Sanofi SA (SNY) 2008 Q3 法說會逐字稿

Good morning ladies and gentlemen and welcome to Sanofi-Aventis 2008 third quarter sales and earnings conference call. I now hand over to Mr. Sebastien Martel, Vice President Investor Relations. Sir, please go ahead.

Hello everyone and welcome to our Q3 results conference call. With me today are Mr. Hanspeter Spek, Executive Vice President Pharmaceutical Operations, Mr. Jean-Claude Leroy, Executive Vice President Finance and Legal, and Ms. Laurence Debroux, our CFO. Before we start, I'd like to encourage you to have on hand copies of our press release, issued this morning, and also the slides for this conference call, which are currently available on our website.

I must advise all participants that our call today may contain forward-looking statements. These statements include uncertainties and risks which could cause actual results and developments to differ materially. These risks and uncertainties are detailed in our Annual Report on Form 20-F and in the document of reference.

I will now hand the call over to Hanspeter Spek for the review of our Q3 sales performance.

Yes, good morning everybody. As you definitely will have been noted, we have decided to raise our guidance for the year 2008. And the basis of this of course was a performance in the third quarter which we consider as good, perhaps even as very good. If I kindly ask you to get to the fourth page of our presentation, where you find those growth drivers we have identified for the good performance of the third quarter.

First of all, we went back to growth, which is partly a technical effect after the negative effect on our sales performance from the Ambien loss of data -- or loss of patent protection has been neutralized after 12 months. But it is also an effect from an overall motivation and mobilization of our sales teams. So overall, we report on a comparable basis a 5.5% sales increase, which is above the worldwide pharmaceutical market, which is reported as only slightly above 5%.

Second, we see a very strong performance of our five leading brands, which are growing by 13.5%. Our US business, in consequence of the Ambien-IR effect, is back to a double-digit growth of 11.5%, and as you know the US business stands for about half of our sales. We are once again in this year the leading flu vaccine supplier for the US American market and we have succeeded to deliver first to this market and abroad as well.

Finally, we have continued to adapt our business model to the changing environment. Best highlight is by a continued reorganization and also partially downsizing of our sales force organizations all over the world and encourage regionalization to get closer to our customers.

On slide number five, you see then once again what I have just described in headlines. What you also see that there is an acceleration of growth, because the nine months' growth for the overall business is reported at 3.8% on a comparable basis, and as I've mentioned, in the third quarter, then, 5.5%. This is true for the overall business. Important to note also is that we continued to maintain our important base business, achieving nearly EUR2b over the last quarter, as totally stable.

On page six, then, you see where the growth of this quarter comes from. I could show you for the second quarter a zero growth for Europe and also a zero growth for the United States, and you see that the picture has changed. The rest of the world is continuously growing by nearly 10%. But the United States are, as said before, back to an 11.5% growth, whilst European sales are stable due to the market conditions in Europe you are very well aware of.

On page number seven, then, more details on our performance in the United States. We have very strong growth. As you see on the right upper side of the page, we are the second leading company, only topped by Abbott in terms of overall growth. And you see on the lower right side that it evidently is due to all of our major brands - Lovenox growing again by 11 point -- by 11%, Lantus more than 34%, Eloxatin close to 8%, Taxotere 17% and also Plavix with 17% as well as Aprovel, the two products we are sharing with Bristol-Myers Squibb, Aprovel growing nearly 9%.

So overall, a very strong performance for our total portfolio. We see that the Plavix trend has normalized. There is continued discussions on the precision IMS can deliver, but we see in our -- out of factory sales a totally consistent picture which we report for this quarter with 17%. We have significantly changed, in the American market, our field force structure by regionalization, and we believe that what we see now in the third quarter are the first fruits coming out of this reorganization on an organizational basis.

Now, on page number eight, a picture on Japan. I have said frequently that Japan has been a soft spot in our geographical presence. This has changed. You see in the third quarter sales of nearly 21%. We are, as such, the fastest growing company amongst the leading 10 in this very important market. And this is driven by reintegration of outsourced sales, which came back from various partners we had in Japan, but also and first of all by Plavix, which is repeating its fantastic performance now also in Japan with constantly growing sales.

We have successfully launched SoloSTAR in connection with Lantus. And you see also on the lower side of, on the lower right side of page number eight that there is an immediate impact on the performance on Lantus in Japan, as we have reported also before in Europe and in the United States. Taxotere, which plays a very important role in Japan as well, has recently been approved for prostate cancer, which of course is relatively late for this product, but gives excellent perspective for the months and the quarters to come also for Taxotere in Japan.

Now, on page number nine, more details on the major products. I said before that Lantus continues on an exceptional growth pattern. In the third quarter, we achieved more than EUR600m sales worldwide, 29% growth. You see on the right side of the page that we have taken over now, with quite some distance, Novo Nordisk in the insulin market of the United States. We see also a continued positive combination effect between Lantus and Apidra, which had a difficult start some years ago, but now is performing quite nicely.

Overall, we remain extremely confident on Lantus' future. A number of studies which are described on page number nine are confirming the superiority of the product. We have achieved significant progress by the newly-issued guidelines of ADA and ESDA (sic - see presentation), which clearly states that basal insulin is the core therapy after metformin or and after metformin failure.

On page number 10, a background on the Clexane and Lovenox growth pattern. The interpretation has been difficult during the second quarter, and also partially during the third quarter, due to the supply crisis for unfractionated heparin. We see today a growth of 8.5%, such the product is EUR635m in the third quarter sales, ahead of Lantus slightly. But when you go into the geographical details, you see that in the United States we are back to a let's call it normal growth pattern of 10%, 11%, which we also had before the so-called crisis.

We have continued supply constraints in the heparin market still in Europe and this also touches us in certain markets, as in Italy we continue to have limited supply. We manage this in the best way possible and we hope that the overall tightened supply of heparin will go away during the beginning of 2009. But overall, you see that the product is back on a good and regular pattern. It remains to be added also that the first new oral product in this market, dabigatran, so far has not made any impact, despite quite intense promotion by Boehringer Ingelheim.

Now, on page 11, Plavix. EUR1.5b sales nearly, worldwide, of course including the sales as booked by Bristol-Myers Squibb, which means a growth of nearly 12%. You see on page number 11 also what I mentioned before, the consecutive growth of Plavix in Japan. Also on Plavix we can report good progress in terms of medical and clinical guidelines. The European STEMI guidelines recommends Plavix across all management types of STEMI as the treatment of choice.

The STEMI treatment and the overall stenting field for us remains important. Consequently, we continue to recruit in the CURRENT trial and you see that also there we are on a good progress, with a target of approximately 16,000 patients being included into this trial. We expect to report the result in the first quarter 2009, then for an overall of 20,000 patients. And of course these results will have also certain impact, to be defined when the results are available, on our positioning in front of an eventual upcoming Prasugrel competition.

On page number 12, I give you more insight into the situation of Plavix in Germany. For those who are not familiar, there are other salts in Germany available through two competitors, Ratiopharm and Sandoz. There has been quite some communication to the financial community in this respect quite recently and I thought it was good to give some facts behind. As you see on the right side on the bar, the impact so far is relatively modest, representing approximately 20% in sales and volume of the overall clopidogrel market. You also see that there is hardly any progress from week to week and I can tell you that we meanwhile have more data into October sales, no change.

Why is this impact so far limited? I believe for a number of reasons. First of all, because those products are not fully substitutable -- nd I have to make this point to contradict the communication from Sandoz which claims the opposite, Sandoz has meanwhile commented that this information has been not correct -- as indications for the salt are limited and we maintain a large part of the market already by the indications.

Second, we have developed a commercial strategy, taking advantage of our good partnership with the major sick funds in Germany, which means we have included Plavix into our existing sick fund contracts, which means in clear terms that we discount, that we integrate it in our overall commercial conditions. So the sick funds see relatively little reason to encourage the salt. This, combined with what I said before on the limited substitutable, makes overall that the progress of Sandoz and Ratiopharm is quite limited so far and we are very confident that we will be successful to keep it like that.

The last page on the products section is dedicated to Multaq where, during the quarter, as you see on page 13, we have reported more results coming out of the ATHENA study. The ATHENA study has reported already before, about four weeks before, very, very impressive and highly significant results in cardiovascular events and hospitalization because of cardiovascular events. And you see then, on page 13 new results, from ATHENA in a sub-population of stroke patients. And you see that the results in stroke are even a little bit more impressive, this decrease of risk of stroke of 34% in the respective patient group.

We have been granted July 1 (sic - see presentation) a priority review by the FDA. So far, there is no indication that there will be an advisory board, which does not exclude that there may be an advisory board. We have to see this in the weeks and in the months to come. We had filed in parallel, with a couple of days of difference only, to the European authorities and there is not such a procedure in place, but nevertheless, also from Europe, we expect the first questions and contact before the end of the ongoing year 2008. And as you see, we have submitted the file also in Canada, Switzerland, Australia, Mexico, Brazil, Turkey and other markets.

Now, on page 14, some comments on the vaccine performance. As you know, of course, the vaccines are a very seasonal business. Overall, we can confirm that we are perfectly in line with our estimates for the overall business. For the third quarter, we could report a growth of nearly 10%. I made already the comment that we could very early deliver flu products this year, and you see then the other performances of our vaccine business on the same page.

You may look to the Menactra performance, which for the first time is negative, slightly negative, it's minus 2%. This is nothing but a technical effect following new patterns in the public ordering of the various United States organizations working with Menactra. Overall, we are fully in line with our annual budget for Menactra and look with a lot of confidence to the end of the year.

Sanofi Pasteur MSD has reported excellent results, the 38.2%. And you find, of course, the important contribution from Gardasil on the same page, which achieved EUR456m in the first nine months, a growth rate of 43% in the third quarter.

On page 15, then, to conclude, another sum-up of our key positions and growth contributors during the third quarter in vaccines. We had pointed out, Wayne Pisano in our last conference call, had pointed out that the WHO/FDA has recommended unprecedented three-strain change in the flu vaccinations this year, which was quite a challenge from the technical point of view. We are quite proud to have managed this in a record time and, as pointed out, to have delivered to the market.

We have seen important expansion of our pediatric vaccine portfolio in Pentacel, where we have new indications available since mid of July 2008. There, also, our deliveries are totally in line with the budget, with about 4m doses which have been delivered so far.

So overall, also for vaccines, a very good third quarter, which sums it up. We have achieved all our results in this quarter. We have good visibility for the end of the year and all of this made us -- contributing to the increased guidance. But of course, this has to be further explained in terms of profit and expenses and I'll therefore pass you over to Jean-Claude.

Thank you, Hanspeter, and good morning, everybody. As Hanspeter mentioned in introduction of the conf call, we've delivered a good set of numbers during this third quarter of 2008. And this shows up rather easily when you make this comparison between the sales evolution on a comparable basis, 5.5%, with the evolution of the adjusted operating income current, which, excluding ForEx, so quite comparable to the expression of the sales, is plus 14%. And that derives into the EPS level, EUR1.47. Yes, up 5%, but, expressed at the guidance rate we're showing in this third quarter, 11.5% growth.

If I then give a quick look on some of the major items in this Q3 P&L, to begin with the sales, worth to explain that we have two negative effects when going from comparable to reported. Main are impact in changes in Group structure. Remember, this is the end of the contract of Copaxone in the United States and Canada as of the end of the first quarter 2008. And mainly the impact in exchange rate, which is minus 5.7% this quarter and average around the same number, 75% of which is the US dollar impact, and if we look on an accumulated basis, it's even a little bit more, 77%.

The main topics in the P&L, to begin with the cost of sales, as you can see, it is lower this year than last year. Fair to say that it's thanks to the favorable impact of the end of Copaxone we can show this improvement. The figures behind that on the Q3 is a positive impact by 0.9% because of this item.

For the rest, two sets of explanations, which balance in figures, which is the negative exchange rate, sorry to repeat, that on each and every line item, and the positive favorable product mix of 0.6% this quarter. Just a word on accumulated basis end of nine months on the same line item, fair to say that the positive Copaxone effect offsets the Ambien IR effect when the currency effect, negative obviously, offsets, unfortunately, the favorable product mix effect.

R&D expense, plus 0.5%. This is plus 4.5% excluding exchange rate. And as you can see, this quarter, we've started several phase III programs, which explain this increase.

Page 21, as Hanspeter mentioned also, we went on looking at our SG&A and continuing the policy of cost control, but also sales force adaptation in Europe. And I guess that the ratio, which goes on decreasing and is now 25.5% to sales at the end of the nine months, shows clearly that this is a continuous effort, especially and mainly in Europe, that the whole market, if I may put it this way. And I can add that this level continues to compare favorably with the competition.

Page 22, as I mentioned, the adjusted operating income current shows an increase by 14% and the ratio to sales, once again, is an improvement at 38.5% of net sales. By the way, simply to report that when we're talking this quarter of the exchange rate effect, it's not only the US dollar. I'm sure you've all noticed that all the rest or the vast majority of the other currencies decreased versus euro, which added up to the global foreign exchange effect. Not much to report on the net financial expenses and income tax, not much change.

So I go directly to page 23, give a word on the share of profits of associates. Fair to say, and Hanspeter gave the figures and comments, that we've a positive impact from Plavix in the US even though translated - the figures are translated in euros - that with an increased contribution from our vaccine JV with Merck with the underlying Gardasil sales improvement, unfortunately the contribution from Merial is impacted by the dollar evolution, the dollar . I can report that the figures in US dollars are positive, but when converted in euros, that doesn't show up as a positive contribution or a positive evolution of the contribution, I should say.

So we come down to the adjusted net income, which is close to EUR1.9b, and a corresponding adjusted EPS of EUR1.45. And obviously, going to the excluding selected items Q3 result and EPS, as you've probably seen, the adjusted -- the selected items are rather small numbers in Q3. That was also the case last year. So at the end of the day, we're making a 5% improvement in this adjusted EPS at EUR1.47 for the quarter and at EUR4.24 for the first nine months, which is also an improvement by 3.4%.

But also, importantly, those two sets of figures are above 15% growth when expressed in US dollars and I remind you that we do that for the purpose of comparison with our peers. And once again, I can tell you that this set of numbers expressed in dollars compares favorably with our peers.

We've taken the opportunity of the set of numbers of the -- which is -- are included in the selected items, the provision of EUR258m for adaptation in the first nine months, to give you a broader information on where we are. So I'd like to address that. From what we've done since the very end of 2006 - remember it was the time of the first measures we had to took in France in the pharmaceutical operation - and going forward up to the end of what -- of this year - I'm talking of the end of 2008, so over two years' period - I can tell you that we will have roughly spent EUR750m before tax of adaptation restructuring costs, the majority, the vast majority, of which being in pharmaceutical operations.

And that, out of this figure, we can tell you that we have and we will derive - and I'm talking now on a full annual basis - an effect of up to EUR375m - once again, before tax - of synergy. So as you can see a figure which is roughly 50% of the restructuring costs. Obviously, we won't reach this level before 2010 full effect, simply because the last measures are ongoing in, once again, the French commercial operations.

Talking about the industrial part of it, obviously we're not talking there of synergy. We are more talking of cost avoidance, because you know that, first, it takes a rather long time to implement. And second, this is there to offset the consequences of the loss in gross margin which you are encountering when there are generification of the products.

Going -- moving to page 26 now, on the financial side of the balance sheet, if I may, as you can see, once again, we're decreasing our debt and we've done that by generating EUR1.9b of cash flow this quarter. I have to give the information that this takes into account the payment of our Symbion acquisition in Australia, but it doesn't take into account the EUR360m of payment for Acambis in the vaccine area we've paid early October. So we are at EUR3.7b at the end of September.

I would like to add a few words about the environment, Sanofi-Aventis and the financial crisis. What I can tell you is that -- so therefore, at the end of the third quarter, when I said that we have EUR3.7b of net debt, this consists of EUR2.9b of cash and investments and EUR6.6b of debt. In our investments, we have no exposure to subprime market or the financial services companies that have failed as a result of the financial crisis. I can add that our investments are essentially done in mutual funds. And to finish up on this slide then, I can add that we continue to have access to the commercial paper market.

Moving to the upgrade in the 2008 guidance, you've seen that we've upgraded from 8% to 9%, obviously at 2007 euro/dollar parity of 1.37. Given that the good set of numbers we just reported to you, and which we have reached during Q3, we've decided that it was totally fair to raise this guidance.

I have to add that if you make a calculation, an obvious calculation, of the implied Q4 performance, you may determine that it will be less strong in Q4 than it has been during these three first quarter. But remember that it is in Q4 that we will have the impact of the suspension of Acomplia, which has been estimated, at this stage, at a maximum of EUR15m net of tax. So in other words this impact has not been considered as an isolated item when we revised our guidance.

So as a conclusion, and it's only to repeat but I guess it's fair to repeat, the good performance of this quarter from an operational standpoint with a performance which outperformed the market and good behavior of the leading brands as well as good improvement in the operating income margin. This level represents the effect of the ongoing adaptation of the Company, which translates once again favorably in the evolution of the bottom line, the EPS line, and this is particularly true when you take out currency effect. Therefore the 15% in dollars and all of that obviously explains the upgrade in the guidance, in the full year guidance. Thank you very

Thank you Jean-Claude. We are now ready to open the call to any questions you may have on our Q3 results. We would very much appreciate if you could limit your questions to one or two at a time to allow as many people to enter the discussion and also we would like callers not to repeat questions which have already been asked. Operator please go ahead.

(Operator Instructions). We have a first question from Mr. Graham Parry, Merrill Lynch. Sir, please go ahead.

Great, thanks for taking my questions. My apologies, I missed when you were talking about Multaq, but it does seem as if there isn't an adcom prior to the FDA's action day, which I think is the end of January, I was just wondering do you think you can get the product's approval without one or are you just expecting another missed PDUFA deadline from FDA.

And then secondly, I was just wondering if you could give us a feel for what your SG&A ratios would look like if you included Plavix and Avapro marketing costs from the Bristol-Myers Squibb joint venture. Because you do seem to have one of the lowest ratios in the industry so I am curious as to whether the scope for further cost reductions would look greater if we actually included those costs in your ratios. Thanks.

So I think to me that question, and you will not too much enjoy it, what I have to answer. My answer, there is today absolutely no opportunity to be precise how the FDA will proceed. As you rightly say we have a PDUFA date, but if you look to the environment a PDUFA date today doesn't mean a lot. I don't want to be nasty, but look what has happened on prasugrel, repetitively I could give other examples.

So we live in this respect, really from one day from the other. We have a PDUFA date, but we have to see what the FDA finally does, and I cannot go any further.

Moving to your SG&A question, what you are saying is correct we don't include the SG&A related to Plavix and Avapro in the area, we don't manage and which is consolidated by BMS, as well as we don't book the sales. We've obviously made the calculation of as if we were consolidating everything 100% in sales and 100% in SG&A. And again at the affirmative, the ratio would even be lower, which is the reason for which we are reporting the -- the not only the figures, but the fact that I mentioned earlier that we have one of the lowest ratio in the competition, because we know that were we to include these costs and sales we'd show an even lower ratio.

Okay, thanks very much.

We now have a question from Mr. Sebastien Berthon, Exane BNP Paribas. Sir, you have the floor.

Yes, hello gentlemen. A few quick questions, first can you tell us why did you drop the SGL T2 inhibitor, I guess in terms of the safety profile of the product.

Secondly, what has been the -- can you give us a sense of the price erosion for Plavix in Germany? You've obviously maintained volumes pretty well. What is the pricing environment in Germany right now?

And lastly on Zentiva when do you expect to close the operations? It seems to be that three shareholders now are holding 42% of the Zentiva shares. What is the situation there? Thank you.

I regret that we have not understood phonetically your first question. Could you repeat it please?

So the first question is what is the reason why you have discontinued the development of the SGL T2 inhibitor AVE 2268?

Sebastien.

Sebastien, I can take this one. Indeed we've decided to discontinue this program mainly for two reasons. One is lack of a differentiating profile and the other one is also the perceived increased regulatory hurdles for anti-diabetic drugs.

I must add to that that the results of the phase II trials in type II diabetes, conducted with that project, will actually be presented very soon at the International Congress of Endocrinology in Rio on November 9. And we will not provide any further details on the data before that date.

Now on the price erosion in Germany we see discounts up to 25% today, but in average they are significantly lower because of the non-substitutability of Plavix with the two competitors. As an orientation I can add that the German price level for Plavix inside Europe is one of the highest, which means that the consequent effects are also important in light of strong parallel importation before the appearance of the two competitors, which was about 50%, which now is being lowered because, as I just described, we discount Plavix to the current customer.

Moving to Zentiva now, to begin with maybe where we are at on the agenda side, as you remember we had to take out our dossiers from the Brussels Competition Authorities when the deal turned amicable, simply because we had to give a lot more information, which now becomes accessible on the Zentiva side. In addition to that you may have seen that last week there was a new regulation, which were issued by the Commission, which asked for a lot more information than in the past. So all in all we should re-file the dossier with the Competition Authority in Europe in the next coming days.

What does that mean? That does mean that it is probable that we will have to move the target date from the operation, which is these days set up at the end of November. We will discuss with the Czech National Bank. I know that to move that probably to into January of '09 when you take into account normal time of review of these Competition Authorities. And I remind you that normal time of review is generally 35 opening days.

Now we are simply talking, I say simply, but we are talking of a delay in the agenda. We are not talking of something which we believe is of importance. I mean by that that it doesn't endanger the operation in itself. It simply causes delays in the implementation.

You mentioned there are several other shareholders. Yes you are right. I could also remind you that these days the share price is around CZK1,075, CZK1,080 and our offer has been set up at CZK1,150 per share. So we believe that we made a fair offer and this is what is on the table.

Thank you very much.

The next question is from Mr. Tim Anderson, Sanford Bernstein. Sir, please go ahead.

Thank you. On the generic Plavix situation in Germany do you expect that that volume impact will continue to remain low and that the branded product will retain the majority of its share going forward or could that change?

On Multaq, when can we expect to see the head to head study versus amiodarone?

And on your cholesterol absorption inhibitor, for the US specifically, will any outcome trials be required or can you just rely on changes on lipid levels? There has obviously been some controversy with this mechanism in the US this year, and I am presuming you've coordinated the design of your phase III program with FDA.

The first question in Germany is, of course, a little bit difficult to predict because those -- first of all perhaps to be really complete the legal battle is not at all over. We continue to fight for our rights. And there may be, of course, change coming from the courtroom.

Second, the question of substitutability, how long will it be maintained? I can only speculate, because it is also related to the first part with the legal battle behind it.

Third, we believe that there is quite some indication from a pharmocokinetic and pharmacology standpoint that to become increasingly reserved towards other salts. And I believe that there is also some movement on the European level in this respect. And there may be, and we hope, that there will be a consequence on the situation in Germany.

Lastly, it's of course depending on our flexibility in terms of commercial conditions. Now that's perhaps the most easiest point, that we have, wherever we have been confronted with generic competition -- and I know of course, that what we have here is not a true generic it is something quite different -- we have never given up. And consequently if you look to products like Eloxatin, we maintain 60%, 70% of volume in a totally hostile typical generic situation. So to be very clear we will do everything, every thing to maintain the majority of market share for clopidogrel in Germany in volume. But this has to develop over time and we have to see.

On your question about DIONYSOS we will have results available in the first quarter of 2009 for submission to the European Regulators, and they will have this data during the review process.

Now on the third you really go into, very much into development strategies of one of our research products. I'd kindly like you to understand that we are not prepared to answer to these kind of questions today because first of all nobody from research is present on the call and we also think that this call should be really largely focusing on the results of the third quarter. There will be, of course, opportunity to ask this kind of question when we report next time on the full year and then also research will be present around the table here.

Thank you.

(Operator Instructions). We have a question from Mr. John Murphy, Goldman Sachs. Sir, please go ahead.

Yes thanks very much, morning gentlemen. Two questions please Can you tell us a bit about the Ambien CR performance in the US, but also your expectations of timing on generics for that product and any recent moves you may have made on the legal side there?

And second maybe give us a little bit more detail from what we've seen in the press release regarding generic Aprovel in Europe? Thanks.

As far as this generic Aprovel, first of all there is so far not any impact measurable from generic Aprovel in Europe. You know that there are only a number of less important markets in Europe today attributable because of lack of patent protection. The most important is Spain. We don't believe that there will be a true competition in Spain before the year end and probably deep into 2009. Consequently to the practice and to the access giving of generics in the Spanish markets, the other markets are minor.

On Ambien, what we see with Ambien is a stabilization in market share. Ambien CR is the leading brand in the American hypnotic market. We see no progress, we see no progress, but we have stabilized market share now over a couple of weeks, even months, and that's our expectation.

We have to recognize that probably further expansion of market share is difficult because the generic presence of zolpidem is simply too strong. We have, I don't know, probably 100's of brands of zolpidem in the US generic market also, so called in-house brands. And as I say there is too much substitution and we believe that we have to live with what we have obtained. Which nevertheless is not so bad, because I repeat once again, we are the leading brand, this with quite some distance to the others.

Now when generics could come I pass this then also over to Jean-Claude from the more legal side. I believe it's once again speculation. We have a quite a good protection, specifically for the galenical form we have in the US American market. And second the much more detailed answer to your question, we have to see if generics come, are they inside our patent or not, but could state so far there are none on the market and so we remain optimistic.

Jean-Claude, you will answer then?

Simply the date of the corresponding patent, the first one is March 2009 which reflects the additional six months gains through the pediatric extension. But as Hanspeter mentioned, there is another patent, this 531 to be precise, patent which cover the formulation and which this one expire into 2019. So for the rest, as you know, we won't develop except to say that if needed we'll defend our right very vigorously.

Can I just ask a follow up there? You didn't choose the option to prosecute or to file under Hatch-Waxman. Do you still have rights by which you can still appeal against any potential generic?

You see the overall legal strategy is, to say the least, really, really delicate in this field. And I really ask you to understand that we don't want to go into more detail. Why we did not prosecute or if we would prosecute, it is really part of our legal strategy and we don't want to discuss on them.

Alright. Thanks very much.

We now have a question from Mr. Andrew Baum, Morgan Stanley. Sir, please go ahead.

Good morning. A couple of questions, so firstly just going back to the -- your comparative SG&A spend perhaps you could give us some sense as to SG&A as a percentage of sales for your tail products versus your top 15 as we try and more fairly benchmark Sanofi against the rest of the industry.

And then secondly, a question for Jean-Claude, just to clarify the cost cutting or adaptation program, as you call it program, particularly within manufacturing. So, firstly when will we start to see the impacts of the reduction in sites on your gross margin? And can you quantify it for us a little bit more accurately than just describing it as offsetting the generic impact?

So on the SG&A spend on the base business, Andrew, it's really difficult to give a precise figure because the base business is so inhomogeneous from one continent to the others. The products are different and of course the investment is different. Also it's important on the regional result, because the difference it has nearly no impact on the US American result. It is close to 50% of our business in the inter-continental and Asia Pacific.

Nevertheless as a rule of thumb I would say that the spend -- I would put it this way, on the leading 15 if you work with, let's say, 30% you are probably well, and if you take the base business it is more 15% than 35%.

Okay that's helpful.

Okay. It also has to do, because the way we can promote those products in those markets is quite different. We have more and more single promotion in the, let's call it, more developed markets. But we can in Asia and Latin America or definitely Africa, we have more a kind of portfolio promotion. So the allocated cost of, for example, sales force is for the individual part of the portfolio much lower than in the other markets.

So you said 35% and 15% just to be clear.

Exactly.

Okay, thank you.

Going to your question on the manufacturing restructuring, first I will answer on what we've done. We've done -- we will have done about EUR100m in restructuring in this area the end of this year. And because it, as you know it takes time to transfer product from one side to others I should add. And to qualify you don't see synergies before three to five years depending on the situation. That is going to be the case for at least for what we have done this year.

Once again when we talk about synergies we are not talking of merger synergy. This is, I'd say, rather marginal simply because you are just avoiding the effect of the generification of big products, but you are not bringing a lot of 10's of million to the cost of goods. I am talking of reduction obviously. You are bringing something, but which has nothing to be compared with the kind of synergy which you can derive from in the pharmaceutical operation area. That's the reason for which I was not more precise.

And obviously on the part of the question related to the future, again we will see that in the future. I am sure that you can understand.

But just to be clear the first benefits of the already implemented restructuring of manufacturing we will begin to see in '09 or '10.

No, no. I said three to five years so it's later than that.

Later than that, okay. Thank you.

We'd like to limit the duration of this call to an hour, and therefore we will take the last question.

The last question is from Mr. Ben Yeoh from Dresdner Kleinwort. Sir, please go ahead.

thank you for taking my question. It was just on Eloxatin, I was just wanting more detail on the dynamics of what was happening to Eloxatin. Is the US pretty much fully penetrated now? And how fast do you expect the decline to be in Europe over the next few months?

On Eloxatin in Europe I think it's fair to say that unfortunately the worst is behind us. The product is more or less fully generic in all major markets. As I said before in another context we maintain high shares of volume between 50% and 80% depending on the market. But consequently through the price erosion the value share is somewhere between, let's say, 30% and 50%.

The performance in the US was good, you are right. We find out that we are getting close to really saturize this market. We have, in the third quarter, a growth of about 8% in the US of sales. But we are limited by the out of patent situation of irinotecan, camptosar, which has an unfavorable reimbursement schedule and consequence on us. I spare you the details, but the methodology in place has a consequence that has a negative impact on our reimbursement situation that will be over in the fourth quarter of 2008.

So consequently looking forward we are pretty optimistic that we will at least maintain this 8% growth, perhaps even get closer to 10%, and this is also because we have some good news from the clinical front. But overall, once again you are right, the limit is of course the indication, which is a single indication colon cancer, and in which we have a degree of penetration of 75%, 80%. And so that's the limit, but nevertheless we continue to believe to see us close to a 10% growth for the quarters to come.

Thank you.

Okay. At this time on behalf on Sanofi-Aventis management, we'd like to thank you for your interest and participation and wish everybody a good day.

Ladies and gentlemen the conference is now over. Thank you all for attending, you may now disconnect.