Sanofi SA (SNY) 2006 Q3 法說會逐字稿

Good morning and many thanks for joining us. I would just like to clarify we are presenting third quarter results. I'm joined today by Mr. Hanspeter Spek, our Head of Operations, Mr. Leroy, our Chief Financial Officer, and [Lauren de Brue], our [inaudible] CFO.

During this conference call we may make projections and forward looking statements that are based on management's current expectations, but actual results may differ materially due to various factors. For additional information about the factors that affect our business, kindly refer to our forward looking statement on slide two as well as our 20-F.

The format of today's call will be a short presentation followed by a Q&A. Mr. Spek will comment on the business during the quarter. Mr. Spek.

Thank you Sanjay. Good morning. So I thank first of all that you are being with us so early at least in Europe today. We will try to explain the background of our results of the third quarter to you, and I propose that we go to the slide pack which has been sent to you. And start there with page number three.

Now, the comments on this quarter are difficult because without any doubt this has been a less successful quarter for our Company, than any quarters before. Nevertheless, there are three major issues which have influenced this quarter and our performance within. The first one we have seen heavy traffic, crucial even interventions in certain European markets, especially in France and in Germany but not only. Second there has been, of course, the chain of events around Plavix and Apotex in the United States. And third, we are at the end of the period which started nine months ago in the United States, and four of our products in the United States went off patent. The most important one was Allegra.

So the last one is, of course, an event which comes to its end and this is, of course, one of the elements which makes up carefully optimistic for the upcoming, or better said, ongoing fourth quarter. The two other events, of course, does maintain.

So if you look to this chart, you see then that there is a negative growth in this third quarter of 1.1% in terms of sales. And you see that this is also due to the vaccine business, which has been showing a very strong, even two digit growth during this year, minus 7% for the third quarter. Which is another fact, we will go back to it in more detail, but I can indicate already now that this is a technical effect, coming from circumstances around the production and putting on the market of flu vaccines. As all other providers, the deliveries have been delayed, retarded, but a lot of sales will be completely recovered during the fourth quarter.

If you look into the geographical split you see that, yes, there is a negative figure for Europe of minus 2%. The European figure, of course, contains the events just described for France and Germany. You see minus 5% in the U.S. This has nothing to do with targets. We are talking about consolidated sales. So this is largely the effect from those four products going off patent in second half of 2005. And, yes, last but not least, you see that our growth in the so-called rest of the world is being maintained with more than 8% as compared to 9.9% in the nine month period of 2006.

Last word on the so-called base business. You see that there has been a little improvement from 5.4% minus to 4.3%. We are relatively content with this development keeping in mind that, of course, the base business is first of all struck by all those interventions, as those taken place in France like price cuts and the reimbursement. Also a third of the base business is equally struck by the out of patent situations in 2006. So if you would take those events out, the negative growth is minus 2% to minus 3%, which we feel is not too bad given the circumstances.

On the next page, page number four, you see then the performance in detail for the top 15 products. You see that Lovenox just missed the two digit growth with 9.2%. You see only 2.5% of growth in consolidated terms for Plavix. And here please keep in mind that in the consolidated sales, included are our sales for finished product of Plavix to our partner, Bristol Myers Squibb, in the United States.

You can correct this and you come up to a figure of an additional growth of 5% to 6%, because those sales have been missing consequent to the Apotex event in the United States. You see then further in extremely strong and very healthy growth of Stilnox, Ambien and Ambien CR. I get back to this in some more detail. And you see a certain [demote] in Taxotere, only 5% growth which, and I would also clearly like to come back to this in an instant, is due to an absolute continuous unsatisfactory performance of Taxotere in the United States. Outside, Taxotere continues to do well. Then Eloxatin, we see the first impact of upcoming generic competition in Europe whilst the product, of course, remains protected in the United States.

So if you look to the top 15, you see a growth of 1.5% as compared to 5% for the nine month period. But, once again, please keep in mind the additional growth of approximately 5% to 6% for Plavix, due to some events.

Now on a more geographical basis as from page number five. Here you see our performance in the United States, as compared with the market. You see first of all on the right side of the page, that the American market will certainly expand, is in the process of coming back from growth rates on the level of 5% to 8%, 9% during the recent months. And you see that also see Sanofi-Aventis's performance is taking advantage of this comeback. And you see, of course, that the performance is well above the market average, when excluding those four products which went out of patent in the second half of 2005.

On the next page, page number six, you see the real issue we have had to face in Europe. First of all in France and Germany, but please keep in mind that we have also seen price reductions in Portugal quite recently, and also in Italy.

Now back to France. You see that the growth of the market is close to zero, and you see that we are performing under the market, which is largely due to the fact that we are extremely exposed in France with a market share of approximately 18%. And those measures, as outlined on the left side of the page, have had a severe and significant impact on our volume.

In Germany the events took place a little bit delayed as compared with France. Nevertheless, you see basically for the market the same trend. The trend of the market has been before artificially inflated. In the first half of 2006 we saw a very strong stocking. You may remember that the French government took some measures, which went into the direction of forbidding price reductions and discounts for generic products to pharmacists. This led to an overstocking in the first half, but afterwards the market became significantly negative. The only positive mentioning perhaps, the fact that our performance is closer to the market, perhaps due to the fact that our exposure is less important in Germany. But nevertheless, also in Germany we are currently number two of the pharmaceutical market.

How did we address those situations in the free market I have commented so far? Yes, we have just buy it and the necessary cost cutting. This is true for variable parts and Jean-Claude to comment, then he makes an instant more explanation on our profit and loss. And also by social measures, those have been reflected partially in the international press since the last two days.

The fact is that we are in all three countries in a very intense, but also absolutely constructive style of this our social partners, to make the necessary adjustments. In average you see that in Germany and in France our negative growth is approximately 10% and we are going, of course, in this direction as far as cost cutting is concerned.

On page seven you see then on the left side first of all the performance in Europe. Then excluding France and Germany, it is good to see that in those markets which are not struck or less struck by government interventions, our performance is despite the fact that we are market leaders is still very well above the performance of the market. And yes, as indicated before, this is even more for the so-called rest of the world, intercontinental region and Asia Pacific, where our performance is well above, despite the fact that we are market leaders, within those segments of the world market. Also called the [inaudible] market.

Now on page eight you see the performance of Plavix, and perhaps that's the opportunity to give you a little bit more insight on the circumstances. What can we say? We can first of all not say what we see, current stock of clopidogrel in the American channel. You may believe that we make a significant effort to get estimates. This is extremely difficult because Apotex has concluded that secrecy and confidentiality agreement, when delivering its partners in the trade. Consequently, those partners are still bound to certain agreements and have to refuse to give us precise information. That's one of the effects which makes it extremely difficult for us to commit to Plavix sales until the end of the year and even into 2007, because we have a very, very limited visibility.

The second fact we do know is that the sales in terms of product which is being expensed following a clopidogrel prescription are partially coming back. The last figures I had for the slide here are 30%, 32%. So we can say that the share of Plavix inside the total molecule prescription is improving every week between one and two points. Of course, this is nothing but an indicator, but nevertheless it's an encouraging one.

Related question, what happens with managed care? Yes, according to the mechanics which are in place in the managed market, we have lost a number of favorable tier ratings. Which means we have today in a number of accounts ratings which are inferior to the previous one. Also, this is an issue which is extremely difficult to predict. It is clear that we are fighting, arguing and negotiating with our partners in the trade and on the payers' side, in order to improve those. But those negotiations are difficult and not very substantial, as long as there is substantial stock in the trade. But we are, of course, convinced that we will gain visibility also in this respect, day after day, week after week, as more as the Apotex will be exhausted.

Now what is the bad news in this context that result? The fact that the clopidogrel molecule total prescription remains on a very, very good level of approximately 15%. If you look to the curve, you may even see a little acceleration at least, this the beginning of this year. Which partially maybe due to the fact that we have gained an additional indication, a [stimulate] indication, during all those turbulences and the anticipation of the question of course. During all those turbulences we have continued to promote and to advertise this product, and we have even accelerated also with the -- this effect for -- to accelerate ending the stock of Apotex's product in the trade. I think that the only comment I can add, more on Plavix concerns.

In Europe you see a relatively modest growth rate of 7%, 7.5%, which is largely due to the situation in Germany and France. Where we have seen heavy interventions on the product in terms of prescribing instructions in Germany, in terms of price cut in France. We believe that this is another after effect of this little bit unfortunate third quarter. And we will go back to a more normal pattern during the fourth quarter.

Now one word on Plavix launch in Japan. You know that the product has been launched during the second quarter 2006. The Japanese situation, allow me to say as usual, is a little bit different from the rest of the world. When launching Plavix in Japan we are being faced with two hurdles. The first one is that we cannot advertise the product to all potential prescribers because there is a so-called [cross] marketing vigilance period in place. Which means we are obliged to call on a limited list of subscribers, and we have to call on those subscribers in a very high frequency. Which means every second week we have to call on those subscribers, and to monitor it for eventual safety issues. Which, by the way, we did not detect, at least we didn't detect anything surprisingly.

Nevertheless, this is an important limitation and the other one exactly is the same. A limitation until May 1 2007 in place concerning the fact that a prescribing doctor can prescribe only two weeks of treatment. This, of course, obliges the patient to come back every two weeks, which is highly inconvenient, but in order to bring this product in a very controlled way to the market, probably adequate.

As a consequence in recent launches, and you see the same on the right page of the chart. You see that all big products have had a very slow penetration for the first six, eight months in the Japanese market. And you see the red lines for Plavix is perfectly in line with those the penetration patterns.

Optimistic indicator below to how you intend to prescribe. You see that the intention to prescribe is between 55% and nearly 70%. And, of course, you see also a significant difference between the intention of neurologists and the intention of GPs due to the fact that this product is today registered and approved in stroke.

Now on Acomplia, we have launched in Germany, Denmark, Finland, Norway, Austria, Ireland and Argentina. We have small sale of 11m in the third quarter which is not at all a surprise because the launches took place just this quarter. And in most of the markets we only launched in the last month, in September.

First some information on U.K. U.K. has been the first launch of those European launches. We have a very good references and benchmarks, and you see that the Acomplia launch is doing well. Allow me to say even very well because we are on a level of Nexium and Seretide. And are getting close to [Crestor], the penetration is much stronger than Lipitor had at the same point of launch. And once again, is also at the same or far better even than the penetration we had with Plavix two or three months post launch.

We monitor this launch as any other with a lot of intention -- attention as you see on page 11. We are very much control the targeting of doctors in order of course come to the right patient. And you see that the diabetologists by far meets the group of physicians intending to prescribe the product, and then followed by the cardiology. Due only followed by the GPs. We see this a s a very encouraging sign, in order to measure that this product is getting adequately medicalized with this positioning.

You see further that this trend placed into the right patients. Because the vast majority of those patients is not only overweight or obese. No, the vast majority, let's say 80% approximately, have associated with this obesity, with this overweight status other problems in the field of cardiometabolic problem.

The same picture in Germany then on page 12. In Germany we have very little data so far because the product has been launched only at the beginning of September. Nevertheless, you see once again, as I said, cardiologists and diabetologists are in the lead. And you see also that there is once again a very, very high interest to prescribe this product, above 80% for all those target groups.

And you see that once again we are targeting and the physicians are targeting the right patients, which means the patient with associated further risk factors. And you see once again that purely only, so to say, obese patients represent less than 20%.

Now a word on the German launch. I -- for reasons you will understand, I cannot give you a precise sales figure, but I think it's fair to say that the success has been extremely successful so far in Germany in terms of all the economic reaction to our promotion in the first month of September. And this continues of course into month of October.

It is no surprise that this has caused concern from the German authorities, as far as the economic consequences are -- have been concerned. We have signaled a significant amount of understanding, and we have made proposals to the German authorities of limiting voluntarily the target patient. Unfortunately, those proposals have been not so far accepted.

You are potentially aware that the GBA, which is the institution of those physicians associated to the public sick fund has given a recommendation to de-reimburse the product. And this is something awaiting the approval or the disapproval of the German Health Minister, as the Health Minister normally has two months to decide. And we are at the beginning of this period.

You may understand that I would not intend to go much deeper into this, but saying that we continue to argue, to explain. And, of course, we are also getting more and more references out of the European community. And, yes, we are to a certain extent proud to be able to announce that the product quite recently has been reimbursed in Ireland and in Denmark. Denmark traditionally a very critical market for reimbursement issues. And I can tell you that the decision on reimbursement in Sweden is imminent, as is [inaudible].

Associated with our argument, we continue to exercise in Germany and elsewhere in Europe. You find then on page number 13, a summary of the methodology of the so-called Serenade study. This is a key study for the first lifecycle management of Acomplia. Why? Because it's the first study in treatment naive patients suffering a type 2 diabetes. You see that it is, of course, a comparative study against placebo and is, of course, randomized. And this study will be presented at the international congress in December 2006. And it is clear, in fact why we put it into this presentation, that we are looking forward to those presentations of the final results of this study. As you say, a lot of optimism and also confidence.

Now on page number 14, a word on Ambien. First of all, you see on the left side of the chart a very, very significant acceleration of this important product in the United States. You see then the family is growing by 21% in August, going -- coming from 16% last year. The product has been burdened by a negative publicity during the first half, which caused a certain slowdown in growth. We have not only recovered this we have further accelerated, I believe, basically by the advantages of Ambien CR. Which meanwhile also overtook [inaudible] in terms of total prescriptions, which were not certainly evident at the beginning of the year. In fact, [inaudible] of course we continued to invest in this product, and the results are there.

Key target still is to switch as many patients as possible from Ambien IR to Ambien CR. In this respect, we have filed for a prolongation of patent protection. This has been done in time by September 29. And now the approval of the FDA in this respect is imminent. As long as this approval is not being prevented, generic cannot come to the market as you very well know.

We have announced, I would say two years ago approximately, a target of 50% switch. You see on the chart that as of the second week of October, the switch rate has been 31%. We are gaining per week approximately 1% to 2%, which means we are still very confident and optimistic. With the six additional months of data protection for Ambien, to get very close to the peers in the marketing. Which, as you see, that we are today more or less on the level of [Paxil]. And, yes, Nexium remains our main benchmark, and we continue to work into this direction.

On page 15, then [outlook] on Lantus. Lantus continues with nearly two digit -- excuse me, Lovenox continues to grow nearly two digits. The -- perhaps most important use is that we see a very strong acceleration in the U.S. retail demand, outlined on the right side of the chart. This is important because it is important for the patient. The patients are being longer treated which means they are being better protected. Yes, and economically it is equally very important because the price level in the retail sector is superior and, consequently, of course, our margin.

On page 16 then, the success story of Lantus continues. You see it's 31% growth. You see that on the right side that at the middle of this year Lantus became the leader of the total U.S. insulin market. In terms of total prescription, you see that most of the other product are going either down, also show only a very, very marginal inroad into this insulin market, as you see on the lower right side of the chart.

On page 17, you see our new pen, SolaStar. This is a pen which has been developed in-house. We have made significant investment to do so in our factory in Frankfurt. This is a new pen for us. We believe that it is on a top level in terms of utility. We start to launch this new pen as of now. The pen has received approval from the European authorities. In the United States the request for approval is under revision. And we will be starting to launch this product, potentially for us before the end of the year in Australia, where we are doing today an intense program of testing and pre-marketing. And then consequently during 2007 in all other markets and also, of course, in the United States.

To anticipate perhaps a question, we don’t see this product in competition with our major supplier. It's -- for me it's a product is in contrary to the [inaudible] product, a disposable pen. So we see there’s a complementary strategy and not as a replacement.

On page 18, now I have indicated this before. We still have the unsatisfactory picture of Taxotere in the United States, which is contrasted by 11% roughly 7% growth in Europe and the rest of the world. We continue to work on our U.S. organization in this respect. With some reason, we have nevertheless to admit to that. As you see on the right side of the chart, that the product has obtained significant penetration in a number of its indications in the United States.

So naturally penetration is getting more and more difficult. Nevertheless, it is to date the only [metastatic] agent which is being indicated in five different indications, a fifth with the quite recent approval in head and neck in the United States, and outside. So, yes, you will continue to fight for this product also in the United States.

On page 19 there is a word on Eloxatin. I have indicated before that in Europe we are now approaching the fact that the product goes off pattern, and we see the first generic entries, especially in Scandinavia. And, of course, those entries are imminent during the next months also on continental Europe.

We try to counteract this with two lifecycle management strategies. We have launched worldwide the aqueous formulation. In nearly all of those markets, the aqueous formulation has replaced the [inaudible] which was the original form. This aqueous formulation represents a number of safety issues, especially for those people who have to work with the product in the hospital.

Another strategy concerns the 200 milligram form. We believe that both strategies will help. It is by far not the only strategy we apply. We have put a number of programs in place to keep our customers in economic terms. For Eloxatin it is the same strategy as for all our other products. We will not let the volume of this product go to generic competition. We fight for it, in order to keep the patient on the same product, and also to keep our relations with our prescribing doctors.

So on the page 20 then, the situation of the vaccines. You see once again this sequence of 7%, which I have outlined before, it's an [artifact]. And if you look to the green segment of influenza, you see that there is a very sharp decrease. And if you switch then on the next page, you see that this is the delay which you may have heard in similar conferences from our competitors. There have been issues with two new strains in this season's vaccines. Also low yielding introduction, and so we are all delayed. But it is clear that we will fully recover those under delivery during October and November.

So far on the product and I hand now over to Jean-Claude concerning the financial.

Thank you, Hanspeter and good morning, everybody. Hanspeter already addressed most of the main factors which impacted our P&L during this quarter, so I propose that we go directly through the figures. And we will follow from page 24 to 30 while keeping an [eye] on page 22, 23, which are the details of the P&L.

If we begin by the first line, the top line, we have to mention what happened on the parity of the US dollar versus euro during that quarter. And as you can see, there has been a decrease in the value of the dollar during this quarter of about 4.4%, which explains most of the impact of exchange rate during that quarter, -2.4%. So when we are looking at the sales from a P&L perspective we are starting with a -4.2%, which in turn translates into a +3.5% on cumulative nine month basis.

Now I propose that we move to the gross margin ratio and I will give a word first to begin on the other revenues. Simply because this is there that we book the royalties coming from the sales of Plavix in the US and you see the downturn by 24%, which is totally explained by the low level sales we saw during this quarter. I remind you the figures, we sold EUR377m of Plavix in the US during this quarter and that's the reason for which the level of this other revenue line item has been decreasing.

[Despite] cost of sales is constant, you see a decrease by 1% or an increase I should say of the cost of sales by 1% when you compare to this quarter 2005. Now this is also to be compared to what happened during the second quarter, or the first quarter of 2006. And I remind you that we have a quite comparable level to these two first quarters of 2006. In other words, the impact of the [four] generic products had a [inaudible] during the -- mainly during the fourth quarter of 2005, of course impacting our cost of sales by about 1%.

I have to comment, the next line items, which are R&D and selling and general expenses. When it comes to R&D, as you can see, we are still continuing making efforts in this area. We are showing an increase by a little bit over 8% during this quarter. It is 11% on a cumulative basis, so as we said earlier in the year, R&D is one of our focus this year. We have a lot of programs to finance this year and this is reflected directly in the P&L.

Going down to the selling and general expenses, yes, there is a special word to address this quarter, because as you can see, there is a decrease by 10.5% of this line item as compared to last year.

Now it is fair to say that during the quarter we didn't have any promotional effort on the genericised products, but that is nothing new as compared to previous quarters. But, in addition to that, as Hanspeter was addressing the measures which were taken by the various governments in France and Germany, the cost containment measures, he said that the press echoed the kind of adaptation measures we took in the group as a reaction to this situation, as well as the issue we have been encountering in the US with Plavix, and it's also fair to say that this is a period where we took some internal measures which had a rather quick effect on the level of expenses just because we felt it was appropriate to react to the change in the environment. And this is the main reason for which you see that downturn in selling and general expenses. I have to confirm that as far as the G&A part of it, G&A are continuing to decrease as they did since the beginning of the year.

If we move now to the next line item, the other current operating income and expenses, just a word to tell you that this quarter we have recognized gains in foreign exchange. It is to be compared to a loss encountered in the third quarter of 2005. And this is quite normal when we remember the variation of the parity between dollar -- US dollar and euro during this quarter, and also because of the policy, the hedging policy we've been doing during this '06 year, we are now realizing some gains just because the dollar is weakening.

So that shows that also on a cumulative basis, and I remind you that in these line item that's also where we group the contribution from Prasco, this US company, which we were to sell the authorized generic of Allegra in the US.

So, all in all we come to an operating income current of EUR2.5b in the third quarter, which is a down I should say of only 6.5% or limited to 6.5%, and which is still showing an increase by 4% on a cumulative basis despite all the kind of impact of generics we had during -- and measures, cost containment measures we had during this period.

If we go down a little bit, page 28 now, from operating current to operating income, I have no comment -- no further comment to make for the Q3. And you would remember that on a cumulative basis we have a very huge positive amount, which is mainly reflecting the kind of capital gain we made on Exubera, the remaining stake of Animal Nutrition and so on, nothing new in this quarter. I will be back on the specific items in a little while.

Net financial expense. Now you see an expense which is of EUR50m in the Q3, which is to be compared to EUR19m in Q3 of '05, so that deserves a little explanation because this is not the usual sense of this line item. It is fair to say that first there has been a reduction in the net debt during the third quarter. We'll see that we improved the cash -- net cash position of the Group by around EUR1.4b during the third quarter so interest charges were lower than in Q3 '05, EUR92m as compared to EUR104m.

Now, in addition to that you may remember that last year we had capital gains which were generated on some biotech companies and that's most of the difference. If we also add up the last line item, which is shown on your slide, which is the foreign exchange gains, which are rather important this quarter as compared to last quarter simply because we are hedging also hedging the US debt instrument, the [inaudible] [USCP] we are drawing on during this period. On a cumulative basis so, again, an improvement, EUR146m to be compared to the EUR224m, and that despite of the fact that in ‘05 there was this capital gain as I just mentioned.

I have no special comment to make on the tax rates for Q3, so I move to page 30 to give a word on the share profit and loss from associates. Once again, as I mentioned, on the royalty line a little earlier, there is the impact on the Plavix in the US situation and you can see that directly in the contribution, which comes from the BMS alliance Territory B, what BMS is managing, where you show a sharp decrease of this contribution, EUR56m after tax income, to be compared to EUR112m last year. This is the main component of this decrease. That also shows that obviously in the cumulative but not at the same pace since we were [doing it] in advance as of -- at the end of the first half of the year.

Minority interests, nothing to mention. You remember that the main component of it is the share of profit we rendered to BMS on the Plavix and approval mainly in Europe, and this is going well as Hanspeter described earlier. So we are giving back more money to BMS than we did last year, EUR100m to be compared to EUR91m.

So as we do usually now, let's have a look at the impact of these famous selected items on the adjusted net income. And as you can see directly from slide page 31, there has been none of them during the third quarter, and this is to be compared to a positive impact of more than EUR100m of after tax income last year, which in turn drive us to the bottom line. You can see that from two angles. The first is bottom. Not only you see a decrease by 12.5% at the level of the EPS, EUR1.25 [sic - see documentation], but you can also mention and keep in mind that this third quarter was only a decrease by 7.4% at the same level EUR1.26 per share.

On the cumulative nine months now we are showing an adjusted EPS of EUR4.21 a share, which is up 15% on the nine months end of September '05. Again, fair to say that excluding these selected items, it was EUR3.87 up 7.5% as compared to the same period of last year.

I already mentioned that we made a positive cash flow of EUR1.4b during this third quarter, so adding that to the EUR1.1b, which we realized at the end of the first half. We are now up to +EUR2.5b as compared to the situation of the first of January, so our net debt is down to EUR7.4b and it's an improvement of the gearing, as well.

As a conclusion I must say a word about the guidance for the 2006 results. What happens since we moved, you remember, from [+12%] to around +2%, and this was at the very beginning of September. On Plavix in the US we've made some sales since August 8. We've made [$85m off sales]. One of the assumptions you have to remember was [0] sales. So as well we will have probably certainly some sales of Plavix in the US during the fourth quarter, but that doesn't mean that we are able to predict the figures since [stocks] may not be distributed equally among channel participants. And as Hanspeter mentioned, because of the confidentiality clauses, we are not yet able to get very good information about what is in the channel.

Another issue, we started to work on adaptation plans and associated costs will arise by the end of the year. While cost containment measures, we mentioned that in France and Germany, the [growth] that they are expected negative effect during this quarter. And again, Hanspeter mentioned that we are seeing additional measures, which are taken in other European countries, just to mention, Italy and Portugal.

So all in all, taking all of that into account, we decided that we could change a little bit, if I may, the guidance for 2006. And we can now say that we expect an increase of at least 2% as compared to the 2005 figures. And again, this is bearing any unforeseen events. And again I won't go through the details but it is the same expression as we already mentioned in September. I mean by that with the priority of $1.25 to the euro with EUR300m of selected item and so on. Nothing change in this definition. So, small improvement in the expression of our guidance we can say today with what we've seen on the Q3 results I just give comment on.

Thank you, Jean-Claude. We can move to the question and answer session now. Operator?

Thank you. Ladies and gentlemen, today's question and answer session will be conducted electronically. [OPERATOR INSTRUCTIONS] Our first question comes from Matthew Weston of Lehman Brothers. Please go ahead.

Matthew?

Can you hear me, gentlemen?

Yes.

Yes.

Okay. If I could ask a couple of questions please. Firstly, on your statement around the US Acomplia, could you just confirm that your confident that you'll get a class one status for your review from the FDA, so we should therefore assume an action date at the very end of the year?

And then just quickly coming to your oncology portfolio where I have to say sales look a little bit disappointing, could you touch on why US Taxotere has underperformed so much given the pictures on slide 18, which highlight how much market potential there remains? Is it competition from Abraxane and with Astra's involvement there should we be increasingly concerned about growth rates?

And similarly with the Eloxatin, I sense a real change in your tone about the generic competition in Europe. Previously you stated a great deal of confidence that your life cycle management would retain the vast majority of market share there, but I now seem to sense that you're actually maybe stepping back from that commitment and whether we should expect considerable generic erosion.

Yes, Matthew, thank you. Let me say an answer first on that one and before summarizing once again what I said before. First I said that we have an extremely positive reaction to the product from physicians and consequently from patients in Europe wherever we have launched the product so far, and I have mentioned that the product in Germany and in UK does better in the first week of launch than the most successful benchmarks we have in [inaudible] and out [inaudible].

Second, I have said that we have advanced well in terms of reimbursement with the exception of Germany where we have continued to fight. I may add that the decision in France is imminent.

Third, I have said that our lifecycle management is on track and that we are looking forward to the publication of the Serenade study in diabetes patients before the end of the year.

And last but not least, I have said that our people in Research and Regulatory have made their homework. Since we have had received the approvable letter on February 14, they have worked and they have submitted October 26 a complete response to this approvable letter. I really kindly ask you to understand that beyond this we will not speculate at all what the FDA now has to do or will do and within which timeline.

Can I just ask one quick follow up on that? Because as I understand it, within 14 days of your complete response the FDA is required by law to inform you whether it's a class one or a class two review of your data, which either gives us a two or a six month timeline. So will you make a public statement when that 14 day timeline is up, to the market, which will inform us whether it is a two or a six month review?

From what I see today we will not make a public statement until we have a reaction from the FDA.

Okay. If we can move on to oncology then?

Yes. Now on oncology, on Eloxatin perhaps, I'm a little bit surprised that you quote me that I would have said that through various measures we would succeed to [offset] generic inroad in Europe. I would not know any example where this would have been the case in the past. I think it is fair to say that overall generics in oncology have a slower penetration than in any other indication. But of course you have to make concessions in terms of price, in terms of rebate, and this in spite of lifecycle management measures. If I look to very competitive fields in which we had to compete with generics in Europe recently, looking for example to Stilnox, we succeed to maintain volume [wide] shares between 50% and 70%, to give a reference. And what I tried to say earlier is that we will try to do the same in a field which usually is not so open to generic penetration [inaudible], as for example Stilnox had been

Now to give a precise estimate how this will develop over time, frankly I feel not able. It also has to do with open questions if the generics will come immediately or only later with an [aqueous] solution, what the sustainability of stock is concerned and [inaudible]. So we are confident to sum it up that even over time we will keep the majority of volume sales, volume sales of course, not value sales, of Eloxatin in Germany and in Europe, but this is a process over the next years as the patent and the data protection goes off over a spread period of approximately 24 to 36 months all over Europe.

Now back on Taxotere in the United States, well, unfortunately I can say nothing really new. The product has had I would say an unfortunate history in the United States. First of all it was launched in the United States against [Taxotere, Taxotere] was really considered as an American development of American oncologists while [inaudible], excuse me, while Taxotere was a product coming from outside, coming from Europe. I have indicated in earlier calls that we believe that the management of the drug has not always been optimum during recent years. And yes today the product is in a competitive field, and an [important] one, which is more intense than in recent years. We tried to work on all those fields so far not with the success we success we wished to have, but we feel encouraged by the recent approval of the fifth indication, which should give a backwind to Taxotere also in the United States, and could even more as we see that outside the United States the product does reasonably well, so in any case, significantly better than [there].

Okay. Thank you.

Thank you.

Could we have the next question, please?

Thank you. Our next question comes from Graham Parry of Merrill Lynch. Please go ahead.

Good morning. Thanks for taking my questions. A few on the Serenade study, please. I just wanted to confirm whether the Serenade data has formed any of your new filing package or complete response submission, and was any more safety data from this study needed for the complete response? If that hasn't been filed, could you give us an update when you do expect to file that? And perhaps your thoughts on whether a 280 patient study would be sufficient for a full indication for diabetes or if you'd just expect this to be a data label enhancement?

And then just on the SG&A line in the quarter, I was wondering, was there any pre-launch activity for Acomplia in the US? We're seeing SG&A has not increased for several quarters and you had indicated you'd expect to see some pre-launch activity second half. Given the seemingly slightly delayed timelines on Acomplia, have you actually been engaging in any pre-launch activity in the US? Thanks.

Graham, [inaudible] the answer to your question, but first we would like to see the results, and then we would need to discuss with the regulatory authority so it's too early to answer any of those questions.

And on Acomplia in the US, perhaps Hanspeter, would like answer?

We maintain our pre-launch activities in the US, of course. I dare to say perhaps we may have even a certain gain from the delays launching to the US simply because we have more time to prepare the [inaudible] of the launch. But all the reductions we have made in the United States have been reductions totally outside the pre-launch program for Acomplia.

Okay. Thanks. And if I could just have a follow up as well. You're talking about the -- proposing limiting the patient population for Acomplia in Germany. I was just wondering have you made any similar proposals to the FDA, and have you discussed a patient registry with them in your discussion?

That's really within the statement I made before on what we want to say on the answer to the approvable letter. But, nevertheless, I dare to say once again that the reimbursement situation in the US is quite different from the situation let's say in Germany. The decision making in Germany is much more related to the exact phrasing of the indication you have, while in the US, as you know, you have to talk of [payers in direct] in order to obtain the [inaudible].

Thank you.

Thank you. Andrew Baum of Morgan Stanley has our next question. Please go ahead.

Morning. A couple of questions. First, on the performance of Eloxatin in the US, is this simply a slack growth because you had a tough comparison in Q3 last year? Or is there any sense that oncologists are restricting Eloxatin use because of the burden of the monoclonal costs?

And then second, could you discuss or give us some indication to the extent that Sanofi participated in forward contracts on Plavix in order to try and stem the impact of the Apotex product, just thinking about how the long term dynamic may play out here?

On Eloxatin, Andrew, good morning first. Eloxatin, I think we have quoted both effects. Yes, it is true that we have a little bit of an unfavorable comparison with the previous quarter and that’s why I expect the fourth quarter will show a stronger growth than the third one.

The second is what I said for Taxotere is even more true for Eloxatin. We cannot overlook that in the adjuvant treatment of colon cancer we have to take a penetration of about 60%. So in this [inaudible] indication for Eloxatin in the United States we have to admit that we get to a level which is probably the optimum and it will be difficult to grow further. In first line metastatic we have 55%, which of course is a fraction also of the 60% we have on the other side in adjuvant. So there may be some room there but overall it is a mix that is [set] previous quarter and the high penetration of the product. I see no direct relationship in conflict with the monoclonal.

We can only add that we are working to get stage 2 adjuvant cancer patients, and that's something we'll decide in next year whether we have favorable data. Because right now we have the stage 3 adjuvant indication and we are looking at stage 2 which might be an additional reservoir for the future.

Thanks a lot.

Now as far as your question on ongoing negotiations with the healthcare providers in the United States are concerned. Yes, in the period when the generic entered the market and when the generic had to go off of the market, of course we have been active with healthcare providers and have made proposals. It is sad to say that because the period was relatively short and also the other circumstances of the [inaudible] launch, the success of those offers has been limited.

Nevertheless, we are today, of course in the reverse position. We are now renegotiating our conditions with the providers for the time when the stock has been exhausted. And we have to see that in a number of accounts not a dramatically large number but nevertheless, a number of accounts, we have seen this regarding in terms of tier position and we have [inaudible] next week, for which expenses oblige us to make concessions, but as indicated earlier, it's a little bit too early to come to a conclusion.

Thank you.

Thank you. We will now move to Phillipe Lanone of IXIS. Please go ahead.

Good morning, gentlemen. Just a quick question. On your guidance you still include EUR300m of exceptional [inaudible] items and that means that you will have a strong negative in Q4. What do you expect here, or do we have to up a bit the guidance to be realistic on this ground?

That’s okay. My other question has been answered.

Okay. Again, on these specific items, selected items, remember that when we expressed to you the guidance we said taking an assumption of EUR300m. Now it's for the sake of being able to make a comparison with the year earlier. Obviously this is not saying at all that the actual level of these specific selected items will be EUR300m. So you cannot draw the conclusion that we are going to end up in the fourth quarter with a negative by more than 200.

I have already mentioned the fact that this line item is made mainly out of unpredictable items. So it's fair to say that we are both -- or close to EUR500m cumulative on a nine month's basis but this has nothing to do with it, again, with the expression of the guidance. It's just for you to be able to make a quick and accurate calculation. Because you remember that last year we had EUR165m net of tax of selected items, so you make your calculation taking 300 into account. Now we may end up differently. We will certainly end up differently. I am not saying it's going to be 500 or something different, but I am not sure. That's because of the specificity of this item. Making capital gain on disposal of a set, or booking the difference between results which were made on [things] of the past and what is going to be the reality. Whether we're talking of tax or legal matters, I don't think it's proper to include that as a judgment on how the Group is going on a day-to-day basis. Reason for which again, we are talking of figuring [itself] for the assumption, so please, if you can just stick to that and make no interference, what's going to be the actual result in this line item.

That does not mean, so, that there will be a further restructuring plan booked here on this line in the Q4?

Oh, as already mentioned, you've seen the [inaudible] some adaptation measures, which have begun to be taken in France, in Germany, and so on. So yes, there will be some restructuring costs, probably at the end of the year. Now I'm not saying that these items are selected items, and so don't make any confusion. Keep in mind the 300 without mixing, it's something which is different, and don't worry about that.

Remember, when we delivered the change in guidance at the beginning of September, we explained why there was such a decrease between +2 -- +12 and +2. There were two components. The first one was Plavix in the US because of the launch of the generic by Apotex. And we said at the time that we took an assumption, once again, that there would be no sale up until the end of the year. And in addition to that, we would be behind the product, so spending the necessary monies to make sure that the stock of generic would go as quickly as possible out of the market, so a negative contribution. This was the first line item, and the second line item, less important obviously, was these measures of adaptation. So yes, we will see that but this was already included in the change of guidance. Today we are saying instead of around 2% -- +2%, we are saying at least 2%, but that doesn't change nothing. These items, I mean the restructuring, will also be included in this -- are included in this new guidance.

Okay, understood. And if I may follow up with another one, a quick one on inventories, because the Q3 figures were on the consensus on several of the big products, is there any significant inventory variation somewhere on these drugs?

No, not at all.

Okay.

Not at all.

Thank you.

Thank you. Our next question comes from Sebastien Berthon of Exane. Please go ahead.

Yes, good morning, gentlemen. Sebastien Berthon from Exane. A question on Europe decline. The major reasons for the declines we would have expected to be on the [base] products, which gets quite a lot of control, while some of your major products have been suffering quite a bit. Lovenox, up 4% versus 9% in Q2. The Plavix 4%, 8% in Q2. Taxotere 7%, up 23% in Q2. What are the main reasons behind the declining growth for these products? Could you give any [inaudible] for these products, if any? That would be useful, thanks.

Yes, in very general terms, if you could look to the respective sales in France and in Germany you would see that at least in the events which we suffered in the third quarter it was, in fact, a major product, which was [flat]. We had, as I said before, a price reduction of let's say Plavix in France, which led to the effect that in the third quarter the stock of Plavix in France has been significantly reduced because for evident reasons wholesalers destocked. If you look to Lovenox we had the same situation in Germany all during the third quarter, with the consequence that the wholesalers and the hospitals destocked.

So our major product in Europe has been [struck] by the interventions, by tax, by price decrease, by increased measures around reference prices in Germany. And yes, as I also said before, the impact on the so-called base business has been a little bit less pronounced. So, as you see there's even a little bit of [inaudible] in terms of 2 to 3% negative growth on the base business.

This is really the issue in Europe now. Today in Germany and France, it is very difficult to know what to do because it's not about the fact that only the base business is hit by the measures, no, also [those] products. I could give you another example, which is Aprovel in Europe, and in most markets we see price reductions consequently to the reference prices which are in place.

Okay. Thank you.

Thank you. Our next question comes from John Murphy of Goldman Sachs. Please go ahead.

Yes. Good morning, gentlemen. First, could you give us a little bit more information maybe around France and Germany in as much as you did mention there was rapid savings there? Can you tell us a bit about that, was that sales force? And do you think that had any at least short term adverse top line impact?

Equally, how should we think about the selling component going forward in terms of one time benefit versus ongoing savings?

Second, on inventory, you mentioned reduction in inventory in France and Germany. Are we now at very much a low here in terms of inventory? Could we maybe hope for a bit of an opposite move in the next quarter?

And then finally, on Ambien, just wondered if you could give us an update in the US on the percentage of tier 2 status for Ambien IR and CR. Thanks a lot.

So on this situation in France and in Germany, the immediate effect which we had in France and in Germany are external sales force. Usually those sales forces can be terminated with four to 12 weeks [inaudible] and this is what we did. We did this in Germany and in France. On the other measures it is too early really to quantify, but yes, overall we say if we are losing 10% of sales as an indicator, we aim to reduce our sales forces proportionately. But we do the same in the management and there has been publication of the French figures by the French subsidiary where you see that we don't stop with the sales force. No, we say if we have a reduction in sales force, we have to make adequate reductions also in the local headquarters, I believe for obvious reasons.

Those measures take more time. We, of course, have to dialogue with the partners. To put them into place will take more time but the overall direction is this. Where we have issues we address them in cost reductions. We have done so in the United States already since the beginning of the year, even since the end of last year. Consequently, [you see a lot of] [inaudible] the same as for product including Allegra.

We have to do this with prudence, and we try to do so, and [this for] the US even more because we are preparing for the launch of Acomplia, but I can't exclude that we undergo real risks on the remaining business. But yes, we have to address this. If we lose our products in the United States, necessarily we have less means for sales force capacity, and yes, if products lose 10% to 15% of their price we have to address this to some extent in the investment policy.

Now on inventory, very difficult. I also don't want to give a guidance on the fourth quarter. If you look to the French market, according to [IMS] you may see a certain recovery in the value in recent weeks and months. This is also true for the US where you see, and as I said in my presentation, that the market is coming back to some extent. [Medicaid] will play a role in this as well. And yes, in perspective of the US market I am relatively confident that we will [terminate] the market close by the end of 2006 superior to what we had seen in the first quarter. As I said before, our stock worldwide is low so consequently if you put the two factors together, yes, I am carefully optimistic for the fourth quarter.

And John, on your question about inventory, about Ambien and Ambien CR?

No, it was about the tier 2 status on Ambien and Ambien CR.

Okay. So Ambien CR is gaining tier two status. The last time we shared with you it was about 15% in tier two life. And it is to be measured in terms of life, because I think [inaudible] from some other companies which measures it in terms of account, and that can give you a misleading picture. But in terms of life we're up 15%, and it's very, very [complicated] [versus Lunesta]. I think maybe we have about [50% to 75%] additional life compared to Lunesta.

Thanks very much.

Thank you. Tim Anderson of Prudential has the next question. Please go ahead.

Thank you very much. Just a couple on the Acomplia if I can. I understand that you don't have an answer from FDA, but I'm hoping you can say whether new clinical data was resubmitted as part of your resubmission, or whether it was just a reanalysis of existing data.

And then on Serenade, your comments as part of the prepared remarks, makes me think that you've seen the full results and now it's just a matter of releasing them publicly. I'm wondering if that's a safe assumption.

And then a third question on Eloxatin in the US, and when we might expect to see generic competition with that product?

So on FDA and Serenade, look, to a certain extent both questions are related. What to say? I think it is for good reason good practice not to talk about the results of a study because -- before it has been exposed to the academic and scientific public. This is the case with Serenade. This is imminent because it will take place in approximately four weeks from today, so I kindly ask you to accept this as a statement. I can really not go further. Of course we are looking forward to the study with a lot of confidence because it's important, it's a landmark study for the further development.

And on Eloxatin, Tim, basically we have three types of protection. The first one is data protection, which expires in August of 2007, and this has been further extended by a period of six months due to the pediatric extension, which we have received from the FDA. Furthermore we have two patents. The patent on the [like for like] version expires 2013. It's a slow process the product patent, the security patent, and we also have a patent on the solution formulation, which expires in 2015.

Okay. So on Eloxatin, you're basically saying no generics from the U.S. within the end of the decade?

Yes. That is the worst case scenario you can imagine in our view.

Thank you.

Thank you. [Jo Remyer] from Dresdner Kleinwort has our next question. Please go ahead.

Hello. Can you hear me?

Yes.

It's [Ben Yo] at Dresdner actually. It's just two or three quick questions. One was in terms of SG&A. You spoke of the less expenses in France and Germany and the less G&A expense. I just wondered how sustainable this is. Is this the absolute level we're going to expect now?

Excuse me? Could you repeat your question? It was phonetically not understandable for us.

Okay, can you hear me better now?

Better now, much better. Yes. Thank you.

In terms of the expenses in France and Germany, you talk about less general expense and also savings in your SG&A line. I just wondered how sustainable this is. Is this the absolute level we're going to expect now?

Also on restructuring, I was just wondering what the financial impact on your plans for restructuring are likely to be, either in Q4 or into 2007?

And then, lastly, just on Ambien. I was just wondering, can you confirm your expectations on Ambien generics and how your strategy for the switch to Ambien CR is progressing?

Perhaps I will start with Ambien. I said before that we have, as of mid of October, about 32% switch rate. We gain between one and two points per month. We have about six months or seven months more to go so, from a purely mathematical point of view, yes, we confirm our original ambition to get close to 50%. Even more, as we see today, that the switch rate is absolutely on the level of the most successful switches so far [for drugs] the United States.

Now on the situation of cost and cost saving in France.

Well, cost-saving in France and maybe Germany and a bit also in the United States just that these countries, which has been impacted by the various situations we mentioned earlier. Hanspeter said, as already mentioned, we need to finish the negotiation with the partner. Therefore we today we feel that we will know more about the cost by the end of the year so you will know more about these costs by the end of the year, probably in the closing of the 2006 books. And as far as the synergies, which maybe drive from these measures are constant, they obviously will be included in the '07 guidance and therefore you will have a [inaudible] of that included when we deliver the '07 guidance next year.

Thank you.

Thank you. [Stuart Close] of HSBC has the next question. Please go ahead.

Yes. Thank you gentlemen. Two quick questions. First of all Monsieur Leroy, just so I understand exactly what you were saying in terms of the full year 2006 guidance. Are you maintaining the view that EUR300m will be the other operating income figure and is that the sort of assumption we should plug into our spreadsheets to get to the 2% guidance? Because, as it stands at the moment we've got adjusted EPS of 421 for the first nine months. The implication being that you're on minus 41% Q4 EPS figure for 2006. Now if that's because we can have a big restructuring charge, that's fine, but just trying to understand if that indeed is the correct assumption.

Secondly, can I ask the Acomplia question again? I think the market is just trying to understand -- everybody appreciates these negotiations are very difficult but obviously the market's just trying to understand, are we on a clock? Was additional data submitted? Was additional data not submitted? And how have we gone from your earlier comments in the year, which said this is an Ambien type review process to less certainty? Thank you very much.

Okay. On the guidance and the selected items. Remember that in last year, in 2005 and I'm talking of the full year now, the bottom line was EUR6,335m of net profit. In that were included EUR165m, all round, net of tax on selected items. And when we expressed the guidance for the year 2006, we had to choose a way to convey this guidance. We said, let's take the last one, when we are saying 2% with EUR300m of selected items in 2006, that means that you take up a nominal EUR300m, whatever the actual figures are or will be on the selected line items. Now, that being said, again that wasn't said that we were going to end up with EUR300m -- I'll give you an example.

We were at close to EUR500m as I mentioned earlier at the end of September. You very well know that during the fourth quarter we sold our [inaudible stake to] the market and therefore, we're going to encounter a capital gain on this one, which is going to be a little bit under EUR100m net. So, once again, the EUR500m may become close to EUR600m before anything else happens. So, I am not taking that into account when we give figures for the guidance. It's just -- the 300 it's just to help you to make the calculation of what is going to be the bottom line, excluding these selected items.

Okay. So, EUR300m is 2%? That's how we think of it?

Yes. And now, in addition to that, we never included -- I mean never since the summer, we did not include any restructuring charge to come because of the cost containment measures, which [inaudible] had to [inaudible] and that [special] measure, we never included that in selected items. This is directly included in -- if I may, in the ordinary bottom line and this is included in the former plus -- around -- plus of 2%, which became today at least 2%. So this is -- the burden is taken into account in this situation. And I mentioned obviously that the main component was the Plavix one.

So, I hope that it becomes a bit clearer for you. Don't measure the selected items as a driver for the bottom line of the company because, once again, there are [inaudible] positive, maybe negative, reasons for which we're giving you as some time as a driver is that level of [inaudible], but that doesn't mean at all that we're going to finish up with a figure with this level of EUR300m.

Okay. Thank you.

Now on our country at large, I think you have used the word negotiation and I have to be clear that we are not in the process of negotiating this American authorities, the approval of the product.

Yes.

That’s not the way it work. We have received an approvable letter and usually, and also in this case, an approvable letter contains questions. We have answered to those questions and as the approvable letter did not ask for new additional clinical trials, consequently it is easier for me to say that we have not submitted new data in this respect.

I may refer perhaps to, an erroneous report on the potential usage of European safety data, which has been issued a couple of weeks ago by Bloomberg. You may have seen that we have made a [inaudible] to this because if this was evidence, it was flawed.

So, to sum it up. We have made our homework. We have answered the questions. We have submitted this and all speculations from there on isuseless and we will not do so.

So when we're talking -- when people are talking about a three-month or a six-month additional data review period; that might just be, a complete fallacy as well? It's just the FDA now has to sit and decide what they do with the response letter. Yes?

Yes. The FDA is totally free in its decision-makings. This is good. This is in the best interest of the patients and, at the very end, also of the industry.

So we're not on a clock?

We have just submitted. We have not received anything. There are more [inaudible] to be made and as Hanspeter said earlier if there is any major clear information, we will issue a press release.

Okay. Thank you very much indeed.

Thank you. We will now move to Amit Roy of Citigroup. Please go ahead.

Hello. Thank you. I just have got two questions. So, firstly a question on the Ambien switch. Looking at the IMS data that we have, it's true that Ambien was switching at about 5% per month, over 1% per week as you say. But more recently that seems to have dropped to 1% per month, so it's about five times less. And that seems to me, it's on track to get to the mid-30s for the switch. And I also noticed that your pricing scheme, you now priced -- you had Ambien CR priced cheaper than Ambien to encourage the switch but that's now -- but they're now both part of the same. With those factors in account, how do you see yourself getting to the 50% switch rate? And that's the first question.

And the second question, regarding Acomplia, I understand that you are unable to talk about the negotiations -- discussions with the FDA, but your February press release stated the approvable letter for Acomplia in weight management. Is it a normal process when you have a resubmission that the broad indications, i.e. weight management stays the same or are you free to change that to something else; i.e. say diabetes or [inaudible] for example? Thank you.

Look, I really don't want to be rude but I have nothing to add to what I have said so far on Acomplia. I kindly ask you to accept that, for the reasons given, the -- our relations with the FDA are driven by this fact and in this sense we don't want to continue to add piece of piece of information, which necessarily becomes speculation.

Now, as far as the switches in Ambien are concerned. First of all what we are looking to is repeat prescription data, which has to be looked to with care. The data is not the most reliable data, which is available. If you look over time, we remain confident that we will have a switch as the major product, which has been switched in recent years and this is inside my presentation, which shows product R. We believe that the switch will develop about 40% and we have given as a medial or as a maximum objective a switch rate of 50, so I remain absolutely confident that the switch will be well above 40, close to 50.

Thank you.

Thank you. Michael Leacock of ABN AMRO has the next question. Please go ahead.

Hi. I just have a question really on Acomplia in France, if I may? I know you said the decision is imminent and I know you wouldn't want to jeopardize any discussions or negotiations with the French. Could you just highlight what is different between the view of the French reimbursement system compared to Germany? What gives you, perhaps some confidence that the French will be rather more open-minded to Acomplia than the Germans seem to have been?

[Technical difficulty].

Ladies and gentlemen. We are currently experiencing an interruption to today's conference. We will be continuing shortly.

Hello?

Mr. Leacock, please go ahead with your question.

Hello, Michael Leacock again. In France you mentioned that there's [inaudible] for Acomplia and you wouldn't want to prejudice that discussion in any way, or outcome. So, I just wondered what the different process is in France in terms of what factors it will consider for company reimbursement, compared to say Germany where we've had a rather more tough time?

The difference in fact are really very different. I would say the major difference is that inside the existing system in France you can make agreements on sub-populations of patients. So you can say, okay we have a relatively vast indication from the A and the R but the product will be limited in its reimbursement on the sub-population.

In Germany this so far is not foreseen. There is to my knowledge only one exception to it, which is oral contraceptives in Germany, where oral contraceptives are being reimbursed to young females, I think until the age of 20 or 21, but the approach in Germany is rather different. I feel it's also a little bit unfortunate because the medical indication is not necessarily the, let's call it, reimbursement indication, while in France and also in Italy and also in Spain, it's a well-established practice to reimburse for [inaudible] of the overall population. Is this answering your question, Sir?

Thank you very much.

Thank you. Our next question comes from Ben Yo of Dresdner Kleinwort. Please go ahead.

Thank you. I just have one very quick follow up question as to whether [Itaparanox] was still on track for an update in December or where we were with that?

The answer is yes.

Thank you.

That will be presented at the American Society of Hematology in December.

Great. Thanks.

Thank you. Alexandra Hauber of Bear Stearns has our next question. Please go ahead.

Good morning. Thank you for taking my questions. Just a couple of follow up questions on the impact on healthcare reform. First of all, in the press release you mentioned parallel imports. Could you tell us which products in which country are affected?

And to just come back to Germany again, you mentioned the Plavix intervention and price cut. If I did understand that correctly, could you just mention exactly what happened in Germany to Plavix?

Then on France, the general question is, I don't understand how you can explain that you have been affected worse than the market by having a big market share because why wouldn't you be benefited in line with the market?

And could you just quantify the price cuts you have added for Plavix in France?

And then just a follow up question on the adaptation measures you have already had, which were restructuring costs, where -- which you said, these are the temporary sales forces. When exactly did you drop them? Did you drop them straight at the beginning of the quarter or somewhere halfway through the quarter?

First of all, on importation. So, first of all it's the market which is most concerned is the UK and Germany. In the UK it's more or less nearly every product. In Germany the products mostly concerned are Plavix, simply because the German price is amongst the highest prices in Europe and to a lesser extent, Lovenox. So, having said so, where does the product come from? They come mainly from the low-price countries for both products, which are for example, Greece, France, Spain and in the case of Lovenox we see also importation meanwhile from Poland, which is raising new issues for evident reasons. Now --

So, Poland -- can I just -- you said that Poland is the new element in the parallel imports --

It is a new element -- it is more an event than having really a massive input. But, yes, necessarily now also, and in the future, importation from the new member states will raise the issue but the majority of importations today, of course, comes from the large markets such as France or Italy or Spain.

But can I -- sorry, can I just follow up on the eastern -- because we were all told when new countries were joining that their prices in the eastern countries were actually, largely, even higher than in the existing EU countries. So is it, again, a specific large product, which is affecting that, which causes that mean dynamic?

I would say it depends on the product. You see, overall we can say that we have relatively -- Sanofi-Aventis we have relatively high prices in eastern European countries, but with exceptions. And the market of importation is a highly selective market. If they find a product, which is less expensive in a very small -- let's say in Lithuania, they buy in this market and they open a new door, which does not change the overall statement that are our prices in Eastern Europe for the time being are relatively comfortable in this respect.

Now, as far as price cut is concerned, the price cut we have for Plavix to place not in Germany, but in France and the price cut has been 5%.

Now the depression of prescription in Germany on Plavix is a result of the overall growing pressure from the German authorities on doctors to become more and more limited in prescribing, so far, high price products. And given the fact that Clopidogrel is both products, [Eostrovere] and Plavix in Germany is the leading pharmaceutical product of the total market, we are suffering more. And yes, evidently, daily treatment and cost of Plavix is relatively high.

Then last, but not least, what I tried to say when I said we are more exposed with 18% market share than anybody else in France. I think yes, it's clear, if you have 18% market share you take more blows than you have sweetness in market share. But perhaps more importantly, we have approached [Feuer] in France with more than 100 products, which go from antibiotics over [inaudible] in to cardiovascular via oncology, we are more or less everywhere.

And the interventions of the French government during this year, have been going into each and every market segment and they've brought a variety of interventions, which means taxes, price reductions, reference prices. So, yes, we see the kind of portfolio we have and the importance we have inside the French market, we are more exposed than anybody else and so, yes, necessarily, in quantitative terms we take more blows than anybody else.

Okay. And the adaptation measures? When were the temporary sales forces --?

I would say that in the U.S. we have already started at the end of 2005 and we terminated the first external sales force. And, we have since started with very beginning of course but they are under the impression of the Apotex event. In France and in Germany we have started let's say, during the last four to eight weeks and we are really at the beginning of our measures. And as I said will translate into true savings into 2007.

Okay. Thank you.

Okay. We have time for a couple of questions and then will be our conclusion.

Thank you. Our next question comes from Paul Mann of Deutsche Bank. Please go ahead.

Hi. I've just got a couple of quick questions. Perhaps you could talk about the tax rate and then can you give us the tax figures on the Plavix royalties? And the tax rate seemed to go down slightly in the third quarter '06. What tax rates do you assume for the fourth quarter of this year and then, for the full year?

And then, secondly, just on Eloxatine, following up from Tim's earlier question. You said you've got two patents in the U.S. How do those patents differ from any patents you've got in Europe, i.e. the patents haven't really prevented generics entering the European market?

Your question was how do those patents differ?

From any patents you may have in Europe that haven't seemed to prevent generics into the market.

Well they differ in terms of time.

Okay.

The European patents comes to their end in 2006/2007 in essence, whereas the U.S. patents come to their end in the 2010 and then after. So that's the major difference to the answer of that one. Right, go ahead.

The other one's on the tax.

Yes. Okay. On the tax. At the beginning of the year, I mentioned that the effective tax rate for 2006 should be around 30.7% of the before tax income. You've seen some difference during the year. The main difference is only -- was related to the tax rate of the capital gain made on the disposal of Exubera. For the rest we have smaller items, which may play a small role in a difference which you see in the quarter -- third quarter for example, the rate used to be 30.6% but all we know, as far as the ongoing operations are concerned, we maintain the 30.7% effective tax rate for the full year '06.

And what tax rate should we assume for Plavix royalties?

Oh, in France, remember that -- I am talking of the French situation, no? Only when you receive royalties the tax rate is 15%.

And so, for the Q4, should tax -- tax should therefore go up I'm assuming quite a bit?

No, that doesn't make necessary differences. You know, you have to make a mix of royalties but also, to make a mix of the result and the tax associated in the United States. So, the answer might not be the one you believe. It may not be such different that the effective tax rate of the country.

Okay. Thanks very much.

I think we're pretty much at the end of our allotted time. Before we go, Jean-Claude would like to make a concluding statement, Mr. Spek.

Yes, if I may conclude maybe with a more positive stance. I would have to comment. The first one, when revising the guidance we could be revisiting these guidances or revising upwards the guidance -- this -- another way around for you to understand. Let me say that when we are selling Plavix in the U.S. from now on, we're going to make some profit, which in turn explains why we said that the guidance would be at least +2%.

Another one and Hanspeter already mentioned it, during his presentation, is that fourth quarter, during the fourth quarter we will see an evolution of the sales on a comparable basis, which are going to show up much better than the three quarters we had during the '06 year. Well just because, first, the general application of these four products mainly Allegra in the U.S. will be again over on a comparable basis. And in addition to that, again, as Hanspeter mentioned that, we will have a very good quarter in the vaccine business, as accounted for to a less favorable figures during the third quarter.

Thank you very much for taking the time to listen to us.

Thank you. Bye-bye.

Thank you. Ladies and gentlemen that will conclude today's Sanofi-Aventis Group sales and earnings results third quarter 2006 conference call. Thank you for your participation. You may now disconnect.