Sanofi's CEO Discusses Q4 2011 Results - Earnings Call Transcript

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Sanofi (NYSE:SNY) Q4 2011 Earnings Call February 8, 2012 8:00 AM ET


Sébastien Martel - VP, IR

Chris Viehbacher - CEO

Jerome Contamine - CFO

Hanspeter Spek - President, Global Operations

Elias Zerhouni - President, Global Research & Development


Luisa Hector - Credit Suisse

Jean Jacques Le Fur – Oddo Securities

Vincent Meunier - Exane BNP Paribas

Philippe Lanone - Natixis

Mark Beards - Goldman Sachs

Eric Le Berrigaud - Bryan, Garnier

Alexandra Hauber - JP Morgan

Béatrice Muzard - Natexis

Sébastien Martel

Good afternoon and welcome to Sanofi's 2011 Annual Results. Thanks a lot for [Technical Difficulty] who have managed to come to Paris despite the snow that we had this morning for a change. And welcome to those who are also following us via webcast. This year we are actually allowing participants to ask questions via webcast and so we will add these questions in the Q&A.

As always, I have to go through the forward-looking statements. So, you know that our presentation today contains forward-looking statements and statements involve known and unknown uncertainties and risks. Those are detailed on our annual report on Form 20-F and in the Document of Reference.

Today, with us, we've got Chris Viehbacher, our CEO, who will share with you the highlights for 2011 and provide with updates on the execution of our strategy. Then Jerome Contamine, our CFO, will share with you the financial performance for 2011. We will deep dive into the performance of our global platforms with Hanspeter Spek, President, Global Operations. And then we've decided to keep enough time to actually cover a number of late stage projects in the pipeline. And this will be done by Dr. Elias Zerhouni, President of Global Research & Development. Chris will then wrap the session and then open up for Q&A.

With that I will actually leave the call to Chris.

Chris Viehbacher

All right. Well, good afternoon everybody. Let me add my words of welcome. Now it was three years ago almost to the day when I had the first opportunity to present results of Sanofi. It were the 2008 results to which I had contributed all of one month but it was an opportunity really to layout our strategy. In 2008, we pointed out and I think this has been kind of the hallmark of what we've been doing, we did point that while results were great in 2008 we could already envisage a time three years, four years hence, when things would not be so great, and that we, as management, have decided to be (a) both transparent but (b) also to layout a strategy that would prepare us for the patent cliff and would actually build a strong and growing company coming out of the patent cliff.

We'll go through some of that in a minute but I would say, three years later I think we've struck to the strategy. I think if you look at 2011 results this should be really unremarkable to you even though they are remarkable to us because they should really just be inline with what we intended to do and where we intended to go.

Now, it was a busy year for us. Clearly, 2011 was particularly marked by the Genzyme acquisition. That was a big move for us in a lot of different ways. Anytime you spend $20 billion is a big deal, but doing a hostile acquisition of a biotech company especially one that had manufacturing difficulties was clearly an element of risk. But equally it gave us an opportunity to create significant value, and I think as we look at 2011 we can already see that we have down the track of creating the value that we felt we would.

2012, I said on numerous occasions is a year that I've had circled in red in my diary for three years. The fact that we lose Plavix and Aprovel this year plus let's not forget Eloxatin full year of Taxotere affecting generic for Lovenox, not to mention a few price reductions in Europe and Turkey and the like. It's not a secret to anybody. I think we've always been open that that was going to occur.

I think really if I look at our investor base, most people have begun to say, okay, but what happens afterwards? And you remember back in September we had an opportunity to really present where we thought the company was going in 2013 and beyond.

So 2012 is a transition year in some way because we lose those blockbuster products, and in some ways its not because just a few years ago our future is not those blockbusters and we stopped promotions on those; we've been essentially milking those and we've been reinvesting in other parts of the business. And so, for us, 2012 has certainly got plenty of challenges but we're going to continue to focus on those things that we have focused on for the last three years which is building a strong, sustainably growing business based on our growth platforms and on Genzyme.

The strategy is what it has been. There's always been three aspects to this one is increased innovation in research and development, and in that we initially tackled development in the first two years and we obviously dramatically reduced our portfolio of assets. I think with the benefit of time what have seen is that a lot of those assets are still with us, I mean, its one thing to chuck things out; its another to decide what are you going to keep, and you have the right criteria to make those decisions. I think the fact that most of what we decided to keep is still with us is an indication that that we have right criteria and so that’s how we've been able to file five [dove] cases here while we've got 18 potential launches coming up between now and 2015.

Last year, we tackled the R and we've embarked upon an ambitious program not only of restructuring but when you look at things like the Warp Drive deal that we did in January although a small deal in itself is very much emblematic of where we see research and development going and I won't say more on that because Elias will come back and talk about that.

Second part was to simply take the cash flow that we knew was going to go away one day and reinvest in those areas where there were growth opportunities. And the third was really to make sure we are adopting our structure. And essentially that meant we're going to disinvest where there is no more growth and we’re going to invest where there is growth.

Strategy is all about making those choices, and it is often very easy to say I want to go here but in making new strategies and choice you have to stop doing things. And that’s what sometimes been very difficult with large organizations. And I think Jerome will show you that we’ve had some extremely impressive shifts in resources from those areas, which no longer provide growth to those that do.

So let’s take these a little bit one at a time. Elias is going to go through each of these products in a little bit more detail, because I think there is an awful lot of value here that is not being recognized. What I’m particularly happy about is is not only Aubagio but also Lemtrada, which we plan to file in the second quarter of this year. By the way, there is no real big difference. There is nothing going on. It was first quarter, it’s just slipped into the second quarter; it’s at the end of the year and with the work flow that’s going to slip a bit, but we’re still very confident in that.

Lemtrada, I think is yet misunderstood. I read an article yesterday in the paper. I mean, I think, people clearly don’t really understand that Lemtrada is in a complete class by itself in multiple sclerosis. The only product that has even demonstrated significant superiority over the gold standard, which is Rebif. One of the things that I didn’t know really realized until even yesterday, which I don’t think most people realized, the market is not dominated by Gilenya or [Tutavre]. 80% of the market is in something called AVCR, which Avenox, Vita-Feron, Copaxone, and Rebif. So the market is still to be had by those who come along within the innovative products and I think Aubagio and Lemtrada will do that.

Now the GLP-1 with Lyxumia reinforced by diabetes franchise Kynamro put this down a path, but will ultimately the PCSK-9 and Zaltrap will add to our as well as Visamerin both of those products will add to our oncology franchise.

I will just say on those five, I can tell you that actually getting five regulatory (inaudible) together in nine months is an incredible task. And I search back; I couldn’t find another company that had ever submitted so many regulatory files in such a concentrated period of time. So for company that, most people don’t think as a pipeline, I think it’s a pretty strong achievement.

Genzyme is clearly, was clearly the focus of 2011. This time, last year, we were addressing and finalizing really the acquisition we announced on 15th of February. On the 16th of February, we already began the pre-integration. And there were number of aspects to this. Obviously bringing a successful biotech company with a Big Pharma is not an easy thing to do. Especially because this was not just any biotech, it was a very iconic biotech company and a big one with 10,000 employees. So, as I stand here today, I am actually amazed that the progress that we have made on a number of fronts.

Clearly, the value proposition of Genzyme we have been able to bring production back on Cerezyme and Fabrazyme to those patients who need it. Central to this was being able to get training and the new facility approved, and so we achieved a major milestone this year when we had within three or four days of each other approval by both the European as well as the US Regulatory Authorities and on the basis of really the first validation batch.

Now, I think that’s a very strong sign of the confidence that the Agency has in the work program that we have put in place since Sanofi and Genzyme have started to working together on this.

Just this week, we have also received formal approval from the FDA of the work plan to get ourselves out of the consent decree. You think about a year ago in Allston, which was the site affected by the consent decree, we were still producing bulk of our products, we were still doing purification and we are still doing fill and finish. By April, we have moved the fill and finish out, by the end of the year we were only producing two products and by the end of this year, we will only be producing one product in Allston and so we have dramatically simplified operations taken the pressure off of Allston and I think that is what’s really given me the confidence that we are getting back well into production.

Now, if you start up a biological facility you don’t go from zero to a hundred in five days. That’s why it is going to take a little bit of time to the middle of the year to really fully get supplied, but on Fabrazyme, for example, we will be able to get all patients in the US back to full dose by the beginning of March. We will then start working on the waiting list. We will be able to also already immediately begin to treat a number of patients in Europe, who are in (inaudible) but who obviously not getting the full dose of the enzyme that they need and so we will be able to start bringing Fabrazyme back. Cerezyme will obviously benefit from the fact that Allston is simplified.

I think this morning you have seen that Phase II data extremely positive on eliglustat and as Elias will tell you that this is an extremely important innovation in the treatment of Gaucher disease. So production was central to this; I think on production I’m confident on.

Next the metric is create synergies. We have proposed $700 million worth of synergies by 2013. By the end of 2011, we have already received $230 million of synergies, and an obviously we feel one very good factor on that too. In fact, most of the integration should be completed in 2012. The only reason we give 2013 as a date is that’s the year we got a full year impact all the savings, because if you complete a task in July of 2012 you are only going to get six months of those synergies.

Third element is Research & Development. In this case we have decided to get our synergies not out of Genzyme but out of Sanofi. So we completely reorganized our research and developmental operations in the US. Genzyme has clearly been selected as our principal source or research in the US. I think Cambridge is one of the most promising areas in the world today to do research and development. And with the acquisition of Genzyme but also past acquisition of Campath, the creation of our oncology research and development, we are now the number one life sciences player in this very promising area. Equally, we closed a major research and development facility in Bridgewater, New Jersey, and has selected there to using New Jersey as our base for Clinical Development, Regulatory Affairs and Pharmacovigilance.

Third element is really the new products, and we talked about them Lemtrada and eliglustat.

Fourth element is really people. And I spent a lot of time personally in Boston this year, and if you do the walking around test, if you talk about the meetings I think what I am really seeing is that not our past and we versus you process but we have actually got teams working together with trust and confidence and I think the success we've had in production is very much a signal of that.

Another signal that I look at is what happen to the businesses that we took out of Genzyme and put in to Sanofi. That’s where you have maximum turbulence. All of those businesses performed in double digits. So that says that we are able to do this without disruption to the business.

Cost savings is critical. We obviously lose a major piece of margin leverage by losing the blockbuster. And to compensate for that, we have embarked upon a program of cost reduction. Now, I would point out all of these cost reductions, they had come earlier than planned but (b) are net. I mean we have not decided to build our company on cost reduction. Within that there have been more massive cost reductions with a reinvestment in places like diabetes and in emerging markets. So, there has been a massive shift of resources within the company, roughly 10,000 people out of North America and Europe with an equivalent number into emerging markets just as an example.

So, with all of that, when we look at our sales in 2008 at €27.5 billion, 25% of that was under threat for generic. We have obviously grown that business and then now €33 billion. Now, yes, we have increased that through acquisition, but I will show you later that actually the gross growth was €10 billion for our growth platforms, $4 billion of it came from acquisitions, but $6 billion of it came from organic growth and the $6 billion is more than the $4 billion that we lost because of generics. Obviously, Genzyme has certainly helped in all of this, but I think you can’t have a robust company going forward unless you continue to build your sales line.

Today, you see the results, the €10 billion on the left to the growth platforms and on the right you see what we’ve lost €7.5 billion down to €3 billion and obviously a major chunk of that is going to go this year.

In 2011, we suffered another €2.2 billion of lost sales due to generics. But you can see that the growth platforms have now moved from 43% when we first talked together in 2009 and has now gone to 65%. So two-thirds of the company is Genzyme and the growth platforms. By 2015, 80% of the company is this business.

Equally on the right we’ve gone from 27% of sales being at risk down to 9% and that will drop to less than 6% at the end of this year.

So when you look at all of these, obviously, emerging markets is really I think an unbelievable story for Sanofi. We’re the only company to do more than €10 billion in emerging markets. We are, by far, the leader in this and this is simply because we have historically been strong there. We have been for decades in India and Latin America. We’re the first foreign company into China. We have local manufacturing. We have local product lines that are adapted to those markets and most importantly we’ve got depth of management in all those countries. And you can see that between 2008 and 2011 we’ve had 16% and Hanspeter will show you the acceleration that we’ve seen in the last three years.

Diabetes, we’ve gone from a company that sells Lantus to being a diabetic solution company and we’ve seen very strong growth particularly pleased by the fourth quarter growth in Lantus of 17% and 15% for the year.

On Human Vaccines, very good growth on average of about 6.8%. I think vaccine is going to be a really strong contributor to growth as the dengue vaccine comes along, as Shantha comes back online and with products like DTP is coming along. But I will say that I think Sanofi Pasteur has done an extraordinary job in line extension strategies in our flu franchise.

Consumer Health is the one I’m happiest about. When we started with €1.2 billion, quite honestly this was a little bit of a hope and a prayer because we had a product here and a product there and nothing in the US, nothing in China, and yet we’ve been able to acquire companies like Chattem really on the basis of our desire to launch Allegra ourselves, that was a risk. We could have launched this with a more established partner. I can tell you that the not only with the sales of Allegra such that we could obtain almost within three weeks of launch the second spot in this highly contested allergy market. But we actually exceed some of the sales projections from the more established players who are pitching to be our partner on this. Obviously with the acquisition of BMP Sunstone who are into traditional Chinese medicines we’ve opened up new channels of distribution and we’re doing the same thing in India. And so, we are now starting to have a global presence in consumer and we’re one of the top five companies in this.

Animal Health, you've heard me talk about for a long, long time. The growth of 4% is pretty much the way we see this business going to 2015 but I think we’ll also see that that would be very active in business development in this area. I still want us to be stronger in production Animals and I still want to be stronger in the emerging markets.

Finally, Innovative Products, you will see that contribution grows but the objective of this has been that we don’t depend too much on R&D and patented medicines in our growth. We want that to be accretive to a sustainably growing sales line and not be the only story to the company.

And so, you see the well-balanced portfolio one of the things that I keep close attention to is, particularly in these times of economic austerity, we have roughly 50% of our sales are reimbursed by government, but 50% which is not and right now the 50% that is not is looking a lot better than the part that is.

So we haven’t been able to completely mitigate the loss on this but if you look at that €5.59 which was our earnings per share in 2008, if you take the €4 billion of generic expiries that we had plus the €2 billion after tax profit related to Plavix and Avapro you can see that essentially in 2008 didn’t say this one I announced it because there is only so much transparency that everybody can tolerate but essentially 50% of the profits of the company were at risk at that point. To me, when I look at €6.65 and even in 2012 we are well above what the profits would have been had we not chosen to implement the strategy.

We have talked about our payout going up to 50% and one of the things we have done is wanted to make sure that investors were confident in that future and we believe that we could do that by regularly improving our dividend. This year we’re increasing our payout to 40% with a 6% increase in the dividend to €2.65. We also purchased a €1 billion of shares and I would remind you that that largely to start to mop up the dilution that was created when we issued the stock dividend. Why do we call them opportunistic? Well, if you can issue shares for €49.60 as part of a dividend and buy them back at the same price or less then that’s probably a good deal.

So with that I will turn it over to Jerome.

Jerome Contamine

Well, thank you, Chris. Good afternoon everybody. As Chris had already commented the dividend I’m just wondering what I should say now, but however I will go to the P&L for 2011, give some details on the financial performance also for this year.

Well, you are used to the graph, which will present quarter after quarter and I still feel that it is quite impressive. So just of the year of 2011, we have lost €2.2 billion of sales from the key products which are being genericized year-on-year, and that we all know I mean these products are not only safe, but also high profit.

On top of that, we are still booked €450 million of sale of H1N1 vaccines in 2010. So we started the year with a sort of handicap as compared to where we expected to be 2011. I mean, as impressive is the contribution of the growth platform, I mean Hanspeter will go through that later on. €1.9 billion of new sale created organically from the growth platform 10.8% growth I think that’s really signaling that these are really the drivers of the Sanofi for tomorrow, today and for tomorrow. On a couple of that of course we booked Genzyme. Genzyme I suppose exceed the frequent sales on which we have booked the sales 7.6% increase of sales including double digit of growth we know in this as well as the Myozyme.

The FX impact, there's always a lot of volatility as we know in the exchange rate. Actually the FX impact negative as mainly driven by the US dollar. We tend to look at the US dollar being a strong currency against the euro today, just six months ago, which was exactly the reverse. So in fact, out of the 700, 600 is coming or precisely 593 is coming from the US dollar against the euro. Which precisely brings me to the next slide, yes.

I think that’s important to at the time, where we are looking at very precise guidance for 2012 to remind you what are the main drivers in terms of currency exposure. So still the dollar is the main currency as you can see. In 2011, it represents 28% of our sales, just after the euro and just before all, you can see it for the other currencies which in the rank of order you see Japanese yen or Brazilian real, you see interestingly that and those used to be taking out the fifth of the company is taking place. That’s why the British pound is just coming at the end of the list.

So we are really now more exposed to the emerging markets really than exposed to European markets and in particular to Europe and we shall not be denominated in euro.

So the sensitivity which I think also has to be taken into mind is 20% of the net income, presenting for valuation of $0.01 of the exchange rate. If you take the 2011 exchange rate, which was an average $1.39 and you are too concerned that in 2012 you will be $1.30, it means that it is $0.09 and $0.09 is 2.7% of our net income for 2012, it’s a 2.7% valuation, so 2.7% of 6.65 is roughly $0.20. So, this gives you an important point on really assuming what is the sensitivity of actual results both in 2011, but also for the forecast 2012.

If you look on the last quarter, of course as usual when you speak about annual accounts you tend not to look so much about the quarter. However, in this quarter, I mean, proof to show strong performance. The sales have been up 9.2%, well not only the sales, but also the profit has been up 9.2% on the business EPS basis.

So this is a fact basically driven by Genzyme, so you can see that in the first quarter, we lost around €387 million from Key Genericized Products, the same as the ones which consolidate to 2.2, we have seen in the previous slide. At the same time, it goes back from as basically compensated for that, slightly less than that.

On the right, it’ really the contribution of Genzyme. So, yes, Genzyme has contributed to the growth of the sale in the first quarter, but at the same time you can say that the growth performed compensating of the loss of the result of genetic competition.

The second largest element in this P&L is that we are enabled to show a strong increase in profit, showing that by the way of saving cost and in fact having minor impact of the change of mix in our gross margin, I mean the net profit has increased in line with the sales, slightly higher than sales. We have slightly more share outstanding, which brings us to the 9.2% increase of business EPS, which is exactly equivalent to the one we are pursuing for sales.

Now, if I look at the full year, so the full year is a 5.3% increase of the consolidation of business of the sales. It’s growth profit, which is basically stable, slightly increasing. This is clearly the results of the change of mix and we come back on that on the next slide.

R&D has increased by 7.4% and SG&A by 6.7%, but of course we need to also keep in mind that this includes the consolidation of Genzyme’s last three quarters. So clearly; it’s not a like-for-like basis, but just on a current basis. So this brings us to the slight decrease of BOI in both business operating income by 3.9% as you can read. I don’t think there is any comments will be made of the other lines, basically they are driven by the contribution of Plavix and the joint venture with BMS on Aprovel.

And then, I will make some more comments on the various margins and the ratios. So to start with cost of sales. So the cost of sales to sales ratio for the first quarter has been 32%. That’s 0.4% of growth delivered equivalent for last year. And we should even remember that not only we’ve lost some of this period things in sales more highly profitable products, but also we shift of sales for the vaccine business between Q3 in 2011 and Q4 in 2010 in terms of flu vaccine, which is unfavorable to the cost of sales to sales ratio. So we can say this strictly that we haven’t been able to stabilize the cost of sales to sales ratio, in spite of the shift of the business mix, which is a positive element and showing that’s very underlying cost savings on this line.

Now, if I look for 2012, I can give you as a guidance that the cost of sales to sales ratio should be around 31.5% but it is slightly higher than that but below 32%. So, pretty much in line with what we’ve achieved in 2011 in terms of ratio and probably slightly better than Q4.

R&D. We have continued to benefit from the confirmations that we took and initiated now three years ago on our existing on the business. But you can see out R&D expense excluding Genzyme, decreased by 2.4%. For next year, you will see on the year (inaudible) that’s from impact of the restructuring of research organization around for hub of the restructuring we have embarked on which will be a positive, or let’s say, which will reduce our fixed cost base and help to maintain our R&D cost, our process will have to improve innovation the way we handle it. At the same time, as you see, you have also contribution of Genzyme and for the stakeholders Genzyme has been consolidated, the contribution and R&D cost has been €419 million.

SG&A. A bit the same story. So, here again, we have the contribution of Genzyme. So, excluding Genzyme, the SG&A has been down in 2011 by 2.6%. This is clearly the result of cost savings. This is a result of the reorganization we have implemented in mature countries both in the US, but positively will not extend in Europe but at the same time we have revisit the schedule to complete the new businesses behind the growth spectrum in particular in the emerging markets. So, our (inaudible) is €300 million to €400 million of cost reduction or (inaudible) reduction of the mature markets and on the other hand its investments in other markets.

The second thing that you can draw as a conclusion from this draft is that really, really tough to see as an increasing impact of our control on our SG&A cost in Q4 and also the result of the synergies being generated between Genzyme and Sanofi unless you can see a good rate going above our cost we've been able to limit the SG&A to sales ratio in Q4 to 26.1 as compared to 28.1 in Q4 2010.

Well, here again, if you go down from the net to -- from the operating income to the net income, I mean here we'll also give a few comments. The first thing which is striking is that there is only a slight increase of financial expenses. I mean, you could be finished by that when we have just raised $20 billion to finance the Genzyme acquisition. Clearly, we've been able to reduce our average cost of debt and it goes to the show the fact that we managed to finance Genzyme on an average cost of 1.4% and also because of a better allocation or reduction earlier and balance between cash available on that. The net impact of this carry has been -- may get even to the whole 2011 and that’s compared to 2010. So, all in all, I think it's impressive to say that we've been able to basically not increase or match our financial expenses despite a significant increase of our debt.

On the income tax, as you can see, we end the year with slightly lower than the guidance I gave at the beginning of the year. This is the result of the positive outcome of the final agreement in terms of cost of price between France and the US which finally appeared to be more beneficial to Sanofi as compared to what we anticipated and has continued to 1% improvement as compared 2007.

For 2012, we will still benefit from this environment but, on other hand, we will have less of the news as coming from royalties linked to patents and these are news our tax in particular in France that are at the lower tax rate. So, by now, I expect an increase of leverage tax rate in the range of 1%, more than 1% growth. So basically, we should have most or something like 28% tax rate for 2012.

The number of shares, outstanding shares, has increased slightly from 1.305 billion to 1.321 billion. This is really of course a result of the dividend we pay in shares. We have created as a result of that 78 million new shares but at the same time as you know this we have bought back during the quarter 21 million of these shares. So, as a projected price which have been very similar to the price we have issued these new shares. So, you can say that the average of this resulting dilution of the payment of the dividend in share have been very limited in 2011 or will be limited either in 2012.

Okay, I take you to the full P&L down to the net IFRS income, I mean I do that once a year. Some elements, I will not go through all the lines which are always technical. We have amortization on intangible asset this is resulting from the intangibles which allocated to products at the time of the Aventis acquisition, but also to the allocation of approximate accounting price or PPA (inaudible) we did in particular of Genzyme and Merial.

The second thing is that because of that we have also evaluated our inventories even in the working balance sheet, with them create some charges which non-cash charges which will basically time testing into 2012, because this is the expense writing of the right on the work down of a acquired inventory. So restructuring cost have been basically very similar to the previous year very much driven by the restructuring in Europe and but also the recently announced restructuring of our research organization.

And we have some positive and some negative elements on the gains and losses on disposals on litigation. On the negative side, in fact, we have to resume amortization of intangibles when we decided not to finally strike the deal with Merck in the venture between Merial on Intervet, which then we have to resume price or sales or amortization of intangible meaning that we have an negative impact which was 517 if I recall properly.

On the other hand, we have some positive elements among which the one which has been announced today that we got a finally outcome of the trial between us and Apotex in connection with launch of Plavix by Apotex, which creates a positive one off gain of €210 million in our P&L in 2011. And actually, we received yesterday the check for this payment which will represent $270 million.

On the tax aspect, beyond the systematic impact of taxes on all elements which I have described on the slide, we have a particular what I mention before which positive one of contribution of finalization of the cost of price agreement between the US and France. So the final outcome is a slight increase of IFRS consolidated net income as you can see by 4.1%.

We continue to generate strong cash flow, despite the shift of business as we can see the free cash flow after CapEx expenditures and variation of working capital has been close to €8.4 billion. We financed that part of acquisitions, I mean the main acquisition of course being Genzyme. On top of that that we have acquisition of BMP Sunstone, and more recently the small acquisition of Universal in CHC in India.

The payment to shareholder in cash has been the part of the dividends which have has been in cash pus the repurchase of shares for total amount of €2.4 billion. And as you can see, the cash out is linked to restructuring as been with more than €900 million. So finally, we end the year with a €10.9 billion of net debt restructured by 1.6, which means that when we have invested in acquisition €14 billion the net debt have just increased by €9 billion which shows the ability of the group to generate free cash flow.

As I mentioned before, the average cost of gross debt has decreased down to 2.6%, and we have now a debt to EBITDA ratio which is significantly below one which make us comfortable to sustain, as mentioned before in particular at the time of our September investor meeting that we can sustain around $10 billion of debt net going forward.

So finally, a word on the new plan. If you remember that we announced in September that we have to plan to launch we aim to save another €2 billion that each and every details of that plan were not already identified in September. Now, we can say that we have gone through a comprehensive exercise to identify new ways of working on new ways of saving costs all across the company, generating more synergies between businesses using the unit approach (inaudible) more systematically in the industrial operations, continuing to restructure R&D in particular on value realizing our cost base in R&D, continuing to keep shifting process between the mature and the newly growing market and being more accurate in the way we spend our (inaudible) expenses and generalizing the approach to a generalized self services approach to all our support functions. We have implemented that in the US, around Libya, serving all businesses. We are progressing in the same direction in Europe but also in Asia and Latin America and our goal is to bring a new role include the savings of the synergies we expect to generate from the Genzyme integration we have mentioned before, should contribute toward $700 million, €500 million by the end of 2013.

We can say also that out of this €2 billion that will -- it will not just speak of the (inaudible) but it will contradict in particular of the result of the Genzyme integration or Genzyme synergies and then also our efforts to implement the sustainable of our structural reorganization over the year 2012.

With that I turn the call to Hanspeter.

Hanspeter Spek

Good morning, good afternoon. I would like to lead you through the performance in essence of our growth platforms in 2007, and I start this with the total picture. As you see here we have achieved €33.4 billion, sales growing by 5.3%. On the left, the positives in essence the growth platforms achieving an additional growth of approximately $2 billion sales compensating there nearly the total losses on the right of the picture caused by newly generalized product, most of them being Taxotere, Lovenox, (inaudible) smaller products mainly in the United States.

For the third time coming incremental sales for Genzyme €2.5 billion to nearly €2.6 billion, giving a total of €4.7 billion new sales size against €2.2 billion sales coming from gentrification.

Now to focus on the growth platform achieving €19 billion spending such for approximately 60% of our total sales over the total year of 2011 growth platforms has been growing by 10.8%, and you’ll see then the rise of remarkable growth for each of them, and most importantly as mentioned by Chris earlier of course Consumer Healthcare with nearly 23%, Animal Health is a relatively modest growth 4.3%. You will see later that we have a nice acceleration of growth for Animal Health in the fourth quarter getting around 7% of growth.

Important to see the way we really get through the cliffs, the patent cliffs, you see here for the last five quarters the impact of generification, which has been in the fourth quarter 2010, nearly €1.1 billion for the third quarter alone and you see that this is coming down, has been coming down to less than €700 million in the fourth quarter. Actually we are losing 14% of sales by the end of 2010 either went down shows remarkable 8% but nevertheless just a little bit more than half of what we have been losing about one year ago.

Now, more focus again on the growth platforms. Here you see our performance on the emerging markets. You see very nicely that this is not something which is recent. You see that evidently this is something which is accelerating as of 2008, 2009. We have an average growth rate of 16% and you see also that it is sustainable. It has all started in 2005 already. So this pickup across some countries and is concerning the future sustainability of this business.

More in detail we achieved more than €10 billion of annual sales in the merging markets, 10% growth at an average growth rate excluding Genzyme. It’s a little bit more if you include Genzyme and the H1N1 sales. And if you focus chart on the famous BRIC countries sales are approximately €3.5 billion and growth rate gross sales are up to 15% respectively even 20% if you include the Genzyme which is less at present in those markets but of course you see this as a very important upside for future growth of Genzyme.

Now, we’re a little bit suspicious in third quarter. There were some question marks also coming from you is already is the beginning of the end of accelerated growth? And I am happy to report that this is not the case, in fact we had a very strong fourth quarter. You see 13.8% respectively 18.7% at constantly exchange rate. And you see then yes, they are very consistent. I had repetitively said I believe it’s the variance which makes it strength of the emerging markets because the emerging markets are not as our uniform in their structure and their opportunity and potentially also in sustainability of growth, this season is that we have had in the first quarter is the strongest growth 21% coming from Latin America well above €800 million relatively moderate 4.9% growth coming out of Eastern Europe and Turkey. I think it’s fair to say that in Eastern Europe of course you have economies which are relatively closer even being part of the European community and we have the issues you are very well aware of.

We also have on top of it Turkey. Turkey has been seeing a extremely difficult year this two consecutive price cut of altogether nearly 40%. Asia continues very strong in the first quarter nearly 16%, and Africa and Middle East very, very close to 10% remarkable growth I believe if we keep in mind that we have a very strong positions in those countries but we have seen the Arab Spring in 2011, being it Algeria, being it Tunisia, or being it also Egypt.

Once again, a little focus on the BRIC countries and you see that also in BRIC countries strong acceleration of growth of +20%. So, no big surprises at all, I believe is very good surprise because we have further accelerated our growth and so far our market leading presence in emerging markets.

Second good news of the fourth quarter and 2011 overall without any doubt is the performance of diabetes. And within diabetes, we are extremely proud on the performance of Lantus. You see that we have succeeded to accelerate Lantus performance on evidently a growing base compared to last year. From quarter to quarter we finished nearly with 18% growth. For the first time, Lantus has achieved more than €1 billion of sales in a single quarter and yet we have been also extremely please to read and to hear the so called Nordic studies said there is continuously not at all any evidence concerning the safety of Lantus and so we are looking with a lot of confidence which is still out pending studies and share with us during 2012 and 2013. So all over very, very strong performance of Lantus (inaudible) overall and for Sanofi and diabetes is €4.7 billion growth and 12% over last year.

CHC, Chris has alluded to it, was hardly anything let's say three years ago. In CHC we have put emphasis on our organization and yes, I believe we have made very good choice in acquiring Chattem and attracting in Chattem into launch successfully Allegra. Allegra has been brought to the market in view of the C segment of the United States in February 2011. This product has taken immediately the number 2 position in an extremely competitive market and we have achieved sales for approximately €230 million in the first year and of course it has nicely and strongly even contributed to the overall sales growth up to €32.7 billion at the close of nearly 23%. We can state that we have today a large, solid, strong position in CHC all over the world ranking approximately number four or number five in this market segment.

We continue to do also generic we don’t (inaudible) in generic, we prefer to the term (inaudible) affordable medication because generic not necessarily is the same if you go the emerging markets most of the business you see on the emerging markets is branded generic business and you see that we do extremely well also this kind of product growing by 16% to about €1.7 billion. You see sales in the United States on the bottom of the two bars for 2010 and 2011. Those are the sales of our authorized in generic in the United States being it Taxotere, being it Ambien, being it once again Lovenox due to the recent decision of giving Ampex access to the market we have reintroduced our generic of Lovenox into the United States and you see that those products altogether have significant sales. Beside, we have no ambition to become really exiting this market segment in the United States beyond authorized generics of our own product.

We have continued to roll out Medley, Medley part of our success story inside acquisitions overall, but evidently also inside affordable medication. And we have rolled out more or less all over Latin America and we will see in 2012 if we can really successfully export this concept from Brazil to the surrounding markets.

One word on Merial. I said already said overall the growth rate 4.3% looks relatively modest but is in line with the overall animal health market. We are happy to report that we had a very good fourth quarter which was safe to say the first quarter of Merial being integrated inside Sanofi. This has been an integration which went extremely smooth and so we had a very nice growth of 10% in the fourth quarter inside when you look to the charges is that we are underrepresented with just 25% of sales coming out of emerging market and yes, of course, this is part of our overall strategy to expand Merial stronger into this so called production animal segment but also stronger inside the emerging markets where this 25% we feel very significant room for growth.

Vaccines are a little bit difficult to read. You see a negative gross rate which is due to a one-time event potentially which was lower sales of H1N1 of more than €400 million in 2010 which could not be repeated of course but if you corrected you see that vaccines had a good growth to 7.2% on a very, very high base vaccine succeeded to make another record year this year vaccines but beyond also the other products did extremely well to be named Pentaxim in the emerging markets as emerging markets overall continue to contribute to the growth of vaccines nicely its close to 11% gross but also Menactra reaccelerated its gross due to new booster recommendations in the United States and extended global launches due to increased production capacity.

Finally, on Genzyme, you see that Genzyme had a good quarter this month and €800 million in the first quarter of 2011. You see then that those products which will be taken care of inside Sanofi portfolio which are in essence Synvisc and Renagel play an important part. We are very, very confident at this larger footprint of Sanofi was first accelerates close in 2012. And I think it is clear and it has been already mentioned since the most important use around Genzyme, of course, easy approval of Framingham, which should help to lead the Genzyme in an even further accelerated growth into 2012 in the years to come in, I mention in the years to come, probably it’s a perfect pitch to pass on to Elias Zerhouni. Thank you so much.

Elias Zerhouni

What we wanted to do in this presentation is focus a little bit more on R&D. And the reason we wanted to is because 2011 has been an extraordinary transition year for the R&D organization. But first, I’d like to show with you some of the principles, the underpinning of the strategy that we followed.

First and foremost, our global R&D goals are really based on the fact that we for the first time created a global R&D organization. And the fundamental reason we did this because, one, there is an enormous convergence in science in terms of vaccines and understanding immunology or in terms of multiple sclerosis, animal health. The convergence of biology gives us some ideas about how to synergize between the different components of what has become today one of the largest biopharma companies in the world because we can produce insulin, biologics, we can do vaccines, monoclonal antibodies and now with Genzyme, one of the best biotechs in the US, we have a spectrum of capabilities that where we think we can get synergies that would not have been available to any other organization. It allows us to exploit the economies of scale. And more importantly, as I will describe to you, we've had a deep exercise in terms of restructuring our R and our D and improving our cost structure, which was inherited from the integration of multiple processing entities.

The second strategy has been to focus on high value projects and what does that mean? Incrementally that there are only three things that will make the R&D organization successful. One, create products with high added medical value. And that is a very profound statement because we don’t know at this point what the market is going to look like in five to ten years, but it’s clear the players are changing their behavior. And it is clear also that healthcare costs are going to grow at a fast rate.

Ten years from now the total healthcare expenditure despite all of the controls that are out there are predicted to double. About 75% of these costs are related to chronic diseases. And so payers, patients, providers are really expecting us to provide integrated solutions to their means of their patients over long periods of time.

And this is where I think what we did, if you focus our portfolio and we stress this to the portfolio in 2009 to really cull out of the portfolio, prune out of the portfolio things that didn't have legs in the context with a new world. But we did focus and you will see the results of that on the execution of late stage projects, we accelerated that execution. We felt it was very important to change how we operated in R&D based on the medical value, but more importantly based on the quality of the science. And quality of the science in this context means taking advantage of all the emerging capabilities that allow us to understand human disease in humans and not just in mice and with low predictability translation.

We also established new models of external innovation, it's clear that if you look at our strategy, it has two components, that is a [decomponent], which is the development of what we do has to be outstanding excellence executed on time across the very complex chain of events that you need to control when you're doing clinical development. So, we focus on the excellence of our development.

On the R side, however, it is a more profound chance that we use to accomplish. Fundamentally, if you look at the productivity, internal productivity of the industry it has been quite low in terms of new products, innovative products in the research side. The reason is in my view not just an organizational reason. And then everybody thought is because the organizations are too big and wieldy but I can tell you, it's not just a question of a small size versus big size, it's also a question of smart. And smart means that you have to change fundamentally how we do a innovation because there is no way with the emerging complexity of biology that any one company, any one country can have all of the resources needed to master the fundamental biology of the disease process like cancer or diabetes.

So it's clear that as the explosion of innovation outside of the company occurred, we were not taking advantage of that. Over the past year, two years we have explored this and we have promoted the concept of external opportunities and partnerships, but also we are really changing the model by creating an open end model of interaction with both biotech and academia and the Warp Drive bio example, which we created now in the past month actually is a good example of what we are trying to do is not invest in others. We do not want to be passive investors.

What we want to do is using the principles that we talk about just to have the clear idea of where and where we can build on our strengths. And so, when you look at R&D and you will see this in the presentation we are not going to be everywhere. I mean diversification does not mean dispersion, and to us what is very important is to stay focused on the greatest opportunities we have. So diabetes is one of them, rare diseases is another one. Immuno inflammation because of the strength we have with vaccines and with other components of the group. And so, we are going to focus on areas where we can internally provide value to an external innovation pathway, but also access patients as early as possible in the process to understand the mode of action and know how to measure it the diagnostics of biomarkers.

This is why, for example, Warp Drive is a unique example, because the scientists who develop the method to read out the genomes of natural products or organisms have a technique that it had no way of really using that until we realized that we had internally expertise that was accumulated for 50 years that was essentially not being used, because we didn’t have a way to read out what our libraries were doing. So we created one plus one equal to three by putting our internal team with the external team and co-founding with an external partner something that we have hope will provide breakthrough products.

Having said that, let me go back to the short term and the medium term, because at the end of the day, we can all talk about concepts of R&D, but at the end of the day what needs to happen is executing on what we have in front of us, and that has been the of 2011. So we focused on delivering what I consider a promising development portfolio. So on the short term, we focused on achieving regulatory milestones. And if you look at the data that you have, we have five products in the submission stage and we submitted eight submissions, five in the European Union and three in the US in the past 12 months. And for those of you who know what it involves very few organizations I know can do this.

Each application is hundreds of thousands of pages of documents, but on top of that we have Lemtrada coming in 2012. We have another four submissions in 2012 to complete the six products that we think have potential for approval in the near future. But at the same time, we decided not to just have a set of generic development approach to the rest of the portfolio. And so, we decided to have some high value, high priority projects that we would fast-track, we would work on in a way that will guarantee, if you will, excellence -- execution, operational excellence is also a factor. And these are the next wave of late stage progress, which I’ll talk about in greater detail for most of them.

So let’s just look at the two concepts, focusing on an the emerging portfolio that is actually promising, and combining this with our strategic intent, which is to build in focused areas across where we have value to add and in opening up to external partners.

So, the first franchise, if you will, that is emerging, is multiple sclerosis. And this is truly an emerging franchise for us because we can in fact envision the ability for us at Sanofi, because we have the capability to cause this spectrum of tools to really address the full spectrum of patient needs in multiple sclerosis. And you have to understand, multiple sclerosis is not one disease, it’s a multiplicity of phases, and types of diseases, there's multiple phenotypes, if you will.

At one end, you can have the patient with early MS and very limited decease, where really you don’t want to take a lot of risk and you want to find treatment that are convenient and safe at the same time. And then you have the relaxing form with mission in the middle, that’s an intermediate a category where you still want convenience but efficacy as well. And then you have the more severe cases; well what’s important here is to stop the disease, have the most efficacious treatment at a reasonable safety level.

Basically that spectrum is covered from Aubagio to Lemtrada. And we other follow-on ideas about how to fill in the blanks, if you will, in the entire multiple sclerosis. Our franchise, if you will, but remember that for us multiple sclerosis not only a disease, it is in the world of what we call immunomodulation and we want to build a very strong franchise in immunomodulation as the top number one or two company in that field.

So Lemtrada. What is Lemtrada? Lemtrada is truly a unique, unique product in the entire spectrum of products in multiple sclerosis. First, it has superior efficacy demonstrated in two Phase III trials, but more importantly it’s an annual dosing mechanism. So, in fact, you treat the patient at the beginning of one year and then you don’t treat the patient anymore now. As Chris said, 80% of patients today require regular injections. This would be a yearly treatment essentially, first year, second year. And I always like to point out that this kind of dosing is quite unusual for an autoimmune disease but is quite common in vaccines. That’s what we do. We vaccinate and then we boost the vaccination.

I think the efficacy demonstrated in Phase III against the comparable rebirth is clear you can have the results from KMS1 and KMS2 with a 55 and 49% reduction in the relapse rate, but also it’s a sophistically significant a sustained accumulation of disability reduction and that is becoming a standard in the care of patients within MS. I think the safety is understood, it is well characterized and consistent across studies; it is effectively managed. So my standpoint, at one end of the spectrum high efficacy, manageable safety, very convenient once-a-year dosing.

Then Aubagio at the other end is an oral molecule, once daily therapy with comparable efficacy to an injectable interferon. That’s the value for our proposition. I mean you can’t complicate things too much. It is important to realize that we are going for efficacy and safety at the different components of the spectrum of multiple sclerosis. And we have demonstrated that efficacy. We see, for example, that patients have a lower rate of discontinuation with Aubagio had equal efficacy to others. And I think the safety is manageable and we have had patients on up to 10 years, we understand exactly what we have to do. So that’s one area of focus autoimmuno disease, autoimmunity, immunomodulation.

The second is one of our best growth platform, diabetes. We completely have some mature R&D serves the needs of that platform and so the first product that is coming out of the pipeline has been filed in the EU this year, will be filled in the US towards this November 2012 as Lyxumia, it’s a lixisenatide.

Why is Lyxumia something that we believe in, because it’s GLP-1 agonist with a very unique post-prandial effect and a one step titration. It is simple and it is very effective in the post-prandial period which is when the asked physicians who treat patients with diabetes that’s one of the very abilities that is the most important to treat. So, how do you treat it? Well, a short acting insulin, but GLP-1 especially this one has the ability to dispense from the use of that short acting insulin on top of basal insulin. That’s why we think there is a very good effect here, because it also has a weight loss component to it which balances the energy effects of insulin.

So it is a consistent GLP-1 effect and was demonstrated to a series of trials including one that is going to be published today. That in fact we are reducing it once the -- having a weight loss effect and a favorable safety profile with much lower risk of hypoglycemic events, and it’s a simple peptide to use.

Now why is that important in this strategy? I mean, people think is that just a copycat or?
In fact it turns out that from my standpoint what’s really important here is that it has an optimal complementarily to basal insulin. And that’s why we see an additional benefit here.

We have two trials which really tested lixisenatide on top of basal insulin, because if you really look at the patients again treated, the type II diabetes patients and as this what I have been trying to do in the R&D organization this year, bring it back to the patient. Science is great. We understand that, but at the end of the day, what does it mean? Well if you look at the people treated today with basal insulin about eight million people treated, half of them on Lantus, half of them on other basal insulin.

When you look at the results how many are really treated well and are getting target. You realize that only half of them we reach targets half of them do not. They still have A1c hemoglobins over 7%. So we need to find a solution to that. We can’t have 50% of our population not using our treatments effectively. And so, what we found is that by combining Lyxumia on top of basal insulin in the pre-trials we find that in fact we can bring these patients within closer to goal and, therefore, we this is why we are developing an injection device for combining Lantus with Lyxumia, a fixed dose Lyxumia, which is on track for Phase III initiation early in 2003 with a device that will do that.

Now, when you look at the diabetes franchise you realize that you have to look at patients needs, and if you really look at the patients who you insulin a large number of them really do not get the target. Why is that? Because when you look at the pharmacokinetics of an insulin, what you have to be careful about is the piece, because the doctor is going to actually calculate the patient according to the peaking of the days. And because of that what tends to happen is that if you have a treatment you want o be safe and, therefore, the great majority of patients on basal insulins are under treated.

And so, what we have been only looking for is an insulin that has a slighter PK/PD profile and this one we founded it has a PK/PD profile. But more importantly 20% of patients with advanced diabetes use very high dose insulin, so they had to stick themselves more times than once and the lower injection volumes allow us to envision a way of helping these patients, but you don’t say it is just a formulation. It is not just a formulation it’s a different bio-physical principal.

The crystal of insulin inside of the total of insulin is really different in a normal formulation where there is a fewer molecules of insulin per unit of space where as in the new formulation we have been able to pack more insulin in a much smaller volume. So, one, we can address the clinical need, but two because of that it eludes at a different rate, and that’s what gives us the unique flat PK/PD profile. And that’s what we are focusing a first phase pre-trials on high dose insulin users to see how we can in fact improve the treatment of these patients.

Now, diabetes is a major franchising area for us. Cancer is also such a franchise. You know about all the currently marketed products and this year we have strengthened our portfolio with Zaltrap. Now why is Zaltrap aflibercept something we think has a potential? Because unlike the other in the market that hits one receptor this one is a trap. It really traps a ligand which means it is really affecting every angiogenic targets in the process. That’s what we wanted to really push this one with positive results in metastatic colorectal cancer, and we have ideas about how we expand the utilization of Zaltrap for patients with different conditions.

Next to that is Visamerin or Mulsevo, which is the -- I mean fundamentally what we have to understand is that treating the cancer patient is not just giving an anti-cancer drug; it is also managing the complications inherent to the cancer state. One of them is that a large number of patients when spotted on chemotherapy will develop (inaudible) and these can be quite lethal conditions.

This product is the only ultra low weight molecular weight heparin that is effective in reducing the particular space of patients with cancer and the coagulability issues and reducing the risk in chemo-treated cancer patients. It doesn’t have an impact on major bleeding incidents and the treatment effect has been consistent across similar types. So that’s again a reinforcement of what we consider one of our platform, if you will, in R&D oncology.

Clearly, when you look at the history of our company and you look at our ability to play in cardiovascular areas, we had a historical success in thrombosis and arrhythmia is another condition. So, there is quite a bit of inherent knowledge and when we looked at what Genzyme was bringing in the rare disease space and then what we had in the portfolio with PCSK-9 we realized that in fact we may have a very favorite franchise there. Why? Because if you look at the 40,000 patients with familial hypercholesterolemia that comes from genetic causes about 5,000 of them are homozygous. In other words, what they inherit the gene from both their mother and their father that increase cholesterol to levels that are unbelievably high and about 35,000 that have a severe but heterozygous condition.

Well, this is what Kynamro is focusing on. This is a novel type of therapy because it suppresses what we call an antisense RNA. It goes directly to the liver and blocks the production of cholesterol. And that significantly reduces LDLC and liver fat is stabilized at 12 months, and we really see a significant reduction in apolipoprotein D production and LPA which are really important characteristics with these patients to have a good outcome. So this is one component.

Again rare disease at one end with the Genzyme approach to rare diseases. On the other hand, we have in our portfolio something that we are putting a lot of attention to, and that is the PCSK-9 monoclonal antibody. This is the first in class monoclonal antibody addressing unmet needs in hypercholesterolemia, and this is a common pattern of development today. When you look at your R&D you have to define a significant unmet need. Now we know that 30% to 40% of patients are not at goals with statins. There are many reasons for them. Some familial, some compliance, some portability, but what is clear is that we have reached a plateau in reducing mortality and morbidity in arteriosclerosis.

I think the landmark study that I am referring to on the slide is the study that showed in Texas 9,000 patients followed over years that is PCSK-9 -- the PCSK-9 gene was disabled. The patients had a very lower rate of coronary disease and lower rate of LDLC cholesterol. That observation a human observation led to a race in developing this. In 2009 Chris and the team decided to focus on PCSK-9 and because it has a strong translational rationale and it has a strong medical value attached to it, in our opinion. And so, when we did realizing that the mode of action is different in statins that in fact we had an opportunity here with smart development to reach a goal quite fast in terms of reaching proof of concept and eventually Phase III.

Sure enough, Phase II results have been described for the reduction in LDLC and 65% systematically even on top of Statins, which shows the complimentarity of the pathways and at the same time that we have opportunities to treat patients who can tolerate statins. And we are starting Phase III in the second quarter of 2012. We have already started the Phase III long-tem study in December 2011. So, again, addressing unmet needs.

Because we are quite expert in cardiovascular thrombosis, for example, and other like Plavix or other treatment like low molecular weight heparins and other approaches, we really focused on this one I will tell next about. Why is that? Because when you talk to physicians who treat acute coronary events what they will tell you is that one of their biggest fear is that they will treat the event and they will harm the patient because they have to use heparin or anticoagulants, the action of which is slow incoming which means that, that when they do the intervention the blood can clot and they fail, or slow ingoing, in other words the anticoagulant action lasts so long that they treat the patient and then the next day they have a significant hemorrhagic complication including hemorrhagic stroke. So, doctors have been looking for something that would be short in terms of reaching efficacy and short in terms of quitting the anti-coagulant effect.

So, I am trying to explain it to you why is it that we are interested in this product is because it provides a superior outcome while simplifying treatment. Treatment today is very complex with this one what we hope is that interventional surgeons and interventional radiologists who do -- a lot of cardiologists, who do a lot of these procedures will realize that with this we can a have a one step penetration and a one step deactivation of the thrombotic event. So, those are in my view the advantages of Otamixaban. And we will see we have a Phase II that will finish at the end of the year and we will see that’s true.

Again, building on the rare disease franchise continuing to say we don’t want to be dispersed we want to be focused on things we are good at and building on strength. This eliglustat is, in my view, not only a novel therapy for Gaucher disease but its probably a revolutionary therapy because it addresses the disease in a different way. With Cerezyme what we are trying to do is replace the defective enzyme. With this medication what we are trying to do is it’s a small molecule goes to the brain and goes to different parts of the body, bones for example, but what we are trying to do is different than Cerezyme.

What we’re trying to do is actually inhibit the enzyme that produces the harmful ceramide which is the one that accumulates and make these patients have a large liver and the dysfunction is associated with the disease. That’s why our colleagues at Genzyme really jumped on this opportunity and frankly it’s a potent and novel substrate inhibitor that has a convenience of all therapy and can eliminate the challenges of infusing patients that is complimentary in many ways because it will help us in truly managing this disease more comprehensively. The total profile is expected to be similar to Cerezyme because its really in the pathway. But we believe that over time with the Phase II there that we have and that we have completely recruited Phase III that what we hope is that this will be a game changer for these patients.

You could have a patient here, for example, 18 years of age. You can see the size of the patient. Three years on eliglustat and you can see the impact physiologically on this young patient. It is in my view already the most significant change in the management of this disease that will occur.

So to finish, I don’t want to miss my colleague Olivier Charmeil's accomplishments here, and again we’re working as a global organization and we’re sharing our resources to make sure that the high value projects are supported and executed with operational efficiency. While dengue vaccine, in my view, is actually in truth over the past ten years has not been in novel vaccine in the field. Everything has been sort of modification of what we know. This is the first true novel vaccine designed for dengue.

Dengue is, in my view, a growing global threat because mosquito that carries dengue lives in cities. Urbanization is fast occurring; global warming is affecting a larger swathe of the world. It’s truly at this point a public health priority in Asia and Latin America, 220 million infections. So we think that this, in my view, provides a solution to a rising problem at the right time.

There’s a global Phase III program currently ongoing with 43,000 individuals, and this is something that I think has to be understood by Global R&D. Global R&D at Sanofi is capable of launching a global clinical development program in all of the areas of interest to the company and this is a good example of that. Now, clearly dengue is a major threat. The vaccine itself is scientifically extremely innovative because it uses a chimera where we use a yellow fever virus and we build all the antigens of the dengue viruses, which are four of them, and so that we can produce the tetravalent vaccine that this dengue vaccine is, and I really have great confidence that this will be a successful launch.

So 18 potential new launches, we have the list. I am only giving you what is in the current late stage portfolio. I understand that and I’m told that there is a lot of discounting whatever R&D Chiefs say in terms of the early portfolio and I agree we should give him the track record of the past 20 years. But I think we have here tangible measurable outcomes at R&D, you can check us on.

And frankly, when you look at the catalyst in 2012, we have the list. We are committed to these. But importantly I think you should not ignore and you have that in the Appendix, our earlier phase portfolio and our preclinical portfolio, which also I think promises to be quite significant.

So, with that, I’ll turn it back over to Chris.

Chris Viehbacher

All right. Thank you, Elias. So let’s have a look at now where we’re going in 2012. So, as we thought about guidance, we said all right, what do we want to signal that’s new? Why do you we want to tell you in the guidance that the change from what we’ve already told you? The answer is nothing. 6th of September a lot of us were up here. We gave you a vision of where we saw the company going into 2015. What’s going to happen in the mean time? We had a very solid first quarter. All of growth platforms performing exactly in line. In fact, for any doubting Thomases on emerging markets, I think we put those to rest. And anything if there is any new news is the fact that we have derisked the Genzyme recovery through the approval of the Framingham facility.

So let’s have a look specifically at 2012. This is just the things that are going to happen. Again, I wouldn’t expect for anybody who has been following us to have any surprises in any of this. Clearly what are the headwinds? Well, March Aprovel is going to go, May Plavix is going to go, August Eloxatin is going to go, on the full year effective Taxotere. We’ve seen that the Momenta has lost the injunction on a second generic and we would expect that in the market. We’ve already put our own generic out there. The Copaxone agreement terminates in Q1 of 2012.

On the other side, we clearly got very strongly performing in our growth platforms. They’ve been performing for three years, and I think they’re going to continue to perform. We will get an additional quarter of Genzyme. So we will consolidate four quarters instead three quarters in 2011. And I think we developed a good reputation on being disciplined on cost.

So what does that mean? Well, I think we were also trying to be very transparent. What is the actual impact on Plavix? Well, on September the 6th it was €1.4 billion. What is today, its still €1.4 billion. So, if we take into account very robust performances in the growth platform cost control and the impact of Plavix, Aprovel and other generic competition. We would expect EPS for 2012 to be in line with consensus, which is around 12% to 15% lower than 2011.

Now, exchange rates always play a role in all the consensus and we try decode all of that, but our belief is that this is in line with consensus. And again, this is exactly in line with our vision of the business that we had on September 6th nothing has changed as far as we are concerned. We still are extremely confident that as we come out of 2012, we got a growing business, and why is that? Because nothing happens to the business. The only thing that happens is the stuff that’s dragging us down goes away, but the growth platforms just continue to march along. And when you remove the part that’s negative then you just have a higher and higher percentage of what is growth platform.

As we stand here today, we believe that we can do 5% annual compound growth rate on sales between 2012 and 2015. You go back 30 years, you will find that diversified companies pretty much consistently have a higher PE than those who aren’t, and we believe that we got a nicely diverse business. We have got scale in some pretty important franchises leaders in vaccines, leaders in diabetes, leaders in rare diseases, leaders in animal health and now one of the top five companies in consumer health.

What happens on patent expires afterwards? Sanofi goes to one of the most concentrated patent cliffs, but it comes through the patent cliffs. By the time we get through the patent cliffs 6% of our sales are related to small molecules in generic-endemic countries i.e., US, Europe, and Japan, probably the lowest of any company in our industry.

Large emerging market presence. Are those countries here and they are going to have hiccups? Yes. Are we going to be able to do double digit every single quarter? I don’t know we can’t manage those businesses as tightly as we have been able to do in US and Europe. But I do fundamentally believe in the emergence of middle class is the growth of those economies, and I think that it is the biggest lever of growth for the entire pharmaceutical, I don't think anybody has got a position to seize than Sanofi.

Research and Development, you heard that having cleaned out the portfolio three years ago, actually that stuff and it's now being filed and it is coming to market. And I think Elias has given a good indication of some of the interesting things we have in the pipeline. There's work to do. That’s why we are doing a massive shift in research, but I actually think in research and development we were behind three years ago. We are at least as good as anybody I think in the industry today. And I think on research, we’re prepared to be more radicals than most.

Operating margin will be affected and we gave guidance on that. Nothing has changed on either by the way. We’re still at the 31% to 32%, but the €2 billion that we will pull out of the business on top of the growing business mathematically leads you to higher margins as we go forward. We'll have leveraged P&L, so that means, we would expect earnings per share, compound annual growth rate to be in excessive sales and as we said, all along we believe in shareholder returns and so increase our dividend payout ratio to 50%.

Thank you very much for listening and let's turn this over to some Q&A and love to hear from you.

Question-and-Answer Session

Luisa Hector - Credit Suisse

Thank you. It’s Luisa Hector at Credit Suisse. I have got three questions for you. Firstly, on the guidance, Chris, you showed the slide with the tailwinds and headwinds, you got the guidance range. Is there anything specific driving that range, Lovenox and Genzyme are probably the two bigger benefactors?

Chris Viehbacher

Well, I mean, you got obviously the €1.4 billion that’s Plavix and Aprovel. We only had Taxotere for three quarters last year, you're going to have a fourth in this year. And we have got Eloxatin, we are very thrilled to get Eloxatin back last year, but Eloxatin will go again in August. We don't expect anything new on European pricing. Last year, European pricing cost is about €300 million. I don’t see things getting better in the Europe, we have no particular evidence, and it isn’t getting worse either so we would kind of expect difficult times in Europe to continue.

I think we will make an extremely strong progress with Genzyme and more confident ever than in the recovery of Genzyme. And I think the ability for us to really work with Genzyme is not just a recovery, I think it is excitement in Genzyme when you look at the new products coming on. And we are clearly seeing the ability, we can’t speed this organization of what we can do behind biosurgery and behind the renal and oncology business.

So there's in particular just -- this is 2012, we've always known this is the cliff year. And so, that’s where we are. And as I said, I think our view of the world is pretty much in sync with where our investors are.

Luisa Hector - Credit Suisse

Okay. And then, Jérôme, just coming back to the cost savings. You've got about €1.7 billion left to deliver. And I think you were saying basically for 2012, it would really be the residual Genzyme cost savings coming through. So can you put any more color on the timing of the rest of the savings and why they are more delayed?

Jérôme Contamine

Well, there is no delay. We have this €2 billion objective for 2015, so if you -- this is a for four years, it’s €500 million per year. The way you need to look at it is the following, I mean, (a) you have Genzyme, so, we have generated $330 million in 2011. We have $700 million full-year impact 2013. And clearly, the savings in 2012 will be somewhere in between because all this change in organization that we started implementing such as an example, I mean funding out a new ERP, you take country by country for the 80 countries where Genzyme is located, and then I mean get assessing of the time of those years. So, I can take examples like that.

So clearly that is another contribution from Genzyme this year. I mean in industrial, I mean you saw the slide I presented. We have implemented all our industrial LEAN approach, having the total cost of ownership approach to see how we can generate maximum value of the production. I mean we’re also having the commercial people speaking more with the field people to use the number of SKUs to stabilize the weak sales, which you are producing (inaudible).

But actually all this take a bit of time to be implemented, because on the other hand, we are going to benefit this year from the savings, which resulted from the decisions we took in 2009 and 2010, for instance, to restructure of our chemical network in France and Europe. So there is always a delay between the time you harvest the saving and the time start doing tightly implement them. Of course, if you decide to reduce fixed cost in the US it is probably much quicker.

On the R, we still (inaudible) taking place. By midyear and even maybe before all people working in Bridgewater will have either move to Cambridge or left the company. That’s I mean, still you have to move all the infrastructure the IS, I mean the information system as well. So these are how things work. So at the end of the day, from what I tried to describe to you, out of the average five times we should see more of these taking place this year. In another term it will be some frontloading of the €2 billion, which will be already in 2012 onto ’13.

Chris Viehbacher

So in other words, if you take €2 billion between now and 2015, you could say it’s €500 million a year, that ain't going to happen. I mean the only thing that takes longer is industrial spares. The rest of it, all is going to come much closer in the period. So most of the savings actually are upfront. And I think, if you look at our last €2 billion, originally in 2009, we said, we will take €2 billion out before 2013, and actual fact we took the €2 billion out in the 2011. So I think we got a pretty good track record of when we sit down to do it and taking cost out.

We’re always cautious in how we express that because we got a big cost base in Europe and there are always negotiations and consultations that have to be done, and we never want to get out ahead of those. But I think if you look at what we’ve done on cost that’s what we’re going to do in the front. So most of those cost savings will come in in the next couple of years and not in 2012.

Luisa Hector - Credit Suisse

Thank you. Could I also just ask on the Lantus new formulation? Does that -- the studies that you’ve started that’s with once daily dosing just sort of pitching as of it true, true once daily? And then, could you comment on the timing of the data and whether this would be filed as a novel drug or as a supplemental to Lantus please?

Elias Zerhouni

Well on the current phase III trial, we’re really focusing on high (inaudible) the goal of glycemic control and hypoglycemia. So that’s exactly the point. And then can we do it in that mode, and reduce the number of injections that you have to do, and, but also more importantly is really understand whether we can get better glycemic control or well with less hypoglycemia. The formulation is really a patented formulation. So it has actually some specific component, I mean completion of matter issues to it in terms of the physics and the biophysics and so it is starting proceed.

Jean Jacques Le Fur – Oddo Securities

Jean Jacques Le Fur, Oddo Securities. The first one is could we have a little bit more color on the impact of austerity measures/healthcare reform, which impacted through 2011, and what could it be for 2012? And my second question is about Iniparib. You found a new mechanism of action. So could we have a little bit more color on this new mechanism of action? And what could be now as new indications for this product and the timing for Phase III timing and launching? Thank you.

Chris Viehbacher

(inaudible) I'll take the austerity measure?

Hanspeter Spek

If I take the austerities, I think it was mentioned before we estimated at approximately €300 million in Europe and I think we have said another $100 million in the United States coming out of previous measures in 2010 possibly even in 2009 out of this so called Obama plan. So round about €400 million.

And in anticipation we anticipate nothing more dramatic which has to be handled with care as the overall macro economic situation became a little bit unpredictable and a small pressure is on the macro system as modeled beyond the micro system of healthcare, but in our estimates we have anticipated approximately the same impact 2012 as in 2011.

Elias Zerhouni

As far as Iniparib is concerned as you can see from the day -- I mean the information that you have would definitely considering the trials that were ongoing. So, we are going to have a redial on that. In the meantime though we did elucidate the mode of action and Iniparib is acting in a way that we understand better which will lead us to redesign some of our approaches to it. Fundamentally it is acting like a prodrug and really is metabolized within cancer cells which really has unique advantages in our view and explains also some of the results that we have had. And so, we are trying to, to really exploit this knowledge right now.

So two phases, one, we continue what we had in the trials because we now we have some confidence that we understand what’s happening; second, redesigning some of the or designing de novo a new approach to it dose wise as well as delivery wise.

Chris Viehbacher

We are not saying much because we have actually new intellectual property pending on this drug.

Vincent Meunier - Exane BNP Paribas

Okay, Vincent Meunier from Exane BNP Paribas. A few questions if I may. The first one is web question on the new Glargine formulation is it required to perform cardiovascular studies with that new compound? And will you test the usual Glargine molecule as the comparator? Also, what’s your commercial strategy against Novo Nordisk Degludec which is potentially launched or at least approved by the end of July this year? And last question on Lemtrada, what could be the pricing for this drug assuming its early infusion.

Elias Zerhouni

I think we are going to have to take one question at a time. I don’t have that you know so go back to the first one on the Glargine if you don’t mind? And I will take that.

Vincent Meunier - Exane BNP Paribas

Yes, sir.

Elias Zerhouni

You mean 300? Yeah.

Vincent Meunier - Exane BNP Paribas

For the Glargine the question is do you have to perform cardiovascular studies and will you compare it to the usual Glargine molecule?

Elias Zerhouni

Well we don’t expect to do that I mean it’s an interest in its own as a molecular matter, its different in its PK/PD so we have to document that we have to find out what happens in terms of the typical endpoint glycemic control and hyperglycemic event. Second question was?

Vincent Meunier - Exane BNP Paribas

Was on Degludec?

Elias Zerhouni

That you see, first, we will not define our commercial strategy before they are through Phase III and have a labeling and even if we would, we would not communicate today about it. Overall, we are not too excited about compounded (inaudible) I think I have said before the events where similar phase with [Tetamer] near you will know as Tetamer has not been such successful. We have seen of course the recent clinical data where we see according to what Novo Nordisk said no difference at all between Lantus and this product in the mainly loss of (inaudible) group of diabetes run patients what we see in diabetes 2 population is very marginal. Already from a clinical point of view I think they have 0.05 (inaudible) per patient here so whatever you show statistically maybe interesting but it has not a lot of clinical relevance. But as I also said earlier we have to see how this product comes to the market at which price and so on and so forth. And then we have a number of options to react or just to let it go by as we did with (inaudible). The last one was on the potential pricing of Lemtrada.

Chris Viehbacher

So did maybe I will add I mean the only thing I would say on Degludec from what we are hearing is that basically if Tetamer was too short you know, Degludec is too long. So, we can deal with that commercially.

Let me start at pricing I think we are not going to comment on it at this stage but given the results we would certainly just not going to comment actually.

Sébastien Martel

Chris, I will jump in with couple of questions from webcast. We have got one (inaudible) from (inaudible) at BNP Paribas. He is asking what are the expectations in terms of payout increase for the dividend in 2012 already. And he wonders whether we’ll naturally increase the dividend 2012 despite an EPS decline this year. And we’ve got another one maybe I guess for our Head of Vaccines here, Olivier Charmeil. There is a question on whether the strong Q4 performance of vaccine in the emerging market is related to any specific tender process or other growth drivers?

Jerome Contamine

Dividend last year is the not a Global Director of the (inaudible) up a meeting to report the dividend. So it’s not time to ask any (inaudible) norms and facts on what's going to be dividend to be paid in 2013 onto 2012 the reason precisely. Now, if you look at the graph I mean we are big. But the fact that if there is an increase in dividend up to 65, we see a 6% increase when our profit is decreasing, the signal that we are aiming slowly to have a regular increase of our dividend over years in order to reach the 50% payout in 2013 paid on the result in 2013 clearing representing 2013 should be higher than the results in 2012. Now how are we exactly to run these two figures and it is what we have to be decided next year.

The other thing that I can say is that we said already that by all means we are not considering or we will not consider reducing the dividend even if our profit will be decline in 2012. So this is also clearly excluded. So between flat to slight increase going through the 50% payout in 2014, I will see where will be next year.

Sébastien Martel

Thanks Jerome. And then so, the question was from Michael (inaudible) at Barclays on vaccines, Olivier.

Olivier Charmeil

So we had a strong quarter in the emerging market as it goes to 16% when compared to a full year growth of 10%. We are leveraging our presence in the emerging market. Our growth is very much driven by our Pantaxim sales, our pediatric combination with strong sales in Mexico and in other parts of Latin America. We have also got the IPV on in sales. Brazil had made the decision to put on its immunization schedule IPV and this is a major achievement and we had first shipment at the end of December but it is of course sustainable sales. And the last element is the OPV sales to UNICEF that it could play from one quarter to the other is nothing -- very significant in here. We continue to see a strong momentum of OPV and since the beginning of the year 2012, we see in the level of requirements coming from UNICEF that the OPV sales continue to show us some fundamental.

Chris Viehbacher

I think it’s also equally valid to say that India is now going two years without any polio outbreak. And, there is certainly a movement now I think that we will see acceleration from OPV to IPV and Sanofi Pasteur is exceptionally well-positioned to take advantage of that opportunity.

Sébastien Martel

So we will take some more questions from the room. Yeah, go ahead.

Philippe Lanone - Natixis

Hello, Philippe Lanone from Natixis, just one quick question on Lyxumia because you know slide you only presented and as on top of Lantus basically. Well, there has been a lot of change in the GLP1 environment but the negative results of the once at least. And, so what you see as a future for a monotherapy Lyxumia apart from the fixed combination?

Elias Zerhouni

Oh, I hope I didn’t convey that, there is defiantly because of the postprandial effect and the ease of use it has a single free standing use per se, and I hope I didn’t misconvey the fact that it can only be used on top of Lantus. But because of that it has a unique profile to be in fact combined with basal insulin, not just Lantus, because of this postprandial control profile which is quite unique across GLP-1, and the fact that you can titrate it in one step you don’t have to wait for six weeks to get there. I hope I am answering it has both uses, GLP-1 alone and GLP-1 on top of insulin. And remember all GLP-1 have the advantage of weight loss versus weight gain so that you stabilize the patient on the better rate. And you, through the studies we have done I mean you can see there is a better achievements of A1c levels with a combination, but it is not just a combo product as a free-standing merit.

Sébastien Martel

Mark, go ahead.

Mark Beards - Goldman Sachs

Thank you. I am Mark Beards from Goldman Sachs. A couple of questions on the pipeline, if I may. Firstly, we didn’t see PCSK-9 on your new launches 2015 slide is that because it’s a long-term opportunity and still (inaudible) as developments, or was a just missing from that? And secondly, Lantus lixisenatide and new Lantus, obviously you've got a combination in development from Lantus lixisenatide. You are also developing a new Lantus. How should we think about those two programs and will they converge at some point?

Elias Zerhouni

So, PCSK-9 go to page 55 its right there, on the bottom of the 2015 column.

Mark Beards - Goldman Sachs

Okay. Thank you.

Elias Zerhouni

Okay. And on the Lantus U100, U300 and you said PCSK-9 I did not hear the question.

Mark Beards - Goldman Sachs

Now the question was that you developed a new Lantus. You also developed Lantus lixisenatide combination, with those two programs converge? Do you have any updates place on them?

Elias Zerhouni

At this point I can’t comment on the new Lantus converging with Lexi. What we’re doing right now is Lexi plus Lantus. Yes, we do define that as a special, kind of give patient the beginning development for U300, the patients were not a target especially the high insulin use patients. So at this point, I can’t comment on whether or not a development is going to go there. First Phase III is only 20% of the patients really are at high doses with any basal insulin by the way and are not our goal.

Mark Beards - Goldman Sachs

Do you have an update on the combination development plan?

Elias Zerhouni

So the combination as I said we are launching the Phase III, 2013, the device you know the FDA requires that you do your Phase IIIs with your final commercial device. So that’s what getting to start into the end of 2012 beginning 2013.

Sébastien Martel

I’ll take a question from Eric Le Berrigaud

Eric Le Berrigaud - Bryan, Garnier

Thank you. Eric Le Berrigaud, Bryan, Garnier, I got three questions. First would be on emerging markets, for the six products to be filed you’re still very much focused on U.S and Europe. How far behind the filings in territories like China or Japan for instance?

Elias Zerhouni

So actually we look at global development now. So if you look at our PCSK-9 already in files in Japan, for example. Zaltrap same thing we’re trying to submit to other health authorities. But you’re right I think the key is in many countries, if you don’t have a EU or an FDA approval it’s hard to go to Phase II. Like China for example will not allow you to do a Phase II trial unless you have or else you have to do the Phase I with compound produced in China. So when you strategize all that you have to understand that it’s almost only the authority you start in US and EU no matter what. So Japan, on the other hand, in Japan we have Lexumia there. We have PCSK-9. I can’t remember the others but I know that we’re put in Japan much earlier in the process because if you recall Japan used to have the tradition of waiting for all approvals elsewhere before starting. That has changed. They do want to reduce the time of access to new molecules by their patients. So it's now (inaudible) I could convey that information to you, if you wish.

Chris Viehbacher

In fact it’s quite a mix because there are some countries also in an emerging market that once you have approval either in the U.S or in Europe you will automatically get approval in those countries. So, there is actually quite a wide range of variability but at least as Elias for particularly China and Japan there is going to be some delay but probably less than it had in the past.

Elias Zerhouni

This is a disease that is specific to the region. We are still going to global development with US and Europe being key to the approval process pathway.

Chris Viehbacher

That will go with dengue for example. It's Latin America and Asia.

Elias Zerhouni

Right, so dengue is different and is halfway of approval.

Eric Le Berrigaud - Bryan, Garnier

So precisely the second question relates to PCSK-9. The target for sale looks very much interesting but what could you say about safety and in terms of injection site reaction, whether you see anything? And whether your own formulation is already in too early stage development?

Elias Zerhouni

No, no, the overall formulation is pretty -- we clearly understand we will be going into Phase III in three months if we didn’t have it. The devise is something, the dosing we're pretty clear on what needs to done. In terms of safety I don’t know if you went through the 8-K but we did report at the AHA immunology and we don’t see that in the Phase II trials. We have one skin reaction unclear whether it's the product or something else. So, it looks extremely safe from the current data that we have. No increase in other parameters that would say oh, there is a counterbalancing effect or lowering for example in HDL or something like that typically you would worry about. So, right now, we are quite comfortable with the safety profile. We will find out in Phase III.

Eric Le Berrigaud - Bryan, Garnier

Okay. last one in terms of dividend. Do you plan as last year to pay too for the possibility for the dividend to be paid in shares?

Chris Viehbacher


Sébastien Martel

It was a quick one. Maybe we will take questions here from Alexandra Hauber, second row.

Alexandra Hauber - JP Morgan

Several questions. Question on (inaudible) first. I think you said in the press release that you saw conversion up to 50% up from 40%. Is that going fairly smooth and are you confident you can sort of increase that penetration that we tended to present to once 2014, 2015 we should be at this sort of 80%, 90%? And what are you actually doing to make sure that that’s happening? And then second question is just around the topic of pens. Have you finally defined which device you're going to take into the Phase III for the lixisenatide combination? Are you still pursuing the version of those components can be tritrated?

Jerome Contamine

I will take conversion. Yes, I think 40% is not better size, you will remember it was a matter totally dominated by [cartridge] so that’s already the answer to the second part of the question, what do we do? We favor everything commercially from a promotional point of view, which goes into conversion and we de-favor anything which would keep the matter on cartridges. Can we bring the market to 100%, I don’t think so, because I think as we grow we are right. Would you like to grow faster? Yes, perhaps on the other side, we have to see that there is still a market of non-pens where we also have to continue to make offers with client is in not in pens but I think 40% today -- 50% today where we have been I think in 2005 or 2006, 10% or 15%, it’s a good rate.

Chris Viehbacher

I think it’s fair to say that we have really increased our efforts in the last two years and that includes pricing and other commercial terms in addition to promotion.

Elias Zerhouni

Absolutely, we are continuing with the development of devices that could give you fixed flex so that you can titrate the insulin, or we think it’s important for patients. I don’t think you have the ability – I mean, the fixed dose for us works well, because lixisenatide has fixed dose at the side of 10 or 20, so there is not a lot of complexity to that, but we have -- this is what we pursue, I mean, we have the devices to back up and aiming for some increased fee with a commercial device in 2013.

Alexandra Hauber - JP Morgan

But it is still not finalized since it’s only in the year or are you initiating or have you nailed it now?

Elias Zerhouni

Pretty much. I mean, all you have to do all the PK/PD trials obviously for that before you start your Phase III, so we are ongoing through that and we have primary devices back like every development plan.

Chris Viehbacher

So, in other words, to be clear, the device is fixed, there is backup device, so we are not tinkering with the device at this stage.

Elias Zerhouni

Yeah, we are just making sure.

Chris Viehbacher

We are going through the PK/PD studies in the device to make sure it is valid and we are able to get authorization to go into Phase III with.

Alexandra Hauber - JP Morgan

And then, I just would like to ask you for a little bit more color on the Genzyme situation. You said that you are going to initiate to the dose the patients on the waiting list (inaudible) 8th of March or the second quarter. How long is that waiting list and how long is it going to get to everyone’s full dosing? And on Cerezyme, I know you it is going to take you some time to get as much out of outcome fund as you would like, but can you just update us on what Cerezymesituation is in terms of patient dosing and waitlist? And just in general, how long do you think since you have to balance the patient dosing and inventory, how long will it be until we have completely normal inventoried that will begin?

Elias Zerhouni

So, if we start with inventory levels, one of the aspects of this type of production is it that yields can vary further significantly. Historically, Genzyme had five, six months of inventories, so if you had some of the fluctuations in batch-to-batch yields, you pick that up. We were running that less than one month of inventory. Now, we came out of 2011 with actually inventory levels than we expected. And so, I think it will be gradual build-in, but clearly, there is a constant patient demand and so, until we really get every patient on a full doze who needs the drug, we are not about to start pointing in product in the warehouse. So we will continue to operate at least through most of 2012 with minimum levels of inventory.

Now, batch-to-batch variability is interesting. We are just coming through the first time that Allston facility has been shut down for maintenance in 10 years. And our belief is that potentially, this could have the beneficial impact on yields as well. We have no evidence of it yet, but those are the sorts of things that could have a result. We won't be able to immediately be able to use the Fabrazyme we operate, but after Fabrazyme is completed, we actually have to go through a validation process to be able to use the other reactors.

The real benefit is expected to come from eliminating some of the other downstream bottlenecks because we have taken Fabrazyme out and really significantly, simplified the operations of the Allston facility. The Allston facility was built 20 years ago and it was built really for one product. And so when four came in, we’d almost overloaded that facility. So we are now getting that facility back to really what it was originally intended to do and we have been also be able to replace a lot of the ageing equipment because this facility has been running flat out for 10 years.

So, I think you as I say on Cerezyme, we're going to see a gradual increase in sales over the years, principally, because in the fourth quarter we weren’t able to fully provide dozing for patients. I think the real change in Gaucher is going to come through eliglustat. Eliglustat is clearly a game changer in this, offering an oral drug, remember patients have been on some of these twice monthly infusions, all their life, I mean Genzyme has followed patients very often from childhood through to adulthood. Now to offer them with the same level of - at least the same level of efficacy is quite an opportunity.

On Fabrazyme, I think the interesting about Fabrazyme is you have got five times the enzyme that this Shire product has. And we have clearly seen that at least some patients don’t do as well when they are not getting the full dose of the product we certainly got enough patients who are anxiously awaiting Fabrazyme to come into the marketplace especially since we offer five times the dose for the same price as Shire. So, I think on that one we are more than competitive.

And we get up to we first have an obligation to patients who are on the drug and to say that we believe we get to in the beginning of March and I can’t remember exactly how many patients are on there but we take that on a first come first serve basis to be fair to our patients and I believe by mid 2012 we get back to full supply even on the waiting list and we will have started to supply those patients in Europe who are desperately awaiting Fabrazyme.

Sébastien Martel

We will take a question from Béatrice Muzard on the left hand side front row.

Béatrice Muzard - Natexis

Yeah, Béatrice from Natexis. I had a question on euro vaccine your joint venture in Europe. You have done extremely well after the acquisition of the full control of Merial, so what is your strategy with your JV vaccine in Europe? Are you satisfied with the [trompfenin] how would you elaborate one the performance of this (inaudible) and (b) the asset value? And I had also question on the (inaudible). What is the value proposition for that one compared to the product of Insight for example thank you?

Chris Viehbacher

Go ahead. Anyone take the Merial question.

Hanspeter Spek

I am not sure if I had understood correctly I think the question goes with the joint venture this Merial also after having successfully integrated Merial and it should go through

Béatrice Muzard - Natexis

How could you elaborate the joint venture the vaccine joint venture (inaudible) performance and (inaudible) asset valuation?

Unidentified Company Speaker

It should be answered by Olivier Charmeil (inaudible).

Olivier Charmeil

Well, we have clearly not happy with the performance of the joint venture. We have changed the management we have a new management on board since September. We are busy working in two directions the first one is identifying growth opportunities and we have clearly -- we are starting to identify growth opportunity I think just an example Glargine sales have been declining significantly since the end of the catch up period but we see now that the immunization rate when compared to the US are really on the low side.

We have faced some issues in terms of supply in the last two or three and most by months and we get back on track and at some point would be in the position not to launch ZOSTVAX in UK.

So the second dimension is really on making sure that we operate in a more efficient way in various countries and we are going to look to various opportunities to combine our force to make sure that we get really the full benefit of the Merck support and of the Sanofic support.

Elias Zerhouni

On the JAK-2, I mean fundamentally you know it’s an equivalent pathway for JAK-2 inhibition, the Insight had and you targets on myelofibrosis, polycythemia, we are looking at other indications. But basically a JAK-2 inhibitor then the differentiation is going to be on relative efficacy and safety.

Chris Viehbacher

So in other ways we’ll need to do the …

Elias Zerhouni

I think the interesting thing for us is having an oncology portfolio that covers all the principle mechanisms of action and I think when you look at whether its MEK inhibiters or PICKs or JAK2s, Sanofi now has been able to build a portfolio and development of all those. I think also what is interesting is that we’re exploring ways of combing those which few companies will be able to do because we essentially have the full portfolio of those.

Sébastien Martel

We had a number of questions from the web which were very similar of what we heard here in the room. Maybe I’ll just seek one last question from Mark Dainty. He basically says that marketing EPS estimate for 2013 seems to be a bit sadistic. So he wonders what are the main differences between how you view 2013 and what the market currently is?

Chris Viehbacher

Right now we’re focused on delivering 2012. I mean in 2009 we gave guidance for 2013. Fundamentally I don’t see any major difference in what’s happening with the business in fact if anything, we’ve had to overcome somethings that weren’t anticipated. We probably lost since we gave 2013 guidance. We probably lost at least a €1 billion before tax because of European price reductions, healthcare reform in the U.S. and essentially we’ve been able to offset that largely because our €2 billion cost reduction program has come in to two years earlier than expected. So overall, I don’t see any difference in the kind of the business. I think we’ve been able to deliver over the three years since we gave the guidance in a manner that was really aligned with the expectations.

Now the one thing that we’re going to be conscious about is, its one thing to give guidance in 2013 when you’re sitting there in 2009 because everybody looks out with error bars around it that are little different than when you're in 2012, I mean we're all pretty experienced in this. And so we don’t want to get into the game of already here in the beginning of 2012 giving pinpoint guidance for 2013. But fundamentally, I think compared to what we said out to do in 2009 we have been delivering on that. I think the growth platforms have come in, I have to say in particular I think the consumer health has done even better than I would have hoped for.

Emerging markets, I think we have really been able to cease upon and we directly muffle out of our investment there and that’s quite a true competitive advantage. I think we have shown a lot of people wondered whether we can take cost out of the business with so much of cost base in Europe, I think we have demonstrated that we have been able to do that.

And I can say there is still plenty of cost to be taken out of the business. We just introduced a program last September in looking fundamentally our productivity across the company, and there is plenty of opportunity. I have always said that nobody ever got promoted in the pharmaceutical industry because they were costly. And so, these are businesses that ever been operated like the car industry for example. So, I don’t think we are going to have much trouble getting the next $2 billion out of that. And that’s really helping us to offset some of the loss, I believe retracted from our blockbuster.

So again, I think now the business continues to perform at a regular pace. We are marching along towards our long-term objectives. But we are not also ignoring any of the shorter-term and interim of milestones along the way.

Sébastien Martel

Well, I think that’s a very nice a way to wrap up. So, I would like to thank your management team for today’s meeting. And conclude the webcast now, and invites participants here to a drink. Thanks a lot.

Chris Viehbacher

Thank you.

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