Sanofi SA (SNY) 2011 Q2 法說會逐字稿

Operator: Ladies and gentlemen, welcome to Sanofi 2011 second-quarter results conference call. (Operator Instructions). I now hand over to Mr. Sebastien Martel. Sir, you have the floor.

Thank you. Hello, everyone, and welcome to Sanofi's conference call on our Q2 2011 results. Before we start I'd like to remind that are slides are available on the website. As always, I must advise you that our present today -- presentation today contains forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results to be materially different. These factors are detailed in our annual report on Form 20-F and in the document of reference.

On slide three you can see the agenda for the day. Basically, the presentation will be divided in four parts. First, Chris Viehbacher, our CEO, will share with you the key highlights for the quarter. Then Hanspeter Spek, President, Global Operations, David Meeker, Chief Operating Officer of Genzyme, Olivier Charmeil, Senior VP, Vaccines, will provide some color on the Q2 2011 business performance. Dr. Elias Zerhouni, President, Global R&D, will review our upcoming key regulatory findings. And we'll come back to the first Phase III results of Lemtrada. And in conclusion, Jerome Contamine, our CFO, will comment on the Q2 2011 financial performance. We will then host a Q&A session.

And, without any further ado, I will now hand the call over to Chris.

Thank you, Sebastien. Good morning, good afternoon, everybody. I'll first just give a very warm welcome to Dr. David Meeker, who's joining us for the first time. We thought it would be helpful for some of our investors who haven't been as familiar with the Genzyme portfolio of products to have David, as COO of Genzyme, be able to provide some of that detail.

I'm going to move straight to slide five, because I think it really best illustrates what's been going on in the Company. As we have been predicting now for several years, obviously, there is an impact of Generics on the many blockbusters that have driven this Company's success for many years. I showed this slide for the first time at the first quarter. This is an update for what it looks like in the second quarter.

To remind you, the first part of the chart really shows the sales of those nine products that are subject to patent expiry. In Q2 of 2009 the sales of those on a quarterly basis were EUR2.1b. And you can see when we fast forward for two years that those sales have melted to EUR773m. And in fact the impact of Generics in the second quarter was stronger even than in the first quarter, with an impact of about EUR800m of sales lost to Generics in Q2 versus EUR500m in our first quarter.

But of course that also says that, at least in terms of sales, we're getting a major part of the cliff behind us and that cliff gets more and more behind us with every quarter that passes.

That's not really the story of the Company, though. The story of the Company really has been the other side of the page, where you can see the growth platforms. As you know, we've made a massive effort two years ago to reallocate resources and shift management attention and strategically align the whole Company behind these growth platforms. And the growth platforms are not just there really to replace those lost sales, but to restructure the sales into areas of business that have natural barriers to entry and which are substantially less exposed to patent expiries to really avoid the -- more of the same on the left side of that chart.

What you can see is that, of course, over time and, again, with each quarter, that these growth platforms become an ever more important part of the Company. And if we look at the sales of Genzyme plus the growth platforms, you can see that already two-thirds of the Company are in this part of the business, and those have performed well. So that's really where we're going. This is -- you're seeing increasingly the new Sanofi emerge with the green bars and, really, the bars on the left side starting to disappear.

So if we move to the next chart we can see what the impact is on earnings per share. Again, if we hadn't had the ability to consolidate Genzyme sales of Sanofi would have been down 4%. As it is, with the consolidation of Genzyme those sales are up 6.9%. Sales on a constant exchange rate basis are affected, obviously -- sorry, those are current exchange rates, yes. So you can see the current exchange rate, yes.

Then if we look at earnings per share we have, obviously, a decrease of 12.1% without the benefit of the Genzyme consolidation. And with the Genzyme consolidation then we have 7.4% decline.

Now, so what's been going on with Genzyme? We've made huge progress on integration. We basically began the integration on -- just after we announced the deal in the middle of February. We've had a global integration committee made up of executives from Genzyme and from Sanofi with, basically, that being chaired by Henry Termeer and myself. We had an Executive Committee in Cambridge last week and basically came to the conclusion that the global integration effort was largely completed. So I think we've done a very good job of actually bringing these two companies together in a relatively short period of time, recognizing that Genzyme has 10,000 employees in 80 countries.

Now, there are still some level of integration work going on, particularly in countries outside of the US. But largely we believe that from a global point of view we've made the key decisions on people, on structures, how we want to organize our business. And I have to say on a people basis we had a dinner together last week and I think we've made a huge step in starting to move from the inevitable parts of integration where we're we and you, and we all become more we.

Now, what did we actually do in terms of structure? We looked at Genzyme's four businesses and they were essentially the Personalized Genetic Health, there are the Biosurgery business, the Renal business and the Oncology business. Then of course there's a new business which comes from creating a new multiple sclerosis platform. And we decided that really the personalized, intensely patient-centric approach would really be best served with the Personalized Genetic Health business and the Multiple Sclerosis business. So the new perimeter of Genzyme, if you like, is the PGH, the Rare Diseases and the Multiple Sclerosis business.

Into that we have put the Sanofi MS product of Aubagio. And this is actually quite an exciting opportunity to launch two major drugs in a category within a short time of each other. So we will be able to become, quite rapidly, I think, a leader in multiple sclerosis.

The other businesses we felt could benefit from Sanofi's size and scale, geographic presence around the world, and so the Oncology division of the two Companies have merged. And that's really where the true integration has occurred. So we've put our portfolio together. And that actually was very helpful, because we actually have an awful lot of extra capacity on the Sanofi side, given the patent expiries. So really those could help the Oncology businesses.

And then on the Pharmaceutical businesses we put Renal business and the Biosurgery businesses in with Sanofi's businesses because we can see some cross-selling opportunities and, again, the opportunity to get some scale behind that.

If I move to the next one, you've seen this morning that we put out a press release separately on forecasts for the CVR. Essentially, when we went through due diligence -- and, if you remember, on some of these calls, even before the close of the transaction, we had expressed some skepticism that the recovery could be as quickly as had been forecasted. And certainly as we went into due diligence and we're looking at the manufacturing forecasts we just felt that those were too optimistic. And so at that time, to really bridge the gap between the two managements, we essentially reallocated $1 of the CVR from Lemtrada to the manufacturing forecast.

Now the Company, and you can see that from this chart, we continue to make very strong progress. You can see on the left that in the first half of 2010 there was a significant decrease in production due to production issues. But that recovery had really been largely affected by the second half of 2010. And the production in 2011 is showing the consistency of the production that we're able to achieve with roughly the same level.

I would point out that's actually a slightly pessimistic view because there was actually a key lot that was approved for release on July 1. Had it been on the thirtieth that would have actually even shown a small increase versus H2 2010. So Cerezyme is an exercise in now trying to build stock and really optimize the production, but I think is in good shape.

Fabrazyme of course has been more difficult to come back and really get the yields out of the new cell banks. And you can see that between the first half and the second half last year that it was more difficult. But the first half of 2011 we're seeing a significant increase. And I think there will be a significant increase again in the second half of the year.

So the progress is there. We're in line with the consent decree. In fact, the fill and finish operations in Alston, which were partly at the root of the consent decree, were stopped. And that's ahead of schedule. So we've got every confidence in the recovery of manufacturing. It's just that the actual levels of production are not going to lead to what was originally forecast.

For Sanofi there's no real difference, because we never built the higher forecasts into our plans. And so this has no significant impact on the outlook for Sanofi and where we're going with our Genzyme colleagues.

The next slide I think is also important and Elias will go into this in a little bit more detail. But I think I'm extremely happy to see progress firming up in a number of areas of the Company and, particularly, in R&D. We've made a number of -- had a number of milestones, some of which are related to R&D and some aren't. Obviously, we completed the divestiture of our Dermik business. I like dermatology, but we had no critical mass in that business and saw no clear path to getting it and so we decided to sell that business at what I think was a very good price.

Jevtana has now been approved in the EU and the rollout is in progress. Certifect, which is a new parasiticide for dogs, has been launched in the US. It's extremely important because of the key element of Frontline to our business and Hanspeter will go into a little more detail on that. We did have some positive Phase III results in second-line colorectal cancer for Zaltrap, and you'll see more of the detail of those presented later in the year.

Lyxumia is -- has also had a lot of data presented at the ADA earlier this year. Lemtrada, of course, you saw the Phase III data and I think Elias will talk a little bit more about that. We've got a new product, semuloparin, coming along for VTE prevention in chemotherapy patients. Hexaxim, in vaccines, we've started the process for licensure in emerging markets. There's sarilumab, which has positive Phase IIb results in rheumatoid arthritis and so that's looking very positive in an interesting market as well.

Not everything goes well, of course, and the sarilumab results in the ankylosing spondylitis didn't work. And of course we had the PALLAS study in Multaq which was stopped due to side effects.

But I think there's a lot of good progress on R&D and Elias will give some more benefit to that. I think the one thing I would say is, we did a -- we culled the portfolio, if you remember, two years ago, and took out 35% to 40% of the portfolio. What I think was good is that the stress test that we put on the portfolio that year, I think, really generated a set of decisions on which products to keep, which appear to have been validated two years later.

Because most everything that we decided to keep has now progressed and is looking at being filed. So that gives me some confidence that some of the discipline and rigor that we need in the decision gates for development are in place and are predictive of -- are better predictive of success in development.

So if we could go to the next slide. We've also made some personnel changes, so we've strengthened our management team. We announced this morning the appointment of David-Alexandre Gros as our Chief Strategy Officer. This looks at business development and M&A, but it's also an opportunity to make sure that we've got enough strategic thinking going on at the Executive Committee level. A lot going on in Healthcare, a lot more integration in Healthcare. There's opportunity everywhere. And David's background, as both a physician, consultant and banker, I think will add a lot to our team.

With the departure of Belen Garijo to Merck Serono, Peter Guenter has moved up to head our European operations, a seasoned marketing executive most recently running our German operations. One of the things that we did as part of the integration of now both Merial and Genzyme is to take advantage of that and move to a new support function model in North America. So rather than having all of these support functions duplicated in our five US businesses, we created a new organization to support those businesses and that be headed by Greg Irace, who has been running our US Pharmaceutical business. And as he moves up we have brought in Anne Whitaker, who was previously running a major part of GSK's US business.

The growth platforms, as I said, continue to perform well, double-digit growth in emerging markets for the first half, Diabetes Solutions doing extremely well, Lantus up 14.5%, I think, is good. Consumer Healthcare clearly driven by the Allegra launch. Animal Health up 6.7%. You're going to see in Vaccines and Animal Health that second-quarter growth was a little lower. This is largely seasonal and shifts between first and second quarter. Vaccines are used to seeing it. Animal Health, of course, you're less used to seeing because we haven't consolidated for that long, but you have seasonality with the fixed season and so there's no real change to the underlying growth. You're just seeing the quarterly variations.

Emerging markets, Hanspeter will take you through as well. There the growth in emerging markets looks a little lower, but that's really related to a couple of specific markets and are largely from the point of view of a different comparative period for the last year.

So, finally, if I take all of that together and look at the outlook for 2011, obviously, we've decided to update our guidance for 2011 now that we've been able to consolidate Genzyme. And so the earnings per share guidance that we had at the start of the year, which, to remind you, was down -- expected to be down 5% to 10%, has now been raised so that we would expect earnings per share to be down by 2% to 5%. So I think the business is in good shape. Quarter two basically is again demonstrating the execution of our strategy. Every quarter takes us less out of the realm of Generic risk and more into the realm of sustainable patent growth.

So, with that, I'll turn it over to Hanspeter Spek.

Thank you, Chris. Good morning. I kindly ask you to move on to page number 14, where you find, then, an in-depth analysis of our quarterly sales. You see that the sales on a comparable level are at the same level, EUR8.3b. We continue to lose to Generics EUR778m, as you have seen in Chris' part. Evidently this is still very significant. Lovenox and Taxotere makes the vast majority of those EUR778m, but it is already significantly less than in the previous trimesters.

The growth platforms you have seen also contribute significantly, approximately half to this loss, and, yes, there is the first-time contribution of Genzyme, which further helps us to compensate a negative ForEx impact of more than EUR500m, which largely, but not only, of course, comes from the US dollar.

On page 15 the already traditional focus on our performance in emerging markets. We have a two-digit growth rate, as in previous quarters, 12.3% equals $2.5b. This would be 7% excluding Genzyme anti-avian flu effect. You see then that, yes, the emerging markets became our largest, most important market segment, more important than the US and Western Europe. And if you then analyze the emerging markets inside you see that, yes, by far the largest contribution to this growth comes from the so-called BRIC countries, Brazil, Russia, India and China.

In the previous quarters we had a little bit of a question mark during 2010 on our performance on Lantus. And I describe by the third- and fourth-quarter 2010 what we are doing in order to correct this performance. And I'm happy to report today that we are back to a two-digit growth already in the first quarter, with 13% for Lantus, which we've further accelerated now to 14.5%. The product achieved close to EUR1b in a single quarter. But also overall our Diabetes division, which achieved nearly EUR1.2b sales, is growing very impressively with 12.4%.

We were happy also to report during the past quarter positive Phase III results for the upcoming intended launch of Lyxumia, which has been presented during the ADA. And also another product out of our Insulin portfolio accelerate nicely its growth. Apidra is close to 30% growth of sales in the second quarter in the United States, but also outside.

Another growth platform becoming more and more important is Consumer Healthcare, as you find then on page 17. Also there we see an accelerated growth of close to 18%, achieving EUR644m in the second quarter. This is a growth largely driven by Allegra, which we launched in March 2011, due to a switch from a prescription to an OTC status in the United States. The product has sold in the first half EUR143m and, as such, we immediately leapfrogged on the second market rank and we are quite proud concerning this achievement. But also outside the US we continue to track the growth of this activity.

And, as we gave as an example, we launched, for example, Lactacyd in China and we very actively built and rebuilt our portfolio of CHC products also in Europe. And we are quite confident that the current growth will continue in the upcoming quarters.

Generics, then, on page number 18, another growth platform performing extremely nice, with 17.6%, sales above EUR400m. You know our policy in this respect. We have a more opportunistic approach to Generics, as you know. We strongly concentrate on the emerging markets where we feel that it is most adequate to propose Generics as a contribution to make medication affordable. Consequently, 64% of our Generic sales come from those markets and they grow nearly 14%, with EUR279m.

In the United States we have a more defensive attitude. We have continuously, since years now, launch authorized Generics through a partner. And we continue to do so with Ambien and, quite recently, with Taxotere.

Overall, our strategy has a two-axis one, is in Europe and in the Eastern European and Middle East country driven by Zentiva and, in the South Americas, driven by our acquisition of Medley, which, by the way, continues to perform extremely well.

A last word, then, on Animal Health. Chris had indicated that Animal Health has a strong seasonality overall, coming from the flea and tick season in the first quarter of any calendar year. This has been even more pronounced for the first quarter in 2011 because we were in a kind of defense battle against upcoming Generics.

We can state that, at least for the time being, we have not won the war but we have won a number of battles, one in the marketplace, where we defended our market share very successfully in the United States, but also in Europe. But also in court, as you see from the chart, we have won two court battles leading to the fact that three of our Generic competitors in the US, they are obliged to withdraw from the market. So we believe that the semester since the second half of 2011 will bring back, therefore, Merial to the expected growth rate, which will be in the range of 5% to 7% for the total year.

So this year's Certifect our recent launch in the flea and tick segment for the United States will contribute and will build, therefore, a certain bridge in the upcoming new generation of those products which we intend, then, to launch as of 2013/2014.

So far on the Pharmaceuticals. Then I pass now on to David Meeker to give you more insight on the performance of Genzyme. David.

Thank you, Hanspeter. So the second quarter for Genzyme was a solid quarter with revenues of EUR796m. That's in the context of continuing to work our way through the supply challenges and deal with the distractions that inevitably accompany an acquisition. So we've been working through the integration part of this.

The quarter was up 16% year on year and that was driven predominantly by a strong performance in our Personalized Genetic Health business, up 36%. And if you look at the pie chart on the right you can see that, within our Group of enzyme replacement therapies, this growth came predominantly from Cerezyme, up 58%. The Cerezyme picture was driven predominantly by the increase in supply in the stabilization and increased consistency of our ability to produce that Chris highlighted earlier. Myozyme and Lumizyme, up 42%. This is a product that's very much in the launch phase and that reflects just the increase in growth of the product overall.

Importantly, the balance of this portfolio, Synvisc up 17%. Again, this is a product that's relatively spiking, an older product, has enormous room to grow, given the still relatively low penetration of visco supplements overall into the osteoarthritis market, up 17%. And Renagel and Renvela, again, the main dominant offering, if you will, within the phosphate binder space, with in excess of 52% share in the US, up 14%.

We're on track, continuing to make progress, dealing with the consent decree and, as Chris highlighted, have discontinued fill and finish activities. Fabrazyme, the good news on Fabrazyme is that we have again consistently been able to supply at our current level. And we're working toward being able to move definitively out of the supply constraints which will require approval of our new plant in Framingham.

And, finally, of course we were quite encouraged by the initial positive top-line results from the first Phase III study, which Elias will review shortly.

And now over to Olivier.

Morning, everyone, good afternoon. So Q2 flu vaccine. Q2 means for us in the south hemisphere the end of the season for flu. The pattern for this year has been a little bit different from the pattern of last year. There was more sales coming into the first quarter. So overall this translates for the total Vaccine business into growth for the quarter of 3.4% and year-to-date performance at the end of June of 6%.

We had record sales in terms of southern hemisphere flu, with a growth showing more 41% growth. We are very happy with the performance that has been very much driven by our performance in Latin America, in Brazil, where we have taken the benefit of some potentials that we have been able to save and, of course, a very strong performance in [inaudible]. Overall, our market share for flu is in excess of 70%.

In the meantime we continue to defend our position in the US on Menactra, where Menactra has been showing in the last couple of months a very strong resilience. Our market share remains close to 90%. And in the emerging market we continue our rollout of our Axim family and we have just launched in China. Our Axim family continued to show a strong growth, with Pentaxim growing more than 36%.

We are very happy also to announce that the licensure process for Hexaxim has just been initiated. Hexaxim, which is the six in one, is a very important growth driver for the emerging markets and the process just started.

Regarding flu, and looking at the upcoming northern hemisphere flu campaign, after Fluzone high dose that was launched last year we got the licensure for the intradermal form that we will be launching. And we, for the time being, are very happy after the first shipments that started on July 18. We are very happy with the pre-bookings and that the price as expected.

I now hand over to Dr. Elias Zerhouni.

Thank you, Olivier. In terms of research and development what I can say is that the organization is extremely busy following, as you know, the stress testing that Chris mentioned before, and focusing on delivering on the portfolio. And I'm pleased to report that we're busy, in fact, filing six new molecular entities in the next nine months. The first one that was filed this month is Kynamro mipomersen, which is indicated in homozygous familial hypercholesterolemia and severe heterozygous familial hypercholesterolemia, and has been filed in July this month in the EU and will be filed in the fourth quarter in the US.

Visamerin/Mulsevo semuloparin was one of the best highlights of ASCO as the first therapy to prevent venous thromboembolism and pulmonary embolism in chemo-treated patients. And we're planning to file that in the third quarter of 2011 the US and the EU. Aubagio teriflunomide is another new therapy for relapsing multiple sclerosis will be filed in the third quarter of 2011 in the US and the first quarter 2012 in the EU.

Zaltrap, or aflibercept, which is a VEGF trap that has the particularity of being able to trap not only VEGF A, but B and PIGF, has been successful in second-line metastatic colorectal cancer and will be filed in the third-quarter 2011 in the US and the fourth-quarter 2011 in the EU. You heard about good results in Lyxumia lixisenatide and this new molecular entity will be filed for Type 2 diabetes in the fourth quarter of 2011 in the EU.

And, finally, we've had the CARE-MS I results from Lemtrada alemtuzumab for relapsing multiple sclerosis, which will be filed in the first quarter of 2002 in the US and the EU. Obviously, this is putting quite a stress on an organization. It's unusual to have six filings coming in such a short order, but we're happy to be able to announce that.

There has been some good news in CARE-MS I which has been positive in its Phase III for top-line results that we released, with a 55% reduction in relapse rate over Rebif, which is an interferon beta 1A inhibitor. Over two years compared to Rebif there's this remarkable reduction, which is confirming Phase IIb result. However, we could not confirm the Phase IIb result in sustained accumulation of disability. There was no statistically significant results on time to six months' sustained accumulation of disability with 8% of patients with Lemtrada and 11% of patients with Rebif having -- showing sustained accumulation of disability, and safety profile was consistent with Phase II clinical trial experience.

So, as I said, we're planning the filings on the basis, obviously, of CARE-MS 1 and we're expecting the results of CARE-MS II. The difference between the two trials is one is being performed on treatment-naive patients, whereas, the CARE-MS II is performed on treatment-experienced patients and will have the results in the fourth-quarter 2011 and are prepared to file in the first quarter of 2012. And we're happy to see that fast track status was granted by the FDA for Lemtrada.

As we go forward we're looking to continue our development jointly, obviously, between Aubagio, which is coming, as you heard, from Sanofi, and Lemtrada, which is coming from Genzyme, as a new approach, new franchise in multiple sclerosis.

With that, I'll turn it over to Jerome Contamine, our Executive Vice President and CFO.

Thank you, Elias. So first I'm slide 26, so I'll come back on the sales. A lot of things have been said already. So just to remind you of a few technical comments. The first one is that the Q2 2010 include -- has been restated with Merial being consolidated which has been represented. So clearly the element is not what we posted last year, Q2. It includes 100% of Merial.

So second is that, as we shared already, the second quarter has been the most challenging in terms of Generic impact on sales, precisely because of Taxotere being Generified (sic) as from the beginning of April. Therefore, we post a minus 4% organic decrease over the quarter. And clearly this is on the lowest point of the -- toughest point, let's say, in terms of Generic impact on sales that we'll see over the year 2011. And I remind you that as from Q3 we already had the Generic of Lovenox as from July 23rd. So therefore on a like-for-like basis the impact of Generification (sic) will be somewhat lower from Q3.

Genzyme is clearly a contributor and allows us to post an overall growth. And this is clearly planned in our game and is in line with our strategy of both diversification and creating new growth platforms. And, on top of that, on the like-for-like basis you'll remember that the exchange rate of the dollar against the euro was (inaudible) in Q2, which was not the case in Q1 in 2010, and exactly the reverse this year. So we have a strong negative impact of ForEx on Q2, which reaches 6.4%, mainly driven by a somewhat stronger euro and a weaker dollar, as you can see. But all in all, with all these effects we post sales for Q2 which are slightly up against sales of Q1 on the current basis.

So also if I look at the P&L, this P&L is -- for Q2 is impacted for the -- by the consolidation of Genzyme as well as the change of mix. So I think it deserves some explanation. So when we have stable sales reported on the reported basis and increased sales on the constant exchange rate basis we have decrease on the operating income. This was expected, let's say, and in line with our guidance, but still I think deserves some explanation, which I will give more following the coming slides.

So if I start with the gross margin on the cost of sales. I said at the Q1 presentation that the level we had reached in Q1 was basically the floor which we should reach for the full year, between 30.5% and 31%. Here again, 31% is the highest level which we should see so we should remain in this range. There is for Q2 a specifically negative impact of the shift of mix, with the loss of sales on the highly profitable products impacting by 2.5% the gross margin, if I compare to Q1 2010. On top of that the exchange rate has not been favorable, because we are producing more in euro and we are selling more in other currencies. So here again on -- if I compare the Q1 2010, Q1 -- Q2, sorry, 2010 Q2 2011, we have a negative 0.5% impact of the exchange rate.

While we're on Genzyme, Genzyme contribution to this cost of sales ratio is slight, a very slight accretion by -- the cost margin on Genzyme has been around 70% -- between 70% and 71%, let's say 70.5%, i.e., the cost of sales for Genzyme for the Q2 has been around 29.5%.

So now I move to the R&D expense. I would say that along with high activity which Elias has described, I think that we have been able to stabilize our R&D expenses on the comparable basis. Of course, Genzyme adds some expense, and precisely EUR135m for the quarter, which is normal. So if I exclude that we have a slight decrease of R&D expense, despite activity on late-stage phases, both in pharma but also in vaccine, because we are really in the process of the Phase III study for -- cyclical study for dengue.

And clearly we have been able to reach that, thanks to the decrease of our infrastructure costs as well as our internal costs over the period. So we now take advantage of the actions we've taken over the past two years so that we are able to stabilize on the comparable basis our R&D expense for the quarter.

SG&A, here again, I think it deserves some explanation. We here again include Genzyme contribution and this is before the synergies that we are planning to generate. So we have an increase of SG&A to sales ratio. In fact, if I take out Genzyme the SG&A expense has decreased as compared to last year and doing somewhat better than during the first quarter on a comparable basis. And, once again, if I include Genzyme we are going to implement some synergies and, particularly, on support functions so that we'll benefit from that in the coming quarters on all over the year 2012, so that we can come back to a level of ratio which was in line with the, let's say, our objective, which is to be more in the range of 25% to 26%.

Below the operating income, then, if I look at the net income. I'm proud to show that, in spite of the increase of the gross debt and the net debt, the net financials have been kept stable. And this is the result of the very good cost of financing that we achieved for the Genzyme acquisition.

As you can see from slide 32, the gross debt -- the average gross debt over the quarter has been slightly above EUR20b, the net debt being around EUR13b, when the average gross debt in Q2 2010 was EUR9b and the net debt around EUR4b. So on one arm we bear less of the cost of carry of having cash on the balance sheet, but on the other arm we also benefit on average cost of gross debt which has been significantly reduced, thanks to the good financing conditions for the Genzyme acquisition. So, as you can see from this slide, the average rate of the cost of debt for the quarter for the gross debt has been 2% compared to 4%, which was more the heritage of older debt on the balance sheet.

One word on the tax rate. So we revised our effective tax rate for the year. We have taken into account Genzyme consolidation, but we have also taken into account the evolution of how a spate of activity between various countries and having more [profits] being generated in countries with a lower tax rate, also some extra optimization on our ability to benefit from the lower tax rate on royalties being paid in our French operation.

So all in all the tax rate for the year will be 27.5%, so lower than what I said at the beginning of the year. We have taken the impact for the two quarters in our P&L in the second quarter, therefore, the tax rate for the second quarter has been 26.5%, which, in fact, is in line with an average 27.5%, sorry, for the first half year.

Now I move to slide 33. I think as Chris has mentioned that already as well as David. We revised up our objective of cost synergies for the integration of Genzyme from $600m to $700m. This is a result of extensive work which has been performed both in terms of putting together and putting in place a new organization, on evaluating in detail where the synergies could be generated.

So, as you can see from the graph on the right side of the slide, clearly a large part of it should come from support functions as well as rationalization of IS/IT systems. Also there will be some synergies to be generated benefiting from those Sanofi and Genzyme organization in R&D, in particular, in the US. And when it comes to operations it's very much related to the integration of the oncology business of Genzyme within the oncology business of Sanofi.

So all in all it's $700m of synergy. This will be achieved by the end of 2013. Don't ask me at this stage if it could be fourth quarter or third quarter. So you can say that at least we'll get $700m full impact 2014. And we'll do our utmost to accelerate, let's say, the ramp up of these synergies.

Cash flow, which is on the next slide, 34. So if I take the quarter we have generated EUR1.6b of free cash flow, EUR2b from net cash flow from operating activity, EUR428m of CapEx. As from Q2 obviously we take into account the CapEx we spent on Genzyme, on the new facilities, as well as the upgrade of existing facilities. So it's EUR90m, which are coming from Genzyme. The rest is, therefore, in line with what we posted during the first quarter.

The sources I'm using for this table take into account the acquisition of Genzyme for this quarter, so this is obviously the bulk of the EUR13.6b you can see on the slide. And we have paid out in cash EUR1.5b in dividend in cash, plus some share repurchase for EUR100m. So all in all the net debt at the end of the quarter is around EUR13.2b, which is basically one-time EBITDA and shows that we still have a very strong capital structure and balance sheet structure.

So if I just summarize before moving to Q&A. On the H1 2011 the growth platforms have generated a double-digit sales increase and, of course, this doesn't take into account Genzyme. We achieved that despite a very significant Generic headwind over the quarter, by EUR1.3b for the full first half of the year.

We managed to limit the impact on our EPS evolution, which is down 6% if I include -- if I exclude, sorry, the impact of H1N1. We are again on track to deliver the EUR2b cost savings objectives by the end of 2011. This refers to our previous plan. Of course this doesn't refer to the integration of Genzyme, which stands on top of the $700m synergies which I mentioned before.

And last, but not least, now we can say that, including Genzyme, our exposure to a patent expiry on, let's say, old, not growing products is being reduced again and growth platform plus Genzyme represents now more than 65% of overall sales.

With that, I think I pass over to Sebastien.

Thank you, Jerome. We are now ready to open the call to questions you may have. Like always we have many people listening into the call today, so I kindly ask you to limit your questions to one or two at a time to allow as many participants as possible to join the Q&A. Operator.

(Operator Instructions). We have the first question from Mr. Tim Anderson from Sanford Bernstein. Sir, please go ahead.

Thank you. A question on Genzyme and then one on Multaq. On the missed milestone, the easy interpretation is that your progress in fixing manufacturing is going slower than expected. But if I heard you right you seem to be saying that it might have just been overly-optimistic timelines set by Genzyme and not by Sanofi. Is that correct?

Then, just looking at the history of manufacturing issues with drug companies, they tend to drag on longer than companies originally think. And I'm wondering how much you're willing to reassure us that this won't happen and that things like the 1Q 2012 milestone you set up for Fabrazyme will be met?

And then on Multaq can you assure us that Multaq won't be removed from major markets like the US and Western Europe? You have two trials now showing worse outcomes, ANDROMEDA and PALLAS, and only one trial showing better outcomes, which is ATHENA. And then on PALLAS were the CV events adjudicated? Thank you.

I'll ask Elias to take the Multaq question. I will confirm what you said on the missed milestone, Tim. That's why we built the CVR in. The issue, though, I would say here is that you're talking about biological manufacturing so in some cases it's -- in a lot of places -- and I know this from previous consent decree experience. It's sometimes hard to get the full capacity going again because you essentially have an awful lot of duplication of effort between trying to get the manufacturing back again and doing all of the things like training and quality.

Here the issue is really around yields and that's just a question of the art of biological manufacturing. You remember there was a viral contamination, the facility had to be sterilized, so new cell banks were there. Cerezyme is actually up and running to expectations. Fabrazyme it's really just been a challenge of getting the cell banks back to previous levels of productivity. The real increase in supply will come with the increase in capacity of Framingham in the first quarter. And assuming our validation runs -- work out well, then I think we would be confident in seeing that date come through.

So that's why we're at pains to say the number was not going to be met. We didn't believe the number back at the time we did the CVR and I think that's been confirmed, but that doesn't diminish the very significant progress that has been achieved on getting the Allston facility back up and running.

So perhaps, Elias, you could address the Multaq question?

Yes, the first question you asked, Tim, was whether or not we can be confident that Multaq will not be removed. I think personally that I cannot -- I can never predict the behavior of regulatory agencies. But we are confident that in its current indication Multaq shows all of the evidence that we had accumulated in the ATHENA trial and, specifically, in patients with paroxysmal or persistent atrial fibrillation.

But remember that we focused on that population, which was early -- patients in early atrial fibrillation that have converted to sinus rhythm, or were in sinus rhythm at the beginning of the therapy, whereas, the PALLAS trial is completely different. It's a permanent atrial fibrillation population over six months. And these patients, as you know, have a higher incidence of underlying cardiovascular issues.

So I don't think the ATHENA trial or the other populations that you mention are comparable. So from my standpoint I think we need to fully evaluate the data, as you asked the question about adjudication. As of last week we had a 40% rate of adjudication. Both the EMEA and the FDA want to see all the data over the summer and we're adjudicating. Hopefully, we'll be fully adjudicated by September and that will give us a basis really to come back to you and tell you what we think.

Again, I think it's important to understand that the expansion of the indication was really never included in our projections. As you know, we do not do that until we have positive results and they are in line for registration.

Next question, please.

The next question is from Mr. Vincent Meunier from Exane BNP Paribas. Sir, please go ahead.

Good afternoon and thank you for taking my questions. I have two questions, please. A follow up on the manufacturing issues at Genzyme. Can you please give us a guideline, any guidance on the volumes you think you will be able to reach for Fabrazyme and Cerezyme? And also, if possible, the sales amount corresponding to that volumes for 2011.

The second question is on Eloxatin in US. Can you please give us an update on the situation regarding the patent litigation?

I think on the -- Vincent, in terms of the volumes the only thing that we can tell you now is that we believe that we can continue to supply Cerezyme patients, so all Cerezyme patients are getting a full dose today and so we consider -- we believe that there'll be consistent manufacturing going forward and essentially supply and demand are in sync and we're mostly just trying to get the yields up a little bit so we can start to build further stock.

Fabrazyme, we said that essentially supply will increase when we have the Framingham facility approved. So at this stage I think we're expecting a stable second-half production, perhaps some increase, but I think at the moment we're willing to commit to being able to maintain supply for existing patients and then we can update the forecast once the Framingham facility comes on line.

A maybe a follow up regarding Cerezyme. Are you able right now to build inventories or not?

No, not yet. We have some inventory but it is still fairly tight and that's why we need to lift production levels somewhat to be able to really build up stock.

Okay.

And just, Vincent, on the Eloxatin topic, there's no news on the appeal I sent. You saw that there was a nice uptake of Eloxatin sales in the second quarter.

Okay. And do you have any idea of the calendar for that, or it's uncertain?

No. The appeal -- there is a hearing set but there is no exact date, so it is entirely up to the district judge who has re-received the trial and evidently we have neither knowledge nor influence on the timing of the trial.

The timing of US legal decisions is notoriously difficult to predict.

For sure, yes. Thank you.

The next question is from Mr. Michael Leuchten from Barclays Capital. Sir, please go ahead.

Thank you. Yes, two questions, please. Number one on your guidance. It looks like you've amended that for Genzyme and Genzyme only, despite the fact that your growth platforms are going quite well, your tax rate is coming down. I was just wondering do I read caution into that. Your peers, specifically in the UK, have made very cautious comments about the industry outlook, not only this year, but certainly going forward, so any color there would be welcome.

And then, secondly, on the Genzyme synergies I'm surprised not to see more synergies coming out of the R&D side. I thought that would maybe be where most of the overlap between the organizations are. Why isn't there more synergy potential at this point in time?

So, on the guidance, this is essentially our best estimate of what the outlook is. There's still an awful lot moving around. There's some -- you shouldn't forget that we still have -- that we lost Xyzal and we've had MBNCR, which we tend not to say, but which have an impact on the results. Obviously, if we can do better we will continue to do better, but today I would say that's our -- and we don't really see anything on the immediate horizon in terms of the US or -- US pharma outlook.

Clearly, the situation in Europe remains challenging and you've seen some recent moves in Spain, for example, to have an across-the-board reduction in price. So just, given where deficits are, I think most of the industry would like to see how that shapes up. But today I'd say that's roughly where we believe the Company's going to go.

In terms of synergies on R&D, I'll let Elias take that one.

Well, there are two reasons that I can give you. First of all, the perimeter of synergies in R&D is not what was initially in the budget of R&D at Genzyme. For example, the initial R&D budget was $821m approximately, but some of that was not really R&D; it was product support. And in our approach to R&D expenditure at Sanofi these would have been more appropriately allocated to different aisles. So the synergies are really achieved on two-thirds of the pre-existing Genzyme budget. That's what you see.

Second is that we have decided to actually concentrate all of our research activities in Boston, in what we call a Boston hub, and, therefore, if you looked at the total plan that concerns the rest of R&D, it didn't make sense to extract more synergies out of the Boston region, because, remember, we have Sanofi Pasteur there plus Oncology. And we think it's a strategic move for R&D to have a much larger footprint in the Boston area because of the open innovation model that we are adopting. So those are the reasons why you might see a little bit of a [disproportionate] percentage.

Yes, one of the things on this is that what we haven't really included in this is the full impact of what Genzyme will do for the overall Company. To give you an example, really, the acquisition of Genzyme and Merial put us in a much different situation in the US, for example. So two years ago we had a pharma operation in New Jersey and a vaccine operation in Pennsylvania.

Well, now with these five businesses that we have we can move to a much different -- we've moved to a shared service transaction model, now moving to a shared support function model not only is there to help achieve synergies in Genzyme and Merial, but we would expect to see cost savings in the rest of the business, which we actually haven't put in here because they're not necessarily specifically the result of the integration savings.

So some of the savings are coming out. We haven't fully evaluated all of those. I think Elias is going also through an exercise in all of R&D now and saying -- okay, there are some immediate synergies. In other words, what we're trying to do is establish some very clear accountabilities for some immediate synergy targets that we need to achieve, but there is a second layer, if you like, of looking at -- okay, now as we look at the broader Group with all of these businesses are there further cost savings that we can be making. And those aren't really in these numbers.

Very clear, thank you.

We have a next question from Miss. Luisa Hector from Credit Suisse. Madam, please go ahead.

Good afternoon, I have a couple of questions on the enzyme business for Genzyme. So, firstly, on Cerezyme, can you quantify the impact of the Latin American tender in the second quarter? And on Cerezyme are you seeing switchbacks from Vpriv? If you could just give a bit of color on the split of patients that you're seeing there.

And then, on Fabrazyme, how confident are you that you can regain share in Fabrazyme in that ex-US region, given that Shire has had an opportunity there?

And then, on Eloxatin, was there a stocking effect during the second quarter?

And then, finally, on the tax rate, obviously you're now guiding to that lower tax rate, but over time should we still expect it to creep up as you lose the benefit of the lower tax from the Plavix/Avapro royalties?

Perhaps I take the Eloxatin one first; it's the easiest one. No, there was no stocking effect. In contrary, we found a little bit more stock of the Generics than we had expected, so there is no stocking effect on our side at all.

David, do you want to take Cerezyme/Fabrazyme?

Yes, I think the first question was on the Brazilian tender. That was less than 10% of the overall total. I don't have the exact number here, but to give you a perspective.

With regard to switching in the Vpriv/Cerezyme market, these enzyme replacement markets tend to have relatively little switching overall. I think we're still pretty early in that experience. But I would say for the moment both companies have supply constraints which are impacting the overall market, so it's not particularly dynamic from a switching standpoint. So we'll see where that goes; it's quite early.

Replagal/Fabrazyme, of course, that's a more complicated history where when we -- prior to having these supply limitations back in 2009, in competitive markets, for example, in Europe, we had in excess of 70% share. With the shortage we've actively worked with Shire to move patients to Replagal product in markets where Replagal was available, to ensure that all patients in those markets could access, at least to the greatest extent possible, some form of enzyme replacement therapy.

So I think -- how confident are we? We took 70% share in the beginning, based on what we felt was a strong competitive positioning in terms of the value offering of Fabrazyme. I think once we get back to full supply we'll see how this market shakes out.

Okay. Can I just quickly ask, with the CVR and the milestone payment that you're going to miss this year, how are you actually being controlled for best efforts on that?

Well, actually, it's all the Genzyme team that has been doing the manufacturing and, in fact, it was the Head of Genzyme Manufacturing up until June 30. He has decided to leave the Company for personal reasons and, as a result, we've appointed the former Head of Sanofi-Pasteur Manufacturing. He was previously Head of Global Manufacturing of Sanofi-Pasteur, and so he's stepped across to become Global Head of Manufacturing for Genzyme.

But essentially where we are is because we produce the enzyme in lots and then we purify it and, given the lead times, we can already see the enzyme that has to be produced for the second half of the year already exists. And the lots that will be produced in the second half of the year won't be purified in time for the end of the year.

So we already know the yields. We already know the yield times and, in fact, actually, Henry Termeer has been within the Company up until June 30, so I think plenty of people have had oversight and it's all pretty clear. So, I don't know, David did you want to add anything?

Yes, I was just going to add one other thought. In terms of the diligence, the Genzyme employee base, the CVR was out there, but the intensity and the pressure to make product, given the patient populations that we serve, is extremely high. So again it's hard to quantify that, but if that helps at all to understand the pressure and the drive here is less the CVR than just the fact that we've been under-serving these markets and that's a pretty high motivation.

Yes. And given that we could produce -- we could sell anything we could produce, obviously, there's a whole lot more interest in producing more and also for the reasons that David pointed out.

Do you want to do the book tax rate, Jerome?

Yes. So, yes, you're right, you still should assume that there will be an uptake in the tax rate when we lose -- when our patents, in particular on Plavix, comes to an end. So we are continuing to optimize, as you can see, and we may need to be a bit better than what we expect and take advantage of evolution of tax legislations here and there. But I think that you could assume that we should be back to somewhere between 28% and 29% next year, or probably going closer to 30%, let's say, after we have totally lost patent on Plavix.

Of course, unless is some other products going forward which could -- patents on products which would come into production. But if I think about the coming two years this is what I can give you as an overall average guidance.

Luisa, well done, you've managed to get six questions in one go. So we'll go for the next one and, again, I'll ask you to ask one or two questions at a time just to allow all the participants to join.

We have a next question from Mr. Gbola Amusa from UBS. Sir, please go ahead.

Thanks. On Multaq and the PALLAS data, just given the contra-indications on heart failure, are you able to say whether the cardiovascular events are correlated with severity of the heart failure?

And then one quick second question, which should be straightforward. In terms of globalizing Genzyme should we continue to assume that Allston and Framingham are the facilities to fulfill incremental global capacity?

In terms of the -- this is Elias Zerhouni. In terms of the cardiovascular events and correlation with the level of cardiovascular failure, we know already that there is, in fact, a correlation that is more severe the cardiovascular failure the more likely you'll have a cardiovascular event. We know that from the previous studies and that's why in the current indication we do not recommend the use of Multaq for class IV congestive heart failure, for example. So we know scientifically there is such a correlation.

In the PALLAS study, obviously, we had more severe patients who had permanent atrial fibrillation as opposed to the current indication with non-permanent atrial fibrillation and, by nature, you'll have more severe patients in that category. Now in terms of data relative to the PALLAS study, in terms of fully evaluating the correlation, we're not through that analysis yet. We have not adjudicated every case. We're doing this diligently and, hopefully, by September we will know in more specific terms. That's the answer to your question.

Is there any risk, though, that the contra-indication on heart failure could be -- in the current indication could be moved to less severe forms of heart failure, based on the PALLAS data?

Well, in the current indication we actually do not recommend, and it is in the label, to use it in severe class III or class IV. So it's already -- we know that correlation and we see a very good reason to use Multaq in class I, II or mild class III. So it's already in there.

David, do you want to take on the (multiple speakers)?

Yes, with regard to global manufacturing supplies, so between Allston and Framingham we currently are supplying our existing population out of six 2,000 liter bioreactors in Allston with approval of the Framingham plant and the bioreactors will come on sequentially. But we will end up with four additional 2,000 liter bioreactors and that will, as I said, enable us to supply globally both the Fabre and Gaucher populations. Our Myozyme/Lumizyme patient population is served out of our Halle, Belgium plant, where we have two 4,000 liter bioreactors with a third 4,000 liter bioreactor scheduled to be approved by the end of this year.

We have a next question from Mr. Graham Parry from Merrill Lynch. Sir, please go ahead.

Great, thanks for taking my questions. I was just wondering, first of all, on this guidance uplift, if I just look at the top end of the range and compare it to the previous guidance, of down 5%, the difference really here is the 3% mechanical Genzyme accretion with no synergies that you talked about on the Q1 call. Yet you should theoretically be benefiting from some synergies and a better tax rate. So does that mean you're seeing something in the business which is worse now than it was when you gave your prior guidance at the beginning of the year? And, if not, is there any Genzyme synergies we should be expecting to accrue through the rest of the year?

Second, on the Eloxatin case, if you could just give us a feel for why wouldn't the Eloxatin judge rule the same way in the [Sun] case as he did previously?

And then, thirdly, a question on Iniparib. Just wondering if you're in a position now to confirm whether you need a new phase III trial for the second/third line triple negative breast cancer indication? Thank you.

I can maybe take the first question, Graham. I'm not totally in agreement with your math. We gave an initial guidance between -- and there was no Genzyme mentioned then, between minus five and minus 10. At the time we had no Generic of Taxotere, we had no Generic of Xyzal. So clearly to which the highest range of the guidance we'd have to assume that there would not be any Generic. And we don't know, if you remember at the time, when would happen the Generic of Taxotere.

So if I take the Genzyme aside, by no way if I put you back to where we were in February you would have been able to reach 5%, so the higher range of the guidance. So it's not just adding an upper range of the guidance and adding the nice Genzyme on top of that. We have more information. Unfortunately, and this is what we said in February, there are now Generic of Taxotere. We don't know yet exactly what will happen on Lovenox so, clearly, if there is no Generic of Lovenox up to the end of the year it will help us to be on the higher range of the new guidance.

So it has nothing to do with Genzyme or nothing to do with the rest of the business going lower than expected. It's clearly how you come back to, not only math, but also a history of the various times when we announced these elements.

Perhaps on the Eloxatin the basic answer of course must be that we cannot speculate on the outcome of a patent trial, especially not in the US. In this specific case I remind you that we already had lost this case; this was about one and a half years ago, which was totally against our own odds. And then we have won it again. So, of course, I tend to your underlying optimism, why should we lose it, but evidently we cannot exclude it.

In terms of Iniparib, internally we are focusing on understanding the result that we've had. We have ongoing trials, as you know. We have a Phase III in non-small cell lung cancer and we are focusing on understanding the mechanics of action more precisely and I think we've made progress there. We're identifying biomarkers that are more predictive of response and, obviously, once that's done we will make that determination obviously, in terms of Phase III.

But at this point I cannot say 100% that we're going to do that, but I tell you the one thing we know is based on all the results we have, is that that is a molecule that will continue to follow the path as we understand it better.

If I can just follow up on that. So do you have a timeline for which you think you'd make a go/no go decision for that indication?

Probably by the end of the year/beginning of next year.

We have a next question from Mr. Mark Dainty from Citi. Sir, please go ahead.

Thank you, just two quick ones. On the Lantus/Lixisenatide combination you mention in the press release you're going to start Phase III in 2013, which I think is a bit of a delay, so can you just give us some color as to what's causing that?

And then, on the global rollout of the non-enzyme replacement products for Genzyme, you mention Synvisc, I think, this quarter. Should we expect a big impact for the rest of this year, or is it going to be more 2012? And would you dare to give us any numbers as to what revenue synergies we might see? Thanks.

On the LixiLan, the combination, the explanation's very straightforward. The FDA changed its stance in terms of how to conduct trials when you do combinations, by insisting the device used for commercial application be the same device that we used for the Phase III trial and putting together a device that can accomplish that goal delayed the program by the appropriate amount of time. That's the only reason that the program is delayed at this time.

Do you want to talk about the revenue synergies?

Yes, so I think two things about Synvisc to keep in mind. One is the viscose supplementation market does have significant seasonality. Q2 tends to be by far the strongest quarter, but then we tend to hold on Q3/Q4, with Q1 often being a down quarter. So if you look at that product going forward, keep that in mind.

Second is in Genzyme's hands that product was predominantly a US product and the vast majority of the revenues came out of the US with relatively little presence outside the US. So the advantage is that, putting this together with the Sanofi organization, is that their global reach will provide, I think, a significant opportunity.

What will determine the rate of growth in global markets, as with any products, is reimbursement and that's something that, again, will take some time in certainly a number of countries to work through. So whether it will be a 2012 event which will see the big ex-US growth, or in subsequent years, again, we'll see. But those will be the factors that will dictate the performance of that product going forward.

Okay, thanks.

The next question is from Mr. Mark Clark from Deutsche Bank. Sir, please go ahead.

Yes, good afternoon all, two questions. Firstly, for Jerome, you put out a figure of EUR0.75 to EUR1 of accretion from Genzyme in 2013 on announcing the deal. I just wondered whether you have rerun the numbers and whether there's -- firstly, whether you can give us confidence that you're happy with that range still and whether there's any finessing of that range.

And, secondly, a question for Elias. We've had a lot of data recently at the ADA etc. on a potential Lantus competitor, Degludec. I just wondered if you could give us your perspective on that and how you expect to compete with Lantus against Degludec in future? Thank you.

Mark, on your first question on accretion, yes, I maintain this guidance. I remind you that it was based on an exchange rate of a dollar against the euro of 1.3 and I think that this is a range which we can confirm, taking into account the ramp up of the synergies as well as the growth profiles of the various products offer of Genzyme.

In terms of the question about Lantus and Degludec, clearly, when you look at the published data there are lots of questions that we have about exactly the construct of the head-to-head trial. As a physician, I can tell you, you will have different rates of hypoglycemia if you take insulin at midnight as opposed to dinner time and we think that by construct these make appear -- make some differences appear.

Not really significant in the relevant categories, so I don't think there's been any -- there's no evidence to my satisfaction that Lantus is not actually the best basal insulin at this point. We'll see more data as they are published. We don't have the full data. We do have data ourselves comparing dinner time versus midnight, versus other times of the day, so we've published them seven years ago and we've had over 10 years experience in that, so we're very confident that Lantus will hold its own.

Thank you.

Yes, I'll go a little further. I think when those data were presented at the ADA I can tell you there were a number of physicians in the audience that questioned even some of the ethics behind that study of trying to artificially induce even more hypoglycemia. And I think dosing -- we had two products who are comparative at different times is not, in my view, a fair comparison and so we'll be able to show a little bit more data but, quite honestly, I seriously question the ethics behind the way those data have being submitted.

I now go one step further. I think I feel reassured that, if you have to do that to prove superiority, there is something superior about our Lantus.

Yes.

Thank you.

The next question is from Mr. Mark Beards from Goldman Sachs. Sir, please go ahead.

Yes, thanks for taking my question. Firstly, Jerome, I just want to confirm you gave an SG&A guidance for the year, a range of 25% to 26%.

Secondly, you haven't mentioned that much about why the non-BRIC growth rate was so low. If you could go into that in a bit more detail.

And then, finally, how stable has the Cerezyme net pricing been since coming back onto the market?

Perhaps I take the non-BRIC first, once again. We see in the -- I think it has been said before that there are certain differences between the second-quarter 2011 and the second-quarter 2010, which is a little bit more true for the non-BRIC countries, which has to do with seasonality of cough and cold seasons and other technical effects, like distribution in Russia.

Now outside BRIC we see a lesser growth in two major markets, one is Russia inside BRIC of course, and the other one is Turkey, which is for us one of the major outside BRIC emerging markets. In Turkey it has mainly to do with price cuts which appeared by the end of last year, not at the beginning of this year. So this is what you see. Besides, I see no substantial differences, once again, the technical effect and so the specific effects on Turkey.

With regard to the Cerezyme pricing question, so obviously pharmaceutical pricing globally is under increased pressure and we're not immune from that in the Rare Disease world. But, that said, we historically have done reasonably well in either being carved out as an exception or having a more moderated impact. And I would say that's where it holds. The supply shortage has had no specific impact at all on our pricing.

On the SG&A to sales ratio what I meant is the following. Last year we had an average ratio of 25.2%. Clearly, the ratio for the quarter and probably still for the coming two quarters will be affected by just the addition of SG&A expense from Sanofi and SG&A expense from Genzyme.

And, clearly, as long as we implement the synergies, and as you saw from the slide on this specific topic, a large part of the synergies are support functions, specifically G&A, and part of it is also on the S part of SG&A. In operations and partly oncology we think that we could rapidly, over the quarters to come, to come back to a ratio which will be more in line with what we had in 2010, i.e., somewhere between 25% and 26%.

Right, thank you.

We have a last question from Mr. Damien Conover from Morningstar. Sir, please go ahead.

Great, thanks for taking my question. Just a product-specific question on Taxotere in the emerging markets. It looks like sales were down about 30% in the quarter. I think traditionally, as we look at some of these products entering the latter parts of their lifecycle in emerging markets, we expect a little bit longer of a tail. I just was wondering if there is anything specific going on with Taxotere in the emerging markets. Thank you.

No, once again you have the effect of Turkey but, besides, there is nothing to report. We have a similar situation inside and outside, but once again we had a price cut in Turkey which additionally damaged the performance of the product.

Yes, all right, so I think time to wrap up. In our view a solid quarter. Obviously, a busy quarter. We've been busy integrating, not only Genzyme, but also Merial, because Merial is now a wholly-owned company. And I think we've spent a good amount of time thinking about how to integrate both and we now move really over the coming quarters into execution mode, really driving the synergies out of our businesses, making sure that we can now drive a lot of the revenue synergies, which we really don't quantify at the moment. But it's pretty clear on businesses like Renal and, in particular, Biosurgery that there can be a significant benefit from having Sanofi sales reps behind that.

In terms of guidance I think we've overcome a number of things and there's an increased guidance because we are more positive in our outlook, but, as always, we continue to drive the businesses as hard as we can. A number of things I think we'll come back to on September 6. As you know, we're doing an investor seminar. We'll be able to deeper dive into each of these different businesses, have a look at some of the medium-term outlook for those businesses. So we'll certainly look forward to seeing all of you there.

As I say, in the meantime, we continue to march through the cliff, getting it further and further behind us and we are driving our growth platforms and I think I'm personally extremely excited about the opportunities that both Merial and Genzyme present for the business.

And I'm also -- I just come back and say -- look, for a Company where everybody thinks there's no pipeline, having six NMEs to file over the next nine months is something I don't think I've ever seen in my career before. So I think that provides a very positive outlook for where R&D could go in the future as well.

So thanks everybody for listening and, hopefully, we'll see many of you on September 6. Take care.

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