Sanofi SA (SNY) 2010 Q4 法說會逐字稿

Okay, well good afternoon and good morning to those of you following us from the US. Welcome to our 2010 annual results conference. As you well know, this conference is also available by webcast and the slides that we'll cover today can be found on our website.

As always, I must advise you that today's presentation will contain forward-looking statements and those statements involve known and unknown risks and uncertainties which may cause actual results to differ and I encourage you to refer to our Document de Reference and our 20-F for more details on those risk factors.

So with that, let me just introduce our agenda for the day and our speakers. We'll have our CEO, Chris Viehbacher, who will cover the 2010 achievements and the 2011 guidance followed by Jerome Contamine, our CFO, who will cover the financial performance for 2010. We will then have Hanspeter Spek, President, Global Operations who will provide you with a business update. Then Olivier Charmeil will cover the Vaccines business. And then Dr. Elias Zerhouni will give you an update on R&D and after that we'll have about 45 minutes left for Q&A. So with that I'll leave the floor to Chris.

Thank you, Sebastien. Good afternoon, everybody. Sebastien's already made some introductions but perhaps just a warm welcome to first, Olivier Charmeil on your outer right who's just been named Head of Sanofi Pasteur and of course a warm welcome to Dr. Elias Zerhouni. We're very excited that Elias has agreed to become President of our Global R&D operations. As some of you know, Elias led the National Institutes of Health for six years in the United States, was Dean of the School of Medicine at Hopkins. But you may not know that he's actually also an entrepreneur and has created five companies. So he's got a broad science and business background and as we'll talk about in a little while, we're moving from cleaning up and restructuring R&D to growing R&D and I think Elias is extremely well placed to do that. Olivier, I think, is extremely well placed also for Sanofi Pasteur. There's a huge opportunity in emerging markets and Olivier most recently has been very ably leading our Pharmacy business in Asia Pacific and you'll see some of the results on that.

So let's move to -- I think we need to go back one. The slides on the little screen aren't moving so I'll read back here. So let's talk a little bit first about 2010 and I'll touch on 2011 and then we can go into some of the detail. It's been very interesting, I was at Davos and ran into Joe Jimenez just after he had reported his first-time results and I think they were up plus 15% and their share price dropped 2.4%. And so he was a little discouraged. And I said, you know, don't worry about it; this is an industry that tends to focus on the negative. People start worrying about patent expiries the day after you launch a new product. If you're any good in R&D they're not going to give you any value for it in your portfolio and if you're not any good at it they're not going to like you either. So the best thing and we've got one major investor who says just keep plugging away and ultimately you will create shareholder value.

I don't know whether that's true or not but it is certainly true that nothing in this business should be a surprise to anybody. I think two years ago, and I go back through every year and look at what we said in the past to make sure that we are being consistent. Two years ago I stood up in front of a lot of you and said 20% to 25% of the sales of this Company are going to disappear between now and 2013 because of generic competition. Not a lot we can do about that. When that goes there's going to be a short-term cash effect but I tend to look at those older products basically as area under the curve and a source of cash. But they're not any more a creation of shareholder value.

The other thing that I discovered over the years was that the only way that you're really going to create any shareholder value in this business is if you could actually show some level of sustainability and predictability of earnings. The number of quarters that I've been through in my life, and even in the old company where you come up with some double-digit earnings only to see the share price slide again because people say, yes, you had a great year but, oh, next year you've got this going off patent and that going off patent.

And so that's why to me we have to really focus on sustainability because this whole industry is at what, a 25% to 30% discount to the S&P 500, CAC 40, whatever your favorite index is. And so it's not really a question of can you make the share price go up 5% or 10% but really to get back to at least being as valuable as people who make chocolate bars and soda drinks. And that's not where we are yet.

So that's what we have been really setting out to do for the last couple of years and we're continuing to do it. And I'll show you in a minute but 2010 we lost EUR2b of sales due to generics. These aren't low margin businesses so you lose EUR2b off your top line, that has an even more disproportional impact on your bottom line.

We went through healthcare reform. It cost this Company about $200m last year in the US alone. Cost reduction measures in Europe cost this Company about EUR250m last year and again when you take hits like that on the top line they essentially flow straight through to the bottom line, certainly before tax. The only little bit of satisfaction I get out of this in fact is that if a European government cuts our price I get to pay a little less tax at the end of the year as well but of course since the tax rates are less than 50% the government still are ahead on these things.

As we look at 2011 that healthcare reform is going to continue. The excise tax bites this year. So it's another $90m this year on US healthcare reform versus $200m last year. Anybody who lives in Europe knows that the structural deficits are not going to go away any time soon and so we would expect the same level of activity on price decreases and the like in Europe as we go forward.

But I do think, what I like to look at, and I don't particularly spend all my time thinking about 2011, but really about where this Company goes beyond that, is to say can you find sources of growth where you've got some level of competency, where you've got some ability to compete and which basically offer you some barriers to entry that means that this business isn't going to go away just as soon as you've built it up. And that's why we defined our five platforms of growth to which we've added animal health as a sixth. But all of these businesses somewhere are in pursuit of growth reserve somewhere in the world and give us some sort of competitive advantage. It doesn't mean that there's no competition but it does mean that we're not going to lose 90% of the business within three weeks of a patent going.

And 2010 really was one where we really started to see these growth platforms start to get some critical mass, start to weigh heavily in the sales and profits of the Company and really start to emerge as what Sanofi-Aventis looks like longer term.

Emerging markets. No company in this industry can say they have sold more in emerging markets than in US and Europe. I mean to me this is almost unthinkable. Somebody told me five years ago that a major pharma would sell more in emerging markets than US and Europe, I'd think they were in their own warehouse taking some of their own drugs. And yet that's the case today. And emerging markets is a EUR9b business growing at 16%.

Nobody thought of Sanofi-Aventis as being a consumer company two or three years ago, especially inside of Sanofi-Aventis. And it's a few products here, a few products there, we've cobbled that together into a regional business. We've been able to bolt on some transactions, we were nowhere in consumer healthcare at the beginning of 2010. Now we not only have a consumer business but we're about to launch Allegra in the OTC market, a switch that one of the CEOs of the major pharmacy chain calls the most interesting OTC switch for the next five years.

We started off last year with no business in consumer in China, obviously a pretty critical market where you'd want to be in consumer. And within one year we've created a majority-owned joint venture in consumer health and done a NASDAQ-quoted Chinese pharmaceutical company with probably the only nationally recognized brand in this space in China, pole vaulting us into one of the top 10.

We don't have a pipeline. But Jevtana suddenly came through where none of us were expecting Jevtana to come through, 30% survival benefit in advanced prostate cancer. Launched that in August, EUR82m in the first four or five months out. For most people a cancer drug is a major cancer drug if it does $100m in its first year out. This has exceeded that in the first five months.

Multaq, we all read an awful lot about Multaq but Multaq continues to progress. EUR172m is a very interesting level of sales. And when I look at it, we're included in guidelines. We got this product reimbursed in all major European markets within 12 months of an EU approval. I challenge you to go out and find how many other drugs in the last five years have accomplished that. The average in Europe used to be four years from the time of approval to reimbursement in all major markets. So somebody sees the value in Multaq somewhere, despite what we're reading.

Animal health. If I ever wondered whether animal health was interesting I can tell you the level of interest that we have in people wanting to buy whatever we're going to divest out of the Merial-Intervet merger tells me that everybody sees fundamental strength there. Growing population, concerns about food supply, growing incomes leading to more pets around the world. Again this is one of those sweet spots that provide sustainability of sales and earnings growth.

We all know that blockbusters have huge margins and as we shift our business to these other businesses we have to be mindful of our cost structure. Two years ago we announced a cost reduction program of EUR2b by 2013. We'll get there two years earlier, by the end of 2011.

I'd also say I get a lot of questions about margins but if you think about Sanofi-Aventis it's a third in the US, a third in Europe, a third in emerging markets. Nobody's got the same level of exposure that we do to emerging markets. And yet we've got one of the highest margins in this industry. So because we can produce locally, because we've got local cost structures I think we've been able to do a good job with the cost savings programs that we have been able to maintain our margins base.

External growth has clearly been part of what we've been doing. Did another 37 transactions in 2010. And I think one of the most important things was, we were doing bolt-on transactions and partnerships in 2009, 2010 when we had a whole lot less competition for those, when we had cash and valuations were suppressed. So there's no way that you could do -- when I look at some of the transactions more recently in Brazil, for example, there's no way you could buy Medley for what we paid for it in March of 2009 just to give you one example.

R&D, I'll let Elias talk about that. We've moved from restructuring to let's grow this thing and apparently there's a possible acquisition of Genzyme out there but we'll come back to that.

So again here's where we see, despite the EUR2b and all the healthcare reform, sales dipped by less than really 1%, still EUR30b of sales. We've got no Plavix in Europe and we've got a substitutable generic for Lovenox and so forth. We actually grew the thing in profits. This time last year I was giving you guidance from 2% to 5% excluding the substitutable generic for Lovenox. Well, we got the substitutable generic for Lovenox and still did over the 2%.

One of the interesting things is that one of the things we do track is what's the exposure to generic competition. And if you look back at 2008 the first time I presented this slide it was 28%. By the end of 2010, these are sales, this is down to 18%. Pretty much by the time you get through to end of 2011 there's not much left in sales. Now remember we don't consolidate Plavix and Avapro sales so that's not quite fair as a comparison, but we probably hit more or less the bottom point on sales because of generic competition in 2011. There's going to be a little bit more of a hit in 2012 obviously on a profit basis just because of Plavix and Avapro. But we are progressively getting through the patent cliff. It's an ugly process. We're doing what we can on cost management, business development and focusing on those businesses that grow but nobody ever said this was going to be a picnic.

This is exactly the picture here on the growth platforms. You can see the EUR9b in emerging markets, EUR4.3b in diabetes is a huge business, vaccines we'll come back and talk to. We missed the EUR4b on the target for this year, largely because of H1N1 sales being cancelled. We still did EUR400m but we hoped to do EUR600m on that. Obviously there is still a huge opportunity on vaccines but we're going to need to unlock it. For that we're certainly going to need a low cost manufacturing base with Shantha and the pipeline out of that. We did have a setback again on that in 2010. And I think to a degree what's reassuring is that nobody can operate that Shantha facility without know-how of a major pharma, a major vaccine company like Sanofi Pasteur. And I think we've talked about the others.

I'm going to be boring here. Strategy doesn't change. We've got to get better at R&D. $63b spent last year in the United States between Pharma and the NIH on research and development, 22 drugs only approved. We can't keep going like that and I think you're starting to see companies taking ever more radical approaches to that. And I don't think we're done yet either in terms of thinking about things differently. The other two things I think you know and I'm not going to spend a lot of time on them.

Elias will go into the R&D. Again I would say we're really entering into a second phase. We did a stress test, to use the banking term, on our portfolio in 2009. That created opportunities within the budget because we suddenly had capacity, we had budget free that allowed us to do a lot of the business development. So I think we've been able to reinforce it. I'm very happy with what I see as an emerging oncology pipeline. I think we've reoriented our business from being a Lantus product-driven company to a diabetes company. We've created new structures, taken out layers, taken out people, focused our sights. But it's a whole lot easier to restructure than it is to rebuild. And that's where obviously Elias has got a major challenge here.

Pipeline's not zero. Jevtana, we've talked about. Lixisenatide is an opportunity to bring a once-a-day GLP-1. You've seen the results versus Byetta on a twice-a-day so I think we're in good shape.

Allegra OTC, I think Hanspeter will tell you that it will almost certainly have very good sales this year if only because the pipeline fill of an OTC switch is massively bigger than on a pharma launch. Obviously we're going to be interested in seeing what pulls through.

Fluzone High-Dose was a very strong success this year. I mean a whole flu franchise. Whereas last year a lot of our competitors decided to stop production early of seasonal flu, we decided not to. We didn't maximize the H1N1 opportunity perhaps but we didn't lose customer base on seasonal flu. And that came roaring back in 2010 with our flu sales up 33%.

Iniparib, this isn't the first cancer drug to not make its primary endpoint in Phase III. I would remind you we had a 60% survival benefit in Phase II in a tumor area where there's no alternative therapies. You do a Phase III, you're going to get an awful lot of patients of varying degrees of illness severity. We announced on the Thursday and had a huge breast cancer forum here in Paris afterwards and I had an opportunity to personally meet with some of the top experts in the world on this. They're all pretty much unanimous, the second and third line are consistent with what we saw on Phase II but the question is really around patient selection. But we are absolutely committed to this. It's a setback financially but I think at least from a medical and a patient point of view I think there's still an awful lot of hope in here.

Teriflunomide, very interesting product and a number of you have been doing things with multiple sclerosis experts. I think you've seen the promise of a safe oral drug which is what teriflunomide represents.

Genzyme, you've probably seen and been scouring the press already this morning, we're not saying an awful lot about that because we've still got our head down and we're working away on this. We've made progress otherwise we wouldn't have been able to sign a confidentiality agreement and start looking at non-public data. There's a timeline that has been put out there by people who shouldn't be talking to the press and who don't really know what they're talking about. So this is a company that's present in 80 countries and 14 manufacturing plants, due diligence is not something you take lightly, so we're continuing to work through that.

We are still absolutely convinced that this is a strategically sensible and financially attractive transaction for our shareholders. It accelerates us towards biotechnology. It reinforces our position in Massachusetts in a very hotbed of research activity. And there are some very interesting synergies that come out of that.

So nothing has changed on that but we certainly -- look I'm spending shareholder money and we're not going to do that frivolously and we're not going to do that rapidly. We're going to make sure that we do that correctly.

And just in that whole line of a disciplined process, that's what we've been doing. And we have an audit committee that wants to go back and audit each and every one of these transactions to compare returns on investment to what was proposed. The performance criteria I can tell you for management stock options, so all the people you have here so for our stock options and performance shares, one of the key performance metrics is going to be return on capital. An unusual metric in this industry but because we have an external growth strategy, Jerome and I decided that because we've got a lot more focus on cash flow and really use of capital that that was going to be one of the most important metrics that we could use in our own remuneration schemes. So we're going to stand by return on capital as what we personally stand for.

We've had Genzyme but we haven't been sleeping in between. In between we managed to do the BMP Sunstone deal. We've done 37 transactions and all of those are pretty much still standing. So we're quite happy with all of those.

You've seen also that we've done massive amounts of work to really shift resource to where growth is. That's really what we've been trying to do. We restructured and downsized our US operations in pharmaceuticals this year by 40%. And we did 40% because so many of our competitors have been doing serial restructuring. Serial restructuring is terrible for morale and motivation and I think starts to weigh on the performance of sales in companies. We decided to say let's take it -- let's look at the future of this business. Multaq, Lantus, oncology, teriflunomide, how do we design an organization that needs to be oriented to selling and marketing those products. And anything that's not there, let's bite the bullet today. Let's not wait for Plavix to go off-patent before we start thinking about harvesting this product.

So Hanspeter Spek renegotiated the selling and marketing arrangements, not the profit arrangements, but basically reorganized it so we eliminated all of the duplication because Sanofi had a marketing team, BMS had a marketing team, we had sales forces, BMS had a sales force. All of that we've managed to dispense with. We're starting to do that in Europe. Equally we've been significantly investing in Asia Pacific, in Latin America, Middle East and Africa. We have close to 19,000 reps in emerging markets today. So where we have been disinvesting we've also been reinvesting wherever we can find growth opportunities.

And that's the story. So if we look now to 2011, all of this just flows through. The numbers start to change a little bit but the underlying dynamics haven't changed, the underlying dynamics are not going to change without something like a Genzyme transaction in 2012. And by mid-year we'll give you an update on where we see the longer-term outlook of the Company.

H1N1 sales. EUR400m were in the books in 2010. Fortunately there is no pandemic this year and so H1N1 sales are going to be zero in 2011. I've already explained the US healthcare reform.

Generic impact, I think if there's one difference I've seen over the last 10 years, if we ever get a little out of kilter in terms of forecasting between the Company and the investor community it generally is around generic erosion. Somewhere the investment community always seems to be a lot more optimistic about how much business we can keep but there's a very frothy generic market out there and so this is just -- it's a phenomenon I've seen now for years and I think this is a little the case too because when I see some people putting comments that we've got some conservative guidance out there, it's largely around -- if we've analyzed where the differences are, it's around the generic erosion. And that's pretty much mechanical.

Equally, what's going well continues to go well. Double-digit sales growth for our growth platforms, emerging markets becoming one-third of our sales. We want to have a successful launch of Allegra in OTC. The cost savings. And the cost savings are not going to stop. We'll get to the EUR2b. Now we're not necessarily doing it all by restructuring. We didn't have any central purchasing in this Company. We buy EUR10.5b of goods and services and yet we're doing purchasing in every little nook and cranny of this business. So if we can put the EUR10.5b as a book of business on the table and organize ourselves, which is what we've done, there are significant savings to be had.

We've rationalized all of our Paris headquarters. We were spending EUR18,000 per person just for office space in Paris. By restructuring our offices we can save EUR50m a year, just to give you an idea of some of the reserves that are within the Company. Focusing a lot more on cash. Jerome will show you some numbers. Jerome's done a bang-up job on managing working capital and CapEx. Free cash flow increased by 27%. So continuing to look for those reserves in our Company is something that we want to do.

So the outlook comes to this. Yes, we're going to lose an awful lot to generics. We don't really know how much because we don't know when that second generic comes from Lovenox. Teva is supposedly going to have an approval soon but we don't really know. They've got this list of questions. How long's it going to take them to answer it? That will clearly have a change in the dynamic of that marketplace. Taxotere, we don't have a clear idea as well. Eloxatin, we've just assumed that we're going to keep it but obviously the last legal skirmishes are ongoing and so that still remains a risk. We're hoping that when this goes back to the Judge that the same Judge makes the same decision but you're never too sure of these things.

So what we decided to do is say all right, here's the guidance, it's a range because there are some moving parts to this. This does not assume a Genzyme transaction, this does not assume that we lose Eloxatin and therefore we're assuming that we can hold the decrease in earnings per share growth or decline to between 5% and 10%.

So with that I'll turn it over to Jerome for a little bit of deeper dive into finance.

Okay, thank you, Chris. Good afternoon or good morning, everybody. So I will get you rapidly, let's say, through some of the key elements of our financial accounts for the whole year. I'll start with sales. Here you have the Q4 sales, well, inevitably you see a decline on the organic growth line, but keeping in mind that we've booked all our sales of H1N1 vaccines in 2009 during Q4, in fact, if I exclude the H1N1, the decrease has been 2.2%, half-compensated by the acquisitions which are mainly Chattem during this period and also helped by the FX impact which has just for the fourth quarter contributed EUR470m.

So you could say in fact that the Q4 sales excluding H1N1 are really consistent with what we report for the full year which is a slight decrease on an organic basis, 2.7%, totally linked to generics. Chris alluded to that already, Hanspeter will show more around that. Then we have lost a bit more than EUR2b of sales from generic competition and we have recreated around EUR1.2b from organic growth of our growth platforms.

On top of that we have the acquisitions which have contributed on a full-year basis by 1.9%, half of it coming from Chattem. And we have a very significant positive headwind coming from -- a positive wind coming from the FX as you can see because all over the year it means EUR1.3b of extra contribution.

You should always be very careful when prognosis about exchange rates but I'd like just to insist upon one point that maybe it's not just by coincidence that we have benefited from this positive impact of FX variation as long as we benefit from the broad geographical presence of the Company, our large presence in the emerging markets, showing that we are both mitigating our exchange rate risk, we are not just exposed to the US dollar/euro exchange rate but also we try to benefit from the reinforcement, the strengthening of some of these currencies in connection with the strengthening of their economies, whether it is the Brazilian real or the Chinese yuan or the Indian rupee. So maybe there is something which is structural behind these short-term variations.

Well, clearly you see in the P&L the impact of the cliff of the loss of patent issue but on the other hand you see also that just over the year 2010 we have even been able to increase our business operating income margin despite the fact that the shift of sales has moved from very high gross margin sales to sales with a slightly lower gross margin which has reduced the gross margin level but we have compensated through a reduction of OpEx and some extra contribution from the acquisition of Merial. You can see here that Merial is a bit ahead of what we expected. The full-year contribution of the 50% of Merial that we did not book last year has been EUR177m.

So a few words on gross margin first. Well, as expected the gross margin has decreased by 1.3% versus last year. In fact, we still keep a very high gross margin, a steady gross margin let's say, at 76.8%. This decrease is totally due to the impact of loss of sales from high margin products which are now genericized and also to one impact which has been valid all over 2010 and which slightly impacts still 2011 which is the higher cost of raw heparin. This has started in 2007, it has started to go into inventories and then going into the cost of goods and into the P&L. The impact for 2011 should be lower than what we had in 2010 but still being present. While now we see that heparin costs tend to decrease slightly so we should see somewhat the end of this impact.

I'd like also to emphasize that we reached -- we keep this level of gross margin despite the fact that we produced more volume. It's clear that expansion in either emerging markets or consumer health for instance or even vaccine are driving either higher volumes or higher industrial costs, particularly for vaccine. And we are able to maintain this steady gross margin also thanks to all the efforts which have been launched to adapt our industrial network. We are either closing or on the verge to close or to dispose from 2010 to 2011 -- 2008 to 2011 10 plants out of the 70 which we had in 2008. At the same time we have acquired new plants through acquisitions and all of them being in emerging markets.

So we are both shifting the structure of our industrial network more to emerging markets and at the same time taking advantage of the restructuring that we are embarking on in Europe and in the States. We'll see the impact of that in the years to come more. As it always takes time before the time you decide to close a plant or you decide to restructure your production and the time you benefit in your P&L. However, this will partly compensate the dilution of gross margin which will result from further generification.

For 2011 you should expect a gross margin in the range of 75%. And here, along with what we said before, it may depend a bit upon the timing of new generic competition coming from either Taxotere or Lovenox.

R&D, clearly we see here the result of all the transforming actions we've taken over the last two years, both in terms of streamlining our portfolio and stress testing our portfolio, focusing on the main products, going for more partnerships, and also reorganizing internally. The bulk of the decrease in 2010 in terms of R&D costs has been driven by internal cost R&D reduction which is really the outcome of the effort we've made to reduce the internal costs. At the same time we have maintained basically stable our expense on late-stage Phase III trials and we have increased our spend on partnerships.

Even more during Q4 the R&D expense reduction has been somewhat more drastic, as you can see, close to 11%. And this is for P&L, and I remember we had this question last year, what about cash. But as a matter of fact, we have also reduced very significantly our capital expenditure, our spend into brick and mortar in R&D so that this reduction by around EUR170m on year on year has helped in fact financing in a way the milestones we are paying to external collaborations. So even from a cash point of view we're reducing the spend we have in R&D and clearly trying to get more value out of that.

SG&A, we have always been among the best in class in this for the ratio of SG&A to sales. We have continued to reduce our SG&A expenses. They have been down 1.2% and 2.9% in the fourth quarter but this also includes the impact of acquisitions. So without acquisitions for 2010 and particularly without Chattem and to a certain extent the contribution of Zentiva, the reduction would have been somewhat higher, in the range of 5%.

It's not only a reduction, it's also a big reallocation. I think that both Chris and Hanspeter have or will speak about that. We have drastically reduced our sales force in the US. We are in the process to continue to reduce sales force but also administrative costs in Europe but we are increasing our spend in emerging markets. We are also increasing our spending on some new launches such as Jevtana or Multaq.

So we are pleased to see that we are going to reach our EUR2b savings two years in advance. This will be achieved by the end of 2011. We have achieved EUR1.3b of savings in 2010 on a comparable structure, meaning without acquisitions, as compared to 2008 which was our target. So clearly this will continue to contribute to the improvement of the P&L for 2011.

Well, not much to say on this slide. I think that the net financial expense has been slightly above the level of 2009. You may have a question about that. The reason is that even if the net debt at the end of the year is lower than what we had at the beginning of the year, the average debt -- the average outstanding debt all over the year has been higher in 2010 as compared to 2009. Also unfortunately we get lower return from the cash we have in the balance sheet if you compare 2010 and 2009. So these two elements explain the difference between the two years which are really minimal and even in the fourth quarter we have had net financial expenses reduce as compared to the same period of 2009.

And the tax rate has been kept stable, slightly lower at 27.8% precisely. I expect to have a tax rate in 2011 to be between 28% and 29%.

So this has allowed us to post this increase of EPS of 6.8%, more than EUR7 per share and 2.6% on a constant exchange rate basis.

But I think this slide is important because we always speak about sales and switch of sales and the sales coming from new areas but this is on profit and I don't think you have ever seen this slide. So this shows you how much we've lost as a result of generification all over the year between 2010 and 2009, around 11% of our net profit. We have also lost the revenues we got from Teva on Copaxone since April 1. We have some slightly positive contribution of the pandemic flu on a like-for-like basis in terms of profit but this will clearly disappear in 2011. The acquisitions, here again if you compare the two years, have contributed to around 4% of our net profit. And the rest has grown by more than 10%.

So the message is not only the top line of the growth platforms are growing by more than 10% but thanks to the contribution of the top line growth and some transformation of the P&L, transformation of our costs, we managed to deliver a top-line underlying growth of our organic activity, of course putting aside the generification.

So if you think ahead and you think about how Sanofi-Aventis will look like, what the P&L of the Group will look like, after we go through the patent cliff, I think it gives you an idea how we can deliver sustained growth in terms of profit.

Well, this is just to remind you that we have some restructuring costs. We are used to that, let's say. We are continuing to restructure the Group and we do take amortization of intangible assets into our P&L to go down to the consolidated net profit under IFRS and the bulk of the amortization of intangible assets is still derived from the acquisition of Aventis in 2005.

I'm rather proud to present this slide because I think that while we have stabilized our profit we have really been able to increase significantly our free cash flow. This is the result of the tight control we have started to put on working capital which has been kept stable in 2010, it was not the case in 2009. We put control on receivables, we put control on payables and we have started to work on reduction of inventories in order to try to streamline the overall logistic process. And we are also paying high attention to CapEx spending and you see that while we are continuing to invest into large facilities such as the new Biolaunch facility in Vitry or the Dengue Vaccine plant in Neuville, close to Lyon and some others, we have decreased the CapEx by more than 13% between 2009 and 2010.

So all in all, the free cash flow has increased by 26.7% and I think if you have to value a company you just need to discount the free cash flows. And we have been able over the last two years to invest in acquisitions more than EUR9b and here I take acquisitions plus in-licensing in connection with new products. We have given back to shareholders more than EUR6b, mainly through dividend payments, and some share buybacks that we did over the last year in 2010. Nevertheless, we have been able to post net debt which is lower than the net debt we had two years earlier at the end of 2008.

Well, this slide just gives you a bit more details around what I have said about just the year 2010. And I think I cannot more emphasize how strong the cash flow generation of the Group is and how much it gives us ability to invest in development, whether in organic development, in R&D where providing it's, of course, profitable, and in acquisitions and continue to sustain return to shareholders which is mainly linked to an increase, a regular increase of dividend.

So we propose for this year to increase the dividend from EUR2.40 to EUR2.50. Clearly, we are taking into account the fact that we will have a decrease of the profit in 2011 and we can confirm that we will at least maintain the level of dividend next year and the years to come and try to clearly even grow the dividend regularly as long as we have more visibility on our ability to grow the profit beyond 2013. So I can just confirm the dividend policy of the Group and just remind you that the Genzyme acquisition will not change this dividend policy if it takes place.

So I'll just summarize all the things we have seen already. Going through the patent cliff while taking advantage of the growth platforms, reduction of OpEx to sales ratio, good control of the gross margin, let's say, cost savings ahead of schedule, EPS growth despite slightly decline of sales and strong cash flow generation and I'll just repeat that over the last two years the growth platform which represented in 2008 just 42% of our sales in 2010 has represented 54% of our sales. Well it shows how fast we have been transforming the Company.

Hanspeter?

Yes, good morning, good afternoon. I would like to give you a short overview about the performance of the Company in terms of operations during 2010. My first chart shows what Chris already has mentioned. You see the significant impact of EUR2b lost sales due to generification. You see not precisely, but I recall it to you, I remind you, that we lost about another EUR450m due to the American healthcare reform and the European measures mainly on price. So through the growth platforms which are diabetes, developing countries, CHC, vaccines, etc., we have created EUR1.7b new sales. And, yes, it is true we have been also helped this year in 2010 favorably by a ForEx impact of approximately EUR1.3b.

Amazing to say despite the negative, slightly negative growth rate at constant exchange rate of 0.8%, the Group has achieved the highest sales number ever, nearly EUR30.4b.

Now on more details, some of the growth platforms I start with the legendary, meanwhile, legendary growth platform of emerging markets. You see that since 2005 we always had double-digit growth, and you see that as of 2009 we even have an acceleration of growth of 19% and then in 2010 16% in those markets where we have, as said 16.3% as constant exchange rate growth and 23% on a reported basis.

Unique our group Sanofi-Aventis also in this respect, to my knowledge the only company which is achieving equal sales in all three major segments, precisely 30% in emerging markets, equally 30% in the USA and 30% in Western Europe. The 11% remaining for rest of the world, in essence is Japan and Australia. We assume of course that this will continue, and that as of 2011 emerging markets will go well above the 30% share we had last year.

What is behind this? Yes, first of all, if you concentrate just on the BRIC-M countries the performance is even stronger, 31% but also outside BRIC-M the growth has been even 61%.

I have been questioned repetitively during 2010 what is your secret, and my answer is always the same, I say part of the secret is we have a strong history in those markets, it's a history which goes back to the traditional pharmaceutical companies like Hoechst the German side, Roussel on the French side.

But it is also part of the secret that we are not just a company going to those markets with field forces with commercial structure. No, we are a fully integrated company, and so in the emerging markets, you see that we have local manufacturing more or less all over. Chris mentioned it before, all of the acquisitions we have made -- additional industrial resources, and we counterbalance this by reducing our industrial presence in the traditional markets.

All over we have nearly 40,000 of our approximately 105,000 people working there. And out of the nearly 40,000 people nearly 19,000 are promoting our products in our various field forces.

Worth to be mentioned, that we just recently pushed our regional approach, our regionalization even further. You may have noticed that we have nominated more managers for more regions, building a new region out of Greater China and South East Asia, of LATAM, which means South America and Pacific, existing out of Australia, New Zealand, Korea and Japan. And we have headed also three regions with young managers just above 40, and those people who have significantly contributed to the growth I just could show you.

Diabetes, we have achieved EUR4.3b sales, nearly two digits on a reported basis, 14.2%. You see some controversial growth rates also coming from one of our competitors. I repeat once again what we understand as diabetes is our total presence, consisting not only about Lantus but also Apidra but also our traditional oral brands in diabetes. When we say we are the leading insulin company our understanding is that it is overall insulin, and this is what we are aiming for.

We have clearly committed to become the leading company in diabetes overall. We stay committed to this objective. We know we have to accelerate in this respect. We believe we have prepared, we have significantly increased our promotional efforts especially in the USA, but not only in the second half of 2010. We see a further acceleration in prescriptions in the US in the second half.

And, yes, we are also at the eve of the launch of the new blood glucose monitoring system which we plan to introduce as of the second quarter, first of all in Europe and then also in the United States. And, yes, you will hear later we are also aiming for new products, Lixisenatide is only one of them.

We have launched in oncology a new product which was, I think it's fair to say also, partially overlooked by ourselves. And we got really alerted by surprisingly positive Phase III results. This is Jevtana in hormone resistant prostate cancer. We have launched the product in the middle of 2010 in the US. And the product has made a very, very good and surprisingly good performance, achieving in approximately four and half months EUR82m of sales.

You see how it has replaced what has been in this market before as the competition. We are going to launch this product next in Germany. And I am going to the launch conference at the beginning of March. And then as from March we will roll out launches all over Europe.

We estimate peak sales for this product between EUR300m and EUR500m, and given the very, very impressive performance in the US I believe personally that it will be much closer to EUR500m than to EUR300m.

The other launch of 2010 in majority, of course, has been Multaq. I had reported before that we had a bumpy start in the US. We had underestimated the importance of non-specialists for this segment. We had underestimated that the GP plays an important role at least in maintaining the patient on the product. Consequently, we have significantly nearly doubled our efforts in the US. We saw then immediately an acceleration which continues to show very nice effects. You see here to which the extent the fourth quarter was superior to the third quarter.

I think another important achievement is that we have obtained for this product in record time, reimbursement, full reimbursement in all European markets so far, including difficult markets like Germany.

Yes, it's true we have recently discovered two cases of severe side effects. We have immediately, due to our obligations and our responsibility, started to inform both relevant agencies, the FDA and the European ones. This had led already and will continue to lead to changes in the prescribing information in the sense of indicating that there should be a repetitive monitoring of the liver functions. We take this, of course, serious. On the other side, it is a fact of life. As said, if you have treated in a relatively short term 200,000 patients you may discover events like this.

We remain totally committed to this product. We believe it's an important contribution to the treatment of the relevant patients. And we believe that there is huge upside opportunity. And that's the reason we believe of course to perform this study PALLAS, which may lead to an additional indication in so-called permanent patients, which represents approximately one-third of the overall patient population of arrhythmic patients.

Consumer healthcare, we have been definitely not recognized prior to Chris's arrival as a consumer healthcare company. And I believe it is even more amazing to see how we have increased our presence between 2008 and 2010. We nearly have doubled our sales to EUR2.2b.

We have done this through external growth. Yes, I think it's fair to say that Chattem was a very good acquisition of ours. We are very proud about the two acquisitions which we did in China, Min Sheng and Sunstone. We are now just, as we speak, in the process of putting both organizations together which will make us a leading player in the CHC market in China, which is not so evident to be done.

But, yes, we have also done our homework. We have accelerated lifecycle management for the products we have, traditional brands like Maalox, like Lactacyd for example. And the outcome is amazing as you see with 45% growth on a constant exchange rate. And I am very, very optimistic that we will continue to by far over-perform the market also in 2011, and this is not only, but mainly due to the switch of Allegra into OTC.

The allergy market in the USA is approximately $1.5b. They are two formerly leading prescription brands on this market, which share nearly two-thirds of this market. And it is clear that we are aiming to be one of those, which means one of the leading two or three products which gives you an indication what our sales ambitions are for this year.

We will launch in an OTC approach as of March. We will make very, very massive investments in terms of advertising and promotions. And we are in fact very confident and even optimistic that within very, very short we will reach sales levels as the two leading products in this field.

And this mainly by the fact that we are convinced, and we have reason to say so, that Allegra is extremely well positioned to be a leading consumer brand. It has by far the least sedative effect. It's a very, very strong trademark. And our subsidiary Chattem has an excellent, really excellent track record in switching products and making some success.

We remain a research-driven company, but nevertheless we have an opportunistic approach to generics. We feel that generics are a good thing. It's a good thing also for research compounds because it makes proven medication available at reasonable prices.

Wherever we see an opportunity we do generics and this was, of course, the main argument for acquiring Zentiva and Medley. And, yes, you see once again a very impressive growth from even not EUR400m sales in 2008 to EUR1.5b sales in 2010, 41% growth.

Once again we had a difficult start with Zentiva two years ago. We acquired 100%. We cleaned up some markets. We made management changes. We reinforced promotion. You see that the Eastern European performance which is more or less equal to Zentiva was very nice with 17%.

And, yes, Medley probably amongst our acquisitions, the most successful acquisition overall, has a fantastic performance with 38%. And it is becoming more and more a model for a new market approach in Brazil, and I believe even beyond a country where there is a growing middle class and where we have positioned Medley very successfully as an alternative approach to affordable medication.

We are currently expanding Zentiva all over Europe as our generic brand, which means Zentiva will replace Winthrop in Europe. This is a pure corporate identity approach. We had questions before if this would have any impact on social issues. And the answer clearly is no.

So we have four major brands, and all of those brands are touched by generics, and that's part of our issue of course. But we should not overlook that even after the generification those products stay very important brands.

You see that for Eloxatin even if we will have again generics in the USA, which we hopefully expect to be not the case before 2012, Eloxatin, according to our forecast will remain a EUR300m brand.

We expect EUR500m to remain in sales of Taxotere despite the fact that generics have been launched in the late month of 2010 in Europe. On the other side we had a slowdown in sales in the US because a competitor announced to be shortly on the market.

I learned within the next days that the shortly will become a little bit longer. And we don't expect a direct competition for Taxotere even now for the first quarter of 2011. But even if the generic companies will come to the US market we believe that worldwide the product will be approximately EUR500m.

Lovenox, as you know, of course, which has received a very direct competitor in the US, which may have another one within relatively short. Has been nevertheless a product selling nearly EUR1.4b outside the US, enjoying a very remarkable growth rate of 8%. And, yes, also in the US itself I believe that our people have made really an impressive battle continuously maintaining 90% of the hospital market despite the appearance of the generic competitor.

Last but not least, Plavix, to make it short, we have offset with more than EUR700m of sales in Japan and in China the losses we have suffered in Europe. And inside the US where the product is a EUR6b product you see we still had a growth of 11%. And once again I am confident that we will continue to do so in 2011. And as you know we have quite recently obtained also the pediatric prolongation for six months more until May 2012.

Those are the growth aspects, but there are others. Yes, we have to adapt, we have to tighten our belt. We have to restructure. We have to get organized differently.

You see on the chart a short summary what we have done in the USA. I believe that what we have done in the USA during the last two years is without reference. We have downsized overall our organization by approximately 35%. And we have not only downsized but we have also totally reorganized what has been largely driven a GP business before, today is much more a specialist-orientated business.

We have done a lot of things in the field of general administration. We have integrated into our US management a system of shared services. And, yes, of course we continue to pursue business development opportunities also in the context but not only of Genzyme.

In Europe, the same, perhaps not to the same extent also not having the same necessities perhaps, but nevertheless also here in a market which is considered by many companies as being totally hostile for doing reorganizations at all, you see here we have reduced our headcount in field forces by 1,800 people over the last two years.

We are in the process of talking to our social partners to develop a new footprint organization for all European subsidiaries, which if we can agree with our partners will be an approach in terms of clusters where we will share services within various countries in order to become more flexible, better performing. And at the end, of course, become also more productive.

A last word on Merial, you remember we have acquired 100% of Merial during 2010. Merial gives us a lot of pleasure I can say, also personally being in charge of it. The business has performed well with 2.6% respectively 3.2%. The major product of Merial which is FRONTLINE, which is the sole blockbuster product inside the veterinary market, has resisted well upcoming generic competition in Europe.

As everywhere we have given more orientation for Merial to the emerging markets, and you see that the growth rate immediately accelerated into two digits. We have given a lot of concentration in improving the operating margin. We have improved it by 2.3% within a little bit more than six months. And, yes, besides we profoundly prepare for the upcoming combination with our partner Merck in bringing Intervet and Merial together and thus creating the market-leading company in veterinary medication.

Thank you so much, and I think it's Olivier now.

Thank you, Hanspeter. Good afternoon, good morning. I am very excited as -- in my new role as Head of Sanofi Pasteur, the vaccines division of Sanofi-Aventis, and the sixth growth platform.

I am going to start by giving you an overview of our performance in 2010. It has been another solid year for Sanofi Pasteur. Our sales have reached EUR3.8b, growing 4.8% and including the impact of the pandemic sales. If we exclude the impact of the pandemic sales our sales growth has reached 5.5%. We had a strong fourth quarter reaching EUR890m, growing 12.6%, excluding the impact of the pandemic sales.

The performance of 2010 has not only been driven by the strong growth of our key franchise but also significant growth in the emerging markets. In 2010 we had a record year for flu vaccines, growing by more than 18.7%. The split between our pandemic sales and our seasonal sales is according to the guidance we provide you at the beginning of the year. Our sales, pandemic sales reach in 2010 EUR452m which is very consistent and very close to the amount of pandemic sales that were sold in 2009 that reached EUR440m.

We are very happy about the resilience, we show with Menactra in the US in an environment where we are able to keep an extremely high market share, significantly above 90%. We continue our rollout on the international front. And we are starting to have significant sales now, especially in the Middle East.

We have a solid performance on Adacel, our acP-IPV combination, where not only in the US we have a strong fourth quarter, but also we continue the rollout of our internationalization program and we are growing nicely.

The most interesting feature is probably our growth in the emerging markets. This is the first time that we hit the EUR1b landmark. We are growing by more than 15%. It comes not only from Pentaxim which is, of course, our combination, five combination acP-IPV product that is rolled out that is showing an outstanding growth above 40%. But it comes also from our broad portfolio and our strong Endemic and Travel franchise.

If we get a little bit closer and look to our influenza vaccines we had a record year on seasonal flu. We have shown a growth of more than 33%. It's very significant growth in the US where we have been growing by more than 50%.

We had a successful launch of our Fluzone High-Dose, which is for the people that are over 50 -- above 65% -- over 65 years. We had the launch of Intanza, our intradermal form, as it has been launched in Australia and certain countries of Asia and in Europe. We get very positive feedback from the healthcare providers, but as well from the patients.

We remain as the undisputed leader of the flu vaccine on the flu markets. We own in the US a market share that is above 50%. We have an extremely high market share in the Southern markets, in the Southern Hemisphere where our market share is about 70%. In the Northern Hemisphere our market share is 40%.

If we look a little bit to the R&D front we had some key milestones that have been achieved in 2010. The Fluzone ID has been submitted, which is intradermal form, has been submitted in the US. And we are expecting some regulatory decision in Q2 2011.

We are expecting also after the submission of Menactra Infant/toddler nine to 12 months, we are also expecting to get regulatory decision in Q2. Regulatory approval of Pediacel in Europe and Imojev licensure was granted in Thailand and in Australia.

We have signed on monoclonal antibodies a partnership with Vivalis. Vivalis has developed a technology that would allow us to identify rapidly human monoclonal antibodies that are clinically relevant and their related antigen against infectious disease.

We have closed at the beginning of the fourth quarter the acquisition of VaxDesign. VaxDesign is a platform that has been developed by -- VaxDesign is a company that has developed a platform that is an in-vitro model of the human immune system that would allow us to move faster and of course to take the right bets for these vaccine candidates.

In terms of Dengue, we are very happy with the progress. And on the development front with Dengue, we have started our Phase III. We will have by the end of 2011 more than 40,000 patients on the drug -- on the product.

Our Fluzone quadrivalent, you know there has been some mismatch in the last couple of years about the B strains. Our quadrivalent, is a quadrivalent with two B strains and two A strains that will offer of course broader protection. And we will -- we have started our Phase III trial in 2010 and our other program in terms of enrollment has just been completed.

On the C difficile, our product for nosocomial infection that is today in Phase II, we are progressing nicely. We got granted the FDA fast track program status. That is the first step for us to be the first in the market.

So overall for Sanofi Pasteur in 2010 a solid year. There are evidently a lot of opportunities in the vaccine world. Sanofi Pasteur is well positioned to capture those opportunities. We have a very strong position in the emerging market with a very good footprint.

And we feel also that further to the acquisition of Shantha not only we have the right low-cost manufacturing base that will allow us to be competitive from a cost standpoint in this part of the world, but also a very good portfolio that would allow us to be -- to have the right reach in terms of breadth of portfolio in the Southern Hemisphere.

My priorities are going to be to focus on boosting the revenues in the emerging markets while continuing to leverage our leadership position in the more mature markets. I am looking forward to work closely with Dr. Elias Zerhouni on the vaccine R&D side, and I now hand over to him.

Good afternoon. This is actually my first meeting. It's sort of my coming out party. And I want to really expose the fact that although I started in January, January 1 my job as President of Global R&D, actually I know about Sanofi R&D and I have known about it for almost a year and half, as I was advising Chris and the R&D organization about what is fundamentally an issue that percolates the industry.

If it was only Sanofi that had a problem in R&D productivity you would see it's -- you would say it's a Sanofi problem. But if it's the entire industry despite great investment from the public sector and the private sector in research and development, you have to realize that we are facing a fundamental issue.

And I think my job going forward is going to complete the work that we've done in the first 18 months. And I think it's important to realize that R&D operations are fundamentally very hard to change, because the programs tend to be multi-year and once you've made a choice it's very difficult to change that choice.

Second, the mindset, traditional mindset of R&D has been more of a closed innovation mindset where you really try to develop everything in confidential ways and try to truly have a strategy that reaches markets in the shortest time possible, in an area that you feel is going to be successful. And once you reach registration you knew that your commercial operations were going to sell the product.

Well, that part of history is over. If you are successful in R&D there is no doubt that you can do very well. But you can only do well if the payers are willing to pay. And therefore the fundamental mindset about how do you decide, how do you prove -- what products you choose and what selection criteria that you apply has changed.

And you have to take this concept to the next extension of it, and that is that, well, if that's the case and since no one has the resources internally to know about every part of biology and every part of the disease process, and all the targets we've discovered through the human genome and others, you have to go from a closed innovation model to an open innovation model.

And that means rethinking your internal operations because you can't really just outsource your creativity, you'd have to out-look and look around for better ideas than what you have, have access to these better ideas, but you have to also have the inner capability to make decisions that ultimately increase your success rate. Because if you succeed you do very well, but the problem is we don't succeed enough, frequently enough in a time that is sufficient to justify the investment.

So then the first thing we did really was to look at the portfolio. As Chris mentioned, we stress-tested it, and looked at it in the eye of someone who will look at it five years from now, three years from now what are the payers going to do?

Second, we looked at the science behind the portfolio. Was it solid was it validated? And at the end of it we end up with a pruning strategy, which in my view has increased the quality of the portfolio. And that's what you're seeing.

Jevtana is an example where the internal R&D folks said, you know, there is something about this that is an unmet need metastatic prostate care, resistant -- hormone resistant prostate cancer is a real public health issue, and we continued the effort there and now I'm pleased to see that with the efforts of the commercial operations it is successful.

I think the other change we've accomplished in the past year and half was to really make R&D internal more visible externally. You can't really have access to open innovation unless you participate in the ecosystem of innovation. And this new ecosystem is what I think is positioning us. And what excited me about probably the greatest challenge in front of us is that how do we transform and translate our scientific advances into real benefits for patients in unmet needs that payers are going to be willing to pay for.

And to do that you have to be able to change, you have to be able to implement change. This is what we have done. I think you've heard from Jerome the fact that R&D has decreased its expenses, and in particular the bricks and mortars. We had 27 sites. You can't really have an effective R&D operation that is distributed around the world and not have the sort of interaction and critical mass.

So we are not just restructuring we are realigning, we are rethinking the way the process is done. So our vision is that no one, and this is something that Chris told me the very first day we met, no one has written the text book about how to do it right. And if you don't know the theory, you don't know the way to do it what you have to do is use a diversity of approaches, be flexible enough, be nimble so that you can in fact have access to opportunities you wouldn't have otherwise.

So our vision is really fundamentally placed on -- based on a very simple concept. If you keep performing an experiment the same way you are going to get the same result, so we have to change the way we do it. And that means a total re-engineering and all of us here on this stage here agree to this. And it will require that. It will require that.

And then you can ask myself, you can ask me and say well how do you intend to do this? I think you have to a measurable target. And to me what is really ailing the productivity of R&D is number one the development times have become too long. On average we had development times of eight to 10 years, now it's 12 to 14, 15 years. And the success rate was 1 in 8, it's now 1 in 13. So if you don't change those parameters you are not going to change anything. So this is a metric that as Global Head of R&D I want to place -- put in place, but also do what's needed to make those things happen.

The key to me is that I believe that we have not adopted inside R&D a strong translation medicine capability. I think because of historical reasons companies were basically tool based. Chemistry was the thing, small molecules, or you did antibodies or you did vaccines. But you defined yourself by the tool not so much by the disease you needed to address with whatever tool worked.

So what we've done is we've really built the toolbox for Sanofi-Aventis over the past year and half. Our biologics have gone up to almost 40% of the portfolio. But more importantly is the skill set, to have those skills, partnerships have increased with areas where we didn't have the internal skill set. We continue to do this.

The key is going to be the ability as a company to understand the biology in humans as soon as we can throughout the R&D process. So we will do this from the get go to discovery all the way to whether or not something is going to be paid for, all throughout the process that we want to reinvent essentially.

And this means rigorous efficacy and safety predectivity of the working hypothesis. If you have a project that is going to take 12 years, and where you have no clear pathway to demonstrate the mode of action, and no clear pathway to have biomarkers that are going to guide your development process, don't do it. On the other hand if you have the opposite this is where we'll be the champions.

So our priorities right now are very simple. You've heard about the fact that we've pruned the portfolio. We've selected and increased the quality of it. And we have put a lot of investments. You've heard that our proportion of Phase III, Phase II investment is the highest it's been in the total portfolio.

And what we need to do is deliver on the current late-stage portfolio. In your material you have all of the late Phase IIIs. We made a decision over two years ago that oncology was going to be a strategic area. So we created a division and you look at the investment we've made and the portfolio that expanded in that area. I think it's quite remarkable. We have to deliver on that.

I think we -- we have to build again our early stage projects. The pipeline we have pruned. Now we need to really get the volume that will allow us to in fact maximally use the resources.

And clearly in this business there is no compromise without excellence. This is -- usually R&D is a multi-disciplinary team effort. And like every team every player has to be excellent. You don't want to be playing football with a goalie that can't stop the ball. So you want to have excellence across the board.

And that's going to be our motto is that, let's be direct, let's be pragmatic. If we don't have the excellence internally we'll get it for whatever skill set we need to have. But ultimately this is the vision including recruiting new talent which we have done.

So I think you've heard about the green shoots, and I want to take your time on this. You've heard about Jevtana, you've heard about lixisenatide the Phase IIIs are coming out exactly as we wanted to have them with lower safety issues; hypoglycemic events are lower in lixisenatide.

And you might ask yourselves why did you do this? There are other products out there. The key is this is a strategic decision. If we want to be number one in diabetes you have to be holistic in what you offer patients.

Hence the decision to stick to an investment, a once-a-day lixisenatide because it fits with what we believe is the appropriate -- sort of span of services and solutions you have to provide for these patients, including for example the glucose monitoring investments was made, but you will see more of this.

iniparib, you heard Chris talk to you about it. We looked at it. We are going to look at with the health authorities. But we are convinced that there is value there that needs to be worked on. We have not stopped any of the programs. The results we've have in second line and third line tell us that this is an active molecule with a terrific safety profile. We'll understand it better. But we are not giving up on it.

You've heard about teriflunomide, and this really is a question about whether or not our efforts in CNS are going to extended or not. This is something we'll talk about over the year. And whether or not we'll build a franchise around this idea of multiple sclerosis and there are other reasons for that.

So, I think this is delivering on what we currently have. And I told you that we really try to build innovation in the earlier stages, and realign, if you will, R&D at Sanofi along opportunities.

For example, we've decided to change the strategy of how we do research in oncology. We've recruited new people. We've established a site in Cambridge. While we have rationalized some of our sites all around the world we decided to make new investments, Asia Pacific and the Cambridge area, especially in oncology.

Why? Because you can have access there to a rich network of external innovators, and here you have the list of potential innovators, based on this new notion that in oncology you need to have a pathway research base that looks at targets in a functional way.

And that explains why we had an agreement with Merck Serono, because Merck Serono had a MEK inhibitor and we know from the biology that PI3K which is our molecule may have a synergy with this particular molecule, hence the collaboration.

I do not want to take too much of your time in the details, but I think you know about the milestones for 2011. We have to further the GETGOAL trials in lixisenatide.

Teriflunomide, I think you've heard about these results. We've important results in anti-angiogenesis VEGF Trap, against angiogenesis in aflibercept. Ombrabulin is finishing its trials, it's already recruited, so we'll go on to follow up to see if it's effective. And you've heard about the results of Semuloparin.

So this is our current late stage portfolio. And I hope that I'll be able to report to you throughout the year about the changes that we are trying to implement going to this sort of Phase II from realignment to now re-expansion.

Thank you.

Right. So, we've been through pretty much everything in the company from all the way down through the pipelines, through cash flows from vaccines to R&D, so over to you. Let's go in the middle here, start here and work our way backwards that one.

Hello, Philippe Lanone, Natixis. A few questions first on your acquisition of Shantha which you mentioned, what can be expected? Where are we in the re-registering of vaccines? And what will be the future?

On Multaq, could you come back on the patent life because this is one of the limitations in the US, are there any initiatives here that could go through? Also there are some issues in Q4 in emerging and OTC which are a bit, especially in Brazil, so could you come back on that and elaborate.

And more generally if I may you lost with iniparib or potentially lost a major growth driver long term. How do you react to that? And how do you see the future of the company with a declining EPS this year, probably next year? Are you intending to accelerate shareholder value in one way or another in acquisitions or share buybacks? I know it's not popular at Sanofi. Could you elaborate on that?

Right so we start with Shantha.

So on Shantha we had a setback and we are busy fixing the Shantha side issue. We aim at participating through the new WHO UNICEF bid that is going to take place in the second part of 2012.

We remain very positive the rationale of the Shantha deal hasn't changed. We need to fix the issue, but in terms of business opportunities , evidently a large opportunity with a cost effective manufacturing base and the right portfolio in the South for the Southern

Yes, I take Brazil, what you see in the Brazilian CHC sales is the technical effect coming from changes in the trade and I think also there was a change in the sales tax which led to the wholesalers to deplete the stock by the end of the year. So it's purely technical.

I have to admit I did not phonetically understand your question on Multaq, perhaps you might (multiple speakers).

Patent Life I think. Karen, do you want to -- we have our General Counsel here, can you give us anything on Multaq?

Microphone.

Right now we are working very hard to ensure that Multaq has longer than the stated patent life. It has five years from launch, but we are working to ensure that through lifecycle management it has a longer life style -- and lifetime, and in Europe it has the 10 years.

Yes. So basically in Europe you've got 10 years, in the US you've got five years, but you can't file a generic in those five years, so you end up with roughly seven. So that's where we are still and nothing's changed on that.

Just on Iniparib, I guess, and the longer-term growth, I don't want to ever be in a position, quite honestly, where if one drug changes it doesn't come that this changes the Company. I think the challenge that we have still is, on the one hand, nobody in our investment committee thinks that the small molecule blockbuster model is a good one to go with, but equally we haven't been very successful in selling the diversified model to the investment community. Because essentially if you have an Iniparib or you have Lantus or you have a Multaq or you have a Brilinta doesn't really matter what it is, but most people still want to see a blockbuster. And that's kind of still a millstone around our necks.

So I think one of the things that we're really setting ourselves a target of doing is trying to really show the composite value of this Company. If you think about a vaccines business, what's a vaccines business worth today? We have a EUR4b vaccines business. What's that worth? What's a consumer health company worth that's doing EUR2.2b. What's a generics business worth? You think about how much money people are paying for companies in India and the like.

So I think the problem is that we're still looking at patent expiries and new molecules in a very traditional way. And we have to do a better job of explaining that. And I think that's really the objective we're setting ourselves for with this strategic seminar. A lot of people have asked what are you going to do with the 2013 guidance? Is that going up, is it down? But the more all of us meet with our key investors, they're not really interested in 2013, they're interested in what happens after 2013.

So that's what we're going to try to address in all of these questions. But also I think to really come back and really hammer home some of the multiples. And I think maybe we can do a better job of segregating the numbers and bringing those out, looking at multiples of transactions that have been done.

But Iniparib was never the lifeblood of the Company. It would have been a great product to have, and I think it's still going to be a great product, by the way. I think if you go back and look at the early studies of Avastin, I can tell you Eloxatin got rescued from the trash heap. The real problem is that when you have a really exciting new cancer drug, a lot of physicians want to put patients into that trial, and particularly patients who are really at the most end stage of disease. And ethically you have to. You can't really say anything about that. But obviously it has an impact on how the numbers come out.

Now I also have to say that the Iniparib study was against an active comparator and had a crossover design. So if you can still actually show efficacy in second and third line in that kind of a trial setting, and given the excitement about this and what kind of patients you have to go in, as I say, I talk to the top breast cancer people in the world and they're all saying this isn't really all that unexpected.

So please don't get a sense that Iniparib is not in the cards for the Company longer term. It's not in the cards necessarily for 2011, but it's still going to be there. But more broadly I take your question to say the whole objective we're trying to do is so that we don't have to rely simply on the pipeline. What I'd really like to do is get a nicely stable-growing business. And then something comes in the pipeline, it's going to accelerate the growth because it's hugely accretive.

Obviously, yes, results are decreasing in '11. Results -- we don't know where we're going to be in '12. But given Plavix, it's going to be a tough haul to show any kind of growth on that. Obviously that's partly where external growth, Genzyme, comes into play. Genzyme's not there because we need to do Genzyme, but just as you've seen in how we've done growth through a Chattem, through the Min Sheng, through the Zentiva, you can start to add onto a stable base.

But we couldn't really do that until we really had a stable base. We had to really get involved in cost-cutting. We had to really reallocate our resources to where growth was inside the Company. We absolutely had to clean up R&D. So we had to do a number of things before you could actually just even use external growth as a lever. But I think we're there and I think that's what we're getting to.

But, again, that's what we really want to do in midyear, so why not do that today. Well, the reason we're not doing it today is because most of our investors aren't really in a mood to listen. The very overwhelming sense I personally get is there is such a focus, everybody can see a patent expiry. That we can calculate and everything else, despite what I might have said in terms of we're not even as aggressive as we should be on calculating those patent expiries. And nobody's really looking beyond the cliff today. I haven't sensed anybody in the investment community really trying to figure out who's going to win in 2014 and '15. That's just not there.

I think it's partly because of where the economic crisis has been. There are a number of factors behind it. But I would suspect as we get through a bigger chunk of the patent cliff and we get closer and closer to 2012 and 2013, I think we're going to have more of a receptive audience to that. And that's why I think we want to do it then. I just think I'd be -- we'd be shouting in the wind a little bit if we tried to do it today. And that's just a personal view. And I'd be happy to hear if you disagree with it. But we are sensitive to that's where investors are going to want to go next, and that's when we figure we'll have a better chance at getting the story across.

I guess it depends on who gets the microphone.

Thank you. Vincent Meunier from Exane BNP Paribas. Three questions, please. The first one is a basic question on guidance for 2011. Can you clarify what is in the guidance or out of the guidance, I'm talking about Eloxatin, Lovenox and Taxotere, and especially that's for Lovenox and Taxotere. Do you expect for Lovenox a second generic company to launch? And if, when? For Taxotere, in the US, is it really in the guidance or not?

The second question is on diabetes. You have again said that your target is to become the world leader in diabetes. How can you convince investors doing that, given the fact that you have Lantus, which will be out of patent protection after 2015, Lixisenatide, which is a GLP-1 not superior to Victoza, it's not inferior to Byetta, but Victoza is superior to Byetta. And it is not on the market still. And lastly the BGM business, which is something on which we can be optimistic, but maybe not sufficient. So how to convince investors?

And finally, the last question is on R&D. How to drive R&D productivity. And basically what's your view regarding the two types of strategy, to put it simple, the Merck strategy of sustainable R&D spending or the Pfizer strategy of a big cut in R&D in order to reallocate money and give money back to shareholders.

All right. Let me just on the guidance be very simple. If tomorrow we woke up and found that there was a second generic for Lovenox and there was a generic for Taxotere, that would have no impact on our guidance. If tomorrow we found out the Eloxatin deal fell apart and we were losing Eloxatin, we'd probably wait and see what happened with Taxotere and Lovenox, if I can put it that way. But Eloxatin is, at the moment, we have assumed that we maintain that for the year. But we've assumed also -- but that's a little bit why you've got the range.

Let me ask Hanspeter to respond on diabetes and Elias on research and development.

So the diabetes, as you say, is a commitment and we have to show it. And I believe that, at the end of the day, we will convince all investors only if we have shown it. The elements are clear. First of all, we have to accelerate. The 9.7% or 8% growth we had in 2010 is not sufficient. We believe there is opportunity for acceleration in the US, whereas I mentioned we have a nice increase in the second half of prescriptions. And if we continue to do so, we will have a stronger growth, a significantly stronger growth in the US in 2011.

And in the emerging markets, giving you an example, just before Christmas we have obtained a full reimbursement for Lantus in Shanghai, which represents about 20% or 25% of the Chinese market. We believe that the approval in Beijing is imminent. If it continues to do so, we will get significant sales out of Asia, also out of Pacific, where in the second half 2010 in Japan the product has a very good performance.

As far as blood glucose monitoring is concerned, we believe we have good products, we have better products. We believe we can leverage the fact that we are the sole company which can offer insulin and needles. And yes, it's to some extent a bet, but first of all it's a commitment and we have to deliver.

I don't share your point of view on Lixisenatide. I strongly believe that Lixisenatide is superior to Byetta. And being it's already just for the fact that lixi is once a day and the other product is twice a day. And against the Merck product, we have ongoing trials. We have to see what comes out of this. And it's premature, but yes, of course, we have the ambition to have the better product.

And I would just add a few things. First of all, I don't think we have -- we're missing anything that Novo has. I am a little surprised that people can see a value in Degludec, which is essentially a me-too of Levemir, but don't want to believe the same thing about a Lixisenatide versus a Victoza. So somewhere I guess we've got to get a little bit better at investor relations perhaps.

I think we've got a GLP-1. We've got a long-acting insulin. We've got a better position in emerging market. We'll probably be faster with a combo. We are slower on GLP-1 than they are, obviously. We're into blood glucose meters and they're not yet. So there's a huge market.

Patent expiries, let's wait and see what that brings. But I don't think at this stage today that anybody really sees the patent expiry as being of a dramatic nature, certainly where we are. And especially when you start looking beyond the traditional markets of Europe and the US, we are busy switching our business in the US to the SoloSTAR. We're up to 40% conversion in the US. And we've still got another four or five years before we are really at that stage yet.

So, at the same time, I think, as Hanspeter said, we want to see some acceleration in that business. We will be investing. And that's part of the reason why we also said we need to be a diabetes company. As long as we're just going to be managing a brand, we're not going to really be developing a diabetes business. So we've got all the elements. It now has to come together and it now has to be executed. And I think we would certainly accept that we have to execute better; no question about that. But I wouldn't say that our product lineup is not as good.

Lantus is still the number-one brand in the entire diabetes world. And given everything that has happened to try to knock Lantus off its perch, I think actually it's shown a tremendous amount of brand loyalty and resilience.

Elias? The sustained budget of Merck versus budget cutting of Pfizer. I'm interested in this one too.

Put me in a tough spot here. But before I do this, I'd like to add something about the diabetes question, because I completely agree with what Hanspeter and Chris has said, that there's a dimension that I think people don't see why we went in this direction. And the dimension is this, that diabetes is only the tip of the iceberg for many other chronic conditions, chronic diseases that are directly related to diabetes.

The comorbidities in eye disease, hence our investment in Fovea and eye, the comorbidity in the cardiovascular system, the renal system, and the epidemiology growth of this disease, which says that there is a need for you to look at holistically diabetes not from the end of product, insulin and Lixisenatide, but the end of the other part of the spectrum, a population to which you provide a continuum across the entire spectrum.

And remember that chronic disease management is going to grow, we believe, as a part of every public health system response. You're not going to take care of a patient with diabetes in hospitals. So you're going to develop systems that are going to be intertwined with the solutions that are provided over the continuum of pathologies. Remember that diabetes is part of the metabolic syndrome diseases it's part of that, and that's why we have in our portfolio the PCSK9 molecule and antibody, which is essential to that population in a sub-part of that population.

So I'd just like to add that dimension beyond 2015, beyond expirations, you have a different strategic vision when you talk about diabetes. Diabetes is just a sort of anchor of many other associated comorbidities and conditions, which tell you that unless you're a strategic player, you're just not going to be a player. And we want to be that player, regardless of what happens to one insulin or another. I just wanted to add that.

The second is what's the model. Do you sustain it? Do you cut it? I think frankly when you make a decision to sustain or cut, that means you know what's going on and you have a great sense of what's the textbook and what's chapter one and chapter two. I think we are more humble than that. I don't think we know. So I think the best thing that we feel is the right strategy is to build a structure that's flexible, so reduce your fixed costs, make sure that you have variable geometry, that despite all of the adoptions, that there be adaptiveness to your budget reality, what the free dollars that you have get allocated properly, that you really use opportunities. Some years it might be higher than the God-given percentage of 14%, I don't know where that came from. But frankly it could be 12% one year and 18% the next.

So I think our approach is more pragmatic that says frankly, as long as you can restructure -- realign your system to allow you the flexibility to go after opportunities, and if you have a good one, well, invest. If you don't have one, well, don't invest. So I think we have a more pragmatic, in between, if you will, approach of sustained, but sustained without surgical cuts, do what you need to do from the fundamental design. 50% internal/50% external. 50% biologics/50% small molecules. Diversify your approach in a flexible way is probably our view; it's not just my view, by the way. This is shared across the stage here.

If a company is spending EUR5b year over year and cuts its budget in half, but nothing comes out of it, the company's still wasted EUR2.5b. So I think a lot of it is either a huge waste of money or it's fabulous value, but it's probably not somewhere in between. And that's where I think Elias' point is extremely important, about looking at fixed versus variable cost and really trying to get the things right. But the problem is there's no correlation today between how much you spend and how successful you are in R&D.

Luisa Hector from Credit Suisse. Just to follow up on the guidance, you say given the range if there were generics tomorrow, but if there were no generics, does that get you to the top end of your range, the minus 5%, no generics by the end of the year?

And then, Hanspeter, just to follow up on emerging markets, if we look specifically at the fourth quarter, the growth in pharma was just 6%. And there seems to be weakness in Africa, Plavix and Taxotere. So is there any color you can give us on those three specifically?

And maybe for Jerome, just a quick question on the cost savings. Is it fair to assume that around half will be reinvested?

On your question on guidance, sorry to interrupt you, Luisa, but yes, if we have given the range, it's because we don't know precisely when either the generic of Taxotere or the second generic of Lovenox are going to come into the market. Because at the end of the day, everybody was convinced, even ourselves, that by before year end 2010 there would be a generic of Taxotere in the market in the US. So the basic reason why we have given this range is exactly what you've said, meaning that if everything goes right we will be on the high range -- at the highest side of the range.

Maybe I can just go on on the cost savings. No, the cost savings are -- there's two questions. One is the cost savings we measure on a constant-perimeter basis. So we have taken the 2008 structure of Sanofi-Aventis, we have put acquisition aside, the acquisitions we did in 2009 and 2010, and we measure the overall cost comparing 2008 and 2011 before tax. And this is where we generated EUR2b of savings. In other terms, if I were to just measure all what we have chopped, without taking into account what we have reinvested, the saving would be much more than that.

Now we have reinvested either in emerging markets obviously. If you think about the commercial investment in emerging markets, we are increasing it by, let's say, EUR200m every year, a rough idea. And we have also supported more Lantus. We have launched Multaq. We have launched Jevtana. We are on the verge to launch the BGM. So all this is reinvestment. But the EUR2b is from 2008 to 2011 on a constant-perimeter basis, so before the impact of acquisition, and you compare the overall cost, whether it is OpEx or evolution of cost of goods.

Yes. I think when you look at the guidance, but Jerome confirmed if there were no generics on Taxotere and Lovenox, it's minus 5%. We say minus 5%? Well, remember that just the drop because of H1N1 is 2 to 3 points already, plus you've got the whole Lovenox effect, even if there's not a second generic. Remember they only came in halfway through. So you've got a whole year's effect of Lovenox in 2011. Plus you've got Ambien CR and you've got Xyzal. You've got US healthcare reform. And then you've got some reinvestment going on.

So pretty much you could probably get to between flat and a couple of percent if you ignored H1N1 and you ignored -- but you also have Taxotere in Europe, where there clearly will be generics. So there is a cumulative effect, so that's how we roughly, in broad numbers, obviously get to some of that.

And I think you had a question for Hanspeter.

In the emerging markets, there's really nothing, but some seasonality. I just was asking Olivier who tells me that there was a lack of season, for example, in Russia. So I also can indicate that we have a very strong start in 2011. Evidently we already closed the first month. So what you see is purely seasonal and there is no change in trend at all.

I have to admit we have to see what happens in Africa due to the events in Tunisia, which -- where we are market-leading company, and in Egypt where I think we are number two or number three, if this has an impact. We will see something, I believe, in Australia due to the flood. December and January was very bad. But this does not go into our terminology of emerging markets. So there is nothing but a little bit of technical.

We also had, in Brazil, we shipped -- we went to direct shipping.

What I said before, we have a change in the distribution system and in the tax system in Brazil. But beyond that, on the other side, Taxotere doesn't play any significant role in those markets at all.

Over there. Alexandra?

Thank you. It's Alexandra Hauber from JPMorgan. Jerome, sorry, there was an announcement this morning that you gave the shareholders an election to proceed with dividends in shares instead of cash. And I just wondered where the shares are coming from. Are you going to issue new shares or do you have treasury shares that you're going to give to recycle for that.

Second question is for Hanspeter. Could you give us an idea what kind of pricing impact you expect in 2011, and ideally separately for the pharma business and for your generics division?

And the third question I had for Olivier for vaccines, you said your key focus will be to grow the emerging market business. Do you have any vaccines in your existing portfolio? I know that you have some candidates from Shantha which will allow you to do some -- to capture additional volume through innovative pricing models.

So Alexandra, on your question, A, it's an option given to shareholders. So it's a free option, let's say. Clearly, you don't know if -- I cannot know what shareholders will decide. It's common practice in the CAC 40 companies. And we decided to do that also to give a chance to whoever shareholder, maybe retail shareholder or more institutional shareholders to reinvest in the Company.

Now, is it going to -- is it going to create new shares? Mechanically, yes, or legally yes. But, on the other hand, we can continue to monitor the number of our outstanding shares by doing some share buybacks as we did in 2010, where, because of stock options, there were some new shares which were created and we bought back the shares in order to maintain the number of outstanding shares.

So I tend to consider there is one thing, which I would say a dividend policy and the other thing which is the monitoring of the capital structure on the number of outstanding shares. And here, again, depending upon -- clearly today we are more thinking about looking at possible acquisitions or using our cash for these acquisitions. But still we can clearly monitor the number of outstanding shares.

On pricing, Alexandra, I think we are active in about 80 markets. And if I look to 80 budgets, we have one form where we see the volume growth and the price growth. I would say in less than 10 I see a positive development on price. In all the remaining 70 I see a negative. And this will not change in 2011 for reasons we all know.

So I believe the more difficult question is what happens in the volume column. And, of course, classical example, in China the volume column for the time being, and I believe also in 2011, will be largely positive because there's more and more access, there's more and more reimbursement, there is more and more kind of system. Now I admit remaining in the example, as long as there is more and more assist and giving access, there will be more and more pressure on the price.

But, as I said before, I believe that in countries like Brazil, Russia and China, the volume side will, for years to come, overpass the growingly negative effect on the price column in my budget form. And we will continue to make, of course, good businesses. But in the historical markets of the US and evidently Europe, there is not a single one where we would have a positive effect on price in our anticipation. And unfortunately this will continue. And we have to continue to adapt.

The vaccines in emerging markets.

On the emerging markets, if we look a little bit where the incremental volume growth could come from our existing portfolio, and I'm not looking to the potential opportunity of Shantha, which is, of course, big, we see some opportunities on Menactra. We are very happy with the early development in some parts of the emerging market and, more specifically, in the Middle East area, as well as in Latina. So in the long run, could we grow faster in terms of volume for Menactra?

Second area of opportunity is evidently with Pentaxim, where we have a very strong growth, over 40%. At some point we will move to Hexaxim which will be a opportunity as well. And the last front, evidently on flu, we have a very significant market share in the emerging market, above 70%. You know that we have recently built two plants, one in Mexico and one in China. That's puts us in a situation in terms of market access that is very favorable.

So in the short term, before we get access to the Shantha portfolio, this would be the main driver, without forgetting Adacel, which continues to expand in the international region.

We have one right up here in the second row.

Mark Dainty from Citi. Just three questions. Jerome, on the dividend, I was surprised that you only committed to a stable dividend given the large opportunity for working capital restructuring and the significant growth in free cash flow that you've generated this year and you should continue to do.

On vaccine margins, they seem to have progressed at the EBIT level every year for the last two years, including some H1N1 impact in there. But is that sustainable going forward? Could you give us some idea of the level?

And then just finally on the cost restructuring, clearly you have some more challenges to deal with next year. Should we continue to assume that you push those restructuring levels further going forward?

On your question of dividend, if I pick it correctly, we have tried to have a -- we want to have a dividend policy which is consistent with our strategy. And our strategy is to resume growth and to resume growth with more sustainable growth than before. So all the idea around dividend is to have a dividend payment or dividend trend which is consistent with that, i.e. being able to sustain a growth of dividend -- a regular growth of dividend, not having any short-term movement in terms of the evolution of the dividend, but more looking medium term.

And this is really why we saw that yes, short term you could decide to give back more to shareholders. But, on the other hand, we clearly want to commit to continue to grow the dividend, even if the profit is going to decrease, for instance, next year. So that's what I would say on dividend.

On the cost cutting, well, A, let's reach the EUR2b. There is still 11 months ahead of us. You could say, well, this is behind us, but this is still to be done. B, there are some actions which have been undertaken which will deliver extra savings beyond 2011 already. Typically all what has been launched, in terms of industrial reorganization, as usual, takes some time to deliver its contribution to improve profitability or productivity, just because it takes you two to three years to go strong for the product and close the -- or transfer the equivalent or the corresponding facilities.

So we know, for instance, from what [Philippe] has launched that there will be some extra hundreds of savings in the cost of goods in the year 2012, 2013. We have just recruited now, less than one year ago, a global head for purchasing. And clearly, we have not driven all what we can get from the taking advantage of our purchase power on the renegotiating, as well as streamlining the number of suppliers or the number or type of sources we use, so there is still some more to come from that.

And not to speak about any further reorganization, but here I would say that all what we have guided us is to try to do to the extent possible once for all. So clearly, what we've done in the US was really to put behind us all the restructuring and, to a large extent, this is now ongoing in Europe. So I would say that, yes, there is more potential. The update we plan to do at the middle of the year will typically be the right time to give you some revised figures, both in terms of cost cutting, as well as a long-term outlook for the Company.

For about the EBIT margin on vaccine?

There was clearly a benefit from H1N1 because you've got, essentially, a cost with no marketing outlay against that.

So there has been improvement in there. I would answer this way. The gross margin in 2011, as compared to 2010 and, even more, 2009 has increased -- has improved. And this is largely linked to the H1N1. And you could say well, you've sold as many doses of H1N1 in 2011, as compared to 2010, but we didn't --

2010 Versus 2009.

2010 versus 2009, sorry. But in 2009 we had some extra costs linked to the use of the facility, and also some R&D or clinical spending -- clinical costs. So yes, in gross margin, I think that there is something in the range of 2% that you may lose or let's go back, let's say, to the previous situation in 2011, as compared to 2010, as a result of no H1N1 sales.

I think, just on the cost reduction, I can tell you, when we introduced the EUR2b program two years ago, that nobody internally thought we could do this. And I think the Company has come a huge, long way on this. But the first part of it has also been the hardest part, in terms of actually doing the restructuring, getting through social plans and the like. But pharmaceutical companies have never really been run to the last penny. And so there are lots of reserves in the Company. It's purchasing. It's package redesign. Our Head of Manufacturing has said that 30% of our SKUs in production account for 1% of sales. So there are a number of opportunities there, so we're not going to stop at the EUR2b. But it's probably going to be around some of these, let's really be a lot more sensible about how we spend money.

Now in terms of the dividend also, I think, we're clearly looking at having a sensible level of debt on the balance sheet. So we've seen that we reimbursed the first EUR9b of transactions pretty fast. If we actually do Genzyme and that's going to put EUR10b of debt on the balance sheet, as that gets reimbursed, then you're also going to make, at any time, a decision on capital allocation. Do you actually do more acquisitions? Or at that point, do you increase dividend or do share buybacks?

The share buybacks, in my view, really only make sense though if you have a company that's got a stable outlook. If you have a company -- and today most, not all, but most companies are in a perspective of a declining asset base, so the buyback probably is a waste of money. But if you have a stable outlook, then that might actually start to look like it adds value. So we're going to try to keep a sensible level of debt on the balance sheet. Now exactly how that gets used is something that is a dialogue between our Board and shareholders and management.

Okay, up here again, please.

Eric Le Berrigaud, Raymond James. Just one quick question. Just if we listen to you carefully, it looks like free cash flow could be a better metric than EPS results. If we look at 2011, to what extent, according to what you know about working capital and what you're doing on the CapEx, do you think that free cash flow could remain into the positive territory, versus a minus 5% or 10% decrease in results.

It's a difficult question. You have to look at it two ways. One is basically the cash flow you generate is very much linked to your profit in this industry, unless you improve your working capital or you spend less on CapEx. So I will say that we are going to continue to make efforts to reduce the working capital requirement for the Company.

I would not like to commit today, in front of you, any figure. But I can tell you that we have put in place an organization which is there to really try to capture any way to improve that, knowing nevertheless that as long as you expand your business in the emerging market, you tend to have delays of payments which on average are higher than what we are used to. I'll say on average because I would say in a way, today, the duration of the receivables is somewhat longer in Southern Europe, for instance, than it is in many emerging markets, not to speak about countries where the habits are different, which is Japan, or practice on the business.

Now on CapEx, I think we could assume that the CapEx for 2011 should be in line with what we have in 2010.

I think we're going to move to one last question. I think we have one right up here. Right here.

Marietta Miemietz, Societe Generale. One financial question, please. Jerome, you made an interesting comment about the dividend, that you're committing to keeping it at least constant. But you would commit to continued growth as soon as you have visibility on some additional issues driving the growth beyond 2013. I was just wondering, what are these issues beyond obviously the outcome of Genzyme? And how confident are you that you're going to have the answers by the mid-year seminar.

And my second question is for Chris, relating to pricing in rare diseases. The space is attracting new entrants that might not have the same level of pricing discipline and are, in fact, starting to get vocal about it. And I was just wondering if you sort of run a stress test, if you had one or two rare disease drugs launch at prices that are maybe a fraction of what we're currently seeing, how long do you think the current prices and margins of the existing drugs could probably be sustained? Thank you.

Well, on dividend, A, so this is a decision which you take year on year. And I think that this is one decision which boards like to take decision year after year is this one whether we like it or not. Now, once again, I think that we are entering into two years where the result will be more difficult, for the reasons that we all know, which are the patent expiries of some of our main products. So the first idea, which is to say, well, whatever happens on the profit, and we know what will happen on the profit in 2011. And you can, all of you around in this room, make your own calculation on what will happen on the profit in 2012. It's not rocket science. So I think you can do that. And all what I have given also today on the underlying growth of the other businesses, give you also some ways to even refine the calculations if necessary.

So I would say that by committing to at least maintain the dividend would clearly, A, firstly give an indication that we are committed to deliver shareholder value, short term. We still believe that really to deliver shareholder value, that's a medium term. And a bit back to what Chris said on the timing of our seminar, it is all about how do we resume growth and how do we give visibility and credibility that our portfolio has changed dramatically. You can compute an underlying growth for several years beyond 2013, as many as possible. In that case, I think you would share with me that the multiple would be several higher multiple than what we have today. And if you get that, whatever dividend back you give to the shareholders, it has much more value to shareholders. So all the focus are on how do we deliver the highest visibility on growth from 2013 onwards, I think is absolutely essential.

The third thing -- and now maybe we'll have more visibility by mid-year, is to have a clear overview on the acquisition of Genzyme. Obviously by mid-year we'll know. And then I mean obviously give us a better picture, not only on the trends, not only on the restructuring costs or on the cost savings, sorry, but also on the cash flow available to accelerate, let's say, a dividend payment of cash being sent back to shareholders, either through dividend or through share buyback, share buyback being --- I share totally what Chris said, making sense only if you are not declining, decreasing your set of assets.

So rare disease pricing. I get this question a lot. Is it a risk? Absolutely, it's a risk. But is it a greater risk than anything else that we're doing? I'm not so sure about that. First is it's kind of a misnomer that the high prices are only in rare diseases. When you actually look at the top-20 most expensive drugs, you've got an awful lot of orphan diseases that are in cancer indications. So when you actually look at the price of an Avastin, for example, where you might be prolonging life for a number of months, versus a drug for a Gaucher's disease, where you can allow a child to grow up and live a normal adult life, you've got different value propositions on this.

When you look at the top-20 most expensive drugs, you're going to find that there's a mix of big companies and small companies. So I think the idea that big companies can't charge as much as small companies, it has to do with the value proposition I think today. Very interesting about rare diseases is you typically know whether the drug works or not. You put it in a patient and it works. If you think about how much money is spent in healthcare systems for treating people with drugs that don't necessarily work for everybody, that's a much bigger budget item for them in most cases. The whole global rare disease market is something like 1% of the total healthcare market. So there's a lot of headline numbers in it.

So to me, we live with a lot of risk anyway. European price cuts, are they really going to pick off products that actually are helping children to grow up and lead normal lives? Or are they going to go out there saying, "Do we really need to be reimbursing Viagra?" which happens in a number of markets.

So we can't discard any of that. And all of this is a balance. But I actually think that if you -- in tomorrow's world, if you have a biomarker, you can define a population, you can show that the product works and there's a clear value versus something else, then I think people are going to be willing to pay for it. And that's a simple as this. So we've got to unfortunately cut it back. Francoise we'll have a cocktail afterwards. We can address the question afterwards. But I think we have to shut it down there.

That actually concludes our conference and webcast. And I invite the participants in the room here to join us for a cocktail just outside the room. Thanks.