Sanofi SA (SNY) 2012 Q1 法說會逐字稿

Welcome to the Sanofi conference call. I now hand over to Mr. Sebastien Martel. Sir, please, go ahead.

Thank you. Hello, everyone, and welcome to our first quarter conference call.

As always, I'd like to draw your attention to the safe harbor statement. I must advise you that information presented in the call today will contain forward-looking statements that involve known and unknown risks, uncertainties, and other factors. These may cause actual results to differ materially. I invite you to refer to our Form 20-F on file with the SEC and also our document de reference for a description of those factors.

Today with us on the call we have Chris Viehbacher, our CEO; Hanspeter Spek, our President of Global Operations; as well as Jerome Contamine, our CFO.

Without any further ado, I will hand the call over to Chris.

Good morning and good afternoon, everybody.

I think we've got a very strong set of results in the first quarter. Sales up 7% at constant exchange rates. Business earnings per share are up 7.2% at constant exchange rates, clearly, benefiting from the acquisition of Genzyme, which you may remember we completed on April 4 last year.

I think it's always useful to come back and say where we've been going strategically. If I go back to 2009, you'll all remember that, really, the story around Sanofi was genericized products, how many sales were going to be lost. And you can really see the cliff graphically here. The products, and they're noted in the footnote in the bottom, that are subject to patent expiry amounted to some EUR2.2 billion in Q2 of 2009, which was kind of the last quarter before the cliff started. That EUR2.2 billion on the same set of products today is now down to EUR813 million. So, as we've seen, and I think we had, roughly, a EUR250 million drop in the quarter due to generics in the first quarter, but that's down from the average of about EUR500 million from what we've been seeing up to now. So, increasingly, we get the cliff behind us. Certainly, from a sales point of view, it's pretty much behind us.

From a profit point of view, of course, the second shoe is now to drop on the patent cliff. We're really about T minus three weeks from the patent expiry of Plavix in the US. Avapro went at the end of March. And, of course, we'll see generic activity restart, actually, in August of this year. But, clearly, the impact of Plavix is the biggest one.

This shouldn't be a surprise for anyone. We've been detailing this amount since September of last year. This is roughly a EUR2-billion effect on a full 12-month basis. Because this is occurring in May, we're obviously not going to have a full 12 months. So the impact on the bottom line and on net after-tax profit of losing both Plavix and Avapro to generics is around EUR1.4 billion for the year. So Q1 obviously is great because we still have Plavix. The next four quarters are certainly going to be impacted by that. But, none of that is a surprise. It's something we've been preparing for for quite some time. We built our growth platforms not only as a means to compensate for the loss of sales but to put Sanofi on a track for sustainable growth. These are all businesses that we believe are not dependent on patents that have long lives because of either our strategic positioning or the extensiveness of capital investment, the know-how, faith in brands. But we believe the growth platforms provide long-term, sustainable growth. To that, we now add new Genzyme.

New Genzyme is essentially the rare disease business today and will, in future, include the multiple sclerosis business. So Genzyme is really focused on Cerezyme and Fabrazyme, Myozyme, Thyrogen, Aldurazyme. And, to that, we will add Aubagio and Lemtrada as we launch those.

And you can see the benefit of the improvement in production. We hit an important milestone in the first quarter in that the new production facility in Framingham, Massachusetts was approved by both the FDA and the EMA. Already in the first quarter, we were able to fully supply patients on Fabrazyme in the United States, and we are now looking at extending supply to other markets. This means, of course, that we will now be able to shift production of Fabrazyme from Allston, progressively, to Framingham, which simplified Allston. It allows us to get faster out of our consent decree situation and really, I think, can have an important benefit in terms of capacity for Cerezyme.

And, as you can see, all of these have performed pretty well. We have good, solid performance with diabetes, up 14.4%, really driven by Lantus, with over 17% increase. Emerging markets, growing at 10%, including, obviously, the benefit of Genzyme but also including the effect of vaccines. Vaccines is not showing stellar growth, but this is nothing more than what we see in the northern hemisphere in the third and fourth quarter. Some years we have the flu vaccine in the third quarter; some years it's in the fourth quarter. Well, the same thing happens in the southern hemisphere in their wintertime. Sometimes it's in the fourth quarter-- in the first quarter, as it was last year. This year, the sales will be in the second quarter. And Hanspeter will come back on animal health, but, again, I think you'll see that, actually, when you look at it on a quarterly basis, the business continues to perform in line with expectations.

The Cerezyme is now coming through. We are busy ramping up. Approval of a site doesn't mean immediate release of product. We essentially have been able to sell the three validation batches. But there is a time that is necessary to ramp up production. We continue for the moment to still produce Fabrazyme in Allston, as well as in Framingham, and, progressively, we'll phase that out. But I think you can see extremely good results on that rare disease portfolio. I think we're very confident, certainly, if share gain in Fabrazyme because it is, objectively, a better product, five times the enzyme for the same price. And Cerezyme, I think we have an opportunity because, as you will have seen, Shire did not get its extended capacity at its Lexington facility approved. And we know that, up to now, Shire has been capacity constrained as well. So, as we gain capacity, this, I think, gives us an opportunity in Cerezyme.

I think the difficulty of Shire with its Lexington facility does demonstrate that none of this is easy. There is always a certain fragility of biological (technical difficulties). And I think it underlines the importance of Genzyme's recovery.

I think one of the things that's really emerging from Sanofi over the last year or so is a very strong, late-stage pipeline. We did a lot of work two or three years ago to clean out products that we didn't see of high value. What really is interesting to me is not so much what we threw out but what we kept. And what we kept, actually, I think, has really stood the test of time, which tells me that we were sufficiently rigorous in deciding what to keep, so much so that, of course, we submitted five new molecular entities in the last nine months.

Kynamro, which is for homozygous familial hypercholesterolemia and the severe heterozygous familial hypercholesterolemia in Europe, and that has been submitted now in the US in the first quarter. This is an important population for us because, although a little bit more severe, this really lays the groundwork for the PCSK9 coming along, which, even though we'll have a higher-- we'll have a larger patient population, it gets us already involved in this field commercially.

Aubagio-- this week, we have AAN, and a lot of excitement is around Lemtrada. We shouldn't forget that this is a drug that has shown equal efficacy to the standard of care, Rebif, with all the convenience of oral dosing. So I think we have a significant opportunity with Aubagio, especially when we're looking at launching both Aubagio and Lemtrada over the next 12 months.

Visamerin-- in VTE prevention in chemo-treated patients, and you've seen we've got an advisory committee coming up on that-- and that really is an indication where nothing is there today.

Lyxumia, our GLP-1, this is progressing well in Europe. We're waiting for the cardiovascular study in October and would expect to file in the US towards the end of 2012.

Zaltrap is progressing well in second-line, metastatic colorectal cancer, both in Europe and was filed in the US in February. And I think we've got a good opportunity, really, to get back into the field commercially, also, with Zaltrap here.

Two exciting compounds in the pipeline-- obviously, the PCSK9. A number of analysts, as well as journalists, really pointing out that the PCSK9 is probably one of the most exciting targets in the industry today. We appear to have a lead on that. We also were able to publish extremely interesting phase II data, and our phase III program is set to start shortly.

Lemtrada I'm going to come on to in a minute, but we've been able to, really, for the first time show the data of the CARE-MSII study. Up to now, we've had to be circumspect in what we said, simply because we didn't want to dilute the impact of this presentation at AAN this week.

I've got three slides on Lemtrada, and I really only just want to focus on this because I think Lemtrada has had a certain reputation out there. And I have to say I used to share it when we were acquiring Genzyme. I think we rightly had some question about the ultimate value in the absence of data because of the long history of development. Equally, I think one has to give credit to where data are there and where the data are showing a different story. And I think, actually, particularly when you look at the CARE-MSII study, the data are nothing short of stunning. Obviously, because of its history, Genzyme and, before then, Bayer set the hurdle high on their phase III. They knew that, if they were going to come to market, they had to have an extremely convincing set of results.

So, when you look at MS studies, there are really two axes in which you look at this. The first is the score of your EDSS, which is really a score showing disability, 0 being great and 10 being not so great. And then, the question is, well, how long can you show some kind of benefit in slowing down disability. So the minimum you have to do for regulatory is three months. Obviously, the higher hurdle is six months.

Then, of course, the question is-- what are you comparing it to? Well, if you're going to give someone a sugar pill with MS, you're probably not going to see them do very well. So it's a lot easier to show that you've got some level of efficacy here. However, because of this high hurdle, the need to really have credibility, I think Genzyme did an extraordinary thing and put an active comparator in. And they didn't even pick the most advantageous comparator; they took the toughest one. They took Rebif. And you can see how many people have actually done this against Rebif; essentially, nobody. So the data that, really, Lemtrada are showing are very difficult to compare to anybody else's studies because no one else has subjected their molecule to the same set of rigor and high hurdle that Lemtrada has.

So what do they show? Well, let's look at relapse. Relapse is extremely important. And these are all two-year studies with follow-up periods. So this isn't a flash in the pan type thing. This is a disease where patients are going to play a big role. Patients want to have two things. First is you want to be disease free. You want to be feeling better. And you're going to feel this in terms of whether you have a relapse or not. So, when you look at the number of patients that have not had any relapse for two years, you're looking at 78% for Lemtrada versus best in class of Rebif, which is only 59%. So, if you ask patients-- what do you prefer? You're going to find a very strong preference for those who don't have any relapse because this feels like you're getting back to a normal life.

Now, the other thing is disability. And we know that MS is a progressive disease. And this is going to have an impact on your quality of life. Up until now, all drugs have been-- have done trials to really show that they slow down the progressive nature of the disability. And, again, 0 is good; 10 is bad. So, an increase is not good. And you can see the black line up top, which is Rebif. And, through the course of the study, you saw that patients actually progressively did worse on Rebif. What happened with Lemtrada? We can see that, actually, for the very first time, a drug actually showed that you can improve the situation of disability. So, you got a longer period without relapse, and you got an improvement in disability scores. Even I can sell this drug.

So where are we on R&D milestones for the remainder of 2012? We will be filing Lemtrada in Q2; as I already said, Lyxumia in Q3. We will be presenting the ORIGIN studies at the ADA. The retrospective cohort studies will also be presented at ADA. The TOWER headline phase III results in remitting multiple sclerosis will be in Q3. Dengue vaccine results also in Q3. We are going into phase III in Q3 with the Anti-PCSK9, and we'll start our second phase III with our anti-IL-6.

So, with that, I'll turn it over to Hanspeter Spek for a review of the operations.

Good morning. Good afternoon.

I would like to share some additional information focusing on the growth platforms, and you'll find, then, a first chart, beginning with number 17, the performance in the emerging markets. If you remember that we had achieved for the first time and as the first company EUR10 billion of sales in emerging markets during 2011, you see then that, with EUR2.6 billion, we had once again a very strong quarter, a growth of nearly 10%, 9.9% to be precise. If we concentrate on the BRIC countries, the growth even has been 16.5%.

If you look to the four different segments we have spelled out on the chart, you see that, overall, we have a strong growth rate. So we are able to also compensate less stronger growth rates, as in eastern Europe and Turkey. You know that Turkey has been hit for several times now by price cuts. And, overall, we have to see that Eastern Europe in terms of growth is approaching more and more Western Europe. But, from the other segments with growth between 8% and 16% overall, we'll achieve to compensate those single-digit performances.

In diabetes we had a very, very impressive acceleration during the second half of 2011, and this performance continues. You see that in the first quarter we achieved EUR1.3 billion in sales, nearly 18% [respectively], 14%, of course, at constant exchange rate.

Excellent performance of Lantus, helped by, now, 51% of quarterly sales in the US through SoloSTAR. A solid performance, with 8% in western Europe, and really outstanding performance in emerging markets with 32%, which means that, if you go more into details in the emerging markets, we have close of 64% in China, 35% in Russia, 30% in Brazil, and 57% in Mexico. So, after having analyzed the Novo Nordisk sales for the first quarter, we are extremely satisfied with this performance.

We believe that we have to continue to close. We have outstanding, very interesting results from a large, long-term study using insulin in type 2 patients called ORIGIN. This will be published in June. And we expect from this study not only more information on the so-called cancer risk concerning Lantus but also on other, especially cardiovascular outcome from early insulinization therapy.

Equally positive our performance in the first quarter with oncology, sales of nearly EUR750 million, close to 17%, respectively, 13% growth. Jevtana has nicely contributed to this, but we also see that, after we have intensified focus and investment on the formerly by Genzyme managed and promoted oncology products, that those products show reactivity with a growth of 8%. We have had mitigated news on Zaltrap. Less positive, evidently, is the failure of the product in prostate cancer. That's the very same day we have obtained the information to have a priority review by the FDA, which makes us very optimistic to be able to launch the product if this review concludes positively before the end of this year.

Now, on something which may be sometimes overlooked, our performance with those products which are off patent, and you find on page 25 (sic - See Slide Presentation) Plavix and Lovenox. And you see that Plavix in those countries where the product has been lost already as of 2010 and then, later on, evidently, in 2011, the product still is achieving EUR359 million in sales only in the first quarter. And this is due to nearly 12% growth in Japan, where the product still has a number of years of patent life ahead of it but also 5.2% growth, close to EUR200 million, from the other emerging markets.

On the right side of the chart, the Lovenox performance, even more remarkable, I believe. More than EUR400 million sales during the first quarter, a growth of 12%, those sales outside the US, where the product more or less never has been patent protected and is undergoing direct competition from other low-molecular weight heparins since many years. I believe it's worth to note also that, also inside the US, Lovenox performed above our expectations, mainly but not only due to the fact that we have seen no additional entries of a generic product. But I think it's fair to say that, also, we have extreme customer loyalty, since, evidently, helped by continued supply problems of our existing competitors.

The consumer healthcare became a more and more substantial growth platform for us during 2011, mainly through the launch of Allegra and a number of acquisitions. We can report for the first quarter that we continued this development again, this two-digit growth rate of 13%, respectively, and 11%. We have been looking with a lot of interest how Allegra would behave in its second allergy season. And, as you see, with sales of EUR87 million in the first quarter, the product does extremely well and, so far, contributes to the overall impressive sales number of EUR805 million. This once again is also supported by a very strong performance in emerging markets, with close to 22% inside a very impressive contribution of our recent acquisition in China, Sunstone, and, there, mainly a product with the trade name Hao Wa Wa.

Chris has made already a comment on the performance of Pasteur, which seasonally affected. We have growth of 11% in the mature market and minus 13% in the emerging markets, which is, as said, due to the different seasonality of the flu in the southern hemisphere. We assume strongly that this will be fully normalized during the second quarter and overall. We are optimistic to achieve another record sales for the first half of 2012 in total. We are also content to report that, after we had agreed with Merck on a number of changes concerning the supervision and the management of our joint venture, we see a quite improved performance during this first quarter.

Last but not least, on Merial, our animal health activity, we have slightly negative sales growth. You see from the chart on the page number 23 that this is, first of all, due to an extremely strong first quarter in 2011, which has been artificially high because we had obtained important sales for foot and mouth disease vaccines and for bluetongue virus disease vaccines in the first quarter 2011 which could not be repeated in the first quarter 2012. Nevertheless, we are convinced that the Merial business will equalize performance in the second quarter and will go to growth in the second half of 2012. The performance as of today is exactly in line with our budget.

So I'll close here and pass on to Jerome Contamine on the financials.

Thank you, Hanspeter.

So I am now on slide 25. This is just a recap of the variation of sales from Q1 2011 to Q1 2012. As you see, we've lost EUR235 million sales on the genericification of our key products, and, here, it's mainly Taxotere-- I remind you that we were still selling Taxotere with no competition in the US in the first quarter last year-- and a few other products. We have also the impact of the end of an agreement we had with Teva to sell Copaxone in Europe and because of the disposal of our Dermik business. We have also a negative element on the like-for-like basis due to these two elements, which is the next column,

On the contrary, the growth platforms, as described by Chris and Hanspeter before, have contributed to EUR287 million of increased sales; so, basically, compensating a little bit more than from the key genericized product negative impact and, of course, the change of perimeters was not compensated. But the genericized it was definitely compensated by the Genzyme contribution. And, here on this slide, you have the sales Genzyme did in the first quarter 2011. So the variation of Genzyme sales have now been taken into account into the growth platform as we qualify Genzyme as a growth platform as from now.

Finally, I remind you that, in the first quarter of 2011, the exchange rate of the US dollar against the euro was to $1.37. During this quarter, it was $1.31. So, clearly, we are benefiting in euro accounts from the slightly weaker euro against main currencies and, in particular, the US dollar. So we have a positive impact of the exchange rate variation of EUR187 million.

So, all in all, our sales have grown over the quarter by 9.4%, including 7% on a constant exchange rate basis.

On the P&L, you will notice that we have posted a strong P&L; i.e., with good ratios, whether it's a gross margin ratio or OpEx to sales ratio. I will comment somewhat more on that. Before that, on slide 26, I'd like just to say that this is the last quarter where, when you compare the P&L in Q1 2011 to Q1 2012, it is, of course, impacted by the consolidation of Genzyme, which was not consolidated during the first quarter 2011. So, as from the second quarter, we won't see any such variation.

The second thing which can be noticed on this slide is that we finally post a BOI, business operating margin, which is above the business operating margin that we posted in Q1 2011, which I think, in the environment where we are with generic competition and switch of business, is really a good achievement. It was somewhat helped by a positive outcome of a litigation-- or settlement on a litigation we had, which has impacted the other current operating income. It's not the full difference between 2011 and 2012 -- also, because 2011 was negatively impacted by the acquisition expenses related to Genzyme. So, when the impact of these nonrecurring events, let's say, is definitely there, it's a small impact to the overall performance of the quarter.

So, if I move to the next slide, I think that some of you have been somewhat positively surprised by our cost of sales to sales ratio. I would say that this cost of sales to sales ratio is really in line with what we anticipated and after a period where we have seen a deterioration of this ratio along the period where we were suffering from higher generic competition on loss of exclusivity on some of our main products. We are now in a period where we are, basically, able to compensate for productivity improvement the remaining impact on the cost of sales ratio of these genericized products. On top of that, we have an improvement of the cost of crude heparin on the slight positive impact of exchange rate on a like-for-like basis.

So we are really heading towards where the guidance we gave at the beginning of the year, i.e., that the cost of sales ratio should be somewhere around 31.5%, when, as you see, we are now able to stabilize, which I think is a good sign that we are both-- really achieving this positive improvement but also that we are getting out of this period where we had, regularly, a decline of ratio. But now we are stabilized. And then we will be able, as from next year, to improve this ratio.

R&D. Here again, I think we clearly have had a good control on our costs and, I would say, specifically in our internal costs. So we start to benefit from the new reorganization of our research and the closure of our New Jersey site and the transfer of all this sort of activity in the US to our Massachusetts, Cambridge, site. So we see that there is, in fact, a decline of our internal expense. And, at the same time, we continue to invest into late-stage development phases.

So, all in all, as you can see, the ratio of R&D to sales has improved if I compare to Q1 2011, and even if I compare to Q1 2010, it's an improvement by 0.7%, which I think is clearly a good achievement in terms of streamlining and improving on the cost side the productivity of R&D expense. And investment went on the efficiency side. We also see that there are some new late-stage products which are now coming closer to filing and even being filed. So we could say also that we benefit from the integration of Genzyme R&D. We mentioned the closure of our New Jersey research site, and we are really generating synergies with Genzyme on the R&D side.

On SG&A, very much the same. We have digested, basically, the impact of Genzyme with still some improvement to come on G&A savings. But now we are back to a ratio of 24.9%, which is very similar to the one we achieved during Q1 2011. There is, of course, some variability on the quarter by quarter in terms of sales and marketing expenses. But I think that we are clearly satisfied with the efforts and the achievements we have reached in terms of cost containment. And, as you can see, if I were-- if I had included on a pro forma basis Genzyme for Q1 2011, then the SG&A expense is down by 4.9%.

On the next slide, there is not much to say. I can just highlight that the net financial expenses are slightly higher than Q1 2011, which is not a surprise because, in Q1 2011, we had no debt associated to the financing of Genzyme. But I could say, on the reverse, that, when we have now-- we had, on average, EUR8 billion more debt during Q1 2012, the increase of financial expenses was very limited, and it's really showing that we have been able to finance Genzyme at a very, very low cost of sales.

The tax rate we expect for the full year, as I mentioned already on February 8, is 28%, leading to a business net income increasing by 12.5% or 8.4% on a constant exchange rate basis.

Of course, we have slightly more shares outstanding during Q1 2012, as I recall you that we pay out dividends partly in scrip, in shares during Q2. But the difference is pretty limited, as we have bought back the last part of the new shares we issued at the time of the payment of dividend in shares. So, as you can see, if I now look at the business EPS, the business EPS is increasing by 7.2% on a constant exchange rate basis from EUR1.66 to EUR1.85.

Cash flow. I'm pretty, as CFO I'm pretty satisfied with this slide, which shows the ability of the Group to generate free cash flow and reimburse debt. We have generated a bit more than EUR2.4 billion of free cash flow after payment of CapEx and taking into account the variation of working capital, which, by the way, is very under good control and is basically neutral. So it's an increase of free cash flow of 23%.

We have had limited acquisitions over the quarter; mainly, some few payments, or milestones in connection with in-licensing.

We continue to do opportunistic share buyback, along our guidance in that respect, so we booked EUR400 million of shares. So, altogether with what we have bought back during the second half of 2011, it's around EUR1.5 billion of shares that we bought back.

So, all in all, the net debt is now down to EUR8.6 billion, so you could say it's below the EUR10 billion target we have. I just remind you that we are going to pay the dividend in a few weeks now, May 15, so debt, by the end of June, will be above EUR10 billion. But we are clearly heading to the direction where we should get close to this EUR10 billion level by yearend, which is what we already highlighted in previous presentations.

So, to summarize before questions, I think that we have really achieved good performance from our growth platforms. We clearly see the positive contribution of Genzyme, by all means, both in terms of growth, in terms of synergies, in terms of R&D, in terms of pipeline.

We clearly have seen some significant progress on our late-stage pipeline in particular.

We continue to have sustained cost control.

And, four, we can reaffirm clearly our guidance for the full year, which I remind you is a decline of profit; of course, this taking into account the huge impact of the Plavix loss of patent in the US, the decline of profit between minus 12% and minus 15% on a constant exchange rate basis.

So, with that, I think I'll turn back to Sebastien to handle the next stage.

We're now ready to take questions. As always, I'll ask you to limit the number of questions to one or two at a time-- you can always get back into the queue-- to allow as many people as possible to participate into the call.

Operator, we can open the Q&A session.

(Operator Instructions). Tim Anderson, Sanford Bernstein.

I have a couple of questions. The first one is on the ORIGIN trial. And I fully understand you can't say anything about the results. But I'm hoping you can, in broader terms, say how this trial could, theoretically, be impactful or not from a commercial perspective to the franchise if the primary endpoint is either hit or missed.

And then a second question is on the various drugs that are filed for regulatory review or that will soon be filed. I'm hoping you can answer two different questions. Which of those products has the highest eventual sales potential in your opinion? And which of those products is perhaps the riskiest in terms of the regulatory outcome.

I think, on ORIGIN, we want to save this for ADA. I think if we start trying to dance around this and sort of say, well, we think this would have an impact and that-- I think let's just wait for the ADA.

I think the second question, Tim was which one do we think has the highest impact of the ones already filed. Is that right?

Yes. Of the ones that have been filed or soon will be filed, which of those could be the biggest in terms of eventual sales potential? And then, also, which of those products do you think embeds the most regulatory risk in terms of getting a favorable regulatory outcome?

I don't think we really see-- on the regulatory outcome, I'd rather predict the weather than predict the regulatory outcome. Right now as I look at it, I don't particularly see a higher risk on any of them. And, actually, I think everything, so far, we've seen-- everything's progressing well.

They're all in different categories. Kynamro obviously doesn't have the same size population as a Lyxumia. At the same time, I would suspect that it's probably a little bigger than what most people think. This is a drug that really has a very clear, meaningful benefit in those patients that need the drug, and there isn't anything out there today. And so I actually think Kynamro is probably underestimated.

Lyxumia is extraordinarily important for our diabetes franchise and getting that in there and I think particularly because I think it's fair to say, Hanspeter, that we see a big synergy with Lantus, especially because you can either add a GLP-1 to insulin or add insulin to this, which Victoza can't. And so I think that one is a big one.

The Visamerin is going to be kind of a tricky one because there isn't anything there today. Is there something that physicians prefer to use today in terms of Lovenox? We'll see. But I think actually having the data and showing a clear benefit is going to open up an opportunity.

You can figure out what Zaltrap is going to do because that market's pretty well known.

And Aubagio, I think, is also one that's probably underestimated. You've got a very-- you've got an oral treatment. It is clearly shown to be equal in efficacy to standard of care. But it is becoming a competitive field.

The one that hasn't been filed yet but clearly is about to be filed is Lemtrada. And, actually, I know, there, sales forecasts are all over the map. I personally think, actually-- and I recognize I'm changing my tune on this, but I'm changing my tune on the base of data. I think this is going to be a major, major drug. People are concerned about safety. I don't see the reason for that. We've seen a higher incidence on impact for thyroid, but thyroid conditions are not uncommon in this population and, indeed, others and are pretty easily treated with standard therapies. The ITP has not been as severe as we've seen outside the population and has all been reversed. If you look at the Tysabris or the Gilenyas of this world, where there's some concern around fatal side effects, so far, we haven't seen anything like that with Lemtrada.

The biggest thing, I think, with Lemtrada that we're going to have to really change people's minds about is this is-- I still see comments out there that this is an immune suppressant. It actually isn't. This is acting on the lymphocytes, and, somehow, in the re-population of these lymphocytes, we are rebalancing the immune system. This is a drug that's in and out pretty rapidly. You're getting five infusions and then nothing for a year and then another three infusions, and then that's it. And, if you can go several years without relapse, you can see some improvement in disability, then I think this is potentially a best in class.

And I would not agree that this is going to be used, actually, in the most severe patients because I think when you get out there and you see where the patients-- where the side effects are versus the others, I think we're going to stack up pretty well.

Now, we know this is a conservative audience. 80% of the treatments are still in ABCR, which tells you the conservative nature of physicians. But each of those drugs is selling well over $1 billion. And so I don't see why this one wouldn't be.

And I guess the final one is, really, Dengue. This is a vaccine. It's a disease that actually affects 230 million people every year. Roughly half the world's population is potentially affected by this. This is a first-in-class vaccine. We're about five years ahead of anybody else in this. So you've clearly got that. We'll see phase IIb results of that later this year. If they are strong enough, we have some countries that we know would be prepared to see that.

Thank you.

Obviously, later on, we'll talk about the PSCK9, but that's not ready to be filed. But that could be quite major too.

Thanks a lot.

Mark Dainty, Citi.

Two quick questions; firstly, on Aubagio. Timings might suggest that you would know whether you were going to need an AdCom from the FDA yet. We haven't seen anything on that. I was just wondering if you could add some color.

Then just a quick question about productivity improvements in COGS. Jerome, could you quantify in euro terms what that would be? Thank you.

We haven't seen-- we're in discussion with the FDA. Some sort of regulatory decision is expected by Q3. But we haven't heard anything either about an AdCom at this stage. That doesn't mean there will be or won't be. We haven't heard anything.

Okay.

Well, on the COGS question, it's not easy, let's say, to quantify it in euro because you have to take into account the shift of mix over time. So it's not just a direct equation. It's much more complex.

But what I can say is that we are now reaching around 4% productivity improvement per year. So, if you say this 4% will apply to pharma-- it would not really apply to vaccines, which is somewhat of a longer-term improvement. But, if you take just the pharma COGS, and take 4%, you arrive to something like EUR200 million to EUR250 million.

Okay. Can I just-- a quick follow-up then. If you take what you're saying in terms of productivity improvements in SG&A and R&D of sort of around 5% or 6% and you add in your EUR2 million for COGS, you're already getting close to a billion a year for this year, and you targeted EUR2 billion by 2015. So I'm just wondering how quickly you're going to reach the EUR2 billion and, really, how far you're going to go.

I think you have to go step by step. We are really heading into the right direction. Clearly, the Q1 results show that we are generating cost savings, productivity improvement, as well as synergies with integration of both Genzyme and Merial, possibly somewhat faster than was expected. But I think it's a bit early to revise how much we can achieve for the full year.

Keep in mind that there will remain some variability on a quarter-by-quarter basis in terms of expense. So, yes. I think you remember that we have given, objectives to save, EUR2 billion from 2012 to 2015. And, well, there's a good chance that we achieve more than the average proportion over this first year. But we need somewhat to be cautious. I like somewhat to wait for the next quarter to give you some more precise, revised quantification for the first year.

Okay. Thank you.

We have to take into account the expense we are going to usher to new launches. As you know, we gave the EUR2-billion target on the net basis, not on a gross basis. So we take into account also the extra expenses, which will link to the launches of the series of products we have discussed a few minutes ago.

I think it's fair to say-- look, nobody ever feels like they run an organization that you can take a lot of cost out. But, once you lose some patents and you're under pressure on profits, it's amazing, when you start looking at things, how you can take cost out of the business. When we launched our first EUR2-billion program, I can tell you that there was not a belief that this was going to be easy. We ended up doing it in two years instead of four years. I think I agree with Jerome. It's a little early to say. But, equally, I think there's been some very strong work done in looking at just things on efficiency, how we organize ourselves. Every piece of the business actually has things that could be run much tighter. So I can certainly say I'm extremely confident that we'll get the EUR2 billion. But we are going to be reinvesting in some of that in new product launches. But we'll give you an update later. But we're certainly pretty confident about the cost savings.

Okay. Thank you very much.

Peter Verdult, Morgan Stanley.

Chris, just firstly, on your guidance, given what you've achieved in Q1 and your stated conservatism regarding planning for Avapro and Plavix generics, I'd just like to better understand what actually needs to go wrong for Sanofi for you not to comfortably exceed your current EPS guidance for the year.

And then, on Lantus, can you just remind us what the US sales force is for promoting Lantus currently and what your plans are, if any, going forward?

And then, if I could quickly add on for Hanspeter Spek on the ORIGIN study, just a clarification. We know it's being presented at ADA. Can you just clarify? Are the results in house, or has anyone-- the management-- have you seen the top line data for ORIGIN yet?

Guidance? We're confirming the guidance. We've never updated guidance after one quarter's worth of results. We give guidance because we have a degree of confidence in achieving it.

That having been said, we live in a reasonably dangerous world with the macroeconomic situation where it is. I would say that one of the things that has progressed is that a lot of the uncertainties that used to be associated with Sanofi are pretty much gone. We used to worry about when-- are we going to get a generic for Lovenox? Well, we kind of know that. What's going to happen with the growth platforms versus the patent expiries? I think we've built up these growth platforms. They're 63% of sales these days. So they have real, critical mass.

So I think, barring anything that's really unusual in the macroeconomic environment, right now, I don't think we do see anything that would put us off our game. At the same time, I think it would be far too early. We don't have enough data, really, yet to see how things are going to go to change the guidance at this stage.

Do you want to talk about sales force, Hanspeter?

Yes. I think, for understandable reasons, we don't be really precise on the number of FTEs. But, as an overall orientation, evidently, we have significantly increased the support during 2011, which then triggered the nice increases you saw.

As a second orientation, of course, we try to match, and we successfully match, usually, with Novo Nordisk.

And as a last, perhaps, very recent comment, we have taken note that, I believe, today, Novo Nordisk has announced to envisage to increase their overall headcount in the US by 15%, and we would be prepared to do the same if time comes.

So, if you measure us with Novo Nordisk, you will get a pretty good picture.

Now, on ORIGIN, once again, I don't want to say much more than what Chris had said before. Please, keep in mind that this is a very huge trial. It is the largest trial ever on insulin. It's more than 12,000 patients. It's up to seven years. And so it is not possible to just say this is a success or this will be not a success because there's multiple outcomes. There is the cancer question, there is the question of the benefit of earlier or later insulinization. There is the question on cardiovascular outcome. So it will be an extremely interesting report, and, evidently, I cannot go any further.

Thanks.

Luisa Hector, Credit Suisse.

I've got two questions, please. Firstly, on emerging markets, you certainly seem to have a very strong quarter compared to some of your peers. Were there any particular large tenders in the quarter that we should be aware of?

And then, secondly, for Jerome, just going back to the other operating income, just to check I'm understanding you correctly. The license litigation settlement-- are you saying that that's somewhere in the region of EUR50 million to EUR100 million? And, also, can you explain what that was with regard to?

I did, phonetically, not understand the middle part of your question when you were referring to emerging markets. Would you be so kind and repeat it?

Of course. For emerging markets, you had a particularly good quarter compared to your peers. So I just wanted to check whether there were any large tender orders during Q1 that we should be aware of.

Absolutely not; more on the contrary. The development we had in Africa that's just below 10% was a little bit marked by tenders which were delayed; also, due to the overall situation in the northern part of Africa. So there is no upside from tenders at all.

Okay. Thank you.

On your second question, Luisa, I can say that the net impact on the-- as you know, we beat the guidance by around 10%. We can say that around 3% was due to this positive outcome of this license litigation. The actual topic we cannot disclose precisely because the other party does not want this to be disclosed. In fact, I'll just tell you that it came out to a pretty old license dating from some years ago.

I think you meant, of the 10% beat versus consensus, about 3% was related to that settlement. So, without that, we would have still been ahead by about 7%.

Okay. Thank you very much.

Vincent Meunier, Exane BNP Paribas.

The first one is on your strategy on acquisitions and bolt-on acquisitions. You were thinking about the possibility to spent EUR1 billion or EUR2 billion in bolt-on acquisitions in emerging markets a few months ago. I think that nothing happened. So what's going on on this?

And the second question is with regards to the Anti-PCSK9. In the phase II data, infection rates, as well as injection site reactions, occurred. What's your view on that with regards to the phase III trial and, also, the device? Thank you.

On the EUR1 billion to EUR2 billion, it was meant to be a guidance versus a target. I think we constantly are looking at things. But it's a little like fishing. You're never sure-- you may be out there fishing, but you're never sure when the fish is actually going to come in over the boat.

I think it's fair to say that-- I would say that pretty much all the acquisitions we've done have been able to drive some significant value because we've kind of been ahead of everybody else. I can tell you that there are plenty of people wondering why they missed Medley, for example. I think the Chattem acquisition really showed a lot of value because we had Allegra.

So I think we spend our time looking at things. We're not just about to go jump in on some things. I have some concern when I see what some of our competitors are doing and some of the valuations that are being paid. You've really got to look a little further and in a little different places to create value, so you're not just doing what your competitors are doing.

So it's meant to be a guidance. But I wouldn't say that, hey, if we don't do EUR1 billion to EUR2 billion by July that we're falling behind.

On the PCSK9, we would expect that the device will be some sort of auto-injector device for patients to use themselves. We haven't really seen any big issues with the injection site reactions. There have been very few discontinuations for this reason in the studies that we've seen to date. There are not even really enough to know what the actual number is. So I don't see that as being a big issue.

Okay. Thank you very much.

Mike Leuchten, Barclays.

Just one question on Lantus. Your friendly competitors at Lilly are quite aggressive with their view on biosimilar Lantus. I think they suggest that the analogs market, the basal market could be split in three ways with equal shares between improved products, Lantus as it is today, and the biosimilars. I'm just wondering what your answer to that would be. Thank you.

It's a simple answer. It's that we don't share this point of view for many reasons. If you look to penetration of the biosimilars which are today in the market, you see penetrations which are much, much lower than what you have just been quoting Lilly for. Second, we believe that the impact of devices will play another role for not just (inaudible) will present another hurdle to a more rapid penetration of biosimilars. So we don't share this point of view at all.

On the fact, perhaps, another positive information we have, we have obtained the promulgation of our patent protection or our overall protection due to the pediatric use just a couple of days ago. So, also from a pure time point of view, we feel rather comfortable.

I think we've got a new formulation coming. We have a record number of SoloSTAR users, and we know from other areas-- you have to at some point go back and look at analogs in any of these forecasts. You can't just have people hoping for things, which is what this Lilly forecast sounds like. You don't see that kind of a market situation in any other market. If you go back and look at, say, respiratory devices, for example, we know that the device plays a big role in patient preference. I believe Lilly's own comments have said that they don't expect this to be a substitutable product. So how are they going to get this? You can go look at other cases, like growth hormones, eryhtropoietins, interferons. We haven't seen that so far. It doesn't mean it won't happen.

I think you're going to see something like this is going to be a fourth entry into a market of-- this is going to be, essentially, a me-too insulin analog. And, for entry into a me-too market, it's got anywhere from probably around 10% market share. I think that's what you've seen in some of the other biosimilar markets. I think that's what you'll probably see here. By the time you take into account devices and new formulations and the fact that Lilly, remember, is not really present much in emerging markets. So they don't even have the presence that a Novo Nordisk really does. So I don't think-- we wouldn't share the same - Hanspeter's point -- we don't share the same forecast as Lilly does.

Thank you.

Philippe Lanone, Natixis.

One question again on emerging markets, because, if there is no special items in the Q1, it must be product mix and geographic mix that makes you much better than, especially, your UK competitors. So we should be able to project that for the next quarters. Do you think it will be the case that we can project about 8% comparable for the next few quarters in the emerging markets? Can you make a comment on price component in the emerging markets? Has it deteriorated, especially in China, in the quarter?

Maybe, if I may, another one on the other prescription product line. It seems to be deteriorating a bit faster than usual, at minus 6%. Is there any special item here, and should it continue this way?

I would basically expect that similar growth for the upcoming quarters, perhaps with the limitation of China, which answers also your second question. We have seen not a negative price impact on our presence in China during the first quarter, but we expect price changes for the rest of the year. We can only speculate for the time being on which products. There may be an impact on Plavix. There may be an impact on Lantus for the time being. We don't know.

So, in summary, I have to leave a certain question mark in terms of continuous growth for the second and the third quarter for China. But, for the other markets, being it Latin America or being it Africa, I don't see this, at least as of today.

The negative growth of the other products is mainly driven by the trends we have in the European community, and the European community, once again, is hit by all sorts of interventions, mainly price cuts which occurred during the last 12 months. And, on top of it, we have a pretty negative scenario in Turkey as far as the emerging markets are concerned coming from price.

Okay. Can I have maybe a follow-up on organic growth? You were almost at 0% organic growth last quarter, and you will have less headwinds with the vaccines and Taxotere in the second quarter. If emerging markets go the same way, can we hope to have positive organic growth in Q2?

Let's not get into doing guidance on a quarterly basis here. I would say, look, we've always said that 2011 was where we felt to be the bottom of our patent cliff on a sales basis, clearly not on a profit basis because we don't consolidate Plavix and Avapro in the US. And there is a cliff peak to that this year. How fast we can get back out? This is kind of a little bit of a mix. It's pretty hard to predict where quarterly sales are. But I think kind of the 0% organic growth that you saw is kind of consistent with the message that we've been giving all along. We got to a point where the organic growth is able to offset the patent expiries.

Thank you very much.

Kyle Rasbach, Cowen & Co.

I was just going to ask another question on Lyxumia, or lixisenatide. I was curious beyond the combination with the Lantus what you might see as some of the differentiating features of this drug. And I was also curious if you believe that there may be a good, strategic reason for Sanofi to add another GLP-1 to your portfolio. Thank you.

For the time being, we really try to have Lyxumia. And why Lyxumia? Because we believe it is the ideal combination partner with insulins and, more specifically, of course, with Lantus. The profile of the product is very favorable to see it as a preferred partner, and that's our intended positioning. If there will be other products of the same drug cannot be the subject of today, Lyxumia shows very good tolerability. Besides, it is easy to titrate because you have only one titration step to make, whilst the other products also those you may speculate about-- need several titration steps. So we believe that this product is not the first in class, but we believe that it has a very attractive profile, especially for us with our very strong position for Lantus.

Any other strategic reason to consider another GLP?

Just given all the speculation that's going on, I think we're just going to leave it sit there. I suspect this is kind of a back-door question around the Amylin situation. We couldn't comment on any specific targets. We're very happy, as Hanspeter said, with our GLP-1. I think it marries extremely well. We're committed to not only the launching as an individual product, but, you may remember, we've got a considerable investment in developing this as a combination product with Lantus and would expect to go into phase III with the combination product in early 2013.

Great. Thank you.

Operator, we're going to take two more questions.

Richard Vosser, JPMorgan.

Just a couple of questions, please. Firstly, what you're seeing or updates on how you're seeing the situation of bad debts across Europe, given the obvious fiscal crisis and, in France, how you're seeing the taxation situation developing around the Presidential election candidates. Anything you could help us on with those two would be good.

And just one on the diabetes franchise. I think we're seeing Levemir taking a little bit of incremental share in the US. If you could talk us around the dynamics there and how you might resolve those, that would be useful too. Thanks very much.

I'll let you take the first two, and then Hanspeter

On the bad debt, well, (a) we need to keep in mind that our total sales in the countries which are mostly taxed with this risk, i.e., southern Europe, tended to decline. So we could say that we the overexposure we have tends to decline. So far, we have not seen really significant deterioration-- of course, I need to except the Greek situation-- of payment conditions. So we used to the fact that, in some southern European countries, hospitals tend to pay late or public sector tends to pay late. But it has not really deteriorated over the last 18 months, let's say. So very, very marginally. So I would not say today that it is really a specific concern (inaudible).

On the taxation in France, it's pretty difficult to read through the program from the candidates. Basically, there is a trend towards somewhat increased taxation.It may be more on personal situation than a corporate situation. So, when it comes to corporations, not so clear this will be something to take in consideration on top of that. I remind you that, today, we are making only 8% of our sales in France. And, also, we have a taxation scheme adapted to IP taxation and royalties linked to IP, which are pretty favorable, which I don't think is going to change because France is still looking to sustaining long term innovation in the political sector, as other sectors as well.

So nothing dramatic that I see today. But, once again, it's a bit difficult to read the crystal ball in this present situation.

Cool. Thanks.

On Lantus and Levemir in the US, I am in fact see nothing alarming. Lantus keeps, by far, the lion's share in the segment of analogs with approximately 80% market share. The overall market, including Levemir and Victoza, by the way, is flat in total prescriptions. And Lantus is growing approximately-- between 7% and 9.5%, depending on the timeframe you are looking at. 9.5% is year to date February 2012, which means we continue to build up market share. And so, of course, we keep an eye on Levemir, but we see absolutely no reason to be alarmed.

Thank you.

All right. We're going to take the last question now.

Jeff Holford, Jefferies.

Just quickly on the upcoming PDUFA for Pfizer's Uplyso for Gaucher. I just interested to get your perspective if that comes to the market how, in your view, it might affect the market dynamics.

And, then, just what's your latest view internally and assumptions around potential timings of any generics of Lovenox in Europe? Thank you.

On Gaucher, quite honestly, I'm not even sure why Pfizer is bothering here. You've already got two players in here in a rare disease market. Doing a market share strategy in rare diseases doesn't strike me as being a particularly intelligent strategy.

But, in any case, the product is approved. I believe it's in Brazil and hasn't done extremely well. And we've certainly been able to maintain a big share of that, even with our constrained supply situation. Obviously, the product has had some difficulty in getting approved everywhere else, including in the US, which suggests that there are some wrinkles around this product. So, even if it does, I would suspect we'll have plenty of ammunition to defend Cerezyme here.

On Lovenox, generics in Europe, Hanspeter?

Well, on Lovenox, the European market is totally different to other markets, mainly because the low molecular market in Europe has seen competition since 10 or 15 years. There is a group of products, which is very, very similar, perhaps not biosimilar but pretty similar since many years. Consequently, there is intensive competition on price and on contracts. And we have seen sharp battles between Sandos - Novartis, us, GSK, previously, Pfizer, and Pharmacia. So I don't see a lot of opportunity for biosimilar, low molecular weight heparins because this is really nothing new. There is no innovative aspect to it to come today with a biosimilar, low molecular weight heparin in Europe. So I believe a very, very low penetration for those products.

That's great. Thank you.

All right. We have made a commitment to some analysts that we would keep the call within an hour and 15 minutes, and I think we're just about there. But I will let Chris conclude the call.

I think, again, we keep getting one quarter further every time through the patent cliff and one quarter closer to getting back to our growth situation. I look at the performance of the growth platforms. Obviously, a lot going on in the world. But very good performance in the first quarter. And that's really what's going to drive Sanofi going forward. Last September, we gave a medium-term outlook, which suggested a compound annual growth in sales of about 5% between 2012 and 2015. I look at the growth platforms. I look at, actually, an increasingly robust portfolio of new drugs coming along. And I look at the very strong cost control that all of our colleagues there have been able to implement. I continue to be confident in the medium-term outlook of the business, and we're on track with where we said we'd be. And this is yet one more month of good, solid execution.

So I thank everybody for your interest and your questions, and we'll talk to you again next quarter.

Ladies and gentlemen, this now concludes our conference call. Thank you, all, very much for attending.