Sanofi SA (SNY) 2013 Q4 法說會逐字稿

Ladies and gentlemen, welcome to the Sanofi 2013 full-year results conference call. I will now hand over to Mr. Sebastien Martel, Head of Investor Relations. Sir, please go ahead.

Thank you. Good morning, good afternoon. Hello, everyone. Thank you for joining our conference call to discuss financial results for Sanofi for the fourth quarter and year ended December 31, 2013. As always, our slides are available on the investors page of our website. You can also follow our call today on the new Sanofi IR application on iPad or iPhone.

And before we begin, as you can see on slide two, I'd like to remind you that our information presented today in this call will contain forward-looking statements that involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. I refer you to our Form 20-F documents on file with the SEC and also our document de reference for a description of these risk factors.

On slide 3, you can see the agenda for the call. First, Chris will discuss key highlights, then Jerome will review our financial performance, following, our Business Heads will discuss operations and Elias will provide you with an update on R&D. Chris will then come back and make concluding remarks. Then we'll open the call to questions.

So with us today on the call are Chris Viehbacher, our Chief Executive Officer; Jerome Contamine, our Senior VP and Chief Financial Officer; Peter Guenter, Executive Vice President, Global Commercial Operations; Pascale Witz, Executive VP, Global Divisions & Strategic Developments; Olivier Charmeil; Executive VP, Vaccines; David Meeker, Executive VP and Chief Executive Officer of Genzyme; Carsten Hellmann, Executive VP, Merial and Elias Zerhouni, President, Global R&D.

So without any further ado, I will now turn the call over to Chris.

Thank you, Sebastien. Good morning and afternoon, everybody. So, as we announced a year ago, we obviously were going to have a year at two different speeds. One was the first part of the year where we still had a comparative period that included Plavix in the bottom line and Eloxatin in the top 10 bottom line. And really it's been since September 1, 2012 that we got beyond the cliff so we needed to get to September 1, 2013 to get into comparable period and I think you've now seen for months of pretty consistent performance post cliff and very much in line with where we expected the business to start to perform following the cliff.

The growth platforms now account for 73% of sales compared to 43% in 2008, it's been a dramatic shift in the profile of sales in the business. I think one of the things I am most proud of actually which I think was one of the hardest things to do is that Elias and his team have put together a pretty darn reasonable and I would say, one of the better pipelines in the industry with nine high-potential late-stage projects.

What most people don't really see Sanofi as yet is that we've really become a biopharmaceutical company. 45% of our sales today come from biologics and 80% of development pipeline projects are biologics. So, you don't have to be a math genius to figure out that the percentage of sales from biologics is going to increase over time.

If we look at the quarterly sales growth on the next slide, you can see this profile emerging. Back in the third quarter we'd already shared exceptionally the sales for the single month of September which were mid-single digits and you can see that that carried through into the fourth quarter with sales growth of 6.5%.

On the profit picture it took us into the fourth quarter to get there. There's clearly some expected one-offs, ones that really have been envisaged from the start of the year and we had obviously some one-off negatives as well and we have a slightly higher tax rate. The real increase in growth I think is due to a favorable comparative period. But nonetheless a very strong organic growth underlying all of that.

If I look at the full year on slide 7, obviously the impact of Eloxatin is felt with the sales slightly declining at 0.5% down at constant exchange rates. Obviously the impact on the bottom line is bigger at 9.8%, largely still because of course we had almost 4.5 months of Plavix sales in 2012 which we didn't in 2013 and that represented about an EUR800m impact in 2013.

The real story of Sanofi are the growth platforms, it's on page 8. Those growth platforms grew at 10% in the fourth quarter with really all of them -- almost all of them performing pretty well. Emerging markets returned to double-digit growth at 10.4%.

Diabetes for again I think the 12th consecutive quarter has grown very strongly, 19% certainly double digits.

Vaccines stable, but that's largely just because we began shipping in the middle of October from Toronto, that's been a progressive return to supply. But actually it hides an extraordinarily successful flu season and Olivier will talk about that a little later.

Our consumer healthcare business, 6.1% for the quarter, 5.2% is an extremely respectable performance in this type of business especially since we had some challenges in distribution in China in the early part of 2013.

Genzyme, an extraordinarily strong success. Again in this year, fourth-quarter sales driven very strongly both rare diseases and a very successful launch of Aubagio.

Animal health, really continuing a trend that we've seen all year, principally affected by Frontline, but I think as Carsten will say, we would expect to see a change in that -- direction of that performance in the beginning of the year.

The last line is of course traditionally where Sanofi has been weak. Here you've got other innovative products, the products that have been launched since 2009. All of EUR705m for the year. Even if we add Aubagio at EUR166m, which is included in the Genzyme line, we're still less than EUR1b. And this is one of the weaker numbers of the industry. But this is where I think you're going to see an awful lot of change going forward. Elias will talk about the launch of products like PCSK9 and Dengue and the like. I think this will give us one of the stronger sources of growth going forward.

On page 9, we have the dividend. For the 20th consecutive year, we'll be increasing the dividend to EUR2.80. This is a payout ratio of 55%. We've always said that 50% was a target but not a ceiling and I think you can see that there. That's a compound annual growth rate in the dividend of 5% from the 2008 to 2013 period and in addition to that, we did about EUR1.6b of share buybacks which is up considerably since 2012. And all of that of course leads to a total shareholder return of 98.9% over the period September 2008 to the end of last year.

So with that I'll turn it over to Jerome Contamine for a brief overview of financial performance.

Thank you, Chris. So, I'll start with slide 11 and I will put a focus on the FX effects as long as we have seen very significant currency movements over the period. So as you can see from this slide, both our top and bottom lines have been affected by the strength of the euro versus all other currencies. As a matter of fact, the FX impact in 2013 on sales as well as EPS more than erased FX gains as we saw during 2012.

If you look at the fourth quarter more precisely, the strength of the euro continued and we saw almost the same impact in the fourth quarter as we saw in the third quarter. So the results of first quarter FX impact is EUR0.60 decrease per share on the business EPS which again was similar to the third quarter.

The main currency impact on sales, on profit in this quarter was from the Japanese yen and the US dollar but also a certain number of currencies in emerging markets. So actually the negative impact on EPS of the Japanese yen on the US dollar during this last quarter was [EUR0.10 for the yen and EUR0.05 for the dollar] (corrected by company after the call).

Now I move to slide 12, look a bit more in detail in the Q4 P&L results. So we see here that as expected, Sanofi returned to growth. As Chris mentioned earlier, net sales increased 6.5%. Other revenues were EUR88m which is a decrease of 33.6% versus last year reflecting the end of royalties on Enbrel sales in the US which ended since last February.

The gross profit was up as well as sales by 5.3% at EUR5.6b. The cost of sales this quarter reflects the impact of vaccine manufacturing issues in Toronto, which we are now obviously (inaudible), the mix effects from lower sales of high margin companion animal products, mainly Frontline and some unfavorable currency variation. These items were however partially offset by the enhanced margins of our pharma operations and also Genzyme.

As you can see, our OpEx were down in Q4 demonstrating tight control over our R&D as well as SG&A expenses.

Other currency -- current operating income and expense increased in Q4, this was mentioned already by Chris, to EUR251m, this was expected, versus an income of EUR56m in Q4 2012. This resulted from two elements; the first was EUR92m payment on Actonel as previously disclosed by Warner Chilcott on October 9, ending the royalty income flow from this collaboration one year ahead of schedule.

In addition, we also benefited from a settlement of EUR93m linked to Rituxan arbitration between Hoechst and Genetech. This amount is smaller than the amount disclosed by Roche by the way for the ones who are following that recognizing that a portion of the total payment had to be made by Sanofi to the initial inventor.

I think there is nothing specific to report on the share of profits and from associates on non-controlling interest in the fourth quarter.

All in all, our business operating income reached almost EUR2.5b, growing over 30% at constant exchange rate.

Now I move to slide 13, looking at the lower part of the P&L. We note that the financial expenses were lower in Q4 as we continue to reduce our net debt but also because we had a EUR29m capital gain linked to the partial sale of a financial investment.

In line with our guidance for 2013, the effective tax rate for the full year was 24%. It was also 23.9% in the fourth quarter. As you probably remember, for the ones again who look at that carefully, the Q4 2012 tax rate was adjusted to 19% to reflect an average tax rate of 25.5% for the full year 2012.

So of note in the unfavorable tax difference in the fourth quarter was compensated by the Actonel payment on the Rituxan settlement. So, if I take all these elements aside, our business net income in the fourth quarter would have grown by 28% demonstrating the good strengths of our performance over the quarter.

Taking everything into account, our business net income in the fourth quarter grew by 30.5% and we delivered a solid business EPS of EUR1.37 despite a negative currency impact of EUR0.60. The average of outstanding shares was basically stable during the quarter.

For the whole year, moving to slide 14, the net sales were stable at constant exchange rate reaching EUR32.9b in line with our expectations other revenues decreased to EUR355m mainly reflecting the loss of exclusivity of Plavix in the US in 2012.

In 2013, the gross profit reached EUR22.3b, down 4.8%.

For the year, the business operating income was 9.3%, so reflecting clearly the low performance during the first half of the year and the high comparison, being down 11.1%. While this clearly reflects the residual impact from the patent cliff and some temporary operational changes experienced up to August as you remember, but also then the return to growth in the remainder of the year.

Just as a reminder as well, to be very precise, this P&L also includes a disposal of some tail products to Covis in the US Q2 2013, reaching an amount of EUR166m before tax as well as the two other elements which I mentioned for Q4.

The effective tax rate was 24% versus 25.5% in 2012. All this is in line with guidance I gave back in Q2.

The business net income decreased by 9.6% to EUR6.7b. As a result, we finished the year with a business EPS of EUR5.05, but also in constant exchange rate EUR5.54 per share.

Now I will give some more detail on the cost line so I'll move to slide 15. So starting with the cost of sales. The cost of sales in 2013 increased by 3.3% at constant exchange rate. This was mainly due to the Toronto manufacturing issues for vaccine but also unfavorable currency impact.

Looking at the year, the ratio cost of sales to net sales was 33.4% versus 31.7% in 2012. But here it also reflects the end of the revenues from former blockbusters which we still benefitted from during the first half.

For 2014, we expect our cost of sales to sales ratio to improve versus 2013 on a constant exchange rate basis.

Slide 16, we were able to maintain our R&D expenses flat again in 2013 while continuing to advance on our most valuable R&D assets. R&D expenses were stable at EUR4,770m, well below the EUR5B ceiling that we have provided for the year. R&D expenses reflect continuous significant reduction of our internal fixed costs but also higher investments supporting late-stage R&D pipeline projects.

For 2014, we expect R&D expense driven by a number of late-stage studies to slightly increase in absolute terms.

SG&A, slide 17, for the full year we here also see that SG&A expenses were stable reaching EUR8.6b. This demonstrates our ability to tightly control sales and marketing costs to keep general expenses flat and also to invest behind our growth platforms such as this year our multiple sclerosis franchise but also from emerging markets.

In 2014, we expect that SG&A would increase somewhat in absolute terms to sustain our growth platforms and to prepare for launches. However, the SG&A to sales ratio, the ratio should be stable to slightly decreasing.

Slide 18, just an update on our cost saving programs where I remind you that now back two years ago, we announced that we'd save EUR2b by the end of 2015. So I can now report to you that we expect to save this EUR2b one year in advance by the end of 2014. Already, we have achieved more than 85% of this cost reduction program over the last two years. During these two years, we have reinvested around half of these savings to support our growth platforms, product launches and late-stage clinical trials.

In 2014, we expected the remaining EUR300m to EUR400m savings to come mainly from cost of sales i.e. from manufacturing productivity but we plan to reinvest these savings to support product launches on late-stage R&D programs.

Slide 19, cash flow, so we generated a strong cash flow during the fourth quarter and all in all we have generated EUR6.5b of free cash flow which is lower than previous year but the decrease is less than the decrease of profit showing that we have a good conversion rate of our profit in to cash. As a matter of fact, we tightly control our CapEx which were reduced from EUR1.4b to EUR1.2b between 2012 and 2013. We also tightly control our working capital requirement which was reduced given in part by the decreasing day sales outstanding DSO by six days.

During the same period, the realized proceeds of over EUR1b from the exercise of stock options on performance shares, and bought back EUR1.6b of share outstanding for the year. Much of this was to compensate for the dilution of the exercise of stock options. The dividend payment was slightly above EUR3.6b. As a result, our net debt, net financial debt now was reduced by EUR1.7b down to around EUR6b at the end of 2013.

So to summarize our financial achievements, we closed the year with a return to growth in the fourth quarter on both top and bottom lines. We delivered strong free cash flow and reached a further reduction of our net financial debt while returning a net amount of close to EUR4.3b to our shareholders through dividend payments and share buyback programs.

Going forward, we plan to sustain strong shareholder returns and our Board of Directors is proposing an increased dividend payment of EUR2.80 per share leading to a payout of around 55%.

I will now return the call over to the business heads and I'll start with Peter Guenter. Peter.

So thanks, Jerome, and good morning or good afternoon to everybody. So my objective today is really to provide an overview of the geographical performance of our commercial operations. So let me start with a look at our emerging markets on slide number 21.

As you can see, we recorded a double-digit sales growth in emerging markets in the fourth quarter making up close to 35% of our total Group sales. So with sales of EUR2.9b in the fourth quarter and around EUR11b for the full year 2013, the emerging markets growth platform makes up the largest geographical segment of our business.

Now within the emerging markets, we do continue to see various dynamics across the regions. You can see that three out of our four regions in emerging markets delivered double-digit growth in the fourth quarter.

Latin America, very satisfying, we grew the business by 10% to EUR825m in the fourth quarter. Within our generic business in Brazil, showed nice recovery and strong improvement in the fourth quarter with sales of EUR59m, up close to 24%.

In Asia you can see that sales grew by 15.4% reaching EUR776m in the fourth quarter.

In this region, China recorded a very strong performance growing 35% to EUR400m in the fourth quarter as a result of both the progressive recovery of the pharmaceutical sales and also very strong vaccine sales.

Africa and Middle East continue to contribute to the double-digit growth in emerging markets reporting EUR568m of sales in the fourth quarter.

Finally, looking at Eastern Europe, Russia and Turkey, this region's growth of 5% was driven by sales mainly in Russia of EUR250m, up 10% and also by Turkey with sales growth of 16% for the quarter.

If we go to slide number 22, we show really how Sanofi is poised to capture future growth in fast growing markets. Our scorecard in emerging markets summarizes key metrics of our leading position and how we will continue to leverage our existing presence in these regions.

Moving from left to right, you can see that Sanofi is the undisputed number one healthcare company in emerging markets with a market share of 5.7%. Our leadership position is well balanced between BRIC and non-BRIC countries. We have a broad and strong presence in these markets in terms of product portfolio, sales forces of over 23,000 people and a very wide network of 37 industrial sites. This really puts us in a unique position to capitalize on ongoing trends related to demographics, urbanization, expansion of the middle class, higher disposable incomes and consequently a strong increase in the demand for healthcare. As we continue to hone our execution strategy in fast-growing markets, we will maximize our growth opportunities in these regions in the years to come.

So if we move to slide number 23, and we look at the other geographies, we can really see also improving sales trend throughout 2013 in the US representing 31% of sales, but also in Western Europe, making up 23% of sales. Specifically I want to highlight the performance in the fourth quarter where both in the US and Europe, we have returned to growth.

So with that, I will turn over to Pascale to discuss diabetes and CHC business performance.

Thank you, Peter. So, let`s start with diabetes on slide 24 where we see the Lantus impressive performance showing yet another year of double-digit growth reaching sales of EUR5.7b in 2013. Lantus is clearly the first choice for insulin therapy.

With over 8m patients worldwide, more than 10 years of clinical experience and extensive cardiovascular safety data, Lantus reported its 12th consecutive quarter of growth in Q4 2013 with sales up 20%. Part of this success is supported by the conversion over to the SoloSTAR pen which now represents 58% of the US sales and the majority of the sales in Europe. Our other innovative pen solutions contributed to the success of Lantus in other geographies.

So turning on to Lyxumia on slide 25, we reiterate the key benefits of our once-daily prandial GLP-1 Lyxumia which complements basal insulin. Lyxumia has a pronounced postprandial glucose lowering effect and a limited risk of hypoglycemia. It can be used in combination with overall therapies and with basal insulin. It is now commercially available in several countries including Germany, UK, Spain, Japan and Mexico and we're encouraged by its initial market uptake. So as for the US, we continue to expect to resubmit our NDA to the FDA in 2015 after completion of the ELIXA cardiovascular outcome trial.

Turning on to slide 26, where we look at another of our growth platforms with consumer healthcare. We are the third largest consumer healthcare player in a large but clearly fragmented OTC market. Q4 sales were up 6.1% reaching EUR722m. For the full year, total sales were EUR3b, up 5% driven by the growth in the US and in emerging markets.

Our top seven brands today account for 40% of total sales. And very recently, we have been busy preparing for the launch of Nasacort OTC in the US, which occurred this week, right in time for the spring allergy season. Nasacort OTC 24 hours will be the first and only nasal spray in its class to be available without a prescription.

With that, I will turn it over to Olivier Charmeil to review the vaccines business.

Thank you, Pascale. Hello everyone, good morning, good afternoon. On slide 27 we see that Sanofi Pasteur delivered stable sales of EUR3.7b in 2013. This was achieved despite significant supply constraints last year. Importantly, seasonal flu vaccine sales in 2013 set a new record and I will discuss this franchise on the next slide.

In mature markets we generated EUR2.4b. We are pleased to report that volumes of our Pertussis-containing vaccines are recovering as a resolution of the Toronto production issue is on track.

In Europe, the Sanofi Pasteur MSD joint venture started the rollout of the 6-in-1 pediatric vaccine Hexyon in 2013. Additional country launches for this product are expected through 2014.

In the US, Menactra sales were impacted by phasing, affecting a high comparison basis in Q4 2012 which included CDC stockpiling in this market while our VaxServe business continued to expand.

In emerging markets, sales growth was mainly driven by Pentaxim penetration, also the rollout of Hexaxim in emerging markets that is now launched across four continents in more than 16 countries continued nicely. Lastly, we expect the World Health Organization to prequalify our Shan-5 vaccine in the first half of 2014.

Now turning to slide 28, looking at flu vaccines specifically as you can see on this slide. Our differentiation strategy resulted in flu sales of EUR929m in 2013, an increase of 9.3%.

Our undisputed leadership position in flu vaccine is based on the sales of 215m doses sold worldwide of which 66m doses were distributed into the US market. Overall, 75% of our total doses were sold into the Northern Hemisphere and 25% in the Southern Hemisphere.

We now have in the US market share of 50% on the flu market proving the relevance of our differentiation strategy. We have successfully differentiated our products to better serve patients and physicians, offering a range of options that fit specific needs such as Fluzone High-Dose for elderly people; Fluzone Quadrivalent vaccine a four-strain influenza vaccine that offer broader protection; and Fluzone ID, which is administered through an intradermal microinjection. In 2013 41% of flu vaccine sales were from differentiated flu vaccines, up from 26% in 2012 and we expect this trend to continue.

For 2014 given the ongoing resolution of our manufacturing issues in Toronto, we can confirm that we aim to return to annual sales growth. In H1, sales are expected to be stable versus last year, but only due to high comparable basis. In the second part of the year, we expect a stronger performance than the previous year.

Now I will pass the presentation to David Meeker to discuss Genzyme business results.

Thank you, Olivier. So as Chris noted, Genzyme had an extremely strong fourth quarter growing 31%, leaving us at 26% -- approximately 26% growth for the year. And if you look at the rare disease business unit specifically, it contributed -- it grew at 17.7% leaving that business unit up 16.6% for the year almost EUR2b.

Now this result is driven predominately by our three main products, Cerezyme, Fabrazyme and Myozyme each of which had strong double digit growth.

If you look at Cerezyme specifically, this is a product that was approved in 1991, so almost 20 years, more than 20 years later and we are still seeing significant growth in this market suggesting we haven't fully begun to address the unmet medical need here and that product grew 14% year on year.

Fabrazyme regained its number one position in just four quarters since coming back to full supply, growing 39% for the year and again, this is a product with significant room still to grow.

Myozyme remains the only approved therapy for Pompe disease and again, relatively early in its life cycle.

We remain committed to developing new therapies for rare diseases. We've got our next generation ERT in the clinic for Pompe disease and we started development of a new oral therapy for Fabry disease. As many of you I am sure know, we announced an expanded collaboration with Alnylam, which we're quite excited about, it's a new novel platform RNA interferon. They are a company that has a stated goal of having five products in the clinic by 2015. A lead product for familial amyloid polyneuropathy is currently in Phase III and they are on track or ahead of their stated goal of getting five products in the clinic. So, we believe this will be a significant contributor to the rare disease portfolio as we move forward.

Now if you move to slide 30, to say a few words about Cerdelga, our new oral therapy for Gaucher disease. We believe this will offer a real meaningful choice to patients with Gaucher disease, eliminating some of the infusion challenges that a lifelong therapy entails. This is the largest clinical program that's ever been run for Gaucher disease, over 400 adults were treated in 29 countries. Of note, we did not study this specifically in pregnancy and children and so this will be a therapy certainly initially which is targeted to the adult population. The children and pregnant population is about 25% to 30% of the overall Gaucher population.

So our Phase III program included two trials predominantly; one was in naive patients and the second was in patients who were switched from Cerezyme. If you look at the graph on the right, you can see the primary endpoint, a reduction in spleen volume of 30% which compares quite favorably to what we see with enzyme replacement therapy.

For the non-inferiority trial, comparing Cerezyme and enzyme and again Cerezyme met the non-inferiority criteria. And both -- Cerdelga is currently under review by both the EMA and the FDA and we have been granted priority review by the FDA.

So if we move to slide 31 and look at the MS franchise, this is obviously a very significant market, a $15b market. We believe we're well positioned to enter this market. Aubagio in its first full year post launch delivered EUR166m in sales and had a very strong fourth quarter driven by both a continued good performance in the US and a strong launch in Germany and the Nordic countries. We received EMEA approval for Aubagio in August.

Lemtrada has received regulatory approvals in the EU as well as Canada, Mexico and Australia and we began our EU launch in the fourth quarter. We did receive a complete response letter from the FDA in late December. As you know, we are in the process appealing that decision. It was obviously a disappointing decision and as a result of that, the CVR milestone for US approval by March 31, 2014 will not be met.

I think it's important to put this in a bit of context. As we look at the overall franchise in the unmet medical need in the multiple sclerosis market, US patients represent about 400,000 out of the 2.1m patients affected with MS and we fully expect that three-quarters of this world will have access to Lemtrada and of course as I indicated, we'll continue to work with the FDA to find out, hopefully a path forward. So we're quite excited about contribution to a market that still has a pretty significant unmet medical need.

With that I'll turn it over to Carsten Hellmann to describe the (technical difficulty).

Thank you, David. Since I joined the company September last year, our primary focus has been on gearing up Merial for the launch of our next generation of flea and tick control products for pets and to build a strong business platform for growth in 2014 and beyond.

As you can see on slide 32, full-year sales of the animal health business were approximately EUR2b in 2013, down 5.3%. Clearly, companion animal sales, which represents 60% of sales, suffered from the weak flea and tick season in the spring 2013 as well as increased competition from Frontline generics. But having said that, we have to bear in mind that all other businesses were growing and production animal sales were up 2.1% and that represents 40% of sales.

Frontline has been the major driver of our business but its patent expired several years ago. So what is important now though is to regain the franchise through innovation and commercial excellence and that's exactly what we have with NexGard and Broadline we are about to launch.

NexGard, a chewable novel oral flea and tick product for dogs was just launched in the US. It's basically a treat for dogs as a little beef treat. Regulatory approval is expected in Europe soon and we also would like to launch the product in EU in time for the flea and tick season which we expect to do.

Broadline, a new topical product for internal and external parasite control in cats, will be launched in Europe also in Q1 2014.

Also, other new launches are planned and we will launch a number of new products the next three years and interestingly these future growth drivers are equally split over our companion and production animal segments.

With that, I will now turn this over to Elias Zerhouni to provide an R&D update now.

Well, thank you, Carsten. As mentioned by Chris, I think we're seeing a real turnaround in our R&D portfolio as you'll see as I present the data. 2013 has really been a year where we've recovered the ability to push forward a very promising robust advanced pipeline with significant data milestones all throughout 2013.

As you can see on the slide, we've had successful completions of Phase III studies in U300 which is the replacement or the approved insulin that is being developed as I will describe later. Alirocumab has also had extensive results, extensive recruitments in a very large program which we will talk about as we go forward as well as other programs such as Dupilumab which has been named the clinical advance of the year.

So when you look at this slide, you see that these six exciting programs are advancing, but they also reflect the broader scope of our portfolio across different disease areas. And as Chris mentioned earlier, it's really important to note the strong shift of our pipeline to biologics. Biologics have a historically higher rate of success which increases the robustness of our portfolio and as you look at the innovation content of our portfolio, you'll be amazed in my view to see that over half of the programs are now in the -- in a first class category, the best-in-class category, first-in-class category.

So I'll walk you through the individual programs in more details later, and on slide 35, I'd like to show you an overview of our approvals and regulatory submission that we achieved in 2013. We delivered seven product approvals in the key markets in 2013. We have two projects in registration, Cerdelga and you heard from David about Lemtrada, which has been approved in 32 countries except in the US for the reasons you heard.

As we look forward on the slide 36, we have essentially nine late-stage high value projects that may potentially be filed over the next four years in several disease areas including diabetes, vaccines, cardiovascular and immunology.

Based on our new strategy for research and developments, some of these potential filings also demonstrate how we've been able to work successfully with our partners and be able to integrate better external and internal innovation into significant growth opportunities for Sanofi.

So I'd like to go into more specifics for you. If you look on slide 37, U300 is a good example of how we are aligning our R&D programs with our growth platforms. With U300 we are developing the next generation of basal insulin for a broad diabetes population.

And the excitement around U300 is due to its really exceptional pharmacological profile. As the slide shows it has less excursions than Lantus and -- at the PK level, which leads to a much better PD pharmacodynamic effectiveness, over the 24-hour period of administration. So if you look at the data from the EDITION program it suggests that at equal efficacy U300 is associated with a lower incidence of hypoglycemic events.

Importantly in the titration phase as well as in the maintenance phase of U300 therapy, we are noticing a decrease in the hypoglycemic event rates. We studied over 3,500 patients in our U300 trials and we expect to submit this data to the regulatory authorities both in the US and Europe in the second quarter of 2014.

On slide 38 I'd like to highlight another key asset in our diabetes pipeline LixiLan. You've heard from Pascale how important this combination can be, by combining insulin glargine with lixisenatide, our GLP-1, which has a pronounced postprandial effect in a fixed ratio single daily injection is being developed as an option in the management of diabetes.

We have just commenced Phase III studies whereby a fixed ratio solution is delivered in a disposable pen device. And if you really look at our program we are targeting two populations. The first one is what we call the LixiLan-O study for oral therapy, which is being conducted with patients who are not controlled or insufficiently controlled with oral therapy. Here what we are trying to achieve is show that as the first injection it is the best medical approach to combine actually our lixisenatide with insulin for those not at goal with oral therapy.

In the second study what we intend to demonstrate is the value of combining in patients who are on insulin therapy and are not at goal, the benefit of the complementary actions of GLP-1 and basal insulins on the effectiveness of therapy both in terms of weight gain, in terms of postprandial control and in overall insulin sparing and hypoglycemia control.

So given the significant delay of Degludec in the US, LixiLan may potentially be the first to market with this combination, which makes sense. And we are targeting late 2015 to submit the dossier to the FDA.

So I'd like to switch now to our very high value asset in cardiovascular. If you look on slide 39, I'm talking about our PCSK9, monoclonal antibody called Alirocumab which is targeting hypercholesterolemic patient populations at high cardiovascular risk with unmet needs.

And if you look at the total population worldwide today -- not worldwide sorry, in the US and EU5, we have about 62m patients who are treated, and when you look at these patients the patients who are at high risk for complications of cardiovascular diseases or about 35m.

And if you look at the ones who have the highest unmet needs you have a population of 21.6m, in particular patients who were intolerant to statins, diabetic patients who are at two, three times the risk of the normal population for macrovascular cardiovascular complications as well as patients who have had a cardiovascular event who need better protection.

So you can see that the market is significant. And for us what is really important is to be able to bring a set of solutions with Alirocumab that will serve the patient population as the needs are apparent in these patients.

So as you can see we are not only talking about a large population of patients but about a large program designed to address these very significant sub-categories of patients who today are not at goal. Now it is going to be a very exciting year for Alirocumab. We will indeed have many Phase III results from the very large global clinical program, which is involving 14 trials and over 23,000 patients.

You've already heard our results from our first Phase III study. ODYSSEY MONO showed that Alirocumab as monotherapy reduced mean LDL cholesterol levels almost three times the amount of -- achieved with ezetimibe from 15.6% for ezetimibe to 47.2% with Alirocumab.

We expect to share the data from other Phase III programs mid-year. And our plan is to start regulatory filings based on the LDL cholesterol in early 2015 outside the US. And we expect to follow with our FDA submission during 2015.

On another note, I'd like to also echo what Chris was saying on our next slide, and that is we have a strategy going forward of not only having research in the growth platforms that we know diabetes and rare disease and vaccines but also create new growth platforms through R&D innovation.

And in that regard we believe that immunology is a very significant opportunity for Sanofi. We have strength across the Group from vaccines to rare diseases to our MS multiple sclerosis franchise. And so we are putting the resources together and we are building an approach and the portfolio around areas where we know there are significant unmet needs.

A good example, and I'm showing you here is, Sarilumab which is the first fully human, high affinity, IL-6 receptor monoclonal antibody which can be administered subcu every two weeks. And we have developed this in rheumatoid arthritis which is a large market with a large demand for more effective therapies, especially in patients who have been on the dominant therapy which is TNF-Alpha inhibitors, but a third of these patients ultimately fail to respond to TNF-Alpha inhibition.

And when you look at our results you can see that in the head-to-head study in rheumatoid arthritis between IL-6 class medication and Humira on the monotherapy basis these classes of IL-6 agents are actually superior.

If you look at our positive first Phase III trial in moderate to severe rheumatoid arthritis we have had robust efficacy across all three primary end points, in particular the fact is that we have seen remarkable inhibition of the progression of structural damage on x-ray.

Clearly when you look at this it's important to realize that what we are doing is to build a portfolio approach that is based on science. And if you look at IL-6, IL-6 is a very key molecule in the immunological response of patients to many different diseases. And so what I think we are seeing here is actually IL-6 advancing in the total spectrum of solutions and approaches and therapies for many of these patients. So as we go forward we are going to share additional Phase III data in 2015 from the ongoing Phase III trials. And we start our regulatory submission process next year as well.

Moving onto another exciting antibody, again in immunology on slide 42, is Dupilumab, and Dupilumab was named the clinical advance of the year in 2013 by Scrip Intelligence. And this is something that we wanted to do, take new targets that can really make a significant change in areas of fully unmet needs.

And if you look at this molecule, this is a monoclonal antibody that is binding to the IL-4R alpha part of the IL-4 receptor but that's what's interesting is that it's also the common part of the IL-13 receptor. So in some ways you're killing two birds with one stone, which really led us to observe significant efficacy in two indications, atopic dermatitis and a large opportunity in asthma with the results that we have observed with a 87% reduction, for example, in the number of asthma exacerbations in percentage of patients with severe, moderate to severe asthma.

So we see a large opportunity there. We see a large opportunity in atopic dermatitis where there is -- there are more than 12m people suffering from atopic dermatitis. And at least 10%, 15% of them have a severe form of the disease as you can see, for example, in this child in the picture, instead of therapies usually involve cortical steroids which have known limitations.

So we've already presented Phase IIa data, we are going to present the rest of our data at the Medical Congress in March, and our Phase IIb is expected in the second quarter of 2014.

Why do we see a large opportunity? Because typically in immunology when you're effective against one fundamental mechanism you generally have affect across multiple indications, and we are looking at many other indications for this molecule which seems to be extremely effective in affecting the IL-4, IL-13 pathway.

I'd like to also turn to a major growth platform for us and that is our vaccines, our vaccine projects pipeline at Sanofi Pasteur are pretty unique. Frankly when you look at the total vaccine world very few companies have two significant Phase III trials in vaccines addressing significant public health problems that are growing.

The first-in-class dengue vaccine which is being developed by Sanofi Pasteur is addressing a growing global threat. In fact, if you look particularly in Asia and Latin America there are over 2.5b people at risk with this disease. There are estimated to be 100m symptomatic dengue cases worldwide per year and over 500,000 of those patients require hospitalization.

More importantly there is a 2.5% mortality rate with severe dengue. It is a public health priority in Asia and Latin America today, but it will be even more important in the future as global warming affects the distribution of the mosquito carrying the disease.

It is an ambitious development program undertaken by Sanofi Pasteur. The Phase IIb results in 4,000 children observed efficacy against three of the four serotypes involved. More importantly it was the first time that a vaccine approach was demonstrated to be safe in dengue. And we are eagerly awaiting the results of the Phase III studies, the two large-scale studies in Asia and Latin America involving 31,000 children and adolescents which we'll hear about in the second half of 2014.

There was another unmet need that the research team at Sanofi Pasteur saw, slide 44, and that is the prevention of primary symptomatic clostridium difficile infections. I think in the US its one of the most common causes of healthcare-associated infections especially in the aged population. There are over 28,000 deaths and up to 450,000 hospital admissions with an associated cost of care of up to $3.4b. So we are targeting patients with of high risk of clostridium difficile infections.

We have entered development for this vaccine which is, as I said very common, and this vaccine was shown to be both safe and immunogenic in both Phase I and Phase II trials with broad antibody responses to the two toxins, toxin A and toxin B which are the primary pathogenic elements of the clostridium difficile infection.

And we decided to start a multinational Phase III trial in the third quarter of 2013 which will include 15,000 adults. This is a case-driven study and is expected to be completed by the end of 2017. In recognition of this very important unmet need, CBER the biologics division at the FDA has assigned a fast-track designation to our Phase III study.

So as I conclude my review here for our high potential pipeline projects we can see that we have over nine projects that are going to be filing and being very active in the Phase III development milestones, the regulatory milestones that we expect in 2014. Obviously Cerdelga which is already submitted to the FDA, regulatory submissions that are expected as you can see on the slide.

Clearly the R&D pipeline is heavily weighted towards biologics which typically have a higher success rate in late phase, so I we are very optimistic. And I think that as we see going forward there is going to a flurry of noise in 2014 and 2015, and we definitely look forward to reporting our progress to you in the months to come.

And so as I conclude I'd like to turn it back over to Chris to conclude the overall presentation.

Thanks, Elias. So as we look out to the outlook for the year we would expect that the business return to growth as we've seen in the fourth quarter really from September 1, will continue through the year.

We are extremely busy preparing for the launch of new products. We have launches rolling out; we have launches that are being prepared. We clearly have a number of major development programs in place. But that all notwithstanding we believe that earnings per share will likely rise between 4% to 7% more than 2013 at constant exchange rate, always barring major unforeseen adverse events.

I think 2014 is certainly one that's exciting for us. This is the first year that we are looking at growth for the whole year. This is the first year that we've got the patent cliff behind us. And in addition to the growth platforms we now have real tangible assets that we are looking at in R&D.

So it's busy at Sanofi, and we now look forward to taking some of your questions. Thanks very much.

Michael Leuchten, Barclays

Thank you very much. A question on your guidance please, clearly consensus was or is quite a lot more optimistic about the outlook for 2014, which is probably understandable given the momentum that you carry out of Q4 with your growth platforms driving a lot of growth.

Your comments around the cost base very helpful. But working it backwards consensus was looking for about EUR1b less in operating expenses than your guidance seems to imply, assuming that you're comfortable with the top line at the moment. And that seems to be mostly within the marketing and sales SG&A cost base. So could you just offer us more color as to where you see the investment potential and requirements. So that's question number one.

And then question number two on the balance sheet, the dividend has gone up or is going up by 1%, your net debt to asset ratio is now about 7%. That's a very healthy balance sheet. Going forward what's your thought about cash allocation please?

So first of all, guidance of 4% to 7% is going to put us pretty well in this industry, I don't think it's going to be too many companies are going to outperform us this year.

I think the biggest issue that people are going to have to work through is looking through the 2013 P&L. People are clearly focused on, yes, there is going to be some upside this year because we don't have the downsides from last year, but equally there are EUR350m of non-recurring income.

Now we never know how much that's going to be. Some of that we envisage, some of that we don't. Some of it just -- someone offers you suddenly to buy out your royalty stream, well, you don't always have that in your plans.

But if you actually look at that, then I think you'll find that actually there is a good healthy underlying organic growth in that. Remember you've got a tax rate that's going from 24% to 25%, 25%, 26% so you lose a little bit there.

There is no question that we are putting more money into R&D and into launches, but I don't think you are going to see expense to sales ratios dramatically changing. We are going to be largely in line with 2013.

I think it's really trying to -- for people to A, get the base line for organic growth rate, make sure people are getting the exchange rate movement. There has been quite a significant decline in a lot of the exchange rates. Who would have thought two years ago that the euro would be one of the strongest currencies in the world. I don't know whether it's going to stay or not, but it's clearly had an impact in this year, we've seen some currency turbulence at the beginning of this year as well in some emerging markets.

So for us we are really focused. First of all I don't think the -- even the guidance that we've just given you is included in our share price. I don't think people are really looking at the pipeline and therefore on the level of investment. But again I don't think you're going to see anything that's really a disruptive trend versus what you saw really in the fourth quarter. You just have to take into account those -- that non-recurring income and the underlying tax rate.

Concerning capital allocation, yes, the balance sheet is healthy. I think we are lower than our target net debt rate, but I think there's a -- there are a number of things in progress. Obviously, there's all kind of speculation about what may or may not occur with L'Oreal's shares so I think it's useful to at the moment at least keep some financial flexibility depending on how that is. And to answer any questions on that, I have no idea whether anything is going to happen on that, there's a very conditional element. But given that here is this kind of level of speculation I think that's one thing we are certainly keeping an eye on.

We have begun to acquire some Regeneron shares, we bought about three-quarters of a percent back from -- out on the open market. No particular hurry on accumulating shares, but we did issue a 13D that said we would over time intend to move to about a 20% shareholding in Regeneron.

We had an investment in Alnylam and I think that type of investment is a good one. I had a number of meetings in San Francisco with investors. I look at something like an Alnylam not only as a way of accessing innovative technology. I mean we are talking about RNA interference where we actually are using the Genzyme rare disease knowledge to be able to access that, because in today's world there was a real fundamental shift in biotech last year. 50 IPOs means that not everybody feels they have to do deals, deals have become more expensive and I think if you really want to have these types of collaborations you have to bring more than just cash.

And so I think we've been able to take a stake in Alnylam. This gives Alnylam some financial independence. We not only brought that though we brought Genzyme's know-how into rare diseases.

And rare diseases are very interesting not just from the public health or even the commercial interest, but you're also going to start to test some of these new technologies in rare diseases, largely because you really genetically better understand targets in this area. And so RNA interference is going to be something that could well be in diseases beyond rare diseases but this is where you're really going to have that proof of concept.

So I can imagine a series of those types of relationships with Alnylam. There is -- no, I can't say how many we would do or how fast, but I think those are also capital-sparing types of arrangements. We are not buying the whole company, we are not betting on one single asset. There are seven very interesting and significant projects in Alnylam. And having a number of those, not all in rare diseases obviously either.

So the objective is clearly not to accumulate cash on the balance sheet. We haven't abandoned our EUR10b net debt. But I think we are now entering into a process, particularly with the patent cliff behind us and a lot more stability in the outlook, of being thoughtful about exactly where we are going to use the capital.

The guidance on M&A, the EUR1b to EUR2b on acquisitions still holds. That would include things like the Alnylam type investment in that EUR1b to EUR2b. So I guess its watch this space. But as I say the idea of picking a net debt target was to say to the shareholders that we don't want to see that cash accumulate.

Thank you.

Thanks, Michael

Mark Clark, Deutsche Bank.

Yes, good afternoon, gentlemen. A couple of things, firstly is a question for Jerome about the tax rate. The tax rate has trended in the last few years better than your initial mid-term assumptions I think. So we are down at 24%, it's heading back to 25%, 26%, can you tell us why it's heading north and is there anything you can do to mitigate this, potentially move it downwards again thinking patent boxes and the like.

Secondly, in terms of the guidance for this year I know you've already answered some -- a question earlier, Chris, about this, but I would counter that you might have had EUR350m of non-recurring income but you also had about EUR300m of non-recurring hit in Brazil. Those two are pretty much a wash.

Are you simply being conservative here after the disappointments of 2013, and can I say would you rule out raising the guidance later in the year or are there no circumstances in which you can envisage that happening?

And finally looking into 2015 the news on the Lantus litigation in the US potentially means that you've got a clear runway through to mid-2016 at least. Assuming the tax rate doesn't deteriorate further should you not, and I'm not pushing you for a financial forecast here, but arithmetically it would seem likely that you'd show an acceleration in growth in 2016 over 2015 given that -- the various moving parts in your business. I just wonder if you could comment there. Thank you.

Well, Mark, I'm quite certain you don't expect me to say I'm being conservative. I will say certainly lowering guidance is not an agreeable experience and not something that I think any company should do on a regular basis.

I think -- look, we live in a world where a lot of things can happen. We are at the beginning of a year. In the past we have not ruled out raising guidance later in the year. Personally I think at the start of the year let's see how things go. I think we've had a good four months of performance under our belt.

I am extremely pleased with the new leadership I have sitting around this table, some of whom you've heard here. We have a -- we've really renewed commercial leadership in the business. I think there's an awful lot going for us with pipeline potentially a longer run to establish U300.

My real objective is not really to focus on just the guidance, Phase I really was to establish a different type of company, get some longer-term growth platforms going, do a dramatic restructuring of research and development and put together a late-stage portfolio.

And quite honestly I have to say being able to have these many assets in late stage considering we started from nothing five years ago, I think I am extremely pleased about. Now we are really focused on building those assets and shaping them and bringing them to market, because everything else we've done up to now is stuff we inherited from the past. This is kind of a new generation of products and these are products we can shape, these are products we can love, these are products we can really bring to market with excitement.

My view is that this industry is still dramatically undervalued. We moved this industry from PEs of 8, 9 four or five years ago to 12, 13 range but in the meantime the broader stock market is sitting there at anywhere from 16 to 18 depending on which market you look at.

And if people who make soft drinks and widgets can be trading at 16 to 18 I don't see why we as an industry shouldn't be there. And to me that's what this -- the objective is, is how do I get this company's PE to that 16 to 18 range. And we are only going to be able to do that by being able to demonstrate that, yes, there is a solid base in the business with these growth platforms and that these new products will deliver.

Not everybody is going to buy into that vision day one, not everybody bought into the growth platform vision five years ago day one either. But that's really where I think the value creation comes from.

So, yes, last year was not agreeable, maybe that has an impact on that, but we are focused on delivering this on the existing business and really these new products. And that's really what we are going to be communicating about.

If you look at the top 10 asset picks of most analysts, eight of them are cancer products. I'm not so sure people really understand what the potential is when they talk atopic dermatitis. You go to IMS, you've got steroid use today and so we've got a job to do of really outlining what the virtual potential of that is.

Now people looking at IL-6 and saying well Actemra is out there sitting there with $1b. This is a $21b biologics market. You look at what happened with the multiple sclerosis market, as orals hit this I think as you see multiple IL-6s coming to market you're going to dramatically shift this market. And you've got a market where people switch between therapies.

So I hear sometimes people comparing Sarilumab to Actemra that's not really the way to look at this. The objective is how do you win in a marketplace like that, how does the shift go from TNF-Alphas to IL-6s, how do you get your market share on that.

And I look at the dengue vaccine and I see peak sales forecast of EUR200m and say we can do better than that. But again we have to do a much better job of really now giving the granularity of where we see this marketplace.

We are busy recruiting an awful lot of people inside the company and bringing expertise into some of these areas. We certainly have it in dengue; we have it now in rheumatoid arthritis. But even we can do an awful lot more in asthma. That's an area I personally know well.

But that's where the real excitement of the business is and that's the area I think that is dramatically underappreciated within the company. And that's our fault. That's our job to do better at. Now that we've got the patent cliff behind us this is really Phase II of this company.

So now really demonstrating that we can be innovative that we can actually bring new products, remember this is a company that hasn't brought a lot of new products to market in the last 10 years, so we've got some rusty muscles on this. But we've also got an awful lot of activity going on, on that.

Okay, thank you. And can I just follow up and ask Jerome for the specifics on the tax rate?

Thank you Mark, so I think that you can look at the tax rate evolution a bit like a half full, half empty glass because at the end of day, you remember that now for why we warned that everything being equal we would have less (background noise) low tax rate, at least for a while, as long as we have less revenues from patents. We clearly have less revenues from patents in (technical difficulty).

And just back one year ago we said, well, it should be 24% in 2013, 26% in 2014 and 28% in 2015. So today what we say and what I say is that we could do a bit better. This is why we are giving out a guidance that it could be 25%, 26%.

And you can say, well, why didn't you [know it better] or earlier. But as a matter of fact it's pretty difficult to assess it more precisely. Just an example, I think that the highest tax rate we have in the world are Japan and the US. So if the yen goes down, your average tax rate goes down. That's surprising but that's true. So just this example shows that -- to be too precise with the tax rate is not an easy exercise.

The second thing is as time is passing both our tax team but also tax authorities don't stay idle. So on one hand we have a lot of tax audits ongoing, and as you know. Everything which happens in this industry goes of big magnitude so you need to take reserves on the risks you may have in terms of transfer pricing as an example.

And then of course when we have the outcome of these audits, then you may reverse some of these reserves depending upon what happens. And it has been the case this year as you notice. At the same time our team is not idle either and trying to optimize so they have made some progress.

So I think today the best assumption I can give you about 2014 is somewhere above -- north to 25% and I can say as well that everything being equal you should probably see an increase of tax rate in 2015 when time passing if we have more good news coming from patented products and hopefully if this (inaudible). We will see the tendency going the other way around everything being equal.

Thank you.

By 26% for 2014.

Thank you.

Philippe Lanone, Natixis.

Good afternoon, gentlemen. A couple of questions if I may. First I see that you have quite a recovery of your business in Europe, which is up I think 2%. So could you comment on the evolution of prices for your business in Europe? And is there something specific to Q4? Can we extrapolate that to 2014?

Also can you give us some flavor on the Lyxumia launch in Germany in terms of market share and what kind of forecast you can do for 2014?

And lastly I think that there is some generification of Renagel especially. Can you comment on when it will happen and what kind of generification it will be? It will be a steep generic or just a soft one. Thank you.

Just turn that over to Peter.

Yes, so thank you for the question. So first on Europe actually what you see is two phenomena. The first is that you start to see some traction of the launches we have in Europe, so we have the Lyxumia launch. We have a couple of other launches having been rolled out in 2012 and going forward in 2013. So that's the first phenomenon.

And the second one is also that you see that slowly but certainly you see the progressive washing out of the patent cliff also in Europe on the other Rx business.

So if you take these two together obviously you come to a much nicer picture in Europe. And I think the trend you have seen in Q4 is something you can probably expect more of that going forward.

On the question about Lyxumia so actually we have launched this product now in a couple of European markets, we have launched it in Japan, we have launched it in Mexico, and we see actually a pretty consistent picture of market share gains which are doing much better than the initial launch for example of Byetta, Bydureon. And we reach market shares in the neighborhood between 6%, 7%, 8% up to 10%, 11% depending on the market.

Specifically your question was around Germany, so in Germany we reached pretty quickly a market share of about 8%. You might recall that we are discussing now with the German Association of Sick Funds a pricing because the IQWiG, which is the HDA watchdog in Germany did not give added therapeutic benefit to Lyxumia for the reason of an inadequate comparator and we are still in these pricing negotiations.

Third point on Renagel, yes, in 2014 the patent goes off in the United States. This being said today we have -- there is no registration of a generic of sevelamer so I cannot answer your question with a high degree of precision. The only thing factually I can tell you is that today we have no sight of upcoming generics in the registration pipeline.

Okay, thank you.

Luisa Hector, Credit Suisse.

Good afternoon, thank you for taking my questions. Firstly on Lantus, could you give us the split of volume and price for Lantus in the US in 2013. And has there been any change in your strategy now that you have the litigation ongoing and the 30 month stay, so I'm thinking the size of the sales force, the pricing strategy, any changes there?

And then maybe I'm afraid to come back on the guidance, because again I'm still struggling a little bit with it here because there are so many positive drivers and not so much in the way of negatives. Perhaps you could tell us whether there are any significant items that lead to you having that range of 4% to 7%.

And just to check maybe on other pharma in Europe, because that has been quite a negative drag but it does seem to have eased in the last two quarters, so just to check that whether you think that could deteriorate in 2014 or whether we are seeing a more stable situation there in Europe. Thank you.

So on Lantus I think for the US, Pascale or Peter.

Yes, well, I can start. Well, for Lantus in the US we see a price volume split of about two-third, one-third. Globally it's more half and half. So that's what we have been seeing.

On the litigation on Lilly as you have seen we consider that there has been an infringement of some of our patents and we have started a process, and it will follow its due course so at this stage we cannot really prejudge on what can happen along these lines.

Concerning the 30 month stay let's wait and see. The underlying strategy is very much the game plan which is we have U300 which is the next generation insulin. We have four studies now that demonstrate safety and efficacy, so we've got a fileable drug.

I think Elias gave you a very clear understanding of where we see that differentiating versus Lantus, not only on the hypos but also on the full 24 hour coverage with both a PK and a PD study.

Degludec has kind of oriented everybody to the importance of hypos, but that was largely because Degludec has a 40 hour half life so they preferred to not talk about that part of the story.

We've got LixiLan now we are starting Phase III. We've got Lyxumia rolling out. We would be able to start to file Lyxumia even (inaudible) next year. So there is a broader portfolio here.

In terms of investment I think we continue to want to defend the whole sector. In terms of the 30 month stay clearly we have a deep analysis of this including external with attorneys. When you have the situation we can request information from the biosimilar filer, and that's why we believe that there is infringement on four of the patents.

Normally that 30 month stay will only end if Lilly could get a summary judgment and I am not going to be speculating on court processes in the US, but obviously we wouldn't have launched this if we didn't think that we had a very robust case to defend us.

I think the major -- if that does hold, the major benefit of that would be clearly you've got an even better time to establish U300 as the standard in diabetes care.

Jerome why don't you take a crack at the guidance since I --

I think these are -- and to me Chris explained it already the math are pretty simple. On one hand, and I think Mark Clark also expressed it, so on one hand it's true that we should have a natural recovery on the negative one-off events of late last year such as the Brazilian situation but also the Toronto manufacturing issue which prevented us from supplying the market in the US for a period of time.

At the same time to make things simple we have EUR350m of non-recurring events that we cannot count on when we give the guidance. We don't know what will happen as Chris mentioned, you cannot count on that when you give guidance. And on top of that we have around 1% more or increase on tax rate so basically these two events are a wash.

So if we exclude these two elements and we think about underlying business and if you compare to the competition, I don't want to compare but just look at the guidance which were given by some of our competitors I feel that it's reasonably strong guidance that we give today.

And that's basically obvious, I don't feel that the 4% to 7% is just applicable to the rest of the business but more or less it could count like that plus or minus 1%. So I don't think there is anything hidden. I think that as I said we should see an improvement on the cost of sales ratio, which of course requires an effort because there is an evolution of business mix.

We say as well that the R&D on the SG&A should increase somewhat but the ratio at the end of the day or the OpEx to sales should not move, to be very close to what we have experienced in 2013, maybe slightly better slightly below and it's really a marginal variation. And if you put all that together that's how we can guide you to the guidance by process of -- at each stage of the year.

Okay. And then in other operating income we just get that negative effect of the Actonel Copaxone washing out as well.

Yes, I mean is plus or minus, we have (multiple speakers) litigation, there is some risk around there. That's -- the rest I would not count on that, there are three elements on that and the rest will be neutral. Maybe I should also add that the consensus tends to be a bit lower on the financial expenses (background noise) when you reduce your debt.

And I don't know exactly what is expectation or anticipation here. You don't reduce that much your cost of debt quite simply because the revenue you get from the deposits are pretty low up to the time you use this money. And as Chris mentioned plans with Alnylam and we have bought some shares of Regeneron.

Part of the financial expense includes also the computed cost of -- or financial cost of the pensions. This is purely something which is calculated, so we use a long-term rate. And this will not change from one year to another. For year 2013 it was EUR160m you remember this is a new IFRS norm that will apply since 2013.

So there is a part which is not moving at all. And the rest is decreasing but not huge. So if you put all that together I think I am done. If it moves through the P&L in detail.

And the European pharma tail that seems to be doing a bit better, does the outlook look positive?

Well, it's of course an incredibly long list of many, many, many products. And you're right if you look -- if you compare the last quarter with the average of the year, it looks better. What you see in there is a lot of small generifications that are washing out. You might also see a little bit less of a price pressure, because you are narrowing or you are nearing, let's say, the bottom of the wave in terms of price pressure, how far you can get. So I think you will see in 2014 moving forward still a negative picture on this, what we call the tail of the tail, but perhaps a little bit less negative than the full year 2013.

And I think, Luisa, it's also fair to say that the tail gets smaller, and therefore the erosion actually can mechanistically get a little smaller, as well.

Okay, thank you.

Steve McGarry, Societe Generale.

Hi, good afternoon. I've got a few questions. Firstly, just on U300, when you look at its profile, it seems sensible to combine that at some point with lixisenatide as a combination. Is that something that's on the cards, and when should we expect to hear something on that?

Secondly, on eliglustat, could you give any guidance on what the potential pricing of that product could be, because obviously being a small molecule, if you placed it right up at the average of Cerezyme, you would assume that the profitability could be significantly higher. And then thirdly, if you look at the R&D costs over the 2014 to 2016 time span, you have the lixisenatide cardiovascular outcomes studies completing, several of the alirocumab Phase IIIs completing and the sarilumab Phase IIIs completing, as well.

Could we have actually a situation over the next couple of years where we could see R&D decline in real terms? Thanks a lot.

I like the last question. We'll hear from our R&D chief. I'm not getting too many messages that R&D is going to decline, so we'll take these in order. Elias, why don't you answer the questions on (technical difficulty) and then maybe how you see R&D costs evolving? And then we'll turn it over to David on the pricing for eliglustat.

So on the combo, as you know, we've already received approval in the label for Lyxumia to combine Lyxumia on top of Lantus. And so we have a lot of data actually validating the notion that by combining the two you get a better effect, because you can actually provoke a weight loss with Lyxumia and counteract the weight gain of insulin.

But, in addition, we see what we call insulin dose sparing. In other words, patients don't go up as fast and they have lower doses of insulin, which ultimately is providing a good combination. So LixiLan is essentially the representation in a single product that can be used by patients as they go into the first injectable.

And so if you really think about the importance of that from the medical standpoint, this is a shift in the medical practice that will basically say, well, if you have to take an injectable, you have to really combine the two. So that we proved, and therefore, the next step is going to be to enhance that with the unique pharmacological profile of U300.

But right now, Lantus is approved, so we are doing the LixiLan development because we have good medical evidence. We're going to do the LixiLan development, get a much better read about the efficacy of this, especially in the first injectable space, and obviously develop that with U300 as we learn more from our current trials.

R&D budget.

R&D budget, you're putting me in a bad spot here, because we don't tend to negotiate budgets with Chris in the call, but think about it. If you look at our pipeline, not only the one that is being developed and you look at the requirements of regulatory agencies in terms of regulatory-mandated studies, what the trend is worldwide is that as you succeed, you also have to sustain the approval through often post-marketing studies. And then you can hear from David about Lemtrada, for example, and so on.

The second is that we have also a rich mid-stage portfolio, which should really reinforce our current portfolio. We have very exciting molecules. One is the anti-CB38 monoclonal antibody I haven't talked to you about.

We have a sarcopenia monoclonal antibody against GDF-8, which is also coming to development. We're having proof-of-concept studies. So, personally, I see a pretty stable R&D budget. We're going to continue to do what we've done, in other words, restructuring the fundamental budget structure of R&D to try and put more money into our development, more money into our collaborations to enrich the portfolio as we go forward.

So I don't -- I see a pretty stable or a slightly increasing budget, really.

I'll just say, I think Elias did a great job also of restructuring the nature of the cost. We started off with the equivalent of 15,000 people, and we went down to what was it, down to 9,000 people? There's been quite a significant shift away from the fixed cost of R&D into program cost, and when you've got over 20,000 people on PCSK9 and you've got an IL-4 program, an IL-6 program, we've got a dengue vaccine, we've got a C difficile program.

These are all big programs. We want to move more into the clinic in Genzyme. So it's actually getting to a point where I'm not so sure we're going to be able to fund everything within the EUR5b envelope. I don't see that exploding, and I'm not about to see it go up until we really demonstrate to shareholders that they really see all the value in that.

But I think it is as Elias said. If you look at the Regeneron relationship, this is really generating quite a series of targets of molecules coming along behind that. Alnylam will likely generate a number of new clinical programs, so R&D is really clicking at the moment. I think we've done an awful lot to carve out some of the fixed costs. We're not going to give up on that, but in all transparency, I don't think that we can really say that R&D is going to decline. It probably will start to gradually increase, not faster than sales, but it probably will start to increase, not necessarily this year, but probably from 2015 onwards.

David, do you want to talk about eli?

Yes, so pricing, not surprisingly, we don't reveal or make decisions about pricing until close to launch, when we understand the label and the indication and the other factors which will help guide that. But a couple things to think about this.

One is, people often underestimate the cost of development in rare diseases. They think programs are smaller and cheaper, easier in some way. I remind you of the largest program run yet to date with 400 patients, and we first put eliglustat into development back near 2000. We're 14 years along, we're not done, and as Elias indicated, it will for sure come with post-marketing commitments, as all these approvals do.

So there's a significant investment that goes into these, so that's a consideration. And with regard to the market itself, on the community, our goal will be to really create a choice for the patient. The results of the clinical data that we have to date, again, is highly favorable. We're extremely encouraged by how it compares to Cerezyme, so again, we want to leave physicians and patients with the ability to make a choice, not have it driven unduly by economics that might force somebody to choose a less than optimal choice for them.

And as we said, Cerdelga won't be for everybody. There will be a significant number of patients who will be remaining on enzyme replacement therapies, typically Cerezyme, and they should. Those will be things we'll take into consideration as we develop pricing.

Okay, that's great. Thanks.

Eric Le Berrigaud, Bryan, Garnier.

Yes, good afternoon. Four questions, please. First is on cost of goods. It looks like in vaccines cost of goods went up by 8.8% in 2013. So is it fair to expect that to partially or even perhaps fully disappear in 2014? Could we expect cost of goods to go down by the same magnitude as it goes up in 2013?

And then a more general question, do we have to expect also cost of goods to go down beyond vaccines? That's for the global statement about cost of goods in 2014.

Second question is very short, on share buyback. Above and beyond what could happen with L'Oreal, could you commit to the same kind of statement you made one year ago, saying that you should at least offset any option exercise to keep the number of shares stable? And if nothing happens with L'Oreal, could you make maybe 1b or 2b share buybacks?

Third question, on the price of PCSK9, I know it's very early days, but how could we see this kind of product? What could be the good benchmark? Could basal insulin as a chronic injectable product be a good benchmark, or is it more into the specialty care and so more expensive? Any kind of insight into how we can think about that?

And lastly, and sorry, but it's guidance, but it's not annual guidance. It's a more general question about how you move towards guidance and visibility as you move through the end of your patent cliff. It looks like it's now less clear than it was and less clear than your peers. Less clear than it was because we used to have a midterm guidance, and we no longer have this long-term guidance. And less than peers because others are providing some kind of sales growth estimates, and we only have EPS estimates with you.

So could we perhaps -- could you perhaps tell us whether the midterm guidance saying 5% growth at least for top line and bottom line above top line, beyond 2013 -- that is now behind us -- is relevant going forward? Could that be the case for 2014, for instance, and in other words, is there any leverage between top and bottom line?

Jerome, why don't you first take the cost of sales and the share buyback?

Yes, so on the cost of sales, and probably Olivier can comment more specifically on vaccines, yes, we continue to see some productivity improvement on our pharma business. And this will be the main driver for improvement of the cost of sales to sales ratio, keeping in mind that, contrary to the previous years, we don't have the negative effect of dilution coming from the end of sales from blockbusters.

So it's clear on the let's say traditional pharma business, we should see some improvement this year. The biologic part is a bit more complex, because biologics in general are always a bit more difficult to forecast. We also have a rate of destruction i.e. products that we cannot put through to the market, which is a bit uncertain when you start the year.

So you can put some budgets, and there are some plans and some actions being taken to reduce the level of destruction that we experienced last year from our manufacturing activities, but it's a bit difficult to forecast. And this is one way to measure it, but there are many aspects of yield, as another example, which are more uncertain to forecast when it comes to a cost of goods -- impact of cost of goods.

But you should also keep in mind, and this goes also into the cost of goods, that as long as we have not received a full visibility on the Phase III results, you take as a charge all the lots you produce for the new product. This is true for, for instance, Cerdelga. That is true for dengue definitely. So when it comes to vaccines, to your point, 2014, we still experience the charge off of all the lots we will provide for testing up to the time of approval. So in that respect, not a good year from an accounting standpoint. As long as we get close to approval, in fact, as long as we submit, then we don't charge anymore and we capitalize this type of cost.

So the last point is that there will be some lagging effect in vaccines when it comes to all the costs that we incurred in connection with the fixing of the Toronto aspect. A large part went into the P&L, but part of it went also into the inventories, necessarily, and this will be unwound in 2014.

So I'm a bit technical, but I think that's important for you to understand. The main driver from the improvements of cost of goods in 2014 will come from pharma and then from Genzyme, and we shall experience now several years of improvement and getting closer to the end of the consent decree. Vaccines, it will be positive, and I think that we should be aware that there will be some investments to be done on some specific elements, such as one I mentioned.

So all in all, improvement in the cost of goods-to-sales ratio. This is really our objective at constant exchange rate, on top of that may have a slight impact, driven firstly from the pharma -- from the pharma productivity.

On the share buyback, yes, Eric, we can commit to compensate for the dilution. There's been objectives now for a while, and we continue to do that. Are we going to go beyond that? I mean, we just look at the Q4. We did a bit more acquisition of shares versus what we issued as new shares as a result of stock option exercise. Quite simply, you never know exactly how many shares can be run -- how many stock options can be exercised.

But if you think more generally, back to what we said, we need to wait to see what happens on L'Oreal, and you well know -- know well that there will be some news, at least, coming in the coming months, but we don't know more. Just read the press.

And we are still looking at acquisition as a business size or small acquisitions as a way to enhance our businesses.

I think it's a bit premature to think about PCSK9 pricing. I can certainly tell you that you're thinking too low on basal insulin. First of all, I think we would say that our own basal insulin pricing was way too low. That's why we've been doing the price increases. Even after the price increases, we're still at around $6 a day in the United States, where little round white pills in the form of DPP-4s are about 40% to 50% above that, and Victoza is sitting there at anywhere from $12 to $18, based on dose.

I think you can take it from there. There's going to be a lot of work in terms of thinking about early populations, later populations. There's still quite a big population of just statin intolerance and with the familial hypercholesterolemia. And, obviously, we've got a competitive situation, so we'll be attentive to that.

But I think you've got an extremely efficacious drug. For the moment, it appears to be a highly tolerable drug. I can certainly tell you that concerns around the injection part don't seem to be an issue. If you think about the fact that we've got over 20,000 patients on Phase III, Amgen does, Pfizer's got one of them going. And it has been no trouble to recruit patients, very low dropout rates, so I think the acceptance of that form of therapy seems to be -- at least on the basis of clinical studies, to be favorable.

So then I think we'll probably give some closer guidance to that as we get closer to launch, probably sometime in 2015. In terms of midterm guidance, midterm guidance was done in September of 2011, when we were facing the patent cliff. People really had no idea where we were going to go. We talked about the different ranges of growth.

I personally think, when I look at the fourth quarter, we're very much in line with that medium-term guidance. If you think about the old Michelin guide to Sanofi, if you remember, when we sort of said double digits for this and high single digits for that and low single digits for the other. I don't really see any need to change any of that.

I think the medium term of this company is now going to be driven more by product launches. You're going to see more and more new products coming along, so I think that is -- and that is always a much more difficult thing to predict. I think right now, we're just very happy to be back to growth and establishing more of a track record of growth through the year.

We'll consult with investors and see whether it's worth it. I personally -- midterm guidance is always a dicey thing to do. I remember the 2009 guidance that we gave for 2013, well, in the meantime, you've got Obamacare comes into this, you've got austerity programs in Europe. You've got acquisitions.

And it's actually not that easy to kind of track where things are necessarily going to go. So I guess we'll think about it, but for the moment, I would say if you go back to that old slide from September [2010] (corrected by company after the call) on where you see the growth platforms going, I personally don't really see that much that has to change. Maybe we performed a little slower on emerging markets and a lot faster on diabetes, but broadly, I think we're still tracking to that. 2013 meant that we were a year later in really coming to where we wanted to be, but where we've ended up is I think where we thought we would be a couple or three years ago.

Do you expect sales to meet the 5%-plus midterm guidance this year, Chris?

We're into 2014, so as you know, traditionally, and we do like tradition here, that we give you earnings per share guidance. Sales guidance is not something we give on a short-term basis.

Graham Parry, Bank of America.

Thanks for taking the questions. Just starting off on the margin outlook into 2014. Jerome, the guidance that you've given out on the cost ratios, for COGS, you guided constant exchange rate. Just wondered if you could give us a feel for the impact of FX on that ratio?

And with R&D and SG&A, the guidances that you're saying about the increases there. Is that in constant exchange rates or reported, and if it's constant exchange rates, again, can you give us a feel for FX sensitivity there?

Secondly, on use of cash again, I'm afraid, at which point would you think you would have enough flex for L'Oreal and then are still looking at excess cash flow beyond that that you might need to deploy into excess dividends or buybacks?

And then, finally, if I can just push you there, Chris, on your 2015 guidance comment, if we take your 2012 sales base and grow it at 5% per year, less the currency impact that you saw, that would equate -- that you've seen at least in 2013, and an expected at the spot rate in 2014, it would still imply about EUR36.6b of revenue.

To get there, you would have to be delivering at something around 7%-plus CAGR in sales this year and next year. Do you think that's achievable?

Well, Graham, nice try, but I think I've said all I'm going to say about 2015. It's one thing to give this kind of guidance when you're three, four, five years away. When you're here, I mean, clearly, if we start to talk about 2015, I'm effectively giving guidance for two years instead of one year, and I think we'd like to focus on 2014.

And use of cash, I mean, you'd do us all a great favor if you could go ask Nestle the question about what they're going to do, and if you wouldn't mind also calling up L'Oreal, then you could tell us, and then I think I could answer these questions a little bit more. But I think if you listen to what's out there and the rumors, all we know is that the shareholder pact comes to an expiry in April, I believe it is.

There's no guarantee that Nestle moves in April, but one will see, I think, that that will be kind of a first card to turn over, if you like. But to a degree, we're flying pretty blind on this ourselves. Obviously, the L'Oreal is a major shareholder. This is highly price-sensitive information and they're not about to share anything with us.

And I suspect L'Oreal doesn't have any greater clarity other than Peter Brabeck's comment a few months ago, either. So I guess all I can really do, I know it's not very satisfactory, is watch this space. It is clearly something that is worth looking at. It's pretty obvious without, again, spending hours on spreadsheets that it would be accretive to do, but you'd have to put that into the whole calculation of what are your other uses of capital and how much of it is occurring.

Remember, this is something that generates a high degree of cash flow for L'Oreal. So it's not necessarily the case that L'Oreal puts all or any of the stake up for sale from Sanofi, even if Nestle decides to sell back some.

So all of that is unknown. So we in the circumstance I think want to keep our powder dry, but beyond that, we really don't know any more than you yourself do. And so just as a final bit, I'll turn it over to Jerome on the margins. But everything, when we talk about margins, it is constant exchange rates, but I don't know, Jerome, whether you can shed any light--

Thank you, okay. So, Graham, maybe a few elements to give you a flavor, but maybe not an answer on all of your questions. So maybe to start on the gross margin, I can -- what I can say, as you know, is that we have been -- we have taken the view that we should manufacture locally for years, and this was done not only for FX reasons or competitive reasons, but was also done to access to markets.

So this you know, and it's more than 80% or 90% of our production, which is manufactured locally when it comes to emerging markets. And, well, when it comes to Europe and the US or Japan, it's a bit different, because the driver is more linked to know-how and historical positions.

But to give you a favor -- flavor, sorry -- and if I take 2013, and of course you know that in 2013 we suffered from a big headwind coming from currencies, the impact on the gross margin of the currency fluctuations has been in the range of 0.4%. So it will give you a flavor. If you go further, you can take many assumptions. It is extremely complex to compute.

Also, the sources, the API we buy, also that end, we try to optimize. But I think this gives you a view.

When it comes to the rest, I will more give you some sensitivity on currencies on the profitability, and here, I mean, two elements. So the first one, first of all, where are the revenues coming from, and it's just a reminder. That is, one-third of the revenues which is denominated in US dollars, we have 7% of our revenues which are denominated in yen. We have 35% of our revenues which are denominated in euro, and of course, the rest is denominated in many other currencies.

The next currency coming is, interestingly, the Chinese yuan, which represents 4%, and then the Brazilian real is 3% and the pound is 2%, and the Australian dollar, Aussies, again, is another 2%. So I don't go further, but just to tell you that after we go beyond the US dollar and the yen, it starts to be scattered in many currencies.

Now, when it comes to the EPS and it could take the net income, the business net income, a 1% variation of the euro versus the dollar, so if you move from let's say 1.37 to 1.35-point-something, 1% less, has an impact of 0.5% on our 2014 business EPS.

On the 1% variation of the yen versus the euro has an impact of 0.1% on our business EPS. So I think with that you have the main sensitivities, which could allow you also to compute the impact of the main two currencies. Of course, the other currencies, each of them have some impact, but it starts to be more complex to compute. And, anyway, it's below the threshold of 0.1% of our business EPS.

I hope that this helps.

Thank you.

So we'll take perhaps just one last question.

Tim Anderson, Sanford Bernstein.

Thank you. I'm sorry, just going back to 2015 -- I'm sorry, the 2014 earnings guidance, some companies just simplify it and give us the impact of all the different currencies at current rates. I'm just hoping you can do that. I've looked at the slide, and it gives us only part of the answer.

The second question is, historically, Sanofi has done a lot of acquisitions over the decades. You haven't done much since Genzyme. I'm assuming some of this relates to the L'Oreal situation, but if L'Oreal ends up not going through, you end up not buying that stake, why wouldn't you look and potentially go out and pursue larger targets?

So in areas like consumer health and animal health, we've got assets up for sale by some of your peer companies. I guess one of my questions is, what's your penchant for acquisitions in those two areas, and why not potentially go larger, because that's certainly been part of the growth strategy over time?

And then, last question, on U300, is there -- can you kind of assure us that there's really no regulatory risk at this point with that product, whether it's on CV safety or manufacturing or anything else? It seems like that's one of your more important near-term products here.

Yes, let me just take the two last ones and then ask Jerome about the FX. I would say first of all, the L'Oreal situation is not really weighing on acquisition strategy. I think I've been pretty clear over the years. My first priority is to invest in the business, but it has to be invest profitably in the business.

The real problem has been is that I've seen plenty of opportunities to make someone else's shareholders wealthy. I haven't really seen that many opportunities where I can create value for Sanofi shareholders. We have been pretty rigorous on our return metrics. Accretion is not enough to do a deal for us. It does have to meet return-on-investment criteria. We're also in a situation where I think organic growth is pretty good, and so I'm not really looking at something to say, well, I've got a gap here or there.

It is true that there are some assets that appear to be in play. It's not clear that they are all for sale. I think there are some people who want to do swaps, it seems, and there are some who may be selling.

On animal health, we're reasonably constrained because of antitrust. We obviously look at everything, and we're not really inhibited by it. There are some other antitrust concerns on some other areas. But yes, if we can do a deal that meets our return on investment criteria, that is within our existing perimeter, then that is our first priority. The question is always can you get a deal done at the right price?

And even, as I say, it's not really clear whether L'Oreal even sells the whole stake. And certainly, that level of acquisition of shares doesn't really inhibit us on any of the other deals that you're talking about anyway, Tim. So I wouldn't want to put it in a position where we absolutely have to wait to see what L'Oreal was going to do before we move on anything.

We are forging ahead in the way that we've always done. We have a very active team. It is true that we have not done a number of the deals that others have done. We have looked at them all, and we just felt that, as I say, they didn't meet our criteria.

But we have been historically a company that has grown by acquisitions, would like to continue to be that, but again, I think we're known as disciplined. On U300, I think we told you as much as we know and can say. We've give the hot headline information. More of these studies will be published at upcoming congresses.

Remember, this is a concentrated form of insulin glargine. The main benefit of this is that really, because of the concentration, the [depot] degrades at a different rate, so that's why you get a different PKPD profile. But from a molecular point of view, we at the moment are of the impression that basically, the safety profile of Lantus carries forward.

We would believe that the ORIGIN, for instance, data that is currently in the Lantus label could transfer over to the U300 because of that. So as much as we know, we've been able to disclose. You know as well as I do that in science nothing is ever 100%, and I don't want to give an absolute guarantee that nobody could give, but from where we sit today, we've told you what we know.

Just on the FX, Jerome, on Tim's question.

Well, Tim, I was wondering, if we see -- if by going further, we would be more precise, but I will give you a further -- so, A, once again, if I look at 2013, 90% of the exchange rate impact is coming from the US dollar and the yen. So this has been the main impact.

Now, I've tried to make a calculation, assuming that all other emerging market currencies would have been at the level of December 2013 instead of being at the average level of 2013. Of course, here, I assume that all currencies are moving in the same direction, which of course won't be the case in 2014. So if we assume that, altogether, the impact is in the range of between 1.5% or 2% of the profit.

So, in other terms, if you move all the exchange rate from where they were on average 2013 to December 2013 for emerging markets, the EPS would have been somewhere between 1.5% and 2% lower than what we believed.

And in fact, we've seen the yen strengthen a little bit. So I think, quite honestly -- I think all we can really do is tell you what the sensitivity is, as Jerome has done. We'd be happy for suggestions, and perhaps we could take it offline sometime, Tim. We'd be happy to make it transparent. There's just a risk of confusing people more about it, but predicting where that could go is obviously difficult for all of us.

Thank you everybody for -- I apologize for having gone over, but given the interesting questions, we decided to extend the session. I think 2013 had certainly bumps. Really, it was the Brazil situation and the Toronto situation.

I think the fourth quarter has shown that we have been able to address both of those issues. I think the fourth quarter -- not only the fourth quarter, but September sales, were largely in that, so we've got four months of performance.

Now, four months of performance is no more than four months of performance, but I think you saw very good growth, again, in emerging markets, saw very strong growth in diabetes. Genzyme performing extraordinarily well, our consumer business I think performing well. We would expect a much better performance out of vaccines.

First quarter, as Olivier had mentioned, remember that there was an extraordinary situation where we were actually able to still continue to sell the flu vaccine in the US in the first quarter, which is highly unusual. But I think if you look at it for the whole year, we're going to see a much better performance out of Sanofi Pasteur, and I think the same is true of animal health.

We're already rolling out NexGard. We'll be rolling out Broadline, and a lot will depend still a little bit, to a degree, on the seasonality, but I think we've got not only those two products coming along, but actually there are another 10 or so new products coming along in animal health, as well.

So pretty much everywhere we look, we've got innovation going on in our portfolios, including consumer health, where we've got the Nasacort switch ongoing. So we're looking forward to a much better year in 2014.

We've got guidance for the early part of the year, and of course, what we would traditionally do is give you an update, as appropriate, at the half-year point, as we've looked at the first six months' results.

So I thank everybody for listening, and we'll see you all soon on a road show somewhere in the world. Take care.

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