Sanofi SA (SNY) 2008 Q4 法說會逐字稿

(Spoken in French) Good afternoon to all. To those in the room today and good morning to those of you who are following us via webcast in the US. My name is Sebastien Martel. I'm in charge of Investor Relations. I have the pleasure to welcome you to the full year 2008 results and outlook presentation.

Before we start I'd like to advise people following us via webcast or by phone today that our press release and our slides are available on our website. As always I have to advise you that the presentation today will contain forward looking statements. These statements involve uncertainties and risk that could cause actual results to differ materially and these factors are actually detailed in our form 20F and also in the document of reference.

Our presentation today will be divided in two parts. First, our CEO, Mr. Chris Viehbacher, will actually lay out what his vision for Sanofi-Aventis is. In the second part we will have Mr. Hanspeter Spek, who is Executive VP for Pharmaceutical Operations, who will comment on the 2008 sales performance. Laurence Debroux, our CFO, will then comment on the financial performance in 2008. After Mr. Viehbacher will have provided concluding remarks, Marc Cluzel, Senior VP of Research, will actually join us on the floor, together with Wayne Pisano, who is President and CEO of Sanofi Pasteur. With that I will pass the floor over to Mr. Viehbacher.

Thank you, Sebastien, and good afternoon everybody. It's a pleasure to see a lot of friends I haven't seen for a little while and certainly since I've moved from orange to light blue. I've obviously been in this job for all of 10 weeks. It's been a pretty busy 10 weeks. We had a couple of weeks of pretty harried activity getting the budget done and approved by the Board. We've launched 12 transformation programs in the Company and trying to get around to see as many of our teams as we can, doing town halls and webcasts in France, Germany, the United States. Going around to see some key external stakeholders, trying to bring in some new positions. But I tell you it feels great to be at this new company. And I'd like to share with you today just a few things about some of the things that I have discovered coming into the organization and then obviously a little bit about where I think we as an organization have the potential to go.

Now, I've got a first slide up here which talks about 2008 results. If you show up on December 1 you can't claim much credit for these results and that obviously goes to Hanspeter Spek and to Wayne Pisano. But, I would like to just make a few comments because it goes a little bit to some of the things that I'd to talk to the Company about. First, if you look at that box to the right, I mean there's some fabulous growth platforms that this Company has built over time.

You look at Plavix growing at 10.5% and it strikes me just as a newcomer to the businesses, not only are these products that are growing in strong double digits, but a lot of these products I have competed against, first of all. And I can tell you these are the gold standard in their categories. Lovenox is a very difficult product to compete against.

We had a very successful launch last year of Pentacel. And I'm very glad I switched companies when I did because Wayne and his team have already grabbed 50% of that market share. We have a very, very strong US based Vaccines business. We've got two products that we've actually filed with the FDA this year. So, we've got Multaq and Ciltyri.

Multaq for me is a very interesting product because I think this is really the type of approach that the FDA is looking for. We've gone and done the long term outcome studies. We've shown a 24% reduction in hospitalizations and cardiovascular death. So, you've got a situation where there is clearly an older product around. We have had some issues with tolerability on that older product. But, rather than just say well we're relying on tolerability what difference does it actually mean to a patient? And the Company's made that investment, made that commitment and we'll have seen the great results of ATHENA. Hanspeter is going to come back and talk about that. But, I think it does show that the Company has adapted to what the regulatory environment requires now. We've got to get it through the FDA and we all know what challenges that can bring.

Ciltyri is also another interesting product. And I looked at it first and said okay this is a sleep agent that doesn't help you fall asleep. And we discovered this new indication called chronic insomnia with nocturnal awakenings. And I looked at it and said this sounds a little bit like restless leg syndrome to me. And I remember when we were launching that, is there an indication? Less than 5% of physicians actually knew about that indication at the time. And I think the CINA, the chronic insomnia with nocturnal awakenings, has the potential to be with that. But, I will tell you, if anybody can do it, if anybody knows the sleep market, it's our Company. You just look at not only the progress of Ambien, but Ambien CR versus Lunesta. I've got a lot of confidence in that.

We've got some very strong growth. Not just the US market. That was nice to see that return to growth, growing five times the rate of the US market. Very strong double digit growth in our emerging markets in the all important Japanese market. And we've been able to progress on our SG&A to sales ratio and, of course, all of that led to double digit growth at constant dollar exchange rates, which means that we're above expectations and above the last guidance we gave back in the third quarter, which is 9%.

Now I'll take an opportunity here to say that we're going to change the way we give guidance. We're giving guidance going forward and everything I'm about to say today is at constant exchange rates. So, we're going to keep it simple. I don't manage the exchange rates any more than I can manage the weather. I think constant exchange rates gives the best view of the underlying business performance. Clearly, when you see the geographic spread of our business it makes sense to take into account all exchange rates and not just the dollar. So, we'll either talk to you in actual exchange rates or constant exchange rates for all of our announcements going forward.

Now, I don't need to go through the list of challenges that this industry faces. You know this better than I do. But, one of the things I would like to do is say okay, yes, we have these challenges, but, there are some real opportunities out there. And when you start thinking about what's the strategy going forward, what you really want to do is say where do I find new reservoirs of growth? Where am I not really strong today and where can I sell more? And when you think about the fact that two-thirds of the world's population doesn't really have much access to healthcare and the fact that we've really focused on just the rich markets, then I think you see that there is a clear underlying need for more healthcare. The whole world's population is getting older and the whole world's population is starting to take on nutritional styles that are going to drive more demand for healthcare.

We've also got some new sources of funding. You've got the people like the Gates Foundation coming into the picture and PEPFAR. So, in emerging markets it's not the model anymore that you're going to give away your products for free. There are people who will actually buy those products and tiered pricing is now a fact, a fact of life. And, obviously, we can use some of this transformation to drive productivity enhancement and I'll show that.

So, as I look at this business, first thing I say well actually if I were to read a number of analysts' reports and you talk to some people, a lot of people would have said I think about Sanofi-Aventis, I think about Plavix, I think about Acomplia. Plavix is going to go way and Acomplia didn't come. So, that's it. Well, let me tell you, what I've certainly found there's a lot more to Sanofi-Aventis than either Plavix or Acomplia. And I think these solid fundamentals are something that are not well understood outside the business. And, so, I'd like to just take a little bit of time to go into that because for me these create the platforms of growth that we're looking for going forward.

So, the other thing that is a little bit complicated with our Company is that of course we don't consolidate all of the sales of those things which drive our business. We're a Company that actually has been built on partnerships. So, all of Plavix sales, as you well know, are not in our books. So, Plavix in the United States is not in our books and, obviously, we have sales in our books for Europe that we then share with BMS later. But, this actually extends beyond that so if I take our Vaccines business really the sales you see on our books are just the sales we have in the United States and some smaller emerging markets. But, we've clearly got a very robust Vaccines business in Europe. Look at that growing 21.8% and the fact that we've done this joint venture with Merck allows us to really participate in the portfolios of two companies, ours and Merck. And, of course, when you do that you see that we've actually got about a business that's closer to EUR4b, that's growing very strongly and will go forward at a similar rate.

I didn't know, I've got a Labrador at home and been using Frontline for years, didn't know that was a Sanofi company. We also share this 50/50 with Merck through Merial. This is an extremely important business. This is a business that has been growing nicely at 7.9%, EUR2.6b. You won't find that in our sales either. But, we have 50% of that company.

Generics, we've kind of got a foothold there. We're pretty modest. EUR350m, and ranked 23rd. Looks like we're going to be able to carry through the Zentiva acquisition. We've got European approval for that. The minority shareholders that had launched the litigation have pretty much withdrawn that. So, I think we're pretty confident that we're going to be able to close that transaction this quarter. If we do that, that would put us actually in the tenth position in terms of generics. So, but even at that small basis, I'm pretty proud of that team. When I went and saw the team in Germany I discovered that the sick funds had done two tender offers and we had won one of them. So, we went up against the likes of a Ratiopharm and won. So, that gives me a lot of confidence to say we can bolt onto this business and build it.

Now, OTC we're EUR1.4b and growing. And I'll tell you a little bit more about that. It's a good base. I will say it's not really run as an OTC business, but it does say we can build onto it. And, obviously, the core Drugs business is very strong.

So, here's another thing, I remember looking at Novartis's third quarter presentation and they were all proud of the fact that they were saying they were the second best company in the industry in terms of geographic spread of sales. So, it begged the question, who's first? Well, guess what, that's us. And we haven't necessarily told that story in a big way. But what you can see is that actually we've got about a third of our business in the US, a third of our business, a little more in Europe, and a third of our business then outside of US and Europe. Why's that important? Well, because I think most people are moving to a model that say you really don't want to be more exposed than you have to be to the small molecule business, particularly in the United States and top five EU markets, where you're subject to all of the vagaries of patent life and patent extension. What you want to do is have a more geographic spread of that, particularly because those markets are growing strongly, and we know that economic growth and healthcare expenditure correlate perfectly and we're only scratching the surface in terms of the numbers of patients.

Now, the other thing I would point out to you is this Company is often referred to as a company that's very "Franco-Francaise" (spoken in French). Look at this. This is a company that was the first one into China. This is a Company that has adapted to the market conditions locally and has been very successful in Mexico.

If you take our Africa business, EUR750m growing at 13%. If I had a product that was EUR750m growing at 13% most of us would be all over that. But, how many of you really know that we have an African business that's that size and growing at that rate? So, to me, in some ways, we have to look at these products and regions a little bit in the same way as we would look at products of that size. And, of course, number 10 in Japan, and I'll talk about that a little bit later.

So, Vaccines, Vaccines, wonderful business. Why is it a wonderful business? Well, from a public health point of view, it's obviously good. There's no better cost effectiveness argument you are ever going to make within a vaccine. But, the second thing, of course, is that it's very hard to compete with anybody in this business. We're in the process of building a factory for our brand new vaccines. It's going to cost us EUR350m to build that. The capital intensity of this business and the competencies that are required are almost natural barriers to entry. I couldn't even tell you the patent expiry dates of some of our key vaccines. But, you're not going to go and spend all this money and develop all those competencies really just to have a generic market.

And we also know there's a huge unmet need. The opportunity of vaccines in Asia, there's plenty of work that has to be done to achieve that potential, but it's worth a huge amount to the Company.

Now, we also end up having a very well balanced portfolio. Not only for North America, not only for Europe, but, we do have products that are going to be able to deal with some of the world's major health issues. Like Dengue, and that's the vaccine for which we're building this factory. 230m people get affected by Dengue fever every year. 2m are going to develop a more severe form in terms of the hemorrhagic fever that comes with that. So, there's a huge opportunity there in that vaccine and given this is where some of the new money has come in and the tiered pricing, this actually ends up being a huge opportunity for us. So, we've got a very strong portfolio here. We've got very clearly strong industrial operations.

One of the things that is so important to this market, as an example, is the 'flu market and I've been in that 'flu market in the United States. The number one success factor is being first out the door. Because those who get out the door, there's four or five people now in that 'flu market in the United States, those people who get out the door first get the best price and sell their vaccine first. If you're out the door late you're going to end up with having to eat that stuff in terms of returns. Sanofi-Aventis is consistently the first Company out the door. And this year I think Wayne it was September 5. Beat everybody by several weeks. So, it shows that this is not only a great business, but we manage this business I think very well.

Now, I put this one up for a couple of reasons. There's kind of this perception that Sanofi-Aventis has missed the train on biotech. Did you know that 30% of our sales come from biological products? I mean if you take Lantus, Lovenox and vaccines, 30% of our business. You may say well that's not what I think about when I think about a biotech business. But, hey, these things walk and talk like biotech products in terms of the difficulties of getting generics, the capital intensity, the competencies to do that. So, and Lovenox is that way. Now, you're going to see that our guidance has been qualified to allow for a major adverse event such as generic substitution for Lovenox. Nothing new. You've seen it before. We have to put it in because it's probably the biggest uncertainty that we have to deal with.

Now, coming in from outside I would say, and I obviously don't have the granularity of knowledge that my colleagues do, but, as I look at it I said last year we had a major heparin scandal. We couldn't even buy enough heparin. This year we are still very tight on supply. So, you have to ask yourself is the FDA really going to take an aggressive approach to substitutability given the heparin scandal, given the fact that if you don't get the bioequivalence thing right you could kill someone. And, even if you do get a generic -- not clear to us where they're actually going to get the supply of heparin. So, that's why we have decided to qualify it in the guidance and not put it as part of our internal plans and budgets. But, it does remain a risk. CHMP is chewing over exactly what the guidelines are for determining bioequivalence. And, of course, the US regulatory pathway is also under evaluation and that may change with the new administration as well.

But, obviously, Lovenox is a very strong driver of growth for us. It's a strong franchise. We tried a lot of effort and we've been chipping away through, we chipped away an awful lot through Arixtra, but it's still peanuts compared to where Lovenox is in the US.

Lantus to me is also a wonderful product. Clearly, this has differentiation in terms of it being a 24 hour product. But, you know, you look at something like the SoloSTAR pen, this is again where I've certainly seen in my background, if you come up with a device that's differentiated, really means something to a patient, you'll beat the competition. And given the competition is suing us it says to me they've been pretty successful at developing this. So, this is likely to become our number one brand.

We think there's plenty of opportunity for growth. If you take China as an example, China is the second biggest population of diabetes patients in the world. 47m and clearly there's an opportunity. Now we may have to operate on a different price strategy. We may go more for volume than for price, but it shows the opportunity that there is.

Diabetes, and the thing that has really interested me over the last couple of years, we've tended to think of diabetes as being an industrialized country type illness. We're starting to see this in a lot of countries around the world.

Now, OTC. I remember my webcast the day I joined the Company, I said did you even know that we are the number six company in OTC? And most people didn't know. And if you actually do the rankings and you add up the sales, yes, we are sort of the sixth company. But, we have to be honest. Clearly, we're not a serious OTC player in that sense. The business is concentrated in a few countries, in particular five or six of them. But, what it does say to me is, it's not zero. It says to me I got some people in this business that understand that. So, I can take some of those brands and actually invest elsewhere. And Hanspeter will go into this a little bit more because we used to have this thing called base business, EUR8b of business. Objective, don't make it go backwards. Just maintain it. But, Hanspeter will show you that actually we could start to look at some of the products in that and there are growth brands and there are things that we can invest in.

And if you're thinking about a growth platform, why do you need it? Well, you're not going to go buy a EUR20m OTC company if you've got nothing. If you already have a business then you can afford to do that. Then these smaller bolt on acquisitions start to make sense. And I've been saying for a couple of weeks now, you think about Pfizer spending $68b to buy Wyeth really to try to get to where we already are. We already have a major vaccines presence. We have some OTC and we have Biologicals business. So, it says that you got the competence and some credibility to actually go forward and build upon it.

Japan is huge for us. 150m people. So, you're talking about a market that's about half the size of the US. And the nice thing about it is look the drugs that have really driven the growth of this Company over a decade are very early in their life cycle. Plavix recently launched. Lovenox, Taxotere, Lantus, Myslee, which is Ambien in Japan, those are all very early in their life cycle. This is a market that's growing at 18%. So, again if you start thinking about a country as a product, there's $1.4b of business growing at 18.5%.

Now, the emerging markets is interesting. If you look at the two bars, so you've got the one on the left is actually the pharma market, and the dark blue shaded piece are the classical BRIC-M markets, so Brazil, Russia, India, China and Mexico. The light blue are all the other emerging market countries. Now, what you see is we're clearly outperforming the BRIC-M slightly, which represents 26% roughly of the market, and we have 31.5% in terms of the growth. The bar height is the percentage of the world pharma market growth that's coming from those countries. So, 26% of the global healthcare market growth is coming from those BRIC-M countries. 31% of our growth is coming from those markets. But, what's interesting is you can see the importance of all these other markets. And, so, we have a very significant presence in a lot of markets such as, for instance, Morocco and Algeria. Number one in those markets. Turkey, South Korea. And that's I think extremely important again because those are growth markets and yes there is going to be probably some impact here of the economic crisis.

There's no question we're already seeing some slowing down of growth in the Chinese and Indian markets. But, you also have to remember there's a huge reserve of patients that we're not even reaching. And this is where the broad product portfolio comes in.

I bet you here nobody in the room has ever heard of the product, Combiflam. Anybody, do you know what Combiflam is? This is a product we sell in India. It reaches one-third of households in India. Now, that's a lot of people and a lot of volume. And it comes back to saying we've got a product portfolio that's adapted to those markets. We're not really using this any more as a metric, the top 15 sales. You know if you take top 15 for an average European country we're about two-thirds, 70% of sales. You go off to China, you go off to India, top 15 is like less than a third of our business. So, we've got a product portfolio that's actually pretty interesting in terms of developing in those markets and, we've figured out how to manufacture there.

So, roughly 47% of the volume that we sell, we sell in the Southern Hemisphere. 37% of the volume we make we also make in the Southern Hemisphere. The manufacturing facility that we have that produces the most in volume and is bursting to capacity is actually our factory in Brazil. So, again it comes back to saying to me this is a Company that has figured out how it can actually profitably sell in these markets.

Because the other thing you're going to be saying is well you're going to get into OTC, you're going to get into emerging markets, isn't all that low margin stuff? None of the businesses I'm talking to you today about have less than 40% to 50% operating margin. So, we can do that.

Now, the only thing that worries me as I look at that graph to the right is other companies have figured this out. And Novartis is hot on our heels and there's no way in heck that we're going to let Novartis overtake us in these markets, or anywhere else for that matter.

So, what's another thing that you often here about Sanofi-Aventis? Well, we don't do any cost cutting. And in fact I can tell you actually just even talking about cost reduction has been kind of a new experience for our presentations here. But, actually when you look and see this is a Company that has been very quietly, very modestly, doing a heck of a job at managing resources effectively. We are that dark blue line with the little circles on it. The X axis is your SG&A cost to sales line. And so a lot of other companies get a lot of credit for cost cutting. Sanofi-Aventis has actually gone on and done it. Now, your next question may be well if you're already so good there's probably no more room to cut. Nonsense. There's plenty of resource in this pharmaceutical industry. I don't think we've actually begun to scratch the surface on what we can do in terms of efficiency.

You know, one of the things if you're looking at a lot of external growth opportunities is how you're able to finance them, especially in this kind of a marketplace. Well, that's another strength of this business in my view. Very little debt. In fact even with the acquisition of Zentiva we should be actually in a virtual zero debt situation by the end of this year. We're throwing off close to EUR4b every year in cash flow prior to dividends. You can do an awful lot with that.

Now, I will also say just because you've got it doesn't mean you go waste it. And I think one of the things that has been a hallmark of this organization, especially Jean-Francois Dehecq over the years, has shown actually how you do this and create shareholder value. And just because we have the cash flow doesn't mean that we're going to go and ignore those principles of making sure that this is driving growth and this is driving shareholder value. We will have disciplined M&A activities.

Obviously, what I'm going to try to do is try to put the patent expiries into context. Now, what we try to do is the camembert there is representing our sales picture and the various slices of that really correspond to the 2008 sales of those products which will face some genericization between now and 2012. Now, the reason it's complicated is obviously because of the numbers that you have on the lower right hand side of that slide. Plavix and Aprovel, or Avapro as it's known in the US, are not in our numbers and they are clearly going to face this. But, I can tell you if you've got to have a patent cliff it's great to share it with someone and that's what we've done. We don't have all of Plavix.

So, actually what we did is we tried to do a simulation. If we proportionately consolidated Plavix for the US but then also deconsolidated the piece that we share with BMS in Europe, you still actually still end up coming back to about 20% of the pipeline. Now, in this, of course, I don't have Lovenox. Lovenox we believe to be a biological product and doesn't face the same risk, so, we're trying to be consistent with it. But obviously we don't have Lovenox on that, which would add probably another 10% if you were differently minded.

Now, pipeline. You might look at this and say this looks like a great pipeline. No, let's be right up front with everybody here. We know that we don't have enough product, new products today to replace all the products that we're going to lose when patents go off in 2012.

However, there are some very interesting things in this pipeline and, I think, I'll talk about a pipeline review that we're doing. It's not quite as easy, because I know in some of your reports you've written things like well, yes, but there's products in here that are in search of an indication. And, I came in there and we've had a great late stage business review with our commercial colleagues and R&D. And it's not quite so black and white as to whether something's of value or not of value.

And just to give you a feel for what we're going through, if you take AVE5026, which is kind of a son of Lovenox, you first say well what the heck are you doing here? You've got orals coming in here. Rivaroxaban looks like a great product. Why are you continuing to develop this thing? Well, good question. So, we went back and had a look at it and we had our commercial colleagues talk to our R&D colleagues and say there are actually -- we have an opportunity in oncology, and we have an opportunity in prophylaxis, at least in abdominal surgery, where the orals are not going to compete. But, we're prepared to say let's not go spend all this money on developing the general medical indication. And certainly if you looked at what we would have to spend in marketing and sales, the NPV of this product was initially negative. After we got through with it and we looked at it and changed the indications and obviously we're not going to have near the investment in marketing and sales, we've got a nice little earner here. We've got a positive NPV and it will be a mid-size product, not a blockbuster probably, but certainly that's going to help pay the rent.

So, that's the kind of process that we're going through and there's some things on here that I think are not going to survive very long. But I can tell you everybody in this industry's got stuff that is not going to survive either.

The Vaccines portfolio I think is very interesting. I look at something like Hexaxim. This is a hexavalent vaccine that's going to be ideal again for the emerging markets. So, as I look at it, I say wow, there's stuff that I can sell here. But, again, we're being realistic with this. This is an issue and I'll come back to saying we need to drive more innovation and we need to change our decision making process about how we advance products. But, there are some very interesting nuggets in here.

So, this is kind of just now trying to position Sanofi-Aventis versus some of our competitors. And, again, in the idea what is there besides Plavix and Acomplia, we actually stack up pretty well in terms of being in biologics, being in vaccines, being in consumer health, being in animal health. Obviously, one star in generics, and I think even at that we really have to count Zentiva to get to that one star if we're honest, but, there's always room to grow from that. So, I think if you believe that a more diversified model geographically in business is the route to success, as certainly I do, then I think this Company is well poised, at least in terms of having platforms upon which we can build.

So, that's kind of, if you think about it, where we start. You've got a big world out there in terms of where we can find growth. So, what do we actually have to do going forward? And there's four elements to this.

There's no question that you cannot survive in this market. 20 years ago when I started in this business, pretty much any new product coming on was going to have some value. That's not the case today. We all know that we have to provide value to payers and to physicians.

We also know though that there's no global pharmaceutical market. This is regionally based. I've lived in a number of countries myself healthcare and culture are intrinsically related. And given how much money gets spent in different markets you can't have the same healthcare offering in each and every market.

We also know that there's no point in just continuing to be based in the United States and in Europe. We need to be looking for new sources of growth and that's where the innovation, the global expansion and diversification comes in. And when you look at all that and you start saying well you're going to be in OTCs, you're going to be all over the world, we're clearly going to have to adapt our Company because as much as we are diversified, in some ways we're like a lot of other companies. We do still spend a lot of our time, management time, thinking about the US and Europe and we're structured in that way. And so if we really want to capitalize on these platforms for growth we'll have to transform it. And I'll come on to that.

I'll just talk about, we did three acquisitions last year. Symbion, a nutrition company in Australia, Acambis, which is a vaccines research company and Zentiva, a branded generic company based in Czech. I think you can see that this is very much in line with the strategy for where we want to go and the type of things that we want to do.

I'd just like to spend a minute on Regeneron. I spent a day with Marc Cluzel in upstate New York going to see these folks. Again, it comes back to well have we missed the boat on biotech? Well, this is something of a brainchild of Marc. Marc said well I've got a couple of options. I can go spend a gazillion dollars to go buy someone. I can go spend a gazillion dollars, take a lot of risk and build this thing myself. Or, I can be a lot more economical and find someone who's good at this and actually partner with them and create that. And that's I think what he's done and to me this is a very good model for how we want to do research going forward.

The left box talks about our VEGF Trap. This is looking in indications where Avastin isn't yet, or in indications where Avastin has failed. We've got four Phase III studies enrolling. So that's really the first product that's come out of that platform.

But the one that interested me is the platform they have for creating antibodies and similar type molecules like traps. And we're providing them with a budget every year. 12 targets. We get to pick four; they get to pick eight. We can sit down and talk about which targets we go after. But, they have the capacity to provide us with two to three antibodies every year. And we obviously have a few of those already in our earlier stage pipeline with one antibody in Phase I, or two of them in Phase I. We've got an IND filed on another. Sorry, on two others. So, I think it's a start and I think actually as I look at it, it's not just a capacity for creating the molecules; they actually have some manufacturing capability. They've got medical capabilities. They already have themselves a small product for an orphan indication on the market. So, they've got some regulatory and medical. And these are the type of people, you sit down with these folks, they know what they're doing.

So, all of this comes then to a three pronged strategy with what we need to do to deliver our goals. Increased innovation in R&D, adapt the Company, and pursue external growth opportunities with what for an objective? What we really need is more sustainable growth. The problem with the blockbuster model is you spend a lot of money and you pray that a blockbuster is going to come your way. And when the blockbuster didn't come, you merged, and you bought some time with cost synergies. But, it's not really a terribly sustainable model. So, what we're looking for is more of a sustainable model. We're looking for profitable growth and we also need to think about the risk profile because just betting on the next blockbuster is highly risky and doesn't work.

So, relaunched 12 transformation projects. I'm going to really only spend a little time with a few. Obviously, you can't keep spending EUR4.5b per year on research and development if you don't think you're getting enough out of it. So, my intention is not to go on a cost cutting exercise here. But, it is my intention to pose five questions to our R&D organization to which I expect an answer and they're really designed around a few things that I think do need changing.

I think two things in particular surprised me on this when I came in. First is that clearly the voice of the patient, the voice of the market place, has not been integrated in R&D decision making. Our commercial teams were not heavily involved in earlier stages and it started to change last year. But, I think we really are saying this has got to be on a regular basis. We need to have some outside input. We need some sunshine on this. We need some good healthy scientific debate as to whether or not a project has value.

So, with that in mind, and one of the things I want to do then is we've got teams of people who are looking at all 65 of our R&D projects rigorously. We've got our commercial teams involved. I've got some outside consultants involved. On specific cases we may bring some outside KOLs involved. But, I wanted to get to a position where I feel comfortable that every project in R&D meets the requirements of our shareholders and our patients to say that these medicines will actually benefit someone and that there is a pathway forward.

Now, just talking about the 5026, you want to make sure you don't throw any value out the window here. So, it's not snap decision making. So, we're going to take time until the end of March to really go through all those projects and we'll give you an update then sometime with the Q1 results as to where we really think we've got to. But, you've seen some pruning of the pipeline already last year and we're going to do that.

Now, where we do prune a project then my intention is we take the money and decide where's the best opportunity to spend the next euro? And it may not be inside the Company. We may say the best opportunity to invest is outside the Company.

Second thing then is you don't want to get back into that process so we're going to be clearly defining who needs to be at the table when we make decisions about when to advance a product from one stage to another.

Another question though is, another thing I think that we haven't done as well, is that we have not looked outside the walls of our own laboratories enough. We've been pretty much internally focused. There is a lot of fabulous science and innovation going on out there. I'm sure many of you have seen those companies. 6,000 biotechs worldwide. We've got NIH. You've got universities. You've got specialty pharma companies. There is an awful lot out there and we need to be able to capture the best science that we can.

Now, that is a lot easier said than done and I can tell you that nobody has really done that exceptionally well yet. Although there are certainly companies out there who do that better than we do because you really have to get good at partnering and you really have to get good at having your folks say I like someone else's science as much as others. And the reality is, hey, I've got brothers and sisters-in-law. I love my children always better than my nieces and nephews. It's just a fact of life and guess what, when it talks to science this is a very human process. So whatever we're going to fix you can never get far from human emotion and that's what makes R&D a very tricky exercise.

So the questions are really, make sure we -- have we got the right portfolio? Have we got the right decision making? How do we create a culture that really is going to foster that ability to look outside? What new technologies do we really need to be in? Where are we with nanotechnology? Where are we with biomarkers? And the final thing is really to say I think the whole mega mergers that we've been through over the years, we look at everything vigorously when we did those mergers, except research and development. We said, hey, I've got two companies, 5,000 people in each one, EUR2b budgets, we'll slam them together and they are going to be twice as effective. And of course the opposite is true.

So I think we need to go back and really say what kind of an organization do we really need that's really going to foster innovation and creativity? You're going to ask me well did Glaxo solve that model with the Zed? Do you know I think the jury's still out on that but they did show that, as you start to play around with that, you can have an impact on productivity. I don't think anybody's really cracked that nut yet and so we really want to make sure we are.

Now, to that end, also made a couple of announcements today. I'm extremely excited about being able to work with someone like Elias Zerhouni who will be a personal scientific and technology advisor both to me and to Marc. Elias ran the NIH, a $30b per year research institute, and took the size of that organization and brought about some transformation, which is extremely hard to do in that environment. You know led the Hopkins Medical School. But he's also got a very interesting feature and that is born in Algeria, did his studies in France, has actually received the Legion D'Honneur from France as well. He brings a multilingual, multicultural background. And so as we start to look at some of the big global public health issues, he can be very helpful. He's right there at the leading edge of what's going on in science. Can be an objective voice because you know in all of this, none of this is every black and white. You can never go to the data and find the answer. You've got to make some judgments and so I look forward to working with Elias just to have that second opinion. Just someone who may push us a little bit further to think in a way that we might not because of our backgrounds.

The other position that we created is a Chief Medical Officer. This kind of takes all of the people who've been working on safety, on patient safety, and brings them more into one organizational structure. It reinforces the strong commitment we've already had to patient safety and gives clear accountability for that. And that position will not only report directly up into Marc and outside of the development chain, but will also be the Chair of the Benefit Risk Committee which looks at all of our projects in development and all of our projects in the marketplace just to make sure that we are meeting all of the rigors of the modern pharmaceutical environment.

External growth opportunities. Oops, I think I need to go back one. Adapting the Company to challenges. Now you can understand an awful lot of things here. But it is true that if you are going to be more geographically diverse, you're going to be in different businesses, you're going to have to adapt the Company. I don't have someone today that runs the OTC business. OTC is run as kind of a product portfolio within a country. If I really want to grow that business we need to have someone who is doing it. And Hanspeter is looking at this and saying let's create a division that's around OTC. Let's bring in some expertise, people who can help us to decide intelligently which products we can take into other markets, which opportunities we can buy.

If you think about volume, the impact of losing sales in the United States has actually got this much impact on the volumes that we produce. When you look at France, our biggest selling product is not Plavix, it's not Lantus, it's Doliprane. I've got an entire factory in France just dedicated to producing Doliprane. So if we are going to get into those businesses a little bit more we've got to think about whether our network of manufacturing is adapted to that.

I asked a lot of our employees in a worldwide video clip tell me the three things that you'd like to see me change, the three things you don't want me to change. Well I can tell you on the things they wanted me to see change, simplify this Company. You know we are very bureaucratic in a lot of ways. We can simplify our processes and we have to if we are going to be able to be nimble and we're going to be able to have decisions taken where. So there are some cost reductions that are possible. And I think that Hanspeter is going to talk to you about what an excellent job his organization has been doing on the sales force and how we can go forward.

Now, external growth, no question that we need to go do that. We don't have enough new products really to compensate for that we know. We're three years out from the cliff. Let's take the cash and intelligently do that. And that's why today's announcement about Laurence's new position on Chief Strategy Officer is so important. It underpins the fact that this is development seeking external growth is not something we're going to do on an ad hoc basis when we don't think we have enough in the pipeline.

This is part of doing business. There are I think 250 or 300 companies that rolled up into Sanofi-Aventis. We are going to be looking around the globe and if you are going to really find why it is that a particular company can do better than we do, it takes some thought, it takes some time. So Laurence is going to have a whole platform of competence, scientific, medical, finance, that will enable us to do this efficiently, quickly and with a lot of -- with the ability to bring in some new deals.

So it will also help us with alliance management. If you are going to do these deals you really have to be good at getting along with smaller structures. It's very hard for smaller structures to deal with big ones and I've been looking at this for years myself. And those companies that really get the partnering capability right are the ones that are going to win going forward.

So I'm not going to go into all of the transformation in this series because not all of them are of interest to you. But I would say that I have come across a company that is actually very eager for change. When you get 7,500 employees from all around the world writing back to you, talking about what things they want to see changed, you know you are pushing against an open door. And that makes me feel very confident that actually we can move things along.

So this approach is also meant to say that you don't want to decide everything from the top. We have tried to engage some of our top talent to think about some of these topics and really drive change from within and right the way through the organization. So the objective of this is to take three, four months really looking at everything, come up with a plan and then execute on that. And that's the timeline that we're in. So we'll run these projects until about the April/May timeframe. We need to sort out the recommendations and then probably by the second quarter results I can give you a little bit more of an update about where we stand with that and what the financial implications of that might be.

Guidance, 2009. Again, remember that we've changed now. We're talking about constant exchange rate. We're predicting guidance of at least 7% barring any major adverse events, such as the launch of the generic Lovenox in the US.

I've going to conclude slowly here now to say that the objectives then -- what we're actually trying to do. Why did we launch these, all these 12 initiatives? One is we clearly want to bring innovation back to our R&D organization. We want to be one of the top companies in the healthcare sector in terms of what we're bringing in terms of new solutions to patients. I don't think the consensus forecast have the bar very high for us as we look out to 2012. I think as we look at this business, our business has a lot more potential and the objective of looking at all this is to try to outperform those consensus forecasts for you.

And the third then is obviously we do need to strengthen these growth platforms. We're very happy and proud of what we've got but it's only of any value if we can use bolt on acquisitions and organic growth to grow them.

So with that, those are our three objectives. You're probably going to have some questions. We'll come back to them. I'm going to turn it over to Hanspeter. I will say as a former competitor of his, that I've always had a great admiration for Sanofi-Aventis. I'm glad to be on the same team. I think a company that delivers double digit earnings growth in this kind of environment is very good. So I'd certainly like to congratulate personally Hanspeter on a great 2008 and I'll turn that over to you.

Thank you for the flowers. Good afternoon, yes, let's go back to the results of 2008. It's a classical, it's a standard chart which information I would like you to focus on.

First of all you see we have been selling approximately EUR27.6b which gave a growth of 3.7%. Second you see that there's a rather significant change in trend in our US performance between the total year of 4.4% growth and 9.5% growth in terms of sales for the fourth quarter. What is the reason? The reason is that during the second half we went away from the hole which left the departure of Ambien IR which took place in the April/May period 2007. So, yes we went back to a very strong growth in the US during the second half and especially during the fourth quarter, since if you keep in mind that today's US market is at zero growth.

Also of course worth mentioning, the good performance of Vaccines which effect a 10% growth rate over the total year, equalizing EUR2.9b sales.

This is more from a geographical angle. On the left side of the chart you see the trends of the world global pharmaceutical market and you see then, yes there is still a growth of 6.6% coming from Europe. You see that what I just indicated the US market went to more or less zero growth and the rest of the world markets are growing in 2008 by 10%. So far the markets on the right side of the chart, you see our own performance. You see then that in Europe we have in fact a zero growth. Why? Mainly due to genericification, most importantly the loss of patent protection of Eloxatine during the past year, more or less in all European markets.

You see then the 5.4% growth in the US, as indicated before, entirely coming out of the second half before the business was negative in the US and then, once again, rest of the world with 10.1% of growth, which means we have successfully defended our market leading position in the rest of the world countries. This is not only true for the so-called BRIC-M countries; it's true for the majority of also approximately 60/70 countries in Asia Pacific and in the South of the Americas.

Now there's a lot of debate if there will be blockbusters in the future. Whilst we continue this debate in any case it is very nice to have those blockbusters. We are proud to report that we don't have only blockbusters; we have mega blockbusters. Those products selling more than 2b. And we are even more proud to report that all those five mega blockbusters in 2008 have performed at double digits. So Plavix you see a growth of 15%. There's a part still of a technical effect coming out of 2007 where we were suffering from the Apotex generic, which later then disappeared of course.

You see later in the chart that Plavix in the US, in Japan is going the same successful way as it went in other parts of the world. We have achieved in the second full year of launch nearly EUR200m of sales in Japan alone, which means sooner or later the product will be the market leading product. Also in Japan, you will see also indicated the patent protection of the product in the US, which is November. We are quite optimistic that we will obtain prolongation of six months through pediatric indications which then lead us of course to May 2012.

Lovenox nearly 11% growth despite an extremely difficult year of supply. Chris has alluded to it. This is the situation which to a certain extent continues. We estimate that we have lost approximately EUR70m, EUR80m of sales in 2008. So evidently if you would add those, let's say EUR80m to the EUR2.7b you will see that the product would have even reached a growth of about 14% or even 15%.

Lantus doing extremely well, close to 28% growth. The product is driven by very strong medical clinical evidence. There is more positive evidence to come in 2009. But it is also extremely doing well supported by our own device by SoloSTAR. We see a direct function wherever we launch SoloSTAR Lantus sales are being even accelerated.

Taxotere, 13% of growth. You, some of you will remember when we took over Taxotere the product was flat. We more and more accelerated through 5%, 6%, 7%, 8% growth. Now last year 13%. The product is the widely used chemotherapy agent. We have eight indications all over the world and the results speak for themselves.

Then at the end of the five leading products you find Avapro, a totally different product. The ion and optimization strategy is a highly competitive environment and you see that we optimize sales very nicely with close to 11%.

From the existing portfolio to the two products we have deposited in 2008. We have deposited both products with the FDA and the EMEA. First of it was in terms of expectations when to launch. With Multaq we go into a totally new field. We aim in a totally new data situation because we are the first product with really clear cut outcome data. We aim for overall 7m patients which suffer a very dangerous and partially deadly disease. It is a costly disease as well. The FDA has fixed a date for an advisory committee by March 18th and evidently we are actively preparing for that.

Meanwhile the good news that this product will become available mainly but not only through the very positive results of ATHENA continue to increase. You see that approximately 90% of the relevant physician population is today already aware of the ATHENA results. And perhaps even more importantly more than 50% of all physicians are ready to prescribe the product immediately as it will become available.

A little bit later we estimate a launch in the first quarter of 2010. We go into a new segment of the sleep market. Chris has also alluded to this. We have of course a vast experience in this field. We believe that we have a different approach this time. We are not a sleep inducing agent. No, we will be a product which is treating those people who suffer from nocturnal awakening. This is a new indication which we call CINA. We have to cultivate, we have to shape this market, but there is a huge patient potential as you see. Approximately 11m patients in Europe and nearly 7m patients in the US are suffering from this disease. We have a product which is extremely safe compared to the existing ways of treating those events and we believe that we will also benefit from this in later labeling and promotion.

Base business overt against also from my side. We have a so-called base business which was in the center of our financial communication for the last four or five years, which is approximately worth EUR8b of sales. We are proud that we have succeeded to stabilize this EUR8b business over the last years and we did it once again in 2008 with just minus 1.1%.

If you go into this portfolio, you see that it is in fact construed of four segments, four clusters which are very different. OTC/OTX, so that's already cited EUR1.4b of sales we have with those major products in this field. We have local stars which are products which play a very important role also in terms of growth in the various parts of the world, especially in Asia Pacific and in the Latin American theater.

We have generics today less than 400m, but through the acquisition of Zentiva more than 1b. And we have something which we call the tail business, which means business which is a milked business where we reduce investment close to zero.

Those four parts underlie totally different approaches. They have different investment strategies. They have different results and accordingly to this we will start to report on those four segments as from the first quarter 2009, which will give you much more transparency to understand what do we do with the EUR8b overall base business. And of course it obliges us to be much more transparent in terms of what we achieve. Evidently we will have growing results and less growing results. But overall you will gain a lot of transparency for this and we will target more and better allocate our investments.

Vaccines once again, also those figures you have seen. Growth 9.6%, nearly EUR2.9b, market-leading position in the world. You see that is not a single portfolio consisting of one major brand. This is a very well balanced portfolio and you see also from the chart that all segments are in high single digit or in double digit growth. We have indicated that we do extremely well with the vaccine portfolio in Asia Pacific with a growth of 17%. We believe that there is huge opportunity in Asia Pacific and this is the reason why we have very recently decided to combine the Pharmaceutical business and the Vaccine business in Asia Pacific because we have a market leading position already in those countries of Asia Pacific. So we'll use the pharma business as a kind of locomotive to pull and to further accelerate the vaccines also in those parts of the world.

Final comments then on our joint venture, important joint venture with Merck Sharpe and Dome in vaccine sales of nearly EUR1.3b in Europe growing by 22%. So far on sales and this to a certain extent already a bridge into Laurence Debroux's later presentation, we have not only worked on sales, we also have worked intensively on resource allocation. You see two aspects of it, or one aspect and the result of it. Over the last three years we have reduced our sales representative number by 2,700, which already we feel is quite an achievement. We have done this our way, without major announcement, in a socially acceptable way and we have achieved what we wanted and what we had to achieve.

Intrinsically you see that we have not only reduced we have also increased. We have reduced in those markets where the markets really already have performed a transformation into a different decision model, more concentrated decisions through treatment guidelines through sick funds and so on. We have reduced 1,800 positions in the US and 2,900 positions in Europe and in the same time we have increased by 2,000 the number of sales reps in the rest of the world.

Consequently, we have continuously driven down our costs, our operating costs. We have started with more than 30% in 2005 and we have once again decreased by 0.9 points in 2008, which gives us today the leading position in terms of overall operating expenses as ratio of sales in our industry.

As a change and also this has been mentioned before by Chris, we believe that the old global marketing approach is no more true. We are more and more facing rationalization on the side of our customers of our clients. We have very different situations from one continent to the other and we have taken care of that in also reorganizing our own structures and also delegating much more decision power on the regional level. And in really combining our various activities on a regional level, activities which means industry, pharma, vaccines and R&D to be really commonly present in front of our customers. We believe that this will also help in the ongoing initiative for accelerated external business growth through local acquisitions.

So, to summarize the key takeaways, 2008 good solid growth more or less in line with the worldwide pharmaceutical market, a reversal of our US performance and the strengthening of our market leading position in the rest of the world. Continued improvement in productivity, best in class, SG&A ratio amongst our industry peers. We expect further improvement in 2009 and onwards, last but not least, new operating and business models through originalization which brings us closer to our customers and will guarantee further growth in the years to come. Thank you so much. Laurence.

(Spoken in French) Good afternoon to those in the room and -- joining us on the web cast.

I am going to briefly present 2008 financial results and I am going to do it in English to add a little touch of French accent to the very international tone of this meeting today.

So Hanspeter commented on sales growth on a comparable basis. And the annual growth of 4% that he commented on is a pretty solid growth, comparing that we had to face in the first quarter comparison, the full impact of generification of Ambien's IR in the United States and of Eloxatine in Europe.

So if I come back to reconciliation with the P&L, in the Q4 2008 you have an exchange rate effect which is favorable by 1.1% and actually it is only 1.1% because the improvement in US dollar was partly offset by a strong decrease in other currencies, especially British pound. Changes in Group structure have a negative effect of 2.1%, mainly linked to the change in contract with Teva on Copaxone at the end of the first quarter 2008. And so we come to a reported net sale of plus 2.6%.

Coming to full year now. Of course exchange rate is this time very negative and it more than wipes out the comparable growth. It's 75% due to the dollar. Changes in Group structure still negative, 1.5%. Same explanation then for the quarter which comes to the growth in reported net sales of minus 1.7%. This is what you see at the top of the P&L but let's not forget the underlying growth of 4%.

We had a very strong performance in the fourth quarter with the plus 2.6% growth in sales translating into plus 12.1% increase in current operating income. And this leverage was reached in spite of the fact that we had to book about EUR60m of costs linked to the discontinuation of Acomplia in the fourth quarter.

R&D went up by 1.3% on the comparable basis, current exchange rate which is a slow down in increased rate compared to the previous quarters and SG&A was down by 4.6%.

What you might find surprising is to see that there is so little difference in the percentage of change in current operating income on the published basis and at constant exchange rate. While this shows you that in the fourth quarter the positive effect of the US dollar was partly offset by negative downturn in other currencies.

Below the current operating income two lines are worth mentioning. One of them is financial net of financial income and expenses which is an increased charge over last year. And the second one is the tax rate which is probably lower than what you would have expected. I will come back to explanation on those two lines when I comment on the full year but what I can already tell you is that the effects in Q4 on those two items offset each other at the level of the bottom line. So no impact on the increase of plus 16.8% that you see in the adjusted EPS excluding selected items.

This strong quarter leads us to a very solid year. Increase in current operating income is plus 8.5% at constant exchange rate, which can be compared to the plus 3.7% of comparable sales increase that Hanspeter presented you earlier.

Of course, we are helped in this performance by the recovery of Plavix as you know in the US. As you know that we are booking royalties on US sales of Plavix in other revenue so that counts in the current operating income. But I would still like to draw your attention again on the improvement of the SG&A to sales ratio which went down from 26.9% to 26%. As Hanspeter was saying, it's an improvement of 4% in three years and this is clearly a consequence of our effort to continuously adapt our selling and marketing structure to the evolution of our market and portfolio.

And just to confirm that there is no trick to this ratio, if we were consolidating Plavix in the United States the ratio would be even better, as Plavix requires less effort as a percentage of sales than some of our other products.

For 2009 the decrease that you see in the SG&A over sales will be continued at about the same pace. Cost of sales for 2009, I can also guide you to a rate that will be -- that will stay around 27% of net sales. And R&D which is up 3.2% at constant exchange rate in 2008. But in this 3.2% we have 1.2% impact from the cost of discontinuation of Acomplia, so R&D should be flat to slightly decreasing in 2009.

Below current operating income two main comments. The first one on financial income and expense which is a charge of EUR270m compared to a charge of 139 last year while interest charge on net debt is decreasing by about EUR30m. But on the other hand you have a negative of EUR74m on the result of financial swaps and hedging on financial exposure, compared to a positive of about EUR84m last year. Well two-thirds of that difference comes from the fact that we swap the deposits, the US dollar deposits of our American subsidiaries to reimburse into euro to reimburse our euro debt and these deposits have an average of USD9b for 2008.

So we actually do better on the charge on the financial debt because we have reimbursed the debt in euro and we have no currency risk here. But when the dollar pays less than the euro we book a difference on that line.

With the disappearance of the resulting tax on dividends from the United States next year we will be able to repatriate more of those deposits and as the effect on our P&L will be diminishing for the further years.

Second comment on the effective tax rate. We booked for Q1, Q2 and Q3 tax rate at 29.6% and for the full year finally the effective tax rate is actually 29%. So what you saw in the first quarter is the full effect for the fourth quarter of the difference of 0.6%. So the tax rate went down for the year from 30.6% to 29%. 1% decrease is directly linked with the decrease in tax rate in Germany and the other 0.6% is due to a variety of factor, including some tax credit, like the US R&D tax credit that was decided in the last part of the year.

What I can tell you is that I can guide you to a 29% effective tax rate for your 2009 models as well.

So all in all earnings per share excluding selected item of 5.49 for 2008 which is an increase at constant euro/dollar rate which is our guidance rate of 11.2%, so comfortably above our guidance.

I have made my comments on the P&L excluding selected items, so just a few words on the selected items. You will find full reconciliation between adjusted excluding selected item, to adjusted, to consolidated, in the press release. So I will just say that the selected items are a negative of EUR0.09 on the 2008 EPS, after a boost of EUR0.11 on 2007 EPS. And I will just comment on the main item, which is a EUR585m of restructuring costs, made of EUR140m in industrial affairs, mainly the plant of Vitry, and the rest being the cost of continuous adaptation and restructuring measures in our sales and commercial organization, mainly in Europe.

So this strong year naturally leads us to strong operating cash flow. EUR8.5b in 2008 compared to EUR7.1b in 2007. Part of this improvement is due to the fact that we managed to stabilize the need for working capital in 2008 when it increased by EUR800m last year, mainly due non-operating items.

So, after CapEx, acquisitions, disposals, dividend and share repurchase, we get to a free cash flow of EUR2.5b this year, which is what we can apply to reimburse our net debts.

And that leads me to the conclusion of the next slide, which is that with EUR1.8b net debt at the end of 2008, I can say that even including the Zentiva acquisition we should be virtually debt free at the end of 2009, excluding of course, the impact of other acquisitions that we might make. And we have here one of the best financial flexibility in our industry.

We will propose a dividend of EUR2.20 per share, which is an increase exactly in line with the increase of the adjusted EPS growth, the adjusted EPS excluding selected items.

And as regards the share buyback program, we completed in the first half of 2008 the share buyback program that was initiated after 2007 AGM. And you know that we were authorized another program from mid-2008 of about the same size, so EUR3b. But we have chosen not to implement it because we found it would be more reasonable in the current financial environment, and also we decided to give priority to cash acquisitions.

So, as a conclusion, 2008 was another year of strong delivery with a solid top line performance, continued improvement of our operating ratio, and EPS growth comfortably ahead of guidance.

And I will finish by repeating the guidance for 2009, which is that we expect an increase of at least 7% in adjusted EPS, excluding selected items, at constant exchange rates and baring major adverse event, for instance, a generic of Lovenox in the United States.

I thank you very much for your attention, and I give the floor back to Chris.

Thank you Laurence. Alright, I think we've tried to demonstrate we are looking at a turning point for our Company. We want to maximize the performance of our existing business.

We are a Company that manages our cost base effectively. Showed you the SG&A ratio to sales. One of the things you may not also know, three years ago we had 79 manufacturing facilities, now we have 64.

We are now also looking at truly trying to launch a transformation program. Some of you, I know, may have been expecting restructuring programs. I've been there, done that. I really don't want to get into running a restructuring program every year. Managing your cost base is part of good management, and we are going to continue to do that.

But I think one of the things that we ultimately have to do as an industry, and certainly what we as a company are focused on, is get back to growth. We have to show that we can build on these growth platforms and we can do the acquisitions.

Yes there is going to be a piece that comes from the growth of cost structure. But you are going to have more in your tool box than I think just restructuring. And that's the objective of why we've launched transformation projects.

If you are going to do some restructuring then you really also want to make sure that you are allocating your resources to those things that are going to help you to grow going forward.

Now, I think one of the things that we were going to try to do this year is have a different approach to communications and to investor relations. We started this at 2 o'clock this afternoon, so that anybody watching in New York isn't having to do that in their pajamas. And I think these are the things that we can do. We will begin to continue to participate at broker conferences. We will be available, as management, to talk with you.

We have a new head of Investor Relations with Sebastien Martel. And obviously investor relations can't be any better than the degree to which they are integrated within the management of the Company. And I think we want to try to do as good a job as we can on that.

So what can you expect for the year as we look forward? Clearly the biggest step for me is really making sure that we've got our pipeline in a robust situation. So that's the work that's ongoing. I expect to have that completed by the end of March, and be able to tell you more with our first quarter results.

We are going to be looking to do more R&D partnerships. We want to look outside the business. There is a lot of opportunity out there. We want to be able to capitalize on that.

We clearly have had two NCEs have been submitted to the FDA. We are looking for an approval, certainly for Multaq, hopefully for Ciltyri as well. I think just given the fact that Ciltyri was submitted at the very end of last year, and given the real timeframes that we have this might be early 2010.

We'll try to give you some sense of what this transformation program really means for the Company when we come back and talk about Q2 results later this year. You are going to be looking for, and you should be able to find, continued productivity improvements.

We are going to be looking outside at growth opportunities. But, again, I really want to insist on this word discipline. This has been the hallmark of this Company. It's something I personally believe it. It's something that we are going to continue to do. Whatever deal we do I want it to help our shareholders and not the shareholders of some target company.

And obviously the last thing, in addition to the communication, I think one of the things that strikes me, and even just conversations that I've had with investors and analysts, is that obviously we are moving beyond the classical blockbuster model. And, therefore, I think we can help in understanding a little bit more about what we do.

So we are going to try to have some thematic investor seminars this year, where we'll have some of our top management talk about, for instance, emerging market dynamics. Or we might do something, a little deeper dive on vaccines. But we'll do that through the course of the year. And as and when we've got those lined up Sebastien will be announcing that to you.

So those are the things you can look for, for 2009. What I'd like to do now is ask Doctor Marc Cluzel, who heads our R&D organization, and Wayne Pisano, who heads our Global Vaccine's organization to come up on stage with us, and we'll move to a Q&A session. So, Wayne and Marc come on and join us.

And I think we've got microphones circulating around, so just let them know. Yes, I've got a few questions; I've got a few here.

Jean-Jacques Le Fur, Oddo Securities. Four questions if I may. The first one is with the new strategy you have described to us how do you see -- how do you think you will pass the 2012 around period of time? And how do you expect the EPS evolution will be at this turnaround there? Could we see growth, decrease, flat?

My second question is regarding OTC strategy. I am a little bit confused there. What is your strategy? Is it to grow the business through acquisitions? Or is it to extend geographically the existing portfolio you have.

My third question is on cost savings. Not restructuring, cost savings, cost reduction. What is preventing you to give us some guidance, I would say, roughly for the plan for the next three years or in three years from now?

And my last question is probably for Wayne. Vaccine sales growth is declining a little bit since two years. How could we see this growth this year and perhaps in 2010? Thank you.

Well you pack a lot in, in a question. Obviously we are not in the business of giving forecasts. I think what we've tried to do is say, one is we recognize that at some point we are going to lose some products to generics. Therefore, do we have enough products in the pipeline? We want to be honest, we are not sure we do. That means we actually have to look for new growth opportunities.

And my message to you is one is that we have a number of growth platforms upon which we can build. Two, is we have a very strong financial situation that gives us the means to go after that. Three, is that we've been reinforcing some of our resources around that, particularly with the appointment of Laurence Debroux as Chief Strategy Officer to say that we'll have a systematic and disciplined approach to this.

So, if you couple that with the fact that we've been pretty darn good at managing our cost base, I think it gives us the confidence that we obviously want to continue to present a growing approach to this business through 2012 and beyond.

I'll let Hanspeter deal -- talk about OTC, and I'll let Wayne answer the question and -- so maybe I'll just jump to the cost savings. Why can't I give you a target today? Hey, look guys, I've been on this job for 10 weeks. I want a little bit of breathing room here. It's a 100,000 person organization, EUR28b and again, it is easy as heck to cut costs. Any idiot can do that quite frankly. I think what really is hard is to try to figure out how can you build a business that's going to grow, and where are you going to put your resources. And that takes a little bit more of a thoughtful approach. And that's the approach that our management wants to take.

We don't want to destroy what's good. We do recognize we are in a situation of reality. But I would like to come back and give you a little bit more detail about how we think we can outperform. But I'd like it to be a mix of things in terms of where we are going to find new sources of growth, and not just the brutality of cost cutting.

So, Hanspeter maybe I can ask you about --

The OTC question is much easier. So, two answers. First the existing growth of what I showed you as classed as the famous EUR1.4b in 2008 is approximately 8%, which is just internal growth, which is not so bad. I mean it's twice the growth of the total business. So that's already a base.

Secondly, yes we have to grow externally. We have made a first step with the acquisition of Symbion. Symbion is a business approximately EUR100m. We don't believe, let's say, a huge jump is possible because there is very little offer. But we believe that there will be repetitively opportunity to acquire businesses, let's say, in the ballpark of EUR100m. So I don't know, as an objection -- as an objective you could perhaps say to try to double this business over the next five years.

Wayne do you want to deal with the growth question?

Sure. I think if you look at the vaccine market place today the -- our projections are that the market will -- overall global market will grow somewhere around 8% a year. We believe that our portfolio will grow at a faster rate than that.

And I think that when you look at the portfolio that we have, we have a number of products that will be coming over the course of the next three to five years. We have a new influenza vaccine that basically will be filed in the second -- actually the second quarter, which is targeted at the elderly.

Chris referenced the Dengue vaccine that basically is in development for us. The acquisition of Acambis has strengthened our upstream pipeline, particularly with a product called clostridium difficile.

And, as Hanspeter referenced, the approach we are taking now from a regional perspective is going to allow us basically to leverage the strength from medical and policy for vaccines, but couple that with the strength that Sanofi-Aventis has at a regional basis, so we are getting the equal marketing and sales strength. And we see a lot of growth coming in the Eastern Pacific region.

In parallel we are making a lot of large investments in our CapEx. Chris referenced the Dengue facility. But right now we have 12 manufacturing facilities under either construction or major renovation. These facilities will start coming on line in 2009.

A new 'flu facility in the US will be the start. We have the Dengue facility, a new Hib facility. We are building a 'flu facility in China. And as this capacity comes on line we are going to basically be able to take advantage of the opportunities.

And you will see over the course of the next 10 years that we will have periods where we will have much larger growth, more of what you saw say three or four years ago, where we were growing in the high teens and low 20%.

Okay, right there, we'll move back down there.

Yes, hello, Sebastien Berthon from Exane BNP Paribas. Three quick questions please. One on the generics. Obviously you want to expand there. I perfectly understand the logic of going into after Zentiva, which is primarily a branded generics company. What would you -- could you share with us the pros and cons on going into non-branded generics from your point of view?

And then two questions on your targets and guidance. We appreciate that you gave a guidance in constant exchange rates. And we have, I think a clear view of what is your exposure to the dollar. But it's difficult for us to assess what is your exposure to the non-US dollar currency. So, if exchange rates were to remain stable for the rest of the year, could you share with us what would be approximately an impact on the reported items for EPS?

And lastly, you aim to beat consensus expectations today over the next three years. What do you see as being the consensus expectations today?

Well I think on consensus you have -- you could find those in all of your reports. We get those from you. So I think you'll look at those and you can see where you are. We'll give you a little bit more detail as we move along.

I'll ask Hanspeter to talk a little bit about generics, and then I'll ask Laurence to give you some of the color on the exchange rates. So Hanspeter do you want to talk about that?

You see the, one of the major issues with generics is really definition what is a generic? And I have said so before, if you define generic as I define it, a generic is a non-patent protected pharmaceutical which is sensitive to price. If this is true we are a major generic company already today. Because EUR8b at least.

Second, a generic is a different animal from one region to the other. You have a very typical Anglo-Saxon generic, which leads to certain functions. For example, rapid penetration of generics over time. You have the issue of branded generics, which is something very typical for Eastern Europe, and very typical for Asia Pacific.

So we believe that we have to have a very pragmatic approach to generics, and we believe that we have to have a very regional approach. Coming from this, we believe today that there is no opportunity in the US for us because the US market is strongly concentrated. Three, four major players, very specific distribution system, very rapid penetration and so on and so forth.

In contrary, we believe that there is opportunity in Europe, preferably in Eastern Europe, but perhaps not only. Because, in France the fastest growing generic company with non-branded generics is Winthrop, which is a subsidiary of us.

And we believe there is opportunity in Asia, which has again a little bit of a different notation, because it has to do with access to medication as well. Referring to what Chris has said, we make our business today with only 20% of the population.

And then we have Latin America, which is again a very different market where you have other issues like similars and so on and so forth. So, overall, regional approach, starting in Europe, later on in Asia Pacific, eventually and eventually in the South of America.

And Laurence do you want to comment on the exchange rates?

It's probably interesting to say first what you said is that our first big exposure is on the US dollar, and we remain on the US dollar. And there I can tell you that the sensitivity to the US dollar that we have recalculated for 2009 is really in the same range as what we've seen in 2008, and in 2007 actually. So 0.5% change in EPS growth for each cent variation.

As regards the other currency, so no other individual currencies coming even close to the impact of the US dollar. We have, of course, exposure to GDP, to Japanese yen which might be our number two or number three, if you look at those currencies.

And we don't do the exercise of actually remeasuring where would be at today's exchange rate. So it's probably easier for you and for me if we stay on the -- if all exchange rates are constant compared to the average of what they were in 2008, which is easily verifiable, then we are at least 7%.

Go to the back of the room there number four.

Thank you, its Michael Leacock from RBS. Chris, I just wondered of the comments you got back from your employees, you mentioned there were three things they wanted to change, three things they wanted to keep. You mentioned simplifying the organization. What were the other two things they wanted to be changed, and what were the three things that people wanted to keep?

Well they want us to find more new products and really have that perspective of growth. And it's really this simplification. Find more products and some of the other things that we are doing. Grow our businesses in other parts of the world. Then your third item becomes kind of an amalgam of a number of things.

Interestingly, the thing they didn't want to see us change were the values of the Company. There are six values that have been a strong part of the culture and I took that to be a very positive sign. It says that people are very emotionally attached and engaged in the organization.

And they are willing to change, as long as we keep some guiding principals in there. And I think that's a very healthy situation in any company. And given that, it's a company that's only four or five years after a merger that you've got that kind of strong backbone to it is a very good sign.

Number three.

Yes, Philippe Lanone, Natixis Securities. First question to Marc Cluzel about Multaq. How do you see the impact of ATHENA trial on the European approval? Does it jeopardize it?

And Chris, one question about one of the worries that the market likes from time to time is the possibility of selling shares by the big shareholders. So, what are your views on that, and could you be a bit more proactive here, given the cash you have?

And about the structure of the Company, as you said a lot of joint ventures. Could there be some simplification here, especially I am thinking about the Animal Health business. Could it be integrated more in the business?

Alright, Marc do you want to do the Multaq?

Yes. I think that the DIONYSOS confirmed was we thought of the respective characteristic of the dronedarone and amiodarone. That amiodarone is a good antiarrhythmic. Like it's acting quite well on the ECG, with a very bad safety profile.

And that the dronedarone has a good safety profile, and at the same time it's not acting per say on the ECG, but it's much more active in fact on the complication of arterial fibrillation, which are the results of the ATHENA study.

And, in fact, in terms of impact on EU registration, there is actually no impact. But clearly, the -- you cannot compare a product -- a study -- you have to consider that Multaq is a first compound, which has proven a benefit in terms of morbi-mortality in the field of antiarrhythmic agent. So really you are changing the product. All the other products had been -- had the best control, and most of the time, in fact, going in the adverse way so increasing the mortality.

Your other question was there was a question on the major shareholders. They are shareholders like everybody else they'll buy and sell depending on how attractive we look as an investment. And obviously our first job is to make sure that we are attractive. And that goes along the same lines that we've been talking about in terms of strategy.

If you think about the size company we are, and the fact that we do have 20% of the capital in the hands of two shareholders, it does suggest that there could be some under ownership of this business compared to a Novartis or a Glaxo SmithKline, who don't have shareholders anywhere near this. We obviously don't have any control over what they do.

Obviously your question goes to a line of well couldn't we use our liquidity to do something? You can't do anything directly, but would we do share buybacks to offset whatever they do?

I think this comes back to what's the best use of your capital. And our principal objective is really to use that capital to the extent we can to grow the business. If there is an opportunity and it makes sense to do that in terms of buybacks we could consider that. But to me, I think, buybacks are something you do when you've exhausted all the other options for your capital. And so it wouldn't be our first priority to do.

Go for one over there. It looks like Andrew, and then maybe go back to the floor afterwards.

I've been asked to stand up, so I am standing up. Three questions Chris. Firstly, you outlined the not invented here syndrome as being something that the Company has struggled with historically. The other issue I think that we get a sense of is putting the cash on the table in order to be competitive versus other bidders.

Practically, what are you doing in terms of the organization in terms of getting rid of the NIH habit and making sure that you've got sufficient conviction to put an adequate sum forward in order to win these products.

Second question is on Regeneron. Obviously GSK, your former employer, took Diamantis in-house. Do you feel that the current relationship with Regeneron is sustainable as it currently is, and what would be the advantages of taking it in?

And the third thing is, and the final thing is on the emerging markets. Some of your peers have commentated they would expect to see the macro slowdown effect most visible in those markets. To what extent have you seen anything out of your exposure to those markets that you highlighted earlier?

I'll let Marc comment to on the not invented here. I will just say before he does a couple of things. First is not invented here is not a Sanofi-Aventis invention by the way.

In my 20 years I can tell you having been a personal champion of a lot of business development deals that if someone senior doesn't put their body on the tracks in front of the train it doesn't get done. I mean, it's just -- it's a human aspect. It's not a Company one, and it's something that we do need to change.

I think personally the way you do it is you have to say you are not just doing this because you -- we are not proud of what you as a team are doing.

The ultimate mission of this Company is to find better healthcare solutions for patients. And I think it is incumbent upon us to do absolutely everything that we can to do that. And if we have to go outside then we should be doing it because the objective is noble.

But it is certainly -- I lay it on the line and say, hey we may want to go and do a lot more of this, but we are going to have to change the Company.

Now, just to deal with the question before I let Marc comment on that -- your question was on Regeneron. No I don't want to take this Company inside. I think there is a clear -- when you spend time with smaller structures, it's a different atmosphere there.

These people had an idea. They had to go fight to find capital and financing. They have had to fight to keep progress going so that they can find new capital. And you always kind of on the risk of am I going to make it or aren't I. And if my project dies then my company dies.

We can't create that same thing in a big pharma organization. And I think to bring this into the mother ship, kind of risks losing some of that strength actually. So -- and then if you think about the fact that you have to use capital to do that, it means that the capital of bringing this is in, I don't have capital to go do a number of other things. And personally I'd rather spread the Company's capital in a broader way.

But I'll let Hanspeter deal with the question on -- sorry Marc answer the question on the (multiple speakers).

So, no -- the first way I think is education, and I think it's quite simple. If you are looking in the '90's most of the product which were going up to the market were produced in the pharma company. Perhaps not the bigger pharma company, but at least they are coming from Japanese company and so on.

Now if you are looking at the number of products which are in the market most of them, in fact, are originating from small companies from biotech. And in fact if you are even looking at spending of the development its quite interesting to see that now most of the big countries are in fact giving grants to find new molecules or new drugs.

So, the first way is to acknowledge that in fact -- I don't know what is exactly the percentage, but more than 90% of the innovation on drugs now is coming outside from the big pharma. And it will be totally foolish to pass it away.

I think another point which is quite interesting is that the model is also changing. That before there was in fact a little bit of chronological events, in that way that the innovation was done outside the big pharma and after that was internalized within the big pharma.

If you are starting to think about potential new model, and if you are doing by example for targeted therapy, you have said that a lot of added value is not existing in the big pharma. You need a blood bank, and most of the time blood bank is not part of the big pharma. You need big tools to analyze the generic of the proteomic, which are not -- which might be part of a big pharma or not. You need big computers most of the time not part of a big pharma.

After that you need a quick production of antibodies so you can have the platform from other types of platforms. I think it's one of the interests of Regeneron by example, and after that you need the clinical trial.

So I think what we are looking in the future is not too much and not invented here, because it's not something that you are taking from outside and going for internalized. It's much more a network of integrated added value coming from different directions.

So I don't think that the model will be, I am taking a drug outside and I try to do it inside. I don't think it will be the model. So the not invented in here syndrome I think will be less prevalent in the big pharma's than before.

Thanks Marc. Did you have another piece, there's a question?

Developing markets.

Oh, yes developing markets right.

So I think that the answer is clearly yes there is a clear relationship between cross-national products and pharmaceutical consumption and pharmaceutical markets.

Now, because of this yes there will be a slowdown. I take the example of China. We had a cross-national product growth of about 8% to 9% in China. If this goes down to 4% to 5% it will be still a very interesting place to be, and to stay, because if you compare to the rest if it goes from zero to minus 2 it is evidence that every pharmaceutical company is in difficulties. Yes we expect slowdown in the BRIC markets, but from a higher level than the others.

Alright, we'll go to this side of the room. We've got number four there.

Marietta Miemietz at Societe Generale. Four -- I have three questions please. The first on your Scientific Advisor. I was just wondering if you could give us some color as to how much time he is going to dedicate to Sanofi-Aventis and how you see his role.

Is he basically a check to make sure you don't invest in any very bad opportunities, or is he more of a sounding board? Or will he in fact help you proactively to generate ideas based on his scientific understanding?

The second question also on R&D. I just wanted to clarify do you think that the perception is correct that in the last few years in particular Sanofi has lagged behind some of its peers on platform technologies like, let's say, RNA interferons, or possibly even on things like translational science capabilities?

And what capabilities do you think you need to build internally to either be an attractive externalization partner for biotech companies, or to make sure on your end that you don't invest in drugs that look good on paper but aren't going to work in reality?

And my final question is just coming back to your strategy. You obviously made it very clear you are looking for sustainable low risk profitable growth, which is very similar to what one of your peers are doing right now. So I was just wondering should we just expect you to go after very similar opportunities like, for example, Glaxo SmithKline, or have you actually already identified any particular areas of expertise where you really see low hanging fruit? And do you think with a few small bolt on acquisitions you can really leverage an existing platform very fast? Thank you.

Alright. So Scientific Advisor, I've actually known Elias only for a couple of years. We serve on the Board of Research America together. You know what I really wanted was someone who helps us think through some of these things. You know, there is all kinds of stuff out there. And this is a person who has clearly been through the whole competitive process of research grants for example, has reallocated resources. It's not about some of these new technologies.

And it's just useful to have someone with that kind of experience and background, as you say to use as a sounding board. But as we think about, for instance, some of the new technologies we may want to be in and some of the platform technologies, one of the things is that you could start to convince yourself that you've got things right.

And personally I think it's always healthy for any organization, and I am not just talking about R&D. On the commercial side we want to always be looking around and see what other people are doing. How good are we doing? Are we really as smart as we think we are?

And so I think there is an approach that helps us to push the limits a little bit. This is someone with a huge network himself, can help us to really identify some of the opportunities where we may want to acquire technologies, partner with people. And he has also given an awful lot of thought in his career about how do you really build a scientific organization of excellence? What are the aspects within an organization that you need?

So he's going to spend a significant amount of time. This will be one of the major things that he does in his career. And probably will spend more time actually on this than anything else he does. So this is a major engagement.

It's -- I don't want to say -- because I haven't checked whether he is comfortable in saying how much time he is going to spend, but it's going to be very significant, very regular, and on an ongoing day to day type basis. So that will be significant.

In terms of the R&D platform technologies, are we behind or not? This is kind of one of the questions that someone like an Elias Zerhouni can look at and advise us on. But I'd turn to Marc and say, what do you think about that Marc?

I think so far we are teaching our self most of the technology, or in fact are partnering with people for technology. I think looking at the platform and thinking in terms of targeted therapy the only platform where we are not at the present time is diagnostic, because it is likely that the targeted therapy will be linked with the diagnostic tools. So some way we have to partner or to find some way to be part of this world.

But except that, we are using every technology we have access to. In fact, we are also in regenerative medicine. We are not communicating too much about that. So I think that in the, I would say in the current, or in the third trimester of this year I think we comment a little bit on that.

You asked about the strategy, look there is sort of a theoretical side of strategy and there is a pragmatic side of strategy. I think we've laid out where we think we want to go. The pragmatic side is then how you execute and where you go.

And I think you are going to see some companies. You could argue that GSK and Sanofi-Aventis and Novartis for instance are thinking about the world in a similar way. But then you've suddenly got a Novartis that takes that and goes and buys an Alcon. So you suddenly see in the execution suddenly some differentiation.

And I am not by any means suggesting we are going go do something like buy an Alcon. I am only using it to suggest that you are going to see something.

I think there are very few companies that really have our, I think, our technology platforms in things like insulin and in vaccines. So we can build upon those in a way that other companies like even a Pfizer may not be able to.

So you are going to see, I think, some clusters of companies I think in terms of how they execute strategy in terms of where they go after acquisitions, where they put their focus. But it's a little bit about where they are right now.

So I just think most of us have come to the conclusion, look, the blockbuster model -- and I don't think by the way blockbusters are dead. It just says that the kind of -- that company and pray that R&D comes up with the next blockbuster as your core strategy, doesn't work.

And for those of us who have been in this business for 20 years, and has seen it not work, we've all said well we've got to diversify the growth and have different businesses that aren't subject to the same forces and that allow us to really respond to healthcare needs around the world.

So I think we are all coming to some of these conclusions. And we may bump elbows on a few of these targets. But, you know, there is plenty out there for everybody.

Number one there.

Thanks. It's Graham Parry from Merrill Lynch. I was just wondering if you could talk a little bit more about your revenue loss. You talked about 20% being lost to patent protection. But I was wondering if you can talk to us about how much your net income you think that might actually related to?

And as you think about offsetting this going forward, proportionally how much of that are you looking to offset through new sources of revenue versus cost rationalization?

Secondly, a question for Laurence. I know you can't really talk to us about the FX sensitivities for 2009. But if you can give us a better feel for just the impact on your emerging markets business that 27% of the business, what was the impact of FX on that in the fourth quarter of the year?

And then for Wayne on vaccines. If you could give us the volume price mix for 'flu in 2008, an update on [Dosesulfin], Menactra and how you are going on capacity into 2009? Thank you.

Okay, the profit impact we've never given it a minute -- it's kind of a little hard to do because you can obviously figure out the effect of lost sales, but it kind of assumes that you sit on your hands and don't do anything while you let those products go off patent. And clearly good management isn't going to do that.

So, I think it is safe to say that the profit impact is probably a little more than 20%, even if you do thing just because obviously you've got greater leverage over some of those brands.

Now, what proportion are we going to use and external growth and everything else Graham? Whatever it takes. Our objective is to offset those losses and present a growing picture of the Company. Laurence, do you want to take that next question?

In the fourth quarter when you saw the positive 1.1 if it had been only for the US dollar it would have been 1.6 positive. So the rest is other currencies.

But really what played in the fourth quarter, if I look, the Japanese yen played favorably and then you had the British pound that played very negatively. So all in all its not really emerging markets currencies that were the main negative.

And if I look on a yearly basis for 2008, and it's really three-quarters of the negative impact was dollar and one quarter was the rest. It's very difficult to guide you because we are exposed from not that big amounts to so many different currencies because of the spectrum of our presence that depending on how and how big they move, like for instance the Russian ruble. The Russian currency in the last weeks of the year has hurt us a little bit on the P&L of the fourth quarter, when I wouldn't even mention this currency in other circumstances, because it's not such a big theoretical exposure. But you've seen very violent and very big movements in those currencies. So, sorry not to be more specific for a model, but it's -- .

There's that exotic island on the other side of the channel, too. I think the next question was for Wayne.

Okay. In terms of the 'flu market place in 2008, 2008 has been an interesting year because it's the first year that, as an industry, we've seen supply exceed demand. We've been coming off an entire decade of, basically, a shortage of vaccine. What's occurred is that the industry has responded to the Government's request, particularly the US Government, to increase capacity. So that, now, is starting to come online, and what has to occur now is that immunization policy has to be expanded.

So, for example, the US ACIP this past year expanded recommendations for children, that was from six months to five years of age, is now recommended all the way to 18 years of age. We expect to see the same sort of phenomena occurring virtually all around the world. In Europe, coming down in age. Many countries recommend from 65 and older. They will start moving those recommendations down to 55 and 50. Asia Pacific begin immunization.

Our personal experience within Sanofi Pasteur this past year is we delivered over 170m doses. What Chris pointed out earlier about the key, when you have the situation where supply exceeds demand, really comes down to time to market. Who gets the doses to the customers before, basically, the market is saturated. We had an excellent year in 2008 in the US. We produced about -- a little over 50m doses, and delivered over 49m of those doses by the first week of October. There is a fair amount of over supply in the US right now from this past season. Fortunately that was not our experience.

I think when you look at Sanofi Pasteur I would raise two points in manufacturing. We probably have -- we clearly have the two most experienced manufacturing teams in the world. The one in Val de Reuil, which is our largest facility today, and the one in the US. And these teams are -- have been producing vaccines for over 40 years.

As relates to the Menactra capacity, in 2008 we produced 8m doses of Menactra, which met the US market demand. The plan for 2009 is 9m doses. We will be filing for the new facility with the FDA in 2009. That should be coming online in 2010, and that facility will be able to deliver a minimum of 20m doses. That's going to allow us to, basically, then take Menactra beyond North America and into the -- into Europe, eventually, and then also into the international zones.

And in terms of 'flu capacity, we have a new facility that will -- we've actually filed with the FDA, that's in the US. This facility will come on in two stages. The first stage will deliver about 50m doses a year. So that's incremental 50m on top of our current capacity. And then, when we go to the full capacity of that facility in 2010, there'll be 100m doses incremental capacity for us.

Okay, go with one.

Thank you. It's Louisa Hector from Credit Suisse. I've got two questions. Firstly, you've highlighted the potential threat of generic Lovenox during the course of this year and the impact that could have on your earnings. Is there any update on timing in the US, when you next expect to hear something? And would you be willing to give any sensitivity on the EPS, if we were to see a generic Lovenox?

And then the second question is really on the oncology market and the oncology pipeline changes that you've made this year. So I've noticed that the two taxels in the pipeline you've stopped development in breast cancer, and also the discontinuation of S-1. So I just wondered if you could give us a bit more color behind those decisions, please?

I think, on Lovenox news, we really --.

No, we really can say there is no news at all. There is still no approval. There is no clear communication from the FDA. Once the FDA takes a standpoint in terms of additional clinical trials for applications, there is no statement referring to substitutability or not. There is nothing new on the US side at all. There is a little bit more of news on the European side, whereas the guidelines clearly go into the direction first to show detailed clinical data for each indication and certain -- and a certain sensitivity to substitutability, which we take as a more positive sign for the future FDA attitudes. But this is nothing as speculation. On the EPS --.

I was just going to -- on the EPS. I think what we've tried to do is say if we don't have one, you see what the guidance is. Beyond that, your models are probably as good as ours. If there's a substitutable generic, you certainly know how to model that one. And, if it's a non-substitutable, well, there aren't an awful lot of analogs around, so you're going to be somewhere in between, and we figure every analyst will come up with what they figure is best. So, where we could give you as a grounding is, what happens if we don't do one. So, Marc, do you want to talk about the taxels?

First one, I think it's a good illustration of the uncertainty of R&D. You have to remember that S-1 is marketed in Japan. And, in fact, it has shown to be positive in survival in adjunct therapy. Unfortunately, when the study was done in the US, the study failed in gastric cancer, and so the product was given back to Taiho.

In terms of taxane, I think we made some kind of analysis in terms of market potential for the product, and we decided, in fact, to focus where there is the most opportunities. And, for one, it's definitely the prostate cancer, which is going very well in terms of recruitment. In fact which is in advance. And we should have the result of an internal analysis for this product in the middle of this year.

And for the other product, we are aware there is some unmet medical need, which is pancreas cancer, which is a risky cancer but which is very interesting if positive. And the other one, which is basal cell cancer, where there is also a highly unmet medical need. At the same time, we are activing -- we are very active, pursuing some kind of opportunities in the cancer field, because we have products in the early portfolio, but we have a relative lack of product in the middle range portfolio and we are looking for opportunities in this range. At the same time, we are conscious that the oncological market is moving more and more for niche market. So -- and I think it is one of the risks with the cytoostatic. So we continue, in fact, to explore cytotoxic and cytostatic at the same time.

Okay. There we go. There is one right there, along the back there.

[Laura Balan], Capital Research. I have three questions. The first one, can you comment on the dividend policy? Second, are you willing to rule out large scale acquisitions as part of your growth strategy? And my third question is for Mr. Dehecq. What is the Board expecting from Chris in terms of tangible deliverables over the next three years or so? Thank you.

Alright, maybe I'll take the second one and turn to Laurence. And I'll turn to my friend Jean Francois for the third. On the second one, which was, again, the --?

Large acquisition.

Large acquisition, of course. How many times have I answered that one today? It's too early to for me in my tenure to actually rollout anything. But I would say, if you think about what we've talked about, where we want to build on growth platforms, and having the ability to target acquisitions so you get what you want in the geography or in the business that you want, it's going to put you more in the mid -- small to mid size. And, basically, we're defining small to mid size, I think, if you talk to most investment bankers they're, in our industry, saying up to EUR5b in market capitalization is small. EUR5b to EUR15b counts as medium and anything above EUR15b is large.

And if you also think about the fact that -- my view is that becoming too big has hurt our R&D capability. It's not going to be obvious that you're going to go after them. Now, if you can create a large structure where you think you can achieve growth, and there is something there, then you wouldn't want to eliminate that and, also, if you're looking for a bigger impact. So I think there's, you -- again, there's a theoretical side to strategy and there's the pragmatic side. But, right now, I can certainly tell you that the large type is not a personal priority to look at. Maybe Laurence, on the dividend policy?

Yes. In the past few years, after we had managed to actually reimburse the bulk of the debt that we incurred for the acquisition of Aventis, we had to catch up with the CAC-40 and our main European competitors, in terms of payout ratio, which is where we came to 40% last year, 40% of EPS excluding selected item. And, last year, that was really a big catch up, because that was an increase of 18% in our dividend. So, this year, as a step, we decided that we would actually mirror the progression of the earnings per share for the year, which doesn't mean that it's a policy that we'll follow exactly, year after year, but we are now quite comparable to the rest of the industry.

Do you want to share with us?

Yes, I think that this question -- I think that, if you remember what we put in the press release in July, it was clear that there are three main points in this press release and that's exactly what Chris is addressing today. So, what I can tell you is that we are very confident in the fact that, yes, we will succeed and we will continue to succeed with this Company.

And one point that Chris said before is the fact that no reason not to continue to increase the profit of this Company, even in 2012, because -- if you remember the story of this Company, just to put on line, if I remember, in '98, our earning per share was around EUR0.8, a little less than EUR0.8. It's now EUR5.4 or EUR5.6. So I think that, yes, we will continue, like during the last 35 years, to increase the EPS of the Company. I think that the -- all the transformation that Chris is doing are totally online with what we wanted at the level of the Board, when we decided to change the management of the Company. So no reason to say anything more, or different, than what Chris was saying. I think that we are totally connected and without any problem.

Very good. Got one up here in the front.

Thank you. Eric Le Berrigaud, Raymond James. Two questions. First, on operating profitability. You're coming in when the Company, for the first time, reaches the 35% operating margin line. Given the -- going forward with the patent expiries and, at the same time, your project, in terms of acquiring less profitable businesses in OTC or generics, how much committed are you to, and how much sustainable do you think this 35% margin level is, in five years time for instance? Are you committed to grow the top line, but also to sustain this level of profitability?

Second, in terms of cost reductions. You pretty much emphasized these as G&A as a percentage of sales. But costs are made also of cost of goods and R&D. We understand that we need another three months perhaps to hear you again on R&D. But on the cost of good line, if we compare Sanofi-Aventis to Glaxo because, in terms of profit -- in term of profile, it's pretty much the same activities in vaccines in consumer and in pharma, you have 40% to 50% more manufacturing sites. Do you think you need as many sites? And what's your policy, in terms of just filling the sites you have, or also restructuring it? And how big a challenge do you think it is for cost reduction, as well?

So, on operating margin. Again, I was talking about -- I think the businesses that we've talked about internally are at about 40% to 50% operating margins. You're not spending a lot on R&D behind those. So it's not obvious to me that we actually have to change that margin. I think what we're certainly looking for is profitable growth. So, we don't want to become a low margin Company. Equally, I think most of our investors are looking for a growth on the bottom line, not necessarily the margin line. So I'm not going to say what's the margin going to be in 5%. But, clearly, you can't have that much margin erosion and still grow your bottom line.

In terms of the manufacturing costs, we -- I've certainly seen in a few analyst reports that we look like we're about 2 points adrift. But, at the same time, we have a far less exposure and even compared to Glaxo that has over 50% of it's sales in the US. We're around the 40% and we have a proportionate more share in some of the developing world, where we don't have the same gross profit.

Now, the interesting thing is, is that we recovered that on the operating expenses. So although we've got -- because of the geographic spread of sales and, to a small degree, the way -- we don't have all of the, for instance, Plavix sales consolidated but as far as the geographic spread of sales we also, therefore, have a lower operating cost, because we're employing salespeople in lower income countries. So, if you think about the sales force reductions that Hanspeter showed you before, and the 2,000 that went up, well, the 2,000 that went up don't cost anywhere near what they -- the ones cost in Europe and the US. So that's why we still end up with the third best operating margin, is that we do -- that's cost us a little bit on cost as sales to reach the bottom.

Now, I can say that one of the things that I am delighted about is -- when we have FDA inspections in this Company, there's not an awful lot in terms of 483s. And I think this is a Company that's avoided some disasters in places around the world with quality issues, whether it's on the pharma side or the vaccine side. You look at where Merck is today, on the -- the fact that they're having difficulty producing a lot of the vaccines because of difficulties in the WestPoint site. Most of our industry had problems in Puerto Rico. I think you want to be careful about trying to save money on your manufacturing line because it can come back and cost you a whole lot more.

Now, that doesn't mean that we don't have to think about that. And we have one of our transformation projects -- Philippe Luscan who runs our manufacturing is working with McKenzie on that project to think about what we need to do to adapt. And I think, as I said, we've already gone from 79 manufacturing facilities to 64, so it shows that the Company has a track record of continuing to seek productivity and progress, and will continue to do so.

I think the only nuance I, again, I'd put in this, is that when you think about driving your business, you do have to think about volumes and not just value. And there are an awful lot of big volumes behind OTC business and behind emerging markets. And -- but I think the fact that, given that 47% of the volume is sold in the Southern Hemisphere, and 37% is already manufactured there, shows that also this is a Company that has been able to make those adaptations. And, if we can do more on that front, we will do more on that. One over there. Number two.

Hi, thanks. Richard Vosser from JPMorgan. Two quick questions. One, there's been a lot of talk from -- especially from the Vaccines business, from -- on manufacturing -- a new manufacturing site so I just wondered if we could get an outlook for capital expenditure, going forward? Possibly for the vaccines business and the business as a whole. And then one product related question for Marc is will we see the eplivanserin data presented at a major conference soon? And what medical conference that might be. Thanks very much.

Laurence, perhaps you could take the capital expenditure question?

So it's EUR1.6b investment this year, which is pretty stable compared to last year. In this amount you have about EUR200m of acquisition of products. So it's EUR1.4b when you talk about the actual investment in the way you were mentioning it. And, out of this, it's about EUR400m for vaccines. And, in the next few years that should be a comparable figure.

For eplivanserin, we are still thinking about which meeting will be the most appropriate in fact for commercial reasons. In terms of eplivanserin, what is quite interesting, in fact, is that when you are going in terms of side effect of the GABA compound, you have a clear difference versus eplivanserin by company.

And one of the good direction for eplivanserin, in fact, on top of the chronic insomnia, with nocturnal awakening in fact is all the patients with the chronic bronchitis, and with some amount of respiratory function which, in fact, are touched by GABA compound but are untouched by eplivanserin. And, in fact, there isn't a previous development of eplivanserin based on previous development with eplivanserin, we may have some kind of benefit on this population. So, we are still looking which might be the best congress in order to publish this kind of data, in order to make the best of eplivanserin.

Yes?

Beatrice Muzard from Natixis. Two quick questions. First, on the vaccine, could you be more specific about the growth for the Vaccine business -- your Vaccine businesses, including the joint venture you have with Merck especially regarding the performance of Gardasil, which has been, over the last quarter, a little bit disappointing, with 20% drop? Can we have to expect a decline in 2009 for this vaccine?

And the second question, on Lantus. We have noticed two years of delay for the outcome of the ORIGIN study. So what is the reason why? And, second question, what are the regulatory risks if the outcome is finally negative?

Marc, do you want to take this one?

I think what we're facing with all these big trials in cardiovascular setting, is that the treatment are changing, and so the number of events is decreasing. And so, if the number of events is decreasing, you need to increase your population in order to show difference. It is what we are facing with Lantus.

In terms of the indication of Lantus versus ORIGIN, so far it is a little bit different, because the purpose of Lantus is to look if an early initialization in patient is beneficial or not, which is not, in fact, the actual indication of Lantus. So, I will say that if ORIGIN is positive, it will increase -- especially in the setting of the present, you know where there is some controversy about the benefit of the perfect control of HBA1C.

So, if Origin is positive, it will be a big boost for Lantus. If ORIGIN is negative, I think we'll stay as Lantus after, in fact, one oral anti-diabetic therapy -- or, most of the time, in fact, an anti-diabetic therapy. So I think benefit impact is positive. No impact if negative and, in terms of -- unfortunately, if you look at most of the cardiovascular study at the present time, we have to increase the sample size because there is a decrease of patients, which is good for the population, but which is bad for pharmaceutical company.

And the growth of vaccines, in particular the JV and Gardasil, Wayne?

Sure. I think we believe that the vaccine market next year is going to grow at about 8% and we expect to, as we've done it historically, basically outpace the vaccine market place. I think the big variable for us next year will be will the 'flu market place expand in 2009 as we would envision? Or is it going to take several years to get the immunization recommendations broadened? So, to speculate how high, but we'll be above 8% above the market growth.

The joint venture is an interesting phenomena, or Gardasil in particular, because the -- when you look at a vaccine product, particularly a product, let's say, like Menactra or Gardasil, peak sales occur, normally, in the first one to three years after launch. And then you see a slight decline and why is that? Because you get recommendations for a specific birth cohort.

In the case of Gardasil, often times the recommendation is for 11 years of age. And the question is, what do you do about the 12 year old, or the 13 year old, or the 14 year old, who is not at that recommendation? And many countries will recommend a catch up. So they'll say, okay, every child at 11 should be immunized, but you should try to catch up with the 12, 13, 14 year old. Well, as the 14 year old becomes 15, they move out of the target market, and so that -- you have a larger target population at launch, because you have the cohort plus the catch up. And then, as you immunize the catch up, they're no longer eligible or, if they don't get immunized, then they move past the target.

So that's the phenomena you see with many new vaccines, and Gardasil is no different, and you see that Gardasil phenomena occurring, as well in the US. Basically, -- sales basically went up very rapidly, and then the fourth quarter, or the second year of launch, it started to slow down. We believe that the product will, in Europe, will continue to grow, but at more modest rates. It's going to be driven by -- there are still countries where a reimbursement needs to be secured. There are still countries that need to, basically, address the catch up market place. But countries like Germany and France have had very rapid uptake, and so you saw a very good growth.

And the other phenomena for Gardasil is that, for the first 18 months, Gardasil was a sole source product. There are now two products available in Europe, so it's -- we're not going to maintain a 100% market share, in the face of another competitor. We are going to maintain a large market share and, in fact, still maintain 90% market share with the second product available.

Right, I think we need to wrap up on the Q&A. It looks like we've pretty much exhausted things. I believe we -- if you're willing to stay, we'll be available. I think we've got a little drinks set up outside so, if you're able to spend some time we can continue any Q&A you have there. Obviously, we'll see you at various other meetings and the quarterlies. I'll certainly be on the earnings calls every quarter as well, so you should have all kinds of opportunity to ask management questions. So, appreciate everybody coming today. Thanks again for your interest in Sanofi-Aventis