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ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

Commission File Number: 001-31368

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yesý    Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yeso    Noýo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAPo International Financial Reporting Standards as issued by the International Accounting Standards Board ý    Other o

If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17o    Item 18o

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YESo    NOý.

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

        The consolidated financial statements contained in this annual report on Form 20-F have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and with IFRS as adopted by the European Union, as of December 31, 2012.2013.

        Unless the context requires otherwise, the terms "Sanofi," the "Company," the "Group," "we," "our" or "us" refer to Sanofi and its consolidated subsidiaries.

        All references herein to "United States" or "U.S." are to the United States of America, references to "dollars" or "$" are to the currency of the United States, references to "France" are to the Republic of France, and references to "euro" and "€"are to the currency of the European Union member states (including France) participating in the European Monetary Union.

        Brand names appearing in this annual report are trademarks of Sanofi and/or its affiliates, with the exception of:

•

trademarks used or that may be or have been used under license by Sanofi and/or its affiliates, such as Actonel® trademark of Warner Chilcott; Avilomics® a trademark of Avila Therapeutics Inc.; BiTE® a trademark of Micromet Inc., Copaxone® a trademark of Teva Pharmaceuticals Industries; Cortizone-10® a trademark of Johnson & Johnson (except in the United-StatesUnited States where it is a trademark of the Group); Dynamic Electrochemistry® a trademark of AgaMatrix Inc.; Fludara® and Leukine® trademarks of Alcafleu; Flutiform™ a trademark of Jagotec AG; Gardasil®, RotaTeq® and Zostavax® trademarks of Merck & Co.; Hyalgan® a trademark of Fidia Farmeceutici S.p.A, under license agreement in the United States; Mutagrip® a trademark of Institut Pasteur; Optinate® a trademark of Warner Chilcott on certain geographical areas and of Shionogi Pharma Inc. in the United States; Pancreate belonging to CureDM; Prevelle® a trademark of Mentor Worldwide LLC USA; RetinoStat® a trademark of Oxford Biomedica;



•

trademarks sold by Sanofi and/or its affiliates to a third party, such as Altace® a trademark of King Pharmaceuticals in the United States; Benzaclin® a trademark of Valeant in the United States and Canada; Carac® a trademark of Valeant in the United States; Liberty®, Liberty® Herbicide, LibertyLink® Rice 601, LibertyLink® Rice 604 and StarLink® trademarks of Bayer; Maalox® a trademark of Novartis in the United States, Canada and Puerto Rico; and Sculptra® a trademark of Valeant; and,



•

other third party trademarks such as Acrel® a trademark of Warner Chilcott; Aspirine®, Cipro®, Advantage® and Advantix® trademarks of Bayer; Atelvia® trademark of Warner Chilcott in the United States; DDAVP® a trademark of Ferring (except in the United States where it is a trademark of the Group); Enbrel® a trademark of Immunex in the United-States and of Wyeth on other geographical areas; Gel One® a trademark of Seikagaku Kogyo Kabushiki Kaisha, DBA Seikagaku Corporation; Humaneered® a trademark of KaloBios Pharmaceuticals; IC31® a trademark of Intercell AG; iPhone® and iPod Touch® trademarks of Apple Inc.; JAKAFI® a trademark of Incyte Corporation; JAKAVI® a trademark of Novartis; Lactacyd® a trademark of Omega Pharma NV in the EU; LentiVector®,EU and several other European countries; Stargen™ and UshStat® trademarks of Oxford BioMedica; Libertas™ a trademark of International Contraceptive & SRH Marketing Limited in the EU; PetArmor® a trademark of Velcera, Inc.; Rebif® a trademark of Ares Trading SA; Rotarix® a trademark of GSK; Trajenta® a trademark of Boehringer Ingelheim; Unisom® a trademark of Johnson & Johnson on certain geographical areas (except the United States where it is a trademark of Signal Investment); and Xyzal® a trademark of GSK in certain countries and of UCB Farchim SA in some others.

        Not all trademarks related to investigational agents have been authorized as of the date of this annual report by the relevant health authorities; for instance Lyxumia® trade name has not been approved by the FDA.

        The data relating to market shares and ranking information for pharmaceutical products, in particular as presented in "Item 4. Information on the Company — B. Business Overview — Markets — Marketing and distribution," are based on sales data from IMS Health MIDAS (IMS), retail and hospital, for calendar year 2012,2013, in constant euros (unless otherwise indicated).

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        While we believe that the IMS sales data we present below are generally useful comparative indicators for our industry, they may not precisely match the sales figures published by the companies that sell the products (including our company and other pharmaceutical companies). In particular, the rules used by IMS to attribute the sales of a product covered by an alliance or license agreement do not always exactly match the rules of the agreement.

        In order to allow a reconciliation with our basis of consolidation as defined in "Item 5. Operating and Financial Review and Prospects — Presentation of Net Sales," IMS data shown in the present document have been adjusted and include:

(i)

sales as published by IMS excluding Sanofi sales generated by the vaccines business, equating to the scope of our pharmaceutical operations;



(ii)

IMS sales of products sold under alliance or license agreements which we recognize in our consolidated net sales but which are not attributed to us in the reports published by IMS; and

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(iii)

adjustments related to the exclusion of IMS sales for products which we do not recognize in our consolidated net sales but which are attributed to us by IMS.

        Data relative to market shares and ranking information presented herein for our vaccines business are based on internal estimates unless stated otherwise.

        Data relative to market shares and ranking information presented herein for our animal health business are based on sales data from Vetnosis unless stated otherwise.

        Product indications described in this annual report are composite summaries of the major indications approved in the product's principal markets. Not all indications are necessarily available in each of the markets in which the products are approved. The summaries presented herein for the purpose of financial reporting do not substitute for careful consideration of the full labeling approved in each market.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

        This annual report contains forward-looking statements. We may also make written or oral forward-looking statements in our periodic reports to the Securities and Exchange Commission on Form 6-K, in our annual report to shareholders, in our offering circulars and prospectuses, in press releases and other written materials and in oral statements made by our officers, directors or employees to third parties. Examples of such forward-looking statements include:

•

projections of operating revenues, net income, business net income, earnings per share, business earnings per share, capital expenditures, cost savings, restructuring costs, positive or negative synergies, dividends, capital structure or other financial items or ratios;



•

statements of our profit forecasts, trends, plans, objectives or goals, including those relating to products, clinical trials, regulatory approvals and competition; and



•

statements about our future events and economic performance or that of France, the United States or any other countries in which we operate.

        This information is based on data, assumptions and estimates considered as reasonable by the Company as at the date of this annual report and undue reliance should not be placed on such statements.

        Words such as "believe," "anticipate," "plan," "expect," "intend," "target," "estimate," "project," "predict," "forecast," "guideline," "should" and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

        Forward-looking statements involve inherent, known and unknown, risks and uncertainties associated with the regulatory, economic, financial and competitive environment, and other factors that could cause future results and objectives to differ materially from those expressed or implied in the forward-looking statements.

        Risk factors which could affect the future results and cause actual results to differ materially from those contained in any forward-looking statements are discussed under "Item 3. Key Information — D. Risk Factors". Additional risks, not currently known or considered immaterial by the Group, may have the same unfavorable effect and investors may lose all or part of their investment.

        Forward-looking statements speak only as of the date they are made. Other than required by law, we do not undertake any obligation to update them in light of new information or future developments.

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PART I

Item 1. Identity of Directors, Senior Management and Advisers

        N/A

Item 2. Offer Statistics and Expected Timetable

        N/A

Item 3. Key Information

A. Selected Financial Data

SUMMARY OF SELECTED FINANCIAL DATA

        The tables below set forth selected consolidated financial data for Sanofi. These financial data are derived from the Sanofi consolidated financial statements. The Sanofi consolidated financial statements for the years ended December 31, 2013, 2012 2011 and 20102011 are included in Item 18 of this annual report.

        The consolidated financial statements of Sanofi for the years ended December 31, 2013, 2012 2011 and 20102011 have been prepared in compliance with IFRS issued by the International Accounting Standards Board (IASB) and with IFRS adopted by the European Union as of December 31, 2012.2013. The term "IFRS" refers collectively to international accounting and financial reporting standards (IAS and IFRS) and to interpretations of the interpretations committees (SIC and IFRIC) mandatorily applicable as of December 31, 2012.2013.

        Sanofi reports its financial results in euros.

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SELECTED CONDENSED FINANCIAL INFORMATION

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SELECTED EXCHANGE RATE INFORMATION

        The following table sets forth, for the periods and dates indicated, certain information concerning the exchange rates for the euro from 20082009 through March 20132014 expressed in U.S. dollars per euro. The information concerning the U.S. dollar exchange rate is based on the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York (the "Noon Buying Rate"). We provide the exchange rates below solely for your convenience. We do not represent that euros were, could have been, or could be, converted into U.S. dollars at these rates or at any other rate. For information regarding the effect of currency fluctuations on our results of operations, see "Item 5. Operating and Financial Review and Prospects" and "Item 11. Quantitative and Qualitative Disclosures about Market Risk."

        On March 6, 20132014 the European Central Bank Rate was 1.30351.3745 per euro.

B. Capitalization and Indebtedness

        N/A

C. Reasons for Offer and Use of Proceeds

        N/A

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D. Risk Factors

        Important factors that could cause actual financial, business, research or operating results to differ materially from expectations are disclosed in this annual report, including without limitation the following risk factors. In addition to the risks listed below, we may be subject to other material risks that as of the date of this report are not currently known to us or that we deem immaterial at this time.

Risks Relating to Legal and Regulatory Matters

We rely on our patents and proprietary rights to provide exclusive rights to market certain of our products, and if such patents and other rights were limited or circumvented, our financial results could be materially and adversely affected.

        Through patent and other proprietary rights such as data exclusivity or supplementary protection certificates in Europe, for instance, we hold exclusivity rights for a number of our research-based products. However, the protection that we are able to obtain varies from product to product and country to country and may not be sufficient to maintain effective product exclusivity because of local variationsdifferences in the patents, differences in national lawlaws or legal systems, development in law or jurisprudence, or inconsistent judgments.

        Moreover, patent rights are limited in time and do not always provide effective protection for our products. Indeed, competitors may successfully avoid patents, for example, through design innovation, and we may not hold sufficient evidence of infringement to bring suit. Manufacturers of generic products are also increasingly seeking to challenge patents before they expire, and our infringement claims may not result in a decision that our rights are valid, enforceable or infringed.

        Also, some countries are becoming more likely to consider granting a compulsory license to patents protecting an innovator's product; India's decision of March 2012 granting a compulsory licenseproduct which limits the protection granted to a generic company to a Bayer patent is illustrative of this risk.these products.

        We are involved in litigation worldwide to enforce certain of theseour patent rights against generics and proposed generics (see "Item 8. Financial Information — A. Consolidated Financial Statements and Other Financial Information — Information on Legal or Arbitration Proceedings" for additional information). Moreover, patent rights are limited in time of our small molecule and do not always provide effective protection for our products: competitors may successfully avoid patents through design innovation, we may not hold sufficient evidence of infringement to bring suit, manufacturers of generic products are also increasingly seeking to challenge patents before they expire, and our infringement claim may not result in a decision that our rights are valid, enforceable or infringed.

biologics pharmaceutical products. Even in cases where we ultimately prevail in ouran infringement claim, legal remedies available for harm caused to us by infringing products may be inadequate to make us whole. A competitor may launch a generic product "at risk" before the initiation or completion of the court proceedings, and the court may decline to grant us a preliminary injunction to halt further "at risk" sales and remove the infringing product from the market. Additionally, while we would be entitled to obtain damages in such a case, the amount that we may ultimately be awarded and able to collect may be insufficient to compensate all harm caused to us.

        Further, our A successful assertion ofresult against a competing product for a given patent against one competing productor in a specific country is not necessarily predictive of our future success or failure in asserting the same patent against a secondanother competing product because of such factors as possible differences in the formulations. Also a successful result in one country may not predict successor in another country because of local variations in the patents and patent laws.

        ToFurther, we have increased the extent valid third-partyproportion of biologic therapeutics in our pipeline relative to traditional small molecule pharmaceutical products. With the statutory pathways provided in the U.S. and Europe for biosimilars, biosimilars can be a threat to our exclusivity of any biological therapeutics we sell, similar to the small molecule generic threat described hereinabove (see "Changes in the laws or regulations that apply to us could affect the Group's business, results of operations and financial condition").

        However, with our increasing presence in generics and anticipated entry into biosimilars, we will utilize patent rights cover our products,challenge strategies against other innovators' patents, similar to those of long established generic companies, but there is no assurance that these strategies would be successful.

        In certain cases, we or our partners may be required to obtain licenses from the holders of these patentsvalid third-party intellectual property rights that cover aspects of our existing and future products in order to manufacture, use or sell these products, andthem. Any payments under these licenses may reduce our profits from these products. Wesuch products and we may not be able to obtain these licenses on favorable terms or at all. If we fail to obtain a required license or are unable to alter the design of our technology to fall outside the scope of a third-party patent,intellectual property rights, we may be unable to market some of our products, which may limit our profitability.

Product liability claims could adversely affect our business, results of operations and financial condition.

        Product liability is a significant business risk for any pharmaceutical company, and the Group's ongoing diversification could increase our product liability exposure (see notably "— The diversificationas liability claims relating to our new businesses may differ with regards to their nature, scope and level, from the types of product liability claims that we have handled in the Group's business exposes us to increased risks." below). past.

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Substantial damage awards and/or settlements have been handed down — notably in the United States and other common law jurisdictions — against pharmaceutical companies based on claims for injuries allegedly caused by the use of their products. Such claims can also be accompanied by consumer fraud claims by customers or third-party payers seeking reimbursement of the cost of the product.

        Often the side effect profile of pharmaceutical drugs cannot be fully established based on preapproval clinical studies involving only several hundred to several thousand patients. Routine review and analysis of the continually growing body of post-marketing safety surveillance and clinical trials provide additional information — for example, potential evidence of rare, population-specific or long-term adverse reactions or of drug interactions that were not observed in preapproval clinical studies — and may cause product labeling to evolve, including restrictions of therapeutic indications, new contraindications, warnings or precautions, and occasionally even the suspension or withdrawal of a product marketing authorization. Several pharmaceutical companiesThis trend has been reinforced by the new European pharmacovigilance legislation which has entered in force since July 2012.The Company and the European Regulatory Agencies (under the supervision of the PRAC (Pharmacovigilance Risk Assessment Committee)) have withdrawnimplemented systematic and intensive safety signal detection systems which may detect safety issues even with mature products fromthat have been used for a long time. This can result in market authorization suspension or withdrawals, such as the market because of newly detected or suspected adverse reactions to their products, and assuspension we experienced with our tetrazepam product (Myolastan®) in 2013.

        As a result of sucha recall or a withdrawal, several pharmaceutical companies now face significant product liability claims.

        We are currently defending a number of product liability claims (See Note D.22.a) to the consolidated financial statements included at Item 18 of this annual report) and there can be no assurance that the Group will be successful in defending against each of these claims or will not face additional claims in the future.

        Furthermore, we commercialize several devices using new technologies which, in case of malfunction, could cause unexpected damages and lead to ourproduct liability claims (see "— We are increasingly dependent on information technologies and networks." below).

        Although we continue to insure a portion of our product liability with third-party carriers, product liability coverage is increasingly difficult and costly to obtain,obtain. This is true particularly in the United States, and especially for genericized products where Sanofi is the innovator, as innovators have been held liable in some U.S. jurisdictions for damages caused by a product commercialized by generic manufacturers. In the future, it is possible that self-insurance may become the sole commercially reasonable means available for managing the product liability financial risk of our pharmaceutical and vaccines businesses (see "Item 4. Information on the Company — B. Business Overview — Insurance and Risk Coverage"). The legal costs that we would bear for handling such claims and potential indemnifications to be paid to claimants could affect our financial condition.

        Due to insurance conditions, even when the Group has insurance coverage, recoveries from insurers may not be totally successful. Moreover, the insolvency of a carrier could negatively affect our ability to achieve the practical recovery of the coverage for which we have already paid a premium.

        Product liability claims, regardless of their merits or the ultimate success of the Group's defense, are costly, divert managementmanagement's attention, may harm our reputation and can impact the demand for our products. Substantial product liability claims if successful, could adversely affect our business, results of operations and financial condition.

Our products and manufacturing facilities are subject to significant government regulations and approvals, which are often costly and could result in adverse consequences to our business if we fail to comply with the regulations or maintain the approvals.

        Each regulatory authority may impose its own requirements either at the time of the filing of the dossier or later during its review in order to grant a license to market the product, including requiring local clinical studies, and may delay or refuse to grant approval, even though a product has already been approved in another country. For example, in December 2013, while the same dossier had been approved in September 2013 by the EMA, Genzyme received a Complete Response Letter from the FDA for its supplemental Biologics License Application seeking approval of Lemtrada™ (alemtuzumab) informing Genzyme that its application was not ready for approval. The FDA took the position that Genzyme had not submitted evidence from adequate and well-controlled studies that demonstrated the benefits of Lemtrada™ outweighed its serious adverse effects.

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        Health authorities are increasingly focusing on product safety and on the risk/benefit profile of pharmaceuticals products. In particular, the FDA and the EMA have increased their requirements particularly in terms of the volume of data needed to demonstrate a product's efficacy and safety.

        Even after regulatory approval, marketed products are subject to continual review, risk evaluations or comparative effectiveness studies. These requirements have increased the costs associated with maintaining regulatory approvals and achieving reimbursement for our products. Post-regulatory approval reviews and data analyses can lead to the issuance of recommendations by government agencies, health professional and patient or other specialized organizations regarding the use of products; for example, a recommendation to limit the patient scope of a drug's indication, impose marketing restrictions, or suspend or withdraw the product can result in a reduction in sales volume, as well as an increased risk of litigation.

        Moreover, to monitor our compliance with applicable regulations, the FDA, the EMA and comparable agencies in other jurisdictions routinely conduct inspections of our facilities and may identify potential deficiencies. For example, further to the Warning Letter received from the FDA in July 2012 and following regular inspections conducted at manufacturing facilities in Canada and France, Sanofi Pasteur submitted a remediation plan to the FDA and has begun its implementation. However, if we fail to adequately respond to this or any other warning letter identifying a deficiency, or otherwise fail to comply with applicable regulatory requirements, we could be subject to enforcement, remedial and/or punitive actions by the FDA, the EMA or other regulatory authorities.

        In addition, to the extent that new regulations raise the costs of obtaining and maintaining product authorizations, or limit the economic value of a new product to its originator, the growth prospects of our industry and of the Group are diminished. Approximately 60% of our current development portfolio consists of biological products that may in the future bring new therapeutic responses to current unmet medical needs, but that may also lead to more technical constraints and costly investments from an industrial standpoint as biological products are regulated by more stringent international rules than small molecule products. These constraints and costs could adversely affect our business, results of operations and financial condition.

Claims and investigations relating to competition law, marketing practices, pricing, compliance, issues, as well as other legal matters, could adversely affect our business, results of operations and financial condition.

        The marketing of our products is heavily regulated. The Group's business covers an extremely wide range of activities worldwide and involves numerous partners. DespiteWe have adopted a Code of Ethics that calls for employees to comply with applicable legislation and regulations, as well as with the specific values and rules of conduct set forth in that Code. We have also set up policies and procedures which are designed to help ensure that we, our employees, officers, agents, intermediaries and other third parties comply with applicable laws and regulations (including the U.S. Foreign Corrupt Practices Act (FCPA), the UK Bribery Act, the OECD Anti-Bribery Convention and other anti-bribery laws and regulations).

        Notwithstanding these efforts, anydeviations may occur and there can be no assurance that, we will not face liability under laws and regulations for actions taken with respect to our business.

        Any failure to comply directly or indirectly (including as a result of a business partners' breach) with law could lead to substantial liabilities.liabilities and repercussions on the Group's reputation. Governments and regulatory authorities around the world have been strengthening enforcement activities in recent years. Sanofi and certain of its subsidiaries are under investigation by various government entities and are defending a number of lawsuits relating to antitrust and/or pricing and marketing practices including,(including, for example in the United States,States), class action lawsuits and whistle blower litigation. In China, the pharmaceutical sector is under scrutiny, the outcome of which is difficult to predict. The Group also faces significant litigation and government investigations or audits, including allegations of securities law violations, corruption, claims related to employment matters, patent and intellectual property disputes, consumer law claims and tax audits. See "Item 8. Financial Information — A. Consolidated Financial Statements and Other Financial Information — Information on Legal or Arbitration Proceedings" and Note D.22. to our consolidated financial statements included at Item 18 of this annual report. Responding to such investigations is costly and distracts management's attention from our business.

        Unfavorable outcomes in any of these matters, or in similar matters to be faced in the future, could preclude the commercialization of products, harm our reputation, negatively affect the profitability of existing products and subject us to substantial fines (including treble damages), punitive damages, penalties and injunctive or administrative remedies, potentially leading to the imposition of additional regulatory controls or exclusion from government reimbursement programs or market and could have a material adverse effect on our business, results of operations or financial conditions.

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        These risks may encourage the companyus to enter into settlement agreement with governmental authorities including with no admission of wrongdoing. Thoseagreements and those settlements may involve large cashsignificant monetary payments and/or criminal penalties and penalties.may include admissions of wrongdoing. Settlement of healthcare fraud cases may require companies to enter into a corporate integrity agreement,Corporate Integrity Agreement, which is intended to regulate company behavior for a specified period of years. For instanceyears for example, in December 2012, Sanofi U.S.2013, Genzyme Corporation entered into a settlement agreement with the U.S. Attorney's Office, District of Massachusetts, the United States Department of Justice and multiple states to resolve allcivil claims arising out of the investigation into promotional practices of Seprafilm® and paid in that respect approximately U.S.$23 million. Discussions with the U.S. Government are ongoing to resolve the matter completely, including any potential criminal resolution. As part of this settlement, and as part of the settlement entered into by Sanofi U.S. in December 2012 relating to civil claims arising out of an

investigation into sampling of Sanofi'sits former viscosupplement product Hyalgan®. As part of the settlement, for which Sanofi U.S. paid U.S.$109 Millionmillion the companies expect to the settling parties and will enter into a Corporate Integrity Agreement with the Office of the Inspector General of the United States Department of Health and Human Services.

Changes in the laws or regulations that apply to us could affect the Group's business, results of operations and financial condition.

        GovernmentalAll aspects of our business, including research and development, manufacturing, marketing, pricing or sales are subject to extensive legislation and regulation. Changes in applicable laws could have a material adverse effect on our business.

        For example, governmental authorities are increasingly looking to facilitate generic and biosimilar competition to existing products through new regulatory proposals intended to, or resulting in, changes to the scope of patent or data exclusivity rights and use of accelerated regulatory pathways for generic and biosimilar drug approvals. Such regulatory proposals if enacted, could make prosecution of patents for new products more difficult and time consuming or could adversely affect the exclusivity period for our products thereby(see "We rely on our patents and proprietary rights to provide exclusive rights to market certain of our products, and if such patents and other rights were limited or circumvented, our financial results could be materially and adversely affecting our financial results.affected" above).

        This new competitive environment and potential regulatory changes may further limit the exclusivity enjoyed by innovative products on the market and directly impact pricing and reimbursement levels, which may adversely affect our business and future results. See "Item 4. Information on the Company — B. Business Overview — Competition" and "Item 4. Information on the Company — B. Business Overview — Regulatory framework".

        In addition, changes in tax laws or in their application with respect to matters such as tax rates, transfer pricing, dividends, controlled companies or a restriction in certain forms of tax relief, could affect our effective tax rate and our future results. Also due to the complexity of tax contingencies, the ultimate resolution of any tax matters may result in payments greater or lesser than amounts accrued.

        For information regarding risks related to changes in environmental rules and regulations, see "— Environmental liabilities and compliance costs may have a significant adverse effect on our results of operations" below.

Risks Relating to Our Business

Our strategic objectives may not be fully realized.

        Our strategy is focused on four pillars in order to deliver sustainable long-term growth and maximize shareholder returns: grow a global healthcare leader with synergistic platforms, bring innovative products to market, seize value-enhancing growth opportunities, and adapt our structure for future opportunities and challenges. We may not be able to fully realize our strategic objectives and, even if we are able to do so, these strategic objectives may not deliver the expected benefits.

        For example, our strategy involves concentrating efforts around identified growth platforms and meeting significant growth objectives over 2012-2015. There is no guarantee that we will meet these objectives or that these platforms will grow in line with anticipated growth rates. A failure to continue to expand our business in targeted growth platforms could affect our business, results of operations or financial condition.

        As a further example, we are pursuing a Group-wide cost savings program which we expect, together with the expected synergies from our acquisition of Genzyme, to generate additional incremental cost savings by 2015. This also includes an adaptation plan regarding the activities of the Group in France. There is no assurance that the Group will successfully realize this plan. Moreover, the publicity given to this adaptation plan, may prejudice the Group's image and its reputation (see "— The expansion of social media platforms and mobile technologies present new risks and challenges." below). We may fail to realize all the expected cost savings resulting from these initiatives, which could materially and adversely affect our financial results.

Our research and development efforts may not succeed in adequately renewing our product portfolio.

        Discovering and developing a new product is a costly, lengthy and uncertain process. To be successful in the highly competitive pharmaceutical industry, we must commit substantial resources each year to research and development in order to develop new products to take the place of products facing expiration of patent and regulatory data exclusivity or competition from new products that are perceived as being superior. In 2012,2013, we spent €4,922€4,770 million on research and development, amounting to approximately 14.1%14.5% of our net sales.

        WeOur industry is driven by the imperative need for constant innovation, but we may not be investing in the right technology platforms, therapeutic area,areas, and products classes in order to build a robust pipeline and fulfill unmet medical needs. Fields of discovery and especially biotechnology are highly competitive and characterized by significant and rapid technological changes. Numerous companies are working on the same targets and a product considered as promising at the very beginning may become less attractive if a competitor addressing the same unmet need reaches the market earlier.

        Developing a product is a costly, lengthy and uncertain process.        The research and development process typically takes from 10 to 15 years from discovery to commercial product launch. This process is conducted in various stages in order to test, along with other features, the effectiveness and safety of a product. There can be no assurance that any of these compounds will be proven safe or effective. See "Item 4. Information on the Company — B. Business Overview — Pharmaceutical Research & Development" and "Item 4. Information on the Company — B. Business Overview — Vaccines Research and Development".

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Accordingly, there is a substantial risk at each stage of development — including clinical studies — that we will not achieve our goals of safety and/or effectiveness including during the course of a development trial and that we will have to abandon a product in which we have invested substantial amounts and human resources, includingeven in late stage development (Phase III). There can be no assurance that our research and development strategy will deliver the expected result in the targeted timeframe or at all, which could affect our profitability in the future.

        Decisions concerning the studies to be carried out can have a significant impact on the marketing strategy for a given product. Multiple in-depth studies can demonstrate that a product has additional benefits, facilitating the product's marketing, but such studies are expensive and time consuming and may delay the product's submission to health authorities for approval. Our ongoing investments in new product launches and research and development for future products could therefore result in increased costs without a proportionate increase in revenues, which maywould negatively affect our operating results.

        Obtaining regulatory marketing approval is not a guaranteeThere can be no assurance that our research and development strategy will deliver the product will achieve commercial success.expected result in the targeted timeframe or at all, which could affect our profitability in the future.

        Following each product marketing approval, the medical need served by the product and the corresponding reimbursement rate are evaluated by other governmental agencies, which mayrequiring in some cases require additional studies, including comparative studies, which may both effectively delay marketing of the new product and add to its development costs.

        The success of a product also depends on our ability to educate patients and healthcare providers and provide them with innovative data about the product and its uses. If these education efforts are not effective, then we may not be able to increase the sales of our new products to the market to realize the full value of our investment in its development.

        On the same topic, for the research and development of drugs in rare diseases, we produce relatively small amounts of material at early stages. Even if a product candidate receives all necessary approvals for commercialization, we may not be able to successfully scale-up production of the product material at a reasonable cost or at all and we may not receive additional manufacturing approvals in sufficient time to meet product demand, which could lead to a significant loss of sales of that drug and could affect our business, results of operations or financial condition.

We may lose market share to competing remedies or generic brands if they are perceived to be equivalent or superior products.

        We are faced with intense competition from generic products and brand-name drugs. Doctors or patients may choose these products over ours if they perceive them to be safer, more reliable, more effective, easier to administer or less expensive, which could cause our revenues to decline and affect our results of operations.

        In 2012, our patented pharmaceutical business faced important patent expirations and generic competition. For example Avapro®, Plavix®, and Eloxatin® lost their market exclusivity in the U.S in March, May and August 2012, and Aprovel® lost its market exclusivity in the E.U in August 2012.

        The introduction of a generic version of a branded medicine typically results in a significant and rapid reduction in net sales for the branded product because generic manufacturers typically offer their unbranded

versions at sharply lower prices. Approval and market entry of a generic product often reduces the price that we receive for these products and/or the volume of the product that we would be able to sell and could materially and adversely affect our business, results of operations and financial condition. The extent of sales erosion also depends on the number of generic versions of our products that are actually marketed.

        Additionally, in many countries such as the United States or France, applicable legislation encourages the use of generic products to reduce spending on prescription drugs. Therefore, the market for our products could also be affected if a competitor's innovative drug in the same market were to become available as generic because a certain number of patients can be expected to switch to a lower-cost alternative therapy.

        Additional products of the Group could become subject to generic competition in the future as we expect this generic competition to continue and to implicate drug products even those with relatively modest revenues.

A substantial share of the revenue and income of the Group continues to depend on the performance of certain flagship products.

        We generate a substantial share of our revenues from the sale of certain key products (see "Item 5. Operating and Financial Review and Prospects — Results of Operations — Year ended December 31, 20122013 compared with year ended December 31, 20112012 — Net Sales by Product — Pharmaceuticals segment"), which represented 42.2%47.3% of the Group's consolidated revenues in 2012. Among these products2013. Lantus® is Lantus®, whichparticularly important; it was the Group's leading product with revenues of €4,960€5,715 million in 2012,2013, representing 14.2%17.3% of the Group's consolidated revenues for the year. Lantus® is a flagship product of the Diabetes division, one of the Group's growth platforms.

        In general, if the products referred to above were to encounter problems such as loss of patent protection, material product liability litigation, unexpected side effects, regulatory proceedings, publicity affecting doctor or patient confidence, pressure from existing competitive products, changes in labeling, or if a new, more effective treatment were introduced, or if there were a reduction in sales of one or more of our flagship products or in their growth, the adverse impact on our business, results of operations and financial condition could be significant.

WeThe manufacture of our products is technically complex, and supply interruptions, product recalls or inventory losses caused by unforeseen events may fail to successfully identify external business opportunities or realizereduce sales, adversely affect our operating results and financial condition, delay the anticipated benefits fromlaunch of new products and negatively impact our strategic investments.image.

        As a complement toMany of our portfolio of products, we pursue a strategy of selective acquisitions, in-licensing and partnerships in order to develop growth opportunities. The implementation of this strategy depends on our ability to identify business development opportunities and execute them at a reasonable cost and under acceptable conditions of financing. Moreover, entering into in-licensing or partnership agreements generally requires the payment of significant "milestones" well before the relevant products are placedmanufactured using technically complex processes requiring specialized facilities, highly specific raw materials and other production constraints. Third parties supply us with a substantial portion of our raw materials, active ingredients and medical devices, which exposes us to the risk of a supply shortage or interruption in the event that these suppliers experience financial difficulties or are unable to manufacture a sufficient supply of our products meeting Group quality standards. It also increases the risk of quality issues, even with the most scrupulously selected suppliers. Further, some raw materials essential to the manufacture of our products are not widely available from sources we consider reliable; for example, we have approved only a limited number of suppliers of heparins for use in the manufacture of Lovenox®. We have also faced price fluctuations with heparin purchase prices. See "Item 4. Information on the market without any assurance that such investments will ultimately become profitableCompany — B. Business Overview — Production and Raw Materials" for a description of these outsourcing arrangements. Any of these factors could adversely affect our business, operating results or financial condition.

        Our products are also increasingly reliant on the use of product-specific devices for administration which may result in technical issues.

        We must also be able to produce sufficient quantities of the products to satisfy demand. Our biologic products (including vaccines) in particular are subject to the risk of manufacturing stoppages or the risk of loss of inventory because of the difficulties inherent in the long term (see Note D.21.1. to the consolidated financial statements included at Item 18processing of this annual report).

        Because of the active competition among pharmaceutical groups for such business development activities, there can be no assurance of our success in completing these transactions when such opportunities are identified.

        Once identified, the inability to quickly or efficiently integrate newly acquired activities or businesses; a longer integration than expected; the loss of key employees; or higher than anticipated integration costs, could delay our growth objectivesbiological materials and prevent us from achieving expected synergies.

        Moreover, we may miscalculate the risks associated with newly acquired activities or businesses at the time they are acquired or not have the means to evaluate them properly, including with regards to the potential unavailability of researchadequate amounts of raw materials meeting our standards. For example, starting from April 2012 and development pipelines, manufacturing issues, compliance issues, orthrough 2013, Sanofi Pasteur imposed supply limitations for Pentacel® and Daptacel® vaccines in the outcome of ongoing legal and other proceedings. It may also take a considerable amount of time and be difficult to implement a risk analysis and risk mitigation plan after the acquisition is completedU.S. due to lack of historical data. As a result, risk management andmanufacturing delay that temporarily reduced the coverage of such risks, particularly through insurance policies, may proveeffective capacity to be insufficient or ill-adapted.below the level needed to fully satisfy market demand in the

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U.S. There can be no guarantee that we will not face similar issues in the future or that we will successfully manage such issues when they arise.

        Additionally, specific conditions must be respected both by the Group and our customers for the storage and distribution of many of our products, for example, cold storage for certain vaccines and insulin-based products.

The diversificationcomplexity of these processes, as well as strict internal and government standards for the Group's business exposesmanufacture of our products, subject us to increased risks.

        While pursuing our objective to become a globalrisks as the investigation and diversified leader withinremediation of any identified or suspected problems can cause production delays, substantial expense, product recalls, lost sales and inventories, and delay the health industry, we are exposed to a numberlaunch of new risks inherent in sectors inproducts, which in the past, we have been either less active or not present at all. As an example:

•

the contribution ofcould adversely affect our animal health business to the Group's income may be adversely affected by a number of risks including some which are specific to this business:i.e., the outbreak of an epidemic or pandemic that could kill large numbers of animals,operating results and financial condition, cause reputational damage and the effect of reduced veterinary expenditures during an economic crisis (see "— The ongoing slowdown of global economic growth and the financial crisis could have negative consequences for our business" below).



•

the margins of consumer health and generic products are generally lower than those of the traditional branded prescription pharmaceutical business. Moreover, the periodic review of the effectiveness, safety and use of certain over-the-counter drug products by health authorities or lawmakers may result in modifications to the regulations that apply to certain components of such products, which may require them be withdrawn from the market and/or that their formulation be modified.



•

specialty products (such as those developed by Genzyme) that treat rare, life-threatening diseases that are used by a small number of patients are often expensive to develop compared to the market opportunity. Third-party payers trying to limit health-care expenses may become less willing to support their per-unit cost.

        Moreover, losses that may be sustained or caused by these new businesses may differ, with regards to their nature, scope and level, from the typesrisk of product liability claims that we have handled in the past (see "— Product liability claims could adversely affect our business, results of operations and financial condition" above), and thus our current risk management and insurance coverage).

        When manufacturing disruptions occur, we may not have alternate manufacturing capacity for certain products, particularly for biologic products. For instance, all of our bulk Cerezyme® products are produced solely at our Allston, Massachusetts facility. Even though we aim to have backup sources of supply whenever possible, including by manufacturing backup supplies of our principal active ingredients at a second or third facility when practicable, we cannot be adaptedcertain they will be sufficient if our principal sources become unavailable. Switching sources and manufacturing facilities require significant time. For instance our protamin product which is the only approved antidote to such losses. These risks could affectheparin in France is made from salmon sourced from Japan. Following the Fukushima nuclear disaster, we moved our business, results of operations or financial condition.

The globalization of the Group's business exposesfishing zone to avoid contamination risks. This change to our supply channel was time consuming and forced us to increased risks.import a similar ingredient commercialized in the United Kingdom.

        Emerging markets have been identified as one of our growth platformsSupply shortages are also subject to public scrutiny and are among the pillars of our overall strategy. Difficulties in adaptingsubject to emerging markets and/or a significant decline in the anticipated growth rate in these regions could impair our ability to take advantage of these growth opportunities and could affect our business, results of operations or financial condition.

        There is no guarantee that our efforts to expand sales in emerging markets will continue to succeed. The significant expansion of our activities in emerging markets may further expose us to more volatile economic conditions, political instability, competition from companies that are already well established in these markets, the inability to adequately respond to the unique characteristics of these markets, particularlyeven greater public criticism when they occur with respect to their regulatory frameworks, difficulties in recruiting qualified personnel, potential exchange controls, weaker intellectual property protection, higher crime levels (particularlylife saving medicines with respect to counterfeit products (see "— Counterfeit versions of our products harm our business," below)), and compliance issues including corruption and fraud, as we operate in many partslimited or no viable therapeutic alternatives. Such shortages can have a negative impact on the image of the world where these problems exist. Our existing policies and procedures, which are designed to help ensure that we, our employees, agents, intermediaries, and other third parties comply with the U.S. Foreign Corrupt Practices Act (FCPA), the UK Bribery Act, and other anti-bribery laws, may not adequately protect us against liability under these laws for actions we or they may take with respect to our business.

        Failure to comply with domestic or international laws could result in various adverse consequences, including possible delay in the approval or refusal to approve a product, recalls, seizures, withdrawal of an approved product from the market, or the imposition of criminal or civil sanctions, including substantial monetary penalties.

Our products and manufacturing facilities are subject to significant government regulations and approvals, which are often costly and could result in adverse consequences to our business if we fail to comply with the regulations or maintain the approvals.

        The industry in which we operate faces a changing regulatory environment and heightened public scrutiny worldwide, which simultaneously require greater assurances than ever as to the safety and efficacy of medications and health products on the one hand, and effectively provide reduced incentives for innovative pharmaceutical research on the other hand.

        Each regulatory authority may also impose its own requirements either at the timeGroup independent of the filinglevel of revenues lost as a result of the dossier or later during its review in order to grant a license to market the product, including requiring local clinical studies, and may delay or refuse to grant approval, even though a product has already been approved in another country. For example in August 2012, Genzyme received a Refuse to File letter from the FDA in response to the supplemental Biologics License Application to the FDA seeking approval of Lemtrada™. The FDA did not request additional data or further studies but requested a modified presentation of the data sets to enable agency to better navigate the application. Finally, Genzyme resubmitted at the end of November 2012 the Lemtrada™ file and the FDA accepted on January 28, 2013 the application for review. In December 2012, the CHMP of the European Medicines Agency (EMA) has adopted a negative opinion for the marketing authorization application for Kynamro™, but this product was approved by the FDA in January 2013.

        Health authorities are increasingly focusing on product safety and on the risk/benefit profile of pharmaceuticals products. In particular, the FDA and the EMA have imposed increasingly burdensome requirements on pharmaceutical companies, particularly in terms of the volume of data needed to demonstrate a product's efficacy and safety. For the same reasons, the marketed products are subject to continual review, risk evaluations or comparative effectiveness studies even after regulatory approval. These requirements have resulted in increasing the costs associated with maintaining regulatory approvals and achieving reimbursement for our products.

        Later discovery of previously undetected problems may result in marketing restrictions or the suspension or withdrawal of the product, as well as an increased risk of litigation for both pharmaceutical and animal health products. These post-regulatory approval reviews and data analyses can lead to the issuance of recommendations by government agencies, health professional and patient organizations or other specialized organizations regarding the use of products, which may result in a reduction in sales volume, such as, for example, a recommendation to limit the patient scopeshortage of a drug's indication. For instance in September 2011, the EMA defined a more restrictive indication for Multaq®, one of our cardiovascular products. Such reviews may result in the discovery of significant problems with respect to a competing product that is similar to one sold by the Group, which may in turn cast suspicion on the entire class to which these products belong and ultimately diminish the sales of the relevant product of the Group. When such issues arise, the contemplative nature of evidence-based health care and restrictions on what pharmaceutical manufacturers may say about their products are not always well suited to rapidly defending the Group or the public's legitimate interests in the face of the political and market pressures generated by social media and rapid news cycles, and this may result in commercial harm, overly restrictive regulatory actions and erratic share price performance.

particular product. Government authorities and regulators in the U.S.United States and in E.U.the European Union are also considering measures to reduce the risk of supply shortages of live-saving medicine in particular if there are no viable therapeutic alternatives.these risks. It cannot be ruled out that these ongoing initiatives may generate additional costs for the Group if they result in a requirement to set-upestablish back up supply channels or to increase the level of the inventoriesinventory levels to avoid shortages.

        In addition,We may lose market share to competing remedies or generic brands if they are perceived to be equivalent or superior products.

        We are faced with intense competition from generic products and brand-name drugs including from retails chains and distributors. Doctors or patients may choose these products over ours if they perceive them to be safer, more reliable, more effective, easier to administer or less expensive, which could cause our revenues to decline and adversely affect our results of operations.

        The success of a product also depends on our ability to educate patients and healthcare providers and provide them with innovative data about the product and its uses. If these education efforts are not effective, we may not be able to increase the sales of our new products to the extent that new regulations raisemarket to realize the costs of obtaining and maintaining product authorization, or limit the economicfull value of our investment in its development.

        The introduction of a newgeneric version of a branded medicine typically results in a significant and rapid reduction in net sales for the branded product tobecause generic manufacturers typically offer their unbranded versions at sharply lower prices, resulting in both and adverse price and volume effect for our genericized products. For example, Plavix® lost its inventor, the growth prospects of our industry and of the Group are diminished. Also about 50% of our current research and development portfolio is constituted by biological products, that may bringmarket exclusivity in the future new therapeutic responsesUnited States in May 2012 and as a result, its sales dropped by 90% in this country within the two months following the loss of market exclusivity.

        These trends are exacerbated by applicable legislation which encourages the use of generic products to current unmet medical needs but which mayreduce spending on prescription drugs in many countries such as the United States or France. Therefore, the market for our products could also leadbe affected if a competitor's innovative drug in the same market were to become available as generic because a certain number of patients can be expected to switch to a lower-cost alternative therapy. We expect this generic competition to continue and to implicate more technical constraints and costly investments from an industrial standpoint.

        Moreover, we and certain of our third-party suppliers are also required to complyproducts, including those with applicable regulations, known as good manufacturing practices, which govern the manufacture of pharmaceutical products. To monitor ourrelatively modest sales.

compliance with those applicable regulations, the FDA, the EMA and comparable agencies in other jurisdictions routinely conduct inspectionsTable of our facilities and may identify potential deficiencies which might be expensive and time consuming to address. For example, in July 2012, Sanofi Pasteur received a Warning Letter from the FDA following regular inspections conducted at manufacturing facilities in Canada and France. If we fail to adequately respond to a warning letter identifying a deficiency, or otherwise fail to comply with applicable regulatory requirements, we could be subject to enforcement, remedial and/or punitive actions by the FDA, the EMA or other regulatory authorities. In 2010, Genzyme entered into a consent decree with the FDA relating to its Allston facility and paid U.S.$175.0 million to the U.S. Federal Government as disgorgement of past profits. The consent decree required Genzyme to implement a plan to bring the Allston facility into compliance with applicable laws and regulations. Genzyme submitted a comprehensive remediation plan to FDA in April 2011 and the plan was accepted by FDA. Remediation of the Allston facility in accordance with that plan is underway and is currently expected to continue for three more years.Contents

Our indebtedness may limit our business flexibility compared to some of our peers.

        Our consolidated debt increased substantially in connection with our acquisition of Genzyme in 2011. Although we continued to reduce our debt in 2012 (as of December 31, 2012, our debt, net of cash and cash equivalents amounted to €7.7 billion), we still make significant debt service payments to our lenders and this could limit our ability to engage in new transactions which could have been part of our strategy.

We face increasingThe pricing and reimbursement pressure onof our pharmaceutical products that could negatively affect our revenues and/or margins.is increasingly affected by government and other third parties decisions and cost reduction initiatives.

        The commercial success of our existing products and our productsproduct candidates depends in part on the conditions under which our products are reimbursed. Our products continue to be subject to increasing price and reimbursement pressure due to, amongst others:

•

price controls imposed by governments in many countries;



•

removal of a number of drugs from government reimbursement schemes (for instance products determined to be less cost-effective than alternatives);



•

increased difficulty in obtaining and maintaining satisfactory drug reimbursement rates;



•

increase in cost containment policies related to health expenses in a context of economic slowdown; and



•

the tendency of governments and private health care providers to favor generic pharmaceuticals.

In addition to the pricing pressures they exert, governmental and private third-party payers and purchasers of pharmaceutical products may reduce volumes of sales by restricting access to formularies or otherwise discouraging physician prescriptions of our products. InFor example, in the United States, the new federal health care reform law is increasing the government's role with respect to price, reimbursement and the coverage levels for healthcare services and products within the large government health carehealthcare sector. This law also imposed cost containment measures and rebates and fees on pharmaceutical companies. Implementation of health care reform has affected and could stillwill continue to affect our revenues and/or margins (for further details concerning this law and a description of certain regulatory pricing systems that affect our Group see "Item 4. Information on the Company — B. Business Overview — Pricing & Reimbursement"). Some U.S. states are also considering legislation that would influence the marketing ofand prices of and access to drugs and U.S. federal and state officials will likely continue to focus on healthcare reform implementation in the future.

        We encounter similar cost containment issues in countries outside the United States. In certain countries, including countries in the EUEuropean Union, China and Canada, the coverage of prescription drugs, pricing and levels of reimbursement are subject to governmental control. For instance early 2013, in China the National Development

        Furthermore there is a growing number of mergers of retail chains and Reform Commission set new national retail ceiling prices for 700 formulationsdistributors, this consolidation of 400 drugs; among them was Lantus® whosedistribution channels increases their capacity to negotiation price was cut by 12.9% (effective February 1, 2013).and other terms.

        Due to the ongoingthese cost containment policies being pursued in many jurisdictions in which we operate, weand pressure on our prices, our revenues and margins are, and could continue to be, negatively affected.

        We are also unable to predict the availability or amount of reimbursement for our product candidates.

        In addition,Finally, our operating results may also be affected by parallel imports, particularly within the European Union, whereby distributors engage in arbitrage based on national price differences to buy productproducts on low cost markets for resale on higher cost markets.

The ongoing slowdown of global economic growth and the financial crisis could have negative consequences for our business¹.

        Over the past several years, growth of the global pharmaceutical market has become increasingly tied to global economic growth. In this context, a substantial and lasting slowdown of the global economy or major national economies could negatively affect growth in the global pharmaceutical market and, as a result, adversely affect our business. Such a slowdown has reduced the sources of funding for national social security systems, leading to heightened pressure on drug prices, increased substitution of generic drugs, and the exclusion of certain products from formularies.

        Further, we believe our net sales may be negatively impacted by the continuing challenging global economic environment, as high unemployment, levels and increases in co-pays, lack of developed third party payer system, may lead some patients to switch to generic products, delay treatments, skip doses or use less effective treatments to reduce their costs. Moreover, current economic conditions in the United States have resulted in an increase in the number of patients in the Medicaid program, under which sales of pharmaceuticals are subject to substantial rebates and, in many U.S. states, to formulary restrictions limiting access to brand-name drugs, including ours.

        The growth of our OTC and CHC business may also be negatively affected by the current slowdown in global economic growth as consumer spending is closely tied to the global economy. Also our animal health business could be impacted. For example, tight credit conditions may limit the borrowing power of livestock producers, causing some to switch to lower-priced products.

        Although macroeconomic and financial measures have been taken in 2012 by governments and monetary authorities, notably in Europe reducing thus the risk of failure of a State, the slowing economic environment, the default or failure of major players including wholesalers or public sector buyers financed by insolvent States may affect the financial situation of the Group but can also cause the Group to experience disruptions in the distribution of its products as well as the adverse effects described below at "We are subject to the risk of non-payment by our customers". Moreover, to the extent that the economic and financial crisis is directly affecting business, it may also lead to a disruption or delay in the performance of third parties on which we rely for parts of our business, including collaboration partners and suppliers (for more information see "Item 5. Operating and Financial Review and Prospects — Liquidity."). Such disruptions or delays could have a material and adverse effect on our business and results of operations. See "— We rely on third parties for the discovery, manufacture and marketing of some of our products" below.

The manufacture of our products is technically complex, and supply interruptions, product recalls or inventory losses caused by unforeseen events may reduce sales, adversely affect our operating results and financial condition and delay the launch of new products.

        Many of our products are manufactured using technically complex processes requiring specialized facilities, highly specific raw materials and other production constraints. We must also be able to produce sufficient quantities of the products to satisfy demand. Our biologic products (including vaccines) in particular are subject to the risk of manufacturing stoppages or the risk of loss of inventory because of the difficulties inherent to the processing of biological materials and the potential unavailability of adequate amounts of raw materials meeting our standards. We may not have redundant manufacturing capacity for certain products particularly biologic products. For instance all of our bulk Cerezyme® products are produced solely at our Allston, Massachusetts facility. Even though we aim to have backup sources of supply whenever possible, including by manufacturing backup supplies of our principal active ingredients at a second or third facility when practicable, we cannot be certain they will be sufficient if our principal sources become unavailable. Switching sources and manufacturing facilities may require significant time.

⁽¹⁾

Information in this section is complementary to Note B.8.8. to our consolidated financial statements included at Item 18 of this annual report, with respect to information required by IFRS 7, and is covered by our independent registered public accounting firms' report on the consolidated financial statements.

        Additionally, specific conditions must be respected both by the Group and our customers for the storage and distribution of many of our products,e.g., cold storage for certain vaccines and insulin-based products. The complexity of these processes, as well as strict internal and government standards for the manufacture of our products, subject us to risks. The occurrence or suspected occurrence of out-of-specification production or storage can lead to lost inventories, and in some cases product recalls, with consequential reputational damage and the risk of product liability (see "— Product liability claims could adversely affect our business, results of operations and financial condition," above). Group products are increasingly reliant on the use of product-specific devices for administration; a technical problem in these devices could jeopardize the approval or the commercialization of the products or require a recall.

        Supply shortages are subject to public scrutiny and are subject to even greater public criticism when they occur with respect to life saving medicines with limited therapeutic alternatives. Such shortages can have a negative impact on the image of the Group independent of the level of revenues lost as a result of the shortage of a particular product. The investigation and remediation of any identified manufacturing problems can cause production delays, substantial expense, lost sales and delay the launch of new products, which could adversely affect our operating results and financial condition.

        Like many of our competitors, we have faced and may face in the future manufacturing issues. For example, Genzyme experienced in the past significant difficulties in manufacturing Cerezyme® and Fabrazyme® for several years. In summer 2011 a technical incident occurred in the filling line used for Apidra 3mL cartridges at our manufacturing site in Frankfurt which caused temporary shortages for Apidra 3mL cartridges. In April 2012 Sanofi Pasteur temporarily imposed supply limitations for Pentacel® and Daptacel® vaccines in the U.S. due to a manufacturing delay that temporarily reduced the effective capacity to below the level needed to fully satisfy market demand in the U.S. In June 2012 Sanofi Pasteur voluntarily recalled the Bacille Calmette-Guérin (BCG) vaccine produced in its Canadian facility due to manufacturing issues. This withdrawal is expected to last several months while the renovation of the building is completed. There can be no guarantee that we will not face similar issues in the future or that we will successfully manage such issues when they arise.

We rely on third parties for the discovery, manufacture and marketing of some of our products.

        Our industry is highly collaborative, whether in the discovery and development of new products, in-licensing, the marketing and distribution of approved products, or manufacturing activities. We expect that the reliance on third parties for key aspects of our business will continue to characterize our activities.

        Third parties supply us with a substantial portion of our raw materials, active ingredients and medical devices, which exposes us to the risk of a supply interruption in the event that these suppliers experience financial difficulties or are unable to manufacture a sufficient supply of our products meeting Group quality standards. It also increases the risk of quality issues, even with the most scrupulously selected suppliers.

        Further, some raw materials essential to the manufacture of our products are not widely available from sources we consider reliable; for example, we have approved only a limited number of suppliers of heparins for use in the manufacture of Lovenox®. Heparin purchase prices can also fluctuate. See "Item 4. Information on the Company — B. Business Overview — Production and Raw Materials" for a description of these outsourcing arrangements. Any of these factors could adversely affect our business, operating results or financial condition.

        If disruptions or quality concerns were to arise in the third-party supply of raw materials, active ingredients or medical devices, this could adversely affect our ability to sell our products in the quantities demanded by the market and could damage our reputation and relationships with our customers. See also "— The manufacture of our products is technically complex, and supply interruptions, product recalls or inventory losses caused by unforeseen events may reduce sales, adversely affect our operating results and financial condition, and delay the launch of new products"products and negatively impact our image" above.

        We also conduct a number of significant research and development programs and market some of our products in collaboration with other biotechnology and pharmaceutical companies. For example, we currently have collaborative arrangements with Regeneron for the discovery, development and commercialization of therapies based on monoclonal antibodies, Warner Chilcott for the osteoporosis treatment Actonel®, and with

Merck & Co., Inc. for the distribution of vaccines in Europe (See "Item 4. Information on the Company — B. Business Overview — Pharmaceutical Products — Main pharmaceutical

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products" and "Item 4. Information on the Company — B. Business Overview — Vaccine Products" for more information on our alliances). We may also rely on partners to design and manufacture medical devices, notably for the administration of our products. When we research and market our products through collaboration arrangements, we are subject to the risk that certain decisions, such as the establishment of budgets, development and promotion strategies and specific tasks, are under the control of our collaboration partners, and that deadlocks, failures in the development or differing priorities may adversely affect the activities conducted through the collaboration arrangements. Any conflicts that we may have with our partners during the course of these agreements or at the time of their renewal or renegotiation may affect the marketing of certain of our products and may cause a decline in our revenues and affect our results of operations.

Counterfeit versions of our products harm our business.

        The drug supply has been increasingly challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet. Counterfeit products are frequently unsafe or ineffective, and can be potentially life-threatening. To distributors and users, counterfeit products may be visually indistinguishable from the authentic version. Reports of adverse reactions to counterfeit drugs or increased levels of counterfeiting could materially affect patient confidence in the authentic product, and harm the business of companies such as Sanofi. Additionally, it is possible that adverse events caused by unsafe counterfeit products will mistakenly be attributed to the authentic product. If a Group product was the subject of counterfeits, the Group could incur substantial reputational and financial harm. See "Item 4. Information on the Company — B. Business Overview — Competition."

We are subject to the risk of non-payment by our customers¹⁽¹⁾.

        We run the risk of delayed payments or even non-payment by our customers, which consist principally of wholesalers, distributors, pharmacies, hospitals, clinics and government agencies. This risk is accentuated by the current worldwide financial crisis.slowdown. The United States poses particular client credit risk issues, because of the concentrated distribution system in which approximately 58% of our consolidated U.S. pharmaceutical sales are accounted for by just three wholesalers. In addition, the Group's three main customers represent 17.0% of our gross total revenues. We are also exposed to large wholesalers in other markets, particularly in Europe. Worldwide, the Group's three main customers represent 18.0% of our gross total revenues. An inability of one or more of these wholesalers to honor their debts to us could adversely affect our financial condition (see Note D.34. to our consolidated financial statements included at Item 18 of this annual report).

        Since 2010,In some countries, of southern Europe have faced important financial difficulties. Somesome customers in these countries are public or subsidized health systems. The deteriorating economic and credit conditions in these countries may lead to longer payment terms. Because of this trendcontext, we may need to reassess the recoverable amount of our debts in these countries during the coming financial years (for more information see "Item 5. Operating and Financial Review and Prospects — Liquidity.").

The ongoing slowdown of global economic growth and the financial environment could have negative consequences for our business⁽²⁾.

        Over the past several years, growth of the global pharmaceutical market has become increasingly tied to global economic growth. In this context, a substantial and lasting slowdown of the global economy, major national economies or emerging markets could negatively affect growth in the global pharmaceutical market and, as a result, adversely affect our business. Such a slowdown has reduced the sources of funding for national social security systems, leading to heightened pressure on drug prices, increased substitution of generic drugs, and the exclusion of certain products from formularies.

        Further, we believe our net sales may be negatively impacted by the continuing challenging global economic environment, as high unemployment, increases in co-pays, and lack of developed third party payer system in certain regions, may lead some patients to switch to generic products, delay treatments, skip doses or use less effective treatments to reduce their costs. Moreover, current economic conditions in the United States have resulted in an increase in the number of patients in the Medicaid program, under which sales of pharmaceuticals are subject to substantial rebates and, in many U.S. states, to formulary restrictions limiting access to brand-name drugs, including ours.

        Our animal health business could also be adversely impacted as difficult economic conditions may limit the financial resources of livestock producers, causing some to switch to lower-priced products.

        Although macroeconomic and financial measures have been taken since 2012 by governments and monetary authorities, notably in Europe, to reduce the risk of failure of a State, the slowing economic environment, the default or failure of major players including wholesalers or public sector buyers financed by insolvent States may affect the financial situation of the Group but can also cause the Group to experience disruptions in the distribution of its products as well as the adverse effects described above at "We are subject to the risk of non-payment by our customers". Moreover, economic and financial difficulties may have an adverse impact on third parties who are important to our business, including collaboration partners and suppliers, which could cause such third parties to delay or disrupt performance of their obligations to us, resulting in a material and adverse effect on our business or

(1)

Information in this section is complementary to Note B.8.8. to our consolidated financial statements included at Item 18 of this annual report, with respect to information required by IFRS 7, and is covered by our independent registered public accounting firms' report on the consolidated financial statements and by Notes D.10. and D.34. to our consolidated financial statements included at Item 18 of this annual report.

(2)

Information in this section is complementary to Note B.8.8. to our consolidated financial statements included at Item 18 of this annual report, with respect to information required by IFRS 7, and is covered by our independent registered public accounting firms' report on the consolidated financial statements.

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results of operations. See "— We rely on third parties for the discovery, manufacture and marketing of some of our products" above. For more information see "Item 5. Operating and Financial Review and Prospects — Liquidity."

Counterfeit versions of our products harm our business.

        Counterfeiting activities and the presence of counterfeit products in a growing number of markets and over the Internet continue to be a challenge for maintaining a safe drug supply. Counterfeit products are frequently unsafe or ineffective, and can be life-threatening. To distributors and users, counterfeit products may be visually indistinguishable from the authentic version. Reports of adverse reactions to counterfeit drugs along with increased levels of counterfeiting could be mistakenly attributed to the authentic product, affect patient confidence in the authentic product and harm the business of companies such as Sanofi. If a Group product were to be the subject of counterfeits, the Group could incur substantial reputational and financial harm. See "Item 4. Information on the Company — B. Business Overview — Competition."

Impairment charges or write downs in our books and changes in accounting standards could have a significant adverse effect on the Group's results of operations and financial results.

        Substantial value is allocated to intangible assets and goodwill resulting from business combinations, as disclosed at Note D.4. to our consolidated financial statements included in this annual report at Item 18, which could be substantially impaired upon indications of impairment (primarily relating to pharmacovigilance, stopped research and development program, patent litigation and the launch of competing products), with adverse effects on our financial condition and the value of our assets.

        Furthermore, if any of our strategic equity investments decline in value and remain below cost for an extended duration, we may be required to write down our investment.

        Finally, the financial environment and in particular the economic difficulties affecting certain European countries could also negatively affect the value of our assets (see "— The ongoing slowdown of global economic growth and the financial environment could have negative consequences for our business" above and "— Fluctuations in currency exchange rates could adversely affect our results of operations and financial condition" below)

        Any new or revised accounting standards, rules and interpretations issued from time to time by the IASB (International Accounting Standards Board) could also result in changes to the recognition of income and expense that may materially and adversely affect the Group's financial results.

Our pension liabilities are affected by factors such as the performance of plan assets, interest rates, actuarial data and experience and changes in laws and regulations.

        Our future funding obligations for our main defined-benefit pension plans depend on changes in the future performance of assets held in trust for these plans, the interest rates used to determine funding levels (or company liabilities), actuarial data and experience, inflation trends, the level of benefits provided for by the plans, as well as changes in laws and regulations. Adverse changes in those factors could increase our unfunded obligations under such plans, which would require more funds to be contributed and hence negatively affect our cash flow and results (see Note D.19.1 to our consolidated financial statements included at Item 18 of this annual report).

⁽¹⁾

Information in this section is complementary to Note B.8.8. to our consolidated financial statements included at Item 18 of this annual report, with respect to information required by IFRS 7, and is covered by our independent registered public accounting firms' report on the consolidated financial statements and by Notes D.10. and D.34. to our consolidated financial statements included at Item 18 of this annual report.

Impairment charges or write downs in our books and changes in accounting standards could have a significant adverse effect on the Group's results of operations and financial results.

        New or revised accounting standards, rules and interpretations issued from time to time by the IASB (International Accounting Standards Board) could result in changes to the recognition of income and expense that may materially and adversely affect the Group's financial results.

        In addition, substantial value is allocated to intangible assets and goodwill resulting from business combinations, as disclosed at Note D.4. to our consolidated financial statements included in this annual report at Item 18, which could be substantially impaired upon indications of impairment (primarily relating to pharmacovigilance, patent litigation and the launch of competing products), with adverse effects on our financial condition and the value of our assets.

        Also if any of our strategic equity investments decline in value and remain below cost for an extended duration, we may be required to write down our investment.

        In addition the global financial crisis and in particular the ongoing sovereign debt crisis affecting certain European countries could also negatively affect the value of our assets (see "— The ongoing slowdown of global economic growth and the financial crisis could have negative consequences for our business" above and "— Fluctuations in currency exchange rates could adversely affect our results of operations and financial condition" below).

We are increasingly dependent on information technologies and networks.

        Our business depends on the use of information technologies, which means that certain key areas such as research and development, production and sales are to a large extent dependent on our information technology capabilities. We are commercializing a number of devices using new technologies which, in case of malfunctions could lead to a risk of harm to patients (see "— Product liability claims could adversely affect our business, results of operations and financial condition" above)) or the unavailability of our products. While we have invested heavily in the protection of data and information technology systems, there can be no assurance that our efforts or those of our third-party service providers (for instance the accounting of some of our subsidiaries has been externalized) to implement adequate security and quality measures for data processing would be sufficient to protect against service disruption, data deterioration or loss in the event of a system malfunction, or prevent data from being stolen or corrupted in the event of a security breach, which could have a material adverse effect on our business, operating results and financial condition.

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The expansion of social media platforms and mobile technologies presents new risks and challenges.

        New technologies are increasingly used to communicate about our products and diseases or the diseases they are intended to treat.provide health services. The use of these media requires specific attention, monitoring programs and moderation of comments. For instance, patients may use these channels to comment on the effectiveness of a product and to report an alleged adverse event. When such issues arise, the nature of evidence-based health care and restrictions on what pharmaceutical manufacturers may say about their products are not always well suited to rapidly defending the Group or the public's legitimate interests in the face of the political and market pressures generated by social media and rapid news cycles, and this may result in commercial harm, overly restrictive regulatory actions and erratic share price performance. Negative posts or comments about the Company, itsSanofi, our business, its directors or officers on any social networking web site could seriously damage our reputation. In addition, our associatesemployees and partners may use the social media tools and mobile technologies inappropriately which may give rise to liability for the Company, or which could lead to the exposure of sensitive information. In either case, such uses of social media and mobile technologies could have a material adverse effect on our business, financial condition and results of operations.

Natural disasters prevalentRisks Relating to the Group Structure and Strategy

We may fail to successfully identify external business opportunities or realize the anticipated benefits from our strategic investments.

        As a complement to our portfolio of products, we pursue a strategy of selective acquisitions, in-licensing and collaborations in certain regionsorder to develop growth opportunities. The implementation of this strategy depends on our ability to identify business development opportunities and execute them at a reasonable cost and under acceptable conditions of financing. Moreover, entering into in-licensing or partnership agreements generally requires the payment of significant "milestones" well before the relevant products are placed on the market without any assurance that such investments will ultimately become profitable in the long term (see Note D.21.1. to the consolidated financial statements included at Item 18 of this annual report and also "— We rely on third parties for the discovery, manufacture and marketing of some of our products" above).

        Once identified, our growth objectives could be delayed or ultimately not realized, and expected synergies could be adversely impacted if:

•

we are unable to quickly or efficiently integrate newly acquired activities or businesses;



•

integration takes longer than expected;



•

the loss of key employees occurs; or



•

we have higher than anticipated integration costs.

        Because of the active competition among pharmaceutical groups for such business development activities, there can be no assurance of our success in completing these transactions when such opportunities are identified.

        Moreover, we may miscalculate the risks associated with newly acquired activities or businesses at the time they are acquired or not have the means to evaluate them properly, including with regards to the potential of research and development pipelines, manufacturing issues, compliance issues, or the outcome of ongoing legal and other proceedings. It may also take a considerable amount of time and be difficult to implement a risk analysis and risk mitigation plan after the acquisition is completed due to lack of historical data. As a result, risk management and the coverage of such risks, particularly through insurance policies, may prove to be insufficient or ill-adapted.

The diversification of the Group's business exposes us to increased risks.

        As a global healthcare leader within the health industry, we are exposed to a number of risks inherent in sectors in which, in the past, we dohave been either less active or not present at all. Examples are set forth below:

•

The business model and the trade channels of the generic and consumer health care (CHC) sectors are different from the traditional pharmaceutical activity with which we are more traditionally familiar. For example, the traditional pharmaceutical business focuses its promotional effort on physicians to drive demand. Depending on geographic location, the generic business concentrates on trade channels such as pharmacies, wholesalers and/or physicians. CHC focuses its promotional effort on pharmacies and consumers. In addition, the CHC and generic businesses have other factors that can impact purchasing patterns and pharmacy inventories more than in the traditional pharmaceutical businesses, such as trade terms to pharmacies which are variable and linked to competition or seasonality.

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•

The contribution of our Animal Health business to the Group's income may be adversely affected by a number of risks including some which are specific to this business i.e., the outbreak of an epidemic or pandemic that could kill large numbers of animals, the weather, and the effect of reduced veterinary expenditures during an economic crisis (see "— The ongoing slowdown of global economic growth and the financial environment could have negative consequences for our business" above).



•

Specialty products (such as those developed by Genzyme) that treat rare, life-threatening diseases that are used by a small number of patients are often expensive to develop compared to the market opportunity. Third-party payers trying to limit health-care expenses may become less willing to support their per-unit cost. Also for the research and development of drugs relating to rare diseases, we produce relatively small amounts of material at early stages. Even if a product candidate receives all necessary approvals for commercialization, we may not be able to successfully scale-up production of the product material at a reasonable cost or at all. In addition, we may not receive additional manufacturing approvals in sufficient time to meet product demand.

        All these risks could affect our operations.business, results of operations or financial condition.

The globalization of the Group's business exposes us to increased risks.

        SomeEmerging Markets have been identified as one of our production sitesgrowth platforms and are located in areas exposed to natural disasters, such as earthquakes (in North Africa, Middle East, Asia, Pacific, Europe, Central and Latin Americas), floods (in Africa, Asia Pacific and Europe) and hurricanes. Inamong the event of a major disaster we could experience severe destruction or interruptionpillars of our overall strategy. Difficulties in adapting to emerging markets, a significant decline in the anticipated growth rate in these regions or an unfavorable movement of the exchange rates of these countries' currencies against the euro could impair our ability to take advantage of these growth opportunities and could affect our business, results of operations or financial condition.

        For example, in 2013, our sales in Emerging Markets continued to grow but at a slower pace. The significant expansion of our activities in Emerging Markets may further expose us to more volatile economic conditions, political instability, competition from companies that are already well established in these markets, the inability to adequately respond to the unique characteristics of these markets, particularly with respect to their regulatory frameworks, difficulties in recruiting qualified personnel or maintaining required internal control systems, potential exchange controls, weaker intellectual property protection, higher crime levels (particularly with respect to counterfeit products (see "— Counterfeit versions of our products harm our business," above)), and compliance issues including corruption and fraud (see "— Claims and investigations relating to competition law, marketing practices, pricing, compliance, as well as other legal matters, could adversely affect our business, results of operations and production capacity.financial condition " above).

Our strategic objectives may not be fully realized.

        Our strategy is focused on four pillars in order to deliver sustainable long-term growth and maximize shareholder returns: grow a global healthcare leader with synergistic platforms, bring innovative products to market, seize value-enhancing growth opportunities, and adapt our structure for future opportunities and challenges. We may not be able to fully realize our strategic objectives and, even if we are able to do so, these strategic objectives may not deliver the expected benefits.

        For example, our strategy involves concentrating efforts around identified growth platforms and meeting significant growth objectives. There is no guarantee that we will meet these objectives or that these platforms will grow in line with anticipated growth rates. A failure to continue to expand our business in targeted growth platforms could affect our business, results of operations or financial condition.

        As a result, our operations could suffer serious harmfurther example, we are pursuing a Group-wide cost savings program by 2015. There is no assurance that the Group will successfully realize this program which could have a material adverse effect onmaterially and adversely affect our business, financial condition and results of operations.results.

Environmental Risks of Our Industrial Activities

Risks from the handling of hazardous materials could adversely affect our results of operations.

        Manufacturing activities, such as the chemical manufacturing of the active ingredients in our products and the related storage and transportation of raw materials, products and wastes, expose us to various risks, including:

•

fires and/or explosions;



•

storage tank leaks and ruptures; and



•

discharges or releases of toxic or pathogen substances.

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        These operating risks can cause personal injury, property damage and environmental contamination, and may result in:

•

the shutdown of affected facilities; and



•

the imposition of civil or criminal penalties.penalties and civil damages.

        The occurrence of any of these events may significantly reduce the productivity and profitability of a particular manufacturing facility and adversely affect our operating results.results and reputation.

        Although we maintain property, business interruption and casualty insurance that we believe is in accordance with customary industry practices, we cannot assure you that this insurance will be adequate to cover fully all potential hazards incidental to our business.

Environmental liabilities and compliance costs may have a significant adverse effect on our results of operations.

        The environmental laws of various jurisdictions impose actual and potential obligations on our Group to remediate contaminated sites. These obligations may relate to sites:

•

that we currently own or operate;



•

that we formerly owned or operated; or



•

where waste from our operations was disposed.

        These environmental remediation obligations could significantly reduce our operating results. Sanofi accrues provisions for remediation when our management believes the need is probable and that it is reasonably possible to estimate the cost. See "Item 4. Information on the Company — B. Business Overview — Health, Safety and Environment (HSE)" for additional information regarding our environmental policies. In particular, our provisions for these obligations may be insufficient if the assumptions underlying these provisions prove incorrect or if we are held responsible for additional, currently undiscovered contamination. These judgments and estimates may later prove inaccurate, and any shortfalls could have a material adverse effect on our results of operations and financial condition.

        Furthermore, we are or may become involved in claims, lawsuits and administrative proceedings relating to environmental matters. Some current and former Sanofi's subsidiaries have been named as "potentially responsible parties" or the equivalent under the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (also known as "Superfund"), and similar statutes in France, Germany, Italy, Brazil and elsewhere. As a matter of statutory or contractual obligation, we and/or our subsidiaries may retain responsibility for environmental liabilities at some of the sites of our predecessor companies, or our subsidiaries that we demerged, divested or may divest. We have disputes outstanding regarding certain sites no longer owned by the Group. An adverse outcome in such disputes might have a significant adverse effect on our operating results. See Note D.22.e) to the consolidated financial statements included at Item 18 of this annual report and "Item 8. Financial Information — A. Consolidated Financial Statements and Other Financial Information — Information on Legal or Arbitration Proceedings".

        Environmental regulations are evolving (i.e., in Europe, REACH, CLP/GHS, SEVESO, IPPC/IED, the Waste Framework Directive, the Emission Trading Scheme Directive, the Water Framework Directive and the Directive on Taxation of Energy Products and Electricity and several other regulations aiming at preventing global warming). Stricter environmental, safety and health laws and enforcement policies could result in substantial costs and liabilities to our Group and could subject our handling, manufacture, use, reuse or disposal of substances or pollutants, site restoration and compliance costs to more rigorous scrutiny than is currently the case. Consequently, compliance with these laws could result in significant capital expenditures as well as other costs and liabilities, thereby adversely affecting our business, results of operations or financial condition. For more detailed information on environmental issues, see "Item 4. Information on the Company — B. Business Overview — Health, Safety and Environment (HSE)."

Natural disasters prevalent in certain regions in which we do business could affect our operations.

        Some of our production sites are located in areas exposed to natural disasters, such as earthquakes (in North Africa, Middle East, Asia, Pacific, Europe, Central and Latin Americas), floods (in Africa, Asia Pacific and Europe) and hurricanes. In the event of a major disaster we could experience severe destruction or interruption of our operations

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and production capacity. As a result, our operations could suffer serious harm which could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Financial Markets¹⁽³⁾

Fluctuations in currency exchange rates could adversely affect our results of operations and financial condition.

        Because we sell our products in numerous countries, our results of operations and financial condition could be adversely affected by fluctuations in currency exchange rates. We are particularly sensitive to movements in exchange rates between the euro and the U.S. dollar, the British pound, the Japanese yen, and to currencies in emerging countries. In 2012, 31%2013, 32% of our net sales were realized in the United States.States, 33% in emerging countries and 8% in Japan. While we incur expenses in those currencies, the impact of currency exchange rates on these expenses does not fully offset the impact of currency exchange rates on our revenues. As a result, currency exchange rate movements can have a considerable impact on our earnings. When deemed appropriate and when technically feasible, we enter into transactions to hedge our exposure to foreign exchange risks. These efforts, when undertaken, may fail to offset the effect of adverse currency exchange rate fluctuations on our results of operations or financial condition. In addition, in the specific context of the sovereign debt crisis affecting certain European countries, the threatened or actual withdrawal of the euro as currency in one or more European Monetary Union countries and the associated fluctuations in currency exchange rates could have a material effect on our financial condition and earnings, the magnitude and consequences of which are unpredictable. For more information concerning our exchange rate exposure, see "Item 11. Quantitative and Qualitative Disclosures about Market Risk."

In the context of the worldwide financial crisis, our liquidity may be constrained.

        As of December 31, 2012, the Group's net debt amounted approximately to €7.7 billion. In addition to debt outstanding, the Group has contracted a number of credit lines and put into place commercial paper and medium term note programs with the aim of providing liquidity. See "Item 11. Quantitative and Qualitative Disclosures about Market Risk." In the event of a market-wide liquidity crisis, the Group might be faced with reduced access to sources of financing, including under programs currently in place, or less favorable conditions.

Risks Relating to an Investment in ourOur Shares or ADSs

Foreign exchange fluctuations may adversely affect the U.S. dollar value of our ADSs and dividends (if any).

        Holders of ADSs face exchange rate risk. Our ADSs trade in U.S. dollars and our shares trade in euros. The value of the ADSs and our shares could fluctuate as the exchange rates between these currencies fluctuate. If and when we do pay dividends, they would be denominated in euros. Fluctuations in the exchange rate between the euro and the U.S. dollar will affect the U.S. dollar amounts received by owners of ADSs upon conversion by the depositary of cash dividends, if any. Moreover, these fluctuations may affect the U.S. dollar price of the ADSs on the New York Stock Exchange (NYSE), whether or not we pay dividends in addition to the amounts, if any, that a holder would receive upon our liquidation or upon the sale of assets, merger, tender offer or similar transactions denominated in euros or any foreign currency other than U.S. dollars.

⁽¹⁾

Information in this section is complementary to Note B.8.8. to our consolidated financial statements included at Item 18 of this annual report, with respect to information required by IFRS 7, and is covered by our independent registered public accounting firms' report on the consolidated financial statements.

Persons holding ADSs rather than shares may have difficulty exercising certain rights as a shareholder.

        Holders of ADSs may have more difficulty exercising their rights as a shareholder than if they directly held shares. For example, if we issue new shares and existing shareholders have the right to subscribe for a portion of them, the depositary is allowed, at its own discretion, to sell for their benefit that right to subscribe for new shares instead of making it available to them. Also, holders of ADSs must instruct the depositary how to vote their shares. Because of this extra procedural step involving the depositary, the process for exercising voting rights will take longer for holders of ADSs than for holders of shares. ADSs for which the depositary does not receive timely voting instructions will not be voted at any meeting.

Recent French tax legislation applicable to the ADSs may affect their attractiveness.

        The implementation of new tax legislation such as the French financial transaction tax of 0.2% (Taxe sur les Transactions Financières — TTF) enacted in 2012 (see "Item 10. — E. Taxation"), which applies by its terms to trading in our shares and ADSs without regard to territoriality could increase the costs linked to the issuance, transfer and cancellation of ADSs. Moreover, uncertainties regarding how such a tax would beis assessed and collected from beneficial owners or financial intermediaries outside of France could discourage holding ofnegatively impact such instruments.

        We cannot foresee the extent to which this tax and uncertainty over its technical and practical aspects may reduce the liquidity and economic value of our ADSs.

Our largest shareholder owns a significant percentage of the share capital and voting rights of Sanofi.

        As of December 31, 2012,2013, L'Oréal held approximately 8.91%8.93% of our issued share capital, accounting for approximately 16.13%16.17% of the voting rights (excluding treasury shares) of Sanofi. See "Item 7. Major Shareholders and

(3)

Information in this section is complementary to Note B.8.8. to our consolidated financial statements included at Item 18 of this annual report, with respect to information required by IFRS 7, and is covered by our independent registered public accounting firms' report on the consolidated financial statements.

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Related Party Transactions — A. Major Shareholders." Affiliates of L'Oréal currently serve on our Board of Directors. To the extent L'Oréal continues to hold a large percentage of our share capital and voting rights, it will remain in a position to exert heightened influence in the appointment of the directors and officers of Sanofi and in other corporate actions that require shareholders' approval.

Sales of our shares may cause the market price of our shares or ADSs to decline.

        To our knowledge, L'Oréal is not subject to any contractual restrictions on the sale of the shares it holds in our Company. L'Oréal announced that it does not consider its stake in our Company as strategic to it. Sales of large numbers of our shares, or a perception that such sales may occur, could adversely affect the market price for our shares and ADSs.

Risks Relating to ourOur Contingent Value Rights (CVRs)

In addition to the risks relating to our shares, CVR holders are subject to additional risks.

        In connection with our acquisition of Genzyme, we issued CVRs under a CVR agreement entered into by and between us and American Stock Transfer & Trust Company, the trustee (see also Note D.18. to the consolidated financial statements included at Item 18 of this annual report). A copy of the form of the CVR agreement is attachedon file with the SEC as exhibit 4.1Annex B to ourAmendment No. 2 to the Registration Statement on Form F-4 (Registration No. 333-172638), as amended.filed with the Securities and Exchange Commission on March 24, 2011. Pursuant to the CVR agreement, each holder of a CVR is entitled to receive cash payments upon the achievement of certain milestones, if any, based on U.S. regulatory approval of Lemtrada™ (alemtuzumab for treatment of multiple sclerosis), and on achievement of certain aggregate net sales thresholds. See "Item 10. Additional Information — C. Material Contracts — The Contingent Value Rights Agreement."

        CVR holders are subject to additional risks, including:

•

an activethe public market for the CVRs may not developbe active or the CVRs may trade at low volumes, both of which could have an adverse effect on the resale price, if any, of the CVRs;



•

the market price and trading volume of the CVRs may be volatile;

•

no payment will be made on the CVRs without the achievement of certain agreed upon milestones. As such, it may be difficult to value the CVRs and accordingly it may be difficult or impossible to resell the CVRsCVRs;



•

if the milestones specified in the CVR agreement are not achieved for any reason within the time periods specified therein, and if net sales do not exceed the thresholds set forth in the CVR agreement for any reason within the time periods specified therein, no payment will be made under the CVRs and the CVRs will expire without value;



•

since the U.S. federal income tax treatment of the CVRs is unclear, any part of any CVR payment could be treated as ordinary income and required to be included in income prior to the receipt of the CVR payment;



•

any payments in respect of the CVRs rank at parity with our other unsecured unsubordinated indebtedness;



•

we are not prohibited from acquiring the CVRs, whether in open market transactions, private transactions or otherwise and we have already purchased CVRs on September 4, 2012 Sanofi launched a tender offer to purchase up to 30% of its outstanding CVRsseveral occasions (for more information see "Item 5. Operating and Financial Review and Prospectus — Liquidity.");



•

we may, under certain circumstances, purchase and cancel all outstanding CVRs; and



•

while we have agreed to use diligent efforts (as defined in the CVR agreement), until the CVR agreement is terminated, to achieve each of the remaining Lemtrada™ related CVR milestones set forth in the CVR agreement, we are not required to take all possible actions to achieve these goals,goals. The first milestone was not met and, following the Complete Response Letter received from the FDA in December 2013, the milestone of U.S. approval will not be met. There can be no assurance that the product sales milestone #1 or the other product sales milestones will be achieved. The failure to achieve such goalsthe sales milestones would have an adverse effect on the value, if any, of the CVRs.

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Item 4. Information on the Company

Introduction

        We are an integrated,a global healthcare company focused on patient needs and engaged in the research, development, manufacture and marketing of healthcare products. In 2012,2013, our net sales amounted to €34,947€32,951 million. We are the fourththird largest pharmaceutical group in the world and the thirdsecond largest pharmaceutical group in Europe (source: IMS sales 2012).Europe. Sanofi is the parent of a consolidated group of companies. A list of the principal subsidiaries included in this consolidation is shown at Note F. to our consolidated financial statements included at Item 18 of this annual report.

        The Sanofi Group is organized around three principal activities: Pharmaceuticals, Human Vaccines via Sanofi Pasteur, and Animal Health via Merial Limited (Merial).Merial. These activities are operating segments within the meaning of the IFRS 8 accounting standard (see Note D.35. to the consolidated financial statements).

        In parallel, the Group operates through seven growth platforms (see "B. Business Overview — Strategy" below): Emerging Markets¹⁽¹⁾, Diabetes Solutions, Vaccines, Consumer Health Care (CHC), Animal Health, New Genzyme,², and Other Innovative Products³⁽²⁾. Unlike the other growth platforms, the Vaccines and Animal Health growth platforms are also operating segments within the meaning of IFRS 8. The Diabetes Solutions, Consumer Health Care, NewCHC, Genzyme, and Other Innovative Products growth platforms are units whose performance is monitored primarily on the basis of their net sales; the products they sell and their related activities are part of our Pharmaceuticals segment. The Emerging Markets growth platform is a unit whose performance is monitored primarily on the basis of its net sales; the products it sells are derived from all three of our principal activities: pharmaceuticals, human vaccinesPharmaceuticals, Human Vaccines and animal health.Animal Health. For an analysis of the net sales of our growth platforms in 20122013 and 2011,2012, refer to "Item 5. Results of Operations — Year Ended December 31, 20122013 Compared with yearYear Ended December 31, 2011"2012".

⁽¹⁾

World excluding the United States, Canada, Western Europe (France, Germany, UK, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Sweden, Portugal, the Netherlands, Austria, Switzerland, Ireland, Finland, Norway, Iceland and Denmark), Japan, Australia and New Zealand.

⁽²⁾

"New Genzyme" covers rare diseases and treatment for multiple sclerosis.

⁽³⁾

"Other Innovative Products" covers new product launches which do not belong to the other growth platforms listed: Multaq®, Jevtana®, Mozobil® and Zaltrap®.

        In our Pharmaceuticals activity, which generated net sales of €28,871€27,250 million in 2012,2013, our major product categories are:

•

Diabetes Solutions: our main products are Lantus®, a long actinglong-acting analog of human insulin which is the leading brand in the insulin market; Amaryl®, an oral once-daily sulfonylurea; Apidra®, a rapid-acting analog of human insulin; Insuman®, a range of human insulin solutions and suspensions; Amaryl®Lyxumia®, an orala once-daily sulfonylurea;prandial GLP-1 receptor agonist; and BGStar®, iBGStar® and iBGStar™MyStar Extra™, blood glucose meters.



•

Rare Diseases: our principal products are enzyme replacement therapies: Cerezyme® to treat Gaucher disease, Myozyme®/Lumizyme®, to treat Gaucher disease;Pompe disease, Fabrazyme®, to treat Fabry disease;disease, and Myozyme®/Lumizyme®Aldurazyme®, to treat Pompe disease.mucopolysaccharidosis Type I (MPS I).



•

Multiple sclerosis (MS): with our MS franchise consists of Aubagio®- a once daily, oral immunomodulator launched in October 2012 in the United States.and Lemtrada™, a humanized monoclonal antibody that selectively targets CD52. Both products have been developed to treat patients with relapsing forms of MS.

Rare Diseases and multiple sclerosisMS are the therapeutic areas of the "New Genzyme""Genzyme" growth platform.

•

Oncology: with our products include Taxotere®, a taxane derivative representing a cornerstone therapy in several cancer types; Eloxatine®Jevtana®, a taxane derivative, indicated for patients with prostate cancer; Eloxatin®, a platinum agent, which is a key treatment for colorectal cancer; Jevtana®Thymoglobulin®, a taxane derivative, indicated for patients with prostate cancer;broad immuno-suppressive and immuno-modulating agent; Mozobil®, a hematopoietic stem cell mobilizer for patients with hematologic maligancies; and Zaltrap®, a recombinant fusion protein, indicated for patients with metastatic colorectal cancer (mCRC) that is resistant to or has progressed following an oxaliplatin-containing regimen, launched in August 2012 in the United States.regimen.



•

Other prescription products: our thrombosis medicines include Plavix®, an anti-platelet agent indicated for a number of atherothrombotic conditions;conditions, and Lovenox®, a low molecular weight heparin indicated for prevention and treatment of deep vein thrombosis and for unstable angina and myocardial infarction. Our cardiovascular medicines include Multaq®, an anti-arrhythmic agent;agent, and Aprovel®/CoAprovel®, two hypertension treatments. Our renal business includes Renagel®/Renvela®, oral phosphate binders used in patients with chronic kidney disease (CKD) on dialysis to treat high phosphorus levels. Our biosurgery business includes Synvisc® and Synvisc-One®, viscosupplements used to treat pain associated with osteoarthritis of certain joints.



•

Our global pharmaceutical portfolio also includes a wide range of other products in Consumer Health Care (CHC),CHC, a category in which we have become the third largest player in terms of global sales, and other prescription drugs including generics.

   We are

---

(1)

World excluding the United States, Canada, Western Europe (France, Germany, UK, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Sweden, Portugal, the Netherlands, Austria, Switzerland, Ireland, Finland, Norway, Iceland and Denmark), Japan, Australia and New Zealand.

(2)

"Other Innovative Products" covers new product launches which do not belong to the other growth platforms listed: Multaq®, Jevtana®, Auvi-Q™, Mozobil® and Zaltrap®.




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        Sanofi Pasteur is a worldworldwide leader in the vaccinesvaccine industry. OurIts net sales amounted to €3,897€3,716 million in 2012,2013, with leading vaccines in five areas: pediatric vaccines, influenza vaccines, adult and adolescent booster vaccines, meningitis vaccines, and travel and endemicsendemic vaccines.

        Our Animal Health activity is carried out through Merial, one of the world's leading animal healthcare companies, dedicated to the research, development, manufacture and delivery of innovative pharmaceuticals and vaccines used by veterinarians, farmers and pet owners and providing a comprehensive line of products to enhance the health, well-being and performance of a wide range of production and companion animals. The net sales of Merial amounted to €2,179€1,985 million in 2012.2013.

        Partnerships are essential to our business, and many of our products on the market or in development have been in-licensed from third parties or rely on third party technologies and rights.

        In the description of our business activities below, the following should be kept in mind:

•

A drug can be referred to either by its international non-proprietary name (INN) or by its brand name, which is normally exclusive to the company that markets it. In most cases, our brand names, which may vary from country to country, are protected by trademark registrations. In general, we have chosen in this annual report to refer to our products by the brand names we use in France, except for Allegra® (sold in France as Telfast®), Tritace® (sold in France as Triatec®), Amaryl® (sold in France as Amarel®), andEloxatin® (sold in France as Eloxatine®), Ambien® CR (an extended-release formulation of zolpidem tartrate, not sold in France), and Thymoglobulin® (sold in France as Thymoglobuline®).



•

For our pharmaceutical activity, except where otherwise stated, all market share percentages and rankings are based on full-year 20122013 sales figures from IMS Health MIDAS (retail and hospital).






•

For ourthe vaccines activity, market shares and rankings are based on our own estimates. These estimates have been made from information in the public domain information collated from various sources, including statistical data collected by industry associations and information published by competitors.



•

We present our consolidated netFor the animal health activity, market shares and rankings are based on sales for our leading products sold directly and through alliances. As regards the products sold through our alliance with Bristol-Myers Squibb (BMS), we also present the aggregate worldwide sales of Plavix® and Aprovel®, whether consolidated by Sanofi or by BMS. A definition of worldwide sales can be found in "Item 5. Operating and Financial Review and Prospects — Results of Operations".data from Vetnosis.


A. History and Development of the Company


        We are present in approximately 100 countries on five continents with 112,128 employees at year end 2013.

        The current Sanofi corporation was incorporated under the laws of France in 1994 as asociété anonyme,, a form of limited liability company, for a term of 99 years. Since May 2011, we have operated under the commercial name "Sanofi" (formerly known as sanofi-aventis). Our registered office is located at 54, rue La Boétie, 75008 Paris, France, and our main telephone number is +33 1 53 77 40 00. Our principal U.S. subsidiary's office is located at 55 Corporate Drive, Bridgewater, NJ 08807; telephone: +1 (908) 981-5000.

        We are present in approximately 100 countries on five continents with 111,974 employees at year end 2012. As a global diversified healthcare company our business includes a diversified offering of medicines, consumer healthcare products, generics, animal health and human vaccines.

History of the Company

        The Group has more than a century of experience in the pharmaceutical industry. Sanofi-Synthélabo (formed in 1999 by the merger of Sanofi, founded in 1973, and Synthélabo, founded in 1970) and Aventis (formed in 1999 by the combination of Rhône-Poulenc, formed in 1928, and Hoechst, founded in the second half of the 19^th century)1863) were combined in 2004 and are the principal legacy companies of our continuously expanding Group.

Important Corporate Developments 2009-2012since 2009

        Starting in 2009, Sanofi began a strategy of targeted acquisitions to become a diversified healthcare company, and created or strengthened various platforms including CHC and Generics.

•

In 2009, we acquired Zentiva, a Prague-based branded generics group and Medley, a leading generics company in Brazil;



•

On February 9, 2010, Sanofi successfully completed its tender offer for all outstanding shares of common stock of Chattem, Inc., a leading U.S. consumer healthcare company;



•

On February 24, 2011, Sanofi acquired BMP Sunstone Corporation (a specialty pharmaceutical company with a proprietary portfolio of branded pharmaceutical and healthcare products in China) through a merger between BMP Sunstone and a wholly-owned subsidiary;



•

In 2011, Merial became Sanofi's dedicated animal healthAnimal Health division. Merial was founded in 1997 for animal health activities, and was initially a joint venture in which we and Merck & Co. Inc. (Merck) each held 50%. On September 17, 2009, we acquired Merck's entire interest in Merial. See Note D.2. to our consolidated financial statements included at Item 18 of this annual report; and




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•

On April 4, 2011, following a tender offer, Sanofi acquired Genzyme Corporation, a leading biotechnology group headquartered in Cambridge, Massachusetts and specializedspecializing in the treatment of rare diseases, renal diseases, endocrinology, oncology and biosurgery. The agreement is described at "Item 10. Additional Information — C. Material Contracts".





B. Business Overview


B.1. Strategy

        Sanofi is an integrated,a global healthcare leader offering solutions across areas of core historical strength and multiple growth platforms. Like other groups active in the pharmaceutical industry, we have been facing competition from generics for several of our major products, in an environment subject to cost containment pressures from both third party payers and healthcare authorities. We responded to these major challenges by implementing a strategy with the objective of repositioning Sanofi for more stable and sustainable revenue and earnings growth. Over the past several years, we have transformed the Group by decreasing our reliance on existing "blockbuster" medicines (medicines with over $1 billion in global sales), optimizing our approach to Research & Developmentresearch and development (R&D), increasing our diversification, and investing in seven growth platforms (Emerging Markets, Diabetes Solutions, Vaccines, Consumer Health Care,CHC, Animal Health, New Genzyme, and Other Innovative Products).

We regularly review our strategy and its implementation, and are continuing to execute thisour strategy along four prongs:

•

•    Growing a global healthcare leader with synergistic platforms

        Our ambition is to offer an integrated set of businesses within the healthcare space with opportunities to create synergies across activities both upstream andat the R&D level and downstream in the market place.

•

•    Bringing innovative products to market

        We regularly review our R&D portfolio in order to improve the allocation of our resources. Also, our decision-makingOur decision making processes integrate commercial potential and scope for value creation into our development choices. The result is an ongoing rationalization and optimization of our portfolio allowing us to focus on high-value projects and, when appropriate, reallocate part of our resources from internal infrastructure to partnerships and collaborations. We have redesigned our R&D footprint, including increasing our presence in the Boston, MAMassachusetts area (United States) with its concentration of universities and innovative biotechnology companies. Our R&D is now based on an organizational structure focused on patient needs and encouraging entrepreneurship. This network-basednetwork based organization, open to external opportunities, enables our R&D portfolio to more effectively capitalize on innovation from a wide range of sources.

        In line with this policy, we signed new alliance and licensing agreements in 20122013 to give us access to new technologies, and/or to broaden or strengthen our existing fields of research. We have also made progress on our objective of offering more products that add value for patients, with, five innovativein 2013, seven approvals of new products (NMEs) submitted to regulatory agenciesand two projects in 2012 and 18registration. We expect nine potential new product launches possiblefilings of late-stage projects between now and the end of 2015.2018.

•

•    Seizing value-enhancingvalue enhancing growth opportunities

        Business development remains an integral and disciplined pillar of our overall strategy, targeting acquisitions and alliances that create and/or strengthen platforms for long-term growth and create value for our shareholders. Since January 2009, we have invested a total of approximately €24 billion in external growth. During 2012,2013, we actively pursued this targeted policy, announcing 2613 new transactions, including 8 acquisitions1 acquisition and 18 major12 R&D alliances.

        In 2012, we strengthened our Emerging Markets growth platform Pursuit of this strategy in 2013 led to the signature in January 2014 of a collaboration with Alnylam for the agreement to acquire Genfar S.A. (announced in October 2012), a leading pharmaceuticals manufacturer headquartered in Bogota, Colombia. Also, we acquired the rights to linesdevelopment of generic products for Sub Saharan Africarare genetic diseases, and for Vietnam. With these acquisitions, Sanofi intends to become a market leader in both Colombia and Nigeria, and has expanded its portfolio of affordable pharmaceuticals in Latin America, Africa and Southeast Asia.

        Our animal health business was also reinforced in 2012 by the acquisitionan amendment of Newport Laboratories, a privately held company based in Worthington, Minnesota (United States), a leader in autogenous vaccinesour investor agreement with a focus on swine and bovine production markets, and with the agreement to acquire the Animal Health Division of Dosch




Pharmaceuticals in India (announced end of December 2012). When completed, this last acquisition will create a market entry for Merial in that country's strategically important and growing Indian animal health sector.Regeneron.

        In the years to come, we expect our sound financial position to provide us the potential to create value through external growth opportunities and to strengthen our diversification and growth platforms through new acquisitions and partnerships. We will remain financially disciplined, within the aims of our business development activities, so that we can execute strategically important transactions and partnerships that deliver a return on investment in excess of our cost of capital.

•

•    Adapting our structure for future opportunities and challenges

        We have adapted our operating model, previously focused on the best-selling prescription drugs in our traditional markets, to a broader set of products and services that better reflect the diversity of our activities and our




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geographical reach. In particular, we have tailored our strategy, structure and product offering to each region's needs, so as to deliver the most appropriate solution to each patient. The result is a dramatic shift in business mix from our top 15 products to key growth platforms. In 2008, 61% of our sales originated from our top 15 products while in 2012, 67.4%2013, 72.5% of our sales were generated by our growth platforms. In addition, 31.9%33.3% of our 20122013 sales were in emerging markets,Emerging Markets, where we have enhanced our offerings in high growth segments such as Generics and Consumer Health Care by completing 25 transactions and investing a total of approximately €3.9 billion in acquisitions over the last four years.CHC.

        We have also realigned our industrial capacity to reflect our expectation of changes in volumes and our analyses of growth opportunities. Combined with the streamlining of our R&D structures and tight control over selling, general and administrative expenses, this has helped us successfully navigate a period in which many of our leading products faced the loss of patent exclusivity protection, in a tougher economic environment with new healthcare cost containment measures in many markets.

Pharmaceutical Products

B.2. Main Pharmaceutical Products

        Within our Pharmaceuticals business, we focus on the following therapeutic areas: diabetes solutions, rare diseases, multiple sclerosis,MS, and oncology. We also have flagship products in such fields as anti-thrombotics, cardiovascular, renal and biosurgery and have developed leading businesses in Consumer Health CareCHC and generics.Generics.

        The sections that follow provide additional information on the indications and market position of our key products. Our intellectual property rights over our pharmaceutical products are material to our operations and are described at "— Patents, Intellectual Property and Other Rights" below. As disclosed in "Item 8. Financial Information — A. Consolidated Financial Statements and Other Financial Information — Patents" of this annual report. Wereport, we are involved in significant litigation concerning the patent protection of a number of these products.




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        The following table sets forth the net sales of our main pharmaceutical products for the year ended December 31, 2012.2013.

Therapeutic Area / Product Name					20122013 Net Sales (€ million)				Drug Category / Main Areas of Use
Diabetes Solutions
Lantus® (insulin glargine)			4,9605,715		Long-acting analog of human insulin
					•  Type 1 and 2 diabetes mellitus
Amaryl® (glimepiride)		375		Sulfonylurea •  Type 2 diabetes mellitus
Apidra® (insulin glulisine)			230288		Rapid-acting analog of human insulin
					•  Type 1 and 2 diabetes mellitus
Insuman® (insulin)			135132		Human insulin (rapid and intermediate acting)
					•  Type 1 and 2 diabetes mellitus
Amaryl® (glimepiride)Lyxumia® (lixisenatide)		9		GLP-1 receptor agonist •  Type 2 diabetes mellitus
Rare Diseases			421		Sulfonylurea
					• Type 2 diabetes mellitus
Rare Diseases
Cerezyme® (imiglucerase for injection)			633688		Enzyme replacement therapy
•  Gaucher disease
Myozyme®/Lumizyme® (alglucosidase alpha)		500		Enzyme replacement therapy •  Pompe disease			• Gaucher disease
Fabrazyme® (agalsidase beta)			292383		Enzyme replacement therapy
•  Fabry disease
Aldurazyme® (laronidase)		159		Enzyme replacement therapy •  Mucopolysaccharidosis Type I
• Fabry disease
Myozyme®/Lumizyme® (alglucosidaseMultiple Sclerosis			462		Enzyme replacement therapy
alpha)					• Pompe disease
Multiple Sclerosis
Aubagio® (teriflunomide)			7166		Oral immunomodulating agent •  MS
Lemtrada™ (alemtuzumab)		2		Humanized monoclonal antibody targeting CD52 antigen •  MS
Oncology					• Multiple Sclerosis
Oncology
Taxotere® (docetaxel)			563409		Cytotoxic agent
					• Breast cancer • Non small cell lung cancer • Prostate cancer • Gastric cancer • Head and neck cancer
Eloxatine® (oxaliplatin)			956		Cytotoxic agent
					• Colorectal cancer
Jevtana® (cabazitaxel)			235231		Cytotoxic agent
•  Prostate cancer
Eloxatin® (oxaliplatin)		221		Cytotoxic agent •  Colorectal cancer
Thymoglobulin® (anti-thymocyte globulin (rabbit))		198		Polyclonal anti-human thymocyte antibody preparation •  Prostate cancer Acute rejection in organ transplantation •  Aplastic anemia •  Graft-versus-Host Disease
Mozobil® (plerixafor)			96101		Hematopoietic stem cell mobilizer
•  Hematologic maligancies					• Hematologic maligancies
Zaltrap® (aflibercept)			2553		Recombinant fusion protein
					•  Oxaliplatin resistant metastatic colorectal cancer




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Therapeutic Area / Product Name					20122013 Net Sales (€ million)				Drug Category / Main Areas of Use
Other Prescription Drugs
Plavix® (clopidogrel bisulfate)		1,857		Platelet adenosine disphosphate receptor antagonist •  Atherothrombosis •  Acute coronary syndrome with and without ST segment elevation
Lovenox® (enoxaparin sodium)			1,8931,703		Low molecular weight heparin
					• Treatment and prevention of deep vein thrombosis • Treatment of acute coronary syndromes
Plavix® (clopidogrel bisulfate)			2,066		Platelet adenosine disphosphate receptor antagonist
					• Atherothrombosis • Acute coronary syndrome with and without ST segment elevation
Aprovel® (irbesartan) / CoAprovel® (irbesartan & hydrochlorothiazide)			1,151882		Angiotensin II receptor antagonist
(irbesartan & hydrochlorothiazide) •  Hypertension					• Hypertension
Multaq® (dronedarone)			255		Anti-arrhythmic drug
					• Atrial Fibrillation
Renagel® (sevelamer hydrochloride) /			653		Oral phosphate binders
Renvala® (sevelamer carbonate)		750			Oral phosphate binders •  High phosphorus levels in patients with chronic kidney disease (CKD) on dialysis
Synvisc® / Synvisc-One®			363		Viscosupplements
(hylan G-F 20)					• Pain associated with osteoarthritis of the knee
Stilnox® /Ambien®/Myslee® (zolpidem			497		Hypnotic
tartrate)					• Sleep disorders
Allegra® (fexofenadine hydrochloride)			553406	&zwsp;(1)	Anti-histamine
•  Allergic rhinitis •  Urticaria					• Allergic rhinitis • Urticaria
Depakine® (sodium valproate)			410405		Anti-epileptic •  Epilepsy
Stilnox® / Ambien® / Myslee® (zolpidem tartrate)		391		Hypnotic •  Sleep disorders
Synvisc® / Synvisc-One® (hylan G-F 20)		371		Viscosupplements •�� Pain associated with osteoarthritis of the knee
Multaq® (dronedarone)		269		Anti-arrhythmic drug •  Atrial Fibrillation (AF)
Actonel® (risedronate sodium)		100		Biphosphonate •  Osteoporosis •  Paget's disease
Auvi-Q™		51		Adrenalin auto-injector •  Emergency treatment of allergic reactions
Consumer Health Care					• Epilepsy
Consumer Health Care
Total			3,008
Generics	3,004
Generics
Total		1,625	1,844

(1)

Excluding Allegra® OTC sales.


a)    Diabetes Solutions


        The prevalence of diabetes is expected to increase significantly by 2030, reflecting multiple socio-economic factors including sedentary lifestyles, excess weight and obesity, unhealthy diet and an aging population. Our principal diabetes products are Lantus®, a long-acting analog of human insulin; Amaryl®, a sulfonylurea; Apidra®, a rapid-acting analog of human insulin;insulin and Insuman®, a human insulin; and Amaryl®, a sulfonylurea. In 2011, in some European markets, we launched the BGStar® range of blood glucose meter solutions for patients with diabetes, whether they are treated with insulin or not.insulin. In February 2013, the European Commission granted marketing authorisation in Europe for Lyxumia®, a once-daily prandial GLP-1 receptor agonist.




Lantus®

        Lantus® (insulin glargine) is a long-acting analog of human insulin, offering an improved pharmacokinetic and pharmacodynamic profile. Lantus® is indicated for once-daily subcutaneous administration in the treatment of adult patients with type 2 diabetes mellitus who require basal insulin for the control of hyperglycemia, and for adult and pediatric patients aged two years (label extension for pediatric use was granted in the EUE.U. in 2012) aged two years and above with type 1 diabetes mellitus.




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        Lantus® is the most studied basal insulin with over 10 years of clinical evidence in diabetes treatment and a well-established safety profile.

        Lantus® can be administered subcutaneously using syringes or specific pens including:

•

Lantus® SoloSTAR® is a pre-filled disposable pen available in over 120 countries worldwide. It is the only disposable pen that combines a low injection force, up to 80 units per injection, and ease-of-use;



•

ClikSTAR® is a reusable insulin pen first approved in 2009 in the European Union and Canada. It is now available in more than 30 countries worldwide; and



•

AllSTAR™ is the first state-of-the-art, re-usable insulin pen developed especially for people with diabetes in emerging markets, indicated for use with Sanofi's insulin portfolio. AllSTAR™ is currently available in India; going forward, Sanofi intends to make AllSTAR™ accessible to other emerging markets.

        In their 2012 updates, the American Diabetes Association (ADA) and European Association for the Study of Diabetes (EASD) have maintained their 2008 treatment recommendations for type 2 diabetes. This consensus statement further established basal insulins such as Lantus®, or a sulfonylurea such as Amaryl®, as two preferred second-line treatment options for people with diabetes who are unable to achieve glycemic control targets with lifestyle intervention and metformin (which reduces hepatic glucose production and decreases insulin resistance) alone. These treatment recommendations reinforce the timely use of basal insulin as a core therapy for type 2 diabetes.

        Lantus® is the world number-one selling insulin brand in terms of both sales and units (source: IMS, 20122013 sales) and is available in over 120 countries worldwide. The three leading countries for sales of Lantus® in 20122013 were the United States, France, China, and Japan.

International epidemiology programAmaryl® / Amarel® / Solosa®

        The epidemiological program sponsored by Sanofi was aimed at evaluating cancer risk in diabetes and generating comprehensive insulin glargine exposure data from large databases. It is the largest observational program designed for this purpose to date. The program results reinforce the robust safety profile of Lantus®, complementing the existing wealth of data already available from more than 80,000 patients enrolled in clinical trials.

        The now completed epidemiological program comprised three major studies. These were designed independently of the company by the lead investigatorsAmaryl® (glimepiride) is an orally administered once-daily sulfonylurea (a glucose-lowering agent), available either in simple form or in combination with metformin, indicated as an adjunct to diet and endorsed by the European Medicines Agency (EMA) and shared with the Food and Drug Administration (FDA). They used state-of-the-art biostatistical methodology with protocols that were discussed with a senior-level Biostatistics Advisory Group:

•

The Northern European Study analyzed over 1.5 million person-years of insulin exposure using databases from five countries — Denmark, Finland, Sweden, Norway and Scotland. The study reported no increased risk of breast cancerexercise to improve glycemic control in women, prostate cancer in men and colorectal cancer in men and women in users of insulin glargine versus other insulins, among all users of insulin, and similarly among users of human insulin.



•

The U.S. Study analyzed over 0.4 million patient-years of insulin exposure from the Kaiser Permanente database (Northern and Southern California regions). Among all insulin users (insulin glargine and NPH insulin), and similarly among those switching to Lantus® and new insulin users, there was no association between use of insulin glargine and risk of breast cancer, prostate cancer, colorectal cancer or all cancers combined.




•

The International Study of Insulin and Cancer (ISICA) was a case-control study of female patients with diabetes in the UK, Canada and France. The study found no increase in the risk of breast cancer with insulin glargine use in diabetes patients and, furthermore, high doses or longer treatment duration with Lantus® were not associated with an increased risk of breast cancer.

ORIGIN

        ORIGIN was a seven-year randomized clinical trial designed to assess the effects of treatment with insulin glargine versus standard care on cardiovascular outcomes. This landmark study involved over 12,500 participants worldwide with pre-diabetes or early type 2 diabetes mellitusdiabetes. Amaryl® reduces the body's blood sugar level in two ways: by helping the body to produce more insulin both at mealtimes and high cardiovascular (CV) risk, with 6,264 participants randomized to receivebetween meals, and by decreasing insulin glargine titrated to achieve fasting normoglycemia. The co-primary endpoints were the compositeresistance.

        A number of CV death, or non-fatal myocardial infarction, or nonfatal stroke;generics have received marketing authorization and the composite of CV death, or non-fatal myocardial infarction, or non-fatal stroke, or revascularization procedure, or hospitalization for heart failure.

        Results showed that Lantus® had no statistically significant positive or negative impact on CV outcomes versus standard care during the study period. Results also showed that insulin glargine delayed progression from pre-diabetes to type 2 diabetes and there was no association between insulin glargine use and increased risk of any cancer. (New England Journal of Medicine, July 2012)

        Sanofi is sponsoring a 2-year extension to ORIGIN, called ORIGINALE (Outcome Reduction with an Initial Glargine Intervention and Legacy Effect).

        The results of the ORIGIN trial have been filed withlaunched in Europe, the FDAUnited States, and the EMA to update the Lantus® dossier at the end of 2012.Japan.

Apidra®

        Apidra® (insulin glulisine) is a rapid-acting analog of human insulin. Apidra® is indicated for the treatment of adults with type 1 diabetes, or in type 2 diabetes for supplementary glycemic control. Apidra® has a more rapid onset and shorter duration of action than fast-acting human insulin and can be used in combination with long-acting insulins such as Lantus® for supplementary glycemic control at mealtime.

        In addition, Apidra® is equally effective in adult diabetics ranging from lean to obese and offers patients greater flexibility of administration, either before or just after mealtime.

mealtimes. Apidra® can be administered subcutaneously using syringes or specific pens including the Apidra® SoloSTAR® disposable pen and the ClikSTAR® reusable pen.

        Apidra® is available in over 100 countries worldwide.

        After a temporary shortage of Apidra® 3mL cartridges (including Apidra® SoloSTAR®) in 2011 which impacted supplies in some markets, production of Apidra® 3mL cartridges returned to full capacity in the first half of 2012.

Insuman®

        Insuman® (human insulin) is a range of insulin solutions and suspensions for injection and is indicated for diabetes patients where treatment with insulin is required. Human insulin is produced by recombinant DNA technology inEscherichia colistrains.

Insuman® is supplied in vials, cartridges, pre-filled disposable pens (OptiSet® and SoloSTAR®), or reusable pens (ClickSTAR®) containing the active substance human insulin.. The Insuman® range is comprised of rapid-acting insulin solutions (Insuman® Rapid and Insuman® Infusat) that contain soluble insulin, an intermediate-acting insulin suspension (Insuman® Basal) that contains isophane insulin, and combinations of fast-fast-acting and intermediate-acting insulins in various proportions (Insuman® Comb).

        Insuman® is principally sold in Germany.Germany and in Emerging Markets.




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Lyxumia®

        Amaryl® (glimepiride)Lyxumia® (lixisenatide) is a latest-generation, orally administered once-daily sulfonylurea (aprandial GLP-1 receptor agonist and is indicated for the treatment of adults with type 2 diabetes mellitus to achieve glycemic control in combination with oral glucose-lowering agent) indicated as an adjunct tomedicinal products and/or basal insulin when these, together with diet and exercise, to improvedo not provide adequate glycemic controlcontrol.

        In February 2013, the European Commission granted marketing authorization in patients with type 2 diabetes. Amaryl® reducesEurope for Lyxumia®. On completion of pricing and reimbursement discussions, Sanofi initiated a phased launch of Lyxumia® throughout the body's blood sugar levelEuropean Union. Applications for regulatory approval have also been submitted in two ways: by helpingseveral other countries around the body to produce more insulin both at mealtimeworld and between meals,are being reviewed. Lyxumia® has also been approved for use in Australia, Brazil, Colombia, Chile, Ecuador, Japan, and by decreasing insulin resistance.Mexico.

        The combinationFDA application was withdrawn in September 2013, to avoid the potential risk that public disclosure of metformin (which reduces hepatic glucose production and decreases insulin resistance) with a sulfonylurea such as Amaryl® is effectiveinterim data compromise the ongoing ELIXA CV outcomes trial. Sanofi intends to resubmit the application in combating2015 once the two causes of type 2 diabetes. It is one of the most prescribed combinations of diabetes drugs worldwide. Amaryl M®, a fixed-dose combination of Amaryl® plus metformin in a single presentation, was launched in 2007.ELIXA CV trial results are known.

        A number of generics have received marketing authorization and have been launched in Europe, the United States and Japan.Additional Phase IIIb studies are ongoing.

BGStar® / iBGStar® / MyStar Extra™

        Sanofi and its partner AgaMatrix are co-developing intelligent solutions in diabetes care that demonstrate their commitment to simplifying and innovating with respect to the diabetes management experience for people with diabetes andas well as healthcare providers. TheThese blood glucose monitoring solutions are exclusive to Sanofi and are designed to be synergistic with the rest of theits diabetes treatment portfolio. BGStar®, iBGStar® and iBGStar®MyStar Extra™ are modern and intelligent blood glucose monitoring solutions which are easy to use, accurate, reliable and fit the lifestyle of people with diabetes today:

•

iBGStar® is the first blood glucose meter that seamlessly connects to the iPhone and iPod touch. It comes with the iBGStar® Diabetes Manager Application (DMA), allowing patients to capture and analyze diabetes-related information on the go, simplifying their daily diabetes management.



•

BGStar® integrates convenient, accurate, and easy-to-use blood glucose management with decision-making support services.



•

MyStar Extra™ provides unique parameters which are critical for insulin titration such as three day fasting blood glucose average, fasting blood glucose trend over the last 10 days, and estimation of the A1C trend.

        These monitoring devices are an important step towards Sanofi's vision of becoming theremaining a global leader in diabetes care by integrating intelligent monitoring technology, therapeutic innovations, personalized services and support solutions.

        MyStar Extra™ launched in October 2013 is available in Italy and Spain. BGStar® and iBGStar® are available in France, Germany, Spain, Italy, the Netherlands, Switzerland, Belgium, Luxembourg, Canada, Estonia, Australia, the UK and the Philippines. iBGStar® is also available in the United States and Saudi Arabia.

Lyxumia®

        Lyxumia® (lixisenatide) is a once-daily prandial GLP-1 receptor agonist. In February 2013, the European Commission granted marketing authorization in Europe for Lyxumia® indicated for the treatment of adults with type 2 diabetes mellitus to achieve glycemic control in combination with oral glucose-lowering medicinal products and/or basal insulin when these, together with diet and exercise, do not provide adequate glycemic control. On completion of pricing and reimbursement discussions, Sanofi will initiate a phased launch of Lyxumia® throughout the European Union. Applications for regulatory approval were also submitted in several other countries around the world and are being reviewed. The FDA accepted the file for review in February 2013.

        Additional Phase IIIb studies have been initiated and the ELIXA cardiovascular outcomes trial is ongoing.

        A proof-of-concept study to compare insulin glargine/lixisenatide fixed ratio combination versus insulin glargine on glycemic control over 24 weeks has been fully recruited.

        GLP-1 is a naturally-occurring peptide hormone that is released within minutes after eating a meal. It is known to suppress glucagon secretion from pancreatic alpha cells and stimulate glucose-dependent insulin secretion by pancreatic beta cells.

        The active ingredient of Lyxumia® is in-licensed from Zealand Pharma.




The main compound currently in Phase III clinical development in the Diabetes field is New Glargine Formulation: A new formulation of insulin glargine with an improved pharmacodynamic profile is now in Phase III clinical testing. In addition to the two Phase III studies started during 2011, in the second half of 2012 the EDITION III and IV Phase III trials were initiated together with two dedicated clinical studies in Japan.


b)    Rare Diseases


        The acquisition of Genzyme in 2011 brought to the Group specific expertise in rare diseases, a sector where there are still many unmet needs, and expanded Sanofi's presence in the biotechnology sector.

        Our Rare DiseaseDiseases business is focused on products for the treatment of rare genetic diseases and other chronic debilitating diseases, including lysosomal storage disorders, or LSDs, a group of metabolic disorders caused by enzyme deficiencies. Our principal rare disease products are enzyme replacement therapies: Cerezyme® (imiglucerase for injection) to treat Gaucher disease, Fabrazyme® (agalsidase beta) to treat Fabry disease and Myozyme® / Lumizyme® (alglucosidase alpha) to treat Pompe disease. In January 2013, Kynamro™ (mipomersen), an antisense oligonucleotide that inhibits the synthesis of apolipoprotein B-100, was approved by the FDA for homozygous familial hypercholesterolemia.

Cerezyme®

        Cerezyme® (imiglucerase for injection) is an enzyme replacement therapy used to treat Gaucher disease, an inherited, potentially life-threatening LSD. It is estimated that there are approximately 10,000 Gaucher patients worldwide.




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        Cerezyme® is the only therapy with an 18-year history of reducing, relieving and reversing many of the symptoms and risks of Type 1 and Type 3 (in certain markets) Gaucher disease. Cerezyme® is administered by intravenous infusion over 1-2one or two hours.

        In 2012, significant progress was made in resolving supply challenges encountered starting in 2009, and successfully restoring existing patients in major markets to normal dosing. For more information regarding manufacturing issues related to Cerezyme®, see "Item 4 — Information on the Company — Production and Raw Materials".

        The principal markets for Cerezyme® are the United States, Europe and Latin America.

Myozyme® / Lumizyme®

        Myozyme® / Lumizyme® (alglucosidase alpha) are enzyme replacement therapies used to treat Pompe disease, an inherited, progressive and often fatal LSD. We estimate that there are approximately 10,000 Pompe patients worldwide.

        Myozyme® has been marketed since 2006 in the United States and the E.U. and is currently available in 48 markets worldwide. Lumizyme® has been marketed since June 2010. It is the first treatment approved in the United States specifically to treat patients with late-onset Pompe disease and patients over eight years of age without evidence of cardiac hypertrophy.

        Myozyme® and Lumizyme® are administered by intravenous infusion. Both products are a recombinant form of the same human enzyme but are manufactured using different sized bioreactors.

Fabrazyme®

        Fabrazyme® (agalsidase beta) is an enzyme replacement therapy used to treat Fabry disease, an inherited, progressive and potentially life-threatening LSD. Fabry disease is estimated to affect between 5,000 and 10,000 people worldwide. Fabrazyme® is administered by intravenous infusion.

        Fabrazyme® is available in over 30 countries, including the United States and Europe.

        The strong recovery ofIn 2013, Fabrazyme®, following manufacturing issues which began in 2009, continued in 2012 with the approval of the new Framingham plant in January 2012, stable production runs, the return of all existing patients in all markets to full doseincrease market share and the addition ofaccrue new patients. In the U.S., Fabrazyme® also benefited from Shire's withdrawal of the Replagal® BLA. For more information regarding manufacturing issues related to Fabrazyme®, see "Item 4 — Information on the Company — Production and Raw Materials".

Myozyme® / Lumizyme®

        MyozymeAldurazyme® / Lumizyme® (alglucosidase alpha) are

        Aldurazyme® (laronidase) is an enzyme replacement therapiestherapy used to treat Pompe disease, an inherited, progressiveMucopolysaccaridosis Type I (MPS I). MPS I occurs in approximately one in 100,000 newborns worldwide, but incidence and often fatal LSD. We estimate that therethe prevalence of phenotypic groups varies from region to region.

        The principal markets for Aldurazyme® are approximately 10,000 Pompe patients worldwide.

        Myozyme® has been marketed since 2006 in the United States, Europe and the EU and is currently available in 48 markets worldwide. Lumizyme® is the first treatment approved in the United States specifically to treat patientsLatin America.




with late-onset Pompe disease: Lumizyme® has been marketed since June 2010. Myozyme® and Lumizyme® are administered by intravenous infusion. Lumizyme® is used to treat Pompe disease in patients over eight years of age without evidence of cardiac hypertrophy.

        Both products are a recombinant form of the same human enzyme but are manufactured using different sized bioreactors.

Kynamro™

        Kynamro™ (mipomersen) is an antisense oligonucleotide (ASO) that inhibits the synthesis of apoB, a primary protein constituent of atherogenic lipoproteins. Mipomersen is being developed, in collaboration with Isis Pharmaceuticals Inc., for the treatment of patients with homozygous familial hypercholesterolemia (HoFH) and severe heterozygous FH (HeFH). FH is a genetic disorder that causes chronic and lifelong exposure to markedly elevated concentrations and numbers of atherogenic, apoB-containing lipoproteins (LDL, Lp(a)) leading to premature and severe cardiovascular disease. On January 29, 2013, Genzyme and Isis announced the FDA approval of Kynamro™ (Mipomersen sodium) for homozygous familial hypercholesterolemia. On December 14, 2012 Genzyme and Isis announced that the Committee for Medicinal Products for Human Use (CHMP) had adopted a negative opinion for its marketing authorization application submitted in 2011. In January 2013, Genzyme requested a re-examination of the CHMP opinion.

The main compounds currently in Phase II or III clinical development in the Rare Diseases field are:

•

Eliglustat tartrate — Substrate reduction therapy targeted for the treatment of Gaucher disease type 1. This product candidate is administered orally in capsule form and has the potential to transform the treatment experience of patients by providing an alternative to bi-weekly infusions. The fourth year of data from the Phase II trial of eliglustat tartrate suggests continued improvement across all endpoints including markers of bone disease. On February 15, 2013 Sanofi and Genzyme announced positive new data from the Phase III ENGAGE and ENCORE Studies.

In ENGAGE, a Phase III trial aimed at evaluating the safety and efficacy of eliglustat in 40 treatment-naive patients with Gaucher disease type 1, improvements were observed across all primary and secondary efficacy endpoints over the nine-month study period.

In ENCORE, a Phase III study assessing eliglustat vs. Cerezyme® in 160 patients with Gaucher disease type 1, the primary composite endpoint of clinical stability was met as well as for the individual components of the composite endpoint which was secondary endpoints.

c)    Multiple Sclerosis (MS)

        OurThe Multiple Sclerosis franchiseactivity is focused on the development and commercialization of therapies thatto treat this chronic autoimmune disease of the central nervous system.system (CNS). More than 2 million people suffer from MS worldwide. OurThe MS franchise consists of Aubagio® (teriflunomide), a once daily, oral immunomodulator, that is approved in the United States and Australia, and Lemtrada™ (alemtuzumab), a monoclonal antibody that has completed two Phase III pivotal studies and has marketing applications under review by regulatory authorities in the U.S. and Europe.antibody. Both products have been developed to treat patients with relapsing forms of MS.

Aubagio®

        Aubagio® (teriflunomide), ana small molecule immunomodulatory agent with anti-inflammatory properties, reversibly inhibits dihydroorotate dehydrogenase, a mitochondrial enzyme involved in de novo pyrimidine synthesis. The exact mechanism by which teriflunomide exerts its therapeutic effect in MS is unknown but may involve a reduction in the number of activated lymphocytes in the CNS. Aubagio® has shown significant efficacy across key measures of MS disease activity, including reducing relapses, slowing the progression of physical disability, reducing relapses, and reducing the number of brain lesions as detected by MRI. Results of the first pivotal study (TEMSO), indicating that the product had an effect on disease activity in terms of relapse rate, disability progression and brain lesions with a favorable safety profile, were published in the New England Journal of Medicine in October 2011. Results from the second pivotal study (TOWER) were presented at 28th Congress of the European Committee for Treatment and Research




in Multiple Sclerosis (ECTRIMS) in October 2012. These results showed that Aubagio® significantly reduced the annualized relapse rate and slowed progression of disability in patients with relapsing forms of multiple sclerosis compared to placebo. Aubagio® is the first and only oral MS therapy to significantly slow the progression of disability in two Phase III trials. In April 2013, top-line results were reported from the TOPIC trial, which was designed to assess whether early initiation of Aubagio® in patients who experienced their first neurological symptoms consistent with Clinically Isolated Syndrome (CIS) could prevent or delay conversion to clinically definite multiple sclerosis (CDMS). In the TOPIC trial, patients receiving Aubagio® 14 mg and 7 mg were




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significantly less likely to develop CDMS, defined as occurrence of a second clinical attack, the primary endpoint, as compared to placebo.

        Aubagio® received FDA approvalwas approved in the United States and Australia in September 2012 for patients with relapsing forms of MS. In August 2013, Aubagio® was approved in the EU for the treatment of adult patients with relapsing remitting multiple sclerosis. The product was also received regulatory approvalapproved during 2013 in Australia in November 2012. Marketing applications for Aubagio® are currentlyArgentina, Chile, Mexico, New Zealand, South Korea and Switzerland, and is under review by additional regulatory agencies around the European Medicines Agency and other regulatory authorities.world.

Lemtrada™

        The main compound currently in Phase III clinical development in the multiple sclerosis fieldLemtrada™ (alemtuzumab) is Lemtrada™ (alemtuzumab), a humanized monoclonal antibody targeting CD52 antigen abundant on the surface of B and T lymphocytes leading to changes in the circulating lymphocyte pool. Alemtuzumab has been developed to treat patients with relapsing forms of MS. The two pivotal Phase IIIIn March 2013, interim results from the first year of the extension study of the CARE MS studies demonstratingwere presented at the safetyannual meeting of the American Academy of Neurology. In this analysis of patients who received 2 courses of Lemtrada™ in CARE MS I and efficacyII (at start of alemtuzumab werestudy and 12 months later) and then completed in 2011their third year of follow-up (first year of the extension study), relapse rates and the results were published in theLancet in November 2012. The first study, CARE-MS I, demonstrated strong and robust treatment effect on the relapse rate co-primary endpoint vs Rebif in treatment-naive MS patients. The co-primary endpoint of disability progression (time to sustained accumulation of disability: SAD)disability remained low. Approximately 80 percent of patients did not meet statistical significance. The second study, CARE-MS II, demonstrated that relapse rate and SAD were significantly reduced in MS patients receiving alemtuzumab as compared with Rebif in MS patients who had relapsed on prior therapy. Results from CARE-MS II also showed that patients treatedreceive further treatment with Lemtrada™ were significantly more likely to experience improvementduring the first year of the extension study and less than 2% received another MS treatment.

        In September 2013, Lemtrada™ was granted marketing authorization in disability scores than those treatedthe E.U. for treatment of adult patients with Rebif, suggestingrelapsing forms of MS with active disease defined by clinical or imaging features. Lemtrada™ was also approved by regulatory authorities in Canada and Australia during the fourth quarter of 2013. In December 2013, Genzyme received a reversalComplete Response Letter from the FDA for its supplemental Biologics License Application seeking approval of disability in some patients. In both pivotal studies, safety results were consistent with previous alemtuzumab use in MS and adverse events continued to be manageable. MarketingLemtrada™ for the treatment of relapsing forms of MS. A Complete Response Letter informs companies that an application is not ready for approval. Genzyme is preparing the appeal of the FDA's decision. Additional marketing applications for Lemtrada™ are currently under review by regulatory authorities.agencies around the world.


d)    Oncology


        Sanofi has started to diversify its presence in the oncology field beyond chemotherapy (Eloxatine®(Taxotere®, Taxotere®Jevtana®, Eloxatin®), Thymoglobulin® and Jevtana®)Mozobil®, and launched an angiogenesis inhibitor, Zaltrap®, in August 2012 in the U.S. and in 2013 in the E.U.

Taxotere®

        Taxotere® (docetaxel), a taxoid class derivative, inhibits cancer cell division by essentially "freezing" the cell's internal skeleton, which is comprised of microtubules. Microtubules assemble and disassemble during a cell cycle. Taxotere® promotes their assembly and blocks their disassembly, thereby preventing many cancer cells from dividing and resulting, ultimately, in death in many cancer cells.

        Taxotere® is available in more than 90 countries as an injectable solution. The single vial formulation (one vial IV route 20-80mg) was launched in the U.S. and in the European Union in 2010. It has been approved for use in eleven11 indications in five different tumor types (breast, prostate, gastric, lung, and head and neck). Taxotere® is indicated for early stage and metastatic breast cancer, first-line and second-line metastatic Non-Small Cell Lung Cancer (NSCLC), androgen-independent (hormone-refractory) metastatic prostate cancer, advanced gastric adenocarcinoma (including adenocarcinoma of the gastroesophageal junction), and the induction treatment of patients with locally advanced squamous cell carcinoma of the head and neck.

The top four countries contributing to sales of Taxotere® in 20122013 were the United States, Japan, China and Russia. Generics of docetaxel were launched at the end of 2010 in Europe, in April 2011 in the U.S., and in December 2012 in Japan (see "— Patents, Intellectual Property and Other Rights" below).

Eloxatine®

        Eloxatine® (oxaliplatin) is a platinum-based cytotoxic agent. Eloxatine®, in combination with infusional (delivered through the bloodstream) administration of two other chemotherapy drugs, 5-fluorouracil/leucovorin (the FOLFOX regimen), is approved by the FDA for adjuvant treatment of people with stage III colon cancer who have had their primary (original) tumors surgically removed. This approval was based on evidence of an improvement in disease-free survival after four years.




        Eloxatine® is in-licensed from Debiopharm and is marketed in more than 70 countries worldwide. The top four countries contributing to sales of Eloxatine® in 2012 were the United States, Canada, China, and South Korea.

        Following the end of Eloxatine® European regulatory data exclusivity in April 2006, a number of oxaliplatin generics have been launched throughout Europe. Market exclusivity in the United States was lost on August 9, 2012. Several generics of oxaliplatin are available globally, except in Canada where Eloxatine® still has exclusivity.

Jevtana®

        Jevtana® (cabazitaxel) is a taxane derivative approved in combination with prednisone for the treatment of patients with hormone-refractory metastatic prostate cancer previously treated with a docetaxel-containing treatment regimen. Jevtana® was the result of a 14-year research and development program to address the significant unmet medical need after taxane-based treatment progression.




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        Jevtana® was launched in the United States in 2010. Jevtana® therapy is now covered by CMS (Committee for Medicare and Medicaid Services), and by most of the private insurance companies that pay for oncology care. In addition, the safety profile seenobserved in clinical practice has been consistent with that seen in the pivotal TROPIC study.

        In March 2011, Jevtana® received marketing authorization from the European Commission. The product was launched during the second quarter of 2011 in Germany and the UK. Jevtana® is now approved in 78in over 80 countries. Regulatory approval in Japan is ongoing and anticipated in June 2014.

        Sanofi has initiated a broad development program with Jevtana®. The clinical program is projected to evaluate Jevtana® in first- and second-line treatment of prostate cancer patients, second-line treatment of small-cell lung cancer patients, and pediatric patients with brain cancer.

        The top fourmain countries contributing to sales of Jevtana® in 20122013 were the U.S., Germany, ItalyFrance, the UK, and Brazil.Italy.

Eloxatin®

        Eloxatin® (oxaliplatin) is a platinum-based cytotoxic agent. Eloxatin®, in combination with infusional administration of two other chemotherapy drugs, 5-fluorouracil/leucovorin (the FOLFOX regimen), is approved by the FDA for adjuvant treatment of people with stage III colon cancer who have had their primary tumors surgically removed. This approval was based on evidence of an improvement in disease-free survival after four years.

        Eloxatin® is in-licensed from Debiopharm and is marketed in more than 70 countries worldwide. The top three countries contributing to sales of Eloxatin® in 2013 were Canada, China, and South Korea. In the second quarter of 2013, Eloxatin® received regulatory approval for advanced Hepatocellular Carcinoma (HCC) in China.

        Following the end of Eloxatin® European regulatory data exclusivity in April 2006, a number of oxaliplatin generics have been launched throughout Europe. Market exclusivity in the United States was lost on August 9, 2012. Several generics of oxaliplatin are available globally, except in Canada where Eloxatin® still has exclusivity.

Thymoglobulin®

        Thymoglobulin® (Anti-thymocyte Globulin (Rabbit)) is a polyclonal anti-human thymocyte antibody preparation that acts as a broad immuno-suppressive and immuno-modulating agent. The product's primary mechanism of action is T-cell depletion, which is complemented by a host of other immuno-modulating effects. Thymoglobulin® is currently marketed in over 65 countries. Depending on the country, Thymoglobulin® is indicated for: the treatment and/or prevention of acute rejection in organ transplantation, immunosuppressive therapy in aplastic anemia, and/or the treatment and/or prevention of Graft-versus-Host Disease (GvHD) after allogeneic hematopoietic stem cell transplantation.

        The main countries contributing to Thymoglobulin® sales in 2013 were the U.S., France, China, and Japan. Thymoglobulin® was launched in Russia in May 2013.

Mozobil®

        Mozobil® (plerixafor injection) is a hematopoietic stem cell mobilizer indicated in combination with granulocyte-colony stimulating factor (G-CSF) to mobilize hematopoietic stem cells to the peripheral blood for collection and subsequent autologous transplantation in patients with non-Hodgkin's lymphoma (NHL) and multiple myeloma (MM).

        The main countries contributing to Mozobil® sales in 20122013 were the U.S., Germany, France, the U.K. and Italy.

Zaltrap®

        Zaltrap® (aflibercept) is a recombinant fusion protein which acts as a soluble decoy receptor that binds to Vascular Endothelial Growth Factor-A (VEGF-A), VEGF-B and placental growth factor (PIGF), preventing the bound VEGF from binding to their native receptors. VEGF-A is one of the mediators contributing to angiogenesis. VEGF-B and PlGF, related growth factors in the VEGF family, may contribute to tumor angiogenesis as well. In the U.S., Zaltrap® is a registered trademark




Table of Regeneron Pharmaceuticals, Inc.Contents

        In the U.S., Zaltrap® is approved under the U.S. proper name ziv-aflibercept for use in combination with FOLFIRI, in patients with metastatic colorectal cancer (mCRC) that is resistant to or has progressed following an oxaliplatin-containing regimen. Zaltrap® ishas been marketed in the U.S. insince August 2012.

        In the European Union, Zaltrap® (aflibercept) was approved in February 2013 by the European Commission to treat metastatic colorectal cancer that is resistant to or has progressed after an oxaliplatin-containing regimen.

        Zaltrap® was also approved in Australia, Ecuador, Israel, South Korea, Switzerland and Taiwan. Marketing authorization application dossiers are under review in several other countries worldwide.

        The main countries contributing to sales of Zaltrap® in 2013 were the U.S., Germany, and the UK.

The marketing of Zaltrap® is organized through our collaboration with Regeneron (see "Item 5 — Alliance Arrangements with Regeneron").

        Concerninge)    Other Prescription Products

Plavix® / Iscover®

        Plavix® (clopidogrel bisulfate), a platelet adenosine diphosphate (ADP) receptor antagonist with a rapid onset of action that selectively inhibits platelet aggregation induced by ADP, is indicated for long-term prevention of atherothrombotic events in patients with a history of recent myocardial infarction, recent ischemic stroke or established peripheral arterial disease. Plavix® is indicated for the development programsecondary prevention of atherothrombosis regardless of the location of the arteries initially affected (heart, brain, lower limbs). Plavix® is now also indicated for the treatment of metastatic prostate cancer, the Phase III VENICE trial (First-line treatment for androgen-independent (hormone-refractory) metastatic prostate cancer in combination




acute coronary syndrome (ACS) with docetaxel and prednisone) did not meet the pre-specified criterion of improvement in overall survival. The safety profile was generally consistent with previous studies of Zaltrap®without ST segment elevation in combination with docetaxel.acetylsalicylic acid (ASA).

        The oncology R&D pipeline includesPlavix® is also available in a broad spectrum of novel agents300 mg tablet that reinforces early use by simplifying its approved loading dose administration in patients with a variety of mechanisms of action for treating cancer, including cytotoxic agents, anti-mitotic agents, anti-angiogenic agents, targeted therapies and monoclonal anti-bodies (unconjugated or conjugated with cytotoxics). Projects are presented from the most advanced to the least advanced stage of development.ACS.

        The main compounds currently in Phase II or III clinical development in the Oncology field are:

•

Iniparib (SAR240550; BSI-201) is an agent with novel mechanism of activity that is currently being studied in advanced squamous non-small cell lung cancer (Phase III, fully accrued) as well as ovarian and breast cancers (Phase II). While the initial dosing regimen was basedIn 2011, on the putative PARP inhibitory activity, current efforts are aimed at elucidatingbasis of the mechanism of action and exploringACTIVE A study results (7,554 patients), the maximal tolerated dose both as a single agent andEMA granted marketing authorization for Plavix® in combination with chemotherapy.



•

SAR302503 (TG101348) was acquired when we purchased TargeGen, Inc. in 2010 and is being developed exclusively by Sanofi. SAR302503 is a selective oral, small molecule inhibitor of the JAK2 kinase. JAK2 and the JAK/stat pathway have been identified as key regulators of growth and differentiation of normal hematopoeitic cells, and are commonly dysregulated in multiple myeloproliferative disorders, including myelofibrosis (MF), polycythemia vera (PV), and essential thrombocytosis (ET). SAR302503 is now in Phase III, being investigated in the JAKARTA trialASA for the treatmentprevention of primaryatherothrombotic and secondary myelofibrosis. Enrollment in this study has been completed. The unique ability of SAR302503 to decrease bone marrow fibrosis will be further explored in the JAKARTA trial. In addition, a Phase II study in MF has recently been completed and results were presented at the December 2012 conference of the American Society of Hematology (ASH). A trial in myelofibrosis patients who have failed treatment with the JAK2 kinase inhibitor, JAKAFI™/JAKAVI™, has been initiated and enrollment is ongoing. Also ongoing is a Phase II trial in hydroxyurea-resistant PV and ET.



•

SAR256212 (MM-121). Under an exclusive global collaboration and licensing agreement, Merrimack Pharmaceuticals, Inc. and Sanofi are co-developing SAR256212, a fully human monoclonal antibody targeting ErbB3. ErbB3 has been identified as a key node in tumor growth and survival. SAR256212 blocks Heregulin binding to ErbB3, and formation of pErbB3 and pAKT. Given SAR256212's mode of action, it has the potential to be used in a wide number of tumors and settings. SAR256212 is in Phase II stage of development in Breast, Lung and Ovarian cancers in order to achieve Proof of Concept of its activity at reversing resistance to hormones, chemotherapy and agents targeting EGFR. During 2012, over 450 patients were enrolled in this phase II program that will complete by the second half of 2013. Biopsies at study entry are being performed for all patients to identify biomarkers predictive of response to MM-121. A companion diagnostic tool will be developed during the clinical program.

In addition, a phase 1 combination ofSAR256212 and SAR245408 has been ongoing throughout 2012 in three U.S. sites, based on the rationale that dual blockade of the PI3K pathway prevents feedback loop for reactivating the pathway. The last dose escalation cohort at full dose of both drugs will start in January 2013; so far the safety of the 2 agents together is excellent with no DLTs reported.

•

SAR245408 (XL147) was in-licensed from Exelixis, Inc. and is being developed by Sanofi. This oral phosphoinositide-3-kinase (PI3K) inhibitor is under evaluation in a Phase Ib study in combination with MM121 (see above) and a Phase II studythromboembolic events, including stroke, in patients with hormone receptor positive breast cancer in combinationAtrial Fibrillation (AF) who have at least one risk factor for vascular events, are not suitable for treatment with letrozole. Development in endometrial cancer has been discontinued due to insufficient evidence of activity. Development of theVitamin K antagonists (VKA), and have a low bleeding risk.

        CoPlavix® / DuoPlavin®, a fixed dose combination of SAR245408 in combination with pimasertib (also known as MSC1936369B) in Phase 1b (under collaboration with Merck Serono, a divisionclopidogrel bisulfate and ASA, is indicated for the prevention of Merck KGaA, Darmstadt, Germany) was discontinued in order to focus on the SAR245409 — pimasertib combination.



•

SAR245409 (XL765) was also in-licensed from Exelixis, Inc. and is being developed by Sanofi. This oral agent is an inhibitor of phosphoinositide-3-kinase (PI3K) and also acts against the mammalian target of rapamycin (mTOR). A Phase II trial of monotherapy in mantle cell lymphoma, follicular lymphoma, chronic lymphocytic leukemia and diffuse large B cell lymphoma is ongoing. As indicated above, a




Phase I trial of a novel combination with MSC1936369B (under collaboration with Merck Serono, a division of Merck KGaA, Darmstadt, Germany) is ongoing. Combinations with bendamustine and rituximab are also being evaluated. Development in metastatic hormone-receptor-positive breast cancer has been discontinued due to insufficient evidence of activity.

•

SAR3419 (Antibody Drug Conjugate (ADC) maytansin-loaded anti-CD19 mAb; B-cell malignancies: B-Non Hodgkin's Lymphomas (NHL), B-Acute Lymphoblastic Leukemias (ALL). License from Immunogen Inc.). The clinical development program is in the Phase II stage in Diffuse Large B Cell Lymphoma (DLBCL, aggressive lymphoma type) with the aim of confirming clinical activity both as a single agent and in combination with Rituximab (rituxan, anti CD20 mAb). A second indication is being developed with a Phase II studyatherothrombotic events in adult patients with R/R ALL.

acute coronary syndrome who are already taking both clopidogrel and ASA.

        Three further projects (semuloparin, ombrabulin and clofarabine) that were under regulatory review and in Phase III respectivelyThe marketing of Plavix® / CoPlavix® / DuoPlavin® is organized through our alliance with Bristol-Myers Squibb (BMS) which was restructured in 2012 and effective on January 1, 2013 (see "Item 5 — Alliance Arrangements with Bristol-Myers Squibb"). Sanofi's sales of Plavix® in Japan are outside the scope of our alliance with BMS. A number of generics have experiencedbeen launched in Europe, in the following changes:U.S. and other markets.

•

Semuloparin: Following

        Plavix® is the June 20, 2012 semuloparin data review byleading anti-platelet in the FDA Oncologic Drugs Advisory Committee,Chinese and its vote against the approval of semuloparin for prophylactic prevention of venous thromboembolism (VTE) in cancer patients undergoing chemotherapy, as well as other comments released by some regulatory authorities, Sanofi has decided to withdraw all applications concerning semuloparin.



•

Ombrabulin (AVE8062) combretastatin derivative, a new anti-vascular agent in-licensed from Ajinomoto; sarcoma; Phase III). The ombrabulin project has been discontinued for the following reasons: the results of the phase III study in sarcoma which despite reaching its primary PFS (progression free survival) endpoint, did not demonstrate sufficient clinical benefit to support regulatory submissions; the negative outcome of a phase II trial in NSCLC; and the early termination of the phase II study in ovarian cancer based on the results of a pre-specified interim analysis. In all these trials there were no substantial safety concerns.



•

Clofarabine (Clolar® / Evoltra®) (Genzyme) (Purine-nucleoside analog). No additional indications are being developed via corporate-sponsored studies for clofarabine in either i.v. or oral formulations, although investigator-initiated studies are continuing.


Other Prescription Products
Japanese markets.

Lovenox®/Clexane®

        Lovenox® (enoxaparin sodium) is available in over 100 countries. It has been used to treat over 350 million patients since its launch.

        Lovenox® has the broadest range of indications amongst low molecular weight heparins (LMWH). A comprehensive clinical development plan has demonstrated the efficacy and safety of Lovenox® in the prevention and treatment of venous thrombo-embolism (VTE) and in the management of the full spectrum of acute coronary syndromes (ACS).

        In VTE management, Lovenox® is continuing to grow as a treatment for the prevention of VTE, mainly in acutely ill patients not undergoing surgery.




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        Two competing generics of enoxaparin and our authorized generic of Lovenox® are available in the U.S. No biosimilar has been approved in the European Union. An authorized generic is available in the U.S. See "Item 5. Operating and Financial Review and Prospects — Impacts from generic competition".

        In 2012,2013, Lovenox® was the leading anti-thrombotic in Germany, France, Italy, Spain, and the United Kingdom (source: IMS 2012 sales).Kingdom.

Plavix®/Iscover®

        Plavix® (clopidogrel bisulfate), a platelet adenosine diphosphate (ADP) receptor antagonist with a rapid onset of action that selectively inhibits platelet aggregation induced by ADP, is indicated for long-term prevention of




atherothrombotic events in patients with a history of recent myocardial infarction, recent ischemic stroke or established peripheral arterial disease. Plavix® is indicated for the secondary prevention of atherothrombosis regardless of the location of the arteries initially affected (heart, brain, lower limbs). Plavix® is now also indicated for the treatment of acute coronary syndrome (ACS) with and without ST segment elevation in combination with ASA.

        Plavix® is also available in a 300 mg tablet that reinforces early use by simplifying its approved loading dose administration in patients with ACS.

        In 2011, on the basis of the ACTIVE A study results (7,554 patients), the EMA granted marketing authorization for Plavix® in combination with ASA for the prevention of atherothrombotic and thromboembolic events, including stroke, in patients with atrial fibrillation who have at least one risk factor for vascular events, are not suitable for treatment with Vitamin K antagonists (VKA), and have a low bleeding risk.

        CoPlavix® / DuoPlavin®, a fixed dose combination of clopidogrel bisulfate and acetylsalicylic acid (ASA), is indicated for the prevention of atherothrombotic events in adult patients with acute coronary syndrome who are already taking both clopidogrel and ASA.

        The marketing of Plavix® / CoPlavix® / DuoPlavin® is organized through our alliance with BMS which was restructured in 2012 with effect on January 1, 2013 (see "Item 5 — Alliance Arrangements with Bristol-Myers Squibb"). Sales of Plavix® in Japan are outside the scope of our alliance with BMS. Exclusivity for Plavix® in the U.S. expired on May 17, 2012 and a number of generics have been launched. Previously, generics had also been launched in Europe.

        Plavix® is the leading anti-platelet in the Chinese and Japanese markets (source: IMS 2012 sales).

Aprovel®/Avapro® /Karvea®/ Karvea®

        Aprovel® (irbesartan) is an anti-hypertensive belonging to the class of angiotensin II receptor antagonists. These highly effective and well tolerated antagonists act by blocking the effect of angiotensin II, the hormone responsible for blood vessel contraction, thereby enabling blood pressure to return to normal. In addition to Aprovel®/Avapro®/Karvea®, we also market CoAprovel®/Avalide®/Karvezide®, a fixed dose combination of irbesartan and hydrochlorothiazide (HCTZ), a diuretic that increases the excretion of water and sodium by the kidneys and provides an additional blood pressure lowering effect. These products achieve control of blood pressure in over 80% of patients, with a very good safety profile.

        Aprovel® and CoAprovel® tablets are available in a wide range of dosages to fit the needs of patients with different levels of hypertension severity.

        Aprovel® is indicated as a first-line treatment for hypertension and for the treatment of nephropathy in hypertensive patients with type 2 diabetes. CoAprovel® is indicated in patients whose blood pressure is not adequately controlled with a monotherapy, but also as initial therapy in patients who are likely to need multiple drugs to achieve their blood pressure goals (in the United States only).

        Aprovel® and CoAprovel® are marketed in more than 80 countries. The marketing of Aprovel® and CoAprovel® is organized through an alliance with BMS which was restructured in 2012 (see "Item 5 — Alliance Arrangements with Bristol-Myers Squibb" below). In Japan, the product is licensed/sub-licensedlicensed to Shionogi Co. Ltd and sub-licensed Dainippon Sumitomo Pharma Co. Ltd, respectively. Aprovel® U.S. market exclusivity expired in March 2012 and a number of generic versions have been launched.Ltd.




Multaq®

        Multaq® (dronedarone) is the most extensively studied anti-arrhythmic drug (AAD) in Atrial Fibrillation (AF) and has demonstrated a unique cardiovascular (CV) outcome benefit in the ATHENA study in addition to effective rhythm control in the EURIDIS and ADONIS studies.

        Multaq® is a multichannel blocker with both rhythm (prevention of atrial fibrillation recurrences) and rate (decrease of ventricular rate) controlling properties and additional effects (anti-hypertensive, vasodilatory). It is the first and only anti-arrhythmic drug to have shown a significant reduction in cardiovascular hospitalization and death in patients with paroxysmal and persistent Atrial Fibrillation/Atrial Flutter .

        Following reports in January 2011 of hepatocellular liver injury and hepatic failure in patients receiving Multaq®, including two post-marketing reports of acute hepatic failure requiring transplantation, Sanofi has collaborated with health authorities agencies to update prescribing information and include liver function monitoring. Sanofi coordinated the implementation of the updated label by disseminating proactively relevant educational materials to prescribers.

        The Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) confirmed in September 2011 that the benefits of Multaq® continue to outweigh the risks with a revised indication for the treatment of a limited, newly defined population: Multaq® is indicated for the maintenance of sinus rhythm after successful cardioversion in adult clinically stable patients with paroxysmal or persistent atrial fibrillation. Due to its safety profile, Multaq® should only be prescribed after alternative treatment options have been considered and should not be given to patients with left ventricular systolic dysfunction or to patients with current or previous episodes of heart failure.

        The FDA approved a label update in December 2011 to ensure its use in the appropriate patient population, specifically in patients in sinus rhythm with history of paroxysmal or persistent atrial fibrillation (AF), and also reinforcing warnings and precautions for use.

        In Europe, updated guidelines were issued by the European Society of Cardiology (ESC) confirming Multaq®'s crucial role in the AF treatment armamentarium as a first line option in a broad range of patients. Multaq® is the only recommended first line AAD for AF patients with hypertensive heart disease and left ventricular hypertrophy. Multaq® is still the only AAD recommended in non-permanent AF with CV risk factors to reduce CV hospitalization.

        The main countries contributing to Multaq® sales in 2012 were the U.S., Germany and Italy.

Renagel® and Renvela®

        Renagel® (sevelamer hydrochloride) and Renvela® (sevelamer carbonate) are oral phosphate binders used by chronic kidney disease (CKD) patients on dialysis as well as late-stage CKD patients in Europe to treat a condition called hyperphosphatemia, or elevated phosphorus levels, which is associated with heart and bone disease. Renvela® is a second generation, buffered phosphate binder.

        In the United States, there are an estimated 395,000 dialysis patients, approximately 90% of whom receive a phosphate binder. There are an estimated 350,000 dialysis patients in the EUE.U. and 65,000 in Brazil. In the EU,E.U., Renvela® is also approved to treat CKD patients not on dialysis.

        We market Renagel® and Renvela® directly to nephrologists through Sanofi's employee sales force and distribute these products through wholesalers and distributors. In Japan and several Pacific Rim countries, Renagel® is marketed by Chugai Pharmaceutical Co., Ltd and its sublicensee, Kyowa Hakko Kirin Co., Ltd.

        In the United States, Genzyme and generic manufacturers have settled pending litigation with regardas part of an amendment to the production and saleANDA settlement, Sanofi has agreed to grant Impax a license to sell a specific allotment of bottles of an authorized generic formulationsversion of Renvela® tablets on April 16, 2014. The specific allotment corresponds to 7-10% of the total 2013 sevelamer sales in the United States. This amendment does not change Sanofi's prior settlement agreement with Impax to sell generic versions of two other sevelamer products, Renvela® for oral suspension and Renagel®. According to the terms of the settlements, the first-filer for each product can enter the U.S. market on March 16, 2014 and second-filers can enter the market, starting on September 16, 2014, or earlier under certain circumstances, pending approval ofwhich is conditioned on their generic application.receiving FDA ANDA��approval.




        The top five countries contributing to the sales of Renagel® and Renvela® in 20122013 were the U.S., France, Italy, France, the UK,Brazil, and Brazil.UK.

Synvisc®Allegra® /Synvisc-One® Telfast®

        Synvisc®Allegra® (fexofenadine hydrochloride) is a long-lasting (12- and Synvisc-One® (hylan G-F 20) are viscosupplements used to treat pain associated with osteoarthritis of certain joints. Synvisc is indicated24-hour) non-sedating prescription anti-histamine for the treatment of pain associated with osteoarthritis of the knee, hip, ankle,seasonal allergic rhinitis (hay fever) and shoulder joint in countries that have adopted CE marking, and for pain due to knee osteoarthritis in the United States. Currently the main viscosupplementation market is for the treatment of painuncomplicated hives. It offers patients significant relief from allergy symptoms without causing drowsiness.




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        We also market Allegra-D® 12 Hour and Allegra-D® 24 Hour, anti-histamine/decongestant combination products with an extended-release decongestant for effective non-drowsy relief of seasonal allergy symptoms, including nasal congestion. Generics of most forms of Allegra® / Tefast® have been approved in our major markets.

        In the United States, the Allegra® family moved to over-the-counter (OTC) use in adults and children two years of age and older in 2011. Allegra® was also launched on the OTC market in Japan in November 2012, though it also remains available on prescription (see "— Consumer Health Care" below).

        Allegra® / Telfast® is marketed in approximately 80 countries. The largest market for prescriptions of Allegra® is Japan, where competing generics entered the market in early 2013 (for more information see "Item 8 Financial Information — A. Consolidated Financial Statements and Other Financial Information — Information on Legal or Arbitration Proceedings").

Depakine®

        Depakine® (sodium valproate) is a broad-spectrum anti-epileptic that has been prescribed for more than 40 years. Numerous clinical trials and long years of experience have shown that it is effective for most forms of epilepsy, and that it is generally well tolerated. Consequently, Depakine® remains a reference treatment for epilepsy worldwide.

        Depakine® is also a mood stabilizer, registered in numerous countries in the treatment of manic episodes associated with osteoarthritis of the knee.

        Synvisc® is a triple-injection productbipolar disorder and Synvisc-One® a single-injection product. Both are administered directly into the intra-articular space of the joint to temporarily restore osteoarthritis synovial fluid.

        Synvisc® and Synvisc-One® are primarily marketed through Sanofi's employee sales force directly to physicians, hospitals, and pharmacies, while in some countries the products are still promoted by independent distributors.

        In 2012, Sanofi initiated a pivotal clinical trial of Synvisc-One® for treatment of pain associated with mild to moderate primary osteoarthritis of the hip. The trial is a double-blind, randomized, placebo-controlled study in 350 patients recruited from 26 sites in the United States.prevention of mood episodes.

        In 2012,We provide a wide range of formulations of Depakine® enabling it to be adapted to most types of patients: syrup, oral solution, injection, enteric-coated tablets, Depakine® Chrono (a sustained release formulation in tablets), and Depakine® Chronosphere (sustained release formulation of Depakine® packaged in sachets, facilitating its use by children, the top fiveelderly and adults with difficulties swallowing).

        Depakine® is marketed in over 100 countries, contributingand is generally subject to Synvisc® and Synvisc-One® sales were the U.S., Canada, France, Mexico and Germany.generic competition.

LeGoo®

        At the end of 2012, Sanofi launched LeGoo®, a gel for temporary endovascular occlusion of blood vessels during surgical procedures in the U.S. LeGoo® is an innovative technology that is expected to enhance the Sanofi Biosurgery portfolio.

Stilnox®/Ambien® /Myslee®/ Myslee®

        Stilnox® (zolpidem tartrate) is indicated in the short-term treatment of insomnia. Stilnox® rapidly induces sleep that is qualitatively close to natural sleep and devoid of certain side effects that are characteristic of the benzodiazepine class as a whole. Its action lasts for a minimum of six hours, and it is generally well tolerated, allowing the patient to awaken with a reduced risk of impaired attention, decreased alertness or memory lapses throughout the day.

        Stilnox® is marketed in over 100 countries. It is available under the brand name Ambien® / Ambien®CR in the United States and Myslee® in Japan, where it is co-promoted jointly with Astellas.

Stilnox® and Ambien CR® are subject to generic competition in most markets, including the United States and Europe. In Japan, generics of Myslee® entered the market in June 2012.

Allegra®Synvisc® /Telfast® Synvisc-One®

        Allegra® (fexofenadine hydrochloride)Synvisc® and Synvisc-One® (hylan G-F 20) are viscosupplements used to treat pain associated with osteoarthritis. Synvisc is a long-lasting (12- and 24-hour) non-sedating prescription anti-histamineindicated for the treatment of seasonal allergic rhinitis (hay fever)pain associated with osteoarthritis (OA) of the knee, hip, ankle, and shoulder joint in countries that have adopted CE marking, and for pain due to knee osteoarthritis in the United States. Synvisc-One® is approved for use in patients with OA of the knee in United States and countries that require CE marking. Currently the main viscosupplementation market is for the treatment of uncomplicated hives. It offers patients significant relief from allergy symptoms without causing drowsiness.pain associated with osteoarthritis of the knee.

        We also market Allegra-D® 12 HourSynvisc® is a triple-injection product and Allegra-D® 24 Hour, anti-histamine/decongestant combination products with an extended-release decongestant forSynvisc-One® a single-injection product. Both are administered directly into the intra-articular space of the joint to temporarily restore osteoarthritis synovial fluid.

        In 2013, the top countries contributing to Synvisc® and Synvisc-One® sales were the U.S., France, Mexico, Canada, Japan, and Brazil.

Multaq®

        Multaq® (dronedarone) is the most extensively studied anti-arrhythmic drug (AAD) in AF and has demonstrated a unique cardiovascular (CV) outcome benefit in the ATHENA study in addition to effective non-drowsy relief of seasonal allergy symptoms, including nasal congestion. Generics of most forms of Allegra®/Tefast® have been approvedrhythm control in our major markets.the EURIDIS and ADONIS studies.




        In the United States, the Allegra® family moved to over-the-counter (OTC) use in adults and children two yearsTable of age and older in 2011. Allegra® was also launched on the OTC market in Japan in November 2012, though it also remains available on prescription (see "— Consumer Health Care" below).Contents

        Allegra®/Telfast® is marketed in approximately 80 countries. The largest market for prescriptions of Allegra® is Japan, where competing generics entered the market in early 2013 (for more information see "Item 8 Financial Information — A. Consolidated Financial Statements and Other Financial Information — Information on Legal or Arbitration Proceedings").

Depakine®

        Depakine® (sodium valproate)Multaq® is a broad-spectrum anti-epileptic that has been prescribed for more than 40 years. Numerous clinical trialsmultichannel blocker with both rhythm (prevention of AF recurrences) and long yearsrate (decrease of experienceventricular rate) controlling properties and additional effects (anti-hypertensive, vasodilatory). It is the first and only anti-arrhythmic drug to have shown that ita significant reduction in CV hospitalization and death in patients with paroxysmal and persistent AF/Atrial Flutter.

        The main countries contributing to Multaq® sales in 2013 were the U.S., Germany and Spain.

Actonel®

        Actonel® (risedronate sodium) is effectivea biphosphonate used for all types of epileptic seizures and epileptic syndromes, and is generally well tolerated. Consequently, Depakine® remains a reference treatment for epilepsy worldwide.

        Depakine® is also a mood stabilizer, registered in the treatment of manic episodes associated with bipolar disorderosteoporosis and in numerous countries, in the prevention of mood episodes.

        We provide a wide range of formulations of Depakine® enabling it to be adapted to most types of patients: syrup, oral solution, injection, enteric-coated tablets, Depakine® Chrono (a sustained release formulation in tablets) and Depakine® Chronosphere (sustained release formulation of Depakine® packaged in stick packs, facilitating its use by children, the elderly and adults with difficulties swallowing).

        Depakine®Paget's disease. The product is marketed in over 100 countries, and is generally subjectthrough an alliance with Warner Chilcott (see note C-3 to generic competition.our consolidated financial statements).

Auvi-Q™

        At the end of January 2013, Sanofi launched Auvi-Q™ (epinephrine injection, USP), in the U.S. Auvi-Q™ is the first-and-only epinephrine auto-injector with audio and visual cues for the emergency treatment of life-threatening allergic reactions in people who are at risk for or have a history of anaphylaxis. Up to six million Americans may be at risk for anaphylaxis, although the precise incidence is unknown and likely underreported.

        Sanofi US licensed the North American commercialization rights to Auvi-Q™ from Intelliject,Inc.

Main compounds currently in Phase II or III clinical development:

        In the Metabolic field:

•

Phase II results forSAR236553, co-developed with Regeneron (REGN727: anti-PCSK9 mAb), have been obtained confirming a significant reduction in mean LDL-C by 40% to 72% over 8 to 12 weeks in patients with elevated LDL-C in patients on stable dose of statins.

A large phase III clinical program has been initiated (11 trials, 22,000 patients), and the first results are expected during the third quarter of 2013.

        In the Ophthalmology field:

        Sanofi started establishing its footprint in ophthalmology through the acquisition of Fovea, a French ophthalmology specialist (in October 2009), the ophthalmology assets of Genzyme (acquired in 2011), and a collaboration agreement with Oxford BioMedica (April 2009) that led to the exercise of two opt-in options in August 2012.

        One project in Phase II (FOV2304 — eye-drop formulation of a bradykinin B1 receptor antagonist evaluated in diabetic macular edema) was discontinued in October 2012, and the review of Phase IIb results forFOV-1101 (eye-drop fixed dose combination of prednisolone acetate and cyclosporine A for the treatment of allergic conjunctivitis) led to a reassessment of the commercial prospects for this compound and a decision to continue development under a sublicense agreement with an as yet unidentified third party.




        In the Thrombosis and Cardiovascular field:

•

Otamixaban (direct factor Xa inhibitor, interventional cardiology; Phase III). Otamixaban is an injectable, selective direct inhibitor of coagulation factor Xa. It is a synthetic small molecule. Otamixaban exhibits a fast on- and off-set of action. A Phase III program to confirm the positive outcome from the SEPIA-ACS Phase II study was initiated in 2010 and is now ongoing; results are expected in the 2^nd quarter of 2013.

        In the Internal Medicine field:

•

Sarilumab (SAR153191), a monoclonal antibody against the Interleukin-6 Receptor (anti IL-6R mAb) derived from our alliance with Regeneron, is in Phase III in adult patients with moderate to severe rheumatoid arthritis (RA). The SARIL-RA phase III program is underway with three ongoing clinical studies:



•

SARIL-RA-MOBILITY study, investigating the effects of sarilumab, (when added to Methotrexate (MTX) in patients with active RA who are inadequate responders to MTX therapy), on the reduction of signs and symptoms of rheumatoid arthritis at 24 weeks, inhibition of progression of structural damage at 52 weeks and improvement in physical function over 52 weeks;



•

SARIL-RA-TARGET study, investigating the effects of Sarilumab when added to DMARD therapy in patients with active RA who are inadequate responders or intolerant to tumor necrosis factor alpha (TNF-a) antagonists on reduction of signs and symptoms at week 24 and improvement of physical function over 24 weeks in patients;



•

SARIL-RA-EXTEND study, which is enrolling participants by invitation from currently ongoing studies and aims to evaluate in this uncontrolled extension the long term safety and efficacy of Sarilumab on top of DMARDs in patients with active RA.

Additional studies in the SARIL-RA phase III clinical program are to be implemented in 2013.

•

Dupilumab (SAR231893), a monoclonal antibody against the Interleukin-4 alpha Receptor (anti IL-4R alpha) derived from our alliance with Regeneron, is currently being developed in two indications. Dupilumab modulates signaling of both IL-4 and IL-13 pathways. Asthma will enter Phase IIb in 2Q2013. The asthma PoC study results demonstrated broader efficacy (exacerbations, lung function and symptoms) than the competition. Atopic dermatitis will also enter Phase IIb in 2Q2013. The atopic dermatitis PoC study results demonstrated improvement in signs and symptoms of active disease, with very effective and rapid onset of action compared to systemic therapies currently used in AD.

f)     Consumer Health Care (CHC)

        Consumer Health Care is a growth platform identified in our broaderglobal strategy. In 2012,2013, we recorded CHC salesset up a Global Consumer Health Care Division, to identify development priorities more proactively and co-ordinate international delivery on these priorities. The division is focused on 6 key categories: Anti-Allergics, Analgesics, Cough and Cold Remedies, Digestive System Products, Feminine Hygiene Products, and Vitamins, Minerals & Supplements (VMS). This new global division, which is being rolled out from the start of €3,008 million, an increase of 9.9%. Nearly half2014, will direct the growth of our CHC activities over the coming years.

        In 2013, our CHC sales reached €3,004 million, up 5.2% year-on-year; nearly half of these sales were generated in emerging markets,Emerging Markets, 22% in Western Europe, and 21% in the United States.

        In March 2011, the Allegra® familyU.S., mid-September 2013 saw the relaunch of allergy medication products was commercially launchedthe Rolaids® brand, that we had acquired at the start of the year from McNeil Consumer Healthcare®. An antacid sold over-the-counter through all American distribution channels, Rolaids® is now once again available to the people who suffer from heartburn and acid reflux. Still in the U.S., we have obtained approval from the FDA in October 2013 for the over-the-counter (OTC) usesale of Nasacort® Allergy 24H, a nasal spray indicated for seasonal and perennial allergies of the upper respiratory tract (allergic rhinitis) in adults and in children aged two years of age and older. The Allegra® family of OTC productsover. Launched in February 2014 in the U.S., Nasacort® (triamcinolone) is the first and to date only treatment in its category to be available in drug, grocery, mass merchandiser, and club stores nationwide. In November 2012, Sanofi launched Allegra® OTC in Japan, for patients suffering allergic rhinitis (15 years and older).over-the-counter.

        CHC sales areGrowth during 2013 was also supported by our legacyfull range of CHC brands,products, which providegive us with a strongwell-established presence in analgesics and the fever & pain and digestive health areas.system.

•

Doliprane® isoffers a range of paracetamol formulas to fightparacetamol-based products for pain and fever. Thanks to a wide offer both in termsbroad range of dosagesdosage options (from suspensions containing 2.4% paracetamol suspension up to 1g formulas)1-gram formulations) and pharmaceutical forms (suspension, tablets, powder,(suspensions, pills, powders, suppositories), Doliprane® coversmeets the needs of patients from baby to elderly.of all ages. Doliprane® is sold mainly in France and in somevarious African countries.






•

NoSpa®No Spa® (drotaverine hydrochloride) is a product containing drotaverine hydrochloride. NoSpa® isan abdominal anti-spasmodic indicated in abdominal spastic pain such asfor intestinal spasm, menstrual pain, or vesical spasm. NoSpa®period pains and bladder spasm; it is sold mainly in Russia and Eastern Europe.



•

Enterogermina® is composed ofa probiotic, which is available as a drinkable suspension in 5-ml mini-bottles or in capsules containing two billionBacillus clausii spores in a ready-to-drink oral suspension in vials of 5ml and in capsules. spores. Enterogermina® is indicated infor the prevention and restoration of gut flora in the treatment of intestinal imbalance during acute or chronic intestinal disorders (from(in babies toand adults). Enterogermina® ishas historically been sold mainly in Europe, and has beenis now enjoying strong growth in Latin America, India, Ukraine and Central Asia.Belarus.



•

Essentiale® is a herbal preparation forplant-based product used in the treatment of liver therapy, madeproblems. Composed of highly purified essential phospholipids extracted from soybeans and containing a high percentage ofhighly purified soya, it is rich in phosphatidylcholine, a major constituentcomponent of cellularcell membrane. Essentiale® is used to treatalleviate symptoms such as lackloss of appetite, sensationoppression of pressure in the right




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epigastrium, toxico-nutritionalfood-related liver damagelesions and hepatitis. Essentiale® is sold mainly in Russia, Eastern Europe, various countries in South-East Asia and some South East Asian countries.

China.

•

Maalox® is a well-established brand containingthat contains two antacids: aluminium hydroxide and magnesium hydroxide. Maalox® is available in several pharmaceuticalvarious forms — tablets,(pills, drinkable suspension, and stick packs — to provide consumer choice.sachets), giving consumers a choice of suitable solutions. Initially launched in France in 1972, Maalox® is presentnow available in 55 countries:countries in Europe, Latin America Russia, Africa, Middle East, and in some Asian countries.Asia.



•

Magne B6® is a productfood supplement containing magnesium and vitamin B6. MagneB6®Magne B6® has variousa wide range of therapeutic indications fromindications: irritability, anxiety, and sleep problems todisorders, and women's health issues like premenstrual syndrome or menopause discomfort. MagneB6®(pre-menstrual stress and menopausal problems). Magne B6® is presentavailable in Europe and Russia.



•

The Lactacyd® isrange covers a rangenumber of products forintimate feminine hygiene.hygiene products. Lactacyd® is sold mainlyprimarily in Brazil and Asia. Lactacyd® was launched in China in May 2011.Asia, where the range is enjoying growth driven by a number of new presentations.

        ComplementaryIn addition to our legacy CHC business, our other products include:these historical brands:

•

Chattem'sThe principal products marketed by Chattem in the United States (other than theU.S. (apart from Allegra® family of OTC products)OTC) are ACT®, mainly comprising branded consumer healthcare products, toiletries and dietary supplements across niche market segments. Chattem's well-known brands include Gold Bond®, Icy Hot®, ACT®, Cortizone-10®, Selsun Blue® and Unisom®. In January 2013, Chattem completed the acquisition of the worldwide rights to the Rolaids® brand from McNeil Consumer Healthcare Division of McNeil-PPC, Inc. Rolaids® is an over-the-counter antacid that helps relieve heartburn and acid indigestion.



•

Oenobiol'sOenobiol® products are food supplements with applications in France: dietary supplements to promote beauty (sun care, weight, hair care, skin care)(sunscreen, slimming, haircare and well-beingskincare), wellbeing (digestive comfort,aids, anti-stress) and to help manage menopausal problems.menopause, and are sold mainly in France.



•

In China, BMP Sunstone productsmarkets Haowawa® (which means "Good Baby" in China, including theChinese), a leading pediatricbrand of children's cough and cold brand Haowawa®.remedies, alongside a portfolio of over-the-counter Western medicines and traditional Chinese remedies.



•

Minsheng productsAlso in China, includingMinsheng Pharmaceuticals Co. Ltd markets 21 Super Vita®,Vita, one of the leading vitamins &vitamin and mineral supplements.supplements in the local market.



•

Universal Medicare, brandsa leading player in India, comprising a wide range of nutraceuticalsells nutraceuticals and lifestyle managementother products including vitamins, antioxidants, mineral supplements, and anti-arthriticsanti-arthritis products such as Seacod®, CoQ®10, Collaflex® and Multivit®. At the end of 2013, the marketing of Universal Medicare products was extended to Pakistan.

        We are also continuing to expand into the Vitamins, Minerals and Supplements (VMS) market, with the Omnivit® range in various emerging market countries and with the Cenovis® and Nature's Own® brands in Australia.

g)    Generics

        To reinforce its generics business, Sanofi created a global "Generics" division in October 2013. The top three countries contributing to our CHC salesmain missions of this division are to:

–

pursue the alignment of the Generics Portfolio strategy and the coordination of the different Generics platforms;



–

drive Generics business performance through specific performance management indicators;



–

establish centers of reference in 2012 were the United States, France,Generics-specific expertise and Russia.

Generics

skills.

        In 2012,2013, sales of the genericsGenerics business reached €1,844€1,625 million, an increasea decrease of 5.0%11.9% from 2012 (8.2% at constant exchange rates). Performance was impacted by temporary difficulties with inventory levels in Brazil as well as by lower sales of theLovenox®, Aprovel® and Taxotere® authorized generic of Lovenox®generics in the U.S. and less favorable market conditions

        During the second quarter of 2013, Sanofi became aware that distribution channels in Brazil (heightened competition coupled with once-off tax changeswere holding inventory in Sao Paulo State which influenced the generics market).

        In Latin America, Medley®, Sanofi's Brazilian brand of affordable medicines, was rolled out in Mexico and Venezuela at end of 2011 and in Colombia and Central America during 2012. In October 2012, Sanofi announced that it had signed an agreement to acquire Genfar S.A., a leading pharmaceuticals manufacturer headquartered in




Bogota, Colombia, and a major player in Colombia and the other countries in Latin America. The closingexcess of the transaction is subjectvolumes needed to certain conditions precedent and is expected to occur in the first quarter of 2013.

        In 2012, Sanofi sales of generic products in Emerging Markets exceeded €1 billion. Seemeet demand (see "Item 5. Operating and Financial Review and Prospects — Results of Operations — Year Ended December 31,^st, 2012 2013 Compared with Year Ended December 31,^st, 2011 — Net Sales by Product — Pharmaceuticals segment" 2012." for further explanations). The re-order point was reached in August and sales have been improving progressively since that date.

        In March 2009 we created ourLatin America, Sanofi completed the acquisition of Genfar S.A., a leading Columbian pharmaceuticals manufacturer, headquartered in Bogota, Colombia, and expanded its leading presence in affordable quality pharmaceuticals.

        In Europe, despite significant price pressure, sales of generics grew 4.7%, driven by strong volume performance overall, led by Western European Generics Platform, covering generics activities across Westerncountries such as France and Eastern Europe,Italy. However, increased volume did not totally compensate price pressure in Central and East European countries (such as the Czech Republic).




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        Emerging Markets significantly contributed to the 2013 performance with remarkable growth in Russia and Turkey. The rebrandingAfrica, the expansion of Sanofi Generics activities under the Zentiva® brandMedreich products in Western Europe, initiatedNigeria and increased antiretroviral business in 2010, is nearly complete.South Africa.

B.3. Vaccine Products

        Sanofi Pasteur, is a fully integrated vaccinesthe vaccine division offeringof Sanofi, offers a broad range of vaccines. In 2012,2013, Sanofi Pasteur provided more than 1one billion doses of vaccine,vaccines, making it possible to immunize more than 500 million people across the globe against 20 serious diseases, and generated net sales of €3,897€3,716 million. Sales were favorably impacted by record sales of influenza vaccines, especially in the United States, and strong growth in markets outside North AmericaEmerging Markets. Nevertheless, 2013 sales were negatively impacted by Pentacel® and Europe, including sales of the IPV (inactivated polio vaccine) Imovax® Polio in Japan, continued growth of Pentaxim® sales and successful seasonal influenza vaccine campaigns in both the Northern and Southern hemispheres. See "Item 5. Operating and Financial Review and Prospects — Results of Operations — Year Ended December 31, 2012 Compared with Year Ended December 31, 2011 — Net Sales — Human Vaccines (Vaccines) segment."Adacel® supply delays due to manufacturing issues.

        Sanofi Pasteur is a world leader in the vaccine industry in terms of sales. In the United States,U.S., Sanofi Pasteur is the market leader in the segments where we compete (source: based on internal estimates).leading producer of influenza and meningitis vaccines.

        In Europe, Sanofi Pasteur vaccine products are developed and marketed by Sanofi Pasteur MSD, a joint venture createdthat serves 19 countries. Created in 1994 and held equally by Sanofi Pasteur and Merck, & Co. Inc., which serves 19 countries. Sanofi Pasteur MSD also distributes such Merck & Co. vaccine productsvaccines, such as Gardasil® and Zostavax®, in the joint venture's geographic scope.. In 2012,2013, Sanofi Pasteur MSD net sales which are accounted for using the equity method, amounted to €845€876 million.

        Sanofi Pasteur has beenis expanding in Asia, (China, India and Japan), Latin America, (Mexico and Brazil), Africa, the Middle-EastMiddle East and Eastern Europe. In addition, Sanofi Pasteur is very active in publicly-fundeda key supplier to publicly funded international markets such as UNICEF, the Pan American Health Organization (PAHO) and the Global Alliance for Vaccines and Immunization (GAVI).

        See "— Vaccines Research and Development" below for a presentation of the Sanofi Pasteur R&D portfolio.

        The table below showslists net vaccine sales of vaccines by product range:

(€ million)					20122013 Net Sales
Polio/Pertussis/Hib Vaccines		1,148	1,184
Influenza Vaccines *			884
Meningitis/Pneumonia Vaccines			650
Adult Booster Vaccines			496
Travel and Other Endemics Vaccines			364
Other Vaccines			319
Total HumanInfluenza Vaccines		929	3,897
Meningitis/Pneumonia Vaccines		496
Adult Booster Vaccines		391
Travel and Other Endemic Vaccines		382
Other Vaccines		370
Total Human Vaccines		3,716

*

Seasonal and pandemic influenza vaccines.

a)    Pediatric, Combination and Poliomyelitis (Polio) Vaccines

        These vaccines vary in composition due to diverse immunization schedules throughout the world.




        Sanofi Pasteur is one of the key players in pediatric vaccines in both emergingmature and matureemerging markets with a broad portfolio of standalone and combination vaccines protecting against up to six diseases in a single injection. Due to the diversity of immunization schedules throughout the world, vaccines vary in composition according to regional preferences.

        Pentaxim®, a combination vaccine protecting against diphtheria, tetanus, pertussis, polio andHaemophilus influenzae type b (Hib), was first marketed in 1997. To date, more than 180 million doses of Pentaxim® have been distributed in over 100 countries, and the vaccine has been included in the national immunization programs of more than 23 countries.

        Hexaxim® is the only fully liquid, ready to use, 6-in-1 (hexavalent) pediatric vaccine that provides protection against diphtheria, tetanus, pertussis, polio, Hib and hepatitis B. In February 2013, the EMA recommended market approval for this hexavalent pediatric vaccine in the E.U., commercialized under the brand name Hexyon™ in Western Europe by Sanofi Pasteur MSD and under the brand name Hexacima™ in Eastern Europe by Sanofi Pasteur. The roll-out of this new hexavalent vaccine began in July 2013 in Germany and 10 countries have already included Hexaxim® in their public or private immunization programs.




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        Pentacel®, a vaccine protecting against five diseases (pertussis, diphtheria,(diphtheria, tetanus, pertussis, polio andHaemophilus influenzae type b), Hib) was launched in the United StatesU.S. in 2008. In 2013, supply issues were responsible for a delay in U.S. market delivery. These issues have now been resolved and supplies of Pentacel® have improved progressively from mid-October 2013.

        Pediacel®, a fully liquid pentavalent vaccine, has been the standard of care in the United Kingdom since 2004 for protecting against diphtheria, tetanus, pertussis, (whooping cough), polio andHaemophilus influenzae type b infections. As of December 31, 2011, Pediacel® was approved in 29 countries across Europe in a new syringe presentation. Hib.

        Pentaxim®, a combination vaccine protecting against diphtheria, tetanus, pertussis, polio andHaemophilus influenzae type b, was first marketed in 1997 and was launched in China in May 2011. To date, more than 150 million doses of Pentaxim® have been distributed in over 100 countries, and the vaccine has been included in the national immunization programs in more than 23 countries.

        Act-HIB®, for the prevention ofHaemophilus influenzae type b (Hib) infections, Hib, is also an important growth driver within the pediatric product line. In 2008, Act-HIB® became the first Hib vaccine to be approved in Japan.

        Hexaxim®        Quadracel® is the only fully liquid, ready to use 6-in-1 (hexavalent) pediatrica combination vaccine providing protection against diphtheria, tetanus, pertussis polio,Haemophilus influenzae type b infections and hepatitis B. In June 2012,polio. It is proposed as a booster to be administered as the fifth dose in the primary series of vaccines, allowing children to complete the entire childhood schedule with as few injections as possible. Quadracel® is already available in Canada and Australia. A Phase III clinical study is currently underway in order to submit an application for the licensure of Quadracel® in the U.S..

        Sanofi Pasteur received a positive scientific opinion for Hexaxim® from the European Medicines Agency (EMA) as part of the Article 58 procedure designed to evaluate medicinal products intended for international markets outside the European Union. As a second step, to ensure continuity of supply as well as expanded access to hexavalent vaccines throughout the 27 E.U. member states, the vaccine was submitted to the European Medicines Agency for license review in Europe. In February 2013, the EMA recommended market approval for the 6 in 1 pediatric vaccine. This innovative vacine will be commercialized under the brand name Hexyon™ in Western Europe by Sanofi Pasteur MSD, and under the brand name Hexacima™ in Eastern Europe by Sanofi Pasteur.

        PR5I is co-developing, with Merck, a combination vaccine (6-in-1 vaccine PR5i) designed to help protect against six diseases:diseases. This new vaccine will protect against diphtheria, tetanus, pertussis, polio, (poliovirus type 1, 2 and 3), invasive disease caused byHaemophilus influenzae type b,Hib and hepatitis B. This product is jointly being developed between Sanofi Pasteur and MerckPhase III clinical studies conducted in the U.S. and Europe. Phase III studies in the U.S. and Europe beganwere concluded in April 2011.2013.

        Sanofi Pasteur is one of the world's leading developers and manufacturers of polio vaccines, inwith both oral polio vaccines (OPV) and enhanced injectable (eIPV) form. The worldwide polio eradication initiativevaccines (IPV) in its portfolio. Sanofi Pasteur is a preferred partner for the supply of OPV and IPV for the Global Polio Eradication Initiative led by the World Health Organization (WHO)WHO and UNICEF has positioned Sanofi Pasteur as a global preferred partner with both OPV and eIPV vaccines.

        Sanofi Pasteur is also supportingUNICEF. In November 2013, GAVI announced its support for the introduction of eIPV internationally. With recent progress towards polio eradicationIPV in the national immunization programs of the world's 73 poorest countries. The combined use of OPV and IPV is expected to improve the level of protection in countries such as Brazil and Japanthreatened by the resurgence of polio. GAVI Alliance support paves the way for the implementation of the recommendation made by the WHO expert group on immunization (SAGE) that all countries introduce at least one dose of IPV in 2012,their routine polio immunization programs before the end of 2015. Consequently, Sanofi Pasteur expects the use of eIPVIPV to gradually increase.increase considerably in the coming five years. As a result, Sanofi Pasteur is expanding its production capacity to meet the growing demand.

        Shantha Biotechnics (Shantha), in India, is currently pursuing requalification of Shan5®Shan5™, a combination vaccine protecting against diphtheria, tetanus, pertussis, Hib and hepatitis B, andHaemophilus influenzae type b, with the WHO. Shantha has worked closely with Sanofi Pasteur to improve key manufacturing steps in the production of the antigen components of the vaccine. The path back to obtaining prequalification status has been discussed extensively with the WHO and local Indian regulators. Based on the successful completion ofIf ongoing clinical studies results are positive, Shan5® is expected toshould regain WHO prequalification in 2014.

b)    Influenza Vaccines

        Sanofi Pasteur is a world leader in the production and marketing of influenza vaccines. Sales of the influenza vaccines Fluzone® and Vaxigrip®/Mutagrip® have more than tripled since 1995 and annual supply reached more thanwith over 200 million doses delivered in 2012 to better meet increasing demand.2013. In recent years, influenza vaccine demand has experienced strong growth in many countries, particularly in the U.S., Brazil and Mexico. Sanofi Pasteur expects




the global demand for influenza vaccines to continue to grow within the next decade due to increased disease awareness, growth in emerging marketsEmerging Markets and wider government immunization recommendations.

        Sanofi Pasteur remains focused on maintaining its leadership in the influenza market and on meeting the increasing demand for both pandemic and seasonal influenza vaccines through the launch of innovative vaccines.

        In 2012, The differentiated product strategy is strengthening Sanofi Pasteur expanded its launch of Fluzone® IDPasteur's leadership in the U.S. in adults. The advantages of this vaccine are particularly its convenience and ease of administration. Fluzone ID® and Intanza®/IDflu® vaccines are now approved ininfluenza market with the United States, European Union, Canada, Australia and other countries for the prevention of seasonal influenza in adults from 18 to 64 years of age.following new product launches:

•

Fluzone® High-Dose vaccine, launched in the United StatesU.S. in 2010, was specifically designed to generate a more robust immune response against influenza in people 65 years of age or older. This age group, which typically showsIn August, 2013, top line results of a weaker immune response, has proven to respond better to thelarge scale study in people 65 or older showed a superior clinical benefit for Fluzone® High-Dose vaccine. It continuedvaccine, compared to Fluzone® vaccine, in preventing influenza (Fluzone® High-Dose vaccine was 24% more effective than Fluzone vaccine). The strong sales growth registered by this new vaccine since its stronglaunch was confirmed in 2013.



•

Fluzone® ID (intradermal) continues its growth following its launch in the U.S. in 2012.

The advantages of this vaccine are, in particular, its convenience and ease of administration. Fluzone ID® and Intanza®/IDflu® vaccines are now approved in Australia, Canada, the E.U., the U.S. and several other countries.



•

Fluzone® QIV candidate vaccine is a quadrivalent inactivated influenza vaccine containing two antigens of type A (H1N1 and H3N2)antigens and two antigens of type B (one each from Yamagata and Victoria lineage). Selectingantigens. Compared to the prevailingtrivalent influenza strains for upcoming seasons is an incredibly difficult task. Invaccine, the recent past, there have beenaddition of a number of mismatches of thesecond B strain component into the trivalent vaccine compared with the circulating B lineage. Sanofi Pasteur expects that increasing the number




Table of strains in the vaccine Contents

will giveprovide increased protection against the most prevalent strains. In June 2013, Sanofi Pasteur filed a supplemental Biologics License Application (sBLA) with theobtained FDA authorization for Fluzone® QIV in October 2012. The sBLA file has been accepted by the FDA for full review, and an action date is anticipatedto be commercialized in the second quarterU.S. for children over 6 months, adolescents and adults.

        Sanofi Pasteur recently made the decision to withdraw the QIV marketing authorization application submitted in Europe through a decentralized procedure, in order to update the pharmaceutical section at the request of 2013.the regulatory authorities. Sanofi Pasteur will take the opportunity of this update to extend the target group to children aged 36 months. A Phase III study will start in 2014 with the objective of providing the necessary data.

c)    Adult and Adolescent Boosters

        Pertussis (whooping cough) affects children,Many countries now recommend pertussis immunization for adolescents and adults. Resurgence, in particular in the U.S. and other parts of the world,These recommendations, combined with increasedimmunization awareness of the dangers of vaccine-preventable diseases in general, hasinitiatives, have led to higher sales offor this product group in recent years.

        Adacel®, the first trivalent adolescent and adult booster against diphtheria, tetanus and pertussis, was licensed and launched in the United StatesU.S. in 2005. Since its launch in the U.S., more than 100 millions doses of Adacel® have been sold. This vaccine plays an important role in efforts to better control pertussis, by preventing the disease in adolescents and adults, and by breaking the cycle of transmission to infants too young to be immunized or only partially vaccinated. Adacel® is now registered in more than 5060 countries.

        Quadracel®,Repevax® (also marketed under the trademark Adacel-Polio®) is a quadrivalent boostercombination vaccine (fifth dose) including diphtheria, tetanus, acellularthat provides all the benefits of Adacel® along with polio vaccine. This product is useful in those markets that recommend adolescent/adult immunizations to protect against both pertussis and IPV,polio. This vaccine is being developed for the U.S. market. It would allow a child to complete the entire childhood series with the fewest doses possible. It is currentlylicensed in Phase III trials.more than 30 countries.

d)    Meningitis and pneumonia vaccinesPneumonia Vaccines

        Sanofi Pasteur is at the forefront ofin the development of vaccines to prevent bacterial meningitis. In 2005, Sanofi Pasteur introduced Menactra®, the first quadrivalent conjugate quadrivalent vaccine against meningococcal meningitis, considered by many as the deadliest form of meningitis in the world. ByIn April, 2011, the FDA had granted Sanofi Pasteur a license to expand the indication of Menactra® to children as young as 9nine months of age. Menactra® is now indicated for people aged 9nine months through 55 years in the United States,U.S., Canada, Saudi Arabia and numerous other countries in Latin America, the Middle East and Asia Pacific regions.

        Meningitis A, C, Y, W-135 conj. Second GenerationSanofi Pasteur is developing a project targeting a second generationsecond-generation conjugated meningococcal vaccine. This second-generation meningococcal vaccine that uses an alternative conjugation technology. In 2011, interim Phase II clinical trial results were obtainedhave demonstrated its safety and indicated thatimmunogenicity. Sanofi Pasteur is continuing the product is sufficiently immunogenic for further development in infants.of this vaccine to suit a wider range of age groups and a flexible range of vaccination schedules.

e)    Travel and EndemicsEndemic Vaccines

        Sanofi Pasteur provides a wide range of travel and endemic vaccines including hepatitis A, typhoid, rabies,cholera, yellow fever, choleraand Japanese encephalitis, as well as rabies vaccines and anti-venoms.immunoglobulins. These vaccines and serums are used in endemic settings in the developing




world and are the basis forof important partnerships with governments and organizations such as UNICEF. They are also used by thetravelers and military and travelers toin endemic areas. AsSanofi Pasteur is the global leader in most of the majority of theseworld's travel and endemic vaccine markets, Sanofi Pasteur's Travel/Endemics activity has demonstrated stable growth.markets.

        IMOJEV™In December, 2009, Shantha launched Shanchol™, the first oral cholera vaccine for children and adults made in India. Shanchol™ received WHO prequalification in 2011, and in 2013 the WHO approved the creation of a stockpile of over 2 million doses.

        IMOJEV®, a Japanese encephalitis vaccine, is alsothe most recent travel and endemic vaccines portfolio addition, was successfully launched in development. The Australian healthcare authorities granted approval of the latest variations of the IMOJEV™ file on September 24,Australia and Thailand in December 2012, for use in individuals aged 12 months and over, followed by the Thai Food and Drug Administration on November 14, 2012. IMOJEV™ has now beenwas then launched in these two countries.

        A new generation Vero serum-free vaccine (VerorabVax™) will provide a worldwide, single rabies vaccine as a replacement to our current rabies vaccine offerings. Results from2013 in Malaysia and the 2009 Phase II clinical trial demonstrated non-inferiority of VRVg versus Verorab® in pre-exposure prophylaxis. VRVg was approved in France as a linePhilippines. An extension of VeroRab in January 2011 and clinical development is finalized in China with completion of Phase III confirming non-inferiority vs. Verorab® in simulated post-exposure prophylaxis.

        In December 2009, Shantha launched ShanChol^TM, India's first oral vaccinethe indication to protect against cholera ininclude children and adults. ShanChol™ was World Health Organization pre-qualified in 2011 and more than 1 million doses of ShanChol^TM were sold worldwide in 2012.

Other Products

        Sanofi Pasteur acquired Topaz Pharmaceuticals in October 2011. The integration of Topaz was completed in 2012. The FDA licensed Sklice® (ivermectin) lotion, 0.5%, on February 7, 2012 as a one-time treatment for head lice in persons aged 6nine months and older has been submitted and commercial launch commencedis currently under approval in July 2012.the Asia Pacific region.

f)     Other Products

        Growth in other products is mainly driven by VaxServe, a leading specialty distributor in the U.S. market. VaxServe, a Sanofi Pasteur company, is a strategic asset that enables us to be closer to our customers and better understand their needs, and to offer a broad product portfolio of both Sanofi Pasteur and non-group products.




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B.4. Animal Health: Merial

        Our animal healthAnimal Health activity is carried out through Merial, one of the world's leading animal healthcare companies (source: Vetnosis), dedicated to the research, development, manufacture and delivery of innovative pharmaceuticals and vaccines used by veterinarians, farmers, and pet owners. ItMerial provides a comprehensive range of products to enhance the health, well-being and performance of a wide range of production and companion animals. Its net sales for 20122013 amounted to €2,179€1,985 million.

        Merial became Sanofi's dedicated animal healthAnimal Health division following the joint statement issued by Merck and Sanofi in March 2011 announcing the end of theirSanofi and Merck's agreement to create a new animal health joint venture by combining their respective animal health segments. Consequently all Merial financials are consolidatedsegments in Group reports.March 2011. See Note D.2. to our consolidated financial statements included at Item 18 of this annual report.

        The animal healthAnimal Health product range comprises four major segments: parasiticides, anti-infectious drugs, other pharmaceutical products (such as anti-inflammatory agents, anti-ulcerous agents, etc.), and vaccines. Merial's top-selling products include Frontline®, a topical anti-parasitic flea and tick brand for dogs and cats, the highest selling veterinary product in the world (source: Vetnosis); Heartgard®, a parasiticide for control of heartworm in companion animals; Ivomec®, a parasiticide for the control of internal and external parasites in livestock; Vaxxitek®, a high-technology vector vaccine, protectsprotecting chickens against infectious bursal disease (IBD) and Marek's disease; Previcox®, a highly selective anti-inflammatory/COX-2 inhibitor for relief of pain and control of inflammation in dogs; Eprinex®, a parasiticide for use in cattle; and Circovac®, a PCV2 (porcine circovirus type 2) vaccine for swine. Merial plays a key role in the veterinary public health activities of governments around the world. It is the world leader in vaccines for Foot-and-Mouth disease (FMD), rabies, and bluetongue (BTV) (source: Vetnosis).

        In 2013, Merial's antiparasiticide product range for companion animals was extended to include:

•

NexGard™ (afoxolaner), monthly beef flavored soft chewables for treatment and prevention of flea and tick infestations in dogs and puppies. The product was approved by the FDA in September 2013, by the EMA in February 2014, and launched in the U.S. in January 2014.



•

Broadline™, a broad spectrum parasite treatment and prevention for cats sold throughout the European Union. Broadline™ is a combination of four active ingredients and helps protect cats for one month. The product was approved by the EMA in December 2013.

        The compound patent protecting fipronil, the active ingredient of Frontline®, expired in 2009 in Japan and in some European countries, including France, Germany, Italy, and the United Kingdom, and in August 2010 in the United States. In those markets where the fipronil compound patent has expired, Frontline® products are generally still protected through formulation patents (directed to combinations) which expire at the latest in 2017 in Europe (August 2016 in the United States). Frontline® is also protected by a method of use patent in the United States and the European Patent area (Germany, France, Italy, and the United Kingdom), expiringwhich expires in March 2018.

        As forwith human




pharmaceutical products, patent protection for animal pharmaceutical products extends in most cases for 20 years from the filing date of the priority application.

        As regardsFrom a regulatory standpoint, in Europe veterinary products (pharmaceutical products and vaccines) enjoy eight-year regulatory exclusivity the position of veterinary medicinal products in Europe is similar to that of human pharmaceutical products: eight-yearfor data and a ten-year exclusivity and ten-year market exclusivity.period for commercialization.

        In the United States, there is ten-year datano exclusivity for animal vaccines. For animal pharmaceutical products, those approved by the Environmental Agency (EPA) enjoy ten-year regulatory exclusivity, with the possibility of obtaining an additional five-year period of exclusivity during which any generics products that cite the innovator's data must indemnify the innovator. For pharmaceutical products approved by the Environmental Protection Agency and an additional five years during whichFDA, a generic applicant has to compensate the originator if it cites the originator's data. For FDA approved veterinary medicinal products, afive-year regulatory exclusivity period of five years is granted for a new chemical entity, and three yearsa three-year period for a previously-approved active ingredient. No data exclusivity exists at present for veterinary vaccines in the United States.

        In April 2012,June 2013, Merial acquired Newport Laboratories (Newport), a privately held company based in Worthington, Minnesota (United States), a leader in autogenous vaccines with a focus on swine and bovine production markets.

        On December 20, 2012, Merial entered into a binding agreement to acquirefinalized the acquisition of the animal health division of the Indian company Dosch Pharmaceuticals Private Limited, creating a market entry for Merial in that country's strategically important and growing animal health sector. Dosch Pharmaceuticals commercializes 86 products under 50 brands for ruminants, poultry and companion animals.

The agreement is subject to regulatory approval and is expected to finalize sometime2013 performance of Merial was mainly affected by the decrease in Frontline® sales in the first half of 2013.

        The 2012 performance of the companion animals franchise was drivenU.S. and in Europe, impacted by the growthcold weather conditions and increased competition. Sales from the rest of pet vaccines worldwide andMerial's portfolio are increasing, mainly driven by the performance of Heartgard® in the U.S. For production animals, the performance was mainly driven by the avian segmentproducts (notably Vaxxitek®) and the swine segment, thanks to Circovac® sales and the acquisitionpet vaccine range.




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        Merial's major markets are the United States, France, Brazil, Italy, the United Kingdom, Australia, Germany, Japan, Spain, China, and Canada. Emerging Markets contributed double digit sales growth in 2012, and now account for 26.6%30% of total Merial sales.

        Merial operates through a network of 17 production sites,sales, with major sites locatedparticularly strong growth in France, the United States, Brazil and China. The major R&D sites are locatedChina (18% in France and in the United States. Merial employs approximately 6,060 people worldwide (see Item 4D "Property, Plant & Equipment")2013).

B.5. Global Research & Development

        The mission of Sanofi's Global Research & DevelopmentR&D organization is to discover and develop therapies that prevent, treat andor cure diseases. Our day-to-day commitment is to respond to patients' real needs and to provide them with adapted therapeutic solutions in order to improve their well-being and extend their life.lives.

        To meet these challenges, R&D has evolved towards an integrated organization, encompassing a wide range of therapeutic areas that represent a large and growing burden on populations and healthcare systems, in line with global trends and the most pressing health needs.

        These include:

Pharma activities (see Section 5.2. below)

•

Diabetes. Diabetes is a rapidly growing health problem in all parts of the world. The current global prevalence of diabetes is approximately 366 million and this number is expected to exceed half a billion subjectspeople by 2030 (source: www.idf.org). Despite numerous therapeutic offerings, people with diabetes are at considerably higher risk of premature death and debilitating complications, impairing their quality of life and imposing massive costs on health care systems all over massive costs.around the world.



•

Cardiovascular diseases. Despite medical advances, cardiovascular diseases account for the largest number of deaths worldwide. Today over 17 million annual deaths are attributable to cardiovascular diseases and because of an aging population and a global epidemic of metabolic disease these numbers are expected to double over the next 25 years (source: WHO 2008).






•

Oncology. Cancer remains a leading cause of death worldwide accounting for over 7 million deaths per year. Deaths from cancer are projected to continue to rise with over 13 million deaths projected in 2030 (source: WHO 2008). While progress has been made in some cancers, development of new therapies is desperately needed.



•

Immune mediated diseases (including Multiple Sclerosis)MS). Immune disorders correspond to a dysfunction of the immune system — leading to an over or an under activation of the system — and can be characterized by whether the condition is congenital or acquired. More than 150 primary immunodeficiency congenital diseases have been identified and figures for the acquired diseases are even greater (source: International Union of Immunological Societies 2007).



•

Age-related degenerative diseases. The increasing proportion of older people in the global population is contributing to a rise in age-related degenerative diseases and has serious implications for health care systems. Care-givers, health systems and societies need to be ready to cope withmanage the growing needs of the elderly in every part of the world.



•

Infectious diseases. These create significant and critical unmet medical needs both in the developed and developing worlds. Hospital-acquired infections are a major concern for public health in industrialized countries. Every year in the United States, 1.7 million people fall victim to hospital-acquired bacterial infections. In low-income countries, peoplemortality is predominantly die ofdue to infectious diseases such as lung infections, tuberculosis and malaria.



•

Rare diseases. Approximately 7,000 rare disorders are known to exist and new ones are discovered each year. Rare diseases affect between 25-30 million people in the United States, and about 30 million people in the European Union.



•

Vaccines. See "— Vaccines Research and Development" below.



•

Animal health.Union (source: European Organization for Rares Diseases).

Vaccines (see Section B.5.3. below).

Animal Health.

        To carry out our mission, meet these challenges and maximize our impact we are striving to bring innovation to patients and to build a pipeline of high value projects.




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        Medical value, scientific quality and operational effectiveness are the three drivers that underpin our strategy. We focus on projects that have the potential to provide the best medical value differential to patients and payers and to reduce healthcare costs for society.

        By using a translational medicine approach, ensuring that research hypotheses are validated in humans as early as possible, we can translate basic research findings into medical practice more quickly and efficiently and improve the scientific quality of our projects. The open innovation and large collaboration processes applied worldwide helped us to deliver the best and most innovative solutions for patients. By implementing new operating models to ensure optimal progress on our projects, especially during clinical development phases, we will improve our operational effectiveness and deliver the right therapeutic solutions to patients more quickly.

B.5.1. Research & Development Organization

        Over recent years, we have moved from a pure pharmaceutical R&D organization to a global and integrated R&D organization where forces are combined to meet a diversity of health needs.

•

Sanofi Pharma R&D, which is dedicated to the discovery and development of human medicines. This is a decentralizedproject-driven organization, consisting of two divisions (Oncology(Diabetes and Diabetes), five therapeuticOncology, a launch unit (PCSK9) and Therapeutic Strategic Units (TSUs), several Distinct Project Units (DPUs) and fivesupported by Scientific platforms,Platforms, responsible for the operational aspects of development.R&D.



•

Genzyme R&D, which has strong expertise in rare diseases, is now fully integrated into Sanofi Pharma R&D. It consists of two different departments covering early and late stage products (according to the development phase of each project).



•

Sanofi Pasteur R&D, which closely monitors all new approaches and technological discoveries in vaccines against infectious diseases. Its research priorities include new vaccines, the improvement of existing vaccines, combination vaccines, administration systems and innovative technologies.



•

Merial R&D, which aims to deliver and support effective, innovative, safe and cost-effective animal health products. Although the specifics of animal health are different from human health, there are many potential synergies opening up a wide range of new research avenues.




        We are constantly adapting our R&D approach, combining global and local action, leveraging local innovative research ecosystems and global high quality development capabilities in order to achieve the greatest possible impact.

        We are creatinghave developed geographically-focused integrated research innovation centers also called "hubs"hubs in four areas: North America, Germany, France and Asia. In the Boston area (United States), which has a high concentration of universities and innovative biotechnology companies, our R&D has been reorganized to support the increasing presence of the Group.

        Our R&D is now organized to promote the best use of our resources within the local ecosystem. Our network-based organization is open to external opportunities, and enables us to more effectively capitalize on innovation from a wide range of sources.

PortfolioB.5.2. Pharmaceuticals

        As in 2011,In 2013, R&D again conducted a rigorous and comprehensive portfolio review. Projects were assessed using two key criteria which allow management to rapidly understand how the portfolio performs in terms of innovation, unmet medical needs, risk and value. The two key criteria include:are:

•

relative medical value: which encompasses the extent of the unmet need, the market dynamics and the likelihood of achieving the desired price and reimbursement based on the health authorities' positioning and Sanofi competencies.getting satisfactory market conditions.



•

science translation: which includes the level of innovation and translatability of the science including likelihood of development success.

        The clinical portfolio as of the date of filing of this annual report is the result of decisions taken during these reviews, plus compounds entering the portfolio from the discovery phase or from third parties via acquisition, collaboration or alliances.

        As described at "Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business — We may fail to adequately renew our product portfolio whether through our own research and developmentR&D or through acquisitions and strategic alliances." our product development efforts are subject to the risks and uncertainties inherent in any new product development program.




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        The clinical portfolio for new medical entitiesproducts can be summarized as follows:

		Phase I		Phase II		Phase III /registration
		Phase I		Phase II		Phase III / registration
Diabetes Solutions		Insulin biosimilar program				Lyxumia® (lixisenatide) Lixilan® (lixisenatide / insulin glargine) U300		lixisenatide(AVE0010)
Cardiovascular diseasesOncology		SAR164653SAR125844 SAR153192 SAR245408 SAR260301 SAR307746 SAR405838 SAR566658 SAR650984				SAR236553
		GZ402669				mipomersen
		SAR126119				otamixaban(XRP0673)
		SAR127963SAR245409 SAR256212 SAR3419
OncologyCardiovascular diseases		SAR125844		SAR245408		iniparib(BSI-201)
		SAR153192	fresolumimab		SAR245409		SAR302503
		SAR260301		SAR256212alirocumab
	SAR307746 Immune Mediated diseases (including Multiple Sclerosis)		SAR3419SAR113244 SAR252067		SAR100842 SAR156597 SAR339658 dupilumab		Lemtrada™ (alemtuzumab) sarilumab Aubagio® (teriflunomide)
	GZ402674 Age Related Degenerative Diseases		SAR228810
		SAR405838
		SAR566658
		SAR650984SAR391786
Immune MediatedInfectious diseases		SAR100842		SAR156597		alemtuzumab
(including MS)		SAR113244		SAR339658		teriflunomide
		SAR252067		dupilumab		sarilumab(SAR153191)
Age related degenerative		SAR228810		SAR110894
diseases		SAR391786		SAR113945
		SAR399063		SAR292833
		SAR404460ferroquine (combo OZ439) SAR279356
Infectious DiseasesRare diseases		GZ402665 GZ402666 GZ402671				ferroquine
				SAR97276
				SAR279356Cerdelga™ (eliglustat) patisiran (SAR438027)
Rare DiseasesOphthalmology		GZ402665GZ402663				eliglustat tartrate
		GZ402671sarilumab (uveitis)
		GZ404477
Ophtalmology		GZ402663		FOV1101
		StarGen™
		UhsStat™
		RetinoStat®

        Phase I studies are the first studies performed in humans, inwho are mainly healthy volunteers. Their main objective is to assess the tolerability, the pharmacokinetic profile (the way the product is distributed and metabolized in the body and the manner by which it is eliminated) and where possible the pharmacodynamic profiles of the new drug (i.e. how the product may react on some receptors).

        Phase II studies are early controlled studies in a limited number of patients under closely monitored conditions to show efficacy and short-term safety and to determine the dose and regimen for Phase III studies.

        Phase III studies have the primary objective of demonstrating or confirming the therapeutic benefit and the safety of the new drug, in the intended indication and population. They are madedesigned to provide an adequate basis for registration.

        Oura)    Diabetes Solutions

Lyxumia® (Lixisenatide)is already registered in the E.U. and many other countries outside the U.S. and is presented in the section "— Pharmaceutical Products — Main Pharmaceutical Products" above.)

The main compounds currently in Phase III clinical development in the Diabetes field are

•

Investigational New Insulin U300:

        A new formulation of insulin glargine has been shown in Phase I studies to have an improved pharmacodynamic profile with even longer, more stable and flatter activity than Lantus®, with the potential to translate into good glycemic outcomes with less hypoglycemia.

        The completed Phase III program includes four studies (EDITION I, II, III and IV) and two studies in Japanese patients (EDITION JPI and JPII). The Phase III program is assessing the efficacy and safety of U300 compared with Lantus® in various populations. The results of Edition I and II have demonstrated similar level of glycemic control




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between U300 and Lantus®, while U300 was consistently associated with a reduction in risk of hypoglycemia. Topline results of EDITION III, IV and JPI showed a similar level of glycemic control in both groups. In EDITION III, fewer patients were affected by the nocturnal severe or confirmed hypoglycemic events in the U300 group but the difference was not statistically significant. The analysis of this criterion was not planned as main secondary endpoint in EDITION IV and JPI.

•

Lixilan® Fixed-Ratio:    Lixilan® Fixed-Ratio, a combination of insulin glargine and lixisenatide, is also under clinical development. A proof-of-concept study to examine the glycemic control of Lixilan® versus insulin glargine alone over 24 weeks has been completed. The Lixilan® Phase III program started recently in the first quarter of 2014 with two clinical studies:



•

LixiLan-O study in patients insufficiently controlled on oral antidiabetics drugs;



•

LixiLan-L study in patients not at goal on basal insulin.

        Lixilan® has the potential to be the first combination of Basal Insulin/GLP-1 in a single daily injection marketed in the U.S.

        Sanofi Diabetes maintains a significant network of R&D collaborations with world leading academic institutions, including partnerships with the Joslin Diabetes Center (an affiliate of Harvard Medical School), the Charite in Berlin and the Helmholtz Zentrum in Munich. Collaborations with Gentofte Hospital (Copenhagen), and Gubra (a Danish biotech company specialized in gut hormone R&D) were recently established, and collaboration on innovative implantable glucose sensors was extended. Sanofi and JDRF continue to jointly fund selected innovation projects in the field of type I diabetes research.

b)    Oncology

��       The main compounds currently in Phase II &clinical development are:

•

SAR256212 (MM-121). Under an exclusive global collaboration and licensing agreement, Merrimack Pharmaceuticals, Inc. and Sanofi are co-developing SAR256212, a fully human monoclonal antibody targeting ErbB3. ErbB3 has been identified as a key node in tumor growth and survival. SAR256212 is in Phase II stage of development in Breast, Lung and Ovarian cancers.



•

SAR245409 (XL765) was in-licensed from Exelixis, Inc. and is being developed by Sanofi. This oral agent is an inhibitor of phosphoinositide-3-kinase (PI3K) and also acts against the mammalian target of rapamycin (mTOR). A Phase II trial of monotherapy in mantle cell lymphoma, follicular lymphoma, chronic lymphocytic leukemia and diffuse large B cell lymphoma is ongoing.



•

Coltuximab ravtansine (SAR3419) is an Antibody Drug Conjugate (ADC) maytansin-loaded anti-CD19 mAb that has been in-licensed from Immunogen Inc and is being developed in Phase II in B-cell malignancies: refractory/relapse Diffuse Large B Cell Lymphoma (DLBCL, aggressive lymphoma type) with the aim of confirming clinical activity both as a single agent and in combination with rituximab (Rituxan®, anti CD20 mAb).

Early stage products:

•

SAR245408 (XL147) was in-licensed from Exelixis, Inc. and is being developed by Sanofi. This oral phosphoinositide-3-kinase (PI3K) inhibitor is currently under evaluation in a Phase I study of the new formulation (Polymorphic Form E Tablet).



•

SAR650984 is a naked humanized immunoglobulin (IgG1) monoclonal antibody (mAb) that has been in-licensed from Immunogen Inc. SAR650984 selectively binds to CD38, a cell surface antigen widely expressed in multiple myeloma cancer cells, and other hematological malignancies. The program is in Phase I with 2 ongoing studies: as a single agent and in combination with lenalidomide/dexamethasone in heavily pretreated relapsed multiple myeloma patients.



•

Two compounds,SAR260301 (PI3Kb selective inhibitor) andSAR405838 (P53/HDM2 antagonist) were added to the Sanofi Phase I pipeline.



•

A Phase I trial of a novel combination withSAR405838/pimasertib in solid tumors has been initiated.

Projects discontinued in 2013:

•

Iniparib (SAR240550; BSI-201) The project, whose initial Phase III compoundstrial in triple-negative breast cancer was negative in 2011, was discontinued following an additional negative Phase III trial in advanced squamous non-small cell lung cancer, as well as inconclusive results of the two Phase II trials in ovarian cancer.




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•

Fedratinib (SAR302503; TG101348) was acquired when we purchased TargeGen, Inc. in 2010 and has been developed exclusively by Sanofi. Fedratinib is a selective oral, small molecule inhibitor of the JAK2 kinase. Sanofi recently announced its decision to halt all clinical trials and cancel plans for regulatory filings with fedratinib following reports of cases consistent with Wernicke's encephalopathy in patients participating in fedratinib clinical trials and a thorough risk-benefit analysis which determined that the risk to patient safety outweighed the benefit that fedratinib would bring to patients.

c)    Cardiovascular diseases

•

Alirocumab (SAR236553), developed in collaboration with Regeneron:  positive results from a Phase III study (ODYSSEY mono) with alirocumab, an investigational monoclonal antibody targeting PCSK9 (proprotein convertase subtilisin/kexin type 9), were obtained in 2013.

        The mean low-density lipoprotein-cholesterol (LDL-C) reduction from baseline to week 24, the primary efficacy endpoint of the study, was significantly greater in patients randomized to alirocumab, as compared to patients randomized to ezetimibe. In the trial, which employed a dose increase (up-titration) for patients who did not achieve an LDL-C level of 70 milligrams/deciliter (mg/dL), the majority of patients remained on the initial low dose of alirocumab of 75 milligrams (mg).

        A large Phase III clinical program (ODYSSEY — 14 studies) is ongoing to assess the product efficacy in different populations, and new results are expected during the second and third quarters of 2014.

        Sanofi and Regeneron have been advised by the FDA that it has become aware of neurocognitive adverse events in the PCSK9 inhibitor class. Neurocognitive adverse events have also been associated with the use of statins for lowering LDL cholesterol. Neither company knows the circumstances under which the FDA became aware of these adverse events or whether these adverse events were observed with a drug candidate tested as monotherapy or in combination with a statin or other cholesterol-lowering agent. The FDA has requested that Sanofi and Regeneron make an assessment of potential neurocognitive adverse events across the global development program for alirocumab, especially in the longer-term studies. Additionally, the FDA requested to be informed about the feasibility of incorporating neurocognitive testing into at least a subset of patients in the ODYSSEY OUTCOMES trial or other long-term Phase III trial(s). While neither company is aware of any neurocognitive adverse event signal relating to alirocumab, if this or another adverse event signal is detected, the further development of alirocumab may be delayed or fail, or its commercial value diminished, which could severely harm future prospects.

•

Fresolumimab (GZ402669 — Genzyme) — TGF-ß antagonist in Phase II in the treatment of Focal Segmental Glomerulosclerosis (FSGS).

d)    Immune Mediated diseases and Multiple Sclerosis

•

Lemtrada™ (Alemtuzumab), a humanized monoclonal antibody targeting CD52 antigen, has been developed and is registered in Europe (dossier under discussion in the U.S.) to treat patients with relapsing forms of MS. The current development activities are described in the section "— Pharmaceutical Products — Main Pharmaceutical Products" above. A table summarizing selected key facts concerning our late stage experimental pharmaceutical products follows, at the end of this section.

        The remainder of this section focuses on compounds entering Phase I or in Phase II and also lists projects that were terminated in 2012.




Diabetes/Other Metabolic Disorders portfolio

•

SAR164653, an inhibitor of Cathepsin A, entered Phase I development. The product is being developed to prevent heart failure for patients having experienced episodes of acute heart failure.

        The network of R&D collaborations with world leading academic institutions was significantly extended in 2012. A collaboration with the Charité in Berlin that began in 2010 was further extended to include Diabetes as an additional focus. In addition we entered into a research alliance with the Helmholtz Zentrum in Munich, and a new collaboration with the Joslin Diabetes Center (affiliate of Harvard Medical School) was formed to promote the development of new medicines for the treatment of diabetes and related disorders.

Oncology portfolio

•

Two compounds, SAR260301 (PI3Kb selective inhibitor) and SAR405838 (P53/HDM2 antagonist) were added to the Sanofi Phase I pipeline.



•

GC 1008, an anti-TGFß monoclonal antibodyAubagio® (Teriflunomide), is not being further developed for oncology indications via corporate-sponsored studies, although investigator-initiated studies are continuing.

        In 2012, we established further collaborations with other companies, universities and institutes to investigate novel oncology agents with partners including the Massachusetts General Hospital (MGH)a once daily, oral immunomodulator approved in the United States and the Institut Gustave-Roussy (IGR)Europe in France.

Sanofi — Genzyme early stage portfolio

•

rhASM — Enzyme replacement therapy targeting the treatment of Niemann-Pick B disease. A Phase Ib study should start early 2013.MS. The current development activities are described in the section "— Pharmaceutical Products — Main Pharmaceutical Products" above.



•

FresolumimabSarilumab (SAR153191) — TGF-ß antagonist targeting, a monoclonal antibody against the treatment of Focal Segmental Glomerulosclerosis (FSGS)Interleukin-6 Receptor (anti IL-6R mAb) derived from our alliance with Regeneron, is in Phase III in adult patients with moderate to severe rheumatoid arthritis (RA). The SARIL-RA Phase IIIII program was launched early 2013.evaluating two doses of sarilumab is underway with one completed and four ongoing clinical studies:



–

The SARIL-RA-TARGET study is investigating the effects of Sarilumab when added to DMARD (Disease-Modifying Anti-Rheumatic Drug) therapy in patients with active RA who are inadequate responders or intolerant to tumor necrosis factor alpha (TNF-a) antagonists on reduction of signs and symptoms at week 24 and improvement of physical function over 24 weeks in patients;



–

The SARIL-RA-ASCERTAIN study is a safety calibrator study evaluating sarilumab and tocilizumab in combination with DMARD therapy in patients with RA who are inadequate responders to, or intolerant of, TNF-alpha inhibitors over 24 weeks;




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–

The SARIL-RA-EXTEND study, which enrolled patients from MOBILITY and is enrolling participants by invitation from the TARGET and ASCERTAIN studies, aims to evaluate in this uncontrolled extension the long term safety and efficacy of Sarilumab on top of DMARDs in patients with active RA;



–

The SARIL-RA-COMPARE study is evaluating the strategy of using IL-6 inhibition with sarilumab in combination with MTX in patients who have had an inadequate response to open-label adalimumab + MTX after 16 weeks of therapy. Those patients identified as inadequate responders are then randomized to a second TNF-alpha inhibitor (etanercept) + MTX or sarilumab + MTX.



–

Additional studies in the SARIL-RA clinical program are to be implemented in 2014.



•

AAV-AADCDupilumab (SAR231893) — Gene therapy based on AAV vector targeting, a monoclonal antibody against the treatmentInterleukin-4 alpha Receptor (anti IL-4R alpha) derived from our alliance with Regeneron, is currently being developed in two indications. Dupilumab modulates signaling of moderate to severe Parkinson's disease.both IL 4 and IL 13 pathways. Atopic dermatitis will enter Phase I is to be completed.III in the fourth quarter of 2014. Asthma will enter Phase III in the second quarter of 2015.



•

SAR339658 (also known as GBR500)(GBR500), a monoclonal antibody directed at the VLA-2 (Very Late Antigen 2) integrin receptor, was in-licensed from Glenmark Pharmaceuticals in May 2011. The primary target indication is inflammatory bowel disease such as ulcerative colitisUlcerative Colitis or Crohn's disease. The compound successfully completed Phase I in 2010 and entered Phase IIaIIA in 2012. Enrollment continued in 2013.



•

SAR100842 (Genzyme, LPA1 receptor antagonist): a Phase IIA study in the treatment of systemic sclerosis has started in 2013 and is currently ongoing.



•

SAR156597 (Genzyme, humanized bi-specific monoclonal antibody targeting the IL-4 and IL-13 cytokines) is currently in Phase IIA in the treatment of Idiopathic Pulmonary Fibrosis.

TSU Aging portfolioe)    Age Related Degenerative Diseases

•

Two compounds have completed their PhaseOne compound has progressed into phase II clinical program with data analysis ongoing:development:



–

SAR391786 — REGN1033 (Anti GDF8 — mAb in sarcopenia) in collaboration with Regeneron



•

One compound has completed Phase I single rising dose in with Alzheimer's disease (AD) patients and started multiple ascending dosing:



–

SAR228810(anti-protofibrillar AB mAb for the treatment of patients with mild cognitive impairment due to AD)



•

Three compounds have been terminated:



–

SAR110894 (H3 receptor antagonist for the treatment of Alzheimer's dementia).disease)



•–

SAR113945 (IKK-ß kinase inhibitor for the treatment of osteoarthritis by intra-articular administration).



•

One compound has progressed into phase II clinical development:



•–

SAR292833 — GCR-15300, licensing agreement with Glenmark Pharmaceutical (TRPV3 antagonist for the oral treatment of chronic pain).



•

Two compounds have entered Phase I clinical development:



•

SAR228810 (anti-protofibrillar AB mAb for the treatment of Alzheimer's dementia).



•

SAR391786 — REGN1033 (Anti GDF8 — mAb in sarcopenia) in collaboration with Regeneron.



•

One nutraceutical project has entered a clinical program:



•

SAR399063 (DHA-GPL & Vit D) for the treatment of sarcopenia.




•

Three compounds have entered preclinical development:



•

SAR396049 (CDRAP-MIA in osteoarthritis), licensing agreement with SCIL.



•

SAR244181 (P75 dimerization inhibitor in Overactive Bladder).



•

SAR296968 (NCX inhibitor in Chronic Heart Failure).



•

Two compounds have been terminated:



•

SAR114137 (CathepsinS/K inhibitor for the oral treatment of chronic pain).



•

SAR407899 (Rho-Kinase inhibitor).

Discovery/development partnerships:

•

The agreement with Audion Therapeutics (research in hearing disorders) has been terminated.



•

An agreement was signed in March 2012 with CNRH, INRA, ASL, 3iNature (Biotechs in Auvergne, France) on the development of products for treatment of sarcopenia.

TSUf)     Infectious Diseases portfolio

•

Ferroquine/OZ439, a combination for malaria (Partnership with Medicines for Malaria Venture (MMV)). Ferroquine is a new 4-amino-quinoline being developed for the treatment of acute uncomplicated malaria. Ferroquinemalaria, and is active against chloroquine-sensitive and chloroquine-resistantPlasmodium strains, and due strains. Due to its long half-life it has the potential to be part of single dose cure regimens andfor the unified global treatment of bothP. vivax andP. falciparum malaria.

OZ439 is a synthetic peroxide antimalarial drug candidate from MMV designed to provide a single dose oral cure in humans. An IND was filed with the FDA in November 2012 and a phase



A Phase I study of combinationscombination of the two compounds is planned to startwas conducted in February 2013. A Phase IIB clinical study of the combination will commence in the second half of 2014.

•

SAR279356 (first-in-class(a first-in-class human monoclonal antibody for the prevention and possible treatment ofS. aureus, S. epidermidis, E. coli, Y. pestis and other serious infections) — The option to acquire an exclusive worldwide license from Alopexx Pharmaceuticals LLC for the development and commercialization of SAR279356 was exercised in October 2010. Following the successful completion of a Phase I study in early 2011, a Phase II PK/PD study was initiated. This study was terminated in 4Q2012 in favor of a revised development plan to include morefurther extensive preclinical credentialing priorexperiments have been successfully completed to conductfurther validate the potential for application of the product in the prevention of nosocomial infections and support a future phasePhase II clinical proof of concept study.




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g)    Rare Diseases (Genzyme)

•

Cerdelga™ (Eliglustat) — a substrate reduction therapy targeted for the treatment of Gaucher disease type 1. This product candidate is administered orally in capsule form and has the potential to transform the treatment experience of patients by providing an alternative to bi-weekly infusions. Eliglustat was submitted for licensure in both Europe and the U.S. in September 2013. In November 2013 the FDA gave the eliglustat submission Fast Track status. The approval is expected for the second half of 2014.



•

SAR97276Patisiran (SAR438027) (in licensed from CNRS)(mRNA inhibition — Alnylam — ALN-TTR02). In October 2012, Genzyme entered into an exclusive license agreement with Alnylam, covering ALN-TTR programs in the Asia-Pacific-Japan region. ALN-TTR01 and ALN-TTR02 Phase I results were published in the New England Journal of Medicine in August 2013. Results showed that RNAi therapeutics targeting transthyretin (TTR) achieved rapid, dose-dependent, durable, and specific knockdown of TTR, the disease-causing protein in TTR-mediated amyloidosis (ATTR). The Phase III program has just started. It is proposed that a Japanese Phase I trial begin in early 2014. Genzyme's exclusive territory rights for the ALN-TTR programs were extended to the rest of world excluding North America and Western Europe on January 14, 2014.



•

GZ402665 (rhASM) — an antimalarial drug belonging to a new chemical class with an innovative mechanism of action, being developed forenzyme replacement therapy targeting the treatment of Niemann-Pick B disease. A Phase Ib study was fully enrolled in July 2013.



•

GZ402666 (Neo GAA) in Phase I in the treatment of Pompe disease.



•

GZ402671 (CGS inhibitor) in Phase I in the treatment of Fabry's disease.



•

GZ404477 (AAV-AADC) — Gene therapy based on AAV vector targeting the treatment of moderate to severe malaria. ClinicalParkinson's disease. Phase I was completed in 2013. Genzyme discontinued development of monotherapy treatment is on hold while the potential for the product as a combination therapy with other antimalarials is evaluated.this program due to strategic considerations.

The Sanofi Fovea ophthalmology pipelinenow includes four projects in clinical-stage development:h)    Ophthalmology portfolio (Sanofi-fovea)

•

sFlt01A proof-of-concept study is being conducted forSAR153191 — sarilumab (Phase II) in an ophthalmology indication: this anti-IL-6-receptor mAb could be a safe and efficient option to treat non-infectious uveitis affecting the posterior segment of the eye at risk of vision loss.



•

GZ402663 (sFlt01 — Phase I): a gene therapy to deliver an anti-angiogenic gene (anti-sFlt01) to stop the progression of neovascularization and edema related to wet Age relatedAge-related Macular Degeneration (AMD) and to improve patients' vision;



•

Retino Stat® (Phase(SAR421868 — Phase I): a gene therapy to treat wet Age-related Macular Degeneration (AMD); Retino Stat® is being developed with Oxford BioMedica and is still under opt-in conditions.



•

StarGen™ (Phase(SAR422459 — Phase I): a gene therapy to treat (by replacing the missing ABCR gene) Stargardt disease, an orphan inherited condition that leads to progressive sight loss from age seven+;seven;



•

UshStat™UshStat® (Phase(SAR421869 — Phase I): a gene therapy to deliver a functional MY07A gene to the photoreceptor in Usher type 1B disease, an orphan inherited condition that results in progressive visual field constriction and vision loss.




Other Projects portfolioTable of Contents

•

The Phase I program forSAR126119, an injectable synthetic inhibitor of TAFI (thrombin-activable fibrinolysis inhibitor) has been successfully conducted. We are looking for a partnership to pursue the development of this molecule and set up a phase II study in the treatment of acute ischemic stroke (AIS).



•

The development ofSSR411298 (an oral fatty acid amide hydrolase (FAAH) inhibitor) as a treatment of chronic pain in cancer patients has been discontinued in light of our positioning in pain treatment and the priorities for our R&D portfolio.

R&D expenditures for late stage development

        Expenditures on research and development amounted to €4,922 million in 2012, of which €4,219 million in the Pharmaceuticals segment, €539 million in HumanB.5.3 Vaccines and €164 million in Animal Health. Research and development expenditures were the equivalent of 14.1% of net sales in 2012, compared to 14.4% in 2011, 14.1% in 2010 and 15.5% in 2009. The stability of R&D expenditure as a percentage of sales over the past three years is explained by the management of the portfolio and close control over expenditures, despite the increasing proportion of products in late stage development. Preclinical research in the Pharmaceuticals segment amounted to €1,038 million in 2012, compared to €1,113 million in 2011 and €1,037 million in 2010. Of the remaining €3,181 million relating to clinical development in the pharmaceutical sector (€2,989 million in 2011 and €2,848 million in 2010), the largest portion was generated by Phase III or post-marketing studies, reflecting the cost of monitoring large scale clinical trials.

        For each of our late stage compounds in the Pharmaceutical segment that were in Phase III in 2012, we set out below the date at which this compound entered into Phase III development, information concerning any compound patent in the principal markets for innovative pharmaceutical products (the United States, European Union and Japan) as well as comments regarding significant future milestones that are reasonably determinable at this date. Because the timing of such milestones typically depends on a number of factors outside of our control (such as the time to validate study protocols and recruit subjects, the speed with which endpoints are realized, and the substantial time taken by regulatory review) it is frequently not possible to provide such estimates, and any such estimates as are given should be understood to be indicative only. See also "Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business".

Phase III		Entry into Phase III (1)		Compound Patent Term (2)									Comments
		(month/year)		U.S.			E.U.			Japan
Lyxumia® (lixisenatide) (3)		May 2008 (4)			2020			2020			2020		Dossier approved in Europe in February 2013 and submitted in the U.S. in December 2012. The FDA accepted the file for review on February 19, 2013
Zaltrap® (aflibercept)		July 2006			2020			2020			2020		2nd line colorectal cancer, approved and launched in the U.S. in August 2012, and approved in the E.U. in February 2013
iniparib (BSI-201)		June 2009			2013			2014			N/A		Phase III program ongoing in 1st line squamous Non Small Cell Lung Cancer
													Phase II program in 2nd line ovarian cancer ongoing




Phase III		Entry into Phase III (1)		Compound Patent Term (2)									Comments
		(month/year)		U.S.			E.U.			Japan
otamixaban		April 2010			2016			2016			2016		Phase III results in Acute Coronay Syndrome (ACS) expected in the second quarter of 2013
Aubagio® (teriflunomide) (3)		September 2004			2014			expired			expired		In the monotherapy treatment of multiple sclerosis, dossier approved in September 2012 in the U.S., launched in October and submitted in February 2012 in Europe.
SAR236553 (REGN727) (anti PCSK-9 mAb)		July 2012			2029			2029			2029		Phase III program on going in hypercholesterolemia
SAR302503 (TG101348)		January 2012			2026			2026	(3)		2026	(3)	Phase III program ongoing in the treatment of myelofibrosis
Lemtrada™ (alemtuzumab)		September 2007 (MS)			2015	(5)		2014			expired		Dossier submitted in Europe and U.S. for the treatment of relapsing forms of Multiple Sclerosis in May and November 2012, respectively
New formulation Insulin glargine		December 2011			2015	(6)		2014			2014		Phase III program ongoing
Kynamro™ (mipomersen) (3)		August 2007			2025			pending			2023		Dossier submitted in July 2011 in Europe and approved in the U.S. on January 29, 2013 in the treatment of homozygous familial hypercholesterolemia (HoFH)
eliglustat tartrate		September 2009			2022			2022			2022		Phase III program ongoing in the treatment of Gaucher Disease type 1
sarilumab		August 2011			2028			2027			2027		Phase III program in the treatment of Rheumatoid Arthritis ongoing

⁽¹⁾

First entry into Phase III in any indication.

⁽²⁾

Subject to any future supplementary protection certificates and patent term extensions.

⁽³⁾

Application pending in some countries.

⁽⁴⁾

Development of lixisenatide as stand alone entity. A program evaluating the benefit of a combination of lixisenatide / Lantus® is in development.

⁽⁵⁾

Regulatory exclusivity: May 2013.

⁽⁶⁾

Including a 6-month pediatric extension.

        With respect to the compound patent information set out above, investors should bear the following additional factors in mind.




•

The listed compound patent expiration dates do not reflect possible extensions of up to five years available in the United States, the European Union, and Japan for pharmaceutical products. See "— Patents, Intellectual Property and Other Rights — Patent Protection" for a description of supplementary protection certificates and patent term extensions.



•

Depending on the circumstances surrounding any final regulatory approval of the compound, there may be other listed patents or patent applications pending that could have relevance to the product as finally approved; the relevance of any such application would depend upon the claims that ultimately may be granted and the nature of the final regulatory approval of the product.



•

Regulatory exclusivity tied to the protection of clinical data is complementary to patent protection, and in many cases may provide more efficacious or longer lasting marketing exclusivity than a compound's patent estate. See "— Patents, Intellectual Property and Other Rights — Regulatory Exclusivity" for additional information. In the United States the data protection generally runs five years from first marketing approval of a new chemical entity extended to seven years for an orphan drug indication and twelve years from first marketing approval of a biological product (e.g., aflibercept). In the European Union and Japan the corresponding data protection periods are generally ten years and eight years, respectively.

Vaccines Research and Development

        Our human vaccine research and development (R&D) remainsHuman Vaccines R&D is focused on improving existing vaccines as well asand on the development ofdeveloping new prophylactic vaccines.

Portfolio

        The Sanofi Pasteur R&D portfolio includes 1413 vaccines currently in advanced development as shown in the table below. The portfolio includes fiveis well balanced, with six vaccines/antibody products for novel targets and nineseven vaccines which are enhancements of existing vaccine products.

Phase I		Phase II				Phase III		Submitted
Phase I		Phase II		Phase III		Submitted
Streptococcus pneumonia *pneumonia* Meningitis & pneumoniaPneumonia and meningitis vaccine Tuberculosis* Recombinant subunit vaccine Rotavirus Live attenuated tetravalent rotavirus oral vaccine Pseudomonas aeruginosaPseudomonas aeruginosa * Antibody fragment product Preventionfor prevention of ventilator-associated pneumonia Herpes Simplex* Live attenuated viral vaccine		Meningitis A,C,Y,W conj. 2nd generation meningococcalMeningococcal conjugate infant vaccine Rabies VRVg Purified vero rabies vaccine ACAM C. diff * Clostridium difficileRotavirus ToxoidLive attenuated tetravalent oral rotavirus vaccine				Quadracel® DTP (1) IPV vaccine 4-6 years U.S. Dengue *Dengue* Mild-to-severe dengue fever vaccine C. difficile toxoid vaccine* Toxoid vaccine againstclostridium difficile DTP-HepB-Polio-Hib(1) Pediatric hexavalent vaccine Fluzone® QIV IMID Quadrivalent inactivated intradermal influenza vaccine Vaxigrip® QIV IM Quadrivalent inactivated influenza vaccine DTP-HepB-Polio-Quadracel® Hib DTP(1) Pediatric hexavalent IPV vaccine 4-6 years U.S.		Hexaxim®/New hexavalent vaccine		DTP-HepB-Polio- Hib vaccine (1) Fluzone® QIV ID Quadrivalent inactivated influenza vaccine intradermal

⁽¹⁾

D=Diphtheria, T=Tetanus, P=Pertussis, Hib=Haemophilus influenzae b, HepB=Hepatitis B, P=Pertussis.B.

*

New targets




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Project highlights


        This section focuses on Phase I and Phase II compounds and novel targets.targets in Phase III. Other vaccines in Phase II or III (excluding novel targets) are described in the section "—"B.3. Vaccine Products" section above.




Influenza

        To sustain our global leadership in the development of influenza vaccine,vaccines, our R&D efforts are focused on innovative approaches for assessingapproaches. Following up on the development of quadrivalent flu vaccines (see "— Vaccine Products"), Sanofi Pasteur will continue to assess new formulations and alternative delivery systems, as well as quadrivalent flu"universal" vaccine development (see "— Vaccine Products").approaches in order to address specific patient needs and to continue to offer innovative solutions in the future.

Pediatric Combination & Adolescent/Adult Boosters

        Several pediatric vaccines are under development. Tailored for specific markets, they are aimed at protecting against five or all six of the following diseases: diphtheria, tetanus, pertussis, poliomyelitis (polio),Haemophilus influenzae type b infectionspolio, Hib and hepatitis B (see "— Vaccine Products").

Meningitis

        Neisseria meningitidis bacteria isare a leading cause of meningitismeningococcal disease in the United States,U.S., Europe, the African meningitis belt and elsewhere, affecting infantsother endemic regions such as Brazil and children as well as adolescents. The primary focusAustralia. Ongoing projects around a new generation of several ongoing projects related to Menactra® is to decreasemeningococcal conjugate vaccine are aimed at lowering the age at which this vaccine can first be administered. (see "— Vaccine Products").

Pneumococcal Vaccine

        Streptococcus pneumoniae bacteria isare the leading etiological agent causing severe infections such as pneumonia, septicemia, meningitis and otitis media, and is responsible for over(over three million deaths per year worldwide, of whichincluding one million are children. Anti-microbialchildren). The anti-microbial resistance inStreptococcus pneumoniae has complicated the treatment of pneumococcal disease and further emphasized the need for vaccination to prevent large-scale morbidity and mortality.

        Sanofi Pasteur is focused on the development of a multi-protein-based pneumococcal vaccine. This approach should result in a vaccine with superior serotype coverage, as compared to current polysaccharide or conjugate based vaccines, and should not induce nor be sensitive to serotype replacement. Results from the firstA Phase I clinical trial in Bangladesh of a bi-component formulation demonstrated safety and immunogenicity. Results from a second Phase I clinical trial to evaluate a third antigen also demonstrated safety and immunogenicity (ability to induce an immune response). A third Phase I clinical trial of a tri-component formulation beganvaccine with three protein-based antigens ended in September 20112013; the results are expected in adults, adolescents, and infants in Bangladesh.2014.

Rabies Vaccine

        Rabies mAb Post Exposure Prophylaxis — This product consists of two rabies monoclonal antibodies (mAbs) that will be used in association with theA new generation serum-free Vero cell human rabies vaccine for post-exposure(VerorabVax™) is under development to allow both of our currently available rabies vaccines to be replaced by a single vaccine. The results of a Phase II clinical trial, carried out in 2009, demonstrated the non-inferiority of VRVg versus Verorab® in pre-exposure prophylaxis. VRVg was approved in France as a line extension of Verorab® in January, 2011. In 2011, Sanofi Pasteur reviewedChina, the rabies mAb project, developed in partnership with Crucell. Crucell, acquired by Johnson & Johnson in 2011, has taken over full responsibility for the developmentcompletion of the product and Sanofi Pasteur will market it, whenclinical development confirmed its non-inferiority against Verorab® in the vaccineChinese population, enabling a registration file to be submitted in 2013. The clinical development plan for licensure in the U.S. is available.currently ongoing.

New Vaccine Targets

        Dengue — Dengue fever has increasing epidemiological importance due to global socio-climatic changes. It isconstitutes a major medical and economic burden in the endemic areas of Asia-Pacific, Latin America and Africa. It is also oneAfrica; more than 100 countries, representing nearly half of the leading causes of fever among travelers. Multiple approaches have been tested to develop a vaccine coveringworld's population, are at risk. Over the four viral serotypes of dengue fever in order to prevent this disease and its severe complications (hemorrhagic fever). Sanofi Pasteur's dengue vaccine research program includes ongoing clinical studies (adults and children) in several countries in endemic regions. The complexity of dengue virus infection has hampered vaccine research for decades and it is the first time inlast 50 years, the incidence of the disease has increased 30-fold. In 2013, dengue research that a vaccine was seen that protected a large grouponce again proved how unpredictable it can be with record breaking epidemics in Brazil, French overseas territories and Singapore. In response to this global threat, the WHO has set ambitious objectives to reduce the burden of children from clinicalthe disease. The first objective is to have an evaluation of the real burden of the disease caused by dengue viruses.2015. The second one is to reduce morbidity by 25% and mortality by 50% by 2020.

        In 2012, the results of the world's first efficacy study conducted in Thailand confirmed the excellent safety profile of the Sanofi Pasteur'sPasteur dengue vaccine candidate. The full analysis ofcandidate which targets four viral serotypes. Nevertheless, this study showed vaccine efficacy against each serotype, reflecting real-life conditions (intent to treat analysis) showed vaccine efficacy to be 61.2%3 types of dengue virus out of four (61.2% against dengue virus type 1, 81.9% against type 3 and 90% against type 4. One4). Thorough investigations have been launched to interpret this lack of theefficacy against




dengue virus types (serotype 2) eludedTable of Contents

serotype 2 in the vaccine. Analyses are ongoing to understand the lackspecific epidemiological context of protection for serotype 2. PhaseThailand. Furthermore, large scale phase III efficacy studies with 31,000 volunteers are ongoing in several Latin American and South EastSoutheast Asian countries. These studies will generate important additional data in a broader population and in a variety of epidemiological settings to demonstrate vaccine efficacy against the four circulating dengue virus serotypes. Results are expected in the second half of2014. Transmission and vaccination models have already demonstrated the significant impact vaccination with a dengue vaccine having the efficacy levels observed in the Phase IIb study could have on morbidity.

        TuberculosisC.diff Toxoid — Statens Serum InstituteClostridium difficile is a major public health concern in North America and Europe. In hospitals, it is the leading cause of Denmark (SSI)infectious diarrhea in adults, particularly the elderly. The epidemiology ofClostridium difficile associated disease has grantedbeen increasing at a worrying rate since 2003, driven primarily by the emergence of a treatment-resistant, highly virulent strain: CD027. There is currently no vaccine available and our C.diff vaccine is the only candidate in Phase III. C.diff is a toxoid-based vaccine. Toxoids have been used as the basis of a number of highly successful licensed vaccines. Sanofi Pasteur received a positive response from the FDA's Center for Biologics Evaluation & Research (CBER) on the Fast Track Development Program submission in 2010. A multinational, large scale, Phase III study, named Cdiffense™, began in August 2013. This trial is focused on evaluating the vaccine's efficacy in preventing the first episode ofClostridium difficile infection in at-risk individuals, including adults with imminent hospitalization or current or impending residence in a long-term care or rehabilitation facility.

Rotavirus — Rotavirus is the world's leading cause of severe, dehydrating diarrhea in children under age five. Shantha has a non-exclusive license to its technology with regard tofor rotavirus strains from the use of certain fusion proteins in the development ofNIH and is developing a tuberculosislive-attenuated human-bovine reassortant vaccine. The license from SSI includes access toexcludes Europe, Canada, the Intercell IC31® adjuvant.U.S., China and Brazil. The Shantha rotavirus vaccine candidate vaccine is made up of recombinant protein units.completed Phase II in 2013. Results from the 2008 Phase I trial found thatI/II dose ranging study demonstrated the H4/IC31 candidate was safe when administered to healthy adults living in a region of high endemic tuberculosis. Rapidsafety and poly-functional antigen-specific T cell responses were induced following a single doseimmunogenicity of the investigational vaccine. A secondvaccine candidate, and one dose has been selected for Phase I trial was initiatedIII studies starting in Switzerland in December 2010. A Phase I/II study will be initiated in the Republic of South Africa in infants primed with BCG.2014.

        HIV — A follow-up study to the Phasephase III clinical trial in Thailand provided new clues, in 2011, about the types of immune responses that may have played a role in the protection seen in 2009 with our ALVAC®-HIV vaccine. In 2011, Sanofi Pasteur entered into a public-private partnership with Novartis Vaccines, the Bill & Melinda Gates Foundation, the U.S. National Institutes of Health (NIH), the HIV Vaccine Trial Network, and the Military HIV Research Program to substantiate and extend the vector prime/protein subunit boost regimen used in Thailand. Plans are being made to also study the regimen in the Republic of South Africa. This collaboration is expected to further the field of HIV vaccine development by sharing resources and by providing the manufacturing component of a partnership of funding agencies, research organizations, governments, and experts in the field of HIV vaccine development. Sanofi Pasteur is also looking at its NYVAC-HIV vaccine replicating vectors and a flavivirus-based viral vector, Replivax, by participating in an international consortium and under the Collaboration for AIDS Vaccine Discovery (CAVD).

        ACAM-CdiffTuberculosis —Clostridium difficile is Statens Serum Institute of Denmark (SSI) has granted Sanofi Pasteur a major public health concernlicense to its technology with regard to the use of certain fusion proteins in North America and Europe. In hospitals, it is the leading cause of infectious diarrhea in adults, particularly the elderly. The epidemiology ofClostridium difficile associated disease (CDAD) has been increasing at a worrying rate since 2003, driven primarily by the emergencedevelopment of a treatment-resistant, highly virulent strain CD027. Theretuberculosis vaccine. The candidate vaccine is currently no vaccine available and the only vaccine candidate currently in development is ACAM-Cdiff. ACAM-Cdiff is a toxoid-based vaccine. Toxoids have been used as the basismade up of a number of highly successful licensed vaccines. This vaccine candidate has successfully completed Phase I clinical trials with more than 200 participants in which safety and immunogenicity were evaluated. Sanofi Pasteur received a positive response from the United States FDA's Center for Biologics Evaluation & Research (CBER) on the Fast Track Development Program submission in 2010. In November 2010, ourClostridium difficile vaccine started Phase II of clinical study in the U.S. This trial is focused on evaluating prevention of the first episode ofClostridium difficile infection (CDI) in at-risk individuals, which includes adults with imminent hospitalization or current or impending residence in a long-term care or rehabilitation facility.recombinant protein units. Results from the first stage of this study showed2008 phase I trial found that the candidate vaccine was safe and immunogenic and provided important information for dose selection. Phase when administered to healthy adults living in a region of high endemic tuberculosis. A phase I/II study results are under review. A multinational Phase III trial is planned to startwas initiated in the third quarter of 2013.July, 2013, in South Africa in infants.

        Pseudomonas aeruginosa — In February 2010, Sanofi Pasteur entered into an agreement with KaloBios Pharmaceuticals, a U.S.-based, privately held biotech company, for the development of a Humaneered™Humaneered® antibody fragment to both treat and preventPseudomonas aeruginosa (Pa) infections. Most seriousPa infections occur in hospitalized and critically or chronically ill patients — primarily affecting the respiratory system in susceptible individuals — and are a serious clinical problem due to their resistance to antibiotics. The two primary target indications for the antibody are prevention ofPa associated pneumonia in mechanically ventilated patients in hospitals, and prevention of relapses and potential improvement of treatment outcomes in patients with an ongoingPa infection. Under the terms of the agreement,patients. Sanofi Pasteur acquired worldwide rights for all disease indications related toPa infections except cystic fibrosis and bronchiectasis, which Sanofi Pasteur has the option to obtain at a later date. KaloBios has already completed Phasephase I clinical trials — one in healthy volunteers and one in cystic fibrosis patients — and a small proof of concept Phasephase II clinical trial in mechanically ventilated patients using anE. coli-derivedtrial. Sanofi Pasteur is developing a new formulation of antibody fragment. Afragments. Completion of the Phase I study in healthy adult volunteers is expected in 2014.

Herpes Simplex Virus — Herpes simplex virus 2 is a member of the herpes virus family and, as such, establishes life-long infections, with latent virus established in neural ganglia. Although antivirals currently exist to treat infections, no vaccine exists, greatly limiting options in disease management. The vaccine candidate is a live, attenuated virus and is being assessed as a therapeutic and, possibly, prophylactic vaccine to reduce recurrence and transmission. An NIH-sponsored phase I trial was initiated in October 2013.

B.5.4 R&D expenditures for late stage development

        Expenditures on research and development amounted to €4,770 million in 2013, comprising €4,087 million in the Pharmaceuticals segment, €518 million in Human Vaccines and €165 million in Animal Health. Research and development expenditures were the equivalent of about 14.5% of net sales in 2013, compared to about 14.1% in 2012, 14.4% in 2011 and 14.1% in 2010. The stability in R&D expenditure as a percentage of sales over the past three years is attributable to active management of the portfolio and close cost control, and has been initiatedachieved




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despite a greater proportion of products being in Decemberlate stage development. Preclinical research in the pharmaceutical segment amounted to €951 million in 2013 compared to €1,037 million in 2012, €1,113 million in 2011 and €1,037 million in 2010. Of the remaining €3,136 million relating to clinical development in the Pharmaceuticals segment (€3,181 million in 2012, €2,989 million in 2011 and €2,848 million in 2010), the largest portion was generated by Phase III or post-marketing studies, reflecting the cost of monitoring large scale clinical trials.

        For each of our current late stage (Phase III) compounds in the Pharmaceuticals segment, we set out below the date at which this compound entered into Phase III development, information concerning any compound patent in the principal markets for innovative pharmaceutical products (the United States, European Union and Japan) as well as comments regarding significant future milestones that are reasonably determinable at this date. Because the timing of such milestones typically depends on a number of factors outside of our control (such as the time to validate study protocols and recruit subjects, the speed with which endpoints are realized, as well as the substantial time taken by regulatory review) it is frequently not possible to provide such estimates, and any such estimates as are given should be understood to be indicative only. See also "Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business".

Phase III

Entry into Phase III(1)

Compound Patent Term(2)

Comments

(month/year)

U.S.

E.U.

Japan

Lyxumia®               (lixisenatide)(3)(4) (AVE0010)

May 2008(5)

2020

2020

2020

Dossier approved in Europe in February 2013 submitted and withdrawn in the U.S. in December 2013. Complementary Phase III study to be added to the U.S. dossier before re-submission (expected in 2015)

Lixilan®

January 2014

2020

2020

2020

Phase III program ongoing

Alirocumab (SAR236553) (REGN727)

July 2012

2029

2029

2029

Phase III program ongoing in hypercholesterolemia

Lemtrada™(4) (alemtuzumab) (GZ402673)

September 2007

2015 Regulatory exclusivity: N/A

expired

expired

Dossier approved in Europe in September 2013 for the treatment of relapsing forms of Multiple Sclerosis. In the U.S. Complete Response Letter received from the FDA in December 2013. Sanofi is preparing its appeal.

U300

December 2011

2014 Protection extended to 2015, by pediatric extension.

2014 Protection extended to 2015, by pediatric extension.

2014

Phase III program ongoing; submission expected in the second quarter of 2014

Cerdelga™ (eliglustat) (GZ385600)

September 2009

2022

2022

2022

Dossier submitted in U.S. and Europe in September 2013 for the treatment of Gaucher Disease type 1

sarilumab (SAR153191)

August 2011

2028

2027

2027

Phase III program in the treatment of Rheumatoid Arthritis ongoing

(1)

First entry into Phase III in any indication.

(2)

Subject to any future supplementary protection certificates and patent term extensions.

(3)

Application pending in some countries.

(4)

See also table in section "— Patents, Intellectual Property and Other Rights" for more information.

(5)

Development of lixisenatide as stand alone entity. A program evaluating the benefit of a combination of lixisenatide / Lantus® is in development.




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        With respect to the compound patent information set out above, investors should bear the following additional factors in mind.

•

The listed compound patent expiration dates do not reflect possible extensions of up to five years available in the United States, the European Union, and Japan for pharmaceutical products. See "— Patents, Intellectual Property and Other Rights — Patent Protection" for a description of supplementary protection certificates and patent term extensions.



•

Depending on the circumstances surrounding any final regulatory approval of the compound, there may be other listed patents or patent applications pending that could have relevance to the product as finally approved; the relevance of any such application would depend upon the claims that ultimately may be granted and the nature of the final regulatory approval of the product.



•

Regulatory exclusivity tied to the protection of clinical data is complementary to patent protection, and in many cases may provide more efficacious or longer lasting marketing exclusivity than a compound's patent estate. See "— Patents, Intellectual Property and Other Rights — Regulatory Exclusivity" for additional information. In the United States the data protection generally runs five years from first marketing approval of a new chemical entity extended to seven years for an orphan drug indication and twelve years from first marketing approval of a biological product (e.g., aflibercept). In the European Union and Japan the corresponding data protection periods are generally ten years and eight years, respectively.

B.6. Markets

        A breakdown of revenues by business segment and by geographic region for 2013, 2012, and 2011 can be found at Note D.35. to our consolidated financial statements included at Item 18 of this annual report.

        The following market shares and ranking information is based on sales data from IMS Health MIDAS, retail and hospital for full year 2013, in constant euros (unless otherwise indicated). For more information on market shares and ranking, see "Presentation of Financial and Other Information" at the beginning of this document.

        Genzyme's sales are included from the acquisition date (April 1, 2011).

B.6.1. Marketing and Distribution

        Sanofi has a commercial presence in approximately 100 countries, and our products are available in more than 170. Our main markets in terms of net sales are, respectively:

        Emerging Markets (see definition in "Item 4. Information on the Company — Introduction" above) represent 33.3% of our 2013 net sales, the largest contribution to net sales of any region. We are the leading healthcare company in emerging markets. In 2013, sales in emerging markets grew by 4.4% at constant exchange rates. Asia and Middle East recorded double-digit sales growth in 2013. Sales in BRIC (Brazil, Russia, India and China) countries account for 34% of Emerging Markets sales. Sales in China and Russia were up 18.6% and 12.0% respectively. In 2013, sales in Africa and the Middle East each exceeded €1 billion.

        The United States represents 31.7% of our net sales; we rank twelfth with a market share of 3.3% (3.7% in 2012). Sales in the U.S. were down 0.7% at constant exchange rates in 2013.

        Western Europe represents 23.8% of our net sales; we are the leading pharmaceutical company in France where our market share is 8.7% (9.3% in 2012), and we rank fourth in Germany with a 4.5% market share. In 2013, sales in Western Europe were down 5.6% at constant exchange rates.

        Other countries represent 11.3% of our net sales; our market share in Japan is 3.3% (3.5% in 2012). Full-year 2013 sales in Japan were down 4.3% at constant exchange rates.

        A breakdown of our sales by geographic market is presented in "Item 5. Operating and Financial Review and Prospects — Results of Operations — Year Ended December 31, 2013 Compared with Year Ended December 31, 2012."

        Although specific distribution patterns vary by country, we sell prescription drugs primarily to wholesale drug distributors, independent and chain retail drug outlets, hospitals, clinics, managed care organizations and government institutions. Rare disease, renal, and biosurgery products are also sold directly to physicians. With the




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exception of CHC products, these drugs are ordinarily dispensed to patients by pharmacies upon presentation of a doctor's prescription.

        We use a selection of channels to disseminate information about and promote our products among healthcare professionals and patients, ensuring that the channels not only cover our latest therapeutic advances but also our mature products, as they provide the foundation for satisfying major therapeutic needs. We regularly advertise in medical journals and exhibit at major medical congresses. In some countries, products are also marketed directly to patients by way of television, radio, newspapers and magazines, and we sometimes use new media channels (such as the internet) to market our products. National education and prevention campaigns can be used to improve patients' knowledge of conditions.

        Our medical representatives, who work closely with healthcare professionals, use their expertise to promote and provide information on our drugs. They represent our values on a day-to-day basis and are required to adhere to a code of ethics. As of December 31, 2013, we had a global sales force of 33,509 representatives: 8,281 in Europe (including 3,691 in Eastern Europe), 4,771 in the United States, and 20,457 in the rest of the world.

        Although we market most of our products through our own sales forces, we have entered into and continue to form partnerships to co-promote/co-market certain products in specific geographic areas. Our major alliances are detailed at "Item 5. Operating and Financial Review and Prospects — Financial Presentation of Alliances." See also "Item 3. Key Information — D. Risk Factors — We rely on third parties for the marketing of some of our products."

        Our vaccines are sold and distributed through multiple channels, including physicians, pharmacies, hospitals, private companies and distributors in the private sector, and governmental entities and non-governmental organizations in the public and international donor markets, respectively.

        Our Animal Health products are sold and distributed through various channels, depending on each country's legislation for veterinary products. Merial takes into account each country's specific characteristics and sells either to veterinaries, chemists, or via wholesalers. In the case of epizootics, Merial delivers directly to governments.

B.6.2. Competition

        The pharmaceutical industry continues to experience significant changes in its competitive environment. Innovative drugs, a broad product range, and a presence in all geographical markets are key factors in maintaining a strong competitive position.

        There are four types of competition in the prescription pharmaceutical market:

•

competition between pharmaceutical companies to research and develop new patented products or new therapeutic indications;



•

competition between different patented pharmaceutical products marketed for the same therapeutic indication;



•

competition between original and generic products or between original biological products and biosimilars, at the end of regulatory exclusivity or patent protection; and



•

competition between generic or biosimilar products.

        We compete with other pharmaceutical companies in all major markets to develop innovative new products. We may develop new technologies and new patented products wholly in-house, but we also enter into collaborative R&D agreements in order to access new technologies. See Note D.21. to our consolidated financial statements included at Item 18 of this annual report.

        Our prescription drugs compete in all major markets against patented drugs from major pharmaceutical companies such as: Novo Nordisk and Merck in diabetes; Eli Lilly in diabetes and oncology; Bristol-Myers Squibb in oncology; GlaxoSmithKline in thrombosis and oncology; Novartis in diabetes, multiple sclerosis, thrombosis and oncology; Shire in rare diseases and renal; Pfizer in rare diseases and oncology; Biogen Idec, Teva and Merck Serono in multiple sclerosis; Bayer in multiple sclerosis and thrombosis prevention; Roche in oncology; Johnson & Johnson in oncology and thrombosis prevention; AstraZeneca in cardiovascular diseases and oncology; Boehringer-Ingelheim in diabetes and thrombosis; and Fresenius Medical Care in renal diseases.

        Our CHC business competes with multinational corporations such as Johnson & Johnson, Bayer, Pfizer, Novartis, and GlaxoSmithKline as well as local players, especially in emerging markets.




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        Our generics business competes with multinational corporations such as Teva, Sandoz (a division of Novartis), Mylan and Actavis and local players, especially in emerging markets.

        In our Human Vaccines business, we compete primarily with multinational players backed by large healthcare groups, including Merck (outside Europe), GlaxoSmithKline, Pfizer (Wyeth), Novartis and Johnson & Johnson (Crucell). In specific market segments, Sanofi Pasteur competes with mid-size international players (such as CSL of Australia in the influenza market for the Southern Hemisphere). Sanofi Pasteur also competes with an increasing number of manufacturers entrenched in densely populated and economically emerging regions that are leveraging their cost/volume advantage and raising their level of technical capability and quality standards to compete with more sophisticated antigens in their domestic markets and increasingly in international donor markets. Multinational players are increasingly seeking alliances with manufacturers from emerging economies to secure positions in their markets of origin. Finally, there are emerging vaccine manufacturers in middle income countries, where privately owned companies in various industry sectors are investing in me-too vaccine production. Overall, there is increasingly intense competition for existing vaccines across the middle to low income segments.

        In our Animal Health business, we compete primarily with international companies like Zoetis, Merck and Elanco in both production and companion animals; with Boehringer Ingelheim in production animals; with Boehringer Ingelheim mainly in the vaccines segment; with Novartis and Bayer for pets, particularly for parasiticides; and with Virbac, Ceva and Vetoquinol, French companies with global presence, for pharmaceuticals and/or vaccines.

        We also face competition from generic drugs that enter the market when our patent protection or regulatory exclusivity expires, or when we lose a patent infringement lawsuit (see "— Patents, Intellectual Property and Other Rights" above). Similarly, when a competing patented drug from another pharmaceutical company faces generic competition, these generic products can also affect the competitive environment of our own patented product. See "Item 3. Key Information — D. Risk factors — Risks related to our business".

        Competition from producers of generics has increased sharply in response to healthcare cost containment measures and to the increased number of products for which patents or regulatory exclusivity have expired.

        Generics manufacturers who have received all necessary regulatory approvals for a product may decide to launch a generic version before the patent expiry date. Such launch may occur notwithstanding the fact that the owner of the original product may already have commenced patent infringement litigation against the generics manufacturer. Such launches are said to be "at risk" for the promoter of the generic product because it may be required to pay damages to the owner of the original product in the context of patent infringement litigation; however, these launches may also significantly impair the profitability of the pharmaceutical company whose product is challenged.

        Drug manufacturers also face competition through parallel trading, also known as reimportation. This takes place when drugs sold abroad under the same brand name as in a domestic market are imported into that domestic market by parallel traders, who may repackage or resize the original product or sell it through alternative channels such as mail order or the Internet. This situation is of particular relevance to the European Union, where these practices have been encouraged by the current regulatory framework. Parallel traders take advantage of the price differentials between markets arising from factors including sales costs, market conditions (such as intermediate trading stages), tax rates, or national regulation of prices.

        Finally, pharmaceutical companies face illegal competition from counterfeit drugs. The WHO estimates that counterfeit products account for 10% of the market worldwide, rising up to 30% in some countries. However, in markets where powerful regulatory controls are in place, counterfeit drugs are estimated to represent less than 1% of market value.

B.6.3. Regulatory Framework

B.6.3.1 Overview

        The pharmaceutical and health-related biotechnology sectors are highly regulated. National and supranational health authorities administer a vast array of legal and regulatory requirements that dictate pre-approval testing and quality standards to maximize the safety and efficacy of a new medical product. These authorities also regulate product labeling, manufacturing, importation/exportation and marketing, as well as mandatory post-approval commitments that may include pediatric development.




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        The submission of an application to a regulatory authority does not guarantee that a license to market will be granted. Furthermore, each regulatory authority may impose its own requirements during the course of the product development and application review. It may refuse to grant approval and require additional data before granting approval, even though the same product has already been approved in other countries. Regulatory authorities also have the authority to request product recalls, product withdrawals and penalties for violations of regulations based on data that are made available to them.

        Product approval can vary from six months or less to several years from the date of application depending upon the country. Factors such as the quality of data, the degree of control exercised by the regulatory authority, the review procedures, the nature of the product and the condition to be treated, play a major role in the length of time a product is under review.

        In recent years, efforts have been made by members of the ICH (International Conference on Harmonization) on harmonization of product development and regulatory submission requirements. The ICH consists of the regulatory agencies of the three founding members (the European Union, Japan, and the United States), plus Health Canada and Swissmedic as observers. An example of these efforts is the Common Technical Document (CTD), which is a format used for product applications in ICH, with only local or regional adaptation.

        In 2013, the ICH Steering Committee continued its discussions on its reform on increased engagement and implementation of guidelines globally, increased transparency, and reviewed future ICH topics. Organizational reform measures are planned to foster international cooperation.

        Emerging markets countries are starting to participate in ICH standardization discussions, and will be more involved in the near future. ICH has expanded beyond its initial members and observers with the 1999 formation of the Global Cooperation Group (GCG), which was formed as a subcommittee of the ICH Steering Committee in response to a growing interest in ICH Guidelines beyond the three ICH regions. Recognising the need to engage actively with other harmonisation initiatives, representatives from five Regional Harmonisation's Initiatives (RHIs) were invited to participate in GCG discussions: APEC, ASEAN, EAC, GCC, PANDRH and SADC. A further expansion of the GCG was agreed in 2007 and regulators were invited from countries with a history of ICH Guideline implementation and/or where major production and clinical research are carried out (Australia, Brazil, China, Chinese hamster ovary cell-derived antibody fragment.Taipei, India, Czech Republic, Russia and Singapore).

        International collaboration between regulatory authorities continues to develop with the implementation of confidentiality arrangements and memoranda of understanding between both ICH and non-ICH regulatory authorities. Examples include work-sharing on Good Manufacturing Practices (GMP) and Good Clinical Practices (GCP) inspections and regular interactions in the form of "clusters" (i.e. pediatrics, oncology, advanced therapy medicinal products, vaccines, pharmacogenomics, orphans, biosimilars, and blood products) between the United States and the European Union.

        In addition to the joint efforts listed above, Free Trade Agreements (FTAs) have proved to be one of the best ways to open up foreign markets to exporters and to allow for discussions on harmonization topics for regulatory authorities. Some agreements, such as the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), are international in nature, while others are between specific countries.

        The requirement of many countries, including Japan and several member states of the European Union, to negotiate selling prices or reimbursement rates for pharmaceutical products with government regulators significantly extends the time for market entry beyond the initial marketing approval. While marketing approvals for new pharmaceutical products in the European Union have been largely centralized with the EMA, pricing and reimbursement remain a matter of national competence.

In the European Union, there are three main procedures by which to apply for marketing authorization:

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The centralized procedure is mandatory for drugs derived from biotechnologies, new active substances designed for human use to treat HIV, viral diseases, cancers, neurodegenerative diseases, diabetes and auto-immune diseases, orphan drugs and innovative products for veterinary use. When an application is submitted to the EMA, the scientific evaluation of the application is carried out by the Committee for Medicinal Products for Human Use (CHMP) and a scientific opinion is prepared. This opinion is sent to the European Commission which adopts the final decision and grants an E.U. marketing authorization. Such a marketing authorization is valid throughout the E.U. and the drug may be marketed within all E.U. member states.



•

If a company is seeking a national marketing authorization in more than one member state, the mutual recognition or decentralized procedure is available to facilitate the granting of harmonized national




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authorizations across member states. Both the decentralized and the mutual recognition procedures are based on the recognition by national competent authorities of a first assessment performed by the regulatory authority of one member state.

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National authorizations are still possible, but are only for products intended for commercialization in a single E.U. member state or for line extensions to existing national product licenses.

        Generic products are subject to the same marketing authorization procedures. A generic product must contain the same active medicinal substance as a reference product approved in the E.U. Generic applications are abridged: generic manufacturers only need to submit quality data and demonstrate that the generic drug is "bioequivalent" to the originator product (i.e., works in the same way in the patient's body), but do not need to submit safety or efficacy data since regulatory authorities can refer to the reference product's dossier. Generic product applications can be filed and approved in the European Union only after the originator product eight-year data exclusivity period has expired. Further, generic manufacturers can only market their generic products after a 10- or 11-year period has elapsed from the date of approval of the originator product.

        Another relevant aspect in the E.U. regulatory framework is the "sunset clause": a provision leading to the cessation of the validity of any marketing authorization if it is not followed by marketing within three years or, if marketing is interrupted for a period of three consecutive years.

        Post-authorization safety monitoring of pharmaceutical products is carefully regulated in Europe. The E.U. pharmaceutical legislation for medicinal products describes the respective obligations of the marketing authorization holder and of the regulatory authorities to set up a system for pharmacovigilance in order to collect, collate and evaluate information about suspected adverse reactions.

        It is possible for the regulatory authorities to withdraw products from the market for safety reasons. Responsibilities for pharmacovigilance rest with the regulatory authorities of all the E.U. member states in which the marketing authorizations are held. In accordance with applicable legislation, each E.U. member state has a pharmacovigilance system for the collection and evaluation of information relevant to the benefit to risk balance of medicinal products. The regulatory authority regularly monitors the safety profile of the products available in its territory, takes appropriate action where necessary, and monitors the compliance of marketing authorization holders (MAHs) with their pharmacovigilance obligations. All relevant information is shared between the regulatory authorities and the MAH, in order to allow all parties involved in pharmacovigilance activities to fulfill their obligations and responsibilities. In 2010, new legislation aimed at improving patient protection by strengthening the E.U. system for the safety monitoring of medicines was approved. In July 2012, pharmacovigilance legislation came into force, with significant impacts on the regulatory environment. Changes include the creation of a new scientific advisory committee, the Pharmacovigilance Risk Assessment Committee (PRAC) at EMA level, with a key role in the assessment of all aspects of the risk management of the use of medicinal products for human use approved in the European Economic Area (EEA). This includes measures relating to the detection, assessment, minimisation and communication of the risk of adverse reactions, having due regard to the therapeutic effect of the medicinal product. This committee is also responsible for the design and evaluation of post-authorisation safety studies (PASS) and pharmacovigilance audits.

        Since its introduction in the second quarter of 2012 the PRAC has initiated reviews of marketed products (by class or onad hoc basis) through various procedures. 38 Sanofi products underwent PRAC review from July 2012 to October 2013, generating 10 labeling variations (up to November 2013; two additional variations are ongoing). In only one case for Sanofi (Myolastan®) did the review lead to the product being withdrawn from the E.U. market.

        The pharmacovigilance legislation was amended in October 2012 by Regulation (EU) No 1027/2012 (applicable since June 5, 2013 to centrally authorized medicines) and Directive 2012/26/EU (applicable since October 28, 2013 to nationally authorized medicines). The amendments aim to further strengthen of the protection of patient health by promoting prompt and appropriate regulatory action on European medicines. The amendments include major changes to notification requirements: MAHs of human medicines have to notify E.U. regulators of any action to withdraw a product from the market, together with the reason for this action.These amendments also include other aspects: clarification of the scope and strengthened safety-referral procedures in the E.U.; improved coordination and facilitation of swift action and extension of assessment, for the benefit of public health; the scope of translation exemptions to include cases of severe issues of availability, including shortages of medicines, in order to facilitate the availability of medicines across the E.U.; and extension of the mandatory scope of the medicines subject to additional monitoring.




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        The Pharmacovigilance legislation also strengthens the legal basis for regulators to require post-authorization safety and efficacy studies throughout the life cycle of a medicinal product, with regulatory supervision of protocols and results. Such studies are aimed at collecting data to enable the safety or efficacy of medicinal products to be assessed in everyday medical practice. The granting of marketing authorization will be conditional on such studies being performed. Consequently, the pharmaceutical industry will have to build the need for post-authorization safety studies (PASS) and post-authorization efficacy studies (PAES) into development and life cycle management plans. Sanofi has put in place robust processes to ensure that required PASS and PAES can be properly implemented as required, either in the frame of a RMP (Risk Management Plan) or following a Health Authority request.

        The Pharmacovigilance legislation also introduces a new periodic safety report to be prepared by the pharmaceutical companies. This is no longer limited to safety data, but instead presents a critical analysis of the risk-benefit balance of the medicinal product, taking into account new or emerging information in the context of cumulative information on risks and benefits. Sanofi has fully implemented the new report since January 2013.

        In theUnited States, applications for approval are submitted for review to the FDA, which has broad regulatory powers over all pharmaceutical and biological products that are intended for sale and marketing in the U.S. To commercialize a product in the U.S., a New Drug Application (NDA) under the Food, Drug and Cosmetic (FD&C) Act or Biological License Application (BLA) under the Public Health Service (PHS) Act is submitted to the FDA with data for filing and pre-market review. Specifically, the FDA must decide whether the product is safe and effective for its proposed use, if the benefits of the drug's use outweigh its risks, whether the drug's labeling is adequate, and if the manufacturing of the drug and the controls used for maintaining quality are adequate to preserve the drug's identity, strength, quality and purity. Based upon this review, the FDA can require post-approval commitments and requirements. Approval for a new indication of a previously approved product requires the submission of a supplemental NDA (sNDA) for a drug or supplemental BLA (sBLA) for a biological product.

        The FD&C Act provides another abbreviated option for NDA approved products, called the 505(b)(2) pathway. This pre-market application may rely on the FDA finding that the reference product has been found to be safe and effective by the FDA based upon the innovator's preclinical and clinical data.

        Sponsors wishing to market a generic drug can file an Abbreviated NDA (ANDA) under 505(j) of the FD&C Act. These applications are "abbreviated" because they are generally not required to include data to establish safety and effectiveness, but need only demonstrate that their product is bioequivalent (i.e., performs in humans in the same manner as the originator's product). Consequently, the length of time and cost required for development of generics can be considerably less than for the originator's drug. With effect from October 1, 2012, under the Food and Drug Administration Safety and Innovation Act (FDASIA) and the Generic Drug User Fee Amendments (GDUFA), an application for a generic drug product requires a user fee payment. The current review time for an ANDA exceeds 30 months. The ANDA pathway in the United States can only be used for generics of drugs approved under the FD&C Act.

        The Patient Protection and Affordable Care Act, signed into law by President Obama on March 23, 2010, amends the Public Health Service Act to create an abbreviated licensure pathway (351k) for biological products that are demonstrated to be "biosimilar" to or "interchangeable" with an FDA-licensed biological product. As of January 1, 2014, no sponsor has submitted a 351k application to the FDA for review.

        The FDASIA, signed into law on July 9, 2012, expands the FDA's authority and strengthens its ability to safeguard and advance public health by giving the FDA the authority to collect user fees from industry to fund reviews of innovator drugs, medical devices, generic drugs and biosimilar biological products; promoting innovation to speed patient access to safe and effective products; increasing stakeholder involvement in FDA processes; and enhancing the safety of the drug supply chain. The FDA has established a three-year implementation plan, which is planned to be updated on a monthly basis.

In Japan, regulatory authorities can require local development studies, though they also accept multi-national studies. They can also request bridging studies to verify that foreign clinical data are applicable to Japanese patients and require data to determine the appropriateness of the dosages for Japanese patients. These additional procedures have created a significant delay in the registration of some innovative products in Japan compared to the European Union and the United States. In order to solve this drug-lag problem, the MHLW (Ministry of Health, Labor and Welfare) introduced the new NHI (National Health Insurance) pricing system on a trial basis in April 2010. Reductions in NHI prices of new drugs every two years are compensated by a "Premium" for a maximum of 15 years. A "Premium" is granted in exchange for the development of off-label indications with high medical needs. The pharmaceutical companies concerned are required to conduct submission based on available documentation within six months or start a clinical trial for registration within one year after the official development request of the off label




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indications. For unproven drugs with high medical needs, clinical trials in Japanese patients are generally required. Otherwise, NHI prices of all products of the company would be reduced dramatically.

        Based on the reform of the NHI price system finalized on December 25, 2013, the "Premium" classification will be restricted to new products from companies which conduct R&D on "pharmaceuticals truly conducive to the improvement of healthcare quality," namely (a) pediatric/orphan drugs, (b) drugs to treat diseases which cannot be adequately controlled with existing drugs. The "Premium" policy will continue its trial stage.

        The PMDA plans to achieve its targets for a total review time of 12 months for products with standard review status and 9 months for products with priority review status for 80% (currently 50%) of all applications by the end of 2018.

        The PMDA also plans to eliminate the "review lag" between the application filing and approval of drugs and medical devices compared to the FDA by the end of 2020.

        The revised Pharmaceutical Affairs Law was enacted on November 27, 2013. There are three major objectives. The first objective is to strengthen safety measures for drugs and medical devices. In particular, MAHs must prepare a package insert based on the latest knowledge and notify the J-MHLW before placing products on the market or when revisions are made. The second objective is to accelerate the development of medical devices. The third-party accreditation system will be expanded to specially controlled generic medical devices (i.e. Class III devices). Consequently, the PMDA can accelerate the review of innovative medical devices. The third objective is accelerated commercialization of regenerative medicinal products.

        The term "Regenerative Medicinal Products" used in the law includes cellular and tissue-based products and gene therapies. This concept is similar to "Advanced Therapy Medicinal Products (ATMPs)" in the E.U. This law enables conditional regulatory approval based on confirmation of probable efficacy and safety in small-scale clinical trials, followed up by comprehensive studies to confirm safety and efficacy in a wider population that would then lead to a regular (full) approval.

        For new drugs and biosimilar products with approval applications submitted on or after April 2013 Japan will begin implementing an RMP, similar to the E.U. Pharmacogivilance system.

        For generic products, the data necessary for filing are similar to E.U. and U.S. requirements. Pharmaceutical companies only need to submit quality data, and data demonstrating bioequivalence to the originator product, unless the drug is administered intravenously.

 — RotavirusB.6.3.2 Biosimilars

        Products can be referred to as "biologics" when they are derived from plant or animal tissues, including blood products or products manufactured within living cells (e.g., antibodies). Most biologics are complex molecules or mixtures of molecules which are difficult to characterize and require physico-chemical-biological testing, and an understanding of and control over the manufacturing process.

        The concept of "generics" is not scientifically appropriate for biologics due to their high level of complexity and therefore the concept of "biosimilar" products is more appropriate. A full comparison of the purity, safety and efficacy of the biosimilar product against the reference biological product should be undertaken, including assessment of physical/chemical, biological, non-clinical and clinical similarity.

        In the European Union, a regulatory framework for developing and evaluating biosimilar products has been in place since November 2005. The CHMP has issued several product/disease specific guidelines for biosimilar products including guidance on preclinical and clinical development of biosimilars of low molecular weight heparins (LMWH). However, starting in 2011 and continuing in 2013, the EMA initiated a revision of the majority of the existing biosimilar guidelines (general over-arching guidelines, quality, non-clinical and clinical guidelines, comments on which had to be submitted to the EMA by end of 2013, as well as immunogenicity and product-related guidelines for recombinant insulin and LMWH).

        The major update in the revised over-arching biosimilar guideline is the leading causeopportunity to use a version of severe, dehydrating diarrheathe reference product sourced outside the EEA provided bridging data are generated by the applicant. This important change will help facilitate the global development of biosimilars and will come into force via the revision of the over-arching biosimilar guideline, expected in children aged under five globally. Estimates suggest2014.




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        While the EMA has adopted a balanced approach for all biosimilars, allowing evaluation on a case-by-case basis in accordance with relevant biosimilar guidelines, the EMA has expressed some willingness to simplify the pathway in very specific circumstances. For a very simple biological fully characterized on the quality level, a biosimilar could be authorized based on a bioequivalence study combined only with an extensive quality package. With respect to vaccines, the CHMP position is that rotavirus causes over 25 million outpatient visits, over 2 million hospitalizationsit is at present unlikely that these products may be characterized at the molecular level, and over 500,000 deaths per year. The burdenthat each vaccine product must be evaluated on a case-by-case basis.

        In 2013, the European Commission granted marketing authorisations for the first monoclonal-antibody biosimilar. This approval was considered a landmark decision by the EMA, proving that the biosimilar concept can be successfully applied to complex molecules such as monoclonal antibodies and that extrapolation of severe rotavirus illness and deaths falls heavily upon childrenmultiple indications is possible.

        Since February 2012, the FDA has published for consultation four draft scientific guidance documents for biosimilar development. All four of these guidance documents remain in draft format.

        At the December 2013 FDA-CMS meeting, the FDA acknowledged that the agency has had the equivalent of pre-NDA "meetings" in the poorerbiosimilar space.

        In Japan, guidelines defining the regulatory approval pathway for follow-on biologics were finalized in March 2009. These guidelines set out the requirements on preclinical and clinical CMC (Chemistry, Manufacturing and Control) data to be considered for the development of the new application category of biosimilars. Unlike the CHMP guidelines, the main scope of the Japanese guidelines includes recombinant proteins and polypeptides, but not polysaccharides such as LMWH.

        Many regulatory authorities worldwide have in place, or are in the process of developing, a regulatory framework for biosimilar development and approval. It should be noted that although many emerging markets are basing their regulations and guidance on WHO or EMA documentation, some markets have approved biosimilars under an existing regulatory framework that is not specific to biosimilars.

B.6.3.3 Medical Devices

        Currently in the E.U., there is no pre-market authorisation by a regulatory authority. Instead there is a Conformity Assessment Procedure (for medium and high risk devices), involving an independent third party "Notified Body" (NB). Once certified, medical devices bear the CE-mark, allowing them to circulate freely in the EU/EFTA countries and Turkey. Medical Devices are currently regulated by three core Directives.

        On September 26, 2012 the European Commission adopted proposals to introduce two Regulations that will overhaul and tighten the current E.U. rules governing medical devices (EU Medical Device Directive 93/42/EC amended in 2007, 2007/47/EC).

        The proposed texts are currently being discussed in the European Parliament and in the Council.

        The position of the European Parliament Committee on the Environment, Public Health and Food Safety (ENVI) passed a vote on September 25, 2013, and ratified by the full European Parliament on October 22, 2013. With these votes, members of the European Parliament endorsed essential measures that will strengthen patient safety and which are supported by the industry, such as improving the competence and control of Notified Bodies, introducing unannounced site visits by Notified Bodies, increasing the transparency and traceability of medical devices, introducing a stricter post-market follow-up, and improved stakeholder engagement. A "scrutiny procedure" would be used at least for high-risk Class III devices (novel technologies or specific public health threats). The recycling of single use medical devices is still under discussion.

        The new revised framework also formally introduces the concept of "companion diagnostic", which is expected to deliver a more accurate definition of the patient population that will benefit from a given product.

B.6.3.4 Generic drugs

        In the E.U., the number of positive opinions by centralized procedure for generics is unchanged year-on-year (16 in 2013). Most of the generics applications for chemical entities use mutual recognition and decentralized procedures, with about 8% of the procedures relating to non-prescription products. Pricing systems for generics remain at national level in the E.U.




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        In the U.S., to help the FDA ensure that participants in the U.S. generic drug system comply with U.S. quality standards and to increase the likelihood that American consumers get timely access to low cost, high quality generic drugs, the FDA and the industry have jointly agreed to a comprehensive user fee program (GDUFA) to supplement traditional appropriated funding, focused on safety, access, and transparency.

        In December 2013 the FDA and EMA announced the launch of a joint initiative to share information on inspections of bioequivalence studies submitted in support of generic drug approvals. This collaborative effort provides a mechanism to conduct joint facility inspections for generic drug applications submitted to both agencies. Taking part in this initiative are the EMA and the E.U. member states France, Germany, Italy, the Netherlands and the United Kingdom

        The NHI price system will be reformed in Japan in fiscal year 2014, including a new special price reduction rule for long-listed drugs. The new rule would reduce the NHI prices of long-listed drugs whose generic replacement rates are less than 20% five years after their first generics join the NHI price list by 2.0% in the first NHI price revision, by 1.75% if the substitution rate is 20% or higher but less than 40%, and by 1.5% if the rate is 40% or higher but less than 60%. The rule would be introduced in April 2014.

        Under the new price system, NHI prices of first generics (currently set at 70%) would be set at 60% of the price of the originator product, while a 50% rule would be applied to oral first generics when more than 10, with the same ingredients, obtain listing.

        In addition, a 10% "precursor premium" would be introduced for new drugs with new mechanisms of action that obtain approval in Japan ahead of the rest of the world if they receive either the premium for innovativeness or the premium for usefulness.

B.6.3.5 OTC drugs

        In the E.U., one product has had a prescription-to-OTC switch approved through Centralized Procedure since May, 2009.

        In the United States, FDA approved two first-in-class prescription-to-OTC switches in 2013, one of which was Sanofi's Nasacort® Allergy 24HR.

        The FDA's Nonprescription Drug Safe Use Regulatory Expansion (NSURE) Initiative was launched to explore regulatory approaches to expanding the nonprescription drug market but the timeline for implementation may be longer than some anticipated.

        In Japan, the J-MHLW drug safety committee meeting held on December 20, 2013 decided on the details of safety evaluations for drugs newly switched from prescription to OTC, following the passage of a bill to revise the Pharmaceutical Affairs Law (PAL). The J-MHLW will give the green light for online sales of such OTC drugs if no safety concerns arise during their three-year safety evaluation period (the safety evaluation period is currently four years). During the three-year evaluation period, drugs that moved from prescription to OTC will have to be categorized as products that require pharmacist consultations when purchasing.

        Under the new plan, the J-MHLW will require marketing authorization holders to submit interim reports upon the completion of their post-marketing surveillance (PMS). Based on these interim reports and other reports on adverse events, the J-MHLW will evaluate serious adverse events two years after the launch of OTC drugs or later.

B.6.3.6 Transparency and public access to documents

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Transparency regarding clinical trials

        Over the last two to three years the pharmaceutical industry has been subject to growing pressure for greater transparency about clinical trials (conduct and results). Regulatory authorities are also being pushed for more openness and transparency, for example by making more comprehensive disclosures about the rationale and basis of regulatory decisions on medicinal products, so as to enhance the credibility of the regulatory process. This is a significant driver of the transparency initiatives undertaken in several countries.

        Pharmaceutical manufacturers have committed to publishing protocols and results of clinical studies performed with more than 80%their products in publicly accessible registries. In addition, both ICH and non-ICH countries often impose mandatory disclosure of rotavirus-related deaths estimatedclinical trials information.




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        From a regulatory perspective, ambitious initiatives have been undertaken by the major regulatory authorities.

        E.U. pharmaceutical legislation for medicinal products requires national regulatory authorities and the EMA to occuractively publish information concerning authorization and supervision of medicinal products. The EMA has introduced a series of initiatives aimed at improving the transparency of its activities, such as improving the format of the European Public Assessment Report and web-published product approvals, withdrawals and rejections. In addition, there is an increased focus on comparative efficacy and effectiveness. The new E.U. pharmacovigilance legislation aims at giving greater transparency, especially with regard to communication of safety issues (e.g. public hearings, specific European web-portals with information on medicinal products). Finally, patients and consumers are increasingly involved in lower income countriesthe work of Asia,the EMA's scientific committees.

        In June 2013, the EMA released a draft policy on publication and in sub-Saharan Africa. Two vaccines (RotaTeq® and Rotarix®) are licensed worldwide, but production of local vaccines is necessaryaccess to achieve wide coverage. Shantha has a non-exclusive license of rotavirus strains fromclinical-trial data.

        In the U.S. NIH, the FDA launched a Transparency Initiative in June 2009. The objective of the initiative was to render the FDA much more transparent and open to the American public by providing the public with useful, user-friendly information about agency activities and decision-making.

        The FDA Transparency Initiative has three phases: Phase I — Improving the understanding of the FDA basics (completed with ongoing updates); Phase II — Improving the FDA's disclosure of information to the public (ongoing); and Phase III — Improving the FDA's transparency to regulated industry (ongoing). Proposals to improve transparency and access to information were released for consultation for both Phase II and Phase III. Some of the less controversial proposals have been implemented; others, such as proactive release of information that the Agency has in its possession, may require revisions to U.S. federal regulations.

        The European Federation of Pharmaceutical Industries and Associations (EFPIA) and the Pharmaceutical Research and Manufacturers of America (PhRMA) have strengthened their long-standing commitment to enhancing public health by endorsing joint "Principles for Responsible Clinical Trial Data Sharing". Under the new commitments, biopharmaceutical companies will dramatically increase the amount of information available to researchers, patients, and members of the public. On January 2, 2014 Sanofi announced its commitment to expanding access to its clinical trial data.

        In Japan, the J-MHLW/PMDA actively publishes information concerning approvals of medicinal products (ethical drugs, non-prescription drugs, and quasi-drugs) and medical devices. For ethical drugs discussed at the J-MHLW's Pharmaceutical Affairs and Food Sanitation Council, the redacted clinical trials data module 1&2 (except for commercial confidential information and personal data) have been made publicly available on the PMDA website.

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Transparency regarding Health Care Professionals

        Regarding transparency regarding Health Care Professionals (HCP), there is developingno common harmonized approach in the E.U. For transparency purpose, there is an increased external scrutiny of interactions between pharmaceutical companies and HCPs at national level with legal provisions or with Healthcare Industry voluntary undertakings (Pharma Code) in some countries (such as United Kingdom, Denmark, France, Portugal or Slovakia).

        The EFPIA released mid-2013 a live-attenuatednew Code on Disclosure of Transfers of Value from Pharmaceutical Companies to HCPs and Healthcare Organizations (HCOs) the "EFPIA HCP/HCO Disclosure Code". The compliance with this new Disclosure Code has become an obligation for EFPIA's memberships, who are required to transpose this Code into their national codes in full by 31 December 2013.

        This new Code includes stricter rules on hospitality and gifts, with the requirement for member associations to include a threshold on hospitality in their national codes and the prohibition of gifts.

B.6.3.7 Other new legislation proposed or pending implementation

Clinical trials regulation:    a proposal for a regulation of the European Parliament and of the Council on clinical trials on medicinal products for human bovine (G1-G4) reassortant vaccine.use, repealing Directive 2001/20/EC, was first released in July 2012.

        On December 20, 2013, the Council of the E.U. endorsed a compromise agreement, reached by the Council, the European Parliament and the European Commission. The license excludes Europe, Canada,move opens the way to the regulation's final approval before the parliamentary elections in May 2014.

        One of the main objectives behind a new proposal for clinical trials regulation by the European Commission was the impact on the competitiveness of the European life sciences industry caused by changes to the conditions of the




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clinical trial approval process. The new legislation was drafted as a more stringent form of regulation instead of a directive in order to reach better harmonization between countries, without interfering with Member States' competences in terms of ethical aspects.

        While the final text has not been released yet, the following major points are known:

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The timeline for approving a clinical trial proposal was set at 60 days without questions (and a maximum of 99 with questions and clock stops). This can be seen as a setback for the industry, as the Commission's proposal was based on 41 days without questions and a maximum of 74 days including all possible delays. In the case of advanced therapy medicinal products, the timeline can be extended by another 50 days, making 110 days in total.



–

To make both the reference state and the relevant Member States comply with the timelines, the legislation includes the concept of tacit approval. The fact that this feature was accepted by all parties can be seen as a positive outcome for the industry.



–

As regards transparency requirements for clinical trial data submitted through a single E.U. submission portal and stored in a Union-level database, the new clinical trial regulation allows for protection of personal data of patients and commercially confidential information, which is in line with the industry data sharing laid out in Policy 70 (see previous section).



–

Selection of reference Member State by the sponsor was maintained.

        During the three-year transition period, both sets of rules will apply in parallel.

Falsified medicines:    implementation of Directive 2011/62/EU: The European Union has reformed the rules for importing active substances for medicinal products for human use into the E.U. As of January 2, 2013, all imported active substances must have been manufactured in compliance with good manufacturing practice (GMP) standards or standards at least equivalent to GMP. The manufacturing standards in the E.U. for active substances are those of the "International Conference for Harmonisation" — ICH Q7. As of July 2, 2013, such compliance must be confirmed in writing by the competent authority of the exporting country, except for countries with waivers. Written confirmation must also confirm that the plant where the active substance was manufactured is subject to control and enforcement of GMP at least equivalent to that in the E.U.

        Implementation of Directive 2011/62/EU was expected by July 2, 2013. To date 17 of the 27 Member States have yet to transpose the directive in to national law.

        A major uncertainty was expected regarding potential temporary drug shortages in the E.U. in cases where manufacturers were unable to supply the required documentation. At end 2013, no shortages of medicines from innovator or generic companies associated with the Falsified Medicines Directive had been identified, largely due to measures taken by companies to avoid importation problems.

        In the U.S., on November 28, 2013, President Obama signed into law H.R. 3204, the Drug Quality and Security Act (DQSA). The legislation introduces a federal track-and-trace system for medicines with serial numbers added to individual packs and (non-mixed) cases within four years of the legislation being adopted, and electronic tracing of production through the supply chain mandated within 10 years.

        It also strengthens licensure requirements for wholesale distributors and third-party logistics providers, and requires the FDA to maintain a database of wholesalers that will be available to the public through its website.

        The law also boosts oversight of compounding pharmacies that make drugs to order, with the FDA getting greater powers to oversee large-volume or 'outsourcing' compounders without individual prescriptions.

NDA electronic clinical trial data submission:    In Japan, the PMDA intends to require pharmaceutical companies to submit clinical trial data for their NDAs in electronic formats, beginning in fiscal year 2016 — a move that would allow the authority to efficiently store and analyze the data to improve its efficacy and safety predictions.

        Under its plan, the PMDA would launch a pilot program this fiscal year, which would run through to the end of fiscal year 2015, to verify its capabilities for storing, managing, and analyzing submitted electronic data with its current setup. Although the agency aims to require such electronic data filings from fiscal year 2016, it will also consider transitional measures to smooth the way for the full changeover.




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        Such mandatory electronic submissions are expected to be limited to clinical trial data for new drugs newly filed for regulatory approval. The necessity of the electronic submission for Phase I trial data will likely be decided on a case-by-case basis, while makers will be required to file nonclinical toxicity study data in one of the SEND (Standard for the Exchange on Non-clinical Data) formats in due course.

        In the E.U., electronic submission for marketing authorization and variation applications has already been in place for many years. To allow secure submission over the internet for all types of eCTD applications for human medicines, the EMA launched the eSubmission Gateway; this was followed by the eSubmission web client, launched in January, 2013. From March, 2014, the use of the eSubmission Gateway or web client will become mandatory for all eCTD submissions through the centralized procedure, order to improve efficiency and decrease costs for applicants.

        The EMA will extend the use of eSubmission Gateway and web client to paediatric submissions, veterinary medicines and referral procedures in the near future.

B.6.4. Pricing & Reimbursement

        Rising overall healthcare costs are leading to efforts to curb drug expenditures in most markets in which Sanofi operates. Increasingly, these efforts result in pricing and market access controls for pharmaceuticals. The nature and impact of these controls vary from country to country, but some common themes are reference pricing, systematic price reductions, formularies, volume limitations, patient co-pay requirements, and generic substitution. In addition, governments and third party payers are increasingly demanding comparative / relative effectiveness data to support their decision making process. They are also increasing their utilization of emerging healthcare information technologies such as electronic prescribing and health records to enforce transparency and tight compliance with these regulations and controls. As a result, the environment in which pharmaceutical companies must operate in order to make their products available to patients and providers who need them continues to grow more complex each year.

        Significant recent pricing events and trends include:

•

In the United States, Chinamandatory health insurance has begun (January 1, 2014). The positive effects of this on the size of the market should begin to appear over the coming years, while increased mandated rebates will have a deleterious effect on the net value of products in these segments of the market.



•

In Europe, the financial crisis of recent years seems to have stabilised. The long-anticipated Value-Based Pricing system in the UK has not led to considerable changes from previous framework agreements. Instead, a new edition of the Pharmaceutical Price Regulation Scheme has been approved, while certain evaluation criteria used by the National Institute for Health and Brazil. Clinical Excellence (NICE) are to be revised in 2014. In Germany, the price freeze implemented under the law on the restructuring of the pharmaceutical market (AMNOG) and scheduled to finish at the end of 2013 has been temporarily extended so that debates can take place to renew the measure for the medium term. However, the mandatory rebate has been reduced from 16% to 6% as scheduled.



•

The projectglobal theme of universal healthcare, with implementation underway in several regions, has led to many issues in funding. Price controls for all products and all sectors of the market have been at issue and are anticipated to be a subject for scrutiny in the future. Among the large emerging markets, India has finally implemented price control. Also, instances of positions taken against innovative product patents have multiplied and compulsory licensing has again been considered with a wider therapeutic scope. Russia continues to widen its programme of pilot insurance schemes and reforms to its Essential Drugs List price controls are expected in 2014, while legislation favours national production. National production is currentlyalso a theme of policy in Phase I/II (dose finding study).Brazil.

        We believe that third party payers will continue to act to curb the cost of pharmaceutical products. While the impact of these measures cannot be predicted with certainty, we are taking the necessary steps to defend the accessibility and price of our products in order to reflect the value of our innovative product offerings:

•

We actively engage with our key stakeholders on the value of our products to them. These stakeholders — including physicians, patient groups, pharmacists, government authorities and third party payers — can have a significant impact on market access for our products.



•

We continue to add flexibility and adaptability to our operations so as to better prepare, diagnose, and address issues in individual markets.




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        Conscious of the importance of recognizing the value of our products and the high cost of R&D, we continue to analyze innovative pricing and access strategies that balance patient access with appropriate rewards for innovation. Specifically, we are involved in risk sharing agreements with payers, whereby part of the financial risk related to a treatment's success is carried by the marketing company. Those agreements provide that clinical efficacy be monitored after launch, for a specified period of time and patient population. The price and reimbursement level of the drug is then either confirmed or revised based on these post-marketing results.

        We are also actively looking at tiered pricing options where this is possible, allowing wider access to populations that would otherwise be denied this for new, innovative therapies.

B.7. Patents, Intellectual Property and Other Rights

Patent Protection

        We own a broad portfolio of patents, patent applications and patent licenses worldwide. These patents are of various types and may cover:

•

active ingredients;



•

pharmaceutical formulations;



•

product manufacturing processes;



•

intermediate chemical compounds;



•

therapeutic indications/methods of use;



•

delivery systems; and



•

enabling technologies, such as assays.

        Patent protection for individual products typically extends for 20 years from the patent filing date in countries where we seek patent protection. A substantial part of the 20-year life span of a patent on a new chemical entitymolecule (small molecule or biologic) has generally already passed by the time the related product obtains marketing approval. As a result, the effective period of patent protection for an approved product's active ingredient is significantly shorter than 20 years. In some cases, the period of effective protection may be extended by procedures established to compensate significant regulatory delay in Europe (a Supplementary Protection Certificate or SPC), the United States (a Patent Term Extension or PTE) and Japan (also a PTE).

        Additionally, the product may benefit from the protection of patents obtained during development or after the product's initial marketing approval. The protection a patent affords the related product depends upon the type of patent and its scope of coverage, and may also vary from country to country. In Europe for instance, applications for new patents may be submitted to the European Patent Office (EPO), an intergovernmental organization which centralizes filing and prosecution. As of December 2012,2013, an EPO patent application may cover the 38 European Patent Convention member states, including all 27 member states of the European Union. The granted "European Patent" establishes corresponding national patents with uniform patent claims among the member states. However, some older patents were not approved through this centralized process, resulting in patents having claim terms for the same invention that differ by country. Additionally, a number of patents prosecuted through the EPO may pre-date the European Patent Convention accession of some current European Patent Convention member states, resulting in different treatment in those countries.

        In 2013, E.U. regulations were signed to create a European patent (Unitary Patent) and a Unified Patent Court. However, they will only enter into force once the agreement on the Unified Patent Court is ratified by at least 13 Member States including France, Germany, and the United Kingdom. As of the date of this document only Austria has ratified.

        The Unitary Patent will provide a unitary protection within the participating states of the European Union (when ratified by the member states with the exception of Italy and Spain). The Unified Patent Court will be a specialized patent court with exclusive jurisdiction for litigation relating to European patents and Unitary patents. The Court will be composed of a central division (with seat in Paris and the pharmaceutical section in London) and by several local and regional divisions in the contracting Member States to the agreement. The Court of Appeal will be located in Luxembourg.




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We monitor our competitors and vigorously seek to challenge patent infringement when such challenges would negatively impact our business objectives. See "Item 8 — A. Consolidated Financial Statements and Other Financial Information — Patents" of this annual report.

        The expiration or loss of a patent covering a new molecule, typically referred to as a compound patent, may result in significant competition from generic products and can result in a dramatic reduction in sales of the original branded product. See "Item 3. Key Information — D. Risk Factors — We may lose market share to competing remedies or generic brands if they are perceived to be equivalent or superior products". In some cases, it is possible to continue to obtain commercial benefits from product




manufacturing trade secrets or from other types of patents, such as patents on processes, intermediates, structure, formulations, methods of treatment, indications or delivery systems. Certain categories of products, such as traditional vaccines and insulin, have been historically relatively less reliant on patent protection and may in many cases have no patent coverage, although it is increasingly frequent for novel vaccines and insulins to be patent protected. See "— Focus on Biologics" below. Patent protection is also an important factor in our animal health business, but is of comparatively lesser importance to our Consumer Health Care and generics businesses, which rely principally on trademark protection.

Regulatory Exclusivity

        In some markets, including the European Union and the United States, many of our pharmaceutical products may also benefit from multi-year regulatory exclusivity periods, during which a generic competitor may not rely on our clinical trial and safety data in its drug application. Exclusivity is meant to encourage investment in research and development by providing innovators the exclusive use for a limited time of the innovation represented by a newly approved drug product. This exclusivity operates independently of patent protection and may protect the product from generic competition even if there is no patent covering the product.

        In the United States, the FDA will not grant final marketing approval to a generic competitor for a New Chemical Entity (NCE) until the expiration of the regulatory exclusivity period (generally five(five years) that commences upon the first marketing authorization of the reference product. The FDA will accept the filing of an Abbreviated New Drug Application (ANDA) containing a patent challenge one year before the end of this regulatory exclusivity period (see the descriptions of ANDAs in "— Product Overview — Challenges to Patented Products" below). In addition to the regulatory exclusivity granted to NCEs, significant line extensions of existing NCEs may qualify for an additional three years of regulatory exclusivity. Also, under certain limited conditions, it is possible to extend unexpired U.S. regulatory and patent-related exclusivities by a pediatric extension. See "— Pediatric Extension", below.

        Further, in the United States, a different regulatory exclusivity period applies to biological drugs. The Biologics Price Competition and Innovation Act of 2009 ("BPCIA"), was enacted on March 23, 2010 as part of the much larger health care reform legislation known as the Patient Protection and Affordable Care Act ("PPACA"). The BPCIA introduced an approval pathway for biosimilar products. A biosimilar product is a biologic product that is highly similar to the reference (or innovator) product notwithstanding minor differences in clinically inactive components, and which has no clinically meaningful differences from the reference product in terms of the safety, purity, and potency of the product. The BPCIA provides that an application for a biosimilar product that relies on a reference product may not be submitted to the FDA until four years after the date on which the reference product was first licensed, and that the FDA may not approve a biosimilar application until 12 years after the date on which the reference product was first licensed.

        In the European Union, regulatory exclusivity is available in two forms: data exclusivity and marketing exclusivity. Generic drug applications will not be accepted for review until eight years after the first marketing authorization (data exclusivity). This eight-year period is followed by a two-year period during which generics cannot be marketed (marketing exclusivity). The marketing exclusivity period can be extended to three years if, during the first eight-year period, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which are deemed to provide a significant clinical benefit over existing therapies. This is known as the "8+2+1" rule.

        In Japan, the regulatory exclusivity period varies from four years for medicinal products with new indications, formulations, dosages, or compositions with related prescriptions, to six years for new drugs containing a medicinal composition, or requiring a new route of administration, to eight years for drugs containing a new chemical entity, to ten years for orphan drugs or new drugs requiring pharmaco-epidemiological study.

Emerging Markets

        One of the main limitations on our operations in emerging market countries is the lack of effective intellectual property protection or enforcement for our products. The World Trade Organization (WTO) Agreement on Trade-




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Related Aspects of Intellectual Property Rights (TRIP) has required developing countries to amend their intellectual property laws to provide patent protection for pharmaceutical products since January 1, 2005, although it provides a limited number of developing countries an extension to 2016. Additionally, these same countries frequently do not provide non-patent exclusivity for innovative products. While the situation has gradually improved, the lack of protection for intellectual property rights or the lack of robust enforcement of intellectual property rights poses difficulties in certain countries. Additionally, in recent years a number of countries facing health crises have waived or threatened to waive intellectual property protection for specific products, for example through compulsory licensing of generics. See "Item 3. Key Information — D. Risk Factors — Risks Relating to Our Businessthe Group Structure and Strategy — The globalization of the Group's business exposes us to increased risks."risks"

Pediatric Extension

        In the United States and Europe, under certain conditions, it is possible to extend a product's regulatory exclusivities for an additional period of time by providing data regarding pediatric studies.

        In the United States, the FDA may ask a company for pediatric studies if it has determined that information related to the use of the drugs in the pediatric population may produce health benefits. The FDA has invited us by written request to provide additional pediatric data on several of our main products. Under the Hatch-Waxman Act, timely provision of data meeting the FDA's requirements (regardless of whether the data supports a pediatric indication) may result in the FDA extending regulatory exclusivity and patent life by six months, to the extent these protections have not already expired (the so-called "pediatric exclusivity"). Our main products which have, for example, Lantus® received FDA grantsgrant of pediatric exclusivity at some point are Aprovel®, Lantus®, Allegra®, Ambien®/Ambien® CR, Plavix®, Taxotere®, and Actonel®.exclusivity.

        In Europe, a regulation on pediatric medicines provides for pediatric research obligations with potential associated rewards including extension of patent protection (for patented medicinal products) and regulatory exclusivity for pediatric marketing authorization (for off-patent medicinal products).

        In Japan, for pediatric research there is no extension of patent protection (for patented medicinal products), however, it may result in an extension of marketing exclusivity from 8 to 10 years.

Orphan Drug Exclusivity

        Orphan drug exclusivity may be granted in the United States to drugs intended to treat rare diseases or conditions (affecting fewer than 200,000 patients in the U.S. or in some cases more than 200,000 with no expectation of recovering costs).

        Obtaining orphan drug exclusivity is a two-step process. An applicant must first seek and obtain orphan drug designation from the FDA for its drug. If the FDA approves the drug for the designated indication, the drug will receive orphan drug exclusivity.

        Orphan drug exclusivity runs from the time of approval and bars approval of another application (ANDA, 505(b)(2), New Drug Application (NDA) or Biologic License Application (BLA)) from a different sponsor for the same drug in the same indication for a seven-year period. Whether a subsequent application is for the "same" drug depends upon the chemical and clinical characteristics. The FDA may approve applications for the "same" drug for indications not protected by orphan exclusivity.

        Orphan drug exclusivities also exist in the European Union and Japan.

Product Overview

        We summarize below the intellectual property coverage in our major markets of the marketed products described above at "— Pharmaceutical Products — Main Pharmaceutical Products". Concerning animal health products, Merial's intellectual property coverage is described above (see "— Animal Health: Merial"). In the discussion of patents below, we focus on active ingredient patents (compound patents) and any later filed patents listed, as applicable, in the FDA's list of Approved Drug Products with Therapeutic Equivalence Evaluations (the




"Orange "Orange Book") or on their foreign equivalents. These patents or their foreign equivalents tend to be the most relevant in the event of an application by a competitor to produce a generic version of one of our products or the equivalent of these patents in other countries (see "— Challenges to Patented Products" below). In some cases, products may also benefit from pending patent applications or from patents not eligible for Orange Book listing (e.g., patents claiming industrial processes). In each case below, we specify whether the active ingredient is claimed by an unexpired patent. Where patent terms have been extended to compensate for regulatory delay, the extended dates are presented below. U.S. patent expirations presented below reflect U.S. Patent and Trademark Office dates, and also reflect six-month pediatric extensions to the FDA's Orange Book dates for Lantus®. Where patent terms have expired we indicate such information and Actonel®.mention if generics are on the market.




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        We do not provide later filed patent information relating to formulations already available as an unlicensed generic. References below to patent protection in Europe indicate the existence of relevant patents in most major markets in the European Union. Specific situations may vary by country, most notably with respect to older patents and to countries having only recently joined the European Union.

        We additionally set out any regulatory exclusivity from which these products continue to benefit in the United States, European Union or Japan. Regulatory exclusivities presented below incorporate any pediatric extensions obtained. While E.U. regulatory exclusivity is intended to be applied throughout the European Union, in some cases member states have taken positions prejudicial to our exclusivity rights.

Lantus® (insulin glargine)

Lantus® (insulin glargine)
U.S.		E.U.		Japan
Compound: August 2014, protection extended to February 2015 by Pediatric extensionExtension(1)		Compound: November 2014 in most of Western Europe requests for pediatric exclusivityextended until May 2015 are pendingby Pediatric Extensions		Compound: November 2014

(1)

A patent infringement suit was filed by Sanofi against Eli Lilly on January 30, 2014 in the United States. The suit was triggered by Eli Lilly's submission to FDA of an NDA (505(b)(2) New Drug Application) seeking approval to sell an insulin glargine drug product. The suit resulted in a stay during which the FDA cannot approve Eli Lilly's NDA. The stay is expected to expire the earlier of (i) a court decision favorable to Eli Lilly or (ii) June 2016.


Apidra® (insulin glulisine)

Apidra® (insulin glulisine)
U.S.		E.U.		Japan
Compound: June 2018		Compound: September 2019 in most of the EU		Compound: May 2022
Later filed patent: ranging through January 2023		Later filed patent: March 2022		Later filed patent: July 2022
		Regulatory exclusivity: September 2014		Regulatory exclusivity: April 2017

Taxotere® (docetaxel)Jevtana® (cabazitaxel)
U.S.		E.U.		Japan
Compound: expired		Compound: expired		Compound: expired
Generics on the market		Generics on the market		Generics on the market




Eloxatine® (oxaliplatin) (1)
U.S.		E.U.		Japan
Compound: expired		Compound: expired		Compound: N/A (3)
Generics on the market (2)		Generics on the market

---

⁽¹⁾

We do not own most Eloxatin® patents but license them from Debiopharm for marketing.

⁽²⁾

See "Item 8 — A. Consolidated Financial Statements and Other Financial Information — Patents — Eloxatin® (oxaliplatin) Patent Litigation".

⁽³⁾

No rights to compound in Japan.




Jevtana® (cabazitaxel)
U.S.		E.U.		Japan
Compound: March 2016 (up to March 2021 if PTE is granted)		Compound: March 2016		Compound: March 2016 (patent term extension to be determined once product is approved in Japan)
Later filed patents: coverage ranging through December 2025		Later filed patents: coverage ranging through September 2024 to March 2025 with SPC granted in some EU countries		Later filed patents: coverage ranging through September 2024
Regulatory exclusivity: June 2015		Regulatory exclusivity: March 2021		Regulatory exclusivity: to be determined upon approval of a product in Japan


Lovenox® (enoxaparin sodium)

Lovenox® (enoxaparin sodium)
U.S.		E.U.		Japan
Compound: no compound patent coverage		Compound: expired		Compound: expired
Generics on the market				Regulatory exclusivity: January 2016




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Plavix® (clopidogrel bisulfate)

Plavix® (clopidogrel bisulfate)
U.S.		E.U.		Japan
Compound: Expiredexpired		Generics on the market		Compound: expired
Generics on the market				Regulatory exclusivity: January 2014expired


Aprovel® (irbesartan)

Aprovel® (irbesartan)
U.S.		E.U.		Japan
Compound: expired		Compound: expired in most of the EU; exceptions: May 2013 in Lithuania. No compound patent in force in Spain, Portugal, Finland, Norway and much of Eastern Europe		Compound: March 2016
Generics on the market		Generics on the market		Regulatory exclusivity: April 2016


Multaq® (dronedarone hydrochloride)

Tritace® (ramipril)
U.S.		E.U.		Japan
N/A (1)		Compound: expired		Compound: expired
July 2016 with PTE		Generics on the marketCompound: expired

---

⁽¹⁾

No rights to compound in the U.S.




Multaq® (dronedarone hydrochloride)
U.S.		E.U.		Japan
Compound: July 2013 with interim petition granted (July 2016 if PTE petition is granted)		Compound: expired		Compound: expired
Later filed patent: formulation (June 2018)		Later filed patent: formulation June 2018 extended with SPC up to June 2023 in most of the countries
Regulatory exclusivity: July 2014		Regulatory exclusivity: November 2019


Stilnox® (zolpidem tartrate)

Stilnox® (zolpidem tartrate)
U.S.		E.U.		Japan
Compound patent: expired		Compound patent: expired		Compound patent: expired
Generics on the market		Generics on the market
				Regulatory exclusivity: expired
				Later filed patent: Ambien® CR formulation (December 2019); not commercialized.commercialized


Depakine® (sodium valproate)

Depakine® (sodium valproate)
U.S.		E.U.		Japan
Compound: N/A(1)		Compound: N/A(1)		Compound: N/A(1)
		Later filed patent: Depakine® Chronosphere formulation (October 2017)		Later filed patent: Depakine® Chronosphere formulation (October 2017)

---

⁽¹⁾

No rights to compounds in the U.S., E.U. and Japan.

Allegra® (fexofenadine hydrochloride)

Allegra® (fexofenadine hydrochloride)
U.S.		E.U.		Japan(1)
Compound: expired		Compound: expired		Compound: expired
Generics on the market		Generics on the market		Generics on the market
Converted to Over-the-Counter				Converted to over-the counter
				Later filed patents: coverage ranging through January 2016

---

⁽¹⁾

See "Item 8 — A. Consolidated Financial Statements and Other Financial Information — Patents — Allegra® Patent Litigation" of this annual report for further information.




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Actonel® (risedronate sodium)⁽¹⁾

Nasacort® (triamcinolone acetonide) (1)
U.S.		E.U.		Japan
Compound: Compound: expired		Compound: expired		Compound: expired
Later filed patents: formulation and method of use July 2016		Later filed patent: formulation July 2017
Generics on the market

---

⁽¹⁾

A license was granted to Barr Laboratories, Inc. in settlement of patent litigation.




Xatral® (alfuzosin hydrochloride)
U.S.		E.U.		Japan
Compound: expired		Compound: expired		Compound: expired
Generics on the market		Generics on the market		Generics on the market

Actonel® (risedronate sodium) (1)
U.S.		E.U.		Japan
Compound: December 2013, Extendedprotection extended to June 2014 by Pediatric extension		Compound: expired		Compound: Expiredexpired
Later filed patents: coverage ranging through June 2018		Later filed patents: coverage ranging through June 2018

---

⁽¹⁾

On October 30, 2009, Procter & Gamble Pharmaceuticals (P&G) sold its pharmaceutical business to Warner Chilcott (WCRX) which became the successor to P&G in rights and interests for the Actonel® alliance and now holds the NDA and the patents for this product in the United States. We commercialize Actonel® with WCRX. See "Item 5 — Financial Presentation of Alliances".

Amaryl® (glimepiride)

Amaryl® (glimepiride)
U.S.		E.U.		Japan
Compound: expired		Compound: expired		Compound: expired


Insuman® (human insulin)

Insuman® (human insulin)
U.S.		E.U.		Japan
Compound: N/A		Compound: N/A		Compound: N/A


Fabrazyme® (agalsidase beta)

Fabrazyme® (agalsidase beta)
U.S.		E.U.		Japan
Compound: N/A		Compound: N/A		Compound: N/A
Later filed patents: coverage ranging through September 2015				Later filed patents: November 2013expired
Biologics Regulatory Exclusivity: April 2015				Orphan regulatory exclusivity: January 2014expired


Cerezyme® (imiglucerase)

Cerezyme® (imiglucerase)
U.S.		E.U.		Japan
Compound: August 2013expired		Compound: N/A		Compound: N/A

Lumizyme® / Myozyme® (alglucosidase alpha)

Lumizyme® / Myozyme® (alglucosidase alpha)
U.S.		E.U.		Japan
Compound: N/A		Compound: N/A		Compound: N/A
Later filed patents: coverage ranging through February 2023		Compound: N/A Later filed patents: coverage ranging from March 2021 to May 2023		Compound: N/A Later filed patents: July 2021
Orphan Drug Exclusivity: April 2013expired		Orphan Regulatory Exclusivity: March 2016		Orphan Regulatory Exclusivity: April 2017
Biologics Regulatory Exclusivity: April 2018		Biologics Regulatory Exclusivity: March 2016





Renagel® (sevelamer hydrochloride)

Renagel® (sevelamer hydrochloride)
U.S.		E.U.		Japan
Compound: N/A		Compound: N/A		Compound: N/A
Later filed patent: coverage ranging through August 2013 and September 2014		Later filed patent: August 2014		Later filed patent: August 2014
		SPC coverage to January 2015 in certain EU countries		PTE protection to December 2016




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Renvela® (sevelamer carbonate)

Renvela® (sevelamer carbonate)
U.S.		E.U.		Japan
Compound: N/A		Compound: N/A		Compound: N/A
Later filed patent: coverage ranging through August 2013 and September 2014		Later filed patent: August 2014		Later filed patent: August 2014
		SPC coverage to January 2015 in certain EU countries
		SPC coverage to August 2019 in certain countries (Austria, Greece, Itay and Luxembourg)


Synvisc® (hyaline G-F 20)

Synvisc® (hyaline G-F 20)
U.S.		E.U.		Japan
Compound: expired		Compound: N/A		Compound: expired


Synvisc-One® (hyaline G-F 20)

Synvisc-One® (hyaline G-F 20)
U.S.		E.U.		Japan
Compound: expired		Compound: N/A		Compound: expired
Later filed patent: January 2028		Compound: N/A		Compound: expired


Lyxumia® (lixisenatide)

Lyxumia® (lixisenatide)
U.S.		E.U.		Japan
Compound: July 2020		Compound: July 2020		Compound: July 2020
		SPC coverage to July 2025 in most of Western Europe		PTE pending for compound patent and two device patents
		Regulatory Exclusivity: February 2023		Regulatory Exclusivity: June 2021


Zaltrap® (aflibercept)

Zaltrap® (aflibercept)
U.S.		E.U.		Japan
Compound: May 2020 (July 2022 if PTE is granted)		Compound: May 2020 (May 2025 if SPC granted)		Compound: May 2020
Biologics Regulatory Exclusivity: November 2023		Regulatory Exclusivity: November 2022


Aubagio® (teriflunomide)

Aubagio® (teriflunomide)
U.S.		E.U.		Japan
Compound: October 2014 (2019(May 2019 if PTE is granted)		Compound: expired		Compound: expired
Regulatory Exclusivity: September 2017





Aldurazyme® (laronidase)

Kynamro™ (mipomersen)
U.S.		E.U.		Japan
Compound: November 2019		Compound: November 2020 in some EU countries only		Compound:November 2020
Later filed patents: June 2020				Orphan Regulatory exclusivity: October 2016
Regulatory Exclusivity: April 2015




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Mozobil® (plerixafor)

U.S.		E.U.		Japan
Compound: N/A		Compound: N/A		Compound: N/A
Later filed patents: ranging through July 2023		Later filed patents: ranging through July 2022		Later filed patents: ranging through July 2022
Orphan Regulatory Exclusivity: December 2015		Regulatory Exclusivity: July 2019

Lemtrada™ (alemtuzumab)

U.S.		E.U.		Japan
Compound: December 20252015		Compound: pendingexpired		Compound: 2023expired
Regulatory Exclusivity: N/A
Later filed patents: coverage ranging through September 2027 (pending)		Later filed patent: September 2027 (pending)		Later filed patent: September 2027

        Patents held or licensed by the Group do not in all cases provide effective protection against a competitor's generic version of our products. For example, notwithstanding the presence of unexpired patents, competitors have launched generic versions of Eloxatin® in Europe, Allegra® in the United States (prior to the product being switched to over-the-counter status) and Plavix® in Europe.

        We caution the reader that there can be no assurance that we will prevail when we assert a patent in litigation and that there may be instances in which the Group determines that it does not have a sufficient basis to assert one or more of the patents mentioned in this report, for example in cases where a competitor proposes a formulation not appearing to fall within the claims of our formulation patent, a salt or crystalline form not claimed by our composition of matter patent, or an indication not covered by our method of use patent. See "Item 3. Key Information — D. Risk Factors — Risks Relating to Legal and Regulatory Matters — We rely on our patents and proprietary rights to provide exclusive rights to market certain of our products, and if such patents and other rights were limited or circumvented, our financial results could be materially and adversely affected."affected".

        As disclosed in Item 8 of this annual report, we are involved in significant litigation concerning the patent protection of a number of our products.

Challenges to Patented Products

        In the United States, companies have filed Abbreviated New Drug Applications (ANDAs), containing challenges to patents related to a number of our products. An ANDA is an application by a drug manufacturer to receive authority to market a generic version of another company's approved product, by demonstrating that the purportedly generic version has the same properties as the original approved product. ANDAs may not be filed with respect to drugs licensed as a biological. See "— Focus on Biologics" below. An ANDA relies on the safety and other technical data of the original approved product, and does not generally require the generic manufacturer to conduct clinical trials (thus the name "abbreviated" new drug application), presenting a significant benefit in terms of time and cost. As a result of regulatory protection of our safety and other technical data, the ANDA may generally be filed only five years following the initial U.S. marketing authorization of the original product. See "— Regulatory Exclusivity" above. This period can be reduced to four years if the ANDA includes a challenge to a patent listed in the FDA's Orange Book. However, in such a case if the patent holder or licensee brings suit in response to the patent challenge within the statutory window, then the FDA is barred from granting final approval to an ANDA during the 30 months following the patent challenge (this bar is referred to in our industry as a "30-month stay"), unless, before the end of the 30 months, a court decision or settlement has determined either that the ANDA does not infringe the listed patent or that the listed patent is invalid and/or unenforceable.

        FDA approval of an ANDA after this 30-month period does not resolve outstanding patent disputes, but it does remove the regulatory impediments to a product launch by a generic manufacturer willing to take the risk of later being ordered to pay damages to the patent holder.

        Procedures comparable to the ANDA exist in other major markets.

In the European Union, a generic drug manufacturer may only reference the data of the regulatory file for the original approved product after data exclusivity has expired. However, there is no patent listing system in Europe




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comparable to the Orange Book, which would allow the patent holder to prevent the competent authorities from granting marketing approval by bringing patent infringement litigation prior to approval. As a result, generic products may be approved for marketing following the expiration of marketing exclusivity without regard to the patent holder's rights. Nevertheless, in most of these jurisdictions once the competing product is launched and in some jurisdictions, even prior to launch (once launch is imminent), the patent holder may seek an injunction against such marketing if it believes its patents are infringed. See Item 8 of this annual report.




        The accelerated ANDA-type procedures are potentially applicable to many, but not all, of the products we manufacture. See "— Focus on Biologics" and "— Regulation" below. We seek to defend our patent rights vigorously in these cases. Success or failure in the assertion of a given patent against a competing product is not necessarily predictive of the future success or failure in the assertion of the same patent — ora fortiori the corresponding foreign patent — against another competing product due to factors such as possible differences in the formulations of the competing products, intervening developments in law or jurisprudence, local variations in the patents and differences in national patent law and legal systems. See "Item 3. Key Information — D. Risk Factors — Risks Relating to Legal and Regulatory Matters — We rely on our patents and proprietary rights to provide exclusive rights to market certain of our products, and if such patents and other rights were limited or circumvented, our financial results could be materially and adversely affected".

Trademarks

        Our products are sold around the world under trademarks that we consider to be of material importance in the aggregate. Our trademarks help to identify our products and to protect the sustainability of our growth. Trademarks are particularly important to the commercial success of our CHC, generics and retail animal health business.

        It is our policy to protect and register our trademarks with a strategy adapted to each product or service depending on their countries of commercialization:i.e., on a worldwide basis for worldwide products or services, or on a regional or local basis for regional or local products or services.

        The process and degree of trademark protection vary country by country, as each country applies its own trademark laws and regulations. In most countries, trademark rights may only be obtained through formal trademark application and registration. In some countries, trademark protection can be based primarily on use. Registrations are granted for a fixed term (in most cases ten years) and are renewable indefinitely, except in some countries where maintenance of the trademarks is subject to their effective use.

        When trademark protection is based on use, it covers the products and services for which the trademark is used. When trademark protection is based on registration, it covers only the products and services designated in the registration certificate. Additionally, in certain cases, we may enter into a coexistence agreement with a third-party that owns potentially conflicting rights in order to better protect and defend our trademarks.

        Our trademarks are monitored and defended based on this policy and in order to prevent counterfeit, infringement and/or unfair competition.

B.8. Production and Raw Materials

        For many years, we have chosen to keep the manufacture of our products in-house in order to have better control of quality and distribution. Our production process consists of three principal stages: the manufacture of active pharmaceutical ingredients, the transformation of these ingredients into products, and packaging.

        Our general policy is to produce our main active ingredients and principal products at our own plants in order to minimize our dependence on external manufacturers and to maintain strict and precise control over the product throughout the production cycle. In some cases, however, we rely on third parties for the manufacture and supply of certain active ingredients and medical devices. We have outsourced some of our production, under supply contracts associated with plant divestitures or to establish a local presence to capitalize on growth in emerging markets. In particular, we outsource part of the production of the active ingredients used in Stilnox® and Xatral®, and certain pharmaceutical product formulations. Our main pharmaceutical subcontractors are Famar, Haupt, Patheon, CatalentMSD, Unither, Valeant and Sofarimex.Alza. These subcontractors follow our general quality and logistics policies, as well as meeting other criteria. See "Item 3. Key Information — D. Risk Factors — Risks Relating to Our Business".




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        We also depend onobtain active ingredients from third parties forunder partnership agreements. This applies to the manufacture of certain products. Under our alliancemonoclonal antibodies developed with BMS, multi-vendor supply and safety stock arrangements are in place for Plavix® (clopidogrel bisulfate) and Aprovel® (irbesartan).Regeneron.




        Our pharmaceutical production sites are divided into three categories:

•

Global sites, which serve all markets. Situated principally in Europe, these facilities are dedicated to the manufacture of our active ingredients, injectables, and a number of our principal products in solid form;



•

Regional sites, which serve markets at continental level, in Europe and particularly the BRIC-M countries (Brazil, Russia, India, China and Mexico), giving us a strong industrial presence in emerging markets;



•

Local sites, which serve their domestic market only.

        Sanofi Pasteur produces vaccines at sites located in North America, France, Mexico, China, Thailand, Argentina and India. The pharmaceutical sites at Le Trait (France) and Anagni (Italy) also contribute to Sanofi Pasteur's industrial operations by making available their aseptic filling and freeze-drying facilities. AIn 2013, the new antigeninfluenza vaccine production facility in Mexico for seasonal and pandemic influenza vaccinesplant at Shenzhen was approved by the MexicanChinese authorities early in 2012, and began commercial production in time for the Mexican influenza vaccination campaign in September 2012.(CFDA).

        In 2011, we diversified our industrial operations into rare diseases (with the acquisition of Genzyme) and via the integration of Merial, Sanofi's dedicated animal health division.

        Merial markets pharmaceutical products (Frontline®, Heartgard®, Zactran®, Previcox®) and a broad range of vaccines for different animal species (dogs, cats, horses, ruminants, pigs and fowl). A number of pharmaceutical products are subcontracted (Heartgard®, Eprinex®) but almost all veterinary vaccines are manufactured at its own plants. Merial's dedicated animal health industrial operations cover all activities, from the purchase of raw materials through to the delivery of the finished product, meeting customer needs through a reliable and flexible offering that meets quality expectations. There are 1718 production sites spread across nine countries.

        All of our pharmaceutical and vaccine facilities are Good Manufacturing Practices (GMP)GMP compliant, in line with international guidelines. Our principal sites are approved by the U.S. Food & Drug Administration (FDA).FDA.

        This applies to our pharmaceutical facilities in France (Ambarès, Tours, Le Trait, Maisons-Alfort, Compiègne and Lyon); in the United Kingdom (Haverhill, Holmes Chapel, Dagenham and Fawdon, the last two of which arelatter due to close in 2013 and 2015, respectively)2015); in Ireland (Waterford); in Germany (Frankfurt); in Hungary (Veresegyhaz); in Italy (Anagni); and in the United States (Saint Louis)Louis and Chattanooga). Our Vaccines sites with FDA approval are Marcy l'Étoile and Le Trait (Fluzone® ID USA) in France; Swiftwater, Canton and Rockville in the United States; and Toronto in Canada.

        The Genzyme facilities in the United States (Allston, Framingham, Ridgefield, Cambridge)Cambridge, Northpointe-Lynnwood, Woburn and Northborough) and in Europe (Geel, Belgium) are all FDA approved.

        Our animal healthAnimal Health facilities in Athens, Worthington, Gainesville, Berlin and Raleigh in the United States are managed by the U.S. Department of Agriculture (USDA), while the sites at Paulinia (Brazil) and Toulouse (France) have FDA approval for some of their operations.

        Wherever possible, we seek to have multiple plants approved for the production of key active ingredients and our strategic finished products. This is the case with Lovenox®, for example.

        In February 2011, we received an FDA warning letter concerning our Frankfurt facility following a routine FDA inspection in September 2010. The warning letter cited GMP compliance issues in certain manufacturing processes, without referring to specific products. While believing that the points raised in the letter did not compromise the quality of our marketed products, we acted on this warning and worked towards satisfying the recommendations through a "compliance first" action plan at the Frankfurt facility. In October 2011, we notified the FDA that we had completed this plan. The FDA reinspected the site in April 2012, and issued an unqualified report on Form FDA 483. This was confirmed in the FDA Establishment Inspection Report, received August 14, 2012, which officially closed the warning letter procedure.

On May 24, 2010, Genzyme entered into a consent decree with the FDA relating to the facility at Allston in the United States, following FDA inspections at the facility that resulted in observations and a warning letter raising




Current Good Manufacturing Practices (CGMP) deficiencies. A consent decree is a court order entered by agreement between a company and the government (in this case the FDA) that requires the company to take certain actions as set out in the decree. Under the terms of Genzyme's consent decree, Genzyme is permitted to continue manufacturing at the site during the remediation process, subject to compliance with the terms of the consent decree.

        The consent decree requires Genzyme to implement a plan to bring the Allston facility operations into compliance with applicable laws and regulations. The plan must address any deficiencies reported to Genzyme or identified as part of an inspection completed by a third-party expert in February 2011. Genzyme has itself retained an expert to monitor and oversee the implementation of the remediation workplan. This workplan was submitted to the FDA in April 2011 and accepted by the FDA in January 2012, and is expected to take a further three years to complete.be completed in 2016. It includes a timetable of specified milestones. If the milestones are not met in accordance with the timetable, the FDA can require




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us to pay $15,000 per day, per affected drug, until these compliance milestones are met. Upon satisfying all compliance requirements in accordance with the terms of the consent decree, Genzyme will be required to retain an auditor to monitor and oversee ongoing compliance at the Allston facility for an additional five years. To date, all requirements of the consent decree, including all requirements of the workplan, have been met by Genzyme.

        In March 2012, modifications to the workplan were submitted to the FDA to take account of planned changes in manufacturing operations for Fabrazyme® and Cerezyme® at the Allston facility. These modifications were accepted by the FDA. In addition, the U.S. facility at Framingham was approved by the FDA and the EMA in January 2012 for the production of Fabrazyme® (agalsidase beta). Production of the Fabrazyme® active substance at the Allston factory ended in 2012.

        OnIn July 12, 2012, Sanofi Pasteur received a warning letter from the FDA following routine inspections conducted during 2012 at its facilities in Toronto (Canada) and Marcy l'Étoile (France). The warning letter contains observations about products intended for the U.S. market, and the premises in which they are produced. Sanofi Pasteur takes these observations extremely seriously, and is working actively with the FDA to implement a series of immediate and ongoing measures to address the issues raised in the warning letter and to further strengthen its production tools and quality systems.

        In June and September 2013, follow-up inspections took place at the Marcy l'Etoile and Toronto facilities respectively. Though significant progress in quality systems was reported by the U.S. authorities at the time of the inspections, Sanofi Pasteur decided to strengthen and accelerate its improvement plan in the third quarter of 2013.

More details about our manufacturing sites are found below at "—section "D. Property, Plant and Equipment".

B.9. Insurance and Risk Coverage

        We are protected by four key insurance programs, relying not only on the traditional corporate insurance and reinsurance market but also on our captive insurance company, Carraig Insurance Ltd (Carraig).

        These four key programs cover Property & Business Interruption, General & Product Liability, Stock and Transit, and Directors & Officers Liability.

        Our captive insurance company, Carraig, participates in our coverage for various lines of insurance mainly including Property & Business Interruption, Stock and Transit, and General & Product Liability. Carraig is run under the supervision of the Irish regulatory authorities, is wholly-owned by Sanofi, and has sufficient resources to meet those portions of our risks that it has agreed to cover. It sets premiums for Group entities at market rates. Claims are assessed using the traditional models applied by insurance and reinsurance companies, and the company's reserves are regularly verified and confirmed by independent actuaries.

        Our Property & Business Interruption program covers all Group entities worldwide, wherever it is possible to use a centralized program operated by our captive insurance company. This approach shares risk between Group entities, enabling us to set deductibles and guarantees that are appropriate to the needs of local entities. It also incorporates a prevention program, including a comprehensive site visit program covering our production, storage, research and distribution facilities and standardized repair and maintenance procedures across all sites. Specialist site visits are conducted every year to address specific needs, such as testing of sprinkler systems or emergency plans to deal with flooding risks.

        The Stock and Transit program protects goods of all kinds owned by the Group that are in transit nationally or internationally, whatever the means of transport, and all our inventories wherever they are located. Sharing risk between Group entities means that we can set deductibles at appropriate levels, for instance differentiating between goods that require temperature controlled distribution and those that do not. We have developed a prevention program with assistance from experts, implementing best practices in this area at our distribution sites. This program, which is led by our captive insurance company, has substantial capacity, largely to deal with the growth in sea freight which can lead to a concentration of value in a single ship.

        Our General & Product Liability program has been renewed for all our subsidiaries worldwide wherever it was possible to do so, despite the increasing reluctance in the insurance and reinsurance market to cover product liability risks for large pharmaceutical groups. For several years, insurers have been reducing product liability cover because of the difficulty of insuring some products that have been subject to numerous claims. These products are excluded from the cover provided by insurers, and hence from the cover obtained by us on the insurance market. This applies to a few of our products, principally those described in Note D.22.a) to our consolidated financial statements included at




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Item 18 in this annual report. Because of these market conditions we have increased, year by year, the extent to which we self-insure.

        The principal risk exposure for our pharmaceutical products is covered with low deductibles at the country level, the greatest level of risk being retained by our captive insurance company. The level of risk self-insured by the Group — including our captive reinsurance company — enables us to retain control over the management and prevention of risk. Our negotiations with third-party insurers and reinsurers are tailored to our specific risks. In particular, they allow for differential treatment of products in the development phase, for the discrepancies in risk exposure between European countries and the United States, and for specific issues arising in certain jurisdictions, including generics coverage in the U.S. Coverage is adjusted every year in order to take into account the relative weight of new product liability risks, such as those relating to rare diseases with very low exposure or to healthcare products which do not require marketing approval.

        Our cover for risks that are not specific to the pharmaceutical industry (general liability) is designed to address the potential impacts of our operations.

        For all lines of business of Carraig, outstanding claims are covered by provisions for the estimated cost of settling all claims incurred but not paid at the balance sheet date, whether reported or not, together with all related claims handling expenses. Where there is sufficient data history from the company or from the market for claims made and settled, management — with assistance from independent actuaries — prepares an actuarial estimate of the company's exposure to unreported claims for the risks covered. The actuaries perform an actuarial valuation of the company's IBNR (incurred but not reported) and ALAE (allocated loss adjustment expense) liabilities at year end. Two ultimate loss projections (based upon reported losses and paid losses respectively) are computed each year using the Bornhuetter-Ferguson method; these projections form the basis for the provisions set.

        The Directors & Officers Liability program protects the legal entities under our control, and their directors and officers. Our captive insurance company is not involved in this program.

        The Group also operates other insurance programs, but these are of much lesser importance than those described above.

        All the insurance programs are backed by best-in-class insurers and reinsurers and are designed in such a way that we can integrate most newly-acquired businesses on a continuous basis. Our cover has been designed to reflect our risk profile and the capacity available in the insurance market. By centralizing our major programs, not only do we reduce costs, but we also provide world-class coverage for the entire Group.

B.10. Health, Safety and Environment (HSE)

        The manufacturing and research operations of Sanofi are subject to increasingly stringent health, safety and environmental (HSE) laws and regulations. These laws and regulations are complex and rapidly changing, and Sanofi invests the necessary sums in order to comply with them. This investment, which aims to respect health, safety and the environment, varies from year to year and totaled approximately €100€86 million in 2012.2013.

        The applicable environmental laws and regulations may require Sanofi to eradicate or reduce the effects of chemical substance usage and release at its various sites. The sites in question may belong to the Group, be currently operational, or they may have been owned or operational in the past. Under some of these laws and regulations, a current or previous owner or operator of a property may be held liable for the costs of removal or remediation of hazardous substances on, under or in its property, or transported from its property to third party sites, without regard to whether the owner or operator knew of, or under certain circumstances caused the presence of the contaminants, or at the time site operations occurred, the discharge of those substances was authorized.




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        Moreover, as is the case for a number of companies involved in the pharmaceutical, chemical and agrochemical industries, soil and groundwater contamination has occurred at some Group sites in the past, and may still occur or be discovered at others. In the Group's case, such sites are mainly located in the United States, Germany, France, Hungary, the Czech Republic, Slovakia,, Brazil, Italy and the United Kingdom. As part of a program of environmental audits conducted over the last few years, detailed assessments of the risk of soil and groundwater contamination have been carried out at current and former Group sites. In cooperation with national and local authorities, the Group regularly assesses the rehabilitation work required and carries out such work when appropriate. Long-term rehabilitation work is in progress or planed in Rochester, Cincinnati, Mount-Pleasant, East Palo Alto, Ambler and Portland in the United States; Frankfurt in Germany; Beaucaire, Valernes, Limay, Rousset,




Romainville, Neuville, Vitry, Tours and Toulouse in France; Dagenham in the United Kingdom; Brindisi and Garessio in Italy; Ujpest in Hungary; Hlohovec in Slovakia; Prague in the Czech Republic; and on a number of sites divested to third parties and covered by contractual environmental guarantees granted by Sanofi. Sanofi may also have potential liability for investigation and cleanup at several other sites.

        Provisions have been established for the sites already identified and to cover contractual guarantees for environmental liabilities for sites that have been divested. For example, the Group is currently participating in 2007an assessment process for natural resource damage liability (NRD) and in the Stateallocation process for future remediation costs that are related to the past operations of New Jersey initiated a claim against Bayer CropScience seeking compensation for damages caused to natural resources (NRD) at a former Rhône-PoulencRhone-Poulenc site in Portland Harbor, Oregon. The Group retains the United States, resulting in indemnification claims by Bayer CropScience against the Groupultimate liability for these costs under contractual environmental guarantees granted at the time of Bayer's acquisition of the CropScience business. Rehabilitation studies and an NRD assessment are underway in a similar project in Portland, Oregon. Potential environmental contingencies arising from certain business divestitures are described in Note D.22.e) to the consolidated financial statements included at Item 18 of this annual report. In 2012,2013, Sanofi spent €45€ 52 million on rehabilitating sites previously contaminated by soil or groundwater pollution. During the year ended December 31, 2012,2013, a comprehensive review was carried out relating to the legacy of environmental pollution. In light of data collected during this review, the Group adjusted the provisions to approximately €728€698 million as at December 31, 2012; this figure includes the provisions related to Genzyme.2013;

        Due to changes in environmental regulations governing site remediation, the Group's provisions for remediation obligations may not be adequate due to the multiple factors involved, such as the complexity of operational or previously operational sites, the nature of claims received, the rehabilitation techniques considered, the planned timetable for rehabilitation, and the outcome of discussions with national regulatory authorities or other potentially responsible parties, as in the case of multiparty sites. Given the long industrial history of some of our sites and the legacy obligations of Aventis arising from its past involvement in the chemical and agrochemical industries, it is impossible to quantify the future impact of these laws and regulations with precision. See "Item 3.D. Risk Factors — Environmental Risks of Our Industrial Activities".

        To our knowledge, the Group ishas not currentlybeen subject in 2013 to liabilities for non-compliance with current HSE laws and regulations that could be expected to significantly jeopardize its activities, financial situation or operating income. We also believe that we are in substantial compliance with current HSE laws and regulations and that all the environmental permits required to operate our facilities have been obtained. Regular HSE audits (53(43 in 2012)2013) are carried out by the Group in order to assess compliance with our standards (which implies compliance with regulations) and to initiate corrective measures. Additionally, nine81 specialized audits covering contractors (72) or biosafety (9) and 163164 loss prevention technical visits were carried out by our teams in 2012.2013.

        Sanofi has implemented a worldwide master policy on health, safety and the environment to promote the health and well-being of the employees and contractors working on its sites and respect for the environment. We consider this master policy to be an integral part of our commitment to social responsibility. In order to implement this master policy, 78 rules (policies) have been drawn up in the key fields of HSE management, Good HSE Practices, safety in the workplace, process safety, industrial hygiene, health in the workplace and protection of the environment.

Health

        From the development of compounds to the commercial launch of new drugs, Sanofi research scientists continuously assess the effect of products on human health. This expertise is made available to employees through two committees responsible for chemical and biological risk assessment. The Group's COVALIS committee classifies all chemical and pharmaceutical products handled within the Group and establishes workplace exposure limits for each of them. The Group's TRIBIO Committee is responsible for classifying all biological agents according to their degree of pathogenicity, and applies rules for their containment and the preventive measures to be respected throughout the Group. See "Item 3. Key Information — D. Risk Factors — Environmental Risks of Our Industrial Activities — Risks from the handling of hazardous materials could adversely affect our results of operations".




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        Appropriate industrial hygiene practices and programs are defined and implemented in each site. These practices consist essentially of containment measures for collective and individual protection against exposure in all workplaces where chemical substances or biological agents are handled. All personnel are monitored with an appropriate initial and routine medical program, focused on the potential occupational health risks linked to their duties.

        In addition, a committee has been set up to prepare and support the implementation of the new European Union REACH regulation on Registration, Evaluation, Authorization and Restriction of Chemicals. To fully comply with the new European regulation on the labeling of chemicals (Classification Labeling Packaging), the Group has registered the relevant hazardous chemical substances with the European Chemicals Agency (ECHA).

Safety

        Sanofi has rigorous policies to identify and evaluate safety risks and to develop preventive safety measures, and methods for checking their efficacy. Additionally, Sanofi invests in training that is designed to instill in all employees a sense of concern for safety, regardless of their duties. These policies are implemented on a worldwide scale to ensure the safety of all employees and to protect their health. Each project, whether in research, development or manufacturing, is subject to evaluation procedures, incorporating the chemical substance and process data communicated by the COVALIS and TRIBIO committees described above. The preventive measures are designed primarily to reduce the number and seriousness of work accidents and to minimize exposures involving permanent and temporary Sanofi employees as well as our sub-contractors.

        The French chemical manufacturing sites in Aramon, Neuville-sur-Saône, Sisteron and Vertolaye, as well as the plants located in the Hoechst Industry Park in Frankfurt, Germany, the Zentiva site in Hlohovec, Slovakia, and the chemical production site in Budapest, Hungary, are listed Seveso II (from the name of the European directive that deals with potentially dangerous sites through a list of activities and substances associated with classification thresholds). In accordance with French law on technological risk prevention, the French sites are also subject to heightened security inspections due to the toxic or flammable materials stored on the sites and used in the operating processes.

        Risk assessments of processes and installations are drawn up according to standards and internal guidelines incorporating the best state-of-the-art benchmarks for the industry. These assessments are used to fulfill regulatory requirements and are regularly updated. Particular attention is paid to any risk-generating changes: process or installation changes, as well as changes in production scale and transfers between industrial or research units.

        Our laboratories that specialize in process safety testing, which are fully integrated into our chemical development activities, apply methods to obtain the physico-chemical parameters of manufactured chemical substances (intermediate chemical compounds and active ingredients) and apply models to measure the effect of potentially leachable substances in the event of a major accident. In these laboratories the parameters for qualifying hazardous reactions are also determined to define scale-up process conditions while transferring from development stage to industrial scale. All these data ensure that our risk assessments are relevant.

        We believe that the safety management systems implemented at each site, the hazard studies carried out and the risk management methods implemented, as well as our third-party property insurance policies covering any third-party physical damage, are consistent with legal requirements and the best practices in the industry.

Environment

        The main objectives of our environmental policy are to implement clean manufacturing techniques, minimize the use of natural resources and reduce the environmental impact of our activities. In order to optimize and improve our environmental performance, we have a strategy of continuous improvement practiced at all our sites through the annual implementation of HSE progress plans. In addition, 6054 sites are currently ISO 14001 certified and 15 buildings are LEED certified either in U.S. and Europe. We believe that this strategy clearly expresses the commitment of both management and individuals to health, safety and the environment. In 2012, seven2013, eight of our European sites were included in the scope of the European CO₂ Emissions Credit Trading Scheme aimed at helping to reach the targets set by the Kyoto protocol.




        Our recent efforts in terms of environmental protection have mainly targeted reductions in energy consumption, greenhouse gas emissions control, improvements in the performance of water treatment installations, reduction of volatile organic compound emissions, raw material savings and recycling, and reductions in waste materials or increases in the percentage being recycled. In 2012,2013, we reduced carbon dioxide emissions caused by our sales representation car fleet by 10% versus 2011,2012 due to the policy of using energy efficient cars as well as a reduction in




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the number of cars. Measured against the benchmark year for our new targets (2010), direct and indirect emissions from our production and research facilities (excluding vehicle fleets) have fallen by 7.2%11.0% overall. We are targeting a 20% reduction in CO₂ emissions in 2020 vs. 2010 on a constant structure basis.

        An internal committee of experts called ECOVAL assesses the environmental impact of the pharmaceutical agents found in products marketed by Sanofi. It has developed an environmental risk assessment methodology and runs programs to collect the necessary data for such assessments. Additional ecotoxicity assessments are being performed on certain substances which predate current regulations, in order to obtain information that was not gathered when they were launched (as regulatory requirements were different at that time) and evaluate environmental risks resulting from their use by patients.

Markets

        A breakdown of revenues by business segment and by geographic region for 2012, 2011 and 2010 can be found at Note D.35. to our consolidated financial statements included at Item 18 of this annual report.

        The following market shares and ranking information is based on sales data from IMS Health MIDAS, retail and hospital for full year 2011, in constant euros (unless otherwise indicated). For more information on market shares and ranking, see "Presentation of Financial and Other Information" at the beginning of this document.

        Genzyme's sales are included from the acquisition date (April 1, 2011).

Marketing and Distribution

        Sanofi has a commercial presence in approximately 100 countries, and our products are available in more than 170. Our main markets in terms of net sales are, respectively:

        Emerging Markets (see definition in "Item 4. Information on the Company — Introduction" above) represent 31.9% of our net sales, the largest contribution to net sales of any region. We are the leading healthcare company in emerging markets. In 2012, sales in emerging markets grew by 8.3% at constant exchange rates (or +7.2% including the non consolidated sales of Genzyme in the first quarter of 2011). Latin America, Asia and Middle East recorded double-digit sales growth in 2012. Sales in BRIC countries were up 12.0%, accounting for 35.0% of Emerging Markets sales. Sales in China, Brazil, Russia were up 15.0%, 7.7% and 13.6% respectively. In 2012, sales in Africa and the Middle East each exceeded €1 billion for the first time.

        The United States represent 31.1% of our net sales; we rank twelfth with a market share of 3.7% (3.1% in 2011). Sales in the U.S. were up 0.7% at constant exchange rates in 2012 (or -2.8% including the non consolidated sales of Genzyme in the first quarter of 2011), driven by strong performances for Diabetes and Generics but impacted by the loss of exclusivity of Eloxatine® and generic competition for Lovenox®.

        Western Europe represents 23.8% of our net sales; we are the leading pharmaceutical company in France where our market share is 9.3% (9.9% in 2011), and we rank fourth in Germany with a 4.7% market share (after the Copaxone® transfer and without taking into account parallel trade). In 2012, sales in Western Europe were down 9.3% at constant exchange rates (or -7.5% including the non consolidated sales of Genzyme in the first quarter of 2011 and excluding Copaxone®), impacted by the transfer of the Copaxone® business to Teva, generic competition for Plavix®, Aprovel® and Taxotere® and the impact of austerity measures.

        Other countries represent 13.1% of our net sales; our market share in Japan is 3.5% (3.4% in 2011). Full-year 2012 sales in Japan were up 6.6% at constant exchange rates (or +4.7% with Genzyme on a full-year basis in 2011).




        A breakdown of our sales by geographic market is presented in "Item 5. Operating and Financial Review and Prospects — Results of Operations — Year Ended December 31, 2012 Compared with Year Ended December 31, 2011."

        Although specific distribution patterns vary by country, we sell prescription drugs primarily to wholesale drug distributors, independent and chain retail drug outlets, hospitals, clinics, managed care organizations and government institutions. Rare disease, renal, and biosurgery products are also sold directly to physicians. With the exception of Consumer Health Care products, these drugs are ordinarily dispensed to patients by pharmacies upon presentation of a doctor's prescription.

        We use a selection of channels to disseminate information about and promote our products among healthcare professionals and patients, ensuring that the channels not only cover our latest therapeutic advances but also our mature products, as they provide the foundation for satisfying major therapeutic needs. We regularly advertise in medical journals and exhibit at major medical congresses. In some countries, products are also marketed directly to patients by way of television, radio, newspapers and magazines, and we sometimes use new media channels (such as the internet) to market our products. National education and prevention campaigns can be used to improve patients' knowledge of conditions.

        Our medical representatives, who work closely with healthcare professionals, use their expertise to promote and provide information on our drugs. They represent our values on a day-to-day basis and are required to adhere to a code of ethics. As of December 31, 2012, we had a global sales force of 32,874 representatives: 9,866 in Europe, 4,866 in the United States, and 18,142 in the rest of the world.

        Although we market most of our products through our own sales forces, we have entered into and continue to form partnerships to co-promote/co-market certain products in specific geographic areas. Our major alliances are detailed at "Item 5. Operating and Financial Review and Prospects — Financial Presentation of Alliances." See also "Item 3. Key Information — D. Risk Factors — We rely on third parties for the marketing of some of our products."

        Our vaccines are sold and distributed through multiple channels, including physicians, pharmacies, hospitals, private companies and distributors in the private sector, and governmental entities and non-governmental organizations in the public and international donor markets, respectively.

        Our animal health products are sold and distributed through various channels, depending on each country's legislation for veterinary products. Merial takes into account each country's specific characteristics and sells either to veterinaries, chemists, or via wholesalers. In the case of epizootics, Merial delivers directly to governments.

Competition

        The pharmaceutical industry continues to experience significant changes in its competitive environment. Innovative drugs, a broad product range, and a presence in all geographical markets are key factors in maintaining a strong competitive position.

        There are four types of competition in the prescription pharmaceutical market:

•

competition between pharmaceutical companies to research and develop new patented products or new therapeutic indications;



•

competition between different patented pharmaceutical products marketed for the same therapeutic indication;



•

competition between original and generic products or between original biological products and biosimilars, at the end of regulatory exclusivity or patent protection; and



•

competition between generic or biosimilar products.

        We compete with other pharmaceutical companies in all major markets to develop innovative new products. We may develop new technologies and new patented products wholly in-house, but we also enter into collaborative




R&D agreements in order to access new technologies. See Note D.21. to our consolidated financial statements included at Item 18 of this annual report.

        Our prescription drugs compete in all major markets against patented drugs from major pharmaceutical companies like: Novo Nordisk in diabetes; Eli Lilly in diabetes and oncology; Bristol-Myers Squibb in diabetes and oncology; Merck & Co in diabetes and hypertension; GlaxoSmithKline in diabetes, oncology and thrombosis; Novartis in diabetes, multiple sclerosis, oncology and hypertension; Shire in rare diseases and renal; Pfizer in rare diseases and oncology; Biogen Idec, Teva and Merck Serono in multiple sclerosis; Bayer in multiple sclerosis and thrombosis prevention; Roche in oncology; Johnson & Johnson in oncology and thrombosis prevention; AstraZeneca in cardiovascular diseases, hypertension and oncology; Boehringer-Ingelheim in diabetes; Fresenius Medical Care in renal diseases.

        Our Consumer Health Care business competes with multinational corporations such as Johnson & Johnson, Bayer, Novartis, Pfizer and GlaxoSmithKline and local players, especially in emerging markets.

        Our generics business competes with multinational corporations such as Teva, Sandoz (a division of Novartis), Mylan and Actavis and local players, especially in emerging markets.

        In our Vaccines business, we compete primarily with multinational players backed by large healthcare groups, including Merck (outside Europe), GlaxoSmithKline, Pfizer (Wyeth), Novartis and Johnson & Johnson (Crucell).

        In selected market segments, Sanofi Pasteur competes with mid-size international players (such as CSL of Australia in the influenza market for the Southern Hemisphere). Sanofi Pasteur also competes with an increasing number of manufacturers, entrenched in densely populated and economically emerging regions, which are leveraging their cost/volume advantage and raising their level of technical capability and quality standards to compete on more sophisticated antigens in their domestic markets and increasingly in international donor markets. Multinational players are increasingly seeking alliances with manufacturers from emerging economies to secure positions in their markets of origin. Finally, there are emerging vaccine manufacturers in middle income countries, where privately owned companies in various industry sectors are investing in me-too vaccine production. Overall, there is increasingly intense competition on existing vaccines across the middle to low income segments.

        In our Animal Health business, we compete primarily with international companies like Pfizer in both production and companion animals; with Merck and Boehringer Ingelheim in production animals; with Boehringer Ingelheim mainly in the vaccines segment; with Novartis and Bayer for pets and particularly for pets parasiticides; and with Virbac, Ceva and Vetoquinol, French companies with global presence, for pharmaceuticals and vaccines (except for Vetoquinol, which operates only in the pharmaceutical segment).

        We also face competition from generic drugs that enter the market when our patent protection or regulatory exclusivity expires, or when we lose a patent infringement lawsuit (see "— Patents, Intellectual Property and Other Rights" above). Similarly, when a competing patented drug from another pharmaceutical company faces generic competition, these generic products can also affect the competitive environment of our own patented product. See "Item 3. Key Information — D. Risk factors — Risks related to our business".

        Competition from producers of generics has increased sharply in response to healthcare cost containment measures and to the increased number of products for which patents or regulatory exclusivity have expired.

        Generics manufacturers who have received all necessary regulatory approvals for a product may decide to launch a generic version before the patent expiry date. Such launch may occur notwithstanding the fact that the owner of the original product may already have commenced patent infringement litigation against the generics manufacturer. Such launches are said to be "at risk" for the promoter of the generic product because it may be required to pay damages to the owner of the original product in the context of patent infringement litigation; however, these launches may also significantly impair the profitability of the pharmaceutical company whose product is challenged.




        Drug manufacturers also face competition through parallel trading, also known as reimportation. This takes place when drugs sold abroad under the same brand name as in a domestic market are imported into that domestic market by parallel traders, who may repackage or resize the original product or sell it through alternative channels such as mail order or the Internet. This situation is of particular relevance to the European Union, where these practices have been encouraged by the current regulatory framework. Parallel traders take advantage of the price differentials between markets arising from factors including sales costs, market conditions (such as intermediate trading stages), tax rates, or national regulation of prices.

        Finally, pharmaceutical companies face illegal competition from counterfeit drugs. The WHO estimates that counterfeit products account for 10% of the market worldwide, rising to more than 30% in some countries. However, in markets where powerful regulatory controls are in place, counterfeit drugs are estimated to represent less than 1% of market value.

        The WHO also estimates that 50% of drugs sold on illegal websites have been found to be counterfeit.

        A counterfeit medicine is deliberately and fraudulently mislabeled with respect to its identity and/or its source. Counterfeiting can apply to both branded and generic products, and counterfeit products may include products with the correct ingredients or with the wrong ingredients, without active ingredients, with insufficient active ingredients, or with fake packaging.

        Sanofi acts ethically and responsibly to protect patient health worldwide. We become involved in any efforts made to overcome drug counterfeiting and have implemented the following actions:

•

Ever closer collaboration with international organizations and with customs and police to reinforce regulatory frameworks (Medicrime Convention, European Directive on Falsified Medicines, etc.), to investigate suspected counterfeiters and to deliver information and educational programs to raise awareness about the risk related to falsified medicines;



•

Centralization and analysis in a specialized laboratory of all suspect Sanofi drugs, to detect falsified medicines and inform health and enforcement authorities; and



•

Development of technologies to make drugs more difficult to copy through packaging protection programs and traceability programs.

Regulatory Framework

        The pharmaceutical and health-related biotechnology sectors are highly regulated. National and supranational health authorities administer a vast array of legal and regulatory requirements that dictate pre-approval testing and quality standards to maximize the safety and efficacy of a new medical product. These authorities also regulate product labeling, manufacturing, importation/exportation and marketing, as well as mandatory post-approval commitments that may include pediatric development.

        The submission of an application to a regulatory authority does not guarantee that a license to market will be granted. Furthermore, each regulatory authority may impose its own requirements during the course of the product development and application review. It may refuse to grant approval and require additional data before granting approval, even though the same product has already been approved in other countries. Regulatory authorities also have the authority to request product recalls, product withdrawals and penalties for violations of regulations based on data that are made available to them.

        Product approval can vary from six months or less to several years from the date of application depending upon the country. Factors such as the quality of data submitted, the degree of control exercised by the regulatory authority, the review procedures, the nature of the product and the condition to be treated, play a major role in the length of time a product is under review.

        In recent years, efforts have been made by the ICH (International Conference on Harmonization) participants to harmonize product development and regulatory submission requirements. The ICH consists of the regulatory agencies of the three founding members (European Union, Japan, United States), plus Health Canada and




Swissmedic as observers. An example of these efforts is the Common Technical Document (CTD), which can be used in different ICH regions for a product application review, with only local or regional adaptation. Electronic CTD is becoming the standard for worldwide product submission. Interestingly, emerging countries are starting to participate in ICH standardization discussions, and could be more involved in the near future.

        International collaboration between regulatory authorities continues to develop with implementation of confidentiality arrangements between ICH regulatory authorities, and with non-ICH regulatory authorities. Examples include work-sharing on Good Manufacturing Practices (GMP) and Good Clinical Practices (GCP) inspections and regular interactions in the form of "clusters" (i.e. pediatrics, oncology, advanced therapy medicinal products, vaccines, pharmacogenomics, orphans, biosimilars, blood products) between the United States and the European Union. Other initiatives include the presence of permanent representatives from the FDA and the Japanese Pharmaceutical and Medical Devices Agency (PMDA) in London, and a corresponding permanent representative from EMA at the FDA.

        The requirement of many countries, including Japan and several member states of the European Union, to negotiate selling prices or reimbursement rates for pharmaceutical products with government regulators significantly extends the time for market entry beyond the initial marketing approval. While marketing approvals for new pharmaceutical products in the European Union have been largely centralized with the EMA, pricing and reimbursement remain a matter of national competence.

In the European Union, there are three main procedures by which to apply for marketing authorization:

•

The centralized procedure is mandatory for certain types of medicinal products. When an application is submitted to the EMA, the scientific evaluation of the application is carried out by the Committee for Medicinal Products for Human Use (CHMP) and a scientific opinion is prepared. This opinion is sent to the European Commission which adopts the final decision and grants an E.U. marketing authorization. Such a marketing authorization is valid throughout the E.U. and the drug may be marketed within all E.U. member states.



•

If a company is seeking a national marketing authorization in more than one member state, the mutual recognition or decentralized procedure is available to facilitate the granting of harmonized national authorizations across member states. Both the decentralized and the mutual recognition procedures are based on the recognition by national competent authorities of a first assessment performed by the regulatory authority of one member state.



•

National authorizations are still possible, but are only for products intended for commercialization in a single E.U. member state or for line extensions to existing national product licenses.

        Generic products are subject to the same marketing authorization procedures. A generic product must contain the same active medicinal substance as a reference product approved in the E.U. Generic applications are abridged: generic manufacturers only need to submit quality data and demonstrate that the generic drug is "bioequivalent" to the originator product (i.e., works in the same way in the patient's body), but do not need to submit safety or efficacy data since regulatory authorities can refer to the reference product's dossier. Generic product applications can be filed and approved in the European Union only after the originator product eight year data exclusivity period has expired. Further, generic manufacturers can only market their generic products after a 10- or 11-year period has elapsed from the date of approval of the originator product has elapsed.

        Another relevant aspect in the E.U. regulatory framework is the "sunset clause": a provision leading to the cessation of the validity of any marketing authorization if it is not followed by marketing within three years or, if marketing is interrupted for a period of three consecutive years.

        Post-authorization safety monitoring of pharmaceutical products is carefully regulated in Europe. The E.U. pharmaceutical legislation for medicinal products describes the respective obligations of the marketing authorization holder and of the regulatory authorities to set up a system for pharmacovigilance in order to collect, collate and evaluate information about suspected adverse reactions.




        It is possible for the regulatory authorities to withdraw products from the market for safety reasons. Responsibilities for pharmacovigilance rest with the regulatory authorities of all the E.U. member states in which the marketing authorizations are held. In accordance with applicable legislation, each E.U. member state has a pharmacovigilance system for the collection and evaluation of information relevant to the benefit to risk balance of medicinal products. The regulatory authority regularly monitors the safety profile of the products available on its territory and takes appropriate action where necessary and monitors the compliance of marketing authorization holders with their obligations with respect to pharmacovigilance. All relevant information is shared between the regulatory authorities and the marketing authorization holder, in order to allow all parties involved in pharmacovigilance activities to fulfill their obligations and responsibilities.

        In 2010, new legislation aimed at improving patient protection by strengthening the E.U. system for the safety monitoring of medicines was approved. In July 2012, Pharmacovigilance legislation came into force, with significant impacts on the regulatory environment. Changes include the creation of a new scientific advisory committee, the Pharmacovigilance Risk Assessment Committee (PRAC) at EMA level, with a key role in recommendation/advice on product safety issues. This committee, which includes a patient representative, can hold public hearings. Since its introduction in the second quarter of 2012 the PRAC has initiated reviews of products with subsequent regulatory actions leading to harmonization of the labeling. For instance several Sanofi products including zolpidem, clopidogrel, and insulin glargine are currently under review.

        The Pharmacovigilance legislation also strengthens the legal basis for regulators to require post-authorization safety and efficacy studies throughout the life cycle of a medicinal product, with regulatory supervision of protocols and results. Such studies are aimed at collecting data to enable the safety or efficacy of medicinal products to be assessed in everyday medical practice. The granting of marketing authorization will be conditional on such studies being performed. Consequently, the pharmaceutical industry will have to build the need for post-authorization safety studies (PASS) and post-authorization efficacy studies (PAES) into development and life cycle management plans. As of today, no PASS or PAES has been requested to Sanofi.

        The Pharmacovigilance legislation also introduces a new periodic safety report prepared by the companies. This is no longer limited to safety data, but instead presents a critical analysis of the risk-benefit balance of the medicinal product, taking into account new or emerging information in the context of cumulative information on risks and benefits.

        In theUnited States, applications for approval are submitted for review to the FDA, which has broad regulatory powers over all pharmaceutical and biological products that are intended for sale and marketing in the U.S. To commercialize a product in the U.S., a New Drug Application (NDA) under the Food, Drug and Cosmetic (FD&C) Act or Biological License Application (BLA) under the Public Health Service (PHS) Act is submitted to the FDA with data for filing and pre-market review. Specifically, the FDA must decide whether the product is safe and effective for its proposed use, if the benefits of the drug's use outweigh its risks, whether the drug's labeling is adequate, and if the manufacturing of the drug and the controls used for maintaining quality are adequate to preserve the drug's identity, strength, quality and purity. Based upon this review, the FDA can require post-approval commitments and requirements. Approval for a new indication of a previously approved product requires the submission of a supplemental NDA (sNDA) for a drug or supplemental BLA (sBLA) for a biological product.

        The FD&C Act provides another abbreviated option for NDA approved products, called the 505(b)(2) pathway. This pre-market application may rely on the FDA finding that the reference product has been found to be safe and effective by the FDA based upon the innovator's preclinical and clinical data.

        Sponsors wishing to market a generic drug can file an Abbreviated NDA (ANDA) under 505(j) of the FD&C Act. These applications are "abbreviated" because they are generally not required to include data to establish safety and effectiveness, but need only demonstrate that their product is bioequivalent (i.e., performs in humans in the same manner as the originator's product). Consequently, the length of time and cost required for development of generics can be considerably less than for the originator's drug. With effect from October 1, 2012 (FDASIA — GDUFA), an application for a generic drug product requires a user fee payment. User fees for generic drug applications are necessary to help alleviate the backlog of applications at the Office of Generics Drugs (OGD). The




current review time for an ANDA exceeds 30 months. The ANDA pathway in the United States can only be used for generics of drugs approved under the FD&C Act.

        The Patient Protection and Affordable Care Act, signed into law by President Obama on March 23, 2010, amends the Public Health Service Act to create an abbreviated licensure pathway (351k) for biological products that are demonstrated to be "biosimilar" to or "interchangeable" with an FDA-licensed biological product. As of January 1, 2013, no sponsor has submitted a 351k application to the FDA for review.

        On July 9, 2012, President Obama signed into law the Food and Drug Administration Safety and Innovation Act (FDASIA), which primarily amends the Federal Food, Drug, and Cosmetic Act and Public Health Service Act. In addition to reauthorizing and amending several drug and medical device provisions that were scheduled to expire, the new law establishes new user fee statutes for generic drugs and biosimilars. FDASIA also provides the FDA with tools intended to expedite the development and review of innovative new medicines that address certain unmet medical needs, and with new authority concerning drug shortages, among other things. The law significantly changes the FDC Act and the PHS Act in several respects that will have considerable short- and long-term effects on the regulated industry.

        FDASIA includes 11 titles, the first five of which concern drug and medical device user fee and pediatric-related programs. FDASIA § 501 makes permanent both the Best Pharmaceuticals for Children Act and Pediatric Research Equity Act by eliminating the "sunset" provision of the BPCA and a related PREA provision. Title VI includes changes to the law styled as medical device regulatory improvements. Title VII makes significant changes to enhance the FDA's inspection authority and the drug supply chain. Title VIII creates incentives to encourage the development of products for antibiotic-resistant infections. Title IX expands the scope of products that qualify for accelerated approval and creates a new "breakthrough therapy" program, among other things. Title X is intended to legislatively address the current drug shortage crisis. Finally, Title XI reauthorizes certain provisions created by the FDA Amendments Act of 2007, provides for the regulation of medical gases, and includes several miscellaneous provisions, such as provisions on prescription drug abuse, 180-day generic drug marketing exclusivity, citizen petitions, controlled substances, and nanotechnology to name a few.

In Japan, regulatory authorities can require local development studies, though they also accept multi-national studies. They can also request bridging studies to verify that foreign clinical data are applicable to Japanese patients and require data to determine the appropriateness of the dosages for Japanese patients. These additional procedures have created a significant delay in the registration of some innovative products in Japan compared to the European Union and the United States. In order to solve this drug-lag problem, the MHLW (Ministry of Health, Labor and Welfare) introduced the new NHI (National Health Insurance) pricing system on a trial basis. Reductions in NHI prices of new drugs every two years are compensated by a "Premium" for a maximum of 15 years. A "Premium" is granted in exchange for the development of unproved drugs/off-label indications with high medical needs. Pharmaceutical manufacturers are required to conduct literatures-based submission within six months or start a clinical trial for registration within one year after the official request. Otherwise, NHI prices of all products of the manufacturer would be reduced dramatically. In addition, the regulatory authorities have begun to promote multinational studies.

        For new drugs and biosimilar products with approval applications submitted on or after April 2013, Japan will begin implementing a "Risk management plan", similar to the E.U. Pharmacogivilance system.

        For generic products, the data necessary for filing are similar to E.U. and U.S. requirements. Pharmaceutical companies only need to submit quality data, and data demonstrating bioequivalence to the originator product, unless the drug is administered intravenously.

Focus on Biologics

        Products can be referred to as "biologics" when they are derived from plant or animal tissues, including blood products or products manufactured within living cells (e.g., antibodies). Most biologics are complex molecules or mixtures of molecules which are difficult to characterize and require physico-chemical-biological testing, and an understanding of and control over the manufacturing process.




        The concept of "generics" is not scientifically appropriate for biologics due to their high level of complexity and therefore the concept of "biosimilar" products is more appropriate. A full comparison of the purity, safety and efficacy of the biosimilar product against the reference biological product should be undertaken, including assessment of physical/chemical, biological, non-clinical and clinical similarity.

        In the European Union, a regulatory framework for developing and evaluating biosimilar products has been in place since November 2005. The CHMP has issued several product/disease specific guidelines for biosimilar products including guidance on preclinical and clinical development of biosimilars of low molecular weight heparins (LMWH). However, starting in 2011 and continuing in 2012, the EMA has initiated a revision of the majority of the existing biosimilar guidelines (general guidelines, as well as immunogenicity and product-related guidelines for recombinant insulin and LMWH). Two new guidelines on monoclonal antibodies and immunogenicity of monoclonal antibodies have also been issued; other product-related guidelines (follitropina andb interferon) are under preparation.

        In response to the European Commission's wish to stimulate the global development of biosimilars, biosimilar reference medicines sourced outside the European Economic Area will be allowed (the basis will always be a locally licensed product, but 'Bridging studies' to another product licensed in another part of the world will be allowed). Currently in the E.U., the reference product for a biosimilar has to be licensed in the E.U. and therefore clinical trials have to be repeated in all three major markets (Japan, E.U. and U.S.). This important change will enter into force after the revision of the EU so-called "over-arching" biosimilar guideline, already under review and expected for early 2013.

        While the EMA has adopted so far a balanced approach for all biosimilars, which allows evaluation on a case-by-case basis in accordance with relevant biosimilar guidelines, it seems that there is some willingness to simplify the pathway in very specific circumstances. For a very simple biological fully characterized on the quality level, a biosimilar could be authorized based on a bioequivalence study combined only with an extensive quality package. With respect to vaccines, the CHMP position is that it is at present unlikely that these products may be characterized at the molecular level, and that each vaccine product must be evaluated on a case-by-case basis.

        In Japan, guidelines defining the regulatory approval pathway for follow-on biologics were finalized in March 2009. These guidelines set out the requirements on CMC (Chemistry, Manufacturing and Control), preclinical and clinical data to be considered for the development of the new application category of biosimilars. Unlike the CHMP guidelines, the main scope of the Japanese guidelines includes recombinant proteins and polypeptides, but not polysaccharides such as LMWH.

        In the United States, the Patient Protection and Affordable Care Act, in particular Title VII, Subtitle A "Biologics Price Competition and Innovation Act," was signed into law by President Obama on March 23, 2010, This law amends the Public Health Service Act to create an abbreviated licensure pathway (351k) for biological products that are demonstrated to be "biosimilar" to or "interchangeable" with an FDA-licensed biological product.

        On February 15, 2012, the FDA published for consultation three draft guidance documents for biosimilar development: Scientific Considerations in Demonstrating Biosimilarity to a Reference Product, Quality Considerations in Demonstrating Biosimilarity to a Reference Protein Product, and Biosimilars: Questions and Answers Regarding Implementation of the Biologics Price Competition and Innovation Act of 2009. These guidance documents remain in draft format. A fourth document on clinical pharmacology has yet to be published.

        The Federal Food, Drug, and Cosmetic Act, as amended by the Biosimilar User Fee Act of 2012 (Title IV of the Food and Drug Administration Safety and Innovation Act, Public Law 112-144, which was signed by the President on July 9, 2012), authorizes the FDA to assess and collect user fees for certain activities in connection with biosimilar biological product development, for certain applications and supplements for approval of biosimilar biological products, on establishments where approved biosimilar biological product products are made, and on biosimilar biological products after approval.

        At the December 2012 FDA-CMS meeting, the agency stated that they had received 50 requests for initial meetings with potential biosimilar sponsors to talk about development plans and conducted 34. The agency has now




received 12 biosimilar INDs and has many other active programs with no IND submitted. Proposals have involved 12 reference products.

Focus on Medical Devices

        In the E.U., the European Commission released its legislative proposal on medical devices on September 26, 2012. The new revised framework could enter into force by 2015, if approved at first reading.

        The main change of this proposal is the replacement of the current three directives by two regulations (one for medical devices and one forin-vitro medical devices).

        The objectives of the legislation are to simplify and strengthen the current E.U. legal framework by implementing a robust and transparent regulatory framework. The revision impacts the pre-market assessment of devices by strengthening the oversight of Notified Bodies (NBs), post-market safety and continuous assessment of NB compliance, and the management of the regulatory system (better coordination, transparency and communication). A "scrutiny procedure" (via a European decentralized approach) would be used for high-risk Class III devices (novel technologies or specific public health threats). The new revised framework also formally introduces the concept of "companion diagnostic", which is expected to deliver a more accurate definition of the patient population that will benefit from a given product.

        In addition, enhanced vigilance and post-market surveillance systems for medical devices, with greater harmonization of E.U. member states' market surveillance activities, are expected.

        In the U.S., in January 2011, the FDA announced a Plan of Action, which includes 36 specific actions, to modernize and improve the FDA's premarket review of medical devices. In the two years since the FDA began implementing the plan, the speed and predictability of device review have improved for the first time in almost a decade, including significant reductions in the time it takes the FDA to review applications and the size of application backlogs. These results have been achieved even though the Plan of Action has not yet been fully implemented.

        The FDA has met almost all of its early implementation timelines. As implementation continues and the impact of the Plan grows over the next several years, the FDA expects performance on review times and reductions in backlogs to continue to improve. The new process improvements and resources made available by this year's reauthorization of the Medical Device User Fee Act (MDUFA III) will accelerate the FDA's ability to make premarket review of devices predictable, consistent, transparent, efficient, and timely.

        Recent biomedical breakthroughs are pushing medicine toward tailored therapeutics, or personalized medicine. This means an increase in the development of companion diagnostics. To address this issue, the FDA issued the draft guidance In Vitro Companion Diagnostic Devices on July 12, 2011, to communicate to industry how the FDA defines these devices and what the Agency's regulatory requirements are for them. The finalization of this guidance has been delayed.

Focus on transparency and public access to documents

        Over the last two to three years the pharmaceutical industry has been subject to growing pressure for greater transparency about clinical trials (conduct and results). Regulatory authorities are also being pushed for more openness and transparency, for example by making more comprehensive disclosure about the rationale and basis of regulatory decisions on medicinal products, so as to enhance the credibility of the regulatory process. This is a significant driver of the transparency initiatives undertaken in several countries.

        Pharmaceutical manufacturers have committed to publishing protocols and results of clinical studies performed with their products in publicly accessible registries. In addition, both ICH and non-ICH countries often impose mandatory disclosure of clinical trials information.

        From a regulatory perspective, ambitious initiatives have been undertaken by the major regulatory authorities.




        E.U. pharmaceutical legislation for medicinal products requires national regulatory authorities and the EMA to actively publish information concerning authorization and supervision of medicinal products. The EMA has introduced a series of initiatives aimed at improving the transparency of its activities, such as improving the format of the European Public Assessment Report, web-published product approvals, withdrawals and rejections. In addition, there is an increased focus on comparative efficacy and effectiveness. With the new E.U. pharmacovigilance legislation, there will be greater transparency, especially with regard to communication of safety issues (e.g. public hearings, specific European web-portals with information on medicinal products). Finally, patients and consumers are increasingly involved in the work of the EMA's scientific committees.

        The European regulators recently took a major step towards more openness and transparency by giving much wider access to documents originated by pharmaceutical companies and submitted to the regulatory authorities for scientific evaluation after a regulatory decision is taken. Whilst it is anticipated that these documents would be redacted before disclosure in order to protect information contained therein that cannot be disclosed (commercial confidential information or personal data), the draft document released in June 2011 for public consultation by the EMA and the Head of Medicines Agencies (HMA) gives a narrower definition of commercially confidential information and personal data within the context of the marketing authorization dossier. Consequently, the scope of the information accessible to the public has been considerably widened (e.g., clinical study reports in a marketing authorization dossier, but also a significant portion of non-clinical test data).

        During the second half of 2012 the EMA informed stakeholders about its intention to implement by January 2014 the previously announced proactive policy for public disclosure of raw data from clinical trials that are included in marketing authorization dossiers of approved medicinal products.

        Protection of patients' personal data, data format definition and document redaction, rules of engagement for third parties willing to conduct new analyses on data files, legal aspects about risk of infringement of commercially confidential information are among the main ethical and technical issues to be overcome before the new transparency policy is enforced, and are to be discussed between the EMA and its stakeholders over the first part of 2013.

        The EMA does not routinely require raw data files as part of the submitted dossier, implying that this new policy will apply in particular to prospective submissions.

        In the highly competitive field of medicinal products, it is still necessary to reinforce the principle that non-innovators cannot obtain marketing authorization based solely on the originator's data released in the E.U. for as long as the data protection period is in force.

        As of the end of 2012, the E.U. disclosure policy appears more advanced than that in other major markets.

        In the U.S., FDA Commissioner, Dr. Margaret A. Hamburg, launched FDA's Transparency Initiative in June 2009, in response to President Obama's January 2009 "Open Government Initiative". The objective of the initiative was to render the FDA much more transparent and open to the American public by providing the public with useful, user-friendly information about agency activities and decision-making.

        The FDA Transparency Initiative has three phases: Phase I — Improving the understanding of FDA basics (completed with ongoing updates); Phase II — Improving FDA's disclosure of information to the public (ongoing); and Phase III — Improving FDA's transparency to regulated industry (ongoing). Proposals to improve transparency and access to information were released for consultation for both Phase II (May 19, 2010) and Phase III (January 6, 2011). Some of the less controversial proposals have been implemented; others, such as proactive release of information that the Agency has in its possession, may require revisions to U.S. federal regulations.




Other new legislation proposed or pending implementation

        Clinical trials applications:    a proposal for a regulation of the European Parliament and of the Council on clinical trials on medicinal products for human use, repealing Directive 2001/20/EC, was released in July 2012 with the following objectives:

1)

To establish a modern regulatory framework for submission, assessment and regulatory follow-up of applications for clinical trials, taking into account the multinational research environment. The goal is to reduce administrative burdens and operational costs, and cut lead times to launch clinical trials, insofar as they are caused by regulation.



2)

Regulatory requirements which are adapted to practical considerations, constraints and needs, without compromising the safety, wellbeing and rights of participants in clinical trials and without compromising data robustness, with a goal of reducing administrative burdens and operational costs as regards two key regulatory requirements: the annual safety report and obligatory insurance/indemnification.



3)

Addressing the global dimension of clinical trials when ensuring compliance with Good Clinical Practices (GCP). The operational objective is to ensure that clinical trials conducted in non-EU countries comply with GCP.

        Discussions have begun on this proposal (2012/2013) and the final regulation is expected to come into force by 2016.

        Overall, the replacement of Directive 2001/20/EC by a Regulation is expected to introduce a harmonized review pathway and timelines without interfering with Member States' competences in terms of ethical aspects. A single E.U. submission portal is expected to significantly streamline the review process and will also allow increased transparency over the conduct and results of clinical trials.

        Falsified medicines:    implementation of Directive 2011/62/EU: The European Union (E.U.) has reformed the rules for importing into the E.U. active substances for medicinal products for human use. As of January 2, 2013, all imported active substances must have been manufactured in compliance with standards of good manufacturing practices (GMP) at least equivalent to the GMP of the E.U. The manufacturing standards in the EU for active substances are those of the "International Conference for Harmonisation" — ICH Q7. As of July 2, 2013, this compliance must be confirmed in writing by the competent authority of the exporting country. This document must also confirm that the plant where the active substance was manufactured is subject to control and enforcement of good manufacturing practices at least equivalent to that in the E.U.

        In practice, the full implementation of Directive 2011/62/EU by July 2013 could generate temporary drug shortages in the E.U. in those cases where manufacturers will be unable to supply the required documentation.

Pricing & Reimbursement

        Rising overall healthcare costs are leading to efforts to curb drug expenditures in most markets in which Sanofi operates. Increasingly these efforts result in pricing and market access controls for pharmaceuticals. The nature and impact of these controls vary from country to country, but some common themes are reference pricing, systematic price reductions, formularies, volume limitations, patient co-pay requirements, and generic substitution. In addition, governments and third-party payers are increasingly demanding comparative / relative effectiveness data to support their decision making process. They are also increasing their utilization of emerging healthcare information technologies such as electronic prescribing and health records to enforce transparency and tight compliance with these regulations and controls. As a result, the environment in which pharmaceutical companies must operate in order to make their products available to patients and providers who need them continues to grow more complex each year.

        Significant changes in the Pharmaceutical/Healthcare environment emerged since 2010:

•

In the United States, implementation of health insurance and market reforms continued during 2012. These reforms are expected to lead to a large number of uninsured being covered by 2014, either through




state programs or mandatory enrollment in private plans. Cost-containment pressures affecting pharmaceuticals are also persisting in the public and private health care sectors.

•

In Europe, emergency cost containment measures and reforms introduced since 2010 in several countries (including, Germany, Greece, Spain, Portugal, and Ireland) are being implemented. These will significantly affect the size of the pharmaceutical market. A number of Central and Eastern European countries are also implementing cost containment measures (Hungary, Slovakia, Poland). In parallel, the full effect of the new German laws (end to the free-price-setting system) has only just begun to see negative dividends for the industry. In 2011, France implemented numerous changes to pharmaceutical access. In addition, health economic assessment is now officially part of the price determination in countries such as France and Spain. Details of the UK value-based pricing of drugs scheme are still to be finalized and it is not clear how or if the emphasis of the Incremental Cost Effectiveness Ratio (ICER) used by the National Institute for Clinical Excellence (NICE) will be diminished.



•

In Japan, along with the usual biennial price cuts (April 2012), the extension of price premiums for drug development and measures to encourage the access to new medications have been announced.

        Regardless of the exact method, we believe that third-party payers will continue to act to curb the cost of pharmaceutical products. While the impact of these measures cannot be predicted with certainty, we are taking the necessary steps to defend the accessibility and price of our products in order to reflect the value of our innovative product offerings:

•

We actively engage with our key stakeholders on the value of our products to them. These stakeholders — including physicians, patient groups, pharmacists, government authorities and third-party payers — can have a significant impact on the market accessibility of our products.



•

We continue to add flexibility and adaptability to our operations so as to better prepare, diagnose, and address issues in individual markets.

        Keeping in mind the importance of recognizing the value of our products and the high cost of research and development, we continue to analyze innovative pricing and access strategies that balance patient accessibility with appropriate rewards for innovation. Specifically, we are involved in risk sharing agreements with payers, whereby part of the financial risk related to a treatment's success is carried by the marketing company. Those agreements usually foresee that the clinical efficacy of a drug is followed after its commercialization, for a specified period of time and patient population. The price and reimbursement level of the drug is then either confirmed or revised based on these post-marketing results.

Insurance and Risk Coverage

        We are protected by four key insurance programs, relying not only on the traditional corporate insurance and reinsurance market but also on our captive insurance company, Carraig Insurance Ltd (Carraig).

        These four key programs cover Property & Business Interruption, General & Product Liability, Stock and Transit, and Directors & Officers Liability.

        Our captive insurance company, Carraig, participates in our coverage for various lines of insurance mainly including excess property, stock and transit and general & product liability. Carraig is run under the supervision of the Irish regulatory authorities, is wholly-owned by Sanofi, and has sufficient resources to meet those portions of our risks that it has agreed to cover. It sets premiums for Group entities at market rates. Claims are assessed using the traditional models applied by insurance and reinsurance companies, and the company's reserves are regularly verified and confirmed by independent actuaries.

        Our Property & Business Interruption program covers all Group entities worldwide, wherever it is possible to use a centralized program operated by our captive insurance company. This approach shares risk between Group entities, enabling us to set deductibles and guarantees that are appropriate to the needs of local entities. It also incorporates a prevention program, including a comprehensive site visit program covering our production, storage, research and distribution facilities and standardized repair and maintenance procedures across all sites. Specialist




site visits are conducted every year to address specific needs, such as testing of sprinkler systems or emergency plans to deal with flooding risks.

        The Stock and Transit program protects goods of all kinds owned by the Group that are in transit nationally or internationally, whatever the means of transport, and all our inventories wherever they are located. Sharing risk between Group entities means that we can set deductibles at appropriate levels, for instance differentiating between goods that require temperature controlled distribution and those that do not. We have developed a prevention program with assistance from experts, implementing best practices in this area at our distribution sites. This program, which is led by our captive insurance company, has substantial capacity, largely to deal with the growth in sea freight which can lead to a concentration of value in a single ship.

        Our General & Product Liability program has been renewed for all our subsidiaries worldwide wherever it was possible to do so, despite the increasing reluctance in the insurance and reinsurance market to cover product liability risks for large pharmaceutical groups. For several years, insurers have been reducing product liability cover because of the difficulty of insuring some products that have been subject to numerous claims. These products are excluded from the cover provided by insurers, and hence from the cover obtained by us on the insurance market. This applies to a few of our products, principally those described in Note D.22.a) to our consolidated financial statements included at Item 18 in this annual report. Because of these market conditions we have increased, year by year, the extent to which we self-insure.

        The principal risk exposure for our pharmaceutical products is covered with low deductibles at the country level, the greatest level of risk being retained by our captive insurance company. The level of risk self-insured by the Group — including our captive reinsurance company — enables us to retain control over the management and prevention of risk. Our negotiations with third-party insurers and reinsurers are tailored to our specific risks. In particular, they allow for differential treatment of products in the development phase, for the discrepancies in risk exposure between European countries and the United States, and for specific issues arising in certain jurisdictions. Coverage is adjusted every year in order to take into account the relative weight of new product liability risks, such as those relating to rare diseases with very low exposure or to healthcare products which do not require marketing approval.

        Our cover for risks that are not specific to the pharmaceutical industry (general liability) is designed to address the potential impacts of our operations.

        For all lines of business of Carraig, outstanding claims are covered by provisions for the estimated cost of settling all claims incurred but not paid at the balance sheet date, whether reported or not, together with all related claims handling expenses. Where there is sufficient data history from the company or from the market for claims made and settled, management — with assistance from independent actuaries — prepares an actuarial estimate of the company's exposure to unreported claims for the risks covered. The actuaries perform an actuarial valuation of the company's IBNR (incurred but not reported) and ALAE (allocated loss adjustment expense) liabilities at year end. Two ultimate loss projections (based upon reported losses and paid losses respectively) are computed each year using the Bornhuetter-Ferguson method; these projections form the basis for the provisions set.

        The Directors & Officers Liability program protects the legal entities under our control, and their directors and officers. Our captive insurance company is not involved in this program.

        The Group also operates other insurance programs, but these are of much lesser importance than those described above.

        All the insurance programs are backed by best-in-class insurers and reinsurers and are designed in such a way that we can integrate most newly-acquired businesses on a continuous basis. Our cover has been designed to reflect our risk profile and the capacity available in the insurance market. By centralizing our major programs, not only do we reduce costs, but we also provide world-class coverage for the entire Group.





C. Organizational Structure


Significant subsidiaries

        Sanofi is the holding company of a consolidated group of subsidiaries. The table below sets forth our significant subsidiaries and affiliates as of December 31, 2012.2013. For a list of the principal companies in our consolidated group, see Note F. to our consolidated financial statements, included in this annual report at Item 18.




Significant Subsidiary or Affiliate				Date of Incorporation				Country of Incorporation				Principal Activity				Financial and Voting Interest
Aventis Inc.		07/01/1998		United States		Pharmaceuticals		100%
Aventis Pharma S.A.		09/24/1974		France		Pharmaceuticals		100%
Genzyme Corporation		11/21/1991		United States		Pharmaceuticals		100%
Hoechst GmbH		07/08/1974		Germany		Pharmaceuticals		100%
Merial Ltd		08/01/1997		United Kingdom		Animal Health		100%
Merial S.A.S.		02/25/1941		France		Animal Health		100%
Sanofi-Aventis Amérique du Nord S.A.S.		09/20/1985		France		Pharmaceuticals		100%
Sanofi-Aventis Deutschland GmbH		06/30/1997		Germany		Pharmaceuticals		100%
Sanofi-Aventis Europe S.A.S.		07/15/1996		France		Pharmaceuticals		100%
Sanofi-Aventis U.S. LLC		06/28/2000		United States		Pharmaceuticals		100%
Sanofi Pasteur		02/08/1989		France		Vaccines		100%
Sanofi Pasteur Inc.		01/18/1977		United States		Vaccines		100%
Sanofi Winthrop Industrie		12/11/1972		France		Pharmaceuticals		100%

        Since 2009, we have transformed our Group through numerous acquisitions (see Item 4A "History and Development of the Company"), in particular those of Genzyme in April 2011 and Merial in September 2009. The financial effects of the Genzyme acquisition are presented in Note D.1.2.D.1.3. to our consolidated financial statements, included in this annual report at Item 18. The financial effects of the Merial acquisition are presented in Note D.1.3. to our consolidated financial statements for the year ended December 31, 2010, included in our annual report on Form 20-F for that year.

        In certain countries, we carry on some of our business operations through joint ventures with local partners. We have also entered into worldwide marketing arrangements. Two of our major products (Plavix® and Aprovel®) are marketed through an alliance with BMS, Actonel® is marketed through an alliance with Warner Chilcott (acquired by Actavis), and Zaltrap® is marketed through an alliance with Regeneron. See "Item 5 — Financial Presentation of Alliances".

Internal organization of activities

        Sanofi and its subsidiaries form a group, organized around three activities: Pharmaceuticals, Human Vaccines (Vaccines) and Animal Health.

        Within the Group, responsibility for research and development (R&D) in their respective fields rests with Sanofi and Genzyme Corporation (Pharmaceuticals), Sanofi Pasteur and Sanofi Pasteur, Inc. (Vaccines), and Merial Ltd




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and Merial S.A.S. (Animal Health); these entities define strategic priorities and coordinate R&D efforts. To fulfill this role, these entities subcontract R&D work to subsidiaries that have the necessary resources. They also license patents, manufacturing know-how and trademarks to certain French and foreign subsidiaries. In these cases, the licensee subsidiaries manufacture and distribute the Group's products, either directly or via local distribution entities.




        Our industrial property rights, patents and trademarks are mainly held by the following companies:

–

Pharmaceuticals: Sanofi, Aventis Pharma S.A. (France), Sanofi-Aventis Deutschland GmbH (Germany), Sanofi-Aventis U.S. LLC and Genzyme Corporation (United States).;



–

Vaccines: Sanofi Pasteur (France) and Sanofi Pasteur, Inc. (United States).;



–

Animal Health: Merial Ltd (United Kingdom) and Merial S.A.S. (France).

        For a description of our principal items of property, plant and equipment, see Item 4.D. "Property, Plant and Equipment". These assets are mainly held by Sanofi Pasteur, Genzyme Corporation, Sanofi Chimie, Sanofi-Aventis Deutschland GmbH, Sanofi Pasteur Inc. and Sanofi Winthrop Industrie.


D. Property, Plant and Equipment


D.1. Overview

        Our headquarters are located in Paris, France. See "— Office Space" below.

        We operate our business through office premises and research, production and logistics facilities in approximately 100 countries around the world. Our office premises house of all our support functions, plus operational representatives from our subsidiaries and the Group.

        A breakdown of these sites by use and by ownership status (owned versus leasehold) is provided below. Breakdowns are based on surface area. All surface area figures are unaudited.

Breakdown of sites by use*

Industrial		63%60%
Research		13%
Offices		12%
Logistics		7%10%
Other		5%

---

*

Our Vaccines and Animal Health activities occupy offices and research, production and warehouse facilities. These sites are allocated between the first four categories in the table above as appropriate.

Breakdown of sites by ownership status

Leasehold		32%
Owned31%		68%
Owned		69%

        We own most of our research and development and production facilities, either freehold or under finance leases with a purchase option exercisable at expiration of the lease.

D.2. Description of our sites

Sanofi industrial sites

        The profound transformation of Sanofi and the increased importance of our growth platforms are driving the continuing evolution of our Industrial Affairs department in support of our new business model. As a result, since June 2013 the Industrial Affairs department has been responsible for all production and quality operations within the Group. The department focuses on the needs of customers and the quality of service, the sharing of lean manufacturing practices, the development of a common culture committed to quality, and the sharing of expertise within technology platforms, particularly in biologics and injectables.




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        We carry out our industrial production at 112 sites in nearly 4041 countries (including 4037 sites in emerging markets):

•

82 sites for our Pharmaceuticals activity, including Genzyme;



•

1312 sites for the industrial operations of Sanofi Pasteur in vaccines; and



•

1718 sites for the Animal Health activities of Merial.




In 2012,2013, we produced the following quantities:

•

Pharmaceuticals: 3,5203,153 million boxes produced and packaged (4,117 including outsourced production) and for Genzyme, 9.1 million vials (42.7 million(3,758 including outsourced production);



•

Vaccines: 417476 million containers prepared (451 million including(including outsourced production); and



•

Animal Health: 500550 million doses of vaccines for all species other than avian, 90 billion doses of avian vaccines, and 1.7 billion68 million units of pharmaceutical products (pipettes, pills, vials, syringes).products.

        We believe that our production facilities are in compliance with all regulatory requirements, are properly maintained and are generally suitable for future needs. Nonetheless, we regularly inspect and evaluate these facilities with regard to environmental, health, safety and security matters, quality compliance and capacity utilization. For more information about our property, plant and equipment, see Note D.3 to theour consolidated financial statements.statements, included at Item 18 of this annual report and "B.8 Production and Raw Materials."

Industrial Sites: Pharmaceuticals

        Production of chemical and pharmaceutical products is the responsibility of our Industrial Affairs function,department, which is also in charge of most of our logistics facilities (distribution and storage centers).

        The sites where our major drugs, active ingredients, specialties and medical devices are manufactured are:

•

France: Ambarès (Aprovel®, Depakine®, Multaq®), Aramon (irbesartan), Compiègne (Arava®, Orelox®, Magne B6®), Le Trait (Lovenox®), Lyon Gerland (Thymoglobulin®, Celsior®), Maisons-Alfort (Lovenox®), Neuville (dronedarone)Neuville-sur-Saône (which discontinued its traditional chemicals activities at end 2013 with the transfer of dronedarone production to the Sisteron site), Quetigny (Stilnox®, Plavix®), Sisteron (clopidogrel bisulfate, dronedarone, zolpidem tartrate), Tours (Stilnox®, Aprovel®, Xatral®), Vitry-sur Seine (docetaxel/aflibercept);



•

Germany: Frankfurt (insulins, Ramipril®,Ramipril, Lantus®, Tritace®, oncology, Taxotere®, Eloxatine®, medical devices, Apidra®);



•

Ireland: Waterford (Myozyme®, Lumizyme®, Cholestagel®, Thymoglobulin®, Renagel®, Renvela®, and Cerezyme®);



•

Italy: Scoppito (Tritace®, Amaryl®) and Anagni (Depakine®, Fasturtec®, Rifa antibiotic family);



•

United Kingdom: Dagenham (Taxotere®, and Eloxatine®, currently beingproduction of which was transferred to Frankfurt in Germany)Germany after closure of the site in June 2013), Fawdon (Plavix®, Aprovel®), Haverhill (sevelamer hydrochloride API (Renagel®), sevelamer carbonate API (Renvela®), Cerezyme®, Fabrazyme®, Thyrogen®, Myozyme®, etc), and Holmes Chapel (Nasacort®, Flutiform®Flutiform™);



•

Hungary: Ujpest (irbesartan), Csanyikvölgy (Lovenox®);



•

Japan: Kawagoe (Plavix®);



•

United States: Kansas City (Allegra®, currently being transferred to Tours and Compiègne in France), and Chattanooga (Consumer Health Care products);



•

Brazil: Suzano (Amaryl® and Novalgine®) and Campinas (generics);



•

Mexico: Ocoyoacac (Flagyl®); and



•

Singapore: Jurong (enoxaparin).

        The rare diseases specialist Genzyme became a Sanofi subsidiary in April 2011. This acquisition expanded our presence in biotechnologies, especially rare diseases.        Genzyme manages 11 production sites and works with more than 20 subcontractors to manufacture 22 commercial products over a broad range of technological platforms.

        Genzyme's sites are as follows:

•

Belgium: Geel (alglucosidase alpha:(A1 alpha glucosidase: Myozyme®/Lumizyme®);




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•

United States: Allston (Cerezyme®), Fabrazyme®); Framingham (Fabrazyme®, Myozyme®, Thyrogen®, Seprafilm, Hyaluronic Acid);Seprafilm®, hyaluronic acid), Cambridge (Carticel®, Epicel®, MACI® (Matrix-induced Autologous Chondrocyte Implantation);, Ridgefield (Synvisc®, Hectorol®, Mozobil®, Jonexa®, Prevelle®);, Woburn (LeGoo®), and Lynnwood, Washington (Leukine®), a former Bayer Healthcare site;




•

Australia: Perth (MACI®); and



•

Denmark: Copenhagen (MACI®).

Industrial Sites: Vaccines (Sanofi Pasteur)

        The headquarters of our Vaccines division, Sanofi Pasteur, are located in Lyon, France. Sanofi Pasteur has production and/or R&D sites at Swiftwater, Cambridge, Rockville, Canton and Orlando (United States); Toronto, (Canada); Marcy l'Étoile, Neuville and Val de Reuil (France); Shenzhen (China); Pilar (Argentina); Chachoengsao (Thailand); Hyderabad (India); and Ocoyoacac (Mexico.)(Mexico).

        In May 2009, we began construction of a new vaccine manufacturing center at our Neuville-sur-Saône site in France. This €300 million investment over the 2009-2011 period, the largest ever made by Sanofi, is intended to gradually transitionreplace the existing chemicalchemicals activity toon the site, which was discontinued at the end of 2013, by vaccine production from 20132014 onwards.

        In 2010, Sanofi Pasteur acquired VaxDesign, a U.S. company located in Orlando, Florida. VaxDesign's Modular IMmune In-vitro Construct (MIMIC®) System is designed to capture genetic and environmental diversity and predict human immune responses. The MIMIC® platform is expected to accelerate vaccine development, reduce time to market and increase success rates in the pre-clinical and clinical stages.

        Sanofi Pasteur owns its Research and DevelopmentR&D and production sites, either freehold or under finance leases with a purchase option exercisable at expiration of the lease.

Industrial Sites: Animal Health (Merial)

        Since Merck and Sanofi announced in March 2011 that they were maintaining separate activities in the field of animal health,        Merial has become a dedicated Sanofi division. Merial has 1718 industrial sites in nine different countries, 915 R&D sites, and numerous administrative offices including its headquarters at Lyon, France.

        Merial industrial sites are as follows:

•

Brazil: Paulinia (avermectin-based pharmaceutical products, and vaccines against foot-and-mouth disease and rabies), and a production unit approved by the FDA and EMA for NexGard™;



•

China: Nanchang (live avian vaccines) and Nanjing (inactivated avian vaccines);



•

France: Toulouse (Frontline® and clostridial vaccines), St-Priest LPA (vaccines), Lyon Gerland, Saint-Herblon (Coophavet), Lentilly (packaging);



•

Italy: Noventa (inactivated avian vaccines);



•

Netherlands: Lelystad (antigen and vaccine against foot-and-mouth disease);



•

Uruguay: Montevideo (primarily anti-clostridium antigens);



•

United Kingdom: Pirbright (antigens and vaccines against foot-and-mouth disease);



•

United States: dedicated facilities for Merial's avian vaccines at Berlin (Maryland), Gainesville (Georgia) and Raleigh (North Carolina);, dedicated facility for mammal viral and bacterial vaccines at Athens (Georgia);, and dedicated facility for autogenous bovine and swine vaccines at Worthington (Minnesota); and



•

New Zealand: Ancare facility, Auckland (pharmaceutical products, mainly for the bovine market).

Research & Development sites:sites

        In Pharmaceuticals,

        Research research and Developmentdevelopment activities are conducted at 15 sites:

•

6 operational sites in France: Chilly/Longjumeau, Montpellier, Paris, Strasbourg, Toulouse and Vitry/Alfortville;



•

2 sites in the rest of Europe (Germany and the Netherlands), the largestlarger of which is in Frankfurt (Germany);






•

5 sites in the United States, the largest being the Bridgewater, Cambridge and Framingham sites; and



•

2 sites in Asia with 1(1 clinical research unit in Beijing, China and 1 unit in Japan.Japan).

        Vaccines research and development sites are presented above.

        In Animal Health, research and development activities are conducted at 15 sites.




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D.3. Acquisitions, Capital Expenditures and Divestitures

        The carrying amount of our property, plant and equipment at December 31, 20122013 was €10,578€10,182 million. During 2012,2013, we invested €1,351€1,082 million (see Note D.3. to our consolidated financial statements, included at Item 18 of this annual report), mainly in increasing capacity and improving productivity at our various production and R&D sites.

        Our principal capital expenditures and divestitures in 2010, 2011, 2012 and 20122013 are described in Notes D.1. ("Impact of changes in the scope of consolidation"), D.2. ("Merial"), D.3. ("Property, plant and equipment") and D.4. ("Goodwill and other intangible assets") to our consolidated financial statements, included at Item 18 of this annual report.

        As of December 31, 2012,2013, our firm commitments in respect of future capital expenditures amounted to €323€324 million. The principal sites involved were (forwere: for the Pharmaceuticals activity)segment, the industrial facilities at Frankfurt (Germany), Framingham and Allston (United States), Vertolaye (France), and in Hungary; and for the Vaccines activity,segment, the facility at Swiftwater (United States).

        In the medium term and assuming no changes in the scope of consolidation, we expect to invest on average €1.4€1.3 billion a year in property, plant and equipment. We believe that our own cash resources and the undrawn portion of our existing credit facilities will be sufficient to fund these expenditures.

        Our principal ongoing investments are described below. During 2012,2013, our industrial network actively contributed to the development of our seven growth platforms: Emerging Markets, Diabetes Solutions, Consumer Health Care, New Genzyme and Other Innovative Products (all of which are part of our Pharmaceuticals activity)segment), Vaccines, and Animal Health.

Pharmaceuticals

•

In ourDiabetes Solutions growth platform, the Frankfurt site — the principal manufacturing center for Sanofi Diabetes products — is being equipped with a new aseptic processing area that uses isolator technology to significantly improve the aseptic filling process.process and improve productivity. This investment will be operational in 2016. The Frankfurt site also celebrated the production of its billionth SoloSTAR® insulin pen on World Diabetes Day in November 2013. In February 2013, Sanofi announced it was investing €44 million in Genzyme's biotechnology campus in Waterford, Ireland. In particular, Sanofi will be investing in filling facilities for Lantus®. Subject to regulatory approval, Lantus® should go into commercial production in Waterford in 2017.

The Sanofi Diabetes industrial network is also expanding its footprint in emerging markets, both in Russia with the Orel site, which is now Sanofi's second largest insulin pen production site after Frankfurt, and in China (Beijing), where a new facility inaugurated in 2012 has begun assembly and packaging ofSoloSTAR®, the pre-filled injection system forLantus®. Finally in order to incorporate Shantha (India) into Sanofi's injectables platform, a certain number of technologies for manufacturing Insuman® insulin are currently being transferred from the Frankfurt site to the Indian site so that it can handle filling and packaging for the local market.



•

Our industrial pharmaceutical operations for theConsumer Health Care platform are based on a network of 10 production sites spread over four growth hubs: in Europe, with the Lisieux (France) factories producing Doliprane®, Origgio (Italy), Cologne (Germany) and Rzeszow (Poland); in Asia, (where awhere the new consumer products facility at Hangzhou in China with a production capacity of(production capacity: 3 billion pills will bepills) has been operational earlysince the beginning of 2013, as well as the Tangshan (China) and Virginia (Australia) sites; in 2013), South America, with the Suzano (Brazil) site; and in the United States, (focused onwith the Chattem site, which in Tennessee, whichSeptember 2013 launched the over-the-counter antacid Rolaids® product from its Chattanooga (Tennessee) production facility (which in 2012 led preparations for the U.S. launch of the pediatric oral suspension formulation of Allegra®). TheIn 2013, the industrial development teams also contributedcontinued making an active contribution to over 30 newconsumer health care product launches, of consumer products during 2012, expanding our presence in this highly competitive market.



•

In theOther Innovative Products platform, our industrial teams are pooling their expertise to develop ever more sophisticated processes. Three dedicated biotech hubs are being developed in Europe at Frankfurt (Germany); Vitry-sur-Seine (France), our biggest integrated cell culture facility, which in 2012 produced the first technical batches2013 completed a production campaign ofaflibercept (the active ingredient ofZaltrap®); as well as launching production of a new product; and Lyon Gerland (France), a new world center dedicated to the production ofthymoglobulin® for the prevention and treatment of transplant rejection. During 2012, our teams at Lyon prepared

In March 2013, a dossier forbioproduction platform was launched to develop synergies between Pharmaceuticals, Sanofi Pasteur, Genzyme, Merial and the healthcare authorities as partBiotherapeutics businesses. This platform will enable Sanofi to build its




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presence in biotechnologies by taking advantage of transversal opportunities, in particular in the use of production capacity, development, technologies of the process of transferring production to this site.

future in biotechnology, and skills management.

•

The development of ourEmerging Markets platform is built on a network of over 30 regional and local industrial sites in 20 countries, supporting growth in these markets. In addition to our recent investments in China in Diabetes Solutions and Consumer Health Care,CHC, a number of other projects are under way. In the Middle




East, 2012 saw Sanofi lay the foundation stone for a facility in Saudi Arabia that will produce solid pharmaceutical formulations, which will be marketed from 2015. In Latin America, where we already have a large industrial footprint, we are building a dedicated hormonal products facilitythe Brasilia plant has been operational since 2013, producing oral antibiotics and generic contraceptives, with potential capacity of 66 million units. In addition, after the acquisition of Genfar at end 2012, Sanofi is now the leading player in Brasilia. Also duringthe Colombian pharmaceuticals market and in the generics market, with the Villa-Rica factory supporting the Sanofi production site at Cali.

In India since 2012, the Ankleshwar Pharma site in Gujarat State (India) has handled packaging and quality control through to release of the first commercial batches ofAllSTAR™AllStar™, the first high-quality affordable insulin pen specifically intended for the local market.pen. The Goa site (India) invested to extend its solid formulation production capacity to around 2.5 billion pills a year. AndIn Vietnam, Sanofi announced in Algeria, Sanofi signed an agreement with the local authorities for a major industrial investmentMarch 2013 that will lead toit was investing $75 million in the construction of our biggesta new factory to produce specialty pharmaceuticals and CHC products from 2015.

In Algeria, where Sanofi has been operating for over 20 years, the foundation stone of the new Sidi Abdellah factory was laid in September 2013. This site, which will be the largest Sanofi industrial complex in the Africa-MiddleAfrica/Middle East region.territory, will mainly produce dry and liquid formulations, and will also host a distribution center. It will have production and distribution capacity of 100 million units per annum, or around 80% of the volumes distributed by Sanofi in Algeria.

•

The industrial network ofDuring 2013, our Pharmaceuticals activitysegment continued throughout 2012 with the roll-out ofto roll out the economic performance improvement plan launched in 2011. ThisBased on its Sanofi Manufacturing System, the plan is intended to deliver performance standards commensurate with the diversity of our pharmaceuticals businesses and markets, and to meet the industrial challenges ahead to 2020. Our Industrial Affairs department is constantly adapting the network of industrial sites to market needs, as a result of which a number of sites are in the process of sale or closure, such as Kansas City in 2015 (United States), Dagenham in 2013 and Fawdon in 2015 (United Kingdom), Romainville (France),in 2013, and Hlohovec (Slovakia)the traditional chemicals business in Neuville-sur-Saône in 2013 (France).



•

The industrial network of theNew Genzyme growth platform is predominantly located in the United States where major investments are under way, especially at the Framingham Biologics site, which was approved by the FDA and the EMA in 2012 for the manufacture of Fabrazyme® (Fabry disease).way. The site at Allston (Massachusetts) has initiated a major investment program in connection with the implementation of its compliance remediation workplan, approved by the FDA in January 2012. Finally,In addition, the Bayer Healthcare facilityFramlington Biologics site, based at Lynnwood (Washington), specializing in the manufacture74 New York Avenue, has started construction of Leukine®, joined the Genzyme industrial network in 2012.a new factory to increase purification capacity for production of Fabrazyme® representing an investment of $83 million.

Vaccines (Sanofi Pasteur)

        Sanofi Pasteur is undergoing a major investment phase, particularly the new dedicated dengue fever vaccine facility at Neuville (France), which will produceproduced its first batches in 2014. Two new dedicated influenza vaccine facilities are in the start-up phase: Shenzhen (China) is currently testing its production processes, while, approved by the Chinese authorities (CFDA) at end 2013, and Ocoyoacac (Mexico). Ocoyoacac was approved by the Mexican authorities at the start of 2012, and began production in time for the Mexicanhad a successful first influenza vaccination programseason in September 2012.Mexico in 2013, and is currently doubling its capacity for 2014. In response to observations made by the FDA during routine inspections conducted in 2012 in Toronto (Canada) and Marcy l'Etoile (France), Sanofi Pasteur initiated and stepped up a compliance program to address the quality issues identified.

Animal Health (Merial)

        Merial is adapting its industrial capacity to keep pace with the growing animal health market. In 2012, Merial acquired Newport Laboratories, which has an autogenous vaccine production facility at Worthington, Minnesota (United States). In China,order to support the future growth of avian and other vaccines in the Chinese market, Merial is investinghas invested $70 million in a new site in the Nanchang high-tech development zone, which was inaugurated in order to service future growth in vaccines for avian and other species in the local market.October 2013. In Europe, a substantial portion of the investment in recent years has been directedBrazil at the transfer of vaccine production from Lyon Gerland (France) to a newPaulinia site, nearby at Saint Priest (Lyon Porte des Alpes). At the Toulouse site (France), Merial is adapting its industrial facilities for the production capacity toof the new products by investing in a packaging line for use in the manufacturing ofproductCertifect®NexGard™ (compliant with(to be governed by European Union Good Manufacturing Practices (GMP), and approved by the U.S. Environmental Protection Agency)FDA).




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Innovation and culture of industrial excellence

        In 2013 Sanofi highlighted industrial innovation by organizing its fifth annual round of innovation trophies, centered on patient needs, industrial performance and citizen entrepreneurship.

        In addition, the investment in a building foran innovative biosynthesis process at the Saint-Aubin-Lès-Elbeuf and Vertolaye sites in France is entering the final phase before start-up and production, with the certification/approval of the numerous items of fermentation and extraction plant which will improve Sanofi's international competitiveness in the production of the injectable form of Zactran®.corticosteroids.

        Industrial innovation was a key theme in 2012.        The fourth "Innovation Trophy" awards again illustrated the striking progress being made in this area, which we regard as a top priority in our industrial strategy. The2012 Pierre Potier Prize was awarded to the ChemicalsChemistry and Biotechnology teams who developedwere awarded the 2013 industry prize by the Chemistry Society of France for developing an innovative industrial process for the production ofmanufacturing artemisinin, used as the basis for antimalarialanti-malarial drugs. InvestmentFinally, the development teams won the Good Design Award, one of the most important industrial design prizes, giving worldwide recognition for Lyxumia® and its AllStar™ and JuniorSTAR® insulin pens.

        The ambition of our Industrial Affairs department is ongoingto continue to raise quality standards in the installationGroup's production activities, and to remain a world leader and a benchmark in the global pharmaceutical industry. To achieve this goal, all our activities share a common culture of an innovative biosynthesis process at two French sites, Saint-Aubin-lès-Elbeuf (Seine Maritime)industrial excellence, enshrined in the Sanofi Manufacturing System. This sets out a series of priorities (such as customer service, constant improvement, site network optimization and Vertolaye (Puy de Dôme), with the aim of improving the international competitiveness oftransverse optimization) that constitute our corticosteroid production.industrial vision and will be crucial to our mutual success.




D.4. Office Space

        As part of the rationalization of our office sites in the Paris region of France, we have since mid-2009 been carrying out a medium-term review of our office space master plan for the Greater Paris area.area since 2009.

        This review will result in all our Group support functions and operating divisions being housed on a smaller number of sites (5(five in 2012 on completion of phase 1, and 3three by 2015). All of these sites will meet environmental certification standards, and offer cost-effective space solutions.

        In this context, the new "Campus Sanofi Val de Bièvre" (CSVB) is currently under construction on the old site (Gentilly Val De Bièvre). The foundation stone was laid at end 2012, with completion expected in early 2015.


        Group support functions and operational divisions were brought together under one roof at the new world headquarters in the business district of Paris (54 rue La Boétie, 8^th arrondissement) in February 2012. The headquarters, in which new work spaces have been developed, marks the Group's transformation symbolically.

        A new Master Plan, initiated at end 2011, which defines the Group's medium-term office space requirements in the Lyon agglomeration, is in the implementation phase. A first off-plan lease was signed in early 2013 covering some of the "Pooled Services" functions, due to be delivered in March 2015 by its owner, Plastic Omnium. A second lease will be signed in early October 2014 for 2016, covering the corporate functions of Merial and Sanofi Pasteur via the sale of an existing freehold site and the off-plan reconstruction of the Group's first energy-positive building in France. The Master Plan aims to align the new sites on the Paris Master Plan, involving buildings with environmental certification, accompanied by a reduction in overall occupancy costs and work space in line with the new Corporate Charter.

        An office space integration project covering the real estate portfolio of Genzyme and Merial, begun in 2011, is operative in 50 countries covering 540,000m². At end 2013, 44 sites had been integrated.

        Other Master Plans were initiated at end 2012 to define office space real estate strategy, the first in the Cambridge (Massachussetts, USA) agglomeration, the second in Frankfurt (Germany). Operational implementation had not begun at end 2013. Integration of Genzyme's activities in the United States will enable office space use to be redefiined in that city.

Item 4A.    Unresolved Staff Comments


        N/A




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Item 5. Operating and Financial Review and Prospects


        You should read the following discussion in conjunction with our consolidated financial statements and the notes thereto included in this annual report at Item 18.

        Our consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and with IFRS adopted by the European Union as of December 31, 2012.2013.

        The following discussion contains forward-looking statements that involve inherent risks and uncertainties. Actual results may differ materially from those contained in such forward-looking statements. See "Cautionary Statement Regarding Forward-Looking Statements" at the beginning of this document.

        Unless otherwise stated, all change figures in this item are given on a reported basis.

20122013 Overview

        During 2012,2013, we continued to follow the strategic direction that we established in 2008, and to pursue the objectives for 2012-2015 announced in September 2011 and reiterated in February 2013. The thrust of these objectives is fourfold: growour four key objectives: continuing to build a global healthcare leader with synergistic platforms, bringbringing innovative products to market, seizeexploring value-enhancing external growth opportunities, and adaptadapting our structure for futurestructures to meet the opportunities and challenges and opportunities.of the future.

        Our 2012 full-year results for 2013 were, affecteduntil August, negatively impacted by the residual effects of the loss of exclusivity for Plavix® and Avapro® in the United States of a number of our historical flagship products in the first half,previous year: Avapro® in March 2012, Plavix® in May 2012, and by ongoing genericEloxatin® in August 2012. Despite temporary difficulties for our Generics business in Brazil, a slowdown in the Chinese pharmaceutical market, temporary supply limitations for our Pentacel® and Adacel® vaccines in the United States and strong competition for our former flagshipFrontline® product in Animal Health, our net sales growth has nevertheless moved back into positive territory since September 2013, which marked the end of the patent cliff related to some of our major products. However,In a tough economic climate and against a backdrop of pressure by governments to cut healthcare costs, we have been able to limit the erosiondrop in our net sales and profitability was cushioned bythanks to the performance of our growth platforms the contribution from Genzyme, and tightrigorous cost control.

        Our 2012 net sales reached €34,947for the year were €32,951 million, 4.7% higher5.7% lower than in 20112012 (0.5% at constant exchange rates, see definition at "— Presentation of Net Sales" below), driven mainly byreflecting the performance€1.3 billion of the Emerging Markets, Diabetes, Vaccines, Consumer Health Care, Animal Health and Other Innovative Products growth platforms, by advances for the Generics business, and by the contribution from Genzyme (whose net sales have only been consolidated since April 2011). This performance was achieved in spite of the significant impact oflost through competition from generics which cost us €1.2 billion in lost sales (€1.3 billion at constant exchange rates, see(see "— Impacts from generic competition" below), but also good performances from our Diabetes Solutions, Genzyme and the endingEmerging Markets growth platforms. The year also saw a number of the co-promotion agreement with Teva on Copaxone®. Milestones fornew product launches stemming from our research efforts during 2012 included the launch ofincluding Zaltrap® (metastatic colorectal cancer), Lyxumia® (type 2 diabetes), and Aubagio® and Lemtrada™ (multiple sclerosis) in Europe, and Kynamro™ (homozygous familial hypercholesterolemia) in the United States.

        Our other revenues fell by €655 million (64.9%) year-on-year, mainly as a result of the loss of license revenues under the worldwide alliance with Bristol-Myers Squibb (BMS) on Plavix® and Aprovel®. The restructuring of the alliance between Sanofi and BMS, announced in October 2012 following the loss of exclusivity for Plavix® and Avapro®/Avalide® in many major markets, took effect on January 1, 2013. Under the new agreement, BMS returned to us our rights to Plavix® and Avapro®/ Avalide® worldwide, with the exception of the United States and Puerto Rico for Plavix®, thereby giving us exclusive control over these products and their commercialization.

        The ongoing realignment of our resources, cutcombined with favorable exchange rate effects, helped reduce further our research and development expenses by 0.4%2.8% and limited the rise inour selling and general expenses to 1.8%, after including Genzyme's costs over the full year. Businessby 3.7%. Our business net income was €8,179€6,687 million, 7.0% lower than in 2011 on a reported basis, mainly due to the loss of exclusivity for Plavix® and Avapro® in the United States and to competitiondown 17.5% from generics. Business2012, while our business earnings per share were €5.05, down 17.8% from 2012. This year-on-year fall includes the effect of exchange rates, which was €6.20, 6.8% lower than in 2011.negative overall. Business net income and business earnings per share are non-GAAP financial measures which our management uses to monitor our operational performance, and which are defined atunder "— Business Net Income" below.

        Net income attributable to equity holders of Sanofi cameamounted to €4,967€3,717 million, down 12.8% on 2011.24.0% from 2012. Basic earnings per share amounted to €3.76, also 12.8% lower than in 2011;were €2.81, down 24.3% from 2012; diluted earnings per share for 20122013 were €3.74 (12.8%€2.78 (24.5% lower).

        During 2012,2013, we continued with our policy of targeted acquisitions and of alliances in research and development. In Consumer Health Care, we acquired the worldwide rights to the Rolaids® brand via our Chattem subsidiary in January 2013. In Generics, we announced in October 2012 that we had signed an agreement to acquirecompleted the acquisition of Colombian pharmaceutical company Genfar S.A., a Colombian pharmaceutical company which is a key generics




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significant player not only in Colombia, but alsoits home country and throughout Latin America generally, in other Latin American countries. Closing of this acquisition is subject to certain conditions, and is expected to take place during the first half ofMarch 2013. In biosurgery, we acquired the U.S. medical devices company Pluromed, Inc. in April 2012. We strengthened our Animal Health, division with the April 2012 acquisition of Newport Laboratories (a U.S. American producer of autogenous vaccines for the bovine and swine markets), and by entering into an agreement to acquireMerial acquired the animal health division of Dosch Pharmaceuticals Pvt Ltd that will give Merial an entry point into the




Indian market.in India in June 2013. We also entered into various alliances and licensing deals to extend or strengthen our existing research fields.

        In October 2012, Sanofi and Bristol-Myers Squibb announced that they were restructuring their alliance following the loss of exclusivity for Plavix® and Avapro®/Avalide® in many major markets. The new agreement, which took effect on January 1, 2013, returns the rights for Plavix® and Avapro®/Avalide® to Sanofi worldwide (except for the United States and Puerto Rico for Plavix®), thereby giving Sanofi exclusive control over these products and their commercialization.

        In August 2012, we sold our interest in Société Financière des Laboratoires de Cosmétologie Yves Rocher, in line with our desire to focus on strategic activities.

As of December 31, 2012,2013, we had reduced our debt, net of cash and cash equivalents to €7.7€6.0 billion compared(compared with €10.9€7.7 billion as of December 31, 2011. The Annual General Meeting of shareholders, to be held on May 3, 2013, will be asked to approve a2012). A dividend of €2.77€2.80 per share in respect of the 2012 fiscal2013 financial year, representing a payout equivalent to 45%55% of our business net income.

        While we remain focused on our objectives for 2012-2015 announced in September 2011, we expect erosion from generic competition to continue, with a negative impact on net income, in 2013 (see "— Impacts from generic competition" below). While we continue to save costs, we expect that part of the savings will be reinvested in product launches and late-stage clinical trials.submitted for approval by the shareholders at the Annual General Meeting of May 5, 2014.

        Our operations generate significant cash flow. We recorded €8,171€6,954 million of net cash provided by operating activities in 20122013 compared to €9,319€8,171 million in 2011.2012. During the course of 2012,2013, we paid out €3.5€3.6 billion in dividends and repaid part of our debt.dividends. With respect to our financial position, we ended 20122013 with our debt, net of cash and cash equivalents (see definition at "— Liquidity and Capital Resources" below) at €7,719€6,043 million (2011: €10,859(2012: €7,719 million). Debt, net of cash and cash equivalents, is a financial indicator that is used by management to measure the Company'sour overall net indebtedness and to manage the Group'sour equity capital. In order to assess the Company'sour financing risk, we also use a "gearing ratio", a non-GAAP financial measure that we define as the ratio of debt, net of cash and cash equivalents, to total equity. Our gearing ratio was 10.6% at the end of 2013 compared to 13.4% at the end of 2012 versus 19.3% at the end of 2011.2012. See "— Liquidity and Capital Resources" below.




Impacts from generic competition

        Some of our flagship products continued to experience sales erosion in 20122013 due to generic competition. While we do not believe it is possible to state with certainty what level of net sales would have been achieved in the absence of generic competition, we are able to estimate the impact of generic competition for each product.

        A comparison of our consolidated net sales for the years ended December 31, 20122013 and 20112012 (see "— Results of Operations — Year Ended December 31, 20122013 Compared with Year Ended December 31, 2011"2012") shows that in 2013, generic competition from generics was associated withled to a declineloss of €1.2€1.3 billion inof net sales in 2012on a reported basis (or €1.3 billion at constant exchange rates). The table below showssets forth the impact by product.

(€ million) Product		2012 Reported			2011 Reported			Change on a reported basis			Change on a reported basis (%)				2013 Reported		2012 Reported		Change on a reported basis		Change on a reported basis (%)
Plavix® Western Europe			285	(1)		406	(1)		(121	)		-29.8%			257		307		(50	)	-16.3%
Aprovel® Western Europe			542	(1)		718	(1)		(176	)		-24.5%			338		557		(219	)	-39.3%
Taxotere® Western Europe			53			189			(136	)		-72.0%			22		53		(31	)	-58.5%
Eloxatine® U.S.			718			806			(88	)		-10.9%
Eloxatin® U.S.															19		718		(699	)	-97.4%
Lovenox® U.S.			319			633			(314	)		-49.6%			187		319		(132	)	-41.4%
Plavix® U.S.			76	(2)		196			(120	)		-61.2%
Aprovel® U.S.			45	(2)		49			(4	)		-8.2%
Plavix® U.S.(1)															5		76		(71	)	-93.4%
Aprovel® U.S.(1)															17		45		(28	)	-62.2%
Taxotere® U.S.			53			243			(190	)		-78.2%			42		53		(11	)	-20.8%
Ambien® U.S.			85			82			+3			+3.7%			88		85		+3		+3.5%
Xatral® U.S.			20			75			(55	)		-73.3%			3		20		(17	)	-85.0%
Nasacort® U.S.			21			54			(33	)		-61.1%			7		21		(14	)	-66.7%
Xyzal® U.S.			6			13			(7	)		-53.8%			6		6		—		—
Allegra® U.S.			(1	)		3			(4	)		-133.3%			(3	)	(1	)	(2	)	—
Total			2,222			3,467			(1,245	)		-35.9%			988		2,259		(1,271	)	-56.3%

⁽¹⁾

Excluding industrial sales (Plavix®: €22 million in 2012, €8 million in 2011; Aprovel®: €15 million in 2012, €35 million in 2011).

⁽²⁾

Sales of active ingredient to the BMS majority-owned entity in the United States.

        Despite the introduction of generics in the second half of 2012, Myslee® in Japan posted a 2.8% rise in net sales in 2012 (or a fall of 4.9% at constant exchange rates), to €292 million.

We expect the erosion fromcaused by generic competition to continue in 2013,2014, with a negative impact on net income. The following products are expectedProducts susceptible to be impacted by genericsthe effects of such competition in 2013:2014 include:

•

productsthose for which new generic competition can reasonably be expected in 20132014 based on expiration dates, patents or other regulatory or commercial exclusivity: Allegra® in Japan;



•

products for which generics competition began in 2012 and is expected to continue in 2013: Plavix®, Avapro® and Eloxatine®Renagel®/Renvela® in the United States (net salesand Europe;




Table of Plavix® and Avapro® in the U.S. are not included in our consolidated net sales), Co-Aprovel® in Europe, and Myslee® and Taxotere® in Japan;Contents



•

productsthose which already faced generic competition as of January 1, 2012,2013, but for which 2013whose sales can reasonably be expected to be subject to further erosion:sales erosion in 2014: Plavix® and Aprovel® in Europe; Lovenox®, Eloxatine®, Aprovel®Ambien® and Taxotere® in Europe;the United States; and Lovenox®Allegra®, Ambien®Amaryl®, Xyzal®,Myslee® and Taxotere®, Xatral® and Nasacort®in the U.S.Japan.

        Eloxatine® inIn 2013, the U.S. is a special case. This product was subject to generic competition for part of 2010 until a court ruling prevented further sales of unauthorized generics from June 2010 until August 9, 2012.

        In 2012, aggregate consolidated net sales generated by all theof these products in countries where generic competition currently exists or is expected in 2013 (excluding Plavix® and Avapro® in the U.S., and industrial sales of these two products worldwide)2014 were €2,996€2,260 million including €1,221(€848 million in the U.S., €880United States, €728 million in Europe and €




895€684 million in Japan (Allegra®, Myslee®Japan). This 2013 figure includes Renagel®/Renvela® sales of €531 million in the U.S. and Taxotere®).€133 million in Western Europe. The negative impact on our 20132014 net sales is liable to represent a substantial portion of this amount, but the actual impact will depend on a number of factors such as the actual launch dates of generic products in 2013,2014, the prices at which they are sold, and potential litigation outcomes.

        In addition, the loss of Plavix® and Avapro® exclusivity in the U.S. in the first half of 2012 is expected to negatively impact our net income by €0.8 billion in 2013 relative to 2012. Although sales of Plavix® and Avapro® in the U.S. are not included in our consolidated net sales, these products nonetheless have an impact on our net income (see "— Financial Presentation of Alliances — Alliance Arrangements with Bristol-Myers Squibb" below for further explanations).

Purchase Accounting Effects

        Our results of operations and financial condition for the years ended December 31, 2012,2013, December 31, 20112012 and December 31, 20102011 have been significantly affected by our August 2004 acquisition of Aventis and certain subsequent transactions, mainly our acquisition of Genzyme on April 4, 2011. See "— Critical accounting and reporting policies — Business combinations" below for an explanation of the impact of business combinations on our results of operations.

        The Aventis acquisitionbusiness combination has given rise to significant amortization expenses (€1,4891,199 million in 2012, €1,788 million in 2011, and €3,070 million in 2010) and impairment of intangible assets (reversals of €122013, €1,489 million in 2012, and of €34€1,788 million in 2011, and charges of €127 million in 2010)2011). The Genzyme acquisitionbusiness combination has also given rise to significant amortization of intangible assets (€981930 million in 2013, €976 million in 2012 and €709€705 million in 2011) and impairment of intangible assets (€25665 million in 2013, €25 million in 2012 and €119 million in 2011).

        In order to isolate the purchase accounting effects of all acquisitions and certain other items, we use a non-GAAP financial measure that we refer to as "business net income". For a further discussion and definition of "business net income", see "— Business Net Income" below.

        Businessand business net income for the years ended December 31, 2013, 2012 and 2011, and 2010 is presented insee "— Business Net Income" below.

Sources of Revenues and Expenses

        Revenue.    Revenue arising from the sale of goods is presented in the income statement under "Net sales". Net sales comprise revenue from sales of pharmaceutical products, human vaccines, animal health products and active ingredients, net of sales returns, of customer incentives and discounts, and of certain sales-based payments paid or payable to the healthcare authorities. Returns, discounts, incentives and rebates described above are recognized in the period in which the underlying sales are recognized, as a reduction of sales revenue. See Note B.14. to our consolidated financial statements included at Item 18 of this annual report. We sell pharmaceutical products, vaccines and human vaccinesanimal health products directly, through alliances, and through licensees throughout the world. When we sell products directly, we record sales revenues as part of our consolidated net sales. When we sell products through alliances, the revenues reflected in our consolidated financial statements are based on the overall level of sales of the products and on the arrangements governing those alliances. For more information about our alliances, see "— Financial Presentation of Alliances" below. When we sell products through licensees, we receive royalty income that we record in "Other revenues". See Note C. to the consolidated financial statements included at Item 18 of this annual report.

        Cost of Sales.    Our cost of sales consists primarily of the cost of purchasing raw materials and active ingredients, and raw materials, labor and other costs relating to our manufacturing activities, packaging materials, payments made under licensing agreements and distribution costs. We have license agreements under which we manufacture, sell and distribute products that are patented by other companies and license agreements under which other companies distribute products that we have patented. When we pay royalties, we record them in cost of sales, and when we receive royalties, we record them in "Other revenues" as discussed above.

        Operating Income.    Our operating income reflects our revenues, our cost of sales and the remainder of our operating expenses, the most significant of which are research and development expenses and selling and general expenses. For our business segments, we also measure our results of operations through an indicator referred to as "Business Operating Income," which we describe below under "— Segment Information — Business Operating Income of Segments."




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Segment Information

Operating Segments

        In accordance with IFRS 8 "Operating Segments," we have defined our segments as "Pharmaceuticals", "Human Vaccines" (Vaccines) and "Animal Health". Our other identified segments are categorized as "Other".

        The Pharmaceuticals segment covers research, development, production and marketing of medicines, including activities acquired with Genzyme. Sanofi's pharmaceuticals portfolio consists of flagship products, plus a broad range of prescription medicines, generic medicines, and consumer health products. This segment also includes all associates and joint ventures whose activities are related to pharmaceuticals, in particular the entities majority owned by BMS. See "— Financial Presentation of Alliances" below.

        The Vaccines segment is wholly dedicated to vaccines, including research, development, production and marketing. This segment includes our Sanofi Pasteur MSD joint venture with Merck & Co., Inc. in Europe.

        The Animal Health segment comprises the research, development, production and marketing activities of Merial, which offers a complete range of medicines and vaccines for a wide variety of animal species.

        The Other segment includes all activities that do not qualify as reportable segments under IFRS 8 "Operating Segments".; it also includes the effects of retained commitments in respect of divested businesses. In particular, this segment included our interest in the Yves Rocher group until the date of loss of significant influence (November 2011) (see note D.6. to our consolidated financial statements included at Item 18 of this annual report); it also includes the effects of retained commitments in respect of divested businesses..

        Inter-segment transactions are not material.

Business Operating Income of Segments

        We report segment results on the basis of "Business Operating Income". This indicator, adopted in compliance with IFRS 8, is used internally to measure operational performance and to allocate resources.

        "Business Operating Income" is derived from "Operating income", adjusted as follows:

•

the amounts reported in the line items "Fair value remeasurement of contingent consideration liabilities", "Restructuring costs" and "Other gains and losses, and litigation" are eliminated;



•

amortization and impairment losses charged against intangible assets (other than software) are eliminated;



•

the share of profits/losses of associates and joint ventures is added;



•

the share attributable to non-controlling interests is deducted;



•

other acquisition-related effects (primarily, the workdown of acquired inventories remeasured at fair value at the acquisition date, and the impact of acquisitions on investments in associates and joint ventures) are eliminated; and



•

restructuring costs relating to associates and joint ventures are eliminated.




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        The following table presents our Business Operating Income for the year ended December 31, 2012.2013.

(€ million)		Pharmaceuticals			Vaccines			Animal Health			Other			Total				Pharmaceuticals		Vaccines		Animal Health		Other		Total
Net sales			28,871			3,897			2,179			—			34,947			27,250		3,716		1,985		—		32,951
Other revenues			933			44			33			—			1,010			295		30		30		—		355
Cost of sales			(8,759	)		(1,635	)		(701	)		—			(11,095	)		(8,517	)	(1,776	)	(689	)	—		(10,982	)
Research and development expenses			(4,219	)		(539	)		(164	)		—			(4,922	)		(4,087	)	(518	)	(165	)	—		(4,770	)
Selling and general expenses			(7,666	)		(611	)		(669	)		(1	)		(8,947	)		(7,361	)	(588	)	(653	)	—		(8,602	)
Other operating income and expenses			98			(7	)		3			14			108			421		3		(1	)	26		449
Share of profit/(loss) of associates and joint ventures			432			(1	)		(7	)		—			424			48		41		(4	)	—		85
Net income attributable to non-controlling interests			(171	)		—			(1	)		—			(172	)		(162	)	1		(1	)	—		(162	)
Business operating income			9,519			1,148			673			13			11,353			7,887		909		502		26		9,324

        The following table presents our Business Operating Income for the year ended December 31, 2011.2012⁽¹⁾.

(€ million)		Pharmaceuticals			Vaccines			Animal Health			Other			Total				Pharmaceuticals		Vaccines		Animal Health		Other		Total
Net sales			27,890			3,469			2,030			—			33,389			28,871		3,897		2,179		—		34,947
Other revenues			1,622			25			22			—			1,669			933		44		33		—		1,010
Cost of sales			(8,368	)		(1,404	)		(654	)		—			(10,426	)		(8,745	)	(1,629	)	(701	)	—		(11,075	)
Research and development expenses			(4,101	)		(564	)		(146	)		—			(4,811	)		(4,203	)	(538	)	(164	)	—		(4,905	)
Selling and general expenses			(7,376	)		(542	)		(617	)		(1	)		(8,536	)		(7,650	)	(609	)	(669	)	(1	)	(8,929	)
Other operating income and expenses			(13	)		—			(7	)		24			4			134		(7	)	3		18		148
Share of profit/(loss) of associates and joint ventures			1,088			1			—			13			1,102			432		(1	)	(7	)	—		424
Net income attributable to non-controlling interests			(246	)		—			(1	)		—			(247	)		(171	)	—		(1	)	—		(172	)
Business operating income			10,496			985			627			36			12,144			9,601		1,157		673		17		11,448

(1)

Includes the impact of applying the revised IAS 19 (see Note A.2.2. to our consolidated financial statements included at Item 18 of this annual report).

        The following table presents our Business Operating Income for the year ended December 31, 2010.2011⁽¹⁾.

(€ million)		Pharmaceuticals			Vaccines			Animal Health			Other			Total				Pharmaceuticals		Vaccines		Animal Health		Other		Total
Net sales			26,576			3,808			1,983			—			32,367			27,890		3,469		2,030		—		33,389
Other revenues			1,623			28			18			—			1,669			1,622		25		22		—		1,669
Cost of sales			(7,316	)		(1,371	)		(615	)		—			(9,302	)		(8,340	)	(1,400	)	(649	)	—		(10,389	)
Research and development expenses			(3,884	)		(517	)		(155	)		—			(4,556	)		(4,082	)	(562	)	(144	)	—		(4,788	)
Selling and general expenses			(6,962	)		(603	)		(604	)		(2	)		(8,171	)		(7,351	)	(541	)	(615	)	(1	)	(8,508	)
Other operating income and expenses			177			14			(6	)		(108	)		77			29		—		(7	)	24		46
Share of profit/(loss) of associates and joint ventures			1,009			19			—			8			1,036			1,088		1		—		13		1,102
Net income attributable to non-controlling interests			(258	)		1			—			—			(257	)		(246	)	—		(1	)	—		(247	)
Business operating income			10,965			1,379			621			(102	)		12,863			10,610		992		636		36		12,274

(1)

Includes the impact of applying the revised IAS 19 (see Note A.2.2. to our consolidated financial statements included at Item 18 of this annual report).




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        The following table (in accordance with paragraph 28 of IFRS 8) reconciles our Business Operating Income to our Income before tax and associates and joint ventures for the years ended December 31, 2013, 2012 2011 and 2010:2011:

(€ million)		Year Ended December 31, 2012			Year Ended December 31, 2011			Year Ended December 31, 2010				2013		2012(1)		2011(1)
Business Operating Income			11,353			12,144			12,863			9,324		11,448		12,274
Share of profit/(loss) of associates and joint ventures (1)			(424	)		(1,102	)		(1,036	)
Net income attributable to non-controlling interests (2)			172			247			257
Share of profit/(loss) of associates and joint ventures(2)												(85	)	(424	)	(1,102	)
Net income attributable to non-controlling interests(3)												162		172		247
Amortization of intangible assets			(3,291	)		(3,314	)		(3,529	)		(2,914	)	(3,291	)	(3,314	)
Impairment of intangible assets			(117	)		(142	)		(433	)		(1,387	)	(117	)	(142	)
Fair value remeasurement of contingent consideration liabilities			(192	)		15			—			314		(192	)	15
Expenses arising from the impact of acquisitions on inventories (3)			(23	)		(476	)		(142	)
Expenses arising from the impact of acquisitions on inventories(4)												(8	)	(23	)	(476	)
Restructuring costs			(1,141	)		(1,314	)		(1,384	)		(300	)	(1,141	)	(1,314	)
Other gains and losses and litigation (4)			—			(327	)		(138	)
Impact of the non-depreciation of property, plant and equipment of Merial (in accordance with IFRS 5)			—			—			77
Other gains and losses and litigation(5)												—		—		(327	)
Operating Income			6,337			5,731			6,535			5,106		6,432		5,861
Financial expense			(553	)		(552	)		(468	)		(612	)	(751	)	(744	)
Financial income			93			140			106			109		93		140
Income before tax and associates and joint ventures			5,877			5,319			6,173			4,603		5,774		5,257

⁽¹⁾

Includes the impact of applying the revised IAS 19 (see Note A.2.2. to our consolidated financial statements included at Item 18 of this annual report).

(2)

Excluding restructuring costs of associates and joint ventures and expenses arising from the impact of acquisitions on associates and joint ventures.

⁽²⁾(3)

Excluding the share of restructuring and other adjusting itemsportion attributable to non-controlling interests.interests of the adjustments shown in the table above.

⁽³⁾(4)

This line comprises the workdown of inventories remeasured at fair value at the acquisition date.

⁽⁴⁾(5)

See Note D.28. to our consolidated financial statements included at Item 18 of this annual report.

Business Net Income

        In addition to net income, we use a non-GAAP financial measure that we refer to as "business net income" to evaluate our Group's performance. Business net income, which is defined below, represents the aggregate business operating income of all of our operating segments, less net financial expenses and the relevant income tax effects. We believe that this non-GAAP financial measure allows investors to understand the performance of our Group because it segregates the results of operations of our current business activities, as opposed to reflecting the impact of past transactions such as acquisitions.

        Our management uses business net income to manage and to evaluate our performance, and we believe it is appropriate to disclose this non-GAAP financial measure, as a supplement to our IFRS reporting, in order to assist investors in analyzing the factors and trends affecting our business performance. Our management also intends to use business net income as the basis for proposing the dividend policy for the Group. Accordingly, management believes that an investor's understanding of trends in our dividend policy is enhanced by disclosing business net income.

        We have also decided to report "business earnings per share". Business earnings per share is a specific non-GAAP financial measure, which we define as business net income divided by the weighted average number of shares outstanding. Our management intends to give earnings guidance based on business earnings per share. We also present business earnings per share on a diluted basis.

        Business net income is defined as "Net income attributable to equity holders of Sanofi", determined under IFRS, excluding (i) amortization of intangible assets; (ii) impairment of intangible assets; (iii) fair value




remeasurement of contingent consideration liabilities; (iv) other impacts associated with acquisitions (including impacts of acquisitions on associates and joint ventures); (v) restructuring costs (including restructuring costs relating to associates and joint ventures); (vi) other gains and losses, and litigation; (vii) the impact of the non-depreciation of the property, plant and equipment of Merial starting September 18, 2009 and continuing through 2010 (in accordance with IFRS 5); (viii) the tax effect related to the items listed in (i) through (vii)(vi); as well as (ix)(viii) the effects of major tax disputes, the tax on dividends distributed to Sanofi shareholders starting in 2013, and as an exception for 2011, the retroactive effect (2006-2010) on the tax liability resulting from the agreement signed on December 22, 2011 by France and the United States on transfer prices (APA-Advance Pricing Agreement), for which the amount is deemed to be significant,significant; and (x)(ix) the share of non-controlling interests in items (i) through (ix)(viii). Items (i), (ii), (iii), (v) and (vi) correspond to those reported in the income statement line items "Amortization




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"Amortization of intangible assets", "Impairment of intangible assets", "Fair value remeasurement of contingent consideration liabilities", "Restructuring costs" and "Other gains and losses, and litigation", as defined in Notes B.19. and B.20. to our consolidated financial statements.

        The following table reconciles our business net income to our Net income attributable to equity holders of Sanofi for the years ended December 31, 2013, 2012 2011 and 2010:2011:

(€ million)				2012			2011			2010			(€ million)			2013		2012(1)		2011(1)
Business net income	Business net income				8,179			8,795			9,215		Business net income			6,687		8,101		8,748
(i)		Amortization of intangible assets			(3,291	)		(3,314	)		(3,529	)		Amortization of intangible assets		(2,914	)	(3,291	)	(3,314	)
(ii)		Impairment of intangible assets			(117	)		(142	)		(433	)		Impairment of intangible assets		(1,387	)	(117	)	(142	)
(iii)		Fair value remeasurement of contingent consideration liabilities			(192	)		15			—			Fair value remeasurement of contingent consideration liabilities		314		(192	)	15
(iv)		Expenses arising from the impact of acquisitions on inventories (1)			(23	)		(476	)		(142	)		Expenses arising from the impact of acquisitions on inventories(2)		(8	)	(23	)	(476	)
(v)		Restructuring costs			(1,141	)		(1,314	)		(1,384	)		Restructuring costs		(300	)	(1,141	)	(1,314	)
(vi)		Other gains and losses, and litigation (2)			—			(327	)		(138	)		Other gains and losses, and litigation(3)		—		—		(327	)
(vii)		Impact of the non-depreciation of the property, plant and equipment of Merial (IFRS 5)			—			—			77			Tax effects on the items listed above, comprising:		1,480		1,580		1,905
(viii)		Tax effects on the items listed above, comprising:			1,580			1,905			1,856
														– amortization of intangible assets		939		1,159		1,178
														– impairment of intangible assets		527		42		37
														– fair value remeasurement of contingent consideration liabilities		(85	)	2		34
		— amortization of intangible assets			1,159			1,178			1,183
		— impairment of intangible assets			42			37			143			– expenses arising from the impact of acquisitions on inventories		2		7		143
		— fair value remeasurement of contingent consideration liabilities			2			34			—
		— expenses arising from the impact of acquisitions on inventories			7			143			44			– restructuring costs		97		370		399
		— restructuring costs			370			399			466
		— other gains and losses, and litigation			—			114			46			– other gains and losses, and litigation		—		—		114
		— non-depreciation of property, plant and equipment of Merial (IFRS 5)			—			—			(26	)
(iv)/(ix)		Other tax items (3)			—			577			—			Other tax items(4)		(109	)	—		577
(x)		Share of items listed above attributable to non-controlling interests			3			6			3			Share of items listed above attributable to non-controlling interests		4		3		6
(iv)/(v)		Restructuring costs and expenses arising from the impact of acquisitions on associates and joint ventures (4)			(31	)		(32	)		(58	)		Restructuring costs and expenses arising from the impact of acquisitions on associates and joint ventures(5)		(50	)	(31	)	(32	)
Net income attributable to equity holders of Sanofi	Net income attributable to equity holders of Sanofi				4,967			5,693			5,467		Net income attributable to equity holders of Sanofi			3,717		4,889		5,646

⁽¹⁾

Includes the impact of applying the revised IAS 19 (see Note A.2.2. to our consolidated financial statements included at Item 18 of this annual report).

(2)

This line comprises the workdown of inventories remeasured at fair value at the acquisition date.

⁽²⁾(3)

See Note D.28. to our consolidated financial statements included at Item 18 of this annual report.

⁽³⁾(4)

In 2013, this line item corresponds to the tax on dividends distributed to Sanofi shareholders. In 2011, this line item includes €349 million relating to the effect of the Franco-American Advance Pricing Agreement (APA), and a €228 million reduction in deferred tax liabilities on remeasurements of intangible assets of Merial as a result of changes in tax legislation in the United Kingdom.

⁽⁴⁾(5)

This line shows the portion of major restructuring costs incurred by associates and joint ventures, and expenses arising from the impact of acquisitions on associates and joint ventures (workdown of acquired inventories, amortization and impairment of intangible assets, and impairment of goodwill).




        The following table sets forth the calculation of our business net income for the years ended December 31, 2013, 2012 2011 and 2010:2011:

(€ million)		2012			2011			2010				2012		2012(1)		2011(1)
Business operating income			11,353			12,144			12,863			9,324		11,448		12,274
Financial income and expenses			(460	)		(412	)		(362	)		(503	)	(658	)	(604	)
Income tax expense			(2,714	)		(2,937	)		(3,286	)		(2,134	)	(2,689	)	(2,922	)
Business net income			8,179			8,795			9,215			6,687		8,101		8,748

(1)

Includes the impact of applying the revised IAS 19 (see Note A.2.2. to our consolidated financial statements included at Item 18 of this annual report).

        The most significant reconciliation items in the table above (reconciling our business net income to our Net income attributable to equity holders of Sanofi) relate to the purchase accounting effect of our acquisitions, particularly the amortization and impairment of intangible assets. We believe that excluding these non-cash charges




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enhances an investor's understanding of our underlying economic performance because we do not consider that the excluded charges reflect the combined entity's ongoing operating performance. Rather, we believe that each of the excluded charges reflects the decision to acquire the businesses concerned.

        The purchase-accounting effects on net income primarily relate to:

•

charges related to the amortization and impairment of intangible assets, net of tax and non-controlling interests;



•

charges to cost of sales resulting from the workdown of acquired inventories remeasured at fair value, net of tax;



•

charges related to the impairment of goodwill; and



•

charges related to the amortization and impairment of intangible assets, net of tax and non-controlling interests.goodwill.

        We believe (subject to the limitations described below) that disclosing business net income enhances the comparability of our operating performance, for the following reasons:

•

the elimination of charges related to the purchase accounting effect of our acquisitions (particularly amortization and impairment of finite-lived intangible assets) enhances the comparability of our ongoing operating performance relative to our peers in the pharmaceutical industry that carry these intangible assets (principally patents and trademarks) at low book values either because they are the result of in-house research and development that has already been expensed in prior periods or because they were acquired through business combinations that were accounted for as poolings-of-interest;



•

the elimination of selected items, such as the increase in cost of sales arising from the workdown of inventories remeasured at fair value, gains and losses on disposals of non-current assets and costs and provisions associated with major litigation, improves comparability from one period to the next; and



•

the elimination of restructuring costs relating to the implementation of our transformation strategy enhances comparability because these costs are directly, and only, incurred in connection with transformation processes such as the rationalization of our research and development structures.

        We remind investors, however, that business net income should not be considered in isolation from, or as a substitute for, net income attributable to equity holders of Sanofi reported in accordance with IFRS. In addition, we strongly encourage investors and potential investors not to rely on any single financial measure but to review our financial statements, including the notes thereto, and our other publicly filed reports, carefully and in their entirety.

        There are material limitations associated with the use of business net income as compared to the use of IFRS net income attributable to equity holders of Sanofi in evaluating our performance, as described below:

•

The results presented by business net income cannot be achieved without incurring the following costs that the measure excludes:



•?

Amortization of intangible assets. Business net income excludes the amortization charges related to intangible assets. Most of these amortization charges relate to intangible assets that we have acquired. Although amortization is a non-cash charge, it is important for investors to consider it because it represents an allocation in each reporting period of a portion of the purchase price that we




paid for certain intangible assets that we have acquired through acquisitions. For example, in connection with our acquisition of Aventis in 2004, we paid an aggregate of €31,279 million for these amortizable intangible assets (which, in general, were to be amortized over their useful lives, representing an average amortization period of eight years) and €5,007 million for in-progress research & development. More recently, in connection with our acquisition of Genzyme in April 2011, we paid an aggregate of €7,877€7,873 million for amortizable intangible assets (average amortization period of eight and a half years) and €2,148 million for in-progress research & development. A large part of our revenues could not be generated without owning acquired intangible assets.





•?

Restructuring costs. Business net income does not reflect restructuring costs even though it does reflect the benefits of the optimization of our activities, such as our research and development activities, much of which we could not achieve in the absence of restructuring costs.



•

In addition, the results presented by business net income are intended to represent the Group's underlying performance, but items such as gains and losses on disposals and provisions associated with major litigation may recur in future years.




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        We compensate for the above-described material limitations by using business net income only to supplement our IFRS financial reporting and by ensuring that our disclosures provide sufficient information for a full understanding of all adjustments included in business net income. In addition, subject to applicable law, we may in the future decide to report additional non-GAAP financial measures which, in combination with business net income, may compensate further for some of the material limitations described above.

        In determining the level of future dividend payments, and in analyzing dividend policy on the basis of business net income, our management intends to take into account the fact that many of the adjustments reflected in business net income have no effect on the underlying amount of cash available to pay dividends. However, although the adjustments relating to the elimination of the effect of the purchase accounting treatment of the Aventis acquisition and other acquisitions represent non-cash charges, the adjustments relating to restructuring costs represent significant cash charges in the periods following the closing of the acquisition.

        This Item 5 contains a discussion and analysis of business net income on the basis of consolidated financial data. Because our business net income is not a standardized measure, it may not be comparable with the non-GAAP financial measures of other companies using the same or a similar non-GAAP financial measure.

Presentation of Net Sales

        In the discussion below, we present our consolidated net sales for 2013, 2012 2011 and 2010.2011. We break down our net sales among various categories, including by business segment, product and geographic region. We refer to our consolidated net sales as "reported" sales.

        In addition to reported sales, we analyze non-GAAP financial measures designed to isolate the impact on our net sales of currency exchange rates and changes in group structure.

        When we refer to changes in our net sales "at constant exchange rates", we exclude the effect of exchange rates by recalculating net sales for the relevant period using the exchange rates that were used for the previous period. See Note B.2 to our consolidated financial statements for further information relating to the manner in which we translate into euros transactions recorded in other currencies.

        When we refer to our net sales on a "constant structure basis", we eliminate the effect of changes in structure by restating the net sales for the previous period as follows:

•

by including sales from an entity or with respect to product rights acquired in the current period for a portion of the previous period equal to the portion of the current period during which we owned them, based on sales information we receive from the party from whom we made the acquisition;



•

similarly, by excluding sales for a portion of the previous period when we have sold an entity or rights to a product in the current period; and






•

for a change in consolidation method, by recalculating the previous period on the basis of the method used for the current period.

        A reconciliation of our reported net sales to our net sales at constant exchange rates is provided at "— Results of Operations — Year Ended December 31, 20122013 Compared with Year Ended December 31, 20112012 — Net Sales" and at "— Results of Operations — Year Ended December 31, 20112012 Compared with Year Ended December 31, 20102011 — Net Sales" below.

Financial Presentation of Alliances

        We have entered into a number of alliances for the development, co-promotion and/or co-marketing of our products. We believe that a presentation of our two principal alliances is useful to an understanding of our financial statements.

        The financial impact of the alliances on the Company's income statement is described in "— Results of Operations — Year Ended December 31, 2013 Compared with Year Ended December 31, 2012" and "— Year Ended December 31, 2012 Compared with Year Ended December 31, 2011" and "— Year Ended December 31, 2011 Compared with Year Ended December 31, 2010", in particular in "— Net sales", "— Other Revenues", "— Share of Profit/Loss of Associates and Joint Ventures" and "— Net Income Attributable to Non-Controlling Interests".




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Alliance Arrangements with Bristol-Myers Squibb
(BMS)

        Our revenues, expenses and operating income are affected significantly by the presentation of our alliance with Bristol-Myers Squibb (BMS)BMS in our consolidated financial statements.

        On September 27, 2012 Sanofi and BMS restructured their alliance following the loss of exclusivity of Plavix® and Avapro®/Avalide® in many major markets.Initial Alliance Agreement

        Under the terms of the revisedinitial alliance agreement, which came into effect on January 1, 2013, BMS has returned to Sanofi its rights to Plavix® and Avapro®/Avalide® in all markets worldwide with the exception of Plavix® in the U.S. and Puerto Rico, giving Sanofi sole control and freedom to operate commercially. In exchange, starting January 1, 2013 BMS will receive royalty payments on Sanofi's sales of branded and unbranded Plavix® worldwide, excluding the U.S. and Puerto Rico, and on sales of branded and unbranded Avapro®/Avalide® worldwide, in each case through 2018; BMS will also receive a terminal payment of $200 million from Sanofi in December 2018. Plavix® rights in the U.S. and Puerto Rico will continue unchanged under the terms of the existing agreement through December 2019.

        In addition, under the terms of this new agreement ongoing disputes between the companies related to the alliance have been resolved. The resolution of these disputes includes various commitments by both companies, including a one-time payment of $80 million by BMS to Sanofi in relation to the Avalide® supply disruption in the U.S. in 2011.

        As of December 31, 2012, there are three principal marketing arrangements that are used:

•

Co-marketing.  Under the co-marketing system, each company markets the products independently under its own brand names. We record our own sales and related costs in our consolidated financial statements.



•

Exclusive Marketing.  Under the exclusive marketing system, one company has the exclusive right to market the products. We record our own sales and related costs in our consolidated financial statements.



•

Co-promotion.  Under the co-promotion system, the products are marketed through the alliance arrangements (either by contractual arrangements or by separate entities) under a single brand name. The accounting treatment of the co-promotion agreement depends upon who has majority ownership and operational management in that territory, as discussed below.




        The initial alliance arrangements as of December 31, 2012 include two royalty streams that are applied on a worldwide basis (excluding Japan and other opt out countries), regardless of the marketing system and regardless of which company has majority ownership and operational management:

•

Discovery Royalty.  As inventor of the two molecules, we earn an adjustable discovery royalty on part of Aprovel®/Avapro®/Karvea®/Karvezide® and Plavix®/Iscover® sold in alliance countries regardless of the marketing system. The discovery royalty earned in territories under operational management of BMS is reflected in our consolidated income statement in "Other revenues."



•

Development Royalty.  In addition to the discovery royalty, we and BMS are each entitled to a development royalty related to certain know-how and other intellectual property in connection with sales of Aprovel®/Avapro®/Karvea®/Karvezide® and Plavix®/Iscover®.



•

We record development royalties paid to BMS in our consolidated income statement as an increase to our cost of sales in countries where we consolidate sales of the products. We record development royalties that we receive as "other revenues" in countries where BMS consolidates sales of the products.

        Under the initial alliance arrangements, as of December 31, 2012, there are two territories, one under our operational management and the other under the operational management of BMS. The territory under our operational management consists of Europe and most of Africa and Asia, while the territory under the operational management of BMS consists of the rest of the world (excluding Japan). In Japan, Aprovel® has been marketed jointly by Shionogi Pharmaceuticals and Dainippon Sumitomo Pharma Co. Ltd since June 2008. Our alliance with BMS does not cover distribution rights to Plavix® in Japan, which is marketed by Sanofi.

        Territory under our operational management.    In the territory under our operational management, the marketing arrangements and recognition of operations by the Group are as follows:

•

we use the co-promotion system for most of the countries in Western Europe for Aprovel®/Avapro®/Karvea®/Karvezide® and Plavix®/Iscover® and for certain Asian countries for Plavix®/Iscover®. We record 100% of all alliance revenues and expenses in our consolidated financial statements. We also record, as selling and general expenses, payments to BMS for the cost of BMS's personnel involved in the promotion of the products. BMS's share of the operating income of the alliances is recorded as "non-controlling interests";



•

we use the co-marketing system in Germany, Spain and Greece for both Aprovel®/Avapro®/Karvea®/Karvezide® and Plavix®/Iscover® and in Italy for Aprovel®/Avapro®/Karvea®/Karvezide®; and



•

we have the exclusive right to market Aprovel®/Avapro®/Karvea®/Karvezide® and Plavix®/Iscover® in Eastern Europe, Africa, the Middle East, and certain Asian countries (excluding Japan); we have the exclusive right to market Aprovel® in Scandinavia and Ireland, and Plavix® in Malaysia.




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        Territory under BMS operational management.    In the territory under BMS operational management, the marketing arrangements and recognition of operations by the Group are as follows:

•

we use the co-promotion system in the United States, Canada and Puerto Rico, where the products are sold through the alliances under the operational management of BMS. With respect to Avapro® (the brand name used in the United States for Aprovel®) and Plavix®, we record our share of the alliance's operating income under "share"Share of profit/loss of associates and joint ventures". We also record payments from BMS for the cost of our personnel in connection with the promotion of the product as a deduction from our selling and general expenses;



•

we use the co-marketing system in Brazil, Mexico, Argentina and Australia for Plavix®/Iscover® and Aprovel®/Avapro®/Karvea®/Karvezide® and in Colombia for Plavix®/Iscover®; and



•

we have the exclusive right to market the products in certain other countries of Latin America.

        In countries where the products are marketed by BMS on a co-marketing basis, or through alliances under the operational management of BMS, we also earn revenues from the sale of the active ingredients for the products to BMS or such entities, which we record as "Net sales" in our consolidated income statement.





Revised Agreement effective January 1, 2013

        On September 27, 2012 Sanofi and BMS restructured their alliance following the loss of exclusivity of Plavix® and Avapro®/Avalide® in many major markets. Under the terms of the revised agreement, which came into effect on January 1, 2013, BMS returned to Sanofi its rights to Plavix® and Avapro®/Avalide® in all markets worldwide with the exception of Plavix® in the U.S. and Puerto Rico, giving Sanofi sole control and freedom to operate commercially. In exchange, starting January 1, 2013 BMS receives royalty payments on Sanofi's sales of branded and unbranded Plavix® worldwide, excluding the U.S. and Puerto Rico, and on sales of branded and unbranded Avapro®/Avalide® worldwide, in each case through 2018; BMS will also receive a terminal payment of $200 million from Sanofi in December 2018. Plavix® rights in the U.S. and Puerto Rico will continue unchanged under the terms of the existing agreement through December 2019.

        In addition, under the terms of this new agreement ongoing disputes between the companies related to the alliance have been resolved. The resolution of these disputes includes various commitments by both companies, including a one-time payment of $80 million by BMS to Sanofi in relation to the Avalide® supply disruption in the U.S. in 2011.

        In the territory managed by BMS (the United States and Puerto Rico for Plavix®), the accounting policies applied by Sanofi remain unchanged and in accordance with the terms of the initial agreement. Marketing is handled through co-promotion entities majority owned by and under the operational management of BMS. Sanofi does not recognize the sales, but invoices these entities for its promotional expenses, recognizes its royalty income in "Other revenues", and recognizes its share of profits (net of tax) in "Share of profit/(loss) of associates and joint ventures".

        In all of the territories managed by Sanofi (including the United States and Puerto Rico for Avapro®^/Avalide®) as defined in the new agreement, the Group recognizes in its financial statements the revenue and expenses generated by its own operations. Payments due to BMS are recognized in "Cost of sales".

Alliance Arrangements with Regeneron


        Our relationship with Regeneron began in 2003 with an agreement for the co-development of the anti-angiogenic agent Zaltrap®. We expanded our relationship in 2007 and created a strategic R&D collaboration on fully human monoclonal antibodies.

Collaboration agreement on Zaltrap® Zaltrap®(aflibercept)

        Zaltrap® (aflibercept) is a solution administered by intravenous perfusion, used in association with 5-fluorouracil, leucovorin and irinotecan (FOLFIRI) as a treatment for metastatic colorectal cancer that is resistant to or has progressed following an oxaliplatin-containing regimen.

        In September 2003, Sanofi and Regeneron signed an agreement to collaborate on the development and commercialization of Zaltrap®. Under the terms of this agreement (as amended in 2005), Sanofi is responsible for funding 100% of the development costs, co-promotion rights are shared between Sanofi and Regeneron, and the profits generated from sales of Zaltrap® worldwide (except Japan) are shared equally. Sales of Zaltrap® made by subsidiaries under the control of Sanofi are recognized in consolidated net sales, and the associated costs incurred by those subsidiaries are recognized as operating expenses in the consolidated income statement. Regeneron's share of the profits is recognized in the line item "Other operating expenses", a component of operating income.




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        Under the terms of the same agreement, Regeneron agreed to repay 50% of the development costs initially funded by Sanofi. Contractually, this amount represents 5% of the residual repayment obligation per quarter, but may not exceed Regeneron's profit share for the quarter unless Regeneron voluntarily decides to make a larger payment in a given quarter.

        The agreement also stipulates milestone payments to be made by Sanofi on receipt of specified marketing approvals for Zaltrap® in the United States, within the European Union and in Japan.

        In the United States, Zaltrap® is a registered trademark of Regeneron Pharmaceuticals, Inc. The product was approved by the U.S. Food and Drug Administration ("FDA") in August 2012, and has been marketed in the United States since that date. On February 5, 2013, the European Commission granted marketing authorization in the European Union for Zaltrap®. Regeneron has not elected to co-promote Zaltrap® at launch in the major market countries defined as United States, France, Italy, Spain, United Kingdom, Germany and Canada.

        In Japan, Sanofi will develop and commercialize Zaltrap®, with Regeneron entitled to receive a royalty.

Collaboration agreement on the discovery, development and commercialization of human therapeutic antibodies

        In November 2007, Sanofi and Regeneron signed additional agreements under whichfor the discovery, development and commercialization of fully human therapeutic antibodies. In November 2009, the agreements were broadened and the term extended. Under the 2009 agreements Sanofi committed to funding theRegeneron's discovery and pre-clinical development costs of Regeneron'sfully human monoclonal antibody research program until 2017,therapeutic antibodies, up to a maximum of $160 million aper year through 2017 (see Note D.21. to our consolidated financial statements included at Item 18 of this annual report). Sanofi has an option to license for further development any antibodies discovered by Regeneron that attain Investigational New Drug (IND) status.

        If such an option is exercised, Sanofi iswould be primarily responsible for funding, and co-developswould co-develop the antibody with Regeneron. Sanofi and Regeneron would share co-promotion rights and profits on sales of the co-developed antibodies. Development costs for the drug candidate arewould be shared between the companies, with Sanofi generally funding these costs up front, except that following receipt of the first positive Phase III trial results for a co-developed drug candidate, subsequent Phase III trial-related costs for that drug candidate arewould be shared 80% by Sanofi and 20% by Regeneron. Once a product begins to be marketed, Regeneron willwould progressively repay out of its profits 50% of the development costs borne by Sanofi for all antibodies licensed by Sanofi. However, Regeneron arewould not be required to apply more than 10% of its share of the profits from collaboration products in any calendar quarter towards reimbursing Sanofi for these development costs. Under the terms of the collaboration agreement, Sanofi may also be required to make milestone payments based on aggregate sales of antibodies. In 2012, six2013, seven antibodies were in clinical development;development, two of which were in Phase III.




        If Sanofi does not exercise its licensing option for an antibody under development, Sanofi willwould be entitled to receive a royalty once the antibody begins to be marketed.

Investor Agreement

        On January 11, 2014, Regeneron, Sanofi and some of its subsidiaries (collectively "Sanofi") agreed to amend and restate the original investor agreement, dated as of December 20, 2007, as amended in its entirety and entered into the Amended and Restated Investor Agreement (the "Amended Investor Agreement"). The Amended Investor Agreement was amended to, among other things, provide Sanofi with the right to nominate a single independent director to the Regeneron's Board of Directors upon reaching 20% ownership of the Company's then outstanding shares of Class A Stock, par value $0.001 per share and Common Stock (together the "Capital Stock") and to extend the term of the lock-up obligations. Sanofi retains its right to acquire up to 30% of the Capital Stock. The Amended Investor Agreement also provides Sanofi with the right to receive certain information as may be reasonably agreed upon by the parties that will facilitate Sanofi 's ability to account for their investment in the Company using the equity method of accounting under International Financial Reporting Standards.

        Subsequently Sanofi has determined to purchase, directly or through its subsidiaries, additional shares of Common Stock to increase its beneficial ownership to approximately 20.5% of the Common Stock outstanding. Sanofi made no commitment in terms of the timing of such transactions, which will depend on market conditions including the price and availability of shares of Common Stock, and on such other factors considered relevant to Sanofi.




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Alliance arrangements with Warner Chilcott (previously with Procter & Gamble Pharmaceuticals)


        Our agreement with Warner Chilcott ("the Alliance Partner") covers the worldwide development and marketing arrangements of Actonel®, except Japan for which we hold no rights. Until October 30, 2009, this agreement was between Sanofi and Procter & Gamble Pharmaceuticals (P&G). Since the sale by P&G of its pharmaceutical business to Warner Chilcott on October 30, 2009, Actonel® has been marketed in collaboration with Warner Chilcott. The local marketing arrangements may take various forms.

•

Co-promotion, whereby sales resources are pooled but only one of the two parties to the alliance agreement (Sanofi or the Alliance Partner) invoices product sales. Co-promotion is carried out under contractual agreements and is not based on any specific legal entity. The Alliance Partner sells the product and incurs all of the related costs in France and Canada. This co-promotion scheme formerly included Germany, Belgium and Luxembourg until December 31, 2007, the Netherlands until March 31, 2008, and the United States and Puerto Rico until March 31, 2010. We recognize our share of revenues under the agreement in our income statement as a component of operating income in the line item "Other operating income". Since April 1, 2010, we have received royalties from the Alliance Partner on sales made by the Alliance Partner in the United States and Puerto Rico. In the secondary co-promotion territories (the United Kingdom until December 31, 2008, Ireland, Sweden, Finland, Greece, Switzerland, Austria, Portugal and Australia), we sell the product and recognize all the revenues from sales of the product along with the corresponding expenses. The share due to the Alliance Partner is recognized in "Cost of sales";



•

Co-marketing, which applies in Italy, whereby each party to the alliance agreement sells the product in the country under its own brand name, and recognizes all revenues and expenses from its own operations in its respective income statement. Each company also markets the product independently under its own brand name in Spain, although Spain is not included in the co-marketing territory;



•

Warner Chilcott only territories:  the product has been marketed by the Alliance Partner independently in Germany, Belgium and Luxembourg since January 1, 2008, in the Netherlands since April 1, 2008, and in the United Kingdom since January 1, 2009.2009 and in the United States and Puerto Rico since April 1, 2010. We recognize our share of revenues under the alliance agreement in "Other operating income"; and



•

Sanofi only territoriesterritories::  we have exclusive rights to sell the product in all other territories. We recognize all revenues and expenses from our own operations in our income statement, but in return for these exclusive rights we pay the Alliance Partner a royalty based on actual sales. This royalty is recognized in "Cost of sales".

        In 2010, Sanofi and Warner Chilcott began negotiations on the future of their alliance arrangements. In an arbitration proceeding, an arbitration panel decided on July 14, 2011 that the termination by Warner Chilcott of an ancillary agreement did not lead to the termination of the Actonel® Alliance. Pursuant to this decision, the alliance will remain in effect until January 1, 2015.

        In October 2013, Warner Chilcott and Sanofi have agreed on an early buy-back of Sanofi's interest in the product in the United States and Puerto Rico. As a consequence, the parties have amended the U.S. amendment (arising from a 2010 restructuring for the U.S. and Puerto Rico) with a view to restructure the parties' economic rights and obligations for the contract year 2014. As such, Warner Chilcott has paid to Sanofi a definitive lump-sum of $125 million.

Impact of Exchange Rates

        We report our consolidated financial statements in euros. Because we earn a significant portion of our revenues in countries where the euro is not the local currency, our results of operations can be significantly affected by exchange rate movements between the euro and other currencies, primarily the U.S. dollar and, to a lesser extent, the Japanese yen, and currencies in emerging countries. We experience these effects even though certain of these countries do not account for a large portion of our net sales. In 2012,2013, we earned 31.1%31.7% of our net sales in the United States. A decrease in the value of the U.S. dollar against the euro has a negative impact on our revenues, which is not offset by an equal reduction in our costs and therefore negatively affects our operating income. A decrease in the value of the U.S. dollar has a particularly significant impact on our operating income, which is higher in the United States than elsewhere, and on the contribution to net income of our alliance with BMS in the United States, which is




under the operational management of BMS, as described at "— Financial Presentation of Alliances — Alliance arrangements with Bristol-Myers Squibb" above.

        For a description of positions entered into to manage operational foreign exchange risks as well as our hedging policy, see "Item 11. Quantitative and Qualitative Disclosures about Market Risk", and "Item 3. Key Information — D. Risk Factors — Risks Related to Financial Markets — Fluctuations in currency exchange rates could adversely affect our results of operations and financial condition".




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Divestments

        In 2013, Sanofi sold its U.S. commercial rights to five pharmaceutical products to Covis Pharma. The gain on this sale amounted to €165 million.

        In August 2012, Sanofi sold its 39.1% interest in Société Financière des Laboratoires de Cosmétologie Yves Rocher, in line with the Group's desire to focus on strategic activities.

        In December 2011 Sanofi sold the Dermik dermatology business to Valeant Pharmaceuticals International Inc., for €321 million (see Note D.1.3. to our consolidated financial statements included at Item 18 of this annual report).

        There were no material divestmentsAcquisitions

•

The principal acquisitions during 2013 are described below:

        In January 2013, Sanofi (via Chattem) completed the acquisition of the worldwide rights to the Rolaids® brand from the McNeil Consumer Healthcare Division of McNEIL-PPC, Inc. Rolaids® is an over-the-counter antacid that helps relieve heartburn and acid reflux.

        In March 2013, Sanofi acquired Genfar S.A. (Genfar), a Colombian pharmaceutical company that is a significant player in 2010.Colombia and other countries in Latin America. Genfar is the second-largest generics manufacturer in Colombia by sales, with annual sales around €100 million. See Note D.1.1. to our consolidated financial statements included at Item 18 of this annual report.

Acquisitions        In June 2013, Merial announced the completion of its acquisition of the animal health division of the Indian company Dosch Pharmaceuticals Private Limited, which markets 86 animal health products and 50 specialities for ruminants, poultry and companion animals.

        Other than Genfar, the impact of these acquisitions on our consolidated financial statements is not material.

•

The principal acquisitions during 2012 are described below:

        In April 2012, Sanofi strengthened its presence in biosurgery by acquiring a 100% equity interest in Pluromed, Inc. (Pluromed), an American medical devices company. Pluromed has developed a proprietary polymer technology — Rapid Transition Polymers (RTP™) — pioneering the use of plugs that can be injected into blood vessels to improve the safety, efficacy and economics of medical interventions.

        In March 2012, Merial (Sanofi's Animal Health division) completed the acquisition of Newport Laboratories, a privately held company based in Worthington, Minnesota (United States), which is a leader in autogenous vaccines for the bovine and swine markets.

        The impact of these two acquisitions on our consolidated financial statements is not material.

        In October 2012, Sanofi signed an agreement to acquire Genfar S.A. (Genfar), a Colombian pharmaceutical company that is a major player in Colombia and other countries in Latin America. Genfar is the second-largest generics manufacturer in Colombia by sales, and the leader by volumes sold. Closing of the deal is subject to certain conditions, and is expected to take place in the first quarter of 2013.

        In December 2012, Sanofi announced that an agreement had been reached to acquire the animal health division of Dosch Pharmaceuticals Pvt Ltd, an Indian company, allowing Merial to enter this strategic animal health market. Closing of the deal is subject to regulatory approval, and is expected to take place during the first half of 2013.

•

The principal acquisitions during 2011 are described below:

        In February 2011, Sanofi completed the acquisition of 100% of the share capital of BMP Sunstone Corporation (BMP Sunstone), a pharmaceutical company that developsis developing a portfolio of branded pharmaceutical and healthcare products in China. See Note D.1.2.D.1.3. to our consolidated financial statements included at Item 18 of this annual report.

        In April 2011, Sanofi acquired Genzyme Corporation (Genzyme), a major biotechnology company headquartered in Cambridge, Massachussets (United States), with primary areas of focus in rare diseases, renal endocrinology, oncology and biosurgery. The transaction was completed in accordance with the terms of the public exchange offer at a price of $74 in cash plus the issuance to Genzyme shareholders of one contingent value right (CVR) per share. The total purchase price amounted to €14.8 billion. The purchase price allocation is disclosed in Note D.1.2.D.1.3. to our consolidated financial statements included at Item 18 of this annual report.




        In October 2011, Sanofi acquired Topaz Pharmaceuticals Inc. (Topaz), a U.S. pharmaceutical research company that developed an innovative anti-parasitic product for treating head lice. An upfront payment of $35 million was made on completion of the transaction. According to the agreement, future milestone payments may be made upon market approval and depending on the achievement of sales targets. See Note D.1.2.D.1.3. to our consolidated financial statements included at Item 18 of this annual report. The total amount of payments (including the upfront payment) could reach $207.5 million.

        In November 2011, Sanofi acquired the business of Universal Medicare Private Limited (Universal), a major producer of nutraceuticals in India. An upfront payment ofThe acquisition price amounted to €83 million was made on completion of the transaction.million. See Note D.1.2.D.1.3. to our consolidated financial statements included at Item 18 of this annual report.




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        In December 2011, Sanofi co-invested in Warp Drive Bio, an innovative start-up biotechnology company, along with two venture capital firms, Third Rock Ventures (TRV) and Greylock Partners. Warp Drive Bio is an innovative biotechnology company, focusing on proprietary genomic technology to discover drugs of natural origin. Sanofi and TRV / Greylock have invested in Warp Drive Bio at parity. Total program funding over the first five years could amount to up to $125 million, including an equity investment of up to $75 million.

•

The principal acquisitions during 2010 are described below:

        In February 2010, Sanofi acquired the U.S.-based company Chattem, Inc. (Chattem) by successfully completing a cash tender offer leading to the acquisition of 100% of the share capital. Chattem is a major consumer health player in the United States, producing and distributing branded consumer health products, toiletries and dietary supplements across various market segments. Chattem manages the Allegra® brand, and acts as the platform for Sanofi over-the-counter and consumer healthcare products in the United States. See Note D.1.4. to our consolidated financial statements included at Item 18 of this annual report.

        In April 2010, Sanofi acquired a controlling interest in the capital of Bioton Vostok, a Russian insulin manufacturer. Under the terms of the agreement, put options were granted to non-controlling interests. See Note D.18. to our consolidated financial statements included at Item 18 of this annual report.

        In May 2010, Sanofi formed a new joint venture with Nichi-Iko Pharmaceuticals Co., Ltd (Nichi-Iko), a leading generics company in Japan, to expand generics activities in the country. In addition to forming this joint venture, Sanofi took a 4.66% equity interest in the capital of Nichi-Iko.

        In June 2010, Sanofi acquired 100% of the share capital of Canderm Pharma Inc. (Canderm), a privately-held leading Canadian skincare company distributing cosmeceuticals and dermatological products. Canderm generated net sales of 24 million Canadian dollars in 2009.

        In July 2010, Sanofi acquired 100% of the share capital of TargeGen, Inc. (TargeGen), a U.S. biopharmaceutical company developing small molecule kinase inhibitors for the treatment of certain forms of leukemia, lymphoma and other hematological malignancies and blood disorders. An upfront payment of $75 million was made on completion of the transaction. Future milestone payments may be made at various stages in the development of TG 101348, TargeGen's principal product candidate. The total amount of payments (including the upfront payment) could reach $560 million. See Note D.1.4. and Note D.18. to our consolidated financial statements included at Item 18 of this annual report.

        In August 2010, Sanofi acquired 100% of the share capital of Nepentes S.A. (Nepentes), a Polish manufacturer of pharmaceuticals and dermocosmetics, for a consideration of PLN 425 million (€106 million).

        In October 2010, Sanofi Pasteur acquired 100% of the share capital of VaxDesign Corporation (VaxDesign), a privately-held U.S. biotechnology company which has developed a technology reproducing in vitro models of the human immune system, that can be used to select the best candidate vaccines at the pre-clinical stage. Under the terms of the agreement, an upfront payment of $55 million was made upon closing of the transaction, and a further $5 million will be payable upon completion of a specified development milestone.




        In October 2010, Sanofi acquired a 60% equity interest in the Chinese consumer healthcare company Hangzhou Sanofi Minsheng Consumer Healthcare Co. Ltd, in partnership with Minsheng Pharmaceutical Co., Ltd ("Minsheng"). Minsheng was also granted a put option over the remaining shares not held by Sanofi. See Note D.18. to our consolidated financial statements included at Item 18 of this annual report.

Results of Operations

Year Ended December 31, 2013 Compared with Year Ended December 31, 2012

        The consolidated income statements for the years ended December 31, 2013 and December 31, 2012 break down as follows:

(under IFRS) (€ million)		2013		as % of net sales		2012 (1)		as % of net sales
Net sales		32,951		100.0%		34,947		100.0%
Other revenues		355		1.1%		1,010		2.9%
Cost of sales		(10,990	)	(33.4%	)	(11,098	)	(31.8%	)
Gross profit		22,316		67.7%		24,859		71.1%
Research & development expenses		(4,770	)	(14.5%	)	(4,905	)	(14.0%	)
Selling & general expenses		(8,602	)	(26.1%	)	(8,929	)	(25.6%	)
Other operating income		691				562
Other operating expenses		(242	)			(414	)
Amortization of intangible assets		(2,914	)			(3,291	)
Impairment of intangible assets		(1,387	)			(117	)
Fair value remeasurement of contingent consideration liabilities		314				(192	)
Restructuring costs		(300	)			(1,141	)
Other gains and losses, and litigation		—				—
Operating income		5,106		15.5%		6,432		18.4%
Financial expenses		(612	)			(751	)
Financial income		109				93
Income before tax and associates and joint ventures		4,603		14.0%		5,774		16.5%
Income tax expense		(763	)			(1,109	)
Share of profit/(loss) of associates and joint ventures		35				393
Net income		3,875		11.8%		5,058		14.5%
Net income attributable to non-controlling interests		158				169
Net income attributable to equity holders of Sanofi		3,717		11.3%		4,889		14.0%
Average number of shares outstanding (million)		1,323.1				1,319.5
Average number of shares outstanding after dilution (million)		1,339.1				1,329.6
Basic earnings per share (in euros)		2.81				3.71
Diluted earnings per share (in euros)		2.78				3.68

(1)

Includes the impact of applying the revised IAS 19 (see Note A.2.2. to our consolidated financial statements included at Item 18 of this annual report).




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Net Sales

        Consolidated net sales for the year ended December 31, 2013 amounted to €32,951 million, 5.7% lower than in 2012. Exchange rate movements had an unfavorable effect of 5.2 points, mainly reflecting the depreciation of the yen, the U.S. dollar, the Brazilian real, the Venezuelan bolivar, the Australian dollar and the South African rand against the euro. At constant exchange rates, net sales fell by 0.5% year-on-year.

        The following table sets forth a reconciliation of our reported net sales for the years ended December 31, 2013 and December 31, 2012 to our net sales at constant exchange rates:

(€ million)		2013		2012		Change
Net sales		32,951		34,947		-5.7%
Effect of exchange rates		1,806
Net sales at constant exchange rates		34,757		34,947		-0.5%

        Our net sales comprise the net sales generated by our Pharmaceuticals, Human Vaccines (Vaccines) and Animal Health segments.

        The following table breaks down our 2013 and 2012 net sales by business segment:

(€ million)		2013 Reported		2012 Reported		Change on a reported basis		Change at constant exchange rates
Pharmaceuticals		27,250		28,871		-5.6%		-0.2%
Vaccines		3,716		3,897		-4.6%		-0.1%
Animal Health		1,985		2,179		-8.9%		-5.3%
Total		32,951		34,947		-5.7%		-0.5%

Net Sales by Product — Pharmaceuticals segment

        In 2013, net sales for the Pharmaceuticals segment were €27,250 million, down 5.6% on a reported basis and 0.2% at constant exchange rates.

        The year-on-year change (decrease of €1,621 million) reflects the negative effect of exchange rates (€1,551 million) on the one hand, and the following impacts at constant exchange rates on the other hand:

–

the positive performance of growth platforms (€1,684 million), mainly our Diabetes and Genzyme businesses;



–

the negative effects of generic competition (mainly on sales of Eloxatin® and Lovenox® in the United States, and of Aprovel® and Plavix® in Western Europe), totaling €1,253 million of net sales lost; and



–

other impacts (negative evolution of €501 million), including the negative impact of austerity measures in the European Union and temporary difficulties in distribution channels for our Generics business in Brazil.

        Our flagship products (Lantus® and Apidra®, Cerezyme®, Myozyme®/Lumizyme®, Fabrazyme®, Aubagio® and Lemtrada™, Multaq®, Jevtana®, Auvi-Q®, Mozobil®, Zaltrap®, Plavix®, Lovenox®, Aprovel®/CoAprovel®, Renagel®/Renvela®, Allegra®, Stilnox® / Ambien® / Myslee®, Synvisc® / Synvisc-One®, Taxotere® and Eloxatin®) are discussed below.




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        The following table breaks down our 2013 and 2012 net sales for the Pharmaceuticals segment by product:

(€ million) Product		Indication		2013 Reported		2012 Reported		Change on a reported basis		Change at constant exchange rates
Lantus®		Diabetes		5,715		4,960		+15.2%		+20.0%
Apidra®		Diabetes		288		230		+25.2%		+31.7%
Amaryl®		Diabetes		375		421		-10.9%		-1.0%
Insuman®		Diabetes		132		135		-2.2%		0.0%
Lyxumia®		Diabetes		9		—		—		—
Other products				49		36		+36.1%		+38.9%
Total: Diabetes		Diabetes		6,568		5,782		+13.6%		+18.7%
Taxotere®		Breast, lung, prostate, stomach, and head & neck cancer		409		563		-27.4%		-19.5%
Jevtana®		Prostate cancer		231		235		-1.7%		+1.3%
Eloxatin®		Colorectal cancer		221		956		-76.9%		-76.0%
Thymoglobulin®		Organ rejection		198		193		+2.6%		+7.3%
Mozobil®		Hematologic malignancies		101		96		+5.2%		+8.3%
Zaltrap®		Colorectal cancer		53		25		+112.0%		+116.0%
Other products				252		326		-22.7%		-18.7%
Total: Oncology				1,465		2,394		-38.8%		-35.3%
Cerezyme®		Gaucher disease		688		633		+8.7%		+13.9%
Myozyme®/Lumizyme®		Pompe disease		500		462		+8.2%		+11.9%
Fabrazyme®		Fabry disease		383		292		+31.2%		+39.0%
Aldurazyme®		Mucopolysaccharidosis		159		150		+6.0%		+11.3%
Other products				244		241		+1.2%		+8.7%
Sub-total: Rare diseases				1,974		1,778		+11.0%		+16.6%
Aubagio®		Multiple sclerosis		166		7		—		—
Lemtrada™		Multiple sclerosis		2		—		—		—
Sub-total: Multiple sclerosis				168		7		—		—
Total: Genzyme				2,142		1,785		+20.0%		+25.9%
Plavix®		Atherothrombosis		1,857		2,066		-10.1%		+1.1%
Lovenox®		Thrombosis		1,703		1,893		-10.0%		-7.2%
Aprovel®/CoAprovel®		Hypertension		882		1,151		-23.4%		-20.9%
Renagel®/Renvela®		Hyperphosphatemia		750		653		+14.9%		+19.0%
Allegra®		Allergic rhinitis, urticaria		406		553		-26.6%		-12.1%
Depakine®		Epilepsy		405		410		-1.2%		+2.7%
Stilnox®/Ambien®/Myslee®		Sleep disorders		391		497		-21.3%		-9.5%
Synvisc®/Synvisc-One®		Arthritis		371		363		+2.2%		+6.1%
Tritace®		Hypertension		307		345		-11.0%		-7.2%
Multaq®		Atrial fibrillation		269		255		+5.5%		+8.2%
Lasix®		Edema, hypertension		172		210		-18.1%		-9.5%
Targocid®		Bacterial infections		166		198		-16.2%		-11.1%
Orudis®		Rheumatoid arthritis, osteoarthritis		144		184		-21.7%		-9.8%
Cordarone®		Arrhythmia		141		163		-13.5%		-4.3%
Xatral®		Benign prostatic hypertrophy		101		130		-22.3%		-20.0%
Actonel®		Osteoporosis, Paget's disease		100		134		-25.4%		-20.1%
Auvi-Q™		Severe allergies, anaphylaxis		51		—		—		—
Other prescription products				4,230		4,853		-12.8%		-8.1%
Total: Other prescription products				12,446		14,058		-11.5%		-5.5%
Consumer Health Care				3,004		3,008		-0.1%		+5.2%
Generics				1,625		1,844		-11.9%		-8.2%
Total Pharmaceuticals				27,250		28,871		-5.6%		-0.2%




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Diabetes division

        Net sales for the Diabetes division were €6,568 million, up 18.7% at constant exchange rates, driven by double-digit growth for Lantus® and Apidra®.

Lantus® increased its net sales by 20.0% (at constant exchange rates) to €5,715 million in 2013 due to robust growth in the United States (up 25.6% at constant exchange rates, at €3,747 million) driven by Lantus® SoloSTAR®, which accounted for 57% of full-year sales, and to a solid performance in Emerging Markets (up 16.8% at constant exchange rates), especially in the Africa/Middle East region (up 34.6% at constant exchange rates) and in Eastern Europe (up 14.5% at constant exchange rates). In Western Europe, growth was once again modest (up 4.1% at constant exchange rates).

        The product's sales growth reflected both an increase in volumes and a generally favorable price effect. Volumes advanced in all geographic segments during 2013 (+9.8% overall), especially in Emerging Markets but also in the United States, reflecting continued strength in prescription rates. We expect continued strength in prescription rates in all geographic segments in the medium term. In the longer term, volume growth will be dependent on a number of factors such as new competing products entering the markets and prevalence of type 2 diabetes. We expect the Emerging Markets zone to continue to be a robust contributor to volume growth going forward, reflecting increased diagnosis of Diabetes and better access to drugs.

        Price effects were overall favorable (+10.2% at constant exchange rates), with price rises in the United States and other key markets more than offsetting price pressure in some countries, such as China. We cannot foresee what the long-term price effects will be, as these will depend on the impact of new competing products on the pricing of diabetes treatments across all geographic treatments. However, favorable price effects are expected in the United States in the short term.

        Net sales ofApidra® totaled €288 million in 2013, up 31.7% at constant exchange rates, due to a strong performance in the United States (up 58.9% at constant exchange rates, at €112 million).

Amaryl® posted a 1.0% fall in net sales at constant exchange rates to €375 million, reflecting the effect of generic competition in Japan (down 18.4% at constant exchange rates, at €81 million), but also a good performance in Emerging Markets (up 9.9% at constant exchange rates, at €269 million).

Lyxumia® (lixisenatide, in-licensed from Zealand Pharma) was launched in various Western European countries, in Japan and in Mexico in 2013, and generated net sales of €9 million.

Oncology business

        The Oncology business posted net sales of €1,465 million, down 35.3% at constant exchange rates, due mainly to the effects of the expected expiration of exclusivity for Eloxatin® in the United States.

Eloxatin® saw net sales fall sharply in 2013, by 76.0% at constant exchange rates to €221 million, triggered by increased competition from generics in the United States beginning in August 2012.

        Net sales ofTaxotere® fell by 19.5% at constant exchange rates to €409 million. The product is facing competition from generics in Western Europe (down 56.6% at constant exchange rates, at €22 million), in the United States (down 18.9% at constant exchange rates, at €42 million) and in Emerging Markets (down 18.5% at constant exchange rates, at €211 million).

Jevtana® reported net sales of €231 million in 2013, up 1.3% at constant exchange rates, reflecting competitive pressure in the United States, where sales slipped by 19.3% at constant exchange rates to €86 million, counteracted by a strong performance in Western Europe (up 22.0% at constant exchange rates, at €110 million).

        Sales ofMozobil® rose by 8.3% at constant exchange rates to €101 million.

        Net sales ofZaltrap® reached €53 million, up 116.0% at constant exchange rates. The product generated sales of €36 million in the United States, where it was launched in the third quarter of 2012 (up 54.2% at constant exchange rates), and sales of €15 million in Western Europe, where launches began during the first half of 2013.

        Net sales of other Oncology products fell by 18.7% at constant exchange rates to €252 million, due mainly to the withdrawal of Campath® from the market in the second half of 2012.




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        Jevtana®, Zaltrap® and Mozobil®, along with the other pharmaceutical products Multaq® and Auvi-Q ^{TM (1)} (see "— Other pharmaceutical products" below), constitute the "Other Innovative Products" growth platform, which in 2013 generated €705 million of net sales, up 18.8% at constant exchange rates.

Genzyme business

        The Genzyme business consists of treatments for rare diseases, and treatments for multiple sclerosis (Aubagio® and Lemtrada™). The business generated net sales of €2,142 million, up 25.9% at constant exchange rates, reflecting the return to full supply capacity for Cerezyme® and Fabrazyme®, an increased number of patients in rare diseases, and the launch of Aubagio® in the United States.

        In rare diseases,Cerezyme® increased its net sales by 13.9% at constant exchange rates to €688 million, driven by Emerging Markets (up 36.3% at constant exchange rates, at €241 million) and the United States (up 10.8% at constant exchange rates, at €178 million).

        Net sales ofMyozyme® /Lumizyme® rose by 11.9% at constant exchange rates to €500 million, due to an increase in sales in Emerging Markets (up 43.6% at constant exchange rates, at €74 million) and in Western Europe (up 7.4% at constant exchange rates, at €274 million).

Fabrazyme® reported strong net sales growth of 39.0% at constant exchange rates, to €383 million. The product was boosted by a rebound in the United States (up 33.6% at constant exchange rates, at €196 million) and Western Europe (up 69.2% at constant exchange rates at €87 million), mainly due to an increase in the number of new patients.

        For more information regarding the manufacturing issues related to Cerezyme® and Fabrazyme® see "Item 4 — Information on the Company — Production and Raw Materials."

        In multiple sclerosis,Aubagio®, which was launched in the United States in October 2012, and in some Western European countries in the fourth quarter of 2013, generated net sales of €166 million in 2013 (of which €152 million came from the United States).Lemtrada™, launched in Germany in October 2013, posted sales of €2 million.

Other pharmaceutical products

        Net sales ofPlavix® were up 1.1% at constant exchange rates at €1,857 million. Growth was limited by the effect of a fall in sales of the active ingredient to the entity majority owned by BMS in the United States (down 93.4% at constant exchange rates, at €5 million), where the product lost its exclusivity on May 17, 2012. Sales of Plavix® in the United States and Puerto Rico are handled by BMS under the terms of the Sanofi-BMS alliance (see "— Financial presentation of alliances — Alliance Arrangements with Bristol-Myers Squibb" above). In Emerging Markets, Plavix® reported net sales growth of 4.6% at constant exchange rates to €807 million, driven by sales in China (up 14.3% at constant exchange rates, at €422 million). In Japan, sales advanced by 13.3% at constant exchange rates to €748 million. In Western Europe, sales fell year-on-year (down 16.3% at constant exchange rates, at €257 million) as a result of competition from generics.

Lovenox® saw net sales fall in 2013 by 7.2% at constant exchange rates to €1,703 million due to competition from generics in the United States, where sales of the branded product were down 39.5% at constant exchange rates at €187 million (sales of the generic version of Lovenox® launched by Sanofi in 2012 are recorded by our Generics business). Sales rose by 0.9% at constant exchange rates in Western Europe to €858 million, while in Emerging Markets sales were down 2.6% at €563 million.

Aprovel® /CoAprovel® reported a drop in net sales of 20.9% at constant exchange rates to €882 million, mainly as a result of competition from generics in Western Europe, where sales were 39.1% lower at €338 million. Emerging Markets net sales increased by 9.1% at constant exchange rates to €410 million.

        Net sales ofRenagel® / Renvela® rose by 19.0% at constant exchange rates to €750 million, driven by a strong performance in the United States (up 22.0% at constant exchange rates, at €531 million) and in Emerging Markets (up 35.8% at constant exchange rates, at €67 million).

---

(1)

Sanofi U.S. has in-licensed the North American commercialization rights for Auvi-Q™ from Intelliject, Inc.




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Allegra® posted a fall in prescription net sales (down 12.1% at constant exchange rates, at €406 million), affected by competition from generics in Japan (down 18.4% at constant exchange rates, at €280 million). Net sales of Allegra® OTC in the United States and in Japan are recorded by the Consumer Health Care business.

        Net sales ofStilnox® / Ambien® / Myslee® fell by 9.5% at constant exchange rates to €391 million, reflecting competition from generics of Myslee® in Japan (down 17.1% at constant exchange rates at €192 million).

Synvisc® / Synvisc-One® achieved net sales of €371 million, up 6.1% at constant exchange rates. Sales held fairly steady in the United States (up 1.0% at constant exchange rates, at €295 million).

        Net sales ofMultaq® increased by 8.2% at constant exchange rates to €269 million, of which €216 million was generated in the United States (up 11.5% at constant exchange rates).

Auvi-Q™ recorded net sales of €51 million in the United States, where it was launched in January 2013.

        No comments are called for in respect of our other prescription medicines.

Consumer Health Care business

        During 2013, theConsumer Health Care business increased its net sales by 5.2% at constant exchange rates to €3,004 million, driven by growth in Emerging Markets (up 7.9% at constant exchange rates, at €1,482 million) and the United States (up 4.8% at constant exchange rates, at €616 million).

        Net sales of Allegra® OTC rose by 7.4% at constant exchange rates, reflecting the product's launch in Japan at the end of 2012. Essentiale®, Enterogermina® and No Spa® all achieved double-digit net sales growth (at constant exchange rates).

        The following table breaks down our 2013 and 2012 net sales for the Consumer Health Care business by product:

(€ million) Product		2013 Reported		2012 Reported		Change on a reported basis		Change at constant exchange rates
Doliprane®		290		268		+8.2%		+9.0%
Allegra®		264		256		+3.1%		+7.4%
Essentiale®		207		178		+16.3%		+21.9%
Enterogermina®		130		119		+9.2%		+21.8%
No Spa®		117		110		+6.4%		+10.0%
Lactacyd®		105		110		-4.5%		+3.6%
Dorflex®		93		101		-7.9%		+5.0%
Other products		1,798		1,866		-3.6%		+1.4%
Total Consumer Healh Care		3,004		3,008		-0.1%		+5.2%

Generics business

        TheGenerics business reported net sales of €1,625 million in 2013, down 8.2% at constant exchange rates, with the performance adversely affected by temporary difficulties in distribution channels in Brazil.

        During the second quarter of 2013, Sanofi became aware that distribution channels in Brazil were holding inventory levels substantially and inappropriately in excess of the volumes needed to meet demand. Consequently, an adjustment was booked for product returns, discounts and chargebacks, the net impact of which was to reduce net sales by €122 million. An additional provision of €79 million was also booked to cover inventory write-downs and other associated costs.

        However, the business was boosted by organic sales growth in Western Europe (up 11.4% at constant exchange rates, at €552 million), principally in the French market, where the penetration of generics increased. In Emerging Markets, the business generated sales of €858 million (down 12.8% at constant exchange rates), hampered by the adjustment to net sales in Brazil. In the United States, net sales fell by 32.4% at constant exchange rates to €179 million, reflecting a decline in sales of authorized generics of Lovenox®, Aprovel® and Taxotere®, due partly to unfavorable price effects.




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        The following table breaks down net sales of our Pharmaceutical segment products by geographical region in 2013:

(€ million) Product		Western Europe (1)		Change at constant exchange rates		United States		Change at constant exchange rates		Emerging Markets (2)		Change at constant exchange rates		Rest of the world (3)		Change at constant exchange rates
Lantus®		804		+4.1%		3,747		+25.6%		874		+16.8%		290		+12.3%
Apidra®		84		+7.7%		112		+58.9%		63		+31.4%		29		+28.6%
Amaryl®		22		-21.4%		2		-33.3%		269		+9.9%		82		-18.1%
Insuman®		90		-8.2%		1		0.0%		42		+18.9%		(1	)	-100.0%
Lyxumia®		6		—		—		—		—		—		3		—
Other products		45		+50.0%		—		-100.0%		2		—		2		—
Total: Diabetes		1,051		+4.4%		3,862		+26.1%		1,250		+16.1%		405		+5.7%
Taxotere®		22		-56.6%		42		-18.9%		211		-18.5%		134		-10.7%
Jevtana®		110		+22.0%		86		-19.3%		31		+3.0%		4		+150.0%
Eloxatin®		6		-53.8%		19		-97.4%		127		-14.4%		69		+1.4%
Thymoglobulin®		31		+6.9%		102		+8.2%		53		+10.0%		12		-6.3%
Mozobil®		32		+6.7%		56		+3.6%		10		+42.9%		3		+33.3%
Zaltrap®		15		—		36		+54.2%		2		—		—		-100.0%
Other products		54		-26.7%		149		-15.8%		30		-28.9%		19		+4.3%
Total: Oncology		270		-6.2%		490		-59.3%		464		-13.3%		241		-5.3%
Cerezyme®		225		+5.1%		178		+10.8%		241		+36.3%		44		-16.1%
Myozyme®/Lumizyme®		274		+7.4%		123		+9.4%		74		+43.6%		29		+3.0%
Fabrazyme®		87		+69.2%		196		+33.6%		51		+31.7%		49		+29.8%
Aldurazyme®		60		+5.2%		29		+15.4%		54		+21.3%		16		0.0%
Other products		39		+14.7%		99		+5.2%		39		+13.9%		67		+8.0%
Sub-total Rare diseases		685		+12.0%		625		+16.0%		459		+32.8%		205		+4.7%
Aubagio®		12		—		152		—		2		—		—		—
Lemtrada™		2		—		—		—		—		—		—		—
Sub-total Multiple sclerosis		14		—		152		—		2		—		—		—
Total: Genzyme(4)		699		+14.3%		777		+42.6%		461		+33.3%		205		+5.1%
Plavix®		257		-16.3%		5	*	-93.4%		807		+4.6%		788		+12.1%
Lovenox®		858		+0.9%		187		-39.5%		563		-2.6%		95		-1.9%
Aprovel®/CoAprovel®		338		-39.1%		17	*	-60.0%		410		+9.1%		117		-20.8%
Renagel®/Renvela®		133		+4.7%		531		+22.0%		67		+35.8%		19		0.0%
Allegra®		10		-9.1%		(3	)	—		120		+12.5%		279		-18.7%
Depakine®		138		-2.1%		—		—		252		+5.6%		15		0.0%
Stilnox®/Ambien®/Myslee®		42		-8.7%		88		-7.1%		65		0.0%		196		-16.6%
Synvisc®/Synvisc-One®		25		+25.0%		295		+1.0%		33		+45.8%		18		+17.6%
Tritace®		136		-9.3%		—		—		160		-4.4%		11		-20.0%
Multaq®		43		-6.5%		216		+11.5%		8		+12.5%		2		0.0%
Lasix®		75		-5.1%		3		0.0%		50		-11.3%		44		-13.6%
Targocid®		79		-8.1%		—		—		75		-10.0%		12		-27.3%
Orudis®		24		-52.9%		—		—		117		+7.8%		3		-25.0%
Cordarone®		25		-10.7%		—		—		74		+2.6%		42		-10.2%
Xatral®		39		-13.3%		3		-85.0%		58		-3.2%		1		-33.3%
Actonel®		22		-33.3%		—		—		48		-22.7%		30		-2.9%
Auvi-Q™		—		—		51		—		—		—		—		—
Other prescription products		1,645		-13.1%		497		-12.0%		1,607		-0.3%		481		-11.1%
Total: Other prescription products		3,889		-13.0%		1,890		-6.1%		4,514		+1.8%		2,153		-5.4%
Consumer Health Care		664		-0.2%		616		+4.8%		1,482		+7.9%		242		+3.9%
Generics		552		+11.4%		179		-32.4%		858		-12.8%		36		+51.9%
Total pharmaceuticals		7,125		-5.4%		7,814		+1.8%		9,029		+3.2%		3,282		-2.6%

(1)

France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark.

(2)

World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand.

(3)

Japan, Canada, Australia and New Zealand.

*

Sales of active ingredient to the entity majority-owned by BMS in the United States.




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Net Sales — Human Vaccines (Vaccines) segment

        In 2013, the Vaccines segment posted net sales of €3,716 million, down 4.6% on a reported basis and 0.1% at constant exchange rates.

        The following table presents the 2013 and 2012 sales of our Vaccines segment by range of products:

(€ million)		2013 Reported		2012 Reported		Change on a reported basis		Change at constant exchange rates
Polio/Pertussis/Hib Vaccines (including Pentacel® and Pentaxim®)		1,148		1,184		-3.0%		+3.2%
Influenza Vaccines (including Vaxigrip® and Fluzone®)		929		884		+5.1%		+9.3%
Meningitis/Pneumonia Vaccines (including Menactra®)		496		650		-23.7%		-20.8%
Adult Booster Vaccines (including Adacel®)		391		496		-21.2%		-18.5%
Travel and Other Endemics Vaccines		382		364		+4.9%		+9.9%
Other Vaccines		370		319		+16.0%		+21.0%
Total Vaccines		3,716		3,897		-4.6%		-0.1%

Polio / Pertussis / Hib vaccines reported net sales up 3.2% at constant exchange rates, to €1,148 million. This reflected a good performance in Emerging Markets (€644 million, up 33.9% at constant exchange rates), driven by the success of Pentaxim®, especially in China, but also a decline in net sales of 23.8% at constant exchange rates in the United States (to €275 million) triggered by supply limitations for of Pentacel® and Adacel® lasting from April 2012 until October 2013.

        Net sales ofInfluenza vaccines were up 9.3% at constant exchange rates at €929 million, helped by a strong performance in the United States (up 20.4% at €533 million) with the Fluzone® range; in Emerging Markets, net sales were down 5.7% at constant exchange rates at €291 million.

Meningitis / Pneumonia vaccines posted net sales of €496 million, down 20.8% at constant exchange rates, affected by a contraction in sales of Menactra® (down 21.5% at constant exchange rates, at €424 million), largely in the United States where the timing of public procurement tenders was less favorable than in 2012. In Emerging Markets, sales for the franchise fell by 17.6% at constant exchange rates to €132 million.

        Net sales ofAdult Booster vaccines were 18.5% lower at constant exchange rates at €391 million, mainly due to reduced sales of Adacel® in the United States (down 25.3% at constant exchange rates, at €234 million) following the temporary restrictions on shipments.

        Net sales ofTravel and Other Endemics vaccines were up 9.9% at constant exchange rates at €382 million, driven by vaccines against rabies and hepatitis A.

Other Vaccines saw net sales rise by 21.0% at constant exchange rates to €370 million, reflecting the expansion of VaxServe, a Sanofi Pasteur company that supplies vaccines in the United States.

        In addition to the Vaccines activity reflected in our consolidated net sales, sales generated by Sanofi Pasteur MSD, our joint venture with Merck & Co., Inc. in Europe, reached €876 million in 2013, up 3.7% (on a reported basis), boosted by sales of the Zostavax® vaccine launched at the end of 2012. Sales generated by Sanofi Pasteur MSD are not included in our consolidated net sales.




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        The following table presents the 2013 sales of our Vaccines segment by range of products and by region:

(€ million)		Western Europe (1) Reported		Change at constant exchange rates		United States Reported		Change at constant exchange rates		Emerging Markets (2) Reported		Change at constant exchange rates		Rest of the world (3) Reported		Change at constant exchange rates
Polio/Pertussis/Hib Vaccines (inc. Pentacel® and Pentaxim®)		35		-34.5%		275		-23.8%		644		+33.9%		194		-8.5%
Influenza Vaccines (inc. Vaxigrip® and Fluzone®)		83		+5.1%		533		+20.4%		291		-5.7%		22		+4.5%
Meningitis/Pneumonia Vaccines (inc. Menactra®)		5		+25.0%		352		-22.4%		132		-17.6%		7		-12.5%
Adult Booster Vaccines (inc. Adacel®)		60		+3.4%		268		-25.3%		48		+11.1%		15		-25.0%
Travel and Other Endemics Vaccines		18		-14.3%		97		+5.2%		215		+11.4%		52		+23.9%
Other Vaccines		3		-88.9%		347		+30.0%		11		-33.3%		9		-13.3%
Total Vaccines		204		-10.1%		1,872		-5.2%		1,341		11.5%		299		-4.9%

(1)

France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark. Net sales in Europe generated by Sanofi Pasteur MSD (the joint venture between Sanofi and Merck & Co., Inc.) are not consolidated.

(2)

World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand.

(3)

Japan, Canada, Australia and New Zealand.

        In the United States, sales of vaccines were down 5.2% at constant exchange rates at €1,872 million, reflecting the supply limitations for Pentacel® and Adacel® coupled with weaker sales of Menactra®. In Emerging Markets, sales growth (up 11.5% at constant exchange rates) was driven by the success of Pentaxim®, especially in China. In the Rest of the World, the fall of 4.9% at constant exchange rates was due largely to lower sales of Imovax® in Japan, reflecting the end of the catch-up vaccinations that followed the launch of this product in September 2012.

Net Sales — Animal Health segment

        Net sales for the Animal Health segment in 2013 amounted to €1,985 million, down 5.3% at constant exchange rates or 8.9% on a reported basis.

        The following table presents the 2013 and 2012 sales of our Animal Health segment by range of products:

(€ million)		2013 Reported		2012 Reported		Change on a reported basis		Change at constant exchange rates
Companion animals		1,195		1,372		-12.9%		-9.8%
Production animals		790		807		-2.1%		+2.1%
Total Animal Health		1,985		2,179		-8.9%		-5.3%
Of which Frontline® and other fipronil-based products		611		775		-21.2%		-17.8%
Of which Vaccines		727		730		-0.4%		+3.0%
Of which Avermectin		413		423		-2.4%		+1.7%
Of which Other products		234		251		-6.8%		-2.8%

        Net sales for theCompanion Animals franchise were 9.8% lower at constant exchange rates, at €1,195 million. Sales of products in theFrontline®/ fipronil range (down 17.8% at constant exchange rates, at €611 million) were affected by increased competition from prescription products and branded generics, and by unfavorable weather conditions in the United States and Western Europe; however, they performed well in Emerging Markets (up 16.1% at constant exchange rates, at €99 million).




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        Sales ofProduction Animals franchise products rose by 2.1% at constant exchange rates to €790 million, driven by growth for avermectin products in the United States (up 3.6% at constant exchange rates, at €225 million).

        The following table breaks down net sales of our Animal Health segment by product and by geographical region in 2013:

(€ million) Product		Western Europe(1)		Change at constant exchange rates		United States		Change at constant exchange rates		Emerging Markets(2)		Change at constant exchange rates		Rest of The World(3)		Change at constant exchange rates
Frontline® and other fipronil-based products		177		-13.9%		289		-28.0%		99		+16.1%		46		-14.3%
Vaccines		182		+1.1%		152		+3.3%		374		+4.3%		19		-4.5%
Avermectin		58		-6.5%		225		+3.6%		59		-1.5%		71		+5.5%
Other products		85		-2.3%		81		-11.7%		55		+28.3%		13		-30.4%
Total Animal Health		502		-6.1%		747		-12.8%		587		+7.4%		149		-7.2%

(1)

France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark.

(2)

World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand.

(3)

Japan, Canada, Australia and New Zealand.

Net Sales by Geographical Region

        We divide our sales geographically into four regions: the United States, Emerging Markets, Western Europe and the Rest of the World. The following table breaks down our 2013 and 2012 net sales by region:

(€ million)		2013 Reported		2012 Reported		Change on a reported basis		Change at constant exchange rates
United States		10,433		10,873		-4.0%		-0.7%
Emerging Markets(1)		10,957		11,145		-1.7%		+4.4%
Of which Eastern Europe and Turkey		2,673		2,721		-1.8%		+2.2%
Of which Asia (excl. Pacific region)		3,040		2,841		+7.0%		+10.1%
Of which Latin America		3,013		3,435		-12.3%		-1.5%
Of which Africa		1,028		1,018		+1.0%		+7.7%
Of which Middle East		1,071		1,001		+7.0%		+10.6%
Western Europe(2)		7,831		8,335		-6.0%		-5.6%
Rest of the World(3)		3,730		4,594		-18.8%		-2.9%
Of which Japan		2,507		3,274		-23.4%		-4.3%
Total		32,951		34,947		-5.7%		-0.5%

(1)

World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand.

(2)

France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark.

(3)

Japan, Canada, Australia and New Zealand.

        In the United States, net sales fell by 0.7% at constant exchange rates to €10,433 million. Negative factors included the loss of exclusivity of Eloxatin® in August 2012 (down 97.4% at constant exchange rates), competition from generics of Lovenox® (down 39.5% at constant exchange rates), and supply limitations for Pentacel® and Adacel® in the Polio/Pertussis/Hib vaccines franchise (down 23.8% at constant exchange rates). Positive factors included strong performances by the Genzyme business (up 42.6% at constant exchange rates, at €777 million) and the Diabetes division (up 26.1% at constant exchange rates, at €3,862 million).

        In Emerging Markets, net sales were €10,957 million, an increase of 4.4% at constant exchange rates. Growth was slowed by temporary difficulties in the Generics business in Brazil, but was mainly driven by the Diabetes division (up 16.1% at constant exchange rates, at €1,250 million), by the Vaccines segment (up 11.5% at constant exchange rates, at €1,341 million) and by Genzyme (up 33.3% at constant exchange rates, at €461 million). In China, net sales




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totaled €1,471 million, up 18.6% at constant exchange rates, reflecting strong performances by Plavix®, Aprovel®, Lantus® and the Vaccines segment. Russia posted sales of €901 million, up 12.0% at constant exchange rates, with Consumer Health Care and Generics having the most impact. Net sales in Brazil slipped by 18.2% at constant exchange rates to €1,111 million, affected by temporary difficulties in distribution channels for the Generics business.

        Western Europe saw net sales fall by 5.6% at constant exchange rates to €7,831 million, hit by competition from generics of Aprovel® (down 39.1% at constant exchange rates) and Plavix® (down 16.3% at constant exchange rates) and by the impact of austerity measures.

        In the Rest of the World, net sales were €3,730 million, down 2.9% at constant exchange rates. In Japan, net sales came to €2,507 million (down 4.3% at constant exchange rates), reflecting on the one hand the impact of generic competition on sales of Allegra® (down 18.4% at constant exchange rates, at €280 million) and Myslee® (down 17.1% at constant exchange rates, at €192 million) combined with lower sales of the Imovax® vaccine, but on the other hand a fine performance by Plavix® (up 13.3% at constant exchange rates, at €748 million).

Other Revenues

        Other revenues, which mainly comprise royalties under licensing agreements contracted in connection with ongoing operations, fell by 64.9% to €355 million (compared with €1,010 million in 2012).

        The decrease was largely due to lower licensing revenue under the worldwide alliance with BMS on Plavix® and Aprovel®, which represented €4 million in 2013 versus €532 million in 2012 (down 99.2% on a reported basis), due to the loss of exclusivity in the United States for Aprovel® (from March 30, 2012) and Plavix® (from May 17, 2012).

        A further factor was a drop in royalties received from Amgen under a worldwide license for Enbrel®, reflecting the contractual termination of royalty payments on U.S. sales of the product in February 2013.

Gross Profit

        Gross profit amounted to €22,316 million in 2013 (67.7% of net sales), versus €24,859 million in 2012 (71.1% of net sales). This represents a year-on-year fall of 10.2%, equivalent to a 3.4-point drop in the gross margin ratio.

        The gross margin ratio for the Pharmaceuticals segment was 3.1 points lower at 69.8%, reflecting not only the drop in royalty revenue (2.1 points) but also a deterioration in the ratio of cost of sales to net sales (1.0 point), due in particular to the adverse impact of generic competition and exchange rates, coupled with temporary difficulties in distribution channels for our generics in Brazil.

        The gross margin ratio for the Vaccines segment was 6.3 points lower at 53.0%, as a result of an unfavorable product mix that was due partly to the temporary supply limitations for Pentacel® and Adacel®.

        The gross margin ratio for the Animal Health segment fell by 2.5 points to 66.8%, reflecting lower sales of fipronil products.

Research and Development Expenses

        Research and development (R&D) expenses amounted to €4,770 million in 2013 (versus €4,905 million in 2012) and represented 14.5% of net sales (versus 14.0% in 2012). The year-on-year reduction was €135 million, or 2.8%.

        In the Pharmaceuticals segment, R&D expenses decreased by €116 million (2.8%), the principal factors being favorable exchange rate effects and ongoing transformation and project portfolio rationalization initiatives.

        R&D expenses for the Vaccines segment fell by €20 million (3.7%), largely due to the end of enrollment of patients for clinical trials of the dengue fever vaccine.

        In the Animal Health segment, R&D expenses were €1 million (0.6%) higher than in 2012.




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Selling and General Expenses

        Selling and general expenses totaled €8,602 million, versus €8,929 million in 2012, a reduction of €327 million or 3.7%. These expenses represented 26.1% of net sales, versus 25.6% in 2012.

        The Pharmaceuticals segment recorded a reduction of €289 million (3.8%), reflecting favorable exchange rate effects, despite increased spend on the Diabetes Solutions and Genzyme growth platforms in North America.

        In the Vaccines segment, selling and general expenses were €21 million (3.4%) lower, again helped by favorable exchange rate effects and despite an increase in promotional spending, especially in China and Japan.

        In the Animal Health segment, selling and general expenses were down €16 million (2.4%), due to a reduction in promotional spending and favorable exchange rate effects.

Other Operating Income and Expenses

        In 2013, other operating income totaled €691 million (versus €562 million in 2012), and other operating expenses €242 million (versus €414 million in 2012).

        Overall, other operating income and expenses represented net income of €449 million in 2013, versus net income of €148 million in 2012. This €301 million rise was mainly due to receipt of a payment of €92 million ($125 million) arising from a change to the contractual terms of the alliance with Warner Chilcott on Actonel® (see Note C.3. to our consolidated financial statements), a €93 million gain arising on the settlement of a dispute between Hoechst and Genentech relating to Rituxan®, and a €165 million gain on the sale to Covis Pharma of commercial rights to some pharmaceutical products in the United States.

        This line item also includes a net operational foreign exchange loss of €64 million, versus €41 million in 2012.

Amortization of Intangible Assets

        Amortization charged against intangible assets totaled €2,914 million in 2013, versus €3,291 million in 2012. the year-on-year decrease of €377 million was mainly due to a reduction in amortization charged against intangible assets recognized on the acquisition of Aventis (€1,199 million in 2013, versus €1,489 million in 2012) as some pharmaceutical products reached the end of their life cycles in the face of competition from generics, plus (to a lesser extent) favorable exchange rate effects.

Impairment of Intangible Assets

        In 2013, this line showed impairment losses of €1,387 million against intangible assets, versus €117 million in 2012. The impairment losses recognized in 2013 related primarily to (i) Lemtrada™ (alemtuzumab) in the United States, following the refusal by the FDA to approve the U.S. marketing application for this product as it stands (€612 million); (ii) the discontinuation of the iniparib R&D project in non-small cell lung cancer and ovarian cancer (€384 million); and (iii) the discontinuation of the project on fedratinib, a selective JAK2 inhibitor in the treatment of polycythemia vera (€170 million).

        In 2012, impairment losses related mainly to the discontinuation of R&D projects in the Pharmaceuticals segment, in particular development programs in oncology.

Fair Value Remeasurement of Contingent Consideration Liabilities

        Fair value remeasurements of contingent consideration liabilities recognized on acquisitions in accordance with the revised IFRS 3 represented a net gain of €314 million in 2013, versus a net expense of €192 million in 2012. This item mainly relates to changes in the fair value of (i) the CVRs issued in connection with the Genzyme acquisition, (ii) the contingent consideration payable to Bayer as a result of an acquisition made by Genzyme prior to the latter's acquisition by Sanofi, and (iii) the contingent consideration arising from the acquisition of TargeGen (see Note D.18. to our consolidated financial statements).




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Restructuring Costs

        Restructuring costs amounted to €300 million in 2013, versus €1,141 million in 2012, and relate primarily to measures associated with the major transformation program that we initiated in 2009 to adapt our structures to the challenges of the future.

        In 2013, these costs related mainly to employee-related expenses arising from headcount adjustment plans in France and the rest of Europe.

        In 2012, these costs mainly related to measures taken to adapt our resources in France, transform our industrial facilities in Europe and make adjustments to our sales forces worldwide, along with the integration of Genzyme and impairment losses against property, plant and equipment in France.

Other Gains and Losses, and Litigation

        Nothing was recognized on this line in either 2013 or 2012.

Operating Income

        Operating income totaled €5,106 million for 2013, versus €6,432 million for 2012, a fall of 20.6%. This year-on-year change reflected the drop in gross profit, but also the reduction in selling and general expenses, research and development expenses and restructuring costs.

Financial Income and Expenses

        Net financial expense for 2013 was €503 million, versus €658 million for 2012, a decrease of €155 million.

        Financial expenses directly related to our debt, net of cash and cash equivalents (see the definition in section "3. Consolidated Balance sheet" below) amounted to €317 million in 2013, compared with €349 million in 2012. This decrease mainly reflects a reduction in both the average level of our total debt, and the average financing rate.

        The reduction in net financial expense was mainly attributable to a decrease in the net interest cost on defined-benefit pension plans (€159 million, versus €198 million in 2012); a lower level of impairment losses on investments and financial assets (€8 million, versus €30 million in 2012), which related mainly to available-for-sale financial assets; and a net financial foreign exchange gain of €5 million (versus a net loss of €17 million in 2012).

        Gains on disposals of non-current financial assets totaled €50 million (versus €37 million in 2012), and mainly related to divestments by Genzyme.

Income before Tax and Associates and Joint Ventures

        Income before tax and associates and joint ventures amounted to €4,603 million in 2013, versus €5,774 million in 2012, a fall of 20.3%.

Income Tax Expense

        Income tax expense represented €763 million in 2013, versus €1,109 million in 2012, giving an effective tax rate (based on consolidated net income) of 16.6% in 2013 compared with 19.2% in 2012 (see Note D.30. to our consolidated financial statements).

        The level of income tax expense was significantly impacted by the positive tax effect relating to the amortization and impairment of intangible assets (€1,466 million in 2013, versus €1,201 million in 2012) and to restructuring costs (€97 million in 2013, versus €370 million in 2012).

        In 2013, this line also includes the "contribution on distributed income", a new French tax levied on the dividend payout to Sanofi shareholders (3%, equivalent to €109 million).

        The effective tax rate based on our business net income is calculated on the basis of business operating income minus net financial expenses and before the share of profit/loss of associates and joint ventures and net income attributable to non-controlling interests. The effective tax rate was 24.0% in 2013, versus 25.5% in 2012. This




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decrease was mainly due to the geographical mix of the results from Group entities, and to recent proceedings involving the tax authorities of various countries that had a positive net effect in 2013.

Share of Profit/Loss of Associates and Joint Ventures

        The share of profits from associates and joint ventures was €35 million in 2013, versus €393 million in 2012. This line mainly includes our share of after-tax profits from territories managed by BMS under the Plavix® and Avapro® alliance, which fell by 94.0% to €25 million (versus €420 million in 2012). The decline in our share was mainly attributable to the drop in sales of Plavix® in the United States due to the loss of exclusivity and competition from generics.

Net Income

        Net income amounted to €3,875 million in 2013, versus €5,058 million in 2012.

Net Income Attributable to Non-Controlling Interests

        Net income attributable to non-controlling interests was €158 million in 2013, versus €169 million in 2012. This line mainly comprises the share of pre-tax profits paid to BMS from territories managed by Sanofi (€141 million, versus €149 million in 2012).

Net Income Attributable to Equity Holders of Sanofi

        Net income attributable to equity holders of Sanofi amounted to €3,717 million, versus €4,889 million in 2012.

        Basic earnings per share for 2013 was €2.81, 24.3% lower than the 2012 figure of €3.71, based on an average number of shares outstanding of 1,323.1 million in 2013 (1,319.5 million in 2012). Diluted earnings per share for 2013 was €2.78 in 2013 (versus €3.68 in 2012), based on an average number of shares outstanding after dilution of 1,339.1 million in 2013 and 1,329.6 million in 2012.

Business Operating Income

        Sanofi reports segment results on the basis of "Business Operating Income". This indicator, adopted in compliance with IFRS 8, is used internally to measure operational performance and to allocate resources. See "Item 5. Operating and Financial Review and Prospects — Segment information" above for the definition of business operating income and reconciliation to our Income before tax and associates and joint ventures.

        Business operating income amounted to €9,324 million in 2013, 18.6% lower than in 2012 (€11,448 million) and represented 28.3% of net sales, versus 32.8% in 2012.

        Business operating income for 2013 and 2012 is set forth below:

(€ million)		2013		2012		Change
Pharmaceuticals		7,887		9,601		-17.9%
Vaccines		909		1,157		-21.4%
Animal Health		502		673		-25.4%
Other		26		17		+52.9%
Business operating income		9,324		11,448		-18.6%

Business Net Income

        Business net income is a non-GAAP financial measure that we use to evaluate our Group's performance. See "Item 5. Operating and Financial Review and Prospects — Business Net Income" above for the definition of business net income and reconciliation to our Net income attributable to equity holders of Sanofi.

        Business net income totaled €6,687 million in 2013, versus €8,101 million in 2012, a fall of 17.5%; it represented 20.3% of net sales, against 23.2% in 2012.




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Business Earnings Per Share

        We also report business earnings per share, a non-GAAP financial measure which we define as business net income divided by the weighted average number of shares outstanding (see "— Business Net Income" above).

        Business earnings per share were €5.05 in 2013, 17.8% lower than the 2012 figure of €6.14, based on an average number of shares outstanding of 1,323.1 million in 2013 and 1,319.5 million in 2012.

Year Ended December 31, 2012 Compared with Year Ended December 31, 2011


        The consolidated income statements for the years ended December 31, 2012 and December 31, 2011 break down as follows:

(under IFRS) (€ million)		2012			as % of net sales			2011			as % of net sales				2012(1)		as % of net sales		2011(1)		as % of net sales
Net sales			34,947			100.0%			33,389			100.0%			34,947		100.0%		33,389		100.0%
Other revenues			1,010			2.9%			1,669			5.0%			1,010		2.9%		1,669		5.0%
Cost of sales			(11,118	)		(31.8%	)		(10,902	)		(32.7%	)		(11,098	)	(31.8%	)	(10,865	)	(32.5%	)
Gross profit			24,839			71.1%			24,156			72.3%			24,859		71.1%		24,193		72.5%
Research & development expenses			(4,922	)		(14.1%	)		(4,811	)		(14.4%	)		(4,905	)	(14.0%	)	(4,788	)	(14.3%	)
Selling & general expenses			(8,947	)		(25.6%	)		(8,536	)		(25.6%	)		(8,929	)	(25.6%	)	(8,508	)	(25.5%	)
Other operating income			562						319						562				319
Other operating expenses			(454	)					(315	)					(414	)			(273	)
Amortization of intangible assets			(3,291	)					(3,314	)					(3,291	)			(3,314	)
Impairment of intangible assets			(117	)					(142	)					(117	)			(142	)
Fair value remeasurement of contingent consideration liabilities			(192	)					15						(192	)			15
Restructuring costs			(1,141	)					(1,314	)					(1,141	)			(1,314	)
Other gains and losses, and litigation (1)			—						(327	)
Other gains and losses, and litigation															—				(327	)
Operating income			6,337			18.1%			5,731			17.2%			6,432		18.4%		5,861		17.6%
Financial expenses			(553	)					(552	)					(751	)			(744	)
Financial income			93						140						93				140
Income before tax and associates and joint ventures			5,877			16.8%			5,319			15.9%			5,774		16.5%		5,257		15.7%
Income tax expense			(1,134	)					(455	)					(1,109	)			(440	)
Share of profit/(loss) of associates and joint ventures			393						1,070						393				1,070
Net income			5,136			14.7%			5,934			17.8%			5,058		14.5%		5,887		17.6%
Net income attributable to non-controlling interests			169						241						169				241
Net income attributable to equity holders of Sanofi			4,967			14.2%			5,693			17.1%			4,889		14.0%		5,646		16.9%
Average number of shares outstanding (million)			1,319.5						1,321.7						1,319.5				1,321.7
Average number of shares outstanding after dilution (million)			1,329.6						1,326.7						1,329.6				1,326.7
Basic earnings per share (in euros)			3.76						4.31						3.71				4.27
Diluted earnings per share (in euros)			3.74						4.29						3.68				4.26

⁽¹⁾

SeeIncludes the impact of applying the amended IAS 19 (see Note B.20.2.A.2.2. to our consolidated financial statements included at Item 18 of this annual report.report).

        Our consolidated income statements include the results of the operations of Genzyme from April 2011. In order to help investors gain a better understanding of our performances, in the narrative discussion of certain income statement line items ("net sales", "research & development expenses", and "selling & general expenses"), we include non-consolidated 2011 first-quarter data for Genzyme in additional analyses.




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Net Sales

        Net sales for the year ended December 31, 2012 amounted to €34,947 million, up 4.7% on 2011. Exchange rate movements had a favorable effect of 4.2 points, mainly reflecting the appreciation of the U.S. dollar against the euro, and to a lesser extent the appreciation of the yen and the yuan. At constant exchange rates and after taking account of changes in structure (mainly the consolidation of Genzyme from April 2011), net sales rose by 0.5% year-on-year.

        The following table sets forth a reconciliation of our reported net sales for the years ended December 31, 2012 and December 31, 2011 to our net sales at constant exchange rates:

(€ million)		2012			2011			Change (%)				2012		2011		Change
Net sales			34,947			33,389			+4.7%			34,947		33,389		+4.7%
Effect of exchange rates			(1,400	)								(1,400	)
Net sales at constant exchange rates			33,547			33,389			+0.5%			33,547		33,389		+0.5%

        Our net sales comprise the net sales generated by our Pharmaceuticals, Human Vaccines (Vaccines) and Animal Health segments.

        The following table breaks down our 2012 and 2011 net sales by business segment:

(€ million)		2012 Reported			2011 Reported			Change on a reported basis (%)			Change at constant exchange rates (%)				2012 Reported		2011 Reported		Change on a reported basis		Change at constant exchange rates
Pharmaceuticals			28,871			27,890			+3.5%			-0.4%			28,871		27,890		+3.5%		-0.4%
Vaccines			3,897			3,469			+12.3%			+5.7%			3,897		3,469		+12.3%		+5.7%
Animal Health			2,179			2,030			+7.3%			+3.1%			2,179		2,030		+7.3%		+3.1%
Total			34,947			33,389			+4.7%			+0.5%			34,947		33,389		+4.7%		+0.5%

Net Sales by Product — Pharmaceuticals segment

        Net sales generated by our Pharmaceuticals segment were €28,871 million in 2012, up 3.5% on a reported basis but down 0.4% at constant exchange rates. The year-on-year change (increase of €981 million) reflects the positive effect of exchange rates (€1,082 million) on the one hand, and the following impacts at constant exchange rates on the other hand:

–

the positive impact of consolidating Genzyme from April 2011 and (non-consolidated sales of €733 million were generated by Genzyme in the first quarter of 2011);



–

the performance of growth platforms but also (€1,381 million);



–

the negative effects of generic competition (mainly on sales of Lovenox®, Taxotere® and Eloxatine®Eloxatin® in the United States, and of Taxotere®, Plavix® and Aprovel® in Western Europe), totaling €1,345 million;



–

the ending of the co-promotion agreement with Teva on Copaxone®, and the divestiture of the Dermik business in July 2011 (negative effects of €559 million); and



–

other impacts (negative effects of €311 million), including the negative impact of austerity measures in the European Union.

        On a constant structure basis and at constant exchange rates (which primarily means including the non-consolidated sales of Genzyme for the first quarter of 2011 and excluding sales of Copaxone® for the whole of 2011), net sales for the Pharmaceuticals segment fell by 0.6% in 2012.

        Our flagship products (Lantus® and Apidra®, Lovenox®, Plavix®, Aprovel®/CoAprovel®, Taxotere®, Eloxatine®, Cerezyme®, Myozyme®/Lumizyme®, Fabrazyme®, Renagel®/Renvela®, Synvisc®/Synvisc-One®Aubagio®, Multaq®, Jevtana®, Aubagio®Mozobil®, Zaltrap®, Lovenox®, Renagel® / Renvela®, Allegra®, Stilnox® / Ambien® / Myslee®, Synvisc® / Synvisc-One®, Taxotere® and Zaltrap®Eloxatin®) are discussed below. Sales of Plavix® and Aprovel® are discussed further below under "— Worldwide Presence of Plavix® and Aprovel®".




Table of Contents

        The following table breaks down our 2012 and 2011 net sales for the Pharmaceuticals segment by product:

(€ million) Product		Indication		2012 Reported			2011 Reported			Change on a reported basis (%)			Change at constant exchange rates (%)				Indication		2012 Reported		2011 Reported		Change on a reported basis		Change at constant exchange rates
Lantus®		Diabetes			4,960			3,916			+26.7%			+19.3%			Diabetes		4,960		3,916		+26.7%		+19.3%
Apidra®		Diabetes			230			190			+21.1%			+16.8%			Diabetes		230		190		+21.1%		+16.8%
Amaryl®		Diabetes			421			436			-3.4%			-8.0%			Diabetes		421		436		-3.4%		-8.0%
Insuman®		Diabetes			135			132			+2.3%			+3.0%			Diabetes		135		132		+2.3%		+3.0%
Other diabetes products		Diabetes			36			10			+260.0%			+250.0%
Other products																			36		10		+260.0%		+250.0%
Total: Diabetes		Diabetes			5,782			4,684			+23.4%			+16.7%			Diabetes		5,782		4,684		+23.4%		+16.7%
Eloxatin®		Colorectal cancer			956			1,071			-10.7%			-17.3%			Colorectal cancer		956		1,071		-10.7%		-17.3%
Taxotere®		Breast, lung, prostate, stomach, and head & neck cancer			563			922			-38.9%			-41.9%			Breast, lung, prostate, stomach, and head & neck cancer		563		922		-38.9%		-41.9%
Jevtana®		Prostate cancer			235			188			+25.0%			+20.2%			Prostate cancer		235		188		+25.0%		+20.2%
Thymoglobulin®(1)																	Organ rejection		193		128		—		—
Zaltrap®		Colorectal cancer			25			—			—			—			Colorectal cancer		25		—		—		—
Mozobil® (1)		Hematologic malignancies			96			59			—			—			Hematologic malignancies		96		59		—		—
Other oncology products (1)					519			389			—			—
Total: Oncology					2,394			2,629			-8.9%			-14.3%
Other products(1)																			326		261		—		—
Total: Oncology(1)																			2,394		2,629		-8.9%		-14.3%
Cerezyme®(1)																	Gaucher disease		633		441		—		—
Myozyme®/Lumizyme®(1)																	Pompe disease		462		308		—		—
Fabrazyme®(1)																	Fabry disease		292		109		—		—
Aldurazyme®(1)																	Mucopolysaccharidosis		150		100		—		—
Other products(1)																			241		164		—		—
Sub-total: Rare diseases(1)																Sub-total: Rare diseases(1)			1,778		1,122		—		—
Aubagio®																	Multiple sclerosis		7		—		—		—
Sub-total: Multiple sclerosis																Sub-total: Multiple sclerosis			7		—		—		—
Total: Genzyme(1)																			1,785		1,122		—		—
Plavix®																	Atherothrombosis		2,066		2,040		+1.3%		-4.6%
Lovenox®		Thrombosis			1,893			2,111			-10.3%			-12.0%			Thrombosis		1,893		2,111		-10.3%		-12.0%
Plavix®		Atherothrombosis			2,066			2,040			+1.3%			-4.6%
Aprovel®/CoAprovel®		Hypertension			1,151			1,291			-10.8%			-13.3%			Hypertension		1,151		1,291		-10.8%		-13.3%
Renagel®/Renvela®(1)																	Hyperphosphatemia		653		415		—		—
Allegra®		Allergic rhinitis, urticaria			553			580			-4.7%			-9.5%			Allergic rhinitis, urticaria		553		580		-4.7%		-9.5%
Stilnox®/Ambien®/Myslee®		Sleep disorders			497			490			+1.4%			-4.5%			Sleep disorders		497		490		+1.4%		-4.5%
Copaxone®		Multiple sclerosis			24			436			-94.5%			-94.7%
Depakine®		Epilepsy			410			388			+5.7%			+3.1%			Epilepsy		410		388		+5.7%		+3.1%
Tritace®		Hypertension			345			375			-8.0%			-8.3%
Multaq®		Atrial fibrillation			255			261			-2.3%			-8.0%
Xatral®		Benign prostatic hypertrophy			130			200			-35.0%			-37.0%
Actonel®		Osteoporosis, Paget's disease			134			167			-19.8%			-21.6%
Nasacort®		Allergic rhinitis			71			106			-33.0%			-35.8%
Renagel®/Renvela® (1)		Hyperphosphatemia			653			415			—			—
Synvisc®/Synvisc-One® (1)		Arthritis			363			256			—			—			Arthritis		363		256		—		—
Aubagio®		Multiple sclerosis			7			—			—			—
Sub-total Multiple sclerosis					7			—			—			—
Cerezyme® (1)		Gaucher disease			633			441			—			—
Myozyme®/Lumizyme® (1)		Pompe disease			462			308			—			—
Fabrazyme® (1)		Fabry disease			292			109			—			—
Other rare disease products (1)					391			264			—			—
Sub-total Rare diseases (1)					1,778			1,122			—			—
Tritace®																	Hypertension		345		375		-8.0%		-8.3%
Total: New Genzyme (1)					1,785			1,122			—			—
Multaq®																	Atrial fibrillation		255		261		-2.3%		-8.0%
Lasix®																	Edema, hypertension		210		213		-1.4%		-3.8%
Targocid®																	Bacterial infections		198		200		-1.0%		-2.5%
Orudis®																	Rheumatoid arthritis, osteoarthritis		184		158		+16,5%		+15.8%
Cordarone®																	Arrhythmia		163		160		+1.9%		-2.5%
Xatral®																	Benign prostatic hypertrophy		130		200		-35.0%		-37.0%
Actonel®																	Osteoporosis, Paget's disease		134		167		-19.8%		-21.6%
Other prescription products					5,513			5,927			-7.0%			-9.1%		Other prescription products			4,853		5,738		-15.4%		-17.4%
Total: Other prescription products(1)																Total: Other prescription products(1)			14,058		15,043		-6.5%		-9.6%
Consumer Health Care					3,008			2,666			+12.8%			+9.9%					3,008		2,666		+12.8%		+9.9%
Generics					1,844			1,746			+5.6%			+5.0%					1,844		1,746		+5.6%		+5.0%
Total Pharmaceuticals					28,871			27,890			+3.5%			-0.4%					28,871		27,890		+3.5%		-0.4%

⁽¹⁾

In 2011, net sales of Genzyme products were recognized from the acquisition date (April 2011).




    DiabetesTable of Contents

Diabetes division

        Net sales for theDiabetes business division amounted to €5,782 million, up 16.7% at constant exchange rates, driven by strong growth for Lantus®.

        Lantus® posted a 19.3% increase in net sales at constant exchange rates in 2012 to €4,960 million, driven by very strong growth in the United States (up 22.0% at €3,087 million); in Emerging Markets (up 25.4% at €793 million), especially in China (up 35.9%) and Latin America (up 32.3%); and in Japan (up 22.0%). In Western Europe, growth was a more modest 5.3% at constant exchange rates.

        Net sales of the rapid-acting insulin analogApidra® advanced by 16.8% (at constant exchange rates) to €230 million in 2012, buoyed by the product's performance in Emerging Markets (up 37.8%).

        Amaryl® saw net sales fall by 8.0% at constant exchange rates to €421 million, mainly as a result of competition from generics in Japan (down 31.7%, at €125 million), and in spite of 11.4% growth in Emerging Markets to €263 million.

Oncology business

        Net sales for theOncology business were €2,394 million, down 14.3% at constant exchange rates.

        Net sales ofEloxatine®Eloxatin® fell by 17.3% at constant exchange rates to 956 million in 2012, reflecting the loss of exclusivity in the United States on August 9, 2012, which had been expected.

        Taxotere® reported a fall in net sales of 41.9% at constant exchange rates, to €563 million. The product is facingfaced competition from generics in Western Europe (down 72.5%) and the United States (down 80.2%). Emerging Markets sales amounted to €270 million, down 11.2% at constant exchange rates.

        Jevtana® posted net sales of €235 million in 2012, up 20.2% at constant exchange rates, boosted by product launches in various countries in Western Europe (€91 million, up 104.5% at constant exchange rates) and in Emerging Markets.

        Zaltrap®, launched in the United States and Puerto Rico at the end of August 2012, generated net sales of €25 million for the year.

        Mozobil® reported net sales of €96 million, up 19.7% on a constant structure basis and at constant exchange rates (i.e., including non-consolidated sales generated by Genzyme in the first quarter of 2011).

        Jevtana®, Zaltrap® and Mozobil®, along with Multaq® (see "— Other pharmaceutical products" below), form the "Other Innovative Products" growth platform. This platform generated net sales of €611 million in 2012.

Genzyme business

        The Genzyme business consists of products used to treat rare diseases, and products for the treatment of multiple sclerosis (Aubagio® and the experimental agent Lemtrada™). Because Genzyme's net sales have been consolidated from the acquisition date (i.e. the start of April 2011), the 2011 consolidated net sales of the Genzyme business do not include sales for the first quarter of 2011. On a constant structure basis and at constant exchange rates, i.e. after including non-consolidated net sales for the first quarter of 2011, the net sales of the Genzyme business rose by 16.9% in 2012 to € 1,785 million.




Table of Contents

        The following table breaks down our 2012 and 2011 net sales for the Genzyme business by product:

(€ million) Product		Indication		2012 Reported		2011 Reported		Change on a constant structure basis and at constant exchange rates
Aubagio®		Multiple sclerosis		7		—		—
Sub-total: Multiple sclerosis				7		—		—
Cerezyme®(1)		Gaucher disease		633		441		+6.0%
Myozyme®/Lumizyme®(1)		Pompe disease		462		308		+11.4%
Fabrazyme®(1)		Fabry disease		292		109		+96.4%
Aldurazyme®(1)		Mucopolysaccharidosis		150		100		+9.8%
Other rare disease products(1)				241		164		+6.1%
Sub-total: Rare diseases(1)				1,778		1,122		+16.4%
Total: Genzyme(1)				1,785		1,122		+16.9%

(1)

In 2011, net sales of Genzyme products were recognized from the acquisition date (April 2011).

Cerezyme® recorded net sales growth of 6.0% on a constant structure basis and at constant exchange rates, to €633 million (+0.9% in Western Europe, at €215 million; +6.3% in the United States, at €166 million). Production continued to improve during the year, enabling normal doses to be delivered to patients in the product's principal markets.

        Net sales ofMyozyme®/Lumizyme® were up 11.4% on a constant structure basis and at constant exchange rates at €462 million (+10,4% in Western Europe, at €257 million; +6.9% in the United States, at €117 million).

Fabrazyme® reported a 96.4% surge in net sales on a constant structure basis and at constant exchange rates, to €292 million. This increase was due mainly to the resumption of production at the new facility at Framingham (United States) in March 2012, enabling full doses to be supplied in all markets where the product is approved for sale.

        For more information regarding the manufacturing issues related to Cerezyme® and Fabrazyme® see "Item 4. — Information on the Company — Production and Raw Materials."

        In multiple sclerosis,Aubagio® was launched in the United States in October 2012, and recorded fourth-quarter net sales of €7 million.

Other pharmaceutical products

        Lovenox® recorded a fall in net sales of 12.0% at constant exchange rates to €1,893 million in 2012, as a result of competition from generics in the United States, where sales slipped by 53.1% (at constant exchange rates) to €319 million. Sales generated outside the United States accounted for 83.1% of worldwide net sales and rose by 5.5% at constant exchange rates to €1,574 million, driven by Emerging Markets (up 11.6% at constant exchange rates at €615 million). Sanofi also launched its own generic version of Lovenox® in the United States, sales of which are recognized in the Generics business.

        Net sales ofRenagel®/Renvela® rose by 13.0% on a constant structure basis and at constant exchange rates (i.e. including non-consolidated sales generated by Genzyme in the first quarter of 2011) to €653 million, on a fine performance in the United States (up 19.2% on a constant structure basis and at constant exchange rates).

        Synvisc®/Synvisc-One® reported sales growth of 4.0% on a constant structure basis and at constant exchange rates (including non-consolidated sales generated by Genzyme in the first quarter of 2011) to €363 million, driven mainly by the Synvisc-One® franchise in the United Sates (€302 million, up 5.7% on a constant structure basis and at constant exchange rates).




        Net sales of theAmbien® range fell by 4.5% at constant exchange rates to €497 million, reflecting competition from generics of Ambien® CR in the United States and Western Europe and the introduction of generic versions of Myslee® in Japan during the second half of 2012.




Table of Contents

        Allegra® reported a decline in net sales as a prescription medicine (down 9.5% at constant exchange rates) to €553 million, reflecting lower prices in Japan (down 15.2% at constant exchange rates, at €423€ 423 million). This product is sold over the counter in the United States, and has also been available over the counter in Japan since November 2012. Sales over the counter are recognized in the Consumer Health Care business. In August 2012 three generic versions of Allegra® were approved by the regulatory authorities in Japan; since February 2013, Allegra® as a prescription medicine has been subject to generic competition in this country.

        Net sales ofMultaq® fell by 8.0% at constant exchange rates to €255 million, due to the effect of restrictions placed on the product's indication during the second half of 2011.

        Net sales ofCopaxone® (reported under the line item "Other prescription products") amounted to €24 million, versus €436 million in 2011, down 94.7% (at constant exchange rates), reflecting the ending of the co-promotion agreement with Teva in all territories in the first quarter of 2012. Since the transfer of Copaxone® to Teva, we no longer recognize net sales of the product. Instead, for the two years following the transfer we are entitled to receive a payment representing 6% of net sales, which we recognize under the income statement line item "Other revenues".

    New Genzyme business

        Thenew Genzyme business consists of products used to treat rare diseases, and products for the treatment of multiple sclerosis (Aubagio® and the experimental agent Lemtrada™).

        Because Genzyme's net sales have been consolidated from the acquisition date (i.e. the start of April 2011), the 2011 consolidated net sales of the new Genzyme business do not include sales for the first quarter of 2011. On a constant structure basis and at constant exchange rates, i.e. after including non-consolidated net sales for the first quarter of 2011, the net sales of the new Genzyme business rose by 16.9% in 2012 to €1,785 million.

        The following table breaks down our 2012 and 2011 net sales for the new Genzyme business by product:

(€ million) Product		Indication		2012 Reported			2011 Reported			Change on a constant structure basis and at constant exchange rates (%)
Aubagio®		Multiple sclerosis			7			—			—
Sub-total Multiple sclerosis					7			—			—
Cerezyme® (1)		Gaucher disease			633			441			+6.0%
Myozyme®/Lumizyme® (1)		Pompe disease			462			308			+11.4%
Fabrazyme® (1)		Fabry disease			292			109			+96.4%
Other rare disease products (1)					391			264			+7.5%
Sub-total Rare diseases (1)					1,778			1,122			+16.4%
Total: New Genzyme (1)					1,785			1,122			+16.9%

⁽¹⁾

In 2011, net sales of Genzyme products were recognized from the acquisition date (April 2011).

Cerezyme® recorded net sales growth of 6.0% on a constant structure basis and at constant exchange rates, to €633 million (+0.9% in Western Europe, at €215 million; +6.3% in the United States, at €166 million). Production continued to improve during the year, enabling normal doses to be delivered to patients in the product's principal markets

        Net sales ofMyozyme®/Lumizyme® were up 11.4% on a constant structure basis and at constant exchange rates at €462 million (+10,4% in Western Europe, at €257 million; +6.9% in the United States, at €117 million).




Fabrazyme® reported a 96.4% surge in net sales on a constant structure basis and at constant exchange rates, to €292 million. This increase was due mainly to the resumption of production at the new facility at Framingham (United States) in March 2012, enabling full doses to be supplied in all markets where the product is approved for sale.

        For more information regarding the manufacturing issues related to Cerezyme® and Fabrazyme® see "Item 4 — Information on the Company — Production and Raw Materials."

        In multiple sclerosis,Aubagio® was launched in the United States in October 2012, and recorded fourth-quarter net sales of €7 million.

Consumer Health Care business

        Net sales for theConsumer Health Care business rose by 9.9% at constant exchange rates in 2012, to €3,008 million. This figure includes revenues generated from the acquisitions made in 2011 (primarily BMP Sunstone in China, and the nutraceuticals business of Universal Medicare in India).

        In Emerging Markets, net sales advanced by 19.9% at constant exchange rates to €1,478 million. In the United States, sales growth was modest (up 2.2% at constant exchange rates, at €606 million) compared with 2011; this reflects the fact that in the early part of 2011, distributors were building up inventories of the over-the-counter (OTC) version of Allegra®, launched in March 2011. Excluding Allegra® OTC, growth in the United States reached 6.2% at constant exchange rates. Allegra® OTC was also launched in Japan in November 2012.

Generics business

        TheGenerics business reported net sales of €1,844 million in 2012, a rise of 5.0% at constant exchange rates. The business was boosted by sales growth in the United States (up 42.4% at constant exchange rates, at €272 million), where we launched our own authorized generic versions of Lovenox® and Aprovel®. In Emerging Markets, net sales fell slightly (down 2.7% at constant exchange rates) to €1,045 million, due to the impact of tougher competition and disruptions in the Brazilian market.

        Net sales of theother prescription products in the portfolio were down 9.1% at constant exchange rates, to €5,513 million. For a description of our other pharmaceutical products, see "Item 4. Information on the Company — B. Business Overview — Pharmaceutical Products."




Table of Contents

        The following table breaks down net sales of our Pharmaceutical segment products by geographical region in 2012:

(€ million) Product		Western Europe (1)			Change at constant exchange rates			United States			Change at constant exchange rates			Emerging Markets (2)			Change at constant exchange rates			Other countries (3)			Change at constant exchange rates				Western Europe(1)		Change at constant exchange rates		United States		Change at constant exchange rates		Emerging Markets(2)		Change at constant exchange rates		Rest of the world(3)		Change at constant exchange rates
Lantus®			778			+5.3%			3,087			+22.0%			793			+25.4%			302			+20.6%			778		+5.3%		3,087		+22.0%		793		+25.4%		302		+20.6%
Apidra®			78			+14.7%			73			+3.1%			51			+37.8%			28			+30.0%			78		+14.7%		73		+3.1%		51		+37.8%		28		+30.0%
Amaryl®			28			-12.5%			3			-25.0%			263			+11.4%			127			-32.6%			28		-12.5%		3		-25.0%		263		+11.4%		127		-32.6%
Insuman®			98			-4.9%			1			—			37			+27.6%			(1	)		—			98		-4.9%		1		—		37		+27.6%		(1	)	—
Other diabetes products			30			+190.0%			3			—			—			—			3			—
Other products																											30		+190.0%		3		—		—		—		3		—
Total: Diabetes			1,012			+4.3%			3,167			+21.5%			1,144			+22.5%			459			+0.2%			1,012		+4.3%		3,167		+21.5%		1,144		+22.5%		459		+0.2%
Eloxatine®			13			-65.8%			718			-18.0%			153			-10.5%			72			+3.1%
Eloxatin®																											13		-65.8%		718		-18.0%		153		-10.5%		72		+3.1%
Taxotere®			53			-72.5%			53			-80.2%			270			-11.2%			187			-10.7%			53		-72.5%		53		-80.2%		270		-11.2%		187		-10.7%
Jevtana®			91			+104.5%			109			-23.7%			33			+153.8%			2			—			91		+104.5%		109		-23.7%		33		+153.8%		2		—
Thymoglobulin®(4)																											29		—		98		—		50		—		16		—
Zaltrap®			—			—			24			—			—			—			1			—			—		—		24		—		—		—		1		—
Mozobil® (4)			30			—			56			—			7			—			3			—			30		—		56		—		7		—		3		—
Other oncology products (4)			104			—			281			—			95			—			39			—
Other products(4)																											75		—		183		—		45		—		23		—
Total: Oncology			291			-23.7%			1,241			-19.8%			558			0.0%			304			-1.7%			291		-23.7%		1,241		-19.8%		558		0.0%		304		-1.7%
Cerezyme®(4)																											215		—		166		—		190		—		62		—
Myozyme®/Lumizyme®(4)																											257		—		117		—		55		—		33		—
Fabrazyme®(4)																											52		—		152		—		41		—		47		—
Aldurazyme®(4)																											58		—		26		—		47		—		19		—
Other products(4)																											34		—		96		—		36		—		75		—
Sub-total Rare diseases(4)																											616		—		557		—		369		—		236		—
Aubagio®																											—		—		7		—		—		—		—		—
Sub-total Multiple sclerosis																											—		—		7		—		—		—		—		—
Total: Genzyme(4)																											616		—		564		—		369		—		236		—
Plavix®																											307		-25.8%		76	*	-62.2%		799		+5.5%		884		+13.4%
Lovenox®			854			+1.9%			319			-53.1%			615			+11.6%			105			+2.1%			854		+1.9%		319		-53.1%		615		+11.6%		105		+2.1%
Plavix®			307			-25.8%			76	*		-62.2%			799			+5.5%			884			+13.4%
Aprovel®/CoAprovel®			557			-26.4%			45	*		-8.2%			395			+2.5%			154			+17.5%			557		-26.4%		45	*	-8.2%		395		+2.5%		154		+17.5%
Renagel®/Renvela®(4)																											128		—		451		—		53		—		21		—
Allegra®			11			-15.4%			(1	)		-133.3%			120			+21.2%			423			-15.1%			11		-15.4%		(1	)	-133.3%		120		+21.2%		423		-15.1%
Stilnox®/Ambien®/Myslee®			46			-13.2%			85			-4.9%			70			+7.7%			296			-5.5%			46		-13.2%		85		-4.9%		70		+7.7%		296		-5.5%
Copaxone®			19			-95.4%			—			—			—			—			5			-81.0%
Depakine®			143			-3.4%			—			—			251			+7.9%			16			-6.3%			143		-3.4%		—		—		251		+7.9%		16		-6.3%
Tritace®			150			-11.8%			—			—			180			-1.1%			15			-37.5%
Multaq®			46			-31.8%			200			+0.5%			8			0.0%			1			-25.0%
Xatral®			45			-24.1%			20			-74.7%			62			-6.3%			3			0.0%
Actonel®			33			-38.9%			—			—			66			-16.7%			35			-5.7%
Nasacort®			20			-20.0%			21			-63.0%			26			+8.7%			4			-25.0%
Renagel®/Renvela® (4)			128			—			451			—			53			—			21			—
Synvisc®/Synvisc-One® (4)			20			—			302			—			24			—			17			—			20		—		302		—		24		—		17		—
Aubagio®			—			—			7			—			—			—			—			—
Sub-total Multiple sclerosis			—			—			7			—			—			—			—			—
Cerezyme® (4)			215			—			166			—			190			—			62			—
Myozyme®/Lumizyme® (4)			257			—			117			—			55			—			33			—
Fabrazyme® (4)			52			—			152			—			41			—			47			—
Other rare disease products (4)			92			—			122			—			83			—			94			—
Sub-total Rare diseases (4)			616			—			557			—			369			—			236			—
Tritace®																											150		-11.8%		—		—		180		-1.1%		15		-37.5%
Total: New Genzyme (4)			616			—			564			—			369			—			236			—
Multaq®																											46		-31.8%		200		+0.5%		8		0.0%		1		-25.0%
Lasix®																											79		-3.7%		3		0.0%		62		+7.0%		66		-12.7%
Targocid®																											86		-9.5%		—		—		90		-3.3%		22		+53.8%
Orudis®																											51		+6.3%		—		—		129		+20.8%		4		—
Cordarone®																											28		-9.7%		—		—		76		+7.4%		59		-9.8%
Xatral®																											45		-24.1%		20		-74.7%		62		-6.3%		3		0.0%
Actonel®																											33		-38.9%		—		—		66		-16.7%		35		-5.7%
Other prescription products			2,105			-12.9%			567			-16.7%			2,062			-2.8%			779			-8.4%			1,900		-27.0%		585		-20.5%		1,731		-4.6%		637		-11.4%
Total: Other prescription products(4)																											4,484		-19.2%		2,085		-18.7%		4,731		+2.6%		2,758		-2.5%
Consumer Health Care			666			+2.2%			606			+2.2%			1,478			+19.9%			258			-2.1%			666		+2.2%		606		+2.2%		1,478		+19.9%		258		-2.1%
Generics			500			+11.5%			272			+42.4%			1,045			-2.7%			27			-29.4%			500		+11.5%		272		+42.4%		1,045		-2.7%		27		-29.4%
Total pharmaceuticals			7,569			-9.9%			7,935			+0.9%			9,325			+7.8%			4,042			-0.3%			7,569		-9.9%		7,935		+0.9%		9,325		+7.8%		4,042		-0.3%

⁽¹⁾

France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark.

⁽²⁾

World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand.

⁽³⁾

Japan, Canada, Australia and New Zealand.

⁽⁴⁾

In 2011, net sales of Genzyme products were recognized from the acquisition date (April 2011).

*

Sales of active ingredient to the entity majority-owned by BMS in the United States.




Table of Contents

Net Sales — Human Vaccines (Vaccines) segment

        Net sales for the Vaccines segment amounted to €3,897 million in 2012, up 12.3% on a reported basis and 5.7% at constant exchange rates.

        The following table presents the 2012 and 2011 sales of our Vaccines segment by range of products:

(€ million)		2012 Reported			2011 Reported			Change on a reported basis (%)			Change at constant exchange rates (%)				2012 Reported		2011 Reported		Change on a reported basis		Change at constant exchange rates
Polio/Pertussis/Hib Vaccines (including Pentacel® and Pentaxim®)			1,184			1,075			+10.1%			+5.0%			1,184		1,075		+10.1%		+5.0%
Influenza Vaccines (including Vaxigrip® and Fluzone®)			884			826			+7.0%			-0.2%			884		826		+7.0%		-0.2%
– of which seasonal influenza vaccines			882			826			+6.8%			-0.6%
– of which pandemic influenza vaccines			2			—			—			—
Meningitis/Pneumonia Vaccines (including Menactra®)			650			510			+27.5%			+18.0%			650		510		+27.5%		+18.0%
Adult Booster Vaccines (including Adacel®)			496			465			+6.7%			0.0%			496		465		+6.7%		0.0%
Travel and Other Endemics Vaccines			364			370			-1.6%			-4.9%			364		370		-1.6%		-4.9%
Other Vaccines			319			223			+43.0%			+31.8%			319		223		+43.0%		+31.8%
Total Vaccines			3,897			3,469			+12.3%			+5.7%			3,897		3,469		+12.3%		+5.7%

        Polio/Pertussis/Hib vaccines saw net sales increase by 5.0% at constant exchange rates to €1,184 million. This rise reflects a strong performance in Japan (€239 million, up 140.9% at constant exchange rates, mainly due to the successful launch of Imovax® in September 2012) and a good performance in Emerging Markets (€495 million, up 5.7% at constant exchange rates), but also a drop in net sales in the United States (down 25.1% at constant exchange rates, at €374 million) due to order restrictions onsupply limitations for Pentacel® and Adacel® following a temporary shutdown in production at Sanofi Pasteur.

        Net sales ofinfluenzaInfluenza vaccines were flat (down 0.2% at constant exchange rates), at €884 million. In the United States, net sales fell by 5.5% at constant exchange rates, to €466 million; in Emerging Markets, net sales rose by 5.1% at constant exchange rates, to €317 million.

        Meningitis/Pneumonia vaccines posted net sales of €650 million, up 18.0% at constant exchange rates, driven by a strong performance from Menactra® (€564 million, up 21.8% at constant exchange rates). Growth was especially strong in Emerging Markets (up 52.9% at constant exchange rates, at €165 million) and in the United States (up 10.5% at constant exchange rates, at €473 million).

        Net sales ofadult boosterAdult Booster vaccines were unchanged year-on-year (at constant exchange rates), at €496 million.

        Net sales oftravelTravel and other endemicsOther Endemics vaccines fell by 4.9% (at constant exchange rates) to €364 million, hit by a temporary shutdown in production of the Theracys®/Immucyst® and BCG vaccines.




        The following table presents the 2012 sales of our Vaccines segment by range of products and by region:

(€ million)		Western Europe (1) Reported			Change at constant exchange rates			United States Reported			Change at constant exchange rates			Emerging Markets (2) Reported			Change at constant exchange rates			Other countries (3) Reported			Change at constant exchange rates
Polio/Pertussis/Hib Vaccines (inc. Pentacel® and Pentaxim®)			55			+52.8%			374			-25.1%			495			+5.7%			260			+105.0%
Influenza Vaccines (4) (inc. Vaxigrip® and Fluzone®)			79			+2.6%			466			-5.1%			317			+5.1%			22			+16.7%
Meningitis/Pneumonia Vaccines (inc. Menactra®)			4			+33.3%			473			+10.5%			165			+52.9%			8			-38.5%
Adult Booster Vaccines (inc. Adacel®)			59			-22.4%			372			+0.9%			45			+50.0%			20			-5.0%
Travel and Other Endemics Vaccines			21			-12.5%			96			-1.1%			201			-4.8%			46			-8.5%
Other Vaccines			9			-46.7%			277			+46.6%			18			0.0%			15			-25.0%
Total Vaccines			227			-2.2%			2,058			-0.7%			1,241			+9.1%			371			+48.9%

⁽¹⁾

France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark. Net sales in Europe generated by Sanofi Pasteur MSD (the joint venture between Sanofi and Merck & Co., Inc.) are not consolidated.

⁽²⁾

World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand.

⁽³⁾

Japan, Canada, Australia and New Zealand.

⁽⁴⁾

Seasonal and pandemic influenza vaccines.

        In Western Europe and the United States, net sales fell slightly (by 2.2% and 0.7% at constant exchange rates, respectively). In Emerging Markets, most of the rise in sales (9.1% at constant exchange rates) was generated in Latin America and China. The Other Countries region reported strong growth (48.9% at constant exchange rates), due mainly to the performance of Imovax® in Japan.

        In addition to the Vaccines activity reflected in our consolidated net sales, sales of Sanofi Pasteur MSD, our joint venture with Merck & Co., Inc. in Europe, amounted to €845 million in 2012, up 6.8% on a reported basis. Sales generated by Sanofi Pasteur MSD are not included in our consolidated net sales. The main growth drivers were the performance of Gardasil® (up 13.6% on a reported basis, at €206 million) and sales of the travel and endemics vaccines franchise.




Table of Contents

        The following table presents the 2012 sales of our Vaccines segment by range of products and by region:

(€ million)		Western Europe(1) Reported		Change at constant exchange rates		United States Reported		Change at constant exchange rates		Emerging Markets(2) Reported		Change at constant exchange rates		Rest of the world(3) Reported		Change at constant exchange rates
Polio/Pertussis/Hib Vaccines (inc. Pentacel® and Pentaxim®)		55		+52.8%		374		-25.1%		495		+5.7%		260		+105.0%
Influenza Vaccines (inc. Vaxigrip® and Fluzone®)		79		+2.6%		466		-5.1%		317		+5.1%		22		+16.7%
Meningitis/Pneumonia Vaccines (inc. Menactra®)		4		+33.3%		473		+10.5%		165		+52.9%		8		-38.5%
Adult Booster Vaccines (inc. Adacel®)		59		-22.4%		372		+0.9%		45		+50.0%		20		-5.0%
Travel and Other Endemics Vaccines		21		-12.5%		96		-1.1%		201		-4.8%		46		-8.5%
Other Vaccines		9		-46.7%		277		+46.6%		18		0.0%		15		-25.0%
Total Vaccines		227		-2.2%		2,058		-0.7%		1,241		+9.1%		371		+48.9%

(1)

France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark. Net sales in Europe generated by Sanofi Pasteur MSD (the joint venture between Sanofi and Merck & Co., Inc.) are not consolidated.

(2)

World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand.

(3)

Japan, Canada, Australia and New Zealand.

        In Western Europe and the United States, net sales fell slightly (by 2.2% and 0.7% at constant exchange rates, respectively). In Emerging Markets, most of the rise in sales (9.1% at constant exchange rates) was generated in Latin America and China. The Rest of the World region reported strong growth (48.9% at constant exchange rates), due mainly to the performance of Imovax® in Japan.

Net Sales — Animal Health segment

        The Animal Health segment achieved net sales of €2,179 million in 2012, up 3.1% at constant exchange rates (7.3% on a reported basis), driven by the performance in Emerging Markets and the first-time consolidation of the net sales of Newport Laboratories ("Newport").

        The following table presents the 2012 and 2011 sales of our Animal Health segment by range of products:

(€ million)		2012 Reported			2011 Reported			Change on a reported basis			Change at constant exchange rates
Frontline® and other fipronil-based products			775			764			+1.4%			-3.4%
Vaccines			730			662			+10.3%			+7.6%
Avermectin			423			372			+13.7%			+7.8%
Other products			251			232			+8.2%			+3.9%
Total Animal Health			2,179			2,030			+7.3%			+3.1%

(€ million)		2012 Reported		2011 Reported		Change on a reported basis		Change at constant exchange rates
Companion animals		1,372		1,277		+7.4%		+1.9%
Production animals		807		753		+7.2%		+5.1%
Total Animal Health		2,179		2,030		+7.3%		+3.1%
Of which Frontline® and other fipronil-based products		775		764		+1.4%		-3.4%
Of which Vaccines		730		662		+10.3%		+7.6%
Of which Avermectin		423		372		+13.7%		+7.8%
Of which Other products		251		232		+8.2%		+3.9%

        Net sales for thecompanion animals franchise rose by 1.8% at constant exchange rates to €1,372 million. Erosion in sales of theFrontline®/fipronil range of products was limited to 3.4% at constant exchange rates




(€ (€775 million) despite competitive pressure in the United States (down 7.8% at constant exchange rates, at €411 million), thanks to good performances in Emerging Markets (up 10.5%, at €93 million).

        Net sales for theproduction animals franchise were 5.1% higher at constant exchange rates, at €807 million. These figures include the contribution from Newport from April 2012 onwards.




Table of Contents

        The following table breaks down net sales of our Animal Health segment by product and by geographical region in 2012:

(€ million) Product		Western Europe (1)			Change at constant exchange rates			United States			Change at constant exchange rates			Emerging Markets (2)			Change at constant exchange rates			Other countries (3)			Change at constant exchange rates				Western Europe(1)		Change at constant exchange rates		United States		Change at constant exchange rates		Emerging Markets(2)		Change at constant exchange rates		Rest of The World(3)		Change at constant exchange rates
Frontline® and other fipronil-based products			208			-0.5%			411			-7.8%			93			+10.5%			63			-3.3%
Frontline® and other fipronil-based products																											208		-0.5%		411		-7.8%		93		+10.5%		63		-3.3%
Vaccines			181			-7.7%			152			+11.1%			375			+14.2%			22			+31.3%			181		-7.7%		152		+11.1%		375		+14.2%		22		+31.3%
Avermectin			62			-4.7%			223			+15.8%			65			+10.0%			73			-2.8%			62		-4.7%		223		+15.8%		65		+10.0%		73		-2.8%
Other products			88			-2.2%			94			+1.1%			46			+27.8%			23			0.0%			88		-2.2%		94		+1.1%		46		+27.8%		23		0.0%
Total Animal Health			539			-3.8%			880			+1.4%			579			+14.0%			181			+0.6%			539		-3.8%		880		+1.4%		579		+14.0%		181		+0.6%

⁽¹⁾

France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark.

⁽²⁾

World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand.

⁽³⁾

Japan, Canada, Australia and New Zealand.

Net Sales by Geographical Region

        We divide our sales geographically into four regions: Western Europe, the United States, Emerging Markets, Western Europe and other countries.the Rest of the World. The following table breaks down our 2012 and 2011 net sales by region:

(€ million)		2012 Reported			2011 Reported			Change on a reported basis			Change at constant exchange rates				2012 Reported		2011 Reported		Change on a reported basis		Change at constant exchange rates
Western Europe (1)			8,335			9,130			-8.7%			-9.3%
United States			10,873			9,957			+9.2%			+0.7%			10,873		9,957		+9.2%		+0.7%
Emerging Markets (2)			11,145			10,133			+10.0%			+8.3%
Emerging Markets(1)															11,145		10,133		+10.0%		+8.3%
Of which Eastern Europe and Turkey			2,721			2,666			+2.1%			+2.1%			2,721		2,666		+2.1%		+2.1%
Of which Asia (excl. Pacific region (3))			2,841			2,416			+17.6%			+10.1%
Of which Asia (excl. Pacific region)															2,841		2,416		+17.6%		+10.1%
Of which Latin America			3,435			3,111			+10.4%			+11.3%			3,435		3,111		+10.4%		+11.3%
Of which Africa			1,018			949			+7.3%			+8.3%			1,018		949		+7.3%		+8.3%
Of which Middle East			1,001			872			+14.8%			+12.2%			1,001		872		+14.8%		+12.2%
Other Countries (4)			4,594			4,169			+10.2%			+2.5%
Western Europe(2)															8,335		9,130		-8.7%		-9.3%
Rest of the World(3)															4,594		4,169		+10.2%		+2.5%
Of which Japan			3,274			2,865			+14.3%			+6.6%			3,274		2,865		+14.3%		+6.6%
Total			34,947			33,389			+4.7%			+0.5%			34,947		33,389		+4.7%		+0.5%

⁽¹⁾

World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand.

(2)

France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark.

⁽²⁾(3)

World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand.

⁽³⁾

Japan, Australia and New Zealand.

⁽⁴⁾

Japan, Canada, Australia and New Zealand.

        Net sales in Western Europe fell by 9.3% at constant exchange rates to €8,335 million, hampered by the transfer of the Copaxone® business to Teva; by competition from generics of Taxotere® (down 72.5% at constant exchange rates), Aprovel® (down 26.4% at constant exchange rates) and Plavix® (down 25.8% at constant exchange




rates); and by the impact of austerity measures implemented by European governments. After including Genzyme for the first quarter of 2011 and excluding Copaxone®, net sales fell by 7.5% at constant exchange rates.

        In the United States, net sales were up 0.7% at constant exchange rates (but fell by 2.8% after including Genzyme in the first quarter of 2011) to €10,873 million. The year-on-year change reflected strong performances from Lantus® and from the new Genzyme and Generics businesses (including our own generic version of Lovenox®), but also the impact of generics of Taxotere®, Lovenox® and Eloxatine®Eloxatin®.

        In Emerging Markets, net sales reached €11,145 million, up 8.3% at constant exchange rates (or 7.2% after including Genzyme for the first quarter of 2011). In China, net sales were €1,249 million, up 15,0%15.0% at constant exchange rates, on a strong performance from Plavix® and Lantus®. In Brazil, net sales increased by 7.7% at constant exchange rates to €1,530 million, boosted by the Consumer Health Care business and the contribution from Genzyme, although growth was hampered by a slowdown in sales of generics. The Africa and Middle East zones topped the billion-euro mark for the first time (€1,018 million and €1,001 million, respectively). Sales in Russia reached €851 million, up 13.6% at constant exchange rates, driven by the Consumer Health Care and Generics businesses and also by Lantus®, Plavix® and Lovenox®.




Table of Contents

        Net sales in Western Europe fell by 9.3% at constant exchange rates to €8,335 million, hampered by the transfer of the Copaxone® business to Teva; by competition from generics of Taxotere® (down 72.5% at constant exchange rates), Aprovel® (down 26.4% at constant exchange rates) and Plavix® (down 25.8% at constant exchange rates); and by the impact of austerity measures implemented by European governments. After including Genzyme for the first quarter of 2011 and excluding Copaxone®, net sales fell by 7.5% at constant exchange rates.

        In the Other CountriesRest of the World region, net sales totaled €4,594 million, up 2.5% at constant exchange rates (or 0.8% after including Genzyme sales for the first quarter of 2011). In Japan, net sales were €3,274 million (up 6.6% at constant exchange rates, or 4.7% after including Genzyme sales for the first quarter of 2011); positive factors included strong performances from Plavix® (up 16.0% at constant exchange rates, at €837 million) and from the Polio/Pertussis/Hib vaccines franchise (up 140.9% at constant exchange rates at €239 million, driven by the successful launch of Imovax®), while negative factors included erosion in sales of Allegra® (down 15.2% at constant exchange rates, at €423 million) and the impact of bi-annual price cuts.

Worldwide Presence of Plavix® and Aprovel®

        Two of our leading products — Plavix® and Aprovel® — were discovered by Sanofi and jointly developed with Bristol-Myers Squibb ("BMS")BMS under an alliance agreement. In all territories except Japan, these products are sold either by Sanofi or by BMS in accordance with the terms of this alliance agreement applicable in 2012 and 2011 (see "— Financial Presentation of Alliances — Alliance arrangements with Bristol-Myers Squibb" above). Plavix® and Aprovel® lost exclusivity in the U.S. on May 17, 2012 and March 30, 2012, respectively.

        Worldwide sales of these two products in 2012 and 2011 are an important indicator because they facilitate a financial statement user's understanding and analysis of our consolidated income statement, particularly in terms of understanding our overall profitability in relation to consolidated revenues, and also facilitate a user's ability to understand and assess the effectiveness of our research and development efforts.

        Also, disclosing sales made by BMS of these two products in 2012 and 2011 enables the users to have a clearer understanding of trends in different lines of our income statement, in particular the lines "Other revenues", where we record royalties received on those sales (see "— Other Revenues"); "Share of profit/loss of associates and joint ventures" (see "— Share of Profit/Loss of Associates and Joint Ventures"), where we record our share of the profit/loss of entities included in the BMS Alliance and under BMS operational management; and "Net income attributable to non-controlling interests" (see "— Net Income Attributable to Non-Controlling Interests"), where we record the BMS share of the profit/loss of entities included in the BMS Alliance and under our operational management.

        On October 3,September 27, 2012, Sanofi and BMS announced the restructuring ofrestructured their alliance with effect from January 1, 2013 (see "— Financial Presentation of Alliances — Alliance arrangements with Bristol-Myers Squibb" above).




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        The table below sets forth the worldwide sales of Plavix® and Aprovel® in 2012 and 2011, by geographic region:

																											2012						2011
(€ million)		2012									2011									Change on a reported basis			Change at constant exchange rates				Sanofi(2)		BMS(3)		Total		Sanofi(2)		BMS(3)		Total		Change on a reported basis		Change at constant exchange rates
Plavix®/Iscover®(1)
		Sanofi (2)			BMS (3)			Total			Sanofi (2)			BMS (3)			Total			Change on a reported basis			Change at constant exchange rates
Europe																										424		29		453		530		44		574		-21.1%		-21.2%
Plavix®/Iscover® (1)
Europe			424			29			453			530			44			574			-21.1%			-21.2%
United States			—			1,829			1,829			—			4,759			4,759			-61.6%			-63.7%			—		1,829		1,829		—		4,759		4,759		-61.6%		-63.7%
Other countries			1,613			89			1,702			1,370			286			1,656			+2.8%			-4.6%			1,613		89		1,702		1,370		286		1,656		+2.8%		-4.6%
Total			2,037			1,947			3,984			1,900			5,089			6,989			-43.0%			-46.2%			2,037		1,947		3,984		1,900		5,089		6,989		-43.0%		-46.2%
Aprovel®/Avapro® /Karvea®/Avalide® (4)
Europe			527			99			626			694			130			824			-24.0%			-24.3%			527		99		626		694		130		824		-24.0%		-24.3%
United States			24			110			134			—			374			374			-64.2%			-66.5%			24		110		134		—		374		374		-64.2%		-66.5%
Other countries			521			91			612			451			156			607			+0.8%			-5.1%			521		91		612		451		156		607		+0.8%		-5.1%
Total			1,072			300			1,372			1,145			660			1,805			-24.0%			-26.6%			1,072		300		1,372		1,145		660		1,805		-24.0%		-26.6%

⁽¹⁾

Plavix® is marketed under the trademarks Plavix® and Iscover®.

⁽²⁾

Net sales of Plavix® consolidated by Sanofi, excluding sales to BMS (€86 million in 2012 and €208 million in 2011). Net sales of Aprovel® consolidated by Sanofi, excluding sales to BMS (€111 million in 2012 and €150 million in 2011).

⁽³⁾

Translated into euros by Sanofi using the method described in Note B.2. "Foreign currency translation" to our consolidated financial statements included at Item 18 in this annual report.

⁽⁴⁾

Aprovel® is marketed under the trademarks Aprovel®, Avapro®, Karvea® and Avalide®.

        Worldwide sales of Plavix®/Iscover® fell by 46.2% at constant exchange rates in 2012 to €3,984 million, under the impact of competition from generics in the United States and Europe. In the United Sates, where the product lost exclusivity on May 17, 2012, sales (consolidated by BMS) were down 63.7% at constant exchange rates, at €1,829 million. In Europe, net sales of Plavix® fell by 21.2% at constant exchange rates, to €453 million. In the Other Countries region, net sales were down 4.6% at constant exchange rates; this reflected the entry of generics into the Canadian market (where sales, consolidated by BMS, dipped by 76.1% at constant exchange rates to €50 million), but also the continuing success of the product in Japan and China where net sales (consolidated by Sanofi) reached €837 million (up 16.0% at constant exchange rates) and €371 million (up 20.6% at constant exchange rates), respectively.

        Worldwide sales of Aprovel®/Avapro®/Karvea®/Avalide® in 2012 amounted to €1,372 million, a decline of 26.6% at constant exchange rates, reflecting loss of exclusivity in the United States on March 30, 2012 and competition from generics in most Western European countries. In Japan and China, net sales (consolidated by Sanofi) came to €101 million (up 47.0% at constant exchange rates) and €138 million (up 17.3% at constant exchange rates), respectively.

Other Revenues

        Other revenues, which mainly comprise royalty income under licensing agreements contracted in connection with ongoing operations, fell by 39.5% to €1,010 million (versus €1,669 million in 2011).

        The decrease was mainly due to lower licensing revenue under the worldwide alliance with BMS on Plavix® and Aprovel®, which totaled €532 million in 2012 versus €1,275 million in 2011 (down 58.1% on a reported basis), due largely to the loss of exclusivity in the United States for Aprovel® (on March 30, 2012) and Plavix® (on May 17, 2012). However, the appreciation of the U.S. dollar against the euro had a favorable impact on other revenues, as did the recognition in 2012 of a €45 million payment from BMS relating to the Avalide® supply disruption in the United States during 2011.




        This line also includes royalty income of €171 million from Amgen relating to a worldwide license contracted on the product Enbrel®. Royalties received on U.S. sales represented a significant portion of this income in 2012 and will contractually end in February 2013.




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Gross Profit

        Gross profit amounted to €24,839€24,859 million in 2012 (71.1% of net sales), versus €24,156€24,193 million in 2011 (72.3%(72.5% of net sales). This represents an increase of 2.8% in gross profit, but a fall of 1.21.4 points in the gross margin ratio.

        The gross margin ratio for the Pharmaceuticals segment slipped by 2.93.0 points to 72.9%, reflecting a lower level of royalty income (-2.6 points) and a deterioration in the ratio of cost of sales to net sales (-0.3(-0.4 of a point); this latter trend was mainly attributable to the adverse impact of generics (mainly of Taxotere® in the United States), partially offset by productivity gains and lower raw materials prices for heparins.

        The gross margin ratio for the Vaccines segment fell by 1.01.1 point to 59.2%59.3%.

        The gross margin ratio for the Animal Health segment improved by 0.40.2 of a point to 69.3%.

        In addition, consolidated gross profit for 2012 was adversely affected by a €23 million expense (0.1 of a point) arising from the workdown of acquired inventories remeasured at fair value in connection with the acquisition of Genzyme. In 2011, this expense was €476 million (1.4 points), out of which €473 million were related to the acquisition of Genzyme.

Research and Development Expenses

        Research and development (R&D) expenses totaled €4,922€4,905 million (versus €4,811€4,788 million in 2011), representing 14.1%14.0% of net sales (versus 14.4%14.3% in 2011). Overall, R&D expenses rose by €111€117 million, or 2.3%2.4% on a reported basis. After including Genzyme's costs for the first quarter of 2011, R&D expenses fell by 0.4%were virtually stable year-on-year. In addition, the amount of R&D expenses reported for 2012 was adversely affected by the appreciation of the U.S. dollar against the euro.

        R&D expenses for the Pharmaceuticals segment increased by €118€121 million, up 2.9%3.0% on a reported basis. After including Genzyme's costs for the first quarter of 2011, R&D expenses fell by €15 million (or 0.4%)were virtually stable year-on-year, reflecting our ongoing transformation initiatives and the rationalization of the project portfolio.

        R&D expenses for the Vaccines segment fell by €25€24 million to €539€538 million (down 4.4%4.3% on a reported basis), due mainly to trends in the cost of clinical trials on the dengue fever vaccine and various influenza-related projects.

        In the Animal Health segment, R&D expenses rose by €18€20 million (up 12.3%13.9% on a reported basis) versus 2011.

Selling and General Expenses

        Selling and general expenses amounted to €8,947€8,929 million, compared with €8,536€8,508 million in 2011, an increase of €411€421 million or 4.8%4.9% on a reported basis. The ratio of selling and general expenses to net sales was virtually unchanged year-on-year at 25.6% (25.5% in 2011). After including Genzyme's costs for the first quarter of 2011, selling and general expenses were up around 1.8% year-on-year. In addition, the amount reported for 2012 was adversely affected by the appreciation of the U.S. dollar against the euro.

        In the Pharmaceuticals segment, selling and general expenses increased by €290€299 million, or 3.9%4.1% on a reported basis. After including Genzyme's costs for the first quarter of 2011, selling and general expenses for the segment fell by €37 million (or 0.5%)were virtually stable year-on-year. This trend reflects tight cost control (especially in mature regions) and the effect of synergies unlocked by the integration of Genzyme, and was achieved in spite of ongoing investment in our growth platforms and the launch costs incurred on Zaltrap® and Aubagio®.

        Selling and general expenses for the Vaccines segment rose by €69€68 million (up 12.7%12.6% on a reported basis), due partly to adverse trends in the U.S. dollar/euro exchange rate and partly to increased promotional investments.




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        In the Animal Health segment, selling and general expenses increased by €52€54 million (up 8.4%8.8% on a reported basis), reflecting adverse trends in the U.S. dollar/euro exchange rate and higher promotional costs on the companion animals franchise.

Other Operating Income and Expenses

        In 2012, other operating income amounted to €562 million (versus €319 million in 2011), and other operating expenses to €454€414 million (versus €315€273 million in 2011).




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        Overall, other operating income and expenses represented net income of €108€148 million in 2012, compared with €4€46 million in 2011. This increase was mainly due to the favorable outcome of litigation relating to a license.

        This line item also includes a net operational foreign exchange loss of €41 million, against €5 million in 2011.

Amortization of Intangible Assets

        Amortization charged against intangible assets amounted to €3,291 million in 2012, versus €3,314 million in 2011. The year-on-year reduction of €23 million was mainly due to:

–

Reductions:reductions: a fall in amortization charged against intangible assets recognized on the acquisition of Aventis (€1,489 million in 2012, versus €1,788 million in 2011), as some products reached the end of their life cycles in the face of competition from generics;



–

Increases:increases: amortization charges generated by intangible assets recognized on the acquisition of Genzyme in the second quarter of 2011 (€981 million over 12 months in 2012, versus €709 million over 9 months in 2011).

Impairment of Intangible Assets

        This line showed impairment losses of €117 million against intangible assets in 2012, compared with €142 million in 2011. The impairment losses recognized in 2012 relate mainly to the discontinuation of R&D projects in the Pharmaceuticals segment, in particular some development programs in oncology.

        In 2011, the impairment losses related mainly to (i) the discontinuation of a Genzyme research project; (ii) certain Zentiva generics, following a downward revision of sales projections; and (iii) the discontinuation of a joint project with Metabolex in diabetes. This line also included a reversal of impairment losses on Actonel®, recognized following confirmation of the terms of the collaboration agreement with Warner Chilcott (see Note C.3. to our consolidated financial statements included at Item 18 of this annual report).

Fair Value Remeasurement of Contingent Consideration Liabilities

        Fair value remeasurements of contingent consideration liabilities recognized on acquisitions in accordance with the revised IFRS 3 represented an expense of €192 million in 2012, compared with a net gain of €15 million in 2011. This item mainly relates to the contingent value rights (CVRs) issued in connection with the Genzyme acquisition, and to contingent consideration payable to Bayer as a result of an acquisition made by Genzyme prior to the latter's acquisition by Sanofi (see Note D.18. to our consolidated financial statements included at Item 18 of this annual report).

Restructuring Costs

        Restructuring costs amounted to €1,141 million in 2012, versus €1,314 million in 2011, and relate primarily to measures announced in connection with the major transformation program that we initiated in 2009 to adapt our structures to the challenges of the future.

        In 2012, these costs mainly related to measures taken to adapt our resources in France, transform our industrial facilities in Europe and make adjustments to our sales forces worldwide, along with the integration of Genzyme and impairment losses against property, plant and equipment in France.




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        In 2011, these costs reflected the transformation and reorganization of our R&D operations, measures taken to adapt our industrial facilities in Europe, adjustments to our sales forces in the United States and Europe, the implementation of multi-country organizations in Europe, and the integration of Genzyme entities worldwide.

Other Gains and Losses, and Litigation

        Nothing was recognized on this line in 2012.

        In 2011, this line item included a net expense of €327 million, mainly comprising (i) a €519 million backlog of depreciation and amortization expense that was not charged against the property, plant and equipment and intangible assets of Merial from September 18, 2009 through December 31, 2010 because these assets were classified as held for sale or exchange during that period in accordance with IFRS 5 (see Note D.8.2. to the consolidated financial statements included at Item 18 of this annual report),; (ii) a gain of €210 million arising from damages received in connection with a Plavix® patent; and (iii) the impact of the divestiture of the Dermik dermatology business (see Note D.28. to our consolidated financial statements).




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Operating Income

        Operating income totaled €6,337€6,432 million for 2012, versus €5,731€5,861 million for 2011, an increase of 10.6%9.7%.

Financial Income and Expenses

        Net financial expense for 2012 was €460€658 million, compared with €412€604 million for 2011, an increase of €48€54 million.

        Financial expenses directly related to our debt, net of cash and cash equivalents (see definition at "— Liquidity and Capital Resources" below) were €349 million in 2012 compared to €325 million in 2011. This increase was due to a reduction in financial income resulting from a lower average rate of return on cash.

        Because the average level of debt and the average rate of interest on debt were relatively stable year-on-year, financial expenses were virtually unchanged in 2012.

        Impairment losses on investments and financial assets amounted to €30 million in 2012 (versus €58 million in 2011). In 2012, these losses related primarily to available-for-sale financial assets; in 2011, they related mainly to Greek government bonds (€49 million, versus €6 million in 2012).

        Gains on disposals of non-current financial assets amounted to €37 million in 2012, compared with €25 million in 2011. The 2011 figure included the effect of the change in consolidation method for the investment in the Société Financière des Laboratoires de Cosmétologie Yves Rocher following loss of significant influence (see Note D.6. to our consolidated financial statements). In August 2012, Sanofi sold this investment.

        The effect of the unwinding of discount on provisions was €87 million in 2012 (versus €83 million in 2011), and the net financial foreign exchange loss was €17 million in 2012 (versus a net gain of €10 million in 2011).

Income before Tax and Associates and Joint Ventures

        Income before tax and associates and joint ventures for 2012 was €5,877€5,774 million in 2011, versus €5,319€5,257 million in 2011, an increase of 10.5%9.8%.

Income Tax Expense

        Income tax expense amounted to €1,134€1,109 million in 2012, versus €455€440 million in 2011 and €1,430 million in 2010.2011.

        The fall in incomeIncome tax expense in 2011 relative to 2010 was mainly attributable toincluded a significant reduction in the deferred tax liability relating to the remeasurement of the intangible assets of Merial in response to changes in tax rates and




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legislation (primarily in the United Kingdom) and the effect of the Franco-American Advance Pricing Agreement (APA) for the period from 2006 through 2011 (see Note D.30. to our consolidated financial statements).

        These effects did not impact income tax expense for 2012. However, the rise in income tax expense during the year was limited by the favorable effects of differential income tax rates applicable to our foreign subsidiaries (including the impact of an Advance Pricing Agreement (APA) with the Japanese authorities covering the period from 2012 through 2014), and also by the settlement of tax inspectionsaudits and the effects of time-barring.some items becoming time-barred.

        This item includes positive tax gainseffects arising from (i) the amortization of intangible assets, totaling €1,159 million in 2012 (versus €1,178 million in 2011, including the impact of the Merial backlog, see "— Other Gains and Losses, and Litigation" above) and (ii) restructuring costs (€370 million in 2012, versus €399 million in 2011).

        The effective tax rate based on our business net income is calculated on the basis of business operating income minus net financial expenses and before the share of profit/loss of associates and joint ventures and net income attributable to non-controlling interests. The effective tax rate was 25.5% in 2012, versus 27.0% in 2011. The difference relative to the standard corporate income tax rate applicable in France (34.4%) was mainly due to royalty income being taxed at a reduced rate in France, and to the differential in tax rates applied to profits of our foreign subsidiaries.

Share of Profit/Loss of Associates and Joint Ventures

        The share of profit/loss of associates and joint ventures in 2012 was €393 million, versus €1,070 million in 2011. This line mainly includes our share of after-tax profits from territories managed by BMS under the Plavix® and Avapro® alliance, which fell by 60.7% to €420 million (versus €1,070 million in 2011). The decline in our share was




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mainly attributable to a 61.6% drop in sales of Plavix® in the United States due to the loss of exclusivity and competition from generics.

Net Income

        Net income amounted to €5,136€5,058 million in 2012, compared with €5,934€5,887 million in 2011.

Net Income Attributable to Non-Controlling Interests

        Net income attributable to non-controlling interests totaled €169 million in 2012, against €241 million in 2011. This line mainly comprises the share of pre-tax profits paid to BMS from territories managed by Sanofi (€149 million, versus €225 million in 2011); this year-on-year fall was directly related to increased competition from generics of clopidogrel (Plavix®) in Europe.

Net Income Attributable to Equity Holders of Sanofi

        Net income attributable to equity holders of Sanofi was €4,967€4,889 million in 2012, versus €5,693€5,646 million in 2011.

        Basic earnings per share for 2012 was €3.76, 12.8%€3.71, 13.1% lower than the 2011 figure of €4.31,€4.27, based on an average number of shares outstanding of 1,319.5 million in 2012 (1,321.7 million in 2011). Diluted earnings per share for 2012 was €3.74,€3.68, compared to €4.29€4.26 for 2011, based on an average number of shares outstanding after dilution of 1,329.6 million in 2012 and 1,326.7 million in 2011.

Business Operating Income

        Sanofi reports segment results on the basis of "Business Operating Income". This indicator, adopted in compliance with IFRS 8, is used internally to measure operational performance and to allocate resources. See "Item 5. Operating and Financial Review and Prospects — Segment information" above for the definition of business operating income and reconciliation to our Income before tax and associates and joint ventures.




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        Business operating income for 2012 was €11,353€11,448 million, compared to €12,144€12,274 million in 2011 (down 6.5%6.7%). The table below shows trends in business operating income by business segment for 2012 and 2011:

(€ million)		2012			2011			Change				2012		2011		Change
Pharmaceuticals			9,519			10,496			-9.3%			9,601		10,610		-9.5%
Vaccines			1,148			985			+16,5%			1,157		992		+16,6%
Animal Health			673			627			+7.3%			673		636		+5.8%
Other			13			36			-63.9%			17		36		-52.8%
Business operating income			11,353			12,144			-6.5%			11,448		12,274		-6.7%

Business Net Income

        Business net income is a non-GAAP financial measure that we use to evaluate our Group's performance. See "Item 5. Operating and Financial Review and Prospects — Business Net Income" above for the definition of business net income and reconciliation to our Net income attributable to equity holders of Sanofi.

        Business net income totaled €8,179€8,101 million in 2012 versus €8,795€8,748 million in 2011 (down 7.0%7.4%), and represented 23.4%23.2% of net sales compared with 26.3%26.2% in 2011.

Business Earnings Per Share

        We also report business earnings per share, a non-GAAP financial measure which we define as business net income divided by the weighted average number of shares outstanding (see "— Business Net Income" above).

        Business earnings per share for 2012 were €6.20€6.14 versus €6.65€6.62 in 2011, down 6.8%7.3%, based on an average number of shares outstanding of 1,319.5 million in 2012 (1,321.7 million in 2011). Diluted business earnings per share for 2012 were €6.15€6.09 versus €6.63€6.59 in 2011, down 7.2%7.6%, based on an average number of shares outstanding of 1,329.6 million in 2012 and 1,326.7 million in 2011.




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Year Ended December 31, 2011 Compared with Year Ended December 31, 2010


        Our consolidated income statements for the years ended December 31, 2011 and December 31, 2010 break down as follows:

(under IFRS) (€ million)		2011			as % of net sales			2010			as % of net sales
Net sales			33,389			100.0%			32,367			100.0%
Other revenues			1,669			5.0%			1,669			5.2%
Cost of sales			(10,902	)		(32.7%)			(9,398	)		(29.0%)
Gross profit			24,156			72.3%			24,638			76.1%
Research & development expenses			(4,811	)		(14.4%)			(4,547	)		(14.0%)
Selling & general expenses			(8,536	)		(25.6%)			(8,149	)		(25.2%)
Other operating income			319						369
Other operating expenses			(315	)					(292	)
Amortization of intangible assets			(3,314	)					(3,529	)
Impairment of intangible assets			(142	)					(433	)
Fair value remeasurement of contingent consideration liabilities			15						—
Restructuring costs			(1,314	)					(1,384	)
Other gains and losses, and litigation (1)			(327	)					(138	)
Operating income			5,731			17.2%			6,535			20.2%
Financial expenses			(552	)					(468	)
Financial income			140						106
Income before tax and associates and joint ventures			5,319			15.9%			6,173			19.1%
Income tax expense			(455	)					(1,430	)
Share of profit/(loss) of associates and joint ventures			1,070						978
Net income			5,934			17.8%			5,721			17.7%
Net income attributable to non-controlling interests			241						254
Net income attributable to equity holders of Sanofi			5,693			17.1%			5,467			16.9%
Average number of shares outstanding (million)			1,321.7						1,305.3
Average number of shares outstanding after dilution (million)			1,326.7						1,308.2
Basic earnings per share (in euros)			4.31						4.19
Diluted earnings per share (in euros)			4.29						4.18

⁽¹⁾

See Note B.20.2. to our consolidated financial statements included at Item 18 of this annual report.

        Our consolidated income statements include the results of the operations of Genzyme from April 2011. In order to help investors gain a better understanding of our performance, in the narrative discussion of certain income statement line items ("research & development expenses", and "selling & general expenses") we exclude 2011 data for Genzyme in the analyses. In the narrative discussion of Genzyme's products net sales, we used non-consolidated 2010 net sales in additional analyses.

    Net Sales

        Net sales for the year ended December 31, 2011 totaled €33,389 million, up 3.2% on 2010. Exchange rate fluctuations had an unfavorable effect of 2.1 points, primarily as a result of the depreciation of the U.S. dollar against the euro. At constant exchange rates, and after taking account of changes in structure (mainly the consolidation of Genzyme from April 2011), net sales were up 5.3% year-on-year.




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        Excluding Genzyme, net sales were down 2.6% in 2011 at constant exchange rates, reflecting the loss in sales associated with competition from generics and the impacts of austerity measures in the European Union. Excluding Genzyme and sales of A/H1N1 vaccines, net sales were down 1.2% at constant exchange rates.

        The following table sets forth a reconciliation of our reported net sales for the years ended December 31, 2011 and December 31, 2010 to our net sales at constant exchange rates:

(€ million)		2011			2010			Change (%)
Net sales			33,389			32,367			+3.2%
Effect of exchange rates			704
Net sales at constant exchange rates			34,093			32,367			+5.3%

        Our net sales comprise the net sales generated by our Pharmaceuticals, Human Vaccines (Vaccines) and Animal Health segments.

        The following table breaks down our 2011 and 2010 net sales by business segment:

(€ million)		2011 Reported			2010 Reported			Change on a reported basis (%)			Change at constant exchange rates (%)
Pharmaceuticals			27,890			26,576			+4.9%			+6.7%
Vaccines			3,469			3,808			-8.9%			-5.5%
Animal Health			2,030			1,983			+2.4%			+4.3%
Total			33,389			32,367			+3.2%			+5.3%

    Net Sales by Product — Pharmaceuticals segment

        Net sales generated by our Pharmaceuticals segment were €27,890 million in 2011, up 4.9% on a reported basis and 6.7% at constant exchange rates. This change reflects the positive impact of the first-time consolidation of Genzyme; the negative impacts of competition from generics on sales of Lovenox®, Ambien® CR and Taxotere® in the United States and Plavix® and Taxotere® in the European Union; and the effects of healthcare reform in the United States and austerity measures in Europe. Excluding Genzyme, our Pharmaceuticals segment posted net sales of €25,495 million, down 4.1% on a reported basis and 2.7% at constant exchange rates.




Table of Contents

        The following table breaks down our 2011 and 2010 net sales for the Pharmaceuticals segment by product:

(€ million) Product		Indication		2011 Reported			2010 Reported			Change on a reported basis (%)			Change at constant exchange rates (%)
Lantus®		Diabetes			3,916			3,510			+11.6%			+15.0%
Apidra®		Diabetes			190			177			+7.3%			+9.6%
Insuman®		Diabetes			132			133			-0.8%			-0.8%
Amaryl®		Diabetes			436			478			-8.8%			-7.9%
Other diabetes products		Diabetes			10			—			—			—
Total: Diabetes		Diabetes			4,684			4,298			+9.0%			+12.0%
Taxotere®		Breast, lung, prostate, stomach, and head & neck cancer			922			2,122			-56.6%			-57.0%
Eloxatine®		Colorectal cancer			1,071			427			+150.8%			+160.9%
Jevtana®		Prostate cancer			188			82			+129.3%			+135.4%
Mozobil®		Hematologic malignancies			59			—			—			—
Other oncology products (1)					389			59			+559.3%			—
Total: Oncology					2,629			2,690			-2.3%			—
Lovenox®		Thrombosis			2,111			2,806			-24.8%			-23.4%
Plavix®		Atherothrombosis			2,040			2,083			-2.1%			-2.9%
Aprovel®/CoAprovel®		Hypertension			1,291			1,327			-2.7%			-2.4%
Allegra®		Allergic rhinitis, urticaria			580			607			-4.4%			-8.6%
Stilnox®/Ambien®/Myslee®		Sleep disorders			490			819			-40.2%			-41.4%
Copaxone®		Multiple sclerosis			436			513			-15.0%			-15.4%
Tritace®		Hypertension			375			410			-8.5%			-6.3%
Depakine®		Epilepsy			388			372			+4.3%			+5.4%
Multaq®		Atrial fibrillation			261			172			+51.7%			+56.4%
Xatral®		Benign prostatic hypertrophy			200			296			-32.4%			-30.7%
Actonel®		Osteoporosis, Paget's disease			167			238			-29.8%			-29.8%
Nasacort®		Allergic rhinitis			106			189			-43.9%			-41.8%
Renagel®/Renvela® (1)		Hyperphosphatemia			415			—			—			—
Synvisc®/Synvisc-One® (1)		Arthritis			256			—			—			—
Cerezyme® (1)		Gaucher disease			441			—			—			—
Myozyme®/Lumizyme® (1)		Pompe disease			308			—			—			—
Fabrazyme® (1)		Fabry disease			109			—			—			—
Other rare disease products (1)					264			—			—			—
Total: New Genzyme (1)					1,122			—			—			—
Other prescription products					5,927			6,005			-1.3%			-0.9%
Consumer Health Care					2,666			2,217			+20.3%			+22.8%
Generics					1,746			1,534			+13.8%			+16.2%
Total pharmaceuticals					27,890			26,576			+4.9%			+6.7%

⁽¹⁾

In 2011, net sales of Genzyme products were recognized from the acquisition date (April 2011).




Table of Contents

    Diabetes

        Net sales for the Diabetes business were €4,684 million, up 12.0% at constant exchange rates, driven by Lantus®.

Lantus® posted a 15.0% increase in net sales at constant exchange rates in 2011 to €3,916 million. This change reflected sharp growth in Emerging Markets (26.0% at constant exchange rates), especially in China (61.7%) and Brazil (29%), as well as solid performances in the United States (14.6%) and Japan (19.5%). In Western Europe, growth was more moderate (6.4%), reflecting pricing pressures (especially in Germany).

        Net sales of the rapid-acting insulin analogApidra® advanced by 9.6% at constant exchange rates in 2011 to €190 million, led by solid performances in Japan (87.9% growth) and the United States (11.3% growth). At year-end, sales were impacted negatively by a temporary shortage of Apidra® 3ml cartridges.

Amaryl® saw net sales decrease by 7.9% at constant exchange rates in 2011 to €436 million, due principally to competition from generics in Japan, and despite an 8.6% increase (at constant exchange rates) in Emerging Markets.

    Oncology

Taxotere® reported net sales of €922 million, down 57.0% at constant exchange rates. This product faced competition from generics in Western Europe (down 73.6%) and the United States (down 69.2%), although the decline was much less pronounced in Emerging Markets (down 24.6%).

Eloxatine® net sales rebounded sharply in 2011 by 160.9% at constant exchange rates to €1,071 million, as sales recovered in the United States (€806 million in 2011, versus €172 million in 2010) following a court ruling barring manufacturers of generics in the United States from selling their unapproved generic versions of oxaliplatin from June 30, 2010.

Jevtana®, which has been available in the U.S. market since July 2010 and has become gradually available throughout most of the countries of Western Europe since April 2011, registered net sales of €188 million in 2011, €131 million of which were generated in the United Sates.

        Other oncology products (net sales of €448 million in 2011) are essentially new products acquired with Genzyme; net sales for these Genzyme products have been consolidated since the acquisition date (April 2011).

    Other pharmaceutical products

Lovenox® saw net sales decrease by 23.4% at constant exchange rates in 2011 to €2,111 million, as a result of competition from generics in the United States where net sales declined by 54.3% to €633 million. Outside the United States, net sales were up 9.0% at constant exchange rates at €1,478 million (representing 70.0% of worldwide 2011 sales of Lovenox®), with good performances in Western Europe (up 6.4%) and Emerging Markets (up 14.0%).

        Net sales of the hypnoticStilnox®/Ambien®/Myslee® fell by 41.4% at constant exchange rates to €490 million, reflecting competition from Ambien® CR generics in the United States. In Japan, Myslee® continued to post a solid performance with net sales up 9.2% at constant exchange rates at €284 million.

Allegra® prescription sales were down 8.6% (at constant exchange rates) at €580 million. In Japan, which represents 80.2% of worldwide sales of Allegra®, net sales totaled €465 million (up 22.1% at constant exchange rates) due to a sharp increase in seasonal allergies. The slump in prescription sales in the United States (down 98.6% at constant exchange rates) was mainly due to the approval of Allegra® as an over-the-counter (OTC) product in the U.S. market effective March 2011. Since this approval, U.S. sales of Allegra® have been recognized in our Consumer Health Care business.




Table of Contents

Copaxone® net sales, generated primarily in Western Europe, fell by 15.4% at constant exchange rates to €436 million. This reflected the ending of the co-promotion agreement with Teva in certain countries, in particular the United Kingdom (from the end of 2010) and Germany (from the end of 2010).

Multaq® posted 56.4% growth in net sales to €261 million at constant exchange rates, primarily in the United States (€184 million) and Western Europe (€66 million).

Renagel®/Renvela® posted net sales of €415 million, up 10.2% on a constant structure basis and at constant exchange rates, due to increased market share in the United States. Net sales for this product are recognized as from the Genzyme acquisition date (April 2011) and comparisons are with the net sales reported by Genzyme in 2010 for the same period.

        Net sales ofSynvisc® totaled €256 million (up 14.7% on a constant structure basis and at constant exchange rates), supported by the solid performance ofSynvisc-One® in the U.S. and Japan. Net sales for this product are recognized as from the Genzyme acquisition date and comparisons are with the net sales reported by Genzyme in 2010 for the same period.

    New Genzyme

        The "new Genzyme" business consists of products used to treat rare diseases and products for the treatment of multiple sclerosis. The latter did not generate any sales in 2011 and 2010, since Aubagio® was only launched in 2012 and Copaxone® is not included in the new Genzyme business. Net sales of Genzyme's rare diseases products are recognized as from the Genzyme acquisition date and comparisons are with the net sales reported by Genzyme in 2010 for the same period.

        Net sales ofCerezyme® were up 11.1% (on a constant structure basis and at constant exchange rates) at €441 million, reflecting higher production volumes in 2011 following a reduction in availability of the product in 2010 due to manufacturing issues.Myozyme®/Lumizyme® posted strong growth (27.4% on a constant structure basis and at constant exchange rates, to €308 million), driven mainly by the performance of Lumizyme® in the United States and volume growth worldwide. Growth inFabrazyme® sales (9.4% on a constant structure basis and at constant exchange rates, to €109 million) was sparked by the increase in the product's availability following partial resolution of manufacturing issues. For more information regarding the manufacturing issues related to Cerezyme® and Fabrazyme® see "Item 4 — Information on the Company — Production and Raw Materials."

    Consumer Health Care

        TheConsumer Health Care business posted year-on-year growth of 22.8% at constant exchange rates to €2,666 million, supported by the successful launch of Allegra® as an over-the-counter product in the U.S. in the first quarter of 2011 (which generated €211 million in net sales for the year out of a worldwide total of €245 million), and by the performance of Emerging Markets where net sales increased by 20.8% at constant exchange rates to €1,225 million. These figures include the effect of the first-time consolidation of the consumer health products of Chattem in the United States from February 2010, and of BMP Sunstone in China from February 2011.

    Generics

        TheGenerics business reported net sales of €1,746 million in 2011, up 16.2% at constant exchange rates. This growth was underpinned by sales in Emerging Markets (€1,092 million, up 14.0% at constant exchange rates), especially in Latin America (up 21.4% at constant exchange rates), and in the United States (up 79.4% at constant exchange rates) where Sanofi launched its own approved generics of Ambien® CR, Taxotere® and Lovenox®.

    Other prescription products

        Net sales of the other prescription products in the portfolio were down 0.9% at constant exchange rates, at €5,928 million. For a description of our other pharmaceutical products, see "Item 4. Information on the Company — B. Business Overview — Pharmaceutical Products."

        Sales of Plavix® and Aprovel® are discussed further below under "— Worldwide Presence of Plavix® and Aprovel®".




Table of Contents

        The following table breaks down net sales of our Pharmaceuticals segment by product and by geographical region in 2011:

(€ million) Product		Western Europe (1)			Change at constant exchange rates			United States			Change at constant exchange rates			Emerging Markets (2)			Change at constant exchange rates			Other countries (3)			Change at constant exchange rates
Lantus®			730			+6.4%			2,336			+14.6%			617			+26.0%			233			+22.3%
Apidra®			68			0.0%			65			+11.3%			37			+8.6%			20			+58.3%
Insuman®			103			-4.6%			—			—			29			+20.0%			—			—
Amaryl®			32			-23.8%			4			-33.3%			228			+8.6%			172			-21.6%
Other diabetes products			10			—			—			—			—			—			—			—
Total: Diabetes			943			+4.3%			2,405			+14.4%			911			+20.1%			425			+0.5%
Taxotere®			189			-73.6%			243			-69.2%			294			-24.6%			196			-20.2%
Eloxatine®			38			-19.6%			806			+393.0%			162			+9.3%			65			+10.2%
Jevtana®			44			—			131			+65.9%			13			—			—			—
Other oncology products (4)			108			—			245			—			69			—			26			—
Total: Oncology			379			���			1,425			—			538			—			287			—
Lovenox®			833			+6.4%			633			-54.3%			551			+14.0%			94			+3.5%
Plavix®			414			-35.6%			196	*		-8.0%			706			+11.9%			724			+18.6%
Aprovel®/CoAprovel®			753			-9.1%			49	*		+25.6%			363			+6.7%			126			+8.6%
Allegra®			13			-18.8%			3			-98.6%			99			+19.3%			465			+22.2%
Stilnox®/Ambien®/Myslee®			53			-3.6%			82			-80.6%			65			-1.5%			290			+8.3%
Copaxone®			415			-14.1%			—			—			—			-100.0%			21			+11.1%
Tritace®			170			-10.1%			—			—			181			0.0%			24			-23.3%
Depakine®			145			-2.0%			—			—			227			+11.5%			16			-6.7%
Multaq®			66			+66.7%			184			+50.8%			7			+250.0%			4			+33.3%
Xatral®			58			-12.1%			75			-49.7%			63			-7.1%			4			-20.0%
Actonel®			54			-48.1%			—			—			78			-12.9%			35			-22.0%
Nasacort®			25			-10.7%			54			-57.7%			23			0.0%			4			-20.0%
Renagel®/Renvela® (4)			98			—			266			—			30			—			21			—
Synvisc®/Synvisc-One® (4)			15			—			211			—			12			—			17			—
Cerezyme® (4)			155			—			108			—			135			—			43			—
Myozyme®/Lumizyme® (4)			175			—			79			—			33			—			21			—
Fabrazyme® (4)			24			—			48			—			14			—			23			—
Other rare disease products (4)			59			—			93			—			53			—			59			—
Total: New Genzyme (4)			413			—			328			—			235			—			146			—
Other prescription products			2,404			-8.7%			627			+7.1%			2,107			+7.6%			790			+7.1%
Consumer Health Care			651			+3.2%			549			+80.0%			1,225			+20.8%			241			+5.1%
Generics			443			+9.4%			177			+79.4%			1,092			+14.0%			34			-20.0%
Total pharmaceuticals			8,345			-3.9%			7,264			+8.5%			8,513			+15.0%			3,768			+14.0%

⁽¹⁾

France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark.

⁽²⁾

World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand.

⁽³⁾

Japan, Canada, Australia and New Zealand.

⁽⁴⁾

In 2011, net sales of Genzyme products were recognized from the acquisition date (April 2011).

*

Sales of active ingredient to the entity majority-owned by BMS in the United States.




    Net Sales — Human Vaccines (Vaccines) segment

        In 2011, the Vaccines segment reported net sales of €3,469 million, down 8.9% on a reported basis, and 5.5% at constant exchange rates. The business suffered in 2011 from the absence of sales of A/H1N1 pandemic influenza vaccines (€452 million in 2010). If we exclude these sales, growth for the Vaccines business reached 7.2% at constant exchange rates, driven primarily by Emerging Markets (up 10.7%).

        The following table presents the 2011 and 2010 sales of our Vaccines segment by range of products:

(€ million)		2011 Reported			2010 Reported			Change on a reported basis (%)			Change at constant exchange rates (%)
Polio/Pertussis/Hib Vaccines (including Pentacel® and Pentaxim®)			1,075			984			+9.3%			+12.0%
Influenza Vaccines (including Vaxigrip® and Fluzone®)			826			1,297			-36.3%			-33.2%
-of which seasonal influenza vaccines			826			845			-2.2%			+2.5%
-of which pandemic influenza vaccines			—			452			-100.0%			-100.0%
Meningitis/Pneumonia Vaccines (including Menactra®)			510			527			-3.2%			+2.3%
Adult Booster Vaccines (including Adacel®)			465			449			+3.6%			+7.3%
Travel and Other Endemics Vaccines			370			382			-3.1%			-1.6%
Other Vaccines			223			169			+32.0%			+37.8%
Total Vaccines			3,469			3,808			-8.9%			-5.5%

        The drop in vaccines sales in 2011 in Western Europe (down 18.4% at constant exchange rates) and in Emerging Markets (down 18.1% at constant exchange rates) was primarily due to the lack of sales of pandemic influenza vaccines. Strong growth in the Other Countries region (up 24.2% at constant exchange rates) was driven by sales of Polio/Pertussis/Hib Vaccines in Japan.

Polio/Pertussis/Hib vaccines net sales were up 12.0% (at constant exchange rates) to €1,075 million, based on the solid performance of Pentaxim® (up 30.2% at constant exchange rates, at €238 million) related to product launches in Russia, India and China, and ofHaemophilus influenzae type b (Hib) vaccines (up 20.7% at €178 million) primarily in Emerging Markets and Japan.

        Net sales ofinfluenza vaccines in 2011 were down 33.2% at constant exchange rates at €826 million, reflecting the non-recurrence in 2011 of the pandemic influenza vaccine sales generated in 2010, primarily in Latin America and Western Europe. Sales of seasonal influenza vaccines were up 2.5% at constant exchange rates, driven by the performance of Latin America.

Meningitis/Pneumonia vaccines generated net sales of €510 million, up 2.3% at constant exchange rates. Growth was limited by the temporary reduction in catch-up immunization programs for the Menactra® quadrivalent vaccine against meningococcal meningitis in the United States during the first half of 2011, but booster vaccinations at the end of the year had a positive impact.

        Net sales ofadult booster vaccines reached €465 million (up 7.3% at constant exchange rates), driven by Adacel® (€314 million, up 9.2% at constant exchange rates).

        Net sales oftravel and other endemics vaccines fell by 1.6% at constant exchange rates to €370 million.




        The following table presents the 2011 sales of our Vaccines segment by range of products and by region:

(€ million)		Western Europe (1) Reported			Change at constant exchange rates			United States Reported			Change at constant exchange rates			Emerging Markets (2) Reported			Change at constant exchange rates			Other countries (3) Reported			Change at constant exchange rates
Polio/Pertussis/Hib Vaccines (inc. Pentacel® and Pentaxim®)			36			-41.0%			463			+2.8%			457			+21.9%			119			+66.7%
Influenza Vaccines (4) (inc. Vaxigrip® and Fluzone®)			77			-39.8%			435			-11.2%			296			-51.1%			18			-21.7%
Meningitis/Pneumonia Vaccines (inc. Menactra®)			3			-40.0%			390			+2.7%			104			+4.0%			13			-6.6%
Adult Booster Vaccines (inc. Adacel®)			76			+40.7%			339			+3.5%			30			-9.1%			20			+11.8%
Travel and Other Endemics Vaccines			24			+33.3%			89			+17.5%			210			-9.4%			47			-8.2%
Other Vaccines			15			-12.5%			176			+45.3%			16			+13.3%			16			+58.7%
Total Vaccines			231			-18.4%			1,892			+2.5%			1,113			-18.1%			233			+24.2%

⁽¹⁾

France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark. Net sales in Europe generated by Sanofi Pasteur MSD (the joint venture between Sanofi and Merck & Co., Inc.) are not consolidated.

⁽²⁾

World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand.

⁽³⁾

Japan, Canada, Australia and New Zealand.

⁽⁴⁾

Seasonal and pandemic influenza vaccines.

        Sales generated by Sanofi Pasteur MSD, our joint venture with Merck & Co., Inc. in Europe (not included in our consolidated net sales), amounted to €791 million in 2011, down 13.8% on a reported basis. The decrease in 2011 reflects lower sales of Gardasil® (down 31.1% on a reported basis, to €181 million), and a decline in sales of influenza vaccines (down 23.7% on a reported basis, to €129 million), primarily of seasonal influenza vaccines.

    Net Sales — Animal Health segment

        The Animal Health business is carried on by Merial, which has been a wholly-owned subsidiary of Sanofi since September 18, 2009. On March 22, 2011 Merck and Sanofi announced that they had mutually terminated their agreement to form a new animal health joint venture and had decided to maintain Merial and Intervet/Schering-Plough as two separate entities, operating independently. This decision was mainly due to the increasing complexity of implementing the proposed transaction. Since January 1, 2011 Merial has no longer been presented separately in our consolidated balance sheet and income statement, and net income from Merial has been reclassified and included in income from continuing operations for all periods reported. Detailed information about the impact of Merial on our consolidated financial statements as of December 31, 2011 is provided in Note D.2. and Note D.8.2. to our consolidated financial statements included at Item 18 of this annual report.

        Merial generated net sales of €2,030 million in 2011, up 4.3% at constant exchange rates and 2.4% on a reported basis, led by the performance in Emerging Markets.




        The following table presents the 2011 and 2010 sales of our Animal Health segment by range of products:

(€ million)		2011 Reported			2010 Reported			Change on a reported basis			Change at constant exchange rates
Frontline® and other fipronil-based products			764			774			-1.3%			+0.9%
Vaccines			662			627			+5.6%			+7.2%
Avermectin			372			355			+4.8%			+6.5%
Other products			232			227			+2.2%			+4.4%
Total Animal Health			2,030			1,983			+2.4%			+4.3%

        Net sales for the companion animals franchise were marked by moderate growth in sales of the Frontline® product range (up 0.9% at constant exchange rates, to €764 million), reflecting the temporary impact from generic Frontline® Plus competitors in the United States and the arrival of competitor products in the United States and Western Europe. Sales of vaccines showed sustained growth (7.2% at constant exchange rates), especially in Emerging Markets (up 14.2%) with the success of the Vaxxitex® vaccine.

        The following table breaks down net sales of our Animal Health segment by product and by geographical region in 2011:

(€ million) Product		Western Europe (1)			Change at constant exchange rates			United States			Change at constant exchange rates			Emerging Markets (2)			Change at constant exchange rates			Other countries (3)			Change at constant exchange rates
Frontline® and other fipronil-based products			206			+4.5%			411			-2.1%			86			+8.8%			61			0.0%
Vaccines			195			+2.6%			126			+2.3%			325			+14.2%			16			-21.1%
Avermectin			64			+8.5%			177			+2.8%			60			+8.9%			71			+13.6%
Other products			89			-6.4%			87			+24.3%			36			+11.8%			20			-24.0%
Total Animal Health			554			+2.4%			801			+2.1%			507			+12.4%			168			-1.2%

⁽¹⁾

France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark.

⁽²⁾

World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand.

⁽³⁾

Japan, Canada, Australia and New Zealand.




Net Sales by Geographical Region

        We divide our sales geographically into four regions: Western Europe, the United States, Emerging Markets and other countries. The following table breaks down our 2011 and 2010 net sales by region:

(€ million)		2011 Reported			2010 Reported			Change on a reported basis			Change at constant exchange rates
Western Europe (1)			9,130			9,539			-4.3%			-4.0%
United States			9,957			9,790			+1.7%			+6.8%
Emerging Markets (2)			10,133			9,533			+6.3%			+10.1%
Of which Eastern Europe and Turkey			2,666			2,659			+0.3%			+3.7%
Of which Asia (excl. Pacific region) (3)			2,416			2,095			+15.3%			+16.5%
Of which Latin America			3,111			2,963			+5.0%			+11.8%
Of which Africa			949			880			+7.8%			+9.7%
Of which Middle East			872			825			+5.7%			+8.6%
Other Countries (4)			4,169			3,505			+18.9%			+13.8%
Of which Japan			2,865			2,275			+25.9%			+20.2%
Total			33,389			32,367			+3.2%			+5.3%

⁽¹⁾

France, Germany, United Kingdom, Italy, Spain, Greece, Cyprus, Malta, Belgium, Luxembourg, Portugal, Netherlands, Austria, Switzerland, Sweden, Ireland, Finland, Norway, Iceland, Denmark.

⁽²⁾

World excluding United States, Canada, Western Europe, Japan, Australia and New Zealand.

⁽³⁾

Japan, Australia and New Zealand.

⁽⁴⁾

Japan, Canada, Australia and New Zealand.

        Western Europe posted a 4% decrease in net sales at constant exchange rates to €9,130 million, hit by competition from generics of Taxotere® (down 73.6% at constant exchange rates) and Plavix® (down 35.6% at constant exchange rates), by the transfer of the Copaxone® business to Teva in certain countries, and by the impact of austerity measures. Excluding A/H1N1 vaccines and Genzyme, the decline was 10.5% at constant exchange rates.

        The United States posted a 6.8% increase in net sales at constant exchange rates to €9,957 million, but a 5.7% decline after excluding A/H1N1 vaccines and Genzyme. Sales were affected by competition from generic versions of Lovenox®, Taxotere® and Ambien® CR, though the impact was partially offset by the performance of Lantus® and Eloxatine® and by the successful launch of Allegra® as an over-the-counter product.

        In Emerging Markets, net sales totaled €10,133 million, up 10.1% at constant exchange rates. Excluding sales of A/H1N1 vaccines reported in 2010 (€361 million, primarily in Latin America) and Genzyme, growth at constant exchange rates reached 10.4%. In Brazil, net sales hit €1,522 million, up 4.9% at constant exchange rates (21.9% after excluding A/H1N1 vaccines), reflecting the solid performance of generics and the contribution made by Genzyme. In China, net sales totaled €981 million (up 40.4% at constant exchange rates), supported by the performance of Plavix® and Lantus®. In Eastern Europe and Turkey, growth (3.7% at constant exchange rates) suffered from lower prices and competition from Taxotere® generics in Turkey; Russia posted sales of €732 million, up 11.2% at constant exchange rates.

        In the Other Countries region, net sales totaled €4,169 million, up 13.8% at constant exchange rates. Excluding A/H1N1 vaccines and Genzyme, net sales increased by 6.2%. Japan recorded net sales of €2,865 million (up 20.2% at constant exchange rates), buoyed by solid performances from Plavix® (up 22.9% to €671 million), Allegra® (up 22.2% to 465 million) and Hib vaccines, as well as by the contribution from Genzyme.




Worldwide Presence of Plavix® and Aprovel®

        Two of our leading products — Plavix® and Aprovel® — were discovered by Sanofi and jointly developed with Bristol-Myers Squibb ("BMS") under an alliance agreement. In all territories except Japan, these products are sold either by Sanofi or by BMS in accordance with the terms of this alliance agreement applicable in 2010 and 2011 (see "— Financial Presentation of Alliances — Alliance arrangements with Bristol-Myers Squibb" above).

        Worldwide sales of these two products are an important indicator because they facilitate a financial statement user's understanding and analysis of our consolidated income statement, particularly in terms of understanding our overall profitability in relation to consolidated revenues, and also facilitate a user's ability to understand and assess the effectiveness of our research and development efforts.

        Also, disclosing sales made by BMS of these two products enables the users to have a clearer understanding of trends in different lines of our income statement, in particular the line items "Other revenues", where we record royalties received on those sales (see "— Other Revenues"); "Share of profit/loss of associates and joint ventures" (see "— Share of Profit/Loss of Associates and Joint Ventures"), where we record our share of profit/loss of entities included in the BMS Alliance and under BMS operational management; and "Net income attributable to non-controlling interests" (see "— Net Income Attributable to Non-Controlling Interests"), where we record the BMS share of profit/loss of entities included in the BMS Alliance and under our operational management.

        The table below sets forth the worldwide sales of Plavix® and Aprovel® in 2011 and 2010, by geographic region:

		2011									2010									Change on a reported basis			Change at constant exchange rates
(€ million)		Sanofi (2)			BMS (3)			Total			Sanofi (2)			BMS (3)			Total
Plavix®/Iscover® (1)
Europe			530			44			574			724			98			822			-30.2%			-29.8%
United States			—			4,759			4,759			—			4,626			4,626			+2.9%			+7.8%
Other countries			1,370			286			1,656			1,165			282			1,447			+14.4%			+13.8%
Total			1,900			5,089			6,989			1,889			5,006			6,895			+1.4%			+4.5%
Aprovel®/Avapro®/ Karvea®/Avalide® (4)
Europe			694			130			824			789			158			947			-13.0%			-13.0%
United States			—			374			374			—			482			482			-22.4%			-18.8%
Other countries			451			156			607			411			216			627			-3.2%			-2.1%
Total			1,145			660			1,805			1,200			856			2,056			-12.2%			-11.0%

⁽¹⁾

Plavix® is marketed under the trademarks Plavix® and Iscover®.

⁽²⁾

Net sales of Plavix® consolidated by Sanofi, excluding sales to BMS (€208 million in 2011 and €273 million in 2010). Net sales of Aprovel® consolidated by Sanofi, excluding sales to BMS (€150 million in 2011 and €129 million in 2010).

⁽³⁾

Translated into euros by Sanofi using the method described in Note B.2. "Foreign currency translation" to our consolidated financial statements included at Item 18 in this annual report.

⁽⁴⁾

Aprovel® is marketed under the trademarks Aprovel®, Avapro®, Karvea® and Avalide®.

        Worldwide sales of Plavix®/Iscover® totaled €6,989 million in 2011, up 4.5% at constant exchange rates. Sales in the U.S. (consolidated by BMS) rose by a robust 7.8% at constant exchange rates, to €4,759 million. In Japan and China, Plavix® continued their success with sales of €671 million (+22.9% at constant exchange rates) and €277 million (+27.7% at constant exchange rates), respectively. These results more than offset the decline in sales of Plavix® in Europe caused by competition from generics (down 29.8% at constant exchange rates, at €574 million).

        Worldwide sales of Aprovel®/Avapro®/Karvea®/Avalide® totaled €1,805 million in 2011, down 11.0% at constant exchange rates, reflecting the impact of increasing penetration of generic losartan on the market for anti-hypertensives.




Other Revenues

        Other revenues, made up primarily of royalty income under licensing agreements contracted in connection with ongoing operations, remained stable at €1,669 million in 2011 and 2010.

        Revenues from licensing under the worldwide alliance with BMS on Plavix® and Aprovel® represented €1,275 million in 2011 versus €1,303 million in 2010 (down 2.1% on a reported basis). These licensing revenues were adversely affected by the depreciation of the U.S. dollar against the euro, despite an increase in sales of Plavix® in the United States (up 7.8% at constant exchange rates).

Gross Profit

        Gross profit for the year ended December 31, 2011 came to €24,156 million (72.3% of net sales), versus €24,638 million (76.1% of net sales) in 2012. This represents a year-on-year fall of 2.0% in gross profit, and a deterioration of 3.8 points in the gross margin ratio.

        The gross margin ratio of the Pharmaceuticals segment was down 2.8 points at 75.8%, reflecting both a decrease in royalty income (-0.3 of a point) and an adverse trend in the ratio of cost of sales to net sales (-2.5 points). The latter was primarily due to the unfavorable impact of new generics (especially Lovenox®, Ambien® CR and Taxotere® in the United States, and Plavix® and Taxotere® in Europe).

        The gross margin ratio of the Vaccines segment was down 4.5 points at 60.2%. This change was principally due to the absence in 2011 of the margin on pandemic influenza vaccines, which had a favorable impact in 2010.

        The gross margin ratio of the Animal Health segment was down 1.0 point at 68.9%.

        Our consolidated gross profit was also impacted in 2011 by an expense of €476 million (or 1.4 points) arising from the workdown of inventories remeasured at fair value in connection with acquisitions, principally Genzyme (€473 million). In 2010, this expense represented €142 million (0.4 of a point) and related mainly to the workdown of Merial inventories.

Research and Development Expenses

        Research and development (R&D) expenses totaled €4,811 million in 2011 (14.4% of net sales), up 5.8% on the 2010 figure of €4,547 million (14.0% of net sales).

        In the Pharmaceuticals segment, R&D expenses rose by €217 million (up 5.6%). Excluding Genzyme, R&D expenses showed a single-digit decrease as a result of reorganizations initiated in 2009, and of the streamlining of the project portfolio.

        In the Vaccines segment, R&D expenses rose by €47 million year-on-year to €564 million (up 9.1%), due mainly to clinical trials on vaccines against dengue fever and Clostridium difficile.

        In the Animal Health segment, R&D expenses fell by €9 million (5.8%) year-on-year.

Selling and General Expenses

        Selling and general expenses amounted to €8,536 million (25.6% of net sales), an increase of 4.7% on the prior-year figure of €8,149 million (25.2% of net sales).

        The Pharmaceuticals segment generated a €414 million increase (+5.9%), due primarily to the first-time consolidation of Genzyme. Excluding Genzyme, selling and general expenses showed a single-digit decrease, reflecting lower costs for genericized products in Europe and the United States and tight control over general expenses.

        In the Vaccines segment, selling and general expenses were down €61 million or 10.1% due to lower selling expenses for pandemic influenza vaccines.




        In the Animal Health segment, selling and general expenses were up €13 million (+2.2%), in line with the increase in net sales.

Other Operating Income and Expenses

        Other operating income totaled €319 million in 2011 (versus €369 million in 2010), and other operating expenses amounted to €315 million (compared with €292 million in 2010).

        Other operating income and expenses represented a net profit of €4 million in 2011, compared with €77 million in 2010. The year-on-year decrease of €73 million was essentially due to the discontinuation of royalty payments from Teva on North American sales of Copaxone® from the second quarter of 2010.

        This line item also includes expenses incurred in connection with the 2011 acquisition of Genzyme (€65 million), as well as a net operational foreign exchange loss of €5 million (versus €138 million in 2010, a year of high volatility in the foreign exchange markets).

Amortization of Intangible Assets

        Amortization charged against intangible assets in the year ended December 31, 2011 amounted to €3,314 million, compared with €3,529 million in the previous year. The reduction of €215 million was mainly due to a decrease in amortization charged against intangible assets recognized on the acquisition of Aventis (€1,788 million in 2011, versus €3,070 million in 2010, as some products reached the end of their life cycles in the face of competition from generics). This positive impact was partially offset by new amortization charges in 2011 generated by intangible assets recognized on the acquisition of Genzyme in the second quarter of 2011 and on the first-time consolidation of Merial in the first quarter of 2011 (€709 million and €353 million, respectively).

Impairment of Intangible Assets

        This line recorded net impairment losses against intangible assets of €142 million in 2011, compared with €433 million in 2010. Impairment losses booked in 2011 were mainly associated with (i) discontinuing a Genzyme research project; (ii) certain Zentiva generics for which the sales outlook was adjusted downward; and (iii) discontinuing a joint development project with Metabolex in the field of diabetes. It also included an impairment reversal in connection with Actonel®, pursuant to confirmation of the terms of the collaboration agreement with Warner Chilcott (see Note C.3. to our consolidated financial statements included at Item 18 of this annual report).

        In 2010, impairment losses related primarily to (i) Actonel®, due to proposed changes to the terms of the collaboration agreement with Warner Chilcott; (ii) the pentavalent vaccine Shan5®, for which sales projections were revised to factor in the need for another WHO pre-qualification following a flocculation problem encountered in some batches; (iii) the BSI-201 project, following a revision to the development plan in response to the announcement of the initial Phase III trial results in metastatic triple negative breast cancer; and (iv) certain generics and Zentiva consumer health products for which sales projections in Eastern Europe were revised downwards.

Fair Value Remeasurement of Contingent Consideration Liabilities

        This line item records fair value remeasurements of liabilities related to business combinations accounted for in accordance with the revised IFRS 3. These remeasurements generated a new gain of €15 million in 2011, mainly related to contingent purchase consideration on the acquisition of TargeGen, to the contingent value rights (CVRs) issued as part of the Genzyme acquisition, and to contingent consideration payable to Bayer on certain Genzyme products (see Note D.18. to the consolidated financial statements included at Item 18 of this annual report).

Restructuring Costs

        Restructuring costs amounted to €1,314 million in 2011, compared with €1,384 million in 2010.




        In 2011, these were mainly employee-related expenses incurred under plans to adjust headcount in support functions and sales forces in Europe and in R&D in Europe and the United States, and measures to adapt our manufacturing facilities in Europe.

        In 2010, these costs related mainly to measures taken to adapt our industrial operations in France, and our sales and R&D functions in the United States and some European countries.

Other Gains and Losses, and Litigation

        This line item showed a net expense of €327 million, mainly comprising (i) the €519 million backlog of depreciation and amortization expense against the tangible and intangible assets of Merial, which was not recognized from September 18, 2009 through December 31, 2010 because these assets were classified as held for sale or exchange during that period in accordance with IFRS 5 (see Note D.8.2. to our consolidated financial statements included at Item 18 of this annual report), (ii) proceeds of €210 million in damages with regard to a Plavix® patent and (iii) the impact of the divestiture of the Dermik dermatology business (see Note D.28. to our consolidated financial statements).

        In 2010, this line item showed a net expense of €138 million arising from an adjustment to vendor's guarantee provisions in connection with past business divestitures.

Operating Income

        Operating income totaled €5,731 million for 2011, versus €6,535 million for 2010 (down 12.3%); the year-on-year fall mainly reflected the competition from generics and the absence of A/H1N1 pandemic influenza vaccine sales in 2011.

Financial Income and Expenses

        Net financial expenses came to €412 million in 2011 versus €362 million in 2010, an increase of €50 million.

        Financial expenses directly related to our debt, net of cash and cash equivalents (see definition at "— Liquidity and Capital Resources" below) were €325 million in 2011, virtually unchanged from the 2010 figure of €324 million, as a result of contrasting factors:

•

a fall in the average interest rate on debt due to the significantly lower rate charged on the debt contracted to fund the acquisition of Genzyme in the first quarter of 2011, which meant that interest expense increased only slightly despite the sharp rise in average debt;



•

a rise in financial income, due to an increase in the average level of cash held during the year and a higher average rate of return.

        Provisions against investments and financial assets totaled €58 million in 2011 (versus €6 million in 2010); in 2011, these provisions were primarily related to the impairment of Greek government bonds.

        Gains on disposals of non-current financial assets came to €25 million versus €61 million in 2010. In 2011, the main item was the impact of the change in the consolidation method for the investment in Société Financière des Laboratoires de Cosmétologie Yves Rocher following loss of significant influence (see Note D.6. to our consolidated financial statements); in 2010, the main item was the disposal of the equity interest in Novexel.

        This item also included net financial foreign exchange gains of €10 million in 2011 (versus a net loss of €20 million in 2010).

Income before Tax and Associates and Joint Ventures

        Income before tax and associates and joint ventures was €5,319 million in 2011, versus €6,173 million in 2010, a decrease of 13.9%.




Income Tax Expense

        Income tax expense totaled €455 million in 2011, compared with €1,430 million in 2010. The decrease was mainly due to a reduction in deferred tax liabilities as a result of changes in tax rates and tax legislation (mainly in the United Kingdom), and to the effect of the Franco-American Advance Pricing Agreement (APA) for the period from 2006 through 2011 (see Note D.30. to our consolidated financial statements).

        This line item also includes the tax effects of the amortization of intangible assets (€1,178 million in 2011 versus €1,183 million in 2010) and of restructuring costs (€399 million in 2011 versus €466 million in 2010).

        The effective tax rate is calculated on the basis of business operating income minus net financial expenses, and before (i) the share of profit/loss of associates and joint ventures and (ii) net income attributable to non-controlling interests. The effective tax rate was 27.0% in 2011, versus 27.8% in 2010. The difference relative to the standard corporate income tax rate applicable in France (34.4%) was mainly due to lower taxes on patent royalties in France.

Share of Profit/Loss of Associates and Joint Ventures

        The share of profit/loss of associates and joint ventures totaled €1,070 million in 2011, compared with €978 million in 2010. This line mainly includes our share of after-tax profits generated in territories managed by BMS under the Plavix® and Avapro® alliance, which advanced by 9.2% to €1,070 million compared with €980 million in 2010. The increase in this share in 2011 was partly related to growth in Plavix® sales in the United States (up 2.9%).

Net Income

        Net income for the year was €5,934 million in 2011, compared with €5,721 million in 2010.

Net Income Attributable to Non-Controlling Interests

        Net income attributable to non-controlling interests amounted to €241 million in 2011, compared with €254 million in 2010. This line mainly includes the share of pre-tax profits paid to BMS generated in territories managed by Sanofi (€225 million, versus €238 million in 2010); the year-on-year fall is directly related to increased competition from clopidogrel (Plavix®) generics in Europe.

Net Income Attributable to Equity Holders of Sanofi

        Net income attributable to equity holders of Sanofi totaled €5,693 million in 2011, against €5,467 million in 2010.

        Basic earnings per share for 2011 was €4.31, 2.9% higher than the 2010 figure of €4.19, based on an average number of shares outstanding of 1,321.7 million in 2011 and 1,305.3 million in 2010. Diluted earnings per share was €4.29 in 2011, versus €4.18 in 2010, based on an average number of shares outstanding after dilution of 1,326.7 million in 2011 and 1,308.2 million in 2010.

Business Operating Income

        Sanofi reports segment results on the basis of "Business Operating Income". This indicator, adopted in compliance with IFRS 8, is used internally to measure operational performance and to allocate resources. See "Item 5. Operating and Financial Review and Prospects — Segment information" above for the definition of business operating income and reconciliation to Income before tax and associates and joint ventures.




        Business operating income for 2011 was €12,144 million, compared to €12,863 million in 2010. The table below shows trends in business operating income by business segment for 2011 and 2010:

(€ million)		2011			2010
Pharmaceuticals			10,496			10,965
Vaccines			985			1,379
Animal Health			627			621
Other			36			(102	)
Business operating income			12,144			12,863

Business Net Income

        Business net income is a non-GAAP financial measure that we use to evaluate our performance (see "Item 5. Operating and Financial Review and Prospects — Business Net Income" above for the definition of business net income and reconciliation to Net Income attributable to equity holders of Sanofi.

        Business net income totaled €8,795 million in 2011 versus €9,215 million in 2010, a drop of 4.6%. It represented 26.3% of net sales compared with 28.5% in 2010.

Business Earnings Per Share

        We also report business earnings per share, a non-GAAP financial measure which we define as business net income divided by the weighted average number of shares outstanding (see "— Business Net Income" above).

        Business earnings per share for 2011 were €6.65, 5.8% lower than the 2010 figure of €7.06, based on a weighted average number of shares outstanding of 1,321.7 million in 2011 and 1,305.3 million in 2010. Diluted business earnings per share for 2011 were €6.63, 5.8% lower than the 2010 figure of €7.04, based on a weighted average number of shares outstanding of 1,326.7 million in 2011 and 1,308.2 million in 2010.

Liquidity and Capital Resources

        Our operations generate significant positive cash flows. We fund our day-to-day investments (with the exception of significant acquisitions) primarily with operating cash flow, and pay regular dividends on our shares. In addition, we reduced our net debt during 2013 and 2012, whereas in 2011 our debt increased significantly to finance the acquisition of Genzyme.

        We define "debt, net of cash and cash equivalents" as (i) the sum total of short-term debt, long-term debt and interest rate and currency derivatives used to hedge debt, minus (ii) the sum total of cash and cash equivalents and interest rate and currency derivatives used to hedge cash and cash equivalents. As of December 31, 2012,2013, our debt, net of cash and cash equivalents stood at €6,043 million versus €7,719 million versusas of December 31, 2012 and €10,859 million as of December 31, 2011 and €1,577 million as of December 31, 2010.2011. See Note D.17. to our consolidated financial statements included at Item 18 of this annual report.

        In order to assess the Company's financing risk, we also use the "gearing ratio", a non-GAAP financial measure. The gearing ratio is defined as the ratio of debt, net of cash and cash equivalents, to total equity. As of December 31, 2012,2013, our gearing ratio stood at 13.4%10.6% of our net equity versus 13.4% as of December 31, 2012 and 19.3% as of December 31, 2011 and 3.0% as of December 31, 2010.2011.





Consolidated Statement of Cash Flows


        The table below shows our summarized cash flows for the years ended December 31, 2013, 2012 2011 and 2010:2011:

(€ million)		2012			2011			2010
Net cash provided by / (used in) operating activities			8,171			9,319			9,859
Net cash provided by / (used in) investing activities			(1,587	)		(14,701	)		(3,475	)
Net cash provided by / (used in) financing activities			(4,351	)		2,893			(4,646	)
Impact of exchange rates on cash and cash equivalents			24			1			55
Impact of the cash and cash equivalents of Merial (1)			—			147			—
Net change in cash and cash equivalents — (decrease) / increase			2,257			(2,341	)		1,793

⁽¹⁾

See Note D.8.1. to our consolidated financial statements included at Item 18 of this annual report.

(€ million)		2013		2012		2011
Net cash provided by / (used in) operating activities		6,954		8,171		9,319
Net cash provided by / (used in) investing activities		(1,273	)	(1,587	)	(14,701	)
Net cash provided by / (used in) financing activities		(3,726	)	(4,351	)	2,893
Impact of exchange rates on cash and cash equivalents		(79	)	24		1
Net change in cash and cash equivalents — (decrease) / increase		1,876		2,257		(2,341	)

        Generally, factors that affect our earnings — for example, pricing, volume, costs and exchange rates — flow through to cash from operations. The most significant source of cash from operations is sales of our branded pharmaceutical products and human vaccines. Receipts of royalty payments also contribute to cash from operations.

Year Ended December 31, 2013 Compared with Year Ended December 31, 2012

        Net cash provided by operating activities amounted to €6,954 million in 2013, versus €8,171 million in 2012.

        Operating cash flow before changes in working capital for 2013 was €6,819 million, versus €8,503 million in 2012, reflecting the fall in consolidated net income (partly attributable to the decline in revenues from the BMS alliance). Working capital requirements fell by €135 million in 2013, after increasing by €332 million in 2012; the 2013 decrease was attributable mainly to changes in short-term provisions.

        Our operating cash flow before changes in working capital is generally affected by the same factors that affect "Operating income", which is discussed in detail above under "Results of Operations — Year Ended December 31, 2013 Compared with Year Ended December 31, 2012". The principal difference is that operating cash flow before changes in working capital reflects our share of the profits and losses of associates and joint ventures, net of dividend and similar income received.

        Net cash used in investing activities decreased from €1,587 million in 2012 to €1,273 million in 2013.

        Acquisitions of property, plant and equipment and intangible assets totaled €1,398 million (versus €1,612 million in 2012). The main items were investments in industrial and research facilities (€1,058 million, compared with €1,324 million in 2012), together with contractual payments for intangible rights under license and collaboration agreements (€310 million, versus €293 million in 2012).

        Acquisitions of investments during 2013 amounted to €319 million, net of cash acquired and after including assumed liabilities and commitments. The main items were the acquisitions of Genfar and Dosch, plus contingent consideration arising from the acquisition of Genzyme. In 2012, acquisitions of investments totaled €328 million, net




Table of Contents

of cash acquired and after including assumed liabilities and commitments. The main items were a payment of contingent consideration to Bayer arising from the acquisition of Genzyme, the repurchase of some of the CVRs issued in connection with that acquisition, the acquisitions of Pluromed and Newport, and the purchase of an equity interest in Merrimack.

        After-tax proceeds from disposals (€409 million) mainly comprised the sale to Covis Pharma of U.S. commercial rights to five pharmaceutical products, the receipt of a $125 million payment associated with changes to the contractual terms of the alliance on Actonel®, and disposals of property, plant and equipment in the United States and France. In 2012, proceeds from disposals amounted to €358 million, related to divestitures of financial assets (in particular, our equity interests in Financière des Laboratoires de Cosmétologie Yves Rocher and Handok) and to disposals of various items of property, plant and equipment and intangible assets.

        Net cash used in financing activities came to €3,726 million in 2013, versus €4,351 million in 2012. The 2013 figure includes net external debt finance raised (net change in short-term and long-term debt) of €599 million (versus €615 million in 2012); the effect of changes in share capital (repurchases of own shares, net of capital increases), amounting to €637 million (compared to €178 million in 2012); and the dividend payout to our shareholders of €3,638 million (€3,487 million in 2012).

        The net change in cash and cash equivalents during 2013 was a €1,876 million increase, compared with a €2,257 million increase in 2012.

Year Ended December 31, 2012 Compared with Year Ended December 31, 2011

        Net cash provided by operating activities amounted to €8,171 million in 2012, compared with €9,319 million in 2011. Operating cash flow before changes in working capital was €8,503 million, versus €9,834 million in 2011. This decrease was largely attributable to erosion in revenues from the territories managed by BMS under the alliance on Plavix® and Avapro®, due to competition from generics in the United States. This revenue erosion was reflected in a reduced share of after-tax profits from these territories (€420 million, versus €1,070 million in 2011) and lower license revenue from the worldwide alliance with BMS on Plavix® and Aprovel®/Avapro® (€532 million in 2012, versus €1,275 million in 2011).

        Our operating cash flow before changes in working capital is generally affected by the same factors that affect "Operating income", which is discussed in detail above under "Results of Operations — Year Ended December 31, 2012 Compared with Year Ended December 31, 2011". The principal difference is that operating cash flow before changes in working capital reflects our share of the profits and losses of associates and joint ventures, net of dividend and similar income received.

        Working capital requirements rose by €332 million in 2012, after an increase of €515 million in 2011. The increase during 2012 was mainly attributable to an increase in inventories (€445 million, including €315 million for reconstituting inventories at the Genzyme business).

        Net cash used in investing activities amounted to €1,587 million in 2012, versus €14,701 million in 2011.

        Acquisitions of property, plant and equipment and intangible assets totaled €1,612 million (2011: €1,782 million). The main items were investments in industrial and research facilities (€1,324 million, versus €1,394 million in 2011) and contractual payments for intangible rights under license and collaboration agreements (€293 million, versus €245 million in 2011).

        Acquisitions of investments in the period amounted to €328 million, net of cash acquired and after including assumed liabilities and commitments. The main items were a payment of contingent consideration to Bayer arising from the acquisition of Genzyme, the repurchase of some of the CVRs issued in connection with that acquisition, the acquisitions of Pluromed and Newport, and the purchase of an equity interest in Merrimack. In 2011, acquisitions of investments amounted to €13,616 million; after including assumed liabilities and commitments, they totaled €14,079 million, and mainly comprised the acquisitions of Genzyme (€13,602 million) and BMP Sunstone (€374 million).




        After-tax proceeds from disposals (€358 million) related to divestitures of financial assets (in particular, our equity interests in Société Financière des Laboratoires de Cosmétologie Yves Rocher and Handok), and to disposals of various items of property, plant and equipment and intangible assets. In 2011, proceeds from disposals came to €359 million, mainly generated by the divestiture of the Dermik dermatology business (€321 million).




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        Financing activities generated a net cash outflow of €4,351 million in 2012, compared with a net cash inflow of €2,893 million in 2011. The 2012 figure includes €615 million of debt repayments (net change in short-term and long-term debt), as compared with net external debt raised of €5,283 million in 2011; it also includes the Sanofi dividend payout of €3,487 million (versus €1,372 million in 2011).

        After the impact of exchange rates and of the cash and cash equivalents of Merial, the net change in cash and cash equivalents in 2012 was an increase of €2,257 million, compared with a decrease of €2,341 million in 2011.

    Year Ended December 31, 2011 Compared with Year Ended December 31, 2010

        Net cash provided by operating activities totaled €9,319 million in 2011, compared with €9,859 million in 2010. In 2011, operating cash flow before changes in working capital was €9,834 million, versus €10,024 million in 2010.

        Our operating cash flow before changes in working capital is generally affected by the same factors that affect "Operating income", which is discussed in detail above under "Results of Operations — Year Ended December 31, 2011 Compared with Year Ended December 31, 2010". The principal difference is that operating cash flow before changes in working capital reflects our share of the profits and losses of associates and joint ventures, net of dividend and similar income received.

        Working capital requirements rose by €515 million in 2011, compared with a €165 million increase in 2010. The 2011 increase was related to increased inventories (€232 million) and trade receivables (€257 million), following the first-time consolidation of Genzyme and Merial.

        Net cash used in investing activities totaled €14,701 million in 2011, versus €3,475 million in 2010.

        Acquisitions of property, plant and equipment and intangible assets amounted to €1,782 million (compared with €1,662 million in 2010) and included Genzyme investments from April 2011. The main items were investments in industrial and research facilities (€1,394 million, compared with €1,261 million in 2010) and contractual payments for intangible rights under licensing or collaboration agreements (€182 million, versus €312 million in 2010).

        Acquisitions of investments for 2011 totaled €13,616 million, net of cash from acquired companies. After including assumed liabilities and commitments, they amounted to €14,079 million. The main items were the acquisitions of Genzyme (€13,602 million) and BMP Sunstone (€374 million). In 2010, financial investments were €1,733 million, net of acquired cash; after including assumed liabilities and commitments, they amounted to €2,130 million, and mainly comprised the acquisition of equity interests in Chattem (€1,640 million) and Nepentes (€104 million).

        After-tax proceeds from disposals amounted to €359 million, mainly from the divestiture of the Dermik dermatology business (€321 million). In 2010, after-tax proceeds from disposals were €136 million, mainly from the divestment of the equity interest in Novexel (€48 million) and the disposal of various items of property, plant and equipment (€55 million).

        Financing activities generated a net cash inflow of €2,893 million in 2011, versus a net cash outflow of €4,646 million in 2010. In 2011, financing cash inflows included €5,283 million of external funding raised (net change in short-term and long-term debt), as opposed to 2010 which saw net debt repayments of €1,165 million. Cash outflows included the dividend payout of €1,372 million to Sanofi shareholders (versus €3,131 million in 2010), and the acquisition of 21.7 million of our own shares for €1,074 million.

        After the impact of exchange rates and of the cash and cash equivalents of Merial, the net change in cash and cash equivalents during 2011 was a decline of €2,341 million, versus a €1,793 million increase in 2010.





Consolidated Balance Sheet and Debt


        Total assets stood at €100,407€96,065 million as of December 31, 2012,2013, versus €100,668€100,409 million as of December 31, 2011,a year earlier, a decrease of €261€4,344 million.

        Debt, net of cash and cash equivalents (see definition above) amounted towas €6,043 million as of December 31, 2013, versus €7,719 million as of December 31, 2012, compared with €10,859 million as of December 31, 2011.2012. The table below shows our financial position for the years ended December 31, 2013, 2012 2011 and 2010:2011:

(€ million)		2012			2011			2010				2013		2012		2011
Long-term debt			10,719			12,499			6,695			10,414		10,719		12,499
Short-term debt and current portion of long-term debt			3,812			2,940			1,565			4,176		3,812		2,940
Cash and cash equivalents			(6,381	)		(4,124	)		(6,465	)		(8,257	)	(6,381	)	(4,124	)
Related interest rate and currency derivatives			(431	)		(456	)		(218	)		(290	)	(431	)	(456	)
Debt, net of cash and cash equivalents			7,719			10,859			1,577			6,043		7,719		10,859

        Our gearing ratio (debt, net of cash and cash equivalents as a proportion of total equity) fell from 19.3% in 2011 to 13.4% in 2012.2012 to 10.6% in 2013. Analyses of debt as of December 31, 2012 and December 31, 2011, by type, maturity, interest rate and currency, are provided in Note D.17. to our consolidated financial statements.

        The financing arrangements in place as of December 31, 20122013 at Sanofi parent company level are not subject to covenants regarding financial ratios and do not contain any clauses linking credit spreads or fees to our credit rating.

        Other key movements in the balance sheet items are described below.

        Total equity stood at €57,472€57,014 million as of December 31, 2012,2013, versus €56,373€57,466 million as of December 31, 2011.2012. The net year-on-year increasedecrease in equity was attributable primarily to:

•–

increases: our net income for the year ended December 31, 20122013 (€4,9673,723 million) and the effects of share-based payment plans (€1,236 million); and



•–

reductions:decreases: the dividend payout to our shareholders in respect of the 20112012 financial year (€3,4873,638 million), and the net change in currency translation differencesrepurchases of our own shares (€532 million, mainly relating to the U.S. dollar)1,641 million).

        As of December 31, 2012,2013, we held 3.13.6 million of our own shares, recorded as a deduction from equity and representing 0.2%0.27% of theour share capital.

        Goodwill and otherOther intangible assets (€58,26552,529 million in total) decreased by €3,956€5,736 million, largely as a result ofmainly reflecting:

–

decreases: amortization and impairment losses recognized induring the period (€3,516��4,475 million), and a decline in the equivalent value in euros ofcurrency translation differences on assets denominated in otherforeign currencies (€6111,766 million, mainly relating to the U.S. dollar);



–

increases: the impact of the Genfar and Dosch acquisitions (€199 million), and acquisitions of other intangible assets (€310 million).

        Provisions and other non-current liabilities (€11,0368,735 million) rosedecreased by €690€2,308 million, due mainly to a net increasedecrease in provisions for pensions and other long-term employee benefits of €874€1,217 million primarily(primarily as a result of actuarial lossesgains on defined-benefit plans.plans, contributions paid into pension funds, and plan settlements) and to transfers to other current liabilities (€682 million).




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        Net deferred tax liabilities (€1,555906 million) fell by €1,342€647 million year-on-year, primarily due to the reversalyear-on-year. This reflects a reduction caused by reversals of deferred tax liabilities relating to the remeasurement of acquired intangible assets (€5,641 million in 2012 versus €6,815 million in 2011, a difference of €1,1741,459 million), but also an increase associated with provisions for pensions (€281 million) and accrued expenses (€271 million).

        Current and non-current liabilities related to business combinations and to non-controlling interests (€1,450 million) were €106€542 million lower. The main factors werelower year-on-year at €908 million. This reduction reflects the reversalimpact of the contingent consideration relatingfair value remeasurements to the Fovea acquisition, payments to Bayer (relating to contingent consideration arising from our acquisition of Genzyme), and the repurchase (for $70 million) of some of the contingent value rights (CVRs) issued in connection with the Genzyme acquisition. These factors were partly offsetacquisition and to the contingent consideration payable to Bayer as a result of an acquisition made by Genzyme prior to the effectlatter's acquisition by Sanofi, plus the reversal of fair value remeasurementscontingent consideration relating to the BiPar and TargeGen acquisitions (see Note D.18. to our consolidated financial statements).





Liquidity


        We expect that our existing cash resources and cash from operations will be sufficient to finance our foreseeable working capital requirements. At year-end 2012,2013, we held cash and cash equivalents amounting to €6,381€8,257 million, substantially all of which were held in euros (see Note D.13. to our consolidated financial statements). As at December 31, 2012, €5072013, €573 million of our cash and cash equivalents were held by our captive insurance and reinsurance companies in accordance with insurance regulations.

        Since 2010, some countries in Southern Europe have facedbeen facing severe financial difficulties.difficulties (see section "— 3.1.8. Risk Factors — 2. Risks Relating to Our Business — We are subject to the risk of non-payment by our customers"). Deteriorating credit and economic conditions and other factors in these countries have resulted in, and may continue to result in an increase in the average length of time taken to collect our accounts receivable in these countries andcountries. Should these factors continue, it may require us to re-evaluate the collectability of these receivables in future periods. We carefully monitor sovereign debt issues and economic conditions and evaluate accounts receivable in these countries for potential collection risks. We arehave been conducting an active recovery policy, adapted to each country and including intense communication with customers, negotiations of paymentspayment plans, charging of interest for late payments, and legal action. See "Item 3.D. Risk Factors — Risks Relating to Our Business — We are subject to the risk of non-payment by our customers" and "— Impairment charges or write downs in our books and changes in accounting standards could have a significant adverse effect on the Group's results of operations and financial results".

        During 2012, the amount of our trade receivables in Europe decreased, primarily as a result of a reduction in the sums owed to us by public-sector customers in Spain due to payments received. The total consolidated amount of trade receivables overdue by more than 12 months — which primarily consists of amounts due from public-sector customers — fell from €276 million as of December 31, 2011 to €161 million as of December 31, 2012 due to payments received (see Note D.10. to our consolidated financial statements included at Item 18 of this annual report).

        During 2013, the amount of our trade receivables in Europe continued to fall, primarily as a result of a reduction in the sums owed to us by public-sector customers in Italy and Greece. Over the Group as a whole, the amount of trade receivables overdue by more than 12 months — which primarily consists of amounts due from public-sector bodies around the world — rose from €161 million as of December 31, 2012 to €168 million as of December 31, 2013 (see Note D.10. to our consolidated financial statements).

In November 2011, Sanofi obtained the necessary corporate authorizations to purchase any or all of the outstanding Contingent Value Rights ("CVR") and subsequently purchased CVRs in 2011. In 2012 following a tender offer initiated in September 2012 on the basis of the same corporate authorization, Sanofi purchased an additional 40,025,805 CVRs (for a total consideration of approximately $70 million). In 2013, Sanofi purchased an additional 10,928,075 CVRs (for a total consideration of approximately $9 million). As of December 31, 2012, 249,196,3712013, 238,275,333 CVRs were outstanding out of 291,313,510 issued at the time of the Genzyme acquisition.

        At year-end 2012,2013, we had no commitments for capital expenditures that we consider to be material to our consolidated financial position. Undrawn confirmed credit facilities amounted to a total of €10.0 billion at December 31, 2012.2013. For a discussion of our treasury policies, see "Item 11. Quantitative and Qualitative Disclosures about Market Risk."

        We expect that cash from our operations will be sufficient to repay our debt. For a discussion of our liquidity risks, see "Item 11. Quantitative and Qualitative Disclosures about Market Risk."

Off-Balance Sheet Arrangements / Contractual Obligations and Other Commercial Commitments

        We have various contractual obligations and other commercial commitments arising from our operations. Our contractual obligations and our other commercial commitments as of December 31, 20122013 are shown in Notes D.3., D.17., D.18. and D.21. to our consolidated financial statements included at Item 18 of this annual report. Note D.21.




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to our consolidated financial statements included at Item 18 discloses details of commitments under our principal research and development collaboration agreements. For a description of the principal contingencies arising from certain business divestitures, refer to Note D.22.e) to our 2012 consolidated financial statements.




        The Group's contractual obligations and other commercial commitments are set forth in the table below:

December 31, 2012		Payments due by period
(€ million)		Total			Under 1 year			From 1 to 3 years			From 3 to 5 years			Over 5 years
• Future contractual cash-flows relating to debt and debt   hedging instruments (1)			15,283			3,959			4,165			4,106			3,053
• Operating lease obligations			1,296			250			367			220			459
• Finance lease obligations (2)			100			20			36			31			13
• Irrevocable purchase commitments (3)
- given			2,913			1,513			651			368			381
- received			(209	)		(106	)		(67	)		(14	)		(22	)
• Research & development license agreements
- Future service commitments (4)			767			181			286			276			24
- Potential milestone payments (5)			2,201			149			267			295			1,490
• Obligations relating to business combinations (6)			4,993			341			1,135			560			2,957
• Firm commitment related to the BMS agreement (7)			82			—			—			—			82
• Estimated benefit payments on unfunded pensions and   post employment benefits (8)			1,741			60			115			133			1,433
Total contractual obligations and other commitments			29,167			6,367			6,955			5,975			9,870
Undrawn general-purpose credit facilities			10,021			3,020			225			6,775			1

		Payments due by period
December 31, 2013 (€ million)		Total		Under 1 year		From 1 to 3 years		From 3 to 5 years		Over 5 years
•  Future contractual cash-flows relating to debt and debt hedging instruments(1)		15,688		4,372		3,681		2,611		5,024
•  Operating lease obligations		1,265		257		356		224		428
•  Finance lease obligations(2)		78		18		33		23		4
•  Irrevocable purchase commitments(3)
– given		3,189		1,707		800		385		297
– received		(237	)	(151	)	(64	)	(3	)	(19	)
•  Research & development license agreements
– Future service commitments(4)		569		150		253		142		24
– Potential milestone payments(5)		1,589		100		174		171		1,144
•  Obligations relating to business combinations(6)		4,416		28		583		480		3,325
•  Firm commitment related to the BMS agreement(7)		75		—		—		75		—
•  Estimated benefit payments on unfunded pensions and post employment benefits(8)		1,039		54		110		119		756
Total contractual obligations and other commitments		27,671		6,535		5,926		4,227		10,983
Undrawn general-purpose credit facilities		10,021		3,020		—		7,001		—

⁽¹⁾

See Note D.17. to our consolidated financial statements included at Item 18 of this annual report.

⁽²⁾

See Note D.3. to our consolidated financial statements included at Item 18 of this annual report.

⁽³⁾

These comprise irrevocable commitments to suppliers of (i) property, plant and equipment, net of down payments (see Note D.3. to our consolidated financial statements included at Item 18 of this annual report) and (ii) goods and services.

⁽⁴⁾

Future service commitments relating to research & development license agreements mainly comprise research financing commitments, but also include consideration for access to technologies.

⁽⁵⁾

This line includes all potential milestone payments on projects regarded as reasonably possible, i.e.,  on projects in the development phase.

⁽⁶⁾

See Note D.18. to our consolidated financial statements included at Item 18 of this annual report.

⁽⁷⁾

See Note C.1. to our consolidated financial statements included at Item 18 of this annual report.

⁽⁸⁾

See Note D.19.1. to our consolidated financial statements included at Item 18 of this annual report. The table above does not include the ongoing annual employer's contributions to plan assets, estimated at €268 million in 2013.

        We may have payments due to our current or former research and development partners under collaborative agreements. These agreements typically cover multiple products, and give us the option to participate in development on a product-by-product basis. When we exercise our option with respect to a product, we pay our collaboration partner a fee and receive intellectual property rights to the product in exchange. We are also generally required to fund some or all of the development costs for the products that we select, and to make payments to our partners when those products reach development milestones.

        We have entered into collaboration agreements under which we have rights to acquire products or technology from third parties through the acquisition of shares, loans, license agreements, joint development, co-marketing and other contractual arrangements. In addition to upfront payments on signature of the agreement, our contracts frequently require us to make payments contingent upon the completion of development milestones by our alliance partner or upon the granting of approvals or licenses.

        Because of the uncertain nature of development work, it is impossible to predict (i) whether Sanofi will exercise further options for products, or (ii) whether the expected milestones will be achieved, or (iii) the number of compounds that will reach the relevant milestones. It is therefore impossible to estimate the maximum aggregate amount that Sanofi will actually pay in the future under existing collaboration agreements.




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        Given the nature of its business, it is highly unlikely that Sanofi will exercise all options for all products or that all milestones will be achieved.




        The main collaboration agreements relating to development projects in the Pharmaceuticals segment are described below. Milestone payments relating to development projects under these agreements amounted to €2.0€1.4 billion in 2012.2013. These exclude projects in the research phase (€5.03.8 billion in 2012, €4.22013, €5.0 billion in 2011)2012) and payments contingent upon the attainment of sales targets once a product is on the market (€4.73.6 billion in 2012, €4.42013, €4.7 billion in 2011)2012).

•

Since acquiring Genzyme in April 2011, the Group has a commitment to Isis Pharmaceuticals Inc. under a collaboration agreement signed in January 2008. This agreement granted an exclusive license to develop and commercialize Mipomersen, a treatment in an advanced development phase for the treatment of severe familial hypercholesterolemia.



•

In May 2011, Sanofi signed a license agreement with Glenmark Pharmaceuticals S.A. (Glenmark), a wholly-owned subsidiary of Glenmark Pharmaceuticals Limited India, to developfor the development and commercializecommercialization of GBR500, a novel monoclonal antibody for the treatment of Crohn's disease and other chronic auto-immuneautoimmune diseases.



•

In June 2010, Sanofi signed an exclusive global collaboration and license agreement with Ascenta Therapeutics, a U.S. biopharmaceutical company, on a number of molecules that could restore apoptosis (cell death) in tumor cells.



•

At the end of April 2010, Sanofi signed a license agreement with Glenmark for the development and commercialization of novel agents to treat chronic pain. Those agents are vanilloid receptor (TRPV3) antagonist molecules, including a first-in-class clinical compound, GRC 15300, which is currently in Phase I clinical development.



•

In April 2010, Sanofi signed a global license agreement with CureDM Group Holdings, LLC for Pancreate™,Pancreate, a novel human peptide which could restore a patient's ability to produce insulin and other pancreatic hormones in both type 1 and 2 diabetes.



•

In December 2009, Sanofi and the U.S. biotechnology company Alopexx Pharmaceuticals LLC simultaneously signed (i) a collaboration agreement, and (ii) an option for a license on an antibody for the prevention and treatment of infections originating in the bacterium that causes plague and other serious infections.



•

At end September 2009, Sanofi and Merrimack Pharmaceuticals Inc. signed an exclusive global licensing and collaboration agreement covering the MM-121 molecule for the management of solid malignancies.



•

In May 2009, Sanofi signed a global license agreement in oncology with the biotechnology company Exelixis, Inc. for XL147 and XL765. Simultaneously SanofiXL765, and simultaneously signed an exclusive research collaboration agreement for the discovery of inhibitors of Phosphoinositide-3 KinasePhosphoinositide-3-Kinase (PI3K) for the management of malignant tumors, that was terminated ontumors. On December 22, 2011.2011, Sanofi and Exelixis, Inc. agreed to end this collaboration agreement.



•

May 2009:2009, Sanofi signed a collaboration and licensing agreement with Kyowa Hakko Kirin Co., Ltd, under which Sanofi obtained the worldwide rights to the anti-LIGHT fully human monoclonal antibody. This anti-LIGHT antibody is presently at preclinical development stage, and is expected to be first-in-class in the treatment of ulcerative colitis and Crohn's disease.



•

In November 2007, Sanofi signed a collaboration agreement with Regeneron to discover, develop and commercialize fully human therapeutic antibodies. This agreement was broadened, and its term extended, on November 10, 2009. Under the terms of the development agreement, Sanofi committed to fund the discovery and pre-clinical development costs of Regeneron's antibody research program until 2017 (see Note C.2. to our consolidated financial statements included at Item 18 of this annual report). Once a product begins to be marketed, Regeneron will repay out of its profits (provided they are sufficient) half of the development costs borne by Sanofi. As of December 31, 2013, the balance of the development costs initially funded by Sanofi amounted to €1.3 billion.



•

In September 2003, Sanofi signed a collaboration agreement in oncology with Regeneron Pharmaceuticals Inc. (Regeneron) to develop the Vascular Endothelial Growth Factor (VEGF) Trap program. Under the terms of the agreement, Sanofi will pay 100% of the development costs of the VEGF Trap. Once a VEGF Trap product starts to be marketed, Regeneron will repay 50% of the development costs (originally paid by Sanofi) in accordance with a formula based on Regeneron's share of the profits.



•

In November 2007, Sanofi signed another collaboration agreement with Regeneron to discover, develop and commercialize fully-human therapeutic antibodies. This agreement was broadened, and its term extended, on November 10, 2009. Under the terms of the development agreement, Sanofi committed to fund 100% of the development costs of Regeneron's antibody research program until 2017. Once a product begins to be marketed, Regeneron will repay out of its profits (provided they are sufficient) half of the development costs borne by Sanofi.




        Sanofi has also entered into the following major agreements, which are currently in a less advanced research phase:

•

In November 2012:2012, Sanofi and the U.S. biotechnology company Selecta Biosciences signed a collaboration agreement with Selecta Biosciences to identify and develop food allergy treatments against alimentary allergies using a nanoparticle-based technology.technology based on nanoparticles.



•

June 2011: exclusive worldwide researchSince acquiring Genzyme in April 2011, the Group has had a commitment to Isis Pharmaceuticals Inc. under a collaboration agreement signed in January 2008. This agreement granted an exclusive license to develop and license option with Rib-X Pharmaceuticals, Inc. (Rib-X) for novel classes of antibiotics resulting from Rib-X's RX-04 programcommercialize mipomersen, a treatment in an advanced development phase for the treatment of resistant Gram-positive and resistant Gram-negative pathogens.severe familial hypercholesterolemia.




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•

In December 2010: Sanofi signed a global licensing and patent transfer agreement with Ascendis Pharma (Ascendis) on the proprietary Transcon Linker and Hydrogel Carrier technology developed by Ascendis for precise, time-controlled release of therapeutic active ingredients into the body. The agreement will enable Sanofi to develop, manufacture and commercialize products combining this technology with active molecules for the treatment of diabetes and related disorders.



•

Also in December 2010:2010, Sanofi entered into an alliance with Avila Therapeutics Inc. (Avila) to discover target covalent drugs for the treatment of cancers, directed towards six signaling proteins that are critical in tumor cells. Under the terms of the agreement, Sanofi will have access to Avila's proprietary Avilomics^TMAvilomics® platform offering "protein silencing" for these pathogenic proteins.



•

December 2010:In June 2010, Sanofi entered into an exclusive global licensing option with Oxford BioTherapeutics for three existing antibodies, plus a research and collaboration agreement to discover and validate new targets in oncology.



•

September 2010: alliance with the Belfer Institute of Applied Cancer Science at the Dana-Farber Cancer Institute (DFCI) to identify novel targets in oncology for the development of new therapeutic agents directed towards these targets and their associated biomarkers. Under the terms of the agreement, Sanofi will have access to the Belfer Institute's anticancer target identification and validation platform and to its translational medicine resources. Sanofi also has an option over an exclusive license to develop, manufacture and commercialize novel molecules directed towards the targets identified and validated under this research collaboration.



•

June 2010: alliance with Regulus Therapeutics Inc. to discover, develop and commercialize novel micro-RNA therapeutics, initially in fibrosis. Sanofi also received an option which if exercised would provide access to the technology to develop and commercialize other micro-RNA based therapeutics, beyond the first four targets.



•

October 2009:At the end of April 2010, Sanofi signed a license agreement with Micromet,Glenmark Pharmaceuticals S.A. for the development and commercialization of novel agents to treat chronic pain. These are vanilloid receptor (TRPV3) antagonist molecules, including ERC 15300, a first-in-class clinical compound.



•

At the end of September 2009, Sanofi and Merrimack Pharmaceuticals Inc. to develop a BiTE® antibody against a tumor antigen present atsigned an exclusive global licensing and collaboration agreement covering the surfaceMM-121 molecule for the management of carcinoma cells.solid tumors.

        In June 2012,July 2013, Sanofi decided to stopdiscontinue the BiTE® project on novel classes of antibiotics derived from the RX-04 and terminatedRib-X program, and to terminate its research agreement with Rib X Pharmaceuticals, Inc.

        In September 2013, Sanofi decided to discontinue the project to identify novel targets in oncology for the development of new therapeutic agents directed towards these targets and their associated biomarkers, and to end its collaboration with Micromet.

the Belfer Institute of Applied Cancer Science at Dana-Farber Cancer Institute (DFCI).

        In November 2013, Sanofi decided to discontinue the project relating to an exclusive global licensing option with Oxford BioTherapeutics for three existing antibodies, plus a research and collaboration agreement to discover and validate new targets in oncology.

        In the Vaccines segment, Sanofi Pasteur has entered into a number of collaboration agreements. Milestone payments relating to development projects under those agreements amounted to €0.2 billion in 2012.2013.

        In December 2009,February 2014, pursuant to the "Pandemic Influenza Preparedness Framework for the sharing of influenza viruses and access to vaccines and other benefits", Sanofi Pasteur and the WHO signed a donation letter"Standard Material Transfer Agreement" (SMTA 2). This bilateral agreement stipulates that Sanofi Pasteur will, during declared pandemic periods, (i) donate 7.5% of its real-time production of pandemic vaccines against any strain with potential to cause a pandemic, and (ii) reserve a further 7.5% of such production on affordable terms. This agreement cancels and replaces all preceding commitments to donate pandemic vaccines to the World Health Organization (WHO). The terms of the agreement committed Sanofi Pasteur to donate 10% of its future output of vaccines against A(H1N1), A(H5N1) or any other influenza strain with pandemic potential, up to a maximum of 100 million doses. Since this agreement was put in place, Sanofi Pasteur has already donated to the WHO some of the doses covered by the commitment.WHO.

Critical accounting and reporting policies

        Our consolidated financial statements are affected by the accounting and reporting policies that we use. Certain of our accounting and reporting policies are critical to an understanding of our results of operations and financial condition, and in some cases the application of these critical policies can be significantly affected by the estimates, judgments and assumptions made by management during the preparation of our consolidated financial




statements. The accounting and reporting policies that we have identified as fundamental to a full understanding of our results of operations and financial condition are the following:

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Revenue recognition.  Our policies with respect to revenue recognition are discussed in Note B.14. to our consolidated financial statements included at Item 18 of this annual report. Revenue arising from the sale of goods is presented in the income statement under "Net sales". Net sales comprise revenue from sales of pharmaceutical products, vaccines, and active ingredients, net of sales returns, of customer incentives and discounts, and of certain sales-based payments paid or payable to the healthcare authorities. Revenue is recognized when all of the following conditions have been met: the risks and rewards of ownership have been transferred to the customer; the Group no longer has effective control over the goods sold; the amount of revenue and costs associated with the transaction can be measured reliably; and it is probable that the economic benefits associated with the transaction will flow to the Group.




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We offer various types of price reductions on our products. In particular, products sold in the United States are covered by various programs (such as Medicare and Medicaid) under which products are sold at a discount. Rebates are granted to healthcare authorities, and under contractual arrangements with certain customers. Some wholesalers are entitled to chargeback incentives based on the selling price to the end customer, under specific contractual arrangements. Cash discounts may also be granted for prompt payment. The discounts, incentives and rebates described above are estimated on the basis of specific contractual arrangements with our customers or of specific terms of the relevant regulations and/or agreements applicable for transactions with healthcare authorities, and of assumptions about the attainment of sales targets. They are recognized in the period in which the underlying sales are recognized, as a reduction of sales revenue. We also estimate the amount of product returns, on the basis of contractual sales terms and reliable historical data; the same recognition principles apply to sales returns. For additional details regarding the financial impact of discounts, rebates and sales returns, see Note D.23. to our consolidated financial statements included at Item 18 of this annual report.

Non-product revenues, mainly comprising royalty income from license arrangements that constitute ongoing operations of the Group, are presented in "Other revenues".

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Business combinations.  As discussed in Note B.3. "Business combinations and transactions with non-controlling interests" to our consolidated financial statements included at Item 18 of this annual report, business combinations are accounted for by the acquisition method. The acquiree's identifiable assets, liabilities and contingent liabilities that satisfy the recognition criteria of IFRS 3 "Business combinations" are measured initially at their fair values as at the acquisition date, except for non-current assets classified as held for sale, which are measured at fair value less costs to sell. Business combinations completed on or after January 1, 2010 are accounted for in accordance with the revised IFRS 3 and the revised IAS 27, "Consolidated and individual financial statements". In particular, contingent consideration to former owners agreed in a business combination, e.g. in the form of payments upon the achievement of certain R&D milestones, is recognized as a liability at fair value as of the acquisition date. Any subsequent changes in amounts recorded as a liability are recognized in the consolidated income statement (see Note D.18. "Liabilities related to business combinations and non-controlling interests" to our consolidated financial statements included at Item 18 of this annual report).



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Goodwill impairment and intangible assets.  As discussed in Note B.6. "Impairment of property, plant and equipment, intangible assets, and investments in associates and joint ventures" and in Note D.5. "Impairment of intangible assets and property, plant and equipment" to our consolidated financial statements included at Item 18 of this annual report, we test our intangible assets periodically for impairment. We test for impairment on the basis of the same objective criteria that were used for the initial valuation. Our initial valuation and ongoing tests are based on the relationship of the value of our projected future cash flows associated with the asset to either the purchase price of the asset (for its initial valuation) or the carrying amount of the asset (for ongoing tests). The determination of the underlying assumptions relating to the recoverability of intangible assets is subjective and requires the exercise of considerable judgment. Key assumptions relating to goodwill impairment and intangible assets are the perpetual growth rate and the post-tax discount rate. Any changes in key assumptions could result in an impairment charge. A sensitivity analysis to the key assumptions is disclosed in Note D.5. "Impairment