Sanofi (SNY) Q1 2017 Earnings Report, Transcript and Summary

Welcome to the Sanofi Q1 2017 Earnings Results Conference Call and Live Webcast. My name is Emma, the Chorus Call operator. [Operator Instructions]. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Mr. George Grofik, Vice President, Head of Investor Relations at Sanofi. Please go ahead, sir.

Good morning and good afternoon to everyone on the call. Thank you for joining us to review Sanofi's first quarter results. As usual, you can find the slides on this call on the Investors page of our website at sanofi.com. Moving to Slide 2. I would like to remind you that information presented in this call contains 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 document on file with the SEC and also our Document de Référence for a description of these risk factors. With that, please advance to Slide 3 and let me introduce our speakers on the call today. With me are Olivier Brandicourt, Chief Executive Officer; Jerome Contamine, Executive Vice President and Chief Financial Officer, as well as David, Executive Vice President, Sanofi Genzyme. Also joining us today for the Q&A session are, Olivier Charmeil, Executive Vice President, General Medicines & Emerging Markets; Peter Guenter, Executive Vice President, Diabetes & Cardiovascular; Karen Linehan, Executive Vice President, Legal Affairs and General Counsel; David Loew, Executive Vice President, Sanofi Pasteur; Alan Main, Executive Vice President, Consumer Healthcare; and Elias Zerhouni, President, Global R&D. First, Olivier will discuss the key highlights of the first quarter, then David will provide an update on our immunology franchise. After that, Jérôme will review Sanofi's financial results before we open the call to Q&A. Before we start, I'd like to remind you that as of the start of 2017, Sanofi's financial statements include the impact of the acquisition of the Boehringer Ingelheim's Consumer Healthcare business, the divestment of our Animal Health business and the termination of the Sanofi Pasteur's European Vaccines JV. In order to help you compare sales growth rate on a like-for-like basis, we will be referring to growth at both cost exchange rate and at constant structure. This has been noted in the slides at CER/CF. And with that, I'd like to turn the call over to Olivier.

Thank you, George. Good morning, good afternoon to everyone and welcome to our first quarter earnings conference call. So before I turn to the results in greater detail, I'd like to highlight the impact of the changes in structure that took effect this quarter as they had a distorting effect on sales growth. With this in mind, Slide 5 provides a bridge to demonstrate the like-for-like sales growth of the company. If we add back the €384 million of sales that would have been generated in Q1 2016, if we had owned the BI brands and European Vaccines, then our first quarter sales growth at CER and constant structure was 3.5%. On the same basis, our growth rates in the previous two quarters was approximately 3%. This consistent growth trend speaks to the strength of our diversified business model. On Slide 6, I'm pleased to report that Sanofi has delivered an encouraging start to the year, with a benefit of structural changes, our first quarter sales grew by 8.6% in CR to reach €8.6 billion. Our business EPS increased by 3% to €1.42. As I mentioned, sales growth was 3.5%, if we also adjust for constant structure. Our business EPS performance was particularly encouraging as we faced significant headwinds in the quarter from the loss of Animal Health contribution and from a higher tax rate. We managed to more than offset these negative factors as a result of solid underlying sales momentum and the benefits from simplification of the organization which as you know, is a key element of our 2020 Strategic Roadmap. Here, you can see that on Slide 7, that 4 of our 5 global business units delivered growth in the first quarter which more than compensated for a decline in our Diabetes and Cardiovascular units. The highlight, as in prior quarters, with Sanofi Genzyme which again grew in double digits. Our Vaccines business grew strongly growing at 13.2% at CER and constant structure. In addition, we saw a further improvement in the momentum of our Consumer Healthcare business following the acquisition of the BI brands with core growth of 4.7% at CER and constant structure. Turning to Slide 8. We're now looking at sales by franchise and geography in the first quarter. The overall picture is reassuring. It is very pleasing to see that all 6 franchises grew in the Emerging Markets, with 3 growing in double digits. You can also see here that the main offsets to our first quarter performance were the pressures on our Diabetes and established products franchises in developed markets. Now turning to our Specialty Care franchise on Slide 9. We again delivered strong growth in Multiple Sclerosis, where our Rare Disease franchise was impacted by the usual differences in order facing quarter-over quarter. Ostensibly, we received a welcome boost from our Oncology business as a result of the U.S. government order. In MS, we gained share in the first quarter with sales up 32%. The main driver was again, our overall therapy, Aubagio which grew by 30%. Our high efficacy product, Lemtrada, also made significant progress, with sales up 41%. Taken together, our MS franchise is now annualizing at €2 billion in sales. In Rare Diseases, we maintained our double-digit momentum in the treatment of Fabry and Pompe disease, mainly as a result of new patient accruals. Our Gaucher franchise on the other hand was impacted by the timing of Cerezyme orders in Latin America. As a result, overall sales growth in Rare Diseases slipped from double-digit in prior quarters to 7.6% in the first quarter. Of course, we're very excited about creating a new immunology franchise within Sanofi Genzyme with the recent approval of Dupixent, an FDA acceptance of our BLA for Kevzara. This opens a new chapter in our growth story in Specialty Care and I'm delighted to have David on the call to discuss our new franchise in a few minutes. Looking at Vaccines on Slide 10. We were very pleased to show growth in first quarter sales of 13.2% at CER and constant structure. The key driver in the quarter was our combination Vaccines franchise were sales grew 38% at CER at constant structure. Significant elements in this performance was the prior recovery of Pentacel in the U.S. In addition, we have seen a recovery of our Chinese Vaccines business after the last year's market disruptions. Our AcXim family of pediatric combination products grew 19% and was helped by the recovery in China. As we discussed on our last earnings call, we're optimistic about the long term growth prospect of our AcXim family built around accessing our 6-in-1 pediatric vaccine. Finally, on this slide, we were delighted to add to our Vaccines a pipeline in the quarter by an agreement with immune to develop and commercialize SB0232, the promising monoclonal antibody for the prevention of RSP related in babies and infants. Turning to Slide 11. Highlighted earlier is the continued pickup in momentum of our Consumer Healthcare business which now ranks as the leading global player in CHC. At CER and constant structure, our expanded CHC business would have grown by 4.7% in the first quarter, in line with our longer term target of sustained mid-single-digit growth. Much of this momentum was delivered by an early and strong cough and cold season in Europe but also enhanced by the launch of OTC Xyzal in the U.S. which brought in over €40 million of sales. The growth of our CHC business in Emerging Markets continued to show sequential improvement but it is still not where we want it to be, mainly due to the tough economic environment in Russia. Let me conclude on this slide by confirming that the integration of BI is progressing well. Turning to Slide 12. Sales of our growing Diabetes franchise declined by 6% in the first quarter. This was primarily driven by a 15% decline in the U.S. business which more than offset double-digit growth in Emerging Markets. We caution against extrapolating first quarter performance to the remaining quarters of 2017 as we expect the U.S. Diabetes sales decline to accelerate over the remainder of the year. Keep in mind that there will be an incremental effect from the CBS formulary exclusion in Q2 and the United Health formulary just went into effect on April 1. Consequently, it remains our expectation, as we said last quarter, that Diabetes performance in 2017 is highly likely to come in below our minus 4 to minus 8 midyear guidance range. Within the overall outlook for the franchise, we expect to make steady progress with the rollout of our basal insulin, GLP-1 combo product, Soliqua and you have secured efficient coverage in the U.S. in the first quarter. Turning to Cardiovascular. Praluent continues to be impacted by a challenging payer environment, however, we were pleased that the Court of Appeals for the Federal Circuit states that Praluent injunction, Praluent injunction litigation with Amgen pending the appeal. Consequently, our product continues to be available to patients. During the quarter, we have seen the competitive outcomes data continue to support the evidence base behind the PCSK9 class and we look forward to reporting our own outcomes data with Praluent in Q1 next year. On Slide 13, our emerging market performance was a highlight of the quarter, up 8.5% at CER at constant structure. We were pleased that the recovery we had expected in China came through, with first quarter sales increasing by 17%. This reflects both the solid underlying growth in our Pharmaceuticals business and the end of local market disruption in Vaccines. Slide 14 highlights that this will be a very busy year for our R&D organization, with multiple new investments planned on ongoing in proof of concept and Phase III studies. These investments, of course, includes a broad range of indication expansion studies for Dupixent, consistent with our views that this exciting molecule represents a pipeline in product. I think many of you are already well aware of this and so I wanted to take the opportunity here to highlight some of the other innovative programs that perhaps had been less of a focus. The key strategic imperative is to step-up our investments in Oncology and here we have a range of studies planned or underway for rituximab in multiple myeloma and for the PD-1 inhibitor in [indiscernible] dermotypes. We also plan on initiating a study of rituximab in combination with the PD-1. Coming up fast behind this we're also making progress with our toxin loader antibody conjugates. I will also like to highlight our biospecific monoclonal antibody for IPS, a deadly disease with very few options, as you know and our dual agonist for type 2 diabetes. Both are innovative although higher risk and potentially address multiple indications. I should also note that we plan to start late-stage development of our GLP-52401 to have trial around the end of this year and overall GCS inhibitor could represent pipeline of new products. As you know, sustaining innovation in R&D is 1 of the 4 key pillars of our 2020 Strategic Roadmap and I am confident that we're making good progress here. Having highlighted earlier on these slides, I will now hand over to David Meeker, our head of Sanofi Genzyme, but before I do, that I would like to say I would like to say a few words about David. Many of you will be aware that David has been essential to the success of Sanofi Genzyme since we bought the business in 2011. In that time, he has driven continued growth in Rare Diseases, he has built a €2 billion Multiple Sclerosis franchise and, last but not least, he has always seen inception and now reality of our new immunology franchise. David deserves all our thanks. Over to you, David.

Thank you, Olivier. And it's been a privilege to lead this business over the past 6 years and leave it in the very capable hands of my colleague, Bill Sibold. So I know there's a tremendous amount of interest in the immunology franchise which is launching and so if we turn to Slide 16. I'll remind you again that as Olivier has said, this is truly a pipeline and a product and we're approved for atopic dermatitis. I'll update you on the launch in the next slide. The asthma Phase III trial is fully enrolled and again, we hope to be filing by the end of the year on that indication. The nasal polyposis indication at Phase III trial is enrolling and we look to have data from using eosinophilic esophagitis trial again coming out this year. I think the biggest challenges we have in helping physicians think about this is to get the dermatologist to think about it co-morbidities to get the pulmonologist ultimately when the asthma medications approved to be thinking about atopic dermatitis and nasal polyposis. And so again, it's a paradigm shift for medicine. So if you turn to Slide 17. I'll provide you some background as to where we're on the launch with the major caveat that it's extremely early. I'm going to provide some numbers that we won't be updating on a regular basis going forward. But obviously, absent significant insight into our revenue stream at this point, I think these numbers are important for you to understand how the launch is going. Overall, very positive about the how the launch is going. From an operational standpoint, we shipped within the first 24 hours, the sales force reimbursement teams, medical affairs that are in the field, all that is working well. And operationally, we haven't seen any major challenges here as we launch. So the target, as we've highlighted many times, is 300,000 patients with adult AD, who feel are in the highest need. We're focusing on the 7,000 physicians have experienced using and prescribing biologics. That may not be an exact universe and some of the early scripts have been written by physicians who are not on our target least. So, not a surprise but does support the broader awareness around this product and certainly, the large unmet medical need. So as of this point, actually through last week, more than 1,200 HCPs have written a prescription for the drug. That translates into more than 2,500 descriptions that have been written to date. On the market access side of the equation, and myself have spent a lot of time working with the different payers in the U.S. We do have coverage from the major 2 PBMs, Express Scripts and CVS which accounts for about 25% of the covered lives in the U.S., that's the national formularies. And we're continuing to work with again, all of the other payer groups. Some would expect that by the end of the year that we would have broad coverage for the product. The goal of this conversation we know as you follow probably in the press, we're to price the product that we recognizes the value but continues to ensure good access. From a utilization management criteria standpoint, we've worked hard to make sure that the criteria reflect good medical practice. So specifically, this is a drug that should be prescribed by a physician who's an expert, so an allergist, immunologist or dermatologist. And we would expect the patients have maxed out on their topical steroids. If you could be managed with a topical steroids, this would not be the right drug for you. But obviously, there's a significant number of patients for whom that's not possible. So there's some variation payer to payer in terms of the kind of UN that they would like. And those are the discussions that are ongoing but the principle behind it is again, to get the medical criteria in place. We're going to back part of the CHMP at the European experience will be supported by the CAFÉ study which is a study which looked at patients who had failed or were intolerant to cyclosporine trend is not indicate for the treatment of ADE. But it's occasionally use then, of course, have some significant toxicities associated with it as well. So overall, extremely positive about where we're in the U.S. but again, early. Moving to Slide 18. Kevzara, we've just announced that we have our PDUFA date for May 22. We have a positive CHMP opinion in Europe. So we will be launching and it's a good moment to launch into RA. I think the trends, as you can see on the left-hand side of the slide, the use of non-TNF mechanism action products is increasing. Clearly, the cycling that previously had taken place in TNF is declining for good medical reasons, if you've got other mechanisms of action which can try benefit. Monotherapy, I think more and more patients are on monotherapy in the recognition of the many of patients will started on a combo of and a TNF, for example. Methotrexate is not the easiest drug to take. And often patients will stop that and so either purposefully or inadvertently, they end up on monotherapy. And finally, patients given the option who preferred sub-Q as opposed to an IV. So in that context, we think the IL-6 class and Kevzara specifically has a key role to play. IL-6, as we've said often, I think experts would concur if in the first drug approved, it might have moved ahead of the TNS. It wasn't. So it's second to market but it clearly has a central role in the pathogenesis, pathophysiology of rheumatoid arthritis. We have strong Phase III results in the methotrexate inadequate responder group in TNF inadequate responders. We've got a positive trial and head-to-head trial with Humira where we hit on all of our endpoints and we've got very consistent results at every 2 week dosing. So this potential of having to increase the frequency which you've seen with other products doesn't seem to be the case for Kevzara. So again, very positive about what's happening there. And looking forward to that launch. So with that, I'll hand it over to Jérôme.

Thank you, David, for this presentation. I will go quick, where we're on the financials. And now on Slide 20. So before discussing the details of the P&L, I would like to again to highlight that the [indiscernible] changed compared positively this quarter to our reported first quarter figures, clearly, in contrast with 2016. This was expected. In total, currency movements added 2.5% or €194 million to reported sales on 3% of $0.04 per share to reported business EPS. So latter has contributed to this positive effect, as expected, again, with the U.S. dollar. Now I'll move to Slide 21, looking at the P&L of the reported basis. Sales were just over €8.6 billion, representing 8.6% growth at constant rate. Again, this includes the impact of acquisition for CHC as well as the contribution of our vaccine European business. You can see on the slide a few items which complicate the picture, as already mentioned, that because the tax rate of the quarter was higher than the low tax rate we had for the first quarter of 2016 which was 22.6%. I just confirmed here that for 2017, we continue to expect the tax rate in the 24% to 25% range. Second, we have no net income contribution for our divested Animal Health business this quarter as compared with the contribution of €171 million last year for the same quarter. Taken together, it reduced our growth at the business net income level to 1% in the quarter to €1.8 billion. Against this, we're fully offset the headwind of Animal Health divestment and share repurchases, the consequence of business EPS grew by 3% to €1.42. I now move to Slide 22 to give a clear picture of the ongoing business. We're just here providing that P&L at constant exchange rates but also at constant structure. So we're comparing our actual versus what we would have looked like if we had instituted both BI CHC, as well as the Sanofi Pasteur business. We again saw gross profit increase faster than sales, up 5.4% at constant exchange rates to €6.2 billion, affecting cost savings on improved product mix. Another message on this slide is that we again delivered operating leverage with our BOI, up 7.6% on sales up 3.5%. This represents a 120 basis points improvement from BOI margin was combination of improved gross margin on carefully controlled expenses. I now move to Slide 23 which here combines our cost ratios in a little more detail. Our gross margin increased by 130 basis points, building on the positive trend we saw in 2016. This again affects the combination of the improved product mix and productivity gains. For the full year, we continue to expect the cost margin to be approximately 70% at constant exchange rates. This is below the reported in Q1, reflecting part of increasing Diabetes cost pressures in the U.S. which should be largely offset by mix of some positive the benefits, as well as the larger contribution of Vaccines in the second half of the year. Turning to OpEx. If we adjust the constant structure, as well as constant exchange rate, they grow in the first quarter by 1.7%. R&D expenses were up 2.1%, representing investment in new Phase III programs while SG&A expenses were up 1.5%, driven by prelaunch cost for our immunology contracts. For the full year of 2017, we expect R&D spending to be -- to somewhat accelerate as a result of the multiple pipeline investment that Olivier highlighted. For SG&A, we continue to expect expenses to grow, mainly driven by investments behind the launch of Dupixent and Kevzara which I think both surged clearly, hearing David. We expect progressive savings on SG&A for sure in other areas, resulting from prioritization and implementation of our new organization which will partially offset the investments. Savings in SG&A together with manufacturing deficiencies on higher growth privatization of the Established Products will be an important contributor to the roughly €1.3 billion of cost savings that we planned for this year which is in line with our previous guidance. Overall, we maintain our expectation that OpEx in 2017 will grow at CER at a similar rate as last year of the cost of social base of approximately €15.4 billion in 2016. Turning to Slide 24. I'd like to highlight the elements of our cash flow. Our free cash flow reflects an improvement of the recent ratio, some inventory build related to launches and some increased investment building capacity. As previously announced, we continue to execute our €3.5 billion share buyback program. We bought around 17 million shares during the first quarter for a total of €1.3 billion. This brings our total repurchase activities in the Q3 2016 to €2.8 billion at the end of Q1 2017. Also, on this slide, you will see that our net debt benefited from the proceeds of the swap with BI. Please note that a tax payment related with the transaction is most likely to occur during the coming quarters, Q2, Q3 and to a small extent, Q4, for a total amount of approximately €2 billion. Finally, the payment of our dividends should be approximately €2.7 billion which due to be paid on May 18. On Slide 25 now, we're pleased to the start of the year, clearly which reflects our good overall business performance, as well as increased focus of our new organization. The outlook for the year is expected to benefit from the ramp-up of our cost savings associated with our efforts to focus our company as the synergies from the BI swap. However, as we highlighted, we expect some headwinds in our U.S. Diabetes franchise to grow in subsequent quarters and we plan significant investments in our franchise on our growing pipeline. As a result, we're confirming our full year guidance for business EPS to be stable to down 3% at constant exchange rate. In terms of currency, we see positive impact on business EPS to be between 3% and 4%, based on March 2017 average exchange rates. With that said, I would like to turn the call back to Olivier for closing remarks.

Thank you, Jérôme. So just to summarize our position. We think we continued to execute on our 2020 Strategic Roadmap. Our first quarter results benefited from our diversified business model and from the simplification of our organization. We now have a global leadership position in CHC and the integration of the business is proceeding well. We're managing our way through a tough U.S. payer environment in Diabetes. At the same time, we're fully focused on delivering successful launches from our exciting new Immunology assets and progressing the next wave of pipeline innovation. And with that, I would like to hand over to George to start the Q&A.

We will now open the call to your questions.

[Operator Instructions]. Your first question comes from the line of Mr. Florent Cespedes from Societe Generale.

So two questions. First, for Peter. Could you tell us if you have retained some prescriptions from CVS in the U.S. or if there is a message which to the biosimilar or the novel products in the U.S.? And if not, what is your strategy to potentially come back on some formularies? And maybe a follow-up question on your strategy regarding stimulus [indiscernible] and my second question would be for Olivier. Just to confirm if there is anything new regarding your strategy or M&A strategy and if you're still looking for opportunities?

Thank you, Flor. You want to start, Peter? Yes?

Yes, sure. So first on your question on the retention on CVS. So you remember, we put into place a $10 co-pay strategy for both and Toujeo and we're relatively satisfied with this co-pay program because we have been able to retain in total CVS 55% of our volumes. Now remember, CVS is actually composed of 2 sub-pockets, if you will, the national template and then you have the custom plans, both account for roughly €20 million commercial lives. And out of the custom plans, actually, so out of that €20 million custom plans, we have been able to retain 70% axis as such for Lantus and Toujeo. So in total, 55% retention of TRxs and if you would then drill it down to the national formulary of CVS commercial, where we totally lost access, so we only have the couponing strategy as a mitigation strategy, there we were able to retain 43% of the TRxs. So if you compare this with benchmarks, I think it's fair to say that our couponing program has been relatively successful. Your follow-up question on lease, as I mentioned, already last quarter, so we have been submitted the file in Europe and the MA has accepted the file for evaluation and for concerns in the U.S. for competitive reasons, we cannot give any additional background on that.

Thank you. Thank you, Peter. So to your question regarding M&A. Yes, I can confirm that nothing has really changed. We're continuing to focus on creating value for shareholders. Our main driver -- main drivers are the strategic fit as we presented in November 2015, right? So looking at strengthening our business in IRTAs where we have already some level of leadership or others where we're looking at building competitive positions and that is MS, oncology, immunology and CHC. When it comes to value creation to shareholder, we said it also last time, we want to remain financially disciplined and we're solidly looking at deals where we strongly believe we can achieve a return on invested capital exceeding ROI. And finally, driver is of course the pipeline because Sanofi pipeline has been significantly strengthened over the last few years, but we believe our R&D capabilities could be further enhanced.

The next question comes from the line of Mr. Graham Parry of Bank of America Merrill Lynch.

So firstly, on Diabetes, could you quantify the incremental volume loss that we should expect in the second quarter from the UnitedHealth contract, taking in any incremental impacts from CVS that you were referring to? And any initial 2018 contracting commentary you can give us, how that's going, how you're prioritizing pricing versus access, especially given the need to get Soliqua access, too? And then secondly, on the Praluent, if you could just give us a feel for what's driving the delay on ODYSSEY, is that just an event rate update happening slower? Do you think you can still get this data in time for ACC and in time for 2019 contracting negotiations?

Thank you, Graham. So the first question, for you, Peter and the OTC question for Elias.

Yes, Graham, so thanks for the question. And the number of lives in United commercial is actually 60 million. So this is less than, for example, the CVS commercial lives, 40 million. You should also know that Toujeo was not covered at United, contrary to Lantus. And of course, we were in a Tier 3 position, so we suspect the impact of United to be less important than the impact of CVS. So your question on 2018 contracting, of course, it is very early to comment on that. As you know, we have, of course, submitted our bids. And we'll have to wait until we get the results of those bids. And in terms of prioritization, we, of course, have a strategy of keeping a large coverage for many reasons, not only for Lantus and Toujeo, but also in the future for Soliqua. I think the Praluent question is for...

Yes, Graham, for OTC, nothing has really changed. As you know, it's an event-driven trial. And we do want to absolutely perform this trial in the best possible way because I think it's critical for the field that we accumulate the best scientific experience and data to enlighten us in terms of the value of PCSK9. So we were hoping, as you remember, to complete all of the events by models that we had by the end of the year. It's clear that we will be able to recruit all the events by the end of the year. But then you have a certain amount of time to analyze that data. On your question about ACC, we're making every effort to be able to present at the ACC. But because it's really beyond our control where the events are and their adjudication, I can't promise. But that's my hope.

Okay, so no change at all in the number of events or follow-up [indiscernible] the study there?

Absolutely not, no.

The next question comes from the line of Vincent Meunier of Morgan Stanley.

Three questions, please. The first question is on Diabetes. So you've clearly highlighted the deeper decline expected this year in Diabetes and particularly for the remainder of 2017. Has anything changed recently which would make you more cautious? Or is your message today just to reiterate what you said before? Because my feeling is that your tone today is a bit more cautious than before. The second question is on Multiple Sclerosis. Can you comment on the pricing trend for Aubagio and also the price environment in MS in general going forward? And the last question is a follow-up on strategy. The follow-up question on M&A, I mean, you said earlier that you might continue buyback and renew buyback if you're not in a position to find a suitable target. Is it still a valid comment?

All right. Thank you, Vincent. On Diabetes, I don't think there is anything new that we're trying to convey today. We just wanted to highlight the Q1 results, the equation of that good result is it was a minus 6% result and it's minus 15% in the U.S., offset by a plus 12% or 13% in China. So we have that momentum in China. Are we going to see that for the rest of the year? We're not entirely sure. And then in the U.S., the indication is what we're trying to convey. We have these formulary decisions which we learned in last August regarding UnitedHealthcare which has not had any impact during Q1. And we see that during the rest of the year, in addition again of CVS which was only partially, had only a partial impact in Q1. And I think maybe, Peter, you can also provide more color around how much more prescription do we have in the government channel, like Medicaid and if you want to add color around whether or not that has changed versus what we conveyed in the past.

No, I think overall we can say that we're actually in line with our expectations. I think you mentioned the 2 key points, Olivier, of the reasons of the deceleration in the U.S. that we forecast in the year-to-go which is, of course, a full impact of CVS. The first quarter was only a partial impact, right? It started to slide actually as of the last 1 or 2 weeks of December. And then we have the additional impact of UnitedHealthcare. It is true that the channel mix remains unfavorable but not more unfavorable than we have anticipated. But of course, as the year unwinds, you get more sales in unprofitable channels. So it's normal in your net sales that you get an acceleration of the decrease. And perhaps the last piece we can provide is that we stick with our long term guidance of minus 4% to minus 8% and CAGR, 15% to 18%. But we also remind you, like we reminded to you in the last quarter, is that for the year 2017, we will be probably below the lower end of that long-range guidance.

Okay, thank you, Peter. David, do you want to answer the Aubagio question?

Yes. So with regard to pricing, I mean, we all know there's much more focus on pricing in the U.S. overall, so it's obviously a point of debate. I think with regard to the MS class specifically, it is part of that discussion. Fundamentally, nothing has changed as of now. The things I'd remind you of is Aubagio itself is the lowest-priced oral with further discounting off the WACC, of course. And from a dataset standpoint, it's the only oral that had a hit on confirmed disability reduction in both Phase III trials, prevention of progression there. So it has a strong dataset. ICER evaluated the class and concluded that the platform therapies and the orals did not meet cost-effective criteria. But I think this was a good example where we're still in dialogue with them. I think we'd have some concerns about the numbers that they actually used to do that calculation and perhaps not recognizing the full value of Aubagio. And Aubagio, just again to remind you, it's 9% market share in the U.S., fastest-growing oral and 11% in new scripts. So I think the Aubagio picture still remains extremely strong. And conversely, on the pricing standpoint in the ICER evaluation, Lemtrada was the one product in the MS class which was judged cost-effective and by a very large margin. So that's it.

All right. Thank you, David. And Vincent, for your last question, so you heard Jérôme. So we have bought back share at the value of €2.8 billion, €2.9 billion since we announced the share buyback program. That included what we did in Q4 last year to the tune of €1.5 billion and a further €1.3 billion, €1.4 billion as of mid-April. It's actually €1.4 billion. Now to your specific question, I think we can keep in mind that we can always look at opportunistic purchases once we have reached €3.5 billion figure. However, when it comes to the priority of allocation, M&A remains above the share buyback allocation. And you expressed a potential case where we would find anything. But again, we're, as you would expect, looking into different TAs I was mentioning before. And that can eventually happen. So that's what I would answer. That's what I would respond.

The next question comes from the line of Mr. Richard Vosser of JPMorgan.

Just a follow-up on Soliqua, please, just you mentioned the formulary access last quarter and kicking in from July. So just perhaps if you could give us an update on how that access discussion is going at the moment, please? And then secondly, just on the Dupixent data mentioned in the press release from the CAFÉ trial, could you just clarify the meaning of the acceptable safety profile? Have you seen a different safety profile in this trial compared to the previous Phase III trials which has obviously been very good. Just some clarity there would be very useful.

Okay. Thank you, Richard. Soliqua access, yes, Peter?

So Soliqua access, what we've seen is that some payers tried to look at the 2 products, so Soliqua and Xultophy, together. So they are kind of delaying their decision in terms of access. This being said, with what we know today, we know that we have 34% commercial access and 31% R&D access already signed but not necessarily all in place. Some of that is yet to come into effect. And actually, during the first quarter, there was actually no access with the exception of the last 2 weeks of the first quarter. So what you see actually in net sales, of course, was Soliqua is underestimated because of the couponing part, the $0 co-pay which of course, offsets against net sales. Perhaps one additional word on Soliqua, it's obviously very early days. We're only a couple of weeks out of the gate. But it's clear that in terms of patient identification, you know that the product has in its label the intensification space, right, so either patients not [indiscernible] with basal insulin alone, so patients where you would either up-titrate with your basal insulin or intensify them, for example, by adding a GLP-1 or a prandial insulin. So that is actually the sweet spot for Soliqua. But that requires a bit of education of our physicians. So that's really what we're focusing on as we speak. And we see that after a certain number of visits, they got that message. So what I'm trying to say is that, of course, the access which is gradual and the education of our customer bases will require some time. And therefore, you will see a gradual uptake of Soliqua.

So for the CAFÉ safety profile, we did not observe any significant difference in the safety profile in CAFÉ as the others. So nothing to report there.

Nothing to report, okay.

The next question comes from the line of Jeffrey Holford of Jefferies.

Wonder if you'd like to just comment around the strategy for consumer regarding M&A, whether you have appetite to do business development there immediately or whether you'll need to sort of see through 2017 before you're ready to integrate more transactions. And then actually just would like to step back a moment, just talk more broadly about your Oncology strategy, whether there are specific areas you feel you want to intensify in terms of product additions and development and whether there are specific areas, like hematology or solid tumors in particular, you feel is more attractive for you to focus on.

All right. So on the CHC strategies, definitely we're busy integrating this relatively large business portfolio from BI. We're going that well and Alan is managing his team very effectively. And you can see already that through the results we're posting for this quarter that it's working well. Does that mean that in the midterm or longer term, we wouldn't look at eventually strengthening even further this business? Of course not. So we would be open. As I said, CHC is part of the TAs and areas we wanted to strengthen. We have done definitely a very important step there. But it might not be the end of the story and opportunities will be critical or will determine the future of that aspect. So that's for CHC. Do you want to answer the question on Oncology, Elias?

Sure. Yes, let me first state that the Oncology strategy is a multi-tier strategy, multiphase. First and foremost, we're going to continue to develop the franchise around CD38. And when you asked the question, as you know, CD38 is for myeloma. But science shows that it has other potential indications, such as in other hematological malignancies and we're going to explore that as well as combined with PD-1 in which we're already starting some early work, it is actually possible to see indications in tumors, in solid tumors. And the reason is that science is showing that CD38 seems to be in itself a checkpoint inhibitor. And this is what the -- is driving, if you will, the growth of this very important pillar. In addition, we will continue our own internal programs in antibody drug conjugates. We're in talk stage for those. Second, we're going to build the immuno-oncology franchise on 2 axes. One, obviously, is the collaboration with Regeneron which gives us the checkpoint inhibitors we need, PD-1 and LAG3. And then combined with our own internal assets which are immune activators, if you will, our TGF-beta antibody, our neukine and other approaches that we're putting together which will complement, if you will, the effort with Regeneron. Third, we believe that there is an opportunity in Oncology to perhaps acquire some assets that will be complementary to our portfolio. So we're looking at opportunities that will be complementary strategically to our prostate portfolio, for example and our breast cancer portfolio. We have both internal and external programs that we're looking at for that purpose. So that's the approach. We're building on what we have. We're continuing to build on a complementary strategy to that of the Regeneron, Sanofi collaboration. We will build the part of it that is immune activating. And on top of that, we'll build the multi-targeting strategies that seem to become the dominant approach in cancer control.

Do you want to add a word on the ADC platform we have?

Right. So the antibody drug conjugate platform is in the clinic right now. We have 3 of them. And we have early promising clinical data that will be expanded further. And clearly, those are assets that we will continue to explore.

Next question comes from the line of Luisa Hector of Exane BNP Paribas.

On Dupixent, can you confirm whether the CAFÉ results are actually required to get the European approval by the end of the year? And then on Diabetes, the glargine franchise, I'm just wondering that now we're sort of seeing more developments in the competitive landscape with BASAGLAR, Soliqua, Xultophy, whether there's any change to your target market share that the Toujeo switch can achieve and whether perhaps Soliqua -- you have a bit more confidence in Soliqua perhaps taking more share than you expected now that we have more information on all the dynamics there.

All right. Thank you, Luisa. Elias, maybe you should answer the regulatory question around CAFÉ.

Yes, CAFÉ was, in fact, a requirement of the EMA. In Europe, they do want you to conduct trials against established standard of care, in this case, even nonestablished standard of care [indiscernible] cyclosporine. So it was a requirement of EMA, yes.

Luisa, your question on Toujeo and, let's say, insulins in general with the increased competition in the field of Diabetes. We stick to our initial thinking. So we think that Toujeo is sufficiently differentiated to make the mark. We're happy with the initial launch of this product. It continues to perform extremely well in Europe. We take very significant market shares. We're coming back to very good performances in Japan. We have been making our first launches in Emerging Markets, where the expectation of the product is also a very good. And the interesting thing is that despite all the new competition in the field of Diabetes in general is that the overall insulin market in volumes, even in the U.S., continues to grow 3%, 4%, 5% depending on the quarter. So that's number one. Number two, in countries where we have more maturity with Toujeo, you take, for example, Germany which was the first launch country in Europe, you see, of course, in the beginning that the first source of business for Toujeo is switches from basal insulin and, of course, to the large extent, Lantus. But you see also that moving forward, that Toujeo captures more and more new patients. For example, today in Germany, the source of business is already 2/3 new patients, right which of course, is an interesting, let's say, opportunity for us to take if you take -- if you look at the overall glargine franchise of Sanofi. So number two on Soliqua, again I provided some early insights, too, in the previous question. Again, it's early days. Don't forget that in the U.S., so FDA did not give us the first injectable label, so post-OAD label, whereas in Europe, we have both the post-OAD label and the insulin intensification label. So that is a fundamental difference of appreciation between EMA and FDA because, of course, the file obviously was the same. So that is basically what I can tell you.

Next question comes from the line of Philippe Lanone of Natixis.

Two remaining ones. First, on CHC, we have a strong growth. However, 40% of that is Xyzal launch. And if we strip out also the strong flu season, probably the underlying growth still is a bit weak. Or is it? And how do you -- can we see that going forward? And can you comment on how the BI business is doing and whether you still maintain the target of bringing the margins of BI to the former Sanofi has won in this business? And another question on Lemtrada which is doing pretty well and accelerating this quarter, while some of the competitors have signaled some weakness in Multiple Sclerosis market on the wake of OCREVU.S. launch by Roche, it should be, I mean, the main target commercially for OCREVU.S.. How do you see this product going forward with this competition?

All right. Thank you for your good questions. So CHC, Alan?

Obviously, you highlighted some of the main impacts of the Q1 performance overall. The pipeline effect of Xyzal, the new switch allergy product in the U.S. So that was just getting in its pipeline fill into the retail sector at the end of the first quarter. It's obviously a bit too early to indicate there, although the first signs of allergy season in the U.S. are relatively weak. But we're not near the peak season yet which comes in the next 2 or 3 weeks. Cough and cold was strong, but it was strong early. We saw bigger pathology in Europe in November, December. And that carried on through into January, so slightly early season this year compared to previous years. And of course, with the addition of the BI portfolio, we're strong in cough and cold in Europe. So we obviously took advantage of that overall positive pathology. The underlying business, I think, is a strong. And to your comment on the BI franchise, we saw no business disruption in the first couple of months of operation. Everything is going well. We're also on track to deliver the synergy targets as indicated and that will go a long way to raising the margin, as you rightly said, towards the Sanofi standard. As overall, I think everything on track, underlying business looking positive and some seasonality obviously we have to build in but overall on track.

All right. Thank you, Alan. David, Lemtrada?

Yes, so thanks for the question on Lemtrada. I think, obviously there's a lot of discussion around ocrelizumab, TYSABRI and Lemtrada all falling in what they call the high-efficacy class. I think the impact on Lemtrada is going to be less, to be honest with you, for the following reason. I think there'll be no impact. But Lemtrada is a unique mechanism of action here which is that, I'll remind you, it depletes -- targets anti-CD52, it depletes the white blood cells, T cells and B cells and they come back. And then we believe the mechanism of action is in the repopulation of those white blood cells. The MS is reset so that autoimmune response is no longer seeing MS in quite the same way. And the data for that is we're now at 6 years. So 5 years after your last treatment, we know that 55% to 60-plus percent of the patients from our Phase III trials we've been following long term have not required any additional therapy. So in essence, they have stable MS without any need for further therapy. That's a very different mechanism of action than what is in place with TYSABRI and with ocrelizumab, where you get chronic immunosuppression. So I think there's a lot of questions still. Again, it's an early therapy. Data is limited when drugs are first launched. We've got 13,500 patients on Lemtrada to date with 8,000 plus, years of follow-up and the like. I think we're going to do fine there. In fact, one hope would be that the presence of ocrelizumab actually drives growth in the high-efficacy class as a whole which is right now only around 10%. So the pipe could go larger, the share of each drug may shift. But overall, the opportunity may be greater.

The next question comes from the line of Jack Scannell of UBS.

A couple of questions. First, fitusiran in hemophilia, a couple of things. First, could you just give us an indication as to what gave you confidence that we may not see -- we won't see some of the safety problems with this agent that we've seen in some other novel hemophilia agents? And secondly, do you think the sweet spot is likely to lie in hemophilia A or hemophilia B? And the second question relates to kind of the impact of out-of-pocket costs. It seems that Americans are increasing, I suppose, their out-of-pocket costs, particularly Medicare Part D population and that influences behavior. [indiscernible] patient or Medicare Part D, roughly what would be their incremental monthly out-of-pocket cost?

All right, Jack. Fitusiran question.

So we carefully looked at all the data on fitusiran. And frankly, if you look at the #1 safety event for fitusiran, if you remember the mechanism is to reduce the amount of antithrombin, therefore, maintain the thrombus. Then the risk obviously will be thrombogenic risk. We have seen none of that. And because we didn't see any thrombogenic risk and we saw a significant reduction in the antithrombin levels, we felt that it was the right thing to do to continue the trial into Phase III. Obviously, we're monitoring all these patients. So far, we haven't seen any thrombotic risks. So it gives us also the confidence that it will be a very novel therapy because it can truly change the paradigm in many ways, especially in patients who have inhibitors, where other approaches are not working and you can essentially treat these patients with a subcutaneous injection and maintain their status for a time that is still to be determined, a month, 2, 3. So that's why we continued the trial of fitusiran.

All right. Then [indiscernible] of Praluent.

So Praluent or in this case, PCSK9 in general in Medicare Part D, of course, is an issue because with the exception of the low-income subsidy patients which account for about 20% of the total Medicare population, so the remaining 80% has, of course, coinsurance for those products. And to give you an idea for the PCSK9 class, it means that the out-of-pocket payment would be above $3,000 a year, even higher in some cases which is, of course, pretty prohibitive for most of those patients. And we see indeed that there is a huge dropoff, not to say -- well and possibility of even starting the treatment for many of those patients, given the high out-of-pocket for Praluent.

The next question comes from the line of Jo Walton of Credit Suisse.

Just two remaining questions, please. You have highlighted fantastic performance with your couponing, retaining 43% of share in part of the CVS formulary. Does that antagonize CVS and make it more difficult when you come to negotiate next year? Because their whole rationale is that they can control volumes and this couponing is going against that. So I just wonder if you could tell us a little bit about how you're seeing them fight back? And do you think that United are a better organization at instilling their formulary? Or do you think that we should be able to see you with your couponing retain a significant proportion of United business going forward? And my second question, just result looks at the Established Products. If I look at your European business and your Emerging Markets business, you had a stronger performance in the first quarter with both of these than you have historically had over the last few years. Was there anything or is there anything unusual about the first quarter? Or have we managed to annualize out some of the high declines? And could this be a new level of growth for that established or low declines for that established business?

Okay. Good questions, Jo. So let's go to Diabetes first, couponing in the 43% and 55%.

Thanks for the compliment. It's a lot of good. But of course, whether this antagonizes CVS, as you mentioned, I don't know. I think you should probably refer that question to them. Your question on United, look, I think that it's very hard to predict how this will play out. We, of course, have 3 months more experience now, where we're going to the United part. And again, our objective is to make sure that we have as less a disruption as possible for the patients. So we're just trying to put patients first here with this action. And that's what really matters for us. So I think the other part of your question, I'm afraid I can't really answer.

But the impact on United because the base is different would not be as great as on CVS, right?

Yes. No, I'm more referring to the relative retention we can keep in United with the couponing. So we'll see. But what I'm trying to express is that we have 3 months more experience now that we have, so to speak, exercised for 3 months with CVS. So there's reason to believe that we will be reasonably affected for United. And of course, in parallel, Jo, we work our way through access for Soliqua, of course. And you know that this is the most strategic objective.

All right, thank you. Thank you, Peter. So Olivier, established in emerging and developed countries?

So of course, thank you for your question, Jo. So in the mature markets, of course, we're less impacted by the generic competition to Plavix in Japan. And we used quarter-on quarter, year-on-year to lose 40% to 50% in the last quarters. For this quarter, we lose only 30%. Our overall performance for Established Products in mature markets is going to be impacted in the coming months, depending on the entry of potential generic novologs in Europe and in the U.S. for [indiscernible]. Regarding the Emerging Markets, we had a strong performance on our Established Products portfolio, driven by all continents. We have double-digit growth across all continents with a specific note to Brazil and China, very strong performance in China. In China, it's Plavix that continues to grow very nicely as well as the rest of our portfolio, including Lovenox. So strong quarter in the Emerging Markets, reflecting a strong performance in China and in Brazil. But for the mature markets, good performance for the quarter, but we will continue to be impacted by potential entry of generics in the upcoming quarters.

All right. Thank you very much, Olivier. So that's the end of the call.

Thank you all for dialing in for today's call. Of course, the IR team will be around for the rest of the day to answer as many questions you might have. So that will conclude today's call.

Very good. Thank you very much, everyone.

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