Sanofi SA (SNY) 2009 Q3 法說會逐字稿

Ladies and gentlemen, welcome to the sanofi-aventis 2009 third quarter sales and results conference call. I now hand over to Mr. Sebastien Martel, head of Investor Relations. Sir, you have the floor.

Hello everyone and welcome to our conference call for Q3 2009 results. Before we start, I'd like to remind you that our slides are available for download on our website. As always, I must advise you that our presentation today may contain 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.

With us today on our call are our CEO Chris Viehbacher, our Executive VP, Pharmaceutical Operations, Hanspeter Spek, our Executive VP, Chief Financial Officer, Jerome Contamine and also the President and CEO of Sanofi Pasteur, Wayne Pisano.

I will now hand the call over to CEO Chris.

Thank you Sebastien. Good morning, good afternoon everybody. So we're here with another very good quarter. You know there are kind of four things that I think are of note here in the third quarter. The first is although we've given guidance for 2013, you always have to remember we've got to pay the rent and therefore short-term earnings also matter, so I'm actually pleased to say that we've made good progress on a short-term basis but also on I guess the second point is that we've made I think some very good progress on our transformation agenda, which has also been very important.

The third point I guess I would make is this is probably the first quarter when we can actually report some good news on R&D. We spend an awful lot of time cleaning out the portfolio but I think we've made -- starting to see some green shoots here in R&D and I'm very pleased to tell you a little bit more about that later on.

And of course this has been an extremely busy quarter. Not that we see it yet completely in sales and we certainly will see it more in fourth quarter sales, but obviously a huge amount of effort going on within the Company to produce the seasonal and H1N1 flu vaccine.

So we'll cover all of those today but it's been certainly, it's been a busy quarter. So I'm going to move immediately to slide five and again, really come back on our key growth drivers, the five platforms of growth that we have established that are really crucial for the future of the Company.

We have our emerging markets business of close to EUREUR1.9 billion growing at 20.9%. Our diabetes products, which includes LANTUS but obviously has Apidra and a few other products in there, also growing very strongly at 18.9%.

Vaccines at just over EUREUR1 billion, 4.8%, what we really have to note about this quarter is that the seasonal flu sales will mostly be recorded as Q4 sales. If you go back over the last five or six years, you'll find that seasonal flu either lands in the third quarter or it lands in the fourth quarter and it's largely a function of the yields and how long it takes to produce.

Last year we had the flu out the door at the end of August, early September and so they were mostly Q3 sales. This year because of a slower yielding B strain on the seasonal flu, most of the flu sales will be in the fourth quarter, so you'll just have to take that into account.

But the underlying growth of vaccines is very good, particularly on Pentacel and Menactra and Wayne, who runs our vaccines business can talk about that a little more.

OTC up 26.3%, obviously helped a little bit here by bolt-on acquisitions but again that was kind of the point that we made at the beginning of the year. We said we're not world champions in OTC but we do have EUR1.5 billion in business and that means you can find some bolt-on acquisitions and start to grow that business and as you can see, those are doing nicely.

And finally obviously we have the US launch on Multaq. Hanspeter will give you an update on that in detail. I think we're both very satisfied looking at the launch. Obviously it's still early days but we're certainly tracking our internal forecasts on that.

Now the other news of course in this quarter is that we are seeing what we've been expecting for quite some time. We know that a number of our old and famous products that have driven a lot of growth for the Company over the last decade will start to disappear. Eloxatin in particular in the United States is still subject to some litigation but has been obviously significantly affected by generic competition really since the summer.

Plavix in Europe, we saw our first generics in Germany and now generics are really starting to roll out in the rest of Europe, notably in the United Kingdom and now that's starting in France and Southern Europe. Not as much impact yet on Plavix in the third quarter but I think you'll see on both Eloxatin and Plavix an acceleration of that genericization in the fourth quarter.

I think what we have to say though is that even with the start of genericization of some of these core brands, as you can see from those five growth drivers, they still delivered a very decent 6% growth in sales at constant exchange rates, 8% on a reported basis. And you'll remember, we're looking to double each of these growth platforms over the next five years, which implies a compound annual growth rate of anywhere from 13% to 15% in order to be able to do that. So these businesses I think are all pretty much online to do that.

If I move to slide six, therefore headline numbers on the performance, again 6% at constant exchange rate on sales, Jerome will take you through a little bit about how much is organic and how much has been added through acquisitions. We're still getting a bit of a tailwind from the dollar in the third quarter so that's at an 8% basis. I don't think we'll see that obviously again for a little while yet given where the dollar is. We probably expect to see that turn negative in the fourth quarter.

Very tight cost controls so we've had decent progress on our R&D and SG&A ratios, recognizing that really a lot of the benefit out of the cost reduction program that we announced at the end of the second quarter, we're going to really start to see in 2010 as we move through the social consultation processes.

All of that means good top line growth, tight cost control, we've leveraged the bottom line so earnings per share up 8.2% at constant exchange rates to EUR1.71 ahead of what we saw as a consensus forecast of about EUR1.64. On a reported basis of course that gives you a very robust 16.3%.

Moving on, come back to really where we started out the year and hate to be boringly consistent but these are the three things that I decided to spend pretty much most of my time on as an incoming CEO. Increasing innovation in R&D, pursuing our external growth opportunities, recognizing that we didn't have enough products immediately in the pipeline to replace what we were going to lose, and really adapting our Company to these new growth platforms, so all of that is ongoing.

There's a considerable amount of change going on within the Company, pretty much now at all levels and in all geography. So let's take those one by one and say well how are we doing on that. So if I move to page eight or slide eight, I think we've been able to now start to reinforce our pipeline largely through external partnerships. In the third quarter we've done three here. Of course we also signed another partnership yesterday with Micromet that we haven't actually put on the slide.

Fovea I think is very interesting because I believe very strongly in ophthalmology. With the aging population and with this science now moving from the surface of the eye type diseases like glaucoma to the interior of the eye with conditions like age-related macular degeneration, this is I think a very interesting area going forward. It's not also an area where you need to have huge sales forces and spend a gazillion dollars on DTC programs. It's also because of the small target population and because of the fundamental change in the science. Not one where you necessarily have to have had a long experience in ophthalmology.

There were three molecules with the Company that we are immediately interested in but we're going to basically operate Fovea a little like BiPar and that is keep it independent. This is based at one of the leading ophthalmology hospitals in Paris with Jose Sahel who's one of the leading ophthalmology experts around the world. And so he is going to continue to do the research and that essentially becomes a research platform for us and not just an opportunity to get these three molecules.

Merrimac we signed a little earlier on with MM-121. This is a monoclonal antibody targeting ErbB3 or HER-3. We all know HER-1 obviously with Herceptin and HER-2 with GSK's Tykerb. A number of oncologists see ErbB3 as really being at the crossroads of most tumors and so most people I talked to are pretty excited about the whole ErbB3 area. Obviously a lot of work to be done yet even on proof of concept on phase I but probably one of the most, considered one of the most interesting companies out there. They're also very advanced in a whole network biology platform and so we're quite excited to partner with Merrimac.

Wellstat Therapeutics gives us an opportunity to access a new first in class insulin sensitizer for the treatment of type 2 diabetes. That's in phase II and again, thinking about what we're doing in R&D, we've hived off oncology and created a whole integrated unit going from research through to actually sales forces in major countries. That oncology business unit reports jointly into Hanspeter Spek as well as Marc Cluzel on the R&D side so we're also trying to build some transversality in the organization.

We've done a similar thing with diabetes except that what we're really trying to do in diabetes is broaden our diabetes offering and have more of a global approach to the disease and not just insulin. So we feel like Wellstat is one of a number of things that will lead us into a broader diabetes offering. Clearly obviously we also had announced previous deals with BiPar, Exelixis and KIRIN.

Moving on to page nine, BSI-201 is I think really emerging as one of the stars in our portfolio. And I just remind you really of the rates that we saw here on the box on the right. Clinical benefit rate in phase II of 62% versus 16% in the existing treatment regimen, that's a huge difference. I was -- we've been able to recruit a number of new people in oncology, have been hemorrhaging people because we didn't have a pipeline.

We were able to hire a new head of oncology from GSK and we've been busy bringing in some new people and I can tell you I've talked to some of those and really people are coming to the Company largely because of this product. One major clinician in the US said this is the most exciting thing he's seen in 10 years.

Median overall survival, so we're not talking progression-free survival here, obviously 9.2 versus 5.7 months. Again, the strategy here has been to not integrate the Company but to leave it independent and plug it into the big machine of sanofi-aventis where it needs to be. And the immediate success of that was that we could move from phase III -- phase II, sorry, into the phase III in eight weeks, which is pretty much unheard of for anybody and certainly for a Big Pharma who it normally takes six months to achieve the same thing.

So we'll be presenting the final results of the phase II study at the San Antonio Breast Cancer Forum in December.

Moving on to page 10, we have a home grown asset, otamixaban, which we've decided to move into phase III based on some very encouraging phase IIb studies. This is largely going to be a product that you could use in emergency room settings. People coming in from a heart attack, largely in the nonSTEMI populations, obviously you give them a big dose of anticoagulants.

We took the study on top of standard of care, which includes the low molecular weight heparins and Angiomax and showed a significant benefit in survival, so I think this could well be a nice medium size product, not necessarily blockbuster but certainly one that I think will be of very strong interest for patients and can help pay the rent.

Moving on to page 11, we've seen I think some nice progress also and we have had now Multaq approved, and if you think about it we've had a significant medicine like Multaq approved in the United States, in Canada, in Switzerland and a positive approval out of the CHMP, pretty much within a three month time frame. Again, that's pretty impressive, getting that many approvals in such a focused time frame.

Obviously the H1N1 monovalent vaccine is [selling] a non-adjuvanted vaccine in the US is now approved. The reusable ClikSTAR pen approved in the EU and Canada and the Sculptra obviously also approved. Sculptra has been approved up to now but really limited to populations in HIV. It's now got a broader aesthetic approval in the United States.

Panenza and Humenza are the two brand name vaccines that we will sell in Europe. We're not allowed to have a brand actually in the US so these are EU brands, Panenza being the non-adjuvanted and Humenza being the adjuvanted. We would expect to have approval for Panenza, the non-adjuvanted, which was submitted on a sort of a mutual recognition basis in four European countries within the next couple of weeks, and Humenza, the adjuvanted vaccine, somewhere in mid-December.

So we've had in general seven new products added since July 29, 2009. We've gone from 52 products in R&D to 59 and importantly we've been able to move two products into phase III, so encouraging performance on R&D.

Obviously we've got an awful long way to go and we are just really starting the whole transformation process in R&D. I would expect that's going to take at least an 18-month process even from today to really be able to feed through where the average researcher can find something.

Moving on to page 12 we've got, you've seen that the Merck-Schering deal has now been approved by the FTC, that you would expect then fairly soon that that merger would then finalize and close. That will trigger then discussions between us and Merck about the opportunity to merge Merial with Schering-Plough's Intervet business so we will -- obviously subject to Merck's discussion and Merck's finalization, start moving to due diligence and a consideration of the option to merge.

So finally on page 13, essentially if you look at Q3, it's really I think has followed the trends that we've established in Q1 and Q2 and I think in the absence of anything else would say we will continue those trends into Q4.

At the time that we did the around 10% guidance, we were unclear as to how much we would sell in H1N1 yields and delivery timelines were unclear. We took partly some sales into account but not obviously that much and now we believe that we will sell at least $500 million of vaccine and I express that in dollars because most of those sales will be to the US government between now and the end of the year. We have a contract for 75 million doses but we also have a number of other countries that we think we can cover.

So if you take the $500 million and what we've already taken into account, that adds about a point to our growth rate and so that's why we've just updated the guidance to around 11%.

Finally on page 14 you can see that we've accomplished a number of things here. We're continuing to add to our business through bolt-on acquisitions and licensing arrangements and partnerships. Next milestones for you will be a vaccine seminar on the 17 of December in Paris, and obviously the full year results on February 10, next year.

So with that, Hanspeter, I will turn it over to you. I think another good quarter well done on that.

Yes, thank you. Good morning, good afternoon. If you would like to follow me on page 16, you see again also the growth drivers which have contributed to the growth of the third quarter. Overall EUR7.4 billion of sales growing by 6%. Pharma sales in line with sales growing by 6.2% equal to approximately EUR6.4 billion .

I think you have heard about most of the growth elements during Chris's presentation, first mentioning that Lovenox was growing by nearly 14% in the quarter, also was mentioning that still on a low level but nevertheless becoming significant OTC and generics with high two-digit growth rates, both sales activity achieving more than EUR300 million by quarter which means it's really become pivotal in the overall picture.

For the first time we report on Animal Health, Merial in the quarter more or less stable, very slight decrease of 0.5%. We headlined it as a recovery. Why? Because the second quarter 2009 showed a 3% decrease. I will get back to it in a couple of minutes but evidently Merial has been suffering by the overall weak economic worldwide situation and consequently we see that Merial gets back to growth as more and more the overall macroeconomic conditions start to improve.

On page 17 and the usual geographical split, we are very content. We are even a little bit proud to show that in Europe our sales have been increasing by 6.8%. If you look to the graph you see then that in Western Europe our sales are slack but we continue to benefit from Eastern European growth which is very strong and of course also supported by the recent Zentiva acquisition, which has its major sales activity as you know in Eastern Europe.

Our sales in the United States, due to the genericization of Eloxatin shows small growth of 1.1%. If you would take the negative growth of Eloxatin out, our sales would be growing by approximately 6% to 7%, which means continuously slightly above the market.

BRIC continues strong growth in the emerging markets, 21% of growth in the third quarter, nearly EUR1.9 billion and if you focus more on the BRIC plus Mexico countries, it is even a close of 24%, which means that our investments, our historical investment in those countries but also the recent acquisitions of Kendrick and Medley show clear benefit and continued growth also above the overall markets.

Now then on page 18 some background information on LANTUS. Perhaps if you would like to look to the graph on the right side, you see a slight difference between the European market and the US market in the sense that when the discussion occurred around LANTUS and the insulins in the month of June there was nearly no effect in the US but there was some effect in Europe.

What had happened in the US can be summarized as we have lost approximately 1 point of new prescriptions and we can say that half of it we have meanwhile recovered. In both parts of the world we are meanwhile content again with the development of the product which overall is well expressed in the 22% growth.

We work in a very, very constructive way with the authorities on both sides of the Atlantic to bring more evidence to the safety of LANTUS in the context of cancer and this is something which is also widely appreciated on the side of the authorities.

We have seen in the quarter a publication of important new data around LANTUS, especially in comparison to detemir and you see that the growth of detemir also remains unchanged and as well the significant distance between those products as in previous quarters.

We are in the process of creating a fully integrated global diabetes division. This division will as the name says integrate all activities from commercial but also all relevant activities from research and development so we believe that we will become more and more competitive in this field. And we have given the management of these activities to Pierre Chancel who has been previously and very successfully managed global marketing inside our Company.

If you follow me on page 19, we get to Taxotere. Taxotere growth rate looks modest. You'll remember that the growth in previous quarters was close to 10%. We have just 1%. This is largely due to a stock fluctuation in the United States where we had high over stocking in the third quarter 2008. So we consider this impact as temporary.

We have good news from CHMP where we have obtained a new registration for 1-vial formulation for Taxotere. One vial of course is very convenient for the oncology personnel and we believe that this product will continue to bring Taxotere even further than as previously.

Also in oncology, we are in the process of creating a worldwide division according to the same concept, putting all activities out of research and development and commercial together, which in front of the upcoming launches and you see them on the right side. It is definitely the right thing to do. That is a strong belief on our side that we will therefore accelerate our time to market with all of those products and as you heard just from Chris, BiPar has BSI-201 is at least currently the next of it and probably also the most promising.

Now on page 20, Multaq. As Chris has lined out, we are fully and totally in line with our forecast. We had to learn during this quarter that nevertheless there was some concern among the analysts, one who was able to project from six-week prescription data to final peak sales, which I found personally very impressive, we don't believe too much in doing so but we see today is nicely outlined on the right side of the chart.

You see that we are performing more or less in line with Januvia in terms of new prescription share. We even have taken over Januvia in the last three reported week. You see that the product is doing much better than Crestor and Exforge. It does much less good than Actos and Diovan products, which of course are not directly comparable. They have been launched years ago, nearly a decade, and they also are targeted to GP market whereas evidently Multaq goes in a very selected target group.

So far everything is good. I could give you another reference to the more recent launches, which are Effient and Onglyza and also there we see a very good performance. Multaq is achieving more than twice or even three times the shares of Effient and Onglyza and this is despite the fact that a full promotional campaign became only available due to FDA approvals by the end of September 2009. We really allocate all resources necessary, all attention to make this product a full success and as we talk beyond, a very good way of doing so.

We continue to launch this product as equally already mentioned by Chris in the upcoming weeks and months first of all in Canada, Switzerland and followed by also European countries during the first two or three quarters of 2010, and of course we will take benefit of our launch experience in the United States.

On page 22 some comments on Plavix, I think it's worth to look again to the product from a geographical point of view. You see that yes, we are losing in Europe by nearly 8% of our sales. Nevertheless the picture is extremely different from one country to the other.

In Germany where we have generic competition, we still maintain about 70% of sales in volumes through price equalization. Mainly in France for example we have very limited expense. We have been the first on the market with our own generic, which we launched through our activity of Winthrop. It is too early to say anything about the effects coming from the other countries.

In contrary, we have very rapidly lost large parts of the market in United Kingdom due to the special condition which this market offers to generic competitors.

In contrary, as you see on the right side of the chart, the product continues to perform extremely well with more than 11% growth in grows to EUR1 billion sales in the third quarter in the United States. And the same is true for Japan, the product is continuously growing around 50% and in the rest of the world by 7.5%.

From what we know today, this will be overall the picture for the weeks and the months to come.

On page 23, a little bit more of detail on what I mentioned before, the very positive performance in OTC, 26% of gross sales of EUR356 million and in the generics, well evidently much driven by the recent acquisitions, more than EUR300 million.

I think the thing -- it's more interesting to look to the products. You see that we concentrate our efforts today on six or seven products. Some of those brands have a very long and strong history like Maalox or Lactacyd. Others are current or recent acquisitions as symbion.

Overall we see that the really stepwise succeed to build up a stronger OTC franchise, you may remember we are currently number five in the worldwide OTC market and yes, we've become also increasingly successful in doing acquisitions as the one we announced yesterday, OENOBIOL, which is a business of about EUR50 million, EUR60 million here in France with quite some internationalization in other European markets and yes, we will of course try to bring this product to other markets in Europe and outside of Europe in Latin America.

On page 24 we turn over to the vaccines and that's the opportunity for me to pass over to Wayne

Thank you Hanspeter. As Chris had indicated earlier, the third quarter was affected significantly by timing of seasonal flu. Despite this timing we still saw continued growth in the rest of the portfolio. Sales for the quarter were up nearly 5% to a little over EUR1 billion . The major underlying growth drivers on that was our Polio/Pertussis/Hib franchise where Pentacel, a pentavalent vaccine in the US saw a significant growth and now it has achieved nearly 60% market share.

PENTAXIM, also a Polio/Pertussis/Hib combination that has been launched in Latin America and Asia Pacific, continues to have strong uptake and so overall for the quarter this franchise was up about nearly -- a little over 12%.

Menactra, our meninge conjugate vaccine had a strong quarter. It was up nearly 20%. This is driven by the continued uptake in the catch-up market in the US and so overall Menactra was very strong.

In the quarter we had a bolt-on acquisition of Shantha Biotechnics. Shantha is an Indian vaccine manufacturer and what Shantha affords the vaccine division of the group is a platform for the South for both an R&D and a manufacturing platform. From an IO perspective, there's a state-of-the-art manufacturing facility in Hyderabad, India and Shantha has been awarded a multiyear, a three-year contract from UNICEF to deliver a product called SHAN5. This is a pentavalent vaccine that is used in the moderate to low income countries. This contract has a value of $340 million over the three-year period.

In the quarter we began delivering our first H1N1 doses. Sales were relatively modest at EUR78 million. The sales for the H1N1 are heavily weighted toward fourth quarter and first quarter 2010.

When you look at the bar graph on the right, you can see that the seasonal vaccine is the major reason for the growth of being 5% where compared to 2008 where the deliveries of the vaccine were heavily weighted to the third quarter. In 2009 the deliveries will be weighted toward the fourth quarter.

If we turn to slide 25, I'll take you through the influenza business and clearly Sanofi Pasteur is the undisputed leader in influenza. We are on track from a global perspective to deliver a record year. Our volume will be up over 40% including seasonal and the H5 and H1N1 vaccines.

In terms of the seasonal vaccines, we will deliver over 180 million doses of trivalent vaccine. Earlier in the first half to the year we delivered 75% of the Southern Hemisphere market place. And for the Northern Hemisphere we will deliver 40% of the total market and in the US in particular we'll deliver over 45% of the US need for seasonal vaccine.

Because of the low yielding B strain, production had to be extended into early October and deliveries will be completed both in Europe and the US by the end of November.

In terms of the H1N1 pandemic vaccine, we have over 195 million doses of commitments. These commitments will result in deliveries between Q4 and early Q1 2010. The US government gave us a license in early September from the FDA and we have a contract to deliver 75.3 million doses, which we will deliver in Q -- by the end of Q4 2009.

We also have a contract in Mexico for 20 million doses. This will -- this is product that we produced in our US facilities. We will begin delivery in next month in November and we'll deliver 5 million doses before year end and the balance of 15 million doses in the first quarter.

We are also in the process of securing licensure for our two pandemic vaccines, Panenza, the un-adjuvanted and Humenza, the adjuvanted vaccine. We expect approvals for these two products in November and December and will begin shipping product out of our France based manufacturing facility in the fourth quarter.

So this will be a record fourth quarter for the vaccine division between seasonal vaccine, H1N1 and then the strong close on the balance of the portfolio.

So with that I'll turn it back to Hanspeter to take you through the Merial on slide

Yes, thank you Wayne. I believe that on the page 26 the interesting part for you is that we give you first time some insight on how the sales and the business of Merial is constructed. From an animal point of view, you see that 66% of sales of Merial come from the companion animals.

This is a market segment which really requires marketing. I believe that Merial has done a fantastic job in this respect. You may know that the leading product, Frontline, is to my knowledge at least the only real blockbuster product in animal health, which means that this is a market which follows the over-riding rules of any consumer market, which means it is a market which is also sensitive to overall macroeconomic constraints and therefore, as mentioned before, there are no current growth rates for Merial to be reported.

The [other] I mention in the animal market is a geographical one and you see that inside Merial US by far is the dominating market with 42%, which is again closely related to the fact that Merial is very strong in companion animals but nevertheless there is of course huge opportunity outside companion animals also in the United States and of course this is what we will be looking for when going into due diligence in studying potential complementaries between Merial and the future Merck-Schering Plough animal health business.

Nevertheless we will use the time to drive the Merial business further and this is nicely earmarked by the fact that we have decided on a $70 million investment in Nanchang, China which is a factory which will exploit further opportunities for Merial on the geographical axis because evidently geared to expand the presence and the opportunities in China but also in terms of additional animal segments because it is a factory which will be largely focusing on poultry which means a segment which was called the avian segment on the right side of the chart.

So far on Merial, if I may summarize then, the third quarter from an operational point overall we have seen a good an solid quarter with approximately 6% growth of sales, which is in line with our previous quarters of 2009 and this despite generic competition. We have seen continued strong, very strong contribution from the emerging markets and we see Multaq launched in the United States which is perfectly on track.

We start to be convinced that we have overcome the LANTUS crisis and this in a way which did not sustainably harm the product and yes, we are proud to continue to report good success also we see with the vaccine division.

For the interim model, I think the third quarter has been good because we have increased our diversification on the growth platforms of generics and the OTC and with this we see the first handwriting of doing so already in the results of this quarter by the impressive increases in terms of sales of those activities.

This was it from my side and I pass on the call to Jerome Contamine.

Thank you Hanspeter. Good morning, good afternoon everybody. So I will now go over the slides describing third quarter accounts. I'll start with slide 29 which show the organic on the external growth contribution to sales growth.

So as you can see from the slide, the overall 8% growth we have reported includes a 2% impact of exchange rate, which is mainly the US dollar and the Yen, which is counterbalancing the slightly negative impact of other currencies. Of course this positive impact will reduce in Q4 and still lower than what we had in Q3 but it is clearly expected.

The external growth contribution is as in Q2 mainly coming from Zentiva and Medley. I remind you that we have decided to -- and following the IFIs5 not to consolidate globally Merial as long as we have now this option to possibly enter into combination of Merial with ISP, so as long as we will be in this situation, we will continue to consolidate Merial the same way we did before, which is basically under the equity method.

The organic growth is 3.2% which is quite a nice figure. If we think that this includes the impact of genericization of Eloxatin and (technical difficulty) --

--underlying growth of our growing platform, our growth platform has been 5.5%, which is above what we have achieved for [her] during Q2 and Q1, which shows the strength of our remaining products and the new products we have as well as vaccines and clearly here we see much more coming in Q4 through the contribution of vaccines.

On slide 30, we have some highlights on the main ratios, CoS to Sales Ratio, R&D to Sales and SG&A to Sales. Firstly on R&D, the ratio has come down to 15%, which is lower than what we achieved in Q2 and definitely lower than what we achieved last year with where we were at 15.9%.

In fact, as you will see from the next slide, the overall R&D spending is basically stable, slightly decreaseing by 0.6% during the quarter. In fact, it hides two different trends. One is that along with the streamlining of our portfolio, the R&D Pharma is going down by close to 7% but on the other -- on vaccines, specifically during this quarter (inaudible) spend on the clinical trials for H1N1 is going up. So in fact we are really definitely in line with what we had planned to do in terms of improving the productivity of our R&D in terms of costs.

SG&A to Sales ratio, we are reaching a very good record, 23.1%, 1% below the level of Q3 2008. It means that we are on track to deliver further robust efficiency on SG&A. We can confirm that the overall SG&A to sales ratio will be for the overall year around 25%, 1% below the level of 2008, keeping in mind of course that there is some seasonality and there is a tendency, we have always a tendency to have more spending in Q4 than in Q3.

When it comes to the overall figure of SG&A, it's basically stable despite the fact that we're including acquisitions so without acquisitions you would see along with our cost cutting program, a decline of SG&A spending by 4% to 5%.

The overall cost of sales, because you have here an increase of cost of sales to sales ratio and you may wonder why. I mean that this is something where I have already had the opportunity to develop that as long as the mix of the business is changing with some more vaccines, some more generic business, a bit less of blockbusters, there will be a tendency to have a slight increase of the CoS to sales ratio.

I think particularly during this quarter this mix effect explains a significant part of it. The other part is more driven from the fact that the cost of raw heparin is increasing and for the time being there has been a high fluctuation in heparin costs, which is obviously getting into our CoS.

So for the overall year along with what we have already given I think as a guideline, which should be at the level of CoS to sales ratio which would be equal, around equal to the level that we had for [Q2] 2008.

Moving to slide 31, I have commented a few elements there. Maybe I could just add other revenues which are -- involve mainly the royalties we get from BMS, from Plavix, from Aprovel, is up of course, both on the constant exchange rates basis, including sales of Plavix, on the current exchange basis which benefit from the stronger dollar.

So all in all, the operating income current is going up and the cost on the consolidated basis by 4.5% and the operating margin is I wouldn't say maybe not very good high but still in the range of 40% along with what we have reached or achieved for the first half at precisely 39.9%. And the net income to sales ratio is above 30%. These both, despite the impact of the competition on Plavix on Eloxatin.

Going down to the net, some comments on page 33, maybe directly. First of all, the only thing I'd like to emphasize here is the increase of the line which is share of profit/loss of associates, definitely profit and the increase is driven by two events there. The first one is the increased contribution of equity stake in the BMS Plavix business and also helped by the stronger dollar, but there's also a stronger sales and profitability of this business.

The second driver is a contribution of Merial. And Merial is now contributing 100% since the 18th of September, so we have an increased contribution of Merial which is benefiting the results of Merial, a lower tax rate as well as 100% consolidation for two weeks, which exactly is around EUR10 million contribution.

Slide 34, cash flow generation, once again we are generating a strong cash flow. The overall cash flow for the nine months is EUR6.8 billion cash flow from operating activities after change in working capital. We have invested this cash flow in CapEx and clearly in some new facilities first for vaccines and for Pharma and the building of a new facility in biologics, in biologic products in particular, to pay for the dividends of course and to finance acquisitions which goes together with licensing as which the total amount of EUR6.2 billion.

Despite of these high EUR6.2 billion, the level of net debt remains quite low if you think about the gearing which we have EUR5 billion level of that by end of September, which is around 11% which keeps us among the most liquid of the less indebted companies in our sector.

So just to conclude on that on page 35, slide 35, we have once again posted a solid Q3 2009 sales performance. We have proven continuous cost management along of our plans of transformation in terms of cost reduction and control. We have an EPS growth which has been ahead of sales growth. We have updated, as you've seen, our EPS guidance, which is now 11% for the full year around. And we have generated strong cash flow, increased by around 20% as compared to the first nine months of 2008 in 2009.

Well I think I will close here and I will pass it to Sebastien so that you can maybe handle the Q&A session.

Okay, many thanks Jerome. Indeed now we're now ready to open the call to any questions you may have. As always, I'll ask you to kindly ask only one or two questions at a time to allow as many people as possible to participate in the discussions. Operator?

(OPERATOR INSTRUCTIONS) We have a first question from Mrs. Luisa Hector from Credit Suisse. Please go ahead.

Good afternoon. I've got a question on Plavix in Europe and then a quick one on Ambien CR so on Plavix Europe, could you just say a little bit more about your strategy with the clopidogrel Winthrop and then just generally around Europe, are you still promoting heavily in the countries where you're seeing the generic competition and just a bit more color around the French situation and how you see that panning out.

And then on Ambien CR, maybe an update on the position of the generics in the US, I believe there's patent litigation and a Citizen's Petition which are outstanding.

Well I propose I start with Ambien CR. There is absolutely nothing for the time being moving on in context with Ambien CR. You may remember as you correctly quoted that there is a Citizen's Petition outside. We have no reaction in this respect. I think it's important to mention that we also have a patent, which is a patent based on the galenical specificities of Ambien CR which of course presents an entry hurdle.

To my knowledge as I speak to you today, there are also no approvals in this respect given out by the FDA so there's really nothing else to say but we continue to sell Ambien CR exactly in the same conditions as before and of course continue the orders supported by a direct to consumer advertising as well as promotion to doctors.

Now on Plavix, as I said before, the situation varies. We have given up all Plavix promotion in the UK for evident reasons. There are no tools in the US --in the UK market which would allow us to have any influence on the penetration of generics or the growth or the de-growth of our own product. Consequently we have stopped promoting it.

In Germany, we have a more selective approach. We promote the product through the Tenders because you know in Germany there are Tenders and we have obtained agreements with the major healthcare provider, Krankenhaus, where we have concluded agreements with the Krankenhaus concerning Plavix so we continue to promote the product also to doctors because there is a continued limited, because there are generics which achieve approximately 30% of volume sales but we still have a very significant volume left of evidently 70% and therefore as we boost promotion for Plavix to the prescribing doctor.

Same situation in France, you see the French situation is totally new. It takes less than four weeks so what we have done in France in contrast to Germany is that we have launched a generic through our generic activity with generic which is lower priced than the Plavix original evidently. It is a generic which is being promoted to pharmacists because the pharmacist has an important word to say in context of replacement and substitution. And to our knowledge we have been the first generic to the market.

Meanwhile we continue (technical difficulty) -- Plavix original to physicians but with a reduced effort and in this respect very similar to the commercial approach we have in Germany.

In all other European markets, we see today no or very, very limited effect coming from the generics in the sense that generics are being approved but not -- is not really available because not actively being distributed and promoted or being distributed and promoted but with insufficient means so we see no significant impact of generics as we speak today in other European markets than the three which we have mentioned.

But this is subject to change and may change every day.

Thank you.

We have a question from Mr. Graham Parry from Merrill Lynch. Please go ahead.

I was just wondering if you could give us a feel for the exact percent of sales covered by managed care, Medicare, Medicaid and how much of that's a tier two and what your expected time lines are in achieving better formulary status. I know you commented that it could take longer than it used to. Are we thinking end of this year, beginning of next year really before we should start to think about a potential ramp because of coverage?

And if you could also confirm what percentage of prescriptions you're currently achieving from patient switches from already treated patients such as new patients just to confirm that you are actually switching some existing patients?

And then secondly, just on the ophthalmology deal that you did in the quarter, I was just wondering does that indicate any kind of increased interest in the area in general or should we just think of this as a one-off? Can you point to any obvious synergies for that with your existing business or would further deals really be needed to extract the value from that acquisition?

So Grant, I'll start with your question on the Multaq switches. 37% of our prescriptions to date come from newly diagnosed patients and 63% come from previously diagnosed patients. Inside those 63%, 32% are switches from other antiarrhythmics, out of which half are coming from Amiodarones, 7% are switches from rate agents which is usually beta blockers of course, 12% are added on to rate agents and another 12% are added on to warfarin.

Since the switch is now on Medicare Part D, there is mandatory review within six months post launch. We therefore would expect that we get access during the first quarter 2010. And earlier access is technically, my understanding at least, hardly, hardly possible.

We have obtained a number of regional accesses in third tier but we have so far no regional -- no national accounts but we expect to get access to those, some until the end of the year, the others definitely in January and February. We continue to see a very open minded approach from some payers for Multaq given its breakthrough character and what we have obtained so far also in this respect is absolutely in line with what we anticipated.

Now with your third question, I don't know, Chris you want to take it?

So on ophthalmology, yes, Graham, we are interested in this area. Again, it comes from really the two mega trends where you've got on aging population and also emerging markets, this is an area where people will tend to want to spend money to maintain their sight. It's pretty critical in terms of quality of life. But just fundamentally we see it as a good business to be in.

There are a number of companies around that we can bolt on to this platform. But we don't need to go buy anything big if that's what you've got in mind to be able to market this successfully.

Great, thank you.

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

Yes, hello gentlemen, two questions if I may. One is on the emerging markets where you've been growing by 6%, 7% organically over I guess the last two quarters which is certainly shy of what you need to double your sales in the region. Could you give us some insights as to where you feel you're not growing fast enough geographically and what could drive faster sales growth organically in emerging markets going forward?

And secondly, could you quantify if possible the impact on the higher heparin role, material prices, and what has been the -- what evolution of prices you expect for that going forward? Thank you.

Frankly I have to say I don't know where you get the 6% growth of emerging markets from. What I have is for a period of six months I see something 7% to 10%, so I said what do you call shy may be due to the fact that the overall achieved repeat growth in sales markets went down due to the so-called worldwide crisis but we nevertheless see a comeback of a number of markets and the most important definitely is Brazil where we saw GDP growth in the third quarter, again close to the 8% but also China, which is coming back.

What to do? I think we continue to do what we have done in the past. We build up on our historical strengths in those markets, which goes back to all our heritage companies which have started to build positions in those markets already up to 50 years ago and yes we will continue to invest.

I think it's fair to say that as we speak today we have the largest sales force in China. You have seen in the presentation we continue to invest also in the industrial tool. We have announced EUR70 million invested in the Merial plant. Last quarter we announced an investment in the new vaccine plant.

So we continue to do this and yes we bolt it up with acquisitions like Kendrick, like Medley and we recently announced that we have signed so far non-binding agreement with a Chinese company which will give us access to the OTC markets also in China.

So we continue to do what we have been successfully doing in the past and yes, if you look to this quarter besides and the growth we had in BRIC+M is around 20% I think is confirming that we are -- we continue to do it very successfully.

I would just echo a few comments of Hanspeter. I mean clearly Mexico is probably the one country where there's still some troubled outlook economically. I was in Mexico and Brazil last week certainly confirming what Hanspeter said. Brazil is on track to produce 3 million cars this year, which is a significant increase over 2008. Just as one macroeconomic indicator, the year started off slower.

People who attended the IMF forum in Istanbul were all looking for areas of global growth and all have basically seized upon emerging markets as the -- as probably the source of growth for all industries. And so I think though we've seen a little bit of a slow down, when India drops from 8% to 5.5%, it has some impact. But I think the medium term macroeconomic outlook for emerging markets is still considered to be extremely strong.

That having been said, as Hanspeter said, we are clearly looking to see what we can do in various markets to ensure that we are growing our presence and gather our market share.

I'll perhaps ask Jerome to respond to the question on the impact of the heparin price.

Yes. Just one word on the doubling of the sales, which we have given as an objective for 2013, Sebastien, this includes the acquisition of Zentiva and on Medley so we are definitely on track to get there. So there might be some bolt-on acquisitions already. I think we can definitely can be confident that we will meet this medium term objective.

On the heparin, yes, as you know probably, since beginning of 2008 the cost of heparin per unit has increased considerably to around EUR10 per unit now or two years ago and now we are at the supply price which is around EUR50. Obviously we have built our inventories and being one of the leaders of the buyer of heparin in the market, we're building inventory so that our average price is below this EUR50 level of spot price but still we see that the balance between demand and offer on the heparin market is not in the favor of the customers.

The impact then on the -- if you take the increase of 1% to 2% or between Q3 2008 and Q3 2009 from the change in heparin cost now for P&L, the impact is roughly half of it. It's around .5% to .6% on this quarter.

So far we don't see when this situation will ease and on the other hand we think that there is still room given there, if we had more, we could supply more in the market so this is where we need to keep the balance.

And I think the drivers, Sebastien are largely, because of the heparin crisis, stocks will run low so everybody is buying for current use and trying to rebuild stocks and in addition obviously a number of suppliers still have not come back into the market place, so for the moment it's hard to say exactly how long the prices will be higher but it could be a little while yet, just given the pressure out there in the market place.

Thank you very much. That's very helpful.

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

Hi, a couple of questions please, first, could you -- you've alluded to the fact that the rebuild in the pipeline is a draw to talent coming back into the Company. Perhaps you could use this as an opportunity to talk about some of the higher profile external hires you've made over the preceding period.

And then second with regard to China, just listening to you it sounds like the major focus of your assets is consumer healthcare products, vaccines and rather less focus on the essential drug list. Am I -- just want to make sure I'm reading that correctly.

I think what we'll do is we'll give you an update on some of the hires. Some of them we haven't actually -- we signed but not yet actually announced so I don't want to do that.

Certainly on the oncology side I'm actually pretty excited by some of the people who are coming back in. When I sat down with our oncology team at the beginning of the year people were concerned about people we were losing and in fact when we brought BiPar in, one of the things, one of the reasons for keeping it independent was that we really didn't have enough people to even actually develop that internally. We had enough people, but not the right people.

We did hire Debasish Roychowdhury, who was head of Oncology Development at Glaxo and was previously at Lilly and someone extremely well known in the community and that has allowed us now to really start to accelerate our development not only in triple negative breast cancer but in other tumor types as well.

It's also allowed us to now really link in and make sure that we can move forward on approval with the EMEA and indeed around the world. One of the interesting things is that actually places like China are actually quite big cancer opportunities as well. If you sat down with the Chinese health minister, he would say his biggest issues are really around diabetes, cardiovascular and oncology.

On China, and I'll let Hanspeter comment a little bit on that too, we are clearly -- there's no question that vaccines is a significant market opportunity just in terms of population. Again, we're the leaders in pediatric vaccines. Just as a number to throw out there, in India there are 25 million babies born every year.

To put that in perspective, the total number of babies born in Europe and the US is around 8 million so this is very significant same as on the -- China is not quite yet at 25 million but it's certainly, it's around 20 million.

So we clearly want to also occupy the ground before someone else does. OTC is a nice business to be in because remember in a lot of countries most people are spending money out of their own pocket and yes the government is putting money into the program, but it's still a drop in the bucket compared to what is being spent privately.

And given the price point, OTCs are quite a nice area to be in. Having been said, Plavix is doing extremely well in China. Our diabetes franchise is doing very well. Though it's a whole emerging market, most of the business, there is no real primary care physician network in China. Most people seek treatment in hospitals. The Chinese government is trying to create more community health centers at least but the whole structure of the market place is different and therefore you've got to tailor a little bit where you're putting your investments.

But longer term, we'd want to have an extremely broad based business including the likes of BSI-201 through to pediatric and flu vaccines and yes some generics and OTCs.

Hanspeter, I don't know whether you'd like to comment further on that.

The only comment I could add is that to some extent, China can become a model for the whole diversification effort we make as a Company and why? Because we can really do it nearly from scratch and because there is also an opportunity as a recent investment and it's a recent signatures in the direction of OTC show

So the second comment would be that the other angle we take to the Chinese market is our strong belief that it is a regional market in itself and so I believe what we have built on in the last two years in terms of building up regional structures in distribution but also in management, in control and regional resource allocation decisions is one of the major factors which continuously will make us successful in China where perhaps as an additional information what you have, we are growing in the third quarter by 38% and 37% on a year-to-date basis and this meanwhile on a basis which is quite significant and also very profitable.

I think it's fair to say if you go to China today you'll find a lot of companies are really focusing on the east coast so you've got a lot of people in Shanghais, Beijing as far as Huangzhou but the country is just so vast in that what we have actually seen is that very few pharma companies really penetrated much into the western regions, even west of the Szechuan province and as Hanspeter said, we've made it a priority to really get to and the fact that we have such a big sales force today and have been there for so long it means that we don't have to waste time developing ourselves on the east coast and we can try to get to the western regions before other people do.

Thank you.

We have a question from Mr. Philippe Lanone from Natixis. Please go ahead.

Good afternoon gentlemen, two quick questions. First on otamixaban, can you elaborate on the phase III protocol and the discussion you had with the FDA especially on the comparator? Would it be the same as in phase II with the (inaudible)?

Second question with good news in H1N1 fourth quarter, for the fourth quarter of '09, that will be a tough comparison base for '10. What can be said of the sales in Q1 '010 in H1N1 vaccine, because obviously in Europe you probably won't -- probably will have most of it in Q1 so what about a figure of $300 million or $400 million for Q1 '010?

And last point, if I may quickly, you are mentioning in the slide operating margin of Merial of 32% yet below you state (inaudible) but when you, in the Merrill conference you disclosed a 29.5 EBIT margin for Merial. So is it a definition difference or is this -- is there something to know about the fourth quarter?

So let me just start with otamixaban. We expect to be starting the phase III study early in 2010 after we've met with regulatory authorities and so I can't confirm the full design for you yet. We would expect that the target population is really going to be similar to the population that we've already studied but we need to finalize with the regulatory authorities before we can give you further information.

In terms of H1N1 for next year, I'll pass over to Wayne to let you give an update.

As you said, in the fourth quarter we're expecting to deliver in excess of $500 million of H1N1. How much will fall in Q4 versus Q1 will depend upon timing of licensure in Europe, the release of product from the regulatory authorities, but our expectations are that we will actually have stronger sales or at least comparable sales in Q1, H1N1 and over the course of 2010 stronger sales in Q4, 2009.

So it's going to be roughly the same.

In Q1 but I think for us, I would say that the H1N1, see probably for us looks out to the March/April time frame. I think it's difficult to predict with any certainty what it looks like there. Normally the summer comes and the seasonal flu goes away. By then you'll have had quite a lot of people vaccinated and we know this vaccine is actually pretty efficacious.

So it's hard to say whether we have sales beyond that but for the four or five month period I think we would probably expect to sell somewhat more in that four or five month period than we've sold in 2009.

Okay.

Okay, on Merial, Jerome Contamine speaking, when we did the acquisition, we mentioned that the margin for last year, the EBIT margin was 29.5%. Actually there is some seasonality in the margins quite simply because it's less parasites and the ticks in Q4 so you're offering less in Q4 than during the summertime for instance.

So as you compare to last year, for the first three quarters, the margin was, if I remember properly, 32.5% or 32.6%. It was marginally above the level we would get this year but you have also to take into account that there were some somewhat less R&D spending last year than this year.

So basically we are heading into a 25%, 29% around, maybe slightly more for the full year, so clearly consistent with the level of margin we achieved for last year.

Thank you very much.

We have a question from Mr. Mark Dainty from Citi. Please go ahead.

Thanks. Just two questions, one on BSI-201. If the final phase II data at the end of the year is similar to the interim data, is there a chance that you'd be able to file with the FDA early before the phase III is completed?

And then the second question on LANTUS in the US, what are you doing in order to sort of reaccelerate the volume growth? Obviously you've done a good job in keeping it stable since the Diabetologia issues. I'm just wondering whether you're putting any extra effort there into looking to grow volumes in the future. Thanks.

Just on BSI-201, I think it's a little too early to speculate exactly on regulatory time frames. Clearly the data are extremely promising. The discussions to date have been very positive with the FDA. So if there is an opportunity for rolling submissions or earlier submissions, we'll obviously be looking for those and they are under examination. But at this stage it's a little too early to confirm exactly what the regulatory strategy is.

Hanspeter, can I turn to you for the LANTUS?

Yes, in fact we have a campaign set up in the US but not only in the US, I would say even more in Europe, to retake the promotion after what we believe the worst is over in context with those unfortunate publications during June.

A major element for this in the US will be the idea to accelerate this from insulin, a second one which will be to take even more benefit from the opportunities we have with the existing pens where we meanwhile really have a fantastic portfolio of useable and reusable pens and the other one is the issue of the timely insulinization which of course is often an increasing importance given the existing competition.

So it is not a very precise labeling but yes, we perform currently at a kind of relaunch in the US given this overall context.

Okay, thanks.

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

Thank you, a couple of questions on Multaq. A key to this product growing at a steady trajectory in the future will be persistence on therapy and I'm wondering if you can talk about what the early data has shown on persistence, which as you know refers to patients being on their therapy once they start on therapy. The reason I ask is that while ATHENA looked good, Multaq doesn't give as good a rate of rhythm control as something like Amiodarone.

And then directionally, can you talk about what you think the pricing of Multaq might look like in Europe, at least how that might compare to US pricing? You have several big brands like LANTUS that do a lot better in the US relative to Europe or the rest of the world and I'm wondering if Multaq might end up looking like one of those products in terms of the US versus ex-US split.

Hanspeter, I'll let you take that.

Yes, Tim, I have to be a little bit vague on both questions for different reasons so it would be not proper to speculate very precisely on the European price of Multaq but I think if you apply the usual, you are not entirely wrong. Yes, the European price will be below the American price for the reasons we all know and I believe it will be the usual so to say proportion, which is also in line with launches from our competitors during the recent weeks.

Now life cycle management, we are currently studying what we could do and what we should do. Also said it's too early to say anything precise but evidently we will continue to do it. We will start to make life cycle management in subpopulations of those which have been subject to the major trials performed so far.

Lastly we have no data so far because the launch time is too short to tell you how long patients stay on treatment. We believe to have a first set of data before the end of this year.

All right. Thank you.

I think the only thing we could add actually is that the atrial fibrillation is really increases in the epidemiology in patients over age 70 and actually there is a slightly higher rate of incidence in Europe because of the average -- the higher average age of the population, so there may be a slight volume compensation for the lower price.

Thank you.

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

Good afternoon. Two questions if I may, one especially on Eplivanserin if you could just update us in terms of any additional information post the response letter from the FDA.

And related to that also then on Sculptra in the cosmetic indication, could you just maybe talk us through your capabilities in there maybe around just how you're going to promote that in the US.

And then just lastly obviously some speculation in terms around US healthcare reform and the impact that might have next year, if you could provide a comment on that, but I'm just curious if you're seeing any pressures also and now in the European markets given the significant budget deficits that are being run by various European countries.

So on Ciltyri we are -- it's hard to comment until we've actually sat down with the FDA. We've had the letter and we'll see how much we need to do to satisfy FDA requests. I think you've seen that we don't highlight Ciltyri much in our presentations and there's a -- there's probably a good reason for that.

On the -- and I'll let Hanspeter talk a little bit about what we're specifically doing on Sculptra. You know we obviously have the Dermik franchise in the United States. [Bacuben] has faced some generic competition so we do have the resource for it. I think you have to look at our dermatology franchise as either build it or get out of it so we're probably not quite where we need to be and if we can add some products in that and make it a little stronger.

Sculptra is now moving into the aesthetics area, which is not really quite the same area as we have been in traditionally in dermatology so I think it is one of those areas that we need to look at from a strategic point of view.

Healthcare reform in the United States, obviously we're still in the process of looking at what actually will pass. We do know the pharma deal is roughly $8 billion per year which works out to about 3% of the market. There is a piece that will probably come sooner, which is the increase in the Medicaid debate -- Medicaid rebate, sorry. We have around 4% to 5% of our sales in Medicaid so there is an impact but one that is probably manageable.

The filling the donut hole will probably take some time, may have some slight volume benefit. Clearly if the data protection of 12 years goes into biosimilars that would also be relatively good news for the industry.

So at this stage I think no matter what passes, it's probably just the start of real healthcare reform in the US.

In terms of Europe not yet there, clearly increased deficits in the Social Security system. This isn't the first time obviously that we've faced that. There are chronic deficits in the European healthcare system. So far we're not really seeing increased pressure but it wouldn't be a surprise either to see some sort of pressure as we have traditionally faced in Europe and have pretty much figured out how to do.

Hanspeter, do you want to add anything on Sculptra or the European situation or even in Ciltyri?

No, you have been pretty complete as usual. I think on Europe nevertheless I believe that the situation is much less severe than in previous years when you speak at the end of the year. I think we can not overlook that we expect to have a much more friendly environment than in Germany from the new coalition government. However a liberal has taken the seat off the health minister and given the importance of Germany for the overall market, I personally see this already as a positive.

Just for translation purposes, this is a liberal as European sees them, i.e., more of a conservative.

Operator, we are actually going to take the last question now.

The last question is from Mr. Brett Kaplan from Cowen and Co. Please go ahead.

Hi, thanks very much. Just on LANTUS and I'm not sure if you did mention on the call, when will we see the first of either the preclinical studies or the epidemiological studies that are ongoing?

And then with respect to the PN2034, I believe it's a PPar modulator, how is this differentiated from the current PPars in terms of (inaudible)?

And those two are fine for now, thank you.

So first I go ahead with LANTUS and the answer is 2010, definitely for the clinical data. The preclinical data is the beginning of the clinical data, more towards the end.

I'm sorry, what was the second question? Was it on the PPar or the Wellstat compound?

It's on the PN2034, the insulin sensitizer, whether that's a PPar gamma modulator and how it's differentiated from current PPars on the market.

It is not a PPar. I've had enough experience with PPar in my professional career so I can assure you when that thing came out that's the first thing I asked.

As far as differentiation we're talking about a phase I compound so it's a little early to tell yet but it is a new compound, acts mostly in the liver in fact and so far the -- all of the safety profile looks very positive.

Great, thanks so much.

All right, I think that pretty much wraps us up. I appreciate everybody's participation. Again I think we've had a great quarter, made some very good progress on our transformation initiative. We're busy rolling out H1N1 vaccines and I think probably for the first time in at least a year and a half, I'm actually -- pleasing to be able to produce some positive news on the R&D pipeline even though obviously no way we would be in any shape to declare any sort of victory here. There's an awful lot of work ongoing and you can expect to see more as we go forward.

So thank you very much everybody.

Ladies and gentlemen, this concludes the sanofi-aventis ---