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sanofi-aventis (NYSE:SNY)

Credit Suisse Healthcare Conference

November 9, 2011 12:00 p.m. ET

Executives

Paul Chew - U.S. CSO/ CMO, SVP

Analysts

Jo Walton - Credit Suisse

Jo Walton - Credit Suisse

Good morning. It’s my pleasure to welcome from the European pharma team to introduce our sanofi’s speakers today. In view of time, we’ll probably just have a presentation from Paul Chew, the Chief Medical Officer of sanofi - sanofi-aventis these days. And we have David-Alexandre Gros who is the Chief Strategy Officer. Now there are many of you have seen Paul Chew before. I know that a very few of you will have seen David-Alexandre Gros before. I met him for the first time at a strategy meeting in September. He will be able to answer questions in the breakout session but the presentation will just come from Paul Chew. He is a cardiologist who’s worked at Bristol-Meyers and Aventis and at sanofi before his final position as Chief Scientific Officer.

So with that, many thanks to Paul. I will just get – can you – we’ve got Catherine Arnold coming through this speaker set. Thank you.

Paul Chew

Can you hear me with all that going on? All right. I will try to talk fast and loud. Well, thank you very much Jo.

These are going to be forward-looking statements as you know. So I think the main message here is that we’re going over a patent cliff. But despite the patent cliff, total sales were improving. Now you will see the sources of that patent cliff and where the sales are improving. And not only the sales but EPS as shown here at least we discussed at the quarterly results last week.

The patent cliff. This is what the patent cliff looks like by component. And you see that the top one is Eloxatin but unlike the previous patent cliffs, Eloxatin has actually taken a slight uptick as the generic products have been withdrawn due to a court ruling until August of this year. But a significant loss in our products with Eloxatin, Aprovel, Lovenox, Plavix and others.

On the bottom, you can see the percentage of total sales that, that represents. So that while it’s decreasing, it represents a smaller part of our total sales. And why is that, is that because – that’s because we have increasing sales from other sources. Notably you will see that Genzyme has contributed over the last two quarters and as percentage of total sales, our growth platforms in vaccines, OTC, generics, animal health. And Genzyme will become an increasingly larger part of the total sales picture, giving us a more sustainable pattern of growth and they’re freeing us somewhat from the ups and downs of the patent cliffs of the future.

So this is the actual by component, growth in the growth platforms, which is 11.9% in the first nine months of this year. There’s overall growth in all of the segments, except for animal health. The animal health took a technical downturn because of two generic products for Frontline which have been withdrawn and so that will get back to a pattern of growth, I am sure. The innovative products in R&D is also continuing and I’m not going to talk about R&D in some detail, especially for the new products that have been recently submitted to FDA or EMA.

Kynamro is a product from Genzyme. It’s a once-weekly subcutaneous injection for patients who are refractory to statins, who have high cholesterol. And I mean, very high cholesterol. These are patients with genetic basis of hypercholesterolemia. It’s called the familial heterozygous or the most severe form homozygous cholesterol. It's so bad. They need weekly apheresis to scrub their blood of excess LDL.

Why go through that? Because many of these people are dead by the age of 30 because of premature cardiovascular disease. Clearly it’s an unmet medical need, and Kynamro is an antisense oligonucleotide against Apo-B. Apo-B is not LDL. Apo-B is the carrier protein on which LDL sits. Without the carrier protein, you don’t have LDL. So it’s really shooting a horse from under the rider so to speak. But that horse also carries Lp(a) which is an even better predictor of cardiovascular disease.

So Kynamro will reduce this LDL by 30% on average, even despite best therapy. So that has been filed in the EU in July and it will be filed in the next few months in the U.S. This is a company that made its big contribution in anticoagulants through Lovenox. Lovenox is a low molecular weight heparin. Semuloparin is an ultra-low molecular weight heparin. And in clinical studies, it has been shown to have efficacy that is comparable or superior. And in this case, to Lovenox, and in this case, Semuloparin and VTE prevention in cancer patients.

Cancer patients have other problems besides their cancer, especially with longer survival and they have complications with venous thrombosis – painful venous thrombosis, not just in the legs but on the chest, in the arms and it can be a major cause of mortality. And so Visamerin will be the first product to show a prevention of venous thromboembolism in chemo patients, and that was just filed a couple of months ago.

Lyxumia is our GLP-1 agonist – our GLP-1 agonist that’s in phase 3. It has also a companion trial called ELIXA. ELIXA is a cardiovascular prevention trial required by the FDA to show there is no excess risk. It’s required of all new anti-diabetic agents. But Lyxumia will be the first and only GLP-1 with the cardiovascular safety at the time of launch.

Zaltrap, for those of you are here just a few minutes ago, is VEGF Trap in our partnership with Regeneron. Zaltrap has shown an increase in overall survival in patients with metastatic colorectal cancer second line. Many of these patients have been treated previously with bevacizumab. So this is really an important addition to the treatment of patients with metastatic colorectal. And we will, in the next months, have a phase 2 trial looking at the first line results in colorectal, and early next year, first line for prostate cancer.

Aubagio has been filed in the U.S. for relapsing and remitting multiple sclerosis. It’s an oral therapy. It’s reduced both the annualized rate of relapse as well as the accumulation of disability at six months, and it’s a very promising agent, along with its companion product, which is going to be filed early next year called Lemtrada. Lemtrada is a very unique compound because it’s – I think I would say more about that because it’s annual dosing.

So this is Kynamro, the cholesterol lowering therapy. So you can see there is approximately 30% reduction. It’s been shown to be very safe and tolerable. We do have to watch for the potential of liver enzyme elevations but that can be monitored. This is a life threatening disease. And so I believe that the benefit risk is a positive for this therapy.

Semuloparin in the cancer patients preventing venous thromboembolism, a major cause of disability and the excess mortality. You can see the clear benefit with the Kaplan-Meier curve with many fewer events on Semuloparin. So the SAVE ONCO study showed a two-thirds reduction in life threatening VTE compared to placebo and unlike most anti-coagulants, you expect more bleeding with the anti-coagulants. In this case, it was a very comparable to placebo. So again, we believe the benefit risk is favorable with this product. And this was filed in the U.S. and the EU September.

Now Lyxumia is our GLP-1 agonist. We’re building on our expertise and global reach in diabetes. This product has been developed as monotherapy in patients who are – have failed oral therapies as well as on top of basal insulins. And so the GetGoal-L and L Asia studies showed the efficacy of adding Lyxumia to a basal insulin, and in most cases, the basal insulin was Lantus. In addition to using the products co-administered but separate, we’re developing a combination product where they can be administered together. Because in real life, GLP-1 agonists are used very often together and you can see on the right on top of Lantus, a reduction in A1C and as you will know, AIC reduction has been established time and again to show reductions in nephropathy, neuropathy and retinopathy.

The main efficacy of A1C was – reduction was met in all studies, over 10 studies and a pronounced effect on postprandial glucose. One of the first things to go in diabetes is your ability to increase insulin secretion after a meal. And so the glucose goes shooting up. Well, product like Lyxumia can reduce that excursion.

There has also been a decrease of about two kilograms in body weight, which is always helpful because our excess body weight has been associated with the development of diabetes. And diabetes is very often more easily managed with a weight loss. And this product does decrease weight about two kilograms.

Compared to Byetta, it’s on a twice-daily. There were fewer symptomatic hypoglycemic events for all patients who take medications. Hypoglycemia, low blood sugar, is a very serious concern. And the GLP-1 class has been associated with GI tolerability, very often nausea. There seems to be very tolerability with Lyxumia compared to Byetta. So one injection per day, once step to the maintenance dose and a single pen device, and we will have cardiovascular safety at the time of launch.

So the GetGoal phase 3 program was very comprehensive. I won’t go through all of this but you can see that it addresses many other broad classes of diabetes, and it has already been filed in Europe in October and the next year – the end of next year in the U.S.

Zaltrap is a VEGF trap, it’s taken a proprietary technology from Regeneron where we have a collaboration where Regeneron will develop the antibodies and we will take them into clinical testing. Recently the VELOUR study showed an increase in survival in metastatic colorectal second line. We finished the first line accrual and we should have the results in the middle of ’12 and – I am sorry, VENICE shows first line in prostate that the results will be in the middle of ’12 and AFFIRM at the end of this year first line in colorectal.

Lemtrada is the product from Genzyme which is annual dosing. You get three days of infusion on day one. You get two days of infusion at the end of year one, and that’s it. And that product has shown a significant reduction in the relapse rate, and this is the most challenging type of trial of all. You have as a comparative, not a placebo but a standard of care therapy interferon one beta. So it’s superior to active therapies.

And in the CARE-MS there was not a significant difference in the time to disability accumulation. In phase 2, there was actual improvement so that there was some regaining of function, and we will be announcing the CARE-MS II data very soon.

Aubagio is teriflunomide, the oral agent for patients with MS, and as you know that any product that affects the immune system, one has to look for infections and malignancies. There have been no excess deaths or malignancies in this patient population. The trials have been two years but we’ve had follow-up up to nine years indications on teriflunomide. And the drop-out in phase 3 is very similar to placebo. For chronic therapy, you want convenient dosing, it’s once daily oral dosing with more than 30% relapse rate reduction and a reduction in the rate of disability progression. This product has been submitted to FDA and has been accepted by FDA as a filing. We announced that recently and in EU we will be filing in the first quarter.

So with these companion products, we have Aubagio and Lemtrada for early multiple sclerosis clinically isolated syndrome. In the middle, the most common type he relapsing remitting multiple sclerosis and also for Lemtrada and those who previously treated or severe relapsing remitting multiple sclerosis.

So what’s the picture going forward? This is occurring as a transformed R&D system research within sanofi-aventis. Our new R&D head is Elias Zerhouni. He had been a scientific advisor to the company for – before 2011 but since 2011 January 1, he is now heading our R&D organization. We are transforming the way we do R&D. We are looking at the high priority products, focusing our research on products that bring a clear medical needs and differentiation.

We're incorporating biomarkers and translational medicine into our development decision making process. We spent a lot of time this morning talking about 2012 but going forward we have products in the vaccine area. Most notably in 2013, we will be hopefully launching the dengue vaccine. Dengue is mosquito borne disease. It’s second only to malaria in its incidence, affects over 200 million people, primarily around equatorial zones but they are having cases reported in Florida, Louisiana and Texas. It’s the only vaccine that’s available – that’s being tested against four sub-types of dengue virus. It’s a launch program with over 31,000 patients globally, predominantly in Asia and Latin America.

Eliglustat is an oral therapy for enzyme replacement. As you know, Genzyme pioneered the area of enzyme replacement therapy. Those are intravenous infusions. Eliglustat is an oral therapy and has so far shown to be very effective in reducing splenomegaly and replacing the blood count and platelet count. I won’t go through all of these products but what you can see is that there is a steady progress of development and filings.

This year alone between the two companies Genzyme and sanofi, we will have six filings in 12 months. That is a very high rate of filings for any company. So not only is that the first fruits of strategic excellence but I believe of the operational excellence that we were able to submit so many products in such a short period of time. This is dengue, and you can see that the incidents is in the equatorial zone but also touching the Southern U.S.

And the tetravalent vaccine with the first submission planned in 2013 with a construction already manufacturing. And as you know, vaccines are the most cost effective approach to global health. Many of the emerging markets have very committed to vaccines. For every dollar spent on a vaccine you have $6 in subsequent health costs. And that was a study performed by the CDC.

Eliglustat, the oral therapy global phase 3 program is underway and we anticipate filing in the latter part of 2013. When you have fatty replacement with Gaucher's disease, the effect goes into the bone marrow, and you cannot make platelets, you cannot make red blood cells, you become anemic, have low platelet counts. Part of the platelet problem is also sequestration in the spleen which becomes huge because it’s trapping all the platelets. So an effective therapy will restore haemoglobin, restore platelet counts and shrink the spleen size. The quality of life will improve and many of the patients that have been treated with the Genzyme therapies are now in their 20s and 30s leading normal lives and having children all because of a very scientific approach – targeted approach to an enzyme deficiency.

The anti-PCSK9 is being developed with – the antibody came from Regeneron. We are developing that product for patients with high cholesterol, and you can see here with the phase 1 study up to 60% reduction in patients with high cholesterol who have not reached their goals with statins.

So the important R&D milestones in the next several months, I have discussed a lot of them already, shows that we are making progress in bring products through the pipeline, through filing to patients. Each one of these has meaningful endpoints for patients and we believe that the value added will be something that will help us very much in market access going forward.

So there is a strong scorecard going forward. It’s built on the foundation of our R&D transformation, our diversification into other areas besides pharmaceuticals to take us off the total reliance on patent cliffs. Continued CAGR growth of 5% is anticipated. We have a broad based health care approach. We have a broad based emerging markets strategy being present in over 80 countries. We are in businesses such as the vaccines that do not allow easy entry. Small molecule exposure is less as we are going toward biologics. We have the product launched anticipated that I have shown you. There is operating margin evolution rebounding as we’ve come off reliance on the small molecules. And EPS and dividend growth is anticipated as well.

So overall I believe that we are on the road to a new sanofi, one that will be a company with sustainable growth in health care across many fields.

So thank you very much.

Question-and-Answer Session

Jo Walton - Credit Suisse

We have a couple of minutes here. Is there anyone who wishes to ask a question here before we move to the breakout session? Well, I will ask one, general one about R&D probabilities of success. You’ve highlighted the proportion of, or the number of drugs that could be available for launch and how that goes off over the years? Obviously some of them will drop out in terms of clinical failures. One of the features of the industry is being a much higher level of drop-out failure of phase 3 in the last five years than we had, say, in the five years prior to that. How confident are you that you have asked the right questions earlier, derisked the studies, or however changed things such that the investors can be more confident that a higher proportion of your projects will actually come through to fruition, especially the ones that are slated for 2014 or ‘15?

Paul Chew

Well, that’s a very important question, Jo. I think the motto is think big but fair early, fail cheap. So how are we going to do that? Well, one of the things that we will do from a scientific point of view is to focus more on biomarkers and translational medicine, identifying markers that are early on in animal studies that will be more predictive of clinical outcome. We are participating in the coalition against major diseases with other pharma companies in a pre-competitive space with FDA, trying to get biomarkers for Alzheimer’s disease which is difficult a disease to diagnose but we had some success there with decreases in hippocampus volume that will be accepted as a biomarker.

What else? We’ve opened up the company not only in terms of the new therapies and other issues I have talked about but we have an external scientific advisory board -- scientific advisory board that will be independent and work with us at a very granular level with our projects to evaluate the continuing viability and competitiveness from a scientific point of view. It’s headed by Rick Klausner, the former head of the National Cancer Institute. We are bringing in periodically the health technology assessment councils in Europe, the U.S. and Asia. We’re bringing in payers early into phase 2 to help advise us as to the type of program that we will need to have access at the time of launch.

We also have the benefit risk advisory board on which I serve, looking continually at benefit risk as the products go through development relative to other therapies to ensure that we have value added at the end. We also have the global product value proposition committee, PVP, that has representative from medical and commercial globally. That will be assessing the program before phase 3. I sit on that committee. So that the R&D organization is much more plugged in internally and externally with the latest science in translational medicine. Being in the Boston area it’s going to help a great deal. We also have alliances with many of the major universities, including Caltech, Hopkins, Harvard, MIT, where we're working on joint research that’s in our areas of interest to see if we can have external innovation, also be a big stream of input to our research and development.

Jo Walton - Credit Suisse

Thank you very much. If you like to move on, breakout will be in the Canyon room.

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