Sanofi SA (SNY) 2014 Q1 法說會逐字稿

Ladies and gentlemen, welcome to Sanofi first quarter 2014 results conference call. I now hand over to Mr. Sebastien Martel, Vice President Head of Investor Relations at Sanofi. Sir, please go ahead.

Thank you. Good afternoon and good morning for those in the US. Thanks a lot for joining us today to discuss our Q1 2014 financial results. As always, I remind you that the slides are available on the investors page of our website at www.sanofi.com.

Before we begin, as you can see on slide 2, I'd like to remind you that the information presented in today's 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 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. With us today are Chris Viehbacher, our Chief Executive Officer and Jerome Contamine, our Executive Vice President and Chief Financial Officer. First, Chris will discuss key highlights and then Jerome will review our financial performance. Chris will return and make concluding comments and then we'll take your questions. We also have Dr. Elias Zerhouni with us. Dr. Zerhouni, as you know, is President of Global R&D. He will be us for the Q&A session.

With that, I will turn the call over to Chris.

Thank you, Sebastien. Hello, everybody. So we'll start off with the key highlights for the first quarter. We had top- and bottom-line growth in line with our expectations with sales up 3.5%, business earnings per share up 5.8%, all at constant exchange rates. Jerome will take you through the exchange rate impact, which of course continued from last year which will likely continue at least until into the first half of this year.

New product launches, Nasacort Allergy 24HR, for those in the US I hope you're seeing it on the shelves in the pharmacy, it's going extremely well. NexGard, the chewables in the United States is also going extremely well, mostly just in the south of the United States obviously because of the weather but I see the stocking has gone well in the first quarter as well.

We have, I think, some extremely strong progress in our R&D pipeline. And in fact, inside the Company significant effort is going on to ramp up all of the launches that are facing us really starting from the second half of this year. We'll talk about the dengue vaccine results from yesterday, but obviously a lot of significant advances with Lemtrada, alirocumab, LixiLan and dupilumab.

And finally, our open innovation model was strengthened. We've strengthened our collaborations with Regeneron and Alnylam. And we have two new collaborations with UCB and SK Chemical.

So if we look at sales, pharmaceutical sales, which is essentially everything but the vaccines and animal health, which is how we present the numbers in the actual official accounts, pharmaceuticals were up 4.7% at constant exchange rate.

We see a decrease of 4.2% at constant exchange rate for vaccines. That is not a continuation of the supply issue. That's really just a number of timing issues of Pentaxim going into emerging markets as well as some one-off sales in the prior year. You may remember that the flu season actually continued quite late into the first quarter in the United States last year.

We not only have been able to address the issues in Toronto and Marcy-l'Etoile near Lyon but we've actually just received official confirmation last night from the FDA that we have addressed all of the concerns raised in their warning letter and that therefore the warning letter has been officially lifted. And that's the result of the very strong effort that we have taken to really go after those issues that have caused us difficulties last year.

We would expect vaccines to be probably flat in the second quarter, again largely because of timing issues and comparison to last year [within] significant growth in the second half of the year.

The animal health business is actually performing quite well. The NexGard launch is off to actually a very strong start. It's down 1.6% principally because again of the comparator period, one of our competitors had supply issues last year with Sentinel which led to higher sales of Heartgard. When you actually look on a like-for-like basis our animal health business is actually back to a slight growth, and we expect that business to be growing for the course of the year.

If I look at -- now if we look around the world how are we doing, emerging markets grew at 5.5%. Actually here again the pharmaceutical business actually grew at over 8%. This is largely around those -- the timing of those Pentaxim sales of vaccine in emerging markets. This is just a function of emerging markets, so when the timing of tenders occurs and the like and timing of shipments it's not as smooth. So there is nothing in particular but it does have an impact on the overall growth.

You can see that Latin America is growing strongly at 13%, Asia at 4%, this is where most of the Pentaxim was occurring, but Asia is growing at double digits without that effect as well. And Middle East, EU, Russia, Turkey and -- is at 4%. Africa is around timing. Largely in North Africa this is just around some timing of price, pricing of governments and therefore shifts in distribution patterns.

US growing strongly at 7.5% largely driven by our diabetes business, Western Europe actually flattish, actually a good result for us in Europe. And the rest of the world is largely Japan and that's related to the price -- to the generic -- the genericization that we saw already last year.

So if we look at the growth platforms, really growing at 7.9% reaching 73.7%. And this is the benefit of the emerging -- of the growth platforms. You're always going to have something going on whether it's timing of vaccine sales or some of the animal health or some of the emerging markets. But actually if you go back the last several years these businesses have really been growing between 5% and 10% every quarter. And the whole idea of these is that in this business you're always going to have some things that are going well and some that are not, and that they balance out and achieve really the medium-term growth in sales that we have always said we would be able to achieve.

A couple of points on diabetes, there has been a trade shift with some of the wholesalers in the US. This is not just affecting us; there has been a couple of others. These are largely as a result of new distribution agreements that were already signed last year. This has led to lower inventory levels in a couple of big wholesalers. That effect on Lantus in the US was about EUR70m. That was an effect but nonetheless it's still -- diabetes grew at 13.2% worldwide.

And again very strong sales of Genzyme, particularly happy with continued growth in the market share for Aubagio. Some of the feedback that we are hearing from the AAN actually just this week is that now that Tecfidera has been out there for a week it's still a very successful product. But I think a number of physicians are seeing an unexpected number of breakthrough cases in MS, which really goes to show that in this oral space I think there are going to be -- there is going to be a space for multiple players.

If we look at now new launches for the quarter, Nasacort, you can see it's the first and only 24 hour full Rx strength nasal allergy spray available. It's -- this is extremely important for a number of allergy sufferers who aren't able to be satisfied with tablets. Obviously this is a huge market and growing with 60m people. So we've got EUR36m sales in the first quarter, a lot of that in stocking and of course this is really the prime season for allergy medicine today.

And down below you see NexGard. This is the successor to Frontline. Frontline is a product where you drop, have drops on the back of the animal's neck to protect it for treating fleas and ticks in dogs. This is a chew that you can give to your dog once a month. It's very easy you just toss this to the dog and the dog -- it's beef flavored and so the dog eats it pretty quickly. And it just is a whole lot more convenient for customers, in the US EUR23m sales in the first quarter.

Now we come to dengue, and I'll just spend a quick minute here on vaccine efficacy. Vaccine efficacy is not the same as in medicines because obviously you get protection directly through the vaccine. But what we are really trying to do is eliminate a lot of these infections by reducing the number of people who can infect others. This is a disease that is transmitted from human to human by a mosquito. And obviously the more people you vaccinate the fewer people that are who can infect others. And so actually the FDA establishes a minimum efficacy level 25%, so now you can see that the 56% is pretty good. And when you actually project this over time with regular vaccinations you can see that the pool of people who can affect others is going to grow.

Now this is particularly important because the mosquito doesn't really go very far. One of the most interesting things about dengue versus malaria is that this is a disease that you find in a lot of big cities. Malaria is out there in the countryside, dengue is actually in major cities so we are talking the Singapores, the Sao Paulos, the Rios of this world. And that's important for a couple of reasons.

First of all, in cities people have much easier access to care and therefore an ability to be vaccinated. Secondly this is where the hospitals are. When you have a dengue epidemic this fills the hospitals. You got people in the aisles, in the corridors and this is a huge burden on the healthcare system. Third, this is where the jobs are and this is where the income levels are, so you're going to have both a public health motivation but you'll have an economic motivation actually to vaccinate.

So this is just obviously the first Phase III study. This was 10,000 children in Asia. And we've got a second one going on in Latin America. 20,000 children and adolescents. Remember dengue is really something that affects people up to the age of 25, and it's really amongst children that we see the most number of deaths in dengue.

So we expect the results of the second trial in the third quarter, and an ability to file sometime towards the end of the year, possibly at the beginning of 2015. This vaccine is really going to be a major weapon in the WHO objective of reducing dengue mortality by 50% and morbidity by at least 25% by 2020, so really within five years of the launch of the dengue vaccine.

Now if I move along to a couple of other products, Lemtrada, as you know we received a complete response letter at the end of 2013. At that time we said that we would appeal that decision. This is a product that has been approved by over 30 countries in the world and is clearly demonstrating and continues to demonstrate valued and important therapeutic advance for patients.

Before you can actually launch an appeal process you go back to the division and you have a discussion with them about the consent decree letter and you consult about the process going forward. Now that discussion we consider to be sufficiently constructive that we decided that at this time we would not initiate an appeal process but that we'd make a resubmission in the second quarter of this year. Under the FDA rules then the FDA will take a certain time to review that file. If the file is acceptable then the FDA will either review this on a two-month timeline or a six-month timeline. Today we don't know which timeline the FDA will pick but that is what the process will be.

If we look at alirocumab we've presented positive Phase III monotherapy trial results. We'll have nine additional Phase III top line readouts. Here's just a couple of thoughts for all of you, because reading some of the notes I'm seeing a number of interesting things out there. First is a lot of people really are not understanding or not being able to figure out really what is the potential before the cardiovascular outcomes trial. Obviously we won't know until we get there, but here is a few things for you to think about.

If you look at Amgen's statin-intolerant trial, and we can certainly confirm that the number is very similar in our own statin-intolerant trials, people who are on Ezetimibe came into those studies as statin-intolerant with a baseline LDL cholesterol of 190. So over twice the recommended level of LDL and that's on top of the Ezetimibe.

If you are looking at people who have already had a cardiovascular event and still have high cholesterol, I think what we are seeing in our market research a high propensity to treat patients with something else, and of course then you have the familial hypercholesterolemia population. So this is all before you see the outcomes trial.

So our view is that I think we are going to see actually very strong interest in the product. We are seeing a side effect profile that today as far as we've seen is pretty benign and obviously some extremely important reductions in LDL cholesterol. And I think if you ask most cardiologists most of them will certainly continue to believe that reducing LDL is a good thing for patients.

On LixiLan this is our combination with Lyxumia and Lantus, we are actually slightly ahead of where we thought we'd be. So we have now initiated two Phase III studies in the first quarter of this year, one in patients insufficiently controlled on orals and a second one in patients not at goal on basal insulin.

And we also have Dupilumab our IL4, we had strong Phase IIa results in atopic dermatitis that we presented back in March. We should have Phase IIb results in atopic dermatitis in the second quarter 2014 and asthma in Q1 of 2015.

I will just tell you that I happen to have had the pleasure of attending a meeting with some experts in atopic dermatitis, both of whom actually described the results in the Phase IIa as 'mind blowing'. This is the first time that any drug has demonstrated any benefit in pruritus or the itching and the scratching. And in case some of you actually think that this is a benign condition I learned actually from some of these experts that we have patients in severe cases who actually commit suicide because of this disease. The patients in this Phase IIa study who are on average 37 years of age have suffered from this disease for 30 years and had over 50% of their body covered with eczema.

So this gives you a sense of not only the significance of the condition, clearly there is no real treatment today so no real market, but we are starting to see I think not just from Sanofi but I think from a few other companies some real innovation coming along in products and we are certainly excited about these.

Now if I move along to Regeneron, as you know we had renegotiated the governance agreement with Regeneron in January. We have been able to reach 20% of the ownership in Regeneron. We have nominated and the Regeneron Board of Directors has accepted Mr. Robert A. Ingram, Bob Ingram as a member of the Regeneron Board of Directors.

Under IFRS, this provides Sanofi with the conditions to achieve significant influence, and that means we will be accounting for the investment in Regeneron using the equity method from April 4, 2014. And I'm sure Jerome can tell you more if you're interested in some of the details behind that.

I think the other one was back in January we extended our collaboration in rare diseases with Alnylam. This is, of course, in RNA interference technology. I think it was clearly some investors posing questions because Novartis actually pulled out of their collaboration with this.

And I would point out that really I don't think it's a question of judgment of Novartis versus Sanofi. I think the real interest is that in this type of technology rare diseases really lends itself to evaluating this technology. And it was really because of Genzyme's expertise in this both in the understanding in the marketplace but also a lot of the science behind rare diseases that really made this an ideal way to really develop this technology.

And in fact I think there are two areas in the world, one is oncology and the other is rare diseases where we are really seeing a lot of the ground-breaking, cutting-edge science being developed. And here of course you've got some much more clearly genetically identified targets here that lend itself really to this type of technology.

We have expanded our collaborations in the first quarter first with UCB in Belgium. Here we have a strategic collaboration for oral anti-inflammatory products. And we are going to be focusing on some of the diseases that you see on the slide with rheumatoid arthritis, ulcerative colitis and Crohn's disease.

And the other is extremely important for us with SK Chemicals in Korea. This is a long-term strategic cooperation to co-develop an innovative pneumococcal conjugate vaccine. And this is interesting from the point of view of being able to complete our own vaccine portfolio, but this is also -- provides us access to some new manufacturing capacity so that we actually will be able to produce as well as develop the product through SK.

A lot of news flow coming through the year. We expect the pre-qualification from the WHO in our Shan5 pediatric vaccine imminently. This is Shantha in India. This was our strategy a few years ago to have actually a low-cost, high-quality vaccine portfolio. Out of the 110m babies born every year, 100m are born outside of US, Europe and Japan. We would not be able to access that population without Shantha. We redeveloped that vaccine and we now are -- expect to be back in the game this year with this pre-qualification.

We expect news on Cerdelga. This is eliglustat in Gaucher disease. This is the oral for adults. Lemtrada we talked about, we have the QIV ID in the US towards the fourth quarter in time for the flu season.

And then we've got a number of other regulatory submissions, we've got -- obviously we talked about Lemtrada. Toujeo is our brand name which we -- it's a provisional name that we will file with for our U300 product. We'll be expecting to confirm submission sometime in the second quarter both in US and Europe.

We have our hexavalent PR5i in the US. Alirocumab as we've talked about. We will be ready for filing certainly by the end of the year in both the EU and the US. As you know for the EU it's pretty straightforward. The US is gated on the progress of the Odyssey outcomes trial and discussions with the FDA. And since those discussions are ongoing we really can't give you any more precise guidance at this time. Nonetheless we would expect the US regulatory requirements will be consistent for different products in the same class.

So dengue vaccine we talked about and the others, so you've got quite a strong news flow with some more Phase III starts towards the end of the year. We've got more LixiLan, we've got Dupilumab and we've got a Rotavirus vaccine from Shantha starting in the fourth quarter.

Finally in terms of returns to shareholders, we have been buying back shares on an opportunistic basis. Largely, the tremendous increase in the share price over the last two years really meant that we had an awful lot of exercise of share options which had not been exercised during many years of lower share price.

We have moved away from options and gone to restricted share units, but that's meant that a lot of the buybacks have really been absorbing some of the dilution of those. The buybacks that we've done for the year to date are EUR583m, have largely been without any dilution from share option exercise so they will actually help to reduce our outstanding share count.

With that, I'll turn it over to Jerome.

Thank you very much, Chris. Good morning, good afternoon, everyone. So I now turn to slide 18. So as you can see from this slide, we've seen that already, we have delivered both top-line and bottom-line growth at constant exchange rate which were in line with our expectations.

We have posted sales of roughly EUR7.8b, slightly more, up 3.5% at constant exchange rate. And the business EPS being EUR1.17, here again up 5.8% at constant -- on a constant exchange rate basis. However, we are negatively affected by the strength of the euro versus other currencies in the first quarter, and I will then explain more in detail the currency impact moving to the next slide.

So the slide 19 we clearly see for another quarter the strength of the euro which continued to -- throughout the quarter to impact both our sales and our profit. So it impacted our sales by 6.2% during Q1 and at business EPS level we experienced a negative currency impact of 9.1% in the quarter.

Currency impact on sales in the first quarter were of course primarily due to the US dollar and also the Japanese yen but also emerging market currencies in mainly the Brazilian real and the Russian ruble.

Assuming, and this is important, assuming Q1 2014 exchange rate would remain at the same level for the full year 2014, so if I assume that just the exchange rate for each and every country which we record here remains the same for the full year as it has been doing the first quarter, the negative FX impact of the 2014 business EPS would be approximately 6% i.e. around EUR0.30.

So as you can see, we have an impact of EUR0.11 during the first quarter and everything being equal we expect this impact to continue to be roughly speaking the same in the second quarter and then starting to diminish, based on the lower reference, for the impact during the third quarter, everything being equal, could be in the range of 5% instead of 9% and in the fourth quarter should be between 2% or 3% i.e. around EUR0.03.

If you need some additional information on foreign exchange sensitivities to key currencies and help refine your model, you invite you to use the slide 38 in the appendix of our slide deck which gives more details. I would be of course happy to comment if you have any further questions.

So now I move to slide 20. Looking at the gross margin, we saw a sequential improvement in Q1 2014 versus the last quarter of 2013. The cost of sales in the first quarter was EUR2.5b, up 4.3% -- percentage points at constant exchange rate compared to last year at this time.

The cost of sales ratio for the Group was down 0.5% from last year, reflecting a positive impact of 0.4% at constant exchange rate due to enhanced margin of our growing pharmaceutical business including Genzyme and diabetes.

However, against this positive trend we saw an offsetting impact of the gross cost of sales ratio of 0.3% from each the vaccine and the animal health business. Specifically lower sales, low sales as traditionally in the first quarter of higher margin vaccines as compared to last year was responsible for this impact in addition to the decrease in Frontline sales at Merial. Unfavorable currency variations contributed slightly negatively as well.

For vaccines we continue to endure some manufacturing costs in Q1 related to the resolution of our supply issues. And Chris commented earlier today that we've got that lifting of our -- of the warning letter. And those costs will continue to impact the following quarters as they have been partly capitalized and you will see it progressively the unwinding of that and improvement over the coming quarters.

We continue overall to expect that our cost of sales ratio will improve at constant exchange rate on a full-year basis for the full year 2014 versus 2013.

I now move to R&D expenses, so once again you can see that we continue to control our R&D expenses and be very selective. We control these R&D expenses rigorously, while increasing investments in activities relating to our multiple Phase III trial programs at the same time.

The significant increased investment in late stage trials was partially offset by the completion of our large Fluzone high-dose study in the third quarter of 2013 which contributed to lower R&D spend on a comparative basis in the first quarter.

Consequently, R&D expenses were EUR1.1b, slightly up by 1.1% over last year which is in line with the guidance we provided at the time of the full year report last February.

I now move to SG&A which is the next slide 22, we see that SG&A expenses increased slightly by 2.5% here again on the constant exchange rate basis in the first quarter reaching a little less than EUR2.1b. This is a modest increase which is spent largely in the commercial investment in our product launches, specifically for Aubagio but also to prepare for Lemtrada in the multiple sclerosis franchise as well as for the launches of the Nasacort OTC, or next generation flea and tick products NexGard.

So overall I want to point out that the modest increase in our SG&A spend in the first quarter remains lower than the percentage increase of sales on the top line, which is within the guidance parameters that we communicated here again in February.

Now I move to slide 23, so I'm looking at the lower part of the P&L. Again I highlight the business EPS up 5.8% on a constant exchange rate basis, consistent with our full-year guidance. Net financial expenses decreased to EUR76m compared to EUR140m in the first quarter of 2013. This includes a capital gain of EUR41m associated with the partial sale of a financial investment.

Our tax rate was 25% in the first quarter. We can now confirm that our tax rate for 2014 will be around 25% i.e. in the low end of the range which was provided last February. Also referring back to Chris's comments earlier during this call we can see the slightly lower average number of shares outstanding in the first quarter, slightly less than 1,320m.

Of note, as of April 25 just now we have bought back shares for a total amount of EUR583m. All this share buyback took place since the full year release at the beginning of February.

I now move to the slide 24, where I am very pleased to report there is an increase in the free cash flow by 20.6% up to close to EUR1.4b after CapEx expenditure. Clearly, this is a good result in the circumstances and the reasons for this is due to good management of our cash flow and the better management of our working capital spread evenly across inventory, receivables as well as payables.

As you can see on the right side of the slide, our net debt has slightly increased to EUR6.7b. This is of course a result of the investments we did in the acquired -- acquisition of the extra shares we acquired in Regeneron as well as the acquisition of our stake in Alnylam. The total amount amounted to EUR1,556m.

Maybe for precision by the end of the quarter we had bought back EUR355m, but I confirm that we continue to buy back shares. This is why I gave the overall figure of EUR583m which is valid by April 25.

I remind you also that we are going to pay the dividend of EUR2.80 per share which will be proposed at the upcoming AGM on May 5, which would represent around EUR3.6b expense to be paid on May 15.

I now turn to the next slide which gives some comment on the Regeneron relationship on the financial side, so we have [led] here some details regarding our intrinsic investment in Regeneron demonstrating clearly the growing importance of this relationship.

As you know, Sanofi has recently reached 20% ownership of Regeneron's outstanding commons stock. And we have nominated a member who was appointed to the Board of Directors of Regeneron and which now allows us to account for our investment under the equity method of accounting and precisely effective as of April 4.

Importantly, this consolidation of Regeneron financials included some differences between US GAAP and IFRS accounting standards, primarily related to deferred tax assets on revenue recognition. Going forward, the accounting for the Regeneron investments will lead to changes in our income statement as well as our balance sheet.

On the income statement we will recognize the contribution from Regeneron on the line share of profits of associates as expected. On the balance sheet we will consolidate our ownership in Regeneron as an investment in associates.

So following these changes in accounting for our investment in Regeneron, Sanofi's business net income is expected to benefit during 2014 by approximately EUR45m, that is three quarters based on Regeneron consensus estimates. Of course, these consensus estimates are in US GAAP but we are going to consolidate under IFRS.

So with that I will now turn back to Chris to conclude.

So we've had a good start to the year with results in line with expectations and guidance. I think we are making significant progress in key pipeline assets. We continue our collaborative model. And we continue to be attentive to shareholder return. As you may remember the dividend will achieve a 55% payout ratio for 2013. And we have continued the opportunistic buyback of shares.

So that will -- operator we'll turn it open to questions.

Michael Leuchten, Barclays.

Thank you. It's Michael Leuchten from Barclays. A couple of questions please, one on Lantus. The EUR70m that you mentioned can you just clarify is that the net change in Q1 to -- last year to Q1 this year or is that a high inventory level that's carried in Q1 where a low inventory level occurred in Q1 and hence will wash out.

Then related to that U300 filing strategies US versus Europe and also the related regulatory requirements around that particularly in cardiovascular side effects, if it is an NDA in the US?

And then if I could tempt you on dengue the press release was fairly limited in terms of the details. A 56% reduction in cases can you just put that into perspective on a regulatory perspective? I understand that this is meaningful from a health economic perspective, but for filing is that enough is that what you need to show? What do the regulators really want to see? Thank you.

So we'll start on dengue which was, yes, the FDA required a minimum efficacy level of 25%, so 56% is a very good result and we expect this to be very filable. Just so we give an idea the Phase IIb study was only around 30% but that was just because the Phase IIb study was a 4,000 patient study and here we had 20,000 patients, so clearly you've got an awful lot more patients and you can really understand the statistical significance of where we are in the vaccine.

What was the second question on the cardiovascular? I didn't get that.

On Toujeo whether or not we will need the cardio --.

Oh, yes, no we won't -- we have definite -- we've had definitive FDA guidance that we will not require a cardiovascular outcome study, remember we did the --

Unless there are -- yes, this is Elias Zerhouni. I mean as far as the cardiovascular outcome study for Toujeo it's not what we expect. We know for sure that the FDA is looking at Lantus as the comparator. And so as far as -- all of our interactions have been with the agency there is no expectation to conduct a cardiovascular outcome study in the US.

All right, so on the inventory thing, Michael, it's -- there was a higher inventory level last year and a lower inventory level this year because of the stocking, the difference being the EUR70m. So it's about 60% related to the higher inventory level last year and 40% related to this year.

Thank you.

Vincent Meunier, Morgan Stanley.

Hello, gentlemen, thank you for taking my questions. Starting with capital allocation there is currently a wave of M&A in large pharma and also a shrinked grow approach which seems to be more trendy currently. What do you think about this, and would you still prefer diversification and then in which area?

Then I have a question on alirocumab. You said that in the US the FDA is likely to have the same position for the different products in the same place with regards to the requirement of the CV trial. Can we assume that if Amgen files and the filing is accepted then Sanofi will be ready to do it almost immediately or will it take a few months for you to prepare the dossier?

And the last question is on the buyback. It seems that now the buyback is becoming more regular and is it still then an opportunistic buyback or is it switching towards a more classical and sustainable program.

So just on alirocumab, it's difficult to compare exactly to where Amgen is at -- the only thing we would say is that from what we understand there is no real reason to suggest why we would be ahead or behind Amgen at this stage. So we would expect that these are on roughly the same timeline as far as we can tell from public explanations by Amgen.

There is an awful lot of elements you can go into here, but we'd prefer at this stage not to do that. We'd just -- there is the outcomes study and the discussions are ongoing so we'd prefer not to be any more precise.

Going back to capital allocation, I think I said this morning to the press I think there is -- the transactions can be grouped into two different camps. I think you've seen some companies -- and this has been building for some time, I've certainly heard it on the road myself from investors that there are some companies who are diversified in terms of having a number of different businesses, but which don't have critical mass.

Also if you start looking at what is the percentage to total sales of some of these diversified businesses you see that there is actually some pretty dramatic differences. I mean if you look at Lilly for example 90% of its business is in pharma and Elanco really only represent actually less than 10%. With the acquisition of the Novartis business it starts to significantly increase as a percentage of total sales and this will of course be accelerated by the fact that the pharma business at Lilly is declining but it's really a 90%, 85% to 90% pharma company.

If you look at Merck, Merck is a little bit more diversified. I think if I remember it's probably 75% pharma and 25%. Now you contrast that with a Novartis and a Sanofi, my calculations are that roughly 55% to 57% of Novartis prior to its divestments were pharma, Sanofi is about 62%. So we are kind of a different position. We have a much greater percentage of our assets and sales base actually in more diversified businesses.

Now Novartis is a little different because it has significant presence in ophthalmology and generics and therefore it had two businesses in OTC and animal health that really weren't contributing to the overall diversification of the company. And I think certainly looking at their animal health business was something in sub-critical mass and although the OTC business is a nice size it really was not going to ever move the needle on a Novartis.

And so I think what you've seen is a way for Novartis to participate in a bigger OTC business, although it didn't want to abandon in any way the diversification but have a little bit more critical mass and then to say, okay, let's sell off the animal health business and then that was -- and enabled them to have some more cash to go buy an oncology business which was more in their core business.

So you've got an awful lot of what I would call portfolio optimization but all companies are not all in the same position. What I would draw from that is when I look at the prices that are applied in some of these transactions that are being paid and some that are rumored for Merck's OTC business, we could see that these are pretty highly prized assets. So nobody is I don't think walking away from the importance of diversification. I think it's largely a function of how much does this weight in my overall company profile and do I have critical mass in it.

Now if I look at Sanofi we have already a much greater degree of diversification than some of our peers. And we have been one, two or three in each of the markets that we are in. For us to try to do swaps and bring an out, then there's not an awful lot of reason or not the same motivation. We clearly are interested in looking at how we might build up on these things.

So that is really one camp. The other camp is, of course, there appears to be some bigger deals out there, and I think that's going to be driven by, really, other factors. Part of those are pipeline. Some of those might be specific to American tax situations, so I'm not so sure how much of that is going to be a change in the real landscape of the industry.

It doesn't really affect us in any case. We're sitting there as a company with a growth profile out into the future. We've got a lot of new products to launch. We've got really I think a good diversification profile, so we clearly continue to monitor that situation, and we'll look at it, but I don't really see any need at this time to really change what has been our strategy.

Buybacks, we are below our EUR10b target for net debt, and we've always said, our first inclination is to invest in the business, but we can really only do that where we find transactions that benefit our shareholders and not simply someone else's shareholders because we've paid a very high price. So we haven't been able to find those transactions, and so in the meantime, in addition to the dividend, we will continue looking at things like a buyback.

I've always been reluctant to make long-term commitments to buybacks, because it sort of says, at that point, management's giving up on looking at how it can invest in its own business. So it's something that we will evaluate over the course of a year and years, with our own Board of Directors, as we've always said. And that's why we set the EUR10b benchmark. It is not the job of management to accumulate cash on the balance sheet, but equally, I think it's also the job of management to look at growth both internally and externally, and that's what we're going to continue to do.

Thank you very much.

Mark Clark, Deutsche Bank.

Yes, good afternoon, gentlemen. A couple of questions. Firstly, on the dengue, I appreciate that the data is still to be presented at a scientific congress, but is there anything you can tell us on the reduction of hospitalizations, which I think is the key issue. And also, can we impute from the 56% efficacy that it was effective in all of the four serotypes?

And the second question is on animal health. It follows from the previous question about capital allocation. It's sub-10% of your sales. It's a drag on your growth for the last year. Although you think it will return to growth, but my suspicion is it won't match the overall growth of the rest of the business, simply because of the drag effect of Frontline. Is there an argument for divesting, or alternatively, looking to do a Glaxo-Novartis OTC partnership deal here? Thank you.

Elias, do you want to, on the dengue?

Yes, I'll take the dengue question. This is Elias. In terms of the specific results, I don't want to really prevent the publication in a top-notch journal, which journals are really anxious to publish this before the end of this quarter, so the results will be out there. But it's trending all in the right direction. Hospitalizations, definitely down.

I don't want to give you specific numbers, but I think that from our standpoint, this is really a landmark event in terms of developing a dengue vaccine. We'll have to wait, obviously, for the second Phase III, but all parameters are moving in the right direction.

So coming back to animal health, I think when we acquired the other half of Merial from Merck, we always knew that Frontline was going to be a drag on growth in the near term, and you may remember that, actually, when we acquired the other half of Merial, the objective was actually to merge it and create a new joint venture with Merck and really to dilute the effect of Frontline.

Frontline is the only and by far $1b blockbuster in the animal health business. A big product in animal health is typically around $100m, so we have a huge product here. Heartgard is another product which went off patent many, many years ago and which is still I think the fourth-biggest product in the animal health industry, but obviously which doesn't have as much growth.

Now, we've got new products coming in. We couldn't do the merger with Merck at the time because of antitrust, and in fact, it's very limited what you can do in animal health. It all depends on where you are, and vaccines and different diseases, they're not just looking at market share as a company. They get into the granular details.

We don't have IMS in animal health. There's something called Vetnosis, but the actual categories and how you define a market is a lot less clear, and in particular, in Europe, this can be quite challenging. Our approach to animal health has been this is part of our diversification strategy, that actually, as a business, it's much bigger than other people's business. It's not as big now as Elanco or Merck's business, but it still is a pretty big business, and we have a number of new products to come in.

Obviously, this is something that has to contribute to Sanofi's growth over time, and we expect it to do so, and so there's no thought process about doing anything today. If we could acquire something to make it bigger, we would do so, but again, there are quite a number of constraints on this from an antitrust point of view.

Okay, thank you.

Graham Parry, Bank of America.

Great. Thanks for taking my questions. Just kicking off on the Regeneron consolidation, the EUR45m is only about a 1% benefit to EPS this year. If you were to just take 20% of their non-GAAP earnings, it would probably yield more like 3%, so can you just help us walk through what the factors are that bring the numbers down to just a 1% accretion. That looks like it's one-off this year, and perhaps a feel for what sort of accretion you're thinking about in 2015 and beyond?

Secondly, on the Lantus destocking, can you just give us a feel for what level inventories are at now? Are they actually at a very low level, and is that at a level that now stays because of the changes that you were seeing in the inventory pipeline? And also, any comment you've got on rebate pressures, have they turned out to be as hard as you were flagging at the beginning of the year?

And then finally, on Lemtrada, can you just expand on the constructive discussions that you've had with the FDA? Given its emphatic view on non-approval in the briefing documents, what's triggered the epiphany that allows you to actually refile? Thanks.

Well, let me take in reverse order. On Lemtrada, we really can't give you much more detail. It's generally pretty bad form to talk about discussions with the FDA in public, so we've tried to give you factually what's going on but really can't go on into any more detail on that.

Considering -- sorry, what was the second question?

On Lantus inventory.

Oh, the inventory. We're down to 12 days. At the end of the quarter, it was about 14 days, so we're obviously at a pretty low level of inventory, and this is kind of the trend, actually. Obviously, in the industry, there's a question always of how things are managed and cash flows, and so I think we've got to quite a low level of inventory. We'll have to wait and see where that goes. I suspect that over the course of quarters, that could go up and down a bit, but I think it looks like, as far as we can tell, it's washed out.

Rebate, not a significant impact in this quarter. I think it's fair to say that the diabetes market is becoming increasingly competitive, and I think some are pushing harder than others for market share. So far, we haven't seen anything on the horizon that would cause us to change our business outlook for the year, but there's definitely an increased competitiveness in this field.

On Regeneron, Graham, so if I'm not wrong, I'll check what was the US GAAP net profit of Regeneron in 2013. And if not wrong, I think it was $524m. So if it take this net profit, or maybe at, don't quote me, it could be around $500m. So if I take 20% of that, that's $100m. Over three quarters, that's $75m, i.e., in the range of EUR50m plus or EUR55m, so we are very close, in fact, to what I've just mentioned, which are the EUR45m and I've explained earlier the main differences are mainly coming from deferred tax accounting and to a lower extent, the timing of some revenue recognition.

So now, then you need to dig into the consensus for 2014 and see where I gave these EUR45m. But if we look ahead, clearly, the contributions will increase. So if I just take 2015, I will rely upon consensus figures, and I don't have any more information, we should be at least at EUR100m in 2015 on these trends. At least, we'll continue to increase, and of course it depends on the assumptions you take on the P&L on the sale of Regeneron.

Thank you.

Philippe Lanone, Natixis.

Good afternoon, gentlemen. Maybe a question on the emerging markets, because we have a decline in Africa. Is there some specific factor here, and how do you see emerging markets going forward, especially with China recovering?

Second question, on tax, the tax guidance for the year was 25% to 26%, in the lower part of the range, so is there something we can forecast for a year?

And maybe a last question on animal health, because we have a very strong start from NexGard, and there was another product to be launched. Will it be the case in Q2, and when will we see the next launches, because I understand there were others coming? Thank you.

So in Africa, this is really -- it's Algeria and Morocco, principally. There's also a tender in Libya that has changed, so this is all really just one-off effects. There's nothing fundamentally different. We've had solid double-digit growth in Africa over the past number of quarters, and we don't see any reason for that to change.

In general, our emerging markets was affected a little bit by some of the timing on Pentaxim. This is our pentavalent emerging markets vaccine, not produced in Toronto, so it's nothing to do with that. It was just really timing issues.

If I take the vaccines part out of that, sales of pharmaceuticals in emerging markets were up 8.6%, so you can see that emerging markets from quarter to quarter is going to be affected by here and there, and of course we've only got one quarter, so you're going to have more of a quarterly impact. As we start to see a year-to-date impact with multiple quarters, these one-off effects tend to have a little less impact as you go through the year.

I have to say, I've been in China twice this year already. One of the things I keep telling people is that, just because you see a decrease in the growth in GDP doesn't necessarily mean that you see a change in the fundamentals of what drives healthcare markets. One is the emerging middle class, so this continues. Just because growth slows down doesn't mean the middle class stops being created.

And the second is that, you see this in general across emerging markets, a significant migration of people from rural areas into cities. And this is extremely important because not only do people make more money in the cities, not only do people start eating differently and having different activity levels, which causes certain diseases, this is where the doctors and hospitals are.

And you're seeing, actually, quite significant investment in healthcare infrastructure really across most emerging markets, because this is the way that governments are able to convey to everybody in the country that they are benefiting from the economic growth of their country. So I think the fundamentals of emerging markets and healthcare continue to be attractive. You're going to always be subject to, here and there, a government decides to do a price increase -- a price decrease, sorry -- or there's a tender that doesn't get made, or that there's some buying patterns in this market or that market.

But I think, as I look over the year and the coming years, I think emerging markets are a big area. I have to say, when I talk to other CEOs at different meetings, we are all of that view. I don't think this is a Sanofi view. I think most people are of the view that emerging markets for healthcare will be a fundamentally important market for our industry.

On tax, I think, yes, Philippe, as you know, when you start the year, you have to monitor many information to try to assess which will be your exact tax rate, where you will generate profit from a tax point of view and the like. Now, I can confirm that for full year you can take 25%.

And what about -- if I may, 2015, the 28% qualitative guidance, is it still valid?

No, I think it is not changed. It is clear that there is a trend happening. Can we do better? This is something we are working day on day, but 28% guidance remains valid for the timing being.

Okay.

Next question, please.

Eric Le Berrigaud, Bryan, Garnier.

Yes, good afternoon. Three questions, actually. First, if we put together everything that is expected to be better later in the year, a cost of goods that deteriorated in Q1 but will improve over the full year, animal health and vaccines that will improve quarter after quarter, comparison basis in Brazil and China that will get better also in the second half, the stock in Lantus being negative in Q1, Pentaxim delays and the tax rate being lower than expected -- and with Q1 already well in the middle of the range, how could you explain the maintenance of your guidance except that you usually are reluctant in moving the guidance after the first quarter? And also, having some more share buybacks potentially and Regeneron?

Second question, a more general one, as to oncology business, what kind of statement would you make about your position in oncology? Would you say that there could be a future for some pharma companies outside oncology, or you're not pleased with where you are and you would like to find a partner or find a solution to be back into the game?

And thirdly, on Lyxumia, are you happy with the way Lyxumia is going, excluding the situation in Germany? Or would you say that it's taking more time than you expected to make this drug a significant drug for you?

Well, Eric, I think you answered your own question. We've never looked at guidance at the end of a quarter. I think it's always a good idea to -- you give guidance at the beginning of the year, and you look at things again in the midyear. There's still lots of time left in the year, and I think it's good to have a better sense of it, so the guidance that we gave a few weeks ago is still valid.

And if you look at oncology, oncology I think is an extraordinarily interesting area. We recently had a look at it internally. The classical oncology market is not going to go away anytime soon. That's absolutely clear, but I think we are seeing a real, I think, tectonic shift here in how cancer is going to be treated.

We are seeing for the first time, with immunotherapy, an opportunity to actually cure some cancer patients, and we're really just at the beginning of that. So you've got a CTLA-4 with Yervoy that's first out there. That really can help 6% of patients, according to clinical trials. You've got the PD-1 class coming along. That would appear on cancer types such as melanoma, non-small-cell lung cancer, renal cancer, to have benefit of about 10% of patients.

Then, obviously, there's going to be thought processes around combinations of these so-called checkpoint inhibitors. Then you've got other types of transfer cell technologies that are coming along, so I think the cards are going to be redistributed here in oncology, and there's an opportunity to be involved in it.

We actually happen to have a portfolio of assets that I think will allow us to play in this market. We're not going to talk about those today, but I think we do feel that we could with some existing compounds get into this.

We also have our anti-CD38, which is looking very good. We've got some new data coming on with Jevtana. We've got a EUR1.5b oncology business. This is not the size that it used to be, but it's already bigger than the business that GSK just sold. It doesn't have the same growth opportunity as GSK's business in the near term, but I think with immunotherapy and an ability to get into that, I think we are developing some real competencies in immunology as a company, not just in oncology but in other areas. So I think for us, oncology is an important area to be in.

On Lyxumia, obviously, this is a European launch to start with. We've had good success in Japan, and our market share across Europe, depending on where we are, is anywhere from 10% to 20%, so yes, actually, we are on track.

Clearly, the situation in Germany is something that has frustrated a number of companies. You've got an AMNOG law that suddenly subjects some new products subsequent to that law to have to be evaluated in a way that products in the same class, reimbursed before that law came along, didn't have to be submitted to.

And the curious thing is, in true German style, and speaking as someone with a German passport, there is a very black-and-white view to this. And oddly enough, you can even propose pricing less than existing products in the same class, but they are absolutely geared to looking at some other comparator versus actually drugs that they're already paying quite an awful lot of money for. It's a very non-economic way of looking at things, but there are certain rigidities in Germany.

The big opportunity is clearly going to be in the US, and we are racing to finish our safety study and to be able to file next year.

Japan, we've got about a 12.5% market share. Mexico's in there at around 16%. We'll expect to be launching in France in Q3. So, obviously, it would be a whole lot nicer if you could launch in the US and then get Japan and then Europe, but we've kind of done it in reverse order. But, yes, I think everything we're seeing is we're very happy with the progress of Lyxumia.

Thank you.

Peter Verdult, Citi.

Hello? Hello?

Yes, we can hear you.

Hi, sorry about that. It's Pete Verdult here from Citi. Chris, just a couple, for you in terms of that capital allocation. I know we've touched on a few of the points. Your communication on M&A has been pretty consistent over the past years, and you've reiterated it again today. Yet, at the same time, you're sitting on one of the stronger balance sheets in the sector. I was wondering, given the recent industry activity and attempts by some companies to resist unwanted advances, do you see scope in the current climate to entertain opportunities other than tuck-ins?

And then just one add on to that before you answer it, and I think it's just been asked, on oncology, I'm happy for you or Elias to shoot me down here, but from my perspective, it's difficult to see how Sanofi will still develop into a credible player organically, given the current pipeline and developments elsewhere. So I just wanted your thoughts on that, and then I have two follow ups.

Well, let me just talk about oncology, because there's also -- I'm seeing in some notes around even on the IL-4 in asthma, that there's kind of an attempt to translate small-molecule marketing into large-molecule marketing, and I'm not so sure that that's really going to play.

Generally, for example, in a small-molecule business, there is a huge benefit to being a first entry into the market, and it makes sense when you think about it, because all drugs are relatively inexpensive. We're talking about a couple of dollars a day, maybe $4 or $5 a day. And with small molecules, you're never too sure around the safety profile, and therefore a product that gains position, gains position confidence, is not overly expensive, it makes the hurdle much higher for anyone else coming in as a second and third line.

Now, contrast that with a biologic drug, which is by definition a lot more expensive than a small molecule. A biologic is unlikely, or is certainly less likely, to have some unknown side effects pop up on it.

And so there, I think you're going to be in a model of if you're going to pay an awful lot for a drug and you're not as concerned about side effects, I think you're going to have something that really then depends on efficacy.

And I tell you, I would use as an analog the years I spent in HIV. These were relatively expensive drugs, as well. And when you looked at HIV, actually, the entry in was a lot less relevant than in some other areas.

So whether you're looking at an IL-4 or you're looking at some of these checkpoint inhibitors, I actually think that people coming in potentially with a larger portfolio, ability to combine, could actually have an opportunity to compete. So it's not visible to you today, but I think some of these immunotherapies could move actually pretty fast.

I think if there's an opportunity to do something externally, I think we'd have a look at it, but I'm not sure that we want to go and invest in an awful lot of technology that we think is probably going to be obsolete over time.

When you look at it, all of the things that we have been doing on angiogenesis and targeted therapies really are still only pushing out the progression-free survival. We haven't really seen any curative therapy. This is where I think immunotherapy will over time really become the dominant form.

Now, a lot more has to be designed and, having spent a half day with Elias and some of the (background noise) top leaders in immunotherapy and other oncologists, what we are seeing first -- although everybody's excited about a PD-1 and everyone's excited about a CTLA-4, there are other checkpoint inhibitors. You're still talking about 80% of people dying in this class, because we don't really know why they work with some versus another. And I think that will be decoded over time.

So, yes, I think we are not going to be seeing much evolution, I think, in our oncology business between now and 2018, but I do think you could see some inflection points post-2018 in what we're looking at.

Coming back to capital allocation, the last major deal we did was really Genzyme, and that was in 2011. I think we were the first one to put $20b in cash on a major deal, when everybody was thinking about doing the string of pearls type acquisition. So I think we've demonstrated that where we see an extraordinary value creation for our shareholders, we're willing to be bold.

But I get paid by Sanofi shareholders, not by someone else's shareholders, and so we are typically I think a disciplined house in terms of acquisitions. We'll continue to be that. Equally, if we did see an opportunity that we felt could really drive value for Sanofi shareholders, we have a balance sheet, and we've demonstrated our ability to use it in the past.

Equally, when you think about all the deals that have been done since Genzyme, we have looked at each and every one of those and have chosen for various reasons either not to compete or certainly not to compete at the level that it took to get those deals done. So I always say we're happy to be evaluated not only on the track record of the deals that we have done, but also on the track record of the deals we have not done.

So I think you're going to see some pretty consistent behavior on ours. The guidance we give is basically based on an environment as far as we can see, and what we would be looking at. Should something change in terms of valuations and attraction of other assets, nobody's going to be rigid in how we look at things going forward, but if you ask me today, I can only really tell you as far as what I look at. We don't see anything today that would cause us to fundamentally change how we look at capital allocations.

Operator, we are actually going to take the one last question, please.

Alexandra Hauber, UBS.

Thank you for taking my questions. I've actually got three. Firstly, is there anything in your -- looking at pharma cost of goods, not at Group cost of goods, is there anything special about your product mix in the first quarter that leads you to report always low cost of goods in the third quarter.

That certainly was the case last year. The first quarter 2013 cost of goods were 200 basis points below the average of the year. And now, we're seeing again very, very low cost of goods. Is that something that is sustainable, or are we going to see the same creep of the cost of goods in pharma for the remaining quarters?

Second question is on dengue again. I was wondering whether you could educate us a little bit about serotype distribution of Asia versus Latin America, and also whether that distribution is relatively stable. As in, would it be fair to assume that in the Phase III you actually had a similar serotype distribution -- the Phase III, that we just had the positive headline results, you had the similar serotype distribution as you had in the Phase II.

And third very quick question, just coming back one more time on Regeneron accounting, should we assume that the IFRS number is actually also going to be the number relevant for your adjusted -- for your business net income number? So there's no further adjustments or no adjustments at all of the US GAAP figure to come to the right number, which is your business net income, which is your guidance basis?

All right, let me just say, on Q1, remember, there is a big difference between pharmaceutical manufacturing and biological manufacturing, in that you generally have a big fixed cost in biologics and not very much variable cost. And first quarter tends to always be a small quarter for vaccines, just because the nature of our business.

I was talking about pharma cost of goods. I'm sorry if I interrupt.

Pharma cost of goods?

The same thing in pharma. Even if I take out vaccines entirely out of the equation.

So what is your point that in pharma there --

That the cost of goods is higher in Q1.

It's lower. It's actually lower.

No, actually, it's lower by 0.2%. So on a published basis, the cost of goods of pharmaceuticals is 29.7% ratio in Q1 2014 versus 29.9% in Q1 2013, so it's an improvement by 0.2%, which is of course -- which is a good improvement, and of course, your question is, is it sustainable over time? And I think that this is the type of increment we should see quarter on quarter in the coming quarters.

Now, we need to think that the mix of business (inaudible). For instance, this quarter, we have sold -- we have sold Lantus in the US. If we don't have any more these effects in the US inventory, this would be favorable to the ratio. On the contrary, we have sold more Plavix in Japan, as you've noticed, linked in part to the VAT issue that has led the trade to build up some more inventory, which was favorable to the ratio.

So we tend not to look at the ratio on the quarterly basis too precisely, but I can just confirm that, over time, for the full year, we will see an improvement of the ratio on the constant exchange basis versus last year, all in all, including vaccines and animal health. And, as we know (inaudible) in animal health will exactly follow the path that Chris has described as there as big quarters and the small quarters, and this has some impact on their cost of sales ratio. So hopefully it helps.

So there will be improvement, progressive improvement, and we expect to have the cost of sales to sales ratio to be better on a full-year basis 2014 versus 2013, as we accelerate the paying of (inaudible). When I say better, it's been 0.5, 0.6 -- is it 0.3, is it 0.7? This is a bit where something lies, depends exactly on the pattern of what we are going to sell.

On your second question, US GAAP, IFRS, no. I think that the P&L of Regeneron is pretty stable. So P&L of Regeneron is revenues from cost, pretax profit, impact of stock options and impact of tax. So if you look in detail, you will see that -- because I believe that's your question -- that Regeneron communicates on a non-GAAP US basis which excludes both the stock option impact of the equity remuneration impact, as well as the tax impact.

And if I understand well the reason why they do that is because these two elements are not cash. We communicate after cash or non-cash elements when it comes to tax or anything linked to remuneration, so basically that's it.

So the rest is minor issues, so don't expect a big, significant discrepancy between IFRS figures on business net income figures on this matter, for the very simple reason which I just described.

Yes. I think it's fair to say that the non-cash remuneration items is a practice of most of the biotech sector to do below the line, whereas on the pharma side, it tends to be above the line.

Just on the margins, I think there's been significant effort done on the pharmaceutical side, as we've seen some significant shift in the mix of business to actually achieve efficiencies. Our real next target is going to be on the biologic side.

We've certainly seen some improvement in gross margin on Genzyme as the cost goes down every year of consent decree. The consent decree plan takes us into 2015, and we've been trying to bring costs of that consent decree down every year and have been able to achieve that.

Vaccines has been first and foremost to ensure that all of the issues raised in the warning letter have been adequately addressed, but I think that's going to be the next biggest area for us to really examine over time, as to how we can get a better cost of goods out of our vaccines business and biological manufacturing on a broader basis.

You asked about dengue, so I'll turn that over to Elias.

Yes, this is Elias. So, again, I'm not going to give you very specific answers that could jeopardize the prompt publication of a comprehensive paper. I think we owe this to our investigators. I'm hoping to do this by the end of this quarter, if at all possible, so that information will be given.

But you're asking a very crucial question, was there a difference between Phase II and Phase III, and this is a question that I will answer two ways. One, the Phase III was conducted in the exact same region. In fact, Phase III was started before Phase II was completed, and so there shouldn't be a difference, and I can say that being in the exact same geographic region, there's no reason to expect a difference between the two in the serotype distribution.

But, again, the specific details and the specific numbers I would like to defer to the investigators who are writing the paper right now.

We don't think there's necessarily -- we don't really know until we see the Phase III study as to whether there's a difference between Asia and Latin America.

Right. So that's a good point that Chris is making. Again, I think it's really important to realize that we can interpret confidently this Phase III because it's conducted where we conducted the Phase II, so we have the baseline data. The second Phase III is obviously going to be conducted in eight different regions of the world, and those data obviously will inform us even further about the distribution, but we cannot say that the distribution will be the same in Latin America as it is in Asia. But we can certainly say that it should be similar between the Phase III conducted in the same region as the Phase II.

And I think let's not get caught up in the serotypes. First of all, remember, the FDA -- the Phase III studies were not designed to actually examine the statistical significance of efficacy by serotype, largely because the agency is looking for overall efficacy. Because from a public health point of view, what you're really looking to do, again, is not only protect people but also reduce the number of people who can infect others. And this level of efficacy is extremely important.

All four serotypes circulate, and regardless of whether you've got variations in the serotype, it is really -- public health people are looking at the overall impact on herd immunity and populations.

Most of our investor base lives in an area where dengue doesn't really occur. If you travel to dengue endemic areas, and this could be Vietnam, this could be Singapore, this could be Brazil, this could be Mexico, this could be all kinds of parts of Africa, India -- this is a major, major health issue. When you travel around, when I was at AIPAC last year in Indonesia, you see big signs out, warning people about dengue.

You've got 100,000 cases of hemorrhagic fever in the Mekong Delta. You've got major issues in Singapore with dengue, and because this is particularly in populated areas, you can see a rapid increase in the epidemic area when it occurs.

For us, this is a -- and Elias said it -- this is a major advance in public health in the Southern Hemisphere. Our industry hasn't typically developed drugs for the Southern Hemisphere, but this is a real incidence where we have really tried to address that, and I think that's why you're seeing such strong interest from the scientific community, from governments in all of the Southern Hemisphere, and that's why we're cautious about the results.

We're conscious of our needs to talk about this is a major investment in the Company, but with such strong scientific interest that we really want to make sure that these data have an opportunity to be published in a peer-reviewed journal.

Let me just wrap up here. We're off to a great start I think for the year. Results are, from our point of view, in line with our expectations and largely unremarkable from that point of view. We talked about some of the shifts here and there on some of the inventory, on Lantus. We talked a little bit about some of the shift on timing on some of the Pentaxim sales, but when I look at the business from a management point of view and the way the executive committee looks at this, this is proceeding largely as we expected.

When you're inside of Sanofi, the biggest thing has really been trying to get ready to launch a major new medicine that will take LDL cholesterol to uncharted territory. We're looking at entering into a $20b injectable treatment market for rheumatoid arthritis.

We're looking at making a major difference here in atopic dermatitis and severe asthma. We have Toujeo, which is our next-generation insulin that we'll be rolling out next year.

We've got dengue vaccine, which we'll also roll out sometime next year, making a huge public health difference in an area where there's going to be an awful lot of economic motivation to see this kind of a vaccine come, in the Southern Hemisphere.

We've got a whole new oral therapy coming for Gaucher's disease. We've got a lot of Phase III studies ongoing. We're about to go into Phase III on a number of other programs.

So, for us as a company, this is a big deal. We have not actually launched that many new products in 10 years, and so we have been really building up our capability in this area, but I think in the meantime while we're doing that, we're still demonstrating very tight cost control.

If you look at the number of people that we have been recruiting, the competency basis that we're building in global marketing and market access and data analytics in bringing in a whole different approach to medical affairs because we'll be a much more specialty-focused company, the fact that we are largely a big biotech today -- 45% of our sales in biotechnology, 80% in the pipeline. A lot of these biology products demanding significant attention to biological manufacturing and the need for recruitment -- all of that you're not really seeing in our OpEx, largely because we keep pulling out expenses out of other areas of the business.

Now, as I've always said, we're reaching some limits to that, but I think we have shown that we're able to really build up the platforms to really launch these products without actually putting us off our path on protecting our margins and building the bottom line and not just the top line. But it's certainly -- it's still pretty exciting times in Sanofi as a result of the new products. But launches of Nasacort and NexGard, which I think provide an awful lot of growth opportunity to our consumer business and our animal health business, so we look forward to updating everybody as we go along through the year.

I think we've got some news flow, and we'll talk to you all again at the end of the second quarter. Thanks very much for listening. Take care.

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