Sanofi SA (SNY) 2009 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to Sanofi-Aventis' First Quarter 2009 Results Conference Call. I now hand over to Mr. Sebastien Martel, Vice President, Head of Investor Relations. Sir, you have the floor.

Hello, everyone, and welcome to our Q1 conference call. Before we start, I'd like to remind you that our press release and the presentation slides are available on our website. As always, I must advise you that our presentation today contains forward-looking statements.

These statements involve known and unknown risks, uncertainties, and other factors which may cause actual results to differ materially. These factors are detailed in our annual report on Form 20-F and in the document of reference. Our presentation today will be divided in four parts. First, Chris Viehbacher, our CEO, will share with you the main achievements of the quarter and an update on strategy. Then Marc Cluzel, Senior Vice President of R&D, will provide the results of a recent R&D portfolio review.

In the third part, Hanspeter Spek, Executive Vice President, Pharmaceutical Operations, will provide some color on the Q1 market performance. In conclusion Jerome Contamine, our CFO, will comment on the Q1 financial performance. We will then host a Q&A session and I will now hand the call over to CEO Chris Viehbacher.

Thank you, Sebastien. Good afternoon, good morning to all of you. Before we start, I'd like to give a warm welcome to Jerome Contamine, who joined us in Q1, as one of our Q1 achievements. I can put it that way. This is Jerome's first earnings call for Sanofi-Aventis, so welcome him, and of course also Hanspeter Spek and to Marc Cluzel, who will talk to you a little later on.

And, as Sebastien already said, I'll start with an overview of the business and then I think Marc will update us on the review of the portfolio and Hanspeter will give us some of the detail on some very strong performance, both on top line and I think in terms of cost control.

So I'm on slide five, which is really giving an introduction to what is a very good start for the year. We have growth of 3% for pharmaceuticals. Obviously, at constant exchange rates, sales were flat as you see in the press release, and it's 3% when you correct for the fact that we had Copaxone in the numbers last year and we don't have Copaxone this year.

The Copaxone comparator does affect various lines. It affects sales, it affects cost of sales and some selling expenses and Jerome will talk about that a little bit, and Hanspeter will go into a little bit more detail on pharmaceuticals and vaccines. 9% growth, very good growth there. At constant exchange rates, and that's the basis on which we're giving now guidance and reporting on earnings principally, we had a very robust 9.8%, constant exchange rate growth of earnings per share on a reported basis, clearly we had a positive benefit of exchange rates such that the actual rate was 16.8%.

I'll give you an update. We're about halfway along on our transformation initiatives. We've clearly made some acquisitions this quarter, which I think is very consistent with the strategy that I had the opportunity to outline to you at our last meeting. And of course we've had in the meantime an FDA advisory committee which has given very strong support to the approval of Multaq, and I'll talk to that in a little bit.

So if I move to slide six, the center part really is one of the classical sources of growth and you can see that our major products, Plavix, Lovenox, Lantus, Taxotere and Aprovel, all had good growth. The Lovenox number looks a little low, but I think as Hanspeter will show you, that's really related to the heparin supply issues we had in the last year, which kind of distorted quarterly growth and we're looking at a strange comparator, but actually all underlying script growth is very much consistent with previous quarters and we're very happy with that performance.

On the vaccine side, to the left, you clearly see sales of Sanofi Pasteur at EUR627 million, up 9%. We include the sales of the Sanofi Pasteur-MSD joint venture. Remember that we don't consolidate those sales. Down 8.7%, largely as a result of Gardasil.

Sales, if you strip out Gardasil, sales were up 15% and I think you've heard from Marc what the story is on Gardasil. Our Animal Health franchise, actually resisting pretty well against the economic crisis, up 2%. Actually, management has done a very good job of cost management there and the joint venture profit sales were actually up 10%, so clearly a good source of growth on Animal Health.

Obviously, we are thinking about the future of Merial, given that Merck and Schering have announced a proposed merger. Schering, as you know, has the inter-vet business and Merck is currently going through an exercise to decide what it wants to do in Animal Health. We're partners in that and we will obviously discuss the future of the joint venture, what we might do with Merck, when they've completed their strategic exercises.

On the right side of the slide, you see OTC business, EUR378 million, a robust 10% growth there, 9.9%, and of course our generics business and Hanspeter will talk about that a little bit more, that does not include Zentiva, Kendrick or Medley, so this is the business that we start with but also very good growth.

I would say that this is a very good performance, particularly when you think about the fact that this is now the second time that Sanofi Winthrop has won a very competitive tender process. You've seen I think it's Ranbaxy has decided to exit from certain European markets because of cost pressure. So I think the fact that Sanofi Winthrop is to compete shows that even a company like Sanofi-Aventis can do well.

So page seven, we're confirming the guidance for the year. I've seen some of the notes some of you have put out there. I would draw to your attention, perhaps, that the guidance is of at least 7%, so it's not 7%. It's at least 7%. And we'll likely with the second quarter try to narrow that range a little bit for you, but we are clearly off to a very good start for the year.

Moving to slide eight, I'll give you an update just briefly on the transforming program. There's an awful lot of activity in the Company and a lot of thought going into it since we announced really the vision of the Company as a global health care leader. That all sounds great, but there are real management decisions and challenges that are a consequence of this.

When you think about the fact that we are now one of the top 10 generics manufacturers, that immediately raises questions about how does this get organized, where do the plants report? If you were to talk to our head of manufacturing, for instance, for the Mexican site, our manufacturing plant in pharma would typically have what they would call 10 launches per year. These are new packages, new formulations. When you move into the generics field, that goes from 10 to about 100, so there are adjustments that have to be made and we have to think about the people we have in those businesses.

We are still very much interested in the remaining three questions in R&D. We've answered really the first two and, again, Marc will go through that in some detail, but obviously in addition to the portfolio review we're still very much interested in thinking about how we can really rejuvenate innovation, create an organization that's looking outward to find new innovation external to the company and of course defining our R&D strategy long-term.

So the portfolio review doesn't completely say we're going to be in or out of some therapeutic areas. That has to be overlaid with our 2015 R&D strategy. So the three pillars are really increasing innovation and R&D and Marc will take you through the portfolio review. Adapting our Company to future challenges is as much around some of the acquisitions we're doing and the fact that we're doing a lot more partnerships and of course you've seen external growth.

So I move to slide nine, and I can give you a little bit of a feel for each of these things. I think R&D is -- it's a critical milestone, the review of the portfolio. It's not really just so much where we've ended up, it's how we've got there. Marc will take you through the four key criteria that we use for our version of the bank stress tests on our own portfolio.

Personally, I think we end up now with a portfolio that we all feel very confident in. This is a portfolio that we can put our resources behind and really drive behind the most promising projects that we have and so I think we have a greater confidence, a greater sense of mobilization around the pipeline that we have. That doesn't mean that we can sit back and be complacent. We clearly need to add to that pipeline, both in terms of our own discovery and in terms of seeking new drugs. And if you look at the middle group there, I think the BiPar acquisition is an excellent example of that.

It underlines and underscores, really, our commitment to innovation. Obviously this gives us a first-in-class oncology compound. It's in an indication of triple-negative breast cancer originally, for which there is no treatment today. Phase II data will be presented at ASCO later in the month of May.

Behind the scenes, I can tell you I'm particularly happy with this, because it was really Hanspeter's team in marketing that did a first screening of opportunities that might be there, and it was really working together with Marc Cluzel's team in research and development to really assess the scientific potential of some of these that really led us to BiPar and so I think we're seeing already new evidence of important collaboration that has to exist between our commercial and R&D organizations.

I think the deal structure itself was also very good. Clearly, if you're buying a company with a product that's not yet on the market there is an enhanced risk, so I think we were able to structure the purchase price really around a similar structure to milestones that we'd have done if we'd have done a partnership instead of an outright acquisition. Clearly, I think another important aspect to this is that we don't want to integrate BiPar. They clearly know that product, they know their business and we want to leave them independent.

Multaq, very strong support at the advisory committee. We've had very good progress with the FDA on labeling and really see no particular issues with moving to an approval. Whether or not we actually get an approval on the action date is very difficult to say. As you've seen, there are always sort of last-minute technical glitches that come up and so I can't really say whether it's actually going to be approved on Thursday, but everything thus far has worked extremely well with the FDA and we look forward to having certainly an approval in Q2 and moving forward with what I think will be an exciting new medicine.

Page 10, three bolt-on acquisitions. They're bolt-on acquisitions, but when you're looking at acquisitions, you don't necessarily say, well, what does this mean to your worldwide company? If you do that, you're going to limit yourself. What I like about these acquisitions is we identified growth opportunities out there on the marketplace and we sought out to find resources, talent and products that could allow us to access those.

So Zentiva now gives us a very strong branded generics platform in Central and Eastern Europe, in Turkey, and that's very important, because we really were sub-critical mass on generics. This now adds a substantial amount of sales, gives us a good base from which we can grow.

We can leverage the global footprint that Sanofi-Aventis has and be able to move some of the products that Zentiva has beyond where it's been able to market. Medley and Kendrick in Mexico and Brazil, also not transformational from a company point of view, but very transformational for our operating companies in those markets, and really between Mexico and Brazil we have close to about EUR1.5 billion of sales, so these are important companies of ours in important markets.

By buying these two companies, that gives us really a leading position as a generic manufacturer in Latin America. And I think you'd also say is that you want to be careful a little bit about even defining generics. If our general manager from Brazil were here with us today, he would say, well you could argue we were already in the generics business, because 95% of what he's selling is not covered by patents, and he's certainly -- and he and his team have certainly figured out how to compete in that kind of environment very successfully.

So I think people ask what's our acquisition strategy? I think these acquisitions are very emblematic of that. I wouldn't necessarily say that you can say that they're all going to be of that size. They just happen to have come down the pipeline like that. But they are very consistent with this strategy of diversifying both geographically and in terms of line of business and I think very much add to the platforms of growth that I laid out at our last meeting.

So I'll close on slide 11 and say, all, right, I've got a to-do list. We all have a to-do list here and we're working our way down that. I think we've started the year very well with very good Q1 results, led by some extremely strong performance of some of our core brands and we're on track to deliver the year. We've added to the team. Jerome Contamine doesn't come from the pharmaceutical industry. I personally look at that as an extremely important aspect. At a time when we're all looking to transform our business, having a different experience I think is very important.

The Chief Strategy Officer, Laurence Debroux, is up and running. This is very important. We looked at probably 75 projects in Q1 alone. You need a dedicated team with some commercial, scientific and financial expertise to really go through the projects systematically and look for where we can find value.

We got some new external R&D deals and Marc will show you the percentage of our pipeline that really is related to partnerships. We've got disciplined investments. We've completed our R&D review. Now, looking forward, we expect approval for Multaq. We will be doing on July 2nd an emerging markets investor seminar. I think that's very important because in discussion with some of the -- I mean, clearly, we as a Company and I think we as an industry are moving away from the product-focused discussion we've always had, and I think it's going to be important to not only understand products but also markets.

In fact, we even struggle a little bit to think about how we're going to show you sales going forward to make this a little bit more transparent. But if we're going to be limited to showing key products, well, we have 400 products that are actually delivering quite a lot of our growth in emerging markets and we would like to be able to share a little bit more about some of the key success factors to competitive elements, what it takes to succeed in Brazil or in Africa or in China. And then obviously then the Q2 results I think we'll be able to give you a much clearer roadmap, following our transformation programs. We're actually achieving recommendation phase coming up into the month of May.

We'll be able to summarize those and present the impact for you on July 29th when we present Q2 results. So with that, I'll turn it to my colleague, Marc Cluzel, Head of Global Research and Development, who has had an extremely busy Q1. So, Marc, over to you.

So thank you very much, Chris. Good afternoon and good morning, for the people in the US. So I will start with slide 13, so as Chris said, the Company is on an ongoing transformation process, quite extensively, and of course R&D is strongly involved.

Our first priority was in fact to make a kind of portfolio prioritization, which will allow us very quickly in fact to in fact define which products we should invest on, but at the same time to give some more flexibility in order to re-look at some of our internal resources to external resources.

At the same time, we are now at the end of the process to evaluate or to try to decipher what will be the pharma in 2015, and by the way to define the R&D for the expected pharma in 2015. And based on what we think should be the pharma in 2015, we will adapt the organization and as Chris said with strong -- how do you say that? With a strong involvement on innovation, because we think that innovation will be key in the future.

A little bit of word about how the portfolio review was done. So it was done on all the products, in fact, covering all the products into development, but also products within one year of entering into development, so I think we must have covered more than 60 products.

It was a multi-dimensional approach and as it is said in the slide 14, the four key dimensions was the degree of innovation, the extent of patient needs addressed, the technical and commercial risk and the overall value and recent investment. I think saying that it's not too important. What is much more important is how the process was done.

The process was done with the involvement of the whole Company, so everybody, whatever their function, was involved in the process, and also what is quite important, that we tried to evaluate the risk on each key feature and even what is much more important, we get an agreement on the level of risk for each of these key parameters, which is giving to the Company I think quite a clear view for all the products.

What must be said also, that it was not only an internal process. Perhaps you re not fully aware, but now we have in place since 2008 a meeting with payers. In fact, we have a separate meeting for European payors and with US payors and we are in fact thinking to address one for the Asian payers in the near future. So some of our decisions we are backed in fact by the payers.

So the next point, that before we were looking to the portfolio project by project. Another feature of our evaluation will be that now there will be a semesterial review of the portfolio, but with a global analysis of the portfolio, mainly based on the risk exposure. So now moving to the slide 15, I will not spend too much time on the project stock.

As said Chris, there is in development, in clinical development, 14 projects stocked and also there is four projects with very close, go/no-go decisions and I'm fully ready to take your questions during the question-and-answer session.

I think it is much more important to move to slide 16 and in fact to look in our portfolio what is new and in fact, again, I will emphasize, as Chris, the importance of the PARP inhibitor for many reasons. The first reason, it's because we are making an acquisition of products, so moving from a mostly internal discovery to external discovery. We are reinforcing our oncology core franchise at a time when it is absolutely critical.

We have a brand-new compound, which is first in class and at the same time, as you will see in the next slide, we are reinforcing our portfolio at one stage where we are a little bit weak and where we need definitely to reinforce it, which is at the Phase II level.

After -- on top of that, I have one product entering in Phase I in Alzheimer's in cognitive impact, as far as improvement of cognition and we have an anti-NGF in pain management, which has different characteristics from the Pfizer one and it's not targeting exactly -- it's targeting the NGF and it's not exactly the same bio-clinical profile and I will pass on the other regulatory approval submissions.

So, now moving to the portfolio, which is slide 17, so you have the number of products. I will make two comments, despite the loss of four products in Phase III, we still have 11 products I will call in pharma R&D in Phase III, which is a relatively good level when compared to our peers, so I will say that in Phase III the portfolio is not too much at risk.

If you are looking to the portfolio, you may expect in fact to have much more product in Phase I and in Phase II than in Phase III, so I think it's to reemphasize what was said before, that we will need to make some acquisition in Phase I and in Phase II in order to reinforce our portfolio.

Moving now for slide 18 and so going first to the right pie or camembert and going in the same way as Chris, now our part of internal versus external is roughly 25% external and 75% internal, with a little bit far from our peers, which most of the time are roughly 50%-50%, but definitely when you are looking in terms of improvement of this ratio I think we are doing a good progress.

Another interesting point, also, which is on the left pie, we have the tradition or the reputation to be a really small chemical company in terms of R&D. In fact, looking at the portfolio now, we are 50-50 between chemical entities and biologics. So I will say that if the transformation is not complete, we will really start to change the landscape of the R&D and by definition if we change the landscape of R&D we'll change a little bit the landscape of the Company. So now moving to slide 19, so it is a very difficult slide, so I will try to explain it of my best.

What is presented, in fact, what is always presented is not the specific spending of pharma R&D, but is global spending of R&D and in the global spending of R&D you have sold the pharma R&D budget, but on top of that you have the vaccine budget. On top of that, you have some marketing studies and also you know there is more and more epidemiological study, pharmacovigilance, post-marketing commitments and so on.

So what is considered as R&D budget is in fact a mix of different factors and based on that you can understand that, if by example pharma R&D is decreasing but vaccine R&D is increasing, the end result might be zero. On top of that you have two other points.

The first point is that when you stop a product, in fact, at the time when you stop the product it is costing you a little bit and Mr. Jerome Contamine will show you that in fact we have some provision in the first quarter about that. So the benefit is not translated immediately in the budget. The other part also that if we stop some internal products, it is also as was said before in the slide on transforming R&D, but also in the comment from Chris, it is to acquire new compounds.

So to make it simple, at the end of this year we are expecting a low single digit decline of the R&D spend at the constant exchange rate in 2009. Of course, we are expecting more substantial decline in 2010 with the two caveats that I have said. It depends of the expansion of the other part of the budget and of course of the acquisition that we will do.

So I hope I have been clear. Now moving to our potential blockbuster. The first one is Aflibercept. So Aflibercept is in competition with Avastin, which is an anti-angiogenic agent. As it was already mentioned, Aflibercept is not only a VEGF inhibitor. It's also acting on the plasma growth factor. We are in fact in an extensive program in Phase III and to characterize it there is three directions.

The first direction is we are in a domain where Avastin failed with these pancreas cancers, we are in fact in a domain after Avastin, which is lung and which is colorectal, and this is -- there is one domain where Avastin is still not registered, which is prostate cancer. It's difficult at this time to give any kind of information about the product except that the recruitment is going extremely well.

In fact, we led recruitment in three of the programs out of four, the program which is slightly behind is the lung program, but by definition addition by tradition it is difficult to mix studies with anti-angiogenic agents in these populations. And, also, one point which might interest you, that you know that with Avastin you have thrombotic events. The thrombotic events in fact are linked to the creation of a complex between the antibodies and the platelets, so it was considered for the development of VEGF an adverse event of specific interest.

Also, we have some information from preclinical that Aflibercept is not creating this complex and so far in terms of monitoring we do not observe thrombotic events, but of course it has to be confirmed at the end of the trial. Going now for the slide 21, which is the PARP inhibitor. So in fact we are very excited about the result of the study where the PARP inhibitor was added on top of gemcitabine in triple-negative cancer, so I will go fast on triple negative, but it is in women who in fact whose tumor is not expressing estrogen receptors, progesterone receptors or epithelial growth factors.

What it is bad to not express these receptors, it is that if your tumor is expressing these receptors, it means that your tumor is somewhere stimulated by these factors, and in fact if you inhibit these factors you can have impact at the prognosis. If you are lacking these stimulating agents, it means that you have less tools to treat the patient, the breast cancer, and so it's not too surprising to discover that the prognosis of this cancer is very bad. And here we might have, in fact, one of the first effective treatments for this specific population, which is really a dramatic medical need and I think the best is to have a meeting at the ASCO when the results will be published.

At the same time, of course, we are looking for other indications. What might be also interesting, that it might be for this product linked a little bit of targeted therapy because the PARP is not the only way to repair the DNA, and it might be interesting, in fact, to administer this drug in populations who are lacking other ways to repair the DNA because we will increase the potency of the compound.

So now moving to slide -- sorry, for PARP, we are in discussions with the FDA in order to define the Phase III program and based on the efficacy of the drug, we hope to have a kind of accelerated development.

Now moving to vaccine and to the dengue. So you know that the dengue is touching a very large part of the population and it's relatively clear on the chart which is on the right part of the slide, page 22, so 230 million people, 2 million children and also it is not put in the slide but it's roughly 30,000 deaths by year.

There is at the present time no treatment available and this result might be worse than the previous one. So definitely, again, there is a huge unmet medical need. Actually, for this compound, it's really at the level of global health and so we are pushing as much as we can both clinically and in fact also in terms of industry operation with the announcement of a factory in [Neville], just dedicated to this vaccine, and of course because here we are touching global health, we are working very closely with WHO and non-governmental offices and so on. The first filing is planned in 2016.

So now moving to slide 23, I should say that in our road map up for the first quarter, we are relatively correct, in fact, because I think we have achieved what we were supposed to achieve. As Chris said, we are waiting for this quarter, the approval of Multaq and so -- at least in the US, and so as a consequence the launch of Multaq with a label that is reflecting the value of the product and the ATHENA study.

So what are the next steps? Focusing the R&D resource on projects with best chance of success and acceptable returns, I think it's already done with, but as you know it is an also an ongoing process, so we need to continue and we need to continue to shape the portfolio and also to look outside. We are now discussing a structure in place, so after that now it's evaluation and the deal process, which is in charge.

So accelerating R&D partnerships, I think we have done already quite a lot in the past but we will accelerate in the future and more details from R&D transformation will be given on the Q2 results. So now it's my pleasure to turn over to my friend, Hanspeter.

Yes, thank you, Marc. Good morning, good afternoon to everybody. To report on this first quarter performance is a good thing to do because overall we believe that the performance is solid and we have put at the top of page number 25 also as planned, indicating that when we did this plan, which was in the second half of 2008, we of course could not anticipate the full dimension of the financial and economic crisis, so indicating now that we perform, resisting very well against those crises, despite the fact that we see some impact in countries like Mexico and Brazil. But overall we do well.

We have a growth rate then of 3.5% in terms of sales, composed from 9% from vaccines and 3% for pharmaceuticals. Performance in Europe has improved a little bit. You may remember that our performance has been slightly negative during all of 2008. Now sales are stable. In the US, we do better than the market. We support 5% growth and in the rest of the world 7.3%, which is more or less in line with the previous quarters.

On page 27, we turn to one of the special trends of our Company, our performance in the emerging markets. Now, on the chart you see that in the so-called BRIC-M, we are growing by 13.5%. This is also once again despite some negative impact as a consequence of the crisis by wholesaler destocking. The BRIC-M performance we forecast to continue to be a very positive for 2009 and we remain convinced that the growth will be very close to 10% or even slightly above.

In line with this, we have reinforced our market-leading positions in those parts of the world by the recent acquisitions, to which Chris has already alluded. This will translate in the fact that first of all we will have a market share of about 6% in these parts of the world and, second, that the part of sales coming from those countries will increase by about 50%.

From the chart, you also see that we have a very good split I feel of risk sharing between the major parts of the world, the United States, Western Europe, and the rest of the world, because we have exactly one-third of our sales coming out of those three parts.

On page 28, then, you see a translation of the recent acquisitions. What we will become as of the second quarter of 2009 when we will be consolidating sales of Zentiva, Kendrick, and Medley. You see that, yes, we advanced pretty significantly from EUR0.4 billion of sales to EUR1.2 billion of sales on an annual basis. Of course, we will become the number eight generic player globally and evidently we will become the number one in Central and Eastern Europe and in Latin America, those markets where we have the quite confident conviction that those markets will continue to grow over-proportionally.

Now turning the page to the next page, then, 29, some comments on our key products. I start with Lovenox.

Also in this respect Chris has already indicated that the overall growth rate is 1.3% for the first quarter, evidently looks modest, but if you look to the chart you see that it's a kind of bubble in the first quarter 2008, which was a consequence to the so-called heparin crisis, when especially in the United States there was over-stocking and in the first quarter we are now competing against this artificial first quarter of 2008. The underlying growth drivers like prescription rate and so on continue to be absolutely normal and you will then see in the second quarter 2009 that we are back to the normal lineal growth for this product.

Good news for the European authorities. They have guidelines issued for low molecular weight heparins as biosimilars. They have become published quite recently. The major key takeaway is that those companies competing for those products will have to submit in Europe clinical data for each individual indication, which evidently will make market access more complex and also costly and we will have to see which impact the European decision will have on the FDA decision, which is still pending. I may anticipate the eventual questions we have, absolutely no news in respect of Lovenox coming from the FDA and for evident reasons, at least for the time being, we take no news for good news.

Last words in context of Lovenox. So far as the impact of the oral anticoagulants remains very insignificant, with market shares of approximately 1% in Germany, UK and France where those respective products have been launched. On page 20 -- and on page 30 you see then the very nice performance of Lantus. Lantus has taken leadership in the latest launch market, which has been Japan. You see that we have here the usual picture. Lantus has taken over the NPH products. It's also performing superior to detemir. The reasons in Japan are the same as in the rest of the world, we have a very strong support from our patents, from SoloSTAR.

We have obtained a new registration from SoloSTAR in the context of a Apidra from the FDA and those pens contribute to the overall growth but this of course is not the only growth driver, as there is a continued stream of positive clinical data coming out for Lantus and this is continuously driving the really superior growth of this product.

On page 31, you see that the success story of Plavix continues. The product has obtained nearly EUR1.7 billion sales in terms of our own consolidation. You have received yesterday the figures for the United States being issued by Bristol-Myers Squibb. The product continues to perform very well, with a growth rate of nearly 9%. We resist very positively against the alternative salt competition in Germany. We maintain a market share of very close to 80% and we feel this is very encouraging for the months to come.

Strong performance in Japan, the product has obtained in the first quarter EUR70 million, growing by more than 90%. For the remaining years in the life cycle of the product we remain extremely confident. We have new positive data coming out of a trial which was recently published, called ACTIVE-A. The data gives us additional opportunities to promote the product in atrial fibrillation.

Therefore, we will submit a request for additional indication to the FDA within very short. Evidently we see some synergies through the upcoming promotion of Multaq there and we have also from the same trial new evidence in the field of stroke reduction, which has been a field which was not so well developing in the current quarters, but with the new data we will regain momentum also in stroke prevention.

This is not all. There are still two more trials going on, the CURRENT trial and the CLARINET trial, which has to be expected for later 2009 and 2010, early.

Page 32, Taxotere, sales of EUR534 million, growing by 8.3%. The composition of this growth has not really changed. There has been a little bit of a negative effect in terms of growth rate, which has been in the fourth quarter 2009 a two digit and this is coming from wholesaler destocking in the first quarter of 2009 in the United States. But this is a technical effect, of course, which will be equalized as of the end of the following quarter.

Also in the context of Taxotere, which of course remains the product with the largest field of indications -- we are promoting the product in 80 indications in the United States. Also there a continued flow of new positive data in early stages of breast cancer and, yes, we also continue to do life cycle management by new dosage forms and it's also good to report that we intend to launch in 2009 more or less worldwide a one-vial form of Taxotere.

I close then on page 33 concerning the pharmaceutical products with Multaq. Of course, you are aware that we have obtained March 18th a positive recommendation from the FDA advisory board. Our conversations progress very well with the FDA concerning the labeling, and if you look to the right side, you see the anticipation and perception of American physicians concerning the product as reports of Multaq and I think so those attributes are very much in line with what we expect in terms of labeling.

And we see that the leading attribute is reduction of risk for cardiovascular hospitalization. So we believe that we will make a product available which matches those expectations in a very positive and interesting way and therefore we are looking forward to commercialize the product during the second half of 2009.

Now, the last chart then, dedicated to the vaccines, also there a good performance as you have seen before, plus 9.1%, EUR627 million of absolute sales. You see that Pentacel, growing by nearly 34% and Vaxigrip growing by 44%, healthy growth drivers. You see that there is a little bit of a B-moll around Menactra, which has negative sales growth of 13%.

This is an effect which is mainly caused by a certain saturation of our patient population in the United States. Please keep in mind that the product for the time being for capacity reasons is only commercialized in the US, and there we have maintained a large penetration in those patient groups which have been approved. We expect and we have good reason to expect new acceleration of growth when we have obtained in these additional patient groups, infants and toddlers, and for this we will be filing a request for extension by 2009.

Important to note that we start to obtain also with our vaccine business very strong sales growth in these emerging markets, where we have started to combine the pharmaceutical business with the vaccine business, and consequently you see that in Latin America our sales are now growing by 51% and in Asia-Pacific by nearly 17%. So let me close. We have a very good performance during the first quarter and this growth is perfectly in line with our expectations.

We have consequently to recently announce strategies, reinforced our positions through acquisitions but also additional investment into major products, regions, generics and evidently in the emerging markets and, yes, we are ready to launch Multaq as soon as we have obtained final approval from the FDA, which is due for the second quarter in 2009.

So this gives me the opportunity to pass on to Jerome Contamine, who will give you more figures on this performance.

Thank you, Hanspeter. Good afternoon and good morning to those being on the other side of the ocean. It's my pleasure to be in the position to present this strong set of results for my first time as the CFO of Sanofi-Aventis. So we go through the coming slides and comment what have been the main drivers for this improved profitability which we have posted this morning.

First of all, when it comes to sales, on page 37, on the start properly at the outset, it's important to remember that since the 1st of April, 2008, we do not commercialize Copaxone anymore in North America, which is the main impact of the change in structure, but when it is impacting our sales, it is not impacting our results.

So the contribution, the royalty, which is served by Teva of Copaxone is booked at the level of other current operating income, so you could say basically that it has no impact on our results, even slightly positive, firstly because performance has been good and second because we have a positive impact of the exchange rate of the dollar against the euro during this period for these royalties.

Apart from this impact, when it comes to the rest, we have both positive impact of organic growth, or actually what we need to read as an underlying performance is 3.5% of sales growth, along with what Hanspeter has just commented a few minutes ago and a positive impact of the exchange rate for a total amount of EUR183 million. That is 2.7%. So all in all 2.5% increase of sales on a reported basis and with a 2.7% contribution of exchange rate and negative contribution of change of structure of 3.5% at the level of sales.

Basically, the coming two slides are mainly commenting about the exchange rate impact. You know that we are selling in various currencies, so just as a reminder, on page 38, to have a gross picture, our sales have been in euro for around 36%. In the US dollar, for around 32%. In Japanese yen, for 7% and quite a number of currencies for the rest, along with the diversity of our geographic positions, the next coming currency being the sterling, but only for 4% and the rest being slower contributors.

Of course, despite that changing from one year to another, apart from the change of currencies and of course when the US dollar is increasing, the relative contribution of the US dollar in sales is slightly increasing as well.

You have on page 39 some more details to understand how the various variations of currencies have impacted our sales. In fact, we have had a positive impact mainly from two currencies, US dollar and the yen. US dollar for 240 million, this is the largest of course, and 121 for the yen. The other ones having a negative impact, which all in all is in the range of 180, leading to the net [answer] of 83 million, which is a net impact of the currency variations.

Now if I move from the sales to the P&L and here I'm on page 40, you can see that when sales have on a reported basis have been increasing by 2.5% at constant exchange rate being stable, all other elements in terms of costs are decreasing and they are focusing on the improvement of the operating income, which are going by 14.9%, close to 15% on the currency exchange rate, on 8.6% on constant exchange rate. A few comments on this slide.

First of all, the fact that beyond the contribution of the increase of sales on like-for-like basis you have also the contribution of other revenues, and those other revenues are mainly royalties received from our partnerships, in particular in connection with Plavix.

And therefore we have both the contribution of the increase of sales of Plavix, in particular in the US, but also the contribution of a stronger dollar. And therefore bringing to a significant increase of the gross profit, which is increasing by 2.4% when the sales are stable and therefore improving the gross profit margin.

R&D is slightly increasing. Here it deserves some explanation. As Marc has described, we have decided to terminate a certain number of projects. On some of these projects, studies have been launched, including external studies on the clinical trials. Therefore, we had to complete them and we take the provisions on these remaining costs during the first quarter. In fact, we have the impact of the termination of our project, which is an impact of EUR54 million on the R&D costs.

So excluding these costs, as you can see, we would have had stable costs of R&D on the current exchange rate basis on the decrease of the R&D spending on a constant exchange rate basis, which is consistent with what Marc has mentioned when it comes to the trend for the overall year in terms of R&D expenses, which should be a single-digit decrease.

SG&A, as usual, I could say are under control, are continuing to decrease by 5.6% on the constant exchange rate basis, therefore leading to the improvement of operating income, which I already commented. The main element when it comes to other operating income is precisely the contribution of the Copaxone royalty in our first quarter 2009, where it was going in the previous lines in 2008.

Shortly, on page 41, if I go down to the net, as you can see, the net income is increasing by 15.7% on the constant exchange rate basis, 8.7%, and as long as a number of shares has decreased, but you remember that we had cancelled some shares last year, the EPS has grown by close to 10% on the constant exchange rate, 16.8%, is a very good result, on the current exchange rate basis.

Maybe for you to weather the storm, where it comes from, I could make it simple. If I take the adjusted net income, the overall increase can be divided to two parts, one contribution in the contribution of exchange rates. This is EUR132 million on the right contribution of operating performance, is EUR163 million. Out of this EUR163 million, around EUR110 million comes from increased sales and increased gross profit and around EUR50 million coming from the decrease in absolute terms of cost, R&D, plus SG&A.

So this leads on page 42 to improvement of all ratios, say like that, possibly the cost of sales to sales ratio, which is decreasing very significantly, from 27.2% to 24.8%. We can say here that it's coming from three elements. One is the Copaxone element, which is impacting positively the level of margins by around 0.9%. The second is coming from the exchange rate, with benefit from the stronger dollar, so it is contributing for around 0.9%, and the rest is improvement of cost of sales, as well as evolution of the mix of products being sold. SG&A to sales ratio is below 25%.

You may remember that we gave the guidance on the 11th of February that we should be able to decrease our SG&A ratio by around 1% from 26% to 25%, so I can today confirm this guidance for the full year. And therefore we have as a combination of these two elements a significant improvement of both operating margins and net income margin.

Page 43, it's some further comments on the sensitivity to our EPS to the variation of currencies. Here again there is really one currency which is impacting significantly -- which can impact significantly our EPS and you know that already. The average sensitivity is $0.01 movement of the US dollar against euro as plus or minus 0.5% of the EPS variation. For the other currencies, I would say the impact is for all currencies really marginal.

Also, I think what is noticeable, this is page 44, is the strong cash flow generation. We have generated before acquisitions and after variation of working capital EUR2.3 billion of cash flow, so it has allowed us to finance all acquisitions, including the debt from the company which we have acquired, namely Zentiva. So the overall investment has been -- in the acquisitions has been EUR1.8 billion, a bit more than EUR1.8 billion, and even that has been financed with cash flow, so that the net debt has decreased again from EUR1.8 billion to EUR1.2 billion.

The two rating agencies have confirmed their rating, with a stable outlook, and we can say quite simply that we have a strong flexibility to cope with any potential external development that we might consider.

So just to summarize, a solid underlying sales performance, in line with expectations, the continued cost management and cost control, the strong EPS growth and cash flow generation, lower -- very low, I would say, net debt level, so we can, as Chris has mentioned, reconfirm our EPS guidance for the year, which is at least -- at least a 7% increase at constant exchange rate, assuming there is no material adverse effect, which may take place before year end. Thank you.

Thank you, Jerome. I think with that we'll move to question-and-answer. So we'll throw the lines open.

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

Great, thanks for taking my questions. Starting off with a question for Chris. When you talked about an update on transforming -- or the transforming program with the second quarter results, I was just wondering, are we talking about targets for cost savings over the long term or even more than they saw on a structural basis? A question on the Copaxone royalty through the other operating income line.

Could you just quantify that and also highlight how much of the other operating income was Allegra royalties? And then a question on the pipeline. The Aflibercept combo with FOLFOX trial, just wondering on Phase III design there, does the control arm involve an Avastin or Erbitux comparator and also is there a combination arm with either or both of those agents? Thanks.

Thanks, Graham. Let me start off on Q2. So in Q2 we will be able to, I think, give some guidance as to what we think the financial impact of transforming will be. I would stress that I have been very clear internally and externally that transforming, though, is much more than what this might have to do with cost.

We are busy trying to have the most creative and innovative research and development. We need to reorient the business around more globally diversified model and we'll put some meat on the bones, certainly, of that.

That having been said, clearly, as you've heard from the R&D presentation, given that we've stopped a number of projects, that we're looking at things like shared services, that we would expect that there's some financial enhancements coming out of that and we'll be able to give you some greater precision around that at the Q2. As far as the other income goes, I'll turn it over to Jerome.

Yes, so you may remember that last year we told you the contribution of Copaxone for the first quarter, which was EUR51 million at operating income level, when sales were EUR220 million. This year, we may have a positive impact of the exchange rate and on top of that we have some improvement in the contribution of Copaxone because professional has done very well during the first quarter. So, all in all, it is more than the EUR51 million, let's say in the range of EUR60 million-plus.

And the Allegra royalty, was it? Was it Allegra royalty, Graham?

Yes, that's right, following the settlement, any Allegra royalties in that line, as well?

Let me check. I need to check. I'll come back later on that one.

Okay, we'll come back on that one, Graham. Move to Marc on the VEGF trial.

For aflibercept -- the end of the question was a little bit lost in the phone. For the first part of the question, in the first round of the trial, we have decided not to go to against Avastin and a little bit to calibrate the component. You know exactly the value of our compounds, so, as I said, we decided to go in an area where Avastin failed, pancreas cancer, second line versus Avastin, colorectal and lung, and the new area, which is prostate-- now we have initiated a trial in first-line colorectal in order based on the result to go head to head versus with Avastin.

I think versus Erbitux, since we do not have exactly the same mechanism of action, I think it's difficult to do it in a -- at a first glance. I think we are still not at the stage. I think initially we have to position Aflibercept versus Avastin and once we will position the assets of Aflibercept versus Avastin, it will be time to go for a new regimen or a new definition of regimen in terms of treatment of cancer.

And I am sorry, but the last part of the question was lost in the -- there was some kind of -- I don't know if I answered already your question.

Yes, so the other one was whether there would be any combination, but I guess from your answer to the first part, that would be no.

No, no, there will be combination, but there will be no combination with Avastin, clearly, but there might be some combination with other agents acting on the vascular bed.

Okay, and to be absolutely clear on the sort of -- what you said on the head to head there, that you would actually initiate with a head to head or that you would run a study that was against best care or just against FOLFOX initially and then look at initiate a head to head later, just to be clear on that.

Your second part of the question is right.

Okay.

On your question of Allegra, the royalty contribution is less than EUR10 million. It's precisely EUR7 million, slightly below last year.

Okay, thank you, Graham. Next question.

We have a question from Mr. Andrew Baum from Morgan Stanley. Please go ahead, sir.

Yes, afternoon. Three questions, if I may. Firstly, on Multaq, perhaps you could share with us your planned pricing strategy and also confirm that the contribution margin should be pretty positive pretty quickly, given the lack of incremental sales. Second, on emerging markets -- sales force, I should say. Second, on emerging markets, when I look at the IMS breakdown from some of your key territories, it's only about 11%, but on revenues it's 24%.

Could you just explain the delta in terms of additional revenues that make up the remainder of the sales? And then the final question is just thinking about the diversification and the reallocation of capital into low-cost health solutions or just call it generics, particularly in the emerging markets, what are you doing to try to minimize execution risk in terms of maintaining the existing management of the businesses that you acquired? And, actually, I'm going to speak in a final one. I don't really understand the significance of the dengue fever slide for the product which only gets introduced in 2015, perhaps if you could explain that, that would be helpful.

Thanks, Andrew. Let me ask Hanspeter to deal with Multaq and the emerging markets. I'll come back on diversification and dengue.

So, Andrew, I understand your interest but evidently it's too early to give you a precise price for Multaq, because mainly we will adjust the prices when we have the final label, but I think there are some criteria evident. It's a chronic treatment. It is a totally unique product which has outstanding and unique outcome data, and it is an important patient population, 7 million, but on the other side it is not such an important patient population as let's say we have for Plavix.

So, you as a professional, I think you will conclude from this that the price will be in the upper range of chronic treatment in cardiovascular and let's say diabetes, but to give more precision it is today too early.

Sales force, that's a very easy one. We will do it within the US for the time being because we are the most advanced with a separate sales force, in hospital and in the private market. We will target of course cardiologists, but we will accompany the launch with context to GPs, which we found are important to maintain the product, but we will not increase our sales force.

We will totally cover the launch out of the existing headcount and also the headcount plan for 2009. In the second part, the Zentiva, Kendrick and Medley question, so to say, so two or three governing principles. First of all, we will keep those businesses relatively apart as far as the operational side is concerned.

In country, we will integrate all general services, like accounting, purchasing, et cetera, and we will make shared services in all markets concerned, but once again, from an operational point of view. From a development point of view, from a regulatory point of view, we will keep those businesses separate because we believe it would be a mistake not to handle it as a different business as in fact it is.

Now, as also said already before by Chris, generic is not necessarily a generic in Brazil or in Europe, so there will be, of course, adaptations to the regional structure but the other governing principle will be that we will be using Medley as our let's call it generic platform for the Latin American market and we will be using Zentiva for the European market, which means we will concentrate all our assets for further developing our presence in generics around those two companies where we have the necessary management and the necessary know-how and in doing so we also believe that we will motivate this management to stay and to contribute, as in the past. And we find that this is absolutely the case.

So let me come back to dengue. Actually, the slide said 2014, not 2015, but that's actually a misprint as well. The actual early filings for dengue will be in 2012. We are in phase really IIB with that study and would move pretty quickly into Phase III. That might even be earlier, depending on what the results look like.

So the other thing I would just say is I think although you may look at this as a developing world vaccine, when you actually look at the number of people and the tiered pricing, personally I think this could be a bigger vaccine than anything we sell today, so that's why we highlighted it. It's a big sales potential and it is actually in the 2012 timeframe, at least in terms of filing.

In terms of diversification, execution risk and maintaining management, certainly on execution risk, I think if you say, well, what do we do well? I look kind of at five kind of critical success factors, and I think we understand health care professionals. We understand distribution through pharmacy. We understand getting reimbursement from either insurance companies or government providers.

We understand the need to develop scientific or clinical evidence to support marketing proposal and we understand technical things like patents and technology. So, to me, as we look at diversification, if I see businesses that have three or four of those things, and I think we minimize execution risks -- somebody asked me about whether we get back into beauty products.

Well, to me, beauty products don't share too many of those five things, so I probably wouldn't want to get into that. Equally, you can imagine some products, certain devices, for example, that share quite a number of those things. They're reimbursed, they're prescribed and the physician is a key customer, those sorts of things, so we would see less execution risk.

Buying things, clearly, making sure we retain management is really up at the top of the to-do list whenever we do things, and whether it's Zentiva or Medley or even BiPar, you know the BiPar, we clearly structured that to ensure that those people who have led this business so successfully are the ones who actually continue to lead that business, and thus far we've actually been pretty successful at it.

You've always got to watch out. You make management millionaires and they all want to head to the beach, so you do have to be careful that you don't lose that talent.

Thank you.

Did we get all your questions there, Andrew?

The only one was explaining the delta between IMS and reported revenues, but I'll take that off line with Sebastien.

I think just remember, the more you move outside of the US and Europe, the less reliable the numbers become. Vaccines are in some markets, not others, we have OTC businesses which are included in IMS. As I say, once you move outside of the classic Western European, European markets, I think the data become much more difficult to interpret.

And, as we become more diversified -- in fact, I was in China last week and I told management I don't ever want to see anybody show me the ranking of our Company. Not necessarily products, products is fair enough. But I don't want to see ranking in IMS terms because I don't want the IMS definition of market to be our definition of a market.

China is a developing frontier. Medicine is not practiced like in Europe and the US, and if you start off with IMS numbers, you are going to define the market in the way we do it in the US and Europe, so I personally really don't even want to see IMS being used, at least as an overall company point of view, because it's going to distort our strategic thinking.

I'm with you. Thanks.

We have a question from Mr. Sebastien Berthon from Exane. Please go ahead, sir.

Yes, hello, gentlemen. Congratulations on an excellent quarter and also thank you for the increased disclosure on your business and geographical segments. I have three questions on R&D. One is on your R&D spending, you've cut your late-stage pipeline by one-third over the past two years, and yet your R&D spending remains stable.

Could you just share with us, what is the main reason behind that? I understand you've got a number of fixed costs, but they are not only fixed costs. Secondly, on idrabiotaparinux. What is the kind of profile you would want to see to decide to continue with this product when you have additional data in six months.

And, lastly, on the GLP-1 analog, AVE0010, have you made any amendment to your Phase III program following the advisory committee of Liraglutide last month? Thanks.

So to start about the costs, I tried to explain that what you are seeing is a mix of different factors, pharma R&D representing 70%, which is a lot, but only 70%. So if you are taking the R&D pharma, there is already a substantial reduction this year in terms of per budget and since there is provision this year for some of the projects which have stopped, there will be even a more substantial reduction next year. This is for the variable cost.

Of course, if we have less activities based -- not external, but internal, based on the reduction of the portfolio, we will have, and in fact we are in the process of looking at it, part of R&D 2015, we have to adapt our organization. In fact, not too much to the present situation, but what we expect to be the situation in one and two years, because it will be crazy to withdraw, to withdraw and to expand again.

So I think what you are doing at the present time is really trying to get a nice view of what will be the current volume of activities, for activities, because some activities are impacted by the -- discovery, for example, is not impacted by the fact that we are stopping product.

And, also, you need to put in account that including products within the portfolio as a -- BiPar is a cost example for R&D in 2009. So, again, in variable costs, a decrease this year, more substantial cost next year, and we are in the process of adapting the internal resources to the volume of the activities within the Company, but not on a day-to-day basis, but on a projection of what should be the activity in the future.

In terms of idrabiotaparinux in fact, we are not waiting for clinical data, because the clinical data will be in 2010, but we want to be really sure with the FDA that we are addressing all the concerns of the FDA, especially about potential bleeding with the long-term compound. So you have the compound which is onboard for one week, which is accumulating a little bit with duration of treatment, so it's a kind of total reassurance. It doesn't mean that we have a specific signal from the FDA about that, but before -- to continue our last program, we want to have an absolutely clear assurance about what the FDA is expecting from us in terms of clinical data to address any kind of bleeding signal.

I must say that at the present time we do not have bleeding signal in the initial study we did of [idrabiotaparinux]. In fact, the bleeding rate was relatively low and BOREALIS, which is a study in deliberation, is so far going ahead of recruitment and we do not have a bleeding signal. But still it has been identifying during the review of the Company has a high-risk regulatory model and in fact the Company wants to ask R&D to address this specific point and we will come back to you on that.

In terms of GLP-1, I think we're a little bit different from competition in the way that competition has this trial done. Unfortunately, before the issue of the guidance, or they were relatively more acting in a retroactive way, we have the chance to -- that's a possibility to act a little bit more in a proactive way.

I think you are speaking mainly about forecasting in so far at least on calcium we do not so much effect. I think you are speaking in terms of cardiovascular effect. So far, we have only reached a population of another (inaudible). For some time, we have some advantage of being late. I think this time we have an advantage of being late, because we can act proactively and not retroactively on the definition of cardiovascular events.

Thank you.

Just maybe I'll follow-up a little bit, to put a little bit more things concretely. Clearly there is -- Marc showed you the graph. Out of the EUR4.6 billion, he's got EUR3.3 billion, of which about two-thirds is fixed cost, one-third is variable. Of the projects that we have stopped, if you were to annualize the variable cost, which we think will be saved, and this is a net, because, as Marc said, as BiPar comes into the portfolio, we'll have some clinical costs for that.

So by adding BiPar and cutting the other products, we estimate that's around EUR200 million on an annualized basis, and we'll have a look at the overall structure and be able to come back to you and then probably we'll give you more of a feel for that later in the year.

On idrabiotaparinux, I think it's just useful to give you a little bit of a sense of, again, what goes on behind the curtains. I would say probably I would be skeptical about the product. Marc is highly passionate about the product. I think that's a healthy thing. I think there's plenty of people who will tell you that Plavix would never have seen the light of day if R&D hadn't been passionate. I can tell you Advair would never have seen the light of day if there hadn't been a few people who believed in it.

So I think you have to -- as we look at the review, I mean, we have to get behind it and at some point somebody's got to believe in something. I think what is important is that you don't kill that passion on the scientific side, but you do put in place a number of milestones. So I respect Marc's passion for the product, but I also want to know, okay, there is a bleeding issue potentially and we have a meeting with the FDA. If the FDA can get comfortable with it, then I think I support Marc's view of it.

If the FDA's not, then we clearly have a safety signal that -- potentially a safety signal that we would have to address. But I think we have to say it's not all quite so black and white here, and I personally have a huge respect for our R&D colleagues who really do believe in a product, because at the end of the day, when we look at the history of this industry, sometimes that belief has really triumphed over commercial logic. So that's why we put it on the table, so that, hey, we know these are some projects where not everybody would see the immediate benefit, but we have identified milestones. We've got a process and I think we've got an objective way of looking at them.

Thank you.

We have a question from Mr. Tim Anderson from Sanford Bernstein. Please go ahead, sir.

Thank you, a few questions. Going back to R&D, obviously, things are in flux in the near terms in terms of portfolio assessment, but I'm wondering if you can give us some directional guidance for long-term R&D spending as you see it over the next three or four or five years. Do you think for Sanofi that's going to be an upward trajectory or a flat trajectory or a downward trajectory?

The second question I have is on Multaq and on life cycle management plans. I guess I'm kind of surprised that I don't yet see any additional trials being run with the product, post the ATHENA results, and I'm wondering at some point if we might see more programs initiated. Last question, on Plavix, your partner Bristol seems to expect that there very well might be additional country launches of generic Plavix in Europe in the current year. I'm wondering if you share that view and, if so, what countries that might include?

Perhaps I start with the Plavix. I think it is a fair statement on Bristol-Myers that there may be additional launches in Europe. First of all, in some European countries, there is no more patent protection for Plavix, which is a natural, so to say, event because the patent in those markets which are by far not the most important markets inside Europe are nevertheless it's off.

Second there is so far no common position from the European authorities being issued how they will handle the question of alternative salts. We understand that European authorities have stopped the clock in this respect, but beyond we have no other information and, yes, I think it's a careful statement to state that we cannot exclude that there may be other launches, but all the rest is speculation.

I think it's nevertheless worth once again to mention that in a highly price sensitive and highly accessible market for any kind of generic competition like Germany we succeed and resist very well with the market share of approximately 80%, so I think this has to be put into perspective with what I just said.

So, yes, Bristol-Myers is right, but I think it's also right to say that so far there is no other market accessible. The European authorities sit and think what to say and, last but not least, we have reason to believe that any penetration of generics would not necessarily show a typical pattern as usually is the case in the US or in Germany, for example.

So on Multaq, when I think you are looking at atrial fibrillation, in fact, in all cases, the products were registered initially in surrogate endpoint, which was EKG, and after in fact all the goal of life cycle management was to demonstrate some kind of morbid-mortality advantage, so when you're looking at Multaq in fact we started from morbi-mortality studies, so I say the urgency need for life cycle management is perhaps less than in the previous situation.

At the same time, we thought that when you're doing life cycle it's to expand the population, so it was quite important to wait for the final label of the FDA in order to know what will be exactly the initial population which can be exposed to Multaq.

And to answer totally your question, there will be of course life cycle management with Multaq, once I think now we are close to the level, so I think we can start to work really on life cycle management in the [last] thing.

So coming back to R&D costs, I think you can say that we're looking at a few components in here. The vaccines part, on R&D, we've got a pretty robust pipeline. Part of the costs are going up because we acquired Acambis last year, which is largely an R&D organization so that adds to R&D, although that having been said, to the extent that we've acquired R&D, vaccines business, Sanofi Pasteur, has actually been looking to make some budget cuts as well, so that it's not all additive, but the net is still an additive.

So you've got post-marketing commitments and the pharmacovigilance and that's not all necessarily going to go away, because clearly an environment of things, being safety conscious, this isn't the time that you'd want to go and cut back on expense on that. So if you look -- however, if you look at the pharma piece, which is the 70%, then I would say, well, this kind of depends a little bit about what happens. If we found no new products, then actually you would expect to see R&D expenses decline from I would call it a high water mark in 2008.

To the degree that we're able to find new products and they come into development, clearly that comes in. Now, that might happen in two different ways. Some of that might go on the balance sheet depending on the accounting treatment for that, because under IFRS, where you've acquired somebody else's product and you have milestones, that could well go on the balance sheet, especially if they continue to do the work. To the extent that we take it on and they come into our portfolio and we start spending money on development, then clearly you will see some increased expense.

So I would say if I were in your shoes as an analyst, I would say, well, my baseline is probably more on a somewhat declining path. And every time we come up with an announcement about what we might be adding to the pipeline, you probably want to ask us about how we're treating that from an accounting point of view? Is this going on the balance sheet or is adding to expenses. So I hope that kind of helps, Tim.

Yes, thank you.

We have a question from Mr. Dani Saurymper from Goldman Sachs. Please go ahead, sir.

Good afternoon. Three quick questions, if I may, and maybe a fourth if I'm not pushing my luck, but I just wanted to understand your aspirations for the generics business within Sanofi, given the [number A] status. Today, you've obviously made steps to increase your exposure in terms of emerging markets, but just trying to understand long term what the aspiration might be for that and whether therefore further acquisitions are on the agenda.

Secondly, with respect to emerging markets, just wondering if you could give a comment in terms of how we should think about the operating margin on the emerging market sales and obviously a lot of up front investment today but where might they get to in future? And then thirdly, on the product mix that we saw improvement in the first quarter, can you just identify what products were the key levers of driving that change in product mix? And I'll leave it there, thank you.

So starting on the generics, that's not such an easy question, and I have said so many times, before it all depends on how you define generics, and I have said earlier -- said that a generic is a non-patent protected product which is sensitive to the promotion through price, we are already a pretty big generic company. But if you are talking in the closer sense, as Zentiva or Medley, I would say as a watermark to have a significant impact here, we probably have to continue to double our immediate size, which is approximately, as you see in the presentation, 1.5 billion.

So I believe that to be something really in this field our sales should get close to 3 billion and of course is also in the light that at least I believe that the market of generics will continue to consolidate. So, perhaps, this may help you as an orientation or an aspiration. On the emerging markets, we have said earlier that at least today our operating margin in the emerging markets is at least on the same level as in other markets, and when I say other markets it's primarily Europe.

Because, as you know, our profit and loss in the US is pretty atypical because we have relatively low sales but relatively high profit coming from the special consideration we are selling and promoting Plavix and [Avapoein]. So I believe that because the European margins probably will go down over the coming years, I believe that in fact the situation in terms of operating margin in the emerging markets will not change.

I believe they are very solid. It has to do that the prices are relatively high. It has to do that [pages] are evidently relatively low as well and it has to do that the promotion schemes are different to others and you can obtain with relatively little in terms of promotional investment a lot of positive impact on your sales. So, in summary, I don't believe that proportionally the operating margin in the emerging markets will go down as compared to Europe.

And I would just add to what Hanspeter said that, remember, I think one of the major things we are doing is disconnecting our R&D investment from overall sales. So if we expand our sales by buying a Medley or they grow in China, it doesn't necessarily follow that we're going to spend 15% or 16% of those sales on R&D, because we don't necessarily need the R&D to replace those sales. We're basically building up our R&D expense on the basis of projects and what we want to invest in and I am not committing to spend any percent number on R&D.

If we come up with the projects, we spend more. If we don't have the projects, we will spend less. But I have seen too long in my career this whole idea, well, we've got to stick to a certain number otherwise everybody gets worried about the pipeline. I think you can't just give someone an envelope. You've got to come back to basics and Marc very much shares that view.

I think the third question was around product mix as it applies to the gross margin. Was that the question?

Yes, just which products in particular drove the improvement in the quarter?

I think the answer, of course, the way you compute it is by difference, so this is just to repeat the figure, the overall increase of the cost of sales -- if I take this figure to cost of sales to sales, which is increasing by 2.4%, is 0.9% for the separate, is 0.9% for Copaxone, it is 0.6% for the mix, and when you say the mix in fact it's a combination of two demands, which products and which geography.

So as long as the sales in the US are growing 5% and, as you know, we have a higher margin. By construction, it increases mix, and then of course one of the projects which are growing fast, which is Lantus, has increased its overall contribution. So basically you can easily see this impact through the gross sales that [inform] the US Lantus, and this is where it comes from.

Thank you.

We have a question from Mrs. Luisa Hector. Please go ahead.

Thank you. Maybe just a follow-up on Dani's question on the cost of goods and the mix benefit. Could you give a bit more guidance on how you see that devolving? Obviously, Lantus certainly looks like it continued to have a positive impact, but then you've then got Zentiva and sort of emerging markets coming in. So should we expect to see some of that benefit erode, or could that continue?

And then on the R&D, I just wanted to be clear, is your guidance, your single-digit decline, including the provisions and on those provisions have we had everything in the first quarter or could there be more later in the year, related to the terminations you speak about today? And could you maybe give us an idea of what proportion of the R&D spend is in the US? And then maybe just one final question.

On the swine flu and just how you're positioned with your vaccine, so how we should think about it in terms of capacity, is there an option to combine the seasonal flu vaccine with something against swine flu. Just give an idea of how it could work.

I guess I think on the margins, without getting into a lot of nitty-gritty here, I think we'll see. But I would say margins will -- I think as Hanspeter said, will largely say roughly stable. We've seen certainly an element of exchange rate here that has helped. I mean, clearly the Copaxone benefits will flow forward. That's really an effect of mix. The exchange rate will depend on where the dollar goes, principally, and I think we've got growth in the US and we have Zentiva coming in.

Clearly, Zentiva has lower margins than the US business, but it's not such a big business compared to what the US market is growing. So I don't think we particularly see any major variations in margin. As far as the costs of the R&D stop, Jerome --

This is included. When we gave this guidance of the low digit -- or low single-digit decrease, it is everything included, including the fact of the -- including the cost of termination of the projects which have been terminated, yes.

This cost synergy will be incurred over the year but has been taken as a charge in the first quarter just as a result of the decision to terminate them.

In terms of the cost of research in the US, I think the question is what is our sensitivity to the dollars in terms of the change between dollars and euro. In fact, we are paying a lot of stuff in dollars. In fact, most of our clinical trials are paid in dollars, so in fact the difference of the company, when the dollar is increasing in fact we're also increasing the cost of R&D, so we have a positive sensitivity to the dollar.

So on swine flu, we are obviously not only a leading vaccine manufacturer, but a leader in seasonal flu. What we see here is a virus that we haven't seen circulate before, so we have clearly a swine flu strain in there.

You've got an avian flu strain in there, you've got a human strain in there, and so it's an H1N1 virus , but it's not the same as the H1N1 component which is included in the seasonal flu. If we are called upon to make a swine flu vaccine, first of all, you have to understand that the manufacturing system of these are the same ones that are making the seasonal flu vaccine. We have two facilities. One is in Val de Reuil in France and the other one is in Swiftwater, Pennsylvania. We are in the middle of campaigns for the northern hemisphere. We basically start in February go through early summer.

So we have a couple of scenarios. It may be that someone says, can you exchange the H1N1 component that's already in there for this swine flu variant that's around. There are a number of technical challenges around that and it would particularly have an impact on both the capacity and the timing for such a flu vaccine. If you wanted a swine flu vaccine as quickly as you could and in the maximum quantities, then at the moment our technical folks believe that creating a monovalent H1N1 vaccine would be the best.

However, if you go to the monovalent H1N1 vaccine, then you are going to be forced to making a choice between seasonal flu vaccine and the swine flu. That is obviously a very sensitive public health question that would be taken by WHO, European, US and Mexican healthcare authorities, and that I don't think anybody believes needs to be taken just yet. I can say we are working in very close collaboration with the WHO, with CDC and the Mexican health care authorities. We have taken all of our stock that we had left over from last year's seasonal flu campaign and put it at the disposal of the Mexican government.

It's not believed that being inoculated against seasonal flu provides you much cross protection for the swine flu, but we're in early days of this and nobody is absolutely certain here, so to the extent that it's needed that vaccine is available. But, I think for this year, the big question is can you combine it with the existing flu?

Remember, if you do that, you've got to produce three strains, which has a capacity implication and a timing implication. Or do you do a monovalent, in which case you're going to have to choose? Because you could end up having a situation where you've produced a swine flu vaccine, the epidemic has resolved itself and then you have a lot of swine flu vaccine and no seasonal flu vaccine and you've put a lot of people at risk there.

However, there are also some people saying, well, you've got to watch out for the fall flu season. It may be that the current epidemic resolves itself, but then you get a rebound there. So all of the experts are really trying to sort that out. We've got daily conversations on this and we will certainly be prepared to respond at the direction of global health

That's very helpful. Thank you.

Maybe just one or two more questions and then we'll wrap up.

We have a question from Mr. Eric Le Berrigaud from Raymond James. Please go ahead.

Yes, good afternoon, two questions. Three on R&D, please. With the focus on Multaq, it seems that if either one goes ahead now in terms of (inaudible). Could you comment perhaps on what your thoughts are in this campaign or how far you are from Phase III start and if it's fair to say that you will go ahead to address this matter in the US.

Second, on [otomixodone], this one seems not to be under review. Could you confirm that and do you think there is a need for a 10-A injectable?

And, thirdly, in R&D, with the Lovenox pen, any thought about when we could expect some data? I know it's probably very sensitive and any kind of filing date, perhaps? And then one on strategic in Animal Health. Is it fair to say that Sanofi will either get 100% or sell its stake in Merial? Or is there any other option that's practical whatsoever?

And the last two in financial. First, on BiPar. In the press release, you mentioned that the maximum standing would be $500 million, but what would be the minimum you're going to pay in any case? What is the part to be spent in Q2 and will that go through the P&L? And then on the guidance, with Q1 being effected for the last item with Copaxone, how could you not beat the guidance significantly with a 10% Q1 performance. Are you waiting for anything specific before updating that?

Wow, you're really lots for your money. I asked for two more questions, I think there were six in there. I'll take the Merial, the BiPar and the guidance questions. Marc, do you want to take the Multaq and the other questions?

I'll start. So I think as you speak about [silverone] and ventricular arrhythmia, yes, we will start with silverone in ventricular arrhythmia. It is expected to be in the beginning of next year, in fact, the beginning of February. Decision to go head to head versus [Amaderine] is a little bit difficult because in fact we are aiming to compete with [safety] with Amaderine so the decision has not fully been taken. It will be a kind of calibrated clear. Now will be added to it a comparison. At this stage, I cannot say.

In terms of otomixodone, it is a good question but I will -- may I excuse the level. What is the level do you think of improvement is necessary to replace GP2b3 plus heparin. So your question is fully valid, but we estimate and we can discuss that, but we estimate if we have a decrease of the events of more than 40% with otomixodone, which has the advantage to be a fully synthetic compound with a half life of 10 minutes we will have a competitive profile and we should have the result of the study rather soon.

The last two points, I think it was the result of AVE 5026, should be the beginning of next year, the first wave of results. But I don't know if I perceive correctly the question.

It was in Lovenox pen, actually.

Oh, the Lovenox pen. The Lovenox pen, I'm sorry, I think Sebastien will come back to you because I cannot answer that.

Okay.

So, then you asked about Merial. Clearly, we have a partnership with Merck on the Merial joint venture. Merck has proposed to merge with Schering-Plough, which has Intervet. Clearly, we are then involved because whatever Merck wants to do with Merial has an implication with us.

Right now, Merck is still working through how it is looking at this and we will be working with Merck. I mean, we could acquire their half. I mean, there are various options here. We'll probably be able to give you an update certainly at the latest by the next Q2.

I would say if there is an opportunity to acquire it, we view the Animal Health sector as an attractive one and we would look at that, but we have to wait and see what our partner is doing first.

BiPar, I think it was an interesting deal, because what we really wanted to do was we took a set of milestones, very much as we would do with a collaborative-type agreement, but rather than having to share profits afterwards, we actually have acquired the company. So the structure is pretty much classic. There is an upfront payment, which we'll have made now, and as the product achieves other certain milestones, then we would pay more.

So if everything comes through and it's approved and there's other indications, then that would add up to $500 million. At the moment, the amount of money is on the balance sheet I think, Jerome. If the product were to be a failure, then we would have to deal with that, but it's substantially less than $500 million, and I think that we could deal with that without any difficulty.

On the guidance, look, it's first quarter. The British have this saying, two swallows don't make a summer. We're off to a strong start. There's nothing in particular. We said at least 7%, so it's put a floor under the guidance. It's not a ceiling.

You guys are extremely talented in your forecasting ability, so I'm sure you have your own numbers. We'll probably give you our own view towards the middle of the year. We'll look and see how markets are shaping up and how currencies are looking but I think, as I say, we're off to a very strong start and don't particularly see anything on the horizon to offset that.

But I don't think it's in anybody's interest after the first quarter to start messing around with guidance, quite honestly. I think that's something we would do at the earliest with Q2 results.

But on the NTR in the US or Plavix in Europe are not swing factors?

Those are all factors that we believe we can manage within the current guidance. I mean, we haven't qualified our guidance for those factors.

Okay, thank you.

Any last questions? Maybe one more, or is that it? One more?

We have a question from Mr. Michael Leacock from RBS. Please go ahead.

Oh, hi, thank you very much. Just two very quick questions, [credibly] relieved. Who is on the portfolio management group in R&D and have you managed to bring forward any drugs in development to free up some resource?

I'm sorry, I don't have this.

So who is on the review teams?

It is people from finance, corporate marketing, affiliates, strategic plan, what else, Chris?

R&D.

Yes, R&D yes is present also. So I think everyone and I think, again, what is important is I think the most critical from my point of view, but my colleagues and Chris can say something else, is that we have an agreement about the level of risk on specific items, because it is the most -- how to say that? The most material aspect that you can have and in fact once you start to agree about the level of risk in different areas, I think you have a better view of the portfolio. But perhaps --

Yes, I think it's also a view of -- the holistic view of a project, that do we really believe this is going to make a difference to a patient? Do we think that there's a reasonable risk here of being able to achieve it? Do we have a balance of risk in the portfolio? To answer your question, the final review, you had Hanspeter Spek, you had Jerome Contamine, you had Marc Cluzel and you had myself. So we have actually reviewed all 65 projects personally and so I think we've got the endorsement here of senior leadership of the Company behind those.

In terms of being able to accelerate, I mean, I think what this does do is, is that, as Marc has done with the acquisition of BiPar, this immediately frees up resource to think about doing more external development. So we would likely be looking to see what kind of external opportunities there are and we now have the budget and the resources to get a good start on that.

Thank you very much.

Okay, maybe just before closing we'd like to remind you that we have several IR events coming up. There's indeed some road shows, as well as some broker conferences. Let me highlight that on May 6th, Hanspeter Spek will be presenting at the Bernstein Pharmaceutical Emerging Markets Conference in New York.

On May 12th, we'll have Jerome Contamine present at the Bank of America/Merrill Lynch conference in New York. Chris Viehbacher will be presenting on May 14th at the Exane Conference in Paris, and in Boston on May 19th we'll have Dr. Paul Chew, our US Chief Medical Officer that will be speaking at the Deutsche Bank Conference.

Again, on July 2nd, we'll be hosting our first IR seminar on emerging markets, which will be held at our headquarters in Paris, and we'll be providing you with further details on the seminar and we look forward to seeing you there. Last point, our second quarter results will actually be released on Wednesday, July 29th. And on behalf of Sanofi-Aventis management, I'd like to thank you all for your participation and wish everybody a good evening.

Thank you, everybody.

Ladies and gentlemen, this concludes the Sanofi-Aventis conference call. We thank you all for your participation. You may now disconnect.