think it is sensible for us to assume the sorts of ramps that we saw in the last few years being applicable to some of your new products? I wonder also if Serge could address and update us on his look for a new CEO and when we might be able to hear something? And finally, you have said that your capital expenditure is going to rise from the €1.2 billion to the €1.9 billion level. How many years should we assume that that high level of capital expenditure is retained?

So I might start with the CEO question. So I have indicated this morning that you should expect an announcement before the end of Q1. So it's only a few weeks to wait for this announcement. It means of course that this process is advanced. So you will have some news in the coming weeks. I will pass the floor to Peter on the question about the patient base.

Yes, Jo. So if you think about the launches in pharma, basically we are looking at three launches Toujeo, Afrezza and Praluent, as you know. And I think the dynamics behind these three products are actually a little bit different obviously. From Toujeo, we are largely looking at switching existing patients as a first source of business. I am not saying that we will not try to right dramatically even increase our new patient market share, but at least in the first step we will try to switch those patients that are today not adequately treated with existing basal insulins. And as you know that the base, for example in U.S. is six million patients today treated with basal insulin. So this is a quite large number. Obviously, on Afrezza, dynamics are completely different as this is a new launch. We are putting into the market a new paradigm of inhaled insulin, where we think there is a significant opportunity. We know by market research that not less than 40% of patients actually are not going into insulins because of the fear of the injections and the hassle of injections. So I think it does respond to an interesting segment in the market. So we will have more insulin-naïve or at least short acting naïve patients in the first step. So you will see a building up a new paradigm and we do think there is an interesting opportunity. And then last, but not least, Praluent. I think Pascale already touched upon the public in the context of the pricing question. You know that we are definitely not going after all patients today treated with statins or with ezetimibe. We have a pretty sharp segmentation of the patient base. As you know, we are going to look at patients with heterozygous familial hypercholesterolemia. We are going to look at patients with statin intolerance and then within the high risk population, we are going to target, of course, patients with secondary prevention or primary prevention with concomitant risk factors, such as diabetes. It is also true that the new reality also in the U.S. is that first you have to secure market access and therefore you will always have a lag time even in the commercial plans before you get listed. And then as you know, in the Medicare Part D, there are processes that take even a little bit of longer time before you got listed. So of course we are working on that. We have a top priority of getting these products also from an access perspective as fast as possible in the market. But that's basically what I could tell you about the three launches in pharma.

Thank you, Peter. Maybe I can ask David Meeker. David, I know you have talked about the patient base for Cerdelga and the source of patients. Do you want to say a few words about Lemtrada?

Sure. I think, as Peter said, these are all quite unique drugs. So I wouldn't say there is a good analogy, if you will. Lemtrada is a potentially transformative therapy with a different treatment paradigm, meaning that you get the five infusions over a course of one week, five days in a row, nothing for the next 12 months and then three infusions and from that point forward, only about 20% of the patients will subsequently be treated again in the third year and that benefit seemed to persist. So the challenge, again, in helping the healthcare system understand this different paradigm as there is a need to pay upfront to get the longer-term benefit. So we have been working that through and certainly the experience in Europe has taught us some of the challenges there. As I indicated, I am quite the positive and encouraged by the early interactions in the U.S. So again from a patient number standpoint, in the U.S., the label is for patients who have been on the at least two other drugs that has a very large residual pool of patients who have a potential. There is a true unmet need there. So again I wouldn't put a number on it in terms of expectations at this point, but I think the potential transformative nature would say that there is a significant percentage of the population who will ultimately potentially use Lemtrada.

So Jo, on the last question about CapEx. We expect to have this increased CapEx which is loosely designed to build our biologics infrastructure to be there for two to three years. So it's a limited period of time, but we have to build that capacity in order to sustain our launches.

Thank you, Serge. Next question, please.

Yes. We have a question from Florent Cespedes from Exane BNP Paribas. Sir, you have got the floor.

Good afternoon, gentlemen. Thank you for taking the questions. Florent Cespedes from Societe Generale. So two products related questions. First for Olivier on vaccines. Could you elaborate on what you called the remaining capacity constraints that you are referring to in your presentation? How this could impact the division this year and onwards? And my second question is on Lemtrada, just a follow-up. If you could give us a little bit more color on how you see the performance in the U.S. and why you believe that the performance would be better than Europe? Thank you very much.

Okay. So I start with vaccines. The situation is pretty different in the U.S. and in Rest of the World. In the U.S., we have experienced very significant progress in terms of ability and to get back to the market with Pentacel. We are not anymore constrained. We don't allocate Pentacel since Q2 and on our booster vaccines. We are out of allocation since in the beginning of Q3. It goes on the private market and on the public market. We are busy in the context of strong demand. We are busy continuing to expand our offer of supply in 2015. By 2015 we will continue to show strong supply versus the 2014. In the Rest of the World and in Europe, our pediatrics vaccine that are manufactured is strong. We continue also to show some progress in terms ability to supply in the context of very strong demand. So we continue to increase our capacity. But you don't know, of course, the cycle time, which for those combination vaccines, now it goes from 12 to 18 months. Of course, this will take a little bit of time.

Thank you, Olivier. David, if I could ask you take the Lemtrada question with the U.S. focus?

Sure. I think the only thing that I would add to my earlier comment is one, with the reversal of the FDA decision that was certainly supported to a very large degree by the community. I mean it was the community stepping up, patients specifically and a large portion of the physician community saying they wanted this drug. So from a preparedness and interest, its high in the U.S. Second, I think Europe certainly was the negative approval over a year ago was a negative drag on Europe in terms of physicians becoming a little more cautious after that negative reading. Secondly we have learned a lot about the logistics of rolling out this drug. The infusion and the post-treatment follow-up is required to use this drug appropriately. And so again, I think the steps we have taken in the U.S. to ensure that there is a comprehensive program surrounding that based on learnings from Europe will help us drive the performance in the U.S.

Thank you. Next question, please.

Yes. We have a question from Luisa Hector from Exane. Please go ahead.

Thank you. Good afternoon. The first question, just going back to Lantus. Can you confirm that the November 14 price rise was within all of the guidance that you have issued on diabetes sales? And could you give us the breakdown from the fourth quarter of that U.S. Lantus growth, the 10% growth, how that split between volume, price and the stocking impact that you mentioned? And then the second question is, looking at the pipeline and your slide 41, where you list all of the launches from now until 2020, the slides on the medicine sales, there is a nice number of launches there and I see one drug from Phase II, which is the CD38 and then if I look at your Phase II pipeline there's a lot of drugs there. They have been there for a few years. So I just wondered why we don't see any more launching by 2020. Is it perhaps you just didn't consider the Phase II drugs when you put that slide together? Thank you.

I can answer the portfolio. We have listed all of the drugs that we have a high level of confidence will be launch before 2020. Others are still there, but you know the question is, when are they going to be launched? And that's obviously an estimate. So that's the reason why. A cancer drug in Phase II with the results we have shared has a high likelihood of being launched within the time window. Others or the early Phase II as well, like the VLA2 for multiple sclerosis because of the development times and the level of proof you have to bring are unlikely to be launched by 2020. So that's why. So the question on Lantus, Luisa. So yes, I confirm that the November price increase was indeed embedded in our guidance for 2015 and in terms of the split between price and volume in the Q4, actually it's 80/20 price and volume.

Okay. We have time for two more participants. So operator, next question, please.

Yes. We have a question from Philippe Lanone from Natixis. Please go ahead.

Hello, gentlemen. One question on animal health because Frontline is up 17% in Q4, which is a bit surprising after the difficult last year. So it seems to be reacting very favorably to the EPC. So is this something that is sustainable? Or is there some impact in margin? Maybe one question, if I may, to try my luck on the CEO profile. Because Serge, on your interview in the Internet, it seemed to have a slightly different wording on the profile of somebody that is with a strong knowledge of pharma as opposed to being a pharma executive. And maybe one last question on the VLA2. How it fits with your multiple sclerosis franchise with the Lemtrada and Aubagio? What will be the differences?

Well, I will start with the CEO. should reread myself before making any statement. But clearly to me knowledge is not about theoretical academic knowledge. It's about having been an executive or being an executive, a strong executive in this industry. So there is no ambiguity there. And I have been consistent since day one.

Thank you, Serge. Maybe Carsten on the trends we are seeing with Frontline.

Yes. In animal health, of course it's very pleasing for us to see that we were able to stabilize the Frontline and even have some slight growth while we also launched new products in the same category. For us, it does shows that the brand value we do have on Frontline is very strong and we are able to maintain the brand value by investing in marketing and being present in front of the veterinarians which we have been doing to a large extent in 2014 and we continue to do. Whether that would have any impact of the margins, I don't think so. As we also have other very profitable launches to come that's going to be compensating for that.

I will take the scientific part of the VLA2 and then maybe David you can help on how it fits with the total franchise. VLA2 is an alpha2-beta1 integrin. It has a very different mode of action than Lemtrada or Aubagio or the existing molecules. And really, when you look at multiple sclerosis, we do believe that there are sub-categories of patients who would benefit from this approach as it keeps protecting the brain as opposed to creating an immune deficient brain tissue status as you see with other drugs. And therefore maintain or modify the disease while not incurring the safety issues that you see with similar inhibitors of integrin. So this, in my view, fits in the total picture of the total franchise. But I will let David comment on how that impacts his strategy. David?

-- to being leaders in MS and the concept of building the franchise. So we are interested in any and all approaches. I think it's clear that Elias highlighted, MS despite the number of treatments available, the unmet medical need remains great. And that no single drug is the right drug for all patients. And so by having a portfolio, a franchise of options, really we strengthen our position and hopefully improve outcomes overall. We are not looking to have me toos in the bag. I think that's the other thing I would say. So I would look for the VLA2 program to differentiate itself on a risk-benefit basis as we go forward.

Thank you. Operator, we are going to take the last question, please.

Yes. Okay. We have the last question from Steve Scala from Cowen. Please go ahead, sir.

Steve --

-- so that R&D will be below the €5 billion level for 2015, which has been the ceiling for some time. And then the second question is, Aubagio is showing impressive momentum. It's now within your top 10 drugs. It's the most rapidly growing of the 10. But I believe it faces a U.S. loss of exclusivity the year after next. Would you remind us what efforts, if any, are underway to extend that date? Thank you.

So a question for Elias about overall R&D spend and which has been below the €5 billion threshold up to know. What about 2015?

So clearly, as you know, Steve, we are going to have to spend more money in R&D for both sustaining the portfolio that I have described. We had a lower than usual attrition rate. So we have to sustain the financing and as I just described for you, for example, the results in IL-4 which we need to accelerate. Also we have a set of immuno-oncology targets that we are working with Regeneron on that we need to fund. In addition to that, as you all know, as you launch drugs, you have of course regulatory requirements and so our budget is going to grow and pass the €5 billion in 2015. However, we are keeping a disciplined spend pattern within this R&D portfolio so that it tracks with sales. And maybe Jerome can say something --

If I can just add something, Steve. This is the reason why I gave this guidance on overall OpEx because there is trade-off between more medical spend, studies linked to the pre-launch and post-launches and commitments we to take these, at least, the various regulatory agencies. So there is no magic figure here and we are more looking at an overall OpEx increase which again I mentioned for 2015 being mid single digit trend.

And David, if you don't mind taking the Aubagio question.

Yes. So as noted, the composition of matter of patent for Aubagio in the U.S. has expired, but we have a method of used patents which extends for the use of teriflunomide in MS, which extends into 2022 and with the patent term extension that we will be seeking out to 2026. So we will see where this plays but to your point, we are looking to continue to support the patent filings and establish as strong position as possible.

So with that, we are now ready to conclude the call and I will ask Serge to say a few concluding remarks.

Well, I want to thank you for your attention this afternoon or this morning. Basically I hope that you have perceived through those explanations and presentations that we have a very strong team here, that the company has been moving forward in many, many directions. I think what is striking when you are in this group, as I have dived in a few months ago, that there is an incredible energy and ability to move forward. I hope we have been able to pass some of this to you and of course, should you have any further questions, Sebastien and his team are available and we will make ourselves available as much as possible to go more into some details if you need that. Thanks a lot, again, for being here with us today.

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