Sanofi SA (SNY) 2010 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to sanofi-aventis third-quarter 2010 results conference call. At this time, all participants are in a listen-only mode. Later there will be a question-and-answer session. (Operator Instructions). I would now like to turn the call over to Mr. Sebastien Martel, Head of Investor Relations. Mr. Martel, the floor is yours.

Hello, everyone, and welcome to the sanofi-aventis third-quarter 2010 results conference call. As you know, our slides are available for download on our website. As always, I must advise you that the information presented in this conference call contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors. These may cause actual results to differ materially. Please refer to our Form 20-F on file with the SEC and also our documents of reference for a description of some of these factors.

With us today on the Q3 call are our CEO, Chris Viehbacher; our President Global Operations, Hanspeter Spek; our Senior VP Vaccines, Wayne Pisano; and our Executive VP, Chief Financial Officer, Jerome Contamine. So without further ado, let me turn the call over to Chris.

Thank you, Sebastien. Good morning, good afternoon, everybody. I'm going to start on slide 5 titled growth platforms and cost savings compensate for impact of generics, which would also be, I guess, the main message of the quarter.

Progressively, as we have gone through the year, we talked about this at the end of the second quarter, you are starting to really see the transformation of sanofi-aventis in numbers. As we will show you a little later on, we will lose over EUR2 billion in sales this year as a result of the genericization of some of the brands that have driven this Company for many, many years. But you're also seeing the emergence, really, of the growth platforms, which start to really compensate for those losses.

And so as you look at the slide on the left side, where we've got quarterly sales in bars, you know you can see that we continue to make progress throughout 2008, 2009 and in 2010. And really, I think the fact that sales are as robust as they are is, I think, a growing sign of the sense of the strategy that we have been involved with.

So, obviously sales up 5.7% on a reported basis, and we had a very nice tailwind from exchange rates, which is not likely to last. But even at a constant exchange rate basis, only losing 1.7% and actually being up on a year-to-date basis of 0.9%, I think, again, is testimony to the importance of the growth platforms in some of the moves that we, as management, have undertaken.

On the earnings-per-share line, down 2.3% on a constant exchange rate basis, but up 6% nine months to date again, at constant exchange rates. We have been able to leverage, really, the growth in the business, largely through extremely tight cost control. So I think we're working our way through the patent cliff. We've got a plan. And I think that the longer-term guidance of achieving the same level of sales and earnings in 2013 as we did before we went into the cliff in 2008, is certainly increasingly an assured outlook.

As we look at slide 6, we've been able to now get a better feel for how the business is doing. At the second quarter, we guided you to zero to minus 4% largely on the back of an approval of a substitutable generic in the US for Lovenox. In the meantime, we provide a little bit more of an update later on that, but we are seeing that we are not -- that the erosion of Lovenox is not quite as dramatic as one might have feared. How long that lasts, we don't know, but that certainly seems to have helped.

And in the meantime, of course, we've also seen very strong performance in the rest of the business, and again, the tight cost control, all of which really, now, I think allows us to calibrate our guidance a little bit more precisely. And our current view is that we will finish the year somewhere between flat and 2% up versus 2009. Always, of course, on a constant exchange rate basis. This guidance takes into account, naturally, the fact that we have competition at least for one form of Ambien CR in the US since the middle of October, and the possible entry of generics of Taxotere in the US and Europe from middle of November, and of course, further erosion from Lovenox generics.

If I turn to slide 7, again, this comes back to where's the growth coming from. Emerging markets, and Hanspeter will give some more color to this, but you can see this part of the business is 29.6%. We now sell more in emerging markets than we do in the US. We probably have the most geographically distributed sales profile of pretty much any company in this industry.

The 30% represents a very significant EUR2.3 billion, and that grew at a very robust 13%. And again, our emerging markets puts everything in. This is everything except US, Western Europe, Japan, and New Zealand, Australia, and Canada. So we're not picking kind of the sexy countries. We're not picking the fastest countries growing. We will show everything. And you have, obviously, quite a mix of countries in that.

Vaccines I think had an extremely good quarter, up 8.9%. Actually sales would have been higher, close to 15%, but of course, last year, we had the initial sales of H1N1 vaccine. If you take out the H1N1 vaccine from that 8.9% growth to close to the 15%, we're off to an extremely strong start on seasonal flu. Wayne will give us a little bit more color on that as well.

And of course, I would remind you that we had significant sales of H1N1 in the fourth quarter of 2009, and we will not have any of those sales in 2010.

Diabetes, up 6.7%. Very good on market share and, again, we will see more detail later. Consumer Health Care, that 45.8% of course looks pretty outstanding, obviously helped by acquisitions. The underlying growth rate organically though, was still, nonetheless, 9.5%. And given that we are still in an economic crisis, and these are products that people are paying for out of their pockets, I think 9.5% growth is extremely strong.

The next box is something I'm happy about seeing. We are not known as a company that has much in the pipeline, and not much in new products. Multaq delivering EUR46 million and we now have that product approved in 23 countries, and we're just starting to roll that out across Europe. And we have launch meetings at the end of September for Italy, Spain, and France.

Jevtana off to a phenomenal start at EUR41 million. That's only in the US, and that's only for about three months.

And the Fluzone High-Dose, which is a higher-dose vaccine for people aged 65 and older, doing very well, and again, above expectations at EUR41 million.

Animal Health, plus 8.8%, and I would make the same comment as I did about consumer health. We talk about products here that are not reimbursed. There's no health insurance or not much. And, seeing 8.8% growth is, clearly, a very strong performance and one we are very happy to see.

Now, we move to slide 8, and of course, this is the flip side of the coin. Slide 7 was all about the growth platforms. Slide 8 is why we need the growth platforms. You can see that we've had significant generic erosion of Plavix in Europe of over EUR200 million. Lovenox already in the US, EUR208 million.

And I would just add for those of you who appear to have not had the full impact of generics thinking that there was no generic erosion in July, that's true. But, I think many people have forgotten the fact that whenever a product goes generic, especially in the US, you are going to get returns, so you need to allow for at least two weeks of the previous month's sales coming back into, in at least on the basis of a reserve.

Eloxatin, down EUR71 million, but we are seeing a progressive uptake again since we've been able to achieve an equitable agreement with generic companies. Allegra D, down EUR39 million, but I'm getting increasingly excited about the Allegra RX-to-OTC switch, which is expected in the first half of 2011. I think we're seeing extremely strong interest in the trade with the head of one major pharmacy chain calling this probably the most important Rx-to-OTC switch for the next five years.

So, slide 9 is a slide that you have seen many times before and you will probably see many times in the future. We continue to plug away at the strategy that is working for us. We clearly have three major axis here, and it's increasing our innovation and research and development. It's using our cash flow to pursue external growth opportunities, and, of course, adapting our Company to future challenges and opportunities. And you will see that we are making some very big resource allocation decisions away from things that are not growing anymore to things that are growing.

So that strategy is really trying to not only compensate for the loss of sales to generics, but I think when you look at those growth platforms, and the longevity of those businesses, it's really trying to achieve a profile of a business that is much less dependent on patents and much more oriented to businesses that have longer-term and more sustainable growth prospects.

Now the next slide, on slide 10 is really, again, coming back to, wow, we have actually four pretty interesting medicines that are going to either have hit the market or are about to hit the market. Jevtana launched in the US, but we've already seen a number of other countries approved. And we, of course, over the next couple of quarters are going to launch this in a number of other markets.

Very strong launch in advanced prostate cancer, with sales estimated to be between EUR300 million and EUR500 million. And we also have new studies to expand indications on that, including cancer. And some of you have seen this from our investor seminar at the end of September, so I won't go into too much detail on that. But this is obviously an extremely interesting product, initial indication in triple negative breast cancer. But we are also fully involved in Phase III and Phase II studies in lung and ovarian cancers, and they're up and running. So we've got a very active program to really make sure that we have a full set of indications.

It's increasingly believed that parp inhibition plays a range with a wider range of tumors than originally thought. It's not just where parp is over expressed.

Lixisenatide, our GLP-1, the get-go program, we have seen two positive Phase III trials already announced. We have initiated in the middle of this year a cardiovascular outcomes trial, and we are still on track for planned submissions in the EU in the first half of 2011 and then first half of 2012 in the US.

Teriflunomide, I think we had a very good session at ECTRIMS. Phase III TEMSO study, showing 31% reduction in relapses. And I think what's important here is it's an extremely favorable safety profile. Obviously as you well know that whenever you are dealing with drugs that are affected by the immune system, safety and efficacy are often flip sides of the same coin. I think what we've seen here is that we've got very strong efficacy without the typical safety penalties that go along with that. And of course, we just announced the start of another Phase III trial as an adjunct to interferon.

Now, when it comes to external growth strategies, and I'm moving to slide 11 here, as you all know, we commenced a tender offer to acquire all of the outstanding shares of Genzyme's common stock for $69 a share on October 4. We believe, as we believed at the time we launched this, that this is a compelling offer for all parties. And let's look again at what this means for both companies.

So on the left side here, if you are a Genzyme shareholder, this provides immediate and certain value and represents a substantial premium. It captures not only business today, but the potential Genzyme's business and pipeline. And quite honestly, it's going to shift the execution risk to us. We believe we can enhance Genzyme's businesses, rare disease businesses, as a center of excellence and create value for Genzyme's other product lines, because we are a bigger company with global reach and resources.

Now, for our shareholders, this creates a new platform for sustainable growth. It increases our biotech exposure; expands the footprint in attractive and growing rare disease market; it allows us to increase our presence in the US, where we're really going to see the impact of patent expiries, both commercially and from an R&D point of view; but also while expanding our R&D pipeline of Phase II and Phase III products.

The transaction meets sanofi-aventis value creation criteria. And here, we just don't mean accretion. We are also looking at creating value through such things as return on invested capital, IRR, cash payback. And of course, our strong balance sheet will preserve our strong capital structure even after the transaction closes.

Now before I move on, let me just take a moment to address some of the information communicated by Genzyme last week.

There was obviously a great deal of data presented on the earnings call and at the meeting in New York. And really, I think the voice of the market is probably most relevant here. Like investors and analysts, we think some of the information presented by Genzyme ignores the realities of the market and the Company's current situation. It also demonstrates the lack of realism in management forecasts.

I think that's particularly true when it came to two specific issues, the Company's aggressive financial forecasts, including those for Campath and its disregard really for the issues still inherent in its manufacturing.

On the financial outlook, keep in mind that Genzyme has lowered its EPS guidance numerous times over the course of the last two years. And on the heels of missing Q3 2010 consensus estimates and fine-tuning its 2010 EPS guidance to the lower end of its previous range, you know the company is projecting results for 2011 and beyond that are dramatically higher than most expect.

In addition, the forecast for Campath is extremely high. In the first year, this is expected to sell more than twice the sales of Gilenya and even Avastin didn't achieve the first-year sales that were projected.

So, you can pretty much take whatever pharmaceutical ever has been launched, and I think it -- the sales forecast for Campath I think stretches the bounds of reality in anybody's mind.

Our manufacturing, I think it was fair to say we were surprised at the company's statement that its manufacturing issues are largely resolved. Keep in mind that six out of the 12 key upcoming milestones listed by the company directly depend on its manufacturing issues being fully resolved.

As you remember from our recent presentation, companies under consent decrees have often taken longer than expected to resolve the issues, so we think a bit more caution is warranted here.

And as you know, until the new Framingham manufacturing facility is actually approved, Genzyme will continue to work with minimal levels of inventory for Cerezyme and Fabrazyme, and any additional manufacturing delays will likely impact supply of these products, and, therefore, potentially create further opportunities for competitors like Shire and Protalix

So I think the bottom line is we didn't hear anything of substance that would cause us to change our offer. As we've said all along, we intend to continue to be disciplined and patient as we proceed with our offer directly to Genzyme's shareholders. Our preference remains to sit down and hold constructive discussions and negotiations with Genzyme's board and management.

We have listened with great interest to the process Genzyme has undertaken to understand its value. But clearly, any process that does not involve sanofi-aventis, the one company that has put a fully financed $18.5 billion all-cash offer on the table, is not one that stands to benefit the Company's shareholders. We have reached out to the company through its advisors as to when and how we can fully participate in this process.

So, I think that's all I really want to say on Genzyme at the moment. Let's move on to slide 12.

Now, one of the things that I think you will see also as Hanspeter talks, part of the transformation is really around making strategic choices. And it's going after where we have growth opportunities, but equally, you can't just have every resource incremental.

At the same time, we also have wanted to make sure that we are not putting our organization through multiple restructurings. So, the US organizations recently announced a significant reduction, 25% of overall headcount, with the idea of being able to launch a new company, but just didn't go through a restructuring, but that went through an entire reengineering to say this is a company that's going to be selling Lantus. It's going to be selling oncology products and diabetes products. It's selling Multaq. It's going to be selling an MS drug going forward with teriflunomide. Let's redesign the company around the things it needs to sell and move forward and build a new company.

So those resources of course are now going to be redeployed towards strategic parties, such as diabetes, oncology and afib, Consumer Health Care, business development. And of course, you are seeing significant increases in headcount in those countries where we are seeing significant growth.

Moving to slide 13, let me just bring this to a close slowly here. We have a number of targeted milestones for the coming year. Obviously, as far as Genzyme is concerned, we have a tender offer that's set to expire on 10 December. We have the launch of Multaq in France, and next year, we have the first US filing of iniparib in Q1. We have the expected closing of the Merial/Intervet J.V. towards the end of March.

In Q2, we will start with the EU filing of iniparib, and we would expect a positive and hope for a positive CHMP opinion for Jevtana. We will have further lixisenatide data from the GETGOAL program. And we would expect to have an FDA decision on Menactra infant toddler. And of course, you've seen some positive news by the way coming out of the AICT just this week. And Wayne, I'm sure, will be able to answer any questions you have on that later.

So with that, I guess Hanspeter, I will turn that over to you.

Thank you, Chris. Yes, good morning, good afternoon, everybody. I would like to give some additional lights on the commercial performance in the third quarter.

As you see then on page 15, we have obtained approximately EUR7.8 billion in sales, and you also see that the ForEx impact nearly exactly outpaces the negative impact we had during the third quarter from generification.

Nevertheless, we also have nearly EUR0.5 billion of increment in new sales coming from positive performance, giving us the overall sales results of 5.7% on a reported basis.

Besides generification, I think it's worth to say that the third quarter was, again, a difficult quarter. In the European markets here, they're coming from price cuts. To name, the most dramatic definitely has been Spain. But also of course, we start to suffer for the time being a negative impact coming from the health care reform in the United States.

On page 16, the point on the emerging markets, Chris has alluded to, you see we have a 13% growth rate, even 22.6% on a reported basis in this market segment which for the first time has outperformed in terms of absolute size, Western Europe, which of course for us is a certain turning point being the leading company so far. In Europe now, we have even stronger sales in the emerging markets.

If you focus further down on the so-called big drugs, end markets, you see a growth rate of nearly 20%. So we continued to perform very strongly there, where we are market leaders. And on the right lower side of the chart, you see that this is true for most of all our growth segments which show a two-digit growth rate for the quarter.

On page 17, you see a growth which may, perhaps, raise a little bit your eyebrows for the diabetes sales. We have achieved EUR900 million, 6.7% growth which looks a little bit modest. It is partially due to a technical effect, but it is also due to the fact that overall, the diabetes market has slowed down in nearly all of the world for various reasons which I am absolutely happy to answer during the Q&A session.

Nevertheless, Lantus has become the number one diabetes brand during this quarter worldwide. In the previous quarter, I had reported to you that we see a slowdown in prescriptions in the US for Lantus. And on the right side, you see then that our investment, our increased investment during the segment and third quarter now really has led to a nice, I would even dare to say sharp increase in total prescriptions within the injectable market of the United States.

More good news, more news also in the light that we continue to approach this market in a holistic manner. We have introduced our new devices for measuring blood glucose during the European congress for diabetes in Stockholm. The products have been received with a lot of interest. And perhaps even more importantly, our approach to not only sell pharmaceuticals, but also to go more and more into services and devices around diabetes, has been greatly appreciated.

We also, during the quarter, had the opportunity to report very well progressing Phase III clinical trial program for lixisenatide. And we have announced that as one of the first products, I believe even the very first product, we have initiated a large cardiovascular outcome study in order to prepare the launch of this product further.

On page 18, you see our performance in oncology. I believe while it is there, it's fair to say that we get back to previous growth. This is on one side true for Eloxatin. You know of course that we have gained in the courtroom, again, access to the US market by overruling previous decisions concerning the protection of Eloxatin. You see that we have a nice increase of sales already in the second quarter, which accelerates in the third quarter with EUR120 million.

And we are confident that during the first quarter 2011, Eloxatin will go back to old standards which means a product above EUR1 billion on an annualized basis of sales in the United States.

Chris has commented on the very good for us, even surprisingly good performance, of Jevtana in the United States, EUR41 million. It's the first full quarter we have with this product at all. And you see on the right side of page 18 how the product benchmarks against all recently launched products in the American oncology market. And you see, as said, we outperformed everybody so far.

And last but not least, yes, we expect an opinion from CHMP during the first half of 2011 for entering the European marketplace. And of course, given the overall perception and reception of the product from a scientific and medical point of view, we are optimistic also as far as Europe is concerned.

On page 19, you see the progress we make with Multaq. In the previous meetings, I had indicated that it is a not so easy battle. We have several times adjusted our investment into the product. We invest today, to say it in very broad terms, heavily. We have increased our spend via sales force, but we have also heavily increased our investment in terms of medical education, and we see that the product is reactive.

We expect this year's sales of probably above EUR160 million, which means if you look to historical benchmarks, I think it is affordable to say that the product is on the way to become over, let's say, two or three years from today a blockbuster product. And this even more as we continue to invest into the clinical development on the product. You see on page 19 that we have just initiated an additional clinical trial, PALLAS, with nearly 11,000 patients, which is aiming for an additional indication for this product, which would be those patients which are under permanent atrial fibrillation, which is, today, excluded from the scope of approved indications.

On page 20 is Plavix evidently Lovenox are already are still those blockbuster products. I believe that's the real message of the page is that both products have a very good chance to remain blockbusters, even after the current -- after patent situations for Plavix in Europe and Lovenox in the US.

You see that Plavix yes, of course, is showing a sharp negative trend in Europe as minus 55%. But the product has a very high two-digit sales growth in Japan and China, where the products will become a blockbuster for those two marketplaces during the next year.

And you see this product continues to grow with nearly 2 digits also in the United States, which gives an overall very impressive growth rate.

On Lovenox, a word I think the most important take-away is that we ensure today in the US market 67% of the volume market which we find impressive. There is another fact which we find encouraging, which is the fact that this is a stable situation off of two consecutive months. It is therefore, evident that at least in the hospital segment, we have managed to stabilize the market to a high degree.

The American hospital market in broad terms is depending on seven GPOs. Out of the seven GPOs, six, we have succeeded to contract on. And given our service and then also, of course, our flexibility in commercial terms. So six out of seven remain stable and reliable customers for us. In country, in the retail segment, where the market follows other rules, in essence, a direct substitution of the pharmacies, we see the usual picture which means we see a sharp deterioration of our market share. But once again, overall, I believe that 67% in terms of volume after three months of generic competition gives a good confirmation of what our American salespeople are able to do.

On page 21, the two other growth platforms, Consumer Health Care, Chris has pointed it out. Yes, 40%, or nearly 46% and at constant exchange rate, even of 58%, as they are also driven by our acquisitions in this field. We feel very much encouraged by this performance.

We are currently working on more acquisitions in Asia-Pacific, but equally important in Latin America, where we see very interesting opportunities. And, yes, we feel fully confirmed in our strategy to continue to build up another important element of our overall portfolio policy.

Generics equally do well. 19% or nearly 30% of growth there. In essence, we are extremely content with our two major acquisitions in this field, Medley in Brazil and Latin America and Zentiva in Europe two very balanced. We are very content with what we see in terms of performance. And this is a very good bridge into vaccines, for which I pass on to Wayne Pisano.

Thank you, Hanspeter. As predicted, vaccine sales have strengthened since midyear, and we had a very strong third quarter. Third-quarter sales were just above EUR1.2 billion, up nearly 9%. And if we exclude the pandemic and just look at our base vaccine business, we were up nearly 15% for the quarter.

We had strong growth across a number of franchises. Obviously, the biggest franchise in the third quarter is the seasonal influenza vaccine. We recorded sales of EUR448 million, and this is up nearly 40% at a comparable basis to third quarter of 2009.

In the US, we delivered 40 million doses by the end of the third quarter, and this is 40% above last year on a comparable basis. We will be finishing our deliveries in the US by the end of next week, and this clearly will be a record year in the US in terms of volume and doses delivered.

During the year, we had a number of product launches in the influenza franchise. In Europe and Asia-Pacific and Latin America, we introduced the first intradermal influenza vaccine, Intanza. And we had very positive feedback and patient receptivity to this. We will launch this product next year in the US.

In the US, we launched the High-Dose Fluzone, which has been developed specifically for the elderly patients over 65. We received our Medicare coverage in late June, and we have had very good uptake in its first year in the marketplace.

To give you a perspective on the full year for influenza, we expect a strong fourth quarter exceeding the fourth quarter of 2009. And as a reminder, last year in the fourth quarter, we had EUR440 million of pandemic sales. Obviously that's not going to repeat this year. On an annual basis, in the first half of the year, we recorded EUR452 million of sales for pandemic which is comparable and which is in line with our projections.

Another strong performance came from the booster franchise in the third quarter. Added sales were in excess of EUR100 million, up 40% -- nearly 40% for the quarter.

The bacterial meningitis marketplace, our brand, Menactra, had a solid quarter with EUR192 million of sales. Sales were off 4% over the previous year, and this is despite the fact that we're dealing with a catch-up market that continues to shrink in terms of size and opportunity. And in the US, we had our first competitor launch in late first quarter. Menactra is clearly the market leader. And in the US, market share is in the range of 90%.

On the R&D front, a number of things have occurred with our dengue vaccine. We have completed the Phase IIb enrollment in Thailand. This is our pivotal efficacy study. And we've begun our Phase III studies with our consistency lots which began in the third quarter.

In the third quarter, we also started the Phase III studies for our quadrivalent seasonal vaccine. The CDC is encouraging the manufacturers to develop a seasonal vaccine that contains two B strains, both lineages. The reason they are doing this is that in many years, both these strains are circulating, and this -- and the B strains have a very high disease burden for the pediatric population.

Finally, in September, we've signed a defining agreement for the acquisition of VaxDesign. VaxDesign is a biotechnology company that develops and manufactures in-vitro models of the human immune system. And they use a proprietary technology which is branded MIMIC. We expect the MIMIC technology to shorten development times and increase the probability of success of future vaccines.

So in conclusion, the vaccine division had a very good quarter, and I will turn it over to Jerome Contamine for the financial aspect. Jerome?

Thank you, Wayne. I move to page 24. I mean of course sales have been already presented. But here you have another angular view, which is the contribution of acquisitions.

For the third quarter, there was not much because most of the acquisitions we did had already been counted for in the Q3 2009, so the main gap is coming from Chattem, and to a lower extent, Oenobiol.

On the full year, on the year-to-date basis, the overall contribution of acquisitions, which is another leg of our strategy, is an increase of 2.1% against last year.

As we all know, this does not include sales from Merial, which are not consolidated, as long as we are considering entering into the joint venture with Merck with the merge between Merial and ISP, as we all know.

You see also from the slide, the nice tailwind from exchange rates. Of course, the US dollar is the main contributor, but as I now tend to say on every quarter, the fact that we are very much exposed and present in many emerging markets or various markets, show that there is also positive contribution of the strengthening of emerging market currencies from all over the world, which I think is a trend which could be not just a short-term trend, but could have been more of a medium-term trend, to the extent you can predict currencies.

On the next slide, while you see the impact on the gross margin of the shift of activity, obviously, we are losing sales with very high gross margins from some of our blockbusters. We've done some acquisitions, and we are replacing that with sales from them being more generic or CHC.

Nevertheless, all you know, we have reached just -- well, rather limited decrease, by 1.3% of our gross margin, of other quarters last year, despite the fact that not only we had the impact of the generification, but also the impact of the increased costs of heparin which is still hurting our P&L. Even if now heparin costs are stabilizing because of the delay of production of Lovenox, which is roughly speaking over nine months delay from start of production to delivery to the market. This heparin increased cost is still going into the COGS, and will continue to go into the COG at least up to the end of the year.

But we were able to compensate for that through two effects, partly. One is the improved reduction of production costs and efforts to bring down these production costs by unit. And also the second thing has been the positive impact of the currency during the quarter.

Moving to slide 26, R&D, well R&D has -- I mean the R&D ratio is down by 1.1%, which is significant. Now we are around 14%, as you can see from the slide as compared to 15.6%, which is well, the sign of both the way we are controlling our costs, but also the way we are completely shifting the way we spend money on R&D.

So behind the decline of 6.4%, you have a much stronger decline of our internal costs, which is a result of the transforming and some increase of spending on either clinical trials or external partnerships which leads to this overall reduction of R&D. So it's clearly the impact of both portfolio rationalization, reduction of internal R&D costs, and also a shift to more external spending, and therefore [viabilization] of our costs, which you can see from the overall R&D spend on the ratios, which I think is positive.

SG&A, well, we have spent a bit more on sales and marketing costs during the quarter. This has been already mentioned by both Chris and Hanspeter. In fact here, again, there's been a big shift between significant reduction in mature markets for declining products, either blockbusters becoming genericized or [their] products are more spent either on new products such as Multaq and of course Jevtana, but also in increased spend in emerging markets.

Still, on a like-for-like basis, and if I exclude acquisition, SG&A has gone down by 1% quarter on quarter from 2009 to 2010. And the ratio of SG&A to sales has gone down over the period if I compare the fourth quarter -- the fourth quarter, sorry, of 2009 which was a ratio of 25% to the 24% level for the first three quarters of 2010.

If I go down in the P&L from -- on the page 28 and thereafter 29, maybe just a few other comments. A, as you may recall or remember, we are not benefiting anymore from royalties from Teva on Copaxone since the second quarter of 2010, so on a like-for-like basis, it's still hurting us on the other current and operating income expense.

On the other hand, we have a stronger contribution of our share of profits of the BMS sanofi-aventis partnership in the US venture. And we benefit also from the 100% consolidation of Merial, as well as better performance of Merial of other quarters as compared to the same quarter in 2009.

On the other hand, as you can see, the minority interest has a lower negative contribution on a like-for-like basis. And this is of course the result of lower sales of Plavix in Europe. All in all, as you can see, our business operating income is up 7.1% on the published basis and slightly down 3.4% on the constant exchange-rate basis.

Now if I go down to the net result, here, we arrive to what you know already, an increase of net margin despite of decrease of sales and the decrease of -- slight decrease of sales -- and the impact on the gross margin, we have been able to more than offset that through a decreased operating cost; and also increased contribution of nonconsolidated joint ventures; and good control of financial expenses; as well as slightly lower tax rate. So that the overall net margin rate is up from 30.7% to 31.6%.

The business EPS is up 8.6%, down 2.3% from the constant exchange-rate basis from EUR1.74 to EUR1.89.

Cash, next slide, here again, I think that is really the sign of the very strong financial health of the group. Over the first nine months, we have generated EUR7.7 billion of net cash from operating activities. We have spent around EUR900 million of CapEx, which by the way is less than last year. We show that we have good control of CapEx spending.

We spent [EUR101] billion out of which EUR700 million on the restructuring cost which is linked to the reorganization of the group which was launched last year as of course, impacts the cash flow. But in spite of that, we have financed over the three quarters both all the acquisitions, EUR2.2 billion of dividend, [EUR3.1 billion]. And we have been able to reduce our debt by EUR500 million over the period, so keeping down -- again, going down to a very low gearing at the end of Q3.

So if I have to summarize before we move to Q&A, the growth platforms have clearly limited significantly the impact of loss of sales from key genericized products. We have been able to continue to reduce our OpEx to sales ratio from the 38.1% to 37.5%, compensating partly to [the decrease] of gross margin. We have a high business operating margin sustained and a resilient business EPS despite of patent cliff.

We have upgraded our guidance slightly to the level of between 0% and 2%, as mentioned previously. Of course, this takes into account the fact that in Q4 we could expect some erosion of Lovenox sales, as well as generic competition on Taxotere. And as it was reminded by Wayne, the fact that we don't expect of course sales of H1N1 vaccines in Q4 contrary to Q4 2009.

We think now that we will be able to deliver cost savings of more than EUR1.2 billion by end of 2010, so we will have reached 60% of our overall EUR2 billion plan over two years, clearly being somewhat ahead of our schedule. We have generated strong free cash flow and, therefore, being able to finance both dividends and acquisitions and reduce debt over the period by EUR500 billion.

I think now I can turn to the operator and we can turn to Q&A.

Yes, operator, we are ready to take questions now. As always, I would like to ask participants to limit their questions to one or two at a time to allow as many people as possible to participate in the discussion. You can always come back into the queue with a follow-up question if you want to.

(Operator Instructions). Graham Parry, Merrill Lynch.

Thanks for taking my questions. Just first question with regards to the strategy seminar you are planning for second quarter next year, is the timing of that because you are expecting to have Genzyme wrapped up by then? And should we think of this as a forum for a new mid- to long-term guidance for the group?

Second question for Jerome, just an update on the COGS expectations for the full year, I think you talked about 29% earlier this year. Nine months, you are running below 28%, so presumably because of some of the FX benefit. And if you could just clarify exactly what the FX benefit was in third quarter.

And then in Lovenox, can you just give us a bit more of a feel for what proportion for sales exactly you think you are preserving in the hospital setting versus retail? And some kind of feel for what's happened to pricing and where the price differential is on your product versus the [Sandoz] product for [now]? Thanks very much.

Well, Graham, I hate to disappoint, but on the strategy session, we actually announced at the end of the second quarter already before we were very far down the path that we were going to do this in mid-2011.

Largely, it's around my view of when investors might be willing to listen to such a message. I mean, I think, again, I won't harp on P/E ratios based on 2013 earnings, but I think it's fairly clear that at this stage today, investors aren't really, really looking beyond the patent cliff and are more preoccupied by short-term issues and short-term patent issues then who's actually going to make it coming through the patent cliff.

I actually think sanofi is extremely well-placed to come out as one of the stronger companies post patent cliff, but I think we have to get a lot closer to the patent cliff before people are really willing to think seriously about that period.

And my judgment is by mid-2011, you are kind of 12 to 18 months away from it, and I think that's more in the investor horizon, and that's why I chose it.

I just think especially given the volatility of markets and other uncertainties it would be a bit of a voice in the wind if we were to do it any earlier. Jerome, do you want to take the margin question?

On the COGS, Graham, yes, there have been some positive impact on the exchange rate ratio for the Q3, which accounts for around 0.7%. Now if I take the year to date, I mean the exchange rate impact is basically nil. So, the overall COGS to sales ratio over the first nine months is down or increased I could say by 2.2% from 25.6% to 27.8%.

We should still assume and we have always some uncertainty because it may depend exactly upon how much we're going to set on Lovenox, for instance, over the fourth quarter. Also, you need to keep in mind the impact of the fact that the mix of vaccine sales would be somewhat different because we don't have H1N1 sales in Q4, so I would expect, depending upon exact exchange rate, something slightly better than the 29% that we gave at the beginning of the year; as a guidance, somewhere between 28.5% and 29%.

Now on Lovenox, so, to answer the third part of your question, the first answer is an easy one because it's a very positive one. We ensured today and as I indicated before, this is far [too stable] since two months, nearly 90% of the institutional market, which is, in essence, a hospital market, and that's really an amazing figure.

On the commercial policy, I regret that for understandable reasons I cannot give you a lot of detail. We have discounted Lovenox before the end of patent and we continue to discount.

I have to leave it with a general statement. I think what we do today is reasonable in the overall context of having a generic competitor, which is substitutable. So it remains in terms, but evidently they had to increase our discount policy.

Thank you.

Luisa Hector, Credit Suisse.

Good afternoon. On Lantus, can you expand a little bit more on the difficulties that you alluded to in that market? And maybe give a bit more color on the US sales, where you are impacted by the reforms, but also by inventory levels. So just any color around that, and whether inventory was significant and changes going into 4Q.

And then on Menactra, again, a bit more color. I think you mentioned changes or the latest comments coming out of ACIP. But anything you can add on the competitive outlook with Menveo, particularly now that we have the infant data on Menveo, or certainly some headlines and how that fits versus Menactra, given that the timing is looking to be perhaps fairly close now.

And final question, just what was the $171 million impairment charge please?

Okay, Hanspeter --

So I go ahead with Lantus. I think the good news, once again, that Lantus is the number one prescribed insulin and remains it of course, and is growing by approximately 5% in total prescriptions on a year-to-date growth versus the previous year.

The growth of the insulin market is lower. It is in the neighborhood between 3% and 4%. So, I believe specifically for the US markets, there are, in broad terms, two effects. One is the healthcare effect, which, of course, translates into accelerated discounts. And you can estimate that about half of what we have made as an accrual for the health care reform is due to Lantus. So, this may be a ballpark of EUR30 million approximately, EUR40 million perhaps for the quarter.

In more broad terms, I believe that the American market is suffering by general economic factors like unemployment and so on and so forth, which makes people have less means to pay for their medication, and consequently, they continue to see less frequently their doctor which of course is deplorable, but overall, there is a change in the market.

This was historically a market dominated by 2.5 competitors, Novo Nordisk, us, and to some extent, Lilly. And it's a market which is, today, much more crowded if you look to let's say share of voice, three or four years ago, you see today a totally different picture with the new competitors like Merck, like Novartis, like GSK, and others.

So as a consequence [is the main starters] besides share of voice, of course that [insulinization] is getting delayed, which is, today, a negative effect. But over time, at the end, we get the patients or it is [made] -- found clinically, but that's the way it is. We can still get the patients, but we get them later.

And the impairment charge, Jerome?

Yes. We have -- so in fact, as you know, all this has no cash impact. And, as you, of course, as you know, allocation of goodwill and intangibles have been created at the time of the merger between Sanofi and Aventis now five years ago, and have been allocated to various products. So we are regularly reviewing the value of these products on the balance sheet versus the actual economic value. And regularly we take some impairment here and there when of course we don't [upgrade] the value of other products such as Lantus or whatever. So it's mainly coming from various products.

The other thing is that as you -- as it was mentioned during the IR seminar on diabetes, we are evaluating the recent pre-clinical observations and performing some additional pre-clinical work on the insulin sensitizer that we had acquired from Wellstat. And we took, let's say, the cautious view that we should write off what we have on the balance sheet on this product at this stage even if we don't know the exact outcome, which counts also for around EUR40 million, which was what we paid as an initial milestone.

And Menactra, Wayne, do you want to take Menactra?

Sure. First of all, yesterday, the ACIP made a recommendation to add a booster dose of mening conjugate, which obviously is Menactra, at 16 years of age. And, they do this because of the concern that this age group, as they enter college and military, will need a booster dose to have full protection. So I think it recognizes the severity of the disease.

This is the first step in the process. It now goes to CDC for approval. It will then be published in what's called the MMWR, which is a notice to the healthcare providers. And then we will go to the BFC program. So, I think what we're going to see is that there will be an expanded marketplace in the US, and we will start to see some of the benefits of that in the first half of 2011.

As it relates to Novartis's product, which you indicated had shared data on their incident indication, and they reported that they will file for that indication later -- sometime in the fourth quarter -- we have filed for our infant toddler indication, which is nine months and 12 months, earlier this year. We expect licensure around midyear in 2011.

And, the reason we pursued infant toddler is that the -- number one, it's a very crowded immunization schedule in the first year of life, and the two-dose product, clearly, will be more cost effective than a four-dose product.

And there's been evidence shown medically that if you are immunized at the infant toddler stage, that you will provide broad protection, again, for all age groups because of the effective herd immunity.

Tim Anderson, Bernstein.

Thank you. I have a couple questions. The other pharmaceutical sales figure in Western Europe of EUR628 million showed a fairly big decline, presumably due to various austerity measures. And in the other direction, that collection of products did well in emerging markets. How should we think about the trend on this line item going forward both in the aggregate and then maybe different geographies?

And then second question is kind of a broad one on emerging markets related to pricing, specifically, what is pricing power like in these regions in terms of drug companies' abilities to take price increases? So if you look at your book of business in emerging markets, for example, what did pricing do year on year, ignoring one-offs, things like Turkey? In places like the US, you can obviously still take price increases. Does the same happen in emerging markets?

Yes, it's absolutely true what you say. The negative trend in Europe is largely caused by price decreases. I think I mentioned a very sharp decrease we had to suffer in Spain. It is also true for Greece which is a market overall in turmoil, not only in respect of pricing. And it is also true for Turkey, which is not geographically inside the European Community, but part of the European -- the emerging markets, of course.

In all those parts, countries, we have suffered price decreases in two digits up to 25%, for example, in increase in Greece.

I believe that overall that's the trend unfortunately which will persist for the quarters to come because all of the events I was mentioning, except Greece, happened after the summer period, so we have at least two or three quarters more to come until we will then come to the level post price decrease.

The question where we can increase prices, it's an easy one. We can de facto not increase any prices in the European Community with very, very few exceptions if hospital products are concerned.

In country, in Turkey, we still have a kind of price increase system, which is a government installed system, which allows, according to inflation over time, you can adjust the prices for imported product. This is something which is today in place.

It has been historically always in place. Of course there is a certain risk that this could be subject to change, but I must say I believe that that's a decision not so easy to be taken by the Turkish government because the Turkish market to quite some extent is depending on importation of pharmaceuticals. So I believe that overall there is not too much of a risk there.

But inside the European Community, when the prices are down, unfortunately, they remain down.

And emerging markets?

In emerging markets, of course it is one of the positive aspects that in emerging markets there are totally different rules. You really have to measure yourself, benchmark yourself, against your competitors. Can your customer most of the time evidently -- if the patient can't afford to pay for it, and then in many markets, you are really free to adjust your prices even in a market like China. And they're even for relatively higher-priced innovative products.

Next question.

Vincent Meunier, Exane BNP.

Thank you for taking my questions. The first one is on Genzyme. Can you please tell us what will be -- what will make you decide to give up the process after December 10?

And regarding your margins, the first question is on R&D. After two quarters at 14%, and also taking into account your comments regarding the shift of R&D spending, is the current level sustainable? And on SG&A, also, is the 24% level, approximately a safe assumption for full year 2010 and beyond?

All right then. On Genzyme, we've got a long way to go to 2010, so I would propose we deal with that when we get there. We've -- I think we have an extremely compelling offer out there. And, at some point, shareholders will have a choice of going with some of the [hozy fat] forecasts and hanging in with management or taking a cash offer. And I think it's premature at this stage to really judge how they're going to choose. And, obviously, we will spend most of November ensuring we're listening to shareholders.

On margins, I'll defer to Jerome. I would just say on the R&D, you know R&D spending can sometimes be lumpy. What we're really trying to do on the R&D side is split the budget between essentially fixed infrastructure costs, so sites, people, depreciation, energy, security, grass cutting, the whole thing, and really try to manage that as tightly as we can, and then look at research and development projects a little like we do capital projects. So, they would have to be return on capital metrics, paybacks, risk assessments. And so that number will kind of go up and down as we have projects.

So, the difference is really versus giving a site or a team a budget. And typically what you used to find is if something went down in the pipeline, people decide well that's my money, I'm going to go spend it on something else.

Here, it's a project by project basis, and only those projects that meet -- not just financial, but also development and commercial hurdles, are going to be developed. So you may find that number fluctuate around a little bit. SG&A I will turn over to Jerome.

I would then to say it would be the same on SG&A. I mean it's clear that on one hand, we really continue to get costs down on paid products as well as of course any spending which was linked to a genericized product. But on the other hand, we need to keep in mind if [a stat] blew her head not in 2010, but probably in 2011, that we're going to launch in Europe, Jevtana, after launching the US. Hopefully we're going to launch iniparib; we're going to launch our BGM, so you also, you need to sustain these launches.

So here at this stage, I mean if you look at the return on commercial investments you can make, I mean you need to think a bit about along the years 2011 and 2012 and how we built the growth of these new products. And this is where the ratio as such would not necessarily exactly be meaningful.

But are we going to continue to decrease or more stabilize [a generic] to sales ratio next year, I would tend to say a bit more the latter. So after several years of decline, we're counting to strongly cut on some mature areas, but spend more on some new areas on new product, taking in, once again into account, the fact that we have a few launches to take place next year. So it's a rough idea at this stage of course will be in a better position to give you more precise ratios at year end counts release. But let's say at least we will maintain this level.

Yes, I mean I think the, again, as Jerome has said, the idea is take fixed cost out and take costs out where we are no longer able to grow. So, you're certainly seeing us do that in the US and also Europe, but there is also investment in markets that are rapidly growing not only geographically but also business lines, such as Consumer Health.

And obviously we have the launch of Allegra next year, for example, where we will certainly want to make sure that that's a successful launch.

So, it's more -- it's not just a question of margins. It's also trying to variablize costs to a maximum degree so that we can adjust our spend to the growth opportunity.

Okay, thank you. And maybe a follow-up question on this. What is the proportion of fixed costs at year-end level and the SG&A level?

In R&D, and here, my answer will be more -- well, yes, in R&D, the aim is to be in the range of 50-50. We are not yet there. We were around 70/30 let's say end of 2008.

This year, we are more around 64 to 65. If I look ahead, this ratio will continue to decrease. Of course also it depends upon how much we spend externally because if you increase the external spending, you more easily improve the ratio. So, we're not yet at the 50% ratio which could be a sort of a golden rule in our view. But year after year we are decreasing our share of fixed costs. And here again, in 2010, we should be around 64% to 65%.

Thank you very much.

Andrew Baum, Morgan Stanley.

Thank you for taking my question. Just a couple please. Firstly, what percentage of your US Lantus revenue do you think you can protect post 2015 from the risk of generic insulin, given that currently you've only got 15% I think of insulin administered by a pen. But obviously you have your GLP-1 compound.

And then second, when do we get an update in terms of the patent term extension for your part for Jevtana? And then is there any chance that Multaq in the US, you may maintain exclusivity beyond the current 2016 time point?

Yes, Andrew, let me start with Lantus. I think that's really so far down the road that I personally would not like to commit to a figure. So, I really have to remain very broad once again I believe. And you will remember that I told you some years ago it's the same for Lovenox I believe that the Lantus market will follow different rules than let's say an average chemical compound because it's a complex market. It's a market where switches definitely will not easily occur. A patient who is content on a product, the physician will be very much hesitating to switch him to a generic.

I have to remind you that also today there are no clear guidelines in the United States how bio-similars of insulins will be handled from an FDA standpoint overall, to name just two important factors which will be [determinating] the penetration of generics when they [towards of] Lantus.

On patent extension for Multaq, yes, we believe we have a number of options. I ask you to understand that I don't want to go so much here into the details. In any case, we have a situation which is 2011 plus five years. That's a minimum. So this makes us into 2016. And definitely we see good opportunities to have a pediatric extension which would evidently give us six months more. And beyond we see a number of opportunities to protect the product further.

And then, finally, on Jevtana, yes, Jevtana it's the same situation here. We have a five year additional protection and we have 10 years more to go in Europe.

Thank you.

Mark Dainty, Citi.

Thanks. Just two quick ones. On the guidance you gave for Jevtana, the oncology seminar, did you include competition from Abiraterone in that?

And secondly, would you consider in the sort of medium term ever moving to a reporting structure that gave EBIT on a divisional basis? And by divisional I mean OTC generics, and I know you do it for vaccines already. Thanks.

The oncology, the Jevtana guidance includes competition; we have confirmed that. And --

On the second question, I mean, it's a fair question. The point is that it's easy to ask, not easy to do, because you can't have this view to look at divisions, but you can have another view to look at regions, for instance. And of course, in the end, you have to cross information between the margin on the region, such as Asia, such as Europe, such as the US versus the margin you can generate per division.

So, I would say at this stage, the way we are organized doesn't allow us to go too far in the allocation of -- we do that, but to have a fair view on the allocation of cost beyond let's say allocation of cost of COGS as well as marketing spending.

Now, one of the advantages of sanofi-aventis is also to have a global spend so that we can share quite a number of costs, whether that is medical costs, whether it's G&A costs, on a country by country basis, on a region by region basis. So yes, we're following that for internal objectives, but I would say at this stage, I would not consider releasing on a regular basis this type of information.

Perhaps I can go again on the previous question on Abiraterone. I believe that when we had the seminar here in Paris, we were not aware of the clinical outcome data of Abiraterone, which came out very shortly after. I might say that we have been pleasantly disappointed. The rates are not as strong as we had built them into our models.

Secondly, I think it's important to underline once again that amongst all those products, Jevtana is the only one which has proven its efficacy against an active comparator (inaudible) which evidently is CSW treatment with Taxotere.

Jevtana is very easy to be administered, and we believe that in fact we have a very, very robust set of data and product arguments which makes us not afraid at all of upcoming competition.

And on top of, we believe that any kind of improvement in those fields increases the overall interest into the possibility for treating those patients and will extend the overall market.

And not -- the guidance provided on Jevtana only reflected second-line prostate cancer. As you know, we're going to embark into other studies next year.

Okay. Thanks very much.

Mark Beards, Goldman Sachs.

Yes, thank you for taking my questions. Firstly, I just wondered what would need to happen for you to start thinking of an authorized Lovenox generic in that market?

Secondly, your -- just more quantification on the European pricing pressure that you've seen in the last quarter and then going forwards. And then thirdly, the EUR321 million share repurchase in the quarter, does that in any way signal a change in stance on cash utilization?

Okay, just on the authorized generic on Lovenox, I mean, I'm sure there's all kinds of other people would love to know that answer. So I'm pretty sure you appreciate that we don't particularly want to tip our hand on that one.

If I take your question by the word, you said when would you start thinking of, there, I can easily say that I think there's a couple of years about it which means we would be ready when we believe that the right scenario occurs. For the time being that's not the case.

on the share repurchase, the strategy here, I would say the policy, has been to compensate for dilution of any exercise of stock options. And actually the EUR300 million we bought back we have bought back during the first quarter as a way to stabilize exactly the number of our outstanding shares. And I think we will continue to go along this line, but it's clear that beyond that, we still feel that there is more value to create to our shareholders by using our cash to do the right acquisitions on a selective basis, and resume growth a growth, a sustainable growth for the group as a whole.

And EU pricing pressures?

On the EU, perhaps I can give you some figures while -- but what we can say for 2010, at the overall impact on here, I will include Turkey, which as a matter of fact is not Europe as Hanspeter just mentioned and also, I mean was decided somewhat independently at the end of 2009.

The overall impact for 2010 is in the range of EUR200 million for the full year, so i.e. around EUR50 million to EUR60 million, EUR65 million, let's say, during the third quarter.

Are we going to see more of that? Of course this is the impact. You could say that this EUR50 million is something which represents what could be the impact of what we know today and which is reproducible for the fourth quarter. Well we don't see anything else coming, but I think the generic comment that there might be some other price cuts coming in the future as a way for European governments to take care of their public spending and public deficits which, as we all know, is an issue.

But on the P&L, I mean a profit basis, we are compensating not all of that, but a significant part of that to cost reduction on cost cutting on a regular basis, as long as we have been used to that now for a certain number of years.

And I don't want to put it this way, but I suppose if there is one good aspect about patent expiries, that it actually exposes us less to both things like healthcare reform in the US as well as EU pricing pressures. The more we move into businesses like vaccines, Consumer Health, generics, actually the less we are exposed to those pieces.

So as you looked at the evolution of the business over time, actually, the patent expiries are clearly the bigger part of the impact on the pharma business. And then, the EU and the US impact becomes increasingly less.

Thank you.

[Steve Scala].

I have three questions. First, if another generic Lovenox were to enter the market, are your contracts such that share would be retained, or should that not be the expectation? So in other words, did you enter multi-year contracts post the Sando entry?

Secondly, for Wayne, could you revisit the EUR4 billion forecast for vaccines in 2010? Given the solid Q3 and the comments about Q4, it seems that you are on pace to even exceed that forecast. Would you agree?

And then lastly, I may have misheard, but did Jerome say that sanofi is getting a bigger share from Bristol of the Plavix joint venture? And if that's true, can you explain why that's the case? Thank you.

Well, I can answer the last question. That's not true. Maybe I did not express myself well. There is a higher contribution because the sales and the profits in the US are increasing. And we get a bigger -- the value is higher, but of course the share remains the same.

Thank you.

On the Lovenox, I really kindly ask you to understand that we will not go into our agreement in detail. But, nevertheless, in the environment, I think it is important to look to the fact that I think at the end of last week, another generic company decided to sue the FDA because the FDA had decided to ban importation for their future generic product from Chinese factories.

So, I think that's a certain indication for the competitive environment in the US. But, you understand that I cannot answer directly to your question.

So you think it would be unlikely for a generic to sue the FDA right before they get an aNDA. That's probably a pretty reasonable assumption.

I think before you do that, you probably have nearly given up.

Yes. Wayne, do you want to take the -- your forecast number?

Yes. I mean, currently, we estimate that our 2010 reported sales should be close to the EUR4 billion objective that we had set at the beginning of the year. And it's going to depend upon how the seasonal flu finishes over the course of the next several weeks. So I think we're pretty much on track to be very -- to achieve it or be very close.

If I may, it will depend upon exchange rates as well.

Thank you.

Tell me the dollar, I will tell you if we make the EUR4 billion.

We are just in budget process, so I'm sure Wayne is going to be hedging his bets before he goes into the budget for 2011. We've got probably time for one more question I think, operator.

Justin Smith, MF Global.

Thanks for taking my question. It's just one on Genzyme for you, Chris. I understand why you disagree with a lot of the assumptions that Genzyme put out last Friday, but nonetheless your offer still implies a lot of long-term value creation at the company. I just wondered if you could kind of help me understand where that long-term value comes from or if -- I understand if that's too premature to answer that question.

I'm not sure I understand the question.

Well, when we look -- you look at where Genzyme is trailing, and we've all run our BCFs and certainly your offer implies a lot of value creation beyond the end of the decade. I'm just trying to understand where you see that coming from.

Yes, I think you're right that it probably is premature. It's probably a question I would love to go into some excruciating detail on, once we own the company.

Fair enough.

All right. I think that's it. Well, folks, appreciate you dialing in. Obviously, over the coming weeks, we will have an opportunity to talk to some of you as we go out to various investor meetings. And obviously our investor team as at your disposal.

Again, I will finish by saying I think given all of the storms that are around, generic entry patent expiries, healthcare reform, EU reform, I think our Company is weathering those storms well.

I think the decisions we made last year to reshift our resources to new growth areas and to trim our costs, as well as, I think, to really reinforce our pipeline, are starting to bear fruit. We've got a long way to go yet, but this time last year, we were still thinking about the patent cliff as somewhere in the future.

If you look at this year, we've seen Plavix in Europe is basically gone. Eloxatin is gone in Europe, and we will come back for a brief cameo over the next 18 months in the US, but I think that's pretty much certain.

Ambien CR has now got a generic, and it's -- we will see what happens with Taxotere.

So we are already a long way into the patent cliff here. Obviously, Plavix and Avapro will be out there going forward.

But I think increasingly, uncertainty is being lifted. We no longer have the uncertainty of what's going to happen with a Lovenox generic. And, so I think increasingly, we are seeing clearer where we're going. And I guess going back to Graham's first question, is I think a lot of that increased certainty will give us an opportunity to have a better discussion with you next year on sort of more longer-term strategy and how we see the company evolving. And particularly trying to give some picture not just for an update on 2013, but really about where is the Company going in the post 2013 period?

Because I think as we go into 2011, and even what I'm hearing from many investors as I go around is that people are getting increasingly interested in not just what happens at the end of the patent cliff, but what does that look like going on out into the '15, '16 period? So we are working on that and we would hope to be able to share some things with you at that seminar.

In the meantime, thanks very much for your interest in sanofi-aventis, and we will talk to you all soon.

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