Sanofi SA (SNY) 2005 Q1 法說會逐字稿

Good day ladies and gentlemen. And welcome to today's Sanofi Aventis first quarter 2005 results conference call. [OPERATOR INSTRUCTIONS]. At this time I would like to turn the call over to your host today Mr. Sanjay Gupta. Please go ahead sir.

Good morning and good afternoon everybody. We're here to comment on our first quarter 2005 performance. As you know, from this year we have moved to the quarterly reporting system.

With me I have sitting here Mr. Hanspeter Spek, Executive Vice President Head of Operations, Mr. Jean-Claude Leroy, who's our CFO and [Laurence Debrus], who's our Deputy CFO.

The format for today's call will be Hanspeter will make a small introduction on the activity during the first quarter, followed by Jean-Claude who will comment the P&L for the first quarter. And then we will take your questions in the limit of the time available. Mr. Spek.

Yes, good morning, good afternoon to everybody. We are reporting now on our second quarter post merger. Overall, we have announced a sales growth of 11.9%. This in front of a pharmaceutical market which is in a decreasing growth by the end of the first quarter this market. So, it's a growth of 6.5%, which means in very simple terms that our growth for this new company is approximately twice the market.

We are overall seeing an acceleration of our growth in terms of sales. You may remember that our annual growth for 2004 has been 10%, and our growth for the fourth quarter has been 8%. So, also inline with this, we are content, even rather content with the development of the first quarter in terms of performance against the market. And, of course, against a background that this is a company which started to configure itself as of the mid of August 2005.

If I analyze the leading 15 products, I see a high growth rate once again, as in the previous reportings. And we have amongst the leading 15 products hardly any weak points in terms of performance versus previous year, except of course Ramipril, which has lost its patent starting of 2003, and then later on in 2004. But even in Ramipril we see now a slowdown of the decrease, because for evident reasons, we come more and more to depart on this product.

Another remarkable effect I feel from the first quarter analysis is the fact that we delivered what we promised on the other products. You remember that this has been an important part of our strategy concerning the purchase of Sanofi Aventis, where we always said it is eminent, and it is important that the so-called other products, which represent about 10% of our sales in the U.S., but on a worldwide basis nearly a third of our sales I'd say, more and more start to form a stable [soccer] for our overall development. And you see that those products have been now slightly even growing.

I'm frank enough to acknowledge that we have taken advantage of a rather good season for our antibiotics. But independently we see also all the other local and regional products more and more on a positive and friendly trend.

So, to sum it up as an opening statement from our side, we are content, even rather content with this beginning of the new year. I may say that, of course, we are through nearly half of the second quarter. And also, what we see from this so far we feel very much encouraged that we are on the trend as we have announced before, in terms of superior market growth, in terms of stabilization, perhaps even a slight growth, of the rest of the portfolio.

And as far as operations are concerned, I can also announce once again that in terms of restruturization in terms of integration of our offices, of our field sales organization, we are fully on track. And this will then, of course, also translate in the figures -- in the relevant figures within the profit and loss, which will now be commented by my colleague Jean-Claude Leroy.

Thank you Hanspeter. A few words on the P&L now, I may be a little longer that -- than Hanspeter, but I will go on track with the first. I wanted to say this first quarterly published result of Sanofi Aventis has been done, obviously, under IFRS. And we provide comparison with the P&L of 2004 also on an IFRS basis.

Now, as a follow up to what Hanspeter just said on the net sales on a top line basis. He was mentioning 11.9% increase on a comparable basis. This does translate into 8.4% on a reported basis. This is a first slightly raised of what we had for the full of year of 2004, which was, you remember, plus 4.6%.

I -- also, I want to explain the difference. The first 1 -- the first item, the first difference is due to currency fluctuation, minus 2.1 percentage points. And you know that we concur for an eventful euro dollar at $1.32 on the first quarter of 2005, which is to be compared to the $1.25 ratio for the same period of 2004. And the second explanation of the difference between the comparable basis performance and the reported 1, is due to the change parameter, mainly the -- or exclusive, yes, to the divestment of products by Aventis made on the first quarter of 2004. And we see that the comparison by 1.4 percentage point.

Just to remember on the revenue, which is that new line under IFRS, it does represent a royalty received by the Group.

I move to the cost of sales. The cost of sale has improved. It does represent 24. -- 27.4% of sales last year. And this quarter we are talking of 26.5%, which is an improvement by 0.9%. Several factors are behind this improvement. Obviously, accrued activity are now present in this quarter. This is a direct translation, therefore, of the level of sales. Second, a good product mix, as Hanspeter mentioned. And finally, some gains in the purchasing area. This is the result of the Sanofi Aventis purchasing promise.

Let's turn now to the R&D expense. They are flat €923m. And they do represent 14.4% of the sales, which are to be compared to the 15.5% last year. Several comments. The first is that the clinical trials program is on schedule. The second comment I would make is that we benefited during this quarter from the consequences of the restructuring plans implemented previously by Aventis, as well as from the consequences of the discontinuation of external collaborations decided at the end of last year within the global R&D portfolio briefing.

As we go up in SG&A we see a slight increase of 0.7%, which translates into a ratio of 30% of sales to be compared to 32.2% last year. Once again 2 comments. We didn't cut the support behind the product and relative costs are increasing.

The other way around G&A. Once again, as in the last part of 2004, they are decreasing as a result of the synergies put in place in this area.

Next item I would like to comment here are the other current operating income. It shows improvement as a result of the increase in the profit of the alliance with Proctor & Gamble and Actonel, as well as a small profit derived from our hedging policy. Importantly, I guess, the operating income current, it does reach €2.143m, to be compared to that €1.675m last year. This is plus 28%, but it is also showing an improvement of 5 percentage point on the ratio to sales, which reaches 33.4% versus that 28.3% in the first quarter of last year.

Improved net sales level combined with on track cost synergies are underlying reasons for this performance. And again, we will be able to comment, especially on the sales level a bit more, earlier in the Q&A session.

Moving down in the P&L, I will make the following comments. The restructuring costs they do relate to decision made by Aventis prior to the operation. They are at the expected level.

Other operating income and expense, you see a decrease by €120m compared to last year. This is totally in line with expectation since in the first quarter of 2004 in this category, we found that €162m of capital gains realized by Aventis on the divestment of product, obviously there is nothing this year. We also find, last year, €50m of defense costs, which obviously has no counterpart this year. So all in all, that does explain that €120m decreased ratio.

As far as the net financial expenses are concerned, we benefited from a decrease by €100m. The origin is twofold. First, a lower cost of debt thanks to the ongoing renegotiations of our acquisition debt, as well as the improvement of the debt level. We're now at €13b, which can be compared also to the €14.2b position, which we had at the end of last year.

Second origin of this improvement, some financial instruments which show a better frame, such as the one which is related to additional consideration to receive from CSL on the sale of Aventis therein, where I think –- which is linked to the [round] year share price, showing a smaller loss this year than last year in the first quarter.

A word about taxes. The effective tax rate is, as you've seen, 31.8% this year versus 30.5% in the first quarter of 2005. I remind you that on the full year of 2004 the -- that effective tax rate was around 31%.

To finish up on the P&L, I would mention the share in profit of associates, which is improving due to the increase of the profit of the alliance with BMS, mainly U.S., as well as a good profitability of Merial in the animal [areas]. On the other side, the minority in trades are increasing, mainly because the BMS share of the profit of the management of [Platinu Natrovel] in Europe and rest of the world is greater.

As a conclusion, the net income reaches €1.415m, 28.3% more than last year. This translates into an EPS of €1.6 shares versus €0.83 last year, or plus 27.7%. These good first quarter results gives us confidence on our -- on the achievement of our 2005 full year guidance.

Operator, we can now turn to the Q&A. Thanks.

Yes, can we -- could we have the first question please?

Certainly. [OPERATOR INSTRUCTIONS]. We now move for the first question with Liz Mitchell with MainFirst. Please go ahead.

Good afternoon. I have 2 questions. First of all about Plavix, which has had a declining sequential growth trend, and you were asked about this at the previous quarterly conference call, and you said Plavix was maintaining market share but you don't see any change in the growth trends. But could you comment on whether you're seeing growth acceleration again from here.

Then secondly, on your improvement operating margin, you've said you had reduced your general expenses. Could you discuss it a little bit more, because, again, in the previous conference call you said that you actually haven't reduced staff numbers by very much, only 200 or 300 in the U.S., 200 in the rest of the world. So, where's the savings from, please?

I would say I go ahead with Plavix. So, the Plavix market share is telling not too much, because by nature this is a market which is largely configurated by Plavix itself, a little bit of remaining Cycopamine and Chinaig aspirin sales.

So, what we are in front of is evidently that we have a decreasing relative close in percent, of course, which is a normal effect given the size -- the absolute size of the product. Nevertheless, it is evident as well that we had a slowdown in prescription growth in the first quarter, which we had analyzed and which we had addressed too. We believe, and we continue to believe, that we have a certain issue in ensuring the secure trends for our patients, who have been put on Plavix prescription in the hospital, then to the retail segment.

As a consequence, we have decided during the first quarter especially from our [mild] scripts to deploy additional 700 sales reps coming out of the Sanofi Aventis armada on Plavix, which we put in place April 1, 2005. Of course, it is much too early to say what the impact is. But we see, at least in the retail during the last 2 or 3 weeks, a certain positive trend, which nevertheless has to be confirmed.

Are you seeing a trend back over 20% now?

Excuse me, I did not understand.

Are you seeing the trend back over a 20% year on year growth now? Has it improved to that level?

I said it is a weekly trend. So, I would not extrapolate a weekly trend to the monthly trends you have probably in front of you.

Okay, thank you.

Okay. As far as the G&A, our concern -- I said that last year in the last quarter we saw really a decrease. This was the demand origin of the synergy which was derived in 2004, and you would remember for a global amount of €220m before tax.

What I said commenting the first quarter is that the G&A -- part of the G&A was still decreasing, which is quite normal because we take the effect of the measures and decisions that we've taken at the end of last year. In addition to that, we will go on making decision. As an example, I have to mention that when we turned to restructuring costs, I can tell you maybe you've seen that in the press release, that on the first quarter we've encountered €258m additional to this category after the little bit, about €550m that we did encounter at the end of 2004. So, things are ongoing. And that trend that we've seen in the first quarter is definitely a trend that we're going to see for the full year.

Liz, I just take the opportunity to clear this misunderstanding. In fact, when we had given the figure of a couple of hundred people, what Hanspeter meant in the previous call, was these were the people that we would have liked to retain, and we lost them because of various factors. It wasn't the -- effect by any assumption. It was just that -- how many people did we lose because the people we would have liked to retain. And that was the figure. It wasn't a global headcount number.

Can you tell me what the headcount was at the end of the first quarter.

We have decided -- we gave the headcount at the end of December 2004. And we will not be giving headcount on a quarterly basis. But our new Annual Report is out and you have a lot of details there on the headcount inside the report.

Okay, thank you very much.

Thank you. We're now moving from Prudential Securities and Tim Anderson. Please go ahead.

Thank you. A couple of questions, the first on R&D trends, the quarter came in below what you were for the last 3 quarters and at least below what we were looking for. And I'm wondering if that's because a lot of the Acomplia trials have finished up primarily. And should we be looking at that as a run rate going forward.

And second question is, as it relates to the certain elements of guidance that you reiterated, can you just confirm -- reconfirm that the pre-tax synergy levels you expect for '05 and '06 are still €960m and €1.6b?

Okay, thank you. On the first 1 on our R&D trend, that's, for sure, that on March 1 when asked about that kind of trend we could imagine for the R&D expense in 2005, we said that first we would put all the emphasis on the decision, which we have made to push up on the clinical trials of those projects which had been retained after the [bolt on] review. That there were ongoing studies, important ones in this year -- in this 2005 year. And you will remember that, as a matter fact, we do expect the results of this to be in Phase III trials before the end of the year, which in turns means that there has been expense also in, and there will be, expense in 2005 in this area.

You have seen that -- I say we are showing only 14.4% ratio to the sales as of the end of the quarter. Is it the trend or is it -- has something different to say then we did say on March 1? No. I would say that we do expect that ratio to be a little bit heavier for the rest of the year, just because we have that ongoing program of clinical trial for the rest of the year. And that the figures we show for the entire year of 2004 was more or less the kind of ratio we could anticipate for the full year.

As far as the pre-tax synergies, yes, we want definitely to redirect that we do expect to come up at the end of 2005 with a total of €960m, which in turn means that this is after the €220m that we did realize in 2004. And we don't intend to change this figure.

And for 2006 it would be €1.6b still?

That is correct.

Okay, thank you very much.

Thank you. We are now moving from Morgan Stanley with Andrew Boon. Please go ahead.

Yes, good afternoon. A couple of questions, first on Ambien CR, as much as you can, can you just update us on the likely timing for refiling and getting this drug to market within the U.S.

Also, on your anticipation for its ability to take market, I think previously you'd spoken about 30%, and then more optimistically recently about 50% of the market. Where are we, given that there has been a delay?

And then finally, I note that Sepracor as been requested for pediatric trials, could we just confirm that there will be no pediatric extension for Ambien?

And then secondly on pricing, could you just indicate which price increases -- major prices increases you took globally in March for your portfolio?

So, Andrew let me start with Ambien CR. You used the word of refiling, perhaps it's accidental but, of course, there is no refiling from our--

Resubmission.

We have received then approval by letter. We are, since a couple of days, in active conversations with the FDA. And we are fully confident to launch the product within the next weeks, or months, or, let's say perhaps in more general terms, during the summer.

As far as pediatrics is concerned, the Cephalon motivation, of course, is a little bit different one than ours. Ours is, of course, largely driven by the end of patent situation and the eventual prolongation by 6 months. So, I said earlier, we are in conversations also on this topic with the FDA. And we have not given up the hope that there may be a pediatric extension. And the necessary measures are put in place, but it is finally a decision of the FDA, because the product so far is not part of those products as fixed by the FDA, which are part of the potential pediatric extension. But we have not given up on this and we are still actively pursuing the topic with the authorities.

Now, the last question on the prices, Sanjay?

Yes, Andrew, basically the prices have increased for some our products in the U.S. in the range of 3 to 5%. And, of course, in terms of products, Lovenox, Avapro and Aprovel, Ambien. Allegra, Duloxetine and Lantus.

And just 1 final question, on Acomplia it sounds like from your press release that the FDA may have some issues with your name. Should I also infer from that you've either have filed it or about to file Rimonabant in the U.S.?

Well, we have filed under the trade mark Acomplia. Everything else is a subject of a FDA decision and we have no prejudice in this respect. But our whole filing strategy is also our communication strategy, as you see, is based on Acomplia. We have to see what the FDA says.

But you have filed?

Yes.

Yes.

Okay, many thanks.

Thank you. We are now moving to Jo Walton with Lehman Brothers. Please go ahead.

Good afternoon. A few product questions please, could you tell us a little bit more about Taxotere. I thought your expectation was for a slightly higher rebound growth rate. We notice that things like Abraxane and Limpeter have grown quite strongly posting good sales in this quarter. Can you just tell us how you feel that is going?

Secondly on Ketek, were you disappointed with the year on year sales outside of the U.S.? They didn't look very strong considering the antibiotic season was really strong elsewhere.

And I wonder if you could give us a little bit more help on your tail. It's huge and there's obviously various moving bits in it. Perhaps you could tell us a bit about the OTC semi ethical side, any residual bulk manufacturing you have, how your generics strategy is going forwards?

And finally on Plavix. In the past the sales growth was always comfortably higher than the prescription growth, and one of those reasons was lengthening scripts. We're now down to the stage where the sales and the scripts are the same, and yet you seem to be posting price rises. So, are we actually seeing reduced lengths of script? So, I wonder if you could help us a bit more there.

Well, I mean for the last part I have no indications that we have a reduced length of scripts. But I have to say it would be not so easy to be detected. But, I said before, we really have no indications that this would play a role.

On Ketek outside the U.S., I have said earlier that Ketek is unfortunately not a verified brand for various reasons. We have a very desperate situation, because of the invention of the -- interventions of the German Government concerning price. So, we have a very unsatisfying situation in Spain, and in Italy also for economic reason.

The major market outside the U.S. is France, where Ketek continues to do extremely well. And where Ketek became the leading antibiotic product inside this rather huge antibiotic market of France.

Now, in the U.S. we did not ask to, but I -- nevertheless I dare to say, we are extremely content with the progress of the product, which continues to be the most successful antibiotic launched in the U.S. market ever. We are growing from month to month in terms of prescription. And we feel very, very confident that this product has continued to make its way in the U.S. great achievement, 0.9m total prescriptions within the first 8 months of its launch, which is a very remarkable score.

On the tail --

On the -- now on the tail, you see the tail first of all it varies extremely. I said before, in the U.S. it's about 10%. For the total Company it's 30% and for intercontinental it is 50%. Coming from this we have decided -- we were obliged to decide not to further go into details on the tail business than we do, because then if you go into our regional breakdown, things get even more complicated.

Overall, I can just say, at least for the first quarter there is no real weak points. The major regional brands we have. So, I'm not talking about products in the magnitude of, let's say, 30 to 50m annual sales. They are all growing. And I made already a comment on the antibiotics, which are everywhere on a very good trend in Europe -- in the intercontinental and, of course, in the U.S. as a result of a very, very good season.

I think, Jo, if you want to have detail you have -- the Company has clearly stated its intention to stabilize its big business. And we are hoping over the long term to keep the sales as close to steady as possible.

Now, the last or your first question then, Jo, on Taxotere. Well, of course, we would be even more happy if Taxotere would have been growing in the first quarter by the same 20% the product is growing outside the U.S. But frankly, I'm relatively content with the 13% sales growth we have obtained in the first quarter in the U.S., because, you remember, that the product has been flat or even slightly decreasing all of 2004.

I have been very clear that the major issue, which was the annual reimbursement system happened January 1. We see, therefore, a good 2 digit sales growth. But we continue to see in the second quarter, it's very much encouraging. We have important news to tell at the upcoming OSCO convention also in the field of new and different indications for Taxotere.

So, we are very, very confident then that for a product of this size. At the restart we've got 13% personally, I think, is not so bad.

Thank you.

Thank you. Now we are now taking our next question from Sebastien Berthon with Exane BNP Paribas. Please go ahead.

Yes, hello. 1 question on Avapro/Aprovel in the U.S. What has been the net price effect in Q1 in terms of increase or decrease? And also when do you expect the destocking to be over? And in more general terms, how do you see stocking or destocking effects outside of Avapro/Aprovel in Q1?

And the second question relates to Vaccines, which you have a fairly soft first quarter. What are your expectations for the year?

And lastly, could you update us on your plans for the Acomplia launch, and your new sales force being put in place right now? And what are your current activities? Thanks.

So, there Sanjay first on the price increase.

The price increase for Avapro was about 3%. But, as you know, the price increase on Avapro does not go down necessarily to the net sales line. And this is a very competitive category where we have to negotiate a lot of contracts, and deal with many sales organizations.

And in terms of stocking/destocking of Avapro, there has been no major change in stock. But as our partners indicated in their conference call, during the first quarter of 2004, there was an overall effect of a large base, and this resulted in a low sales growth this quarter.

Perhaps in a more general way, I think we all have to be very, very careful when looking to stock levels in the U.S. You probably all know that intense negotiations between pharmaceutical manufacturers and the major wholesalers, in order to conclude the so-called wholesaler purchasing agreement, and in consequence of this, and in preparation of those conversations, we see some development in stock, which we have difficulty to follow our mathematical models, which shows there is a certain wrestling going on in the U.S. between the manufacturers and the wholesalers.

Overall, we can say that our overall stock is in an extremely low level in the U.S. And we have no product which would be beyond 1 month. Most of them are between 0.5 and 0.8.

Thank you.

Sorry, 1 question on Vaccines as well, and Acomplia launch program.

Well, the Acomplia launch program goes perfectly inline with our overall plan. As we have said earlier, the earliest -- theoretically earliest launch date, would be at the very end of the first quarter, if there would be a contract for [Citro]. So yes, in theoretical terms we even prepare for such a launch.

In order to do so, we are in the process of ramping further our sales force in the U.S. This is in the magnitude of approximately 500 people. We try to take advantage of the very, very strong sales force we have with our diabetes program in the U.S. And, of course, there is a lot of complimentarity and potentially synergy between diabetes and Acomplia. So, we put those people now in addition on Lantus, which is doing extremely well and where we think we can even further accelerate. And we also use those people for the pre-marketing of Acomplia. So in general terms, everything is on track.

Now, on the vaccines, I'm sorry, but I really cannot subscribe to your statement that we had a rather soft first quarter with the vaccines. To my knowledge, this was 1 of the best first quarters ever of the vaccine business. And we are very confident in terms of this business. And Jean-Francois Dehecq has made a number of strategic statements in this respect and said he will give large priority and emphasis on the vaccines. And we feel very much encouraged by the recent development of the business.

I think we don't give guidance on the vaccines business on a yearly basis. As you know, this is included in our overall guidance and this might fluctuate with the seasons. We had a very successful start to Menactra in the United States. And as, over the next few years, you will see that you can additional each group's -- in size of Menactra population which should increase.

Okay, thank you.

Welcome.

Thank you. We are now taking our next question from Goldman Sachs with Vikram Sahu. Please go ahead.

Good afternoon. Just 2 subjects, please. The first 1 relates to Plavix and the U.S. litigation. Our understanding is that Sanofi's legal counsel is aiming to get an outcome on this trial from a jury as opposed to a judge. Could you confirm if that's the case and what the thinking might be behind that? I understand it would mean a quicker outcome, but why would you want a jury ruling on this, because that introduces a degree of variability?

The second relates to Acomplia and a follow on question I guess to Andrew's. Can you confirm what indication you filed Acomplia for, please?

The second, I have said we will not communicate on what we have filed with the FDA, because we feel it is the privilege of the FDA to build up an opinion before we go public on it. But of course it is clear and it has been said earlier that we will position this product as a product in the prevention of metabolic disorders, which are a very important indicator for upcoming cardiovascular disease. And our third clinical trial program is built up in this respect. And I think, from this, it is not so difficult for you to conclude what we have filed with the FDA.

On the Plavix litigation, we have never communicated any preference between a judge or between a jury trial. And this exactly reflects our position. It is entirely in the hands of the judge to make a decision in this respect. Whatever comes, we accept it and we will deal with it.

Thank you.

Thank you. Our next question is coming from Peter Cartwright with Williams de Broe. Please go ahead.

Hello. It's actually Ben Yeoh at Williams de Broe. Just a couple of quick questions. 1 is do you have any target for net debt, maybe by the end of the year? Is your current run rate going to continue so we'd expect it to be paid down to maybe around about €10b by year end? Or do you have anything else you're planning to do with the cash flow coming in?

And secondly, just a follow on on Acomplia. Can you confirm for us that you have applied for a priority review?

We always said that we have an excellent record with the fast track process in the U.S. I think most or nearly all of our recent accomplishments in this respect have been accomplished in fast track. And I remember there are a few reasons we said. It is nice to have again a fast track. And I said it is nice to have some operations but it is not totally vital to have it, because if we would have it, we would really fall to the end of the year, so the plus minus is about 3 months in net to the market. Now I really leave it up to you what we have asked for.

And as far as the net debt, no, we don't have -- or we don't publish any target on a yearly basis. We prefer to stick with what we've said, which is a commitment of what we said at the launch of the operation to the reinvestment of the acquisition debt within 5 years. Now you would remember that last year we were able to put €4.1b positive, obviously with some self target features. So I could translate that in €2.7b out of those elements in 2004. And you've seen that €1.2b in the first quarter, which is the decrease of the debt, which is the beginning of an answer to your question, remembering that the dividend payment is to come on the second quarter of the year. So just to state that, even though I will not give figures, precise figures, we are pretty much on track with our main objective of that taking care of this acquisition debt within 5 years.

Thank you. And just to make sure, you're not confirming that you've applied for a priority review, but you've just said it is a nice to have thing?

You are absolutely correct.

Thank you.

Next question, please.

Thank you. We are now moving to Brian Bordeaux with UBS. Please go ahead.

Thank you very much. I'd just like to ask a few numbers. Firstly, the amount of cost savings you've achieved out of the merger. At the end of last year, you confirmed that you had achieved cost savings of €220m. I was just wondering if you're prepared to give us any update on that.

Secondly, we would just like some details relating to the size of the hedging gains and revaluation of financial instruments that occurred in the first quarter. And also whether you might give any guidance on further restructuring charges that you might be planning for this year.

As I said earlier on the synergies, we've stated the end of last year, I mean, March 1, that we wouldn't give too much detail in the components for reasons which were developed by our Chairman Jean-Francois Dehecq. And not being too much pushing in the cascading redevelopment, because it turns out that when you do that, you put the Company in trouble but you don't succeed in achieving nothing.

That being said, with the comment I've still made on the [debt] level and this is true because to the market performance, you see that we've achieved, largely. On the market performance, you've seen that in particular, the kind of goal that we set for the tail business, that the rest of the portfolio, which was more or less to put zero as a target, was already achieved and the minus -- the plus 3 we've seen on first quarter, as Hanspeter said, was more or less pathology.

So let's talk about that plus or minus zero. We are already on track on that. On the other side, cost savings. I mentioned several items, even though I didn't give figures - like the purchasing policy, like obviously -- [in terms of] what we've done for 8 quarters around the world, I can say that, for example, in the restructuring area, that the charge I mentioned earlier of €258m is mainly, this quarter, devoted to the operation in France, which is in addition to mainly what has been done abroad at the end of last year. And we will see in the coming quarter also things – pre-retirement plans in France, in the headquarters, in the second, third quarter and so on.

So to finish up on your question, guidance on what could be the restructuring costs of this year, well, you know, said that more or less should turn around €1b before tax. We don't change our -- it's not a guidance, it's a best guess set of the figures we could achieve during this year.

As far as the hedging policy, well, as we've always done during our life, we are trying to hedge from time to time. And we've been successful to do a little bit of a plus. I say a little bit of a plus, because there was not that many opportunities on the euro dollar parity. I hope that we'll be able to do it again seeing that the dollar is improving these -- I shouldn't say these days, I should say these hours. So -- but that doesn't just very well bear that the 1.25 kind of rate, exchange rate, that we delivered with the guidance we provided.

Revaluation of financial instruments, I gave precise information earlier on the components of this. And you know that fluctuation of markets, so I can't tell more, except that you can be a plus or minus and that has nothing to do with the Company policy. We cannot monitor this. So it's going to be what it's going to be. And I guess that does answer all of your questions.

Yes, thanks very much.

Thank you. We now move to Alexandra Hauber with Bear Stearns. Please go ahead.

Yes, good afternoon. Just a follow up question on Taxotere U.S. sales development. Looks to me that, even if I translate the sales back in dollars, you were actually roughly flat, about -- over the third and fourth quarter. And the reason why I focus on this timeframe is that when technically you should have got the early breast cancer indication scene taken off. So I was wondering whether you could please comment on shifts you may have seen in the composition of Taxotere. As in an increase in use in early breast cancer and maybe a reduction in lung cancer due to competition from [Alympta] and other drugs. And also, could you update us on your filing plans for the further indications? Where are you with prostate and when will you file for gastric and head and neck cancer?

And then just also on Eloxatin, could you give us an update, as you did last quarter, about the penetration in first and second line? And also on your ex U.S. sales - can you give us any indication roughly how large your off label sales are outside colorectal cancer?

Well, you will understand that I cannot give you any information on off label sales in a conference call, very frankly. There is an amount of off label sales, but I have no precise knowledge about it. So --

Is that --

Yes?

I was just wondering why that is. I mean, I don't know about Eloxatin, but in the past Aventis used to tell us that a year ago, 1.5 years ago, Taxotere off label sales used to be about 20% and they made that comment on a conference call.

Yes. Well, I mean, I don't know what Aventis did 1 or 2 years ago. I don't do that. I cannot comment on usage which is not covered by our labeling. And I really kindly ask you to understand and to respect this.

So on the other questions, roughly 40% of our Taxotere growth is coming from the new indications, which means adjuvant and prostate, which means those indications which have been only approved in the last quarter. Which means we are, today, in a split of approximately 25% of sales coming from early breast cancer stages, 15% coming from metastatic breast cancer and 17% is coming from non small lung cell cancer. 17% is coming, then, from prostate and 26% is coming from all others. Those figures are the U.S. figures I just stated.

And is that very different outside the U.S.?

Outside the U.S., we have very, very weak data. So I could not give you such a split for ex U.S. But I would not expect that it is fundamentally different from what I just could give you for the U.S.

The breast cancer is slightly higher outside the U.S. compared [to indications].

And that would be early -- Yes, okay. And in terms of the -- Have you submitted for gastric cancer? Or what comes next, gastric or head and neck?

Both come next and we both have not submitted, as I indicated earlier. We will have some important news upcoming at the next OSCO. So also from this respect we could not have submitted earlier. Which means we will submit by the end of 2005 or very early 2006, for both additional indications, head and gastric.

And then the Eloxatin penetration?

The Eloxatin penetration in the U.S. --

It's close to 50% for adjuvant indication. And you know we also have close to 50% share in first line metastatic colorectal cancer.

Is this answering your question? We have 50% market share in both.

Okay, thank you.

Next question, please.

Thank you. We are now moving to Bob Parente with Leerink Swann. Please go ahead.

Thank you very much, ma'am. Just a little more bit information on Ambien CR, if you please. You've just mentioned you fully expect an approval and launch of Ambien CR in the summer time frame. This would suggest the submission to the FDA of the response in the very near term and a 2 month review. Is this accurate, first of all? And then, what do you expect for the labeling, for the FDA approved labeling? Do you expect the removal of the short term restriction?

Once again, on the second part of the question, we don't comment on ongoing conversations with the FDA, because we don't want to prejudice and we have a profound respect of the decision power of the FDA. Having said so, it's already partly answering the first part of your question. Yes, we are confident that we will obtain a definite registration from the FDA within very short. And in line with this, we expect to make the product available during summer.

Thank you very much.

Thank you. We now move to [indiscernible] with Reuters. Please go ahead.

I'm sorry, my question has already been answered. Thank you.

Thank you. We will now move to [Mike Herman] with ING. Please go ahead.

Afternoon. 3 quick questions. Firstly, I just wanted to get your -- whether you had any plans with regards to Allegra and an OTC switch.

Secondly, with regards to Plavix and the continuous court delays, or delay to the court date. Can you give us what actually has been driving that -- those delays? And whether those issues have now been resolved, do you believe?

And then finally, just wanted to get your view on [Lunesta] and its launch and what remedial action you've been doing. Obviously the script data looks very encouraging. Thanks very much.

Yes, thank you for your interest. Allegra OTC will definitely be a strategy of last choice. If you look to the market, those who have taken this choice lost significant parts of their previous presence in the market. Nevertheless, they have been forced to do so, at least for the time being. We are happy and lucky to be able to say that we are not forced to go OTC. So it would be the very last choice we would do.

On the Plavix court delays, yes, you are right. There have been a number of delays, for various reasons. The last delay, where we have communicated upon about 2 days ago, is a very short delay of 2 weeks, which, you can read of course in the press release, was a request from both sides. And I kindly ask you to understand that I have nothing to communicate about what has been said there on the reasoning. But once again, this is 2 weeks. I think it is not as significant as earlier delays which have not been initiated by us.

Last not least, on Lunesta. We feel that Lunesta is a good launch so far. The product has obtained approximately 8% of new prescriptions and approximately 4% of the total market, which is about the level [Sonesta] had as a maximum. So as benchmark to Sonesta, it's a successful launch -- Sonata. It's a successful launch. But what we also see is that there is an extension of the market which, once again, is something we have seen a couple of years ago when [wires] came. And so we have to see how those trends continue, how they stabilize. It is extremely short. We have about 6 weekly data. So we have to see how this continues during the next 2 or 3 weeks.

To your question how we reacted, yes, of course we have intensified all of our efforts, in OTC and direct promotion by our sales forces in each and every respect. And of course, we continue to stress the quality of our product. And also, of course, in consequence of this intense competition, we start to hear also the side effects of our competitors, which are not totally as a surprise, because they are intrinsic to the molecule.

Can I just ask a follow up question on the Allegro OTC? Just -- if you wanted to switch and get the 3 year exclusivity in the OTC market -- obviously, since we don't know what the outcome of any court negotiations or discussions would be on bar, does that mean that you would not end up with those 3 years, or you'd have to wait for a potential generic launch and then apply for the OTC rights? I'm just trying to understand, in that scenario, what would happen.

I am frank enough to say this question leaves me not sufficiently prepared. I would not dare to answer to this from a technical side what would be the consequences. I just can repeat what I said before. For us, an OTC strategy is really the strategy of last choice, because the loss in revenues is very, very significant. And we are very good where we are, and of course we are very content with the performance we have with the product.

Thank you.

Thank you. We are now moving to Heidi Sprang with Deutsche Bank. Please go ahead.

Hi. Actually, most of my questions have been answered, but I've just got a couple more, if I may. Firstly, can you talk about what experience you've seen with Eloxatin having longer treatment cycles with the approval of Avastin and how that's been progressing, what you've seen in terms of the length of treatment cycle? And a second question on Eloxatin as well. Can you give us any detail on market share in adjuvant and first line in Europe? And then the second question is just very quick. Is there any specific deadline by which you and Pfizer need to come to an agreement on the Exubra deal?

I start with the last 1 - no. The answer is no. There is no definite deadline. To the extent we launched the product together, as was seen in the agreement, and we do everything necessary in the best interests of the common product.

As far as the penetration of Eloxatin in Europe is concerned, again, difficult to answer because the quality of data is not the same as in the U.S. But it is fair to say that the penetration in adjuvant in Europe is lower than in the U.S. So, you have heard before that the market share in the U.S. is about 50%. So I would estimate that in Europe it varies between let's say 30 and 45%, depending on the market.

On the number of cycles, I think the cycles under Eloxatin have increased. And they've increase primarily as a result of the adjuvant indication. Because you know the number of cycles in adjuvant in first line tend to be longer than the second line treatment that we had earlier. So yes, we've seen an extension in the number of cycles. But less due to Avastin, more due to our newer indications.

Fair enough. Just a final question. I presume you're probably not going to be able to comment on this. Since you did mention plans of launching Exubra, do you have any -- can you comment at all about the European filing, timing of that?

No, frankly. The product is filed, the process is going on and we could not make an estimate for the time being. The process is going on, but we are unable to give any estimate.

Fair enough. Thanks very much.

Thank you. We are now moving to Chris Jenner with [T Rowe Price]. Please go ahead.

Hi, good afternoon. Just a follow up question on Ambien CR. I'm just -- I understand your -- you said your profound respect for the authority of the FDA and not wanting to get into any kind of detailed discussions. But could you just qualitatively speak about how we should think about what points of differentiation we could anticipate between Ambien CR and Ambien, given what you described as your confidence in launching the product this summer?

I think that, in very general terms, if you look to the clinical trial program for Ambien CR, is that you may expect - and profoundly may expect - a longer deeper sleep with Ambien CR than with Ambien IR. And, of course, we anticipate that this is reflected in the labeling. Now, as always, question is in which works and which works in which section. Is it in the indication section, is it in the pharmacology section, is it in the clinical section? But those are the 2 actions where the product positioning takes place, perfectly in line with the clinical trial program.

And just a follow up on that, if I may. What do you think is likely to change between the date of the approvable letter and the launch of the product this summer? What are the factors that you are confident that are likely to change to give you a label that would have some differentiation relative to Ambien?

An agreement on the labeling? I don't know. Look, sir, if the background of your question is if it would need new data, additional data, in order to get a registration, the answer is no. If this should be the background of the question. The approvable letter says you have a product which is, in principle, approvable. Come and see us and we decide which labeling, which -- within which constraints.

And of course the limitation of 7 to 12 days is 1 of the issues the FDA will address, because we said earlier that the limitation so far has been a class limitation. The FDA came obviously to the decision that it is no more a class limitation. So now the FDA has to take a stand on what to in this respect with Ambien.

So we have received an invitation from the FDA to talk about those topics, which we have done, which we have done very, very recently. And now things are developing. But once again, the approvable letter does not request that we readdress the clinical trial program or that we make additional clinical trials in order to get a registration for this product.

Thank you.

Thank you. [OPERATOR INSTRUCTIONS]. We are now moving to our next question, with Andrew Boon with Morgan Stanley. Please go ahead.

Sorry, I thought I'd take the opportunity of just a quick couple more. Hanspeter, any thoughts on the impact of [Bayeta] or the likely impact on the Atlantis franchise in the U.S. going forward? Are you seeing any trend? And then secondly, in relation to Acomplia, which divisions of the FDA will be reviewing the data?

I did not understand the last part of your question. Which position --?

Well, the FDA presumably is going to be looked at – Acomplia is going to be reviewed by a couple of divisions inside it. 1 for the smoking cessation and 1 for the metabolic weight loss claims, perhaps diabetes. Regarding the latter, is it metabolism and endocrine who is going to be reviewing it, or is it going to be cardiovascular -- cardio renal?

Andrew, I haven't mentioned which is that it is metabolic division and endocrine should be reviewing it for 1 part and the other 1 you know is the [indiscernible] division which will be reviewing because of the smoking cessation component.

So, on [Bayeta], well, as you know, we are very deeply in diabetes. As a consequence, we are looking to new modes of actions. And we feel, of course, that [Bayeta] is an interesting new approach. As 1 of those consequences, we have license in a product of the same class, which is actually in phase 2 of clinical development, which is an AVE0010.

What those products will really do at the market has to be seen. You are, of course, aware that those products have very profound modes of action. Consequently, they have a specific profile of side effects, and we have to see which part of the market those products take. We find it interesting. Nevertheless, once again, it's a several times daily subcutaneous injection and we have to see how those products really succeed. Time will tell.

Thanks.

Operator, can we have 1 last question, please, because we are running out of time.

Certainly, sir. So the final question will be from Eric Le Berrigaud with Raymond James. Please go ahead.

Good afternoon. A series of quick questions. First, could you give us some updates on the Apidra launch schedule? Secondly, did you get the 6 months pediatric extension for Amaryl in the U.S.? Thirdly, did you also file Acomplia in Europe and did you file [Dronidarone]? Fourthly, on cash flow statement, could you just get perhaps cash -- operating cash flow and free cash flow numbers for the first quarter? And finally, tax rate. For the full year guidance, you previously gave us the same level as last year. In first quarter we are 1 point ahead. What's the right guidance? Is it more 31 or 32%? Thank you.

So I'll start with the marketing questions. No, we did not get a 6 months extension for Amaryl. Yes --

Yes, we have responded to the request of the FDA regarding this pediatric --

I think we have extension till the beginning of quarter 4.

So we did not launch Apidra so far, except in Germany where this product does extremely well, which makes us relook again on our launch schedules for Apidra. Overall, I think it's fair to say that we will launch Apidra all over the world, let's say, within the next 12 months, approximately. This depends on our other launch schedules. It depends also on the penetration rates of Lantus, on free sales force capacity. And, last but not least, the availability of devices, because in most markets, the product will be launched with the device of OptiClik.

Acomplia, yes, we have filed - I think with less than a week delay - also in Europe. And the little delay was due to the fact that the European filing requests both an electronic filing and a paper filing.

And [Dronidarone], last of your questions, we have said that we will file [Dronidarone] during the ongoing second quarter and this is still our filing strategy. No change in this respect.

As far as the cash flow statement for the first quarter of 2005 concerned, we've decided as a corporate policy not to provide, on first quarter and third quarter, the cash flow statement in detail. Reason for which we have provided with the evolution of the net debt on the quarter. So that answers your question.

And as far as the tax rate question is, I suppose, whether the 30.9% of last year, as an average, or 31.8% of the first quarter is the 1 to be retained for the full year. As I said, earlier, on the full year guidance, the tax rate of the 2004 should be retained as an average rate. So it's somewhere in between. And don't ask me too much precise, because even though it's monies, it's too much precise for such an exercise.

Sure. Thank you.

So I try then to make a short summary of what we could present to you as of today. We could present to you an accelerated growth first quarter as compared to our first year 2004. We could present to you a growth which is nearly twice the growth of the worldwide pharmaceutical market. We could present to you a portfolio which shows none - or very, very little - weakness. Also the so called tail business is perfectly in line and on track. We told you that our plans with Ambien CR are fine. We continue to foresee a launch during summer. And we also could confirm that our work on Acomplia exactly continues as foreseen. So thank you so much for your interest as of today. And goodbye. Have a good day. Bye bye.

Thank you.

Thank you.

Ladies and gentlemen, that will conclude today's conference. We wish you a good day and you can now disconnect.